SECOND DIVISION

[G.R. No. L-31342. April 7, 1976.]

JUAN T. BORROMEO, Petitioner, v. COURT OF APPEALS, EMMANUEL B. AZNAR, ALMA

AZNAR and JOSE B. AZNAR, Respondents.

[G.R. No. L-31740. April 7, 1976.]

EMMANUEL B. AZNAR, ALMA AZNAR and JOSE B. AZNAR, As Special Administrator of the
Estate of Matias H. Aznar, Petitioners, v. COURT OF APPEALS and JUAN T. BORROMEO, As
Special Administrator of the Estate of Simeon Rallos, Respondents.

Ciriaco Lopez, Jr. and Associates for Petitioner.

Sabido, Sabido & Associates and Pablo P. Garcia for Respondents.

Sabido, Sabido & Associates and Pablo P. Garcia, for Petitioners.

Ciriaco Lopez, Jr. and Associates for Respondents.

SYNOPSIS

The controversy centers on the true nature of three documents which on their faces are
unquestionably deeds of absolute sale of the real properties therein described executed by the
deceased Rallos on various dates in favor of Emmanuel Aznar and his sister. In the court below, Juan
T. Borromeo, as administrator of the estate of Rallos prayed for the reformation of the documents
alleging that these documents were in fact equitable mortgages to secure the loans granted to Rallos
by Matias Aznar, the deceased father of Emmanuel and Alma. The trial court dismissed the complaint
and on appeal, said dismissal was affirmed by the Court of Appeals in its original decision. However,
in its per curiam resolution, this position was completely reversed. The appellate court admitted
pieces of evidence that it had previously rejected and held that the notations and memoranda of
Crispina Rallos Alcantara, although previously considered self-serving and unsatisfactory evidence of
the facts asserted, may be considered as constituting part of the res gestae and hence admissible in
evidence to show the nature of the contracts in question. Further, it found that the Aznars "retained
part of the purchase price" stipulated in the deed in question and that there was unusual inadequacy
in the purchase price thereby justifying the presumption created by Article 1602 of the Civil Code that
whenever said circumstances are shown, the transaction should be considered as equitable
mortgages.
G.R. No. L-31342 seeks the modifications of the per curiam resolution of the Court of Appeals, dated
November 19, 1969 in order to include an award of damage and an increase of attorney’s fees. G.R.
No. L-31740 seeks to set aside the same resolution which reversed entirely its previous decision of
January 30, 1968 thereby ultimately holding, inter alia that the questioned transactions are equitable
mortgages, instead of absolute sales.
The Supreme Court held that the rulings in the appealed resolution as to the admissibility of the
evidence are legally erroneous such that the original decision of the Court of Appeals affirming that of
the trial court must stand.
Resolution reversed.
SYLLABUS
1. APPEALS; PARTY’S RIGHT TO APPEAL NOT AFFECTED BY THE PERFECTION OF
ANOTHER APPEAL FROM THE SAME DECISION; INSTANT CASE. — Petitioner Borromeo
contends that the Supreme Court has no jurisdiction to entertain the petition of the Aznars in G.R. No.
l-31740 because the latter failed to file said petition within fifteen days from December 2, 1969, the
date they were notified of the resolution under. His theory is that upon the filing of his own petition in
G.R. No. L-31342 on December 22, 1969, by way of appeal from the aforesaid resolution insofar as it
failed to grant him the awards he now asks for, the Court of Appeals was divested of jurisdiction to
entertain the motion for reconsideration which the Aznars filed on the same date in the Court of
Appeals praying for the reversal of the same resolution, copy of which had been received by them
only on December 20, 1969. According to Borromeo, what the Aznars should have done upon being
notified of the filing of the petition in G.R. No. L-31342 was to file already their petition for review with
the Supreme Court instead of filing or continuing with their motion for reconsideration in the Appellate
Court, and that since the latter court had lost its jurisdiction over the case by the reason of his appeal,
the Aznars’ motion for reconsideration did not suspend their period for appeal to the Supreme Court
which they made only on February 27, 1970. HELD: To sustain Borromeo’s theory would lead to the
absurd proposition that one party may be deprived of the right to appeal from the portion of a decision
against him just because the other party who had been notified of the decision ahead had already
perfected his appeal in so far as the said decision adversely affects him.
2. ID.; DISMISSAL FOR FAILURE TO MEET THE REQUIREMENTS OF THE LAW;
UNINTENTIONAL OMISSION OF SOME REQUIREMENTS NOT A GROUND, WHERE THE BRIEF
WAS TIMELY FILED. — The digest of arguments and the copy of the appealed resolution are not in
strict sense parts of the brief so as to justify the charge that appellants filed their brief in two parts. No
conceivable prejudice could have been caused to anyone concerned by their late filing nineteen days
after the reglementary period had expired, the brief itself, with the assignments of error and the
arguments supporting them, having been filed already within said period. Of course, it would be ideal
if all the requirements of the rules were complied with on time, but it is not imperative for the Court to
dismiss an appeal upon no more ground that such obviously unintentional and harmless technicality
as the omission of the requirements complained of.
3. COURTS; POWER; AMENDMENT OF ORDERS; LIMITATION. — It would be inimical to the
interest of justice and would not be conductive to the fair and just resolution of judicial controversies
to deprive a court of the power to reconsider possible errors committed by it in many of its actuations.
It is in fact one of the inherent powers of courts "to amend and control its process and orders so as to
make them conformable to law and justice," (Sec. 5(g), Rule 136) The only limitation to this power is
that it cannot be exercised anymore after the action or judgment concerned has already become final
and executory by the expiration of the corresponding reglementary period for the purpose, this as a
matter of public policy requiring that litigations should from the very nature of things have a definite
conclusion at a given time even at the risk of occasional errors or unintended injustice.
4. ID.; ID.; ID.; COURT OF APPEALS WITH POWER TO REVERSE ITS FINDINGS PROVIDED
THERE IS ADEQUATE BASIS THEREFOR. — True it is that the Court of Appeals is the final arbiter
of questions of fact and as such has the inherent power to reverse its findings. For it, however, to
alter its factual findings without any adequate basis borders on being whimsical and capricious. At the
very least, to do so is such a departure from the accepted and usual course of judicial proceedings as
to call for the exercise of the Supreme Court’s power of supervision.
5. EVIDENCE; WITNESS; CREDIBILITY OF TESTIMONY; EFFECT OF RELATIONSHIP
THEREON. — While it is true that relationship does not disqualify a witness, it calls for a close
scrutiny of his testimony. For obvious reasons, the testimony of close relatives by affinity or
consanguinity to corroborate a claim is not given much credence.
6. ID.; ID.; ID.; REFERENCE TO MEMORANDUM. — The provision of Sec. 10, Rule 132 applies only
when it is shown beforehand that there is need to refresh the memory of the witness. The
memorandum used to refresh his memory does not constitute evidence, and may not be admitted as
such, for the simple reason that the witness has to testify just the same on the basis of refreshed
memory. In other words, where the witness has testified independently of or after his testimony has
been refreshed by a memorandum of the events in dispute, such memorandum is not admissible as
corroborative evidence.
7. ID.; ID.; ID.; ID.; MEMORANDA NOT CONSIDERED PART OF RES GESTAE. — Where the
witness who took down notations or memoranda was not a party to the transaction in question, the
record not revealing any basis for holding that she actually took part therein, the notes she took
makes her at best only a witness and not a party. It cannot be said, therefore, that her taking down of
the notes, absent any showing that she was requested or directed by the parties to do so or that the
parties who are being sought to be bound by them, knew what she was doing, constitute part of the
transaction, the res gestae itself. If such taking of notes has to be given any legal significance at all,
the most that it can be is that it is one circumstance relevant to the main fact in dispute. It could at the
most be only circumstantial evidence.
8. CONTRACTS; PARTIES; DUTY. — It is the duty of every contracting party to learn and know the
contents of a contract before he signs and delivers it. He owes this duty to the other party to the
contract, because the latter may, and probably will pay his money and shape his action in reliance
upon the agreement. To permit a party, when sued on a written contract, to admit that he signed it but
to deny that it expresses the agreement he made, or to allow him to admit that he signed it but did not
read it, or know its stipulations, would absolutely destroyed the value of all contracts.
9. ID.; CONSIDERATION; WHEN MERE INADEQUACY NOT SUFFICIENT GROUND TO RESCIND
CONTRACT. — A difference in value is not always a decisive factor for determining whether the
contract is one of sale with right to repurchase or a mere loan with guaranty . Mere inadequacy is not
a sufficient ground for the rescission or resolution of a contract when both parties were in a position to
form an independent judgment concerning the transaction.
10. JUDGES; DUTY; ADMINISTRATION OF JUSTICE WITHOUT BEING SWAYED BY THE
ABILITY OF COUNSELS. —It is the ever existing responsibility of judges to guard themselves
against being awed by the professional proficiency and fame of the lawyers appearing before them
and to be doubly careful in studying and resolving the issues they raise. And in this respect, there is
no substitute for well grounded preparation, up-to-dateness in the development of the law and legal
principles and an adequate sense of logic and proportion inspired solely by probity of the highest
order. The assertion made in some quarters about alleged inherent inequality before the courts
resulting from the disparity of the abilities of respective counsels of the parties cannot have ground for
being, if only the judges remain conscious of the inevitable fact that they are supposed to possess the
levelling factor — their own knowledge pitted against those of the most learned advocates, to
augment the possible inadequacy of the opposing attorney, who in most cases are of the poor who
cannot afford the fees of better barristers.
DECISION
BARREDO, J.:
Cross-petitions for the review of the per curiam resolution of the Court of Appeals in CA-G.R. No.
30092-R. Juan T. Borromeo etc. v. Emmanuel B. Aznar, Et Al., dated November 19, 1969 which
reversed entirely its previous decision of January 30, 1968 thereby ultimately holding that the
transactions in question are equitable mortgages instead of absolute sales of real properties and
granting the heirs of the deceased Simeon Rallos a period of one year from the finality of the
resolution within which to effect a redemption of said properties, without prejudice to the right of the
opposing party to foreclose the declared mortgages if no such redemption takes place and the
amounts stated in the documents are not fully paid, and ordering furthermore the Aznars to pay said
heirs P10,000 for and as attorney’s fees and the costs. In G. R. No. L-31342, petitioner Juan T.
Borromeo, as administrator of the estate of the deceased Simeon Rallos, prays for the modification of
the per curiam resolution in order to include an award of moral and exemplary damages of P200,000
and P50,000, respectively, and to increase the award of attorney’s fees to not less than P75,000,
whereas in G. R. No. L-31740, the Aznars are asking that said resolution be set aside and that the
decision of January 30, 1968 be reinstated and affirmed.
There are three preliminary questions We have to resolve. First, Borromeo contends that this Court
has no jurisdiction to entertain the petition of the Aznars in G. R. No. L-31740 because the latter failed
to file said petition within fifteen days from December 20, 1969, the date they were notified of the
resolution now under review. Borromeo’s theory is that upon the filing of his own petition in G. R. No.
L-31342 on December 22, 1969, by way of appeal from the aforesaid resolution in so far as it failed to
grant him the awards referred to in said petition, the Court of Appeals was divested of jurisdiction to
entertain the motion for reconsideration which the Aznars filed on the same date, December 22,
1969, in the Court of Appeals praying for the reversal of the same resolution, copy of which had been
received by them only on December 20, 1969. According to Borromeo, what the Aznars should have
done upon being notified of the filing of the petition in G. R. No. L-31342 should have been to file
already their petition for review with this Court instead of filing or continuing with their motion for
reconsideration in the Appellate Court, and that since the latter court had lost its jurisdiction over the
case by reason of his (Borromeo’s appeal), citing in this respect the resolution of this Court of
September 3, 1965 in G. R. No. L-24762 (Manila Electric Co. v. Public Service Commission, et al),
the Aznars’ motion for reconsideration did not suspend their period for appeal to this Court which they
made only on February 27, 1970 (erroneously alleged as March 11, 1970 by Borromeo).
Obviously, Borromeo’s contention has absolutely no merit. To start with, when We issued Our
