(69) [EVIDENCE] Rule 130, Sec.

5-7 | MASANGKAY

COMPANIA MARITIMA V ALLIED FREE WORKERS
G.R. No. 28999 May 24, 1977| Aquino, J.
JOKE TIME ACCOUNTANT SIDELINE ‘company records’ daw
Petitioners: Compania Maritima
Respondents: Allied Free Workers Union, Salvador
Lluch, Mariano Badelles (Pres of Union), Nicanor Halibas
and Laurentino Badelles (officers of Union)
On July 23, 1954, (2 years from the institution of the
contract) the union sent a letter to the company
requesting that it be recognized as the exclusive
bargaining unit to load and unload the cargo of its
vessels at Iligan. The company ignored. Thus, the
Union filed before the Court of Industrial Relations
a petition praying that it be certified as the sole
bargaining unit.

FACTS
Company gave notice to union that it was
Compania Maritima and Allied Workers Union
terminating contract on Aug 31.
entered into stevedoring & arrastre contract
Despite the certification case, the company on August
On August 11, 1952 Compania Maritima and Allied Free
24, 1954 served a written notice on the union that in
Workers Union entered into a contract whereby the
accordance with Par.4 of the 1952 contract, the same
union agreed to perform arrastre and stevedoring1 work
would be terminated on August 31.
for Compania’s vessels at Iligan City. The contract was to
last a month to begin on August 12, 1952.
Because of that notice, the union on August 26, 1954
filed before CIR charges of unfair labor practice
Some stipulations of the contract:
against the company.
i. that the Company could revoke the contract before
the expiration of the term if the union failed to
On Aug 31, a new company was providing service for
render proper service
Compania
ii. that the contract could be renewed by agreement of
When the said ‘temination date’ came (Aug 31),
the parties
Compania entered into a new stevedoring and arrastre
iii.that the Company would not be liable for the
contract with the Iligan Steveoring Association. The
payment of the service of the Union and that the
following day (Sept.1), the Union members picketed
compensation for such services would be paid by
the wharf and prevented the new Association from
the owners and consignees of the cargoes;
performing work for 9 days.
following the practice in the Port of Iligan

Compania sued the union for damages

But kulang bayad kay union only arrastre work was
paid
What happened was that the shippers and consignees
paid the union only for the arrastre work. The
shippers and consignees claim that the shipowner was
the one obligated to pay for the stevedoring service
because the bill of lading provided that the unloading of
the cargo was at the shipowner’s expense,
Compania: not our job to pay based on contract!
On the other hand, Compania refused to pay for the
stevedoring service invoking a stipulation of the contract
where it was explicitly provided that the compensation
for both arrastre and stevedoring work should be paid
by the shippers and consignees, as was the alleged
practice in Iligan.
On September 9, 1954 Compania sued the union and its
officers before the CFI of Lanao for the rescission of the
1952 contract and praying to enjoin the union from
interfering with the loading and unloading of the cargo
and for recovery of damages. The damages were based
on the following:
1. union’s failure to load and unload cargo in and from the
company’s vessels during the period when they ‘picketed’
2. damages due to the union’s inefficiency in performing
their work during the latter part of the contract
3. that by reason of the acts of harassment and
obstruction by the union in the loading and unloading of
cargo, the Company suffered additional damage in the
form of lost and unrealized freight and passenger
charges
4. moral and exemplary damages

Upon the expiration of the one-month period, the
said contract was verbally renewed, the company
allowed the Union to continue performing arrastre
and stevedoring work.
Union wanted to be exclusive bargaining unit
Injunction was issued but was lifted immediately
The following day, upon posting of a bond, the lower
Court issued an ex parte writ of preliminary injunction
to enjoing the union from interfering with the
operations in the wharf. However, a few hours later on
the same day, the union was allowed to file a

1Arrastre refers to hauling of consignee or shipper and the ship’s tackle; while stevedoring refers to the handling of the cargo in the holds of the vessel or
between the ship’s tackle and the holds of the vessel

