State v.

Lungsford
Annotate this Case

167 N.J. Super. 296 (1979)

400 A.2d 843

STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. LAWRENCE LUNGSFORD,

DEFENDANT-APPELLANT.

Superior Court of New Jersey, Appellate Division.

Argued January 16, 1979.

Decided April 4, 1979.

*298 Before Judges CONFORD, PRESSLER and KING.

Mr. Edward A. Halpern argued the cause for appellant (Mr. Stanley C. Van Ness, Public Defender,
attorney for appellant).

Mr. Frank J. Cozzarelli argued the cause for respondent (Mr. John J. Degnan, Attorney General of
New Jersey, attorney for respondent).

The opinion of the court was delivered by KING, J.A.D.

Defendant was tried before a jury and found guilty of both counts of a two-count indictment charging
him with knowing possession of a motor vehicle with an altered serial number for which no verified
statement had been filed with the Division of Motor Vehicles within ten days of possession, contrary
to N.J.S.A. 2A:127-3, and receiving a motor vehicle known to have been stolen and belonging to
James Wilton, contrary to N.J.S.A. 2A:139-3. Post-trial motions for acquittal and a new trial were
denied and defendant was sentenced to two concurrent 12-month terms in the Essex County
Correction Center.

On April 19, 1975 defendant Lungsford was arrested upon being found in possession of a 1968
Plymouth Road Runner two-door hardtop. The State alleged that the Road Runner was stolen on
January 8, 1975 from James Wilton *299 of Edison. The State was unable to produce Wilton at trial to
identify the vehicle or testify that it was stolen. Defendant testified at trial that he purchased the car
from James Law of Hillside in January 1973. Although he had a title and registration he could not
corroborate the purchase. Both sides attempted to locate Law but were unsuccessful. Defendant's
appellate claims emphasize the hearsay nature of certain evidence admitted at trial over his
objection.

The claims of trial error focus on the manner in which the police attempted to prove that the Road
Runner in defendant's possession when he was arrested was the allegedly stolen Wilton vehicle.
Some background from the record is necessary for understanding. Automobiles each have at least
two, sometimes three, distinguishing numbers which are placed in the car at the point of production.
The primary and most visible number is called the vehicle identification number (VIN). This indicates
the type, year and make of the car. On the 1968 Road Runner the VIN was riveted to the driver's side
of the dashboard. The second number, a confidential serial number, is usually found elsewhere in a
permanent component of the car. This confidential number is for the benefit of auto theft investigation.
Chrysler Corporation's version of the confidential serial number on this 1968 Road Runner model was
called a factory order number and was found underneath the hood stamped into the radiator brace on
the driver's side. In this case, a third number, called a packing slip number was placed in the coils of
the back seat of the Road Runner.

A car may be traced through any of the numbers. In this case, because the VIN, in the opinion of
Detective Walsh of Newark's auto theft squad, did not appear to have been factory-installed, the
police requested the National Automobile Theft Bureau (NATB) to factory-trace the car through the
factory order number. (Unfortunately, the record is totally uninformative about the nature and function
of NATB.) A factory-trace provides the time of manufacture and reveals the zone office where the car
was sold, and thus *300 permits the identification of the first owner. From the factory-trace the proper
VIN for the vehicle may also be determined. That VIN then may be forwarded to the Division of Motor
Vehicles and the current ownership of the car traced through state records.

In the present case the trace of the factory order number stamped on the radiator brace produced an
allegedly corresponding VIN which NATB rendered to the Newark police who, in turn, forwarded the
VIN to the Division of Motor Vehicles in Trenton. The VIN rendered to Trenton was RM21H8A267488.
The Division sent back to Newark the name of the alleged owner, James Wilton, who had reported a
like car stolen on January 8, 1975. The record, though unclear, is susceptible of the conclusion that
the VIN on the Division's reply did not completely match the number furnished by the NATB the H
was a 2 and the last two digits were 68 rather than 88.

At trial the State alleged that defendant obtained possession of the car stolen from Wilton and then
took the VIN tag from a similar model car and screwed it on to the dashboard of the stolen car. The
State also contended the packing slip number found in the back seat coils, when traced, proved that
the seats came from a stolen 1969 Plymouth. In addition to the various number traces the State
produced a criminal investigation report which showed that James Wilton reported his car stolen on
January 8, 1975. The incident report contained on obviously incorrect VIN, RMH1H8A267468.
Sergeant Barrett of the Edison Police testified that he contacted Wilton by phone within a week of the
incident and obtained the correct VIN, RM21H8A267488, which the factory-trace undertaken through
the NATB ultimately revealed to be the VIN compatible with the confidential serial number on the
radiator brace of the subject Road Runner.

As stated, the State could not locate Wilton; defendant could not locate Law. Defendant testified to
the purchase of the Road Runner in January 1973 when he said he received a New Jersey title and
registration from Law. Defendant *301 testified that since his acquisition of the vehicle the windshield
was broken and the ignition was stolen. He said that when the windshield was smashed the VIN tag
was broken loose on one side, thus creating the condition which aroused Detective Walsh's
suspicions. Defendant also said he bought new seats from a junkyard, replaced the engine, and put
in a new radiator and brace after he bought the car. He did not say when he replaced the radiator. He
produced no receipts for these transactions. Because he had allegedly lost the front license plate,
defendant had re-registered the car on January 21, 1975 and had received new plates. The car
thereafter passed inspection in April even though the registration showed a blue vehicle and the Road
Runner was then gray. Defendant testified he had primed the car gray without removing the blue. The
VIN on defendant's car was RM21HAG125629, a number incompatible with the model in Detective
Walsh's opinion.

In order to attempt to prove its case the State was required to rely on the NATB factory-trace
information to establish that the car in defendant's possession when he was arrested was the car
reported stolen by Wilton. The NATB information led the police to the Wilton car-theft incident report
through the not quite perfect matchup with the Division of Motor Vehicles' VIN information. Although
the judge did not permit the State to prove exactly what NATB told Detective Walsh, the entire tracing
process in effect was crucial in the State's attempt to link the car in defendant's possession to the
allegedly stolen Wilton vehicle. The record, however, contains no information about the probable
reliability of the NATB.

Our independent inquiry has provided some background about the NATB which is useful in analyzing
the admissibility into evidence of information transmitted by it. The NATB is a nonprofit corporation,
national in scope, founded in 1912 and financed by over 500 automobile insurance companies
representing 95% of the industry. The companies are assessed for the expense of the NATB's
upkeep based on the *302 relative amounts of premium written for physical damage insurance on
motor vehicles. The purpose of the organization is in large part to prevent and reduce theft losses of
automobiles. NATB assembles and disseminates information on stolen automobiles and assists law
enforcement in their identification and recovery. Information on stolen vehicles is routinely sent by
member companies to the NATB where it is computer-stored. The NATB is also the automobile
industry's approved repository for all vehicle information and identification numbers on all American
and some foreign-made cars. Federal and state law enforcement authorities call upon the NATB for
information pertinent to investigations directed towards identifying and retrieving stolen cars. The
NATB is essentially an informational warehouse, a registry for the industry.
Once Detective Walsh derived the confidential factory code number from the radiator brace on the
Road Runner, he was able to set the factory trace machinery in process through the NATB. The
information provided by the NATB led him through the state information bank on motor vehicles at
Trenton to the report of Wilton's stolen Road Runner, which VIN keyed into the confidential factory
number on the radiator brace in defendant's car.

We are constrained to hold that this conviction must be reversed. Although Walsh was not permitted
to tell the jury the precise content of the information he received from NATB, his whole process of
tracing the identity of the 1968 Road Runner in the Spring of 1975 was dependent thereon. Therefore
this critical aspect of the case this crucial link was effectively evidential against defendant. Without the
use of the NATB process no potential nexus between Wilton's car and defendant's car could have
possibly been established. But the record is devoid of any proof of the reliability of the NATB
procedures and therefore of any proper evidential basis for admission of data derived therefrom.

*303 In our opinion the NATB procedures for tracing the identification of motor vehicles could properly
be held by a trial court to be evidential in a criminal case if compliance with Evid. R. 63 (30) was
established. This rule states:

Evidence of a statement of matters of interest to persons engaged in an occupation contained in a

list, register, periodical, or other published compilation is admissible to prove the truth of any relevant
matter so stated if the compilation is published for use by persons engaged in that occupation and is
generally used and relied upon by them.

