Republic of the Philippines

SUPREME COURT
Manila

After due posting and publication of the requisite notices, and since no oppositor
registered any oppositions after the petitioner met the jurisdictional requirements, the
court a quo issued an order of general default against the whole world, and the
petitioner was allowed to present evidence ex-parte.9

FIRST DIVISION
G.R. No. 188956

The petitioner then presented as its witness, Ms. Alma P. Aban (Ms. Aban), its Vice
President and Head of its Asset Enhancement Office. She testified, inter alia, that:
among her main duties is to ensure that the properties and assets of petitioner,
especially real property, are legally titled and freed of liens and encumbrances; the
subject properties were acquired by the petitioner through a land grant under
Presidential Proclamation No. 1218; prior to Presidential Proclamation No. 1218, the
Republic of the Philippines was in open, continuous, exclusive, notorious, and
peaceful possession and occupation of the subject properties in the concept of an
owner to the exclusion of the world since time immemorial; petitioner, after the
Republic of the Philippines transferred ownership of the subject properties to it,
assumed open, continuous, exclusive, notorious, and peaceful possession and
occupation, and exercised control over them in the concept of owner, and likewise
assumed the obligations of an owner; petitioner has been paying the real estate taxes
on the subject properties; and the subject properties are not mortgaged, encumbered,
or tenanted.10

March 20, 2013

ARMED FORCES OF THE PHILIPPINES RETIREMENT AND SEPARATION

BENEFITS SYSTEM, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 assailing the Orders
dated February 17, 20091 and July 9, 20092 of the Regional Trial Court (RTC) of Pasig
City, Branch 68, in Land Registration Case No. N-11517.

Subsequently, petitioner submitted its Formal Offer of Evidence,11 following which, the
court a quo granted the application in a Decision dated April 21, 2008. The dispositive
portion of the said decision reads:

The first Order reconsidered and recalled the Decision of the RTC dated April 21,
2008, which granted the- application for land registration of petitioner Armed Forces
of the Philippines Retirement and Separation Benefits System. The second Order
denied the Motion for Reconsideration filed by the petitioner.

WHEREFORE, finding the Petition meritorious, the Court DECLARES, CONFIRMS

AND ORDERS the registration of AFPRSBS title thereto.

Petitioner was "created under Presidential Decree (P.D.) No. 361,4 as amended, and
was designed to establish a separate fund to guarantee continuous financial support
to the Armed Forces of the Philippines military retirement system as provided for in
Republic Act No. 340."5

As soon as this Decision shall have become final and after payment of the required
fees, let the corresponding Decree be issued in the name of Armed Forces of the
Philippines Retirement and Separation Benefits System.
Let copies of this Decision be furnished the Office of the Solicitor General, Land
Registration Authority, Land Management Bureau and the Registry of Deeds, Taguig
City, Metro Manila.

Petitioner filed an Application for Registration of Title6 over three parcels of land
located in West Bicutan, Taguig City, before the RTC of Pasig City. The said
application was later docketed as LRC Case No. N-11517 and raffled to Branch 68 of
the court a quo.

SO ORDERED.12
These three parcels of land constitute a land grant by virtue of Presidential
Proclamation No. 1218, issued by former President Fidel V. Ramos on May 8, 1998.7

In response, the Office of the Solicitor General (OSG) filed a Motion for
Reconsideration13 dated May 12, 2008, wherein it argued that the petitioner failed to
prove that it has personality to own property in its name and the petitioner failed to
show that the witness it presented was duly authorized to appear for and in its behalf.

The application was filed by Mr. Honorio S. Azcueta (Mr. Azcueta), the then Executive
Vice President and Chief Operating Officer of the petitioner, who was duly authorized
to do so by the Board of Trustees of the petitioner, as evidenced by a notarized
Secretarys Certificate8 dated August 18, 2003.

On June 2, 2008, petitioner filed its Comment/Opposition.14

On February 17, 2009, the court a quo issued the assailed Order granting the Motion
for Reconsideration of the OSG on the ground that the petitioner failed to prosecute
its case. The dispositive portion of the assailed Order reads:

other words, unless there be a qualification in the order of dismissal that it is without
prejudice, the dismissal should be regarded as an adjudication on the merits and is
with prejudice. (Emphasis supplied.)

WHEREFORE, premises considered, the OSGs motion for reconsideration is

GRANTED. The Courts Decision of April 21, 2008 is hereby RECONSIDERED and
RECALLED, and a new one issued DISMISSING this Application for Registration of
Title for failure to prosecute.

Clearly, the court a quos basis for pronouncing that the petitioner failed to prosecute
its case is not among those grounds provided by the Rules. It had no reason to
conclude that the petitioner failed to prosecute its case. First, the petitioner did not fail
to appear at the time of the trial. In fact, the Decision of the RTC dated April 21, 2008
ordering the registration of petitioners title to the subject lots shows that the petitioner
appeared before the Court and was represented by counsel. Records would also
reveal that the petitioner was able to present its evidence, and as a result, the RTC
rendered judgment in its favor.

SO ORDERED.15
The Motion for Reconsideration16 of petitioner was denied by the court a quo in the
other assailed Order17 dated July 9, 2009. Hence, this petition.

Second, the petitioner did not fail to prosecute the subject case considering that it
appeared during trial, presented Ms. Aban, who gave competent testimony as regards
the titling of the subject lots, and the court a quo never held petitioner liable for any
delay in prosecuting the subject case.

The issue to be resolved in the present case is whether the court a quo acted
contrary to law and jurisprudence when it dismissed petitioners application for land
registration on the ground that petitioner failed to prosecute the subject case.

Third, a perusal of the records would demonstrate that the petitioner did not fail to
comply with the Rules or any order of the court a quo, as there is no ruling on the part
of the latter to this effect.

We answer in the affirmative.

The reason of the court a quo in dismissing petitioners application for land
registration on the ground of failure to prosecute was the lack of authority on the part
of Ms. Aban to testify on behalf of the petitioner.

Indeed, there was no basis for the court a quos ruling that the petitioner failed to
prosecute the subject case, because none of the grounds provided in the Rules for
dismissing a case due to failure to prosecute is present. That the RTC dismissed the
application for land registration of the petitioner for failure to prosecute after the
petitioner presented all its evidence and after said court has rendered a decision in its
favor, is highly irregular.

However, Section 3, Rule 17 of the 1997 Rules of Civil Procedure, as amended,

provides only three instances wherein the Court may dismiss a case for failure to
prosecute:
Sec. 3. Dismissal due to fault of plaintiff.If, for no justifiable cause, the plaintiff fails to
appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules
or any order of the court, the complaint may be dismissed upon motion of the
defendant or upon the courts own motion, without prejudice to the right of the
defendant to prosecute his counterclaim in the same or in a separate action. This
dismissal shall have the effect of an adjudication upon the merits, unless otherwise
declared by the court.
Jurisprudence has elucidated on this matter in De Knecht v. CA:

At this juncture, it would be appropriate to discuss the basis of the court a quo in
dismissing the petitioners application for land registration for failure to prosecute
the alleged lack of authority of the witness, Ms. Aban, to testify on behalf of the
petitioner.
The assailed Order held as follows:
With things now stand, the Court believes that OSG was correct in observing that
indeed the AFPRSBS did not present its duly authorized representative to prosecute
this case. And the records support the observation since AFPRSBS presented only
one witness Mrs. Aban. In view of the foregoing the Court is left without choice than
to grant OSGs motion for reconsideration.19

18

An action may be dismissed for failure to prosecute in any of the following instances:
(1) if the plaintiff fails to appear at the time of trial; or (2) if he fails to prosecute the
action for an unreasonable length of time; or (3) if he fails to comply with the Rules of
Court or any order of the court. Once a case is dismissed for failure to prosecute, this
has the effect of an adjudication on the merits and is understood to be with prejudice
to the filing of another action unless otherwise provided in the order of dismissal. In

However, there is no substantive or procedural rule which requires a witness for a

party to present some form of authorization to testify as a witness for the party
presenting him or her. No law or jurisprudence would support the conclusion that such
omission can be considered as a failure to prosecute on the part of the party

presenting such witness. All that the Rules require of a witness is that the witness
possesses all the qualifications and none of the disqualifications provided therein.
Rule 130 of the Rules on Evidence provides:

said application. The asseveration that the subject case was not prosecuted by a duly
authorized representative of the petitioner is thus unfounded.
Interestingly enough, the respondent itself agrees with the petitioner that the
dismissal of the subject application by the court a quo on the ground of failure to
prosecute due to lack of authority of the sole witness of the petitioner is unfounded
and without legal basis.24

SEC. 20. Witnesses; their qualifications.Except as provided in the next succeeding

section, all persons who can perceive, and perceiving, can make known their
perception to others, may be witnesses.
xxxx

WHEREFORE, the petition for review on certiorari is GRANTED. The Orders of the
Regional Trial Court dated February 17, 2009 and July 9, 2009 are REVERSED AND
SET ASIDE. The Decision of the Regional Trial Court dated April 21, 2008, granting
the Application for Registration of Title of the petitioner is hereby REINSTATED and
UPHELD.

Cavili v. Judge Florendo20 speaks of the disqualifications:

Sections 19 and 20 of Rule 130 provide for specific disqualifications.1wphi1 Section
19 disqualifies those who are mentally incapacitated and children whose tender age
or immaturity renders them incapable of being witnesses. Section 20 provides for
disqualification based on conflicts of interest or on relationship. Section 21 provides
for disqualifications based on privileged communications. Section 15 of Rule 132 may
not be a rule on disqualification of witnesses but it states the grounds when a witness
may be impeached by the party against whom he was called.

No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT

x x x The specific enumeration of disqualified witnesses excludes the operation of

causes of disability other than those mentioned in the Rules. It is a maxim of
recognized utility and merit in the construction of statutes that an express exception,
exemption, or saving clause excludes other exceptions. (In Re Estate of Enriquez, 29
Phil. 167) As a general rule, where there are express exceptions these comprise the
only limitations on the operation of a statute and no other exception will be implied.
(Sutherland on Statutory Construction, Fourth Edition, Vol. 2A, p. 90) The Rules
should not be interpreted to include an exception not embodied therein. (Emphasis
supplied.)

THIRD DIVISION
G.R. No. 143439 October 14, 2005
MAXIMO ALVAREZ, Petitioner,
vs.
SUSAN RAMIREZ, Respondent.

A reading of the pertinent law and jurisprudence would show that Ms. Aban is
qualified to testify as a witness for the petitioner since she possesses the
qualifications of being able to perceive and being able to make her perceptions known
to others. Furthermore, she possesses none of the disqualifications described above.

DECISION
SANDOVAL-GUTIERREZ, J.:

The RTC clearly erred in ordering the dismissal of the subject application for land
registration for failure to prosecute because petitioners witness did not possess an
authorization to testify on behalf of petitioner. The court a quo also erred when it
concluded that the subject case was not prosecuted by a duly authorized
representative of the petitioner. The OSG and the court a quo did not question the
Verification/Certification21 of the application, and neither did they question the
authority of Mr. Azcueta to file the subject application on behalf of the petitioner. Case
records would reveal that the application was signed and filed by Mr. Azcueta in his
capacity as the Executive Vice President and Chief Operating Officer of the petitioner,
as authorized by petitioners Board of Trustees.22 The authority of Mr. Azcueta to file
the subject application was established by a Secretarys Certificate23 attached to the

Before us is a petition for review on certiorari1 assailing the Decision2 of the Court of
Appeals dated May 31, 2000 in CA-G.R. SP No. 56154, entitled "Susan
Ramirez, petitioner, versus, Hon. Benjamin M. Aquino, Jr., as Judge RTC, Malabon,
MM, Br. 72, and Maximo Alvarez, respondents."
Susan Ramirez, herein respondent, is the complaining witness in Criminal Case No.
19933-MN for arson3pending before the Regional Trial Court, Branch 72, Malabon
City. The accused is Maximo Alvarez, herein petitioner. He is the husband of
Esperanza G. Alvarez, sister of respondent.

On June 21, 1999, the private prosecutor called Esperanza Alvarez to the witness
stand as the first witness against petitioner, her husband. Petitioner and his counsel
raised no objection.

Q: When you were able to find the source, incidentally what was the source of that
scent?

Esperanza testified as follows:

A: When I stand by the window, sir, I saw a man pouring the gasoline in the house of
my sister (and witness pointing to the person of the accused inside the court room).

"ATTY. ALCANTARA:

Q: For the record, Mrs. Witness, can you state the name of that person, if you know?

We are calling Mrs. Esperanza Alvarez, the wife of the accused, Your Honor.

A: He is my husband, sir, Maximo Alvarez.

COURT:

Q: If that Maximo Alvarez you were able to see, can you identify him?

Swear in the witness.

A: Yes, sir.

xxx

Q: If you can see him inside the Court room, can you please point him?

ATTY. MESIAH: (sic)

A: Witness pointing to a person and when asked to stand and asked his name, he
gave his name as Maximo Alvarez."4

Your Honor, we are offering the testimony of this witness for the purpose of proving
that the accused Maximo Alvarez committed all the elements of the crime being
charged particularly that accused Maximo Alvarez pour on May 29, 1998 gasoline in
the house located at Blk. 5, Lot 9, Phase 1-C, Dagat-dagatan, Navotas, Metro Manila,
the house owned by his sister-in-law Susan Ramirez; that accused Maximo Alvarez
after pouring the gasoline on the door of the house of Susan Ramirez ignited and set
it on fire; that the accused at the time he successfully set the house on fire (sic) of
Susan Ramirez knew that it was occupied by Susan Ramirez, the members of the
family as well as Esperanza Alvarez, the estranged wife of the accused; that as a
consequence of the accused in successfully setting the fire to the house of Susan
Ramirez, the door of said house was burned and together with several articles of the
house, including shoes, chairs and others.

In the course of Esperanzas direct testimony against petitioner, the latter showed
"uncontrolled emotions," prompting the trial judge to suspend the proceedings.
On June 30, 1999, petitioner, through counsel, filed a motion5 to disqualify Esperanza
from testifying against him pursuant to Rule 130 of the Revised Rules of Court on
marital disqualification.
Respondent filed an opposition6 to the motion. Pending resolution of the motion, the
trial court directed the prosecution to proceed with the presentation of the other
witnesses.
On September 2, 1999, the trial court issued the questioned Order disqualifying
Esperanza Alvarez from further testifying and deleting her testimony from the
records.7 The prosecution filed a motion for reconsideration but was denied in the
other assailed Order dated October 19, 1999.8

COURT:
You may proceed.
xxx

This prompted respondent Susan Ramirez, the complaining witness in Criminal Case
No. 19933-MN, to file with the Court of Appeals a petition for certiorari9 with
application for preliminary injunction and temporary restraining order.10

DIRECT EXAMINATION
ATTY. ALCANTARA:

On May 31, 2000, the Appellate Court rendered a Decision nullifying and setting aside
the assailed Orders issued by the trial court.

xxx
Hence, this petition for review on certiorari.

The issue for our resolution is whether Esperanza Alvarez can testify against her
husband in Criminal Case No. 19933-MN.

offense directly attacks, or directly and vitally impairs, the conjugal relation, it comes
within the exception to the statute that one shall not be a witness against the other
except in a criminal prosecution for a crime committee (by) one against the other."

Section 22, Rule 130 of the Revised Rules of Court provides:

Obviously, the offense of arson attributed to petitioner, directly impairs the conjugal
relation between him and his wife Esperanza. His act, as embodied in the Information
for arson filed against him, eradicates all the major aspects of marital life such as
trust, confidence, respect and love by which virtues the conjugal relationship survives
and flourishes.

"Sec. 22. Disqualification by reason of marriage. During their marriage, neither the
husband nor the wife may testify for or against the other without the consent of the
affected spouse, except in a civil case by one against the other, or in a criminal case
for a crime committed by one against the other or the latters direct descendants or
ascendants."

As correctly observed by the Court of Appeals:

The reasons given for the rule are:
"The act of private respondent in setting fire to the house of his sister-in-law Susan
Ramirez, knowing fully well that his wife was there, and in fact with the alleged intent
of injuring the latter, is an act totally alien to the harmony and confidences of marital
relation which the disqualification primarily seeks to protect. The criminal act
complained of had the effect of directly and vitally impairing the conjugal relation. It
underscored the fact that the marital and domestic relations between her and the
accused-husband have become so strained that there is no more harmony, peace or
tranquility to be preserved. The Supreme Court has held that in such a case, identity
is non-existent. In such a situation, the security and confidences of private life which
the law aims to protect are nothing but ideals which through their absence, merely
leave a void in the unhappy home. (People v. Castaeda, 271 SCRA 504). Thus,
there is no longer any reason to apply the Marital Disqualification Rule."

1. There is identity of interests between husband and wife;

2. If one were to testify for or against the other, there is consequent danger of perjury;
3. The policy of the law is to guard the security and confidences of private life, even at
the risk of an occasional failure of justice, and to prevent domestic disunion and
unhappiness; and
4. Where there is want of domestic tranquility there is danger of punishing one
spouse through the hostile testimony of the other.11
But like all other general rules, the marital disqualification rule has its own exceptions,
both in civil actions between the spouses and in criminal cases for offenses
committed by one against the other. Like the rule itself, the exceptions are backed by
sound reasons which, in the excepted cases, outweigh those in support of the general
rule. For instance, where the marital and domestic relations are so strained that there
is no more harmony to be preserved nor peace and tranquility which may be
disturbed, the reason based upon such harmony and tranquility fails. In such a case,
identity of interests disappears and the consequent danger of perjury based on that
identity is non-existent. Likewise, in such a situation, the security and confidences of
private life, which the law aims at protecting, will be nothing but ideals, which through
their absence, merely leave a void in the unhappy home.12

It should be stressed that as shown by the records, prior to the commission of the
offense, the relationship between petitioner and his wife was already strained. In fact,
they were separated de facto almost six months before the incident. Indeed, the
evidence and facts presented reveal that the preservation of the marriage between
petitioner and Esperanza is no longer an interest the State aims to protect.

In Ordoo vs. Daquigan,13 this Court held:

WHEREFORE, the Decision of the Court of Appeals is AFFIRMED. The trial court,
RTC, Branch 72, Malabon City, is ordered to allow Esperanza Alvarez to testify
against petitioner, her husband, in Criminal Case No. 19933-MN. Costs against
petitioner.

At this point, it bears emphasis that the State, being interested in laying the truth
before the courts so that the guilty may be punished and the innocent exonerated,
must have the right to offer the direct testimony of Esperanza, even against the
objection of the accused, because (as stated by this Court in Francisco14), "it was the
latter himself who gave rise to its necessity."

"We think that the correct rule, which may be adopted in this jurisdiction, is that laid
down in Cargil vs. State, 35 ALR 133, 220 Pac. 64, 25 Okl. 314, wherein the court
said:

SO ORDERED.
The rule that the injury must amount to a physical wrong upon the person is too
narrow; and the rule that any offense remotely or indirectly affecting domestic
harmony comes within the exception is too broad. The better rule is that, when an

party is dead or insane, must be applied strictly in accordance with their express
wording, irrespective of their spirit. The law uses the word against an executor or
administrator or other representative of a deceased person. It should be noted that
after the mention of an executor or administrator the words or other representative
follows, which means that the word representative includes only those who, like the
executor or administrator, are sued in their representative, not personal, capacity. And
that is emphasized by the law by using the words against the estate of such
deceased persons, which convey the idea of an estate actually owned by the
deceased at the time the case was brought and that, therefore, it is only his rights that
are to be asserted and defendant in the litigation by the person representing him, not
the personal rights of such representative." (Moran, ibid., pp. 169-171)

FIRST DIVISION
[G.R. No. L-58164. September 2, 1983.]
JOSE GUERRERO, MARIA GUERRERO, MAGDALENA GUERRERO ESPIRITU,
assisted by her husband CANDIDO ESPIRITU, GREGORIO GUERRERO, CLARA
GUERRERO, Et Al., Petitioner, v. ST. CLARES REALTY CO., LTD., GUILLERMO
T. GUERRERO, CECILIA GUERRERO, assisted by ANGELO CARDEO,
PERLINDA GUERRERO, etc., Et Al., Respondents.

3. ID.; ID.; IMPROVIDENT EXCLUSION AND PRECLUSION FROM PRESENTING

FURTHER PROOF; CASE AT BAR. Prior to the issuance of the courts order of
June 14, 1974, by which the plaintiffs were "deemed to have waived their right to
further present or formally offer their evidence," the following had testified as
witnesses of the plaintiffs, namely: Alfredo Zamora, Roman Mataverde, Moises
Javillionar, Dominador Ramirez, Bonifacio Sumulong, Frisco Cervantes, Laura
Cervantes and Jose Cervantes. It was error to hold that the testimonial evidence
should have been formally offered, or that without such offer, such evidence was
waived. The offer of testimonial evidence is effected by calling the witness to the
stand and letting him testify before the court upon appropriate questions. (Moran,
Comments on the Revised Rules of Court, Vol. 6, 1970 ed., p. 122)

Romeo J. Callejo, for Petitioners.

Poblador, Nazareno, Azada, Tomacruz & Paredez Law Offices for respondent
United Housing Corp.
Neptali Gonzales & Associates for respondent Guerreros.
F.B. Santiago & Associates for respondent St. Clares Realty Co., Ltd.

SYLLABUS

4. ID.; JUDGMENT RENDERED SOLELY ON THE BASIS OF DEFENDANTS

EVIDENCE DISREGARDING THAT OF THE PLAINTIFFS; REMAND TO TRIAL
COURT PROPER RECOURSE. The trial court rendered its decision solely on the
basis of the defendants evidence and without regard to the proofs that the plaintiffs
had presented on July 17, 1974 before the Court of Appeals could finally resolve
plaintiffs petition to disqualify the trial judge. As modified by the Court of Appeals, the
decision sentences the plaintiffs to pay damages and attorneys feet, apart from the
costs of suit, in the staggering amount of Two Million One Hundred Eighty Three
Thousand and Five Hundred (P12,183,500.00) Pesos, without plaintiffs having been
gives, the chance to complete their evidence, to cross-examine the witnesses of the
defense, and to present rebuttal evidence. The way the trial court and the Court of
Appeals proceeded in this case, litigation became more a game of technicalities than
a proceeding to search the truth and mete justice. No other fairer course of action is
demanded but for this Court to remand the case for further proceedings.

1. REMEDIAL LAW; EVIDENCE; WITNESSES; INCOMPETENCY UNDER SEC.

20(a), RULE 130, RULES OF COURT, CONSTRUED. The plain truth is that Laura
Cervantes and Jose Cervantes are not parties in the present case, and neither are
they assignors of the parties nor "persons in whose behalf a case is prosecuted."
They are mere witnesses by whose testimonies the plaintiffs aimed to establish that it
was not Cristina Guerrero, but Andres Guerrero, who owned the disputed land at the
time of its alleged sale to Manuel Guerrero; that Cristina Guerrero did not really sell
but merely mortgaged the property to Manuel Guerrero. It may be said that
competency to testify established in Sec. 20(a), Rule 130, Rules of Court, affects only
the persons therein mentioned, and no others, that is, only parties plaintiff or their
assignors, persons in whose behalf a case is prosecuted. Mere witnesses who are
neither parties plaintiff, nor their assignors, nor persons in whose behalf a case is
prosecuted, are not included in the prohibition. (Moran, Comments on the Rules of
Court, 1970 ed., Vol. 5, p. 166) By excluding the testimonies of the two witnesses and
by barring them from further testifying, upon reasoning that unduly strained the
meaning of the provisions of the Rules of Court relied upon, the trial court deprived
itself of the opportunity of knowing the truth in this case.

DECISION

VASQUEZ, J.:

2. ID.; ID.; ID.; DEAD MANS RULE; INAPPLICABLE IN THE CASE AT BAR. The
present case is not a claim or demand against the estate of the deceased Manuel
Guerrero. The defendants Guerreros are not the executors or administrators or
representatives of such deceased. They are being sued as claimants of ownership in
their individual capacities of the disputed lot. The lot is not a part of the estate of
Manuel Guerrero. Hence, the inapplicability of dead mans rule. "It has been held that
statutes providing that a party in interest is incompetent to testify where the adverse

In their petition for review by certiorari, petitioners are seeking a reversal of the
decision of the former Court of Appeals (now the Intermediate Appellate Court) dated
April 30, 1981 in CA-G.R No. 57597-R, and its resolution dated September 3, 1981
which denied the petitioners motion for reconsideration thereof. Our resolution of May
25, 1981 gave due course to the petition.

The action initiated by the petitioners in the Court of First Instance of Rizal prayed for
a judgment:jgc:chanrobles.com.ph

The complaints further alleged that as early as December 10, 1957, the land was
surveyed by the Bureau of Lands for and in the name of Andres Guerrero as Lot No.
4752, Case No. 4, Cadastre No. 229 of the Paraaque Cadastre. Sometime during
the latter part of 1971 certain people who introduced themselves as agents or buyers
of the land approached some of the plaintiffs in order to secure their consent to the
sale of the property. Said plaintiffs were informed that the land was titled in the name
of their cousin, Manuel Guerrero. Plaintiffs made inquiries and discovered the
following: that Manuel Guerrero was able to have the lot titled in his name on the
basis of a Deed of Sale of Land dated April 24, 1948 purportedly executed by
Cristina Guerrero; that he caused the lot to be surveyed in his name as Lot No. 4752
and he was issued advance Plan No. AP-10008 on February 28, 1962; that in the
advance plan issued to him, it was duly noted that Lot No. 4752 had been previously
surveyed for Andres Guerrero; that in 1963, Manuel Guerrero, assisted by Felicisimo
Guerrero, father of the defendants Guerreros, filed an application for registration of
land with the Court of First Instance of Rizal; that notwithstanding the opposition of
the heirs of Cristina Guerrero, the court ruled that Manuel Guerrero owned the lot;
that despite oppositors appeal to a higher court, the Register of Deeds issued
Original Certificate of Title No. 4591 to the applicant; that on September 14, 1971,
there was filed with the Register of Deeds of Rizal a "Deed of Absolute Sale"
purportedly executed by Manuel Guerrero in favor of the defendants Guerreros; that
the Register of Deeds gave due course to the registration of that deed, cancelled
OCT No. 4591 and was issued Transfer Certificate No. 339629 in its stead; that on
the same day that the deed of sale was registered, the defendants Guerreros caused
to be notarized an "Articles of Partnership" of St. Clares Realty Company, Ltd.,
constituting themselves as partners; that on September 28, 1971, the defendants
Guerreros sold the disputed lot in a "Deed of Absolute Sale" to the St. Clares Realty
Company, Ltd.; that by virtue thereof, the Register of Deeds issued TCT No. 340842
in the name of said realty company.

"1. Declaring the in existence of the Deed of Sale of Lands, Annex A hereof, and
Deeds of Absolute Sale, Annexes B and C, as well as the Original Certificate of
Title No. 4591 and Transfer Certificates of Title Nos. 339629 and 340842 of the
Registry of Deeds, null and void;
2. Declaring the plaintiffs (now petitioners) the owners in fee simple of the
aforedescribed property, pro-indiviso;
3. Ordering the private defendants (now private respondents) to reconvey to the
plaintiffs the aforedescribed lot;
4. Declaring the Joint Venture Agreement executed by the defendant partnership and
the defendant corporation null and void and ineffective insofar as the plaintiffs are
concerned;
5. Ordering the defendant Register of Deeds of Rizal to issue a new transfer
certificate of title in favor of the plaintiffs over the said lot;
6. Condemning the defendants, except the defendant Register of Deeds, to pay the
plaintiffs, actual and exemplary damages, the amounts of which they will prove during
the hearing of the instant case on the merit;
7. Condemning the defendants, except the defendant Register of Deeds, to pay to the
plaintiffs attorneys fees in the amount of P5,000.00; plus costs of suit." (Printed
Record on Appeal, pp. 116-118.)
Petitioners original and amended complaints alleged that during their lifetime the
spouses Isidoro Guerrero and Panay Ramos were the absolute owners of the
disputed property, which is a parcel of land located at San Dionisio, Paraaque, Rizal,
with an area of 42,299 square meters, more or less. The spouses had six children,
named Andres, Juliana, Aurelio, Leona, Jose and Cristina, and all surnamed
Guerrero. Panay Ramos predeceased Isidoro Guerrero. Before his demise, Isidoro
Guerrero verbally willed and ordained that the questioned lot be assigned and
adjudicated to Andres Guerrero as his share in the inheritance, the other children
having been assigned other lots. Accordingly, upon the death of Isidoro Guerrero,
Andres Guerrero physically possessed the lot and cultivated it through his tenant
Dominador Ramirez, who earned a 50% share in the net produce, the other 50%
being retained by Andres Guerrero who defrayed the cultivation expenses and real
estate taxes on the property. Shortly after the beginning of the Japanese occupation,
Andres Guerrero entrusted the land to his sister, Cristina Guerrero, and allowed her to
have the property cultivated and to retain the owners share in the harvests. The
arrangement between brother and sister was that Cristina Guerrero could continue in
the cultivation of the land and enjoyment of the owners share in the produce for as
long as she needed the property. Dominador Ramirez continued his tenancy until
shortly before the death of Andres Guerrero. Sometime in July 1943, Andres Guerrero
died survived by his widow, Segunda Laquindanum, and their children, who are the
petitioners in this case. Cristina Guerrero continued as trustee of the deceased
Andres Guerrero.chanrobles virtual lawlibrary

According to the original and amended complaints, the Deed of Sale in favor of
Manuel Guerrero was fraudulent, simulated and falsified for the reason, among
others, that Cristina Guerrero was not the owner of the land at the time she
purportedly sold it; that Manuel Guerrero obtained OCT No. 4591 in fraud of the
plaintiffs; that the Deeds of Sale to the defendants Guerreros and St. Clares Realty
Company, Ltd. and the transfer certificates of title in their favor are fraudulent and
simulated, and ineffective against the plaintiffs for the reason, among others, that at
the time of execution of the Deeds of Sale, the defendants Guerreros knew that the
property belonged to Andres Guerrero; that long after the complaint in the present
case has been filed, the plaintiffs came to know that the St. Clares Realty Company,
Ltd. executed a "Joint Venture Agreement" with the United Housing Corporation under
which the latter bound itself to develop the property into a residential subdivision; and
that the said agreement was entered into in gross and evident bad faith.
Separate answers were filed by the defendants Guerreros, St. Clares Realty
Company, Ltd. and United Housing Corporation. The defendants Guerreros alleged
that Cristina Guerrero was the absolute owner of the property; that the action of the
plaintiffs had prescribed and they are guilty of laches. St. Clare s Realty Company,
Ltd. averred that its contract with United Housing Corporation was made in good faith.
United Housing Corporation averred that there is no privity of interest between
plaintiffs and this defendant considering that the plaintiffs are not parties to the Joint
Venture Agreement.

testimony subject to such objection. (TSN, pp. 9-20, October 19, 1973.)
Issues having been joined, the case proceeded to trial.
Resuming her testimony, Laura Cervantes stated that the land was lent by Andres
Guerrero to Cristina Guerrero; that Manuel Guerrero loaned money to Cristina
Guerrero for quite some time; that shortly after the death of Cristina Guerrero, Manuel
Guerrero went to their house, accompanied by Felicisimo Guerrero, and summed up
the loans he had extended to Cristina Guerrero in the total amount of P1,900.00; and
that Felicisimo Guerrero asked Laura Cervantes to sign a piece of paper to attest to
the fact that a certain amount of money had been borrowed from Manuel
Guerrero.cralawnad

Frisco Cervantes, grandson of Cristina Guerrero, testified as a witness of the plaintiffs

that having had previous information that the disputed lot was borrowed from Andres
Guerrero and that Cristina Guerrero merely mortgaged it to Manuel Guerrero, he went
to the house of Manuel Guerrero in Barrio San Dionisio, Paraaque, Rizal, in 1968 at
the behest of the plaintiffs, to inquire about the mortgage; that in reply, Manuel
Guerrero stated that the land had been sold but it would be changed with another lot
of the same area; that in 1970, Sotero Cervantes and Laura Cervantes, children of
Cristina Guerrero, and he went to see Manuel Guerrero at the Sta. Rita Church in
Paraaque; that Sotero and Laura asked if they could get the land back, that Manuel
Guerrero answered that it were better to change the disputed lot with another parcel
of the same area and value; that as he was not satisfied with the answer, Frisco
Cervantes went to the Office of the Register of Deeds in Pasig, Rizal, where he
obtained a copy of a Deed of Sale in favor of Manuel Guerrero which he delivered to
the children of Andres Guerrero.chanroblesvirtualawlibrary

On October 24, 1973, the defendants Guerreros filed a written motion to disqualify
Laura Cervantes as a witness on the basis of Section 20(a), Rule 130, of the New
Rules of Court. The motion was opposed by the plaintiffs. On November 16, 1973, the
trial court granted the motion and declared that Laura Cervantes, Jose Cervantes as
well as other witnesses similarly situated, are disqualified to testify in the case.
On February 12, 1974, plaintiffs filed a "Motion For The Honorable Presiding Judge
Of This Honorable Court To Inhibit Himself And/Or To Transfer Case To Another
Branch." Oppositions to the said motion were filed. On April 26, 1974, the trial court
denied the motion.

Roman Mataverde, Chief Geodetic Engineer of the Bureau of Lands designated as

Officer-In-Charge of the Surveys Division, testified for the plaintiffs that in the
Bureaus Lot Data Computation Book showing the list of claimants for Lot 4752, Case
4, Cadastre 299, Paraaque, Rizal, (Exhibit A), which was surveyed on December 10,
1957, Andres Guerrero is listed as claimant. The records of the Bureau of Lands from
1957 (when Lot 4752 was cadastrally surveyed for Andres Guerrero) until 1962 show
no claimant to the property except Andres Guerrero. In 1962, the Bureau of lands
received a letter with an affidavit attached to it from Manuel Guerrero requesting that
an advance plan be made. Advance Plan No. 10008 was made without Andres
Guerrero being notified. But in the advance plan, the Bureau of Lands listed Andres
Guerrero as original claimant so that he would not be prejudiced when a case comes
to trial.

At the continuation of the trial on June 14, 1974, plaintiffs and their counsel failed to
appear despite due notice and repeated previous warnings to their lawyer. Instead of
appearing in court, plaintiffs, thru counsel, filed an urgent motion to reset the hearing,
which was opposed by the defendants. On even date, the court issued an order as
follows:jgc:chanrobles.com.ph
"In view of the non-appearance of the plaintiffs as well as their counsel for todays
hearing, they are deemed to have waived their right to further present or formally offer
their evidence in court, and on motion of defendants counsels, the Clerk of Court,
Atty. Juan A. Carambas, is hereby authorized and commissioned to receive the
evidence for the defendants. After the defendants have closed their case, they are
given 10 days within which to file their respective memoranda and the case is
deemed submitted for decision after receipt of the complete transcript of stenographic
notes." (Record on Appeal, p. 212.)

Dominador Ramirez testified that during the rainy season of 1936, Andres Guerrero
asked him to work on his land located at Barrio San Dionisio, Paraaque, Rizal, with
an area of four (4) hectares, more or less. As tenant, his agreement with Andres
Guerrero was that he would till the land in consideration of 50% of the harvests with
Andres Guerrero shouldering the cultivation expenses. From 1936 to about 1941 or
1942, he worked on the land and gave 50% of the produce to Andres Guerrero who
went personally to the field to get the same. In 1941 or 1942, he stopped working on
the land because war had broken out.

On June 22, 1974, plaintiffs filed a "Manifestation" to the effect that they did not waive
their rights to present further evidence, to cross-examine defendants witnesses, and
to present rebuttal evidence; and that they were reserving the exercise of those rights
upon the finality of the decision of the Court of Appeals in a petition for certiorari,
prohibition and mandamus against the Presiding Judge of the trial court, which they
were then preparing to file.

On October 19, 1973, Laura Cervantes testified that her mother, Cristina Guerrero,
had been sick for a long time before she died at the age of 80 years in 1948; and that
her mother could walk only inside their house in Paraaque; that the money spent for
the illness of her mother came from Manuel Guerrero; and that, through her children,
Cristina Guerrero could ask money from Manuel Guerrero because of the land that
Andres Guerrero had lent to her.

Indeed, on June 25, 1974, plaintiffs instituted the said special civil action, which was
docketed in the Court of Appeals as its CA-G.R. No. SF-03120. The action sought the
disqualification of the trial judge from continuing with the hearing of the case. On June
27, 1974, the Court of Appeals denied the petition outright. Copy of the resolution was
received by the plaintiffs on July 2, 1974. They filed a motion for reconsideration on
July 17, 1974.

After Laura Cervantes had thus testified, counsel for the defendants Guerreros
objected to the line of questioning on the ground that the said witness was testifying
"on matters which are prohibited under Sec. 20(a), Rule 130, of the Rules of Court."
The trial court having ruled that the witness "may answer", defendants counsel
registered a continuing objection. The court allowed the witness to continue her

On the same date, July 17, 1974, the trial court rendered its decision with the

following dispositive part:jgc:chanrobles.com.ph

5) The plaintiffs Motion for Reconsideration and Supplemental Motion for

Reconsideration are not pro-forma and have suspended the running of the period of
appeal."cralaw virtua1aw library

"WHEREFORE, judgment is hereby rendered in favor of the defendants (and) against

the plaintiffs:chanrob1es virtual 1aw library

On February 21, 1975, plaintiffs perfected their appeal to the Court of Appeals where
the case was docketed as CA-G.R. No. 57597-R. On April 20, 1981, the Court of
Appeals rendered its decision as follows:jgc:chanrobles.com.ph

1. Dismissing the complaint and Amended Complaint;

2. Ordering the plaintiffs to pay the private defendant Guerreros the amount of
P20,000.00 for actual damages, P500,000.00 for moral damages and P10,000.00 as
attorneys fees;

"WHEREFORE, all the foregoing considered, the decision appealed from is hereby
affirmed, with modification in regard to damages as follows: (a) for the defendants
Guerreros, P50,000.00 moral damages, and P10,000.00 exemplary damages; (b) for
the defendant St. Clares Realty Co., Ltd., P10,000.00 exemplary damages; (c) for the
defendant United Housing Corporation, P40,000.00 for loss of goodwill and business
reputation and P10,000.00 exemplary damages. The actual damages and attorneys
fees are hereby maintained."cralaw virtua1aw library

3. Ordering the plaintiffs to pay the defendant St. Clares Realty Co. Ltd., the amount
of P1,923,000.00 as actual damages, P50,000.00 as exemplary damages and
P5,000.00 as attorneys fees;
4. Ordering the plaintiffs to pay the defendant United Housing Corporation the amount
of P90,500.00 as actual damages; P100,000.00 for loss of goodwill and business
reputation, P80,000.00 as exemplary damages, P15,000.00 as lawyers fees; and

On May 27, 1981, the Court of Appeals denied plaintiffs motion for reconsideration.
Hence, the present petition for review by certiorari.

5. To pay the cost of suit.

In their instant petition for review, petitioners have raised substantive and procedural
points on which the lower tribunals have allegedly erred. The substantive issues refer
to the lack of basis for the grant of actual, moral and exemplary damages in the huge
amount of over two million pesos; and the error of ruling that the action was barred by
prescription and laches. Petitioners underscore the procedural errors they attribute to
the lower courts which resulted in the deprivation of their full opportunity to ventilate
their case and prove the validity of their claim. They assail the ruling that their
witnesses Laura Cervantes, Jose Cervantes "and others similarly situated" are
disqualified to testify; and that they waived the right to present their evidence when
they failed to appear at a hearing set by the trial judge during the pendency of
proceedings taken by the petitioners to disqualify him due to alleged hostility
manifested by the latter towards the petitioners.chanroblesvirtualawlibrary

The Register of Deeds of Rizal is hereby directed to cancel the Lis Pendens in
Transfer Certificate of Title No. 340842 in the name of the St. Clares Realty Co., Ltd.,
Book T-1971. Meanwhile, the defendant United Housing Corporation is ordered to
proceed and continue with its commitments under the Memorandum Agreement
dated October 12, 1971." (Record on Appeal, pp. 259-261.)cralawnad
On July 20, 1974, or three (3) days before plaintiffs received the decision, they filed
with the trial court a "Motion Ex-Abundantia Cautela" praying that should the Court of
Appeals render an adverse resolution in CA-G.R. No. SF-03120, the lower court
should set aside its order of June 14, 1974 and allow plaintiffs to present other
evidence, cross-examine witnesses of the defendants, and present rebuttal evidence.
On August 21, 1974, plaintiffs filed a motion for reconsideration of the decision which
they received on July 23, 1974.

At this instance, We consider it unnecessary to discuss the substantive merits of the

petitioners cause of action. The record reveals that they have not yet completed the
presentation of their evidence. Whatever evidence they had previously presented
were apparently not considered in the rendition of the questioned decisions for not
having been "formally offered." It does not strike Us as fair and just that the
petitioners would be made answerable for damages in such a huge amount for having
filed an allegedly baseless and unfounded action without affording them the full
opportunity of establishing the merit of their claim. On the face of the record, We are
convinced that they had been denied that chance due to some mistaken and
capricious application of pertinent procedural rules.

Early in 1975, Judge Arsenio Alcantara who rendered the decision was replaced by
Judge Floreliana Castro-Bartolome. In her order of February 13, 1975, Judge CastroBartolome resolved that:jgc:chanrobles.com.ph
"1) The plaintiffs Motion Ex-Abundantia Cautela dated July 18, 1974, having been
passed upon by Judge Arsenio B. Alcantara by the rendition of the Decision dated
July 17, 1974, is deemed to have been clearly denied by the Honorable Judge who
penned the said decision;

The first question of importance that engages the attention of this Court is whether or
not the witnesses Laura Cervantes and Jose Cervantes were correctly disqualified
from testifying in the case and their testimonies excluded on the basis of Section
20(a), Rule 130, of the Rules of Court, which provides as
follows:jgc:chanrobles.com.ph

2) The plaintiffs Motion for Reconsideration dated August 21, 1974 and
Supplemental Motion for Reconsideration dated August 22, 1974, have to be as they
are hereby, denied;
x

"Section 20. Disqualification by reason of interest or relationship. The following

persons cannot testify as to matters in which they are interested, directly or indirectly

as herein enumerated:chanrob1es virtual 1aw library

The next question that requires attention is whether or not the exclusion of plaintiffs
evidence and their preclusion from presenting further proof was correctly sustained by
the respondent Court of appeals. Prior to the issuance of the courts order of June 14,
1974, by which the plaintiffs were "deemed to have waived their right to further
present or formally offer their evidence", the following had testified as witnesses of the
plaintiffs, namely: Alfredo Zamora, Roman Mataverde, Moises Javillonar, Dominador
Ramirez, Bonifacio Sumulong, Frisco Cervantes, Laura Cervantes and Jose
Cervantes. It was error to hold that the testimonial evidence should have been
formally offered, or that without such offer, such evidence was waived. The offer of
testimonial evidence is effected by calling the witness to the stand and letting him
testify before the court upon appropriate questions. (Moran, Comments on the
Revised Rules of Court, Vol. 6, 1970 ed., p. 122.)chanrobles virtual lawlibrary

(a) Parties or assignors of parties to a case, or persons in whose behalf a case is

prosecuted, against an executor or administrator or other representative of a
deceased person, or against a person of unsound mind, upon a claim or demand
against the estate of such deceased person or against such person of unsound mind,
cannot testify as to any matter of fact occurring before the death of such deceased
person or before such became of unsound mind."cralaw virtua1aw library
Upon the facts and under the law, this Court is fully persuaded that the affirmative
rulings of both the trial court and the Court of Appeals were made in error. The plain
truth is that Laura Cervantes and Jose Cervantes are not parties in the present case,
and neither are they assignors of the parties nor "persons in whose behalf a case is
prosecuted." They are mere witnesses by whose testimonies the plaintiffs aimed to
establish that it was not Cristina Guerrero, but Andres Guerrero, who owned the
disputed land at the time of its alleged sale to Manuel Guerrero; that Cristina
Guerrero did not really sell but merely mortgaged the property to Manuel
Guerrero.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

Notwithstanding rigid cross-examination conducted by the lawyers of the defendants,

the witnesses discovered the following facts: In the 1930s Andres Guerrero physically
possessed the disputed lot, paid the real estate taxes for it, had the same cultivated
through a tenant, defrayed the cultivation expenses, and exclusively enjoyed the
owners share in the harvests. Andres Guerrero loaned the lot to his sister, Cristina
Guerrero, before he died. Cristina Guerrero became ill prior to the year 1948. She
could walk only inside her house in Paraaque, Rizal. The money spent for her illness
was borrowed from Manuel Guerrero. After the death of Cristina Guerrero, Manuel
Guerrero and Felicisimo Guerrero came to her house and the money loaned to her
was totalled in the amount of P1,900.00. On December 10, 1957, the questioned lot
was cadastrally surveyed and denominated as Lot 4752 of the Paraaque Cadastre.
Andres Guerrero was the lone claimant. Until 1962, no other person claimed the lot.

"Following this rule of construction, it may be said that incompetency to testify

established in the provision above quoted, affects only the persons therein
mentioned, and no others, that is, only parties plaintiff or their assignors, persons in
whose behalf a case is prosecuted. Mere witnesses who are neither parties plaintiff,
nor their assignors, nor persons in whose behalf a case is prosecuted, are not
included in the prohibition." (Moran, Comments on the Rules of Court, 1970 ed., Vol.
5, p. 166.)
By excluding the testimonies of the two witnesses and by barring them from further
testifying, upon reasoning that unduly strained the meaning of the provisions of the
Rules of Court relied upon, the trial court deprived itself of the opportunity of knowing
the truth in this case.

The foregoing proofs bear materially on the questions raised by the plaintiffs as to
whether or not: (1) Cristina Guerrero or Andres Guerrero owned the lot when the
former purportedly sold it to Manuel Guerrero in 1948; (2) Cristina Guerrero really
sold or merely mortgaged the land to Manuel Guerrero; (3) Manuel Guerrero and,
after him, the defendants Guerreros were buyers in good faith. Instead of insulating
itself from evidence that could lead it to the truth, the trial court should have
addressed itself to the questions why: (1) if it is true that Cristina Guerrero was the
owner of the disputed lot in 1948, the cadastral surveyors who actually repaired to the
field listed Andres Guerrero as the sole claimant of the property, (2) until 1962, no
other person except Andres Guerrero claimed the lot as his own; (3) notwithstanding
the purported deed of sale by Cristina Guerrero to Manuel Guerrero was executed on
April 24, 1948, it was presented for registration with the Register of Deeds almost ten
(10) years later only on February 27, 1958 (TSN, p. 15, January 9, 1974); (4) in the
deed of sale to Manuel Guerrero, it is stated that he appeared in Paraaque, Rizal,
before Atty. Jose D. Villena who was a notary public in Makati, Rizal; (5) the area of
the land bought by Manuel Guerrero was 33,090 square meters whereas the area of
the land sold by him to the defendants Guerreros was 42,299 square meters. The
court also ought rather to have noticed the fact that in the deed of sale in favor of
Manuel Guerrero, it is stated that the subject parcel of land "is surrounded by
muddikes besides the stone monuments that visibly marked all its "boundaries",
which clearly indicate a previous survey and which may in turn lead to the question if
the deed of sale to Manuel Guerrero might have been made after the cadastral
survey in 1957 and not in 1948.

Moreover, the present case is not a claim or demand against the estate of the
deceased Manuel Guerrero. The defendants Guerreros are not the executors or
administrators or representatives of such deceased. They are being sued as
claimants of ownership in their individual capacities of the disputed lot. The lot is not a
part of the estate of Manuel Guerrero. Hence, the inapplicability of the dead mans
rule.
"It has been held that statutes providing that a party in interest is incompetent to
testify where the adverse party is dead or insane, must be applied strictly in
accordance with their express wording, irrespective of their spirit. The law uses the
word against an executor or administrator or other representative of a deceased
person. It should be noted that after the mention of an executor or administrator the
words or other representative follows, which means that the word representative
includes only those who, like the executor or administrator, are sued in their
representative, not personal, capacity. And that is emphasized by the law by using the
words against the estate of such deceased persons, which convey the idea of an
estate actually owned by the deceased at the time the case was brought and that,
therefore, it is only his rights that are to be asserted and defendant in the litigation by
the person representing him, not the personal rights of such representative." (Moran,
ibid, pp. 169-171.)

The trial court rendered its decision solely on the basis of the defendants evidence

10

and without regard to the proofs that the plaintiffs had presented on July 17, 1974
before the Court of Appeals could finally resolve plaintiffs petition to disqualify the trial
judge. As modified by the Court of Appeals, the decision sentences the plaintiffs to
pay damages and attorneys fees, apart from the costs of suit, in the staggering
amount of Two Million One Hundred Eighty Three Thousand and Five Hundred
(P2,183,500.00) Pesos, without plaintiffs having been given the chance to complete
their evidence, to cross-examine the witnesses of the defense, and to present rebuttal
evidence. The way the trial court and the Court of Appeals proceeded in this case,
litigation became more a game of technicalities than a proceeding to search the truth
and mete justice. No other fairer course of action is demanded but for this Court to
remand the case for further proceedings.chanrobles.com.ph : virtual law library

promising to pay the loan within 90 days with interest at the rate of 10% per annum.
The note was executed in the presence of Florencia Q. Abraham, the creditor's wife,
who affixed her signature at the bottom thereof as a witness thereto. Upon the
maturity of the note, a demand was made for its payment, but the debtor failed to pay.
On February 9, 1945, Alfonso Abraham, Sr. died. On the other hand, Juan C. Ysmael
died intestate on April 23, 1952 leaving the note still unpaid.
On November 13, 1954, in Special Proceedings No. Q-285 for the settlement of the
intestate estate of Juan Ysmael, pending before the Court of First Instance of Quezon
City, Florencia Q. Vda. de Abraham, together with her sons, Alfonso and Jesus, all
surnamed Abraham, filed a pleading entitled "Reclamation" demanding payment of
the amount represented by the note. Because no regular administrator of the estate
had yet been appointed by the court, the "Reclamation" was not acted upon.
However, as soon as Priscilla Recto-Kasten was appointed administratrix, the
claimants reproduced their "Reclamation" before the lower court and the same was
finally set for hearing. As agreed upon by the parties, the reception of evidence was
delegated to a commissioner. During the hearing before the commissioner, the
counsel for the administratrix interposed a general and continuing objection to the
testimony of Florencia Vda. de Abraham invoking the provisions of Section 26(c),
Rule 123 of the Rules of Court. However, after the claimant had testified, he lengthily
cross-examined her on the very matters against which he interposed a general
objection.1wph1.t

WHEREFORE, the decision of the respondent Court of Appeals is hereby set aside.
Let the records of the case be remanded to the court of origin with instruction to the
trial court to allow the plaintiffs to complete their evidence, to cross-examine the
defendants witnesses, and to present rebuttal evidence if they so desire, and
thereafter to decide the case anew.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

On October 4, 1956, the lower court issued in Order-Decree allowing the claim
against the intestate estate of Juan C. Ysmael, the dispositive portion of which reads:

EN BANC
G.R. No. L-16741

January 31, 1962

IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court rules that

the claimants established a just and valid claim against the estate of Juan C.
Ysmael, and therefore the "reclamation" under consideration is hereby
APPROVED.

FLORENCIA Q. DE ABRAHAM, ALFONSO ABRAHAM, and JESUS

ABRAHAM, petitioners,
vs.
INTESTATE ESTATE OF JUAN C. YSMAEL, PRISCILLA RECTOKASTEN, respondent.

The administratrix is hereby ordered to pay the claimants herein the amount
of P5,000.00 with interest thereon at 10% per annum, in accordance with the
Ballantyne Scale of Value for the year December, 1943, out of the funds of
the estate in the course of her administration.

Menandro Quiogue for petitioners.

Jose Ma. Recto and Paterno R. Canlas for respondent.

SO ORDERED.

DE LEON, J.:

From the above Order-Decree, Priscilla Recto-Kasten, the administratrix, appealed to

the Court of Appeals. The appellate court concluding that "the lower court erred in
finding that the claimants have established a just and valid claim, and in allowing the
claim supposing it was a claim with consideration when the same had been
barred by prescription, estoppel and laches," reversed the Order-Decree appealed
from. Hence, this petition for review brought by the claimants.

This is a petition to review on certiorari the decision of the Court of Appeals in CAG.R. No. 21222-R.
The facts as shown by the record are as follows: On September 3, 1943, Juan C.
Ysmael, obtained a loan from Alfonso Abraham, Sr. in the amount of P12,500.00 in
Japanese currency notes, and executed a promissory note in favor of the latter

11

The main issue in this petition is whether or not petitioners have established a just
and valid claim. And if the answer is in the affirmative, whether the same is already
barred by prescription and laches.

... . The reason for the rule apparently is that a litigant cannot be permitted to
speculate as to what his examination of a witness may bring forth. Having
made his selection of one of two courses which he may pursue, he has no
right, after he discovers that the course selected is not to his advantage, and
after he has put the opposite party to the expense, and has consumed the
time of the courts in a trial of the case in accordance with the course
selected, to change his position and make another and different selection.
Such course would be unfair both to the opposite party and to the court and
should not be countenanced in any court of justice. (IV Francisco, RULES
OF COURT, 876, 877, citing the case of Comstock's Adm'r vs. Jacob, 89 VT.
133, 94 A. 497, Ann. Cas. 1918A, 465)

The record shows that petitioners have established the due execution and
genuineness of the promissory note and that respondents failed to present any
evidence to destroy the same. Thus in the Order-Decree appealed from, the lower
court observed:.
It is interesting to note that the promissory note executed by the deceased
was produced before the Court and marked as Exhibit B-1, and the
circumstances under which the same was executed was extensively
described by Florencia Q. de Abraham during the hearing, who, strikingly is
one of the witnesses to the said instrument. Much to the surprise of the
Court this description was more vividly given by the said witness not in
answer to the questions propounded by her lawyer but on cross-examination
of counsel for the administratrix, who feebly attempted to destroy the due
execution and genuineness of the said document. It is indeed unfortunate
that counsel for the administratrix did not choose to present evidence to
destroy the alleged genuineness of the promissory note (Exhibit B-1) in
support of his theory, despite his insinuation during the course of the trial
that he might try to secure the services of an expert to determine the
genuineness of the signature of the late Juan C. Ysmael mentioned therein.
(t.s.n., p. 83), Again counsel manifested that if Exhibit B-1 is a genuine
document the same has been fully paid already, (t.s.n., p. 83), however,
counsel did not present any proof to support this contention.

The next issue is whether or not the claim is already barred by prescription and
laches. Under the New Civil Code, an action upon a written contract must be brought
within 10 years from the time the right of action accrues. (Art. 1144, par. 1). In the
case at bar, the cause of action accrued on December 3, 1943 (the date when the
note became due and demandable) and petitioners filed their "reclamation" only on
November 13, 1954. Apparently, the action has already prescribed, because more
than ten years had elapsed before any suit was filed. However, it must be
remembered that the provisions on moratorium had the effect of suspending the
statute of limitations from November 18, 1944 when Executive Order No. 25 was
issued, to May 18, 1953, the date of promulgation of the decision in the case of Rutter
v. Esteban (G.R. No. L-3708) holding such provisions no longer applicable (Rio y
Compania v. Sandoval, G. R. No. L-9391, November 28, 1956; Compania Maritima
vs. Court of Appeals, G.R. No. L-14949, May 30, 1960). Thus, from December 3,
1943 to November 13, 1954, eleven years, eleven months and ten days have
elapsed. Deducting from this period eight years and six months, the time during which
the statute of limitations was suspended, it is clear that petitioners' claim has not yet
prescribed when it was filed on November 13, 1954.

It is true that Section 26(c), Rule 123 of the Rules of Court provides:.
(c) Parties or assignors of parties to a case, or persons in whose behalf a
case is prosecuted, against an executor administrator or other
representative of a deceased person, or against such person of unsound
mind, cannot testify as to any matter of fact occurring before the death of
such deceased person or before such person became of unsound mind;

Respondents, however, contend that Republic Act No. 342, which took effect on July
26, 1948, lifted the moratorium on debts contracted during the Japanese occupation.
The contention is untenable. This court has already held that Republic Act No. 342
did not lift the moratorium on debts contracted during the war (Uy v. Kalaw Katigbak.
G.R. No. L-1830, Dec. 31, 1949) but modified Executive Order No. 32 is to pre-war
debts, making the protection available only to debtors who had war damage claims
(Sison v. Mirason, G.R. No. L-4711, Oct. 31, 1952).

However, there was a waiver of the prohibition when the counsel for the administratrix
extensively cross-examined the witness on the very matters subject of the prohibition.
(Wright v. Tinio, G.R. No. L-4004, May 29, 1952; see also Tongco v. Vianzon, 50 Phil.
698; Macfarlane v. Green, 54 Phil. 551) It was for this reason that the trial judge
eventually overruled the counsel's previous general and continuing objection and
admitted the testimony of the witness. Furthermore, it is difficult to believe that the
counsel's lengthy cross-examination on the prohibited matter was merely for the
purpose of establishing the "motive, prejudices and predilection" of the witness. In this
connection, it has been said: .

In order that the defense of laches may prosper, the following elements must be
present: (1) conduct on the part of defendant, or one under whom he claims, giving
rise to the situation complained of, (2) delay in asserting complainant's right after
knowledge or notice of defendant's conduct and an opportunity to sue, (3) lack of
knowledge or notice on the part of the defendant that complainant would assert the
right on which he bases suit, and (4) injury or prejudice to defendant in the event relief
is accorded. (Villoria v. Secretary of Agriculture and Natural Resources, G.R. No. L11754, April 29, 1960) Assuming that the first three elements are present, we do not
see how the last element may exist, for neither injury or prejudice to respondent may

12

occur by the allowance of the claim. It should be emphasized here that mere lapse of
time during which there was neglect to enforce the right is not the sole basis of the
rule on laches, but also the changes of conditions which arise during the period there
has been neglect. When there are no changes of conditions detrimental to the
defendant, the defense of laches may not prosper.

The three (3) haciendas known as San Sebastian, Sarria and Dulce Nombre de Maria
situated in the Municipality of Bais, Negros Oriental, were originally owned by the
Compania General de Tabacos de Filipinas [TABACALERA]. Sometime in 1949, the
late Praxedes T. Villanueva, predecessor-in-interest of petitioners, negotiated with
TABACALERA for the purchase of said haciendas. However, as he did not have
sufficient funds to pay the price, Villanueva with the consent of TABACALERA, offered
to sell Hacienda Sarria to one Santiago Villegas, who was later substituted by
Joaquin Villegas. Allegedly because TABACALERA did not agree to the transaction
between Villanueva and Villegas, without a guaranty private respondent Gaspar
Vicente stood as guarantor, for Villegas in favor of TABACALERA. The guarantee was
embodied in a document denominated as "Escritura de Traspaso de Cuenta." 1

IN VIEW OF THE FOREGOING, the decision of the Court of Appeals in CA-G.R. No.
21222-R is hereby reversed and the Order-Decree dated October 4, 1956 of the
Court of First Instance of Quezon City in Special Proceedings No. Q-285 is hereby
affirmed in all respects. Without cost.

Either because the amount realized from the transaction between Villanueva and
Villegas still fell short of the purchase price of the three haciendas, or in consideration
of the guaranty undertaken by private respondent Vicente, Villanueva contracted or
promised to sell to the latter fields nos. 3, 4 and 13 of Hacienda Dulce Nombre de
Maria for the sum of P13,807.00. This agreement was reduced to writing and signed
by petitioner Genaro Goni as attorney-in-fact of Villanueva, thus:

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

En consideracion a la garantia que Don Gaspar Vicente assume

con la Cia. Gral. de Tabacos de Filipinas por el saldo de Don
Santiago Villegas de P43,539.75 asumido por Don Joaquin Villegas
el que Subscribe Praxedes T. Villanueva se compromete ceder es
venta a Don Gaspar Vicente los campos nos. 3, 4 y 13 del plano de
porcelario de la Hacienda Dulce Nombre de Maria, en compra
projectada de la Cia. Gral. de Tabacos de Filipinas. Estas campos
representan 6-90-35 hectares por valor de P13,807.00 que Don
Gasper Vicente pagara directamente a Praxedes T. Villanueva

G.R. No. L-27434 September 23, 1986

GENARO GOI, RUFINA P. vda. DE VILLANUEVA, VIOLA P. VILLANUEVA,
OSCAR P. VILLANUEVA, MARINA P. VILLANUEVA, VERNA P. VILLANUEVA,
PRAXEDES P. VILLANUEVA, JR., JOSE P. VILLANUEVA, SAMUEL P.
VILLANUEVA, LOURDES P. VILLANUEVA, MILAGROS P. VILLANUEVA DE
ARRIETA, petitioners-appellants,
vs.
THE COURT OF APPEALS and GASPAR VICENTE, respondents-appellees.

Bais Central, Octubre 24, 1949.

Ambrosio Padilla Law Office for petitioners-appellants.

Fdo. Praxedes T. Villanueva

San Juan, Africa, Gonzales & San Agustin Law Office for respondents-appellees.

Por: Fdo Genaro Goi Apoderado 2

Private respondent Vicente thereafter advised TABACALERA to debit from his
account the amount of P13,807.00 as payment for the balance of the purchase price.
However, as only the amount of P12,460.24 was actually needed to complete the
purchase price, only the latter amount was debited from private respondent's account.
The difference was supposedly paid by private respondent to Villanueva, but as no
receipt evidencing such payment was presented in court, this fact was disputed by
petitioners.

FERNAN, J.:
This is an appeal by certiorari from the decision of the then Court of Appeals in CAG.R. No. 27800-R entitled, "Gaspar Vicente, Plaintiff-Appellant, vs. Genaro Goni, et.
al., Defendants-Appellants" as well as from the resolution denying petitioners' motion
for reconsideration.

It is alleged by petitioners that subsequent to the execution of the contract/promise to

sell, Villanueva was able to raise funds by selling a property in Ayungon, Negros
Oriental. He thus went to private respondent Vicente for the purpose of rescinding the

The factual backdrop is as follows:

13

contract/promise to sell However, as the amount of P12,460.24 had already been

debited from private respondent's account, it was agreed that lots 4 and 13 of the
Hacienda Dulce Nombre de Maria would merely be leased to private respondent
Vicente for a period of five (5) years starting with crop-year 1950-51 at an annual
rental of 15% of the gross income, said rent to be deducted from the money
advanced by private respondent and any balance owing to Villanueva would be
delivered by Vicente together with the lots at the end of the stipulated period of lease.

On October 25, 1954, petitioner Goni as defendant in Civil Case No. 2990, filed an
answer with counterclaim for accounting of the produce of fields nos. 4 and 13, as
well as the surrerder thereof on June 20, 1955, the end of the fifth crop-year, plus
moral damages in the sum of P30,000.00 and P3,000.00 as attorney's fees. After an
answer to the counter-claim had been filed, private respondent Vicente amended his
complaint on September 1, 1955, to include a prayer for damages representing the
produce of field no. 3 from 1949-50 until delivery thereof to him. An answer with
counterclaim to the amended complaint was duly filed, and on April 25, 1956, private
respondent Vicente amended his complaint anew to include as parties-defendants the
heirs of the late Praxedes Villanueva.

On December 10, 1949, TABACALERA executed a formal deed of sale covering the
three haciendas in favor of Villanueva. Fields Nos. 3, 4 and 13 of the Hacienda Dulce
Nombre de Maria were thereafter registered in the name of Villanueva under TCT No.
T-4780 of the Register of Deeds of Negros Oriental. The fields were likewise
mortgaged by Villanueva to the Rehabilitation Finance Corporation (RFC), later
transferred to the Philippine National Bank on December 16, 1955, for a total
indebtedness of
P334,400.00. 3

On July 13, 1957, the parties entered into a stipulation of facts, agreeing, among
others, on the costs of production and produce of the three fields in question. The
case thereafter proceeded to trial. Plaintiff presented two (2) witnesses: then partyplaintiff Gaspar Vicente, himself, who over the objection of therein defendants testified
on facts occurring before the death of Praxedes Villanueva, and Epifanio Equio a
clerk of TABACALERA Agency in the Bais Sugar Central. Defendants presented
Genaro Goni, who testified on the alleged verbal lease agreement.

Meanwhile, Fields nos. 4 and 13 were delivered to private respondent Vicente after
the 1949-1950 milling season in January and February, 1950.

On December 18, 1959, the trial court rendered a decision ordering therein
defendants-heirs to deliver to Gaspar Vicente field no 3, to execute a formal deed of
sale covering fields nos. 3, 4 and 13 in favor of Vicente, to pay the latter actual or
compensatory damages in the amount of P 81,204.48, representing 15% of the total
gross income of field no. 3 for crop-years 1950-51 to 1958-59, and such other
amounts as may be due from said field for the crop years subsequent to crop-year
1958-59, until the field is delivered to Vicente, and to pay the sum of P2,000.00 as
attorney's fees plus costs. Therein defendant Goi was relieved of any civil liability for
damages, either personally or as administrator of the estate. 5

On June 17, 1950, Villanueva executed a "Documento de la Venta Definitive" in favor

of Joaquin Villegas, covering Lot No. 314 of the Cadastral Survey of Bais with an area
of 468,627 square meters, more or less. (Hacienda Sarria). A supplemental
instrument was later executed by Villanueva in favor of Villegas to include in the sale
of June 17, 1950 the sugar quota of the land.
On November 12, 1951, Villanueva died. Intestate proceedings were instituted on
November 24, 1951 before the then Court of First Instance of Negros Oriental,
docketed as Special Case No. 777. Among the properties included in the inventory
submitted to the court were fields nos. 3, 4 and 13 of Hacienda Dulce Nombre de
Maria. Field no. 13 with an area of 1 hectare, 44 ares and 95 centares was listed as
Lot no. 723 of the inventory while fields nos. 3 and 4, with areas of 3 hectares, 75
ares and 60 centares, and 1 hectare, 69 ares and 80 centares, respectively, were
included in Lot no. 257 of the inventory.

