Case Summary (G.R. No. 159831)
Key Dates
Relevant delivery period: 1955–1977. First volumetric test: July 24, 1974 (showed 190 liters versus billed 210 liters). Later tests: January 23/25, 1975 (187.5 liters) and October–November 1977 measurements (180 liters). Formal letters/demands: October 24, 1974; February 1, 1975; additional communications in 1975. Complaint filed: August 20, 1980. RTC decision: August 30, 1991. CA decision: August 20, 2002; CA resolution denying reconsideration: August 29, 2003. Supreme Court decision: October 14, 2005.
Applicable Law and Procedural Framework
Governing constitution: 1987 Philippine Constitution (decision date post‑1990). Procedural rules: Rules of Court (Rule 45 petitions for review, requirements for verification and certification against forum shopping). Evidence law: Rule 130 on competence and personal knowledge of witnesses, Rule 48 on opinion evidence. Substantive law: Civil Code provisions on prescription (Art. 1144 and related articles), and on exemplary damages and attorney’s fees (Arts. 2208, 2229, 2232, 2233).
Nature of the Case and Relief Sought
Respondent sued for specific performance and damages, alleging systematic underdelivery of fuel oil sold and billed at 210 liters per drum but actually containing less. Reliefs sought included delivery of the undelivered volume, actual and exemplary damages, attorney’s fees, and costs.
Factual Findings Relevant to Liability
The trial evidence included parties’ invoices, multiple volumetric tests, and witness testimony. The July 24, 1974 volumetric test—conducted in the presence of both parties’ representatives—showed drums holding only 190 liters. Subsequent tests in 1975 and 1977 showed progressively lower capacities. Petitioner admitted deliveries occurred from 1955 to 1977 but denied underdelivery and contended the tested drums were not representative. The RTC and the CA found the volumetric tests and attendant testimony established short deliveries totaling 916,487.62 liters.
Procedural History and Questions Before the Supreme Court
After the RTC awarded specific performance and damages, petitioner appealed to the Court of Appeals, which largely affirmed the RTC (modifying exemplary damages and attorney’s fees). Petitioner then filed a Rule 45 petition to the Supreme Court raising, among other points: (1) alleged defects in verification and certification against forum shopping; (2) misappreciation of facts and erroneous reliance on respondent’s witness; (3) lack of proof or disproval of volumetric tests; (4) prescription, laches and estoppel; and (5) erroneous awards of exemplary damages and attorney’s fees.
Verification and Certification Against Forum Shopping
Respondent challenged the authority of petitioner’s signatory to execute the petition’s verification and certification against forum shopping. The Supreme Court accepted evidence showing the board of directors delegated authority to the vice‑president who signed, and, applying the policy of liberal interpretation of procedural rules, found the petition compliant and meant in good faith. Thus, procedural defects were not a basis for dismissal.
Standard for Review of Factual Findings
The Court reiterated the settled rule that the Supreme Court will not ordinarily disturb factual findings of the trial court that have been affirmed by the appellate court, since Rule 45 raises questions of law and not of fact. Exceptions exist for palpable errors, speculation, or grave abuse of discretion; petitioner invoked such exceptions but the Court reviewed the record and found no adequate basis to overturn the lower courts’ factual conclusions.
Competence and Credibility of Respondent’s Witness
Petitioner argued Engr. Macarubbo’s testimony was improper opinion evidence and that he lacked personal knowledge. The Court found Macarubbo testified from personal knowledge and direct involvement—he participated in or observed the 1974 and 1975 tests and the discovery of the discrepancy—and thus was competent as an ordinary witness under the rule confining testimony to personal knowledge. The CA’s allowance of his testimony was upheld.
Weight of Evidence and Volumetric Tests
Petitioner contested the volumetric tests’ reliability, asserting (a) that one test used a badly‑dented drum selected by respondent, (b) tests did not simulate actual drum position during loading, and (c) drums tested were not representative of drums used across the period 1955–1974. The Court treated these challenges as credibility and weight issues. It found petitioner failed to present convincing counter‑evidence (for example, no proof that earlier drums were all sound or that delivery measurement systems were reliable), and that petitioner’s representative had the opportunity to correct drum positioning during the joint tests but did not. The Court therefore agreed with the lower courts that the preponderance of evidence supported short deliveries.
