1
G.R. No. 132362 June 28, 2001
PIO BARRETTO REALTY DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, JUDGE PERFECTO A. S. LAGUIO, JR., RTC-Branch
18, Manila, and HONOR P. MOSLARES, respondents.
BELLOSILLO, J.:
This petition for review on certiorari assails the Decision dated 30 June 1997 of
the Court of Appeals in CA-G.R. SP No. 33982, "Pio Barretto Realty Development
Corporation v. Hon. Perfecto A. Laguio, et al.," which dismissed the special civil
action for certiorari filed by petitioner, as well as its Resolution dated 14 January
1998 denying reconsideration.
On 2 October 1984 respondent Honor P. Moslares instituted an action for
annulment of sale with damages before the Regional Trial Court of Manila against
the Testate Estate of Nicolai Drepin represented by its Judicial Administrator
Atty. Tomas Trinidad and petitioner Pio Barretto Realty Development
Corporation. Moslares alleged that the Deed of Sale over four (4) parcels of land
of the Drepin Estate executed in favor of the Barretto Realty was null and void
on the ground that the same parcels of land had already been sold to him by the
deceased Nicolai Drepin. The case was docketed as Civil Case No. 84-27008 and
raffled to respondent Judge Perfecto A. S. Laguio, Jr., RTC-Br. 18, Manila.
On 2 May 1986 the parties, to settle the case, executed a Compromise
Agreement pertinent portions of which are quoted hereunder -
1. The Parties agree to sell the Estate, subject matter of the instant
case, which is composed of the following real estate properties, to wit:
a. Three (3) titled properties covered by TCT Nos. 50539, 50540
and 505411 of the Registry of Deeds for the Province of Rizal,
with a total area of 80 hectares, more or less, and
b. Untitled Property, subject matter of (a) Land Registration
Case No. 1602 of the Regional Trial Court, Pasig, Metro Manila,
with an area of 81 hectares, more or less,
subject to the following situations and conditions, to wit:
a. If plaintiff Honor P. Moslares x x x buys the property, he is
under obligation, as follows:
1. To reimburse and pay Defendant Pio Barretto Realty
Development Corporation, represented by Anthony
Que, its capital investment of Three Million Pesos
(P3,000,000.00), Philippine Currency, and
2. To pay the Estate of Nicolai Drepin, represented by
the Judicial Administrator, Atty. Tomas Trinidad, the
sum of One Million Three Hundred Fifty Thousand
(P1,350,000.00) Pesos, Philippine Currency
b. If defendant Pio Barretto Realty Development Corporation,
represented by Mr. Anthony Que x x x continue[s] to buy the
property, it shall pay for the interests of plaintiff Honor P.
Moslares:
1. The sum of One Million (P1,000.000.00) Pesos,
Philippine Currency to plaintiff Honor P. Moslares
personally and
2. Pay to the Estate of Nicolai Drepin, through the
Judicial Administrator, Atty. Tomas Trinidad, the
balance of the agreed purchase price subject to
negotiation and verification of payments already made.
2. In the event that plaintiff Honor P. Moslares buys the Estate and pays
in full the amount of Three Million (P3,000,000.00) Philippine Currency
to defendant Pio Barretto Realty Development Corporation, and the full
sum of One Million Three Hundred Fifty Thousand (P1,350,000.00)
Pesos, Philippine Currency, to the Estate of Nicolai Drepin, through Atty.
Tomas Trinidad, defendant Pio Barretto shall execute the corresponding
Deed of Conveyance in favor of plaintiff Honor P. Moslares and deliver
to him all the titles and pertinent papers to the Estate.
IN WITNESS WHEREOF, the parties hereto hereby sign this Compromise
Agreement at Manila, Philippines, this 2nd day of May 1986 x x x
x xxxx xxxx
On 24 July 1986 the trial court rendered a decision approving the Compromise
Agreement.2 However, subsequent disagreements arose on the question of who
bought the properties first.
It must be noted that the Compromise Agreement merely gave Moslares and
Barretto Realty options to buy the disputed lots thus implicitly recognizing that
the one who paid first had priority in right. Moslares claimed that he bought the
lots first on 15 January 1990 by delivering to Atty. Tomas Trinidad two (2)

PBCom checks, one (1) in favor of Barretto Realty for P3 million, and the other,
in favor of the Drepin Estate for P1.35 million.
But petitioner Barretto Realty denied receiving the check. Instead, it claimed
that it bought the properties on 7 March 1990 by tendering a Traders Royal Bank
Manager's Check for P1million to Moslares, and a Far East Bank and Trust
Company Cashier's Check for P1 million and a Traders Royal Bank Manager's
Check for P350,000.00 to Atty. Tomas Trinidad as Judicial Administrator of the
Estate. However, Moslares and Atty. Trinidad refused to accept the checks.
Consequently, Barretto Realty filed a motion before the trial court alleging that
it complied with its monetary obligations under the Compromise Agreement but
that its offers of payment were refused, and prayed that a writ of execution be
issued to compel Moslares and Atty. Trinidad to comply with the Compromise
Agreement and that the latter be directed to turn over the owner's duplicate
certificates of title over the lots.
On 10 May 19903 Judge Laguio, Jr. ordered that "a writ of execution be issued
for the enforcement of the decision of this Court for the parties to deposit with
this Court, thru the City Treasurer's Office of Manila, their respective monetary
obligations under the compromise agreement that had been executed by them
x x x x"
Reacting to the order, Atty. Trinidad for the Estate filed an urgent motion to hold
the execution in abeyance on the ground that there was another case involving
the issue of ownership over subject lots pending before the Regional Trial Court
of Antipolo City. Moslares in turn filed a motion for reconsideration while Barretto
Realty moved to amend the order since the lower court did not exactly grant
what it prayed for.
On 14 June 1990, ruling on the three (3) motions, Judge Laguio, Jr., issued his
Order -
Considering Defendant Judicial Administrator's urgent motion to hold in
abeyance x x x the plaintiff's motion for reconsideration, and the
Defendant Pio Barretto Realty Development, Inc.'s opposition to both
motions x x x this Court finds the two motions without merit and are
accordingly, denied.
As regards Pio Barretto Realty Development, Inc.'s ex-parte motion to
amend order x x x the same is hereby granted and the deputy sheriff of
this Court is allowed to deliver to the parties concerned thru their
counsels the bank certified checks mentioned in par. 2 of the motion
(underscoring ours).4
2
On 20 June 1990 Deputy Sheriff Apolonio L. Golfo of the RTC-Br. 18, Manila,
implemented the order by personally delivering the checks issued by Barretto
Realty in favor of Moslares and the Estate to Atty. Pedro S. Ravelo, counsel for
Moslares, and to Atty. Tomas Trinidad, respectively, as recorded in a Sheriff's
Return dated 25 June 1990.5
However, on 17 September 1993, or more than three (3) years later, Moslares
filed a Motion for Execution alleging that he bought the lots subject of the
Compromise Agreement on 15 January 1990 and that he paid the amounts
specified as payment therefor. He asked that Barretto Realty be directed to
execute a deed of conveyance over subject lots in his favor. In a Supplement to
his motion Moslares contended that the previous tender of the checks by Barretto
Realty did not produce the effect of payment because checks, according to
jurisprudence, were not legal tender.
Respondent Judge granted Moslares' Motion for Execution. Consequently, on 8
November 1993 Barretto Realty was ordered to execute a deed of conveyance
over the subject lots in favor of Moslares.
Aggrieved, Barretto Realty moved for reconsideration alleging that respondent
Judge could no longer grant Moslares' motion since the prior sale of subject lots
in its favor had already been recognized when the court sheriff was directed to
deliver, and did in fact deliver, the checks it issued in payment therefor to
Moslares and Atty. Trinidad.
On 7 December 1993 respondent Judge granted the motion of Barretto Realty
for reconsideration and ruled -
Considering the motion for reconsideration and to quash writ of
execution filed by defendant Pio Barretto Realty Corporation, Inc., dated
16 November 1993, together with the plaintiff's comment and/or
opposition thereto, dated 18 November 1993, and the movant's reply to
the opposition etc., dated 20 November 1993, this Court finds the
motion well taken. The record shows that on 10 May 1990, a writ of
execution was issued by this Court for the parties to deposit with the
Court, thru the City Treasurer's Office of Manila, their respective
monetary obligations under the compromise agreement that they had
executed, and that it was only defendant Pio Barretto Realty Corporation
Inc. that had complied therewith, per the return of this Court's deputy
sheriff, Apolonio L. Golfo, dated June 25, 1990. Such being the case,
Defendant Pio Barretto Realty Corporation Inc., is the absolute
owner of the real properties in question and the issue on such
ownership is now a closed matter.
WHEREFORE, Defendant Pio Barretto Realty Corporation Inc.'s motion
for reconsideration etc., dated November 16, 1993, is hereby granted;
this Court's order, dated November 8, 1993, is reconsidered and set

aside, and the writ of execution of the same date against Defendant Pio
Barretto Realty Corporation Inc. is ordered quashed (underscoring
ours).6
Within a reglementary period Moslares moved to reconsider insisting that
Barretto Realty's payment by check was not valid because (a) the check was not
delivered personally to him but to his counsel Atty. Pedro Ravelo, (b) the check
was not encashed hence did not produce the effect of payment; and, (c) the
check was not legal tender per judicial pronouncements. Barretto Realty opposed
the motion, but to no avail. On 11 February 1994 respondent Judge granted the
motion for reconsideration and set aside his Order of 7 December 1993. Judge
Laguio ruled that Barretto Realty's payment through checks was not valid
because "a check is not legal tender and it cannot produce the effect of payment
until it is encashed x x x x the check in question has neither been negotiated nor
encashed by the plaintiff."7 At the same time, however, Moslares' alleged
payment of P3,000,000.00 on 15 January 1990 intended for Barretto Realty but
delivered to Atty. Tomas Trinidad was likewise decreed as not valid because the
latter was not authorized to accept payment for Barretto Realty.
Invoking interest of justice and equity, respondent Judge resolved to: (a) set
aside its ruling contained in its order of 7 December 1993 that "(d)efendant Pio
Barretto Realty Corporation, Inc., is the absolute owner of the property in
question and the issue on such ownership is now a closed matter;" (b) order the
plaintiff (should he desire to exercise his option to buy the real property in
question) to pay defendant Pio Barretto Realty Corporation, Inc., the sum of
P3,000,000.00 within five (5) days from notice thereof by way of reimbursement
of the latter's capital investment; and, (c) order defendant Pio Barretto Realty
Development Corporation, Inc., to pay the plaintiff (in the event the latter should
fail to exercise his said option and the former would want to buy the real property
in question) the sum of P1,000,000.00.
But Moslares failed to exercise his option and pay the amount within the five (5)-
day period granted him. Instead, he filed a Supplemental Motion to Pay praying
that he be given additional seven (7) days within which to do so. Barretto Realty
opposed and invoked par. 3 of the Order of 11 February 1994 granting it the
option to buy the lots in the event that Moslares should fail to pay within the
period given him. Barretto Realty prayed that the P1 million cashier's check still
in Moslares' possession be considered as sufficient compliance with the pertinent
provision of the court's order. Later, Barretto Realty offered to exchange the
check with cash. When Moslares did not appear however at the designated time
for payment on 10 March 1994 before the Branch Clerk of Court, Barretto Realty
filed a motion for consignation praying that it be allowed to deposit the
P1,000,000.00 payment with the cashier of the Office of the Clerk of Court.
Respondent Judge however failed to act on the motion as he went on vacation
leave. For reasons which do not clearly appear in the record, Judge Rosalio G.
dela Rosa, Executive Judge of the RTC, Manila, acted on the motion and granted
the prayer of Barretto Realty.8 Upon the return of respondent Judge Laguio from
3
his vacation, petitioner Barretto Realty immediately filed a motion for his
inhibition on the ground that he had already lost the cold neutrality of an
impartial judge as evident from his "seesaw" orders in the case. On 28 March
1994 respondent Judge denied the motion for his inhibition. Moslares for his part
moved for reconsideration of Executive Judge dela Rosa's Order of 10 March
1994.
On 15 April 1994, in a Consolidated Order, respondent Judge Laguio set aside
the questioned order of Executive Judge dela Rosa on the ground that the motion
for consignation should have been referred to the pairing judge of Branch 18,
Judge Zenaida Daguna of Branch 19. Respondent Judge further ruled that the
questioned order was premature since there were pending motions, namely,
Moslares' Supplemental Motion to Pay dated 1 March 1994, and Motion to
Deposit dated 9 March 1994 which were both filed earlier than Barretto Realty's
Motion for Consignation which however remained unresolved.
Respondent Judge Laguio found Moslares' motions meritorious and granted
them. Moslares was thus given a non-extendible grace period of three (3) days
within which to pay the P3,000,000.00 to Barretto Realty. Moslares then
deposited the amount with the Branch Clerk of Court of Br. 18 within two (2)
days from receipt of the order of respondent Judge, and on 25 April 1994 filed a
motion for the Clerk of Court to be authorized to execute the necessary deed of
conveyance in his favor.
On 2 May 1994 Barretto Realty filed a petition for certiorari and prohibition with
prayer for a temporary restraining order and/or preliminary injunction with the
Court of Appeals assailing the Orders of respondent Judge dated 28 March 1994
and 15 April 1994 on the ground that they were issued with grave abuse of
discretion.
Meanwhile, on 12 October 1994 or during the pendency of the petition,
respondent Judge granted Moslares' motion and authorized the Clerk of Court to
execute the deed of conveyance in his favor. The implementation of the order
however was enjoined by the Court of Appeals on 9 December 1994 when it
issued a writ of preliminary injunction barring the issuance of the writ until
further orders from the court.
In its Petition and Memorandum petitioner specifically alleged that respondent
Judge's Orders of 8 November 1993,9 11 February 1994,10 15 April 1994,11 and
12 October 199412were all issued with grave abuse of discretion as the trial court
had no more jurisdiction to issue such orders since the Compromise Agreement
of 2 May 1986 which was the basis of the decision of 24 July 1986 had already
been executed and implemented in its favor way back on 20 June 1990.
Petitioner likewise contended that the Order of 28 March 199413denying
petitioner's motion for inhibition was void because it did not state the legal basis
thereof; that respondent Judge displayed obvious bias and prejudice when he

