BURDEN OF PROOF VS BURDEN OF EVIDENCE establish that he had himself made the withdrawals, or
that he had caused the withdrawals to be made. In his
G.R. No. 170598 October 9, 2013
FAR EAST BANK TRUST COMPANY, Petitioner,
vs.
ROBERTO MAR CHANTE, a.k.a. ROBERT MAR G.
CHAN, Respondents.
Ponente: Bersamin, J.
Facts:
1. Robert Chan, also known as Robert Chan was a current
account depositor for petitioner.
a. He was issues a “Do-it-all” card to handle credit card
and ATM transactions.
b. A PIN, known only to Chan, was the security feature.
2. FEBTC bought a complaint against Chan to recover
P770,488.30 as unpaid balance for an amount allegedly
withdrawn using the card at the ATM facility at the
Manila Pavilion Hotel in Manila.
a. The withdrawals were done in a series of 242
transactions with the use of the same machine at P4,000
per transaction.
b. The transactions were processed despite:
b. 1. the offline status of the branch of account (FEBTC
Ongpin Branch);
b. 2. Chan’s account balance being only P198,511.70 at
the time, as shown in the bank statement;
b. 3. the maximum withdrawal limit of the ATM facility
being P50,000.00/day; and
b. 4. his withdrawal transactions not being reflected in
his account, and no debits or deductions from his current
account with the FEBTC Ongpin Branch being recorded.
b. 5. FECTC alleged a bug allowed Chan to withdraw
more than his account would allow.
3. Chan denied liability alleging he was home at the time
of the withdrawal.
a. He argued it was humanly impossible to stand long
hours in front of the ATM to withdraw those funds.
4. The RTC rendered judgment in favor of FEBTC.
a. Regardless of lack of precedence regarding computer
errors, respondent should return what is not rightfully
his.
5. The CA reversed the decision.
a. The evidentiary dilemma was that there was no direct
evidence on who made the actual withdrawals.
Issue: Is Chan liable for the amount?
Held:
The FEBTC argues that Chan authorized the
withdrawals based on the fact that only Chan knew the
correct PIN.
We disagree with FEBTC.
Although there was no question that Chan had
the physical possession of Far East Card No. 05-01120-5-0
at the time of the withdrawals, the exclusive possession
of the card alone did not suffice to preponderantly
answer, he denied using the card to withdraw funds from
his account on the dates in question, and averred that
the withdrawals had been an "inside job." His denial
effectively traversed FEBTC’s claim of his direct and
personal liability for the withdrawals, that it would lose
the case unless it competently and sufficiently
established that he had personally made the withdrawals
himself, or that he had caused the withdrawals. In other
words, it carried the burden of proof.
Burden of proof is a term that refers to two
separate and quite different concepts, namely: (a) the
risk of non-persuasion, or the burden of persuasion, or
simply persuasion burden; and (b) the duty of producing
evidence, or the burden of going forward with the
evidence, or simply the production burden or the burden
of evidence.10 In its first concept, it is the duty to
establish the truth of a given proposition or issue by such
a quantum of evidence as the law demands in the case at
which the issue arises.11 In its other concept, it is the duty
of producing evidence at the beginning or at any
subsequent stage of trial in order to make or meet a
prima facie case. Generally speaking, burden of proof in
its second concept passes from party to party as the case
progresses, while in its first concept it rests throughout
upon the party asserting the affirmative of the issue. 12
The party who alleges an affirmative fact has the
burden of proving it because mere allegation of the fact is
not evidence of it.13 Verily, the party who asserts, not he
who denies, must prove.
In civil cases, the burden of proof is on the party
who would be defeated if no evidence is given on either
side.15This is because our system frees the trier of facts
from the responsibility of investigating and presenting
the facts and arguments, placing that responsibility
entirely upon the respective parties.16 The burden of
proof, which may either be on the plaintiff or the
defendant, is on the plaintiff if the defendant denies the
factual allegations of the complaint in the manner
required by the Rules of Court; or on the defendant if he
admits expressly or impliedly the essential allegations but
raises an affirmative defense or defenses, that, if proved,
would exculpate him from liability.17
Section 1, Rule 133 of the Rules of Court sets the
quantum of evidence for civil actions, and delineates how
preponderance of evidence is determined, viz :
Section 1. In civil cases, the party having the burden of
proof must establish his case by a preponderance of
evidence. In determining where the preponderance 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. (Emphasis supplied)
As the rule indicates, preponderant evidence
refers to evidence that is of greater weight, or more
convincing, than the evidence offered in opposition to
it.18 It is proof that leads the trier of facts to find that the
existence of the contested fact is more probable than its
nonexistence.19
Being the plaintiff, FEBTC must rely on the
strength of its own evidence instead of upon the
weakness of Chan’s evidence. Its burden of proof thus
required it to preponderantly demonstrate that his ATM
card had been used to make the withdrawals, and that he
had used the ATM card and PIN by himself or by another
person to make the fraudulent withdrawals. Otherwise, it
could not recover from him any funds supposedly
improperly withdrawn from the ATM account. We remind
that as a banking institution, FEBTC had the duty and
responsibility to ensure the safety of the funds it held in
trust for its depositors. It could not avoid the duty or
evade the responsibility because it alone should bear the
price for the fraud resulting from the system bug on
account of its exclusive control of its computer system.
Did FEBTC discharge its burden of proof?
The CA ruled that FEBTC did not because –
After a review of the records of this case, we
find the totality of evidence submitted by FEBTC
insufficient to establish the crucial facts that would justify
a judgment in its favor.
To our mind, the fact that Chan’s account
number and ATM card number were the ones used for
the withdrawals, by itself, is not sufficient to support the
conclusion that he should be deemed to have made the
withdrawals.
FEBTC offers in this regard the PNB ATM’s journal
tapes to prove the withdrawals and their details – the
time of the transactions; the account number used; the
ATM card number; and the amount withdrawn – and at
the same time declared that these tapes are authentic
and genuine. These tapes, however, are not as reliable as
FEBTC represented them to be as they are not even
internally consistent. A disturbing internal discrepancy we
note relates to the amounts reflected as "ledger balance"
and "available balance". We find it strange that for every
4,000.00 pesos allegedly withdrawn by Chan, the
available balance increased rather than diminished.
Worse, the amount of available balance as reflected in
the tapes was way above the actual available balance of
less than Php200,000.00 that Chan’s current account had
at that time. These discrepancies must inevitably reflect
on the integrity of the journal tapes; the proven
inconsistencies in some aspects of these tapes leave the
other aspects suspect and uncertain.
But more than this, we are not convinced that
the tapes lead us to the inevitable conclusion that Chan’s
card, rather than a replacement card containing Chan’s
PIN and card number or some other equivalent scheme,
was used. To our mind, we cannot discount this
possibility given the available technology making
computer fraud a possibility, the cited instances of
computer security breaches, the admitted system bug,
and – most notably – the fact that the withdrawals were
made under circumstances that took advantage of the
system bug. System errors of this kind, when taken
advantage of to the extent that had happened in this
case, are planned for. Indeed, prior preparation must take
place to avoid suspicion and attention where the
withdrawal was made for seven (7) long hours in a place
frequented by hundreds of guests, over 242 transactions
where the physical volume of the money withdrawn was
not insignificant. To say that this was done by the owner
of the account based solely on the records of the
transactions, is a convenient but not a convincing
explanation.20
In our view, the CA’s ruling was correct.
To start with, Edgar Munarriz, FEBTC’s very own
Systems Analyst, admitted that the bug infecting the
bank’s computer system had facilitated the fraudulent
withdrawals.21 This admission impelled the CA to
thoroughly dissect the situation in order to determine the
consequences of the intervention of the system bug in
FEBTC’s computer system. It ultimately determined
thusly:
Significantly, FEBTC made the admission that
there was a program bug in its computer system. To
digress, computers are run based on specific pre-
arranged instructions or "programs" that act on data or
information that computer users input. Computers can
only process these inputted data or information
according to the installed programs. Thus, computers are
as efficient, as accurate and as convenient to use as the
instructions in their installed programs. They can count,
sort, compute and arrive at decisions but they do so only
and strictly in accordance with the programs that make
them work. To cite an easy example, a computer can be
programmed to sort a stack of cards prepared by male
and female clients, into male and female stacks,
respectively. To do this, the computer will first scan a card
and look at the place ("a field") where the male/female
information can be found. This information may be in an
appropriate box which the bank client checks or shades
to indicate if he/she is male or female. The computer will
check if the box beside the word "Female" is shaded. If it
is, it will send the card to the "Female" bin. If the box
beside the "male" is shaded, it will send the card to the
"Male" bin. If both the squares are shaded or none is
shaded or the card cannot be read, it will send the card
to the "Unknown" bin. This way, the female cards and the
male cards can be sorted efficiently. However, the
program instructions can be written in such a way that
the computer can only make two decisions, that is, if the
Female box is shaded, then the card goes to the "Female"
bin; otherwise, the card goes to the "Male" bin. In this
program, all the Female cards will be sorted correctly but
the Male bin will contain all the other cards, that is, the
Male cards, the cards with no shading at all, and all the
other cards that cannot be classified.
The imperfect results arose from the imperfect
program instructions or from a program "bug".
Something very close to this example happened in the
present case.
According to the testimony of the FEBTC’s
systems analyst, there were two computer programs that
were involved in the transactions: CAPDROTH and SCPUP
900. CAPDROTH is the program that validates if the
account exists in the FEBTC files, if the transaction is
valid, and if the branch where the account is maintained
is ON-LINE (i.e. continuously sending data). When the
Chan transaction entered the system, it was validated by
CAPDROTH which, on seeing that the FEBTC-Ongpin
branch was off-line, returned a decision code passing on
the decision to authorize the transaction to the SCPUP
900, another module. However, SCPUP 900 was not
expecting this type of response or decision code. As the
SCPUP 900 program was originally written, it will send
back an error message and abort a requested transaction
if it receives an error message from any other module;
otherwise, it will send a message authorizing the
transaction. In other words, SCPUP 900 had only two
decisions to make: check if the message is an error
message, if not then, authorize. Since what it received in
the disputed transactions were not error messages and
were not also authorizations, it sent back authorization
messages allowing the cash withdrawals. It kept on
sending authorization messages for the 242 cash
withdrawal transactions made from Chan’s account
between the evening of May 4 and early morning of May
5, 1992. This program bug was the reason the 242 cash
withdrawals were allowed by the PNB ATM-Megalink
machine.
The program bug occurred because of the
simultaneous presence of three conditions that allowed it
to happen: (1) the withdrawal transactions involved a
current account; (2) the current account was with a
branch that at that time was off-line; and (3) the
transaction originated from MEGALINK (i.e., through
MEGALINK through a member bank other than FEBTC).
Because of the bug, Chan’s account was not accessed at
the time of the transactions so that withdrawals in excess
of what the account contained were allowed.
Additionally, FEBTC’s rule that only a maximum
withdrawable amount per day (in the present
case P50,000.00 per day) can be made from an ATM
account, was by-passed. Thus, 242 withdrawals were
made over an eight hour period, in the total amount
ofP967,000.00.22
Secondly, the RTC’s deductions on the cause of
the withdrawals were faulty. In holding against Chan, the
RTC chiefly relied on inferences drawn from his acts
subsequent to the series of withdrawals, specifically his
attempt to withdraw funds from his account at an FEBTC
ATM facility in Ermita, Manila barely two days after the
questioned withdrawals; his issuance of a check
for P190,000.00 immediately after the capture of his ATM
card by the ATM facility; his failure to immediately report
the capture of his ATM card to FEBTC; and his going to
FEBTC only after the dishonor of the check he had issued
following the freezing of his account. The inferences were
not warranted, however, because the subsequent acts
would not persuasively establish his actual participation
in the withdrawals due to their being actually susceptible
of other interpretations consistent with his innocence.
We join the CA’s observation that Chan’s
subsequent acts "could have been impelled by so many
reasons and motivations, and cannot simply be given the
meaning that the lower court attributed to them," and,
instead, were even consistent with the purpose and
nature of his maintaining the current account deposit
with FEBTC, rendering the acts "not unusual nor …
illegal."23 Although he was expected to forthwith bring his
card’s capture to FEBTC’s attention, that he did not do so
could have other plausible explanations consistent with
good faith, among them his being constantly occupied as
a businessman to attend to the multifarious activities of
his business. He might have also honestly believed that
he still had the sufficient funds in his current account, as
borne out by his issuance of a check instead after the
capture of the card so as not for him to undermine any
financial obligation then becoming due. Nor should his
opting to withdraw funds from his account at the ATM
facility in Ermita in less than two days after the
questioned withdrawals manifest responsibility on his
part, for he could also be properly presumed to be then
still unaware of the situation involving his account. We
note that his letters 24 written in response to FEBTC’s
written demands to him disclosed honest intentions
rather than malice.
Thirdly, the RTC ignored the likelihood that
somebody other than Chan familiar with the bug
infection of FEBTC’s computer system at the time of the
withdrawals and adept with the workings of the
computer system had committed the fraud. This
likelihood was not far-fetched considering that FEBTC had
immediately adopted corrective measures upon its
discovery of the system bug, by which FEBTC admitted its
negligence in ensuring an error-free computer system;
and that the system bug had affected only the account of
Chan.25 Truly, the trial court misapprehended the extent
to which the system bug had made the computer system
of FEBTC stumble in serious error.
Fourthly, and perhaps the most damaging lapse,
was that FEBTC failed to establish that the PNB-
MEGALINK’s ATM facility at the Manila Pavilion Hotel had
actually dispensed cash in the very significantly large
amount alleged during the series of questioned
withdrawals. For sure, FEBTC should have proved the
actual dispensing of funds from the ATM facility as the
factual basis for its claim against Chan. It did require PNB
to furnish a validated showing of the exact level of cash
then carried by the latter’s ATM facility in the Manila
Pavilion Hotel on May 4, 1992.26 Yet, when PNB employee
Erwin Arellano stood as a witness for FEBTC, he
confirmed the authenticity of the journal tapes that had
recorded Chan’s May 4 and May 5, 1992 supposed ATM
transactions but did not categorically state how much
funds PNB-MEGALINK’s ATM facility at the Manila
Pavilion Hotel had exactly carried at the time of the
withdrawals, particularly the amounts immediately
preceding and immediately following the series of
withdrawals. The omission left a yawning gap in the
evidence against Chan.

And lastly, Chan’s allegation of an "inside job"

accounting for the anomalous withdrawals should not be
quickly dismissed as unworthy of credence or weight.
FEBTC employee Manuel Del Castillo, another witness for
FEBTC, revealed that FEBTC had previously encountered
problems of bank accounts being debited despite the
absence of any withdrawal transactions by their owners.
He attributed the problems to the erroneous tagging of
the affected accounts as somebody else’s account,
allowing the latter to withdraw from the affected
accounts with the use of the latter’s own ATM card, and
to the former’s account being debited. 27 The revelation of
Del Castillo tended to support Chan’s denial of liability, as
it showed the possibility of withdrawals being made by
another person despite the PIN being an exclusive access
number known only to the cardholder.28

It is true that Del Castillo also declared that

FEBTC did not store the PINs of its clients’ ATM cards.
However, he mentioned that FEBTC had stored the
opposite numbers corresponding to the PINs, which
meant that the PINs did not remain entirely irretrievable
at all times and in all cases by any of its officers or
employees with access to the bank’s computer system.
Accordingly, Del Castillo’s assertion that the PINs were
rendered useless upon being entered in the bank’s
computer system did not entirely disclose how the
information on the PINs of the depositors was stored or
discarded as to become useless for any purpose.

In view of the foregoing, FEBTC did not present

preponderant evidence proving Chan’s liability for the
supposedly fraudulent withdrawals. It thus failed in
discharging its burden of persuasion.

WHEREFORE, the Court AFFIRMS the decision of the

Court of Appeals; and DIRECTS the petitioner to pay the
costs of suit. SO ORDERED.

CONCLUSIVE PRESUMPTIONS

[G.R. No. 123817. December 17, 1999]

IBAAN RURAL BANK INC., petitioner, vs. THE COURT OF
APPEALS and MR. and MRS. RAMON
TARNATE, respondents.
DECISION
QUISUMBING, J.:
This petition for review under Rule 45 of the Rules
of Court seeks to set aside the decision of the Court of
Appeals in CA-G.R. CV No. 32984 affirming with
modification the decision of the Regional Trial Court of
Batangas, Branch 2, in Civil Case No. 534, as well as the
resolution of the Court of Appeals denying petitioners
motion for reconsideration.
The facts are as follows:
Spouses Cesar and Leonila Reyes were the owners
of three (3) lots covered by Transfer Certificate of Title
(TCT) Nos. 33206, 33207 and 33208 of the Register of
Deeds of Lipa City. On March 21, 1976, the spouses
mortgaged these lots to Ibaan Rural Bank, Inc. [herein
petitioner]. On June 11, 1976, with the knowledge and
consent of the petitioner, the spouses as sellers, and Mr.
and Mrs. Ramon Tarnate [herein private respondents] as
buyers, entered into a Deed of Absolute Sale with
Assumption of Mortgage of the lots in question. Private
respondents failed to pay the loan and the bank extra-
judicially foreclosed on the mortgaged lots. The Provincial
Sheriff conducted a public auction of the lots and
awarded the lots to the bank, the sole bidder. On
December 13, 1978, the Provincial Sheriff issued a
Certificate of Sale which was registered on October 16,
1979. The certificate stated that the redemption period
expires two (2) years from the registration of the sale. No
notice of the extrajudicial foreclosure was given to the
private respondents. On September 23, 1981, private
respondents offered to redeem the foreclosed lots and
tendered the redemption amount of
P77,737.45. However, petitioner Bank refused the
redemption on the ground that it had consolidated its
titles over the lots. The Provincial Sheriff also denied the
redemption on the ground that private respondents did
not appear on the title to be the owners of the lots.
Private respondents filed a complaint to compel the
bank to allow their redemption of the foreclosed
lots. They alleged that the extra-judicial foreclosure was
null and void for lack of valid notice and demand upon
them. They further argued that they were entitled to
redeem the foreclosed lots because they offered to
redeem and tendered the redemption price before
October 16, 1981, the deadline of the 2-year redemption
period.
The bank opposed the redemption, contending that
the private respondents had no right to redeem the lots
because they were not the real parties in interest; that at
the time they offered to redeem on September 23, 1981,
the right to redeem had prescribed, as more than one
year had elapsed from the registration of the Certificate
of Sale on October 16, 1979; that there was no need of
personal notice to them because under Section 3 of Act
3135, only the posting of notice of sale at three public
places of the municipality where the properties are
located was required.[1]
After trial on the merits, the lower court ruled in
favor of herein private respondents and against the
petitioner, thus:
WHEREFORE, in view of the foregoing, the Court renders
judgment in favor of the plaintiffs and against the
defendants, to wit:
(a) Ordering the defendant Ibaan Rural Bank Inc., and
Provincial Sheriff of Batangas for the redemption of the
foreclosed properties covered by Transfer Certificate of
Title Nos. T-33206, T-33207 and T-33208 of the Registry
of Deeds, Lipa City by the plaintiffs by paying the
mortgaged obligation.
(b) Ordering the Provincial Sheriff of Batangas to cancel
the Transfer Certificate of Titles issued to defendant
Ibaan Rural Bank, Inc. and its successors-in-interest and
to issue the corresponding Transfer of Certificate of Titles
to plaintiffs upon payment of the required legal fees.
(c) Ordering the defendant Ibaan Rural Bank, Inc., to pay
plaintiffs moral damages in the amount of P200,000.00,
and attorneys fees in the sum of P20,000.00.
All other claims not having been duly proved are ordered
DISMISSED.
Without pronouncement as to costs.
SO ORDERED.[2]
On appeal, the Court of Appeals affirmed with
modification the decision of the lower court. The
dispositive portion of the CA decision reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED with the following modifications:
1. The register of Deeds of Lipa City is hereby ordered to
cancel the Certificate of Titles issued to defendant Ibaan
Rural Bank, Inc. and its successor-in-interest and to issue
the corresponding Transfer Certificate of Title to
plaintiffs-appellees upon proper redemption of the
properties and payment of the required legal fees.
2. Defendant Ibaan Rural bank, is hereby ordered to pay
to plaintiffs the amount of P15,000.00 as attorneys fees.
3. The moral damages awarded in favor of plaintiffs is
hereby ordered deleted.
SO ORDERED.[3]
A timely Motion for Reconsideration was filed by
the petitioner but the same was denied in a Resolution
dated February 14, 1996. Hence, this petition.
Petitioner assigns the following errors:
1. THE RESPONDENT COURT ERRED AND, ACCORDINGLY,
THE PETITIONER IS ENTITLED TO A REVIEW OF ITS
DECISION, WHEN IT SUSTAINED AVAILABILITY OF
REDEMPTION DESPITE THE LAPSE OF ONE YEAR FROM
DATE OF REGISTRATION OF THE CERTIFICATE OF SALE.
2. THE RESPONDENT COURT ERRED AND, ACCORDINGLY,
THE PETITIONER IS ENTITLED TO A REVIEW OF ITS
DECISION, WHEN THE RESPONDENT COURT ALLOWED
RECOVERY OF ATTORNEYS FEES SIMPLY BECAUSE THE
PETITIONER DID NOT ALLOW THE PRIVATE RESPONDENTS
TO EXERCISE BELATEDLY REDEMPTION OF THE
FORECLOSED PROPERTY.[4]
Essentially, two issues are raised for
resolution. What was the period of redemption: two
years as unilaterally fixed by the sheriff in the contract, or
one year as fixed by law? May respondent court properly
award attorneys fees solely on the basis of the refusal of
the bank to allow redemption?
We now resolve these issues.
When petitioner received a copy of the Certificate
of Sale registered in the Office of the Register of Deeds of
Lipa City, it had actual and constructive knowledge of the
certificate and its contents.[5] For two years, it did not
object to the two-year redemption period provided in the MODIFICATION that the award of attorneys fees is
certificate. Thus, it could be said that petitioner deleted. No pronouncement as to costs.
consented to the two-year redemption period specially SO ORDERED.
since it had time to object and did not. When Bellosillo, (Chairman), Mendoza, Buena, and De
circumstances imply a duty to speak on the part of the Leon, Jr., JJ., concur.
person for whom an obligation is proposed, his silence
can be construed as consent.[6] By its silence and inaction,
petitioner misled private respondents to believe that
they had two years within which to redeem the
mortgage. After the lapse of two years, petitioner is
estopped from asserting that the period for redemption
was only one year and that the period had already
lapsed. Estoppel in pais arises when one, by his acts,
representations or admissions, or by his own silence
when he ought to speak out, intentionally or through
culpable negligence, induces another to believe certain
facts to exist and such other rightfully relies and acts on
such belief, so that he will be prejudiced if the former is
permitted to deny the existence of such facts.[7]
In affirming the decision of the trial court, the Court
of Appeals relied on Lazo vs. Republic Surety and
Insurance Co., Inc.,[8] where the court held that the one
year period of redemption provided in Act No. 3135 is
only directory and can be extended by agreement of the
parties. True, but it bears noting that in Lazo the
parties voluntarily agreed to extend the redemption
period. Thus, the concept of legal redemption was
converted by the parties in Lazo into conventional
redemption. This is not so in the instant case. There was
no voluntary agreement. In fact, the sheriff unilaterally
and arbitrarily extended the period of redemption to two
(2) years in the Certificate of Sale. The parties were not
even privy to the extension made by the
sheriff. Nonetheless, as above discussed, the bank can
not after the lapse of two years insist that the
redemption period was one year only.
Additionally, the rule on redemption is liberally
interpreted in favor of the original owner of a
property. The fact alone that he is allowed the right to
redeem clearly demonstrates the solicitousness of the
law in giving him another opportunity, should his fortune
improve, to recover his lost property.[9]
Lastly, petitioner is a banking institution on whom
the public expects diligence, meticulousness and mastery
of its transactions. Had petitioner diligently reviewed the
Certificate of Sale it could have easily discovered that the
period was extended one year beyond the usual period
for redemption. Banks, being greatly affected with public
interest, are expected to exercise a degree of diligence in
the handling of its affairs higher than that expected of an
ordinary business firm.[10]
On the second issue, the award of attorneys fees
must be disallowed for lack of legal basis. The fact that
private respondents were compelled to litigate and incur
expenses to protect and enforce their claim does not
justify the award of attorneys fees. The general rule is
that attorneys fees cannot be recovered as part of
damages because of the public policy that no premium
should be placed on the right to litigate. [11] The award of
attorneys fees must be deleted where the award of moral
and exemplary damages are eliminated.[12]
WHEREFORE, the decision of the Court of Appeals [G.R. No. 128568. April 9, 2003]
in CA-G.R. CV No. 32984 is AFFIRMED, with the
SPOUSES REYNALDO ALCARAZ and ESMERALDA
ALCARAZ, petitioners, vs. PEDRO M. TANGGA-
 AN, MENAS R. TANGGA-AN, VIRGINIA III
YVETTE R. TANGGA-AN, CECIL T. VILLAFLOR,
HERMES R. TANGGA-AN, VENUS R. TANGGA-
AN, JUPITER R. TANGGA-AN, YVONNE T. FRI,
VIVIEN R. TANGGA-AN and HON. JUDGE P.
BURGOS and THE COURT OF
APPEALS, respondents.
DECISION
CORONA, J.:
Before us is a petition for review of the
decision[1] dated January 10, 1997 of the Court of
Appeals[2] affirming the decision[3] dated June 26, 1995 of
the Regional Trial Court (RTC) of Cebu City, Branch 17,
which in turn upheld the decision [4] dated January 5, 1995
of the Municipal Trial Court (MTC) of Cebu City, Branch 2,
ordering the ejectment of the petitioner spouses from
the house they were renting from respondents.
On October 4, 1994, respondents Pedro Tangga-an,
Menas Tangga-an, Virginia III Yvette Tangga-an, Cecil
Villaflor, Hermes Tangga-an, Venus Tangga-an, Jupiter
Tangga-an, Yvonne Fri and Vivien Tangga-an filed a
complaint for unlawful detainer, with damages, docketed
as Civil Case No. R-33928, against petitioner spouses
Reynaldo Alcaraz and Esmeralda Alcaraz.
The complaint alleged that the late Virginia Tangga-
an (the spouse of respondent Pedro Tangaa-an and
mother of the rest of the respondents) leased a
residential building (house) located at Premier Street,
Hipodromo, Cebu City to the petitioner spouses. The
lease contract was limited to the use and occupancy of
the said residential building and did not include the lot
on which it was constructed because the said lot was
then owned by the National Housing Authority (NHA).
Under the contract, the petitioner spouses bound
themselves for five years to pay Virginia a monthly rental
of P4,000 beginning November 22, 1991. However, since
November 1993, they failed to pay rent. Thus, as of
October, 1994, they were in arrears in the amount
of P48,000. Despite repeated demands by respondents to
pay the rentals in arrears and to surrender the possession
of the residential building, the petitioner spouses refused
to vacate the same. Respondents sought to repossess the
property for their own use and benefit. On the other
hand, the petitioner spouses alleged that, on July 23,
1993, the ownership of the lot on which the house stood
was transferred by the NHA to Virgilio and Angelita D.
Tangga-an. Virgilio Tangga-an is the son of the late Virgilia
Tangga-an and respondent Pedro Tangga-an, and the
brother of the other respondents. Transfer Certificate of
Title No. 125657 was consequently issued in the name of
Virgilio Tangga-an. According to the petitioner spouses,
the subsequent change in ownership of the lot and the
house resulted in the cancellation of the contract of lease
between respondents and petitioner spouses. Thereafter,
they paid the rent to the new owners of the lot (Virgilio
and Angelita) and not to respondents since the latter
supposedly no longer had the legal right to collect
rentals.
On January 5, 1995, the MTC rendered a decision,
the dispositive portion of which read:
WHEREFORE, Judgment is entered by way of
preponderance of evidence in favor of plaintiffs and
against the defendants, Ordering the latter to vacate the
premises immediately, including all those who are
occupying the subject house in relation to them; They are
also jointly ordered to pay the sum of P48,000
representing rental payment in arrears from November,
1993 up to October, 1994 and to update monthly
payment of P4,000 thereafter until their vacation
therefrom; They are saddled to pay attorneys fees in the
sum of P5,000 and litigation costs in the amount of
P1,000.
SO ORDERED.[5]
In ruling in favor of the respondents, the MTC held
that the petitioner spouses clearly violated the contract
of lease due to non-payment of rent. They failed to show
that the subject house belonged to Virgilio alone. On the
other hand, the respondents proved that, after the death
of Virgilia, they registered said house in the name of their
trustees, co-respondents Hermes Tangga-an and his wife.
Furthermore, considering that Virgilios claim of
ownership over the lot was the subject of a pending
litigation for annulment of deed of sale and reconveyance
of property involving the Tangga-ans, the MTC ruled that
it cannot usurp to pass judgment on the issues, as well as
the conflicting claims of the parties therein. [6] On appeal,
the RTC affirmed the decision of the MTC, and held that:
xxx [D]efendants failed to present any documentary
evidence modifying or amending the contract of lease
(Annex C, complaint) to justify the transfer of payment of
the monthly rental to Virgilio Tanga-an who claims only as
the registered owner of the lot on which the leased
house is located. It appears that Virgilio Tanga-an does
not possess any proof of ownership of the rented house.
Clearly, defendants had violated the lease agreement
executed between them and the deceased lessor Virginia
R. Tangga-an (sic) the predecessor in interest of Hermes
Tangaa-an and his wife as shown in the Tax Declaration of
the said spouses (Annex A, complaint) whose name
appears under the space for previous owner by stopping
payment of rental to the present owner despite the
existence of the contract of lease which expires on
November 22, 1996. The law on contracts basically
states:
Obligations arising fro contracts have the force of law
between the contracting parties and should be complied
with in good faith. (Article 1159, New Civil Code of the
Philippines).
xxx xxx xxx[7]
In denying the petition for review and affirming the
judgments of the courts a quo, the Court of Appeals ruled
that:
We also concur with the holding of both courts that as
heirs of Virginia Tangga-an, private respondents have the
right to institute the action for ejectment, in accordance
with Article 487 of the Civil Code; and that the claim of
petitioner that Virgilio Tangga-an owns the lot where the
leased residential building stands and occupied by
petitioners is still the subject of a civil action for
annulment of the sale of the lot before the Regional Trial
Court of Cebu. It does not follow as a matter of course
that whoever owns the lot owns the building in question.
Ownership of the lot cannot change the nature and
ownership of the building, which belongs to the plaintiffs
as heirs of the late Virginia Tangga-an through Ernest
Tangga-an and his wife. Respondent court correctly
reasoned out that xxx defendants cannot hide over the
cloak of Virgilio Tangga-an, his claim of ownership over
the lot as far as the Court is concerned being irrelevant to
this case xxx. Most importantly, the action involving the
question of ownership of the lot is not a lawful ground to
suspend/abate the ejectment proceeding. The rationale
of the rule being that an ejecment suit involves only the
issue of material possession or possession de facto (San
Pedro vs. Court of Appeals, 235 SCRA 145, 150, and cases
cited).[8]
Hence, this petition on the following assignments of
error:
I incorporated or attached thereto, either naturally or
THE LEASE CONTRACT EXECUTED BY PETITIONERS
WITH VIRGINIA TANGGA-AN, PLAINTIFFS PREDECESSOR-
IN-INTEREST, COVERED NOT ONLY THE LAND, BUT ALSO
THE IMPROVEMENT THEREON, INCLUDING THE
BUILDING.
II
VIRGILIO TANGGA-AN, AS ONE OF THE HEIRS OF
VIRGINIA, HAD THE SAME RIGHTS OVER THE PROPERTY
AS THOSE OF THE OTHER HEIRS, THE PLAINTIFFS. HENCE,
VIRGILIO MAY NOT BE EXCLUDED UNILATERALLY BY THE
OTHER HEIRS IN HIS ENJOYMENT OF HIS HEREDITARY
RIGHTS.
III
THE REGISTRATION OF THE LAND, INCLUDING THE
IMPROVEMENTS THEREON, IN THE NAME OF VIRGILIO
TANGGA-AN UNDER THE TORRENS SYSTEM IS
INDEFEASIBLE AND MAY NOT BE ATTACKED
COLLATERALLY IN THE PRESENT ILLEGAL DETAINER CASE.
[9]
We rule in favor of the respondents.
Section 16 of the 1997 Revised Rules of Civil
Procedure provides that:
SEC. 16. Resolving defense of ownership. - When the
defendant raises the defense of ownership in his
pleadings and the question of possession cannot be
resolved without deciding the issue of ownership, the
issue of ownership shall be resolved only to determine
the issue of possession.
The issue of ownership is precisely what the
petitioner spouses raised to justify their non-payment of
rent and to resist eviction from the house they leased
from respondents. Being indispensable to the resolution
of the issue of possession, we herein render a provisional
ruling on ownership.
Petitioner spouses seek a dismissal of the case for
lack of jurisdiction claiming that the only issue to be
resolved is ownership over the house which is improper
in an ejectment case. We disagree. The issue in the case
at bar is whether the petitioner spouses, as lessees, were
excused from paying the rent because of the change in
the ownership of the land on which the rented house was
built. The main question therefore is still the lawful
possession of the subject premises by the petitioner
spouses. To resolve it, a discussion of the ownership issue
is necessary.
The petitioner spouses insist that the courts a
quo erred in not finding that Virgilio Tangga-an became
the new owner not only of the lot but also of the
residential house. They claim that, before she died,
Virginia, the original owner of the subject house, waived
and ceded her rights over the land in favor of Virgilio. The
said transfer allegedly included the subject house
because, pursuant to Article 440 of the Civil Code, the
ownership of the property gives the right of accession to
everything which is produced thereby, or which is
artificially. They also maintain that the NHA executed a
deed of sale of both the house and the lot in favor of
Virgilio. According to the petitioner spouses, the tax
declaration over the house in the name of respondent
Hermes Tangga-an, as trustee of the other respondents,
was self-serving and had no probative value compared to
the certificate of title over the lot in the name of Virgilio
Tangga-an.
We find no merit in petitioners arguments.
Pursuant to Section 1, Rule 45 of the 1997 Revised
Rules of Civil Procedure, a petition for review before this
Court should only raise questions of law. In the absence
of showing that the case falls under one of the
exceptions,[10] factual findings of the Court of Appeals are
conclusive on the parties and not reviewable by this
Court. And they carry even more weight when the Court
of Appeals affirms the factual findings of the trial court.
As such, this Court is not duty-bound to analyze and
weigh all over again the evidence already considered in
the proceedings below.[11]
The courts a quo were unanimous in holding that
the petitioner spouses failed to substantiate their factual
averment that Virgilio not only acquired the lot but also
the house. After examining the records, we found
nothing to disprove the facts determined by the lower
courts. All the petitioner spouses presented was Virgilios
uncertified xerox copy of the certificate of title over the
lot. No document was ever shown evidencing cession of
the subject house in Virgilios favor. Virgilios title could
not be used to prove ownership over the house built on
said lot as it carried no reference at all to the house. A
building by itself is a real or immovable property distinct
from the land on which it is constructed [12] and therefore
can be a separate subject of contracts. On the other
hand, the respondents proved that, as compulsory heirs
of Virginia, they were the rightful owners of the subject
house. They presented a tax declaration in the name of
their trustees, co-respondent Hermes Tangga-an and his
wife, which tax declaration sufficiently evidences their co-
ownership and acquisition of title following the death of
the decedent Virginia. We have ruled that:Although tax
declarations or realty tax payment of property are not
conclusive evidence of ownership, nevertheless, they are
good indicia of possession in the concept of owner for no
one in his right mind would be paying taxes for a property
that is not in his actual or at least constructive
possession. They constitute at least proof that the holder
has a claim of title over the property. The voluntary
declaration of a piece of property for taxation purposes
manifests not only ones sincere and honest desire to
obtain title to the property and announces his adverse
claim against the State and all other interested parties,
but also the intention to contribute needed revenues to
the Government. Such an act strengthens ones bona
fide claim of acquisition of ownership.[13]
One of the factual issues raised by the petitioner
spouses concerns the alleged waiver and cession of
Virginias rights over the house and lot to Virgilio. But the
petitioner spouses did not mention any consideration
received by Virginia for the waiver of the house, in effect
making said waiver a donation thereof to Virgilio.
However, in order for a donation of real property like a
house to be valid, a public instrument duly signed by the
donor and accepted by the donee (which acceptance
must be known to the donor while alive) must be
executed.[14]Moreover, said donation must not impair the
legitime of the forced heirs of the donor in order for the
same not to be inofficious.[15] In the case at bar, no such
public instrument was presented. Neither was it
explained why said waiver did not impair the rights of the
other compulsory heirs of Virginia.
To support their argument that the house
necessarily became Virgilios property as a result of the
acquisition of the lot on which the same was built, the
petitioner spouses invoke the principle that the accessory
follows the principal. Being an accessory, the house is
necessarily owned by the owner of the lot on which it is
built.
There is no need, however, to disturb and analyze
the applicability of this well-entrenched principle
because the petitioner spouses are estopped from raising
the same. Both parties knew that their contract
pertained only to the lease of the house, without
including the land. The contract states: 1. That the lessor
is the owner of a building of mixed materials situated at
Premier St., Mabolo, Hipodromo, Cebu City. [16] At the
time of the perfection of the contract, the petitioner
spouses, as lessees, were aware that the NHA, and not
Virginia, the lessor, owned the land on which the rented
house stood yet they signed the same, obliged
themselves to comply with the terms thereof for five
years and performed their obligations as lessees for two
years. Now they assume a completely different legal
position. They claim that the lease contract ceased to be
effective because Virgilios assumption of ownership of
the land stripped the respondents of ownership of the
building. They argue that, under Article 440 of the Civil
Code, Virgilios title over the lot necessarily included the
house on the said lot, thus automatically canceling the
contract.
Section 2, Rule 131 of the Rules of Court provides as
a conclusive presumption that:
Sec. 2. Conclusive presumptions. The following are
instances of conclusive presumptions:
(a) Whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such
declaration, act or omission, be permitted to falsify it;
xxx xxx xxx
After recognizing the validity of the lease contract
for two years, the petitioner spouses are barred from
alleging the automatic cancellation of the contract on the
ground that the respondents lost ownership of the house
after Virgilio acquired title over the lot.
We also note that the petitioner spouses rescinded
the contract of lease without judicial approval. Due to the
change in ownership of the land, the petitioner spouses
decided to unilaterally cancel the contract because
Virgilio supposedly became the new owner of the house
after acquiring title to the lot. They alleged that there
was no reason anymore to perform their obligations as
lessees because the lessor had ceased to be the owner of
the house. But there is nothing in their lease contract
that allows the parties to extrajudicially rescind the same
in case of violation of the terms thereof. Extrajudicial
rescission of a contract is not possible without an express
stipulation to that effect.[17] What the petitioner spouses
should have done was to file a special civil action for
interpleader for the claimants to litigate their claims and
to deposit the rentals in court.
The petitioner spouses aver that their payments to
Virgilio beginning November, 1993 were payments made
in good faith to a person in possession of the credit, in
consonance with Article 1242 of the Civil Code. [18] This
therefore released them from their obligation. They claim
that Virgilio collected the rentals in his capacity as a co-
owner. Being a son of Virginia, he was also entitled to the
rent of the subject house. We disagree. Virgilio collected
the rentals not as a co-owner but as the alleged sole
owner of the subject house. The petitioner spouses
themselves admitted that Virgilio claimed sole ownership
of the house and lot. It would be incongruous for them to
now assert payment in good faith to a person they
believed was collecting in behalf of his co-heirs after
admitting that they paid rent to Virgilio as the sole owner
thereof.
Hence, for violating of the terms of the lease
contract, i.e., payment of rent, respondents can legally
demand the ejectment of the petitioner spouses.
WHEREFORE, the decision dated January 10, 1997
of the Court of Appeals is hereby AFFIRMED. With costs
against the petitioners.
[ G.R. No. 194964-65, January 11, 2016 ]
UNIVERSITY OF MINDANAO, INC., PETITIONER, VS.
BANGKO SENTRAL PILIPINAS, ET AL., RESPONDENTS.
DECISION
LEONEN, J.:
Acts of an officer that arc not authorized by the board of
directors/trustees do not bind the corporation unless the
corporation ratifies the acts or holds the officer out as a
person with authority to transact on its behalf.
This is a Petition for Review on Certiorari [1] of the Court of
Appeals' December 17, 2009 Decision[2] and December
20, 2010 Resolution.[3] The Court of Appeals reversed the
Cagayan De Oro City trial court's and the Iligan City trial
court's Decisions to nullify mortgage contracts involving
University of Mindanao's properties.[4]
University of Mindanao is an educational institution. For
the year 1982, its Board of Trustees was chaired by
Guillermo B. Torres. His wife, Dolores P. Torres, sat as
University of Mindanao's Assistant Treasurer. [5]
Before 1982, Guillermo B. Torres and Dolores P. Torres
incorporated and operated two (2) thrift banks: (1) First
Iligan Savings & Loan Association, Inc. (FISLAI); and (2)
Davao Savings and Loan Association, Inc. (DSLAI).
Guillermo B. Torres chaired both thrift banks. He acted as
FISLAI's President, while his wife, Dolores P. Torres, acted
as DSLAI's President and FISLAI's Treasurer. [6]
Upon Guillermo B. Torres' request, Bangko Sentral ng
Pilipinas issued a P1.9 million standby emergency credit
to FISLAI. The release of standby emergency credit was
evidenced by three (3) promissory notes dated February
8, 1982, April 7, 1982, and May 4, 1982 in the amounts of
P500,000.00, P600,000.00, and P800,000.00,
respectively. All these promissory notes were signed by
Guillermo B. Torres, and were co-signed by either his
wife, Dolores P. Torres, or FISLAI's Special Assistant to the
President, Edmundo G. Ramos, Jr.[7]
On May 25, 1982, University of Mindanao's Vice
President for Finance, Saturnino Petalcorin, executed a
deed of real estate mortgage over University of
Mindanao's property in Cagayan de Oro City (covered by
Transfer Certificate of Title No. T-14345) in favor of
Bangko Sentral ng Pilipinas.[8] "The mortgage served as
security for FISLAI's PI.9 Million loan[.]"[9] It was allegedly
executed on University of Mindanao's behalf.[10]
As proof of his authority to execute a real estate
mortgage for University of Mindanao, Saturnino
Petalcorin showed a Secretary's Certificate signed on
April 13, 1982 by University of Mindanao's Corporate
Secretary, Aurora de Leon.[11] The Secretary's Certificate
stated:
That at the regular meeting' of the Board of Trustees of
the aforesaid corporation [University of Mindanao] duly
convened on March 30, 1982, at which a quorum was
present, the following resolution was unanimously
adopted:
"Resolved that the University of Mindanao, Inc. be and is
hereby authorized, to mortgage real estate properties
with the Central Bank of the Philippines to serve as
security for the credit facility of First Iligan Savings and
Loan Association, hereby authorizing the President
and/or Vice-president for Finance, Saturnino R. Petalcorin
of the University of Mindanao,- Inc. to sign, execute and
deliver the covering mortgage document or any other
documents which may be proper[l]y required."[12]
The Secretary's Certificate was supported by an excerpt
from the minutes of the January 19, 1982 alleged
meeting of University of Mindanao's Board of Trustees.
The excerpt was certified by Aurora de Leon on March 13,
1982 to be a true copy of University of Mindanao's
records on file.[13] The excerpt reads:
3 - Other Matters:
(a) Cagayan de Oro and Iligan properties:
Resolution No. 82-1-8
Authorizing the Chairman to appoint Saturnino R.
Petalcorin, Vice-President for Finance, to represent the
University of Mindanao to transact, transfer, convey,
lease, mortgage, or otherwise hypothecate any or all of
the following properties situated at Cagayan de Oro and
Iligan City and authorizing further Mr. Petalcorin to sign
any or all documents relative thereto:
1. A parcel of land situated at Cagayan de Oro City,
covered and technically described in TRANSFER
CERTIFICATE OF TITLE No. T-14345 of the
Registry of Deeds of Cagayan de Oro City;
2. A parcel of land situated at Iligan City, covered
and technically described in TRANSFER
CERTIFICATE OF TITLE NO..T-15696 (a.t.) of the
Registry of Deeds of Iligan City; and
3. A parcel of land situated at Iligan City, covered
and technically described in TRANSFER
CERTIFICATE OF TITLE NO. T-15697 (a.f.) of the
Registry of Deeds of Iligan City.[14]
The mortgage deed executed by Saturnino Petalcorin in
favor of Bangko Sentral ng Pilipinas was annotated on the
certificate of title of the Cagayan de Oro City property
(Transfer Certificate of Title No. 14345) on June 25, 1982.
Aurora de Leon's'certification was also annotated on the
Cagayan de Oro City property's certificate of title
(Transfer Certificate of Title No. 14345).[15]
On October 21, 1982, Bangko Sentral ng Pilipinas granted
FISLAI an additional loan of P620,700.00. Guillermo B.
Torres and Edmundo Ramos executed a promissory note
on October 21, 1982 to cover that amount.[16]
On November 5, 1982, Saturnino Petalcorin executed
another deed of real estate mortgage, allegedly on behalf
of University of Mindanao, over its two properties in
Iligan City. This mortgage served as additional security for
FISLAI's loans. The two Iligan City properties were
covered by Transfer Certificates of Title Nos, T-15696 and
T-15697.[17]
On January 17, 1983, Bangko Sentral ng Pilipinas'
mortgage lien over the Iligan City properties and Aurora
de Leon's certification were annotated on Transfer
Certificates of Title Nos. T-15696 and T-15697. [18] On
January 18, 1983, Bangko Sentral ng Pilipinas' mortgage
lien over the Iligan City properties was also annotated on
the tax declarations covering the Iligan City properties.[19]
Bangko Sentral ng Pilipinas also granted emergency
advances to DSLAI on May 27, 1983 and on August 20,
1984 in the amounts of P1,633,900.00 and
P6,489,000.00, respectively.[20]
On January 11, 1985, FISLAI, DSLAI, and Land Bank of the
Philippines entered into a Memorandum of Agreement
intended to rehabilitate the thrift banks, which had been
suffering from their depositors' heavy withdrawals.
Among the terms of the agreement was the merger of
FISLAI and DSLAI, with DSLAI as the surviving corporation.
DSLAI later became known as Mindanao Savings and
Loan Association, Inc. (MSLAI).[21]
Guillermo B. Torres died on March 2, 1989.[22]
MSLAI failed to recover from its losses and was liquidated
on May 24, 1991.[23]
On June 18, 1999, Bangko Sentral ng Pilipinas sent a
letter to University of Mindanao, informing it that the
bank would foreclose its properties if MSLAI's total
outstanding obligation of P12,534,907.73 remained
unpaid.[24]
In its reply to Bangko Sentral ng Pilipinas' June 18, 1999
letter, University of Mindanao, through its Vice President
for Accounting, Gloria E. Detoya, denied that University
of Mindanao's properties were mortgaged. It also denied
having received any loan proceeds from Bangko Sentral
ng Pilipinas.[25]
On July 16, 1999, University of Mindanao filed two
Complaints for nullification and cancellation of mortgage.
One Complaint was filed before the Regional Trial Court
of Cagayan de Oro City, and the other Complaint was filed
before the Regional Trial Court of Iligan City. [26]
University of Mindanao alleged in its Complaints that it
did not obtain any loan from Bangko Sentral ng Pilipinas.
It also did not receive any loan proceeds from the bank.
[27]
University of Mindanao also alleged that Aurora de
Leon's certification was anomalous. It never authorized
Saturnino Petalcorin to execute real estate mortgage
contracts involving its properties to secure FISLAI's debts.
It never ratified the execution of the mortgage contracts.
Moreover, as an educational institution, it cannot
mortgage its properties to secure another person's debts.
[28]
On November 23, 2001, the Regional Trial Court of
Cagayan de Oro City rendered a Decision in favor of
University of Mindanao,[29] thus:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff and against defendants:
1. DECLARING the real estate mortgage Saturnino R.
Petalcorin executed in favor of BANGKO SENTRAL NG
PILIPINAS involving Lot 421-A located in Cagayan de Oro
City with an area of 482 square meters covered by TCT
No. T-14345 as annuled [sic];
2. ORDERING the Register of Deeds of Cagayan de Oro
City to cancel Entry No. 9951 and Entry No. 9952
annotated at the back of said TCT No. T-14345, Registry
of Deeds of Cagayan de Oro City;
Prayer for attorney's fee [sic] is hereby denied there
being no proof that in demanding payment of the
emergency loan, defendant BANGKO SENTRAL NG
PILIPINAS was motivated by evident bad faith,
SO ORDERED.[30] (Citation omitted)
The Regional Trial Court of Cagayan de Oro City found
that there was no board resolution giving Saturnino
Petalcorin authority to execute mortgage contracts on
behalf of University of Mindanao. The Cagayan de Oro
City trial court gave weight to Aurora de Leon's testimony
that University ofMindanao's Board of Trustees did not
issue a board resolution that would support the
Secretary's Certificate she issued. She testified that she
signed the Secretary's Certificate only upon Guillermo B.
Torres' orders.[31]
Saturnino Petalcorin testified that he had no authority to
execute a mortgage contract on University ofMindanao's
behalf. He merely executed the contract because of
Guillermo B. Torres' request.[32]
Bangko Sentral ng Pilipinas' witness Daciano Pagui, Jr.
also admitted that there was no board resolution giving
Saturnino Petalcorin authority to execute mortgage
contracts on behalf of University of Mindanao.[33]
The Regional Trial Court of Cagayan de Oro City ruled that
Saturnino Petalcorin was not authorized to execute
mortgage contracts for University of Mindanao. Hence,
the mortgage of University ofMindanao's Cagayan de Oro
City property was unenforceable. Saturnino Petalcorin's
unauthorized acts should be annulled.[34]
Similarly, the Regional Trial Court of Iligan City rendered a
Decision on December 7, 2001 in favor of University of
Mindanao.[35] The dispositive portion of the Decision
reads:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiff and against the
defendants, as follows:
1. Nullifying and canceling [sic] the subject Deed of Real
Estate Mortgage dated November 5, 1982 for being
unenforceable or void contract;
2. Ordering the Office of the Register of Deeds of Iligan
City to cancel the entries on TCT No. T-15696 and TCT No.
T- 15697 with respect to the aforesaid Deed of Real
Estate Mortgage dated November 5, 1982 and all other
entries related thereto;
3. Ordering the defendant Bangko Sentral ng Pilipinas to
return the owner's duplicate copies of TCT No. T-15696
and TCT No. 15697 to the plaintiff;
4. Nullifying the subject [foreclosure [proceedings and
the [a]uction [s]ale conducted by defendant Atty. Gerardo
Paguio, Jr. on October 8, 1999 including all the acts
subsequent thereto and ordering the Register of Deeds of
Iligan City not to register any Certificate of Sale pursuant
to the said auction sale nor make any transfer of the
corresponding titles, and if already registered and
transferred, to cancel all the said entries in TCT No. T-
15696 and TCT No. T-15697 and/or cancel the
corresponding new TCTs in the name of defendant
Bangko Sentral ng Pilipinas;
5. Making the Preliminary Injunction per Order of this
Court dated October 13, 2000 permanent.
No pronouncement as to costs.[36] (Citation omitted)
The Iligan City trial court found that the Secretary's
Certificate issued by Aurora de Leon was fictitious[37] and
irregular for being unnumbered.[38] It also did not specify
the identity, description, or location of the mortgaged
properties.[39]
The Iligan City trial court gave credence to Aurora de
Leon's testimony that the University of Mindanao's Board
of Trustees did not take up the documents in its
meetings. Saturnino Petalcorin corroborated her
testimony.[40]
The Iligan City trial court ruled that the lack of a board
resolution authorizing Saturnino Petalcorin to execute
documents of mortgage on behalf of University of
Mindanao made the real estate mortgage contract
unenforceable under Article 1403[41] of the Civil Code.
[42]
The mortgage contract and the subsequent acts of
foreclosure and auction sale were void because the
mortgage contract was executed without University of
Mindanao' s authority.[43]
The Iligan City trial court also ruled that the annotations
on the titles of University of Mindanao's properties do
not operate as notice to the University because
annotations only bind third parties and not owners.
[44]
Further, Bangko Sentral ng Pilipinas' right to foreclose
the University of Mindanao's properties had already
prescribed.[45]
Bangko Sentral ng Pilipinas separately appealed the
Decisions of both the Cagayan de Oro City and the Iligan
City trial courts.[46]
After consolidating both cases, the Court of Appeals
issued a Decision on December 17, 2009 in favor of
Bangko Sentral ng Pilipinas, thus:
FOR THE REASONS STATED, the Decision dated 23
November 2001 of the Regional Trial Court of Cagayan de
Oro City, Branch 24 in Civil Case No. 99-414 and the
Decision dated 7 December 2001 of the Regional Trial
Court of Iligan City, Branch 1 in Civil Case No. 4790
are REVERSED and SET ASIDE. The Complaints in both
cases before the trial courts are DISMISSED. The Writ of
Preliminary Injunction issued by the Regional Trial Court
of Iligan City, Branch 1 in Civil Case No. 4790
is LIFTED and SET ASIDE.
SO ORDERED.[47]
The Court of Appeals ruled that "[although BSP failed to
prove that the UM Board of Trustees actually passed a
Board Resolution authorizing Petalcorin to mortgage the
subject real properties,"[48] Aurora de Leon's Secretary's
Certificate "clothed Petalcorin with apparent and
ostensible authority to execute the mortgage deed on its
behalf[.]"[49] Bangko Sentral ng Pilipinas merely relied in
good faith on the Secretary's Certificate.[50] University of
Mindanao is estopped from denying Saturnino
Petalcorin's authority.[51]
Moreover, the Secretary's Certificate was notarized. This
meant that it enjoyed the presumption of regularity as to
the truth of its statements and authenticity of the
signatures.[52] Thus, "BSP cannot be faulted for relying on
the [Secretary's Certificate.]"[53]
The Court of Appeals also ruled that since University of
Mindanao's officers, Guillermo B. Torres and his wife,
Dolores P. Torres, signed the promissory notes, University
of Mindanao was presumed to have knowledge of the
transaction.[54] Knowledge of an officer in relation to
matters within the scope of his or her authority is notice
to the corporation.[55]
The annotations on University of Mindanao's certificates
of title also operate as constructive notice to it that its
properties were mortgaged.[56] Its failure to disown the
mortgages for more than a decade was implied
ratification.[57]
The Court of Appeals also ruled that Bangko Sentral ng
Pilipinas' action for foreclosure had not yet prescribed
because the due date extensions that Bangko Sentral ng
Pilipinas granted to FISLAI extended the due date of
payment to five (5) years from February 8, 1985.[58] The
bank's demand letter to Dolores P. Torres on June 18,
1999 also interrupted the prescriptive period. [59]
University of Mindanao and Bangko Sentral ng Pilipinas
filed a Motion for Reconsideration60 and Motion for
Partial Reconsideration respectively of the Court of
Appeals' Decision. On December 20, 2010, the Court of
Appeals issued a Resolution, thus:
Acting on the foregoing incidents, the Court RESOLVES to:
 1. GRANT the appellant's twin motions for Saturnino Petalcorin.
extension of time to file comment/opposition
and NOTE the Comment . on the appellee's We grant the Petition.
Motion for Reconsideration it subsequently filed
on June 23, 2010; I

