CASE DIGEST

BUSINESS LAW (OBLIGATION & CONTRACT)

Submitted by: Submitted to:

Castrillo , Leonard P. Ma’am Rhea Rejano.
 Development Bank of the Philippines V.S. Pundogar

GR No. 96921 . January 29 , 1993

Romero, J . :

Facts

The historical antecedents of the present petition hark back to 1955 when Republic Act No.
1396 was enacted authorizing National Shipyards and Steel Corporation (NASSCO) to establish
a pig-iron smelting plant. When NASSCO started negotiations with the United States Export-
Import

Bank (EXIMBANK) for a $62.3 million loan, the latter suggested that the management of the
project be placed in the hands of the private sector. After a public bidding, the Jacinto Steel, Inc.
(JSI) was entrusted with the implementation of the project. Later, in October 1963,... Iligan
Integrated Steel Mills, Inc. (IISMI) was incorporated with the Jacintos and the Government,
through the GSIS, SSS and NASSCO as principal investors and about fifty other minority
stockholders.

On January 22, 1964, an agreement was entered into by the Government, IISMI and the
EXIMBANK whereby the latter would provide the funds required to launch the project into
commercial operation, including provisions for overruns and other financial assistance. On the
same date,... IISMI and the Government entered into a collateral agreement whereby the
Government committed to extend equity and non-equity funds to IISMI during the construction
period, including an amount of no less than P34 million. Pursuant to a Second Collateral
Agreement dated July 26,... 1966, the Development Bank of the Philippines granted IISMI
additional loans which were secured by real and chattel mortgages over all of IISMI's assets

On February 7, 1991, this Court issued a Temporary Restraining Order requiring respondent
Judge Amir Pundogar to desist from taking any... further proceeding in Civil Case No. 111-1549.

For a clear disposition of the issues raised, we shall consider them seriatim.

The second group of allegations pertaining to the foreclosure are specifically, that the sheriff
sold IISMI at public auction when it was not in the possession of the mortgagee and that the
Jacintos offered to redeem the same.
We make short shrift of these allegations by pointing out that the sheriff's act of selling the
property which was then under government control is woven into the very warp and woof of the
issue of the legality of the take-over.

Considering that private respondents had waived their opportunity to question the take-over,
they cannot raise the same belatedly. Otherwise, the effect would be to allow private
respondents to evade their liabilities simply because the foreclosure happened at the time
when... martial law was in effect.

Issues

In order to forestall a threatened foreclosure due to defaults in loan payments, IISMI instituted
on June 1, 1971 an injunction suit against the Republic of the Philippines, Development Bank of
the Philippines (DBP), Central Bank of the Philippines (CB), Board of Investments

(BOI) and the Sheriff of Lanao del Norte and Iligan City. The complaint which was docketed as
Civil Case No. 1701 alleged that the inability of IISMI to meet its obligations was due to
"(g)overnment violations of its commitments to the Integrated Steel

On January 10, 1974, the lower court issued an Order dissolving the writ of preliminary
injunction. It held that there was mismanagement of the financial affairs of IISMI by its corporate
officials through the diversion of its... profits to other Jacinto-controlled corporations especially to
Ferro Products Inc. (FERRO), its known marketing instrumentality and biggest single buyer,
which led to its failure to meet its different due and demandable obligations to DBP. More
specifically, mismanagement was... shown by the setting up of an unrealistic pricing scheme
where, while the floating exchange rate jacked up the cost of materials by 50%, the selling price
of goods sold to FERRO was increased by only 25% and FERRO resold the goods at prices
higher by 30%, thus realizing in the... process additional gross profits of 5%; by giving FERRO
extraordinarily long credit terms of 90-180 days; by unduly postponing FERRO's payments of its
matured payables through reinvoicing; by unjustifiably delaying the collecting trade and non-
trade receivables from FERRO and... other Jacinto-controlled corporations; by heavily loading
the selling expenses of IISMI with other nonlegitimate charges which created an economic
imbalance between its income and expenses; by giving interest-free loans and direct advances
from IISMI funds to the Jacintos and... their corporations; by passing on to IISMI travel and
representation expenses of the Jacintos and their own corporations thus, using IISMI funds to
pay expenses of some Jacinto-controlled corporations; by making IISMI borrow at 12% interest
per annum from Jacinto-controlled... corporations instead of IISMI collecting receivables from its
debtors especially FERRO; by appropriating IISMI's money to the Jacintos' private benefit; by
debiting IISMI for goods and shipments actually received not by IISMI but by the Jacintos and
their corporations; and by... importing raw materials for Jacinto-controlled corporations through
the use of DBP guaranties intended for IISMI.