The qualification of evidence offered under Evid. R. 63(30) must first be decided by the judge
pursuant to Evid. R. 8. To satisfy the threshold the judge must be convinced that the compilation is
published for use by persons engaged in that occupation and is generally considered useful and
reliable. If these conditions are met, statements from the compilation are admissible to prove the truth
of the relevant matter stated. Evid. R. 63(30) has been said to effectively overrule the holdings in
Crowley v. Homan Co., 3 N.J. Misc. 968, 130 A. 372 (Sup. Ct. 1925) (used car blue book
inadmissible), and Horst v. Peter Breidt City Brewery, 94 N.J.L. 230 (Sup. Ct. 1920) (newspaper price
quotation not competent evidence without proof of source). New Jersey Rules of Evidence 285 (Gann
1972).

In the Report of the New Jersey Supreme Court Committee on Evidence 211 (1963), which preceded
the adoption of our evidence codification by the Supreme Court and the Legislature in 1967, Evid. R.
63 (30) was recommended thusly:

The rationale of the Rule is that the use of such materials is necessary because it is too difficult to call
to the witness stand those who have participated in their preparation or compilation. The
trustworthiness requirement is satisfied by the requirement that a finding be made by the judge that
the material is regularly published for use by persons in a given occupation who rely on it. There is no
motive to falsify; on the contrary, there is every reason to be accurate *304 and precise since the
success of a business depends on accuracy and reliability.

Dean Wigmore discusses the hearsay exception embraced by Evid. R. 63(30) under the topic,
"Sundry commercial and professional registers (stock pedigree, business directory, shipping lists,
etc.)," stating:

There are many kinds of registers, records, reports, compilations, and the like, which may in a given
case fulfill the requirements already indicated (§ 1692 supra) [necessity and trustworthiness] as
sufficient for this exception. A printed pedigree register of blooded animals, for example, made by a
person having more or less direct acquaintance with the subject matter, intended to be publicly
circulated and consulted by persons interested and informed, tested by their use, and found by their
experience to be trustworthy and actually relied upon as the basis of transactions in the trade, is a
typical illustration.

The principle, indeed, has large possibilities which have already been recognized, though with due
caution, by the courts and in a few statutes. The application of the principle might well be left largely
in the hands of the trial court. [6 Wigmore, Evidence (Chadbourne rev. 1976), § 1706 at 49-51]

Wigmore gives numerous examples of the practical utility of the exception, including: Abel v. Potts,
170 Eng. Rep. 602 (K.B. 1800) (Lloyd's register used to prove a capture in an action on a marine
policy); Warrick v. Reinhard, 136 Iowa 27, 111 N.W. 983 (Sup. Ct. 1907) (a certificate of registry in
the Iowa Breeder's Association admitted on value of a thoroughbred sow); Slocovich v. Oriental
Mutual Ins. Co., 108 N.Y. 56, 14 N.E. 802 (Ct. App. 1888) (American Lloyd's and other shipping
registers admitted to show the condition, capacity, age and value of ships).

The exception is also contained in the Federal Rules of Evidence § 803(17), effective in 1975,
rendering admissible "market quotations, tabulations, lists, directories, or other published
compilations, generally used and relied upon by the public or by persons in particular occupations."
The Federal Advisory Committee Note on the exception states: *305 "The basis of trustworthiness is
general reliance by the public or by a particular segment of it, and the motivation of the compiler to
foster reliance by being accurate."

Two New Jersey cases decided before the adoption of the Rules of Evidence in 1967 discuss the
common-law exception generally. In Associated Metals, etc., Corp. v. Dixon Chemicals, etc., 82 N.J.
Super. 281, 313 (App. Div. 1963), certif. den. 42 N.J. 501 (1964), Judge Goldmann affirmed the
admissibility of a periodical named Iron Age, the weekly publication of the steel trade considered by
plaintiff's well-qualified expert to be "the bible of the steel industry," to prove recorded warehouse
prices for structural steel during a five-year period. State v. Carrano, 27 N.J. Super. 382, 389 (App.
Div. 1953), relied upon in Associated Metals, affirmed the admissibility of The Morning Telegraph in a
bookmaking prosecution as proof of the racing events of the day stating:

The testimony of the State's experts on the general acceptance of The Morning Telegraph as a
responsible periodical "in the trade" would in our opinion warrant the trial court, in its discretion, in
finding that the periodical was admissible as a record of the events covered therein.

Since the codification of the rules the only reported New Jersey case discussing Evid. R. 63(30) is
State v. McGee, 131 N.J. Super. 292 (App. Div. 1974), a prosecution for bringing a stolen gun into the
State. The prosecution relied on a computer report from the National Crime Information Center
(N.C.I.C.) that the gun answered a description of a gun reported stolen by the Baltimore Police
Department. On appeal the State relied on Evid. R. 63(30) to sustain the admissibility of the hearsay
report that the gun was stolen. The State's witness described the N.C.I.C.'s function pertinent to the
case as a computer storehouse of reports from police departments throughout the country concerning
stolen guns. The McGee court was very chary about the admissibility of the N.C.I.C. report,
suggesting that the data stored in its computer was nothing more than an investigative tool, which
*306 could not be used as substantive proof. The court in McGee found that the trial judge erred in
admitting the N.C.I.C. report under the proofs available, and reversed the conviction, stating:

We believe the trial judge mistakenly exercised his discretion in finding that the data furnished by
N.C.I.C. was sufficiently trustworthy to justify its admission. Accepting Lintott's expert testimony of
how N.C.I.C. functions, we still do not know (a) how and when the information furnished by the owner
of the gun was passed on to the Baltimore police; (b) how and who fed the information into the
computer; (c) who programmed the computer and how it was done; how the data was retrieved from
the computer; the accuracy of those who operated the computer. Most importantly, the printout
supporting the proffered evidence was not produced. Under the circumstances existing here, the
evidence should not have been admitted. [at 298]

See also, State in Interest of D.C., 114 N.J. Super. 499 (App. Div. 1971). The McGee court held
essentially that the State did not produce enough proof of the reliability of the data supplied by
N.C.I.C. in those circumstances for the judge to fairly conclude that it was inherently trustworthy
enough to be admitted in a criminal trial.

We conclude that the information before the trial court in the instant case concerning the modus
operandi of the NATB was inadequate to permit admissibility under Evid. R. 63(30). If the conditions
of admissibility under the rule had been established and the judge had been satisfied at an Evid. R. 8
hearing that the proffer was sufficiently trustworthy, based on the method of compilation and industry
reliance, the evidence would have been properly admissible.

We are next compelled to examine defendant's challenge to the admissibility into evidence of S-6, the
criminal investigation report of the Edison Police Department, and to a reference in S-7, a supplement
thereto. The report and the reference in the supplement were admitted pursuant to Evid. R. 63(13),
the "Business Entries" exception to the hearsay rule which states:
*307 A writing offered as a memorandum or record of acts, conditions or events, is admissible to
prove the facts stated therein if the writing or the record upon which it is based was made in the
regular course of a business, at or about the time of the act, condition or event recorded, and if the
sources of information from which it was made and the method and circumstances of its preparation
were such as to justify its admission.

The State established that after reasonable inquiry the owner of the allegedly stolen car, James
Wilton, could not be located for trial. The report and supplement, S-6 and S-7, contained the
information that Wilton allegedly gave to the police immediately after he realized his car was stolen.
This was the only evidence in the case establishing that Wilton's car had been stolen. If the report
and the reference in the supplement were inadmissible, the State had no case for receiving a stolen
vehicle.

The following facts convinced the trial judge that the report was in his discretion sufficiently
trustworthy to fulfill the conditions of admissibility under Evid. R. 63(13), i.e., "the sources of
information from which it was made and the method and circumstances of its preparation were such
as to justify admission."