2. GRANT the appellee's three (3) motions for
extension of time to file comment/opposition
and NOTE the Comment on the appellant's
Motion for Partial Reconsideration it filed on July
26, 2010;
3. NOTE the appellant's "Motion for Leave to File
Attached Reply Dated August 11, 2010" filed on
August 13, 2010 and DENY the attached "Reply
to Comment Dated July 26, 2010";
4. DENY the appellee's Motion for Reconsideration
as it does' not offer any arguments sufficiently
meritorious to warrant modification or reversal
of the Court's 17 December 2009 Decision. The
Court finds that there is no compelling reason to
reconsider its ruling; and
5. GRANT the appellant's Motion for Partial
Reconsideration, as the Court finds it
meritorious, considering that it ruled in its
Decision that "BSP can still foreclose on the
UM's real property in Cagayan de Oro City
covered by TCT No. T- 14345." It then follows
that the injunctive writ issued by the RTC of
Cagayan de Oro City, Branch 24 must be lifted.
The Court's 17 December 2009 Decision is
accordingly MODIFIED and AMENDED to read as
follows:
Petitioner argues that respondent's action to foreclose its
mortgaged properties had already prescribed.
Petitioner is mistaken.
Prescription is the mode of acquiring or losing rights
through the lapse of time.[62] Its purpose is "to protect the
diligent and vigilant, not those who sleep on their
rights."[63]
The prescriptive period for actions on mortgages is ten
(10) years from the day they may be brought.[64] Actions
on mortgages may be brought not upon the execution of
the mortgage contract but upon default in payment of
the obligation secured by the mortgage.[65]
A debtor is considered in default when he or she fails to
pay the obligation on due date and, subject to
exceptions, after demands for payment were made by
the creditor. Article 1169 of the Civil Code provides:
ART. 1169. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their
obligation.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare;
or

(2) When from the nature and the circumstances of the

"FOR THE REASONS STATED, the Decision dated
obligation it appears that the designation of the time
23 November 2001 of the Regional Trial Court of
when the thing is to be delivered or the service is to be
Cagayan de Oro City, Branch 24 in Civil Case No.
rendered was a controlling motive for the establishment
99-414 and the Decision dated 7 December
of the contract; or
2001 of the Regional Trial Court of Iligan City,
Branch 1 in Civil Case No. 4790
(3) When demand would be useless, as when the obligor
are REVERSED and SET ASIDE. The Complaints in
has rendered it beyond his power to perform.
both cases before the trial courts are
DISMISSED. The Writs of Preliminary Injunction
Article 1193 of the Civil'Code provides that an obligation
issued by the Regional Trial Court of Iligan City,
is demandable only upon due date. It provides:
Branch 1 in Civil Case No. 4790 and in the
Regional Trial Court of Cagayan de Oro City,
Branch 24 in Civil Case No. 99-414
ART. 1193. Obligations for whose fulfillment a day certain
are LIFTED and SET ASIDE."
has been fixed, shall be demandable only when that day
SO ORDERED.[61] (Citation omitted)
comes.
Hence, University of Mindanao filed this Petition for
Obligations with a resolutory period take effect at once,
Review. The issues for resolution are:
but terminate upon arrival of the day certain.
First, whether respondent Bangko Sentral ng Pilipinas'
A day certain is understood to be that which must
action to foreclose the mortgaged properties had already
necessarily come, although it may not be known when.
prescribed; and
If the uncertainty consists in whether the day will come
Second, whether petitioner University of Mindanao is
bound by the real estate mortgage contracts executed by
or not, the obligation is conditional, and it shall be
regulated by the rules of the preceding Section.
In other words, as a general rule, a person defaults and
prescriptive period for action runs when (1) the
obligation becomes due and demandable; and (2)
demand for payment has been made.
The prescriptive period neither runs from the date of the
execution of a contract nor does the prescriptive period
necessarily run on the date when the loan becomes due
and demandable.[66] Prescriptive period runs from the
date of demand,[67] subject to certain exceptions.
In other words, ten (10) .years may lapse from the date of
the execution of contract, without barring a cause of
action on the mortgage when there is a gap between the
period of execution of the contract and the due date or
between the due date and the demand date in cases
when demand is necessary.[68]
The mortgage contracts in this case were executed by
Saturnino Petalcorin in 1982. The maturity dates of
FISLAI's loans were repeatedly extended until the loans
became due and demandable only in 1990.
[69]
Respondent informed petitioner of its decision to
foreclose its properties and demanded payment in 1999.
The running of the prescriptive period of respondent's
action on the mortgages did not start when it executed
the mortgage contracts with Saturnino Petalcorin in
1982.
The prescriptive period for filing an action may run either
(1) from 1990 when the loan became due, if the
obligation was covered by the exceptions under Article
1169 of the Civil Code; (2) or from 1999 when
respondent demanded payment, if the obligation was not
covered by the exceptions under Article 1169 of the Civil
Code.
In either case, respondent's Complaint with cause of
action based on the mortgage contract was filed well
within the prescriptive period.
Given the termination of all traces of FISLAI's existence,
[70]
demand may have been rendered unnecessary under
Article 1169(3)[71] of the Civil Code. Granting that this is
the case,.respondent would have had ten (10) years from
due date in 1990 or until 2000 to institute an action on
the mortgage contract.
However, under Article 1155[72] of the Civil Code,
prescription of actions may be interrupted by (1) the
filing of a court action; (2) a written extrajudicial demand;
and (3) the written acknowledgment of the debt by the
debtor.
Therefore, the running of the prescriptive period was
interrupted when respondent sent its demand letter to
petitioner on June 18, 1999. This eventually led to
petitioner's filing of its annulment of mortgage
complaints before the Regional Trial Courts of Iligan City
and Cagayan De Oro City on July 16, 1999.
Assuming that demand was necessary, respondent's
action was within the ten (10)-year prescriptive period.
Respondent demanded payment of the loans in 1999 and
filed an action in the same year.
II
Petitioner argues that the execution of the mortgage
contract was ultra vires. As an educational institution, it
may not secure the loans of third persons.[73] Securing
loans of third persons is not among the purposes for
which petitioner was established.[74]
Petitioner, is correct.
Corporations are artificial entities granted legal
personalities upon their creation by their incorporators in
accordance with law. Unlike natural persons, they have
no inherent powers. Third persons dealing with
corporations cannot assume that corporations have
powers. It is up to those persons dealing with
corporations to determine their competence as expressly
defined by the law and their articles of incorporation.[75]
A corporation may exercise its powers only within those
definitions. Corporate acts that are outside those express
definitions under the law or articles of incorporation or
those "committed outside the object for which a
corporation is created"[76] are ultra vires.
The only exception to this, rule is when acts are
necessary and incidental to carry out a corporation's
purposes, and to the exercise of powers conferred by the
Corporation Code and under a corporation's articles of
incorporation.[77] This exception is specifically included in
the general powers of a corporation under Section 36 of
the Corporation Code:
SEC. 36. Corporate powers and capacity.—Every
corporation incorporated under this Code has the power
and capacity:
1. To sue and be sued in its corporate name;
2. Of succession by its corporate name for the
period of time stated in the articles of
incorporation and the certificate of
incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in
accordance with the provisions of this Code;
5. To adopt by-laws, not contrary to law, morals, or
public policy, and to amend or repeal the same
in accordance with this Code;
6. In case of stock corporations, to issue or sell
stocks to subscribers and to sell treasury stocks
in accordance with the provisions of this Code;
and to admit members to the corporation if it be
a non stock corporation;
 7. To purchase, receive, take or grant, hold, convey,
sell, lease, pledge, mortgage and otherwise deal
with such real and personal property, including
securities and bonds of other corporations, as
the transaction of the lawful business of the
corporation may reasonably and necessarily
require, subject to the limitations prescribed by
law and the Constitution;
8. To enter into merger or consolidation with other
corporations as provided in this Code;
9. To make reasonable donations, including those
for the public welfare or for hospital, charitable,
cultural, scientific, civic, or similar
purposes: Provided, That no corporation,
domestic or foreign, shall give donations in aid
of any political party or candidate or for
purposes of partisan political activity;
10. To establish pension, retirement, and other
plans for the benefit of its directors, trustees,
officers and employees; and
11. To exercise such other powers as may be
essential or necessary to carry out its purpose or
purposes as stated in its articles of
incorporation. (Emphasis supplied)
Montelibano, et al. v. Bacolod-Murcia Milling Co., Inc.
[78]
stated the test to determine if a corporate act is in
accordance with its purposes:
It is a question, therefore, in each case, of the logical
relation of the act to the corporate purpose expressed in
the charter. If that act is one which is lawful in itself, and
not otherwise prohibited, is done for the purpose of
serving corporate ends, and is reasonably tributary to the
promotion of those ends, in a substantial, and not in a
remote and fanciful, sense, it may fairly be considered
within charter powers. The test to be applied is whether
the act in question is in direct and immediate furtherance
of the corporation's business, fairly incident to the
express powers and reasonably necessary to their
exercise. If so, the corporation has the power to do it;
otherwise, not.[79] (Emphasis supplied)
As an educational institution, petitioner serves:
a. To establish, conduct and operate a college or
colleges, and/or university;
b. To acquire properties,, real and/or personal, in
connection with the establishment and
operation of such college or colleges;
c. To do and perform the various and sundry acts
and things permitted by the laws of the
Philippines unto corporations like classes and
kinds;
d. To engage in agricultural, industrial, and/or
commercial pursuits in line with educational
program of the corporation and to acquire all
properties, real and personal [,] necessary for
the purposes[;]
e. To establish, operate, and/or acquire
broadcasting and television stations also in line
with the educational program of the corporation
and for such other purposes as the Board of
Trustees may determine from time to time;
f. To undertake housing projects of faculty
members and employees, and to acquire real
estates for this purpose;
g. To establish, conduct and operate and/or invest
in educational foundations; [As amended on
December 15, 1965][;]
h. To establish, conduct and operate housing and
dental schools, medical facilities and other
related undertakings;
i. To invest in other corporations. [As amended on
December 9, 1998]. [Amended Articles of
Incorporation of the University of Mindanao,
Inc. - the Petitioner].[80]
Petitioner does not have the power to mortgage its
properties in order to secure loans of other persons. As
an educational institution, it is limited to developing
human capital through formal instruction. It is not a
corporation engaged in the business of securing loans of
others.
Hiring professors, instructors, and personnel; acquiring
equipment and real estate; establishing housing facilities
for personnel and students; hiring a concessionaire; and
other activities that can be directly connected to the
operations and conduct of the education business may
constitute the necessary and incidental acts of an
educational institution.
Securing FISLAI's loans by mortgaging petitioner's
properties does not appear to have even the remotest
connection to the operations of petitioner as an
educational institution. Securing loans is not an adjunct
of the educational institution's conduct of business.[81] It
does not appear that securing third-party loans was
necessary to maintain petitioner's business of providing
instruction to individuals.
This court upheld the validity of corporate acts when
those acts were shown to be clearly within the
corporation's powers or were connected to the
corporation's purposes.
In Pirovano, et al. v. De la Rama Steamship Co.,[82] this
court declared valid the donation given to the children of
a deceased person who contributed to the growth of the
corporation.[83] This court found that this donation was
within the broad scope of powers and purposes of the
corporation to "aid in any other manner any person . . . in
which any interest is held by this corporation or in the
affairs or prosperity of which this corporation has a lawful
interest."[84]

