Saturday, December 17, 2011

Oblicon Cases: Nature and Effect of Obligations( Part 2)


G.R. No. 141968      February 12, 2001
THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE PHILIPPINES), petitioner,
vs.
SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO, respondents.
KAPUNAN, J.:
The respondent Gueco Spouses obtained a loan from petitioner International Corporate Bank (now Union Bank of the Philippines) to purchase a car - a Nissan Sentra 1600 4DR, 1989 Model. In consideration thereof, the Spouses executed promissory notes which were payable in monthly installments and chattel mortgage over the car to serve as security for the notes.1âwphi1.nêt
The Spouses defaulted in payment of installments. Consequently, the Bank filed on August 7, 1995 a civil action docketed as Civil Case No. 658-95 for "Sum of Money with Prayer for a Writ of Replevin"1 before the Metropolitan Trial Court of Pasay City, Branch 45.2 On August 25, 1995, Dr. Francis Gueco was served summons and was fetched by the sheriff and representative of the bank for a meeting in the bank premises. Desi Tomas, the Bank's Assistant Vice President demanded payment of the amount of P184,000.00 which represents the unpaid balance for the car loan. After some negotiations and computation, the amount was lowered to P154,000.00, However, as a result of the non-payment of the reduced amount on that date, the car was detained inside the bank's compound.
On August 28, 1995, Dr. Gueco went to the bank and talked with its Administrative Support, Auto Loans/Credit Card Collection Head, Jefferson Rivera. The negotiations resulted in the further reduction of the outstanding loan to P150,000.00.
On August 29, 1995, Dr. Gueco delivered a manager's check in amount of P150,000.00 but the car was not released because of his refusal to sign the Joint Motion to Dismiss. It is the contention of the Gueco spouses and their counsel that Dr. Gueco need not sign the motion for joint dismissal considering that they had not yet filed their Answer. Petitioner, however, insisted that the joint motion to dismiss is standard operating procedure in their bank to effect a compromise and to preclude future filing of claims, counterclaims or suits for damages.
After several demand letters and meetings with bank representatives, the respondents Gueco spouses initiated a civil action for damages before the Metropolitan Trial Court of Quezon City, Branch 33. The Metropolitan Trial Court dismissed the complaint for lack of merit.3
On appeal to the Regional Trial Court, Branch 227 of Quezon City, the decision of the Metropolitan Trial Court was reversed. In its decision, the RTC held that there was a meeting of the minds between the parties as to the reduction of the amount of indebtedness and the release of the car but said agreement did not include the signing of the joint motion to dismiss as a condition sine qua non for the effectivity of the compromise. The court further ordered the bank:
1. to return immediately the subject car to the appellants in good working condition; Appellee may deposit the Manager's check - the proceeds of which have long been under the control of the issuing bank in favor of the appellee since its issuance, whereas the funds have long been paid by appellants to .secure said Manager's Check, over which appellants have no control;
2. to pay the appellants the sum of P50,000.00 as moral damages; P25,000.00 as exemplary damages, and P25,000.00 as attorney's fees, and
3. to pay the cost of suit.
In other respect, the decision of the Metropolitan Trial Court Branch 33 is hereby AFFIRMED.4
The case was elevated to the Court of Appeals, which on February 17, 2000, issued the assailed decision, the decretal portion of which reads:
WHEREFORE, premises considered, the petition for review on certiorari is hereby DENIED and the Decision of the Regional Trial Court of Quezon City, Branch 227, in Civil Case No. Q-97-31176, for lack of any reversible error, is AFFIRMED in toto. Costs against petitioner.
SO ORDERED.5
The Court of Appeals essentially relied on the respect accorded to the finality of the findings of facts by the lower court and on the latter's finding of the existence of fraud which constitutes the basis for the award of damages.
The petitioner comes to this Court by way of petition for review on certiorari under Rule 45 of the Rules of Court, raising the following assigned errors:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO AGREEMENT WITH RESPECT TO THE EXECUTION OF THE JOINT MOTION TO DISMISS AS A CONDITION FOR THE COMPROMISE AGREEMENT.
II
THE COURT OF APPEALS ERRED IN GRANTING MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES IN FAVOR OF THE RESPONDENTS.
III
THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER RETURN THE SUBJECT CAR TO THE RESPONDENTS, WITHOUT MAKING ANY PROVISION FOR THE ISSUANCE OF THE NEW MANAGER'S/CASHIER'S CHECK BY THE RESPONDENTS IN FAVOR OF THE PETITIONER IN LIEU OF THE ORIGINAL CASHIER'S CHECK THAT ALREADY BECAME STALE.6
As to the first issue, we find for the respondents. The issue as to what constitutes the terms of the oral compromise or any subsequent novation is a question of fact that was resolved by the Regional Trial Court and the Court of Appeals in favor of respondents. It is well settled that the findings of fact of the lower court, especially when affirmed by the Court of Appeals, are binding upon this Court.7 While there are exceptions to this rule,8 the present case does not fall under anyone of them, the petitioner's claim to the contrary, notwithstanding.
Being an affirmative allegation, petitioner has the burden of evidence to prove his claim that the oral compromise entered into by the parties on August 28, 1995 included the stipulation that the parties would jointly file a motion to dismiss. This petitioner failed to do. Notably, even the Metropolitan Trial Court, while ruling in favor of the petitioner and thereby dismissing the complaint, did not make a factual finding that the compromise agreement included the condition of the signing of a joint motion to dismiss.