counterbond, thus the injunction was lifted. The lifting
allowed union members to resume their arrastre and
stevedoring work.
Company filed motion to revive injunction; with
auditor’s report proving the damages suffered
The Company filed a motion for the revival of the
injunction against the union. It attached to the motion
an auditor’s report dated Sept. 15, 1954 wherein it
was indicated that the company lost freight
revenues amounting to P178,000 from Jan 1- Sept 7
1954.
Further, company blamed inefficiency of union
The company further added a cause of action to its
complaint alleging that during the period of Sept 12-Dec
28, 1954 it lost freight charges on unloaded cargoes in
the sum of P62,600 and that it incurred P20,000
overhead expenses for the delay in the departure of its
vessels attributable to the union’s unsatisfactory
work.
Union denied allegations
In its answer the union denied that its members had
rendered inefficient service. It averred that the
termination of the contract was prompted by the
company’s desire to give the work to a new entity
which was actually its sister company— Iligan
Stevedoring Assoc.
The union filed a counterclaim for P200,000 as
compensation for its services to the company and
P500,000 as damages.
Compania’s iligan branch manager testified
For its evidence, the Company’s branch manager in
Iligan, Jose Teves testified that to avoid further losses to
the company caused by the union’s inefficient service,
he terminated the contract with the Union. After such
termination, Teves testified that the members of the
union harassed the company with help of goons.
Teves hired auditors to ascertain the losses suffered
by the company from jan 1 to Sept 11 1954. The
auditor’s reports were presented as evidence.
Teves also presented accountants’ reports
Other than the auditor’s reports, the Company
presented the reports of their two hired accountants —
Demetrio Jayme andM.J Siojo whose reports show that
the aggregate amount of damages suffered by the
company is P349,000 and not P450,000.
After trial , the lower court:
(69) [EVIDENCE] Rule 130, Sec.5-7 | MASANGKAY
1. declared the 1952 contract terminated on August 31
1954
2. dismissed the union’s counterclaims
3. ordered the union and its officers to the Company
P450,000 as damages based on the auditor’s
reports
4. permanently enjoining the union from performing
any arrastre and stevedoring work for the company
Union contends that the trial court erred in awarding
the company damages amounting to 450,000 on the
ground that the auditor’s reports, on which they were
based, were hearsay.
ISSUES
I.
W/N the auditor’s were admissible in evidence and
were proper basis for the grant of damages by the
trial court? No. The trial court’s award of 450,000 as
damages not supported by evidence.
Argument of the Company: admissible since not
practical to present voluminous records!
The Company argues that the reports are admissible in
evidence because of the rule that: “when the original
consists of numerous accounts or other documents
which cannot be examined in court without great loss of
time and the fact sought to be established from the m is
only the general result of the whole”, the original
writings need not be produced . (Sec. 2e, Rule 130)
APPLICABLE LAW/DOCTRINES
GR: Follow best evidence rule i.e.original of the
documents must be presented in Court
General rule is that the original of the documents must
be presented in Court.
Exceptions: Secondary Evidence— when docs not
available
One of the known exception to the rule is in a case when
the original is unavailable (lost, destroyed, cannot be
produced in court)— the offeror upon proof of its
execution or existence and the cause of its unavailability
without bad faith, may prove its contents by a copy,
recital of its contents in some authentic document or
by testimony of witnesses (Sec.5, Rule 130)
Pre-requisite to establish voluminous character
For the exception to apply, an offeror must first duly
establish the voluminous character of the records
Also a pre-requisite that records & accounts
accessible to the adverse party
It is also a requisite for the application of the rule that
the records and accounts should be made accessible to

the adverse party so that the correctness of the
summary may be tested on cross-examination.
Note, that an audit report is inadmissible in
evidence to prove originals
Further, an audit made by, or the testimony of, a private
auditor, is inadmissible in evidence as proof of the
original records, books of accounts, reports or the like.
APPLICATION TO THIS CASE (PRINCIPLES)
Voluminous character in this case not established
The exception cannot be applied in this case because
the voluminous character of the records, on which the
accountants’ reports were allegedly based, was not duly
established.
As to the Argument of Voluminous: No showing of
difficulty to produce records in court
That general rule cannot be relaxed in this case because
the company failed to make a preliminary showing as to
the difficulty or impossibility attending the production
of the records in court and their examination and
analysis as evidence by the court.
As to Admissibility of Auditor’s report issue: Not
admissible
What applies to this case is the general rule ‘that an
audit made by, or the testimony of, a private auditor, is
inadmissible in evidence as proof of the original records,
book of accounts, reports or the like”
II
W/N trial court erred in allowing Compania to
recover damages based on the evidence presented
by auditors/accoutnants? Yes.
A scrutiny of the accountants’ reports reveals their
lack of probative value.
1. UNREALIZED FREIGHT AND PASSENGER REVENUE
Accountant Jayme: Based on company records
and trends of company revenues monthly
Accountant Jayme allegedly found from the
company’s records at Iligan that its freight and
passenger revenue should have been at least
P600,000 if the union rendered better service.
This was based on the big volume of business in
Iligan City due to several big businesses— i.e
hydroelectric plants, steel mills, etc. (basically ang
ginawa niya was he compared revenues of several
months, and projected na because there was a
‘boom’ in business, dapat yung revenues ng vessel
were also ‘booming’)
(69) [EVIDENCE] Rule 130, Sec.5-7 | MASANGKAY
He included in his report that his estimates of
the losses were based on interviews with
disinterested parties at the wharf.
2. DAMAGES ON LOST FREIGHT CHARGES FOR
SHUTOUT CARGOES and OVERHEAD EXPENSES FOR
DELAY OF VESSELS
Additional losses computed by chief clerk— but
tada! Accountant Jayme pa din ang nag testify!
The company’s chief clerk Salvador Magante also
computed damages from Sept 12-Dec 28 1954 for
lost freight charges on shutout cargoes and overhead
expenses; however instead of Magante testifying on
his statement, it was also accountant Jayme who
substituted.
Jayme said that he verified the company’s records
on which Magante based his statement. Jayme
assured the court that the figures in Magante’s
statement were supported by the company’s
records.
3. DAMAGES DUE TO ACTS OF UNION AND ITS
OFFICERS
Damages caused by union computed by
Accountant Siojo for 2 days NO SLEEP based on
several company documents
The said damages were computed in the report of
accountant Siojo who, allegedly, for 2 days and
nights examined the company’s record at Iligan such
as its cash book, cash vouchers, reports to the head
office, shipping manifests, and liquidation reports.
APPLICATION TO THE CASE (FACTS-BASED)
The truth about Accountant Jayme:
According to Jayme may team of auditors siya: and
special hire siya only for this damage incident
His report was allegedly made by a team of auditors
working with accountant Jayme. It was also shown that
Jayme was an independent accountant hired by the
company to make the special investigation of the
company’s losses.
But the truth is co-employee and very close friend
sila ni Teves!
However the truth is that Jayme was a co-employee and
a friend of Teves, He was the branch manager at Ozamis
and CDO offices. He suppressed that fact in his report.
For his accounting sideline he violated accountants’
code of ethics
Apparently, the practice of “Accounting” was his sideline.
Obviously, Jayme would be biased for the company. He
violated a rule of the accountants’ code of ethics by not