resolution of January 13, 1970, granting the Aznars an extension of fifteen (15) days from the time
they were to be notified of the resolution of the Court of Appeals of its action on their motion for
reconsideration then still pending therein, We already knew that the petition of Borromeo against the
same resolution of the Court of Appeals had already been filed with Us. In other words, in that
resolution, the Court already recognized the right of the Aznars to file their own separate appeal from
the resolution of the Court of Appeals after the reconsideration thereof was to be denied by the Court
of Appeals notwithstanding Borromeo’s appeal was already with Us. Besides, to sustain Borromeo’s
theory would lead to the absurd proposition that one party may be deprived of the right to appeal from
the portion of a decision against him just because the other party who had been notified of the
decision ahead had already perfected his appeal in so far as the said decision adversely affects him.
Indeed, We have already virtually ruled against such pose of Borromeo in Timoteo Simsim v. The
Hon. Judge Feliciano Belmonte etc., Et Al., 34 SCRA 536 and People v. Ursua, 60 Phil. 252. The
Meralco resolution invoked by Borromeo is not in point.
Borromeo secondly tries to make capital of the fact that while it is true that the brief of the Aznars was
filed on time, on August 31, 1970, the last day therefor, it did not contain a digest of the arguments
nor the text of the resolution sought to be reviewed, which are required by the rules (Sections 1 and 6
of Rule 56 read together with Section 16 of Rule 46) and that these requirements were complied with
only on September 19, 1970, for which reason, he prays that their appeal should be dismissed
pursuant to Section 1 (b) of Rule 50. We are not impressed. The digest of arguments and the copy of
the appealed resolution are not in strict sense parts of the brief so as to justify the charge that the
Aznars filed their brief in two parts. No conceivable prejudice could have been caused to anyone
concerned by their late filing nineteen days after the reglementary period had expired, the brief itself,
with the assignments of error and the arguments supporting them, having been filed already within
said period. Of course, it would be ideal if all the requirements of the rules were complied with on
time, but there is nothing in principle or in the precedents relied upon by Borromeo that makes it
imperative for Us to dismiss an appeal upon no more ground than such obviously unintentional and
harmless technicality as the omission of the requirements herein complained of.
The third preliminary issue raised by Borromeo is that the appeal of the Aznars in G. R. No. L-31342
involves purely questions of fact. It is argued that the reversal by the Court of Appeals of its original
conclusion, upholding the trial court, that the transactions in question were absolute sales, by holding
in its per curiam resolution that they were actually equitable mortgages, does not constitute an error
of law but a mere reappraisal or reweighing of the evidence which it has the power to do. Borromeo
insists that a ruling as to whether a transaction is a sale or a mortgage involves no more than
evaluation of the evidence and is consequently a factual matter beyond the Supreme Court’s
authority to review except under peculiar circumstances that do not obtain here.
To be sure, this is not the first instance that a reversal by the Court of Appeals of its own original
decision has been brought to Our attention. And indeed, where the reversal was the result exclusively
of a reevaluation or reweighing of the evidence, this Court has refrained from interfering. No doubt, it
would be inimical to the interest of justice and would not be conducive to the fair and just resolution of
judicial controversies to deprive a court of the power to reconsider possible errors committed by it in
any of its actuations. It is in fact one of the inherent powers of courts "to amend and control its
process and orders so as to make them conformable to law and justice." (Section 5 (g), Rule 135).
And the Court of Appeals is certainly included in the contemplation of such rule. The only limitation to
this power is that it cannot be exercised anymore after the action or judgment concerned has already
become final and executory by the expiration of the corresponding reglementary period for the
purpose, this as a matter of public policy requiring that litigations should from the very nature of things
have a definite conclusion at a given time even at the risk of occasional errors or unintended injustice.
We perceive however that the instant case does not fall under the foregoing principles. While the
main impugned resolution does relate ultimately to factual conclusions of the Court of Appeals, We
see that in reversing its previous findings of fact, which it arrived at after excluding on grounds of legal
incompetency the corresponding evidence presented by Borromeo, the Appellate Court first reversed
those rulings on the admissibility of said evidence and declared them competent, and then predicated
its new factual conclusions on these subsequently admitted evidence it had rejected in its original
decision. And so, it is safe to presume that had not the Appellate Court reversed its legal rulings on
the admissibility or competency of the evidence referred to, it would not have reversed its actual
conclusion as to the nature of the transactions in controversy. Accordingly, and on the theory that if
this Court should hold that the later rulings of the Court of Appeals on the admissibility of evidence
are erroneous in law, the inevitable result would be that the factual conclusions of said court in its
original decision, which were favorable to the Aznars, would be revived, it is now the position of the
Aznars that their attack against said later rulings constitute legal issues over which this Court has
jurisdiction. After carefully studying all the points respectively raised by the parties, We are convinced
that this contention is well taken and We shall now proceed to resolve the legal issues on
admissibility of evidence which are extensively, exhaustively and very well discussed by both counsel
in their briefs and other papers filed with the Court and for which they are both worthily deserving of
commendation for unusual diligence and expertise in the work of advocacy, thereby lightening
considerably the work of the Court. We refer equally to the late Senator Vicente J. Francisco, counsel
for Borromeo, and Atty. Ciriaco Lopez, Jr., who is appearing for the Aznars.
As already stated, the main controversy here centers on the true nature of the three documents,
Exhibits A, B and C, which on their faces are unquestionably deeds of absolute sale of the real
properties therein described executed by the deceased Simeon Rallos on various dates in favor of
Emmanuel Aznar, in Exhibits A and C, and his sister, Alma Aznar, in Exhibit B. In his complaint in the
court below, Juan T. Borromeo, as administrator of the estate of Simeon Rallos, alleged that these
documents were in fact equitable mortgages to secure loans granted to Rallos by Matias Aznar,
deceased father of Emmanuel and Alma, and prayed for their reformation. The trial court dismissed
the said complaint and on appeal, said dismissal was affirmed by the Court of Appeals in its original
decision of January 30, 1968 penned by Justice Ramon Nolasco and concurred in by Presiding
Justice Francisco B. Capistrano and Justice Antonio Cañizares. The pertinent portions of said
decision read thus:jgc:chanrobles.com.ph
"We have examined Exhibits A, B and C carefully, and we find them clear, unambiguous and
unequivocal. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. (Article 1370, Civil Code.) The
intention of the parties is to be deduced from the language employed by them, and the terms of the
contract, where unambiguous, are conclusive, in the absence of averment and proof of mistake, the
question being, not what intention existed in the minds of the parties, but what intention is expressed
by the language used. When a written contract is clear and unequivocal, its meaning must be
determined by its contents alone; and a meaning cannot be given it other than that expressed. (City
of Manila v. Rizal Park C., 53 Phil. 515; 17 C.J.S. 700.)
According to the testimony of Crispina Rallos Alcantara, who claimed to have been present when the
transactions took place, her deceased father merely borrowed money from the late Matias Aznar in
the sums of P6,000.00 and P35,000.00 and to secure the repayment thereof mortgaged to the latter
the properties described in Exhibits A, B and C. She testified that the transactions were disguised as
absolute sales and Rallos was assured by Matias Aznar that he could exercise the right to
repurchase the lots and would deliver to him the corresponding options in writing.
We find the testimony of Crispina Rallos Alcantara in this respect unreliable and insufficient to justify
the reformation of the instruments in question. While it is true that relationship does not disqualify a
witness, it calls for a close scrutiny of his testimony. For obvious reasons, the testimony of close
relatives by affinity or consanguinity to corroborate a claim is not given much credence. (People v.
Guzman, 70 Phil. 23.) As correctly observed by the trial court, her testimony cannot be considered as
absolutely unbiased or impartial, as she was naturally interested in an outcome of the case favorable
to the plaintiff. More than this, however, the record shows that Rallos was even cautioned by his
daughter Crispina and her husband before signing Exhibit A. The fact remains that Exhibits A, B and
C were signed by Rallos himself as a party thereto. His successors-in-interest cannot now be heard
to complain that the parties to said exhibits intended the same to be loans with mortgages contrary to
what are clearly expressed therein. The natural presumption is that one does not sign a document
without first informing himself of its contents, and that presumption acquires greater force where, as in
the case at bar, not only one but several documents, executed at different times, were signed by
Rallos. (Javier v. Javier, 7 Phil. 261.) It is the duty of every contracting party to learn and know the
contents of a contract before he signs and delivers it. He owes this duty to the other party to the
contract, because the latter may, and probably will pay his money and shape his action in reliance
upon the agreement. To permit a party when sued on a written contract, to admit that he signed it but
to deny that it expresses the agreement he made, or to allow him to admit that he signed it but did not
read it, or know its stipulations, would absolutely destroy the value of all contracts. (Tan Tun Sia v. Yu
Bino Sentua, 56 Phil. 711; Moran, idem, pp. 123-124.)
The appellant urges that Exhibits A-2, A-3, B-3 and C-5, which, according to Crispina Rallos
Alcantara, were her notations allegedly representing the deductions made by Matias Aznar for
advance interest, attorney’s fees and miscellaneous expenses, are corroborative of her testimony that
the transactions in controversy were really loans with mortgages. We, likewise, find the said exhibits
weak and unsatisfactory as evidence of the facts asserted. They are clearly self-serving, as they were
admittedly prepared by the declarant herself (2 Wharton’s Criminal Evidence, Sec. 690; 2 Jones on
Evidence, 2d., Ed., Sec. 895), who was a daughter of the deceased Rallos and who cannot,
therefore, be said to be disinterested witness. With respect to Exhibit J, the option to repurchase Lots
Nos. 462 and 7032, also relied upon by the appellant as allegedly corroborative of the testimony of
Crispina Rallos Alcantara that all the transactions in question were loans secured by mortgages, it is
to be noted that said exhibit has to do with the two lots mentioned therein and none other. Certainly, it
is no proof that Rallos was similarly given a written option to redeem any of the lots covered by
Exhibits B and C, which, according to Crispina Rallos Alcantara, was taken back by Matias Aznar but
never renewed. The evidence shows that the period fixed in Exhibit J expired without the lots involved
being redeemed.
To show, too, that Matias Aznar had agreed to the repurchase of the lots in question by Rallos, the
plaintiff presented at the trial of the case Exhibit L, which appears to be a copy of a draft of deed of
absolute sale. This exhibit deserves but the scantest consideration, it being undated, unsigned and
unsubscribed by any purported party thereto. Besides, even granting arguendo that the same was
prepared by a lawyer of the Aznars, as alleged by Crispina Rallos Alcantara, we fail to see its
materiality to the resolution of the main issue involved in this case of whether or not reformation is
proper or justified, as the draft appears to have been drawn in favor of Crispina Rallos Alcantara who
was not a party to the instruments sought to be reformed, and there is nothing in said exhibit to
indicate that the contested transactions were really loans secured by mortgages.
As to Exhibits Q, Q-1, Q-2, Q-3, R and R-1, which, according to the appellant, were erroneously
ignored by the court below, the same invariably refer to an alleged indebtedness of Rallos to Matias
Aznar and not to the defendants, Emmanuel and Alma Aznar, to whom the properties in question
appear to have been sold (Exhibits A, B and C). The said exhibits fail to show clearly and
satisfactorily that the transactions mentioned therein relate to the same transactions and the same
parcels of land involved in the case at bar.
The appellant further contends that the considerations paid for the lots in dispute were very
inadequate or unusually low which would justify reformation under the provisions of Articles 1602,
