Heirs of Jose V. Lagon vs. Ultramax Healthcare Supplies, Inc.

Evidence not identified and pre-marked during pre-trial may be admitted during trial upon a showing of "good cause," defined as any substantial reason that affords a legal excuse, particularly when the necessity for such evidence arises after the pre-trial conference and the evidence is relevant to establish the probability or improbability of the fact in issue, such as the authenticity of signatures on a questioned document.

Spouses Jose and Nenita Lagon owned two parcels of land in Koronadal City covered by Transfer Certificate of Title (TCT) Nos. T-72558 and T-72564. In July 2011, they discovered that the Registry of Deeds had cancelled their titles and issued new ones (TCT Nos. T-141372 and T-131373) in the name of Ultramax Healthcare Supplies, Inc., allegedly based on a falsified Deed of Absolute Sale. The spouses denied executing any sale, claiming the signatures on the deed were forged. Ultramax countered that the properties were transferred to satisfy a pre-existing loan obligation secured by a real estate mortgage. The dispute centered on the admissibility of the Deed of Mortgage for handwriting comparison after the heirs had already rested their case and presented evidence of the forgery.

• The Disputed Transfer: Spouses Jose and Nenita Lagon were registered owners of two parcels of land in Marbel, Koronadal City, covered by TCT Nos. T-72558 and T-72564. In July 2011, they discovered that the Registry of Deeds of South Cotabato had cancelled these titles and issued new ones (TCT Nos. T-141372 and T-131373) in the name of Ultramax Healthcare Supplies, Inc.
• Allegations of Falsification: The Lagon Spouses filed a Complaint for annulment of the new titles on September 29, 2011, alleging that the cancellation and transfer were effected through a falsified Deed of Absolute Sale. They denied selling the properties and claimed the signatures on the deed were forged.
• Respondent's Defense: Ultramax claimed that in 2009, Margie Huan, one of its directors, loaned P2.3 million to the Lagon Spouses with 4% monthly interest, using the two properties as collateral. When the spouses allegedly could not pay, they agreed to cede the properties to Huan, with Ultramax as the transferee. A representative of the spouses allegedly delivered the original titles to Huan in exchange for the evidence of indebtedness.
• Substitution of Parties: Jose Lagon died while the case was pending. On June 17, 2013, the trial court granted the Motion to substitute him with his heirs: his spouse Nenita and their children Maria Jocelyn, Armando, Jonald Jose, Joselito, Leilanie, Jose Jr., Mary Emilie, Stefanie Grace, Ryan Niel, and Nenita Jr.
• Forensic Examination of the Deed of Sale: On August 2, 2013, Al Barrometro testified that he facilitated the registration by presenting a Deed of Absolute Sale to the Registry of Deeds, purportedly executed by the Lagon Spouses and notarized by Atty. Damaso Cordero. On September 7, 2013, the heirs moved for forensic examination of the deed by the National Bureau of Investigation (NBI), which the court granted. The NBI found the signatures on the deed had been falsified. The heirs thereafter rested their case.
• Introduction of the Deed of Mortgage: On November 20, 2015, Ultramax filed a Request for Admission addressed to Nenita Lagon regarding a Real Estate Mortgage (Deed of Mortgage) and a Deed of Absolute Sale, both dated December 2009. The heirs objected, claiming immateriality. On May 18, 2016, Ultramax filed a Supplemental Judicial Affidavit by Margie Huan introducing the Deed of Mortgage signed by the Lagon Spouses. The heirs objected, arguing the document was never alleged in the Answer, was introduced too late in the proceedings, and was irrelevant.
• RTC Resolutions: On July 1, 2016, the RTC admitted the Supplemental Judicial Affidavit on grounds of substantial justice and equity, permitting the Deed of Mortgage to be introduced not to prove the existence of the mortgage contract, but to prove "previously existing obligations" of the heirs. On March 10, 2017, the RTC granted Ultramax's Motion to have the Deed of Mortgage examined by an NBI handwriting expert to compare the signatures with those on the questioned Deed of Absolute Sale.
• Certiorari Proceedings: The heirs filed a Petition for Certiorari before the Court of Appeals, alleging grave abuse of discretion. The CA dismissed the petition on January 31, 2019, holding that the RTC merely sought to determine the authenticity of signatures and did not rule on the admissibility of the Deed of Mortgage per se. The CA denied reconsideration on May 8, 2019.

• Procedural Defect: Petitioners argued that the Deed of Mortgage was inadmissible because it was never mentioned in Ultramax's Answer or other pleadings and had already been deemed inadmissible by the trial court in prior proceedings.
• Irrelevance: They maintained that the Deed of Mortgage was irrelevant to the case, asserting that the Complaint questioned the Deed of Absolute Sale, not the Deed of Mortgage. They contended that while respondents could prove existing obligations, they could not use the Deed of Mortgage for this purpose.
• Violation of Judicial Affidavit Rule: Petitioners claimed that the admission of the Supplemental Judicial Affidavit and the Deed of Mortgage violated Section 2 of the Judicial Affidavit Rule, which requires evidence to be pre-marked during pre-trial.

