Henry Ching Tiu, Christopher Halin Go, and George Co v. Philippine Bank of Communications G.R. No. 151932 August 19, 2009 Peralta, J.: Facts

Henry Ching Tiu, Christopher Halin Go, And George Co v.
Philippine Bank Of Communications

G.R. No. 151932; August 19, 2009
PERALTA, J.:
Facts:
Asian Water Resources, Inc. (AWRI), represented by herein petitioners, applied for a real estate
loan with the Philippine Bank of Communications (PBCOM) to fund its purified water distribution business.
In support of the loan application, petitioners submitted a Board Resolution. Later on, AWRI applied for a
bigger loan from PBCOM for additional capitalization using the same Board Resolution, but without any
additional real estate collateral. Considering that the proposed additional loan was unsecured, PBCOM
required all the members of the Board of Directors of AWRI to become sureties. Thus, a Surety
Agreement was executed by its Directors and acknowledged by a notary public on the same date. All
copies of the Surety Agreement, except two, were kept by PBCOM. Of the two copies kept by the notary
public, one copy was retained for his notarial file and the other was sent to the Records Management and
Archives Office, through the Office of the RTC Clerk of Court.
Thereafter, AWRI informed the bank of its desire to surrender and/or assign in its favor, all the
present properties of the former to apply as dacion en pago for AWRI’s existing loan obligation to the
bank. PBCOM sent a reply denying the request and also sent a letter to petitioners demanding full
payment of its obligation to the bank. Its demands having remained unheeded, PBCOM instructed its
counsel to file a complaint for collection against petitioners.
Petitioners filed their Answer. It alleged, among other things, that they were not personally liable
on the promissory notes, because they signed the Surety Agreement in their capacities as officers of
AWRI. They claimed that the Surety Agreement attached to the complaint as Annexes "A" to "A-2" were
falsified, considering that when they signed the same, the words "In his personal capacity" did not yet
appear in the document and were merely intercalated thereon without their knowledge and consent.
In support of their allegations, petitioners attached to their Answer a certified photocopy of the
Surety Agreement by the Records Management and Archives Office in Davao City, showing that the
words "In his personal capacity" were not found at the foot of page two of the document where their
signatures appeared. Because of this development, PBCOM’s counsel searched for and retrieved the file
copy of the Surety Agreement. The notarial copy showed that the words "In his personal capacity" did not
appear on page two of the Surety Agreement.
Petitioners’ counsel then asked PBCOM to explain the alteration appearing on the agreement.
PBCOM subsequently discovered that the insertion was ordered by the bank auditor. It alleged that when
the Surety Agreement was inspected by the bank auditor, he called the attention of the loans clerk,
Kenneth Cabahug, as to why the words "In his personal capacity" were not indicated under the signature
of each surety, in accordance with bank standard operating procedures. The auditor then ordered Mr.
Cabahug to type the words "In his personal capacity" below the second signatures of petitioners.
However, the notary public was never informed of the insertion. Mr. Cabahug subsequently executed an
affidavit attesting to the circumstances why the insertion was made.
PBCOM then filed a Reply and Answer to Counterclaim with Motion for Leave of Court to
Substitute Annex "A" of the Complaint, wherein it attached the duplicate original copy retrieved from the
file of the notary public. PBCOM also admitted its mistake in making the insertion and explained that it
was made without the knowledge and consent of the notary public. PBCOM maintained that the insertion
was not a falsification, but was made only to speak the truth of the parties’ intentions. PBCOM also
contended that petitioners were already primarily liable on the Surety Agreement whether or not the
insertion was made, having admitted in their pleadings that they voluntarily executed and signed the
Surety Agreement in the original form. PBCOM, invoking a liberal application of the Rules, emphasized
that the motion incorporated in the pleading can be treated as a motion for leave of court to amend and
admit the amended complaint pursuant to Section 3, Rule 10 of the Rules of Court.
The RTC issued an Order allowing the substitution of the altered document with the original
Surety Agreement. Petitioners filed a motion for reconsideration, but it was denied.
Aggrieved, petitioners sought recourse before the CA via a petition for certiorari under Rule 65 of
the Rules of Court. The CA rendered a Decision dismissing the petition for lack of merit.
Hence, the petition.
Issue:
Is the substitution of the falsified document proper?
Ruling: Yes.
As to the substitution of the earlier surety agreement that was annexed to the complaint with the
original thereof, this Court finds that the RTC did not err in allowing the substitution.
The pertinent rule on actionable documents is found in Section 7, Rule 8 of the Rules of Court,
which provides that when the cause of action is anchored on a document, its substance must be set forth,
and the original or a copy thereof "shall" be attached to the pleading as an exhibit and deemed a part
thereof.
With respect to PBCOM’s right to amend its complaint, including the documents annexed thereto,
after petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court specifically allows
amendment by leave of court.
The granting of leave to file amended pleading is a matter particularly addressed to the sound
discretion of the trial court; and that discretion is broad, subject only to the limitations that the
amendments should not substantially change the cause of action or alter the theory of the case, or that it
was not made to delay the action. Nevertheless, as enunciated in Valenzuela, even if the amendment
substantially alters the cause of action or defense, such amendment could still be allowed when it is
sought to serve the higher interest of substantial justice; prevent delay; and secure a just, speedy and
inexpensive disposition of actions and proceedings.
Furthermore, amendments to pleadings are generally favored and should be liberally allowed in
furtherance of justice in order that every case, may so far as possible, be determined on its real facts and
in order to speed up the trial of the case or prevent the circuity of action and unnecessary expense.
In the present case, there was no fraudulent intent on the part of PBCOM in submitting the
altered surety agreement. In fact, the bank admitted that it was a mistake on their part to have submitted it
in the first place instead of the original agreement. It also admitted that, through inadvertence, the copy
that was attached to the complaint was the copy wherein the words "IN HIS PERSONAL CAPACITY"
were inserted to conform to the bank’s standard practice. This alteration was made without the knowledge
of the notary public. PBCOM’s counsel had no idea that what it submitted was the altered document,
thereby necessitating the substitution of the surety agreement with the original thereof, in order that the
case would be judiciously resolved.

Henry Ching Tiu, Christopher Halin Go, and George Co v. Philippine Bank of Communications G.R. No. 151932 August 19, 2009 Peralta, J.: Facts

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Henry Ching Tiu, Christopher Halin Go, and George Co v. Philippine Bank of Communications G.R. No. 151932 August 19, 2009 Peralta, J.: Facts

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Henry Ching Tiu, Christopher Halin Go, And George Co v.

Philippine Bank Of Communications

Hence, the petition.

Is the substitution of the falsified document proper?

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