paragraph 1, and 1604, of the Civil Code. This contention is untenable.
The evidence shows that Lot No. 7032 was sold to the defendant Emmanuel for P6,000.00 (Exhibit
A), which was higher than its assessed value of P4,447.25 in 1954 when the transaction took place
(Exhibit A-1). The price paid for Lots Nos. 2713 and 7728 is P5,000.00 in lump sum (Exhibit B), while
the price paid for Lots Nos. 519-B, 519-C, 467 and 490 is P40,000.00 also in lump sum (Exhibit C).
The total consideration for said six lots is P45,000.00, which was more than one-half, or
approximately 60%, of their total assessed value of P74,647.00 at the time of transaction in 1954
(Exhibits B-1, B-2, C-1, C-2, C-3 and C-4). It is to be noted that at the time of the sale, there was a
mortgage encumbrance of P5,000.00 on Lots Nos. 2713 and 7728 in favor of the Go Chan & Sons
Realty Corporation, while Lots Nos. 519-B, 519-C, 467 and 490 had a mortgage encumbrance of
P20,000.00 in favor of the Philippine National Bank, which obligations were assumed by the
defendants-vendees (Exhibits 27, 28, 29, 30, 32, 33 and 34). In fact, when Exhibit C was executed,
the indebtedness to the bank was already due and demands for the payment thereof had been made
upon Rallos (Exhibits H and H-1).
On this question of the valuation of the subject lots, the plaintiff presented Hipolito S. Ricardo, at one
time Deputy City Assessor in Cebu City, who testified that the assessment of a real estate property
was only about 40% of its fair market value, but the same was not the basis for determining the fair
market value of a real estate property; that the factors considered by their office in appraising the fair
market value of a real estate property were the transactions of the parties and the prices appearing in
the deeds of sale of the adjacent or neighboring lots, but in the absence thereof, the capitalization
system was used, based upon the investment in the property, its income, plus 6% interest annually
after deductions for taxes paid, insurance premiums, repairs, losses and other miscellaneous
expenses; and that in the assessment of real properties their office had a schedule of values to be
followed, and a partial revision of the assessments was made yearly. According to him, however, their
schedule of values was not applied in the assessment of Lots Nos. 2713 and 7728, covered by tax
declarations, Exhibits B-1, and B-2, and subject matter of Exhibit B and of Lots Nos. 519-C, 519-B,
467 and 490, covered by tax declarations, Exhibits C-1, C-2, C-3 and C4, and subject matter of
Exhibit C. As to the assessment of Lot No. 7032, covered by tax declaration, Exhibit A-1, and subject
matter of Exhibit A, the said schedule was used. At any rate, taking the assessed values of the seven
lots involved in this case as a reasonable basis for determining their actual valuation at the time of the
transactions, and considering the encumbrances existing on six of the lots and their purchase by the
defendants, Emmanuel and Alma Aznar, at one time and in lump sums, this Court is not prepared to
conclude that under the attendant circumstances, the considerations paid for the lots in question were
unusually inadequate or shockingly low to warrant the application of the provisions of paragraph No. 1
of Article 1602 of the Civil Code on equitable mortgage. (Manalo v. Gueco, 42 Phil. 925; Cabigao v.
Lim, 50 Phil. 844.) .
The appellant points out that, according to the bank records, Exhibits T, T-1, U, U-1, V, V-1, W and
W-1, the appraised values of the lots mortgaged with the bank were considerably higher than the
prices paid for them. The fact remains, however, that the mortgage obligation of Rallos secured by
the same six lots was only P20,000.00, which was assumed by the defendants-vendees. Besides, no
bank appraiser or representative was presented by the plaintiff at the trial to testify as to how the
appraised values appearing in said exhibits were arrived at.
On the other hand, the testimony of Vicente Kyamko, also relied upon by the appellant to prove the
alleged fair market values of the subject lots, deserves but scant consideration. The said witness
admitted that he was not a licensed appraiser, and that he did not know what the assessed values of
the lots in question were in 1954, although, according to him, the assessed value of a real property
was the basis for computing or estimating its fair market value. However, even granting arguendo that
there were differences in value or some inadequacy of consideration here, nevertheless, the same
cannot be said to be controlling when viewed in the light of the entire evidence adduced in this case.
A difference in value is not always a decisive factor for determining whether the contract is one of
sale with right to repurchase or a mere loan with guaranty. (Ocuma v. Olandesca [CL] 47 O.G. 1902.)
Mere inadequacy is not a sufficient ground for the rescission or resolution of a contract when both
parties, as in the instant case, were in a position to form an independent judgment concerning the
transaction. (Askay v. Coselan, 46 Phil. 179.)
In its tenth assignment of error, the appellant assails the trial court’s finding that the defendant
vendees were in possession of the lots in question after the execution of the deeds of absolute sale,
Exhibits A, B, and C. It contends that the defendants never possessed the contested lots. We see no
merit in this contention.
The records show that after the execution of the documents in question, the defendants, Emmanuel
and Alma Aznar, transferred in their names the tax declarations covering the properties sold to them,
paid the taxes thereon and caused the issuance of new certificates of title accordingly (Exhibits 7, 8,
9, 10, 11, 12, 21, 22, 24, 25, 26, 35, 36, 37, 38, 39 and 40). They demanded for the payment to them
of the rentals due from the tenants of the lots, and began to collect the rentals from them after the
maturity of the promissory note of Rallos for P1,800.00, Exhibit 1, which, according to the defendant,
Emmanuel, represented the rentals for one year collected in advance by Rallos from the lessees.
Thereafter, defendants Emmanuel and Alma Aznar filed detainer suits against those occupants who
failed to pay their rents to them (Exhibits D to D-21, inclusive, 41, 41-A, 41-B, 41-C 41-D). Certainly,
those facts belie the appellant’s claim that the defendant vendees were never in possession of the
lots in dispute.
From the evidence adduced, we are satisfied that after the execution of the deeds of absolute sale,
Exhibits A, B and C, the defendants vendees took possession of the subject lots, and they were in
possession thereof and collected the rentals due until the plaintiff’s administrator was authorized by
the court a quo to collect the rents and deposit them in a bank, subject to the court’s disposition.
The appellant capitalizes, too, on the statement, Exhibit K, which allegedly shows that Matias Aznar
charged Rallos with the payment of the taxes due on the contested lots. According to Crispina Rallos
Alcantara, the said exhibit was prepared by an employee of Matias Aznar upon the latter’s orders,
when she went to see him concerning the repurchase of the lots. This, however, was denied by the
defendant, Emmanuel Aznar, who claimed that after the sale, neither Rallos nor his daughter Crispina
went to see any of the Aznars in their office for the redemption of the lots. The exhibit in question,
allegedly a statement of account of Rallos to Matias Aznar involving the disputed transactions is
neither dated nor signed, much less by the party sought to be charged. The alleged writer thereof was
not presented at the trial of the case, and we have only the biased testimony of Crispina as to its
authenticity or preparation. Even if it were true, however, that the writing was made, as alleged by
Crispina, we cannot consider the name as proof of what was said or transacted then. The mere
making of written memorandum immediately after the interview does not make the memorandum
affirmative intrinsic proof of the things said or transacted. (32 C.J.S. 948.) Knowledge on the part of
the person who made the memorandum, at the time it was made, that the statements or entries
therein were correct must be shown (32 C.J.S. 947), and this the plaintiff failed to do. On the other
hand, the record indubitably shows that after the execution of the questioned instruments, the taxes
on the lots subject matter thereof were paid by the defendants vendees. Consequently, we hold that
Exhibit K has no evidentiary value, and the lower court was correct in disregarding it." (Pp. 82-95,
Record of L-31740.)
However, in its per curiam resolution of November 19, 1969, wherein Presiding Justice Capistrano
who had by then been elevated to this Court was substituted by his successor Presiding Justice Julio
Villamor, this rather strong disposition taken by the appellate court was completely reversed by itself
as follows:jgc:chanrobles.com.ph
"While it is true that in our decision rendered in this case, we held that the notations or memoranda of
Crispina Rallos Alcantara marked as Exhibits A-2, A-3, B-3 and C-5 were self-serving and
unsatisfactory as evidence of the facts asserted (Decision, p. 24), the same, however, as now
correctly contended by the plaintiff-appellant in his motion for reconsideration, may be considered as
constituting part of the res gestae, and as such, are admissible in evidence to show the nature of the
contracts in question and the relation of the parties involved.
‘Statements, acts or conduct accompanying or so nearly connected with the main transaction as to
form a part of it, and which illustrate, elucidate, qualify, or characterize the act, are admissible as part
of the res gestae. Accordingly, the attendant circumstances and the statements then made by the
parties are admissible as part of the res gestae to show the execution of a contract, and, where
relevant, matters said and done which parts of the res gestae of the negotiation and execution of a
contract are admissible to show the existence and nature of the contract and the relation of the
parties. Matters attendant upon a sale or conveyance may also be admissible as part of the res
gestae. (32 CJS 30-32.)
‘Conversations occurring during the negotiation of a loan or other transaction, as well as the
instrument given or received, being part of the res gestae, are competent evidence to show the
nature of the transaction and the parties for whose benefit it was made, where the fact is material.’
(National Bank v. Kennedy, 17 Wall. [U.S.] 19, 21 L. Ed. 554, cited in 20 Am. Jr. 575.).
‘. . . The character of the transaction is precisely what the intention of the parties at the time made it.
It will therefore be discovered that the testimony of those who were present at the time the instrument
was made, and especially of those who participated in the transaction, becomes most important.’
(Cuyugan v. Santos, 34 Phil. 100, 114-115.)
Thus, while the testimony of Crispina Rallos Alcantara may not be free from bias, she being the
daughter of the deceased, Simeon Rallos, the same should not, however, be totally rejected on the
ground of bias alone (U.S. v. Mante, 27 Phil. 124; People v. Pagaduan, 37 Phil. 90), considering that
it appears to be clearly and sufficiently supported by her memoranda which, as already stated, are
admissible in evidence as part of the res gestae (Exhibits A-2, A-3, B-3 and C-5), and by the ledgers
of the Philippine National Bank (Exhibits X and Y). Besides, mere relationship of a witness to a party
does not discredit his testimony in court. (U.S. v. Mante, supra.)
In this connection, the appellant has pointed out in his motion under consideration that on page 34 of
this Court’s decision, there was an erroneous citation of C.J.S., i.e., Vol. 32 pp. 947-948 thereof. The
said citation, however, appears and may be found in the 1964 edition of the Corpus Juris Secundum,
Vol. 32, pages 947-948.
In the case at bar, there is another factor why the transactions in question should be considered as
equitable mortgages. This factor consists of the unusual inadequacy of the prices of the sale of the
properties involved. For purposes of comparison, the prices paid for the properties mentioned in
Exhibits A, B and C and the assessed values thereof are hereunder tabulated:chanrob1es virtual 1aw
library
Lot No. Purchase Price Assessment as per
Tax Declaration
7032 P6,000.00 (Exh. A) P4,447.25 (Exh. A-1)
2713) 4,679.00 (Exh. B-1)
7728) 5,000.00 (Exh. B) 9,308.00 (Exh. B-2)
519-C) 150.00 (Exh. C-1)
519-B) 31,300.00 (Exh. C-2)
467) 17,760.00 (Exh. C-3)
490) 40,000.00 (Exh. C) 11,440.00 (Exh. C-4)
———— ————
P51,000.00 P79,084.25
======== ========
From the foregoing tabulation, it can be seen that the total amount paid to Simeon Rallos for all the
properties involved is only P51,000.00 as against the total assessed values thereof which amounted
to P79,084.25, or a difference of P28,084.25. In short, the total sum paid as purchase price for the
subject lots represents only 64% of their total assessed valuation. To our mind, this constitutes a
strong indication that the transactions in question were really loans with mortgages and not absolute
sale.
Moreover, it appears that Lots Nos. 519-C, 519-B, 467 and 490 covered by the deed of absolute sale
(Exhibit C) were previously mortgaged with the Philippine National Bank, which obligation was
assumed by the supposed vendee in the transaction under consideration. As appraised by the
Philippine National Bank and as shown in its inspection and appraisal report, marked as Exhibits T, U
and V in this case, the market values, respectively, of said properties are as follows:chanrob1es
virtual 1aw library
TCT No. 1096 - Lot No. 490
Market value - land
572 sq. m. at P25/sq. m. P14,300.00
TCT No. 10915 - Lot No. 467
Market value - land
888 sq. m. at P25/sq. m. P22,200.00
TCT No. 10832 - Lots Nos.