The Court of Appeals made the factual findings in this wise:
In support of its claim, petitioner presented the testimony of Mr. Jefferson Rivera who related that respondent Dr. Gueco was aware that the signing of the draft of the Joint Motion to Dismiss was one of the conditions set by the bank for the acceptance of the reduced amount of indebtedness and the release of the car. (TSN, October 23, 1996, pp. 17-21, Rollo, pp. 18, 5). Respondents, however, maintained that no such condition was ever discussed during their meeting of August 28, 1995 (Rollo, p. 32).
The trial court, whose factual findings are entitled to respect since it has the 'opportunity to directly observe the witnesses and to determine by their demeanor on the stand the probative value of their testimonies' (People vs. Yadao, et al. 216 SCRA 1, 7 [1992]), failed to make a categorical finding on the issue. In dismissing the claim of damages of the respondents, it merely observed that respondents are not entitled to indemnity since it was their unjustified reluctance to sign of the Joint Motion to Dismiss that delayed the release of the car. The trial court opined, thus:
'As regards the third issue, plaintiffs' claim for damages is unavailing. First, the plaintiffs could have avoided the renting of another car and could have avoided this litigation had he signed the Joint Motion to Dismiss. While it is true that herein defendant can unilaterally dismiss the case for collection of sum of money with replevin, it is equally true that there is nothing wrong for the plaintiff to affix his signature in the Joint Motion to Dismiss, for after all, the dismissal of the case against him is for his own good and benefit. In fact, the signing of the Joint Motion to Dismiss gives the plaintiff three (3) advantages. First, he will recover his car. Second, he will pay his obligation to the bank on its reduced amount of P150,000.00 instead of its original claim of P184,985.09. And third, the case against him will be dismissed. Plaintiffs, likewise, are not entitled to the award of moral damages and exemplary damages as there is no showing that the defendant bank acted fraudulently or in bad faith.' (Rollo, p. 15)
The Court has noted, however, that the trial court, in its findings of facts, clearly indicated that the agreement of the parties on August 28, 1995 was merely for the lowering of the price, hence -
'xxx On August 28, 1995, bank representative Jefferson Rivera and plaintiff entered into an oral compromise agreement, whereby the original claim of the bank of P184,985.09 was reduced to P150,000.00 and that upon payment of which, plaintiff was informed that the subject motor vehicle would be released to him.' (Rollo, p. 12)
The lower court, on the other hand, expressly made a finding that petitioner failed to include the aforesaid signing of the Joint Motion to Dismiss as part of the agreement. In dismissing petitioner's claim, the lower court declared, thus:
'If it is true, as the appellees allege, that the signing of the joint motion was a condition sine qua non for the reduction of the appellants' obligation, it is only reasonable and logical to assume that the joint motion should have been shown to Dr. Gueco in the August 28, 1995 meeting. Why Dr. Gueco was not given a copy of the joint motion that day of August 28, 1995, for his family or legal counsel to see to be brought signed, together with the P150,000.00 in manager's check form to be submitted on the following day on August 29, 1995? (sic) [I]s a question whereby the answer up to now eludes this Court's comprehension. The appellees would like this Court to believe that Dr Gueco was informed by Mr. Rivera Rivera of the bank requirement of signing the joint motion on August 28, 1995 but he did not bother to show a copy thereof to his family or legal counsel that day August 28, 1995. This part of the theory of appellee is too complicated for any simple oral agreement. The idea of a Joint Motion to Dismiss being signed as a condition to the pushing through a deal surfaced only on August 29, 1995.
'This Court is not convinced by the appellees' posturing. Such claim rests on too slender a frame, being inconsistent with human experience. Considering the effect of the signing of the Joint Motion to Dismiss on the appellants' substantive right, it is more in accord with human experience to expect Dr. Gueco, upon being shown the Joint Motion to Dismiss, to refuse to pay the Manager's Check and for the bank to refuse to accept the manager's check. The only logical explanation for this inaction is that Dr. Gueco was not shown the Joint Motion to Dismiss in the meeting of August 28, 1995, bolstering his claim that its signing was never put into consideration in reaching a compromise.' xxx.9
We see no reason to reverse.
Anent the issue of award of damages, we find the claim of petitioner meritorious. In finding the petitioner liable for damages, both .the Regional Trial Court and the Court of Appeals ruled that there was fraud on the part of the petitioner. The CA thus declared:
The lower court's finding of fraud which became the basis of the award of damages was likewise sufficiently proven. Fraud under Article 1170 of the Civil Code of the Philippines, as amended is the 'deliberate and intentional evasion of the normal fulfillment of obligation' When petitioner refused to release the car despite respondent's tender of payment in the form of a manager's check, the former intentionally evaded its obligation and thereby became liable for moral and exemplary damages, as well as attorney's fees.10
We disagree.
Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission; the fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of obligation.11 We fail to see how the act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could constitute as fraud. True, petitioner may have been remiss in informing Dr. Gueco that the signing of a joint motion to dismiss is a standard operating procedure of petitioner bank. However, this can not in anyway have prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner against it before the lower court would be dismissed with prejudice. The whole point of the parties entering into the compromise agreement was in order that Dr. Gueco would pay his outstanding account and in return petitioner would return the car and drop the case for money and replevin before the Metropolitan Trial Court. The joint motion to dismiss was but a natural consequence of the compromise agreement and simply stated that Dr. Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioner's act of requiring Dr. Gueco to sign the joint motion to dismiss can not be said to be a deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties. It should, likewise, be noted that in cases of breach of contract, moral damages may only be awarded when the breach was attended by fraud or bad faith.12 The law presumes good faith. Dr. Gueco failed to present an iota of evidence to overcome this presumption. In fact, the act of petitioner bank in lowering the debt of Dr. Gueco from P184,000.00 to P150,000.00 is indicative of its good faith and sincere desire to settle the case. If respondent did suffer any damage, as a result of the withholding of his car by petitioner, he has only himself to blame. Necessarily, the claim for exemplary damages must fait. In no way, may the conduct of petitioner be characterized as "wanton, fraudulent, reckless, oppressive or malevolent."13
We, likewise, find for the petitioner with respect to the third assigned error. In the meeting of August 29, 1995, respondent Dr. Gueco delivered a manager's check representing the reduced amount of P150,000.00. Said check was given to Mr. Rivera, a representative of respondent bank. However, since Dr. Gueco refused to sign the joint motion to dismiss, he was made to execute a statement to the effect that he was withholding the payment of the check.14 Subsequently, in a letter addressed to Ms. Desi Tomas, vice president of the bank, dated September 4, 1995, Dr. Gueco instructed the bank to disregard the 'hold order" letter and demanded the immediate release of his car,15 to which the former replied that the condition of signing the joint motion to dismiss must be satisfied and that they had kept the check which could be claimed by Dr. Gueco anytime.16 While there is controversy as to whether the document evidencing the order to hold payment of the check was formally offered as evidence by petitioners,17 it appears from the pleadings that said check has not been encashed.
The decision of the Regional Trial Court, which was affirmed in toto by the Court of Appeals, orders the petitioner:
1. to return immediately the subject car to the appellants in good working condition. Appellee may deposit the Manager's Check - the proceeds of which have long been under the control of the issuing bank in favor of the appellee since its issuance, whereas the funds have long been paid by appellants to secure said Manager's Check over which appellants have no control.18
Respondents would make us hold that petitioner should return the car or its value and that the latter, because of its own negligence, should suffer the loss occasioned by the fact that the check had become stale.19 It is their position that delivery of the manager's check produced the effect of payment20 and, thus, petitioner was negligent in opting not to deposit or use said check. Rudimentary sense of justice and fair play would not countenance respondents' position.
A stale check is one which has not been presented for payment within a reasonable time after its issue. It is valueless and, therefore, should not be paid. Under the negotiable instruments law, an instrument not payable on demand must be presented for payment on the day it falls due. When the instrument is payable on demand, presentment must be made within a reasonable time after its issue. In the case of a bill of exchange, presentment is sufficient if made within a reasonable time after the last negotiation thereof.21
A check must be presented for payment within a reasonable time after its issue,22 and in determining what is a "reasonable time," regard is to be had to the nature of the instrument, the usage of trade or business with respect to such instruments, and the facts of the particular case.23 The test is whether the payee employed such diligence as a prudent man exercises in his own affairs.24 This is because the nature and theory behind the use of a check points to its immediate use and payability. In a case, a check payable on demand which was long overdue by about two and a half (2-1/2) years was considered a stale check.25 Failure of a payee to encash a check for more than ten (10) years undoubtedly resulted in the check becoming stale.26 Thus, even a delay of one (1) week27 or two (2) days,28 under the specific circumstances of the cited cases constituted unreasonable time as a matter of law.
In the case at bar, however, the check involved is not an ordinary bill of exchange but a manager's check. A manager's check is one drawn by the bank's manager upon the bank itself. It is similar to a cashier's check both as to effect and use. A cashier's check is a check of the bank's cashier on his own or another check. In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance.29 It is really the bank's own check and may be treated as a promissory note with the bank as a maker.30 The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof. If treated as promissory note, the drawer would be the maker and in which case the holder need not prove presentment for payment or present the bill to the drawee for acceptance.31
Even assuming that presentment is needed, failure to present for payment within a reasonable time will result to the discharge of the drawer only to the extent of the loss caused by the delay.32 Failure to present on time, thus, does not totally wipe out all liability. In fact, the legal situation amounts to an acknowledgment of liability in the sum stated in the check. In this case, the Gueco spouses have not alleged, much less shown that they or the bank which issued the manager's check has suffered damage or loss caused by the delay or non-presentment. Definitely, the original obligation to pay certainly has not been erased.
It has been held that, if the check had become stale, it becomes imperative that the circumstances that caused its non-presentment be determined.33 In the case at bar, there is no doubt that the petitioner bank held on the check and refused to encash the same because of the controversy surrounding the signing of the joint motion to dismiss. We see no bad faith or negligence in this position taken by the Bank.1âwphi1.nêt
WHEREFORE, premises considered, the petition for review is given due course. The decision of the Court of Appeals affirming the decision of the Regional Trial Court is SET ASIDE. Respondents are further ordered to pay the original obligation amounting to P150,000.00 to the petitioner upon surrender or cancellation of the manager's check in the latter's possession, afterwhich, petitioner is to return the subject motor vehicle in good working condition.
SO ORDERED.
Davide, Jr., Puno, Pardo, and Ynares-Santiago, JJ., concur.


 
G.R. No. 139050            October 2, 2001
REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF CUSTOMS, petitioner,
vs.
THE COURT OF TAX APPEALS and AGFHA, INCORPORATED, respondents.
