Henry Ching Tiu, Christopher Halin Go and George Co v Philippine National Bank

Date: aug 19 2009

Ponente: J. Peralta

Facts:
 Asian Water Resources Inc (AWRI) represented by Petitioners applied for a real
estate loan with the Philippine Bank Communications (PBCOM) to fund its purified
water distribution business
 Board Resolution dated June 7 1993 to support it
 Loan was guaranteed by collateral over the party covered by TCT and eventually
approved
 Aug 1996, AWRI applied for a bigger loan with PBCOM using the same Board
Resolution but without any additional collateral
 PBCOM required the Board members to become sureties and a surety agreement
was executed
 AWRI informed the bank its desire to apply dacion en pago for its existing loan
obligation to the bank
 PBCOM denied request and sent letter to Petitioners demanding full payment of its
obligation to the bank
 Demand unheeded so filed a complaint for collection against P
 Filed their answer that they were not personally liable on the promissory notes
because they signed surety agreement in their capacities as officers of AWRI
o also argued hat the surety agreement attached to the complaint were
falsified as when they signed the phrase “in his personal capacity” was not
there and thus, knowledge and consent were vitiated
o attached to their answer is a certified photocopy of the surety agreement
issued by the Records Management and Archives Office in Davao City that
the phrase was not there
 The Bank looked at its file copy and realized that the notarial copy did not contain
the phrase
 P’s counsel asked PBCOM to explain
 PBCOM discovered that the bank auditor inserted the phrase and the Notary
public was not informed of such insertion
 PBCOM replied to the counterclaim of P that it admitted to its mistake but not a
falsification as it was only to speak the truth of the parties’ intentions
 Regardless of the insertion, P have already admitted that they signed the Surety
Agreement in the original form and thus primarily liable
 PBCOM invoking a liberal application of the Rules, emphasized that the motion
incorporated in the pleading can be treated as a motion for leave of court to
amend and admit the amended complaint pursuant to Sec 3 Rule 10 of ROC
 RTC ordered allowing the substitution of the altered document with the original
surety agreement (substitution of Annex A to A-2)
 P filed an MR but denied
 P went to CA on Rule 65
 CA denied\
 P argues
o Withdrawal of the document results in withdrawal of the whole complaint on
the ground that there is no more cause of action to be maintained or
enforced by PBCOM against P
o Their defenses will be gravely affected by such substitution
 o Misapplied the principle of equity as appeal
o P appeal will be inadequate as the substitution will not be nullified if the
roginal documents are not found in the records
 R argues
o Actionable document is the surety agreement
o Rules allow substantial amendment with leave of court and it is discretionary
ISSUE: WON substantial amendment should be allowed (YES)

Held:
 Rule 8 Sec 7 provides when the cause of action is anchored on a document, its
substance must be set forth and the original or a copy thereof “shall” be attached
to the pleading as an exhibit and deemed part thereof
 Rule 10 sec 3 specifically allows amendment by leave of court
SECTION 3. Amendments by leave of court.—Except as provided in the
next preceding section, substantial amendments may be made only
upon leave of court. But such leave may be refused if it appears to the
court that the motion was made with intent to delay. Orders of the
court upon the matters provided in this section shall be made upon
motion filed in court, and after notice to the adverse party, and an
opportunity to be heard.”

 Valenzuela v CA
o “or that the cause of action or defense is substantially altered” was stricken
off and not retained in the new rules
o Thus, amendment may no substantially alter the cause of action or defense
o However, this should only be true when despite a substantial change or
alteration in the cause of action or defense, the amendments sought to be
made shall serve the higher interests of substantial justice and prevent delay
and equally promote the laudable objective of the rules which is to secure a
just, speedy and inexpensive disposition of every action and proceeding
 Granting of leave to file amendment pleading is a matter of discretion upon the
court
 The courts should be liberal in allowing amendments to pleadings to avoid a
multiplicity of suits and in order that the real controversies between the parties are
presented, their rights determined, and the case decided on the merits without
uncessaru delay
 This liberality is greatest in the early stages of a lawsuit, especially before trial of the
case giving the petitioners all the time allowed by law to answer and prepare for
trial
 Amendments of pleadings are generally favored in so far as it will be determined
on its real facts and will avoid circuity of action and unnecessary expenses
 As applied
o No fraudulent intent on the part of PBCOM as it even admitted its mistake
o Counsel of PBCOM had no ideal of the insertion
o Substitution was necessary in order for the case to be judicially resolved
o Cardinal rule on evidence is writtend document is the best evidence of its
own contents. It is also the repository of the parties’ stipulations and
everything else, excluded
o The surety agreement is the best evidence to establish the rights and
obligation
  It is important to remember that procedure are but mere tools designed to facilitate
the attainment of justice
 Strict application that would frustrate rather than promote substantial justice should
be avoided
 Contrary to P’s contention, they could not be prejudiced by the substitution as they
can still present the substituted documents, Annexes “A” to A-2” as part of the
evidence of their affirmative defenses
 It did not delay but in fact, expedited the determination of the controversy
 It does not preclude P from filing a criminal case of falsification as the substitution
will not erase the fact of falsification
 Rule 65 is grave abuse and none present in the order of RTC judge as it properly
acted on its discretion
 However SC ruled that CA was wrong in determining the rights based on the surety
agreement
 It was beyond jurisdiction on certiorari and preempted RTC from trying the case
DENIED CA and RTC affirmed