Heirs of Asis v. G.G. Sportswear Manufacturing Corporation
REITERATIONFacts
The Antecedents: Respondents G.G. Sportswear Manufacturing Corporation and Nari K. Gidwani expressed intent to purchase Filipinas Washing Company, Inc. (FWC) from its stockholders, including Dominador S. Asis, Jr. and petitioners. A Letter-Agreement was executed on June 17, 1996. Respondents made partial payments and issued a check for FWC's obligations to Westmont Bank. Petitioners represented FWC to banks for loan restructuring, ceased FWC operations, and advised employees of the sale. Respondents failed to assume FWC's loan obligations, prompting petitioners to demand compliance. Respondents, in turn, cancelled the Letter-Agreement, citing petitioners' failure to deliver FWC shares. Petitioners filed a complaint for rescission with damages. Procedural History: The Regional Trial Court (RTC) found respondents breached the Letter-Agreement by failing to assume FWC's loan obligations. The RTC ruled rescission was proper, ordered restitution of respondents' partial payment, and awarded petitioners actual damages for rehabilitation costs and attorney's fees. The Court of Appeals (CA) affirmed the rescission but deleted the awards for actual damages and attorney's fees due to lack of competent evidence and explanation. Petitioners sought to transmit missing exhibits to the CA, but the CA denied their motion, stating the period for reconsideration had lapsed. The CA later denied petitioners' motion for reconsideration of its denial. The Petition: Petitioners sought review of the CA's decision, specifically assailing the deletion of actual damages and attorney's fees, and the denial of their motion to transmit missing exhibits.
Issue(s)
Whether the Court of Appeals erred in deleting the award for actual damages. Whether the Court of Appeals erred in deleting the award for attorney's fees.
Ruling
The petition is partly meritorious. The Court modified the CA's decision by affirming the deletion of actual damages but awarding temperate damages in lieu thereof. It also affirmed the deletion of attorney's fees by the CA but reinstated an award for attorney's fees based on exemplary damages and the necessity of litigation. The order for petitioners to return the partial payment to respondents was affirmed. Monetary awards shall earn 6% interest per annum from finality of judgment.
Ratio Decidendi
On the deletion of actual damages: The Court affirmed the CA's deletion of actual damages for lack of evidentiary basis. The RTC's award was based on Exhibits "E" to "BB," which were not transmitted to the CA and were missing from the records. The Supreme Court reiterated that actual damages must be proven with reasonable certainty and cannot be presumed. Furthermore, the Court clarified that outstanding loan obligations prior to the Letter-Agreement, which petitioners claimed as consequential damages, could not be awarded because rescission requires mutual restitution, restoring parties to their original positions as if no contract existed. However, recognizing that petitioners suffered damages due to the breach, the Court awarded temperate damages in the amount of P500,000.00, as the exact amount of pecuniary loss could not be proved with certainty but was evident. On the award of attorney's fees: The Court agreed with the CA that the RTC failed to provide a clear factual and legal justification for the award of attorney's fees, which should not be left to speculation. However, in light of the award of exemplary damages and the fact that petitioners were compelled to litigate to protect their interests due to respondents' breach, the Court found it proper to award attorney's fees in the amount of P100,000.00, consistent with Article 2208(1) of the Civil Code.
Main Doctrine
While actual damages require strict proof of pecuniary loss, temperate damages may be awarded when such loss is certain but its amount cannot be proved with certainty. Mutual restitution is required in rescission, meaning parties are restored to their original positions. Outstanding loan obligations prior to a rescinded agreement cannot be claimed as consequential damages.