VITUG, J.:
On 12 December 1992, a shipment of bales of textile gray cloth, under Bill of Lading No. HKT-138899, arrived at the Manila International Container Port (MICP) aboard the vessel "S/S ACX Daisy." The shipment's Inward Foreign Manifest stated that the bales of cloth were consigned to GQ GARMENTS, Inc., of 244 Escolta Street, Binondo, Manila. The Clean Report of Findings (CRF) issued by the Societe Generale de Surveilance (SGS), however, mentioned AGFHA, Incorporated, to be the consignee of the shipment. Forthwith, the shipping agent, FIL-JAPAN, requested for an amendment of the Inward Foreign Manifest so as to correct the name of the consignee from that of GQ GARMENTS, Inc., to that of AGFHA, Inc.
On 22 January 1993, FIL-JAPAN forwarded to AGFHA, Inc., the amended Inward Foreign Manifest which the latter, in turn, submitted to the MICP Law Division. The MICP indorsed the document to the Customs Intelligence Investigation Services (CIIS). The CIIS placed the subject shipment under Hold Order No. H/CI/01/2293/01, dated 22 January 1993, on the ground that GQ GARMENTS, Inc., could not be located in its given address at 244 Escolta Street, Binondo, Manila, and was thus suspected to be a fictitious firm. Forfeiture proceedings under Section 2530(f) and (l) (3-5) of the Tariff and Customs Code were initiated.
AGFHA, Inc., through its president Wilson Kho, filed a motion for intervention contending that AGFHA, Inc., is the lawful owner and actual consignee of the subject shipment. The motion for intervention was granted on 2 March 1993. Following a hearing, the Collector of Customs came up with a draft decision ordering the lifting of the warrant of seizure and detention on the basis of its findings that GQ GARMENTS, Inc., was not a fictitious corporation and that there was a valid waiver of rights over the bales of cloth by GQ GARMENTS, Inc., in favor of AGFHA, Inc. The draft decision was submitted to the Deputy Commissioner for clearance and approval, who, in turn, transmitted it to the CIIS for comment. The CIIS opposed the draft decision, insisting that GQ GARMENTS, Inc., was a fictitious corporation and that even if it did exist, its president, John Barlin, had no authority to waive the right over the subject shipment in favor of AGFHA, Inc.
The Deputy Commissioner, relying on the comment of the CIIS, rejected the draft decision of the Collector of Customs.
GQ GARMENTS, Inc., and AGFHA, Inc., filed a joint motion for reconsideration, which was given due course. Convinced that the evidence presented established the legal existence of GQ GARMENTS, Inc., and finding that a resolution passed by the Board of Directors of GQ GARMENTS, Inc., ratified the waiver of its president, the Collector of Customs in another draft decision granted the joint motion. The Office of the Commissioner of Customs, however, disapproved the new draft decision and denied the release of the goods; it ruled:
"1. x x x [I]t is quite suspicious that it took more than one month before the alleged error in the consignee was discovered by the shipper and by AGFHA, Inc., and by GQ Garments especially considering the fact that there is a CRF naming therein AGFHA as consignee of the subject shipment which means that the shipper was contracted by SGS so that the latter can inspect the subject shipment to be imported by consignee; that Mr. Wilson Kho admitted it was AGFHA who ordered the shipment by telephone call; that prior to this shipment there was no order placed in the name of GQ Garments from Indonesia; and that this is already the second of four shipments ordered by AGFHA, Inc., from Jakarta, Indonesia.
"2. Mr. Wilson Kho's explanation that the shipper committed an error in naming GQ GARMENTS as the consignee of the subject shipment because his business card contains the name of both GQ GARMENTS and AGFHA, Inc. appears to be an afterthought and self-serving. Moreover, he admitted that he is not an officer nor even a stockholder of GQ GARMENTS so why should his business card indicate his name as President/General Manager of GQ GARMENTS and AGFHA, Inc. That is clearly a misrepresentation.
"3. During the hearing on April 15, 1994, Mr. John John Barlin of GQ GARMENTS admitted that the letter dated February 11, 1993 purportedly signed by him (in which he allegedly informed the Collector of Customs that AGFHA, Inc., is the rightful owner of the subject shipment and that GQ GARMENTS is waiving its right over the same) actually came from Wilson Kho. In other words, the said letter is spurious.
"4. From the admissions of both Mr. Wilson Kho and Mr. John John Barlin, it is clear that GQ GARMENTS is actually owned by Mr. Wilson Kho and its corporate franchise appears to be being used to perpetrate fraud and other scheme to confuse authorities (pp. 1-4, Decision of Commissioner of Customs, Custom Case No. 94-017)"1
In deference to the directive of the Commissioner, the District Collector of Customs ordered the forfeiture of the shipment. On 14 October 1994, AGFHA, Inc., interposed an appeal to the Office of the Commissioner of Customs. The appeal was dismissed consistently with the Commissioner's earlier stand that disapproved the Collector of Customs' draft decision.
On 5 October 1995, AGFHA, Inc., filed a petition for review with the Court of Tax Appeals questioning the forfeiture of the bales of textile cloth. Finding merit in the plea of appellants, the Court of Tax Appeals granted the petition and ordered the release of the goods to AGFHA, Inc.
On 27 December 1996, the Commissioner of Customs then challenged before the Court of Appeals the decision of the tax court.
In its decision, dated 31 May 1999, the Court of Appeals dismissed the appeal for lack of merit. Quoting extensively from the assailed decision of the tax court, the appellate court ruled that the Bureau of Customs has failed to satisfy its burden of proving fraud on the part of the importer or consignee. It expounded thusly:
"Section 2530 (f) and (1) 3-5 of the Tariff and Customs Code, provide that in order that a shipment be liable to forfeiture, it must be proved that fraud has been committed by the importer/consignee to evade payment of the duties due. To establish the existence of fraud, the onus probandi is on the part of the Bureau of Customs who ordered the forfeiture of the subject shipments. The BOC, however, failed.
