Philippine Phosphate Fertilizer Corporation v. Kamalig Resources

TINGA, J.:

This is an appeal by certiorari under Rule 45 of the Revised Rules of Court from the Decision1 dated 26 May 2004 promulgated by the Court of Appeals in CA G.R. No. 52553 which reversed the Decision2 dated 25 September 1995 of the Regional Trial Court (RTC) of Makati City, Branch 63, in Civil Case No. 17641, a case for collection of a sum of money representing overwithdrawals by respondent Kamalig Resources, Inc. (Kamalig) of fertilizer stocks of various grades from the Iloilo and Manila warehouses of petitioner Philippine Phosphate Fertilizer Corporation (Philphos). The factual and legal antecedents follow. Kamalig purchased fertilizer products from Philphos for eventual sale to its customers.

The agreement governing the business transaction consisted of advance payment to Philphos for Kamalig's purchases of fertilizer products, followed by Philphos's issuance of a Sales Official Receipt and an Authority to Withdraw, indicating the kind of fertilizer product purchased and the location of the warehouse where the merchandise would be picked up. Kamalig would subsequently resell the fertilizer products and issue to its customers the corresponding Delivery Orders signed only by its authorized officers. The customers would then present the Delivery Orders to the proper Philphos warehouse for the release of the fertilizer products.

On 30 September 1985, Kamalig purchased from and made advance payments for fertilizer products of various grades to Philphos in the total sum of ₱4,548,152.53, embodied in Sales Official Receipt No. 03539,3 covering the following commercial invoices: (a) Commercial Invoice (CI) No. 04891 for fertilizer products to be withdrawn from the warehouse in Poro Point; (b) CI No. 04892 for fertilizer products to be withdrawn from the Manila supply point; (c) CI No. 04893 for such products to be withdrawn from the Iloilo warehouse; and (d) CI No. 04894 for the products to be withdrawn from the Davao supply point.4 Prior to the release of fertilizer products at the said supply points, however, Kamalig requested for a readjustment of the various fertilizer grades and a modification of the locations from which the fertilizer stocks would be picked up. The request was contained in a letter dated 11 October 1985.5 In a subsequent letter dated 14 October 1985,6 Kamalig requested another adjustment, this time a conversion of its stocks in Davao to be delivered and picked up in Manila.

All these requests were approved by Philphos . In the letter dated 21 July 1986,7 Philphos informed Kamalig of its overwithdrawal of various fertilizer stocks in the supply depots in Manila and Iloilo. This consisted of 291.45 metric tons (MT) of fertilizer grade 21-0-0 from the Manila supply point and 50 MT each of fertilizer grades 14-14-14, 16-20-0, and 21-0-0 from the Iloilo supply station.

According to Philphos, the cost of these overwithdrawals by Kamalig amounted to ₱1,016,994.21. But since Philphos also had an obligation to Kamalig in the amount of ₱470,348.91 representing the Capital Recovery Component, partial compensation took place by operation of law thereby reducing Kamalig's obligation to ₱546,645.30. Thus, Philphos demanded that this sum be settled on or before 31 July 1986, otherwise Kamalig would be charged 34% interest per annum.

Kamalig, however, denied that it had exceeded its withdrawals of fertilizer and thus contended that it should not be made liable for any amount. On 20 August 1987, Philphos filed the case for collection of a sum of money against Kamalig before the RTC of Makati City.

During pre-trial, the parties agreed to confine the issue to whether or not Kamalig overwithdrew 150 MT or 3,000 bags of various grades of fertilizer products amounting to ₱441,738.50 from Philphos's warehouse in Iloilo and 291.45 MT or 5,829 bags of fertilizer grade 21-0-0 amounting to ₱575,255.71 from Philphos's warehouse in Manila.8 After trial, giving more credence to the evidence presented by Philphos, the RTC disposed of the case in its Decision9 dated 25 September 1995, thus: In the light of the foregoing, judgment is hereby rendered as follows: 1) Ordering defendant to pay plaintiff the amount of ₱546,645.30 representing the overwithdrawn stocks made by defendant to plaintiff plus 34% interest per annum from 20 August 1987 until fully paid; 2) Ordering defendant to pay plaintiff an amount equivalent to 25% of the total claim as and for attorney's fees; and 3) Ordering defendant to pay the costs of suit.

