Salas v. Sta. Mesa Market Corp., G.R.
No. 157766, July 12, 2007
FACTS:
In a letter-agreement dated October 15, 1984, Primitivo E. Domingo handed
the management of his estate, including the respondent corporation Sta. Mesa Market
Corporation (SMMC), to petitioner Ernesto L. Salas. As estate manager, petitioner
was primarily tasked to ensure SMMC’s continued viability and profitability by
redeveloping the Sta. Mesa market and restructuring the corporation’s finances.
Domingo, on the other hand, bound himself to transfer (on or before June 30,
1985) 30% of SMMC’s subscribed and paid-up capital stock to petitioner as part of
his compensation. But, if petitioner failed to achieve a monthly market revenue of at
least P350,000, he would be obliged to return the shares of stock of SMMC to
Domingo.
On December 28, 1984, Domingo, as chairman of SMMC, and petitioner, in his
personal capacity and as chairman of Inter-Alia Management Corporation (Inter-Alia),
formalized their agreement under a property and financial management contract
(management contract). After its execution, SMMC, under petitioner’s management,
leased the Sta. Mesa market to Malaca Realty Corporation (Malaca). But it became
apparent soon thereafter that Malaca was financially incapable of improving and
expanding the existing facilities of the Sta. Mesa market. In fact, it was unable to pay
the monthly rent. Thus, SMMC terminated its lease contract with Malaca. As a result,
its board of directors became dissatisfied with petitioner’s management of the
corporation. Thereafter, it ended its management contract with petitioner (and Inter-
Alia).
On June 8, 1987, petitioner filed an action for specific performance and damages.
He alleged that SMMC’s monthly market revenue had surpassed P350,000 yet
Domingo refused to comply with his obligation to deliver 30% of the subscribed and
paid-up capital stock of SMMC to him.
In his answer, Domingo argued that petitioner was not entitled to the shares of
SMMC. On the contrary, the corporation suffered additional losses and incurred new
liabilities (which respondents consistently itemized in their pleadings) amounting to
P1,935,995.06 over the twenty-one (21) months petitioner was managing it.
Regional Trial Court ruled in favor of petitioner. The Court of Appeals found that the
trial court erred in admitting petitioner’s documentary evidence. Thus, the Court of
Appeals reversed the Regional Trial Court’s decision and dismissed petitioner’s
complaint.
ISSUE:
Whether or not the Court of Appeals is correct in reversing the RTC decision.
HELD:
YES.
The documents in question were supposedly copies of the audited financial statements
of SMMC. Financial statements (which include the balance sheet, income statement
and statement of cash flow) show the fiscal condition of a particular entity within a
specified period. The financial statements prepared by external auditors who are
certified public accountants (like those presented by petitioner) are audited financial
statements. Financial statements, whether audited or not, are, as general rule, private
documents.However, once financial statements are filed with a government office
pursuant to a provision of law, they become public documents.
Petitioner and respondents agree that the documents presented as evidence were
mere copies of the audited financial statements submitted to the BIR and
SEC. Neither party claimed that copies presented were certified true copies of audited
financial statements obtained or secured from the BIR or the SEC which under
Section 19(c), Rule 132 would have been public documents. Thus, the statements
presented were private documents. Consequently, authentication was a precondition to
their admissibility in evidence.
During authentication in court, a witness positively testifies that a document presented
as evidence is genuine and has been duly executed or that the document is neither
spurious nor counterfeit nor executed by mistake or under duress. In this case,
petitioner merely presented a memorandum attesting to the increase in the
corporation’s monthly market revenue, prepared by a member of his management
team. While there is no fixed criterion as to what constitutes competent evidence to
establish the authenticity of a private document, the best proof available must be
presented. The best proof available, in this instance, would have been the testimony of
a representative of SMMC’s external auditor who prepared the audited financial
statements. Inasmuch as there was none, the audited financial statements were never
authenticated.
Nevertheless, petitioner insists on the application of an exception to this
rule: authentication is not necessary where the adverse party has admitted the
genuineness and due execution of a document. The fact, however, was that nowhere in
his testimony did Amado Domingo categorically admit the authenticity of the copies
of the audited financial statements. He only testified that SMMC regularly submitted
its audited financial statements to the BIR and SEC. There was never any admission
that the documents presented by petitioner were true or faithful copies of those
submitted to the BIR and the SEC. PETITION FOR REVIEW ON CERTIORARI IS
DENIED.
