36. Capital Shoes Factory, Ltd. Vs. Traveler Kids, Inc. the documents offered,...
the documents offered,... contending that several of the sales invoices and order slips
G.R. No. 200065, Sept. 14, 2014
Mendoza, J.
Facts:
Sometime in 2000, petitioner Capital Shoes Factory Ltd., (CSFL), a foreign corporation
engaged in the manufacturing and trading of children's shoes and similar products, and
respondent Traveller Kids, Inc. (TKI), a domestic corporation  engaged in the business... of
manufacturing, importing and distributing shoes, sandals and other footware entered into
an agreement, wherein they agreed that TKI would import the shoes and sandals made by
CSFL from its China factory. After TKI placed numerous purchase orders, CSFL began
manufacturing the... goods pursuant to the special designs and specifications of TKI. CSFL
then shipped the goods to TKI.
It was their arrangement that TKI would pay thirty (30%) percent of the purchase price of
the goods by way of letters of credit, and the balance of seventy (70%) percent by way of
telegraphic transfer, thirty (30) days from the date of delivery of the goods.
For the first three years, TKI was able to pay its purchase orders and the shipments made by
CSFL.
KI started to default in its payments. CSFL granted numerous concessions and extensions to
TKI. Thereafter, TKI was able to make a partial payment on its unpaid... accounts.
he total unpaid accounts of TKI amounted to U.S. $325,451.39, exclusive of the interest
accruing thereto. In addition, CSFL also manufactured $92,000.00 worth of children's shoes
and sandals pursuant to the design and specifications of TKI in its purchase... orders.
Both verbal and written demand letters were made by CSFL to TKI for the payment of its
unpaid accounts, but to no avail.
To protect its interest, CSFL filed a complaint for collection of sum of money and damages
against TKI before the RTC.
CSFL, through its witn... identified several sales invoices and order slips it issued as evidence
of its transactions with TKI.
The latter... objected to the identification pointing out that the documents being presented
were mere photocopies. TKI also objected to the evidence presented by CSFL to prove the
amount of attorney's fees on the ground that it was not an issue raised during the pre-trial
The RTC noted the... objections.
CSFL filed its Formal Offer of Exhibits[5] seeking the admission of, among others, the sales
invoices and order slips earlier objected to by TKI. The latter objected to the admission of
should not be admitted because they were merely photocopies. TKI also objected to the
admission of documents by which CSFL sought to prove its claim for attorney's fees.[6]
RTC issued the Order[7] admitting all the exhibits offered by CFSL... cting on Plaintiff's
Formal Offer of Exhibits as well as Defendant's Comment/Opposition on/thereto and finding
the said offer to be well-taken and in order despite the objections made to the admission of
said exhibits by defendant, Exhibits "A" to ZZZ-1-A," inclusive, are... all admitted for the
purposes for which the same are offered and as part of the testimony of the witness who
testified thereon.
Let the presentation of defendant's evidence commence on May 25, 2011 at 8:30 o'clock in
the morning, as previously scheduled.
SO ORDERED.
Not in conformity, TKI filed a motion for reconsideration... rguing that the exhibits formally
offered by CSFL were inadmissible in evidence for being mere photocopies.
also argued that the evidence relating to the claimed "legal fees" were erroneously...
admitted because the matter was not raised as an issue during the pre-trial.
On June 23, 2011, the RTC issued the order[9] denying TKI's motion for reconsideration,
ruling that the sales invoices and order slips could be admitted because the duplicate
originals of the invoices were already sufficiently established by the testimony... of CSFL's
officer and principal witness, Ms. Susan Chiu (Chiu).
RTC stated that the demand for attorney's fees was impliedly included in the issue of
whether or not TKI was liable to CSFL... for the entire amount claimed.
nstead of presenting evidence, TKI opted to file a petition for certiorari with prayer for
Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction before the CA...
reiterated its argument regarding the inadmissibility of the photocopied... evidence and the
erroneous inclusion of those documents... there was no injunction order issued by the CA,...
the RTC continued the proceedings and directed TKI to present evidence.
TKI refused, citing the petition for certiorari it filed with the CA.
WHEREFORE, premises considered, the Petition for Certiorari is PARTIALLY GRANTED.
Accordingly, the assailed Orders dated May 13, 2011 and June 23, 2011 of public respondent
judge are hereby AFFIRMED... he CA explained that while it was true that the original copies
of the sales invoices were the best evidence to prove TKI's obligation, CSFL merely
presented photocopies of the questioned exhibits. It... stated that Chiu's testimony merely
established the existence or due execution of the original invoices. CSFL, however, did not
present the original invoices, only the photocopies, contrary to Section 5, Rule 130 of the
Rules of Court.
e CA agreed with the RTC's admission of CSFL's evidence proving attorney's fees, quoting
verbatim its logic and reasoning.
CSFL filed a motion for partial reconsideration, but it was denied by the CA in its
Resolution... fter a review of the RTC and the CA records, which were ordered elevated, the
Court is of the considered view that the CA erred in not admitting the invoices and order
slips denominated as Exhibits "D" to "GG-1" and "HH" to "KK-1," which were duplicate
originals. Section 4(b),... Rule 130 of the Rules of Court
The above pronouncement of respondent court is manifestly groundless. It is undisputed
that the documents presented were duplicate originals and are therefore admissible as
evidence.
Records reveal that Chiu, CSFL's principal witness, was able to satisfactorily explain that
Exhibits "D" to "GG-1" and "HH" to "KK-1" were duplicate originals of invoices and order
slips, and not mere photocopies... ranscripts of stenographic notes (TSNs) clearly show that
Chiu convincingly explained that CSFL usually prepared two (2) copies of invoices for a
particular transaction, giving one copy to a client and retaining the other copy. The Court
combed through her testimony... and found nothing that would indicate that the documents
offered were mere photocopies. She remained firm and consistent with her statement that
the subject invoices were duplicate originals as they were prepared at the same time.