The State produced Sergeant Barrett of the Edison Township Police Department Auto Theft Bureau
to prove the report and that it was compiled in the ordinary course of the Department's business and
lodged in its files. The report was actually filled out by a Detective Vittello, who was not produced as a
witness, on January 8, 1975 at 10:20 P.M. at the stationhouse. The report contained a summary of
the information supplied by James E. Wilton, Jr., who stated he lived at 30 Mt. Pleasant Avenue,
Edison, and was employed by Oaktree Ceramics of Iselin. He reported to Detective Vittello that
between 8 and 10 P.M. on the evening of January 8 his 1968 Plymouth two-door Road Runner, color
gray prime, state registration 718 BFU, had been stolen from the parking lot of the Sunnyside
Delicatessen on Oaktree Road. Wilton declared the value of the car at $500 and gave a vehicle
identification number of RMHIH8A267468.

*308 Detective Vittello recorded in handwriting the following statement on the report as taken from the
victim:

Victim stated that between the above times someone stole the above described vehicle from where it
was parked at the above location. The vehicle is unregistered at this time but it displays New Jersey
plates on it which are unknown at this time. Victim stated he has the keys but the registration is in the
vehicle. The vehicle was not locked. Approximate value of the vehicle is $500.00.

Sergeant Barrett testified that the auto theft reports are routinely filled out contemporaneously with
the complaint and are kept in the department's files. When reviewing the report about a week later,
apparently pursuant to his special duties, Barrett observed that the VIN as recorded could not be
accurate because of the sequence of numbers and letters. Barrett then called the owner on the phone
and obtained a corrected VIN. Barrett had known the 22-year-old Wilton since Wilton's high school
days and had seen or spoken to him frequently about town before the theft complaint. Barrett was
also familiar with the subject vehicle and had seen it the day before it was missing, observing it was
gray prime in color. The corrected VIN number Barrett obtained was RM21H8A267488, which keyed
with the confidential identification number discovered by Detective Walsh on the radiator bracket of
defendant's car. This corrected VIN number was personally recorded by Barrett on S-7, the
supplemental report.

The trial judge admitted the investigation report, S-6, and Barrett's testimony about the corrected VIN
from S-7, stating:

Under the circumstances where the witness is unavailable, where this record is kept in an ordinary
course of business, where it's the report of a crime and necessary to establish not the identification of
the defendant or some other essential element but merely that the car was stolen that there is a
degree of reliability which would warrant admissibility.

*309 In our view the trial judge erred in holding that this hearsay of Wilton was admissible under the
business records exception. While police records may qualify as business records for certain
purposes and in certain respects, they are nevertheless not vehicles by which substantive evidential
status may be conferred upon the otherwise hearsay declarations of a victim of or witness to a crime,
accident or other occurrence. If the declarant is not available to testify and if the statement is not
admissible under some other exception to the hearsay rule, such as excited utterance or dying
declaration, then admissibility cannot be predicated exclusively upon the circumstance that the
statement was made to a police officer who paraphrased its content in his report.

Our reason for this conclusion lies in the essential rationale of the business records exception, now
codified by Evid. R. 63(13). As explicated by this court in Fagan v. Newark, 78 N.J. Super. 294, 309
(App. Div. 1963), the exception was "founded upon the twin principles of reliability and necessity."
Originally conceived as an aid to commercial litigation, the theory of the exception is that records
made in the usual course of business "normally possess a circumstantial probability of
trustworthiness." Mahoney v. Minsky, 39 N.J. 208 (1963). But it is clear that one of the critical
circumstances importing reliability is the fact that the informant whose declaration is so recorded is
under a duty, in the context of the activity in which the record is made, to make an honest and truthful
report. Thus, the business record exception is predicated not only on the circumstance that the record
itself is kept in the usual course of the business but also on the circumstance that the recorded
information is obtained by the recorder from a declarant having a "business" duty to communicate it
truthfully. See, e.g., State v. Taylor, 46 N.J. 316, 330-331; State v. McGee, 131 N.J. Super. 292, 297
(App. Div. 1974); Fagan v. Newark, supra, 78 N.J. Super. at 319.

*310 Both of these criteria, namely, the recording of the information in the usual course of the
business activity and the providing of that information by a declarant whose duty it is to supply it
truthfully, must be met before the trial judge is free to exercise his discretion in admitting or excluding
the business entry based upon his ultimate evaluation of its reliability. Here, the second of these
criteria was not met. Obviously, the making of investigations and the receiving of information
concerning crime is usual police business. Hence a police record is admissible to prove, for example,
that a report of crime was made by a member of the public and when the report was made and
received. It is not, however, admissible to prove the truth of the contents of that report since members
of the public, whether targets of investigation, witnesses or victims, are not under a duty, in the nature
of a business duty, to make an honest and truthful report. Thus, such "citizen" declarations are
virtually universally held to constitute excluded hearsay in respect of otherwise admissible police
reports. See, e.g., United States v. Graham, 391 F.2d 439 (6 Cir.1968); United States v. Shiver, 414
F.2d 461 (5 Cir.1969); United States v. Burruss, 418 F.2d 677 (4 Cir.1969). And see, generally,
Annotation, "Police reports as business records," 77 A.L.R.3d 115 (1977); Annotation, "Admissibility
of police reports," 31 A.L.R. Fed. 457 (1977). See Contra, People v. Giesa, 71 Misc.2d 506, 337
N.Y.S.2d 233 (Crim. Ct. 1972), and People v. Meyers, 72 Misc.2d 1003, 340 N.Y.S.2d 505 (Crim. Ct.
1973).

The trial judge here evidently admitted the police report as proof of the truth of Wilton's declaration
because of his personal belief that it was probably true. If, however, a hearsay declaration does not
meet the threshold test of circumstantial reliability applicable to its category of hearsay exception in
this instance the declarant's business duty the probable trustworthiness of a particular hearsay
declaration is irrelevant.

Reversed.

G.R. No. 107518 October 8, 1998

PNOC SHIPPING AND TRANSPORT CORPORATION, petitioner,

vs.
HONORABLE COURT OF APPEALS and MARIA EFIGENIA FISHING CORPORATION, respondents.

ROMERO, J.:

A party is entitled to adequate compensation only for such pecuniary loss actually suffered and duly
proved.  Indeed, basic is the rule that to recover actual damages, the amount of loss must not only be
1

capable of proof but must actually be proven with a reasonable degree of certainty, premised upon
competent proof or best evidence obtainable of the actual amount thereof.  The claimant is duty-bound to
2

point out specific facts that afford a basis for measuring whatever compensatory damages are borne.  A
3

court cannot merely rely on speculations, conjectures, or guesswork as to the fact and amount of
damages  as well as hearsay  or uncorroborated testimony whose truth is suspect.  Such are the
4 5 6

jurisprudential precepts that the Court now applies in resolving the instant petition.
The records disclose that in the early morning of September 21, 1977, the M/V Maria Efigenia XV, owned by
private respondent Maria Efigenia Fishing Corporation, was navigating the waters near Fortune Island in
Nasugbu, Batangas on its way to Navotas, Metro Manila when it collided with the vessel Petroparcel which
at the time was owned by the Luzon Stevedoring Corporation (LSC).

After investigation was conducted by the Board of Marine Inquiry, Philippine Coast Guard Commandant
Simeon N. Alejandro rendered a decision finding the Petroparcel at fault. Based on this finding by the Board
and after unsuccessful demands on petitioner,   private respondent sued the LSC and
7

the Petroparcel captain, Edgardo Doruelo, before the then Court of First Instance of Caloocan City, paying
thereto the docket fee of one thousand two hundred fifty-two pesos (P1,252.00) and the legal research fee of
two pesos (P2.00).   In particular, private respondent prayed for an award of P692,680.00, allegedly
8

representing the value of the fishing nets, boat equipment and cargoes of M/V Maria Efigenia XV, with
interest at the legal rate plus 25% thereof as attorney's fees. Meanwhile, during the pendency of the case,
petitioner PNOC Shipping and Transport Corporation sought to be substituted in place of LSC as it had
already acquired ownership of the Petroparcel.  9

For its part, private respondent later sought the amendment of its complaint on the ground that the original
complaint failed to plead for the recovery of the lost value of the hull of M/V Maria Efigenia
XV.   Accordingly, in the amended complaint, private respondent averred that M/V Maria Efigenia XV had an
10

actual value of P800,000.00 and that, after deducting the insurance payment of P200,000.00, the amount of
P600,000.00 should likewise be claimed. The amended complaint also alleged that inflation resulting from
the devaluation of the Philippine peso had affected the replacement value of the hull of the vessel, its
equipment and its lost cargoes, such that there should be a reasonable determination thereof. Furthermore,
on account of the sinking of the vessel, private respondent supposedly incurred unrealized profits and lost
business opportunities that would thereafter be proven.  11

Subsequently, the complaint was further amended to include petitioner as a defendant   which the lower
12

court granted in its order of September 16,

1985.   After petitioner had filed its answer to the second amended complaint, on February 5, 1987, the
13

lower court issued a pre-trial order   containing, among other things, a stipulations of facts, to wit:
14

1. On 21 September 1977, while the fishing boat "M/V MARIA EFIGENIA" owned by plaintiff
was navigating in the vicinity of Fortune Island in Nasugbu, Batangas, on its way to Navotas,
Metro Manila, said fishing boat was hit by the LSCO tanker "Petroparcel" causing the former
to sink.

