Evid

G.R. No. 3810, U.S. v. Orera, 11 Phil. 596October 18, 1907G.R. No. 3810THE UNITED STATES,plaintiff-appellee,vs.DAMIAN ORERA (alias KIM CUAN),defendant-appellant.Del-Pan, Ortigas and Fisher for appellant.Attorney-General Araneta for appellee.ARELLANO,C.J.:Damian Orera (aliasKim Cuan) was convicted by the Court of First Instance of the city of Manila, of the crime charged in the complaint, namely, of having falsified, to the damages of a Chinese theatrical company of the Philippine Islands, called Eng Ning, "a Chinese theater ticket which entitled the bearer thereof to admission to a performance held in the theater of the above company at Manila, on the 7th of October, 1906, by counterfeiting and simulating the signature and rubric of Eng Ning on the ticket the same figures, letters, dragons, ornaments and signatures, as placed by Eng Ning and the above mentioned Chinese theatrical company . . ." The accused was sentenced to be imprisoned at the Insular Prison of Bilibid for the period of six months and one day, to pay a fine of 625 pesetas, Philippine currency, and the costs of the suit, from which the judgment the accused appealed.The appeal having been heard, this court holds:1. That, in effect, as argued by the appellant, he could not be convicted of the falsification of six tickets, as declared and held in the judgment appealed from, inasmuch as the complaint was restricted to one ticket only.2. That the court below did not err in qualifying such ticket as a document in order to prosecute and punish the crime of falsification, the subject-matter of the complaint, because if, according to the authority cited by the appellant, a document is a "deed, instrument or other duly authorized paper by which something is proved, evidenced or set forth," and a private document is, according to another authority cited by the appellant, "every deed or instrument executed by a private person, without the intervention of a public notary or of other person legally authorized, by which document some disposition or agreement is proved, evidenced or set forth," it follows that the ticket in question, being an authorized document evidencing an agreement for the rent of a place in a theater to enable the possessor to witness a theatrical performance, is a private document.The error has been in the penalty imposed, an error which necessarily must be remedied by this court in the present appeal, in order that the judgment may be in conformity with the law. Said penalty, according to the provisions of article 304 of the Penal Code, should be that ofpresidio correccionalin its minimum and medium degrees, and a fine, plus the corresponding indemnification for the damage caused, which in the present case was P1, the price of the true ticket.We, therefore, sentence Damian Orera (aliasKim Cuan) to one year, eleven months, and twenty one days ofpresidio correccional, and to pay a fine of 625 pesetas, as imposed in the judgment, with the accessory penalty provided for in article 58, the indemnification of P1 to the offended party, or, in default thereof, to subsidiary imprisonment, and the payment of the costs of both instances. So ordered.Torres, Johnson, Willard and Tracey, JJ., concur.

G.R. No. L-9181 November 28, 1955

THE PEOPLE OF THE PHILIPPINES, petitioner, vs.THE HON. NICASIO YATCO, Judge of the Court of First Instance of Rizal, Quezon City Branch, and JUAN CONSUNJI and ALFONSO PANGANIBAN, respondents.

Office of the Solicitor General Ambrosio Padilla, Solicitor Meliton G. Soliman, City Attorney Pedro R. Revilla and Assistant City Attorney Julian E. Lustre for petitioner.Estanislao A. Fernandez, Augusto Ilagan, Claro T. Almeda and Rufino Navarro for respondents.

REYES, J.B.L., J.:

In an amended information filed by the City Attorney of Quezon City on March 22, 1955, Juan Consunji, Alfonso Panganiban, and another whose identity is still unknown, were charged with having conspired together in the murder of one Jose Ramos (Criminal Case No. Q-1637 of the Court of First Instance of Quezon City). Trial of the case started on May 3, 1955, and in several hearings the prosecution had been presenting its evidence. During the progress of the trial on May 18, 1955, while the prosecution was questioning one of its witnesses, Atty. Arturo Xavier of the National Bureau of Investigation, in connection with the making of a certain extra-judicial confession (allegedly made before him) by defendant Juan Consunji to the witness, counsel for the other defendant Alfonso Panganiban interposed a general objection to any evidence on such confession on the ground that it was hearsay and therefore incompetent as against the other accused Panganiban. The Court below ordered the exclusion of the evidence objected to, but on an altogether different ground: that the prosecution could not be permitted to introduce the confessions of defendants Juan Consunji and Alfonso Panganiban to prove conspiracy between them, without prior proof of such conspiracy by a number of definite acts, conditions, and circumstances. Thereafter, according to the transcript, the following remarks were made:

FISCAL LUSTRE:

May we know from counsel if he is also objecting to the admissibility of the confession of Consunji as against the accused Consunji himself?

COURT:

That would be premature because there is already a ruling of the Court that you cannot prove a confession unless you prove first conspiracy thru a number of indefinite acts, conditions and circumstances as required by law. Annex "B" of the petition, p. 9

The prosecution then moved in writing for a reconsideration of the order of exclusion, but again the motion was denied. Wherefore, this petition for certiorari was brought before this Court by the Solicitor General, for the review and annulment of the lower Court's order completely excluding any evidence on the extrajudicial confessions of the accused Juan Consunji and Alfonso Panganiban without prior proof of conspiracy.

We believe that the lower Court committed a grave abuse of discretion in ordering the complete exclusion of the prosecution's evidence on the alleged confessions of the accused Juan Consunji at the stage of the trial when the ruling was made.

Section 14, Rule 123, Rules of Court, is specific as to the admissibility of the extrajudicial confession of an accused, freely and voluntarily made, as evidence against him.

SEC. 14. Confession. The declaration of an accused expressly acknowledging the truth of his guilt as to the offense charged, may be given in evidence against him.

Under the rule of multiple admissibility of evidence, even if Consunji's confession may not be competent as against his co-accused Panganiban, being hearsay as to the latter, or to prove conspiracy between them without the conspiracy being established by other evidence, the confession of Consunji was, nevertheless, admissible as evidence of the declarant's own guilt (U. S. vs. Vega, 43 Phil. 41; People vs. Bande, 50 Phil. 37; People vs. Buan, 64 Phil. 296), and should have been admitted as such.

The rule cited by the Court below in support of its exclusion of the proffered evidence is Sec. 12 of Rule 123, providing that:

The act or declaration of a conspirator relating to the conspiracy and during its existence may be given in evidence against the co-conspirator after the conspiracy is shown by evidence other than such act or declaration.

Manifestly, the rule refers to statements made by one conspirator during the pendency of the unlawful enterprises ("during its existence") and in furtherance of its object, and not to a confession made, as in this case, long after the conspiracy had been brought to an end (U. S. vs. Empeinado, 9 Phil., 613; U. S. vs. Raymundo, 14 Phil., 416; People vs. Badilla, 48 Phil., 718; People vs. Nakpil, 52 Phil., 985).

Besides, the prosecution had not yet offered the confessions to prove conspiracy between the two accused, nor as evidence against both of them. In fact, the alleged confessions (both in writing and in tape recordings) had not yet even been identified (the presentation of Atty. Xavier was precisely for the purpose of identifying the confessions), much less formally offered in evidence. For all we know, the prosecution might still be able to adduce other proof of conspiracy between Consunji and Panganiban before their confessions are formally offered in evidence. Assuming, therefore, that section 12 of Rule 123 also applies to the confessions in question, it was premature for the respondent Court to exclude them completely on the ground that there was no prior proof of conspiracy.

It is particularly noteworthy that the exclusion of the proferred confessions was not made on the basis of the objection interposed by Panganiban's counsel, but upon an altogether different ground, which the Court issued motu proprio. Panganiban's counsel objected to Consunji's confession as evidence of the guilt of the other accused Panganiban, on the ground that it was hearsay as to the latter. But the Court, instead of ruling on this objection, put up its own objection to the confessions that it could not be admitted to prove conspiracy between Consunji and Panganiban without prior evidence of such conspiracy by a number of indefinite acts, conditions, circumstances, etc. and completely excluded the confessions on that ground. By so doing, the Court overlooked that the right to object is a mere privilege which the parties may waive; and if the ground for objection is known and not reasonably made, the objection is deemed waived and the Court has no power, on its own motion, to disregard the evidence (Marcella vs. Reyes, 12 Phil., 1).

We see no need for the present to discuss the question of the admissibility of the individual extrajudicial confessions of two or more accused for the purpose of establishing conspiracy between them through the identity of the confessions in essential details. After all, the confessions are not before us and have not even been formally offered in evidence for any purpose. Suffice it to say that the lower Court should have allowed such confessions to be given in evidence at least as against the parties who made them, and admit the same conditionally to establish conspiracy, in order to give the prosecution a chance to get into the record all the relevant evidence at its disposal to prove the charges. At any rate, in the final determination and consideration of the case, the trial Court should be able to distinguish the admissible from the inadmissible, and reject what, under the rules of evidence, should be excluded.