Likewise, the court found that there were attempts to hide these corporate malpractices by
"window dressing" of the financial statements and records of IISMI and of the Jacinto-controlled
corporations. This consisted in understating profits to create the impression that losses... were
not due to improper operations but rather to other factors like the floating exchange rate;
painting a favorable but unreal cash position on the part of IISMI; creating an ostensibly
favorable asset position by including as IISMI's assets goods returned by FERRO to the

Security Bank and Trust Co.; by overstating the inventories account; and by understating the
account receivables from FERRO and other Jacinto-controlled corporations by intercepting
legitimate payables to IISMI.

Moreover, the lower court rejected the claim of IISMI that its failure to meet its obligations was
due to the floating exchange rate, holding that IISMI could only claim a loss of P51.9 million
owing to the floating rate as importations before February 1970 were sold at... pre-devaluation
prices even after devaluation. However, no such loss could be claimed after June 1970 since
price adjustments could and should have been instituted by IISMI after that time. Furthermore,
despite the disposition of the processed raw materials, IISMI failed to use... the proceeds to
liquidate its accounts which, as of June 30, 1972 had ballooned to P407 million. Such failure
compelled DBP to assume payments in its capacity as guarantor to assume payments due to
IISMI's creditors.

February 13, 1987.[39] Private respondents have erroneously termed... these "opinions" written
after the EDSA Revolution as "facts". Truth to tell, no fact or event has supervened which may
justify the overturning of a finding of the court which had long become final. These are but long
debunked, tired reiterations of the same Jacinto refrain, of

"fraudulent, illegal and systematic deprivation of IISMI of its assets (w)as part of a general
preconceived plan . . . to oppress, impoverish and destroy Jacinto and his family and their
interests."[4... second
Ruling

Petitioners contend that the final Orders of January 10, 1974 and February 25, 1974 in Civil
Case No. 1701 bar IISMI from filing Civil Case No. 111-1549, which questions the same DBP
foreclosure upon the very same claim that the foreclosure was fraudulent, that is, IISMI...
defaulted on its loans due to GSIS-SSS-DBP-CB conspiracy. The only difference is that in Civil
Case No. 1701, they asked for a prospective relief (that the threatened DBP foreclosure be
enjoined) while in Civil Case No. 111-1549, they asked for a retrospective relief (that the...
foreclosure be annulled).

Private respondents, on the other hand, argue that the present action cannot be barred by res
judicata because the proceedings in Civil Case No. 1701 is not a judgment on the merits and
there is no identity of causes of action between the first and the second cases.

Res judicata is indeed present. Imbedded in Philippine jurisprudence are the elements
constituting res judicata as a ground for the dismissal of a complaint: a) the former judgment
must be final; b) the court which rendered it had jurisdiction over the subject... matter and the
parties; c) it must be a judgment on the merits and d) there must be, between the first and
second actions, identity of parties, subject matter and causes of action.

