I.

MANNER OF MAKING ALLEGATIONS IN PLEADINGS

G.R. No. 154080

January 22, 2008

NELSIE B. CAETE, RONA ANAS, MILAGROSA APUAN, ERLINDA AQUINO,

GODOFREDO AQUINO, CORITA BARREDO, TESSIE BARREDO, JESUS
BATRINA, ALBERTO BUENAVENTURA, BONIFACIO BUENAVENTURA,
EUSEBIO CAPIRAL, MARIO CAPIRAL, LOLITA CAPIRAL, ELENA CAPIRAL,
LETICIA CAPIRAL, RENATO CAPIRAL, ELY CABANGON, ERWIN CATALUNA,
JESSIE CONRADO, JOEL CONRADO, NARCISIO CONRADO, RICARDO
CALAMPIANO, ALUMNIO CORSANES, NILO COLATOY, MARJETO DAYAN,
HENRY DIAZ, SALVACION ESMANDE, REYNALDO FUENTEBELLA, GERRY
GEQUILLANA, DELSIE GARCIA, NERISSA GONZALES, VISITACION JUNSAY,
ESTELA JOVEN, JOSE LANZUELA, MARLON MALANGAYON, RENATO
MARCELO, ANITA MARZONIA, MARCELINO MONTALBO, AMADO MULI, JR.,
LEONITA MULI, EDUARDO OLVIDO, ALMARIO PACON, ASUNCION PACON,
SALVACION PAGAYUNAN, ESTER PANTALEON, SHERLITA RABE, ANITA
REYES, MEDELYN RIOS, BERTITO RIVAS, ENGRACIA RIVERA, GERALYN
RIVERA, ARMANDO RIVERA, MA. MERCY SHERVA, ALEXANDER SANGALAN,
ERNESTO SANTIAGO, JOY SANTIAGO, ELENA TALION, JOE RANDY
TRESVALLES, ELIAS VALENZUELA, GERRY VALENZUELA, LILIBETH
VALENZUELA, JOSEPHINE VICTORINO, JOJO VICTORINO, MAXIMINO
VICTORINO, NOEL VICTORINO, REYNANTE VICTORINO, ROBERTO
VICTORINO and JOVITO VILLAREAL, represented by NELSIE B.
CAETE, petitioners,
vs.
GENUINO ICE COMPANY, INC., respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari seeks to set aside the Decision 1 of the Court of
Appeals dated January 9, 2002 in CA-G.R. SP No. 64337 entitled "Genuino Ice
Company, Inc. vs. Hon. Victorino P. Evangelista, Nelsie B. Caete, et al.," and its
Resolution2 dated June 26, 2002, dismissing petitioners "Second Amended
Complaint" in Civil Case No. Q-99-36483 filed in Branch 223 of the Regional Trial
Court of Quezon City.
Records show that on January 11, 1999, petitioners filed a complaint for cancellation
of title to property covered by Transfer Certificate of Title (TCT) Nos. N140441;3 14399;4 RT-94384 (292245);5 RT-94794 (292246);6 and
292247.7 Petitioners alleged that said titles are spurious, fictitious and were issued
"under mysterious circumstances," considering that the holders thereof including
their predecessors-in-interest were never in actual, adverse and physical
possession of the property, rendering them ineligible to acquire title to the said
property under the Friar Lands Act.8 Petitioners also sought to nullify Original
Certificate of Title (OCT) No. 614 from which the foregoing titles sought to be
cancelled originated or were derived.
Respondent Genuino Ice Co., Inc. filed a motion to dismiss9 on the ground that the
complaint states no cause of action because petitioners are not real parties-ininterest; that no relief may be granted as a matter of law; and that petitioners failed
to exhaust administrative remedies, but it was denied by the trial court. Respondent
moved for reconsideration but the same was denied.

On November 4, 1999, petitioners filed a "Second Amended Complaint"10 which

sought to annul, in addition to the titles already alleged in the original complaint, TCT
Nos. 274095 and 274096;11 274097 and 274098;12 and 274099.13
The Second Amended Complaint alleged the following causes of action, as well as
the remedy sought to be obtained, thus:
4. That plaintiffs (petitioners) and their predecessors-in-interest are
among those who have been in actual, adverse, peaceful and continuous
possession in concept of owners of unregistered parcels of land situated
at Sitio Mabilog, Barangay Culiat, Quezon City, Metro Manila, which
parcels of land are more particularly described as follows:
(1) "A parcel of unregistered land known as Lot 668, situated
at Barangay Culiat, Quezon City x x x."
(2) "A parcel of unregistered land known as Lot 669, situated
at Barangay Culiat, Quezon City x x x."
5. That the above-described real property is a portion of a friar land
known as "Piedad Estate," which property is intended for distribution
among the bona fide occupants thereof pursuant to the Friar Lands Act.
6. That transfer certificates of title allegedly having originated or derived
from Original Certificate of Title No. 614 were issued by the Register of
Deeds of Quezon City, which transfer certificates of title are in truth and in
fact fictitious, spurious and null and void, for the following reasons: (a)
that no record of any agency of the government shows as to how and in
what manner was OCT 614 issued; (b) that no record of any proceedings
whatsoever, whether judicial or administrative, can support defendants
claim that the above-described property originated from OCT 614; and (c)
that the transfer certificates of title over the above-described property
were issued under mysterious circumstances for the above-named
defendants and their so-called predecessors-in-interest never had any
actual, adverse, physical possession of the said property, thus, not
allowed to acquire title over the property in litigation pursuant to the Friar
Lands Act.
7. That defendants are holders of transfer certificates of title of the abovedescribed property, which transfer certificates of title are null and void, for
reasons specifically mentioned in Paragraph 6 hereof x x x;
8. That the acts in acquiring and keeping the said transfer certificates of
title in violation of the Friar Lands Act and other existing laws are
prejudicial to plaintiffs rights over the above-described property.
9. That equity demands that defendants transfer certificates of title as
specified in Paragraph 7 hereof be declared fictitious, spurious and null
and void ab initio.
PRAYE R
WHEREFORE, premises considered, it is most respectfully prayed of this
Honorable Court that judgment be rendered in favor of plaintiffs and
against defendants:
(1) Declaring as null and void ab initio OCT 614 and all transfer
certificates of title derived therefrom;

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(2) Declaring as null and void defendants transfer certificates of title over
the property in litigation;
(3) Ordering defendant Register of Deeds of Quezon City to cancel
defendants transfer certificates of title and all transfer certificates of title
derived therefrom;
(4) Declaring the plaintiffs as bona fide occupants of the property in
litigation pursuant to the provisions of the Friar Lands Act and other
existing laws.14
Respondent moved to dismiss the Second Amended Complaint on the following
grounds:
a) The complaint states no cause of action because: (1) on the
allegations alone, plaintiffs (petitioners) are not real parties in interest who
may bring suit to cancel defendants (including respondent) titles; (2)
based on the allegations and prayer of the complaint, no relief, as a
matter of law, may be granted;
b) Prescription has set in;
c) There are earlier similar complaints (Civil Case Nos. Q-95-22834 and
Q-95-23111) filed by a different set of plaintiffs against a different set of
defendants but which involve the same subject matter, cause of action
and allegations of the plaintiffs, with respect to the cancellation of OCT
614 and succeeding titles derived from it. Said complaints have since
been dismissed by Branch 93 of the Regional Trial Court of Quezon City,
the dismissal of which is the subject of a pending certiorari proceeding in
the appellate court.15
On January 3, 2001,16 the trial court denied respondents motion to dismiss the
Second Amended Complaint. Its motion for reconsideration was likewise denied
hence respondent filed a petition for certiorari with the Court of Appeals.
The appellate court granted respondents petition for certiorari and dismissed
petitioners Second Amended Complaint for failure to state a cause of action. Hence,
the instant petition raising the following issues:
A. THAT THE COURT OF APPEALS ERRED IN DECLARING THAT THE
COMPLAINT FILED BY THE PETITIONERS WITH THE REGIONAL
TRIAL COURT OF QUEZON CITY IN CIVIL CASE NO. Q-99-36483
DOES NOT STATE A VALID CAUSE OF ACTION;
B. THAT THE COURT OF APPEALS ERRED IN DECLARING THAT THE
PETITIONERS ARE NOT REAL PARTIES IN INTEREST;
C. THAT THE COURT OF APPEALS ERRED IN APPLYING THE
DOCTRINE OF "EXHAUSTION OF ADMINISTRATIVE REMEDIES"; and,
D. THAT THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND DENIED PETITIONERS RIGHT TO DUE PROCESS
WHEN IT DISMISSED THEIR COMPLAINT.17
We deny the petition.
The subject lots are part of the Piedad Estate, Quezon City, a Friar Land acquired on
December 23, 1903 by the Philippine Government from the Philippine Sugar Estates

Development Company, Ltd., La Sociedad Agricola de Ultramar, the British-Manila

Estate Company, Ltd., and the Recoleto Order of the Philippine Islands, as indicated
in Public Act No. 1120 (Friar Lands Act) enacted on April 26, 1904.18
After the Piedad Estate was registered in OCT No. 614 in the name of the Philippine
Government in 1910 under the provisions of Act 496, the area was subdivided
originally into 874 lots. As a result of subsequent surveys executed in the course of
disposition, the number of lots increased to 1,305. Disposition of these lots was
made by the Bureau of Lands thru sales, under the Friar Lands Act, as early as 1910
and records show that even before the Second World War, all lots in the Piedad
Estate have been disposed of.19 The Piedad Estate has long been segregated from
the mass of the public domain and has become private land duly registered under
the Torrens system following the procedure for the confirmation of private lands
prescribed in Act 496. Thus the lands inside the Piedad Estate are no longer lands of
the public domain.20
One who acquires land under the Friar Lands Act, as well as his successors-ininterest, may not claim successional rights to purchase by reason of occupation from
time immemorial, as this contravenes the historical fact that friar lands were bought
by the Government of the Philippine Islands, pursuant to an Act of Congress of the
United States, approved on July 1, 1902, not from individual persons but from certain
companies, a society and a religious order. Under the Friar Lands Act, only "actual
settlers and occupants at the time said lands are acquired by the Government" were
given preference to lease, purchase, or acquire their holdings, in disregard of the
settlement and occupation of persons before the government acquired the lands. 21
The basic rules of proper pleading and procedure require that every pleading shall
contain in a methodical and logical form, a plain, concise and direct statement of the
ultimate facts on which the party pleading relies for his claim or defense, as the case
may be, omitting the statement of mere evidentiary facts.22 And in all averments of
fraud or mistake, the circumstances constituting fraud or mistake must be stated with
particularity.23
It is axiomatic that the averments of the complaint determine the nature of
the action, and consequently, the jurisdiction of the courts. This is
because the complaint must contain a concise statement of the ultimate
facts constituting the plaintiff's cause of action and must specify the relief
sought. No rule is better established than that which requires the
complaint to contain a statement of all the facts constituting the plaintiff's
cause of action. Additionally, Section 5, Rule 8 of the Rules of Court
provides that in all averments of fraud or mistake, the circumstances
constituting fraud or mistake must be stated with particularity. In the case
at bar, while there are allegations of fraud in the above quoted
complaints, the same are not particular enough to bring the controversy
within the SEC's jurisdiction. The said allegations are not statements of
ultimate facts but are mere conclusions of law.
A pleading should state the ultimate facts essential to the rights of action
or defense asserted, as distinguished from mere conclusions of fact, or
conclusions of law. General allegations that a contract is valid or legal, or
is just, fair and reasonable, are mere conclusions of law. Likewise,
allegations that a contract is void, voidable, invalid, illegal, ultra vires, or
against public policy, without stating facts showing its invalidity, are mere
conclusions of law.24
"Ultimate facts" means the essential facts constituting the plaintiff's cause of action,
or such facts as are so essential that they cannot be stricken out without leaving the
statement of the cause of action inadequate.25"Cause of action" has been defined as
an act or omission of one party in violation of the legal right or rights of the
other;26 and its essential elements are: 1) a right in favor of the plaintiff by whatever

Page 2 of 26

means and under whatever law it arises or is created; 2) an obligation on the part of
the named defendant to respect or not to violate such right; and 3) an act or
omission on the part of the named defendant violative of the right of the plaintiff or
constituting a breach of the obligation of defendant to the plaintiff for which the latter
may maintain an action for recovery of damages. If these elements are not extant,
the complaint becomes vulnerable to a motion to dismiss on the ground of failure to
state a cause of action.27 In the resolution of a motion to dismiss based on failure to
state a cause of action, only the facts alleged in the complaint as well as its annexes
must be considered.28 The test in such case is whether a court can render a valid
judgment on the complaint based upon the facts alleged and pursuant to the prayer
therein.29
Corollarily, the question of whether or not a complaint states a cause of action
against a defendant or the action is premature is one of law. The trial court can
consider all the pleadings filed, including annexes, motions and the evidence on
record. However in so doing, the trial court does not rule on the truth or falsity of
such documents. It merely includes such documents in the hypothetical admission.
Any review of a finding of lack of cause of action based on these documents would
not involve a calibration of the probative value of such pieces of evidence but would
only limit itself to the inquiry of whether the law was properly applied given the facts
and these supporting documents. Therefore, what would inevitably arise from such a
review are pure questions of law, and not questions of fact.
The trial court must likewise apply relevant statutes and jurisprudence in determining
whether the allegations in a complaint establish a cause of action. While it focuses
on the complaint, a court clearly cannot disregard decisions material to the proper
appreciation of the questions before it. In resolving a motion to dismiss, every court
must take cognizance of decisions this Court has rendered because they are proper
subjects of mandatory judicial notice. The said decisions, more importantly, form part
of the legal system, and failure of any court to apply them shall constitute an
abdication of its duty to resolve a dispute in accordance with law, and shall be a
ground for administrative action against an inferior court magistrate.30
Considering the foregoing, it is not difficult to see the need for particularity and
incipient substantiation in the petitioners Second Amended Complaint.
First, their initial claim that OCT 614 of which all the other subject titles are
derivatives is null and void, has been proven wrong. As has been held
in Pinlac and other cases, OCT 614 did legally exist and was previously issued in the
name of the Philippine Government in 1910 under the provisions of Act 496.
Second, the Ad Hoc Committee of the then Ministry of Natural Resources, which
was specifically tasked to investigate the historical background of the Piedad Estate,
found that as early as the period prior to the Second World War, all lots in the Piedad
Estate had already been disposed of.
Third, the Piedad Estate has been placed under the Torrens system of land
registration, which means that all lots therein are titled.
Fourth, as held in the Balicudiong case, one who acquires land under the Friar
Lands Act, as well as his successors-in-interest, may not claim successional rights to
purchase by reason of occupation from time immemorial, which means that
petitioners claimed actual, adverse, peaceful and continuous possession of the
subject property is really of no moment unless it is shown that their predecessors-ininterest were actual settlers and occupants at the time said lands were acquired by
the Government, and whose rights were not disregarded even though they were in
occupation of the same before the government acquired the land; yet, no period of
time in relation to adverse possession is alleged.

Petitioners Second Amended Complaint betrays no more than an incomplete

narration of facts unsupported by documentary or other exhibits; the allegations
therein partake of conclusions of law unsupported by a particular averment of
circumstances that will show why or how such inferences or conclusions were
arrived at. It is replete with sweeping generalizations and inferences derived from
facts that are not found therein. While there are allegations of fraud upon the claim
that the subject titles were fictitious, spurious and obtained under "mysterious
circumstances," the same are not specific to bring the controversy within the trial
courts jurisdiction. There is no explanation or narration of facts as would show why
said titles are claimed to be fictitious or spurious, contrary to the requirement of the
Rules that the circumstances constituting fraud must be stated with particularity;
otherwise, the allegation of fraud would simply be an unfounded conclusion of law. In
the absence of specific averments, the complaint is defective, for it presents no basis
upon which the court should act, or for the defendant to meet it with an intelligent
answer.
As to the second issue raised, petitioners claim that they are bona fide occupants of
the subject property within the contemplation of the Friar Lands Act, having allegedly
been in actual, adverse, peaceful and continuous possession of the property,
although it is not stated for how long and since when. In their second amended
complaint, they seek judgment
(4) Declaring the plaintiffs as bona fide occupants of the property in
litigation pursuant to the provisions of the Friar Lands Act and other
existing laws. (Emphasis supplied)
They do not pray to be declared owners of the subject property despite their
alleged adverse possession but only to be adjudged as the "bona fide occupants"
thereof. In other words, petitioners concede the States ownership of the property.
Being so, petitioners may not be considered the real parties in interest for the
purpose of maintaining the suit for cancellation of the subject titles. The Court of
Appeals is correct in declaring that only the State, through the Solicitor General, may
institute such suit. Jurisprudence on the matter has been settled and the issue need
not be belabored. Thus
The Court also holds that private respondents are not the proper parties
to initiate the present suit. The complaint, praying as it did for the
cancellation of the transfer certificates of title of petitioners on the ground
that they were derived from a "spurious" OCT No. 4216, assailed in effect
the validity of said title. While private respondents did not pray for the
reversion of the land to the government, we agree with the petitioners that
the prayer in the complaint will have the same result of reverting the land
to the government under the Regalian doctrine. Gabila vs. Barriga ruled
that only the government is entitled to this relief. The Court in that case
held:
"The present motion to dismiss is actually predicated on
Section 1(g), Rule 16 of the Revised Rules of Court, i.e.,
failure of the complaint to state a cause of action, for it alleges
in paragraph 12 thereof that the plaintiff admits that he has no
right to demand the cancellation or amendment of the
defendants title, because, even if the said title were canceled
or amended, the ownership of the land embraced therein, or of
the portion thereof affected by the amendment, would revert to
the public domain. In his amended complaint the plaintiff
makes no pretense at all that any part of the land covered by
the defendants title was privately owned by him or by his
predecessors-in-interest.Indeed, it is admitted therein that the
said land was at all times a part of the public domain until

Page 3 of 26

December 18, 1964, when the government issued a title

thereon in favor of defendant. Thus, if there is any person or
entity to relief, it can only be the government.
In the case at bar, the plaintiffs own averments negate the existence of
such right, for it would appear therefrom that whatever right might have
been violated by the defendant belonged to the government, not to the
plaintiff. Plaintiff-appellant argues that although his complaint is captioned
as one for cancellation of title, he has nevertheless stated therein several
causes of action based on his alleged rights of possession and ownership
over the improvements, on defendant-appellees alleged fraudulent
acquisition of the land, and on the damages allegedly incurred by him
(plaintiff-appellant) in relation to the improvements. These matters are
merely ancillary to the central issue of whether or not defendantappellees title should be canceled or amended, and they may not be
leaned upon in an effort to make out a cause of action in relation to the
said focal issue. Indeed, the principal relief prayed for in the amended
complaint is the cancellation or amendment of defendant-appellees
title."31

filed with the Court of Appeals. Clearly, the same was timely filed hence, the
appellate court correctly entertained the same.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
January 9, 2002 in CA-G.R. SP No. 64337 dismissing petitioners "Second Amended
Complaint" in Civil Case No. Q-99-36483 and the Resolution dated June 26, 2002
denying the motion for reconsideration, are AFFIRMED.
SO ORDERED.

