Case Summary (G.R. No. 137329)
Relevant Dates and Documentary Milestones
Loan advice/renewal confirmation: Letter-advice dated May 28, 1997.
Continuing Suretyship Agreement: August 20, 1997.
Promissory Notes: PN No. 7626, No. 7627, No. 7628 (all dated August 20, 1997) and PN No. 7581 (dated July 9, 1997).
Complaint filed: March 8, 2006.
RTC Decision in petitioner’s favor: April 20, 2010.
CA Decision reversing RTC as to Gabinete: March 25, 2014.
Supreme Court petition: Rule 45 petition filed February 17, 2015.
Applicable Law and Standards
Constitutional basis: 1987 Philippine Constitution (decision rendered post-1990).
Procedural law: Rules of Court (Rule 45 limitations).
Evidentiary/legal standards cited: presumption of regularity of notarized documents; burden of proof for forgery (clear, positive and convincing evidence or, depending on context, preponderance as described in the record); appellate-review limitations on factual findings and the recognized exceptions allowing this Court to review facts (the ten Medina exceptions as recited in the decision). Case authorities relied upon in the opinion include Cheesman v. IAC, Medina v. Mayor Asistio, Jr., Mendoza v. Fermin, Libres v. Delos Santos, and related jurisprudence as presented in the record.
Nature of the Loan Obligations and Security
Philtrust granted or renewed a bills-discounting/loan facility to Shangrila, evidenced by several promissory notes: PN No. 7626 (P7,200,000) secured by a Real Estate Mortgage; PN No. 7627 (P6,540,000); PN No. 7628 (P1,200,000); and PN No. 7581 (P5,000,000). Contractual interest rates and other terms were specified in the notes. The Continuing Suretyship Agreement executed August 20, 1997 named Tan and Gabinete as sureties jointly and severally guaranteeing borrower’s obligations.
Default, Foreclosure, and Computation of Deficiency
Shangrila defaulted; Philtrust foreclosed extrajudicially and bid P6,000,000 as highest bidder. By the time of the foreclosure/auction, total obligations under the PNs and accrued interest amounted to roughly P61.357 million (breakdown by note provided in the record). Auction proceeds were insufficient; after application of proceeds, significant deficiency and outstanding obligations remained. Philtrust applied attorney’s fees of 10% per stipulation and computed total outstanding obligations in its pleadings and trial evidence.
Trial Proceedings and Evidence Presented
Philtrust secured default declarations against defendants initially and later presented witnesses ex parte; the RTC reinstated proceedings and allowed Gabinete to lift default and to cross-examine. Philtrust’s witnesses, including bank officers, testified and formally offered evidence; Gabinete testified and denied signing or authorizing the loan documents, asserting lack of connection to Shangrila at the relevant time and alleging forgery of his signature. Gabinete requested and obtained NBI questioned-document examination of his signature.
NBI Examination and Its Evidentiary Role
NBI document examiner Efren Flores conducted a comparative analysis of specimen signatures submitted and the questioned signature on the Continuing Suretyship Agreement and reported that the questioned signatures and standard samples "were not written by one and the same person." However, the record shows critical limitations in the samples submitted to the NBI: the samples consisted of Gabinete’s full signature, not the shortened form appearing on the Suretyship Agreement; the samples were not contemporaneous with the questioned instrument; the examiner acknowledged variations among specimens; and the examiner did not categorically state a conclusive finding of forgery. These deficiencies were central to the RTC’s assessment of the evidentiary weight of the NBI report.
RTC’s Findings and Rationale
The RTC found for Philtrust. It evaluated the NBI testimony, cross-examination of the NBI examiner, the notary public’s testimony (who testified that both Tan and Gabinete signed the Continuing Suretyship Agreement in her presence), and other documentary evidence. The RTC concluded that the NBI specimen set was insufficient for definitive comparison (absence of the shortened signature and lack of contemporaneity), that the NBI examiner’s findings were not conclusive, and that the notary’s categorical testimony and the notarization itself supported the document’s regularity. The RTC thus held defendants jointly and severally liable for P64,153,827.02 (computed as of March 26, 2008) plus 10% attorneys’ fees and costs.
Court of Appeals’ Reversal as to Gabinete and Its Reasoning
The Court of Appeals reversed the RTC insofar as it held Gabinete liable. The CA gave weight to the NBI examiner’s finding and performed its own signature comparison—comparing the questioned signature to Gabinete’s shortened signatures in other corporate documents—finding visible differences (e.g., disconnection of the initials R and G, segmentation of the name) that supported a conclusion of forgery. The CA also considered circumstantial factors (Gabinete’s asserted lack of connection with Shangrila at the time, absence of board resolution authorizing Tan or Gabinete as signatories, and certain banking irregularities) as reinforcing the conclusion that Gabinete’s signature on the Suretyship Agreement was forged.