Once more, attention should be called to the ruling of this Court in the case of Prats & Co. vs. Phoenix Insurance Co., 52 Phil., 807, 816-817:

In the course of long experience we have observed that justice is most effectively and expeditiously administered in the courts where trial objections to the admission of proof are received with least favor. The practice of excluding evidence on doubtful objections to its materiality or technical objections to the form of the questions should be avoided. In a case of any intricacy it is impossible for a judge of first instance, in the early stages of the development of the proof, to know with any certainty whether testimony is relevant or not; and where there is no indication of bad faith on the part of the Attorney offering the evidence, the court may as a rule safely accept the testimony upon the statement of the attorney that the proof offered will be connected later. Moreover, it must be remembered that in the heat of the battle over which the presides, a judge of first instance may possibly fall into error in judging of the relevancy of proof where a fair and logical connection is in fact shown. When such a mistake is made and the proof is erroneously ruled out, the Supreme Court, upon appeal, often finds itself embarrassed and possibly unable to correct the effects of the error without returning the case for a new trial, a step which this Court is always very loath to take. On the other hand, the admission of proof in a court of first instance, even if the question as to its form, materiality, or relevancy is doubtful, can never result in much harm to either litigant, because the trial judge is supposed to know the law; and it is duty, upon final consideration of the case, to distinguish the relevant and material from the irrelevant and immaterial. If this course is followed and the cause is prosecuted to the Supreme Court upon appeal, this Court then has all the material before it necessary to make a correct judgment.

There is greater reason to adhere to such policy in criminal cases where questions arise as to admissibility of evidence for the prosecution, for the unjustified exclusion of evidence may lead to the erroneous acquittal of the accused or the dismissal of the charges, from which the People can no longer appeal.

Wherefore, the order excluding the confessions of the accused Juan Consunji and Alfonso Panganiban is annulled and set aside and the Court below is directed to proceed with the trial in accordance with law and this opinion. Costs against respondents Juan Consunji and Alfonso Panganiban. So ordered.

G.R. No. 105813September 12, 1994CONCEPCION M. CATUIRA, petitioner, vs.COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.BELLOSILLO, J.:

Is the testimony of a witness inadmissible in evidence if not formally offered at the time the witness is called to testify, as required in Sec. 35, in relation to Sec. 34, Rule 132, of the Revised Rules on Evidence? 1

On 8 June 1990, two (2) Informations for estafa were filed against petitioner Concepcion M. Catuira with the Regional Trial Court of Calamba, Laguna, for having issued two (2) checks in payment of her obligation to private complainant Maxima Ocampo when petitioner had no sufficient funds to cover the same, which checks upon presentment for payment were dishonored by the drawee bank. 2

After the prosecution had presented its evidence, petitioner Concepcion M. Catuira filed a Motion to Dismiss (by way of Demurrer to Evidence) under Sec. 15, Rule 119, of the 1985 Revised Rules on Criminal Procedure. 3 Petitioner contended that the testimony of private respondent Ocampo was inadmissible in evidence since it was not properly introduced when she was called to testify as mandated in Sec. 35, Rule 132, of the Revised Rules on Evidence. Petitioner also argued that even if the testimony of private respondent was considered, the evidence of the prosecution still failed to prove that the checks were issued in payment of an obligation.

On 26 July 1991, the trial court denied the motion to dismiss for lack of merit. On 18 Oct 1991, it likewise denied the motion to reconsider its denial of the motion to dismiss.

On 4 November 1991 petitioner elevated her case to the Court of Appeals through a petition for certiorari, prohibition and mandamus. In a similar move, the appellate court rejected her petition and sustained the trial court in its denial of the motion to dismiss. Hence, this recourse seeking to annul the decision of the Court of Appeals rendered on 27 February 1992 as well as its resolution of 1 June 1992. 4

Petitioner claims that the Court of Appeals erred when it accepted the testimony of private respondent despite the undisputed fact that it was not offered at the time she was called to testify; her testimony should have been stricken off the record pursuant to Sec. 34, Rule 132, which prohibits the court from considering evidence which has not been formally offered; and, it was error for respondent appellate court to declare that petitioner's objection was not done at the proper time since under Sec. 36, Rule 132, 5 objection to evidence offered orally must be made immediately after the offer is made. Evidently, petitioner could not have waived her right to object to the admissibility of the testimony of private respondent since the rule requires that it must be done only at the time such testimony is presented and the records plainly show that the opportunity for petitioner to object only came when the prosecution attempted, albeit belatedly, to offer the testimony after it has rested its case. 6

The petition is devoid of merit. The reason for requiring that evidence be formally introduced is to enable the court to rule intelligently upon the objection to the questions which have been asked. 7 As a general rule, the proponent must show its relevancy, materiality and competency. Where the proponent offers evidence deemed by counsel of the adverse party to be inadmissible for any reason, the latter has the right to object. But such right is a mere privilege which can be waived. Necessarily, the objection must be made at the earliest opportunity, lest silence when there is opportunity to speak may operate as a waiver of objections. 8

Thus, while it is true that the prosecution failed to offer the questioned testimony when private respondent was called to the witness stand, petitioner waived this procedural error by failing to object at the appropriate time, i.e., when the ground for objection became reasonably apparent the moment private respondent was called to testify without any prior offer having been made by the proponent. Most apt is the observation of the appellate court:

While it is true that the prosecution failed to offer in evidence the testimony of the complaining witness upon calling her to testify and that it was only after her testimony and after the petitioner moved that it be stricken that the offer was made, the respondent Court did not gravely err in not dismissing the case against the petitioner on the ground invoked. For, she should have objected to the testimony of the complaining witness when it was not first offered upon calling her and should not have waited in ambush after she had already finished testifying. By so doing she did not save the time of the Court in hearing the testimony of the witness that after all according to her was inadmissible. And for her failure to make known her objection at the proper time, the procedural error or defect was waived. 9

Indeed, the rationale behind Sec. 34, Rule 132, is manifest in the minutes of the Revision of Rules Committee. 10 Thus The new rule would require the testimony of a witness to offer it at the time the witness is called to testify. This is the best time to offer the testimony so that the court's time will not be wasted. Since it can right away rule on whether the testimony is not necessary because it is irrelevant or immaterial.

If petitioner was genuinely concerned with the ends of justice being served, her actuations should have been otherwise. Instead, she attempted to capitalize on a mere technicality to have the estafa case against her dismissed. 11 But even assuming that petitioner's objection was timely, it was at best pointless and superfluous. For there is no debating the fact that the testimony of complaining witness is relevant and material in the criminal prosecution of petitioner for estafa. It is inconceivable that a situation could exist wherein an offended party's testimony is immaterial in a criminal proceeding. Consequently, even if the offer was belatedly made by the prosecution, there is no reason for the testimony to be expunged from the record. On the contrary, the unoffered oral evidence must be admitted if only to satisfy the court's sense of justice and fairness and to stress that substantial justice may not be denied merely on the ground of technicality. 12

WHEREFORE, the decision of the Court of Appeals sustaining the order of the Regional Trial Court of Calamba, Laguna, Br. 35, denying petitioner's motion to dismiss (by way of demurrer to evidence) is AFFIRMED. Costs against petitioner.SO ORDERED.G.R. No. 86062June 6, 1990

INTERPACIFIC TRANSIT, INC., petitioner, vs.RUFO AVILES and JOSEPHINE AVILES, respondents.

Balane, Barican, Cruz, Alampay Law Office for petitioner.

Francisco G. Mendoza private respondents.

CRUZ, J.:

This case hinges on the proper interpretation and application of the rules on the admissibility of documentary evidence and the viability. of a civil action for damages arising from the same acts imputed to the defendant in a criminal action where he has been acquitted.

In the information filed against Rufo and Josephine Aviles, the private respondents herein, it was alleged that being then sub-agents of Interpacific Transit, Inc. and as such enjoying its trust and confidence, they collected from its various clients payments for airway bills in the amount of P204,030.66 which, instead of remitting it to their principal, they unlawfully converted to their own personal use and benefit. 1

At the trial, the prosecution introduced photocopies of the airway bills supposedly received by the accused for which they had not rendered proper accounting. This was done in, the course of the direct examination of one of the prosecution witnesses. 2 The defense objected to their presentation, invoking the best evidence rule. The prosecution said it would submit the original airway bills in due time. Upon such undertaking, the trial court allowed the marking of the said documents a s Exhibits "B" to "OO." The e prosecution n did submit the original airway bills nor did it prove their loss to justify their substitution with secondary evidence. Nevertheless, when the certified photocopies of the said bills formally were offered, 3 in evidence, the defense interposed no objection.

In acquitting the accused, Judge Herminio I. Benito of the Regional Trial Court of Makati rejected the agency theory of the prosecution and held that the relationship between the petitioner and Rufo Aviles was that of creditor and debtor only. "Under such relationship,' it declared, "the outstanding account, if any, of the accused in favor of ITI would be in the nature of an indebtedness, the non- payment of which does not Constitute estafa." 4

The court' also held that the certified photocopies of the airway by were not admissible under the rule that "there can be no evidence of a writing the content of which is the subject of inquiry other' than the writing itself." Loss of the originals had not been proved to justify the exception to the rule as one of the prosecution witness had testified that they were still in the ITI bodega. Neither had it been shown that the originals had been "recorded in an existing record a certified copy of which is made evidence by law."

