Borromeo vs. Court of Appeals

A court's reversal of its own factual findings is reviewable where the reversal was induced by an erroneous ruling on the admissibility of evidence; self-serving memoranda prepared by a witness who was not a party to the transaction are not admissible as part of the res gestae or as corroborative evidence.

The controversy concerned three documents, Exhibits A, B and C, which on their faces are deeds of absolute sale of real properties executed by Simeon Rallos in favor of Emmanuel B. Aznar and Alma Aznar. Juan T. Borromeo, as administrator of Rallos's estate, claimed the deeds were equitable mortgages securing loans from Matias H. Aznar, while the Aznars maintained they were absolute sales. The governing statutory backdrop included Article 1602 of the Civil Code on equitable mortgages and the Rules of Court on admissibility of evidence.

Simeon Rallos owned several lots in Cebu. In 1954, he executed three documents, Exhibits A, B and C, appearing as deeds of absolute sale. Exhibit A conveyed Lot No. 7032 to Emmanuel B. Aznar for P6,000; Exhibit B conveyed Lots Nos. 2713 and 7728 to Alma Aznar for P5,000; and Exhibit C conveyed Lots Nos. 519-B, 519-C, 467 and 490 to Emmanuel for P40,000. The Aznars assumed existing mortgage obligations: P5,000 on Lots Nos. 2713 and 7728 in favor of Go Chan & Sons Realty Corporation, and P20,000 on the four lots in Exhibit C in favor of the Philippine National Bank. At the time Exhibit C was executed, the PNB debt was already due and demands for payment had been made upon Rallos. After the sales, the Aznars transferred the tax declarations in their names, paid the taxes, caused the issuance of new certificates of title, demanded and collected rentals from tenants, and in 1956 filed detainer suits against occupants who failed or refused to pay rents to them.

After Rallos died in 1956, Juan T. Borromeo was appointed special administrator of his estate. In his complaint, Borromeo alleged that the documents were in fact equitable mortgages to secure loans granted to Rallos by Matias H. Aznar, the deceased father of Emmanuel and Alma, and prayed for their reformation. Crispina Rallos Alcantara, daughter of Simeon, testified that she was present when the transactions took place; that her father merely borrowed money from Matias Aznar in the sums of P6,000 and P35,000 and mortgaged the properties to secure repayment; that the transactions were disguised as absolute sales; and that Rallos was assured he could repurchase the lots and would receive the corresponding options in writing. She prepared notes, marked as Exhibits A-2, A-3, B-3 and C-5, which she claimed represented deductions made by Matias Aznar for advance interest, attorney's fees and miscellaneous expenses. Borromeo also relied on Exhibit J, an option to repurchase Lots Nos. 462 and 7032, which expired without Rallos exercising it; Exhibit L, an undated, unsigned and unsubscribed draft deed of absolute sale; Exhibits Q, Q-1, Q-2, Q-3, R and R-1, alleged indebtedness documents; Exhibit K, an unsigned and undated statement of account; Exhibits X and Y, alleged PNB ledgers for the current account of Southwestern Colleges, Inc.; and Exhibits T, U and V, PNB inspection and appraisal reports.

The Aznars denied the claim. Emmanuel Aznar testified that after the sale, neither Rallos nor Crispina went to any of the Aznars' office for redemption of the lots. The Aznars maintained that the deeds were absolute sales and that they took possession of the properties and exercised acts of dominion over them. The trial court dismissed Borromeo's complaint. On appeal, the Court of Appeals originally affirmed the dismissal, finding the deeds clear, unambiguous and unequivocal; rejecting Crispina's testimony as unreliable and insufficient to justify reformation; treating her notes as self-serving; and finding no sufficient proof of unusual inadequacy of price. It also found that the Aznars took possession, transferred tax declarations, paid taxes, caused new certificates of title to issue, and collected rentals.