Issues Presented to the Supreme Court
Philtrust’s Rule 45 petition challenged the CA’s finding that Gabinete’s signature was forged, arguing (1) that the CA improperly credited the NBI expert despite procedural and substantive deficiencies in the specimen set and in the examiner’s methods and conclusions; (2) the CA ignored the presumption of regularity that attends notarized instruments and the notary’s categorical testimonial identification of Gabinete’s signing in her presence; and (3) the CA failed to respect the RTC’s independent examination and factual findings supported by the record.
Standards on Review of Factual Findings under Rule 45 and Applicable Exceptions
The Supreme Court reiterated that Rule 45 petitions are confined to questions of law and that this Court is not ordinarily a trier of facts. Findings of fact by trial courts and appellate courts are final and binding when supported by substantial evidence. Nevertheless, recognized exceptions permit factual reexamination by this Court; the decision reproduced the ten Medina exceptions (e.g., findings based entirely on speculation, grave abuse of discretion, conflicting findings, findings contrary to trial court, conclusions without citation of specific evidence, among others). Because the CA and RTC reached opposite factual conclusions on a pivotal point (forgery), the Court considered the case appropriate for closer review under these principles.
Supreme Court’s Analysis of Forgery Allegations and Evidentiary Burdens
The Court emphasized that forgery cannot be presumed and that the party alleging forgery bears the burden of proof. A finding of forgery must be established by clear, positive and convincing evidence (or at least evidence of greater weight). While handwriting experts can be useful, their testimony is not indispensable nor conclusively binding; judges must exercise independent judgment and may rely on naked-eye comparison where differences are conspicuous. However, where expert testimony is presented, the adequacy and quality of specimen standards and contemporaneity are crucial to the probative value of expert conclusions. The Court found that Gabinete failed to prove forgery by clear and convincing evidence because the NBI examination was undermined by (a) an inadequate set of specimen signatures that did not include the shortened signature style found on the questioned document, (b) lack of contemporaneous samples from 1997, (c) admitted variations among the
Case Syllabus (G.R. No. 137329)
Case Caption, Citation and Nature of Proceeding
- G.R. No. 216120. Decision promulgated March 29, 2017. Reported at 808 Phil. 297. Second Division.
- Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioner Philippine Trust Company (a.k.a. Philtrust Bank) dated February 17, 2015.
- Petition seeks reversal and setting aside of the Court of Appeals Decision dated March 25, 2014 in CA-G.R. CV No. 96009, which had reversed the Regional Trial Court, Branch 33, Manila Decision dated April 20, 2010 in a case for collection of sum of money.
Parties
- Petitioner: Philippine Trust Company (also known as Philtrust Bank), a domestic commercial banking corporation organized and existing under Philippine laws.
- Respondents/Defendants: Shangrila Realty Corporation (domestic corporation), Elisa T. Tan, and Redentor R. Gabinete.
Complaint and Core Allegations
- Philtrust alleges it granted Shangrila a renewal of its bills discounting line in the amount of Twenty Million Pesos (P20,000,000.00) as shown by a letter-advice dated May 28, 1997 bearing the conformity of Shangrila's duly-authorized representatives, Tan and Gabinete.
- The loan was conditioned on the execution of a Continuing Suretyship Agreement dated August 20, 1997, with Shangrila as borrower and respondents Gabinete and Tan as sureties, jointly and severally guaranteeing payment of the loan and related indebtedness, interest and expenses.
Loan Instruments, Amounts, Collateral and Interest Rates
- Promissory Note (PN) No. 7626 dated 20 August 1997 — principal P7,200,000.00; maturity 30 May 1998; secured by Real Estate Mortgage dated 6 July 1995 over properties covered by TCT Nos. 220865-ind. and 220866-ind., registered in the name of Shangrila; interest rate 23% per annum.
- PN No. 7627 dated 20 August 1997 — clean loan P6,540,000.00; maturity 30 May 1998; interest rate 25% per annum.
- PN No. 7628 dated 20 August 1997 — clean loan P1,200,000.00; maturity 30 May 1998; interest rate 25% per annum.
- PN No. 7581 dated 09 July 1997 — clean loan P5,000,000.00; maturity 03 September 1997; interest rate 21% per annum.
Default, Foreclosure, Auction and Deficiency
- Shangrila failed to pay at maturity; Philtrust made repeated demands without success.
- Philtrust filed a Petition for Extrajudicial Foreclosure of the real estate mortgage; Philtrust was the highest bidder at public auction with a bid of Six Million Pesos (P6,000,000.00).
- Breakdown of Shangrila’s total obligation as of date of auction: PN No. 7626 — P22,015,535.90; PN No. 7627 — P20,159,092.93; PN No. 7628 — P3,741,835.86; PN No. 7581 — P15,440,982.80; total P61,357,447.49.