In Twin Towers Condominium Corporation v. Court of
Appeals, et al.,[85] this court declared valid a rule by Twin
Towers Condominium denying delinquent members the
right to use condominium facilities.[86] This court ruled
that the condominium's power to promulgate rules on
the use of facilities and to enforce provisions of the
Master Deed was clear in the Condominium Act, Master
Deed, and By-laws of the condominium.[87] Moreover, the
promulgation of such rule was "reasonably necessary" to
attain the purposes of the condominium project. [88]
This court has, in effect, created a presumption that
corporate acts are valid if, on their face, the acts were
within the corporation's powers or purposes. This
presumption was explained as early as in 1915
in Coleman v. Hotel De France,[89] where this court ruled
that contracts entered into by corporations in the
exercise of their incidental powers are not ultra vires. [90]
Coleman involved a hotel's cancellation of an
employment contract it executed with a gymnast. One of
the hotel's contentions was the supposed ultra vires
nature of the contract.- It was executed outside its
express and implied powers under the articles of
incorporation.[91]
In ruling in favor of the contract's validity, this court
considered the incidental powers of the hotel to include
the execution of employment contracts with entertainers
for the purpose of providing its guests entertainment and
increasing patronage.[92]
This court ruled that a contract executed by a corporation
shall be presumed valid if on its face its execution was
not beyond the powers of the corporation to do.[93] Thus:
When a contract is not on its face necessarily beyond the
scope of the power of the corporation by which it was
made, it will, in the absence of proof to the contrary, be
presumed to be valid. Corporations are presumed to
contract within their powers. The doctrine of ultra vires,
when invoked for or against a corporation, should not be
allowed to prevail where it would defeat the ends of
justice or work a legal wrong.[94]
However, this should not be interpreted to mean that
such presumption applies to all cases, even when the act
in question is on its face beyond the corporation's power
to do or when the evidence contradicts the presumption.
Presumptions are "inference[s] as to the existence of a
fact not actually known, arising from its usual connection
with another which is known, or a conjecture based on
past experience as to what course human affairs
ordinarily take."[95] Presumptions embody values and
revealed behavioral expectations under a given set of
circumstances.
Presumptions may be conclusive[96] or disputable.[97]
Conclusive presumptions are presumptions that may not
be overturned by evidence, however strong the evidence
is.[98] They are made conclusive not because there is an
established uniformity in behavior whenever identified
circumstances arise. They are conclusive because they
are declared as such under the law or the rules. Rule 131,
Section 2 of the Rules of Court identifies two (2)
conclusive presumptions:
SEC. 2. Conclusive presumptions.— The following are
instances of conclusive presumptions:
(a) Whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such
declaration, act or omission, be permitted to falsify it;
(b) The tenant is not permitted to deny the title of his
landlord at the time of the commencement of the
relation of landlord and tenant between them.
On the other hand, disputable, presumptions are
presumptions that may be overcome by contrary
evidence.[99] They are disputable in recognition of the
variability of human behavior. Presumptions are not
always true. They may be wrong under certain
circumstances, and courts are expected to apply them,
keeping in mind the nuances of every experience that
may render the expectations wrong.
Thus, the application of disputable presumptions on a
given circumstance must be based on the existence of
certain facts on which they are meant to operate.
"[Presumptions are not allegations, nor do they supply
their absence[.]"[100] Presumptions are conclusions. They
do not apply when there are no facts or allegations to
support them.
If the facts exist to set in motion the operation of a
disputable presumption, courts may accept the
presumption. However, contrary evidence may be
presented to rebut the presumption.
Courts cannot disregard contrary evidence offered to
rebut disputable presumptions. Disputable presumptions
apply only in the absence of contrary evidence or
explanations. This court explained in Philippine Agila
Satellite Inc. v. Usec. Trinidad-Lichauco: [101]
We do not doubt the existence of the presumptions of
"good faith" or "regular performance of official duty," yet
these presumptions are disputable and may be
contradicted and overcome by other evidence. Many civil
actions are oriented towards overcoming any number of
these presumptions, and a cause of action can certainly
be geared towards such effect. The very purpose of trial
is to allow a party to present evidence to overcome the
disputable presumptions involved. Otherwise, if trial is
deemed irrelevant or unnecessary, owing to the perceived
indisputability of the presumptions, the judicial exercise
would be relegated to a mere ascertainment of what
presumptions apply in a given case, nothing more.
Consequently, the entire Rules of Court is rendered as
excess verbiage, save perhaps for the provisions laying
down the legal presumptions.
If this reasoning of the Court of Appeals were ever
adopted as a jurisprudential rule, no public officer could
ever be sued for acts executed beyond their official
functions or authority, or for tortious conduct or
behavior, since such acts would "enjoy the presumption
of good faith and in the regular performance of official
duty." Indeed, few civil actions of any nature would ever
reach the trial stage, if a case can be adjudicated by a
mere determination from the complaint or answer as to
which legal presumptions are applicable. For-example,
the presumption that a person is innocent of a wrong is a
disputable presumption on the same level as that of the
regular performance of official duty. A civil complaint for
damages necessarily alleges that the defendant
committed a wrongful act or omission that would serve
as basis for the award of damages. With the rationale of
the Court of Appeals, such complaint can be dismissed
upon a motion to dismiss solely on the ground that the
presumption is that a person is innocent of a wrong.[102]
(Emphasis supplied, citations omitted)
In this case, the presumption that the execution of
mortgage contracts was within petitioner's corporate
powers does not apply. Securing third-party loans is not
connected to petitioner's purposes as an educational
institution.
III
Respondent argues that petitioner's act of mortgaging its
properties to guarantee FISLAI's loans was consistent
with petitioner's business interests, since petitioner was
presumably a FISLAI shareholder whose officers and
shareholders interlock with FISLAI. Respondent points
out that petitioner and its key officers held substantial
shares in MSLAI when DSLAI and FISLAI merged.
Therefore, it was safe to assume that when the
mortgages were executed in 1982, petitioner held
substantial shares in FISLAI.[103]
Parties dealing with corporations cannot simply assume
that their transaction is within the corporate powers. The
acts of a corporation are still limited by its powers and
purposes as provided in the law and its articles of
incorporation.
Acquiring shares in another corporation is not a means to
create new powers for the acquiring corporation. Being a
shareholder of another corporation does not
automatically change the nature and purpose of a
corporation's business. Appropriate amendments must
be made either to the law or the articles of incorporation
before a corporation can validly exercise powers outside
those provided in law or the articles of incorporation. In
other words, without an amendment, what is ultra vires
before a corporation acquires shares in other
corporations is still ultra vires after such acquisition.
Thus, regardless of the number of shares that petitioner
had with FISLAI, DSLAI, or MSLAI, securing loans of third
persons is still beyond petitioner's power to do. It is still
inconsistent with its purposes under the law[104] and its
articles of incorporation.[105]
In attempting to show petitioner's interest in securing
FISLAI's loans by adverting to their interlocking, directors
and shareholders, respondent disregards petitioner's
separate personality from its officers, shareholders, and
other juridical persons.
The separate personality of corporations means that they
are "vest[ed] [with] rights, powers, and attributes [of
their own] as if they were natural persons[.]"[106] Their
assets and liabilities are their own and not their officers',
shareholders', or another corporation's. In the same vein,
the assets and liabilities of their officers and shareholders
are not the corporations'. Obligations incurred by
corporations are not obligations of their officers and
shareholders. Obligations of officers and shareholders are
not obligations of corporations.[107] In other words,
corporate interests are separate from the personal
interests of the natural persons that comprise
corporations.
Corporations are given separate personalities to allow
natural persons to balance the risks of business as they
accumulate capital. They are, however, given limited
competence as a means to protect the public from
fraudulent acts that may be committed using the
separate juridical personality given to corporations.
Petitioner's key officers, as shareholders of FISLAI, may
have an interest in ensuring the viability of FISLAI by
obtaining a loan from respondent and securing it by
whatever means. However, having interlocking officers
and stockholders with FISLAI does not mean that
petitioner, as an educational institution, is or must
necessarily be interested in the affairs of FISLAI.
Since petitioner is an entity distinct and separate not only
from its own officers and shareholders but also from
FISLAI, its interests as an educational institution may not
be consistent with FISLAI's.
Petitioner and FISLAI have different constituencies.
Petitioner's constituents comprise persons who have
committed to developing skills and acquiring knowledge
in their chosen fields by availing the formal instruction
provided by petitioner. On the other hand, FISLAI is a
thrift bank, which constituencies comprise investors.
While petitioner and FISLAI exist ultimately to benefit
their stockholders, their constituencies affect the means
by which they can maintain their existence. Their
interests are congruent with sustaining their constituents'
needs because their existence depends on that.
Petitioner can exist only if it continues to provide for the
kind and quality of instruction that is needed by its
constituents. Its operations and existence are placed at
risk when resources are used on activities that are not
geared toward the attainment of its purpose. Petitioner
has no business in securing FISLAI, DSLAI, or MSLAI's
loans. This activity is not compatible with its business of
providing quality instruction to its constituents.
Indeed, there are instances when we disregard the
separate corporate personalities of the corporation and
its stockholders, directors, or officers. This is called
piercing of the corporate veil.
Corporate veil is pierced when the separate personality
of the corporation is being used to perpetrate fraud,
illegalities, and injustices.[108] In Lanuza, Jr. v. BF
Corporation:[109]
Piercing the corporate veil is warranted when "[the
separate personality of a corporation] is used as a means
to perpetrate fraud or an illegal act, or as a vehicle for the
evasion of an existing obligation, the circumvention of
statutes, or to confuse legitimate issues." It is also
warranted in alter ego cases "where a corporation is
merely a farce since it is a mere alter ego or business
conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted
as to make it merely an instrumentality, agency, conduit
or adjunct of another corporation." [110]
These instances have not been shown in this case. There
is no evidence pointing to the possibility that petitioner
used its separate personality to defraud third persons or
commit illegal acts. Neither is there evidence to show
that petitioner was merely a farce of a corporation. What
has been shown instead was that petitioner, too, had
been victimized by fraudulent and unauthorized acts of
its own officers and directors.
In this case, instead of guarding against fraud, we
perpetuate fraud if we accept respondent's contentions.
IV
Petitioner argues that it did not authorize Saturnino
Petalcorin to mortgage its properties on its behalf. There
was no board resolution to that effect. Thus, the
mortgages executed by Saturnino Petalcorin were
unenforceable.[111]
The mortgage contracts executed in favor of respondent
do not bind petitioner. They were executed without
authority from petitioner.
Petitioner must exercise its.powers and conduct its
business through its Board of Trustees. Section 23 of the
Corporation Code provides:
SEC. 23. The board of directors or trustees—Unless
otherwise provided in this Code, the corporate powers of
all corporations formed under this Code shall be
exercised, all business conducted and all property of such
corporations controlled and held by the board of
directors or trustees to be elected from among the
holders of stocks, or where there is no stock, from among
the members of the corporation, who shall hold office for
one (1) year and until their successors are elected and
qualified.
Being a juridical person, petitioner cannot conduct its
business, make decisions, or act in any manner without
action from its Board of Trustees. The Board of Trustees
must act as a body in order to exercise corporate powers.
Individual trustees are not clothed with corporate powers
just by being a trustee. Hence, the individual trustee
cannot bind the corporation by himself or herself.
The corporation may, however, delegate through a board
resolution its corporate powers or functions to a
representative, subject to limitations under the law and
the corporation's articles of incorporation.[112]
The relationship between a corporation and its
representatives is governed by the general principles of
agency.[113] Article 1317 of the Civil Code provides that
there must be authority from the principal before anyone
can act in his or her name:
ART. 1317. No one may contract in the name of another
without being authorized by the latter, or unless he has
by law a right to represent him.
Hence, without delegation by the board of directors or
trustees, acts of a person—including those of the
corporation's directors, trustees, shareholders, or officers
—executed on behalf of the corporation are generally not
binding on the corporation.[114]
Contracts entered into in another's name without
authority or valid legal representation are generally
unenforceable. The Civil Code provides:
ART. 1317. . . .
A contract entered into in the name of another by one
who has no authority or legal representation, or who has
acted beyond his powers, shall be unenforceable, unless
it is ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is revoked
by the other contracting party.
....
ART. 1403. The following contracts are unenforceable,
unless they are ratified:
(1) Those entered into in the name of another person by
one who has been given no authority or legal
representation, or who has acted beyond his powers[.]
The unenforceable status of contracts entered into by an
unauthorized person on behalf of another is based on the
basic principle that contracts must be consented to by
both parties.[115] There is no contract without meeting of
the minds as to the subject matter and cause of the
obligations created under the contract.[116]
Consent of a person cannot be presumed from
representations of another, especially if obligations will
be incurred as a result. Thus, authority is required to
make actions made on his or her behalf binding on a
person. Contracts entered into by persons without
authority from the corporation shall generally be
considered ultra vires and unenforceable[117] against the
corporation.
Two trial courts[118] found that the Secretary's Certificate
and the board resolution were either non-existent or
fictitious. The trial courts based their findings on the
testimony of the Corporate Secretary, Aurora de Leon
herself. She signed the Secretary's Certificate and the
excerpt of the minutes of the alleged board meeting
purporting to authorize Saturnino Petalcorin to mortgage
petitioner's properties. There was no board meeting to
that effect. Guillermo B. Torres ordered the issuance of
the Secretary's Certificate. Aurora de Leon's testimony
was corroborated by Saturnino Petalcorin.
Even the Court of Appeals, which reversed the trial
courts' decisions, recognized that "BSP failed to prove
that the UM Board of Trustees actually passed a Board
Resolution authorizing Petalcorin to mortgage the subject
real properties[.]"[119]
Well-entrenched is the rule that this court, not being a
trier of facts, is bound by the findings of fact of the trial
courts and the Court of Appeals when such findings are
supported by evidence on record.[120] Hence, not having
the proper board resolution to authorize Saturnino
Petalcorin to execute the mortgage contracts for
petitioner, the contracts he executed are unenforceable
against petitioner. They cannot bind petitioner.
However, personal liabilities may be incurred by directors
who assented to such unauthorized act[121] and by the
person who contracted in excess of the limits of his or her
authority without the corporation's knowledge. [122]
V party to the transaction are in precisely the same
Unauthorized acts that are merely beyond the powers of
the corporation under its articles of incorporation are not
void ab initio.
In Pirovano, et al, this court explained that corporate acts
may be ultra vires but not void.[123] Corporate acts may be
capable of ratification:[124]
[A] distinction should be made between corporate acts or
contracts which are illegal and those which are merely
ultra vires. The former contemplates the doing of an act
which is contrary to law, morals, or public order, or
contravene some rules of public policy or public duty, and
are, like similar transactions between individuals, void.
They cannot serve as basis of a court action, nor acquire
validity by performance, ratification, or estoppel. Mere
ultra vires acts, on the other hand, or those which are not
illegal and void ab initio, but are not merely within the
scope of the articles of incorporation, are merely
voidable and may become binding and enforceable when
ratified by the stockholders.[125]
Thus, even though a person did not give another person
authority to act on his or her behalf, the action may be
enforced against him or her if it is shown that he or she
ratified it or allowed the other person to act as if he or
she had full authority to do so. The Civil Code provides:
ART. 1910. The principal must comply with all the
obligations which the agent may have contracted within
the scope of his authority.
As for any obligation wherein the agent has exceeded his
power, the principal is not bound except when he ratifies
it expressly or tacitly.
ART. 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the agent if
the former allowed the latter to act as though he had full
powers. (Emphasis supplied)
Ratification is a voluntary and deliberate confirmation or
adoption of a previous unauthorized act. [126] It converts
the unauthorized act of an agent into an act of the
principal.[127] It cures the lack of consent at the time of
the execution of the contract entered into by the
representative, making the contract valid and
enforceable.[128] It is, in essence, consent belatedly given
through express or implied acts that are deemed a
confirmation or waiver of the right to impugn the
unauthorized act.[129] Ratification has the effect of placing
the principal in a position as if he or she signed the
original contract. In Board of Liquidators v. Heirs ofM.
Kalaw, et al.:[130]
Authorities, great in number, are one in the idea that
"ratification by a corporation of an unauthorized act or
contract by its officers or others relates back to the time
of the act or contract ratified, and is equivalent to original
authority;" and that "[t]he corporation and the other
position as if the act or contract had been authorized at
the time." The language of one case is expressive: "The
adoption or ratification of a contract by a corporation is
nothing more nor less than the making of an original
contract. The theory of corporate ratification is
predicated on the right of a corporation to contract, and
any ratification or adoption is equivalent to a grant of
prior authority."[131] (Citations omitted)
Implied ratification may take the form of silence,
acquiescence, acts consistent with approval of the act,, or
acceptance or retention of benefits.[132] However, silence,
acquiescence, retention of benefits, and acts that may be
interpreted as approval of the act do not by themselves
constitute implied ratification. For an act to constitute an
implied ratification, there must be no acceptable
explanation for the act-other than that there is an
intention to adopt the act as his or her own. [133] "[It]
cannot be inferred from acts that a principal has a right
to do independently of the unauthorized act of the
agent."[134]
No act by petitioner can be interpreted as anything close
to ratification. It was not shown that it issued a resolution
ratifying the execution of the mortgage contracts. It was
not shown that it received proceeds of the loans secured
by the mortgage contracts. There was also no showing
that it received any consideration for the execution of the
mortgage contracts. It even appears that petitioner was
unaware of the mortgage contracts until respondent
notified it of its desire to foreclose the mortgaged
properties.
Ratification must be knowingly and voluntarily done.
[135]
Petitioner's lack of knowledge about the mortgage
executed in its name precludes an interpretation that
there was any ratification on its part.
Respondent further argues that petitioner is presumed to
have knowledge of its transactions with respondent
because its officers, the Spouses Guillermo and Dolores
Torres, participated in obtaining the loan.[136]
Indeed, a corporation, being a person created by mere
fiction of law, can act only through natural persons such
as its directors, officers, agents, and representatives.
Hence, the general rule is that knowledge of an officer is
considered knowledge of the corporation.
However, even though the Spouses Guillermo and
Dolores Torres were officers of both the thrift banks and
petitioner, their knowledge of the mortgage contracts
cannot be considered as knowledge of the corporation.
The rule that knowledge of an officer is considered
knowledge of the corporation applies only when the
officer is acting within the authority given to him or her
by the corporation. In Francisco v. Government Service
Insurance System:[137]
Knowledge of facts acquired or possessed by an officer or
agent of a corporation in the course of his employment,
and in relation to matters within the scope of his
authority, is notice to the corporation, whether he
communicates such knowledge or not.[138]
The public should be able to rely on and be protected
from the representations of a corporate representative
acting within the scope of his or her authority. This is why
an authorized officer's knowledge is considered
knowledge of corporation. However, just as the public
should be able to rely on and be protected from
corporate representations, corporations should also be
able to expect that they will not be bound by
unauthorized actions made on their account.
Thus, knowledge should be actually communicated to the
corporation through its authorized representatives. A
corporation cannot be expected to act or not act on a
knowledge that had not been communicated to it
through an authorized representative. There can be no
implied ratification without actual communication.
Knowledge of the existence of contract must be brought
to the corporation's representative who has authority to
ratify it. Further, "the circumstances must be shown from
which such knowledge may be presumed."[139]
The Spouses Guillermo and Dolores Torres' knowledge
cannot be interpreted as knowledge of petitioner. Their
knowledge was not obtained as petitioner's
representatives. It was not shown that they were acting
for and within the authority given by petitioner when
they acquired knowledge of the loan transactions and the
mortgages. The knowledge was obtained in the interest
of and as representatives of the thrift banks.
VI
Respondent argues that Satnrnino Petalcorin was clothed
with the authority to transact on behalf of petitioner,
based on the board resolution dated March 30, 1982 and
Aurora de Leon's notarized Secretary's Certificate.
[140]
According to respondent, petitioner is bound by the
mortgage contracts executed by Saturnino Petalcorin.[141]
This court has recognized presumed or apparent
authority or capacity to bind corporate representatives in
instances when the corporation, through its silence or
other acts of recognition, allowed others to believe that
persons, through their usual exercise of corporate
powers, were conferred with authority to deal on the
corporation's behalf.[142]
The doctrine of apparent authority does not go into the
question of the corporation's competence or power to do
a particular act. It involves the question of whether the
officer has the power or is clothed with the appearance
of having the power to act for the corporation. A finding
that there is apparent authority is not the same as a
finding that the corporate act in question is within the
corporation's limited powers.
The rule on apparent authority is based on the principle
of estoppel. The Civil Code 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.
....
ART, 1869. Agency may be express, or implied from the
acts of the principal, from his silence or lack of action, or
his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific
form.
A corporation is estopped by its silence and acts of
recognition because we recognize that there is
information asymmetry between third persons who have
little to no information as to what happens during
corporate meetings, and the corporate officers, directors,
and representatives who are insiders to corporate affairs.
[143]
In People's Air car go and Warehousing Co. Inc. v. Court
of Appeals,[144] this court held that the contract entered
into by the corporation's officer without a board
resolution was binding upon the corporation because it
previously allowed the officer to contract on its behalf
despite the lack of board resolution.[145]
In Francisco, this court ruled that Francisco's proposal for
redemption of property was accepted by and binding
upon the Government Service Insurance System. This
court did not appreciate the Government Service
Insurance System's defense that since it was the Board
Secretary and not the General Manager who sent
Francisco the acceptance telegram, it could not be made
binding upon the Government Service Insurance System.
It did not authorize the Board Secretary to sign for the
General Manager. This court appreciated the
Government Service Insurance System's failure to disown
the telegram sent by the Board Secretary and its silence
while it accepted all payments made by Francisco for the
redemption of property.[146]
There can be no apparent authority and the corporation
cannot be estopped from denying the binding affect of an
act when there is no evidence pointing to similar acts and
other circumstances that can be interpreted as the
corporation holding out a representative as having
authority to contract on its behalf. In Advance Paper
Corporation v. Arma Traders Corporation,[147] this court
had the occasion to say:
The doctrine of apparent authority does not apply if the
principal did not commit any acts or conduct which a
third party knew and relied upon in good faith as a result
of the exercise of reasonable prudence. Moreover, the
agent's acts or conduct must have produced a change of
position to the third party's detriment.[148] (Citation
omitted)
Saturnino Petalcorin's authority to transact on behalf of
petitioner cannot be presumed based on a Secretary's
Certificate and excerpt from the minutes of the alleged
board meeting that were found to have been simulated.
These documents cannot be considered as the corporate
acts that held out Saturnino Petalcorin as petitioner's
authorized representative for mortgage transactions.
They were not supported by an actual board meeting.[149]
VII
Respondent argues that it may rely on the Secretary's
Certificate issued by Aurora de Leon because it was
notarized.
The Secretary's Certificate was void whether or not it was
notarized.
Notarization creates a presumption of regularity and
authenticity on the document. This presumption may be
rebutted by "strong, complete and conclusive
proof"[150] to the contrary. While notarial
acknowledgment "attaches full faith and credit to the
document concerned[,]"[151] it does not give the
document its validity or binding effect. When there is
evidence showing that the document is invalid, the
presumption of regularity or authenticity is not
applicable.
In Basilio v. Court of Appeals[152] this court was convinced
that the purported signatory on a deed of sale was not as
represented, despite testimony from the notary public
that the signatory appeared before him and signed the
instrument.[153] Apart from finding that there was forgery,
[154]
this court noted:
The notary public, Atty. Ruben Silvestre, testified that he
was the one who notarized the document and that
Dionisio Z. Basilio appeared personally before him and
signed the. instrument himself. However, he admitted
that he did not know Dionisio Z. Basilio personally to
ascertain if the person who signed the document was
actually Dionisio Z. Basilio himself, or another person
who stood in his place. He could not even recall whether
the document had been executed in his office or not.
Thus, considering the testimonies of various witnesses
and a comparison of the signature in question with
admittedly genuine signatures, the Court is convinced
that Dionisio Z. Basilio did not execute the questioned
deed of sale. Although the questioned deed of sale was a
public document having in its favor the presumption of
regularity, such presumption was adequately refuted by
competent witnesses showing its forgery and the Court's
own visual analysis of the document.[155] (Emphasis
supplied, citations omitted)
In Suntay v. Court of Appeals,[156] this court held that a
notarized deed of sale was void because it was a mere
sham.[157] It was not intended to have any effect between
the parties.[158] This court said:
[I]t is not the intention nor the function of the notary
public to validate and make binding' an instrument never,
in the first place, intended to have any binding legal
effect upon the parties thereto.[159]
Since the notarized Secretary's Certificate was found to
have been issued without a supporting board resolution,
it produced no effect. It is not binding upon petitioner. It
should not have been relied on by respondent especially
given its status as a bank.
VIII
The banking institution is "impressed with public
interest"[160] such that the public's faith is "of paramount
importance."[161] Thus, banks are required to exercise the
highest degree of diligence in their transactions.
[162]
In China Banking Corporation v. Lagon, [163]this court
found that the bank was not a mortgagee in good faith
for its failure to question the due execution of a Special
Power of Attorney that was presented to it in relation to a
mortgage contract.[164] This court said:
Though petitioner is not expected to conduct an
exhaustive investigation on the history of the mortgagor's
title, it cannot be excused from the duty of exercising the
due diligence required of a banking institution. Banks are
expected to exercise more care and prudence than
private individuals in their dealings, even those that
involve registered lands, for their business is affected
with public interest.[165] (Citations omitted)
For its failure to exercise the degree of diligence required
of banks, respondent cannot claim good faith in the
execution of the mortgage contracts with Saturnino
Petalcorin. Respondent's witness, Daciano Paguio, Jr.,
testified that there was no board resolution authorizing
Saturnino Petalcorin to act on behalf of petitioner.
[166]
Respondent did not inquire further as to Saturnino
Petalcorin's authority.

Banks cannot rely on assumptions. This will be contrary

to the high standard of diligence required of them.

VI

According to respondent, the annotations of

respondent's mortgage interests on the certificates of
titles of petitioner's properties operated as constructive
notice to petitioner of the existence of such interests.
[167]
Hence, petitioners are now estopped from claiming
that they did not know about the mortgage.

Annotations of adverse claims on certificates of title to

properties operate as constructive notice only to third
parties—not to the court or the registered owner.
In Sajonas v. Court of Appeals:[168]

[Annotation of an adverse claim is a measure designed to

protect the interest of a person over a piece of real
property where the registration of such interest or right is
not otherwise provided for by the Land Registration Act
or Act 496 (now [Presidential Decree No.] 1529 or the
Property Registration Decree), and serves a warning to
third parties dealing with said property that someone is
claiming an interest on the same or a better right than
that of the registered owner thereof.[169] (Emphasis
supplied)

Annotations are merely claims of interest or claims of the

legal nature and incidents of relationship between the
person whose name appears on the document and the
person who caused the annotation. It does not say
anything about the validity of the claim or convert a
defective claim or document into a valid one.[170] These
claims may be proved or disproved during trial.

Thus, annotations are not conclusive upon courts or upon

owners who may not have reason to doubt the security
of their claim as their properties' title holders.

WHEREFORE, the Petition is GRANTED. The Court of

Appeals' Decision dated December 17, 2009
is REVERSED and SET ASIDE. The Regional Trial Courts'
Decisions of November 23, 2001 and December 7, 2001
are REINSTATED.

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo, and Mendoza,

JJ., cocnur.

