GOVERNMENT SERVICE INSURANCE SYSTEM, PETITIONER-APPELLANT, VS. THE COURT OF APPEALS AND AGRICULTURAL CREDIT ADMINISTRATION (ACA), RESPONDENTS-APPELLEES.

Before us is a petition for review on certiorari seeking
the annulment of respondent court’s resolutions dated May 7, 1979 and November
23, 1979 rendered in CA-G.R. No. 59286-R.

The facts of the case, as
established by the record, being undisputed, we quote with approval the
following concise summary thereof made by petitioner Government Service
Insurance System (GSIS) in its brief filed before respondent
court:

On June 20, 1961, Fire Policy No. N-­29704 (Exh. 533 and D) was
issued by the Property Insurance Fund of the defendant-appellee Government
Service Insurance System (GSIS) to cover the insurance of various grades of
Virginia leaf tobacco owned by the plaintiff-appellant and stored in Warehouse
F belonging to the Philippine Tobacco Flue-Curing and Redrying Corporation
(PTFC & RC), located at Baesa, Novaliches, Quezon City, with a declared
value of P21,459,575.66 and for the period from July 1, 1961 to July 1, 1962.

On November 17, 1961 another Fire Policy No. N-30871 (Exhs. 534 and
H) was issued by the Property Insurance Fund of the GSIS to cover the insurance
of various grades of Virginia leaf tobacco belonging to the plaintiff-appellant
and stored in the said Warehouse F, with the declared value of P2,048,518.50
and for the period from September 30, 1961 to September 30, 1962.

The said insurance policies provide among other things that in the
event of loss, whether total or partial, the amount thereof shall be subject to
appraisal and that the liability of the GSIS, if established shall be limited
to the actual loss, subject to the applicable terms, conditions, warranties and
clauses of the policies, and in no case to exceed the amount of the
policies. This is the open policy
clause of the said insurance policies. (Exhs. 533-A-1 and 534-A-1).

On February 15, 1962 at about 7:20 in the evening thereof, a fire
occurred which burned the said Warehouse F and practically all the tobacco
stored therein. As already stated, the
said warehouse was owned by the Philippine Tobacco Flue-Curing and Redrying
Corporation, then controlled by the well-known Harry Stonehill. The said warehouse is one of the warehouses
in the Baesa compound of the PTFC & RC.

Subsequently, plaintiff-appellant filed with the GSIS its fire
claim, Exhs. N-­1 to N-4.

Pursuant to the open policy clause of the insurance policies, the
GSIS, as is the practice in the insurance business, employed three insurance
adjusters to ascertain the actual loss suffered by the
plaintiff-appellant. Said adjusters are
the Manila Adjustment Company, H. H. Bayne Adjustment Company and the Allied
Adjustment Company. The said adjusters
examined the records of the plaintiff-appellant and of the Philippine Tobacco
Flue-Curing and Redrying Corporation and they employed two tobacco experts to
assist them in evaluating the loss of the plaintiff-appellant. Said tobacco experts were Mr. George Flagg
and Edrington S. Penn. After the
adjusters, with the assistance of Mr. Flagg and Penn, had verified the records
of the plaintiff-appellant and of the PTFC & RC and had employed the
hogshead metal strap recovery method, the said adjusters rendered a report on
September 25, 1962 (Exh. 538) and a final report on September 25, 1963 (Exhs.
29 to 529-F; also marked as Exhs. Q to Q-6 and Exhs. 537 to 537-H). In said final report, the adjusters
recommended as the basis for the adjustment of appellant’s claims the amount of
P12,557,968.68. Their verification
showed that only 15,467 hogshead of tobacco of various grades were inside the
Warehouse F at the time of the fire.

Plaintiff-appellant refused
to accept the correctness of the said report and so conferences were had
between the officials of plaintiff-appellant and the GSIS, together with the
adjusters, and as a result, the GSIS offered as final payment of the
appellant’s claim the amount of P13,500,000.00. Said offer was embodied in the letter of December 7, 1964 of then
General Manager Ramon A. Diaz, which reads as follows:

“Please be advised that we are now preparing partial payment
of the captioned loss in the amount of P2,295,873.21. We shall effect payment of the balance (of the P13,500,000.00
proposed settlement) as soon as possible.

