G.R. No.

170598               October 9, 2013

FAR EAST BANK TRUST COMPANY, Petitioner,

vs.
ROBERTO MAR CHANTE, a.k.a. ROBERT MAR G. CHAN, Respondents.

DECISION

BERSAMIN, J.:

In this dispute between a. bank and its depositor over liability for several supposedly fraudulent
withdrawals from the latter s account through an automated tellering machine (ATM), we hereby
resolve the issue of liability against the bank because of the intervention of a system bug that
facilitated the purported withdrawals.

The Case

Under review on certiorari is the decision promulgated on August l, 2005,1 whereby the Court of
Appeals (CA) reversed the judgment the Regional Trial Court, Branch 51, in Manila (RTC) rendered
in favor of the petitioner on May 14, 1998 in Civil Case No. 92-61706.2 Thereby, the CA relieved the
depositor of any liability for the supposedly fraudulent withdrawals.

Antecedents

Robert Mar Chante, also known as Robert Mar G. Chan (Chan), was a current account depositor of
petitioner Far East Bank & Trust Co. (FEBTC) at its Ongpin Branch (Current Account No. 5012-
00340-3). FEBTC issued to him Far East Card No. 05-01120-5-0 with July 1993 as the expiry date.
The card, known as a "Do-It-All" card to handle credit card and ATM transactions, was tagged in his
current account. As a security feature, a personal identification number (PIN), known only to Chan
as the depositor, was required in order to gain access to the account. Upon the card’s issuance,
FEBTC required him as the depositor to key in the six-digit PIN. Thus, with the use of his card and
the PIN, he could then deposit and withdraw funds from his current account from any FEBTC ATM
facility, including the MEGALINK facilities of other member banks that included the Philippine
National Bank (PNB).

Civil Case No. 92-61706 sprang from the complaint brought by petitioner Far East Bank & Trust Co.
(FEBTC) on July 1, 1992 in the RTC,3 to recover from Chan the principal sum of ₱770,488.30
representing the unpaid balance of the amount fraudulently withdrawn from Chan’s Current Account
No. 5012-00340-3 with the use of Far East Card No. 05-01120-5-0.

FEBTC alleged that between 8:52 p.m. of May 4, 1992 and 4:06 a.m. of May 5, 1992, Chan had
used Far East Card No. 05-01120-5-0 to withdraw funds totaling ₱967,000.00 from the PNB-
MEGALINK ATM facility at the Manila Pavilion Hotel in Manila; that the withdrawals were done in a
series of 242 transactions with the use of the same machine, at ₱4,000.00/withdrawal, except for
transaction No. 108 at 3:51 a.m. of May 5, 1992, when the machine dispensed only ₱3,000.00; that
MEGALINK’S journal tapes showed that Far East Card No. 05-01120-5-0 had been used in all the
242 transactions; and that the transactions were processed and recorded by the respective
computer systems of PNB and MEGALINK despite the following circumstances, namely: (a) the
offline status of the branch of account (FEBTC Ongpin Branch); (b) Chan’s account balance being
only ₱198,511.70 at the time, as shown in the bank statement; (c) the maximum withdrawal limit of
the ATM facility being ₱50,000.00/day; and (d) his withdrawal transactions not being reflected in his
account, and no debits or deductions from his current account with the FEBTC Ongpin Branch being
recorded.

FEBTC added that at the time of the ATM withdrawal transactions, there was an error in its computer
system known as "system bug" whose nature had allowed Chan to successfully withdraw funds in
excess of his current credit balance of ₱198,511.70; and that Chan had taken advantage of the
system bug to do the withdrawal transactions.

On his part, Chan denied liability. Although admitting his physical possession of Far East Card No.
05-01120-5-0 on May 4 and May 5, 1992, he denied making the ATM withdrawals totaling
₱967,000.00, and instead insisted that he had been actually home at the time of the withdrawals. He
alluded to a possible "inside job" as the cause of the supposed withdrawals, citing a newspaper
report to the effect that an employee of FEBTC’s had admitted having debited accounts of its
depositors by using his knowledge of computers as well as information available to him. Chan
claimed that it would be physically impossible for any human being like him to stand long hours in
front of the ATM facility just to withdraw funds. He contested the debiting of his account, stating that
the debiting had affected his business and had caused him to suffer great humiliation after the
dishonor of his sufficiently-funded checks by FEBTC.

The records show that FEBTC discovered the system bug only after its routine reconciliation of the
ATM-MEGALINK transactions on May 7, 1992; that it immediately adopted remedial and corrective
measures to protect its interest in order to avoid incurring further damage as well as to prevent a
recurrence of the incident; that one of the measures it adopted pursuant to its ATM Service
Agreement with Chan was to program its computer system to repossess his ATM card; that his ATM
card was repossessed at the Ermita Branch of FEBTC when he again attempted to withdraw at the
ATM facility there; that the ATM facility retained his ATM card until its recovery by the bank; and that
FEBTC conducted an in-depth investigation and a time-and-motion study of the withdrawals in
question.

On May 14, 1992, FEBTC debited his current account in the amount of ₱192,517.20 pursuant to
Chan’s ATM Service Agreement. It debited the further sum of ₱3,000.00 on May 18, 1992, leaving
the unrecovered portion of the funds allegedly withdrawn by him at ₱770,488.30. Thus, on May 14
and May 18, 1992, FEBTC sent to Chan letters demanding the reimbursement of the unrecovered
balance of ₱770,488.30, but he turned a deaf ear to the demands, impelling it to bring this case on
July 1, 1992.4

Ruling of the RTC

As reflected in the pre-trial order of October 19, 1992, the issues to be resolved were, firstly, whether
or not Chan had himself withdrawn the total sum of ₱967,000.00 with the use of his Far East Card
No. 05-01120-5-0 at the PNB-MEGALINK ATM facility; and, secondly, if the answer to the first issue
was that he did, whether or not he was liable to reimburse to FEBTC the amount of ₱770,488.30 as
actual damages, plus interest.5

On May 14, 1998, the RTC rendered judgment in favor of FEBTC, pertinently holding and ruling as
follows:6

In the instant case, what happened was that the defendant who was at the U.N. Branch of the PNB
used his card. He entered his PIN to have access to a withdrawal transaction from his account in Far
East Bank, Ongpin Branch. However, after recognizing the card and went to the path of his account
it could not get a signal to proceed with the transaction so it proceeded to the other path who gave
the signal to go on and dispense money. But there was a computer error as it did not only dispense
the money limit for the day buty it continued to dispense a lot more until it reached the amount of
₱967,000.00 which took the defendant till the hours of the morning to obtain. But defendant says he
did not use his card. He alleges that it could be an inside job just like what happened to the said
bank which was published in the newspaper wherein the bank employee admitted having done the
theft through his knowledge of the computer. Could this be true?

The Court opines that it is not far-fetched. However why did this Court state that plaintiff’s cause of
action will survive? The action of the defendant after the incident gave him away. Merely two days
after the heavy withdrawal, the defendant returned not at the exact scene of the incident but at a
nearby branch which is also in Ermita and tried again to withdraw. But at this time the bank already
knew what happened so it blocked the card and retained it being a hot card. The defendant was not
successful this time so what he did was to issue a check almost for the whole amount of his balance
in his account leaving only a minimal amount. This incident puzzles the Court. Maybe the defendant
was hoping that the machine nearby may likewise dispense so much amount without being detected.
He will not definitely go back to the U.N. branch as he may think that it is being watched and so he
went to a nearby branch. Unfortunately, luck was not with him this time and his card was taken by
the bank. The fact that he hastily withdrew the balance of his account after his card was retained by
the bank only showed his knowledge that the bank may debit his account. It also showed his intent
to do something further other than first inquire why his card was considered a hot card if he is really
innocent. When he went to the Ermita branch to withdraw from the ATM booth he was intending to
withdraw not more than ₱50,000.00 as it is the bank’s limit for the day and if ever he needed a
bigger amount than ₱50,000.00 immediately he should have gone to the branch for an over the
counter transaction but he did not do so and instead issued a check for ₱190,000.00 dated May 7,
1992 and another check for ₱5,000.00 dated May 13, 1992. To the mind of the Court, to take
advantage of a computer error, to gain sudden and undeserved amount of money should be
condemned in the strongest terms.

There are no available precedents in this case regarding computer errors, but the Court feels that
defendant should be held liable for the mistaken amount he was able to get from the machine based
on the following provisions of the law.

Articles 19, 21, 22 and 23 of the Civil Code x x x.

xxxx

There is likewise one point that the Court would like to discuss about the allegation of the defendant
that it was impossible for him to withdraw the money in such long period and almost minute after
minute. This Court believes that money is the least of all, a person may give priority in life. There are
many who would sacrifice a lot just to have lots of it, so it would not be impossible for one to take
time, stand for several hours and just enter some items in the computer if the return would be
something like a million or close to a million. In fact, the effort exerted was just peanuts compared to
other legitimate ways of earning a living as the only capital or means used to obtain it was the
defendant’s loss of sleep and the time spent in withdrawing the same. Moreover, though the cause
of action in this case may be the erroneous dispensation of money due to computer bug which is not
of defendant’s wrong doing, the Court sees that what was wrong was the failure to return the amount
in excess of what was legally his. There is such a thing as JUSTICE. Justice means rendering to
others their due. A person is just when he is careful about respecting the rights of others, and who
knows too, how to claim what he rightfully deserves as a consequence of fulfilling his duties.

From the foregoing, the conclusion is manifest that plaintiff is within its right in initiating the instant
suit, as defendant’s refusal to pay the claim constitutes the cause of action for sum of money.
 xxxx

WHEREFORE, judgment is hereby rendered in favor of the plaintiff Far East Bank and Trust
Company and against the defendant Robert Mar Chante a.k.a. Robert Mar G. Chan ordering the
latter to pay the former the following:

1. the amount of ₱770,488.30 as actual damages representing the unrecovered balance of

the amounts withdrawn by defendant;

2. interest of 24% per annum on the actual damages from July 1, 1992, the date of the filing
of the complaint until fully paid;

3. the amount of ₱100,000.00 as exemplary damages;

4. the sum of ₱30,000.00 as and for attorney’s fees; and

5. the costs of the suit. Defendant’s counterclaim is hereby dismissed for lack of merit.

SO ORDERED.

Ruling of the CA

Chan appealed,7 assigning the following errors to the RTC, to wit:

1. THE TRIAL COURT ERRED IN HOLDING DEFENDANT-APPELLANT LIABLE FOR THE

ALLEGED WITHDRAWAL OF THE AMOUNT OF ₱967,000.00 WITH INTEREST AT THE
RATE OF 24% PER ANNUM BASED MERELY ON CONJECTURES AND SUSPICIONS
NOT ESTABLISHED BY SOLID EVIDENCE;

2. THE TRIAL COURT ERRED IN AWARDING IN FAVOR OF APPELLEE EXEMPLARY

DAMAGES IN THE AMOUNT OF ₱100,000.00 AND ATTORNEY’S FEES IN THE AMOUNT
OF ₱30,000.00;

3. THE TRIAL COURT ERRED IN NOT ORDERING THE RESTITUTION OF THE AMOUNT
OF ₱196,521.30 ILLEGALLY DEBITED BY APPELLEE FROM APPELLANT’S ACCOUNT.

On August 1, 2005, the CA promulgated the assailed decision, reversing the RTC’s judgment, to wit:

x x x. The issues really before us are issues of contract application and issues of fact that would
require an examination and appreciation of the evidence presented. The first order therefore in our
review of the trial court’s decision is to take stock of the established and undisputed facts, and of the
evidence the parties have presented. We say this at the outset as we believe that it was in this
respect that the lower court failed in its consideration and appreciation of the case.

xxxx

An evidentiary dilemma we face in this case is the fact that there is no direct evidence on the issue
of who made the actual withdrawals. Chan correctly claims that the bank failed to present any
witness testifying that he (Chan) made the actual withdrawals. At the same time, Chan can only rely
on his own uncorroborated testimony that he was at home on the night that withdrawals were made.
We recognize that the bank can claim that no other evidence of actual withdrawal is necessary
because the PIN unique to Chan is already evidence that only Chan or his authorized representative
– and none other – could have accessed his account. But at the same time, we cannot close our
eyes to the fact that computers and the ATM system is not perfect as shown by an incident cited by
Chan involving the FEBTC itself. Aside from the vulnerability to inside staff members, we take
judicial notice that no less than our own Central Bank has publicly warned banks about other
nefarious schemes involving ATM machines. In a March 7, 2003 letter, the Central Bank stated:

March 7, 2003

BSP CIRCULAR LETTER

TO : All Banks

SUBJECT : Technology Fraud on ATM Systems

Please be advised that there were incidents in other countries regarding technology fraud in ATM
systems perpetrated by unscrupulous individuals and/ or syndicates.

These acts are carried out by:

1. A specialized scanner attached to the ATM card slot, and;

2. A pinhole camera

xxxx

In light of the absence of conclusive direct evidence of actual withdrawal that we can rely upon, we
have to depend on evidence "other than direct" to reach verdict in this case.

xxxx

WHEREFORE , premises considered, we hereby GRANT the appeal and accordingly REVERSE
and SET ASIDE the Decision dated May 14, 1998 of the Regional Trial Court of Manila, Branch 51,
in Civil Case No. 92-61706. We accordingly ORDER plaintiff-appellee Far East Bank and Trust
Company (FEBTC) to return to Chan the amount of Php196,571.30 plus 12% interest per annum
computed from August 7, 1992 – the time Chan filed his counterclaim – until the obligation is
satisfied. Costs against the plaintiff-appellee FEBTC.

SO ORDERED.8

FEBTC moved for reconsideration, but the CA denied its motion on November 24, 2005.9

Issues

Hence, FEBTC has appealed, urging the reversal of the CA’s adverse decision, and praying that
Chan be held liable for the withdrawals made from his account on May 4 and May 5, 1992; and that
it should not be held liable to return to Chan the sum of ₱196,571.30 debited from his account.

Ruling
The appeal lacks merit.

FEBTC would want us to hold that Chan had authored the May 4 and May 5, 1992 ATM withdrawals
based on the following attendant factors, namely: (a) ATM transactions were processed and
identified by the PIN, among others; (b) the PIN was exclusive and known only to the account
holder; (c) the ATM was tagged in the cardholder’s account where the ATM transactions were
debited or credited; (d) the account number tagged in the ATM card identified the cardholder; (e) the
ATM withdrawals were documented transactions; and (f) the transactions were strictly monitored and
recorded not only by FEBTC as the bank of account but also by the ATM machine and MEGALINK.
In other words, the ATM transactions in question would not be processed unless the PIN, which was
known only to Chan as the cardholder, had been correctly entered, an indication both that it was his
ATM card that had been used, and that all the transactions had been processed successfully by the
PNB-MEGALINK ATM facility at the Manila Pavilion Hotel with the use of the correct PIN.

We disagree with FEBTC.

Although there was no question that Chan had the physical possession of Far East Card No. 05-
01120-5-0 at the time of the withdrawals, the exclusive possession of the card alone did not suffice
to preponderantly establish that he had himself made the withdrawals, or that he had caused the
withdrawals to be made. In his answer, he denied using the card to withdraw funds from his account
on the dates in question, and averred that the withdrawals had been an "inside job." His denial
effectively traversed FEBTC’s claim of his direct and personal liability for the withdrawals, that it
would lose the case unless it competently and sufficiently established that he had personally made
the withdrawals himself, or that he had caused the withdrawals. In other words, it carried the burden
of proof.

Burden of proof is a term that refers to two separate and quite different concepts, namely: (a) the risk
of non-persuasion, or the burden of persuasion, or simply persuasion burden; and (b) the duty of
producing evidence, or the burden of going forward with the evidence, or simply the production
burden or the burden of evidence.10 In its first concept, it is the duty to establish the truth of a given
proposition or issue by such a quantum of evidence as the law demands in the case at which the
issue arises.11 In its other concept, it is the duty of producing evidence at the beginning or at any
subsequent stage of trial in order to make or meet a prima facie case. Generally speaking, burden of
proof in its second concept passes from party to party as the case progresses, while in its first
concept it rests throughout upon the party asserting the affirmative of the issue.12

The party who alleges an affirmative fact has the burden of proving it because mere allegation of the
fact is not evidence of it.13 Verily, the party who asserts, not he who denies, must prove.14

In civil cases, the burden of proof is on the party who would be defeated if no evidence is given on
either side.15 This is because our system frees the trier of facts from the responsibility of investigating
and presenting the facts and arguments, placing that responsibility entirely upon the respective
parties.16 The burden of proof, which may either be on the plaintiff or the defendant, is on the plaintiff
if the defendant denies the factual allegations of the complaint in the manner required by the Rules
of Court; or on the defendant if he admits expressly or impliedly the essential allegations but raises
an affirmative defense or defenses, that, if proved, would exculpate him from liability.17

Section 1, Rule 133 of the Rules of Court sets the quantum of evidence for civil actions, and
delineates how preponderance of evidence is determined, viz :

Section 1. In civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence. In determining where the preponderance or superior weight of evidence
on the issues involved lies, the court may consider all the facts and circumstances of the case, the
witnesses’ manner of testifying, their intelligence, their means and opportunity of knowing the facts
to which they are testifying, the nature of the facts to which they testify, the probability or
improbability of their testimony, their interest or want of interest, and also their personal credibility so
far as the same may legitimately appear upon the trial. The court may also consider the number of
witnesses, though the preponderance is not necessarily with the greater number. (Emphasis
supplied)

As the rule indicates, preponderant evidence refers to evidence that is of greater weight, or more
convincing, than the evidence offered in opposition to it.18 It is proof that leads the trier of facts to find
that the existence of the contested fact is more probable than its nonexistence.19

Being the plaintiff, FEBTC must rely on the strength of its own evidence instead of upon the
weakness of Chan’s evidence. Its burden of proof thus required it to preponderantly demonstrate
that his ATM card had been used to make the withdrawals, and that he had used the ATM card and
PIN by himself or by another person to make the fraudulent withdrawals. Otherwise, it could not
recover from him any funds supposedly improperly withdrawn from the ATM account. We remind
that as a banking institution, FEBTC had the duty and responsibility to ensure the safety of the funds
it held in trust for its depositors. It could not avoid the duty or evade the responsibility because it
alone should bear the price for the fraud resulting from the system bug on account of its exclusive
control of its computer system.

Did FEBTC discharge its burden of proof?

The CA ruled that FEBTC did not because –

After a review of the records of this case, we find the totality of evidence submitted by FEBTC
insufficient to establish the crucial facts that would justify a judgment in its favor.

To our mind, the fact that Chan’s account number and ATM card number were the ones used for the
withdrawals, by itself, is not sufficient to support the conclusion that he should be deemed to have
made the withdrawals.

FEBTC offers in this regard the PNB ATM’s journal tapes to prove the withdrawals and their details –
the time of the transactions; the account number used; the ATM card number; and the amount
withdrawn – and at the same time declared that these tapes are authentic and genuine. These
tapes, however, are not as reliable as FEBTC represented them to be as they are not even internally
consistent. A disturbing internal discrepancy we note relates to the amounts reflected as "ledger
balance" and "available balance". We find it strange that for every 4,000.00 pesos allegedly
withdrawn by Chan, the available balance increased rather than diminished. Worse, the amount of
available balance as reflected in the tapes was way above the actual available balance of less than
Php200,000.00 that Chan’s current account had at that time. These discrepancies must inevitably
reflect on the integrity of the journal tapes; the proven inconsistencies in some aspects of these
tapes leave the other aspects suspect and uncertain.

But more than this, we are not convinced that the tapes lead us to the inevitable conclusion that
Chan’s card, rather than a replacement card containing Chan’s PIN and card number or some other
equivalent scheme, was used. To our mind, we cannot discount this possibility given the available
technology making computer fraud a possibility, the cited instances of computer security breaches,
the admitted system bug, and – most notably – the fact that the withdrawals were made under
circumstances that took advantage of the system bug. System errors of this kind, when taken
advantage of to the extent that had happened in this case, are planned for. Indeed, prior preparation
must take place to avoid suspicion and attention where the withdrawal was made for seven (7) long
hours in a place frequented by hundreds of guests, over 242 transactions where the physical volume
of the money withdrawn was not insignificant. To say that this was done by the owner of the account
based solely on the records of the transactions, is a convenient but not a convincing explanation.20

In our view, the CA’s ruling was correct.

To start with, Edgar Munarriz, FEBTC’s very own Systems Analyst, admitted that the bug infecting
the bank’s computer system had facilitated the fraudulent withdrawals.21 This admission impelled the
CA to thoroughly dissect the situation in order to determine the consequences of the intervention of
the system bug in FEBTC’s computer system. It ultimately determined thusly:

Significantly, FEBTC made the admission that there was a program bug in its computer system. To
digress, computers are run based on specific pre-arranged instructions or "programs" that act on
data or information that computer users input. Computers can only process these inputted data or
information according to the installed programs. Thus, computers are as efficient, as accurate and
as convenient to use as the instructions in their installed programs. They can count, sort, compute
and arrive at decisions but they do so only and strictly in accordance with the programs that make
them work. To cite an easy example, a computer can be programmed to sort a stack of cards
prepared by male and female clients, into male and female stacks, respectively. To do this, the
computer will first scan a card and look at the place ("a field") where the male/female information can
be found. This information may be in an appropriate box which the bank client checks or shades to
indicate if he/she is male or female. The computer will check if the box beside the word "Female" is
shaded. If it is, it will send the card to the "Female" bin. If the box beside the "male" is shaded, it will
send the card to the "Male" bin. If both the squares are shaded or none is shaded or the card cannot
be read, it will send the card to the "Unknown" bin. This way, the female cards and the male cards
can be sorted efficiently. However, the program instructions can be written in such a way that the
computer can only make two decisions, that is, if the Female box is shaded, then the card goes to
the "Female" bin; otherwise, the card goes to the "Male" bin. In this program, all the Female cards
will be sorted correctly but the Male bin will contain all the other cards, that is, the Male cards, the
cards with no shading at all, and all the other cards that cannot be classified.

The imperfect results arose from the imperfect program instructions or from a program "bug".
Something very close to this example happened in the present case.

According to the testimony of the FEBTC’s systems analyst, there were two computer programs that
were involved in the transactions: CAPDROTH and SCPUP 900. CAPDROTH is the program that
validates if the account exists in the FEBTC files, if the transaction is valid, and if the branch where
the account is maintained is ON-LINE (i.e. continuously sending data). When the Chan transaction
entered the system, it was validated by CAPDROTH which, on seeing that the FEBTC-Ongpin
branch was off-line, returned a decision code passing on the decision to authorize the transaction to
the SCPUP 900, another module. However, SCPUP 900 was not expecting this type of response or
decision code. As the SCPUP 900 program was originally written, it will send back an error message
and abort a requested transaction if it receives an error message from any other module; otherwise,
it will send a message authorizing the transaction. In other words, SCPUP 900 had only two
decisions to make: check if the message is an error message, if not then, authorize. Since what it
received in the disputed transactions were not error messages and were not also authorizations, it
sent back authorization messages allowing the cash withdrawals. It kept on sending authorization
messages for the 242 cash withdrawal transactions made from Chan’s account between the evening
of May 4 and early morning of May 5, 1992. This program bug was the reason the 242 cash
withdrawals were allowed by the PNB ATM-Megalink machine.
The program bug occurred because of the simultaneous presence of three conditions that allowed it
to happen: (1) the withdrawal transactions involved a current account; (2) the current account was
with a branch that at that time was off-line; and (3) the transaction originated from MEGALINK (i.e.,
through MEGALINK through a member bank other than FEBTC). Because of the bug, Chan’s
account was not accessed at the time of the transactions so that withdrawals in excess of what the
account contained were allowed. Additionally, FEBTC’s rule that only a maximum withdrawable
amount per day (in the present case ₱50,000.00 per day) can be made from an ATM account, was
by-passed. Thus, 242 withdrawals were made over an eight hour period, in the total amount of
₱967,000.00.22

Secondly, the RTC’s deductions on the cause of the withdrawals were faulty. In holding against
Chan, the RTC chiefly relied on inferences drawn from his acts subsequent to the series of
withdrawals, specifically his attempt to withdraw funds from his account at an FEBTC ATM facility in
Ermita, Manila barely two days after the questioned withdrawals; his issuance of a check for
₱190,000.00 immediately after the capture of his ATM card by the ATM facility; his failure to
immediately report the capture of his ATM card to FEBTC; and his going to FEBTC only after the
dishonor of the check he had issued following the freezing of his account. The inferences were not
warranted, however, because the subsequent acts would not persuasively establish his actual
participation in the withdrawals due to their being actually susceptible of other interpretations
consistent with his innocence.

We join the CA’s observation that Chan’s subsequent acts "could have been impelled by so many
reasons and motivations, and cannot simply be given the meaning that the lower court attributed to
them," and, instead, were even consistent with the purpose and nature of his maintaining the current
account deposit with FEBTC, rendering the acts "not unusual nor … illegal."23 Although he was
expected to forthwith bring his card’s capture to FEBTC’s attention, that he did not do so could have
other plausible explanations consistent with good faith, among them his being constantly occupied
as a businessman to attend to the multifarious activities of his business. He might have also honestly
believed that he still had the sufficient funds in his current account, as borne out by his issuance of a
check instead after the capture of the card so as not for him to undermine any financial obligation
then becoming due. Nor should his opting to withdraw funds from his account at the ATM facility in
Ermita in less than two days after the questioned withdrawals manifest responsibility on his part, for
he could also be properly presumed to be then still unaware of the situation involving his account.
We note that his letters24 written in response to FEBTC’s written demands to him disclosed honest
intentions rather than malice.

Thirdly, the RTC ignored the likelihood that somebody other than Chan familiar with the bug infection
of FEBTC’s computer system at the time of the withdrawals and adept with the workings of the
computer system had committed the fraud. This likelihood was not far-fetched considering that
FEBTC had immediately adopted corrective measures upon its discovery of the system bug, by
which FEBTC admitted its negligence in ensuring an error-free computer system; and that the
system bug had affected only the account of Chan.25 Truly, the trial court misapprehended the extent
to which the system bug had made the computer system of FEBTC stumble in serious error.

Fourthly, and perhaps the most damaging lapse, was that FEBTC failed to establish that the PNB-
MEGALINK’s ATM facility at the Manila Pavilion Hotel had actually dispensed cash in the very
significantly large amount alleged during the series of questioned withdrawals. For sure, FEBTC
should have proved the actual dispensing of funds from the ATM facility as the factual basis for its
claim against Chan. It did require PNB to furnish a validated showing of the exact level of cash then
carried by the latter’s ATM facility in the Manila Pavilion Hotel on May 4, 1992.26 Yet, when PNB
employee Erwin Arellano stood as a witness for FEBTC, he confirmed the authenticity of the journal
tapes that had recorded Chan’s May 4 and May 5, 1992 supposed ATM transactions but did not
categorically state how much funds PNB-MEGALINK’s ATM facility at the Manila Pavilion Hotel had
exactly carried at the time of the withdrawals, particularly the amounts immediately preceding and
immediately following the series of withdrawals. The omission left a yawning gap in the evidence
against Chan.

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

It is true that Del Castillo also declared that FEBTC did not store the PINs of its clients’ ATM
cards.  However, he mentioned that FEBTC had stored the opposite numbers corresponding to the
1âwphi1

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

In view of the foregoing, FEBTC did not present preponderant evidence proving Chan’s liability for
the supposedly fraudulent withdrawals. It thus failed in discharging its burden of persuasion.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and DIRECTS the
petitioner to pay the costs of suit.

SO ORDERED.
 SECOND DIVISION

G.R. No. 194964-65, January 11, 2016

UNIVERSITY OF MINDANAO, INC., Petitioner, v. BANGKO SENTRAL PILIPINAS,

ET AL., Respondents.

DECISION

LEONEN, J.:

Acts of an officer that are not authorized by the board of directors/trustees do not bind
the corporation unless the corporation ratifies the acts or holds the officer out as a
person with authority to transact on its behalf.

