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BANCO FILIPINO v.

MONETARY BOARD
July 8, 1986 | Carpio, J. | Judicial Notice | Conejero

PETITIONER/S: Banco Filipino


RESPONDENT/S: Monetary Board et al.
SUMMARY:
DOCTRINE:

FACTS:

RESOLUTION

On November 4, 1985, Petitioner Bank filed in the instant case a "Motion to Pay Back Salaries to All
BF Officers and Employees from February to August 29, 1985" in connection with its "Opposition to
Respondents" Motion for Reconsideration or for Clarification of the Resolution of the Court En Banc
of October 8, 1985." On November 7, 1985, this Court referred said motion to pay back salaries to
Branch 136 (Judge Ricardo Francisco, presiding) of the Makati Regional Trial Court, which this
Court had earlier directed under our Resolution of October 8, 1985 issued in G.R. No. 77054, to
conduct hearings on the matter of the closure of petitioner Bank and its alleged pre-planned
liquidation.

On January 22, 1986, said Regional Trial Court, after considering the petitioner's motion of
November 4, 1985, the respondents' opposition thereto dated January 15, 1986; the petitioner's Reply
dated January 16, 1986, and the respondents' Rejoinder dated January 20, 1986, issued an order
directing the respondents herein "to pay all officers and employees of petitioner their back salaries
and wages corresponding to the period from February to August 29, 1985."

On February 4, 1986, respondents herein filed with this Court an "Appeal from, or Petition to Set
Aside, order to Pay Back Salaries dated 22 January 1986" praying for the reversal and setting aside of
the aforestated trial court's Order dated January 22, 1986. This was formally opposed by Petitioner
when it filed its "Answer to Appeal (re: back salaries)" on February 26, 1986. A month later, on
March 26, 1986, respondents filed their "Reply to the Answer" which petitioner traversed in a
"Rejoinder to the Reply" dated April 2, 1986.

In a normal situation, no controversy would be expected in the matter of the payment of said back
salaries because in the instant case, the party praying for the same is the employer Bank. The
attendant circumstances here present have, however, created a peculiar situation. There is resistance
to the claim because the management of the assets of the Bank has been transferred to the
Respondents' Receiver who perceived that the directive to pay back salaries after closure of the Bank
would be dissipation of the banks' assets to the prejudice of its various creditors.

There is, however, in this case a significant matter that deserves consideration of this Court and
which must be viewed from the stand-point of equity. What stands out is that, regardless of whether
the employees of Banco Filipino worked or not after January 25, 1985, there is the uncontested
manifestation found in BF's Answer to the Appeal, dated February 26, 1986 (Vol. IV of Case Records)
that:
2. In the fact the receiver/liquidator Carlota Valenzuela had paid Union employees
of petitioner BF back salaries for no work from January 25, 1985 up to June, 1985. ..
(Emphasis supplied)

All employees, thereto, of petitioner Banco Filipino who have not yet received their back salaries
corresponding to the period from January 25, 1985 up to June, 1985 manifestly deserve and ought to
be similarly paid by the respondent Monetary Board. It is but fair that the issue whether or not the
employees of petitioner Bank had actually worked during said period should now be discounted
considering this voluntary act of respondent Monetary Board which would remove by estoppel any
impediment to the receipt by all bank employees of their back salaries from January 25, 1985 up to
June, 1985, assuming that some of them have not yet received the same.

As the remaining period from June, 1985 to August, 1985, involves but a minimal period only of two
(2) months, and considering the unfortunate plight of the numerous employees who now invoke the
symphathetic concern of this Court, and inasmuch as the appealed Order for the payment of back
salaries is only for a limited period or up to August, 1985, the appealed order of November 7, 1985
may be sustained.

Petitioner BF and its stockholders have long put on record their consent to this patment of back
salaries of its separated officers and employees. It is also averred that BF intends to reopen its bank
and branches, and the payment of back salaries to its employees, no less would help in the
preservation of its personnel which is the bank's most important assest, apart from doing justice to
those aggrieved employees. It is mentioned that the Central Bank Liquidator has now more than a
billion pesos in cash of Banco Filipino since it continued to receive payments from BF borrowers
some P1.5 million a day. It is also said that with the deposits of petitioner BF with the Bank of PI,
there is money sufficient to allow the withdrawal of the sums needed to pay the salaries of the
employees who have been now out of work for over a year. Apparently, no substantial prejudice for
the payment of the distressed employees of the bank for only a specified limited period until the
other issues in the consolidated consideration.