“We sincerely believe that the amount of P13,500,000.00 is
just and fair indemnity for the loss. Inasmuch as that office refused to execute the required Sworn Statement
in Proof of Loss, we wish to ask your written agreement to the following conditions (which were embodied in our
letter of July 17, 1964 to the Central Bank of the Philippines) before we
remit the above?mentioned partial payment and subsequent payments of the
balance:

“1. In the event
that ACA claims for additional indemnity (in excess of the amount of
P13,500,000.00) the burden of proving such additional claim shall be its own
responsibility.

“2 That should ACA
be able to present additional proof and evidence for additional indemnity, the
same shall be referred for adjudication to a competent court.

(Ex. EE; Exh. 530; pp. 13-14, tsn, May 19, 1972)

Plaintiff-appellant accepted the offer and its acceptance is
embodied in the letter of Mr. Amado A. Lansang, Officer-in-Charge, dated December 16, 1964. Thus, the body of said letter, Exh. FF (also
Exh. 631) reads as follows:

“In attention to your letter of December 7th which was
transmitted to us by the Central Bank under its 1st Indorsement dated December
14, 1964, please be advised that we agree to the following condition set by you
in your aforesaid letters, viz: –

“1. That in the
event ACA claims for further indemnity in excess of the amount of
P13,500,000.00, the burden of proving such additional amount shall be of ACA’s
responsibility.

“2. That ACA
shall present additional proof and evidence for further indemnity to a competent court for adjudication.”

(pp. 14-16, tsn, May 19, 1972)

Pursuant to the said agreement of the parties, the GSIS paid to the plaintiff-appellant
the amount of P13,500,000.00. (p. 17,
tsn, May 19, 1972).

Since it claims that its
loss from the fire is P23,610,571.61, the plaintiff-appellant filed the
present action in Court, praying among other things, that the defendant-appellee
be ordered to pay the difference of P10,110,571.61 (p. 11, Record on Appeal)
(pp. 2-7, Brief for Defendant?Appellee
Government Service Insurance System; p. 83, Rollo)

ACA’s complaint was filed with the then Court of First Instance
of Manila on September 21, 1965 and docketed as Civil Case No. 62683. On September 9, 1975, the trial court
rendered a decision dismissing the complaint. ACA appealed to respondent Court of Appeals where the appeal was
docketed as CA-G.R. No. 59286-R. On December 29, 1978 respondent court
promulgated its decision affirming
the decision of the trial court (de Castro (P), Reyes, Sundiam, JJ.). However,
upon ACA’s motion, respondent court issued a resolution (penned by
Justice Samuel Reyes who had taken over
from Justice Pacifico de Castro due to the latter’s promotion to the
Supreme Court; and with the
addition of Justice Isidro Borromeo as third member) on May 7, 1979, the dispositive portion of which reads
as follows:

WHEREFORE, the  Motion  for Reconsideration is hereby GRANTED and
consequently, the decision in this case dated December 29, 1978 is REVERSED,
thus, entitling plaintiff-appellant the
balance of P10,110,571.61 on the two (2) fire insurance policies issued by
defendant-appellee covering its tobacco stocks stored at the PTFC & REC
Warehouse “F”. (p. 77, Rollo)

On July 16, 1979, GSIS filed a motion for reconsideration of the
resolution of May 7, 1979, and on November 23, 1979, the respondent court
issued a resolution denying the motion for reconsideration.

Hence, the present petition under the following assigned errors.

I

Respondent Court of Appeals erred in its Resolution of May 7, 1979
and November 23, 1979 in making a wrong interpretation and application of the
term “additional proof and evidence for further indemnity” as
stipulated in the agreement of the parties.

II

Respondent Court of Appeals erred in its Resolution of May 7, 1979
and Nov. 23, 1979 in not sustaining the interpretation and application of said
term as originally made by respondent Court of Appeals in its Decision of
December 29, 1978.

III

Respondent Court of Appeals erred in refusing, and thus committed a
grave abuse of discretion, to make a physical count of the withdrawals of
tobacco hogsheads indicated in ACA’s own evidence, Exhibits QQ to QQ-2024, in
the face of the repeated protestations of petitioner GSIS that the allegation
of ACA’s witness, Patrocinio Torres, that the withdrawals recorded in said
exhibits totalled only 12,922 hogsheads is a brazen lie.

IV

Respondent Court of Appeals erred in not finding that the
withdrawals recorded in ACA’s Exhibits QQ to QQ-2024 totalled 15,679 hogsheads
of tobacco, and not just 12,922 hogsheads.

V

Respondent Court of Appeals erred in totally ignoring and in not
finding that there were additional withdrawals of 1,994 hogsheads as shown in
Exhs. 134 to 368.