DISPUTABLE PRESUMPTIONS
G.R. No. 194846 June 19, 2013
*HOSPICIO D. ROSAROSO, ANTONIO D. ROSAROSO,
MANUEL D. ROSAROSO, ALGERICA D. ROSAROSO, and
CLEOFE R. LABINDAO, Petitioners,
vs.
LUCILA LABORTE SORIA, SPOUSES HAM SOLUTAN
and **LAILA SOLUTAN, and MERIDIAN REALTY
CORPORATION, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of
the Rules of Court assailing the December 4, 2009
Decision1 of the Court of Appeals (CA). in CA G.R. CV No.
00351, which reversed and set aside the July 30, 2004
Decision2 of the Regional Trial Court, Branch 8, 7th
Judicial Region, Cebu City (RTC), in Civil Case No. CEB-
16957, an action for declaration of nullity of documents.
The Facts
Spouses Luis Rosaroso (Luis) and Honorata Duazo
(Honorata) acquired several real properties in Daan
Bantayan, Cebu City, including the subject properties. The
couple had nine (9) children namely: Hospicio, Arturo,
Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio, and
Angelica. On April 25, 1952, Honorata died. Later on, Luis
married Lourdes Pastor Rosaroso (Lourdes).
On January 16, 1995, a complaint for Declaration of
Nullity of Documents with Damages was filed by Luis, as
one of the plaintiffs, against his daughter, Lucila R. Soria
(Lucila); Lucila’s daughter, Laila S. Solutan (Laila); and
Meridian Realty Corporation (Meridian). Due to Luis’
untimely death, however, an amended complaint was
filed on January 6, 1996, with the spouse of Laila, Ham
Solutan (Ham); and Luis’ second wife, Lourdes, included
as defendants.3 In the Amended Complaint, it was alleged
by petitioners Hospicio D. Rosaroso, Antonio D. Rosaroso
(Antonio), Angelica D. Rosaroso (Angelica), and Cleofe R.
Labindao (petitioners) that on November 4, 1991, Luis,
with the full knowledge and consent of his second wife,
Lourdes, executed the Deed of Absolute Sale4 (First Sale)
covering the properties with Transfer Certificate of Title
(TCT) No. 31852 (Lot No. 8); TCT. No. 11155 (Lot 19); TCT
No. 10885 (Lot No. 22); TCT No. 10886 (Lot No. 23); and
Lot Nos. 5665 and 7967, all located at Daanbantayan,
Cebu, in their favor.5
They also alleged that, despite the fact that the said
properties had already been sold to them, respondent
Laila, in conspiracy with her mother, Lucila, obtained the
Special Power of Attorney (SPA),6 dated April 3, 1993,
from Luis (First SPA); that Luis was then sick, infirm, blind,
and of unsound mind; that Lucila and Laila accomplished
this by affixing Luis’ thumb mark on the SPA which
purportedly authorized Laila to sell and convey, among
others, Lot Nos. 8, 22 and 23, which had already been
sold to them; and that on the strength of another SPA 7 by
Luis, dated July 21, 1993 (Second SPA), respondents Laila
and Ham mortgaged Lot No. 19 to Vital Lending Investors,
Inc. for and in consideration of the amount of
₱150,000.00 with the concurrence of Lourdes. 8
Petitioners further averred that a second sale took place
on August 23, 1994, when the respondents made Luis
sign the Deed of Absolute Sale9 conveying to Meridian
three (3) parcels of residential land for ₱960,500.00
(Second Sale); that Meridian was in bad faith when it did
not make any inquiry as to who were the occupants and
owners of said lots; and that if Meridian had only
investigated, it would have been informed as to the true
status of the subject properties and would have desisted
in pursuing their acquisition.
Petitioners, thus, prayed that they be awarded moral
damages, exemplary damages, attorney’s fees, actual
damages, and litigation expenses and that the two SPAs
and the deed of sale in favor of Meridian be declared null
and void ab initio.10
On their part, respondents Lucila and Laila contested the
First Sale in favor of petitioners. They submitted that
even assuming that it was valid, petitioners were
estopped from questioning the Second Sale in favor of
Meridian because they failed not only in effecting the
necessary transfer of the title, but also in annotating their
interests on the titles of the questioned properties. With
respect to the assailed SPAs and the deed of absolute
sale executed by Luis, they claimed that the documents
were valid because he was conscious and of sound mind
and body when he executed them. In fact, it was Luis
together with his wife who received the check payment
issued by Meridian where a big part of it was used to foot
his hospital and medical expenses.11 Respondent
Meridian, in its Answer with Compulsory Counterclaim,
averred that Luis was fully aware of the conveyances he
made. In fact, Sophia Sanchez (Sanchez), Vice-President
of the corporation, personally witnessed Luis affix his
thumb mark on the deed of sale in its favor. As to
petitioners’ contention that Meridian acted in bad faith
when it did not endeavor to make some inquiries as to
the status of the properties in question, it countered that
before purchasing the properties, it checked the titles of
the said lots with the Register of Deeds of Cebu and
discovered therein that the First Sale purportedly
executed in favor of the plaintiffs was not registered with
the said Register of Deeds. Finally, it argued that the suit
against it was filed in bad faith.12
On her part, Lourdes posited that her signature as well as
that of Luis appearing on the deed of sale in favor of
petitioners, was obtained through fraud, deceit and
trickery. She explained that they signed the prepared
deed out of pity because petitioners told them that it was
necessary for a loan application. In fact, there was no
consideration involved in the First Sale. With respect to
the Second Sale, she never encouraged the same and
neither did she participate in it. It was purely her
husband’s own volition that the Second Sale materialized.
She, however, affirmed that she received Meridian’s
payment on behalf of her husband who was then
bedridden.13
 RTC Ruling
After the case was submitted for decision, the RTC ruled
in favor of petitioners. It held that when Luis executed
the second deed of sale in favor of Meridian, he was no
longer the owner of Lot Nos. 19, 22 and 23 as he had
already sold them to his children by his first marriage. In
fact, the subject properties had already been delivered to
the vendees who had been living there since birth and so
had been in actual possession of the said properties. The
trial court stated that although the deed of sale was not
registered, this fact was not prejudicial to their interest. It
was of the view that the actual registration of the deed of
sale was not necessary to render a contract valid and
effective because where the vendor delivered the
possession of the parcel of land to the vendee and no
superior rights of third persons had intervened, the
efficacy of said deed was not destroyed. In other words,
Luis lost his right to dispose of the said properties to
Meridian from the time he executed the first deed of sale
in favor of petitioners. The same held true with his
alleged sale of Lot 8 to Lucila Soria. 14 Specifically, the
dispositive portion of the RTC decision reads:
IN VIEW OF THE FOREGOING, the Court finds that a
preponderance of evidence exists in favor of the plaintiffs
and against the defendants. Judgment is hereby
rendered:
a. Declaring that the Special Power of Attorney,
Exhibit "K," for the plaintiffs and Exhibit "3" for
the defendants null and void including all
transactions subsequent thereto and all
proceedings arising therefrom;
b. Declaring the Deed of Sale marked as Exhibit
"E" valid and binding;
c. Declaring the Deed of Absolute Sale of Three
(3) Parcels of Residential Land marked as Exhibit
"F" null and void from the beginning;
d. Declaring the Deed of Sale, Exhibit "16"
(Solutan) or Exhibit "FF," null and void from the
beginning;
e. Declaring the vendees named in the Deed of
Sale marked as Exhibit "E" to be the lawful,
exclusive and absolute owners and possessors of
Lots Nos. 8, 19, 22, and 23;
f. Ordering the defendants to pay jointly and
severally each plaintiff ₱50,000.00 as moral
damages; and
g. Ordering the defendants to pay plaintiffs
₱50,000.00 as attorney’s fees; and ₱20,000.00
as litigation expenses.
The crossclaim made by defendant Meridian Realty
Corporation against defendants Soria and Solutan is
ordered dismissed for lack of sufficient evidentiary basis.
SO ORDERED."15
Ruling of the Court of Appeals
On appeal, the CA reversed and set aside the RTC
decision. The CA ruled that the first deed of sale in favor
of petitioners was void because they failed to prove that
they indeed tendered a consideration for the four (4)
parcels of land. It relied on the testimony of Lourdes that
petitioners did not pay her husband. The price or
consideration for the sale was simulated to make it
appear that payment had been tendered when in fact no
payment was made at all.16 With respect to the validity of
the Second Sale, the CA stated that it was valid because
the documents were notarized and, as such, they enjoyed
the presumption of regularity. Although petitioners
alleged that Luis was manipulated into signing the SPAs,
the CA opined that evidence was wanting in this regard.
Dr. Arlene Letigio Pesquira, the attending physician of
Luis, testified that while the latter was physically
infirmed, he was of sound mind when he executed the
first SPA.17 With regard to petitioners’ assertion that the
First SPA was revoked by Luis when he executed the
affidavit, dated November 24, 1994, the CA ruled that the
Second Sale remained valid. The Second Sale was
transacted on August 23, 1994, before the First SPA was
revoked. In other words, when the Second Sale was
consummated, the First SPA was still valid and subsisting.
Thus, "Meridian had all the reasons to rely on the said
SPA during the time of its validity until the time of its
actual filing with the Register of Deeds considering that
constructive notice of the revocation of the SPA only
came into effect upon the filing of the Adverse Claim and
the aforementioned Letters addressed to the Register of
Deeds on 17 December 1994 and 25 November 1994,
respectively, informing the Register of Deeds of the
revocation of the first SPA."18 Moreover, the CA observed
that the affidavit revoking the first SPA was also revoked
by Luis on December 12, 1994.19
Furthermore, although Luis revoked the First SPA, he did
not revoke the Second SPA which authorized respondent
Laila to sell, convey and mortgage, among others, the
property covered by TCT T-11155 (Lot No. 19). The CA
opined that had it been the intention of Luis to discredit
the
Second Sale, he should have revoked not only the First
SPA but also the Second SPA. The latter being valid, all
transactions emanating from it, particularly the mortgage
of Lot 19, its subsequent redemption and its second sale,
were valid.20 Thus, the CA disposed in this wise:
WHEREFORE, the appeal is hereby GRANTED. The
Decision dated 30 July 2004 is hereby REVERSED AND SET
ASIDE, and in its stead a new decision is hereby rendered:
1. DECLARING the Special Power of Attorney,
dated 21 July 1993, as valid;
2. DECLARING the Special Power of Attorney,
dated 03 April 1993, as valid up to the time of its
revocation on 24 November 1994;
 3. DECLARING the Deed of Absolute sale, dated
04 November 1991, as ineffective and without
any force and effect;
4. DECLARING the Deed of Absolute Sale of
Three (3) Parcels of Residential Land, dated 23
August 1994, valid and binding from the very
beginning;
5. DECLARING the Deed of Absolute Sale, dated
27 September 1994, also valid and binding from
the very beginning;
6. ORDERING the substituted plaintiffs to pay
jointly and severally the defendant-appellant
Meridian Realty Corporation the sum of
Php100,000.00 as moral damages,
Php100,000.00 as attorney’s fee and
Php100,000.00 as litigation expenses; and
7. ORDERING the substituted plaintiffs to pay
jointly and severally the defendant-appellants
Leila Solutan et al., the sum of Php50,000.00 as
moral damages.
SO ORDERED.21
Petitioners filed a motion for reconsideration, but it was
denied in the CA Resolution,22 dated November 18, 2010.
Consequently, they filed the present petition with the
following ASSIGNMENT OF ERRORS
I.
THE HONORABLE COURT OF APPEALS (19TH DIVISION)
GRAVELY ERRED WHEN IT DECLARED AS VOID THE FIRST
SALE EXECUTED BY THE LATE LUIS ROSAROSO IN FAVOR
OF HIS CHILDREN OF HIS FIRST MARRIAGE.
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
NOT SUSTAINING AND AFFIRMING THE RULING OF THE
TRIAL COURT DECLARING THE MERIDIAN REALTY
CORPORATION A BUYER IN BAD FAITH, DESPITE THE
TRIAL COURT’S FINDINGS THAT THE DEED OF SALE (First
Sale), IS GENUINE AND HAD FULLY COMPLIED WITH ALL
THE LEGAL FORMALITIES.
III.
THE HONORABLE COURT OF APPEALS FURTHER ERRED IN
NOT HOLDING THE SALE (DATED 27 SEPTEMBER 1994),
NULL AND VOID FROM THE VERY BEGINNING SINCE LUIS
ROSAROSO ON NOVEMBER 4, 1991 WAS NO LONGER THE
OWNER OF LOTS 8, 19, 22 AND 23 AS HE HAD EARLIER
DISPOSED SAID LOTS IN FAVOR OF THE CHILDREN OF HIS
(LUIS ROSAROSO) FIRST MARRIAGE.23
Petitioners argue that the second deed of sale was null
and void because Luis could not have validly transferred
the ownership of the subject properties to Meridian, he
being no longer the owner after selling them to his
children. No less than Atty. William Boco, the lawyer who
notarized the first deed of sale, appeared and testified in
court that the said deed was the one he notarized and
that Luis and his second wife, Lourdes, signed the same
before him. He also identified the signatures of the
subscribing witnesses.24 Thus, they invoke the finding of
the RTC which wrote:
In the case of Heirs of Joaquin Teves, Ricardo Teves versus
Court of Appeals, et al., G.R. No. 109963, October 13,
1999, the Supreme Court held that a public document
executed [with] all the legal formalities is entitled to a
presumption of truth as to the recitals contained therein.
In order to overthrow a certificate of a notary public to
the effect that a grantor executed a certain document
and acknowledged the fact of its execution before him,
mere preponderance of evidence will not suffice. Rather,
the evidence must (be) so clear, strong and convincing as
to exclude all reasonable dispute as to the falsity of the
certificate. When the evidence is conflicting, the
certificate will be upheld x x x .
A notarial document is by law entitled to full faith and
credit upon its face. (Ramirez vs. Ner, 21 SCRA 207). As
such it … must be sustained in full force and effect so long
as he who impugns it shall not have presented strong,
complete and conclusive proof of its falsity or nullity on
account of some flaw or defect provided against by law
(Robinson vs. Villafuerte, 18 Phil. 171, 189-190). 25
Furthermore, petitioners aver that it was erroneous for
the CA to say that the records of the case were bereft of
evidence that they paid the price of the lots sold to them.
In fact, a perusal of the records would reveal that during
the cross-examination of Antonio Rosaroso, when asked
if there was a monetary consideration, he testified that
they indeed paid their father and their payment helped
him sustain his daily needs.26
Petitioners also assert that Meridian was a buyer in bad
faith because when its representative visited the site, she
did not make the necessary inquiries. The fact that there
were already houses on the said lots should have put
Meridian on its guard and, for said reason, should have
made inquiries as to who owned those houses and what
their rights were over the same.27
Meridian’s assertion that the Second Sale was registered
in the Register of Deeds was a falsity. The subject titles,
namely: TCT No. 11155 for Lot 19, TCT No. 10885 for Lot
22, and TCT No. 10886 for Lot 23 were free from any
annotation of the alleged sale.28
After an assiduous assessment of the records, the Court
finds for the petitioners.
The First Deed Of Sale Was Valid
The fact that the first deed of sale was executed,
conveying the subject properties in favor of petitioners,
was never contested by the respondents. What they
vehemently insist, though, is that the said sale was
simulated because the purported sale was made without
a valid consideration.
Under Section 3, Rule 131 of the Rules of Court, the
following are disputable presumptions: (1) private
transactions have been fair and regular; (2) the ordinary
course of business has been followed; and (3) there was
sufficient consideration for a contract.29 These
presumptions operate against an adversary who has not
introduced proof to rebut them. They create the
necessity of presenting evidence to rebut the prima facie
case they created, and which, if no proof to the contrary
is presented and offered, will prevail. The burden of proof
remains where it is but, by the presumption, the one who
has that burden is relieved for the time being from
introducing evidence in support of the averment,
because the presumption stands in the place of evidence
unless rebutted.30
In this case, the respondents failed to trounce the said
presumption. Aside from their bare allegation that the
sale was made without a consideration, they failed to
supply clear and convincing evidence to back up this
claim. It is elementary in procedural law that bare
allegations, unsubstantiated by evidence, are not
equivalent to proof under the Rules of Court.31
The CA decision ran counter to this established rule
regarding disputable presumption. It relied heavily on the
account of Lourdes who testified that the children of Luis
approached him and convinced him to sign the deed of
sale, explaining that it was necessary for a loan
application, but they did not pay the purchase price for
the subject properties.32 This testimony, however, is self-
serving and would not amount to a clear and convincing
evidence required by law to dispute the said
presumption. As such, the presumption that there was
sufficient consideration will not be disturbed. Granting
that there was no delivery of the consideration, the seller
would have no right to sell again what he no longer
owned. His remedy would be to rescind the sale for
failure on the part of the buyer to perform his part of
their obligation pursuant to Article 1191 of the New Civil
Code. In the case of Clara M. Balatbat v. Court Of Appeals
and Spouses Jose Repuyan and Aurora Repuyan,33 it was
written: The failure of the buyer to make good the price
does not, in law, cause the ownership to revest to the
seller unless the bilateral contract of sale is first rescinded
or resolved pursuant to Article 1191 of the New Civil
Code. Non-payment only creates a right to demand the
fulfillment of the obligation or to rescind the contract.
[Emphases supplied]
Meridian is Not a
Buyer in Good Faith
Respondents Meridian and Lucila argue that, granting
that the First Sale was valid, the properties belong to
them as they acquired these in good faith and had them
first recorded in the Registry of Property, as they were
unaware of the First Sale.34
Again, the Court is not persuaded.
The fact that Meridian had them first registered will not
help its cause. In case of double sale, Article 1544 of the
Civil Code provides:
ART. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to
the person who may have first possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in
possession; and, in the absence thereof; to the person
who presents the oldest title, provided there is good
faith.
Otherwise stated, ownership of an immovable property
which is the subject of a double sale shall be transferred:
(1) to the person acquiring it who in good faith first
recorded it in the Registry of Property; (2) in default
thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who
presents the oldest title, provided there is good faith. The
requirement of the law then is two-fold: acquisition in
good faith and registration in good faith. Good faith must
concur with the registration. If it would be shown that a
buyer was in bad faith, the alleged registration they have
made amounted to no registration at all.
The principle of primus tempore, potior jure (first in time,
stronger in right) gains greater significance in case of a
double sale of immovable property. When the thing sold
twice is an immovable, the one who acquires it and first
records it in the Registry of Property, both made in good
faith, shall be deemed the owner. Verily, the act of
registration must be coupled with good faith— that is,
the registrant must have no knowledge of the defect or
lack of title of his vendor or must not have been aware of
facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with
the defects in the title of his vendor.)35 [Emphases and
underlining supplied]
When a piece of land is in the actual possession of
persons other than the seller, the buyer must be wary
and should investigate the rights of those in possession.
Without making such inquiry, one cannot claim that he is
a buyer in good faith. When a man proposes to buy or
deal with realty, his duty is to read the public manuscript,
that is, to look and see who is there upon it and what his
rights are. A want of caution and diligence, which an
honest man of ordinary prudence is accustomed to
exercise in making purchases, is in contemplation of law,
a want of good faith. The buyer who has failed to know
or discover that the land sold to him is in adverse
possession of another is a buyer in bad faith.36 In the case
of Spouses Sarmiento v. Court of Appeals,37 it was
written: Verily, every person dealing with registered land
may safely rely on the correctness of the certificate of
title issued therefor and the law will in no way oblige him
to go behind the certificate to determine the condition of
the property. Thus, the general rule is that a purchaser
may be considered a purchaser in good faith when he has
examined the latest certificate of title. An exception to
this rule is when there exist important facts that would
create suspicion in an otherwise reasonable man to go
beyond the present title and to investigate those that
preceded it. Thus, it has been said that a person who
deliberately ignores a significant fact which would create
suspicion in an otherwise reasonable man is not an
innocent purchaser for value. A purchaser cannot close
his eyes to facts which should put a reasonable man upon
his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of
the vendor. As we have held:
The failure of appellees to take the ordinary precautions
which a prudent man would have taken under the
circumstances, specially in buying a piece of land in the
actual, visible and public possession of another person,
other than the vendor, constitutes gross negligence
amounting to bad faith. In this connection, it has been
held that where, as in this case, the land sold is in the
possession of a person other than the vendor, the
purchaser is required to go beyond the certificate of title
to make inquiries concerning the rights of the actual
possessor. Failure to do so would make him a purchaser
in bad faith. (Citations omitted).
One who purchases real property which is in the actual
possession of another should, at least make some inquiry
concerning the right of those in possession. The actual
possession by other than the vendor should, at least put
the purchaser upon inquiry. He can scarely, in the
absence of such inquiry, be regarded as a bona fide
purchaser as against such possessors. (Emphases
supplied) Prescinding from the foregoing, the fact that
private respondent RRC did not investigate the Sarmiento
spouses' claim over the subject land despite its
knowledge that Pedro Ogsiner, as their overseer, was in
actual possession thereof means that it was not an
innocent purchaser for value upon said land. Article 524
of the Civil Code directs that possession may be exercised
in one's name or in that of another. In herein case, Pedro
Ogsiner had informed RRC that he was occupying the
subject land on behalf of the Sarmiento spouses. Being a
corporation engaged in the business of buying and selling
real estate, it was gross negligence on its part to merely
rely on Mr. Puzon's assurance that the occupants of the
property were mere squatters considering the invaluable
information it acquired from Pedro Ogsiner and
considering further that it had the means and the
opportunity to investigate for itself the accuracy of such
information. [Emphases supplied]
In another case, it was held that if a vendee in a double
sale registers the sale after he has acquired knowledge of
a previous sale, the registration constitutes a registration
in bad faith and does not confer upon him any right. If
the registration is done in bad faith, it is as if there is no
registration at all, and the buyer who has first taken
possession of the property in good faith shall be
preferred.38 In the case at bench, the fact that the subject
properties were already in the possession of persons
other than Luis was never disputed. Sanchez,
representative and witness for Meridian, even testified as
follows:
x x x; that she together with the two agents, defendant
Laila Solutan and Corazon Lua, the president of Meridian
Realty Corporation, went immediately to site of the lots;
that the agents brought with them the three titles of the
lots and Laila Solutan brought with her a special power of
attorney executed by Luis B. Rosaroso in her favor but she
went instead directly to Luis Rosaroso to be sure; that the
lots were pointed to them and she saw that there were
houses on it but she did not have any interest of the
houses because her interest was on the lots; that Luis
Rosaroso said that the houses belonged to him; that he
owns the property and that he will sell the same because
he is very sickly and he wanted to buy medicines; that
she requested someone to check the records of the lots
in the Register of Deeds; that one of the titles was
mortgaged and she told them to redeem the mortgage
because the corporation will buy the property; that the
registered owner of the lots was Luis Rosaroso; that in
more or less three months, the encumbrance was
cancelled and she told the prospective sellers to prepare
the deed of sale; that there were no encumbrances or
liens in the title; that when the deed of absolute sale was
prepared it was signed by the vendor Luis Rosaroso in
their house in Opra x x x.39 (Underscoring supplied)
From the above testimony, it is clear that Meridian,
through its agent, knew that the subject properties were
in possession of persons other than the seller. Instead of
investigating the rights and interests of the persons
occupying the said lots, however, it chose to just believe
that Luis still owned them. Simply, Meridian Realty failed
to exercise the due diligence required by law of
purchasers in acquiring a piece of land in the possession
of person or persons other than the seller. In this regard,
great weight is accorded to the findings of fact of the
RTC. Basic is the rule that the trial court is in a better
position to examine real evidence as well as to observe
the demeanor of witnesses who testify in the case.40
WHEREFORE, the petition is GRANTED. The December 4,
2009 Decision and the November 18, 201 0 Resolution of
the Court of Appeals, in CA-G.R. CV No. 00351, are
REVERSED and SET ASIDE. The July 30, 2004 Decision of
the Regional Trial Court, Branch 8, 7th Judicial Region,
Cebu City, in Civil Case No. CEB-16957, is hereby
REINSTATED.
G.R. No. 175874 December 11, 2013
HEIRS OF CIPRIANO TRAZONA, Namely: FRANCISCA T.
MATBAGON, NATIVIDAD T. ABADIANO, CARLITO C.
TRAZONA; and Heirs of EDELBERTO C. TRAZONA
represented by his daughter DOMICINA T. ARANAS,
ELADIA T. ALICAMEN (Now Deceased) Substituted by
DOMINGO ALICAMEN, LUPECIO ALICAMEN, REBECCA
ALICAMEN-BALBUTIN, ELSEI ALICAMEN, GLENN
ALICAMEN, LENNEI ALICAMEN-GEONZON, DANILO
ALICAMEN, JOVELYN ALICAMEN-VILLETA, JIMBIE
ALICAMEN and HERMOGENES C. TRAZONA (Now
Deceased) Substituted by LILYBETH TRAZONA-MANGILA,
GEMMA TRAZONA, ELIZALDE TRAZONA, BOBBY
TRAZONA, and PALABIANA B. TRAZONA, Petitioners,
vs.
HEIRS OF DIONISIO CANADA, Namely: ROSITA C.
GERSALINA, CONCEPTION C. GEONZON, DANIEL
CANADA, GORGONIO CANADA, LEOPOLDO CANADA,
SUSANA C. DUNGOG, LUZVIMINDA C. TABUADA, AND
CEFERINA CANADA; PROVINCIAL ASSESSOR of Cebu and
MUNICIPAL ASSESSOR of Minglanilla,
Cebu, Respondents.
DECISION
SERENO, CJ.:
This is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court assailing the Decision1 and
Resolution2 of the Court of Appeals Cebu City (CA) in CA-
G.R. CV No. 00099. The CA reversed the Decision3 of the
Regional Trial Court of Cebu City, Branch 57 (RTC) in Civil
Case No. CEB-20620, which annulled the Deed of
Absolute Sale dated 27 June 1956 and ordered the
cancellation of Tax Declaration No. 23959 in the name of
Dionisio Cañada (Dionisio), predecessor of respondents.
Petitioners are heirs of Cipriano Trazona (Cipriano), who
owned an untitled parcel of land referred to as Lot No.
5053-H. The property, located in Minglanilla, Cebu, is
covered by Tax Declaration No. 07764 and has an area of
9,515 square meters.4 The land was purchased from the
government in 1940.5 Since then, Cipriano had taken
possession of the land, cultivated it and diligently paid
taxes thereon.6
In 1949, Dionisio bought the adjacent parcel of land from
Pilar Diaz.7 It was later found that he had encroached on
a small portion of Lot No. 5053-H. He was then
summoned by Cipriano for a confrontation before
the barangay captain in 1952.8 Dionisio offered to buy
the encroached portion, but Cipriano refused the
offer.9 In 1956, the latter gave Dionisio permission to
temporarily build a house on said portion, where it still
stands.10 No action for ejectment was filed against
Dionisio during the lifetime of Cipriano,11 who eventually
died on 18 May 1982.12 The latter’s son Hermogenes, one
of the petitioners herein who had cultivated the lot since
1972, took over.13 On 24 March 1992, Dionisio died.14
The present controversy arose in 1997. Petitioners went
to the Office of the Municipal Assessor to secure a copy
of Tax Declaration No. 07764, as they intended to sell Lot
No. 5053-H to an interested buyer.15 To their surprise,
they were informed that Tax Declaration No. 07764 had
been cancelled and, in lieu thereof, Tax Declaration No.
23959 was issued on 24 June 1996 in the name of
Dionisio.16 Apparently, respondents had caused the
issuance of Tax Declaration No. 23959 by submitting a
Deed of Absolute Sale dated 27 June 1956 supposedly
executed by Cipriano in favor of Dionisio.17 That sale
involved a portion of Lot No. 5053-H described as
follows:
x x x that portion of land of Lot No. FIVE THOUSAND
FIFTY THREE-H (5053-H) under subdivision plan FLR-133
approved by the Director of Lands Jose P. Dans on
September 5, 1953, covered by monuments No. 7, 8, 9,
10, 11, of said Lot No. 5053 bounded on the North by Lot
No. 5954 & portion of Lot 5053-H; East by portion of Lot
5053-H; South by Lot no. 5053-J of Domingo Ababon;
West by Lot no. 9479; x x x.18
Petitioners summoned respondents before the Lupon
Tagapamayapa, but the conciliation was not
successful.19 On 28 July 1997, petitioners filed a
Complaint20 against respondents for quieting of title,
annulment of deed of sale, cancellation of Tax
Declaration No. 23959, recovery of possession and
ownership, damages, and payment of attorney’s fees.
Petitioners alleged therein that the Deed of Absolute Sale
dated 27 June 1956 was a forgery. Respondents, in their
Answer,21 alleged that the assailed deed was a genuine
document and asked for the payment of moral and
exemplary damages, and attorney’s fees, as
counterclaims.
During trial, among the witnesses presented by
petitioners was Romeo O. Varona, document examiner of
the Philippine National Police Crime Laboratory, Region
VII. He testified that according to his comparative analysis
of Cipriano’s signature on the assailed deed and standard
signatures on other documents, Cipriano’s signature on
the deed in question was a forgery. 22
For their part, respondents presented Dionisio’s son
Gorgonio, who testified that he was present when the
assailed deed was executed.23 He also stated that they
had enjoyed the fruits of the lot in question from 1956
until 1960, when they were confronted by petitioners.
Respondents were asked to show proof of ownership, but
could not present any.24 Thus, from 1960 onwards,
petitioners enjoyed the fruits of the property. 25 Later,
respondents were able to find a copy of the assailed deed
in the National Archives, thereby enabling them to cause
the issuance of Tax Declaration No. 23959.26
In the presentation of their rebuttal evidence, petitioners
presented a Deed of Absolute Sale dated 11 April
1953,27executed by Pilar Diaz in favor of
Dionisio.1âwphi1 This prior sale involved the exact same
portion allegedly sold to him by Cipriano – except that in
the date of approval of the subdivision plan by the
Director of Lands, two figures were interchanged.
Whereas the assailed deed showed the date as
"September 5, 1953," the Deed of Absolute Sale dated 11
April 1953 showed the date as "September 5, 1935."
In its Decision dated 6 April 2004, the RTC annulled the
assailed deed and ordered the cancellation of Tax
Declaration No. 23959, as well as the reinstatement of
Tax Declaration No. 07764.28 Respondents were also
ordered to demolish their residential house on Lot No.
5053-H and to pay petitioners attorney’s fees and
litigation expenses.29
The RTC found that respondents’ failure to present the
deed for 40 years from its alleged execution had not been
satisfactorily and convincingly explained.30 It also found
that the assailed deed was indeed a forgery for the
following reasons:
1. It would have been pointless for Dionisio to
buy the same property twice from different
owners.
2. Cipriano’s residence certificate, whose
number was indicated in the assailed deed, as
well as in the notarial register where the deed
was recorded, was allegedly issued in
Minglanilla, Cebu. The other persons’ residence
certificates, whose numbers were indicated on
the same page of the notarial register, appear to
have come from the same booklet as the
residence certificate of Cipriano, judging from
their numerical sequence. However, the
residence certificates of these other persons had
been issued in Sogod, Cebu.
3. There was indeed a glaring difference
between the alleged signature of Cipriano in the
assailed deed and in his standard signatures in
10 other documents submitted by plaintiffs.
Respondents filed a Notice of Appeal dated 30 April
2004.
RULING OF THE CA
On 25 May 2006, the CA issued a Decision reversing that
of the RTC. The appellate court ruled that petitioners had
failed to prove by requisite evidence their allegation that
the assailed deed was a forgery.31 The deed, being a
notarized document, enjoyed the presumption of
authenticity and due execution. Also, the fact that it was
an ancient document that "remained unaltered after so
many years, bodes well for its authenticity." 32
The CA also concluded that the document examiner was
not able to determine the forgery with certainty. What he
had examined was a mere machine copy of the assailed
deed.33 Furthermore, even he admitted that the standard
signatures of Cipriano had shown variations among
themselves.
Finally, the CA ruled that respondents were the actual
possessors of Lot No. 5053-H, since it was their house
that was standing on the property.34 Thus, the CA granted
the appeal and consequently dismissed the Complaint of
petitioners.
ISSUES
Petitioners come before us on a Petition for Review on
Certiorari35
alleging that the CA erred as follows:
1. Ruling that petitioners were not able to
overturn the presumption of regularity of the
assailed deed;
2. Finding that the document examiner was not
able to establish the forgery with certainty;
3. Finding that respondents were in actual
possession of Lot No. 5053-H;
4. Ruling that there was no merit in petitioners’
prayer for the award of attorney’s fees and
litigation expenses.
OUR RULING
Petitioners presented clear and convincing
evidence that the assailed deed is a forgery.
Well-settled is the rule that petitions for review on
certiorari under Rule 45 before this Court should involve
only questions of law.36 A reading of the issues raised by
petitioners readily show that they are questions of fact,
which are generally not within the purview of this Court.
When a question involves facts, the findings of the CA,
including the probative weight accorded to certain pieces
of evidence, are binding on this Court. Also well-settled,
however, are exceptions to this rule,37 such as when the
findings of fact of the CA are contrary to those of the RTC,
as in this case.
We sustain the findings of the RTC.
At the outset, it is worth pointing out that the sale of a
mere portion of Lot No. 5053-H was what brought about
the cancellation of Tax Declaration No. 07764 and the
consequent issuance of Tax Declaration No. 23959, each
of which covered the entire lot. The fact that the assailed
deed covers only a portion of Lot No. 5053-H becomes
clearer still when one considers that it was bounded on
the north and the east by portions of Lot No. 5053-H
itself.
As will be shown below, the assailed deed is a forgery.
Assuming it were genuine, petitioners have a right to the
rest of the property not covered by the purported sale. If
the procedure for the issuance of tax declarations was
followed – if care had been observed to make sure that
all papers were in order and understood – this
irregularity would not have taken place.
It is true that notarized documents are accorded
evidentiary weight as regards their due
execution.38 Nevertheless, while notarized documents
enjoy the presumption of regularity, this presumption is
disputable. They can be contradicted by evidence that is
clear, convincing, and more than merely
preponderant.39 Here, contrary to the conclusion of the
CA, we find clear and convincing evidence that is enough
to overturn the presumption of regularity of the assailed
deed.
First, the document examiner determined that the
signature of Cipriano in the assailed deed had been
forged. No issue has been raised about his expertise. The
finding of the CA that he had examined a mere machine
copy of the assailed deed was erroneous. The pertinent
portion of his testimony clearly shows otherwise, to wit:
ATTY. DURANO:
Q: Now you made mention of the standard documents,
could you kindly tell the Honorable Court what is [the]
questioned document stated in your report?
[ROMEO O. VARONA]
[A]: The questioned document is the Deed of Absolute
Sale dated June 27, 1956.
Q: Do you have a copy of that Deed of Sale as examined
by you?
A: Well, I have a machine copy. I have examined the
original copy at the archive’s office, Mandaue
City.40(Emphasis supplied)
In concluding that the signature of Cipriano in the
assailed deed was a forgery, the document examiner
found that there were "significant differences in letter
formation, construction and other individual handwriting
characteristics" between the assailed and the standard
signatures of Cipriano.41
The fact that the document examiner himself admitted
that even the standard signatures of Cipriano showed
variations among themselves does not make the former’s
determination any less convincing. He explained that
while every signature of the same person varies, the
individual handwriting characteristics of the person
remain the same.42 In Cesar v. Sandiganbayan,43 we
recognized that there is bound to be some variation in
the different samples of genuine signatures of the same
person.
Second, the RTC did not just rely on expert testimony in
ruling that the signature was forged. It likewise supported
its finding that the signature was forged through
independent observation:
Finally, a scrutiny of the signature on the questioned
deed of sale compared to the eleven (11) signatures on
the ten (10) standard documents there exists a glaring
difference in the letter formation of capital letters "C" in
Cipriano and "T" in Trazona. The capital C in questioned
signature, the initial stroke stopped at the upper curve of
the letter C while in the standard signatures, it overlaps
from the upper curve. In the word Trazona, the capital T
in the questioned signature is disconnected from the T
bar to the body of the questioned signature whereas, in
the standard signatures, the capital T is connected. These
discrepancies can easily be noticed by mere physical
appearance that the letters C and T were written. 44
Third, the existence of the Deed of Absolute Sale dated
11 April 1953 brings into question the regularity of the
assailed deed. This deed was never disputed by
respondents at any stage of the proceedings, and was in
fact admitted by them in their Comments to Plaintiffs’
Additional Formal Offer of Exhibits.45 Indeed, the RTC was
correct in its observation that no one in complete
possession of one’s mental faculties would buy the same
property twice from different owners. Respondents never
provided any explanation for this anomalous situation. In
any case, it has been established that Lot No. 5053-H is in
the name of Cipriano, who bought it from the
government in 1940. Thus, only Cipriano had the right to
dispose of the property, or portions thereof.
Fourth, Cipriano had cultivated the property and paid
taxes thereon since the time he acquired it from the
government, and even after its purported sale to
Dionisio, until his death.46 Petitioners continued paying
the taxes thereon even after Cipriano had
died.47 Respondents started paying taxes on the property
only after Tax Declaration No. 23959 was issued in
Dionisio’s name in 1997.48 It would be absurd for
petitioners to pay taxes on a property they do not own.
Fifth, as admitted by Gorgonio himself, petitioners were
the ones enjoying the fruits of the property from 1960
until the present controversy. 49 Again, it is incongruous
for petitioners to enjoy the fruits if respondents owned
the property.
Sixth, as the RTC noted, there was an irregularity
regarding the place of issuance of Cipriano’s residence
certificate indicated in the assailed deed, as compared
with the residence certificates of the other persons
indicated on the same page of the notarial register.
Finally, when the record management analyst from the
Bureau of Archives presented the assailed deed, the
paper was noted to be white, while its supposed
contemporaries in the bunch from where it was taken
had turned yellow with age. 50 Further, when the analyst
was asked the question of when- the assailed deed was
received by the Bureau of Archives, she answered that it
was forwarded to them only on 28 September 1987 by
RTC Region 7, Notarial Division.51
Clearly, the evidence adduced fully supports the position
of petitioners that the assailed deed of sale is forged and
that they are the owners of the property. Having been
forced to litigate in order to protect their interest therein,
the award of attorney's fees and litigation expenses to
them is in order.
The actual possession of Lot No. 5053-H by petitioners
has been properly ruled on by the RTC.1âwphi1 Much
has been made by the CA of the fact that respondents'
house was standing on the property. However,
petitioners have explained that the house was erected
only after Cipriano permitted it.
Dionisio was then well aware that this temporary
arrangement may be terminated at any time.
Respondents cannot now refuse to vacate the property
or eventually demand reimbursement of necessary and
useful expenses under Articles 448 and 546 of the New
Civil Code, because the provisions apply only to a
possessor in good faith, i.e., one who builds on land with
the belief that he is the owner thereof. 52 Persons who
occupy land by virtue of tolerance of the owners are not
possessors in good faith. 53 Thus, the directive of the RTC
for respondents to demolish their residential house on
Lot No. 5053-H was also proper.

WHEREFORE, the Decision and Resolution of the Court of

Appeals Cebu City in CA-G.R. CV No. 00099
are REVERSED and SET ASIDE. The Decision of the
Regional Trial Court of Cebu City, Branch 57, in Civil Case
No. CEB-20620 is REINSTATED in all respects.

SO ORDERED.

MARIA LOURDES P. A. SERENO

Chief Justice, Chairperson

[ GR No. 206220, Aug 19, 2015 ]

LUIS UY v. SPS. JOSE LACSAMANA AND ROSAURA*

MENDOZA

DECISION
CARPIO, J.:
This is a petition for review on certiorari[1] assailing the
Decision dated 14 September 2011[2] and Resolution
dated 1 March 2013[3] of the Court of Appeals (CA) in CA-
G.R. CV No. 93786.

The subject of the litigation involves a parcel of land

known as Lot 5506 of the Cadastral Survey of Batangas
plan (LRC) SWO-2817, L.R. Case No. N-445, L.R.C. Record
No. N-22499. The land, situated in Barrio Alangilan,
Batangas City, contains an area of 484 square meters
under Transfer Certificate of Title (TCT) No. T-24660.
[4]
The land was previously owned by spouses Anastacio
Manuel and Mariquita de Villa (Spouses Manuel) under
Original Certificate of Title (OCT) No. 0-2840.
On 4 May 1979, petitioner Luis Uy (Uy) filed with the
Regional Trial Court (RTC) of Pallocan West, Batangas City,
Branch 4, a Complaint[5] for Declaration of Nullity of
Documents with Damages against respondents Petra
Rosca (Rosca), and spouses Jose Lacsamana and Rosaura
Mendoza (Spouses Lacsamana).
In the Complaint, Uy alleged that he was the lawful
husband of Rosca. He stated that they lived together as
husband and wife from the time they were married in
1944 until 1973 when they separated and lived apart. Uy
and Rosca had eight children.
Uy alleged that on 29 January 1964,[6] he and his wife
acquired a 484 square meter residential land for a
consideration of P1,936 evidenced by a Deed of
Sale[7] from the Spouses Manuel. The sellers' OCT No. 0-
2840 was cancelled and TCT No. T-24660 was issued in
the name of "Petra Rosca, married to Luis G. Uy."
On 15 June 1964, Uy and Rosca allegedly purchased, as
evidenced by a Deed of Absolute Sale,[8] another
residential land adjacent to the 484 square meter land
from the spouses Felix Contreras and Maxima de Guzman
(Spouses Contreras). The second purchase consisted of
215 square meters, as declared under Tax Declaration No.
61724, for a consideration of P700. Thereafter, a split
level house with a floor area of 208.50 square meters was
constructed on the 484 square meter land.
Uy further alleged that Rosca, in gross and evident bad
faith, executed and signed a false and simulated Deed of
Sale[9] dated 18 April 1979 on the 484 square meter land,
together with the house erected thereon, for a
consideration of P80,000 in favor of Spouses Lacsamana.
Uy prayed that (1) the Deed of Sale dated 18 April 1979
executed by Rosca in favor of Spouses Lacsamana be
declared null and void with respect to his rights, interest,
and ownership; (2) that defendants be directed to pay,
jointly and severally, to Uy the amounts of P100,000 as
moral damages, P10,000 as attorney's fees, P2,000 as
expenses incident to litigation, plus costs of suit; (3) upon
declaration of the nullity of the Deed of Sale, the Register
of Deeds of Batangas City and the City Assessor be
directed to register Uy as the sole owner of the real
properties; (4) if defendant Spouses Lacsamana are found
by the court to be buyers in good faith, Rosca be ordered
to turn over to Uy the entire proceeds of sale of the
properties and be adjudged to pay the damages; and (5)
that the sum of P600,000 taken by Rosca from Uy be
collated into the mass of the conjugal partnership
properties.
In her Answer with Counterclaim dated 22 May 1979,
Rosca denied the allegations of Uy and claimed that she
lawfully acquired the subject real properties using her
paraphernal funds. Rosca added that she was never
married to Uy and prayed for the dismissal of the
complaint for lack of merit. In her Counterclaim, Rosca
prayed that the court award her (1) P200,000 as moral
damages; (2) P100,000 as exemplary damages; (3)
P12,000 as attorney's fees; (4) P3,000 as incidental
litigation expenses; and (5) costs of suit. Spouses
Lacsamana also filed their Answer with Counterclaim
dated 21 May 1979 claiming that they were buyers in
good faith and for value and that they relied on the
Torrens title which stated that Rosca was the owner of
the subject property.
In the meantime, Uy questioned the registrability of the
Deed of Sale before the Office of the Register of Deeds of
Batangas City. The Register of Deeds elevated the matter,
on consulta,[10] with the Land Registration Commission
(LRC) because of an affidavit subsequently filed by Uy
contesting the sale and alleging, among others, that the
property was conjugal in nature and sold without his
marital consent.
In a Resolution[11] dated 7 November 1979, the LRC
decided in favor of registration stating that since the
property in question was registered in Rosca's name,
such circumstance indicated that the property belonged
to Rosca, as her paraphernal property. The LRC added
that litigious matters, such as a protest from the other
party based on justifiable and legal grounds, were to be
decided not by the Register of Deeds but by a court of
competent jurisdiction. The dispositive portion of the
Resolution states:
WHEREFORE, this Commission is of the opinion that the
subject document should be admitted for registration.
SO ORDERED.[12]
On 18 February 1981, Uy died.[13] His two daughters, Lydia
Uy Velasquez (Lydia) and Shirley Uy Macaraig (Shirley)
substituted him in the case. Fifteen years later or on 10
May 1996, Rosca also died.[14] Earlier, respondent Jose
Lacsamana died on 20 March 1991.[15]
Meanwhile, on 24 December 1982, Spouses Lacsamana
sold the property to Corazon Buena (Buena) through a
Deed of Absolute Sale.[16]Thus, both Rosca and the
Spouses Lacsamana were substituted by Buena as
respondent in this case.
During the trial, Uy presented the testimonies of his two
daughters, Lydia and Shirley, as his own witnesses, as well
as Rosca, as an adverse witness.
Lydia testified that the Uy family lived in the house built
on the land acquired by Uy and Rosca. She alleged that
the house existed until it was demolished by Buena's
agent sometime in 2006. Lydia also stated that the funds
used to construct the family dwelling came from Uy's
business. Shirley corroborated the testimony of Lydia on
all material points.