The first three requisites are obviously present. The Orders of January 10, 1974 and February
25, 1974 attained finality as no motion for reconsideration or appeal had been filed. The said
Orders were issued by the CFI of Lanao del Norte, Branch 11... which had jurisdiction over the
injunction case as the property subject of the complaint is located within its territorial jurisdiction.
These Orders are judgments on the merits. In the Order of January 10, 1974 where the writ of
preliminary injunction was lifted, then Judge Tutaan, after considering not only the evidence
presented during the hearing of the motion for preliminary injunction but also the additional
evidence presented after this Court ordered the resumption of proceedings, found that a case of
mismanagement existed. On the other hand,... the Order of February 25, 1974 whereby the
complaint was dismissed with prejudice for failure to appear during the pre-trial despite due
notice, had the effect of an adjudication upon the merits

For the fourth requisite to exist, the identity required is not only of the parties and subject matter
but also of the causes of action. In Civil Case No. 1701, the complaint was filed by IISMI against
the Republic, BOI, CB and DBP. In Civil Case No. 111-1549, the complaint was... filed by IISMI,
Fernando Jacinto and Jacinto Steel, Inc. against DBP, NDC and NSC. For res judicata to apply,
absolute identity of parties is not required because substantial identity is sufficient.Inclusion of
additional parties will not affect... the application of the principle of res judicata. In both cases,
the subject matter involved is the Iligan Integrated Steel Mills, Inc.

As regards identity of causes of action, this requisite is similarly present although the same may
not be quite apparent. In Civil Case No. 1701, the caption clearly indicates that the action is one
for injunction while in Civil Case No. 111-1549, the caption does not state the... title of the action
as required by Sec. 1, Rule 7 of the Rules of Court. This omission not with standing, the test of
identity of causes of action lies, not in the form of the action, but on whether the same evidence
would support and establish the former and the present causes of action.

A comparison between the allegations of the complaints in Civil Case No. 1701 and that of Civil
Case No. 111-1549 reveals that there is indeed identity of causes of action. In both cases,
private respondents claim that DBP has no right to foreclose because it violated its... financial
commitments to IISMI and that it conspired with other agencies of the government to cause the
latter's financial ruin. It follows, therefore, that the evidence that private respondents used to
support Civil Case No. 1701 is the same evidence that they would utilize to... establish Civil
Case No. 111-1549... the lower court did not consider the attack on jurisdiction well-taken
because the annulment of the decision in Civil Case No. 1701 is not being sought by private
respondents

Private respondents counter that regardless of the prescriptive period (four or ten years)
applicable, the same was suspended during the martial law regime which should be treated as a
force majeure and hence, the prescriptive period should start to run only on February 25, 1986.
Involving as it does an issue of fact, they aver that the presentation of evidence must be made
before the trial court. Furthermore, they allege that since the action is one to recover immovable
property, the same prescribes in thirty (30)... years. In any case, they assert that the action is
imprescriptible under Art. 1410 of the New Civil Code.

TEMPORARY RESTRAINING ORDER

In a Manifestation and Motion dated April 29, 1992, private respondents prayed that an order be
issued commanding the petitioners NDC and NSC to cease and desist from conducting the
privatization and sale of NSC during the pendency of the action. They explained that "the claims
of IISMI and JACINTO on the assets held by NSC and the privatization of NSC through the sale
of 51% of its shares, are so inextricably intertwined," so that a decision in their favor "will greatly
prejudice the buyers of these shares." They added that the sale "will further complicate the
already complex issues" and might render the implementation or execution of a favorable
decision "extremely difficult, if not impossible."

On May 19, 1992, we resolved to issue a Temporary Restraining Order (TRO) enjoining the
petitioners National Development Corporation (NDC) and National Steel Corporation (NSC), "to
CEASE and DESIST from conducting the privatization and sale of National Steel Corporation
(NSC) during the pendency of this action."

Petitioners filed an Urgent Motion to Lift TRO[70] explaining that any sale of the 51% shares does
not in any way threaten the private respondents' claim over the IISMI assets which constitute
only "1.1% of the total financial asset base of NSC of P24.8 billion."