VI

Respondent Court of Appeals erred in concluding that ACA’s evidence
on the withdrawals is correct since such conclusion is not supported by the
evidence on record and adduced during the trial.

VII

Respondent Court of Appeals erred in making a glaring
misapprehension of fact in concluding that Joseph Singh confirmed ACA’s
contention that the tobacco stocks were intact at the time of the fire, as the
evidence is clear that what were brought out of the warehouse were the contents
of the tobacco hogsheads stored there.

VIII

Respondent Court of Appeals erred in not finding that the whole
contents of warehouse F were substituted with rotten tobacco before the fire.

IX

Respondent Court of Appeals erred in not sustaining its original
decision of December 29, 1978 and the decision of the trial court.

X

Respondent Court of Appeals erred in not dismissing the complaint
of respondent-appellee Agricultural Credit Administration. (pp. 1-4, Brief for Petitioner-Appellant Government Service Insurance System; p. 160, Rollo)

The decisive issue involved in the case at bar is the quantity of
tobacco stored in Warehouse “F” at the time said warehouse was
totally destroyed by fire on February 15, 1962. Petitioner GSIS maintains that a total of 17,623 hogsheads of
tobacco were withdrawn from Warehouse “F” before the fire
occurred. On the other hand, respondent
ACA contends that only 12,922 hogsheads of tobacco were withdrawn.

Before resolving said issue, we shall dispose of an incidental
issue which appears to preoccupy both parties, i.e., whether or not the
testimony of ACA’s witnesses, Dorotea Toledo, Aurelio B. de Jesus, Demetrio P. Tabije, and Patrocinio Torres, is “additional proof
of evidence” within the contemplation of the letter of offer of GSIS dated
December 7, 1964 and the letter of acceptance of ACA dated December 16,
1964. The discussion by the parties of
said issue is a futile exercise in semantics.

The Constitution of the Republic of the Philippines vests upon
the Supreme Court the power to promulgate rules concerning pleading, practice
and procedure in all courts (par. 5, sec. 4, art. VIII, Constitution). Even the provision in both the 1935 and the
1973 Constitutions that the rules of court promulgated by the Supreme Court may be “repealed, altered or
supplemented” by the legislature does not appear in the 1987
Constitution. Parties have, therefore,
no discretion or power to alter, modify or circumscribe the rules on evidence
to suit their particular needs in a case brought before the courts.

We, therefore, rule that the admissibility of the testimony of
ACA’s witnesses must be determined by the rules of court. Since said testimony is relevant to the
facts in issue and said witnesses are competent witnesses, we hold that said
testimony is admissible in evidence and we shall take it into consideration in
resolving the issue involved.

As a general rule the findings of fact of the Court of Appeals
are binding upon this Court (De Gala­-Sison vs. Manalo,
8 SCRA 595 [1963]; Chan vs. Court of Appeals,
33 SCRA 737 [1970]; Evangelista & Co., vs. Santos,
51 SCRA 416 [1973]). However, said rule
admits of exceptions. The exceptions,
as set forth in Macadangdang vs. Court of Appeals
(100 SCRA 73 [1980]) are:

The findings of facts of the Court of Appeals are conclusive on the
parties and on the Supreme Court, unless (1) the conclusion is a finding
grounded entirely on speculation,
surmise, and conjectures; (2) the inference made is manifestly mistaken; (3)
there is grave abuse of discretion; (4) the judgment is based on
misapprehension of facts; (5) the Court of Appeals went beyond the issues of
the case and its findings are contrary to the admission of both appellant and
appellee; (6) the findings of facts of the Court of Appeals are contrary to
those of the trial court; (7) said findings of facts are conclusions
without citation of specific evidence on which they are based; (8) the facts
set forth in the petition as well as in the petitioner’s main and reply briefs
are not disputed by the respondents; and (9) when the finding of facts of the
Court of Appeals is premised on the absence of evidence and is contradicted by
evidence on record.

This Court retains the power to review and
rectify findings of fact of the Court of Appeals where said court manifestly
overlooked, ignored, or misinterpreted certain facts or circumstances of weight
and significance (Carolina Industries, Inc., vs. CMS
Stock Brokerage, 97 SCRA 734 [1980]; People vs. Arciaga,
98 SCRA 1 [1980]). Considering that the
findings of fact of the Court of Appeals conflict with those of the trial
court, the exercise of our power of review over the decision of the Court of
Appeals is not unjustified.