On Borromeo's motion for reconsideration, the Court of Appeals reversed itself in its per curiam resolution. It admitted Crispina's notes as part of the res gestae and considered them corroborative of her testimony. It also took into account Exhibit J, Exhibits X and Y, Exhibits T, U and V, and Exhibit K. It found unusual inadequacy of price: the total purchase price of P51,000 against total assessed values of P79,084.25, and for the Exhibit C lots, P40,000 against a PNB-appraised market value of P178,920. On these bases, it declared the transactions equitable mortgages, granted the Rallos heirs one year from finality to redeem, and awarded P10,000 attorney's fees and costs.

The trial court and the Court of Appeals originally found the deeds to be absolute sales, while the Court of Appeals in its per curiam resolution later found them to be equitable mortgages based on the evidence it had previously rejected but subsequently admitted.

• Borromeo's Prayer for Damages (G.R. No. L-31342): Borromeo, as administrator of the estate of Simeon Rallos, sought modification of the per curiam resolution to include moral and exemplary damages of P200,000 and P50,000, respectively, and to increase attorney's fees to not less than P75,000.
• Aznars' Challenge to the Per Curiam Resolution (G.R. No. L-31740): The Aznars asked that the per curiam resolution be set aside and the January 30, 1968 decision be reinstated and affirmed. They argued that the Court of Appeals committed legal error in admitting evidence it had originally held incompetent, and that its reversal of factual findings was based on inadmissible evidence, including Crispina's notes, Exhibit J, Exhibits X and Y, Exhibit K, and Exhibits T, U and V.
• Aznars' Admissibility Arguments: The Aznars contended that Crispina's notes were not part of the res gestae; that Exhibit J had no basis for the inference of options in Exhibits B and C; that Exhibits X and Y were not identified or testified to; that Exhibits T, U and V were not public records and were not authenticated; and that Exhibit K had no evidentiary value.

• Borromeo's Procedural Objections to Aznars' Petition: Borromeo contended that the Supreme Court had no jurisdiction over the Aznars' petition in G.R. No. L-31740 because it was filed beyond fifteen days from December 20, 1969; that after his own appeal, the Court of Appeals lost jurisdiction over the case, so the Aznars' motion for reconsideration did not suspend their appeal period; that the Aznars' brief omitted the digest of arguments and the text of the appealed resolution; and that the appeal raised purely questions of fact.
• Aznars' Opposition to Borromeo's Damage Claim: The Aznars, as respondents in G.R. No. L-31342, maintained that the per curiam resolution should be set aside and the original decision reinstated, which would leave no basis for Borromeo's claim for moral and exemplary damages and increased attorney's fees.

• Jurisdiction over Aznars' Petition: Whether the Supreme Court has jurisdiction to entertain the Aznars' petition in G.R. No. L-31740 despite Borromeo's claim that it was filed late after he had already appealed the same Court of Appeals resolution.
• Procedural Compliance of Aznars' Brief: Whether the Aznars' appeal should be dismissed because their brief, though timely filed, omitted the digest of arguments and the text of the appealed resolution until later.
• Nature of Appeal / Question of Law or Fact: Whether the Aznars' appeal raises purely questions of fact, or whether it presents a reviewable question of law because the Court of Appeals' reversal of factual findings was induced by its rulings on admissibility of evidence.
• Admissibility of Crispina's Notes as Res Gestae: Whether the notes and memoranda, Exhibits A-2, A-3, B-3 and C-5, prepared by Crispina Rallos Alcantara are admissible as part of the res gestae or as corroborative evidence.
• Admissibility of Other Exhibits: Whether Exhibits J, X and Y, K, and T, U and V were properly admitted and considered by the Court of Appeals in reversing its original decision.
• Propriety of the Court of Appeals' Reversal: Whether the per curiam resolution reversing the original decision and holding the deeds equitable mortgages should be set aside and the original decision affirmed.
• Borromeo's Entitlement to Damages: Whether Borromeo is entitled to moral and exemplary damages and increased attorney's fees.