Under Rule 3, Section 2 of the Rules of Court, a real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the party entitled to
the avails of the suit. "Interest" within the meaning of the rule means material
interest, an interest in issue and to be affected by the decree, as distinguished from
mere interest in the question involved, or a mere incidental interest. The interest of
the party must also be personal and not one based on a desire to vindicate the
constitutional right of some third and unrelated party. Real interest, on the other
hand, means a present substantial interest, as distinguished from a mere
expectancy or a future, contingent, subordinate, or consequential interest.32
If petitioners are to be believed, they would possess a mere inchoate interest in the
properties covered by the subject titles, a mere expectancy conditioned upon the fact
that if the questioned titles are cancelled and the property is reverted to the State,
they would probably or possibly be given preferential treatment as qualified buyers
or lessees of the property under the Friar Lands Act. But this certainly is not the
"interest" required by law that grants them license or the personality to prosecute
their case. Only to the State does the privilege belong.
On the issue of exhaustion of administrative remedies, suffice it to state that since
petitioners do not possess the necessary interest to prosecute the case for
cancellation of title in the courts, neither do they have the right to pursue
administrative remedies outside thereof. They are not the owners; nor are they
qualified applicants therefor. It has not been shown by their complaint that they have
previously taken steps to avail of the benefits under the Friar Lands Act, since all
they seek, should the questioned titles be nullified, is to be declared bona
fideoccupants of the property covered by the questioned titles. Neither is there any
indication that they possess the qualifications necessary to enable them to avail of
the preference granted under the Act.
Finally, there is no merit in petitioners contention that respondent belatedly filed the
petition for certiorari with the Court of Appeals, and that the appellate court gravely
abused its discretion when it entertained and resolved the same.
The Order of the trial court dated January 3, 2001 denying respondents motion to
dismiss the Second Amended Complaint was received by the respondent on
January 16, 2001. Respondent filed a motion for reconsideration on January 18,
2001 which was denied on February 28, 2001. Respondent received the order
denying its motion for reconsideration on March 27, 2001. On the same day, it filed a
Notice to File Petition for Certiorari. On April 2, 2001, the petition for certiorari was

Page 4 of 26

[G.R. No. L-20761. July 27, 1966.]

LA MALLORCA, Petitioner, v. HONORABLE COURT OF APPEALS, MARIANO
BELTRAN, ET AL.,Respondents.
G. E. Yabut, R. Monterey and M. C. Lagman for Petitioner.
Achmed Garcia for Respondents.

SYLLABUS

1. COMMON CARRIERS; CARRIER - PASSENGER RELATION CONTINUES

UNTIL PASSENGER HAS REASONABLE TIME TO LEAVE CARRIERS
PREMISES. The relation of carrier and passenger does not cease at the moment
the passenger alights from the carriers vehicle at a place selected by the carrier at
the point of destination, but continues until the passenger has had a reasonable time
or a reasonable opportunity to leave the carriers premises (Ormond v. Hayes, 60
Tex. 180, cited in 10 C.J. 626).
2. ID.; ID.; "REASONABLE TIME" CONSTRUED. What is a reasonable time or a
reasonable delay is to be determined from all the circumstances. Thus, a person
who, after alighting from a train, walks along the station platform, is considered still a
passenger (Keefe v. Boston, etc. R. Co., 142 Mass. 251, 7 N.E. 874). So also, where
a passenger has alighted at his destination and is proceeding by the usual way to
leave the companys premises, but before actually doing so is halted by the report
that his brother, a fellow passenger, has been shot, and he in good faith and without
intent of engaging in the difficulty, returns to relieve his brother, he is deemed
reasonably and necessarily delayed and thus continues to be a passenger entitled
as such to the protection of the railroad and company and its agents (Layne v.
Chesapeake, etc., R. Co., 68 W. Va. 213, 69 S.E. 700, 31 L.R.A., [N.S.] 414).
3. ID.; ID.; CARRIERS RESPONSIBILITY FOR NEGLIGENCE; CASE AT BAR.
In the present case, the father returned to the bus to get one of his baggages which
was not unloaded when he end other members of his family alighted from the bus.
The victim, one of his minor daughters, must have followed her father. However,
although the father was still on the running board of the bus awaiting for the
conductor to hand to him the bag or bayong, the bus started to run, so that even he
(the father) had to jump down from the moving vehicle. It was at this instance that
the child, who must be near the bus, was run over and killed. Held: In the
circumstances, it cannot be claimed that the carriers agent had exercised the
"utmost diligence" of a "very cautious person" required by Article 1755 of the Civil
Code to be observed by a common carrier in the discharge of its obligation to
transport safely its passengers. In the first place, the driver, although stopping the
bus, did not put off the engine. Secondly, he started to run the bus even before the
bus conductor gave him the signal to go and while the latter was still unloading a
baggage of some passengers. The presence of said passengers near the bus was
not unreasonable and they are, therefore, to be considered still as passengers of the
carrier, entitled to the protection under their contract of carriage.
4. ID.; ID.; ID.; AVERMENT FOR QUASI-DELICT, ALTHOUGH INCOMPATIBLE
WITH CLAIM UNDER CONTRACT OF CARRIAGE, PERMISSIBLE. The
inclusion of the averment for quasi-delict in appellees complaint in the court a quo,
while incompatible with the other claim under the contract of carriage, is permissible
under Section 2, Rule 8 of the new Rules of Court, which allows a plaintiff to allege
causes of action in the alternative, be they compatible with each other or not, to the
end that the real matter in controversy may be resolved and determined (Nelayan,
Et. Al. v. Nelayan, Et Al., 109 Phil., 183).
5. ID.; ID.; ID.; ID.; EFFECT OF PRESENTATION OF PROOF OF CARRIERS
NEGLIGENCE; CASE AT BAR. - The presentation of proof of the negligence of its
employee gave rise to the presumption that the defendant employer did not exercise
the diligence of a good father of the family in the selection and supervision of its
employees. This presumption not having been overcome, the employer must be
adjudged pecuniarily liable for the death of the passenger.

6. ID.; ID.; ID.; ID.; ID.; SUFFICIENT ALLEGATION IN THE COMPLAINT; CASE AT
BAR. The allegation in the complaint to the effect that "the death of Raquel
Beltran, plaintiffs daughter, was caused by the negligence and want of exercise of
the utmost diligence of a very cautious person on the part of the defendants and
their agent," sufficiently pleads the culpa or negligence upon which the claim was
predicated. This allegation was proved when it was established during the trial that
the driver, even before receiving the proper signal from the conductor, and while
there were still persons on the running board of the bus and near it, started to run off
the vehicle.
7. APPEALS; WHAT CAN BE PASSED UPON ON APPEAL; CASE AT BAR.
Generally, the appellate court can only pass upon and consider questions or issues
raised and argued in appellants brief. In the case at bar, plaintiffs did not appeal
from that portion of the judgment of the trial court awarding them only P3,000.00 as
damages for the death of their daughter. Neither did they point out in their brief in the
Court of Appeals that the award was inadequate, or that the inclusion of that figure
was merely a clerical error, in order that the matter may be treated as an exception
to the general rule (Section 7, Rule 51, new Rules of Court). The Court of Appeals
therefore erred in raising the amount of the award.

DECISION

BARRERA, J.:

La Mallorca seeks the review of the decision of the Court of Appeals in CA- G. R.
No. 23267-R, holding it liable for quasi-delict and ordering it to pay to respondents
Mariano Beltran, Et. Al. P6,000.00 for the death of his minor daughter Raquel
Beltran, plus P400.00 as actual damages.chanrobles virtual lawlibrary
The facts of the case, as found by the Court of Appeals, briefly
are:jgc:chanrobles.com.ph
"On December 20, 1953, at about noontime, plaintiffs, husband and wife, together
with their minor daughters, namely Milagros, 13 years old, Raquel, about 4-1/2 years
old, and Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate
TPU No. 757 (1953 Pampanga), owned and operated by the defendant, at San
Fernando, Pampanga, bound for Anao, Mexico, Pampanga. At the time, they were
carrying with them four pieces of baggages containing their personal belongings.
The conductor of the bus who happened to be a half-brother of plaintiff Mariano
Beltran, issued three tickets (Exhs. A, B, & C) covering the full fares of the plaintiff
and their eldest child, Milagros. No fare was charged on Raquel and Fe, since both
were below the height at which fare is charged in accordance with the appellants
rules and regulations.
"After about an hours trip, the bus reached Anao, whereat it stopped to allow the
passengers bound therefor, among whom were the plaintiffs and their children to get
off. With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of
their baggages, was the first to get down the bus, followed by his wife and his
children. Mariano led his companions to a shaded spot on the left pedestrians side of
the road about four or five meters away from the vehicle. Afterwards, he returned to
the bus in controversy to get his other bayong, which he had left behind, but in so
doing, his daughter Raquel followed him unnoticed by her father. While said Mariano
Beltran was on the running board of the bus waiting for the conductor to hand him
his bayong which he left under one of its seats near the door; the bus, whose motor
was not shut off while unloading, suddenly started moving forward, evidently to
resume its trip, notwithstanding the fact that the conductor has not given the driver
the customary signal to start, since said conductor was still attending to the baggage
left behind by Mariano Beltran. Incidentally, when the bus was again placed into a
complete stop, it had travelled about ten meters from the point where the plaintiffs
had gotten off.
"Sensing that the bus was again in motion, Mariano Beltran immediately jumped
from the running board without getting his bayong from the conductor. He landed on
the side of the road almost in front of the shaded place where he left his wife and
children. At that precise time, he saw people beginning to gather around the body of
the child lying prostrate on the ground, her skull, crushed, and without life. The child

Page 5 of 26

was none other than his daughter Raquel, who was run over by the bus in which she
rode earlier together with her parents.
"For the death of their said child, the plaintiffs commenced the present suit against
the defendant seeking to recover from the latter an aggregate amount of P6,000 to
cover moral damages and actual damages sustained as a result thereof and
attorneys fees. After trial on the merits the court below rendered the judgment in
question."cralaw virtua1aw library
On the basis of these facts, the trial court found defendant liable for breach of
contract of carriage and sentenced it to pay P3,000.00 for the death of the child and
P400.00 as compensatory damages representing burial expenses and
costs.chanrobles law library : red
On appeal to the Court of Appeals, La Mallorca claimed that there could not be a
breach of contract in the case, for the reason that when the child met her death, she
was no longer a passenger of the bus involved in the incident and, therefore, the
contract of carriage had already terminated. Although the Court of Appeals sustained
this theory, it nevertheless found the defendant-appellant guilty of quasi- delict and
held the latter liable for damages, for the negligence of its driver, in accordance with
Article 2180 of the Civil Code. And, the Court of Appeals did not only find the
petitioner liable, but increased the damages awarded the plaintiffs-appellees to
P6,000.00, instead of P3,000.00 granted by the trial court.
In its brief now before us, La Mallorca contends that the Court of Appeals erred (1) in
holding it liable for quasi- delict, considering that respondents complaint was one for
breach of contract, and (2) in raising the award of damages from P3,000.00 to
P6,000.00 although respondents did not appeal from the decision of the lower court.
Under the facts as found by the Court of Appeals we have to sustain the judgment
holding petitioner liable for damages for the death of the child, Raquel Beltran. It may
be pointed out that although it is true that respondent Mariano Beltran, his wife, and
their children (including the deceased child) had alighted from the bus at a place
designated for disembarking or unloading of passengers, it was also established that
the father had to return to the vehicle (which was still at a stop) to get one of his
bags or bayong that was left under one of the seats of the bus. There can be no
controversy that as far as the father is concerned, when he returned to the bus for
his bayong which was not unloaded, the relation of passenger and carrier between
him and the petitioner remained subsisting. For, the relation of carrier and passenger
does not necessarily cease where the latter, after alighting from the car, aids the
carriers servant or employee in removing his baggage from the car. 1 The issue to
be determined here is whether as to the child, who was already led by the father to a
place about 5 meters away from the bus, the liability of the carrier for her safety
under the contract of carriage also persisted.cralawnad
It has been recognized as a rule that the relation of carrier and passenger does not
cease at the moment the passenger alights from the carriers vehicle at a place
selected by the carrier at the point of destination, but continues until the passenger
has had a reasonable time or a reasonable opportunity to leave the carriers
premises. And, what is a reasonable time or a reasonable delay within this rule is to
be determined from all the circumstances. Thus, a person who, after alighting from a
train, walks along the station platform is considered still a passenger. 2 So also,
where a passenger has alighted at his destination and is proceeding by the usual
way to leave the companys premises, but before actually doing so is halted by the
report that his brother, a fellow passenger, has been shot, and he in good faith and
without intent of engaging in the difficulty, returns to relieve his brother, he is deemed
reasonably and necessarily delayed and thus continues to be a passenger entitled
as such to the protection of the railroad and company and its agents. 3

the bus even before the bus conductor gave him the signal to go and while the latter
was still unloading part of the baggages of the passengers Mariano Beltran and
family. The presence of said passengers near the bus was not unreasonable and
they are, therefore, to be considered still as passengers of the carrier, entitled to the
protection under their contract of carriage.
But even assuming arguendo that the contract of carriage has already terminated,
herein petitioner can be held liable for the negligence of its driver, as ruled by the
Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the
complaint, which reads
"That aside from the aforesaid breach of contract, the death of Raquel Beltran,
plaintiffs daughter, was caused by the negligence and want of uxorious of the
utmost diligence of a very cautious person on the part of the defendants and their
agent, necessary to transport plaintiffs and their daughter safely as far as human
and care and foresight can provide in the operation of their vehicle." is clearly an
allegation for quasi-delict. The inclusion of this averment for quasi-delict, while
incompatible with the other claim under the contract of carriage, is permissible under
Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to allege
causes of action in the alternative, be they compatible with each other or not, to the
end that the real matter in controversy may be resolved and determined. 4
The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was
predicated when it was alleged in the complaint that "the death of Raquel Beltran,
plaintiffs daughter, was caused by the negligence and want of exercise of the utmost
diligence of a very cautious person on the part of the defendants and their agent."
This allegation was also proved when it was established during the trial that the
driver, even before receiving the proper signal from the conductor, and while there
were still persons on the running board of the bus and near it, started to run off the
vehicle. The presentation of proof of the negligence of its employee gave rise to the
presumption that the defendant employer did not exercise the diligence of a good
father of the family in the selection and supervision of its employees. And this
presumption, as the Court of Appeals found, petitioner had failed to overcome.
Consequently, petitioner must be adjudged pecuniarily liable for the death of the
child Raquel Beltran.
The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of
Appeals, however, cannot be sustained. Generally, the appellate court can only pass
upon and consider questions or issues raised and argued in appellants brief.
Plaintiffs did not appeal from that portion of the judgment of the trial court awarding
them only P3,000.00 damages for the death of their daughter. Neither does it appear
that, as appellees in the Court of Appeals, plaintiffs have pointed out in their brief the
inadequacy of the award, or that the inclusion of the figure P3,000.00 was merely a
clerical error, in order that the matter may be treated as an exception to the general
rule. 5 Herein petitioners contention, therefore, that the Court of Appeals committed
error in raising the amount of the award for damages is, evidently,
meritorious.chanrobles virtual lawlibrary
WHEREFORE, the decision of the Court of Appeals is hereby modified by
sentencing the petitioner to pay to the respondents Mariano Beltran, Et Al., the sum
of P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00
as actual damages. No costs in this instance. So ordered.

In the present case, the father returned to the bus to get one of his baggages which
was not unloaded when they alighted from the bus. Raquel, the child that she was,
must have followed the father. However, although the father was still on the running
board of the bus awaiting for the conductor to hand him the bag or bayong, the bus
started to run, so that even he (the father) had to jump down from the moving
vehicle. It was at this instance that the child, who must be near the bus, was run over
and killed. In the circumstances, it cannot be claimed that the carriers agent had
exercised the "utmost diligence" of a "very cautious person" required by Article 1755
of the Civil Code to be observed by a common carrier in the discharge of its
obligation to transport safely its passengers. In the first place, the driver, although
stopping the bus, nevertheless did not put off the engine. Secondly, he started to run

Page 6 of 26

[G.R. No. 57821. January 17, 1985.]

SEGUNDINO TORIBIO, EUSEBIA TORIBIO, and the HEIRS OF OLEGARIO
TORIBIO, represented by his widow, ADELA DE LOS REYES, Petitioner, v. THE
HON. JUDGE ABDULWAHID A. BIDIN, in his capacity as Presiding Judge,
Branch I, Court of First Instance, City of Zamboanga, DALMACIO RAMOS, and
JUANITO CAMACHO, Respondents.

must reflect a deep insight into the failings of human nature, a capability for making
allowances for human error and/or negligence, and the ability to maintain the scales
of justice happily well-balanced between these virtues and the application of the
law." An interpretation of a rule of procedure which would not deny to the petitioners
their rights to their inheritance is warranted by the circumstances of this case.

