SECOND DIVISION
BIENVENIDO DE GUZMAN, G.R. No. 145795
Petitioner,
Present:
PUNO,
J., Chairperson,
SANDOVAL-GUTIERREZ,
- versus -
AZCUNA, and
GARCIA,
JJ.
Promulgated:
NATIONAL FOOD AUTHORITY,
Respondent. August 9, 2006
x - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
D E C I S I O N
PUNO, J.:
Petitioner Bienvenido
de Guzman comes to us via a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the decision[1]
and resolution[2]
of the Court of Appeals (CA) in CA-G.R. CV No. 50690 which reversed the decision[3]
of the trial court dismissing the complaint filed by respondent National Food
Authority (NFA) against him.
Respondent
NFA is a government agency created by virtue of Presidential Decree Nos. 1485
and 1770 while petitioner de Guzman is the owner-proprietor of Mabuhay Rice Mill in Tuguegarao, Cagayan.
On
1) Milling degree Well
Milled;
x x
x
3) Guaranteed Milling
Recovery 63.5%
x x
x
5) Not less than 65% headrice;
6) Not more than 35% brokens;
7) Not more than 14% moisture content;
8) Not more than 0.3% impurities;
9) Not more than 3.0% yellow and damaged
kernels;
10) Must be free from live infestation.[5]
The
Contract also provided for the following penalties in case of delivery of milled
rice which does not conform to the specifications set by respondent and in case
the contractor incurs delay in the delivery, viz:
SPECIAL PROVISIONS:
x x x
8. In case the
milled rice does not conform with the required milling
quality/specifications, NFA will accept delivery subjecting at the same time
the CONTRACTOR to a penalty of fifty (P0.50) centavos per kilogram of
rice. Provided, that if the sub-standard
rice so delivered is clearly apparent to NFA that its palay
form was obviously changed into an inferior quality or that the same was
adulterated, the CONTRACTOR shall be considered authomatically
(sic) in default and he shall be
liable for the whole value of the stocks based on replacement cost, without
prejudice to the incipient criminal liability he may incur therefrom.
Likewise,
if rice recoveries and by-products were adulterated, NFA shall have the right
to demand replacement cost.
For
this purpose, replacement cost shall be based on the latest available
replacement cost existing at the time of the issuance of the palay for milling as imposed by NFA.
The
foregoing actions shall be without prejudice to such other actions NFA may take
under the premises.
9. In case the CONTRACTOR fails to make
available for delivery to/withdrawal by NFA the rice recoveries and by-products
within five (5) calendar days from the last day of milling of NFA stocks based
on the capacity of the mill, the CONTRACTOR shall be given another five (5)
calendar days within which to deliver.
After the aforementioned additional five (5) grace
day period, the CONTRACTOR shall be deemed in default with or without demand,
in which case CONTRACTOR shall be liable for payment of the replacement cost
plus 12% per annum interest.[6]
On
January 18, 19 and 20, 1987, petitioner received from respondent NFA a total of
96,150.50 net kilos of palay or its equivalent in
rice form of 61,055.58 kilos. On March
12, 14 and
An
inventory and audit examination of the stocks and empty sacks accountabilities
of petitioner de Guzman for the period of October 29, 1986 to April 8, 1987 was
conducted by Conrado Pagulayan,
the resident auditor of respondent NFA's regional
office in Tuguegarao, Cagayan.
Based on his findings, petitioner incurred a shortage of 56,372.26 net kilos of
palay with an equivalent monetary value of P476,909.31, computed at P8.46 (replacement cost) per
kilo. Petitioner was likewise found liable
for 12% interest per annum due to late deliveries and penalty of P30,527.54 for deliveries of 61,055.08 net kilos of sub-standard
rice, computed at P0.50 per kilo.
In all, petitioner de Guzman was found to have a total net shortage of P512,342.72.
A
letter of demand[7]
dated March 11, 1991 was sent by respondent NFA, through its litigation
division, to petitioner de Guzman, demanding that petitioner pay his alleged accountabilities
for late delivery, delivery of sub-standard milled rice and shortage, in the
amount of P512,342.72. Petitioner
de Guzman failed to comply.