Issue:
Whether or not the CA correctly modified the RTC order admitting the exhibits offered by
CSFL. [15]
Ruling:
CSFL basically argues that the excluded documents are admissible in evidence because it
was duly established during the trial that the said documents were duplicate originals, and
not mere photocopies, considering that they were prepared at the same time as the
originals.
On the other hand, TKI counters that CSFL's claim that the photocopied documents were
duplicate originals was just a unilateral and self-serving statement without any supportive
evidence.
The Court finds merit in the petition.
he Court went over the RTC records and the TSNs and found that, contrary to the assertion
ofTKI, the duplicate originals were produced in court and compared with their photocopies
during the hearing before the trial court.
ranscripts bare all of these but were missed... by the appellate court, which believed the
assertion of TKI... fter the admission of CSFL's exhibits as evidence, TKI should have let trial
proceed in due course instead of immediately resorting to certiorari, by presenting its own
testimonial and documentary evidence and in case of an unfavorable decision, appeal the
same in accordance... with law. After all, the RTC stated that, granting that the questioned
exhibits were not admissible,... there is no dispute that the RTC had jurisdiction over the
cases filed by the public respondent against the petitioner for estafa.  The Order admitting in
evidence the photocopies of the charge invoices and checks was issued by the RTC in the...
exercise of its jurisdiction.  Even if erroneous, the same is a mere error of judgment and not
of jurisdiction.  Additionally, the admission of secondary evidence in lieu of the original
copies predicated on proof of the offeror of the conditions sine qua non to the... admission
of the said evidence is a factual issue addressed to the sound discretion of the trial court.
he remedy of the petitioner, after the admission of the photocopies of the charge invoices
and the checks, was to adduce his evidence, and if after trial, he is convicted, to appeal the
decision to the appropriate appellate... court
WHEREFORE, the October 5, 2011 Decision and the January 16, 2012 Resolution of the Court
of Appeals in CA-G.R. SP No. 120413, are hereby REVERSED and SET ASIDE insofar as the
exclusion of Exhibits "D" to "GG-1" and "HH" to "KK-1" are concerned. The May 13,... 2011
Order of the Regional Trial Court, Branch 170, Malabon City, is REINSTATED.
The pertinent records of the case are hereby ordered remanded to the Regional Trial Court,
Branch 170, Malabon City, for appropriate proceedings.
The trial court is directed to give priority to this case and act on it with dispatch.
Principles:
Sec. 4 . Original of document.
xxxx
(b) When a document is in two or more copies executed at or about the same time, with
identical contents, all such copies are equally regarded as originals.
[W]hen the law speaks of the delivery of the private document evidencing a credit, it must
be construed as referring to the original. In this case, appellees (Trans-Pacific) presented,
not the originals but the duplicates of the three promissory notes." (Rollo,... p. 42)
37. Northern Mindanao Power Corporation vs. CIR, G.R. No. 185115, February 18, 2015
Sereno, C.J.,
Facts:
Petitioner is engaged in the production sale of electricity as an independent power producer
and sells electricity to National Power Corporation (NPC). It allegedly incurred input value-
added tax (VAT) on its domestic purchases of goods and services that were used in its
production and sale of electricity to NPC. For the 3 rd and the 4th quarters of taxable year
1999, petitioner’s input VAT totaled to P2,490,960.29, while that incurred for all the
quarters of taxable year 2000 amounted to
P3,920,932.55.4chanroblesvirtuallawlibrary
Petitioner filed an administrative claim for a refund on 20 June 2000 for the 3 rd and the
4th quarters of taxable year 1999, and on 25 July 2001 for taxable year 2000 in the sum of
P6,411,892.84.5chanroblesvirtuallawlibrary
Thereafter, alleging inaction of respondent on these administrative claims, petitioner filed a
Petition6 with the CTA on 28 September 2001.
The CTA First Division denied the Petition and the subsequent Motion for Reconsideration
for lack of merit. The Court in Division found that the term “zero-rated” was not imprinted
on the receipts or invoices presented by petitioner in violation of Section 4.108-1 of
Revenue Regulations No. 7-95. Petitioner failed to substantiate its claim for a refund and to
strictly comply with the invoicing requirements of the law and tax regulations. 7 In his
Concurring and Dissenting Opinion, however, then Presiding Justice Ernesto D. Acosta
opined that the Tax Code does not require that the word “zero-rated” be imprinted on the
face of the receipt or invoice. He further pointed out that the absence of that term did not
affect the admissibility and competence of the receipt or invoice as evidence to support the
claim for a refund.8chanroblesvirtuallawlibrary
On appeal to the CTA En Banc, the Petition was likewise denied. The court ruled that for
every sale of services, VAT shall be computed on the basis of gross receipts indicated on the
official receipt. Official receipts are proofs of sale of services and cannot be interchanged
with sales invoices as the latter are used for the sale of goods. Further, the requirement of
issuing duly registered VAT official receipts with the term “zero-rated” imprinted is
mandatory under the law and cannot be substituted, especially for input VAT refund
purposes. Then Presiding Justice Acosta maintained his dissent.
Hence, this appeal before us.
Issue:
Petitioner’s appeal is anchored on the following grounds:chanRoblesvirtualLawlibrary
Section 4.108-1 of Revenue Regulations (RR) No. 7-95 which expanded the statutory
requirements for the issuance of official receipts and invoices found in Section 113 of the
1997 Tax Code by providing for the additional requirement of the imprinting of the terms
“zero-rated” is unconstitutional.
Company invoices are sufficient to establish the actual amount of sale of electric power
services to the National Power Corporation and therefore sufficient to substantiate
Petitioner’s claim for refund.9
Held:
Finally, as regards the sufficiency of a company invoice to prove the sales of services to NPC,
we find this claim is without sufficient legal basis. Section 113 of the NIRC of 1997 provides
that a VAT invoice is necessary for every sale, barter or exchange of goods or properties,
while a VAT official receipt properly pertains to every lease of goods or properties; as well as
to every sale, barter or exchange of services.