This is a Petition for Review on Certiorari1 of the Court of Appeals' December 17, 2009
Decision2 and December 20, 2010 Resolution.3 The Court of Appeals reversed the
Cagayan De Oro City trial court's and the Iligan City trial court's Decisions to nullify
mortgage contracts involving University of Mindanao's properties.4

University of Mindanao is an educational institution. For the year 1982, its Board of
Trustees was chaired by Guillermo B. Torres. His wife, Dolores P. Torres, sat as
University of Mindanao's Assistant Treasurer.5

Before 1982, Guillermo B. Torres and Dolores P. Torres incorporated and operated two
(2) thrift banks: (1) First Iligan Savings & Loan Association, Inc. (FISLAI); and (2)
Davao Savings and Loan Association, Inc. (DSLAI). Guillermo B. Torres chaired both
thrift banks. He acted as FISLAI's President, while his wife, Dolores P. Torres, acted as
DSLAI's President and FISLAI's Treasurer.6

Upon Guillermo B. Torres' request, Bangko Sentral ng Pilipinas issued a P1.9 million
standby emergency credit to FISLAI. The release of standby emergency credit was
evidenced by three (3) promissory notes dated February 8, 1982, April 7, 1982, and
May 4, 1982 in the amounts of P500,000.00, P600,000.00, and P800,000.00,
respectively. All these promissory notes were signed by Guillermo B. Torres, and were
co-signed by either his wife, Dolores P. Torres, or FISLAI's Special Assistant to the
President, Edmundo G. Ramos, Jr.7

On May 25, 1982, University of Mindanao's Vice President for Finance, Saturnino
Petalcorin, executed a deed of real estate mortgage over University of Mindanao's
property in Cagayan de Oro City (covered by Transfer Certificate of Title No. T-14345)
in favor of Bangko Sentral ng Pilipinas.8 "The mortgage served as security for FISLAI's
PI.9 Million loan[.]"9 It was allegedly executed on University of Mindanao's behalf.10

As proof of his authority to execute a real estate mortgage for University of Mindanao,
Saturnino Petalcorin showed a Secretary's Certificate signed on April 13, 1982 by
University of Mindanao's Corporate Secretary, Aurora de Leon.11 The Secretary's
Certificate stated:
chanRoblesvirtualLawlibrary
That at the regular meeting' of the Board of Trustees of the aforesaid corporation
[University of Mindanao] duly convened on March 30, 1982, at which a quorum was
present, the following resolution was unanimously adopted: chanRoblesvirtualLawlibrary

"Resolved that the University of Mindanao, Inc. be and is hereby authorized, to

mortgage real estate properties with the Central Bank of the Philippines to serve as
security for the credit facility of First Iligan Savings and Loan Association, hereby
authorizing the President and/or Vice-president for Finance, Saturnino R. Petalcorin of
the University of Mindanao,- Inc. to sign, execute and deliver the covering mortgage
document or any other documents which may be proper[l]y required."12
cralawlawlibrary

The Secretary's Certificate was supported by an excerpt from the minutes of the
January 19, 1982 alleged meeting of University of Mindanao's Board of Trustees. The
excerpt was certified by Aurora de Leon on March 13, 1982 to be a true copy of
University of Mindanao's records on file.13 The excerpt reads: chanRoblesvirtualLawlibrary

3 - Other Matters:

(a) Cagayan de Oro and Iligan properties:

Resolution No. 82-1-8

Authorizing the Chairman to appoint Saturnino R. Petalcorin, Vice-President for Finance,

to represent the University of Mindanao to transact, transfer, convey, lease, mortgage,
or otherwise hypothecate any or all of the following properties situated at Cagayan de
Oro and Iligan City and authorizing further Mr. Petalcorin to sign any or all documents
relative thereto: chanRoblesvirtualLawlibrary

1. A parcel of land situated at Cagayan de Oro City, covered and technically

described in TRANSFER CERTIFICATE OF TITLE No. T-14345 of the
Registry of Deeds of Cagayan de Oro City;

2. A parcel of land situated at Iligan City, covered and technically described

in TRANSFER CERTIFICATE OF TITLE NO..T-15696 (a.t.) of the Registry of
Deeds of Iligan City; and

3. A parcel of land situated at Iligan City, covered and technically described

in TRANSFER CERTIFICATE OF TITLE NO. T-15697 (a.f.) of the Registry of
Deeds of Iligan City.14
cralawlawlibrary

The mortgage deed executed by Saturnino Petalcorin in favor of Bangko Sentral ng

Pilipinas was annotated on the certificate of title of the Cagayan de Oro City property
(Transfer Certificate of Title No. 14345) on June 25, 1982. Aurora de Leon's'certification
was also annotated on the Cagayan de Oro City property's certificate of title (Transfer
Certificate of Title No. 14345).15
On October 21, 1982, Bangko Sentral ng Pilipinas granted FISLAI an additional loan of
P620,700.00. Guillermo B. Torres and Edmundo Ramos executed a promissory note on
October 21, 1982 to cover that amount.16

On November 5, 1982, Saturnino Petalcorin executed another deed of real estate

mortgage, allegedly on behalf of University of Mindanao, over its two properties in
Iligan City. This mortgage served as additional security for FISLAI's loans. The two
Iligan City properties were covered by Transfer Certificates of Title Nos, T-15696 and T-
15697.17

On January 17, 1983, Bangko Sentral ng Pilipinas' mortgage lien over the Iligan City
properties and Aurora de Leon's certification were annotated on Transfer Certificates of
Title Nos. T-15696 and T-15697.18 On January 18, 1983, Bangko Sentral ng Pilipinas'
mortgage lien over the Iligan City properties was also annotated on the tax declarations
covering the Iligan City properties.19

Bangko Sentral ng Pilipinas also granted emergency advances to DSLAI on May 27,
1983 and on August 20, 1984 in the amounts of P1,633,900.00 and P6,489,000.00,
respectively.20

On January 11, 1985, FISLAI, DSLAI, and Land Bank of the Philippines entered into a
Memorandum of Agreement intended to rehabilitate the thrift banks, which had been
suffering from their depositors' heavy withdrawals. Among the terms of the agreement
was the merger of FISLAI and DSLAI, with DSLAI as the surviving corporation. DSLAI
later became known as Mindanao Savings and Loan Association, Inc. (MSLAI).21

Guillermo B. Torres died on March 2, 1989.22

MSLAI failed to recover from its losses and was liquidated on May 24, 1991.23

On June 18, 1999, Bangko Sentral ng Pilipinas sent a letter to University of Mindanao,
informing it that the bank would foreclose its properties if MSLAI's total outstanding
obligation of P12,534,907.73 remained unpaid.24

In its reply to Bangko Sentral ng Pilipinas' June 18, 1999 letter, University of Mindanao,
through its Vice President for Accounting, Gloria E. Detoya, denied that University of
Mindanao's properties were mortgaged. It also denied having received any loan
proceeds from Bangko Sentral ng Pilipinas.25 cralawred

On July 16, 1999, University of Mindanao filed two Complaints for nullification and
cancellation of mortgage. One Complaint was filed before the Regional Trial Court of
Cagayan de Oro City, and the other Complaint was filed before the Regional Trial Court
of Iligan City.26

University of Mindanao alleged in its Complaints that it did not obtain any loan from
Bangko Sentral ng Pilipinas. It also did not receive any loan proceeds from the bank.27

University of Mindanao also alleged that Aurora de Leon's certification was anomalous.
It never authorized Saturnino Petalcorin to execute real estate mortgage contracts
involving its properties to secure FISLAI's debts. It never ratified the execution of the
mortgage contracts. Moreover, as an educational institution, it cannot mortgage its
properties to secure another person's debts.28

On November 23, 2001, the Regional Trial Court of Cagayan de Oro City rendered a
Decision in favor of University of Mindanao,29 thus: chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff

and against defendants: chanRoblesvirtualLawlibrary

1. DECLARING the real estate mortgage Saturnino R. Petalcorin executed in favor of

BANGKO SENTRAL NG PILIPINAS involving Lot 421-A located in Cagayan de Oro City
with an area of 482 square meters covered by TCT No. T-14345 as annuled [sic];

2. ORDERING the Register of Deeds of Cagayan de Oro City to cancel Entry No. 9951
and Entry No. 9952 annotated at the back of said TCT No. T-14345, Registry of Deeds
of Cagayan de Oro City;

Prayer for attorney's fee [sic] is hereby denied there being no proof that in demanding
payment of the emergency loan, defendant BANGKO SENTRAL NG PILIPINAS was
motivated by evident bad faith,

SO ORDERED.30 (Citation omitted) cralawlawlibrary

The Regional Trial Court of Cagayan de Oro City found that there was no board
resolution giving Saturnino Petalcorin authority to execute mortgage contracts on
behalf of University of Mindanao. The Cagayan de Oro City trial court gave weight to
Aurora de Leon's testimony that University ofMindanao's Board of Trustees did not issue
a board resolution that would support the Secretary's Certificate she issued. She
testified that she signed the Secretary's Certificate only upon Guillermo B. Torres'
orders.31

Saturnino Petalcorin testified that he had no authority to execute a mortgage contract

on University ofMindanao's behalf. He merely executed the contract because of
Guillermo B. Torres' request.32

Bangko Sentral ng Pilipinas' witness Daciano Pagui, Jr. also admitted that there was no
board resolution giving Saturnino Petalcorin authority to execute mortgage contracts on
behalf of University of Mindanao.33

The Regional Trial Court of Cagayan de Oro City ruled that Saturnino Petalcorin was not
authorized to execute mortgage contracts for University of Mindanao. Hence, the
mortgage of University ofMindanao's Cagayan de Oro City property was unenforceable.
Saturnino Petalcorin's unauthorized acts should be annulled.34

Similarly, the Regional Trial Court of Iligan City rendered a Decision on December 7,
2001 in favor of University of Mindanao.35 The dispositive portion of the Decision
reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff
and against the defendants, as follows: chanRoblesvirtualLawlibrary

1. Nullifying and canceling [sic] the subject Deed of Real Estate Mortgage dated
November 5, 1982 for being unenforceable or void contract;

2. Ordering the Office of the Register of Deeds of Iligan City to cancel the entries on
TCT No. T-15696 and TCT No. T- 15697 with respect to the aforesaid Deed of Real
Estate Mortgage dated November 5, 1982 and all other entries related thereto;

3. Ordering the defendant Bangko Sentral ng Pilipinas to return the owner's duplicate
copies of TCT No. T-15696 and TCT No. 15697 to the plaintiff;

4. Nullifying the subject [foreclosure [proceedings and the [a]uction [s]ale conducted
by defendant Atty. Gerardo Paguio, Jr. on October 8, 1999 including all the acts
subsequent thereto and ordering the Register of Deeds of Iligan City not to register any
Certificate of Sale pursuant to the said auction sale nor make any transfer of the
corresponding titles, and if already registered and transferred, to cancel all the said
entries in TCT No. T-15696 and TCT No. T-15697 and/or cancel the corresponding new
TCTs in the name of defendant Bangko Sentral ng Pilipinas;

5. Making the Preliminary Injunction per Order of this Court dated October 13, 2000
permanent.

No pronouncement as to costs.36 (Citation omitted) cralawlawlibrary

The Iligan City trial court found that the Secretary's Certificate issued by Aurora de
Leon was fictitious37 and irregular for being unnumbered.38 It also did not specify the
identity, description, or location of the mortgaged properties.39

The Iligan City trial court gave credence to Aurora de Leon's testimony that the
University of Mindanao's Board of Trustees did not take up the documents in its
meetings. Saturnino Petalcorin corroborated her testimony.40

The Iligan City trial court ruled that the lack of a board resolution authorizing Saturnino
Petalcorin to execute documents of mortgage on behalf of University of Mindanao made
the real estate mortgage contract unenforceable under Article 140341 of the Civil
Code.42 The mortgage contract and the subsequent acts of foreclosure and auction sale
were void because the mortgage contract was executed without University of Mindanao'
s authority.43

The Iligan City trial court also ruled that the annotations on the titles of University of
Mindanao's properties do not operate as notice to the University because annotations
only bind third parties and not owners.44 Further, Bangko Sentral ng Pilipinas' right to
foreclose the University of Mindanao's properties had already prescribed.45

Bangko Sentral ng Pilipinas separately appealed the Decisions of both the Cagayan de
Oro City and the Iligan City trial courts.46
After consolidating both cases, the Court of Appeals issued a Decision on December 17,
2009 in favor of Bangko Sentral ng Pilipinas, thus: chanRoblesvirtualLawlibrary

FOR THE REASONS STATED, the Decision dated 23 November 2001 of the Regional
Trial Court of Cagayan de Oro City, Branch 24 in Civil Case No. 99-414 and the Decision
dated 7 December 2001 of the Regional Trial Court of Iligan City, Branch 1 in Civil Case
No. 4790 are REVERSED and SET ASIDE. The Complaints in both cases before the
trial courts are DISMISSED. The Writ of Preliminary Injunction issued by the Regional
Trial Court of Iligan City, Branch 1 in Civil Case No. 4790 is LIFTED and SET ASIDE.

SO ORDERED.47 cralawlawlibrary

The Court of Appeals ruled that "[although BSP failed to prove that the UM Board of
Trustees actually passed a Board Resolution authorizing Petalcorin to mortgage the
subject real properties,"48 Aurora de Leon's Secretary's Certificate "clothed Petalcorin
with apparent and ostensible authority to execute the mortgage deed on its
behalf[.]"49 Bangko Sentral ng Pilipinas merely relied in good faith on the Secretary's
Certificate.50 University of Mindanao is estopped from denying Saturnino Petalcorin's
authority.51

Moreover, the Secretary's Certificate was notarized. This meant that it enjoyed the
presumption of regularity as to the truth of its statements and authenticity of the
signatures.52 Thus, "BSP cannot be faulted for relying on the [Secretary's Certificate.]"53

The Court of Appeals also ruled that since University of Mindanao's officers, Guillermo
B. Torres and his wife, Dolores P. Torres, signed the promissory notes, University of
Mindanao was presumed to have knowledge of the transaction.54 Knowledge of an
officer in relation to matters within the scope of his or her authority is notice to the
corporation.55

The annotations on University of Mindanao's certificates of title also operate as

constructive notice to it that its properties were mortgaged.56 Its failure to disown the
mortgages for more than a decade was implied ratification.57

The Court of Appeals also ruled that Bangko Sentral ng Pilipinas' action for foreclosure
had not yet prescribed because the due date extensions that Bangko Sentral ng
Pilipinas granted to FISLAI extended the due date of payment to five (5) years from
February 8, 1985.58 The bank's demand letter to Dolores P. Torres on June 18, 1999
also interrupted the prescriptive period.59

University of Mindanao and Bangko Sentral ng Pilipinas filed a Motion for

Reconsideration60 and Motion for Partial Reconsideration respectively of the Court of
Appeals' Decision. On December 20, 2010, the Court of Appeals issued a Resolution,
thus:chanRoblesvirtualLawlibrary

Acting on the foregoing incidents, the Court RESOLVES to: chanRoblesvirtualLawlibrary

 1. GRANT the appellant's twin motions for extension of time to file
comment/opposition and NOTE the Comment . on the appellee's
Motion for Reconsideration it subsequently filed on June 23, 2010;

2. GRANT the appellee's three (3) motions for extension of time to

file comment/opposition and NOTE the Comment on the
appellant's Motion for Partial Reconsideration it filed on July 26,
2010;

3. NOTE the appellant's "Motion for Leave to File Attached Reply

Dated August 11, 2010" filed on August 13, 2010 and DENY the
attached "Reply to Comment Dated July 26, 2010";

4. DENY the appellee's Motion for Reconsideration as it does' not

offer any arguments sufficiently meritorious to warrant modification
or reversal of the Court's 17 December 2009 Decision. The Court
finds that there is no compelling reason to reconsider its ruling;
and

5. GRANT the appellant's Motion for Partial Reconsideration, as the

Court finds it meritorious, considering that it ruled in its Decision
that "BSP can still foreclose on the UM's real property in Cagayan
de Oro City covered by TCT No. T- 14345." It then follows that the
injunctive writ issued by the RTC of Cagayan de Oro City, Branch
24 must be lifted. The Court's 17 December 2009 Decision is
accordingly MODIFIED and AMENDED to read as follows: chanRoblesvirtualLawlibrary

"FOR THE REASONS STATED, the Decision dated 23

November 2001 of the Regional Trial Court of Cagayan de
Oro City, Branch 24 in Civil Case No. 99-414 and the
Decision dated 7 December 2001 of the Regional Trial Court
of Iligan City, Branch 1 in Civil Case No. 4790
are REVERSED and SET ASIDE. The Complaints in both
cases before the trial courts are DISMISSED. The Writs of
Preliminary Injunction issued by the Regional Trial Court of
Iligan City, Branch 1 in Civil Case No. 4790 and in the
Regional Trial Court of Cagayan de Oro City, Branch 24 in
Civil Case No. 99-414 are LIFTED and SET ASIDE."

SO ORDERED.61 (Citation omitted)
cralawlawlibrary

Hence, University of Mindanao filed this Petition for Review. The issues for resolution
are: chanRoblesvirtualLawlibrary

First, whether respondent Bangko Sentral ng Pilipinas' action to foreclose the

mortgaged properties had already prescribed; and
Second, whether petitioner University of Mindanao is bound by the real estate mortgage
contracts executed by Saturnino Petalcorin.

We grant the Petition.

Petitioner argues that respondent's action to foreclose its mortgaged properties had
already prescribed.

Petitioner is mistaken.

Prescription is the mode of acquiring or losing rights through the lapse of time.62 Its
purpose is "to protect the diligent and vigilant, not those who sleep on their rights."63

The prescriptive period for actions on mortgages is ten (10) years from the day they
may be brought.64 Actions on mortgages may be brought not upon the execution of the
mortgage contract but upon default in payment of the obligation secured by the
mortgage.65

A debtor is considered in default when he or she fails to pay the obligation on due date
and, subject to exceptions, after demands for payment were made by the creditor.
Article 1169 of the Civil Code provides: chanRoblesvirtualLawlibrary

ART. 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.

However, the demand by the creditor shall not be necessary in order that delay may
exist:
chanRoblesvirtualLawlibrary

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service is to be
rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his
power to perform. cralawlawlibrary

Article 1193 of the Civil'Code provides that an obligation is demandable only upon due
date. It provides: chanRoblesvirtualLawlibrary

ART. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be
demandable only when that day comes.

Obligations with a resolutory period take effect at once, but terminate upon arrival of
the day certain.
A day certain is understood to be that which must necessarily come, although it may
not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is
conditional, and it shall be regulated by the rules of the preceding Section.cralawlawlibrary

In other words, as a general rule, a person defaults and prescriptive period for action
runs when (1) the obligation becomes due and demandable; and (2) demand for
payment has been made.

The prescriptive period neither runs from the date of the execution of a contract nor
does the prescriptive period necessarily run on the date when the loan becomes due
and demandable.66 Prescriptive period runs from the date of demand,67 subject to
certain exceptions.

In other words, ten (10) .years may lapse from the date of the execution of contract,
without barring a cause of action on the mortgage when there is a gap between the
period of execution of the contract and the due date or between the due date and the
demand date in cases when demand is necessary.68

The mortgage contracts in this case were executed by Saturnino Petalcorin in 1982. The
maturity dates of FISLAI's loans were repeatedly extended until the loans became due
and demandable only in 1990. Respondent informed petitioner of its decision to
foreclose its properties and demanded payment in 1999.

The running of the prescriptive period of respondent's action on the mortgages did not
start when it executed the mortgage contracts with Saturnino Petalcorin in 1982.

The prescriptive period for filing an action may run either (1) from 1990 when the loan
became due, if the obligation was covered by the exceptions under Article 1169 of the
Civil Code; (2) or from 1999 when respondent demanded payment, if the obligation
was not covered by the exceptions under Article 1169 of the Civil Code.

In either case, respondent's Complaint with cause of action based on the mortgage
contract was filed well within the prescriptive period.

Given the termination of all traces of FISLAI's existence,70 demand may have been
rendered unnecessary under Article 1169(3)71 of the Civil Code. Granting that this is the
case,.respondent would have had ten (10) years from due date in 1990 or until 2000 to
institute an action on the mortgage contract.

However, under Article 115572 of the Civil Code, prescription of actions may be
interrupted by (1) the filing of a court action; (2) a written extrajudicial demand; and
(3) the written acknowledgment of the debt by the debtor.

Therefore, the running of the prescriptive period was interrupted when respondent sent
its demand letter to petitioner on June 18, 1999. This eventually led to petitioner's filing
of its annulment of mortgage complaints before the Regional Trial Courts of Iligan City
and Cagayan De Oro City on July 16, 1999.

Assuming that demand was necessary, respondent's action was within the ten (10)-
year prescriptive period. Respondent demanded payment of the loans in 1999 and filed
an action in the same year.

II

Petitioner argues that the execution of the mortgage contract was ultra vires. As an
educational institution, it may not secure the loans of third persons.73 Securing loans of
third persons is not among the purposes for which petitioner was established.74

Petitioner, is correct.

Corporations are artificial entities granted legal personalities upon their creation by
their incorporators in accordance with law. Unlike natural persons, they have no
inherent powers. Third persons dealing with corporations cannot assume that
corporations have powers. It is up to those persons dealing with corporations to
determine their competence as expressly defined by the law and their articles of
incorporation.75

A corporation may exercise its powers only within those definitions. Corporate acts that
are outside those express definitions under the law or articles of incorporation or those
"committed outside the object for which a corporation is created"76 are ultra vires.

The only exception to this, rule is when acts are necessary and incidental to carry out a
corporation's purposes, and to the exercise of powers conferred by the Corporation
Code and under a corporation's articles of incorporation.77 This exception is specifically
included in the general powers of a corporation under Section 36 of the Corporation
Code: chanRoblesvirtualLawlibrary

SEC. 36. Corporate powers and capacity.—Every corporation incorporated under this

Code has the power and capacity: chanRoblesvirtualLawlibrary

1. To sue and be sued in its corporate name;

2. Of succession by its corporate name for the period of time stated in the
articles of incorporation and the certificate of incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in accordance with the provisions of
this Code;
5. To adopt by-laws, not contrary to law, morals, or public policy, and to
amend or repeal the same in accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to subscribers and to
sell treasury stocks in accordance with the provisions of this Code; and to
admit members to the corporation if it be a non stock corporation;
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge,
mortgage and otherwise deal with such real and personal property,
including securities and bonds of other corporations, as the transaction of
 the lawful business of the corporation may reasonably and necessarily
require, subject to the limitations prescribed by law and the Constitution;
8. To enter into merger or consolidation with other corporations as provided
in this Code;
9. To make reasonable donations, including those for the public welfare or
for hospital, charitable, cultural, scientific, civic, or similar
purposes: Provided, That no corporation, domestic or foreign, shall give
donations in aid of any political party or candidate or for purposes of
partisan political activity;
10.To establish pension, retirement, and other plans for the benefit of its
directors, trustees, officers and employees; and
11.To exercise such other powers as may be essential or necessary to carry
out its purpose or purposes as stated in its articles of
incorporation. (Emphasis supplied)
cralawlawlibrary

Montelibano, et al. v. Bacolod-Murcia Milling Co., Inc.78 stated the test to determine if a

corporate act is in accordance with its purposes: chanRoblesvirtualLawlibrary

It is a question, therefore, in each case, of the logical relation of the act to the

corporate purpose expressed in the charter. If that act is one which is lawful in itself,
and not otherwise prohibited, is done for the purpose of serving corporate ends, and is
reasonably tributary to the promotion of those ends, in a substantial, and not in a
remote and fanciful, sense, it may fairly be considered within charter powers. The test
to be applied is whether the act in question is in direct and immediate furtherance of
the corporation's business, fairly incident to the express powers and reasonably
necessary to their exercise. If so, the corporation has the power to do it; otherwise,
not.79 (Emphasis supplied) cralawlawlibrary

As an educational institution, petitioner serves: chanRoblesvirtualLawlibrary

a. To establish, conduct and operate a college or colleges, and/or university;

b. To acquire properties,, real and/or personal, in connection with the
establishment and operation of such college or colleges;
c. To do and perform the various and sundry acts and things permitted by
the laws of the Philippines unto corporations like classes and kinds;
d. To engage in agricultural, industrial, and/or commercial pursuits in line
with educational program of the corporation and to acquire all properties,
real and personal [,] necessary for the purposes[;]
e. To establish, operate, and/or acquire broadcasting and television stations
also in line with the educational program of the corporation and for such
other purposes as the Board of Trustees may determine from time to
time;
f. To undertake housing projects of faculty members and employees, and to
acquire real estates for this purpose;
g. To establish, conduct and operate and/or invest in educational
foundations; [As amended on December 15, 1965][;]
 h. To establish, conduct and operate housing and dental schools, medical
facilities and other related undertakings;
i. To invest in other corporations. [As amended on December 9, 1998].
[Amended Articles of Incorporation of the University of Mindanao, Inc. -
the Petitioner].80
cralawlawlibrary

Petitioner does not have the power to mortgage its properties in order to secure loans
of other persons. As an educational institution, it is limited to developing human capital
through formal instruction. It is not a corporation engaged in the business of securing
loans of others.

Hiring professors, instructors, and personnel; acquiring equipment and real estate;
establishing housing facilities for personnel and students; hiring a concessionaire; and
other activities that can be directly connected to the operations and conduct of the
education business may constitute the necessary and incidental acts of an educational
institution.

Securing FISLAI's loans by mortgaging petitioner's properties does not appear to have
even the remotest connection to the operations of petitioner as an educational
institution. Securing loans is not an adjunct of the educational institution's conduct of
business.81 It does not appear that securing third-party loans was necessary to maintain
petitioner's business of providing instruction to individuals.

This court upheld the validity of corporate acts when those acts were shown to be
clearly within the corporation's powers or were connected to the corporation's purposes.

In Pirovano, et al. v. De la Rama Steamship Co.,82 this court declared valid the donation
given to the children of a deceased person who contributed to the growth of the
corporation.83 This court found that this donation was within the broad scope of powers
and purposes of the corporation to "aid in any other manner any person . . . in which
any interest is held by this corporation or in the affairs or prosperity of which this
corporation has a lawful interest."84

In Twin Towers Condominium Corporation v. Court of Appeals, et al.,85 this court

declared valid a rule by Twin Towers Condominium denying delinquent members the
right to use condominium facilities. This court ruled that the condominium's power to
promulgate rules on the use of facilities and to enforce provisions of the Master Deed
was clear in the Condominium Act, Master Deed, and By-laws of the
condominium.87 Moreover, the promulgation of such rule was "reasonably necessary" to
attain the purposes of the condominium project.88

This court has, in effect, created a presumption that corporate acts are valid if, on their
face, the acts were within the corporation's powers or purposes. This presumption was
explained as early as in 1915 in Coleman v. Hotel De France,89 where this court ruled
that contracts entered into by corporations in the exercise of their incidental powers are
not ultra vires.90

Coleman involved a hotel's cancellation of an employment contract it executed with a

gymnast. One of the hotel's contentions was the supposed ultra vires nature of the
contract.- It was executed outside its express and implied powers under the articles of
incorporation.91

In ruling in favor of the contract's validity, this court considered the incidental powers
of the hotel to include the execution of employment contracts with entertainers for the
purpose of providing its guests entertainment and increasing patronage.92

This court ruled that a contract executed by a corporation shall be presumed valid if on
its face its execution was not beyond the powers of the corporation to do.93 Thus: chanRoblesvirtualLawlibrary

When a contract is not on its face necessarily beyond the scope of the power of the
corporation by which it was made, it will, in the absence of proof to the contrary, be
presumed to be valid. Corporations are presumed to contract within their powers. The
doctrine of ultra vires, when invoked for or against a corporation, should not be allowed
to prevail where it would defeat the ends of justice or work a legal wrong.94 cralawlawlibrary

However, this should not be interpreted to mean that such presumption applies to all
cases, even when the act in question is on its face beyond the corporation's power to do
or when the evidence contradicts the presumption.

Presumptions are "inference[s] as to the existence of a fact not actually known, arising
from its usual connection with another which is known, or a conjecture based on past
experience as to what course human affairs ordinarily take."95 Presumptions embody
values and revealed behavioral expectations under a given set of circumstances.

Presumptions may be conclusive96 or disputable.97

Conclusive presumptions are presumptions that may not be overturned by evidence,

however strong the evidence is.98 They are made conclusive not because there is an
established uniformity in behavior whenever identified circumstances arise. They are
conclusive because they are declared as such under the law or the rules. Rule 131,
Section 2 of the Rules of Court identifies two (2) conclusive presumptions: chanRoblesvirtualLawlibrary

SEC. 2. Conclusive presumptions.— The following are instances of conclusive

presumptions: chanRoblesvirtualLawlibrary

(a)  Whenever a party has, by his own declaration, act, or omission, intentionally and
deliberately led another to believe a particular thing true, and to act upon such belief,
he cannot, in any litigation arising out of such declaration, act or omission, be
permitted to falsify it;

(b) The tenant is not permitted to deny the title of his landlord at the time of the
commencement of the relation of landlord and tenant between them. cralawlawlibrary

On the other hand, disputable, presumptions are presumptions that may be overcome
by contrary evidence.99 They are disputable in recognition of the variability of human
behavior. Presumptions are not always true. They may be wrong under certain
circumstances, and courts are expected to apply them, keeping in mind the nuances of
every experience that may render the expectations wrong.