DECISION
SYLLABUS
GUTIERREZ, JR., J.:
1. REMEDIAL LAW; CIVIL PROCEDURE; ALLEGATION; TEST AS TO THE
ESSENTIALITY THEREOF. The following question furnishes an absolute test as
to the essentiality of any allegation: Can it be made the subject of a material issue?
In other words, if it be denied, will the failure to prove it decide the case in whole or
in part? If it will not, the fact is not essential. It is not one of those which constitute
the cause of action, defense, or reply (Sutherlands Code of Pleading, Practice and
Forms, p. 82). A fact is essential if it cannot be stricken out without leaving the
statement of the cause of action or defense insufficient.
2. ID.; ID.; CONTESTING ACTIONABLE DOCUMENT; REASON FOR THE RULE.
As early as Lim-Chingco v. Terariray (5 Phil. 120), this Court gave the reason for
the rule on contesting actionable documents. The purpose of the enactment (sec.
103) appears to have been to relieve a party of the trouble and expense of proving in
the first instance an alleged fact, the existence or non-existence of which is
necessarily within the knowledge of the adverse party, and of the necessity (to his
opponents case) of establishing which such adverse party is notified by his
opponents pleading. As stated earlier, the reason for the rule is to enable the
adverse party to know beforehand whether he will have to meet the issue of
genuineness or due execution of the document during trial. (In re Dicks Estate, 235
N.W. 401). While mandatory, the rule is a discovery procedure and must be
reasonably construed to attain its purpose, and in a way as not to effect a denial of
substantial justice. The interpretation should be one which assist the parties in
obtaining a speedy, inexpensive, and most important, a just determination of the
disputed issues.
3. ID.; ID.; RULE ON ACTIONABLE DOCUMENT; REFER EITHER TO ACTION OR
A DEFENSE; BASED UPON A WRITTEN INSTRUMENTS. The petitioners are
themselves parties to the deeds of sale which are sought to be enforced against
them. The complaint was filed by the petitioners. They filed suit to recover their
hereditary properties. The new owners introduced deeds of sale as their main
defense. In other words, the petitioners brought the issue upon themselves. They
should meet it properly according to the Rules of Court. Sections 7 and 8 of Rule 8,
therefore, apply. The petitioners counsel was obviously lulled into complacency by
two factors. First, the plaintiffs, now petitioners, had already stated under oath that
they never sold, transferred, or disposed of their shares in the inheritance to others.
Second, the usual procedure is for a defendant to specifically deny under oath the
genuineness and due execution of documents set forth in and annexed to the
complaint. Somehow, it skipped counsels attention that the rule refers to either an
action or a defense based upon a written instrument or document. It applies to both
plaintiffs and defendants.
4. ID.; ID.; ID.; NON-PARTIES TO THE DOCUMENT NOT REQUIRED TO DENY
UNDER OATH; CASE AT BAR. The heirs of Olegario Toribio, his widow and minor
children represented by their mother, are among the plaintiffs-petitioners. They are
not parties to the deeds of sale allegedly executed by their father, aunt, and uncle.
They are not required to deny the deeds of sale under oath. The private respondents
will still have to introduce evidence to establish that the deeds of sale are genuine
and that they were truly executed by the parties with authority to dispose of the
disputed property.
5. ID.; RULES OF PROCEDURE, LITERALLY CONSTRUED. It bears repeating
that rules of procedure should be liberally construed to the end that substantial
justice may be served. As stated in Pongasi v. Court of Appeals (71 SCRA 614): "We
repeat what We said in Obut v. Court of Appeals, Et Al., supra, that what should
guide judicial action is the principle that a party-litigant is to be given the fullest
opportunity to establish the merits of his complaint or defense rather than for him to
lose life, liberty, honor or property on technicalities. "In dispensing justice Our action

This petition is premised on the interpretation and application of Sections 7 and 8,

Rule 8 of the Revised Rules of Court on actionable documents, which
state:jgc:chanrobles.com.ph
"SEC. 7. Action or defense based on document. Whenever an action or defense
is based upon a written instrument or document, the substance of such instrument or
document shall be set forth in the pleading, and the original or a copy thereof shall
be attached to the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the pleading.
"SEC. 8. How to contest genuineness of such documents.When an action of
defense is founded upon a written instrument, copied in or attached to the
corresponding pleading as provided in the preceding section, the genuineness and
due execution of the instrument shall be deemed admitted unless the adverse party,
under oath, specifically denies them, and sets forth what he claims to be the facts;
but this provision does not apply when the adverse party does not appear to be a
party to the instrument or when compliance with an order for an inspection of the
original instrument is refused."cralaw virtua1aw library
The present controversy stems from a complaint filed by the petitioners against
private respondents Dalmacio Ramos and Juanito Camacho.
Engracio Francisco and Juliana Esteban were the registered owners of a parcel of
land in Zamboanga. At the death of said spouses, they were survived by their ten
(10) children who inherited their estate in equal pro indiviso shares. Subsequently,
the property was subdivided among the heirs and a portion designated as Lot No.
1943-B was alloted to the heir Justa Francisco. Justa died and was survived by her
eight (8) children namely: Dionisio, Eufemia, Alfonso, Rafael, Petrona, Olegario,
Segundino and Eusebia, all surnamed Toribio, who inherited her estate in equal pro
indiviso shares. Three of the eight heirs, Eufemia, Alfonso and Petrona, sold their
shares in the property to Ramon Ledesma. Rafael also sold his share to Dionisio
who, in turn, sold the same to Ramon Ledesma. Thus, the latter acquired four (4)
shares out of eight (8) shares, or a 1/2 pro indiviso share of Lot 1943-B.
Subsequently, Dionisio sold his own, hereditary share in the aforesaid estate of his
mother to Juanito Camacho, who by said sale acquired a 1/8 pro indiviso share of
the property.chanrobles virtual lawlibrary
The three other heirs, petitioners Segundino, Eusebia and Olegario alleging that
their shares had never been sold nor in any wise transferred or disposed to others
filed a case against herein private respondents for recovery of hereditary rights. How
Juanito Camacho, who was entitled to only a total area of 931 square meters, nor,
how one Dalmacio Ramos, Jr., acquired 1/4 share of the property was allegedly not
known to them.
In their answer, the defendants-respondents alleged that the shares of plaintiffspetitioners had likewise been sold to Dionisio Toribio, their brother, who, in turn, sold
the same to Juanito Camacho and Dalmacio Ramos. The alleged sale from
petitioners to Dionisio and the sale from Dionisio to the respondents were evidenced
by deeds of sale, xerox copies of which were appended to and made an integral part
of the respondents partition agreement between the respondents and also a xerox
copy of the respondents transfer certificates of title.
While testifying during the trial, Eusebia Toribio was asked whether she executed
any sale of her share in the parcel of land in litigation. The counsel for private
respondents objected, raising the proper mode of contesting the genuineness of an

Page 7 of 26

actionable document pursuant to Sections 7 and 8, Rule 8 of the Revised Rules of

Court. The trial court sustained the objection.
Petitioners, thereupon, filed a constancia with a motion for reconsideration stating
that the documents submitted by the respondents were merely evidentiary in nature,
not a cause of action or defense, the due execution and genuineness of which they
had to prove. They alleged that the subject of litigation was the hereditary shares of
plaintiffs-petitioners, not any document. They stated that the defense consisting
mainly of transfer certificates of titles in the respondents names originating from the
sale from petitioners to Dionisio and from the latter to the respondents were merely
evidentiary in nature. They argued that a simple specific denial without oath is
sufficient. The court denied the motion for reconsideration. The documents attached
to the respondents answer and made an integral part thereof were declared to be
the very foundation or basis of the respondents defense and not merely evidentiary
in nature. Hence, this petition for review on certiorari.
The initial issue brought before us is whether or not the deeds of sale allegedly
executed by the petitioners in favor of their brother Dionisio Toribio and appended to
the respondents answer are merely evidentiary in nature or the very foundation of
their defense which must be denied under oath by the petitioner.
The records show that the deeds of sale are actionable documents.
Jurisprudence has centered mainly on a discussion of actionable documents as
basis of a plaintiffs cause of action. Little has been said of actionable documents
being the foundation of a defense. The Rule, however, covers both an action or a
defense based on documents.chanrobles law library : red
The situation obtaining in the case at bar is not a common one. The usual case is
between plaintiff and defendant where, the latter, as his defense, would present a
document to which both parties are parties and which states that the former
relinquishes his rights to the defendant. In the case at bar, we have a situation where
the defendant presented a document in his defense, a document to which the
plaintiff is a party but to which defendant is not. Thus, the question arises as to
whether or not the document is included as a necessary part of the defense so as to
make it actionable.
The petitioners alleged in their complaint that their shares in the inheritance left by
their mother were never sold nor in any wise transferred or disposed to others.
The defendants, in their answers, declare:chanrob1es virtual 1aw library
x

". . . that the hereditary shares of plaintiffs OLEGARIO TORIBIO, SEGUNDINO

TORIBIO and EUSEBIA TORIBIO were likewise sold, transferred and conveyed, first
in favor of DIONISIO TORIBIO by virtue of two (2) deeds of sale executed in due
form on October 24, 1964 and November 2, 1964, respectively, and thereafter, by
DIONISIO TORIBIO in favor of defendants JUANITO A. CAMACHO and DALMACIO
C. RAMOS, JR., on November 11, 1964 as adverted to in the preceding paragraph,
as will be discussed further in the specific and/or affirmative defenses hereunder;
x

"As heretofore alleged, the hereditary shares of all the plaintiffs herein in and over
Lot 1943-B were all sold, transferred and conveyed in favor of DIONISIO TORIBIO
plaintiffs OLEGARIO TORIBIO and SEGUNDINO TORIBIO on October 24, 1964
and that of plaintiff EUSEBIA TORIBIO on November 2, 1964, by virtue of two (2)
deeds of sale all of which were acknowledged before Notary Public for and within the
City of Zamboanga, Atty. Armando B. Torralba and entered as Doc. No. 6, Page No.
3, Book No. IX, Series of 1964, respectively, in his notarial register, xerox copies of
which are appended hereto to form integral part hereof as Annexes "1" & "2",
respectively."cralaw virtua1aw library
From the foregoing, it is clear that the respondents anchor their defense on the
deeds of sale by virtue of which the hereditary rights of all the petitioners over Lot
1943-B were sold, transferred, and conveyed in favor of their brother, Dionisio
Toribio, who in turn, sold the same to herein respondents. The deed of sale executed

by the petitioners in favor of their brother Dionisio is an essential and indispensable

part of their defense to the allegation that the petitioners had never disposed of their
property.chanrobles.com : virtual law library
The following question furnishes an absolute test as to the essentiality of any
allegation: Can it be made the subject of a material issue? In other words, if it be
denied, will the failure to prove it decide the case in whole or in part? If it will not, the
fact is not essential. It is not one of those which constitute the cause of action,
defense, or reply (Sutherlands Code of Pleading, Practice and Forms, p. 82). A fact
is essential if it cannot be stricken out without leaving the statement of the cause of
action or defense insufficient.
Apart from alleging that the documents in this case are merely evidentiary, the
petitioners also point out that the deeds of sale purportedly executed by them were
in favor of their brother, Dionisio, who in turn executed deeds of sale in favor of the
respondents. Under this circumstance, does the genuineness and due execution of
the deeds evidencing the two transactions have to be denied under oath?
The deed of sale executed by Dionisio Toribio in favor of the respondents, by itself,
would be insufficient to establish a defense against the petitioners claims. If the
petitioners deny that they ever sold their shares in the inherited lot to their brother
Dionisio, a failure to prove the sale would be decisive. For if it can be shown that no
conveyance of the property was executed by the petitioners, then Dionisio Toribio
had no right to convey what did not belong to him. The respondents could acquire
only the rights that Dionisio had over the disputed property. The genuineness and
due execution of the deed between the co-heirs is also elemental to the defense of
the respondents. The first deeds of sale, to which the respondents were not parties
but which they seek to enforce against the parties are also actionable documents.
The petitioners further alleged that this case falls under the exception to Section 8,
Rule 8 which provides:chanrob1es virtual 1aw library
SECTION 8. . . . but this provision does not apply when the adverse party does not
appear to be a party to the instrument.
As early as Lim-Chingco v. Terariray (5 Phil. 120), this Court gave the reason for the
rule on contesting actionable documents. The purpose is:jgc:chanrobles.com.ph
"Reasonably construed, the purpose of the enactment (sec. 103) appears to have
been to relieve a party of the trouble and expense of proving in the first instance an
alleged fact, the existence or non-existence of which is necessarily within the
knowledge of the adverse party, and of the necessity (to his opponents case) of
establishing which such adverse party is notified by his opponents pleading."cralaw
virtua1aw library
This being so, the documents have to be treated in like manner. The petitioners are
themselves parties to the deeds of sale which are sought to be enforced against
them. The complaint was filed by the petitioners. They filed suit to recover their
hereditary properties. The new owners introduced deeds of sale as their main
defense. In other words, the petitioners brought the issue upon themselves. They
should meet it properly according to the Rules of Court.
Sections 7 and 8 of Rule 8, therefore, apply. The proper procedure was for the
petitioners to specifically deny under oath the genuineness and due execution of the
questioned deeds of sale and to set forth what they claim to be the facts. However,
the oversight or negligence of petitioners counsel in not properly drafting a reply to
the answer and an answer to the counter claim is not necessarily fatal to their cause.
The facts of the case and equitable considerations constrain us to grant the petition
and to set aside the questioned order of the respondent court.
As stated earlier, the reason for the rule is to enable the adverse party to know
beforehand whether he will have to meet the issue of genuineness or due execution
of the document during trial. (In re Dicks Estate, 235 N.W. 401). While mandatory,
the rule is a discovery procedure and must be reasonably construed to attain its
purpose, and in a way as not to effect a denial of substantial justice. The
interpretation should be one which assist the parties in obtaining a speedy,
inexpensive, and most important, a just determination of the disputed
issues.chanrobles lawlibrary : rednad

Page 8 of 26

Paragraphs 11 and 13 of the petitioners complaint reads:chanrob1es virtual 1aw

library
x

"11. That the share of herein Plaintiffs were never sold or in any wise transferred or
disposed to others;
x

"13. That just how and by what means Defendant; JUANITO CAMACHO was able to
acquire the total area of 931 square meters, is not known; however, the acquisition
might have been effected, the same was in fraud of herein plaintiffs; and so with the
share of Defendant, DALMACIO C. RAMOS, Jr., herein Plaintiffs, jointly and/or
severally, do not know the person; and, however he might have acquired the said
share of ONE FOURTH (1/4) of the property, was not from either, much less all, of
the Plaintiffs;
x

The complaint was verified under oath by the petitioners.

The petitioners counsel was obviously lulled into complacency by two factors. First,
the plaintiffs, now petitioners, had already stated under oath that they never sold,
transferred, or disposed of their shares in the inheritance to others. Second, the
usual procedure is for a defendant to specifically deny under oath the genuineness
and due execution of documents set forth in and annexed to the complaint.
Somehow, it skipped counsels attention that the rule refers to either an action or a
defense based upon a written instrument or document. It applies to both plaintiffs
and defendants.
Under the facts of this case, the private respondents were placed on adequate
notice by Paragraph 11 of the verified complaint that they would be called upon
during trial to prove the genuineness or due execution of the disputed deeds of sale.
Moreover, the heirs of Olegario Toribio, his widow and minor children represented by
their mother, are among the plaintiffs-petitioners. They are not parties to the deeds of
sale allegedly executed by their father, aunt, and uncle. They are not required to
deny the deeds of sale under oath. The private respondents will still have to
introduce evidence to establish that the deeds of sale are genuine and that they
were truly executed by the parties with authority to dispose of the disputed property.
It bears repeating that rules of procedure should be liberally construed to the end
that substantial justice may be served. As stated in Pongasi v. Court of Appeals (71
SCRA 614):chanroblesvirtualawlibrary
"We repeat what We said in Obut v. Court of Appeals, Et Al., supra, that what should
guide judicial action is the principle that a party-litigant is to be given the fullest
opportunity to establish the merits of his complaint or defense rather than for him to
lose life, liberty, honor or property on technicalities.
"In dispensing justice Our action must reflect a deep insight into the failings of
human nature, a capability for making allowances for human error and/or
negligence, and the ability to maintain the scales of justice happily well-balanced
between these virtues and the application of the law."cralaw virtua1aw library
An interpretation of a rule of procedure which would not deny to the petitioners their
rights to their inheritance is warranted by the circumstances of this case.
WHEREFORE, the order of the respondent court dated July 20, 1981 is hereby
REVERSED and SET ASIDE. The Regional Trial Court which took over the cases of
the respondent court is ordered to receive the petitioners evidence regarding the
genuineness and due execution of the disputed deeds of sale.
SO ORDERED.

Page 9 of 26

[G.R. No. 86568. March 22, 1990.]

IMPERIAL TEXTILE MILLS, INC., Petitioner, v. COURT OF APPEALS and THE
INTERNATIONAL CORPORATE BANK, INC., Respondents.

1. REMEDIAL LAW; ACTIONS BASED ON A WRITTEN INSTRUMENT;

GENUINENESS AND DUE EXECUTION OF INSTRUMENT DEEMED ADMITTED
IN ADVERSE PARTY FAILS TO DENY THE SAME UNDER OATH. No rule is
more settled than that in an action based on a written instrument attached to the
complaint, if the defendant fails to specifically deny under oath the genuineness and
due execution of the instrument, the same is deemed admitted. By its omission,
petitioner clearly admitted the genuineness and due execution of the document and
that the party whose signature appears thereon had indeed signed the same and
that he has the authority to sign the same and that the agreement between the
parties is what was in words and figures in the document. Defenses which are
inconsistent with the due execution and genuineness of the written instrument are
cut-off by such admission.
2. ID.; ID.; WAYS OF PLEADING ACTIONABLE DOCUMENT. Section 7, Rule 8
of the Rules of Court is explicit in that there are two ways of pleading an actionable
document, namely: (a) by alleging the substance of such written instrument in the
pleading and attaching a copy thereof to the pleading; and (b) by copying the
instrument in the pleading. The complaint in the present case complied with the first
situation under paragraph (a). The complaint alleged the substance of the
promissory note subject of the litigation and a copy of the promissory note was
attached. There is no question likewise that the petitioner failed to specifically deny
under oath the genuineness and due execution of the promissory note subject of the
complaint.

DECISION

This case involves the application of Sections 7 and 8 of Rule 8 of the Rules of Court
when the action or defense is based on a written document.
The facts are undisputed. In an action for the collection of a sum of money that was
filed by the private respondent against petitioner in the Regional Trial Court of
Makati, Metro Manila, it was alleged, among others, as follows:cralawnad

2. Ordering the defendant to pay plaintiff the sum of P40,000.00 as and for attorneys
fees, plus the sum of P47,470.00 as costs. (Cf. Exhibits E, F and G).
SO ORDERED." 3
Petitioner brought an appeal to the Court of Appeals. In a decision dated October 17,
1988, the Court of Appeals affirmed the judgment appealed from with costs against
petitioner. 4
A motion for reconsideration of said decision was likewise denied by the appellate
court.
Hence, this petition.
The petition is devoid of merit. Sections 7 and 8 of Rule 8 of the Rules of Court
provide as follows:jgc:chanrobles.com.ph
"SEC. 7. Action or defense based on document. Whenever an action or defense
is based upon a written instrument or document, the substance of such instrument or
document shall be set forth in the pleading, and the original or a copy thereof shall
be attached to the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the pleading.
"SEC. 8. How to contest genuineness of such documents. When an action or
defense is founded upon a written instrument, copied in or attached to the
corresponding pleading as proxided in the preceding section, the genuineness and
due execution of the instrument shall be deemed admitted unless the adverse party,
under oath, specifically denies them, and sets forth what he claims to be the facts;
but this provision does not apply when the adverse party does not appear to be a
party to the instrument or when compliance with an order for an inspection of the
original instrument is refused."cralaw virtua1aw library
No rule is more settled than that in an action based on a written instrument attached
to the complaint, if the defendant fails to specifically deny under oath the
genuineness and due execution of the instrument, the same is deemed admitted. 5
Section 7, Rule 8 of the Rules of Court is explicit in that there are two ways of
pleading an actionable document, namely:chanrob1es virtual 1aw library
(a) by alleging the substance of such written instrument in the pleading and attaching
a copy thereof to the pleading; and

"3. On August 18, 1980, for valuable consideration, defendant executed in favor of,
and delivered to plaintiff Promissory Note No. TL-0532-80, copy of which is hereto
attached as Annex A, whereby defendant obligated itself to pay plaintiff on
November 16, 1980 the sum of Twelve Million Pesos (P12,000,000.00) and with
interest thereon at the rate of 16% per annum.

(b) by copying the instrument in the pleading.