issued "seesaw" orders in the case; and, that the bias in favor of Moslares was
apparent when respondent Judge granted the former another three (3)-day
period within which to pay the P3 million notwithstanding the fact that Moslares
failed to comply with the original five (5)-day period given him. With respect to
Executive Judge dela Rosa's Order of 10 March 1994, petitioner contended that
there was no rule of procedure prohibiting the Executive Judge from acting on
an urgent motion even if the pairing judge of the judge to whom the case was
raffled was present.
The Court of Appeals dismissed the petition. It ruled that the denial by
respondent Judge of the motion for his inhibition was not tainted with grave
abuse of discretion correctible by certiorari. Aside from the fact that judges are
given a wide latitude of discretion in determining whether to voluntarily recuse
themselves from a case, which is not lightly interfered with, the appellate court
however observed that the orders and resolutions issued by respondent Judge
in the five (5) years he had been presiding over Civil Case No. 84-27008
indicated that they were not uniformly issued in favor of one or the other party.
As petitioner itself aptly described, respondent Judge's actuations in the case
"seesawed" between the parties.
On the matter of the validity of Judge dela Rosa's Order of 10 March 1994
granting petitioner's motion for consignation, the Court of Appeals ruled that the
order was precipitate and unauthorized not only because the motion did not
comply with the requisites for litigated motions but also because Judge dela Rosa
had no judicial authority to act on the case. His duties as Executive Judge were
purely administrative and did not include acting on a case assigned to another
judge.
With respect to the two (2) writs of execution, one dated 10 May 1990 in favor
of petitioner, and the other dated 11 February 1994 in favor of respondent, the
Court of Appeals ruled -
Lastly, anent the existence of two writs of execution, first one for
petitioner and the second for Moslares which the former has repeatedly
cited as capricious and whimsical exercise of judicial discretion by
respondent Judge, the records reveal that on 10 May 1990 a writ of
execution was issued in favor of the petitioner upon its motion. For
reasons of its own, petitioner did not pursue its effective and fruitful
implementation in accordance with the decision based on a compromise
agreement, spelling out the respective monetary obligations of
petitioner and Moslares. Hence, after the lapse of at least one year,
Moslares filed a motion for execution of the same decision x x x x [I]t
cannot be said that respondent Judge issued two conflicting orders sans
any legal basis. What really happened was that the matter of the first
order granting execution in favor of petitioner was repeatedly put at
issue until the order of the court dated 11 February 1994 x x x x
Observedly, the said order was never elevated by petitioner to the
appellate courts. Instead, he agreed with it by filing a "Manifestation
4
and Motion" on 01 March 1994 praying that the P1 Million Cashier's
Check still in the possession of Moslares be considered compliance with
paragraph 3 of that order x x x x
On 14 January 1998 petitioner's motion for reconsideration was denied; hence,
this petition.
Petitioner contends that the Court of Appeals erred (a) in concluding that
petitioner did not pursue the effective and fruitful implementation of the writ of
execution dated 10 May 1990 in its favor, (b) in not setting aside Judge Laguio's
Orders dated 11 February 1994, 15 April 1994 and 12 October 1994 as patent
nullities, and, (c) in disregarding jurisprudence declaring that cashier's or
manager's checks are deemed cash or as good as the money they represent.
We grant the petition. Final and executory decisions, more so with those already
executed, may no longer be amended except only to correct errors which are
clerical in nature. They become the law of the case and are immutable and
unalterable regardless of any claim of error or incorrectness.14 Amendments or
alterations which substantially affect such judgments as well as the entire
proceedings held for that purpose are null and void for lack of jurisdiction.15 The
reason lies in the fact that public policy dictates that litigations must be
terminated at some definite time and that the prevailing party should not be
denied the fruits of his victory by some subterfuge devised by the losing party.16
It is not disputed, and in fact borne by the records, that petitioner bought the
disputed lots of the Drepin Estate subject matter of the Compromise Agreement
ahead of Moslares and that the checks issued in payment thereof were even
personally delivered by the Deputy Sheriff of the RTC-Br. 18, Manila, upon Order
of respondent Judge dated 14 June 1990 after tender was refused by Moslares
and the Drepin Estate. Respondent Moslares never raised the invalidity of the
payment through checks either through a motion for reconsideration or a timely
appeal. Hence, with the complete execution and satisfaction of the Decision
dated 24 July 1986 which approved the Compromise Agreement, Civil Case No.
84-27008 became closed and terminated leaving nothing else to be done by the
trial court with respect thereto.17 As petitioner correctly contended, the Court of
Appeals erred when it concluded that petitioner did not pursue the fruitful and
effective implementation of the writ of execution in its favor. As already stated
petitioner paid for the lots through the court-sanctioned procedure outlined
above. There was no more need for the Drepin Estate, owner of the lots, to
execute a deed of conveyance in petitioner's favor because it had already done
so on 10 October 1980. In fact the disputed lots were already registered in
petitioner's name under TCT Nos. 50539, 50540 and 50541 as a consequence
thereof. That was also why in the penultimate paragraph of the Compromise
Agreement it was provided that in the event respondent Moslares bought the
lots ahead of petitioner Barretto Realty the latter, not the Drepin Estate, was to
execute the corresponding deed of conveyance and deliver all the titles and
pertinent papers to respondent Moslares. There was therefore nothing more to
be done by way of fruitful and effective implementation.
 5

Clearly then respondent Judge Laguio no longer had any jurisdiction whatsoever SO ORDERED.1âwphi1.nêt
to act on, much less grant, the motion for execution and supplement thereto
filed by Moslares on 17 September 1993 or more than three (3) years later,
G.R. No. 123567 June 5, 1998
claiming that he had already bought the lots. The fact that the check paid to him
by Barretto Realty was never encashed should not be invoked against the latter.
As already stated, Moslares never questioned the tender done three (3) years PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
earlier. Besides, while delivery of a check produces the effect of payment only vs.
when it is encashed, the rule is otherwise if the debtor was prejudiced by the ROBERTO TONGKO, accused-appellant.
creditor's unreasonable delay in presentment. Acceptance of a check implies an
undertaking of due diligence in presenting it for payment. If no such presentment
was made, the drawer cannot be held liable irrespective of loss or injury
sustained by the payee. Payment will be deemed effected and the obligation for
which the check was given as conditional payment will be discharged.18 PUNO, J.:

Considering the foregoing, respondent Judge Laguio's Order dated 8 November
1993 which granted private respondent's motion for execution thus nullifying the
1990 sale in favor of petitioner after he had in effect approved such sale in his
Order of 14 June 1990 and after such order had already become final and
executory, amounted to an oppressive exercise of judicial authority, a grave
abuse of discretion amounting to lack of jurisdiction, for which reason, all further
orders stemming therefrom are also null and void and without effect.19
This is an appeal by accused Roberto Tongko from the Decision of the RTC of
Pasig City, Branch 156 finding him guilty of estafa under Article 315 (2) (d) of
the Revised Penal Code. He was sentenced to suffer twenty seven (27) years of
reclusion perpetua and to indemnify Carmelita v. Santos by way of actual
damges in the sum of P100,000.00 and to pay the cost of suit.
Accused was charged under the following Information:

The principle of laches does not attach when the judgment is null and void for
want of jurisdiction.20 The fact that petitioner invoked par. 3 of the Order of 11
February 1994 praying that its P1,000,000.00 check still in Moslares' possession
be considered sufficient payment of the disputed lots, could not be cited against
it. For one thing, petitioner from the very start had always consistently
questioned and assailed the jurisdiction of the trial court to entertain
respondent's motion for execution filed three (3) years after the case had in fact
been executed. Secondly, estoppel being an equitable doctrine cannot be
invoked to perpetuate an injustice.21
WHEREFORE, the questioned Decision and Resolution of the Court of Appeals
dated 30 June 1997 and 14 January 1998, respectively, are REVERSED and SET
ASIDE. The Order of respondent Judge Perfecto A. S. Laguio Jr. dated 11
February 1994 in Civil Case No. 84-27008, setting aside his earlier ruling of 7
December 1993 which had declared petitioner Pio Barretto Realty Development
Corporation as the absolute owner of the real properties in question, and all
subsequent proceedings culminating in the Order of 12 October 1994 authorizing
the Clerk of Court, RTC-Manila, to execute a deed of conveyance over subject
properties in favor of respondent Honor P. Moslares, are declared NULL and
VOID for want of jurisdiction.
That on or about the 20th day of August, 1993, in the
Municipality of Pasig, Metro Manila, Philippines and within the
jurisdiction of this Honorable Court, the above-named accused,
by means of deceit and false pretenses committed prior to or
simultaneously with the commission of the fraudulent acts, did
then and there willfully, unlawfully and feloniously make or
draw and issue to one, Carmelita Santos to apply on account or
for value, the check described below:
BANK CHECK NO. DATE AMOUNT
Phil. Amanah Bank 203729 12-20-93 P10,000.00
Phil. Amanah Bank 203730 12-20-93 10,000.00
Phil. Amanah Bank 203731 12-20-93 10,000.00
Phil. Amanah Bank 203732 12-20-93 10,000.00

Phil. Amanah Bank 203733 12-20-93 10,000.00

Consequently, petitioner Pio Barretto Realty Development Corporation is
declared the absolute owner of the disputed properties subject matter of the
Compromise Agreement dated 2 May 1986 as fully implemented by the Deputy Phil. Amanah Bank 203737 12-20-93 10,000.00
Sheriff, RTC-Br. 18, Manila, pursuant to the final and executory Order dated 14
June 1990 of its Presiding Judge Perfecto A. S. Laguio, Jr. Phil. Amanah Bank 203738 12-20-93 10,000.00

Phil. Amanah Bank 203739 12-20-93 10,000.00
Phil. Amanah Bank 203740 12-20-93 10,000.00
Phil. Amanah Bank 203741 12-20-93 10,000.00
said accused well knowing at the time of issue he did not have
sufficient funds in or credit with the drawee bank for the
payment in full of the face amount of such check upon
presentment which check when presented for payment within
ninety (90) days from the date thereof was subsequently
dishonored by the drawee bank for the reason "Account Closed"
and despite the lapse of three (3) banking days from receipt of
notice that said check has been dishonored, the accused failed
to pay said payee the face amount of such check or to make
arrangement for full payment thereof, to the damage and
prejudice of said Carmelita Santos in the total amount of
P100,000.00.
CONTRARY TO LAW.
Accused pled not quilty and underwent trial.
The evidence for the prosecution shows that on September 21, 1990, accused
opened savings and current account with Amanah Bank. 1 In the morning of
August 20, 1993, Marites Bo-ot brought the accused to the office of
Carmelita V. Santos at Room 504 Pacific Place, Pearl Drive, Ortigas
Center, Pasig City to borrow money. 2 The accused asked for P50,000.00
to be paid not later than December 1993. 3 He assured Santos that his
receivables would come in by November 1993. He persuaded Santos to
give the loan by issuing five (5) check, each in the sum of P10,000.00,
postdated December 20, 1993 and by signing a promissory note. 4 The
promissory note was co-signed by Bo-ot. In the afternoon of the same
date, the accused returned to Santos and borrowed an additional
P50,000.00. Again, he issued five (5) checks, each worth P10,000.00
postdated December 20, 1993. He also signed a promissory note
together with Bo-ot. 5
On September 14, 1993, Amanah Bank closed accused's current account
for lack of funds. On October 19, 1993, accused himself requested for
the closing of his savings account. 6
Santos did not present accused's checks to the drawee bank on their
due date upon the request of accused himself. 7 Instead, the checks
were presented on March 1, 1994 but were dishonored as accused's
accounts had been closed. 8 Accused was informed that his checks had
6
bounced. He promised to make good the checks. He failed to redeem his
promise, hence, the case at bar. 9
The accused testified for himself. Nobody corroborated his testimony.
He admitted the evidence of the prosecution but alleged that the
postdated checks were issued a day or two after he signed the
promissory notes. 10 Obviously, he was relying on the defense that the
checks were in payment of a pre-existing obligation.
As aforestated, the trial court convicted the accused. He appealed to this
Court and changed his counsel. 11 He now contends:
I
THE TRIAL COURT ERRED IN HOLDING THAT THE
ISSUANCE OF THE TEN (10) POSTDATED CHECKS (EXHS.
"C" TO "L") BY THE ACCUSED-APPELLANT CONSTITUTED
FRAUD WHICH INDUCED THE PRIVATE COMPLAINANT
TO EXTEND THE LOANS. IT IS RESPECTFULLY
SUBMITTED THAT THE INDUCEMENT WAS THE
EXECUTION OF THE TWO (2) PROMISSORY NOTES AS
WELL AS THE CO-SIGNING THEREOF BY MA. THERESA
DEL ROSARIO BO-OT (WHO INTRODUCED ACCUSED-
APPELLANT TO PRIVATE COMPLAINANT), IN A JOINT
AND SEVERAL CAPACITY.
II
THE TRIAL COURT ERRED IN NOT HOLDING THAT THE
POST-DATED CHECKS WERE IN PAYMENT OF PRE-
EXISTING OBLIGATIONS.
III
THE TRIAL COURT ERRED IN FINDING THE ACCUSED-
APPELLANT GUILTY OF ESTAFA AS CHARGED, AND IN
IMPOSING A STIFF PRISON TERM OF 27 YEARS OF
RECLUSION PERPETUA, A PENALTY "TOO HARSH AND
OUT OF PROPORTION" AS TO BE VIOLATIVE OF THE
CONSTITUTION.
The appeal is without merit.
Estafa, under Article 315, paragraph 2(d) of the Revised Penal Code, as
amended by Republic Act. No. 4885, has the following elements: (1)
postdating or issuance of a check in payment of an obligation contracted