In the Resolution of May 28, 1992,[71] we granted petitioners' urgent motion to set the case for
Oral Argument. At the hearing on June 4, 1992, the counsel for private respondents admitted
that they had actually no facts to support their assertion of ownership over the 51% shares of
NSC but were merely proceeding from inference.

After the hearing, the Court resolved to deny the petitioners' motion to lift the temporary
restraining order and to require private respondents to post a cash or surety bond in the amount
of P1.5 million.

WHEREFORE, there being grave abuse of discretion on the part of the court a quo in denying
petitioners' motion to dismiss and motion for reconsideration, the instant petition is
hereby GRANTED. The Temporary Restraining Order issued on February 7, 1991 is
made PERMANENT and respondent Judge Amir Pundogar is hereby ordered to DISMISS Civil
Case No. 111-1549. The Temporary Restraining Order issued on May 9, 1992 is
hereby DISSOLVED. SO ORDERED.
 China Banking Corporation v. Court of Appeals
G.R No. 153267 . June 23 , 2005
Quisumbing , J . :

Facts
On September 24, 1996, private respondent Armed Forces and Police Savings and Loan
Association, Inc. (AFPSLAI) filed a complaint for a sum of money against petitioner China
Banking Corporation (CBC) with the Regional Trial Court of Quezon City, Branch 216.

The petitioner admitted being the registered owner of the Home Notes, the subject
matter of the complaint. These are instruments of indebtedness issued in favor of a corporation
named Fund Centrum Finance, Inc. (FCFI) and were sold, transferred and assigned to private
respondent. Thus, the petitioner filed a Motion to Dismiss alleging that the real party in interest
was FCFI, which was not joined in the complaint, and that petitioner was a mere trustee of
FCFI.
The trial court denied the motion to dismiss. Petitioner filed a motion for reconsideration,
which the court a quo again denied. Petitioner elevated the case to the Court of Appeals
through a Petition for Certiorari and Prohibition. The appellate court denied the petition for lack
of merit. The petitioner then brought the matter to this Court via a Petition for Certiorari, under
Rule 65. We dismissed the petition for being an improper remedy.

Petitioner filed another Motion to Dismiss, this time invoking prescription. The lower
court denied said motion to dismiss for lack of merit. It held that it was not apparent in the
complaint whether or not prescription had set in. Thus, the trial judge directed petitioner to
present its evidence. However, petitioner instead filed a motion for reconsideration, which the
trial court denied, ratiocinating thus:
This Court finds that there are conflicting claims on the issue of whether or not the action has
already prescribed. A full blown trial is in order to determine fully the rights of the contending
parties.Undeterred, petitioner impugned, through a petition under Rule 65, the two orders of the
trial court claiming before the appellate court that:

RESPONDENT COURT GROSSLY ERRED OR GRAVELY ABUSED ITS DISCRETION

AMOUNTING TO LACK OF JURISDICTION IN DENYING THE MOTION TO DISMISS AND
DECLARING THAT PRESCRIPTION HAS NOT SET IN AGAINST PRIVATE RESPONDENT.
Issues:

WHETHER [OR] NOT THE DATE OF MATURITY OF THE INSTRUMENTS IS THE DATE OF
ACCRUAL OF CAUSE OF ACTION. Petitioner insists that upon the face of the complaint,
prescription has set in. It claims that the Home Notes annexed to the pleading bearing a uniform
maturity date of December 2, 1983 indicate the date of accrual of the cause of action. Hence,
argues petitioner, private respondent’s filing of the complaint for sum of money on September
24, 1996, is way beyond the prescriptive period of ten years under Article 1144 of the Civil
Code. Citing Soriano v. Ubat, petitioner maintains the prescription period starts from the time
when the creditor may file an action, not from the time he wishes to do so. However, private
respondent counters that prescription is not apparent in the complaint because the maturity date
of the Home Notes attached thereto is not the time of accrual of petitioner’s action. Relying on
Elido, Sr. v. Court of Appeals, private respondent insists that the action accrued only on July
20, 1995, when demand to pay was made on petitioner. Private respondent also points out that
since both the trial court and the appellate court found that prescription is not apparent on the
face of the complaint, such factual finding should therefore be binding on this Court. We find the
petition without merit.