Both parties appealed the decision to the then Court of Appeals; the plaintiff from the
portion awarding damages on a claim that he was entitled to more, and defendants,
from the entire decision.
On December 15, 1966, the Court of Appeals promulgated its decision, affirming that
of the lower court, with the modification that the amount of damages to be paid by
defendant-heirs to the plaintiff should be the total net income from field no. 3 from the
crop year 1950-51 until said field is finally delivered to the plaintiff plus interest
thereon at the legal rate per annum. 6

On October 7, 1954, the day before the intestate proceedings were ordered closed
and the estate of the late Praxedes Villanueva delivered to his heirs, private
respondent Vicente instituted an action for recovery of property and damages before
the then Court of First Instance of Negros Oriental against petitioner Goi in his
capacity as administrator of the intestate estate of Praxedes Villanueva. In his
complaint docketed as Civil Case No. 2990, private respondent Vicente sought to
recover field no. 3 of the Hacienda Dulce Nombre de Maria, basing his entitlement
thereto on the contract/promise to sell executed by the late Praxedes Villanueva in his
favor on October 24, 1949. He likewise prayed by way of attorney's fees and other
costs the sum of P2,000.00 and for such other further relief which the court may
deem just and equitable in the premises. 4

Petitioners filed a motion for reconsideration, but were denied the relief sought in a
resolution dated February 9, 1967. Hence, the present appeal by certiorari whereby
petitioners raise the following questions of law:
MAY RESPONDENT GASPAR VICENTE TESTIFY ON MATTERS
OF FACT OCCURRING BEFORE THE DEATH OF PRAXEDES T.
VILLANUEVA, WHICH CONSTITUTES A CLAIM OR DEMAND

14

UPON HIS ESTATE. IN VIOLATION OF RULE 123, SEC, 26, PAR.

(C), NOW RULE 130, SEC. 20 PAR. (A)?

when death has closed the lips of the party defendant, in order to remove from the
surviving party the temptation to falsehood and the possibility of fictitious claims
against the deceased. 10

MAY NOT A WRITTEN PROMISE TO SELL DATED OCTOBER

24,1949 BE NOVATED INTO A VERBAL AGREEMENT OF LEASE
DURING THE LIFETIME OF THE PROMISSOR, WHOSE DEATH
OCCURRED ON NOVEMBER 12, 1951, BY FACTS AND
CIRCUMSTANCES SUBSTANTIATED BY COMPETENT ORAL
EVIDENCE IN THIS CASE?

The case at bar, although instituted against the heirs of Praxedes Villanueva after the
estate of the latter had been distributed to them, remains within the ambit of the
protection. The reason is that the defendants-heirs are properly the "representatives"
of the deceased, not only because they succeeded to the decedent's right by descent
or operation of law, but more importantly because they are so placed in litigation that
they are called on to defend which they have obtained from the deceased and make
the defense which the deceased might have made if living, or to establish a claim
which deceased might have been interested to establish, if living. 11

SHOULD THE PROMISEE IN A PROMISE TO SELL, WHO PAID

P12,460.24 WHICH WAS TO BE ACCOUNTED AND TO BE
CREDITED AS RENTALS AFTER FIVE (5) YEARS OF LEASE,
WHO IN HIS ORIGINAL COMPLAINT DID NOT ALLEGE NOR
PROVE DAMAGES, EXCEPT THE SUM OF P2,000.00 AS
ATTORNEY'S FEES, RECEIVE A JUDGMENT FOR DAMAGES IN
THE AMOUNT OF P74,056.35 WHICH CONSISTS OF P37,121.26
PLUS LEGAL INTEREST FOR THE CROP YEARS 1950-51 TO
1958-59 AND FOR P3,624.18 TO P4,374.78 FOR EVERY CROP
YEAR SUBSEQUENT TO 1958-59 PLUS
INTEREST? 7

Such protection, however, was effectively waived when counsel for petitioners crossexamined private respondent Vicente. "A waiver occurs when plaintiff's deposition is
taken by the representative of the estate or when counsel for the representative
cross-examined the plaintiff as to matters occurring during deceased's lifetime. 12 It
must further be observed that petitioners presented a counterclaim against private
respondent Vicente. When Vicente thus took the witness stand, it was in a dual
capacity as plaintiff in the action for recovery of property and as defendant in the
counterclaim for accounting and surrender of fields nos. 4 and 13. Evidently, as
defendant in the counterclaim, he was not disqualified from testifying as to matters of
fact occurring before the death of Praxedes Villanueva, said action not having been
brought against, but by the estate or representatives of the estate/deceased person.

We find that neither the trial nor appellate court erred in ruling for the admissibility in
evidence of private respondent Vicente's testimony. Under ordinary circumstances,
private respondent Vicente 8 would be disqualified by reason of interest from testifying
as to any matter of fact occurring before the death of Praxedes T. Villanueva, such
disqualification being anchored on Section 20(a) of Rule 130, commonly known as
the Survivorship Disqualification Rule or Dead Man Statute, which provides as
follows:

Likewise, under a great majority of statutes, the adverse party is competent to testify
to transactions or communications with the deceased or incompetent person which
were made with an agent of such person in cases in which the agent is still alive and
competent to testify. But the testimony of the adverse party must be confined to those
transactions or communications which were had with the agent. 13 The
contract/promise to sell under consideration was signed by petitioner Goi as
attorney-in-fact (apoderado) of Praxedes Villanueva. He was privy to the
circumstances surrounding the execution of such contract and therefore could either
confirm or deny any allegations made by private respondent Vicente with respect to
said contract. The inequality or injustice sought to be avoided by Section 20(a) of
Rule 130, where one of the parties no longer has the opportunity to either confirm or
rebut the testimony of the other because death has permanently sealed the former's
lips, does not actually exist in the case at bar, for the reason that petitioner Goi could
and did not negate the binding effect of the contract/promise to sell. Thus, while
admitting the existence of the said contract/promise to sell, petitioner Goi testified
that the same was subsequently novated into a verbal contract of lease over fields
nos. 4 and 13 of the Hacienda Dulce Nombre de Maria.

Section 20. Disqualification by reason of interest or relationship.The following persons cannot testify as to matters in which they are
interested, directly or indirectly, as herein enumerated:
(a) Parties or assignors of parties to a case, or persons in whose
behalf a case is prosecuted, against an executor or administrator or
other representative of a deceased person, or against a person of
unsound mind, upon a claim or demand against the estate of such
deceased person or against such person of unsound mind, cannot
testify as to any matter of fact occurring before the death of such
deceased person or before such person became of unsound mind.
The object and purpose of the rule is to guard against the temptation to give false
testimony in regard to the transaction in question on the part of the surviving party
and further to put the two parties to a suit upon terms of equality in regard to the
opportunity of giving testimony. 9 It is designed to close the lips of the party plaintiff

Novation takes place when the object or principal condition of an obligation is

changed or altered. 14 In order, however, that an obligation may be extinguished by
another which substitutes the same, it is imperative that it be so declared in
unequivocal terms, or that the old and the new obligations be on every point

15

incompatible with each other. 15 "Novation is never presumed. It must be established

that the old and the new contracts are incompatible in all points, or that the will to
novate appear by express agreement of the parties or in acts of equivalent import. 16

In rejecting petitioners' contention respecting the verbal lease agreement, the

appellate court put much weight on the failure of petitioners to demand an accounting
of the produce of fields nos. 4 and 13 from 1950 to 1954, when the action for recovery
of property was filed. Such failure was satisfactorily explained by petitioners in their
motion for reconsideration filed before the then Court of Appeals, in this manner:

The novation of the written contract/promise to sell into a verbal agreement of lease
was clearly and convincingly proven not only by the testimony of petitioner Goi, but
likewise by the acts and conduct of the parties subsequent to the execution of the
contract/promise to sell. Thus, after the milling season of crop year 1949-50, only
fields nos. 4 and 13 were delivered to private respondent Vicente. Fields nos. 3, 4
and 13 were subsequently registered in Villanueva's name and mortgaged with the
RFC. Villanueva likewise executed a deed of sale covering Hacienda Sarria in favor
of Joaquin Villegas. All these were known to private respondent Vicente, yet he did
not take any steps toward asserting and/or protecting his claim over fields nos. 3, 4
and 13 either by demanding during the lifetime of Villanueva that the latter execute a
similar document in his favor, or causing notice of his adverse claim to be annotated
on the certificate of title of said lots. If it were true that he made demands on
Villanueva for the surrender of field no. 3 as well as the execution of the
corresponding deed of sale, he should have, upon refusal of the latter to do so,
immediately or within a reasonable time thereafter, instituted an action for recovery, or
as previously observed, caused his adverse claim to be annotated on the certificate of
title. Considering that field no. 3, containing an area of three (3) hectares, 75 ares and
60 centares, is the biggest among the three lots, an ordinary prudent man would have
taken these steps if he honestly believed he had any right thereto. Yet, private
respondent Vicente did neither. In fact such inaction persisted even during the
pendency of the intestate proceedings wherein he could have readily intervened to
seek exclusion of fields nos. 3, 4 and 13 from the inventory of properties of the late
Praxedes Villanueva.

... Mr. Genaro Goni is also a farmer by profession and that there
was no need for him to demand a yearly accounting of the total
production because the verbal lease agreement was for a term of 5
years. The defendant Mr. Genaro Goni as a sugar planter has
already full knowledge as to the annual income of said lots nos. 4
and 13, and since there was the amount of P12,460.25 to be
liquidated, said defendant never deemed it wise to demand such a
yearly accounting. It was only after or before the expiration of the 5
year lease that said defendant demanded the accounting from the
herein plaintiff regarding the production of the 2 lots that were then
leased to him.
It is the custom among the sugar planters in this locality that the
Lessee usually demands an advance amount to cover the rental for
the period of the lease, and the demand of an accounting will be
only made after the expiration of the lease period. It was adduced
during the trial that the amount of P12,460.75 was considered as
an advance rental of the 2 lots which was leased to the Plaintiff, lots
nos. 4 and 13; so we humbly believe that there was no necessity on
the part of defendant Mr. Genaro Goi to make a yearly demand for
an accounting for the total production of 2 parcels leased to the
plaintiff. 18

The reason given by private respondent Vicente that field no. 3 was not delivered to
him together with fields nos. 4 and 13 because there were small sugar cane growing
on said field at that time belonging to TABACALERA, might be taken as a plausible
explanation why he could not take immediate possession of lot no. 3, but it certainly
could not explain why it took him four years before instituting an action in court, and
very conveniently, as petitioners noted, after Villanueva had died and at the time
when the verbal contract of lease was about to expire.

Petitioners, having clearly and sufficiently shown that the contract/promise to sell was
subsequently novated into a verbal lease agreement, it follows that they are entitled
to a favorable decision on their counterclaim. Discussion of the third issue raised
therefore becomes unnecessary.
WHEREFORE, the decision appealed from is hereby reversed. The judicial
administrator of the estate of private respondent Gaspar Vicente and/or his
successors-in-interest are hereby ordered to: a) surrender possession of fields nos. 4
and 13 of the Hacienda Dulce Nombre de Maria to petitioners; b) render an
accounting of the produce of said fields for the period beginning crop-year 1950-51
until complete possession thereof shall have been delivered to petitioners; and c) to
pay the corresponding annual rent for the said fields in an amount equivalent to 15%
of the gross produce of said fields, for the periods beginning crop-year 1950-51 until
said fields shall have been surrendered to petitioners, deducting from the amount due
petitioners the sum of P12,460.24 advanced by private respondent Gaspar Vicente.

Both the trial and appellate courts chose to believe in the contract/promise to sell
rather than the lease agreement, simply because the former had been reduced to
writing, while the latter was merely verbal. It must be observed, though, that the
contract/promise to sell was signed by petitioner Goi as attorney-in-fact of the late
Praxedes Villanueva, an indication, to our mind, that final arrangements were made
by petitioner Goi in the absence of Villanueva. It was therefore natural for private
respondent Vicente to have demanded that the agreement be in writing to erase any
doubt of its binding effect upon Villanueva. On the other hand, the verbal lease
agreement was negotiated by and between Villanueva and private respondent
Vicente themselves. Being close friends and relatives 17 it can be safely assumed that
they did not find it necessary to reduce the same into writing.

SO ORDERED.

16

said lot." Sometime later, a motion for a new trial was presented with accumulated
affidavits by counsel for the losing party. This motion was denied by the trial judge.

Republic of the Philippines

SUPREME COURT
Manila

On July 19, 1926, the administratrix of the estate began action against Anastacia
Vianzon for the recovery of specified property and for damages. The issue was
practically the same as in the cadastral case Judgment was rendered by Judge
Rovira couched in the following language: "Therefore, the court renders judgment
absolving the defendant from the complaint in this case, and only declares that onehalf of the value of the shares in the Sociedad Cooperativa de Credito Rural de Orani,
to the amount of ten pesos (P10), belonging to the intestate estate of Marcelino
Tongco, which one-half interest must appear in the inventory of the property of the
estate of the deceased Marcelino Tongco." The motion for a new trial was denied by
His Honor, the trial judge.

EN BANC
G.R. No. 27498

September 20, 1927

Inestate estate of Marcelino Tongco, represented by JOSEFA TONGCO,

administratrix, plaintiff-appellant,
vs.
ANASTACIA VIANZON, defendant-appellee.

From both of the judgments hereinbefore mentioned, the administratrix of the estate
of Marcelino Tongco had appealed. The first action filed, which was in the cadastral
case, has now become the last in number and is 27399. The second action filed in
the property case has now become the first in number and is 27498. As pursuant to
the agreement of the parties the two cases were tried together, they can be best
disposed of together on appeal.

M. H. de Joya and Enrique Tiangco for appellant.

Vicente J. Francisco for appelle.
MALCOLM, J.:
The fundamental question which is being litigated in this case and its companion
case, R. G. No. 27499,1 is whether the property in dispute should be assigned to the
estate of Marcelino Tongco, or whether it should be set aside as belonging exclusively
to the widow.

The first, third, fourth, and fifth errors assigned in the property case and the second
error assigned in the cadastral case primarily concern findings of fact and relate to the
discretionary power of the trail judge. The second error assigned in the property case
and the first error assigned in the cadastral case attack the ruling of the trial judge to
the effect that the widow was competent to testify.

Marcelino Tongco and Anastacia Vianzon contracted marriage on July 5, 1894. The
first named died on July 8, 1925, leaving the second named as his widow. The niece
of the deceased, Josefa Tongco, was named administratrix of the estate. It appears
that shortly before the death of Marcelino Tongco, he had presented claims in a
cadastral case in which he had asked for titles to certain properties in the name of the
conjugal partnership consisting of himself and his wife, and that corresponding
decrees for these lots were issued in the name of the conjugal partnership not long
after his death.

It is true that by reason of the provisions of article 1407 of the Civil Code the
presumption is that all the property of the spouses is partnership property in the
absence of proof that it belongs exclusively to the husband or to the wife. But even
proceeding on this assumption, we still think that the widow has proved in a decisive
and conclusive manner that the property in question belonged exclusively to her, that
is, it would, unless we are forced to disregard her testimony. No reversible error was
committed in the denial of the motion for a new trial for it is not at all certain that it
rested on a legal foundation, or that if it had been granted it would have changed the
result.

In the cadastral case, the widow began action on April 28, 1926, when she presented
a motion for a revision of certain decrees within the one-year period provided by the
Land Registration Law. Issue was joined by the administratrix of the estate. A decision
was rendered by Judge of First Instance Rovira concluding with this pronouncement
of a judgment: "Therefore, and by virtue of the provisions of section 38 of Act. No.
496, decrees Nos. 191390, 191504, and 190925, relative to lots Nos. 1062, 1263,
and 491 of this cadastral record, as well as the original certificates of title Nos. 3247,
3298, and 3297 in regard thereto, and hereby annulled and set aside, and it is
ordered that in lieu thereof new decrees and certificates of title be issued for lots Nos.
1062, 1263, and 491, as the exclusive property of Anastacia Vianzon, of legal age,
widow, and resident of Orani Bataan, free from all encumbrances and liens. In regard
to lot No. 460, the court sustains the decree already issued in due time with respect to

Counsel for the appellant, however, asserts that if the testimony of the widow be
discarded, as it should be, then the presumption of the Civil Code, fortified by the
unassailable character of Torrens titles, arises, which means that the entire fabric of
appellee's case is punctured. Counsel relies on that portion of section 383 of the
Code of Civil Procedure as provides that "Parties or assignors of parties to an action
or proceeding, or persons in whose behalf an action or proceeding is
prosecuted, against an executor or administrator or other representative of a
deceased person, . . ., upon a claim or demand against the estate of such deceased
person . . ., cannot testify as to any matter of fact occurring before the death of such
deceased person . . . ." Counsel is eminently correct in emphasizing that the object

17

and purpose of this statute is to guard against the temptation to give false testimony
in regard to the transaction is question on the part of the surviving party. He has,
however, neglected the equally important rule that the law was designed to aid in
arriving at the truth and was not designed to suppress the truth.

Perkins, Ponce Enrile, Contreras and Gomez and Taada, Pelaez and Teehankee for
appellant.
Roxas, Picazo and Mejia for appellee.
OZAETA, J.:

The law twice makes use of the word "against." The actions were not brought
"against" the administratrix of the estate, nor were they brought upon claims "against"
the estate. In the first case at bar, the action is one by the administratrix to enforce
demand "by" the estate. In the second case at bar, the same analogy holds true for
the claim was presented in cadastral proceedings where in one sense there is no
plaintiff and there is no defendant. Director of Lands vs. Roman Catholic Archibishop
of Manila [1920], 41 Phil., 120 nature of cadastral proceedings; Fortis vs. Gutierrez
Hermanos [1906], 6 Phil., 100 in point by analogy; Maxilom vs. Tabotabo [1907], 9
Phil., 390 and Kiel vs. Estate of P. S. Sabert [1924], 46 Phil., 193 both clearly
distinguishable as can be noted by looking at page 197 of the last cited case;
Sedgwick vs. Sedgwick [1877], 52 Cal., 336, 337; Myers vs. Reinstein [1885], 67 Cal.,
89; McGregor vs. Donelly [1885], 67 Cal., 149, 152; Booth vs. Pendola [1891], 88
Cal., 36; Bernardis vs. Allen [1902], 136 Cal., 7; Calmon vs. Sarraille [1904], 142 Cal.,
638, 642; Bollinger vs. Wright [1904], 143 Cal., 292, 296; Whitney vs. Fox [1897], 166
U. S. 637, 648.) Moreover, a waiver was accomplished when the adverse party
undertook to cross-examine the interested person with respect to the prohibited
matters. (4 Jones on Evidence, pp. 767 et seq.; Stair vs. McNulty [1916], 133 Minn.,
136; Ann. Cas., 1918D 201.) We are of the opinion that the witness was competent.

This is an appeal from a judgment of the Court of First Instance of Manila denying
appellant's claim of P63,868.67 against the estate of the deceased Richard T.
Fitzsimmons, and granting appellee's counterclaim of P90,000 against the appellant.
That appellant Atlantic, Gulf and Pacific Company of Manila is a foreign corporation
duly registered and licensed to do business in the Philippines, with its office and
principal place of business in the City of Manila.
Richard T. Fitzsimmons was the president and one of the largest stockholders of said
company when the Pacific war broke out on December 8, 1941. As such president he
was receiving a salary of P3,000 a month. He held 1,000 shares of stocks, of which
545 shares had not been fully paid for, but for which he had executed promissory
notes in favor of the company aggregating P245,250, at the rate P450 a share. In
1941 the sum of P64,500 had been credited in his favor on account of the purchase
price of the said 545 share of stock out of bonuses and dividends to which he was
entitled from the company. Under his agreements with the company dated April 4 and
July 12, 1939, should he die without having fully paid for the said 545 shares of stock,
the company, at its option, may either reacquire the said 545 shares of stock by
returning to his estate the amount applied thereon, or issue in favor of his estate the
corresponding number of the company's shares of stock equivalent to the amount
paid thereon at P450 a share.

The result, therefore, must be to adhere to the findings and rulings of the trial judge.
No prejudicial error is noted in the proceedings.

Soon after the Japanese army occupied Manila in January, 1942, it seized and took
possession of the office and all the properties and assets of the appellant corporation
and interned all its officials, they being American citizens.

Judgment affirmed, with the costs of this instance against the appellant.

Richard T. Fitzsimmons died on June 27, 1944, in the Santos Tomas interment camp,
and special proceeding No. 70139 was subsequently instituted in the Court of First
Instance of Manila for he settlement of his estate.

Republic of the Philippines

SUPREME COURT
Manila

The Atlantic, Gulf and Pacific Company of Manila resumed business operation in
March, 1945.

EN BANC
G.R. No. L-2016

In due course the said company filed a claim against the estate of Richard T.
Fitzsimmons which, as amended, consisted of the following items:

August 23, 1949

Testate estate of RICHARD THOMAS FITZSIMMONS, deceased, MARCIAL P.

LICHAUCO, administrator-appellee,
vs.
ATLANTIC, GULF and PACIFIC COMPANY OF MANILA, claimant-appellant.

A. Personal overdraft of Richard T. Fitzsimmons with Atlantic, Gulf and

Pacific Company of Manila in current
account ...................................................................

18

P63,000.00

B. Charges from San Francisco agent of the company not included in

above figure A as of November 30, 1945 (P1,002), less subsequent
credit advice from San Francisco agent
(P133.33) .............................................................................

Total ....................................................................................

last statement of account rendered in the year 1941, it was around P63,000." At the
end of each month the accounting department rendered to the deceased a statement
of his account showing the balance of his account, and at the bottom of that
correctness of the balance. The last statement of account rendered to the deceased
was that corresponding to the month of November, 1941, the office of the company
868.67 having closed on December 29, 1941. Asked how it was possible for him to
remember the status of the personal account of Mr. Fitzsimmons, he replied: "As Mr.
Fitzsimmons was the president and member of the board of directors, I have to
remember it, because it is very shameful on my part that when the said officer and
P63,868.67 other officers of the company come around and ask me about their balance, I could
not tell them the amount of their balance, although not in exact figures, at least in
round figures." This witness further testified on direct examination as follows:

In the same claim the company offered to require the 545 shares sold to the
deceased Fitzsimmons upon return to his estate of the amount of P64,500 paid
thereon, and asked the court to authorize the setoff of the amount of its claim of
P63,868.67 from the amount of P64,500 returnable to the estate.

Q. You said that Mr. Fitzsimmons is one of those office whose personal
account with the Atlantic, Gulf & Pacific Co. used to be on the debit side in
the years previous to 1941. Can you tell the Honorable Court what would
happen at the end of each year to the personal account, and to the status of
the personal account of Mr. Fitzsimmons? A. At the each year, after the
declaration of dividends on paid shares, bonuses and directors' fees, the
account will balance to a credit balance. In other words, at the start of the
following years, the account will be on the credit side.

In his answer to the amended claim the administrator denied the alleged
indebtedness of the deceased to the claimant, expressed his conformity to the refund
of P64,500 by the claimant to the estate and the retransfer by the latter to the former
of the 545 shares of stock, and set up a counterclaim of P90,000 for salaries allegedly
due the deceased from the claimant corresponding to the years 1942, 1943, and the
first half of 1944, at P36,000 per annum.

Q. So that I gather from you, Mr. Inacay, that the personal account of Mr.
Fitzsimmons, as well as the other officers of the Atlantic, Gulf & Co., at the
end of each year, and at the beginning of the incoming year, generally, would
be in the credit balance; because of the application of dividends on paid
shares, bonuses and the directors' fees? A. Yes, sir. (Page 80, t. s. n.)

The issues raised by this appeal are:

1. Whether appellant's claims of P63,000 and P868.67 have been established by
satisfactory evidence; and

On cross-examination the witness admitted that he could not recollect the amount of
the balance, either debit or credit, of each of the Americans and other employees who
maintained a current account with the company; and on redirect examination he
explained that he remembered the balance of the account of Mr. Fitzsimmons
"because as account I should be I should have knowledge more or less, of the
status of the account of the president, the treasurer, and the rest of the directors."

2. Whether the deceased Richard T. Fitzsimmons was entitled to his salary as

president of the Atlantic, Gulf & Pacific Company of Manila from January, 1942, to
June 27, 1944, when he died in the Santo Tomas internment camp.
I. Upon the claim of P63,000 (item A) the evidence for the claimant consisted of the
testimony of Santiago Inacay and Modesto Flores, chief accountant and assistant
accountant, respectively, of the Atlantic, Gulf & Pacific Company of Manila. (It is
admitted that all the prewar books and records of the company were completely
destroyed or lost during the war.)

Modesto Flores testified in substance as follows: He was assistant accountant of the

Atlantic, Gulf & Pacific Company from October 1, 1935, to December, 1941, and from
March 8, 1945, to the present. In 1941, Mr. Fitzsimmons, president of the company,
had a personal account with the latter consisting of cash advances which he withdrew
from the company and of payments for his account of groceries, automobile, salary of
his chauffeur, gasoline and oil, and purchases of furniture for his house and other
articles for his personal use. On the credit side of his account were entered his
monthly salaries, the dividends declared, if any, the bonuses, and the director's fees.
Witness was the one who as accountant made the entries in the books of the
company. When Mr. Fitzsimmons withdrew funds by way of cash advances from the
company, he signed receipts therefor which were delivered to the cashier, who in turn
delivered them to him. When creditors of Mr. Fitzsimmons presented bills to the
accounting department for payments, those bills were approved by Mr. Fitzsimmons
and the company paid them and charged them to his account. All the books, receipts,
papers, documents, and accounts referring to the personal account of Mr.

Santiago Inacay testified in substance as follows: He was chief of the accounting

department of the Atlantic, Gulf & Pacific Company from June, 1930, to December,
1941, and from March, 1945, to the present. The officers of the company had the
privilege of maintaining personal accounts with the company. The deceased
Fitzsimmons maintained such an account, which consisted of cash advances from the
company and payments of bills from outside for his account. On the credit side were
entered the salaries of the official and the payments made by him. "The personal
account of Mr. Fitzsimmons, in the year 1941, was on the debit balance; that is, he
owed money that debit account of Mr. Fitzsimmons, basing on your recollections?
A. In my collections of the account, personal account of Mr. Fitzsimmons, as of the

19

Fitzsimmons were lost during the war. Witness remembered that the personal
account of Mr. Fitzsimmons on December 29, 1941, was on the debit side, amounting
to P63,000 more or less, according to his best recollection. On cross-examination he
testified that in the absence of the records he could not state what part of the P63,000
represented cash advances and what part represented payments made by the
company to the creditors of Mr. Fitzsimmons.

The evidence for the administrator against this claim of P63,000 consisted of Exhibit 1
and the testimony of Mr. Marcial P. Lichauco explaining the circumstances under
which said document was prepared and signed by the deceased Fitzsimmons. It
appears that on December 15, 1942, Richard Thomas Fitzsimmons sued his wife
Miguela Malayto for divorce in the Court of First Instance of Manila. On August 9,
1943, after due trial, the court rendered judgment granting plaintiff's petition for
divorce and ordering the dissolution of the marriage between the parties. Attorney
Lichauco represented the plaintiff in that divorce case. After the decree of divorce had
become final the plaintiff Fitzsimmons, pursuant to the provisions of the divorce law
then in force, submitted to the court an inventory of the assets and liabilities of the
conjugal partnership, with a proposed adjudication or division of the net assets among
the ex-pouses and their children. A carbon copy of said inventory, which was signed
by Richard Thomas Fitzsimmons on November 9, 1943, and filed in the Court of First
Instance of Manila on the same date in civil case No. 296, was presented by the
administrator as Exhibit 1 in this case and admitted by the trial court over the
objection of the claimant. The administrator Mr. Lichauco testified herein that as
attorney for Mr. Fitzsimmons in the divorce case he prepared the said inventory from
the data furnished him by Mr. Fitzsimmons after he had conferred with and explained
to the latter why it was necessary to prepare said inventory, telling him that under the
divorce law the conjugal properties had to be liquidated; that since he (Fitzsimmons)
was married to Miguela Malayto in the year 1939, he had to include in said inventory
all the properties acquired by him between the date of his marriage and the date of
his divorce, and that all the obligations incurred by him and not yet paid during the
same period should be included because they had to be deducted from the assets in
order to determine the net value of the conjugal properties; that he made it very clear
to Mr. Fitzsimmons that he should not forget the obligations he had because they
would diminish the amount his wife was going to receive, and that any obligation not
included in the inventory would be borne by him alone after his wife had received her
share.

Aside from Santiago Inacay and Modesto Flores, the claimant also called as
witnesses Mr. Henry J. Belden and Mr. Samuel Garmezy, vice-president-treasurer
and president, respectively, of the claimant company, to testify on the status of the
personal account of the deceased Fitzsimmons with the company as of December,
1941; but upon objection of the administrator the trial court refused to admit their
testimony on that point on the ground that said witnesses were incompetent under
section 26(c) of Rule 123, they being not only large stockholders and members of the
board of directors but also vice-president-treasurer and president, respectively, of the
claimant company.
In view of the ruling of the trial court, counsel for he claimant stated in the record that
Mr. Belden, if permitted to testify, would testify as follows: That the deceased
Fitzsimmons, being president of the Atlantic, Gulf and Pacific Company in the year
1941, had a current account with said company which, upon the outbreak of the war
in December, 1941, had a debt balance against him of P63,000, and that said sum or
any part thereof had not been paid. At the suggestion of the court counsel asked his
witness whether, if permitted, he really would so testify, and the witness answered in
the affirmative, whereupon the court said: "Let Attorney Gomez's offer of testimony
ratified by the witness Mr. Belden be made of record."
With regard to the witness Mr. Garmezy, counsel for the claimant also made the
following offer of proof, to wit: That if said witness were allowed to testify, he would
testify as follows:

According to Exhibit 1 the gross value of the assets of the conjugal partnership
between the deceased Fitzsimmons and his wife Miguela Malayto as of November,
1943, was P174,700, and the total amount of the obligations was P30,082. These
obligations consisted of only two itemsone of P21,426 in favor of the Peoples Bank
and Trust Company and another of P8,656 in favor of the Philippine Bank of
Commerce. In other words, no obligation whatsoever in favor of the Atlantic, Gulf and
Pacific Company of Manila was listed in said inventory Exhibit 1. And upon that fact
the administrator based his opposition to the claim in question.

That sometimes in Novembersometime during the last days of November,

or the first days of December, 1941he received a copy of the trial balance
sheet, and in that trial balance sheet, among other things, the personal
accounts of each and every one of the officers of the Atlantic, Gulf and
Pacific Co., including himself, and also the deceased R. T. Fitzsimmons,
appear; and that this witness would also testify to the fact that on that
occasion he checked up his own personal record with the entries appearing
in the said trial balance sheet, and he then had occasion to find out that the
account of the deceased Fitzsimmons with the Atlantic, Gulf and Pacific Co.
was a debit account in the amount of around sixty-three thousand pesos,
while the personal account of Mr. Garmezy, the witness now testifying,
showed a credit account in the sum of around sixty-three thousand pesos.
This witness will also testify that this account of sixty-three thousand pesos
owed by Mr. Fitzsimmons appeared in that trial balance, which he had
occasion to read in the first days of December, 1941, was not paid by Mr.
Fitzsimmons until the present date. (Pages 35-36, t. s. n.)

Before weighing the evidence hereinabove set forth to determine whether it is

sufficient to prove appellant's claim of P63,000, it necessary for us to pass upon
appellant's first and third assignments of error referring, respectively, to the trial
court's rejection of the testimony of the witnesses Belden and Garmezy and its
admission of Exhibit 1.
The question raised by the first assignment of error is whether or not the officers of a
corporation which is a party to an action against an executor or administrator of a
deceased person are disqualified from testifying as to any matter of fact occurring
before the death of such deceased person, under Rule 123, section 26(c), of the
Rules of Court, which provides:

That offer of proof was likewise ratified by the witness Garmezy and made of record
by the trial court.

20

Parties or assignors of parties to a case, or persons in whose behalf a case

is prosecuted, against an executor or administrator or other representative of
a deceased person, or against a person of unsound mind, upon a claim or
demand against the estate of such deceased person or against such person
of unsound mind, cannot testify as to any matter of fact occurring before the
death of such deceased person or before such person became of unsound
mind.

statutes, but that generally, where interest in the litigation or its outcome has
ceased to disqualify, officers and directors of corporations are not considered
to be parties within the meaning of the law. In example, the statute of
Maryland (Pub. Gen. Laws, art. 35, sec. 2) limits the disability to the "party"
to a cause of action or contract, and it is held that a salesman of a
corporation, who is also a director and stockholder, is not a party, within the
meaning of the law, so as to be incompetent to testify in an action by the
company agaisnt the other party, who is insane or dead. Flach vs.
Cottschalk Co., 88 Md., 368; 41 Atl., 908; 42 L. R. A., 745; 71 Am. St. Rep.,
418 To the contrary, the Michigan law expressly forbids "any officer or agent
of a corporation" to testify at all in relation to matters which, if true, must
have been equally within the knowledge of such deceased person. Howell's
Ann. St. Mich. sec. 7545. The Supreme Court of Michigan, in refusing to
extend the rule to agents of partnership, said: "It is conceded that this
testimony does not come directly within the wording of the statute, but it is
said there is the same reason for holding the agent of a partnership
disqualified from testifying that there is in holding the agent of a corporation.
This is an argument which should be directed to the legislative rather than to
the judicial department of government. . . . The inhibition has been put upon
agents of corporations, and has not been put upon agents of partnerships.
We cannot, by construction, put into the statute what the Legislature has not
seen fit to put into it." Demary vs. Burtenshaws" Estate (Mich.), 91 N. W.,
649. In New York the statute provides that against the executor,
administrator, etc., "no party or person interested in the event, or person
from, through, or under whom such party or interested person derives his
interest or title shall be examined as a witness in his own behalf or interest."
This is followed by the exception that a person shall not be deemed
interested by reason of being a stockholder or officer of any banking
corporation which is a party to the action or proceeding or interested in the
event thereof. Ann. Code Civ. Proc. N. Y., sec. 829. Here it is apparent that
the interest of the witness is made a disqualification, and it is of course held
that stockholder and officers of corporations other than banking corporations
are under disqualification. Keller vs. West Bradley Mfg. Co., 39 Hun, 348.

This provision was taken from section 383, paragraph 7, of our former Code of Civil
Procedure, which in turn was derived from section 1880 of the Code of Civil
Procedure of California.
In the case of City Savings Bank vs. Enos, 135 Cal., 167; 67 Pac., 52, 55, the
Supreme Court of California, interpreting said article 1880, said:
. . . The provision applies only to parties or assignors of parties, and Haslam
was neither the one nor the other. If he was a stockholder, which it is claimed
he was, that fact would make no difference, for interest no longer disqualifies
under our law, Civ. Code Proc. sec. 1879. Appellant cites section 14, Civ.
Code, to the effect that the word "person" includes a corporation; and claims
that, as the corporation can only speak through its officers, the section must
be held to apply to all who are officially related to section must be held to
apply to all who are officially related to the corporation. A corporation may be
conceded to be a person, but the concession does not help appellant. To
hold that the statute disqualifies all persons from testifying who are officers
or stockholders of a corporation would be equivalent to materially amending
the statute by judicial interpretation. Plainly the law disqualifies only "parties
or assignors of parties," and does not apply to persons who are merely
employed by such parties or assignors of parties.
In a later case, Merriman vs. Wickersman, 141 Cal., 567; 75 Pac., 180, 181-182, the
same tribunal, in passing upon the competency of a vice-president and principal
stockholder of a corporation to testify, reaffirmed its ruling in City Savings Bank vs.
Enos, supra, after examining decisions of other state supreme courts in relation to
their respective statutes on the same subject. The court said:

To like effect is the statute of Illinois, which declares that no party to any civil
action, suit or proceedings, or person directly interested in the event thereof
shall be allowed to testify under the given circumstances. Under this statute
it is held that stockholders are interested, within the meaning of the section,
and are incompetent to testify against the representatives of the deceased
party. Albers Commission Co. vs. Sessel, 193 Ill., 153, 61 N. E., 1075. The
law of Missouri disqualifies "parties to the contract or cause of action," and it
is held that a stockholder, even though an officer of the bank, is not
disqualified by reason of his relation to the corporation when he is not
actually one of the parties to the making of the contract in the interest of the
bank.

The Burnham and Marsh Company is a corporation. Mr. Marsh, vicepresident and one of its principal stockholders, was allowed to testify to
matters and facts in issue. It is contended that the evidence was improperly
admitted, in violation of section 1880 of the Code of Civil Procedure, which
provides that "the following persons cannot be witnesses: . . . Parties or
assignors of parties to an action or proceeding, or persons in whose behalf
an action or proceeding is prosecuted, against an executor or administrator,
upon a claim or demand against the estate of a deceased person, as to any
matter of fact occurring before the death of such deceased person." At
common law interest disqualified any person from being a witness. That rule
has been modified by statute. In this state interest is no longer a
disqualification, and the disqualifications are only such as the law imposes.
Code Civ. Proc., sec. 1879. An examination of the authorities from other
states will disclose that their decisions rest upon the wordings of their

Our own statute, it will be observed, is broader than any of these. It neither
disqualifies parties to a contract nor persons in interest, but only parties to
the action (Code Civil Procedure, sections 1879, 1880); and thus it is that in
City Savings Bank vs. Enos, 135 Cal., 167, 67 Pac., 52, it has been held that
one who is cashier and at the same time a stockholder of a bank was not

21

disqualified, it being said: "to hold that the statute disqualifies all persons
from testifying who are officers or stockholders of a corporation would be
equivalent to materially amending the statute by judicial interpretation." It is
concluded, therefore, that our statute does not exclude from testifying a
stockholder of a corporation, whether he be but a stockholder, or whether, in
addition thereto, he be a director or officer thereof.

classes of hearsay evidence, whether the declaration was uttered under

circumstances justifying the conclusion that there was no probable motive to falsify."
(Id., section 556, pp. 467-468.)
Insofar, at least, as the appellant was concerned, there was no probable motive on
the part of Fitzsimmons to falsify his inventory Exhibit 1 by not including therein
appellant's present claim of P63,000 among his obligations or liabilities to be
deducted from the assets of the conjugal partnership between him and his divorced
wife. He did not know then that he would die within one year and that the corporation
of which he was the president and one of the largest stockholders would present the
claim in question against his estate. Neither did he know that the books and records
of that corporation would be destroyed or lost. Yet, although he listed in said inventory
his obligations in favor of the Peoples Bank and Trust Company and the Philippine
Bank of Commerce aggregating more than P30,000, he did not mention at all any
obligation in favor of the corporation of which he was the president and one of the
largest stockholders.

The same view is sustained in Fletcher Cyclopedia Corporations, Vol. 9, pages 535538; in Jones on Evidence, 1938 Ed. Vol. 3, page 1448; and in Moran on the Law of
Evidence in the Philippines, 1939 Ed. pages 141-142.
The appellee admits in his brief in those states where the "dead man's statute"
disqualifies only parties to an action, officers and stockholders of the corporation,
have been allowed to testify in favor of the corporation, while in those states where
"parties and persons interested in the outcome of the litigation" are disqualified under
the statute, officers and stockholders of the corporation have been held to be
incompetent to testify against the estate of a deceased person.

Assuming that he owed his corporation P63,000 for which he signed receipts and
vouchers and which appeared in the books of said corporation, there was no probable
motive for him not to include such obligation in the inventory Exhibit 1. It would have
been to his interest to include it so that his estranged and divorced wife might share in
its payment. The net assets appearing in Exhibit 1 amounted to P144,618, one-half of
which was adjudicated to the children and the other half was divided between the
spouses, so that each of the latter received only P36,154.50. By not including the
obligation of P63,000 claimed by the appellant (assuming that he owed it),
Fitzsimmons' adjudicated share in the liquidation of the conjugal partnership would be
short by nearly P27,000 to meet said claim, whereas by including said obligation he
would have received a net share of more than P10,000 free from any liability.

The weight of authority sustains appellant's first assignment of error. Inasmuch as

section 26(c) of Rule 123 disqualifies only parties or assignors of parties, we are
constrained to hold that the officers and/or stockholders of a corporation are not
disqualified from testifying, for or against the corporation which is a party to an action
upon a claim or demand against the estate of a deceased person, as to any matter of
fact occurring before the death of such deceased person.
It results that the trial court erred in not admitting the testimony of Messrs. Belden and
Garmezy. It is not necessary, however, to remand the case for the purpose of taking
the testimony of said witnesses because it would be merely corroborative, if at all,
and in any event what said witnesses would have testified, if permitted, already
appears in the record as hereinabove set forth, and we can consider it together with
the testimony of the chief accountant and the assistant accountant who, according to
the appellant itself, were "the only ones in the best of position to testify on the status
of the personal account" of the deceased Fitzsimmons.

We find no merit, that Exhibit 1, insofar as the commission therefrom of the claim in
question was concerned, far from being self-serving to, was a declaration against the
interest of, the declarant Fitzsimmons. He having since died and therefore no longer
available as a witness, said document was correctly admitted by the trial court in
evidence.

The third assignment of error raises the question of the admissibility of Exhibit 1.
Appellant contends that it is a self-serving declaration, while appellee contends that it
is a declaration against interest.

We have no reason whatsoever to doubt the good faith of Messrs. Samuel Garmezy
and Henry J. Belden, president and vice-president-treasurer, respectively, of the
claimant corporation, in presenting the claim of P63,000 against the estate of
Fitzsimmons, nor the good faith of the administrator Mr. Marcial P. Lichauco in
opposing said claim. They are all men of recognized integrity and of good standing in
society. The officers of the claimant corporation have shown commendable fairness in
their dealings with the estate of Fitzsimmons. They voluntarily informed the
administrator that Fitzsimmons had paid P64,500 on account of the purchase price of
545 shares of stock of the company, and not P45,000 only, as the administrator
believed. Likewise, they voluntarily informed him in connection with his claim for
Fitzsimmons' back salaries that Fitzsimmons' annual salary was P36,000 and not
P30,000, as the administrator believed. We can therefore readily assume that
Messrs. Garmezy and Belden believed in good faith that the books of the corporation
showed a debit balance of around P63,000 as of the outbreak of the Pacific war on
December 8, 1941.

A self-serving declaration is a statement favorable to the interest of the declarant. It is

not admissible in evidence as proof of the facts asserted. "The vital objection to the
admission of this kind of evidence is its hearsay character. Furthermore such
declarations are untrustworthy; to permit their introduction in evidence would open the
door to frauds and perjuries." (20 Am. Jur., Evidence, sec. 558, pages 470-471.).
On the other hand, a declaration against the interest of the person making it is
admissible in evidence, notwithstanding its hearsay character, if the declaration is
relevant and the declarant has died, become insane, or for some other reason is not
available as a witness. "The true test in reference to the reliability of the declaration is
not whether it was made ante litem motam, as is the case with reference to some

22

On the other hand, if Mr. Fitzsimmons, who was the president and one of the largest
stockholders of the claimant corporation, really owed the latter around P63,000 on
December 8, 1941, and had not paid it before he liquidated his conjugal partnership in
November, 1943, as a consequence of the decree of divorce he obtained against his
wife, we see no reason why did not include such obligation in said liquidation. Judging
from the high opinion which the officers and stockholders of the corporation
entertained of Fitzsimmons as shown by their resolution hereinafter quoted, they
cannot impute bad faith to him in not acknowledging the claim in question.

director's fees had been earned, the fact that they were not actually declared and
credited to him, should not prejudice him the subsequent loss of the company's
properties and assets as a result of the war should be borne by the company and not
by its officers.
Leaving the foregoing reflections aside, we are confronted only, on the one hand, by
the oral testimony of the witnesses for the claimant based entirely on their memory as
to the status of Fitzsimmons' account, and not on the other by Exhibit 1, which
contradicts said testimony. Realizing the frailty and unreability of human memory,
especially with regard to figures, after the lapse of more than five years, we find no
sufficient basis upon which to reverse the trial court's finding that this claim had not
been satisfactorily proven.

There is a possible explanation of this seemingly irreconcilable conflict, which in the

absence of other proofs we consider satisfactory but which both parties seem to have
overlooked. We find it in the testimony on direct examination of appellant's witness
Santiago Inacay, page 80 of the transcript, hereinabove quoted. According to Inacay,
at the end of each year, after the declaration of dividends, bonuses, and director's
fees, the account of Fitzsimmons was brought up to a direct balance. "In other
words," he said, "at the start of the following year the account will be on the credit
side." Not satisfied with that categorical statement, counsel for the appellant asked his
own witness the following question and the witness gave the following answer:

With reference to the item of P868.67, we find it to have been sufficiently proven by
the testimony of Santiago Inacay and Modesto Flores, supported by the documents
Exhibit A, B, C, and D, which establish the fact that in November and December,
1941, the San Fracisco agent of the company deposited in the Crocker First National
Bank of San Francisco the total sum of $500 to the account of Fitzsimmons, which
said agent debited against the company. Debit notices of the deposits were not
received by the company until after the liberation. The administrator admitted in his
testimony that after the death of Fitzsimmons' account in the sum of P1,788.75. Aside
from that debit of P1,000, against also paid $1 or P2 for Fitzsimmons' subscription to
the San Fracisco Chronicle, making a total of P1,002. From this was deducted a
credit of P133.33, consisting of a payment made on June 30, 1946, by a creditor of
Fitzsimmons named J. H. Chew as testified to by Mr. Flores and supported by Exhibit
E, leaving a balance of P868.67.

Q. So that I gather from you, Mr. Inacay, that the personal account of Mr.
Fitzsimmons, as well as the officers of the Atlantic, Gulf and Pacific Co., at
the end of each year, and at the beginning of the incoming year, generally,
would be in the credit balance; because of the application of dividends on
paid shares, bonuses, and director's fees? A. Yes, sir.
Q. In the year, 1941, therefore, no declaration of dividends for the last six
months-there were no declarations of director's fees . . . I withdraw the
question, and that is all.

The trial court therefore erred in not allowing said claim.

It is to be regretted that neither counsel for the appellant nor counsel for the appellee
pursued the examination of the witness to determine, if possible, the approximate
amount of the dividends, bonuses, and director's fees that would have been credited
to Fitzsimmons as of the end of the year 1941. But enough appears in the testimony
to warrant the deduction that had the war not forced the corporation to close office on
December 29, 1941, dividends, bonuses, and director's fees for the year 1941 would,
as of the and of that year, have been declared and credited to the account of
Fitzsimmons, which as in previous years would or might have brought that account on
the credit side. President Garmezy reported to the meeting of the stockholders that
the volume of work performed by the company in 1941 "exceed that of 1940." (Exhibit
2.) We cannot assume that the company earned less profits in 1941 than in 1940.
Probably the reason why Fitzsimmons did not include or mention any obligation in
favor of his own corporation in his inventory Exhibit 1 was that he believed he was
entitled to be credited by said corporation with dividends, bonuses, and director's fees
corresponding to the year 1941, which as in previous years would bring his account
on the credit side. If that was the case, the company was technically correct in
asserting that at the outbreak of the Pacific war in December, 1941, its books showed
a debit balance against Fitzsimmonsno dividends, bonuses, and director's fees
having been actually declared and credited to Fitzsimmons at that time. But we think
Fitzsimmons was justified in considering his account was having to all intends and
purposes been brought on the credit side; because if such dividends, bonuses, and

II. We shall now pass upon appellant's fourth assignment of error, which assails the
trial court's granting of appellee's counterclaim of P90,000 for salaries allegedly due
to the deceased Fitzsimmons as president of the appellant corporation for the years
1942, 1943, and the first six months of 1944.
The undisputed facts are: Fitzsimmons was the president of the appellant corporation
in 1941 with a salary of P36,000 a year. The corporation was forced to suspend its
business operations from December 29, 1941, to March 8, 1945, on account of the
war, its office and all its properties having been seized by the Japanese invader.
Fitzsimmons, together with the other officers of the corporation, was interned by the
enemy in the Santo Tomas internment camp, where he died on June 27, 1944.
At the annual meeting of the stockholders of the corporation held on January 21,
1946, the president, S. Garmezy, reported among other things as follows:
While interned, the Company borrowed money on notes signed by Mr.
Fitzsimmons and Mr. Garmezy; money was also received for the same
purpose without signing of notes. Mr. Kihlstedt, who before the war was
Superintendent of the Philippine Iron Mines, helped a great deal in obtaining
this money, bringing it to Camp and distributing it to families living outside

23

the Camp. Mr. Kihlstedt being a Swedish citizen, was able to live outside and
he did some very good work.

We know of no principle of law that would authorize the court to compel a corporation,
which for a long period was not in operation and did not receive any income, to pay
the salaries of its officers during such period, even though they were incapacitated
and did not perform any service. To do so would be tantamount to depriving the
corporation or its stockholders of their property without due process of law.

And in that meeting the following resolutions, among others, were approved:
RESOLVED, that all acts in 1941 through 1945 of the Directors in office
since their election in 1941 and elected in the interim, as duly recorded in the
minutes of the meetings of the Board, are hereby approved, ratified and
confirmed, and are to be accepted as acts of this corporation.

The resolutions of the stockholders hereinabove quoted are invoked by the appellee
to support the proposition that Fitzsimmons, during his internment, performed certain
acts as president of the corporation, which were ratified and confirmed by the
stockholders in their annual meeting on January 21, 1946. But those acts consisted
merely of borrowing money for himself and the other officers of the corporation and
their respective families to enable them to eke out an existence during their
internment. The ratification of those acts by the stockholders had for its purpose to
relieve Fitzsimmons of personal liability for the obligations thus contracted by him in
the name of the company. To say that by thus ratifying those acts of Fitzsimmons the
corporation became obligated to pay his salaries during his internment aggregating
P90,000, would be the height of absurdity.

RESOLVED, that in the death of R. T. Fitzsimmons, President of the

Company from March, 1939, to the time of his death, which occurred in the
Santo Tomas Internment Camp, Manila, on June 27, 1944, the Company
suffered a distinct loss and his country a loyal American;
FURTHER, that his passing is keenly felt and mourned by those of the
Company with whim he was associated for more than thirty years, not only
for the kindness, consideration and tolerance he showed to all at all times;

We are clearly of the opinion that the estate of Fitzsimmons is not entitled to its
counterclaim of P90,000 or any part thereof.

BE IT FURTHER RESOLVED, that the Company convey its sympathies to

the family and other immediate relatives of the late Mr. Fitzsimmons,
transmitting to them a copy of this resolution.

Let judgment be entered modifying that of the trial court to read as follows:
The appellant Atlantic, Gulf and Pacific Company of Manila is ordered to pay
to the administrator the sum of P64,500 upon the retransfer by the latter to
the former of the 545 shares of stock purchased by the decedent in 1939.

Based upon those facts, the trial court granted the "back pay" claimed by the
appellee.
There was no resolution either of the stockholders of the board of directors of the
company authorizing the payment of the salaries of the president or any other officer
or employee of the corporation for the period of the war when the corporation was
forced completely to suspend its business operations and when its officers were
interned or virtually held prisoners by the enemy.

The administrator is ordered to pay to the said company the sum of P868.67.
The claim of the company against the estate for P63,000 and the
counterclaim of the estate against the company for P90,000 are
disapproved.

The theory of the appellee, which was sustained by the trial court, is that as long as a
corporation officer with a fixed salary retains the office he is entitled to that salary
notwithstanding his inability to perform his duties. The main case cited by the
appellee in support of his theory is Brown vs. Galvenston Wharf Co., 50 S. W., 126,
128; 92 Tex., 520. In that case the president of the defendants corporation claimed
his salary for a period of almost eleven months, during which he was on an indefinite
leave of absence, and the court allowed it, holding that "so long as he remained the
president of the company, the salary was an incident to the office, and ran with it for
the whole time, although he may have failed to perform the duties of president for any
given part of such time."

It is so ordered, without costs.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

If such a sweeping pronouncement is to be applied regardless of whether or not the

corporation was in operation during the period covered by the claim for the salary, as
seems to be contended by the appellee, we must say that we cannot subscribe to it.
G.R. No. 74306 March 16, 1992

24

ENRIQUE RAZON, petitioner,

vs.
INTERMEDIATE APPELLATE COURT and VICENTE B. CHUIDIAN, in his capacity
as Administrator of the Estate of the Deceased JUAN T. CHUIDIAN, respondents.

In their answer filed on June 18, 1973, defendants alleged that all
the shares of stock in the name of stockholders of record of the
corporation were fully paid for by defendant, Razon; that said
shares are subject to the agreement between defendants and
incorporators; that the shares of stock were actually owned and
remained in the possession of Razon. Appellees also alleged . . .
that neither the late Juan T. Chuidian nor the appellant had paid
any amount whatsoever for the 1,500 shares of stock in question . .
.

G.R. No. 74315 March 16, 1992

VICENTE B. CHUIDIAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, ENRIQUE RAZ0N, and E. RAZON,
INC., respondents.

xxx xxx xxx

The evidence of the plaintiff shown that he is the administrator of
the intestate estate of Juan Telesforo Chuidian in Special
Proceedings No. 71054, Court of First Instance of Manila.

GUTIERREZ, JR., J.:

Sometime in 1962, Enrique Razon organized the E. Razon, Inc. for

the purpose of bidding for the arrastre services in South Harbor,
Manila. The incorporators consisted of Enrique Razon, Enrique
Valles, Luisa M. de Razon, Jose Tuason, Jr., Victor Lim, Jose F.
Castro and Salvador Perez de Tagle.

The main issue in these consolidated petitions centers on the ownership of 1,500
shares of stock in E. Razon, Inc. covered by Stock Certificate No. 003 issued on April
23, 1966 and registered under the name of Juan T. Chuidian in the books of the
corporation. The then Court of First Instance of Manila, now Regional Trial Court of
Manila, declared that Enrique Razon, the petitioner in G.R. No. 74306 is the owner of
the said shares of stock. The then Intermediate Appellate Court, now Court of
Appeals, however, reversed the trial court's decision and ruled that Juan T. Chuidian,
the deceased father of petitioner Vicente B. Chuidian in G.R. No. 74315 is the owner
of the shares of stock. Both parties filed separate motions for reconsideration.
Enrique Razon wanted the appellate court's decision reversed and the trial court's
decision affirmed while Vicente Chuidian asked that all cash and stock dividends and
all the pre-emptive rights accruing to the 1,500 shares of stock be ordered delivered
to him. The appellate court denied both motions. Hence, these petitions.

On April 23, 1966, stock certificate No. 003 for 1,500 shares of
stock of defendant corporation was issued in the name of Juan T.
Chuidian.
On the basis of the 1,500 shares of stock, the late Juan T. Chuidian
and after him, the plaintiff-appellant, were elected as directors of E.
Razon, Inc. Both of them actually served and were paid
compensation as directors of E. Razon, Inc.

The relevant Antecedent facts are as follows:

From the time the certificate of stock was issued on April 1966 up to
April 1971, Enrique Razon had not questioned the ownership by
Juan T. Chuidian of the shares of stock in question and had not
brought any action to have the certificate of stock over the said
shares cancelled.

In his complaint filed on June 29, 1971, and amended on

November 16, 1971, Vicente B. Chuidian prayed that defendants
Enrique B. Razon, E. Razon, Inc., Geronimo Velasco, Francisco de
Borja, Jose Francisco, Alfredo B. de Leon, Jr., Gabriel Llamas and
Luis M. de Razon be ordered to deliver certificates of stocks
representing the shareholdings of the deceased Juan T. Chuidian in
the E. Razon, Inc. with a prayer for an order to restrain the
defendants from disposing of the said shares of stock, for a writ of
preliminary attachment v. properties of defendants having
possession of shares of stock and for receivership of the properties
of defendant corporation . . .

The certificate of stock was in the possession of defendant Razon

who refused to deliver said shares to the plaintiff, until the same
was surrendered by defendant Razon and deposited in a safety box
in Philippine Bank of Commerce.
Defendants allege that after organizing the E. Razon, Inc., Enrique
Razon distributed shares of stock previously placed in the names of
the withdrawing nominal incorporators to some friends including
Juan T. Chuidian

xxx xxx xxx

25

Stock Certificate No. 003 covering 1,500 shares of stock upon

instruction of the late Chuidian on April 23, 1986 was personally
delivered by Chuidian on July 1, 1966 to the Corporate Secretary of
Attorney Silverio B. de Leon who was himself an associate of the
Chuidian Law Office (Exhs. C & 11). Since then, Enrique Razon
was in possession of said stock certificate even during the lifetime
of the late Chuidian, from the time the late Chuidian delivered the
said stock certificate to defendant Razon until the time (sic) of
defendant Razon. By agreement of the parties (sic) delivered it for
deposit with the bank under the joint custody of the parties as
confirmed by the trial court in its order of August 7, 1971.

xxx xxx xxx

The purpose of the rule has been explained by this Court in this wise:
The reason for the rule is that if persons having a claim against the
estate of the deceased or his properties were allowed to testify as
to the supposed statements made by him (deceased person), many
would be tempted to falsely impute statements to deceased
persons as the latter can no longer deny or refute them, thus
unjustly subjecting their properties or rights to false or unscrupulous
claims or demands. The purpose of the law is to "guard against the
temptation to give false testimony in regard to the transaction in
question on the part of the surviving party." (Tongco v. Vianzon, 50
Phil. 698; Go Chi Gun, et al. v. Co Cho, et al., 622 [1955])

Thus, the 1,500 shares of stook under Stock Certificate No. 003
were delivered by the late Chuidian to Enrique because it was the
latter who paid for all the subscription on the shares of stock in the
defendant corporation and the understanding was that he
(defendant Razon) was the owner of the said shares of stock and
was to have possession thereof until such time as he was paid
therefor by the other nominal incorporators/stockholders (TSN., pp.
4, 8, 10, 24-25, 25-26, 28-31, 31-32, 60, 66-68, July 22, 1980,
Exhs. "C", "11", "13" "14"). (Ro11o 74306, pp. 66-68)

The rule, however, delimits the prohibition it contemplates in that it is applicable to a

case against the administrator or its representative of an estate upon a
claim against the estate of the deceased person. (See Tongco v. Vianzon, 50 Phil.
698 [1927])
In the instant case, the testimony excluded by the appellate court is that of the
defendant (petitioner herein) to the affect that the late Juan Chuidian, (the father of
private respondent Vicente Chuidian, the administrator of the estate of Juan
Chuidian) and the defendant agreed in the lifetime of Juan Chuidian that the 1,500
shares of stock in E. Razon, Inc. are actually owned by the defendant unless the
deceased Juan Chuidian opted to pay the same which never happened. The case
was filed by the administrator of the estate of the late Juan Chuidian to recover
shares of stock in E. Razon, Inc. allegedly owned by the late Juan T. Chuidian.

In G.R. No. 74306, petitioner Enrique Razon assails the appellate court's decision on
its alleged misapplication of the dead man's statute rule under Section 20(a) Rule 130
of the Rules of Court. According to him, the "dead man's statute" rule is not applicable
to the instant case. Moreover, the private respondent, as plaintiff in the case did not
object to his oral testimony regarding the oral agreement between him and the
deceased Juan T. Chuidian that the ownership of the shares of stock was actually
vested in the petitioner unless the deceased opted to pay the same; and that the
petitioner was subjected to a rigid cross examination regarding such testimony.

It is clear, therefore, that the testimony of the petitioner is not within the prohibition of
the rule. The case was not filed against the administrator of the estate, nor was it filed
upon claims against the estate.

Section 20(a) Rule 130 of the Rules of Court (Section 23 of the Revised Rules on
Evidence) States:

Furthermore, the records show that the private respondent never objected to the
testimony of the petitioner as regards the true nature of his transaction with the late
elder Chuidian. The petitioner's testimony was subject to cross-examination by the
private respondent's counsel. Hence, granting that the petitioner's testimony is within
the prohibition of Section 20(a), Rule 130 of the Rules of Court, the private
respondent is deemed to have waived the rule. We ruled in the case of Cruz v. Court
of Appeals (192 SCRA 209 [1990]):

Sec. 20. Disqualification by reason of interest or relationship The

following persons cannot testify as to matters in which they are
interested directly or indirectly, as herein enumerated.
(a) Parties or assignors of parties to a case, or persons in whose
behalf a case is prosecuted, against an executor or administrator or
other representative of a deceased person, or against a person of
unsound mind, upon a claim or demand against the estate of such
deceased person or against such person of unsound mind, cannot
testify as to any matter of fact accruing before the death of such
deceased person or before such person became of unsound mind."
(Emphasis supplied)

It is also settled that the court cannot disregard evidence which

would ordinarily be incompetent under the rules but has been
rendered admissible by the failure of a party to object thereto. Thus:

26

. . . The acceptance of an incompetent witness to testify in a civil

suit, as well as the allowance of improper questions that may be put
to him while on the stand is a matter resting in the discretion of the
litigant. He may assert his right by timely objection or he may waive
it, expressly or by silence. In any case the option rests with him.
Once admitted, the testimony is in the case for what it is worth and
the judge has no power to disregard it for the sole reason that it
could have been excluded, if it had been objected to, nor to strike it
out on its own motion (Emphasis supplied). (Marella v. Reyes, 12
Phil. 1.)

delivery to the transferee of the certificate properly indorsed. Title

may be vested in the transferee by the delivery of the duly indorsed
certificate of stock (18 C.J.S. 928, cited in Rivera v. Florendo, 144
SCRA 643). However, no transfer shall be valid, except as between
the parties until the transfer is properly recorded in the books of the
corporation (Sec. 63, Corporation Code of the Philippines; Section
35 of the Corporation Law)
In the instant case, there is no dispute that the questioned 1,500 shares of stock of E.
Razon, Inc. are in the name of the late Juan Chuidian in the books of the corporation.
Moreover, the records show that during his lifetime Chuidian was ellected member of
the Board of Directors of the corporation which clearly shows that he was a
stockholder of the corporation. (See Section 30, Corporation Code) From the point of
view of the corporation, therefore, Chuidian was the owner of the 1,500 shares of
stock. In such a case, the petitioner who claims ownership over the questioned
shares of stock must show that the same were transferred to him by proving that all
the requirements for the effective transfer of shares of stock in accordance with the
corporation's by laws, if any, were followed (See Nava v. Peers Marketing
Corporation, 74 SCRA 65 [1976]) or in accordance with the provisions of law.

The issue as to whether or not the petitioner's testimony is admissible having been
settled, we now proceed to discuss the fundamental issue on the ownership of the
1,500 shares of stock in E. Razon, Inc.
E. Razon, Inc. was organized in 1962 by petitioner Enrique Razon for the purpose of
participating in the bidding for the arrastre services in South Harbor, Manila. The
incorporators were Enrique Razon, Enrique Valles, Luisa M. de Razon, Jose Tuazon,
Jr., Victor L. Lim, Jose F. Castro and Salvador Perez de Tagle. The business,
however, did not start operations until 1966. According to the petitioner, some of the
incorporators withdrew from the said corporation. The petitioner then distributed the
stocks previously placed in the names of the withdrawing nominal incorporators to
some friends, among them the late Juan T. Chuidian to whom he gave 1,500 shares
of stock. The shares of stock were registered in the name of Chuidian only as nominal
stockholder and with the agreement that the said shares of stock were owned and
held by the petitioner but Chuidian was given the option to buy the same. In view of
this arrangement, Chuidian in 1966 delivered to the petitioner the stock certificate
covering the 1,500 shares of stock of E. Razon, Inc. Since then, the Petitioner had in
his possession the certificate of stock until the time, he delivered it for deposit with the
Philippine Bank of Commerce under the parties' joint custody pursuant to their
agreement as embodied in the trial court's order.

The petitioner failed in both instances. The petitioner did not present any by-laws
which could show that the 1,500 shares of stock were effectively transferred to him. In
the absence of the corporation's by-laws or rules governing effective transfer of
shares of stock, the provisions of the Corporation Law are made applicable to the
instant case.
The law is clear that in order for a transfer of stock certificate to be effective, the
certificate must be properly indorsed and that title to such certificate of stock is vested
in the transferee by the delivery of the duly indorsed certificate of stock. (Section 35,
Corporation Code) Since the certificate of stock covering the questioned 1,500 shares
of stock registered in the name of the late Juan Chuidian was never indorsed to the
petitioner, the inevitable conclusion is that the questioned shares of stock belong to
Chuidian. The petitioner's asseveration that he did not require an indorsement of the
certificate of stock in view of his intimate friendship with the late Juan Chuidian can
not overcome the failure to follow the procedure required by law or the proper conduct
of business even among friends. To reiterate, indorsement of the certificate of stock is
a mandatory requirement of law for an effective transfer of a certificate of stock.

The petitioner maintains that his aforesaid oral testimony as regards the true nature of
his agreement with the late Juan Chuidian on the 1,500 shares of stock of E. Razon,
Inc. is sufficient to prove his ownership over the said 1,500 shares of stock.
The petitioner's contention is not correct.

Moreover, the preponderance of evidence supports the appellate court's factual

findings that the shares of stock were given to Juan T. Chuidian for value. Juan T.
Chuidian was the legal counsel who handled the legal affairs of the corporation. We
give credence to the testimony of the private respondent that the shares of stock were
given to Juan T. Chuidian in payment of his legal services to the corporation.
Petitioner Razon failed to overcome this testimony.