at the time the check was issued; (2) lack of sufficiency of funds to cover
the check; and (3) damage to the payee thereof.
To avoid the first element, appellant contends that he was able to
borrow P100,000.00 from Santos due to the promissory notes he co-
signed with Bo-ot and not due to the postdated checks he issued. We
reject this contention. Firstly, this contention was contrived only after
appellant's conviction in the trial court. The records show that appellant
did not raise this defense in the trial court. He cannot fault the trial court
for failing to consider a defense which he never raised. Secondly, Santos
is the best person who can testify on what induced her to lend
P100,000.00 to the appellant. Santos categorically declared that it was
the issuance of postdated checks which persuaded her to part with her
money. We quote her testimony, viz.: 12
Q What happened to those checks you
mentioned in the promissory note?
A When presented to the bank they were
all returned by the bank for reason,
account closed.
Q Before this was deposited to the bank
when the accused came to your office and
loaned money from you, what was his
representation if any to you?
A That his collection will come in by Nov.
1993 and also the checks issued to me
will be definitely funded on the date that
it will become due.
Q Were you persuaded as a result of the
statement of the accused that these
checks will be good that you parted away
the amount?
A Yes, sir.
There is likewise no merit to the submission of appellant that his
postdated checks were in payment of a pre-existing obligation. Again,
we note appellant's change of theory in foisting this argument. In the
trial court, appellant testified that he issued the postdated checks, thru
Bo-ot, a day or two after he obtained the P100,000.00 loan from Santos.
13 The falsity of the uncorroborated claim, however, is too obvious and
the trial court correctly rejected it. The claim cannot succeed in light of
7
Santos' testimony that the issuance of said checks persuaded her to
grant the loans. A look at the two promissory notes will show that they
bear the date August 20, 1993 and they referred to the postdated checks
issued by the appellant. There could be no reference to the postdated
checks if they were issued a day or two after the loans. In this appeal,
however, appellant offers the new thesis that since the checks were
postdated December 1993, ergo, they were issued in payment of the
P100,000.00 he got from Santos on August 20, 1993. The postdating of
the checks to December 1993 simply means that on said date the checks
would be properly funded. It does not mean that the checks should be
deemed as issued only on December 1993.
Lastly, appellant contends that the penalty of twenty seven (27) years
of reclusion perpetua is too harsh and out of proportion to the crime he
committed. He submits that his sentence violates section 19(1), Article
III of the Constitution which prohibits the infliction of cruel, degrading
or inhuman punishment. We are not persuaded. In People v. de la Cruz,
14 we held that ". . . the prohibition of cruel and unusual punishments
is generally aimed at the form or character of the punishment rather
than its severity in respect of duration or amount, and apply to
punishments which never existed in America or which public sentiment
has regarded as cruel or obsolete . . . for instance those inflicted at the
whipping post, or in the pillory, burning at the stake, breaking on the
wheel, disemboweling, and the like . . ." In People v. Estoista, 15 we
further held:
It takes more than merely being harsh, excessive, out of
proportion, or severe for a penalty to be obnoxious to the
Constitution. The fact that the punishment authorized by
the statute is severe does not make it cruel and unusual.
Expressed in other terms, it has been held that to come
under the ban, the punishment must be "flagrantly and
plainly oppressive," "wholly disproportionate to the
nature of the offense as to shock the moral sense of the
community."
The legislature was not thoughtless in imposing severe penalties
for violation of par. 2(d) of Article 315 of the Revised Penal Code.
The history of the law will show that the severe penalties were
intended to stop the upsurge of swindling by issuance of
bouncing checks. It was felt that unless aborted, this kind of
estafa ". . . would erode the people's confidence in the use of
negotiable instruments as a medium of commercial transaction
and consequently result in the retardation of trade and
commerce and the undermining of the banking system of the
country." 16 The Court cannot impugn the wisdom of Congress
in setting this policy.

IN VIEW WHEREOF, the Decision dated January 16, 1996 of the RTC of
Pasig City, Br. 156 in Criminal Case No. 106614 convicting appellant is
affirmed. Costs against appellant.
SO ORDERED.
G.R. No. 160855 April 16, 2008
CONCEPCION CHUA GAW, petitioner,
vs.
SUY BEN CHUA and FELISA CHUA, respondents.
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari from the Decision1 of the Court of
Appeals (CA) in CA-G.R. CV No. 66790 and Resolution2 denying the motion for
reconsideration. The assailed decision affirmed the ruling of the Regional Trial
Court (RTC) in a Complaint for Sum of Money in favor of the plaintiff.
The antecedents are as follows:
Spouses Chua Chin and Chan Chi were the founders of three business
enterprises3 namely: Hagonoy Lumber, Capitol Sawmill Corporation, and
Columbia Wood Industries. The couple had seven children, namely, Santos
Chua; Concepcion Chua; Suy Ben Chua; Chua Suy Phen; Chua Sioc Huan; Chua
Suy Lu; and Julita Chua. On June 19, 1986, Chua Chin died, leaving his wife
Chan Chi and his seven children as his only surviving heirs. At the time of Chua
Chin’s death, the net worth of Hagonoy Lumber was P415,487.20.4
On December 8, 1986, his surviving heirs executed a Deed of Extra-Judicial
Partition and Renunciation of Hereditary Rights in Favor of a Co-Heir5 (Deed of
Partition, for brevity), wherein the heirs settled their interest in Hagonoy Lumber
as follows: one-half (1/2) thereof will pertain to the surviving spouse, Chan Chi,
as her share in the conjugal partnership; and the other half, equivalent to
P207,743.60, will be divided among Chan Chi and the seven children in equal
pro indiviso shares equivalent to P25,967.00 each.6 In said document, Chan Chi
and the six children likewise agreed to voluntarily renounce and waive their
shares over Hagonoy Lumber in favor of their co-heir, Chua Sioc Huan.
In May 1988, petitioner Concepcion Chua Gaw and her husband, Antonio Gaw,
asked respondent, Suy Ben Chua, to lend them P200,000.00 which they will use
for the construction of their house in Marilao, Bulacan. The parties agreed that
the loan will be payable within six (6) months without interest.7 On June 7, 1988,
8
respondent issued in their favor China Banking Corporation Check No. 2408108
for P200,000.00 which he delivered to the couple’s house in Marilao, Bulacan.
Antonio later encashed the check.
On August 1, 1990, their sister, Chua Sioc Huan, executed a Deed of Sale over
all her rights and interests in Hagonoy Lumber for a consideration of
P255,000.00 in favor of respondent.9
Meantime, the spouses Gaw failed to pay the amount they borrowed from
respondent within the designated period. Respondent sent the couple a demand
letter,10 dated March 25, 1991, requesting them to settle their obligation with
the warning that he will be constrained to take the appropriate legal action if
they fail to do so.
Failing to heed his demand, respondent filed a Complaint for Sum of Money
against the spouses Gaw with the RTC. The complaint alleged that on June 7,
1988, he extended a loan to the spouses Gaw for P200,000.00, payable within
six months without interest, but despite several demands, the couple failed to
pay their obligation.11
In their Answer (with Compulsory Counterclaim), the spouses Gaw contended
that the P200,000.00 was not a loan but petitioner’s share in the profits of
Hagonoy Lumber, one of her family’s businesses. According to the spouses, when
they transferred residence to Marilao, Bulacan, petitioner asked respondent for
an accounting, and payment of her share in the profits, of Capital Sawmills
Corporation, Columbia Wood Industries Corporation, and Hagonoy Lumber. They
claimed that respondent persuaded petitioner to temporarily forego her demand
as it would offend their mother who still wanted to remain in control of the family
businesses. To insure that she will defer her demand, respondent allegedly gave
her P200,000.00 as her share in the profits of Hagonoy Lumber.12
In his Reply, respondent averred that the spouses Gaw did not demand from him
an accounting of Capitol Sawmills Corporation, Columbia Wood Industries, and
Hagonoy Lumber. He asserted that the spouses Gaw, in fact, have no right
whatsoever in these businesses that would entitle them to an accounting thereof.
Respondent insisted that the P200,000.00 was given to and accepted by them
as a loan and not as their share in Hagonoy Lumber.13
With leave of court, the spouses Gaw filed an Answer (with Amended Compulsory
Counterclaim) wherein they insisted that petitioner, as one of the compulsory
heirs, is entitled to one-sixth (1/6) of Hagonoy Lumber, which the respondent
has arrogated to himself. They claimed that, despite repeated demands,
respondent has failed and refused to account for the operations of Hagonoy
Lumber and to deliver her share therein. They then prayed that respondent make
an accounting of the operations of Hagonoy Lumber and to deliver to petitioner
her one-sixth (1/6) share thereof, which was estimated to be worth not less than
P500,000.00.14

In his Answer to Amended Counterclaim, respondent explained that his sister,
Chua Sioc Huan, became the sole owner of Hagonoy Lumber when the heirs
executed the Deed of Partition on December 8, 1986. In turn, he became the
sole owner of Hagonoy Lumber when he bought it from Chua Sioc Huan, as
evidenced by the Deed of Sale dated August 1, 1990.15
Defendants, in their reply,16 countered that the documents on which plaintiff
anchors his claim of ownership over Hagonoy Lumber were not true and valid
agreements and do not express the real intention of the parties. They claimed
that these documents are mere paper arrangements which were prepared only
upon the advice of a counsel until all the heirs could reach and sign a final and
binding agreement, which, up to such time, has not been executed by the heirs.17
During trial, the spouses Gaw called the respondent to testify as adverse witness
under Section 10, Rule 132. On direct examination, respondent testified that
Hagonoy Lumber was the conjugal property of his parents Chua Chin and Chan
Chi, who were both Chinese citizens. He narrated that, initially, his father leased
the lots where Hagonoy Lumber is presently located from his godfather, Lu Pieng,
and that his father constructed the two-storey concrete building standing
thereon. According to respondent, when he was in high school, it was his father
who managed the business but he and his other siblings were helping him. Later,
his sister, Chua Sioc Huan, managed Hogonoy Lumber together with their other
brothers and sisters. He stated that he also managed Hagonoy Lumber when he
was in high school, but he stopped when he got married and found another job.
He said that he now owns the lots where Hagonoy Lumber is operating.18
On cross-examination, respondent explained that he ceased to be a stockholder
of Capitol Sawmill when he sold his shares of stock to the other stockholders on
January 1, 1991. He further testified that Chua Sioc Huan acquired Hagonoy
Lumber by virtue of a Deed of Partition, executed by the heirs of Chua Chin. He,
in turn, became the owner of Hagonoy Lumber when he bought the same from
Chua Sioc Huan through a Deed of Sale dated August 1, 1990. 19
On re-direct examination, respondent stated that he sold his shares of stock in
Capitol Sawmill for P254,000.00, which payment he received in cash. He also
paid the purchase price of P255,000.00 for Hagonoy Lumber in cash, which
payment was not covered by a separate receipt as he merely delivered the same
to Chua Sioc Huan at her house in Paso de Blas, Valenzuela. Although he
maintains several accounts at Planters Bank, Paluwagan ng Bayan, and China
Bank, the amount he paid to Chua Sioc Huan was not taken from any of them.
He kept the amount in the house because he was engaged in rediscounting
checks of people from the public market. 20
On December 10, 1998, Antonio Gaw died due to cardio vascular and respiratory
failure.21
9
On February 11, 2000, the RTC rendered a Decision in favor of the respondent,
thus:
WHEREFORE, in the light of all the foregoing, the Court hereby renders
judgement ordering defendant Concepcion Chua Gaw to pay the
[respondent] the following:
1. P200,000.00 representing the principal obligation with legal interest
from judicial demand or the institution of the complaint on November
19, 1991;
2. P50,000.00 as attorney’s fees; and
3. Costs of suit.
The defendants’ counterclaim is hereby dismissed for being devoid of
merit.
SO ORDERED.22
The RTC held that respondent is entitled to the payment of the amount of
P200,000.00 with interest. It noted that respondent personally issued Check No.
240810 to petitioner and her husband upon their request to lend them the
aforesaid amount. The trial court concluded that the P200,000.00 was a loan
advanced by the respondent from his own funds and not remunerations for
services rendered to Hagonoy Lumber nor petitioner’s advance share in the
profits of their parents’ businesses.
The trial court further held that the validity and due execution of the Deed of
Partition and the Deed of Sale, evidencing transfer of ownership of Hagonoy
Lumber from Chua Sioc Huan to respondent, was never impugned. Although
respondent failed to produce the originals of the documents, petitioner judicially
admitted the due execution of the Deed of Partition, and even acknowledged her
signature thereon, thus constitutes an exception to the best evidence rule. As
for the Deed of Sale, since the contents thereof have not been put in issue, the
non-presentation of the original document is not fatal so as to affect its
authenticity as well as the truth of its contents. Also, the parties to the
documents themselves do not contest their validity. Ultimately, petitioner failed
to establish her right to demand an accounting of the operations of Hagonoy
Lumber nor the delivery of her 1/6 share therein.
As for petitioner’s claim that an accounting be done on Capitol Sawmill
Corporation and Columbia Wood Industries, the trial court held that respondent
is under no obligation to make such an accounting since he is not charged with
operating these enterprises.23