- Proceeds of auction (P6,000,000.00) were applied to PN No. 7626, leaving a deficiency of P16,015,535.90 as of December 16, 2002.
- Despite demands, respondents failed to fully settle the deficiency and the remaining promissory notes. As of February 28, 2006, respondents’ total outstanding obligation to Philtrust was P50,425,059.20, inclusive of interest.
Engagement of Counsel and Attorney’s Fees
- Philtrust engaged counsel and incurred attorney’s fees equivalent to 10% of the total amount due as stipulated in the promissory notes.
Trial Court Proceedings — Defaults, Evidence, and Motions
- Summons initially served by publication; on May 29, 2007, Philtrust filed a Motion to Declare Shangrila, Tan and Gabinete in default for failure to file an Answer.
- On June 26, 2007, the RTC declared them in default and allowed Philtrust to present evidence ex parte.
- On January 4, 2008, the RTC dismissed the complaint without prejudice due to Philtrust’s failure to present its evidence ex parte; Philtrust filed a motion for reconsideration which was granted by Order dated February 29, 2008.
- Philtrust presented witnesses Rosario Cruz Sy and Atty. Jane Laplana Suarez; by March 26, 2008, total loan obligation of defendants amounted to P64,153,827.02. Philtrust formally offered its evidence on April 10, 2008.
- Respondent Gabinete filed a Motion to Lift Order of Default on April 18, 2005, which was granted by RTC Order dated June 19, 2008; he was allowed to cross-examine Philtrust’s witnesses.
Gabinete’s Answer and Denials
- Gabinete alleged he ceased to be connected with Shangrila as of 1995; he claimed Shangrila never started doing business after incorporation in March 1994.
- He specifically denied under oath the genuineness and due execution of the confirmation letter dated May 28, 1997, asserting his signature of conformity was a forgery and that he had nothing to do with the loans.
- He asserted the mortgagor in the REM dated July 6, 1995 was Tan and that the properties did not belong to Shangrila.
- He alleged PN No. 7581 appeared to be secured by a third-party post-dated check; Philtrust’s silence as to the identity of the third party evidenced bad faith.
- He averred the promissory notes were void because Tan lacked authority to incur the loans or execute loan documents for Shangrila.
- He claimed he denied any participation upon receipt of demand, denied his signature on the Continuing Suretyship Agreement, and expressed willingness to cooperate with any investigation.
Request for Forensic Examination; NBI Document Examiner Testimony
- On March 3, 2009, Gabinete filed a motion asking the RTC to direct the National Bureau of Investigation (NBI) to conduct an analysis of the signature in the Continuing Suretyship Agreement; RTC granted this in Order dated March 11, 2009.
- NBI senior document examiner Efren Flores testified that after comparative examination, the questioned signatures and the standard sample signatures were not written by one and the same person (Questioned Documents Report No. 246-509 (165-409) dated June 11, 2009).
- Flores testified that specimen signatures submitted exhibited variations, that specimen signatures should be written in the same style as the questioned, executed contemporaneously with the date of the questioned signature and sufficient in number; the submitted specimens did not meet these criteria for reliable comparison.
- Flores acknowledged signatures vary over time and that no documents submitted bore signatures dated 1997, the year of the Continuing Suretyship Agreement.
RTC Decision (April 20, 2010) — Findings, Rejection of Forgery, Judgment
- RTC disbelieved the NBI document examiner’s findings after cross-examination and found the standard/sample signatures submitted to the NBI did not include Gabinete’s shortened signature as appearing on the Continuing Suretyship Agreement.
- RTC found not a single document submitted to the NBI reflected the shortened signature (“RGabinete”) necessary for conclusive comparison; specimen signatures showed variations and were not contemporaneous with the questioned signature.
- RTC ruled forgery cannot be presumed; the NBI findings were not conclusive and the document examiner did not categorically state evidence of forgery.
- Notary public who notarized the Continuing Suretyship Agreement testified that both Elisa Tan and Redentor R. Gabinete signed the Agreement in her presence and identified their signatures.
- RTC concluded Gabinete failed to prove forgery by clear, positive and convincing evidence; emphasized that forgery must be proved and the burden lies on the party alleging it.
- Dispositive portion ordered defendants jointly and severally to pay:
- P64,153,827.02 (total deficiency obligation under PN 7626 and outstanding obligations under PN 7627, PN 7628 and PN 7581 computed as of March 26, 2008), plus penalties and interests until fully paid;
- Attorney’s fees of 10% of the total amount due;
- Costs of suit.
- Decision penned by Presiding Judge Reynaldo G. Ros.
Appeal to Court of Appeals — Rationale of CA Decision (March 25, 2014)
- CA found merit in Gabinete’s a