Tiu Vs Pbcom
Tiu Vs Pbcom
Tiu Vs Pbcom
Henry Ching Tiu, Christopher Halin Go, and George Co vs. Philippine Bank of Communications,
G.R. No. 151932 August 19, 2009 PERALTA, J.:
TOPIC: Amendment of pleadings
FACTS:
In June 1993, Asian Water Resources, Inc. (AWRI), represented by herein petitioners, applied for a real
estate loan with the respondent PBCOM to fund its purified water distribution business. In support of the
loan application, petitioners submitted a Board Resolution dated June 7, 1993. The loan was guaranteed
by collateral over the property covered by a TCT. The loan was eventually approved. In August 1996,
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.
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. On December 16, 1998,
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 AWRIs existing loan obligation to the bank. PBCOM sent a
reply denying the request. PBCOM 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. On July 3, 1999, petitioners filed their Answer. It alleged 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 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. Petitioners
attached to their Answer a certified photocopy of the Surety Agreement issued on March 25, 1999 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.
PBCOMs 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. On
December 14, 1999, 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 in the Order
dated January 11, 2000. Aggrieved, petitioners sought recourse before the CA via a petition for certiorari
under Rule 65 of the Rules of Court. Petitioners claimed that the RTC acted without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction in denying their
motion for reconsideration and in allowing PBCOM to substitute the altered copy of the Surety Agreement
with the duplicate original notarial copy thereof considering that the latters cause of action was solely and