"4. The promissory note, Annex A, expressly stipulates that in case of non-payment
when due, defendant shall pay plaintiff an additional amount equal to 3% per month
of the amount due as liquidated damages and a further sum equal to 10% thereof as
attorneys fees." 1

There is no question likewise that the petitioner failed to specifically deny under oath
the genuineness and due execution of the promissory note subject of the complaint.
By its omission, petitioner clearly admitted the genuineness and due execution of the
document and that the party whose signature appears thereon had indeed signed
the same and that he has the authority to sign the same and that the agreement
between the parties is what was in words and figures in the document. Defenses
which are inconsistent with the due execution and genuineness of the written
instrument are cut-off by such admission. 6

Attached to the complaint as Annex A was the Promissory Note. 2

An answer to the complaint was filed by petitioner. The petitioner denied liability and
alleged that one Julio Tan had no authority to negotiate and obtain a loan on its
behalf. While defendant specifically denied the aforestated promissory note alleged
in the complaint, the answer was not verified. For this reason, in due course, a
decision was rendered by the trial court on December 1, 1986, the dispositive portion
of which reads as follows:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff International
Corporate Bank, Inc. and against the defendant Imperial Textile Mills, Inc. as
follows:chanrob1es virtual 1aw library
1. Ordering the defendant to pay plaintiff the total sum of P40,486,229.16, with
interest thereon at the rate of 16% per annum from 17 June 1985 until fully paid (Cf.
Exhibit B Statement of Account, p. 35, id.);

The complaint in the present case complied with the first situation under paragraph
(a). The complaint alleged the substance of the promissory note subject of the
litigation and a copy of the promissory note was attached.chanroblesvirtualawlibrary

The claim of petitioner is that its failure to specifically deny under oath the actionable
document does not prevent it from showing that one Julio Tan was not authorized to
enter into the transaction and to sign the promissory note for and in behalf of the
petitioner. But precisely, the petitioner is a party to the instrument represented by
Julio Tan so that it may not now deny the authority of Julio Tan to so represent it. 7
The due execution and genuineness of the document have thereby been
conclusively established.chanrobles law library
Moreover, in this case the judgment appealed from is supported by the evidence.
This petition is at best dilatory.
WHEREFORE, the petition is DISMISSED, with costs against petitioner.

Page 10 of 26

[G.R. No. 8418. December 9, 1915. ]

L. O. HIBBERD, Plaintiff-Appellant, v. WM. J. ROHDE and D. J.
MCMILLIAN, Defendants-Appellees.
Gibbs, McDonough & Blanco for Appellant.
W. L. Wright for Appellees.
SYLLABUS
1. CONTRACTS; ADMISSION OF GENUINENESS AND DUE EXECUTION. By
the admission of the genuineness and due execution of an instrument, as the term is
used in section 103 of the Code of Civil Procedure, is meant that the party whose
signature it bears admits that he signed it or that it was signed by another for him
with his authority; that at the time it was signed it was in words and figures exactly as
set out in the pleading of the party relying upon it; that the document was delivered
and that any formal requisites required by law, such as a seal, an acknowledgment,
or revenue stamp, which it lacks, are waived by him.
2. ID.; ID; DEFENSES CUT OFF. Such defenses as that the signature is a
forgery; or that it was unauthorized, as in the case of an agent signing for his
principal, or one signing in behalf of a partnership, or of a corporation; or that, in the
ease of the latter, that the corporation was not authorized under its charter to sign
the instrument; or that the party charged signed the instrument in some other
capacity than that alleged in the pleading setting it out; or that it was never delivered
are cut off by the admission of its genuineness and due execution.
3. ID.; ID.; DEFENSES ALLOWED. Any defense of new matter, such as payment
where nonpayment is alleged, the statute of limitations, illegality of consideration,
etc., may be under a proper plea to that effect, notwithstanding the failure of the
party charged to enter a verified denial of the genuineness and due execution of the
document declared upon.
4. ID; CONSIDERATION; INTERFERENCE WITH CRIMINAL PROSECUTIONS.
Any contract whereby it is sought to actively obstruct or hinder the prosecution of a
public offense, as by the promise of the injured person not to prosecute, or by the
suppression of evidence or by improper solicitation of officials of the State whose
authority extends to the due investigation and prosecution of the culprit, is against
public policy and will not be enforced by the courts, notwithstanding that there has
been, in fact, no crime committed, or that the greater part of the consideration of the
contract may consist of reparation to the injured party.
5. ID.; ID.; COMPROMISE OF CIVIL LIABILITY RESULTING FROM PUBLIC
OFFENSE. Contracts relating exclusively to the civil liability of one charged with a
public offense are legal and enforcible. The mere expectation of the accused person
that settlement of his civil liability will stop the criminal prosecution, or the promise of
the injured person not to actively assist in such criminal case is not sufficient to taint
the contract with illegality. Whether a contract of this character tends to obstruct the
due administration of the criminal laws is a question of fact which must be
determined from all the facts and circumstances of the particular case.
6. ID.; ID.; ID.; FACTS OF THIS CASE. In accordance with an executory contract
entered into after the preliminary investigation of a complaint of estafa, but before
decision had been rendered by the justice of the peace, the complaining party
moved for the dismissal of the criminal complaint, the consideration being a
promissory note signed by the accused and one other for the amount of the property
taken. There was no evidence that the criminal prosecution had been instituted for
the purpose of extorting a settlement from the accused nor that the injured party
undertook to suppress evidence, not to testify, or to do any other thing that would
tend to obstruct further investigation of the complaint by the States prosecuting
officers. In the absence of any other evidence, and in view of the publicity which had
been given to the accusation, Held: That the contract did not tend to obstruct the
administration of the criminal laws, and that it was valid and enforcible.

DECISION

TRENT, J. :

This is a suit on a promissory note against the makers. Only one of them, the
defendant Rohde, appeared and answered. He not having entered a verified specific
denial of the genuineness and due execution of the note, the plaintiff claims that his
special defense of illegality of consideration is cut off by section 103 of the Code of
Civil Procedure, which reads as follows: "Actions and defenses based upon written
instruments. When an action is brought upon a written instrument and the
complaint contains or has annexed a copy of such instrument, the genuineness and
due execution of the instrument shall be deemed admitted, unless specifically denied
under oath in the answer; and when the defense to an action, or a counterclaim
stated in an answer, is founded upon a written instrument and the copy thereof is
contained in or annexed to the answer, the genuineness and due execution of such
instrument shall be deemed admitted, unless specifically denied under oath by the
plaintiff in his pleadings."cralaw virtua1aw library
By the admission of the genuineness and due execution of an instrument, as
provided in this section, is meant that the party whose signature it bears admits that
he signed it or that it was signed by another for him with his authority; that at the time
it was signed it was in words and figures exactly as set out in the pleading of the
party relying upon it; that the document was delivered; and that any formal requisites
required by law, such as a seal, an acknowledgment, or revenue stamp, which it
lacks, are waived by him. Hence, such defenses as that the signature is a forgery
(Puritan Mfg. Co. v. Toti & Gradi, 14 N. M., 425; Cox v. Northwestern Stage Co., 1
Idaho, 376; Woollen v. Whitacre, 73 Ind., 198; Smith v. Ehnert, 47 Wis., 479; Faelnar
v. Escaho, 11 Phil. Rep., 92); or that it was unauthorized, as in the case of an agent
signing for his principal, or one signing in behalf of a partnership (County Bank v.
Greenberg, 127 Cal., 26; Henshaw v. Root, 60 Ind., 220; Naftzker v. Lantz, 137
Mich., 441), or of a corporation (Merchant v. International Banking Corporation, 6
Phil. Rep., 314; Wanita v. Rollins, 75 Miss., 253; Barnes v. Spencer & Barnes Co.,
162 Mich., 509); or that, in the case of the latter, that the corporation was not
authorized under its charter to sign the instrument (Merchant v. International Banking
Cor- poration, supra); or that the party charged signed the instrument in some other
capacity than that alleged in the pleading setting it out (Payne v. National Bank, 16
Kan., 147); or that it was never delivered (Hunt v. Weir, 29 Ill., 83; Elbring v. Mullen! 4
Idaho, 199; Thorp v. Keokuk Co., 48 N. Y., 253; Fire Association of Philadelphia vs:
Ruby, 60 Neb., 216) are cut off by the admission of its genuineness and due
execution.
The effect of the admission is such that in the case of a promissory note a prima
facie case is made for the plaintiff which dispenses with the necessity of evidence on
his part and entitles him to a judgment on the pleadings unless a special defense of
new matter, such as payment, is interposed by the defendant. (Papa v. Martinez, 12
Phil. Rep., 613; Chinese Chamber of Commerce v. Pua To Ching, 14 Phil. Rep., 222;
Banco Espanol-Filipino v. McKay & Zoeller, 27 Phil. Rep., 183.) But we have held
that the section is not applicable to the indorsement on a promissory note in a suit
against the maker (Heinszen & Co. v. Jones, 5 Phil. Rep., 27); nor against the heirs
of a decedent who signed a document declared upon (Nery Lim-Chingco v. Terariray,
5 Phil. Rep., 120) . Under statutes similar to our own it has been held that the
admission of the genuineness and due execution of the instrument does not bar the
defense of want of consideration. (Farmers & Merchants Bank v. Copsey, 134 Ill.
[Cal. ], 287; Barnes v. Scott, 29 Fla., 285; Booco v. Mansfield, 66 Ohio, 121; Holt v.
Robinson, 21 Ala., 106.) And in Kentucky in actions based upon promissory notes
the consideration for which were gambling debts, it has been held that such an
admission does not prevent the defense of illegality of consideration. (Burton v.
Emerine, 10 Ky., 499; Arnold v. Trundle, 30 Ky., 115.) In Freeman v. Ellison (37
Mich., 458), it was said: "It is now claimed for plaintiff below that this (rule) precludes
any inquiry into the date of delivery or the circumstances of the signing as bearing on
any defenses dependent on time in any way.
"There is no authority that we know of or any such construction of the rule.
Undoubtedly when a plaintiff produces in court an instrument corresponding to the
one set forth he is exempted from proving its execution. But the actual time of
delivery may involve questions which it would be absurd to hold foreclosed by any
such assumption. If a note is dated back in order to include usurious interest, and
that defense is set up, it would hardly be regarded as bearing on the question of

Page 11 of 26

execution. Execution can only refer to the actual making and delivery, but it cannot
involve other matters without enlarging its meaning beyond reason. The only object
of the rule was to enable a plaintiff to make out a prima facie, not a conclusive case,
and it cannot preclude a defendant from introducing any defense on the merits which
does not contradict the execution of the instrument introduced in evidence."cralaw
virtua1aw library
To so interpret section 103 as to prohibit such a defense as illegality of
consideration, which is clearly a defense of new matter, would pro tanto repeal the
second paragraph of section 94, which permits a defendant to answer by "A
statement of any new matter constituting a defense or counterclaim." Likewise,
section 285 provides that the terms of a writing may be impeached by reason of its
illegality or fraud. We do not understand that such defenses are barred by the
provisions of section 103. We accordingly hold that the special defense interposed
by the defendant of illegality of consideration is not barred by his failure to enter a
verified denial of the genuineness and due execution of the note set out in the
complaint. Hence, the evidence in support of that plea was competent. The note
reads as follows:chanrob1es virtual 1aw library
BAGUIO, BENGUET, April 27th, 1911.
"For value received, we the undersigned parties, jointly and severally agree to pay to
the firm of Brand & Hibberd, of the city of Baguio, P. I., twelve hundred pesos,
Philippine currency, in monthly installments of one hundred pesos per month,
beginning with the first day of June, 1911. (Not transferable, excepting to Jos. C.
Brand or L. O. Hibberd.)
"WM. J. ROHDE.
"D. J. MCMILLIAN."
According to the testimony of the defendant Rohde, McMillian.was in the retail liquor
business and secured a stock of merchandise valued at P1,200 from Brand &
Hibberd and sold it. Alleging that they delivered the merchandise to him on deposit
only, Brand & Hibberd filed a complaint of estafa against McMillian. McMillian was
arrested and released on bond pending the preliminary hearing before the justice of
the peace. The defendant Rohde was a practicing attorney and undertook
McMillians defense in the estafa case. Rohde testified that he was well acquainted
with the nature of the transaction between the firm of Brand & Hibberd and
McMillian; that the merchandise was sold outright to McMillian; that he knew the
estafa complaint was absolutely without foundation; and that McMillian could not
possibly be convicted; but that one Sullivan informed him after the preliminary
hearing was held that he knew positively that McMillian would be bound over for trial
in the Court of First Instance. In rebuttal, Sullivan testified that what he told Rohde
was that he was satisfied from the evidence introduced at the hearing that McMillian
would be held for trial in the Court of First Instance. Upon the strength of Sullivans
statement, Rohde agreed to sign the note reproduced above if Brand & Hibberd
would withdraw the estafa complaint. He did this because he did not want his client
to remain in confinement pending his trial in the Court of First Instance, which would
not have occurred for three months. His client was sick at the time and Rohde was
afraid that confinement in the jail for such a period of time would seriously endanger
his health. After the execution of the note, Brand & Hibberd moved in the justice
court that the estafa complaint be dismissed and this motion was granted by the
presiding justice. In the order dismissing the complaint, the justice stated that, from
the evidence introduced at the hearing he was convinced that there was no sufficient
basis for a criminal action, but that the controversy was of a civil character. Rohde
subsequently said two hundred pesos on the note. The note was assigned to the
plaintiff L. O. Hibberd, on June 10, 1911.
Any agreement which has for its purpose the concealment of a public offense, the
suppression of evidence thereof, or the stifling of a criminal prosecution already
commenced is contra bonos mores and against public policy. Every successful
attempt to shield persons guilty of such offenses adds impetus to crime by
encouraging the culprits and all others of criminal tendencies who may learn of such
perversions of justice, to commit further offenses. A person suffering pecuniarily from
the commission of such a crime may not barter away the benefits of public order and
the personal safety and security of the people by representing to the culprit that he
will actively aid in the task of securing immunity from the public prosecution if his civil
damages are made good. Courts are charged with the duty of administering the law,

and they should not lend their aid to the enforcement of any contract which looks to
its perversion. (Wever v. Shay, 56 Ohio, 116; 60 Am. St. Rep., 743; Ormerod v.
Dearman, 100 Pa., 561; 45 Am. Rep., 391; Partridge v. Hood, 120 Mass., 403; 21
Am. Rep., 524; Gardner v. Maxey, 9 B. Mon. [48 Ky. ], 90; Goodrum v. Merchants &
Planters Bank, 102 Ark., 326; Ann. Cas., 1914A; Nickelson v. Wilson, 60 N. Y., 362.)
Nor is it important that the shielding of the guilty party was a minor consideration of
the agreement, or necessary that a crime shall have been in fact committed. The
intention of the parties to obstruct criminal justlce to whatever extent taints the entire
contract and makes it unenforcible. (United States Fidelity & Guaranty Co. v. Charles
(Ala.) , 57 L. R. A., 212; W. T. Joyce Co. v. Rohan, 134 Iowa, 12; 120 Am. St. Rep.,
410; Crowder v. Reed, 80 Ind., 1.) The courts will not interfere either to rescind an
executed contract or to enforce an executory contract of such character. The parties
are left just where they are found. Perez v. Herranz, 7 Phil. Rep., 693; Rohdes v.
Neal, 64 Ga., 704; 37 Am. Rep., 93; Bowman v. Phillips, 41 Kan., 364; 13 Am. St.
Rep., 292; Atwood v. Fisk, 101 Mass., 363; 100 Am. Dec., 124; Case v. Smith, 107
Mich., 416; 61 Am. St. Rep., 341; 31 L. R. A., 282.)
A very large number of public offenses, however, inflict pecuniary damage on private
persons. The Penal Code recognizes the civil liability of offenders (arts. 119, et seq).
In this civil liability the State has no interest other than its undertaking to aid the
injure person in securing compensation for his injuries, and it cannot be doubted that
if the injured person so desires he may privately negotiate with the criminals or with
persons interested in the latter for the settlement of his private damages. Article
1813 of the Civil Code provides that a civil action arising from a crime may be
compromised, but the public action for the imposition of the legal penalty shall not be
extinguished thereby. So long as the right of the State to exact the penalty for the
public offense is not trenched upon, there is nothing unlawful or immoral in such a
contract. (Schirm v. Wieman, 103 Md., 541; 7 Ann. Cas., 1008; Atwood v. Fisk, 101
Mass., 363; 100 Am. Dec., 124; Goodrum v.s. Merchants & Planters Bank, 102 Ark.,
326; Ann. Cas., 1914A; Lomax v. Colo. Nat. Bank, 46 cOro., 229.) And mere threats
of prosecution will not vitiate an instrument given for an amount embezzled or for the
value of property feloniously taken, unless coupled with an agreement not to
prosecute if the instrument be given. (Wolf v. Troxell Estate, 94 Mich., 573; Portner v.
Kirschner, 169 Pa., 472; 47 Am. St. Rep., 925; Goodwin v. Crowell, 56 Ga., 567;
Thorn v. Pinkham, 84 Me., 101; 30 Am. St. Rep., 335.) A mere expectation of one of
the parties that the settlement of the civil injuries will stop the public prosecution is
not sufficient to make such a contract void as against public morals or public policy.
(Phillips v. Pullen, 45 N. J. Eq., 830.) As was said in Moog v. Strang (69 Ala., 98), the
law does not "seek to control the hope or expectation of the offender. He may very
reasonably, in many cases, expect that the prompt settlement of a discovered default
may tend to paralyze the energy of an incipient prosecution, and however
reprehensible the motives of the parties, they are not cognizable by the courts so
long as their minds falls short of concurring in an agreement, express or implied, to
compound or not to prosecute as the consideration in part or in whole of the
payment of the debt or damages resulting from the crime committed."cralaw
virtua1aw library
In this country a person is not an accessory to a public offense except in the cases
expressly provided by law. (Penal Code, art. 15; Act No.292; U.S. v. Caballeros, 4
Phil. Rep., 350.) In Goodrum v. Merchants & Planters Bank (102 Ark., 326; Ann.
Cas., 1914A), it appears that Goodrum was manager of a bank and that one Eagle
held the majority of the banks capital stock and controlled its policies. Goodrum
defaulted, and to settle his shortage executed a trust deed which was to be
surrendered to the bank in case an examination showed that he was criminally
liable. In a suit by the bank to compel the conveyance, Goodrum sought to show the
illegality of the contract by evidence that he had been promised immunity from
criminal prosecution if he would make good the shortage. Eagle testified that he
promised that, if the conveyance were made "We wont lie around the courthouse
and try to prosecute him; but if the grand jury calls on me and asks me to explain
these books and asks me if the shortage occurred upon the experts report, I will tell
them everything I know about it." The court said: "We do not think that this statement
of Mr. Eagle in effect that he would not go before the grand jury until summoned to
appear was an implied agreement either to withhold testimony, conceal the crime, or
to stifle the prosecution under the facts and circumstances of this case. The charges
made against Goodrum that he was short in his accounts with the bank, and
criminally so, were not only known to all the directors and persons present at the
conference, but they had been published to the world, and the knowledge thereof rife
amongst the people of that community, if not also amongst the people of the county.
This is not a case where the charges were only known by a few persons, and upon
their failure to divulge them they would not come to the notice or knowledge of the