Aggrieved, petitioner appealed to the CA, alleging that the trial court erred (1)
when it considered the amount of P200,000.00 as a loan obligation and not
Concepcion’s share in the profits of Hagonoy Lumber; (2) when it considered as
evidence for the defendant, plaintiff’s testimony when he was called to testify as
an adverse party under Section 10 (e), Rule 132 of the Rules of Court; and (3)
when it considered admissible mere copies of the Deed of Partition and Deed of
Sale to prove that respondent is now the owner of Hagonoy Lumber.24
On May 23, 2003, the CA affirmed the Decision of the RTC. 25 The appellate court
found baseless the petitioner’s argument that the RTC should not have included
respondent’s testimony as part of petitioner’s evidence. The CA noted that the
petitioner went on a fishing expedition, the taking of respondent’s testimony
having taken up a total of eleven hearings, and upon failing to obtain favorable
information from the respondent, she now disclaims the same. Moreover, the CA
held that the petitioner failed to show that the inclusion of respondent’s
testimony in the statement of facts in the assailed decision unduly prejudiced
her defense and counterclaims. In fact, the CA noted that the facts testified to
by respondent were deducible from the totality of the evidence presented.
The CA likewise found untenable petitioner’s claim that Exhibits "H" (Deed of
Sale) and Exhibit "I" (Deed of Partition) were merely temporary paper
arrangements. The CA agreed with the RTC that the testimony of petitioner
regarding the matter was uncorroborated — she should have presented the other
heirs to attest to the truth of her allegation. Instead, petitioner admitted the due
execution of the said documents. Since petitioner did not dispute the due
execution and existence of Exhibits "H" and "I", there was no need to produce
the originals of the documents in accordance with the best evidence rule.26
On December 2, 2003, the CA denied the petitioner’s motion for reconsideration
for lack of merit.27
Petitioner is before this Court in this petition for review on certiorari, raising the
following errors:
I. THAT ON THE PRELIMINARY IMPORTANT RELATED ISSUE, CLEAR AND
PALPABLE LEGAL ERROR HAS BEEN COMMITTED IN THE APPLICATION
AND LEGAL SIGNIFICANCE OF THE RULE ON EXAMINATION OF
ADVERSE PARTY OR HOSTILE WITNESS UNDER SECTION 10 (d) AND
(e) OF RULE 132, CAUSING SERIOUS DOUBT ON THE LOWER COURT’S
APPEALED DECISION’S OBJECTIVITY, ANNEX "C".
II. THAT ON THE IMPORTANT LEGAL ISSUE RELATIVE TO THE
AFORESAID TWO OPPOSING CLAIMS OF RESPONDENT AND
PETITIONER, CLEAR AND PALPABLE LEGAL ERROR HAS BEEN
COMMITTED UNDER THE LOWER COURT’S DECISION ANNEX "C" AND
THE QUESTIONED DECISION OF MAY 23, 2003 (ANNEX "A") AND THE
RESOLUTION OF DECEMBER 2, 2003, (ANNEX "B") IN DEVIATING FROM
10
AND DISREGARDING ESTABLISHED SUPREME COURT DECISIONS
ENJOINING COURTS NOT TO OVERLOOK OR MISINTERPRET
IMPORTANT FACTS AND CIRCUMSTANCES, SUPPORTED BY CLEAR AND
CONVINCING EVIDENCE ON RECORD, AND WHICH ARE OF GREAT
WEIGHT AND VALUE, WHICH WOULD CHANGE THE RESULT OF THE
CASE AND ARRIVE AT A JUST, FAIR AND OBJECTIVE DECISION.
(Citations omitted)
III. THAT FINALLY, AS TO THE OTHER LEGAL IMPORTANT ISSUE
RELATIVE TO CLAIM OR OWNERSHIP OF THE "Hagonoy Lumber" FAMILY
BUSINESS, CLEAR AND PALPABLE LEGAL ERROR HAS BEEN COMMITTED
ON THE REQUIREMENTS AND CORRECT APPLICATION OF THE "BEST
EVIDENCE RULE" UNDER SECTION 3, RULE 130 OF THE REVISED RULES
OF COURT.28
The petition is without merit.
Petitioner contends that her case was unduly prejudiced by the RTC’s treatment
of the respondent’s testimony as adverse witness during cross-examination by
his own counsel as part of her evidence. Petitioner argues that the adverse
witness’ testimony elicited during cross-examination should not be considered
as evidence of the calling party. She contends that the examination of
respondent as adverse witness did not make him her witness and she is not
bound by his testimony, particularly during cross-examination by his own
counsel.29 In particular, the petitioner avers that the following testimony of the
respondent as adverse witness should not be considered as her evidence:
(11.a) That RESPONDENT-Appellee became owner of the "HAGONOY
LUMBER" business when he bought the same from Chua Sioc Huan
through a Deed of Sale dated August 1, 1990 (EXH.H);
(11.b) That the "HAGONOY LUMBER," on the other hand, was acquired
by the sister Chua Sioc Huan, by virtue of Extrajudicial Partition and
Renunciation of Hereditary Rights in favor of a Co-Heir (EXH. I);
(11.c) That the 3 lots on which the "HAGONOY LUMBER" business is
located were acquired by Lu Pieng from the Santos family under the
Deed of Absolute Sale (EXH. J); that Lu Pieng sold the Lots to Chua Suy
Lu in 1976 (EXHS. K, L, & M.); that Chua Siok Huan eventually became
owner of the 3 Lots; and in 1989 Chua Sioc Huan sold them to
RESPONDENT-Appellee (EXHS. Q and P); that after he acquired the 3
Lots, he has not sold them to anyone and he is the owner of the lots.30
We do not agree that petitioner’s case was prejudiced by the RTC’s treatment of
the respondent’s testimony during cross-examination as her evidence.

If there was an error committed by the RTC in ascribing to the petitioner the
respondent’s testimony as adverse witness during cross-examination by his own
counsel, it constitute a harmless error which would not, in any way, change the
result of the case.
In the first place, the delineation of a piece of evidence as part of the evidence
of one party or the other is only significant in determining whether the party on
whose shoulders lies the burden of proof was able to meet the quantum of
evidence needed to discharge the burden. In civil cases, that burden devolves
upon the plaintiff who must establish her case by preponderance of evidence.
The rule is that the plaintiff must rely on the strength of his own evidence and
not upon the weakness of the defendant’s evidence. Thus, it barely matters who
with a piece of evidence is credited. In the end, the court will have to consider
the entirety of the evidence presented by both parties. Preponderance of
evidence is then determined by considering all the facts and circumstances of
the case, culled from the evidence, regardless of who actually presented it.31
That the witness is the adverse party does not necessarily mean that the calling
party will not be bound by the former’s testimony. The fact remains that it was
at his instance that his adversary was put on the witness stand. Unlike an
ordinary witness, the calling party may impeach an adverse witness in all
respects as if he had been called by the adverse party,32 except by evidence of
his bad character.33 Under a rule permitting the impeachment of an adverse
witness, although the calling party does not vouch for the witness’ veracity, he
is nonetheless bound by his testimony if it is not contradicted or remains
unrebutted.34
A party who calls his adversary as a witness is, therefore, not bound by the
latter’s testimony only in the sense that he may contradict him by introducing
other evidence to prove a state of facts contrary to what the witness testifies
on.35 A rule that provides that the party calling an adverse witness shall not be
bound by his testimony does not mean that such testimony may not be given its
proper weight, but merely that the calling party shall not be precluded from
rebutting his testimony or from impeaching him.36 This, the petitioner failed to
do.
In the present case, the petitioner, by her own testimony, failed to discredit the
respondent’s testimony on how Hagonoy Lumber became his sole property. The
petitioner admitted having signed the Deed of Partition but she insisted that the
transfer of the property to Chua Siok Huan was only temporary. On cross-
examination, she confessed that no other document was executed to indicate
that the transfer of the business to Chua Siok Huan was a temporary
arrangement. She declared that, after their mother died in 1993, she did not
initiate any action concerning Hagonoy Lumber, and it was only in her
counterclaim in the instant that, for the first time, she raised a claim over the
business.
11
Due process requires that in reaching a decision, a tribunal must consider the
entire evidence presented.37 All the parties to the case, therefore, are considered
bound by the favorable or unfavorable effects resulting from the evidence.38 As
already mentioned, in arriving at a decision, the entirety of the evidence
presented will be considered, regardless of the party who offered them in
evidence. In this light, the more vital consideration is not whether a piece of
evidence was properly attributed to one party, but whether it was accorded the
apposite probative weight by the court. The testimony of an adverse witness is
evidence in the case and should be given its proper weight, and such evidence
becomes weightier if the other party fails to impeach the witness or contradict
his testimony.
Significantly, the RTC’s finding that the P200,000.00 was given to the petitioner
and her husband as a loan is supported by the evidence on record. Hence, we
do not agree with the petitioner’s contention that the RTC has overlooked certain
facts of great weight and value in arriving at its decision. The RTC merely took
into consideration evidence which it found to be more credible than the self-
serving and uncorroborated testimony of the petitioner.
At this juncture, we reiterate the well-entrenched doctrine that the findings of
fact of the CA affirming those of the trial court are accorded great respect, even
finality, by this Court. Only errors of law, not of fact, may be reviewed by this
Court in petitions for review on certiorari under Rule 45.39 A departure from the
general rule may be warranted where the findings of fact of the CA are contrary
to the findings and conclusions of the trial court, or when the same is
unsupported by the evidence on record.40 There is no reason to apply the
exception in the instant case because the findings and conclusions of the CA are
in full accord with those of the trial court. These findings are buttressed by the
evidence on record. Moreover, the issues and errors alleged in this petition are
substantially the very same questions of fact raised by petitioner in the appellate
court.
On the issue of whether the P200,000.00 was really a loan, it is well to remember
that a check may be evidence of indebtedness.41 A check, the entries of which
are in writing, could prove a loan transaction.42 It is pure naiveté to insist that
an entrepreneur who has several sources of income and has access to
considerable bank credit, no longer has any reason to borrow any amount.
The petitioner’s allegation that the P200,000.00 was advance on her share in the
profits of Hagonoy Lumber is implausible. It is true that Hagonoy Lumber was
originally owned by the parents of petitioner and respondent. However, on
December 8, 1986, the heirs freely renounced and waived in favor of their sister
Chua Sioc Huan all their hereditary shares and interest therein, as shown by the
Deed of Partition which the petitioner herself signed. By virtue of this deed, Chua
Sioc Huan became the sole owner and proprietor of Hagonoy Lumber. Thus,
when the respondent delivered the check for P200,000.00 to the petitioner on
June 7, 1988, Chua Sioc Huan was already the sole owner of Hagonoy Lumber.
At that time, both petitioner and respondent no longer had any interest in the