In the case of Embassy Farms, Inc. v. Court of Appeals (188 SCRA 492 [1990]) we
ruled:
. . . For an effective, transfer of shares of stock the mode and
manner of transfer as prescribed by law must be followed (Navea v.
Peers Marketing Corp., 74 SCRA 65). As provided under Section 3
of Batas Pambansa Bilang, 68 otherwise known as the Corporation
Code of the Philippines, shares of stock may be transferred by

In G.R. No. 74315, petitioner Vicente B. Chuidian insists that the appellate court's
decision declaring his deceased father Juan T. Chuidian as owner of the 1,500 shares

27

of stock of E. Razon, Inc. should have included all cash and stock dividends and all
the pre-emptive rights accruing to the said 1,500 shares of stock.

LEONOR MENDEZONA, plaintiff-appellee,

vs.
ENCARNACION C. VIUDA DE GOITIA, administratrix of the estate of Benigno
Goitia, defendant-appellant.

The petition is impressed with merit.

-----------------------------

The cash and stock dividends and all the pre-emptive rights are all incidents of stock
ownership.

G.R. No. L-31740

March 11, 1930

The rights of stockholders are generally enumerated as follows:

VALENTINA IZAGUIRRE Y NAZABAL, plaintiff-appellee,
vs.
ENCARNACION C. VIUDA DE GOITIA, ETC., defendant-appellant.

xxx xxx xxx

. . . [F]irst, to have a certificate or other evidence of his status as
stockholder issued to him; second, to vote at meetings of the
corporation; third, to receive his proportionate share of the profits of
the corporation; and lastly, to participate proportionately in the
distribution of the corporate assets upon the dissolution or winding
up. (Purdy's Beach on Private Corporations, sec. 554) (Pascual v.
Del Saz Orozco, 19 Phil. 82, 87)

Avancea and Lata for appellant.

Ramon Sotelo for appellees.
VILLAMOR, J.:
The plaintiffs, Leonor Mendezona and Valentina Izaguirre y Nazabal, filed separate
claims with the committee of claims and appraisal against the intestate estate of
Benigno Goitia y Lazaga (Court of First Instance of Manila, civil case No. 30273), the
first for the amount of P5,940, and the second, P2,376. By order of the court dated
June 16, 1927, these claims were heard by the committee. The claimants presented
their evidence, which the committee deemed insufficient and disapproved their
claims. Both claimants appealed from the report of the committee, and in accordance
with section 776 of the Code of Civil Procedure, filed a new complaint which was later
amended with the approval of the court, there being nothing in the bill of exceptions to
show that the defendant, or the administratrix of the deceased Benigno Goitia,
excepted to the court's order admitting the amendments to the complaints.

WHEREFORE, judgment is rendered as follows:

a) In G.R. No. 74306, the petition is DISMISSED. The questioned decision and
resolution of the then Intermediate Appellate Court, now the Court of Appeals, are
AFFIRMED. Costs against the petitioner.
b) In G.R. No. 74315, the petition is GRANTED. The questioned Resolution insofar as
it denied the petitioner's motion to clarify the dispositive portion of the decision of the
then Intermediate Appellate Court, now Court of Appeals is REVERSED and SET
ASIDE. The decision of the appellate court is MODIFIED in that all cash and stock
dividends as, well as all pre-emptive rights that have accrued and attached to the
1,500 shares in E. Razon, Inc., since 1966 are declared to belong to the estate of
Juan T. Chuidian.

The defendant answered the amended complaints, pleading in special defense, that
not having no knowledge of the supposed management of their rights in the "Tren de
Aguadas," and , furthermore, not having seen nor received any money of the
plaintiff's from said business, she is not in a position to render an account of any sort
to the plaintiffs, either in her own personal capacity or as judicial administratrix of
Benigno Goitia's intestate estate.

SO ORDERED.

By agreement of the parties, both cases were tried together, and the trial court
rendered but one decision upon them on October 31, 1928, holding it sufficiently
proved, "that defendant Encarnacion C. Vda, de Goitia has been duly appointed
judicial administratrix of the estate of her deceased husband Benigno Goitia in special
proceeding No. 30273 of this court; that Benigno Goitia was the representative and
attorney-in-fact of the plaintiffs in the joint-account partnership known as the "Tren de
Aguadas" and located in the City of Manila, of which the plaintiff Leonor Mendezona,
widow of Juan Bautista Goitia, owns 180 shares worth P18,000, and the plaintiff
Valentina Izaguirre y Nazabal owns 72 shares worth P7,200; that prior to 1915,

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-31739

March 11, 1930

28

Benigno Goitia, at that time the manager of the aforesaid co-partnership, collected the
dividends for the plaintiffs, which he remitted to them every year; that prior to 1915,
the usual dividends which Benigno Goitia forwarded to plaintiff Leonor Mendezona
each year were P540, and to plaintiff Valentina Izaguirre y Nazabal, P216; that from
1915 until his death in August, 1926, Benigno Goitia failed to remit to the dividends
upon their shares in the "Tren de Aguadas"; that some time before his death, more
particularly, in July, 1926, Benigno Goitia, who was no longer the manager of the said
business, receive as attorney-in-fact of both plaintiff, the amount of P90 as dividend
upon plaintiff Leonor Mendezona's shares, and P36 upon Valentina Izaguirre y
Nazabal's stock; that from 1915 to 1926, the "Tren de Aguadas" paid dividends to the
share-holders, one of them, Ramon Salinas, having received the total amount of
P1,155 as ordinary and special dividends upon his 15 shares' that calculating the
dividends due from 1915 to 1926 upon Leonor Mendezona's 180 shares at P540 per
annum, and at P216 yearly upon the 72 shares held by Valentina Izaguirre y Nazabal,
counsel for both plaintiffs filed their claims with the committee of claims and appraisal
of the estate of Benigno Goitia, and, upon their disallowance, appealed from the
committee's decision by means of the complaints in these two cases."

found no more evidence of any amount received by her late husband, Benigno de
Goitia, than a book of accounts where she came upon an item of P90 for Leonor
Mendezona, and another of P36 for Valentina Izaguirre.
In view of this report and the evidence taken at the hearing the court rendered a
suppletory judgment, upon motion of the plaintiffs dated December 3, 1928; and
taking into account chiefly the testimony of Ruperto Santos and Ramon Salinas, it
was held that, upon the basis of the dividends received by the witness Salinas on his
fifteen shares in the "Tren de Aguadas" from 1915 to 1925, it appears that the
dividends distributed for each share was equal to one-fifteenth of P1,087.50, that is
P72.50. Thus the dividends upon plaintiff Leonor Mendezona's 180 shares would be
P13,050, and upon the 72 shares pertaining to Valentina Izaguirre, P5,220; and these
sums, added to those collected by the attorney-in-fact Benigno Goitia as part of the
1926 dividends, P90 for Leonor Mendezona, and P36 for Valentina Izaguirre, show
that Benigno Goitia thereby received P13,140 in behalf of Leonor Mendezona, and
P5,256 in behalf of Valentina Izaguirre.
Wherefore, the court ordered the defendant, as judicial administratrix of the estate of
the deceased Benigno Goitia, to pay the plaintiff Leonor Mendezona the sum of
P13,140 with legal interest from the date of the filing of the complaint, and to pay the
plaintiff Valentina Izaguirre P5,256 likewise with legal interest from the date of the
filing of the complaint, and moreover, to pay the costs of both instances.

The trial court likewise deemed it proven that "during the period from 1915 to 1926,
Benigno Goitia collected and received certain sums as dividends and profits upon the
plaintiffs's stock in the "Tren de Aguadas" in his capacity as representative and
attorney-in-fact for both of them, which he has neither remitted nor accounted for to
the said plaintiffs, although it has been prove that said Benigno Goitia was their
attorney-in-fact and representative in the "Tren de Aguadas" up to the time of his
death."

The defendant duly appealed from this judgment to this Supreme Court through the
proper bill of exceptions.

The court below therefore ordered the defendant, as judicial administratrix of Benigno
Goitia's estate to render a judicial account of the intestate estate of the deceased
Benigno Goitia, in special proceeding No. 30273 of this court (below), to render an
account of the amounts collected by her aforesaid husband Benigno Goitia, as
attorney-in-fact and representative of the plaintiffs Leonor Mendezona and Valentina
Izaguirre y Nazabal in the copartnership known as the "Tren de Aguadas" from 1915
to July, 1926, within thirty days from notice of this decision; and that the defendant
may see, examine, and make a copy of the books and documents relative to the
business of the aforementioned copartnership, in accordance with the provisions of
section 664 of the Code of Civil Procedure. Without special pronouncement of costs.

The fundamental question raised by the appellant in the first assignment of error
refers to the court's jurisdiction to admit the amended complaints whereby the
plaintiffs claim P13,680 and P5,470 respectively, whereas the claims presented to the
committee of claims and appraisal were only for P5,940 and P2,376, respectively.
Appellant contends that the plaintiffs have not perfected their appeal in accoundance
with section 773 of the Code of Civil Procedure in claiming more in their complaints
than in the claims filed with the committee of claims and appraisal, by including
therein, not only the yearly dividends paid from 1915 to 1925, inclusive, but also the
ordinary and extraordinary dividends upon their shares for the years of 1915 to 1926,
alleged to have been delivered to Benigno Goitia.

On December 15, 1928, at the instance of the plaintiffs, the trial court set the 15th of
January, 1929, as the date on which the defendant should present her account of the
dividends and profits collected by the decedent, as attorney-in-fact for the plaintiffs,
with regard to the "Tren de Aguatas" copartnership, form 1915 to 1926, and the
hearing was postponed to the 7th of February, 1929.

The fact that the claims filed with the committee were upon the basis of annual
dividends, while those filed with the court below were on ordinary and extraordinary
dividends, is of no importance, for, after all they refer to the same amounts received
by the deceased Benigno Goitia in the name and for the benefit of the plaintiffs. The
question to be decided is whether or not in this jurisdiction a greater sum may be
claimed before the court than was claimed before the committee. It should be noted
that according to the cases cited by the appellant on pages 12 and 13 of her brief, to
wit, Patrick vs. Howard, 47 Mich., 40; 10 N. W. 71. 72; Dayton vs. Dakin's Estate, 61
N. W., 349; and Luizzi vs. Brandy's Estate, 113 N. W., 574; 140 Mich., 73; 12 Detroit
Leg., 59, the claims passed upon by the committee cannot be enlarged in the Circuit

On February 6, 1929, the defendant, reiterating her exception to the court's decision
enjoining her to render accounts, manifested that after a painstaking examination of
the books of account of the copartnership "Tren de Aguadas," and several attempts to
obtain data from Ruperto Santos, the manager and administrator thereof, she has

29

Court by amendment. But counsel for the appellees draws our attention to the
doctrines of the Vermont Supreme Court (Maughan vs. Burns' Estate, 64 Vt., 316; 23
Atlantic, 583), permitting an augmentative amendment to the claim filed with the
committee.

However this may be, in this jurisdiction there is a rule governing the question raised
in this assignment of error, namely, section 776 of the Code of Civil Procedure, as
construed in the cases of Zaragoza vs. Estate of De Viademonte (10 Phil., 23);
Escuin vs. Escuin (11 Phil., 332); and In re Estate of Santos (18 Phil., 403). This
section provides:

In the Maughan case, supra, the court stated:

SEC. 776. Upon the lodging of such appeal; with the clerk, the disputed
claim shall stand for trial in the same manner as any other action in the
Court of First Instance, the creditor being deemed to be the plaintiff, and the
estate the defendant, and pleading as in other actions shall be filed.

ROWELL, J. This is an appeal from the decision and report of the

commissioners on the estate of Michael Burns. Plaintiff presented her claim
to the commissioners at $2,789.65. The ad damnum in her declaration filed
in the probate court was $3,500. In the country court she recovered
$3,813.49. Thereupon she moved for leave to amend her declaration by
raising the ad damnum to $4,000, which was granted, and she had judgment
for the amount of her recovery. The identical claim presented to the
commissioners was the claim tried above. The amount of plaintiff's recovery
rested on the quantum meruit. The jury found that she merited more than
she estimated her claim when she presented it to the commissioners. But
such underestimate did not preclude her from recovering more, if the
testimony show her entitled to it, as presumably it did, as more was found.
The fact of such estimate was evidence against here deserving more, as it
was an implied admission that what she claimed was enough; but the
admission was not conclusive upon her, and did not prevent 527;
Stowe vs. Bishop, 58 Vt., 498; 3 Atl. Rep., 494; Hard vs. Burton, 62 Vt., 314;
20 Atl. Rep., 269.)

Just as in ordinary actions in which the pleadings may be amended, so in the instant
case, the original complaint for the same amounts claimed before the committee was
altered, increasing the amounts, and the amended complaint was approved by the
court and not objected to by the adverse party. The character of the action throughout
is the same. The action before the committee rested on the contention that as
attorney-in-fact for the plaintiffs with respect to the partnership "Tren de Aguadas," the
late Benigno Goitia had received dividends upon their shares which he failed to turn
over to them; the appeal to the Court of First Instance is founded on the same
contention. When the claim was filed with the committee, counsel for the plaintiffs
merely made a calculation of the amounts due, in view of the fact that he had not all
the data from the plaintiffs, who live in Spain; but after filing the complaint on appeal
with the court of First Instance, he discovered that his clients were entitled to larger
sums, and was therefore compelled to change the amount of the claims.

It is conceded that in common-low actions the court has power to raise the
ad damnum at any time; but it is claimed that as the probate court is not a
common-low court, but is a court of special and limited jurisdiction, and has
by statue original jurisdiction of settlement of the estates of deceased
person, the country court has no power to raise the ad damnum of the
declaration filed in the probate court. The county court has, by statue,
appellate jurisdiction of matters originally within the jurisdiction of the probate
court and in such appeals it sits as a higher court of probate, and its
jurisdiction is co-extensive with that of the probate court. It is not limited to
the particular questions that arose in the probate court in the matter
appealed, but is expressly extended to matters originally within the
jurisdiction of that court. It is an appellate court for the rehearing and the reexamination of matters not particular questions merely that have been
acted upon in the court below. (Adams vs. Adams, 21 Vt., 162) And these
matters embrace even those that rest in discretion. (Holmes vs. Holmes, 26
Vt., 536.) In Francis vs. Lathrope, 2 Tyler, 372, the claimant was allowed, on
terms, to file a declaration in the country court, he having omitted to file one
in the probate court as required by statute. It was within the jurisdiction of the
probate court to have allowed this amendment, and, as the county court had
all the jurisdiction of the probate court in this behalf, it also had power to
allow the amendment.

Considering the distance that separated the plaintiffs from their attorney-in-fact, the
deceased Benigno Goitia, and that the latter failed to supply them with data from
1915 until his death in 1926, it is natural that they had to resort to calculating the
amounts due them from the "Tren de Aguadas." To deny them the right to amend their
complaint in accordance with section 776, when they had secured more definite
information as to the amounts due them, would be an injustice, especially when it is
taken into consideration that this action arises from trust relations between the
plaintiffs and the late Benigno Goitia as their attorney-in-fact.
The first error is therefore overruled.
The allegation found in the second assignment of error that the plaintiffs are not in
reality interested parties in this case is untenable. It does not appear from the bill of
exceptions that the appellant demurred on the ground of misjoinder of parties, or
alleged such misjoinder in her answer. In accordance with section 93 of the Code of
Civil Procedure, the appellant has waived the right to raise any objection on the
ground that the plaintiffs are not the real parties in interest, or that they are not the
owners of the stock in question. (Broce vs. Broce, 4 Phil., 611; and
Ortiz vs. Aramburo, 8 Phil., 98) Furthermore it appears from Exhibits D, E, F, and G,
that the late Benigno Goitia recognized that those shares of the "Tren de Aguadas"
really belonged to the plaintiffs. And above all, Exhibit K-1, which is a copy of the
balance sheet for May and June, 1926, taken from the books of the partnership,

30

clearly shows that Leonor Mendezona owned 180 shares, and Valentina Izaguirre, 72
shares. Therefore the appellant cannot now contend that the plaintiffs are not the real
interested parties.

intestate estate from fictitious claims. But this protection should not be treated as an
absolute bar or prohibition from the filing of just claims against the decedent's estate.
The facts in the case of Maxilom vs. Tabotabo (9 Phil., 390), differ from those in the
case at bar. In that case, the plaintiff Maxilom liquidated his accounts with the
deceased Tabotabo during his lifetime, with the result that there was a balance in his
favor and against Tabotabo of P312.37, Mexican currency. The liquidation was signed
by both Maxilom and Tabotabo. In spite of this, some years later, or in 1906, Maxilom
filed a claim against the estate of Tabotabo for P1,062.37, Mexican currency, alleging
that P750 which included the 1899 liquidation had not really been received, and that
therefore instead of P312.37, Mexican currency, that liquidation should have shown a
balance of P1,062.37 in favor of Maxilom. It is evident that in view of the prohibition of
section 383, paragraph 7, of the Code of Civil Procedure, Maxilom could not testify in
his own behalf against Tabotabo's estate, so as to alter the balance of the liquidation
made by and between himself and the decedent. But in the case before us there has
been no such liquidation between the plaintiffs and the deceased Goitia. They testify,
denying any such liquidation. To apply to them the rule that "if death has sealed the
lips of one of the parties, the law seals those of the other," would be to exclude all
possibility of a claim against the testamentary estate. We do not believe that this was
the legislator's intention.

In the third assignment of error it is argued that following section 676 of the Code of
Civil Procedure, the court below had no power to order the defendant to render an
account of dividends supposed to have been received by her deceased husband. We
are of opinion that the order of the court enjoining the appellant to render an account
of all the amounts collected by her aforesaid husband Benigno Goitia as
representative and attorney-in-fact of the plaintiffs, from 1915 until June, 1926, was
made for the purpose of giving her an opportunity of showing, if she could, just what
amounts the deceased Goitia received on account of the appellees' stock. There is no
reversible error in this; for, as the complaint demanded the return of amounts alleged
to have been received by the deceased attorney-in-fact represented by the appellant,
it was quite in order to determine whether such amounts were really received or not.
The fourth assignment of error relates to Exhibits A and B, being the appellees'
depositions made before the American consul at Bilbao, Spain, in accordance with
section 356 of the Code of Civil Procedure. Counsel for the appellant was notified of
the taking of these depositions, and he did not suggest any other interrogatory in
addition to the questions of the committee. When these depositions were read in
court, the defendant objected to their admission, invoking section 383, No. 7, of the
Code of Civil Procedure. Her objection referred mainly to the following questions:

The plaintiffs-appellees did not testify to a fact which took place before their
representative's death, but on the contrary denied that it had taken place at all, i.e.
they denied that a liquidation had been made or any money remitted on account of
their shares in the "Tren de Aguadas" which is the ground of their claim. It was
incumbent upon the appellant to prove by proper evidence that the affirmative
proposition was true, either by bringing into court the books which the attorney-in-fact
was in duty bound to keep, or by introducing copies of the drafts kept by the banks
which drew them, as was the decedents's usual practice according to Exhibit I, or by
other similar evidence.

1. Did Mr. Benigno Goitia render you an account of your partnership in the
"Tren de Aguadas?" Yes, until the year 1914.
2. From the year 1915, did Mr. Benigno Goitia send you any report or money
on account of profits upon your shares? He sent me nothing, nor did he
answer, my letters.

The appellant admits having found a book of accounts kept by the decedent showing
an item of P90 for the account of Leonor Mendezona and another of P36 for the
account of Valentina Izaguirre, which agrees with the statement of Ruperto Santos,
who succeeded Benigno Goitia in the administration of said partnership, to the effect
that the deceased attorney-in-fact had collected the amounts due the plaintiffs as
dividends on their shares for the months of May and June, 1926, or P90 for Leonor
Mendezona, and P36 for Valentina Izaguirre, amounts which had not been remitted
by the deceased to the plaintiffs.

3. did you ever ask him to send you a statement of your account Yes,
several times by letter, but I never received an answer.
The first of these questions tends to show the relationship between the principals and
their attorney-in-fact Benigno Goitia up to 1914. Supposing it was error to permit such
a question, it would not be reversible error, for that very relationship is proved by
Exhibits C to F, and H to I. As to the other two questions, it is to be noted that the
deponents deny having received from the deceased Benigno Goitia any money on
account of profits on their shares, since 1915. We are of opinion that the claimants'
denial that a certain fact occurred before the death of their attorney-in-fact Benigno
Agoitia does not come within the legal prohibitions (section 383, No. 7, Code of Civil
Procedure). The law prohibits a witness directly interested in a claim against the
estate of a decedent from testifying upon a matter of fact which took place before the
death of the deceased. The underlying principle of this prohibition is to protect the

Finally, the appellant complains that the trial court held by mere inference that
Benigno Goitia received from the "Tren de Aguadas" the amounts of P13,140 and
P5,265 for Mendezona and Izaguirre, respectively, as dividends for the years from
1915 to 1926, inclusive, and in holding again, by mere inference, that Benigno Goitia
did not remit said sums to the plaintiffs.

31

It is a well established fact in the record that the plaintiffs had an interest or some
shares in the partnership called "Tren de Aguadas," Mendezona holding 180 shares,
worth P18,000, and Izaguirre, 72 shares worth P7,200. By the testimony of Ruperto
Santos, former secretary of Benigno Goitia and his successor in the administration of
that partnership, it appears that the deceased Benigno Goitia had received the
dividends due the appellees for the months of May and June, 1926. And according to
Exhibit K-I, the dividend for the months of May and June was P0.50 a share. And
witness Ramon Salinas, a practising attorney and one of the shareholders of the
partnership "Tren de Aguadas," testified, from a notebook which he had, that he
received from the "Tren de Aguadas" the following ordinary dividends: P45 in 1915;
P45 in 1916; P45 in 1917; P45 in 1918; P45 in 1919; P90 in 1920; P67.50 in 1921,
and P45 each for 1922, 1923, 4924, 1925, and 1926. By way of extraordinary
dividends, the witness testified that he received P22.50 each year from 1915 to 1918
inclusive; P45 in 1919; P60 in 1920; P37.50 in 1921, 1922, 1923, and 1924; P15 in
1925; and P22.50 in 1926. He further stated that he received P165 in 1918 as his
share of the proceeds of the sale of the boat Santolan. Summing up all these
amounts, we find that the witness Ramon Salinas, from 1915 to 1925, received a total
of P1,087.50.

SECOND DIVISION
G.R. No. 180843

April 17, 2013

APOLONIO GARCIA, in substitution of his deceased mother, Modesta Garcia,

and CRISTINA SALAMAT,Petitioners,
vs.
DOMINGA ROBLES VDA. DE CAPARAS, Respondent.
DECISION
DEL CASTILLO, J.:
Under the Dead Man's Statute Rule, "if one party to the alleged transaction is
precluded from testifying by death, insanity, or other mental disabilities, the other
party is not entitled to the undue advantage of giving his own uncontradicted and
unexplained account of the transaction."1 Thus, the alleged admission of the
deceased Pedro Caparas (Pedro) that he entered into a sharing of leasehold rights
with the petitioners cannot be used as evidence against the herein respondent as the
latter would be unable to contradict or disprove the same.

It further appears that Ruperto Santos assured the court that the dividends for the
period from 1915 to 1926 have been distributed among the shareholders, and that the
late Benigno Goitia received the dividends due on the shares pertaining to Leonor
Mendezona and Valentina Izaguirre, deducting them from the total distribution. In
view of these data, the court below reached the conclusion, on the basis of the
dividends received by partner Ramon Salinas, that the attorney-in-fact Benigno Goitia
received for the plaintiffs-appellees, respectively, the amounts of P13,140 and
P5.256, including the dividends for 1926, or P90 for Leonor Mendezona, and P36 for
Valentina Izaguirre.

This Petition for Review on Certiorari2 seeks to reverse and set aside the August 31,
2007 Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 90403;4 as well as its
December 13, 2007 Resolution5denying petitioners' Motion for Reconsideration.
Factual Antecedents
Flora Makapugay (Makapugay) is the owner of a 2.5-hectare farm in Barangay
Lugam, Malolos, Bulacan (the land) covered by Transfer Certificate of Title No. (TCT)
RT-65932 (T-25198)6 and being tilled by Eugenio Caparas (Eugenio) as agricultural
lessee under a leasehold agreement. Makapugay passed away and was succeeded
by her nephews and niece, namely Amanda dela Paz-Perlas (Amanda), Justo dela
Paz (Justo) and Augusto dela Paz (Augusto). On the other hand, Eugenios children
Modesta Garcia (Garcia), Cristina Salamat (Salamat) and Pedro succeeded him.

As to the interest imposed in the judgment appealed from, it is sufficient to cite article
1724 of the Civil Code, which provides that an agent shall be liable for interest upon
any sums he may have applied to his own use, from the day on which he did so, and
upon those which he still owes, after the expiration of the agency, from the time of his
default.
The judgment appealed form being in accordance with the merits of the case, we are
of opinion, and so hold, that the same must be, as it is hereby, affirmed, with costs
against the appellant. So ordered.

Before she passed away, Makapugay appointed Amanda as her attorney-in-fact. After
Eugenio died, or in 1974, Amanda and Pedro entered into an agreement entitled
"Kasunduan sa Buwisan",7 followed by an April 19, 1979 Agricultural Leasehold
Contract,8 covering the land. In said agreements, Pedro was installed and recognized
as the lone agricultural lessee and cultivator of the land.

Republic of the Philippines

SUPREME COURT
Manila

Pedro passed away in 1984, and his wife, herein respondent Dominga Robles Vda.
de Caparas (Dominga), took over as agricultural lessee.

32

On July 10, 1996, the landowners Amanda, Justo and Augusto, on the one hand, and
Pedros sisters Garcia and Salamat on the other, entered into a "Kasunduan sa
Buwisan ng Lupa"9 whereby Garcia and Salamat were acknowledged as Pedros colessees.

nullified; that the execution of a new leasehold agreement between her and the
landowners be ordered; and by way of counterclaim, that moral damages15 and
litigation costs be awarded her.
Ruling of the PARAD

On October 24, 1996, herein petitioners Garcia and Salamat filed a Complaint10 for
nullification of leasehold and restoration of rights as agricultural lessees against
Pedros heirs, represented by his surviving spouse and herein respondent Dominga.
Before the office of the Provincial Agrarian Reform Adjudicator (PARAD) of Bulacan,
the case was docketed as Department of Agrarian Reform Adjudication Board
(DARAB) Case No. R-03-02-3520-96.

After hearing and consideration of the parties respective position papers and other
submissions, the PARAD issued on May 4, 1998 a Decision,16 which decreed as
follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
defendant and against the plaintiffs and Order is hereby issued:

In their Complaint, Garcia and Salamat claimed that when their father Eugenio died,
they entered into an agreement with their brother Pedro that they would alternately
farm the land on a "per-season basis"; that the landowner Makapugay knew of this
agreement; that when Makapugay passed away, Pedro reneged on their agreement
and cultivated the land all by himself, deliberately excluding them and
misrepresenting to Amanda that he is Eugenios sole heir; that as a result, Amanda
was deceived into installing him as sole agricultural lessee in their 1979 Agricultural
Leasehold Contract; that when Amanda learned of Pedros misrepresentations, she
executed on July 10, 1996 an Affidavit11 stating among others that Pedro assured her
that he would not deprive Garcia and Salamat of their "cultivatory rights"; that in order
to correct matters, Amanda, Justo and Augusto executed in their favor the 1996
"Kasunduan sa Buwisan ng Lupa", recognizing them as Pedros co-lessees; that
when Pedro passed away, Dominga took over the land and, despite demands,
continued to deprive them of their rights as co-lessees; that efforts to settle their
controversy proved futile, prompting the Barangay Agrarian Reform Committee to
issue the proper certification authorizing the filing of a case; and that they suffered
damages as a consequence. Petitioners prayed that the 1979 Agricultural Leasehold
Contract between Pedro and Amanda be nullified; that they be recognized as colessees and allowed to cultivate the land on an alternate basis as originally agreed;
and that they be awarded P50,000.00 attorneys fees and costs of litigation.

1. ORDERING the dismissal of the case;

2. DECLARING defendant Dominga Robles Vda. de Caparas as lawful
successor-tenant;
3. ORDERING plaintiffs to maintain defendant in her peaceful possession
and cultivation of the subject landholding;
4. ORDERING the MARO of Malolos, Bulacan to execute a new leasehold
contract between the landowner and defendant Dominga Robles Vda. de
Caparas;
5. No pronouncement as to costs.
SO ORDERED.17
The PARAD held that Amandas act of executing the July 10, 1996 Affidavit and
"Kasunduan sa Buwisan ng Lupa" amounted to dispossession of Pedros landholding
and rights without cause; that Amandas 1996 disclaimer, after having installed Pedro
as tenant in 1979, was belated and unjustified; that petitioners have not shown by
evidence that they actually cultivated the land, or that they paid rentals to the
landowners; that petitioners cause of action has prescribed in accordance with
Section 38 of RA 3844; that for failure to timely question Pedros leasehold, his rights
were transferred, by operation of law, to Dominga upon his death. Finally, the PARAD
held that petitioners July 10, 1996 "Kasunduan sa Buwisan ng Lupa" is null and void
for being issued against Pedros existing 1979 Agricultural Leasehold Contract, which
has not been cancelled by competent authority.

In her Answer,12 herein respondent Dominga claimed that when her father-in-law
Eugenio died, only her husband Pedro succeeded and cultivated the land, and that
petitioners never assisted him in farming the land; that Pedro is the sole agricultural
lessee of the land; that Amandas July 10, 1996 Affidavit and "Kasunduan sa Buwisan
ng Lupa" of even date between her and the petitioners are self-serving and violate the
existing 1979 Agricultural Leasehold Contract; that under Section 3813 of Republic Act
No. 384414 (RA 3844), petitioners cause of action has prescribed. Dominga further
claimed that Pedro has been in possession of the land even while Eugenio lived; that
petitioners have never cultivated nor possessed the land even for a single cropping;
that Pedro has been the one paying the lease rentals as evidenced by receipts; that
when Pedro died in 1984, she succeeded in his rights as lessee by operation of law,
and that she had been remitting lease rentals to the landowners since 1985; and that
petitioners had no right to institute themselves as her co-lessees. She prayed that the
Complaint be dismissed; that the July 10, 1996 "Kasunduan sa Buwisan ng Lupa" be

DARAB Case No. 03-03-10307-99

It appears that sometime after the execution of the July 10, 1996 "Kasunduan sa
Buwisan ng Lupa" and during the pendency of DARAB Case No. R-03-02-3520-96,

33

petitioners entered the land and began tilling the same. For this reason, Dominga filed
DARAB Case No. 03-03-10307-99, for maintenance of peaceful possession with
injunctive relief, against the landowners and petitioners. On petitioners motion, the
case was dismissed.18

Agricultural Leasehold Contract, which was subsisting and which has not been
cancelled by competent authority.

Ruling of the DARAB

Petitioners filed before the CA a Petition for Certiorari, which was docketed as CAG.R. SP No. 90403, seeking to set aside the DARAB Decision. The sole basis of their
Petition rests on the argument that as a result of a May 9, 2005 Order issued by the
Regional Technical Director (Region III) of the Department of Environment and
Natural Resources, the survey returns and plans covering TCT RT-65932 have been
cancelled, which thus rendered the June 15, 2005 DARAB Decision null and void and
a proper subject of certiorari.

Ruling of the Court of Appeals

Petitioners appealed the May 4, 1998 PARAD Decision in DARAB Case No. R-03-023520-96 to the DARAB, where the case was docketed as DARAB Case No.
972219 (DCN 9722). Dominga likewise appealed the dismissal of DARAB Case No.
03-03-10307-99, which appeal was docketed as DARAB Case No. 11155 (DCN
11155). On motion, both appeals were consolidated.
On June 15, 2005, the DARAB issued its Decision,20 the dispositive portion of which
reads, as follows:

On August 31, 2007, the CA issued the assailed Decision which decreed as follows:
IN LIGHT OF ALL THE FOREGOING, the instant petition is DENIED. The assailed
decision is AFFIRMED in toto.

WHEREFORE, premises considered, a new judgment is hereby rendered:

SO ORDERED.22

1. DECLARING Dominga Robles Vda. de Caparas as the lawful successortenant of Pedro Caparas over the subject landholding;

The CA held that the issue raised by petitioners the cancellation of the survey
returns and plans covering TCT RT-65932 was not part of their causes of action in
the PARAD or DARAB, and this new issue changed the theory of their case against
Dominga, which is not allowed. The CA added that it could not decide the case on the
basis of a question which was not placed in issue during the proceedings below.

2. ORDERING the plaintiffs in DCN 9722 and the respondents in DCN 11155
or any person acting in their behalves [sic], to maintain Dominga Robles
Vda. de Caparas in peaceful possession and cultivation of the subject
landholding;
3. ORDERING the MARO of Malolos, Bulacan, to execute a new leasehold
contract between the landowner and Dominga Robles Vda. de Caparas; and

The CA held further that even granting that the issues are resolved on the merits, the
petition would fail; the cancellation of the survey returns and plans covering TCT RT65932 reverts the property to its original classification as agricultural land which thus
vindicates the leasehold agreements of the parties. And speaking of leasehold
agreements, the CA held that petitioners may not be considered as Pedros colessees, for lack of proof that they actually tilled the land and with petitioners own
admission in their pleadings that they merely received a share from Pedros harvests;
that the original 1974 and 1979 leasehold agreements between Makapugay, Amanda
and Pedro categorically show that Pedro is the sole designated agricultural lessee;
and that without proper legal termination of Pedros lease in accordance with RA
3844, the landowners cannot designate other tenants to the same land in violation of
the existing lessees rights.

4. ORDERING for the dismissal of DCN 11155 for being moot and academic.
SO ORDERED.21
In upholding the PARAD Decision, the DARAB held that contrary to petitioners claim,
there was no alternate farming agreement between the parties, and thus petitioners
may not claim that they were co-lessees; that Pedro merely shared his harvest with
petitioners as an act of generosity, and Domingas act of stopping this practice after
succeeding Pedro prompted petitioners to file DARAB Case No. R-03-02-3520-96
and claim the status of co-lessees; that Amandas Affidavit and the 1996 "Kasunduan
sa Buwisan ng Lupa" between the landowners and petitioners cannot defeat Pedros
1979 Agricultural Leasehold Contract and his rights as the sole tenant over the land;
that for sleeping on their rights, petitioners are now barred by laches from claiming
that they are co-lessees; and that petitioners 1996 "Kasunduan sa Buwisan ng Lupa"
is null and void for being contrary to law, morals, public policy, and Pedros 1979

Petitioners moved for reconsideration, arguing that the land has been re- classified as
residential land, and has been actually used as such. Petitioners cited a 1997
ordinance, Malolos Municipal Resolution No. 41-97,23 which adopted and approved
the zoning ordinance and the Malolos Development Plan prepared jointly by the
Housing and Land Use Regulatory Board and the Malolos Sangguniang Bayan. In the
assailed December 13, 2007 Resolution,24 the CA denied the Motion for
Reconsideration.

34

Issues

Petitioners justify their change of theory, the addition of new issues, and the raising of
factual issues, stating that the resolution of these issues are necessary in order to
arrive at a just decision and resolution of the case in its totality. They add that the new
issues were raised as a necessary consequence of supervening events which took
place after the Decisions of the PARAD and DARAB were issued.

In this petition, the following errors are assigned:

1. x x x RESPONDENTS ACT OF HAVING BUILT THREE (3) HOUSES
(FOR HERSELF AND TWO OF HER CHILDREN), WAS "CONVERSION OF
THE FARMHOLD INTO A HOUSING-RESIDENTIAL SUBDIVISION" AND
THEREFORE, SHE IS NOT BEING PUT IN SURPRISE NOR IN UNFAIR
SITUATION. CONSEQUENTLY, SHE IS THE PARTY IN ESTOPPEL. AND
FROM THE TIME BY HER ACTS OF SELF-CONVERSION OF THE LAND,
IN THE EARLY 90S OR EARLIER, SHE "LOST HER SECURITY OF
TENURE" AS AGRICULTURAL LESSEE.

Respondents Arguments
In her Comment,27 Dominga argues that the Petition raises questions of fact which
are not the proper subject of a Petition under Rule 45 of the Rules. She adds that
petitioners raised anew issues which further changed the theory of their case, and
which issues may not be raised for the first time at this stage of the proceedings.

2. THE DECISIONS OF THE DARAB PROVINCIAL ADJUDICATOR,

DARAB CENTRAL OFFICE, AND THE HONORABLE COURT OF
APPEALS, SPEAK OF NO HOMELOT HAVING BEEN AWARDED BY THE
DEPARTMENT OF AGRARIAN REFORM TO PRIVATE RESPONDENT.

Our Ruling
The Petition is denied.
DARAB Case No. R-03-02-3520-96, which was filed in 1996 or long after Pedros
death in 1984, has no leg to stand on other than Amandas declaration in her July 10,
1996 Affidavit that Pedro falsely represented to Makapugay and to her that he is the
actual cultivator of the land, and that when she confronted him about this and the
alleged alternate farming scheme between him and petitioners, Pedro allegedly told
her that "he and his two sisters had an understanding about it and he did not have the
intention of depriving them of their cultivatory rights."28 Petitioners have no other
evidence, other than such verbal declaration, which proves the existence of such
arrangement. No written memorandum of such agreement exists, nor have they
shown that they actually cultivated the land even if only for one cropping. No receipt
evidencing payment to the landowners of the latters share, or any other documentary
evidence, has been put forward.

3. ACTUAL PHYSICAL CHANGE IN THE USE OF THE LAND FROM

AGRICULTURAL TO "RESIDENTIAL" MAY OCCUR AFTER TRIAL, BUT
DURING THE APPEAL, WHICH THE HON. COURT OF APPEALS MAY
CONSIDER.
4. "CONVERSION" (WHICH REQUIRES PRIOR APPROVAL BY THE DAR)
HAVING BECOME A "FAIT ACCOMPLI", SECTION 220 OF THE REAL
ESTATE TAX CODE AND ARTICLE 217 OF THE LOCAL GOVERNMENT
CODE OF 1991 AFFIRM THE TRUSTWORTHINESS OF THE TAX
DECLARATION THAT IS, THE PREVIOUS FARMHOLD HAS BEEN
CONVERTED INTO "RESIDENTIAL" LAND, AND CONFIRMED BY THE
CITY ZONING DIRECTOR.

What the PARAD, DARAB and CA failed to consider and realize is that Amandas
declaration in her Affidavit covering Pedros alleged admission and recognition of the
alternate farming scheme is inadmissible for being a violation of the Dead Mans
Statute,29 which provides that "[i]f one party to the alleged transaction is precluded
from testifying by death, insanity, or other mental disabilities, the other party is not
entitled to the undue advantage of giving his own uncontradicted and unexplained
account of the transaction."30 Thus, since Pedro is deceased, and Amandas
declaration which pertains to the leasehold agreement affects the 1996 "Kasunduan
sa Buwisan ng Lupa" which she as assignor entered into with petitioners, and which
is now the subject matter of the present case and claim against Pedros surviving
spouse and lawful successor-in-interest Dominga, such declaration cannot be
admitted and used against the latter, who is placed in an unfair situation by reason of
her being unable to contradict or disprove such declaration as a result of her
husband-declarant Pedros prior death.

5. IN NOT HAVING CONSIDERED THE TAX DECLARATION AND THE

ZONING CERTIFICATION x x x, THE HON. COURT OF APPEALS
COMMITTED A VERY FUNDAMENTAL ERROR.25
Petitioners Arguments
In their Petition and Reply,26 petitioners this time argue that in building houses upon
the land for herself and her children without a homelot award from the Department of
Agrarian Reform, Dominga converted the same to residential use; and by this act of
conversion, Dominga violated her own security of tenure and the land was removed
from coverage of the land reform laws. They add that the Malolos zoning ordinance
and the tax declaration covering the land effectively converted the property into
residential land.

35

If petitioners earnestly believed that they had a right, under their supposed mutual
agreement with Pedro, to cultivate the land under an alternate farming scheme, then
they should have confronted Pedro or sought an audience with Amanda to discuss
the possibility of their institution as co-lessees of the land; and they should have done
so soon after the passing away of their father Eugenio. However, it was only in 1996,
or 17 years after Pedro was installed as tenant in 1979 and long after his death in
1984, that they came forward to question Pedros succession to the leasehold. As
correctly held by the PARAD, petitioners slept on their rights, and are thus precluded
from questioning Pedros 1979 agricultural leasehold contract.

would not be left out. But evidently, they did not; they slept on their rights, and true
enough, they were excluded, if there was any such alternate farming agreement
between them. And after Pedro was chosen and installed as Eugenios successor,
they allowed 17 years to pass before coming out to reveal this claimed alternate
farming agreement and insist on the same.1wphi1
With the above pronouncements, there is no other logical conclusion than that the
1996 "Kasunduan sa Buwisan ng Lupa" between Amanda and petitioners, which is
grounded on Pedros inadmissible verbal admission, and which agreement was
entered into without obtaining Domingas consent, constitutes an undue infringement
of Domingas rights as Pedros successor-in-interest under Section 9, and operates to
deprive her of such rights and dispossess her of the leasehold against her will. Under
Section 732 of RA 3844, Dominga is entitled to sennity of tenure; and under Section
16,33 any modification of the lease agreement must be done with the consent of both
parties and without prejudicing Dominga's security of tenure.

Amanda, on the other hand, cannot claim that Pedro deceived her into believing that
he is the sole successor to the leasehold. Part of her duties as the landowners
representative or administrator was to know the personal circumstances of the lessee
Eugenio; more especially so, when Eugenio died. She was duty-bound to make an
inquiry as to who survived Eugenio, in order that the landowner or she as
representative could choose from among them who would succeed to the
leasehold. Under Section 9 of RA 3844, Makapugay, or Amanda as Makapugays
duly appointed representative or administrator was required to make a choice,
within one month from Eugenios death, who would succeed as agricultural lessee.
Thus:

This Court shall not delve into the issue of re-classification or conversion of the land.
Re-classification/conversion changes nothing as between the landowners and
Dominga in regard to their agreement, rights and obligations. On the contrary, reclassification/conversion can only have deleterious effects upon petitioners' cause.
Not being agricultural lessees of the land, petitioners may not benefit at all, for under
the law, only the duly designated lessee -herein respondent - is entitled to disturbance
compensation in case of re-classification/conversion of the landholding into
residential, commercial, industrial or some other urban purposes.34 Besides, a valid
re-classification of the land not only erases petitioners' supposed leasehold rights; it
renders them illegal occupants and sowers in bad faith thereof, since from the
position they have taken as alleged lessees, they are not the owners of the land.

Section 9. Agricultural Leasehold Relation Not Extinguished by Death or Incapacity of

the Parties - In case of death or permanent incapacity of the agricultural lessee to
work his landholding, the leasehold shall continue between the agricultural lessor and
the person who can cultivate the landholding personally, chosen by the agricultural
lessor within one month from such death or permanent incapacity, from among the
following: (a) the surviving spouse; (b) the eldest direct descendant by consanguinity;
or (c) the next eldest descendant or descendants in the order of their age: Provided,
That in case the death or permanent incapacity of the agricultural lessee occurs
during the agricultural year, such choice shall be exercised at the end of that
agricultural year: Provided, further, That in the event the agricultural lessor fails to
exercise his choice within the periods herein provided, the priority shall be in
accordance with the order herein established.

WHEREFORE, the Petition is DENIED. The assailed August 31, 2007 Decision and
December 13, 2007 Resolution of the Court of Appeals are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

In case of death or permanent incapacity of the agricultural lessor, the leasehold shall
bind his legal heirs. (Emphasis supplied)
Amanda may not claim ignorance of the above provision, as ignorance of the law
excuses no one from compliance therewith.31 Thus, when she executed the 1979
Agricultural Leasehold Contract with Pedro, she is deemed to have chosen the latter
as Eugenios successor, and is presumed to have diligently performed her duties, as
Makapugays representative, in conducting an inquiry prior to making the choice.

EN BANC
G.R. No. L-22948

March 17, 1925

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee,

vs.
FAUSTO V. CARLOS, defendant-appellant.

The same holds true for petitioners. They should be held to a faithful compliance with
Section 9. If it is true that they entered into a unique arrangement with Pedro to
alternately till the land, they were thus obliged to inform Makapugay or Amanda of
their arrangement, so that in the process of choosing Eugenios successor, they

36

M.H. de Joya, Jose Padilla, Vicente Sotto and Monico Mercado for appellant.
Attorney-General Villa-Real and City Fiscal Guevara for appellee.

The defendant admits that he killed the deceased but maintains that he did so in selfdefense. He explains that he went to Doctor Sityar's office to protest against the
amount of the fee charged by the doctor and, in any event, to ask for an extension of
the time of payment; that during the conversation upon that subject the deceased
insulted him by telling him that inasmuch as he could not pay the amount demanded
he could send his wife to the office as she was the one treated, and that she could
then talk the matter over with the decease; that this statement was made in such an
insolent and contemptuous manner that the defendant became greatly incensed and
remembering the outrage committed upon his wife, he assumed a threatening attitude
and challenged the deceased to go downstairs with him and there settle the matter;
that the deceased thereupon took a pocket-knife from the center drawer of his desk
and attacked the defendant, endeavoring to force him out of the office; that the
defendant, making use of his knowledge of fencing, succeeded in taking the knife
away from the deceased and blinded by fury stabbed him first in the right side of the
breast and then in the epigastric region, and fearing that the deceased might secure
some other weapon or receive assistance from the people in the adjoining room, he
again stabbed him, this time in the back.

OSTRAND, J.:
This is an appeal from a decision of the Court of First Instance of the City of Manila
finding the defendant Fausto V. Carlos guilty of the crime of murder and sentencing
him to suffer life imprisonment, with the accessory penalties prescribed by law and
with the costs.
It appears from the evidence that the victim of the alleged murder, Dr. Pablo G. Sityar,
on March 3, 1924, in Mary Chiles Hospital, performed a surgical operation upon the
defendant's wife for appendicitis and certain other ailments. She remained in the
hospital until the 18th of the same month, but after her release therefrom she was
required to go several times to the clinic of Doctor Sityar at No. 40 Escolta, for the
purpose of dressing the wounds caused by the operation. On these occasions she
was accompanied by her husband, the defendant. The defendant states that on one
of the visits, that of March 20, 1924, Doctor Sityar sent him out on an errand to buy
some medicine, and that while defendant was absent on this errand Doctor Sityar
outraged the wife. The defendant further states that his wife informed him of the
outrage shortly after leaving the clinic. Notwithstanding this it nevertheless appears
that he again went there on March 28th to consult the deceased about some lung
trouble from which he, the defendant, was suffering.. He was given some medical
treatment and appears to have made at least one more visit to the clinic without
revealing any special resentment.

The defendant's testimony as to the struggle described is in conflict with the evidence
presented by the prosecution. But assuming that it is true, it is very evident that it fails
to establish a case of self-defense and that, in reality, the only question here to be
determined is whether the defendant is guilty of murder or of simple homicide.
The court below found that the crime was committed with premeditation and therefore
constituted murder. This finding can only be sustained by taking into consideration
Exhibit L, a letter written to the defendant by his wife and siezed by the police in
searching his effects on the day of his arrest. It is dated May 25, 1924, two days
before the commission of the crime and shows that the writer feared that the
defendant contemplated resorting to physical violence in dealing with the deceased.

On May 12, 1924, the defendant, suffering from some stomach trouble, entered the
Philippine General Hospital where he remained until May 18, 1924, and where he
was under the care of two other physicians. While in the hospital her received a letter
(Exhibit 5) from Doctor Sityar asking the immediate settlement of the account for the
professional services rendered his wife. Shortly after his release from the hospital the
defendant sought an interview with Doctor Sityar and went to the latter's office several
times without finding him in. On one of these occasions he was asked by an
employee of the office, the nurse Cabaera, if he had come to settle his account, to
which the defendant answered that he did not believe he owed the doctor anything.

Counsel for the defendant argues vigorously that the letter was a privileged
communication and therefore not admissible in evidence. The numerical weight of
authority is, however, to the effect that where a privileged communication from one
spouse to another comes into the hands of a third party, whether legally or not,
without collusion and voluntary disclosure on the part of either of the spouses, the
privilege is thereby extinguished and the communication, if otherwise competent,
becomes admissible. (28 R.C.L., 530 and authorities there cited.) Such is the view of
the majority of this court.

In the afternoon of May 26th the defendant again went to the office of the deceased
and found him there alone. According to the evidence of the prosecution, the
defendant then, without any preliminary quarrel between the two, attacked the
deceased with a fan-knife and stabbed him twice. The deceased made an effort to
escape but the defendant pursued him and overtaking him in the hall outside the
office, inflicted another wound upon him and as a consequence if the three wounds
he died within a few minutes. The defendants made his escape but surrendered
himself to the Constabulary at Malolos, Bulacan, in the evening of the following day.

Professor Wigmore states the rule as follows:

For documents of communication coming into the possession of a third
person, a distinction should obtain, analogous to that already indicated for a
client's communications (ante, par. 2325, 2326); i. e., if they were obtained
from the addressee by voluntary delivery, they should still be privileged (for
otherwise the privilege could by collusion be practically nullified for written
communications); but if they were obtained surreptitiously or otherwise

37

without the addressee's consent, the privilege should cease. (5 Wigmore on

Evidence, 2nd ed., par. 2339.)

the trial the letter might have been admissible to impeach her testimony, but she was
not put on the witness-stand and the letter was therefore not offered for that purpose.
If the defendant either by answer or otherwise had indicated his assent to the
statements contained in the letter it might also have been admissible, but such is not
the case here; the fact that he had the letter in his possession is no indication of
acquiescence or assent on his part. The letter is therefore nothing but pure hearsay
and its admission in evidence violates the constitutional right of the defendant in a
criminal case to be confronted with the witnesses for the prosecution and have the
opportunity to cross-examine them. In this respect there can be no difference
between an ordinary communication and one originally privileged.

The letter in question was obtained through a search for which no warrant appears to
have been issued and counsel for the defendant cites the causes of Boyd and
Boyd vs. United States (116 U.S., 616) and Silverthorne Lumber Co. and
Silverthorne vs. United States (251 U.S., 385) as authority for the proposition that
documents obtained by illegal searches of the defendant's effects are not admissible
in evidence in a criminal case. In discussing this point we can do not better than to
quote Professor Wigmore:

The question is radically different from that of the admissibility of testimony of a third
party as to a conversation between a husband and wife overheard by the witness.
Testimony of that character is admissible on the ground that it relates to a
conversation in which both spouses took part and on the further ground that where
the defendant has the opportunity to answer a statement made to him by his spouse
and fails to do so, his silence implies assent. That cannot apply where the statement
is contained in an unanswered letter.

The foregoing doctrine (i. e., that the admissibility of evidence is not affected
by the illegality of the means through which the party has been enabled to
obtain the evidence) was never doubted until the appearance of the illstarred majority opinion of Boyd vs. United States, in 1885, which has
exercised unhealthy influence upon subsequent judicial opinion in many
States.
xxx

xxx

xxx

The Attorney-General in support of the contrary view quotes Wigmore, as follows:

The progress of this doctrine of Boyd vs. United States was as follows: (a)
The Boyd Case remained unquestioned in its own Court for twenty years;
meantime receiving frequent disfavor in the State Courts (ante, par. 2183).
(b) Then in Adams vs. New York, in 1904, it was virtually repudiated in the
Federal Supreme Court, and the orthodox precedents recorded in the State
courts (ante, par. 2183) were expressly approved. (c) Next, after another
twenty years, in 1914 moved this time, not by erroneous history, but by
misplaced sentimentality the Federal Supreme Court, in Weeks vs. United
States, reverted to the original doctrine of the Boyd Case, but with a
condition, viz., that the illegality of the search and seizure should first have
been directly litigated and established by a motion, made before trial, for the
return of the things seized; so that, after such a motion, and then only, the
illegality would be noticed in the main trial and the evidence thus obtained
would be excluded. ... (4 Wigmore on Evidence, 2nd ed., par. 2184.)

. . . Express communication is always a proper mode of evidencing

knowledge or belief. Communication to a husband or wife is always
receivable to show probable knowledge by the other (except where they are
living apart or are not in good terms), because, while it is not certain that the
one will tell the other, and while the probability is less upon some subjects
than upon others, still there is always some probability, which is all that
can be fairly asked for admissibility. ... (1 Wigmore, id., par. 261.)
This may possibly be good law, though Wigmore cites no authority in support of his
assertion, but as far as we can see it has little or nothing to do with the present case.
As we have already intimated, if Exhibit L is excluded, there is in our opinion not
sufficient evidence in the record to show that the crime was premeditated.

In the Silverthorne Lumber Co. case the United States Supreme Court adhered to its
decision in the Weeks Case. The doctrine laid down in these cases has been followed
by some of the State courts but has been severely criticized and does not appear to
have been generally accepted. But assuming, without deciding, that it prevails in this
jurisdiction it is, nevertheless, under the decisions in the Weeks and Silverthorne
cases, inapplicable to the present case. Here the illegality of the search and seizure
was not "directly litigated and established by a motion, made before trial, for the
return of the things seized."

The prosecution maintains that the crime was committed with alevosia. This
contention is based principally on the fact that one of the wounds received by the
deceased showed a downward direction indicating that the deceased was sitting
down when the wound was inflicted. We do not think this fact is sufficient proof. The
direction of the wound would depend largely upon the manner in which the knife was
held.
For the reasons stated we find the defendant guilty of simple homicide, without
aggravating or extenuating circumstances.

The letter Exhibit L must, however, be excluded for reasons not discussed in the
briefs. The letter was written by the wife of the defendant and if she had testified at

38

The sentence appealed from is therefore modified by reducing the penalty to fourteen
years, eight months and one day of reclusion temporal, with the corresponding
accessory penalties and with the costs against the appellant. So ordered

with the understanding that such a compromise was to be effected. The plaintiff was
asked, while on the witness stand, if he had any objection to his attorney's testifying
concerning the surrender of the policies, to which he replied in the negative. The
attorney was then called for that purpose. Whereupon, counsel for the plaintiff
formally withdrew the waiver previously given by the plaintiff and objected to the
testimony of the attorney on the ground that it was privileged. Counsel, on this
appeal, base their argument of the proposition that a waiver of the client's privilege
may be withdrawn at any time before acted upon, and cite in support thereof Ross vs.
Great Northern Ry. Co., (101 Minn., 122; 111 N. W., 951). The case of Natlee Draft
Horse Co. vs. Cripe and Co. (142 Ky., 810), also appears to sustain their contention.
But a preliminary question suggest itself, Was the testimony in question privileged?

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-9231

Our practice Act provides: "A lawyer must strictly maintain inviolate the confidence
and preserve the secrets of his client. He shall not be permitted in any court, without
the consent of his client, given in open court, to testify to any facts imparted to him by
his client in professional consultation, or for the purpose of obtaining advice upon
legal matters." (Sec. 31, Act No. 190.)

January 6, 1915

UY CHICO, plaintiff-appellant,
vs.
THE UNION LIFE ASSURANCE SOCIETY, LIMITED, ET AL., defendants-appellees.

A similar provision is inserted in section 383, No. 4, of the same Act. It will be noted
that the evidence in question concerned the dealings of the plaintiff's attorney with a
third person. Of the very essence of the veil of secrecy which surrounds
communications made between attorney and client, is that such communications are
not intended for the information of third persons or to be acted upon by them, put of
the purpose of advising the client as to his rights. It is evident that a communication
made by a client to his attorney for the express purpose of its being communicated to
a third person is essentially inconsistent with the confidential relation. When the
attorney has faithfully carried out his instructions be delivering the communication to
the third person for whom it was intended and the latter acts upon it, it cannot, by any
reasoning whatever, be classified in a legal sense as a privileged communication
between the attorney and his client. It is plain that such a communication, after
reaching the party for whom it was intended at least, is a communication between the
client and a third person, and that the attorney simply occupies the role of
intermediary or agent. We quote from but one case among the many which may be
found upon the point:

Beaumont and Tenney for appellant.

Bruce, Lawrence, Ross and Block for appellees.
TRENT, J.:
An appeal from a judgment dismissing the complaint upon the merits, with costs.
The plaintiff seeks to recover the face value of two insurance policies upon a stock of
dry goods destroyed by fire. It appears that the father of the plaintiff died in 1897, at
which time he was conducting a business under his own name, Uy Layco. The
plaintiff and his brother took over the business and continued it under the same
name, "Uy Layco." Sometime before the date of the fire, the plaintiff purchased his
brother's interest in the business and continued to carry on the business under the
father's name. At the time of the fire "Uy Layco" was heavily indebted and subsequent
thereto the creditors of the estate of the plaintiff's father. During the course of these
proceedings, the plaintiff's attorney surrendered the policies of insurance to the
administrator of the estate, who compromised with the insurance company for onehalf their face value, or P6,000. This money was paid into court and is now being held
by the sheriff. The plaintiff now brings this action, maintaining that the policies and
goods insured belonged to him and not to the estate of his deceased father and
alleges that he is not bound by the compromise effected by the administrator of his
father's estate.

The proposition advanced by the respondent and adopted by the trial court,
that one, after fully authorizing his attorney, as his agent, to enter into
contract with a third party, and after such authority has been executed and
relied on, may effectively nullify his own and his duly authorized agent's act
by closing the attorney's mouth as to the giving of such authority, is most
startling. A perilous facility of fraud and wrong, both upon the attorney and
the third party, would result. The attorney who, on his client's authority,
contracts in his behalf, pledges his reputation and integrity that he binds his
client. The third party may well rely on the assurance of a reputable lawyer
that he has authority in fact, though such assurance be given only by
implication from the doing of the act itself. It is with gratification, therefore,
that we find overwhelming weight of authority, against the position assumed

The defendant insurance company sought to show that the plaintiff had agreed to
compromise settlement of the policies, and for that purpose introduced evidence
showing that the plaintiff's attorney had surrendered the policies to the administrator

39

by the court below, both in states where the privilege protecting

communications with attorneys is still regulated by the common law and in
those where it is controlled by statute, as in Wisconsin. (Koeber vs.
Sommers, 108 Wis., 497; 52 L. R. A., 512.)

PARAJA G. HAYUDINI, petitioner, vs. THE SANDIGANBAYAN

REPUBLIC OF THE PHILIPPINES, respondents.

and

THE

DECISION

Other cases wherein the objection to such evidence on the ground of privilege has
been overruled are: Henderson vs. Terry (62 Tex., 281); Shove vs. Martin (85 Minn.,
29); In re Elliott (73 Kan., 151); Collins vs. Hoffman (62 Wash., 278); Gerhardt vs.
Tucker (187 Mo., 46). These cases cover a variety of communications made by an
authority in behalf of his client to third persons. And cases wherein evidence of the
attorney as to compromises entered into by him on behalf of his client were allowed to
be proved by the attorney's testimony are not wanting. (Williams vs. Blumenthal, 27
Wash., 24; Koeber vs. Sommers, supra.)

KAPUNAN, J.:
These cases touch the very cornerstone of every State's judicial system, upon
which the workings of the contentious and adversarial system in the Philippine legal
process are based - the sanctity of fiduciary duty in the client-lawyer relationship. The
fiduciary duty of a counsel and advocate is also what makes the law profession a
unique position of trust and confidence, which distinguishes it from any other
calling. In this instance, we have no recourse but to uphold and strengthen the mantle
of protection accorded to the confidentiality that proceeds from the performance of the
lawyer's duty to his client.

It is manifest that the objection to the testimony of the plaintiff's attorney as to his
authority to compromise was properly overruled. The testimony was to the effect that
when the attorney delivered the policies to the administrator, he understood that there
was a compromise to be effected, and that when he informed the plaintiff of the
surrender of the policies for that purpose the plaintiff made no objection whatever.
The evidence is sufficient to show that the plaintiff acquiesced in the compromise
settlement of the policies. Having agreed to the compromise, he cannot now disavow
it and maintain an action for the recovery of their face value.

The facts of the case are undisputed.

The matters raised herein are an offshoot of the institution of the Complaint on
July 31, 1987 before the Sandiganbayan by the Republic of the Philippines, through
the Presidential Commission on Good Government against Eduardo M. Cojuangco,
Jr., as one of the principal defendants, for the recovery of alleged ill-gotten wealth,
which includes shares of stocks in the named corporations in PCGG Case No. 33
(Civil Case No. 0033), entitled "Republic of the Philippines versus Eduardo
Cojuangco, et al."[1]

For the foregoing reasons the judgment appealed from is affirmed, with costs. So
ordered.

Among the defendants named in the case are herein petitioners Teodoro
Regala, Edgardo J. Angara, Avelino V. Cruz, Jose C. Concepcion, Rogelio A. Vinluan,
Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayudini, and herein private
respondent Raul S. Roco, who all were then partners of the law firm Angara, Abello,
Concepcion, Regala and Cruz Law Offices (hereinafter referred to as the ACCRA Law
Firm). ACCRA Law Firm performed legal services for its clients, which included,
among others, the organization and acquisition of business associations and/or
organizations, with the correlative and incidental services where its members acted
as incorporators, or simply, as stockholders. More specifically, in the performance of
these services, the members of the law firm delivered to its client documents which
substantiate the client's equity holdings, i.e., stock certificates endorsed in blank
representing the shares registered in the client's name, and a blank deed of trust or
assignment covering said shares. In the course of their dealings with their clients, the
members of the law firm acquire information relative to the assets of clients as well as
their personal and business circumstances.As members of the ACCRA Law Firm,
petitioners and private respondent Raul Roco admit that they assisted in the
organization and acquisition of the companies included in Civil Case No. 0033, and in
keeping with the office practice, ACCRA lawyers acted as nominees-stockholders of
the said corporations involved in sequestration proceedings.[2]

EN BANC

[G.R. No. 105938. September 20, 1996]

TEODORO R. REGALA, EDGARDO J. ANGARA, AVELINO V. CRUZ, JOSE C.
CONCEPCION, ROGELIO A. VINLUAN, VICTOR P. LAZATIN, and
EDUARDO
U.
ESCUETA, petitioners, vs. THE
HONORABLE
SANDIGANBAYAN, First Division, REPUBLIC OF THE PHILIPPINES,
ACTING THROUGH THE PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT, and RAUL S. ROCO, respondents.

[G.R. No. 108113. September 20, 1996]

40

On August 20, 1991, respondent Presidential Commission on Good

Government (hereinafter referred to as respondent PCGG) filed a "Motion to Admit
Third Amended Complaint" and "Third Amended Complaint" which excluded private
respondent Raul S. Roco from the complaint in PCGG Case No. 33 as partydefendant.[3] Respondent PCGG based its exclusion of private respondent Roco as
party-defendant on his undertaking that he will reveal the identity of the principal/s for
whom he acted as nominee/stockholder in the companies involved in PCGG Case
No. 33.[4]

4.5. Defendant ACCRA-lawyer Avelino V. Cruz was one of the incorporators in 1976
of Mermaid Marketing Corporation, which was organized for legitimate business
purposes not related to the allegations of the expanded Amended
Complaint. However, he has long ago transferred any material interest therein and
therefore denies that the shares appearing in his name in Annex A of the expanded
Amended Complaint are his assets.[6]
Petitioner Paraja Hayudini, who had separated from ACCRA law firm, filed a
separate answer denying the allegations in the complaint implicating him in the
alleged ill-gotten wealth.[7]

Petitioners were included in the Third Amended Complaint on the strength of the
following allegations:

Petitioners ACCRA lawyers subsequently filed their "COMMENT AND/OR

OPPOSITION" dated October 8, 1991 with Counter-Motion that respondent PCGG
similarly grant the same treatment to them (exclusion as parties-defendants) as
accorded private respondent Roco.[8] The Counter-Motion for dropping petitioners
from the complaint was duly set for hearing on October 18, 1991 in accordance with
the requirements of Rule 15 of the Rules of Court.

14. Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C.

Concepcion, Teodoro Regala, Avelino V. Cruz, Rogelio A. Vinluan,
Eduardo U. Escueta, Paraja G. Hayudini and Raul Roco of the Angara
Concepcion Cruz Regala and Abello law offices (ACCRA) plotted,
devised, schemed. conspired and confederated with each other in
setting up, through the use of the coconut levy funds, the financial and
corporate framework and structures that led to the establishment of
UCPB, UNICOM, COCOLIFE, COCOMARK, CIC, and more than
twenty other coconut levy funded corporations, including the acquisition
of San Miguel Corporation shares and its institutionalization through
presidential directives of the coconut monopoly. Through insidious
means and machinations, ACCRA, being the wholly-owned investment
arm, ACCRA Investments Corporation, became the holder of
approximately fifteen million shares representing roughly 3.3% of the
total outstanding capital stock of UCPB as of 31 March 1987. This
ranks ACCRA Investments Corporation number 44 among the top 100
biggest stockholders of UCPB which has approximately 1,400,000
shareholders. On the other hand, corporate books show the name
Edgardo J. Angara as holding approximately 3,744 shares as of
February, 1984.[5]
In
their
answer
to
the
petitioners ACCRA lawyers alleged that:

Expanded

Amended

In its "Comment," respondent PCGG set the following conditions precedent for
the exclusion of petitioners, namely: (a) the disclosure of the identity of its clients; (b)
submission of documents substantiating the lawyer-client relationship; and (c) the
submission of the deeds of assignments petitioners executed in favor of its clients
covering their respective shareholdings.[9]
Consequently, respondent PCGG presented supposed proof to substantiate
compliance by private respondent Roco of the conditions precedent to warrant the
latter's exclusion as party-defendant in PCGG Case No. 33, to wit: (a) Letter to
respondent PCGG of the counsel of respondent Roco dated May 24, 1989 reiterating
a previous request for reinvestigation by the PCGG in PCGG Case No. 33; (b)
Affidavit dated March 8, 1989 executed by private respondent Roco as Attachment to
the letter aforestated in (a); and (c) Letter of the Roco, Bunag, and Kapunan Law
Offices dated September 21, 1988 to the respondent PCGG in behalf of private
respondent Roco originally requesting the reinvestigation and/or re-examination of the
evidence of the PCGG against Roco in its Complaint in PCGG Case No. 33.[10]

Complaint,

4.4. Defendants-ACCRA lawyers participation in the acts with which their codefendants are charged, was in furtherance of legitimate lawyering.

