J.A.B. Bulao & Associates

CASE  2012-0052: PHILIPPINE NATIONAL BANK VS. SPOUSES CHEAH CHEE CHONG AND OFELIA CAMACHO CHEAH (G.R. NO. 170865) SPOUSES CHEAH CHEE CHONG AND OFELIA CAMACHO CHEAH VS. PHILIPPINE NATIONAL BANK (G.R. NO. 170892) (25 APRIL 2012,  DEL CASTILLO, J). SUBJECT: PROXIMATE CAUSE; SOLUTIO INDEBITI; CONTRIBUTORY NEGLIGENCE; DUTY OF COLLECTING BANK; DEGREE OF DILIGENCE REQUIRED OF BANKS. (BRIEF TITLE: PNB VS. SPOUSES CHONG ET AL.)

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DIS POSITIVE:

WHEREFORE, premises considered, the Petitions for Review on Certiorari in G.R. No. 170865 and in G.R. No. 170892 are both DENIED.  The assailed August 22, 2005 Decision and December 21, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 63948 are hereby AFFIRMED in toto. 

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

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SUBJECTS/DOCTRINES/DIGEST

WHAT IS PROXIMATE CAUSE?

THAT CAUSE, WHICH, IN NATURAL AND CONTINUOUS SEQUENCE, UNBROKEN BY ANY EFFICIENT INTERVENING CAUSE, PRODUCES THE INJURY AND WITHOUT WHICH THE RESULT WOULD NOT HAVE OCCURRED.’

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HOW TO DETERMINE PROXIMATE CAUSE?

BY ASKING: IF THE EVENT DID NOT HAPPEN, WOULD THE INJURY HAVE RESULTED?  IF THE ANSWER IS NO, THEN THE EVENT IS THE PROXIMATE CAUSE.”^[1][34]

“Proximate cause is ‘that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred.’ x x x To determine the proximate cause of a controversy, the question that needs to be asked is: If the event did not happen, would the injury have resulted?  If the answer is no, then the event is the proximate cause.”^[2][34]

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PNB RECEIVED FOREIGN CHECKS. THE RULE REQUIRES A 15-DAY CLEARING. BUT PNB ALLOWED THE CHECKS TO BE CLEARED BEFORE THE END OF THE 15 DAY PERIOD? WHOSE FAULT IS IT?

FAULT OF PNB. PNB’S DISREGARD OF ITS PREVENTIVE AND PROTECTIVE MEASURE AGAINST THE POSSIBILITY OF BEING VICTIMIZED BY BAD CHECKS HAD BROUGHT UPON ITSELF THE INJURY OF LOSING A SIGNIFICANT AMOUNT OF MONEY. 

Here, while PNB highlights Ofelia’s fault in accommodating a stranger’s check and depositing it to the bank, it remains mum in its release of the proceeds thereof without exhausting the 15-day clearing period, an act which contravened established banking rules and practice. 

It is worthy of notice that the 15-day clearing period alluded to is construed as 15 banking days. As declared by Josephine Estella, the Administrative Service Officer who was the bank’s Remittance Examiner, what was unusual in the processing of the check was that the “lapse of 15 banking days was not observed.”^[3][35]  Even PNB’s agreement with Philadelphia National Bank^[4][36] regarding the rules on the collection of the proceeds of US dollar checks refers to “business/ banking days.”  Ofelia deposited the subject check on November 4, 1992.  Hence, the 15^th banking day from the date of said deposit should fall on November 25, 1992.  However, what happened was that PNB Buendia Branch, upon calling up Ofelia that the check had been cleared, allowed the proceeds thereof to be withdrawn on November 17 and 18, 1992, a week before the lapse of the standard 15-day clearing period. 

This Court already held that the payment of the amounts of checks without previously clearing them with the drawee bank especially so where the drawee bank is a foreign bank and the amounts involved were large is contrary to normal or ordinary banking practice.^[5][37]  Also, in Associated Bank v. Tan,^[6][38] wherein the bank allowed the withdrawal of the value of a check prior to its clearing, we said that “[b]efore the check shall have been cleared for deposit, the collecting bank can only ‘assume’ at its own risk x x x that the check would be cleared and paid out.”  The delay in the receipt by PNB Buendia Branch of the November 13, 1992 SWIFT message notifying it of the dishonor of the subject check is of no moment, because had PNB Buendia Branch waited for the expiration of the clearing period and had never released during that time the proceeds of the check, it would have already been duly notified of its dishonor. Clearly, PNB’s disregard of its preventive and protective measure against the possibility of being victimized by bad checks had brought upon itself the injury of losing a significant amount of money. 

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WHAT KIND OF DILIGENCE IS REQUIRED OF BANKS?

MORE THAN THAT OF A ROMAN PATER FAMILIAS OR A GOOD FATHER OF A FAMILY.  THE HIGHEST DEGREE OF DILIGENCE IS EXPECTED.”^[7][39]

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WHAT IS THE DUTY OF A COLLECTING BANK?

WITH REGARD TO COLLECTION OR ENCASHMENT OF CHECKS, SUFFICE IT TO SAY THAT THE LAW IMPOSES ON THE COLLECTING BANK THE DUTY TO SCRUTINIZE DILIGENTLY THE CHECKS DEPOSITED WITH IT FOR THE PURPOSE OF DETERMINING THEIR GENUINENESS AND REGULARITY.  “THE COLLECTING BANK, BEING PRIMARILY ENGAGED IN BANKING, HOLDS ITSELF OUT TO THE PUBLIC AS THE EXPERT ON THIS FIELD, AND THE LAW THUS HOLDS IT TO A HIGH STANDARD OF CONDUCT.”^[8][41]

It bears stressing that “the diligence required of banks is more than that of a Roman pater familias or a good father of a family.  The highest degree of diligence is expected.”^[9][39]  PNB miserably failed to do its duty of exercising extraordinary diligence and reasonable business prudence.  The disregard of its own banking policy amounts to gross negligence, which the law defines as “negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but wilfully and intentionally with a conscious indifference to consequences in so far as other persons may be affected.”^[10][40]  With regard to collection or encashment of checks, suffice it to say that the law imposes on the collecting bank the duty to scrutinize diligently the checks deposited with it for the purpose of determining their genuineness and regularity.  “The collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it to a high standard of conduct.”^[11][41]  A bank is expected to be an expert in banking procedures and it has the necessary means to ascertain whether a check, local or foreign, is sufficiently funded. 

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PNB OBLIGES CHEA TO RETURN THE MONEY UNDER THE PRINCIPLE OF SOLUTION INDEBITI.

WHAT IS SOLUTION INDEBITI?

IF SOMETHING IS RECEIVED WHEN THERE IS NO RIGHT TO DEMAND IT, AND IT WAS UNDULY DELIVERED THROUGH MISTAKE, THE OBLIGATION TO RETURN IT ARISES. (ART. 2154, CIVIL CODE)

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WHAT ARE THE REQUISITES OF SOLUTIO INDEBITI?

(A) THAT HE WHO PAID WAS NOT UNDER OBLIGATION TO DO SO; AND

(B) THAT THE PAYMENT WAS MADE BY REASON OF AN ESSENTIAL MISTAKE OF FACT.^[12][43] 

ARE SPOUSES CHEAH OBLIGATED TO RETURN THE MONEY WITHDRAWN UNDER THE PRINCIPLE OF SOLUTIO INDEBITI?

NO.  IN THE FIRST PLACE, THE GROSS NEGLIGENCE OF PNBCAN NEVER BE EQUATED WITH A MERE MISTAKE OF FACT, WHICH MUST BE SOMETHING EXCUSABLE AND WHICH REQUIRES THE EXERCISE OF PRUDENCE.  NO RECOVERY IS DUE IF THE MISTAKE DONE IS ONE OF GROSS NEGLIGENCE.

            Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under the principle of solutio indebiti, which is laid down in Article 2154 of the Civil Code:^[13][42]

Art. 2154.  If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

“[T]he indispensable requisites of the juridical relation known as solutio indebiti, are, (a) that he who paid was not under obligation to do so; and (b) that the payment was made by reason of an essential mistake of fact.^[14][43] 

In the case at bench, PNB cannot recover the proceeds of the check under the principle it invokes.  In the first place, the gross negligence of PNB, as earlier discussed, can never be equated with a mere mistake of fact, which must be something excusable and which requires the exercise of prudence.  No recovery is due if the mistake done is one of gross negligence.