business enterprise; neither had a right to demand a share in the profits of the
business. Respondent became the sole owner of Hagonoy Lumber only after
Chua Sioc Huan sold it to him on August 1, 1990. So, when the respondent
delivered to the petitioner the P200,000.00 check on June 7, 1988, it could not
have been given as an advance on petitioner’s share in the business, because at
that moment in time both of them had no participation, interest or share in
Hagonoy Lumber. Even assuming, arguendo, that the check was an advance on
the petitioner’s share in the profits of the business, it was highly unlikely that
the respondent would deliver a check drawn against his personal, and not against
the business enterprise’s account.
It is also worthy to note that both the Deed of Partition and the Deed of Sale
were acknowledged before a Notary Public. The notarization of a private
document converts it into a public document, and makes it admissible in court
without further proof of its authenticity.43 It is entitled to full faith and credit
upon its face.44 A notarized document carries evidentiary weight as to its due
execution, and documents acknowledged before a notary public have in their
favor the presumption of regularity. Such a document must be given full force
and effect absent a strong, complete and conclusive proof of its falsity or nullity
on account of some flaws or defects recognized by law.45 A public document
executed and attested through the intervention of a notary public is, generally,
evidence of the facts therein express in clear unequivocal manner.46
Petitioner, however, maintains that the RTC erred in admitting in evidence a
mere copy of the Deed of Partition and the Deed of Sale in violation of the best
evidence rule. In addition, petitioner insists that the Deed of Sale was not the
result of bona fide negotiations between a true seller and buyer.
The "best evidence rule" as encapsulated in Rule 130, Section 3,47 of the Revised
Rules of Civil Procedure applies only when the content of such document is the
subject of the inquiry. Where the issue is only as to whether such document was
actually executed, or exists, or on the circumstances relevant to or surrounding
its execution, the best evidence rule does not apply and testimonial evidence is
admissible. Any other substitutionary evidence is likewise admissible without
need to account for the original.48 Moreover, production of the original may be
dispensed with, in the trial court’s discretion, whenever the opponent does not
bona fide dispute the contents of the document and no other useful purpose will
be served by requiring production.49
Accordingly, we find that the best evidence rule is not applicable to the instant
case. Here, there was no dispute as to the terms of either deed; hence, the RTC
correctly admitted in evidence mere copies of the two deeds. The petitioner
never even denied their due execution and admitted that she signed the Deed
of Partition.50 As for the Deed of Sale, petitioner had, in effect, admitted its
genuineness and due execution when she failed to specifically deny it in the
manner required by the rules.51 The petitioner merely claimed that said
documents do not express the true agreement and intention of the parties since
they were only provisional paper arrangements made upon the advice of
12
counsel.52 Apparently, the petitioner does not contest the contents of these
deeds but alleges that there was a contemporaneous agreement that the transfer
of Hagonoy Lumber to Chua Sioc Huan was only temporary.
An agreement or the contract between the parties is the formal expression of
the parties’ rights, duties and obligations. It is the best evidence of the intention
of the parties.53 The parties’ intention is to be deciphered from the language
used in the contract, not from the unilateral post facto assertions of one of the
parties, or of third parties who are strangers to the contract.54 Thus, when the
terms of an agreement have been reduced to writing, it is deemed to contain all
the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the
written agreement.55
WHEREFORE, premises considered, the petition is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 66790 dated May 23, 2003 and Resolution
dated December 2, 2003 are AFFIRMED.
SO ORDERED.
G.R. No. 85419 March 9, 1993
DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,
vs.
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG,
ASIAN INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF
THE PHILIPPINES, defendants-respondents.
Yngson & Associates for petitioner.
Henry A. Reyes & Associates for Samso Tung & Asian Industrial Plastic
Corporation.
Eduardo G. Castelo for Sima Wei.
Monsod, Tamargo & Associates for Producers Bank.
Rafael S. Santayana for Mary Cheng Uy.
CAMPOS, JR., J.:

On July 6, 1986, the Development Bank of Rizal (petitioner Bank for brevity)
filed a complaint for a sum of money against respondents Sima Wei and/or Lee
Kian Huat, Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation
(Plastic Corporation for short) and the Producers Bank of the Philippines, on two
causes of action:
(1) To enforce payment of the balance of P1,032,450.02 on a
promissory note executed by respondent Sima Wei on June 9,
1983; and
(2) To enforce payment of two checks executed by Sima Wei,
payable to petitioner, and drawn against the China Banking
Corporation, to pay the balance due on the promissory note.
Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss
alleging a common ground that the complaint states no cause of action. The trial
court granted the defendants' Motions to Dismiss. The Court of Appeals affirmed
this decision, * to which the petitioner Bank, represented by its Legal Liquidator,
filed this Petition for Review by Certiorari, assigning the following as the alleged
errors of the Court of Appeals:1
(1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE
PLAINTIFF-PETITIONER HAS NO CAUSE OF ACTION AGAINST
DEFENDANTS-RESPONDENTS HEREIN.
(2) THE COURT OF APPEALS ERRED IN HOLDING THAT
SECTION 13, RULE 3 OF THE REVISED RULES OF COURT ON
ALTERNATIVE DEFENDANTS IS NOT APPLICABLE TO HEREIN
DEFENDANTS-RESPONDENTS.
The antecedent facts of this case are as follows:
In consideration for a loan extended by petitioner Bank to respondent Sima Wei,
the latter executed and delivered to the former a promissory note, engaging to
pay the petitioner Bank or order the amount of P1,820,000.00 on or before June
24, 1983 with interest at 32% per annum. Sima Wei made partial payments on
the note, leaving a balance of P1,032,450.02. On November 18, 1983, Sima Wei
issued two crossed checks payable to petitioner Bank drawn against China
Banking Corporation, bearing respectively the serial numbers 384934, for the
amount of P550,000.00 and 384935, for the amount of P500,000.00. The said
checks were allegedly issued in full settlement of the drawer's account evidenced
by the promissory note. These two checks were not delivered to the petitioner-
payee or to any of its authorized representatives. For reasons not shown, these
checks came into the possession of respondent Lee Kian Huat, who deposited
the checks without the petitioner-payee's indorsement (forged or otherwise) to
the account of respondent Plastic Corporation, at the Balintawak branch,
Caloocan City, of the Producers Bank. Cheng Uy, Branch Manager of the
13
Balintawak branch of Producers Bank, relying on the assurance of respondent
Samson Tung, President of Plastic Corporation, that the transaction was legal
and regular, instructed the cashier of Producers Bank to accept the checks for
deposit and to credit them to the account of said Plastic Corporation, inspite of
the fact that the checks were crossed and payable to petitioner Bank and bore
no indorsement of the latter. Hence, petitioner filed the complaint as aforestated.
The main issue before Us is whether petitioner Bank has a cause of action against
any or all of the defendants, in the alternative or otherwise.
A cause of action is defined as an act or omission of one party in violation of the
legal right or rights of another. The essential elements are: (1) legal right of the
plaintiff; (2) correlative obligation of the defendant; and (3) an act or omission
of the defendant in violation of said legal right.2
The normal parties to a check are the drawer, the payee and the drawee bank.
Courts have long recognized the business custom of using printed checks where
blanks are provided for the date of issuance, the name of the payee, the amount
payable and the drawer's signature. All the drawer has to do when he wishes to
issue a check is to properly fill up the blanks and sign it. However, the mere fact
that he has done these does not give rise to any liability on his part, until and
unless the check is delivered to the payee or his representative. A negotiable
instrument, of which a check is, is not only a written evidence of a contract right
but is also a species of property. Just as a deed to a piece of land must be
delivered in order to convey title to the grantee, so must a negotiable instrument
be delivered to the payee in order to evidence its existence as a binding contract.
Section 16 of the Negotiable Instruments Law, which governs checks, provides
in part:
Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of
giving effect thereto. . . .
Thus, the payee of a negotiable instrument acquires no interest with respect
thereto until its delivery to him.3 Delivery of an instrument means transfer of
possession, actual or constructive, from one person to another.4 Without the
initial delivery of the instrument from the drawer to the payee, there can be no
liability on the instrument. Moreover, such delivery must be intended to give
effect to the instrument.
The allegations of the petitioner in the original complaint show that the two (2)
China Bank checks, numbered 384934 and 384935, were not delivered to the
payee, the petitioner herein. Without the delivery of said checks to petitioner-
payee, the former did not acquire any right or interest therein and cannot
therefore assert any cause of action, founded on said checks, whether against
the drawer Sima Wei or against the Producers Bank or any of the other
respondents.

In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei
on the promissory note, and the alternative defendants, including Sima Wei, on
the two checks. On appeal from the orders of dismissal of the Regional Trial
Court, petitioner Bank alleged that its cause of action was not based on collecting
the sum of money evidenced by the negotiable instruments stated but on quasi-
delict — a claim for damages on the ground of fraudulent acts and evident bad
faith of the alternative respondents. This was clearly an attempt by the petitioner
Bank to change not only the theory of its case but the basis of his cause of action.
It is well-settled that a party cannot change his theory on appeal, as this would
in effect deprive the other party of his day in court.5
Notwithstanding the above, it does not necessarily follow that the drawer Sima
Wei is freed from liability to petitioner Bank under the loan evidenced by the
promissory note agreed to by her. Her allegation that she has paid the balance
of her loan with the two checks payable to petitioner Bank has no merit for, as
We have earlier explained, these checks were never delivered to petitioner Bank.
And even granting, without admitting, that there was delivery to petitioner Bank,
the delivery of checks in payment of an obligation does not constitute payment
unless they are cashed or their value is impaired through the fault of the
creditor.6 None of these exceptions were alleged by respondent Sima Wei.
Therefore, unless respondent Sima Wei proves that she has been relieved from
liability on the promissory note by some other cause, petitioner Bank has a right
of action against her for the balance due thereon.
However, insofar as the other respondents are concerned, petitioner Bank has
no privity with them. Since petitioner Bank never received the checks on which
it based its action against said respondents, it never owned them (the checks)
nor did it acquire any interest therein. Thus, anything which the respondents
may have done with respect to said checks could not have prejudiced petitioner
Bank. It had no right or interest in the checks which could have been violated by
said respondents. Petitioner Bank has therefore no cause of action against said
respondents, in the alternative or otherwise. If at all, it is Sima Wei, the drawer,
who would have a cause of action against her
co-respondents, if the allegations in the complaint are found to be true.
With respect to the second assignment of error raised by petitioner Bank
regarding the applicability of Section 13, Rule 3 of the Rules of Court, We find it
unnecessary to discuss the same in view of Our finding that the petitioner Bank
did not acquire any right or interest in the checks due to lack of delivery. It
therefore has no cause of action against the respondents, in the alternative or
otherwise.
In the light of the foregoing, the judgment of the Court of Appeals dismissing
the petitioner's complaint is AFFIRMED insofar as the second cause of action is
concerned. On the first cause of action, the case is REMANDED to the trial court
for a trial on the merits, consistent with this decision, in order to determine
14
whether respondent Sima Wei is liable to the Development Bank of Rizal for any
amount under the promissory note allegedly signed by her.
SO ORDERED.
G.R. No. 156132 February 6, 2007
CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS’
FINANCE CORPORATION, doing business under the name and style of
FNCB Finance, Petitioners,
vs.
MODESTA R. SABENIANO, Respondent.
RESOLUTION
CHICO-NAZARIO, J.:
On 16 October 2006, this Court promulgated its Decision1 in the above-entitled
case, the dispositive portion of which reads –
IN VIEW OF THE FOREGOING, the instant Petition is PARTLY GRANTED. The
assailed Decision of the Court of Appeals in CA-G.R. No. 51930, dated 26 March
2002, as already modified by its Resolution, dated 20 November 2002, is hereby
AFFIRMED WITH MODIFICATION, as follows –
1. PNs No. 23356 and 23357 are DECLARED subsisting and
outstanding. Petitioner Citibank is ORDERED to return to respondent
the principal amounts of the said PNs, amounting to Three Hundred
Eighteen Thousand Eight Hundred Ninety-Seven Pesos and Thirty-Four
Centavos (₱318,897.34) and Two Hundred Three Thousand One
Hundred Fifty Pesos (₱203,150.00), respectively, plus the stipulated
interest of Fourteen and a half percent (14.5%) per annum, beginning
17 March 1977;
2. The remittance of One Hundred Forty-Nine Thousand Six Hundred
Thirty Two US Dollars and Ninety-Nine Cents (US$149,632.99) from
respondent’s Citibank-Geneva accounts to petitioner Citibank in Manila,
and the application of the same against respondent’s outstanding loans
with the latter, is DECLARED illegal, null and void. Petitioner Citibank
is ORDERED to refund to respondent the said amount, or its equivalent
in Philippine currency using the exchange rate at the time of payment,
plus the stipulated interest for each of the fiduciary placements and
current accounts involved, beginning 26 October 1979;