The Court has in fact distinguished an invoice from a receipt in Commissioner of Internal
Revenue v. Manila Mining Corporation:15
A “sales or commercial invoice” is a written account of goods sold or services rendered
indicating the prices charged therefor or a list by whatever name it is known which is used in
the ordinary course of business evidencing sale and transfer or agreement to sell or transfer
goods and services.

A “receipt” on the other hand is a written acknowledgment of the fact of payment in money
or other settlement between seller and buyer of goods, debtor or creditor, or person
rendering services and client or customer.cralawred
A VAT invoice is the seller’s best proof of the sale of goods or services to the buyer, while a
VAT receipt is the buyer’s best evidence of the payment of goods or services received from
the seller. A VAT invoice and a VAT receipt should not be confused and made to refer to one
and the same thing. Certainly, neither does the law intend the two to be used
alternatively.16chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the instant Petition is DENIED.
38. MCMP Construction Corporation vs. Monark Equipment Corp. G.R. No. 201001,
November 10, 2014
Velasco, Jr. J.
Facts:
Monark Equipment Corp. (respondent Monark) leased 5 pieces of heavy equipment to
MCMP Construction Corporation (petitioner MCMP) covered by a Rental Equipment
Contract.
In the invoice, it states that the customer agrees to the following: a) that the credit sales are
payable within 30 days from the date of invoice, b) to pay interest at 24% p.a. on all
amounts, c) to the collection fee of 1% compounded monthly and 2% per month penalty
charge for late payment on amounts overdue d) to pay a sum equal to 25% of any amount
due as attorney’s fees in case of suit, and expressly submit to the jurisdiction of the courts of
Quezon City, Makati, Pasig or Manila, Metro Manila, for any legal action arising from, this
transactions.
MCMP however failed to pay all the rental fees. Upon demands by Monark, MCMP was only
able to pay P100,000.00 on April 15, 2001 and PhP100,000.00 on August 15, 2001. Further
demands went unheeded. As of April 30, 2002, MCMP owed Monark the amount of
PhP1,282,481.83.
On June 18, 2002, Monark filed a suit for a Sum of Money, the RTC issued a Decision in favor
of the plaintiff, ordering MCMP to pay 1,282,481.83, as well as the 25% of the amount and
the costs of suit.
Issue:
MCMP challenges the ruling of the CA arguing that the appellate court should have
disallowed the presentation of secondary evidence to prove the existence of the Contract,
following the Best Evidence Rule. MCMP specifically argues that based on the testimony of
Peregrino, Monark did not diligently search for the original copy of the Contract as
evidenced by the fact that: 1) the actual custodian of the document was not presented; 2)
the alleged loss was not even reported to management or the police; and 3) Monark only
searched for the original copy of the document for the purposes of the instant case.
Ruling:
Petitioner’s contention is erroneous.
The Best Evidence Rule, a basic postulate requiring the production of the original document
whenever its contents are the subject of inquiry, is contained in Section 3 of Rule 130 ofthe
Rules of Court which provides:
"Section 3. Original document must be produced; exceptions. — When the subject of inquiry
is the contents of a document, no evidence shall be admissible other than the original
document itself, except in the following cases:
(a) When the original has been lost or destroyed, or cannot be produced in court, without
bad faith on the part of the offeror;
(b) When the original is in the custody or under the control of the party against whom the
evidence is offered, and the latter fails to produce it after reasonable notice;
(c) When the original consists of numerous accounts or other documents which cannot be
examined in court without great loss of time and the fact sought to be established from
them is only the general result of the whole; and
(d) When the original is a public record in the custody of a public officer or is recorded in a
public office. (Emphasis supplied)"
Relative thereto, Sections 5 and 6 of Rule 130 provide the relevant rules on the presentation
of secondary evidence to prove the contents of a lost document:
"Section 5. When original document is unavailable. — When the original document has been
lost ordestroyed, or cannot be produced in court, the offeror, upon proof of its execution or
existence and the cause of its unavailability without bad faith on his part, may prove its
contents by a copy, or by a recital of its contents in some authentic document, or by the
testimony of witnesses in the order stated. (4a)
Section 6. When original document is in adverse party's custody or control. — If the
document is inthe custody or under the control of adverse party, he must have reasonable
notice to produce it. If after such notice and after satisfactory proof of its existence, he fails
to produce the document, secondary evidence may be presented as in the case of its loss."
In Country Bankers Insurance Corporation v. Lagman, 11 the Court set down the requirements
before a party may present secondary evidence to prove the contents of the original
document whenever the original copy has been lost:
Before a party is allowed to adduce secondary evidence to prove the contents of the
original, the offeror must prove the following: (1) the existence or due execution of the
original; (2) the loss and destruction of the original or the reason for its non-production in
court; and (3) on the part of the offeror, the absence of bad faith to which the unavailability
of the original can be attributed. The correct order of proof is as follows: existence,
execution, loss, and contents.
In the instant case, the CA correctlyruled that the above requisites are present. Both the CA
and the RTC gave credence to the testimony of Peregrino that the original Contract in the
possession of Monark has been lost and that diligent efforts were exerted to find the same
but to no avail. Such testimony has remained uncontroverted. As has been repeatedly held
by this Court, "findings offacts and assessment ofcredibility of witnesses are matters best
left to the trial court."12 Hence, the Court will respect the evaluation of the trial court on the
credibility of Peregrino.
MCMP, to note, contends that the Contract presented by Monark is not the contract that
they entered into. Yet, it has failed to present a copy of the Contract even despite the
request ofthe trial court for it to produce its copy of the Contract. 13 Normal business practice
dictates that MCMP should have asked for and retained a copy of their agreement. Thus,
MCMP’s failure to present the same and even explain its failure, not only justifies the
presentation by Monark of secondary evidence in accordance with Section 6 of Rule 130 of
the Rules of Court, butit also gives rise to the disputable presumption adverse to MCMP
under Section 3 (e) of Rule 131 of the Rules of Court that "evidence willfully suppressed
would be adverse if produced."
