While the presentation in evidence of the marked money in drugs cases resulting from buy-bust operations may not be indispensable,19 the peculiar circumstances of this case, heightened by the attempt of the alleged poseur-buyer to present a photocopy of what he claims to be the buy-bust money and the unexplained failure of the prosecution to call to the witness stand the claimed custodian of the marked money although the latter had already appeared in court, only taint further the veracity of PO3 Labrador's story. Exhibit "E" is not admissible in evidence under the best evidence rule.20 To be admissible as secondary evidence, the prosecution should have shown that the original marked money has been lost or destroyed or cannot be produced in court or that it is in the custody of the adverse party.21 The prosecution did not.

FIRST DIVISION

G.R. No. 108453 July 11, 1994

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
DONALD DISMUKE Y PAMARITO, accused-appellant.

The Solicitor General for plaintiff-appellee.

Public Attorney's Office for accused-appellant.

DAVIDE, JR., J.:

In an information1 filed with the Regional Trial Court of Valenzuela, Metro Manila, and docketed therein as Criminal Case No. 994-V-92, accused Donald Dismuke y Pamarito was charged with the violation of Section 4, Article II of R.A. No. 6425, as amended, committed in this wise:

That on or about the 8th day of February 1992 in Valenzuela, MM. and within the jurisdiction of this Honorable Court, the above-named accused, without having been authorized by law, did then and there wilfully, unlawfully and feloniously deliver, sell and give away to one PO2 Nelson Labrador two tea bags of marijuana flowering tops for one Twenty peso bill with SN QB65721, knowing the same to be a prohibited drug under the provision of the above-cited law.

CONTRARY TO LAW.

The accused pleaded not guilty at his arraignment on 24 February 1992.

After trial on the merits, the lower court promulgated on 28 August 1992 its decision2 finding the accused guilty of the crime charged and sentencing him to suffer the penalty of reclusion perpetua, to pay a fine of P20,000.00, and to pay the costs.

In the main, the prosecution's case drew its support from the uncorroborated testimony of PO3 Nelson Labrador of the Northern Police District Anti-Narcotics Unit (NPD-ANU). He had joined the National Police Service on 5 November 1991.3 According to him, at about 3:00 p.m. of 8 February 1992 (barely three months after he had joined the service), he was at the office of the NPD-ANU at Sangandaan, Caloocan City, when an informer arrived and told him that a certain "Donald" was selling marijuana.4 He then decided to conduct a buy-bust operation, with himself acting as the buyer, and with PO3 Eliseo Gargaritano and PO3 Wilfredo Lumba as the other team members. Together with the informer, they proceeded to Consuelo Street, Doña Ata Subdivision, Marulas, Valenzuela, Metro Manila. They arrived at their destination at about 5:00 p.m. and while cruising around, their informer pointed to a man near a sari-sari store as Donald, the accused in this case. Labrador, who was in plainclothes, approached Donald and told the latter of his "intention to buy P20.00 worth of marijuana." Since Donald "trusted" him, he (Labrador) "gave him the buy/bust money" and Donald in turn gave the former "two teabags of marijuana."5 Then, pursuant to the team's pre-arranged signal, Labrador held Donald's right hand. Responding thereto, the other members of the team came out from their strategic locations, identified themselves, and assisted Labrador in arresting Donald. The team then brought Donald to the NPD-ANU office in Sangandaan, Caloocan City, where he was turned over to the unit's investigator, a certain Reynaldo Lichido, for proper disposition and investigation. The latter prepared a referral-letter to the PC Laboratory for examination of the tea bags.

Labrador, however, could only produce in court a photocopy of the alleged marked money (Exhibit "E") because the bill itself was allegedly in the custody of PO3 Gargaritano. The bill had supposedly been marked by Gargaritano on the "Saligang Batas" portion thereof.6 The latter, despite subpoenas sent to him, failed to appear, thereby causing the postponement of the hearing and prompting the trial court to issue orders requiring him to show cause why he should not be held in contempt of court.7 Although he subsequently appeared, the prosecution did not present him as a witness in the case.

Through Ms. Tita V. Advincula, a forensic chemist of the PNP Central Laboratory Section, Central Police District, Manila, the prosecution also proved that the contents of the two heat-sealed transparent plastic bags (Exhibits "B-1" and "B-2"), which were transmitted to her office by PNP Inspector Asuncion S. Santos of the District Dangerous Drug Enforcement Division of the Northern Police District Command, were found positive "for marijuana, a prohibited drug."8

On the other hand, through the testimonies of the accused and Dennis Pinpin, the defense presented a different version of the incident. According to the accused, in the afternoon of 8 February 1992, he and his friends, namely, Dennis Pinpin, Ricky Pinpin, and Erwin Soriano were at Consuelo Street, Marulas, Valenzuela, helping their friend, Allan Olequino, transfer residence.9 Suddenly, a tricycle stopped, and PO3 Nelson Labrador and his two companions, Erning and Vicente, alighted from the tricycle. Labrador asked who among them had quarreled with his brother. Labrador's companions pointed to the accused and so Nelson told him to board the tricycle and picked up a piece of wood of which he brandished at him. The three forced him to board the tricycle. The accused protested that he had not done anything, but he was told to do his explaining at the police headquarters. He was not, however, brought to the headquarters but to a place near the barangay hall at F. Bautista Street in Marulas where he was questioned about the identities of the pushers in the area. When he failed to name or pinpoint any pusher, he was taken to the Sangandaan police headquarters where PO3 Labrador took out two plastic teabags of marijuana which Labrador threatened to use against him if he would still refuse to name the pushers. Nonetheless, he insisted that he did not know any pusher. He was detained at the said headquarters for about two days. Thereafter, he was brought before a fiscal in Caloocan City after being warned not to say anything against them.10

The accused further testified that during his school days at the Valenzuela Municipal High School in 1990, he intervened in a fight between his neighbor and Noel Labrador, a brother of PO3 Labrador. When he failed to pacify them, he boxed Noel, hitting him on the chin. This incident came to the knowledge of the school principal who then called them to a conference, which PO3 Labrador attended. He had personally known PO3 Labrador for a long time because the latter's residence is at F. Bautista Street, Marulas, Valenzuela, which is merely within "walking distance" from where he, the accused, lived.11

Dennis Pinpin, a neighbor, friend, and former schoolmate of Donald, corroborated the latter's testimony on the incident of 8 February 1992,12 He also testified that he was the one who had a misunderstanding with Noel Labrador in 1990. He reported the matter to Donald who tried to settle their differences but Donald ended up fighting with Noel. He, Donald, and Noel were called to the principal's office and were reprimanded by the principal. At the said conference, Noel's parents and PO3 Labrador were present. Thereafter, Noel threatened them by saying that the fight was not yet over.13

The lower court found the testimony of PO3 Labrador to be credible and positive and dismissed the accused's claim that he was framed and that the charge was ill-motivated. It said:

The alleged quarrel happened in 1990 almost two years ago and was allegedly patched up and settled by the school principal in the presence of PO2 Nelson Labrador. If it is true that there was a fight/quarrel, the Labradors will not wait that long a time to take the alleged vindictive
move.14

In his Appellant's Brief, the accused asserts that the trial court erred:

I

. . . IN GIVING WEIGHT AND CREDENCE TO THE IMPROBABLE AND INCREDIBLE TESTIMONY OF THE PROSECUTION LONE EYEWITNESS.

II

. . . IN ADMITTING IN EVIDENCE THE TWO TEA BAGS OF MARIJUANA WHICH WAS PLANTED BY POLICE OFFICER NELSON LABRADOR IN BLATANT VIOLATION OF THE ACCUSED ['S] CONSTITUTIONAL RIGHTS.

III

. . . IN NOT HOLDING THAT THE PROSECUTION MISERABLY FAILED TO PROVE THE GUILT OF THE ACCUSED BEYOND REASONABLE DOUBT.15

At the heart of these assigned errors is the issue of credibility of witnesses. It is well-settled that this Court will not interfere with the judgment of the trial court in passing on the credibility of the witnesses, unless there appears in the record some fact or circumstance of weight and influence which has been overlooked or the significance of which has been misapprehended or misinterpreted.16 The reason for this is that the trial court is in a better position to decide the question, having heard the witnesses themselves and observed their deportment and manner of testifying during the trial.17

A careful review of the records of this case and a meticulous evaluation of the evidence of the parties reveal vital facts and circumstances which the trial court overlooked or misapprehended and which if taken into account would alter the result of this case.