Page 12 of 26

public or to those to whom the prosecution of crime is entrusted by the law. . . . At

the most, Eagle only stated that he would not instigate a prosecution. . . . Because
he would remain passive relative to matters of which the public authorities had full
knowledge, it can not be said that he thereby agreed to shield Goodrum from any
public prosecution."cralaw virtua1aw library
In Nickelson v. Wilson (60 N. Y., 362), it was said: "But an agreement to lay the
whole facts before the court, and to leave it to the free exercise of the discretionary
powers vested in it by law, is not in itself wrong, and is not rendered illegal even by a
stipulation on the part of a prosecutor to exert such legitimate influence as his
position gives him in favor of the extension of mercy to a guilty party."cralaw
virtua1aw library
Whether the tendency of an agreement is to interfere with the due enforcement of
criminal law is always a question of fact. (Martin v. Tucker, 35 Ark., 279; Goodwin v.
Crowell, 56 Ga., 567; Beath v. Chapoton, 115 Mich., 506; 69 Am. St. Rep., 589;
Goodrum v. Merchants & Planters Bank, supra.)
In the case at bar, the findings of fact made by the court below have been duly
submitted to us for review. The trial court found as a fact that the consideration of the
note was the compromise of a public offense. We do not think that the evidence
justifies this conclusion. It is true that the defendant Rohde testified that the
consideration of the note was "the withdrawal of the false charge against him
(McMillian) and to get him out of jail." But it is also in evidence that McMillian owed
Brand & Hibberd the full amount of the note and Rohde knew this fact before he
signed the note. There is no charge that Brand & Hibberd filed the criminal complaint
with a view of extorting a settlement of their claim against McMillian. The hearing at
the preliminary investigation was duly had and all the evidence was before the
justice of the peace before the agreement represented by the note was made. It is
not shown that Brand & Hibberd agreed not to testify in any further criminal
proceedings against McMillian, or that they would suppress any evidence in their
possession, or that they would solicit the States prosecutor or any other
Government official whose authority extend to the criminal case, to not hold the
defendant for trial. What they actually did was to move in open court for a dismissal
of the complaint. This is all they did so far as the record shows, and that it was
satisfactory to the defendant Rohde is apparent from the fact that he subsequently
made partial payments on the note.
There can be no doubt that the agreement which resulted in the execution of the
note was entered into by Brand & Hibberd with an eye to the satisfaction of their
pecuniary claim against McMillian. From the testimony of Rohde himself it appears
that he strongly insisted that McMillian was not guilty of the crime charged, and no
doubt his ability as a lawyer tended to convince the complainants that the criminal
charge was unjustified. If they became converted to this view of the matter, they no
doubt more readily consented not to actively assist in the further prosecution of the
criminal complaint. We do not think the record justifies a more radical conclusion as
to what Brand & Hibberd agreed to do with reference to the criminal phase of the
transaction than that they promised not to further actively participate in the case. The
record does not justify the conclusion that they went further and agreed to actively
assist in preventing the due investigation of the criminal charge by suppressing
evidence, by declining to appear against McMillian if duly subpoenaed as witnesses,
or by other means. In our opinion, the case is similar in many aspects to Goodrum v.
Merchants & Planters Bank (102 Ark., 326), to which we have referred above. The
record indicates the same passivity on the part of the injured party and the same
publicity of the criminal charge. There having been no agreement to interfere with
the due administration of the criminal law, we are constrained to hold that no part of
the consideration of the note declared upon is illegal or against public policy. The
plaintiff is therefore entitled to judgment. The judgment appealed from is reversed
and judgment is decreed against the defendant Rohde for the sum of one thousand
pesos, the amount remaining unpaid on the note, together with legal interest from
the date of the institution of this action. Without costs. So ordered.

Page 13 of 26

[G.R. No. L-28633. March 30, 1971.]

CENTRAL SURETY & INSURANCE COMPANY, Petitioner, v. C. N. HODGES and
THE COURT OF APPEALS, Respondents.
Pelaez, Jalandoni & Jamir for Petitioner.

refutation, the rule will be considered waived." In the case at bar, the parties acted in
complete disregard of or wholly overlooked the rule above-quoted. Hodges had
neither objected to the evidence introduced by petitioner herein in order to prove that
Mrs. Mesa had no authority to issue a surety bond, much less one in excess of
P8,000.00, and took no exception to the admission of said evidence. Hence, Hodges
must be deemed to have waived the benefits of said rule and petitioner herein
cannot be held liable in excess of the sum of P8,000.00

Leon P. Gellada for respondent C. N. Hodges.

DECISION
SYLLABUS
CONCEPCION, C.J.:
1. CIVIL LAW; SPECIAL CONTRACTS; AGENCY; GENERAL POWERS;
EXTINGUISHMENT; REVOCATION; PUBLICATION THEREOF REQUIRED; CASE
AT BAR Article 1922 of our Civil Code provides: If the agent had general powers,
revocation of the agency does not prejudice third person who acted in good faith and
without knowledge of the revocation. Notice of the revocation in a newspaper of
general circulation is a sufficient warning to third persons." It is not disputed that
petitioner has not caused to be published and, notice of the revocation of Mrs.
Mesas authority to issue surety bonds on its behalf, notwithstanding the fact that the
powers of Mrs. Mesa, as its branch manager in Iloilo, were of a general nature, for
she had exclusive authority, in the City of Iloilo, to represent petitioner herein, not
with a particular person, but with the public in general "in all the negotiations,
transactions, and business wherein the Company may lawfully transact or engage
in," subject only to the restrictions specified in their agreement, copy of which was
attached to petitioners answer as Annex 3. Contrary to petitioners claim, Article
1922 applies whenever an agent has general powers not merely when the principal
has published the same, apart from the fact that the opening of petitioners branch
office amounted to a publication of the grant of powers to the manager of said office.
Then, again, by honoring several surety bonds issued in its behalf by Mrs. Mesa
subsequently to March 15, 1952, petitioner induced the public to believe that she
had authority to issue such bonds. As a consequence, petitioner is now estopped
from pleading, particularly against a regular customer thereof, like Hodges, the
absence of said authority.
2. INSURANCE; CLAIMS; ACTION; PRESCRIPTION. Petitioner maintains that,
having been instituted on October 24, 1955 or nine (9) months after the expiration
of petitioner s surety bond on January 23, 1955 the present action is barred by
the provision in said bond to the effect that it: ". . . will not be liable for any claim not
discovered and presented to the Company within three (3) months from the
expiration of this bond and that the obligee hereby waives his right to file any court
action against the surety after the termination of the period of three months abovementioned." Interpreting an identical provision, this Court has, however, held "that
the three-month period" prescribed therein "established only a condition precedent,
not a limitation of action." and that, when a claim has been presented within said
period, the action to enforce the claim may be "filed within the statutory time of
prescription." This view was clarified in a subsequent case, in the sense that the
above-quoted provision was." . . merely interpreted to mean that presentation of the
claim within three months was a condition precedent to the filing of a court action.
Since the obligee in said case presented his claim seasonably although it did not file
the action within the same period, this Court ruled that the stipulation in the bond
concerning the limitation being ambiguous the ambiguity should be resolved against
the surety, which drafted the agreement, and that the action could be filed within the
statutory period of prescription."cralaw virtua1aw library
3. REMEDIAL, LAW; CIVIL, PROCEDURE; ALLEGATIONS; DOCUMENTS; RULE
WHEN NO OBJECTION MADE; RATIONALE; CASE AT BAR. It is true that,
pursuant to Section 8 of Rule 8 of the Rules of Court: "When an action or defense is
founded upon a written instrument, copied in or attached to the corresponding
pleading as provided in the preceding section the genuineness and due execution of
the instrument shall be deemed admitted unless the adverse party, under oath
specifically denies them, and sets forth what he claims to be the facts; but this
provision does not apply when the adverse party does not appear to be a partly to
the instrument or when compliance with an order for an inspection of the original
instrument is refused." We have however, held that: ". . . where a case has been
tried in complete disregard of the rule and the plaintiff having pleaded a document by
copy, presents oral evidence to prove the due execution of the document as well as
the agents authority and no objections are made to the defendants evidence in

Appeal by certiorari from a decision of the Court of Appeals, the dispositive part of
which reads as follows:jgc:chanrobles.com.ph
"WHEREFORE, in view of the foregoing considerations, the decision appealed from
is modified and judgment is hereby rendered against Central Surety & Insurance
Company:jgc:chanrobles.com.ph
"(a) To pay plaintiff C. N. Hodges the sum of P17,826.08 with interest thereon at the
rate of 12% per annum from October 24, 1955 until fully paid;"
(b) To pay plaintiff C. N. Hodges the sum of P1,551.60 as attorneys fees; and
(c) To pay the costs."cralaw virtua1aw library
The main facts are not disputed. Prior to January 15, 1954, lots Nos. 1226 and 1182
of the Cadastral Survey of Talisay, Negros Occidental, had been sold by C N.
Hodges to Vicente M. Layson, for the sum of P43,000.00, payable on installments.
As of January 15, 1954, the outstanding balance of Laysons debt, after deducting
the installments paid by him prior thereto, amounted to P15,516.00. In order that he
could use said lots as security for a loan he intended to apply from a bank, Layson
persuaded Hodges to execute in his (Laysons) favor a deed of absolute sale over
the properties, with the understanding that he would put up a surety bond to
guarantee the payment of said balance. Accordingly, on the date above mentioned,
Layson executed, in favor of Hodges, a promissory note for P15,516.00, with interest
thereon at the rate of 1% per month, and the sum of P1,551.60, for attorneys fees
and costs, in case of default in the payment of the principal or interest of said note.
To guarantee the same, on January 23, 1954, the Central Surety and Insurance
Company hereinafter referred to as petitioner through the manager of its
branch office in Iloilo, Mrs. Rosita Mesa, executed in favor of Hodges the surety
bond Annex B, which was good for twelve (12) months from the date thereof.
When Layson defaulted in the discharge of his aforesaid obligation, Hodges
demanded payment from the petitioner, which, despite repeated extensions of time
granted thereto, at its request, failed to honor its commitments under the surety
bond. On October 24, 1955, Hodges commenced, therefore, the present action, in
the Court of First Instance of Iloilo, against Layson and petitioner herein, to recover
from them, jointly and severally, the sums of P17,826.08, representing the principal
and interest due up to said date, and P1,551.60, as attorneys fees. In his answer to
the complaint, Layson admitted the formal allegations and denied the other
allegations thereof.
Having failed to file its answer within the reglementary period, the petitioner was, on
January 18, 1956, declared in default. When the case was called for trial, insofar as
Layson was concerned, the latter did not appear, and Hodges was allowed to
introduce his evidence. Then the trial court rendered a partial decision against
Layson, petitioner having, in the meantime, filed a motion to set aside the order of
default, which motion was still pending resolution. Thereafter, said motion was
denied, and upon presentation of the evidence of Hodges against herein petitioner,
judgment was rendered against the latter as prayed for in the complaint. Thereupon,
petitioner filed a motion for reconsideration and a motion for relief under Rule 38.
Acting thereon, His Honor, the trial Judge, later set aside its decision against the
petitioner and admitted its answer, attached to the motion to set aside the order of
default.

Page 14 of 26

In its answer, petitioner disclaimed liability under the surety bond in question, upon
the ground (a) that the same is null and void, it having been issued by Mrs. Rosita
Mesa after her authority therefor had been withdrawn on March 15, 1952; (b) that
even under her original authority, Mrs. Mesa could not issue surety bonds in excess
of P8,000.00 without the approval of petitioners main office, which was not given to
the surety bond in favor of Hodges; and (c) that the present action is barred by the
provision in the surety bond to the effect that all claims and actions thereon should
be filed within three (3) months from the date of its expiration on January 23, 1955.
Petitioner, moreover, set up a counterclaim for damages.

Moreover. the revocation of agency does not prejudice third persons who acted in
good faith without knowledge of the revocation. (Joson v. Garcia, CA-G.R. No.
29336-R, Nov. 19, 1962)."cralaw virtua1aw library
Indeed, Article 1922 of our Civil Code provides:jgc:chanrobles.com.ph
"If the agent had general powers, revocation of the agency does not prejudice third
persons who acted in good faith and without knowledge of the revocation. Notice of
the revocation in a newspaper of general circulation is a sufficient warning to third
persons."cralaw virtua1aw library

In due course, thereafter, the trial court rendered a decision:jgc:chanrobles.com.ph

"a) Condenando a la demanda Central Surety & Insurance Co. que pague al
demandante la desde la P8,000.00 con intereses legales a contar desde la fecha de
la demanda 24 de Octubre de 1955;
"b) Condenando a la misma demanda que pague al demandante la suma de
P600.00 en concepto de honorarios de abogado; y
"c) Condenando, ademas, a la misma demanda que pague las costas del
juicio."cralaw virtua1aw library
Hodges appealed to the Court of Appeals (CA-G.R. No. L-24684-R) from this
decision, insofar as it limited petitioners liability to P8,000.00. Petitioner, also,
appealed to said Court upon the ground that the trial court had erred: a) in holding
petitioner liable under a contract entered into by Its agent in excess of her authority;
(b) in sentencing petitioner to pay Hodges the sum of P8.000.00 with interest
thereon, in addition to attorneys fees and the costs; and (c) in "not awarding"
petitioners counterclaim.
After appropriate proceedings, the Court of Appeals rendered the decision above
referred to, from which petitioner has appealed to this Court, alleging that the Court
of Appeals has erred: (1) in finding that petitioner "was liable on a bond issued by an
agent whose authority . . . had already been withdrawn and revoked" ; (2) "in
applying the rule on implied admission by reason of failure to deny under oath the
authenticity of a pleaded document" and (3) "in not considering the legal effect of the
waiver contained in the disputed bond and in not disposing of this case under the
light of such waiver."cralaw virtua1aw library
The first assignment of error is predicated upon the fact that prior to January 23,
1954, when the surety bond involved in this case was executed, or on March 15,
1952, petitioner herein had withdrawn the authority of its branch manager in the City
of Iloilo, Mrs. Rosita Mesa, to issue, inter alia, surety bonds and that, accordingly, the
surety bond, copy of which was attached to the complaint as Annex B, is null and
void. On this point, the Court of Appeals had the following to
say:jgc:chanrobles.com.ph
". . . we are of the opinion that said surety bond is valid. In the first place, there
appears to be no showing that the revocation of authority was made known to the
public in general by publication, nor was Hodges notified of such revocation despite
the fact that he was a regular client of the firm. And even if Hodges would have
inquired from Mrs. Mesa as to her authority to issue said bond, we doubt if she
would disclose the contents of the letter of March 15, 1952 in view of Central
Suretys claim that she was committing irregularities in her remittances to the main
office. Secondly, some surety bonds issued by Mrs. Mesa in favor of Hodges after
her authority had allegedly been curtailed, were honored by the Central Surety
despite the fact that these were not reported to the main office at the time of their
issuance. These accounts were paid on January 31, 1957, to wit: Felicito and
Libertad Parra issued on August 16, 1952; Estrella Auayan issued on November 16,
1953; Dominador Jordan issued on August 26, 1953; and Ladislao Lachica issued
on February 28, 1953. (Exhs. F, G, H, I and J). By these acts Central Surety ratified
Mrs. Mesas unauthorized acts and as such it is now estopped from setting forth Mrs.
Mesas lack of authority to issue surety bonds after March 15, 1952. It has been held
that although the agent may have acted beyond the scope of his authority, or may
have acted without authority at all, the principal may yet subsequently see fit to
recognize and adopt the act as his own. Ratification being a matter of assent to and
approval of the act as done on account of the person ratifying, any words or acts
which show such assent and approval are ordinarily sufficient. (Sta. Catalina v.
Espitero, CA-G.R. No. 27075-R, April 28, 1964, citing IV Padilla, CIVIL CODE 1959
ed., pp. 478-479; Roxas v. Villanueva, CA-G.R. No. 18928-R, June 20, 1958).

It is not disputed that petitioner has not caused to be published any notice of the
revocation of Mrs. Mesas authority to issue surety bonds on its behalf,
notwithstanding the fact that the powers of Mrs. Mesa, as its branch manager in
Iloilo, were of a general nature, for she had exclusive authority, in the City of Iloilo, to
represent petitioner herein, not with a particular person, but with the public in
general, "in all the negotiations, transactions, and business wherein the Company
may lawfully transact or engage in," subject only to the restrictions specified in their
agreement. copy of which was attached to petitioners answer as Annex 3. 1
Contrary to petitioners claim, Article 1922 applies whenever an agent has general
powers, not merely when the principal has published the same, apart from the fact
that the opening of petitioners branch office amounted to a publication of the grant
of powers to the manager of said office. Then, again, by honoring several surety
bonds issued in its behalf by Mrs. Mesa subsequently to March 15, 195 2, petitioner
induced the public to believe that she had authority to issue such bonds. As a
consequence, petitioner is now estopped from pleading, particularly against a
regular customer thereof, like Hodges, the absence of said authority.
Let us now take up the third assignment of error and defer, until after the same has
been disposed of, the consideration of the second assignment of error.
Under the third assignment of error, petitioner maintains that, having been instituted
on October 24, 1955 or nine (9) months after the expiration of petitioners surety
bond on January 23, 1955 the present action is barred by the provision in said
bond to the effect that it:jgc:chanrobles.com.ph
". . . will not be liable for any claim not discovered and presented to the Company
within three (3) months from the expiration of this bond and that the obligee hereby
waives his right to file any court action against the surety after the termination of the
period of three months above-mentioned."cralaw virtua1aw library
Interpreting an identical provision, 2 this Court has, however, held "that the threemonth period" prescribed therein "established only a condition precedent, not a
limitation of action," and that, when a claim has been presented within said period,
the action to enforce the claim may be "filed within the statutory time of prescription."
This view was clarified in a subsequent case, 3 in the sense that the above-quoted
provision was." . . merely interpreted to mean that presentation of the claim within
three months was a condition precedent to the filing of a court action. Since the
obligee in said case presented his claim seasonably although it did not file the action
within the same period, this Court ruled that the stipulation in the bond concerning
the limitation being ambiguous, the ambiguity should be resolved against the surety,
which drafted the agreement, and that the action could be filed within the statutory
period of prescription." 4
In the case at bar, it is not contended that Hodges had not presented his claim within
three (3) months from January 23, 1955. In fact, he had repeatedly demanded from
petitioner herein compliance with its obligations under the surety bond in question,
and, in reply to such demands, petitioner asked extensions of time, on January 29,
February 16, March 15, May 3, June 16, July 1 and 15, and October 15, 1955. 5
After thus securing extensions of time, even beyond three (3) months from January
23, 1955, petitioner cannot plead the lapse of said period to bar the present action.
The second assignment of error assails the finding of the Court of Appeals to the
effect that the petitioner is liable for the full amount of surety bond despite the fact
that it exceeded the sum of P8,000.00 and hence, required, for its validity and
binding effect as against petitioner herein, the express approval and confirmation of
its Manila office, which were not secured in view of petitioners failure to deny
under oath the genuineness and due execution of said bond, copy of which was
attached to the complaint. It is true that, pursuant to section 8 of Rule 8 of the Rules
of Court:jgc:chanrobles.com.ph

