Republic of the Philippines v. Court of Appeals and R & B Surety and Insurance, Inc.
REITERATIONFacts
The Antecedents: Endelo Manufacturing Corporation imported raw materials for export, depositing them in a customs bonded warehouse. To secure the release of these materials, Endelo obtained re-export bonds from Communications Insurance Company, Inc. (CICI) and R & B Surety and Insurance Co., Inc. (R & B Surety). These bonds guaranteed payment of duties and taxes if Endelo failed to re-export the materials or finished goods within the stipulated period. Endelo's license to operate was later suspended due to alleged pilferage of the imported materials by Enrique Jocson, a representative of R & B Surety, which prevented Endelo from fulfilling its re-export obligations. Procedural History: The Republic of the Philippines, through the Bureau of Customs, filed a collection case against Endelo, CICI, and R & B Surety for the unpaid customs duties and taxes. The trial court ruled in favor of the Republic, holding Endelo, CICI, and R & B Surety jointly and severally liable for the amounts due and ordering the forfeiture of their bonds. Only R & B Surety appealed to the Court of Appeals, specifically concerning its liability for eight of the eleven causes of action. The Court of Appeals reversed the trial court's decision, finding R & B Surety not liable. The Republic then filed the present petition for review on certiorari with the Supreme Court. The Petition: The Republic of the Philippines, represented by the Bureau of Customs, seeks review under Rule 45 of the Revised Rules of Court of the Court of Appeals' decision. The petitioner argues that the Court of Appeals erred in ruling that the testimonies of its witnesses were hearsay, that the suspension of Endelo's license was not sufficiently substantiated, that there was no proof of Endelo's participation in the pilferage, and that R & B Surety's liability was extinguished due to lack of notice of the license suspension. The petitioner contends that the testimonies were admissible as entries in official records and that the burden was on Endelo to prove the illegality of the suspension, which it failed to do. The petitioner also asserts that notice of license suspension was not required for R & B Surety's liability to arise, as the bond only stipulated notice for revocation or cancellation.
Issue(s)
Whether the testimonies of Atty. Rodolfo Casareno, Sergio Romero, and Melchor Cruz are hearsay and insufficient to establish the petitioner's cause of action against R & B Surety. Whether the suspension of Endelo's license to operate was sufficiently substantiated. Whether there is evidence proving Endelo's participation or ratification of Enrique Jocson's acts of pilferage. Whether R & B Surety's liability under its embroidery bonds was extinguished due to the petitioner's failure to notify it of Endelo's license suspension.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals is SET ASIDE, and the Decision of the Regional Trial Court is REINSTATED and AFFIRMED.
Ratio Decidendi
On the issue of hearsay testimonies: The Supreme Court ruled that the testimonies of Atty. Casareno, Sergio Romero, and Melchor Cruz were not hearsay. These testimonies concerned official records and matters within their personal knowledge as public officers performing their duties. Specifically, Atty. Casareno testified on the existence of documents forming part of Bureau of Customs records, Sergio Romero testified on the status of the bonds as Bonds Custodian, and Melchor Cruz testified on records evidencing Endelo's failure to re-export. These fall under the exception to the hearsay rule for entries in official records made in the performance of duty. On the substantiation of Endelo's license suspension: The Court found that Endelo's license was indeed suspended in 1970 due to pilferage, a fact admitted by Endelo in its Answer. While Endelo claimed the suspension was illegal and unnecessary, it failed to provide supporting evidence. The burden was on Endelo to prove the illegality of the suspension, not on the petitioner to prove its propriety. The Court noted that the investigation report could not be produced because it was already condemned, consistent with Bureau of Customs record-keeping policies. The Court also emphasized the presumption of regularity in the performance of official functions. On Endelo's participation in pilferage: The Court found no sufficient proof that Endelo participated in or ratified Enrique Jocson's acts of pilferage. However, this did not absolve the surety. The Court pointed out that Endelo failed to prove the illegality of its license suspension and did not take steps to have the suspension lifted. This omission, coupled with the presumption of regularity, suggested the suspension was proper and likely caused by the pilferage. On the extinguishment of R & B Surety's liability due to lack of notice: The Court held that the issue of notice was rendered moot by its findings regarding the suspension of Endelo's license. The bonds did not require notice for mere suspension, only for revocation or cancellation. Furthermore, the Court found that R & B Surety failed to discharge its burden of proving the alleged impropriety of the suspension. The Court also noted that Endelo was not precluded from complying with its obligation to export the materials in their original state within the stipulated period, even with the suspension.
Main Doctrine
The suspension of a license to operate, if not proven to be illegal or indefinite, does not automatically extinguish the obligations of a surety under an embroidery re-export bond, especially when the principal obligor fails to prove the illegality or to take steps to lift the suspension. The presumption of regularity in the performance of official functions applies absent convincing evidence to the contrary.