For one thing, the accused personally knew PO3 Labrador; they had met in 1990 in the principal's office of the Valenzuela Municipal High School during a confrontation between PO3 Labrador's brother, Nelson, on the one hand, and Dennis Pinpin and the accused on the other, after the accused had intervened in the fight between Nelson and Dennis and boxed Nelson on his chin. It is, therefore, most unlikely that the accused would sell a prohibited drug to a brother of a former foe who, after the confrontation, had warned that the fight was not yet over.18 This incident could have provided PO3 Labrador with a motive against the accused. The trial court is of the view that it could not have, because the incident happened two years earlier, the dispute was settled by the principal, and if Labrador desired revenge, he would not have waited for two years. We do not agree. While time may heal wounds of conflict, it does not necessarily extinguish the desire for vengeance, which may just hibernate until the circumstances become favorable.

In the instant case, the favorable circumstances could have arisen when PO3 Labrador joined the PNP in November of 1991. Within three months thereafter, he conducted the alleged buy-bust operation against the accused solely on the basis of an alleged tip from an informer given two hours before he conducted the operation. It may be noted that PO3 Labrador did not testify that he had obtained other derogatory information against the accused or that he had known the accused to be a drug dealer, pusher, or user. His conduct in this case tainted the presumption of regularity in the performance of his duty.

For another, we have serious doubts on the existence of the alleged marked money. There is no evidence as to who provided it and as to when and where it was allegedly marked by PO3 Gargaritano. What Labrador produced was a mere photocopy of the alleged marked money (Exhibit "E"). He claimed that the marked money itself was in the possession of Gargaritano. If it was in Gargaritano's possession, we cannot understand why he was not called anymore to the witness stand to testify for the prosecution when he finally appeared in court in compliance with its orders.

While the presentation in evidence of the marked money in drugs cases resulting from buy-bust operations may not be indispensable,19 the peculiar circumstances of this case, heightened by the attempt of the alleged poseur-buyer to present a photocopy of what he claims to be the buy-bust money and the unexplained failure of the prosecution to call to the witness stand the claimed custodian of the marked money although the latter had already appeared in court, only taint further the veracity of PO3 Labrador's story.

Exhibit "E" is not admissible in evidence under the best evidence rule.20 To be admissible as secondary evidence, the prosecution should have shown that the original marked money has been lost or destroyed or cannot be produced in court or that it is in the custody of the adverse party.21 The prosecution did not.

Then too, the prosecution failed to prove that the specimens examined by the forensic chemist were the ones purportedly sold by the accused to PO3 Labrador. According to the latter, when they arrived at their headquarters after the buy-bust operation, he turned over the accused to their investigator, a certain Reynaldo Lichido, for proper disposition and investigation. Lichido also "immediately prepared the referral to the PC Laboratory for examination in order to be sure if the specimen is positive."22 What the forensic chemist examined were the contents of "two transparent plastic bag [sic] containing flowering tops with rolling papers suspected to be marijuana" transmitted by PNP Inspector Asuncion Santos, Officer-in-Charge of the District Dangerous Drugs Enforcement Division of the Northern Police District Command. 23 Both Lichido and Santos were not presented by the prosecution to testify in this case. Thus, there is no evidence to prove that what were allegedly sold by the accused to PO3 Labrador were actually the ones turned over to Lichido, that what the latter received were turned over to Santos, and that what Santos transmitted to the forensic chemist were those allegedly sold by the accused. The failure to establish the evidence's chain of custody is damaging to the prosecution's case.

On the whole then, the scanty evidence for the prosecution casts serious doubts as to the guilt of the accused. It does not pass the test of moral certainty and is insufficient to rebut the presumption of innocence which the Bill of Rights guarantees the accused. It is apropos to repeat the doctrine that an accusation is not, according to the fundamental law, synonymous with guilt; the prosecution must overthrow the presumption of innocence with proof of guilt beyond reasonable doubt.24

In the light of the above disquisition, it is apparent that the law enforcement agency charged with the enforcement of the Dangerous Drugs Act is partly to be blamed for the result of this case, assuming that it does have a case against the accused. In People vs. Tantiado,25 we exhorted "the law enforcement agencies, especially those assigned to enforce the Dangerous Drugs Act, to carefully prepare their plans for buy-bust operations and to efficiently and effectively carry them out, ever mindful of the possibility that their blunders may not only frustrate the efforts to eradicate the drug menace but worse, embolden drug lords, pushers or users into defying the authorities." Equally at fault is the prosecuting arm of the Government, whose ineptitude in prosecuting the case warrants that its attention be likewise directed, as in the Tantiado case and the recent case of People vs. Camba,26 to what was said in People vs. Esquivel:27

In this connection it may not be out of place to bring to the attention of prosecuting attorneys the absolute necessity of laying before the court the pertinent facts at their disposal with methodical and meticulous attention, clarifying contradictions and filling up gaps and loopholes in their evidence, to the end that the court's mind may not be tortured by doubts, that the innocent may not suffer and the guilty not escape unpunished. Obvious to all, this is the prosecution's prime duty to the court, to the accused, and to the state.

Again, just like in People vs. Camba,28 we cannot help but notice that the trial court imposed the penalty of reclusion perpetua which was not the penalty provided for by law at the time the offense charged was allegedly committed. Although the penalty imposable is now immaterial, we call the trial court's attention to the fact that the penalty then imposable was life imprisonment, if only to underscore the need to impose only the penalty which the law prescribes.

WHEREFORE, the appealed decision of Branch 171 of the Regional Trial Court of Valenzuela, Metro Manila, in Criminal Case No. 994-V-92 is REVERSED and, on the ground of reasonable doubt, accused-appellant DONALD DISMUKE y PAMARITO is hereby ACQUITTED. His immediate release from detention is hereby ordered, unless further detention for any lawful cause is warranted.

Costs de oficio.

SO ORDERED.

Cruz, Bellosillo, Quiason and Kapunan, JJ., concur.

#Footnotes

1 Original Records (OR) 1. The information is dated 10 February 1992.

2 OR, 53-58; Rollo, 13-18. Per Judge Adriano R. Osorio of Branch 171.

3 TSN, 24 April 1992, 9; TSN, 13 May 1992, 10.

4 TSN, 24 April 1992, 10.

5 Id., 9-10.

6 TSN, 24 April 1992, 11.

7 Orders of 9 March 1992 (OR, 10) and 8 April 1992 (OR, 20).

8 Exhibit "C"; OR, 34; TSN, 24 April 1992, 4-6.

9 TSN, 6 July 1992, 2-3.

10 Id., 3-4.

11 TSN, 6 July 1992, 5-6.

12 TSN, 27 July 1992, 4-7.

13 Id., 9-10.

14 OR, 57; Rollo, 17.

15 Rollo, 37.

16 United States vs. Ambrosio, 17 Phil. 295 [1910].

17 People vs. Tismo, 204 SCRA 535 [1991]; People vs. Lee, 204 SCRA 900 [1991]; People vs. Simon, 209 SCRA 148 [1992]; People vs. Jumamoy, 221 SCRA 333 [1993]; People vs. Kyamko, 222 SCRA 183 [1993].

18 TSN, 27 July 1992, 10.

19 People vs. Pascual, 208 SCRA 393 [1992].

20 Section 3, Rule 130, Rules of Court.

21 Sections 5 and 6, Rule 130, Rules of Court.

22 TSN, 24 April 1992, 12.

23 Exhibit "A"; OR, 32.

24 People vs. Dramayo, 42 SCRA 59 [1971]; People vs. Garcia, 215 SCRA 349 [1992].

25 213 SCRA 365 [1992].

26 G.R. No. 97960, 10 May 1994.

27 82 Phil. 453, 459 [1948].

28 Supra.

The parol evidence rule forbids any addition to, or contradiction of, the terms of a written agreement by testimony or other evidence purporting to show that different terms were agreed upon by the parties, varying the purport of the written contract.9 This principle notwithstanding, petitioner would have the Court rule that this case falls within the exceptions, particularly that the written agreement failed to express the true intent and agreement of the parties. This argument is untenable. Although parol evidence is admissible to explain the meaning of a contract, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing unless there has been fraud or mistake.10 Evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid contract.11 The Vehicle Sales Invoice12 is the best evidence of the transaction. A sales invoice is a commercial document. Commercial documents or papers are those used by merchants or businessmen to promote or facilitate trade or credit transactions.13 Business forms, e.g., order slip, delivery charge invoice and the like, are commonly recognized in ordinary commercial transactions as valid between the parties and, at the very least, they serve as an acknowledgment that a business transaction has in fact transpired.14 These documents are not mere scraps of paper bereft of probative value, but vital pieces of evidence of commercial transactions. They are written memorials of the details of the consummation of contracts.15 The terms of the subject sales invoice are clear. They show that Autocorp sold to Seaoil one unit Robex 200 LC Excavator paid for by checks issued by one Romeo Valera. This does not, however, change the fact that Seaoil Petroleum Corporation, as represented by Yu, is the customer or buyer. The moment a party affixes his or her signature thereon, he or she is bound by all the terms stipulated therein and is subject to all the legal obligations that may arise from their breach.16

THIRD DIVISION

G.R. No. 164326              October 17, 2008

SEAOIL PETROLEUM CORPORATION, petitioners,
vs.
AUTOCORP GROUP and PAUL Y. RODRIGUEZ, respondents.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision¹ of the Court of Appeals (CA) dated May 20, 2004 in CA-G.R. CV No. 72193, which had affirmed in toto the Decision² of the Regional Trial Court (RTC) of Pasig City, Branch 157, dated September 10, 2001 in Civil Case No. 64943.