The Court of Appeals validly dismissed the petition, there being no grave abuse of discretion
committed by the trial court in denying petitioner’s motion to dismiss the complaint on the
ground of prescription. Well-settled is the rule that since a cause of action requires, as essential
elements, not only a legal right of the plaintiff and a correlative duty of the defendant but also
"an act or omission of the defendant in violation of said legal right," the cause of action does not
accrue until the party obligated refuses, expressly or impliedly, to comply with its duty.
Otherwise stated, a cause of action has three elements, to wit, (1) a right in favor of the plaintiff
by whatever means and under whatever law it arises or is created; (2) an obligation on the part
of the named defendant to respect or not to violate such right; and (3) an act or omission on the
part of such defendant violative of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff.13 It bears stressing that it is only when the last
element occurs that a cause of action arises. Accordingly, a cause of action on a written
contract accrues only when an actual breach or violation thereof occurs.
Ruling

Since the defense of prescription under the facts obtaining did not rest on solid ground, the trial
court took a more judicious move to direct the defendant therein, herein petitioner, to present its
evidence. It is self-evident that with the evidence of both parties adduced, the trial court could
proceed to decide on the merits of the case including prescription, and thus avoid collateral
proceedings such as the one at bar that unduly prolong the final determination of the
controversy. After all, prescription subsists as a valid issue in the decision process. The trial
court wanted precisely a definite and definitive-factual premise to determine whether or not the
action has prescribed. Surely, such exercise of judgment is not grave abuse of discretion
correctible by writ of certiorari. If ever he erred, it was error in judgment. Errors of judgment may
be reviewed only by appeal.

Since the defense of prescription under the facts obtaining did not rest on solid ground, the trial
court took a more judicious move to direct the defendant therein, herein petitioner, to present its
evidence. It is self-evident that with the evidence of both parties adduced, the trial court could
proceed to decide on the merits of the case including prescription, and thus avoid collateral
proceedings such as the one at bar that unduly prolong the final determination of the
controversy. After all, prescription subsists as a valid issue in the decision process. The trial
court wanted precisely a definite and definitive-factual premise to determine whether or not the
action has prescribed. Surely, such exercise of judgment is not grave abuse of discretion
correctible by writ of certiorari. If ever he erred, it was error in judgment. Errors of judgment may
be reviewed only by appeal.

Applying the foregoing principle to the instant case, we rule that private respondent’s cause of
action accrued only on July 20, 1995, when its demand for payment of the Home Notes was
refused by petitioner. It was only at that time, and not before that, when the written contract was
breached and private respondent could properly file an action in court. The cause of action
cannot be said to accrue on the uniform maturity date of the Home Notes as petitioner posits
because at that point, the third essential element of a cause of action, namely, an act or
omission on the part of petitioner violative of the right of private respondent or constituting a
breach of the obligation of petitioner to private respondent, had not yet occurred. The subject
Home Notes, in fact, specifically states that payment of the principal and interest due on the
notes shall be made only upon presentation for notation and/or surrender for cancellation of the
notes, thus: Payment of the principal amount and interest due on this Note shall be made by the
Company at the principal office of the Trustee herein referred to or at such other office or
agency that the Company may designate for the purpose, in such coin or currency of the
Republic of the Philippines as at the time of payment shall be legal tender for payment of public
and private debts, upon presentation for notation and/or surrender for cancellation of this Note. .
. . (Emphasis supplied.) Thus, the maturity date of the Home Notes is not controlling as far as
accrual of cause of action is concerned. What said date indicates is the time when the obligation
matures, when payment on the Notes would commence, subject to presentation, notation and/or
cancellation of those Notes. The date for computing when prescription of the action for
collection begins to set in is properly a function related to the date of actual demand by the
holder of the Notes for payment by the obligor, herein petitioner bank. Since the demand was
made only on July 20, 1995, while the civil action for collection of a sum of money was filed on
September 24, 1996, within a period of not more than ten years, such action was not yet barred
by prescription. WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision
dated November 23, 2001, and the Resolution dated April 24, 2002, of the Court of Appeals are
AFFIRMED. Costs against petitioner.