Effect of Petitioner’s Subsequent Reduction of Billing Rate
Petitioner reduced its billed liters per drum from 210 to 200 effective July 24, 1974. Petitioner characterized this as mere business accommodation. The Court found it unnecessary to resolve this alternative contention because the established short deliveries were already supported by the evidence; nonetheless, the CA had regarded the voluntary reduction as corroborative of the tests’ accuracy.
Characterization of the Cause of Action and Prescriptive Period
Petitioner argued respondent’s claim was a quasi‑delict subject to a four‑year prescription. The Court rejected this and characterized the action as contractual—arising from the contract of sale and the billing relationship—thus subject to the ten‑year prescriptive period (Art. 1144). The Court emphasized that a cause of action in contract accrues upon breach; prescription runs from the time the breach is discovered or is reasonably discoverable, depending on the circumstances.
Accrual of Cause of Action in This Case
Applying prior jurisprudence, the Court held the cause of action accrued when respondent discovered with certainty the short deliveries—on July 24, 1974—because buyers of bulk fuel reasonably rely on sellers’ representations and cannot be expected to measure every delivery. Respondent’s letters of October 24, 1974 and February 1, 1975 were treated as formal extrajudicial demands that interrupted prescription, but more importantly the action filed on August 20, 1980 was within ten years from the accrual date. The CA’s conclusion that the cause of action arose upon a later definite denial (circa 1979) was noted, but the Supreme Court explicitly determined accrual on July 24, 1974 and found the suit timely.
Estoppel, Laches and Invoice Certification
Petitioner invoked estoppel and laches based on the certification printed on invoices—“RECEIVED ABOVE PRODUCT(S) IN GOOD CONDITION. I HAVE INSPECTED . . .” Petitioner argued respon
...continue readingCase Syllabus (G.R. No. 159831)
Nature of the Case and Procedural Posture
- Petition for Review under Rule 45 of the Rules of Court (G.R. No. 159831) challenging the Court of Appeals (CA) Decision dated August 20, 2002 and the CA Resolution dated August 29, 2003 in CA-GR CV No. 46974.
- RTC, Branch 26, Manila, rendered judgment (August 30, 1991) ordering specific performance, damages, exemplary damages, attorney’s fees and costs; CA affirmed that judgment with modification reducing exemplary damages and attorney’s fees to P100,000.00 each.
- Petitioner Pilipinas Shell filed the present petition seeking reversal of the CA rulings; respondent John Bordman opposed.
- Supreme Court proceeded to examine both factual and legal issues despite the general rule limiting review to questions of law, and ultimately denied the petition with a modification: deletion of exemplary damages and affirmation of attorney’s fees at P100,000, costs against petitioner.
Parties and Business Context
- Petitioner: Pilipinas Shell Petroleum Corporation — corporation engaged in refining and processing petroleum products; invoicing performed by Pilipinas Shell while delivery was effected through its distributor Arabay, Inc., until Arabay ceased operations in 1975.
- Respondent: John Bordman Ltd. of Iloilo, Inc. — purchaser of bunker oil in drums from Arabay (1955–1975) and thereafter directly from Pilipinas Shell.
- Business relationship context: long-standing purchases and invoicing practices, including a consistent billing rate stated in invoices (210 liters per drum prior to adjustments).
Core Factual Allegations (Respondent)
- John Bordman filed suit on August 20, 1980 for specific performance alleging short deliveries of fuel oil from 1955 onward, and sought exemplary damages, attorney’s fees and costs.
- Allegation: Arabay and Pilipinas Shell billed at 210 liters per drum while other companies billed at 200 liters per drum.
- July 24, 1974 volumetric test (conducted by representatives of John Bordman and Arabay) showed drums filled only up to 190 liters — a short delivery rate of 9.5%.