Rosca, on the other hand, testified that sometime before
or during World War II, she and Uy cohabited and settled
in Batangas. The couple attempted to formalize their
marital union with a marriage ceremony. However, the
celebration was not consummated because of the
bombings which occurred on the day of the ceremony.
Likewise, they were unable to secure a marriage contract.
Rosca stated that on 29 January 1964, she alone
purchased, as sole vendee, with money coming from her
own personal and paraphernal funds, the land covered by
OCT No. 0-2840 and owned by Spouses Manuel.
Thereafter, on 15 June 1964, she again purchased, using
her own personal and paraphernal funds, the land
adjacent to the first purchased property owned by
Spouses Contreras and covered by Tax Declaration No.
61724. Immediately after, she caused the construction of
a split level house on the land using her own paraphernal
funds which became their family dwelling.
Rosca alleged that Uy had an affair with another woman
and sired children with her which led to their physical
separation before the year 1973. On 17 September 1976,
Rosca obtained a real estate loan in the amount of
P50,000 from Philippine Banking Corporation (PBC) using
the house and lot as collateral. In support of this loan,
Rosca executed an Affidavit of Ownership[17] dated 27
September 1976, stating that (1) she was the lawful and
sole owner of the 484 square meter land, together with
the building erected thereon, and (2) the land was
registered under her name and that the phrase "Petra
Rosca, married to Luis G. Uy" in TCT No. T-24660 was
merely a description of her status.
Defendants offered the testimony of Rosca, Atty. Teodulfo
Dequito, Jr., Rosaura Mendoza, and Buena.
Atty. Teodulfo Dequito, Jr. testified that Uy questioned
the registrability of the Deed of Sale before the Office of
the Register of Deeds of Batangas City. The Register of
Deeds elevated the matter on consulta with the LRC,
which issued a Resolution dated 7 November 1979
recognizing Rosca as the sole registered owner of the
property.
Rosaura Mendoza testified that she and her husband
purchased, in the amount of P80,000, the 484 square
meter property of Rosca on 18 April 1979 through a Deed
of Absolute Sale of House and Lot.[18] The Registry of
Deeds of Batangas City cancelled TCT No. T-24660 and
issued TCT No. T-35[19] in favor of the spouses. Then,
Spouses Lacsamana mortgaged the property to PBC for
P48,000. Upon full payment of the mortgage debt on 15
April 1982, PBC issued a Release of Real Estate Mortgage.
Buena testified that she purchased the same property
under TCT No. T-35 from Spouses Lacsamana on 24
December 1982 for a consideration of P80,000.
Consequently, the Registry of Deeds of Batangas City
cancelled TCT No. T-35 and issued TCT No. T-3244 [20]in her
name. Likewise, the Assessor's Office of Batangas City
issued Tax Declaration No. 90210.[21]
Before the resolution of the case, Shirley and Lydia filed a
Motion for Issuance of Preliminary Injunction and/or
Temporary Restraining Order. They claimed that Buena
entered the property and caused the construction of
structures without any court order. Consequently, the
RTC issued an Order dated 21 September 2007 granting
the preliminary injunction. Thereafter, the case was
submitted for resolution.
In a Decision[22] dated 21 April 2009, the RTC decided the
case in favor of respondents. The lower court found that
(1) there was no valid marriage between Uy and Rosca;
(2) the Deed of Sale executed by Rosca over the house
and lot in favor of Spouses Lacsamana was valid; and (3)
both parties were not entitled to their respective claims
for damages. The dispositive portion of the Decision
states:
WHEREFORE, all premises considered, the instant
Complaint filed by plaintiff Uy is hereby DISMISSED. The
preliminary injunction and bond are cancelled and are
rendered of no force and effect. The claims for damages
of both parties are hereby DENIED. Cost against both
parties.
SO ORDERED.[23]
Uy filed an appeal[24] with the CA. In a Decision[25] dated
14 September 2011, the CA affirmed the ruling of the
trial court. The appellate court found that respondents
were able to overthrow the presumption of marriage and
that the subject property was Rosca's paraphernal
property. The appellate court also upheld the validity of
the sale. The dispositive portion of the Decision states:
WHEREFORE, the appealed Decision dated April 21, 2009
is AFFIRMED.
SO ORDERED.[26]
Uy then filed a Motion for Reconsideration which was
denied by the appellate court in a Resolution[27] dated 1
March 2013.
Hence, the instant petition.
The Issue
The main issue for our resolution is whether the Deed of
Sale dated 18 April 1979, executed by Rosca alone,
without Uy's consent, in favor of Spouses Lacsamana, is
valid.
The Court's Ruling
The petition lacks merit.
Uy contends that the Deed of Sale executed by Rosca is
not valid for being simulated or fictitious for lack of
consideration and consent. Uy states that no proof was
presented by Spouses Lacsamana to show that they
actually paid P80,000 to Rosca for the purchase of the
property. Uy also insists that he did not give his consent
to the sale which prejudiced his rights and interest. Uy
argues that Rosca did not give physical possession of the
house and lot to the alleged buyers. Further, Uy adds,
without admitting that the sale is valid, that the
consideration paid was unreasonably low and
unconscionable such that it constitutes an equitable
mortgage. Uy insists that Spouses Lacsamana and Buena
cannot be considered buyers in good faith.
Respondents, on the other hand, assert that the
contentions of Uy rely on the re-examination and re-
evaluation of the evidence of the parties which had
previously been passed upon exhaustively by both the
trial and appellate courts. Respondents added that only
questions of law may be raised under Rule 45. Since the
findings of fact of the trial and appellate courts were
supported by substantial evidence and none of the
recognized exceptions allowing this Court to exercise its
power to review is present, then the petition should be
dismissed.
We agree with respondents.
The issues raised by Uy had been thoroughly passed
upon by the trial and appellate courts. We find no reason
to disturb their factual findings. In petitions for review on
certiorari as a mode of appeal under Rule 45, like in the
present case, a petitioner can raise only questions of law.
Here, Uy would like us to review again the factual
circumstances surrounding the Deed of Sale executed by
Rosca with the Spouses Lacsamana and to declare the
Deed of Sale invalid for being simulated due to lack of
consideration and consent. Clearly, these are questions of
fact which are within the purview of the trial and
appellate courts to determine. Also, the issues raised do
not come within the purview of the recognized
exceptions[28] for this Court to take cognizance of the
case. We have reiterated time and again that this Court is
not the proper venue to consider factual issues as it is
not a trier of facts.
Here, the main issue in determining the validity of the
sale of the property by Rosca alone is anchored on
whether Uy and Rosca had a valid marriage. There is a
presumption established in our Rules "that a man and
woman deporting themselves as husband and wife have
entered into a lawful contract of marriage." [29] Semper
praesumitur pro matrimonio — Always presume
marriage.[30] However, this presumption may be
contradicted by a party and overcome by other evidence.
Marriage may be proven by any competent and relevant
evidence. In Pugeda v. Trias,[31] we held that testimony by
one of the parties to the marriage, or by one of the
witnesses to the marriage, as well as the person who
officiated at the solemnization of the marriage, has been
held to be admissible to prove the fact of marriage.
Documentary evidence may also be shown. In Villanueva
v. Court of Appeals,[32] we held that the best documentary
evidence of a marriage is the marriage contract itself.
Under Act No. 3613 or the Marriage Law of 1929, [33] as
amended by Commonwealth Act No. 114,[34] which is
applicable to the present case being the marriage law in
effect at the time Uy and Rosca cohabited, the marriage
certificate, where the contracting parties state that they
take each other as husband and wife, must be furnished
by the person solemnizing the marriage to (1) either of
the contracting parties, and (2) the clerk of the Municipal
Court of Manila or the municipal secretary of the
municipality where the marriage was solemnized. The
third copy of the marriage contract, the marriage license
and the affidavit of the interested party regarding the
solemnization of the marriage other than those
mentioned in Section 5 of the same Act shall be kept by
the official, priest, or minister who solemnized the
marriage.
Here, Uy was not able to present any copy of the
marriage certificate which he could have sourced from
his own personal records, the solemnizing officer, or the
municipal office where the marriage allegedly took place.
Even the findings of the RTC revealed that Uy did not
show a single relevant evidence that he was actually
married to Rosca. On the contrary, the documents Uy
submitted showed that he and Rosca were not legally
married to each other. The pertinent portions of the RTC
Decision state:
x x x In the case under consideration, the presumption of
marriage, on which plaintiff Uy anchored his allegations,
has been sufficiently offset. Records reveal that there is
plethora of evidence showing that plaintiff Uy and
defendant Rosca were never actually married to each
other, to wit:
First. In his Petition for Naturalization as a Filipino citizen
filed before the then Court of First Instance of Batangas
on 12 November 1953, plaintiff Uy himself stated in the
fifth paragraph of his Petition, to quote: "I am married
(not legally)."
Second. The Sworn Statement of no less than the
Governor of the Province of Batangas executed in
support of the plaintiff Uy's Petition for Naturalization
categorically states, in Nos. 2 and 4 thereof, that plaintiff
Uy was married (not legally).
Third. The Immigrant Certificate of Residence shows that
as late as 9 October 1951, plaintiff Uy also known by his
Chinese name of Uy Suan Tee, regarded himself as
"single" when filling up his civil status therein.
Fourth. The Alien Certificate of Registration No. 83758
establishes that plaintiff Uy was an alien duly registered
with the Bureau of Immigration of the Philippines and
that his civil status was single.
Fifth. The Affidavit of Vicente J. Caedo, a prominent
citizen of Batangas, establishes in Nos. 2 and 4 thereof
that plaintiff Uy was not legally married to defendant
Rosca.
Sixth. The testimony of defendant Rosca as an adverse
witness reveals that plaintiff Uy was not legally married
to her because their marriage was not consummated.
For his part, plaintiff Uy tried to justify the non-
presentation of their marriage certificate by presenting
public documents, namely:
First. Decision in the case entitled: "In the matter of the
Petition of Uy Suan Tee alias Luis G. Uy, to be admitted a
citizen of the Philippines";
Second. Certificate of Live Birth of Violeta Uy, daughter of
plaintiff Uy and defendant Rosca and the descriptive
word "legitimate" showing that Violeta Uy was
legitimate;
Third. Death Claim under SSS Employee Compensation
executed and signed by defendant Rosca, stating that she
is the wife of plaintiff Uy;
Fourth. Various pictures of the plaintiff Uy and defendant
Rosca with their children;
Fifth. Special Power of Attorney executed by defendant
Rosca dated 19 July 1985 wherein she admitted being the
wife of plaintiff Uy;
Sixth. Sinumpaang Salaysay dated 3 August 1982
executed by defendant Rosca admitting she is the widow
of plaintiff Uy which was not testified to nor identified by
Rosca;
Seventh. Affidavit of Ownership dated 27 September
1976 signed by defendant Rosca admitting her status as
married;
to establish the fact of his marriage with defendant
Rosca. Likewise, plaintiff Uy presented defendant Rosca
as an adverse witness purportedly to elicit from her the
fact of his marriage with the latter. However, this
presumption had been debunked by plaintiff Uy's own
evidence and most importantly, by the more superior
evidence presented by the defendants.
While it is true that plaintiff Uy and defendant Rosca
cohabited as husband and wife, defendant Rosca's
testimony revealed that plaintiff Uy was not legally
married to her because their marriage was not
consummated. In People vs. Borromeo, this Court held
that persons living together in apparent matrimony are
presumed, absent any counter presumption or evidence
special to the case, to be in fact married. Consequently,
with the presumption of marriage sufficiently overcome,
the onus probandi of defendant Rosca shifted to plaintiff
Uy. It then became the burden of plaintiff Uy to prove
that he and defendant Rosca, were legally married. It
became necessary for plaintiff Uy therefore to submit
additional proof to show that they were legally married.
He, however, dismally failed to do so.[35]
Since Uy failed to discharge the burden that he was
legally married to Rosca, their property relations would
be governed by Article 147 of the Family Code which
applies when a couple living together were not
incapacitated from getting married. Article 147 provides:
Art. 147. When a man and a woman who are capacitated
to marry each other, live exclusively with each other as
husband and wife without the benefit of marriage or
under a void marriage, their wages and salaries shall be
owned by them in equal shares and the property
acquired by both of them through their work or industry
shall be governed by the rules on co-ownership.
In the absence of proof to the contrary, properties
acquired while they lived together shall be presumed to
have been obtained by their joint efforts, work or
industry, and shall be owned by them in equal shares. For
purposes of this Article, a party who did not participate in
the acquisition by the other party of any property shall
be deemed to have contributed jointly in the acquisition
thereof if the former's efforts consisted in the care and
maintenance of the family and of the household.
Neither party can encumber or dispose by acts inter vivos
of his or her share in the property acquired during
cohabitation and owned in common, without the consent
of the other, until after the termination of their
cohabitation.
When only one of the parties to a void marriage is in
good faith, the share of the party in bad faith in the co-
ownership shall be forfeited in favor of their common
children. In case of default of or waiver by any or all of
the common children or their descendants, each vacant
share shall belong to the respective surviving
descendants. In the absence of descendants, such share
shall belong to the innocent party. In all cases, the
forfeiture shall take place upon termination of the
cohabitation.
The provision states that properties acquired during
cohabitation are presumed co-owned unless there is
proof to the contrary. We agree with both the trial and
appellate courts that Rosca was able to prove that the
subject property is not co-owned but is paraphernal.
First, in the Resolution dated 7 November 1979 of the
LRC in LRC Consulta No. 1194, Rosca was recognized as
the sole registered owner of the property. [36]
Second, in the Deed of Sale dated 29 January 1964
between Spouses Manuel and Rosca covering the 484
square meter land, Uy served as a mere witness to
Rosca's purchase of the land as evidenced by his
signature under "signed in the presence of." [37] This could
only mean that Uy admitted the paraphernal nature of
Rosca's ownership over the property.
Third, in the Affidavit of Ownership dated 27 September
1976 executed by Rosca in support of her real estate loan
application with PBC in the amount of P5 0,000, Rosca
stated that she was the sole and lawful owner of the
subject property and that the land was registered under
her name and that the phrase "Petra Rosca, married to
Luis G. Uy" in TCT No. T-24660 was merely a description
of her status.[38]
 93786.
Last, the title to the property in the name of "Petra
Rosca, married to Luis G. Uy" was notice to the world, SO ORDERED.
including her heirs and successors-in-interest, that such
belonged to Rosca as her paraphernal property. [39] The Brion, Del Castillo, Mendoza, and Leonen, JJ., concur.
words "married to" were merely descriptive of Rosca's
status at the time the property was registered in her
name.[40] Otherwise, if the property was conjugal, the title
to the property should have been in the names of Luis Uy
and Petra Rosca.[41]

In Ruiz v. Court of Appeals,[42] the property subject of the

mortgage was registered in the name of "Corazon G. Ruiz,
of legal age, married to Rogelio Ruiz, Filipinos." This Court
ruled that the title is registered in the name of Corazon
alone because the phrase "married to Rogelio Ruiz" is
merely descriptive of the civil status of Corazon and
should not be construed to mean that her husband is also
a registered owner.

Based on the evidence she presented, Rosca was able to

sufficiently overcome the presumption that any property
acquired while living together shall be owned by the
couple in equal shares. The house and lot were clearly
Rosca's paraphernal properties and she had every right to
sell the same even without Uy's consent.

Uy further contends that the Deed of Sale executed by

Rosca is not valid for being simulated or fictitious for lack
of consideration. Uy states that no proof was presented
by Spouses Lacsamana to show that they actually paid
P80,000 to Rosca for the purchase of the property or
even if there was consideration, such was unreasonably
low and unconscionable. Thus, Spouses Lacsamana and
Buena cannot be considered as buyers in good faith.

We disagree.

Uy did not present any proof to show that Rosca did not
receive any consideration for the sale. Neither did he
submit any evidence, whether documentary or
testimonial, showing the fair market value of the
property at the time of the sale to prove that the
purchase price was unreasonably low or unconscionable.
It was even mentioned by the appellate court that
"appellants failed to prove that on April 18, 1979, the
property might have been worth millions of pesos." Thus,
Uy's allegations lack sufficient substantiation. G.R. No. 180677 February 18, 2013

Moreover, the factual findings of the appellate court
carry great weight and are binding on this Court when
they coincide with the factual findings of the trial court.
This Court will not weigh the evidence all over again since
payment of the purchase price and the consideration for
the sale are factual issues which cannot be raised in this
petition.
In sum, we find that the Deed of Sale, executed by Rosca
on her paraphernal property in favor of Spouses
Lacsamana, is valid.
WHEREFORE, we DENY the petition. We AFFIRM the
Decision dated 14 September 2011 and Resolution dated
1 March 2013 of the Court of Appeals in CA-G.R. CV No.
VICTORIO P. DIAZ, Petitioner,
vs.
PEOPLE OF THE PHILIPPINES AND LEVI STRAUSS [PHILS.],
INC., Respondents.
DECISION
BERSAMIN, J.:
It is the tendency of the allegedly infringing mark to be
confused with the registered trademark that is the
gravamen of the offense of infringement of a registered
trademark. The acquittal of the accused should follow if
the allegedly infringing mark is not likely to cause
confusion. Thereby, the evidence of the State does not
satisfy the quantum of proof beyond reasonable doubt.
Accused Victorio P. Diaz (Diaz) appeals the resolutions
promulgated on July 17, 20071 and November 22,
2007,2whereby the Court of Appeals (CA), respectively,
dismissed his appeal in C.A.-G.R. CR No. 30133 for the
belated filing of the appellant's brief, and denied his
motion for reconsideration. Thereby, the decision
rendered on February 13, 2006 in Criminal Case No. 00-
0318 and Criminal Case No. 00-0319 by the Regional Trial
Court, Branch 255, in Las Pifias City (RTC) convicting him
for two counts of infringement of trademark were
affirmed.3
Antecedents
On February 10, 2000, the Department of Justice filed
two informations in the RTC of Las Piñas City, charging
Diaz with violation of Section 155, in relation to Section
170, of Republic Act No. 8293, also known as
the Intellectual Property Code of the
Philippines (Intellectual Property Code), to wit:
Criminal Case No. 00-0318
That on or about August 28, 1998, and on dates prior
thereto, in Las Pinas City, and within the jurisdiction of
this Honorable Court, the abovenamed accused, with
criminal intent to defraud Levi’s Strauss (Phil.) Inc.
(hereinafter referred to as LEVI’S), did then and there,
willfully, unlawfully, feloniously, knowingly and
intentionally engaged in commerce by reproducing,
counterfeiting, copying and colorably imitating Levi’s
registered trademarks or dominant features thereof such
as the ARCUATE DESIGN, TWO HORSE BRAND, TWO
HORSE PATCH, TWO HORSE LABEL WITH PATTERNED
ARCUATE DESIGN, TAB AND COMPOSITE
ARCUATE/TAB/TWO HORSE PATCH, and in connection
thereto, sold, offered for sale, manufactured, distributed
counterfeit patches and jeans, including other
preparatory steps necessary to carry out the sale of said
patches and jeans, which likely caused confusion,
mistake, and /or deceived the general consuming public,
without the consent, permit or authority of the
registered owner, LEVI’S, thus depriving and defrauding
the latter of its right to the exclusive use of its trademarks
and legitimate trade, to the damage and prejudice of
LEVI’S.
CONTRARY TO LAW.4
Criminal Case No. 00-0319
That on or about August 28, 1998, and on dates prior
thereto, in Las Pinas City, and within the jurisdiction of
this Honorable Court, the abovenamed accused, with
criminal intent to defraud Levi’s Strauss (Phil.) Inc.
(hereinafter referred to as LEVI’S), did then and there,
willfully, unlawfully, feloniously, knowingly and
intentionally engaged in commerce by reproducing,
counterfeiting, copying and colorably imitating Levi’s
registered trademarks or dominant features thereof such
as the ARCUATE DESIGN, TWO HORSE BRAND, TWO
HORSE PATCH, TWO HORSE LABEL WITH PATTERNED
ARCUATE DESIGN, TAB AND COMPOSITE
ARCUATE/TAB/TWO HORSE PATCH, and in connection
thereto, sold, offered for sale, manufactured, distributed
counterfeit patches and jeans, including other
preparatory steps necessary to carry out the sale of said
patches and jeans, which likely caused confusion,
mistake, and /or deceived the general consuming public,
without the consent, permit or authority of the
registered owner, LEVI’S, thus depriving and defrauding
the latter of its right to the exclusive use of its trademarks
and legitimate trade, to the damage and prejudice of
LEVI’S.
CONTRARY TO LAW.5
The cases were consolidated for a joint trial. Diaz entered
his pleas of not guilty to each information on June 21,
2000.6
1.
Evidence of the Prosecution
Levi Strauss and Company (Levi’s), a foreign corporation
based in the State of Delaware, United States of America,
had been engaged in the apparel business. It is the owner
of trademarks and designs of Levi’s jeans like LEVI’S 501,
the arcuate design, the two-horse brand, the two-horse
patch, the two-horse patch with pattern arcuate, and the
composite tab arcuate. LEVI’S 501 has the following
registered trademarks, to wit: (1) the leather patch
showing two horses pulling a pair of pants; (2) the
arcuate pattern with the inscription "LEVI STRAUSS &
CO;" (3) the arcuate design that refers to "the two
parallel stitching curving downward that are being sewn
on both back pockets of a Levi’s Jeans;" and (4) the tab or
piece of cloth located on the structural seam of the right
back pocket, upper left side. All these trademarks were
registered in the Philippine Patent Office in the 1970’s,
1980’s and early part of 1990’s.7
Levi Strauss Philippines, Inc. (Levi’s Philippines) is a
licensee of Levi’s. After receiving information that Diaz
was selling counterfeit LEVI’S 501 jeans in his tailoring
shops in Almanza and Talon, Las Piñas City, Levi’s
Philippines hired a private investigation group to verify
the information. Surveillance and the purchase of jeans
from the tailoring shops of Diaz established that the jeans
bought from the tailoring shops of Diaz were counterfeit
or imitations of LEVI’S 501. Levi’s Philippines then sought
the assistance of the National Bureau of Investigation
(NBI) for purposes of applying for a search warrant
against Diaz to be served at his tailoring shops. The
search warrants were issued in due course. Armed with
the search warrants, NBI agents searched the tailoring
shops of Diaz and seized several fake LEVI’S 501 jeans
from them. Levi’s Philippines claimed that it did not
authorize the making and selling of the seized jeans; that
each of the jeans were mere imitations of genuine LEVI’S
501 jeans by each of them bearing the registered
trademarks, like the arcuate design, the tab, and the
leather patch; and that the seized jeans could be
mistaken for original LEVI’S 501 jeans due to the
placement of the arcuate, tab, and two-horse leather
patch.8
2.
Evidence of the Defense
On his part, Diaz admitted being the owner of the shops
searched, but he denied any criminal liability.
Diaz stated that he did not manufacture Levi’s jeans, and
that he used the label "LS Jeans Tailoring" in the jeans
that he made and sold; that the label "LS Jeans Tailoring"
was registered with the Intellectual Property Office; that
his shops received clothes for sewing or repair; that his
shops offered made-to-order jeans, whose styles or
designs were done in accordance with instructions of the
customers; that since the time his shops began operating
in 1992, he had received no notice or warning regarding
his operations; that the jeans he produced were easily
recognizable because the label "LS Jeans Tailoring," and
the names of the customers were placed inside the
pockets, and each of the jeans had an "LSJT" red tab; that
"LS" stood for "Latest Style;" and that the leather patch
on his jeans had two buffaloes, not two horses.9
Ruling of the RTC
On February 13, 2006, the RTC rendered its decision
finding Diaz guilty as charged, disposing thus:
WHEREFORE, premises considered, the Court finds
accused Victorio P. Diaz, a.k.a. Vic Diaz, GUILTY beyond
reasonable doubt of twice violating Sec. 155, in relation
to Sec. 170, of RA No. 8293, as alleged in the
Informations in Criminal Case Nos. 00-0318 & 00-0319,
respectively, and hereby sentences him to suffer in each
of the cases the penalty of imprisonment of TWO (2)
YEARS of prision correcional, as minimum, up to FIVE (5)
YEARS of prision correcional, as maximum, as well as pay
a fine of ₱50,000.00 for each of the herein cases, with
subsidiary imprisonment in case of insolvency, and to
suffer the accessory penalties provided for by law.
Also, accused Diaz is hereby ordered to pay to the private
complainant Levi’s Strauss (Phils.), Inc. the following,
thus:
1. ₱50,000.00 in exemplary damages; and
2. ₱222,000.00 as and by way of attorney’s fees.
Costs de officio.
SO ORDERED.10
Ruling of the CA
Diaz appealed, but the CA dismissed the appeal on July
17, 2007 on the ground that Diaz had not filed his
appellant’s brief on time despite being granted his
requested several extension periods.
Upon denial of his motion for reconsideration, Diaz is
now before the Court to plead for his acquittal.
Issue
Diaz submits that:
THE COURT OF APPEALS VIOLATED EXISTING LAW AND
JURISPRUDENCE WHEN IT APPLIED RIGIDLY THE RULE ON
TECHNICALITIES AND OVERRIDE SUBSTANTIAL JUSTICE BY
DISMISSING THE APPEAL OF THE PETITIONER FOR LATE
FILING OF APPELLANT’S BRIEF.11
Ruling
The Court first resolves whether the CA properly
dismissed the appeal of Diaz due to the late filing of his
appellant’s brief.
Under Section 7, Rule 44 of the Rules of Court, the
appellant is required to file the appellant’s brief in the CA
"within forty-five (45) days from receipt of the notice of
the clerk that all the evidence, oral and documentary, are
attached to the record, seven (7) copies of his legibly
typewritten, mimeographed or printed brief, with proof
of service of two (2) copies thereof upon the appellee."
Section 1(e) of Rule 50 of the Rules of Court grants to the
CA the discretion to dismiss an appeal either motu
proprio or on motion of the appellee should the
appellant fail to serve and file the required number of
copies of the appellant’s brief within the time provided
by the Rules of Court.12
The usage of the word may in Section 1(e) of Rule 50
indicates that the dismissal of the appeal upon failure to
file the appellant’s brief is not mandatory, but
discretionary. Verily, the failure to serve and file the
required number of copies of the appellant’s brief within
the time provided by the Rules of Court does not have
the immediate effect of causing the outright dismissal of
the appeal. This means that the discretion to dismiss the
appeal on that basis is lodged in the CA, by virtue of
which the CA may still allow the appeal to proceed
despite the late filing of the appellant’s brief, when the
circumstances so warrant its liberality. In deciding to
dismiss the appeal, then, the CA is bound to exercise its
sound discretion upon taking all the pertinent
circumstances into due consideration.
The records reveal that Diaz’s counsel thrice sought an
extension of the period to file the appellant’s brief. The
first time was on March 12, 2007, the request being for
an extension of 30 days to commence on March 11,
2007. The CA granted his motion under its resolution of
March 21, 2007. On April 10, 2007, the last day of the 30-
day extension, the counsel filed another motion, seeking
an additional 15 days. The CA allowed the counsel until
April 25, 2007 to serve and file the appellant’s brief. On
April 25, 2007, the counsel went a third time to the CA
with another request for 15 days. The CA still granted
such third motion for extension, giving the counsel until
May 10, 2007. Notwithstanding the liberality of the CA,
the counsel did not literally comply, filing the appellant’s
brief only on May 28, 2007, which was the 18th day
beyond the third extension period granted.
Under the circumstances, the failure to file the
appellant’s brief on time rightly deserved the outright
rejection of the appeal. The acts of his counsel bound
Diaz like any other client. It was, of course, only the
counsel who was well aware that the Rules of Court fixed
the periods to file pleadings and equally significant
papers like the appellant’s brief with the lofty objective of
avoiding delays in the administration of justice.
Yet, we have before us an appeal in two criminal cases in
which the appellant lost his chance to be heard by the CA
on appeal because of the failure of his counsel to serve
and file the appellant’s brief on time despite the grant of
several extensions the counsel requested. Diaz was
convicted and sentenced to suffer two indeterminate
sentences that would require him to spend time in
detention for each conviction lasting two years, as
minimum, to five years, as maximum, and to pay fines
totaling ₱100,000.00 (with subsidiary imprisonment in
case of his insolvency). His personal liberty is now no less
at stake. This reality impels us to look beyond the
technicality and delve into the merits of the case to see
for ourselves if the appeal, had it not been dismissed,
would have been worth the time of the CA to pass upon.
After all, his appellant’s brief had been meanwhile
submitted to the CA. While delving into the merits of the
case, we have uncovered a weakness in the evidence of
guilt that cannot be simply ignored and glossed over if we
were to be true to our oaths to do justice to everyone.
We feel that despite the CA being probably right in
dismissing the excuses of oversight and excusable
negligence tendered by Diaz’s counsel to justify the
belated filing of the appellant’s brief as unworthy of
serious consideration, Diaz should not be made to suffer
the dire consequence. Any accused in his shoes, with his
personal liberty as well as his personal fortune at stake,
expectedly but innocently put his fullest trust in his
counsel’s abilities and professionalism in the handling of
his appeal. He thereby delivered his fate to the hands of
his counsel. Whether or not those hands were efficient or
trained enough for the job of handling the appeal was a
learning that he would get only in the end. Likelier than
not, he was probably even unaware of the three times
that his counsel had requested the CA for extensions. If
he were now to be left to his unwanted fate, he would
surely suffer despite his innocence. How costly a learning
it would be for him! That is where the Court comes in. It
is most important for us as dispensers of justice not to
allow the inadvertence or incompetence of any counsel
to result in the outright deprivation of an appellant’s right
to life, liberty or property.13
We do not mind if this softening of judicial attitudes be
mislabeled as excessive leniency. With so much on the
line, the people whose futures hang in a balance should
not be left to suffer from the incompetence,
mindlessness or lack of professionalism of any member
of the Law Profession. They reasonably expect a just
result in every litigation. The courts must give them that
just result. That assurance is the people’s birthright. Thus,
we have to undo Diaz’s dire fate.
Even as we now set aside the CA’s rejection of the appeal
of Diaz, we will not remand the records to the CA for its
review. In an appeal of criminal convictions, the records
are laid open for review. To avoid further delays,
therefore, we take it upon ourselves to review the
records and resolve the issue of guilt, considering that
the records are already before us.
Section 155 of R.A. No. 8293 defines the acts that
constitute infringement of trademark, viz:
Remedies; Infringement. — Any person who shall,
without the consent of the owner of the registered mark:
155.1. Use in commerce any reproduction, counterfeit,
copy, or colorable imitation of a registered mark or the
same container or a dominant feature thereof in
connection with the sale, offering for sale, distribution,
advertising of any goods or services including other
preparatory steps necessary to carry out the sale of any
goods or services on or in connection with which such
use is likely to cause confusion, or to cause mistake, or to
deceive; or
155.2. Reproduce, counterfeit, copy or colorably imitate a
registered mark or a dominant feature thereof and apply
such reproduction, counterfeit, copy or colorable
imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used in
commerce upon or in connection with the sale, offering
for sale, distribution, or advertising of goods or services
on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive, shall be
liable in a civil action for infringement by the registrant
for the remedies hereinafter set forth: Provided, That the
infringement takes place at the moment any of the acts
stated in Subsection 155.1 or this subsection are
committed regardless of whether there is actual sale of
goods or services using the infringing material.
The elements of the offense of trademark infringement
under the Intellectual Property Code are, therefore, the
following:
1. The trademark being infringed is registered in
the Intellectual Property Office;
2. The trademark is reproduced, counterfeited,
copied, or colorably imitated by the infringer;
3. The infringing mark is used in connection with
the sale, offering for sale, or advertising of any
goods, business or services; or the infringing
mark is applied to labels, signs, prints, packages,
wrappers, receptacles or advertisements
intended to be used upon or in connection with
such goods, business or services;
 4. The use or application of the infringing mark
is likely to cause confusion or mistake or to
deceive purchasers or others as to the goods or
services themselves or as to the source or origin
of such goods or services or the identity of such
business; and
5. The use or application of the infringing mark
is without the consent of the trademark owner
or the assignee thereof.14
As can be seen, the likelihood of confusion is the
gravamen of the offense of trademark
infringement.15 There are two tests to determine
likelihood of confusion, namely: the dominancy test, and
the holistic test. The contrasting concept of these tests
was explained in Societes Des Produits Nestle, S.A. v. Dy,
Jr., thus:
x x x. The dominancy test focuses on the similarity of the
main, prevalent or essential features of the competing
trademarks that might cause confusion. Infringement
takes place when the competing trademark contains the
essential features of another. Imitation or an effort to
imitate is unnecessary. The question is whether the use
of the marks is likely to cause confusion or deceive
purchasers.
The holistic test considers the entirety of the marks,
including labels and packaging, in determining confusing
similarity. The focus is not only on the predominant
words but also on the other features appearing on the
labels.16
As to what test should be applied in a trademark
infringement case, we said in McDonald’s Corporation v.
Macjoy Fastfood Corporation17 that:
In trademark cases, particularly in ascertaining whether
one trademark is confusingly similar to another, no set
rules can be deduced because each case must be decided
on its merits. In such cases, even more than in any other
litigation, precedent must be studied in the light of the
facts of the particular case. That is the reason why in
trademark cases, jurisprudential precedents should be
applied only to a case if they are specifically in point.
The case of Emerald Garment Manufacturing
Corporation v. Court of Appeals,18 which involved an
alleged trademark infringement of jeans products, is
worth referring to. There, H.D. Lee Co., Inc. (H.D. Lee), a
corporation based in the United States of America,
claimed that Emerald Garment’s trademark of "STYLISTIC
MR. LEE" that it used on its jeans products was
confusingly similar to the "LEE" trademark that H.D. Lee
used on its own jeans products. Applying the holistic test,
the Court ruled that there was no infringement.
The holistic test is applicable here considering that the
herein criminal cases also involved trademark
infringement in relation to jeans products. Accordingly,
the jeans trademarks of Levi’s Philippines and Diaz must
be considered as a whole in determining the likelihood of
confusion between them. The maong pants or jeans
made and sold by Levi’s Philippines, which included
LEVI’S 501, were very popular in the Philippines. The
consuming public knew that the original LEVI’S 501 jeans
were under a foreign brand and quite expensive. Such
jeans could be purchased only in malls or boutiques as
ready-to-wear items, and were not available in tailoring
shops like those of Diaz’s as well as not acquired on a
"made-to-order" basis. Under the circumstances, the
consuming public could easily discern if the jeans were
original or fake LEVI’S 501, or were manufactured by
other brands of jeans. Confusion and deception were
remote, for, as the Court has observed in Emerald
Garments:
First, the products involved in the case at bar are, in the
main, various kinds of jeans. These are not your ordinary
household items like catsup, soy sauce or soap which are
of minimal cost. Maong pants or jeans are not
inexpensive. Accordingly, the casual buyer is predisposed
to be more cautious and discriminating in and would
prefer to mull over his purchase. Confusion and
deception, then, is less likely. In Del Monte Corporation v.
Court of Appeals, we noted that:
.... Among these, what essentially determines the
attitudes of the purchaser, specifically his inclination to
be cautious, is the cost of the goods. To be sure, a person
who buys a box of candies will not exercise as much care
as one who buys an expensive watch. As a general rule,
an ordinary buyer does not exercise as much prudence in
buying an article for which he pays a few centavos as he
does in purchasing a more valuable thing. Expensive and
valuable items are normally bought only after deliberate,
comparative and analytical investigation. But mass
products, low priced articles in wide use, and matters of
everyday purchase requiring frequent replacement are
bought by the casual consumer without great care....
Second, like his beer, the average Filipino consumer
generally buys his jeans by brand. He does not ask the
sales clerk for generic jeans but for, say, a Levis, Guess,
Wrangler or even an Armani. He is, therefore, more or
less knowledgeable and familiar with his preference and
will not easily be distracted.
Finally, in line with the foregoing discussions, more credit
should be given to the "ordinary purchaser." Cast in this
particular controversy, the ordinary purchaser is not the
"completely unwary consumer" but is the "ordinarily
intelligent buyer" considering the type of product
involved.
The definition laid down in Dy Buncio v. Tan Tiao Bok is
better suited to the present case. There, the "ordinary
purchaser" was defined as one "accustomed to buy, and
therefore to some extent familiar with, the goods in
question. The test of fraudulent simulation is to be found
in the likelihood of the deception of some persons in
some measure acquainted with an established design
and desirous of purchasing the commodity with which
that design has been associated. The test is not found in
the deception, or the possibility of deception, of the
person who knows nothing about the design which has
been counterfeited, and who must be indifferent
between that and the other. The simulation, in order to
be objectionable, must be such as appears likely to
mislead the ordinary intelligent buyer who has a need to
supply and is familiar with the article that he seeks to
purchase.19
Diaz used the trademark "LS JEANS TAILORING" for the
jeans he produced and sold in his tailoring shops. His
trademark was visually and aurally different from the
trademark "LEVI STRAUSS & CO" appearing on the patch
of original jeans under the trademark LEVI’S 501. The
word "LS" could not be confused as a derivative from
"LEVI STRAUSS" by virtue of the "LS" being connected to
the word "TAILORING", thereby openly suggesting that
the jeans bearing the trademark "LS JEANS TAILORING"
came or were bought from the tailoring shops of Diaz,
not from the malls or boutiques selling original LEVI’S 501
jeans to the consuming public.
quantum of proof required for a criminal conviction,
which is proof beyond reasonable doubt. According to
Section 2, Rule 133 of the Rules of Court, proof beyond a
reasonable doubt does not mean such a degree of proof
as, excluding possibility of error, produces absolute
certainty. Moral certainty only is required, or that degree
of proof which produces conviction in an unprejudiced
mind. Consequently, Diaz should be acquitted of the
charges.
WHEREFORE, the Court ACQUITS petitioner VICTORIO P.
DIAZ of the crimes of infringement of trademark charged
in Criminal Case No. 00-0318 and Criminal Case No. 00-
0319 for failure of the State to establish his guilt by proof
beyond reasonable doubt.
No pronouncement on costs of suit.
SO ORDERED.

There were other remarkable differences between the LUCAS P. BERSAMIN

two trademarks that the consuming public would easily Associate Justice
perceive. Diaz aptly noted such differences, as follows:
WE CONCUR:
The prosecution also alleged that the accused copied the
"two horse design" of the petitioner-private complainant
but the evidence will show that there was no such design
in the seized jeans. Instead, what is shown is "buffalo
design." Again, a horse and a buffalo are two different
animals which an ordinary customer can easily
distinguish. x x x.

The prosecution further alleged that the red tab was

copied by the accused. However, evidence will show that
the red tab used by the private complainant indicates the
word "LEVI’S" while that of the accused indicates the
letters "LSJT" which means LS JEANS TAILORING. Again,
even an ordinary customer can distinguish the word
LEVI’S from the letters LSJT.

xxxx

In terms of classes of customers and channels of trade,

the jeans products of the private complainant and the
accused cater to different classes of customers and flow SUPRESSION OF TESTIMONY
through the different channels of trade. The customers of
the private complainant are mall goers belonging to class [G.R. No. 137664. May 9, 2002]
A and B market group – while that of the accused are PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
those who belong to class D and E market who can only vs. ROBERTO PADRIGONE a.k.a. ROBERTO SAN
afford Php 300 for a pair of made-toorder pants.20 x x x. MIGUEL, accused-appellant.

