G.R. No. 91852 August 15, 1995
TALISAY-SILAY MILLING CO., INC., and TALISAY-SILAY INDUSTRIAL COOPERATIVE ASSOCIATION, INC., Petitioners, v. ASOCIACION DE AGRICULTORES DE TALISAY-SILAY, INC.; FIRST FARMERS MILLING CO., INC.; DOMINADOR AGRAVANTE and others (named in the Annex "A" of the Original Complaint); RAMON NOLAN, in his personal and official capacity as Administrator, SUGAR QUOTA ADMINISTRATION; PHILIPPINE NATIONAL BANK; and NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, Respondents.
RAMON A. GONZALES,intervenor-petitioner.
On 15 February 1966, Talisay-Silay Milling Co., Inc. ("TSMC") and Talisay-Silay Industrial Cooperative Association, Inc. ("TSICA") instituted an action for damages (Civil Case No. 9133) against defendants Asociacion de Agricultores de Talisay-Silay, Inc. ("AATSI"), First Farmers Milling Co., Inc. ("FFMCI"), Dominador Agravante and other individual sugar planters and Ramon Nolan in his personal and official capacity as administrator of the Sugar Quota Administration. On 9 March 1967, an amended and supplemental complaint formally included as defendants the Philippine National Bank ("PNB") and the National Investment Development Corporation ("NIDC").chanroblesvirtualawlibrarychanrobles virtual law library
On 4 March 1972, the then Court of First Instance of Rizal, Branch VIII rendered its decision in Civil Case No. 9133 the dispositive portion of which reads:
Appeal was had by defendants-appellants AATSI, et al., and on 30 October 1989, the Court of Appeals rendered a decision affirming with modification the decision of the court a quo. 2More specifically, the Court of Appeals (a) absolved from liability appellants Ramon Nolan of the Sugar Quota Administration, the PNB and the NIDC, and (b) reduced the amount of damages due plaintiffs-appellees TSMC and TSICA from approximately P15.4 million to only P1 million. The Court of Appeals decreed:
A motion for reconsideration and a partial motion for reconsideration were filed by defendants-appellants AATSI, et al. and by Atty. Ramon A. Gonzales, former counsel of plaintiffs-appellees TSMC and TSICA in his own behalf, respectively. 4AATSI, et al. argued that TSMC and TSICA were not entitled to any award of damages since their amended and supplemental complaint which had superseded their original complaint failed to specify the amount of damages being prayed for. 5 On the other hand, Atty. Ramon A. Gonzales filed his motion in respect of the compensation he expects to receive for legal services rendered to TSMC and TSICA. 6 Both motions for reconsideration were denied by the appellate court. 7
The present Petition for Review was filed by TSMC and TSICA and by intervenor-petitioner Atty. Ramon A. Gonzales. Petitioners TSMC and TSICA essentially seek a review of the decision of the Court of Appeals reducing the award of damages granted by the court a quo from approximately P15.4 million to only P1 million. On the other hand, petitioner-intervenor Atty. Ramon A. Gonzales maintains that by previously filing a notice of attorney's lien, he now has the right to appeal the decision of the Court of Appeals or seek its modification.chanroblesvirtualawlibrarychanrobles virtual law library
On 22 May 1991, the Court issued a Resolution denying the Petition for Review insofar as petitioner Atty. Ramon A. Gonzales was concerned. The Court ruled that by virtue of his withdrawing as counsel pending resolution of the case by the Court of Appeals, Atty. Gonzales no longer had the locus standi to file, on behalf of his clients, a partial motion for reconsideration before the Court of Appeals nor a Petition for Review before the Supreme Court. The Court said:
Hence, there is left for determination the extent of liability, if any, of respondents AATSI, et al. who had seceded and transferred their sugar export quota from TSMC to FFMCI.chanroblesvirtualawlibrarychanrobles virtual law library
The Court gave due course to the instant Petition and required the parties with locus standi to file their respective memoranda. 9 On 27 August 1993, respondents AATSI, et al. filed their memorandum. 10 On 27 April 1994, petitioners TSMC and TSICA filed theirs. 11
The disposition of the instant case, to the mind of the Court, involves the resolution of the following issues: (a) whether AATSI, et al. are, in fact, liable to TSMC and TSICA; (b) assuming AATSI, et al. are liable, whether the Court of Appeals erred in reducing the amount of damages awarded by the trial court to TSMC and TSICA from P15.4 million to P1 million; and (c) assuming error on the part of the Court of Appeals, whether the amount of damages awarded by the trial court is supported by the evidence of record.