RESOLUTION:

WHEREFORE, ruling that the Order of November 7, 1985 of Judge Ricardo Francisco, granting
salary to the officers and employees of Banco Filipino for the period from February, 1985 to August
29, 1985, may now be deemed moot and academic insofar as it relates to the period from January 25,
1985 to June, 1985 up to August, 1985, covers but a minimal span of two (2) months, the Court
RESOLVES, for the reasons of equity, to allow the aforestated Order to remain undisturbed and to
DISMISS the appeal therefrom. This Order is immediately held executory.

BANCO FILIPINO, petitioner,


vs.
MONETARY BOARD, ET AL., respondents.

RESOLUTION

Banco Filipino "Petition to Set Aside Order to Produce Documents dated 17 February 1986" is the
Order of Branch 136, Regional Trial Court, Makati, granting the motion of the petitioner herein,
based on Section 1, Rule 27, of the Rules of Court, for the production, inspection, and copying of
certain papers and records which are claimed as needed by the Petitioner Bank for the
preparation of its comments, objections, and exceptions to the Conservator's report dated January
8, 1985, and Receiver's Report dated March 19, 1985. The documents now asked to be produced,
inspected, and copied are the following:

(1) Copies of tapes and transcripts of the Monetary Board (MB) deliberations on the closure of
Banco Filipino (BF) and its meeting on July 27, 1984, and March 22, 1985;

(2) Copies of the letter and reports of first conservator, Mr. Basilio Estanislao, to the MB and to
Central Bank Governor Jose Fernandez;

(3) Papers showing computations of all the interests and penalties charged by the CB against BF;

(4) Schedule of recommended valuation of reserves per Mr. Tiaoqui's report dated March 19, 1985;

(5) Adjustment per A0nnex "C" of Mr. Tiaoqui's report;

(6) Annexes"A","B",and"C"of the joint report of Mr. Tiaoqui, Mr. Aurellano, and Mrs. Valenzuela;

(7) Schedule of devaluation of CB premises of Paseo de Roxas of same report;

(8) Schedule of BF's realizable assets from P5,159.44 B to P3,909.23 B as of January 25, 1985;

(9) Documents listed in BF's letter to Mrs. Carlota Valenzuela dated October 25, 1985.

In issuing the challenged order, the court below took the view that the Supreme Court's
resolution referring to it the matters relative to the bank's closure does not preclude the petitioner
from availing of this mode of discovery as an additional means of preparing for the hearing. It
considered the documents sought to be produced as not privileged because these constitute or
contain evidence material to the issues into by the Court. These materials are said to comprise of
records of the administrative proceedings conducted by respondent's officials and representatives
from the inception of and preparation of the challenged reports and the resolution placing
petitioner under receivership and thereafter under liquidation as it is the regularity and
impartiality of these administrative proceedings which are being assailed by the petitioner, the
trial court saw no reason why said documents should be thus concealed from it.

Respondents Monetary Board and Central Bank take exception to the said order and pray in their
petition before this Court for the reversal and setting aside of the same. The grounds recited in
support of their petition are the following:

(1) The ratiocination of the trial court is wholly in error because the proceedings before it do not
at all deal with either the administrative proceedings conducted by the respondents or the
regularity and impartiality of the CB actions on BF; it does so simply upon the charge that no
"hearing" was given BF prior to those actions of closure and liquidation. However, no such prior
hearing had been called as none is required by the law and by the Supreme Court decisions in
force to this date (Rural Bank of Lucena, Inc. vs. Arca, 15 SCRA 66, and Rural Bank of Bato vs.
IAC, G.R. 65642, Oct. 15, 1984).