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A STRANGER GAVE THE CHEAH SPOUSES A CHECK FOR US$300,000.00. THEY WENT TO THE BANK AND DEPOSITED IT. BEFORE THE 15 DAY CLEARING PERIOD THEY WERE INFORMED BY PNB THAT THE CHECK HAS ALREADY BEEN CLEARED. THEY WENT TO THE BANK AND ENCASHED IT. ARE THEY LIABLE TO RETURN THE MONEY.

YES, BECAUSE THEY ARE GUILTY OF CONTRIBUTORY NEGLIGENCE. SPOUSES LEAH SHOULD HAVE BEEN MORE DILIGENT BECAUSE THE ONE WHO GAVE HER THE CHECK WAS A STRANGER. ALSO, WHE THE BANK CALLED HER UP AND INFORM HER THAT THE BANK WAS CLEARED BEFORE THE 15 DAY PERIOD SHE SHOULD HAVE FIRST VERIFIED THE REGULARITY OF SUCH HASTY CLEARANCE CONSIDERING THAT IF SOMETHING GOES WRONG WITH THE TRANSACTION, IT IS SHE AND HER HUSBAND WHO WOULD BE PUT AT RISK AND NOT THE ACCOMMODATED PARTY.

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WHAT IS CONTRIBUTORY NEGLIGENCE?

“CONTRIBUTORY   NEGLIGENCE   IS  CONDUCT  ON  THE   PART  OF  THE  INJURED  PARTY, CONTRIBUTING AS A LEGAL CAUSE TO THE HARM HE HAS SUFFERED, WHICH FALLS BELOW THE STANDARD TO WHICH HE IS REQUIRED TO CONFORM FOR HIS OWN PROTECTION.”^[15][44]

The spouses Cheah are guilty of contributory negligence and are bound to share the loss with the bank

“Contributory   negligence   is  conduct  on  the   part  of  the  injured  party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection.”^[16][44]

The CA found Ofelia’s credulousness blameworthy.  We agree.  Indeed, Ofelia failed to observe caution in giving her full trust in accommodating a complete stranger and this led her and her husband to be swindled.  Considering that Filipina was not personally known to her and the amount of the foreign check to be encashed was $300,000.00, a higher degree of care is expected of Ofelia which she, however, failed to exercise under the circumstances. Another circumstance which should have goaded Ofelia to be more circumspect in her dealings was when a bank officer called her up to inform that the Bank of America check has already been cleared way earlier than the 15-day clearing period.   The fact that the check was cleared after only eight banking days from the time it was deposited or contrary to what Garin told her that clearing takes 15 days should have already put Ofelia on guard.  She should have first verified the regularity of such hasty clearance considering that if something goes wrong with the transaction, it is she and her husband who would be put at risk and not the accommodated party.  However, Ofelia chose to ignore the same and instead actively participated in immediately withdrawing the proceeds of the check.  Thus, we are one with the CA in ruling that Ofelia’s prior consultation with PNB officers is not enough to totally absolve her of any liability. In the first place, she should have shunned any participation in that palpably shady transaction.      

In any case, the complaint against the spouses Cheah could not be dismissed.  As PNB’s client, Ofelia was the one who dealt with PNB and negotiated the check such that its value was credited in her and her husband’s account.  Being the ones in privity with PNB, the spouses Cheah are therefore the persons who should return to PNB the money released to them. 

All told, the Court concurs with the findings of the CA that PNB and the spouses Cheah are equally negligent and should therefore equally suffer the loss.  The two must both bear the consequences of their mistakes.

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Republic of thePhilippines

Supreme Court

BaguioCity

FIRST DIVISION

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x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

DEL CASTILLO, J.:

Law favoreth diligence, and therefore, hateth folly and negligence.—Wingate’s Maxim.

In doing a friend a favor to help the latter’s friend collect the proceeds of a foreign check, a woman deposited the check in her and her husband’s dollar account.  The local bank accepted the check for collection and immediately credited the proceeds thereof to said spouses’ account even before the lapse of the clearing period.  And just when the money had been withdrawn and distributed among different beneficiaries, it was discovered that all along, to the horror of the woman whose intention to accommodate a  friend’s friend backfired,  she  and  her

bank had dealt with a rubber check.

These consolidated^[17][1] Petitions for Review on Certiorari filed by the Philippine National Bank (PNB)^[18][2] and by the spouses Cheah Chee Chong and Ofelia Camacho Cheah (spouses Cheah)^[19][3] both assail the August 22, 2005 Decision^[20][4] and December 21, 2005 Resolution^[21][5]of the Court of Appeals (CA) in CA-G.R. CV No. 63948 which declared both parties equally negligent and, hence, should equally suffer the resulting loss.  For its part, PNB questions why it was declared blameworthy together with its depositors, spouses Cheah, for the amount wrongfully paid the latter, while the spouses Cheah plead that they be declared entirely faultless.

 Factual Antecedents

On November 4, 1992, Ofelia Cheah (Ofelia) and her friend Adelina Guarin (Adelina) were having a conversation in the latter’s office when Adelina’s friend, Filipina Tuazon (Filipina), approached her to ask if she could have Filipina’s check cleared and encashed for a service fee of 2.5%.  The check is Bank of America Check No. 190^[22][6] under the account of Alejandria Pineda and Eduardo Rosales and drawn by Atty. Eduardo Rosales against Bank of America Alhambra Branch inCalifornia,USA, with a face amount of $300,000.00, payable to cash.  Because Adelina does not have a dollar account in which to deposit the check, she asked Ofelia if she could accommodate Filipina’s request since she has a joint dollar savings account with her Malaysian husband Cheah Chee Chong (Chee Chong) under Account No. 265-705612-2 with PNB Buendia Branch. 

Ofelia agreed. 

That same day, Ofelia and Adelina went to PNB Buendia Branch.  They met with Perfecto Mendiola of the Loans Department who referred them to PNB Division Chief Alberto Garin (Garin).  Garin discussed with them the process of clearing the subject check and they were told that it normally takes 15 days.^[23][7]  Assured that the deposit and subsequent clearance of the check is a normal transaction, Ofelia deposited Filipina’s check.  PNB then sent it for clearing through its correspondent bank, Philadelphia National Bank.  Five days later, PNB received a credit advice^[24][8] from Philadelphia National Bank that the proceeds of the subject check had been temporarily credited to PNB’s account as of November 6, 1992.  On November 16, 1992, Garin called up Ofelia to inform her that the check had already been cleared.^[25][9]  The following day, PNB Buendia Branch, after deducting the bank charges, credited $299,248.37 to the account of the spouses Cheah.^[26][10] Acting on Adelina’s instruction to withdraw the credited amount, Ofelia that day personally withdrew $180,000.00.^[27][11] Adelina was able to withdraw the remaining amount the next day after having been authorized by Ofelia.^[28][12]  Filipina received all the proceeds. 

In the meantime, the Cable Division of PNB Head Office in Escolta, Manila received on November 16, 1992 a SWIFT^[29][13] message from Philadelphia National Bank dated November 13, 1992 with Transaction Reference Number (TRN) 46506218, informing PNB of the return of the subject check for insufficient funds.^[30][14]  However, the PNB Head Office could not ascertain to which branch/office it should forward the same for proper action.  Eventually, PNB Head Office sent Philadelphia National Bank a SWIFT message informing the latter that SWIFT message with TRN 46506218 has been relayed to PNB’s various divisions/departments but was returned to PNB Head Office as it seemed misrouted. PNB Head Office thus requested for Philadelphia National Bank’s advice on said SWIFT message’s proper disposition.^[31][15]  After a few days, PNB Head Office ascertained that the SWIFT message was intended for PNB Buendia Branch. 

PNB Buendia Branch learned about the bounced check when it received on November 20, 1992 a debit advice,^[32][16] followed by a letter^[33][17] on November 24, 1992, from Philadelphia National Bank to which the November 13, 1992 SWIFT message was attached.  Informed about the bounced check and upon demand by PNB Buendia Branch to return the money withdrawn, Ofelia immediately contacted Filipina to get the money back.  But the latter told her that all the money had already been given to several people who asked for the check’s encashment.  In their effort to recover the money, spouses Cheah then sought the help of the National Bureau of Investigation.  Said agency’s Anti-Fraud and Action Division was later able to apprehend some of the beneficiaries of the proceeds of the check and recover from them $20,000.00. Criminal charges were then filed against these suspect beneficiaries.^[34][18]

Meanwhile, the spouses Cheah have been constantly meeting with the bank officials to discuss matters regarding the incident and the recovery of the value of the check while the cases against the alleged perpetrators remain pending.  Chee Chong in the end signed a PNB drafted^[35][19] letter^[36][20] which states that the spouses Cheah are offering their condominium units as collaterals for the amount withdrawn.  Under this setup, the amount withdrawn would be treated as a loan account with deferred interest while the spouses try to recover the money from those who defrauded them.  Apparently, Chee Chong signed the letter after the Vice President and Manager of PNB Buendia Branch, Erwin Asperilla (Asperilla), asked the spouses Cheah to help him and the other bank officers as they were in danger of losing their jobs because of the incident.  Asperilla likewise assured the spouses Cheah that the letter was a mere formality and that the mortgage will be disregarded once PNB receives its claim for indemnity from Philadelphia National Bank.