519-B and 519-C
Market value - land
14,242 sq. m. at P10/sq. m. P142,420.00
—————
Total P178,920.00
There is, therefore, a difference of P138,920.00 between the purchase price of the same properties
stated at P40,000.00 in the deed of absolute sale (Exhibit C) and the total market value as appraised
by the Philippine National Bank amounting to P178,920.00.
Under Republic Act 357, otherwise known as the General Banking Act, a bank may grant loans
against a real estate security and improvements thereon on the basis of the appraised value of the
real estate made by the bank itself. Section 78 of said Act provides that ‘loans against real estate
security shall not exceed 70% of the appraised value of the improvement.’ Inasmuch as the appraisal
of the mortgage values of the lots in question were made by competent officers of the Philippine
National Bank in the performance of their assigned duties and who are presumed to have regularly
performed such duties, the same are not only admissible in evidence but are prima facie evidence of
the facts therein stated.
‘Entries in official records made in the performance of his duty by a public officer of the Philippines, or
by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the
facts therein stated.’ (Section 38, Rule 130, Rules of Court.).
If a prima facie case exists, it sustains the quantum of evidence on the point which it covers, shifting
the burden of proof to the other party. It relieves a party of the burden of proving the fact presumed.
The same result is effected by any substitute for evidence, such as statutory regulations prescribing
prima facie evidence of specified facts. (1 Jones on Evidence 2 Ed., Sec. 369.)
It results, therefore, as previously stated, that the appraisal of the lots in question made by the
officials of the Philippine National Bank in the performance of a duty specially enjoined bylaw is not
only admissible in evidence, but is a prima facie evidence of the specified facts stated therein. The
defendants, however, presented no evidence to rebut the same. We have here, therefore, a case
where four of the seven lots involved appear to have been sold for the total sum of P40,000.00
(Exhibit C), which is equivalent to only 22% of their market value as appraised by the Philippine
National Bank. Certainly, this fact clearly bolsters the plaintiff’s claim that the transactions in
controversy were really loans secured by mortgages and not absolute sales, as there is gross
unusual inadequacy of the prices paid for the same. The fact that the properties were mortgaged and
a notice of lis pendens was annotated on the corresponding certificate of title at the time of the sale
does not lessen nor affect the values of the lands.
‘It has been held that in determining the amount of compensation, or the market value of the property
taken, no account should be given . . . to the fact that the property is mortgaged.’ (City of Detroit v.
Fidelity Realty Co., 182 N.W. 140, 213 Mich., cited in 29 C.J.S. 972-973.)
As regards the lis pendens annotation on the certificates of title of the subject lots, the facts show that
the same arose from the action for support filed by Lourdes Rallos against her husband, Simeon
Rallos. Such annotation appears to be improper as an action for support is one in personam and a
notice of lis pendens is available only in real actions, that is, actions affecting the title to or the right of
possession of real property and not in any other action. (Saavedra v. Martinez, 58 Phil. 767;
Garchitorena v. Register of Deeds, G. R. No. L-9731, May 11, 1957; Somes v. Government of the
Phil., 62 Phil. 432; and Geronimo v. Nava, G. R. No. L-12111, January 31, 1969.)
On the question of possession of the properties in litigation, however, which was likewise raised by
the appellant in his motion under consideration, we are not disposed to disturb our findings on this
point. At least, the records show that after the execution of the documents in question (Exhibits A, B
and C), the defendants exercised over the litigated properties acts constitutive of dominion and
possession for sometime prior to the appointment of the plaintiff-appellant as the administrator thereof
in 1957. They transferred in their names the tax declarations of the properties described therein,
caused the issuance of new certificates of title thereto accordingly in July, August and November,
1954, and paid the corresponding taxes thereon (Exhibits 7 to 12, 21 to 26, and 36 to 40). Prior to the
institution of the present action, the defendants, too, appeared to have demanded for the payment to
them of the rentals due from the lands in dispute, and in 1956, they filed detainer suits against the
occupants thereof who failed or refused to pay the rents to them (Exhibits D to D-21, inclusive, and
41, 41-A to 41-D, inclusive).
It appears, too, that after the death of Simeon Rallos in 1956, the plaintiff who was appointed special
administrator of the decedent’s estate was authorized by the court a quo to collect the rentals due
from the subject premises in an order issued on August 8, 1957 and had since then been in
possession of the lots in question up to the present (printed Record on Appeal, pp. 34-38). Thus,
paragraph 2 of Article 1602 of the Civil Code is not applicable in the present case." (Pp. 117-124, Id.).
Thus, as may be seen, in overturning its own previous conclusion that the deeds in question are
really absolute sales by subsequently finding that they are equitable mortgages, the Court of Appeals
did not do it by just committing a turnabout in its appreciation or evaluation of the evidence. Rather, it
reversed first its rulings on the admissibility of the relevant evidence by admitting those it had rejected
in its original decision and then premised the reversal of its conclusions therein on these newly
admitted evidence. Indeed, it appears to Us from the above ratiocination of the Court of Appeals in its
per curiam resolution considered together with the arguments adduced by it relative to the same
matters in its original decision, that had that court found no reason to admit and take into account said
evidence, it would not have reversed its previous finding that the subject deeds are absolute sales. In
the final analysis, therefore, the specific question of law raised by the Aznars in this appeal is whether
or not the Court of Appeals committed a legal error in admitting the evidence it had originally held to
be incompetent. To reiterate, it is evidently their position that in the affirmative, no alternative is left to
Us except to grant the prayer of their petition.
The thrust of the per curiam resolution is that the plaintiff Borromeo was able to prove that the
defendants Aznars "retained part of the purchase price" stipulated in the deeds in question and that
there was unusual inadequacy of said purchase price thereby justifying the use in this case of the
presumption created by Article 1602 of the Civil Code whenever said circumstances are shown
(Paragraphs 1 and 4 of said article). According to the Court of Appeals, these circumstances were
proven through, among other evidence, the testimony of plaintiff Crispina Rallos Alcantara, the
daughter of the deceased Simeon Rallos, who declared that she was present on all occasions when
the three transactions in dispute took place between her father and Matias Aznar and that while thus
listening to their conversations she took down notes of the various amounts mentioned by them and
the respective purposes thereof such as interest, attorney’s fees, other obligations to be paid out of
the money being borrowed by her father etc., which notes were identified at the trial as Exhibits A-2,
A-3, B-3 and C-5. More specifically, the Court of Appeals held that because the testimony of the
witness Alcantara was corroborated by these notes, it should be believed, from which it can be
gathered that it was only because said notes were considered by it as inadmissible that in its original
decision, said testimony and notes were deemed to be without evidentiary value for being self-
serving. "While it is true," says the appealed resolution, "that in our decision rendered in this case, we
held that the notations or memoranda of Crispina Rallos Alcantara marked as Exhibits A-2, A-3, B-3
and C-5 were self-serving and unsatisfactory as evidence of the facts asserted (Decision, p. 24), the
same, however, as now correctly contended by plaintiff-appellant in his motion for reconsideration,
may be considered as constituting part of the res gestae, and as such, are admissible in evidence to
show the nature of the contracts in question and the relation of the parties involved." (p. 18, Annex C
of the petition.) It is this ruling upholding the admissibility of said notes and memoranda as parts of
the res gestae that the Aznars contend to be a legal error committed by the Court of Appeals.
We cannot see how the disputed notes and memoranda can be considered in any sense as part of
the res gestae as this matter is known in the law of evidence. It must be borne in mind, in this
connection, that Crispina was not a party to the transaction in question. Only Simeon Rallos, on the
one hand, and Matias Aznar, if she is to be believed, or Emmanuel and Alma Aznar, as the
documents show, on the other, were the parties thereto. The record does not reveal why Crispina
was with her father at the time, hence, there can be no basis for holding that she actually took part in
the transaction. That she allegedly took notes thereof while there present made her at best only a
witness not a party. It cannot be said, therefore, that her taking down of her alleged notes, absent any
showing that she was requested or directed by the parties to do so or that the parties, more
particularly the Aznars, who are being sought to be bound by them, knew what she was doing,
constitute part of the transaction, the res gestae itself. If such alleged taking of notes by Crispina has
to be given any legal significance at all, the most that it can be is that it is one circumstance relevant
to the main fact in dispute. It other words it could be at the most be only circumstantial evidence.
The trouble however is that the admission of said notes and memoranda suffers from a fatal defect.
No witness other than Crispina has testified as to the veracity of her testimony relative to her alleged
notes and memoranda. Not even her husband who, according to her, was present on one of the
occasions in issue, was called to testify. It cannot be denied that Crispina is interested in the outcome
of this case. In the words of the Court of Appeals itself in its original decision, "her testimony cannot
be considered as absolutely unbiased or impartial", hence "unreliable and insufficient to justify the
reformation of the instruments in question." Such being the case, how can the notes and memoranda
in dispute and any weight to her testimony, when she herself created them? Surely, they cannot have
anymore credibility than her own declarations given under oath in open court.
The extensive and repeated arguments of the parties relative to the issue of whether or not self-
serving statements may be admitted in evidence as parts of the res gestae are very interesting and
illuminating, but We feel they are rather off tangent. The notes supposedly prepared by witness
Alcantara during the transaction between her father and the Aznars do not partake at all of the nature
of hearsay evidence. If anything they constitute memoranda contemplated in Section 10 of Rule 132
which provides:jgc:chanrobles.com.ph
"SEC. 10. When witness may refer to memorandum. — A witness may be allowed to refresh his
memory respecting a fact, by anything written by himself or under his direction at the time when the
fact occurred, or immediately thereafter, or at any other time when the fact was fresh in his memory
and he knew that the same was correctly stated in the writing; but in such case the writing must be
produced and may be inspected by the adverse party, who may, if he chooses, cross-examine the
witness upon it, and may read it in evidence. So, also, a witness may testify from such a writing,
though he retain no recollection of the particular facts, if he is able to swear that the writing correctly
stated the transaction when made; but such evidence must be received with caution."cralaw
virtua1aw library
As may be observed, this provision applies only when it is shown beforehand that there is need to
refresh the memory of the witness, which is not the case here. Nowhere in the record is there any
indication that Alcantara needed during her testimony the aid of any memorandum in respect to the
matters contained in the notes in dispute. Besides, under the above provision, the memorandum used
to refresh the memory of the witness does not constitute evidence, and may not be admitted as such,
for the simple reason that the witness has just the same to testify on the basis of refreshed memory.
In other words, where the witness has testified independently of or after his testimony has been
refreshed by a memorandum of the events in dispute, such memorandum is not admissible as
corroborative evidence. It is self-evident that a witness may not be corroborated by any written
statement prepared wholly by him. He cannot be more credible just because he supports his open-
court declaration with written statements of the same facts even if he did prepare them during the
occasion in dispute, unless the proper predicate of his failing memory is priorly laid down. What is
more, even where this requirement has been satisfied, the express injunction of the rule itself is that
such evidence must be received with caution, if only because it is not very difficult to conceive and
fabricate evidence of this nature. This is doubly true when the witness stands to gain materially or