(2) The tapes and transcripts of the Monetary Board deliberations are confidential pursuant to
Sections 13 and 15 of the Central Bank Act.
Sec. 13. Withdrawal of persons having a personal interest. Whenever any member
attending a meeting of the Monetary Board has a material personal interest,
directly or indirectly, in the discussion or resolution of any given matter, said
member shall not participate in the discussion or resolution of the matter and
must retire from the meeting during the deliberation thereon. The subject matter,
when resolved, and the fact that a member had a personal interest in it, shall be
made available to the public. The minutes of the meeting shall note the
withdrawal of the member concerned. (As amended by PD No. 1827).

Sec. 15. Responsibility. Any member of the Monetary Board or officer or


employee of the Central Bank who wilfully violates this Act or who is guilty of
gross negligence in the performance of his duties shall be held liable for any loss
or injury suffered by the Bank as a result of such violation or negligence. Similar
responsibility shall apply to the disclosure of any information of a confidential
nature about the discussion or resolutions of the Monetary Board, except as required
in Section 13 of this Act, or about the operations of the Bank, and to the use of such
information for personal gain or to the detriment of the Government, the Bank or
third parties. (As amended by Presidential Decree No. 72). (Italics supplied).

(3) The Monetary Board deliberations were necessarily held subsequent t the submission of the
CB reports. They did not enter into the making of those reports and can have no materiality to
any question of fact that may be raised in relation to their contents.

On April 16, 1986, Petitioner Banco Filipino filed its Comment on Respondent's petition to set
aside the order for the production of the documents. In said pleading, the petitioner bank assails
the respondent's petition on the following grounds:

(1) There is no reason why Banco Filipino should not be furnished the documents, particularly
Nos. 3 to 9 of its motion, when these are merely attachments to the Supervision and Examination
Sector, Dept. It (SES) Reports, copies of which were given to it pursuant to a Supreme Court
order.

(2) The Supreme Court in its referral of October 8, 1985 to the RTC Makati intended full evidence
taking of the proceeding for judicial review of administrative action filed with the Supreme
Court, the trial court being better equipped for evidence taking.

(3) The respondents cannot claim privilege in refusing to produce the Central Bank records
because it is based only on the generalized interest in confidentiality. Petitioner cites as a
precedent the doctrine established in the case of U.S. vs. Nixon, 418 U.S. 683, 713, which states
that "when the ground for asserting privilege as to subpoenaed materials sought for use in a
criminal case is based only on the generalized interest in confidentiality, it cannot prevail over
the fundamental demands of due process of law."

(4) The requested documents and records of the Central Bank are material and relevant because
BF is entitled to prove from the CB records (a) that Governor Fernandez closed BF without a MB
resolution and without examiner's reports on the financial position of BF; (b) that a MB
resolution was later made to legalize the BF closure but it had no supporting examiner's report;
(c) that the earlier reports did not satisfy respondent Governor Fernandez and he ordered the
examiners and the conservator, Gilberto Teodoro, to "improve" them; and (d) that the reports
were then fabricated.
Petitioner adds that what respondents fear is disclosure of their proceedings because petitioner
has accused the CB governor of (a) covering 51% of its stockholding, (b) encashing BF securities
in trickles as fuel a run, (c) appointing a conservator when the President ordered the MB to grant
petitioner a P 3 Billion credit line, (d) replacing Estanislao with Gilberto Teodoro when the
former wanted to resume normal operations of BF, and (e) changing the conservatorship to
receivership when it appointed Carlota Valenzuela as receiver again without hearing.

On May 13, 1986, Respondent Monetary Board filed their Reply to Petitioner Bank's Comment
dated April 15, 1986. Respondents argue that:

(1) The case of U.S. vs. Nixon and the other decisions cited by petitioner are inapplicable because-

a) The authorities cited refer only to a claim of privilege based only on the
generalized interest of confidentiality or on an executive privilege that is merely
presumptive. On the other hand, the so-called MB deliberations are privileged
communications pursuant to Section 21, Rule 130 of the Rules of Court because
statements and opinions expressed in the deliberation of the members of the MB
are specifically vested with confidentiality under Secs. 13 and 15 of the Central
Bank Act. The "public interest" requirement for non-disclosure is evident from the
fact that the statute punishes any disclosure of such deliberations.

b) Petitioner has not in the least shown any relevance or need to produce the
alleged MB deliberations. What petitioner intends to prove are not "issues" raised
in the pleadings of the main petition.