Page 15 of 26

"When an action or defense is founded upon a written instrument, copied in or

attached to the corresponding pleading as provided in the preceding section, the
genuineness and due execution of the instrument shall be deemed admitted unless
the adverse party, under oath, specifically denies them, and sets forth what he
claims to be the facts; but this provision does not apply when the adverse party does
not appear to be a party to the instrument or when compliance with an order for an
inspection of the original instrument is refused."cralaw virtua1aw library
We have however, held that:jgc:chanrobles.com.ph
". . . where a case has been tried in complete disregard of the rule and the plaintiff
having pleaded a document by copy, presents oral evidence to prove the due
execution of the document as well as the agents authority and no objections are
made to the defendants evidence in refutation, the rule will be considered waived."
6
The reason for such view was explained by this Court as
follows:jgc:chanrobles.com.ph
"Before entering upon a discussion of the questions raised by the assignments of
error, we may draw attention to a matter which has not been mentioned either by
counsel or by the court below, but which, to prevent misunderstanding, should be
briefly explained: It is averred in the complaint that it is accompanied by a copy of
the contract between the parties (Exhibit A) which copy, by the terms of the
complaint, is made a part thereof. The copy is not set forth in the bill of exceptions
and aside from said averment, there is no indication that the copy actually
accompanied the complaint, but an examination of the record of the case in the
Court of First Instance shows that a translation of the contract was attached to the
complaint and served upon the defendant. As this translation may be considered a
copy and as the defendant failed to deny its authenticity under oath, it will perhaps
be said that under section 103 of the Code of Civil Procedure the omission to so
deny it constitutes an admission of the genuineness and due execution of the
document as well as of the agents authority to bind the defendant. (Merchant v.
International Banking Corporation, 6 Phil. 314.)
"In ordinary circumstances that would be true. But this case appears to have been
tried upon the theory that the rule did not apply; at least, it was wholly overlooked or
disregarded by both parties. The plaintiffs at the beginning of the trial presented a
number of witnesses to prove the due execution of the document as well as the
agents authority; no objections were made to the defendants evidence in refutation
and no exceptions taken; and the matter is not mentioned in the decision of the trial
court.
"The object of the rule is to relieve a party of the trouble and expense of proving in
the first instance an alleged fact, the existence or nonexistence of which is
necessarily within the knowledge of the adverse party, and of the necessity (to his
opponents case) of establishing which such adverse party is notified by his
opponents pleading. (Nery Lim-Chingco v. Terariray, 5 Phil., at p. 124.)
"The plaintiff may, of course, waive the rule and that is what he must be considered
to have done in the present case by introducing evidence as to the execution of the
document and failing to object to the defendants evidence in refutation; all this
evidence is now competent and the case must be decided thereupon. . . .. Nothing of
what has here been said is in conflict with former decisions of this court; it will be
found upon examination that in all cases where the applicability of the rule has been
sustained the party invoking it has relied on it in the court below and conducted his
case accordingly." 7
In the case at bar, the parties acted in complete disregard of or wholly overlooked
the rule above-quoted. Hodges had neither objected to the evidence introduced by
petitioner herein in order to prove that Mrs. Mesa had no authority to issue a surety
bond, much less one in excess of P8,000.00, and took no exception to the admission
of said evidence. Hence, Hodges must be deemed to have waived the benefits of
said rule and petitioner herein cannot be held liable in excess of the sum of
P8,000.00.
WHEREFORE, with the modification that petitioners liability to Hodges is limited to
said sum of P8,000.00 the period, the petitioner was, on January 18, 1956, declared
it is hereby affirmed in all other respects, without costs. It is so ordered.

Page 16 of 26

[A.C. NO. 7136 : August 1, 2007]

JOSELANO GUEVARRA, Complainant, v. ATTY. JOSE EMMANUEL
EALA, Respondent.

Do not worry about me! I will be happy for you. I have enough memories of us to last
me a lifetime. Always remember though that in my heart, in my mind and in my soul,
YOU WILL ALWAYS
. . . AND THE WONDERFUL THINGS YOU DO!

DECISION
PER CURIAM:
Joselano Guevarra (complainant) filed on March 4, 2002 a Complaint for
Disbarment1 before the Integrated Bar of the Philippines (IBP) Committee on Bar
Discipline (CBD) against Atty. Jose Emmanuel M. Eala a.k.a. Noli Eala (respondent)
for "grossly immoral conduct and unmitigated violation of the lawyer's oath."
In his complaint, Guevarra gave the following account:
He first met respondent in January 2000 when his (complainant's) then-fiancee Irene
Moje (Irene) introduced respondent to him as her friend who was married to
Marianne (sometimes spelled "Mary Ann") Tantoco with whom he had three children.
After his marriage to Irene on October 7, 2000, complainant noticed that from
January to March 2001, Irene had been receiving from respondent cellphone calls,
as well as messages some of which read "I love you," "I miss you," or "Meet you at
Megamall."
Complainant also noticed that Irene habitually went home very late at night or early
in the morning of the following day, and sometimes did not go home from work.
When he asked about her whereabouts, she replied that she slept at her parents'
house in Binangonan, Rizal or she was busy with her work.
In February or March 2001, complainant saw Irene and respondent together on two
occasions. On the second occasion, he confronted them following which Irene
abandoned the conjugal house.
On April 22, 2001, complainant went uninvited to Irene's birthday celebration at
which he saw her and respondent celebrating with her family and friends. Out of
embarrassment, anger and humiliation, he left the venue immediately. Following that
incident, Irene went to the conjugal house and hauled off all her personal
belongings, pieces of furniture, and her share of the household appliances.
Complainant later found, in the master's bedroom, a folded social card bearing the
words "I Love You" on its face, which card when unfolded contained a handwritten
letter dated October 7, 2000, the day of his wedding to Irene, reading:
My everdearest Irene,
By the time you open this, you'll be moments away from walking down the aisle. I will
say a prayer for you that you may find meaning in what you're about to do.
Sometimes I wonder why we ever met. Is it only for me to find fleeting happiness but
experience eternal pain? Is it only for us to find a true love but then lose it again? Or
is it because there's a bigger plan for the two of us?cralaw library
I hope that you have experienced true happiness with me. I have done everything
humanly possible to love you. And today, as you make your vows . . . I make my own
vow to YOU!
I will love you for the rest of my life. I loved you from the first time I laid eyes on you,
to the time we spent together, up to the final moments of your single life. But more
importantly, I will love you until the life in me is gone and until we are together again.

BE MINE . . . . AND MINE ALONE, and I WILL ALWAYS BE YOURS AND YOURS
ALONE!
I LOVE YOU FOREVER, I LOVE YOU FOR ALWAYS. AS LONG AS I'M LIVING MY
TWEETIE YOU'LL BE!"2

Eternally yours,
NOLI

Complainant soon saw respondent's car and that of Irene constantly parked at No.
71-B 11th Street, New Manila where, as he was to later learn sometime in April 2001,
Irene was already residing. He also learned still later that when his friends saw Irene
on or about January 18, 2002 together with respondent during a concert, she was
pregnant.
In his ANSWER,3 respondent admitted having sent the I LOVE YOU card on which
the above-quoted letter was handwritten.
On paragraph 14 of the COMPLAINT reading:
14. Respondent and Irene were even FLAUNTING THEIR ADULTEROUS
RELATIONSHIP as they attended social functions together. For instance, in or about
the third week of September 2001, the couple attended the launch of the "Wine All
You Can" promotion of French wines, held at the Mega Strip of SM Megamall B at
Mandaluyong City. Their attendance was reported in Section B of the Manila
Standard issue of 24 September 2001, on page 21. Respondent and Irene were
photographed together; their picture was captioned: "Irene with Sportscaster Noli
Eala." A photocopy of the report is attached as Annex C.4 (Italics and emphasis in
the original; CAPITALIZATION of the phrase "flaunting their adulterous relationship"
supplied),
respondent, in his ANSWER, stated:
4. Respondent specifically denies having ever flaunted an adulterous
relationship with Irene as alleged in paragraph 14 of the Complaint, the truth of the
matter being thattheir relationship was low profile and known only to the
immediate members of their respective families, and that Respondent, as far as
the general public was concerned, was still known to be legally married to Mary
Anne Tantoco.5 (Emphasis and underscoring supplied)cralawlibrary
On paragraph 15 of the COMPLAINT reading:
15. Respondent's adulterous conduct with the complainant's wife and his
apparentabandoning or neglecting of his own family, demonstrate his gross moral
depravity, making him morally unfit to keep his membership in the bar. He flaunted
his aversion to the institution of marriage, calling it a "piece of paper." Morally
reprehensible was his writing the love letter to complainant's bride on the very day of
her wedding, vowing to continue his love for her "until we are together again," as
now they are.6 (Underscoring supplied),
respondent stated in his ANSWER as follows:
5. Respondent specifically denies the allegations in paragraph 15 of the Complaint
regarding his adulterous relationship and that his acts demonstrate gross moral

Page 17 of 26

depravity thereby making him unfit to keep his membership in the bar, the reason
being that Respondent's relationship with Irene was not under scandalous
circumstances and that as far as his relationship with his own family:

Rule 1.01: A lawyer shall not engage in unlawful, dishonest, immoral or

deceitfulconduct (Underscoring supplied),
and Rule 7.03 of Canon 7 of the same Code reading:

5.1 Respondent has maintained a civil, cordial and peaceful relationship with [his
wife] Mary Anne as in fact they still occasionally meet in public, even if Mary Anne is
aware of Respondent's special friendship with Irene.

Rule 7.03: A lawyer shall not engage in conduct that adversely reflects on his fitness
to practice law, nor shall he, whether in public or private life, behave in a scandalous
manner to the discredit of the legal profession. (Underscoring supplied)cralawlibrary

xxx
5.5 Respondent also denies that he has flaunted his aversion to the institution of
marriage by calling the institution of marriage a mere piece of paper because his
reference [in his above-quoted handwritten letter to Irene] to the marriage between
Complainant and Irene as a piece of paper was merely with respect to the formality
of the marriage contract.7 (Emphasis and underscoring supplied)cralawlibrary
Respondent admitted8 paragraph 18 of the COMPLAINT reading:
18. The Rules of Court requires lawyers to support the Constitution and obey the
laws. The Constitution regards marriage as an inviolable social institution and is the
foundation of the family (Article XV, Sec. 2).9
And on paragraph 19 of the COMPLAINT reading:
19. Respondent's grossly immoral conduct runs afoul of the Constitution and the
laws he, as a lawyer, has been sworn to uphold. In pursuing obsessively his illicit
love for the complainant's wife, he mocked the institution of marriage, betrayed
his own family, broke up the complainant's marriage, commits adultery with his wife,
anddegrades the legal profession.10 (Emphasis and underscoring supplied),
respondent, in his ANSWER, stated:
7. Respondent specifically denies the allegations in paragraph 19 of the Complaint,
the reason being that under the circumstances the acts of Respondent with respect
to his purely personal and low profile special relationship with Irene is neither
under scandalous circumstances nor tantamount to grossly immoral
conductas would be a ground for disbarment pursuant to Rule 138, Section 27 of
the Rules of Court.11(Emphasis and underscoring supplied)cralawlibrary
To respondent's ANSWER, complainant filed a REPLY,12 alleging that Irene gave
birth to a girl and Irene named respondent in the Certificate of Live Birth as the girl's
father. Complainant attached to the Reply, as Annex "A," a copy of a Certificate of
Live Birth13 bearing Irene's signature and naming respondent as the father of her
daughter Samantha Irene Louise Moje who was born on February 14, 2002 at St.
Luke's Hospital.
14

Complainant's REPLY merited a REJOINDER WITH MOTION TO DISMISS dated

January 10, 2003 from respondent in which he denied having "personal knowledge
of the Certificate of Live Birth attached to the complainant's Reply."15 Respondent
moved to dismiss the complaint due to the pendency of a civil case filed by
complainant for the annulment of his marriage to Irene, and a criminal complaint for
adultery against respondent and Irene which was pending before the Quezon City
Prosecutor's Office.
During the investigation before the IBP-CBD, complainant's Complaint-Affidavit and
Reply to Answer were adopted as his testimony on direct
examination.16 Respondent's counsel did not cross-examine complainant.17
After investigation, IBP-CBD Investigating Commissioner Milagros V. San Juan, in a
12-page REPORT AND RECOMMENDATION18 dated October 26, 2004, found the
charge against respondent sufficiently proven.
The Commissioner thus recommended19 that respondent be disbarred for
violating Rule 1.01 of Canon 1 of the Code of Professional
Responsibility reading:

The IBP Board of Governors, however, annulled and set aside the Recommendation
of the Investigating Commissioner and accordingly dismissed the case for lack of
merit, by Resolution dated January 28, 2006 briefly reading:
RESOLUTION NO. XVII-2006-06
CBD Case No. 02-936
Joselano C. Guevarra v.
Atty. Jose Emmanuel M. Eala
a.k.a. Noli Eala
RESOLVED to ANNUL and SET ASIDE, as it is hereby ANNULLED AND SET
ASIDE, the Recommendation of the Investigating Commissioner, and to APPROVE
the DISMISSALof the above-entitled case for lack of merit.20 (Italics and emphasis in
the original)
Hence, the present petition21 of complainant before this Court, filed pursuant to
Section 12 (c), Rule 13922 of the Rules of Court.
The petition is impressed with merit.
Oddly enough, the IBP Board of Governors, in setting aside the Recommendation of
the Investigating Commissioner and dismissing the case for lack of merit, gave no
reason therefor as its above-quoted 33-word Resolution shows.
Respondent contends, in his Comment23 on the present petition of complainant, that
there is no evidence against him.24 The contention fails. As the IBP-CBD
Investigating Commissioner observed:
While it may be true that the love letter dated October 7, 2000 (Exh. "C") and the
news item published in the Manila Standard (Exh. "D"), even taken together do not
sufficiently prove that respondent is carrying on an adulterous relationship with
complainant's wife, there are other pieces of evidence on record which support the
accusation of complainant against respondent.
It should be noted that in his Answer dated 17 October 2002, respondent
through counsel made the following statements to wit: "Respondent specifically
denies having [ever] flaunted an adulterous relationship with Irene as alleged in
paragraph [14] of the Complaint, the truth of the matter being [that] their relationship
was low profile and known only to immediate members of their respective
families . . ., and Respondent specifically denies the allegations in paragraph 19 of
the complaint, the reason being that under the circumstances the acts of the
respondents with respect to his purely personal and low profile relationship with
Irene is neither under scandalous circumstances nor tantamount to grossly immoral
conduct . . ."
These statements of respondent in his Answer are an admission that there is
indeed a "special" relationship between him and complainant's wife, Irene,
[which] taken together with the Certificate of Live Birth of Samantha Louise
Irene Moje (Annex "H-1") sufficiently prove that there was indeed an illicit
relationship between respondent and Irene which resulted in the birth of the child
"Samantha". In the Certificate of Live Birth of Samantha it should be noted that
complainant's wife Irene supplied the information that respondent was the
father of the child. Given the fact that the respondent admitted his special
relationship with Irene there is no reason to believe that Irene would lie or make
any misrepresentation regarding the paternity of the child. It should be

Page 18 of 26

underscored that respondent has not categorically denied that he is the father
of Samantha Louise Irene Moje.25 (Emphasis and underscoring
supplied)cralawlibrary
Indeed, from respondent's Answer, he does not deny carrying on an adulterous
relationship with Irene, "adultery" being defined under Art. 333 of the Revised Penal
Code as that "committed by any married woman who shall have sexual intercourse
with a man not her husband and by the man who has carnal knowledge of her,
knowing her to be married, even if the marriage be subsequently declared
void."26 (Italics supplied) What respondent denies is having flaunted such
relationship, he maintaining that it was "low profile and known only to the immediate
members of their respective families."
In other words, respondent's denial is a negative pregnant,

SEC. 27. Disbarment or suspension of attorneys by Supreme Court, grounds

therefor. A member of the bar may be disbarred or suspended from his office as
attorney by the Supreme Court for any deceit, malpractice, or other gross
misconduct in such office, grossly immoral conduct, or by reason of his conviction
of a crime involving moral turpitude, or for any violation of the oath which he is
required to take before admission to practice, or for a willful disobedience appearing
as an attorney for a party to a case without authority so to do. The practice of
soliciting cases at law for the purpose of gain, either personally or through paid
agents or brokers, constitutes malpractice.
The disbarment or suspension of a member of the Philippine Bar by a competent
court or other disciplinatory agency in a foreign jurisdiction where he has also been
admitted as an attorney is a ground for his disbarment or suspension if the basis of
such action includes any of the acts hereinabove enumerated.

a denial pregnant with the admission of the substantial facts in the pleading
responded to which are not squarely denied. It was in effect an admission of the
averments it was directed at. Stated otherwise, a negative pregnant is a form of
negative expression which carries with it in affirmation or at least an implication of
some kind favorable to the adverse party. It is a denial pregnant with an admission of
the substantial facts alleged in the pleading. Where a fact is alleged with qualifying
or modifying language and the words of the allegation as so qualified or modified are
literally denied, it has been held that the qualifying circumstances alone are
denied while the fact itself is admitted.27 (Citations omitted; emphasis and
underscoring supplied)

The judgment, resolution or order of the foreign court or disciplinary agency shall
beprima facie evidence of the ground for disbarment or suspension (Emphasis and
underscoring supplied),

A negative pregnant too is respondent's denial of having "personal knowledge" of

Irene's daughter Samantha Louise Irene Moje's Certificate of Live Birth. In said
certificate, Irene named respondent - a "lawyer," 38 years old - as the child's father.
And the phrase "NOT MARRIED" is entered on the desired information on "DATE
AND PLACE OF MARRIAGE." A comparison of the signature attributed to Irene in
the certificate28 with her signature on the Marriage Certificate29 shows that they were
affixed by one and the same person. Notatu dignum is that, as the Investigating
Commissioner noted,respondent never denied being the father of the child.

ART. 334. Concubinage. - Any husband who shall keep a mistress in the conjugal
dwelling, or, shall have sexual intercourse, under scandalous circumstances, with a
woman who is not his wife, or shall cohabit with her in any other place, shall be
punished by prision correccional in its minimum and medium periods.