The factual antecedents, as summarized by the CA, are as follows:

On September 24, 1994, defendant-appellant Seaoil Petroleum Corporation (Seaoil, for brevity) purchased one unit of ROBEX 200 LC Excavator, Model 1994 from plaintiff-appellee Autocorp Group (Autocorp for short). The original cost of the unit was ₱2,500,000.00 but was increased to ₱3,112,519.94 because it was paid in 12 monthly installments up to September 30, 1995. The sales agreement was embodied in the Vehicle Sales Invoice No. A-0209 and Vehicle Sales Confirmation No. 258. Both documents were signed by Francis Yu (Yu for short), president of Seaoil, on behalf of said corporation. Furthermore, it was agreed that despite delivery of the excavator, ownership thereof was to remain with Autocorp until the obligation is fully settled. In this light, Seaoil’s contractor, Romeo Valera, issued 12 postdated checks. However, Autocorp refused to accept the checks because they were not under Seaoil’s name. Hence, Yu, on behalf of Seaoil, signed and issued 12 postdated checks for ₱259,376.62 each with Autocorp as payee.

The excavator was subsequently delivered on September 26, 1994 by Autocorp and was received by Seaoil in its depot in Batangas.

The relationship started to turn sour when the first check bounced. However, it was remedied when Seaoil replaced it with a good check. The second check likewise was also good when presented for payment. However, the remaining 10 checks were not honored by the bank since Seaoil requested that payment be stopped. It was downhill from thereon.

Despite repeated demands, Seaoil refused to pay the remaining balance of ₱2,593,766.20. Hence, on January 24, 1995, Autocorp filed a complaint for recovery of personal property with damages and replevin in the Regional Trial Court of Pasig. The trial court ruled for Autocorp. Hence, this appeal.

Seaoil, on the other hand, alleges that the transaction is not as simple as described above. It claims that Seaoil and Autocorp were only utilized as conduits to settle the obligation of one foreign entity named Uniline Asia (herein referred to as Uniline), in favor of another foreign entity, Focus Point International, Incorporated (Focus for short). Paul Rodriguez (Rodriguez for brevity) is a stockholder and director of Autocorp. He is also the owner of Uniline. On the other hand, Yu is the president and stockholder of Seaoil and is at the same time owner of Focus. Allegedly, Uniline chartered MV Asia Property (sic) in the amount of $315,711.71 from its owner Focus. Uniline was not able to settle the said amount. Hence, Uniline, through Rodriguez, proposed to settle the obligation through conveyance of vehicles and heavy equipment. Consequently, four units of Tatamobile pick-up trucks procured from Autocorp were conveyed to Focus as partial payment. The excavator in controversy was allegedly one part of the vehicles conveyed to Focus. Seaoil claims that Rodriguez initially issued 12 postdated checks in favor of Autocorp as payment for the excavator. However, due to the fact that it was company policy for Autocorp not to honor postdated checks issued by its own directors, Rodriguez requested Yu to issue 12 PBCOM postdated checks in favor of Autocorp. In turn, said checks would be funded by the corresponding 12 Monte de Piedad postdated checks issued by Rodriguez. These Monte de Piedad checks were postdated three days prior to the maturity of the PBCOM checks.

Seaoil claims that Rodriguez issued a stop payment order on the ten checks thus constraining the former to also order a stop payment order on the PBCOM checks.

In short, Seaoil claims that the real transaction is that Uniline, through Rodriguez, owed money to Focus. In lieu of payment, Uniline instead agreed to convey the excavator to Focus. This was to be paid by checks issued by Seaoil but which in turn were to be funded by checks issued by Uniline. x x x³

As narrated above, respondent Autocorp filed a Complaint for Recovery of Personal Property with Damages and Replevin⁴ against Seaoil before the RTC of Pasig City. In its September 10, 2001 Decision, the RTC ruled that the transaction between Autocorp and Seaoil was a simple contract of sale payable in installments.⁵ It also held that the obligation to pay plaintiff the remainder of the purchase price of the excavator solely devolves on Seaoil. Paul Rodriguez, not being a party to the sale of the excavator, could not be held liable therefor. The decretal portion of the trial court’s Decision reads, thus:

WHEREFORE, judgment is hereby rendered in favor of plaintiff Autocorp Group and against defendant Seaoil Petroleum Corporation which is hereby directed to pay plaintiff:

- ₱2,389,179.23 plus 3% interest from the time of judicial demand until full payment; and

- 25% of the total amount due as attorney’s fees and cost of litigation.

The third-party complaint filed by defendant Seaoil Petroleum Corporation against third-party defendant Paul Rodriguez is hereby DISMISSED for lack of merit.

SO ORDERED.

Seaoil filed a Petition for Review before the CA. In its assailed Decision, the CA dismissed the petition and affirmed the RTC’s Decision in toto.⁶ It held that the transaction between Yu and Rodriguez was merely verbal. This cannot alter the sales contract between Seaoil and Autocorp as this will run counter to the parol evidence rule which prohibits the introduction of oral and parol evidence to modify the terms of the contract. The claim that it falls under the exceptions to the parol evidence rule has not been sufficiently proven. Moreover, it held that Autocorp’s separate corporate personality cannot be disregarded and the veil of corporate fiction pierced. Seaoil was not able to show that Autocorp was merely an alter ego of Uniline or that both corporations were utilized to perpetrate a fraud. Lastly, it held that the RTC was correct in dismissing the third-party complaint since it did not arise out of the same transaction on which the plaintiff’s claim is based, or that the third party’s claim, although arising out of another transaction, is connected to the plaintiff’s claim. Besides, the CA said, such claim may be enforced in a separate action.

Seaoil now comes before this Court in a Petition for Review raising the following issues:

I

Whether or not the Court of Appeals erred in partially applying the parol evidence rule to prove only some terms contained in one portion of the document but disregarded the rule with respect to another but substantial portion or entry also contained in the same document which should have proven the true nature of the transaction involved.

II

Whether or not the Court of Appeals gravely erred in its judgment based on misapprehension of facts when it declared absence of facts which are contradicted by presence of evidence on record.

III

Whether or not the dismissal of the third-party complaint would have the legal effect of res judicata as would unjustly preclude petitioner from enforcing its claim against respondent Rodriguez (third-party defendant) in a separate action.

IV

Whether or not, given the facts in evidence, the lower courts should have pierced the corporate veil.

The Petition lacks merit. We sustain the ruling of the CA.

We find no fault in the trial court’s appreciation of the facts of this case. The findings of fact of the trial court are conclusive upon this Court, especially when affirmed by the CA. None of the exceptions to this well-settled rule has been shown to exist in this case.

Petitioner does not question the validity of the vehicle sales invoice but merely argues that the same does not reflect the true agreement of the parties. However, petitioner only had its bare testimony to back up the alleged arrangement with Rodriguez.

The Monte de Piedad checks – the supposedly "clear and obvious link"⁷ between the documentary evidence and the true transaction between the parties – are equivocal at best. There is nothing in those checks to establish such link. Rodriguez denies that there is such an agreement.

Unsubstantiated testimony, offered as proof of verbal agreements which tends to vary the terms of a written agreement, is inadmissible under the parol evidence rule.⁸

Rule 130, Section 9 of the Revised Rules on Evidence embodies the parol evidence rule and states:

SEC. 9. Evidence of written agreements.—When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement.

However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading:

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors-in-interest after the execution of the written agreement.

The term "agreement" includes wills.

The parol evidence rule forbids any addition to, or contradiction of, the terms of a written agreement by testimony or other evidence purporting to show that different terms were agreed upon by the parties, varying the purport of the written contract.⁹

This principle notwithstanding, petitioner would have the Court rule that this case falls within the exceptions, particularly that the written agreement failed to express the true intent and agreement of the parties. This argument is untenable.