Thus, the application of disputable presumptions on a given circumstance must be

based on the existence of certain facts on which they are meant to operate.
"[Presumptions are not allegations, nor do they supply their
absence[.]"100 Presumptions are conclusions. They do not apply when there are no facts
or allegations to support them.

If the facts exist to set in motion the operation of a disputable presumption, courts may
accept the presumption. However, contrary evidence may be presented to rebut the
presumption.

Courts cannot disregard contrary evidence offered to rebut disputable presumptions.

Disputable presumptions apply only in the absence of contrary evidence or
explanations. This court explained in Philippine Agila Satellite Inc. v. Usec. Trinidad-
Lichauco:101chanroblesvirtuallawlibrary

We do not doubt the existence of the presumptions of "good faith" or "regular

performance of official duty," yet these presumptions are disputable and may be
contradicted and overcome by other evidence. Many civil actions are oriented towards
overcoming any number of these presumptions, and a cause of action can certainly be
geared towards such effect.  The very purpose of trial is to allow a party to present
evidence to overcome the disputable presumptions involved. Otherwise, if trial is
deemed irrelevant or unnecessary, owing to the perceived indisputability of the
presumptions, the judicial exercise would be relegated to a mere ascertainment of what
presumptions apply in a given case, nothing more. Consequently, the entire Rules of
Court is rendered as excess verbiage, save perhaps for the provisions laying down the
legal presumptions.

If this reasoning of the Court of Appeals were ever adopted as a jurisprudential rule, no
public officer could ever be sued for acts executed beyond their official functions or
authority, or for tortious conduct or behavior, since such acts would "enjoy the
presumption of good faith and in the regular performance of official duty." Indeed, few
civil actions of any nature would ever reach the trial stage, if a case can be adjudicated
by a mere determination from the complaint or answer as to which legal presumptions
are applicable. For-example, the presumption that a person is innocent of a wrong is a
disputable presumption on the same level as that of the regular performance of official
duty. A civil complaint for damages necessarily alleges that the defendant committed a
wrongful act or omission that would serve as basis for the award of damages. With the
rationale of the Court of Appeals, such complaint can be dismissed upon a motion to
dismiss solely on the ground that the presumption is that a person is innocent of a
wrong.102 (Emphasis supplied, citations omitted) cralawlawlibrary

In this case, the presumption that the execution of mortgage contracts was within
petitioner's corporate powers does not apply. Securing third-party loans is not
connected to petitioner's purposes as an educational institution.

III
Respondent argues that petitioner's act of mortgaging its properties to guarantee
FISLAI's loans was consistent with petitioner's business interests, since petitioner was
presumably a FISLAI shareholder whose officers and shareholders interlock with FISLAI.
Respondent points out that petitioner and its key officers held substantial shares in
MSLAI when DSLAI and FISLAI merged. Therefore, it was safe to assume that when the
mortgages were executed in 1982, petitioner held substantial shares in FISLAI.103

Parties dealing with corporations cannot simply assume that their transaction is within
the corporate powers. The acts of a corporation are still limited by its powers and
purposes as provided in the law and its articles of incorporation.

Acquiring shares in another corporation is not a means to create new powers for the
acquiring corporation. Being a shareholder of another corporation does not
automatically change the nature and purpose of a corporation's business. Appropriate
amendments must be made either to the law or the articles of incorporation before a
corporation can validly exercise powers outside those provided in law or the articles of
incorporation. In other words, without an amendment, what is ultra vires before a
corporation acquires shares in other corporations is still ultra vires after such
acquisition.

Thus, regardless of the number of shares that petitioner had with FISLAI, DSLAI, or
MSLAI, securing loans of third persons is still beyond petitioner's power to do. It is still
inconsistent with its purposes under the law104 and its articles of incorporation.105

In attempting to show petitioner's interest in securing FISLAI's loans by adverting to

their interlocking, directors and shareholders, respondent disregards petitioner's
separate personality from its officers, shareholders, and other juridical persons.

The separate personality of corporations means that they are "vest[ed] [with] rights,
powers, and attributes [of their own] as if they were natural persons[.]"106 Their assets
and liabilities are their own and not their officers', shareholders', or another
corporation's. In the same vein, the assets and liabilities of their officers and
shareholders are not the corporations'. Obligations incurred by corporations are not
obligations of their officers and shareholders. Obligations of officers and shareholders
are not obligations of corporations.107 In other words, corporate interests are separate
from the personal interests of the natural persons that comprise corporations.

Corporations are given separate personalities to allow natural persons to balance the
risks of business as they accumulate capital. They are, however, given limited
competence as a means to protect the public from fraudulent acts that may be
committed using the separate juridical personality given to corporations.

Petitioner's key officers, as shareholders of FISLAI, may have an interest in ensuring

the viability of FISLAI by obtaining a loan from respondent and securing it by whatever
means. However, having interlocking officers and stockholders with FISLAI does not
mean that petitioner, as an educational institution, is or must necessarily be interested
in the affairs of FISLAI.
Since petitioner is an entity distinct and separate not only from its own officers and
shareholders but also from FISLAI, its interests as an educational institution may not be
consistent with FISLAI's.

Petitioner and FISLAI have different constituencies. Petitioner's constituents comprise

persons who have committed to developing skills and acquiring knowledge in their
chosen fields by availing the formal instruction provided by petitioner. On the other
hand, FISLAI is a thrift bank, which constituencies comprise investors.

While petitioner and FISLAI exist ultimately to benefit their stockholders, their
constituencies affect the means by which they can maintain their existence. Their
interests are congruent with sustaining their constituents' needs because their
existence depends on that. Petitioner can exist only if it continues to provide for the
kind and quality of instruction that is needed by its constituents. Its operations and
existence are placed at risk when resources are used on activities that are not geared
toward the attainment of its purpose. Petitioner has no business in securing FISLAI,
DSLAI, or MSLAI's loans. This activity is not compatible with its business of providing
quality instruction to its constituents.

Indeed, there are instances when we disregard the separate corporate personalities of
the corporation and its stockholders, directors, or officers. This is called piercing of the
corporate veil.

Corporate veil is pierced when the separate personality of the corporation is being used
to perpetrate fraud, illegalities, and injustices.108 In Lanuza, Jr. v. BF Corporation:109 chanroblesvirtuallawlibrary

Piercing the corporate veil is warranted when "[the separate personality of a

corporation] is used as a means to perpetrate fraud or an illegal act, or as a vehicle for
the evasion of an existing obligation, the circumvention of statutes, or to confuse
legitimate issues." It is also warranted in alter ego cases "where a corporation is merely
a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation."110 cralawlawlibrary

These instances have not been shown in this case. There is no evidence pointing to the
possibility that petitioner used its separate personality to defraud third persons or
commit illegal acts. Neither is there evidence to show that petitioner was merely a farce
of a corporation. What has been shown instead was that petitioner, too, had been
victimized by fraudulent and unauthorized acts of its own officers and directors.

In this case, instead of guarding against fraud, we perpetuate fraud if we accept

respondent's contentions.

IV

Petitioner argues that it did not authorize Saturnino Petalcorin to mortgage its
properties on its behalf. There was no board resolution to that effect. Thus, the
mortgages executed by Saturnino Petalcorin were unenforceable.111
The mortgage contracts executed in favor of respondent do not bind petitioner. They
were executed without authority from petitioner.

Petitioner must exercise its.powers and conduct its business through its Board of
Trustees. Section 23 of the Corporation Code provides: chanRoblesvirtualLawlibrary

SEC. 23. The board of directors or trustees—Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations controlled and held by the
board of directors or trustees to be elected from among the holders of stocks, or where
there is no stock, from among the members of the corporation, who shall hold office for
one (1) year and until their successors are elected and qualified. cralawlawlibrary

Being a juridical person, petitioner cannot conduct its business, make decisions, or act
in any manner without action from its Board of Trustees. The Board of Trustees must
act as a body in order to exercise corporate powers. Individual trustees are not clothed
with corporate powers just by being a trustee. Hence, the individual trustee cannot bind
the corporation by himself or herself.

The corporation may, however, delegate through a board resolution its corporate
powers or functions to a representative, subject to limitations under the law and the
corporation's articles of incorporation.112

The relationship between a corporation and its representatives is governed by the

general principles of agency.113 Article 1317 of the Civil Code provides that there must
be authority from the principal before anyone can act in his or her name: chanRoblesvirtualLawlibrary

ART. 1317. No one may contract in the name of another without being authorized by
the latter, or unless he has by law a right to represent him. cralawlawlibrary

Hence, without delegation by the board of directors or trustees, acts of a person—

including those of the corporation's directors, trustees, shareholders, or officers—
executed on behalf of the corporation are generally not binding on the corporation.114

Contracts entered into in another's name without authority or valid legal representation
are generally unenforceable. The Civil Code provides: chanRoblesvirtualLawlibrary

ART. 1317. . . .

A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party.
....

ART. 1403. The following contracts are unenforceable, unless they are ratified: chanRoblesvirtualLawlibrary
(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers[.] cralawlawlibrary

The unenforceable status of contracts entered into by an unauthorized person on behalf

of another is based on the basic principle that contracts must be consented to by both
parties.115 There is no contract without meeting of the minds as to the subject matter
and cause of the obligations created under the contract.116

Consent of a person cannot be presumed from representations of another, especially if

obligations will be incurred as a result. Thus, authority is required to make actions
made on his or her behalf binding on a person. Contracts entered into by persons
without authority from the corporation shall generally be considered ultra vires and
unenforceable117 against the corporation.

Two trial courts118 found that the Secretary's Certificate and the board resolution were
either non-existent or fictitious. The trial courts based their findings on the testimony of
the Corporate Secretary, Aurora de Leon herself. She signed the Secretary's Certificate
and the excerpt of the minutes of the alleged board meeting purporting to authorize
Saturnino Petalcorin to mortgage petitioner's properties. There was no board meeting
to that effect. Guillermo B. Torres ordered the issuance of the Secretary's Certificate.
Aurora de Leon's testimony was corroborated by Saturnino Petalcorin.

Even the Court of Appeals, which reversed the trial courts' decisions, recognized that
"BSP failed to prove that the UM Board of Trustees actually passed a Board Resolution
authorizing Petalcorin to mortgage the subject real properties[.]"119

Well-entrenched is the rule that this court, not being a trier of facts, is bound by the
findings of fact of the trial courts and the Court of Appeals when such findings are
supported by evidence on record.120 Hence, not having the proper board resolution to
authorize Saturnino Petalcorin to execute the mortgage contracts for petitioner, the
contracts he executed are unenforceable against petitioner. They cannot bind
petitioner.

However, personal liabilities may be incurred by directors who assented to such

unauthorized act121 and by the person who contracted in excess of the limits of his or
her authority without the corporation's knowledge.122

Unauthorized acts that are merely beyond the powers of the corporation under its
articles of incorporation are not void ab initio.

In Pirovano, et al, this court explained that corporate acts may be ultra vires but not
void.123 Corporate acts may be capable of ratification:124chanroblesvirtuallawlibrary

[A] distinction should be made between corporate acts or contracts which are illegal
and those which are merely ultra vires. The former contemplates the doing of an act
which is contrary to law, morals, or public order, or contravene some rules of public
policy or public duty, and are, like similar transactions between individuals, void. They
cannot serve as basis of a court action, nor acquire validity by performance, ratification,
or estoppel. Mere ultra vires acts, on the other hand, or those which are not illegal and
void ab initio, but are not merely within the scope of the articles of incorporation, are
merely voidable and may become binding and enforceable when ratified by the
stockholders.125cralawlawlibrary

Thus, even though a person did not give another person authority to act on his or her
behalf, the action may be enforced against him or her if it is shown that he or she
ratified it or allowed the other person to act as if he or she had full authority to do so.
The Civil Code provides: chanRoblesvirtualLawlibrary

ART. 1910. The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.

ART. 1911. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full
powers. (Emphasis supplied) cralawlawlibrary

Ratification is a voluntary and deliberate confirmation or adoption of a previous

unauthorized act. It.converts the unauthorized act of an agent into an act of the
principal.127 It cures the lack of consent at the time of the execution of the contract
entered into by the representative, making the contract valid and enforceable.128 It is,
in essence, consent belatedly given through express or implied acts that are deemed a
confirmation or waiver of the right to impugn the unauthorized act.129 Ratification has
the effect of placing the principal in a position as if he or she signed the original
contract. In Board of Liquidators v. Heirs ofM. Kalaw, et al.:130 chanroblesvirtuallawlibrary

Authorities, great in number, are one in the idea that "ratification by a corporation of an
unauthorized act or contract by its officers or others relates back to the time of the act
or contract ratified, and is equivalent to original authority;" and that "[t]he corporation
and the other party to the transaction are in precisely the same position as if the act or
contract had been authorized at the time." The language of one case is expressive:
"The adoption or ratification of a contract by a corporation is nothing more nor less than
the making of an original contract. The theory of corporate ratification is predicated on
the right of a corporation to contract, and any ratification or adoption is equivalent to a
grant of prior authority."131 (Citations omitted) cralawlawlibrary

Implied ratification may take the form of silence, acquiescence, acts consistent with
approval of the act,, or acceptance or retention of benefits.132 However, silence,
acquiescence, retention of benefits, and acts that may be interpreted as approval of the
act do not by themselves constitute implied ratification. For an act to constitute an
implied ratification, there must be no acceptable explanation for the act-other than that
there is an intention to adopt the act as his or her own.133 "[It] cannot be inferred from
acts that a principal has a right to do independently of the unauthorized act of the
agent."134

No act by petitioner can be interpreted as anything close to ratification. It was not

shown that it issued a resolution ratifying the execution of the mortgage contracts. It
was not shown that it received proceeds of the loans secured by the mortgage
contracts. There was also no showing that it received any consideration for the
execution of the mortgage contracts. It even appears that petitioner was unaware of
the mortgage contracts until respondent notified it of its desire to foreclose the
mortgaged properties.

Ratification must be knowingly and voluntarily done.135 Petitioner's lack of knowledge

about the mortgage executed in its name precludes an interpretation that there was
any ratification on its part.

Respondent further argues that petitioner is presumed to have knowledge of its

transactions with respondent because its officers, the Spouses Guillermo and Dolores
Torres, participated in obtaining the loan.136

Indeed, a corporation, being a person created by mere fiction of law, can act only
through natural persons such as its directors, officers, agents, and representatives.
Hence, the general rule is that knowledge of an officer is considered knowledge of the
corporation.

However, even though the Spouses Guillermo and Dolores Torres were officers of both
the thrift banks and petitioner, their knowledge of the mortgage contracts cannot be
considered as knowledge of the corporation.

The rule that knowledge of an officer is considered knowledge of the corporation applies
only when the officer is acting within the authority given to him or her by the
corporation. In Francisco v. Government Service Insurance System:137 chanroblesvirtuallawlibrary

Knowledge of facts acquired or possessed by an officer or agent of a corporation in the

course of his employment, and in relation to matters within the scope of his authority,
is notice to the corporation, whether he communicates such knowledge or not.138 cralawlawlibrary

The public should be able to rely on and be protected from the representations of a
corporate representative acting within the scope of his or her authority. This is why an
authorized officer's knowledge is considered knowledge of corporation. However, just as
the public should be able to rely on and be protected from corporate representations,
corporations should also be able to expect that they will not be bound by unauthorized
actions made on their account.

Thus, knowledge should be actually communicated to the corporation through its

authorized representatives. A corporation cannot be expected to act or not act on a
knowledge that had not been communicated to it through an authorized representative.
There can be no implied ratification without actual communication. Knowledge of the
existence of contract must be brought to the corporation's representative who has
authority to ratify it. Further, "the circumstances must be shown from which such
knowledge may be presumed."139

The Spouses Guillermo and Dolores Torres' knowledge cannot be interpreted as

knowledge of petitioner. Their knowledge was not obtained as petitioner's
representatives. It was not shown that they were acting for and within the authority
given by petitioner when they acquired knowledge of the loan transactions and the
mortgages. The knowledge was obtained in the interest of and as representatives of the
thrift banks.

VI

Respondent argues that Satnrnino Petalcorin was clothed with the authority to transact
on behalf of petitioner, based on the board resolution dated March 30, 1982 and Aurora
de Leon's notarized Secretary's Certificate.140 According to respondent, petitioner is
bound by the mortgage contracts executed by Saturnino Petalcorin.141

This court has recognized presumed or apparent authority or capacity to bind corporate
representatives in instances when the corporation, through its silence or other acts of
recognition, allowed others to believe that persons, through their usual exercise of
corporate powers, were conferred with authority to deal on the corporation's behalf.142

The doctrine of apparent authority does not go into the question of the corporation's
competence or power to do a particular act. It involves the question of whether the
officer has the power or is clothed with the appearance of having the power to act for
the corporation. A finding that there is apparent authority is not the same as a finding
that the corporate act in question is within the corporation's limited powers.

The rule on apparent authority is based on the principle of estoppel. The Civil Code
provides:chanRoblesvirtualLawlibrary

ART. 1431. Through estoppel an admission or representation is rendered conclusive

upon the person making it, and cannot be denied or disproved as against the person
relying thereon.
....

ART, 1869. Agency may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority.

Agency may be oral, unless the law requires a specific form. cralawlawlibrary

A corporation is estopped by its silence and acts of recognition because we recognize

that there is information asymmetry between third persons who have little to no
information as to what happens during corporate meetings, and the corporate officers,
directors, and representatives who are insiders to corporate affairs.143

In People's Air car go and Warehousing Co. Inc. v. Court of Appeals,144 this court held
that the contract entered into by the corporation's officer without a board resolution
was binding upon the corporation because it previously allowed the officer to contract
on its behalf despite the lack of board resolution.145

In Francisco, this court ruled that Francisco's proposal for redemption of property was
accepted by and binding upon the Government Service Insurance System. This court
did not appreciate the Government Service Insurance System's defense that since it
was the Board Secretary and not the General Manager who sent Francisco the
acceptance telegram, it could not be made binding upon the Government Service
Insurance System. It did not authorize the Board Secretary to sign for the General
Manager. This court appreciated the Government Service Insurance System's failure to
disown the telegram sent by the Board Secretary and its silence while it accepted all
payments made by Francisco for the redemption of property.146

There can be no apparent authority and the corporation cannot be estopped from
denying the binding affect of an act when there is no evidence pointing to similar acts
and other circumstances that can be interpreted as the corporation holding out a
representative as having authority to contract on its behalf. In Advance Paper
Corporation v. Arma Traders Corporation,147 this court had the occasion to say: chanRoblesvirtualLawlibrary

The doctrine of apparent authority does not apply if the principal did not commit any
acts or conduct which a third party knew and relied upon in good faith as a result of the
exercise of reasonable prudence. Moreover, the agent's acts or conduct must have
produced a change of position to the third party's detriment. (Citation omitted)cralawlawlibrary

Saturnino Petalcorin's authority to transact on behalf of petitioner cannot be presumed

based on a Secretary's Certificate and excerpt from the minutes of the alleged board
meeting that were found to have been simulated. These documents cannot be
considered as the corporate acts that held out Saturnino Petalcorin as petitioner's
authorized representative for mortgage transactions. They were not supported by an
actual board meeting.149

VII

Respondent argues that it may rely on the Secretary's Certificate issued by Aurora de
Leon because it was notarized.

The Secretary's Certificate was void whether or not it was notarized.

Notarization creates a presumption of regularity and authenticity on the document. This

presumption may be rebutted by "strong, complete and conclusive proof"150 to the
contrary. While notarial acknowledgment "attaches full faith and credit to the document
concerned[,]"151 it does not give the document its validity or binding effect. When there
is evidence showing that the document is invalid, the presumption of regularity or
authenticity is not applicable.

In Basilio v. Court of Appeals152 this court was convinced that the purported signatory
on a deed of sale was not as represented, despite testimony from the notary public that
the signatory appeared before him and signed the instrument.153 Apart from finding that
there was forgery,154 this court noted: chanRoblesvirtualLawlibrary

The notary public, Atty. Ruben Silvestre, testified that he was the one who notarized
the document and that Dionisio Z. Basilio appeared personally before him and signed
the. instrument himself. However, he admitted that he did not know Dionisio Z. Basilio
personally to ascertain if the person who signed the document was actually Dionisio Z.
Basilio himself, or another person who stood in his place. He could not even recall
whether the document had been executed in his office or not.

Thus, considering the testimonies of various witnesses and a comparison of the

signature in question with admittedly genuine signatures, the Court is convinced that
Dionisio Z. Basilio did not execute the questioned deed of sale. Although the questioned
deed of sale was a public document having in its favor the presumption of regularity,
such presumption was adequately refuted by competent witnesses showing its forgery
and the Court's own visual analysis of the document. (Emphasis supplied, citations
omitted)cralawlawlibrary

In Suntay v. Court of Appeals,156 this court held that a notarized deed of sale was void
because it was a mere sham.157 It was not intended to have any effect between the
parties.158 This court said: chanRoblesvirtualLawlibrary

[I]t is not the intention nor the function of the notary public to validate and make
binding' an instrument never, in the first place, intended to have any binding legal
effect upon the parties thereto.159 cralawlawlibrary

Since the notarized Secretary's Certificate was found to have been issued without a
supporting board resolution, it produced no effect. It is not binding upon petitioner. It
should not have been relied on by respondent especially given its status as a bank.

VIII

The banking institution is "impressed with public interest"160 such that the public's faith
is "of paramount importance."161 Thus, banks are required to exercise the highest
degree of diligence in their transactions.162 In China Banking Corporation v.
Lagon,163 this court found that the bank was not a mortgagee in good faith for its failure
to question the due execution of a Special Power of Attorney that was presented to it in
relation to a mortgage contract.164 This court said: chanRoblesvirtualLawlibrary

Though petitioner is not expected to conduct an exhaustive investigation on the history

of the mortgagor's title, it cannot be excused from the duty of exercising the due
diligence required of a banking institution. Banks are expected to exercise more care
and prudence than private individuals in their dealings, even those that involve
registered lands, for their business is affected with public interest.165 (Citations
omitted)  cralawlawlibrary
For its failure to exercise the degree of diligence required of banks, respondent cannot
claim good faith in the execution of the mortgage contracts with Saturnino Petalcorin.
Respondent's witness, Daciano Paguio, Jr., testified that there was no board resolution
authorizing Saturnino Petalcorin to act on behalf of petitioner.166 Respondent did not
inquire further as to Saturnino Petalcorin's authority.

Banks cannot rely on assumptions. This will be contrary to the high standard of
diligence required of them.

VI

According to respondent, the annotations of respondent's mortgage interests on the

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

Annotations of adverse claims on certificates of title to properties operate as

constructive notice only to third parties—not to the court or the registered owner.
In Sajonas v. Court of Appeals:168chanroblesvirtuallawlibrary

[Annotation of an adverse claim is a measure designed to protect the interest of a

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

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

Thus, annotations are not conclusive upon courts or upon owners who may not have
reason to doubt the security of their claim as their properties' title holders.

WHEREFORE, the Petition is GRANTED. The Court of Appeals' Decision dated

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

SO ORDERED.
G.R. No. 202514

ANNA MARIE L. GUMABON, Petitioner

vs.
PHILIPPINE NATIONAL BANK, Respondent

DECISION

BRION, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Anna
1

Marie Gumabon (Anna Marie) assailing the December 16, 2011 decision  and June 26, 2012
2

resolution  of the Court of Appeals (CA) in CA-G.R. CV. No. 96289. The CA reversed the Regional
3

Trial Court (RTC)'s ruling  in Civil Case No. Q-04-53432 favoring Anna Marie.
4

The Facts

On August 12, 2004, Anna Marie filed a complaint for recovery of sum of money and damages
before the RTC against the Philippine National Bank (PNB) and the PNB Delta branch manager
Silverio Fernandez (Fernandez). The case stemmed from the PNB’s refusal to release Anna Marie’s
money in a consolidated savings account and in two foreign exchange time deposits, evidenced
by Foreign Exchange Certificates of Time Deposit (FXCTD).

In 2001, Anna Marie, together with her mother Angeles and her siblings Anna Elena and Santiago,
(the Gumabons) deposited with the PNB Delta Branch $10,945.28 and $16,830.91, for which they
were issued FXCTD Nos. A-993902  and A-993992,  respectively.
5 6

The Gumabons also maintained eight (8) savings accounts  in the same bank. Anna Marie decided
7

to consolidate the eight (8) savings accounts and to withdraw ₱2,727,235.85 from the consolidated
savings account to help her sister’s financial needs.

Anna Marie called the PNB employee handling her accounts, Reino Antonio Salvoro (Salvoro), to
facilitate the consolidation of the savings accounts and the withdrawal. When she went to the bank
on April 14, 2003, she was informed that she could not withdraw from the savings accounts since
her bank records were missing and Salvoro could not be contacted.

On April 15, 2003, Anna Marie presented her two FXCTDs, but was also unable to withdraw against
them. Fernandez informed her that the bank would still verify and investigate before allowing the
withdrawal since Salvoro had not reported for work.

Thus, Anna Marie sent two demand letters  dated April 23 and April 25, 2003 to the PNB.
8

After a month, the PNB finally consolidated the savings accounts and issued a passbook
for Savings Account (SA) No. 6121200.  The PNB also confirmed that the total deposits amounted
9

to ₱2,734,207.36. Anna Marie, her mother, and the PNB executed a Deed of Waiver and
Quitclaim dated May 23, 2003  to settle all questions regarding the consolidation of the savings
10

accounts. After withdrawals, the balance of her consolidated savings account was ₱250,741.82.

On July 30, 2003, the PNB sent letters to Anna Marie to inform her that the PNB refused to honor its
obligation under FXCTD Nos. 993902 and 993992,  and that the PNB withheld the release of the
11
balance of ₱250,741.82 in the consolidated savings account.  According to the PNB, Anna Marie
12

pre-terminated, withdrew and/or debited sums against her deposits.

Thus, Anna Marie filed before the RTC a complaint for sum of money and damages against the
PNB and Fernandez. 13

As to the two FXCTDs, Anna Marie contended that the PNB’s refusal to pay her time deposits is
contrary to law.  The PNB cannot claim that the bank deposits have been paid since the certificates
1âwphi1

of the time deposits are still with Anna Marie.

14

As to the consolidated savings account, Anna Marie stated that the PNB had already acknowledged
the account’s balance in the Deed of Waiver and Quitclaim amounting to ₱2,734,207.36. As of
January 26, 2004, the remaining balance was ₱250,741.82. PNB presented no concrete proof that
this amount had been withdrawn.

Anna Marie prayed that the PNB and Fernandez be held solidarily liable for actual, moral, and
exemplary damages, as well as attorney’s fees, costs of suit, and legal interests because of the
PNB’s refusal to honor its obligations.

In its answer,  the PNB argued that: (1) Anna Marie is not entitled to the balance of the consolidated
15

savings account based on solutio indebiti; (2) the PNB already paid the $10,058.01 covered by
FXCTD No. 993902; (3) the PNB is liable to pay only $10,718.87 of FXCTD No. 993992, instead of
the full amount of $17,235.41; and (4) Anna Marie is guilty of contributory negligence. The PNB’s
arguments are discussed below.

First, Anna Marie is not entitled to the alleged balance of ₱250,741.82. The PNB’s investigation
showed that Anna Marie withdrew a total of ₱251,246.81  from two of the eight savings accounts
16

and she used this amount to purchase manager’s check No. 0000760633.  Hence, ₱251,246.81
17

should be deducted from the sum agreed upon in the Deed of Waiver and Quitclaim. The PNB
offered photocopies of the PNB’s miscellaneous ticket  and the manager’s check as evidence to
18

prove the withdrawals. The PNB argued that unjust enrichment would result if Anna Marie would be
allowed to collect ₱250,741.82 from the consolidated savings account without deducting her
previous withdrawal of ₱251,246.81.

Second, Anna Marie is not entitled to receive $10,058.01 covered by FXCTD No. 993902. Based on
the PNB’s records, Anna Marie pre-terminated FXCTD No. 993902 on March 11, 2002, and used the
deposit, together with another deposit covered by FXCTD No. 993914 (for $8,111.35), to purchase
a foreign demand draft (FX Demand Draft No. 4699831) payable to Anna Rose/Angeles Gumabon.
The PNB presented a facsimile copy of Anna Rose’s Statement of Account (SOA)  from the PNB
19

Bank to prove that the amount covered by FXCTD No. 993902 was already paid.

Third, Anna Marie is only entitled to receive $10,718.87 instead of the full amount of $17,235.41
covered by FXCTD No. 993992 because: (a) the amount of $1,950.00 was part of the money used
by Anna Marie to purchase the manager’s check; (2) the amount of $2,566.54 was credited to
Current Account No. 227-810961-8 owned by Anna Marie’s aunt, Lolita Lim; and (3) the amount of
$2,000.00 was credited to Current Account No. 2108107498 of Anna Marie and Savings Account
No. 212-5057333 of Anna Marie/or Angeles or Santiago/or Elena (all surnamed Gumabon). Hence,
these amounts should be deducted from the amount payable to Anna Marie.