In its order denying the motion for reconsideration, the trial court declared that it "had resolved the issue of whether the accused has civil obligation to ITI on the basis of the admissibility in evidence of the xerox copies of the airway bills." 5

Right or wrong, the acquittal on the merits of the accused can no longer be the subject of an appeal under the double jeopardy rule. However, the petitioner seeks to press the civil liability of the private respondents, on the ground that the dismissal of the criminal action did not abate the civil claim for the recovery of the amount. More to the point, ITI argues that the evidence of the airways bills should not have been rejected and that it had sufficiently established the indebtedness of the private respondents to it.

The Court of Appeals 6 affirmed, the decision of the trial court in toto, adding that the existing record spoken of in Section 2 (e) and (d) of Rule 130 of the Rules of Court must be in the custody, of a public officer only. It also declared that:

Since no evidence of civil liability was presented, no necessity existed on the part of the private respondents to present evidence of payment of an obligation which was not shown to exist.

The petitioner now asks this Court to annul that judgment as contrary to law and the facts established at the As in the courts below, it is insisting on the admissibility of its evidence to prove the civil liability of the private respondents.

We agree with the petitioner. The certified photocopies of the airway bills should have been considered.

In assessing this evidence, the lower courts confined themselves to the best evidence rule and the nature of the documents being presented, which they held did not come under any of the exceptions to the rule. There is no question that the photocopies were secondary evidence and as such were not admissible unless there was ample proof of the loss of the originals; and neither were the other exceptions allowed by the Rules applicable. The trouble is that in rejecting these copies under Rule 130, Section 2, the respondent court disregarded an equally important principle long observed in our trial courts and amply supported by jurisprudence.

This is the rule that objection to documentary evidence must be made at the time it is formally offered. as an exhibit and not before. Objection prior to that time is premature.

It is instructive at this paint to make a distinction between Identification of documentary evidence and its formal offer as an exhibit. The first is done in the course of the trial and is accompanied by the marking of the evidence an an exhibit. The second is done only when the party rests its case and not before. The mere fact that a particular document is Identified and marked as an exhibit does not mean it will be or has been offered as part of the evidence of the party. The party may decide to formally offer it if it believes this will advance its cause, and then again it may decide not to do so at all. In the latter event, the trial court is, under Rule 132, Section 35, not authorized to consider it.

Objection to the documentary evidence must be made at the time it is formally offered, not earlier. The Identification of the document before it is marked as an exhibit does not constitute the formal offer of the document as evidence for the party presenting it. Objection to the Identification and marking of the document is not equivalent to objection to the document when it is formally offered in evidence. What really matters is the objection to the document at the time it is formally offered as an exhibit.

In the case at bar, the photocopies of the airway bills were objected to by the private respondents as secondary evidence only when they, were being Identified for marking by the prosecution. They were nevertheless marked as exhibits upon the promise that the original airway bills would be submitted later. it is true that the originals were never produced. Yet, notwithstanding this omission, the defense did not object when the exhibits as previously marked were formally offered in evidence. And these were subsequently admitted by the trial court. 7

In People v. Teodoro, 8 a document being Identified by a prosecution witness was objected to as merely secondary, whereupon the trial judge ordered the testimony stricken out. This Court, in holding the objection to be premature, said:

It must be noted that the Fiscal was only Identifying the official records of service of the defendant preparatory to introducing them as evidence. ... The time for the presentation of the records had not yet come; presentation was to be made after their Identification. For what purpose and to what end the Fiscal would introduce them as evidence was not yet stated or disclosed. ... The objection of counsel for the defendant was, therefore, premature, especially as the Fiscal had not yet stated for what purpose he would introduce the said records. ...

The time for objecting the evidence is when the same is offered. (Emphasis supplied).

The objection of the defense to the photocopies of the airway bins while they were being Identified and marked as exhibits did not constitute the objection it should have made when the exhibits were formally offered in evidence by the prosecution. No valid and timely objection was made at that time. And it is no argument to say that the earlier objection should be considered a continuing objection under Sec. 37 of Rule 132, for that provision obviously refers to a single objection to a class of evidence (testimonial or documentary) which when first offered is considered to encompass the rest of the evidence. The presumption is, of course, that there was an offer and a seasonable objection thereto. But, to repeat, no objection was really made in the case before us because it was not made at the proper time.

It would have been so simple for the defense to reiterate its former objection, this time seasonably, when the formal offer of exhibits was made. It is curious that it did not, especially so since the objections to the formal offer of exhibits was made in writing. In fact, the defense filed no objection at all not only to the photocopies but to all the other exhibits of the prosecution.

The effect of such omission is obvious. The rule is that evidence not objected to is deemed admitted and may be validly considered by the court in arriving at its judgment. 9 This is true even if by its nature the evidence is inadmissible and would have surely been rejected if it had been challenged at the proper time.

The records certainly would have been the, beet proof of such former conviction. The certificate was not the best proof. There seems to be no justification for the presentation of proof of a character. ... Under an objection upon the ground that the said certificate was not the best proof, it should have been rejected. Once admitted, however, without objection, even though not admissible under an objection, we are not inclined now to reject it. If the defendant had opportunely presented an objection to the admissibility of said certificate, no doubt the prosecution would have presented the best proof upon the questions to which said certificate relates. 10

(It) is universally accepted that when secondary or incompetent evidence is presented and accepted without any objection on the part of the other party, the latter is bound thereby and the court is obliged to grant it the probatory value it deserves. 11

We hold therefore that it was erroneous for the lower courts to reject the photocopies of the airway bills to prove the liability of the private respondents to the petitioner. While we may agree that there was really no criminal liability that could attach to them because they had no fiduciary relationship with ITI, the rejected evidence sufficiently established their indebtedness to the petitioner. Hence, we must reverse the ruling below that "on account of the inadmissibility of the prosecution's Exhibits 'B' and 'OO', coupled with the denial made by the accused, there appears to be no concrete proof of such accountability."

Accoording to Rule 120, Section 2, of the Rules of Court:

In case of acquittal, unless there is a clear showing that the act from which the civil liability might arise did not exist, the judgment shall make a finding on the civil liability of the accused in favor of the offended party.

With the admission of such exhibits pursuant to the ruling above made, we find that there is concrete proof of the defendant's accountability. More than this, we also disbelieve the evidence of the private respondents that the said airway bills had been paid for. The evidence consists only of check stubs corresponding to payments allegedly made by the accused to the ITI, and we find this insufficient.

As it is Aviles who has alleged payment, it is for him to prove that allegation. He did not produce any receipt of such payment. He said that the cancelled payment checks had been lost and relied merely on the check stubs, which are self-serving. The prosecution correctly stressed in its motion for reconsideration that the accused could have easily secured a certification from the bank that the checks allegedly issued to ITI had been honored. No such certification was presented. In short, the private respondents failed to establish their allegation that payment for the airway bills delivered to them had been duly remitted to ITI.

In Padilla v. Court of Appeals, 12 we held:

There appear to be no sound reasons to require a separate civil action to still be filed considering that the facts to be proved in the civil case have already been established in the criminal proceedings where the accused was acquitted. He was, in fact, exonerated of the charge. The constitutional presumption of innocence called for more vigilant efforts on the part of prosecuting attorneys and defense counsel, a keener awareness by all witnesses of the serious implications of perjury, and a more studied consideration by the judge of the entire records and of applicable statutes and precedents. To require a separate civil action simply because the accused was I acquitted would mean needless clogging of court dockets and unnecessary duplication of litigation with all its attendant loss of time, effort, and money on the part of all concerned.

By the same token, we find that remand of this case to, the trial court for further hearings would be a needless waste of time and effort to the prejudice of the speedy administration of justice. Applying the above ruling, we hereby declare therefore, on the basis of the evidence submitted at the trial as reflected in the records before us, that the private respondents are liable to the petitioner in the sum of P204,030.66, representing the cost of the airway bills.

WHEREFORE, the petition is GRANTED. The challenged decision of the Court of Appeals is SET ASIDE and a new one is rendered ORDERING the private respondents to. pay to the petitioner the sum of P204,030.66, with 6% interest from November 16, 1981, plus the costs of this suit.

SO ORDERED.

G.R. No. 140944 April 30, 2008

RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate of the deceased JOSE P. FERNANDEZ, petitioner, vs.COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

D E C I S I O N

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA) Decision2 dated April 30, 1999 which affirmed the Decision3 of the Court of Tax Appeals (CTA) dated June 17, 1997.4

The Facts

On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his will5 was filed with Branch 51 of the Regional Trial Court (RTC) of Manila (probate court).[6] The probate court then appointed retired Supreme Court Justice Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon (petitioner) as Special and Assistant Special Administrator, respectively, of the Estate of Jose (Estate). In a letter7 dated October 13, 1988, Justice Dizon informed respondent Commissioner of the Bureau of Internal Revenue (BIR) of the special proceedings for the Estate.