Although parol evidence is admissible to explain the meaning of a contract, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing unless there has been fraud or mistake.¹⁰ Evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid contract.¹¹

The Vehicle Sales Invoice¹² is the best evidence of the transaction. A sales invoice is a commercial document. Commercial documents or papers are those used by merchants or businessmen to promote or facilitate trade or credit transactions.¹³ Business forms, e.g., order slip, delivery charge invoice and the like, are commonly recognized in ordinary commercial transactions as valid between the parties and, at the very least, they serve as an acknowledgment that a business transaction has in fact transpired.¹⁴ These documents are not mere scraps of paper bereft of probative value, but vital pieces of evidence of commercial transactions. They are written memorials of the details of the consummation of contracts.¹⁵

The terms of the subject sales invoice are clear. They show that Autocorp sold to Seaoil one unit Robex 200 LC Excavator paid for by checks issued by one Romeo Valera. This does not, however, change the fact that Seaoil Petroleum Corporation, as represented by Yu, is the customer or buyer. The moment a party affixes his or her signature thereon, he or she is bound by all the terms stipulated therein and is subject to all the legal obligations that may arise from their breach.¹⁶

Oral testimony on the alleged conditions, coming from a party who has an interest in the outcome of the case, depending exclusively on human memory, is not as reliable as written or documentary evidence.¹⁷

Hence, petitioner’s contention that the document falls within the exception to the parol evidence rule is untenable. The exception obtains only where "the written contract is so ambiguous or obscure in terms that the contractual intention of the parties cannot be understood from a mere reading of the instrument. In such a case, extrinsic evidence of the subject matter of the contract, of the relations of the parties to each other, and of the facts and circumstances surrounding them when they entered into the contract may be received to enable the court to make a proper interpretation of the instrument."¹⁸

Even assuming there is a shred of truth to petitioner’s contention, the same cannot be made a basis for holding respondents liable therefor.

As pointed out by the CA, Rodriguez is a person separate and independent from Autocorp. Whatever obligations Rodriguez contracted cannot be attributed to Autocorp¹⁹ and vice versa. In fact, the obligation that petitioner proffers as its defense – under the Lease Purchase Agreement – was not even incurred by Rodriguez or by Autocorp but by Uniline.

The Lease Purchase Agreement²⁰ clearly shows that the parties thereto are two corporations not parties to this case: Focus Point and Uniline. Under this Lease Purchase Agreement, it is Uniline, as lessee/purchaser, and not Rodriguez, that incurred the debt to Focus Point. The obligation of Uniline to Focus Point arose out of a transaction completely different from the subject of the instant case.

It is settled that a corporation has a personality separate and distinct from its individual stockholders or members, and is not affected by the personal rights, obligations and transactions of the latter.²¹ The corporation may not be held liable for the obligations of the persons composing it, and neither can its stockholders be held liable for its obligation.²²

Of course, this Court has recognized instances when the corporation’s separate personality may be disregarded. However, we have also held that the same may only be done in cases where the corporate vehicle is being used to defeat public convenience, justify wrong, protect fraud, or defend crime.²³ Moreover, the wrongdoing must be clearly and convincingly established. It cannot be presumed.²⁴

To reiterate, the transaction under the Vehicle Sales Invoice is separate and distinct from that under the Lease Purchase Agreement. In the former, it is Seaoil that owes Autocorp, while in the latter, Uniline incurred obligations to Focus. There was never any allegation, much less any evidence, that Autocorp was merely an alter ego of Uniline, or that the two corporations’ separate personalities were being used as a means to perpetrate fraud or wrongdoing.

Moreover, Rodriguez, as stockholder and director of Uniline, cannot be held personally liable for the debts of the corporation, which has a separate legal personality of its own. While Section 31 of the Corporation Code²⁵ lays down the exceptions to the rule, the same does not apply in this case. Section 31 makes a director personally liable for corporate debts if he willfully and knowingly votes for or assents to patently unlawful acts of the corporation. Section 31 also makes a director personally liable if he is guilty of gross negligence or bad faith in directing the affairs of the corporation.²⁶ The bad faith or wrongdoing of the director must be established clearly and convincingly. Bad faith is never presumed.²⁷

The burden of proving bad faith or wrongdoing on the part of Rodriguez was, on petitioner, a burden which it failed to discharge. Thus, it was proper for the trial court to have dismissed the third-party complaint against Rodriguez on the ground that he was not a party to the sale of the excavator.

Rule 6, Section 11 of the Revised Rules on Civil Procedure defines a third-party complaint as a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponent’s claim.

The purpose of the rule is to permit a defendant to assert an independent claim against a third party which he, otherwise, would assert in another action, thus preventing multiplicity of suits.²⁸ Had it not been for the rule, the claim could have been filed separately from the original complaint.²⁹

Petitioner’s claim against Rodriguez was fully ventilated in the proceedings before the trial court, tried and decided on its merits. The trial court’s ruling operates as res judicata against another suit involving the same parties and same cause of action. This is rightly so because the trial court found that Rodriguez was not a party to the sale of the excavator. On the other hand, petitioner Seaoil’s liability has been successfully established by respondent.

A last point. We reject Seaoil’s claim that "the ownership of the subject excavator, having been legally and completely transferred to Focus Point International, Inc., cannot be subject of replevin and plaintiff [herein respondent Autocorp] is not legally entitled to any writ of replevin."³⁰ The claim is negated by the sales invoice which clearly states that "[u]ntil after the vehicle is fully paid inclusive of bank clearing time, it remains the property of Autocorp Group which reserves the right to take possession of said vehicle at any time and place without prior notice."³¹

Considering, first, that Focus Point was not a party to the sale of the excavator and, second, that Seaoil indeed failed to pay for the excavator in full, the same still rightfully belongs to Autocorp. Additionally, as the trial court found, Seaoil had already assigned the same to its contractor for the construction of its depot in Batangas.³² Hence, Seaoil has already enjoyed the benefit of the transaction even as it has not complied with its obligation. It cannot be permitted to unjustly enrich itself at the expense of another.

WHEREFORE, the foregoing premises considered, the Petition is hereby DENIED. The Decision of the Court of Appeals dated May 20, 2004 in CA-G.R. CV No. 72193 is AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ* Associate Justice

ADOLFO S. AZCUNA Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

* Additional member replacing Associate Justice Ruben T. Reyes per Special Order dated September 29, 2008.

¹ Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices Marina L. Buzon and Noel G. Tijam, concurring; rollo, pp. 26-37.

² Penned by Judge Esperanza Fabon-Victorino, id. at 44-52.

³ Id. at 27-29.

⁴ Records, pp. 1-9.

⁵ Rollo, p. 50.

⁶ Id. at 37.

⁷ Id. at 15.

⁸ Spouses Sabio v. The International Corporate Bank, Inc., 416 Phil. 785, 816 (2001), citing Aerospace Chemical Industries, Inc. v. Court of Appeals, 315 SCRA 92, 107 (1999).

⁹ Spouses Edrada v. Spouses Ramos, G.R. No. 154413, August 31, 2005, 468 SCRA 597, 604.

¹⁰ Ortañez v. CA, 334 Phil. 519 (1997), citing Pioneer Savings and Loan Bank v. Court of Appeals, 226 SCRA 740, 744 (1993).

¹¹ Lapulapu Foundation, Inc. v. Court of Appeals, 466 Phil. 53, 62 (2004), citing MC Engineering v. CA, 380 SCRA 116 (2002).

¹² Records, p. 22.

¹³ Monteverde v. People, 435 Phil. 906, 921 (2002), citing Reyes, The Revised Penal Code, Book II, 1998 ed., p. 235.

¹⁴ Donato C. Cruz Trading Corporation v. Court of Appeals, 400 Phil. 776, 782 (2000).

¹⁵ Monteverde v. People, supra note 13, citing Lagon v. Hooven Comalco Industries, Inc., 349 SCRA 363, 379 (2001).

¹⁶ Camacho v. Court of Appeals, G.R. No. 127520, February 9, 2007, 515 SCRA 242, 261.

¹⁷ Pilipinas Bank v. Court of Appeals, 395 Phil. 751, 757-758 (2000), citing Ortañez v. CA, supra note 10.

¹⁸ Ortañez v. CA, supra note 10, citing Heirs of del Rosario v. Santos, 194 Phil. 671, 687 (1981).

¹⁹ Rollo, p. 33.

²⁰ Records, p. 514.

²¹ Philippine National Bank v. Ritrato Group, Inc., 414 Phil. 494, 503 (2001), citing Yutivo Sons Hardware Company v. Court of Tax Appeals, 1 SCRA 160 (1961). See also Elcee Farms, Inc., v. National Labor Relations Commission, G.R. No. 126428, January 25, 2007, 512 SCRA 603.