Finally, the PNB alleged that Anna Marie was guilty of contributory negligence in her bank dealings.
In her reply,  Anna Marie argued that the best evidence of her withdrawals is the withdrawal slips
20

duly signed by her and the passbooks pertaining to the accounts. PNB, however, failed to show any
of the withdrawal slips and/or passbooks, and also failed to present sufficient evidence that she used
her accounts’ funds.

The RTC Ruling

The RTC ruled in Anna Marie’s favour. 21

The RTC held that the PNB had not yet paid the remaining balance of $10,058.01 under FXCTD No.
993902. Anna Marie’s SOA,  which the PNB relied upon, is a mere photocopy and does not satisfy
22

the best evidence rule. Moreover, there is no indication on the stated amounts in the SOA that the
funds have come from FXCTD No. 993902.  The PNB failed to obtain the deposition of a PNC Bank
23

officer or present any other evidence to show that the amounts stated in the SOA came from FXCTD
No. 993902. The RTC also held that the alleged pre-termination of FXCTD No. 993902 on March 11,
2002, is hard to believe since the certificate shows that the last entry was made on March 24, 2003,
with a reflected balance of $10,058.01.

On FXCTD No. 993992, the RTC held that the PNB failed to prove Anna Marie’s alleged
withdrawals. These alleged withdrawals are not reflected at the back of the certificate. Anna Marie’s
ledger was also not presented as evidence to show that several withdrawals had been made against
FXCTD No. 993992.

On the consolidated savings account, the RTC held that the PNB failed to prove that Anna Marie
withdrew the balance of ₱250,741.82. The RTC excluded PNB’s evidence, i.e., photocopies of the
miscellaneous ticket and manager’s check, to prove the alleged withdrawals, since these documents
were just photocopies and thus failed to satisfy the best evidence rule.

The RTC awarded damages to Anna Marie due to the PNB’s mishandling of her account through its
employee, Salvoro. The RTC also held that the PNB failed to establish Anna Marie’s contributory
negligence.

In conclusion, the RTC ordered the PNB to pay Anna Marie these amounts:

(1) Actual damages of:

(a) $10,058.01, as the outstanding balance of FXCTD No. 993902;

(b) $20,244.42, as the outstanding balance of FXCTD No. 993992;and

(c) ₱250,741.82, as the outstanding balance of SA No. 6121200;

(2) ₱100,000.00 as moral damages;

(3) ₱50,000.00 as exemplary damages;

(4) ₱150,000.00 as attorney’s fees; and

(5) Costs of suit.

From this ruling, the PNB appealed before the CA.

The CA Ruling

The CA reversed the RTC’s ruling. 24

The CA held that the PNB had paid the actual amounts claimed by Anna Marie in her complaint. The
CA noted Anna Marie’s suspicious and exclusive dealings with Salvoro and the Gumabons’
instruction to Salvoro to make unauthorized and unrecorded withdrawals. Hence, there are no
entries of withdrawals reflected in Anna Marie’s passbook.

The CA also considered Anna Rose’s SOA as proof that the PNB had paid the remaining balance of
$10,058.01 on FXCTD No. 993902. The CA held that the PNB verified the SOA and it was
corroborated by the affidavit  of the PNB Branch Operations Officer in New York. The CA stated
25

that the RTC should have allowed the taking of the deposition of the PNB bank officer.

The CA also relied on the PNB’s investigation and concluded that the PNB had already paid the
amounts claimed by Anna Marie under FXCTD Nos. 993902 and 993992.

As to Anna Marie’s consolidated savings account, the CA gave credence to the miscellaneous ticket
and the manager’s check presented by the PNB to prove that it had already paid the balance.

Anna Marie moved but failed to obtain reconsideration of the CA’s decision; hence, the present
petition.
26

The Petition

Anna Marie filed the present petition for review to question the CA’s decision and resolution which
reversed the RTC’s ruling.

Anna Marie argues that: first, the CA should not have disregarded the RTC’s conclusive
findings; second, the CA erred in considering the PNB New York bank officer’s affidavit because it
was not formally offered as evidence; third, the CA erroneously relied on a foreign demand draft  to
27

prove the PNB’s payment of the amount due under FXCTD No. 993902; fourth, the CA erroneously
considered the miscellaneous ticket and the manager’s check because these documents are mere
photocopies and inadmissible under the best evidence rule; and fifth, the CA’s conclusion about a
purported "connivance" between Anna Marie and Salvoro has no evidentiary basis.

In its comment, the PNB counters that: first, the CA can rectify the RTC’s factual findings since the
RTC committed errors in its appreciation of the evidence; second, the RTC completely ignored the
PNB’s several evidence proving its payment of Anna Marie’s FXCTDs; third, Anna Marie did not
refute the PNB’s allegations of payment; fourth, the CA has the right to review even those exhibits
which were excluded by the RTC; and fifth, the CA correctly ruled that the PNB should not be faulted
about the unrecorded transactions, and that the PNB had done its duty to its depositors when it
conducted investigations and an internal audit of Anna Marie’s accounts.

The Issues

The issue before this Court is whether Anna Marie is entitled to the payment of the following
amounts:

(a) $10,058.01 or the outstanding balance under FXCTD No. 993902;

(b) $20,244.42 for FXCTD No. 993992;

(c) ₱250,741.82 for SA No. 6121200; and

(3) Damages.

Our Ruling

We grant the petition and reverse the CA’s ruling.

The core issue raised in the present petition is a question of fact. As a general rule, a petition for
review under Rule 45 of the Rules of Court covers only questions of law. Questions of fact are not
reviewable and cannot be passed upon by the Court in the exercise of its power to review under
Rule 45.28

There are, however, exceptions to the general rule. Questions of fact may be raised before this
Court in any of these instances: (1) when the findings are grounded entirely on speculations,
surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible;
(3) when there is a grave abuse of discretion; (4) when the judgment is based on misappreciation of
facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the same are
contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to
those of the trial court; (8) when the findings are conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the petition as well as in the petitioners main
and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised
on the supposed absence of evidence and contradicted by the evidence on record. 29

The present case falls under two of the exceptions, particularly that the CA’s findings are contrary to
the RTC’s findings, and that the CA’s findings of fact are premised on absent evidence and
contradicted by the evidence on record.

We note that the CA considered pieces of evidence which are inadmissible under the Rules of Court,
particularly the manager’s check and the corresponding miscellaneous ticket, Anna Rose’s SOA,
and the affidavit of the PNB New York’s bank officer. The inadmissibility of these documents is
explained more fully in the following discussion.

PNB failed to establish the fact of

payment to Anna Marie in FXCTD
Nos. 993902 and 993992, and SA No. 6121200.

It is a settled rule in evidence that the one who alleges payment has the burden of proving it.  The
30

burden of proving that the debt had been discharged by payment rests upon the debtor once the
debt’s existence has been fully established by the evidence on record. When the debtor introduces
some evidence of payment, the burden of going forward with the evidence – as distinct from the
burden of proof – shifts to the creditor. Consequently, the creditor has a duty to produce evidence to
show non-payment. 31

In the present case, both the CA and the RTC declared that the PNB has the burden of proving
payment. The lower courts, however, differed in resolving the question of whether the PNB
presented sufficient evidence of payment to shift the burden of evidence to Anna Marie. The RTC
ruled that the PNB failed to do so, after excluding PNB’s evidence, i.e., miscellaneous ticket,
manager’s check, and the affidavit of the PNB New York’s bank officer, based on the rules of
evidence. The CA, on the other hand, considered the excluded evidence and found that the PNB
presented sufficient proof of payment.

i. The PNB’s alleged payment of

the amount covered by SA No.
6121200

The PNB alleged that it had already paid the balance of the consolidated savings account (SA No.
6121200) amounting to P250,741.82. It presented the manager’s check to prove that Anna Marie
purchased the check using the amounts covered by the Gumabon’s two savings accounts which
were later part of Anna Marie’s consolidated savings account. The PNB also presented the
miscellaneous ticket to prove Anna Marie’s withdrawal from the savings accounts.

The RTC denied the admission of the manager’s check and the miscellaneous ticket since the
original copies were never presented.  The PNB moved to tender the excluded evidence and argued
32

that even without the presentation of the original copies, the photocopies are admissible because
they have been identified by Fernandez. 33

Evidence, to be admissible, must comply with two qualifications: (a) relevance and (b) competence.
Evidence is relevant if it has a relation to the fact in issue as to induce a belief in its existence or
nonexistence.  On the other hand, evidence is competent if it is not excluded by the law or by the
34

Rules of Court. 35

One of the grounds under the Rules of Court that determines the competence of evidence is the best
evidence rule. Section 3, Rule 130 of the Rules of Court provides that the original copy of the
document must be presented whenever the content of the document is under inquiry. 36

However, there are instances when the Court may allow the presentation of secondary evidence in
the absence of the original document. Section 3, Rule 130 of the Rules of Court enumerates these
exceptions:

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

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

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

(d) when the original is a public record in the custody of a public officer or is recorded in a public
office.

While the RTC cannot consider the excluded evidence to resolve the issues, such evidence may still
be admitted on appeal provided there has been tender of the excluded evidence under Section 40 of
Rule 132 of the Rules of Court. 37

The PNB cannot simply substitute the mere photocopies of the subject documents for the original
copies without showing the court that any of the exceptions under Section 3 of Rule 130 of the Rules
of Court applies. The PNB’s failure to give a justifiable reason for the absence of the original
documents and to maintain a record of Anna Marie’s transactions only shows the PNB’s dismal
failure to fulfill its fiduciary duty to Anna Marie.  The Court expects the PNB to "treat the accounts of
38

its depositors with meticulous care, always having in mind the fiduciary nature of their
relationship."  The Court explained in Philippine Banking Corporation v. CA,  the fiduciary nature of
39 40

the bank’s relationship with its depositors, to wit:

The business of banking is imbued with public interest. The stability of banks largely depends on the
confidence of the people in the honesty and efficiency of banks. In Simex International (Manila) Inc.
v. Court of Appeals we pointed out the depositor’s reasonable expectations from a bank and the
bank’s corresponding duty to its depositor, as follows:

In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether
such account consists only of a few hundred pesos or of millions. The bank must record every
single transaction accurately, down to the last centavo, and as promptly as possible.  This has
to be done if the account is to reflect at any given time the amount of money the depositor can
dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs.
(emphasis and underscoring supplied)

Consequently, the CA should not have admitted the subject documents even if the PNB tendered
the excluded evidence.

Notably, the PNB clearly admitted in the executed Deed of Waiver and Quitclaim that it owed Anna
Marie ₱2,734,207.36 under the consolidated savings account. After a number of uncontested
transactions, the remaining balance of Anna Marie’s deposit became ₱250,741.82. The inevitable
conclusion is that PNB’s obligation to pay ₱250,741.82 under SA No. 6121200 subsists.

ii. The PNB’s alleged payment of

the amount covered by FXCTD No. 993902

The PNB claimed that it had already paid the amount of $10,058.01 covered by FXCTD No. 993902.
It presented the foreign demand draft dated March 11, 2002 which Anna Marie allegedly purchased
with the funds of FXCTD No. 993902. In addition, the PNB also presented Anna Rose’s SOA to
show that there was a fund transfer involving the contested amount. To further support its claim, the
PNB annexed the affidavit of the PNB New York’s branch officer about the fund transfer. The PNB,
however, failed to formally offer the affidavit as evidence.

Anna Marie moved for the exclusion of the photocopy of Anna Rose’s SOA for failing to conform to
the best evidence rule. The RTC granted her motion and denied its admission. When the case
reached the CA, the CA stated that the RTC should have considered the evidence in the light of the
PNB’s identification of the SOA as an exact copy of the original and the claim that it is corroborated
by the affidavit of the PNB New York’s bank officer.

The PNB explained that its failure to present the original copy of Anna Rose’s SOA was because the
original was not in the PNB’s possession.

We rule that the SOA is inadmissible because it fails to qualify as relevant evidence. As the RTC
correctly stated, the SOA "does not show which of the amount stated therein came from the funds of
Certificate of Time Deposit No. A-993902." 41

The affidavit of the PNB New York’s bank officer is also inadmissible in the light of the following
self-explanatory provision of the Rules of Court:
"Sec. 34. Offer of evidence. – The court shall consider no evidence which has not been formally
offered. x x x."
42

Formal offer means that the offeror shall inform the court of the purpose of introducing its exhibits
into evidence. Without a formal offer of evidence, courts cannot take notice of this evidence even if
this has been previously marked and identified. 43

In Heirs of Pedro Pasag v. Parocha,  we reiterated the importance of a formal offer of evidence.
44

Courts are mandated to rest their factual findings and their judgment only and strictly upon the
evidence offered by the parties at the trial. The formal offer enables the judge to know the purpose
or purposes for which the proponent is presenting the evidence. It also affords the opposing parties
the chance to examine the evidence and to object to its admissibility. Moreover, it facilitates review
as the appellate court will not be required to review documents not previously scrutinized by the trial
court.

In People v. Napat-a,  People v. Mate,  and Heirs of Romana Saves, et al. v. Escolastico Saves, et
45 46

al.,  we recognized the exceptions from the requirement of a formal offer of evidence, namely: (a)
47

the evidence must have been duly identified by testimony duly recorded; and (b) the evidence must
have been incorporated in the records of the case.

It is unmistakable that the PNB did not include the affidavit of the PNB New York’s bank officer in its
formal offer of evidence to corroborate Anna Rose’s SOA. Although the affidavit was included in the
records and identified by Fernandez, it remains inadmissible for being hearsay. Jurisprudence
dictates that an affidavit is merely hearsay evidence when its affiant or maker did not take the
witness stand.48

In the present case, Fernandez is not the proper party to identify the affidavit executed by the PNB
New York’s bank officer since he is not the affiant. Therefore, the affidavit is inadmissible.

Thus, the PNB failed to present sufficient and admissible evidence to prove payment of the
$10,058.01.This failure leads us to conclude that the PNB is still liable to pay the amount covered by
FXCTD No. 993902.

iii. The PNB’s alleged payment of

the amount covered by FXCTD No. 993992

The PNB alleged that Anna Marie’s claim over FXCTD No. 993992 should only be limited to
$5,857.79. It presented the manager’s check, which admissibility we have heretofore discussed and
settled, and the miscellaneous tickets.

We cannot absolve the PNB from liability based on these miscellaneous tickets alone. As the RTC
correctly stated, the transactions allegedly evidenced by these tickets were neither posted at the
back of Anna Marie’s certificate, nor recorded on her ledger to show that several withdrawals had
been made on the account.

At this point, we remind the PNB of the negotiability of a certificate of deposit as it is a written
acknowledgment by the bank of the receipt of a sum of money on deposit which the bank promises
to pay to the depositor, to the latter’s order, or to some other person or the latter’s order.  To
49

discharge a debt, the bank must pay to someone authorized to receive the payment.  A bank acts at
50

its peril when it pays deposits evidenced by a certificate of deposit, without its production and
surrender after proper indorsement. 51
Again, as the RTC had correctly stated, the PNB should not have allowed the withdrawals, if there
were indeed any, without the presentation of the covering foreign certificates of time deposit. There
are no irregularities on Anna Marie’s certificates to justify the PNB’s refusal to pay the stated
amounts in the certificates when it was presented for payment.

Therefore, the PNB is liable for Anna Marie’s claims since it failed to prove that it had already been
discharged from its obligation.

PNB is liable to Anna Marie for actual, moral, and

exemplary damages as well as attorney’s fees for its
negligent acts as a banking institution.

Since the PNB is clearly liable to Anna Marie for her deposits, the Court now determines PNB’s
liability for damages under existing laws and jurisprudence.

Section 2 of Republic Act No. 8791,  declares the State’s recognition of the "fiduciary nature of
52

banking that requires high standards of integrity and performance." It cannot be overemphasized
that the banking business is impressed with public interest. The trust and confidence of the public to
the industry is given utmost importance.  Thus, the bank is under obligation to treat its depositor’s
53

accounts with meticulous care, having in mind the nature of their relationship.  The bank is required
54

to assume a degree of diligence higher than that of a good father of a family. 55

As earlier settled, the PNB was negligent for its failure to update and properly handle Anna Marie’s
accounts. This is patent from the PNB’s letter to Anna Marie, admitting the error and unauthorized
withdrawals from her account. Moreover, Anna Marie was led to believe that the amounts she has in
her accounts would remain because of the Deed of Waiver and Quitclaim executed by her, her
mother, and PNB. Assuming arguendo that Anna Marie made the contested withdrawals, due
diligence requires the PNB to record the transactions in her passbooks.

The Court has established in a number of cases the standard of care required from banks, and the
bank’s liability for the damages sustained by the depositor. The bank is not absolved from liability by
the fact that it was the bank’s employee who committed the wrong and caused damage to the
depositor.  Article 2180 of the New Civil Code provides that the owners and managers of an
56

establishment are responsible for damages caused by their employees while performing their
functions.57

In addition, we held in PNB v. Pike,  that although the bank’s employees are the ones negligent, a
58

bank is primarily liable for the employees’ acts because banks are expected to exercise the highest
degree of diligence in the selection and supervision of their employees.

Indeed, a great possibility exists that Salvoro was involved in the unauthorized withdrawals. Anna
Marie entrusted her accounts to and made her banking transactions only through him. Salvaro’s
unexplained disappearance further confirms this Court’s suspicions. The Court is alarmed that he
was able to repeatedly do these unrecorded transactions without the bank noticing it. This only
shows that the PNB has been negligent in the supervision of its employees.

As to contributory negligence, the Court agrees with the RTC that the PNB failed to substantiate its
allegation that Anna Marie was guilty of contributory negligence.
Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to
the harm he has suffered, which falls below the standard to which he is required to conform for his
own protection.  Whether contributory negligence transpired is a factual matter that must be proven.
59

In the present case, Anna Marie cannot be held responsible for entrusting her account with Salvoro.
As shown in the records, Salvoro was the bank’s time deposit specialist. Anna Marie cannot thus be
faulted if she engaged the bank’s services through Salvoro for transactions related to her time
deposits.

The Court also cannot accept the CA’s conclusion that there was connivance between Anna Marie
and Salvoro. This conclusion is simply not supported by the records and is therefore baseless.

In these lights, we hold that Anna Marie is entitled to moral damages of ₱100,000.00. In cases of
breach of contract, moral damages are recoverable only if the defendant acted fraudulently or in bad
faith, or is guilty of gross negligence amounting to bad faith, or in clear disregard of his contractual
obligations.  Anna Marie was able to establish the mental anguish and serious anxiety that she
60

suffered because of the PNB’s refusal to honor its obligations.

Anna Marie is likewise entitled to exemplary damages of ₱50,000.00. Article 2229 of the New Civil
Code imposes exemplary damages by way of example or correction for the public good. To repeat,
banks must treat the accounts of its depositors with meticulous care and always have in mind the
fiduciary nature of its relationship with them.  Having failed to observe these, the award of exemplary
61

damages is justified.

As exemplary damages are awarded herein  and as Anna Marie was compelled to litigate to protect
62

her interests,  the award of attorney’s fees and expenses of litigation of ₱150,000.00 is proper.
63

Finally, we impose legal interest pursuant to the guidelines in Nacar v. Gallery Frames.  We held in
64

that case that for interest awarded on actual and compensatory damages, the interest rate is
imposed as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum [changed to 6% per
annum starting July 1, 2013] to be computed from default, i.e., from extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

xxxx

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest x x x shall be 6% per annum from such finality until its satisfaction. x x x

We note that pursuant to the Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, the legal
interest rate is 6% per annum effective July 1, 2013. The new rate is applicable prospectively; thus,
the 12% per annum shall still apply until June 30, 2013.

In the present case, Anna Marie filed her complaint on August 12, 2004. PNB is therefore liable for
legal interest of 12% per annum from Augus t 12, 2004 until June 30, 2013, and 6% per annum from
July 1, 2013, until its full satisfaction.
WHEREFORE, the petition is GRANTED. The assailed December 16, 2011 decision and June 26,
2012 resolution of the Court of Appeals is hereby reversed. The October 26, 2010 decision of the
Regional Trial Court is REINSTATED with MODIFICATIONS. Thus, the Philippine National Bank
is ORDERED to pay Anna Marie Gumabon the following:

(1) Actual damages of:

(a) $10,058.01, as the outstanding balance of FXCTD No. 993902;

(b) $ 20,244.42, as the outstanding balance of FXCTD No. 993992; and

(c) ₱250,741.82, as the outstanding balance of SA No. 6121200;

(2) Legal interest of twelve percent (12%) per annum of the total actual damages from August 12,
2004 to June 30, 2013, and six percent (6o/o) per annum from July 1, 2013 until full satisfaction;

(3) ₱l00,000.00 as moral damages;

(4) ₱50,000.00 as exemplary damages;

(5) ₱l50,000.00 as attorney's fees; and

(7) Costs of suit.

Let a copy of this Decision be furnished the Financial Consumers Protection Department of the
Bangko Sentral ng Pilipinas, for information and possible action in accordance with the Bangko
Sentral ng Pilipinas' mandate to protect the banking public.

SO ORDERED.
G.R. No. 175874               December 11, 2013

HEIRS OF CIPRIANO TRAZONA, Namely: FRANCISCA T. MATBAGON, NATIVIDAD T.

ABADIANO, CARLITO C. TRAZONA; and Heirs of EDELBERTO C. TRAZONA represented by
his daughter DOMICINA T. ARANAS, ELADIA T. ALICAMEN (Now Deceased) Substituted by
DOMINGO ALICAMEN, LUPECIO ALICAMEN, REBECCA ALICAMEN-BALBUTIN, ELSEI
ALICAMEN, GLENN ALICAMEN, LENNEI ALICAMEN-GEONZON, DANILO ALICAMEN,
JOVELYN ALICAMEN-VILLETA, JIMBIE ALICAMEN and HERMOGENES C. TRAZONA (Now
Deceased) Substituted by LILYBETH TRAZONA-MANGILA, GEMMA TRAZONA, ELIZALDE
TRAZONA, BOBBY TRAZONA, and PALABIANA B. TRAZONA, Petitioners,
vs.
HEIRS OF DIONISIO CANADA, Namely: ROSITA C. GERSALINA, CONCEPTION C. GEONZON,
DANIEL CANADA, GORGONIO CANADA, LEOPOLDO CANADA, SUSANA C. DUNGOG,
LUZVIMINDA C. TABUADA, AND CEFERINA CANADA; PROVINCIAL ASSESSOR of Cebu and
MUNICIPAL ASSESSOR of Minglanilla, Cebu, Respondents.

DECISION

SERENO, CJ.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision  and Resolution  of the Court of Appeals Cebu City (CA) in CA-G.R. CV No. 00099. The CA
1 2

reversed the Decision  of the Regional Trial Court of Cebu City, Branch 57 (RTC) in Civil Case No.
3

CEB-20620, which annulled the Deed of Absolute Sale dated 27 June 1956 and ordered the
cancellation of Tax Declaration No. 23959 in the name of Dionisio Cañada (Dionisio), predecessor of
respondents.

Petitioners are heirs of Cipriano Trazona (Cipriano), who owned an untitled parcel of land referred to
as Lot No. 5053-H. The property, located in Minglanilla, Cebu, is covered by Tax Declaration No.
07764 and has an area of 9,515 square meters.  The land was purchased from the government in
4

1940.  Since then, Cipriano had taken possession of the land, cultivated it and diligently paid taxes
5

thereon. 6

In 1949, Dionisio bought the adjacent parcel of land from Pilar Diaz.  It was later found that he had
7

encroached on a small portion of Lot No. 5053-H. He was then summoned by Cipriano for a
confrontation before the barangay captain in 1952.  Dionisio offered to buy the encroached portion,
8

but Cipriano refused the offer.  In 1956, the latter gave Dionisio permission to temporarily build a
9

house on said portion, where it still stands.  No action for ejectment was filed against Dionisio during
10

the lifetime of Cipriano,  who eventually died on 18 May 1982.  The latter’s son Hermogenes, one of
11 12

the petitioners herein who had cultivated the lot since 1972, took over.  On 24 March 1992, Dionisio
13

died.14

The present controversy arose in 1997. Petitioners went to the Office of the Municipal Assessor to
secure a copy of Tax Declaration No. 07764, as they intended to sell Lot No. 5053-H to an interested
buyer.  To their surprise, they were informed that Tax Declaration No. 07764 had been cancelled
15

and, in lieu thereof, Tax Declaration No. 23959 was issued on 24 June 1996 in the name of
Dionisio.  Apparently, respondents had caused the issuance of Tax Declaration No. 23959 by
16
submitting a Deed of Absolute Sale dated 27 June 1956 supposedly executed by Cipriano in favor of
Dionisio.  That sale involved a portion of Lot No. 5053-H described as follows:
17

x x x that portion of land of Lot No. FIVE THOUSAND FIFTY THREE-H (5053-H) under subdivision
plan FLR-133 approved by the Director of Lands Jose P. Dans on September 5, 1953, covered by
monuments No. 7, 8, 9, 10, 11, of said Lot No. 5053 bounded on the North by Lot No. 5954 & portion
of Lot 5053-H; East by portion of Lot 5053-H; South by Lot no. 5053-J of Domingo Ababon; West by
Lot no. 9479; x x x. 18

Petitioners summoned respondents before the Lupon Tagapamayapa, but the conciliation was not
successful.  On 28 July 1997, petitioners filed a Complaint  against respondents for quieting of title,
19 20

annulment of deed of sale, cancellation of Tax Declaration No. 23959, recovery of possession and
ownership, damages, and payment of attorney’s fees. Petitioners alleged therein that the Deed of
Absolute Sale dated 27 June 1956 was a forgery. Respondents, in their Answer,  alleged that the
21

assailed deed was a genuine document and asked for the payment of moral and exemplary
damages, and attorney’s fees, as counterclaims.

During trial, among the witnesses presented by petitioners was Romeo O. Varona, document
examiner of the Philippine National Police Crime Laboratory, Region VII. He testified that according
to his comparative analysis of Cipriano’s signature on the assailed deed and standard signatures on
other documents, Cipriano’s signature on the deed in question was a forgery. 22

For their part, respondents presented Dionisio’s son Gorgonio, who testified that he was present
when the assailed deed was executed.  He also stated that they had enjoyed the fruits of the lot in
23

question from 1956 until 1960, when they were confronted by petitioners. Respondents were asked
to show proof of ownership, but could not present any.  Thus, from 1960 onwards, petitioners
24

enjoyed the fruits of the property.  Later, respondents were able to find a copy of the assailed deed
25

in the National Archives, thereby enabling them to cause the issuance of Tax Declaration No.
23959. 26

In the presentation of their rebuttal evidence, petitioners presented a Deed of Absolute Sale dated
11 April 1953,  executed by Pilar Diaz in favor of Dionisio.  This prior sale involved the exact same
27
1âwphi1

portion allegedly sold to him by Cipriano – except that in the date of approval of the subdivision plan
by the Director of Lands, two figures were interchanged. Whereas the assailed deed showed the
date as "September 5, 1953," the Deed of Absolute Sale dated 11 April 1953 showed the date as
"September 5, 1935."

In its Decision dated 6 April 2004, the RTC annulled the assailed deed and ordered the cancellation
of Tax Declaration No. 23959, as well as the reinstatement of Tax Declaration No.
07764.  Respondents were also ordered to demolish their residential house on Lot No. 5053-H and
28

to pay petitioners attorney’s fees and litigation expenses. 29

The RTC found that respondents’ failure to present the deed for 40 years from its alleged execution
had not been satisfactorily and convincingly explained.  It also found that the assailed deed was
30

indeed a forgery for the following reasons:

1. It would have been pointless for Dionisio to buy the same property twice from different
owners.

2. Cipriano’s residence certificate, whose number was indicated in the assailed deed, as well
as in the notarial register where the deed was recorded, was allegedly issued in Minglanilla,
Cebu. The other persons’ residence certificates, whose numbers were indicated on the same
 page of the notarial register, appear to have come from the same booklet as the residence
certificate of Cipriano, judging from their numerical sequence. However, the residence
certificates of these other persons had been issued in Sogod, Cebu.

3. There was indeed a glaring difference between the alleged signature of Cipriano in the
assailed deed and in his standard signatures in 10 other documents submitted by plaintiffs.

Respondents filed a Notice of Appeal dated 30 April 2004.