3. Petitioner Citibank is ORDERED to pay respondent moral damages in
the amount of Three Hundred Thousand Pesos (₱300,000.00);
exemplary damages in the amount of Two Hundred Fifty Thousand
Pesos (₱250,000.00); and attorney’s fees in the amount of Two Hundred
Thousand Pesos (₱200,000.00); and
4. Respondent is ORDERED to pay petitioner Citibank the balance of
her outstanding loans, which, from the respective dates of their maturity
to 5 September 1979, was computed to be in the sum of One Million
Sixty-Nine Thousand Eight Hundred Forty-Seven Pesos and Forty
Centavos (₱1,069,847.40), inclusive of interest. These outstanding
loans shall continue to earn interest, at the rates stipulated in the
corresponding PNs, from 5 September 1979 until payment thereof.
Subsequent thereto, respondent Modesta R. Sabeniano filed an Urgent Motion
to Clarify and/or Confirm Decision with Notice of Judgment on 20 October 2006;
while, petitioners Citibank, N.A. and FNCB Finance2 filed their Motion for Partial
Reconsideration of the foregoing Decision on 6 November 2006.
The facts of the case, as determined by this Court in its Decision, may be
summarized as follows.
Respondent was a client of petitioners. She had several deposits and market
placements with petitioners, among which were her savings account with the
local branch of petitioner Citibank (Citibank-Manila3 ); money market placements
with petitioner FNCB Finance; and dollar accounts with the Geneva branch of
petitioner Citibank (Citibank-Geneva). At the same time, respondent had
outstanding loans with petitioner Citibank, incurred at Citibank-Manila, the
principal amounts aggregating to ₱1,920,000.00, all of which had become due
and demandable by May 1979. Despite repeated demands by petitioner Citibank,
respondent failed to pay her outstanding loans. Thus, petitioner Citibank used
respondent’s deposits and money market placements to off-set and liquidate her
outstanding obligations, as follows –
Respondent’s outstanding obligation (principal and interest as of 26 October All the parties appealed the afore-mentioned RTC Decision to the Court of
1979)
Less: Proceeds from respondent’s money market placements with petitioner
FNCB Finance (principal and interest as of 5 September 1979)
Deposits in respondent’s bank accounts with petitioner Citibank
Proceeds of respondent’s money market placements and dollar
accounts with Citibank-Geneva (peso equivalent as of 26 October
1979)
(1,102,944.78)
Balance of respondent’s obligation ₱ 0.00 defendant-appellant Citibank to refund the said amount to the plaintiff-
15
Respondent, however, denied having any outstanding loans with petitioner
Citibank. She likewise denied that she was duly informed of the off-setting or
compensation thereof made by petitioner Citibank using her deposits and money
market placements with petitioners. Hence, respondent sought to recover her
deposits and money market placements.
Respondent instituted a complaint for "Accounting, Sum of Money and Damages"
against petitioners, docketed as Civil Case No. 11336, before the Regional Trial
Court (RTC) of Makati City. After trial proper, which lasted for a decade, the RTC
rendered a Decision4 on 24 August 1995, the dispositive portion of which reads
–
WHEREFORE, in view of all the foregoing, decision is hereby rendered as follows:
(1) Declaring as illegal, null and void the setoff effected by the defendant
Bank [petitioner Citibank] of plaintiff’s [respondent Sabeniano] dollar
deposit with Citibank, Switzerland, in the amount of US$149,632.99,
and ordering the said defendant [petitioner Citibank] to refund the said
amount to the plaintiff with legal interest at the rate of twelve percent
(12%) per annum, compounded yearly, from 31 October 1979 until fully
paid, or its peso equivalent at the time of payment;
(2) Declaring the plaintiff [respondent Sabeniano] indebted to the
defendant Bank [petitioner Citibank] in the amount of ₱1,069,847.40 as
of 5 September 1979 and ordering the plaintiff [respondent Sabeniano]
to pay said amount, however, there shall be no interest and penalty
charges from the time the illegal setoff was effected on 31 October
1979;
(3) Dismissing all other claims and counterclaims interposed by the
parties against each other.
Costs against the defendant Bank.
₱ 2,156,940.58
Appeals, docketed as CA-G.R. CV No. 51930. On 26 March 2002, the appellate
court promulgated its Decision,5 ruling entirely in favor of respondent, to wit –
(1,022,916.66)
Wherefore, premises considered, the assailed 24 August 1995 Decision of the
(31,079.14)
court a quo is hereby AFFIRMED with MODIFICATION, as follows:
1. Declaring as illegal, null and void the set-off effected by the
defendant-appellant Bank of the plaintiff-appellant’s dollar deposit with
Citibank, Switzerland, in the amount of US$149,632.99, and ordering
appellant with legal interest at the rate of twelve percent (12%) per

annum, compounded yearly, from 31 October 1979 until fully paid, or
its peso equivalent at the time of payment;
2. As defendant-appellant Citibank failed to establish by competent
evidence the alleged indebtedness of plaintiff-appellant, the set-off of
₱1,069,847.40 in the account of Ms. Sabeniano is hereby declared as
without legal and factual basis;
3. As defendants-appellants failed to account the following plaintiff-
appellant’s money market placements, savings account and current
accounts, the former is hereby ordered to return the same, in
accordance with the terms and conditions agreed upon by the
contending parties as evidenced by the certificates of investments, to
wit:
(i) Citibank NNPN Serial No. 023356 (Cancels and Supersedes
NNPN No. 22526) issued on 17 March 1977, ₱318,897.34 with
14.50% interest p.a.;
(ii) Citibank NNPN Serial No. 23357 (Cancels and Supersedes
NNPN No. 22528) issued on 17 March 1977, ₱203,150.00 with
14.50 interest p.a.;
(iii) FNCB NNPN Serial No. 05757 (Cancels and Supersedes
NNPN No. 04952), issued on 02 June 1977, ₱500,000.00 with
17% interest p.a.;
(iv) FNCB NNPN Serial No. 05758 (Cancels and Supersedes
NNPN No. 04962), issued on 02 June 1977, ₱500,000.00 with
17% interest per annum;
(v) The Two Million (₱2,000,000.00) money market placements
of Ms. Sabeniano with the Ayala Investment & Development
Corporation (AIDC) with legal interest at the rate of twelve
percent (12%) per annum compounded yearly, from 30
September 1976 until fully paid;
4. Ordering defendants-appellants to jointly and severally pay the
plaintiff-appellant the sum of FIVE HUNDRED THOUSAND PESOS
(₱500,000.00) by way of moral damages, FIVE HUNDRED THOUSAND
PESOS (₱500,000.00) as exemplary damages, and ONE HUNDRED
THOUSAND PESOS (₱100,000.00) as attorney’s fees.
Acting on petitioners’ Motion for Partial Reconsideration, the Court of Appeals
issued a Resolution,6 dated 20 November 2002, modifying its earlier Decision,
thus –
16
WHEREFORE, premises considered, the instant Motion for Reconsideration is
PARTIALLY GRANTED as Sub-paragraph (V) paragraph 3 of the assailed
Decision’s dispositive portion is hereby ordered DELETED.
The challenged 26 March 2002 Decision of the Court is AFFIRMED with
MODIFICATION.
Since the Court of Appeals Decision, dated 26 March 2002, as modified by the
Resolution of the same court, dated 20 November 2002, was still principally in
favor of respondent, petitioners filed the instant Petition for Review on Certiorari
under Rule 45 of the Revised Rules of Court. After giving due course to the
instant Petition, this Court promulgated on 16 October 2006 its Decision, now
subject of petitioners’ Motion for Partial Reconsideration.1awphi1.net
Among the numerous grounds raised by petitioners in their Motion for Partial
Reconsideration, this Court shall address and discuss herein only particular
points that had not been considered or discussed in its Decision. Even in
consideration of these points though, this Court remains unconvinced that it
should modify or reverse in any way its disposition of the case in its earlier
Decision.
As to the off-setting or compensation of respondent’s outstanding loan balance
with her dollar deposits in Citibank-Geneva
Petitioners’ take exception to the following findings made by this Court in its
Decision, dated 16 October 2006, disallowing the off-setting or compensation of
the balance of respondent’s outstanding loans using her dollar deposits in
Citibank-Geneva –
Without the Declaration of Pledge, petitioner Citibank had no authority to
demand the remittance of respondent’s dollar accounts with Citibank-Geneva
and to apply them to her outstanding loans. It cannot effect legal compensation
under Article 1278 of the Civil Code since, petitioner Citibank itself admitted that
Citibank-Geneva is a distinct and separate entity. As for the dollar accounts,
respondent was the creditor and Citibank-Geneva is the debtor; and as for the
outstanding loans, petitioner Citibank was the creditor and respondent was the
debtor. The parties in these transactions were evidently not the principal creditor
of each other.
Petitioners maintain that respondent’s Declaration of Pledge, by virtue of which
she supposedly assigned her dollar accounts with Citibank-Geneva as security
for her loans with petitioner Citibank, is authentic and, thus, valid and binding
upon respondent. Alternatively, petitioners aver that even without said
Declaration of Pledge, the off-setting or compensation made by petitioner
Citibank using respondent’s dollar accounts with Citibank-Geneva to liquidate
the balance of her outstanding loans with Citibank-Manila was expressly
authorized by respondent herself in the promissory notes (PNs) she signed for

her loans, as well as sanctioned by Articles 1278 to 1290 of the Civil Code. This
alternative argument is anchored on the premise that all branches of petitioner
Citibank in the Philippines and abroad are part of a single worldwide corporate
entity and share the same juridical personality. In connection therewith,
petitioners deny that they ever admitted that Citibank-Manila and Citibank-
Geneva are distinct and separate entities.
Petitioners call the attention of this Court to the following provision found in all
of the PNs7 executed by respondent for her loans –
At or after the maturity of this note, or when same becomes due under any of
the provisions hereof, any money, stocks, bonds, or other property of any kind
whatsoever, on deposit or otherwise, to the credit of the undersigned on the
books of CITIBANK, N.A. in transit or in their possession, may without notice be
applied at the discretion of the said bank to the full or partial payment of this
note.
It is the petitioners’ contention that the term "Citibank, N.A." used therein should
be deemed to refer to all branches of petitioner Citibank in the Philippines and
abroad; thus, giving petitioner Citibank the authority to apply as payment for
the PNs even respondent’s dollar accounts with Citibank-Geneva. Still proceeding
from the premise that all branches of petitioner Citibank should be considered
as a single entity, then it should not matter that the respondent obtained the
loans from Citibank-Manila and her deposits were with Citibank-Geneva.
Respondent should be considered the debtor (for the loans) and creditor (for her
deposits) of the same entity, petitioner Citibank. Since petitioner Citibank and
respondent were principal creditors of each other, in compliance with the
requirements under Article 1279 of the Civil Code,8 then the former could have
very well used off-setting or compensation to extinguish the parties’ obligations
to one another. And even without the PNs, off-setting or compensation was still
authorized because according to Article 1286 of the Civil Code, "Compensation
takes place by operation of law, even though the debts may be payable at
different places, but there shall be an indemnity for expenses of exchange or
transportation to the place of payment."
Pertinent provisions of Republic Act No. 8791, otherwise known as the General
Banking Law of 2000, governing bank branches are reproduced below –
SEC. 20. Bank Branches. – Universal or commercial banks may open branches
or other offices within or outside the Philippines upon prior approval of the
Bangko Sentral.
Branching by all other banks shall be governed by pertinent laws.
A bank may, subject to prior approval of the Monetary Board, use any or all of
its branches as outlets for the presentation and/or sale of the financial products
of its allied undertaking or its investment house units.
17
A bank authorized to establish branches or other offices shall be responsible for
all business conducted in such branches and offices to the same extent and in
the same manner as though such business had all been conducted in the head
office. A bank and its branches and offices shall be treated as one unit.
xxxx
SEC. 72. Transacting Business in the Philippines. – The entry of foreign banks in
the Philippines through the establishment of branches shall be governed by the
provisions of the Foreign Banks Liberalization Act.
The conduct of offshore banking business in the Philippines shall be governed by
the provisions of Presidential Decree No. 1034, otherwise known as the "Offshore
Banking System Decree."
xxxx
SEC. 74. Local Branches of Foreign Banks. – In case of a foreign bank which has
more than one (1) branch in the Philippines, all such branches shall be treated
as one (1) unit for the purpose of this Act, and all references to the Philippine
branches of foreign banks shall be held to refer to such units.
SEC. 75. Head Office Guarantee. – In order to provide effective protection of the
interests of the depositors and other creditors of Philippine branches of a foreign
bank, the head office of such branches shall fully guarantee the prompt payment
of all liabilities of its Philippine branch.
Residents and citizens of the Philippines who are creditors of a branch in the
Philippines of a foreign bank shall have preferential rights to the assets of such
branch in accordance with existing laws.
Republic Act No. 7721, otherwise known as the Foreign Banks Liberalization Law,
lays down the policies and regulations specifically concerning the establishment
and operation of local branches of foreign banks. Relevant provisions of the said
statute read –
Sec. 2. Modes of Entry. - The Monetary Board may authorize foreign banks to
operate in the Philippine banking system through any of the following modes of
entry: (i) by acquiring, purchasing or owning up to sixty percent (60%) of the
voting stock of an existing bank; (ii) by investing in up to sixty percent (60%)
of the voting stock of a new banking subsidiary incorporated under the laws of
the Philippines; or (iii) by establishing branches with full banking authority:
Provided, That a foreign bank may avail itself of only one (1) mode of entry:
Provided, further, That a foreign bank or a Philippine corporation may own up to
a sixty percent (60%) of the voting stock of only one (1) domestic bank or new
banking subsidiary.