Petitioner alleged that several requests for extension of the period to file the required estate tax return were granted by the BIR since the assets of the estate, as well as the claims against it, had yet to be collated, determined and identified. Thus, in a letter8 dated March 14, 1990, Justice Dizon authorized Atty. Jesus M. Gonzales (Atty. Gonzales) to sign and file on behalf of the Estate the required estate tax return and to represent the same in securing a Certificate of Tax Clearance. Eventually, on April 17, 1990, Atty. Gonzales wrote a letter9 addressed to the BIR Regional Director for San Pablo City and filed the estate tax return10 with the same BIR Regional Office, showing therein a NIL estate tax liability, computed as follows:

COMPUTATION OF TAX

Conjugal Real Property (Sch. 1)

P10,855,020.00

Conjugal Personal Property (Sch.2)

3,460,591.34

Taxable Transfer (Sch. 3)

Gross Conjugal Estate

14,315,611.34

Less: Deductions (Sch. 4)

187,822,576.06

Net Conjugal Estate

NIL

Less: Share of Surviving Spouse

NIL.

Net Share in Conjugal Estate

NIL

x x x

Net Taxable Estate

NIL.

Estate Tax Due

NIL.11

On April 27, 1990, BIR Regional Director for San Pablo City, Osmundo G. Umali issued Certification Nos. 2052[12] and 2053[13] stating that the taxes due on the transfer of real and personal properties[14] of Jose had been fully paid and said properties may be transferred to his heirs. Sometime in August 1990, Justice Dizon passed away. Thus, on October 22, 1990, the probate court appointed petitioner as the administrator of the Estate.15

Petitioner requested the probate court's authority to sell several properties forming part of the Estate, for the purpose of paying its creditors, namely: Equitable Banking Corporation (P19,756,428.31), Banque de L'Indochine et. de Suez (US$4,828,905.90 as of January 31, 1988), Manila Banking Corporation (P84,199,160.46 as of February 28, 1989) and State Investment House, Inc. (P6,280,006.21). Petitioner manifested that Manila Bank, a major creditor of the Estate was not included, as it did not file a claim with the probate court since it had security over several real estate properties forming part of the Estate.16

However, on November 26, 1991, the Assistant Commissioner for Collection of the BIR, Themistocles Montalban, issued Estate Tax Assessment Notice No. FAS-E-87-91-003269,17 demanding the payment of P66,973,985.40 as deficiency estate tax, itemized as follows:

Deficiency Estate Tax- 1987

Estate tax

P31,868,414.48

25% surcharge- late filing

7,967,103.62

late payment

7,967,103.62

Interest

19,121,048.68

Compromise-non filing

25,000.00

non payment

25,000.00

no notice of death

15.00

no CPA Certificate

300.00

Total amount due & collectible

P66,973,985.4018

In his letter19 dated December 12, 1991, Atty. Gonzales moved for the reconsideration of the said estate tax assessment. However, in her letter20 dated April 12, 1994, the BIR Commissioner denied the request and reiterated that the estate is liable for the payment of P66,973,985.40 as deficiency estate tax. On May 3, 1994, petitioner received the letter of denial. On June 2, 1994, petitioner filed a petition for review21 before respondent CTA. Trial on the merits ensued.

As found by the CTA, the respective parties presented the following pieces of evidence, to wit:

In the hearings conducted, petitioner did not present testimonial evidence but merely documentary evidence consisting of the following:

Nature of Document (sic)

Exhibits

1.

Letter dated October 13, 1988 from Arsenio P. Dizon addressed to the Commissioner of Internal Revenue informing the latter of the special proceedings for the settlement of the estate (p. 126, BIR records);

"A"

2.

Petition for the probate of the will and issuance of letter of administration filed with the Regional Trial Court (RTC) of Manila, docketed as Sp. Proc. No. 87-42980 (pp. 107-108, BIR records);

"B" & "B-1"

3.

Pleading entitled "Compliance" filed with the probate Court submitting the final inventory of all the properties of the deceased (p. 106, BIR records);

"C"

4.

Attachment to Exh. "C" which is the detailed and complete listing of the properties of the deceased (pp. 89-105, BIR rec.);

"C-1" to "C-17"

5.

Claims against the estate filed by Equitable Banking Corp. with the probate Court in the amount of P19,756,428.31 as of March 31, 1988, together with the Annexes to the claim (pp. 64-88, BIR records);

"D" to "D-24"

6.

Claim filed by Banque de L' Indochine et de Suez with the probate Court in the amount of US $4,828,905.90 as of January 31, 1988 (pp. 262-265, BIR records);

"E" to "E-3"

7.

Claim of the Manila Banking Corporation (MBC) which as of November 7, 1987 amounts to P65,158,023.54, but recomputed as of February 28, 1989 at a total amount of P84,199,160.46; together with the demand letter from MBC's lawyer (pp. 194-197, BIR records);

"F" to "F-3"

8.

Demand letter of Manila Banking Corporation prepared by Asedillo, Ramos and Associates Law Offices addressed to Fernandez Hermanos, Inc., represented by Jose P. Fernandez, as mortgagors, in the total amount of P240,479,693.17 as of February 28, 1989 (pp. 186-187, BIR records);

"G" & "G-1"

9.

Claim of State Investment House, Inc. filed with the RTC, Branch VII of Manila, docketed as Civil Case No. 86-38599 entitled "State Investment House, Inc., Plaintiff, versus Maritime Company Overseas, Inc. and/or Jose P. Fernandez, Defendants," (pp. 200-215, BIR records);

"H" to "H-16"

10.

Letter dated March 14, 1990 of Arsenio P. Dizon addressed to Atty. Jesus M. Gonzales, (p. 184, BIR records);

"I"

11.

Letter dated April 17, 1990 from J.M. Gonzales addressed to the Regional Director of BIR in San Pablo City (p. 183, BIR records);

"J"

12.

Estate Tax Return filed by the estate of the late Jose P. Fernandez through its authorized representative, Atty. Jesus M. Gonzales, for Arsenio P. Dizon, with attachments (pp. 177-182, BIR records);

"K" to "K-5"

13.

Certified true copy of the Letter of Administration issued by RTC Manila, Branch 51, in Sp. Proc. No. 87-42980 appointing Atty. Rafael S. Dizon as Judicial Administrator of the estate of Jose P. Fernandez; (p. 102, CTA records) and

"L"

14.

Certification of Payment of estate taxes Nos. 2052 and 2053, both dated April 27, 1990, issued by the Office of the Regional Director, Revenue Region No. 4-C, San Pablo City, with attachments (pp. 103-104, CTA records.).

"M" to "M-5"

Respondent's [BIR] counsel presented on June 26, 1995 one witness in the person of Alberto Enriquez, who was one of the revenue examiners who conducted the investigation on the estate tax case of the late Jose P. Fernandez. In the course of the direct examination of the witness, he identified the following:

Documents/Signatures

BIR Record

1.

Estate Tax Return prepared by the BIR;

p. 138

2.

Signatures of Ma. Anabella Abuloc and Alberto Enriquez, Jr. appearing at the lower Portion of Exh. "1";

-do-

3.

Memorandum for the Commissioner, dated July 19, 1991, prepared by revenue examiners, Ma. Anabella A. Abuloc, Alberto S. Enriquez and Raymund S. Gallardo; Reviewed by Maximino V. Tagle

pp. 143-144

4.

Signature of Alberto S. Enriquez appearing at the lower portion on p. 2 of Exh. "2";

-do-

5.

Signature of Ma. Anabella A. Abuloc appearing at the lower portion on p. 2 of Exh. "2";

-do-

6.

Signature of Raymund S. Gallardo appearing at the Lower portion on p. 2 of Exh. "2";

-do-

7.

Signature of Maximino V. Tagle also appearing on p. 2 of Exh. "2";

-do-

8.

Summary of revenue Enforcement Officers Audit Report, dated July 19, 1991;

p. 139

9.

Signature of Alberto Enriquez at the lower portion of Exh. "3";

-do-

10.

Signature of Ma. Anabella A. Abuloc at the lower portion of Exh. "3";

-do-

11.

Signature of Raymond S. Gallardo at the lower portion of Exh. "3";

-do-

12.

Signature of Maximino V. Tagle at the lower portion of Exh. "3";

-do-

13.

Demand letter (FAS-E-87-91-00), signed by the Asst. Commissioner for Collection for the Commissioner of Internal Revenue, demanding payment of the amount of P66,973,985.40; and

p. 169

14.

Assessment Notice FAS-E-87-91-00

pp. 169-17022

The CTA's Ruling

On June 17, 1997, the CTA denied the said petition for review. Citing this Court's ruling in Vda. de Oate v. Court of Appeals,23 the CTA opined that the aforementioned pieces of evidence introduced by the BIR were admissible in evidence. The CTA ratiocinated:

Although the above-mentioned documents were not formally offered as evidence for respondent, considering that respondent has been declared to have waived the presentation thereof during the hearing on March 20, 1996, still they could be considered as evidence for respondent since they were properly identified during the presentation of respondent's witness, whose testimony was duly recorded as part of the records of this case. Besides, the documents marked as respondent's exhibits formed part of the BIR records of the case.24

Nevertheless, the CTA did not fully adopt the assessment made by the BIR and it came up with its own computation of the deficiency estate tax, to wit:

Conjugal Real Property

P 5,062,016.00

Conjugal Personal Prop.