2. The Board of Marine Inquiry conducted an investigation of this marine accident and on 21
November 1978, the Commandant of the Philippine Coast Guard, the Honorable Simeon N.
Alejandro, rendered a decision finding the cause of the accident to be the reckless and
imprudent manner in which Edgardo Doruelo navigated the LSCO "Petroparcel" and declared
the latter vessel at fault.

3. On 2 April 1978, defendant Luzon Stevedoring Corporation (LUSTEVECO), executed in

favor of PNOC Shipping and Transport Corporation a Deed of Transfer involving several
tankers, tugboats, barges and pumping stations, among which was the LSCO Petroparcel.

4. On the same date on 2 April 1979 (sic), defendant PNOC STC again entered into an
Agreement of Transfer with co-defendant Lusteveco whereby all the business properties and
other assets appertaining to the tanker and bulk oil departments including the motor tanker
LSCO Petroparcel of defendant Lusteveco were sold to PNOC STC.

5. The aforesaid agreement stipulates, among others, that PNOC-STC assumes, without
qualifications, all obligations arising from and by virtue of all rights it obtained over the LSCO
"Petroparcel".

6. On 6 July 1979, another agreement between defendant LUSTEVECO and PNOC-STC was
executed wherein Board of Marine Inquiry Case No. 332 (involving the sea accident of 21
September 1977) was specifically identified and assumed by the latter.

7. On 23 June 1979, the decision of Board of Marine Inquiry was affirmed by the Ministry of
National Defense, in its decision dismissing the appeal of Capt. Edgardo Doruelo and Chief
mate Anthony Estenzo of LSCO "Petroparcel".

8. LSCO "Petroparcel" is presently owned and operated by PNOC-STC and likewise Capt.
Edgardo Doruelo is still in their employ.

9. As a result of the sinking of M/V Maria Efigenia caused by the reckless and imprudent
manner in which LSCO Petroparcel was navigated by defendant Doruelo, plaintiff suffered
actual damages by the loss of its fishing nets, boat equipments (sic) and cargoes, which
 went down with the ship when it sank the replacement value of which should be left to the
sound discretion of this Honorable Court.

After trial, the lower court   rendered on November 18, 1989 its decision disposing of Civil Case No. C-9457
15

as follows:

WHEREFORE, and in view of the foregoing, judgment is hereby rendered in favor of the
plaintiff and against the defendant PNOC Shipping & Transport Corporation, to pay the
plaintiff:

a. The sum of P6,438,048.00 representing the value of the fishing boat with
interest from the date of the filing of the complaint at the rate of 6% per annum;

b. The sum of P50,000.00 as and for attorney's fees; and

c. The costs of suit.

The counterclaim is hereby DISMISSED for lack of merit. Likewise, the case against
defendant Edgardo Doruelo is hereby DISMISSED, for lack of jurisdiction.

SO ORDERED.

In arriving at the above disposition, the lower court cited the evidence presented by private respondent
consisting of the testimony of its general manager and sole witness, Edilberto del Rosario. Private
respondent's witness testified that M/V Maria Efigenia XV was owned by private respondent per Exhibit A, a
certificate of ownership issued by the Philippine Coast Guard showing that M/V Maria Efigenia XV was a
wooden motor boat constructed in 1965 with 128.23 gross tonnage. According to him, at the time the vessel
sank, it was then carrying 1,060 tubs (bañeras) of assorted fish the value of which was never recovered.
Also lost with the vessel were two cummins engines (250 horsepower), radar, pathometer and compass. He
further added that with the loss of his flagship vessel in his fishing fleet of fourteen (14) vessels, he was
constrained to hire the services of counsel whom he paid P10,000 to handle the case at the Board of Marine
Inquiry and P50,000.00 for commencing suit for damages in the lower court.

As to the award of P6,438,048.00 in actual damages, the lower court took into account the following pieces
of documentary evidence that private respondent proffered during trial:

(a) Exhibit A — certified xerox copy of the certificate of ownership of M/V Maria
Efigenia XV;

(b) Exhibit B — a document titled "Marine Protest" executed by Delfin

Villarosa, Jr. on September 22, 1977 stating that as a result of the collision,
the M/V Maria Efigenia XV sustained a hole at its left side that caused it to sink
with its cargo of 1,050 bañeras valued at P170,000.00;

(c) Exhibit C — a quotation for the construction of a 95-footer trawler issued by

Isidoro A. Magalong of I. A. Magalong Engineering and Construction on
January 26, 1987 to Del Rosario showing that construction of such trawler
would cost P2,250,000.00;

(d) Exhibit D — pro forma invoice No. PSPI-05/87-NAV issued by E.D. Daclan of

Power Systems, Incorporated on January 20, 1987 to Del Rosario showing that
two (2) units of CUMMINS Marine Engine model N855-M, 195 bhp. at 1800 rpm.
would cost P1,160,000.00;

(e) Exhibit E — quotation of prices issued by Scan Marine Inc. on January 20,
1987 to Del Rosario showing that a unit of Furuno Compact Daylight Radar,
Model FR-604D, would cost P100,000.00 while a unit of Furuno Color Video
Sounder, Model FCV-501 would cost P45,000.00 so that the two units would
cost P145,000.00;

(f) Exhibit F — quotation of prices issued by Seafgear Sales, Inc. on January

21, 1987 to Del Rosario showing that two (2) rolls of nylon rope (5" cir. X 300fl.)
would cost P140,000.00; two (2) rolls of nylon rope (3" cir. X 240fl.), P42,750.00;
one (1) binocular (7 x 50), P1,400.00, one (1) compass (6"), P4,000.00 and 50
pcs. of floats, P9,000.00 or a total of P197,150.00;

(g) Exhibit G — retainer agreement between Del Rosario and F. Sumulong

Associates Law Offices stipulating an acceptance fee of P5,000.00, per
 appearance fee of P400.00, monthly retainer of P500.00, contingent fee of 20%
of the total amount recovered and that attorney's fee to be awarded by the
court should be given to Del Rosario; and

(h) Exhibit H — price quotation issued by Seafgear Sales, Inc. dated April 10,
1987 to Del Rosario showing the cost of poly nettings as: 50 rolls of 400/18
3kts. 100md x 100mtrs., P70,000.00; 50 rolls of 400/18 5kts. 100md x 100mtrs.,
P81,500.00; 50 rolls of 400/18 8kts. 100md x 100mtrs., P116,000.00, and 50 rolls
of 400/18 10kts. 100md x 100mtrs., P146,500 and bañera (tub) at P65.00 per
piece or a total of P414,065.00.

The lower court held that the prevailing replacement value of P6,438,048.00 of the fishing boat and all its
equipment would regularly increase at 30% every year from the date the quotations were given.