Although some of the officers of PNB were amenable to the proposal,^[37][21] the same did not materialize.  Subsequently, PNB sent a demand letter to spouses Cheah for the return of the amount of the check,^[38][22] froze their peso and dollar deposits in the amounts of P275,166.80 and $893.46,^[39][23] and filed a complaint^[40][24] against them for Sum of Money with Branch 50 of the Regional Trial Court (RTC) of Manila, docketed as Civil Case No. 94-71022.  In said complaint, PNB demanded payment of around P8,202,220.44, plus interests^[41][25] and attorney’s fees, from the spouses Cheah. 

As their main defense, the spouses Cheah claimed that the proximate cause of PNB’s injury was its own negligence of paying a US dollar denominated check

without waiting for the 15-day clearing period, in violation of its bank practice as mandated by its own bank circular, i.e., PNB General Circular No. 52-101/88.^[42][26]  Because of this, spouses Cheah averred that PNB is barred from claiming what it had lost.  They further averred that it is unjust for them to pay back the amount disbursed as they never really benefited therefrom.  As counterclaim, they prayed for the return of their frozen deposits, the recoupment of P400,000.00 representing the amount they had so far spent in recovering the value of the check, and payment of moral and exemplary damages, as well as attorney’s fees.

Ruling of the Regional Trial Court

The RTC ruled in PNB’s favor.  The dispositive portion of its Decision^[43][27] dated May 20, 1999 reads:

            WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Philippine National Bank [and] against defendants Mr. Cheah Chee Chong and Ms. Ofelia Camacho Cheah, ordering the latter to pay jointly and severally the herein plaintiffs’ bank the amount:

1. of US$298,950.25 or its peso equivalent based on Central Bank Exchange Rate prevailing at the time the proceeds of the BA Check No. 190 were withdrawn or the prevailing Central Bank Rate at the time the amount is to be reimbursed by the defendants to plaintiff or whatever is lower.  This is without prejudice however, to the rights of the defendants (accommodating parties) to go against the group of Adelina Guarin, Atty. Eduardo Rosales, Filipina Tuazon, etc., (Beneficiaries- accommodated parties) who are privy to the defendants.

No pronouncement as to costs.

            No other award of damages for non[e] has been proven.

            SO ORDERED.^[44][28]

          The RTC held that  spouses  Cheah  were guilty of contributory negligence. 

Because Ofelia trusted a friend’s friend whom she did not know and considering the amount of the check made payable to cash, the RTC opined that Ofelia showed lack of vigilance in her dealings.  She should have exercised due care by investigating the negotiability of the check and the identity of the drawer.  While the court found that the proximate cause of the wrongful payment of the check was PNB’s negligence in not observing the 15-day guarantee period rule, it ruled that spouses Cheah still cannot escape liability to reimburse PNB the value of the check as an accommodation party pursuant to Section 29 of the Negotiable Instruments Law.^[45][29]  It likewise applied the principle of solutio indebiti under the Civil Code.  With regard to the award of other forms of damages, the RTC held that each party must suffer the consequences of their own acts and thus left both parties as they are.

Unwilling to accept the judgment, the spouses Cheah appealed to the CA.

Ruling of the Court of Appeals

While the CA recognized the spouses Cheah as victims of a scam who nevertheless have to suffer the consequences of Ofelia’s lack of care and prudence in immediately trusting a stranger, the appellate court did not hold PNB scot-free.  It ruled in its August 22, 2005 Decision,^[46][30] viz:

As both parties were equally negligent, it is but right and just that both parties should equally suffer and shoulder the loss. The scam would not have been possible without the negligence of both parties. As earlier stated, the complaint of PNB cannot be dismissed because the Cheah spouses were negligent and Ms. Cheah took an active part in the deposit of the check and the withdrawal of the subject amounts.  On the other hand, the Cheah spouses cannot entirely bear the loss because PNB allowed her to withdraw without waiting for the clearance of the check. The remedy of the parties is to go after those who perpetrated, and benefited from, the scam.

WHEREFORE, the May 20, 1999 Decision of the Regional Trial Court, Branch 5,Manila, in Civil Case No. 94-71022, is hereby REVERSED and SET ASIDE and another one entered DECLARING both parties equally negligent and should suffer and shoulder the loss.

            Accordingly, PNB is hereby ordered to credit to the peso and dollar accounts of the Cheah spouses the amount due to them.

            SO ORDERED.^[47][31]

            In so ruling, the CA ratiocinated that PNB Buendia Branch’s non-receipt of the SWIFT message from Philadelphia National Bank within the 15-day clearing period is not an acceptable excuse.  Applying the last clear chance doctrine, the CA held that PNB had the last clear opportunity to avoid the impending loss of the money and yet, it glaringly exhibited its negligence in allowing the withdrawal of funds without exhausting the 15-day clearing period which has always been a standard banking practice as testified to by PNB’s own officers, and as provided in its own General Circular No. 52/101/88.  To the CA, PNB cannot claim from spouses Cheah even if the latter are accommodation parties under the law as the bank’s own negligence is the proximate cause of the damage it sustained.  Nevertheless, it also found Ofelia guilty of contributory negligence.  Thus, both parties should be made equally responsible for the resulting loss. 

Both parties filed their respective Motions for Reconsideration^[48][32] but same were denied in a Resolution^[49][33] dated December 21, 2005.

Hence, these Petitions for Review on Certiorari.

Our Ruling

          The petitions for review lack merit.  Hence, we affirm the ruling of the CA.

PNB’s act of releasing the proceeds of the check prior to the lapse of the 15-day clearing period was the proximate cause of the loss.

“Proximate cause is ‘that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred.’ x x x To determine the proximate cause of a controversy, the question that needs to be asked is: If the event did not happen, would the injury have resulted?  If the answer is no, then the event is the proximate cause.”^[50][34]

Here, while PNB highlights Ofelia’s fault in accommodating a stranger’s check and depositing it to the bank, it remains mum in its release of the proceeds thereof without exhausting the 15-day clearing period, an act which contravened established banking rules and practice. 

It is worthy of notice that the 15-day clearing period alluded to is construed as 15 banking days. As declared by Josephine Estella, the Administrative Service Officer who was the bank’s Remittance Examiner, what was unusual in the processing of the check was that the “lapse of 15 banking days was not observed.”^[51][35]  Even PNB’s agreement with Philadelphia National Bank^[52][36] regarding the rules on the collection of the proceeds of US dollar checks refers to “business/ banking days.”  Ofelia deposited the subject check on November 4, 1992.  Hence, the 15^th banking day from the date of said deposit should fall on November 25, 1992.  However, what happened was that PNB Buendia Branch, upon calling up Ofelia that the check had been cleared, allowed the proceeds thereof to be withdrawn on November 17 and 18, 1992, a week before the lapse of the standard 15-day clearing period. 

This Court already held that the payment of the amounts of checks without previously clearing them with the drawee bank especially so where the drawee bank is a foreign bank and the amounts involved were large is contrary to normal or ordinary banking practice.^[53][37]  Also, in Associated Bank v. Tan,^[54][38] wherein the bank allowed the withdrawal of the value of a check prior to its clearing, we said that “[b]efore the check shall have been cleared for deposit, the collecting bank can only ‘assume’ at its own risk x x x that the check would be cleared and paid out.”  The delay in the receipt by PNB Buendia Branch of the November 13, 1992 SWIFT message notifying it of the dishonor of the subject check is of no moment, because had PNB Buendia Branch waited for the expiration of the clearing period and had never released during that time the proceeds of the check, it would have already been duly notified of its dishonor. Clearly, PNB’s disregard of its preventive and protective measure against the possibility of being victimized by bad checks had brought upon itself the injury of losing a significant amount of money. 