It is noteworthy that during said proceedings, private respondent Roco did not
refute petitioners' contention that he did actually not reveal the identity of the client
involved in PCGG Case No. 33, nor had he undertaken to reveal the identity of the
client for whom he acted as nominee-stockholder.[11]

4.4.1. In the course of rendering professional and legal services to clients,

defendants-ACCRA lawyers, Jose C. Concepcion, Teodoro D. Regala, Rogelio A.
Vinluan and Eduardo U. Escueta, became holders of shares of stock in the
corporations listed under their respective names in Annex A of the expanded
Amended Complaint as incorporating or acquiring stockholders only and, as such,
they do not claim any proprietary interest in the said shares of stock.

On March 18, 1992, respondent Sandiganbayan promulgated the Resolution,

herein questioned, denying the exclusion of petitioners in PCGG Case No. 33, for
their refusal to comply with the conditions required by respondent PCGG. It held:
x x x.

41

ACCRA lawyers may take the heroic stance of not revealing the identity of the client
for whom they have acted, i.e. their principal, and that will be their choice. But until
they do identify their clients, considerations of whether or not the
privilege claimed by the ACCRA lawyers exists cannot even begin to be debated. The
ACCRA lawyers cannot excuse themselves from theconsequences of their acts until
they have begun to establish the basis for recognizing the privilege; the
existence and identity of the client.

The Honorable Sandiganbayan committed grave abuse of discretion in not

considering petitioners ACCRA lawyers and Mr. Roco as similarly situated and,
therefore, deserving of equal treatment.
1. There is absolutely no evidence that Mr. Roco had revealed, or had
undertaken to reveal, the identities of the client(s) for whom he acted
as nominee-stockholder.

This is what appears to be the cause for which they have been impleaded by the
PCGG as defendants herein.

2. Even assuming that Mr. Roco had revealed, or had undertaken to

reveal, the identities of the client(s), the disclosure does not constitute
a substantial distinction as would make the classification reasonable
under the equal protection clause.

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that
Roco has apparently identified his principal, which revelation could show the lack of
cause against him. This in turn has allowed the PCGG to exercise its power both
under the rules of Agency and under Section 5 of E.O. No. 14-A in relation to the
Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

3. Respondent Sandiganbayan sanctioned favoritism and undue

preference in favor of Mr. Roco in violation of the equal protection
clause.

The PCGG has apparently offered to the ACCRA lawyers the same conditions availed
of by Roco; full disclosure in exchange for exclusion from these proceedings (par. 7,
PCGG's COMMENT dated November 4, 1991). The ACCRA lawyers have preferred
not to make the disclosures required by the PCGG.

III
The Honorable Sandiganbayan committed grave abuse of discretion in not holding
that, under the facts of this case, the attorney-client privilege prohibits petitioners
ACCRA lawyers from revealing the identity of their client(s) and the other information
requested by the PCGG.

The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as
party defendants. In the same vein, they cannot compel the PCGG to be accorded
the same treatment accorded to Roco.

1. Under the peculiar facts of this case, the attorney-client privilege

includes the identity of the client(s).

Neither can this Court.

2. The factual disclosures required by the PCGG are not limited to the
identity of petitioners ACCRA lawyers' alleged client(s) but extend to
other privileged matters.

WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA
lawyers and joined in by Atty. Paraja G. Hayudini for the same treatment by the
PCGG as accorded to Raul S. Roco is DENIED for lack of merit.[12]

IV

ACCRA lawyers moved for a reconsideration of the above resolution but the
same was denied by the respondent Sandiganbayan. Hence, the ACCRA lawyers
filed the petition for certiorari, docketed as G.R. No. 105938, invoking the following
grounds:

The Honorable Sandiganbayan committed grave abuse of discretion in not requiring

that the dropping of party-defendants by the PCGG must be based on reasonable
and just grounds and with due consideration to the constitutional right of petitioners
ACCRA lawyers to the equal protection of the law.

Petitioner Paraja G. Hayudini, likewise, filed his own motion for reconsideration
of the March 18, 1991 resolution which was denied by respondent
Sandiganbayan. Thus, he filed a separate petition for certiorari, docketed as G.R. No.
108113, assailing respondent Sandiganbayan's resolution on essentially the same
grounds averred by petitioners in G.R. No. 105938.

The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners

ACCRA lawyers who undisputably acted as lawyers in serving as nomineestockholders, to the strict application of the law of agency.
II

42

Petitioners contend that the exclusion of respondent Roco as party-defendant in

PCGG Case No. 33 grants him a favorable treatment, on the pretext of his alleged
undertaking to divulge the identity of his client, giving him an advantage over them
who are in the same footing as partners in the ACCRA law firm. Petitioners further
argue that even granting that such an undertaking has been assumed by private
respondent Roco, they are prohibited from revealing the identity of their principal
under their sworn mandate and fiduciary duty as lawyers to uphold at all times the
confidentiality of information obtained during such lawyer-client relationship.

that their so called client is Mr. Eduardo Cojuangco; that it was Mr. Eduardo
Cojuangco who furnished all the monies to those subscription payments in
corporations included in Annex A of the Third Amended Complaint; that the ACCRA
lawyers executed deeds of trust and deeds of assignment, some in the name of
particular persons, some in blank.
We quote Atty. Ongkiko:
ATTY. ONGKIKO:

Respondent PCGG, through its counsel, refutes petitioners' contention, alleging

that the revelation of the identity of the client is not within the ambit of the lawyerclient confidentiality privilege, nor are the documents it required (deeds of
assignment) protected, because they are evidence of nominee status.[13]

With the permission of this Hon. Court. I propose to establish through these ACCRA
lawyers that, one, their so-called client is Mr. Eduardo Cojuangco. Second, it was Mr.
Eduardo Cojuangco who furnished all the monies to these subscription payments of
these corporations who are now the petitioners in this case. Third, that these lawyers
executed deeds of trust, some in the name of a particular person, some in
blank. Now, these blank deeds are important to our claim that some of the shares are
actually being held by the nominees for the late President Marcos. Fourth, they also
executed deeds of assignment and some of these assignments have also blank
assignees. Again, this is important to our claim that some of the shares are for Mr.
Cojuangco and some are for Mr. Marcos. Fifth, that most of these corporations are
really just paper corporations. Why do we say that? One: There are no really fixed
sets of officers, no fixed sets of directors at the time of incorporation and even up to
1986, which is the crucial year. And not only that, they have no permits from the
municipal authorities in Makati. Next, actually all their addresses now are care of
Villareal Law Office. They really have no address on records. These are some of the
principal things that we would ask of these nominees stockholders, as they called
themselves.[16]

In his comment, respondent Roco asseverates that respondent PCGG acted

correctly in excluding him as party-defendant because he "(Roco) has not filed an
Answer.PCGG had therefore the right to dismiss Civil Case No. 0033 as to Roco
`without an order of court by filing a notice of dismissal,'"[14] and he has undertaken to
identify his principal.[15]
Petitioners' contentions are impressed with merit.
I
It is quite apparent that petitioners were impleaded by the PCGG as codefendants to force them to disclose the identity of their clients. Clearly, respondent
PCGG is not after petitioners but the bigger fish as they say in street parlance. This
ploy is quite clear from the PCGGs willingness to cut a deal with petitioners -- the
names of their clients in exchange for exclusion from the complaint. The statement of
the Sandiganbayan in its questioned resolution dated March 18, 1992 is explicit:

It would seem that petitioners are merely standing in for their clients as
defendants in the complaint. Petitioners are being prosecuted solely on the basis of
activities and services performed in the course of their duties as lawyers. Quite
obviously, petitioners inclusion as co-defendants in the complaint is merely being
used as leverage to compel them to name their clients and consequently to enable
the PCGG to nail these clients. Such being the case, respondent PCGG has no valid
cause of action as against petitioners and should exclude them from the Third
Amended Complaint.

ACCRA lawyers may take the heroic stance of not revealing the identity of the client
for whom they have acted, i.e., their principal, and that will be their choice. But until
they do identify their clients, considerations of whether or not the privilege claimed by
the ACCRA lawyers exists cannot even begin to be debated. The ACCRA lawyers
cannot excuse themselves from the consequences of their acts until they have begun
to establish the basis for recognizing the privilege; the existence and identity of the
client.

II
The nature of lawyer-client relationship is premised on the Roman Law concepts
of locatio conductio operarum (contract of lease of services) where one person lets
his services and another hires them without reference to the object of which the
services are to be performed, wherein lawyers' services may be compensated
by honorarium or for hire,[17] and mandato (contract of agency) wherein a friend on
whom reliance could be placed makes a contract in his name, but gives up all that he

This is what appears to be the cause for which they have been impleaded by the
PCGG as defendants herein. (Underscoring ours)
In a closely related case, Civil Case No. 0110 of the Sandiganbayan, Third
Division, entitled Primavera Farms, Inc., et al. vs. Presidential Commission on Good
Government respondent PCGG, through counsel Mario Ongkiko, manifested at the
hearing on December 5, 1991 that the PCGG wanted to establish through the ACCRA

43

gained by the contract to the person who requested him. [18] But the lawyer-client
relationship is more than that of the principal-agent and lessor-lessee.

stenographer, or clerk be examined, without the consent of the client and his
employer, concerning any fact the knowledge of which has been acquired in such
capacity.[29]

In modern day perception of the lawyer-client relationship, an attorney is more

than a mere agent or servant, because he possesses special powers of trust and
confidence reposed on him by his client.[19] A lawyer is also as independent as the
judge of the court, thus his powers are entirely different from and superior to those of
an ordinary agent.[20] Moreover, an attorney also occupies what may be considered as
a "quasi-judicial office" since he is in fact an officer of the Court [21] and exercises his
judgment in the choice of courses of action to be taken favorable to his client.

Further, Rule 138 of the Rules of Court states:

Sec. 20. It is the duty of an attorney:
(e) to maintain inviolate the confidence, and at every peril to himself, to preserve the
secrets of his client, and to accept no compensation in connection with his clients
business except from him or with his knowledge and approval.

Thus, in the creation of lawyer-client relationship, there are rules, ethical

conduct and duties that breathe life into it, among those, the fiduciary duty to his client
which is of a very delicate, exacting and confidential character, requiring a very high
degree of fidelity and good faith, [22] that is required by reason of necessity and public
interest[23] based on the hypothesis that abstinence from seeking legal advice in a
good cause is an evil which is fatal to the administration of justice.[24]

This duty is explicitly mandated in Canon 17 of the Code of Professional

Responsibility which provides that:
Canon 17. A lawyer owes fidelity to the cause of his client and he shall be mindful of
the trust and confidence reposed in him.

It is also the strict sense of fidelity of a lawyer to his client that distinguishes him
from any other professional in society. This conception is entrenched and embodies
centuries of established and stable tradition.[25] In Stockton v. Ford,[26] the U.S.
Supreme Court held:

Canon 15 of the Canons of Professional Ethics also demands a lawyer's fidelity

to client:
The lawyer owes "entire devotion to the interest of the client, warm zeal in the
maintenance and defense of his rights and the exertion of his utmost learning and
ability," to the end that nothing be taken or be withheld from him, save by the rules of
law, legally applied. No fear of judicial disfavor or public popularity should restrain him
from the full discharge of his duty. In the judicial forum the client is entitled to the
benefit of any and every remedy and defense that is authorized by the law of the land,
and he may expect his lawyer to assert every such remedy or defense. But it is
steadfastly to be borne in mind that the great trust of the lawyer is to be performed
within and not without the bounds of the law. The office of attorney does not permit,
much less does it demand of him for any client, violation of law or any manner of
fraud or chicanery. He must obey his own conscience and not that of his client.

There are few of the business relations of life involving a higher trust and confidence
than that of attorney and client, or generally speaking, one more honorably and
faithfully discharged; few more anxiously guarded by the law, or governed by the
sterner principles of morality and justice; and it is the duty of the court to administer
them in a corresponding spirit, and to be watchful and industrious, to see that
confidence thus reposed shall not be used to the detriment or prejudice of the rights
of the party bestowing it.[27]
In our jurisdiction, this privilege takes off from the old Code of Civil Procedure
enacted by the Philippine Commission on August 7, 1901. Section 383 of the Code
specifically forbids counsel, without authority of his client to reveal any communication
made by the client to him or his advice given thereon in the course of professional
employment.[28]Passed on into various provisions of the Rules of Court, the attorneyclient privilege, as currently worded provides:

Considerations favoring confidentiality in lawyer-client relationships are many

and serve several constitutional and policy concerns. In the constitutional sphere, the
privilege gives flesh to one of the most sacrosanct rights available to the accused, the
right to counsel. If a client were made to choose between legal representation without
effective communication and disclosure and legal representation with all his secrets
revealed then he might be compelled, in some instances, to either opt to stay away
from the judicial system or to lose the right to counsel. If the price of disclosure is too
high, or if it amounts to self incrimination, then the flow of information would be
curtailed thereby rendering the right practically nugatory. The threat this represents
against another sacrosanct individual right, the right to be presumed innocent is at
once self-evident.

Sec. 24. Disqualification by reason of privileged communication. - The following

persons cannot testify as to matters learned in confidence in the following cases:
xxx
An attorney cannot, without the consent of his client, be examined as to any
communication made by the client to him, or his advice given thereon in the course
of, or with a view to, professional employment, can an attorneys secretary,

44

Encouraging full disclosure to a lawyer by one seeking legal services opens the
door to a whole spectrum of legal options which would otherwise be circumscribed by
limited information engendered by a fear of disclosure. An effective lawyer-client
relationship is largely dependent upon the degree of confidence which exists between
lawyer and client which in turn requires a situation which encourages a dynamic and
fruitful exchange and flow of information. It necessarily follows that in order to attain
effective representation, the lawyer must invoke the privilege not as a matter of option
but as a matter of duty and professional responsibility.

election laws or that he had accepted a bribe to that end. In her testimony, the
attorney revealed that she had advised her client to count the votes correctly, but
averred that she could not remember whether her client had been, in fact, bribed. The
lawyer was cited for contempt for her refusal to reveal his clients identity before a
grand jury. Reversing the lower courts contempt orders, the state supreme court held
that under the circumstances of the case, and under the exceptions described above,
even the name of the client was privileged.

The question now arises whether or not this duty may be asserted in refusing to
disclose the name of petitioners' client(s) in the case at bar. Under the facts and
circumstances obtaining in the instant case, the answer must be in the affirmative.

U.S. v. Hodge and Zweig,[35] involved the same exception, i.e. that client identity
is privileged in those instances where a strong probability exists that the disclosure of
the client's identity would implicate the client in the very criminal activity for which the
lawyers legal advice was obtained.

As a matter of public policy, a clients identity should not be shrouded in mystery.

Under this premise, the general rule in our jurisdiction as well as in the United
States is that a lawyer may not invoke the privilege and refuse to divulge the name or
identity of his client.[31]

The Hodge case involved federal grand jury proceedings inquiring into the
activities of the Sandino Gang, a gang involved in the illegal importation of drugs in
the United States. The respondents, law partners, represented key witnesses and
suspects including the leader of the gang, Joe Sandino.

[30]

The reasons advanced for the general rule are well established.

In connection with a tax investigation in November of 1973, the IRS issued

summons to Hodge and Zweig, requiring them to produce documents and information
regarding payment received by Sandino on behalf of any other person, and vice
versa. The lawyers refused to divulge the names. The Ninth Circuit of the United
States Court of Appeals, upholding non-disclosure under the facts and circumstances
of the case, held:

First, the court has a right to know that the client whose privileged information is
sought to be protected is flesh and blood.
Second, the privilege begins to exist only after the attorney-client relationship
has been established. The attorney-client privilege does not attach until there is a
client.

A clients identity and the nature of that clients fee arrangements may be
privileged where the person invoking the privilege can show that a strong probability
exists that disclosure of such information would implicate that client in the very
criminal activity for which legal advice was sought Baird v. Koerner, 279 F.2d at
680. While in Baird Owe enunciated this rule as a matter of California law, the rule
also reflects federal law. Appellants contend that the Baird exception applies to this
case.

Third, the privilege generally pertains to the subject matter of the relationship.
Finally, due process considerations require that the opposing party should, as a
general rule, know his adversary. A party suing or sued is entitled to know who his
opponent is.[32] He cannot be obliged to grope in the dark against unknown forces.[33]

The Baird exception is entirely consonant with the principal policy behind the
attorney-client privilege. In order to promote freedom of consultation of legal advisors
by clients, the apprehension of compelled disclosure from the legal advisors must be
removed; hence, the law must prohibit such disclosure except on the clients
consent. 8 J. Wigmore, supra sec. 2291, at 545. In furtherance of this policy, the
clients identity and the nature of his fee arrangements are, in exceptional cases,
protected as confidential communications.[36]

Notwithstanding these considerations, the general rule is however qualified by

some important exceptions.
1) Client identity is privileged where a strong probability exists that
revealing the clients name would implicate that client in the very activity
for which he sought the lawyers advice.

2) Where disclosure would open the client to civil liability, his identity is
privileged. For instance, the peculiar facts and circumstances
of Neugass v. Terminal Cab Corporation,[37] prompted the New York
Supreme Court to allow a lawyers claim to the effect that he could not

In Ex-Parte Enzor,[34] a state supreme court reversed a lower court order

requiring a lawyer to divulge the name of her client on the ground that the subject
matter of the relationship was so closely related to the issue of the clients identity that
the privilege actually attached to both. In Enzor, the unidentified client, an election
official, informed his attorney in confidence that he had been offered a bribe to violate

45

reveal the name of his client because this would expose the latter to
civil litigation.

progress in establishing by such evidence their version of the litigation. As already

suggested, such testimony by the witness would compel him to disclose not only that
he was attorney for certain people, but that, as the result of communications made to
him in the course of such employment as such attorney, he knew that they were
interested in certain transactions. We feel sure that under such conditions no case
has ever gone to the length of compelling an attorney, at the instance of a hostile
litigant, to disclose not only his retainer, but the nature of the transactions to which it
related, when such information could be made the basis of a suit against his client.[41]

In the said case, Neugass, the plaintiff, suffered injury when the taxicab she was
riding, owned by respondent corporation, collided with a second taxicab, whose
owner was unknown. Plaintiff brought action both against defendant corporation and
the owner of the second cab, identified in the information only as John Doe. It turned
out that when the attorney of defendant corporation appeared on preliminary
examination, the fact was somehow revealed that the lawyer came to know the name
of the owner of the second cab when a man, a client of the insurance company, prior
to the institution of legal action, came to him and reported that he was involved in a
car accident. It was apparent under the circumstances that the man was the owner of
the second cab. The state supreme court held that the reports were clearly made to
the lawyer in his professional capacity. The court said:

3) Where the governments lawyers have no case against an attorneys client

unless, by revealing the clients name, the said name would furnish the only link that
would form the chain of testimony necessary to convict an individual of a crime, the
clients name is privileged.
In Baird vs Korner,[42] a lawyer was consulted by the accountants and the lawyer
of certain undisclosed taxpayers regarding steps to be taken to place the undisclosed
taxpayers in a favorable position in case criminal charges were brought against them
by the U.S. Internal Revenue Service (IRS).

That his employment came about through the fact that the insurance company
had hired him to defend its policyholders seems immaterial. The attorney in such
cases is clearly the attorney for the policyholder when the policyholder goes to him to
report an occurrence contemplating that it would be used in an action or claim against
him.[38]

It appeared that the taxpayers returns of previous years were probably incorrect
and the taxes understated. The clients themselves were unsure about whether or not
they violated tax laws and sought advice from Baird on the hypothetical possibility
that they had. No investigation was then being undertaken by the IRS of the
taxpayers.Subsequently, the attorney of the taxpayers delivered to Baird the sum of
$12,706.85, which had been previously assessed as the tax due, and another amount
of money representing his fee for the advice given. Baird then sent a check for
$12,706.85 to the IRS in Baltimore, Maryland, with a note explaining the payment, but
without naming his clients. The IRS demanded that Baird identify the lawyers,
accountants, and other clients involved. Baird refused on the ground that he did not
know their names, and declined to name the attorney and accountants because this
constituted privileged communication. A petition was filed for the enforcement of the
IRS summons. For Bairds repeated refusal to name his clients he was found guilty of
civil contempt. The Ninth Circuit Court of Appeals held that, a lawyer could not be
forced to reveal the names of clients who employed him to pay sums of money to the
government voluntarily in settlement of undetermined income taxes, unsued on, and
with no government audit or investigation into that clients income tax liability
pending. The court emphasized the exception that a clients name is privileged when
so much has been revealed concerning the legal services rendered that the
disclosure of the clients identity exposes him to possible investigation and sanction by
government agencies. The Court held:

x x x xxx xxx.
All communications made by a client to his counsel, for the purpose of
professional advice or assistance, are privileged, whether they relate to a suit pending
or contemplated, or to any other matter proper for such advice or aid; x x x And
whenever the communication made, relates to a matter so connected with the
employment as attorney or counsel as to afford presumption that it was the ground of
the address by the client, then it is privileged from disclosure. xxx.
It appears... that the name and address of the owner of the second cab came to
the attorney in this case as a confidential communication. His client is not seeking to
use the courts, and his address cannot be disclosed on that theory, nor is the present
action pending against him as service of the summons on him has not been
effected. The objections on which the court reserved decision are sustained.[39]
In the case of Matter of Shawmut Mining Company,[40] the lawyer involved was
required by a lower court to disclose whether he represented certain clients in a
certain transaction. The purpose of the courts request was to determine whether the
unnamed persons as interested parties were connected with the purchase of
properties involved in the action. The lawyer refused and brought the question to the
State Supreme Court. Upholding the lawyers refusal to divulge the names of his
clients the court held:

The facts of the instant case bring it squarely within that exception to the general
rule. Here money was received by the government, paid by persons who thereby
admitted they had not paid a sufficient amount in income taxes some one or more
years in the past. The names of the clients are useful to the government for but one
purpose - to ascertain which taxpayers think they were delinquent, so that it may
check the records for that one year or several years. The voluntary nature of the

If it can compel the witness to state, as directed by the order appealed from, that
he represented certain persons in the purchase or sale of these mines, it has made

46

payment indicates a belief by the taxpayers that more taxes or interest or penalties
are due than the sum previously paid, if any. It indicates a feeling of guilt for
nonpayment of taxes, though whether it is criminal guilt is undisclosed. But it may well
be the link that could form the chain of testimony necessary to convict an individual of
a federal crime. Certainly the payment and the feeling of guilt are the reasons the
attorney here involved was employed - to advise his clients what, under the
circumstances, should be done.[43]

question. In turn, petitioners gave their professional advice in the form of, among
others, the aforementioned deeds of assignment covering their clients shareholdings.
There is no question that the preparation of the aforestated documents was part
and parcel of petitioners legal service to their clients. More important, it constituted an
integral part of their duties as lawyers. Petitioners, therefore, have a legitimate fear
that identifying their clients would implicate them in the very activity for which legal
advice had been sought, i.e., the alleged accumulation of ill-gotten wealth in the
aforementioned corporations.

Apart from these principal exceptions, there exist other situations which could
qualify as exceptions to the general rule.

Furthermore, under the third main exception, revelation of the client's name
would obviously provide the necessary link for the prosecution to build its case, where
none otherwise exists. It is the link, in the words of Baird, that would inevitably form
the chain of testimony necessary to convict the (client) of a... crime."[47]

For example, the content of any client communication to a lawyer lies within the
privilege if it is relevant to the subject matter of the legal problem on which the client
seeks legal assistance.[44] Moreover, where the nature of the attorney-client
relationship has been previously disclosed and it is the identity which is intended to
be confidential, the identity of the client has been held to be privileged, since such
revelation would otherwise result in disclosure of the entire transaction.[45]

An important distinction must be made between a case where a client takes on

the services of an attorney for illicit purposes, seeking advice about how to go around
the law for the purpose of committing illegal activities and a case where a client thinks
he might have previously committed something illegal and consults his attorney about
it. The first case clearly does not fall within the privilege because the same cannot be
invoked for purposes illegal. The second case falls within the exception because
whether or not the act for which the advice turns out to be illegal, his name cannot be
used or disclosed if the disclosure leads to evidence, not yet in the hands of the
prosecution, which might lead to possible action against him.

Summarizing these exceptions, information relating to the identity of a client

may fall within the ambit of the privilege when the clients name itself has an
independent significance, such that disclosure would then reveal client confidences.
[46]

The circumstances involving the engagement of lawyers in the case at bench,

therefore, clearly reveal that the instant case falls under at least two exceptions to the
general rule. First, disclosure of the alleged client's name would lead to establish said
client's connection with the very fact in issue of the case, which is privileged
information, because the privilege, as stated earlier, protects the subject matter or the
substance (without which there would be no attorney-client relationship).

These cases may be readily distinguished, because the privilege cannot be

invoked or used as a shield for an illegal act, as in the first example; while the
prosecution may not have a case against the client in the second example and cannot
use the attorney client relationship to build up a case against the latter. The reason for
the first rule is that it is not within the professional character of a lawyer to give advice
on the commission of a crime.[48] The reason for the second has been stated in the
cases above discussed and are founded on the same policy grounds for which the
attorney-client privilege, in general, exists.

The link between the alleged criminal offense and the legal advice or legal
service sought was duly established in the case at bar, by no less than the PCGG
itself. The key lies in the three specific conditions laid down by the PCGG which
constitutes petitioners ticket to non-prosecution should they accede thereto:

In Matter of Shawmut Mining Co., supra, the appellate court therein stated that
"under such conditions no case has ever yet gone to the length of compelling an
attorney, at the instance of a hostile litigant, to disclose not only his retainer, but the
nature of the transactions to which it related, when such information could be made
the basis of a suit against his client. [49] "Communications made to an attorney in the
course of any personal employment, relating to the subject thereof, and which
may be supposed to be drawn out in consequence of the relation in which the parties
stand to each other, are under the seal of confidence and entitled to protection as
privileged communications."[50]Where the communicated information, which clearly
falls within the privilege, would suggest possible criminal activity but there would be
not much in the information known to the prosecution which would sustain a charge
except that revealing the name of the client would open up other privileged
information which would substantiate the prosecutions suspicions, then the clients

(a) the disclosure of the identity of its clients;

(b) submission of documents substantiating the lawyer-client relationship; and
(c) the submission of the deeds of assignment petitioners executed in favor of their
clients covering their respective shareholdings.
From these conditions, particularly the third, we can readily deduce that the
clients indeed consulted the petitioners, in their capacity as lawyers, regarding the
financial and corporate structure, framework and set-up of the corporations in

47

identity is so inextricably linked to the subject matter itself that it falls within the
protection. The Baird exception, applicable to the instant case, is consonant with the
principal policy behind the privilege, i.e., that for the purpose of promoting freedom of
consultation of legal advisors by clients, apprehension of compelled disclosure from
attorneys must be eliminated. This exception has likewise been sustained in In re
Grand Jury Proceedings[51] and Tillotson v. Boughner.[52] What these cases
unanimously seek to avoid is the exploitation of the general rule in what may amount
to a fishing expedition by the prosecution.

To the same effect is the ruling in Searcy, Denney, Scarola, Barnhart, and
Shipley P.A. v. Scheller[55] requiring strict obligation of lawyers vis-a-vis clients. In this
case, a contingent fee lawyer was fired shortly before the end of completion of his
work, and sought payment quantum meruit of work done. The court, however, found
that the lawyer was fired for cause after he sought to pressure his client into signing a
new fee agreement while settlement negotiations were at a critical stage. While the
client found a new lawyer during the interregnum, events forced the client to settle for
less than what was originally offered. Reiterating the principle of fiduciary duty of
lawyers to clients in Meinhard v. Salmon[56] famously attributed to Justice Benjamin
Cardozo that "Not honesty alone, but the punctilio of an honor the most sensitive, is
then the standard of behavior," the US Court found that the lawyer involved was fired
for cause, thus deserved no attorney's fees at all.

There are, after all, alternative sources of information available to the prosecutor
which do not depend on utilizing a defendant's counsel as a convenient and readily
available source of information in the building of a case against the latter. Compelling
disclosure of the client's name in circumstances such as the one which exists in the
case at bench amounts to sanctioning fishing expeditions by lazy prosecutors and
litigants which we cannot and will not countenance. When the nature of the
transaction would be revealed by disclosure of an attorney's retainer, such retainer is
obviously protected by the privilege.[53] It follows that petitioner attorneys in the instant
case owe their client(s) a duty and an obligation not to disclose the latter's identity
which in turn requires them to invoke the privilege.

The utmost zeal given by Courts to the protection of the lawyer-client

confidentiality privilege and lawyer's loyalty to his client is evident in the duration of
the protection, which exists not only during the relationship, but extends even after
the termination of the relationship.[57]
Such are the unrelenting duties required of lawyers vis-a-vis their clients
because the law, which the lawyers are sworn to uphold, in the words of Oliver
Wendell Holmes,[58]"xxx is an exacting goddess, demanding of her votaries in
intellectual and moral discipline." The Court, no less, is not prepared to accept
respondents position without denigrating the noble profession that is lawyering, so
extolled by Justice Holmes in this wise:

In fine, the crux of petitioners' objections ultimately hinges on their expectation

that if the prosecution has a case against their clients, the latter's case should be built
upon evidence painstakingly gathered by them from their own sources and not from
compelled testimony requiring them to reveal the name of their clients, information
which unavoidably reveals much about the nature of the transaction which may or
may not be illegal. The logical nexus between name and nature of transaction is so
intimate in this case that it would be difficult to simply dissociate one from the other. In
this sense, the name is as much "communication" as information revealed directly
about the transaction in question itself, a communication which is clearly and distinctly
privileged. A lawyer cannot reveal such communication without exposing himself to
charges of violating a principle which forms the bulwark of the entire attorney-client
relationship.

Every calling is great when greatly pursued. But what other gives such scope to
realize the spontaneous energy of one's soul? In what other does one plunge so deep
in the stream of life - so share its passions its battles, its despair, its triumphs, both as
witness and actor? x x x But that is not all. What a subject is this in which we are
united - this abstraction called the Law, wherein as in a magic mirror, we see
reflected, not only in our lives, but the lives of all men that have been. When I think on
this majestic theme my eyes dazzle. If we are to speak of the law as our mistress, we
who are here know that she is a mistress only to be won with sustained and lonely
passion - only to be won by straining all the faculties by which man is likened to God.

The uberrimei fidei relationship between a lawyer and his client therefore
imposes a strict liability for negligence on the former. The ethical duties owing to the
client, including confidentiality, loyalty, competence, diligence as well as the
responsibility to keep clients informed and protect their rights to make decisions have
been zealously sustained. In Milbank, Tweed, Hadley and McCloy v. Boon,[54] the US
Second District Court rejected the plea of the petitioner law firm that it breached its
fiduciary duty to its client by helping the latter's former agent in closing a deal for the
agent's benefit only after its client hesitated in proceeding with the transaction, thus
causing no harm to its client. The Court instead ruled that breaches of a fiduciary
relationship in any context comprise a special breed of cases that often loosen
normally stringent requirements of causation and damages, and found in favor of the
client.

We have no choice but to uphold petitioners' right not to reveal the identity of
their clients under pain of the breach of fiduciary duty owing to their clients, because
the facts of the instant case clearly fall within recognized exceptions to the rule that
the clients name is not privileged information.
If we were to sustain respondent PCGG that the lawyer-client confidential
privilege under the circumstances obtaining here does not cover the identity of the
client, then it would expose the lawyers themselves to possible litigation by their
clients in view of the strict fiduciary responsibility imposed on them in the exercise of
their duties.

48

The complaint in Civil Case No. 0033 alleged that the defendants therein,
including herein petitioners and Eduardo Cojuangco, Jr. conspired with each other in
setting up through the use of coconut levy funds the financial and corporate
framework and structures that led to the establishment of UCPB, UNICOM and others
and that through insidious means and machinations, ACCRA, using its wholly-owned
investment arm, ACCRA Investments Corporation, became the holder of
approximately fifteen million shares representing roughly 3.3% of the total capital
stock of UCPB as of 31 March 1987. The PCGG wanted to establish through the
ACCRA lawyers that Mr. Cojuangco is their client and it was Cojuangco who furnished
all the monies to the subscription payment; hence, petitioners acted as dummies,
nominees and/or agents by allowing themselves, among others, to be used as
instrument in accumulating ill-gotten wealth through government concessions, etc.,
which acts constitute gross abuse of official position and authority, flagrant breach of
public trust, unjust enrichment, violation of the Constitution and laws of the Republic
of the Philippines.

arrangement between Mr. Roco and the PCGG, an undertaking which is so material
as to have justified PCGG's special treatment exempting the private respondent from
prosecution, respondent Sandiganbayan should have required proof of the
undertaking more substantial than a "bare assertion" that private respondent did
indeed comply with the undertaking. Instead, as manifested by the PCGG, only three
documents were submitted for the purpose, two of which were mere requests for reinvestigation and one simply disclosed certain clients which petitioners (ACCRA
lawyers) were themselves willing to reveal. These were clients to whom both
petitioners and private respondent rendered legal services while all of them were
partners at ACCRA, and were not the clients which the PCGG wanted disclosed for
the alleged questioned transactions.[61]
To justify the dropping of the private respondent from the case or the filing of the
suit in the respondent court without him, therefore, the PCGG should conclusively
show that Mr. Roco was treated as a species apart from the rest of the ACCRA
lawyers on the basis of a classification which made substantial distinctions based on
real differences.No such substantial distinctions exist from the records of the case at
bench, in violation of the equal protection clause.

By compelling petitioners, not only to reveal the identity of their clients, but
worse, to submit to the PCGG documents substantiating the client-lawyer
relationship, as well as deeds of assignment petitioners executed in favor of its clients
covering their respective shareholdings, the PCGG would exact from petitioners a link
that would inevitably form the chain of testimony necessary to convict the (client) of a
crime.

The equal protection clause is a guarantee which provides a wall of protection

against uneven application of statutes and regulations. In the broader sense, the
guarantee operates against uneven application of legal norms so that all persons
under similar circumstances would be accorded the same treatment.[62] Those who fall
within a particular class ought to be treated alike not only as to privileges granted but
also as to the liabilities imposed.

III
In response to petitioners' last assignment of error, respondents allege that the
private respondent was dropped as party defendant not only because of his
admission that he acted merely as a nominee but also because of his undertaking to
testify to such facts and circumstances "as the interest of truth may require, which
includes... the identity of the principal."[59]

x x x. What is required under this constitutional guarantee is the uniform operation of

legal norms so that all persons under similar circumstances would be accorded the
same treatment both in the privileges conferred and the liabilities imposed. As was
noted in a recent decision: Favoritism and undue preference cannot be allowed. For
the principle is that equal protection and security shall be given to every person under
circumstances, which if not identical are analogous. If law be looked upon in terms of
burden or charges, those that fall within a class should be treated in the same
fashion, whatever restrictions cast on some in the group equally binding the rest.[63]

First, as to the bare statement that private respondent merely acted as a lawyer
and nominee, a statement made in his out-of-court settlement with the PCGG, it is
sufficient to state that petitioners have likewise made the same claim not merely outof- court but also in their Answer to plaintiff's Expanded Amended Complaint, signed
by counsel, claiming that their acts were made in furtherance of "legitimate lawyering.
[60]
Being "similarly situated" in this regard, public respondents must show that there
exist other conditions and circumstances which would warrant their treating the
private respondent differently from petitioners in the case at bench in order to evade a
violation of the equal protection clause of the Constitution.

We find that the condition precedent required by the respondent PCGG of the
petitioners for their exclusion as parties-defendants in PCGG Case No. 33 violates
the lawyer-client confidentiality privilege. The condition also constitutes a
transgression by respondents Sandiganbayan and PCGG of the equal protection
clause of the Constitution.[64] It is grossly unfair to exempt one similarly situated litigant
from prosecution without allowing the same exemption to the others. Moreover, the
PCGGs demand not only touches upon the question of the identity of their clients but
also on documents related to the suspected transactions, not only in violation of the
attorney-client privilege but also of the constitutional right against selfincrimination. Whichever way one looks at it, this is a fishing expedition, a free ride at
the expense of such rights.

To this end, public respondents contend that the primary consideration behind
their decision to sustain the PCGG's dropping of private respondent as a defendant
was his promise to disclose the identities of the clients in question. However,
respondents failed to show - and absolutely nothing exists in the records of the
case at bar - that private respondent actually revealed the identity of his client(s) to
the PCGG. Since the undertaking happens to be the leitmotif of the entire

49

An argument is advanced that the invocation by petitioners of the privilege of

attorney-client confidentiality at this stage of the proceedings is premature and that
they should wait until they are called to testify and examine as witnesses as to
matters learned in confidence before they can raise their objections. But petitioners
are not mere witnesses.They are co-principals in the case for recovery of alleged illgotten wealth. They have made their position clear from the very beginning that they
are not willing to testify and they cannot be compelled to testify in view of their
constitutional right against self-incrimination and of their fundamental legal right to
maintain inviolate the privilege of attorney-client confidentiality.

JAMES D. BARTON, plaintiff-appellee,

vs.
LEYTE ASPHALT & MINERAL OIL CO., LTD., defendant-appellant.
Block, Johnston & Greenbaum and Ross, Lawrence & Selph for appellant.
Frank B. Ingersoll for appellee.
STREET, J.:
This action was instituted in the Court of First Instance of the City of Manila by James
D. Barton, to recover of the Leyte Asphalt & Mineral Oil Co., Ltd., as damages for
breach of contract, the sum of $318,563.30, United States currency, and further to
secure a judicial pronouncement to the effect that the plaintiff is entitled to an
extension of the terms of the sales agencies specified in the contract Exhibit A. The
defendant answered with a general denial, and the cause was heard upon the proof,
both documentary and oral, after which the trial judge entered a judgment absolving
the defendant corporation from four of the six causes of action set forth in the
complaint and giving judgment for the plaintiff to recover of said defendant, upon the
first and fourth causes of action, the sum of $202,500, United States currency,
equivalent to $405,000, Philippine currency, with legal interest from June 2, 1921, and
with costs. From this judgment the defendant company appealed.

It is clear then that the case against petitioners should never be allowed to take
its full course in the Sandiganbayan. Petitioners should not be made to suffer the
effects of further litigation when it is obvious that their inclusion in the complaint arose
from a privileged attorney-client relationship and as a means of coercing them to
disclose the identities of their clients. To allow the case to continue with respect to
them when this Court could nip the problem in the bud at this early opportunity would
be to sanction an unjust situation which we should not here countenance. The case
hangs as a real and palpable threat, a proverbial Sword of Damocles over petitioners'
heads. It should not be allowed to continue a day longer.
While we are aware of respondent PCGGs legal mandate to recover ill-gotten
wealth, we will not sanction acts which violate the equal protection guarantee and the
right against self-incrimination and subvert the lawyer-client confidentiality privilege.

The plaintiff is a citizen of the United States, resident in the City of Manila, while the
defendant is a corporation organized under the law of the Philippine Islands with its
principal office in the City of Cebu, Province of Cebu, Philippine Islands. Said
company appears to be the owner by a valuable deposit of bituminous limestone and
other asphalt products, located on the Island of Leyte and known as the Lucio mine.
On April 21, 1920, one William Anderson, as president and general manager of the
defendant company, addressed a letter Exhibit B, to the plaintiff Barton, authorizing
the latter to sell the products of the Lucio mine in the Commonwealth of Australia and
New Zealand upon a scale of prices indicated in said letter.

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolutions of respondent

Sandiganbayan (First Division) promulgated on March 18, 1992 and May 21, 1992
are hereby ANNULLED and SET ASIDE. Respondent Sandiganbayan is further
ordered to exclude petitioners Teodoro D. Regala, Edgardo J. Angara, Avelino V.
Cruz, Jose C. Concepcion, *Rogelio A. Vinluan, Victor P. Lazatin, Eduardo U. Escueta
and Paraja G. Hayuduni as parties-defendants in SB Civil Case No. 0033 entitled
"Republic of the Philippines v. Eduardo Cojuangco, Jr., et al.".

In the third cause of action stated in the complaint the plaintiff alleges that during the
life of the agency indicated in Exhibit B, he rendered services to the defendant
company in the way of advertising and demonstrating the products of the defendant
and expended large sums of money in visiting various parts of the world for the
purpose of carrying on said advertising and demonstrations, in shipping to various
parts of the world samples of the products of the defendant, and in otherwise carrying
on advertising work. For these services and expenditures the plaintiff sought, in said
third cause of action, to recover the sum of $16,563.80, United States currency. The
court, however, absolved the defendant from all liability on this cause of action and
the plaintiff did not appeal, with the result that we are not now concerned with this
phase of the case. Besides, the authority contained in said Exhibit B was admittedly
superseded by the authority expressed in a later letter, Exhibit A, dated October 1,
1920. This document bears the approval of the board of directors of the defendant
company and was formally accepted by the plaintiff. As it supplies the principal basis
of the action, it will be quoted in its entirety.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21237

March 22, 1924

50

(Exhibit A)
CEBU, CEBU, P. I.
October 1, 1920.

may be contracted for by you and we agree to accept such contracts subject to draft
attached to bill of lading in full payment of such shipment.
It is understood that the purchasers of the products of the Lucio mine are to pay
freight from the mine carriers to destination and are to be responsible for all freight,
insurance and other charges, providing said shipment has been accepted by their
inspectors.

JAMES D. BARTON, Esq.,

Cebu Hotel City.
DEAR SIR: You are hereby given the sole and exclusive sales agency for our
bituminous limestone and other asphalt products of the Leyte Asphalt and Mineral Oil
Company, Ltd., May first, 1922, in the following territory:
Australia

Saigon

Java

New Zealand

India

China

Tasmania

Sumatra

Hongkong

All contracts taken with responsible firms are to be under the same conditions as with
municipal governments.
All contracts will be subject to delays caused by the acts of God, over which the
parties hereto have no control.
It is understood and agreed that we agree to load all ships, steamers, boats or other
carriers prompty and without delay and load not less than 1,000 tons each twenty-four
hours after March 1, 1921, unless we so notify you specifically prior to that date we
are prepared to load at that rate, and it is also stipulated that we shall not be required
to ship orders of 5,000 tons except on 30 days notice and 10,000 tons except on 60
days notice.

Siam and the Straits Settlements, also in the United States of America until May 1,
1921.
As regard bituminous limestone mined from the Lucio property. No orders for less
than one thousand (1,000) tons will be accepted except under special agreement with
us. All orders for said products are to be billed to you as follows:

In 1,000 ton lots ...........................................

In 2,000 ton lots ...........................................
In 5,000 ton lots ...........................................
In 10,000 ton lots ..........................................

If your sales in the United States reach five thousand tons on or before May 1, 1921,
you are to have sole rights for this territory also for one year additional and should
your sales in the second year reach or exceed ten thousand tons you are to have the
option to renew the agreement for this territory on the same terms for an additional
Per ton two years.
Should your sales equal exceed ten thousand (10,000) tons in the year ending
October 1, 1921, or twenty thousand (20,000) tons by May 1, 1922, then this contract
is to be continued automatically for an additional three years ending April 30, 1925,
under the same terms and conditions as above stipulated.

with the understanding, however that, should the sales in the above territory equal or
exceed ten thousand (10,000) tons in the year ending October 1, 1921, then in that
event the price of all shipments made during the above period shall be ten pesos
(P10) per ton, and any sum charged to any of your customers or buyers in the
aforesaid territory in excess of ten pesos (P10) per ton, shall be rebated to you. Said
rebate to be due and payable when the gross sales have equalled or exceeded ten
thousand (10,000) tons in the twelve months period as hereinbefore described.
Rebates on lesser sales to apply as per above price list.

The products of the other mines can be sold by you in the aforesaid territories under
the same terms and conditions as the products of the Lucio mine; scale of prices to
be mutually agreed upon between us.
LEYTE ASPHALT & MINERAL OIL CO., LTD.
By (Sgd.) WM. ANDERSON
President

You are to have full authority to sell said product of the Lucio mine for any sum see fit
in excess of the prices quoted above and such excess in price shall be your extra and
additional profit and commission. Should we make any collection in excess of the
prices quoted, we agree to remit same to your within ten (10) days of the date of such
collections or payments.

(Sgd.) W. C. A. PALMER
Secretary
Approved by Board of Directors,
October 1, 1920.
(Sgd.) WM. ANDERSON
President

All contracts taken with municipal governments will be subject to inspector before
shipping, by any authorized representative of such governments at whatever price

51

Accepted.
(Sgd.) JAMES D. BARTON
Witness D. G. MCVEAN

another interview on the same Anderson definitely informed the plaintiff that the
contracts which be claimed to have procured would not be filled.
Three days later the plaintiff addressed a letter (Exhibit Y) to the defendant company
in Cebu, in which he notified the company to be prepared to ship five thousand tons
of bituminous limestone to John Chapman Co., San Francisco, loading to commence
on May 1, and to proceed at the rate of one thousand tons per day of each twentyfour hours, weather permitting.

Upon careful perusal of the fourth paragraph from the end of this letter it is apparent
that some negative word has been inadvertently omitted before "prepared," so that
the full expression should be "unless we should notify you specifically prior to that
date that we are unprepared to load at that rate," or "not prepared to load at that rate."
Very soon after the aforesaid contract became effective, the plaintiff requested the
defendant company to give him a similar selling agency for Japan. To this request the
defendant company, through its president, Wm. Anderson, replied, under date of
November 27, 1920, as follows:

On March 5, 1921, Frank B. Smith, of Sydney, had cabled the plaintiff an order for five
thousand tons of bituminous limestone; and in his letter of March 15 to the defendant,
the plaintiff advised the defendant company to be prepared to ship another five
thousand tons of bituminous limestone, on or about May 6, 1921, in addition to the
intended consignment for San Francisco. The name Henry E. White was indicated as
the name of the person through whom this contract had been made, and it was stated
that the consignee would be named later, no destination for the shipment being given.
The plaintiff explains that the name White, as used in this letter, was based on an
inference which he had erroneously drawn from the cable sent by Frank B. Smith,
and his intention was to have the second shipment consigned to Australia in response
to Smith's order.

In re your request for Japanese agency, will say, that we are willing to give
you, the same commission on all sales made by you in Japan, on the same
basis as your Australian sales, but we do not feel like giving you a regular
agency for Japan until you can make some large sized sales there, because
some other people have given us assurances that they can handle our
Japanese sales, therefore we have decided to leave this agency open for a
time.

It will be noted in connection with this letter of the plaintiff, of March 15, 1921, that no
mention was made of the names of the person, or firm, for whom the shipments were
really intended. The obvious explanation that occurs in connection with this is that the
plaintiff did not then care to reveal the fact that the two orders had originated from his
own subagents in San Francisco and Sydney.

Meanwhile the plaintiff had embarked for San Francisco and upon arriving at that port
he entered into an agreement with Ludvigsen & McCurdy, of that city, whereby said
firm was constituted a subagent and given the sole selling rights for the bituminous
limestone products of the defendant company for the period of one year from
November 11, 1920, on terms stated in the letter Exhibit K. The territory assigned to
Ludvigsen & McCurdy included San Francisco and all territory in California north of
said city. Upon an earlier voyage during the same year to Australia, the plaintiff had
already made an agreement with Frank B. Smith, of Sydney, whereby the latter was
to act as the plaintiff's sales agent for bituminous limestone mined at the defendant's
quarry in Leyte, until February 12, 1921. Later the same agreement was extended for
the period of one year from January 1, 1921. (Exhibit Q.)

To the plaintiff's letter of March 15, the assistant manager of the defendant company
replied on March, 25, 1921, acknowledging the receipt of an order for five thousand
tons of bituminous limestone to be consigned to John Chapman Co., of San
Francisco, and the further amount of five thousand tons of the same material to be
consigned to Henry E. White, and it was stated that "no orders can be entertained
unless cash has been actually deposited with either the International Banking
Corporation or the Chartered Bank of India, Australia and China, Cebu." (Exhibit Z.)

On February 5, 1921, Ludvigsen & McCurdy, of San Francisco, addressed a letter to

the plaintiff, then in San Francisco, advising hi that he might enter an order for six
thousand tons of bituminous limestone to be loaded at Leyte not later than May 5,
1921, upon terms stated in the letter Exhibit G. Upon this letter the plaintiff
immediately indorsed his acceptance.

To this letter the plaintiff in turn replied from Manila, under date of March, 1921,
questioning the right of the defendant to insist upon a cash deposit in Cebu prior to
the filling of the orders. In conclusion the plaintiff gave orders for shipment to Australia
of five thousand tons, or more, about May 22, 1921, and ten thousand tons, or more,
about June 1, 1921. In conclusion the plaintiff said "I have arranged for deposits to be
made on these additional shipments if you will signify your ability to fulfill these orders
on the dates mentioned." No name was mentioned as the purchaser, or purchases, of
these intended Australian consignments.

The plaintiff then returned to Manila; and on March 2, 1921, Anderson wrote to him
from Cebu, to the effect that the company was behind with construction and was not
then able to handle big contracts. (Exhibit FF.) On March 12, Anderson was in Manila
and the two had an interview in the Manila Hotel, in the course of which the plaintiff
informed Anderson of the San Francisco order. Anderson thereupon said that, owing
to lack of capital, adequate facilities had not been provided by the company for filling
large orders and suggested that the plaintiff had better hold up in the matter of taking
orders. The plaintiff expressed surprise at this and told Anderson that he had not only
the San Francisco order (which he says he exhibited to Anderson) but other orders for
large quantities of bituminous limestone to be shipped to Australia and Shanghai. In

Soon after writing the letter last above-mentioned, the plaintiff embarked for China
and Japan. With his activities in China we are not here concerned, but we note that in
Tokio, Japan, he came in contact with one H. Hiwatari, who appears to have been a
suitable person for handling bituminous limestone for construction work in Japan. In
the letter Exhibit X, Hiwatari speaks of himself as if he had been appointed exclusive

52

sales agent for the plaintiff in Japan, but no document expressly appointing him such
is in evidence.

of Tokio, approved by the Bank of Taiwan, for a minimum of ten thousand annually for
a period of five years, first shipment of a thousand tons to be as early after July 1 as
possible. In the letter Exhibit H the plaintiff gives notice of an "additional" (?) order
from H. E. White, Sydney, for two lots of bituminous limestone of five thousand tons
each, one for shipment not later than June 30, 1921, and the other by July 20, 1921.
In the same letter thousand tons from F. B. Smith, to be shipped to Brisbane,
Australia, by June 30, and a similar amount within thirty days later.

While the plaintiff was in Tokio he procured the letter Exhibit W, addressed to himself,
to be signed by Hiwatari. This letter, endited by the plaintiff himself, contains an order
for one thousand tons of bituminous limestone from the quarries of the defendant
company, to be delivered as soon after July 1, 1921, as possible. In this letter
Hiwatari states, "on receipt of the cable from you, notifying me of date you will be
ready to ship, and also tonnage rate, I will agree to transfer through the Bank of
Taiwan, of Tokio, to the Asia Banking Corporation, of Manila, P. I., the entire payment
of $16,000 gold, to be subject to our order on delivery of documents covering bill of
lading of shipments, the customs report of weight, and prepaid export tax receipt. I
will arrange in advance a confirmed or irrevocable letter of credit for the above
amounts so that payment can be ordered by cable, in reply to your cable advising
shipping date."

After the suit was brought, the plaintiff filed an amendment to his complaint in which
he set out, in tabulated form, the orders which he claims to have received and upon
which his letters of notification to the defendant company were based. In this
amended answer the name of Ludvigsen & McCurdy appears for the first time; and
the name of Frank B. Smith, of Sydney, is used for the first time as the source of the
intended consignments of the letters, Exhibits G, L, M, and W, containing the orders
from Ludvigen & McCurdy, Frank B. Smith and H. Hiwatari were at no time submitted
for inspection to any officer of the defendant company, except possibly the Exhibit G,
which the plaintiff claims to have shown to Anderson in Manila on March, 12, 1921.

In a letter, Exhibit X, of May 16, 1921, Hiwatari informs the plaintiff that he had shown
the contract, signed by himself, to the submanager of the Taiwan Bank who had given
it as his opinion that he would be able to issue, upon request of Hiwatari, a credit note
for the contracted amount, but he added that the submanager was not personally able
to place his approval on the contract as that was a matter beyond his authority.
Accordingly Hiwatari advised that he was intending to make further arrangements
when the manager of the bank should return from Formosa.

The different items conspiring the award which the trial judge gave in favor of the
plaintiff are all based upon the orders given by Ludvigsen & McCurdy (Exhibit G), by
Frank B. Smith (Exhibit L and M), and by Hiwatari in Exhibit W; and the appealed
does not involve an order which came from Shanghai, China. We therefore now
address ourselves to the question whether or not the orders contained in Exhibit G, L,
M, and W, in connection with the subsequent notification thereof given by the plaintiff
to the defendant, are sufficient to support the judgment rendered by the trial court.

In the letter of May 5, 1921, containing Hiwatari's order for one thousand tons of
bituminous limestone, it was stated that if the material should prove satisfactory after
being thoroughly tested by the Paving Department of the City of Tokio, he would
contract with the plaintiff for a minimum quantity of ten thousand additional tons, to be
used within a year from September 1, 1921, and that in this event the contract was to
be automatically extended for an additional four years. The contents of the letter of
May 5 seems to have been conveyed, though imperfectly, by the plaintiff to his
attorney, Mr. Frank B. Ingersoll, of Manila; and on May 17, 1921, Ingersoll addressed
a note to the defendant company in Cebu in which he stated that he had been
requested by the plaintiff to notify the defendant that the plaintiff had accepted an
order from Hiwatari, of Tokio, approved by the Bank of Taiwan, for a minimum order of
ten thousand tons of the stone annually for a period of five years, the first shipment of
one thousand tons to be made as early after July 1 as possible. It will be noted that
this communication did not truly reflect the contents of Hiwatari's letter, which called
unconditionally for only one thousand tons, the taking of the remainder being
contingent upon future eventualities.

The transaction indicated in the orders from Ludvigsen, & McCurdy and from Frank B.
Smith must, in our opinion, be at once excluded from consideration as emanating
from persons who had been constituted mere agents of the plaintiff. The San
Francisco order and the Australian orders are the same in legal effect as if they were
orders signed by the plaintiff and drawn upon himself; and it cannot be pretended that
those orders represent sales to bona fide purchasers found by the plaintiff. The
original contract by which the plaintiff was appointed sales agent for a limited period
of time in Australia and the United States contemplated that he should find reliable
and solvent buyers who should be prepared to obligate themselves to take the
quantity of bituminous limestone contracted for upon terms consistent with the
contract. These conditions were not met by the taking of these orders from the
plaintiff's own subagents, which was as if the plaintiff had bought for himself the
commodity which he was authorized to sell to others. Article 267 of the Code of
Commerce declares that no agent shall purchase for himself or for another that which
he has been ordered to sell. The law has placed its ban upon a broker's purchasing
from his principal unless the latter with full knowledge of all the facts and
circumstances acquiesces in such course; and even then the broker's action must be
characterized by the utmost good faith. A sale made by a broker to himself without the
consent of the principal is ineffectual whether the broker has been guilty of fraudulent
conduct or not. (4 R. C. L., 276-277.) We think, therefore, that the position of the
defendant company is indubitably sound in so far as it rest upon the contention that
the plaintiff has not in fact found any bona fide purchasers ready and able to take the
commodity contracted for upon terms compatible with the contract which is the basis
of the action.

It will be noted that the only written communications between the plaintiff and the
defendant company in which the former gave notice of having any orders for the sale
of bituminous limestone are the four letters Exhibit Y, AA, BB, and II. In the first of
these letters, dated March 15, 1921, the plaintiff advises the defendant company to
be prepared to ship five thousand tons of bituminous limestone, to be consigned to
John Chapman, Co., of San Francisco, to be loaded by March 5, and a further
consignment of five thousand tons, through a contract with Henry E. White,
consignees to be named later. In the letter Exhibit BB dated May 17, 1921, the
plaintiff's attorney gives notice of the acceptance by plaintiff of an order from Hiwatari,

53

It will be observed that the contract set out at the beginning of this opinion contains
provisions under which the period of the contract might be extended. That privilege
was probably considered a highly important incident of the contract and it will be seen
that the sale of five thousand tons which the plaintiff reported for shipment to San
Francisco was precisely adjusted to the purpose of the extension of the contract for
the United States for the period of an additional year; and the sales reported for
shipment to Australia were likewise adjusted to the requirements for the extention of
the contract in that territory. Given the circumstances surrounding these contracts as
they were reported to the defendant company and the concealment by the plaintiff of
the names of the authors of the orders, -- who after all were merely the plaintiff's
subagents, the officers of the defendant company might justly have entertained the
suspicion that the real and only person behind those contracts was the plaintiff
himself. Such at least turns out to have been the case.

defendant's assistant general manager undertakes to reply to the plaintiff's letter of

March 29 proceeding. It was evidently intended as an argumentative presentation of
the plaintiff's point of view in the litigation then pending, and its probative value is so
slight, even if admissible at all, that there was no error on the part of the trial court in
excluding it.
Exhibit 7, 8, 9 and 10 comprise correspondence which passed between the parties by
mail or telegraph during the first part of the year 1921. The subject-matter of this
correspondence relates to efforts that were being made by Anderson to dispose of the
controlling in the defendant corporation, and Exhibit 9 in particular contains an offer
from the plaintiff, representing certain associates, to but out Anderson's interest for a
fixed sum. While these exhibits perhaps shed some light upon the relations of the
parties during the time this controversy was brewing, the bearing of the matter upon
the litigation before us is too remote to exert any definitive influence on the case. The
trial court was not in error in our opinion in excluding these documents.

Much energy has been expended in the briefs upon his appeal over the contention
whether the defendant was justified in laying down the condition mentioned in the
letter of March 26, 1921, to the effect that no order would be entertained unless cash
should be deposited with either the International Banking Corporation of the
Chartered Bank of India, Australia and China, in Cebu. In this connection the plaintiff
points to the stipulation of the contract which provides that contracts with responsible
parties are to be accepted "subject to draft attached to bill of lading in full payment of
such shipment." What passed between the parties upon this point appears to have
the character of mere diplomatic parrying, as the plaintiff had no contract from any
responsible purchaser other than his own subagents and the defendant company
could no probably have filled the contracts even if they had been backed by the Bank
of England.

Exhibit E is a letter from Anderson to the plaintiff, dated April 21, 1920, in which
information is given concerning the property of the defendant company. It is stated in
this letter that the output of the Lucio (quarry) during the coming year would probably
be at the rate of about five tons for twenty-four hours, with the equipment then on
hand, but that with the installation of a model cableway which was under
contemplation, the company would be able to handle two thousand tons in twentyfour hours. We see no legitimate reason for rejecting this document, although of slight
probative value; and her error imputed to the court in admitting the same was not
committed.

With respect to the order from H. Hiwatari, we observe that while he intimates that he
had been promised the exclusive agency under the plaintiff for Japan, nevertheless it
does not affirmatively appear that he had been in fact appointed to be such at the
time he signed to order Exhibit W at the request of the plaintiff. It may be assumed,
therefore, that he was at that time a stranger to the contract of agency. It clearly
appears, however, that he did not expect to purchase the thousand tons of bituminous
limestone referred to in his order without banking assistance; and although the
submanager of the Bank of Taiwan had said something encouraging in respect to the
matter, nevertheless that official had refrained from giving his approval to the order
Exhibit W. It is therefore not shown affirmatively that this order proceeds from a
responsible source.

Exhibit 14, which was offered in evidence by the defendant, consists of a carbon copy
of a letter dated June 13, 1921, written by the plaintiff to his attorney, Frank B.
Ingersoll, Esq., of Manila, and in which plaintiff states, among other things, that his
profit from the San Francisco contract would have been at the rate of eigthy-five cents
(gold) per ton. The authenticity of this city document is admitted, and when it was
offered in evidence by the attorney for the defendant the counsel for the plaintiff
announced that he had no objection to the introduction of this carbon copy in
evidence if counsel for the defendant would explain where this copy was secured.
Upon this the attorney for the defendant informed the court that he received the letter
from the former attorneys of the defendant without explanation of the manner in which
the document had come into their possession. Upon this the attorney for the plaintiff
made this announcement: "We hereby give notice at this time that unless such an
explanation is made, explaining fully how this carbon copy came into the possession
of the defendant company, or any one representing it, we propose to object to its
admission on the ground that it is a confidential communication between client and
lawyer." No further information was then given by the attorney for the defendant as to
the manner in which the letter had come to his hands and the trial judge thereupon
excluded the document, on the ground that it was a privileged communication
between client and attorney.

The first assignment of error in the appellant's brief is directed to the action of the trial
judge in refusing to admit Exhibit 2, 7, 8, 9 and 10, offered by the defendant, and in
admitting Exhibit E, offered by the plaintiff. The Exhibit 2 is a letter dated June 25,
1921, or more than three weeks after the action was instituted, in which the

We are of the opinion that this ruling was erroneous; for even supposing that the letter
was within the privilege which protects communications between attorney and client,
this privilege was lost when the letter came to the hands of the adverse party. And it
makes no difference how the adversary acquired possession. The law protects the

Upon inspection of the plaintiff's letters (Exhibit Y and AA), there will be found ample
assurance that deposits for the amount of each shipment would be made with a bank
in Manila provided the defendant would indicated its ability to fill the orders; but these
assurance rested upon no other basis than the financial responsibility of the plaintiff
himself, and this circumstance doubtless did not escape the discernment of the
defendant's officers.

54

client from the effect of disclosures made by him to his attorney in the confidence of
the legal relation, but when such a document, containing admissions of the client,
comes to the hand of a third party, and reaches the adversary, it is admissible in
evidence. In this connection Mr. Wigmore says:

STREET, J.:
This is an original petition for writs of certiorari and mandamus filed in this court by
the Orient Insurance Company against the respondent judge of the Court of First
Instance of Manila and the Teal Motor Co., Inc. The object of the petition is to obtain
an order requiring the respondent judge to permit the attorney for the petitioner to
examine a letter (Exhibits 49 and 49-Act) part of which has been read into the record
in the course of the examination of one of the witnesses testifying for the plaintiff in
the case of Teal Motor Co., Inc. vs. Orient Insurance Company, now pending in the
Court of First Instance of the City of Manila, civil case No. 35825, with which, for
purposes of trial, have been consolidated several other cases of similar character.
The cause is now before us for resolution upon the complaint and answer interposed
by the two respondents.

The law provides subjective freedom for the client by assuring him of
exemption from its processes of disclosure against himself or the attorney or
their agents of communication. This much, but not a whit more, is necessary
for the maintenance of the privilege. Since the means of preserving secrecy
of communication are entirely in the client's hands, and since the privilege is
a derogation from the general testimonial duty and should be strictly
construed, it would be improper to extend its prohibition to third persons who
obtain knowledge of the communications. One who overhears the
communication, whether with or without the client's knowledge, is not within
the protection of the privilege. The same rule ought to apply to one who
surreptitiously reads or obtains possession of a document in original or copy.
(5 Wigmore on Evidence, 2d ed., sec. 2326.)

The respondent Teal Motor Co., Inc. is plaintiff in a civil action instituted in the Court of
First Instance of Manila (civil case No. 35825) for the purpose of recovering upon two
fire insurance policies issued by the Orient Insurance Company, aggregating
P60,000, upon a stock of merchandise alleged to be of the value of P414,513.56,
which, with the exception of salvage valued at about P50,000, was destroyed by a fire
on or about January 6, 1929. In one of the clauses of the policies sued upon is a
stipulation to the effect that all benefit under the policy would be forfeited if, in case of
loss, the claim should be rejected by the insurer and action or suit should not be
commenced within three months after such rejection. In the answer of the Orient
Insurance Company, interposed in the civil case mentioned, it is alleged, by way of
defense, that the company rejected the claim on April 15, 1929, that notice of such
rejection was given to the plaintiff by letter on the same day, and that suit was not
instituted on the policy until August 3, 1929, which was more than three months after
the rejection of the claim.

Although the precedents are somewhat confusing, the better doctrine is to the effect
that when papers are offered in evidence a court will take no notice of how they were
obtained, whether legally or illegally, properly or improperly; nor will it form a collateral
issue to try that question. (10 R. C. L., 931; 1 Greenl. Evid., sec. 254a;
State vs. Mathers, 15 L. R. A., 268; Gross vs. State, 33 L. R. A., [N. S.], 477, note.)
Our conclusion upon the entire record is that the judgment appealed from must be
reversed; and the defendant will be absolved from the complaint. It is so ordered,
without special pronouncement as to costs of either instance.
Araullo, C.J., Johnson, Avancea, Ostrand, Johns and Romualdez, JJ., concur.