Next, MCMP claims that the piecesof equipment were not actually delivered to it by
Monark. It bears pointing out, however, that the witnesses of MCMP itself, Jorge Samonte, a
Budget Supervisor of MCMP, and Engr. Horacio A. Martinez, Sr., General Manager of MCMP,
both acknowledged the delivery of the equipment to the project sites. 14 Clearly, the
contention of MCMP is false.
Evidently, the instant petition must be dismissed.
39. EDSA Shanri-la Hotel and Resort vs. BF Corp., G.R. No. 145842, 27 June 2008
Velasco, Jr. J.
Facts:
The SC consolidated the petitions assailing the decision of the CA.Edsa Shangri-la Hotel
entered into a construction contract with BF Corporation. Among otherthings, the contract
stipulated for the payment of the contract price on the basis of the workaccomplished as
describe in the monthly progress billings. Under this arrangement, BF shall submit amonthly
progress billing to Edsa Shangri-la which would then re-measure the work accomplished and
prepare a Progress Payment Certificate for that month’s progess billing.
 There was a total of 19 progress billing submitted by BF to Edsa Shangr-la. Progress Billing
Nos. 1to 13 were paid by the Hotel. However, despite demands, BF was not able to collect
for Progress BillingsNos. 14 to 19. BF filed a suit for a sum of money and damages before the
RTC.As part of BF
’s claims, it submitted
photocopies of Progress Billings Nos. 14 to 19. Edsa Shangri-la argued that BF Corp ought
to have laid the basis for the presentation of the photocopies as secondaryevidence before
the court admitted the evidence.BF claims that it had complied with the laying-the basis
requirement. , BF explained that it couldnot present the original of the documents since
they were in the possession of ESHRI which refused tohand them over to BF despite
requests.
Issue:
Whether or not BF has complied with the laying-the basis requirement for the admission of
the photocopies as secondary evidence.
Held:
Yes. We agree with BF. The only actual rule that the term "best evidence" denotes is the rule
requiring that the original of a writing must, as a general proposition, be produced 17 and
secondary evidence of its contents is not admissible except where the original cannot be
had. Rule 130, Section 3 of the Rules of Court enunciates the best evidence rule:
SEC. 3. Original document must be produced; exceptions. - When the subject of inquiry is the
contents of a document, no evidence shall be admissible other than the original document
itself, except in the following cases:
(a) When the original has been lost or destroyed, or cannot be produced in court, without
bad faith on the part of the offeror;
(b) When the original is in the custody or under the control of the party against whom the
evidence is offered, and the latter fails to produce it after reasonable notice; (Emphasis
added.)
Complementing the above provision is Sec. 6 of Rule 130, which reads:
SEC. 6. When original document is in adverse party's custody or control. - If the document is
in the custody or under control of the adverse party, he must have reasonable notice to
produce it. If after such notice and after satisfactory proof of its existence, he fails to
produce the document, secondary evidence may be presented as in the case of loss.
Secondary evidence of the contents of a written instrument or document refers to evidence
other than the original instrument or document itself. 18 A party may present secondary
evidence of the contents of a writing not only when the original is lost or destroyed, but also
when it is in the custody or under the control of the adverse party. In either instance,
however, certain explanations must be given before a party can resort to secondary
evidence.
In our view, the trial court correctly allowed the presentation of the photocopied documents
in question as secondary evidence. Any suggestion that BF failed to lay the required basis for
presenting the photocopies of Progress Billing Nos. 14 to 19 instead of their originals has to
be dismissed.
40. Compana Maritima vs. Allied Free Worker’s Union 167 Phil. 381
Facts:
On August 11, 1952 the Compañia Maritima and the Allied Free Workers Union entered into
a written contract whereby the union agreed to perform arrastre and stevedoring work for
the company's vessels at Iligan
City.  The contract was to be effective for one month counted from August 12, 1952.
It was stipulated that the company could revoke the contract before the expiration of the
term if the union failed to render proper service.  The contract could be renewed by
agreement of the parties (Exh. J).
At the time the contract was entered into, the union had just been organized.  Its primordial
desire was to find work for its members.  The union agreed to the stipulation that the
company would not be liable for the payment of the... services of the union "for the loading,
unloading and deliveries of cargoes" and that the compensation for such services would be
paid "by the owners and consignees of the cargoes" as "has been the practice in the port of
Iligan City"
The union found out later that that stipulation was oppressive and that the company was
unduly favored by that arrangement.
Under the contract, the work of the union consisted of arrastre and stevedoring services.
Arrastre, a Spanish word which refers to hauling of cargo, comprehends the handling of
cargo on the wharf or between the establishment of the consignee or... shipper and the
ship's tackle.  The service is usually performed by longshoremen.
On the other hand, stevedoring refers to the handling of the cargo in the holds of the vessel
or between the ship's tackle and the holds of the vessel.
The shippers and consignees paid the union only for the arrastre work.  They refused to pay
for the stevedoring service.  They claimed that the shipowner was the one obligated to pay
for the stevedoring service... because the bill of lading provided that the unloading of the
cargo was at the shipowner's expense (Exh. 1).
On the other hand, the company refused to pay for the stevedoring service because the
contract (Exh. J) explicitly provided that the compensation for both arrastre and stevedoring
work should be paid by the shippers and consignees, as was the alleged... practice in Iligan
City, and that the shipowner would not be liable for the payment of such services.
Although the arrastre and stevedoring contract (Exh. J) was disadvantageous to the union, it
did not terminate the contract because its members were in dire need of work and work,
which was not adequately compensated, was preferable to having no work... at al... verbally
renewed.