(2) Petitioner is interested, not in discovering evidence, but in practicing


oppression by the forced publication of the MB members' confidential statements
at board meetings.

(3) The so-called deliberations of the Monetary Board are in truth merely the
individual statements and expressions of opinion of its members. They are not
statements or opinions that can be imputed to the board itself or to the Central
Bank. The transcripts of stenographic notes on the deliberations of the MB are not
official records of the CB; they are taken merely to assist the Secretary of the MB
in the preparation of the minutes of the meetings. And as advertedly also, the tape
recordings are not available as these are used over and over again.

The motion for the production of the subject documents was filed by petitioner pursuant to
Section 1, Rule 27, of the Rules of Court. It has been held that "a party is ordinarily entitled to the
production of books, documents and papers which are material and relevant to the establishment
of his cause of action or defense" (General Electric Co. vs. Superior Court in and for Alameda
County, 45 C. 2d 879, cited in Martin, Rules of Court, 3rd edition, Vol. 2, p. 104). "The test to be
applied by the trial judge in determining the relevancy of documents and the sufficiency of their
description is one of reasonableness and practicability" (Line Corp. of the Philippines vs. Moran,
59 Phil. 176, 180). "On the ground of public policy, the rules providing for production and
inspection of books and papers do not authorize the production or inspection of privileged
matter, that is, books, papers which because of their confidential and privileged character could
not be received in evidence" (27) CJS 224). "In passing on a motion for discovery of documents,
the courts should be liberal in determining whether or not documents are relevant to the subject
matter of action" (Hercules Powder Co. vs. Haas Co., U.S. Dist. Ct. Oct. 26, 1944, 9 Fed. Rules
Service, 659, cited in Moran, Comments on the Rules of Court, 1979 Ed. Vol. 2, p. 102). Likewise,
"any statute declaring in general terms that official records are confidential should be liberally
construed, to have an implied exception for disclosure when needed in a court of justice"
(Wigmore on Evidence, Vol. VIII, p. 801, citing the case of Marbury vs. Madison, 1 Cr. 137,143).

In the light of the jurisprudence above-cited, this Court holds that no grave abuse of discretion
was committed by the court below in granting petitioner's motion for the production of the
documents enumerated herein. We accept the view taken by the court below that the documents
are not privileged and that these constitute or contain evidence material to the issues being
inquired into by the Court.

With respect to Items Nos. 3 to 9, these are the annexes to the Supervision and Examination
Sector, Dept. II (SES) Reports submitted to the Central Bank and Monetary Board which were
taken into consideration by said respondents in closing petitioner bank. A copy of the SES
Reports was furnished to the petitioner. We, therefore, fail to see any proper reason why the
annexes thereto should be withheld. Petitioner cannot adequately study and properly analyze the
report without the corresponding annexes. Pertinent and relevant, these could be useful and even
necessary to the preparation by petitioner of its comment, objections and exceptions to the
Conservator's reports and receiver's reports.

Regarding copies of the letter and reports of first Conservator, Mr. Basilio Estanislao, to the
Monetary Board and to Central Bank Governor Fernandez (Item No. 2) these appear relevant as
petitioner has asserted that the above-named Conservator had in fact wanted to resume normal
operations of Banco Filipino but then he was thereafter replaced by Mr. Gilberto Teodoro. The
letter and reports could be favorable or adverse to the case of petitioner but whatever the result
may be, petitioner should be allowed to photocopy the same.

As to the tapes and transcripts of the Monetary Board deliberations on the closure of Banco
Filipino and its meetings on July 27, 1984, and March 22, 1985, (Item No. 1), respondents contend
that "it is obvious from the requirement (Sections 13 and 15 of the Central Bank Act) that the
subject matter (of the deliberations), when resolved. . . shall be made available to the public but
the deliberations themselves are not open to disclosure but are to be kept in confidence." This
Court, however, sees it in a different light. The deliberations may be confidential but not
necessarily absolute and privileged. There is no specific provision in the Central Bank Act, even
in Sections 13 and 15 thereof, which prohibits absolutely the courts from conducting an inquiry
on said deliberations when these are relevant or material to a matter subject of a suit pending
before it. The disclosure is here not intended to obtain information for personal gain. There is no
indication that such disclosure would cause detriment to the government, to the bank or to third
parties. Significantly, it is the bank itself here that is interested in obtaining what it considers as
information useful and indispensably needed by it to support its position in the matter being
inquired to by the court below.