Sec. 5. Head Office Guarantee. - The head office of foreign bank branches shall
guarantee prompt payment of all liabilities of its Philippine branches.
It is true that the afore-quoted Section 20 of the General Banking Law of 2000
expressly states that the bank and its branches shall be treated as one unit. It
should be pointed out, however, that the said provision applies to a universal9
or commercial bank,10 duly established and organized as a Philippine corporation
in accordance with Section 8 of the same statute,11 and authorized to establish
branches within or outside the Philippines.
The General Banking Law of 2000, however, does not make the same categorical
statement as regards to foreign banks and their branches in the Philippines.
What Section 74 of the said law provides is that in case of a foreign bank with
several branches in the country, all such branches shall be treated as one unit.
As to the relations between the local branches of a foreign bank and its head
office, Section 75 of the General Banking Law of 2000 and Section 5 of the
Foreign Banks Liberalization Law provide for a "Home Office Guarantee," in which
the head office of the foreign bank shall guarantee prompt payment of all
liabilities of its Philippine branches. While the Home Office Guarantee is in accord
with the principle that these local branches, together with its head office,
constitute but one legal entity, it does not necessarily support the view that said
principle is true and applicable in all circumstances.
The Home Office Guarantee is included in Philippine statutes clearly for the
protection of the interests of the depositors and other creditors of the local
branches of a foreign bank.12 Since the head office of the bank is located in
another country or state, such a guarantee is necessary so as to bring the head
office within Philippine jurisdiction, and to hold the same answerable for the
liabilities of its Philippine branches. Hence, the principle of the singular identity
of that the local branches and the head office of a foreign bank are more often
invoked by the clients in order to establish the accountability of the head office
for the liabilities of its local branches. It is under such attendant circumstances
in which the American authorities and jurisprudence presented by petitioners in
their Motion for Partial Reconsideration were rendered.
Now the question that remains to be answered is whether the foreign bank can
use the principle for a reverse purpose, in order to extend the liability of a client
to the foreign bank’s Philippine branch to its head office, as well as to its branches
in other countries. Thus, if a client obtains a loan from the foreign bank’s
Philippine branch, does it absolutely and automatically make the client a debtor,
not just of the Philippine branch, but also of the head office and all other
branches of the foreign bank around the world? This Court rules in the negative.
There being a dearth of Philippine authorities and jurisprudence on the matter,
this Court, just as what petitioners have done, turns to American authorities and
jurisprudence. American authorities and jurisprudence are significant herein
18
considering that the head office of petitioner Citibank is located in New York,
United States of America (U.S.A.).
Unlike Philippine statutes, the American legislation explicitly defines the relations
among foreign branches of an American bank. Section 25 of the United States
Federal Reserve Act13 states that –
Every national banking association operating foreign branches shall conduct the
accounts of each foreign branch independently of the accounts of other foreign
branches established by it and of its home office, and shall at the end of each
fiscal period transfer to its general ledger the profit or loss accrued at each
branch as a separate item.
Contrary to petitioners’ assertion that the accounts of Citibank-Manila and
Citibank-Geneva should be deemed as a single account under its head office, the
foregoing provision mandates that the accounts of foreign branches of an
American bank shall be conducted independently of each other. Since the head
office of petitioner Citibank is in the U.S.A., then it is bound to treat its foreign
branches in accordance with the said provision. It is only at the end of its fiscal
period that the bank is required to transfer to its general ledger the profit or loss
accrued at each branch, but still reporting it as a separate item. It is by virtue
of this provision that the Circuit Court of Appeals of New York declared in Pan-
American Bank and Trust Co. v. National City Bank of New York14 that a branch
is not merely a teller’s window; it is a separate business entity.
The circumstances in the case of McGrath v. Agency of Chartered Bank of India,
Australia & China15 are closest to the one at bar. In said case, the Chartered
Bank had branches in several countries, including one in Hamburg, Germany and
another in New York, U.S.A., and yet another in London, United Kingdom. The
New York branch entered in its books credit in favor of four German firms. Said
credit represents collections made from bills of exchange delivered by the four
German firms. The same four German firms subsequently became indebted to
the Hamburg branch. The London branch then requested for the transfer of the
credit in the name of the German firms from the New York branch so as to be
applied or setoff against the indebtedness of the same firms to the Hamburg
branch. One of the question brought before the U.S. District Court of New York
was "whether or not the debts and the alleged setoffs thereto are mutual," which
could be answered by determining first whether the New York and Hamburg
branches of Chartered Bank are individual business entities or are one and the
same entity. In denying the right of the Hamburg branch to setoff, the U.S.
District Court ratiocinated that –
The structure of international banking houses such as Chartered bank defies one
rigorous description. Suffice it to say for present analysis, branches or
agencies of an international bank have been held to be independent
entities for a variety of purposes (a) deposits payable only at branch where
made; Mutaugh v. Yokohama Specie Bank, Ltd., 1933, 149 Misc. 693, 269 N.Y.S.

65; Bluebird Undergarment Corp. v. Gomez, 1931, 139 Misc. 742, 249 N.Y.S.
319; (b) checks need be honored only when drawn on branch where deposited;
Chrzanowska v. Corn Exchange Bank, 1916, 173 App. Div. 285, 159 N.Y.S. 385,
affirmed 1919, 225 N.Y. 728, 122 N.E. 877; subpoena duces tecum on foreign
bank’s record barred; In re Harris, D.C.S.D.N.Y. 1939, 27 F. Supp. 480; (d) a
foreign branch separate for collection of forwarded paper; Pan-American Bank
and Trust Company v. National City Bank of New York, 2 Cir., 1925, 6 F. 2d 762,
certiorari denied 1925, 269 U.S. 554, 46 S. Ct. 18, 70 L. Ed. 408. Thus in law
there is nothing innately unitary about the organization of international
banking institutions.
Defendant, upon its oral argument and in its brief, relies heavily on Sokoloff v.
National City Bank of New York, 1928, 250 N.Y. 69, 164 N.E. 745, as authority
for the proposition that Chartered Bank, not the Hamburg or New York Agency,
is ultimately responsible for the amounts owing its German customers and,
conversely, it is to Chartered Bank that the German firms owe their obligations.
The Sokoloff case, aside from its violently different fact situation, is centered on
the legal problem of default of payment and consequent breach of contract by a
branch bank. It does not stand for the principle that in every instance an
international bank with branches is but one legal entity for all purposes.
The defendant concedes in its brief (p. 15) that there are purposes for which the
various agencies and branches of Chartered Bank may be treated in law as
separate entities. I fail to see the applicability of Sokoloff either as a guide to or
authority for the resolution of this problem. The facts before me and the cases
catalogued supra lend weight to the view that we are dealing here with Agencies
independent of one another.
xxxx
I hold that for instant purposes the Hamburg Agency and defendant were
independent business entities, and the attempted setoff may not be utilized by
defendant against its debt to the German firms obligated to the Hamburg
Agency.
Going back to the instant Petition, although this Court concedes that all the
Philippine branches of petitioner Citibank should be treated as one unit with its
head office, it cannot be persuaded to declare that these Philippine branches are
likewise a single unit with the Geneva branch. It would be stretching the principle
way beyond its intended purpose.
Therefore, this Court maintains its original position in the Decision that the off-
setting or compensation of respondent’s loans with Citibank-Manila using her
dollar accounts with Citibank-Geneva cannot be effected. The parties cannot be
considered principal creditor of the other. As for the dollar accounts, respondent
was the creditor and Citibank-Geneva was the debtor; and as for the outstanding
loans, petitioner Citibank, particularly Citibank-Manila, was the creditor and
respondent was the debtor. Since legal compensation was not possible,
19
petitioner Citibank could only use respondent’s dollar accounts with Citibank-
Geneva to liquidate her loans if she had expressly authorized it to do so by
contract.
Respondent cannot be deemed to have authorized the use of her dollar deposits
with Citibank-Geneva to liquidate her loans with petitioner Citibank when she
signed the PNs16 for her loans which all contained the provision that –
At or after the maturity of this note, or when same becomes due under any of
the provisions hereof, any money, stocks, bonds, or other property of any kind
whatsoever, on deposit or otherwise, to the credit of the undersigned on the
books of CITIBANK, N.A. in transit or in their possession, may without notice be
applied at the discretion of the said bank to the full or partial payment of this
note.
As has been established in the preceding discussion, "Citibank, N.A." can only
refer to the local branches of petitioner Citibank together with its head office.
Unless there is any showing that respondent understood and expressly agreed
to a more far-reaching interpretation, the reference to Citibank, N.A. cannot be
extended to all other branches of petitioner Citibank all over the world. Although
theoretically, books of the branches form part of the books of the head office,
operationally and practically, each branch maintains its own books which shall
only be later integrated and balanced with the books of the head office. Thus, it
is very possible to identify and segregate the books of the Philippine branches of
petitioner Citibank from those of Citibank-Geneva, and to limit the authority
granted for application as payment of the PNs to respondent’s deposits in the
books of the former.
Moreover, the PNs can be considered a contract of adhesion, the PNs being in
standard printed form prepared by petitioner Citibank. Generally, stipulations in
a contract come about after deliberate drafting by the parties thereto, there are
certain contracts almost all the provisions of which have been drafted only by
one party, usually a corporation. Such contracts are called contracts of adhesion,
because the only participation of the party is the affixing of his signature or his
"adhesion" thereto. This being the case, the terms of such contract are to be
construed strictly against the party which prepared it.17
As for the supposed Declaration of Pledge of respondent’s dollar accounts with
Citibank-Geneva as security for the loans, this Court stands firm on its ruling
that the non-production thereof is fatal to petitioners’ cause in light of
respondent’s claim that her signature on such document was a forgery. It bears
to note that the original of the Declaration of Pledge is with Citibank-Geneva, a
branch of petitioner Citibank. As between respondent and petitioner Citibank,
the latter has better access to the document. The constant excuse forwarded by
petitioner Citibank that Citibank-Geneva refused to return possession of the
original Declaration of Pledge to Citibank-Manila only supports this Court’s

finding in the preceding paragraphs that the two branches are actually operating
separately and independently of each other.
Further, petitioners keep playing up the fact that respondent, at the beginning
of the trial, refused to give her specimen signatures to help establish whether
her signature on the Declaration of Pledge was indeed forged. Petitioners seem
to forget that subsequently, respondent, on advice of her new counsel, already
offered to cooperate in whatever manner so as to bring the original Declaration
of Pledge before the RTC for inspection. The exchange of the counsels for the
opposing sides during the hearing on 24 July 1991 before the RTC reveals the
apparent willingness of respondent’s counsel to undertake whatever course of
action necessary for the production of the contested document, and the evasive,
non-committal, and uncooperative attitude of petitioners’ counsel.18
Lastly, this Court’s ruling striking down the Declaration of Pledge is not entirely
based on respondent’s allegation of forgery. In its Decision, this Court already
extensively discussed why it found the said Declaration of Pledge highly
suspicious and irregular, to wit –
First of all, it escapes this Court why petitioner Citibank took care to have the
Deeds of Assignment of the PNs notarized, yet left the Declaration of Pledge
unnotarized. This Court would think that petitioner Citibank would take greater
cautionary measures with the preparation and execution of the Declaration of
Pledge because it involved respondent’s "all present and future fiduciary
placements" with a Citibank branch in another country, specifically, in Geneva,
Switzerland. While there is no express legal requirement that the Declaration of
Pledge had to be notarized to be effective, even so, it could not enjoy the same
prima facie presumption of due execution that is extended to notarized
documents, and petitioner Citibank must discharge the burden of proving due
execution and authenticity of the Declaration of Pledge.
Second, petitioner Citibank was unable to establish the date when the
Declaration of Pledge was actually executed. The photocopy of the Declaration
of Pledge submitted by petitioner Citibank before the RTC was undated. It
presented only a photocopy of the pledge because it already forwarded the
original copy thereof to Citibank-Geneva when it requested for the remittance of
respondent’s dollar accounts pursuant thereto. Respondent, on the other hand,
was able to secure a copy of the Declaration of Pledge, certified by an officer of
Citibank-Geneva, which bore the date 24 September 1979. Respondent,
however, presented her passport and plane tickets to prove that she was out of
the country on the said date and could not have signed the pledge. Petitioner
Citibank insisted that the pledge was signed before 24 September 1979, but
could not provide an explanation as to how and why the said date was written
on the pledge. Although Mr. Tan testified that the Declaration of Pledge was
signed by respondent personally before him, he could not give the exact date
when the said signing took place. It is important to note that the copy of the
Declaration of Pledge submitted by the respondent to the RTC was certified by
an officer of Citibank-Geneva, which had possession of the original copy of the
20
pledge. It is dated 24 September 1979, and this Court shall abide by the
presumption that the written document is truly dated. Since it is undeniable that
respondent was out of the country on 24 September 1979, then she could not
have executed the pledge on the said date.
Third, the Declaration of Pledge was irregularly filled-out. The pledge was in a
standard printed form. It was constituted in favor of Citibank, N.A., otherwise
referred to therein as the Bank. It should be noted, however, that in the space
which should have named the pledgor, the name of petitioner Citibank was
typewritten, to wit –
The pledge right herewith constituted shall secure all claims which the Bank now
has or in the future acquires against Citibank, N.A., Manila (full name and
address of the Debtor), regardless of the legal cause or the transaction (for
example current account, securities transactions, collections, credits, payments,
documentary credits and collections) which gives rise thereto, and including
principal, all contractual and penalty interest, commissions, charges, and costs.
The pledge, therefore, made no sense, the pledgor and pledgee being the same
entity. Was a mistake made by whoever filled-out the form? Yes, it could be a
possibility. Nonetheless, considering the value of such a document, the mistake
as to a significant detail in the pledge could only be committed with gross
carelessness on the part of petitioner Citibank, and raised serious doubts as to
the authenticity and due execution of the same. The Declaration of Pledge had
passed through the hands of several bank officers in the country and abroad,
yet, surprisingly and implausibly, no one noticed such a glaring mistake.
Lastly, respondent denied that it was her signature on the Declaration of Pledge.
She claimed that the signature was a forgery. When a document is assailed on
the basis of forgery, the best evidence rule applies –
Basic is the rule of evidence that when the subject of inquiry is the contents of
a document, no evidence is admissible other than the original document itself
except in the instances mentioned in Section 3, Rule 130 of the Revised Rules of
Court. Mere photocopies of documents are inadmissible pursuant to the best
evidence rule. This is especially true when the issue is that of forgery.
As a rule, forgery cannot be presumed and must be proved by clear, positive
and convincing evidence and the burden of proof lies on the party alleging
forgery. The best evidence of a forged signature in an instrument is the
instrument itself reflecting the alleged forged signature. The fact of forgery can
only be established by a comparison between the alleged forged signature and
the authentic and genuine signature of the person whose signature is theorized
upon to have been forged. Without the original document containing the alleged
forged signature, one cannot make a definitive comparison which would establish
forgery. A comparison based on a mere xerox copy or reproduction of the
document under controversy cannot produce reliable results.