The company allowed the union to continue performing arrastre and stevedoring work.
On July 23, 1954 the union sent a letter to the company requesting that it be recognized as
the exclusive bargaining unit to load and unload the cargo of its vessels at Iligan City.  The
company ignored that demand.  So, the... union filed on August 6, 1954 in the Court of
Industrial Relations (CIR) a petition praying that it be certified as the sole collective
bargaining unit.
Despite that certification case, the company on August 24, 1954 served a written notice on
the union that, in accordance with paragraph 4 of the 1952 contract, the same would be
terminated on August 31, 1954.  Because of that notice, the union on August 26,... 1954 filed
in the CIR charges of unfair labor practice against the company.
On August 31, 1954 the company entered into a new stevedoring and arrastre contract with
the Iligan Stevedoring Association.  On the following day, September 1, the union members
picketed the wharf and prevented the
Iligan Stevedoring Association from performing arrastre and stevedoring work.  The picket
lasted for nine days.
On September 8, 1954 the company sued the union and its officers in the Court of First
Instance of Lanao for the rescission of the aforementioned 1952 contract, to enjoin the
union from interfering with the loading and unloading of the cargo, and for the recovery... of
damages.
On the following day, September 9, the lower court issued ex parte a writ of preliminary
injunction after the company had posted a bond in the sum of P20,000.  A few hours later on
that same day the union was allowed to file a... counterbond.  The injunction was lifted.  The
union members resumed their arrastre and stevedoring work.
Later, the union assailed in a prohibition action in this Court the jurisdiction of the trial court
to entertain the action for damages and injunction.
A majority of this Court held that the lower court had jurisdiction to issue the injunction and
to take cognizance of the damage suit filed by the company but that the injunction was void
because it was issued ex parte and the procedure laid down in... section 9(d) of Republic Act
No. 875 was not followed by the trial court
Plaintiff company's evidence. - Jose C. Teves, the company's branch manager at Iligan City,
testified that on August 24, 1954 he terminated the arrastre and stevedoring contract with
the union
(Exh. J) upon instruction of the head office.  The contract was terminated in order to avoid
further losses to the company caused by the union's inefficient service (85-86 tsn March 11,
1960).
After the termination of the contract, the members of the union allegedly harassed the
company with the help of goons.  The cargoes could not be unloaded in spite of the fact that
the company had sought the protection of the law-enforcing authorities
(88).  The company's last recourse was to go to court (89).
The company supposedly suffered losses as a result of the union's inefficient service since
September 1, 1954 (91).  Teves hired auditors to ascertain the losses suffered by the
company during the period from January 1 to September 11, 1954.
The trial court awarded actual damages amounting to P450,000 on the basis of the auditors'
reports, Exhibits A to I.  It did not carefully examine the said exhibits.  Contrary to the trial
court's impression, Exhibits B, C and D are not... auditors' reports.
The trial court did not bother to make a breakdown of the alleged damages totalling
P450,000.  The reports of the two hired accountants, Demetrio S. Jayme and M.J. Siojo,
show the following alleged damages... in the aggregate amount of P349,245.37 (not
P412,663.17, as erroneously added by the company's counsel, 161, 163-4 tsn March 11,
1960):
TABULATION OF ALLEGED DAMAGES CLAIMED BY COMPAÑIA MARITIMA
We tabulated the alleged damages to show that the trial court's award to the company of
P450,000 as damages is not supported by the evidence.  On the other hand, the statement
of the company's counsel that the damages totalled P412,663.17
(162-164 tsn March 11, 1960) is wron
We tabulated the alleged damages to show that the trial court's award to the company of
P450,000 as damages is not supported by the evidence.  On the other hand, the statement
of the company's counsel that the damages totalled P412,663.17
(162-164 tsn March 11, 1960) is wrong.
Teves, the company's branch manager, submitted a statement (Exh. K) showing the alleged
cost of three forklifts, 200 pieces of pallet boards, 530 pieces of wire rope slings and two
pieces of tarpaulins in the total sum of
P27,215.  In that statement, he claims that the damages to the company by reason of the
depreciation of the said items of equipment amounted to P38,835 or more than the cost
thereof.
The company's counsel, in his summary of the damages, ignored the alleged damages of
P38,835 indicated by Teves in Exhibit K.  The company's counsel relied only on the auditors'
reports, Exhibits A and E to I and on Exhibit B, the chief clerk's... statement.  As already
noted, those documents show that the total damages claimed by the company amounted to
P349,245.37.
The best evidence on the cost of the said equipment would have been the sales invoices
instead of the oral testimony of Teves.  He did not produce the sales invoices.
Issues:
Thus, the issue of whether the company should pay for the stevedoring service became a
sore point of contention between the parties.
The union members labored under the impression that they were not being compensated
for their stevedoring service as... distinguished from arrastre service.
Ruling:
The company's counsel, in his summary of the damages, ignored the alleged damages of
P38,835 indicated by Teves in Exhibit K.  The company's counsel relied only on the auditors'
reports, Exhibits A and E to I and on Exhibit B, the chief clerk's... statement.  As already
noted, those documents show that the total damages claimed by the company amounted to
P349,245.37.
The company argues that the accountants' reports are admissible in evidence because of the
rule that "when the original consists of numerous accounts or other documents which
cannot be examined in court without great loss of time and the fact sought to be
established... from them is only the general result of the whole", the original writings need
not be produced (Sec. 2[e], Rule 130, Rules of Court).
That rule cannot be applied in this case because the voluminous character of the records, on
which the accountants' reports were based, was not duly established (U. S. vs. Razon and
Tayag, 37 Phil. 856, 861; 29 Am
Jur 2nd 529).
It is also a requisite for the application of the rule that the records and accounts should be
made accessible to the adverse party so that the correctness of the summary may be tested
on cross-examination (29 Am Jur 2nd 517-8; 32A C.J.S. 111).