It bears stressing that “the diligence required of banks is more than that of a Roman pater familias or a good father of a family.  The highest degree of diligence is expected.”^[55][39]  PNB miserably failed to do its duty of exercising extraordinary diligence and reasonable business prudence.  The disregard of its own banking policy amounts to gross negligence, which the law defines as “negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but wilfully and intentionally with a conscious indifference to consequences in so far as other persons may be affected.”^[56][40]  With regard to collection or encashment of checks, suffice it to say that the law imposes on the collecting bank the duty to scrutinize diligently the checks deposited with it for the purpose of determining their genuineness and regularity.  “The collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it to a high standard of conduct.”^[57][41]  A bank is expected to be an expert in banking procedures and it has the necessary means to ascertain whether a check, local or foreign, is sufficiently funded. 

            Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under the principle of solutio indebiti, which is laid down in Article 2154 of the Civil Code:^[58][42]

Art. 2154.  If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

“[T]he indispensable requisites of the juridical relation known as solutio indebiti, are, (a) that he who paid was not under obligation to do so; and (b) that the payment was made by reason of an essential mistake of fact.^[59][43] 

In the case at bench, PNB cannot recover the proceeds of the check under the principle it invokes.  In the first place, the gross negligence of PNB, as earlier discussed, can never be equated with a mere mistake of fact, which must be something excusable and which requires the exercise of prudence.  No recovery is due if the mistake done is one of gross negligence.

The spouses Cheah are guilty of contributory negligence and are bound to share the loss with the bank

“Contributory   negligence   is  conduct  on  the   part  of  the  injured  party,

contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection.”^[60][44]

The CA found Ofelia’s credulousness blameworthy.  We agree.  Indeed, Ofelia failed to observe caution in giving her full trust in accommodating a complete stranger and this led her and her husband to be swindled.  Considering that Filipina was not personally known to her and the amount of the foreign check to be encashed was $300,000.00, a higher degree of care is expected of Ofelia which she, however, failed to exercise under the circumstances. Another circumstance which should have goaded Ofelia to be more circumspect in her dealings was when a bank officer called her up to inform that the Bank of America check has already been cleared way earlier than the 15-day clearing period.   The fact that the check was cleared after only eight banking days from the time it was deposited or contrary to what Garin told her that clearing takes 15 days should have already put Ofelia on guard.  She should have first verified the regularity of such hasty clearance considering that if something goes wrong with the transaction, it is she and her husband who would be put at risk and not the accommodated party.  However, Ofelia chose to ignore the same and instead actively participated in immediately withdrawing the proceeds of the check.  Thus, we are one with the CA in ruling that Ofelia’s prior consultation with PNB officers is not enough to totally absolve her of any liability. In the first place, she should have shunned any participation in that palpably shady transaction.      

In any case, the complaint against the spouses Cheah could not be dismissed.  As PNB’s client, Ofelia was the one who dealt with PNB and negotiated the check such that its value was credited in her and her husband’s account.  Being the ones in privity with PNB, the spouses Cheah are therefore the persons who should return to PNB the money released to them. 

All told, the Court concurs with the findings of the CA that PNB and the spouses Cheah are equally negligent and should therefore equally suffer the loss.  The two must both bear the consequences of their mistakes.

WHEREFORE, premises considered, the Petitions for Review on Certiorari in G.R. No. 170865 and in G.R. No. 170892 are both DENIED.  The assailed August 22, 2005 Decision and December 21, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 63948 are hereby AFFIRMED in toto. 

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

MARTIN S. VILLARAMA, JR.

Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

Chief Justice

CASE 2012-0051: VALENTIN ZAFRA Y DECHOSA AND EROLL MARCELINO Y REYES VS. PEOPLE OF THE PHILIPPINES (G.R. NO. 190749, 25 APRIL 2012, PEREZ, J.) SUBJECT/S: POSSESSION OF DANGEROUS DRUGS; CHAIN OF CUSTODY RULE; EXCEPTIONS TO THE RULE; REGULARITY IN THE PERFORMANCE OF DUTY NOT APPLIED; ACQUITTAL ON THE BASIS OF REASONABLE DOUBT; (BRIEF TITLE: ZAFRA VS. PEOPLE)

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DISPOSITIVE:

WHEREFORE, premises considered, we REVERSE and SET ASIDE the Decision of the Court of Appeals dated 30 October 2009 in CA-G.R. CR No. 31713.  Petitioners Valentin Zafra y Dechosa and Eroll Marcelino y Reyes are hereby ACQUITTED for the failure of the prosecution to prove their guilt beyond reasonable doubt.  They are ordered immediately RELEASED from detention, unless they are confined for another lawful cause.

Let a copy of this Decision be furnished to the Director of the Bureau of Corrections,MuntinlupaCity, for immediate implementation.  The Director of the Bureau of Corrections is directed to report to this Court the action taken within five (5) days from receipt of this Decision.

SO ORDERED.

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SUBJECTS/DOCTRINES/DIGEST

WHAT IS THE RULE WITH REGARDS TO EVALUATION BY THE TRIAL COURT OF THE CREDIBILITY OF THE WITNESS?

THE EVALUATION OF THE TRIAL COURT IS ENTITLED TO GREAT WEIGHT AND IS GENERALLY NOT DISTURBED ON APPEAL.

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IS THERE AN EXCEPTION TO THIS RULE?

YES. WHEN  THE TRIAL COURT HAS OVERLOOKED, MISAPPREHENDED, OR MISAPPLIED ANY FACT OF WEIGHT OR SUBSTANCE.^[1][24]

While, it is hornbook doctrine that the evaluation of the trial court on the credibility of the witness and the testimony is entitled to great weight and is generally not disturbed upon appeal,^[2][23] such rule does not apply when the trial court has overlooked, misapprehended, or misapplied any fact of weight or substance.^[3][24] In the instant case, these circumstances are present, that, when properly appreciated, would warrant the acquittal of petitioners.

Certainly, SPO4 Mendoza’s credibility has to be thoroughly looked into, being the only witness in this case. While in his affidavit, SPO4 Mendoza claimed that he saw the sachet of shabu (0.30 gram) because Zafra was in the act of handing it to Marcelino, his testimony during the direct examination reveals another version, that is, from a distance, he saw Zafra and Marcelino holding shabu, respectively, hence, he approached them from behind and confiscated the shabu from both of them and the paraphernalia from Daluz. How he saw a 0.30 gram of shabu from a distance in a busy street, baffles this Court. Asked, however, on cross examination, who among the three were holding the shabu and drug paraphernalia, SPO4 Mendoza failed to be consistent with his earlier testimony and pointed to Daluz as the one holding shabu with a handkerchief in his hand and Zafra as the one in possession of drug paraphernalia.  These inconsistencies are not minor ones, and, certainly, not among those which strengthens the credibility of a witness. Possession of drug paraphernalia vis-à-vis shabu, are two different offenses under RA No. 9165. That Zafra was holding drug paraphernalia and not shabu is material to this case, to the accusation against him, and to his defense.  

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BUT THE COURT RELIED ON THE PRESUMPTION OF REGULARITY OF THE ARRESTING PERSONNEL. IS THIS NOT SUFFICIENT?

NO.  PRESUMPTION OF REGULARITY IN THE PERFORMANCE OF OFFICIAL FUNCTIONS CANNOT BY ITS LONESOME OVERCOME THE CONSTITUTIONAL PRESUMPTION OF INNOCENCE.^[4][26]  

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WHAT THEN SHOULD BE THE BASIS FOR CONCLUDING THAT THE ACCUSED IS GUILTY.

EVIDENCE BEYOND REASONABLE DOUBT.

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HOW IS THIS BURDENT MET?

BY OBLITERATING ALL DOUBTS AS TO HIS CULPABILITY AND NOT BY BESTOWING DISTRUST ON THE INNOCENCE OF THE ACCUSED.^[5][27]

Second, a reading of the RTC decision on this matter reveals that the conviction was arrived at upon reliance on the presumption of regularity in the performance of Mendoza’s official duty.^[6][25] 

It is noteworthy, however, that presumption of regularity in the performance of official functions cannot by its lonesome overcome the constitutional presumption of innocence.^[7][26] Evidence of guilt beyond reasonable doubt and nothing else can eclipse the hypothesis of guiltlessness. And this burden is met not by bestowing distrust on the innocence of the accused but by obliterating all doubts as to his culpability.^[8][27]

Third, SPO4 Mendoza was the lone arresting officer, who brought the petitioners to the police station,^[9][28] who himself marked the confiscated pieces of evidence sans witnesses, photographs, media, and in the absence of the petitioners.  His colleagues were nowhere.^[10][29]  And, worse, he was the same person who took custody of the same pieces of evidence, then, brought them on his own to the crime laboratory for testing.^[11][30] No inventory was ever done;^[12][31]  no inventory was presented in court.