In a replication to the answer of the defendant, containing the foregoing and other
defenses, the plaintiff admitted that the adjusters of the defendant company had, on
April 15, 1929, notified the plaintiff that the Orient Insurance Company would not pay
the claim, basing refusal upon alleged incendiarism and fraud on the part of the
plaintiff; and by way of avoidance, it was alleged in the replication that, after
notification of denial of liability by the insurance company, one E. E. Elser, as
representative of the company, expressly requested the plaintiff to defer judicial action
until after the following July 31, stating that three were great possibilities that an
extrajudicial compromise might be arranged in the matter; and it was further asserted,
in the replication, that the plaintiff had deferred action, relying upon this request.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 34098

September 17, 1930

ORIENT INSURANCE COMPANY, petitioner,

vs.
E. P. REVILLA, Judge of First Instance of Manila, and TEAL MOTOR CO.,
INC., respondents.

It will thus be seen that the reason for the admitted delay in the institution of the
action is an important issue in the case, or case, now in course of trial.

Gibbs and McDonough for petitioner.

Guevara, Francisco and Recto for respondents.

It further appears that while case No. 35825 was in course of trial, as it still is, before
the respondent judge, in the Court of First Instance of Manila, the witness E. M.
Bachrach, president of the Teal Motor Co., Inc., while being examined in chief by the
attorneys for the plaintiff, and speaking of the circumstances surrounding the

55

institution of the action, said that he had reported certain conversations to plaintiff's
attorneys, and he added: "I waited for about a week longer and not having heard
anything about it, in the meantime, on the 13th of July, I received a letter from our
attorneys, Guevara, Francisco & Recto, urging me to file these cases." The attorney
for the defendant, Orient Insurance Company, thereupon interposed, saying: "I ask
that the witness be required to produce the letter referred to from Mr. Guevara, or else
his answer be stricken out. (To the witness) Have you got the letter there?" The
witness replied that he had the letter with him and that he had no objection to show
that part of the letter in which Guevara urged him to proceed with the cases. Upon
being asked about the other part of the letter, the witness said that the other part
contained private matter, "between the attorney and ourselves," meaning between the
Teal Motor Co., Inc., and its attorneys. Thereupon the attorney for the defendant,
Orient Insurance Company, said he would like to see the letter, inquiring as to its
date. The witness replied that it bore date of July 13, 1929; and upon the court
inquiring whether the witness had any objection to the reading of the letter by the
attorney for the defendant, the witness replied that he wished to consult with his
attorney. Upon this the attorney for the adversary party, the Orient Insurance
Company, suggested that he would like to have the letter marked without his reading
it, and it was accordingly marked as Exhibit 49. The attorney then said: "In view of the
production of the letter, I withdraw the objection to the statement of the witness as to
its contents," and he added: "I now ask the permission of the court to read the letter
for my information." The court thereupon inquired of the attorney for the Teal Motor
Co., Inc., whether he had any objection, and the attorney observed that he would
have no objection to the disclosing of that part of the letter which referred exactly to
the point of the urging of the filing of the complaints, and he added: "Unfortunately,
the other part of the letter being a communication between a client and attorney, I
don't think, if your Honor please, it can be disclosed without the consent of both."

in the record;" whereupon the following part of the letter was read out in court and
incorporated in the transcript.
July 13, 1929
DEAR SIR: As you know, your attorney Mr. Basilio Francisco has turned over
to us, prior to his departure, all the papers in connection with the insurance
claim of the Teal Motor Co., Inc., on destroyed or burned merchandise, and
everything is now ready for filing of the corresponding complaints in the
Court of First Instance.
When the matter above quoted had been thus read into the record, the attorney for
the defendant made the following observation: "In view of the fact that counsel for the
plaintiff has just now read into the record and presented as evidence a part of the
letter of July 13, I now request that the entire letter be produced." This request was
overruled by the court, and the attorney for the defendant excepted. After further
discussion, upon the suggestion of the attorney for the defendant and by agreement
of the counsel for both parties, the second page of the letter was marked 49-A by the
clerk court.
The incident was renewed when it came at turn of the attorney for the defendant to
cross-examine the same witness E. M. Bachrach, when the attorney for the
defendant, having ascertained from the witness that he still had the letter in his
possession, and that he had not answered it in writing, formally offered the letter in
evidence. The attorney for the plaintiff again objected, on the ground that the letter
was of a privileged nature and that it was the personal property of the witness.
Thereupon the court, receiving the letter in hand from the witness, observed that he
had already ruled upon it, and after further discussion, the court sustained the
objection of the attorney for the plaintiff and refused to admit in evidence so much of
the letter as had not already been read into the record. The attorney for the defendant
again excepted.

In the course of the colloquy which thereupon unsued between the attorney for the
plaintiff and the attorney for the defendant, it was stated by the attorney for the
plaintiff that only a part of the letter had anything to do with the urging of the
presentation of the complaints in the cases to which the witness had testified, and
that the other part of the letter referred to the contract of fees, or retaining of the
services of plaintiff's attorneys in connection with said cases, a matter, so the attorney
suggested, entirely distinct from the urging of the presentation of the cases. The
attorney for the defendant thereupon insisted before the court that, inasmuch as all
the letter refers to the case then in court, the entire document should be exhibited, in
conformity with the rule that when part of a document is offered in evidence, the entire
document must be presented.

At a later stage of the trial the attorney interposed a formal motion for reconsideration
of the ruling of the court in refusing to admit the letter in evidence, or the part of it not
already incorporated in the record. The court, however, adhered to its original ruling,
and the attorney for the defendant excepted. Another incident that might be noted,
though not alleged as a ground of relief in the petition before us, but set forth in the
answer of the respondents, is that the attorney for the defendant procured a
subpoena duces tecum to be issued by the clerk of court requiring the attorneys for
the plaintiff to produce in court certain papers including the letter which gave rise to
the present controversy. The court, on motion of the attorneys for the plaintiff,
quashed said subpoena.

Upon this the respondent judge ruled as follows: "Objection of the counsel for the
plaintiff and the witness, Mr. Barchrach, to the showing or reading of the whole letter
in the record is sustained, and it is ordered that only that part of the letter which has
been referred to by Mr. Bachrach in his testimony be read and transcribed into the
record." To this ruling the attorney for the defendant excepted and the respondent
judge then said: "Let that part of the letter pointed out by Mr. Bachrach be transcribed

The essential character of this incident, which we have perhaps narrated with
unnecessary prolixity, is readily discernible. A witness for the plaintiff made an oral
statement as to the substance of part of a letter which had been received by the

56

plaintiff from its attorney, and when the fact was revealed that the communication had
been made by letter, the attorney for the defendant requested that the witness be
required to produce the letter in court, and if not, that his answer should be stricken
out. This in legal effect was a demand for the production of "the best evidence," it
being a well-known rule of law that a witness cannot be permitted to give oral
testimony as to the contents of a paper writing which can be produced in court. In
response to this request that portion of the letter to which the witness had supposedly
referred was read into the record.

substance of the case is well stated in the note to Kelly vs. Cummens (20 Am. & Eng.
Ann. Cases, 1283, 1287), from which we quote as follows:
In Western Union Tel. Co. vs. Baltimore, etc., Tel. Co. (26 Fed., 55), it
appeared that upon a motion in the cause, which was in equity for a
preliminary injunction, one of the questions involved was whether a reissued
patent upon which the suit was founded was obtained for the legitimate
purpose of correcting mistake or inadvertence in the specification and claims
of the original, or whether it was obtained merely for the purpose of
expanding the claims of the original in order to subordinate to the reissue
certain improvements or inventions made by others after the grant of the
original patent and before the application for the reissue. To fortify its theory
of the true reasons for obtaining the reissue, the complainant upon that
motion embodied in affidavits extracts from communications made by a
patent expert and attorney in the office of the solicitor general of the
complainant, to the president and the vice-president of the complainant,
when the subject of applying for a reissue was under consideration by the
officers of the complainant, and while the proceedings for a reissue were
pending. After the cause had proceeded to the taking of proofs for final
hearing the defendant sought to introduce in evidence the original
communications, extracts from which were used by the complainant upon
the motion for an injunction, on the ground that the parts of the
communication which were not disclosed had an important bearing upon the
history of the application for a reissue, and indicated that it was not made for
any legitimate purpose. The complainant resisted the efforts of the defendant
to have the original communications admitted, on the ground that they were
privileged as made to its officers by its attorney, but it was held that the
defendant was entitled to introduce them in evidence, the court saying: "The
question, then, is whether the complainant can shelter itself behind its
privilege to insist upon the privacy of the communications between its
attorney and its other officers as confidential communications, when it has
itself produced fragmentary part of them, and sought to use them as a
weapon against the defendant to obtain the stringent remedy of a
preliminary injunction. Assuming that the communications addressed to the
president and vice-president of the complainant by Mr. Buckingham were
communications made to the complainant by its attorney, and as such
privileged at the option of the complainant, it was competent for the
complainant to waive its privilege. It would hardly be contended that the
complainant could introduce extracts from these communications as
evidence in its own behalf for the purpose of a final hearing, and yet withhold
the other parts if their production were required by the defendant. A party
cannot waive such a privilege partially. He cannot remove the seal of
secrecy from so much of the privileged communications as makes for his
advantage, and insist that it shall not be removed as to so much as makes to
the advantage of his adversary, or may neutralize the effect of such as has
been introduced. Upon the principle it would seem that it cannot be material
at what stage of the proceedings in a suit a party waives his right to maintain
the secrecy of privileged communication. All the proceedings in the cause

The respondent judge appears to have considered that the excerpt from the letter
thus incorporated in the record was either proof of the defendant, its production
having been demanded by defendant's counsel, or that at least the legal responsibility
for the incorporation of said excerpt into the record was attributable to the defendant.
We are unable to accept this view. The incorporation of this excerpt from the letter
was a necessary support of the oral statement which the witness had made, and if
this basis for such statement had not been laid by the incorporation of the excerpt into
the record, the oral statement of the witness concerning the tenor of the letter should
properly have been stricken out. But instead of withdrawing the oral statement of the
witness concerning the nature of the written communication, the witness produced the
letter and the part of it already quoted was read into the record. The excerpt in
question must therefore be considered as proof submitted by the plaintiff; and there
can be no question that, part of the letter having been introduced in behalf of the
plaintiff, the whole of the letter could properly be examined by the other party, in
accordance with the express provision of section 283 of the Code of Civil Procedure.
It was stated in the court by the attorney for the plaintiff, in opposing the introduction
of other portions of the letter in proof, that the other parts were privileged, because
they related to the terms of employment between attorney and client, or to the fee to
be paid to the attorney. With respect to this point it is difficult to see how a contract for
fees could be considered privileged. Irrelevant it might, under certain circumstances,
certainly be, but not privileged. Of course contracts between attorneys and clients are
inherently personal and private matters, but they are a constant subject of litigation,
and contracts relating to fees are essentially not of privileged nature. Privilege
primarily refers to communications from client to attorney, an idea which of course
includes communications from attorney to client relative to privileged matters.
But, even supposing that the matter contained in the letter and withheld from the
inspection of the adversary was originally of a privileged nature, the privilege was
waived by the introduction in evidence of part of the letter. The provision in section
283 of the Code of Civil Procedure making the whole of a declaration, conversation,
or writing admissible when part has been given in evidence by one party, makes no
exception as to privileged matter; and the jurisprudence on the subject does not
recognize any exception. Practically every feature of the question now under
consideration was involved in the case of Western Union Tel. Co. vs. Baltimore &
Ohio Tel. Co. (26 Fed., 55), which in 1885 came before Wallace, J., a distinguished
jurist presiding in the Federal Circuit Court of the Southern District of New York. The

57

are constituent parts of the controversy, and it is not obvious how any
distinction can obtain as to the effect of waiver when made by a party for the
purpose of obtaining temporary relief and when made by him to obtain final
relief."

From what has been said it follows that the writ of mandamus prayed for will be
granted, and the respondent judge is directed to permit the attorney for the defendant
(petitioner here) to inspect the letter (Exhibit 49 and 49-A) with a view to the
introduction in evidence of such parts thereof as may be relevant to the issues made
by the pleadings in civil case No. 35825 and other cases which have been
consolidated with it for trial. So ordered, with costs against the respondent Teal Motor
Co., Inc.

From the foregoing decision and other cases contained in the note referred to, we are
led to the conclusion that the attorney for the defendant in the court below was
entitled to examine the whole of the letter (Exhibit 49 and 49-A), with a view to the
introduction in evidence of such parts thereof as may be relevant to the case on trial,
and the respondent judge was in error in refusing to permit the inspection of the letter
by said attorney.

EN BANC

It is suggested in the argument for the respondents that the question of the
admissibility in evidence of the parts of the letter not already read into the record was
prematurely raised, and that the attorney for the defendant should have waited until it
became his turn to present evidence in chief, when, as is supposed, the question
could have been properly raised. We are of the opinion, however, that if the attorney
for the defendant had a right to examine the letter, it should have been produced
when he asked for it on the cross-examination of the witness who had the letter in his
possession. Besides, in the lengthy discussions between court and attorneys,
occuring at different times, there was not the slightest suggestion from the court that
the parts of the letter which were held inadmissible would be admitted at any time.
Furthermore, the action of the court in quashing the subpoena duces tecum for the
production of the letter shows that the court meant to rule that the letter could not be
inspected at all by the attorney for the defendant.

[G.R. Nos. 115439-41. July 16, 1997]

PEOPLE OF THE PHILIPPINES, petitioner, vs. HONORABLE SANDIGANBAYAN,
MANSUETO V. HONRADA, CEFERINO S. PAREDES, JR. and
GENEROSO S. SANSAET, respondents.
DECISION
REGALADO, J.:

Objection is also here made by the attorney for the respondents to the use of the writ
of mandamus for the purpose of correcting the error which is supposed to have been
committed. The situation presented is, however, one where the herein petitioner has
no other remedy. The letter which the petitioner seeks to examine has been ruled
inadmissible, as to the parts not introduced in evidence by the defendant in the court
below, and the respondent judge had not permitted the document to become a part of
the record in such a way that the petitioner could take advantage of the error upon
appeal to this court. It is idle to discuss whether other remedy would be speedy or
adequate when there is no remedy at all. This court is loath, of course, to interfere in
course of the trial of a case in a Court of First Instance, as such interference might
frequently prolong unduly the litigation in that court. But this case has been pending
before the respondent judge for a considerable period of time, and undoubtedly the
probatory period will be necessarily extended much longer. Under these
circumstances, the action of this court in entertaining the present application will
either be conductive to the speedy determination of case, or at least will not
appreciably extend the proceedings.

Through the special civil action for certiorari at bar, petitioner seeks the
annulment of the resolution of respondent Sandiganbayan, promulgated on
December 22, 1993, which denied petitioners motion for the discharge of respondent
Generoso S. Sansaet to be utilized as a state witness, and its resolution of March 7,
1994 denying the motion for reconsideration of its preceding disposition.[1]
The records show that during the dates material to this case, respondent
Honrada was the Clerk of Court and Acting Stenographer of the First Municipal Circuit
Trial Court, San Francisco-Bunawan-Rosario in Agusan del Sur. Respondent Paredes
was successively the Provincial Attorney of Agusan del Sur, then Governor of the
same province, and is at present a Congressman. Respondent Sansaet was a
practicing attorney who served as counsel for Paredes in several instances pertinent
to the criminal charges involved in the present recourse.
The same records also represent that sometime in 1976, respondent Paredes
applied for a free patent over Lot No. 3097-A, Pls-67 of the Rosario Public Land
Subdivision Survey. His application was approved and, pursuant to a free patent
granted to him, an original certificate of title was issued in his favor for that lot which is
situated in the poblacion of San Francisco, Agusan del Sur.

It goes without saying that the subject matter of the contention is of a nature which
makes the use of the writ of mandamus appropriate, since the right from the exercise
of which the petitioner is excluded is one to which it is entitled under the law and the
duty to be performed is one pertaining to the respondent judge in his official capacity.

58

However, in 1985, the Director of Lands filed an action [2] for the cancellation of
respondent Paredes patent and certificate of title since the land had been designated
and reserved as a school site in the aforementioned subdivision survey. The trial
court rendered judgment[3] nullifying said patent and title after finding that respondent
Paredes had obtained the same through fraudulent misrepresentations in his
application. Pertinently, respondent Sansaet served as counsel of Paredes in that civil
case.[4]

Ombudsman seeking the investigation of the three respondents herein for falsification
of public documents.[12] He claimed that respondent Honrada, in conspiracy with his
herein co-respondents, simulated and certified as true copies certain documents
purporting to be a notice of arraignment, dated July 1, 1985, and transcripts of
stenographic notes supposedly taken during the arraignment of Paredes on the
perjury charge.[13] These falsified documents were annexed to respondent Paredes
motion for reconsideration of the Tanodbayan resolution for the filing of a graft charge
against him, in order to support his contention that the same would constitute double
jeopardy.

Consequent to the foregoing judgment of the trial court, upon the subsequent
complaint of the Sangguniang Bayan and the preliminary investigation conducted
thereon, an information for perjury[5] was filed against respondent Paredes in the
Municipal Circuit Trial Court.[6] On November 27, 1985, the Provincial Fiscal was,
however, directed by the Deputy Minister of Justice to move for the dismissal of the
case on the ground inter alia of prescription, hence the proceedings were terminated.
[7]
In this criminal case, respondent Paredes was likewise represented by respondent
Sansaet as counsel.

In support of his claim, Gelacio attached to his letter a certification that no notice
of arraignment was ever received by the Office of the Provincial Fiscal of Agusan del
Sur in connection with that perjury case; and a certification of Presiding Judge Ciriaco
Ario that said perjury case in his court did not reach the arraignment stage since
action thereon was suspended pending the review of the case by the Department of
Justice.[14]

Nonetheless, respondent* Paredes was thereafter haled before the Tanodbayan

for preliminary investigation on the charge that, by using his former position as
Provincial Attorney to influence and induce the Bureau of Lands officials to favorably
act on his application for free patent, he had violated Section 3(a) of Republic Act No.
3019, as amended. For the third time, respondent Sansaet was Paredes counsel of
record therein.

Respondents filed their respective counter-affidavits, but Sansaet subsequently

discarded and repudiated the submissions he had made in his counter-affidavit. In a
so-called Affidavit of Explanations and Rectifications,[15] respondent Sansaet revealed
that Paredes contrived to have the graft case under preliminary investigation
dismissed on the ground of double jeopardy by making it that the perjury case had
been dismissed by the trial court after he had been arraigned therein.

On August 29, 1988, the Tanodbayan, issued a resolution[8] recommending the

criminal prosecution of respondent Paredes. Atty. Sansaet, as counsel for his
aforenamed co-respondent, moved for reconsideration and, because of its legal
significance in this case, we quote some of his allegations in that motion:

For that purpose, the documents which were later filed by respondent Sansaet
in the preliminary investigation were prepared and falsified by his co-respondents in
this case in the house of respondent Paredes. To evade responsibility for his own
participation in the scheme, he claimed that he did so upon the instigation and
inducement of respondent Paredes. This was intended to pave the way for his
discharge as a government witness in the consolidated cases, as in fact a motion
therefor was filed by the prosecution pursuant to their agreement.

x x x respondent had been charged already by the complainants before the Municipal
Circuit Court of San Francisco, Agusan del Sur, went to jail on detention in 1984
under the same set of factsand the same evidence x x x but said case after
arraignment, was ordered dismissed by the court upon recommendation of the
Department of Justice. Copy of the dismissal order, certificate of arraignment and
the recommendation of the Department of Justice are hereto attached for ready
reference; thus the filing of this case will be a case of double jeopardy for respondent
herein x x x.[9] (Italics supplied.)

Withal, in a resolution[16] dated February 24, 1992, the Ombudsman approved

the filing of falsification charges against all the herein private respondents. The
proposal for the discharge of respondent Sansaet as a state witness was rejected by
the Ombudsman on this evaluative legal position:
x x x Taking his explanation, it is difficult to believe that a lawyer of his stature, in the
absence of deliberate intent to conspire, would be unwittingly induced by another to
commit a crime. As counsel for the accused in those criminal cases, Atty. Sansaet
had control over the case theory and the evidence which the defense was going to
present. Moreover, the testimony or confession of Atty. Sansaet falls under the mantle
of privileged communication between the lawyer and his client which may be objected
to, if presented in the trial.

A criminal case was subsequently filed with the Sandiganbayan [10] charging
respondent Paredes with a violation of Section 3(a) of Republic Act No. 3019, as
amended.However, a motion to quash filed by the defense was later granted in
respondent courts resolution of August 1, 1991[11] and the case was dismissed on the
ground of prescription.
On January 23, 1990, one Teofilo Gelacio, a taxpayer who had initiated the
perjury and graft charges against respondent Paredes, sent a letter to the

59

The Ombudsman refused to reconsider that resolution [17] and, ostensibly to

forestall any further controversy, he decided to file separate informations for
falsification of public documents against each of the herein respondents. Thus, three
criminal cases,[18] each of which named one of the three private respondents here as
the accused therein, were filed in the graft court. However, the same were
consolidated for joint trial in the Second Division of the Sandiganbayan.

cannot be presented as a witness against accused Ceferino S. Paredes, Jr. without

the latters consent.[21]
The Court is of a contrary persuasion. The attorney-client privilege cannot apply
in these cases, as the facts thereof and the actuations of both respondents therein
constitute an exception to the rule. For a clearer understanding of that evidential rule,
we will first sweep aside some distracting mental cobwebs in these cases.

As stated at the outset, a motion was filed by the People on July 27, 1993 for
the discharge of respondent Sansaet as a state witness. It was submitted that all the
requisites therefor, as provided in Section 9, Rule 119 of the Rules of Court, were
satisfied insofar as respondent Sansaet was concerned. The basic postulate was
that, except for the eyewitness testimony of respondent Sansaet, there was no other
direct evidence to prove the confabulated falsification of documents by respondents
Honrada and Paredes.

1. It may correctly be assumed that there was a confidential communication

made by Paredes to Sansaet in connection with Criminal Cases Nos. 17791-93 for
falsification before respondent court, and this may reasonably be expected since
Paredes was the accused and Sansaet his counsel therein. Indeed, the fact that
Sansaet was called to witness the preparation of the falsified documents by Paredes
and Honrada was as eloquent a communication, if not more, than verbal statements
being made to him by Paredes as to the fact and purpose of such falsification. It is
significant that the evidentiary rule on this point has always referred to any
communication, without distinction or qualification.[22]

Unfortunately for the prosecution, respondent Sandiganbayan, hewing to the

theory of the attorney-client privilege adverted to by the Ombudsman and invoked by
the two other private respondents in their opposition to the prosecutions motion,
resolved to deny the desired discharge on this ratiocination:

In the American jurisdiction from which our present evidential rule was taken,
there is no particular mode by which a confidential communication shall be made by a
client to his attorney. The privilege is not confined to verbal or written communications
made by the client to his attorney but extends as well to information communicated by
the client to the attorney by other means.[23]

From the evidence adduced, the opposition was able to establish that client and
lawyer relationship existed between Atty. Sansaet and Ceferino Paredes, Jr., before,
during and after the period alleged in the information. In view of such relationship, the
facts surrounding the case, and other confidential matter must have been disclosed
by accused Paredes, as client, to accused Sansaet, as his lawyer in his professional
capacity. Therefore, the testimony of Atty. Sansaet on the facts surrounding the
offense charged in the information is privileged.[19]

Nor can it be pretended that during the entire process, considering their past
and existing relations as counsel and client and, further, in view of the purpose for
which such falsified documents were prepared, no word at all passed between
Paredes and Sansaet on the subject matter of that criminal act. The clincher for this
conclusion is the undisputed fact that said documents were thereafter filed by
Sansaet in behalf of Paredes as annexes to the motion for reconsideration in the
preliminary investigation of the graft case before the Tanodbayan. [24] Also, the acts
and words of the parties during the period when the documents were being falsified
were necessarily confidential since Paredes would not have invited Sansaet to his
house and allowed him to witness the same except under conditions of secrecy and
confidence.

Reconsideration of said resolution having been likewise denied, [20] the

controversy was elevated to this Court by the prosecution in an original action for the
issuance of the extraordinary writ of certiorari against respondent Sandiganbayan.
The principal issues on which the resolution of the petition at bar actually turns
are therefore (1) whether or not the projected testimony of respondent Sansaet, as
proposed state witness, is barred by the attorney-client privilege; and (2) whether or
not, as a consequence thereof, he is eligible for discharge to testify as a particeps
criminis.

2. It is postulated that despite such complicity of Sansaet at the instance of

Paredes in the criminal act for which the latter stands charged, a distinction must be
made between confidential communications relating to past crimes already
committed, and future crimes intended to be committed, by the client. Corollarily, it is
admitted that the announced intention of a client to commit a crime is not included
within the confidences which his attorney is bound to respect. Respondent court
appears, however, to believe that in the instant case it is dealing with a past crime,
and that respondent Sansaet is set to testify on alleged criminal acts of respondents
Paredes and Honrada that have already been committed and consummated.

I
As already stated, respondent Sandiganbayan ruled that due to the lawyer-client
relationship which existed between herein respondents Paredes and Sansaet during
the relevant periods, the facts surrounding the case and other confidential matters
must have been disclosed by respondent Paredes, as client, to respondent Sansaet,
as his lawyer. Accordingly, it found no reason to discuss it further since Atty. Sansaet

60

The Court reprobates the last assumption which is flawed by a somewhat

inaccurate basis. It is true that by now, insofar as the falsifications to be testified to in
respondent court are concerned, those crimes were necessarily committed in the
past. But for the application of the attorney-client privilege, however, the period to be
considered is the date when the privileged communication was made by the client to
the attorney in relation to either a crime committed in the past or with respect to a
crime intended to be committed in the future. In other words, if the client seeks his
lawyers advice with respect to a crime that the former has theretofore committed, he
is given the protection of a virtual confessional seal which the attorney-client privilege
declares cannot be broken by the attorney without the clients consent. The same
privileged confidentiality, however, does not attach with regard to a crime which a
client intends to commit thereafter or in the future and for purposes of which he seeks
the lawyers advice.

It is evident, therefore, that it was error for respondent Sandiganbayan to insist

that such unlawful communications intended for an illegal purpose contrived by
conspirators are nonetheless covered by the so-called mantle of privilege. To prevent
a conniving counsel from revealing the genesis of a crime which was later committed
pursuant to a conspiracy, because of the objection thereto of his conspiring client,
would be one of the worst travesties in the rules of evidence and practice in the noble
profession of law.
II
On the foregoing premises, we now proceed to the consequential inquiry as to
whether respondent Sansaet qualifies, as a particeps criminis, for discharge from the
criminal prosecution in order to testify for the State. Parenthetically, respondent court,
having arrived at a contrary conclusion on the preceding issue, did not pass upon this
second aspect and the relief sought by the prosecution which are now submitted for
our resolution in the petition at bar. We shall, however, first dispose likewise of some
ancillary questions requiring preludial clarification.

Statements and communications regarding the commission of a crime already

committed, made by a party who committed it, to an attorney, consulted as such,
are privileged communications. Contrarily, the unbroken stream of judicial dicta is to
the effect that communications between attorney and client having to do with the
clients contemplated criminal acts, or in aid or furtherance thereof, are not covered by
the cloak of privileges ordinarily existing in reference to communications between
attorney and client.[25] (Emphases supplied.)

1. The fact that respondent Sandiganbayan did not fully pass upon the query as
to whether or not respondent Sansaet was qualified to be a state witness need not
prevent this Court from resolving that issue as prayed for by petitioner. Where the
determinative facts and evidence have been submitted to this Court such that it is in a
position to finally resolve the dispute, it will be in the pursuance of the ends of justice
and the expeditious administration thereof to resolve the case on the merits, instead
of remanding it to the trial court.[28]

3. In the present cases, the testimony sought to be elicited from Sansaet as

state witness are the communications made to him by physical acts and/or
accompanying words of Paredes at the time he and Honrada, either with the active or
passive participation of Sansaet, were about to falsify, or in the process of falsifying,
the documents which were later filed in the Tanodbayan by Sansaet and culminated
in the criminal charges now pending in respondent Sandiganbayan. Clearly, therefore,
the confidential communications thus made by Paredes to Sansaet were for purposes
of and in reference to the crime of falsification which had not yet been committed in
the past by Paredes but which he, in confederacy with his present co-respondents,
later committed. Having been made for purposes of a future offense, those
communications are outside the pale of the attorney-client privilege.

2. A reservation is raised over the fact that the three private respondents here
stand charged in three separate informations. It will be recalled that in its resolution of
February 24, 1992, the Ombudsman recommended the filing of criminal charges for
falsification of public documents against all the respondents herein. That resolution
was affirmed but, reportedly in order to obviate further controversy, one information
was filed against each of the three respondents here, resulting in three informations
for the same acts of falsification.

4. Furthermore, Sansaet was himself a conspirator in the commission of that

crime of falsification which he, Paredes and Honrada concocted and foisted upon the
authorities. It is well settled that in order that a communication between a lawyer and
his client may be privileged, it must be for a lawful purpose or in furtherance of a
lawful end. The existence of an unlawful purpose prevents the privilege from
attaching.[26] In fact, it has also been pointed out to the Court that the prosecution of
the honorable relation of attorney and client will not be permitted under the guise of
privilege, and every communication made to an attorney by a client for a criminal
purpose is a conspiracy or attempt at a conspiracy which is not only lawful to divulge,
but which the attorney under certain circumstances may be bound to disclose at once
in the interest of justice.[27]

This technicality was, however, sufficiently explained away during the

deliberations in this case by the following discussion thereof by Mr. Justice Davide, to
wit:
Assuming no substantive impediment exists to block Sansaets discharge as state
witness, he can, nevertheless, be discharged even if indicted under a separate
information. I suppose the three cases were consolidated for joint trial since they were
all raffled to the Second Division of the Sandiganbayan. Section 2, Rule XV of the
Revised Rules of the Sandiganbayan allows consolidation in only one Division of
cases arising from the same incident or series of incidents, or involving common
questions of law and fact. Accordingly, for all legal intents and purposes, Sansaet
stood as co-accused and he could be discharged as state witness. It is of no moment

61

that he was charged separately from his co-accused. While Section 9 of Rule 119 of
the 1985 Rules of Criminal Procedure uses the word jointly, which was absent in the
old provision, the consolidated and joint trial has the effect of making the three
accused co-accused or joint defendants, especially considering that they are charged
for the same offense. In criminal law, persons indicted for the same offense and tried
together are called joint defendants.

from the information charging him and two others with the crime of estafa. The trial
court found that he was not the most guilty as, being a poor and ignorant man, he
was easily convinced by his two co-accused to open the account with the bank and
which led to the commission of the crime.
On appeal, this Court held that the finding of respondent appellate court that
Lugtu was just as guilty as his co-accused, and should not be discharged as he did
not appear to be not the most guilty, is untenable. In other words, the Court took into
account the gravity or nature of the acts committed by the accused to be discharged
compared to those of his co-accused, and not merely the fact that in law the same or
equal penalty is imposable on all of them.

As likewise submitted therefor by Mr. Justice Francisco along the same vein,
there having been a consolidation of the three cases, the several actions lost their
separate identities and became a single action in which a single judgment is
rendered, the same as if the different causes of action involved had originally been
joined in a single action.[29]

Eventually, what was just somehow assumed but not explicitly articulated found
expression in People vs. Ocimar, et al.,[36] which we quote in extenso:

Indeed, the former provision of the Rules referring to the situation (w)hen two or
more persons are charged with the commission of a certain offense was too broad
and indefinite; hence the word joint was added to indicate the identity of the charge
and the fact that the accused are all together charged therewith substantially in the
same manner in point of commission and time. The word joint means common to two
or more, as involving the united activity of two or more, or done or produced by two or
more working together, or shared by or affecting two or more. [30] Had it been intended
that all the accused should always be indicted in one and the same information, the
Rules could have said so with facility, but it did not so require in consideration of the
circumstances obtaining in the present case and the problems that may arise from
amending the information.After all, the purpose of the Rule can be achieved by
consolidation of the cases as an alternative mode.

Ocimar contends that in the case at bar Bermudez does not satisfy the conditions for
the discharge of a co-accused to become a state witness. He argues that no accused
in a conspiracy can lawfully be discharged and utilized as a state witness, for not one
of them could satisfy the requisite of appearing not to be the most guilty. Appellant
asserts that since accused Bermudez was part of the conspiracy, he is equally guilty
as the others.
We do not agree. First, there is absolute necessity for the testimony of
Bermudez. For, despite the presentation of four (4) other witnesses, none of them
could positively identify the accused except Bermudez who was one of those who
pulled the highway heist which resulted not only in the loss of cash, jewelry and other
valuables, but even the life of Capt. Caeba, Jr. It was in fact the testimony of
Bermudez that clinched the case for the prosecution. Second, without his testimony,
no other direct evidence was available for the prosecution to prove the elements of
the crime.Third, his testimony could be, as indeed it was, substantially corroborated in
its material points as indicated by the trial court in its well-reasoned
decision. Fourth, he does not appear to be the most guilty. As the evidence reveals,
he was only invited to a drinking party without having any prior knowledge of the plot
to stage a highway robbery. But even assuming that he later became part of the
conspiracy, he does not appear to be the most guilty. What the law prohibits is that
the most guilty will be set free while his co-accused who are less guilty will be sent to
jail. And by most guilty we mean the highest degree of culpability in terms of
participation in the commission of the offense and not necessarily the severity of the
penalty imposed. While all the accused may be given the same penalty by reason of
conspiracy, yet one may be considered least guilty if We take into account his degree
of participation in the perpetration of the offense. Fifth, there is no evidence that he
has at any time been convicted of any offense involving moral turpitude.

2. We have earlier held that Sansaet was a conspirator in the crime of

falsification, and the rule is that since in a conspiracy the act of one is the act of all,
the same penalty shall be imposed on all members of the conspiracy. Now, one of the
requirements for a state witness is that he does not appear to be the most guilty.
[31]
not that he must be the least guilty [32] as is so often erroneously framed or
submitted. The query would then be whether an accused who was held guilty by
reason of membership in a conspiracy is eligible to be a state witness.
To be sure, in People vs. Ramirez, et al.[33] we find this obiter:
It appears that Apolonio Bagispas was the real mastermind. It is believable that he
persuaded the others to rob Paterno, not to kill him for a promised fee. Although he
did not actually commit any of the stabbings, it was a mistake to discharge Bagispas
as a state witness. All the perpetrators of the offense, including him, were bound in a
conspiracy that made them equally guilty.
However, prior thereto, in People vs. Roxas, et al.,[34] two conspirators charged
with five others in three separate informations for multiple murder were discharged
and used as state witnesses against their confederates. Subsequent thereto, in
Lugtu, et al. vs. Court of Appeals, et al.,[35] one of the co-conspirators was discharged

xxx

62

Thus, We agree with the observations of the Solicitor General that the rule on the
discharge of an accused to be utilized as state witness clearly looks at his actual and
individual participation in the commission of the crime, which may or may not have
been perpetrated in conspiracy with the other accused. Since Bermudez was not
individually responsible for the killing committed on the occasion of the robbery
except by reason of conspiracy, it cannot be said then that Bermudez appears to be
the most guilty. Hence, his discharge to be a witness for the government is clearly
warranted. (Italics ours.)

Prosecutor Claudio A. Nistal; Teofilo Gelacio, private complainant who initiated the
criminal cases through his letter-complaint; Alberto Juvilan of the Sangguniang Bayan
of San Fernando, Agusan del Sur, who participated in the resolution asking their
Provincial Governor to file the appropriate case against respondent Paredes, and
Francisco Macalit, who obtained the certification of non-arraignment from Judge Ario.
On the final requirement of the Rules, it does not appear that respondent
Sansaet has at any time been convicted of any offense involving moral
turpitude. Thus, with the confluence of all the requirements for the discharge of this
respondent, both the Special Prosecutor and the Solicitor General strongly urge and
propose that he be allowed to testify as a state witness.

The rule of equality in the penalty to be imposed upon conspirators found guilty
of a criminal offense is based on the concurrence of criminal intent in their minds and
translated into concerted physical action although of varying acts or degrees of
depravity. Since the Revised Penal Code is based on the classical school of thought,
it is the identity of the mens rea which is considered the predominant consideration
and, therefore, warrants the imposition of the same penalty on the consequential
theory that the act of one is thereby the act of all.

This Court is not unaware of the doctrinal rule that, on this procedural aspect,
the prosecution may propose but it is for the trial court, in the exercise of its sound
discretion, to determine the merits of the proposal and make the corresponding
disposition. It must be emphasized, however, that such discretion should have been
exercised, and the disposition taken on a holistic view of all the facts and issues
herein discussed, and not merely on the sole issue of the applicability of the attorneyclient privilege.

Also, this is an affair of substantive law which should not be equated with the
procedural rule on the discharge of particeps criminis. This adjective device is based
on other considerations, such as the need for giving immunity to one of them in order
that not all shall escape, and the judicial experience that the candid admission of an
accused regarding his participation is a guaranty that he will testify truthfully. For
those reasons, the Rules provide for certain qualifying criteria which, again, are based
on judicial experience distilled into a judgmental policy.

This change of heart and direction respondent Sandiganbayan eventually

assumed, after the retirement of two members of its Second Division [37]and the
reconstitution
thereof. In
an
inversely
anticlimactic
Manifestation
and
Comment [38] dated June 14, 1995, as required by this Court in its resolution on
December 5, 1994, the chairman and new members thereof [39] declared:

III
4) That the questioned Resolutions of December 22, 1993 and March 7, 1994 upon
which the Petition for Certiorari filed by the prosecution are based, was penned by
Associate Justice Narciso T. Atienza and concurred in by the undersigned and
Associate Justice Augusto M. Amores;

The Court is reasonably convinced, and so holds, that the other requisites for
the discharge of respondent Sansaet as a state witness are present and should have
been favorably appreciated by the Sandiganbayan.
Respondent Sansaet is the only cooperative eyewitness to the actual
commission of the falsification charged in the criminal cases pending before
respondent court, and the prosecution is faced with the formidable task of
establishing the guilt of the two other co-respondents who steadfastly deny the
charge and stoutly protest their innocence. There is thus no other direct evidence
available for the prosecution of the case, hence there is absolute necessity for the
testimony of Sansaet whose discharge is sought precisely for that purpose. Said
respondent has indicated his conformity thereto and has, for the purposes required by
the Rules, detailed the substance of his projected testimony in his Affidavit of
Explanations and Rectifications.

5) That while the legal issues involved had been already discussed and passed upon
by the Second Division in the aforesaid Resolution, however, after going over the
arguments submitted by the Solicitor-General and re-assessing Our position on the
matter, We respectfully beg leave of the Honorable Supreme Court to manifest that
We are amenable to setting aside the questioned Resolutions and to grant the
prosecutions motion to discharge accused Generoso Sansaet as state witness, upon
authority of the Honorable Supreme Court for the issuance of the proper Resolution to
that effect within fifteen (15) days from notice thereof.
WHEREFORE, the writ of certiorari prayed for is hereby granted SETTING
ASIDE the impugned resolutions and ORDERING that the present reliefs sought in
these cases by petitioner be allowed and given due course by respondent
Sandiganbayan.

His testimony can be substantially corroborated on its material points by

reputable witnesses, identified in the basic petition with a digest of their prospective
testimonies, as follows: Judge Ciriaco C. Ario, Municipal Circuit Trial Court in San
Francisco, Agusan del Sur; Provincial Prosecutor and Deputized Ombudsman

SO ORDERED.

63

divulged to "strangers" or outsiders can scarcely be considered a confidential

communication between attorney and client. See In re Grand Jury Proceedings, 5
Cir., 1975,517 F.2d 666; United States v. Blackburn, 5 Cir., 1971, 446 F.2d 1089,
1091; International Business Machine Corp. v. Sperry Rand Corp., D.Del., 1968,44
F.R.D. 10, 12; United States v. United Shoe Machinery Corp., D.Mass., 1950, 89
F.Supp. 357, 358; 8 Wigmore on Evidence 2311 (McNaughton Rev.1961).
Therefore, this communication is not protected by the attorney-client privilege. But
even if it appeared that the communication in question were otherwise privileged (i.
e., that the communication was considered confidential despite the presence of a
stranger), the testimony was nonetheless admissible. The conversations in question
dealt with plans to commit perjury so as to hide the criminal activity of appellant and
others. It is beyond dispute that the attorney-client privilege does not extend to
communications regarding an intended crime. See 8 Wigmore on Evidence 2298
(McNaughton Rev.1961) and cases cited; Pollock v. United States, 5 Cir., 1953, 202
F.2d 281, 286. The policy underlying the attorney-client privilege is to promote the
administration of justice. It would be a perversion of the privilege to extend it so as to
protect communications designed to frustrate justice by committing other crimes to
conceal past misdeeds.

518 F.2d 972

UNITED STATES of America, Plaintiff-Appellee,
v.
Ana Luisa GORDON-NIKKAR, Defendant-Appellant.
1
Appellant, Ana Gordon-Nikkar, was convicted after a trial by jury on all three
counts of an indictment charging her with conspiracy to possess with intent to
distribute approximately four kilograms of cocaine, and the substantive charges of
possession with intent to distribute and distribution of the cocaine. 21 U.S.C.
841(a)(1), 846. On appeal, appellant contends her conviction should be reversed
because the district court permitted a Government witness, Brenda Marchand, to
give testimony regarding allegedly privileged conversations between appellant's
attorney and his clients, and because the trial court denied appellant's motion to
quash the jury panel on account of the exclusion of resident aliens from grand and
petit juries. We affirm.

II.
4

I.

Appellant next argues that the trial court erroneously refused to quash the petit
jury venire as requested on the ground that the exclusion therefrom of resident
aliens deprived her of her right to trial before a jury representing a fair crosssection of the community. The right and duty to act as grand or petit jurors is
presently reserved to citizens. "Any citizen of the United States . . . is competent
to serve as a grand or petit juror." 28 U.S.C. 1861 (emphasis added). See also
28 U.S.C. 1865. This statutory mandate serves to exclude otherwise eligible
resident aliens from jury service. All defendants at the trial below were of Cuban
origin. Defense counsel alleged to the trial court that in Miami, where the trial took
place, 30 per cent of the city's population are resident aliens, mostly of Cuban
descent. It is contended that the exclusion of otherwise eligible resident aliens
under these circumstances deprived appellant of a fair trial.

2
Brenda Marchand was charged as a codefendant with the crimes for which
appellant was convicted. Marchand subsequently pled guilty on Count I of the
indictment and testified at trial for the Government. Prior to entering her plea,
Marchand had two meetings in the office of appellant's attorney, Mr.
Estrumsa.1 On each of these occasions, several of the codefendants were
present. Marchand, however, was not a client of Estrumsa, and it is unclear
whether all the other persons in these meetings were Estrumsa's clients. Of the
two conversations related by Marchand, the second was the subject of thorough
cross-examination by Estrumsa. The second conversation involved Estrumsa's
alleged recommendation that Marchand leave the country and go to Venezuela.
On redirect, the Government inquired, over defense objection, into the substance
of the conversation during the first meeting. Marchand testified that at this
meeting the participants, at Mr. Estrumsa's suggestion, agreed to give perjured
cover-up testimony at trial to the effect that none of them had possessed the
cocaine, but instead merely happened to be at a party where the cocaine was
discovered.

5
It is true that the Supreme Court has held that the Sixth Amendment right to an
impartial jury encompasses a fundamental right to trial by a jury which is a truly
representative cross-section of the community. Taylor v. Louisiana, 419 U.S. 522,
95 S.Ct. 692, 42 L.Ed.2d 690 (1975); see Peters v. Kiff, 407 U.S. 493, 498, 92
S.Ct. 2163, 2166, 33 L.Ed.2d 83 (1972); Glasser v. United States, 315 U.S. 60,
86, 62 S.Ct. 457, 472, 86 L.Ed. 680 (1942).3 Despite this requirement, however, "it
has never been thought that federal juries must be drawn from a cross-section of
the total population without the imposition of any qualifications." United States v.
McVean, 5 Cir., 1971, 436 F.2d 1120, 1122, cert. denied, 404 U.S. 822, 92 S.Ct.
45, 30 L.Ed.2d 50 (emphasis in original). Thus, if citizenship is a reasonable
qualification for jury duty and resident aliens may properly be excluded from jury
service, no Sixth Amendment violation results from such an exclusion. The "truly
representative cross-section" requirement encompasses only individuals qualified

The principal issue in this regard is whether the statements in attorney Estrumsa's
office were protected by the attorney-client privilege.2 There were at least five persons
present at Estrumsa's office on this occasion; at least one of the persons, Brenda
Marchand, and perhaps others, were not clients of Mr. Estrumsa. A communication

64

to serve as jurors. Our inquiry is thus whether the Government can constitutionally
impose citizenship as a qualification for jury service.

foreign power, have so assimilated our societal and political mores that an equal
reliance could be placed on their performing as well as citizens the duties of jurors in
our judicial system.
9
The nature of the operation of juries makes it apparent that persons unfit for jury
service can work a great deal of harm, through inability or malice, to efficiency
and fairness. Jury deliberations are perhaps the most secret form of decisionmaking in the nation; the means of persuasion used by jurors on each other are
never revealed. A single juror who failed to understand the import of the evidence
being presented or who lacked any concern for the fairness of the outcome could
severely obstruct or distort the course of justice. A single persuasive and
unprincipled juror could even direct the course of justice into channels deliberately
chosen for their deleterious effect on this country. We conclude, therefore, that the
state has a compelling interest in the restriction of jury service to those who will be
loyal to, interested in, and familiar with, the customs of this country.

6
In a series of cases as recent as 1973, the Supreme Court has held that aliens
are protected by the Equal Protection Clause of the Fourteenth Amendment, and
that classifications based on alienage are inherently suspect and subject to close
judicial scrutiny. In re Griffiths, 413 U.S. 717, 93 S.Ct. 2851, 37 L.Ed.2d 910
(1973); Sugarman v. Dougall, 413 U.S. 634, 93 S.Ct. 2842, 37 L.Ed.2d 853
(1973); Graham v. Richardson, 403 U.S. 365, 91 S.Ct. 1848, 29 L.Ed.2d 534
(1971); Takahashi v. Fish and Game Commission,334 U.S. 410, 68 S.Ct. 1138, 92
L.Ed. 1478 (1948); cf. Truax v. Raich, 239 U.S. 33, 36 S.Ct. 7, 60 L.Ed. 131
(1915); Yick Wo v. Hopkins, 118 U.S. 356, 6 S.Ct. 1064, 30 L.Ed. 220 (1886).
While all the previous cases involved challenges based on the Equal Protection
Clause of the Fourteenth Amendment to discrimination by states on the basis of
alienage, the same analysis is applicable to the Due Process Clause of the Fifth
Amendment, which relates to classifications by the Federal Government. See
Bolling v. Sharpe, 347 U.S. 497, 74 S.Ct. 693, 98 L.Ed. 884 (1953). If a
classification is invalid under the Equal Protection Clause of the Fourteenth
Amendment, it is also invalid under the Due Process Clause of the Fifth
Amendment. Johnson v. Robinson,415 U.S. 361, 363 n. 4, 94 S.Ct. 1160, 1164 n.
4, 39 L.Ed.2d 289 (1974); see Richardson v. Belcher, 404 U.S. 78, 81, 92 S.Ct.
254, 257, 30 L.Ed.2d 231 (1971). Because alienage is a suspect classification,
the Federal Government must therefore demonstrate that it has a compelling
state interest in confining the selection of jurors to those who are citizens.

10
Resident aliens by definition have not yet been admitted to citizenship. Until they
become citizens, they remain in most cases legally bound to the country of their
origin. Nothing is to prevent their return to that country, or a move to yet a third
nation. It is true that many, if not most, aliens do intend to become citizens, and
that their loyalty could probably be counted upon. However, it is the process of
filing for citizenship that establishes that loyalty; any attempt at prior screening
would undercut the efficiency and significance of existing procedures. Therefore,
although the presumption that all aliens owe no allegiance to the United States is
not valid in every case, no alternative to taking citizenship for testing allegiance
can be devised, so that we conclude that the classification is compelled by
circumstances, and that it is justifiable.

7
The precise issue before this court was considered in Perkins v. Smith, D.Md.,
1974, 370 F.Supp. 134 (three-judge court), appeal docketed,43 U.S.L.W. 3001
(U.S., June 21, 1974) (Docket No. 73-1915).4 In Perkins, the court held that there
was a compelling state interest in restricting jury service to citizens, and upheld
the federal statutory scheme excluding non-citizens from jury service. We agree
with the court's conclusion that there was a compelling interest "in ensuring that
persons who serve as jurors are personally committed to the proper application
and enforcement of the laws of the United States" which therefore justifies the
exclusion of aliens. Perkins v. Smith, supra, 370 F.Supp. at 142 (concurring
opinion). The following discussion from Perkins is pertinent:

11
370 F.Supp. at 138.
12
While we are satisfied that the Government has a compelling state interest
sufficient to uphold the statute as constitutional, there is another reason why
aliens may be excluded from federal juries. Under Article I, section 8, clause 4 of
the Constitution, Congress is granted the power "to establish an uniform Rule of
Naturalization." This specific grant of authority vests in Congress the plenary,
unqualified power to determine which aliens shall be admitted to this country, the
period they may remain, and the terms and conditions of their naturalization.
Graham v. Richardson, supra, 403 U.S. at 377, 91 S.Ct. at 1854; Takahashi v.
Fish and Game Comm'n, supra, 334 U.S. at 419, 68 S.Ct. at 1142; Hines v.
Davidowitz, 312 U.S. 52, 66, 61 S.Ct. 399, 403, 85 L.Ed. 581 (1941); see also
Harisiades v. Shaughnessy,353 U.S. 72, 77 S.Ct. 618, 1 L.Ed.2d 652 (1957);
United States ex rel. Knauff v. Shaughnessy, 338 U.S. 537, 70 S.Ct. 309, 94 L.Ed.
317 (1950).

In maintaining the jury system as "the very palladium of free government" the states
logically can anticipate that native-born citizens would be conversant with the social
and political institutions of our society, the customs of the locality, the nuances of local
tradition and language. Likewise naturalized citizens, who have passed through the
citizenship classes sponsored by the Immigration and Naturalization Service, have
demonstrated a basic understanding of our form of government, history and
traditions. There is no corresponding basis for assuming that resident aliens, who
owe allegiance not to any state or to the federal government, but are subjects of a

13
The plenary authority to admit or exclude aliens necessarily permits Congress to
place certain conditions on an alien's right of entry or continued residence.

65

Silverman v. Rogers, 1 Cir., 1970, 437 F.2d 102, 107, cert. denied, 402 U.S. 983,
91 S.Ct. 1667, 29 L.Ed.2d 149; see Perdido v. I.N.S., 5 Cir., 1969, 420 F.2d 1179,
1181. While resident aliens are entitled to the full protection of this country's laws,
until they obtain and maintain citizenship by naturalization they are subject to the
plenary authority of Congress' immigration and naturalization powers. Carlson v.
Landon, 342 U.S. 524, 534, 72 S.Ct. 525, 531, 96 L.Ed. 547 (1952). Thus, while
most state classifications based on alienage are inherently suspect, Graham v.
Richardson, In re Griffiths, Sugarman v. Dougall, Takahashi v. Fish and Game
Comm'n, supra, the same is not true of all such federal classifications where
Congress' plenary authority in the field of immigration is involved.

3
We assume, without deciding, that resident aliens of Cuban descent in Miami
constitute an "identifiable segment" or a "distinctive group" in that community. Cf.
Taylor v. Louisiana, supra
4
In Carter v. Jury Commission, 396 U.S. 320, 332, 90 S.Ct. 518, 525, 24 L.Ed.2d 549
(1970), the Supreme Court in dictum commented that states are "free to confine the
selection (of jurors) to citizens . . . ."

14
Although Congress may not single out aliens for discriminatory treatment in
matters not related to the furtherance of its naturalization responsibilities, Ramos
v. United States Civil Service Comm'n, D.P.R., 1974,376 F.Supp. 361, 366 (threejudge court), Congress has the power to define reasonable prerequisites to an
alien's exercise of the rights and duties of citizenship. We believe that preventing
resident aliens from serving as jurors is rationally related to Congress' legitimate
power to define the extent of resident aliens' rights prior to obtaining citizenship.
Recently, the Supreme Court stated that a state may deny to aliens the
opportunity to participate in the electoral process because of a "State's historical
power to exclude aliens from participation in its democratic political institutions"
and its "constitutional responsibility for the establishment and operation of its own
government," Sugarman v. Dougall, supra, 413 U.S. at 648, 93 S.Ct. at 28502851. If a state has the inherent power to deprive aliens of the right to vote,
Congress, with its broad powers in dealing with aliens, may validly require
citizenship as a prerequisite to service on federal juries. Cf. Ramos v. United
States Civil Service Comm'n, supra, 376 F.Supp. at 367 n. 9; Perkins v. Smith,
supra, 370 F.Supp. at 139 n. 1 (concurring opinion). Since Congress may validly
exclude aliens from jury service, appellant was deprived of no Sixth Amendment
right by the failure to have resident aliens included in the grand or petit jury
venires.

UNITED STATES of America, Plaintiff-Appellee,

v.
Robert McPARTLIN et al., Defendant-Appellants.

As Amended on Denial of Rehearing and Rehearing En Banc April 23, 1979.

TONE, Circuit Judge.
The appellants were convicted, in a nine-week jury trial, of conspiring to violate the
wire and travel fraud statutes and of substantive violations of those statutes.
The indictment charged that defendant Frederick B. Ingram, 1 chairman of the board of
the Louisiana-based Ingram Corporation, had paid defendant Robert F. McPartlin, an

15

Illinois legislator, defendant Valentine Janicki, a trustee for the Metropolitan Sanitary

Affirmed.

District, and others more than $900,000 to secure for the Ingram Corporation a multi-

Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al.,
5 Cir., 1970, 431 F.2d 409, Part I
1
The defense does not contend that Marchand's presence in the attorney's office
during the conversations was a deliberate and surreptitious invasion by a government
agent into the legal camp of the defense. Cf. Hoffa v. United States, 385 U.S. 293, 87
S.Ct. 408, 17 L.Ed.2d 374 (1966)
2
While the Government contended that the statements were not privileged, it also
defended inquiry into the conversation not touched on during cross-examination as
"completion of an area only partially explored on cross-examination." United States v.
Koss, 2 Cir., 1974, 506 F.2d 1103, 1113

million dollar sludge-hauling contract with the District. Defendants Franklin H. Weber,
a businessman, and Edwin T. Bull, president of a towing company, were alleged to be
intermediaries through whom many of the payments were made. William J. Benton,
vice president of Ingram Corporation, was an unindicted co-conspirator who played a
major role in the conspiracy and testified as a witness for the prosecution. The
defendants were convicted of numerous violations of the Travel Act,

66

[595 F.2d 1328]

18 U.S.C. 1952, and the Wire, Radio, Television Fraud Act, 18 U.S.C. 1343, and
of conspiring to violate those acts in violation of 18 U.S.C. 371. The jury acquitted
three other defendants, E. Bronson Ingram, brother of Frederick B. Ingram and an
officer of Ingram Corporation, Chester Majewski, a Metropolitan Sanitary District
trustee, and Bart T. Lynam, General Supervisor of the Sanitary District.2

hauling contract to be awarded to Ingram Corporation and one of its subsidiaries, and
later bribed the same officials to secure favorable treatment under the contract and
modifications of the contract. The details were as follows:
When the District solicited bids on the sludge-hauling project, defendant Bull assisted

The defendants urge as grounds for reversal the district court's denial of motions for

Frank Oberle, an employee of Ingram Contractors, Inc., a wholly owned subsidiary of

severance, a ruling on the alleged withholding by the prosecution of evidence

Ingram Corporation, in investigating the new proposal. During the week before the

favorable to the defendants until the beginning of the trial, rulings admitting and

bids were to be submitted, Bull visited Robert Howson, a vice president of Ingram

excluding evidence, certain instructions to the jury, and other alleged trial errors. In

Contractors, Inc., in New Orleans, Louisiana, and told Howson that if Ingram

this portion of the opinion the facts are stated and the issues arising from the denial of

Corporation expected to secure the contract, it would have to make a "political

severance are decided. Judge Pell and Judge Sprecher have written, and I concur in,

contribution." Howson responded that he was not in that sort of business, but then

the portions of the opinion dealing with the other issues.

took Bull to meet William J. Benton, vice president of Ingram Corporation and
president of Ingram Contractors, Inc.

The Facts

Ingram Corporation, Burlington Northern, Inc., and the Atchison, Topeka and Santa

The Sanitary District is a municipal corporation with primary responsibility for

Fe Railway Company were the leading contenders among those submitting bids on

disposing of sewage from Chicago and surrounding areas. The District's business is

March 19, 1971. To negotiate with these three bidders, the Sanitary District

governed by an elected Board of Trustees3 and managed by a professional staff,

established a committee, which met with representatives of the bidders for the first

which from time to time makes recommendations to the Board concerning major

time on March 23, 1971.

undertakings of the District.

That evening Bull, Oberle, and Benton met in Benton's hotel room, where they were

The Sanitary District operates a sewage treatment plant in Stickney, Illinois. Until

later joined by defendant Weber. After Bull had introduced Weber to Benton, Bull and

1971 the sludge produced as a by-product was disposed of by pumping it into nearby

Oberle left the room. Weber then told Benton that if Ingram Corporation wanted the

lagoons. Early that year, because the lagoons were rapidly being filled and efforts to

sludge-hauling contract, it

clean them had failed, the District announced plans to have the sludge transported to

[595 F.2d 1329]

would have to make a $250,000 "political contribution." Benton replied that he would
have to get approval from his superiors. After agreeing to meet Benton the next day,
Weber left.

Fulton County, Illinois, about 160 miles southwest of Stickney, and solicited bids on
the project, which were due on March 19, 1971.
Viewed in the light most favorable to the prosecution, the evidence showed that
Benton, acting with the knowledge and complicity of Frederick Ingram and through
intermediaries Bull and Weber, bribed McPartlin and Janicki to cause the sludge-

67

Benton then telephoned defendant Frederick Ingram to inform him of Weber's

On April 6, 1971, Weber telephoned Benton, asking for $25,000 in cash immediately

"political contribution" proposal. Ingram agreed, provided that the contribution could

to secure the cooperation of three Sanitary District staff members. When Benton

be added to the cost of the contract.

protested that he could not deliver $25,000 cash on such short notice, Weber
suggested that Ingram Corporation issue a check in that amount to Bull Towing

On March 24, 1971, Benton again met with Bull, who expressed his belief that if the

Company, which Benton caused to be done the next day. On April 8, 1971, Edwin Bull

Ingram Corporation accepted Weber's proposal, it would get the contract. Bull also

deposited the Ingram check in the account of Bull Towing Company and, at the same

told Benton that if the corporation did get the contract, he wanted $100,000 in addition

time, withdrew $25,000 in cash from the account.

to anything it paid Weber. At another meeting later in the day, Weber asked Benton to
open an account at a Chicago bank to demonstrate Ingram Corporation's "good faith."

The Sanitary District requested the three bidders on the sludge-hauling contract to

That same day, Benton opened an account at the First National Bank of Chicago.

submit new bids by April 15, 1971. Santa Fe declined. Burlington Northern submitted
a revised bid of $18,300,000. Oberle submitted Ingram Corporation's revised bid of

The following week, Weber called Benton and told him that Burlington Northern, Inc.

$16,990,000, after which he returned to his hotel room, where he received a

had offered to make a $295,000 political contribution. According to Weber, it was

telephone call from either Benton or Weber. The caller instructed him to go to the bar

therefore necessary for Ingram Corporation to raise its contribution to $450,000,

at the Continental Plaza Hotel to meet defendant Janicki, which Oberle did. 4 At the

including a $150,000 cash payment before the contract was awarded. Again Benton

meeting in the bar Janicki told Oberle to raise Ingram's revised bid to $17,990,000.

consulted Frederick Ingram, who again agreed on condition that the contribution

Oberle then returned to his hotel room and telephoned Benton for advise. Benton

could be added to the contract price. Benton communicated Ingram Corporation's

instructed Oberle to attend the Sanitary District negotiating committee meeting

approval to Weber, but said that the corporation could not raise $150,000 in cash on

scheduled for that afternoon. While attending the meeting, Oberle received telephone

such short notice. Weber replied that some of the $150,000 had to be paid by April 3,

instructions from Benton to raise the Ingram bid by $1,000,000 to $17,990,000.

1971.

Oberle did so.

On April 3, 1971, Weber and McPartlin went to Benton's Chicago hotel room, where

On April 22, 1971, the Sanitary District Board of Trustees voted to award the contract

Weber introduced McPartlin to Benton as the man who handled all political

to Ingram Corporation. Between that date and May 12, 1971, a contract was drafted

contributions for the Democratic Party in Illinois. McPartlin assured Benton that

by members of the Sanitary District staff and Ingram Corporation representatives,

Ingram Corporation would receive at least $21,500,000 in total revenue from the

including John Donnelly, president of Ingram Barge Company, the Ingram Corporation

sludge-hauling contract. Benton gave McPartlin $75,000 in cash, including several

subsidiary that would transport the sludge under the contract.

one thousand dollar bills. On April 6, 1971, Weber deposited nine one thousand dollar
[595 F.2d 1330]
The staff insisted on a liquidated damages clause authorizing the District to prescribe
the amount of sludge to be transported in any 24-hour period and providing that
Ingram Corporation would be assessed a penalty for each ton of sludge not
transported, as prescribed, in any 24-hour period. Donnelly, after initially refusing to
agree to the provision, discussed it with Benton, who told him to agree to it. Only after

bills in the account of one of his defunct corporations, Illinois Southern Materials.

68

talking with Frederick Ingram, however, did Donnelly accede to inclusion of the
liquidated damages clause.

Donnelly signed this contract but refused to sign the other contract, under which
Ingram Corporation would agree to pay Bull $.17 per ton for transporting sludge from

The contract provided that Ingram Corporation would construct additions to the

Stickney to the Lemont Bridge. Ten cents per ton were intended as payment for actual

treatment facilities at Stickney and an unloading dock and pump station in Fulton

towing services; the other seven cents per ton were intended as payment for

County, for which work the Sanitary District was to pay $733,000. Ingram Corporation

consulting services and engineering and feasibility studies that Bull had allegedly

was also to construct a pipeline over property not owned by the District, for which

performed for Ingram Corporation. The second contract also provided for payment to

construction the District agreed to pay $68,000 per month for 36 months, a total of

Bull of a $76,000 "finder's fee."5 Donnelly objected to the "finder's fee," questioned

$2,448,000. The contract also provided that Ingram Corporation would receive $1.802

whether any consulting services or studies that Bull provided to Ingram Corporation

per ton of sludge hauled from Stickney to Fulton County. The parties estimated that

were worth $560,000, and questioned Bull's competence as a barge operator. Out of

over the life of the contract 8,000,000 tons of sludge would be transported.

Bull's presence, Benton told Donnelly that if Bull did not participate in the sludgehauling contract, there would be no contract. Donnelly still refused to sign the second

On May 19, 1971, Weber and Benton met in New Orleans to discuss ways of

Ingram-Bull contract, but permitted Benton to sign it on behalf of Ingram Barge

increasing Ingram Corporation's total revenue under the contract to the $21,500,000

Corporation as well as Ingram Corporation.

that McPartlin had assured Benton would be forthcoming. Weber told Benton that
Janicki and he thought that the corporation could receive an additional $2,100,000 by

On August 15, 1971, Benton, Weber, and McPartlin met in Chicago to discuss further

billing the Sanitary District a second time for the construction of the pipeline and the

payments. Benton agreed to provide $146,000 in two installments. On August 18,

construction in Fulton County.

1971, Oscar Hardison, comptroller of Ingram Corporation, delivered $30,000 in cash

to Weber at O'Hare Airport in Chicago. On August 28, 1971, another Ingram

On June 26, 1971, Weber told Benton that Janicki needed $21,250 to pay off three

executive, G. Glen Martin, gave Weber $116,000, which

District staff members. Ingram issued a check for that amount to Southwest
[595 F.2d 1331]
consisted of $46,000 in cash and $70,000 in checks payable to Weber's defunct
corporations.

Expressway, another of Weber's defunct corporations.

On July 27, 1971, Weber issued a $20,000 check to Bull Towing Company. Edwin Bull
deposited the check and, at the same time, withdrew $20,000. The next day, the

Ingram Barge Corporation began transporting sludge six days later than the date it

Illinois Commerce Commission granted Ingram Corporation's request for a certificate

was required to do so under the sludge-hauling contract; whereupon the Sanitary

of convenience and necessity.

District assessed liquidated damages of $30,000 under the liquidated damages

clause. In early October, 1971, Benton, Weber, and Janicki held a meeting in Chicago

On August 14, 1971, Edwin Bull negotiated two contracts with Ingram Corporation. In

to discuss this matter, following which the Sanitary District withdrew the assessment.

one of them Ingram Corporation agreed to rent barges from Bull Towing Company to

After the meeting, Weber told Benton that Janicki wanted $100,000 by the end of

transport sludge from the Lemont Bridge over the Illinois River to Fulton County.

1971. When informed by Benton of this request, however, Frederick Ingram refused,

69

saying that no more payments would be made until the Sanitary District began

dollar contract by paying more than $300,000 to Chicago officials.6Ingram testified

making payments on the pipeline, as Weber had promised it would.

that he protested against paying the bribes, but reluctantly agreed when Benton
informed him that if he refused to pay, the Sanitary District would not pay the

On December 15, 1971, Weber telephoned Benton to tell him that the Sanitary

additional $2,100,000 for the pipeline and would use the liquidated damages clause

District would issue a check to Ingram Corporation for $1,000,000, as partial payment

to penalize Ingram Corporation.

on the pipeline. When Benton arrived at Janicki's office the following day, however,
Janicki disclaimed any knowledge of the $1,000,000 check. Benton threatened to

On March 10, 1972, Weber told Benton that if Ingram Corporation could deliver

"jerk the rug" from under everyone in Chicago.