RULING OF THE CA

On 25 May 2006, the CA issued a Decision reversing that of the RTC. The appellate court ruled that
petitioners had failed to prove by requisite evidence their allegation that the assailed deed was a
forgery.  The deed, being a notarized document, enjoyed the presumption of authenticity and due
31

execution. Also, the fact that it was an ancient document that "remained unaltered after so many
years, bodes well for its authenticity." 32

The CA also concluded that the document examiner was not able to determine the forgery with
certainty. What he had examined was a mere machine copy of the assailed deed.  Furthermore,
33

even he admitted that the standard signatures of Cipriano had shown variations among themselves.

Finally, the CA ruled that respondents were the actual possessors of Lot No. 5053-H, since it was
their house that was standing on the property.  Thus, the CA granted the appeal and consequently
34

dismissed the Complaint of petitioners.

ISSUES

Petitioners come before us on a Petition for Review on Certiorari 35

alleging that the CA erred as follows:

1. Ruling that petitioners were not able to overturn the presumption of regularity of the
assailed deed;

2. Finding that the document examiner was not able to establish the forgery with certainty;

3. Finding that respondents were in actual possession of Lot No. 5053-H;

4. Ruling that there was no merit in petitioners’ prayer for the award of attorney’s fees and
litigation expenses.

OUR RULING

Petitioners presented clear and convincing

evidence that the assailed deed is a forgery.

Well-settled is the rule that petitions for review on certiorari under Rule 45 before this Court should
involve only questions of law.  A reading of the issues raised by petitioners readily show that they
36

are questions of fact, which are generally not within the purview of this Court. When a question
involves facts, the findings of the CA, including the probative weight accorded to certain pieces of
evidence, are binding on this Court. Also well-settled, however, are exceptions to this rule,  such as
37

when the findings of fact of the CA are contrary to those of the RTC, as in this case.

We sustain the findings of the RTC.

At the outset, it is worth pointing out that the sale of a mere portion of Lot No. 5053-H was what
brought about the cancellation of Tax Declaration No. 07764 and the consequent issuance of Tax
Declaration No. 23959, each of which covered the entire lot. The fact that the assailed deed covers
only a portion of Lot No. 5053-H becomes clearer still when one considers that it was bounded on
the north and the east by portions of Lot No. 5053-H itself.

As will be shown below, the assailed deed is a forgery. Assuming it were genuine, petitioners have a
right to the rest of the property not covered by the purported sale. If the procedure for the issuance
of tax declarations was followed – if care had been observed to make sure that all papers were in
order and understood – this irregularity would not have taken place.

It is true that notarized documents are accorded evidentiary weight as regards their due
execution.  Nevertheless, while notarized documents enjoy the presumption of regularity, this
38

presumption is disputable. They can be contradicted by evidence that is clear, convincing, and more
than merely preponderant.  Here, contrary to the conclusion of the CA, we find clear and convincing
39

evidence that is enough to overturn the presumption of regularity of the assailed deed.

First, the document examiner determined that the signature of Cipriano in the assailed deed had
been forged. No issue has been raised about his expertise. The finding of the CA that he had
examined a mere machine copy of the assailed deed was erroneous. The pertinent portion of his
testimony clearly shows otherwise, to wit:

ATTY. DURANO:

Q: Now you made mention of the standard documents, could you kindly tell the Honorable Court
what is [the] questioned document stated in your report?

[ROMEO O. VARONA]

[A]: The questioned document is the Deed of Absolute Sale dated June 27, 1956.

Q: Do you have a copy of that Deed of Sale as examined by you?

A: Well, I have a machine copy. I have examined the original copy at the archive’s office,
Mandaue City.  (Emphasis supplied)
40

In concluding that the signature of Cipriano in the assailed deed was a forgery, the document
examiner found that there were "significant differences in letter formation, construction and other
individual handwriting characteristics" between the assailed and the standard signatures of
Cipriano.41

The fact that the document examiner himself admitted that even the standard signatures of Cipriano
showed variations among themselves does not make the former’s determination any less
convincing. He explained that while every signature of the same person varies, the individual
handwriting characteristics of the person remain the same.  In Cesar v. Sandiganbayan,  we
42 43
recognized that there is bound to be some variation in the different samples of genuine signatures of
the same person.

Second, the RTC did not just rely on expert testimony in ruling that the signature was forged. It
likewise supported its finding that the signature was forged through independent observation:

Finally, a scrutiny of the signature on the questioned deed of sale compared to the eleven (11)
signatures on the ten (10) standard documents there exists a glaring difference in the letter
formation of capital letters "C" in Cipriano and "T" in Trazona. The capital C in questioned signature,
the initial stroke stopped at the upper curve of the letter C while in the standard signatures, it
overlaps from the upper curve. In the word Trazona, the capital T in the questioned signature is
disconnected from the T bar to the body of the questioned signature whereas, in the standard
signatures, the capital T is connected. These discrepancies can easily be noticed by mere physical
appearance that the letters C and T were written. 44

Third, the existence of the Deed of Absolute Sale dated 11 April 1953 brings into question the
regularity of the assailed deed. This deed was never disputed by respondents at any stage of the
proceedings, and was in fact admitted by them in their Comments to Plaintiffs’ Additional Formal
Offer of Exhibits.  Indeed, the RTC was correct in its observation that no one in complete possession
45

of one’s mental faculties would buy the same property twice from different owners. Respondents
never provided any explanation for this anomalous situation. In any case, it has been established
that Lot No. 5053-H is in the name of Cipriano, who bought it from the government in 1940. Thus,
only Cipriano had the right to dispose of the property, or portions thereof.

Fourth, Cipriano had cultivated the property and paid taxes thereon since the time he acquired it
from the government, and even after its purported sale to Dionisio, until his death.  Petitioners
46

continued paying the taxes thereon even after Cipriano had died.  Respondents started paying taxes
47

on the property only after Tax Declaration No. 23959 was issued in Dionisio’s name in 1997.  It 48

would be absurd for petitioners to pay taxes on a property they do not own.

Fifth, as admitted by Gorgonio himself, petitioners were the ones enjoying the fruits of the property
from 1960 until the present controversy.  Again, it is incongruous for petitioners to enjoy the fruits if
49

respondents owned the property.

Sixth, as the RTC noted, there was an irregularity regarding the place of issuance of Cipriano’s
residence certificate indicated in the assailed deed, as compared with the residence certificates of
the other persons indicated on the same page of the notarial register.

Finally, when the record management analyst from the Bureau of Archives presented the assailed
deed, the paper was noted to be white, while its supposed contemporaries in the bunch from where
it was taken had turned yellow with age.   Further, when the analyst was asked the question of
50

when- the assailed deed was received by the Bureau of Archives, she answered that it was
forwarded to them only on 28 September 1987 by RTC Region 7, Notarial Division. 51

Clearly, the evidence adduced fully supports the position of petitioners that the assailed deed of sale
is forged and that they are the owners of the property. Having been forced to litigate in order to
protect their interest therein, the award of attorney's fees and litigation expenses to them is in order.

The actual possession of Lot No. 5053-H by petitioners has been properly ruled on by the
RTC.  Much has been made by the CA of the fact that respondents' house was standing on the
1âwphi1

property. However, petitioners have explained that the house was erected only after Cipriano
permitted it.
Dionisio was then well aware that this temporary arrangement may be terminated at any time.
Respondents cannot now refuse to vacate the property or eventually demand reimbursement of
necessary and useful expenses under Articles 448 and 546 of the New Civil Code, because the
provisions apply only to a possessor in good faith, i.e., one who builds on land with the belief that he
is the owner thereof.   Persons who occupy land by virtue of tolerance of the owners are not
52

possessors in good faith.   Thus, the directive of the RTC for respondents to demolish their
53

residential house on Lot No. 5053-H was also proper.

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

SO ORDERED.
G.R. No. 137664            May 9, 2002

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
ROBERTO PADRIGONE a.k.a. "ROBERTO SAN MIGUEL", accused-appellant.

YNARES-SANTIAGO, J.:

Roberto Padrigone a.k.a. Roberto San Miguel, Michael San Antonio, Jocel Ibaneta and Abelardo
Triumpante were charged with rape in an amended information which reads:

That on or about the 3rd day of January, 1995, in Salvacion, Buhi, Camarines Sur,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused,
conspiring, confederating together and mutually helping each other and by means of force
and intimidation, did then and there willfully, unlawfully and feloniously have carnal
knowledge with (sic) Rowena Contridas against her will, to her damage and prejudice in the
amount that may be proven in court.

Acts contrary to law.1

All the accused pleaded "not guilty." Trial on the merits thereafter ensued.

The antecedent facts are as follows:

It appears that at 3:00 in the morning of January 3, 1995, appellant Roberto Padrigone and the other
accused broke into the house of Rowena Contridas, then 16 years old, situated in San Benito,
Salvacion, Buhi, Camarines Sur. Appellant Roberto Padrigone and accused Jocel Ibaneta poked a
knife at Rowena and her fourteen year-old sister, Nimfa,2 and threatened to kill them if they reported
the incident to others. They gagged Rowena with a handkerchief and Nimfa with a handtowel. Then,
appellant undressed Rowena, forced her to lie down and sexually violated her while his co-accused
watched with glee. Accused Jocel Ibanita tried to rape Nimfa but failed because she was able to
elude him.

After appellant satisfied his lust on Rowena, the other accused took their turns. Every one of the
accused raped Rowena. Before they left, they warned the sisters not to report the incident or else
they will kill them.

Despite the threats, Rowena and Nimfa reported the incident to the police and identified appellant
and his co-accused as the perpetrators. However, based on the police blotter, Rowena stated that it
was only appellant who raped her.

Dr. Damiana Claveria, Municipal Health Officer, conducted a medical examination on Rowena and
found the following:

patient – very talkative, incoherent as to questions asked.

PE – no signs of external injury

 IE – hymenal tear, recent 6", 9" don't bleed on manipulation, but complained of tenderness
upon insertion of 1 finger, copious vaginal discharge.3

According to Dr. Claveria, there is a possibility that the fluids found inside Rowena's vagina may be
semen. She added that it was possible for Rowena to have only two hymenal tears even if four men
had sexual intercourse with her.

Dr. Chona C. Belmonte, a psychiatrist of Cadlan Mental Hospital in Pili, Camarines Sur, testified that
while she interviewed Rowena, the latter was crying, incoherent and had shouting episodes. She
was confined at the Cadlan Mental Hospital for further treatment. Upon further medical consultation,
Dr. Belmonte observed thus:

Rowena was in a depressed mood and at the same time overactive. She was combative,
violent, and was experiencing auditory hallucination, meaning, she heard things that only she
could hear. She was also grandiously deluded, falsely believing that she could do things
others could not do. By that time, according to Dr. Belmonte, Rowena had already lost touch
with reality.4

Dr. Belmonte diagnosed her illness as "Acute Psychotic Depressive Condition."5 She found that her
mental disorder was not hereditary because before the incident took place, she did not exhibit any
unusual behavior. She concluded that her mental illness was strongly related to a traumatic
experience. She noted that at one point in the treatment, Rowena confided to her that "she was
raped."6

All the accused, including appellant Roberto Padrigone, interposed the defense of denial and alibi.
Appellant claimed that in the evening of January 2, 1995, he and his companions, Jocel Ibanita and
Michael San Antonio, visited Rowena at her house. According to him, Rowena was crying when they
arrived. When appellant asked her what was wrong, she told him that she wanted to elope with him.
He replied that he was not ready as he was still studying. Rowena snapped, "it's up to him but he
might regret it."7 While appellant and Rowena were talking, Jocel Ibanita and Michael San Antonio
were in the kitchen cooking noodles. Later, a certain Ismeraldo Quirante, in the presence of several
barangay watchmen patrolling the area, passed by the Contridas' house and advised the accused to
go home because it was getting late. They heeded the advice and left the Contridas' house at
around 11:30 p.m.

The trial court gave credence to the prosecution evidence and rendered a decision, the dispositive
portion of which reads:

WHEREFORE, in view of the foregoing considerations, this Court finds the accused,
ROBERTO PADRIGONE a.k.a. ROBERTO SAN MIGUEL, GUILTY of the crime of Rape,
under Article 335 of the Revised Penal Code (as amended by Section 11, R.A. 7659) and
hereby sentences him to suffer imprisonment of RECLUSION PERPETUA, considering the
mitigating circumstance of voluntary surrender. He is likewise directed to indemnify the
offended party, Rowena Contridas, the amount of Fifty thousand Pesos (P50,000.00) as
moral damages and to pay the costs of this suit. Accused JOCEL IBANITA, MICHAEL SAN
ANTONIO and ABELARDO TRIUMPANTE are ACQUITTED for insufficiency of evidence. It
being shown that the three accused are presently detained at the Municipal Jail at PNP,
Buhi, Camarines Sur, their immediate release is hereby ordered.

SO ORDERED.8

Appellant interposed the instant appeal based on the following arguments:

 I

THE TRIAL COURT GRAVELY ERRED IN CONVICTING ACCUSED-APPELLANT OF THE

CRIME OF RAPE INSPITE OF THE INHERENT WEAKNESSES AND INSUFFICIENCY OF
PROSECUTION'S EVIDENCE.

II

THE TRIAL COURT GRAVELY ERRED IN DECIDING THE INSTANT CASE NOT IN
ACCORDANCE WITH THE ESTABLISHED PRINCIPLE IN CRIMINAL LAW THAT THE
PROSECUTION MUST RELY ON THE STRENGTH OF ITS EVIDENCE AND NOT ON THE
WEAKNESS OF THAT OF THE DEFENSE.

Appellant contends that the prosecution evidence was insufficient to prove his guilt beyond
reasonable doubt.

Appellant argues that according to the prosecution witness, Nimfa, he and his co-accused Michael
San Antonio, Abelardo Triumpante and Jocel Ibanita, took turns in raping Rowena while Jocel
Ibanita also attempted to rape her. However, after preliminary investigation, the Municipal Trial Court
of Buhi, Camarines Sur, dismissed Nimfa's complaint for attempted rape against Jocel Ibanita
because of its findings that the latter committed only acts of lasciviousness, considering his voluntary
and spontaneous desistance from continuing to perform the acts leading to carnal knowledge.
Furthermore, the investigating Judge entertained doubts about the truth of her story, which was
uncorroborated.9

We agree with the following observation of the Solicitor General:

[T]he dismissal of the complaint for attempted rape filed by Nimfa against one of the
accused, Jocel Ibanita, during the preliminary investigation stage should not detract from the
credibility of her testimony. Even if the prosecution wanted to, the merits of the dismissal of
Nimfa's complaint for attempted rape could not be properly challenged in the criminal
proceedings below since the said proceedings involved only the culpability of the four
accused for the crime of rape committed against Rowena, the sister of Nimfa.10

Appellant further claims that Nimfa's lack of credibility was underscored when the trial court acquitted
appellant's co-accused. Appellant's claim is not well taken. Evidence shows that the trial court
acquitted appellant's co-accused because of doubt engendered on the extent of their participation in
the sexual assault committed against Rowena in light of Rowena's own statement as recorded in the
police blotter.11

Appellant alleges that Nimfa's reactions after the rape of her sister are "unnatural, unexpected and
mind-boggling,"12 specifically when she resumed her sleep after having been raped and even
reported for work the following day. The contention deserves scant consideration. It is an accepted
maxim that different people react differently to a given situation or type of situation and there is no
standard form of behavioral response when one is confronted with a strange or startling
experience.13

Further, appellant argues that Nimfa admitted before the police that she did not recognize the rapists
of Rowena. In this connection, we quote with approval the observation of the Solicitor General, to
wit:
 Anent the portion of Nimfa's testimony wherein she admitted to the defense counsel that she
told the Chief of Police that she was not able to recognize the persons who raped her sister
Rowena, the same is capable of explanation. Accused-appellant Roberto Padrigone was
present when Nimfa uttered the statement. Hence, she was afraid to tell the truth because of
the earlier threat to her and sister Rowena's lives by accused-appellant Padrigone.14

We find that Nimfa's credibility has not been impaired despite rigorous cross-examination. In fact,
defense counsel was not able to point to any inconsistency in Nimfa's testimony. A perusal of the
transcripts of stenographic notes reveals that she was steadfast in narrating the circumstances of
the rape and in pointing to appellant as one of the perpetrators.

Appellant likewise alleges that it was error for the trial court to have dismissed his "sweetheart"
defense by the mere absence of love notes, mementos or pictures.

In People v. Corea,15 we held that:

x x x Moreover, even if such averment is true, it does not necessarily follow that no rape can
be committed against one's sweetheart. Such a relationship provides no license to explore
and invade that which every virtuous woman holds so dearly and trample upon her honor
and dignity. That relationship is held sacred by many x x x. A sweetheart cannot be forced to
engage in sexual intercourse against her will. As a matter of fact, proof even of a prior history
of a common-law marital relationship will not prevail over clear and positive evidence of
copulation by the use of force or intimidation.

Regardless, the most telling indication that would belie appellant's "sweetheart theory" was the fact
that he had carnal knowledge of Rowena in the presence of Nimfa and his co-accused. It is most
unnatural for lovers to engage in the ultimate expression of their love for each other in the presence
of other people.

Appellant assails the procedural irregularities committed by the prosecution and by the trial court. He
claims that the prosecution suppressed evidence by not presenting Rowena, the victim, when the
latter should have had her sane moments. As a consequence, the trial court deprived appellant of
the opportunity to cross-examine her when she allegedly declared before the Chief of Police of Buhi
that it was only appellant who raped her which declaration became the basis for the latter's
conviction.

Appellant's contention is misplaced if not misleading. The basis of his conviction was not Rowena's
declaration before the Chief of Police but rather Nimfa's testimony before the trial court that it was
him who raped Rowena, among others.16 In fact, the trial court found, thus:

x x x The evidence adduced by the parties in this case disclosed that accused Roberto
Padrigone, a.k.a. Roberto San Miguel, Jocel Ibanita, Michael San Antonio and Abel
Triumpante entered the dwelling of the Contridas sisters at 3:00 a.m. of January 3, 1995,
and at knifepoint successively raped Rowena Contridas, a 16 year old lass. The victim
became insane after the incident and was not able to testify in Court. Nimfa Contridas, her
fourteen year old sister, who was also present that time narrated the incident when her elder
sister's innocence was forcibly violated. Accused interposed the defense of denial and alibi. x
xx

The prosecution has established beyond reasonable doubt that accused Roberto Padrigone
ravished Rowena Contridas against her will and consent, and with the use of a bladed weapon.17
Besides, the non-presentation of Rowena on the witness stand cannot be considered as
suppression of evidence. Under Rule 131, Section 3(e) of the Rules of Court, the rule that "evidence
willfully suppressed would be adverse if produced" does not apply if (a) the evidence is at the
disposal of both parties; (b) the suppression was not willful; (c) it is merely corroborative or
cumulative; and (d) the suppression is an exercise of a privilege.18

Plainly, there was no suppression of evidence in this case. First, the defense had the opportunity to
subpoena Rowena even if the prosecution did not present her as a witness. Instead, the defense
failed to call her to the witness stand. Second, Rowena was certified to be suffering from "Acute
Psychotic Depressive Condition" and thus "cannot stand judicial proceedings yet."19 The non-
presentation, therefore, of Rowena was not willful. Third, in any case, while Rowena was the victim,
Nimfa was also present and in fact witnessed the violation committed on her sister.

Appellant cannot claim that the trial court erred in convicting him on the basis of Rowena's statement
as recorded in the police blotter. His conviction was based on the trial court's findings of facts and
assessment of the witnesses' credibility. Well-settled is the rule that the findings of facts and
assessment of credibility of witnesses is a matter best left to the trial court because of its unique
position of having observed that elusive and incommunicable evidence of the witnesses' deportment
on the stand while testifying, which opportunity is denied to the appellate courts. Only the trial judge
can observe the "furtive glance, blush of conscious shame, hesitation, flippant or sneering tone,
calmness, sigh, or the scant or full realization of an oath," all of which are useful aids for an accurate
determination of a witness' honesty and sincerity. The trial court's findings are accorded finality,
unless there appears in the record some fact or circumstance of weight which the lower court may
have overlooked, misunderstood or misappreciated and which, if properly considered, would alter
the results of the case.20

Besides, in rape cases where the offended parties are young and immature girls from the ages of
twelve to sixteen, we have consistently held that the victim's version of what transpired deserves
credence, considering not only their relative vulnerability but also the shame and embarrassment to
which such a grueling experience as a court trial, where they are called upon to lay bare what
perhaps should be shrouded in secrecy, exposed them to. This is not to say that an uncritical
acceptance should be the rule. It is only to emphasize that skepticism should be kept under control.21

Nonetheless, no young and decent Filipina would publicly admit that she was ravished and her
honor tainted unless the same were true, for it would be instinctive on her part to protect her honor
and obtain justice for the wicked acts committed upon her.22 Not to be overlooked is the
complainant's willingness to face police investigators and to submit to a physical examination which
are eloquent and sufficient affirmations of the truth of her charge.23

As regards the matter of damages, the trial court ordered accused-appellant "to indemnify the
offended party, Rowena Contridas, the amount of Fifty Thousand Pesos (P50,000.00) as moral
damages."24 In People v. Belga,25 it was held that civil indemnity is mandatory upon the finding of the
fact of rape; it is distinct from and should not be denominated as moral damages which are based on
different jural foundations and assessed by the court in the exercise of sound discretion. Thus,
consistently with present case law which treats the imposition of civil indemnity as mandatory upon a
finding of rape, accused-appellant is ordered to pay the additional amount of fifty thousand
(P50,000.00) pesos as civil indemnity ex delicto.26

WHEREFORE, based on the foregoing, the assailed Decision, finding accused-appellant Roberto
Padrigone a.k.a. Roberto San Miguel guilty beyond reasonable doubt of the crime of rape and
sentencing him to suffer the penalty of reclusion perpetua, is AFFIRMED with the MODIFICATION
that he is ordered to pay Rowena Contridas civil indemnity in the amount of P50,000.00 in addition
to moral damages in the amount of P50,000.00. Costs de oficio.

SO ORDERED.
G.R. No. 221029

REPUBLIC OF THE PHILIPPINES, Petitioner

vs
MARELYN TANEDO MANALO, Respondent

RESOLUTION

PERALTA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court (Rules) seeks to reverse
and set aside the September 18, 2014 Decision  and October 12, 2015 Resolution  of the Court of
1 2

Appeals (CA) in CA-G.R. CV No. 100076. The dispositive portion of the Decision states:

WHEREFORE, the instant appeal is GRANTED. The Decision dated 15 October 2012 of the

Regional Trial Court of Dagupan City, First Judicial Region, Branch 43, in SPEC. PROC. NO. 2012-
0005 is REVERSED and SET ASIDE.

Let a copy of this Decision be served on the Local Civil Registrar of San Juan, Metro Manila.

SO ORDERED. 3

The facts are undisputed.

On January 10, 2012, respondent Marelyn Tanedo Manalo (Manalo) filed a petition for cancellation
of Entry of marriage in the Civil Registry of San Juan , Metro Manila, by virtue of a judgment of
divorce Japanese court.

Finding the petition to be sufficient in form and in substance, Branch 43 of the Regional Trial Court
(RTC) of Dagupan City set the case for initial hearing on April 25, 2012. The petition and the notice
of initial hearing were published once a week for three consecutive weeks in newspaper of general
circulation. During the initial hearing, counsel for Manalo marked the documentary evidence
(consisting of the trial courts Order dated January 25, 2012, affidavit of publication, and issues of the
Northern Journal dated February 21-27, 2012, February 28 - March 5, 2012, and March 6-12, 2012)
for purposes of compliance with the jurisdictional requirements.

The Office of the Solicitor General (OSG) entered its appearance for petitioner Republic of the
Philippines authorizing the Office of the City Prosecutor of Dagupan to appear on its behalf.
Likewise, a Manifestation and Motion was filed questioning the title and/or caption of the petition
considering that based on the allegations therein, the proper action should be a petition for
recognition and enforcement of a foreign judgment.

As a result, Manalo moved to admit an Amended Petition, which the court granted. The Amended
Petition, which captioned that if it is also a petition for recognition and enforcement of foreign
judgment alleged:

2. That petitioner is previously married in the Philippines to a Japanese national named YOSHINO
MINORO as shown by their Marriage Contract xxx;

3. That recently, a case for divorce was filed by herein [petitioner] in Japan and after die
proceedings, a divorce decree dated December 6, 2011 was rendered by the Japanese Court x x x;
4. That at present, by virtue of the said divorce decree, petitioner and her divorce Japanese husband
are no longer living together and in fact, petitioner and her daughter are living separately from said
Japanese former husband;

5. That there is an imperative need to have the entry of marriage in Civil Registry of San Juan, Metro
Manila cancelled, where the petitioner and the former Japanese husband's marriage was previously
registered, in order that it would not appear anymore that petitioner is still married to the said
Japanese national who is no longer her husband or is no longer married to her, she shall not be
bothered and disturbed by aid entry of marriage;

6. That this petition is filed principally for the purpose of causing the cancellation of entry of the
marriage between the petitioner and the said Japanese national, pursuant to Rule 108 of the
Revised Rules of Court, which marriage was already dissolved by virtue of the aforesaid divorce
decree; [and]

7. That petitioner prays, among others, that together with the cancellation of the said entry of her
marriage, that she be allowed to return and use her maiden surname, MANALO. 4

Manalo was allowed to testify in advance as she was scheduled to leave for Japan for her
employment. Among the documents that were offered and admitted were:

1. Court Order dated January 25, 2012, finding the petition and its attachments to be sufficient in
form and in substance;

2. Affidavit of Publication;

3. Issues of the Northern Journal dated February 21-27, 2012, February 28 - March 5, 2012, and
March 6-12, 2012;

4. Certificate of Marriage between Manalo and her former Japanese husband;

5. Divorce Decree of Japanese court;

6. Authentication/Certificate issued by the Philippine Consulate General in Osaka, Japan of the

Notification of Divorce; and

7. Acceptance of Certificate of Divorce. 5

The OSG did not present any controverting evidence to rebut the allegations of Manalo.

On October 15, 2012, the trial court denied the petition for lack of merit. In ruling that the divorce
obtained by Manalo in Japan should not be recognized, it opined that, based on Article 15 of the
New Civil Code, the Philippine law "does not afford Filipinos the right to file for a divorce whether
they are in the country or living abroad, if they are married to Filipinos or to foreigners, or if they
celebrated their marriage in the Philippines or in another country" and that unless Filipinos "are
naturalized as citizens of another country, Philippine laws shall have control over issues related to
Filipinos' family rights and duties, together with the determination of their condition and legal capacity
to enter into contracts and civil relations, inclusing marriages."
6

On appeal, the CA overturned the RTC decision. It held that Article 26 of the Family Code of the
Philippines (Family Code) is applicable even if it was Manalo who filed for divorce against her
Japanese husband because the decree may obtained makes the latter no longer married to the
former, capacitating him to remarry. Conformably with Navarro, et al. V. Exec. Secretary Ermita, et
al.  ruling that the meaning of the law should be based on the intent of the lawmakers and in view of
7

the legislative intent behind Article 26, it would be height of injustice to consider Manalo as still
married to the Japanese national, who, in turn, is no longer married to her. For the appellate court,
the fact that it was Manalo who filed the divorce case is inconsequential. Cited as similar to this case
was Van Dorn v. Judge Romilo, Jr.  where the mariage between a foreigner an a Filipino was
8

dissolved filed abroad by the latter.

The OSG filed a motion for reconsideration, but it was denied; hence, this petition.

We deny the petition and partially affirm the CA decision.

Divorce, the legal dissolution of a lawful union for a cause arising after the marriage, are of two
types: (1) absolute divorce or a vinculo matrimonii, which terminates the marriage, and (2) limited
divorce or a mensa et thoro, which suspends it and leaves the bond in full force.  In this jurisdiction,
9

the following rules exist:

1. Philippine law does not provide for absolute divorce; hence, our courts cannot
grant it. 10

2. Consistent with Articles 15  and 17  of the New Civil Code, the marital bond
11 12

between two Filipinos cannot be dissolved even by an absolute divorce obtained

abroad. 13

3. An absolute divorce obtained abroad by a couple, who both aliens, may be

recognized in the Philippines, provided it is consistent with their respective national
laws.14

4. In mixed marriages involving a Filipino and a foreigner, the former is allowed to

contract a subsequent marriage in case the absolute divorce is validly obtained
abroad by the alien spouse capacitating him or her to remarry. 15

On July 6, 1987, then President Corazon C. Aquino signed into law Executive Order (E.O.) No. 209,
otherwise known as the Family Code of the Philippines, which took effect on August 3,
1988.  Shortly thereafter , E.O. No. 227 was issued on July 17, 1987.  Aside from amending Articles
16 17

36 and 39 of the Family Code, a second paragraph was added to Article 26.  This provision was
18

originally deleted by the Civil Code Revision Committee (Committee),but it was presented and
approved at a Cabinet meeting after Pres. Aquino signed E.O. No. 209.  As modified, Article 26 now
19

states:

Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in the
where country where they were solemnized, and valid there as such, shall also be valid in this
country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.