²² Padilla v. Court of Appeals, 421 Phil. 883, 895 (2001).

²³ Id.; Development Bank of the Philippines v. Court of Appeals, 415 Phil. 538, 546 (2001), citing Yutivo Sons Hardware Company v. Court of Tax Appeals, 1 SCRA 160 (1961). See also Jardine Davies, Inc. v. JRB Realty, Inc., G.R. No. 151438, July 15, 2005, 463 SCRA 555.

²⁴ Padilla v. Court of Appeals, supra note 22.

²⁵ Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.

²⁶ Carag v. National Labor Relations Commission, G.R. No. 147590, April 2, 2007, 520 SCRA 28, 48.

²⁷ Id. at 49. (Citations omitted).

²⁸ Asian Construction and Development Corporation v. Court of Appeals, G.R. No. 160242, May 17, 2005, 458 SCRA 750, 758.

²⁹ Id. at 759, citing Allied Banking Corporation v. Court of Appeals, 178 SCRA 526 (1989).

³⁰ Records, p. 79.

³¹ Id. at 22.

³² Rollo, p. 51.

The parol evidence rule forbids any addition to . . . the terms of a written instrument by testimony purporting to show that, at or before the signing of the document, other or different terms were orally agreed upon by the parties.17 Although parol evidence is admissible to explain the meaning of a contract, "it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing unless there has been fraud or mistake."18 No such fraud or mistake exists in this case.

THIRD DIVISION

G.R. No. 107372 January 23, 1997

RAFAEL S. ORTAÑES, petitioner,
vs.
THE COURT OF APPEALS, OSCAR INOCENTES AND ASUNCION LLANES INOCENTES, respondents.

R E S O L U T I O N

FRANCISCO, J.:

On September 30, 1982, private respondents sold to petitioner two (2) parcels of registered land in Quezon City for a consideration of P35,000.00 and P20,000.00, respectively. The first deed of absolute sale covering Transfer Certificate of Title (TCT) No. 258628 provides in part:

That for and in consideration of the sum of THIRTY FIVE THOUSAND (P35,000.00) PESOS, receipt of which in full is hereby acknowledged, we have sold, transferred and conveyed, as we hereby sell, transfer and convey, that subdivided portion of the property covered by TCT No. 258628 known as Lot No. 684-G-1-B-2 in favor of RAFAEL S. ORTAÑEZ, of legal age, Filipino, whose marriage is under a regime of complete separation of property, and a resident of 942 Aurora Blvd., Quezon City, his heirs or assigns.1

while the second deed of absolute sale covering TCT. No. 243273 provides:

That for and in consideration of the sum of TWENTY THOUSAND (P20,000.00) PESOS receipt of which in full is hereby acknowledged, we have sold, transferred and conveyed, as we hereby sell, transfer and convey, that consolidated-subdivided portion of the property covered by TCT No. 243273 known as Lot No. 5 in favor of RAFAEL S. ORTANEZ, of legal age, Filipino, whose marriage is under a regime of complete separation of property, and a resident of 942 Aurora Blvd., Cubao, Quezon City his heirs or assigns.2

Private respondents received the payments for the above-mentioned lots, but failed to deliver the titles to petitioner. On April 9, 1990 the latter demanded from the former the delivery of said titles.3 Private respondents, however, refused on the ground that the title of the first lot is in the possession of another person,4 and petitioner's acquisition of the title of the other lot is subject to certain conditions.

Offshoot, petitioner sued private respondents for specific performance before the RTC. In their answer with counterclaim private respondents merely alleged the existence of the following oral conditions5 which were never reflected in the deeds of sale:6

3.3.2 Title to the other property (TCT No. 243273) remains with the defendants (private respondents) until plaintiff (petitioner) shows proof that all the following requirements have been met:

(i) Plaintiff will cause the segregation of his right of way amounting to 398 sq. m.;

(ii) Plaintiff will submit to the defendants the approved plan for the segregation;

(iii) Plaintiff will put up a strong wall between his property and that of defendants' lot to segregate his right of way;

(iv) Plaintiff will pay the capital gains tax and all other expenses that may be incurred by reason of sale. . .

During trial, private respondent Oscar Inocentes, a former judge, orally testified that the sale was subject to the above conditions,7 although such conditions were not incorporated in the deeds of sale. Despite petitioner's timely objections on the ground that the introduction of said oral conditions was barred by the parol evidence rule, the lower court nonetheless, admitted them and eventually dismissed the complaint as well as the counterclaim. On appeal, the Court of Appeals (CA) affirmed the court a quo. Hence, this petition.

We are tasked to resolve the issue on the admissibility of parol evidence to establish the alleged oral conditions-precedent to a contract of sale, when the deeds of sale are silent on such conditions.

The parol evidence herein introduced is inadmissible. First, private respondents' oral testimony on the alleged conditions, coming from a party who has an interest in the outcome of the case, depending exclusively on human memory, is not as reliable as written or documentary evidence.8 Spoken words could be notoriously unreliable unlike a written contract which speaks of a uniform language.9 Thus, under the general rule in Section 9 of Rule 13010 of the Rules of Court, when the terms of an agreement were reduced to writing, as in this case, it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the contents thereof.11 Considering that the written deeds of sale were the only repository of the truth, whatever is not found in said instruments must have been waived and abandoned by the parties.12 Examining the deeds of sale, we cannot even make an inference that the sale was subject to any condition. As a contract, it is the law between the parties.13

Secondly, to buttress their argument, private respondents rely on the case of Land Settlement Development, Co. vs. Garcia Plantation14 where the Court ruled that a condition precedent to a contract may be established by parol evidence. However, the material facts of that case are different from this case. In the former, the contract sought to be enforced15 expressly stated that it is subject to an agreement containing the conditions-precedent which were proven through parol evidence. Whereas, the deeds of sale in this case, made no reference to any pre-conditions or other agreement. In fact, the sale is denominated as absolute in its own terms.

Third, the parol evidence herein sought to be introduced would vary, contradict or defeat the operation of a valid instrument,16 hence, contrary to the rule that:

The parol evidence rule forbids any addition to . . . the terms of a written instrument by testimony purporting to show that, at or before the signing of the document, other or different terms were orally agreed upon by the parties.17

Although parol evidence is admissible to explain the meaning of a contract, "it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing unless there has been fraud or mistake."18 No such fraud or mistake exists in this case.

Fourth, we disagree with private respondents' argument that their parol evidence is admissible under the exceptions provided by the Rules, specifically, the alleged failure of the agreement to express the true intent of the parties. Such exception obtains only in the following instance:

[W]here the written contract is so ambiguous or obscure in terms that the contractual intention of the parties cannot be understood from a mere reading of the instrument. In such a case, extrinsic evidence of the subject matter of the contract, of the relations of the parties to each other, and of the facts and circumstances surrounding them when they entered into the contract may be received to enable the court to make a proper, interpretation of the instrument.19

In this case, the deeds of sale are clear, without any ambiguity, mistake or imperfection, much less obscurity or doubt in the terms thereof.

Fifth, we are not persuaded by private respondents' contention that they "put in issue by the pleadings" the failure of the written agreement to express the true intent of the parties. Record shows20 that private respondents did not expressly plead that the deeds of sale were incomplete or that it did not reflect the
intention21 of the buyer (petitioner) and the seller (private respondents). Such issue must be, "squarely presented."22 Private respondents merely alleged that the sale was subject to four (4) conditions which they tried to prove during trial by parol evidence.23 Obviously, this cannot be done, because they did not plead any of the exceptions mentioned in the parol evidence rule.24 Their case is covered by the general rule that the contents of the writing are the only repository of the terms of the agreement. Considering that private respondent Oscar Inocentes is a lawyer (and former judge) he was "supposed to be steeped in legal knowledge and practices" and was "expected to know the consequences"25 of his signing a deed of absolute sale. Had he given an iota's attention to scrutinize the deeds, he would have incorporated important stipulations that the transfer of title to said lots were conditional.26

One last thing, assuming arguendo that the parol evidence is admissible, it should nonetheless be disbelieved as no other evidence appears from the record to sustain the existence of the alleged conditions. Not even the other seller, Asuncion Inocentes, was presented to testify on such conditions.

ACCORDINGLY, the appealed decision is REVERSED and the records of this case REMANDED to the trial court for proper disposition in accordance with this ruling.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Panganiban, JJ., concur.

Footnotes

1 Annex "B", Records, p. 79: Rollo pp. 27-28.

2 Annex "A", p. 77; Rollo, p. 28.

3 Rollo, p. 24; Records, p. 7.

4 The title is with a certain Atty. Joson for the purpose of subdividing the said lot, which fact is allegedly known to petitioner.