On the other hand, the lower court noted that petitioner only presented Lorenzo Lazaro, senior estimator at
PNOC Dockyard & Engineering Corporation, as sole witness and it did not bother at all to offer any
documentary evidence to support its position. Lazaro testified that the price quotations submitted by
private respondent were "excessive" and that as an expert witness, he used the quotations of his suppliers
in making his estimates. However, he failed to present such quotations of prices from his suppliers, saying
that he could not produce a breakdown of the costs of his estimates as it was "a sort of secret scheme." For
this reason, the lower court concluded:

Evidently, the quotation of prices submitted by the plaintiff relative to the replacement value
of the fishing boat and its equipments in the tune of P6,438,048.00 which were lost due to the
recklessness and imprudence of the herein defendants were not rebutted by the latter with
sufficient evidence. The defendants through their sole witness Lorenzo Lazaro relied heavily
on said witness' bare claim that the amount afore-said is excessive or bloated, but they did
not bother at all to present any documentary evidence to substantiate such claim. Evidence
to be believed must not only proceed from the mouth of the credible witness, but it must be
credible in itself. (Vda. de Bonifacio vs. B. L. T. Bus Co., Inc. L-26810, August 31, 1970).

Aggrieved, petitioner filed a motion for the reconsideration of the lower court's decision contending that: (1)
the lower court erred in holding it liable for damages; that the lower court did not acquire jurisdiction over
the case by paying only P1,252.00 as docket fee; (2) assuming that plaintiff was entitled to damages, the
lower court erred in awarding an amount greater than that prayed for in the second amended complaint;
and (3) the lower court erred when it failed to resolve the issues it had raised in its
memorandum.   Petitioner likewise filed a supplemental motion for reconsideration expounding on whether
16

the lower court acquired jurisdiction over the subject matter of the case despite therein plaintiff's failure to
pay the prescribed docket fee.  17

On January 25, 1990, the lower court declined reconsideration for lack of merit.   Apparently not having
18

received the order denying its motion for reconsideration, petitioner still filed a motion for leave to file a
reply to private respondent's opposition to said motion.   Hence, on February 12, 1990, the lower court
19

denied said motion for leave to file a reply on the ground that by the issuance of the order of January 25,
1990, said motion had become moot and academic.  20

Unsatisfied with the lower court's decision, petitioner elevated the matter to the Court of Appeals which,
however, affirmed the same in toto on October 14, 1992.   On petitioner's assertion that the award of
21

P6,438,048.00 was not convincingly proved by competent and admissible evidence, the Court of Appeals
ruled that it was not necessary to qualify Del Rosario as an expert witness because as the owner of the lost
vessel, "it was well within his knowledge and competency to identify and determine the equipment installed
and the cargoes loaded" on the vessel. Considering the documentary evidence presented as in the nature
of market reports or quotations, trade journals, trade circulars and price lists, the Court of Appeals held,
thus:

Consequently, until such time as the Supreme Court categorically rules on the admissibility
or inadmissibility of this class of evidence, the reception of these documentary exhibits
(price quotations) as evidence rests on the sound discretion of the trial court. In fact, where
the lower court is confronted with evidence which appears to be of doubtful admissibility, the
judge should declare in favor of admissibility rather than of non-admissibility (The Collector
of Palakadhari, 124 [1899], p. 13, cited in Francisco, Revised Rules of Court, Evidence,
Volume VII, Part I, 1990 Edition, p. 18). Trial courts are enjoined to observe the strict
enforcement of the rules of evidence which crystallized through constant use and practice
and are very useful and effective aids in the search for truth and for the effective
administration of justice. But in connection with evidence which may appear to be of
doubtful relevancy or incompetency or admissibility, it is the safest policy to be liberal, not
rejecting them on doubtful or technical grounds, but admitting them unless plainly irrelevant,
immaterial or incompetent, for the reason that their rejection places them beyond the
consideration of the court. If they are thereafter found relevant or competent, can easily be
 remedied by completely discarding or ignoring them. (Banaria vs. Banaria, et al., C.A. No.
4142, May 31, 1950; cited in Francisco, Supra). [Emphasis supplied].

Stressing that the alleged inadmissible documentary exhibits were never satisfactorily rebutted by
appellant's own sole witness in the person of Lorenzo Lazaro, the appellate court found that petitioner
ironically situated itself in an "inconsistent posture by the fact that its own witness, admittedly an expert
one, heavily relies on the very same pieces of evidence (price quotations) appellant has so vigorously
objected to as inadmissible evidence." Hence, it concluded:

. . . The amount of P6,438,048.00 was duly established at the trial on the basis of appellee's
documentary exhibits (price quotations) which stood uncontroverted, and which already
included the amount by way of adjustment as prayed for in the amended complaint. There
was therefore no need for appellee to amend the second amended complaint in so far as to
the claim for damages is concerned to conform with the evidence presented at the trial. The
amount of P6,438,048.00 awarded is clearly within the relief prayed for in appellee's second
amended complaint.

On the issue of lack of jurisdiction, the respondent court held that following the ruling in Sun Insurance
Ltd. v. Asuncion,   the additional docket fee that may later on be declared as still owing the court may be
22

enforced as a lien on the judgment.

Hence, the instant recourse.

In assailing the Court of Appeals' decision, petitioner posits the view that the award of P6,438,048 as actual
damages should have been in light of these considerations, namely: (1) the trial court did not base such
award on the actual value of the vessel and its equipment at the time of loss in 1977; (2) there was no
evidence on extraordinary inflation that would warrant an adjustment of the replacement cost of the lost
vessel, equipment and cargo; (3) the value of the lost cargo and the prices quoted in respondent's
documentary evidence only amount to P4,336,215.00; (4) private respondent's failure to adduce evidence to
support its claim for unrealized profit and business opportunities; and (5) private respondent's failure to
prove the extent and actual value of damages sustained as a result of the 1977 collision of the vessels.  23

Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of,
or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are
designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a
penalty.   In actions based on torts or quasi-delicts, actual damages include all the natural and probable
24

consequences of the act or omission complained of.   There are two kinds of actual or compensatory
25

damages: one is the loss of what a person already possesses (daño emergente), and the other is the failure
to receive as a benefit that which would have pertained to him (lucro cesante).   Thus:
26

Where goods are destroyed by the wrongful act of the defendant the plaintiff is entitled to
their value at the time of destruction, that is, normally, the sum of money which he would
have to pay in the market for identical or essentially similar goods, plus in a proper case
damages for the loss of use during the period before replacement. In other words, in the case
of profit-earning chattels, what has to be assessed is the value of the chattel to its owner as a
going concern at the time and place of the loss, and this means, at least in the case of ships,
that regard must be had to existing and pending engagements, . . .

. . . . If the market value of the ship reflects the fact that it is in any case virtually certain of
profitable employment, then nothing can be added to that value in respect of charters
actually lost, for to do so would be pro tanto to compensate the plaintiff twice over. On the
other hand, if the ship is valued without reference to its actual future engagements and only
in the light of its profit-earning potentiality, then it may be necessary to add to the value thus
assessed the anticipated profit on a charter or other engagement which it was unable to
fulfill. What the court has to ascertain in each case is the "capitalised value of the vessel as a
profit-earning machine not in the abstract but in view of the actual circumstances," without,
of course, taking into account considerations which were too remote at the time of the
loss.   [Emphasis supplied].
27

As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is
required to prove the actual amount of loss with reasonable degree of certainty premised upon competent
proof and on the best evidence available.   The burden of proof is on the party who would be defeated if no
28

evidence would be presented on either side. He must establish his case by a preponderance of evidence
which means that the evidence, as a whole, adduced by one side is superior to that of the other.   In other
29

words, damages cannot be presumed and courts, in making an award must point out specific facts that
could afford a basis for measuring whatever compensatory or actual damages are borne.  30

In this case, actual damages were proven through the sole testimony of private respondent's general
manager and certain pieces of documentary evidence. Except for Exhibit B where the value of the
1,050 bañeras of fish were pegged at their September 1977 value when the collision happened, the pieces of
documentary evidence proffered by private respondent with respect to items and equipment lost show
similar items and equipment with corresponding prices in early 1987 or approximately ten (10) years after
the collision. Noticeably, petitioner did not object to the exhibits in terms of the time index for valuation of
the lost goods and equipment. In objecting to the same pieces of evidence, petitioner commented that these
were not duly authenticated and that the witness (Del Rosario) did not have personal knowledge on the
contents of the writings and neither was he an expert on the subjects thereof.   Clearly ignoring petitioner's
31

objections to the exhibits, the lower court admitted these pieces of evidence and gave them due weight to
arrive at the award of P6,438,048.00 as actual damages.