What applies to this case is the general rule "that an audit made by, or the testimony of, a
private auditor, is inadmissible in evidence as proof of the original records, books of
accounts, reports or the like" (Anno:  52 ALR 1266).
That general rule cannot be relaxed in this case because the company failed to make a
preliminary showing as to the difficulty or impossibility attending the production of the
records in court and their examination and analysis as evidence by the court (29 Am Jur
2nd 529).
A close scrutiny of the accountants' reports reveals their lack of probative value.  The
propriety of allowing the different items of damages is discussed below.
Unrealized freight and passenger revenue for 1954 ascertained by Accountant Demetrio S.
Jayme.- In his report (Exh. A, pp. 134 to 147, Record on Appeal), Jayme used the pronouns
"we" and "our" and made reference to the examination made by the "auditors" of his
accounting office.  He did not disclose the names of other "auditors" who assisted him in
making the examination of the company's records.
He gave the impression that he was an independent accountant hired by the company to
make a "special investigation" of the company's losses for the period from January 1 to
September 7, 1954.
The truth is that Jayme was a "personal friend" of Teves, the company's branch manager at
Iligan City. Teves was the company's principal witness in this case.  He verified the
complaint... herein.  He signed for the company the stevedoring and arrastre contract which
he later rescinded.  In fact, Teves intervened in the drafting of the contract.  It was his idea
that the company should... not pay the arrastre and stevedoring fees and that those charges
should be borne by the shippers and consignees.
It would not be proper to allow Jayme's estimates as recoverable damages.  They are not
supported by reliable evidence.  They can hardly be sanctioned by the "generally accepted
auditing standards" alluded to in
Jayme's report.  The pertinent records of the company should have been produced in court. 
The purser and steward did not testify
The rule is that the auditor's summary should not include his conclusions or inferences (29
Am Jur 2d 519).  His opinion is not evidence.
Jayme allegedly based his computations on the records of the company which were not
produced in court.  The union objected to Jayme's report as inadmissible under the hearsay
rule or as not being the best evidence.
Lost freight revenue and operating expenses for the forklifts.- The company claimed as
damages the sum of P87,986.05 (P151,403.85 as erroneously computed by the company's
counsel, 163 tsn March 11, 1960) consisting of supposed unrealized freight charges for
shutout or... unloaded cargoes for the year 1955 to 1959 (Exh. E to I, Items 11 to 20 of the
tabulation of damages).
The claim is covered by the company's third supplemental complaint dated March 9, 1960
wherein it was alleged that due to the acts of the union and its officers the company had
suffered damages of not less than P25,000 annually since 1955 (320-3, Record on
Appeal).  That supplemental complaint was hurriedly filed during the trial as directed by the
trial court.
The said damages were computed in the reports of Miguel J. Siojo, an accountant who, for
two days and nights, March 8 to 10, 1960, or shortly before and during the trial, allegedly
examined the company's record at Iligan City, such as its cash book,... cash vouchers, reports
to the head office, shipping manifests, and liquidation reports.  Those records were not
produced in court.  Their nonproduction was not explained.  If the accountant was able to
summarize... the contents of those records in two days, they could not have been very
voluminous.  They should have been offered in evidence.
41. Spouses Paras vs. Kimwa Construction and Development Corporation
FACTS:
In their Complaint, Spouses Paras alleged that sometime in December 1994, Lucia was
approached by Kimwa expressing its interest to purchase gravel and sand from her. Kimwa
allegedly asked that it be “assured” of 40,000 cubic meters worth of aggregates. 20 Lucia
countered that her concession area was due to be rechanneled on May 15, 1995, when her
Special Permit expires. 21 Thus, she emphasized that she would be willing to enter into a
contract with Kimwa “provided the forty thousand cubic meter[s] w[ould] be withdrawn
or completely extracted and hauled before 15 May 1995[.]” 22 Kimwa then assured Lucia
that it would take only two to three months for it to completely haul the 40,000 cubic
meters of aggregates. 23 Convinced of Kimwa’s assurances, Lucia and Kimwa entered into
the Agreement. 24
Spouses Paras added that within a few days, Kimwa was able to extract and haul 10,000
cubic meters of aggregates. However, after extracting and hauling this quantity, Kimwa
allegedly transferred to the concession area of a certain Mrs. Remedios dela Torre in
violation of their Agreement. They then addressed demand letters to Kimwa. As these went
unheeded, Spouses Paras filed their Complaint. Kimwa asserted that the Agreement
articulated the parties’ true intent that 40,000 cubic meters was a maximum limit and that
May 15, 1995 was never set as a deadline. Invoking the Parol Evidence Rule, it insisted that
Spouses Paras were barred from introducing evidence which would show that the parties
had agreed differently. 30
On May 16, 2001, the Regional Trial Court rendered the Decision in favor of Spouses Paras.
The trial court noted that the Agreement stipulated that the allotted aggregates were set
aside exclusively for Kimwa.On appeal, the Court of Appeals reversed the Regional Trial
Court’s Decision. It faulted the trial court for basing its findings on evidence presented which
were supposedly in violation of the Parol Evidence Rule. It noted that the Agreement was
clear that Kimwa was under no obligation to haul 40,000 cubic meters of aggregates by May
15, 1995. In a subsequent Resolution, the Court of Appeals denied reconsideration to
Spouses Paras. 35
ISSUE:
Whether or not petitioners Spouses Paras were able to establish that respondent Kimwa
was obliged to haul a total of 40,000 cubic meters of aggregates on or before May 15, 1995.
HELD:
Yes. Respondent Kimwa is liable for failing to haul the remainder of the quantity which it
was obliged to acquire from petitioner Lucia Paras. Rule 130, Section 9 of the Revised Rules
on Evidence provides for the Parol Evidence Rule, the rule on admissibility of documentary
evidence when the terms of an agreement have been reduced into writing. However, a
party may present evidence to modify, explain or add to the terms of written agreement if
he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the
parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after
the execution of the written agreement. The term “agreement” includes wills.
