PEOPLE’S AIRCARGO & WAREHOUSING CO., INC, petitioner, vs.

PHILIPPINE AIRLINES,
INC. and PRUDENTIAL GUARANTEE AND ASSURANCE, INC, respondents.
G.R. No. 226168 | January 30, 2019 | (First Division)

Nature of the Action: Complaint for sum of money with damages

Facts: On September 17, 1996, respondent Philippine Airlines, Inc. (PAL) and petitioner People's Air
Cargo and Warehousing Co. Inc. (PAIR) entered into a Warehousing Agreement (agreement). Under the
terms of the agreement, PAIR undertook to provide PAL with warehousing facilities and cargo handling
services from October 16, 1996 to October 15, 2001, unless sooner terminated. Pursuant to the terms of
the agreement, PAIR provided a Performance Guarantee Bond (surety bond) in the amount of
P5,000,000.00 issued by respondent Prudential Guarantee and Assurance, Inc. (Prudential) to ensure the
faithful performance of its obligations.

Under the agreement, PAIR had the obligation to remit to PAL its share from the storage and non-storage
revenue on the 30th day of the month or the 15th day of the succeeding month, depending where the
cargo would be stored. The agreement further mandated that the consequent failure of PAIR to remit said
revenue share within the required period puts it in default, despite the lack of notice and made it liable for
penalty charges equivalent to 5% of the delayed remittances per month, computed on a daily basis.

PAL alleged that PAIR breached its obligation by either partially remitting payments or remitting said
payments way past their due dates. Negotiations were then undertaken to resolve this issue. Thus, in April
1997, PAL agreed to equally share both storage and non-storage revenues with PAIR, which was
reflected through the amendment of the agreement retroacting from October 16, 1996. Such amendment
had the condition that PAIR accept PAL’s computation of the former’s total liability from October, 1996
to March, 1997. Upon audit PAL found that PAIR was still liable for P4,322,969.14. Unfortunately, PAIR
failed to pay such amount.

PAL terminated the agreement due to PAIR’s continued inability to remit PAL’s share and its failure to
provide quality service for PAL. Thereafter, PAL sent letters to PAIR demanding payment of its
unremitted share under the agreement, but the latter failed to heed the demand. Prudential, as the surety,
also refused to pay when PAL called upon the surety bond. PAL filed a complaint for sum of money with
damages before the RTC on July 11, 2000.

PAIR filed an Answer with compulsory counterclaim and cross-claim, alleging that it did not dispute the
due execution of the agreement but asserted that it had not been delinquent in its remittances and it was
PAL which had been delinquent in paying its rent, which already amounted to P3,554,151.83.

RTC ruled in favor of PAL as it was able to sufficiently establish its claim, while PAIR failed to refute
the same. RTC also dismissed PAIR’s counterclaim and ruled that Prudential was liable to the extent of
its undertaking in the amount of P5 Million. CA modified the decision of the RTC as to the liability of
Prudential, which it ruled not liable as PAL failed to make a claim within 60-day period stipulateed in the
surety bond. However, CA affirmed RTC ruling that PAIR failed to remit the payments due and provided
no countervailing evidence.

Issue: Whether PAIR presented sufficient evidence to prove payment of its obligation.

Held: NO. The Court agrees with the findings of the RTC and the CA that PAL was able to prove its
claim when it submitted the invoices and summary of collectibles, which were duly confirmed and
testified on by its witnesses. PAIR, on the other hand, failed to present any evidence to contradict the
same. PAIR could have presented any oral or documentary evidence, such as receipts, to prove that
payment has been made. In Monfort v. Aguinaldo, the receipts of payment, although not exclusive, were
deemed to be the best evidence, to wit:

That the best evidence for proving payment is by the evidence of receipts showing the same is also
admitted. What respondents claim is that there is no rule which provides that payment can only be proved
by receipts. While receipts are deemed to be the best evidence, they are not exclusive. Other evidence may
be presented in lieu thereof if they are not available, as in case of loss, destruction or disappearance. The
fact of payment may be established not only by documentary evidence, but also by parol evidence (48 C.J.
727; Greenleaf, Law of Evidence, Vol. II, p. 486; Jones on Evidence [1913] Vol. II, p. 193), specially in
civil cases where preponderance of evidence is the rule. Here respondents presented documentary as well as
oral evidence which the Court of Appeals found to be sufficient, and this finding is final. (Emphases
supplied)

In the instant case, Prudential's appeal to the CA is meritorious because records reveal that PAL' s claim
was made beyond the 60-day period required in the surety bond and mentioned in the agreement between
PAL and PAIR. The CA correctly explained:

Accordingly, PAL cannot distance itself from the terms of the Surety Bond because the same is deemed
part and parcel of the Agreement. It had then obligation to make a claim within the terms of the Bond.
Surely, PAL cannot lay claim anytime it wants or anyhow it wants to proceed with the claim. Logic
dictates that when it seeks to make a claim against the bond, it has to refer to the terms of the surety bond
agreement to make the proper claims within the acceptable procedure as stated in the manner by which
claims should be taken. The terms of the surety bond is clear, thus:

"The liability of PRUDENTIAL GUARANTEE AND ASSURANCE, INC., under this bond will expire on
October 15, 1997. Furthermore, it is hereby agreed and understood that PRUDENTIAL GUARANTEE
AND ASSURANCE INC. shall not be liable for any claim not discovered and presented to the company
within sixty (60) days from the expiration of this bond or from the occurrence of the default or failure of the
principal, whichever is the earliest, and the obligee hereby waives his right to file any claim against the
Surety after the termination of the period of sixty (60) days above mentioned afterwhich time this bond
shall definitely terminate and be deemed absolutely cancelled."

Furthermore, PAL cannot claim ignorance over the time-bar period because in the terms of the
Agreement particularly under the heading Obligations of PAIR Cargo Clause 3.5 (2) which provides:

”The prescriptive period in filing a claim against the surety shall be extended to sixty (60) days from the
expiration of the bond."

Verily, PAL knew that there is a period within which to file a claim under the surety bond. Using the
"complementary-contracts-construed-together" doctrine it may be said PAL knew that there is a
reglementary period within which to file a valid claim. Thus, Prudential rightfully argued that PAL should
have presented its claim sixty (60) days from November 21, 1997 or until January 1998, the effective
period of the cessation of contractual relations between PAL and PAIR. Thus, since the claim dated
October 5, 1998 was received by Prudential on October 12, 1998, it is clear that the claim was made way
beyond the time provided under the surety bond. (Emphasis in the original)

Indeed, PAIR has failed to show compelling grounds for a reversal of the findings and conclusions of the
RTC and the CA. Thus, the instant petition must be denied

Fallo: WHEREFORE, the petition is DENIED. The Decision dated September 30, 2015 and the
Resolution dated July 20, 2016 of the Court of Appeals in CA-G.R. CV No. 99066 are hereby
AFFIRMED in toto.
SO ORDERED."