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The rulings of the trial and appellate courts need to be viewed in the context of the laws relating to the sugar trade which had been enacted by the legislatures of the Philippines and of the United States of America. A very condensed statement of these laws is essayed below.chanroblesvirtualawlibrarychanrobles virtual law library
In 1933, addressing the threat of overproduction of sugar by countries exporting the commodity to the United States, the Congress of the United States of America enacted the "Agricultural Adjustment Act" also known as the "Jones-Costigan Act." That Act established a system of quotas for the exportation of sugar into the United States free of duties. The Philippines was granted a quota of 953,000 short tons. In 1934, the United States Congress enacted the "Philippine Independence Act" or the "Tydings-McDuffie Act," primarily known as the document paving the way for the grant of complete independence to the then Commonwealth of the Philippines. Incorporated in the Tydings-McDuffie Act was an authority to the Philippine legislature to enact a proportional allocation or production scheme for unrefined sugar: firstly, among sugar mills (or districts) and secondly, among sugar planters or plantations attached to a sugar mill. 12
To implement the above Acts, a number of executive orders were issued. On 2 July 1934, the American Governor-General in the Philippines issued Executive Order No. 489 providing for the creation and completion of a master record or registry list by the Insular Auditor of all sugar producing mills and their adherent plantations with the production and percentage share of each for the years 1931 to 1933. Subsequently, the Insular Auditor submitted to the Governor-General the Sugar Mill Audit of 1934 and the Sugar Plantation Audit of 1934 covering all centrifugal mills and plantations in the Philippines which had produced sugar during the period from 1931 to 1933. On the basis of the audit reports, the Governor-General issued Executive Order No. 525 by virtue of which Mill District No. 44, also known as the Talisay-Silay Milling Co., Inc. and its adherent plantations, was established. Later, by the terms of Executive Order No. 900, the entire quota of sugar to be exported from the Philippines into the United States was proportionately distributed or allocated among the various mill districts in the Philippines. This quota or allocation among mill districts was termed "mill district U.S. production coefficient" and when expressed in tons of sugar, was known as "mill district production allowance." The production allowance granted a mill district was in turn divided into the "plantation owner's U.S. marketing coefficient" and the "mill's U.S. marketing coefficient" in accordance with the sugar plantations' and the sugar mills' respective share reported in the audit report of the Insular Auditor.chanroblesvirtualawlibrarychanrobles virtual law library
On 3 December 1934, declaring that a state of national emergency existed, i.e., that the production of sugar in the Philippines had reached such a degree of development that unless restricted and regulated, a huge surplus of unmarketable sugar would inevitably result, the Philippine Legislature enacted Act No. 4166 known as the "Sugar Limitation Act." This Act essentially reiterated the policies laid down by the Tydings-McDuffie Act insofar as the production of sugar for export to the united States was concerned. Section 10 of Act 4166 provided that the Act would remain in force for three (3) years commencing with the 1931-1932 crop year unless the Governor-General determined that the state of emergency declared in the Act had ceased. This declared state of emergency was continued for another six (6) crop years by section 4 of Commonwealth Act No. 77 approved on 26 October 1936; then for another period of six (6) crop years commencing on 1941 by Commonwealth Act No. 584; and finally extended until 1974 by Republic Act No. 279 approved on 16 July 1948.chanroblesvirtualawlibrarychanrobles virtual law library
In 1946, the Congress of the United States passed the United States-Philippines Trade Relations Act, know as the "Bell Trade Act" essentially continuing the policies of the Tydings-McDuffie Act insofar as the production of sugar for export to the United State was concerned.chanroblesvirtualawlibrarychanrobles virtual law library