• Matter of Defense Evidence: Respondent Ultramax countered that presenting the Deed of Mortgage was a matter of defense evidence not prohibited by the Rules on Evidence. It asserted that the Court of Appeals correctly found no fault on the part of the trial court.
• Relevance to Authentication: Ultramax argued that the Deed of Mortgage was relevant because it aimed to prove that the signatures found in it were authentic and executed by the same persons who signed the other documents relevant to the case, thereby establishing the authenticity of the signatures on the Deed of Absolute Sale through comparison.

• Good Cause Exception: Whether the Court of Appeals erred in finding that the Regional Trial Court did not gravely abuse its discretion in granting the Motion to have the Deed of Mortgage examined by a handwriting expert despite not being pre-marked during pre-trial.
• Relevance of Collateral Document: Whether the Deed of Mortgage was relevant evidence to establish the authenticity of the signatures on the questioned Deed of Absolute Sale.

• Good Cause Exception: The Court of Appeals did not err. The Regional Trial Court did not gravely abuse its discretion in admitting the Deed of Mortgage for examination. Under Section 2 of the Judicial Affidavit Rule, the trial court may allow the introduction of documentary evidence not previously marked during pre-trial if good cause is shown. "Good cause" is defined as any substantial reason that affords a legal excuse. Here, the need to introduce the Deed of Mortgage arose only after the pre-trial, when petitioners presented forensic evidence showing the signatures on the Deed of Absolute Sale were falsified. The admission was necessary to afford respondents an opportunity to refute petitioners' evidence and compare the signatures.
• Relevance of Collateral Document: The Deed of Mortgage was relevant evidence. Pursuant to Rule 128, Section 4 of the Rules of Court, evidence on collateral matters is admissible when it tends in any reasonable degree to establish the probability or improbability of the fact in issue. Since the main question was the falsification of the Deed of Absolute Sale, the signatures on the Deed of Mortgage—which respondents claimed were genuine—were material to establish the probability of such falsification through handwriting comparison.
• Waiver by Reservation: The admission was further justified by the parties' reservation in the Pre-Trial Order of their rights to present additional evidence without objection, which amounted to a waiver of the strict application of Section 2 of the Judicial Affidavit Rule.

• "Good Cause" Exception to Pre-Marking Requirement — Under Section 2 of the Judicial Affidavit Rule (A.M. No. 03-1-09-SC), the general prohibition against admitting evidence not identified and pre-marked during pre-trial yields to an exception when the trial court finds "good cause." Good cause constitutes any substantial reason that affords a legal excuse, such as when the necessity for the evidence arises after the pre-trial conference due to unforeseen developments in the presentation of evidence. The trial court retains discretion to admit such evidence to prevent a miscarriage of justice.
• Relevance of Collateral Matters — Evidence on collateral matters is admissible under Rule 128, Section 4 of the Rules of Court when it tends in any reasonable degree to establish the probability or improbability of the fact in issue. A document not directly in controversy may be admitted if it provides a basis for comparing handwriting or signatures to determine the authenticity of the principal document in dispute.
• Waiver of Pre-Marking Requirement — A party's reservation in the Pre-Trial Order of the right to present additional evidence without objection from the other party constitutes a waiver of the requirement under the Judicial Affidavit Rule that evidence must be pre-marked during pre-trial.

• "It is a well-established rule that no evidence may be introduced during trial if it was not identified and pre-marked during pre-trial. However, the rule allows for an exception: If good cause has been shown, the trial court may allow documentary or object evidence not previously marked to be introduced. By good cause, it must be shown that there is a 'substantial reason that affords a legal excuse.'"
• "Petitioners rely on technicalities, but these rules are not so rigid as to frustrate the full adjudication of cases. Procedural rules are designed to aid the courts in resolving cases. They neither create nor take away vested rights, but merely facilitate the trial court's reception and evaluation of all evidence given the facts and circumstances presented by the parties."
• "The main question of the Complaint before the trial court is the falsification of the Deed of Absolute Sale, and the signatures on the Deed of Mortgage may establish the probability of such falsification."

• Cruz v. People, 810 Phil. 801 (2017) — Controlling precedent defining "good cause" under the Judicial Affidavit Rule as any substantial reason affording a legal excuse, and affirming trial court discretion to admit evidence not pre-marked when justified by the circumstances.
• Lara's Gift and Decors, Inc. v. PNB General Insurers Co., Inc., 824 Phil. 652 (2018) — Cited for the standard of review in certiorari proceedings (grave abuse of discretion) and for the principle that reservation of rights in pre-trial orders can waive procedural objections.
• Republic v. Spouses Gimenez, 776 Phil. 233 (2016) — Cited for the principle that procedural rules are designed to aid courts in resolving cases and should not be applied strictly when such would frustrate substantial justice.
• Heirs of Zaulda v. Zaulda, 729 Phil. 639 (2014) — Cited for the principle that procedural rules give litigants opportunity to establish merits rather than lose rights on technicalities.

• Section 2, Judicial Affidavit Rule (A.M. No. 03-1-09-SC) — Mandates submission of judicial affidavits and documentary evidence before pre-trial, but allows trial courts to admit additional evidence during trial for good cause shown.
• Section 4, Rule 128, Rules of Court — Defines relevancy and provides that evidence on collateral matters is admissible when it tends to establish the probability or improbability of the fact in issue.

Hernando, Inting, Delos Santos, and Rosario, JJ.