otherwise from the admission of such evidence, which is exactly the case of Crispina Alcantara.
The other pieces of evidence rejected by the trial court as well as the Court of Appeals in its original
decision but which it subsequently admitted upon motion for reconsideration of Borromeo, thereby
causing the appellate court to reverse its own affirmatory conclusion as to the nature of the
transactions in dispute as absolute sales, are the following:chanrob1es virtual 1aw library
1. Exhibit J, the document giving Simeon Rallos the option to "repurchase" the lots sold under Exhibit
A, which however expired without Rallos exercising the same.
2. Exhibits X and Y, alleged ledgers of the Philippine National Bank apparently showing the items in
the current account of Southwestern Colleges, Inc. purportedly corresponding to the checks allegedly
issued by Matias Aznar to Simeon Rallos in the course of the controversial transactions herein
invoked and which, it is contended, proves that the amounts actually received by Rallos were less
than the stipulated prices, because corresponding interests for the alleged loan had already been
deducted.
3. Exhibit K, supposedly a statement of the account of Rallos with Matias Aznar alleged by Crispina
Alcantara to have been prepared by an employee of Aznar who, however, was not called to testify.
4. Exhibits T, U and V, purported inspection and appraisal reports allegedly submitted by
investigators of the Philippine National Bank to whom the property described in Exhibit C covering
four lots, Nos. 467, 490, 519-B and 519-C, had been mortgaged indicating therein the market value
thereof as appraised by said investigators and on the basis of which Borromeo now maintains that
there was inadequacy of the purchase price in said deed of sale Exhibit C for the purposes of the
presumption in Article 1602 of the Civil Code that the disputed transactions are equitable mortgages.
As regards Exhibit J, the contention of the Aznars is that in its per curiam resolution, the Court of
Appeals reversed itself as to the evidentiary value of this exhibit without giving any reason at all. What
is worse, whereas in its original decision, the Appellate Court pointedly held that since Exhibit J was
an option to repurchase that had expired without being exercised, it could not alter the true nature of
Exhibit A, the deed of absolute sale of the properties to which said option refers, in its resolution, this
exhibit was used as basis for the further inference that there were also similar options relative to the
other two sales in question, Exhibits B and C, merely because Crispina Alcantara testified that the
latter options actually existed but were withdrawn by Matias Aznar, hence the same could not be
produced.
Again, We find the position of the Aznars to be well taken. True it is that the Court of Appeals is the
final arbiter of questions of fact and as such has the inherent power to reverse its findings. For it,
however, to alter its factual findings without any adequate basis borders on being whimsical and
capricious. At the very least, to do so is such a departure from the accepted and usual course of
judicial proceedings as to call for the exercise of the Supreme Court’s power of supervision. (Section
4 (b), Rule 45.) In this case of Exhibit J here, nowhere in the appealed resolution is there any
explanation for the Court’s turnabout. The casual reference in the said resolution to Exhibit J as being
corroborative of the testimony of Crispina Alcantara together with her notes, Exhibits A-2, A-3, B-3
and C-5, is certainly an unwarranted conclusion, considering specially that We have already ruled
above that there was no legal basis for the Appellate Court’s reversal of its original position as to said
notes themselves. In this connection, it should be borne in mind that under the resolution, the same
notes constitute the main support of Crispina’s testimony, hence the corroborative force of Exhibit J
must necessarily dissipate without them. Indeed, under the circumstances, with the notes of Crispina
being inadmissible, and absent any other pertinent document to back up her words, the inference
drawn by the Court of Appeals regarding options to repurchase the properties covered by Exhibits B
and C appear hollow and baseless. The appealed resolution also reversed the Appellate Court’s
original pose anent the admissibility of Exhibits X and Y by attributing to it corroborative evidentiary
value of the testimony of Crispina, although it did not even mention said exhibits in its earlier decision.
As in the case of exhibits previously discussed, We are of the considered opinion that it was legal
error for the Court of Appeals to have thus ruled in favor of the admission of these exhibits, X and Y
merely be implication. It is true that their contents were discussed in the resolution, but no reason is
given therein why they have suddenly become admissible.
These exhibits purport to be ledgers of the Philippine National Bank corresponding to the current
account of the Southwestern Colleges owned by the Aznars. Now, it is undisputed that these exhibits
were offered only in rebuttal and that no witness testified on them, not even for purposes of
identification. How the Appellate Court came to take them into account is surprising, considering that
the appealed resolution does not contain the slightest discussion relative to these exhibits. Obviously,
such a procedure cannot deserve Our sanction. We reject it as unjudicial.chanrobles law library
The same observation may be made with respect to Exhibits T, U and V. No one testified as to their
controversial contents. Nobody even identified them. They were just marked and shoved in as part of
the documentary evidence of Borromeo in rebuttal. In an effort to give them a semblance of
admissibility, counsel now contends that they are public documents appearing to have been prepared
by employees of the Philippine National Bank. But although this bank is a government bank, it is not
wholly owned by the government, there being private persons owning shares thereof. This is a matter
of judicial notice. Officials and employees of the Philippine National Bank are not, therefore, public
officers within the contemplation of Section 38 of Rule 130. Moreover, assuming otherwise or that
these exhibits could have any standing as public or official records, under Section 35 of Rule 132,
they do not prove themselves, as certain requisites must be complied with before they can be
admitted, none of which appears to have been established in connection with the exhibits in question.
Worse, it is clear in the record that these exhibits relate to only one of the three transactions herein
involved. Accordingly, We do not see any justification at all for their admission as evidence to prove
the true nature of the said transactions.
Very little needs be said of Exhibit K. In its original decision, the Appellate Court rejected this exhibit
holding: "The exhibit in question, allegedly a statement of account of Rallos to Matias Aznar involving
the disputed transaction is neither dated nor signed, much less by the party sought to be charged.
The alleged writer thereof was not presented at the trial of the case, and we have only the biased
testimony of Crispina as to its authenticity or preparation. Even if it were true, however, that the
writing was made, as alleged by Crispina, we cannot consider the same as proof of what was said or
transacted then. The mere making of written memorandum immediately after the interview does not
make the memorandum affirmative intrinsic proof of the things said or transacted. (32 C.J.S. 948.)
Knowledge on the part of the person who made the memorandum, at the time it was made, that the
statements or entries therein were correct must be shown (32 C.J.S. 947), and this the plaintiff failed
to do. On the other hand, the record indubitably shows that after the execution of the questioned
instruments, the taxes on the lots subject matter thereof were paid by the defendants vendees.
Consequently, we hold that Exhibit K has no evidentiary value, and the lower court was correct in
disregarding it." (Pages 94-95, Record of L-31740.) On the other hand, in the impugned resolution,
the only mention made of Exhibit K is but casual thus: "Crispina Rallos Alcantara went to Matias
Aznar to know the total indebtedness of her father, which, according to Aznar had accumulated to
P55,428.00 (Exhibit K)."cralaw virtua1aw library
We are not prepared to give Our assent to such a mode of treating a factual issue. If anything, the
subsequent treatment thus given to the document in question reflects lack of serious consideration of
the material points in dispute. That is not the way to decide judicial controversies. While courts do not
have to so rationalize their decisions as to meet all the arguments of counsel to the satisfaction of the
latter, it is imperative for the credibility of the judiciary and the maintenance of the people’s faith
therein that pivotal contentions be not treated in cavalier fashion that leaves the motive or grounds for
the court’s ruling to pure speculation and imagination. The attempt of counsel to classify this exhibit
as some kind of admission by Matias Aznar is without merit, if only because it was not to Crispina, the
witness, to whom the alleged admission was made and it is not explained why the supposed
employee of Aznar, a certain Baltazar, who imputedly prepared it was not called to testify and be
cross-examined.
In the final analysis, therefore, it is evident that the Court of Appeals has sought to support its
reversing per curiam resolution with props that are legally untenable. True it is that the reversal
involves factual findings, but as already explained earlier, a careful review of the appealed resolution
reveals unmistakably that the reversal was induced by the reconsideration by the Court of its previous
rulings on the admissibility of the relevant evidence, such that its original conclusions of fact would
not have been altered had the Court not been convinced by the motion for reconsideration of
Borromeo that the exhibits it had rejected or refused to consider are admissible under the law. In
these premises, and it being Our considered view that the rulings in the appealed resolution as to the
admissibility of the exhibits concerned are legally erroneous, the irresistible conclusion is that the
original decision of the Court of Appeals affirming that of the trial court must stand. Indeed, We have
gone over both decisions and We are satisfied that they were well studied and are in accord with law
and justice.
We are not overlooking the point raised by counsel that some of the exhibits in question (Exhibits X
and Y and T, U and V) were not specifically objected to on the grounds We have discussed above.
The truth is that counsel’s proposition is not entirely accurate. These exhibits are supposed to be
records of the Philippine National Bank, but nobody testified to even identify them as genuine. And
they were introduced only in rebuttal. True it is that the technical objections mentioned by Aznar’s
counsel when they were offered were general — for being immaterial, irrelevant and impertinent, but
the explanation accompanying these general grounds included the point that defendants were being
deprived of the right to cross-examine the ones who prepared the exhibits. In fact, the objecting
counsel is quoted to have expressly argued that "It appears that these exhibits are hearsay."
(referring to Exhibits T, U and V.) (Page 241, Brief for Respondents.) Furthermore, inasmuch as the
Court of Appeals failed to give any reason for overturning its previous conclusions, without explaining
why it considered these evidence admissible, after ruling against them in the original decision, We
deem it superfluous to rule squarely on counsel’s contention.chanrobles.com : virtual law library
That somehow the Court of Appeals has been overly swayed by the masterly presentation of
Borromeo’s case by his notably brilliant counsel is, of course, understandable in the course of the
administration of human justice but it is the ever existing responsibility of judges to guard themselves
against being awed by the professional proficiency and fame of the lawyers appearing before them
and to be doubly careful in studying and resolving the issues they raise. And in this respect, there is
no substitute for well grounded preparation, up-to-dateness in the development of the law and legal
principles and an adequate sense of logic and proportion inspired solely by probity of the highest
order. The assertion made in some quarters about alleged inherent inequality before the courts
resulting from the disparity of the abilities of respective counsels of the parties cannot have real
ground for being, if only the judges remain conscious of the inevitable fact that they are supposed to
possess the levelling factor — their own knowledge pitted against those of the most learned
advocates, to augment the possible inadequacy of the opposing attorney, who in most cases are of
the poor who cannot afford the fees of better barristers.
IN VIEW OF ALL THE FOREGOING, the per curiam resolution of the Court of Appeals appealed in
G.R. No. L-31740 is hereby reversed and the original decision of that court dated January 30, 1968 in
CA-G.R. No. 30092-R is affirmed. In consequence, obviously, the prayer of the petition in G. R. No. L-
31342 being to augment the reliefs granted by the appealed resolution to Borromeo cannot be
granted, hence said petition is hereby ordered dismissed. Costs against Borromeo, as administrator
of the estate of Simeon Rallos.
Antonio, Concepcion, Jr. and Martin, JJ., concur.
Aquino, J., concurs in the result.
Fernando, J., is on leave.
Martin, J., was designated to sit in the Second Division.
Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. 92103 November 8, 1990