In 1952, the Congress of the Republic of the Philippines, still acting by virtue of its powers to limit and regulate the sugar industry, approved Republic Act No. 809 known as the "Sugar Act of 1952" which provided for a production-sharing scheme between a sugar mill or central and its adherent sugar planters in the absence of a written milling agreement between the mill and planters. Section 1 of R.A. No. 809 read:
On 22 June 1957, Congress approved Republic Act No. 1825 entitled "An Act to Provide for the Allocation, Re-allocation and Administration of Absolute Quota on Sugar," which governed the transfer, under certain conditions, of a planter's sugar production allowance or quota from one sugar mill to another. Section 4 of R.A. No. 1825 provides as follows:
In their respective decisions, both the trial court and the Court of Appeals held that the abovequoted Section 4 had been violated by AATSI and certain individual sugar planters when they transferred their production allotments or sugar quota from TSMC to FFMCI despite the non-concurrence of the twin conditions specified in Section 4 for the lawful transfer of such quota, i.e., (a) the absence or expiration of their milling contract with TSMC; and (b) the refusal of the sugar mill TSMC and of TSICA to comply with the production-sharing or participation scheme established by Section 1 of R.A. No. 809.chanroblesvirtualawlibrarychanrobles virtual law library
In its motion for reconsideration before the Court of Appeals, appellant AATSI contended that when it left TSMC and moved over to appellant FFMCI during crop year (CY) 1964-1965, there no longer existed a milling contract between AATSI and TSMC as their last milling contract had expired at the end of crop year (CY) 1951-1952 and had never been renewed or extended. The Court of Appeals, however, was unperturbed:
We find no cogent reason to disturb the conclusion of the Court of Appeals and the court a quo that the transfer of export sugar quota by AATSI and certain individual sugar planters from TSMC to FFMCI was illegal and invalid for having been effected despite the absence of the second condition imposed by Section 4 of Republic Act No. 1825, that is, that TSMC was not willing to give AATSI, et al. the participation of the plantation owner laid down in Republic Act No. 809 vis-a-vis the sugar mill.chanroblesvirtualawlibrarychanrobles virtual law library
Two (2) circumstances show the willingness of TSMC, et al. to comply with the participation scheme mandated by Republic Act No. 809. First, AATSI had seceded from TSMC only at the end of crop year (CY) 1964-1965, i.e., only after twelve (12) years had elapsed since crop year (CY) 1951-52 which significantly was the same year that Republic Act No. 809 was approved. These twelve (12) years were marked by the continued production of sugar and its by-products by TSMC, TSICA and AATSI, et al. despite the nonexistence of a written milling contract among them. Second, when the constitutionality of R.A. 809 was assailed in Asociacion de Agricultores de Talisay-Silay, Inc., et al. v. Talisay-Silay Milling Co., Inc., et al., 14 in particular, the participation or sharing scheme Republic Act No. 809 had provided, TSMC nevertheless deposited from time to time, in escrow with the PNB subject to the disposition of the trial court, amounts representing the participation mandated by Republic Act No. 809. 15 TSMC thereby signalled its willingness to abide by the seventy percent (70%) share claimed by the planters should the court hold them entitled to such percentage share. These are conclusions for the overturning of which respondents AATSI, et al. have offered no reasonable basis.chanroblesvirtualawlibrarychanrobles virtual law library
From the foregoing, it clearly appears that AATSI, et al. had no legal basis for transferring its sugar allotment or quota to FFMCI since TSMC never refused and in fact was complying with the participation scheme required by Republic Act No. 809. We agree with the Court of Appeals and the trial court that, by so transferring their sugar allotments, AATSI as well as the individual sugar planters similarly situated became liable to TSMC and TSICA. By accepting AATSI, et al's invalidly transferred sugar allotments, FFMCI became solidarily liable with the transferors to TSMC and TSICA.