SO ORDERED.
 Pilipinas Shell Petroleum Corporations v. John Bordman ltd. of Ilo-Ilo

G.R No. 159831 . October 14,2005

Facts

Petitioner Pilipinas Shell Petroleum Corporation ("Pilipinas Shell") is a corporation

engaged in the business of refining and processing petroleum products. The invoicing of
the products was made by Pilipinas Shell, but delivery was effected through Arabay,
Inc., its sole distributor at the time material to the present case.From 1955 to 1975,
Respondent John Bordman Ltd. of Iloilo, Inc. ("John Bordman") purchased bunker oil in
drums from Arabay.When Arabay ceased its operations in 1975, Pilipinas Shell took
over and directly marketed its products to John Bordman.

On August 20, 1980, John Bordman filed against Pilipinas Shell a civil case for
specific performance.The former demanded the latter’s short deliveries of fuel oil since
1955; as well as the payment of exemplary damages, attorney’s fees and costs of suit.
John Bordman alleged that Pilipinas Shell andArabay had billed it at 210 liters per drum,
while other oil companies operating in Bacolod had billedtheir customers at 200 liters
per drum. On July 24, 1974, when representatives from John Bordman and Arabay
conducted a volumetric test to determine the quantity of fuel oil actually delivered, the
drum used could only fill up to 190 liters, instead of 210 liters, or a short delivery rate of
9.5%. After this volumetric test, Arabay reduced its billing rate to 200 (instead of 210)
liters per drum, except for 4 deliveries between August 1 and September 9, 1974, when
the billing was at 190 liters per drum.

On January 23, 1975, another volumetric test allegedly showed that the drum could
contain only 187.5 liters.On February 1, 1975, John Bordman requested from Pilipinas
Shell that 640,000 liters of fuel oil, representing the latter’s alleged deficient deliveries,
be credited to the former’s account.The volume demanded was adjusted to 780,000
liters, upon a realization that the billing rate of 210 liters per drum had been effective
since 1966.
 On October 24, 1977 and November 9, 1977, representatives from John Bordman,
the auditor of the Iloilo City Commission on Audit, pump boat carriers, and truck drivers
conducted actual measurements of fuel loaded on tanker trucks as transferred to
dented drums at mouth full. They found that the drums could contain 180 liters only.In
its Complaint, John Bordman prayed for the appointment of commissioners to ascertain
the volume of short deliveries. On October 21, 1980, Pilipinas Shell and Arabay filed
their Answer with Counterclaim. They specifically denied that fuel oil deliveries had
been less than those billed.Moreover, the drums used in the volumetric tests were
allegedly not representative of the ones used in the actual deliveries.

By way of affirmative defense, Pilipinas Shell and Arabay countered that John
Bordman had no cause of action against them.If any existed, it had been waived or
extinguished; or otherwise barred by prescription, laches, and estoppel. During the
pretrial, the parties agreed to limit the issues to the following: (1) whether the action had
prescribed, and (2) whether there had been short deliveries in the quantities of fuel oil.
John Bordman’s Motion for Trial by Commissioner was granted by the RTC, and the
court-appointed commissioner submitted her Report on April 20, 1988.