Respondent NFA filed a Complaint for Sum of Money and Damages[8] against petitioner, praying that judgment be rendered:
1) Ordering defendant
to pay plaintiff the sum of P476,909.31 representing the amount covered
by the shortages of 35,796.39 kilos of rice or an equivalent of 56,372.26 net
kilos of palay;
2) Ordering defendant
to pay plaintiff interest in the amount of P7,941.07 plus
12% interest per annum of the entire obligation to commence from
3) Ordering defendant to pay plaintiff the sum
of P30,527.54 as penalty;
4) Ordering defendant to pay plaintiff the sum of P50,000.00
as exemplary damages;
5) Ordering defendant to pay plaintiff the sum
of P50,000.00 as attorneys fees and other cost and expenses
of this suit. . and
6) Such other and further relief as this
Honorable Court may deem just and equitable x x x.[9]
Petitioner filed his Answer with counterclaim.[10] He admitted having received from respondent
96,150.50 net kilos of palay from
During pre-trial, the parties agreed to litigate the instant case on the following issues, viz:
1.
Whether or not the defendant incurred the shortage imputed to him by the
plaintiff;
2.
Whether or not the plaintiff is entitled to the damages and penalties
claimed by it;
3.
Whether or not the defendant is entitled to his counterclaim;
4.
Whether or not defendant is liable for the amount claimed by plaintiff;
and
5. Whether or not defendant['s] defenses are meritorious or not.[11]
To prove its allegations, respondent presented Auditor Conrado Pagulayan and Saturnino Rola, Jr., the Assistant Director for Legal Affairs of respondent NFA, as witnesses. It likewise presented the following pieces of documentary evidence: 1) the Contract; 2) Demand to Produce all accountable forms and other pertinent documents dated April 8, 1987; 3) Inventory Certificate dated April 8, 1987; 4) Statement of Palay received by petitioner de Guzman from October 29, 1986 to April 8, 1987; 5) Summary of Complete Examination of Stocks and Sack Accountabilities of petitioner de Guzman from October 29, 1986 to April 8, 1987; 6) Valuation of Shortage; 7) Computation of Interest; and 8) Demand Letter dated March 11, 1991.
On the other hand, petitioner de Guzman and his wife, Victoria de Guzman, testified in his defense. He presented as evidence: 1) the Contract; 2) the Certification[12] of Evelyn T. Cunanan, Provincial SQAO of respondent NFA, to prove that some of the stocks issued by respondent NFA for the period of December 1986 to February 1987 were of ages C and D, which, on account of their long-term storage, had acquired characteristics within the borderline of yellow and damaged specifications; and 3) the Memorandum of Edison A. Villasis, Assistant Administrator for Stabilization to the Administrator of respondent NFA, dated January 6, 1993, to prove that other miller-contractors in Tuguegarao, Cagayan received palay of inferior quality from respondent NFA and were likewise protesting against the erroneous assessment of accountabilities.
After trial, the trial court rendered a decision dismissing respondent NFA's complaint "for lack of cause of action" and petitioner de Guzman's counterclaim "for lack of legal and factual basis."[13]
In absolving petitioner from payment of penalty under paragraph 8 of the Special Provisions of the Contract, the trial court held:
After
careful reading of par. 8, it is very clear that the same is applicable only if
the contractor delivers to NFA rice which does not conform with the required
milling quality/specifications and that the contractor changed into an inferior
quality the palay form delivered by the plaintiff or
that the same was adulterated. In the
case at bar, there is no evidence whatsoever presented by the plaintiff that
defendant changed the palay stocks delivered by the
plaintiff to the defendant for milling into an inferior quality or that
defendant adulterated the same with inferior quality. While it is admitted by the defendant that
the milled rice delivered to plaintiff were of ages C and D, it was however
established by defendant's evidence that the palay
stocks delivered for milling by plaintiff were of ages C and D (Exh. 2). Thus, it
follows that the milled rice delivered by defendant to the plaintiff was
likewise of ages C and D and of the same quality of palay
stocks delivered for milling by the plaintiff.
Defendant is therefore not liable for plaintiff's claim based on the provision
found in par. 8 of the contract.[14]
On appeal, the CA reversed and set aside the decision of the trial court. The dispositive portion of the CA's decision states:
WHEREFORE, premises considered,
the appealed decision in Civil Case No. Q-92-14073 is hereby REVERSED and SET
ASIDE and a new one is hereby rendered ordering the defendant-appellee to pay to plaintiff-appellant the following sums:
(1) P516,525.97
representing the value of 61,055.08 net kilos of milled rice based on
replacement cost of P8.46 per kilo, with interest at 6% per annum from
the finality of this judgment until fully paid;
(2) P10,000.00
as liquidated damages; and
(3) P10,000.00
as attorney's fees.