5 Records, p. 21.

6 Rollo, p. 26.

7 TSN, Oscar Inocentes, February 27, 1991, pp. 4, 5.

8 Abella vs. CA. G.R. No. 107606, June 20, 1996.

9 De Leon vs. CA, 204 SCRA 612.

10 Formerly Sec. 7 of Rule 130.

11 Siasat v. IAC, 139 SCRA 238; Enriquez vs. Ramos, 116 Phil. 525.

12 Cu vs. CA, 195 SCRA 647, citing Moran, Comments on the Rules of Court, Vol. V, 1980 ed., p. 101.

13 Manila Bay Club Corp. vs. CA, 245 SCRA 715; Gaw vs. IAC, 220 SCRA 405.

14 117 Phil. 761 (1963).

15 Exhibit "L".

16 Tupue vs. Urgel, 161 SCRA 417, Continental Airlines vs. Santiago, 172 SCRA 490; Gerales vs. CA, 218 SCRA 640.

17 Heirs of del Rosario vs. Santos, 194 Phil. 671; 108 SCRA 43.

18 Pioneer Savings and Loan Bank vs. CA, 226 SCRA 740, 744 (1993) citing dela Rama vs. Ledesma, 143 SCRA 1 and Yu Tek vs. Gonzales, 29 Phil. 384.

19 Heirs of del Rosario vs. Santos, supra., (Phil.) at 687 citing Francisco, Vicente J.; The Revised Rules of Court in the Philippines, vol. VII, pp. 161-162 (1973).

20 Private respondents' answer with counterclaim filed before the lower court does not mention nor refer to the parol evidence rule and the exceptions therein. All that they pleaded were the alleged conditions for which petitioner must first comply.

21 Phil. National Railways vs. CIR of Albay, Br. 1, 83 SCRA 569.

22 Tolentino vs. Gonzales, 50 Phil. 558, 567 (1927).

23 Phil. National Railways vs. CIR of Albay, Br. 1, supra.

24 Ibid.

25 See Pioneer Savings and Loan Bank vs. CA, supra. at 744.

26 Ibid., see also dela Rama and Gaw cases, supra.

This rule is in keeping with the general principle that administrative bodies are not strictly bound by technical rules of procedure: [A]dministrative bodies are not bound by the technical niceties of law and procedure and the rules obtaining in courts of law. Administrative tribunals exercising quasi-judicial powers are unfettered by the rigidity of certain procedural requirements, subject to the observance of fundamental and essential requirements of due process in justiciable cases presented before them. In administrative proceedings, technical rules of procedure and evidence are not strictly applied and administrative due process cannot be equated with due process in its strict judicial sense

SECOND DIVISION

January 18, 2017

G.R. No. 186967

DIVINA PALAO, Petitioner
vs.
FLORENTINO INTERNATIONAL, INC., Respondent

D E C I S I O N

LEONEN, J.:

This resolves a Petition for Review on Certiorari 1 filed by petitioner Divina Palao (Palao) praying that the assailed January 8, 2009 Decision2 and the March 2, 2009 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105595 be reversed and set aside.

In its assailed Decision, the Court of Appeals reversed and set aside the September 22, 2008 Order4 of Intellectual Property Office Director General Adrian S. Cristobal, Jr. and reinstated respondent Florentino III International, Inc.'s (Florentino) appeal from Decision No. 2007-31,5 dated March 5, 2007, of the Bureau of Legal Affairs of the Intellectual Property Office.

Decision No. 2007-31 denied Florentino's Petition for Cancellation of Letters Patent No. UM-7789, which the Intellectual Property Office had issued in favor of Palao. 6

Letters Patent No. UM-7789 pertained to "A Ceramic Tile Installation on Non-Concrete Substrate Base Surfaces Adapted to Form Part of Furniture, Architectural Components and the Like."7

In its Petition for Cancellation, Florentino claimed that the utility model covered by Letters Patent No. UM-7789 was not original, new, or patentable, as it had been publicly known or used in the Philippines and had even been the subject of several publications.8 It added that it, as well as many others, had been using the utility model well before Palao' s application for a patent.9

In its Decision No. 2007-31,10 the Bureau of Legal Affairs of the Intellectual Property Office denied Florentino's Petition for Cancellation. It noted that the testimony and pictures, which Florentino offered in evidence, failed to establish that the utility model subject of Letters Patent No. UM-7789 was publicly known or used before Palao' s application for a patent. 11

In its Resolution No. 2008-1412 dated July 14, 2008, the Bureau of Legal Affairs of the Intellectual Property Office denied Florentino' s Motion for Reconsideration.

On July 30, 2008, Florentino appealed to the Office of the Director General of the Intellectual Property Office. 13 This appeal's Verification and Certification of Non-Forum Shopping was signed by Atty. John Labsky P. Maximo (Atty. Maximo) of the firm Balgos and Perez. 14 However, Florentino failed to attach to its appeal a secretary's certificate or board resolution authorizing Balgos and Perez to sign the Verification and Certification of Non-Forum Shopping. 15 Thus, on August 14, 2008, the Office of the Director General issued the Order requiring Florentino to submit proof that Atty. Maximo or Balgos and Perez was authorized to sign the Verification and Certification ofNon-Forum Shopping. 16

On August 19, 2008, Florentino filed a Compliance. 17 It submitted a copy of the Certificate executed on August 15, 2008 by Florentino's Corporate Secretary, Melanie Marie A. C. Zosa-Tan, supposedly showing its counsel's authority to sign. 18 This Certificate stated:

[A]t a meeting of the Board of Directors of the said corporation on 14 August 2008, during which a majority of the Directors were present, the following resolution was unanimously adopted:

'RESOLVED, as it is hereby resolved, that BALGOS & PEREZ, or any of its associates, be, as they are hereby, authorized to sign for and on behalf of the corporation, the Verification and Certification on NonForum Shopping and/or all other documents relevant to the Appeal filed by the Corporation with the Office of the Director General of the Intellectual Property Office entitled "Philippine Chambers of Stonecraft Industries, Inc. and Florentino III International, Inc. vs. Divina Palao".'

IN WITNESS WHEREOF, I have hereunto set my hand on these presents, this 15 August 2008 in Cebu City, Cebu. 19

In his Order dated September 22, 2008, Intellectual Property Office Director General Adrian S. Cristobal, Jr. (Director General Cristobal) dismissed Florentino's appeal.20 He noted that the Secretary's Certificate pertained to an August 14, 2008 Resolution issued by Florentino' s Board of Directors, and reasoned that the same Certificate failed to establish the authority of Florentino's counsel to sign the Verification and Certification of Non-Forum Shopping as of the date of the filing of Florentino's appeal (i.e., on July 30, 2008).21

Florentino then filed before the Court of Appeals a Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure. In its assailed January 8, 2009 Decision,22 the Court of Appeals faulted Director General Cristobal for an overly strict application of procedural rules. Thus, it reversed Director General Cristobal's September 22, 2008 Order and reinstated Florentino' s appeal. 23

In its assailed March 2, 2009 Resolution,24 the Court of Appeals denied Palao's Motion for Reconsideration.

Hence, this Petition was filed.

For resolution is the sole issue of whether the Court of Appeals erred in reversing the September 22, 2008 Order of Intellectual Property Office Director General Adrian S. Cristobal, Jr., and in reinstating respondent Florentino III International, Inc.' s appeal.

We deny the Petition and sustain the ruling of the Court of Appeals.

The need for a certification of non-forum shopping to be attached to respondent's appeal before the Office of the Director General of the Intellectual Property Office is established.

Section 3 of the Intellectual Property Office's Uniform Rules on Appeai25 specifies the form through which appeals may be taken to the Director General:

Section 3. Appeal Memorandum. - The appeal shall be perfected by filing an appeal memorandum in three (3) legible copies with proof of service to the Bureau Director and the adverse party, if any, and upon payment of the applicable fee, Reference Code 127 or 128, provided in the IPO Fee Structure.