33,021,999.93

Gross Conjugal Estate

38,084,015.93

Less: Deductions

26,250,000.00

Net Conjugal Estate

P 11,834,015.93

Less: Share of Surviving Spouse

5,917,007.96

Net Share in Conjugal Estate

P 5,917,007.96

Add: Capital/Paraphernal

Properties P44,652,813.66

Less: Capital/Paraphernal Deductions

44,652,813.66

Net Taxable Estate

P 50,569,821.62============

Estate Tax Due P 29,935,342.97

Add: 25% Surcharge for Late Filing

7,483,835.74

Add: Penalties for-No notice of death

15.00

No CPA certificate

300.00

Total deficiency estate tax

P 37,419,493.71============

exclusive of 20% interest from due date of its payment until full payment thereof

[Sec. 283 (b), Tax Code of 1987].25

Thus, the CTA disposed of the case in this wise:

WHEREFORE, viewed from all the foregoing, the Court finds the petition unmeritorious and denies the same. Petitioner and/or the heirs of Jose P. Fernandez are hereby ordered to pay to respondent the amount of P37,419,493.71 plus 20% interest from the due date of its payment until full payment thereof as estate tax liability of the estate of Jose P. Fernandez who died on November 7, 1987.

SO ORDERED.26

Aggrieved, petitioner, on March 2, 1998, went to the CA via a petition for review.27

The CA's Ruling

On April 30, 1999, the CA affirmed the CTA's ruling. Adopting in full the CTA's findings, the CA ruled that the petitioner's act of filing an estate tax return with the BIR and the issuance of BIR Certification Nos. 2052 and 2053 did not deprive the BIR Commissioner of her authority to re-examine or re-assess the said return filed on behalf of the Estate.28

On May 31, 1999, petitioner filed a Motion for Reconsideration29 which the CA denied in its Resolution30 dated November 3, 1999.

Hence, the instant Petition raising the following issues:

1. Whether or not the admission of evidence which were not formally offered by the respondent BIR by the Court of Tax Appeals which was subsequently upheld by the Court of Appeals is contrary to the Rules of Court and rulings of this Honorable Court;

2. Whether or not the Court of Tax Appeals and the Court of Appeals erred in recognizing/considering the estate tax return prepared and filed by respondent BIR knowing that the probate court appointed administrator of the estate of Jose P. Fernandez had previously filed one as in fact, BIR Certification Clearance Nos. 2052 and 2053 had been issued in the estate's favor;

3. Whether or not the Court of Tax Appeals and the Court of Appeals erred in disallowing the valid and enforceable claims of creditors against the estate, as lawful deductions despite clear and convincing evidence thereof; and

4. Whether or not the Court of Tax Appeals and the Court of Appeals erred in validating erroneous double imputation of values on the very same estate properties in the estate tax return it prepared and filed which effectively bloated the estate's assets.31

The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of the gross estate, no estate tax was due; that the lack of a formal offer of evidence is fatal to BIR's cause; that the doctrine laid down in Vda. de Oate has already been abandoned in a long line of cases in which the Court held that evidence not formally offered is without any weight or value; that Section 34 of Rule 132 of the Rules on Evidence requiring a formal offer of evidence is mandatory in character; that, while BIR's witness Alberto Enriquez (Alberto) in his testimony before the CTA identified the pieces of evidence aforementioned such that the same were marked, BIR's failure to formally offer said pieces of evidence and depriving petitioner the opportunity to cross-examine Alberto, render the same inadmissible in evidence; that assuming arguendo that the ruling in Vda. de Oate is still applicable, BIR failed to comply with the doctrine's requisites because the documents herein remained simply part of the BIR records and were not duly incorporated in the court records; that the BIR failed to consider that although the actual payments made to the Estate creditors were lower than their respective claims, such were compromise agreements reached long after the Estate's liability had been settled by the filing of its estate tax return and the issuance of BIR Certification Nos. 2052 and 2053; and that the reckoning date of the claims against the Estate and the settlement of the estate tax due should be at the time the estate tax return was filed by the judicial administrator and the issuance of said BIR Certifications and not at the time the aforementioned Compromise Agreements were entered into with the Estate's creditors.32

On the other hand, respondent counters that the documents, being part of the records of the case and duly identified in a duly recorded testimony are considered evidence even if the same were not formally offered; that the filing of the estate tax return by the Estate and the issuance of BIR Certification Nos. 2052 and 2053 did not deprive the BIR of its authority to examine the return and assess the estate tax; and that the factual findings of the CTA as affirmed by the CA may no longer be reviewed by this Court via a petition for review.33

The Issues

There are two ultimate issues which require resolution in this case:

First. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence which were not formally offered by the BIR; and

Second. Whether or not the CA erred in affirming the CTA in the latter's determination of the deficiency estate tax imposed against the Estate.

The Courts Ruling

The Petition is impressed with merit.

Under Section 8 of RA 1125, the CTA is categorically described as a court of record. As cases filed before it are litigated de novo, party-litigants shall prove every minute aspect of their cases. Indubitably, no evidentiary value can be given the pieces of evidence submitted by the BIR, as the rules on documentary evidence require that these documents must be formally offered before the CTA.34 Pertinent is Section 34, Rule 132 of the Revised Rules on Evidence which reads:

SEC. 34. Offer of evidence. The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified.

The CTA and the CA rely solely on the case of Vda. de Oate, which reiterated this Court's previous rulings in People v. Napat-a35 and People v. Mate36 on the admission and consideration of exhibits which were not formally offered during the trial. Although in a long line of cases many of which were decided after Vda. de Oate, we held that courts cannot consider evidence which has not been formally offered,37 nevertheless, petitioner cannot validly assume that the doctrine laid down in Vda. de Oate has already been abandoned. Recently, in Ramos v. Dizon,38 this Court, applying the said doctrine, ruled that the trial court judge therein committed no error when he admitted and considered the respondents' exhibits in the resolution of the case, notwithstanding the fact that the same were not formally offered. Likewise, in Far East Bank & Trust Company v. Commissioner of Internal Revenue,39 the Court made reference to said doctrine in resolving the issues therein. Indubitably, the doctrine laid down in Vda. De Oate still subsists in this jurisdiction. In Vda. de Oate, we held that:

From the foregoing provision, it is clear that for evidence to be considered, the same must be formally offered. Corollarily, the mere fact that a particular document is identified and marked as an exhibit does not mean that it has already been offered as part of the evidence of a party. In Interpacific Transit, Inc. v. Aviles [186 SCRA 385], we had the occasion to make a distinction between identification of documentary evidence and its formal offer as an exhibit. We said that the first is done in the course of the trial and is accompanied by the marking of the evidence as an exhibit while the second is done only when the party rests its case and not before. A party, therefore, may opt to formally offer his evidence if he believes that it will advance his cause or not to do so at all. In the event he chooses to do the latter, the trial court is not authorized by the Rules to consider the same.

However, in People v. Napat-a [179 SCRA 403] citing People v. Mate [103 SCRA 484], we relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the following requirements are present, viz.: first, the same must have been duly identified by testimony duly recorded and, second, the same must have been incorporated in the records of the case.40

From the foregoing declaration, however, it is clear that Vda. de Oate is merely an exception to the general rule. Being an exception, it may be applied only when there is strict compliance with the requisites mentioned therein; otherwise, the general rule in Section 34 of Rule 132 of the Rules of Court should prevail.

In this case, we find that these requirements have not been satisfied. The assailed pieces of evidence were presented and marked during the trial particularly when Alberto took the witness stand. Alberto identified these pieces of evidence in his direct testimony.41 He was also subjected to cross-examination and re-cross examination by petitioner.42 But Albertos account and the exchanges between Alberto and petitioner did not sufficiently describe the contents of the said pieces of evidence presented by the BIR. In fact, petitioner sought that the lead examiner, one Ma. Anabella A. Abuloc, be summoned to testify, inasmuch as Alberto was incompetent to answer questions relative to the working papers.43 The lead examiner never testified. Moreover, while Alberto's testimony identifying the BIR's evidence was duly recorded, the BIR documents themselves were not incorporated in the records of the case.

A common fact threads through Vda. de Oate and Ramos that does not exist at all in the instant case. In the aforementioned cases, the exhibits were marked at the pre-trial proceedings to warrant the pronouncement that the same were duly incorporated in the records of the case. Thus, we held in Ramos:

In this case, we find and so rule that these requirements have been satisfied. The exhibits in question were presented and marked during the pre-trial of the case thus, they have been incorporated into the records. Further, Elpidio himself explained the contents of these exhibits when he was interrogated by respondents' counsel...

x x x x

But what further defeats petitioner's cause on this issue is that respondents' exhibits were marked and admitted during the pre-trial stage as shown by the Pre-Trial Order quoted earlier.44

While the CTA is not governed strictly by technical rules of evidence,45 as rules of procedure are not ends in themselves and are primarily intended as tools in the administration of justice, the presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's claims against the Estate.46 The BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause.47 Such failure is aggravated by the fact that not even a single reason was advanced by the BIR to justify such fatal omission. This, we take against the BIR.