- After the 1974 test Arabay reduced billing to 200 liters per drum, except for four deliveries (Aug 1–Sep 9, 1974) billed at 190 liters.
- January 23, 1975 volumetric test allegedly showed drums holding only 187.5 liters.
- Respondent’s demand on February 1, 1975 asked for credit of 640,000 liters allegedly deficient; later adjusted to 780,000 liters upon realizing 210 liters billing had been effective since 1966.
- October 24 and November 9, 1977 measurements (involving John Bordman reps, Iloilo City Commission on Audit auditor, pump boat carriers, truck drivers) found drums could contain only 180 liters when transferred to dented drums at mouth full.
- Respondent requested appointment of commissioners to ascertain volume of short deliveries; the trial court granted motion for trial by commissioner and Commissioner Rebecca R. Mariano submitted a report (April 20, 1988).
Petitioner’s Denials and Defenses
- Pilipinas Shell and Arabay denied deliveries were less than billed and claimed drums used in volumetric tests were not representative of those used in deliveries.
- Affirmative defenses included: absence of cause of action, waiver or extinguishment of claim, prescription, laches, and estoppel.
- Petitioner contended it controverted respondent’s evidence and disputed the credibility and representativeness of volumetric tests; it argued reduction in billing was a business accommodation, not admission.
Issues Presented to the Supreme Court
- Validity of petitioner’s verification and certification against forum shopping executed by its vice-president.
- Whether the CA and RTC committed grave abuse of discretion and misappreciated facts: credibility of respondent’s sole witness, adequacy and rebuttal of volumetric tests, representativeness of tested drums, and whether petitioner’s billing reduction constituted an admission.
- Whether respondent’s claims for short deliveries (1955–1976) were barred by prescription.
- Whether respondent’s claims were barred by estoppel and laches given alleged 25-year delay.
- Whether awards of compensatory damages, exemplary damages, attorney’s fees and costs were proper given petitioner’s alleged good faith.
Court’s Ruling — Disposition
- Petition denied in substantial part; the assailed CA Decision and Resolution affirmed with modification: exemplary damages deleted; attorney’s fees of P100,000 affirmed; costs against petitioner.
- Supreme Court found no sufficient reason to overturn the CA’s main Decision and agreed with the CA’s factual findings and many legal conclusions, but removed the award of exemplary damages for lack of bad faith proven.
Supreme Court’s Preliminary Determination on Procedural Formalities
- Verification and certification against forum shopping executed by Romeo B. Garcia, vice-president of petitioner, were valid.
- The petitioner’s president had delegated authority to the vice-president to institute actions; delegation certified by assistant board secretary and authorized by the board of directors.
- The power to institute actions included the power to execute required verification and certification; Court invoked policy of liberal interpretation of procedural rules and absence of intent to circumvent verification requirements.
Appellate Review of Factual Findings — General Principle
- Restated doctrine: factual findings by the CA affirming trial court are, subject to exceptions, binding on the Supreme Court; generally only questions of law may be raised in Rule 45 petitions.
- Court nonetheless examined both factual and legal issues in interest of substantial justice and found no reason to overturn lower courts’ main findings.
Credibility and Admissibility of Respondent’s Witness (Jose A. Macarubbo)
- Petitioner argued Macarubbo’s testimony was inadmissible opinion evidence because he was not an expert and lacked personal knowledge.
- Court’s analysis: Macarubbo testified regarding his personal involvement — he was contacted in May 1974, discovered the billing discrepancy (210 vs. 200 liters), and participated in the July 24, 1974 and January 25, 1975 volumetric tests alongside Shell and Arabay representatives.
- Court concluded Macarubbo testified as an ordinary witness from personal knowledge and direct participation; his testimony was admissible under the rule that witnesses may testify only to matters of their personal knowledge (Rule 130 / Sec. 36).
- CA correctly allowed the testimony and accorded it weight.
Volumetric Tests — Evidence, Contestations and Weight
- Key volumetric test results relied upon by respondent and confirmed in evidence:
- July 24, 1974 test: drums fill