This, however, is merely a general rule. Provided that a party puts in issue in its pleading any
of the four (4) items enumerated in the second paragraph of Rule 130, Section 9, “a party
may present evidence to modify, explain or add to the terms of the agreement[.]” 41 Raising
any of these items as an issue in a pleading such that it falls under the exception is not
limited to the party initiating an action.TIADCc
In sum, two (2) things must be established for parol evidence to be admitted: first, that the
existence of any of the four (4) exceptions has been put in issue in a party’s pleading or has
not been objected to by the adverse party; and second, that the parol evidence sought to be
presented serves to form the basis of the conclusion proposed by the presenting party.
Contrary to the Court of Appeal’s conclusion, petitioners Spouses Paras pleaded in the
Complaint they filed before the trial court a mistake or imperfection in the Agreement, as
well as the Agreement’s failure to express the true intent of the parties. Further, respondent
Kimwa, through its Answer, also responded to petitioners Spouses Paras’ pleading of these
issues. This is, thus, an exceptional case allowing admission of parol evidence.
Considering how the Agreement’s mistake, imperfection, or supposed failure to express the
parties’ true intent was successfully put in issue in petitioners Spouses Paras’ Complaint (and
even responded to by respondent Kimwa in its Answer), this case falls under the exceptions
provided by Rule 130, Section 9 of the Revised Rules on Evidence. Accordingly, the
testimonial and documentary parol evidence sought to be introduced by petitioners Spouses
Paras, which attest to these supposed flaws and what they aver to have been the parties’
true intent, may be admitted and considered. AIDSTE
Our evidentiary rules impel us to proceed from the position (unless convincingly shown
otherwise) that individuals act as rational human beings, i.e, “[t]hat a person takes ordinary
care of his concerns[.]” 58 This basic evidentiary stance, taken with the supporting evidence
petitioners Spouses Paras adduced, respondent Kimwa’s awareness of the conditions under
which petitioner Lucia Paras was bound, and the Agreement’s own text specifying exclusive
allotment for respondent Kimwa, supports petitioners Spouses Paras’ position that
respondent Kimwa was obliged to haul 40,000 cubic meters of aggregates on or before May
15, 1995. As it admittedly hauled only 10,000 cubic meters, respondent Kimwa is liable for
breach of contract in respect of the remaining 30,000 cubic meters.  from the joint venture’s borrowers. They were, however, able to collect only to the extent of
42. Spouses Abella vs. Abella
Facts:
The assailed September 30, 2010 Decision of the Court of Appeals reversed and set aside the
December 28, 2005 Decision of the Regional Trial Court, Branch 8, Kalibo, Aklan in Civil Case
No. 6627. It directed petitioners to pay respondents P148,500.00 (plus interest), which was
the amount respondents supposedly overpaid. The assailed January 4, 2011 Resolution of
the Court of Appeals denied petitioners’ Motion for Reconsideration.
The Regional Trial Court’s December 28, 2005 Decision ordered respondents to pay
petitioners the supposedly unpaid loan balance of P300,000.00 plus the allegedly stipulated
interest rate of 30% per annum, as well as litigation expenses and attorney’s fees.
On July 31, 2002, petitioners Spouses Salvador and Alma Abella filed a Complaint for sum of
money and damages with prayer for preliminary attachment against respondents Spouses
Romeo and Annie Abella before the Regional Trial Court, Branch 8, Kalibo, Aklan. The case
was docketed as Civil Case No. 6627.
In their Complaint, petitioners alleged that respondents obtained a loan from them in the
amount of P500,000.00. The loan was evidenced by an acknowledgment receipt dated
March 22, 1999 and was payable within one (1) year. Petitioners added that respondents
were able to pay a total of P200,000.00—P100,000.00 paid on two separate occasions—
leaving an unpaid balance of P300,000.00.
In their Answer (with counterclaim and motion to dismiss), respondents alleged that the
amount involved did not pertain to a loan they obtained from petitioners but was part of
the capital for a joint venture involving the lending of money.
Specifically, respondents claimed that they were approached by petitioners, who proposed
that if respondents were to “undertake the management of whatever money [petitioners]
would give them, [petitioners] would get 2.5% a month with a 2.5% service fee to
[respondents].”The 2.5% that each party would be receiving represented their sharing of the
5% interest that the joint venture was supposedly going to charge against its debtors.
Respondents further alleged that the one year averred by petitioners was not a deadline for
payment but the term within which they were to return the money placed by petitioners
should the joint venture prove to be not lucrative. Moreover, they claimed that the entire
amount of P500,000.00 was disposed of in accordance with their agreed terms and
conditions and that petitioners terminated the joint venture, prompting them to collect
P200,000.00; hence, the P300,000.00 balance remained unpaid.
In the Decision dated December 28, 2005, the Regional Trial Court ruled in favor of
petitioners. It noted that the terms of the acknowledgment receipt executed by respondents
clearly showed that: (a) respondents were indebted to the extent of P500,000.00; (b) this
indebtedness was to be paid within one (1) year; and (c) the indebtedness was subject to
interest. Thus, the trial court concluded that respondents obtained a simple loan, although
they later invested its proceeds in a lending enterprise. The Regional Trial Court adjudged
respondents solidarity liable to petitioners. In the Order dated March 13, 2006,the Regional
Trial Court denied respondents’ Motion for Reconsideration.
On respondents’ appeal, the Court of Appeals ruled that while respondents had indeed
entered into a simple loan with petitioners, respondents were no longer liable to pay the
outstanding amount of P300,000.00.
The Court of Appeals reasoned that the loan could not have earned interest, whether as
contractually stipulated interest or as interest in the concept of actual or compensatory
damages. As to the loan’s not having earned stipulated interest, the Court of Appeals
anchored its ruling on Article 1956 of the Civil Code, which requires interest to be stipulated
in writing for it to be due. The Court of Appeals noted that while the acknowledgement
receipt showed that interest was to be charged, no particular interest rate was specified.
