GSIS vs. Court of Appeals

The findings of fact of the Court of Appeals are not conclusive on the Supreme Court where they conflict with those of the trial court, and the Court may review such findings when the Court of Appeals manifestly overlooked, ignored, or misinterpreted facts of weight and significance. The tally-out sheets (Exhibits QQ to QQ-2022 and Exhibits 134 to 368) constitute the best evidence of withdrawals from a warehouse, and a court should scrutinize these primary documents rather than rely merely on a summary thereof.

The Government Service Insurance System (GSIS) is a government insurance corporation that issued two fire insurance policies to the Agricultural Credit Administration (ACA), a government financial institution, covering various grades of Virginia leaf tobacco stored in Warehouse F owned by the Philippine Tobacco Flue-Curing and Redrying Corporation (PTFC & RC) in Baesa, Novaliches, Quezon City. The policies contained an open policy clause providing that GSIS's liability, if established, shall be limited to the actual loss and in no case exceed the amount of the policies. The warehouse was part of the Baesa compound of PTFC & RC, a corporation then controlled by Harry Stonehill.

On June 20, 1961, GSIS issued Fire Policy No. N-29704 to ACA covering various grades of Virginia leaf tobacco stored in Warehouse F of the Philippine Tobacco Flue-Curing and Redrying Corporation (PTFC & RC) at Baesa, Novaliches, Quezon City, with a declared value of P21,459.66 for the period from July 1, 1961 to July 2, 1962. On November 17, 1961, GSIS issued another Fire Policy No. N-30871 covering various grades of Virginia leaf tobacco in the same warehouse, with a declared value of P2,048,518.50 for the period from September 30, 1961 to September 30, 1962. Both policies contained an open policy clause providing that in the event of loss, the amount thereof shall be subject to appraisal, and that GSIS's liability, 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.

On February 15, 1962, at about 7:20 in the evening, a fire occurred which burned Warehouse F and practically all the tobacco stored therein. ACA subsequently filed its fire claim with GSIS. Pursuant to the open policy clause, GSIS employed three insurance adjusters—the Manila Adjustment Company, H. H. Bayne Adjustment Company, and the Allied Adjustment Company—to ascertain the actual loss. The adjusters examined the records of ACA and PTFC & RC, employed two tobacco experts, Mr. George Flagg and Edrington S. Penn, and used the hogshead metal strap recovery method. They rendered a report on September 25, 1962 and a final report on September 25, 1963, recommending P12,557,968.68 as the basis for adjustment, having verified that only 15,467 hogsheads of tobacco were inside Warehouse F at the time of the fire.

ACA refused to accept the report, and after conferences, GSIS offered P13,500,000.00 as final payment, embodied in a letter of December 7, 1964 from General Manager Ramon A. Diaz. The offer was conditioned on: (1) in the event ACA claims additional indemnity in excess of P13,500,000.00, the burden of proving such additional claim shall be ACA's own responsibility; and (2) should ACA present additional proof and evidence for additional indemnity, the same shall be referred for adjudication to a competent court. ACA accepted the offer through a letter of Mr. Amado A. Lansang, Officer-in-Charge, dated December 16, 1964, and GSIS paid the P13,500,000.00.

ACA claimed its loss from the fire was P23,610,571.61 and filed the present action praying for the difference of P10,110,571.61. The decisive issue was the quantity of tobacco withdrawn from Warehouse F before the fire. GSIS maintained that a total of 17,623 hogsheads were withdrawn, while ACA contended that only 12,922 hogsheads were withdrawn. The withdrawals were recorded in Delivery Order and Tally-Out Sheets, Exhibits QQ to QQ-2022 and Exhibits 134 to 368. The Court of Appeals, in its resolution of May 7, 1979, based its finding that 120,270 hogsheads were stored immediately before the fire on Exhibit GG, a summary of withdrawals based on Exhibits QQ to QQ-2022, without scrutinizing the primary tally-out sheets themselves.

• Misinterpretation of "Additional Proof": GSIS argued that the Court of Appeals erred in its May 7, 1979 and November 23, 1979 resolutions 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, and that the appellate court erred in its interpretation of the same term as originally made in its December 29, 1978 decision.
• Failure to Conduct Physical Count: GSIS argued that the Court of Appeals committed grave abuse of discretion in refusing 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 GSIS's protestations that the allegation of ACA's witness Patrocinio Torres that the withdrawals totaled only 12,922 hogsheads was a brazen lie.
• Erroneous Withdrawal Figures: GSIS argued that the Court of Appeals erred in not finding that the withdrawals recorded in ACA's Exhibits QQ to QQ-2024 totaled 15,679 hogsheads, and not just 12,922, and in totally ignoring additional withdrawals of 1,994 hogsheads shown in Exhibits 134 to 368.
• Misapprehension of Fact: GSIS argued that the Court of Appeals erred in concluding that ACA's evidence on withdrawals was correct since such conclusion was not supported by the evidence on record, and 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 showed that what were brought out of the warehouse were the contents of the tobacco hogsheads stored there.
• Substitution of Tobacco: GSIS argued that the Court of Appeals erred in not finding that the whole contents of Warehouse F were substituted with rotten tobacco before the fire.
• Failure to Sustain Original Decision: GSIS argued that the Court of Appeals erred in not sustaining its original decision of December 29, 1978 and the decision of the trial court, and in not dismissing ACA's complaint.