The solo performance by SPO4 Mendoza of all the acts necessary for the prosecution of the offense is unexplained and puts the proof of corpus delicti, which is the illegal object itself in serious doubt.  No definite answer can be established regarding the question as to who possessed what at the time of the alleged apprehension.  More significantly, we are left in doubt whether not the two sachets of shabu allegedly seized from the petitioners were the very same objects offered in court as the corpus delicti.

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BUT THE ACCUSED WAS CAUGHT IN POSSESSION OF THE DANGEROUS DRUG? IS THIS FACT OF POSSESSION NOT SUFFICIENT TO CONVICT HIM?

THE MERE FACT OF UNAUTHORIZED POSSESSION WILL NOT SUFFICE TO CREATE IN A REASONABLE MIND THE MORAL CERTAINTY REQUIRED TO SUSTAIN A FINDING OF GUILT.^[13][35] MORE THAN JUST THE FACT OF POSSESSION, THE FACT THAT THE SUBSTANCE ILLEGALLY POSSESSED IN THE FIRST PLACE IS THE SAME SUBSTANCE OFFERED IN COURT AS EXHIBIT MUST ALSO BE ESTABLISHED WITH THE SAME UNWAVERING EXACTITUDE AS THAT REQUISITE TO MAKE A FINDING OF GUILT.^[14][36]

Prosecutions for illegal possession of prohibited drugs necessitates that the elemental act of possession of a prohibited substance be established with moral certainty.^[15][32] The dangerous drug itself constitutes the very corpus delicti of the offense and the fact of its existence is vital to a judgment of conviction.^[16][33] Essential therefore in these cases is that the identity of the prohibited drug be established beyond doubt.^[17][34] Be that as it may, the mere fact of unauthorized possession will not suffice to create in a reasonable mind the moral certainty required to sustain a finding of guilt.^[18][35] More than just the fact of possession, the fact that the substance illegally possessed in the first place is the same substance offered in court as exhibit must also be established with the same unwavering exactitude as that requisite to make a finding of guilt.^[19][36] The chain of custody requirement performs this function in that it ensures that unnecessary doubts concerning the identity of the evidence are removed.^[20][37]

Section 21, paragraph 1, Article II of RA No. 9165 reads:

(1) The apprehending team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof.

Section 21(a) Article II of the Implementing Rules and Regulations of RA No. 9165 reads:

(a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof: Provided, that the physical inventory and photograph shall be conducted at the place where the search warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team, whichever is practicable, in case of warrantless seizures; Provided, further, that non-compliance with these requirements under justifiable grounds, as long as the integrity and the evidentiary value of the seized items are properly preserved by the apprehending officer/team, shall not render void and invalid such seizures of and custody over said items.

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WHAT DOES THE CHAIN OF CUSTODY RULE REQUIRES?

IT REQUIRES THAT THAT THE ADMISSION OF AN EXHIBIT BE PRECEDED BY EVIDENCE SUFFICIENT TO SUPPORT A FINDING THAT THE MATTER IN QUESTION IS WHAT THE PROPONENT CLAIMS IT TO BE.^[21][38] IT WOULD INCLUDE TESTIMONY ABOUT EVERY LINK IN THE CHAIN, FROM THE MOMENT THE ITEM WAS PICKED UP TO THE TIME IT IS OFFERED INTO EVIDENCE, IN SUCH A WAY THAT EVERY PERSON WHO TOUCHED THE EXHIBIT WOULD DESCRIBE HOW AND FROM WHOM IT WAS RECEIVED, WHERE IT WAS AND WHAT HAPPENED TO IT WHILE IN THE WITNESS’ POSSESSION, THE CONDITION IN WHICH IT WAS RECEIVED AND THE CONDITION IN WHICH IT WAS DELIVERED TO THE NEXT LINK IN THE CHAIN.^[22][39] THESE WITNESSES WOULD THEN DESCRIBE THE PRECAUTIONS TAKEN TO ENSURE THAT THERE HAD BEEN NO CHANGE IN THE CONDITION OF THE ITEM AND NO OPPORTUNITY FOR SOMEONE NOT IN THE CHAIN TO HAVE POSSESSION OF THE SAME.^[23][40]

As a method of authenticating evidence, the chain of custody rule requires that the admission of an exhibit be preceded by evidence sufficient to support a finding that the matter in question is what the proponent claims it to be.^[24][38] It would include testimony about every link in the chain, from the moment the item was picked up to the time it is offered into evidence, in such a way that every person who touched the exhibit would describe how and from whom it was received, where it was and what happened to it while in the witness’ possession, the condition in which it was received and the condition in which it was delivered to the next link in the chain.^[25][39] These witnesses would then describe the precautions taken to ensure that there had been no change in the condition of the item and no opportunity for someone not in the chain to have possession of the same.^[26][40]

The records readily raise significant doubts as to the identity of the sachets of shabu allegedly seized from Zafra and Marcelino. SPO4 Mendoza’s claim that the two sachets of shabu presented in court were the same ones confiscated from the petitioners, cannot be taken at its face value, solely on the presumption of regularity of one’s performance of duty. SPO4 Mendoza blatantly broke all the rules established by law to safeguard the identity of a corpus delicti.   There was even no mention about the details of the laboratory examination of the allegedly seized drugs.  To allow this to happen is to abandon everything that has been said about the necessity of proving an unbroken chain of custody.  SPO4 Mendoza cannot alone satisfy the requirements in RA No. 9165 which is anchored on, expressly, the participation of several personalities and the execution of specified documents.

And, while jurisprudence has refined the enumerated duties of an apprehending officer in a drug case and has thus described the equivalent requirements for a proper chain of custody of the corpus delicti, still, the case at bar cannot pass the constitutional requirement of proof beyond reasonable doubt. 

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GIVE EXAMPLES OF CASES WHERE THE COURT ACQUITTED THE ACCUSED BECAUSE OF FAILURE TO FOLLOW THE PRESCRIBED PROCEDURES IN HANDLING SEIZED DRUGS.

IN THE FOLLOWING CASES MENTIONED IN THE PARAGRAPH BELOW:

We reiterate, that this Court will never waver in ensuring that the prescribed procedures in the handling of the seized drugs should be observed.  In People v. Salonga,^[27][41] we acquitted the accused for the failure of the police to inventory and photograph the confiscated items.  We also reversed a conviction in People v. Gutierrez,^[28][42] for the failure of the buy-bust team to inventory and photograph the seized items without justifiable grounds.  People v. Cantalejo^[29][43] also resulted in an acquittal because no inventory or photograph was ever made by the police.

We reached the same conclusions in the recent cases of People v. Capuno,^[30][44] People v. Lorena,^[31][45] and People v. Martinez.^[32][46]

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WOULD NON-COMPLIANCE WITH THE PRESCRIBED REQUIREMENTS OF THE CHAIN OF CUSTODY RULE ABSOLUTELY RENDER THE SEIZURE AND CUSTODY OF THE  DRUGS VOID?

NO. THE SEIZURE MUST BE VALID IF THE FOLLOWING TWO CONDITIONS ARE PRESENT:

A)     THERE IS A JUSTIFIABLE GROUND FOR THE NON-COMPLIANCE,         AND

(B)    THE INTEGRITY AND EVIDENTIARY VALUE OF THE SEIZED ITEMS         ARE SHOWN TO HAVE BEEN PROPERLY PRESERVED.^[33][47]

Lest the chain of custody rule be misunderstood, we reiterate that non-compliance with the prescribed procedural requirements does not necessarily render the seizure and custody of the items void and invalid; the seizure may still be held valid, provided that (a) there is a justifiable ground for the non-compliance, and (b) the integrity and evidentiary value of the seized items are shown to have been properly preserved.^[34][47]  These conditions, however, were not met in the present case as the prosecution did not even attempt to offer any justification for the failure of SPO4 Mendoza to follow the prescribed procedures in the handling of the seized items.  As we held in People v. De Guzman,^[35][48] the failure to follow the procedure mandated under RA No. 9165 and its Implementing Rules and Regulations must be adequately explained.  The justifiable ground for the non-compliance must be proven as a fact.  The Court cannot presume what these grounds are or that they even exist.

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WHAT IS THE BASIC DOCTRINE IN PROVING GUILT?

THE PROSECUTION MUST    RELY ON THE STRENGTH OF ITS OWN EVIDENCE AND NOT ON THE WEAKNESS OF THE DEFENSE.^[36][49]

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WHAT IS THE BASIS OF THIS DOCTRINE?