• Jurisdiction over Aznars' Petition: Yes. The Supreme Court had jurisdiction; Borromeo's contention has no merit, and to sustain it would deprive a party of the right to appeal merely because the other party had perfected its appeal earlier.
• Procedural Compliance of Aznars' Brief: No dismissal. The omission of the digest and copy of the appealed resolution was a harmless technicality that caused no prejudice, and the brief itself with assignments of error and arguments was timely filed.
• Nature of Appeal / Question of Law or Fact: The appeal involves a reviewable question of law. Although the reversal related to factual conclusions, it was induced by the Court of Appeals' reversal of its prior admissibility rulings; if those legal rulings are erroneous, the original factual conclusions are revived.
• Admissibility of Crispina's Notes as Res Gestae: No. The notes are not part of the res gestae and cannot corroborate Crispina's testimony; she was not a party, no showing exists that she was requested or directed by the parties to take notes, and the notes are self-serving.
• Admissibility of Other Exhibits: No. Exhibits J, X and Y, K, and T, U and V were not properly admitted or considered; the Court of Appeals gave no adequate basis for admitting them, and they were not identified, testified to, or authenticated as required.
• Propriety of the Court of Appeals' Reversal: The per curiam resolution is reversed, and the original decision of January 30, 1968 is affirmed. The reversal was supported by legally untenable props.
• Borromeo's Entitlement to Damages: No. Because the per curiam resolution is reversed, Borromeo's prayer to augment the reliefs granted by that resolution cannot be granted, and his petition is dismissed.

• Jurisdiction over Aznars' Petition: The contention lacks merit. When the Supreme Court issued its January 13, 1970 resolution granting the Aznars an extension, it already knew that Borromeo's petition had been filed and still recognized the Aznars' right to file a separate appeal after the Court of Appeals resolved their motion for reconsideration. To sustain Borromeo's theory would allow one party to deprive another of the right to appeal merely because the first party perfected its appeal earlier. Timoteo Simsim vs. The Hon. Judge Feliciano Belmonte, etc., et al., 34 SCRA 536, and People vs. Ursua, 60 Phil. 252, support the rejection of this theory. Manila Electric Co. vs. Public Service Commission et al., G.R. No. L-24762, cited by Borromeo, is not in point.
• Procedural Compliance of Aznars' Brief: The omission of the digest of arguments and the text of the appealed resolution did not justify dismissal. Those items are not strictly parts of the brief, and no prejudice was caused by their late filing nineteen days after the reglementary period. The brief itself, with assignments of error and arguments, was filed on time. The rules do not require dismissal for such an unintentional and harmless technicality.
• Nature of Appeal / Question of Law or Fact: Although the Court of Appeals' reversal ultimately related to factual conclusions, it first reversed its rulings on admissibility and then predicated its new factual conclusions on evidence it had previously rejected. If the later admissibility rulings are erroneous in law, the original factual conclusions favorable to the Aznars would be revived. Thus, the appeal presents a reviewable legal issue.
• Admissibility of Crispina's Notes as Res Gestae: The notes are not part of the res gestae. Crispina was not a party to the transactions; only Simeon Rallos and Matias Aznar or the Aznars were parties. No showing exists that she was requested or directed by the parties to take notes or that the Aznars knew she was doing so. At best, her taking notes is circumstantial evidence. The notes also cannot be admitted as corroborative evidence under Section 10, Rule 132, because no predicate of failing memory was laid, and a witness cannot be corroborated by a written statement prepared wholly by her. The notes are self-serving and have no more credibility than her testimony.
• Admissibility of Other Exhibits: Exhibit J was used by the Court of Appeals to infer options in Exhibits B and C without explanation, and its corroborative force dissipated once the notes were inadmissible. Exhibits X and Y were offered only in rebuttal, no witness testified on them, and the Court of Appeals gave no reason for admitting them. Exhibits T, U and V were not identified or testified to; PNB is not wholly government-owned, so its employees are not public officers under Section 38, Rule 130; and even if public records, the requisites of Section 35, Rule 132 were not established. Exhibit K was undated and unsigned, its alleged writer was not presented, and the Court of Appeals treated it casually without serious consideration.
• Propriety of the Court of Appeals' Reversal: The per curiam resolution was supported by legally untenable props. Its reversal of factual findings was induced by erroneous admissibility rulings. Since the original decision of the Court of Appeals affirming the trial court was studied and in accord with law and justice, it must stand.
• Borromeo's Entitlement to Damages: Because the per curiam resolution is reversed, Borromeo's prayer to augment the reliefs granted by that resolution cannot be granted. His petition in G.R. No. L-31342 must be dismissed.