Respondent made several attempts to have the original copy of the pledge
produced before the RTC so as to have it examined by experts. Yet, despite
several Orders by the RTC, petitioner Citibank failed to comply with the
production of the original Declaration of Pledge. It is admitted that Citibank-
Geneva had possession of the original copy of the pledge. While petitioner
Citibank in Manila and its branch in Geneva may be separate and distinct entities,
they are still incontestably related, and between petitioner Citibank and
respondent, the former had more influence and resources to convince Citibank-
Geneva to return, albeit temporarily, the original Declaration of Pledge.
Petitioner Citibank did not present any evidence to convince this Court that it
had exerted diligent efforts to secure the original copy of the pledge, nor did it
proffer the reason why Citibank-Geneva obstinately refused to give it back, when
such document would have been very vital to the case of petitioner Citibank.
There is thus no justification to allow the presentation of a mere photocopy of
the Declaration of Pledge in lieu of the original, and the photocopy of the pledge
presented by petitioner Citibank has nil probative value. In addition, even if this
Court cannot make a categorical finding that respondent’s signature on the
original copy of the pledge was forged, it is persuaded that petitioner Citibank
willfully suppressed the presentation of the original document, and takes into
consideration the presumption that the evidence willfully suppressed would be
adverse to petitioner Citibank if produced.
As far as the Declaration of Pledge is concerned, petitioners failed to submit any
new evidence or argument that was not already considered by this Court when
it rendered its Decision.
As to the value of the dollar deposits in Citibank-Geneva ordered refunded to
respondent
In case petitioners are still ordered to refund to respondent the amount of her
dollar accounts with Citibank-Geneva, petitioners beseech this Court to adjust
the nominal values of respondent’s dollar accounts and/or her overdue peso
loans by using the values of the currencies stipulated at the time the obligations
were established in 1979, to address the alleged inequitable consequences
resulting from the extreme and extraordinary devaluation of the Philippine
currency that occurred in the course of the Asian crisis of 1997. Petitioners base
their request on Article 1250 of the Civil Code which reads, "In case an
extraordinary inflation or deflation of the currency stipulated should supervene,
the value of the currency at the time of the establishment of the obligation shall
be the basis of payment, unless there is an agreement to the contrary."
It is well-settled that Article 1250 of the Civil Code becomes applicable only when
there is extraordinary inflation or deflation of the currency. Inflation has been
defined as the sharp increase of money or credit or both without a corresponding
increase in business transaction. There is inflation when there is an increase in
the volume of money and credit relative to available goods resulting in a
substantial and continuing rise in the general price level.19 In Singson v. Caltex
21
(Philippines), Inc.,20 this Court already provided a discourse as to what
constitutes as extraordinary inflation or deflation of currency, thus –
We have held extraordinary inflation to exist when there is a decrease or increase
in the purchasing power of the Philippine currency which is unusual or beyond
the common fluctuation in the value of said currency, and such increase or
decrease could not have been reasonably foreseen or was manifestly beyond the
contemplation of the parties at the time of the establishment of the obligation.
An example of extraordinary inflation, as cited by the Court in Filipino Pipe and
Foundry Corporation vs. NAWASA, supra, is that which happened to the
deutschmark in 1920. Thus:
"More recently, in the 1920s, Germany experienced a case of hyperinflation. In
early 1921, the value of the German mark was 4.2 to the U.S. dollar. By May of
the same year, it had stumbled to 62 to the U.S. dollar. And as prices went up
rapidly, so that by October 1923, it had reached 4.2 trillion to the U.S. dollar!"
(Bernardo M. Villegas & Victor R. Abola, Economics, An Introduction [Third
Edition]).
As reported, "prices were going up every week, then every day, then every hour.
Women were paid several times a day so that they could rush out and exchange
their money for something of value before what little purchasing power was left
dissolved in their hands. Some workers tried to beat the constantly rising prices
by throwing their money out of the windows to their waiting wives, who would
rush to unload the nearly worthless paper. A postage stamp cost millions of
marks and a loaf of bread, billions." (Sidney Rutberg, "The Money Balloon", New
York: Simon and Schuster, 1975, p. 19, cited in "Economics, An Introduction"
by Villegas & Abola, 3rd ed.)
The supervening of extraordinary inflation is never assumed. The party alleging
it must lay down the factual basis for the application of Article 1250.
Thus, in the Filipino Pipe case, the Court acknowledged that the voluminous
records and statistics submitted by plaintiff-appellant proved that there has been
a decline in the purchasing power of the Philippine peso, but this downward fall
cannot be considered "extraordinary" but was simply a universal trend that has
not spared our country. Similarly, in Huibonhoa vs. Court of Appeals, the Court
dismissed plaintiff-appellant's unsubstantiated allegation that the Aquino
assassination in 1983 caused building and construction costs to double during
the period July 1983 to February 1984. In Serra vs. Court of Appeals, the Court
again did not consider the decline in the peso's purchasing power from 1983 to
1985 to be so great as to result in an extraordinary inflation.
Like the Serra and Huibonhoa cases, the instant case also raises as basis for the
application of Article 1250 the Philippine economic crisis in the early 1980s ---
when, based on petitioner's evidence, the inflation rate rose to 50.34% in 1984.

We hold that there is no legal or factual basis to support petitioner's allegation
of the existence of extraordinary inflation during this period, or, for that matter,
the entire time frame of 1968 to 1983, to merit the adjustment of the rentals in
the lease contract dated July 16, 1968. Although by petitioner's evidence there
was a decided decline in the purchasing power of the Philippine peso throughout
this period, we are hard put to treat this as an "extraordinary inflation" within
the meaning and intent of Article 1250.
Rather, we adopt with approval the following observations of the Court of
Appeals on petitioner's evidence, especially the NEDA certification of inflation
rates based on consumer price index:
xxx (a) from the period 1966 to 1986, the official inflation rate never exceeded
100% in any single year; (b) the highest official inflation rate recorded was in
1984 which reached only 50.34%; (c) over a twenty one (21) year period, the
Philippines experienced a single-digit inflation in ten (10) years (i.e., 1966, 1967,
1968, 1969, 1975, 1976, 1977, 1978, 1983 and 1986); (d) in other years (i.e.,
1970, 1971, 1972, 1973, 1974, 1979, 1980, 1981, 1982, 1984 and 1989) when
the Philippines experienced double-digit inflation rates, the average of those
rates was only 20.88%; (e) while there was a decline in the purchasing power
of the Philippine currency from the period 1966 to 1986, such cannot be
considered as extraordinary; rather, it is a normal erosion of the value of the
Philippine peso which is a characteristic of most currencies.
"Erosion" is indeed an accurate description of the trend of decline in the value of
the peso in the past three to four decades. Unfortunate as this trend may be, it
is certainly distinct from the phenomenon contemplated by Article 1250.
Moreover, this Court has held that the effects of extraordinary inflation are not
to be applied without an official declaration thereof by competent authorities.
The burden of proving that there had been extraordinary inflation or deflation of
the currency is upon the party that alleges it. Such circumstance must be proven
by competent evidence, and it cannot be merely assumed. In this case,
petitioners presented no proof as to how much, for instance, the price index of
goods and services had risen during the intervening period.21 All the information
petitioners provided was the drop of the U.S. dollar-Philippine peso exchange
rate by 17 points from June 1997 to January 1998. While the said figure was
based on the statistics of the Bangko Sentral ng Pilipinas (BSP), it is also
significant to note that the BSP did not categorically declare that the same
constitute as an extraordinary inflation. The existence of extraordinary inflation
must be officially proclaimed by competent authorities, and the only competent
authority so far recognized by this Court to make such an official proclamation
is the BSP.22
Neither can this Court, by merely taking judicial notice of the Asian currency
crisis in 1997, already declare that there had been extraordinary inflation. It
22
should be recalled that the Philippines likewise experienced economic crisis in
the 1980s, yet this Court did not find that extraordinary inflation took place
during the said period so as to warrant the application of Article 1250 of the Civil
Code.
Furthermore, it is incontrovertible that Article 1250 of the Civil Code is based on
equitable considerations. Among the maxims of equity are (1) he who seeks
equity must do equity, and (2) he who comes into equity must come with clean
hands. The latter is a frequently stated maxim which is also expressed in the
principle that he who has done inequity shall not have equity.23 Petitioner
Citibank, hence, cannot invoke Article 1250 of the Civil Code because it does not
come to court with clean hands. The delay in the recovery24 by respondent of
her dollar accounts with Citibank-Geneva was due to the unlawful act of
petitioner Citibank in using the same to liquidate respondent’s loans. Petitioner
Citibank even attempted to justify the off-setting or compensation of
respondent’s loans using her dollar accounts with Citibank-Geneva by the
presentation of a highly suspicious and irregular, and even possibly forged,
Declaration of Pledge.
The damage caused to respondent of the deprivation of her dollar accounts for
more than two decades is unquestionably relatively more extensive and
devastating, as compared to whatever damage petitioner Citibank, an
international banking corporation with undoubtedly substantial capital, may have
suffered for respondent’s non-payment of her loans. It must also be remembered
that petitioner Citibank had already considered respondent’s loans paid or
liquidated by 26 October 1979 after it had fully effected compensation thereof
using respondents deposits and money market placements. All this time,
respondent’s dollar accounts are unlawfully in the possession of and are being
used by petitioner Citibank for its business transactions. In the meantime,
respondent’s businesses failed and her properties were foreclosed because she
was denied access to her funds when she needed them most. Taking these into
consideration, respondent’s dollar accounts with Citibank-Geneva must be
deemed to be subsisting and continuously deposited with petitioner Citibank all
this while, and will only be presently withdrawn by respondent. Therefore,
petitioner Citibank should refund to respondent the U.S. $149,632.99 taken from
her Citibank-Geneva accounts, or its equivalent in Philippine currency using the
exchange rate at the time of payment, plus the stipulated interest for each of
the fiduciary placements and current accounts involved, beginning 26 October
1979.
As to respondent’s Motion to Clarify and/or Confirm Decision with Notice of
Judgment
Respondent, in her Motion, is of the mistaken notion that the Court of Appeals
Decision, dated 26 March 2002, as modified by the Resolution of the same court,
dated 20 November 2002, would be implemented or executed together with this
Court’s Decision.
 23

This Court clarifies that its affirmation of the Decision of the Court of Appeals, as
modified, is only to the extent that it recognizes that petitioners had liabilities to
the respondent. However, this Court’s Decision modified that of the appellate
court’s by making its own determination of the specific liabilities of the
petitioners to respondent and the amounts thereof; as well as by recognizing
that respondent also had liabilities to petitioner Citibank and the amount thereof.

Thus, for purposes of execution, the parties need only refer to the dispositive
portion of this Court’s Decision, dated 16 October 2006, should it already become
final and executory, without any further modifications.

As the last point, there is no merit in respondent’s Motion for this Court to already
declare its Decision, dated 16 October 2006, final and executory. A judgment
becomes final and executory by operation of law and, accordingly, the finality of
the judgment becomes a fact upon the lapse of the reglementary period without
an appeal or a motion for new trial or reconsideration being filed.25 This Court
cannot arbitrarily disregard the reglementary period and declare a judgment final
and executory upon the mere motion of one party, for to do so will be a culpable
violation of the right of the other parties to due process.

IN VIEW OF THE FOREGOING, petitioners’ Motion for Partial Reconsideration of

this Court’s Decision, dated 16 October 2006, and respondent’s Motion for this
Court to declare the same Decision already final and executory, are both
DENIED for lack of merit.

SO ORDERED.