Where a marriage between Filipino citizen and a foreigner is validly celebrated and a divorce is
thereafter validly obtained abroad by the alien spouse capacitating him her to remarry under
Philippine law.

Paragraph 2 of Article 26 confers jurisdiction on Philippine courts to extend the effect of a foreign
divorce decree to a Filipino spouse without undergoing trial to determine the validity of the
dissolution of the marriage.  It authorizes our courts to adopt the effects of a foreign divorce decree
20

precisely because the Philippines does not allow divorce.  Philippine courts cannot try the case on
21

the merits because it is tantamount to trying a divorce case.  Under the principles of comity, our
22

jurisdiction recognizes a valid divorce obtained by the spouse of foreign nationality, but the legal
effects thereof, e.g., on custody, care and support of the children or property relations of the
spouses, must still be determined by our courts. 23

According to Judge Alicia Sempio-Diy, a member of the Committee, the idea of the amendment is to
avoid the absurd situation of a Filipino as still being married to his or her alien spouse, although the
latter is no longer married to the former because he or she had obtained a divorce abroad that is
recognized by his or national law.  The aim was that it would solved the problem of many Filipino
24

women who, under the New Civil Code, are still considered married to their alien husbands even
after the latter have already validly divorced them under their (the husbands') national laws and
perhaps have already married again. 25

In 2005, this Court concluded that Paragraph 2 of Article 26 applies to a case where, at the time of
the celebration of the marriage, the parties were Filipino citizens, but later on, one of them acquired
foreign citizenship by naturalization, initiated a divorce proceeding, and obtained a favorable decree.
We held in Republic of the Phils. v. Orbecido III:26

The jurisprudential answer lies latent in the 1998 case of Quita v. Court of Appeals. In Quita, the
parties were, as in this case, Filipino citizens when they got married. The wife became naturalized
American citizen n 1954 and obtained a divorce in the same year. The court therein hinted, by the
way of obiter dictum, that a Filipino divorced by his naturalized foreign spouse is no longer married
under Philippine law and can thus remarry.

Thus, taking into consideration the legislative intent and applying the rule of reason, we hold that
Paragraph 2 of Article 26 should be interpreted to include cases involving parties who, at the time of
the celebration of the marriage were Filipino citizens, but later on, one of them becomes naturalized
as foreign citizen and obtains divorce decree. The Filipino spouse should likewise be allowed to
remarry as if the other party were foreigner at the time of the solemnization of the marriage. To rule
otherwise would be to sanction absurdity and injustice. x x x

If we are to give meaning to the legislative intent to avoid the absurd situation where the Filipino
spouse remains married to the alien spouse who after obtaining a divorce is no longer married to the
Filipino spouse, then the instant case must be deemed as coming within the contemplation of
Paragraph 2 of Article 26.

In view of the foregoing, we state the twin elements for the application of Paragraph 2 of Article 26
as follows:

1. There is a valid marriage that has been celebrated between a Filipino citizen and a foreigner; and

2. A valid divorce is obtained abroad by the alien spouse capacitating him or her to remarry.

The reckoning point is not the citizenship of the parties at the time of the celebration of marriage, but
their citizenship at the time valid divorced obtained abroad by the alien spouse capacitating the latter
to remarry.

Now, the Court is tasked to resolve whether, under the same provision, a Filipino citizen has the
capacity to remarry under Philippine law after initiating a divorce proceeding abroad and obtaining a
favorable judgment against his or her alien spouse who is capacitated to remarry. Specifically,
Manalo pleads for the recognition of enforcement of the divorced decree rendered by the Japanese
court and for the cancellation of the entry of marriage in the local civil registry " in order that it would
not appear anymore that she is still married to the said Japanese national who is no longer her
husband or is no longer married to her; [and], in the event that [she] decides to be remarried, she
shall not be bothered and disturbed by said entry of marriage," and to use her maiden surname.

We rule in the affirmative.

Both Dacasin v. Dacasin  and Van Dorn  already recognized a foreign divorce decree that was
28 29

initiated and obtained by the Filipino spouse and extended its legal effects on the issues of child
custody and property relation, respectively.

In Dacasin, post-divorce, the former spouses executed an Agreement for the joint custody of their
minor daughter. Later on, the husband who is a US citizen, sued his Filipino wife enforce the
Agreement, alleging that it was only the latter who exercised sole custody of their child. The trial
court dismissed the action for lack of jurisdiction, on the ground, among others, that the divorce
decree is binding following the "nationality rule" prevailing in this jurisdiction. The husband moved to
reconsider, arguing that the divorce decree obtained by his former wife is void, but it was denied. In
ruling that the trial court has jurisdiction to entertain the suit bu not to enforce the Agreement, which
is void, this Court said:

Nor can petitioner rely on the divorce decree's alleged invalidity - not because the Illinois court
lacked jurisdiction or that the divorced decree violated Illinois law, but because the divorce was
obtained by his Filipino spouse - to support the Agreement's enforceability . The argument that
foreigners in this jurisdiction are not bound by foreign divorce decrees is hardly novel. Van Dron v.
Romillo settled the matter by holding that an alien spouse of a Filipino is bound by a divorce decree
obtained abroad. There, we dismissed the alien divorcee's Philippine suit for accounting of alleged
post-divorce conjugal property and rejected his submission that the foreign divorce (obtained by the
Filipino spouse) is not valid in this jurisdiction x x x.
30

Van Dorn was decided before the Family Code took into effect. There, a complaint was filed by the
ex-husband , who is a US citizen, against his Filipino wife to render an accounting of a business that
was alleged to be a conjugal property and to be declared with right to manage the same. Van Dorn
moved to dismiss the case on the ground that the cause of action was barred by previous judgment
in the divorce proceedings that she initiated, but the trial court denied the motion. On his part, her
ex-husband averred that the divorce decree issued by the Nevada court could not prevail over the
prohibitive laws of the Philippines and its declared national policy; that the acts and declaration of a
foreign court cannot, especially if the same is contrary to public policy, divest Philippine courts of
jurisdiction to entertain matters within its jurisdiction . In dismissing the case filed by the alien
spouse, the Court discussed the effect of the foreign divorce on the parties and their conjugal
property in the Philippines. Thus:

There can be no question as to the validity of that Nevada divorce in any of the States of the United
States. The decree is binding on private respondent as an American citizen. For instance, private
respondent cannot sue petitioner, as her husband, in any State of the Union. What he is contending
in this case is that the divorce is not valid and binding in this jurisdiction, the same being contrary to
local law and public policy.

Is it true that owing to the nationality principle embodied in Article 15 of the Civil Code, only
Philippine nationals are covered by the policy and morality. However, aliens may obtain divorce
abroad, which may be recognized in the Philippines, provided they are valid according to their
national law. In this case, the divorce in Nevada released private respondent from the marriage from
standards of American law, under which divorce dissolves the marriage. As stated by the Federal
Supreme Court of the United States in Atherton vs. Atherton, 45 L. Ed. 794,799:

"The purpose and effect of a decree of divorce from the bond of matrimony by a court of competent
jurisdiction are to change the existing status or domestic relation of husband and wife, and to free
them both from the bond. The marriage tie, when thus severed as stone party, ceases to bind either.
A husband without a wife, or a wife without a husband, is unknown to the law. When the law
provides in the nature of penalty, that the guilty party shall not marry again, that party, as well as the
other, is still absolutely feed from the bond of the former marriage."

Thus, pursuant to his national law, private respondent is no longer the husband of petitioner. He
would have no standing to sue in the case below as petitioner's husband entitled to exercise control
over conjugal assets. As he is estopped by his own representation before said court from asserting
his right over the alleged conjugal property.

To maintain, as private respondent does, that under our laws, petitioner has to be considered still
married to private respondent and still subject to a wife's obligations under Article 109, et. seq. of the
Civil Code cannot be just. Petitioner should not be obliged to live together with, observe respect and
fidelity, and render support to private respondent. The latter should not continue to be one of her
heirs with possible rights to conjugal property. She should not be discriminated against in her own
country if the ends of justice are to be served.31

In addition, the fact that a validity obtained foreign divorce initiated by the Filipino spouse can be
recognized and given legal effects in the Philippines is implied from Our rulings in Fujiki v. Marinay,
et al.  and Medina v. Koike.
32 33

In Fujiki, the Filipino wife, with the help of her husband, who is a Japanese national, was able to
obtain a judgment from Japan's family court. Which declared the marriage between her and her
second husband, who is a Japanese national, void on the ground of bigamy. In resolving the issue of
whether a husband or wife of a prior marriage can file a petition to recognize a foreign judgment
nullifying the subsequent marriage between his her spouse and a foreign citizen on the ground of
bigamy, We ruled:

Fujiki has the personality to file a petition to recognize the Japanese Family Court judgment nullifying
the marriage between Marinay and Maekara on the ground of bigamy because the judgment
concerns his civil status as married to Marinay. For the same reason he has the personality to file a
petition under Rule 108 to cancel the entry of marriage between Marinay and Maekara in the civil
registry on the basis of the decree of the Japanese Family Court.

There is no doubt that the prior spouse has a personal and material interest in maintaining the
integrity of the marriage he contracted and the property relations arising from it. There is also no
doubt that he is interested in the cancellation of an entry of a bigamous marriage in the civil registry,
which compromises the public record of his marriage. The interest derives from the substantive right
of the spouse not only to preserve (or dissolve, in limited instances) his most intimate human
relation, but also to protect his property interests that arise by operation of law the moment he
contracts marriage. These property interests in marriage included the right to be supported "in
keeping with the financial capacity of the family" and preserving the property regime of the marriage.

Property rights are already substantive rights protected by the Constitution, but a spouse's right in a
marriage extends further to relational rights recognized under Title III ("Rights and Obligations
between Husband and Wife") of the Family Code. x x x 34
On the other hand, in Medina, the Filipino wife and her Japanese husband jointly filed for divorce,
which was granted.  Subsequently, she filed a petition before the RTC for judicial recognition of
1âwphi1

foreign divorce and declaration of capacity to remarry pursuant to Paragraph 2 of Article 26. The
RTC denied the petition on the ground that the foreign divorce decree and the national law of the
alien spouse recognizing his capacity to obtain a divorce must be proven in accordance with
Sections 24 and 25 of Rule 132 of the Revised Rules on Evidence. This Court agreed and ruled that,
consistent with Corpuz v. Sto. Tomas, et al.  and Garcia v. Recio,  the divorce decree and the
35 36

national law of the alien spouse must be proven. Instead of dismissing the case, We referred it to the
CA for appropriate action including the reception of evidence to determine and resolve the pertinent
factual issues.

There is no compelling reason to deviate from the above-mentioned rulings. When this Court
recognized a foreign divorce decree that was initiated and obtained by the Filipino spouse and
extended its legal effects on the issues of child custody and property relation, it should not stop short
in a likewise acknowledging that one of the usual and necessary consequences of absolute divorce
is the right to remarry. Indeed, there is no longer a mutual obligation to live together and observe
fidelity. When the marriage tie is severed and ceased to exist, the civil status and the domestic
relation of the former spouses change as both of them are freed from the marital bond.

The dissent is of the view that, under the nationality principle, Manalo's personal status is subject to
Philippine law, which prohibits absolute divorce. Hence, the divorce decree which she obtained
under Japanese law cannot be given effect, as she is, without dispute, a national not of Japan, bit of
the Philippines. It is said that that a contrary ruling will subvert not only the intention of the framers of
the law, but also that of the Filipino peopl, as expressed in the Constitution. The Court is, therefore,
bound to respect the prohibition until the legislature deems it fit to lift the same.

We beg to differ.

Paragraph 2 of Artilce 26 speaksof "a divorce x x x validly obtained abroad by the alien spouse
capacitating him or her to remarry." Based on a clear and plain reading of the provision, it only
requires that there be a divorce validly obtained abroad. The letter of the law does not demand that
the alien spouse should be the one who initiated the proceeding wherein the divorce decree was
granted. It does not distinguish whether the Filipino spouse is the petitioner or the respondent in the
foreign divorce proceeding. The Court is bound by the words of the statute; neither can We put
words in the mouth of lawmakers.  The legislature is presumed to know the meaning of the words to
37

have used words advisely and to have expressed its intent by the use of such words as are found in
the statute. Verba legis non est recedendum, or from the words if a statute there should be
departure." 38

Assuming, for the sake of argument, that the word "obtained" should be interpreted to mean that the
divorce proceeding must be actually initiated by the alien spouse, still, the Court will not follow the
letter of the statute when to do so would depart from the true intent of the legislature or would
otherwise yield conclusions inconsistent with the general purpose of the act.  Law have ends to
39

achieve, and statutes should be so construed as not to defeat but to carry out such ends and
purposes.  As held in League of Cities of the Phils. et al. v. COMELEC et. al.:
40 41

The legislative intent is not at all times accurately reflected in the manner in which the resulting law
is couched. Thus, applying a verba legis or strictly literal interpretation of a statute may render it
meaningless and lead to inconvience, an absurd situation or injustice. To obviate this aberration, and
bearing in mind the principle that the intent or the spirit of the law is the law itself, resort should be to
the rule that the spirit of the law control its letter.
To reiterate, the purpose of Paragraph 2 of Article 26 is to avoid the absurd situation where the
Filipino spouse remains married to the alien spouse who, after a foreign divorce decree that is
effective in the country where it was rendered, is no longer married to the Filipino spouse. The
provision is a corrective measure is free to marry under the laws of his or her countr.  Whether the
42

Filipino spouse initiated the foreign divorce proceeding or not, a favorable decree dissolving the
marriage bond and capacitating his or her alien spouse to remarry will have the same result: the
Filipino spouse will effectively be without a husband or wife. A Filipino who initiated a foreign divorce
proceeding is in the same place and in like circumstances as a Filipino who is at the receiving end of
an alien initiated proceeding. Therefore, the subject provision should not make a distinction. In both
instance, it is extended as a means to recognize the residual effect of the foreign divorce decree on
a Filipinos whose marital ties to their alien spouses are severed by operations of their alien spouses
are severed by operation on the latter's national law.

Conveniently invoking the nationality principle is erroneous. Such principle, found under Article 15 of
the City Code, is not an absolute and unbending rule. In fact, the mere existence of Paragraph 2 of
Article 26 is a testament that the State may provide for an exception thereto. Moreover, blind
adherence to the nationality principle must be disallowed if it would cause unjust discrimination and
oppression to certain classes of individuals whose rights are equally protected by law. The courts
have the duty to enforce the laws of divorce as written by the Legislature only if they are
constitutional. 43

While the Congress is allowed a wide leeway in providing for a valid classification and that its
decision is accorded recognition and respect by the court of justice, such classification may be
subjected to judicial review.  The deference stops where the classification violates a fundamental
44

right, or prejudices persons accorded special protection by the Constitution.  When these violations
45

arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and
require a stricter and more exacting adherence to constitutional limitations.  If a legislative
46

classification impermissibly interferes with the exercise of a fundamental right or operates to the
peculiar disadvantage of a suspect class strict judicial scrutiny is required since it is presumed
unconstitutional, and the burden is upon the government to prove that the classification is necessary
to achieve a compelling state interest and that it is the least restrictive means to protect such
interest. 47

"Fundamental rights" whose infringement leads to strict scrutiny under the equal protection clause
are those basic liberties explicitly or implicitly guaranteed in the Constitution.  It includes the right to
48

free speech, political expression, press, assembly, and forth, the right to travel, and the right to
vote.  On the other hand, what constitutes compelling state interest is measured by the scale rights
49

and powers arrayed in the Constitution and calibrated by history.  It is akin to the paramount interest
50

of the state for which some individual liberties must give way, such as the promotion of public
interest, public safety or the general welfare.  It essentially involves a public right or interest that,
51

because of its primacy, overrides individual rights, and allows the former to take precedence over
the latter. 52

Although the Family Code was not enacted by the Congress, the same principle applies with respect
to the acts of the President which have the force and effect of law unless declared otherwise by the
court. In this case, We find that Paragraph 2 of Article 26 violates one of the essential requisites  of
53

the equal protection clause.  Particularly, the limitation of the provision only to a foreign divorce
54

decree initiated by the alien spouse is unreasonable as it is based on superficial, arbitrary, and
whimsical classification.

A Filipino who is married to another Filipino is not similarly situated with a Filipino who is married to a
foreign citizen. There are real, material and substantial differences between them. Ergo, they should
not be treated alike, both as to rights conferred and liabilities imposed. Without a doubt, there are
political, economic cultural, and religious dissimilarities as well as varying legal systems and
procedures, all too unfamiliar, that a Filipino national who is married to an alien spouse has to
contend with. More importantly, while a divorce decree obtained abroad by a Filipino against another
Filipino is null and void, a divorce decree obtained by an alien against his her Filipino spouse is
recognized if made in accordance with the national law of the foreigner. 55

On the contrary, there is no real and substantial difference between a Filipino who initiated a foreign
divorce proceedings a Filipino who obtained a divorce decree upon the instance of his or her alien
spouse . In the eyes of the Philippine and foreign laws, both are considered as Filipinos who have
the same rights and obligations in a alien land. The circumstances surrounding them are alike. Were
it not for Paragraph 2 of Article 26, both are still married to their foreigner spouses who are no longer
their wives/husbands. Hence, to make a distinction between them based merely on the superficial
difference of whether they initiated the divorce proceedings or not is utterly unfair. Indeed, the
treatment gives undue favor to one and unjustly discriminate against the other.

Further, the differentiation in Paragraph 2 Article 26 is arbitrary. There is inequality in treatment

because a foreign divorce decree that was initiated and obtained by a Filipino citizen against his or
her alien spouse would not be recognized even if based on grounds similar to Articles 35, 36, 37 and
38 of the Family Code.  In filing for divorce based on these grounds, the Filipino spouse cannot be
56

accused of invoking foreign law at whim, tantamount to insisting that he or she should be governed
with whatever law he or she chooses. The dissent's comment that Manalo should be "reminded that
all is not lost, for she may still pray for the severance of her martial ties before the RTC in
accordance with the mechanism now existing under the Family Code" is anything but comforting. For
the guidance of the bench and the bar, it would have been better if the dissent discussed in detail
what these "mechanism" are and how they specifically apply in Manalo's case as well as those who
are similarly situated. If the dissent refers to a petition for declaration of nullity or annulment of
marriage, the reality is that there is no assurance that our courts will automatically grant the same.
Besides, such proceeding is duplicitous, costly, and protracted. All to the prejudice of
our kababayan.

It is argued that the Court's liberal interpretation of Paragraph 2 of Artilce 26 encourages Filipinos to
marry foreigners, opening the floodgate to the indiscriminate practice of Filipinos marrying foreign
nationals or initiating divorce proceedings against their alien spouses.

The supposition is speculative and unfounded.

First, the dissent falls into a hasty generalization as no data whatsoever was sworn to support what
he intends to prove. Second, We adhere to the presumption of good faith in this jurisdiction. Under
the rules on evidence, it is disputable presumed (i.e., satisfactory if uncontradicted and overcome by
other evidence) that a person is innocent of crime or wrong,  that a person takes ordinary care of his
57

concerns,  that acquiescence resulted from a belief that the thing acquiesced in was conformable to
59

the law and fact,   that a man and woman deporting themselves as husband and wife have entered
60

into a lawful contract of marriage,  and that the law has been obeyed.  It is whimsical to easily
61 62

attribute any illegal, irregular or immoral conduct on the part of a Filipino just because he or she
opted to marry a foreigner instead of a fellow Filipino. It is presumed that interracial unions are
entered into out of genuine love and affection, rather than prompted by pure lust or profit. Third, We
take judicial notice of the fact that Filipinos are relatively more forbearing and conservative in nature
and that they are more often the victims or losing end of mixed marriages. And Fourth, it is not for Us
to prejudge the motive behind Filipino's decision to marry an alien national. In one case, it was said:
Motive for entering into a marriage are varied and complex. The State does not and cannot dictated
on the kind of life that a couple chooses to lead. Any attempt to regulate their lifestyle would go into
the realm of their right to privacy and would raise serious constitutional questions. The right marital
privacy allows married couples to structure their marriages in almost any way they see it fit, to live
together or live apart, to have children or no children, to love one another or not, and so on. Thus,
marriages entered into for other purposes, limited or otherwise, such as convenience,
companionship, money, status, and title, provided that they comply with all the legal requisites, are
equally valid. Love, though the ideal consideration in a marriage contract, is not the only valid cause
for marriage. Other considerations, not precluded by law, may validly support a marriage. 63

The 1987 Constitution expresses that marriage, as an inviolable social institution, is the foundation
of the family and shall be protected by the State.  Nevertheless, it was not meant to be a general
64

prohibition on divorce because Commissioner Jose Luis Martin C. Gascon, in response to a question
by Father Joaquin G. Bernas during the deliberations of the 1986 Constitutional Commission, was
categorical about this point.  Their exchange reveal as follows:
65

MR. RAMA. Mr. Presiding Officer, may I ask that Commissioner Bernas be recognized.

THE PRESIDING OFFICER (Mr. Colayco). Commissioner Bernas is recognized.

FR. BERNAS. Just one question, and I am not sure if it has been categorically answered. I refer
specifically to the proposal of Commissioner Gascon. Is this be understood as a prohibition of a
general law on divorce? His intention is to make this a prohibition so that the legislature cannot pass
a divorce law.

MR. GASCON. Mr. Presding Officer, that was not primarily my intention. My intention was primarily
to encourage the social institution of marriage, but not necessarily discourage divorce. But now that
the mentioned the issue of divorce, my personal opinion is to discourage it. Mr. Presiding Officer.

FR. BERNAS. No my question is more categorical. Does this carry the meaning of prohibiting a
divorce law?

MR. GASCON. No Mr. Presiding Officer.

FR. BERNAS. Thank you. 66

Notably, a law on absolute divorce is not new in our country. Effectivity March 11, 1917, Philippine
courts could grant an absolute divorce in the grounds of adultery on the part of the wife or
concubinage on the part of the husband by virtue of Act No. 2710 of the Philippine Legislature.  On
67

March 25, 1943, pursuant to the authority conferred upon him by the Commander-in-Chief fo the
Imperial Japanese Forces in the Philippines and with the approval of the latter, the Chairman of the
Philippine Executive Commission promulgated an E.O. No. 141 ("New Divorce Law"), which
repealed Act No. 2710 and provided eleven ground for absolute divorce, such as intentional or
unjustified desertion continuously for at least one year prior to the filing of the action, slander by
deed or gross insult by one spouse against the other to such an extent as to make further living
together impracticable, and a spouse's incurable insanity.  When the Philippines was liberated and
68

the Commonwealth Government was restored, it ceased to have force and effect and Act No. 2710
again prevailed.  From August 30, 1950, upon the effectivity of Republic Act No. 836 or the New
69

Civil Code, an absolute divorce obatined by Filipino citizens, whether here or abroad, is no longer
recognized. 70
Through the years, there has been constant clamor from various sectors of the Philippine society to
re-institute absolute divorce. As a matte of fcat, in the currnet 17th Congress, House Bill (H.B.) Nos.
116  1062  2380  and 6027  were filed in the House of representatives. In substitution of these bills,
71 72 73 74

H.B. No. 7303 entitled "An Act Instituting Absolute Divorce and Dissolution of Marriage in the
Philippines" or the Absolute Divorce Act of 2018 was submitted by the House Committee on
Population

And Family Relations of February 8, 2018. It was approved on March 19, 2018 on Third Reading -
with 134 in favor, 57 against, and 2 absentations. Under the bill, the grounds for a judicial decree of
absolute divorce are as follows:

1. The grounds for legal separation under Article 55 of the Family Code, modified or amended, as
follows:

a. Physical violence or grossly abusive conduct directed against the petitioner, a

common child, or a child of the petitioner;

b. Physical violence or moral pressure to compel the petitioner to change religious or

political affiliation;

c. Attempt of respondent to corrupt or induce the petitioner, a common child, or a

child of a petitioner, to engage in prostitution, or connivance in such corruption or
inducement;

d. Final judgment sentencing the respondent to imprisonment of more than six (6)
years, even if pardoned;

e. Drug addiction or habitual alchoholism ro chronic gambling of respondent;

f. Homosexuality of the respondent;

g. Contracting by the respondent of a subsequent bigamous marriage, whether in the

Philippines or abroad;

h. Marital infidelity or perversion or having a child with another person other than
one's spouse during the marriage, except when upon the mutual agreement of the
spouses, a child is born to them by in vitro or a similar procedure or when the wife
bears a child after being a victim of rape;

i. attempt by the respondent against the life of the petitioner, a common child or a
child of a petitioner; and

j. Abandonment of petitioner by respondent without justifiable cause for more than

one (1) year.

When the spouses are legally separated by judicial decree for more thath two (2) years, either or
both spouses can petition the proper court for an absolute divorce based on said judicial decree of
legal separation.

1. Grounds for annulment of marriage under Article 45 of the Family Code restated as follows:
 a. The party in whose behalf it is sought to have the marriage annulled was eighteen
(18) years of age or over but below twety-one (21), and the marriage was solemnized
without the consent of the parents guradian or personl having substitute parental
authority over the party, in that order, unless after attaining the age of twenty-one
(21) such party freely cohabited with the other and both lived together as husband
and wife;

b. either party was of unsound mind, unless such party after coming to reason, freely
cohabited with the other as husband and wife;

c. The consent of either party was obtained by fraud, unless such party afterwards
with full knowledge of the facts constituting the fraud, freely cohabited with the other
husband and wife;

d. consent of either party was obtained by force, intimidation or undue influence,

unless the same having disappeared or ceased, such party thereafter freely
cohabited with the other as husband and wife;

e. Either party was physically incapable of consummating the marriage with the other
and such incapacity continues or appears to be incurable; and

f. Either part was afflicted with the sexually transmissible infection found to be
serious or appears to be incurable.

Provided, That the ground mentioned in b, e and f existed either at the time of the marriage or
supervening after the marriage.

1. When the spouses have been separated in fact for at least five (5) years at the time the petition
for absolute divorce is filed, and the reconciliation is highly improbable;

2. Psychological incapacity of either spouse as provided for in Article 36 of the Family Code, whether
or not the incapacity was present at the time of the celebration of the marriage or later;

3. When one of the spouses undergoes a gender reassignment surgery or transition from one sex to
another, the other spouse is entitled to petition for absolute divorce with the transgender or
transsexual as respondent, or vice-versa;

4. Irreconcilable marital differences and conflicts which have resulted in the total breakdown of the
marriage beyond repair, despite earnest and repeated efforts at reconciliation.

To be sure, a good number of Filipinos led by the Roman Catholic Church react adversely to any
attempt to enact a law on absolute divorce, viewing it as contrary to our customs, morals, and
traditions that has looked upon marriage and family as an institution and their nature of permanence,

In the same breath that the establishment clause restricts what the government can do with religion,
it also limits what religious sects can or cannot do. They can neither cause the government to adopt
their particular doctrines as policy for everyone, nor can they cause the government to restrict other
groups. To do so, in simple terms, would cause the State to adhere to a particular religion and, thus
establish a state religion.
76
The Roman Catholic Church can neither impose its beliefs and convictions on the State and the rest
of the citizenry nor can it demand that the nation follow its beliefs, even if it is sincerely believes that
they are good for country.  While marriage is considered a sacrament, it has civil and legal
77

consequences which are governed by the Family Code.  It is in this aspect, bereft of any
78

ecclesiastical overtone, that the State has a legitimate right and interest to regulate.

