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[G.R. No. 143011. September 27, 2006]

CALOOCAN GAS CORPORATION, PETITIONER v. CONSOLIDATED INDUSTRIAL GASES, INC., RESPONDENT

Third Division

Sirs/Mesdames:

Quoted hereunder, for your information, is a resolution of this Court dated SEPT. 27, 2006 .

G.R. No. 143011 (Caloocan Gas Corporation, Petitioner v. Consolidated Industrial Gases, Inc., Respondent)

x ------------------------------------------------------------------------------------------------------------------------- x

RESOLUTION

Assailed in this Petition for Review on Certiorari is the January 21, 2000 Decision of the Court of Appeals which modified the July 19, 1995 Decision of the Regional Trial Court of Kalookan City, Branch 131 in Civil Case No. C-15991, entitled Caloocan Gas Corporation v. Consolidated Industrial Gases, Inc., whereby the appellate court struck out the award of actual or compensatory, moral, and exemplary damages, but granted nominal damages and attorney's fees to respondent Caloocan Gas Corporation (Caloocan Gas for brevity).

On January 23, 1991, the Exclusive Supply Contract between Consolidated Industrial Gases, Inc. (CIGI for brevity) [1] cralaw and Caloocan Gas stipulated that CIGI would supply liquid oxygen to Caloocan Gas, which the latter would convert to and resell as industrial compressed gas in Metro Manila. Further, the contract provided that Caloocan Gas would purchase its total liquid oxygen requirements from CIGI with a minimum of 40,000 cylinders every month for three (3) years, that is, from February 15, 1991 until February 15, 1994. [2] cralaw

Based on the same contract, CIGI would provide Caloocan Gas with a VIE storage vessel or service equipment, high pressure liquid oxygen pump, vaporizers, and interconnecting pipes from the vaporizers to the manifold. On the other hand, Caloocan Gas would provide its own charging manifold, electrical systems, foundation, as well as the labor for installing the equipment, the protective fence for the service equipment, and the cost of the use of a crane on their own account. Also, Caloocan Gas would provide adequate space for the service equipment and recognize CIGI's right to use such area for the intended purpose free of charge. [3] cralaw

However, after the fire at petitioner's oxygen plant on May 30, 1993, which gutted some of the cylinders, liquid oxygen tank, and the automatic panel board of the plant, [4] cralaw CIGI pulled out its service equipment from petitioner's premises and stopped supplying liquid oxygen to Caloocan Gas. [5] cralaw

Through its June 28, 1993 letter, Caloocan Gas asked compensation from CIGI for the losses it incurred resulting from said equipment pullout and the latter's failure to supply liquid oxygen. [6] cralaw On the same date, CIGI demanded payment from Caloocan Gas for the prevailing replacement value of its service equipment. [7] cralaw

On July 9, 1993, Caloocan Gas filed a Complaint against CIGI for damages in Civil Case No. C-15991, alleging that the callous, malevolent, and unwarranted withdrawal by CIGI of its service equipment from its premises, and CIGI's deliberate failure to service their compressed gas requirements without any valid reason made them incur losses during the unexpired term of the Exclusive Supply Contract. Thus, Caloocan Gas asked to be compensated the following amounts: (a) PhP 7,527,218.40 for unrealized income as compensatory damages; (b) PhP 750,000.00 as moral damages; (c) PhP 250,000.00 as exemplary damages; (d) PhP 100,000.00 for attorney's fees; and (e) the costs of suit; and for additional reliefs which are just and equitable under [petitioner's] premises. [8] cralaw

In its August 19, 1993 Answer with Compulsory Counterclaim, CIGI alleged that the negligence of Caloocan Gas resulted in damage to CIGI's VIE service equipment and such damage rendered it totally unserviceable. CIGI claimed that under the contract, Caloocan Gas was liable to pay the following: (a) PhP 2,742,047.50 as replacement value of the service equipment and its accessories; (b) PhP 10,000,000.00 as moral damages; (c) PhP 5,000,000.00 as exemplary damages; and (d) PhP 300,000.00 as attorney's fees and costs of suit. [9] cralaw