Thus, at the time respondents were making
interest payments of 2.5% per month, these interest payments were invalid for not being
properly stipulated by the parties.
In the Resolution dated January 4, 2011, the Court of Appeals denied petitioners’ Motion for
Reconsideration.
Issue: Whether or not even though no interest rate was stipulated in the
acknowledgment receipt, the case fell under the exception to the Parol Evidence Rule.
Ruling:
Petitioners, however, insist on conventional interest at the rate of 2.5% per month or 30%
per annum. They argue that the acknowledgment receipt fails to show the complete and
accurate intention of the contracting parties. They rely on Article 1371 of the Civil Code,
which provides that the contemporaneous and subsequent acts of the contracting parties
shall be considered should there be a need to ascertain their intent. 44 In addition, they claim
that this case falls under the exceptions to the Parol Evidence Rule, as spelled out in Rule
130, Section 9 of the Revised Rules on Evidence. 45redarclaw
It is a basic precept in legal interpretation and construction that a rule or provision that
treats a subject with specificity prevails over a rule or provision that treats a subject in
general terms.46redarclaw
The rule spelled out in Security Bank and Spouses Toring is anchored on Article 1956 of the
Civil Code and specifically governs simple loans or mutuum. Mutuum is a type of nominate
contract that is specifically recognized by the Civil Code and for which the Civil Code
provides a specific set of governing rules: Articles 1953 to 1961. In contrast, Article 11371 is
among the Civil Code provisions generally dealing with contracts. As this case particularly
involves a simple loan, the specific rule spelled out in Security Bank and Spouses Toring finds
preferential application as against Article 1371.
Contrary to petitioners' assertions, there is no room for entertaining extraneous (or parol)
evidence. In Spouses Bonifacio and Lucia Paras v. Kimwa Construction and Development
Corporation,47 we spelled out the requisites for the admission of parol
evidence:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
In sum, two (2) things must be established for parol evidence to be admitted: first, that the
existence of any of the four (4) exceptions has been put in issue in a party's pleading or has
not been objected to by the adverse party; and second, that the parol evidence sought to be
presented serves to form the basis of the conclusion proposed by the presenting party. 48
The issue of admitting parol evidence is a matter that is proper to the trial, not the
appellate, stage of a case. Petitioners raised the issue of applying the exceptions to the Parol
Evidence Rule only in the Reply they filed before this court. This is the last pleading that
either of the parties has filed in the entire string of proceedings culminating in this Decision.
It is, therefore, too late for petitioners to harp on this rule. In any case, what is at issue is not
admission of evidence per se, but the appreciation given to the evidence adduced by the
parties. In the Petition they filed before this court, petitioners themselves acknowledged
that checks supposedly attesting to payment of monthly interest at the rate of 2.5% were
admitted by the trial court (and marked as Exhibits "2," "3," "4," "5," "6," "7," and
"8").49 What petitioners have an issue with is not the admission of these pieces of evidence
but how these have not been appreciated in a manner consistent with the conclusions they
advance.
Even if it can be shown that the parties have agreed to monthly interest at the rate of 2.5%,
this is unconscionable. As emphasized in Castro v. Tan,50 the willingness of the parties to
enter into a relation involving an unconscionable interest rate is inconsequential to the
validity of the stipulated rate:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
The imposition of an unconscionable rate of interest on a money debt, even if knowingly
and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation
and an iniquitous deprivation of property, repulsive to the common sense of man. It has no
support in law, in principles of justice, or in the human conscience nor is there any reason
whatsoever which may justify such imposition as righteous and as one that may be
sustained within the sphere of public or private morals. 51
The imposition of an unconscionable interest rate is void ab initio for being "contrary to
morals, and the law."52redarclaw
In determining whether the rate of interest is unconscionable, the mechanical application of
pre-established floors would be wanting. The lowest rates that have previously been
considered unconscionable need not be an impenetrable minimum. What is more crucial is
a consideration of the parties' contexts. Moreover, interest rates must be appreciated in
light of the fundamental nature of interest as compensation to the creditor for money lent
to another, which he or she could otherwise have used for his or her own purposes at the
time it was lent. It is not the default vehicle for predatory gain. As such, interest need only
be reasonable. It ought not be a supine mechanism for the creditor's unjust enrichment at
the expense of another.

Petitioners here insist upon the imposition of 2.5% monthly or 30% annual interest.
Compounded at this rate, respondents' obligation would have more than doubled—
increased to 219.7% of the principal—by the end of the third year after which the loan was
contracted if the entire principal remained unpaid. By the end of the ninth year, it would
have multiplied more than tenfold (or increased to 1,060.45%). In 2015, this would have
multiplied by more than 66 times (or increased to 6,654.17%). Thus, from an initial loan of
only P500,000.00, respondents would be obliged to pay more than P33 million. This is
grossly unfair, especially since up to the fourth year from when the loan was obtained,
respondents had been assiduously delivering payment. This reduces their best efforts to
satisfy their obligation into a protracted servicing of a rapacious loan.

The legal rate of interest is the presumptive reasonable compensation for borrowed money.
While parties are free to deviate from this, any deviation must be reasonable and fair. Any
deviation that is far-removed is suspect. Thus, in cases where stipulated interest is more
than twice the prevailing legal rate of interest, it is for the creditor to prove that this rate is
required by prevailing market conditions. Here, petitioners have articulated no such
justification.

In sum, Article 1956 of the Civil Code, read in light of established jurisprudence, prevents the
application of any interest rate other than that specifically provided for by the parties in
their loan document or, in lieu of it, the legal rate. Here, as the contracting parties failed to
make a specific stipulation, the legal rate must apply. Moreover, the rate that petitioners
adverted to is unconscionable. The conventional interest due on the principal amount
loaned by respondents from petitioners is held to be 12% per annum.