On April 3, 1989, Pilipinas Shell and Arabay filed a Motion for Resolution of their
affirmative defense of prescription. Because prescription had not been established with
certainty, the RTC ordered them on November 6, 1989, to present evidence in support
of their defense On August 30, 1991, the RTC issued a Decision in favor of respondent.
Pilipinas Shell and Arabay were required to deliver to John Bordman 916,487.62 liters
of bunker fuel oil, to pay actual damages of P1,000,000; exemplary damages of
P500,000; attorney’s fees of P500,000; and the costs of suit. The basis of the trial
court’s decision was predicated on the following pronouncement:

"Since [respondent] had fully paid their contract price at 210 liters per drum, then the
[petitioner] should deliver to the [respondent] the undelivered volume of fuel oil from
1955 to 1974, which is 20 liters per drum; and 10 liters per drum from 1974 to 1977. Per
the invoice receipts submitted, the total volume of fuel oil which [petitioner] have failed
to deliver to [respondent] is 916,487.62 liters." Pilipinas Shell appealed to the CA,
alleging that John Bordman had failed to prove the short deliveries; and that the suit had
been barred by estoppel, laches, and prescription.

Ruling of the Court of Appeals

Upholding the trial court, the CA overruled petitioner’s objections to the evidence of
respondent in relation to the testimonies of the latter’s witnesses and the results of the
volumetric tests.The CA noted that deliveries from 1955 to 1977 had been admitted by
petitioner; and the fact of deficiency, established by respondent. The appellate court
also debunked petitioner’s claims of estoppel and laches. It held that the stipulation
in the product invoices stating that respondent had received the products in good order
was not controlling.On the issue of prescription, the CA ruled that the action had been
filed within the period required by law.

Hence, this Petition.

Issue
wether or not the Pilipinas Shell breached the contract by delivering short deliveries of
fuel.

Held
Challenge to Volumetric Tests
Petitioner disputes the CA’s finding that it had failed to disprove the results of the
volumetric tests conducted by respondent. The former claims that it was able to
controvert the latter’s evidence. During the July 24, 1974 volumetric test,
representatives of both petitioner and respondent allegedly agreed to conduct two tests
using drums independently chosen by each. Respondent allegedly chose the worst-
dented drum that could fill only up to 190 liters. The second drum, which was chosen by
petitioner, was not tested in the presence of Macarubbo because of heavy rain.It
supposedly filled up to 210 liters, however.
The issue, therefore, relates not to the submission of evidence, but to its weight and
credibility. While petitioner may have submitted evidence, it failed to disprove the short
deliveries. The lower courts obviously gave credence to the volumetric tests witnessed
by both parties as opposed to those done solely by petitioner.

Petitioner also challenges the reliability of the volumetric tests on the grounds of
failure to simulate the position of the drums during filling and the fact that those tested
were not representative of the one used from 1955 to 1974.57 These contentions fail to
overturn the short deliveries established by respondent. The evidence of petitioner
challenging the volumetric tests was wanting. It did not present any as regards the
correct position of the drums during loading. Notably, its representative had witnessed
the two tests showing the short deliveries.58 He therefore had the opportunity to correct
the position of the drums, if indeed they had been incorrectly positioned. Further, there
was no proof that those used in previous years were all good drums with no defects.
Neither was there evidence that its deliveries from 1955 had been properly measured.
From the foregoing observations, it is apparent that the evidence presented by both
parties preponderates in favor of respondent.

Ruling
The Court agrees with the following observations of the CA:
"[Petitioner] posits that its fuel deliveries were properly measured and/or calibrated. To
the mind of this Court, regardless of what method or manner the deliveries were made,
whether pre-packed drums, by the dip stick method or through ex-jetty, the fact remains
that [petitioner] failed to overcome the burden of proving that indeed the drums used
during the deliveries contain 210 liters. The [petitioner], to support its claim, adduced no
evidence. Moreover, it failed to disprove the results of the volumetric tests." Having
sustained the finding of short deliveries, the Court finds it no longer necessary to
address the contention of petitioner that its subsequent reduction of billings constituted
merely a business accommodation.