On September 2, 1993, petitioner Caloocan Gas filed its Reply and Answer to Counterclaim [10] cralaw to which respondent CIGI filed its Amended Answer with Compulsory Counterclaim on March 15, 1994. [11] cralaw

The Caloocan City RTC then rendered its July 19, 1995 Decision, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff [Caloocan Gas] and against defendant [CIGI], ordering the latter to pay the former the following:

a) The sum of P6,947,419.50 as actual and compensatory damages minus P604,207.94 representing plaintiff's unpaid purchases;

b) The sum of P350,000.00 as moral damages;

c) The sum of P150,000.00 as exemplary damages;

d) The sum of P100,000.00 as attorney's fees, plus costs of suit.

All other counterclaims are hereby dismissed for lack of merit. [12] cralaw

Aggrieved, CIGI filed a notice of appeal on August 3, 1995 before the Court of Appeals (CA).

The Ruling of the Court of Appeals

In its January 21, 2000 Decision, [13] cralaw the CA held that Caloocan Gas was not guilty of negligence in the maintenance and operation of its oxygen plant, and that there was no exact finding as to the cost of the fire in the plant. The photographs of the VIE storage vessel did not prove that said vessel was damaged beyond repair as borne out by the fact that CIGl did not ask indemnification for its insured storage equipment. Thus, the CA did not sustain CIGI's allegation of Caloocan Gas' liability for the prevailing replacement value of the said equipment.

On the other hand, Caloocan Gas failed to prove pecuniary loss by the non-submission of receipts showing that it refilled its oxygen tanks from Mystar and Regimen in amounts ranging from PhP 80.00 to PhP 85.00. The CA held that the failure of Caloocan Gas to present said receipts was fatal to its claim because damages incurred through unrealized profits or lucro cessante cannot be awarded in the absence of supporting evidence.

The court a quo also held that

[i]n the case at bar, appellee Caloocan Gas failed to substantiate its claim that it is entitled to an award of moral damages. Except for the self serving testimony of Mr. Murphy Chu, President and General Manager of appellee Caloocan Gas, that the withdrawal of the VIE storage vessel resulted to [sic] an embarrassment and humiliation because appellee Caloocan Gas was not able to meet its delivery schedules and as such appellee's reputation has been eroded, no other evidence was proffered to show that its business was adversely affected by reason thereof (emphasis supplied). [14] cralaw

The same CA ruling held that CIGl was obligated to supply Caloocan Gas with liquefied oxygen until the expiration of the contract; therefore, the latter was entitled to nominal damages, attorney's fees, and litigation expenses.

Ultimately, the CA rendered its judgment, thus:

WHEREFORE, the foregoing premises considered, the appealed Decision is hereby MODIFIED. The awards for actual or compensatory damages, moral damages and exemplary damages are hereby DELETED. Appellant CIGI is ordered to pay appellee Caloocan Gas nominal damages in the sum of Three Hundred Thousand (PhP 300,000.00) Pesos. The award of attorney's fees and expenses of litigation in the sum of One Hundred Thousand (PhP 100,000.00) Pesos to appellee Caloocan Gas, and the award of Six Hundred Four Thousand Two Hundred Seven Pesos and Ninety-Four Centavos (PhP 604,207.94) to appellant CIGI representing appellee Caloocan Gas' unpaid purchases are affirmed. [15] cralaw

Dissatisfied by the CA judgment, petitioner Caloocan Gas consequently filed a Motion for Reconsideration of the CA's Decision; but the court a quo, in its May 2, 2000 Resolution, [16] cralaw denied the motion for lack of merit.

The Court's Ruling

Hence, before us is a Petition for Review on Certiorari based on the following three (3) issues:

I.

The Court of Appeals erred in ruling that petitioner failed to present evidence to prove its claim for actual and compensatory damages.

II.

The Court of Appeals erred in ruling that petitioner failed to substantiate its claim for moral damages.

III.