• Equitable Mortgage under Article 1602, Civil Code — When a deed appears as an absolute sale but is alleged to be a loan secured by mortgage, the statutory circumstances in Article 1602 may raise a presumption of equitable mortgage. The Court of Appeals relied on paragraphs 1 and 4, namely inadequate price and retention of part of the purchase price, but the Supreme Court reversed because the evidence offered to prove those circumstances was inadmissible. Thus, the presumption cannot be established by incompetent evidence.
• Res Gestae — Statements, acts or conduct accompanying or so nearly connected with the main transaction as to form part of it, and which illustrate, elucidate or qualify the act, are admissible as part of the res gestae. The notes prepared by Crispina Rallos Alcantara were not part of the res gestae because she was not a party, was not shown to have been requested or directed by the parties to take notes, and the Aznars were not shown to have known of her note-taking.
• Memorandum to Refresh Memory; Corroborative Evidence — Under Section 10, Rule 132, a witness may refer to a memorandum to refresh memory, but the memorandum itself is not admissible as corroborative evidence unless a proper predicate of failing memory is laid. A witness cannot be corroborated by a written statement prepared wholly by her, especially when she is interested in the outcome.
• Review of the Court of Appeals' Reversal of Its Own Findings — Courts have the inherent power to amend and control their process and orders to conform to law and justice, but this power cannot be exercised after judgment becomes final and executory. The Court of Appeals may reverse its factual findings, but not without adequate basis; where the reversal is induced by erroneous admissibility rulings, the Supreme Court may review the legal issue and revive the original factual conclusions if the later rulings are wrong.
• Public Records and Prima Facie Evidence — Entries in official records made by public officers in the performance of duty are prima facie evidence of the facts stated. PNB employees are not public officers within Section 38, Rule 130 because PNB is not wholly government-owned; and public records do not prove themselves without complying with Section 35, Rule 132.
• Lis Pendens — A notice of lis pendens is available only in real actions affecting title to or possession of real property, not in an action in personam such as one for support. The Court of Appeals per curiam noted that the lis pendens annotation on the certificates of title was improper, although the Supreme Court's disposition rested on the inadmissibility of the evidence.

• "We cannot see how the disputed notes and memoranda can be considered in any sense as part of the res gestae as this matter is known in the law of evidence." — This passage states the core evidentiary ruling rejecting the Court of Appeals' basis for admitting Crispina Rallos Alcantara's notes as part of the res gestae.
• "It is self-evident that a witness may not be corroborated by any written statement prepared wholly by him." — This passage articulates the rule that a witness's self-prepared notes cannot serve as corroborative evidence, especially absent a predicate for refreshing memory under Section 10, Rule 132.
• "In these premises, and it being Our considered view that the rulings in the appealed resolution as to the admissibility of the exhibits concerned are legally erroneous, the irresistible conclusion is hat the original decision of the Court of Appeals affirming that of the trial court must stand." — This passage contains the ratio decidendi for reversing the per curiam resolution and restoring the original decision.
• "The only limitation to this power is that it cannot be exercised anymore after the action or judgment concerned has already become final and executory by the expiration of the corresponding reglementary period for the purpose, this as a matter of public policy requiring that litigations should from the very nature of things have a definite conclusion at a given time even at the risk of occasional errors or unintended injustice." — This passage defines the limit on a court's inherent power to amend or control its own processes and orders.