THE LAW PRESUMES ONE’S  INNOCENCE UNLESS AND UNTIL THE CONTRARY IS SHOWN.^[37][50]

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WHEN IS ACQUITTAL ON REASONABLE DOUBT BECOMES A MATTER OF RIGHT?

WHEN MORAL MORAL CERTAINTY AS TO CULPABILITY HANGS IN THE BALANCE, ACQUITTAL ON REASONABLE DOUBT INEVITABLY BECOMES A MATTER OF RIGHT.^[38][52]

In our constitutional system, basic and elementary is the presupposition that the burden of proving the guilt of an accused lies on the prosecution which must rely on the strength of its own evidence and not on the weakness of the defense.^[39][49] The rule is invariable whatever may be the reputation of the accused, for the law presumes his innocence unless and until the contrary is shown.^[40][50] In dubio pro reo.^[41][51] When moral certainty as to culpability hangs in the balance, acquittal on reasonable doubt inevitably becomes a matter of right.^[42][52]

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SECOND DIVISION

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D E C I S I O N

PEREZ, J.:

For review before this Court is the Decision of the Court of Appeals (CA) in CA-G.R. CR No. 31713 dated 30 October 2009,^[43][1] affirming the decision of the Regional Trial Court (RTC), Branch 76, Malolos, Bulacan,^[44][2] which found petitioners Valentin Zafra y Dechosa (Zafra) and Eroll Marcelino y Reyes (Marcelino) guilty beyond reasonable doubt of Possession of Dangerous Drugs in violation of Section 11, Article II of Republic Act (RA) No. 9165 (the Comprehensive Dangerous Drugs Act of 2002) and imposing on each of them the penalty of imprisonment of twelve (12) years and one (1) day as  the minimum term, to thirteen (13) years as maximum, and of fine of Three Hundred Thousand Pesos (P300,000.00).  

The Facts

The prosecution charged Zafra and Marcelino with violation of Section 11, Article II of RA No. 9165^[45][3] before the RTC of Bulacan under the Information below:

That on or about the 12^th day of June, 2003, in the municipality of Balagtas, province of Bulacan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, without authority of law and legal justification, did then and there willfully, unlawfully and feloniously have in their possession and control dangerous drug consisting of two (2) heat-sealed transparent plastic sachet of methylamphetamine hydrochloride (shabu) weighing 0.061^[46][4] gram, in conspiracy with one another.^[47][5]

The prosecution’s lone witness, SPO4^[48][6] Apolinario Mendoza (SPO4 Mendoza), Chief of the Investigation and Drug Enforcement Unit of the Philippine National Police of Balagtas, Bulacan, testified that on 12 January 2003, at around 4:30 in the afternoon, he conducted surveillance in front of a sari-sari store at the corner of Miraflor Subdivision and P. Castro Street in Balagtas, Bulacan, due to reported drug trafficking in the area.  SPO4 Mendoza found there the group of Zafra, Marcelino, and a certain Marlon Daluz (Daluz) standing and facing each other.^[49][7]  In that position, he saw Zafra and Marcelino holding shabu, while Daluz was holding an aluminum foil and a disposable lighter.^[50][8]  Seeing this illegal activity, SPO4 Mendoza single-handedly apprehended them.  He grabbed the shabu from the hands of Zafra and Marcelino, and confiscated the drug paraphernalia from Daluz. Then, he ordered the three to lie down; he frisked them.  Boarding a tricycle, he brought them to the Balagtas Police Station,^[51][9] where he personally marked the confiscated two (2) sachets of shabu, one with VSD, the initials of Valentin Zafra y Dechosa and the other with EMR, the initials of Eroll Marcelino y Reyes.^[52][10] 

On the following day, 13 June 2003, SPO4 Mendoza brought the accused and the items to the crime laboratory for urine sampling and laboratory examination, respectively.^[53][11] The test of the items resulted to positive presence of methylamphetamine hydrochloride.^[54][12]

The RTC, Branch 76, Malolos, Bulacan, in a decision dated 11 June 2008, convicted Zafra and Marcelino for the crime of possession of shabu:

WHEREFORE, finding guilt of the accused beyond reasonable doubt in Criminal Case No. 2297-M-2003, accused VALENTIN ZAFRA y DECHOSA and accused EROLL MARCELINO y REYES are hereby CONVICTED for possession of sachets of methylamphetamine hydrochloride commonly known as shabu, with a weight of 0.31 gram and 0.30 gram, respectively, which are classified as dangerous drugs in violation of Section 11, Article II of Republic Act No. 9165, otherwise known as the “Comprehensive Dangerous Drugs Act of 2002” and are each SENTENCED to suffer the IMPRISONMENT of, applying the Indeterminate Sentence Law, TWELVE (12) YEARS AND ONE DAY, AS THE MINIMUM TERM, TO THIRTEEN (13) YEARS, AS THE MAXIMUM TERM, and to pay the FINE of THREE HUNDRED THOUSAND PESOS (P300,000.00).^[55][13]

Daluz, on the other hand, who was charged of possession of drug paraphernalia in violation of Section 12 of RA No. 9165 pleaded guilty to the charge and was released after serving his sentence of eight (8) months.^[56][14]

Zafra and Marcelino appealed; but the CA affirmed in toto the RTC Decision:

WHEREFORE, premises considered, the instant appeal is DENIED for lack of merit. Accordingly, the assailed 11 June 2008 Decision of the Court a quo STANDS.^[57][15]

Hence, this appeal on the following grounds: first, the arrest was unlawful; second, the prohibited drugs are inadmissible in evidence; third, Section 21 of RA No. 9165 was not complied with; and, finally, the prosecution failed to prove petitioners’ guilt beyond reasonable doubt.  

The Court’s Ruling

We resolve to ACQUIT petitioners Zafra and Marcelino on the following grounds:

First, the prosecution’s lone witness, SPO4 Mendoza,^[58][16] testified that, from a distance, he saw Zafra and Marcelino holding shabu by their bare hands, respectively, while Daluz was holding an aluminum foil and a disposable lighter.^[59][17]  Seeing this illegal activity, he single-handedly apprehended them.^[60][18]  He grabbed the shabu from the hands of Zafra and Marcelino, and confiscated the drug paraphernalia from Daluz.

In his affidavit, however, SPO4 Mendoza stated, that:

Na, nitong nakaraang Hunyo 12, 2003 ng 4:30 ng hapon humigit kumulang, sa P. Casto St., Barangay Borol-1, Balagtas Bulacan, habang ako ay nagsasagawa ng surveillance sa Suspected Drug Pusher sa nasabing lugar ay aking nakita ang tatlo (3) kalalakihan na nakatalikod sa isang corner ng tindahan sa P. Castro St., na nakilala ko na sina Valentine D. Zafra @ Val, Eroll R. Marcelino @ Eroll, at Marlon B. Daluz @ Marlon na pawang mga residente ng Borol-1, Balagtas, Bulacan.

Na, ako ay lumapit na naglalakad kina Valentine Zafra, Errol Marcelino at Marlon Daluz at sa aking paglapit sa kanilang tatlo ay aking nakita at naaktuhang inabot ni Valentine Zafra kay Eroll Marcelino ang isang (1) plastic sachet ng shabu may timbang na 0.30 grams, at isa pang plastic sachet ng shabu na si Marlon Daluz ay hawak ang isang disposable lighter at 2 piraso ng aluminum foil na inaayos na nilalagyan ng lupi at 7 piraso ng empty plastic sachet. (Emphasis supplied)^[61][19]

x x x x

On cross examination, SPO4 Mendoza testified that it was Zafra and not Daluz, who was holding the aluminum foil (contrary to his earlier testimony that Zafra was holding shabu);^[62][20] that Daluz (whom he claimed during the direct examination to be holding the aluminum foil) and Marcelino were holding handkerchiefs and on top of them were shabu;^[63][21] When the defense confronted SPO4 Mendoza about the inconsistency, he told the court that his version during his direct testimony was the correct one.^[64][22]  

While, it is hornbook doctrine that the evaluation of the trial court on the credibility of the witness and the testimony is entitled to great weight and is generally not disturbed upon appeal,^[65][23] such rule does not apply when the trial court has overlooked, misapprehended, or misapplied any fact of weight or substance.^[66][24] In the instant case, these circumstances are present, that, when properly appreciated, would warrant the acquittal of petitioners.