disclosing in his report of examination that he was an
employee of the company
1. FOR THE UNREALIZED FREIGHT AND PASSENGER
REVENUE CLAIMS
Trial court should not have relied on the reports.
Jayme’s estimates as recoverable damages were not
supported by reliable evidence. They can hardly be
sanctioned by the generally accepted auditing
standards.
Jayme inflated guesses are inherently speculative
and devoid of probative value
The trial court unreservedly gave credence to the
conjectures of Jayme. Obviously, his inflated guesses are
inherently speculative and devoid of probative value. It
is noteworthy that those losses were not averred with
particularity and certitude in the companyÊs complaint.
In fact, the list found in the report of Jayme had
overlapping items— i.e. some bags of fertilizers were
mentioned twice which amounted to doubling the
‘expense’l or that some cargoes were listed booked for
shipment in 1954 while it was not actually during the 8-
month period in question when the cargo was actually
booked.
If there were such records— should have been
presented in court!
Second, Jayme allegedly based his computations on the
records of the company which were not produced in
court. The union objected to Jayme’s report as
inadmissible under the hearsay rule or as not being the
best evidence
Company should have brought even the small
documents; or photocopies!
The company to show good faith and fair dealing,
should have brought the records in court (i.e manifests,
bills of ladings, receipts for the freights if any) and
enabled the court and the union’s counsel and its expert
accountant to verify the accuracy of Jayme’s summaries.
Photostatic copies of some manifests and bills of
lading proving that the company was not able to
collect the stipulated freight on the alleged shutout
cargoes should have been presented in evidence as
supporting papers for Jayme’s report. No such exhibits
were presented.
In his report he was pertaining to several documents
allegedly attached; for example a comparative
statement of gross revenue with another vessel; but no
such documents were attached to the report.
(69) [EVIDENCE] Rule 130, Sec.5-7 | MASANGKAY
The flaw or error in relying merely on Jayme’s
summaries is that, cargoes might be shutout due to
causes other than the alleged inefficiency of the
union.
The pertinent records of the company should have
been produced in court
The rule is that the auditor’s summary should not
include his inclusions or inferences His opinion is not
evidence. Our conclusion is that an injustice would be
perpetrated if the damages computed and estimated in
the report of Jayme, a biased witness, should be
accepted at their face value.

2. DAMAGES ON LOST FREIGHT CHARGES FOR
SHUTOUT CARGOES and OVERHEAD EXPENSES FOR
DELAY OF VESSELS
Magante’s statement is hearsay
Trial court erred in allowing the damages because
Magante’s statement is hearsay. Magante should have
been presented as a witness. Jayme was not
competent to take his place since the statement
was prepared by Magante, not by Jayme. More
appropriate still, the documents and records on which
the statement was based should have been
presented as evidence or at least brought to the
court for examination by the union’s counsel and its
accountant, The trial court required the production of
the manifests supporting Magante’s statement. The non-
production of the other records was not explained
3. DAMAGES DUE TO ACTS OF UNION AND ITS
OFFICERS
Those records were not produced in court. Their non-
production was not explained. If the accountant was
able to summarize the contents of those records in
two days, they could not have been very
voluminous. They should have been offered in evidence
DISPOSITIVE PORTION
(As for evidence related issue)
The lower court’s award of damages is
reversed and set aside.