VIOLETA T. TEOLOGO, petitioner,

vs.

THE CIVIL SERVICE COMMISSION, DR. PRUDENCIO J. ORTIZ, DR. JOSE M. TUPAZ, JR., and
MRS. RUBY G. GELVEZON, respondents.

Tranquilino R. Gale for petitioner.

Rene S. Sarabia for Ruby G. Gelvezon.

Thelma S. Panganiban-Gamindo, Rogelio C. Limare and Florencio P. Gabriel, Jr. for CSC.

CRUZ, J.:

The petitioner questions the appointment of private respondent Ruby G. Gelvezon as Chief Nurse I of
the Representative Pedro Trono Memorial Hospital in Guimbal, Iloilo, as approved by the Civil
Service Commission in its Resolution No. 89-321 dated May 5,1989. She claims she has a
preferential right to be appointed to the said position, which she had held in an acting capacity for
more than a year. She stresses that she is next-in-rank and not disqualified; Gelvezon, on the other
hand, is not eligible.

At the time of the challenged appointment, Gelvezon was no longer in the service, having retired as
Senior Nurse of the said hospital on October 26,1986, subsequently collecting the gratuity, terminal
leave and other benefits due her. She was therefore being reinstated under CSC Memorandum-
Circular No. 5, s-1983, which allows the reinstatement of a retiree only under certain conditions. The
required request of the Regional Health Office No. 6 for authority to reinstate her was denied by Civil
Service Regional Office No. 6 (CSRO No. 6) on the ground that the vacancy could be filled by
promotion of qualified personnel, "attention being invited to the attached copy of the letter protest
dated September 15,1988 of Ms. Violeta Teologo," one of two other aspirants for the same position.
This denial was appealed to the Civil Service Commission by Dr. Prudencio J. Ortiz, Regional Health
Director, who justified the appointment of Gelvezon on grounds of the "exigency of the service" and
her superior qualifications compared to those of the other applicants.

In the assailed resolution, the CSC set aside the denial of CSRO No. 6 and directed it "to take
appropriate action on the appointment of Mrs. Ruby G. Gelvezon, subject to Civil Service Laws and
Rules." It declared inter alia that "in the case of Mrs. Gelvezon, who is neither a retiree nor overage
(57 or over), the head is not required to secure prior authority."

The petitioner filed a motion for reconsideration insisting that the appointment of Gelvezon was
violative of law and the pertinent administrative regulations, particularly CSC Memorandum Circular
No. 5, s-1982. CSRO No. 6 also reminded the CSC that "grant of authority is a condition precedent
before Mrs. Gelvezon can be reinstated in the service, considering that she retired therefrom as may
be duly supported" by her application for retirement dated May 23, 1988 and its approval effective
October 26, 1988.

These representations were denied by the CSC in its Resolution No. 90-307, dated January 11, 1990,
the dispositive portion of which read:

WHEREFORE, the foregoing premises considered, the Commission

resolved to deny, as it hereby denies, the instant motion for
reconsideration. The earlier decision of this Commission as embodied in
CSC Resolution No. 89-321 dated May 5, 1989 is therefore affirmed.
However, Mrs. Ruby G. Gelvezon, the Chief of Hospital II of RPTMH and
the Regional Health Director of Region VI, Iloilo City are hereby
admonished to be more prudent and circumspect in making
representations, otherwise, a repetition of a similar act in the future will be
dealt with administratively.

The petitioner then came to this Court, claiming that the respondent CSC had committed grave abuse
of discretion in sustaining the reinstatement of private respondent Gelvezon.

Required to comment, the Solicitor General begins with an assertion of his right and duty "to present
to the Court the position that will legally uphold the best interest of the Government although it may
run counter to a client's position" and his "specific mandate to act and represent the Republic and/or
the people before any court, tribunal, body or commission in any matter, action or proceeding which,
in his opinion, affects the welfare of the people as the ends of justice may require." He then declares
that he cannot agree with the respondent CSC and proceeds to explain why he thinks it is in error.

In the recent case of Orbos v. Civil Service Commission 1 we sustained the authority invoked here by
the Solicitor General. To be fair, however, we have made it clear that whenever he disagrees with the
office he is supposed to represent, as in the case at bar, we shall allow such office to file its own
comment in support of its position. Such comment has been submitted by public respondent CSC.

It is the contention of the Solicitor General that the abovementioned resolutions of the CSC should be
reversed as contrary to law and regulations. His view is that the CSC cannot direct the appointment of
Gelvezon as this would be an encroachment on the prerogative of another department, besides the
fact that there is no justification for her appointment in view of her ineligibility and the availability of
other candidates. He notes especially her disqualification for the office for having misrepresented that
she had merely resigned (and so needed no special authority to return) when the truth was that she
had retired.

It is true, as he maintains, that the CSC cannot usurp the appointing power from the appropriate
authority and substitute its choice with another on the ground that the latter is better qualified. The
discretion to determine this matter belongs to the appointing authority and not respondent CSC. The
only function of the CSC in this regard is to ascertain whether the appointee possesses the
prescribed qualifications and, if so, to attest to such fact. The only ground upon which the
appointment may be disallowed is that the appointee is not qualified, not that he is in its opinion less
qualified than others. The presumption is that the appointing authority is the best judge of this matter.
As we said in Luego v. Civil Service Commission: 2

Appointment is an essentially discretionary power and must be performed by the officer

in which it is vested according to his best lights, the only condition being that the
appointee should possess the qualifications required by law. If he does, then the
appointment cannot be faulted on the ground that there are others better qualified who
should have been preferred. This is a political question involving considerations of
wisdom which only the appointing authority can decide.

The CSC denies that it has usurped the appointing power of another department and stresses that all
it did was direct CSRO No. 6 to act on the appointment made by the Health authorities. It was not
making the appointment itself or ordering it to be made but merely sustaining it under the applicable
civil service rules and regulations. Finding that Gelvezon possessed the prescribed qualifications and
satisfied the requirements of CSC Memorandum-Circular No. 5, s-1983, it had merely approved her
reinstatement as proposed by the Regional Health Director.

It is not clear from the records who has appointed Gelvezon as Chief Nurse I. Dr. Jose M. Tupaz, Jr.,
Director of the Hospital, merely recommended her reinstatement to Dr. Prudencio M. Ortiz as
Regional Health Director, who in turn requested from CSRO No. 6 authority to reinstate her. The
reinstatement was presumably to be done by him. Under the law, it is the President of the Philippines
or his alter ego, the Secretary of Health, who can make appointments of key personnel in the
Department of Health. Yet, in the case at bar, Dr. Ortiz was asking for authority to reinstate Gelvezon
as if he himself had the power to do this.

It seems to us that Dr. Ortiz's request should at the very least have been coursed through or cleared
by the Secretary of Health before being submitted to CSRO No. 6 with his approval. The
reinstatement of Gelvezon would require a new appointment and it has not been shown that the
Regional Health Director has the power to make such appointment. The presumption of regularity of
official functions is not applicable because the power in question clearly belongs not to Dr. Ortiz but
his superiors.

But even assuming that the Regional Health Director was duly empowered to make the appointment,
there were still special conditions that had to be fulfilled under Memorandum-Circular No. 5, s-1983,
which, significantly, was promulgated by the Civil Service Commission itself. It must be remembered
that we deal here not with the appointment of a newcomer to the public service. Gelvezon is a retiree.
Additional requirements are prescribed for her appointment because it involves the reinstatement of a
person who, after having left the government, has a change of heart and wishes to return.

These requirements are embodied in CSC Memorandum-Circular No. 5, s-1983, reading in full as
follows:

MEMORANDUM CIRCULAR

TO: ALL HEADS OF MINISTRIES, BUREAUS, AND AGENCIES

OF THE NATIONAL AND LOCAL GOVERNMENTS, INCLUDING
GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS.

SUBJECT: Guidelines on Appointment of Persons who have

Reached the age of 57 Years. Reinstatement of persons who have
been Previously Retired from the Service, and Retention in the
 Service of Persons who have Reached the Compulsory Retirement
Age of 65 Years

Pursuant to Presidential Decree No. 830 dated November 27, 1975 as implemented by Letter of
implementation No. 47 dated August 18, 1976, the Civil Service Commission is empowered to
reinstate in the service persons who have been previously retired from the service, and to extend the
services of persons who have reached the compulsory retirement age of 65 years, except
Presidential appointees.

To insure effective and facilitate action on requests of such nature, the following guidelines are
prescribed:

1. All requests shall be made by the appointing authority concerned and directly
addressed to the respective Civil Service Regional Office. CSC Regional Offices have
been given authority to act on such requests.

2. Requests for authority for such appointment, reinstatement or retention shall meet the
following conditions as certified by the appointing authority.

a. the exigencies of the service so require;

b. the officer or employee concerned possesses special qualification not

possessed by other officers or employees in the agency where he is to be
appointed or retained; and

c. the vacancy cannot be filled by promotion of qualified officers or

employees in the agency concerned, or by transfer of qualified officers or
employees from other government agencies, or there are no eligibles in
the appropriate register of the Commission available for certification to the
vacancy.

3. No person shall be reinstated if he has been separated from the service through
delinquency or misconduct on his part or if he has been separated under LOI Nos. 11,
14, 14-A, and 14-B unless he has been granted executive clemency by the President.

4. Each request must be accompanied by a medical certificate issued by a government

physician certified that the person is still physically and mentally healthy to be appointed
in the service.
 5. Officers or employees who have been recommended for appointment, reinstatement,
or retention in the service shall not be allowed to assumed or continue in office pending
receipt of authority from the Civil Service Regional Office concerned.

Henceforth, all requests relating to the above matters should make reference to this
Memorandum Circular.

This Memorandum Circular shall take effect immediately.

(SGD.) ALBINA
MANALO-DANS

Chairman

August 1, 1983 (Emphasis supplied).

The Solicitor General maintains that the appointment of Gelvezon, assuming it has been made by the
appropriate authority, nevertheless does not meet the three conditions mentioned in Paragraph 2 of
the memorandum-circular. Neither is the authorization to reinstate required in Paragraph 5
sustainable under the proven facts.

Like the assessment of the appointee's qualifications, the determination of whether the appointment is
demanded by the exigencies of the service should be made by the appointing authorities themselves,
at least in the first instance. As it is they who can best understand the needs and operations of their
own offices, their findings on this matter are entitled to great respect even from this Court.

We note, however, that in meeting the requirement of Paragraph 2(a), Dr. Tupas, as Director of the
RPTMH merely said in his recommendation. 3

1. That the exigency of the service demands that the position should be filled. Problems
in the Nursing Service have cropped up, wanting of the attendance of a nursing
administrator which may assume, unmanageable magnitude if left unsolved.

This same recommendation was reiterated verbatim by Dr. Ortiz in his own letter to CSRO No. 6
requesting authority to reinstate Gelvezon .4

Its tortuous construction aside, the above-quoted statement actually says nothing. It is no more than
so many cliches stringed together to satisfy the requirement, without any earnest effort to specify the
problems facing the Nursing Service and why they "may assume unmanageable magnitude if left
unsolved" because of the non-appointment of the recommendee. The "exigency of the service" is not
explained nor is it shown why it "demands" the filling of the position. The necessity for Gelvezon
sounds exaggerated. The generalization seeks more to impress than to inform and persuade. If a
meaningless justification like this could suffice, the requirement might as well be discarded altogether
as a useless formality.