SO ORDERED.[15]
In reversing the trial court's decision, the CA held:
We agree with the trial court that
paragraph 9 which imposes the payment of replacement cost plus 12% interest per
annum, cannot be applied against the appellee because the latter actually delivered the milled
rice to appellant. Neither is appellee liable for shortage because the records clearly
show that appellant received from appellee 61,055.08
net kilos of milled rice on March 12, 14 and
However, We believe that appellee is still liable under
paragraph 8 for delivery of sub-standard rice as indicated in Exhibit
"4" under the column "Variety." Appellee's claim that
the palay delivered by plaintiff for milling was of
inferior quality in the first place, was not substantiated by him. This is specially significant in view of the milling contractor's duty
to accomplish and submit a Milling Liquidation Report on the basis of a milling
logbook wherein entries of the issuance by plaintiff of palay
for milling and the delivery of milled rice to plaintiff are supposed to be
recorded.
x x x
Since
the appellee clearly violated paragraph 8 under
Special Provisions (E) in delivering milled rice of inferior quality, he can be
considered automatically in default and is liable for the whole value of the
stocks based on replacement cost. In view thereof, the amount of total
accountabilities of appellee to appellant should be
computed as follows:
61,055.08 net kilos of rice X P8.46
= P516,525.97[16]
(emphases supplied)
Petitioner filed a motion for reconsideration[17] of the CA's decision, to no avail.[18] Hence, this petition in which petitioner raises the following arguments, viz:
[1.] The Honorable Court of Appeals
manifestly committed an error in applying the provisions of paragraph 8 of the
Special Provisions of the Contract x x x as basis for holding the Petitioner liable for
replacement cost x x x;
x x x
[2.] The finding of fact of the Honorable Court of
Appeals that "[a]ppellee's claim that the palay delivered by plaintiff for milling was of inferior
quality in the first place, was not substantiated by him" is contradicted
by the finding of the trial court and by the evidence on record x x x
[3.] The Honorable Court of Appeals decided
an issue which was not raised and litigated in the trial court x x x
x x x
[4.] The finding of the
Honorable Court of Appeals that "[t]he delivery by appellee
was likewise late or behind schedule, contrary to the findings of the lower
court," is contradicted by the evidence on record x x
x.[19]
The issue to be resolved is whether petitioner should be held liable for delivery of sub-standard rice under paragraph 8 of the Special Provisions of the Contract.
Petitioner contends that only two
situations are provided under paragraph 8 of the Special Provisions of the
Contract. In the first scenario, the contractor is subjected to a penalty of P0.50
per kilo of sub-standard rice when the milled rice delivered to respondent NFA
does not conform to the required milling quality or specification under the Contract. In the second scenario, the contractor is
deemed automatically in default and liable for the whole value of the stocks
based on replacement cost when, aside from delivering milled rice which does
not conform to the required milling quality under the Contract, it appears to
respondent NFA that the palay form of the
sub-standard rice delivered was obviously changed into an inferior quality or
that the same was adulterated. The CA
allegedly erred in considering him automatically in default and making him
liable for the whole value of the stocks based on replacement cost as there is
no evidence to show that he changed or adulterated the palay
stocks delivered by respondent NFA into an inferior quality. Moreover, petitioner points
out that respondent NFA's complaint does not
allege such a claim. Since the CA decided an issue that was not raised and
litigated in the trial court, its decision thereon is allegedly null and void. If at all, petitioner contends that he should
only be made liable to pay the penalty of P0.50 per kilo under the first
scenario. However, he contends that he
is likewise not liable under the first scenario as he was allegedly able to
prove that the palay stocks delivered to him by
respondent NFA was, in the first place, of inferior quality. The ruling of the CA that he was not able to
substantiate this defense is allegedly contrary to the factual finding of the
trial court and the evidence on record.[20]
In its Comment,[21] respondent NFA contends that paragraph 8 of the Special Provisions of the Contract is clear that when petitioner, as contractor, delivered to it milled rice of inferior quality, he is considered as automatically in default and is liable for the whole value of the stocks based on replacement cost. It maintains that petitioner's liability for replacement cost under paragraph 8 of the Special Provisions of the Contract is premised on his failure to accomplish and submit a Milling Liquidation Report on the basis of a milling logbook where the issuance of palay and the delivery of the milled rice were supposed to be recorded.
We rule for petitioner.
First, it is a rule that except for questions on jurisdiction, no question will be entertained on appeal unless it has been raised in the court below and it is within the issues made by the parties in their pleadings.[22]
In
the case at bar, the CA erred in making petitioner liable for the whole value
of stocks based on replacement cost under paragraph 8 of the Special Provisions
of the Contract. As correctly held by
the trial court and contended by petitioner, paragraph 8 of the Special
Provisions of the Contract provides for two different causes of action. The first cause of action is the delivery of
milled rice of inferior quality to respondent NFA. This makes petitioner liable for the penalty
of P0.50 per kilo of sub-standard rice.