The declared State policy that marriage, as an inviolable social institution, is a foundation of the
family and shall be protected by the State, should not be read in total isolation but must be
harmonized with other constitutional provision. Aside from strengthening the solidarity of the Filipino
family, the State is equally mandated to actively promote its total development.  It is also obligated to
79

defend, among others, the right of children to special protection from all forms of neglect, abuse,
cruelty, exploitation, and other conditions prejudicial to their development.  To Our mind, the State
80

cannot effectively enforce these obligation s if We limit the application of Paragraph 2 or Article 26
only those foreign divorce initiated by the alien spouse. It is not amiss to point that the women and
children are almost always the helpless victims of all forms of domestic abuse and violence. In fact,
among the notable legislation passed in order to minimize, if not eradicate, the menace are R.A. No.
9262 ("Anti-Violence Against Women and Their Children Act of 2004") R.A. No. 9710 ("The Magna
Carta of Women"), R.A. No 10354 ("The Responsible Parenthood and Reproductive Health Act of
2012") and R.A. No 9208 ("Anti-Trafficking in Person Act of 2003"), as amended by R.A. No.
10364 ("ExpandedAnti-Trafficking in Persons Act of 2012"). Moreover, in protecting and
strengthening the Filipino family as a basic autonomous social institution, the Court must not lose
sight of the constitutional mandate to value the dignity of every human person, guarantee full respect
for human rights, and ensure the fundamental equality before the law of women and men. 81

A prohibitive view of Paragraph 2 of Article 26 would do more harm than good. If We disallow a
Filipino citizen who initiated and obtained a foreign divorce from the coverage of Paragraph 2 Article
26 and still require him or her to first avail of the existing "mechanisms" under the Family Code, any
subsequent relationship that he or she would enter in the meantime shall be considered as illicit in
the eyes of the Philippine law. Worse, any child born out such "extra-marital" affair has to suffer the
stigma of being branded as illegitimate. Surely, these are just but a few of the adverse
consequences, not only to the parent but also to the child, if We are to hold a restrictive
interpretation of the subject provision. The irony is that the principle of inviolability of marriage under
Section 2, Article XV of the Constitution is meant to be tilted in favor of marriage and against unions
not formalized by marriage, but without denying State protection and assistance to live-in
arrangements or to families formed according to indigenous customs. 82

This Court should not turn a blind eye to the realities of the present time. With the advancement of
communication and information technology, as well as the improvement of the transportation system
that almost instantly connect people from all over the world, mixed marriages have become not too
uncommon. Likewise, it is recognized that not all marriages are made in heaven and that imperfect
humans more often than not create imperfect unions.  Living in a flawed world, the unfortunate
83

reality for some is that the attainment of the individual's full human potential and self fulfillment is not
found and achieved in the context of a marriage. Thus it is hypocritical to safeguard the quantity of
existing marriages and, at the same time, brush aside the truth that some of them are rotten quality.

Going back, we hold that marriage, being a mutual and shared commitment between two parties,
cannot possibly be productive of any good to the society where one is considered released from the
marital bond while the other remains bound to it.  In reiterating that the Filipino spouse should not be
84

discriminated against in his or her own country if the ends of justice are to be served, San Luis v.
San Luis  quoted:
85

x x x In Alonzo v. Intermediate Applellate Court, the Court stated:

But as has also been aptly observed, we test a law by its results: and likewise, we may add, by its
purposes. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge
should be to discover in its provisions the intent of the lawmaker. Unquestionably, the law should
never be interpreted in such a way as to cause injustice as this is never within the legislative intent.
An indispensable part of that intent, in fact, for we presume the good motives of the legislature, is
to render justice.

Thus, we interpret and apply the law not independently of but in consonance with justice. Law and
justice are inseparable, and we must keep them so. To be sure, there are some laws that, while
generally valid, may seem arbitrary when applied in a particular case because only of our nature and
functions, to apply them just the same, in slavish obedience to their language. What we do instead is
find a balance between the sord and the will, that justice may be done even as the law is obeyed.

As judges, we are not automatons. We do not and must not unfeelingly apply the law as it worded,
yielding like robots to the literal command without regard to its cause and consequence. "Courts are
apt to err by sticking too closely to the words of law," so we are warned, by Justice Holmes agaian,
"where these words import a policy that goes beyond them."

xxxx

More that twenty centuries ago, Justinian defined justice "as the constant and perpetual wish to
render every one of his due." That wish continues to motivate this Court when it assesses the facts
and the law in ever case brought to it for decisions. Justice is always an essential ingredient of its
decisions. Thus when the facts warrant, we interpret the law in a way that will render justice,
presuming that it was the intention if the lawmaker, to begin with, that the law be dispensed with
justice.
86

Indeed, where the interpretation of a statute according to its exact and literal import would lead to
mischievous results or contravene the clear purpose of the legislature, it should be construed
according to its spirit and reason, disregarding as far as necessary the letter of the law.  A statute
87

may therefore, be extended to cases not within the literal meaning of its terms, so long as they come
within its spirit or intent.
88

The foregoing notwithstanding, We cannot yet write finis to this controversy by granting Manalo's
petition to recognize and enforce the divorce decree rendered by the Japanese court and to cancel
the entry of marriage in the Civil Registry of San Juan, Metro Manila.

Jurisprudence has set guidelines before the Philippine courts recognize a foreign judgment relating
to the status of a marriage where one of the parties is a citizen of foreign country. Presentation
solely of the divorce decree will not suffice.  The fact of divorce must still first be proven.  Before a a
89 90

foreign divorce decree can be recognized by our courts, the party pleading it must prove the divorce
as a fact and demonstrate its conformity to the foreign law allowing it. 91

x x x Before a foreign judgment is given presumptive evidentiary value, the document must first be
presented and admitted in evidence. A divorce obtained abroad is proven by the divorce decree
itself. The decree purports to be written act or record of an act of an official body or tribunal of
foreign country.

Under Sections 24 and 25 of Rule 132, on the other hand, a writing or document may be proven as a
public or official record of a foreign country by either (1) an official publication or (2) a copy thereof
attested by the officer having legal custody of the document. If the record is not kept in the
Philippines, such copy must be (a) accompanied by a certificate issued by the proper diplomatic or
consular officer in the Philippine foreign service stationed in the foreign country in which the record is
kept and (b)authenticated by the seal of his office. 92

In granting Manalo's petition, the CA noted:

In this case, Petitioner was able to submit before the court a quo the 1) Decision of the Japanese
Court allowing the divorce; 2) the Authentication/Certificate issued by the Philippines Consulate
General in Osaka, Japan of the Decree of Divorce; and 3) Acceptance of Certificate of Divorce byu
the Petitioner and the Japanese national. Under Rule 132, Sections 24 and 25, in relation to Rule
39, Section 48 (b) of the Rules of Court, these documents sufficiently prove the subject Divorce
Decree as a fact. Thus, We are constrained to recognize the Japanese Court's judgment decreeing
the divorce.93

If the opposing party fails to properly object, as in this case, the divorce decree is rendered
admissible a a written act of the foreign court.  As it appears, the existence of the divorce decree
94

was not denied by the OSG; neither was the jurisdiction of the divorce court impeached nor the
validity of its proceedings challenged on the ground of collusion, fraud, or clear mistake of fact or
law, albeit an opportunity to do so. 95

Nonetheless, the Japanese law on divorce must still be proved.

x x x The burden of proof lies with the "party who alleges the existence of a fact or thing necessary in
the prosecution or defense of an action." In civil cases, plaintiffs have the burden of proving the
material defendants have the burden of proving the material allegations in their answer when they
introduce new matters. x x x

It is well-settled in our jurisdiction that our courts cannot take judicial notice of foreign laws. Like any
other facts, they must alleged and proved. x x x The power of judicial notice must be exercise d with
caution, and every reasonable doubt upon the subject should be resolved in the negative. 96

Since the divorce was raised by Manalo, the burden of proving the pertinent Japanese law validating
it, as well as her former husband's capacity to remarry, fall squarely upon her. Japanese laws on
persons and family relations are not among those matters that Filipino judges are supposed to know
by reason of their judicial function.

WHEREFORE, the petition for review on certiorari is DENIED. The September 18, 2014 Decision
and October 12, 2015 Resolution if the Court of Appeals in CA G.R. CV. No. 100076, are
AFFIRMED IN PART. The case is REMANDED to the court of origin for further proceedings and
reception of evidence as to the relevant Japanese law on divorce.

SO ORDERED
 FIRST DIVISION
[ G.R. No. 191914, August 09, 2017 ]
AGNES V. GUISON, PETITIONER, V. HEIRS OF LOREÑO TERRY, JOSE U.
ALBERTO III, SPOUSES MEDIN M. FRANCISCO AND FRANCIA M. FRANCISCO,
FE M. ALBERTO AND ELISA B. SARMIENTO, RESPONDENTS.

DECISION
SERENO, C.J.:
This resolves the Petition[1] filed by Agnes V. Guison to assail the Court of Appeals (CA) Decision[2] and
Resolution[3] in CA-G.R. CV No. 90319. Reversing the earlier Decision[4] of the Regional Trial Court (RTC), the CA
sustained the validity of certain instruments of conveyance in favor of respondent Loreño Terry.[5] These instruments
pertained to a 3,000-square-meter parcel of land located in Virac, Catanduanes, and covered by Transfer Certificate
of Title No. (TCT) 12244.[6]
FACTUAL ANTECEDENTS
The facts, as culled from the records, are as follows.

On 14 March 1995, a Deed of Absolute Sale[7] was executed in favor of respondent Terry by Angeles Vargas, the
father of petitioner. The subject of the sale was a parcel of agricultural land located in Moonwalk, Danicop,
Catanduanes, with an area of 1.3894 hectares and identified as Lot No. 10628-pt. In the deed, Vargas acknowledged
receipt of the payment for the lot in the amount of P5,557.60.
Between September and December 1995, Terry sold certain parts of the lot to third parties, namely, Jose U. Alberto
III (583 square meters),[8] Alona M. Guerrero (400 square meters)[9] and respondent Lino Gianan (200 square meters).
[10]
 Gianan is a respondent in this case.
On 22 January 1996, Vargas and Terry executed an Agreement of Revocation of Sale[11] (Revocation Agreement)
relating to the same parcel of land. The instrument stated that Vargas had erroneously sold the entire area of Lot
10628-pt to Terry. The parties, however, averred that their true intention was only to convey a 3,000-square-meter
portion of the land to Terry, considering that there was no monetary consideration for the transaction. Consequently,
they agreed to revoke the earlier Deed of Absolute Sale to the extent of 1.0894 hectares, while affirming the validity
of the conveyance to Terry of a 3,000-square-meter potion, whose actual location would later be determined by both
parties in a separate document. The agreement states:
WHEREAS, a Deed of Absolute Sale of Real Property was executed by [Angeles S. Vargas] on March 14, 1995, in
Manila, whereby a 1.3894 has. of land in Moonwalk & Danicop, Virac, Catanduanes was erroneously sold to [Loreño
Terry];

WHEREAS, the intention of both parties was the transfer of only Three Thousand (3,000) square meters [sic] portion
thereof, considering that there was not even any monetary consideration in the sale;

NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto hereby REVOKE the sale
said parties executed on March 14, 1995 to the extent of 1.0894 has. while retaining as valid the transfer to [Loreño
Terry] the area of Three Thousand (3,000) square meters.

That the actual location of said 3,000 square meters shall be determined by both parties in a separate document
consonant with this agreement but forming part hereof.

Vargas died on 10 June 1998[12] with no agreement executed regarding the actual location of the land conveyed to
Terry.
On 3 May 2000, a Partition Agreement[13] was entered into by the Heirs of Angeles Vargas, represented by petitioner,
and respondent Terry. The instrument, which was executed for the purpose of physically segregating the 3,000-
square-meter portion allotted to Terry, provides:
1. WHEREAS, the late Angeles Vargas left a parcel of land more particularly described as follows:

A parcel of agricultural land situated in Moonwalk, Virac, Catanduanes designated as Lot No. 10628-portion
containing an area of 1.3894 hectares, more or less, declared under A.R.P. No. 011-0723 in the name of Angeles S.
Vargas and bounded as follows:
North Lot No. 10628-part
-----------
East ------------Lot No. 10627; Lot No. 12438 and Lot No. 10649;
South Lot No. 10630
-----------
West Lot No. 10628-part
------------
2. WHEREAS, Lorenio Terry is entitled to a portion of said land with an area of Three Thousand (3,000) Square
Meters;

3. WHEREAS, it is the mutual agreement of all parties to partition the said land in order to physically segregate the
3,000 square meter portion belonging to Lorenio Terry from the bigger remaining portion;

WHEREFORE, the parties do hereby [p]artition the abovesaid property in accordance with the attached Subdivision
Plan as follows:

TO LORENIO TERRY:

The Southwestern portion of Lot No. 10628-part with an area of Two Thousand Six Hundred (2,600) Square Meters
as indicated in the attached Subdivision Plan;

The Western portion of Lot No. 10628-part with an area of Four Hundred (400) Square Meters as indicated in the
attached Subdivision Plan; and

The Three Thousand (3,000) Square Meters portion which is hereby adjudicated to Lorenio Terry, already
INCLUDES the portion which he sold to third persons prior to the execution of the Revocation of Deed of Sale;

TO THE HEIRS OF ANGELES VARGAS:

The entire remaining portion of Lot 10628-part with an area of Ten Thousand Eight Hundred Ninety Four (10,894)
Square Meters more or less, as show[n] in the attached Subdivision Plan;

The undersigned parties do hereby respect and recognize each other's rights as absolute owners of the portion
respectively adjudicated to them by virtue of this Partition Agreement, and they hereby request the Assessor's Office
to effect the transfer of the A.R.P. to the names of the corresponding party in accordance with this Partition
Agreement and the attached Subdivision Plan.

Thereafter, Terry sold other portions of the property to third parties, specifically, Alex Laynes (500 square meters),
[14]
 Elisa Sarmiento (400 square meters),[15] Fe Alberto (400 square meters),[16] Medin Francisco (200 square meters),
[17]
 Eddie Alcantara (100 square meters),[18] and Oswaldo de Leon (200 square meters).[19] All the foregoing
transactions left Terry with ownership of only 17 square meters of the lot.[20]
On 8 May 2000, the heirs of Vargas executed an Extrajudicial Settlement of Estate Among Heirs.[21] In that
instrument, Lot 10628-pt was allotted to petitioner as part of her share of the estate.[22]
On 16 November 2006, petitioner filed a Complaint[23] for annulment of contracts, accion publiciana, and damages
against Terry and all those who had allegedly purchased portions of Lot 10628-pt from him, i.e. Jose U. Alberto III,
Spouses Medin M. Francisco and Francia M. Francisco, Eddie Alcantara, Fe M. Alberto, Elisa B. Sarmiento, Lino S.
Gianan, Alex Laynes, Alona Guerrero and Oswaldo de Leon.
The instruments sought to be annulled were the following: (a) the original Deed of Absolute Sale executed by Vargas
in favor of Terry; (b) the Agreement of Revocation of Sale signed by Vargas and Terry; (c) the Partition Agreement
entered into by petitioner and Terry; and (d) the Deeds of Absolute Sale executed by Terry in favor of third parties.

Petitioner argued that the original Deed of Absolute Sale and the Agreement of Revocation of Sale should be
considered void for lack of consideration. She then contended that the nullity of those earlier instruments led to the
invalidity of the Partition Agreement, because it was signed in the mistaken belief that Terry had a right to the
property.

On 11 January 2007, Terry filed his Answer[24] before the RTC. Refuting the assertions in the Complaint, he insisted
that the 3,000-square-meter lot was conveyed to him by Vargas. Terry explained that the property was in fact
originally owned by his grandfather, but incorrectly registered in the name of Fernando Vargas, who was petitioner's
predecessor-in-interest. The original Deed of Absolute Sale was purportedly executed to rectify the error in
registration and restore the property to its rightful owner. Terry further alleged that he had only signed the Agreement
of Revocation of Sale in consideration of his closeness to the Vargas family and in order to avoid litigation. He
pointed out that petitioner herself confirmed the validity of the instruments of sale by executing the Partition
Agreement after the death of Vargas.
For their part, respondents Laynes, Spouses Francisco, Alcantara, Gianan, De Leon, Sarmiento and Fe Alberto all
claimed to be buyers in good faith. In their respective Answers[25] before the RTC, they insisted that they had merely
relied upon the Partition Agreement; in particular, the statements made by petitioner acknowledging Terry's
entitlement to the property. These declarations, it was argued, estopped petitioner from now seeking recovery of the
portions of the property sold to third persons.
Respondents Guerrero and Jose Alberto III did not file Answers with the RTC. Petitioner later withdrew her Complaint
against them.[26]
RTC RULING
After trial, the RTC rendered a Decision[27] in favor of petitioner. Citing the absence of certain elements of a sale, the
trial court declared that the Deed of Absolute Sale, Revocation Agreement, and Partition Agreement were invalid
contracts:
The following belies defendant's claim of ownership over the 3,000 sq. m. lot.

1. Vargas and defendant Terry revoked the Deed of [A]bsolute Sale dated March 14, 1995 because of want
of monetary consideration and failure of the contract to reflect the true intention of the parties. Thus,
there was no sale at all of any portion of Lot No. 10628.

2. The Agreement of Revocation of [S]ale merely affirms the intention of the parties to transfer the 3,000
sq. m. lot to defendant Terry as gleaned from the parties['] promise to specify the actual location of the
3,000 sq. m. lot in a separate document and the absence of agreement as to the price of the 3,000 sq.
m. lot and the absence of [any] statement that defendant Terry had already paid therefor.
Verily, the allege[d] conveyance of the 3,000 sq. m. lot to defendant Terry under the Agreement of Revocation of Sale
was also without valuable consideration.

As it was, defendant Terry capitalized on the Agreement of Revocation of Sale and lured the heirs of Vargas into
signing the Partition Agreement dated May 3, 2000. The Court gives credence to the testimony of the plaintiff that she
signed the Partition Agreement only because of the promise of defendant Terry that he shall cause the approval of
the draft of the subdivision plan that he had shown to plaintiff and that he shall pay the heirs of Vargas the prevailing
price for the 3,000 sq. m. lot upon the approval of the subdivision plan (Exh. "D"). But defendant Terry failed to make
good his promise to cause the approval of the subdivision plan nor pay for [the] lot. Indeed, defendant Terry
miserably failed to present any receipt or proof of payment for the said 3,000 sq. m. lot nor produce the approved
subdivision plan as stipulated in the Partition Agreement.[28]
With respect to the other respondents, the RTC declared that they were not purchasers in good faith, as they had
failed to exercise the required diligence before buying the property:

Facts and circumstances surrounding this case debunk the presumption of good faith on the part of defendants. To
elucidate, it was clear to them that, at the time of sale, defendant Terry [had] no certificate of title to prove ownership
over the lot being sold, instead, they merely relied on several documents which they did not verify and [the]
genuineness of which were doubtful at the beginning. The lots sold by defendant Terry to his co-respondents are part
of the lot registered in the name of Angeles Vargas under TCT No. 8193 and later in the name of the plaintiff under
TCT No. 1224. The herein buyers of defendant Terry simply failed to exercise the diligence of investigating the
ownership of the vendor.

Thus on the issue on whether Terry's co-defendants are buyers in good faith, the Court rules in the negative.[29]
Based on the above findings, the RTC ordered respondents to vacate the land and surrender possession to petitioner
within 15 days from notice of the Decision. Respondents were likewise held solidarily liable to petitioner for (a)
P50,000 as attorney's fees and (b) P5,000 per appearance of counsel before the trial court.
Respondents Alcantara, De Leon, Gianan and Spouses Francisco sought reconsideration[30] of the Decision, but their
motion was denied.[31] They no longer appealed the Order denying their Motion for Reconsideration.
Meanwhile, respondents Terry, Alberto, and Sarmiento opted to file a Notice of Appeal[32] instead of a motion for
reconsideration. The RTC gave due course to the appeal and ordered the elevation of the records of the case to the
CA.[33]
THE CA RULING
In its Decision[34] dated 19 March 2009, the CA reversed the ruling of the RTC. While recognizing the nullity of the
Deed of Absolute Sale given the parties' admission that there was no consideration for the transaction, the appellate
court found no reason to invalidate the Revocation Agreement. It ruled that this independent document proved the
true intent of the parties to transfer 3,000 square meters of the disputed property to Terry, even without consideration.
The CA also declared that the claims of petitioner were barred by laches, considering that she had allowed more than
six years to elapse before asserting her rights against respondents.
The appellate court further noted that petitioner was estopped from refuting the validity of the instruments, because
she was equally to blame for the predicament of those who had purchased the property from Terry. In particular, the
CA referred to the representations made by petitioner in the Partition Agreement, as well as her contemporaneous
and subsequent acts, as sufficient bases for respondents to believe that the property had been validly sold to Terry.

Petitioner sought reconsideration of the Decision, but her motion was denied by CA.[35] She then elevated the matter
to this Court via the instant Petition for Review.
PROCEEDINGS BEFORE THIS COURT
In her Petition filed before this Court, petitioner persists in her claim that the Revocation Agreement and the Partition
Agreement are invalid. She maintains that Vargas and Terry never gave effect to the Revocation Agreement, since
they never executed the document needed for the segregation of the portion allegedly conveyed to Terry. As to the
Partition Agreement, she insists that the instrument was not supported by any consideration.

Petitioner also asserts that her claim was not barred by either estoppel or laches. In her view, the six-year delay
incurred in asserting the claim was not sufficient to constitute laches. She also claims that estoppel cannot be applied
in favor of respondents, because they have likewise been negligent.

In their Comment,[36] respondents reiterate that petitioner was estopped from asserting her claim over the land, given
her statements in the Partition Agreement. They further emphasize their status as buyers in good faith, citing their
awareness of all the transactions involving the property. Finally, they allege that Terry paid Vargas the amounts of
P5,557.60 and P3,000 as consideration for the lot.
On 7 July 2012, Terry died[37] and his heirs were substituted as respondents in this case.
In her Reply,[38] petitioner insists that no consideration was ever paid for the transactions. She points out that the
assertion that payment was made was a mere afterthought, as Terry never alleged payment as a defense when he
filed his Answer. He also allegedly failed to submit proof of his assertion.
ISSUES
The following issues are presented to this Court for resolution:

1. Whether or not the CA erred when it refused to annul the Revocation Agreement and the Partition Agreement
subject of this case;

2. Whether or not the CA erred when it ruled that petitioner's claims were barred by estoppel and laches.

OUR RULING 
The Petition for Review is PARTLY GRANTED.
After a judicious consideration of the merits of the case, we reverse the ruling of the CA insofar as it upheld Terry's
right to the property. We find sufficient basis to declare the Revocation Agreement and the Partition Agreement null
and void because of the absence of the required meeting of the minds regarding the consideration for the sale.
Consequently, we are compelled to conclude that the property was never validly conveyed to Terry.
Nevertheless, we agree with the conclusion of the CA that petitioner is estopped from questioning the title of those
who purchased the lot from Terry and relied upon petitioner's representations in the Partition Agreement.
The CA committed a grave error when it
upheld the validity of the Revocation
Agreement and the Partition Agreement.
The principal issue in this case pertains to the validity of two instruments - the Revocation Agreement and the
Partition Agreement -purporting to convey a portion of the subject lot to Terry.
Before proceeding to discuss the validity of the contract, however, a clarification must be made. Based on the
provisions of the Revocation Agreement and the Partition Agreement, we conclude that the two instruments must be
read as part of a single contract of sale. In the Revocation Agreement, the parties recognized the transfer of a 3,000-
square meter portion of Lot No. 10628-pt to Terry. However, instead of identifying the specific segment of the
property allegedly conveyed, they stipulated that "the actual location of the said 3,000 square meters shall be
determined by both parties in a separate document consonant with this agreement, but forming a part hereof."[39] That
separate document was the Partition Agreement subsequently executed by the parties to physically segregate the
portion of the property sold to Terry.
It is therefore evident that the two instruments in question are not separate contracts, but are mere components of the
same sales transaction. Accordingly, we must examine both documents together to determine whether a valid
contract of sale exists.
Article 1458 of the Civil Code describes a contract of sale as a transaction by which "one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price
certain in money or its equivalent." The elements of a perfected contract of sale are the following: (1) the meeting of
the minds of the parties or their consent to a transfer of ownership in exchange for a price; (2) the determinate object
or subject matter of the contract; and (3) the price certain in money or its equivalent as consideration for the sale.
[40]
 The absence of any of these elements renders a contract void.
In this case, the Revocation Agreement and the Partition Agreement are silent on the matter of consideration. Neither
instrument mentions the purchase price for the sale of the lot. The CA, however, sustained the validity of both
instruments. It held that the true intent of the parties was to transfer 3,000 square meters of the disputed property to
Terry without reserving his right to consideration. Petitioner, on the other hand, insists that the RTC correctly declared
both contracts void - the Revocation Agreement, because of the absence of consideration and the failure of Vargas
and Terry to execute the document needed to segregate the portion allegedly conveyed; and the Partition Agreement
for lack of consideration.
Given the contradictory findings of the CA and the RTC in this case, we have been compelled to look into the records
of the case in order to arrive upon our own factual determinations.[41] After carefully studying the records, we conclude
that not all the elements of a perfected contract of sale were present. In particular, we find no sufficient evidence that
the parties ever agreed on a specific purchase price for the property.
We note the competing allegations of the parties on this point. While the purchase price for the property was not
indicated on either of the instruments,[42] respondents insist that consideration was paid twice for the same lot
(P5,557.60 upon the execution of the original Deed of Absolute Sale and P3,000 upon the signing of the Revocation
Agreement).[43] On the other hand, petitioner contends that there was no consideration stated in the Revocation
Agreement, because the parties agreed to determine the price of the property in a separate document.[44] She then
asserts that an agreement was reached on the sale of the property to Terry at the prevailing market price.[45]
As stated above, we find no evidence that the parties ever agreed upon a "price certain" as consideration for the
property.

This Court considers Terry's claim of payment untenable considering his failure to present any evidence of his
assertion other than his bare testimony. We also note significant inconsistencies in his allegations before the trial
court. He insisted during his testimony that he had paid for the property. In his Answer, however, he never asserted
the payment of consideration as a defense.[46] Instead, he emphasized that the Deed of Absolute Sale was executed
by Vargas to return the land to him as the heir of the true owner of the property.[47]
Further, Terry did not mention any form of consideration in connection with the Revocation Agreement. In fact, he
admitted in his Answer that no consideration was given to him in exchange for his consent to the revocation of the
earlier contract. He supposedly agreed to the revocation only because of his closeness to the Vargas family and in
order to avoid litigation.[48] This statement directly contradicts his later assertion that there was monetary
consideration for the sale.
In the same manner, the allegation made by petitioner that the parties agreed to the sale of the lot at the prevailing
market price is bereft of factual basis. Other than her own bare allegation, there was no evidence submitted to
support her claim that the sale was agreed upon by the parties upon the execution of the Partition Agreement. In fact,
that instrument did not refer to any supposed agreement as to the price for the lot.

Given that both the Revocation Agreement and the Partition Agreement are silent on the issue of consideration, and
further considering the conflicting accounts of the parties themselves as to the exact amount of the purchase price,
this Court agrees with the finding of the RTC that the parties did not reach any agreement as to the amount of
monetary consideration for the property.[49]
This lack of consensus as to the price prevented the perfection of the sale. We emphasize that the law requires a
definite agreement as to a "price certain"; otherwise, there is no true meeting of the minds between the parties.
[50]
 In Villanueva v. Court of Appeals,[51] this Court stated:
The price must be certain, otherwise there is no true consent between the parties. There can be no sale without a
price. In the instant case, however, what is dramatically clear from the evidence is that there was no meeting of mind
as to the price, expressly or impliedly, directly or indirectly.

Sale is a consensual contract. He who alleges it must show its existence by competent proof. Here, the very essential
element of price has not been proven.

As there was no sufficient evidence of a meeting of the minds between the parties with regard to the consideration for
the sale, we are compelled to declare the transaction null and void.

Typically, the foregoing ruling would likewise invalidate all of Terry's subsequent transactions involving the property,
pursuant to the principle that the spring cannot rise higher than its source.[52] Nevertheless, we come to a different
conclusion in this case as regards the rights of respondents Sarmiento and Alberto given the applicability of the
equitable principle of estoppel in pais.
Petitioner is estopped from assailing the sale
transactions in favor of respondents Alberto
and Sarmiento.
The CA ruled in the assailed Decision that by virtue of the principles of estoppel and laches, petitioner was barred
from questioning the sale of the property to respondents:

[A]ppellee waited more than six (6) years from the time she executed said Partition Agreement before asserting her
supposed claim. Thus, even assuming, for the sake of argument, that appellee has a valid claim against appellant
Terry, laches has ineluctably set in.

The doctrine of laches or of "stale demands" is based upon grounds of public policy which requires, for the peace of
society, the discouragement of stale claims and, unlike the statute of limitations, is not merely a question of time but
is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted.

xxxx

Indeed, it would be [iniquitous] to allow appellee to assert her supposed claim under the present circumstances,
especially when all of appellant Terry's co-defendants relied on the strength of appellee's representation in the
Partition Agreement which she executed allotting the disputed portion to appellant Terry. The error in appellee's line
of argument is that she is merely tucking (sic) the alleged bad faith on the part of appellant Terry's co-defendants to
appellant Terry's alleged bad faith in acquiring the disputed portion, such that any and all rights acquired by appellant
Terry's co-defendants cannot be better than those of appellant Terry himself. Appellee failed to realize that she
herself is equally at fault as appellant Terry's co-defendants relied on her representations in the Partition Agreement
which she voluntarily and freely executed.[53]
This Court does not agree that the doctrine of laches is applicable here. The interval of six years between the date of
execution of the Partition Agreement and that of the institution of the Complaint in this case does not, by itself, render
the demands of petitioner stale.