On the other hand, respondents cite Section 21, Rule 130, Rules of Court which states:

Section 21. Privileged Communications. The following persons cannot testify as to


matters learned in confidence in the following cases:

xxx xxx xxx


(e) A public officer cannot be examined during his term of office or afterwards, as
to communications made to him in official confidence, when the court finds that
the public interest would suffer by disclosure.

But this privilege, as this Court notes, is intended not for the protection of public officers but for
the protection of public interest (Vogel vs. Gruaz 110 U.S. 311 cited in Moran, Comments on the
Rules of Court, 1980 Ed. Vol. 5, p. 211). Where there is no public interest that would be
prejudiced, this invoked rule will not be applicable.

The rule that a public officer cannot be examined as to communications made to


him in official confidence does not apply when there is nothing to show that the
public interest would suffer by the disclosure question. ... ,( Agnew vs. Agnew,'52
SD 472, cited in Martin Rules of Court of the Philippines, Third Edition, Vol. 5, p.
199).

In the case at bar, the respondents have not established that public interest would suffer by the
disclosure of the papers and documents sought by petitioner. Considering that petitioner bank
was already closed as of January 25, 1985, any disclosure of the aforementioned letters, reports,
and transcripts at this time pose no danger or peril to our economy. Neither will it trigger any
bank run nor compromise state secrets. Respondent's reason for their resistance to the order of
production are tenuous and specious. If the respondents public officials acted rightfully and
prudently in the performance of their duties, there should be nothing at all that would provoke
fear of disclosure

On the contrary, public interests will be best served by the disclosure of the documents. Not only
the banks and its employees but also its numerous depositors and creditors are entitled to be
informed as to whether or not there was a valid and legal justification for the petitioner's bank
closure. It will be well to consider that

Public interest means more than a mere curiosity; it means something in which the
public, the community at large, has some pecuniary interest by which their legal
rights or liabilities are affected (State vs. Crocket, 206, p. 816 cited in Words and
Phrases, Vol. 35, p. 229).

IN VIEW OF ALL THE FOREGOING, the order to produce documents dated February 17, 1986
issued by the court below in S.C.- G.R. No. 70054, is hereby affirmed, except as to the copies of
the tapes relative to the Monetary Board deliberations on the closure of Banco Filipino on
January 25, 1985 and its meetings on July 27, 1984, and March 22, 1985 and only if such tapes are
actually no longer available taking into account respondent Monetary Board's manifestations that
the tape recording of the deliberations of that Board are, for purposes of economy, used over and
over again inasmuch as these tapes are not required to be kept or stored. (See Respondent's
Reply, dated May 12, 1986; Rollo, Vol. IV, pp. 1288-1289).

SO ORDERED.
LEA MER v. MALAYAN INSURANCE
September 30, 2005 | Panganiban, J. | ____________ | Conejero

PETITIONER/S: Lea Mer Industries, Inc.


RESPONDENT/S: Malayan Insurance Co., Inc.
SUMMARY:
DOCTRINE: Common carriers are bound to observe extraordinary diligence in their vigilance over the
goods entrusted to them, as required by the nature of their business and for reasons of public policy.
Consequently, the law presumes that common carriers are at fault or negligent for any loss or damage
to the goods that they transport. In the present case, the evidence submitted by petitioner to overcome
this presumption was sorely insufficient.

FACTS:
1. Ilian Silica Mining entered into a contract of carriage with Lea Mer for shipment from Palawan to
Manila of 900 metric tons of silica sand consigned to Vulcan Industrial and Mining Corporation.
2. On October 25, 1991, Judy VII, a barge leased by Lea Mer, sank, resulting in the loss of the sand.
3. Malayan Insurance Co., Inc., as insurer, paid Vulcan the P565,000 value of the lost cargo, which it
unsuccessfully sought to recover from Lea Mer in the exercise of its right of subrogation.
4. Malayan filed a complaint for collection RTC Manila on September 4, 1992, which was dismissed
upon finding that the cause of the loss was a fortuitous event.
a. The vessel had sunk because of the bad weather conditions of Typhoon Trining.
b. Petitioner had no advance knowledge of the incoming typhoon, and that the vessel had
been cleared by the Philippine Coast Guard to travel from Palawan to Manila.
5. The CA reversed, holding that the vessel was not seaworthy when it sailed for Manila, and that
the loss of the cargo was occasioned by petitioners fault.