"x x x           x x x           x x x
"'x x x This Court could not fathom any individual or collective importance of the x x x findings [of the BOC] as indicative of the actual commission of fraud or any attempt or frustration thereof. As defined, actual or intentional fraud consists of deception willfully and deliberately done or resorted to in order to induce another to give up some right. It must amount to intentional wrong-doing with the sole object of avoiding the tax.
`The circumstances or findings presented by the [BOC] do not reveal x x x any kind of deception that could have been played upon [the] Bureau to give up some of its right, e.g., to collect correct taxes on properly declared shipment of goods.
`x x x           x x x           x x x
`[BOC] is saying that the shipper knew all along that AGFHA, Inc., was the real consignee due to the pre-inspection done by SGS and the corresponding issuance of the CRF naming AGFHA, Inc. as the consignee. So that in naming GQ GARMENTS Inc. as the consignee in the Bill of Lading and Inward Foreign Manifest, the same was intentional and deliberately done and not a case of error or inadvertence x x x.
`[The Court] could not believe that [BOC] assumed the above circumstance as a fact in his attempt to forfeit the subject shipment in favor of the government. The respondent is trying to second guess the act of the shipper that the latter had prior knowledge of AGFHA Inc., as the true consignee before the shipment. [The Court] deem[s] such conclusion as pure hearsay. Obviously, it is only the shipper and/or the SGS who could personally vouch for events that transpired prior to the shipment of the goods subject matter of this case.
`x x x [AGFHA Inc.] has offered the following controverting and convincing evidence x x x:
`1. Telex message from the shipping agent of shipper P.T. Mandala Subur Textile Industry to FIL-JAPAN Shipping Company Manila, requesting amendment of the Bill of Lading and other shipping records, to change consignee from GQ Garments, Inc. to Agfha, Inc.;
`2. Application for Amendment of the Inward Foreign Manifest filed by the shipper's agent, FIL-JAPAN Shipping Company, for approval with the Customs Law Division, Manila International Container Port (MICP), to change the name of the consignee from GQ Garments, Inc. to Agfha, Inc.
`3. Letter dated February 10, 1993 by Wilson Kho, president of Agfha, Inc. addressed to Atty. Buenaventura Maniego, District Collector of Customs, MICP, North Harbor, Manila manifesting the former's intention and willingness to pay the corresponding duties and taxes on the subject shipment based on a higher valuation indicated in the Clean Report of Findings (CRF) as recommended by the SGS, as against the lower valuation indicated in the invoice.
`4. Bill of Lading covering the subject shipment showing the shipper as P.T. Mandala Subur Textile Industry and the consignee as GQ Garments, Inc.
`5. The Clean Report of Findings (CRF) dated December 9, 1992 showing the consignee of the subject shipment as Agfha, Inc. and the shipper as P.T. Mandala Subur Textile Industry.
`6. Import Authority No. (IAN) 18.012.37679, assigned by the Central Bank of the Philippines appearing on the right hand portion of the CRF.
`The above evidence speak for themselves. If any deception is intended by petitioner Agfha, Inc., why would it apply for an Import Authority Number under its name? It knew for certain that the subject goods will be pre-inspected by SGS under its name.
"x x x           x x x           x x x
`x x x [AGFHA Inc.] expressed its willingness to pay the higher duties and taxes imposed on the subject shipment as indicated in the CRF. x x x From the very start up to the end, petitioner had been consistent in its actuations. It applied for an Import Authority with the Central Bank of the Philippines which authority was used by the SGS in making the necessary pre-inspection and issuing the CRF. It undertook remedial measures to amend the consignee in the Bill of Lading and Inward Foreign Manifest when the shipper made a mistake. It then manifested to pay the correct taxes and duties. The government stands to lose nothing.'"2
The Court of Appeals attributed the error in indicating GQ GARMENTS, Inc., instead of AGFHA, Inc., in the Inward Foreign Manifest as being the consignee of the subject shipment to the shipping agent. It also noted the finding of the tax court that GQ GARMENTS, Inc., was, in fact, a registered importer with Registration No. 91-5624 per the Customs Intelligence and Investigation Service List of Registered Importers contained in Customs Memorandum Order No. 149-88 for the year 1991.
The BOC instituted the instant petition for review under Rule 45 of the Revised Rules of Court assailing the affirmance by the Court of Appeals of the tax court's decision of 04 November 1996.
The appeal is not meritorious.
Section 2530 (f) and (1) (3-5) provides:
"Section 2530. Property Subject to Forfeiture Under Tariff and Customs Law. - Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the following conditions be subjected to forfeiture;
"x x x           x x x           x x x
"f. Any article the importation or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other articles which, in the opinion of the Collector, have been used, are or were entered to be used as instruments in the importation or exportation of the former.
"x x x           x x x           x x x
"1. Any article sought to be imported or exported:
"x x x           x x x           x x x
"(3) On the strength of a false declaration or affidavit executed by the owner, importer, exporter or consignee concerning the importation of such article;
"(4) On the strength of a false invoice or other document executed by the owner, importer, exporter or consignee concerning the importation or exportation of such article; and
"(5) Through any other practice or device contrary to law by means of which such articles was entered through a customhouse to the prejudice of the government."