Moreover, based on the certificate issued by the DECISION

Intellectual Property Office, "LS JEANS TAILORING" was a
registered trademark of Diaz. He had registered his
trademark prior to the filing of the present cases. 21 The
Intellectual Property Office would certainly not have
allowed the registration had Diaz’s trademark been
confusingly similar with the registered trademark for
LEVI’S 501 jeans.
Given the foregoing, it should be plain that there was no
likelihood of confusion between the trademarks involved.
Thereby, the evidence of guilt did not satisfy the
YNARES-SANTIAGO, J.:
Roberto Padrigone a.k.a. Roberto San Miguel,
Michael San Antonio, Jocel Ibaneta and Abelardo
Triumpante were charged with rape in an amended
information which reads:
That on or about the 3rd day of January, 1995, in
Salvacion, Buhi, Camarines Sur, Philippines and within the
jurisdiction of this Honorable Court, the above-named
accused, conspiring, confederating together and mutually
helping each other and by means of force and
intimidation, did then and there willfully, unlawfully and
feloniously have carnal knowledge with (sic) Rowena
Contridas against her will, to her damage and prejudice in
the amount that may be proven in court.
Acts contrary to law.[1]
All the accused pleaded not guilty. Trial on the
merits thereafter ensued.
The antecedent facts are as follows:
It appears that at 3:00 in the morning of January 3,
1995, appellant Roberto Padrigone and the other
accused broke into the house of Rowena Contridas, then
16 years old, situated in San Benito, Salvacion, Buhi,
Camarines Sur. Appellant Roberto Padrigone and accused
Jocel Ibaneta poked a knife at Rowena and her fourteen
year-old sister, Nimfa,[2] and threatened to kill them if
they reported the incident to others. They gagged
Rowena with a handkerchief and Nimfa with a
handtowel. Then, appellant undressed Rowena, forced
her to lie down and sexually violated her while his co-
accused watched with glee. Accused Jocel Ibanita tried to
rape Nimfa but failed because she was able to elude him.
After appellant satisfied his lust on Rowena, the
other accused took their turns. Every one of the accused
raped Rowena. Before they left, they warned the sisters
not to report the incident or else they will kill them.
Despite the threats, Rowena and Nimfa reported
the incident to the police and identified appellant and his
co-accused as the perpetrators. However, based on the
police blotter, Rowena stated that it was only appellant
who raped her.
Dr. Damiana Claveria, Municipal Health Officer,
conducted a medical examination on Rowena and found
the following:
patient very talkative, incoherent as to questions asked.
PE no signs of external injury
IE hymenal tear, recent 6, 9 dont bleed on manipulation,
but complained of tenderness upon insertion of 1 finger,
copious vaginal discharge.[3]
According to Dr. Claveria, there is a possibility that
the fluids found inside Rowenas vagina may be
semen. She added that it was possible for Rowena to
have only two hymenal tears even if four men had sexual
intercourse with her.
Dr. Chona C. Belmonte, a psychiatrist of Cadlan
Mental Hospital in Pili, Camarines Sur, testified that while
she interviewed Rowena, the latter was crying,
incoherent and had shouting episodes. She was confined
at the Cadlan Mental Hospital for further
treatment. Upon further medical consultation, Dr.
Belmonte observed thus:
Rowena was in a depressed mood and at the same time
overactive. She was combative, violent, and was
experiencing auditory hallucination, meaning, she heard
things that only she could hear. She was also grandiously
deluded, falsely believing that she could do things others
could not do. By that time, according to Dr. Belmonte,
Rowena had already lost touch with reality. [4]
Dr. Belmonte diagnosed her illness as Acute
Psychotic Depressive Condition.[5] She found that her
mental disorder was not hereditary because before the
incident took place, she did not exhibit any unusual
behavior. She concluded that her mental illness was
strongly related to a traumatic experience. She noted
that at one point in the treatment, Rowena confided to
her that she was raped.[6]
All the accused, including appellant Roberto
Padrigone, interposed the defense of denial and
alibi. Appellant claimed that in the evening of January 2,
1995, he and his companions, Jocel Ibanita and Michael
San Antonio, visited Rowena at her house. According to
him, Rowena was crying when they arrived. When
appellant asked her what was wrong, she told him that
she wanted to elope with him. He replied that he was not
ready as he was still studying. Rowena snapped, its up to
him but he might regret it.[7] While appellant and Rowena
were talking, Jocel Ibanita and Michael San Antonio were
in the kitchen cooking noodles. Later, a certain Ismeraldo
Quirante, in the presence of several barangay watchmen
patrolling the area, passed by the Contridas house and
advised the accused to go home because it was getting
late. They heeded the advice and left the Contridas
house at around 11:30 p.m.
The trial court gave credence to the prosecution
evidence and rendered a decision, the dispositive portion
of which reads:
WHEREFORE, in view of the foregoing considerations, this
Court finds the accused, ROBERTO PADRIGONE a.k.a.
ROBERTO SAN MIGUEL, GUILTY of the crime of Rape,
under Article 335 of the Revised Penal Code (as amended
by Section 11, R.A. 7659) and hereby sentences him to
suffer imprisonment of RECLUSION PERPETUA,
considering the mitigating circumstance of voluntary
surrender.He is likewise directed to indemnify the
offended party, Rowena Contridas, the amount of Fifty
thousand Pesos (P50,000.00) as moral damages and to
pay the costs of this suit. Accused JOCEL IBANITA,
MICHAEL SAN ANTONIO and ABELARDO TRIUMPANTE are
ACQUITTED for insufficiency of evidence. It being shown
that the three accused are presently detained at the
Municipal Jail at PNP, Buhi, Camarines Sur, their
immediate release is hereby ordered.
SO ORDERED.[8]
Appellant interposed the instant appeal based on
the following arguments:
I
THE TRIAL COURT GRAVELY ERRED IN CONVICTING
ACCUSED-APPELLANT OF THE CRIME OF RAPE INSPITE OF
THE INHERENT WEAKNESSES AND INSUFFICIENCY OF
PROSECUTIONS EVIDENCE.
II
THE TRIAL COURT GRAVELY ERRED IN DECIDING THE
INSTANT CASE NOT IN ACCORDANCE WITH THE
ESTABLISHED PRINCIPLE IN CRIMINAL LAW THAT THE
PROSECUTION MUST RELY ON THE STRENGTH OF ITS
EVIDENCE AND NOT ON THE WEAKNESS OF THAT OF THE
DEFENSE.
Appellant contends that the prosecution evidence
was insufficient to prove his guilt beyond reasonable
doubt.
Appellant argues that according to the prosecution
witness, Nimfa, he and his co-accused Michael San
Antonio, Abelardo Triumpante and Jocel Ibanita, took
turns in raping Rowena while Jocel Ibanita also attempted
to rape her. However, after preliminary investigation, the
Municipal Trial Court of Buhi, Camarines Sur, dismissed
Nimfas complaint for attempted rape against Jocel Ibanita
because of its findings that the latter committed only acts
of lasciviousness, considering his voluntary and
spontaneous desistance from continuing to perform the
acts leading to carnal knowledge. Furthermore, the
investigating Judge entertained doubts about the truth of
her story, which was uncorroborated.[9]
We agree with the following observation of the
Solicitor General:
[T]he dismissal of the complaint for attempted rape filed
by Nimfa against one of the accused, Jocel Ibanita, during
the preliminary investigation stage should not detract
from the credibility of her testimony.Even if the
prosecution wanted to, the merits of the dismissal of
Nimfas complaint for attempted rape could not be
properly challenged in the criminal proceedings below
since the said proceedings involved only the culpability of
the four accused for the crime of rape committed against
Rowena, the sister of Nimfa.[10]
Appellant further claims that Nimfas lack of
credibility was underscored when the trial court
acquitted appellants co-accused. Appellants claim is not
well taken. Evidence shows that the trial court acquitted
appellants co-accused because of doubt engendered on
the extent of their participation in the sexual assault
committed against Rowena in light of Rowenas own
statement as recorded in the police blotter. [11]
Appellant alleges that Nimfas reactions after the
rape of her sister are unnatural, unexpected and mind-
boggling,[12] specifically when she resumed her sleep after
having been raped and even reported for work the
following day. The contention deserves scant
consideration. It is an accepted maxim that different
people react differently to a given situation or type of
situation and there is no standard form of behavioral
response when one is confronted with a strange or
startling experience.[13]
Further, appellant argues that Nimfa admitted
before the police that she did not recognize the rapists of
Rowena. In this connection, we quote with approval the
observation of the Solicitor General, to wit:
Anent the portion of Nimfas testimony wherein she
admitted to the defense counsel that she told the Chief
of Police that she was not able to recognize the persons
who raped her sister Rowena, the same is capable of
explanation. Accused-appellant Roberto Padrigone was
present when Nimfa uttered the statement. Hence, she
was afraid to tell the truth because of the earlier threat
to her and sister Rowenas lives by accused-appellant
Padrigone.[14]
We find that Nimfas credibility has not been
impaired despite rigorous cross-examination. In fact,
defense counsel was not able to point to any
inconsistency in Nimfas testimony. A perusal of the
transcripts of stenographic notes reveals that she was
steadfast in narrating the circumstances of the rape and
in pointing to appellant as one of the perpetrators.
Appellant likewise alleges that it was error for the
trial court to have dismissed his sweetheart defense by
the mere absence of love notes, mementos or pictures.
In People v. Corea,[15] we held that:
x x x Moreover, even if such averment is true, it does not
necessarily follow that no rape can be committed against
ones sweetheart. Such a relationship provides no license
to explore and invade that which every virtuous woman
holds so dearly and trample upon her honor and
dignity. That relationship is held sacred by many x x x. A
sweetheart cannot be forced to engage in sexual
intercourse against her will.As a matter of fact, proof
even of a prior history of a common-law marital
relationship will not prevail over clear and positive
evidence of copulation by the use of force or
intimidation.
Regardless, the most telling indication that would
belie appellants sweetheart theory was the fact that he
had carnal knowledge of Rowena in the presence of
Nimfa and his co-accused. It is most unnatural for lovers
to engage in the ultimate expression of their love for
each other in the presence of other people.
Appellant assails the procedural irregularities
committed by the prosecution and by the trial court. He
claims that the prosecution suppressed evidence by not
presenting Rowena, the victim, when the latter should
have had her sane moments. As a consequence, the trial
court deprived appellant of the opportunity to cross-
examine her when she allegedly declared before the
Chief of Police of Buhi that it was only appellant who
raped her which declaration became the basis for the
latters conviction.
Appellants contention is misplaced if not
misleading. The basis of his conviction was not Rowenas
declaration before the Chief of Police but rather Nimfas
testimony before the trial court that it was him who
raped Rowena, among others.[16] In fact, the trial court
found, thus:
x x x The evidence adduced by the parties in this case
disclosed that accused Roberto Padrigone, a.k.a. Roberto
San Miguel, Jocel Ibanita, Michael San Antonio and Abel
Triumpante entered the dwelling of the Contridas sisters
at 3:00 a.m. of January 3, 1995, and at knifepoint
successively raped Rowena Contridas, a 16 year old
lass. The victim became insane after the incident and was
not able to testify in Court. Nimfa Contridas, her fourteen
year old sister, who was also present that time narrated
the incident when her elder sisters innocence was
forcibly violated. Accused interposed the defense of
denial and alibi. x x x
The prosecution has established beyond reasonable
doubt that accused Roberto Padrigone ravished Rowena
Contridas against her will and consent, and with the use
of a bladed weapon.[17]
Besides, the non-presentation of Rowena on the
witness stand cannot be considered as suppression of
evidence. Under Rule 131, Section 3(e) of the Rules of
Court, the rule that evidence willfully suppressed would
be adverse if produced does not apply if (a) the evidence
is at the disposal of both parties; (b) the suppression was
not willful; (c) it is merely corroborative or cumulative;
and (d) the suppression is an exercise of a privilege.[18]
Plainly, there was no suppression of evidence in this
case. First, the defense had the opportunity to subpoena
Rowena even if the prosecution did not present her as a
witness. Instead, the defense failed to call her to the
witness stand. Second, Rowena was certified to be
suffering from Acute Psychotic Depressive Condition and
thus cannot stand judicial proceedings yet. [19] The non-
presentation, therefore, of Rowena was not willful. Third,
in any case, while Rowena was the victim, Nimfa was also
present and in fact witnessed the violation committed on
her sister.
Appellant cannot claim that the trial court erred in
convicting him on the basis of Rowenas statement as
recorded in the police blotter. His conviction was based
on the trial courts findings of facts and assessment of the
witnesses credibility. Well-settled is the rule that the
findings of facts and assessment of credibility of
witnesses is a matter best left to the trial court because
of its unique position of having observed that elusive and
incommunicable evidence of the witnesses deportment
on the stand while testifying, which opportunity is denied
to the appellate courts. Only the trial judge can observe
the furtive glance, blush of conscious shame, hesitation,
flippant or sneering tone, calmness, sigh, or the scant or
full realization of an oath, all of which are useful aids for
an accurate determination of a witness honesty and
sincerity. The trial courts findings are accorded finality,
unless there appears in the record some fact or
circumstance of weight which the lower court may have
overlooked, misunderstood or misappreciated and which,
if properly considered, would alter the results of the case.
[20]
Besides, in rape cases where the offended parties
are young and immature girls from the ages of twelve to
sixteen, we have consistently held that the victims
version of what transpired deserves credence,
considering not only their relative vulnerability but also
the shame and embarrassment to which such a grueling
experience as a court trial, where they are called upon to
lay bare what perhaps should be shrouded in secrecy,
exposed them to. This is not to say that an uncritical
acceptance should be the rule. It is only to emphasize
that skepticism should be kept under control. [21]
Nonetheless, no young and decent Filipina would
publicly admit that she was ravished and her honor
tainted unless the same were true, for it would be
instinctive on her part to protect her honor and obtain
justice for the wicked acts committed upon her. [22] Not to
be overlooked is the complainants willingness to face
police investigators and to submit to a physical
examination which are eloquent and sufficient
affirmations of the truth of her charge.[23]
As regards the matter of damages, the trial court
ordered accused-appellant to indemnify the offended
party, Rowena Contridas, the amount of Fifty Thousand
Pesos (P50,000.00) as moral damages. [24] In People v.
Belga,[25] it was held that civil indemnity is mandatory
upon the finding of the fact of rape; it is distinct from and
should not be denominated as moral damages which are
based on different jural foundations and assessed by the
court in the exercise of sound discretion. Thus,
consistently with present case law which treats the
imposition of civil indemnity as mandatory upon a finding
of rape, accused-appellant is ordered to pay the
additional amount of fifty thousand (P50,000.00) pesos
as civil indemnity ex delicto.[26]
WHEREFORE, based on the foregoing, the assailed
Decision, finding accused-appellant Roberto Padrigone
a.k.a. Roberto San Miguel guilty beyond reasonable
doubt of the crime of rape and sentencing him to suffer
the penalty of reclusion perpetua, is AFFIRMED with the
MODIFICATION that he is ordered to pay Rowena
Contridas civil indemnity in the amount of P50,000.00 in
addition to moral damages in the amount of
P50,000.00. Costs de oficio.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno,
Kapunan, and Austria-Martinez, JJ., concur.
G.R. No. 88866 February 18, 1991
METROPOLITAN BANK & TRUST COMPANY, petitioner,
vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN
ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO
and GLORIA CASTILLO, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for
Magno and Lucia Castillo.
Agapito S. Fajardo and Jaime M. Cabiles for respondent
Golden Savings & Loan Association, Inc.
CRUZ, J.:
This case, for all its seeming complexity, turns on a simple
question of negligence. The facts, pruned of all non-
essentials, are easily told.
The Metropolitan Bank and Trust Co. is a commercial
bank with branches throughout the Philippines and even
abroad. Golden Savings and Loan Association was, at the
time these events happened, operating in Calapan,
Mindoro, with the other private respondents as its
principal officers.
In January 1979, a certain Eduardo Gomez opened an
account with Golden Savings and deposited over a period
of two months 38 treasury warrants with a total value of
P1,755,228.37. They were all drawn by the Philippine Fish
Marketing Authority and purportedly signed by its
General Manager and countersigned by its Auditor. Six of
these were directly payable to Gomez while the others
appeared to have been indorsed by their respective
payees, followed by Gomez as second indorser. 1
On various dates between June 25 and July 16, 1979, all
these warrants were subsequently indorsed by Gloria
Castillo as Cashier of Golden Savings and deposited to its
Savings Account No. 2498 in the Metrobank branch in
Calapan, Mindoro. They were then sent for clearing by
the branch office to the principal office of Metrobank,
which forwarded them to the Bureau of Treasury for
special clearing.2
More than two weeks after the deposits, Gloria Castillo
went to the Calapan branch several times to ask whether
the warrants had been cleared. She was told to wait.
Accordingly, Gomez was meanwhile not allowed to
withdraw from his account. Later, however,
"exasperated" over Gloria's repeated inquiries and also as
an accommodation for a "valued client," the petitioner
says it finally decided to allow Golden Savings to
withdraw from the proceeds of the
warrants.3
The first withdrawal was made on July 9, 1979, in the
amount of P508,000.00, the second on July 13, 1979, in
the amount of P310,000.00, and the third on July 16,
1979, in the amount of P150,000.00. The total
withdrawal was P968.000.00.4
In turn, Golden Savings subsequently allowed Gomez to
make withdrawals from his own account, eventually
collecting the total amount of P1,167,500.00 from the
proceeds of the apparently cleared warrants. The last
withdrawal was made on July 16, 1979.
On July 21, 1979, Metrobank informed Golden Savings
that 32 of the warrants had been dishonored by the
Bureau of Treasury on July 19, 1979, and demanded the
refund by Golden Savings of the amount it had previously
withdrawn, to make up the deficit in its account.
The demand was rejected. Metrobank then sued Golden
Savings in the Regional Trial Court of Mindoro.5 After trial,
judgment was rendered in favor of Golden Savings,
which, however, filed a motion for reconsideration even
as Metrobank filed its notice of appeal. On November 4,
1986, the lower court modified its decision thus:
ACCORDINGLY, judgment is hereby rendered:
1. Dismissing the complaint with costs against
the plaintiff;
2. Dissolving and lifting the writ of attachment of
the properties of defendant Golden Savings and
Loan Association, Inc. and defendant Spouses
Magno Castillo and Lucia Castillo;
3. Directing the plaintiff to reverse its action of
debiting Savings Account No. 2498 of the sum of
P1,754,089.00 and to reinstate and credit to
such account such amount existing before the
debit was made including the amount of
P812,033.37 in favor of defendant Golden
Savings and Loan Association, Inc. and
thereafter, to allow defendant Golden Savings
and Loan Association, Inc. to withdraw the
amount outstanding thereon before the debit;
4. Ordering the plaintiff to pay the defendant
Golden Savings and Loan Association, Inc.
attorney's fees and expenses of litigation in the
amount of P200,000.00.
5. Ordering the plaintiff to pay the defendant
Spouses Magno Castillo and Lucia Castillo
attorney's fees and expenses of litigation in the
amount of P100,000.00.
SO ORDERED.
On appeal to the respondent court,6 the decision was
affirmed, prompting Metrobank to file this petition for
review on the following grounds:
1. Respondent Court of Appeals erred in
disregarding and failing to apply the clear
contractual terms and conditions on the deposit
slips allowing Metrobank to charge back any
amount erroneously credited.
(a) Metrobank's right to charge back is
not limited to instances where the
checks or treasury warrants are forged
or unauthorized.
(b) Until such time as Metrobank is
actually paid, its obligation is that of a
mere collecting agent which cannot be
held liable for its failure to collect on
the warrants.
2. Under the lower court's decision, affirmed by
respondent Court of Appeals, Metrobank is
made to pay for warrants already dishonored,
thereby perpetuating the fraud committed by
Eduardo Gomez.
 3. Respondent Court of Appeals erred in not
finding that as between Metrobank and Golden
Savings, the latter should bear the loss.
4. Respondent Court of Appeals erred in holding
that the treasury warrants involved in this case
are not negotiable instruments.
The petition has no merit.
From the above undisputed facts, it would appear to the
Court that Metrobank was indeed negligent in giving
Golden Savings the impression that the treasury warrants
had been cleared and that, consequently, it was safe to
allow Gomez to withdraw the proceeds thereof from his
account with it. Without such assurance, Golden Savings
would not have allowed the withdrawals; with such
assurance, there was no reason not to allow the
withdrawal. Indeed, Golden Savings might even have
incurred liability for its refusal to return the money that
to all appearances belonged to the depositor, who could
therefore withdraw it any time and for any reason he saw
fit.
It was, in fact, to secure the clearance of the treasury
warrants that Golden Savings deposited them to its
account with Metrobank. Golden Savings had no clearing
facilities of its own. It relied on Metrobank to determine
the validity of the warrants through its own services. The
proceeds of the warrants were withheld from Gomez
until Metrobank allowed Golden Savings itself to
withdraw them from its own deposit.7 It was only when
Metrobank gave the go-signal that Gomez was finally
allowed by Golden Savings to withdraw them from his
own account.
The argument of Metrobank that Golden Savings should
have exercised more care in checking the personal
circumstances of Gomez before accepting his deposit
does not hold water. It was Gomez who was entrusting
the warrants, not Golden Savings that was extending him
a loan; and moreover, the treasury warrants were subject
to clearing, pending which the depositor could not
withdraw its proceeds. There was no question of Gomez's
identity or of the genuineness of his signature as checked
by Golden Savings. In fact, the treasury warrants were
dishonored allegedly because of the forgery of the
signatures of the drawers, not of Gomez as payee or
indorser. Under the circumstances, it is clear that Golden
Savings acted with due care and diligence and cannot be
faulted for the withdrawals it allowed Gomez to make.
By contrast, Metrobank exhibited extraordinary
carelessness. The amount involved was not trifling —
more than one and a half million pesos (and this was
1979). There was no reason why it should not have
waited until the treasury warrants had been cleared; it
would not have lost a single centavo by waiting. Yet,
despite the lack of such clearance — and notwithstanding
that it had not received a single centavo from the
proceeds of the treasury warrants, as it now repeatedly
stresses — it allowed Golden Savings to withdraw — not
once, not twice, but thrice — from the uncleared treasury
warrants in the total amount of P968,000.00
Its reason? It was "exasperated" over the persistent
inquiries of Gloria Castillo about the clearance and it also
wanted to "accommodate" a valued client. It "presumed"
that the warrants had been cleared simply because of
"the lapse of one week."8 For a bank with its long
experience, this explanation is unbelievably naive.
And now, to gloss over its carelessness, Metrobank would
invoke the conditions printed on the dorsal side of the
deposit slips through which the treasury warrants were
deposited by Golden Savings with its Calapan branch. The
conditions read as follows:
Kindly note that in receiving items on deposit,
the bank obligates itself only as the depositor's
collecting agent, assuming no responsibility
beyond care in selecting correspondents, and
until such time as actual payment shall have
come into possession of this bank, the right is
reserved to charge back to the depositor's
account any amount previously credited,
whether or not such item is returned. This also
applies to checks drawn on local banks and
bankers and their branches as well as on this
bank, which are unpaid due to insufficiency of
funds, forgery, unauthorized overdraft or any
other reason. (Emphasis supplied.)
According to Metrobank, the said conditions clearly show
that it was acting only as a collecting agent for Golden
Savings and give it the right to "charge back to the
depositor's account any amount previously credited,
whether or not such item is returned. This also applies to
checks ". . . which are unpaid due to insufficiency of
funds, forgery, unauthorized overdraft of any other
reason." It is claimed that the said conditions are in the
nature of contractual stipulations and became binding on
Golden Savings when Gloria Castillo, as its Cashier, signed
the deposit slips.
Doubt may be expressed about the binding force of the
conditions, considering that they have apparently been
imposed by the bank unilaterally, without the consent of
the depositor. Indeed, it could be argued that the
depositor, in signing the deposit slip, does so only to
identify himself and not to agree to the conditions set
forth in the given permit at the back of the deposit slip.
We do not have to rule on this matter at this time. At any
rate, the Court feels that even if the deposit slip were
considered a contract, the petitioner could still not validly
disclaim responsibility thereunder in the light of the
circumstances of this case.
In stressing that it was acting only as a collecting agent
for Golden Savings, Metrobank seems to be suggesting
that as a mere agent it cannot be liable to the principal.
This is not exactly true. On the contrary, Article 1909 of
the Civil Code clearly provides that —
Art. 1909. — The agent is responsible not only
for fraud, but also for negligence, which shall be
judged 'with more or less rigor by the courts,
according to whether the agency was or was not
for a compensation.
The negligence of Metrobank has been sufficiently
established. To repeat for emphasis, it was the clearance
given by it that assured Golden Savings it was already
safe to allow Gomez to withdraw the proceeds of the
treasury warrants he had deposited
Metrobank misled Golden Savings. There may have been
no express clearance, as Metrobank insists (although this
is refuted by Golden Savings) but in any case that
clearance could be implied from its allowing Golden
Savings to withdraw from its account not only once or
even twice but three times. The total withdrawal was in
excess of its original balance before the treasury warrants
were deposited, which only added to its belief that the
treasury warrants had indeed been cleared.
Metrobank's argument that it may recover the disputed
amount if the warrants are not paid for any reason is not
acceptable. Any reason does not mean no reason at all.
Otherwise, there would have been no need at all for
Golden Savings to deposit the treasury warrants with it
for clearance. There would have been no need for it to
wait until the warrants had been cleared before paying
the proceeds thereof to Gomez. Such a condition, if
interpreted in the way the petitioner suggests, is not
binding for being arbitrary and unconscionable. And it
becomes more so in the case at bar when it is considered
that the supposed dishonor of the warrants was not
communicated to Golden Savings before it made its own
payment to Gomez.
The belated notification aggravated the petitioner's
earlier negligence in giving express or at least implied
clearance to the treasury warrants and allowing
payments therefrom to Golden Savings. But that is not
all. On top of this, the supposed reason for the dishonor,
to wit, the forgery of the signatures of the general
manager and the auditor of the drawer corporation, has
not been established.9 This was the finding of the lower
courts which we see no reason to disturb. And as we said
in MWSS v. Court of Appeals:10
Forgery cannot be presumed (Siasat, et al. v. IAC,
et al., 139 SCRA 238). It must be established by
clear, positive and convincing evidence. This was
not done in the present case.
A no less important consideration is the circumstance
that the treasury warrants in question are not negotiable
instruments. Clearly stamped on their face is the word
"non-negotiable." Moreover, and this is of equal
significance, it is indicated that they are payable from a
particular fund, to wit, Fund 501.
The following sections of the Negotiable Instruments
Law, especially the underscored parts, are pertinent:
Sec. 1. — Form of negotiable instruments. — An
instrument to be negotiable must conform to
the following requirements:
(a) It must be in writing and signed by the maker
or drawer;
(b) Must contain an unconditional promise or
order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or
determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a
drawee, he must be named or otherwise
indicated therein with reasonable certainty.
xxx xxx xxx
Sec. 3. When promise is unconditional. — An
unqualified order or promise to pay is
unconditional within the meaning of this Act
though coupled with —
(a) An indication of a particular fund out of
which reimbursement is to be made or a
particular account to be debited with the
amount; or
(b) A statement of the transaction which gives
rise to the instrument judgment.
But an order or promise to pay out of a
particular fund is not unconditional.
The indication of Fund 501 as the source of the payment
to be made on the treasury warrants makes the order or
promise to pay "not unconditional" and the warrants
themselves non-negotiable. There should be no question
that the exception on Section 3 of the Negotiable
Instruments Law is applicable in the case at bar. This
conclusion conforms to Abubakar vs. Auditor
General11 where the Court held:
The petitioner argues that he is a holder in good
faith and for value of a negotiable instrument
and is entitled to the rights and privileges of a
holder in due course, free from defenses. But
this treasury warrant is not within the scope of
the negotiable instrument law. For one thing,
the document bearing on its face the words
"payable from the appropriation for food
administration, is actually an Order for payment
out of "a particular fund," and is not
unconditional and does not fulfill one of the
essential requirements of a negotiable
instrument (Sec. 3 last sentence and section
[1(b)] of the Negotiable Instruments Law).
Metrobank cannot contend that by indorsing the
warrants in general, Golden Savings assumed that they
were "genuine and in all respects what they purport to
be," in accordance with Section 66 of the Negotiable
Instruments Law. The simple reason is that this law is not
applicable to the non-negotiable treasury warrants. The
indorsement was made by Gloria Castillo not for the
purpose of guaranteeing the genuineness of the warrants
but merely to deposit them with Metrobank for clearing.
It was in fact Metrobank that made the guarantee when
it stamped on the back of the warrants: "All prior
indorsement and/or lack of endorsements guaranteed,
Metropolitan Bank & Trust Co., Calapan Branch."

The petitioner lays heavy stress on Jai Alai Corporation v.

Bank of the Philippine Islands,12 but we feel this case is
inapplicable to the present controversy.1âwphi1 That
case involved checks whereas this case involves treasury
warrants. Golden Savings never represented that the
warrants were negotiable but signed them only for the
purpose of depositing them for clearance. Also, the fact
of forgery was proved in that case but not in the case
before us. Finally, the Court found the Jai Alai
Corporation negligent in accepting the checks without
question from one Antonio Ramirez notwithstanding that
the payee was the Inter-Island Gas Services, Inc. and it
did not appear that he was authorized to indorse it. No
similar negligence can be imputed to Golden Savings.

We find the challenged decision to be basically correct.

However, we will have to amend it insofar as it directs the
petitioner to credit Golden Savings with the full amount
of the treasury checks deposited to its account.

The total value of the 32 treasury warrants dishonored

was P1,754,089.00, from which Gomez was allowed to
withdraw P1,167,500.00 before Golden Savings was
notified of the dishonor. The amount he has withdrawn
must be charged not to Golden Savings but to
Metrobank, which must bear the consequences of its
own negligence. But the balance of P586,589.00 should
be debited to Golden Savings, as obviously Gomez can no
longer be permitted to withdraw this amount from his
deposit because of the dishonor of the warrants. Gomez
has in fact disappeared. To also credit the balance to
Golden Savings would unduly enrich it at the expense of
Metrobank, let alone the fact that it has already been
OFFICIAL DUTY
informed of the dishonor of the treasury warrants.
G.R. No. 198457, August 13, 2013
WHEREFORE, the challenged decision is AFFIRMED, with
the modification that Paragraph 3 of the dispositive FILOMENA G. DELOS SANTOS, JOSEFA A. BACALTOS,
portion of the judgment of the lower court shall be NELANIE A. ANTONI, AND MAUREEN A.
reworded as follows: BIEN, Petitioners, v. COMMISSION ON AUDIT,
REPRESENTED BY ITS COMMISSIONERS, Respondent.
3. Debiting Savings Account No. 2498 in the sum
of P586,589.00 only and thereafter allowing DECISION
defendant Golden Savings & Loan Association,
Inc. to withdraw the amount outstanding PERLAS-BERNABE, J.:
thereon, if any, after the debit.

SO ORDERED. Assailed in this petition for certiorari1 under Rule 64 in

relation to Rule 65 of the Rules of Court are Decision Nos.
Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., 2010-0512 and 2011-045,3 dated April 8, 2010 and August
concur. 8, 2011, respectively, of respondent Commission on Audit
(CoA) which affirmed Notice of Disallowance (ND) No.
2008-09-01 (SAT)4 dated September 8, 2008 for the
amount of P3,386,697.10 and thereby held petitioners
Filomena G. Delos Santos, Josefa A. Bacaltos, Nelanie A.
Antoni, and Maureen A. Bien (petitioners), inter alia,
solidarily liable therefor.
The Facts

Sometime in October 2001, then Congressman Antonio V.