Per the records of this case, the BIR was directed to present its evidence48 in the hearing of February 21, 1996, but BIR's counsel failed to appear.49 The CTA denied petitioner's motion to consider BIR's presentation of evidence as waived, with a warning to BIR that such presentation would be considered waived if BIR's evidence would not be presented at the next hearing. Again, in the hearing of March 20, 1996, BIR's counsel failed to appear.50 Thus, in its Resolution51 dated March 21, 1996, the CTA considered the BIR to have waived presentation of its evidence. In the same Resolution, the parties were directed to file their respective memorandum. Petitioner complied but BIR failed to do so.52 In all of these proceedings, BIR was duly notified. Hence, in this case, we are constrained to apply our ruling in Heirs of Pedro Pasag v. Parocha:53

A formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to enable the trial judge to know the purpose or purposes for which the proponent is presenting the evidence. On the other hand, this allows opposing parties to examine the evidence and object to its admissibility. Moreover, it facilitates review as the appellate court will not be required to review documents not previously scrutinized by the trial court.

Strict adherence to the said rule is not a trivial matter. The Court in Constantino v. Court of Appeals ruled that the formal offer of one's evidence is deemed waived after failing to submit it within a considerable period of time. It explained that the court cannot admit an offer of evidence made after a lapse of three (3) months because to do so would "condone an inexcusable laxity if not non-compliance with a court order which, in effect, would encourage needless delays and derail the speedy administration of justice."

Applying the aforementioned principle in this case, we find that the trial court had reasonable ground to consider that petitioners had waived their right to make a formal offer of documentary or object evidence. Despite several extensions of time to make their formal offer, petitioners failed to comply with their commitment and allowed almost five months to lapse before finally submitting it. Petitioners' failure to comply with the rule on admissibility of evidence is anathema to the efficient, effective, and expeditious dispensation of justice.

Having disposed of the foregoing procedural issue, we proceed to discuss the merits of the case.

Ordinarily, the CTA's findings, as affirmed by the CA, are entitled to the highest respect and will not be disturbed on appeal unless it is shown that the lower courts committed gross error in the appreciation of facts.54 In this case, however, we find the decision of the CA affirming that of the CTA tainted with palpable error.

It is admitted that the claims of the Estate's aforementioned creditors have been condoned. As a mode of extinguishing an obligation,55 condonation or remission of debt56 is defined as:

an act of liberality, by virtue of which, without receiving any equivalent, the creditor renounces the enforcement of the obligation, which is extinguished in its entirety or in that part or aspect of the same to which the remission refers. It is an essential characteristic of remission that it be gratuitous, that there is no equivalent received for the benefit given; once such equivalent exists, the nature of the act changes. It may become dation in payment when the creditor receives a thing different from that stipulated; or novation, when the object or principal conditions of the obligation should be changed; or compromise, when the matter renounced is in litigation or dispute and in exchange of some concession which the creditor receives.57

Verily, the second issue in this case involves the construction of Section 7958 of the National Internal Revenue Code59 (Tax Code) which provides for the allowable deductions from the gross estate of the decedent. The specific question is whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with its creditors.

"Claims against the estate," as allowable deductions from the gross estate under Section 79 of the Tax Code, are basically a reproduction of the deductions allowed under Section 89 (a) (1) (C) and (E) of Commonwealth Act No. 466 (CA 466), otherwise known as the National Internal Revenue Code of 1939, and which was the first codification of Philippine tax laws. Philippine tax laws were, in turn, based on the federal tax laws of the United States. Thus, pursuant to established rules of statutory construction, the decisions of American courts construing the federal tax code are entitled to great weight in the interpretation of our own tax laws.60

It is noteworthy that even in the United States, there is some dispute as to whether the deductible amount for a claim against the estate is fixed as of the decedent's death which is the general rule, or the same should be adjusted to reflect post-death developments, such as where a settlement between the parties results in the reduction of the amount actually paid.61 On one hand, the U.S. court ruled that the appropriate deduction is the "value" that the claim had at the date of the decedent's death.62 Also, as held in Propstra v. U.S., 63 where a lien claimed against the estate was certain and enforceable on the date of the decedent's death, the fact that the claimant subsequently settled for lesser amount did not preclude the estate from deducting the entire amount of the claim for estate tax purposes. These pronouncements essentially confirm the general principle that post-death developments are not material in determining the amount of the deduction.

On the other hand, the Internal Revenue Service (Service) opines that post-death settlement should be taken into consideration and the claim should be allowed as a deduction only to the extent of the amount actually paid.64 Recognizing the dispute, the Service released Proposed Regulations in 2007 mandating that the deduction would be limited to the actual amount paid.65

In announcing its agreement with Propstra,66 the U.S. 5th Circuit Court of Appeals held:

We are persuaded that the Ninth Circuit's decision...in Propstra correctly apply the Ithaca Trust date-of-death valuation principle to enforceable claims against the estate. As we interpret Ithaca Trust, when the Supreme Court announced the date-of-death valuation principle, it was making a judgment about the nature of the federal estate tax specifically, that it is a tax imposed on the act of transferring property by will or intestacy and, because the act on which the tax is levied occurs at a discrete time, i.e., the instance of death, the net value of the property transferred should be ascertained, as nearly as possible, as of that time. This analysis supports broad application of the date-of-death valuation rule.67

We express our agreement with the date-of-death valuation rule, made pursuant to the ruling of the U.S. Supreme Court in Ithaca Trust Co. v. United States.68 First. There is no law, nor do we discern any legislative intent in our tax laws, which disregards the date-of-death valuation principle and particularly provides that post-death developments must be considered in determining the net value of the estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government.69 Any doubt on whether a person, article or activity is taxable is generally resolved against taxation.70 Second. Such construction finds relevance and consistency in our Rules on Special Proceedings wherein the term "claims" required to be presented against a decedent's estate is generally construed to mean debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime, or liability contracted by the deceased before his death.71 Therefore, the claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.

WHEREFORE, the instant Petition is GRANTED. Accordingly, the assailed Decision dated April 30, 1999 and the Resolution dated November 3, 1999 of the Court of Appeals in CA-G.R. S.P. No. 46947 are REVERSED and SET ASIDE. The Bureau of Internal Revenue's deficiency estate tax assessment against the Estate of Jose P. Fernandez is hereby NULLIFIED. No costs.

SO ORDERED.

G.R. No. 152866 October 6, 2010

THE HEIRS OF ROMANA SAVES, namely: FIDELA ALMAIDA, EMILIANO ALMAIDA, JESUS ALMAIDA, CATALINA ALMAIDA, ALFREDO RAMOS, GINA RAMOS, LUZ ALMAIDA, ANITA ALMAIDA, PETRA GENERAL, EDNA GENERAL, ESTHER ALMAIDA, DIONISIA ALMAIDA, CORNELIA ALMAIDA, FELIMON ALMAIDA (represented by SINFROSA ALMAIDA); The Heirs of RAFAELA SAVES, namely: JULIANA DIZON, HILARIA DIZON, JOVENCIO DIZON, MAURA DIZON, BABY DIZON & ULDARICO AMISTOSO (represented by ULDARICO AMISTOSO); The Heirs of JANUARIA SAVES, namely: FELICIDAD MARTINEZ, MARLOU MARTINEZ, ROWENA MARTINEZ, BABY LOU MARTINEZ, BOBERT MARTINEZ, JERRY MARTINEZ (represented by FELICIDAD MARTINEZ); The Heirs of MAXIMO SAVES, namely: ELPIDIO AMIGO, CELESTINA DEMETRIA AMIGO, MEREN (daughter of SEVERA SAVES), FRUTO ROSARIO (represented by ELPIDIO AMIGO); The Heirs of BENEDICTA SAVES, namely: AUTEMIA JUCOM, CATALINA JUCOM, DOLORES JUCOM, SERGIA JUCOM, BENEDICTA JUCOM, JOSEFINA JUCOM, FLORDIVIDA REMETILLO, FELINA REMETILLO and ANNA MARIE REMETILLO, (represented by AUTEMIA JUCOM), Petitioners, vs.THE HEIRS OF ESCOLASTICO SAVES, namely: REMEDIOS SAVES-ADAMOS, LUZ SAVES-HERNANDEZ and DODONG SAVES, and ENRIQUETA CHAVES-ABELLA, Respondents.

D E C I S I O N

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision1 promulgated on June 28, 2001 by the Court of Appeals, in CA-G.R. CV No. 51058, entitled "The Heirs of Romana Saves, et al. v. The Heirs of Escolastico Saves, et al.," reversing the Decision2 dated May 23, 1995 of the Regional Trial Court (RTC) of Dumaguete City, Branch 39 in Civil Case No. 7678, in favor of the petitioners.

The facts of this case as narrated in the assailed Court of Appeals Decision are as follows:

Sometime on January 1921, several persons filed their respective claims before the then, Court of First Instance of the province of Oriental Negros for the titling of the respective lots they occupy, among them were Severo Chaves and Benedicta Chaves, who filed their claim for Lot No. 382, to be titled in their names, together with Escolastico Saves, Maximo Saves, Romana Saves, Rafaela Saves, and Januaria Saves, in Cadastral Case No. 15.