• Timoteo Simsim vs. The Hon. Judge Feliciano Belmonte, etc., et al., 34 SCRA 536 — Cited to reject Borromeo's theory that one party's appeal deprived the other party of the right to appeal from the same Court of Appeals resolution.
• People vs. Ursua, 60 Phil. 252 — Cited together with Simsim to support the ruling that the filing of one party's appeal does not bar another party's separate appeal.
• Manila Electric Co. vs. Public Service Commission et al., G.R. No. L-24762, September 3, 1965 — Cited by Borromeo but held not in point on the jurisdictional objection.
• Cuyugan vs. Santos, 34 Phil. 100 — Cited in the Court of Appeals' per curiam resolution for the proposition that the character of a transaction is the intention of the parties and that testimony of those present at the execution is important; the Supreme Court nonetheless found the notes inadmissible.
• U.S. vs. Mante, 27 Phil. 124 — Cited for the rule that relationship of a witness to a party does not necessarily discredit the witness's testimony.
• National Bank vs. Kennedy, 17 Wall. [U.S.] 19, 21 L. Ed. 554 — Cited in the per curiam resolution on conversations during negotiation of a loan or other transaction as part of the res gestae.
• Saavedra vs. Martinez, 58 Phil. 767 — Cited on the rule that a notice of lis pendens is available only in real actions and not in an action in personam.
• Manalo vs. Gueco, 42 Phil. 925; Cabigao vs. Lim, 50 Phil. 844 — Cited on the principle that inadequacy of price is not sufficient to justify reformation or the application of Article 1602 of the Civil Code.

• Article 1602, Civil Code — Provides the circumstances under which a contract of sale with right to repurchase is presumed to be an equitable mortgage. The Court of Appeals relied on paragraphs 1 and 4, but the Supreme Court reversed because the evidence offered to prove those circumstances was inadmissible.
• Article 1370, Civil Code — Provides that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations controls. This was cited in the Court of Appeals' original decision holding the deeds to be absolute sales.
• Section 5(g), Rule 135 — Recognizes the inherent power of courts to amend and control their process and orders so as to make them conformable to law and justice. The Court used this to explain the Court of Appeals' power to reverse its own decision, subject to the limitation that the judgment must not have become final and executory.
• Section 4(b), Rule 45 — Cited in connection with the Supreme Court's power of supervision where a lower court's alteration of factual findings is a departure from the accepted and usual course of judicial proceedings.
• Section 10, Rule 132 — Allows a witness to refresh memory by a writing, but the writing itself is not admissible as corroborative evidence unless the proper predicate of failing memory is laid. The Court applied this to reject Crispina's notes.
• Section 38, Rule 130 — Provides that entries in official records made by a public officer in the performance of duty are prima facie evidence of the facts stated. The Court held that PNB employees are not public officers within this rule because PNB is not wholly government-owned.
• Section 35, Rule 132 — Governs the authentication of public records. The Court held that even if Exhibits T, U and V were public records, the requisites for their admission were not established.
• Sections 1 and 6, Rule 56; Section 16, Rule 46; Section 1(b), Rule 50 — Cited by Borromeo in arguing that the Aznars' brief should be dismissed for omitting the digest of arguments and the text of the appealed resolution. The Court found the omission harmless and not a ground for dismissal.
• Section 78, Republic Act No. 357 (General Banking Act) — Provides that loans against real estate security shall not exceed 70% of the appraised value of the improvement. This was cited in the per curiam resolution in connection with the PNB appraisal reports, which the Supreme Court later held inadmissible.

Antonio, Concepcion, Jr. and Martin, JJ., concur. Aquino, J., concurs in the result. Fernando, J., is on leave. Martin, J., was designated to sit in the Second Division.