Section 4(e) specifies the need for a certification of non-forum shopping. Section 4 reads in full:

Section 4. Contents of the Appeal Memorandum. - The appeal memorandum shall:

a) State the full name or names, capacity and address or addresses of the appellant or appellants;

b) Indicate the material dates showing that it was filed on time;

c) Set forth concisely a statement of the matters involved, the issues raised, the specification of errors of fact or law, or both, allegedly committed by the Bureau Director and the reasons or arguments relied upon for the allowance of the appeal;

d) Be accompanied by legible copies of the decision or final order of the Bureau Director and of the material portions of the record as would support the allegations of the appeal; and

e) Contain a certification of non-forum-shopping. (Emphasis supplied)

These requirements notwithstanding, the Intellectual Property Office's own Regulations on Inter Partes Proceedings (which governs petitions for cancellations of a mark, patent, utility model, industrial design, opposition to registration of a mark and compulsory licensing, and which were in effect when respondent filed its appeal) specify that the Intellectual Property Office "shall not be bound by the strict technical rules of procedure and evidence. "26

Rule 2, Section 6 of these Regulations provides:

Section 6 Rules of Procedure to be Followed in the Conduct of Hearing of Inter Partes Cases

In the conduct of hearing of inter partes cases, the rules of procedure herein contained shall be primarily applied. The Rules of Court, unless inconsistent with these rules, may be applied in suppletory character, provided, however, that the Director or Hearing Officer shall not be bound by the strict technical rules of procedure and evidence therein contained but may adopt, in the absence of any applicable rule herein, such mode of proceedings which is consistent with the requirements of fair play and conducive to the just, speedy and inexpensive disposition of cases, and which will give the Bureau the greatest possibility to focus on the technical grounds or issues before it. (Emphasis supplied)

This rule is in keeping with the general principle that administrative bodies are not strictly bound by technical rules of procedure:

[A]dministrative bodies are not bound by the technical niceties of law and procedure and the rules obtaining in courts of law. Administrative tribunals exercising quasi-judicial powers are unfettered by the rigidity of certain procedural requirements, subject to the observance of fundamental and essential requirements of due process in justiciable cases presented before them. In administrative proceedings, technical rules of procedure and evidence are not strictly applied and administrative due process cannot be fully equated with due process in its strict judicial sense.27

In conformity with this liberality, Section 5(b) of the Intellectual Property Office's Uniform Rules on Appeal expressly enables appellants, who failed to comply with Section 4' s formal requirements, to subsequently complete their compliance:

Section 5. Action on the Appeal Memorandum - The Director General shall:

a) Order the adverse party if any, to file comment to the appeal memorandum within thirty (30) days from notice and/or order the Bureau Director to file comment and/or transmit the records within thirty (30) days from notice; or

b) Order the appellant/appellants to complete the formal requirements mentioned in Section 4 hereof;

c) Dismiss the appeal for being patently without merit, Provided, that the dismissal shall be outright if the appeal is not filed within the prescribed period or for failure of the appellant to pay the required fee within the period of appeal. (Emphasis supplied)

Given these premises, it was an error for the Director General of the Intellectual Property Office to have been so rigid in applying a procedural rule and dismissing respondent's appeal.

Petitioner-in her pleadings before this Court-and Director General Cristobal-in his September 2, 2008 Order-cite Decisions of this Court (namely: Philippine Public School Teachers Association v. Heirs of lligan28 and Philippine Airlines, Inc. v. Flight Attendants & Stewards Association of the Philippines29) to emphasize the need for precise compliance with the rule on appending a certification of non-forum shopping.

Philippine Public School Teachers Association states:

Under Section 3 of the same Rule, failure to comply shall be sufficient ground for the dismissal of the petition. The rule on certification against forum shopping is intended to prevent the actual filing of multiple petitions/complaints involving identical causes of action, subject matter and issues in other tribunals or agencies as a form of forum shopping. This is rooted in the principle that a party-litigant should not be allowed to pursue simultaneous remedies in different forums, as this practice is detrimental to orderly judicial procedure. Although not jurisdictional, the requirement of a certification of non-forum shopping is mandatory. The rule requires that a certification against forum shopping J should be appended to or incorporated in the initiatory pleading filed before the court. The rule also requires that the party, not counsel, must certify under oath that he has not commenced any other action involving the same issue in the court or any other tribunal or agency.

The requirement that the certification of non-forum shopping should be executed and signed by the plaintiff or principal means that counsel cannot sign said certification unless clothed with special authority to do so. The reason for this is that the plaintiff or principal knows better than anyone else whether a petition has previously been filed involving the same case or substantially the same issues. Hence, a certification signed by counsel alone is defective and constitutes a valid cause for dismissal of the petition. In the case of natural persons, the Rule requires the parties themselves to sign the certificate of non-forum shopping. However, in the case of the corporations, the physical act of signing may be performed, on behalf of the corporate entity, only by specifically authorized individuals for the simple reason that corporations, as artificial persons, cannot personally do the task themselves. It cannot be gainsaid that obedience to the requirements of procedural rules is needed if we are to expect fair results therefrom. Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal construction.30

Philippine Airlines, for its part, states that:

The required certification of non-forum shopping must be valid at the time of filing of the petition .. An invalid certificate cannot be remedied by the subsequent submission of a Secretary's Certificate that vests authority only after the petition had been filed. 31

As pointed out by the Court of Appeals, 32 however, the strict posturing of these Decisions are not entirely suitable for this case. Both Philippine Public School Teachers Association and Philippine Airlines involved petitions filed before the Court of Appeals, that is, petitions in judicial proceedings. What is involved here is a quasi-judicial proceeding that is "unfettered by the strict application of the technical rules of procedure imposed in judicial proceedings."33

In any case, even in judicial proceedings, this Court has rebuked an overly strict application of the rules pertaining to certifications of non-forum shopping.1âwphi1

In Pacquing v. Coca-Cola Philippines, Inc.:34

[T]he rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective. Strict compliance with the provision regarding the certificate of non-forum shopping underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded. It does not, however, prohibit substantial compliance therewith under justifiable circumstances, considering especially that although it is obligatory, it is notjurisdictional.35

Thus, in Pacquing, this Court held that while, as a rule, "the certificate of non-forum shopping must be signed by all the plaintiffs in a case and the signature of only one of them is insufficient,"36 still, "when all the petitioners share a common interest and invoke a common cause of action or defense, the signature of only one of them in the certification against forum shopping substantially complies with the rules."37

Likewise, in Peak Ventures Corp. v. Heirs of Villareal, 38 we did not consider as fatally defective the fact that a petition for review on certiorari's verification and certification of non-forum shopping was dated November 6, 2008, while the petition itself was dated November 10, 2008.39 We state:

With respect to the requirement of a certification of non-forum shopping, "[t]he fact that the [Rules] require strict compliance merely underscores its mandatory nature that it cannot be dispensed with or its requirements altogether disregarded, but it does not thereby interdict substantial compliance with its provisions under justifiable circumstances. "40

Even petitioner's own cited case, Philippine Public School Teachers Association v. Heirs of lligan,41 repudiates her position. The case involved a petition for review filed before the Court of Appeals by the Philippine Public School Teachers Association.42 The verification and certification of nonforum shopping of the petition was signed by a certain Ramon G. Asuncion, Jr. without an accompanying board resolution or secretary's certificate attesting to his authority to sign. The petition for review was dismissed by the Court of Appeals "for being 'defective in substance,' there being no proof that Asuncion had been duly authorized by [the Philippine Public School Teachers Association] to execute and file a certification of nonforum shopping in its behalf."43

This Court acknowledged that, in the strict sense, the Court of Appeals was correct: "The ruling of the [Court of Appeals] that [the Philippine Public School Teachers Association] was negligent when it failed to append in its petition a board resolution authorizing petitioner Asuncion to sign the certification of non-forum shopping in its behalf is correct.'44

However, this Court did not end at that. It went on to state that "a strict application of [the rule] is not called for": 45

We have reviewed the records, however, and find that a strict application of Rule 42, in relation to Section 5, Rule 7 of the Revised Rules of Court is not called for. As we held in Huntington Steel Products, Inc. v. National Labor Relations Commission, while the requirement of strict compliance underscores the mandatory nature of the rule, it does not necessarily interdict substantial compliance with its provisions under justifiable circumstances. The rule should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective which is the goal of all rules of procedure, that is, to achieve justice as expeditiously as possible. A liberal application of the rule may be justified where special circumstances or compelling reasons are present.

