MALAYAN INSURANCE CO., INC., PETITIONER, VS. PHILIPPINE NAILS AND WIRES CORPORATION, RESPONDENT.

Malayan Insurance versus Philippine Nails and Wires

The Case

This is a petition for review brought by Malayan Insurance Company against its own insured, Philippine Nails and Wires Corporation. The insured imported a shipment of steel billets, insured it against all risks, and then claimed for the cargo that never arrived. When the insurer refused to pay, the insured sued for a sum of money. The case matters because the Supreme Court uses it to draw a clean line between a witness who speaks from personal knowledge and one who merely repeats what others recorded, and to remind every litigant that a private document proves nothing until its due execution and authenticity are established.

Procedural History

The insured filed a complaint for a sum of money before the Regional Trial Court of Pasig. The insurer moved to dismiss on the grounds that the complaint stated no cause of action and that venue was wrong; the motion was denied. The insurer then went up to the Court of Appeals on a petition for prohibition, which was likewise denied, and that denial became final and executory.

Back in the trial court, the insured amended its complaint, and the court gave the insurer until the end of October 1993 to answer. The insurer answered only in November. On the insured's motion, the trial court declared the insurer in default, allowed evidence to be presented ex parte before the branch clerk of court, and later expunged the late answer. Judgment by default followed in December 1993, ordering the insurer to pay the insured value of the undelivered steel billets with legal interest, attorney's fees of fifteen percent, and costs.

The insurer appealed. The Court of Appeals affirmed the judgment in full, and denied reconsideration. The insurer then came to the Supreme Court by petition for review.

Facts

Philippine Nails and Wires Corporation imported 10,053.400 metric tons of steel billets valued at 67,156,300 pesos, and insured the shipment against all risks with Malayan Insurance Company. When the cargo was delivered, it was short by 377.168 metric tons. The insured claimed 2,698,637.04 pesos, representing the value of the undelivered billets plus customs duties, taxes, and other charges it had paid. The insurer refused to pay.

At the ex parte hearing, the insured presented a single witness, Jeanne King, who had been assigned to handle and monitor the company's importations, including their insurance coverage. She personally prepared the summary of the weight of steel billets received. That summary, however, was built not on her own observation but on receipts prepared by other persons, and on a bill of lading and an SGS report that were never authenticated.

The insurer argued on appeal that King's testimony was hearsay and that the documentary exhibits were admitted without proper authentication. The Court of Appeals upheld the trial court, finding King competent because she had prepared the documents and had personal knowledge of the allegations, and finding no denial of due process in the absence of a written report by the branch clerk of court.

Issues

• Whether or not the testimony of Jeanne King was hearsay and therefore without probative value.
• Whether or not the respondent had to authenticate the private documentary evidence it submitted at the trial before that evidence could be admitted and given weight.

Applicable Provisions

Section 36 of Rule 130 of the Rules of Court defines the hearsay rule and its exception:

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.

This is the test applied to King: what she perceived herself may stand; what she only learned from the records of others may not.

Section 19 of Rule 132 classifies documents as public or private:

For the purpose of their presentation in evidence, documents are either public or private. Public documents are: a) The written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers, whether of the Philippines, or of a foreign country; b) Documents acknowledged before a notary public except last wills and testaments; and c) Public records, kept in the Philippines, of private documents required by law to be entered therein. All other writings are private.

The insured's exhibits, not being among the enumerated public documents, are private, and so the next section governs them.

Section 20 of Rule 132 states the requirement of proof:

Proof of private document. Before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either: (a) By anyone who saw the document executed or written; or (b) By evidence of the genuineness of the signature or handwriting of the maker. Any other private document need only be identified as that which it is claimed to be.

This is the hurdle the insured failed to clear for its bill of lading and SGS report.

Ruling

On the first issue, the Court split the witness's testimony in two. On the volume of steel billets imported, King had personal knowledge, because she was assigned to handle the importations and their insurance coverage; to that extent her testimony was not hearsay and she was competent. But on the shortage in delivery she was not qualified, because she had no personal knowledge of the billets actually received. Her summary rested only on receipts prepared by other persons. Her testimony on that point was hearsay and, the Court stressed, had no probative value even if no objection was raised at the trial.

On the second issue, the Court ruled for the insurer. The insured itself admitted that King was none of the persons who could authenticate a private document under Section 20 of Rule 132: not the one who executed it, not the one before whom it was acknowledged, not a person who saw it executed or recognized the signatures, and not one to whom the parties had confessed execution. She merely summarized weights from an unauthenticated bill of lading and SGS report. The summary therefore had no proven real basis, and her testimony on it could not be taken at face value. Since the exhibits could not be used to prove the short delivery, there was no sufficient competent evidence of the insurer's liability.

Doctrine

First, the hearsay rule under Section 36 of Rule 130 confines a witness to facts derived from his own perception. A witness may testify to matters within her personal knowledge, but testimony resting on records prepared by others is hearsay and has no probative value, even absent an objection.

Second, under Sections 19 and 20 of Rule 132, a private document offered as authentic must first have its due execution and authenticity proved by one who saw it executed or written, or by evidence of the genuineness of the signature or handwriting of the maker. Until then it cannot be admitted to prove its contents, and a summary built upon it inherits its defect.

Third, a judgment by default does not relieve the plaintiff of the burden of proving its case with competent evidence; the ex parte presentation still demands proof that would survive the rules on evidence.

Disposition

The petition was granted; the decision and resolution of the Court of Appeals were reversed and set aside, and the civil case was ordered dismissed, with no pronouncement as to costs. The insurer won.

Remember This

Memorize the pairing: personal knowledge under Section 36 of Rule 130, and authentication of private documents under Section 20 of Rule 132, without which a summary of unauthenticated records is worthless. Examiners use this case in evidence questions on hearsay and the authentication of private documents, and in civil procedure questions on whether a defaulted defendant may still be held liable on incompetent proof.