The exhibits were presented ostensibly in the course of Del Rosario's testimony. Private respondent did not
present any other witnesses especially those whose signatures appear in the price quotations that became
the bases of the award. We hold, however, that the price quotations are ordinary private writings which
under the Revised Rules of Court should have been proffered along with the testimony of the authors
thereof. Del Rosario could not have testified on the veracity of the contents of the writings even though he
was the seasoned owner of a fishing fleet because he was not the one who issued the price quotations.
Section 36, Rule 130 of the Revised Rules of Court provides that a witness can testify only to those facts
that he knows of his personal knowledge.

For this reason, Del Rosario's claim that private respondent incurred losses in the total amount of
P6,438,048.00 should be admitted with extreme caution considering that, because it was a bare assertion, it
should be supported by independent evidence. Moreover, because he was the owner of private respondent
corporation   whatever testimony he would give with regard to the value of the lost vessel, its equipment
32

and cargoes should be viewed in the light of his self-interest therein. We agree with the Court of Appeals
that his testimony as to the equipment installed and the cargoes loaded on the vessel should be given
credence   considering his familiarity thereto. However, we do not subscribe to the conclusion that his
33

valuation of such equipment, cargo and the vessel itself should be accepted as gospel truth.   We must,
34

therefore, examine the documentary evidence presented to support Del Rosario's claim as regards the
amount of losses.

The price quotations presented as exhibits partake of the nature of hearsay evidence considering that the
persons who issued them were not presented as witnesses.   Any evidence, whether oral or documentary,
35

is hearsay if its probative value is not based on the personal knowledge of the witness but on the
knowledge of another person who is not on the witness stand. Hearsay evidence, whether objected to or
not, has no probative value unless the proponent can show that the evidence falls within the exceptions to
the hearsay evidence rule.   On this point, we believe that the exhibits do not fall under any of the
36

exceptions provided under Sections 37 to 47 of Rule 130.  37

It is true that one of the exceptions to the hearsay rule pertains to "commercial lists and the like" under
Section 45, Rule 130 of the Revised Rules on Evidence. In this respect, the Court of Appeals considered
private respondent's exhibits as "commercial lists." It added, however, that these exhibits should be
admitted in evidence "until such time as the Supreme Court categorically rules on the admissibility or
inadmissibility of this class of evidence" because "the reception of these documentary exhibits (price
quotations) as evidence rests on the sound discretion of the trial court."   Reference to Section 45, Rule
38

130, however, would show that the conclusion of the Court of Appeals on the matter was arbitrarily arrived
at. This rule states:

Commercial lists and the like. — Evidence of statements of matters of interest to persons
engaged in an occupation contained in a list, register, periodical, or other published
compilation is admissible as tending to prove the truth of any relevant matter so stated if that
compilation is published for use by persons engaged in that occupation and is generally
used and relied upon by them there.

Under Section 45 of the aforesaid Rule, a document is a commercial list if: (1) it is a statement of matters of
interest to persons engaged in an occupation; (2) such statement is contained in a list, register, periodical
or other published compilation; (3) said compilation is published for the use of persons engaged in that
occupation, and (4) it is generally used and relied upon by persons in the same occupation.

Based on the above requisites, it is our considered view that Exhibits B, C, D, E, F and H   are not
39

"commercial lists" for these do not belong to the category of "other published compilations" under Section
45 aforequoted. Under the principle of ejusdem generis, "(w)here general words follow an enumeration of
persons or things, by words of a particular and specific meaning, such general words are not to be
construed in their widest extent, but are to be held as applying only to persons or things of the same kind
or class as those specifically mentioned."   The exhibits mentioned are mere price quotations issued
40

personally to Del Rosario who requested for them from dealers of equipment similar to the ones lost at the
collision of the two vessels. These are not published in any list, register, periodical or other compilation on
the relevant subject matter. Neither are these "market reports or quotations" within the purview of
"commercial lists" as these are not "standard handbooks or periodicals, containing data of everyday
professional need and relied upon in the work of the occupation."   These are simply letters responding to
41

the queries of Del Rosario. Thus, take for example Exhibit D which reads:
 January 20, 1987

PROFORMA INVOICE NO. PSPI-05/87-NAV

MARIA EFIGINIA FISHING CORPORATION

Navotas, Metro Manila

Attention: MR. EDDIE DEL ROSARIO

Gentlemen:

In accordance to your request, we are pleated to quote our Cummins Marine Engine, to wit.

Two (2) units CUMMINS Marine Engine model N855-M, 195 bhp.
at 1800 rpm., 6-cylinder in-line, 4-stroke cycle, natural aspirated,
5 1/2 in. x 6 in. bore and stroke, 855 cu. In. displacement, keel-
cooled, electric starting coupled with Twin-Disc Marine gearbox
model MG-509, 4.5:1 reduction ratio, includes oil cooler,
companion flange, manual and standard accessories as per
attached sheet.

Price FOB Manila P580,000.00/unit

Total FOB Manila P1,160,000.00

TERMS : CASH

DELIVERY : 60-90 days from date of order.

VALIDITY : Subject to our final confirmation.

WARRANTY : One (1) full year against factory defect.

Very truly
yours,

POWER
SYSTEMS,
INC.

(Sgd.)

E. D. Daclan

To be sure, letters and telegrams are admissible in evidence but these are, however, subject to the general
principles of evidence and to various rules relating to documentary evidence.   Hence, in one case, it was
42

held that a letter from an automobile dealer offering an allowance for an automobile upon purchase of a new
automobile after repairs had been completed, was not a "price current" or "commercial list" within the
statute which made such items presumptive evidence of the value of the article specified therein. The letter
was not admissible in evidence as a "commercial list" even though the clerk of the dealer testified that he
had written the letter in due course of business upon instructions of the dealer.  43

But even on the theory that the Court of Appeals correctly ruled on the admissibility of those letters or
communications when it held that unless "plainly irrelevant, immaterial or incompetent," evidence should
better be admitted rather than rejected on "doubtful or technical grounds,"   the same pieces of evidence,
44

however, should not have been given probative weight. This is a distinction we wish to point out.
Admissibility of evidence refers to the question of whether or not the circumstance (or evidence) is to
considered at all.   On the other hand, the probative value of evidence refers to the question of whether or
45

not it proves an issue.   Thus, a letter may be offered in evidence and admitted as such but its evidentiary
46

weight depends upon the observance of the rules on evidence. Accordingly, the author of the letter should
be presented as witness to provide the other party to the litigation the opportunity to question him on the
contents of the letter. Being mere hearsay evidence, failure to present the author of the letter renders its
contents suspect. As earlier stated, hearsay evidence, whether objected to or not, has no probative value.
Thus:

The courts differ as to the weight to be given to hearsay evidence admitted without objection.
Some hold that when hearsay has been admitted without objection, the same may be
 considered as any other properly admitted testimony. Others maintain that it is entitled to no
more consideration than if it had been excluded.

The rule prevailing in this jurisdiction is the latter one. Our Supreme Court held that although
the question of admissibility of evidence can not be raised for the first time on appeal, yet if
the evidence is hearsay it has no probative value and should be disregarded whether
objected to or not. "If no objection is made" — quoting Jones on Evidence — "it (hearsay)
becomes evidence by reason of the want of such objection even though its admission does
not confer upon it any new attribute in point of weight. Its nature and quality remain the
same, so far as its intrinsic weakness and incompetency to satisfy the mind are concerned,
and as opposed to direct primary evidence, the latter always prevails.

The failure of the defense counsel to object to the presentation of incompetent evidence, like
hearsay evidence or evidence that violates the rules of res inter alios acta, or his failure to
ask for the striking out of the same does not give such evidence any probative value. But
admissibility of evidence should not be equated with weight of evidence. Hearsay evidence
whether objected to or not has no probative value.  47

Accordingly, as stated at the outset, damages may not be awarded on the basis of hearsay evidence.  48

Nonetheless, the non-admissibility of said exhibits does not mean that it totally deprives private respondent
of any redress for the loss of its vessel. This is because in Lufthansa German Airlines v. Court of Appeals,
49 the Court said:

In the absence of competent proof on the actual damage suffered, private respondent is
"entitled to nominal damages which, as the law says, is adjudicated in order that a right of
the plaintiff, which has been violated or invaded by defendant, may be vindicated and
recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered."
[Emphasis supplied].