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In reducing the amount of damages awarded by the court a quo to petitioners TSMC and TSICA from roughly P15.4 million to only P1 million, the Court of Appeals, citing Malayan Insurance Co., Inc. v. Manila Port Services 16reasoned that the reduction was dictated by the failure of TSMC and TSICA to comply with Section 5, Rule 10 of the Rules of Court, i.e., TSMC and TSICA's failure to amend their complaint to conform to the evidence presented during trial which showed that TSMC and TSICA suffered damages amounting to more than P1 million by virtue of the illegal transfer of export sugar quota from TSMC to FFMCI. 17
We are unable to agree with the Court of Appeals on this point.
Section 5, Rule 10 of the Rules of Court reads as follows:
In applying the abovequoted Section 5, the Court, in Northern Cement Corporation v. Intermediate Appellate Court, 18 clearly, though impliedly, held that the Malayan Insurance Company, Inc. case relied upon by the Court of Appeals can no longer be cited with any confidence. In Northern Cement Corporation, under a set of facts very closely similar to the facts of the instant case, the Court said:
The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude an adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings, 20or serve as a basis for a higher award of damages. 21Although the pleading may not have been amended to conform to the evidence submitted during trial, judgment may nonetheless be rendered, not simply on the basis of the issues alleged but also on the basis of issues discussed and the assertions of fact proved in the course of trial. 22The court may treat the pleading as if it had been amended to conform to the evidence, although it had not been actually so amended. Former Chief Justice Moran put the matter in this way:
Clearly, a court may rule and render judgment on the basis of the evidence before it even though the relevant pleading had not been previously amended, so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long as the basic requirements of fair play had been met, as where litigants were given full opportunity to support their respective contentions and to object to or refute each other's evidence, the court may validly treat the pleadings as if they had been amended to conform to the evidence and proceed to adjudicate on the basis of all the evidence before it.chanroblesvirtualawlibrarychanrobles virtual law library
The record of the instant cage shows that TSMC and TSICA formally offered as evidence documents (Exhibits "P-1"-"P-8" and "W-1"-"W-6") which set out in detail the estimated unrealized income suffered by TSMC and TSICA during four (4) consecutive crop years, i.e., (CYs) 1964-1965, 1965-1966, 1966-1967 and 1967-1968, the failure of realization being attributed to the transfer by AATSI, et al. of their sugar quota to FFMCI. These documents, along with the corroborative testimony of one Ricardo Yapjoco, 24a Certified Public Accountant and Internal Auditor of TSMC, were the basis of the trial court's award of P8,802,612.89 to TSMC and of P6,609,714.32 to TSICA. It is noteworthy that the joint record on appeal reveals that AATSI, et al. objected to the Offer of Evidence of TSMC and TSICA, specifically to Exhibits "P-1"-"P-8" and "W-1"-"W-6," 25not on the basis that such evidence fell outside the scope of the issues as defined in the pleadings as they then stood, but rather on the basis that such evidence was "incompetent" and speculative in character, i.e., as "being mere estimates prepared by witness Yapjoco" was subjected to extensive cross-examination by counsel for AATSI, et al. 26The trial court did not expressly overrule AATSI, et al.'s objection to the Offer of Evidence of TSMC and TSICA; it is nevertheless clear that the trial court did not accord much weight to that objection.chanroblesvirtualawlibrarychanrobles virtual law library
The point that may be here underscored is that AATSI, et al., having been given the opportunity and having in fact been able to register their objections to the evidence formally offered by TSMC and TSICA including, in particular, Exhibits "P-1"-"P-8" and "W-1"-"W-6," were not in any way prejudiced by the discrepancy between the allegations in the complaint filed and the propositions which the evidence submitted by TSMC and TSICA tended to establish. We conclude that the Court of Appeals erred when it failed to treat the amended and supplemental complaint of TSMC and TSICA as if such complaint had in fact been amended to conform to the evidence, and when it limited the damages due to TSMC and TSICA to the amount prayed for in their original complaint.