The second cause of action requires the concurrence of two acts: (1)
that milled rice of inferior quality is delivered to respondent NFA; and 2) that the sub-standard rice so
delivered is clearly apparent to NFA that its palay
form was changed into an inferior quality or that the same was
adulterated. The second cause of action makes
petitioner liable for the whole value of the stocks based on replacement cost.
In
respondent NFA's Complaint before the trial court and
appeal before the CA, it consistently prayed that petitioner be made liable to
pay the sum of P30,527.54 as penalty for delivering 61,055.08 kilos of
sub-standard milled rice, computed at P0.50 per kilo.[23]
Respondent NFA never claimed in the courts below that petitioner should be made
liable for replacement cost for delivery of sub-standard rice. In fact, it never alleged that petitioner de
Guzman committed the second act required to warrant such penalty, i.e., that petitioner changed the palay stocks delivered to him by respondent NFA into an
inferior quality or that he adulterated the same.
Moreover, in making petitioner liable for the whole value of the stocks based on replacement cost under paragraph 8 of the Special Provisions of the Contract, the CA merely held that petitioner's act of "delivering milled rice of inferior quality" caused him to be "considered automatically in default and x x x liable for the whole value of the stocks based on replacement cost." This is clearly erroneous as the CA imposed the penalty of replacement cost without a finding that petitioner changed or altered into an inferior quality the palay stocks delivered to him by respondent NFA.
Second, petitioner cannot likewise be
held liable for the penalty of P0.50 per kilo of sub-standard rice.
The factual findings of the CA and the trial court are in conflict in giving credence to petitioner's defense that respondent NFA delivered palay stocks of inferior quality to him. Thus, as an exception to the well-entrenched rule that this Court is not a trier of facts,[24] we are duty-bound to
reexamine the evidence on record in the case at bar.
Rudimentary is the rule that
the findings of the judge who tried the case and heard the witnesses are not to
be disturbed on appeal, unless there are substantial facts and circumstances
which have been overlooked and which, if properly considered, might affect the
result of the case.[25] This is so because the matter of
assigning values to declarations at the witness stand is best and most
competently performed or carried out by a trial judge who, unlike appellate
magistrates, can weigh such testimony in light of the defendant's behavior, demeanor,
conduct and attitude at trial.[26]
In the
case at bar, we do not find strong and cogent reason to deviate from this well-grounded
rule. The evidence on record
preponderates in favor of the trial court's factual finding. We quote the pertinent portions of petitioner’s
testimony, to wit:
A - When
the palay stocks were unloaded at my rice mill, we
found out that the palay was of inferior quality and
we were advised by the Milling Supervisor of NFA not to proceed with the actual
milling.
Q - When you saw that the quality of palay delivered was inferior, what was your reaction?
A - Well, of course, I told them that
this palay may not come up with their specifications
especially with the damage in yellow kernels.
Q - Do you have evidence to show that
what was delivered to you was an inferior quality of palay
for milling?
A - I do not have any physical evidence
but then practically all the millers
were complaining of the same thing and this thing was supported by a document
in your possession I believe at a meeting among the millers and the
representative of the National Food Authority.
x x x
Q - So that, Mr. de Guzman, when you
apparently objected to the delivery of these palay
belonging to the classification C and D, what did you do?
A - Well, we were advised not to mill it immediately so we just stood pat and
waited for whatever decision the NFA will give us regarding their stocks.
Q - And how long thereafter after the
delivery of these palay in your bodega elapsed when
you started milling?
A - That was already in March when we
were advised to proceed with the milling so we milled the stocks of the NFA.
Q - Why did you agree to mill this kind
of inferior quality of palay which will turn out
specification that would not be in accordance with your contract?