Admittedly, the authorization of petitioner PPSTA's corporate secretary was submitted to the appellate court only after petitioners received the comment of respondents. However, in view of the peculiar circumstances of the present case and in the interest of substantial justice, and considering further that petitioners submitted such authorization before the [Court of Appeals] resolved to dismiss the petition on the technical ground, we hold that, the procedural defect may be set aside pro hac vice. Technical rules of procedure should be rules enjoined to facilitate the orderly administration of justice. The liberality in the application of rules of procedure may not be invoked if it will result in the wanton disregard of the rules or cause needless delay in the administration of justice. Indeed, it cannot be gainsaid that obedience to the requirements of procedural rule is needed if we are to expect fair results therefrom.46 (Emphasis supplied)

The "peculiar circumstances"47 in Philippine Public School Teachers Association pertained to a finding that the signatory of the verification and certification of non-forum shopping, Ramon G. Asuncion, Jr., was "the former Acting General Manager"48 of the Philippine Public School Teachers Association and was, thus, previously "authorized to sign a verification and certification of non-forum shopping"49 on behalf of the Association. By the time the Association actually filed its petition before the Court of Appeals, however, his authority as the Acting General Manager had ceased, and the Association's Board of Directors needed to give him specific authority to sign a certification of non-forum shopping:

We agree with respondents' contention that when they filed their complaint in the MTC, they impleaded petitioner Asuncion as party defendant in his capacity as the Acting General Manager of petitioner PPST A. As such officer, he was authorized to sign a verification and certification of non-forum shopping. However, he was no longer the Acting General Manager when petitioners filed their petition in the CA, where he was in fact referred to as "the former Acting General Manager." Thus, at the time the petition was filed before the CA, petitioner Asuncion's authority to sign the verification and certification of non-forum shopping for and in behalf of petitioner PPSTA ceased to exist. There was a need for the board of directors of petitioner PPS TA to authorize him to sign the requisite certification of non-forum shopping, and to append the same to their petition as Annex thereof. 50

We find this case to be attended by analogous circumstances. As pointed out by the Court of Appeals, respondent's counsel, Balgos and Perez, has been representing respondent (and signing documents for it) "since the [original] Petition for Cancellation of Letter Patent No. UM-7789 was filed." 51 Thus, its act of signing for respondent, on appeal before the Director General of the Intellectual Property Office, was not an aberration. It was a mere continuation of what it had previously done.

It is reasonable, therefore-consistent with the precept of liberally applying procedural rules in administrative proceedings, and with the room allowed by jurisprudence for substantial compliance with respect to the rule on certifications of non-forum shopping-to construe the error committed by respondent as a venial lapse that should not be fatal to its cause. We see here no "wanton disregard of the rules or [the risk of] caus[ing] needless delay in the administration of justice."52 On the contrary, construing it as such will enable a full ventilation of the parties' competing claims. As with Philippine Public School Teachers Association, we consider it permissible to set aside, pro hac vice, the procedural defect. 53 Thus, we sustain the ruling of the Court of Appeals.

WHEREFORE, the Petition is DENIED. The assailed January 8, 2009 Decision and the March 2, 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 105595 are AFFIRMED.

SO ORDERED.

MARVIC M.V.F. LEONEN
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA Associate Justice

JOSE CATRAL MENDOZA Associate Justice

FRANCIS H. JARDELEZA
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO
Chief Justice

Footnotes

1 Rollo, pp. 3-19. The Petition was filed under Rule 45 of the Rules of Court.

2 Id. at 24-42. The Decision was penned by Associate Justice Celia C. Librea-Leagogo and concurred in by Associate Justices Mariano C. Del Castillo (now Associate Justice of this Court) and Apolinario D. Bruse las, Jr. of the Twelfth Division, Court of Appeals, Manila.

3 Id. at 21-22. The Resolution was penned by Associate Justice Celia C. Librea-Leagogo and concurred in by Associate Justices Mariano C. Del Castillo (now Associate Justice of this Court) and Apolinario D. Bruselas, Jr. of the Twelfth Division, Court of Appeals, Manila.

4 Id. at 44-45.

5 Id. at 48-62. The Decision was penned by Director Estrellita Beltran-Abelardo.

6 Id. at 62.
7 Id. at 48.
8 Id. at 25.
9 Id.
10 Id. at 48-62.
11 Id. at 58.

12 Id. at 87-89. The Resolution was penned by Director Estrellita Beltran-Abelardo.

13 Id. at 44.
14 Id.
15 Id.
16 Id.
17 Id.
18 Id.
19 Id. at 44-45.
20 Id. at 45.
21 Id.
22 Id. at 24-42.
23 Id. at 40.
24 Id. at 21-22.
25 IPO Office 0. No. 12 (2002).
26 REGULATIONS ON INTER PARTES PROCEEDINGS (1998)' Rule 2, sec. 6.

27 Samalio v. Court of Appeals, 494 Phil. 456, 464 (2005) [Per J. Corona, En Banc], citing Bantolino, et al. v. Coca-Cola Bottlers Phils., Inc., 451 Phil. 839, 846 (2003) [Per J. Bellosillo, Second Division]; De las Santos v. National Labor Relations Commission, et al., 423 Phil. 1020, 1034 (2001) [Per J. Bellosillo, Second Division]; and Emin v. De Leon, et al., 428 Phil. 172, 186-187 (2002) [Per J. Quisumbing, En Banc].

28 528 Phil. 1197 (2006) [Per J. Callejo, Sr., First Division].
29 515 Phil. 579 (2006) [Per J. Azcuna, Second Division].

30 Philippine Public School Teachers Association v. Heirs of Iligan, 528 Phil. 1197, 1209-1210 (2006) [Per J. Callejo, Sr., First Division], citing RULES OF COURT, Rule 42, sec. 3; Republic v. Carmel Development, Inc., 427 Phil. 723, 743 (2002) [Per J. Carpio, Third Division]; and Hydro Resources Contractors Corporation v. National Irrigation Administration, 484 Phil. 581, 597-598 (2004) [Per J. Ynares-Santiago, First Division].

31 Philippine Airlines, Inc. v. Flight Attendants & Stewards Association of the Philippines, 515 Phil. 579, 582-583 (2006) [Per J. Azcuna, Second Division].

32 Rollo, p. 39.
33 Id.

34 567 Phil. 323 (2008) [Per J. Austria-Martinez, Third Division].

35 Id. at 332-333, citing Iglesia ni Cristo v. Pof!ferrada, 536 Phil. 705, 718-719 (2006) [Per J. Callejo, Sr., First Division]; HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association, 458 Phil. 392, 398-400 (2003) [Per J. Corona, Third Division]; Bank of the Philippine Islands v. Court of Appeals, 450 Phil. 532, 540 (2003) [Per J. Panganiban, Third Division]; Cavile v. Heirs of Cavile, 448 Phil. 302, 311 (2003) [Per J. Puno, Third Division]; Twin Towers Condominium Corporation v. Court of Appeals, 446 Phil. 280, 298 (2003) [Per J. Carpio, First Division]; Solmayor v. Arroyo, 520 Phil. 854, 869-870 (2006) [Per J. Chico-Nazario, First Division]; Cua v. Vargas, 536 Phil. 1082, 1096 (2006) [Per J. Azcuna, Second Division]; Heirs of Dicman v. Carino, 523 Phil. 630, 651-653 (2006) [Per J. Austria-Martinez, First Division]; and Heirs of Agapito T. Olarte v. Office of the President of the Philippines, 499 Phil. 562, 651-653 (2005) [Per J. YnaresSantiago, First Division].

36 Id. at 332.

37 Id. at 333, citing Cua v. Vargas, 536 Phil. 1082, 1096 (2006) [Per J. Azcuna, Second Division]; San Miguel Corporation v. Aballa, 500 Phil. I 70, 190-194 (2005) [Per J. Carpio Morales, Third Division]; and Espina v. Court of Appeals, 548 Phil. 255, 270-271 (2007) [Per J. Chico-Nazario, Third Division].

38 G.R. No. 184618, November 19, 2014, 741 SCRA 43 [Per J. Del Castillo, Second Division].

39 Id. at 53-55.

40 Id. at 54, citing Huntington Steel Products, Inc. v. National Labor Relations Commission, 485 Phil. 227, 235 (2004) [Per J. Quisumbing, First Division].

41 528 Phil. 1197 (2006) [Per J. Callejo, Sr. First Division].
42 Id. at 1203.
43 Id. at 1204, as cited in rollo, p. 44.
44 Id. at 1211.
45 Id.

46 Id. at 1211-1212, citing Huntington Steel Products, Inc. v. National Labor Relations Commission, 485 Phil. 227, 235 (2004) [Per J. Quisumbing, First Division]; Marcopper Mining Corporation v. Solidbank Corporation, 476 Phil. 415, 443-441 (2004) [Per J. Callejo, Sr., Second Division]; and Pet Plans, Inc. v. Court of Appeals, 486 Phil. 112, 121 (2004) [Per J. Austria-Martinez, Second Division].

47 Id. at 1212.
48 Id. at 1210.
49 Id.

50 Id., citing Novelty Philippines, Inc. v. Court of Appeals, 458 Phil. 36, 44-45 (2003) [Per J. Panganiban, Third Division].

51 Rollo, p. 38.

52 Philippine Public School Teachers Association v. Heirs of lligan, 528 Phil. 1197, 1212 (2006) [Per J. Callejo, Sr., First Division].

53 Id.