ISSUES/HELD:
1. Whether petitioner is liable for the loss of the cargoYES.
2. Whether the survey report of Jesus Cortez is admissible in evidenceNO.

RATIO:
First Issue:
Liability for Loss of Cargo

Question of Fact

The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous
event. This issue involves primarily a question of fact, notwithstanding petitioners claim that it
pertains only to a question of law. As a general rule, questions of fact may not be raised in a petition
for review.[15] The present case serves as an exception to this rule, because the factual findings of the
appellate and the trial courts vary.[16] This Court meticulously reviewed the records, but found no
reason to reverse the CA.

Rule on Common Carriers

Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods, or both -- by land, water, or air -- when this service is
offered to the public for compensation.[17] Petitioner is clearly a common carrier, because it offers to
the public its business of transporting goods through its vessels.[18]
Thus, the Court corrects the trial courts finding that petitioner became a private carrier when Vulcan
chartered it.[19] Charter parties are classified as contracts of demise (or bareboat) and affreightment,
which are distinguished as follows:

Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated. The
charterer mans the vessel with his own people and becomes, in effect, the
owner pro hac vice, subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must completely and
exclusively relinquish possession, command and navigation thereof to the
charterer; anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all. [20]

The distinction is significant, because a demise or bareboat charter indicates a business


undertaking that is private in character. [21] Consequently, the rights and obligations of the parties to a
contract of private carriage are governed principally by their stipulations, not by the law on common
carriers.[22]

The Contract in the present case was one of affreightment, as shown by the fact that it was
petitioners crew that manned the tugboat M/V Ayalit and controlled the barge Judy
VII.[23] Necessarily, petitioner was a common carrier, and the pertinent law governs the present
factual circumstances.

Extraordinary Diligence Required

Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and
the safety of the passengers they transport, as required by the nature of their business and for
reasons of public policy.[24] Extraordinary diligence requires rendering service with the greatest skill
and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery.[25]

Common carriers are presumed to have been at fault or to have acted negligently for loss or
damage to the goods that they have transported.[26] This presumption can be rebutted only by proof
that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the
following causes:[27]

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;


(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.[28]

Rule on Fortuitous Events

Article 1174 of the Civil Code provides that no person shall be responsible for a fortuitous event
which could not be foreseen, or which, though foreseen, was inevitable. Thus, if the loss or damage
was due to such an event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a fortuitous event as follows: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that constituted the caso
fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it impossible for the debtors to fulfill their obligation
in a normal manner; and (d) the obligor must have been free from any participation in the
aggravation of the resulting injury to the creditor.[29]

To excuse the common carrier fully of any liability, the fortuitous event must have been the
proximate and only cause of the loss.[30] Moreover, it should have exercised due diligence to prevent
or minimize the loss before, during and after the occurrence of the fortuitous event.[31]

Loss in the Instant Case

There is no controversy regarding the loss of the cargo in the present case. As the common carrier,
petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid the loss,
or that the loss had been occasioned by a fortuitous event -- an exempting circumstance.

It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed
that the loss of the cargo was due to the bad weather condition brought about by Typhoon
Trining.[32] Evidence was presented to show that petitioner had not been informed of the incoming
typhoon, and that the Philippine Coast Guard had given it clearance to begin the voyage. [33] On
October 25, 1991, the date on which the voyage commenced and the barge sank, Typhoon Trining
was allegedly far from Palawan, where the storm warning was only Signal No. 1.[34]
The evidence presented by petitioner in support of its defense of fortuitous event was sorely
insufficient. As required by the pertinent law, it was not enough for the common carrier to show
that there was an unforeseen or unexpected occurrence. It had to show that it was free from any
fault -- a fact it miserably failed to prove.