Regarding subsection (b), the respondents stress that in the examination given by the Selection,
Placement and Promotion Board of the RPTMH, Gelvezon placed first with a rating of 88.25%,
followed by Medalla P. Balandra with 87.5% and Violeta T. Teologo with 83.25%. This was probably
the main reason for the conclusion that Gelvezon was the best candidate among the three and for the
following encomium from Dr. Ortiz (again echoing Dr. Tupaz word for word):

2. Mrs. Ruby G. Gelvezon brings along with her the degree of competence,
respectability and dedication to service, qualities very desirable among people in the
Civil Service, especially in the Department of Health. These qualities are found wanting
in the other applicants.5

It is not explained why applicants Balandra and Teologo are "wanting" in the qualities of
"competence, respectability and dedication to service" that seem to be the exclusive virtues of the
private respondent. The statement is itself wanting for not stating what other special qualifications
Gelvezon possessed, besides topping the examination, that were not possessed by the other
candidates. The qualifications of these aspirants were not discussed at all and were probably simply
dismissed as irrelevant. But they are not, of course, for the requirement is that the appointee must
possess special qualifications "not possessed" by the other candidates.

As we see it, the recommendation is at best an unfair commentary on Balandra and Teologo, at worst
an undeserved disparagement of their credentials. These are not so far behind those of Gelvezon,
especially in the case of Balandra, or even of Teologo, who had served as acting Chief Nurse and
holds the degree of Bachelor of Science in Nursing. Gelvezon finished only the Graduate Nurse
course.

The discretion given the appointing authority is subject to stricter review where the person appointed
is being returned to the government after voluntarily retiring and collecting all the benefits appurtenant
to such retirement. The earlier approval of Gelvezon's retirement signifies that her services as Senior
Nurse were dispensable in 1986. Suddenly she is needed again. It must take more than the usual
explanation to justify her reinstatement now on the ground that her services are after all
indispensable. A retiree cannot just resume where he left off without the special qualifications (not
possessed by the other candidates) required in Paragraph 2(b).

Even assuming that Gelvezon does have these qualifications, her appointment is still not defensible
under Paragraph 2(c) because there are other candidates for the office who are eligible and available.
The rule expressly allows reinstatement only "if the vacancy cannot be filled by promotion of qualified
officers or employees in the agency concerned." It is true that the next-in-rank rule admits of
exceptions, as we have ruled in many cases. 6 But deviation from that rule requires special
justification in the case at bar because a retiree should ordinarily not be allowed to pre-empt
incumbent aspirants.

The treatment of Paragraph 5 is still another matter that is not easy to understand. Contrary to the
original findings of the respondent CSC, there was a need for authority to reinstate Gelvezon because
she had retired from the public service four years ago. The reason for the original erroneous finding
was her suppression of that material fact. Confronted later with the record, she could not deny that
she had indeed not merely resigned but retired. The CSC then retracted its earlier statement and
conceded that as a retiree Gelvezon was directly covered by the memorandum-circular.
Nevertheless, by some queer logic, it blandly declared in its Resolution No. 90-037:

... Moreover, the Commission, in said Resolution, directed CSRO No. 6 to act on the
appointment of Mrs. Gelvezon for the reason that the Commission found that said Mrs.
Gelvezon merely resigned from her position and thus, CSC MC No. 5, series of 1983
does not apply to her case. By this action of the Commission, whatever defect there
may be in the questioned appointment of Mrs. Gelvezon to the contested position is
thus validated or rectified.

The Court feels that in giving such authority, the CSC was unduly forebearing. Even if Paragraph 2
were disregarded, Gelvezon would still not qualify for the position because she had falsified her
application and concealed the fact that she was a retiree. It is plain that she was less than honest. As
the CSC itself later declared:

A keen restudy of the case reveals that Mrs. Gelvezon actually filed an Application for
Retirement under RA 1616 on May 23, 1986 effective October 26, 1986, as shown by
the said document and her signature in it. More importantly, in a letter dated July
12,1988 to the Secretary of the Department of Health (DOH), the Manager of the
 Government Service Insurance System (GSIS), Iloilo Branch, Iloilo City, approved the
said application for retirement of Mrs. Gelvezon effective October 26, 1986, which
approval was docketed as Retirement Gratuity No. ILO-RG 003331. Hence, it can be
said that a misrepresentation or suppression of fact was made by Mrs. Gelvezon, the
Chief of Hospital II of RPTMH and the Regional Health Director as to the alleged
resignation of Mrs. Gelvezon ..., (Emphasis supplied).

One wonders why, despite this finding, the CSC still approved Gelvezon's appointment, deciding
simply to rap her on the wrist with a mere admonition. To use the language of Rule 111, Section 23,
of Civil Service Rules and Personnel Actions and Policies, she "had intentionally made a false
statement of a material fact or had practiced or attempted to practice a deception or fraud in
connection with her appointment." Yet the CSC brushed aside this offense as a minor infraction that
deserved no sterner action than a mild reproof.

Her reinstatement does not square with the high standards the CSC has itself set for the members of
the Civil Service. As the constitutional body charged with the improvement of the quality of the civil
service, the CSC should have been the first to question Gelvezon's appointment instead of heartily
endorsing it.

Parenthetically, we note the Solicitor General's observations that Gelvezon was not really being
reinstated as she had never before held the position of Chief Nurse I, having retired only as Senior
Nurse, He is correct, strictly speaking, but the word out "reinstatement" was probably used in a
generic sense to mean simply returning to the service. At any rate, the point is not really material
because the memorandum-circular speaks of "appointment, reinstatement or retention" of the
persons covered by its provisions.

We hold, in sum, that as a retiree, Gelvezon could not be simply reinstated like any new appointee
but had to satisfy the stringent requirements laid down by CSC Memorandum-Circular No. 5, s-1983.
While it is true that the appointing authority has wide discretion to determine the need to appoint and
to assess the qualifications of the person to be appointed, that discretion may not be exercised ex-
gratia but "in conformity to the spirit of the law and in a manner to subserve the ends of substantial
justice." 7 That discretion may be reviewed and reversed in proper cases, especially where
extraordinary care is required to attend its exercise, as in the case at bar. Apart from the fact that the
Regional Health Director does not appear to be the official authorized to appoint the private
respondent, we are not convinced that Gelvezon was the best choice under the particular
circumstances of this case, not the least important of which was the shunting aside of the other
candidates, who were eligible and available, besides being incumbent in the service. We also feel
that while not the crucial consideration, the private respondent's disqualification should have been
taken into serious account in comparing the over-all competence of the candidates instead of being
dismissed as a light and forgivable misdeed.

It is really curious that Gelvezon was accommodated in the disputed position despite the confluence
of formidable arguments against her reinstatement. For prejudicing the rights of the other qualified
candidates, the grave abuse of discretion clearly shown here should be corrected and reversed.

Promotions in the Civil Service should always be made on the basis of qualifications, including
occupational competence, moral character, devotion to duty, and, not least important, loyalty to the
service. The last trait should always be given appropriate weight, to reward the civil servant who has
chosen to make his employment in the Government a lifetime career in which he can expect
advancement through the years for work well done. Political patronage should not be necessary. His
record alone should be sufficient assurance that when a higher position becomes vacant, he shall be
seriously considered for the promotion and, if warranted, preferred to less devoted aspirants.

WHEREFORE, certiorari is GRANTED. CSC Resolution Nos. 89-321 and 90-037 are hereby SET
ASIDE as NULL AND VOID. It is so ordered.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Gancayco, Padilla, Bidin, Sarmiento,
Griño-Aquino, Medialdea and Regalado, JJ., concur.

Feliciano, J., is on leave.

Backup

G.R. No. 95450. March 19, 1993.

HOME INSURANCE AND GUARANTY CORPORATION (HIGC), petitioner, vs. CIVIL SERVICE
COMMISSION and DANIEL R. CRUZ, respondents.

The Government Corporate Counsel for petitioner.

The Solicitor General for public respondents.

Jacinto D. Jimenez for private respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; CIVIL SERVICE COMMISSION; LEVELS OF POSITIONS IN CAREER

SERVICE; POSITIONS IN CAREER EXECUTIVE SERVICE; HOW ENTRANCE TO DIFFERENT
LEVELS ACCOMPLISHED; HOW APPOINTMENTS TO CIVIL SERVICE MADE. — Presidential
Decree No. 807, otherwise known as the "Civil Service Decree of the Philippines," provides the
following levels of positions in the career service: (a) the first level which includes clerical, trades,
crafts and custodial service positions involving non-professional or sub-professional work in a non-
supervisory capacity requiring at least four years of college work up to Division Chief level; and, (c)
the third level; which includes positions in the Career Executive Service. Positions in the Career
Executive Service consist of Undersecretary, Assistant Secretary, Bureau Director, Assistant Bureau
Director, Regional Director, Assistant Regional Director, Chief of Department Service and other
officers of equivalent ranks as may be identified by the Career Executive Service Board, all of whom
are appointed by the President. Entrance to the first two levels shall be through competitive
examinations, while entrance to the third level shall be prescribed by the Career Executive Service
Board. The Constitution clearly mandates that appointments in the civil service shall be made only
according to merit and fitness to be determined as far as practicable, and except to positions which
are policy-determining, primarily confidential or highly technical, by competitive examination.

2. ID.; ID.; PERMANENT APPOINTMENT; DEFINED; CIVIL SERVICE ELIGIBILITY; WHEN

REQUIRED FOR PERMANENT APPOINTMENT. — we agree then with petitioner HIGC that the
position of Vice President to which Cruz was formerly appointed belongs to the second level position
which under the law includes professional, technical or scientific positions involving professional,
technical or scientific work in a non-supervisory or supervisory capacity requiring at least four years of
college work up to Division Chief level. Entrance to this second level is through competitive
examination. In other words, a person occupying a position in this level must possess a civil service
eligibility, i.e., he must have obtained a passing grade in a civil service examination, or has been
granted a civil service eligibility and whose name is accordingly entered in the register of eligibles.
Clearly, eligibility then is a sine qua non to acquiring a permanent appointment, except those
positions which are not required by law to be filled with civil service eligibles. A permanent
appointment is defined as one issued to a person who meets all the requirements for the position to
which he is being appointed, including the appropriate eligibility prescribed in accordance with the
provisions of law, rules and standards promulgated in pursuance thereof. In the case before Us, it is
not disputed that respondent Cruz is without any civil service eligibility as shown by his appointment
papers. As such, respondent Cruz cannot be legally conferred a permanent appointment for the law is
clear that career positions, particularly the first and second level positions in the service, require civil
service eligibility.

3. ID.; ID.; PERMANENT APPOINTMENT OF NON-CIVIL SERVICE ELIGIBLE TO CAREER

POSITION A NULLITY; TEMPORARY APPOINTMENT TERMINATED AT PLEASURE OF
APPOINTING POWER. — "The permanent appointment of a non-civil service eligible to a career
position is, from a legal viewpoint, a nullity. Not even the CSC can validate the error, as it cannot rise
higher than the law that created it — the same law that requires civil service eligibility for a permanent
appointment to any of the two positions subject of the present petition." Consequently, respondent
Cruz' appointment being merely temporary in the context of the Civil Service Law, it follows that Cruz'
appointment can be terminated at the pleasure of the appointing power.