Cuenco (Cuenco) of the Second District of Cebu City
entered into a Memorandum of Agreement5 (MOA) with
the Vicente Sotto Memorial Medical Center (VSMMC or
hospital), represented by Dr. Eusebio M. Alquizalas (Dr.
Alquizalas), Medical Center Chief, appropriating to the
hospital the amount of P1,500,000.00 from his Priority
Development Assistance Fund (PDAF) to cover the
medical assistance of indigent patients under the Tony N'
Tommy (TNT) Health Program (TNT Program).6 It was
agreed, inter alia, that: (a) Cuenco shall identify and
recommend the indigent patients who may avail of the
benefits of the TNT Program for an amount not exceeding
P5,000.00 per patient, except those with major illnesses
for whom a separate limit may be specified; (b) an
indigent patient who has been a beneficiary will be
subsequently disqualified from seeking further medical
assistance; and (c) the hospital shall purchase medicines
intended for the indigent patients from outside sources if
the same are not available in its pharmacy, subject to
reimbursement when such expenses are supported by
official receipts and other documents.7 In line with this,
Ma. Isabel Cuenco, Project Director of the TNT Program,
wrote8 petitioner Nelanie Antoni (Antoni), Pharmacist V
of VSMMC, requesting the latter to purchase needed
medicines not available at the hospital pharmacy from
Sacred Heart Pharmacy or Dell Pharmacy which were
supposedly accredited suppliers of the Department of
Health. The said request was approved. 9cralaw virtualaw
library
The Audit Proceedings
Several years after the enforcement of the MOA,
allegations of forgery and falsification of prescriptions
and referrals for the availment of medicines under the
TNT Program surfaced. On December 14, 2004, petitioner
Filomena G. Delos Santos (Delos Santos), who
succeeded10 Dr. Alquizalas, created, through Hospital
Order No. 1112,11 a fact-finding committee to investigate
the matter.
Within the same month, Beatriz M. Booc (Booc), State
Auditor IV, who was assigned to audit the hospital, came
up with her own review of the account for drugs and
medicines charged to the PDAF of Cuenco. She furnished
Delos Santos the results of her review as contained in
Audit Observation Memoranda (AOM) Nos. 2004-
21,12 2004-21B,13 and 2004-21C,14 all dated December 29,
2004, recommending the investigation of the following
irregularities:
a. AOM No. 2004-21 x x x involving fictitious
patients and falsified prescriptions for anti-rabies
and drugs costing
P3,290,083.29;chanr0blesvirtualawlibrary
b. AOM No. 2004-21B x x x involving issuance of
vitamins worth P138,964.80 mostly to the staff of
VSMMC and TNT Office covering the period January
to April 2004; and
c. AOM No. 2004-21C x x x covering fictitious
patients and falsified prescriptions for other drugs
and medicines worth P552,853.85 and unpaid
falsified prescriptions and referral letters for drugs
and medicines costing P602,063.50.15cralaw
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Meanwhile, the fact-finding committee created by Delos
Santos submitted its Report16 dated January 18, 2005
essentially affirming the “unseen and unnoticeable”
irregularities attendant to the availment of the TNT
Program but pointing out, however, that: (a) VSMMC was
made an “unwilling tool to perpetuate a scandal involving
government funds”;17 (b) the VSMMC management was
completely “blinded” as its participation involved merely
“a routinary ministerial duty” in issuing the checks upon
receipt of the referral slips, prescriptions, and delivery
receipts that appeared on their faces to be regular and
complete;18 and (c) the detection of the falsification and
forgeries “could not be attained even in the exercise of
the highest degree or form of diligence”19 as the VSMMC
personnel were not handwriting experts.
In the initial investigation conducted by the CoA, the
results of which were reflected in AOM No. 2005-
00120 dated October 26, 2005, it was found that: (a) 133
prescriptions for vaccines, drugs and medicines for anti-
rabies allegedly dispensed by Dell Pharmacy costing
P3,407,108.40, and already paid by VSMMC from the
PDAF of Cuenco appeared to be falsified;21 (b) 46
prescriptions for other drugs and medicines allegedly
dispensed by Dell Pharmacy costing P705,750.50, and
already paid by VSMMC from the PDAF of Cuenco
likewise appeared to be falsified;22 and (c) 25
prescriptions for drugs and medicines allegedly issued by
Dell Pharmacy costing P602,063.50 were also ascertained
to be falsified and have not been paid by
VSMMC.23cralaw virtualaw library
In her Comment/Reply24 to the aforementioned AOM No.
2005-001 addressed to Leonor D. Boado (Boado),
Director of the CoA Regional Office VII in Cebu City, Delos
Santos explained that during the initial stage of the
implementation of the MOA (i.e., from 2000 to 2002) the
hospital screened, interviewed, and determined the
qualifications of the patients-beneficiaries through the
hospital’s social worker.25 However, sometime in 2002,
Cuenco put up the TNT Office in VSMMC, which was run
by his own staff who took all pro forma referral slips
bearing the names of the social worker and the Medical
Center Chief, as well as the logbook.26 From then on, the
hospital had no more participation in the said program
and was relegated to a mere “bag keeper.” 27 Since the
benefactor of the funds chose Dell Pharmacy as the sole
supplier, anti-rabies medicines were purchased from the
said pharmacy and, by practice, no public bidding was
anymore required.28cralaw virtualaw library
Consequently, a special audit team (SAT), led by Team
Leader Atty. Federico E. Dinapo, Jr., State Auditor V, was
formed pursuant to Legal and Adjudication Office (LAO)
Order Nos. 2005-019-A dated August 17, 2005 and 2005-
019-B dated March 10, 2006 to conduct a special audit
investigation with respect to the findings of Booc and her
team.29 Due to time constraints, however, AOM No. 2005-
001 was no longer included in the SAT focus. 30 On
October 15, 2007, the SAT reported31 the following
findings and observations:
1. The provision of National Budget Circular No.
476 dated September 20, 2001 prescribing the
 guidelines on the release of funds for the PDAF
authorized under Republic Act (R.A.) No. 8760, as
Reenacted (GAA for CY 2001) were not
followed;32cralaw virtualaw library
2. Existing auditing law, rules and regulations
governing procurement of medicines were not
followed in the [program's] implementation;33cralaw
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3. The [program's] implementation did not follow
the provisions of the MOA by and between
[Congressman Cuenco] and the Hospital;34 and
4. Acts committed in the implementation of the
project were as follows:
a. There were [one hundred thirty-three
(133)] falsified prescriptions for anti-rabies
vaccines, drugs and medicines [costing]
P3,345,515.75 [allegedly] dispensed by Dell
Pharmacy [were] paid by VSMMC from the
[PDAF of Congressman
Cuenco];chanr0blesvirtualawlibrary
b. [Forty-six (46) falsified prescriptions] for
other drugs and medicines costing P695,410.10
[were likewise reportedly] dispensed by Dell
Pharmacy and paid by VSMMC from the [said
PDAF] x x x; and
c. [Twenty-five (25) prescriptions worth]
P602,063.50 [were also claimed to have been]
served by Dell Pharmacy but still unpaid x x
x.35cralaw virtualaw library
Examination by the SAT of the records and interviews
with the personnel involved showed that the purported
patients-beneficiaries of the TNT Program were mostly
non-existent and there was no actual procedure followed
except for the mere preparation of payment documents
which were found to be falsified as evidenced by the
following:
1. Thirteen (13) hospital surgeons disowned the
signatures on the prescriptions supporting the
claims. Surgeons do not prescribe anti-rabies
vaccines; they operate on patients.
2. Almost all of the patients named in the
prescriptions were not treated or admitted at the
Hospital or in its Out-patient Department. Those
whose names appeared on Hospital records were
treated at different dates than those appearing on
the prescriptions:
PATIENT
Leah Clamon
Jean Cañacao
Felipe Sumalinog
Vicente Perez
Vincent Rabaya
Rodulfo Cañete
3. Full dosages of anti-rabies vaccines were
allegedly given to the patients although it is gross
error to do so for these medicines are highly
perishable. These should be refrigerated and
injected immediately and periodically. For instance:
a. Mr. Vicente Perez received the full
dosage on November 26, 2003 and again on
November 27, 2003. (Hospital records showed
that Mr. Perez was admitted in March 2003 for
surgery.)
b. Mr. Maximo Buaya received the full
dosage on January 25 and on February 29, 2004.
c. Mr. Gregorio Rabago received his full
dosage on December 6, 2003.
4. The dates of 80 prescriptions for anti-rabies and
45 for other drugs and medicines are earlier than the
dates of the corresponding delivery receipts. The
gaps in the dates ranged from 1 to 47 days. On the
other hand, 33 prescriptions for anti-rabies had later
dates than the dates of the delivery receipts. The
difference in the dates ranged from 1 to 22 days.
5. The Pharmacy Unit still prepared Purchase
Request [PR] for the claims Dell [Pharmacy]
submitted to that office when the PR is no longer
necessary as the medicines have already been taken
by the patients.
6. Of the three South District residents personally
interviewed by the Team, two denied having sought
or received help from the [TNT] Program or being
hospitalized at VSMMC for dog bite.
7. The hospital social worker, Ms. Mergin Acido,
declared that she was bypassed in the evaluation of
the alleged patients for the TNT Office has clerks
who “evaluate” the eligibility of the patients. The
prescriptions and referral slips were directly
forwarded to the Pharmacy Unit for stamping and
submission to the Dell Pharmacy. She had no
opportunity then to see the patients personally.
8. Mr. Louies James S. Yrastorza has stated under
oath the falsity of the claims for payment. He stated
that he was ordered to submit to the Pharmacy Unit
falsified prescriptions accompanied by referral slips
signed by Mr. James Cuenco for non-existing
patients. Subsequently, sometime in September
2007 Mr. Yrastorza “clarified” his statements
effectively recanting his first oath.
9. The Office of the Provincial Election Supervisor
certified that out of the 30 names of the patients
randomly selected, only 15 were found listed in the
registered voters' database.
10. Prescriptions were stamped “VSMMC”
signed/initialed by the Pharmacist who is off duty as
shown by the attendance record, e.g. Mesdames
Arly Capuyan, Norma Chiong, Corazon Quiao,
Rowena Rabillas, and Riza Sei[s]mundo.36cralaw
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Subsequently, or on September 8, 2008, the SAT Team
Supervisor, Boado, issued ND No. 2008-09-
01,37 disallowing the amount of P3,386,697.10 for the
payment of drugs and medicines for anti-rabies with
falsified prescription and documents, and holding
petitioners, together with other VSMMC officials,
solidarily liable therefor. 38 Petitioners’ respective
participations were detailed as follows: (a) for Delos
Santos, in her capacity as Medical Center Chief, for
signing and approving the disbursement vouchers and
checks; (b) for petitioner Dr. Josefa A. Bacaltos, in her
capacity as Chief Administrative Officer, for certifying in
Box A that the expenses were lawful, necessary and
incurred in her direct supervision; (c) for Antoni, in her
capacity as Chief of the Pharmacy Unit, for approving the
supporting documents when the imputed delivery of the
medicines had already been consummated; (d) for
petitioner Maureen A. Bien, in her capacity as Hospital
Accountant, for certifying in Box B of the disbursement
voucher that the supporting documents for the payment
to Dell Pharmacy were complete and proper. 39cralaw
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Aggrieved, petitioners filed their respective
appeals40 before the CoA which were denied through
Decision No. 2010-05141 dated April 8, 2010, maintaining
their solidary liability, to wit:
WHEREFORE, premises considered, the appeal[s] of Dr.
Filomena [G]. Delos Santos, Dr. Josefa A. Bacaltos, Ms.
Nelanie A. Antoni and Ms. Maureen A. Bien [are] hereby
DENIED for lack of merit. However, the appeal of Ms.
Corazon Quiao, Ms. Norma Chiong, Ms. Rowena Rabillas
and Ms. Riza Seismundo is hereby given due course.
Likewise, Ms. Arly Capuyan who is similarly situated is
excluded although she did not file her appeal. ND No.
2008-09-01 (SAT) dated September 8, 2008 involving the
amount of P3,386,697.10 is hereby affirmed with the
modification by excluding therein the names [of[ Ms.
Corazon Quiao, Ms. Norma Chiong, Ms. Rowena Rabillas,
Ms. Riza Seismundo, and Ms. Arly Capuyan as persons
liable. The other persons named liable therein, i.e., Ma.
Isabel Cuenco and Mr. James R. Cuenco, TNT Health
Program Directors, and Mr. Sisinio Villacin, Jr., proprietor
of Dell Pharmacy, and herein appellants Delos Santos,
Bacaltos, Antoni and Bien remain solidarily liable for the
disallowance.42 (Emphasis supplied)
The Motion for Reconsideration43 of the foregoing
decision was further denied in Decision No. 2011-
04544 dated August 8, 2011. Hence, the instant petition.
The Issue Before the Court
The essential issue in this case is whether or not the CoA
committed grave abuse of discretion in holding
petitioners solidarily liable for the disallowed amount of
P3,386,697.10.
The Court's Ruling
At the outset, it must be emphasized that the CoA is
endowed with enough latitude to determine, prevent,
and disallow irregular, unnecessary, excessive,
extravagant or unconscionable expenditures of
government funds. It is tasked to be vigilant and
conscientious in safeguarding the proper use of the
government's, and ultimately the people's, property. The
exercise of its general audit power is among the
constitutional mechanisms that gives life to the check
and balance system inherent in our form of
government.45cralaw virtualaw library
Corollary thereto, it is the general policy of the Court to
sustain the decisions of administrative authorities,
especially one which is constitutionally-created, such as
the CoA, not only on the basis of the doctrine of
separation of powers but also for their presumed
expertise in the laws they are entrusted to enforce.
Findings of administrative agencies are accorded not only
respect but also finality when the decision and order are
not tainted with unfairness or arbitrariness that would
amount to grave abuse of discretion. It is only when the
CoA has acted without or in excess of jurisdiction, or with
grave abuse of discretion amounting to lack or excess of
jurisdiction, that this Court entertains a petition
questioning its rulings. There is grave abuse of discretion
when there is an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law or to act in
contemplation of law as when the judgment rendered is
not based on law and evidence but on caprice, whim, and
despotism.46 In this case, the Court finds no grave abuse
of discretion on the part of the CoA in issuing the assailed
Decisions as will be discussed below.
The CoA correctly pointed out that VSMMC, through its
officials, should have been deeply involved in the
implementation of the TNT Program as the hospital is a
party to the MOA and, as such, has acted as custodian
and disbursing agency of Cuenco’s PDAF.47 Further, under
the MOA executed between VSMMC and Cuenco, the
hospital represented itself as “willing to
cooperate/coordinate and monitor the implementation
of a Medical Indigent Support Program.” 48 More
importantly, it undertook to ascertain that “[a]ll
payments and releases under [the] program x x x shall be
made in accordance with existing government accounting
and auditing rules and regulations.”49 It is a standing rule
that public officers who are custodians of government
funds shall be liable for their failure to ensure that such
funds are safely guarded against loss or damage, and that
they are expended, utilized, disposed of or transferred in
accordance with the law and existing regulations, and on
the basis of prescribed documents and necessary
records.50 However, as pointed out by the SAT, provisions
of the National Budget Circular No. (NBC) 47651 dated
September 20, 2001 prescribing the guidelines on the
release of funds for a congressman’s PDAF authorized
under Republic Act No. 876052 were not followed in the
implementation of the TNT Program, as well as other
existing auditing laws, rules and regulations governing
the procurement of medicines.
In particular, the TNT Program was not implemented by
the appropriate implementing agency, i.e., the
Department of Health, but by the office set up by
Cuenco. Further, the medicines purchased from Dell
Pharmacy did not go through the required public bidding
in violation of the applicable procurement laws and
rules.53 Similarly, specific provisions of the MOA itself
setting standards for the implementation of the same
program were not observed. For instance, only seven of
the 133 prescriptions served and paid were within the
maximum limit of P5,000.00 that an indigent patient can
avail of from Cuenco’s PDAF. Also, several indigent
patients availed of the benefits more than once, again in
violation of the provisions of the MOA.54 Clearly, by
allowing the TNT Office and the staff of Cuenco to take
over the entire process of availing of the benefits of the
TNT Program without proper monitoring and observance
of internal control safeguards, the hospital and its
accountable officers reneged on their undertaking under
the MOA to “cooperate/coordinate and monitor” the
implementation of the said health program. They likewise
violated paragraph 555 of NBC 476 which requires a
“regular monitoring activity” of all programs and projects
funded by the PDAF, as well as Sections 12356 and 12457 of
Presidential Decree No. 1445,58 otherwise known as the
“Government Auditing Code of the Philippines” (Auditing
Code), which mandates the installation, implementation,
and monitoring of a “sound system of internal control” to
safeguard assets and check the accuracy and reliability of
the accounting data.
By way of defense, petitioners nonetheless argue that
VSMMC was merely a passive entity in the disbursement
of funds under the TNT Program and, thus, invoke good
faith in the performance of their respective duties,
capitalizing on the failure of the assailed Decisions of the
CoA to show that their lapses in the implementation of
the TNT Program were attended by malice or bad faith.
The Court is not persuaded.
Jurisprudence holds that, absent any showing of bad faith
and malice, there is a presumption of regularity in the
performance of official duties. However, this presumption
must fail in the presence of an explicit rule that was
violated.59 For instance, in Reyna v. CoA60 (Reyna), the
Court affirmed the liability of the public officers therein,
notwithstanding their proffered claims of good faith,
since their actions violated an explicit rule in the
Landbank of the Philippines’ Manual on Lending
Operations.61 In similar regard, the Court, in Casal v.
CoA62(Casal), sustained the liability of certain officers of
the National Museum who again, notwithstanding their
good faith participated in approving and authorizing the
incentive award granted to its officials and employees in
violation of Administrative Order Nos. 268 and 29 which
prohibit the grant of productivity incentive benefits or
other allowances of similar nature unless authorized by
the Office of the President.63 In Casal, it was held that,
even if the grant of the incentive award was not for a
dishonest purpose, the patent disregard of the issuances
of the President and the directives of the CoA amounts to
gross negligence, making the [“approving officers”] liable
for the refund [of the disallowed incentive
award].64cralaw virtualaw library
Just as the foregoing public officers
in Reyna and Casal were not able to dispute their
respective violations of the applicable rules in those
cases, the Court finds that the petitioners herein have
equally failed to make a case justifying their non-
observance of existing auditing rules and regulations, and
of their duties under the MOA. Evidently, petitioners’
neglect to properly monitor the disbursement of
Cuenco's PDAF facilitated the validation and eventual
payment of 133 falsified prescriptions and fictitious
claims for anti-rabies vaccines supplied by both the
VSMMC and Dell Pharmacy, despite the patent
irregularities borne out by the referral slips and
prescriptions related thereto.65 Had there been an
internal control system installed by petitioners, the
irregularities would have been exposed, and the hospital
would have been prevented from processing falsified
claims and unlawfully disbursing funds from the said
PDAF. Verily, petitioners cannot escape liability for failing
to monitor the procedures implemented by the TNT
Office on the ground that Cuenco always reminded them
that it was his money.66 Neither may deviations, from the
usual procedure at the hospital, such as the admitted
bypassing of the VSMMC social worker in the
qualification of the indigent-beneficiaries,67 be justified as
“a welcome relief to the already overworked and
undermanned section of the hospital.”68cralaw virtualaw
library
In this relation, it bears stating that Delos Santos’
argument that the practices of the TNT Office were
already pre-existing when she assumed her post and that
she found no reason to change the same69 remains highly
untenable. Records clearly reveal that she, in fact,
admitted that when she was installed as the new Medical
Center Chief of VSMMC sometime “in the late 2003,”
Antoni disclosed to her the irregularities occurring in the
hospital specifically on pre-signed and forged
prescriptions.70 Hence, having known this significant
information, she and Antoni should have probed into the
matter further, and, likewise, have taken more stringent
measures to correct the situation. Instead, Delos Santos
contented herself with giving oral instructions to resident
doctors, training officers, and Chiefs of Clinics not to
leave pre-signed prescriptions pads, which Antoni
allegedly followed during the orientations for new
doctors.71 But, just the same, the falsification and
forgeries continued, and it was only a year after, or in
December 2004, that Delos Santos ordered a formal
investigation of the attendant irregularities. By then, too
much damage had already been done.
All told, petitioners’ acts and/or omissions as detailed in
the assailed CoA issuances72 and as aforedescribed
reasonably figure into the finding that they failed to
faithfully discharge their respective duties and to exercise
the required diligence which resulted to the irregular
disbursements from Cuenco’s PDAF. In this light, their
liability pursuant to Sections 10473and 10574 of the
Auditing Code, as well as Section 16 of the 2009 Rules
and Regulations on Settlement of Accounts,75 as
prescribed in CoA Circular No. 2009-006, must perforce
be upheld. Truly, the degree of their neglect in handling
Cuenco’s PDAF and the resulting detriment to the public
cannot pass unsanctioned, else the standard of public
accountability be loosely protected and even rendered
illusory.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

G.R. No. 191263 October 16, 2013

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
HADJI SOCOR CADIDIA, Accused-Appellant.

DECISION

PEREZ, J.:

For review through this appeal1 is the Decision2 dated 28

August 2009 of the Court of Appeals in CA-G.R. CR.-I I C.
No. 03316, which affirmed the conviction of herein
accused-appellant Hadji Socor Cadidia (Cadidia) of
violation of Section 53 of Article II of Republic Act No.
9165 or the Comprehensive Dangerous Drugs Act of
2002.

The factual antecedents of the case are as follows:

The prosecution presented Marilyn Trayvilla (Trayvilla), a
Non-Uniformed Personnel of the Philippine National
Police, who testified that on 31 July 2002 at around 6:30
in the morning, while performing her duty as a female
frisker assigned at the Manila Domestic Airport Terminal I
(domestic airport) in Pasay City, she frisked the accused
Cadidia upon her entry at the departure area4 and she
noticed something unusual and thick in the area of
Cadidia’s buttocks. Upon inquiry, Cadidia answered that it
was only her sanitary napkin which caused the unusual
thickness.5Not convinced with Cadidia’s explanation,
Trayvilla and her female co-employee Leilani M. Bagsican
(Bagsican) brought the accused to the comfort room
inside the domestic airport to check. When she and
Bagsican asked Cadidia to remove her underwear, they
discovered that inside were two sachets of shabu . The
two sachets of shabu were turned over to their
supervisor SPO3 Musalli I. Appang (SPO3
Appang).6 Trayvilla recalled that Cadidia denied that the
two sachets of shabu were hers and said that she was
only asked by an unidentified person to bring the
same.7 The accused was identified and found to be bound
for Butuan City on board Cebu Pacific Airline as
evidenced by her confiscated airline ticket. 8 In open
court, Trayvilla identified the two sachets containing
shabu previously marked as Exhibits "B-2" and "B-3." She
also identified the signature placed by her co-employee,
Bagsican, at the side of the items, as well as the picture
of the sanitary napkin used by the accused to conceal the
bags of shabu.9
The second prosecution witness, Bagsican, corroborated
the testimony of Trayvilla. She testified that together with
Trayvilla, she was also assigned as a frisker at the
departure area of the domestic airport. While frisking the
accused, Trayvilla noticed something bulky in her maong
pants.10 As a result, Trayvilla asked for her help and with
the accused, they proceeded to the comfort room inside
the domestic airport. While inside the cubicle of the
comfort room, Bagsican asked the accused to open her
pants and pull down her underwear. Inside the accused’s
sanitary napkin were two plastic sachets of shabu which
they confiscated. Thereafter, she reported the incident to
their supervisor SPO3 Appang, to whom she endorsed
the confiscated items. They then proceeded to their
office to report to the Criminal Investigation and
Detection Group.11 In open court, she identified the
accused Cadidia as the one whom they apprehended.
She also identified the two plastic sachets of shabu they
confiscated from Cadidia and pointed to her initials
"LMB" she placed on the items for marking as well as the
picture of the napkin likewise marked with her initials. 12
Finally, the prosecution presented domestic airport Police
Supervisor SPO3 Appang who testified that on 31 July
2002 at around 6:40 in the morning, the accused passed
the walk-thru machine manned by two domestic airport
friskers, Trayvilla and Bagsican. When Trayvilla frisked the
accused, she called his attention and informed him that
something was kept inside the accused’s private area.
Accordingly, he instructed Trayvilla and Bagsican to
proceed to the comfort room to check what the thing
was.13 Trayvilla and Bagsican recovered two plastic
sachets containing shabu from the accused. The plastic
sachets together with the sanitary napkin were turned
over to him by the friskers Trayvilla and Bagsican.
Subsequently, he turned over the two plastic sachets and
sanitary napkin to the Intelligence and Investigation
Office of the 2 nd Regional Aviation Security Office
(RASO), Domestic International Airport.14 The seized
items were then turned over to SPO4 Rudy Villaceran of
NAIA-DITG.15 SP03 Appang placed his initials on the
confiscated items at the Philippine Drug Enforcement
Agency Office (PDEA) located at the Ninoy Aquino
International Airport.16
The specimens in turn were referred by PO2 Samuel B.
Cobilla (PO2 Cobilla) of the NAIA-DITG to Forensic
Chemist Elisa G. Reyes (Forensic Chemist Reyes) of the
Crime Laboratory at Camp Crame, Quezon City for
examination.17
Due to the loss of the stenographic notes regarding the
latter part of the direct testimony of SPO3 Appang and of
Forensic Chemist Reyes, the prosecution and the accused
agreed to dispense with their testimonies and agreed on
the following stipulation of facts:
a. The prosecution will no longer recall SPO3
Appang to the witness stand in view of his
retirement from service;18
b. The parties agreed on Forensic Chemist Reyes’
competence and expertise in her field;19
c. That she was the one who examined the
specimen in this case against Hadji Socor
Cadidia, consisting of one (1) heat-sealed
transparent plastic sachet, previously marked as
Exhibit "1" containing 48.48 grams of white
crystalline substance of Shabu, and, one (1)
knot-tied transparent plastic bag with marking
"Exhibit-2 LMB, RSA containing 98.29 grams
white crystalline substance of Shabu or
Methamphetamine Hydrochloride;20
d. That after conducting laboratory examination
on the two (2) specimens, she prepared the
document and reduced her findings into writing
which is Chemistry Report No. D-364-02 which is
the Initial Laboratory Report marked as Exhibit
"C"21; and,
e. That thereafter, Forensic Chemist Reyes
likewise prepared the Final Chemistry Report
marked as Exhibit "D."22
The accused, of course, has a different story to tell.
Cadidia testified that on 31 July 2002, at around 8:15 in
the morning, she proceeded to the departure area of the
domestic airport at Pasay City to board a Cebu Pacific
plane bound for Butuan City. When she passed-by the x-
ray machine, two women, whom she later identified as
Trayvilla and Bagsican, apprehended her.23 Trayvilla and
Bagsican held her arms and asked her if she was a
Muslim. When she replied in the affirmative, the two
women said that she might be carrying gold or Upon arraignment on 12 August 2002, Cadidia entered a
jewelries.24 Despite her denial, Trayvilla and Bagsican plea of "not guilty."38
brought her to the comfort room and told her she might
be carrying shabu. She again denied the allegation but On 7 April 2008, the trial court found the accused-
the two women told her to undress.25 When she asked appellant guilty as charged. The disposition reads:
why, they answered that her back was bulging. In reply,
she told them that she was having her menstrual period. WHEREFORE, this Court finds accused HADJI SOCOR
Trayvilla and Bagsican did not believe her and proceeded CADIDIA guilty beyond reasonable doubt of violation of
to ask her to remove her underwear. They later frisked Section 5 of Republic Act [No.] 9165, she is hereby
her body but failed to recover anything.26 Thereafter, the sentenced to suffer life imprisonment and to pay the fine
two women asked for money as they allegedly recovered of Five Hundred Thousand Pesos (₱500,000.00).
two plastic sachets containing shabu from her. 27 At this
moment, Cadidia became afraid and called her relatives
The methamphetamine hydrochloride recovered from
for money, particularly her female relative Dam Bai. 28 Her
the accused is considered confiscated in favor of the
relatives arrived at the airport at around 1 o’clock in the
government and to be turned to the Philippine Drug
afternoon of the same day but she failed to talk to them
Enforcement Agency for its disposal.39
because she has already been brought to Camp Crame
for drug examination.29 She called her relatives again to
On appeal, the accused-appellant, contended that the
ask for ₱200,000.00 and to bring the amount at 7 o’clock
trial court gravely erred when it failed to consider the
in the morning of the next day. Her relatives arrived on
conflicting testimonies of the prosecution witnesses’
the agreed day and time but managed to bring only
Trayvilla and Bagsican as to who among them instructed
₱6,000.00 which the police officers found
the accused-appellant to bring out the contents of her
unacceptable.30 As a consequence, Cadidia was subjected
underwear.40 Another contradiction pressed on by the
to inquest proceedings.31 In her re-direct, she testified
defense was the recollection of Bagsican that when she
that at that time, she was engaged in selling compact
and Trayvilla found the illegal drugs, Bagsican placed it
discs in Quiapo, Manila. She recalled that the names of
inside her blazer for safekeeping, in contrast with
the relatives she called for money were a certain Lani and
statement of SPO3 Appang that when Bagsican and
Andy.32
Trayvilla went out of the comfort room, they immediately
handed him the shabu allegedly taken from the accused-
The defense presented its next witness Haaji Mohamad
appellant.41 Appellant likewise argued against her
Domrang (Domrang) to corroborate the statement of
conviction by the trial court despite the fact that the
accused Cadidia that she called up her relatives including
identity of the illegal drugs allegedly seized was not
him to bring money to the airport and give the same to
proven with moral certainty due to the broken chain of
the police officers.33 Domrang testified that he knew
custody of evidence.42
Cadidia as a jeweller with a place of business in
Greenhills. He recalled at around 9 o’clock in the morning
The People, through the Office of the Solicitor General
of 31 July 2002, he was with his nephew when the latter
(OSG) countered that the inconsistencies of the
received a call from Cadidia and was told by the accused
prosecution’s witnesses did not touch on material points.
that she needed money amounting to ₱200,000.00.34 His
Hence, they can be disregarded for they failed to affect
nephew told him that he would go to the airport, so he
the credibility of the evidence as a whole. The alleged
accompanied him. They arrived there at around one
inconsistencies failed to diminish the fact that the
o’clock in the afternoon but failed to see Cadidia.
accused-appellant was caught in flagrante delicto at the
However, they were able to talk to the police officers at
departure area of the domestic airport transporting
the airport and inquired about the accused. The police
shabu. The defenses of frame-up and alibi cannot stand
officers replied that she was brought to Camp Crame but
against the positive testimonies of the witnesses absent
will be brought back to the airport at 7:00 o’clock in the
any showing that they were impelled with any improper
evening.35 The police officers told Domrang and Andy that
motive to implicate her of the offense charged.43 Finally,
if they would not be able to raise the ₱200,000.00, they
the OSG posited that the integrity of evidence is
would file a case against Cadidia. Since they were able to
presumed to be preserved unless there is any showing of
raise ₱6,000.00 only, the police officers rejected the
bad faith, and accused-appellant failed to overcome this
money.36
presumption.44
After the arrest, the following Information was filed in
In its decision, the Court of Appeals affirmed the ruling of
Criminal Case No. 02-1464 for violation of Sec. 5, Art. II of
the trial court. The appellate court ruled that the alleged
Republic Act No. 9165:
contradictory statements of the prosecution’s witnesses
did not diminish their credibility as they pertained only to
That on or about the 31st of July 2002, in Pasay City,
minor details and did not dwell on the principal elements
Metro Manila, Philippines, and within the jurisdiction of
of the crime. It emphasized that the more important
this Honorable Court, the above-named accused, without
matter was the positive identification of the accused-
authority of law, did then and there willfully, unlawfully
appellant as the perpetrator of the crime of illegal
and feloniously transport 146.77 grams of
transportation of dangerous drug.45 Further, it upheld the
Methylamphetamine Hydrochloride, a dangerous drug.37
trial court’s ruling that the prosecution satisfactorily
preserved the chain of custody of evidence over the
seized drugs as well as the integrity of the specimen
confiscated from the accused-appellant.46
In this instant appeal, the accused-appellant manifested
that she would no longer file her Supplemental Brief as
she had exhaustively discussed her assignment of errors
in her Appellant’s Brief.47
Before this Court for resolution are the two assigned
errors raised by the accused-appellant:
I.
THE TRIAL COURT GRAVELY ERRED IN FINDING THE
ACCUSED-APPELLANT GUILTY BEYOND REASONABLE
DOUBT OF THE CRIME CHARGED.
II.
THE TRIAL COURT GRAVELY ERRED IN CONVICTING THE
ACCUSED-APPELLANT OF THE CRIME CHARGED DESPITE
THE PROSECUTION’S FAILURE TO ESTABLISH THE CHAIN
OF CUSTODY OF THE ALLEGED CONFISCATED DRUG.48
We uphold the ruling of both the trial and the appellate
courts.
At the outset, We find it unnecessary to discuss the
propriety of the charge of violation of Section 5 of
Republic Act No. 9165 against Cadidia for illegal
transportation of 146.77 grams of Methylamphetamine
Hydrochloride by the prosecution. As elucidated by the
trial court, "there is no doubt that the accused had the
intention to board the flight bound for Butuan as per her
plane ticket and had submitted herself to body frisking at
the final check-in counter at the airport when she was
found to be carrying prohibited drugs in her persons (sic).
In like manner, considering the weight of the "shabu" and
the intention of the accused to transport the same to
another place or destination, she must be accordingly
penalized under Section 5 of Republic Act No. 9165, x x
x.49"
Now to the issues presented before this Court.
As to the first assignment of error, the accused casts
doubt on the set of facts presented by the prosecution
particularly the narration of Trayvilla, Bagsican and SPO3
Appang. She alleges that since the testimonies given by
the witnesses were conflicting, the same should not be
given credit and should result in her acquittal. She cited
two instances as examples of inconsistencies. First,
Trayvilla in her testimony recalled that she was the one
who asked the accused to bring out the contents of her
underwear. However, in her re-direct, she clarified that it
was Bagsican who asked the accused. Bagsican, in turn
testified that she was the one who asked the accused
while Trayvilla was beside her.50 Second, Bagsican in her
testimony recalled that after confiscation of the alleged
illegal drugs, she placed the items inside her blazer for
safekeeping. However, SPO3 Appang testified that when
the two female friskers came out from the comfort room,
they immediately handed to him the seized illegal drugs
allegedly taken from Cadidia.51
In cases involving violations of Dangerous Drugs Act,
credence should be given to the narration of the incident
by the prosecution witnesses especially when they are
police officers who are presumed to have performed
their duties in a regular manner, unless there is evidence
to the contrary.52 Further, the evaluation of the credibility
of witnesses is addressed to the sound discretion of the
trial judge, whose conclusion thereon deserves much
weight and respect because the judge has the direct
opportunity to observe said witnesses on the stand and
ascertain if they are telling the truth or not. Applying the
foregoing, we affirm the findings of the lower court in the
appreciation of facts and credibility of the witnesses.53
Upon review of the records, we find no conflict in the
narration of events of the prosecution witnesses. In her
direct testimony, Trayvilla testified that both of them
asked Cadidia to remove what was inside her underwear
when she and Bagsican brought the accused to the
comfort room to check what was hidden
inside.54 However, in her re-direct, she clarified that it was
really Bagsican who particularly made the request but
she was then also inside the cubicle with the
accused.55 This clarification is sufficient for the Court to
conclude that the two of them were inside the cubicle
when the request to bring out the contents of the
underwear was made and the concealed illegal drug was
discovered.
The other inconsistency alleged by the accused pertains
to what happened during the confiscation of the illegal
drug at the cubicle. The accused alleges that Bagsican
and SPO3 Appang differed in their statements. Upon
review, We find no such inconsistency. Bagsican testified
that after confiscation, she put the two plastic sachets of
shabu in her blazer for safekeeping. She further narrated
that afterwards, she turned over the accused and the
plastic sachets to SPO3 Appang.56 SPO3 Appang, in turn,
testified that when the two female friskers went out of
the comfort room, they handed to him what was taken
from the accused. The statements can be harmonized as
a continuous and unbroken recollection of events.
Even assuming that the said set of facts provided
conflicting statements, We have consistently held time
and again that minor inconsistencies do not negate the
eyewitnesses’ positive identification of the appellant as
the perpetrator of the crime. As long as the testimonies
as a whole presented a coherent and believable
recollection, the credibility would still be upheld. What is
essential is that the witnesses’ testimonies corroborate
one another on material details surrounding the
commission of the crime.57
The accused also assails the application of presumption
of regularity in the performance of duties of the
witnesses. She claimed that the self-serving testimonies
of Trayvilla and Bagsican failed to overcome her
presumption of innocence guaranteed by the
Constitution.58
Again, we disagree.
In People v. Unisa,59 this Court held that "in cases
involving violations of the Dangerous Drugs Act, credence
is given to prosecution witnesses who are police officers
for they are presumed to have performed their duties in
a regular manner, unless there is evidence to the contrary
suggesting ill-motive on the part of the police officers."
In this case, the prosecution witnesses were unable to
show ill-motive for the police to impute the crime against
Cadidia. Trayvilla was doing her regular duty as an airport
frisker when she handled the accused who entered the x-
ray machine of the departure area. There was no pre-
determined notice to particularly search the accused
especially in her private area. The unusual thickness of
the buttocks of the accused upon frisking prompted
Trayvilla to notify her supervisor SPO3 Appang of the
incident. The subsequent search of the accused would
only show that the two female friskers were just doing
their usual task when they found the illegal drugs inside
accused’s underwear. This is bolstered by the fact that
the accused on the one hand and the two friskers on the
other were unfamiliar to each other. Neither could they
harbour any ill-will against each other. The allegation of
frame-up and denial of the accused cannot prevail over
the positive testimonies of three prosecution witnesses
who corroborated on circumstances surrounding the
apprehension.
As final attempt at acquittal, the accused harps on the
alleged broken chain of custody of the confiscated drugs.
She casts doubt on the identity of the drugs allegedly
taken from her and the one presented in open court to
prove her guilt.60 She also questions the lack of physical
inventory of the confiscated items at the crime scene, the
absence of photographs taken on the alleged illegal drugs
and the failure to mark the seized items upon
confiscation.61
The duty of seeing to the integrity of the dangerous drugs
and substances is discharged when the arresting law
enforcer ensures that the chain of custody is unbroken.
Section 1(b) of Dangerous Drugs Board Regulation No. 1,
Series of 2002, defines the chain of custody as:
b. "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 was of the seized item, the date
and time when such transfer of custody made in the
course of safekeeping and use in court as evidence, and
the final disposition.62
In Mallillin v. People,63 the requirements to establish
chain of custody were laid down by this Court. First,
testimony about every link in the chain, from the
moment the item was picked up to the time it is offered
into evidence. Second, witnesses should 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
item.
The prosecution in this case was able to prove, through
the testimonies of its witnesses, that the integrity of the
seized item was preserved every step of the process.
As to the first link, Trayvilla and Bagsican testified that
upon confiscation of the two plastic sachets of illegal
drug from the accused, the seized items were transferred
to SPO3 Appang, who himself confirmed such transfer.
The second link pertains to the point when SPO3 Appang
turned over the two plastic sachets and sanitary napkin
to the RASO of the Domestic International Airport.64 As to
the marking, Bagsican testified that she put her initials
and signature on the plastic sachet and the sanitary
napkin at the Investigation Office. Afterwards, the seized
items were turned over to SPO4 Rudy Villaceran of the
NAIA-DITG.65 SP03 Appang signed the confiscated items
at the PDEA Office which is also located at the airport. 66
As evidenced by the Initial Laboratory Report,67 the
specimens were referred by PO2 Cobilla of the NAIA-DITG
to Forensic Chemist Reyes of the Crime Laboratory at
Camp Crame, Quezon City for examination. Finally, based
on the Chemistry Report68 of Forensic Chemist Reyes and
stipulation69 of facts agreed upon by both parties, the
specimen submitted by PO2 Cobilla tested positive for
Methylamphetamine Hydrochloride after qualitative
testing. The same specimens contained in the two plastic
sachets previously marked were identified by two female
friskers Trayvilla and Bagsican in open court as the same
ones confiscated from the accused.70
As to non-compliance of all the requirements laid down
by Section 21, paragraph 1, Article II of Republic Act No.
9165 regarding the custody and disposition of
confiscated, seized, and/or surrendered dangerous
drugs,71 the Implementing Rules and Regulations of
Republic Act No. 9165 states that non-compliance with
these requirements under justifiable grounds shall not
render void and invalid such seizure of and custody over
said items as long as the integrity and evidentiary value
of the seized items are properly preserved by the
apprehending officer/team. What is important is the
preservation of the integrity and the evidentiary value of
the seized items, as the same would be utilized in the
determination of the guilt or innocence of the
accused.72 The successful presentation of the prosecution
of every link of chain of custody as discussed above is
sufficient to hold the accused liable for the offense
charged.
On a final note, we held that airport frisking is an
authorized form of search and seizure.1âwphi1 As held in
similar cases of People v Johnson73 and People v
Canton,74 this Court affirmed the conviction or the
accused Leila Reyes Johnson and Susan Canton for
violation of drugs law when they were found to be in
hiding in their body illegal drugs upon airport frisking.
The Court in both cases explained the rationale for the
validity of airport frisking thus:
Persons may lose the protection of the search and seizure
clause by exposure or their persons or property to the
public in a manner reflecting a lack or subjective
expectation of privacy, which expectation society is
prepared to recognize as reasonable. Such recognition is
implicit in airport security procedures. With increased
concern over airplane hijacking and terrorism has come
increased security at the nation s airports. Passengers
attempting to hoard an aircraft routinely pass through
metal detectors: their carry-on baggage as well as
checked luggage arc routinely subjected to x-ray scans.
Should these procedures suggest the presence of
suspicious objects. physical searches are conducted to
determine what the objects are. There is little question
that such searches arc reasonable, given their minimal
intrusiveness, the gravity or the safety interests involved,
and the reduced privacy expectations associated with
airline travel. Indeed. travellers are often notified through
airport public address systems, signs, and notices in their
airline tickets that the are subject to search and. if any
prohibited materials or substances are found, such would
he subject to seizure. These announcements place
passengers on notice that ordinary constitutional
protections against warrantless searches and seizures do
not apply to routine airport procedures. 75

WHEREFORE, the instant appeal is DENIED Accordingly,

the Decision of the Court of Appeals dated 28 August
2009 in CA-G.R. CR.-H. C. No. 03316 is hereby AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

COHABITATION

[G.R. No. 119072. April 11, 1997]

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs.
JESUS EDUALINO, accused-appellant.