A - Well, when it comes to the quality
of the rice, we cannot do anything about that anymore and they gave us
assurance that they would accept whatever rice that would be the output of
their stocks.[27]
Petitioner's testimony is corroborated by the testimony of his wife, Victoria de Guzman, who also managed petitioner's rice mill. The claim that other rice millers in Tuguegarao, Cagayan also experienced the same plight is supported by: a) the Certification issued by Evelyn Cunanan, Provincial SQAO of respondent NFA, that some of the stocks issued by respondent NFA for the period of December 1986 to February 1987 were of ages C and D, which, on account of their long-term storage, had acquired characteristics within the borderline of yellow and damaged specifications; and b) the Memorandum of Edison A. Villasis, Assistant Administrator for Stabilization to the Administrator of respondent NFA dated January 6, 1993, stating that the "Technical Services Directorate, after conducting a joint evaluation on the case of defaulting miller-contractors of Region II, in coordination with the Directorate for Marketing Operations, recommended that the miller-contractors of Region II x x x should not be penalized x x x based on two considerations, namely: (1) that there was a variance in the results of analysis between the source and receiving NFA offices and, (2) that there was a deviation from existing SOP committed by the NFA Provincial offices regarding the conduct of proper reclassification of the palay stocks prior to their issuance to the miller-contractors." The Memorandum shows that other miller-contractors in Tuguegarao, Cagayan, were similarly held accountable for delay and sub-standard delivery when they claim that "they should not be penalized because the problem was not due to their fault but that of NFA." It states that the views of the miller-contractors were "shared both by Director Vergara, TSD, and Atty. Mallabo, DLA, considering that the local COA [had] no access yet [to] the documents relating to the circumstances which led to the delay and sub-standard delivery, hence, their findings [were] based purely on the provisions of the contract."[28]
Moreover, as highlighted by the CA, time is of the essence in the
Contract. Paragraph 2 of the Duties and
Responsibilities of the Contractor provides that the "CONTRACTOR shall
commence milling within twenty-four (24) hours upon receipt of palay stocks in accordance with NFA specifications." Paragraph 2 of the Special Provisions of the
Contract also provides that the "CONTRACTOR shall give priority in milling
NFA stocks and unless otherwise ordered
by the NFA, shall in one (1) operation exclusively and continuously mill
the palay. NFA reserves the right to terminate this
contract in case of non-prioritization by Contractor in milling NFA stocks."[29]
It is, therefore, curious that despite
the delivery of the palay stocks to petitioner de
Guzman on
It is noteworthy that respondent NFA did not present any rebuttal evidence against petitioner de Guzman's claim that the palay stocks delivered to him by respondent were of inferior quality.[30] To the contrary, the pieces of documentary evidence presented by petitioner were issued by respondent NFA's officers in the performance of their duties.[31] The absence of a Milling Liquidation Report is of little relevance as nowhere in the Contract does it provide that the contractor's failure to accomplish a Milling Liquidation Report is a tacit admission that he received palay of good quality from respondent NFA. The absence of this report was not even raised as an argument during trial or on appeal with the CA.
IN VIEW WHEREOF, the petition
is GRANTED. The August 18, 2000 Decision
and October 11, 2000 Resolution of the Court of Appeals in CA-G.R. CV No. 50690 are
reversed and set aside. The
Decision dated
No costs.
SO ORDERED.
REYNATO S. PUNO
Associate Justice
WE CONCUR:
CANCIO C. GARCIA
Associate Justice
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairperson
Pursuant to Section 13, Article VIII of the Constitution
and the Division Chairperson’s Attestation, I certify that the conclusions in
the above decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
ARTEMIO
V. PANGANIBAN
[1] Dated August 18, 2000, penned by
Justice Martin S. Villarama, Jr., and concurred in by
Justices Salome A. Motoya and Romeo S. Callejo, Sr.; Rollo, pp. 28-33.
[2] Dated
[3] In Civil Case
No. Q-92-14073 dated May 31, 1995 penned by Hon. Godofredo
L. Legaspi, Judge of the RTC of Quezon
City, Branch 79; Id. at 67-73.
[4] Annex "C-1";
[5]
[6]
[7] Original Records, pp. 71-72.
[8] Dated
[9]
[10]
[11] Order of the trial court dated
[12] Exhibit 2;
[13] Rollo,
p. 73.
[14]
[15]
[16]
[17]
[18]
[19]
[20] Petition for Review on Certiorari;
[21] Comment;
[22] Vencilao v. Vano, G.R. No. L-25660,
[23] CA rollo, pp. 29, 103.
[24] See Buduhan v. Pakurao, G.R. No. 168237, February 22, 2006, citing Naguiat v. Court of Appeals, G.R. No.
118375, October 3, 2003, 412 SCRA 591, 596; Casimiro
v. Stern Real Estate Inc., G.R. No. 162233,
March 10, 2006, citing Samson v.
National Labor Relations Commission, 386 Phil. 669, 681 (2000).
[25] GSIS v. CA,
G.R. No. 101439,
[26] See
[27] Transcript of Stenographic Notes
dated
[28] Original Records, pp. 104-105.
[29]
[30] Order of the trial court dated
[31] Note that Atty. Arleen Tagaban, counsel for respondent NFA in the trial court,
admitted Exhibits 1, 1-a to 3 of petitioner de Guzman
during pre-trial;