SO ORDERED.10 The RTC noted that Kamalig did not categorically deny that there were overwithdrawals of fertilizer products in its stock, and that if there were overwithdrawals, Kamalig merely claimed that it should not be at fault because some of the delivery receipts were signed by Kamalig officers who were not authorized to make such withdrawals. However, the RTC held that the alleged unauthorized withdrawals did not relieve Kamalig from liability for the following reasons: first, Kamalig's policy of not allowing withdrawals via handwritten forms or forms that are not pre-printed or pre-numbered was not communicated to Philphos but was only an internal company policy; second, if it is Kamalig's internal policy not to allow withdrawals by unauthorized officers, then it should have been followed by all of its employees, and the withdrawals by such unauthorized officers only goes to show that said procedure is actually not an internal policy of Kamalig.

Therefore, such withdrawals should be for the account of Kamalig.11 Kamalig appealed the decision to the Court of Appeals, which found merit in the appeal. The dispositive portion of the Decision dated 26 May 2004 reads:

WHEREFORE , the assailed Decision is REVERSED and SET ASIDE. The complaint is DISMISSED and judgment is rendered ordering Philippine Phosphate Fertilizer Corporation to pay Kamalig Resources, Inc., the following: 1. Actual damages in the sum of ₱470,348.91, representing the value of the Capital Recovery Component, plus legal interest from the date of the filing of the Complaint; 2. Actual damages in the sum pf ₱174,841.34, representing the value of unauthorized withdrawals erroneously charged to Kamalig Resources, Inc.; 3. Attorney's fees in the amount of ₱30,000.00; and 4. The costs of suit. SO ORDERED.12 The Court of Appeals disagreed with the RTC's finding that Kamalig failed to categorically deny Philphos's claim of overwithdrawal of fertilizer stocks. The appellate court pointed out that there were specific denials in Kamalig's Answer that it had not overwithdrawn its stocks, and in its Pre-Trial Brief that it had withdrawn fertilizer stocks only in such grade and quantity equivalent to the payment it had previously made. A categorical denial having been made by Kamalig, the Court of Appeals declared that the burden of proof had shifted to Philphos to prove such overwithdrawals.13 The Court of Appeals found, however, that Philphos did not overcome the burden of proof as it failed to prove the alleged overwithdrawal of fertilizer products by Kamalig which is the core of its cause of action. The Court of Appeals also found that Philphos's computations not only included improperly documented withdrawals but also violated Kamalig's policy of authorizing withdrawals based only on pre-printed and numbered forms duly issued to its customers, which policy according to the Court of Appeals, was communicated by Kamalig to Philphos. The Court of Appeals likewise found that it was also Philphos's company policy to disallow withdrawals not using the pre-numbered and pre-printed delivery receipts. By adopting the same policy, the appellate court declared, Philphos should have been forewarned that allowing withdrawals without the proper documentation would be abetting unauthorized withdrawals to its prejudice. Thus, such unauthorized withdrawals should also be deducted from the value of the fertilizer products withdrawn by Kamalig.14 Consequently, the unauthorized withdrawals, in the total amount of ₱378,891.45,15 should be deducted from the total withdrawals made by Kamalig as stated in the delivery receipts, placed at ₱4,752,202.62, thereby leaving a difference of ₱4,373,311.21. Said difference should then be deducted from the purchase price of ₱4,548,152.55 previously paid by Kamalig, leaving an overpayment of ₱174,841.34 by Kamalig. Add to this the amount of ₱470,348.91 representing the Capital Recovery Component which Philphos admitted it owed Kamalig, resulting in the total amount of ₱645,190.25 owed by Philphos to Kamalig, said the Court of Appeals. Total value of withdrawals made by Kamalig ₱4,752,202.62 Less: Value of unauthorized withdrawals - 378,891.41