• Quantity of Withdrawals: ACA contended that only 12,922 hogsheads of tobacco were withdrawn from Warehouse F before the fire, contrary to GSIS's claim of 17,623 hogsheads.
• Admissibility of Testimony as "Additional Proof": ACA's witnesses—Dorotea Toledo, Aurelio B. de Jesus, Demetrio P. Tabije, and Patrocinio Torres—testified in an attempt to explain away, vary, and modify the meaning and significance of Exhibits QQ to QQ-2022 and Exhibits 134 to 368, and ACA argued that such testimony constituted "additional proof and evidence" within the contemplation of the parties' agreement.

• Admissibility of Testimony: Whether the testimony of ACA's witnesses constitutes "additional proof and evidence" within the contemplation of the parties' letters of December 7, 1964 and December 16, 1964, and whether such testimony is admissible in evidence.
• Quantity of Tobacco Withdrawn: Whether the quantity of tobacco withdrawn from Warehouse F before the fire was 17,613 hogsheads, as GSIS claimed, or only 12,922 hogsheads, as ACA contended.
• Review of Factual Findings: Whether the Supreme Court may review the Court of Appeals' findings of fact where they conflict with those of the trial court and where the appellate court manifestly overlooked, ignored, or misinterpreted facts of weight and significance.

• Admissibility of Testimony: Yes, the testimony is admissible. The admissibility of evidence is determined by the Rules of Court, not by the parties' stipulations, since the Constitution vests upon the Supreme Court the power to promulgate rules concerning pleading, practice, and procedure in all courts, and parties have no discretion to alter, modify, or circumscribe the rules on evidence.
• Quantity of Tobacco Withdrawn: No, ACA's claim fails. According to ACA's own documentary evidence, Exhibits QQ to QQ-2022, a total of 15,669 hogsheads were withdrawn from 1955 to 1959, and Exhibits 134 to 368 show further withdrawals of 1,944 hogsheads, giving a total of 17,613 hogsheads withdrawn—which, when deducted from the 15,457 hogsheads delivered, leaves no tobacco inside the warehouse at the time of the fire.
• Review of Factual Findings: Yes, the Supreme Court may review the findings. The general rule that findings of fact of the Court of Appeals are binding admits of exceptions, including where the findings conflict with those of the trial court and where the appellate court manifestly overlooked, ignored, or misinterpreted certain facts or circumstances of weight and significance.

• Admissibility of Testimony: The Court ruled that the parties' discussion of whether the testimony of ACA's witnesses constitutes "additional proof and evidence" within the contemplation of the parties' agreement is "a futile exercise in semantics." The Constitution vests upon the Supreme Court the power to promulgate rules concerning pleading, practice, and procedure in all courts, and even the provision in both the 1935 and 1973 Constitutions allowing the legislature to "repeal, alter or supplement" the rules of court does not appear in the 1987 Constitution. Parties therefore have no discretion or power to alter, modify, or circumscribe the rules on evidence to suit their particular needs. Since the testimony is relevant to the facts in issue and the witnesses are competent, the testimony is admissible and was taken into consideration in resolving the issue.

• Quantity of Tobacco Withdrawn: The Court found that the Court of Appeals should not have merely relied on Exhibit GG, a summary of withdrawals, but should have gone to the original sources and scrutinized Exhibits QQ to QQ-2022 and Exhibits 134 to 368, the tally-out sheets, which 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. The Court computed the withdrawals by crop year from ACA's own documentary evidence: Crop Year 1955—126 hogsheads; Crop Year 1956—5,348 hogsheads; Crop Year 1957—1,155 hogsheads; Crop Year 1958—4,317 hogsheads; Crop Year 1959—4,723 hogsheads; totaling 15,669 hogsheads. Adding the 1,944 hogsheads shown in Exhibits 134 to 368, the total withdrawals reached 17,613 hogsheads. Deducting 17,613 hogsheads from the total of 15,457 hogsheads delivered to the warehouse yields a negative figure, meaning no tobacco remained inside the warehouse at the time of the fire on February 15, 1962. The documentary evidence clearly supported the position of GSIS.

• Review of Factual Findings: The Court cited the general rule that findings of fact of the Court of Appeals are binding upon the Supreme Court, citing De Gala-Sison vs. Manalo, Chan vs. Court of Appeals, and Evangelista & Co. vs. Santos. However, the Court noted the exceptions set forth in Macadangdang vs. Court of Appeals, which include: (1) the conclusion is a finding grounded entirely on speculation, surmise, and conjectures; (2) the inference made is manifestly mistaken; (3) there is a 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. Since the findings of fact of the Court of Appeals conflicted with those of the trial court, the exercise of the Supreme Court's power of review was justified. The Court also cited Carolina Industries, Inc. vs. CMS Stock Brokerage and People vs. Arciaga for the proposition that the 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.