First, petitioner presented no evidence that it had attempted to minimize or prevent the loss
before, during or after the alleged fortuitous event.[35] Its witness, Joey A. Draper, testified that he
could no longer remember whether anything had been done to minimize loss when water started
entering the barge.[36] This fact was confirmed during his cross-examination, as shown by the
following brief exchange:

Atty. Baldovino, Jr.:


Other than be[a]ching the barge Judy VII, were there other precautionary measure[s]
exercised by you and the crew of Judy VII so as to prevent the los[s] or sinking of
barge Judy VII?

xxxxxxxxx

Atty. Baldovino, Jr.:


Your Honor, what I am asking [relates to the] action taken by the officers and
crew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking of barge
Judy VII?

xxxxxxxxx

Court:
Mr. witness, did the captain of that tugboat give any instruction on how to save
the barge Judy VII?

Joey Draper:
I can no longer remember sir, because that happened [a] long time ago. [37]

Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is
a preponderance of evidence that the barge was not seaworthy when it sailed for
Manila.[38] Respondent was able to prove that, in the hull of the barge, there were holes that might
have caused or aggravated the sinking.[39] Because the presumption of negligence or fault applied to
petitioner, it was incumbent upon it to show that there were no holes; or, if there were, that they did
not aggravate the sinking.

Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A.
Luna, testified that the barge was in tip-top or excellent condition,[40] but that he had not personally
inspected it when it left Palawan.[41]

The submission of the Philippine Coast Guards Certificate of Inspection of Judy VII, dated
July 31, 1991, did not conclusively prove that the barge was seaworthy.[42] The regularity of the
issuance of the Certificate is disputably presumed.[43] It could be contradicted by competent
evidence, which respondent offered. Moreover, this evidence did not necessarily take into account
the actual condition of
[44]
the vessel at the time of the commencement of the voyage.

Second Issue:
Admissibility of the Survey Report

Petitioner claims that the Survey Report[45] prepared by Jesus Cortez, the cargo surveyor, should not
have been admitted in evidence. The Court partly agrees. Because he did not testify during the
trial,[46] then the Report that he had prepared was hearsay and therefore inadmissible for the purpose
of proving the truth of its contents.

The Survey Report Not the Sole Evidence

The facts reveal that Cortezs Survey Report was used in the testimonies of respondents witnesses --
Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of
Toplis and Harding Company.[47] Soriano testified that the Survey Report had been used in preparing
the final Adjustment Report conducted by their company.[48] The final Report showed that the barge
was not seaworthy because of the existence of the holes. Manlapig testified that he had prepared that
Report after taking into account the findings of the surveyor, as well as the pictures and the sketches
of the place where the sinking occurred.[49] Evidently, the existence of the holes was proved by the
testimonies of the witnesses, not merely by Cortez Survey Report.

Rule on Independently
Relevant Statement

That witnesses must be examined and presented during the trial,[50] and that their testimonies must
be confined to personal knowledge is required by the rules on evidence, from which we quote:

Section 36. Testimony generally confined to personal knowledge; hearsay


excluded. A witness can testify only to those facts which he knows of his
personal knowledge; that is, which are derived from his own perception, except
as otherwise provided in these rules.[51]

On this basis, the trial court correctly refused to admit Jesus Cortezs Affidavit, which respondent
had offered as evidence.[52] Well-settled is the rule that, unless the affiant is presented as a witness, an
affidavit is considered hearsay.[53]

An exception to the foregoing rule is that on independently relevant statements. A report


made by a person is admissible if it is intended to prove the tenor, not the truth, of the
statements.[54] Independent of the truth or the falsity of the statement given in the report, the fact
that it has been made is relevant. Here, the hearsay rule does not apply.[55]

In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of
the testimonies of respondents witnesses. The referral to Cortezs Report was in relation to
Manlapigs final Adjustment Report. Evidently, it was the existence of the Survey Report that was
testified to. The admissibility of that Report as part of the testimonies of the witnesses was correctly
ruled upon by the trial court.

At any rate, even without the Survey Report, petitioner has already failed to overcome the
presumption of fault that applies to common carriers.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution
are AFFIRMED. Costs against petitioner.