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Turning to the extent of liability incurred by AATSI, FFMCI and the individual sugar planters when they illegally seceded and transferred their sugar quota from TSMC and TSICA, we address first the issue raised by AATSI, et al. that the pieces of evidence offered by TSMC and TSICA and relied upon by the court a quo, in particular, Exhibits "P-1"-"P-8" and "W-1"-"W-6" are "incompetent" and the testimony of Mr. Yapjoco merely his "opinion." 27According to AATSI, et al.,
In fine, AATSI, et al. maintains that TSMC and TSICA failed to clearly prove unrealized profits or ganancias frustradas and that the court a quo had erred in awarding the same.chanroblesvirtualawlibrarychanrobles virtual law library
We consider that the evidence of record requires us to reject this overly broad contention.chanroblesvirtualawlibrarychanrobles virtual law library
The familiar rule is that damages consisting of unrealized profits, frequently referred as "ganancias frustradas" or "lucrum cessans," are not to be granted on the basis of mere speculation, conjecture or surmise but rather by reference to some reasonably definite standard such as market value, established experience or direct inference from known circumstances. 29Uncertainty as to whether or not a claimant suffered unrealized profits at all - i.e., uncertainty as to the very fact of injury - will, of course, preclude recovery of this species of damages. Where, however, it is reasonably certain that injury consisting of failure to realize otherwise reasonably expected profits had been incurred, uncertainty as to the precise amount of such unrealized profits will not prevent recovery or the award of damages. The problem then would be the ascertainment of the amount of such unrealized profits.chanroblesvirtualawlibrarychanrobles virtual law library
In the case at bar, as earlier stated, Exhibits "P-1" and "W-1" were offered by TSMC and TSICA to substantiate their claim for unrealized profits covering four (4) crop years, CYs 1964-1965, 1965-1966, 1966-1967 and 1967-1968. 30Exhibits "P-1" and "W-1" set forth the income that TSMC and TSICA claim should have been realized had they milled the sugar allocations for Mill District No. 44 (composed of TSMC and TSICA) during those four (4) crop years, which allocations had been transferred to and milled by FFMCI.chanroblesvirtualawlibrarychanrobles virtual law library
To support the figures set out in Exhibits "P-1" and "W-1," TSMC and TSICA submitted detailed schedules marked as Exhibits "P-2"-"P-8" and "W-2"-"W-6," respectively. These schedules purport to show, in greater detail, the various components of the "Total Sales Value" of the sugar allotted to Mill District No. 44 as well as the "Total Cost of Production" of such sugar on a given crop year. Deducting the Total Cost of Production from the Total Sales Value, the remainder represents the "Total Unrealized Income" suffered by TSMC and TSICA in a given crop year.chanroblesvirtualawlibrarychanrobles virtual law library
Examination of Exhibits "P-2" to "P-8" and "W-2" to "W-6" shows that the figures there set out were based, in turn, on data provided by (a) circulars issued by the Sugar Quota Administration; 31(b) certifications issued by the then Bureau of Commerce listing the average selling prices of sugar and molasses during given years; 32 as well as (c) the sugar and molasses production and distribution reports of FFMCI. 33 Combining these specific documentary material with the testimony of Mr. Yapjoco, we consider that they provided sufficient basis for a reasonable estimate of the unrealized net income or profit sustained by TSMC and TSICA for CYs 1964-1965, 1965-1966, 1966-1967 and 1967-1968. We do not believe that the data embodied in Exhibits "P-1" to "P-8" and "W-1" to "W-6" can be dismissed as merely speculative; the data, in fact, appears to rest on fairly definite standards utilized by the governmental agency having relevant administrative jurisdiction (i.e., the Sugar Quota Administration) and accounting standards widely employed in the world of business and commerce.chanroblesvirtualawlibrarychanrobles virtual law library