We emphasize that laches does not merely concern the lapse of time.[54] As we explained in Heirs of Nieto v.
Municipality of Meycauayan:[55]
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that
which, by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a
right within a reasonable time, warranting the presumption that the party entitled to assert his right has either
abandoned or declined to assert it.[56]
Here, petitioner did not exhibit any conduct that would warrant the presumption that she had abandoned or declined
to assert her right over the property. It was her initial belief that the lot was truly sold by her father to Terry, albeit
pending the determination of the consideration and the specific location of the subject portion. Moreover, the latter's
repeated assurances that he would pay for the lot explained the delay in the institution of the case. For this reason,
this Court does not find the delay unreasonable.

However, we do find sufficient basis to utilize the doctrine of estoppel in pais to bar the claims of petitioner against
respondents Sarmiento and Alberto. In GE Money Bank, Inc. v. Spouses Dizon,[57] the Court clarified the meaning of
this doctrine:
Estoppel in pais arises when one, by his acts, representations or admissions, or by his own silence when he ought to
speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and such
other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the
existence of such facts. The principle of estoppel would step in to prevent one party from going back on his or her
own acts and representations to the prejudice of the other party who relied upon them. It is a principle of equity and
natural justice, expressly adopted in Article 1431 of the New Civil Code and articulated as one of the conclusive
presumptions in Rule 131, Section 2 (a) of our Rules of Court.[58]
For the principle to apply, certain elements must be present in respect of both the party sought to be estopped and
the party claiming estoppel:

The essential elements of estoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct
amounting to false representation or concealment of material facts or, at least, calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; 2) an
intent or, at least, an expectation, that this conduct shall influence, or be acted upon by, the other party; and 3) the
knowledge, actual or constructive, by him of the real facts. With respect to the party claiming the estoppel, the
conditions he must satisfy are: 1) lack of knowledge or of the means of knowledge of the truth as to the facts in
question; 2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and 3) action or
inaction based thereon of such character as to change his position or status calculated to cause him injury or
prejudice. It has not been shown that respondent intended to conceal the actual facts concerning the property; more
importantly, petitioner has been shown not to be totally unaware of the real ownership of the subject property.[59]
All the foregoing requisites have been fulfilled in this case. When petitioner signed the Partition Agreement, she
clearly recognized Terry's right as absolute owner of the portion of the property assigned to him, with no reservation
whatsoever. She recognized that right despite her doubts about the validity of the sale made by her father and the
knowledge that Terry had not yet paid for the land. Moreover, she could not have been oblivious to the fact that the
document might be used to influence others to buy the land, because she knew that Terry had previously sold
portions of the property to third persons.

Respondents Sarmiento and Alberto, on the other hand, clearly relied in good faith on the Partition Agreement. Since
there was no evidence that they knew of the true state of the transaction between petitioner and Terry, it was
reasonable for them to rely on the statement of petitioner alone, who unconditionally recognized Terry's right to the
property. To allow her to now adopt a contrary position would cause respondents undue injury and prejudice. This
Court is thus compelled to rule that petitioner is estopped from asserting her right to the property as against
Sarmiento and Alberto. In this respect, the CA ruling is affirmed.

The Heirs of Terry must remit to petitioner the

payments received by their predecessor-in-
interest from Sarmiento and Alberto.
Given our conclusions on the nullity of the sale and the applicability of the principle of estoppel, we deem it proper to
order the Heirs of Terry to remit to petitioner all the payments received by their predecessor-in-interest from
Sarmiento and Alberto in connection with the sale of the property. Based on the Deeds of Absolute Sale executed by
the two purchasers, Sarmiento and Alberto paid Terry P2000[60] and P10,000,[61] respectively, for their portions of the
lot. The Heirs of Terry must now turn over the proceeds of these sale transactions to petitioner.
This ruling is demanded by the equitable principle of unjust enrichment. We have declared that "[t]here is unjust
enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or
property of another against the fundamental principles of justice, equity and good conscience."[62] Since Terry never
paid any consideration and the property was never validly conveyed to him, he and his heirs should not be allowed to
benefit from the sale thereof.
Moreover, while petitioner is barred by estoppel from recovering the lot from Sarmiento and Alberto, her right to
enforce claims against Terry remained unaffected. Under the circumstances, it is only fair and reasonable to allow her
to recover the payments received by Terry for the lot. Given that Terry died in 2012, his heirs are liable for the
reimbursement of these amounts.[63]
WHEREFORE, the Petition for Review is PARTLY GRANTED. The Court of Appeals Decision dated 19 March 2009
and its Resolution dated 29 March 2010 are AFFIRMED insofar as the rights of Fe M. Alberto and Elisa B. Sarmiento
are concerned. However, in respect of the Heirs of Loreño Terry, the Decision and the Resolution are MODIFIED as
follows:
1. The Revocation Agreement dated 22 January 1996 and the Partition Agreement dated 3 May 2000 are hereby
declared NULL and VOID.
2. The Heirs of Loreño Terry are ORDERED to vacate the property and surrender the peaceful possession thereof to
Agnes Guison.
3. The Heirs of Loreño Terry are likewise ORDERED to remit to Agnes Guison the payments received by their
predecessor-in-interest from Fe M. Alberto and Elisa B. Sarmiento in the amounts of P2,000 and P10,000,
respectively.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 186417               July 27, 2011

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
FELIPE MIRANDILLA, JR., Defendant and Appellant.

DECISION

PEREZ, J.:

For Review before this Court is the Decision of the Court of Appeals (CA) in CA-G.R. CR-HC No.
00271,1 dated 29 February 2008, finding accused Felipe Mirandilla, Jr., (Mirandilla) guilty beyond
reasonable doubt of special complex crime of kidnapping with rape; four counts of rape; and, one
count of rape through sexual assault.

Mirandilla is now asking this Court to acquit him. He contends that he could not have kidnapped and
raped the victim, AAA,2 whom he claims to be his live-in partner. The records, however, reveal with
moral certainty his guilt. Accordingly, We modify the CA Decision and find him guilty of the special
complex crime of kidnapping and illegal detention with rape.

THE FACTS

AAA narrated her 39-day ordeal in the hands of Mirandilla.

It was 2 December 2000, eve of the fiesta in Barangay San Francisco, Legazpi City. At the plaza,
AAA was dancing with her elder sister, BBB.3

AAA went out of the dancing hall to buy candies in a nearby store. While making her way back
through the crowd, a man grabbed her hand, his arm wrapped her shoulders, with a knife’s point
thrust at her right side. She will come to know the man’s name at the police station, after her escape,
to be Felipe Mirandilla, Jr.4 He told her not to move or ask for help. Another man joined and went
beside her, while two others stayed at her back, one of whom had a gun. They slipped through the
unsuspecting crowd, walked farther as the deafening music faded into soft sounds. After a four-hour
walk through the grassy fields, they reached the Mayon International Hotel, where they boarded a
waiting tricycle. Upon passing the Albay Cathedral, the others alighted, leaving AAA alone with
Mirandilla who after receiving a gun from a companion, drove the tricycle farther away and into the
darkness. Minutes later, they reached the Gallera de Legazpi in Rawis.5

Mirandilla dragged AAA out of the tricycle and pushed her inside a concrete house. At gunpoint he
ordered her to remove her pants.6 When she defied him, he slapped her and hit her arms with a gun,
forced his hands inside her pants, into her panty, and reaching her vagina, slipped his three fingers
and rotated them inside. The pain weakened her. He forcibly pulled her pants down and lifting her
legs, pushed and pulled his penis inside.7 "Sayang ka," she heard him whisper at her,8 as she
succumbed to pain and exhaustion.

When AAA woke up the following morning, she found herself alone. She cried for help, shouting until
her throat dried. But no one heard her. No rescue came.

At around midnight, Mirandilla arrived together with his gang. Pointing a gun at AAA, he ordered her
to open her mouth; she sheepishly obeyed. He forced his penis inside her mouth, pulling through her
hair with his left hand and slapping her with his right. After satisfying his lust, he dragged her into the
tricycle and drove to Bogtong, Legazpi. At the road’s side, Mirandilla pushed her against a reclining
tree, gagged her mouth with cloth, punched her arm, thigh, and lap, and pulled up her over-sized
shirt. Her underwear was gone. Then she felt Mirandilla’s penis inside her vagina. A little while, a
companion warned Mirandilla to move out. And they drove away.9

They reached a nipa hut and AAA was thrown inside. Her mouth was again covered with cloth.
Mirandilla, with a gun aimed at her point blank, grabbed her shirt, forced her legs open, and again
inserted his penis into her vagina.10

The following evening, Mirandilla and his gang brought AAA to Guinobatan, where she suffered the
same fate. They repeatedly detained her at daytime, moved her back and forth from one place to
another on the following nights, first to Bonga, then back to Guinobatan, where she was locked up in
a cell-type house and was raped repeatedly on the grassy field right outside her cell, then to
Camalig, where they caged her in a small house in the middle of a rice field. She was allegedly
raped 27 times.11

One afternoon, in Guinobatan, AAA succeeded in opening the door of her cell. Seeing that Mirandilla
and his companions were busy playing cards, she rushed outside and ran, crossed a river, got
drenched, and continued running. She rested for awhile, hiding behind a rock; she walked through
the fields and stayed out of people’s sight for two nights. Finally, she found a road and followed its
path, leading her to the house of Evelyn Guevarra who brought her to the police station. It was 11
January 2001. AAA was in foul smell, starving and sleepless. Evelyn Guevarra gave her a bath and
the police gave her food. When the police presented to her pictures of suspected criminals, she
recognized the man’s face – she was certain it was him. He was Felipe Mirandilla, Jr., the police told
her.12

The following morning, accompanied by the police, AAA submitted herself to Dr. Sarah Vasquez,
Legazpi City’s Health Officer for medical examination. The doctor discovered hymenal lacerations in
different positions of her hymen, indicative of sexual intercourse.13 Foul smelling pus also oozed from
her vagina - AAA had contracted gonorrhoea.14

Mirandilla denied the charges against him. This is his version.

Mirandilla first met AAA on 3 October 2000. By stroke of fate, they bumped into each other at the
Albay Park where AAA, wearing a school uniform, approached him. They had a short chat. They
were neighbors in Barangay San Francisco until Mirandilla left his wife and daughter there for good.15

Two days later, Mirandilla and AAA met again at the park. He started courting her,16 and, after five
days, as AAA celebrated her 18th birthday, they became lovers. Mirandilla was then 33 years old.

Immediately, Mirandilla and AAA had sex nightly in their friends’ houses and in cheap motels. On 24
October 2000, after Mirandilla went to his mother’s house in Kilikao, they met again at the park, at
their usual meeting place, in front of the park’s comfort room, near Arlene Moret, a cigarette vendor
who also served as the CR’s guard.17 They decided to elope and live as a couple. They found an
abandoned house in Rawis, at the back of Gallera de Legazpi. Emilio Mendoza who owned the
house, rented it to them for ₱1,500.00.18 They lived there from 28 October until 11 December
2000.19 From 12 December 2000 until 11 January 2001,20 Mirandilla and AAA stayed in Rogelio
Marcellana’s house, at the resettlement Site in Banquerohan, Legazpi City.

Mirandilla and AAA’s nightly sexual intimacy continued, with abstentions only during AAA’s
menstrual periods, the last of which she had on 7 December 2000.21 In late December, however,
Mirandilla, who just arrived home after visiting his mother in Kilikao, saw AAA soaked in blood,
moaning in excruciating stomach pain.22 AAA had abortion – an inference he drew upon seeing the
cover of pills lying beside AAA. Mirandilla claimed that AAA bled for days until she left him in
January 2001 after quarrelling for days.23

Mirandilla, however, had a second version of this crucial event. He claimed that AAA missed her
menstruation in December 200024 and that he would not have known she had an abortion had she
not confessed it to him.25

THE RTC RULING

Mirandilla was charged before the Regional Trial Court (RTC) of Legazpi City, Branch 5, with
kidnapping with rape (Crim. Case No. 9278), four counts of rape (Crim. Case Nos. 9274 to 9277),
and rape through sexual assault (Crim. Case No. 9279).

The RTC, in its decision dated 1 July 2004, convicted Mirandilla of kidnapping, four counts of rape,
and one count of rape through sexual assault with this finding:

This Court has arrived at the factual conclusion that Felipe Mirandilla, Jr., in the company of three
others [conferrers], kidnapped AAA in Barangay xxx, City of xxx, on or on about midnight of
December 2, 2000 or early morning of December 3, 2000, held her in detention for thirty-nine days in
separate cells situated in the City of xxx; xxx; and xxx. Felipe Mirandilla, Jr., carnally abused her
while holding a gun and/or a knife for twenty seven times, employing force and intimidation. The
twenty seven sexual intercourses were eventually perpetrated between the City of xxx and the towns
of xxx and xxx. At least once, Felipe Mirandilla, Jr., put his penis inside the mouth of AAA against
her will while employing intimidation, threats, and force.26

THE COURT OF APPEALS RULING

On review, the CA affirmed with modification the RTC ruling, convicting Mirandilla. It found him guilty
of the special complex crime of kidnapping with rape (instead of kidnapping as the RTC ruled), four
counts of rape, and one count of rape by sexual assault.27 It rejected Mirandilla’s defense that he and
AAA were live-in partners and that their sexual encounters were consensual.28 It noted that Mirandilla
failed to adduce any evidence or any credible witness to sustain his defense.29

Hence, this appeal.

Mirandilla repeats his allegations that the prosecution’s lone witness, AAA, was not a credible
witness and that he and AAA were live-in partners whose intimacy they expressed in consensual
sex.

OUR RULING

We find Mirandilla guilty of the special complex crime of kidnapping and illegal detention with rape.

Mirandilla admitted in open court to have had sexual intercourse with AAA, which happened almost
nightly during their cohabitation. He contended that they were live-in partners, entangled in a
whirlwind romance, which intimacy they expressed in countless passionate sex, which headed
ironically to separation mainly because of AAA’s intentional abortion of their first child to be – a
betrayal in its gravest form which he found hard to forgive.
In stark contrast to Mirandilla’s tale of a love affair, is AAA’s claim of her horrific ordeal and her flight
to freedom after 39 days in captivity during which Mirandilla raped her 27 times.

First Issue:

Credibility of Prosecution Witness

Jurisprudence is consistent that for testimonial evidence to be believed, it must not only come from a
credible witness but must be credible in itself – tested by human experience, observation, common
knowledge and accepted conduct that has evolved through the years.30

Daggers v. Van Dyck,31 illuminates:

Evidence to be believed, must not only proceed from the mouth of a credible witness, but it must be
credible in itself – such as the common experience and observation of mankind can approve as
probable under the circumstances. We have no test of the truth of human testimony, except its
conformity to our knowledge, observation, and experience. Whatever is repugnant to these belongs
to the miraculous and is outside of judicial cognizance.32

First, the trial judge, who had the opportunity of observing AAA’s manner and demeanour on the
witness stand, was convinced of her credibility: "AAA appeared to be a simple and truthful woman,
whose testimony was consistent, steady and firm, free from any material and serious
contradictions."33 The court continued:

The record nowhere yields any evidence of ill motive on the part of AAA to influence her in
fabricating criminal charges against Felipe Mirandilla, Jr. The absence of ill motive enhances the
standing of AAA as a witness. x x x.

When AAA testified in court, she was sobbing. While she was facing Felipe Mirandilla, Jr., to
positively identify him in open court, she was crying. Felipe Mirandilla Jr.’s response was to smile.
AAA was a picture of a woman who was gravely harmed, craving for justice. x x x.34

Second, the trial court found AAA’s testimony to be credible in itself. AAA’s ordeal was entered into
the police blotter immediately after her escape,35 negating opportunity for concoction.36 While in
Mirandilla’s company, none of her parents, brothers, sisters, relatives, classmates, or anyone who
knew her, visited, saw, or talked to her. None of them knew her whereabouts.37 AAA’s testimony was
corroborated by Dr. Sarah Vasquez, Legazpi City’s Health Officer, who discovered the presence not
only of hymenal lacerations but also gonorrhoea, a sexually transmitted disease.

More importantly, AAA remained consistent in the midst of gruelling cross examination. The defense
lawyer tried to impeach her testimony, but failed to do so.

The Court of Appeals confirmed AAA’s credibility in affirming the RTC decision.

We emphasize that a trial court’s assessment of a witness’ credibility, when affirmed by the CA, is
even conclusive and binding, if not tainted with arbitrariness or oversight of some fact or
circumstance of weight or influence.38 This is so because of the judicial experience that trial courts
are in a better position to decide the question of credibility, having heard the witnesses themselves
and having observed firsthand their deportment and manner of testifying under gruelling
examination.39 Thus, in Estioca v. People,40 we held:
In resolving issues pertaining to the credibility of the witnesses, this Court is guided by the following
principles: (1) the reviewing court will not disturb the findings of the lower courts, unless there is a
showing that it overlooked or misapplied some fact or circumstance of weight and substance that
may affect the result of the case; (2) the findings of the trial court on the credibility of witnesses are
entitled to great respect and even finality, as it had the opportunity to examine their demeanour
when they testified on the witness stand; and (3) a witness who testifies in a clear, positive and
convincing manner is a credible witness.41

Second Issue

"Sweetheart Theory" not Proven

Accused’s bare invocation of sweetheart theory cannot alone, stand. To be credible, it must be
corroborated by documentary, testimonial, or other evidence.42 Usually, these are letters, notes,
photos, mementos, or credible testimonies of those who know the lovers.43

The sweetheart theory as a defense, however, necessarily admits carnal knowledge, the first
element of rape. Effectively, it leaves the prosecution the burden to prove only force or intimidation,
the coupling element of rape. Love, is not a license for lust.44

This admission makes the sweetheart theory more difficult to defend, for it is not only an affirmative
defense that needs convincing proof;45 after the prosecution has successfully established a prima
facie case,46 the burden of evidence is shifted to the accused,47 who has to adduce evidence that the
intercourse was consensual.48

A prima facie case arises when the party having the burden of proof has produced evidence
sufficient to support a finding and adjudication for him of the issue in litigation.49

Burden of evidence is "that logical necessity which rests on a party at any particular time during the
trial to create a prima facie case in his favour or to overthrow one when created against
him."50(Emphasis supplied)

Mirandilla with his version of facts as narrated above attempted to meet the prosecution’s prima
facie case. To corroborate it, he presented his mother, Alicia Mirandilla; his relatives, Rogelio
Marcellana and Emilio Mendoza; and, his friend Arlene Moret.

Arlene Moret, the cigarette vendor who also served as the CR’s guard, testified that on 30 October
2000, AAA and Mirandilla arrived together at the park.51 They approached her and chatted with her.
On cross examination, she claimed otherwise: Mirandilla arrived alone two hours earlier, chatting
with her first, before AAA finally came.52 She also claimed meeting the couple for the first time on 30
October 2000, only to contradict herself on cross examination with the version that she met them
previously, three times at least, in the previous month.53 On the other hand, Mirandilla claimed first
meeting AAA on 3 October 2000 at the park.54

The accused’s mother, Alicia Mirandilla, testified meeting her son only once, and living in Kilikao only
after his imprisonment.55 This contradicted Mirandilla’s claim that he visited his mother several times
in Kilikao, from October 2000 until January 2001.56

Even Mirandilla contradicted himself. His claim that he saw AAA soaked in blood, agonizing in pain,
with the abortifacient pills’ cover lying nearby, cannot be reconciled with his other claim that he came
to know AAA’s abortion only through the latter’s admission.57
Taken individually and as a whole, the defense witnesses’ testimonies contradicted each other and
flip-flopped on materials facts, constraining this Court to infer that they concocted stories in a
desperate attempt to exonerate the accused.

As a rule, self-contradictions and contradictory statement of witnesses should be reconciled,58 it

being true that such is possible since a witness is not expected to give error-free testimony
considering the lapse of time and the treachery of human memory.59 But, this principle, learned from
lessons of human experience, applies only to minor or trivial matters – innocent lapses that do not
affect witness’ credibility.60 They do not apply to self-contradictions on material facts.61 Where these
contradictions cannot be reconciled, the Court has to reject the testimonies,62 and apply the maxim,
falsus in uno, falsus in omnibus. Thus,

To completely disregard all the testimony of a witness based on the maxim falsus in uno, falsus in
omnibus, testimony must have been false as to a material point, and the witness must have a
conscious and deliberate intention to falsify a material point. In other words, its requirements, which
must concur, are the following: (1) that the false testimony is as to one or more material points; and
(2) that there should be a conscious and deliberate intention to falsity.63

Crimes and Punishment

An appeal in criminal case opens the entire case for review on any question, including one not
raised by the parties.64 This was our pronouncement in the 1902 landmark case of U.S. v.
Abijan,65 which is now embodied in Section 11, Rule 124 of the Rules of Court:

SEC 11. Scope of Judgment. – The Court of Appeals may reverse, affirm, or modify the judgment
and increase or reduce the penalty imposed by the trial court, remand the case to the Regional Trial
Court for new trial or retrial, or dismiss the case. (Emphasis supplied)

The reason behind this rule is that when an accused appeals from the sentence of the trial court, he
waives the constitutional safeguard against double jeopardy and throws the whole case open to the
review of the appellate court, which is then called upon to render such judgment as law and justice
dictate, whether favorable or unfavorable to the appellant.66

To reiterate, the six informations charged Mirandilla with kidnapping and serious illegal detention
with rape (Crim. Case No. 9278), four counts of rape (Crim. Case Nos. 9274-75-76-77), and one
count of rape through sexual assault (Crim. Case No. 9279).

The accusatory portion of the information in Criminal Case No. 9278 alleged that Mirandilla
kidnapped AAA and seriously and illegally detained her for more than three days during which time
he had carnal knowledge of her, against her will.67

The Court agrees with the CA in finding Mirandilla guilty of the special complex crime of kidnapping
with rape, instead of simple kidnapping as the RTC ruled. It was the RTC, no less, which found that
Mirandilla kidnapped AAA, held her in detention for 39 days and carnally abused her while holding a
gun and/or a knife.68

Rape under Article 266-A of the Revised Penal Code states that:

Art. 266-A. Rape, When and How Committed. – Rape is committed –

 1. By a man who shall have carnal knowledge of a woman under any of the following
circumstances:

a. Through force, threat or intimidation; xxx.

2. By any person who, under any of the circumstances mentioned in paragraph 1 hereof,
shall commit an act of sexual assault by inserting his penis into another person’s mouth or
anal orifice, or any instrument or object, into the genital or anal orifice of another person.

AAA was able to prove each element of rape committed under Article 266-A, par. 1(a) of the Revised
Penal Code, that (1) Mirandilla had carnal knowledge of her; (2) through force, threat, or intimidation.
She was also able to prove each element of rape by sexual assault under Article 266-A, par. 2 of the
Revised Penal Code: (1) Mirandilla inserted his penis into her mouth; (2) through force, threat, or
intimidation.

Likewise, kidnapping and serious illegal detention is provided for under Article 267 of the Revised
Penal Code:

Article 267. Kidnapping and serious illegal detention. – Any private individual who shall kidnap or
detain another, or in any manner deprive him of his liberty, shall suffer the penalty of reclusion
perpetua to death;

1. If the kidnapping or detention shall have lasted more than three days. xxx

An imminent Spanish commentator explained:

la detención, la prición, la privación de la libertad de una persona, en cualquier forma y por cualquier
medio ó por cualquier tiempo en virtud de la cual resulte interrumpido el libre ejercicio de su
actividad."69

Emphatically, the last paragraph of Article 267 of the Revised Penal Code, as amended by R.A. No.
7659,70 states that when the victim is killed or dies as a consequence of the detention or is raped, or
is subjected to torture or dehumanizing acts, the maximum penalty shall be imposed. This provision
gives rise to a special complex crime. As the Court explained in People v. Larrañaga,71 this arises
where the law provides a single penalty for two or more component offenses.72

Notably, however, no matter how many rapes had been committed in the special complex crime of
kidnapping with rape, the resultant crime is only one kidnapping with rape.73 This is because these
composite acts are regarded as a single indivisible offense as in fact R.A. No. 7659 punishes these
acts with only one single penalty. In a way, R.A. 7659 depreciated the seriousness of rape because
no matter how many times the victim was raped, like in the present case, there is only one crime
committed – the special complex crime of kidnapping with rape.

However, for the crime of kidnapping with rape, as in this case, the offender should not have taken
the victim with lewd designs, otherwise, it would be complex crime of forcible abduction with rape. In
People v. Garcia,74 we explained that if the taking was by forcible abduction and the woman was
raped several times, the crimes committed is one complex crime of forcible abduction with rape, in
as much as the forcible abduction was only necessary for the first rape; and each of the other counts
of rape constitutes distinct and separate count of rape.75
It having been established that Mirandilla’s act was kidnapping and serious illegal detention (not
forcible abduction) and on the occasion thereof, he raped AAA several times, We hold that Mirandilla
is guilty beyond reasonable doubt of the special complex crime of kidnapping and serious illegal
detention with rape, warranting the penalty of death. However, in view of R.A. No. 9346 entitled, An
Act Prohibiting the Imposition of Death Penalty in the Philippines,76 the penalty of death is hereby
reduced to reclusion perpetua,77 without eligibility for parole.78

We, therefore, modify the CA Decision. We hold that the separate informations of rape cannot be
considered as separate and distinct crimes in view of the above discussion.

As to the award of damages, we have the following rulings.

This Court has consistently held that upon the finding of the fact of rape, the award of civil damages
ex delicto is mandatory.79 As we elucidated in People v. Prades,80 the award authorized by the
criminal law as civil indemnity ex delicto for the offended party, aside from other proven actual
damages, is itself equivalent to actual or compensatory damages in civil law.81 Thus, we held that the
civil liability ex delicto provided by the Revised Penal Code, that is, restitution, reparation, and
indemnification,82 all correspond to actual or compensatory damages in the Civil Code.83

In the 1998 landmark case of People v. Victor,84 the Court enunciated that if, in the crime of rape, the
death penalty is imposed, the indemnity ex delicto for the victim shall be in the increased amount
of NOT85 less than ₱75,000.00. To reiterate the words of the Court: "this is not only a reaction to the
apathetic societal perception of the penal law and the financial fluctuation over time, but also an
expression of the displeasure of the Court over the incidence of heinous crimes..."86 xxx (Emphasis
supplied)

After the enactment R.A. 9346,87 prohibiting the imposition of death penalty, questions arose as to
the continued applicability of the Victor88 ruling. Thus, in People v. Quiachon,89 the Court pronounced
that even if the penalty of death is not to be imposed because of R.A. No. 9346, the civil indemnity
ex delicto of ₱75,000.00 still applies because this indemnity is not dependent on the actual
imposition of death, but on the fact that qualifying circumstances warranting the penalty of death
attended the commission of the offense.90 As explained in People v. Salome,91 while R.A. No. 9346
prohibits the imposition of the death penalty, the fact remains that the penalty provided for by the law
for a heinous offense is still death, and the offense is still heinous.92 (Emphasis supplied)

In addition, AAA is entitled to moral damages pursuant to Art. 2219 of the Civil Code,93 without the
necessity of additional pleadings or proof other than the fact of rape. This move of dispensing
evidence to prove moral damage in rape cases, traces its origin in People v. Prades,94 where we
held that:

The Court has also resolved that in crimes of rape, such as that under consideration, moral
damages may additionally be awarded to the victim in the criminal proceeding, in such amount as
the Court deems just, without the need for pleading or proof of the basis thereof as has heretofore
been the practice. Indeed, the conventional requirement of allegata et probata in civil procedure and
for essentially civil cases should be dispensed with in criminal prosecutions for rape with the civil
aspect included therein, since no appropriate pleadings are filed wherein such allegations can be
made. (Emphasis supplied) 1avvphi1

Corollarily, the fact that complainant has suffered the trauma of mental, physical and psychological
sufferings which constitute the bases for moral damages are too obvious to still require the recital
thereof at the trial by the victim, since the Court itself even assumes and acknowledges such agony
on her part as a gauge of her credibility. What exists by necessary implication as being ineludibly
present in the case need not go through superfluity of still being proven through a testimonial
charade. (Emphasis supplied)95

AAA is also entitled to exemplary damages of ₱30,000.00, pursuant to the present jurisprudence.

WHEREFORE, the appeal is DENIED. The Decision of the Court of Appeals in CA-G.R. CR-HC No.
00271 is hereby AFFIRMED with MODIFICATION. Accused Felipe Mirandilla, Jr., is found guilty
beyond reasonable doubt of the special complex crime of kidnapping and serious illegal detention
with rape under the last paragraph of Article 267 of the Revised Penal Code, as amended, by R.A.
No. 7659, and is sentenced to suffer the penalty of reclusion perpetua, without eligibility for parole,
and to pay the offended party AAA, the amounts of ₱75,000.00 as civil indemnity ex delicto,
₱75,000.00 as moral damages, and ₱30,000.00 as exemplary damages.

SO ORDERED.