DECISION
PADILLA, J.:
Accused Jesus Edualino was charged with rape in an
information dated 5 July 1994 reading as follows:
"That on or about the 12th day of May, 1994, at Bgy. xxx,
Municipality of xxx, Province of xxx, Philippines, and
within the jurisdiction of this Honorable Court, the said
accused with lewd design, did then and there wilfully,
unlawfully and feloniously have carnal knowledge with
one AAA, a pregnant woman, against her will and
consent to her damage and prejudice.
CONTRARY TO LAW."[1]
The case for the prosecution, as told by complainant
AAA, is as follows:
On 12 May 1994, the complainant and her mother
BBB were in xxx to attend a dance. At about ten (10)
o'clock in the evening of that day AAA saw her cousin
CCC at the dance and she asked him to drink beer with
her.
 CCC got drunk and fell asleep. It was at this time
that accused Jesus Edualino approached her and offered
her a glass of beer. AAA noticed that Edualino was drunk
so she accepted the glass. She then felt dizzy after
drinking the beer.
Edualino then dragged her towards a grassy area
where no people were present. The accused then
forced himself on top of her and succeeded in raping her
while she was in a semi-unconscious state.
AAA further stated that she was continuously
resisting the assault upon her but Edualino was stronger
and he even boxed her in the stomach. She stated that
she passed out after the rape was consummated.
Prosecution witness DDD testified that she saw the
accused in the act of raping AAA in the grassy area near
the store of a certain Sgt. Edep and the house of a certain
Mrs. Adier.
DDD stated that she was looking for her cousin AAA
in the early morning of 12 May 1994 at xxx where a
dance was being held. She saw AAA with the accused on
top of her in a dark grassy area near the site of the
dance. Both the accused and AAA were naked. She was
able to identify the accused by pointing her flashlight
from a distance of less than two (2) meters away.
She then called her aunt EEE, the victim's mother,
but when they returned, the accused immediately left
when he noticed their presence.
Dr. xxx, a physician at the xxx District Hospital,
testified that on 13 May 1994, he examined AAA who
alleged that she was sexually abused.
The medical certificate issued by Dr. xxx reads as
follows:
"Medical Certificate
This is to certify that Mrs. AAA, 22 years old, married, of
xxx, with a 2-1/2 yrs old child, was examined of this
date. She alleged to have been sexually forcefully
assaulted by a known person, last May 12, 1994. She was
accompanied by her mother.
The patient upon admission was found to be combative,
with emotional outburst, shouting and crying. She was
then put to sleep.
Findings
1. General: Fairly developed and
nourished, patient was still under sedation
during the exam. Approximately 5'4"
in Ht.; wt.: 118 lbs.
2. Head & Face: contusion left
temporal area 2 x 2 cm.
dia. Multiple superficial abrasions on the
left forehead, right and left side of the face.
3. Abdomen: Linear abrasion,
post. lumbar, 3 inches length, longitudinal
4. Breast: slightly globular, dark
brown areola and nipple, presence of
multiple contusion just below the areola on
both breast.
5. Upper extremities: presence of
multiple linear abrasions on both arm and
forearm.
6. External genitalia: numerous pubic
hair, labia majora and minora both gaping,
presence of numerous dry leaves (grass)
noted on both buttocks.
7. I.E. hymen fimbriated in shape, no
laceration noted, easily admits 2 fingers
vaginal wall lax, less prominent rugae,
uterus enlarges to 2-3 mos. gestation.
Note: no sperm cell exam. done. no available microscope.
Conclusion: hymenal opening admits easily 2 fingers, it
can admit an average size penis in erection without
laceration, uterus enlarges to 2-3 months gestation. The
defense had a different version of the incident.
Accused Jesus Edualino, while admitting that he was
at the dance at xxx on 11 May 1994, denied that he raped
complainant AAA.
Edualino testified that after leaving the dance, he
and a certain Calixto Flora went to the store of Sgt. Edep
to drink beer. After he and Flora had finished a big bottle
of beer, complainant AAA and a certain CCC
arrived. They noticed that AAA and CCC were already
drunk. Accused Edualino testified that complainant AAA
then began teasing him to kiss her. He (Edualino) stood
up to get away from her but the latter followed
him. Flora then held on to AAA's arm to prevent the
latter from following him. Edualino testified that he and
Flora then went to his house where they stayed until the
morning of 12 May 1994.
Edualino also testified that CCC and AAA may have
been under the influence of marijuana since he heard the
two (2) talking about having taken drugs.
Calixto Flora corroborated the accused-appellant's
version of the incident.
Felix Alberto, a resident of xxx, testified that in the
evening of 11 May 1994 while they were walking towards
the place where the dance was being held, he and his
sister Rose saw complainant AAA sitting by the roadside
with her hands cupped covering her mouth. Upon seeing
them, AAA allegedly called out "Rose, halika, tikman mo,
masarap ito." (Rose, come and try this. It's tasty). When
they approached AAA, Alberto testified that he saw her
holding what appeared to be dried marijuana
leaves. Alberto then testified that he even scolded AAA
saying, "Why are you doing that? You have already two
children and you know that is bad." Alberto then took his
sister and left.
Rodolfo Caabay, then barangay captain of xxx
testified that in the early morning of 12 May 1994, an
unusual incident was reported to him. BBB complained
that her daughter AAA was found lying on the ground
about eight (8) meters from the store owned by a certain
Sgt. Edep. He found AAA was very hysterical and he
observed that she had too much to drink. He turned over
AAA to the police. He later learned that accused-
appellant was picked up for questioning regarding his
alleged rape of AAA.
 Epifania Caabay, Rodolfo's wife, testified that she
accompanied AAA and her mother on board the police
vehicle which took them to xxx District Hospital. She
stated that AAA was hysterical and kept on shouting in
the vernacular, "I want water! " Epifania further stated
that AAA's mother slapped her and hit her on different
parts of the body to quiet her down. Epifania agreed
with the other defense witnesses that AAA was quite
drunk at the time.
On 23 December 1994, the trial court rendered a
decision, the dispositive part of which reads:
"WHEREFORE, in view of all the foregoing facts and
considerations, the Court hereby finds the herein
accused, JESUS EDUALINO guilty beyond reasonable
doubt of the crime of RAPE charged in the above-entitled
case as defined and penalized under Article 335 of the
Revised Penal Code in relation to and as amended by
Republic Act No. 7659 and accordingly, he is hereby
sentenced to suffer the penalty of DEATH in the gas
chamber or in the electric chair and ordered to indemnify
the raped victim, AAA moral and exemplary damages
amounting to P60,000.00, and to pay the costs.
With this conviction and imposition of the death penalty
to the accused, he is hereby ordered immediately
shipped to the national penitentiary, Muntinlupa, Metro
Manila, under maximum security, to await the execution
of this sentence there and the review of this decision by
the Honorable Supreme Court, Manila, Philippines.
SO ORDERED."[3]
The conviction of accused-appellant is now before
this Court on automatic review.
Accused-appellant assigns the following errors to
the trial court.
1. The trial court acted with grave abuse of
discretion and demonstrated bias and
partiality in favor of the prosecution during
the entire proceedings of the case;
2. The trial court erred in giving credence to
the false and incredible testimony of the
complainant and other witnesses for the
prosecution and in not giving due credence
to the evidence for the defense;
3. The trial court erred in making findings of
facts not supported by the evidence and in
making conclusions based on mere
surmises, conjectures and speculation; and
4. The trial court erred in convicting the
appellant of the heinous crime of rape
instead of upholding his innocence based
on the evidence and the law.[4]
Accused-appellant contends that the trial judge
actively and "enthusiastically" assisted the prosecution,
both in the direct and cross-examination of the
witnesses. It is argued that "the undue interest and bias
of (the trial judge) is revealed by his active participation
in the entire proceeding, consistently taking the cudgels
for the prosecution, instead of conducting the trial with
the cold neutrality of an impartial judge."[5]
A close and careful scrutiny of the transcripts of the
proceedings before the trial court shows that the trial
court judge may have exhibited a degree of zeal which
could lead to impressions of partiality and bias. However,
this per se does not warrant nullification of the entire
proceedings in the case.
In People v. Hatton[6], this Court citing People v.
Ibasan[7] held thus:
"x x x. It is not denied that the court had at certain points
conducted its own questioning during the
proceedings. The records, however, show that the
court's questions did not amount to interference as to
make the case for the prosecution and deprive the
accused of their defense. The question of the judge
addressed to the witnesses and the accused were merely
to clarify certain points and confirm certain
statements. The number of times that a judge intervenes
is not necessarily an indication of bias. It cannot be taken
against a judge if the clarificatory questions he
propounds happen to reveal certain truths which tend to
destroy the theory of one party.
'As held in the case of Ventura v. Yatco (105 Phil. 287)
'Judges are not mere referees like those of a boxing bout,
only to watch and decide the results of a game; they
should have as much interest as counsel in the orderly
and expeditious presentation of evidence calling
attention of counsel to points at issue that are
overlooked, directing them to ask questions that would
elicit the facts on the issues involved, clarifying
ambiguous remarks by witnesses, etc.'
A judge may properly intervene in the trial of a case to
promote expedition and avoid unnecessary waste of time
or to clear up some obscurity (People v. Catindihan, 97
SCRA 196; Par. 14 Canons of Judicial Ethics;
Administrative Order No. 162 dated August 1, 1946, 42
O.G. 1803). In this respect, the record shows no
irregularity in the conduct of the trial judge."
Moreover, it is of note that counsel for accused-
appellant did not object, during the trial, to the manner
of questioning of the trial judge nor was his inhibition
sought by the defense for alleged bias and technicality for
the prosecution.
The Court will now proceed to determine if the guilt
of accused-appellant has been proven beyond reasonable
doubt.
The elements of the crime of rape, as allegedly
committed by accused-appellant, are:
1. That the accused-appellant had carnal
knowledge of the complainant;
2. That the act was done against the
complainant's will;
3. That force and/or intimidation was used in
the commission of the act.
In the present case, the prosecution's evidence
consists mainly of the testimonies of the complainant
AAA, DDD and Dr. xxx.
On the other hand, accused-appellant relies on
alternative defenses of alibi and consent on the part of
complainant. While accused-appellant's defense before
the trial court alleges that he had left the scene of the
incident together with defense witness Calixto Flora, he
alternatively raises before this Court the contention that
the elements of the crime of rape have not been
established.[8]
Accused-appellant posits the following arguments:
1) No carnal knowledge occurred
It is argued that since Dr. xxx did not examine specimens
from the complainant's private parts for the presence of
spermatozoa, then complainant's testimony to the effect
she, although in a state of semi-unconsciousness, felt
accused-appellant on top of her consummating the
sexual act, deserves no credence.
2) No force or intimidation was employed
It is argued that the force allegedly employed to
consummate the rape was merely implied by the trial
court from complainant's testimony that she did not
enjoy the sexual act. Accused-appellant contends that
even assuming that the sexual act was consummated, the
same could only have been successfully done with the
consent of the complainant, "for if she ever attempted to
resist or evade the thrust of the penis of appellant, the
latter could not have successfully hit the mark and
penetrate the vagina".[9]
Accused-appellant likewise argues that the medical
examination conducted on complainant fails to support
the latter's testimony that accused-appellant boxed her
in the stomach.
3) The identity of the assailant has not been
established
Accused-appellant assails the finding that the
complainant and prosecution witness DDD had
adequately established that it was accused-appellant
who committed the rape.
It is argued that complainant, who admitted being only
semi-conscious, could not have seen who raped her and
DDD who, in a written statement before trial, stated that
she only saw accused-appellant in shorts beside the
complainant, at the time and place of the alleged rape,
contradicted herself when she testified at the trial that
she saw accused-appellant on top of the complainant in a
grassy area behind the store of Sgt. Edep.
4) The offense of rape has not been
established.
Accused-appellant contends that the testimony of the
complainant tends to show "that there was foreplay
before the alleged rape whereby the accused allegedly
kissed her, caressed her breast and bit her nipple; that
the accused was on top of her and inserted his penis in
her vagina and did the push and pull movement; that she
cannot remember how long it lasted but she knew
[accused] had an orgasm after which the accused stood
up and left, all this bear the earmarks of a voluntary and
mutual coition, a consensual intercourse. There was no
rape."[10]
Finally, accused-appellant raises the issue of the
character of complainant AAA. It is argued that a
responsible and decent married woman, who was then
three (3) months pregnant, would not be out at two (2)
o'clock in the morning getting drunk much less would a
decent Filipina ask a man to accompany her to drink
beer. It is contended that complainant merely concocted
the charge of rape to save her marriage since her
husband had found out that she was using drugs and
drinking alcohol and even made a spectacle
of herself when she tried to seduce accused-appellant on
11 May 1994 while she was under the influence of drugs
and alcohol.
At the outset of this discussion, it should be pointed
out that the moral character of a rape victim is
immaterial in the prosecution and conviction of the
accused. The Court has ruled that prostitutes can be the
victims of rape.[11]
In the present case, even if accused-appellant's
allegations that the victim was drunk and under the
influence of drugs and that she (the victim) cannot be
considered a decent and responsible married woman,
were true, said circumstances will not per se preclude a
finding that she was raped.
Accused-appellant cannot successfully argue that no
rape occurred because no medical examination was
conducted to confirm the presence of spermatozoa in her
private parts.
The Court has repeatedly held that a medical
examination of the victim is not a prerequisite in
prosecutions for rape.[12]
A person accused of rape can be convicted solely on
the testimony of the victim provided the testimony is
credible, natural, convincing and otherwise consistent
with human nature and the course of things.[13]
After a careful and thorough study of the records of
the case, the Court is convinced that the constitutional
presumption of accused-appellant's innocence has been
overcome by proof of guilt beyond reasonable doubt.
On accused-appellant's contention that the
presence of force and intimidation was not proven, the
Court has consistently ruled that force and intimidation
should be viewed in the light of the victim's perception
and judgment at the time of the commission of the
offense.[14]
Indeed, there can be no hard and fast rule on the
matter specially in a situation like the present case where
the victim testified to being in a state of semi-
consciousness after drinking a glass of beer given to her
by accused-appellant.
Besides, the testimony of the victim is supported by
the findings in the aforequoted medical certificate which
shows that the injuries suffered by the victim are
consistent with the charges of rape and contrary to the
theory of the defense that the injuries were inflicted by
the victim's mother when she was trying to quiet her
daughter who was hysterical.
The allegation that accused-appellant's identity has
not been established deserves scant consideration. It is
to be noted that accused-appellant was known to the
victim and prosecution witness DDD long before the
incident. Both witnesses positively identified the accused
as the perpetrator of the rape. There is nothing to show
that these two (2) witnesses would or did falsely
implicate accused-appellant.
 On whether the acts of accused-appellant
constitute rape, the victim AAA's testimony was
sufficiently clear to show that the carnal knowledge was
without her consent and with force and
intimidation. There is no doubt that the crime committed
by accused-appellant is rape.
Accused-appellant in a final attempt to
absolve himself argues that the charge of rape was
concocted by the victim to save her marriage.
The Court cannot believe that a married woman
would invent a story that she was raped in an attempt to
conceal addiction to drugs or alcohol, in order to save her
marriage. We fail to understand how a false rape story
can save a marriage under the circumstances averred by
accused-appellant.
The other arguments adduced by accused-appellant
pertaining to credibility of the two (2) prosecution
witnesses are basically issues that cannot be reviewed by
the Court absent attendant circumstances that do not
exist in this case.
The alleged inconsistencies in the testimonies of the
prosecution witnesses pertain to minor matters and are
even badges that the witnesses were unrehearsed and
honest.
Besides, in reviewing the entire records of this case,
we find no reversible error in the judgment of conviction
except as to the penalty of death imposed by the trial
court.
The Solicitor General correctly points out that
absent the attending circumstances provided for under
Article 335 of the Revised Penal Code as amended by
Republic Act No. 7659 wherein the penalty for rape is
death, the correct penalty is reclusion perpetua.
Under Article 335 of the Revised Penal Code, as
amended by Section 11, R.A. No. 7659:
"x x x.
The death penalty shall be imposed if the crime of rape is
committed with any of the following circumstances:
1. When the victim is under eighteen (18) years of age
and the offender is a parent, ascendant, step-parent,
guardian, relative by consanguinity or affinity within the
third civil degree, or the common-law spouse of the
parent of the victim.
2. When the victim is under the custody of the police or
military authorities.
3. When the rape is committed in full view of the
husband, parent, any of the children or other relatives
within the third degree of consanguinity.
4. When the victim is a religious or a child below seven
(7) years old.
5. When the offender knows that he is afflicted with
Acquired Immune Deficiency Syndrome (AIDS) disease.
6. When committed by any member of the Armed Forces
of the Philippines or the Philippine National Police or any
law enforcement agency.
7. When by reason or on the occasion of the rape, the
victim has suffered permanent physical mutilation. (As
amended by Sec. 11, RA 7659.)"[15]
In the present case, the prosecution has not proved
any circumstance which would justify or call for the
imposition of the supreme penalty of death.
Finally, with regard to the award of P60,000.00 as
moral and exemplary damages, it is noted that there is no
basis for said award. Consequently the award of moral
and exemplary damages is deleted. However, the
accused-appellant is liable to indemnify the victim the
amount of Fifty Thousand Pesos (P50,000.00) consistent
with prevailing jurisprudence.
WHEREFORE, based on the foregoing, the judgment
of the trial court finding accused-appellant Jesus Edualino
guilty of the crime of rape is AFFIRMED with the
following modifications:
1) Accused-appellant is hereby sentenced to
suffer the penalty of reclusion perpetua;
and
2) He is ordered to indemnify the victim the
amount of Fifty Thousand Pesos
(P50,000.00) in lieu of the award of moral
and exemplary damages.
SO ORDERED.
G.R. No. 208113, December 02, 2015
DOLORES DIAZ, Petitioner, v. PEOPLE OF THE
PHILIPPINES AND LETICIA S. ARCILLA, Respondents.
DECISION
PERLAS-BERNABE, J.:
Before the Court is a petition for review
on certiorari1 assailing the Decision2 dated January 30,
2013 and the Resolution3 dated July 10, 2013 of the Court
of Appeals (CA) in CA-G.R. CV No. 97571, which directed
petitioner Dolores Diaz (petitioner) to pay respondent
Leticia S. Arcilla, (respondent) the amount of P32,000.00,
with legal interest at the rate of six percent (6%) per
annum (p.a.) from July 28, 1998 until finality of the
decision and thereafter, interest at the rate of twelve
percent (12%) p.a. on the outstanding balance until full
satisfaction.
The Facts
On March 11, 1999, an Information4 for estafa was filed
against petitioner before the Regional Trial Court of
Manila, Branch 5 (RTC) for her alleged failure to return or
remit the proceeds from various merchandise valued at
P32,000.00 received by her in trust - i.e., on consignment
basis from respondent.5 During arraignment, petitioner
entered a negative plea. Thereafter, trial on the merits
ensued.6
The prosecution anchored its case on the testimony of
respondent who claimed to be a businesswoman
engaged in the business of selling goods/merchandise
through agents (one of whom is petitioner) under the
condition that the latter shall turn over the proceeds or
return the unsold items to her a month after they were
entrusted. Respondent averred that on February 20,
1996, she entrusted merchandise consisting of umbrellas
and bath towels worth P35,300.00 to petitioner7 as
evidenced by an acknowledgment receipt8 dated
February 20, 1996 duly signed by the latter. However, on
March 20, 1996, petitioner was only able to remit the
amount of P3,300.009 and thereafter, failed to make
further remittances and ignored respondent's demands
to remit the proceeds or return the goods.10
In her defense, petitioner admitted having previous
business dealings with respondent but not as an agent.
She clarified that she was a client who used to buy
purchase order cards (POCs) and gift checks (GCs) from
respondent on installment basis and that, during each
deal, she was made to sign a blank sheet of paper prior
to the issuance of POCs and GCs. She further claimed
that their last transaction was conducted in 1995, which
had long been settled. However, she denied having
received P32,000.00 worth of merchandise from
respondent on February 20, 1996.11
The RTC Ruling
In a Decision12 dated June 29, 2011, the RTC acquitted
petitioner of the charge of estafa but held her civilly
liable to pay respondent the amount of P32,000.00, with
interest from the filing of the Information on March 11,
1999 until fully paid, and to pay the costs.
The RTC found that the prosecution failed to establish
any intent on the part of the petitioner to defraud
respondent and, thus, could not be held criminally
liable.13 However, it adjudged petitioner civilly liable
"having admitted that she received the [GCs] in the
amount of P32,000.00." In this relation, it further
considered the relationship of respondent and petitioner
as in the nature of a principal-agent which renders the
agent civilly liable only for damages which the principal
may suffer due to the non-performance of his duty under
the agency.14
With the foregoing pronouncement, petitioner elevated
the civil aspect of the case before the CA on appeal,
docketed as CA-G.R. CV No. 97571.
The CA Ruling
In a Decision15 dated January 30, 2013, the CA upheld
petitioner's civil liability.
It ruled that respondent was able to establish by
preponderance of evidence her transaction with
petitioner, as well as the latter's failure to remit the
proceeds of the sale of the merchandise worth
P32,000.00, or to return the same to respondent in case
the items were not sold, the fact of which having been
substantiated by the acknowledgment receipt dated
February 20, 1996.16 To this, the CA rejected petitioner's
attempt to discredit the said receipt which she denied
executing on the ground that she was only made to sign
blank documents, finding that even if petitioner was
indeed made to sign such blank documents, such was
merely a safety precaution employed by respondent in
the event the former reneges on her obligation.17
However, the CA modified the award of interests by
reckoning the same from the time of extrajudicial
demand on July 28, 1998.18 Accordingly, it directed
petitioner to pay respondent the amount of P32,000.00
with legal interest at the rate of 6% p.a. from July 28,
1998 until finality of the decision and thereafter, at the
rate of 12% p.a. on the outstanding balance until full
satisfaction.
Dissatisfied, petitioner filed a motion for
reconsideration19 which was denied in a
Resolution20 dated July 10, 2013; hence, this petition.
The Issue Before the Court
The essential issue for the Court's resolution is whether
or not the CA committed reversible error in finding
petitioner civilly liable to respondent.
The Court's Ruling
The petition lacks merit.
At the outset, it is noteworthy to mention that the
extinction of the penal action does not carry with it the
extinction of the civil liability where the acquittal is based
on reasonable doubt as only preponderance of evidence,
or "greater weight of the credible evidence," is
required.21 Thus, an accused acquitted of estafamay still
be held civilly liable where the facts established by the
evidence so warrant,22 as in this case.
In upholding the civil liability of petitioner, the CA did not
dwell into the purported admission of petitioner anent
her receipt of GCs in the amount of P32,000.00 as found
by the RTC. Instead, the CA hinged its ruling23 on the
acknowledgment receipt24 dated February 20, 1996, the
documentary evidence that respondent had duly
identified25 and formally offered26 in the course of these
proceedings.
For her part, petitioner denied having entered into the
subject transaction with respondent, claiming that she:
(a) had not transacted with respondent as to other
goods, except GCs27 and POCs;28 (b) was made to sign two
(2) one-half sheets of paper and a trust receipt in blank
prior to the issuance of the GCs and POCs,29 and (c) was
not able to retrieve the same after paying her obligation
to respondent.30
The Court agrees with the CA.
Petitioner's claim that she was required to sign two (2)
one-half sheets of paper and a trust receipt in
blank31 during her transactions with respondent, which
she allegedly failed to retrieve after paying her
obligations,32 is a bare allegation that cannot be given
credence. It is well-settled that "[h]e who alleges a fact
has the burden of proving it and a mere allegation is not
evidence."33
On the contrary, the CA correctly found that respondent
was able to prove by preponderance of evidence the fact
of the transaction, as well as petitioner's failure to remit
the proceeds of the sale of the merchandise worth
P32,000.00, or to return the same to respondent in case
such merchandise were not sold. This was established
through the presentation of the acknowledgment
receipt34 dated February 20, 1996, which, as the
document's name connotes, shows that petitioner
acknowledged receipt from respondent of the listed
items with their corresponding values, and assumed the
obligation to return the same on March 20, 1996 if not
sold.35

In this relation, it should be pointed out that under

Section 3 (d), Rule 131 of the Rules of Court, the legal
presumption is that a person takes ordinary care of his
concerns. To this, case law dictates that the natural
presumption is that one does not sign a document
without first informing himself of its contents and
consequences.36 Further, under Section 3 (p) of the same
Rule, it is equally presumed that private transactions
have been fair and regular.37 This behooves every
contracting party to learn and know the contents of a
document before he signs and delivers it.38 The effect of a
presumption upon the burden of proof is to create the
need of presenting evidence to overcome the prima
facie case created, thereby which, if no contrary proof is
offered, will prevail.39 In this case, petitioner failed to
present any evidence to controvert these presumptions.
Also, respondent's possession of the document
pertaining to the obligation strongly buttresses her claim
that the same has not been
extinguished.40 Preponderance of evidence only requires
[G.R. No. 122899. June 8, 2000]
that evidence be greater or more convincing than the
opposing evidence.41 All things considered, the evidence
METROPOLITAN BANK & TRUST COMPANY, petitioner,
in this case clearly preponderates in respondent's favor.
vs. COURT OF APPEALS and G.T.P. DEVELOPMENT
CORPORATION, respondents.
In fine, the CA's ruling on petitioner's civil liability is
hereby sustained. In line, however, with the amendment
introduced by the Bangko Sentral ng Pilipinas Monetary DECISION
Board in BSP-MB Circular No. 799,42series of 2013, there
is a need to partially modify the same in that the interest BUENA, J.:
accruing from the time of the finality of this Decision
should be imposed at the lower rate of six percent (6%) This petition for review on certiorari under Rule 45 of the
p.a., and not twelve percent (12%) p.a. as imposed by the Rules of Court assails (1) the amended decision of public
CA. respondent Court of Appeals [1] dated 03 July 1995 in CA-
GR CV No. 33395 affirming the trial court's judgment
WHEREFORE, the petition is DENIED. The Decision dated ordering herein petitioner Metropolitan Bank and Trust
January 30, 2013 and the Resolution dated July 10, 2013 Company (hereafter, METROBANK) to release/cancel the
of the Court of Appeals in CA-G.R. CV No. 97571 are real estate mortgage constituted over the subject
hereby AFFIRMED with MODIFICATION, directing property, and (2) the respondent court's resolution dated
petitioner Dolores Diaz to pay respondent Leticia S. 04 December 1995 denying petitioner METROBANK's
Arcilla the amount of P32,000.00 with legal interest at motion for reconsideration.
the rate of six percent (6%) per annum from July 28, 1998
until full payment. The subject property is a parcel of land in Diliman,
Quezon City consisting of six hundred ninety (690) square
SO ORDERED.chanroblesvirtuallawlibrary meters originally owned by businessman Tomas Chia
under Transfer Certificate of Title No. RT-16753 (106901)
Sereno, C.J., (Chairperson), Leonardo-De Castro, of the Registry of Deeds for Quezon City. Saddled with
Bersamin, and Perez, JJ., concur debts and business reverses, Mr. Chia offered the subject
property for sale to private respondent G.T.P.
Development Corporation (hereafter, GTP), with
assumption of the mortgage indebtedness in favor of
petitioner METROBANK secured by the subject property.
Pending negotiations for the proposed sale, Atty.
Bernardo Atienza, acting in behalf of respondent GTP,
went to the METROBANK branch in Quiapo, Manila
sometime in the last week of August 1980 to inquire on
Mr. Chia's remaining balance on the real estate mortgage.
METROBANK obliged with a statement of account of Mr.
Chia amounting to about P115,000.00 as of August ,1980.
The deed of sale[2] and the memorandum of
agreement[3] between Mr. Chia and respondent GTP were
eventually executed and signed on 04 September 1980 in
the office of Atty. Atienza. Twelve (12) days later, or on 16
September 1980, Atty. Atienza went to METROBANK
Quiapo Branch and paid one hundred sixteen thousand
four hundred sixteen pesos and seventy-one centavos
(P116,416.71),[4] for which METROBANK issued an official
receipt acknowledging payment.
This notwithstanding, petitioner METROBANK refused to
release the real estate mortgage on the subject property
despite repeated requests from Atty. Atienza, thus
prompting respondent GTP to file on October 17, 1980 an
action for specific performance against petitioner
METROBANK and Mr. Chia.
In answer to the complaint, Mr. Chia denied having
executed any deed of sale in favor of respondent GTP
involving the subject property. Petitioner for its part
justified its non-release of the real estate mortgage (1)
upon the advise of Mr. Chia that he never executed any
sales agreement with respondent GTP, and (2) by the fact
that there are other loans incurred by Mr. Chia which are
also secured by the subject property.
After trial, judgment was rendered by the regional trial
court on 11 December 1990 granting the reliefs prayed
for by respondent GTP as plaintiff, viz:
"WHEREFORE, after a careful and
thorough study of the record, this Court
holds that in view of the facts
contained in the records, judgment is
hereby rendered in favor of plaintiff
and against defendants, ordering -
"1.....Defendant Metropolitan Bank &
Trust Co. to execute the release or
cancellation of the real estate
mortgages executed by the deceased
defendant Tomas Chia and his wife,
defendant Vicenta Chia, over the
property described in TCT No. 106901
of the registry of deeds for Quezon City;
"2.....Defendants to surrender or
deliver the owner's duplicate copy of
said TCT No. 106901; and,
"3.....Defendants to pay, jointly and
severally, the sum of P10,000.00 as and
for attorney's fees, plus costs of suit.
"The counterclaims set up by both
defendants are dismissed.
"IT IS SO ORDERED."[5]
On appeal, respondent Court of Appeals rendered a
Decision dated 24 October 1994[6] reversing the trial
court's 11 December 1990 judgment, ruling in the main
that the one hundred sixteen thousand four hundred
sixteen pesos and seventy-one centavos (P116,416.71)
paid by respondent GTP to petitioner METROBANK did
not extinguish the real estate mortgage inasmuch as
there are other unliquidated past due loans secured by
the subject property.
With this unfavorable turn of events, respondent GTP, on
07 November 1994,[7] filed before respondent Court of
Appeals a "motion for reconsideration with alternative
prayer to require METROBANK to furnish appellee (GTP)
of the alleged unpaid balance of Mr. Chia." At the re-
scheduled date of oral arguments on 08 March 1995
where METROBANK was supposed to bring before the
respondent Court the current statement of the mortgage
debt of Mr. Chia secured by the deeds of mortgage
sought to be released, METROBANK's counsel did not
appear; only the lawyers of respondent GTP and Mr. Chia
appeared. Thus, the Court required GTP's counsel to file a
memorandum in lieu of oral arguments in support of its
motion for reconsideration.[8] GTP filed its memorandum
on March 17, 1995[9] to which a reply memorandum was
filed by METROBANK on April 10, 1995.[10]
On 03 July 1995,[11] the now assailed amended decision
was rendered reconsidering the original 24 October 1994
Decision and thus affirming the 11 December 1990
judgment of the regional trial court. Respondent Court of
Appeals took a second hard look at the evidence on hand
and seriously considered METROBANK's refusal to specify
any unpaid debt secured by the subject property, in
concluding anew that "the present case for specific
performance is well-grounded, absent indubitable
showing that the aforesaid amount of P116,416.71 paid
by appellee on September 16, 1980 did not suffice to pay
in full the mortgage debt assumed under the Deed of
Absolute Sale, with assumption of mortgage, it inked with
the late Tomas Chia. There is therefore merit in its motion
for reconsideration at bench." Petitioner METROBANK is
now before us after its motion for reconsideration of the
03 July 1995 amended decision was denied by
respondent Court of Appeals per Resolution of 04
December 1995.[12]
We find no compelling reasons to disturb the assailed
decision.
We quote with favor the following pronouncements of
respondent Court of Appeals in the Amended Decision,
thus:
 "x x x. In the case under scrutiny, we
are convinced that we erred in
reversing the appealed judgment
despite the finding that subject
property covered by TCT 106901-
Quezon City had been sold, in a manner
absolute and irrevocable, by the
spouses, Tomas Chia and Vicenta Chan,
to plaintiff-appellee, and on September
16, 1980, the latter complied with its
contractual obligation thereunder by
paying the total mortgage debt it
assumed, amounting according to
Metrobank itself, to P116,416.71, as of
September 16, 1980.
"All things studiedly viewed in proper
perspective, we are of the opinion, and
so rule, that whatever debts or loans
mortgagor Chia contracted with
Metrobank after September 4, 1980,
without the conformity of plaintiff-
appellee, could not be adjudged as part
of the mortgage debt the latter so
assumed. We are persuaded that the
contrary ruling on this point in Our
October 24, 1994 decision would be
unfair and unjust to plaintiff-appellee
because, before buying subject
property and assuming the mortgage
debt thereon, the latter inquired from
Metrobank about the exact amount of
the mortgage debt involved.
"The stipulation in subject Deeds of
Mortgage that mortgagors' debts
subsequently obtained would be
covered by the same security became
inapplicable, when mortgagor sold to
appellee the mortgaged property with
the knowledge of the mortgagee bank.
Thus, since September 4, 1980, it was
obvious that whatever additional loan
mortgagor got from Metrobank, the
same was not chargeable to and
collectible from plaintiff-appellee. It is
then decisively clear that Metrobank is
without any valid cause or ground not
to release the Deeds of Mortgage in
question, despite full payment of the
mortgage debt assumed by
appellee."[13]
Petitioner METROBANK is estopped from refusing the
discharge of the real estate mortgage on the claim that
the subject property still secures "other unliquidated past
due loans." In Maneclang vs. Baun,[14] this Court
enumerated the requisites for estoppel by conduct to
operate, to wit:
"1.....there must have been a
representation or concealment of
material facts;
"2.....the representation must have
been with knowledge of the facts;
"3.....the party to whom it was made
must have been ignorant of the truth of
the matter; and
"4.....it must have been with the
intention that the other party would act
upon it.
Respondent GTP, thru Atty. Atienza, requested from
METROBANK that he be furnished a copy of the full
indebtedness secured by the real estate mortgage.[15] In
response thereto, petitioner METROBANK issued a
statement of account as of September 15, 1980[16] which
amount was immediately settled and paid the next day
amounting to P116, 416.71. Petitioner METROBANK is
thus barred from taking a stand inconsistent with its
representation upon which respondent GTP, as an
innocent third person to the real mortgage agreement,
placed exclusive reliance. Respondent GTP had the
reasonable right to rely upon such representations as
true, considering that it had no participation whatsoever
in the mortgage agreement and the preparation of the
statement of account, coupled with the expectation that
a reputable banking institution such as petitioner
METROBANK do conduct their business concerns in the
highest standards of efficiency and professionalism. For
an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or
disproved as against a person relying thereon. A party
may not go back on his own acts and representations to
the prejudice of the other party who relied upon them. In
the law of evidence, whenever a party has, by his own
declaration, act or omission, intentionally and
deliberately led another to believe a particular thing true,
and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act, or omission, be
permitted to falsify it.[17]
Just as decisive is petitioner METROBANK's failure to
bring before respondent Court of Appeals the current
statement evidencing what it claims as "other
unliquidated past due loans" at the scheduled hearing of
8 March 1995. It was a golden opportunity, so to speak,
lost for petitioner METROBANK to defend its non-release
of the real estate mortgage. Thus, the following
pronouncements of this Court in Manila Bay Club
Corporation vs. Court of Appeals et. al,[18] speaking thru
Mr. Justice Ricardo Francisco,[19] find rightful
application, viz.-
"It is a well-settled rule that when the
evidence tends to prove a material fact
which imposes a liability on a party, and
he has it in his power to produce
evidence which from its very nature
must overthrow the case made against
him if it is not founded on fact, and he
refuses to produce such evidence, the
presumption arises that the evidence, if
produced, would operate to his
 prejudice, and support the case of his
adversary. x x x"

"No rule of law is better settled than

that a party having it in his power to
prove a fact, if it exists, which, if
proved, would benefit him, his failure
to prove it must be taken as conclusive
that the fact does not exist."

x x x......................x x x......................x x x

"Where facts are in evidence affording

legitimate inferences going to establish
the ultimate fact that the evidence is
designed to prove, and the party to be
affected by the proof, with an
opportunity to do so, fails to deny or
explain them, they may well be taken
as admitted with all the effect of the
inferences afforded. x x x"

"The ordinary rule is that one who has

knowledge peculiarly within his own
control, and refuses to divulge it,
cannot complain if the court puts the
most unfavorable construction upon his
silence, and infers that a disclosure
would have shown the fact to be as
claimed by the opposing party."

Verily, petitioner METROBANK's omission to present its

evidence only created an adverse inference against its
cause. Therefore, it cannot now be heard to complain
since respondent Court extended a reasonable
opportunity to petitioner METROBANK that it did not
avail.

WHEREFORE, the petition is DENIED. The amended

decision of respondent Court of Appeals dated 3 July
1995 as well as its resolution of 4 December 1995 is
AFFIRMED, with costs against petitioner.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and De

Leon, Jr., JJ., concur.