The requisites for the forfeiture of goods under Section 2530(f), in relation to (1) (3-5), of the Tariff and Customs Code are: (a) the wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person of any invoice, letter or paper - all touching on the importation or exportation of merchandise; (b) the falsity of such declaration, affidavit, invoice, letter or paper; and (c) an intention on the part of the importer/consignee to evade the payment of the duties due.3
Petitioner asserts that all of these requisites are present in this case. It contends that it did not presume fraud, rather the events positively point to the existence of fraud. Private respondent AGFHA, Inc., on the other hand, maintains that there has only been an inadvertent error and not an intentional wrongful declaration by the shipper to evade payment of any tax due. The resolution of this issue would entail a reevaluation of the attendant circumstances, a matter that cannot be freely undertaken by this Tribunal. It has been a settled rule that the Supreme Court is not a trier of facts.4 Findings of the appellate court are generally binding and cannot be disturbed by this Court unless it is sufficiently shown that there has been no evidence on record to support such findings.5 The assessment made by the appellate court carry even more weight when it is consistent with that of the trial court.6 Consonantly, the factual determination of the Court of Tax Appeals, when supported by substantial evidence, will not be reversed on appeal unless it is clear that the said court has committed gross error in the process.7 The Collector of Customs, Court of Tax Appeals and the Court of Appeals are unanimous in concluding that no fraud has been committed by private respondent in the importation of the bales of cloth. The records do appear to sustain this conclusion.
Fraud must be proved to justify forfeiture.8 It must be actual, amounting to intentional wrong-doing with the clear purpose of avoiding the tax.9 Forfeiture is not favored in law nor in equity.10 Mere negligence is not equivalent to the fraud contemplated by law.11 What is here involved is an honest mistake, not even directly attributable to private respondent, which will not deprive the government of its right to collect the proper tax. The conclusion of the appellate court, being consistent with the evidence on record and not contrary to law and jurisprudence, hardly can be overturned by this Court.
WHEREFORE, the petition is hereby DENIED and the assailed decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Melo, (Chairman), Panganiban, and Sandoval-Gutierrez, JJ., concur.

 
SECOND DIVISION
[G.R. No. 146173.  December 11, 2003]
CECILIA YAMBAO, petitioner, vs. MELCHORITA C. ZUÑIGA, LEOVIGILDO C. ZUÑIGA, REGINALDO C. ZUÑIGA, AND THE MINORS, HERMINIGILDO C. ZUÑIGA, JR., AND LOVELY EMILY C. ZUÑIGA – both represented by their legal guardian, the aforenamed MELCHORITA C. ZUÑIGA, respondents.
D E C I S I O N
QUISUMBING, J.:
This petition for review on certiorari seeks to reverse and set aside the decision[1][1] of the Court of Appeals, dated September 8, 2000, in CA-G.R. CV No. 52275. The appellate court affirmed the judgment[2][2] of the Regional Trial Court (RTC) of Malolos City, Bulacan, Branch 8, in Civil Case No. 581-M-92, finding herein petitioner, among others, liable for the untimely death of Herminigildo Zuñiga in a vehicular accident and ordering her to indemnify his legal heirs, the respondents herein.  Also challenged in this petition is the resolution[3][3] of the Court of Appeals, dated November 27, 2000, denying the petitioner’s Motion for Reconsideration.
Petitioner Cecilia Yambao is the registered owner of “Lady Cecil and Rome Trans” passenger bus with Plate No. CVK 606, with a public transport franchise to ply the Novaliches-via Quirino-Alabang route.
The respondents are the legal heirs of the late Herminigildo Zuñiga. Melchorita Zuñiga is the surviving spouse, while Leovigildo, Reginaldo, Herminigildo, Jr., and Lovely Emily are their children.
The facts, as established by the trial court and affirmed by the appellate court, are as follows:
At around 3:30 p.m. of May 6, 1992, the bus owned by the petitioner was being driven by her driver, one Ceferino G. Venturina along the northbound lane of Epifanio delos Santos Avenue (EDSA), within the vicinity of Bagong Barrio, Kalookan City.  With Venturina was the bus conductor, Fernando Dumaliang.  Suddenly, the bus bumped Herminigildo Zuñiga, a pedestrian.  Such was the force of the impact that the left side of the front windshield of the bus was cracked.  Zuñiga was rushed to the Quezon City General Hospital where he was given medical attention, but due to the massive injuries sustained, he succumbed shortly thereafter.
Private respondents, as heirs of the victim, filed a Complaint[4][4] against petitioner and her driver, Venturina, for damages, docketed as Civil Case No. 581-M-92 at the RTC of Malolos City.  The complaint essentially alleged that Venturina drove the bus in a reckless, careless and imprudent manner, in violation of traffic rules and regulations, without due regard to public safety, thus resulting in the victim’s premature death.
In her Answer, the petitioner vehemently denied the material allegations of the complaint.  She tried to shift the blame for the accident upon the victim, theorizing that Herminigildo bumped into her bus, while avoiding an unidentified woman who was chasing him.  She further alleged that she was not liable for any damages because as an employer, she exercised the proper diligence of a good father of a family, both in the selection and supervision of her bus driver.
On September 8, 1995, the trial court rendered judgment, the dispositive portion of which reads:
In view of the foregoing consideration, judgment is hereby rendered in favor of the plaintiffs and against the defendants ordering the herein defendants jointly and severally, with Plaridel Surety & Insurance Co., and Times Surety & Insurance Co. Inc. to the extent of their respective liabilities under their respective insurance policies to pay the herein plaintiffs the following sums of money:
1.         P50,000.00 as indemnity for the death of Herminigildo Zuñiga;
2.         P92,000.00 as funeral expenses;
3.         P200,000.00 as moral damages;
4.         P30,000.00 as exemplary damages;
5.         P30,000.00 as attorney’s fees;
6.         P5,000.00 as litigation expenses; and
7.         To pay the cost of the suit
to be paid by all the herein defendants and third party defendants within thirty (30) days from receipt of this Decision.