The Court of Appeals erred in ruling that petitioner is not entitled to exemplary damages. [17] cralaw

The Court hereby resolves the aforementioned allegations, as follows:

(1) No Proof was Presented to Substantiate the Claim for Actual and Compensatory Damages

Petitioner asserts that adequate documentary and testimonial evidence was adduced to substantiate its claim for actual and compensatory damages. CIGI Liquid Oxygen Purchases Reports (Exhibits "L" and "M") were introduced to demonstrate that "from January to June 1993, the cost of 22,580 cylinders based on the average purchases per month was P1,077,077.80[,] but after the withdrawal of the VIE, the cost of refilling from other pumping stations for the same number of cylinders grew to P1,913,180.00 or a difference of P836,172.20 monthly."

According to Caloocan Gas, from June 1993 up to [and including] February 1994 or for nine (9) months, which is the unexpired period of the Exclusive Supply Contract, a total of P7,525,549.80 was allegedly lost due to the withdrawal of the VIE and CIGI's "evident bad faith in refusing to replace the damaged parts of the service equipment." [18] cralaw

To support its allegation on the losses incurred, Caloocan Gas presented its Administrative Officer, Catherine Ong, as witness before the lower court. She testified that "starting June 1, 1993, since the CIGI removed the liquefied oxygen, we have to refill our oxygen with other plant[s] which charge[d] us at P80.00 to P85.00 per cylinder (emphasis supplied). Assuming using [the] average 22,508 cylinders refilled per month x x x, our cost of production now will be x x x an increment monthly cost of P836,357.6[0]." Thus, according to Ong, "these losses could not have been incurred if the x x x VIE of CIGI [had] not been withdrawn," [19] cralaw making the monthly sales of liquid oxygen, in 22,508 cylinders, yield a net loss instead of a positive net income.

Petitioner further argues that its failure to present the receipts of purchases of oxygen from other pumping stations should not prevent it from recovering its unearned profits. It disagrees with the CA's ruling that the loss must be subjected to exact quantification to entitle one to recover unrealized profits and it asserts that absolute certainty as to the amount of damages is not required when the existence of loss is established. [20] cralaw

The Court is not persuaded.

Petitioner relies on the CIGI Liquid Oxygen Purchases Report (Exhibit "M"), the Schedule of Liquid Purchase from April 1992 to May 1993 (Exhibit "N"), and the testimony of its Accountant and Administrative Officer, Catherine Ong, to justify the award of actual or compensatory damages of PhP 6,947,419.50 as determined by the trial court. Although the Purchases Report and Schedule of Liquid Purchases clearly reveal an increase in the cost of liquid oxygen in the amount of PhP 836,172.20 monthly which would amount to PhP 7,525,549.80 for nine (9) months [which constitute the remaining period of the Exclusive Supply Contract], petitioner miserably failed to adduce proof that the cost of liquid oxygen from other suppliers actually increased from PhP 47.85 per cylinder (price prior to the fire) to PhP 85.00 per cylinder. No other documentary evidence was introduced to show that such was the increase of the cost of liquid oxygen. The testimony of its employee, Catherine Ong, does not deserve much weight because of the principle that such witness is generally biased in favor of its employer due to their 'employee-employer' relationship. The testimony of a biased witness related to a party must be subjected to close scrutiny; considering that such person usually has a preconceived opinion or inclination to favor the latter.

Worse, Catherine Ong-as accountant of Caloocan Gas-could have easily produced the receipts from Mystar and Regimen because in normal office practice, said receipts are kept by a company accountant and the transactions shown in such receipts are recorded in the books of accounts of a company. Her inability to produce said receipts prejudices the cause of petitioner and leads the court to conclude that contrary to petitioner's claim, no such purchases from Mystar and Regimen were made during the unexpired portion of the contract and that the actual cost of liquid oxygen was lower than PhP 85.00 per cylinder as claimed by petitioner. Verily, "the award of actual damages cannot be based on the allegation of a witness without any tangible document, such as receipts or other documentary [proof] to support such claim." [21] cralaw

Without proof of the amount of actual damages, "the Court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but must depend upon competent proof that x x x the injured party [suffered from such damages] and on the best obtainable evidence of the actual amount thereof." [22] cralaw

Hence, the petitioner's claim must fail.

