SALAS v. STA.
MESA MARKET CORPORATION
GR. No. 157766 July 27, 2007
FACTS:
Primitivo Domingo and Ernesto Salas had a letter-agreement where Domingo handed the management of
his estate (including SMMC) to Salas. Salas, as estate manager, was tasked to ensure SMMC's viability
and profitability by redeveloping the Sta. Mesa market and restructuring the finances. Domingo bound
himself to transfer 30% of SMMC's stock to Salas as part of his compensation. If Salas fails to achieve the
minimum monthly market revenue of P350k, he has to return the shares of stock.
SMMC, under Salas, leased the Sta. Mesa market to Malaca Realty. However, Malaca was financially
incapable of improving the market. Subsequently, Malaca was actually unable to pay the monthly rent.
This prompted SMMC to terminate the lease contract. The SMMC board became dissatisfied with Salas, so
SMMC ended the management contract with Salas and Inter-Alia.
Salas filed an action for specific performance and damages against SMMC and Domingo. He contended
that SMMC's monthly market revenue surpassed P350k, yet Domingo refused to comply with his
obligation.
On the other hand, Domingo claimed that Salas is not entitled to the shares. SMMC suffered additional
losses and incurred new liabilities over the 21 months under Salas' management.
RTC: ruled in favor of Salas.
The copies of SMMC's audited financial statements showing an improvement in the corporation's monthly
average gross income was considered by the court. SMMC's monthly gross income was increased, and
the P350k target was surpassed. Hence, Domingo was ordered to deliver the shares to Salas.
CA: reversed the RTC's ruling.
It held that the RTC erred in admitting the copies of audited financial statements because Salas failed to
prove the authenticity of the audited financial statements. SMMC's external auditor was not presented to
testify on the documents' genuineness and due execution. Salas only presented a memorandum prepared
by a member of his management team attesting to the increase in revenue. In sum, the audited financial
statements were self-serving and hearsay.
Salas' argument
Amado Domingo (SMMC VP and heir of Domingo) testified that the audited financial statement presented
were copies of those submitted to BIR and SEC for purposes of tax payments, compliance with reportorial
requirements. Hence, A. Domingo admitted genuineness and due execution, which made authentication
unnecessary.
ISSUE:
1. WON the copies of audited financial statements are public or private documents
2. WON the copies of audited financial statements should be admitted in evidence
RULING:
1. The audited financial statements are private documents because they were mere copies and NOT
certified true copies.
Financial statements show the fiscal condition of a particular entity within a specified period. As a general
rule, financial statements, whether audited or not, are private documents. They become public
documents once they are filed with a government office pursuant to law.
Whether a document is public or private is relevant in determining its admissibility as evidence. Public
documents are admissible in evidence even without further proof of their due execution and genuineness.
Private documents are inadmissible in evidence unless they are properly authenticated.
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.
2. No. The copies of the audited financial statements should not be admitted in evidence because
there was no proper authentication of the same.
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.