The counterclaim of the defendant Cecilia Yambao is hereby dismissed for lack of merit.
SO ORDERED.[5][5]
In finding for the respondents herein, the trial court observed:
[T]he allegations and evidence presented by the defendants that it was the victim Herminigildo Zuñiga who bumped the bus owned by defendant Cecilia Yambao and her husband… is incredible if not preposterous. No sane person would bump his head or body against a running bus along a big highway like EDSA at Bagong Barrio, Caloocan City and neither did any of the defendants presented (sic) any evidence or proof to show that the victim was mentally deranged at the time of the accident and the presumption therefore is that he was in his normal senses.[6][6]
In holding the petitioner liable for Herminigildo’s death, the trial court applied Article 1756[7][7] of the Civil Code, observing that petitioner had failed to prove that she observed the diligence required by Articles 1733[8][8] and 1755[9][9] of the said Code.
Dissatisfied, Yambao filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 52275, faulting the trial court for failing to appreciate that:  (a) it was the victim who ran into her bus, and (b) she had exercised the proper diligence of a bonus pater familias in the selection and supervision of her employee, the driver of said bus.
On September 8, 2000, the Court of Appeals decided CA-G.R. CV No. 52275 as follows:
WHEREFORE, on the foregoing modificatory premises, and considering that the same result has been reached by the trial court, its Decision dated September 8, 1995 is hereby AFFIRMED.
Costs against defendant-appellant.
SO ORDERED.[10][10]
While sustaining the trial court’s findings that Venturina had been reckless and negligent in driving the petitioner’s bus, thus hitting the victim with fatal results, the appellate court, however, found the trial court’s reliance on Articles 1755 and 1756 of the Civil Code misplaced.  It held that this was a case of quasi-delict, there being no pre-existing contractual relationship between the parties.  Hence, the law on common carriers was inapplicable.  The court a quo then found the petitioner directly and primarily liable as Venturina’s employer pursuant to Article 2180 of the Civil Code as she failed to present evidence to prove that she has observed the diligence of a good father of a family in the selection and supervision of her employees.
Yambao then duly moved for reconsideration, but her motion was denied for want of merit.[11][11]
Hence, this petition for review, anchored on the following formulation of issues:
I
WHETHER OR NOT THE ALLEGATIONS AND EVIDENCE PRESENTED BY THE PETITIONER, THE VICTIM HERMINIGILDO ZUÑIGA WAS THE ONE WHO BUMPED THE BUS OWNED BY HEREIN PETITIONER CECILIA YAMBAO AND HER HUSBAND AND WHO DISREGARDED THE TRAFFIC RULES AND REGULATIONS AT THE PLACE AND TIME OF THE INCIDENT WHICH UNDOUBTEDLY AND CONCLUSIVELY PROVED THAT IT WAS THE PLAINTIFF’S OWN NEGLIGENCE THAT WAS THE IMMEDIATE AND PROXIMATE CAUSE OF HIS DEATH.
II
WHETHER OR NOT, PETITIONER CECILIA YAMBAO IS NOT LIABLE FOR ANY DAMAGES AND THAT SHE EXERCISED THE PROPER DILIGENCE OF A GOOD FATHER OF THE FAMILY, BOTH IN THE SELECTION AND SUPERVISION OF HER DRIVER AND/OR EMPLOYEE.[12][12]
At the outset, we must state that the first issue raised by the petitioner is a factual one.  Whether a person is negligent or not is a question of fact,[13][13] which this Court cannot pass upon in a petition for review on certiorari, as our jurisdiction is limited to reviewing errors of law.[14][14] The resolution of factual issues is the function of the trial court and its findings on these matters are, as a general rule, binding on this Court,[15][15] more so where these have been affirmed by the Court of Appeals.[16][16] We have carefully examined and weighed the petitioner’s arguments on the first issue submitted, as well as the evidence on record, and find no cogent reason to disregard the cited general rule, much less to reverse the factual findings of the trial court as upheld by the court a quo.  Hence, we sustain the trial court’s finding, as affirmed by the Court of Appeals, that it was Venturina’s reckless and imprudent driving of petitioner’s bus, which is the proximate cause of the victim’s death.
To our mind, therefore, the only issue before the Court properly is whether petitioner exercised the diligence of a good father of a family in the selection and supervision of her employees, thus absolving her from any liability.
Petitioner contends that as an employer, she observed the proper diligence of a good father of a family, both in the selection and supervision of her driver and therefore, is relieved from any liability for the latter’s misdeed.  To support her claim, she points out that when Venturina applied with her as a driver in January 1992, she required him to produce not just his driver’s license, but also clearances from the National Bureau of Investigation (NBI), the Philippine National Police, and the barangay where he resides.  She also required him to present his Social Security System (SSS) Number prior to accepting him for employment.  She likewise stresses that she inquired from Venturina’s previous employer about his employment record, and only hired him after it was shown to her satisfaction that he had no blot upon his record.
The petitioner’s arguments ring hollow and fail to sway this Court.