Certainly, SPO4 Mendoza’s credibility has to be thoroughly looked into, being the only witness in this case. While in his affidavit, SPO4 Mendoza claimed that he saw the sachet of shabu (0.30 gram) because Zafra was in the act of handing it to Marcelino, his testimony during the direct examination reveals another version, that is, from a distance, he saw Zafra and Marcelino holding shabu, respectively, hence, he approached them from behind and confiscated the shabu from both of them and the paraphernalia from Daluz. How he saw a 0.30 gram of shabu from a distance in a busy street, baffles this Court. Asked, however, on cross examination, who among the three were holding the shabu and drug paraphernalia, SPO4 Mendoza failed to be consistent with his earlier testimony and pointed to Daluz as the one holding shabu with a handkerchief in his hand and Zafra as the one in possession of drug paraphernalia.  These inconsistencies are not minor ones, and, certainly, not among those which strengthens the credibility of a witness. Possession of drug paraphernalia vis-à-vis shabu, are two different offenses under RA No. 9165. That Zafra was holding drug paraphernalia and not shabu is material to this case, to the accusation against him, and to his defense.       

Second, a reading of the RTC decision on this matter reveals that the conviction was arrived at upon reliance on the presumption of regularity in the performance of Mendoza’s official duty.^[67][25] 

It is noteworthy, however, that presumption of regularity in the performance of official functions cannot by its lonesome overcome the constitutional presumption of innocence.^[68][26] Evidence of guilt beyond reasonable doubt and nothing else can eclipse the hypothesis of guiltlessness. And this burden is met not by bestowing distrust on the innocence of the accused but by obliterating all doubts as to his culpability.^[69][27]

Third, SPO4 Mendoza was the lone arresting officer, who brought the petitioners to the police station,^[70][28] who himself marked the confiscated pieces of evidence sans witnesses, photographs, media, and in the absence of the petitioners.  His colleagues were nowhere.^[71][29]  And, worse, he was the same person who took custody of the same pieces of evidence, then, brought them on his own to the crime laboratory for testing.^[72][30] No inventory was ever done;^[73][31]  no inventory was presented in court.

The solo performance by SPO4 Mendoza of all the acts necessary for the prosecution of the offense is unexplained and puts the proof of corpus delicti, which is the illegal object itself in serious doubt.  No definite answer can be established regarding the question as to who possessed what at the time of the alleged apprehension.  More significantly, we are left in doubt whether not the two sachets of shabu allegedly seized from the petitioners were the very same objects offered in court as the corpus delicti.

Prosecutions for illegal possession of prohibited drugs necessitates that the elemental act of possession of a prohibited substance be established with moral certainty.^[74][32] The dangerous drug itself constitutes the very corpus delicti of the offense and the fact of its existence is vital to a judgment of conviction.^[75][33] Essential therefore in these cases is that the identity of the prohibited drug be established beyond doubt.^[76][34] Be that as it may, the mere fact of unauthorized possession will not suffice to create in a reasonable mind the moral certainty required to sustain a finding of guilt.^[77][35] More than just the fact of possession, the fact that the substance illegally possessed in the first place is the same substance offered in court as exhibit must also be established with the same unwavering exactitude as that requisite to make a finding of guilt.^[78][36] The chain of custody requirement performs this function in that it ensures that unnecessary doubts concerning the identity of the evidence are removed.^[79][37]

Section 21, paragraph 1, Article II of RA No. 9165 reads:

(1) The apprehending team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof.

Section 21(a) Article II of the Implementing Rules and Regulations of RA No. 9165 reads:

(a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof: Provided, that the physical inventory and photograph shall be conducted at the place where the search warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team, whichever is practicable, in case of warrantless seizures; Provided, further, that non-compliance with these requirements under justifiable grounds, as long as the integrity and the evidentiary value of the seized items are properly preserved by the apprehending officer/team, shall not render void and invalid such seizures of and custody over said items.

As a method of authenticating evidence, the chain of custody rule requires that the admission of an exhibit be preceded by evidence sufficient to support a finding that the matter in question is what the proponent claims it to be.^[80][38] It would include testimony about every link in the chain, from the moment the item was picked up to the time it is offered into evidence, in such a way that every person who touched the exhibit would describe how and from whom it was received, where it was and what happened to it while in the witness’ possession, the condition in which it was received and the condition in which it was delivered to the next link in the chain.^[81][39] These witnesses would then describe the precautions taken to ensure that there had been no change in the condition of the item and no opportunity for someone not in the chain to have possession of the same.^[82][40]

The records readily raise significant doubts as to the identity of the sachets of shabu allegedly seized from Zafra and Marcelino. SPO4 Mendoza’s claim that the two sachets of shabu presented in court were the same ones confiscated from the petitioners, cannot be taken at its face value, solely on the presumption of regularity of one’s performance of duty. SPO4 Mendoza blatantly broke all the rules established by law to safeguard the identity of a corpus delicti.   There was even no mention about the details of the laboratory examination of the allegedly seized drugs.  To allow this to happen is to abandon everything that has been said about the necessity of proving an unbroken chain of custody.  SPO4 Mendoza cannot alone satisfy the requirements in RA No. 9165 which is anchored on, expressly, the participation of several personalities and the execution of specified documents.

And, while jurisprudence has refined the enumerated duties of an apprehending officer in a drug case and has thus described the equivalent requirements for a proper chain of custody of the corpus delicti, still, the case at bar cannot pass the constitutional requirement of proof beyond reasonable doubt. 

We reiterate, that this Court will never waver in ensuring that the prescribed procedures in the handling of the seized drugs should be observed.  In People v. Salonga,^[83][41] we acquitted the accused for the failure of the police to inventory and photograph the confiscated items.  We also reversed a conviction in People v. Gutierrez,^[84][42] for the failure of the buy-bust team to inventory and photograph the seized items without justifiable grounds.  People v. Cantalejo^[85][43] also resulted in an acquittal because no inventory or photograph was ever made by the police.

We reached the same conclusions in the recent cases of People v. Capuno,^[86][44] People v. Lorena,^[87][45] and People v. Martinez.^[88][46]

The present petition is the sum total of all the violations committed in the cases cited above.

Lest the chain of custody rule be misunderstood, we reiterate that non-compliance with the prescribed procedural requirements does not necessarily render the seizure and custody of the items void and invalid; the seizure may still be held valid, provided that (a) there is a justifiable ground for the non-compliance, and (b) the integrity and evidentiary value of the seized items are shown to have been properly preserved.^[89][47]  These conditions, however, were not met in the present case as the prosecution did not even attempt to offer any justification for the failure of SPO4 Mendoza to follow the prescribed procedures in the handling of the seized items.  As we held in People v. De Guzman,^[90][48] the failure to follow the procedure mandated under RA No. 9165 and its Implementing Rules and Regulations must be adequately explained.  The justifiable ground for the non-compliance must be proven as a fact.  The Court cannot presume what these grounds are or that they even exist.

In our constitutional system, basic and elementary is the presupposition that the burden of proving the guilt of an accused lies on the prosecution which must rely on the strength of its own evidence and not on the weakness of the defense.^[91][49] The rule is invariable whatever may be the reputation of the accused, for the law presumes his innocence unless and until the contrary is shown.^[92][50] In dubio pro reo.^[93][51] When moral certainty as to culpability hangs in the balance, acquittal on reasonable doubt inevitably becomes a matter of right.^[94][52]

WHEREFORE, premises considered, we REVERSE and SET ASIDE the Decision of the Court of Appeals dated 30 October 2009 in CA-G.R. CR No. 31713.  Petitioners Valentin Zafra y Dechosa and Eroll Marcelino y Reyes are hereby ACQUITTED for the failure of the prosecution to prove their guilt beyond reasonable doubt.  They are ordered immediately RELEASED from detention, unless they are confined for another lawful cause.

Let a copy of this Decision be furnished to the Director of the Bureau of Corrections,MuntinlupaCity, for immediate implementation.  The Director of the Bureau of Corrections is directed to report to this Court the action taken within five (5) days from receipt of this Decision.

SO ORDERED.