Nevertheless, a review of the damages actually awarded to TSMC and TSICA by the trial court on the one hand and the Court of Appeals on the other, reveals the need for a more careful and thorough examination of the matter. As earlier noted, the Court of Appeals' award of P1 million based simply on the amount set out in the original complaint of TSMC and TSICA must be discarded. Upon the other hand, the award by the trial court of damages to TSMC and TSICA was arrived at merely by totalling up the unrealized income sustained by TSMC and TSICA over the relevant four (4) crop year period:
We believe, in other words, that the figures and computations utilized by the trial court in its award of damages need further examination and refinement.chanroblesvirtualawlibrarychanrobles virtual law library
For instance, the award of damages rendered by the trial court took into account the loss of income suffered by TSMC and TSICA when AATSI, et al. transferred two (2) types of sugar quota: the "domestic quota" and the "export quota." In respect of the domestic quota, the Court, in Hawaiian Philippines Corporation v. Asociacion de Hacenderos de Silay-Saravia, Inc., 35 ruled that the transfer by AATSI, et al. of their domestic quota was valid considering that Section 9 of Act No. 4166 as amended by R.A. No. 1072, required only one (1) condition for the validity of a transfer of such quota: the absence or expiration of a milling contract between the sugar central and the sugar planter. The consent of the sugar central was not required for the validity of a transfer of the domestic sugar quota. Accordingly, the transfer by AATSI, et al. of their domestic sugar quota must be regarded as valid and the loss of income attributable to the transfer of such domestic sugar quota from TSMC and TSICA to FFMCI must be deducted from the aggregated amount of damages due to TSMC and TSICA.chanroblesvirtualawlibrarychanrobles virtual law library
A second example: Exhibits "P-1" and "W-1" embody figures relating to "molasses." Molasses are a by-product of milled sugar, whether that sugar be covered by a "domestic quota" or by an "export quota." The amount of income lost traceable to molasses that would have been extracted from domestic sugar must be deducted from the aggregate damages due to TSMC and TSICA.chanroblesvirtualawlibrarychanrobles virtual law library
We consider, therefore, that there is need for recalculation of the damages due to TSMC and TSICA, in the interest of substantial and impartial justice. To this end, and following the course of action taken by the Court in the Northern Cement Corporation case, the Court finds it necessary and appropriate to remand this case to the Court of Appeals in accordance with Section 9 of B.P. Blg. 129 for a more careful evaluation of the evidence already adduced by the parties and re-computation of the damages appropriately due to TSMC and TSICA. The Court also directs that, in computing the actual amount of damages due, the Court of Appeals should provide for legal interest in accordance with recent caselaw of this Court. 36
Finally, in accordance with the rule laid down in Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 37the corresponding additional judicial filing fees shall constitute a lien on the judgment award, to be assessed and collected by the Clerk of Court.chanroblesvirtualawlibrarychanrobles virtual law library
WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-G.R. No. 51350-R dated 30 October 1989 and 10 January 1990, respectively are hereby MODIFIED insofar as the award of actual damages due Talisay-Silay Milling Co., Inc. and Talisay-Silay Industrial Cooperative Association, Inc. are concerned. Subject to the rulings referred to herein, this case is REMANDED to the Court of Appeals for the determination, with all deliberate dispatch, of the amount of damages due Talisay-Silay Milling Co., Inc. and Talisay-Silay Industrial Cooperative Association, Inc. considering that this litigation among the parties has already lasted more that twenty-eight (28) years. The rest of the Decision of the Court of Appeals is hereby AFFIRMED. Cost against respondents.chanroblesvirtualawlibrarychanrobles virtual law library
Romero, Melo and Vitug, JJ., concur.
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