The law governing petitioner’s liability, as the employer of bus driver Venturina, is Article 2180 of the Civil Code, the full text of which reads:
Art. 2180.  The obligation imposed by Article 2176[17][17] is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.  (Italics ours)
The “diligence of a good father” referred to in the last paragraph of the aforecited statute means diligence in the selection and supervision of employees.[18][18] Thus, when an employee, while performing his duties, causes damage to persons or property due to his own negligence, there arises the juris tantum presumption that the employer is negligent, either in the selection of the employee or in the supervision over him after the selection.[19][19] For the employer to avoid the solidary liability for a tort committed by his employee, an employer must rebut the presumption by presenting adequate and convincing proof that in the selection and supervision of his employee, he or she exercises the care and diligence of a good father of a family.[20][20] In the instant case, we find that petitioner has failed to rebut the presumption of negligence on her part.
Petitioner’s claim that she exercised due diligence in the selection and supervision of her driver, Venturina, deserves but scant consideration.  Her allegation that before she hired Venturina she required him to submit his driver’s license and clearances is worthless, in view of her failure to offer in evidence certified true copies of said license and clearances.  Bare allegations, unsubstantiated by evidence, are not equivalent to proof under the rules of evidence.[21][21] Moreover, as the court a quo aptly observed, petitioner contradicts herself.  She declared that Venturina applied with her sometime in January 1992 and she then required him to submit his license and clearances.  However, the record likewise shows that she did admit that Venturina submitted the said requirements only on May 6, 1992, or on the very day of the fatal accident itself (italics for emphasis).  In other words, petitioner’s own admissions clearly and categorically show that she did not exercise due diligence in the selection of her bus driver.
In any case, assuming arguendo that Venturina did submit his license and clearances when he applied with petitioner in January 1992, the latter still fails the test of due diligence in the selection of her bus driver.  Case law teaches that for an employer to have exercised the diligence of a good father of a family, he should not be satisfied with the applicant’s mere possession of a professional driver’s license; he must also carefully examine the applicant for employment as to his qualifications, his experience and record of service.[22][22] Petitioner failed to present convincing proof that she went to this extent of verifying Venturina’s qualifications, safety record, and driving history.  The presumption juris tantum that there was negligence in the selection of her bus driver, thus, remains unrebutted.
Nor did petitioner show that she exercised due supervision over Venturina after his selection.  For as pointed out by the Court of Appeals, petitioner did not present any proof that she drafted and implemented training programs and guidelines on road safety for her employees.  In fact, the record is bare of any showing that petitioner required Venturina to attend periodic seminars on road safety and traffic efficiency.  Hence, petitioner cannot claim exemption from any liability arising from the recklessness or negligence of Venturina.
In sum, petitioner’s liability to private respondents for the negligent and imprudent acts of her driver, Venturina, under Article 2180 of the Civil Code is both manifest and clear.  Petitioner, having failed to rebut the legal presumption of negligence in the selection and supervision of her driver, is responsible for damages, the basis of the liability being the relationship of pater familias or on the employer’s own negligence.[23][23] Thus, this Court has no option but to uphold the ruling of the appellate court.
WHEREFORE, the instant petition is DENIED.  The assailed decision of the Court of Appeals, dated September 8, 2000, in CA-G.R. CV No. 52275, as well as its resolution dated November 27, 2000, denying petitioner Cecilia Yambao’s motion for reconsideration are hereby AFFIRMED.  Costs against the petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.


[1][1] Rollo, pp. 14-26. Per Associate Justice Teodoro P. Regino, and concurred in by Associate Justices Conchita Carpio Morales and Perlita J. Tria-Tirona.
[2][2] CA Rollo, pp. 47-55.
[3][3] Rollo, p. 27.
[4][4] A separate criminal complaint for reckless imprudence resulting in homicide, docketed as Crim. Case No. 156134, was also filed against Venturina before the Metropolitan Trial Court in Caloocan City, Branch 52.  However, the lower court could not proceed with the trial due to the failure and refusal of the accused Venturina to appear.  See Rollo, p. 16.
[5][5] Id. at 35-36.
[6][6] CA Rollo, pp. 53-54.
[7][7] Art. 1756.  In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755.
[8][8] Art. 1733.  Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, nos. 5,6, and 7 while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.
[9][9] Art. 1755.  A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of  very cautious persons, with a due regard for all the circumstances.
[10][10] Rollo, p. 25.
[11][11] Supra, note 3.
[12][12] Rollo, p. 97.
[13][13] Thermochem Incorporated v. Naval, G.R. No. 131541, 20 October 2000, 344 SCRA 76, 82.
[15][15] Mckee v. Intermediate Appellate Court, G.R. Nos. 68102-03, 16 July 1992, 211 SCRA 517, 537.
[16][16] Supra, note 13 at 83.
[17][17] Art. 2176.  Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done.  Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
[18][18] Supra, note 15 at 544-545.
[19][19] Pantranco North Express, Inc. v. Baesa, G.R. Nos. 79050-51, 14 November 1989, 179 SCRA 384, 393.
[20][20] Metro Manila Transit Corp. v. Court of Appeals, G.R. No. 141089, 1 August 2002, pp. 8-9 citing Pantranco North Express, Inc. v. Baesa, supra, note 19; Umali v. Hon. Bacani, 161 Phil. 351, 357 (1976).
[21][21] Manzano v. Perez, Sr., 414 Phil., 728, 738 (2001).
[22][22] Ramos v. Pepsi-Cola Bottling Co. of the Philippines, 125 Phil. 701, 703-704 (1967) citing Campo v. Camarote, 100 Phil. 459, 463 (1956).
[23][23] Metro Manila Transit Corp. v. Court of Appeals, G.R. No. 104408, 21 June 1993, 223 SCRA 521, 539.

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