$100,000 before the end of the month, the Sanitary District Board of Trustees would
approve the purchase of the pipeline. One-fourth of this amount was delivered, but

Upon learning of Benton's threat, Weber informed Oberle of it and asked Oberle to do

the balance was not, and the trustees failed to approve the purchase. At a July 6,

whatever he could about Benton. Oberle telephoned defendant Frederick Ingram to

1972 meeting between Benton, Janicki, and Weber, however, Janicki promised that

tell him of Benton's threat. Ingram expressed no surprise, simply thanked Oberle for

the trustees would take some action on the pipeline in the month of July. As promised,

the information and hung up, and later in the day met with Benton to discuss the

the board of trustees authorized the staff to negotiate with Ingram for the purchase of

matter. At the meeting they agreed that Benton would continue to represent Ingram's

the pipeline on July 20, 1972.

interest in dealing with the Chicago officials.

On August 23, 1972, Benton gave McPartlin $80,000 in cash. McPartlin told Benton
On December 21, 1971, Weber, Janicki, and Benton met in Benton's hotel room in

that the trustees would approve the purchase

Chicago. Benton apologized for his threat. He then gave Weber two checks payable
[595 F.2d 1332]
of the pipeline in September, but Ingram would have to pay the balance of its
contribution, about $95,000, in September also.

to Weber's defunct corporations in the amount of $50,070. This payment brought

Ingram's total contribution to $317,320, leaving a balance of $132,680 on the
$450,000 commitment.

Between August and November, 1972, Ingram Corporation and the Chicago officials
negotiated a new agreement. Ingram would pay $750,000 over a three year period,

In February, 1972, Weber told Benton that because of the difficulties in getting the

and the Sanitary District would purchase the pipeline, modify the liquidated damages

Sanitary District to pay the additional $2,100,000 for the pipeline, Ingram Corporation

clause, and extend the sludge-hauling contract for three years at a higher price per

would have to increase its contribution to $620,000. On February 17, 1972, Weber

ton.

asked Benton for $100,000 in cash immediately. When Benton told defendant Ingram
of the request, Ingram responded that he would investigate ways of raising the

On December 28, 1972, representatives of the Ingram companies and the District

money. On February 28, 1972, Benton delivered $100,000 to Mrs. Valentine Janicki.

signed an agreement covering the pipeline purchase that was to be effective only if
the parties also signed two other agreements: a retroactive modification of the

At trial, defendant Frederick Ingram contended that he did not learn until this
February, 1972 meeting with Benton that his company had secured a multi-million

70

liquidated damages clause and a three year extension of the sludge-hauling contract.

During his second appearance, Henry Weber testified that he had been mistaken

On January 26, 1973, the additional agreements were signed.

when he said that he had only visited Frankfurt and Munich and that he had also
visited Vaduz.

After the signing, Benton returned to his hotel room and telephoned Janicki to tell him
that his money was ready. Janicki sent his secretary to pick up a package containing

On December 9, 1975, Franklin Weber's attorney telephoned one of the government's

$50,000 in cash. Benton then telephoned Weber to tell him to come and pick up the

attorneys in this case and informed him of what the government attorney already had

balance of the money due. When Weber arrived, Benton gave him $95,000 in cash

reason to suspect, namely, that Franklin Weber had possession of the remaining

and nine letters of credit drawn on a Swiss bank in the amount of $70,000 each.

letters of credit.

One of the letters of credit matured in June, 1973, and each of the others matured

Additional details and procedural matters necessary to an understanding of the

sequentially at six-month intervals. Weber admitted negotiating the first four letters at

various issues to be decided will be stated at appropriate places in the opinion.

the Swiss bank in July, 1973, December, 1973, June, 1974, and December, 1974. On
I.

each occasion, he purchased his plane ticket to Europe with cash, arranged for his
trip to Switzerland only after he arrived in Europe, and stopped in Toronto, Canada,

Severance

on the way back to the United States. On his last two trips, Weber telephoned Janicki
from Europe.

Before discussing the specific attacks on the district court's denial of severance,
Sometime before the fall of 1974 a federal grand jury commenced an investigation of

[595 F.2d 1333]

some general principles should be noted. The question of whether charges that have
been properly joined ought to be severed for trial is for the discretion of the trial judge,
whose decision will be reversed only upon a showing of clear abuse. United States v.
Tanner, 471 F.2d 128, 137 (7th Cir.), cert. denied, 409 U.S. 949, 93 S.Ct. 269, 34
L.Ed.2d 220 (1972). The defendant has the burden of showing prejudice, which is a
difficult one. Id. A denial of severance will rarely be reversed on review, Tillman v.
United States, 406 F.2d 930, 935 (5th Cir.), cert. denied, 395 U.S. 830, 89 S.Ct. 2143,
23 L.Ed.2d 742 (1969), and then only for the most "cogent reasons," United States v.
Kahn, 381 F.2d 824, 838 (7th Cir.), cert. denied, 389 U.S. 1015, 88 S.Ct. 591, 19
L.Ed.2d 661 (1967). There is, moreover, a strong policy in favor of joint trial "where
the charge against all the defendants may be proved by the same evidence and
results from the same series of acts." United States v. Cohen, 124 F.2d 164, 165 (2d
Cir.), cert. denied sub nom. Bernstein v. United States, 315 U.S. 811, 62 S.Ct. 796, 86
L.Ed. 1210 (1942). See also United States v. Echeles, 352 F.2d 892, 896 (7th Cir.
1965) recently quoted in United States v. Harris, 542 F.2d 1283, 1312 (7th Cir.), cert.
denied, 430 U.S. 934, 97 S.Ct. 1558, 51 L.Ed.2d 779 (1976).

the events surrounding the sludge-hauling contract. In May, 1975, the government
granted immunity to Benton.
In November, 1975, Weber sent his brother, Henry Weber, to Europe to negotiate the
fifth and sixth letters of credit, which matured in June, 1975, and December,
1975.8 Following his brother's instructions, Henry Weber did not proceed directly to
the drawee Swiss bank but went to a bank in Vaduz, Liechtenstein, to have that bank
present the letters to the Swiss bank.
On November 26, 1975, two weeks after his return from Liechtenstein, Henry Weber
appeared before the grand jury and testified that he had only visited Frankfurt and

In the case at bar all appellants assert error in the denial of their motions for

Munich. On December 3, 1975, the government called Henry Weber to appear a

severance. Frederick Ingram argues that the denial deprived him of evidence that

second time before the grand jury, this time asking Weber to bring his travel records.

71

that a defendant is not entitled to a severance merely because it would give him a
better chance of acquittal. See United States v. Tanner, supra, 471 F.2d at 137. Thus
antagonistic defenses do not require the granting of severance, United States v.
Hutul, 416 F.2d 607, 620 (7th Cir.), cert. denied, 396 U.S. 1007, 90 S.Ct. 573, 24
L.Ed.2d 504 (1970), even when one defendant takes the stand and blames his codefendant for the crime, United States v. Joyce, 499 F.2d 9, 21 (7th Cir.), cert.
denied, 419 U.S. 1031, 95 S.Ct. 512, 42 L.Ed.2d 306 (1974). Even when the
defendant who testified he was the victim of extortion had dealt directly with the
defendant alleged to have extorted the bribe, we sustained the denial of
severance. United States v. George, 477 F.2d 508 (7th Cir.), cert. denied, 414 U.S.
827, 94 S.Ct. 49, 38 L.Ed.2d 61 (1973).

would otherwise have been available. The other appellants, whom we shall call the
Illinois defendants, argue that they were prejudiced by the denial because Ingram and
his brother (whom the jury acquitted) defended on a ground antagonistic to the
defenses of their co-defendants and because of curtailment of cross-examination and
the spillover effect of evidence admitted only against Frederick Ingram. We turn first
to the argument of the Illinois defendants.

A. The Illinois Defendants

There may be cases, as we recognized in George, in which the conflict among

defendants is of such a nature that the "jury will unjustifiably infer that this conflict

1. Antagonistic Defenses

alone demonstrates that both are guilty." 477 F.2d at 515. This is not such a case.
The joinder did not result in the exclusion or admission of any evidence of

The Ingrams contended that the payments were made only because the Sanitary

consequence that would not have been excludable or admissible in separate trials.

District threatened to take action that would have resulted in financial disaster to

Nor was any argument made that could not properly have been made in such a

Ingram Corporation, and therefore neither of them had the "intent (to influence the

separate trial. There was no cognizable prejudice arising from antagonistic

performance of an official act) required by the Illinois bribery statute." United States v.

defenses.11

Peskin, 527 F.2d 71, 84 (7th Cir. 1975), cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50
L.Ed.2d 79 (1976). It was not necessary to this defense that the Illinois defendants

2. Curtailment of Cross-Examination

were guilty of extortion or received bribes, because it was possible that Benton,
through whom the corporation's communications with, and payments to, the Illinois

Janicki complains that cross-examination was curtailed because of the joinder when,

defendants were carried out, did not pass any of the money on but kept it all

during cross-examination of Benton, the trial judge delivered a general admonition

himself. Thus the Ingram defense was not necessarily antagonistic to the defenses

against repetitious cross-examination. Neither Janicki nor the other Illinois

of others, although it was possible, on the Ingrams' theory, that they were innocent

defendants, who adopt by reference his arguments on severance, show any prejudice

even if the others were guilty.

resulting from the admonition or point to any specific ruling curtailing their crossexamination. It was, moreover, entirely proper for the judge to attempt to forestall

Even if the defenses were to a degree antagonistic, however, it does not follow that

repetition.

there should have been two or more trials. One has no right to any tactical advantage
that would result if evidence that is admissible against him in either a joint or separate

3. Spillover Effect of Evidence Offered Against Frederick

trial might be unavailable in a separate trial. Cf. Brady v. Maryland, 373 U.S. 89, 90-

Ingram

91, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963).10 It is therefore the settled rule
[595 F.2d 1334]

72

Janicki also asserts that he was prejudiced by evidence offered against Frederick

he had made the payments in response to the threats Benton had reported to him,

Ingram showing that Ingram Corporation had bribed a Brazilian corporate official

because Ingram's account of events in issue differed materially from Benton's, and

between 1969 and 1971, because the conduct of the Brazilian was similar to that with

because the government's case hinged largely on Benton's testimony. Since Benton's

which Janicki was charged. The trial court instructed the jury to consider the evidence

diaries corroborated so much of his testimony, it was imperative from the standpoint

of the earlier bribe only as to Frederick Ingram's state of mind, but Janicki asserts that

of all defendants that an effort be made to discredit them.

this instruction was ineffective. We see no substantial risk that the jury would believe
that because a Brazilian corporate officer took a bribe from Ingram Corporation,

Such an effort was made, and Frederick Ingram and McPartlin cooperated in that

Janicki did also, and therefore we conclude that Janicki was not prejudiced by the

effort. In a brief supporting a pretrial "Motion for Additional Time to Conduct Document

admission of this evidence. Its admissibility as to Frederick Ingram and the

Analysis," Ingram's counsel stated, with reference to contemplated tests on the

effectiveness of the limiting instruction are discussed below.

Benton diaries,
[T]he defendant Frederic B. Ingram is not the only defendant who may be affected by
the results of these tests. Besides the general effect of the doubts that may be raised
as to Benton's veracity and the credibility of the diary entries, the case against at least
one other defendant Robert F. McPartlin may be substantially affected by the
results of the tests. From the results of the tests conducted so far, it appears that at
least two of the suspicious diary entries relate to alleged payments of money to Mr.
McPartlin.

[595 F.2d 1335]

The Illinois defendants were not deprived of a fair trial by the joinder.

B. Frederick Ingram
Frederick Ingram's attack on the joinder is based on the district court's exclusion of

An investigator acting for Frederick Ingram's counsel twice interviewed McPartlin with

three items of evidence offered to support his extortion defense, which Ingram argues

the consent of the latter's counsel12 for the purpose of determining whether there was

occurred because he was tried with the men he allegedly bribed.

a basis for challenging the truth of some of the diary entries. In the second of these
interviews McPartlin made certain statements, which Ingram argues tend to support

1. The McPartlin Statements and the Attorney- Client Privilege

his defense. At trial, when Ingram offered evidence of these statements, McPartlin's

Among Co-defendants and Their Counsel

counsel objected on the ground, inter alia, of the attorney-client privilege, and the

Throughout the period covered by the indictment, Benton kept diaries, or appointment

court, after an in camera hearing, sustained the objection on this and another

calendars, in which he made notes concerning meetings and telephone

ground.13

conversations, naming the persons involved and often recording the substance of the

The exclusion of the McPartlin statements would not be reversible error even if he

conversations. The Benton diaries figured prominently in the government's case, for

had not been entitled to claim the privilege. We are satisfied from our examination of

they corroborated much of his testimony.

the transcript of the in camera hearing, which was sealed and made a part of the

Destroying Benton's credibility was important to Ingram, as it was to the other

record on appeal, that the statements merely corroborated facts which were admitted

defendants, even though Ingram's defense was based, in part, on the argument that

in evidence and which the jury obviously found to be true.14 We do not disclose

73

[595 F.2d 1336]

the contents of the statements because they remain protected by the attorney-client
privilege, on which we alternatively base our ruling on this point.

Ingram argues that the co-defendants' defenses must be in all respects compatible if
the joint-defense privilege is to be applicable. The cases do not establish such a
limitation,15 and there is no reason to impose it. Rule 503(b)(3) of the proposed

McPartlin was entitled to the protection of the attorney-client privilege, because his

Federal Rules of Evidence, as approved by the Supreme Court, stated that the

statements were made in confidence to an attorney for a co-defendant for a common

privilege applies to communications by a client "to a lawyer representing another in a

purpose related to both defenses. They were made in connection with the project of

matter of common interest." See 2 J. Weinstein, Evidence 503-52 (1977). The

attempting to discredit Benton, a project in which Ingram and McPartlin and their

Advisory Committee's Note to proposed Rule 503(b) makes it clear that the joint-

attorneys were jointly engaged for the benefit of both defendants. Ingram

interest privilege is not limited to situations in which the positions of the parties are

acknowledges that communications by a client to his own lawyer remain privileged

compatible in all respects:

when the lawyer subsequently shares them with co-defendants for purposes of a

The third type of communication occurs in the joint defense or pooled information
situation, where different lawyers represent clients who have some interests in
common. . . . The rule does not apply to situations where there is no common interest
to be promoted by a joint consultation, and the parties meet on a purely adversary
basis.

common defense. The common-defense rule, which is not as narrow as Ingram

contends, has been recognized in cases spanning more than a century. Chahoon v.
Commonwealth, 62 Va. (21 Gratt.) 822 (1871); Schmitt v. Emery, 211 Minn. 547, 2
N.W.2d

413

(1942); Continental

Oil

Co.

v.

United

States, 330

F.2d

347 (1964); Hunydee v. United States, 355 F.2d 183 (9th Cir. 1965); Matter of Grand

Quoted in 2 J. Weinstein, supra, at 503-6 to 503-7. (Emphasis supplied and citations

Jury

omitted.) Although the Congress, in its revision of the Federal Rules of Evidence,

Subpoena, 406

F.Supp.

381,

387-389

(S.D.N.Y.1975); see

State

v.

deleted the detailed privilege rules and left the subject of privilege in federal question

Emmanuel, 42 Wn.2d 799, 259 P.2d 845, 854-855 (1953); Note, "Waiver of AttorneyClient Privilege on Inter-Attorney Exchange of Information," 63 Yale L.J. 1030 (1954);

[595 F.2d 1337]

cases to "be governed by the principles of common law as they may be interpreted by
the courts of the United States," R. 501 Fed.R.Evid., the recommendations of the
Advisory Committee, approved by the Supreme Court, are a useful guide to the
federal courts in their development of a common law of evidence. 2 J.
Weinstein, supra, at 501-20.4 to 501-20.5. In this instance we follow the
recommendation. The privilege protects pooling of information for any defense
purpose common to the participating defendants. Cooperation between defendants in
such circumstances is often not only in their own best interests but serves to expedite
the trial or, as in the case at bar, the trial preparation.16

Note, "The Attorney-Client Privilege in Multiple Party Situations," 8 Colum.J.L. &

Soc.Prob. 179 (1972). Uninhibited communication among joint parties and their
counsel about matters of common concern is often important to the protection of their
interests. Note, supra, 8 Colum.J.L. & Soc.Prob. at 179-180. In criminal cases it can
be necessary to a fair opportunity to defend. Therefore, waiver is not to be inferred
from the disclosure in confidence to a co-party's attorney for a common purpose.

Ingram also seems to argue that the communication was not privileged because it

In the case at bar, the judge found, as a preliminary question of fact, from the

was made to an investigator rather than an attorney. The investigator was an agent

evidence adduced at the hearing held pursuant to Rule 404(a), Fed.R.Evid., that

for Ingram's attorney, however, so it is as if the communication was to the attorney

McPartlin had made the statements to the investigator in confidence. That finding is

himself. "It has never been questioned that the privilege protects communications to

not clearly erroneous.

the attorney's . . . agents . . for rendering his services." 8 Wigmore, Evidence 2301

74

at 583 (McNaughton rev. 1961); cf. United States v. Kovel, 296 F.2d 918, 921-922 (2d

Frederick Ingram also argues that joinder caused specific prejudice through the trial

Cir. 1961) (client's communications to an accountant employed by his attorney).

court's exclusion, as prejudicial to other defendants, of evidence of threats of physical

harm directed against Benton. The short answer is that prejudice to other defendants

Nor was it, as Ingram contends, fatal to the privilege that McPartlin made the

was not the only ground for the exclusion. The excluded evidence consisted of

statement, in effect, to Ingram's attorney rather than his own. When the Ingram and

testimony by Ingram that in the fall of 1972 Benton expressed fear for his own

McPartlin camps decided to join in an attempt to discredit Benton, the attorney for

physical well-being if Ingram refused to make the promised payments to the Chicago

each represented both for purposes of that joint effort. The relationship was no

officials, and testimony by two other witnesses that Benton told them in October 1974

different than it would have been if during the trial the Ingram and McPartlin attorneys

that someone had threatened him with physical harm. To begin with, both statements

had decided that Ingram's attorney would cross-examine Benton on behalf of both,
[595 F.2d 1338]
by Benton were said to have been made long after February 1972, when Ingram, by
his own admission, authorized Benton to make payments to secure the contract.
There is no indication in the record that the second, made long after all payments
were made was ever communicated to Ingram. The alleged threats were directed at
Benton, not Frederick Ingram, who had no dealings in the matter with anyone outside
Ingram Corporation. Finally, Ingram's theory throughout the trial was economic, not
physical, coercion.17 The evidence was properly excluded as irrelevant, and it would
have been equally irrelevant if Ingram had been tried separately.

and during cross-examination McPartlin passed Ingram's attorney a note containing

information for use in the cross-examination. The attorney who thus undertakes to
serve his client's co-defendant for a limited purpose becomes the co-defendant's
attorney for that purpose. A claim of privilege was upheld in circumstances such as
these where communications were made directly to the attorney for another party
in In the Matter of Grand Jury Subpoena Duces Tecum, supra, 406 F.Supp. at
391. United States v. Friedman, 445 F.2d 1076, 1085 n.4 (9th Cir.), cert. denied, 404

3. Relevance of an Unrelated Payment by a Third-Party

U.S. 958, 92 S.Ct. 326, 30 L.Ed.2d 275 (1971), relied on by Ingram, is not to the
contrary. In Friedman the court held its decision in Hunydee v. United States,

Frederick Ingram also contends that the joinder caused the exclusion of evidence that

supra, inapplicable, because no joint defense or common interest was alleged. The

an attorney who represented Ingram Corporation before the Illinois Commerce

court went on to state, in the footnote relied upon, that even if Hunydee was

Commission made a $5,000 contribution to McPartlin's reelection campaign fund, and

applicable, there was no privilege since "the facts of the conversation negate

that the payment was motivated in part by McPartlin's having recommended the

confidentiality." 445 F.2d at 1085 n.4.

attorney's firm to Ingram Corporation. There was no showing that the attorney was
coerced. This evidence, offered first by the prosecution and then by the Ingrams, was

Inasmuch as McPartlin was entitled to assert the privilege whether Ingram was tried

rightly excluded on both occasions as irrelevant. In rejecting the Ingram offer the court

jointly or separately, no prejudice would have resulted from the joint trial by reason of

said that it "could be prejudicial to McPartlin without being probative of any issue as

the exclusion of the McPartlin statements even if those statements had not been

far as the Ingrams are concerned." Prejudice to McPartlin aside, the trial court was

merely cumulative.

correct as to the probative value of the evidence.

2. Relevance of Threats Against Benton

We therefore conclude that the denial of the motions for severance was not error.

75

difference between paying a public official for something one is entitled to receive and
paying a public official for something one is not entitled to receive.If one does not
believe he is legally entitled to receive the thing in question, then, no matter how
much he needs it and no matter how great the economic loss one might suffer by not
receiving it, there can be no legal justification for paying a public official to get it. Such
a payment is bribery, pure and simple.However, if one is legally entitled to the thing in
question or in good faith believes he is legally entitled to it, then the fear of economic
harm from not receiving it may be sufficient to render the act of payment involuntary,
depending upon three additional considerations: The seriousness of the economic
harm perceived by the defendant, the effect that perception had on his ability to
exercise free choice, and the defendant's awareness of reasonable alternatives to the
making of the demanded payments.If a defendant did not in fact fear serious
economic harm or if his fear did not substantially impair his ability to exercise free
choice or if he was aware of actions he might take to forestall the harm without
making the payments and chose not to take those actions, then his conduct in
authorizing the payment cannot be considered involuntary within the meaning of the
law.In order to prove, therefore, that a defendant acted willfully as opposed to
involuntarily in authorizing a payment, the government must prove one of the
following things: (a) that the defendant was not motivated by a fear of economic harm
in authorizing the particular payment, or (b) the thing which the defendant sought to
obtain by making the payment was not something he believed Ingram Barge
Company was legally entitled to have without making the payment, or (c) the
defendant did not perceive the threatened economic harm to be of serious magnitude,
or (d) the defendant's fear was not such as to substantially impair his ability to
exercise free choice, or (e) and finally, the defendant was aware of reasonable
alternatives to making the payments and chose not to pursue those alternatives.

SPRECHER, Circuit Judge:

I concur in the portions of this opinion prepared by Judges Pell and Tone.

II.

Extortion Defense Instruction

As noted earlier, defendant Ingram never denied making certain of the illicit personal
payments to officials of the Sanitary District. Instead Ingram premised his defense to
the counts relating to these payments on the theory that these payments were not
intended as bribes but were extorted from him by threats that, unless these payments
were made, the Sanitary District would, contrary to an alleged understanding, refuse
to purchase the pipeline which Ingram had already constructed and would invoke the
liquidated damages clause to further penalize Ingram Corporation. 18 In relation to
these arguments, the trial court gave the jury the following instructions on the defense
of extortion:

Defendant Ingram urges that this instruction was prejudicial error in three respects. In
considering these contentions we shall assume without deciding, that as the

Now, I have just told you that willful conduct, which is required in each of the crimes
charged in this indictment, must be voluntary.One of the defenses raised by the
Defendants Frederick B. Ingram and E. Bronson Ingram is that they authorized
certain payments to be made only because they were told unless the payments were
made, the pipeline would not be paid for and the liquidated damage provision would
be used against Ingram Barge Company in an unreasonable and punitive manner.
These defendants claim, therefore, that they did not commit bribery or conspire to
commit bribery and lacked the intent to bribe.In analyzing this defense, there are
several things for you to consider. First, you should determine whether a defendant
did in fact authorize payments because of a fear of economic loss. If you find that a
defendant did authorize any of the payments in question, but that he did so solely to
procure an economic advantage rather than out of fear of an economic loss, then this
defense that the act was involuntary must fail.On the other hand, if you do find that a
defendant authorized payments because of his fear of economic loss, then you
should proceed to a consideration of whether that fear of economic loss was such as
to render his action involuntary within the meaning of the law.There are several things
to consider in this connection. First, did the defendant fear loss as a result of a
withholding of something to which he believed Ingram Barge Company was already
legally entitled? Specifically, did the defendant believe that the Metropolitan Sanitary
District was already under a legal obligation to pay Ingram Barge for the pipeline? Did
he believe that the threatened assessment of liquidated damages was legally
unjustified?The answers to these questions are important because there is a

instruction states, under Illinois law, if one who pays a bribe is or believes himself to
be "legally entitled" to have the official take the action induced by the bribe, "then the
[595 F.2d 1340]
fear of economic harm from not receiving it may be sufficient to render the act of
payment involuntary." This court's decision in United States v. Peskin, 527 F.2d 71, 84
(7th Cir. 1975), cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1976), in the
following words, left open the question whether this is so but did establish the rule
applicable in the case of a discretionary official decision:
[A]t least in a case where a discretionary or legislative decision . . . has been
requested, the withholding of such action until a money demand is met could not
negate the intent (to influence the performance of an official act) required by the
Illinois bribery statute.
Id. at 84.

76

First, Ingram argues that the distinction between economic loss and gain was

Ingram's final objection to the trial court instruction is that the instruction, by its

erroneous. The prejudice from this distinction allegedly arose from the fact that the

emphasis on the voluntariness of the payments, implicitly disallowed the extortion

jury was likely to define economic loss as the payment of money and economic gain

defense and permitted only the narrower defense of duress. Assuming that the

as the receipt of money and therefore might have rejected the extortion defense out

distinction drawn in United States v. Barash, 365 F.2d 395 (2d Cir. 1966), between the

of hand on the ground that the admitted object of the payment was to complete the

defenses of duress and extortion is correct, 24 the instruction could not have prejudiced

sludge-hauling project and thereby gain a profit. In response we note initially that

Ingram since Ingram, before this court and the trial court, characterized his own

Ingram here has too narrowly characterized his own defense. Ingram asserted

conduct in such a way as to absolutely preclude the availability of the extortion

throughout the trial and continues to assert before us that the payments were at least

defense, even assuming that the voluntariness of his conduct alone would not negate

in part motivated by a desire to avoid assessment of liquidated damages. Even under

the extortion defense. Ingram, during the course of the trial, admitted that he had no

the simplistic construction of the loss-gain distinction which Ingram alleges was most

legal

likely, this would constitute an economic "loss" thereby preventing the jury from

obtain.25Accordingly he is absolutely precluded from prevailing on an extortion

rejecting the defense on the basis of the loss-gain distinction. 19 Moreover it is not

defense under Peskin, which makes that defense unavailable where the defendant is

clear that Ingram preserved this objection for appeal; the written objection to the

seeking to obtain a benefit not owed and thus the emphasis

instruction tendered at trial makes no mention of any error in this distinction.

20

Finally,

entitlement to the benefits which

his payments were designed

to

[595 F.2d 1342]

of the instructions on involuntariness could not have harmed the defendant.26

we are not convinced that the jury would put such a simplistic construction on the
loss-gain distinction. Certainly it requires no extraordinary economic acumen to

III.

realize that the receipt of money may not represent an economic gain if the amount
received is less than an amount to which one was previously entitled. Conversely, an

Evidence of Ingram's Bribes of Foreign Officials

ordinary juror would certainly realize that a real economic gain accrues only when a
person becomes entitled to something to which he had no prior entitlement, that is,

At trial the government, seeking to rebut Ingram's testimony that he made the

when a discretionary official act is performed for his benefit. The district court followed

payments only as a victim of extortion, sought to demonstrate that in other instances

this gain-loss instruction with a discussion of the concept of entitlement, explicitly

Ingram had been willing to make such payments without the alleged incentive of

denoting a "loss" as a failure to receive a benefit to which one was entitled, thereby

extortion. The trial court carefully screened this proffer with an ex parte review of the

further clarifying the interdependent relation between these two concepts.21

evidence, an in camera meeting with all counsel, and a voir dire of the government
[595 F.2d 1341]
Ingram advances a second attack on this instruction. He argues that the district court
erred in instructing the jury that the extortion defense is unavailable if the defendant
did not believe that he had a legal entitlement to the official action. Once again we
must note that this objection appears not to have been properly preserved for appeal,
since Ingram's objection to the trial court did not criticize the entitlement aspects of
the instruction.22 Even if this objection were properly preserved, it lacks merit. The
district court's instruction is consistent with Peskin.23

witnesses. After this careful consideration, the court, although rejecting a substantial
portion of the government's offer of proof,27permitted the government to introduce
testimony that Ingram had made surreptitious payments to an employee of a semiofficial Brazilian corporation in order to receive preferential treatment.

77

The government introduced at trial the testimony of Chris Daley, an official of the

Ingram forwards three attacks on the admission of this evidence. First, he claims, the

Ingram Corporation, to establish the government's account of Ingram's alleged

prior payments to Caniero were not sufficiently similar to the payments for which he
was indicted to establish their relevance to his intent. Before examining the particular

[595 F.2d 1343]

prior bribe. Daley testified that in 1967 the Ingram Corporation became interested in
engaging in an off-shore drilling project conducted by Petrobas, a Brazilian oil
company owned jointly by the Brazilian government and private investors. Daley and
Benton then met with Levindo Caniero, the Petrobas official with responsibility for
procuring the contractor for the off-shore drilling. As a result of this meeting, Caniero
agreed to provide inside information to Ingram Corporation to assure that it was lowbidder in exchange for a "payoff or commission." Benton, Daley and Caniero agreed
that these payments should be made into a Swiss bank account. The contract was
then awarded to Ingram Corporation through a letter of intent. However, Caniero
threatened to withdraw the letter of intent because of a delay in Ingram Corporation's
establishment of a Swiss account for him. At this point Daley informed Ingram that the
letter of intent was about to be lost because of the delay in making the payoffs.
Ingram then put Daley in touch with an international banker at Lehmann Brothers to
expedite the establishment of the account. Subsequently, between 1969 and 1973,
$172,000 was paid into the account.

dissimilarities urged, we note that there is no requirement that the prior acts be
virtually identical to the charged acts and that it is sufficient that the acts be similar
enough and close enough in time to be relevant. The major thrust of Ingram's
argument is that there is no showing that the Brazilian payments were either illegal or
immoral since such payments are simply a way of doing business in Brazil. Initially we
must note that we would be loathe to assume that surreptitious payments to
governmental or private officials is a common and accepted practice in Brazil absent
proof to that effect. Ingram admits that neither he nor the government offered proof on
that matter, and thus this argument rests solely on Ingram's facile and unsupported
characterizations of Brazilian practice. However, even were we to accept that such

We hold that this evidence was properly admissible against Ingram in that it tended to

payments are a legal and accepted practice in Brazil,28 we do not find that fact

refute Ingram's defense that he lacked the intent to bribe the Chicago defendants and

sufficient to differentiate the two transactions. In United States v. Boggett, 481 F.2d

made the payments only to satisfy extortionate demands. Rule 404(b) of the Federal

114

Rules of Evidence permits proof of prior crimes or acts where it is used for such
[595 F.2d 1344]
(4th Cir.), cert. denied, 414 U.S. 1116, 94 S.Ct. 850, 38 L.Ed.2d 744 (1973), the
government was permitted to introduce in a Travel Act bribery prosecution against a
zoning official evidence showing a series of transactions wherein gifts were made to
the official and favorable actions by him on behalf of the donor followed shortly
thereafter. The defendant urged that since no showing of a quid pro quo had been
made by the government there was nothing to establish anything improper in these
transactions. The court, however, admitted the evidence holding that regardless of the
propriety of the individual's acts, the evidence demonstrated a course of conduct
which indicated the defendant's "preference for favors and gifts over his public
duty." Id. at 115. Likewise here, whatever the moral and legal status of the Brazilian
payoffs, they indicate that the defendant had knowingly circumvented ordinary
business channels with "facilitating payments." Admittedly the illegality of such
payments to government officials in the United States would make such payments
less likely than those not involving illegality; that, however, does not deny that one
making such payments, legal or not, is more likely to have the intent to influence
official action by similar payments in other instances than one who has never made
such payments.29The other differences urged by Ingram are even less substantial.
The fact that the Brazilian official was an employee of a semi-public entity and that
the indictment alleged payments to employees of a wholly public governmental entity
is a completely negligible difference, unless of course one makes the irrational
assumption that one who would knowingly cheat both the public and private investors

purposes "as proof of motive, opportunity, intent, preparation, plan, knowledge,

identity, or absence of mistake or accident." This provision has been interpreted as
permitting admission of evidence of prior acts as long as it has a substantial
relevance to an issue other than showing that the defendant has a criminal character
and therefore possesses a propensity to commit criminal acts. See, e. g., United
States v. Sigal, 572 F.2d 1320, 1323 (9th Cir. 1978). Or, as this court has held, such
evidence is admissible "if, entirely apart from the matter of `propensity,' it has a
tendency to make the existence of an element of the crime charged more probable
than it would be without such evidence." United States v. Fairchild, 526 F.2d 185, 189
(7th Cir. 1975), cert. denied, 425 U.S. 942, 96 S.Ct. 1682, 48 L.Ed.2d 186 (1976)
(emphasis added).

78

would not knowingly cheat the public alone. Nor is it relevant that the Brazilian payoff
was not initiated by Ingram: we can see no difference in active participation in making
payments suggested by another and initiation of the suggestion itself, since one who
is willing to perform the essential act of bribery that is, to dispense the bribe
moneys themselves must be presumed to have also been willing to suggest the
bribe. Finally, we reject Ingram's characterization of the Brazilian transaction as
involving less harm that the Sanitary District bribes since the latter added the amount
of the bribes onto the contract price. Nothing in this record suggests that the amounts
charged to Brazil would not have decreased once the cost of the project was reduced
by the amount of the bribes. Further, it is axiomatic that for a competitively-bid project,
where no inside information was available, Ingram would have bid less and therefore
charged less than where the project is guaranteed by virtue of a bribe and Ingram
could set its own price. It is therefore completely disingenuous to suggest that the
level of harm differed.

since the careful balancing of the probative value of prior acts versus their possible
unduly prejudicial effect is uniquely appropriate to the informed discretion of the trial
judge. See United States v. Peskin, 527 F.2d 71, 84 (7th Cir. 1975), cert. denied, 429
U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1976); United States v. Sigal, 572 F.2d 1320,
1323 (9th Cir. 1978). More precisely, this balancing entails considering whether the
probative value this evidence had in indicating that Ingram's intent was to bribe, not to
satisfy extortionate demands, outweighs its possible prejudicial effect, that is, the
possibility that the jury will take the evidence to be indicative of a criminal disposition.

Ingram's second objection is that there was no clear and convincing proof that Ingram

The highly judgmental character of this test mandates that we not restrike the balance

knew the purpose of the payments made to Caniero. We have held that there must be

ourselves but instead examine only the manner in which the district court exercised

clear and convincing evidence of the prior act to justify its admissibility, and we find

its discretion. The record here shows that the trial court was meticulous and

that there is evidence in the record to meet that standard. Daley testified in camera as

deliberate in its decision to admit the evidence. The trial court heard in camera

to Ingram's reaction when he learned of the payments and that Benton's delay in

evidence of a number of prior acts which the government had sought to

setting up the account might lead to a revocation of the letter of intent. Daley stated:

introduce.31 After extensive discussion the court permitted proof only of the Petrobas

30

transaction. Further, the court required the government to present its witness to the

Benton was to open it, which we wouldn't do. So that's when I called Fritz, and Fritz
says, Jesus Christ. How did you get into that, or whatever. And he says, Okay, okay.
We will go ahead and call him back and see what we can put together.
[595 F.2d 1345]
(Tr. 5638). At trial, Daley testified as to Ingram's response to knowledge of the
payments in the following terms: "Mr. Ingram, in disgust, says `Well, okay. I will see
what I can do about it. . . .'" (Tr. 5674). It is difficult to understand why Ingram would
have responded "in disgust" or with queries as to how Daley became involved "in
that" unless he knew that the payments were illicit payments made to procure
unauthorized benefits or at least were improper in some respect. Furthermore, the
government introduced a memorandum sent out by Daley to Ingram in which Daley
stated that he knew after speaking with Petrobas personnel that Ingram would be the
low bidder and that Caniero had assured Daley that "we could count on him for any
assistance we need." Considering all the evidence, particularly Ingram's reaction to
Daley's statement and his knowledge that Ingram was assured to be the low bidder,
there is a convincing portrait of Ingram's knowledge of the purpose of the Caniero
payments.

Petrobas transaction in camera to confirm the substance of the testimony. Finally, to

minimize any prejudice the court preceded the presentation of this witness's
testimony before the jury with an extensive limiting instruction emphasizing that
Ingram was not "on trial" for this previous transaction, that the evidence was to be
considered only as it concerned Ingram's intent in the Sanitary District transaction
and that the court passed no judgment on the value of this evidence. Courts have
often looked to these factors indicating due consideration to uphold the trial court's
judgment. See, e. g., United States v. Carleo, 576 F.2d 846 (10th Cir. 1978). In
particular the use of limiting instructions has been accorded great significance. See
United States v. Sigal, 572 F.2d 1320, 1323 (9th Cir. 1978). We therefore decline to
hold that the trial court abused its discretion.

Finally, Ingram urges, relying on Rule 403 of the Federal Rules of Evidence, that the
prejudicial impact of the evidence outweighed its relevance and therefore should have

I V.

been excluded. Ingram must sustain a heavy burden to succeed on this argument

79

prosecutor did not conceal or withhold evidence of Benton's defalcations but waited

Government 's Compliance with Brady v. Maryland

until early in the trial to reveal them.32 There is nothing in Brady or Agurs to require
During his opening statement, counsel for the government revealed that the principal

that such disclosures be made before trial, and we have explicitly held this in the

government witness, Benton, had embezzled and applied to his own benefit $375,000

past. United States v. Stone, 471 F.2d 170, 173-74 (7th Cir. 1972), cert. denied, 411

of the money he obtained from Ingram in order to pay off the Chicago defendants.

U.S. 931, 93 S.Ct. 1898, 36 L.Ed.2d 391 (1973). See also United States v.

Although the government had turned over to the defendants both Benton's and

Lomprez, 472 F.2d 860 (7th Cir. 1972), cert. denied, 411 U.S. 965, 93 S.Ct. 2144, 36

Ingram Corporation's financial records, from which the government asserts the

L.Ed.2d 685 (1973). Thus, even though evidence might be material or might create a

defalcations could have been discerned by the defendants, the government did not

reasonable doubt as to guilt, Due Process, albeit requiring eventual disclosure, does

turn over to

not require that in all instances this disclosure must occur before trial.

[595 F.2d 1346]

the defendants Benton's grand jury testimony in which he referred to the $375,000 as
"the amount of money I am responsible for keeping," nor did the government disclose
that Benton had expressly admitted the embezzlements in interviews with
government counsel. Defendants McPartlin and Janicki, relying on Brady v.
Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), urge that this failure to
disclose this information earlier violated their Due Process rights and mandates
reversal of the convictions.

The appropriate standard to be applied in a case such as this is whether the

disclosure came so late as to prevent the defendant from receiving a fair trial. See
United States v. Stone, 471 F.2d at 174. After considering the record and the claims of
prejudice forwarded by the defendants, we cannot say that this disclosure came so
late as to violate Due Process.

We note initially that Brady and its successor, United States v. Agurs, 427 U.S. 97, 96

The defendants, apparently relying on their misinterpretation of Brady as a

S.Ct. 2392, 49 L.Ed.2d 342 (1976), address a thoroughly different problem than the

constitutional mandate for pretrial discovery, concentrated on the exculpatory nature

one before us. The concern of Agurs and Brady is whether the suppression of

of the evidence and barely developed before this court any specific ways in which

exculpatory material until after trial requires that a new trial be given so that this

they were prejudiced by this delay.33 McPartlin merely argues that, had the Benton

evidence may be considered. The Court in Agurs characterized the situations to

embezzlements been revealed before trial, "specific requests could have been

which the Brady principles apply as those involving "the discovery, after trial, of

directed toward more detailed information concerning these [embezzled] funds. . . . A

information which had been known to the prosecution but unknown to the defense."

thorough investigation into the disposition of those funds which he admittedly retained

427 U.S. at 103, 96 S.Ct. at 2397 (emphasis supplied). Indeed the standard

might have revealed that additional funds were

developed in Agurs can only sensibly be applied to the suppression of evidence

[595 F.2d 1347]
similarly expended, deposited or hidden." Brief for Defendant McPartlin at 34-36. It is
difficult for us to discern any undue prejudice on this basis. To begin with, there was
nothing to preclude the defendants from having made additional investigations
between the time of the disclosure and the close of the evidence almost two months
later, and yet nothing in the record reveals that defendants directed any further
inquiries to Benton. This omission is even more important given the statement of the
trial court that it would reconsider the defendant's motion for a recess if it later
became apparent that "anyone has in fact been prejudiced by a late disclosure." Tr. at

throughout the trial: "if the omitted evidence creates a reasonable doubt that did not
otherwise exist, constitutional error has been committed. Id. at 112, 96 S.Ct. at 2402
(emphasis supplied).
The defendants here, however, do not complain of a total suppression of favorable
evidence but merely attack the timing of the disclosure of such evidence. Here the

80

250. Nor did the defendants subsequently renew their request for a continuance.
Thus, given the failure of the defendants to pursue adequately any subsequent
investigation and their subsequent failure to request additional time for any
investigation thoroughly discredits their assertion that they were prejudiced by the
timing of the disclosure.

I find no indication of a motive to falsify. At the time these entries were made back in
1971 and 1972, there is not the slightest bit of evidence to suggest that Mr. Benton
thought this scheme was going to be disclosed; that he thought that he would be
caught. There is nothing self-serving about these entries. They implicate Mr. Benton
in serious criminal misconduct. Indeed, if he were unavailable, I think these diaries
might well be admissible as statements against penal interest, so incriminatory are
they of Mr. Benton.So I think they have the earmarks of reliability in that sense.

V.
We agree with the district court that these diaries were admissible. These diaries
Admission of Benton's Desk Calendars

clearly fulfilled all the requirements which justify the admission of business records
under Federal Rule of Evidence 803(6). These records were kept as part of a

At trial the government introduced as exhibits over the objections of the defendant,

business activity and the entries were made with regularity at or near the time of the

the desk calendar-appointment diaries of William J. Benton described above, Part I,

described event. Most importantly these diaries satisfied the central rationale of the

B, 1. These diaries documented in some detail the dealings of Benton with the

business records exception: since Benton had to rely on the entries made, there

Chicago defendants. As a foundation for admission of the diaries, Benton testified that

would be little reason for him to distort or falsify the entries.

he had kept such business diaries since 1952 or 1953 and that he maintained these
diaries during the period of his dealings with Metropolitan Sanitary District officials.

The application of the business record exception to documents differing greatly from

Benton further testified that he kept these diaries and made entries in them as a

the classic "shopbook" or business ledger is well established. See, e. g., United

regular part of his business activity as a vice-president of Ingram Corp., noting in

States v. Reese, 568 F.2d 1246 (6th Cir. 1977) (scrapbook of press clippings

them anticipated meetings, telephone calls, personnel matters and bids. These

compiled by public relations department);

entries were characterized by Benton as "things which I would need to look back on,"

[595 F.2d 1348]

United States v. Yates, 553 F.2d 518 (6th Cir. 1977) (letter from bank to employees
describing recent robbery); Magnus Petroleum Co. v. Skelly Oil Co.,446 F.Supp.
874 (E.D.Wis.1978) (corporate officer's personal notes of business
negotiations); Aluminum Co. v. Sperry Products, Inc., 285 F.2d 911, 916 (6th Cir.
1960), cert. denied, 368 U.S. 890, 82 S.Ct. 139, 7 L.Ed.2d 87 (1961) (inventor's diary
of progress on invention). Moreover, the business record exception has been applied
to admit documents indistinguishable in kind from Benton's desk calendars. In United
States v. Evans, 572 F.2d 455 (5th Cir. 1978), the court permitted the introduction of
"pocket-size appointment calendars known as `daytimers.'" Id. at 487. The court
noted in support of its holding that these calendars were business records that "[t]he
entries purport on their face to list . . . business entertainment expenses . . . [and]
such documents were used as a matter of company policy." Id. at 488. Likewise, the
calendars here on their face describe business matters and, even if not mandated by
Ingram policy, were kept in accord with the widespread practice of business
executives to maintain such records.

to recall a bid or to prepare letters and memoranda, for example.

In admitting the diaries the trial court made the following findings:
It was the regular course of business for Mr. Benton to make entries in diaries about
the things he did during the course of a business day, where he went, what people
said to him, what commitments he made and what commitments were made to him in
connection with that business. The entries that are contained in the diary, in the series
of diaries, do pertain to Ingram's business.
The contents of the diaries further indicated their reliability to the district court:

Defendants McPartlin and Weber have argued that several facts differentiate the
records here from admissible business records. First, the defendants stress that

81

non-contemporaneously, it remains within the district court's discretion to determine

whether the few non-contemporaneous entries so undermine the reliability of the
record as to preclude admissibility. Given that there were only fifteen non-sequential
entries over a two year period, even if many of these were shown to be noncontemporaneous, we could not say that this discretion was abused.

some of the entries in the calendars were made out of sequence. The defendants'
document expert testified that fifteen entries out of all those made over a two-year
period were made out of sequence. We do not however agree with the defendants
that nonsequential entries preclude admissibility as business records. Although there

The defendants also urge that these diaries could not be business records because

is no dispute that Benton's entries in a few cases did not proceed page by page in the

they were relied on by no one other than Benton and in any event contained many

book, the defendants' document examiner could not disprove Benton's statements

entries of a purely private nature, viz., the alleged extortion scheme engaged in by

that entries were made at or about the time of the described event. 34 Indeed, it seems

Benton which supposedly was not related to Ingram Corporation's official business.

to us that insisting that entries proceed methodically from the first to last page is as

However, nothing in the text or comments to the Rule provides any indication that a

pointless as insisting that ledger and account entries proceed in alphabetical order or

necessary prerequisite to the reliability of a business record is verification by persons

from top to bottom. As long as the entries satisfy the contemporaneity and regularity

other than the one making the entry. Indeed, the Advisory Committee Notes appear to

requirements, their sequence is irrelevant. This point was made clear by the Tenth

suggest otherwise:

Circuit in United States v. Carranco, 551 F.2d 1197 (10th Cir. 1977). There the
defendants attempted to block the admission of freight bills on the ground that some

The element of unusual reliability of business records is said variously to be supplied

by systematic checking, by regularity and continuity which produce habits of
precision, by actual experience of business in relying upon them, or by a duty to make
an accurate record as part of a continuing job or occupation.

of the notations on the bills occurred after the document had been completed by the
freight originator. The court rejected this argument noting:
The notations on the freight bill were explained by the witnesses, and this is probably
more than is required by the business records exception to the hearsay rule. As
pointed out by the appellee, a freight bill is not meant to be a static document nor is it
used as such. As testified to by those familiar with the shipping business, a freight bill
is used by many different people and it is their job to make notations on the freight bill
so it will continue to be an accurate description of the shipment. It was adopted by
ICX as its record, in the regular course of its business, when the ICX driver signed it
as he picked up the interline shipment. He used it as an ICX record, verified the
shipment, and made the notations on it. The notations as testified to by the witnesses
were thus also made in the regular course of business of ICX. One of the freight bill
copies went into the ICX terminal records, and one or more copies continued with the
shipment. The requirements of Rule 803(6) of the Federal Rules of Evidence were
met.

Certainly the second and fourth, and possibly the first, indicia of reliability contemplate
only the accuracy imposed by the record keeper on himself. Accordingly, admissibility
has been upheld even in instances in which the records were made only for the
benefit of the record keeper himself and not for the benefit of the entire business
entity. See United States v. Prevatt, 526 F.2d 400, 403 (5th Cir. 1976); Aluminum Co.
of America v. Sperry Products, Inc.,285 F.2d 911, 916 (6th Cir. 1960), cert.
denied, 368 U.S. 890, 82 S.Ct. 139, 7 L.Ed.2d 87 (1961).
Nor do we consider it significant that the illegality of Benton's activities may have

Id. at 1200. Similarly here there is no reason to require that an appointment calendar

removed these actions in some technical sense from a narrow construction of his

remain a "static document"; indeed as appointments and other matters change

duties at Ingram. This argument proceeds on the false premise that because Benton's
activities were not a part of Ingram Corporation's business, they could not be a

[595 F.2d 1349]

the calendar to be useful must be nonsequentially revised. The only requirement is
that these revisions be contemporaneous and regular, and the defendant's proof of
simple nonsequentiality does not rebut Benton's testimony that the entries were made
regularly and contemporaneously. However, even if several of the entries were made

business at all. United States v. Re,336 F.2d 306 (2d Cir.), cert. denied, 379 U.S. 904,
85 S.Ct. 188, 13 L.Ed.2d 177 (1964), addressed, and rejected, such a contention.

82

There the defendant after having gained control of a company, engaged in a

187 F.2d at 575 (emphasis supplied). Certainly if such papers have sufficient

fraudulent scheme for the distribution of that company's securities for his own

business character to remove them from the personal paper protections of the Fourth

personal benefit. The court was unpersuaded that records relating to that scheme,

Amendment, they have sufficient reliability to permit admissibility.

since they were not part of the company's business, could not constitute business
records. The court pointed out that the defendant, "while distributing a huge block of

Defendants finally rely heavily on Buckley v. Altheimer, 152 F.2d 502 (7th Cir. 1945) in

control stock to the investing public through a complex system of brokerage accounts

support of their position. In Buckley, this circuit declined to permit, under the business

and over-the-counter sales, was engaged in a `business,'" albeit a business of his

record exception, the admission of a diary which contained entries documenting the

own and not the company's. Id. at 313. The court further rejected the notion that

amount of indebtedness between two parties, Frost and Altheimer. The court, in

business records would lose admissibility as such because of the illegality of the

denying admission, noted that "[t]he book did not contain any regular set of entries

underlying business. We think that the same rationale applies here. Benton was

relating to any accounts between Frost and Altheimer." Id. at 507. It was argued that,

engaged in systematically negotiating under-the-counter payments either for himself

although no claim was made that the entries in the diary occurred in the regular

or the Chicago defendants in order to facilitate the award of business contracts.

course of business and was "informally kept," the diary should have been admitted

Although this is not a business of "the usual orthodox nature" (id.), there is no

because the entries were made "precisely and meticulously." Id. The court rejected

question that this bribery scheme was as much a business as a fraudulent securities-

this argument, stating that "private diaries as distinguished from account books or

marketing scheme.

individual memoranda of particular transactions" are inadmissible. Id. at 508. It is this

latter statement upon which the defendants rely.

However, even if there were to be some question as to whether Benton's activities

constituted an independent business, we believe that his activities can also be

We believe however that the defendants' emphasis on the court's language

characterized as part of Ingram's business. As long as the recorded activities had

concerning "private diaries" is misplaced. We do not believe that the court there

become, properly or not, an integral part of Benton's business activities for Ingram,

intended to make any per se rule precluding the admissibility of private diaries;

the records are not too personal to preclude admissibility

instead it is clear that the decisive factor in that case was that no regular entries had
been made documenting the relationship. The desk calendar before us is clearly a

[595 F.2d 1350]

under this exception. In this matter we are persuaded by United States v. Schiller, 187
F.2d 572 (2d Cir. 1951). There the defendant, a government employee in the Rent
Control Program, maintained a diary which evidenced a bribe paid to him. The court,
in refusing to consider a Fourth Amendment challenge to the admission of the diary
premised on the personal, non-official nature of the papers, noted:
We think . . . there was a sufficient showing that the entries introduced in evidence
dealt with official duties. Such matters as rent adjustments and recommendations
regarding the same were within his general duties, whether he performed them rightly
or wrongly, at lunch or elsewhere. . . .

record of a different order: regular and frequent entries documenting the relation
between Benton and Sanitary District officials were made systematically for the
purpose of allowing Benton to rely on its accounts of the status of the relationship.
We note as a final matter that even if any of the defendant's arguments were
sufficient grounds to prevent admission of these diaries under the business record
exception, they would be admissible under two other exceptions. First, they would be
admissible under the "residual" exception, Federal Rule of Evidence 803(24). 35 A

83

number of factors combine to demonstrate the reliability of the entries: the highly self-

accountant, as well as the accountant's copy of the bank statement recording the

incriminatory nature of the entries themselves, the regularity with which they were

deposit. In an offer of proof Weber indicated that the accountant would testify that in

made, Benton's need to rely on the entries. Where evidence complies with the spirit, if

1973, two years after the deposit, Weber told him, in connection with his preparation

not the latter, of several exceptions, admissibility is appropriate under the residual

of an IRS audit, that the funds were obtained from Weber's mother. The proffered

exception. See

F.Supp.

bank statement contained the accountant's notation next to the sum: "Overdraft

554 (E.D.N.Y.), aff'd,540 F.2d 574 (2d Cir. 1976), cert. denied, 429 U.S. 1041, 97

covered and paid in cash from Mother (per FNW)." The trial court refused the

S.Ct. 739, 50 L.Ed.2d 752 (1977) (especially Judge Weinstein's opinion for the district

admission of the accountant's testimony and his copy of the bank statement.

court). Furthermore the degree of reliability necessary for admission is greatly

Defendants McPartlin36 and Weber urge that this was error.

generally,

United

States

v.

Ianconetti, 406

reduced where, as here, the declarant is testifying and is available for crossTwo theories of admissibility are advanced. First, it is argued that the evidence was

examination, thereby satisfying

admissible under Federal Rule of Evidence 801(d)(1)(B) as a prior consistent

[595 F.2d 1351]
the central concern of the hearsay rule. Second, these calendars would also be
admissible under Rule 801(d)(2)(E) as statements "by a coconspirator of a party
during the course and in furtherance of the conspiracy." Since these entries were
made so that Benton could rely on them in carrying out his scheme, they aided and
were "in furtherance of" the conspiracy. See United States v. Evans, 572 F.2d
455 (5th Cir. 1978).

statement.37 We do not believe, however, that these statements were admissible

under this theory. Evidence offered under this theory must have some probative value
in rebutting the implied charge of recent fabrication or improper motive. However,
where a motive to falsify also existed at the time of the earlier statement, it possesses
no such probative value. As Judge Weinstein correctly pointed out in his treatise on

VI.

the Federal Rules:

Substantive use under Rule 801(d)(1)(B) is limited to situations where high probative
value is most likely . . . Evidence which merely shows that the witness said the same
thing on other occasions when his motive was the same does not have much
probative force for the simple reason that mere repetition does not imply veracity.

Weber's Prior Consistent Statements

The government's evidence revealed that the first installment of the bribe money
consisted of $75,000 given to McPartlin in Weber's presence. Some part of that

4 J. Weinstein & M. Berger, Evidence 801(d)(1)(B)[01] at 801-100 (1977). Obviously

amount consisted of thousand-dollar bills. The government further presented

Weber would have had no more reason to tell the IRS that the proceeds were illegal

evidence to establish that three days after this cash payment, Weber deposited nine

bribes than he has a motive now to tell that to a jury in a criminal prosecution. Indeed,

thousand-dollar bills in the bank account of one of the companies controlled by

Weber would have even had a further

Weber. Weber, in an attempt to rebut the damaging inferences that could properly be

[595 F.2d 1352]

reason not to tell the IRS that the $9,000 was part of a kickback: a bribe would be
includable in Weber's gross income whereas an appropriation of jointly-held funds
might not have been. Thus, we do not feel that these prior statements were
admissible under 801(d)(1)(B).

drawn from such a cash deposit, testified that he obtained this money from a safedeposit box maintained by himself and his mother. His mother testified that they
indeed had such a joint safe-deposit box and that it did contain several thousanddollar bills. As further corroboration, Weber sought to introduce the testimony of his

84

As a second ground of admissibility, Weber and McPartlin urge that the bank

Id. at 710. The records made by Weber's accountant are no more trustworthy than

statement was admissible as a business record under Federal Rule of Evidence

those prepared by the agent in Hartzog: they were prepared as a matter of his

803(6). This argument creates a paradoxical tension with their arguments that

judgment and discretion; they were not produced as part of any regular system; there

Benton's desk calendars were not business records. The defendants assailed the

was no reliance on these notations by the accountant or others to guard against error

diaries on the grounds that the entries were not made at or near the time of the event

or misstatement. If anything, the records in this case are less trustworthy since,

related (but recorded in advance as reminders of appointments) and that many of the

unlike Hartzog where the agent examined records that the defendant had prepared

entries were derived from "second or third-hand information." Brief for Defendant

for his own use, these notations were the product of Weber's own representations for

Weber at 7. Yet the defendants urge that a single notation of a cash transaction made

the purposes of the audit, thereby furthering the possibility of misstatement.

more than two years after the transaction and based solely on information supplied by

Accordingly, we hold that the trial court properly exercised its discretion to exclude

someone other than the person making the entry constitutes a business record. We

these records.38

do not rely on these two grounds, however, to uphold the exclusion of the notation on
PELL, Circuit Judge:

the bank statement. Instead we find a more fundamental flaw in this evidence: this
notation, unlike those in Benton's diaries, was not made for future reference and

I concur in the portions of this opinion prepared by Judges Tone and Sprecher.

reliance but was made in anticipation of IRS litigation. The defendants appear to

[595 F.2d 1353]

admit this fact, and the trial judge was informed of this. (Tr. 1363-69). As such
prelitigation records, we hold that they lacked sufficient trustworthiness to permit
VII.

admissibility. Indeed, this case is not significantly distinguishable from Hartzog v.

United States, 217 F.2d 706 (4th Cir. 1954), which was cited by the Advisory

Weber's Political Acquaintances

Committee Notes to Rule 803(6) as an example of insufficient trustworthiness.

In Hartzog the court held it was error to admit the worksheets of an IRS agent,

Henry Weber, brother of Franklin Weber, called as a Government witness, was

deceased at the time of trial, that had been prepared from his examination of the

permitted to testify on direct examination without objection that his brother Franklin

defendant's records in preparation for a tax-evasion prosecution. The court explained

was an acquaintance of Clyde Choate. He was then asked whether his brother was

the reasons for finding insufficient trustworthiness as follows:

an acquaintance of Paul Powell to which he also responded in the affirmative. An

These worksheets were made in preparation for this prosecution; they were
Baynard's [the agent's] personal working papers, were the product of his judgment
and discretion and not a product of any efficient clerical system. There was no
opportunity for anyone . . . to tell when an error or misstatement had been made.
These worksheets were not more than Baynard's unsworn, unchecked version of
what he thought [the defendant] Hartzog's records contained.

objection was made, without any specificity, following the answer as to Powell. There
was no motion to strike the answer and the "objection" as such was overruled. No
effort was made at the time to demonstrate to the trial judge any particular basis for
the objection.

85

Subsequently during redirect examination Weber moved for a mistrial on the basis of

and cannot complain of surprise if evidence of his political associations was

the Powell matter because "[i]t was highly prejudicial and has no relation whatsoever

introduced.

to this case." The court in denying the motion, properly from our examination of the
VIII.

record, observed that:

the reason I let that in is that you cross examined several witnesses about whether or
not there was any reason to believe Mr. Weber had any political connections, whether
it was credible to believe that he knew anybody, and there again, that is something
you opened up.

Henry Weber's Grand Jury Testimony

Franklin Weber also objects to the admission of his brother Henry's grand jury

Without specific reference to Powell, Weber again moved for a mistrial following final

testimony at trial. Henry Weber testified on direct examination that he went to Vaduz,

argument. He now says that which he didn't say to the court specifically that on the

Liechtenstein, to negotiate two letters of credit given to him by the defendant. During

basis of Fed.R.Evid. 404(b) the testimony as to Powell was improper and prejudicial

the course of the direct examination, the Government attempted to introduce Henry

in the light of widely-circulated publicity of wrongdoing on the part of Powell when he

Weber's inconsistent grand jury testimony that he had never gone to Liechtenstein,

was Secretary of State of Illinois. Certainly in any trial and particularly in a complex

testimony given two weeks after his return from that country at the first of his two

trial involving numerous defendants such as the present case, a lawyer should make

appearances before the grand jury. The court would not admit the testimony on direct

clear to the trial judge the exact nature of the claimed prejudice, which was not done

examination, however, on the basis that the trial jury might unfairly infer that the

here. Even, however, if we assume what probably was a fact that the notoriety given

defendant had somehow been responsible for his brother's falsehoods. When cross-

to the Powell case some seven years earlier was such as to make it clear why

examined by the defendant, Henry explained that because he was by coincidence

Weber's attorney did not want his client linked with Powell, we agree here with the

going to Europe, he negotiated the letters of credit as a favor to his brother. Henry

district court that the door had been opened. Weber, not the Government, portrayed

also testified that the defendant had

political associations, which he sufficiently indicated he did not have, as a unique

[595 F.2d 1354]

told him the letters "covered sale commissions for oil or Arabian interest or
something." The trial court then permitted the Government to introduce the grand jury
testimony on redirect examination, and the defendant argues that the evidence still
created the prejudical impression that Franklin Weber forced his brother to testify
falsely.

requirement for accomplishing that with which Weber is charged.

For the court to admit relevant evidence in rebuttal on the subject was well within its
discretion. See United States v. Eliano, 522 F.2d 201 (2d Cir. 1975); United States v.
Jones, 438 F.2d 461 (7th Cir. 1971). C. Wright and K. Graham, Federal Practice &

Weber's argument that the admission of this evidence was a prejudicial linking of the

Procedure 5241. The purpose of Rule 404(b) is to prevent "the use of alleged

brothers Weber, however, shifts the focus from the basis on which the evidence was

particular acts ranging over the entire period of the defendant's life [making] it

properly admitted. As the district court pointed out there need be no connection

impossible for him to be prepared to refute the charges, any or all of which may be

between Franklin Weber and the giving of the false testimony to the grand jury for that

mere

testimony to be admissible.

fabrications."

J.

Weinstein, Evidence

405[04],

at

405-

39, quoting Wigmore, Evidence 194. The defendant focused the proof on this issue

86

The trial court properly admitted the statement as nonhearsay, Fed.R.Evid.

IX.

801(c); see Anderson v. United States, 417 U.S. 211, 219-21, 94 S.Ct. 2253, 41
L.Ed.2d 20 (1974), to rebut the theory of the defense raised by the defendant during

Denial of Effecti ve Assi stance of Counsel

cross-examination. During cross-examination, the defendant did not attempt to rebut

the Government's showing on direct examination that Henry Weber negotiated the

A second aspect of the Swiss letters and Henry Weber's various connections

letters of credit. The defendant instead attempted to impose upon the transactions the

therewith is the basis for a claim that Franklin Weber was denied effective assistance

appearance of innocence. Once the defendant, again opening a door, attempted to

of

create this impression, the testimony became significant as rebuttal merely because it

was aware that he was involved in improper transactions. See id. at 220.

[595 F.2d 1355]

counsel. The gist of the claim is that evidence pertaining to the Swiss letters in
addition to that discussed in Part VIII of this opinion not only further linked Franklin
Weber with his brother's first grand jury testimony but also constituted such a
challenge to the integrity of Franklin Weber's trial lawyer as to deny the defendant
effective assistance of counsel.

In his reply brief, Weber argues that the Government has resorted to mere rules of

Specifically, the proof to which the objection is directed is the testimony, presented

impeachment to justify the introduction of the grand jury testimony. It is true that as a

during the Government's rebuttal, of Assistant United States Attorney Michael

secondary justification the Government, citing Fed.R.Evid. 607, argues that it could

O'Brien, who had conducted the preliminary grand jury investigation. The testimony

properly

argue

described the following sequence of events: About a week after Henry Weber testified

otherwise. Although the impeachment aspect is one which enters the present

truthfully before the grand jury on December 3, 1975, his second appearance, that he

picture, this aspect appears neither to be the prime thrust of the Government's

carried the letters of credit to Liechtenstein, Franklin Weber's attorney had called

position nor the basis on which the trial court admitted the evidence. As the trial judge

Government counsel to report his client's possession of other letters of credit. During

pointed out when the impeaching testimony was being discussed, the cross-

closing argument, the prosecutor suggested, "Isn't it interesting that after Henry

examination by Franklin Weber was designed expressly to bring out that this was a

Weber has all this recollection, then everybody is calling up and telling the

routine transaction that the witness was conducting for his brother, nothing was wrong

Government about it, after the cat is out of the bag." The defendant argues that this

with it and there was no reason to suspect it. The judge then pointed out:

statement implied that defense counsel engaged in wrongdoing and therefore denied

You didn't have to do that. I had earlier ruled that this [impeaching testimony] would
not be admissible. Having opened it up, I think the Government is now entitled to
show that two weeks after he returned from Liechtenstein and I hadn't realized that
it was that soon that he appeared before the Grand Jury this witness said he had
never been to Liechtenstein.

the defendant assistance of counsel. This argument is completely without merit. The

39

was given, and not for its truth. The grand jury testimony, viewed with other
admissible evidence showing that it was false, tended to establish that Henry Weber

impeach

its

own

witness,

although

Weber

does

not

40

cases cited by the defendant, United States v. Candelaria-Gonzalez, 547 F.2d

291 (5th Cir. 1977), and Zebouni v. United States, 226 F.2d 826 (5th Cir. 1955),
concerned continuous derision of the defense attorney by the trial judge and are not
in point. Furthermore, we have difficulty seeing how this testimony and final argument

We agree with the district judge that the evidence was properly admissible through

disparaged defense counsel. The Government's questioning and argument were

the open door.

obviously for the purpose of rebutting the defendant's exculpatory evidence that

87

Franklin Weber had not learned of the grand jury investigation until "very recently,"

The judge did fully explain to the jury that in reflecting upon the matter he thought he

and that he had been suspicious of the purpose behind the letters of credit, and that

should not have made the statement and that he in no way intended to reflect or

he therefore directed his attorney to notify the United States Attorney that he

comment on Weber's testimony or indicate any attitude whatsoever about the

possessed more letters of credit.

testimony. The judge also in final instructions made it clear that any comment by the
court was not intended to invade the jury's province to decide the facts.