On April 22, 1921, a Decision was rendered by the court, adjudicating several parcels of land to different claimants, among the lots adjudicated, were as follows:

1. Lote No. 382 Se adjudica pro indiviso y en partes iguales a los hermanos Benedicta Saves, Escolastico Saves, Romana Saves, finado Rafaela Saves, Januaria Saves y Maximo Saves finado en la proindiviso de una sixta parte cada uno. La parte que corresponde a los difuntos Romana Saves y Maximo Saves perteneceran a sus hijos respectivos;

2. Lote No. 383 Se adjudica con las mejores existentes en el a la acciedad conyugal formada por Escolastico Saves y Gaudencia Valencia;

3. Lote No. 386 Se adjudica con las mejoras ixistentes en el a la acciedad conyugal formada por Escolastico Saves y Gaudencia Valencia;

Also on April 22, 1921, Decree No. 177831 was issued by the United States of America for the Court of First Instance of the Province of Negros ordering the registration of Lot No. 382 in the names of Benedicta Saves, Escolastica Saves, the sons of Romana Saves, deceased, Rafaela Saves, Januaria Saves, and the sons of Maximo Saves, deceased.

Thereafter, Severo Saves died intestate, leaving his wife, Teresa Ramirez, his four (4) surviving children, and the heirs of his two children who predeceased him.

On June 21, 1941, Adelaida S. Martinez and Felicidad S. Martinez, who were the heirs of Januaria Saves, who predeceased them, sold their 1/6 share in Lot No. 382 to a certain Gaudencia Valencia evidenced by a public instrument, with Doc. No. 1029, Page 46, Book IV, Series of 1941, of the notarial register, per allegation in a Motion for the Issuance of Transfer Certificate of Title, filed by Gaudencia Valencia.

On June 30, 1941, a Deed of Sale was executed by the heirs of Romana Saves, namely: Sinforosa Alimayda, Juan Alimayda, Vicente Alimayda, Felimon Alimayda and Porferia Alimayda; the sole heir of Rafaela Saves, Pablo Saves Dizon; and the sole heir of Escolastico Saves, Teodoro Saves, their respective 1/6 share in Lot No. 382, or 3/6 of the property, to Gaudencia Valencia.

On June 6, 1947, Benedicta Saves and Marcela Saves, the sole heir of Maximo Saves, sold their respective 1/6 share in Lot No. 382, also to Gaudencia Valencia, or 2/6 of the property, as embodied in a Deed of Absolute Sale.

Considering that all the 1/6 share, rights, and participation of each co-owner in Lot No. 382 were already sold to Gaudencia Valencia, she initiated the titling of the said property under her name in a Motion for Issuance of Transfer Certificate of Title before the Court of First Instance of Negros Oriental. Subsequently, Transfer Certificate of Title No. 148 was issued by the Register of Deeds for Negros Oriental in the name of Gaudencia Valencia.

Sometime in 1961, Gaudencia Valencia sold the entire property to Enriqueta Chavez Abella, and Transfer Certificate of Title No. 110 was issued in the name of Enriqueta Chavez, who was married to Charles Abella.1avvphi1

In 1979, Meleriana Saves, who was then residing in Cebu, wrote her relatives in Negros Oriental, the herein appellees, asking them to verify from the Register of Deeds information pertaining to Lot 382, as they were among the heirs entitled to said property.

On March 17, 1981, a case for Reconveyance, Partition, and Damages was filed before the Regional Trial Court of Negros Oriental by plaintiffs-appellees, alleging, inter alia, that Lot No. 382 was fraudulently acquired by Gaudencia Valencia, and that Gaudencia Valencia fictitiously sold the lot to her grandchild Enriqueta Chaves Abella.

The complaint was amended twice by plaintiffs considering that the original plaintiffs and defendants were all deceased.

The parties failed to arrive to an amicable settlement during the pre-trial stage, but have agreed to exclude Lot 386 in the litigation and limited the issues as to the ownership of lots 382 and 383, thus, trial ensued.3 (Citations omitted.)

The trial court rendered a Decision in favor of the petitioners, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing considerations, judgment is rendered

1. Dismissing defendants counterclaim;

2. Declaring the Deed of Sale and Deed of Absolute Sale null and void ab initio; and being derived from a polluted source, whatever documents Gaudencia Valencia executed in favor of defendant Enriquita Chavez Abella in relation to Lot No. 382, Dumaguete Cadastre and the issuance of TCT No. 110 covering said lot, suffers the same legal infirmity that of a total nullity;

3. Ordering defendant Enriquita Chavez Abella to convey and deliver unto the plaintiffs their shares of Lot No. 382, Dumaguete Cadastre in the proportion of their respective rights and interests thereto which they are entitled to participate and succeed from the shares of their predecessors-in-interest who are the original registered owners of the aforesaid lot; and after which, the parties are ordered to effect physical division and partition of the lot in question to avoid further animosity between and among themselves;

4. Ordering defendant Enriquita Chavez Abella to pay plaintiffs P6,000.00 as litigation expenses and P2,500.00 as plaintiffs counsel court appearances as well as moral damages in the sum of P120,000.00;

5. Dismissing plaintiffs claim of Lot No. 383, Dumaguete Cadastre, for lack of merit, the same is originally titled in the name of Escolastico Saves, married to Gaudencia Valencia; and

6. Defendant Enriquita Chavez Abella is ordered to pay the costs.4 (Citations omitted.)

Respondents appealed the RTC Decision to the Court of Appeals which reversed and set aside the same in the herein assailed Court of Appeals Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the Decision dated, May 23, 1995 rendered by the Regional Trial Court of Negros Oriental, Branch 39, is hereby REVERSED and SET ASIDE, and a new one entered, declaring Transfer Certificate of Title No. 110 in the name of Enriqueta Chaves Abella as valid and subsisting, and the complaint filed by the plaintiffs is DISMISSED for lack of merit.5

Petitioners filed a Motion for Reconsideration but this was denied by the Court of Appeals in a Resolution6 promulgated on March 7, 2002, the dispositive portion of which reads:

WHEREFORE, the foregoing premises considered, the Motion for Reconsideration is DENIED for lack of merit.7

Unperturbed by the adverse Court of Appeals Decision, petitioners come before this Court and raise the following issues:

(a) Can the Court of Appeals, in the exercise of its appellate jurisdiction, consider as evidence exhibits not formally offered as such by the defendants (now respondents) in the trial court?

(b) Are exhibits (Exhibits "7", "8" and "13") not formally offered as evidence by the defendants in the trial court subject to judicial notice by the Court of Appeals for the purpose of utilizing the same as basis for the reversal of the trial courts decision?

(c) Is it legally correct to consider a rule of evidence simply as a rule of procedure? x x x.8

Petitioners also put into issue the failure of the Court of Appeals to consider respondent Enriquita Chaves-Abella (hereinafter "Abella") a purchaser and registrant in bad faith9 and the reasonableness of its declaration that, even if petitioners are indeed co-owners of Lot No. 382, they are already barred due to the equitable principle of estoppel by laches in asserting their rights over the same.10

We find the instant petition to be without merit.

The first three issues propounded by petitioners can be summed up into the question of whether or not the Court of Appeals can consider evidence not formally offered in the trial court as basis for the herein assailed Court of Appeals ruling.

Petitioners draw attention to the fact that respondents did not formally offer Exhibits "7," "8" and "13" at the trial court proceedings. In accordance with Section 34, Rule 132 of the Revised Rules of Court,11 the trial court did not consider them as evidence. Despite this, the Court of Appeals allegedly utilized the same as basis for reversing and setting aside the trial courts decision.

It is a basic procedural rule that the court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified.12 A formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to enable the trial judge to know the purpose or purposes for which the proponent is presenting the evidence. On the other hand, this allows opposing parties to examine the evidence and object to its admissibility. Moreover, it facilitates review as the appellate court will not be required to review documents not previously scrutinized by the trial court.13

However, in People v. Napat-a,14 citing People v. Mate,15 we relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the following requirements are present, viz: first, the same must have been duly identified by testimony duly recorded and, second, the same must have been incorporated in the records of the case.16

In the case at bar, the records would show that the above requisites have been satisfactorily complied with respect to Exhibit "7."

With regard to Exhibit "7," which is a document entitled "Motion for the Issuance of Transfer Certificate of Title" filed by Gaudencia Valencia (hereinafter "Valencia") in the same trial court that led to the issuance of Transfer Certificate of Title (TCT) No. 148, the records would show that it is the same document that petitioners witness Fruto Rosario identified in his March 5, 1984 testimony and marked as petitioner-plaintiffs Exhibit "I." He testified as follows:

Empleo Here is another document, Mr. Rosario, which appears to be a motion for issuance of transfer certificate of title, dated March 9, 1948, in 3 pages. Will you please go over this certified true copy of the motion in Cad. Case No. 1, GLRO Rec. No. 140, Lot 382, and find out if these are among the documents which you have obtained in connection with your verification?