• Documentary vs. Testimonial Evidence: The Court found that the presentation of the testimony of ACA's witnesses was "nothing but a convoluted attempt of ACA to minimize and neutralize the impact of Exhibits QQ to QQ-2022 and Exhibits 134 to 368," as their testimony consisted mainly in trying to explain away, vary, and modify the meaning and significance of the documentary exhibits. Citing Marvel Building Corporation vs. David, the Court stated that testimonial evidence is easy of fabrication and there is very little room for choice between testimonial evidence and documentary evidence, and that generally, documentary evidence prevails over testimonial evidence.

• Exceptions to the Conclusiveness of Court of Appeals Findings of Fact — The findings of fact 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 a 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. In this case, the Court applied the exception where the findings of the Court of Appeals conflicted with those of the trial court, and where the appellate court manifestly overlooked, ignored, or misinterpreted facts of weight and significance by relying on a summary rather than the primary tally-out sheets.

• Best Evidence Rule — The tally-out sheets (Exhibits QQ to QQ-2022 and Exhibits 134 to 368) are the primary documents recording each and every withdrawal of tobacco from the warehouse at the time of delivery, and constitute the best evidence to prove the withdrawal of tobacco from the warehouse. A court should scrutinize these primary documents rather than merely rely on a summary thereof, and a tally sheet summary is of no significance where the original weighers' tally sheets cannot be produced or their non-production explained.

• Documentary Evidence Prevails Over Testimonial Evidence — Testimonial evidence is easy of fabrication and there is very little room for choice between testimonial evidence and documentary evidence. Generally, documentary evidence prevails over testimonial evidence. The Court applied this doctrine in rejecting ACA's witnesses' attempts to explain away, vary, and modify the meaning and significance of the documentary exhibits.

• Supreme Court's Exclusive Power to Promulgate Rules of Procedure — The Constitution vests upon the Supreme Court the power to promulgate rules concerning pleading, practice, and procedure in all courts. Even the provision in both the 1935 and 1973 Constitutions allowing the legislature to "repeal, alter or supplement" the rules of court does not appear in the 1987 Constitution. Parties have 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.

• "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 are 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." — This passage establishes the Court's exclusive power over procedural rules and rejects the parties' attempt to define admissibility of evidence through their stipulations.

• "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." — This passage articulates the best evidence rule as applied to the tally-out sheets and explains why the Court of Appeals erred in relying on a summary.

• "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. 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." — This passage states the doctrine that documentary evidence prevails over testimonial evidence and characterizes the witnesses' testimony as a convoluted attempt to neutralize the documentary exhibits.

• Macadangdang vs. Court of Appeals, 100 SCRA 73 (1980) — Cited as the source of the enumerated exceptions to the general rule that findings of fact of the Court of Appeals are conclusive on the parties and on the Supreme Court.
• De Gala-Sison vs. Manalo, 8 SCRA 595 (1963) — Cited for the general rule that findings of fact of the Court of Appeals are binding upon the Supreme Court.
• Chan vs. Court of Appeals, 33 SCRA 416 (1970) — Cited for the general rule that findings of fact of the Court of Appeals are binding upon the Supreme Court.
• Evangelista & Co. vs. Santos, 51 SCRA 416 (1973) — Cited for the general rule that findings of fact of the Court of Appeals are binding upon the Supreme Court.
• Carolina Industries, Inc. vs. CMS Stock Brokerage, 97 SCRA 734 (1980) — Cited for the proposition that the Supreme 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.
• People vs. Arciaga, 98 SCRA 1 (1980) — Cited for the same proposition as Carolina Industries, Inc. regarding the Supreme Court's power to review findings of fact.
• Santiago Virginia Tobacco Planters Asso., Inc. vs. Philippine Virginia Tobacco Administration, 31 SCRA 528 (1970) — Cited for the proposition that the best evidence available is that which relates directly or has a direct connection with the delivery and which affirms the presence of the tobacco delivered at the warehouse.
• Marvel Building Corporation vs. David, 94 Phil. 376 (1954) — Cited for the doctrine that testimonial evidence is easy of fabrication and that documentary evidence prevails over testimonial evidence.

• Paragraph 5, Section 4, Article VIII, 1987 Constitution — Vests upon the Supreme Court the power to promulgate rules concerning pleading, practice, and procedure in all courts. The Court applied this provision to hold that parties have no discretion or power to alter, modify, or circumscribe the rules on evidence to suit their particular needs, and that the admissibility of testimony must be determined by the Rules of Court.

Justices Feliciano, Bidin, Davide, Jr., and Romero concurred.