We find no error in the admission of the rebuttal evidence. It was for the jury to draw
such inferences as the evidence properly supported on the issues to be determined

Weber, while not challenging the completeness of the court's curative instruction,

by the jury. The admission of this evidence properly bearing on what amounted to an

argues that it did nothing to heal an incurable

assertion of a defense does not by any stretch of the imagination so impugn the

[595 F.2d 1356]

situation, stating that "A placebo cannot cure a terminal condition." In candor, we
regard this hyperbolic characterization as a desperate bit of straw grabbing. In the
first place we would have had difficulty even absent the curative instruction in reading
this remark as any indication that the judge was expressing disbelief in the
defendant's testimony. The judge, however, made it abundantly clear, if there had
been any doubt, by his curative instruction that there was no reflection on the
witness's credibility. In any event, this was an isolated incident in a long and complex
trial. Weber testified for two full days during which the jury had ample opportunity to
formulate its opinion of his credibility without regard to what was at most an oblique
passing remark by the judge. Courts generally, and properly, decline to reverse in
comparable situations. See, e. g., United States v. Cardall, 550 F.2d 604, 606 (10th
Cir. 1976), cert. denied, 434 U.S. 841, 98 S.Ct. 137, 54 L.Ed.2d 105 (1978); Gordon
v. United States, 438 F.2d 858, 862-63 (5th Cir.), cert. denied, 404 U.S. 828, 92 S.Ct.
63, 30 L.Ed.2d 56 (1971); United States v. Allen, 431 F.2d 712, 712-13 (9th Cir.
1970); United States v. Wilkins, 422 F.Supp. 1371 (E.D.Pa. 1976), aff'd sub nom.
Appeal of Smith, 547 F.2d 1164 (3d Cir. 1976), 547 F.2d 1166 (3d Cir. 1976), 559 F.2d
1210 (3d Cir. 1977).

defendant's attorney as to make his assistance ineffective to the prejudice of his

client. We find no suggestion in the record that the attorney had the information with
respect to the letters any sooner than he provided the information to the Government.

X.

Judge's Comment during Weber's Testimony

Franklin Weber finally argues that a comment by the trial judge during his testimony
constitutes reversible error. The defendant testified, "I can swear that I did not see Mr.
Benton give him anything . . . ." The trial judge then said in the presence of the jury,
"that is what you are doing in everything you say. You understand that." Thereafter the

As the Supreme Court stated in United States v. Glasser, 315 U.S. 60, 83, 62 S.Ct.

matter was brought to the attention of the judge by way of a motion for a mistrial in

457, 471, 86 L.Ed. 680 (1942):

which it was claimed that Weber's credibility was seriously depreciated in the eyes of
[An] examination of the record as a whole leads to the conclusion that the substantial
rights of the petitioners were not affected. The trial was long and the incidents relied
on by petitioners few. We must guard against the magnification on appeal of
instances which were of little importance in their setting.

the jury. The court immediately stated that the remark was not intended in any such
way and offered to make that clear to the jury.

XI.

Sufficiency of Evidence as to Edwin Bull

88

The defendant Edwin Bull argues that the evidence against him was insufficient to

Rule 801(d)(2)(E) provides that statements of a co-conspirator made during the

sustain a conviction for conspiracy because of an absence of evidence showing that

course of and in furtherance of a conspiracy are not hearsay. In United States v.

he had knowledge of the illegal purposes of the conspiracy. He argues that the

Santiago, 582 F.2d 1128 (7th Cir. 1978), we held that the trial court alone should

statements of co-conspirators connecting him to the conspiracy were improperly

decide, as a

admitted against him, and that if these inadmissible statements had been excluded,

[595 F.2d 1357]

question of competence under Rule 104(a), the preliminary question of whether the
proponent has submitted sufficient proof that there was a conspiracy before admitting
a co-conspirator's statement under Rule 801(d)(2)(E). For the statement to be
admissible, we held that this preliminary showing must satisfy the preponderance of
the evidence standard, and that the trial court's determination of admissibility is final
as to admissibility.

his conviction could not stand.

Bull's theory of defense was that he was merely a "friendly and accommodating"
businessman who earned a finder's fee and a subcontract by introducing the Ingrams
to the contract opportunities available at the Sanitary District. Especially damaging to
this defense, however, was testimony admitted at trial of conversations between Bull's

The proceedings below, however, took place prior to our decision in Santiago, at a

alleged co-conspirators concerning Bull's role in the conspiracy. Benton testified, for

time when there were ambiguities in the law about who was to decide co-conspirator

example, that prior to receiving the contract, Ingram was having trouble generating

preliminary

sufficient cash to meet the demands of Sanitary District officials. When Weber learned

Weinstein, Evidence 104[05]. In Santiago we noted that in this circuit the former

of this problem, he instructed Benton to write a check for $25,000 (the amount then

standard for determining the admissibility of co-conspirators' statements committed

demanded) payable to "Mr. Bull's company, Bull Towing Company, and that he and

the question to both judge and jury. The trial court would admit the statement if the

Mr. Bull would handle this check and convert it into cash and take care of the staff of

proponent made a prima facie showing, on the basis of evidence other than the

the Sanitary District." Bull argues that without this statement the evidence merely

statement, that there had been a conspiracy. The jury, however, was instructed not to

shows that he deposited a check from Ingram for $25,000 in the No. 3 Bull Towing

consider the statement against another defendant unless they found, beyond a

account and drew a counter-check for the same amount and received cash. Bull also

reasonable doubt, that the evidence other than the statement showed that a

declared this sum on his corporate and personal income tax returns and paid the

conspiracy existed and that the other defendant was a member of the

necessary taxes. According to Bull's brief, "[t]here is not a scintilla of evidence that

conspiracy. See also United States v. Rizzo, 418 F.2d 71 (7th Cir. 1969), cert.

any of these monies reached anyone else." We hold that the co-conspirators'

denied, 397 U.S. 967, 90 S.Ct. 1006, 25 L.Ed.2d 260 (1970); United States v.

statements connecting Bull to the conspiracy were admissible under Fed.R. Evid.

Santos, 385 F.2d 43 (7th Cir. 1967), cert. denied, 390 U.S. 954, 88 S.Ct. 1048, 19

801(d)(2)(E) and that the evidence against Bull was adequate to sustain the

L.Ed.2d 1148 (1968).

questions

and

by

what

standards. See

generally, 1

J.

conviction.
The trial court in this case proceeded substantially according to the prior standard,
described in Santiago.41 Bull, however, relying on Santiago language, which, of
course, was not available to the trial judge here, seizes upon a part of the court's
instructions given during the course of the trial in connection with the admission of

89

testimony of statements of alleged co-conspirators. It is true that the judge did say

On analysis, all that the district court was really saying as to the establishment of a

that the jury could consider such statements on the question of whether a conspiracy

conspiracy was as follows: If there was testimony as to a conversation between B and

existed. Bull cites us to criticism in Santiago of "the view that the existence of a

C which reflected an agreement to violate the law, this testimony would be admissible

conspiracy could be proved by the very hearsay statement for which admission is

as to B and C and would, if believed by the jury, tend to establish a conspiracy as to B

sought." 582 F.2d at 1133 n. 11. That was done here, he argues, and constituted

and C. If during the course of the conversation either B or C had spoken of A's

"boot-strapping" proof which had been condemned by earlier cases.

participation this would not have been proof of A's participation unless and until it had
already been established by independent evidence, other than the statements of co-

This argument however, taking language of the instructions out of context, ignores the

conspirators, that A was a participant.

clear and explicit admonitions of the court during the course of the trial that as to any
particular charged co-conspirator it was essential that he be proved a participant in

While the quoted portion of the instructions above was perhaps repetitive, and we

the conspiracy by independent evidence before statements of others could be

note its substance as to the necessity for independent evidence as to any particular

considered on the question of his liability.

defendant becoming a conspiracy member was repeated thereafter, it is evident that

the trial judge was attempting to make absolutely clear to the jury by repetitive

Thus, on the first occasion during the trial that the subject was addressed, which was

emphasis that the statements of others could not be considered against a defendant

early in the trial, the judge instructed as follows:

for finding him to be a participant in a conspiracy unless his membership had been

There are two fundamental questions that you have to decide in regard to the
conspiracy count of the indictment. The first of those questions is what is the
conspiracy that is alleged by the indictment to have existed? Was there such a
conspiracy? On that question you consider all of the evidence that I allow in and you
make up your minds at the conclusion of the case as to whether a conspiracy, as
alleged in the indictment, has been shown to exist as between somebody.The second
question is and it is eight separate questions here was this particular defendant
shown to have been a member of that conspiracy. On that second question which you
must answer in regard to each defendant, only those acts of that particular defendant
should be considered to answer that question. You can't decide that Defendant B was
a member of the conspiracy, if you find there has been a conspiracy, on the basis of
something Defendant A said. It has to be on the basis of what you find Defendant B
said and did.Those are the two questions, and let's just assume, generally speaking,
that a jury in a hypothetical case finds Defendant B to have been a member of the
conspiracy. All right, then and only then are the statements and actions of his alleged
co-conspirators admissible against him. Provided they are acts and statements which
the jury finds were committed in furtherance of the objectives of the conspiracy.So, to
recapitulate, question one, was there a conspiracy? Question two, was Defendant B a
member of that conspiracy? Question three, as to any acts or statements of an
alleged co-conspirator in considering whether you are going to consider that against
Defendant B, was that act or statement committed in furtherance of the common
conspiracy?Only if you answer all three of those questions in the affirmative can you
consider this act or statement of, say, Defendant A against Defendant B.

otherwise independently established. From the record we regard this attempt by the
judge to have been successful.
In sum, we fail to see any prejudice to Bull. The instructions on conspiracy as in the
case of all instructions must be considered in the whole complex of instructions, and it
was made perfectly clear to the jury by those instructions that even though a
conspiracy had been established by all of the evidence which the court had admitted,
the jury could not find Bull guilty as a conspirator unless his membership in the
conspiracy had been established by independent evidence other than the statements
of co-conspirators.
Further, and in any event on the record in this case, we are firmly convinced that
apart from any statements there was overwhelming independent evidence sufficient
to show the existence of a conspiracy. If there had been any error in the instruction it

90

would have been harmless. Fed.R.Evid. 103(a); Williams v. United States, 119

We have already found that the evidence that a conspiracy existed was

U.S.App.D.C. 190, 338 F.2d 530 (1964).

overwhelming. In United States v. Robinson, 470 F.2d 121 (7th Cir. 1972), we noted
that once the existence of a common scheme is established, very little may be

Bull disagrees that there was independent evidence linking him to the conspiracy and

required to show beyond a reasonable doubt that a particular defendant became a

asserts that the co-conspirators' statements were therefore not admissible against

party. See also United States v. Harris, 542 F.2d 1283 (7th Cir. 1976), cert.

him. As we have said the trial court instructed the jury that it must find beyond a

denied, 430 U.S. 934, 97 S.Ct. 1558, 51 L.Ed.2d 779 (1977). From the evidence of

reasonable doubt and on the basis of independent evidence that Bull was a member

Bull's independent acts and statements, the jury was entitled to find beyond a

of the conspiracy before it could consider co-conspirator statements against Bull.

reasonable doubt that Bull was a member of this conspiracy, and the jury therefore
was entitled to use the statements of other conspirators against him.42 The

In reviewing the jury's determination of the sufficiency of the independent evidence

discriminating conclusions of guilt and innocence returned by the jury in this complex

linking Bull to the conspiracy, we do not weigh the evidence or determine the

case demonstrate that the jury studied the evidence with great care. See United

credibility of witnesses. We will affirm the jury's finding if there is substantial evidence,

States v. Kaufman, 429 F.2d 240, 244 (2d Cir.), cert. denied, 400 U.S. 925, 91 S.Ct.

viewed in the light most favorable to the government, to support it, Glasser v. United

185, 27 L.Ed.2d 184 (1970). We decline to disturb their verdict, holding that the

States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942); United States v.

independent evidence of Bull's knowing participation in the conspiracy was sufficient

Buschman, 527 F.2d 1082, 1085 (7th Cir. 1976), and we therefore turn to an

to support the jury's use of the co-conspirators' statements against him, and that with

examination of that evidence.

such evidence there is no merit in his claim of insufficiency.

[595 F.2d 1359]

Robert Howson, an Ingram Contractors, Inc. Vice President, testified that Bull came
to New Orleans in March 1971 and told him that for a southern contractor like Ingram
to get the Sanitary District contract, a political contribution would be necessary.
Benton testified that Bull brought Benton and Weber together for a meeting later that
month, and that the day after this meeting, Bull told Benton that "if [Benton] agreed
with the discussion with Mr. Weber, he felt Ingram would get this contract, there would
be no problem, and that he expected to receive $100,000 and Mr. Weber's group
$200,000." There was evidence that Bull deposited a $25,000 check from Ingram,
and withdrew the same amount in cash. Although Bull declared the amount on his
taxes, there was also testimony that Bull insisted to Benton that his finder's fee from
Ingram include reimbursement for the taxes he paid on the check drawn to his
company. From this testimony, the jury certainly could infer that Bull did not keep the
$25,000, and from Bull's insistence that Ingram be responsible for the taxes, the jury
could infer that Bull's laundering of the check was a favor for Ingram, to whom Bull
had earlier suggested the need for political contributions in exchange for a contract.
The testimony also showed that Bull's involvement in the bribery scheme continued.
When insisting on an increase in his subcontract rates, Bull was reminded by Benton
in January 1975 "that this contract extension was a similar situation with the original
contract and that Ingram did not retain all of the increase that would be reflected
between the various unit prices in the two agreements."

XII.

Bull's Claim of Prosecutorial Misconduct

Edwin Bull also argues that during its closing argument, the Government raised for
the first time an unfounded inference that he bribed someone in the Illinois Commerce
Commission to procure a Certificate of Public Necessity and Convenience for
[595 F.2d 1360]
Ingram. Specifically, during closing arguments the Government attorney made the
following statement:
On July 27, 1971, Frank Weber and Ed Bull went through another series of
transactions to generate cash very similar to what they did in April, to generate the
$25,000. This time the amount involved was $20,000.Frank Weber made out a
Southwest Expressways' check for $20,000, payable to Bull Towing. Bull took it to the
bank, deposited it into the Bull Towing Company account, and wrote a check in that
amount made payable to himself and received $20,000 in cash.This occurred on July

91

27, ladies and gentlemen, the day before Ingram received his Commerce
Commission Certificate of Registration.

Ingram. On direct examination, Weber testified that he gave Bull the $20,000 check
as a payment for a dredge, and during cross-examination the Government confronted

During rebuttal argument, the Government added:

Weber with the connection between the memo, the laundered check, and the
issuance of the Certificate. Bull did not object to this line of questioning.

Would you put up Government Exhibit 1-12(A).That is a check from Southwest

Expressways to No. 3 Bull Towing dated July 27, 1971, the same day as Government
Exhibit 1-12(D) was issued. It is again a check to Ed Bull, and as the evidence
indicates, Mr. Bull left the bank with $20,000. Benton had nothing to do with this
transaction, but as you have seen from the notes that Mr. Weber wrote, there was
apparently some sort of problem at the ICC, Illinois Commerce Commission.It just so
happens that the following day, Ingram is granted their Certificate of Convenience and
Necessity by the Illinois Commerce Commission. Well, the bankers and those
documents are not ghosts, and they begin to add up.

These matters admitted in evidence were available to Bull in time to prepare his
rebuttal. The conversion of the $20,000 check to cash was one of the overt acts
charged in the conspiracy indictment. The documents connected with this line of proof
were turned over to Bull's attorney ten months prior to the trial. Bull's argument that
this closing statement unfairly prejudiced his defense must therefore fail.

Bull argues that this suggestion constituted an unconstitutional amendment of the

indictment and that it prejudiced unfairly the preparation of his defense. The

Our examination of the Government's argument and the evidence supporting it also

defendant concedes that the evidence shows he converted a $20,000 check from

leads us to conclude that the inference created was that Weber, not Bull, bribed the

Franklin Weber to cash on July 27, 1971, but argues that absolutely no evidence

Commerce Commission. The Government therefore did not stray beyond the confines

supports the implication in the Government argument that he bribed the Commerce

of the scheme alleged in the indictment, which describes Bull in paragraphs

Commission.

[595 F.2d 1361]

21 and 27 as having been a knowing conduit for the bribery funds. Furthermore,
paragraphs 21 and 27 of the indictment describe in broad language the objects of the
bribery scheme as "public officers and employees," so that proof of bribes to Illinois
Commerce Commission officials was entirely within the scope of the scheme alleged.
Bull's argument that any proof involving officials from agencies other than the Sanitary
District amended the indictment is therefore without merit. See Stirone v. United
States, 361 U.S. 212, 218-19, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960).

Although the prosecution, of course, must never refer to matters with no basis in the
evidence, United States v. Morris, 568 F.2d 396 (5th Cir. 1978); United States v.
Meeker, 558 F.2d 387 (7th Cir. 1977), the prosecutor may in argument suggest
reasonable inferences from the evidence already admitted. United States v.
Jones, 157 U.S.App.D.C. 158, 482 F.2d 747 (1973). Because of the secret nature of

XIII.

the crime, conspiracy is especially subject to proof by circumstantial evidence. We

decline to require the prosecutor to suggest to the jury only conclusions supported by

Claimed Error of Instructions on Travel Act

direct evidence.
The defendant Frederick Ingram challenges the portion of the court's instructions
During the trial there was evidence that the Certificate of Public Necessity and

pertaining to the counts charging violations of 18 U.S.C. 1952 (the "Travel Act")

Convenience was granted to Ingram the day after Bull converted the check to cash.

insofar as the jury was told that under the Travel Act a defendant need not know or

Government Exhibit 11-1, a memo made by Weber, also admitted in evidence,

reasonably foresee that the facilities of interstate commerce will be used or that

indicated that Weber had made payments to the Commerce Commission on behalf of

someone will travel in interstate commerce in order to be guilty under the Travel Act.

92

VICTORIO, as Presiding Judge of RTC-Rosales, Pangasinan, Branch 53, and

JUAN SIM, Respondents.

The authority in this circuit is that neither the language nor the purpose of the Travel
Act compels this showing of knowledge on the part of each co-conspirator. United

Quisumbing, Torres & Evangelista for Petitioner.

States v. Peskin, 527 F.2d 71 (7th Cir. 1975), cert. denied, 429 U.S. 818, 97 S.Ct. 63,

Bince, Oficiana & Dancel for Private Respondent.

50 L.Ed.2d 79 (1976). See United States v. Feola, 420 U.S. 671, 95 S.Ct. 1255, 43
L.Ed.2d 541 (1975). The defendant has offered no persuasive reason for a different

SYLLABUS

rule. The use of interstate facilities merely provides the basis for federal
jurisdiction. United States v. Peskin, 527 F.2d at 78; United States v. Bursten, 560

1. REMEDIAL LAW; ACTIONS; EVIDENCE; PRIVILEGED COMMUNICATIONS;

PHYSICIAN-PATIENT PRIVILEGE; RATIONAL BEHIND THE RULE. This rule on
the physician-patient privilege is intended to facilitate and make safe full and
confidential disclosure by the patient to the physician of all facts, circumstances and
symptoms, untrammeled by apprehension of their subsequent and enforced
disclosure and publication on the witness stand, to the end that the physician may
form a correct opinion, and be enabled safely and efficaciously to treat his patient. It
rests in public policy and is for the general interest of the community.

F.2d 779, 783-84 (7th Cir. 1977).

What we have said herein no way indicates that there is not a necessity for interstate
travel or the use of an interstate facility. The court did properly instruct the jury that the
Government had to prove:

2. ID.; ID.; ID.; ID.; ID.; SUBJECT TO WAIVER. Since the object of the privilege is
to protect the patient, it may be waived if no timely objection is made to the
physicians testimony.

(1) that someone traveled in interstate commerce, or used an interstate facility in

furtherance of the bribery scheme; (2) that a person who caused the travel or use did
so with intent to facilitate the bribery scheme; (3) that a member of the scheme
thereafter performed or caused to be performed acts to promote the carrying on of the
bribery scheme; and (4) that the particular defendant under consideration was a
knowing and willful participant in the bribery scheme at the time of the interstate travel
or use of the interstate facility and at the time the subsequent act or acts took place.

3. ID.; ID.; ID.; ID.; ID.; REQUISITES. In order that the privilege may be
successfully claimed, the following requisites must concur: "1. the privilege is claimed
in a civil case; 2. the person against whom the privilege is claimed is one duly
authorized to practice medicine, surgery or obstetrics; 3. such person acquired the
information while he was attending to the patient in his professional capacity; 4. the
information was necessary to enable him to act in that capacity; and 5. the
information was confidential, and, if disclosed, would blacken the reputation (formerly
character) of the patient."cralaw virtua1aw library

The fact that Frederick Ingram did not travel interstate or use interstate facilities or
that he may not have known that others in the bribery scheme would do so is

4. ID.; ID.; ID.; ID.; CONDITIONS. These requisites conform with the four (4)
fundamental conditions necessary for the establishment of a privilege against the
disclosure of certain communications, to wit: "1. The communications must originate
in a confidence that they will not be disclosed. 2. This element of confidentiality must
be essential to the full and satisfactory maintenance of the relation between the
parties. 3. The relation must be one which in the opinion of the community ought to be
sedulously fostered 4. The injury that would inure to the relation by the disclosure of
the communications must be greater than the benefit thereby gained for the correct
disposal of litigation."cralaw virtua1aw library

immaterial.
The judgments accordingly are affirmed.
AFFIRMED.

5. ID.; ID.; ID.; ID.; PHYSICIAN-PATIENT PRIVILEGE; SCOPE. The physician may
be considered to be acting in his professional capacity when he attends to the patient
for curative, preventive, or palliative treatment. Thus, only disclosures which would
have been made to the physician to enable him "safely and efficaciously to treat his
patient" are covered by the privilege. It is to be emphasized that "it is the tenor only of
the communication that is privileged. The mere fact of making a communication, as
well as the date of a consultation and the number of consultations, are therefore not
privileged from disclosure, so long as the subject communicated is not stated."cralaw

THIRD DIVISION
[G.R. No. 91114. September 25, 1992.]
NELLY LIM, Petitioner, v. THE COURT OF APPEALS, HON. MANUEL D.

93

virtua1aw library

that petitioner has been allegedly suffering from a mental illness called schizophrenia
"before, during and after the marriage and until the present." After the issues were
joined and the pre-trial was terminated, trial on the merits ensued. Private respondent
presented three (3) witnesses before taking the witness stand himself to testify on his
own behalf. On 11 January 1989, private respondents counsel announced that he
would present as his next witness the Chief of the Female Services of the National
Mental Hospital, Dr. Lydia Acampado, a Doctor of Medicine who specializes in
Psychiatry. Said counsel forthwith orally applied for the issuance of a subpoena ad
testificandum requiring Dr. Acampado to testify on 25 January 1989. Petitioners
counsel opposed the motion on the ground that the testimony sought to be elicited
from the witness is privileged since the latter had examined the petitioner in a
professional capacity and had diagnosed her to be suffering from schizophrenia. Over
such opposition, the subpoena was issued on 12 January 1989.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph

6. ID.; ID.; ID.; BURDEN OF PROOF AND PRESUMPTIONS; ONE WHO CLAIMS
PRIVILEGED COMMUNICATIONS MUST PROVE REQUISITES THEREOF. One
who claims this privilege must prove the presence of these aforementioned requisites.
7. ID.; ID.; ID.; PRIVILEGED COMMUNICATIONS; PHYSICIAN-PATIENT
PRIVILEGE; INFORMATION GATHERED IN PRESENCE OF THIRD PARTIES, NOT
PRIVILEGED. There is authority to the effect that information elicited during
consultation with a physician in the presence of third parties removes such
information from the mantle of the privilege: "Some courts have held that the casual
presence of a third person destroys the confidential nature of the communication
between doctor and patient and thus destroys the privilege, and that under such
circumstances the doctor may testify. Other courts have reached a contrary
result."cralaw virtua1aw library

On 24 January 1989, petitioners counsel filed an urgent omnibus motion to quash the
subpoena and suspend the proceedings pending resolution of the motion.

8. ID.; ID.; ID.; ID.; ID.; PRIVILEGED, WAIVED IN CASE AT BAR. while it may be
true that counsel for the petitioner opposed the oral request for the issuance of a
subpoena ad testificandum to Dr. Acampado and filed a formal motion for the quashal
of the said subpoena a day before the witness was to testify, the petitioner makes no
claim in any of her pleadings that her counsel had objected to any question asked of
the witness on the ground that it elicited an answer that would violate the privilege,
despite the trial courts advise that said counsel may interpose his objection to the
testimony "once it becomes apparent that the testimony, sought to be elicited is
covered by the privileged communication rule." The particular portions of the
stenographic notes of the testimony of Dr. Acampado quoted in the petitioners
Petition and Memorandum, and in the private respondents Memorandum, do not at
all show that any objections were interposed. Even granting ex gratia that the
testimony of Dr. Acampado could be covered by the privilege, the failure to
seasonably object thereto amounted to a waiver thereof.

Before Dr. Acampado took the witness stand on 25 January 1989, the court heard this
urgent motion. Movant argued that having seen and examined the petitioner in a
professional capacity, Dr. Acampado is barred from testifying under the rule on the
confidentiality of a physician-patient relationship. Counsel for private respondent
contended, however, that Dr. Acampado would be presented as an expert witness
and would not testify on any information acquired while attending to the petitioner in a
professional capacity. The trial court, per respondent Judge, denied the motion and
allowed the witness to testify. Dr. Acampado thus took the witness stand, was
qualified by counsel for private respondent as an expert witness and was asked
hypothetical questions related to her field of expertise. She neither revealed the
illness she examined and treated the petitioner for nor disclosed the results of her
examination and the medicines she had prescribed.
Since petitioners counsel insisted that the ruling of the court on the motion be
reduced to writing, respondent Judge issued the following Order on the same
date:jgc:chanrobles.com.ph

DECISION

"In his omnibus motion filed with the Court only yesterday, January 24, 1989,
petitioner seeks to prevent Dr. Lydia Acampado from testifying because she saw and
examined respondent Nelly Lim in her professional capacity perforce her testimony is
covered by the privileged (sic) communication rule.

DAVIDE, JR., J.:

This petition brings into focus the rule on the confidentiality of the physician-patient
relationship. Petitioner urges this Court to strike down as being violative thereof the
resolution of public respondent Court of Appeals in C.A.-G.R. SP No. 16991 denying
due course to a petition to annul the order of the trial court allowing a Psychiatrist of
the National Mental Hospital to testify as an expert witness and not as an attending
physician of petitioner.

Petitioner contends that Dr. Acampado is being presented as an expert witness and
that she will not testify on any information she acquired in (sic) attending to Nelly Lim
in her professional capacity.

Petitioner and private respondent are lawfully married to each other.

Based on the foregoing manifestation of counsel for petitioner, the Court denied the
respondents motion and forthwith allowed Dr. Acampado to testify. However, the
Court advised counsel for respondent to interpose his objection once it becomes
apparent that the testimony sought to be elicited is covered by the privileged
communication rule.

On 25 November 1987, private respondent filed with Branch 53 of the Regional Trial
Court (RTC) of Pangasinan a petition for annulment of such marriage on the ground

On the witness box, Dr. Acampado answered routinary (sic) questions to qualify her
as an expert in psychiatry; she was asked to render an opinion as to what kind of

The parties are in agreement as to the following facts:chanrob1es virtual 1aw library

94

illness (sic) are stelazine tablets applied to; she was asked to render an opinion on a
(sic) hypothetical facts respecting certain behaviours of a person; and finally she
admitted she saw and treated Nelly Lim but she never revealed what illness she
examined and treated her (sic); nor (sic) the result of her examination of Nelly Lim,
nor (sic) the medicines she prescribed.

answer solely on facts related in (sic) the hypothetical question. (Butler v. Role, 242
Pac. 436; Supreme Court of Arizona Jan. 7, 1926). Expert testimony of a physician
based on hypothetical question (sic) as to cause of illness of a person whom he has
attended is not privileged, provided the physician does not give testimony tending to
disclose confidential information related to him in his professional capacity while
attending to the patient. (Crago v. City of Cedar Rapids, 98 NW 354, see Jones on
Evidence, Vol. 3, p. 843, 3rd Ed.).

WHEREFORE, the omnibus motion dated January 19, 1989 is hereby DENIED." 1
On 3 March 1989, petitioner filed with the public respondent Court of Appeals a
petition 2 for certiorari and prohibition, docketed therein as C.A.-G.R. SP No. 16991,
to annul the aforesaid order of respondent Judge on the ground that the same was
issued with grave abuse of discretion amounting to lack of jurisdiction, and to prohibit
him from proceeding with the reception of Dr. Acampados
testimony.chanrobles.com : virtual law library

The rule on privilege (sic) communication in the relation of physician and patient
proceeds from the fundamental assumption that the communication to deserve
protection must be confidential in their origin. Confidentiality is not to be blindly
implied from the mere relation of physician and patient. It might be implied according
to circumstances of each case, taking into consideration the nature of the ailment and
the occasion of the consultation. The claimant of the privilege has the burden of
establishing in each instance all the facts necessary to create the privilege, including
the confidential nature of the information given." 4

On 18 September 1989, the Court of Appeals promulgated a resolution 3 denying due

course to the petition on the ground that "the petitioner failed in establishing the
confidential nature of the testimony given by or obtained from Dr. Acampado when
she testified on January 25, 1989." Hence, the respondent Judge committed no grave
abuse of discretion. In support thereof, the respondent Court discussed the conditions
which would render as inadmissible testimonial evidence between a physician and his
patient under paragraph (c), Section 24, Rule 130 of the Revised Rules of Court and
made the following findings:jgc:chanrobles.com.ph

Her motion to reconsider the resolution having been denied, petitioner took this
recourse under Rule 45 of the Rules of Court. In her view, the respondent Court of
Appeals "seriously erred" :chanrob1es virtual 1aw library
"I.

"The present suit is a civil case for annulment of marriage and the person whose
testimony is sought to be stopped as a privileged communication is a physician, who
was summoned by the patient in her professional capacity for curative remedy or
treatment. The divergence in views is whether the information given by the physician
in her testimony in open court on January 25, 1989 was a privileged communication.
We are of the opinion that they do not fall within the realm of a privileged
communication because the information were (sic) not obtained from the patient while
attending her in her professional capacity and neither were (sic) the information
necessary to enable the physician to prescribe or give treatment to the patient Nelly
Lim. And neither does the information obtained from the physician tend to blacken the
character of the patient or bring disgrace to her or invite reproach. Dr. Acampado is a
Medical Specialist II and in-charge (sic) of the Female Service of the National Center
for Mental Health a fellow of the Philippine Psychiatrist Association and a Diplomate
of the Philippine Board of Psychiatrists. She was summoned to testify as an expert
witness and not as an attending physician of petitioner.

. . . in not finding that all the essential elements of the rule on physician-patient
privileged communication under Section 21, Rule 130 of the Rules of Court (Section
24, Rule 130 of the Revised Rules of Evidence) exist in the case at bar.
II.
. . . in believing that Dr. Acampado was summoned as an expert witness and not as
an attending physician of petitioner.
III.
. . . in concluding that Dr. Acampado made no declaration that touched (sic) or
disclosed any information which she has acquired from her patient, Nelly Lim, during
the period she attended her patient in a professional capacity.

After a careful scrutiny of the transcript of Dr. Acampados testimony, We find no

declaration that touched (sic) or disclosed any information which she has acquired
from her patient, Nelly Lim, during the period she attended her patient in a
professional capacity. Although she testified that she examined and interviewed the
patient, she did not disclose anything she obtained in the course of her examination,
interview and treatment of her patient. Given a set of facts and asked a hypothetical
question, Dr. Acampado rendered an opinion regarding the history and behaviour of
the fictitious character in the hypothetical problem. The facts and conditions alleged in
the hypothetical problem did not refer and (sic) had no bearing to (sic) whatever
information or findings the doctor obtained from attending the (sic) patient. A
physician is not disqualified to testify as an expert concerning a patients ailment,
when he can disregard knowledge acquired in attending such patient and make

IV.
. . . in declaring that the petitioner failed in establishing the confidential nature of the
testimony given by or obtained from Dr. Acampado." 5
We gave due course to the petition and required the parties to submit their respective
Memoranda 6 after the private respondent filed his Comment 7 and the petitioner
submitted her reply 8 thereto. The parties subsequently filed their separate
Memoranda.

95

The petition is devoid of any merit. Respondent Court of Appeals committed no

reversible error in its challenged resolution.

2. the person against whom the privilege is claimed is one duly authorized to practice
medicine, surgery or obstetrics;

The law in point is paragraph (c), Section 24 of the Revised Rules on Evidence which
reads:jgc:chanrobles.com.ph

3. such person acquired the information while he was attending to the patient in his
professional capacity;

"SECTION 24. Disqualification by reason of privileged communication. The

following persons cannot testify as to matters learned in confidence in the following
cases:chanrob1es virtual 1aw library

4. the information was necessary to enable him to act in that capacity; and

5. the information was confidential, and, if disclosed, would blacken the reputation
(formerly character) of the patient." 14

These requisites conform with the four (4) fundamental conditions necessary for the
establishment of a privilege against the disclosure of certain communications, to
wit:jgc:chanrobles.com.ph

(c) A person authorized to practice medicine, surgery or obstetrics cannot in a civil

case, without the consent of the patient, be examined as to any advice or treatment
given by him or any information which he may have acquired in attending such patient
in a professional capacity, which information was necessary to enable him to act in
that capacity, and which would blacken the reputation of the patient." chanrobles
virtual lawlibrary

"1. The communications must originate in a confidence that they will not be disclosed.
2. This element of confidentiality must be essential to the full and satisfactory
maintenance of the relation between the parties.
3. The relation must be one which in the opinion of the community ought to be
sedulously fostered

This is a reproduction of paragraph (c), Section 21, Rule 130 of the 1964 Revised
Rules of Court with two (2) modifications, namely: (a) the inclusion of the phrase
"advice or treatment given by him," and (b) substitution of the word reputation for the
word character. Said Section 21 in turn is a reproduction of paragraph (f), Section 26,
Rule 123 of the 1940 Rules of Court with a modification consisting in the change of
the phrase "which would tend to blacken" in the latter to "would blacken." 9 Verily,
these changes affected the meaning of the provision. Under the 1940 Rules of Court,
it was sufficient if the information would tend to blacken the character of the patient. In
the 1964 Rules of Court, a stricter requirement was imposed; it was imperative that
the information would blacken such character. With the advent of the Revised Rules
on Evidence on 1 July 1989, the rule was relaxed once more by the substitution of the
word character with the word reputation. There is a distinction between these two
concepts." Character is what a man is, and reputation is what he is supposed to be
in what people say he is.Character depends on attributes possessed, and
reputation on attributes which others believe one to possess. The former signifies
reality and the latter merely what is accepted to be reality at present." 10

4. The injury that would inure to the relation by the disclosure of the communications
must be greater than the benefit thereby gained for the correct disposal of litigation."
15
The physician may be considered to be acting in his professional capacity when he
attends to the patient for curative, preventive, or palliative treatment. Thus, only
disclosures which would have been made to the physician to enable him "safely and
efficaciously to treat his patient" are covered by the privilege. 16 It is to be
emphasized that "it is the tenor only of the communication that is privileged. The mere
fact of making a communication, as well as the date of a consultation and the number
of consultations, are therefore not privileged from disclosure, so long as the subject
communicated is not stated." 17
One who claims this privilege must prove the presence of these aforementioned
requisites. 18

This rule on the physician-patient privilege is intended to facilitate and make safe full
and confidential disclosure by the patient to the physician of all facts, circumstances
and symptoms, untrammeled by apprehension of their subsequent and enforced
disclosure and publication on the witness stand, to the end that the physician may
form a correct opinion, and be enabled safely and efficaciously to treat his patient. 11
It rests in public policy and is for the general interest of the community. 12

Our careful evaluation of the submitted pleadings leads Us to no other course of

action but to agree with the respondent Courts observation that the petitioner failed to
discharge that burden. In the first place, Dr. Acampado was presented and qualified
as an expert witness. As correctly held by the Court of Appeals, she did not disclose
anything obtained in the course of her examination, interview and treatment of the
petitioner; moreover, the facts and conditions alleged in the hypothetical problem did
not refer to and had no bearing on whatever information or findings the doctor
obtained while attending to the patient. There is, as well, no showing that Dr.
Acampados answers to the questions propounded to her relating to the hypothetical
problem were influenced by the information obtained from the petitioner. Otherwise
stated, her expert opinion excluded whatever information or knowledge she had about
the petitioner which was acquired by reason of the physician-patient relationship

Since the object of the privilege is to protect the patient, it may be waived if no timely
objection is made to the physicians testimony. 13
In order that the privilege may be successfully claimed, the following requisites must
concur:jgc:chanrobles.com.ph
"1. the privilege is claimed in a civil case;

96

existing between them. As an expert witness, her testimony before the trial court
cannot then be excluded. The rule on this point is summarized as follows:chanrobles
virtual lawlibrary

"Some courts have held that the casual presence of a third person destroys the
confidential nature of the communication between doctor and patient and thus
destroys the privilege, and that under such circumstances the doctor may testify.
Other courts have reached a contrary result." 21

"The predominating view, with some scant authority otherwise, is that the statutory
physician-patient privilege, though duly claimed, is not violated by permitting a
physician to give expert opinion testimony in response to a strictly hypothetical
question in a lawsuit involving the physical mental condition of a patient whom he has
attended professionally, where his opinion is based strictly upon the hypothetical facts
stated, excluding and disregarding any personal professional knowledge he may have
concerning such patient. But in order to avoid the bar of the physician-patient
privilege where it is asserted in such a case, the physician must base his opinion
solely upon the facts hypothesized in the question, excluding from consideration his
personal knowledge of the patient acquired through the physician and patient
relationship. If he cannot or does not exclude from consideration his personal
professional knowledge of the patients condition he should not be permitted to testify
as to his expert opinion." 19

Thirdly, except for the petitioners sweeping claim that" (T)he information given by
Dr. Acampado brings disgrace and invite (sic) reproach to petitioner by falsely making
it appear in the eyes of the trial court and the public that the latter was suffering from
a mental disturbance called schizophrenia which caused, and continues to cause,
irreparable injury to the name and reputation of petitioner and her family," 22 which
is based on a wrong premise, nothing specific or concrete was offered to show that
indeed, the information obtained from Dr. Acampado would blacken the formers
"character" (or "reputation"). Dr. Acampado never disclosed any information obtained
from the petitioner regarding the latters ailment and the treatment recommended
therefor.chanrobles.com : virtual law library
Finally, while it may be true that counsel for the petitioner opposed the oral request for
the issuance of a subpoena ad testificandum to Dr. Acampado and filed a formal
motion for the quashal of the said subpoena a day before the witness was to testify,
the petitioner makes no claim in any of her pleadings that her counsel had objected to
any question asked of the witness on the ground that it elicited an answer that would
violate the privilege, despite the trial courts advise that said counsel may interpose
his objection to the testimony "once it becomes apparent that the testimony, sought to
be elicited is covered by the privileged communication rule." The particular portions of
the stenographic notes of the testimony of Dr. Acampado quoted in the petitioners
Petition 23 and Memorandum, 24 and in the private respondents Memorandum, 25
do not at all show that any objections were interposed. Even granting ex gratia that
the testimony of Dr. Acampado could be covered by the privilege, the failure to
seasonably object thereto amounted to a waiver thereof.

Secondly, it is quite clear from Dr. Acampados testimony that the petitioner was never
interviewed alone. Said interviews were always conducted in the presence of a third
party, thus:jgc:chanrobles.com.ph
"Q I am asking you, doctor, whom did you interview?
A I interviewed the husband first, then the father and after having the history, I
interviewed the patient, Nelly.
Q How many times did Juan Sim and Nelly Lim go to your office?
A Now, the two (2) of them came three (3) times. As I have stated before, once in the
month of April of 1987 and two (2) times for the month of June 1987, and after that,
since July of 1987, it was the father of Nelly, Dr. Lim, who was bringing Nelly to me
until November of 1987.

WHEREFORE, the instant petition is DENIED for lack of merit.

Costs against petitioner.

Q Now, Dr. Lim is a fellow physician?

SO ORDERED.

A Yes, I understand.
Q Was there anything that he told you when he visited with you in a clinic?

Republic of the Philippines

SUPREME COURT
Manila

A I would say that there was none. Even if I asked information about Nelly, I could not
get anything from Dr. Lim.
Q Now, when Dr. Lim and his daughter went to your clinic, was there any doctor who
was also present during that interview?

FIRST DIVISION

A No, sir, I dont remember any." 20

There is authority to the effect that information elicited during consultation with a
physician in the presence of third parties removes such information from the mantle of
the privilege:jgc:chanrobles.com.ph

G.R. No. 108854 June 14, 1994

97

MA. PAZ FERNANDEZ KROHN, petitioner,

vs.
COURT OF APPEALS and EDGAR KROHN, JR., respondents.

On 23 October 1990, Edgar filed a petition for the annulment of his marriage with Ma.
Paz before the trial court. 3In his petition, he cited the Confidential Psychiatric
Evaluation Report which Ma. Paz merely denied in her Answer as "either unfounded
or irrelevant." 4

Cruz, Durian, Agabin, Atienza, Alday and Tuason for petitioner.

At the hearing on 8 May 1991, Edgar took the witness stand and tried to testify on the
contents of the Confidential Psychiatric Evaluation Report. This was objected to on
the ground that it violated the rule on privileged communication between physician
and patient. Subsequently, Ma. Paz filed a Manifestation expressing her "continuing
objection" to any evidence, oral or documentary, "that would thwart the physicianpatient privileged communication rule," 5 and thereafter submitted a Statement for the
Record asserting among others that "there is no factual or legal basis whatsoever for
petitioner (Edgar) to claim 'psychological incapacity' to annul their marriage, such
ground being completely false, fabricated and merely an afterthought." 6 Before
leaving for Spain where she has since resided after their separation, Ma. Paz also
authorized and instructed her counsel to oppose the suit and pursue her counterclaim
even during her absence.

Oscar F. Martinez for private respondent.

BELLOSILLO, J.:
A confidential psychiatric evaluation report is being presented in evidence before the
trial court in a petition for annulment of marriage grounded on psychological
incapacity. The witness testifying on the report is the husband who initiated the
annulment proceedings, not the physician who prepared the report.

On 29 May 1991, Edgar opposed Ma. Paz' motion to disallow the introduction of the
confidential psychiatric report as evidence, 7 and afterwards moved to strike out Ma.
Paz' Statement for the Record. 8

The subject of the evaluation report, Ma. Paz Fernandez Krohn, invoking the rule on
privileged communication between physician and patient, seeks to enjoin her
husband from disclosing the contents of the report. After failing to convince the trial
court and the appellate court, she is now before us on a petition for review
on certiorari.

On 4 June 1991, the trial court issued an Order admitting the Confidential Psychiatric
Evaluation Report in evidence and ruling that

On 14 June 1964, Edgar Krohn, Jr., and Ma. Paz Fernandez were married at the
Saint Vincent de Paul Church in San Marcelino, Manila. The union produced three
children, Edgar Johannes, Karl Wilhelm and Alexandra. Their blessings
notwithstanding, the relationship between the couple developed into a stormy one. In
1971, Ma. Paz underwent psychological testing purportedly in an effort to ease the
marital strain. The effort however proved futile. In 1973, they finally separated in fact.

. . . the Court resolves to overrule the objection and to sustain the

Opposition to the respondent's Motion; first, because the very issue
in this case is whether or not the respondent had been suffering
from psychological incapacity; and secondly, when the said
psychiatric report was referred to in the complaint, the respondent
did not object thereto on the ground of the supposed privileged
communication between patient and physician. What was raised by
the respondent was that the said psychiatric report was irrelevant.
So, the Court feels that in the interest of justice and for the purpose
of determining whether the respondent as alleged in the petition
was suffering from psychological incapacity, the said psychiatric
report is very material and may be testified to by petitioner (Edgar
Krohn, Jr.) without prejudice on the part of the respondent to
dispute the said report or to cross-examination first the petitioner
and later the psychiatrist who prepared the same if the latter will be
presented. 9

In 1975, Edgar was able to secure a copy of the confidential psychiatric report on Ma.
Paz prepared and signed by Drs. Cornelio Banaag, Jr., and Baltazar Reyes. On 2
November 1978, presenting the report among others, he obtained a decree
("Conclusion") from the Tribunal Metropolitanum Matrimoniale in Manila nullifying his
church marriage with Ma. Paz on the ground of "incapacitas assumendi onera
conjugalia due to lack of due discretion existent at the time of the wedding and
thereafter." 1 On 10 July 1979, the decree was confirmed and pronounced "Final and
Definite." 2
Meanwhile, on 30 July 1982, the then Court of First Instance (now Regional Trial
Court) of Pasig, Br. II, issued an order granting the voluntary dissolution of the
conjugal partnership.

On 27 November 1991, the trial court denied the Motion to Reconsider Order dated
June 4, 1991, and directed that the Statement for the Record filed by Ma. Paz be
stricken off the record. A subsequent motion for reconsideration filed by her counsel
was likewise denied.

98

Counsel of Ma. Paz then elevated the issue to respondent Court of Appeals. In a
Decision promulgated 30 October 1992, the appellate court dismissed the petition
for certiorari. 10 On 5 February 1993, the motion to reconsider the dismissal was
likewise denied. Hence, the instant petition for review.

Besides, private respondent submits that privileged communication may be waived by

the person entitled thereto, and this petitioner expressly did when she gave her
unconditional consent to the use of the psychiatric evaluation report when it was
presented to the Tribunal Metropolitanum Matrimoniale which took it into account
among others in deciding the case and declaring their marriage null and void. Private
respondent further argues that petitioner also gave her implied consent when she
failed to specifically object to the admissibility of the report in her Answer where she
merely described the evaluation report as "either unfounded or irrelevant." At any
rate, failure to interpose a timely objection at the earliest opportunity to the evidence
presented on privileged matters may be construed as an implied waiver.

Petitioner now seeks to enjoin the presentation and disclosure of the contents of the
psychiatric report and prays for the admission of her Statement for the Record to form
part of the records of the case. She argues that since
Sec. 24, par. (c), Rule 130, of the Rules of Court 11 prohibits a physician from
testifying on matters which he may have acquired in attending to a patient in a
professional capacity, "WITH MORE REASON should be third person (like
respondent-husband in this particular instance) be PROHIBITED from testifying on
privileged matters between a physician and patient or from submitting any medical
report, findings or evaluation prepared by a physician which the latter has acquired as
a result of his confidential and privileged relation with a patient." 12 She says that the
reason behind the prohibition is

With regard to the Statement for the Record filed by petitioner, private respondent
posits that this in reality is an amendment of her Answer and thus should comply with
pertinent provisions of the Rules of Court, hence, its exclusion from the records for
failure to comply with the Rules is proper.
The treatise presented by petitioner on the privileged nature of the communication
between physician and patient, as well as the reasons therefor, is not doubted.
Indeed, statutes making communications between physician and patient privileged
are intended to inspire confidence in the patient and encourage him to make a full
disclosure to his physician of his symptoms and condition. 17 Consequently, this
prevents the physician from making public information that will result in humiliation,
embarrassment, or disgrace to the patient. 18 For, the patient should rest assured with
the knowledge that the law recognizes the communication as confidential, and guards
against the possibility of his feelings being shocked or his reputation tarnished by
their subsequent disclosure. 19 The physician-patient privilege creates a zone of
privacy, intended to preclude the humiliation of the patient that may follow the
disclosure of his ailments. Indeed, certain types of information communicated in the
context of the physician-patient relationship fall within the constitutionally protected
zone of privacy, 20 including a patient's interest in keeping his mental health records
confidential. 21 Thus, it has been observed that the psychotherapist-patient privilege is
founded upon the notion that certain forms of antisocial behavior may be prevented
by encouraging those in need of treatment for emotional problems to secure the
services of a psychotherapist.

. . . to facilitate and make safe, full and confidential disclosure by a

patient to his physician of all facts, circumstances and symptoms,
untrammeled by apprehension of their subsequent and enforced
disclosure and publication on the witness stand, to the end that the
physician may form a correct opinion, and be enabled safely and
efficaciously to treat his patient. 13
She further argues that to allow her husband to testify on the contents of the
psychiatric evaluation report "will set a very bad and dangerous precedent because it
abets circumvention of the rule's intent in preserving the sanctity, security and
confidence to the relation of physician and his patient." 14 Her thesis is that what
cannot be done directly should not be allowed to be done indirectly.
Petitioner submits that her Statement for the Record simply reiterates under oath
what she asserted in her Answer, which she failed to verify as she had already left for
Spain when her Answer was filed. She maintains that her "Statement for the Record
is a plain and simple pleading and is not as it has never been intended to take the
place of her testimony;" 15 hence, there is no factual and legal basis whatsoever to
expunge it from the records.

Petitioner's discourse while exhaustive is however misplaced. Lim v. Court of

Appeals 22 clearly lays down the requisites in order that the privilege may be
successfully invoked: (a) the privilege is claimed in a civil case; (b) the person against
whom the privilege is claimed is one duly authorized to practice medicine, surgery or
obstetrics; (c) such person acquired the information while he was attending to the
patient in his professional capacity; (d) the information was necessary to enable him
to act in that capacity; and, (e) the information was confidential and, if disclosed,
would blacken the reputation (formerly character) of the patient.

Private respondent Edgar Krohn, Jr., however contends that "the rules are very
explicit: the prohibition applies only to a physician. Thus . . . the legal prohibition to
testify is not applicable to the case at bar where the person sought to be barred from
testifying on the privileged communication is the husband and not the physician of the
petitioner." 16 In fact, according to him, the Rules sanction his testimony considering
that a husband may testify against his wife in a civil case filed by one against the
other.

In the instant case, the person against whom the privilege is claimed is not one duly
authorized to practice medicine, surgery or obstetrics. He is simply the patient's
husband who wishes to testify on a document executed by medical practitioners.

99

Plainly and clearly, this does not fall within the claimed prohibition. Neither can his
testimony be considered a circumvention of the prohibition because his testimony
cannot have the force and effect of the testimony of the physician who examined the
patient and executed the report.

NEOMI AND DANILO OLIVARES

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION

Counsel for petitioner indulged heavily in objecting to the testimony of private

respondent on the ground that it was privileged. In his Manifestation before the trial
court dated 10 May 1991, he invoked the rule on privileged communications but never
questioned the testimony as hearsay. It was a fatal mistake. For, in failing to object to
the testimony on the ground that it was hearsay, counsel waived his right to make
such objection and, consequently, the evidence offered may be admitted.

CORONA, J.:

This is a petition for review on certiorari [1] of a decision[2] and resolution[3] of the Court

The other issue raised by petitioner is too trivial to merit the full attention of this Court.
The allegations contained in the Statement for the Records are but refutations of
private respondent's declarations which may be denied or disproved during the trial.

of Appeals (CA) dated July 29, 2005 and September 21, 2005, respectively, in CA-

The instant appeal has taken its toll on the petition for annulment. Three years have
already lapsed and private respondent herein, as petitioner before the trial court, has
yet to conclude his testimony thereat. We thus enjoin the trial judge and the parties'
respective counsel to act with deliberate speed in resolving the main action, and
avoid any and all stratagems that may further delay this case. If all lawyers are
allowed to appeal every perceived indiscretion of a judge in the course of trial and
include in their appeals depthless issues, there will be no end to litigations, and the
docket of appellate courts will forever be clogged with inconsequential cases. Hence,
counsel should exercise prudence in appealing lower court rulings and raise only
legitimate issues so as not to retard the resolution of cases. Indeed, there is no point
in unreasonably delaying the resolution of the petition and prolonging the agony of the
wedded couple who after coming out from a storm still have the right to a renewed
blissful life either alone or in the company of each other. 23

Makati City, Branch 61 dated February 2, 2004 in Civil Case No. 03-1153, [4] which in

WHEREFORE, the instant petition for review is DENIED for lack of merit. The
assailed Decision of respondent Court of Appeals promulgated on 30 October 1992 is
AFFIRMED.

availed of the additional service of limitless consultations for an additional amount

SO ORDERED.

approved on October 22, 2002. In the health care agreement, ailments due to pre-

G.R. SP No. 84163 which affirmed the decision of the Regional Trial Court (RTC),

turn reversed the decision of the Metropolitan Trial Court (MeTC), Makati City, Branch
66 dated August 5, 2003 in Civil Case No. 80867.[5]

Respondent Neomi T. Olivares applied for a health care program with petitioner Blue
Cross Health Care, Inc., a health maintenance firm. For the period October 16, 2002
to October 15, 2003,[6] she paid the amount of P11,117. For the same period, she also

of P1,000. She paid these amounts in full on October 17, 2002. The application was

existing conditions were excluded from the coverage.[7]

FIRST DIVISION

On November 30, 2002, or barely 38 days from the effectivity of her health insurance,
respondent Neomi suffered a stroke and was admitted at the Medical City which was

GR No. 169737

February 12, 2008

one of the hospitals accredited by petitioner. During her confinement, she underwent

BLUE CROSS HEALTH CARE, INC.

VS

several laboratory tests. On December 2, 2002, her attending physician, Dr. Edmundo

100

Saniel,[8] informed her that she could be discharged from the hospital. She incurred
xxx the best person to determine whether or not the stroke she
suffered was not caused by pre-existing conditions is her attending
physician Dr. Saniel who treated her and conducted the test during
her confinement. xxx But since the evidence on record reveals that
it was no less than [respondent Neomi] herself who prevented her
attending physician from issuing the required certification, petitioner
cannot be faulted from suspending payment of her claim, for until
and unless it can be shown from the findings made by her
attending physician that the stroke she suffered was not due to preexisting conditions could she demand entitlement to the benefits of
her policy.[13]

hospital expenses amounting to P34,217.20. Consequently, she requested from the

representative of petitioner at Medical City a letter of authorization in order to settle
her medical bills. But petitioner refused to issue the letter and suspended payment
pending the submission of a certification from her attending physician that the stroke
she suffered was not caused by a pre-existing condition.[9]

She was discharged from the hospital on December 3, 2002. On December

On appeal, the RTC, in a decision dated February 2, 2004, reversed the

5, 2002, she demanded that petitioner pay her medical bill. When petitioner still

ruling of the MeTC and ordered petitioner to pay respondents the following amounts:

refused, she and her husband, respondent Danilo Olivares, were constrained to settle

(1) P34,217.20 representing the medical bill in Medical City and P1,000 as

the bill.[10] They thereafter filed a complaint for collection of sum of money against

reimbursement for consultation fees, with legal interest from the filing of the complaint

petitioner in the MeTC on January 8, 2003.[11] In its answer dated January 24, 2003,

until fully paid; (2) P20,000 as moral damages; (3) P20,000 as exemplary damages;

petitioner maintained that it had not yet denied respondents' claim as it was still

(4) P20,000 as attorney's fees and (5) costs of suit. [14] The RTC held that it was the

awaiting Dr. Saniel's report.

burden of petitioner to prove that the stroke of respondent Neomi was excluded from
the coverage of the health care program for being caused by a pre-existing

In a letter to petitioner dated February 14, 2003, Dr. Saniel stated that:
This is in response to your letter dated February 13,
2003. [Respondent] Neomi T. Olivares called by phone on January
29, 2003. She stated that she is invoking patient-physician
confidentiality. That she no longer has any relationship with
[petitioner]. And that I should not release any medical information
concerning her neurologic status to anyone without her
approval. Hence, the same day I instructed my secretary to inform
your office thru Ms. Bernie regarding [respondent's] wishes.

condition. It was not able to discharge that burden.[15]

Aggrieved, petitioner filed a petition for review under Rule 42 of the Rules of Court in
the CA. In a decision promulgated on July 29, 2005, the CA affirmed the decision of
the RTC. It denied reconsideration in a resolution promulgated on September 21,

xxx xxx xxx[12]

2005. Hence this petition which raises the following issues: (1) whether petitioner was
In a decision dated August 5, 2003, the MeTC dismissed the complaint for lack of

able to prove that respondent Neomi's stroke was caused by a pre-existing condition

cause of action. It held:

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and therefore was excluded from the coverage of the health care agreement and (2)

Under this provision, disabilities which existed before the commencement of

whether it was liable for moral and exemplary damages and attorney's fees.

the agreement are excluded from its coverage if they become manifest within one
year from its effectivity. Stated otherwise, petitioner is not liable for pre-existing

The health care agreement defined a pre-existing condition as:

conditions if they occur within one year from the time the agreement takes effect.

x x x a disability which existed before the commencement date of

membership whose natural history can be clinically determined,
whether or not the Member was aware of such illness or condition.
Such conditions also include disabilities existing prior to
reinstatement date in the case of lapse of an Agreement.
Notwithstanding, the following disabilities but not to the exclusion of
others are considered pre-existing conditions including their
complications when occurring during the first year of a Members
coverage:
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
XV.
XVI.
XVII.
XVIII.
XIX.
XX.

Petitioner argues that respondents prevented Dr. Saniel from submitting his
report regarding the medical condition of Neomi. Hence, it contends that the
presumption that evidence willfully suppressed would be adverse if produced should
apply in its favor.[17]

Tumor of Internal Organs

Hemorrhoids/Anal Fistula
Diseased tonsils and sinus conditions
requiring surgery
Cataract/Glaucoma
Pathological Abnormalities of nasal septum
or turbinates
Goiter and other thyroid disorders
Hernia/Benign prostatic hypertrophy
Endometriosis
Asthma/Chronic Obstructive Lung disease
Epilepsy
Scholiosis/Herniated disc and other Spinal
column abnormalities
Tuberculosis
Cholecysitis
Gastric or Duodenal ulcer
Hallux valgus
Hypertension and other Cardiovascular
diseases
Calculi
Tumors of skin, muscular tissue, bone or any
form of blood dyscracias
Diabetes Mellitus
Collagen/Auto-Immune disease

Respondents counter that the burden was on petitioner to prove that

Neomi's stroke was excluded from the coverage of their agreement because it was
due to a pre-existing condition. It failed to prove this.[18]

We agree with respondents.

In Philamcare Health Systems, Inc. v. CA,[19] we ruled that a health care

agreement is in the nature of a non-life insurance. [20] It is an established rule in
insurance contracts that when their terms contain limitations on liability, they should
be construed strictly against the insurer. These are contracts of adhesion the terms of
which must be interpreted and enforced stringently against the insurer which
prepared the contract. This doctrine is equally applicable to health care agreements.

After the Member has been continuously covered for 12 months,

this pre-existing provision shall no longer be applicable except for
illnesses specifically excluded by an endorsement and made part of
this Agreement.[16]

[21]

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Petitioner never presented any evidence to prove that respondent Neomi's stroke was

The mere reliance on a disputable presumption does not meet the strict standard

due to a pre-existing condition. It merely speculated that Dr. Saniel's report would be

required under our jurisprudence.

adverse to Neomi, based on her invocation of the doctor-patient privilege. This was a
Next, petitioner argues that it should not be held liable for moral and
disputable presumption at best.
exemplary damages, and attorney's fees since it did not act in bad faith in denying
Section 3 (e), Rule 131 of the Rules of Court states:

respondent Neomi's claim. It insists that it waited in good faith for Dr. Saniel's report

Sec. 3. Disputable presumptions. The following presumptions are

satisfactory if uncontradicted, but may be contradicted and
overcome by other evidence:
xxx xxx xxx

and that, based on general medical findings, it had reasonable ground to believe that

(e) That evidence willfully suppressed would be adverse if

produced.

after the coverage took effect.[25]

her stroke was due to a pre-existing condition, considering it occurred only 38 days

We disagree.
Suffice it to say that this presumption does not apply if (a) the evidence is at the

The RTC and CA found that there was a factual basis for the damages

disposal of both parties; (b) the suppression was not willful; (c) it is merely

adjudged against petitioner. They found that it was guilty of bad faith in denying a

corroborative or cumulative and (d) the suppression is an exercise of a privilege.

[22]

claim based merely on its own perception that there was a pre-existing condition:
[Respondents] have sufficiently shown that [they] were forced to
engage in a dispute with [petitioner] over a legitimate claim while
[respondent Neomi was] still experiencing the effects of a stroke
and forced to pay for her medical bills during and after her
hospitalization despite being covered by [petitioners] health care
program, thereby suffering in the process extreme mental anguish,
shock, serious anxiety and great stress. [They] have shown that
because of the refusal of [petitioner] to issue a letter of
authorization and to pay [respondent Neomi's] hospital bills, [they
had] to engage the services of counsel for a fee
of P20,000.00. Finally, the refusal of petitioner to pay
respondent Neomi's bills smacks of bad faith, as its refusal
[was] merely based on its own perception that a stroke is a preexisting condition. (emphasis supplied)

Here, respondents' refusal to present or allow the presentation of Dr. Saniel's

report was justified. It was privileged communication between physician and patient.

Furthermore, as already stated, limitations of liability on the part of the insurer or

health care provider must be construed in such a way as to preclude it from evading
its obligations. Accordingly, they should be scrutinized by the courts with extreme
jealousy[23] and care and with a jaundiced eye.[24] Since petitioner had the burden of
proving exception to liability, it should have made its own assessment of whether

This is a factual matter binding and conclusive on this Court. [26] We see no

respondent Neomi had a pre-existing condition when it failed to obtain the attending

reason to disturb these findings.

physician's report. It could not just passively wait for Dr. Saniel's report to bail it out.

103

excessive use of prohibited drugs. Indeed, she had convinced him to undergo
hospital confinement for detoxification and rehabilitation.
WHEREFORE, the petition is hereby DENIED. The July 29, 2005 decision
Johnny resisted the action, claiming that it was Josielene who failed in her wifely
duties. To save their marriage, he agreed to marriage counseling but when he and
Josielene got to the hospital, two men forcibly held him by both arms while another
gave him an injection. The marriage relations got worse when the police temporarily
detained Josielene for an unrelated crime and released her only after the case
against her ended. By then, their marriage relationship could no longer be repaired.

and September 21, 2005 resolution of the Court of Appeals in CA-G.R. SP No. 84163
are AFFIRMED.

Treble costs against petitioner.

During the pre-trial conference, Josielene pre-marked the Philhealth Claim Form1 that
Johnny attached to his answer as proof that he was forcibly confined at the
rehabilitation unit of a hospital. The form carried a physicians handwritten note that
Johnny suffered from "methamphetamine and alcohol abuse." Following up on this
point, on August 22, 2006 Josielene filed with the RTC a request for the issuance of a
subpoena duces tecum addressed to Medical City, covering Johnnys medical records
when he was there confined. The request was accompanied by a motion to "be
allowed to submit in evidence" the records sought by subpoena duces tecum.2

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

Johnny opposed the motion, arguing that the medical records were covered by
physician-patient privilege. On September 13, 2006 the RTC sustained the opposition
and denied Josielenes motion. It also denied her motion for reconsideration,
prompting her to file a special civil action of certiorari before the Court of Appeals
(CA) in CA-G.R. SP 97913, imputing grave abuse of discretion to the RTC.

THIRD DIVISION
G.R. No. 179786

July 24, 2013

JOSIELENE LARA CHAN, Petitioner,

vs.
JOHNNY T. CHAN, Respondent.

On September 17, 2007 the CA3 denied Josielenes petition. It ruled that, if courts
were to allow the production of medical records, then patients would be left with no
assurance that whatever relevant disclosures they may have made to their physicians
would be kept confidential. The prohibition covers not only testimonies, but also
affidavits, certificates, and pertinent hospital records. The CA added that, although
Johnny can waive the privilege, he did not do so in this case. He attached the
Philhealth form to his answer for the limited purpose of showing his alleged forcible
confinement.

DECISION
ABAD, J.:
This case is about the propriety of issuing a subpoena duces tecum for the production
and submission in court of the respondent husband's hospital record in a case for
declaration of nullity of marriage where one of the issues is his mental fitness as a
husband.

Question Presented
The central question presented in this case is:

The Facts and the Case

Whether or not the CA erred in ruling that the trial court correctly denied the issuance
of a subpoena duces tecum covering Johnnys hospital records on the ground that
these are covered by the privileged character of the physician-patient communication.

On February 6, 2006 petitioner Josielene Lara Chan (Josielene) filed before the
Regional Trial Court (RTC) of Makati City, Branch 144 a petition for the declaration of
nullity of her marriage to respondent Johnny Chan (Johnny), the dissolution of their
conjugal partnership of gains, and the award of custody of their children to her.
Josielene claimed that Johnny failed to care for and support his family and that a
psychiatrist diagnosed him as mentally deficient due to incessant drinking and

The Ruling of the Court

Josielene requested the issuance of a subpoena duces tecum covering the hospital
records of Johnnys confinement, which records she wanted to present in court as

104

evidence in support of her action to have their marriage declared a nullity.