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

ARTURO D. BRION                             MARIA LOURDES P. A. SERENO

    Associate Justice                                        Associate Justice     

BIENVENIDO L. REYES

Associate Justice

A T T E S T A T I O N

        I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                     ANTONIO T. CARPIO

                                                                         Associate Justice

                                                                             Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                        RENATO C. CORONA

                                                        Chief Justice

CASE 2012-0050: (SEPARATE OPINION OF JUSTICE SERENO)  HACIENDA LUISITA, INCORPORATED, PETITIONER, LUISITA INDUSTRIAL PARK CORPORATION AND RIZAL COMMERCIAL BANKING CORPORATION,                       PETITIONERS-IN-INTERVENTION VS. PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, AND JULIO SUNIGA^[1][1] AND HIS SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. AND WINDSOR ANDAYA, RESPONDENTS. (G.R. NO. 171101, APRIL 24, 2012, VELASCO, JR., J.:)

SEPARATE OPINION

(Concurring and Dissenting)

SERENO, J.:

          There is never any acceptable reason to be unjust. While this Court must be just and fully sympathetic to the farmers, it cannot also be unjust to the landowner. When the ponente first circulated the draft that became the 05 July 2011 Decision, I was the first to counter that the lands of petitioner Hacienda Luisita, Inc., (HLI) should be immediately distributed to the farmers. One of the theories of my Dissent of even date – namely, that the Stock Distribution Option Agreement (SDOA) cannot be upheld because, as designed, the farmworker-beneficiaries (FWBs) would forever be the minority stockholders of petitioner HLI – was the same theory used to justify the majority’s reversal in its 22 November 2011 Resolution. Little did I suspect that my position in November, that the reckoning of the time of the taking should follow the uniform jurisprudence of this Court, would be stretched to such wild accusations, with some claiming that I had moved that petitioner HLI be paid ₱10 Billion, and that the FWBs had prayed that I be inhibited from participating in this case for unduly advocating the cause of petitioner HLI. Neither of the two claims is true nor has any basis on the record. This Court has never discussed any monetary values for the land for purposes of just compensation, and none of the justices has even attempted to peg any such value.

          In my Separate Opinion to the 22 November 2011 Resolution, I lament the fact that Congress did not choose a revolutionary form of taking for agrarian reform by allowing effective partial confiscation by not requiring payment to the landowners at fair market value.^[2][1] I also advocated the immediate freedom of the land and the FWBs by construing that the 10-year prohibition against transfers of land should not be considered as effective in this case.^[3][2] The FWBs of Hacienda Luisita deserve the full benefits of agrarian reform. But with the Supreme Court consistently requiring that payment to landowners be pegged at fair market value for all kinds of expropriation, and in the case of agrarian reform, pegging it at the time of the notice of coverage, this same Court is required to be fair and observe the same rule by not unduly discriminating against petitioner HLI. Thus, I maintain the position I have earlier expounded in my Opinions in the 05 July 2011 Decision and the 22 November 2011 Resolution, specifically, that petitioner HLI, as any other landowner, is entitled to just compensation for their farmlands to be reckoned at the time of the actual taking of the expropriated property.

There is absolutely no basis on the record to claim that my position will render the lands beyond the FWBs’ capability to pay. In my Opinion in the 22 November 2011 Resolution, the deliberations of the framers of the Constitution were cited to conclude that there is no strict and absolute correspondence between the fair market value to be awarded to the landowners as just compensation and the amortization payments to be paid by the FWBs to the Land Bank of the Philippines for the awarded agricultural lands.^[4][3] Although the State is obliged to pay the fair market value of the agricultural lands in accordance with the law, rules and jurisprudence, the State does not shift that burden to the FWBs that would receive the expropriated properties. It shall subsidize the repayment schemes for the distributed agricultural lands and offer terms that are affordable to the farmers and allow them to simultaneously pursue their chosen agricultural enterprises on the lands. In fact, under the CARL, the Presidential Agrarian Reform Council or the Land Bank of the Philippines may even reduce the principal obligation or the interest rates on amortization payments to make them more affordable to the FWBs.^[5][4] Hence, a totally different regime of social justice applies when it is the FWBs that will pay the amortization to the State through the Land Bank of the Philippines under the CARL.

Nevertheless, I have listened to the reasoning recently expounded in full by Justice Lucas P. Bersamin and join his position for the most judicious and equitable recourse of remanding the issue of determining just compensation, initially, to the Department of Agrarian Reform, and ultimately, to the Regional Trial Court, acting as a Special Agrarian Court. Considering that the parties had not fully substantiated or argued the determination of the award of just compensation, factual circumstances are clearly lacking for this Court to make a substantial and definitive ruling on significant, yet insufficiently factually-litigated facets of the case. As Justice Bersamin explains, the matter of the time when the taking of the Hacienda Luisita farmlands is to be pegged for purposes of valuation of the property has not been properly raised as an issue by the parties and that factual issue is within the exclusive and original jurisdiction of the Regional Trial Court, acting as a Special Agrarian Court.^[6][5]

In his Separate Opinion, Justice Arturo D. Brion approximates, to some extent, the proper value of the expropriated lands for purposes of just compensation by characterizing petitioner HLI as a builder in good faith and allowing it reimbursement for its improvements on the expropriated lands.^[7][6] As I mentioned in my previous Opinion, I would have been persuaded by Justice Brion’s reasoning to reckon the period to the 1989 value of the lands, if petitioner HLI would be compensated for the time difference with interest in the interim period when payment was not made by the government.^[8][7] The payment of interest is a superior solution to identifying and assessing each building or improvement attributable to petitioner HLI, as previous corporate landowner since it acquires less factual determination and accounting, which is open again to prolonged dispute and further adjudication. In any case, it seems incongruent to declare petitioner HLI a good faith builder of improvements on the land and yet, expropriate the same land under confiscatory, and hence, punitive values. The nullification of the SDOA and distribution of the lands to the FWBs should not come at the expense of depriving petitioner HLI what is due to it under the Constitution, the law and existing jurisprudence. If petitioner HLI has to be penalized for some historical infraction, then the factual and legal basis for such penalty has to be clearly articulated by the Court.

For the Court to impose the reckoning period for the valuation of the expropriated Hacienda Luisita farmlands to its 1989 levels is an unwarranted departure from what the Philippine legal system has come to understand and accept^[9][8] (and continues to do so, as recently as last month) ^[10][9] as the meaning of just compensation in agrarian reform cases since the 1988 Comprehensive Agrarian Reform Law (CARL).^[11][10] The decision taken by the Court today (albeit pro hac vice) to pay petitioner HLI an amount based on outdated values of the expropriated lands is too confiscatory considering the years of jurisprudence built by this Court. No reasonable explanation has been offered in this case to justify such deviation from our past decisions that would lead to a virtual non-compensation for petitioner HLI’s lands. The majority’s and Justice Brion’s legal fiction that the “taking” is to be reckoned from the time of the approval of the SDOA is unjust for two reasons. First, the uniform jurisprudence on this matter is that taking is actual taking. Second, no clever restatement of the law is acceptable if it will result in injustice, and in this case, to a landowner who is differently treated from every other landowner.

Although I continue to believe that the application of the ordinary reckoning period for the time of the taking of the expropriated property as enunciated in existing agrarian reform jurisprudence is applicable to this case, the resolution of this case, as explained by Justice Bersamin, requires further reception of documentary evidence, administrative investigation and judicial analysis to arrive at the approximate value of the expropriated lands and the amount of just compensation to be paid to petitioner HLI. The records of the case as it now stands sorely lack factual certainty for this Court to make a proper determination of the exact award of just compensation. It has only been in the media that a purported numerical value has been argued; no argument over such amount has ever taken place before this Court. Although this Court can provide guidelines for the concerned judicial authorities, the dearth in evidence to substantiate the value of the lands (regardless of whether it is reckoned from 1989 or 2006) requires that the parties be allowed to present before an impartial authority with jurisdiction to receive evidence, hear their cases and finally decide the matter. The Supreme Court is not a trier of facts. Factual matters such as the scope of the farmlands in the name of Tarlac Development Corporation (TADECO) or petitioner HLI that should be subject to CARP coverage, the number and value of the homelots given, the improvements introduced, the type of lands subject to coverage, and the amounts actually received by both the corporate landowner and the farmworker beneficiaries during the operation of the SDOA have yet to be convincingly determined to arrive at the amount of just compensation. The more equitable solution would be to allow reception of evidence on these factual matters and to relegate the adjudication of the same to the proper trial court with exclusive and original jurisdiction over the controversy.

          In the midst of these reasoned disagreements in our separate Opinions as to the period when to determine just compensation, the parties must not lose sight of our near unanimity of the substantial merits of the case – that the SDOA is nullified and that the lands should be immediately and without delay be distributed to the farmworker beneficiaries. Hence, the remand of the determination of the just compensation due to petitioner HLI should not in any way hinder the immediate distribution of the farmlands in Hacienda Luisita. Legal processes regarding the determination of the amount to be awarded to the corporate landowner in case of non-acceptance, must not be used to deny the farmworker beneficiaries the legal victory they have long fought for and successfully obtained.

For the foregoing reasons, I join the Separate Concurring and Dissenting Opinion of Justice Lucas P. Bersamin.

MARIA LOURDES P. A. SERENO

Associate Justice