As afore-mentioned, the quantity of tobacco delivered to
Warehouse “F” is not in dispute. The issue in dispute is the quantity of tobacco withdrawn from said
warehouse before the fire of February 15, 1962. Withdrawals of tobacco from Warehouse “F” are recorded
in the Delivery Order and Tally-Out Sheets, Exhibits QQ to Q-2022 and Exhibits
134 to 368.

The Court of Appeals, in its resolution of May 7, 1979, mainly
based its findings, that 120,270 hogsheads of tobacco were stored in Warehouse
“F” immediately before the fire, on Exhibit GG, a summary of the
withdrawals based on Exhibits QQ to QQ-2022. The Court of Appeals should not have merely relied on the summary but
should have gone to the original sources and the bases thereof and should have
scrutinized Exhibits QQ to QQ-2022 and Exhibits 134 to 368, the tally-out
sheets for these are the primary documents recording each and every withdrawal
of tobacco from the warehouse at the time of delivery. These exhibits constitute the best evidence
to prove the withdrawal of tobacco from the warehouse.

Nor may the tally sheet summary be of any significance. The contents of the tally sheet summary were
supposed to have been merely copied from the weighers’ tally sheets prepared
right at the ramps. The inability of
SVTPA to produce the original of the weighers’ tally sheets or even explain its non-production creates the
impression that no delivery was actually made. As testified to by plaintiff’s witness Maria Malabanan, the weighers’
tally sheets are prepared at the same time that the weighing and grading of the
delivered tobacco are made in the presence of the respective grader and the
weigher of FVTR and PVTA.

x x x

x x x

x x x

The best evidence available, therefore, is that which relates
directly or has a direct connection with the delivery. And these are the documents prepared at the moment of delivery and which affirm the
presence of the tobacco delivered at the FVTR warehouse. (Santiago
Virginia Tobacco Planters Asso., Inc., vs. Philippine Virginia Tobacco Administration,
31 SCRA 528, 538-541 [1970])

According to Exhibits QQ to QQ-2022, the withdrawals of tobacco from Warehouse “F”
during the period 1955 to 1959 were as follows:

(pp. 40-41, Rollo)

Adding the withdrawal by crop years, we arrive at the following
figures:

Crop Year 1955   ————————————   126 Hogsheads

Crop year 1956    ———————————–    5,348   “

Crop Year 1957   ———————————–    1,155   “

Crop Year 1958   ———————————–    4,317   “

Crop Year 1959   ———————————–    4,723   “

Total            ———————————– 15,669 Hogsheads

(p. 41, Rollo)

Therefore, according to ACA’s own documentary evidence, 15,669
hogshead of tobacco were withdrawn from the warehouse from 1955 to 1959.

In addition thereto, Exhibits 134 to 368, delivery orders dated
August 13 to 16, 1959, indicate that there were further withdrawals of 1,944
hogsheads from
the warehouse during said period. 15,669 hogsheads plus 1944 additional hogsheads, gives us a total of
17,613 hogsheads of tobacco withdrawn from the warehouse. Deducting 17,613 hogsheads of tobacco from
the total receipt of 33,090 hogsheads of tobacco gives a total of 15,457 tobacco hogsheads inside the warehouse at the time of the fire on
February 15, 1962. The
documentary evidence on record, therefore, clearly supports the position of
petitioner GSIS.

The presentation of the testimony of ACA’s witnesses, Doroteo
Toledo, Aurelio B. de Jesus, Demetrio P. Tabije, and Patronicio Torres is
nothing but a convoluted attempt of ACA to minimize and neutralize the impact
of Exhibits QQ to QQ-2022 and Exhibits 134 to 368. Their testimony consisted mainly in trying to explain away, vary,
and modify the meaning and significance of Exhibits QQ to QQ-2022 and Exhibits 134 to
368. Their testimony cannot prevail
over the documentary evidence, Exhibits QQ to QQ-2022 and Exhibits 134 to
368. Testimonial evidence is easy of
fabrication and there is very little room for choice between testimonial
evidence and documentary evidence (Marvel
Building Corporation vs. David, 94
Phil. 376 [1954]). Generally,
documentary evidence prevails over testimonial evidence.

WHEREFORE, the resolution dated May 7, 1979, as well as
that of November 23, 1979, of respondent Court of Appeals are hereby ANNULLED
and SET ASIDE and the complaint filed in Civil Case No. 62683 is hereby
DISMISSED.

SO ORDERED.

Feliciano, (Chairman), Bidin, Davide, Jr., and Romero, JJ.,
concur.