A Yes, this is the one, these are among the documents.

Empleo We request that this certified true copy of the motion for issuance of transfer certificate of title in Cad. Case No. 1, GLRO Rec. No. 140, Lot 382, be marked as Exhibit "I" for page one; "I-1" for page two and "I-2" for page 3.

Appearing on Exh. I is a third paragraph, which states, "that Maximo Saves, owner of 1/6 of Lot 382 is now dead, upon his death Marcela Saves is the only heiress and successor of his rights and interest in and over 1/6 portion of said lot." Do you understand that?

A Yes, Sir.

Q Is it true that Maximo Saves left only one heir named Marcela Saves?

A No, Sir, it is not true.

Q Why is it not true?

A Because Maximo had two children, Sir.

Empleo We request that paragraph 3 be marked as Exhibit "I-3".

Court (to witness): Who died ahead Severa or Maximo?

A Maximo, Sir.

Court Who died ahead Marcela or Severa?

A Severa.

Court Did Severa die before 1948?

A No, Sir, because she died before the war; she died in 1940.

Court So, when this motion for issuance of certificate of title was filed on March 10, 1948, Severa had already died?

A Yes, Sir.

Court And when this motion was filed on March 10, 1948, Marcela was still alive?

A Yes.

Court That is why the motion and which resulted to a certificate of title had only claim Marcela as a surviving heir of Maximo?

A That is not so, Sir, because what about us the children of Severa?

Court ORDER

The hour of noon having come, continuance of the direct examination of fifth plaintiffs witness Fruto Rosario, as already scheduled, will be done tomorrow at 10:30 a.m.17

Verily, Exhibit "7" was incorporated and made part of the records of this case as a common exhibit of the parties.18 That only plaintiffs were able to formally offer the said motion as Exhibit "I" most certainly does not mean that it can only be considered by the courts for the evidentiary purpose offered by plaintiffs. It is well within the discretion of the courts to determine whether an exhibit indeed serves the probative purpose for which it is offered.

Likewise, Exhibit "13," which is TCT No. 11019 or the Torrens title that was issued to respondent Abella after she bought Lot No. 382 from Valencia, complies with the requirements enunciated in Napat-a and Mate.

The records of the case bear out that Exhibit "13" was identified by respondent Abella during the continuation of her direct examination on March 15, 1988. This much was noted even by the trial court in its Decision dated May 23, 1995, to wit:

During the continuation of the direct examination, witness Enriquita Chavez Abella testified and identified the TCT No. 110 of Lot No. 382 registered in the name of Enriquita Chavez which priorly reserved and now marked Exh. "13." x x x.20 (Emphasis supplied.)

Moreover, it cannot be denied that Exhibit "13" was included in the records that was elevated to the Court of Appeals.21 In fact, the Court of Appeals correctly noted Abellas testimony regarding this document in resolving petitioners motion for reconsideration.22

It is likewise worth emphasizing that under the Revised Rules on Evidence, an admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof such admission may be contradicted only by showing that it is made through palpable mistake or that no such admission was made.23

The existence of Exhibit "13" was not only known to petitioners but it was expressly alleged in their Appellees Brief24 filed with the Court of Appeals and their Petition for Review25 filed with this Court that Lot No. 382 is registered in the name of respondent Abella.

Indeed, petitioners did not merely acknowledge the existence of TCT No. 110 (respondents Exhibit "13"), but in fact relied upon it in order to put forward their main theory that the sale from Valencia to respondent Abella is fictitious or void because, according to petitioners, it appears from the said title that respondent Abella was supposedly only nine years old at the time of the transaction. Verily, it is inconsistent for petitioners to claim that Exhibit "13" proves its theory and in the same breath assail it as inadmissible.

Lastly, petitioners present objection to Exhibit "8" hardly deserves any credit. Exhibit "8" is a rather innocuous document which has no bearing on any of the significant issues in this case. Its existence was only referred to in the second paragraph of page 7 of the RTC Decision wherein it is identified as an "Order of the Hon. Court dated May 11, 1948."26 Though it never formed part of the records of this case upon appeal, a careful perusal of the assailed Court of Appeals Decision would reveal that Exhibit "8" was not in any way used or referred to by the Court of Appeals in arriving at the aforementioned ruling.

Anent the issue of whether or not the Court of Appeals erred in failing to consider that respondent Abella is a purchaser in bad faith, petitioner insists that "for failing to exercise prudent (sic) and caution in buying the property in question,"27 respondent Abella is a buyer in bad faith. She did not investigate closely the basis of the ownership of Gaudencia Valencia, her grandmother, over Lot No. 382 which a buyer in good faith should have done under the circumstances. She did not even bother to know the persons from whom her grandmother acquired the parcel in question. 28

Respondents argue that the issue of good faith or bad faith of Enriquita Chaves-Abella was not raised in the Complaint filed by petitioners in the RTC. Petitioners original theory of the case is that the sale by Gaudencia Valencia to Enriquita Chaves-Abella was fictitious because the latter was only nine years old at the time of the sale. However, during trial, it was clearly established by common evidence that Enriquita was already married to Charles Abella when she bought the lot in 1961, and, as a matter of fact, the purchase money was provided by her husband, Charles. Confronted with the above situation which completely destroyed their theory of the case, petitioners switched from their "fictitious sale to a 9-year old" theory to an entirely different theory, to wit: that Enriquita Chaves-Abella is a purchaser in bad faith.29

Despite this, the RTC declared that respondent Abella is a purchaser in bad faith because "[s]he did not investigated (sic) closely the basis of the ownership of Gaudencia Valencia over Lot No. 382 which a buyer in good faith should have done under the circumstances."30

The Court of Appeals reversed the above finding and ruled that respondent Abella is an innocent purchaser for value and in good faith because the "[r]ecords reveal that appellant derived her title of Lot No. 382 from the title of Gaudencia Valencia, who sold the entire property to the former. Appellant relied on the face of Transfer Certificate of Title No. 148 in the name of Gaudencia Valencia, which was free from any encumbrances or annotation."31

We agree with the Court of Appeals ruling in this regard.

It is a well-settled doctrine that one who deals with property registered under the Torrens system need not go beyond the same, but only has to rely on the certificates of title. He is charged with notice only of such burdens and claims as are annotated on the certificates.32

In the case at bar, TCT No. 110, which represented proof of respondent Abellas ownership of Lot No. 382, did not contain any encumbrance or annotation that was transferred from its title of origin - TCT No. 148. It must be recalled that the plaintiffs called Abella as one of their witnesses during the trial of this case. It is Abellas unrebutted testimony, elicited as a hostile witness for the plaintiffs, that her predecessor-in-interests (Valencias) title was clean when she (Abella) purchased the property.33 To be sure, the burden to prove that Abella had notice of any defect in the title of her predecessor lies with the plaintiffs. Plaintiffs failed to substantiate their contention. On the contrary, their own evidence tended to prove that Abella was a purchaser in good faith of the property.

Likewise, there is no cogent reason or legal compulsion for respondent Abella to inquire beyond Valencias title over the property at issue since the latter had been in possession of Lot No. 382 prior to the sale. Settled is the rule that a buyer of real property in possession of persons other than the seller must be wary and should investigate the rights of those in possession, for without such inquiry the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property.34 As pointed out by the assailed Court of Appeals Decision, Valencia had been occupying the property prior to its sale to respondent Abella. Herein petitioners were never in possession of the property from the very start, nor did they have any idea that they were entitled to the fruits of the property not until co-petitioner Meleriana Saves wrote her relatives, co-petitioners in this case, about the possibility of having a claim to the property. 35

Neither does the plaintiffs insistence that Exhibits "G" and "H" (the deeds of sale executed in favor of Valencia) were void support their theory that Abella is a purchaser in bad faith. To begin with, we agree with the Court of Appeals ruling that the purported irregularities in Exhibits "G" and "H" relied upon by the trial court hardly suffice to deem the said contracts as null and void. There is no need to repeat the Court of Appeals comprehensive and apt discussions on this point here. What must be highlighted, however, is the fact that Abella had no participation in the execution of Exhibits "G" and "H" which were signed by the parties thereto when she was very young. Like any stranger to the said transactions, it was reasonable for Abella to assume that these public documents were what they purport to be on their face in the absence of any circumstance to lead her to believe otherwise.

A purchaser in good faith is one who buys property without notice that some other person has a right to or interest in such property and pays its fair price before he has notice of the adverse claims and interest of another person in the same property.36 Clearly, the factual circumstances surrounding respondent Abellas acquisition of Lot No. 382 makes her an innocent purchaser for value or a purchaser in good faith.

Finally, on the issue of whether or not petitioners, in the remote possibility that they are co-owners of Lot No. 382, are barred from asserting their claims over the same because of estoppel by laches, petitioners argue that they are not guilty of unreasonable and unexplained delay in asserting their rights, considering that they filed the action within a reasonable time after their discovery of the allegedly fictitious deeds of sale, which evinced Lot No. 382s transfer of ownership to Valencia, in 1980. They maintain that the delay in the discovery of the simulated and fictitious deeds was due to the fact that Escolastico Saves