Nominal damages are awarded in every obligation arising from law, contracts, quasi-contracts, acts or
omissions punished by law, and quasi-delicts, or in every case where property right has been
invaded.   Under Article 2223 of the Civil Code, "(t)he adjudication of nominal damages shall preclude
50

further contest upon the right involved and all accessory questions, as between the parties to the suit, or
their respective heirs and assigns."

Actually, nominal damages are damages in name only and not in fact. Where these are allowed, they are not
treated as an equivalent of a wrong inflicted but simply in recognition of the existence of a technical
injury.   However, the amount to be awarded as nominal damages shall be equal or at least commensurate
51

to the injury sustained by private respondent considering the concept and purpose of such damages.   The 52

amount of nominal damages to be awarded may also depend on certain special reasons extant in the
case. 53

Applying now such principles to the instant case, we have on record the fact that petitioner's
vessel Petroparcel was at fault as well as private respondent's complaint claiming the amount of
P692,680.00 representing the fishing nets, boat equipment and cargoes that sunk with the M/V Maria
Efigenia XV. In its amended complaint, private respondent alleged that the vessel had an actual value of
P800,000.00 but it had been paid insurance in the amount of P200,000.00 and, therefore, it claimed only the
amount of P600,000.00. Ordinarily, the receipt of insurance payments should diminish the total value of the
vessel quoted by private respondent in his complaint considering that such payment is causally related to
the loss for which it claimed compensation. This Court believes that such allegations in the original and
amended complaints can be the basis for determination of a fair amount of nominal damages inasmuch as a
complaint alleges the ultimate facts constituting the plaintiffs cause of
action.   Private respondent should be bound by its allegations on the amount of its claims.
54

With respect to petitioner's contention that the lower court did not acquire jurisdiction over the amended
complaint increasing the amount of damages claimed to P600,000.00, we agree with the Court of Appeals
that the lower court acquired jurisdiction over the case when private respondent paid the docket fee
corresponding to its claim in its original complaint. Its failure to pay the docket fee corresponding to its
increased claim for damages under the amended complaint should not be considered as having curtailed
the lower court's jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion,   the 55

unpaid docket fee should be considered as a lien on the judgment even though private respondent
specified the amount of P600,000.00 as its claim for damages in its amended complaint.

Moreover, we note that petitioner did not question at all the jurisdiction of the lower court on the ground of
insufficient docket fees in its answers to both the amended complaint and the second amended complaint.
It did so only in its motion for reconsideration of the decision of the lower court after it had received an
adverse decision. As this Court held in Pantranco North Express, Inc. v. Court of Appeals,   participation in
56

all stages of the case before the trial court, that included invoking its authority in asking for affirmative
relief, effectively barred petitioner by estoppel from challenging the court's jurisdiction. Notably, from the
time it filed its answer to the second amended complaint on April 16, 1985,   petitioner did not question the
57

lower court's jurisdiction. It was only on December 29, 1989   when it filed its motion for reconsideration of
58

the lower court's decision that petitioner raised the question of the lower court's lack of jurisdiction.
Petitioner thus foreclosed its right to raise the issue of jurisdiction by its own inaction.

WHEREFORE, the challenged decision of the Court of Appeals dated October 14, 1992 in CA-G.R. CV No.
26680 affirming that of the Regional Trial Court of Caloocan City, Branch 121, is hereby MODIFIED insofar
as it awarded actual damages to private respondent Maria Efigenia Fishing Corporation in the amount of
P6,438,048.00 for lack of evidentiary bases therefor. Considering the fact, however, that: (1) technically
petitioner sustained injury but which, unfortunately, was not adequately and properly proved, and (2) this
case has dragged on for almost two decades, we believe that an award of Two Million (P2,000,000.00)   in 59

favor of private respondent as and for nominal damages is in order.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 127598           February 22, 2000

MANILA ELECTRIC COMPANY, petitioner,

vs.
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and WORKERS
ASSOCIATION (MEWA), respondent.

RESOLUTION

YNARES-SANTIAGO, J.:

In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:

WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August
19, 1996 and December 28, 1996 are set aside to the extent set forth above. The parties are directed to
execute a Collective Bargaining Agreement incorporating the terms and conditions contained in the
unaffected portions of the Secretary of Labor's orders of August 19, 1996 and December 28, 1996, and the
modifications set forth above. The retirement fund issue is remanded to the Secretary of Labor for reception
of evidence and determination of the legal personality of the MERALCO retirement fund. 1

The modifications of the public respondent's resolutions include the following:

January 27, 1999 decision Secretary's resolution

Wages - P1,900.00 for 1995-96 P2,200.00
X'mas bonus - modified to one month 2 months
Retirees - remanded to the Secretary granted
Loan to coops - denied granted
GHSIP, HMP and
Housing loans - granted up to P60,000.00 granted
Signing bonus - denied granted
Union leave - 40 days (typo error) 30 days
High voltage/pole - not apply to those who are members of a team
not exposed to the risk
Collectors - no need for cash bond, no
need to reduce quota and MAPL
CBU - exclude confidential employees include
Union security - maintenance of membership closed shop
Contracting out - no need to consult union consult first
All benefits - existing terms and conditions all terms
Retroactivity - Dec. 28, 1996-Dec. 27, 199(9) from Dec. 1, 1995
Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity) filed a motion
for intervention and a motion for reconsideration of the said Decision. A separate intervention was likewise made by
the supervisor's union (FLAMES2) of petitioner corporation alleging that it has bona fide legal interest in the outcome
of the case.3 The Court required the "proper parties" to file a comment to the three motions for reconsideration but
the Solicitor-General asked that he be excused from filing the comment because the "petition filed in the instant
case was granted" by the Court.4 Consequently, petitioner filed its own consolidated comment. An "Appeal Seeking
Immediate Reconsideration" was also filed by the alleged newly elected president of the Union. 5 Other subsequent
pleadings were filed by the parties and intervenors.

The issues raised in the motions for reconsideration had already been passed upon by the Court in the January 27,
1999 decision. No new arguments were presented for consideration of the Court. Nonetheless, certain matters will
be considered herein, particularly those involving the amount of wages and the retroactivity of the Collective
Bargaining Agreement (CBA) arbitral awards.

Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is allowed, it would
simply pass the cost covering such increase to the consumers through an increase in the rate of electricity. This is
a non sequitur. The Court cannot be threatened with such a misleading argument. An increase in the prices of
electric current needs the approval of the appropriate regulatory government agency and does not automatically
result from a mere increase in the wages of petitioner's employees. Besides, this argument presupposes that
petitioner is capable of meeting a wage increase. The All Asia Capital report upon which the Union relies to support
its position regarding the wage issue cannot be an accurate basis and conclusive determinant of the rate of wage
increase. Section 45 of Rule 130 Rules of Evidence provides:

Commercial lists and the like. — Evidence of statements of matters of interest to persons engaged in an
occupation contained in a list, register, periodical, or other published compilation is admissible as tending to
prove the truth of any relevant matter so stated if that compilation is published for use by persons engaged
in that occupation and is generally used and relied upon by them therein.

Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted only "if that
compilation is published for use by persons engaged in that occupation and is generally used and relied upon by
them therein." As correctly held in our Decision dated January 27, 1999, the cited report is a mere newspaper
account and not even a commercial list. At most, it is but an analysis or opinion which carries no persuasive weight
for purposes of this case as no sufficient figures to support it were presented. Neither did anybody testify to its
accuracy. It cannot be said that businessmen generally rely on news items such as this in their occupation. Besides,
no evidence was presented that the publication was regularly prepared by a person in touch with the market and
that it is generally regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy, these reports are
not admissible.6 In the same manner, newspapers containing stock quotations are not admissible in evidence when
the source of the reports is available. 7 With more reason, mere analyses or projections of such reports cannot be
admitted. In particular, the source of the report in this case can be easily made available considering that the same
is necessary for compliance with certain governmental requirements.

Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 billion. 8 An estimate by
the All Asia financial analyst stated that petitioner's net operating income for the same year was about P5.7 billion, a
figure which the Union relies on to support its claim. Assuming without admitting the truth thereof, the figure is higher
than the P4.171 billion allegedly suggested by petitioner as its projected net operating income. The P5.7 billion
which was the Secretary's basis for granting the P2,200.00 is higher than the actual net income of P5.1 billion
admitted by petitioner. It would be proper then to increase this Court's award of P1,900.00 to P2,000.00 for the two
years of the CBA award. For 1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was
reduced to P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For supervisory employees, the agreed
wage increase for the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the
foregoing figures, the P2,000.00 increase for the two-year period awarded to the rank-and-file is much higher than
the highest increase granted to supervisory employees. 9 As mentioned in the January 27, 1999 Decision, the Court
does "not seek to enumerate in this decision the factors that should affect wage determination" because collective
bargaining disputes particularly those affecting the national interest and public service "requires due consideration
and proper balancing of the interests of the parties to the dispute and of those who might be affected by the
dispute."10 The Court takes judicial notice that the new amounts granted herein are significantly higher than the
weighted average salary currently enjoyed by other rank-and-file employees within the community. It should be
noted that the relations between labor and capital is impressed with public interest which must yield to the common
good.11 Neither party should act oppressively against the other or impair the interest or convenience of the
public.12 Besides, matters of salary increases are part of management prerogative. 13

On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the renegotiation of
the parties' 1992-1997 CBA insofar as the last two-year period thereof is concerned. When the Secretary of Labor
assumed jurisdiction and granted the arbitral awards, there was no question that these arbitral awards were to be
given retroactive effect. However, the parties dispute the reckoning period when retroaction shall commence.
Petitioner claims that the award should retroact only from such time that the Secretary of Labor rendered the award,
invoking the 1995 decision in Pier 8 case14 where the Court, citing Union of Filipino Employees v. NLRC,15 said:

The assailed resolution which incorporated the CBA to be signed by the parties was promulgated on June 5,
1989, the expiry date of the past CBA. Based on the provision of Section 253-A, its retroactivity should be
 agreed upon by the parties. But since no agreement to that effect was made, public respondent did not
abuse its discretion in giving the said CBA a prospective effect. The action of the public respondent is within
the ambit of its authority vested by existing law.

On the other hand, the Union argues that the award should retroact to such time granted by the Secretary, citing the
1993 decision of St. Luke's.16

Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration of the
previous CBA, contrary to the position of petitioner. Under the circumstances of the case, Article 253-A
cannot be properly applied to herein case. As correctly stated by public respondent in his assailed Order of
April 12, 1991 dismissing petitioner's Motion for Reconsideration —

Anent the alleged lack of basis for the retroactivity provisions awarded; we would stress that the
provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreements by
and between the parties, and not arbitral awards . . .

Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of arbitral
awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein
involved, public respondent is deemed vested with plenary and discretionary powers to determine the
effectivity thereof.

In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that:

In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA negotiations between
management and the union. The Secretary of Labor assumed jurisdiction and ordered the retroaction of the
CBA to the date of expiration of the previous CBA. As in this case, it was alleged that the Secretary of Labor
gravely abused its discretion in making his award retroactive. In dismissing this contention this Court held:

Therefore, in the absence of a specific provision of law prohibiting retroactive of the effectivity of
arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such
as herein involved, public respondent is deemed vested with plenary and discretionary powers to
determine the effectivity thereof.

The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2 years counted
from December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers a three-year period. Labor
laws are silent as to when an arbitral award in a labor dispute where the Secretary had assumed jurisdiction by
virtue of Article 263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six months after the
expiration of the existing CBA retroacts to the day immediately following such date and if agreed thereafter, the
effectivity depends on the agreement of the parties. 18 On the other hand, the law is silent as to the retroactivity of a
CBA arbitral award or that granted not by virtue of the mutual agreement of the parties but by intervention of the
government. Despite the silence of the law, the Court rules herein that CBA arbitral awards granted after six months
from the expiration of the last CBA shall retroact to such time agreed upon by both employer and the employees or
their union. Absent such an agreement as to retroactivity, the award shall retroact to the first day after the six-month
period following the expiration of the last day of the CBA should there be one. In the absence of a CBA, the
Secretary's determination of the date of retroactivity as part of his discretionary powers over arbitral awards shall
control.

It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the parties
because it requires the interference and imposing power of the State thru the Secretary of Labor when he assumes
jurisdiction. However, the arbitral award can be considered as an approximation of a collective bargaining
agreement which would otherwise have been entered into by the parties. 19 The terms or periods set forth in Article
253-A pertains explicitly to a CBA. But there is nothing that would prevent its application by analogy to an arbitral
award by the Secretary considering the absence of an applicable law. Under Article 253-A: "(I)f any such agreement
is entered into beyond six months, the parties shall agree on the duration of retroactivity thereof." In other words, the
law contemplates retroactivity whether the agreement be entered into before or after the said six-month period. The
agreement of the parties need not be categorically stated for their acts may be considered in determining the
duration of retroactivity. In this connection, the Court considers the letter of petitioner's Chairman of the Board and
its President addressed to their stockholders, which states that the CBA "for the rank-and-file employees covering
the period December 1, 1995 to November 30, 1997 is still with the Supreme Court," 20 as indicative of petitioner's
recognition that the CBA award covers the said period. Earlier, petitioner's negotiating panel transmitted to the
Union a copy of its proposed CBA covering the same period inclusive. 21 In addition, petitioner does not dispute the
allegation that in the past CBA arbitral awards, the Secretary granted retroactivity commencing from the period
immediately following the last day of the expired CBA. Thus, by petitioner's own actions, the Court sees no reason
to retroact the subject CBA awards to a different date. The period is herein set at two (2) years from December 1,
1995 to November 30, 1997.

On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's claim that it is no
different from housing loans granted by the employer. The award of loans for housing is justified because it pertains
to a basic necessity of life. It is part of a privilege recognized by the employer and allowed by law. In contrast,
providing seed money for the establishment of the employee's cooperative is a matter in which the employer has no
business interest or legal obligation. Courts should not be utilized as a tool to compel any person to grant loans to
another nor to force parties to undertake an obligation without justification. On the contrary, it is the government that
has the obligation to render financial assistance to cooperatives and the Cooperative Code does not make it an
obligation of the employer or any private individual. 22

Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid any confusion,
it is herein declared that the union leave is only thirty (30) days as granted by the Secretary of Labor and affirmed in
the Decision of this Court.

The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6) months or
more has been rejected by the Court. Suffice it to say that the employer is allowed to contract out services for six
months or more. However, a line must be drawn between management prerogatives regarding business
operations per se and those which affect the rights of employees, and in treating the latter, the employer should see
to it that its employees are at least properly informed of its decision or modes of action in order to attain a
harmonious labor-management relationship and enlighten the workers concerning their rights. 23 Hiring of workers is
within the employer's inherent freedom to regulate and is a valid exercise of its management prerogative subject
only to special laws and agreements on the matter and the fair standards of justice. 24 The management cannot be
denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its
operation. It has the ultimate determination of whether services should be performed by its personnel or contracted
to outside agencies. While there should be mutual consultation, eventually deference is to be paid to what
management decides.25 Contracting out of services is an exercise of business judgment or management
prerogative.26 Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere
with the exercise of judgment by an employer. 27 As mentioned in the January 27, 1999 Decision, the law already
sufficiently regulates this matter.28 Jurisprudence also provides adequate limitations, such that the employer must be
motivated by good faith and the contracting out should not be resorted to circumvent the law or must not have been
the result of malicious or arbitrary actions.29 These are matters that may be categorically determined only when an
actual suit on the matter arises.

WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed Decision is MODIFIED as
follows: (1) the arbitral award shall retroact from December 1, 1995 to November 30, 1997; and (2) the award of
wage is increased from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand
Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is subject to the monetary advances granted by
petitioner to its rank-and-file employees during the pendency of this case assuming such advances had actually
been distributed to them. The assailed Decision is AFFIRMED in all other respects. 1âwphi1.nêt

SO ORDERED.