Franklin A. Ricafort, the records custodian of St. Luke's Medical Center, in his
January 29, 2003 Affidavit30 which he identified at the witness stand, declared that
Irene gave the information in the Certificate of Live Birth that the child's father is
"Jose Emmanuel Masacaet Eala," who was 38 years old and a lawyer.31
Without doubt, the adulterous relationship between respondent and Irene has been
sufficiently proven by more than clearly preponderant evidence - that evidence
adduced by one party which is more conclusive and credible than that of the other
party and, therefore, has greater weight than the other32 - which is the quantum of
evidence needed in an administrative case against a lawyer.
Administrative cases against lawyers belong to a class of their own. They are distinct
from and they may proceed independently of civil and criminal cases.
. . . of proof for these types of cases differ. In a criminal case, proof beyond
reasonable doubt is necessary; in an administrative case for disbarment or
suspension, "clearly preponderant evidence" is all that is required.33 (Emphasis
supplied)cralawlibrary
Respondent insists, however, that disbarment does not lie because his relationship
with Irene was not, under Section 27 of Rule 138 of the Revised Rules of Court,
reading:

under scandalous circumstances.34

The immediately-quoted Rule which provides the grounds for disbarment or
suspension uses the phrase "grossly immoral conduct," not "under scandalous
circumstances." Sexual intercourse under scandalous circumstances is, following
Article 334 of the Revised Penal Code reading:

x x x x,
an element of the crime of concubinage when a married man has sexual intercourse
with a woman elsewhere.
"Whether a lawyer's sexual congress with a woman not his wife or without the
benefit of marriage should be characterized as 'grossly immoral conduct' depends on
the surrounding circumstances."35The case at bar involves a relationship between a
married lawyer and a married woman who is not his wife. It is immaterial whether the
affair was carried out discreetly. Apropos is the following pronouncement of this
Court in Vitug v. Rongcal:36
On the charge of immorality, respondent does not deny that he had an extra-marital
affair with complainant, albeit brief and discreet, and which act is not "so corrupt and
false as to constitute a criminal act or so unprincipled as to be reprehensible to a
high degree" in order to merit disciplinary sanction. We disagree.
x x x
While it has been held in disbarment cases that the mere fact of sexual relations
between two unmarried adults is not sufficient to warrant administrative sanction for
such illicit behavior, it is not so with respect to betrayals of the marital vow of
fidelity. Even if not all forms of extra-marital relations are punishable under penal
law,sexual relations outside marriage is considered disgraceful and immoral as it
manifestsdeliberate disregard of the sanctity of marriage and the marital
vowsprotected by the Constitution and affirmed by our laws.37 (Emphasis and
underscoring supplied)cralawlibrary
And so is the pronouncement in Tucay v. Atty. Tucay:38
The Court need not delve into the question of whether or not the respondent did
contract a bigamous marriage . . . It is enough that the records of this administrative
case substantiate the findings of the Investigating Commissioner, as well as the IBP
Board of Governors, i.e., that indeed respondent has been carrying on an illicit

Page 19 of 26

affairwith a married woman, a grossly immoral conduct and indicative of an

extremely low regard for the fundamental ethics of his profession. This
detestable behaviorrenders him regrettably unfit and undeserving of the
treasured honor and privileges which his license confers upon
him.39 (Underscoring supplied)cralawlibrary
Respondent in fact also violated the lawyer's oath he took before admission to
practice law which goes:
I _________, having been permitted to continue in the practice of law in the
Philippines, do solemnly swear that I recognize the supreme authority of the
Republic of the Philippines; I will support its Constitution and obey the laws as well
as the legal orders of the duly constituted authorities therein; I will do no falsehood,
nor consent to the doing of any in court; I will not wittingly or willingly promote or sue
any groundless, false or unlawful suit, nor give aid nor consent to the same; I will
delay no man for money or malice, and will conduct myself as a lawyer according to
the best of my knowledge and discretion with all good fidelity as well as to the courts
as to my clients; and I impose upon myself this voluntary obligation without any
mental reservation or purpose of evasion. So help me God. (Underscoring
supplied)cralawlibrary
Respondent admittedly is aware of Section 2 of Article XV (The Family) of the
Constitution reading:
Section 2. Marriage, as an inviolable social institution, is the foundation of the family
and shall be protected by the State.
In this connection, the Family Code (Executive Order No. 209), which echoes this
constitutional provision, obligates the husband and the wife "to live together, observe
mutual love, respect and fidelity, and render mutual help and support."40
Furthermore, respondent violated Rule 1.01 of Canon 1 of the Code of Professional
Responsibility which proscribes a lawyer from engaging in "unlawful,
dishonest, immoral or deceitful conduct," and Rule 7.03 of Canon 7 of the same
Code which proscribes a lawyer from engaging in any "conduct that adversely
reflects on his fitness to practice law."
Clutching at straws, respondent, during the pendency of the investigation of the case
before the IBP Commissioner, filed a Manifestation41 on March 22, 2005 informing
the IBP-CBD that complainant's petition for nullity of his (complainant's) marriage to
Irene had been granted by Branch 106 of the Quezon City Regional Trial Court, and
that the criminal complaint for adultery complainant filed against respondent and
Irene "based on the same set of facts alleged in the instant case," which was
pending review before the Department of Justice (DOJ), on petition of complainant,
had been, on motion of complainant, withdrawn.
The Secretary of Justice's Resolution of January 16, 2004 granting complainant's
Motion to Withdraw Petition for Review reads:
Considering that the instant motion was filed before the final resolution of the Petition
for Review, we are inclined to grant the same pursuant to Section 10 of Department
Circular No. 70 dated July 3, 2000, which provides that "notwithstanding the
perfection of the appeal, the petitioner may withdraw the same at any time before it
is finally resolved, in which case the appealed resolution shall stand as though
no appeal has been taken."42 (Emphasis supplied by complainant)
That the marriage between complainant and Irene was subsequently declared
void ab initio is immaterial. The acts complained of took place before the marriage
was declared null and void.43 As a lawyer, respondent should be aware that a man
and a woman deporting themselves as husband and wife are presumed, unless
proven otherwise, to have entered into a lawful contract of marriage.44 In carrying on
an extra-marital affair with Irene prior to the judicial declaration that her marriage
with complainant was null and void, and despite respondent himself being married,
he showed disrespect for an institution held sacred by the law. And he betrayed his
unfitness to be a lawyer.

As for complainant's withdrawal of his Petition for Review before the DOJ,
respondent glaringly omitted to state that before complainant filed his December 23,
2003 Motion to Withdraw his Petition for Review, the DOJ had already promulgated
a Resolution on September 22, 2003 reversing the dismissal by the Quezon City
Prosecutor's Office of complainant's complaint for adultery. In reversing the City
Prosecutor's Resolution, DOJ Secretary Simeon Datumanong held:
Parenthetically the totality of evidence adduced by complainant would, in the fair
estimation of the Department, sufficiently establish all the elements of the offense of
adultery on the part of both respondents. Indeed, early on, respondent Moje
conceded to complainant that she was going out on dates with respondent Eala, and
this she did when complainant confronted her about Eala's frequent phone calls and
text messages to her. Complainant also personally witnessed Moje and Eala having
a rendezvous on two occasions. Respondent Eala never denied the fact that he
knew Moje to be married to complainant[.] In fact, he (Eala) himself was married to
another woman. Moreover, Moje's eventual abandonment of their conjugal home,
after complainant had once more confronted her about Eala, only served to confirm
the illicit relationship involving both respondents. This becomes all the more
apparent by Moje's subsequent relocation in No. 71-B, 11th Street, New Manila,
Quezon City, which was a few blocks away from the church where she had
exchange marital vows with complainant.
It was in this place that the two lovers apparently cohabited. Especially since Eala's
vehicle and that of Moje's were always seen there. Moje herself admits that she
came to live in the said address whereas Eala asserts that that was where he held
office. The happenstance that it was in that said address that Eala and Moje had
decided to hold office for the firm that both had formed smacks too much of a
coincidence. For one, the said address appears to be a residential house, for that
was where Moje stayed all throughout after her separation from complainant. It was
both respondent's love nest, to put short; their illicit affair that was carried out there
bore fruit a few months later when Moje gave birth to a girl at the nearby hospital of
St. Luke's Medical Center. What finally militates against the respondents is
the indubitable fact that in the certificate of birth of the girl, Moje furnished the
information that Eala was the father. This speaks all too eloquently of the
unlawful and damning nature of the adulterous acts of the respondents.
Complainant's supposed illegal procurement of the birth certificate is most certainly
beside the point for both respondents Eala and Moje have not denied, in any
categorical manner, that Eala is the father of the child Samantha Irene Louise
Moje.45 (Emphasis and underscoring supplied)cralawlibrary
It bears emphasis that adultery is a private offense which cannot be prosecuted de
oficio and thus leaves the DOJ no choice but to grant complainant's motion to
withdraw his Petition for Review . But even if respondent and Irene were to be
acquitted of adultery after trial, if the Information for adultery were filed in court, the
same would not have been a bar to the present administrative complaint.
Citing the ruling in Pangan v. Ramos,46 viz:
x x x The acquittal of respondent Ramos [of] the criminal charge is not a bar to these
[administrative] proceedings. The standards of legal profession are not satisfied by
conduct which merely enables one to escape the penalties of x x x criminal
law.Moreover, this Court, in disbarment proceedings is acting in an entirely different
capacity from that which courts assume in trying criminal case47 (Italics in the
original),
this Court in Gatchalian Promotions Talents Pools, Inc. v. Atty. Naldoza,48 held:
Administrative cases against lawyers belong to a class of their own. They are distinct
from and they may proceed independently of civil and criminal cases.
WHEREFORE, the petition is GRANTED. Resolution No. XVII-2006-06 passed on
January 28, 2006 by the Board of Governors of the Integrated Bar of the Philippines
is ANNULLED and SET ASIDE.
Respondent, Atty. Jose Emmanuel M. Eala, is DISBARRED for grossly immoral
conduct, violation of his oath of office, and violation of Canon 1, Rule 1.01 and
Canon 7, Rule 7.03 of the Code of Professional Responsibility.

Page 20 of 26

Let a copy of this Decision, which is immediately executory, be made part of the
records of respondent in the Office of the Bar Confidant, Supreme Court of the
Philippines. And let copies of the Decision be furnished the Integrated Bar of the
Philippines and circulated to all courts.
This Decision takes effect immediately.
SO ORDERED.

Page 21 of 26

[G.R. No. 87434. August 5, 1992.]

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM
PLASTICS, INC.,Petitioners, v. SWEET LINES, INC., DAVAO VETERANS
ARRASTRE AND PORT SERVICES, INC. and HON. COURT OF
APPEALS, Respondents.
De Lara, De Lunas & Rosales, for Petitioners.
Carlo L. Aquino for Sweet Lines, Inc.

DECISION

REGALADO, J.:

A maritime suit 1 was commenced on May 12, 1978 by herein petitioner Philippine
American General Insurance Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI)
against private respondents Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre
and Port Services, Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation
of India Limited) and F.E. Zuellig, Inc., as co-defendants in the court a quo, seeking
recovery of the cost of lost or damaged shipment plus exemplary damages,
attorneys fees and costs allegedly due to defendants negligence, with the following
factual backdrop yielded by the findings of the court below and adopted by
respondent court:jgc:chanrobles.com.ph
"It would appear that in or about March 1977, the vessel SS `VISHVA YASH
belonging to or operated by the foreign common carrier, took on board at Baton
Rouge, LA, two (2) consignments of cargoes for shipment to Manila and later for
transhipment to Davao City, consisting of 600 bags Low Density Polyethylene 631
and another 6,400 bags Low Density Polyethylene 647, both consigned to the order
of Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics,
Inc., Madaum, Tagum, Davao City. Said cargoes were covered, respectively, by Bills
of Lading Nos. 6 and 7 issued by the foreign common carrier (Exhs. E and F). The
necessary packing or Weight List (Exhs. A and B), as well as the Commercial
Invoices (Exhs. C and D) accompanied the shipment. The cargoes were likewise
insured by the Tagum Plastics Inc. with plaintiff Philippine American General
Insurance Co., Inc., (Exh. G).
"In the course of time, the said vessel arrived at Manila and discharged its cargoes
in the Port of Manila for transhipment to Davao City. For this purpose, the foreign
carrier awaited and made use of the services of the vessel called M/V Sweet Love
owned and operated by defendant interisland carrier.
"Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These
were commingled with similar cargoes belonging to Evergreen Plantation and also
Standfilco.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
"On May 15, 1977, the shipment(s) were discharged from the interisland carrier into
the custody of the consignee. A later survey conducted on July 8, 1977, upon the
instance of the plaintiff, shows the following:jgc:chanrobles.com.ph
"Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain 6,400
bags of Low Density Polyethylene 647 originally inside 160 pallets, there were
delivered to the consignee 5,413 bags in good order condition. The survey shows
shortages, damages and losses to be as follows:chanrob1es virtual 1aw library
Undelivered/Damaged bags as tallied during discharge from vessel-173 bags;
undelivered and damaged as noted and observed whilst stored at the pier-699 bags;
and shortlanded-110 bags (Exhs. P and P-1).
"Of the 600 bags of Low Density Polyethylene 631, the survey conducted on the
same day shows an actual delivery to the consignee of only 507 bags in good order
condition. Likewise noted were the following losses, damages and shortages, to
wit:chanrob1es virtual 1aw library
Undelivered/damaged bags and tally sheets during discharge from vessel-17 bags.

Undelivered and damaged as noted and observed whilst stored at the pier-66 bags;
Shortlanded-10 bags.
Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets,
only a total of 5,820 bags were delivered to the consignee in good order condition,
leaving a balance of 1,080 bags. Such loss from this particular shipment is what any
or all defendants may be answerable to (sic).
"As already stated, some bags were either shortlanded or were missing, and some
of the 1,080 bags were torn, the contents thereof partly spilled or were fully/partially
emptied, but, worse, the contents thereof contaminated with foreign matters and
therefore could no longer serve their intended purpose. The position taken by the
consignee was that even those bags which still had some contents were considered
as total losses as the remaining contents were contaminated with foreign matters
and therefore did not (sic) longer serve the intended purpose of the material. Each
bag was valued, taking into account the customs duties and other taxes paid as well
as charges and the conversion value then of a dollar to the peso, at P110.28 per bag
(see Exhs. L and L-1 M and O)." 2
Before trial, a compromise agreement was entered into between petitioners, as
plaintiffs, and defendants S.C.I. Line and F.E. Zuellig, upon the latters payment of
P532.65 in settlement of the claim against them. Whereupon, the trial court in its
order of August 12, 1981 3 granted plaintiffs motion to dismiss grounded on said
amicable settlement and the case as to S.C.I. Line and F.E. Zuellig was
consequently "dismissed with prejudice and without pronouncement as to
costs."cralaw virtua1aw library
The trial court thereafter rendered judgment in favor of herein petitioners on this
dispositive portion:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff Philippine
General American Insurance Company Inc. and against the remaining defendants,
Sweet Lines Inc. and Davao Veterans Arrastre Inc. as follows:chanrob1es virtual
1aw library
Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sum of P34,902.00,
with legal interest thereon from date of extrajudicial demand on April 28, 1978 (Exh.
M) until fully paid;
Defendant Sweet Lines Inc. and Davao Veterans Arrastre and (Port) Services Inc.
are directed to pay jointly and severally, the plaintiff the sum of P49,747.55, with
legal interest thereon from April 28, 1978 until fully paid;
Each of said defendants are ordered to pay the plaintiffs the additional sum of
P5,000 as reimbursable attorneys fees and other litigation expenses;chanrobles law
library : red
Each of said defendants shall pay one-fourth (1/4) costs." 4
Due to the reversal on appeal by respondent court of the trial courts decision on the
ground of prescription, 5 in effect dismissing the complaint of herein petitioners, and
the denial of their motion for reconsideration, 6 petitioners filed the instant petition for
review on certiorari, faulting respondent appellate court with the following errors: (1)
in upholding, without proof, the existence of the so-called prescriptive period; (2)
granting arguendo that the said prescriptive period does exist, in not finding the
same to be null and void; and (3) assuming arguendo that the said prescriptive
period is valid and legal, in failing to conclude that petitioners substantially complied
therewith. 7
Parenthetically, we observe that herein petitioners are jointly pursuing this case,
considering their common interest in the shipment subject of the present
controversy, to obviate any question as to who the real party in interest is and to
protect their respective rights as insurer and insured. In any case, there is no
impediment to the legal standing of petitioner Philamgen, even if it alone were to sue
herein private respondents in its own capacity as insurer, it having been subrogated
to all rights of recovery for loss of or damage to the shipment insured under its
Marine Risk Note No. 438734 dated March 31, 1977 8 in view of the full settlement
of the claim thereunder as evidenced by the subrogation receipt 9 issued in its favor
by Far East Bank and Trust Co., Davao Branch, for the account of petitioner TPI.

Page 22 of 26

valid defenses." 22
Upon payment of the loss covered by the policy, the insurers entitlement to
subrogation pro tanto, being of the highest equity, equips it with a cause of action
against a third party in case of contractual breach. 10 Further, the insurers
subrogatory right to sue for recovery under the bill of lading in case of loss of or
damage to the cargo is jurisprudentially upheld. 11 However, if an insurer, in the
exercise of its subrogatory right, may proceed against the erring carrier and for all
intents and purposes stands in the place and in substitution of the consignee, a
fortiori such insurer is presumed to know and is just as bound by the contractual
terms under the bill of lading as the insured.
On the first issue, petitioners contend that it was error for the Court of Appeals to
reverse the appealed decision on the supposed ground of prescription when SLI
failed to adduce any evidence in support thereof and that the bills of lading said to
contain the shortened periods for filing a claim and for instituting a court action
against the carrier were never offered in evidence. Considering that the existence
and tenor of this stipulation on the aforesaid periods have allegedly not been
established, petitioners maintain that it is inconceivable how they can possibly
comply therewith. 12 In refutation, SLI avers that it is standard practice in its
operations to issue bills of lading for shipments entrusted to it for carriage and that it
in fact issued bills of lading numbered MD-25 and MD-26 therefor with proof of their
existence manifest in the records of the case. 13 For its part, DVAPSI insists on the
propriety of the dismissal of the complaint as to it due to petitioners failure to prove
its direct responsibility for the loss of and/or damage to the cargo. 14
On this point, in denying petitioners motion for reconsideration, the Court of Appeals
resolved that although the bills of lading were not offered in evidence, the litigation
obviously revolves on such bills of lading which are practically the documents or
contracts sued upon, hence, they are inevitably involved and their provisions cannot
be disregarded in the determination of the relative rights of the parties thereto. 15
Respondent court correctly passed upon the matter of prescription, since that
defense was so considered and controverted by the parties. This issue may
accordingly be taken cognizance of by the court even if not inceptively raised as a
defense so long as its existence is plainly apparent on the face of relevant pleadings.
16 In the case at bar, prescription as an affirmative defense was seasonably raised
by SLI in its answer, 17 except that the bills of lading embodying the same were not
formally offered in evidence, thus reducing the bone of contention to whether or not
prescription can be maintained as such defense and, as in this case, consequently
upheld on the strength of mere references thereto.
As petitioners are suing upon SLIs contractual obligation under the contract of
carriage as contained in the bills of lading, such bills of lading can be categorized as
actionable documents which under the Rules must be properly pleaded either as
causes of action or defenses, 18 and the genuineness and due execution of which
are deemed admitted unless specifically denied under oath by the adverse party. 19
The rules on actionable documents cover and apply to both a cause of action or
defense based on said documents. 20
In the present case and under the aforestated assumption that the time limit involved
is a prescriptive period, respondent carrier duly raised prescription as an affirmative
defense in its answer setting forth paragraph 5 of the pertinent bills of lading which
comprised the stipulation thereon by parties, to wit:chanrobles law library : red
"5. Claims for shortage, damage, must be made at the time of delivery to consignee
or agent, if container shows exterior signs of damage or shortage. Claims for nondelivery, misdelivery, loss or damage must be filed within 30 days from accrual. Suits
arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted
within 60 days from date of accrual of right of action. Failure to file claims or institute
judicial proceedings as herein provided constitutes waiver of claim or right of action.
In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of
damage to cargo while cargo is not in actual custody of carrier." 21
In their reply thereto, herein petitioners, by their own assertions that
"2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.s Answer,
plaintiffs state that such agreements are what the Supreme Court considers as
contracts of adhesion (see Sweet Lines, Inc. v. Hon. Bernardo Teves, Et Al., G.R.
No. L-37750, May 19, 1978) and, consequently, the provisions therein which are
contrary to law and public policy cannot be availed of by answering defendant as

