G.R. No. 175021 ; June 15, 2011
REPUBLIC OF THE PHILIPPINES, represented by the Chief of the Philippine National Police, Petitioner, vs. THI THU THUY T. DE GUZMAN, Respondent.

FACTS

Respondent Thi Thu Thuy T. De Guzman is the proprietress of Montaguz General Merchandise (MGM), a contractor accredited by the Philippine National Police (PNP). On December 11, 1995, MGM and the PNP, through its Chief, executed a Contract of Agreement for the supply of construction materials amounting to ₱2,288,562.60. Respondent claimed that MGM delivered the materials in March 1996, as evidenced by delivery receipts, sales invoices, and a “Report of Public Property Purchase” issued by PNP officers. The PNP subsequently issued Disbursement Voucher No. 96-04-1010 for ₱2,226,147.26 in favor of MGM and another for the 3% withholding tax.
On November 5, 1997, respondent demanded payment from the PNP. The PNP replied, claiming payment had been made via Land Bank of the Philippines (LBP) Check No. 0000530631 dated April 18, 1996, and presented Receipt No. 001 allegedly issued by respondent on April 23, 1996. Respondent denied receiving the check, asserting that Receipt No. 001 was under the name “Montaguz Builders”—a separate entity from MGM—and that the PNP’s Warrant Register showed the check was received by one Edgardo Cruz, whom she did not authorize.
Respondent filed a Complaint for Sum of Money. The PNP filed a Motion to Dismiss, claiming payment was made and evidenced by the check and receipt. The RTC denied the motion. During pre-trial and trial, the PNP, through its counsel Atty. Norman Bueno, admitted that respondent was contracted to deliver the materials and that she complied with the delivery. The PNP also admitted the issuance of the LBP check and that the Warrant Register indicated the check was released. The sole issue was confined to whether respondent received payment.
Respondent testified that on April 18, 1996, she went to the PNP Finance Center to claim a check for Montaguz Builders. She pre-signed a blank Official Receipt No. 001 from Montaguz Builders in anticipation. Upon learning the check was not yet available, she went to the Engineering Services Office, where she left her belongings, including the receipt booklet, unattended. The next day, she discovered Receipt No. 001 was missing and issued Receipt No. 002 instead to claim the Montaguz Builders check. Months later, she inquired about MGM’s payment and discovered the check had been released to Edgardo Cruz, who signed the Warrant Register. She denied authorizing Cruz to receive the check.
The PNP presented Cruz, who testified he was authorized by respondent to receive the check and that he gave it to her. He claimed respondent issued Receipt No. 001 upon receiving the check. The RTC found Cruz’s testimony inconsistent and not credible, noting discrepancies in his account and the unusual circumstance of a contractor authorizing a competitor to receive a substantial payment. The RTC ruled in favor of respondent, ordering the PNP to pay the principal amount of ₱2,226,147.26 plus legal interest. The Court of Appeals affirmed the RTC decision but deleted the award of attorney’s fees. The Republic, through the PNP, filed the present petition.

ISSUE

Whether the Court of Appeals erred in affirming the RTC decision that respondent did not receive payment for the delivered construction materials, thereby holding the PNP liable to pay the sum of ₱2,226,147.26.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Decision of the Court of Appeals.
The Court held that the factual findings of the RTC, affirmed by the Court of Appeals, are generally conclusive and binding. It found no compelling reason to deviate from these findings. The core issue was the credibility of witnesses, which is best determined by the trial court. The RTC found the testimony of respondent credible and that of Edgardo Cruz inconsistent and unreliable. Cruz, a business competitor, gave conflicting statements about how he received authorization and delivered the check. His claim that respondent pre-signed a blank receipt for Montaguz Builders but later used it for MGM was illogical and unsupported.
The PNP failed to prove that payment was validly made to respondent or her authorized agent. The burden of proof to establish payment as a mode of extinguishing an obligation rests on the debtor. The evidence presented—the check, the Warrant Register showing Cruz’s signature, and Receipt No. 001 under “Montaguz Builders”—was insufficient to prove respondent received the payment. The PNP’s release of the check to Cruz, without verifying his authority from MGM, constituted negligence. The PNP’s duty was to ensure payment was made to the proper payee or its authorized representative.
Therefore, the obligation of the PNP to pay for the delivered materials remained unpaid and extant. The Court affirmed the award of ₱2,226,147.26 with legal interest at 6% per annum from the date of judicial demand (May 5, 1999) until finality of judgment, and thereafter at 12% per annum on the total amount until full payment. The deletion of attorney’s fees by the Court of Appeals was sustained.