4. ID.; ID.; APPOINTMENT ESSENTIALLY A DISCRETIONARY POWER; FUNDAMENTAL

REQUISITE OF APPOINTMENT; NON-ELIGIBLE NOT APPOINTED WHENEVER A CIVIL
SERVICE ELIGIBLE IS AVAILABLE AND READY TO ACCEPT APPOINTMENT. — respondent Cruz
is not a civil service eligible; neither is he a certified public accountant who can be vested with civil
service eligibility upon examination under R.A. 1080. After all, a non-eligible shall not be appointed to
any position in the civil service whenever there is a civil service eligible actually available for and
ready to accept appointment. It is certainly erroneous for respondent COMMISSION to direct HIGC to
reappoint respondent Cruz, a non civil service eligible, to a position which requires a first grade civil
service eligibility. As We have repeatedly held, appointment is an essentially discretionary power and
must be exercised by the officer in whom it is vested according to his best lights, the fundamental
requisite being that the appointee must possess the qualifications required by law. If he does, then
the appointment cannot be faulted on the ground that there are others better qualified who should
have been appointed. This is a political question involving considerations of wisdom which only the
appointing authority can decide.

5. ID.; ID.; REORGANIZATION WHEN VALID; WHEN CARRIED OUT IN GOOD FAITH; NO
DISMISSAL OR SEPARATION ACTUALLY OCCURS IN VALID REORGANIZATION; REASON
THEREFOR. — As We ruled in Dario v. Mison, "[R]eorganizations in this jurisdiction have been
regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is
carried out in 'good faith' if it is for the purpose of economy or to make bureaucracy more efficient. In
that event, no dismissal (in case of dismissal) or separation actually occurs because the position itself
ceases to exist. And in that case, security of tenure would not be a Chinese wall." In sum, We find
that respondent COMMISSION committed grave abuse of discretion amounting to lack or excess of
jurisdiction when it insisted in holding respondent Cruz eligible for reappointment to a permanent
position in a government owned and controlled corporation in derogation of the provision of law
categorically proscribing such as conclusion.

DECISION

BELLOSILLO, J p:

This is a petition for certiorari 1 seeking to set aside the Resolution 2 of respondent Civil Service
Commission which directed petitioner Home Insurance and Guaranty Corporation (HIGC) to
reappoint private respondent Daniel R. Cruz albeit to a position next lower in rank to Vice-President in
petitioner corporation, and to pay him backwages from the date of his dismissal making as basis his
old salary rate as Vice-President.

Private respondent was the Vice President, Finance and Administrative Group of the Home Financing
Corporation, now known as the Home Insurance and Guaranty Corporation (HIGC), from 1 June
1986 to 8 July 1988, when he was not reappointed as a result of the reorganization of petitioner firm.

Initially, the appointment of private respondent Cruz was approved as temporary by the Civil Service
Commission (COMMISSION for brevity) subject to his completion of the Executive Leadership and
Management Program. On a reconsideration, the COMMISSION changed the appointment from
temporary to permanent but still subject to his completion of the leadership program within three (3)
years from the effectivity date of his date of his appointment, otherwise he would be reverted to
temporary status.
Sometime in 1987, Cruz was found responsible by an investigating committee for simple neglect of
duty arising from his inefficient supervision over his subordinates arising from the loss of six (6) Land
Bank checks.

In July 1988, HIGC underwent a reorganization which resulted among others in the reduction of the
number of Vice-President positions from (6) to three (3). Respondent Cruz was one of those not
reappointed as he was found to have no civil service eligibility.

On appeal to the HIGC Reorganization Appeals Board, Cruz invoked his permanent appointment and
insisted that the question of his eligibility should be left for determination by the COMMISSION.

In the meantime, Cruz sought to avail of the Early Separation Incentive Package (ESIP) granted by
HIGC to those who were not reappointed and then withdrew his appeal.

On 7 December 1988, Cruz refiled his appeal after he was not granted ESIP benefits by HIGC.

On 8 December 1988, Cruz elevated his appeal for reinstatement with the COMMISSION.

On 20 February 1989, the HIGC Reorganization Appeals Board dismissed Cruz' appeal.

On 2 August 1989, however, the COMMISSION issued Resolution No. 89-543 finding Cruz to be a
holder of a permanent career position at HIGC, hence, may be reappointed to a position next lower in
rank to Vice President under the Finance Group without reduction in salary, pursuant to CSC
Memorandum Circular No. 10, s. 1986, and that in case Cruz could not be reappointed then his
application to avail of the Early Separation Incentive Package (ESIP) should be approved. It further
ruled that Cruz should be paid all the benefits and privileges due him as Vice President of HIGC in
connection with his reassignment to the Office of the President and Bliss Development Corporation.

Resolving petitioner's Motion for Reconsideration of the Resolution, the COMMISSION issued on 18
December 1989 Resolution No. 89-973 holding that since Cruz had not received the early retirement
benefits he applied for, he should reappointed to the position next lower to the Vice President of the
Finance Group, such as Manager of the Comptrollership Department, Treasury or other Department,
and that he should be paid his back salaries from the time of his termination on the basis of modified
Resolution No. 89-973. Hence, this petition for certiorari.

On 6 November 1990, We issued a temporary restraining order, effective immediately and to continue
until further orders from the Court, enjoining respondent COMMISSION to cease and desist from
enforcing its Order of 10 October 1990, 3 as well as the resolutions in question.
Petitioner now contends that respondent COMMISSION committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it issued the questioned Resolutions for being
contrary to established principles governing the civil service career system and of the basic
constitutional mandate that appointments to the civil service shall be made only according to merit
and fitness; and, that the non-reappointment of Cruz was the result of a valid reorganization.

We grant the petition.

The principal issue to be resolved is whether the COMMISSION committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it ruled that respondent Cruz was a permanent
employee enjoying security of tenure and thus may be removed from office only for cause.

Respondent Cruz contends that he was extended a permanent appointment as indicated in his
appointment papers 4 He asserts that it is not necessary for him to pass any competitive civil service
examination to become eligible for he belongs to the third level in the career service, which covers
positions in the Career Executive Service, and which does not require passing a competitive civil
service examination.

But law jurisprudence do not support the contention of private respondent. Presidential Decree No.
807, otherwise known as the "Civil Service Decree of the Philippines," provides the following levels of
positions in the career service: (a) the first level which includes clerical, trades, crafts and custodial
service positions involving non-professional or sub-professional work in a non-supervisory capacity
requiring at least four years of college work up to Division Chief level; and, (c) the third level; which
includes positions in the Career Executive Service. 5

Positions in the Career Executive Service consist of Undersecretary, Assistant Secretary, Bureau
Director, Assistant Bureau Director, Regional Director, Assistant Regional Director, Chief of
Department Service and other officers of equivalent ranks as may be identified by the Career
Executive Service Board, all of whom are appointed by the President. 6

Entrance to the first two levels shall be through competitive examinations, while entrance to the third
level shall be prescribed by the Career Executive Service Board. 7

The Constitution clearly mandates that appointments in the civil service shall be made only according
to merit and fitness to be determined as far as practicable, and except to positions which are policy-
determining, primarily confidential or highly technical, by competitive examination. 8
Respondent Cruz has not satisfactorily shown that his former position as Vice President in the HIGC
belongs to the third level in the career service as prescribed by law. His former position as Vice
President is not among those enumerated by law as falling under the third level, nor has he
established that it is one of those identified by the Career Executive Service Board as of equivalent
rank to those listed by law. Neither is it claimed that he was appointed by the President.

We agree then with petitioner HIGC that the position of Vice President to which Cruz was formerly
appointed belongs to the second level position which under the law includes professional, technical or
scientific positions involving professional, technical or scientific work in a non-supervisory or
supervisory capacity requiring at least four years of college work up to Division Chief level.

Entrance to this second level is through competitive examination. In other words, a person occupying
a position in this level must possess a civil service eligibility, i.e., he must have obtained a passing
grade in a civil service examination, or has been granted a civil service eligibility and whose name is
accordingly entered in the register of eligibles. 9 Clearly, eligibility then is a sine qua non to acquiring
a permanent appointment, except those positions which are not required by law to be filled with civil
service eligibles. A permanent appointment is defined as one issued to a person who meets all the
requirements for the position to which he is being appointed, including the appropriate eligibility
prescribed in accordance with the provisions of law, rules and standards promulgated in pursuance
thereof. 10

In the case before Us, it is not disputed that respondent Cruz is without any civil service eligibility as
shown by his appointment papers. 11 As such, respondent Cruz cannot be legally conferred a
permanent appointment for the law is clear that career positions, particularly the first and second level
positions in the service, require civil service eligibility. Thus the attestation by respondent
COMMISSION that respondent Cruz' appointment is permanent must be struck down for being
contrary to law. As correctly observed by the Solicitor General: "The permanent appointment of a
non-civil service eligible to a career position is, from a legal viewpoint, a nullity. Not even the CSC can
validate the error, as it cannot rise higher than the law that created it — the same law that requires
civil service eligibility for a permanent appointment to any of the two positions subject of the present
petition." 12 Consequently, respondent Cruz' appointment being merely temporary in the context of
the Civil Service Law, it follows that Cruz' appointment can be terminated at the pleasure of the
appointing power. 13

There can therefore be no question that petitioner HIGC acted legally when, after effecting a
reorganization, it no longer reappointed respondent Cruz. We agree with petitioner HIGC that the
qualifications of respondent Cruz are definitely inferior to those of the incumbents of the next-lower-in-
rank positions who have civil service eligibilities and are at the same time certified public accountants.
As we have noted earlier, respondent Cruz is not a civil service eligible; neither is he a certified public
accountant who can be vested with civil service eligibility upon examination under R.A. 1080. 14 After
all, a non-eligible shall not be appointed to any position in the civil service whenever there is a civil
service eligible actually available for and ready to accept appointment. 15

It is certainly erroneous for respondent COMMISSION to direct HIGC to reappoint respondent Cruz, a
non civil service eligible, to a position which requires a first grade civil service eligibility. As We have
repeatedly held, appointment is an essentially discretionary power and must be exercised by the
officer in whom it is vested according to his best lights, the fundamental requisite being that the
appointee must possess the qualifications required by law. If he does, then the appointment cannot
be faulted on the ground that there are others better qualified who should have been appointed. This
is a political question involving considerations of wisdom which only the appointing authority can
decide. 16

We also find reasonable, fair and valid the reorganization carried out by petitioner HIGC which led to
the separation from the service of respondent Cruz. Significantly, respondent COMMISSION does not
question — but appears in fact to concede — the validity of the reorganization effected by petitioner
HIGC as reflected in the questioned CSC Resolution No. 89-543 —

It is admitted that this reorganization of the HIGC resulted in the reduction in the number of positions
of Vice President from (6) six to three (3) only. And, after due assessment and evaluation, Cruz was
found to be one of the least competent and qualified to be reinstated to the same or comparable
position as shown by the comparative analysis of the qualifications of the appellant and the
reappointed Vice Presidents, Carlo P. Doble, Fernando M. Miranda and Wilfredo F. Hernandez . . ."
17

As We ruled in Dario v. Mison, 18 "[R]eorganizations in this jurisdiction have been regarded as valid
provided they are pursued in good faith. As a general rule, a reorganization is carried out in 'good
faith' if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no
dismissal (in case of dismissal) or separation actually occurs because the position itself ceases to
exist. And in that case, security of tenure would not be a Chinese wall."

In sum, We find that respondent COMMISSION committed grave abuse of discretion amounting to
lack or excess of jurisdiction when it insisted in holding respondent Cruz eligible for reappointment to
a permanent position in a government owned and controlled corporation in derogation of the provision
of law categorically proscribing such as conclusion.

WHEREFORE, the petition is GRANTED. The questioned CSC Resolutions Nos. 89-543, 89-973 and
90-823 are REVERSED and SET ASIDE. Accordingly, respondent Daniel R. Cruz is declared
ineligible for reappointment in petitioner Home Insurance and Guaranty Corporation for lack of civil
service eligibility as required by law.

SO ORDERED.

Narvasa, C . J., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon,
Melo, Campos, Jr. and Quiason, JJ., concur.