thereby failed to controvert the existence of the bills of lading and the aforequoted
provisions therein, hence they impliedly admitted the same when they merely
assailed the validity of subject stipulations.
Petitioners failure to specifically deny the existence, much less the genuineness and
due execution, of the instruments in question amounts to an admission. Judicial
admissions, verbal or written, made by the parties in the pleadings or in the course
of the trial or other proceedings in the same case are conclusive, no evidence being
required to prove the same, and cannot be contradicted unless shown to have been
made through palpable mistake or that no such admission was made. 23 Moreover,
when the due execution and genuineness of an instrument are deemed admitted
because of the adverse partys failure to make a specific verified denial thereof, the
instrument need not be presented formally in evidence for it may be considered an
admitted fact. 24
Even granting that petitioners averment in their reply amounts to a denial, it has the
procedural earmarks of what in the law on pleadings is called a negative pregnant,
that is, a denial pregnant with the admission of the substantial facts in the pleading
responded to which are not squarely denied. It is in effect an admission of the
averment it is directed to. 25 Thus, while petitioners objected to the validity of such
agreement for being contrary to public policy, the existence of the bills of lading and
said stipulations were nevertheless impliedly admitted by them.
We find merit in respondent courts comments that petitioners failed to touch on the
matter of the non-presentation of the bills of lading in their brief and earlier on in the
appellate proceedings in this case, hence it is too late in the day to now allow the
litigation to be overturned on that score, for to do so would mean an over-indulgence
in technicalities. Hence, for the reasons already advanced, the non-inclusion of the
controverted bills of lading in the formal offer of evidence cannot, under the facts of
this particular case, be considered a fatal procedural lapse as would bar respondent
carrier from raising the defense of prescription. Petitioners feigned ignorance of the
provisions of the bills of lading, particularly on the time limitations for filing a claim
and for commencing a suit in court, as their excuse for non-compliance therewith
does not deserve serious attention.
It is to be noted that the carriage of the cargo involved was effected pursuant to an
"Application for Delivery of Cargoes without Original Bill of Lading" issued on May
20, 1977 in Davao City 26 with the notation therein that said application corresponds
to and is subject to the terms of bills of lading MD-25 and MD-26. It would be a safe
assessment to interpret this to mean that, sight unseen, petitioners acknowledged
the existence of said bills of lading. By having the cargo shipped on respondent
carriers vessel and later making a claim for loss on the basis of the bills of lading,
petitioners for all intents and purposes accepted said bills. Having done so they are
bound by all stipulations contained therein. 27 Verily, as petitioners are suing for
recovery on the contract, and in fact even went as far as assailing its validity by
categorizing it as a contract of adhesion, then they necessarily admit that there is
such a contract, their knowledge of the existence of which with its attendant
stipulations they cannot now be allowed to deny.chanrobles lawlibrary : rednad
On the issue of the validity of the controverted paragraph 5 of the bills of lading
above quoted which unequivocally prescribes a time frame of thirty (30) days for
filing a claim with the carrier in case of loss of or damage to the cargo and sixty (60)
days from accrual of the right of action for instituting an action in court, which periods
must concur, petitioners posit that the alleged shorter prescriptive period which is in
the nature of a limitation on petitioners right of recovery is unreasonable and that
SLI has the burden of proving otherwise, citing the earlier case of Southern Lines,
Inc. v. Court of Appeals, Et Al., 28 They postulate this on the theory that the bills of
lading containing the same constitute contracts of adhesion and are, therefore, void
for being contrary to public policy, supposedly pursuant to the dictum in Sweet Lines,
Inc. v. Teves, Et. Al. 29
Furthermore, they contend, since the liability of private respondents has been clearly
established, to bar petitioners right of recovery on a mere technicality will pave the
way for unjust enrichment. 30 Contrarily, SLI asserts and defends the
reasonableness of the time limitation within which claims should be filed with the
carrier; the necessity for the same, as this condition for the carriers liability is
uniformly adopted by nearly all shipping companies if they are to survive the
concomitant rigors and risks of the shipping industry; and the countervailing balance

Page 23 of 26

afforded by such stipulation to the legal presumption of negligence under which the
carrier labors in the event of loss of or damage to the cargo. 31

whatever right of action they may have in their favor or, taken in another sense, that
remedial right or right to relief had prescribed. 44

It has long been held that Article 366 of the Code of Commerce applies not only to
overland and river transportation but also to maritime transportation. 32 Moreover,
we agree that in this jurisdiction, as viewed from another angle, it is more accurate to
state that the filing of a claim with the carrier within the time limitation therefor under
Article 366 actually constitutes a condition precedent to the accrual of a right of
action against a carrier for damages caused to the merchandise. The shipper or the
consignee must allege and prove the fulfillment of the condition and if he omits such
allegations and proof, no right of action against the carrier can accrue in his favor. As
the requirements in Article 366, restated with a slight modification in the assailed
paragraph 5 of the bills of lading, are reasonable conditions precedent, they are not
limitations of action. 33 Being conditions precedent, their performance must precede
a suit for enforcement 34 and the vesting of the right to file suit does not take place
until the happening of these conditions. 35

The shipment in question was discharged into the custody of the consignee on May
15, 1977, and it was from this date that petitioners cause of action accrued, with
thirty (30) days therefrom within which to file a claim with the carrier for any loss or
damage which may have been suffered by the cargo and thereby perfect their right
of action. The findings of respondent court as supported by petitioners formal offer
of evidence in the court below show that the claim was filed with SLI only on April 28,
1978, way beyond the period provided in the bills of lading 45 and violative of the
contractual provision. the inevitable consequence of which is the loss of petitioners
remedy or right to sue. Even the filing of the complaint on May 12, 1978 is of no
remedial or practical consequence, since the time limits for the filing thereof, whether
viewed as a condition precedent or as a prescriptive period, would in this case be
productive of the same result, that is, that petitioners had no right of action to begin
with or, at any rate, their claim was time-barred.

Now, before an action can properly be commenced all the essential elements of the
cause of action must be in existence, that is, the cause of action must be complete.
All valid conditions precedent to the institution of the particular action, whether
prescribed by statute, fixed by agreement of the parties or implied by law must be
performed or complied with before commencing the action, unless the conduct of the
adverse party has been such as to prevent or waive performance or excuse nonperformance of the condition. 36

What the court finds rather odd is the fact that petitioner TPI filed a provisional claim
with DVAPSI as early as June 14, 1977 46 and, as found by the trial court, a survey
fixing the extent of loss of and/or damage to the cargo was conducted on July 8,
1977 at the instance of petitioners. 47 If petitioners had the opportunity and
awareness to file such provisional claim and to cause a survey to be conducted soon
after the discharge of the cargo, then they could very easily have filed the necessary
formal, or even a provisional, claim with SLI itself 48 within the stipulated period
therefor, instead of doing so only on April 28, 1978 despite the vessels arrival at the
port of destination on May 15, 1977. Their failure to timely act brings us to no
inference other than the fact that petitioners slept on their rights and they must now
face the consequences of such inaction.

It bears restating that a right of action is the right to presently enforce a cause of
action, while a cause of action consists of the operative facts which give rise to such
right of action. The right of action does not arise until the performance of all
conditions precedent to the action and may be taken away by the running of the
statute of limitations, through estoppel, or by other circumstances which do not affect
the cause of action. 37 Performance or fulfillment of all conditions precedent upon
which a right of action depends must be sufficiently alleged, 38 considering that the
burden of proof to show that a party has a right of action is upon the person initiating
the suit. 39
More particularly, where the contract of shipment contains a reasonable requirement
of giving notice of loss of or injury to the goods, the giving of such notice is a
condition precedent to the action for loss or injury or the right to enforce the carriers
liability. Such requirement is not an empty formalism. The fundamental reason or
purpose of such a stipulation is not to relieve the carrier from just liability, but
reasonably to inform it that the shipment has been damaged and that it is charged
with liability therefor, and to give it an opportunity to examine the nature and extent
of the injury. This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated so as to
safeguard itself from false and fraudulent claims. 40
Stipulations in bills of lading or other contracts of shipment which require notice of
claim for loss of or damage to goods shipped in order to impose liability on the
carrier operate to prevent the enforcement of the contract when not complied with,
that is, notice is a condition precedent and the carrier is not liable if notice is not
given in accordance with the stipulation, 41 as the failure to comply with such a
stipulation in a contract of carriage with respect to notice of loss or claim for damage
bars recovery for the loss or damage suffered. 42
On the other hand, the validity of a contractual limitation of time for filing the suit
itself against a carrier shorter than the statutory period therefor has generally been
upheld as such stipulation merely affects the shippers remedy and does not affect
the liability of the carrier. In the absence of any statutory limitation and subject only
to the requirement on the reasonableness of the stipulated limitation period, the
parties to a contract of carriage may fix by agreement a shorter time for the bringing
of suit on a claim for the loss of or damage to the shipment than that provided by the
statute of limitations. Such limitation is not contrary to public policy for it does not in
any way defeat the complete vestiture of the right to recover, but merely requires the
assertion of that right by action at an earlier period than would be necessary to
defeat it through the operation of the ordinary statute of limitations. 43
In the case at bar, there is neither any showing of compliance by petitioners with the
requirement for the filing of a notice of claim within the prescribed period nor any
allegation to that effect. It may then be said that while petitioners may possibly have
a cause of action, for failure to comply with the above condition precedent they lost

The ratiocination of the Court of Appeals on this aspect is worth

reproducing:chanrobles law library
x
x
x
"It must be noted, at this juncture, that the aforestated time limitation in the
presentation of claim for loss or damage, is but a restatement of the rule prescribed
under Art. 366 of the Code of Commerce which reads as follows:chanrob1es virtual
1aw library
Art. 366. Within the twenty-four hours following the receipt of the merchandise, the
claim against the carrier for damage or average which may be found therein upon
opening the packages, may be made, provided that the indications of the damage or
average which gives rise to the claim cannot be ascertained from the outside part of
the packages, in which case the claims shall be admitted only at the time of the
receipt.
After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered.
Gleanable therefrom is the fact that subject stipulation even lengthened the period
for presentation of claims thereunder. Such modification has been sanctioned by the
Supreme Court. In the case of Ong Yet (M)ua Hardware Co., Inc. v. Mitsui
Steamship Co., Ltd., Et Al., 59 O.G. No. 17, p. 2764, it ruled that Art. 366 of the Code
of Commerce can be modified by a bill of lading prescribing the period of 90 days
after arrival of the ship, for filing of written claim with the carrier or agent, instead of
the 24-hour time limit after delivery provided in the aforecited legal provision.
"Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that the
commencement of the instant suit on May 12, 1978 was indeed fatally late. In view
of the express provision that suits arising from . . . damage or loss shall be instituted
within 60 days from date of accrual of right of action, the present action necessarily
fails on ground of prescription.
In the absence of constitutional or statutory prohibition, it is usually held or
recognized that it is competent for the parties to a contract of shipment to agree on a
limitation of time shorter than the statutory period, within which action for breach of
the contract shall be brought, and such limitation will be enforced if reasonable. . .
(13 C.J.S. 496-497)

Page 24 of 26

A perusal of the pertinent provisions of law on the matter would disclose that there is
no constitutional or statutory prohibition informing paragraph 5 of subject Bill of
Lading. The stipulated period of 60 days is reasonable enough for appellees to
ascertain the facts and thereafter to sue, if need be, and the 60-day period agreed
upon by the parties which shortened the statutory period within which to bring action
for breach of contract is valid and binding. . . . ." (Emphasis in the original text.) 49

Thus, to put the legal effect of respondent carriers report on losses or damages, the
preparation of which is standard procedure upon unloading of cargo at the port of
destination, on the same level as that of a notice of claim by imploring substantial
compliance is definitely far-fetched. Besides, the cited notation on the carriers report
itself makes it clear that the filing of a notice of claim in any case is imperative if
carrier is to be held liable at all for the loss of or damage to cargo.

As explained above, the shortened period for filing suit is not unreasonable and has
in fact been generally recognized to be a valid business practice in the shipping
industry. Petitioners advertence to the Courts holding in the Southern Lines case,
supra, is futile as what was involved was a claim for refund of excess payment. We
ruled therein that non-compliance with the requirement of filing a notice of claim
under Article 366 of the Code of Commerce does not affect the consignees right of
action against the carrier because said requirement applies only to cases for
recovery of damages on account of loss of or damage to cargo, not to an action for
refund of overpayment, and on the further consideration that neither the Code of
Commerce nor the bills of lading therein provided any time limitation for suing for
refund of money paid in excess, except only that it be filed within a reasonable time.

Turning now to respondent DVAPSI and considering that whatever right of action
petitioners may have against respondent carrier was lost due to their failure to
seasonably file the requisite claim, it would be awkward, to say the least, that by
some convenient process of elimination DVAPSI should proverbially be left holding
the bag, and it would be pure speculation to assume that DVAPSI is probably
responsible for the loss of or damage to cargo. Unlike a common carrier, an arrastre
operator does not labor under a presumption of negligence in case of loss,
destruction, or deterioration of goods discharged into its custody. In other words, to
hold an arrastre operator liable for loss of and/or damage to goods entrusted to it
there must be preponderant evidence that it did not exercise due diligence in the
handling and care of the goods.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph

The ruling in Sweet Lines categorizing the stipulated limitation on venue of action
provided in the subject bill of lading as a contract of adhesion and, under the
circumstances therein, void for being contrary to public policy is evidently likewise
unavailing in view of the discrete environmental facts involved and the fact that the
restriction therein was unreasonable. In any case, Ong Yiu v. Court of Appeals, Et
Al., 50 instructs us that "contracts of adhesion wherein one party imposes a readymade form of contract on the other . . . are contracts not entirely prohibited. The one
who adheres to the contract is in reality free to reject it entirely; if he adheres he
gives his consent." In the present case, not-even an allegation of ignorance of a
party excuses non-compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of a contract of
carriage devolves not on the carrier but on the owner, shipper, or consignee as the
case may be.chanrobles virtual lawlibrary
While it is true that substantial compliance with provisions on filing of claim for loss of
or damage to cargo may sometimes suffice, the invocation of such an assumption
must be viewed vis-a-vis the object or purpose which such a provision seeks to
attain and that is to afford the carrier a reasonable opportunity to determine the
merits and validity of the claim and to protect itself against unfounded impositions.
51 Petitioners would nevertheless adopt an adamant posture hinged on the
issuance by SLI of a "Report on Losses and Damages," dated May 15, 1977, 52
from which petitioners theorize that this charges private respondents with actual
knowledge of the loss and damage involved in the present case as would obviate the
need for or render superfluous the filing of a claim within the stipulated period.

Petitioners failed to pinpoint liability on any of the original defendants and in this
seemingly wild goose-chase, they cannot quite put their finger down on when,
where, how and under whose responsibility the loss or damage probably occurred,
or as stated in paragraph 8 of their basic complaint filed in the court below, whether"
(u)pon discharge of the cargoes from the original carrying vessel, the SS VISHVA
YASH," and/or upon discharge of the cargoes from the interisland vessel the MV
SWEET LOVE, in Davao City and later while in the custody of defendant arrastre
operator." 54
The testimony of petitioners own witness, Roberto Cabato, Jr., Marine and Aviation
Claims Manager of petitioner Philamgen, was definitely inconclusive and the
responsibility for the loss or damage could still not be ascertained
therefrom:jgc:chanrobles.com.ph
"Q In other words, Mr. Cabato, you only computed the loss on the basis of the
figures submitted to you and based on the documents like the survey certificate and
the certificate of the arrastre?
A Yes, sir.
Q Therefore, Mr. Cabato, You have no idea how or where these losses were
incurred?
A No, sir.

Withal, it has merely to be pointed out that the aforementioned report bears this
notation at the lower part thereof: "Damaged by Mla. labor upon unloading; B/L
noted at port of origin," as an explanation for the cause of loss of and/or damage to
the cargo, together with an iterative note stating that" (t)his copy should be submitted
together with your claim invoice or receipt within 30 days from date of issue
otherwise your claim will not be honored."cralaw virtua1aw library
Moreover, knowledge on the part of the carrier of the loss of or damage to the goods
deducible from the issuance of said report is not equivalent to nor does it
approximate the legal purpose served by the filing of the requisite claim, that is, to
promptly apprise the carrier about a consignees intention to file a claim and thus
cause the prompt investigation of the veracity and merit thereof for its protection. It
would be an unfair imposition to require the carrier, upon discovery in the process of
preparing the report on losses or damages of any and all such loss or damage, to
presume the existence of a claim against it when at that time the carrier is
expectedly concerned merely with accounting for each and every shipment and
assessing its condition. Unless and until a notice of claim is therewith timely filed, the
carrier cannot be expected to presume that for every loss or damage tallied, a
corresponding claim therefor has been filed or is already in existence as would alert
it to the urgency for an immediate investigation of the soundness of the claim. The
report on losses and damages is not the claim referred to and required by the bills of
lading for it does not fix responsibility for the loss or damage, but merely states the
condition of the goods shipped. The claim contemplated herein, in whatever form,
must be something more than a notice that the goods have been lost or damaged; it
must contain a claim for compensation or indicate an intent to claim. 53

Q Mr. Witness, you said that you processed and investigated the claim involving the
shipment in question. Is it not a fact that in your processing and investigation you
considered how the shipment was transported? Where the losses could have
occurred and what is the extent of the respective responsibilities of the bailees
and/or carriers involved?
x
x
x
A With respect to the shipment being transported, we have of course to get into it in
order to check whether the shipment coming in to this port is in accordance with the
policy condition, like in this particular case, the shipment was transported to Manila
and transhipped through an interisland vessel in accordance with the policy. With
respect to the losses, we have a general view where losses could have occurred. Of
course we will have to consider the different bailees wherein the shipment must have
passed through, like the ocean vessel, the interisland vessel and the arrastre, but
definitely at that point and time we cannot determine the extent of each liability. We
are only interested at that point and time in the liability as regards the underwriter in
accordance with the policy that we issued.
x
x
x
Q Mr. Witness, from the documents, namely, the survey of Manila Adjusters and
Surveyors Company, the survey of Davao Arrastre contractor and the bills of lading

Page 25 of 26

issued by the defendant Sweet Lines, will you be able to tell the respective liabilities
of the bailees and/or carriers concerned?

already occurred and that the same could not have possibly occurred while the same
was in the custody of DVAPSI, as demonstrated by the observations of the trial court
quoted at the start of this opinion.cralawnad

A No, sir." (Emphasis ours.) 55

Neither did nor could the trial court, much less the Court of Appeals, precisely
establish the stage in the course of the shipment when the goods were lost,
destroyed or damaged. What can only be inferred from the factual findings of the trial
court is that by the time the cargo was discharged to DVAPSI, loss or damage had

ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the
dismissal of the complaint in the court a quo as decreed by respondent Court of
Appeals in its challenged judgment is hereby AFFIRMED.

Page 26 of 26