Respondent Johnny resisted her request for subpoena, however, invoking the
privileged character of those records. He cites Section 24(c), Rule 130 of the Rules of
Evidence which reads:

Since the offer of evidence is made at the trial, Josielenes request for subpoena
duces tecum is premature. She will have to wait for trial to begin before making a
request for the issuance of a subpoena duces tecum covering Johnnys hospital
records. It is when those records are produced for examination at the trial, that
Johnny may opt to object, not just to their admission in evidence, but more so to their
disclosure. Section 24(c), Rule 130 of the Rules of Evidence quoted above is about
non-disclosure of privileged matters.

SEC. 24. Disqualification by reason of privileged communication. The following

persons cannot testify as to matters learned in confidence in the following cases:

2. It is of course possible to treat Josielenes motion for the issuance of a subpoena

duces tecum covering the hospital records as a motion for production of documents, a
discovery procedure available to a litigant prior to trial. Section 1, Rule 27 of the Rules
of Civil Procedure provides:

xxxx
(c) A person authorized to practice medicine, surgery or obstetrics cannot in a civil
case, without the consent of the patient, be examined as to any advice or treatment
given by him or any information which he may have acquired in attending such patient
in a professional capacity, which information was necessary to enable him to act in
that capacity, and which would blacken the reputation of the patient.

SEC. 1. Motion for production or inspection; order. Upon motion of any party
showing good cause therefor, the court in which an action is pending may (a) order
any party to produce and permit the inspection and copying or photographing, by or
on behalf of the moving party, of any designated documents, papers, books,
accounts, letters, photographs, objects or tangible things, not privileged, which
constitute or contain evidence material to any matter involved in the action and which
are in his possession, custody or control; or (b) order any party to permit entry upon
designated land or other property in his possession or control for the purpose of
inspecting, measuring, surveying, or photographing the property or any designated
relevant object or operation thereon. The order shall specify the time, place and
manner of making the inspection and taking copies and photographs, and may
prescribe such terms and conditions as are just. (Emphasis supplied)

The physician-patient privileged communication rule essentially means that a

physician who gets information while professionally attending a patient cannot in a
civil case be examined without the patients consent as to any facts which would
blacken the latters reputation. This rule is intended to encourage the patient to open
up to the physician, relate to him the history of his ailment, and give him access to his
body, enabling the physician to make a correct diagnosis of that ailment and provide
the appropriate cure. Any fear that a physician could be compelled in the future to
come to court and narrate all that had transpired between him and the patient might
prompt the latter to clam up, thus putting his own health at great risk.4

But the above right to compel the production of documents has a limitation: the
documents to be disclosed are "not privileged."

1. The case presents a procedural issue, given that the time to object to the
admission of evidence, such as the hospital records, would be at the time they are
offered. The offer could be made part of the physicians testimony or as independent
evidence that he had made entries in those records that concern the patients health
problems.

Josielene of course claims that the hospital records subject of this case are not
privileged since it is the "testimonial" evidence of the physician that may be regarded
as privileged. Section 24(c) of Rule 130 states that the physician "cannot in a civil
case, without the consent of the patient, be examined" regarding their professional
conversation. The privilege, says Josielene, does not cover the hospital records, but
only the examination of the physician at the trial.

Section 36, Rule 132, states that objections to evidence must be made after the offer
of such evidence for admission in court. Thus:
SEC. 36. Objection. Objection to evidence offered orally must be made immediately
after the offer is made.

To allow, however, the disclosure during discovery procedure of the hospital records
the results of tests that the physician ordered, the diagnosis of the patients illness,
and the advice or treatment he gave himwould be to allow access to evidence that
is inadmissible without the

Objection to a question propounded in the course of the oral examination of a witness

shall be made as soon as the grounds therefor shall become reasonably apparent.

patients consent. Physician memorializes all these information in the patients

records. Disclosing them would be the equivalent of compelling the physician to
testify on privileged matters he gained while dealing with the patient, without the
latters prior consent.

An offer of evidence in writing shall be objected to within three (3) days after notice of
the offer unless a different period is allowed by the court.
In any case, the grounds for the objections must be specified.

105

3. Josielene argues that since Johnny admitted in his answer to the petition before
the RTC that he had been confined in a hospital against his will and in fact attached
to his answer a Philhealth claim form covering that confinement, he should be
deemed to have waived the privileged character of its records. Josielene invokes
Section 17, Rule 132 of the Rules of Evidence that provides:

DECISION
LEONARDO-DE CASTRO, J.:
At bar is a petition for certiorari under Rule 65 of the Rules of Court assailing the
show cause Letter1 dated November 22, 2007 and contempt Order2 dated January
30, 2008 concurrently issued by respondent

SEC. 17. When part of transaction, writing or record given in evidence, the remainder
admissible. When part of an act, declaration, conversation, writing or record is
given in evidence by one party, the whole of the same subject may be inquired into by
the other, and when a detached act, declaration, conversation, writing or record is
given in evidence, any other act, declaration, conversation, writing or record
necessary to its understanding may also be given in evidence.1wphi1

Senate Committees on Accountability of Public Officers and Investigations,3 Trade

and Commerce,4 and National Defense and Security5 against petitioner Romulo L.
Neri, former Director General of the National Economic and Development Authority
(NEDA).
The facts, as culled from the pleadings, are as follows:

But, trial in the case had not yet begun. Consequently, it cannot be said that Johnny
had already presented the Philhealth claim form in evidence, the act contemplated
above which would justify Josielene into requesting an inquiry into the details of his
hospital confinement. Johnny was not yet bound to adduce evidence in the case
when he filed his answer. Any request for disclosure of his hospital records would
again be premature.

On April 21, 2007, the Department of Transportation and Communication (DOTC)

entered into a contract with Zhong Xing Telecommunications Equipment (ZTE) for the
supply of equipment and services for the National Broadband Network (NBN) Project
in the amount of U.S. $ 329,481,290 (approximately P16 Billion Pesos). The Project
was to be financed by the People's Republic of China.

For all of the above reasons, the CA and the RTC were justified in denying Josielene
her request for the production in court of Johnnys hospital records.

In connection with this NBN Project, various Resolutions were introduced in the
Senate, as follows:

ACCORDINGLY, the Court DENIES the petition and AFFIRMS the Decision of the
Court of Appeals in CA-G.R. SP 97913 dated September 17, 2007.

(1) P.S. Res. No. 127, introduced by Senator Aquilino Q. Pimentel, Jr.,
entitled RESOLUTION DIRECTING THE BLUE RIBBON COMMITTEE AND
THE COMMITTEE ON TRADE AND INDUSTRY TO INVESTIGATE, IN AID
OF LEGISLATION, THE CIRCUMSTANCES LEADING TO THE APPROVAL
OF THE BROADBAND CONTRACT WITH ZTE AND THE ROLE PLAYED
BY THE OFFICIALS CONCERNED IN GETTING IT CONSUMMATED AND
TO MAKE RECOMMENDATIONS TO HALE TO THE COURTS OF LAW
THE PERSONS RESPONSIBLE FOR ANY ANOMALY IN CONNECTION
THEREWITH AND TO PLUG THE LOOPHOLES, IF ANY IN THE BOT LAW
AND OTHER PERTINENT LEGISLATIONS.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

(2) P.S. Res. No. 144, introduced by Senator Mar Roxas, entitled
RESOLUTION URGING PRESIDENT GLORIA MACAPAGAL ARROYO TO
DIRECT THE CANCELLATION OF THE ZTE CONTRACT

EN BANC
G.R. No. 180643

(3) P.S. Res. No. 129, introduced by Senator Panfilo M. Lacson, entitled
RESOLUTION DIRECTING THE COMMITTEE ON NATIONAL DEFENSE
AND SECURITY TO CONDUCT AN INQUIRY IN AID OF LEGISLATION
INTO THE NATIONAL SECURITY IMPLICATIONS OF AWARDING THE
NATIONAL BROADBAND NETWORK CONTRACT TO THE CHINESE
FIRM ZHONG XING TELECOMMUNICATIONS EQUIPMENT COMPANY
LIMITED (ZTE CORPORATION) WITH THE END IN VIEW OF PROVIDING
REMEDIAL LEGISLATION THAT WILL PROTECT OUR NATIONAL
SOVEREIGNTY, SECURITY AND TERRITORIAL INTEGRITY.

March 25, 2008

ROMULO L. NERI, petitioner,

vs.
SENATE COMMITTEE ON ACCOUNTABILITY OF PUBLIC OFFICERS AND
INVESTIGATIONS, SENATE COMMITTEE ON TRADE AND COMMERCE, AND
SENATE COMMITTEE ON NATIONAL DEFENSE AND SECURITY, respondents.

106

(4) P.S. Res. No. 136, introduced by Senator Miriam Defensor Santiago,
entitled RESOLUTION DIRECTING THE PROPER SENATE COMMITTEE
TO CONDUCT AN INQUIRY, IN AID OF LEGISLATION, ON THE LEGAL
AND ECONOMIC JUSTIFICATION OF THE NATIONAL BROADBAND
NETWORK (NBN) PROJECT OF THE NATIONAL GOVERNMENT.

On September 26, 2007, petitioner testified before respondent Committees for eleven
(11) hours. He disclosed that then Commission on Elections (COMELEC) Chairman
Benjamin Abalos offered him P200 Million in exchange for his approval of the NBN
Project. He further narrated that he informed President Arroyo about the bribery
attempt and that she instructed him not to accept the bribe. However, when probed
further on what they discussed about the NBN Project, petitioner refused to answer,
invoking "executive privilege". In particular, he refused to answer the questions on (a)
whether or not President Arroyo followed up the NBN Project,6 (b) whether or not she
directed him to prioritize it,7 and (c) whether or not she directed him to approve.8

At the same time, the investigation was claimed to be relevant to the consideration of
three (3) pending bills in the Senate, to wit:
1. Senate Bill No. 1793, introduced by Senator Mar Roxas, entitled AN ACT
SUBJECTING TREATIES, INTERNATIONAL OR EXECUTIVE
AGREEMENTS INVOLVING FUNDING IN THE PROCUREMENT OF
INFRASTRUCTURE PROJECTS, GOODS, AND CONSULTING SERVICES
TO BE INCLUDED IN THE SCOPE AND APPLICATION OF PHILIPPINE
PROCUREMENT LAWS, AMENDING FOR THE PURPOSE REPUBLIC
ACT NO. 9184, OTHERWISE KNOWN AS THE GOVERNMENT
PROCUREMENT REFORM ACT, AND FOR OTHER PURPOSES;

Unrelenting, respondent Committees issued a Subpoena Ad Testificandum to

petitioner, requiring him to appear and testify on November 20, 2007.
However, in the Letter dated November 15, 2007, Executive Secretary Eduardo R.
Ermita requested respondent Committees to dispense with petitioner's testimony on
the ground of executive privilege. The pertinent portion of the letter reads:
With reference to the subpoena ad testificandum issued to Secretary
Romulo Neri to appear and testify again on 20 November 2007 before the
Joint Committees you chair, it will be recalled that Sec. Neri had already
testified and exhaustively discussed the ZTE / NBN project, including his
conversation with the President thereon last 26 September 2007.

2. Senate Bill No. 1794, introduced by Senator Mar Roxas, entitled AN ACT
IMPOSING SAFEGUARDS IN CONTRACTING LOANS CLASSIFIED AS
OFFICIAL DEVELOPMENT ASSISTANCE, AMENDING FOR THE
PURPOSE REPUBLIC ACT NO. 8182, AS AMENDED BY REPUBLIC ACT
NO. 8555, OTHERWISE KNOWN AS THE OFFICIAL DEVELOPMENT
ASSISTANCE ACT OF 1996, AND FOR OTHER PURPOSES; and

Asked to elaborate further on his conversation with the President, Sec. Neri
asked for time to consult with his superiors in line with the ruling of the
Supreme Court in Senate v. Ermita, 488 SCRA 1 (2006).

3. Senate Bill No. 1317, introduced by Senator Miriam Defensor Santiago,

entitled AN ACT MANDATING CONCURRENCE TO INTERNATIONAL
AGREEMENTS AND EXECUTIVE AGREEMENTS.

Specifically, Sec. Neri sought guidance on the possible invocation of

executive privilege on the following questions, to wit:

Respondent Committees initiated the investigation by sending invitations to certain

personalities and cabinet officials involved in the NBN Project. Petitioner was among
those invited. He was summoned to appear and testify on September 18, 20, and 26
and October 25, 2007. However, he attended only the September 26 hearing,
claiming he was "out of town" during the other dates.

a) Whether the President followed up the (NBN) project?

b) Were you dictated to prioritize the ZTE?
c) Whether the President said to go ahead and approve the
project after being told about the alleged bribe?

In the September 18, 2007 hearing, businessman Jose de Venecia III testified that
several high executive officials and power brokers were using their influence to push
the approval of the NBN Project by the NEDA. It appeared that the Project was
initially approved as a Build-Operate-Transfer (BOT) project but, on March 29, 2007,
the NEDA acquiesced to convert it into a government-to-government project, to be
financed through a loan from the Chinese Government.

Following the ruling in Senate v. Ermita, the foregoing questions fall under
conversations and correspondence between the President and public
officials which are considered executive privilege (Almonte v. Vasquez, G.R.
95637, 23 May 1995; Chavez v. PEA, G.R. 133250, July 9, 2002).
Maintaining the confidentiality of conversations of the President is necessary
in the exercise of her executive and policy decision making process. The
expectation of a President to the confidentiality of her conversations and
correspondences, like the value which we accord deference for the privacy
of all citizens, is the necessity for protection of the public interest in candid,
objective, and even blunt or harsh opinions in Presidential decision-making.
Disclosure of conversations of the President will have a chilling effect on the
President, and will hamper her in the effective discharge of her duties and

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responsibilities, if she is not protected by the confidentiality of her

conversations.

Be that as it may, should there be new matters that were not yet taken up
during the 26 September 2007 hearing, may I be furnished in advance as to
what else I need to clarify, so that as a resource person, I may adequately
prepare myself.

The context in which executive privilege is being invoked is that the

information sought to be disclosed might impair our diplomatic as well as
economic relations with the People's Republic of China. Given the
confidential nature in which these information were conveyed to the
President, he cannot provide the Committee any further details of these
conversations, without disclosing the very thing the privilege is designed to
protect.

In addition, petitioner submitted a letter prepared by his counsel, Atty. Antonio R.

Bautista, stating, among others that: (1) his (petitioner) non-appearance was upon the
order of the President; and (2) his conversation with President Arroyo dealt with
delicate and sensitive national security and diplomatic matters relating to the impact
of the bribery scandal involving high government officials and the possible loss of
confidence of foreign investors and lenders in the Philippines. The letter ended with a
reiteration of petitioner's request that he "be furnished in advance" as to what else he
needs to clarify so that he may adequately prepare for the hearing.

In light of the above considerations, this Office is constrained to invoke the

settled doctrine of executive privilege as refined in Senate v. Ermita, and has
advised Secretary Neri accordingly.

In the interim, on December 7, 2007, petitioner filed with this Court the present
petition for certiorari assailing the show cause Letter dated November 22, 2007.

Considering that Sec. Neri has been lengthily interrogated on the subject in
an unprecedented 11-hour hearing, wherein he has answered all questions
propounded to him except the foregoing questions involving executive
privilege, we therefore request that his testimony on 20 November 2007 on
the ZTE / NBN project be dispensed with.

Respondent Committees found petitioner's explanations unsatisfactory. Without

responding to his request for advance notice of the matters that he should still clarify,
they issued the Order dated January 30, 2008, citing him in contempt of respondent
Committees and ordering his arrest and detention at the Office of the Senate
Sergeant-At-Arms until such time that he would appear and give his testimony. The
said Order states:

On November 20, 2007, petitioner did not appear before respondent Committees.
Thus, on November 22, 2007, the latter issued the show cause Letter requiring him to
explain why he should not be cited in contempt. The Letter reads:

ORDER
Since you have failed to appear in the said hearing, the Committees on
Accountability of Public Officers and Investigations (Blue Ribbon), Trade and
Commerce and National Defense and Security require you to show cause
why you should not be cited in contempt under Section 6, Article 6 of the
Rules of the Committee on Accountability of Public Officers and
Investigations (Blue Ribbon).

For failure to appear and testify in the Committee's hearing on Tuesday,

September 18, 2007; Thursday, September 20, 2007; Thursday, October 25,
2007; and Tuesday, November 20, 2007, despite personal notice and
Subpoenas Ad Testificandum sent to and received by him, which thereby
delays, impedes and obstructs, as it has in fact delayed, impeded and
obstructed the inquiry into the subject reported irregularities, AND for failure
to explain satisfactorily why he should not be cited for contempt (Neri letter
of 29 November 2007), herein attached) ROMULO L. NERI is hereby cited
in contempt of this (sic) Committees and ordered arrested and
detained in the Office of the Senate Sergeant-At-Arms until such time
that he will appear and give his testimony.

The Senate expects your explanation on or before 2 December 2007.

On November 29, 2007, petitioner replied to respondent Committees, manifesting that
it was not his intention to ignore the Senate hearing and that he thought the only
remaining questions were those he claimed to be covered by executive privilege,
thus:

The Sergeant-At-Arms is hereby directed to carry out and implement this

Order and make a return hereof within twenty four (24) hours from its
enforcement.

It was not my intention to snub the last Senate hearing. In fact, I have
cooperated with the task of the Senate in its inquiry in aid of legislation as
shown by my almost 11 hours stay during the hearing on 26 September
2007. During said hearing, I answered all the questions that were asked of
me, save for those which I thought was covered by executive privilege, and
which was confirmed by the Executive Secretary in his Letter 15 November
2007. In good faith, after that exhaustive testimony, I thought that what
remained were only the three questions, where the Executive Secretary
claimed executive privilege. Hence, his request that my presence be
dispensed with.

SO ORDERED.
On the same date, petitioner moved for the reconsideration of the above Order.9 He
insisted that he has not shown "any contemptible conduct worthy of contempt and
arrest." He emphasized his willingness to testify on new matters, however,
respondent Committees did not respond to his request for advance notice of
questions. He also mentioned the petition for certiorari he filed on December 7, 2007.

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According to him, this should restrain respondent Committees from enforcing the
show cause Letter "through the issuance of declaration of contempt" and arrest.

contract on his assertions that the said conversations "dealt with

delicate and sensitive national security and diplomatic matters
relating to the impact of bribery scandal involving high
government officials and the possible loss of confidence of
foreign investors and lenders in the Philippines" x x x within the
principles laid down in Senate v. Ermita (488 SCRA 1 [2006])?

In view of respondent Committees' issuance of the contempt Order, petitioner filed on

February 1, 2008 a Supplemental Petition for Certiorari (With Urgent Application for
TRO/Preliminary Injunction), seeking to restrain the implementation of the said
contempt Order.

1.c Will the claim of executive privilege in this case violate the
following provisions of the Constitution:

On February 5, 2008, the Court issued a Status Quo Ante Order (a) enjoining
respondent Committees from implementing their contempt Order, (b) requiring the
parties to observe the status quo prevailing prior to the issuance of the assailed order,
and (c) requiring respondent Committees to file their comment.

Sec. 28, Art. II (Full public disclosure of all transactions

involving public interest)

Petitioner contends that respondent Committees' show cause Letter and contempt
Order were issued with grave abuse of discretion amounting to lack or excess of
jurisdiction. He stresses that his conversations with President Arroyo are "candid
discussions meant to explore options in making policy decisions." According to
him, these discussions "dwelt on the impact of the bribery scandal involving high
government officials on the country's diplomatic relations and economic and
military affairs and the possible loss of confidence of foreign investors and
lenders in the Philippines." He also emphasizes that his claim of executive privilege
is upon the order of the President and within the parameters laid down in Senate v.
Ermita10 and United States v. Reynolds.11 Lastly, he argues that he is precluded from
disclosing communications made

Sec. 7, Art. III (The right of the people to information on

matters of public concern)
Sec. 1, Art. XI (Public office is a public trust)
Sec. 17, Art. VII (The President shall ensure that the laws
be faithfully executed)
and the due process clause and the principle of separation of powers?
2. What is the proper procedure to be followed in invoking executive
privilege?

to him in official confidence under Section 712 of Republic Act No. 6713, otherwise
known as Code of Conduct and Ethical Standards for Public Officials and Employees,
and Section 2413 (e) of Rule 130 of the Rules of Court.

3. Did the Senate Committees gravely abuse their discretion in ordering the
arrest of petitioner for non-compliance with the subpoena?

Respondent Committees assert the contrary. They argue that (1) petitioner's
testimony is material and pertinent in the investigation conducted in aid of legislation;
(2) there is no valid justification for petitioner to claim executive privilege; (3) there is
no abuse of their authority to order petitioner's arrest; and (4) petitioner has not come
to court with clean hands.

After the oral argument, the parties were directed to manifest to the Court within
twenty-four (24) hours if they are amenable to the Court's proposal of allowing
petitioner to immediately resume his testimony before the Senate Committees to
answer the other questions of the Senators without prejudice to the decision on the
merits of this pending petition. It was understood that petitioner may invoke executive
privilege in the course of the Senate Committees proceedings, and if the respondent
Committees disagree thereto, the unanswered questions will be the subject of a
supplemental pleading to be resolved along with the three (3) questions subject of the
present petition.14 At the same time, respondent Committees were directed to submit
several pertinent documents.15

In the oral argument held last March 4, 2008, the following issues were ventilated:
1. What communications between the President and petitioner Neri are
covered by the principle of 'executive privilege'?
1.a Did Executive Secretary Ermita correctly invoke the principle of
executive privilege, by order of the President, to
cover (i) conversations of the President in the exercise of her
executive and policy decision-making and (ii) information, which
might impair our diplomatic as well as economic relations with the
People's Republic of China?

The Senate did not agree with the proposal for the reasons stated in the
Manifestation dated March 5, 2008. As to the required documents, the Senate and
respondent Committees manifested that they would not be able to submit the latter's
"Minutes of all meetings" and the "Minute Book" because it has never been the
"historical and traditional legislative practice to keep them."16 They instead submitted
the Transcript of Stenographic Notes of respondent Committees' joint public hearings.

1.b. Did petitioner Neri correctly invoke executive privilege to avoid

testifying on his conversations with the President on the NBN

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On March 17, 2008, the Office of the Solicitor General (OSG) filed a Motion for Leave
to Intervene and to Admit Attached Memorandum, founded on the following
arguments:

rules of each House shall provide, appear before and be heard by such
House on any matter pertaining to their departments. Written questions shall
be submitted to the President of the Senate or the Speaker of the House of
Representatives at least three days before their scheduled appearance.
Interpellations shall not be limited to written questions, but may cover
matters related thereto. When the security of the state or the public interest
so requires and the President so states in writing, the appearance shall be
conducted in executive session.

(1) The communications between petitioner and the President are covered
by the principle of "executive privilege."
(2) Petitioner was not summoned by respondent Senate Committees in
accordance with the law-making body's power to conduct inquiries in aid of
legislation as laid down in Section 21, Article VI of the Constitution
and Senate v. Ermita.

Senate cautions that while the above provisions are closely related and
complementary to each other, they should not be considered as pertaining to the
same power of Congress. Section 21 relates to the power to conduct inquiries in aid
of legislation. Its aim is to elicit information that may be used for legislation. On the
other hand, Section 22 pertains to the power to conduct a question hour, the objective
of which is to obtain information in pursuit of Congress' oversight function.19 Simply
stated, while both powers allow Congress or any of its committees to conduct inquiry,
their objectives are different.

(3) Respondent Senate Committees gravely abused its discretion for alleged
non-compliance with the Subpoena dated November 13, 2007.
The Court granted the OSG's motion the next day, March 18, 2008.

This distinction gives birth to another distinction with regard to the use of compulsory
process. Unlike in Section 21, Congress cannot compel the appearance of executive
officials under Section 22. The Court's pronouncement in Senate v. Ermita20 is clear:

As the foregoing facts unfold, related events transpired.

On March 6, 2008, President Arroyo issued Memorandum Circular No. 151, revoking
Executive Order No. 464 and Memorandum Circular No. 108. She advised executive
officials and employees to follow and abide by the Constitution, existing laws and
jurisprudence, including, among others, the case of Senate v. Ermita17 when they are
invited to legislative inquiries in aid of legislation.

When Congress merely seeks to be informed on how department heads are

implementing the statutes which it has issued, its right to such information is
not as imperative as that of the President to whom, as Chief Executive, such
department heads must give a report of their performance as a matter of
duty. In such instances, Section 22, in keeping with the separation of
powers, states that Congress may only request their appearance.
Nonetheless, when the inquiry in which Congress requires their appearance
is 'in aid of legislation' under Section 21, the appearance is mandatory for
the same reasons stated in Arnault.

At the core of this controversy are the two (2) crucial queries, to wit:
First, are the communications elicited by the subject three (3) questions
covered by executive privilege?
And second, did respondent Committees commit grave abuse of discretion
in issuing the contempt Order?

In fine, the oversight function of Congress may be facilitated by

compulsory process only to the extent that it is performed in pursuit of
legislation. This is consistent with the intent discerned from the
deliberations of the Constitutional Commission

We grant the petition.

Ultimately, the power of Congress to compel the appearance of executive

officials under section 21 and the lack of it under Section 22 find their basis
in the principle of separation of powers. While the executive branch is a coequal branch of the legislature, it cannot frustrate the power of Congress to
legislate by refusing to comply with its demands for information. (Emphasis
supplied.)

At the outset, a glimpse at the landmark case of Senate v. Ermita18 becomes

imperative. Senate draws in bold strokes the distinction between
the legislative and oversight powers of the Congress, as embodied under Sections
21 and 22, respectively, of Article VI of the Constitution, to wit:
SECTION 21. The Senate or the House of Representatives or any of its
respective committees may conduct inquiries in aid of legislation in
accordance with its duly published rules of procedure. The rights of persons
appearing in or affected by such inquiries shall be respected.

The availability of the power of judicial review to resolve the issues raised in this case
has also been settled in Senate v. Ermita, when it held:
As evidenced by the American experience during the so-called "McCarthy
era," however, the right of Congress to conduct inquiries in aid of legislation

SECTION 22. The heads of department may upon their own initiative, with
the consent of the President, or upon the request of either House, or as the

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is, in theory, no less susceptible to abuse than executive or judicial power. It

may thus be subjected to judicial review pursuant to the Court's certiorari
powers under Section 1, Article VIII of the Constitution.

The Nixon and post-Watergate cases established the broad contours of

the presidential communications privilege.28 In United States v. Nixon,29 the U.S.
Court recognized a great public interest in preserving "the confidentiality of
conversations that take place in the President's performance of his official
duties." It thus considered presidential communications as "presumptively
privileged." Apparently, the presumption is founded on the "President's generalized
interest in confidentiality." The privilege is said to be necessary to guarantee the
candor of presidential advisors and to provide "the President and those who assist
him with freedom to explore alternatives in the process of shaping policies
and making decisions and to do so in a way many would be unwilling to
express except privately."

Hence, this decision.

I
The Communications Elicited by the Three (3) Questions are Covered by
Executive Privilege

In In Re: Sealed Case,30 the U.S. Court of Appeals delved deeper. It ruled that there
are two (2) kinds of executive privilege; one is the presidential communications
privilege and, the other is the deliberative process privilege. The former pertains
to "communications, documents or other materials that reflect presidential
decision-making and deliberations and that the President believes should
remain confidential." The latter includes 'advisory opinions, recommendations
and deliberations comprising part of a process by which governmental
decisions and policies are formulated."

We start with the basic premises where the parties have conceded.
The power of Congress to conduct inquiries in aid of legislation is broad. This is
based on the proposition that a legislative body cannot legislate wisely or effectively
in the absence of information respecting the conditions which the legislation is
intended to affect or change.21 Inevitably, adjunct thereto is the compulsory process to
enforce it. But, the power, broad as it is, has limitations. To be valid, it is imperative
that it is done in accordance with the Senate or House duly published rules of
procedure and that the rights of the persons appearing in or affected by such inquiries
be respected.

Accordingly, they are characterized by marked distinctions. Presidential

communications privilege applies to decision-making of the President while,
the deliberative process privilege, to decision-making of executive officials. The
first is rooted in the constitutional principle of separation of power and the President's
unique constitutional role; the second on common law privilege. Unlike
the deliberative process privilege, the presidential communications
privilege applies to documents in their entirety, and covers final and postdecisional materials as well as pre-deliberative ones31 As a consequence,
congressional or judicial negation of the presidential communications privilege is
always subject to greater scrutiny than denial of the deliberative process privilege.

The power extends even to executive officials and the only way for them to be
exempted is through a valid claim of executive privilege.22 This directs us to the
consideration of the question -- is there a recognized claim of executive privilege
despite the revocation of E.O. 464?
A- There is a Recognized Claim
of Executive Privilege Despite the
Revocation of E.O. 464

Turning on who are the officials covered by the presidential communications

privilege, In Re: Sealed Case confines the privilege only to White House Staff that
has "operational proximity" to direct presidential decision-making. Thus, the privilege
is meant to encompass only those functions that form the core of presidential
authority, involving what the court characterized as "quintessential and non-delegable
Presidential power," such as commander-in-chief power, appointment and removal
power, the power to grant pardons and reprieves, the sole-authority to receive
ambassadors and other public officers, the power to negotiate treaties, etc.32

At this juncture, it must be stressed that the revocation of E.O. 464 does not in any
way diminish our concept of executive privilege. This is because this concept has
Constitutional underpinnings. Unlike the United States which has further accorded the
concept with statutory status by enacting the Freedom of Information Act23 and
the Federal Advisory Committee Act,24 the Philippines has retained its constitutional
origination, occasionally interpreted only by this Court in various cases. The most
recent of these is the case of Senate v. Ermita where this Court declared
unconstitutional substantial portions of E.O. 464. In this regard, it is worthy to note
that Executive Ermita's Letter dated November 15, 2007 limits its bases for the claim
of executive privilege to Senate v. Ermita, Almonte v. Vasquez,25 and Chavez v.
PEA.26 There was never a mention of E.O. 464.

The situation in Judicial Watch, Inc. v. Department of Justice33 tested the In Re:
Sealed Case principles. There, while the presidential decision involved is the exercise
of the President's pardon power, a non-delegable, core-presidential function, the
Deputy Attorney General and the Pardon Attorney were deemed to be too remote
from the President and his senior White House advisors to be protected. The Court
conceded that

While these cases, especially Senate v. Ermita,27 have comprehensively discussed

the concept of executive privilege, we deem it imperative to explore it once more in
view of the clamor for this Court to clearly define the communications covered by
executive privilege.

functionally those officials were performing a task directly related to the President's
pardon power, but concluded that an organizational test was more appropriate for

111

confining the potentially broad sweep that would result from the In Re: Sealed
Case's functional test. The majority concluded that, the lesser protections of the
deliberative process privilege would suffice. That privilege was, however, found
insufficient to justify the confidentiality of the 4,341 withheld documents.

2) The communication must be authored or "solicited and received" by a

close advisor of the President or the President himself. The judicial test is
that an advisor must be in "operational proximity" with the President.
3) The presidential communications privilege remains a qualified
privilege that may be overcome by a showing of adequate need, such that
the information sought "likely contains important evidence" and by the
unavailability of the information elsewhere by an appropriate investigating
authority.44

But more specific classifications of communications covered by executive privilege

are made in older cases. Courts ruled early that the Executive has a right to withhold
documents that might reveal military or state secrets,34 identity of government
informers in some circumstances,,35 and information related to pending
investigations.36 An area where the privilege is highly revered is in foreign
relations. In United States v. Curtiss-Wright Export Corp.37 the U.S. Court, citing
President George Washington, pronounced:

In the case at bar, Executive Secretary Ermita premised his claim of executive
privilege on the ground that the communications elicited by the three (3) questions
"fall under conversation and correspondence between the President and public
officials" necessary in "her executive and policy decision-making process" and, that
"the information sought to be disclosed might impair our diplomatic as well as
economic relations with the People's Republic of China." Simply put, the bases
are presidential communications privilege and executive privilege on matters
relating to diplomacy or foreign relations.

The nature of foreign negotiations requires caution, and their success must
often depend on secrecy, and even when brought to a conclusion, a full
disclosure of all the measures, demands, or eventual concessions which
may have been proposed or contemplated would be extremely impolitic, for
this might have a pernicious influence on future negotiations or produce
immediate inconveniences, perhaps danger and mischief, in relation to other
powers. The necessity of such caution and secrecy was one cogent reason
for vesting the power of making treaties in the President, with the advice and
consent of the Senate, the principle on which the body was formed confining
it to a small number of members. To admit, then, a right in the House of
Representatives to demand and to have as a matter of course all the papers
respecting a negotiation with a foreign power would be to establish a
dangerous precedent.

Using the above elements, we are convinced that, indeed, the communications
elicited by the three (3) questions are covered by the presidential communications
privilege. First, the communications relate to a "quintessential and non-delegable
power" of the President, i.e. the power to enter into an executive agreement with
other countries. This authority of the President to enter into executive
agreements without the concurrence of the Legislature has traditionally been
recognized in Philippine jurisprudence.45 Second, the communications are "received"
by a close advisor of the President. Under the "operational proximity" test, petitioner
can be considered a close advisor, being a member of President Arroyo's cabinet.
And third, there is no adequate showing of a compelling need that would justify the
limitation of the privilege and of the unavailability of the information elsewhere by an
appropriate investigating authority.

Majority of the above jurisprudence have found their way in our jurisdiction.
In Chavez v. PCGG38, this Court held that there is a "governmental privilege against
public disclosure with respect to state secrets regarding military, diplomatic and other
security matters." In Chavez v. PEA,39 there is also a recognition of the confidentiality
of Presidential conversations, correspondences, and discussions in closed-door
Cabinet meetings. In Senate v. Ermita, the concept of presidential communications
privilege is fully discussed.

The third element deserves a lengthy discussion.

United States v. Nixon held that a claim of executive privilege is subject to balancing
against other interest. In other words, confidentiality in executive privilege is not
absolutely protected by the Constitution. The U.S. Court held:

As may be gleaned from the above discussion, the claim of executive privilege is
highly recognized in cases where the subject of inquiry relates to a power textually
committed by the Constitution to the President, such as the area of military and
foreign relations. Under our Constitution, the President is the repository of the
commander-in-chief,40 appointing,41 pardoning,42 and diplomatic43 powers. Consistent
with the doctrine of separation of powers, the information relating to these powers
may enjoy greater confidentiality than others.

[N]either the doctrine of separation of powers, nor the need for confidentiality
of high-level communications, without more, can sustain an absolute,
unqualified Presidential privilege of immunity from judicial process under all
circumstances.

The above cases, especially, Nixon, In Re Sealed Case and Judicial Watch,
somehow provide the elements of presidential communications privilege, to wit:

The foregoing is consistent with the earlier case of Nixon v. Sirica,46 where it was held
that presidential communications are presumptively privileged and that the
presumption can be overcome only by mere showing of public need by the branch
seeking access to conversations. The courts are enjoined to resolve the competing
interests of the political branches of the government "in the manner that preserves the
essential functions of each Branch."47 Here, the record is bereft of any categorical

1) The protected communication must relate to a "quintessential and nondelegable presidential power."

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explanation from respondent Committees to show a compelling or citical need for the
answers to the three (3) questions in the enactment of a law. Instead, the questions
veer more towards the exercise of the legislative oversight function under Section 22
of Article VI rather than Section 21 of the same Article. Senate v. Ermita ruled that the
"the oversight function of Congress may be facilitated by compulsory
process only to the extent that it is performed in pursuit of legislation." It is
conceded that it is difficult to draw the line between an inquiry in aid of legislation and
an inquiry in the exercise of oversight function of Congress. In this regard, much will
depend on the content of the questions and the manner the inquiry is conducted.

instead, on the nature and appropriateness of the function in the

performance of which the material was sought, and the degree to
which the material was necessary to its fulfillment. Here also our task
requires and our decision implies no judgment whatever concerning
possible presidential involvement in culpable activity. On the contrary,
we think the sufficiency of the Committee's showing must depend
solely on whether the subpoenaed evidence is demonstrably critical to
the responsible fulfillment of the Committee's functions.
In its initial briefs here, the Committee argued that it has shown exactly this.
It contended that resolution, on the basis of the subpoenaed tapes, of the
conflicts in the testimony before it 'would aid in a determination whether
legislative involvement in political campaigns is necessary' and 'could help
engender the public support needed for basic reforms in our electoral
system.' Moreover, Congress has, according to the Committee, power to
oversee the operations of the executive branch, to investigate instances of
possible corruption and malfeasance in office, and to expose the results of
its investigations to public view. The Committee says that with respect to
Watergate-related matters, this power has been delegated to it by the
Senate, and that to exercise its power responsibly, it must have access to
the subpoenaed tapes.

Respondent Committees argue that a claim of executive privilege does not guard
against a possible disclosure of a crime or wrongdoing. We see no dispute on this. It
is settled in United States v. Nixon48 that "demonstrated, specific need for evidence
in pending criminal trial" outweighs the President's "generalized interest in
confidentiality." However, the present case's distinction with the Nixon case is very
evident. In Nixon, there is a pending criminal proceeding where the information is
requested and it is the demands of due process of law and the fair administration of
criminal justice that the information be disclosed. This is the reason why the U.S.
Court was quick to "limit the scope of its decision." It stressed that it is "not
concerned here with the balance between the President's generalized interest
in confidentiality x x x and congressional demands for information." Unlike in
Nixon, the information here is elicited, not in a criminal proceeding, but in a legislative
inquiry. In this regard, Senate v. Ermita stressed that the validity of the claim of
executive privilege depends not only on the ground invoked but, also, on
the procedural setting or the context in which the claim is made. Furthermore,
in Nixon, the President did not interpose any claim of need to protect military,
diplomatic or sensitive national security secrets. In the present case, Executive
Secretary Ermita categorically claims executive privilege on the grounds
of presidential communications privilege in relation to her executive and policy
decision-making process and diplomatic secrets.

We turn first to the latter contention. In the circumstances of this case, we

need neither deny that the Congress may have, quite apart from its
legislative responsibilities, a general oversight power, nor explore what the
lawful reach of that power might be under the Committee's constituent
resolution. Since passage of that resolution, the House Committee on the
Judiciary has begun an inquiry into presidential impeachment. The
investigative authority of the Judiciary Committee with respect to presidential
conduct has an express constitutional source. x x x We have been shown
no evidence indicating that Congress itself attaches any particular
value to this interest. In these circumstances, we think the need for the
tapes premised solely on an asserted power to investigate and inform
cannot justify enforcement of the Committee's subpoena.

The respondent Committees should cautiously tread into the investigation of matters
which may present a conflict of interest that may provide a ground to inhibit the
Senators participating in the inquiry if later on an impeachment proceeding is initiated
on the same subject matter of the present Senate inquiry. Pertinently, in Senate
Select Committee on Presidential Campaign Activities v. Nixon,49 it was held that
since an impeachment proceeding had been initiated by a House Committee, the
Senate Select Committee's immediate oversight need for five presidential tapes
should give way to the House Judiciary Committee which has the constitutional
authority to inquire into presidential impeachment. The Court expounded on this issue
in this wise:

The sufficiency of the Committee's showing of need has come to depend,

therefore, entirely on whether the subpoenaed materials are critical to the
performance of its legislative functions. There is a clear difference between
Congress' legislative tasks and the responsibility of a grand jury, or any
institution engaged in like functions. While fact-finding by a legislative
committee is undeniably a part of its task, legislative judgments
normally depend more on the predicted consequences of proposed
legislative actions and their political acceptability, than on precise
reconstruction of past events; Congress frequently legislates on the basis
of conflicting information provided in its hearings. In contrast, the
responsibility of the grand jury turns entirely on its ability to determine
whether there is probable cause to believe that certain named individuals did
or did not commit specific crimes. If, for example, as in Nixon v. Sirica, one
of those crimes is perjury concerning the content of certain conversations,
the grand jury's need for the most precise evidence, the exact text of oral
statements recorded in their original form, is undeniable. We see no

It is true, of course, that the Executive cannot, any more than the other
branches of government, invoke a general confidentiality privilege to shield
its officials and employees from investigations by the proper governmental
institutions into possible criminal wrongdoing. The Congress learned this as
to its own privileges in Gravel v. United States, as did the judicial branch, in
a sense, in Clark v. United States, and the executive branch itself in Nixon v.
Sirica. But under Nixon v. Sirica, the showing required to overcome the
presumption favoring confidentiality turned, not on the nature of the
presidential conduct that the subpoenaed material might reveal, but,

113

comparable need in the legislative process, at least not in the

circumstances of this case. Indeed, whatever force there might once have
been in the Committee's argument that the subpoenaed materials are
necessary to its legislative judgments has been substantially undermined by
subsequent events. (Emphasis supplied)

Thus, while Congress is composed of representatives elected by the

people, it does not follow, except in a highly qualified sense, that in
every exercise of its power of inquiry, the people are exercising their
right to information.
The members of respondent Committees should not invoke as justification in their
exercise of power a right properly belonging to the people in general. This is because
when they discharge their power, they do so as public officials and members of
Congress. Be that as it may, the right to information must be balanced with and
should give way, in appropriate cases, to constitutional precepts particularly those
pertaining to delicate interplay of executive-legislative powers and privileges which is
the subject of careful review by numerous decided cases.

Respondent Committees further contend that the grant of petitioner's claim of

executive privilege violates the constitutional provisions on the right of the people to
information on matters of public concern.50 We might have agreed with such
contention if petitioner did not appear before them at all. But petitioner made himself
available to them during the September 26 hearing, where he was questioned for
eleven (11) hours. Not only that, he expressly manifested his willingness to answer
more questions from the Senators, with the exception only of those covered by his
claim of executive privilege.

B- The Claim of Executive Privilege

is Properly Invoked

The right to public information, like any other right, is subject to limitation. Section 7 of
Article III provides:

We now proceed to the issue -- whether the claim is properly invoked by the
President. Jurisprudence teaches that for the claim to be properly invoked, there
must be a formal claim of privilege, lodged by the head of the department which has
control over the matter."56 A formal and proper claim of executive privilege requires a
"precise and certain reason" for preserving their confidentiality.57

The right of the people to information on matters of public concern shall be

recognized. Access to official records, and to documents, and papers
pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by
law.

The Letter dated November 17, 2007 of Executive Secretary Ermita satisfies the
requirement. It serves as the formal claim of privilege. There, he expressly states that
"this Office is constrained to invoke the settled doctrine of executive privilege
as refined in Senate v. Ermita, and has advised Secretary Neri accordingly."
Obviously, he is referring to the Office of the President. That is more than enough
compliance. In Senate v. Ermita, a less categorical letter was even adjudged to be
sufficient.

The provision itself expressly provides the limitation, i.e. as may be provided by law.
Some of these laws are Section 7 of Republic Act (R.A.) No. 6713,51 Article 22952 of
the Revised Penal Code, Section 3 (k)53 of R.A. No. 3019, and Section 24(e)54 of Rule
130 of the Rules of Court. These are in addition to what our body of jurisprudence
classifies as confidential55 and what our Constitution considers as belonging to the
larger concept of executive privilege. Clearly, there is a recognized public interest in
the confidentiality of certain information. We find the information subject of this case
belonging to such kind.

With regard to the existence of "precise and certain reason," we find the grounds
relied upon by Executive Secretary Ermita specific enough so as not "to leave
respondent Committees in the dark on how the requested information could be
classified as privileged." The case of Senate v. Ermita only requires that an allegation
be made "whether the information demanded involves military or diplomatic secrets,
closed-door Cabinet meetings, etc." The particular ground must only be specified.
The enumeration is not even intended to be comprehensive."58 The following
statement of grounds satisfies the requirement:

More than anything else, though, the right of Congress or any of its Committees to
obtain information in aid of legislation cannot be equated with the people's right to
public information. The former cannot claim that every legislative inquiry is an
exercise of the people's right to information. The distinction between such rights is
laid down in Senate v. Ermita:

The context in which executive privilege is being invoked is that the

information sought to be disclosed might impair our diplomatic as well as
economic relations with the People's Republic of China. Given the
confidential nature in which these information were conveyed to the
President, he cannot provide the Committee any further details of these
conversations, without disclosing the very thing the privilege is designed to
protect.

There are, it bears noting, clear distinctions between the right of Congress to
information which underlies the power of inquiry and the right of people to
information on matters of public concern. For one, the demand of a citizen
for the production of documents pursuant to his right to information does not
have the same obligatory force as a subpoena duces tecum issued by
Congress. Neither does the right to information grant a citizen the power to
exact testimony from government officials. These powers belong only to
Congress, not to an individual citizen.

At any rate, as held further in Senate v. Ermita, 59 the Congress must not require the
executive to state the reasons for the claim with such particularity as to compel

114

Committee was present during the deliberation. 61 Section 18 of the Rules of

Procedure Governing Inquiries in Aid of Legislation provides that:

disclosure of the information which the privilege is meant to protect. This is a matter
of respect to a coordinate and co-equal department.
II

"The Committee, by a vote of majority of all its members, may punish for
contempt any witness before it who disobeys any order of the Committee or
refuses to be sworn or to testify or to answer proper questions by the
Committee or any of its members."

Respondent Committees Committed Grave Abuse of Discretion

in Issuing the Contempt Order
Grave abuse of discretion means "such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, or, in other words where the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility
and it must be so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law."60

Clearly, the needed vote is a majority of all the members of the Committee.
Apparently, members who did not actually participate in the deliberation were made to
sign the contempt Order. Thus, there is a cloud of doubt as to the validity of the
contempt Order dated January 30, 2008. We quote the pertinent portion of the
transcript, thus:

It must be reiterated that when respondent Committees issued the show cause Letter
dated November 22, 2007, petitioner replied immediately, manifesting that it was not
his intention to ignore the Senate hearing and that he thought the only remaining
questions were the three (3) questions he claimed to be covered by executive
privilege. In addition thereto, he submitted Atty. Bautista's letter, stating that his nonappearance was upon the order of the President and specifying the reasons why his
conversations with President Arroyo are covered by executive privilege. Both
correspondences include an expression of his willingness to testify again,
provided he "be furnished in advance" copies of the questions. Without
responding to his request for advance list of questions, respondent Committees
issued the Order dated January 30, 2008, citing him in contempt of respondent
Committees and ordering his arrest and detention at the Office of the Senate
Sergeant-At-Arms until such time that he would appear and give his testimony.
Thereupon, petitioner filed a motion for reconsideration, informing respondent
Committees that he had filed the present petition for certiorari.

THE CHAIRMAN (SEN. CAYETANO, A). For clarification. x x x The Chair

will call either a caucus or will ask the Committee on Rules if there is a
problem. Meaning, if we do not have the sufficient numbers. But if we
have a sufficient number, we will just hold a caucus to be able to
implement that right away becauseAgain, our Rules provide that any
one held in contempt and ordered arrested, need the concurrence of a
majority of all members of the said committee and we have three
committees conducting this.
So thank you very much to the members
SEN. PIMENTEL. Mr. Chairman.
THE CHAIRMAN (SEN. CAYETANO,A). May I recognize the Minority
Leader and give him the floor, Senator Pimentel.

Respondent Committees committed grave abuse of discretion in issuing the

contempt Order in view of five (5) reasons.

SEN. PIMENTEL. Mr. Chairman, there is no problem, I think, with

consulting the other committees. But I am of the opinion that the Blue
Ribbon Committee is the lead committee, and therefore, it should have
preference in enforcing its own decisions. Meaning to say, it is not
something that is subject to consultation with other committees. I am
not sure that is the right interpretation. I think that once we decide
here, we enforce what we decide, because otherwise, before we know
it, our determination is watered down by delay and, you know, the socalled "consultation" that inevitably will have to take place if we follow
the premise that has been explained.

First, there being a legitimate claim of executive privilege, the issuance of the
contempt Order suffers from constitutional infirmity.
Second, respondent Committees did not comply with the requirement laid down
in Senate v. Ermita that the invitations should contain the "possible needed statute
which prompted the need for the inquiry," along with "the usual indication of the
subject of inquiry and the questions relative to and in furtherance thereof."
Compliance with this requirement is imperative, both under Sections 21 and 22 of
Article VI of the Constitution. This must be so to ensure that the rights of both
persons appearing in or affected by such inquiry are respected as mandated by
said Section 21 and by virtue of the express language of Section 22. Unfortunately,
despite petitioner's repeated demands, respondent Committees did not send him an
advance list of questions.

So my suggestion, Mr. Chairman, is the Blue Ribbon Committee should not

forget it's the lead committee here, and therefore, the will of the lead
committee prevails over all the other, you, know reservations that other
committees might have who are only secondary or even tertiary committees,
Mr. Chairman.

Third, a reading of the transcript of respondent Committees' January 30, 2008

proceeding reveals that only a minority of the members of the Senate Blue Ribbon

THE CHAIRMAN (SEN. CAYETANO, A.) Thank you very much to the
Minority Leader. And I agree with the wisdom of his statements. I was merely

115

mentioning that under Section 6 of the Rules of the Committee and under
Section 6, "The Committee by a vote of a majority of all its members may
punish for contempt any witness before it who disobeys any order of the
Committee."

Fourth, we find merit in the argument of the OSG that respondent Committees
likewise violated Section 21 of Article VI of the Constitution, requiring that the inquiry
be in accordance with the "duly published rules of procedure." We quote the
OSG's explanation:

So the Blue Ribbon Committee is more than willing to take that

responsibility. But we only have six members here today, I am the
seventh as chair and so we have not met that number. So I am merely
stating that, sir, that when we will prepare the documentation, if a majority of
all members sign and I am following the Sabio v. Gordon rule wherein I do
believe, if I am not mistaken, Chairman Gordon prepared the documentation
and then either in caucus or in session asked the other members to sign.
And once the signatures are obtained, solely for the purpose that Secretary
Neri or Mr. Lozada will not be able to legally question our subpoena as being
insufficient in accordance with law.

The phrase 'duly published rules of procedure' requires the Senate of every
Congress to publish its rules of procedure governing inquiries in aid of
legislation because every Senate is distinct from the one before it or after it.
Since Senatorial elections are held every three (3) years for one-half of the
Senate's membership, the composition of the Senate also changes by the
end of each term. Each Senate may thus enact a different set of rules as it
may deem fit. Not having published its Rules of Procedure, the subject
hearings in aid of legislation conducted by the 14th Senate, are
therefore, procedurally infirm.
And fifth, respondent Committees' issuance of the contempt Order is arbitrary and
precipitate. It must be pointed out that respondent Committees did not first pass upon
the claim of executive privilege and inform petitioner of their ruling. Instead, they
curtly dismissed his explanation as "unsatisfactory" and simultaneously issued the
Order citing him in contempt and ordering his immediate arrest and detention.

SEN. PIMENTEL. Mr. Chairman, the caution that the chair is suggesting is
very well-taken. But I'd like to advert to the fact that the quorum of the
committee is only two as far as I remember. Any two-member senators
attending a Senate committee hearing provide that quorum, and therefore
there is more than a quorum demanded by our Rules as far as we are
concerned now, and acting as Blue Ribbon Committee, as Senator Enrile
pointed out. In any event, the signatures that will follow by the additional
members will only tend to strengthen the determination of this Committee to
put its foot forward put down on what is happening in this country, Mr.
Chairman, because it really looks terrible if the primary Committee of the
Senate, which is the Blue Ribbon Committee, cannot even sanction people
who openly defy, you know, the summons of this Committee. I know that the
Chair is going through an agonizing moment here. I know that. But
nonetheless, I think we have to uphold, you know, the institution that we are
representing because the alternative will be a disaster for all of us, Mr.
Chairman. So having said that, I'd like to reiterate my point.

A fact worth highlighting is that petitioner is not an unwilling witness. He

manifested several times his readiness to testify before respondent Committees. He
refused to answer the three (3) questions because he was ordered by the President
to claim executive privilege. It behooves respondent Committees to first rule on the
claim of executive privilege and inform petitioner of their finding thereon, instead of
peremptorily dismissing his explanation as "unsatisfactory." Undoubtedly, respondent
Committees' actions constitute grave abuse of discretion for being arbitrary and for
denying petitioner due process of law. The same quality afflicted their conduct when
they (a) disregarded petitioner's motion for reconsideration alleging that he had filed
the present petition before this Court and (b) ignored petitioner's repeated request for
an advance list of questions, if there be any aside from the three (3) questions as to
which he claimed to be covered by executive privilege.

THE CHAIRMAN (SEN. CAYETANO, A.) First of all, I agree 100 percent
with the intentions of the Minority Leader. But let me very respectfully
disagree with the legal requirements. Because, yes, we can have a
hearing if we are only two but both under Section 18 of the Rules of the
Senate and under Section 6 of the Rules of the Blue Ribbon
Committee, there is a need for a majority of all members if it is a case
of contempt and arrest. So, I am simply trying to avoid the court rebuking
the Committee, which will instead of strengthening will weaken us. But I do
agree, Mr. Minority Leader, that we should push for this and show the
executive branch that the well-decided the issue has been decided upon
the Sabio versus Gordon case. And it's very clear that we are all allowed to
call witnesses. And if they refure or they disobey not only can we cite them in
contempt and have them arrested. x x x 62

Even the courts are repeatedly advised to exercise the power of contempt judiciously
and sparingly with utmost self-restraint with the end in view of utilizing the same for
correction and preservation of the dignity of the court, not for retaliation or
vindication.63 Respondent Committees should have exercised the same restraint,
after all petitioner is not even an ordinary witness. He holds a high position in a coequal branch of government.
In this regard, it is important to mention that many incidents of judicial review could
have been avoided if powers are discharged with circumspection and deference.
Concomitant with the doctrine of separation of powers is the mandate to observe
respect to a co-equal branch of the government.
One last word.

116

The Court was accused of attempting to abandon its constitutional duty when it
required the parties to consider a proposal that would lead to a possible compromise.
The accusation is far from the truth. The Court did so, only to test a tool that other
jurisdictions find to be effective in settling similar cases, to avoid a piecemeal
consideration of the questions for review and to avert a constitutional crisis between
the executive and legislative branches of government.

WHEREFORE, the petition is hereby GRANTED. The subject Order dated January
30, 2008, citing petitioner Romulo L. Neri in contempt of the Senate Committees and
directing his arrest and detention, is hereby nullified.
SO ORDERED.

In United States v. American Tel. & Tel Co.,64 the court refrained from deciding the
case because of its desire to avoid a resolution that might disturb the balance of
power between the two branches and inaccurately reflect their true needs. Instead, it
remanded the record to the District Court for further proceedings during which the
parties are required to negotiate a settlement. In the subsequent case of United
States v. American Tel. &Tel Co.,65 it was held that "much of this spirit of compromise
is reflected in the generality of language found in the Constitution." It proceeded to
state:

SECOND DIVISION

G.R. No. 177861

Under this view, the coordinate branches do not exist in an exclusively

adversary relationship to one another when a conflict in authority arises.
Rather each branch should take cognizance of an implicit constitutional
mandate to seek optimal accommodation through a realistic evaluation of
the needs of the conflicting branches in the particular fact situation.

July 13, 2010

EMMA K. LEE
VS
COURT OF APPEALS, RITA K. LEE, LEONCIO K. LEE, LUCIA K. LEE-ONG,
JULIAN K. LEE, MARTIN K. LEE, ROSA LEE-VANDERLEK, MELODY LEE-CHIN,
HENRY K. LEE, NATIVIDAD LEE-MIGUEL, VICTORIANO K. LEE, and THOMAS K.
LEE, represented by RITA K. LEE, as Attorney-in-Fact

It thereafter concluded that: "The Separation of Powers often impairs efficiency, in

terms of dispatch and the immediate functioning of government. It is the longterm staying power of government that is enhanced by the mutual
accommodation required by the separation of powers."
In rendering this decision, the Court emphasizes once more that the basic principles
of constitutional law cannot be subordinated to the needs of a particular situation. As
magistrates, our mandate is to rule objectively and dispassionately, always mindful of
Mr. Justice Holmes' warning on the dangers inherent in cases of this nature, thus:

x --------------------------------------------------------------------------------------- x
DECISION
ABAD, J.:

"some accident of immediate and overwhelming interestappeals to the

feelings and distorts the judgment. These immediate interests exercise a
kind of hydraulic pressure which makes what previously was clear seem
doubtful, and before which even well settled principles of law will bend."66

This

case

is

about

the

grounds

for

quashing

subpoena ad

testificandum and a parents right not to testify in a case against his children.
In this present crusade to "search for truth," we should turn to the fundamental
constitutional principles which underlie our tripartite system of government, where the
Legislature enacts the law, the Judiciary interprets it and the Executive implements it.
They are considered separate, co-equal, coordinate and supreme within their
respective spheres but, imbued with a system of checks and balances to prevent
unwarranted exercise of power. The Court's mandate is to preserve these
constitutional principles at all times to keep the political branches of government
within constitutional bounds in the exercise of their respective powers and
prerogatives, even if it be in the search for truth. This is the only way we can preserve
the stability of our democratic institutions and uphold the Rule of Law.

The Facts and the Case

Spouses Lee Tek Sheng (Lee) and Keh Shiok Cheng (Keh) entered the Philippines in the
1930s as immigrants from China. They had 11 children, namely, Rita K. Lee, Leoncio K.
Lee, Lucia K. Lee-Ong, Julian K. Lee, Martin K. Lee, Rosa Lee-Vanderlek, Melody Lee-

117

Chin, Henry K. Lee, Natividad Lee-Miguel, Victoriano K. Lee, and Thomas K. Lee
(collectively, the Lee-Keh children).

On the basis of this report, the respondent Lee-Keh children filed two
separate petitions, one of them before the Regional Trial Court (RTC) of Caloocan
City[2]in Special Proceeding C-1674 for the deletion from the certificate of live birth of

In 1948, Lee brought from China a young woman named Tiu Chuan (Tiu),

the petitioner Emma Lee, one of Lees other children, the name Keh and replace the

supposedly to serve as housemaid. The respondent Lee-Keh children believe that Tiu

same with the name Tiu to indicate her true mothers name.

left the Lee-Keh household, moved into another property of Lee nearby, and had a
relation with him.

In April 2005 the Lee-Keh children filed with the RTC an ex parte request for
the issuance of a subpoena ad testificandum to compel Tiu, Emma Lees presumed

Shortly after Keh died in 1989, the Lee-Keh children learned that Tius

mother, to testify in the case. The RTC granted the motion but Tiu moved to quash

children with Lee (collectively, the Lees other children) claimed that they, too, were

the subpoena, claiming that it was oppressive and violated Section 25, Rule 130 of

children of Lee and Keh. This prompted the Lee-Keh children to request the National

the Rules of Court, the rule on parental privilege, she being Emma Lees stepmother.

Bureau of Investigation (NBI) to investigate the matter. After conducting such an

[3]

investigation, the NBI concluded in its report:

On August 5, 2005 the RTC quashed the subpoena it issued for being

unreasonable and oppressive considering that Tiu was already very old and that the

[I]t is very obvious that the mother of these 8 children is

certainly not KEH SHIOK CHENG, but a much younger woman,
most probably TIU CHUAN. Upon further evaluation and
analysis by these Agents, LEE TEK SHENG is in a quandary in
fixing the age of KEH SHIOK CHENG possibly to conform with
his grand design of making his 8 children as their own
legitimate children, consequently elevating the status of his
second family and secure their future. The doctor lamented
that this complaint would not have been necessary had not the
father and his second family kept on insisting that the 8
children are the legitimate children of KEH SHIOK CHENG.[1]

obvious object of the subpoena was to badger her into admitting that she was Emma
Lees mother.
Because the RTC denied the Lee-Keh childrens motion for reconsideration,
they filed a special civil action of certiorari before the Court of Appeals (CA) in CAG.R. SP 92555. On December 29, 2006 the CA rendered a decision,[4] setting aside
the RTCs August 5, 2005 Order. The CA ruled that only a subpoena duces tecum, not
a subpoena ad testificandum, may be quashed for being oppressive or unreasonable

The NBI found, for example, that in the hospital records, the eldest of the

under Section 4, Rule 21 of the Rules of Civil Procedure. The CA also held that Tius

Lees other children, Marcelo Lee (who was recorded as the 12th child of Lee and

advanced age alone does not render her incapable of testifying. The party seeking to

Keh), was born of a 17-year-old mother, when Keh was already 38 years old at the

quash the subpoena for that reason must prove that she would be unable to

time. Another of the Lees other children, Mariano Lee, was born of a 23-year-old

withstand the rigors of trial, something that petitioner Emma Lee failed to do.

mother, when Keh was then already 40 years old, and so forth. In other words, by the
Since the CA denied Emma Lees motion for reconsideration by resolution of

hospital records of the Lees other children, Kehs declared age did not coincide with

May 8, 2007,[5] she filed the present petition with this Court.

her actual age when she supposedly gave birth to such other children, numbering
eight.

The Question Presented

118

the correction of entries in the petitioners' records of birth

were intended to establish that for physical and/or biological
reasons it was impossible for Keh Shiok Cheng to have
conceived and given birth to the petitioners as shown in their
birth records. Contrary to petitioners' contention that the
petitions before the lower courts were actually actions to
impugn legitimacy, the prayer therein is not to declare that
petitioners are illegitimate children of Keh Shiok Cheng, but to
establish that the former are not the latter's children. There is
nothing to impugn as there is no blood relation at all between
Keh Shiok Cheng and petitioners.[7] (Underscoring supplied)

The only question presented in this case is whether or not the CA erred in
ruling that the trial court may compel Tiu to testify in the correction of entry case that
respondent Lee-Keh children filed for the correction of the certificate of birth of
petitioner Emma Lee to show that she is not Kehs daughter.
The Ruling of the Court
Petitioner Emma Lee claims that the RTC correctly quashed the
subpoena ad testificandum it issued against Tiu on the ground that it was

Taking in mind the ultimate purpose of the Lee-Keh childrens action,

unreasonable and oppressive, given the likelihood that the latter would be badgered

obviously, they would want Tiu to testify or admit that she is the mother of Lees other

on oral examination concerning the Lee-Keh childrens theory that she had illicit

children, including petitioner Emma Lee. Keh had died and so could not give

relation with Lee and gave birth to the other Lee children.

testimony that Lees other children were not hers. The Lee-Keh children have,

But, as the CA correctly ruled, the grounds citedunreasonable and

therefore, a legitimate reason for seeking Tius testimony and, normally, the RTC

oppressiveare proper for subpoena ad duces tecum or for the production of

cannot deprive them of their right to compel the attendance of such a material

documents and things in the possession of the witness, a command that has a

witness.

tendency to infringe on the right against invasion of privacy. Section 4, Rule 21 of the

But petitioner Emma Lee raises two other objections to requiring Tiu to come

Rules of Civil Procedure, thus provides:

to court and testify: a) considering her advance age, testifying in court would subject

SECTION 4. Quashing a subpoena. The court may

quash a subpoena duces tecum upon motion promptly made
and, in any event, at or before the time specified therein if it is
unreasonable and oppressive, or the relevancy of the books,
documents or things does not appear, or if the person in
whose behalf the subpoena is issued fails to advance the
reasonable cost of the production thereof.

her to harsh physical and emotional stresses; and b) it would violate her parental right
not to be compelled to testify against her stepdaughter:
1. Regarding the physical and emotional punishment that would be inflicted
on Tiu if she were compelled at her age and condition to come to court to testify,
petitioner Emma Lee must establish this claim to the satisfaction of the trial

Notably, the Court previously decided in the related case of Lee v. Court of

court. About five years have passed from the time the Lee-Keh children sought the

Appeals[6] that the Lee-Keh children have the right to file the action for correction of

issuance of a subpoena for Tiu to appear before the trial court. The RTC would have

entries in the certificates of birth of Lees other children, Emma Lee included. The

to update itself and determine if Tius current physical condition makes her fit to

Court recognized that the ultimate object of the suit was to establish the fact that Lees

undergo the ordeal of coming to court and being questioned. If she is fit, she must

other children were not children of Keh. Thus:

obey the subpoena issued to her.

It is precisely the province of a special proceeding

such as the one outlined under Rule 108 of the Revised Rules
of Court to establish the status or right of a party, or a
particular fact. The petitions filed by private respondents for

Tiu has no need to worry that the oral examination might subject her to
badgering by adverse counsel. The trial courts duty is to protect every witness against

119

oppressive behavior of an examiner and this is especially true where the witness is of

But here Tiu, who invokes the filial privilege, claims that she is the

[8]

advanced age.

stepmother of petitioner Emma Lee. The privilege cannot apply to them because the
rule applies only to direct ascendants and descendants, a family tie connected by a

2. Tiu claimed before the trial court the right not to testify against her

common

stepdaughter, petitioner Emma Lee, invoking Section 25, Rule 130 of the Rules of

ancestry. A

stepdaughter

has

no

common

ancestry

by

her

stepmother. Article 965 thus provides:

Evidence, which reads:

Art. 965. The direct line is either descending or ascending. The

former unites the head of the family with those who descend
from him. The latter binds a person with those from whom he
descends.

SECTION 25. Parental and filial privilege.- No person

may be compelled to testify against his parents, other direct
ascendants, children or other direct descendants.
The above is an adaptation from a similar provision in Article 315 of the Civil

Consequently, Tiu can be compelled to testify against petitioner Emma Lee.

Code that applies only in criminal cases. But those who revised the Rules of Civil
WHEREFORE, the Court DENIES the petition and AFFIRMS the decision

Procedure chose to extend the prohibition to all kinds of actions, whether civil,

and resolution of the Court of Appeals in CA-G.R. SP 92555.

criminal, or administrative, filed against parents and other direct ascendants or

descendants.

SO ORDERED.

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