(2) No Moral Damages

On the issue on moral damages, petitioner Caloocan Gas maintains that the wanton and fraudulent pullout of the VIE from its premises by CIGI prevented Caloocan Gas from processing liquid oxygen to compressed gas, which resulted in their failure to meet its delivery schedules and commitments to their clients; thus, Caloocan Gas' good image and reputation in the business community were tarnished. For these reasons, petitioner claims that it is entitled to moral damages.

WE hold OTHERWISE.

Only the testimony of Murphy Chu was proffered for petitioner's allegation that its failure to meet delivery schedules and commitments to its clients caused the company embarrassment and humiliation, and such led to the erosion of its reputation. However, this claim is totally demolished by the admission of Caloocan Gas' Accountant and Administrative Officer, Catherine Ong, who admitted in her testimony that their refilling of gas from Mystar and Regimen enabled Caloocan Gas to fulfill its commitments to its clients. [23] cralaw

Moreover, mere allegation or supposition of damage to the good reputation of a company without any sufficient evidence on record [24] cralaw would not suffice as basis for an award of moral damages.

Thus, petitioner's claim for moral damages must fail as well.

(3) No Exemplary Damages

Anent the third issue, petitioner Caloocan Gas claims that the CA erred in not awarding the company exemplary damages.

Exemplary damages cannot be recovered as a matter of right. The court will decide whether they should be adjudicated. [25] cralaw While the amount of the exemplary damages need not be proved, the petitioner must show that it is entitled to moral, temperate, or compensatory damages, before the Court may consider the question of whether exemplary damages should be awarded. [26] cralaw

Considering that petitioner has not shown its right to moral and actual or compensatory damages, it cannot demand exemplary damages. [27] cralaw

WHEREFORE, the January 21, 2000 Decision of the Court of Appeals is hereby AFFIRMED IN TOTO .

Costs against petitioner.

SO ORDERED.

Very truly yours,

(Sgd.) LUCITA ABJELINA-SORIANO
Clerk of Court


Endnotes:

[1] cralaw Records, p. 197.

[2] cralaw Id. at 197-199.

[3] cralaw Id. at 200.

[4] cralaw Records, p. 309.

[5] cralaw Records, p. 214.

[6] cralaw Id.

[7] cralaw Records, p. 291.

[8] cralaw Records, pp. 2-8.

[9] cralaw Records, pp. 24-31.

[10] cralaw Records, p. 45.

[11] cralaw Records, p. 126.

[12] cralaw Rollo, p. 56.

[13] cralaw Penned by Associate Justice Wenceslao I. Agnir, Jr., with Associate Justices Corona Ibay-Somera and Portia Ali�o-Hormachuelos concurring, rollo, pp. 58-74.

[14] cralaw Id. at 69.

[15] cralaw Id. at 74.

[16] cralaw Rollo, p. 79.

[17] cralaw Rollo, p. 18.

[18] cralaw Id. at 21.

[19] cralaw Id. at 26.

[20] cralaw Id. at 28.

[21] cralaw Bank of the Philippine Islands v. ALS Management & Development Corp., G.R. No. 151821, April 14, 2004, 427 SCRA 564, 582, citing David v. CA, 353 Phil. 170, 189; 290 SCRA 727 (1998); last citation omitted.

[22] cralaw Saguid v. Security Finance, Inc., G.R. No. 159467, December 9, 2005, 477 SCRA 256, 275, citing Manufacturers Building, Inc. v. CA, G.R. No. 116847, March 16, 2001, 354 SCRA 521.

[23] cralaw TSN, Folder No. 3, July 21, 1994, pp. 7-8.

[24] cralaw Bank of the Philippine Islands v. Casa Montessori Internationale, G.R. No. 149454, May 28, 2004, 430 SCRA 261, 295, citing Grapilon v. Municipal Council of Carigara, Leyte, 112 Phil. 24, 29; 2 SCRA 103, 108 (1961).

[25] cralaw CIVIL CODE, Art. 2233.

[26] cralaw Id. at Art. 2234.

[27] cralaw Supra note 24, at 296, citing Estopa v. Piansay, Jr., 109 Phil. 640, 642 (1960).


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