CASE NO. 2011-0071: OCEANEERING CONTRACTORS (PHILS), INC.  VS. NESTOR N. BARRETTO, DOING BUSINESS AS N.N.B. LIGHTERAGE (G.R. NO. 184215, 9 FEBRUARY 2011, PEREZ, J.) SUBJECTS: MARITIME CASE; NEGLIGENCE OF COMMON CARRIER; COMPENSATORY DAMAGES DEPENDS ON PLEADING AND PROOF; ATTORNEYS FEES NOT AUTOMATIC FOR WINNING CASES. (BRIEF TITLE: OCEANEERING CONTRACTORS VS. BARRETO).

FIRST DIVISION

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DECISION

PEREZ, J.:

          The requirements for an award of actual damages are central to this petition for review filed under Rule 45 of the 1997 Rules of Civil Procedure, primarily assailing the Decision dated 12 December 2007 rendered by the then Special Third Division of the Court of Appeals (CA) in CA-G.R. CV No. 87168,^[1] the dispositive portion of which states:

            WHEREFORE, premises considered, the instant appeal is PARTIALLY GRANTED.  The decision dated 27 December 2005 and order dated 28 April 2006 of the Regional Trial Court of Las Piñas, City, Branch 255, to the extent that it dismissed the counterclaims of defendant-appellant, are hereby reversed and set aside.  Plaintiff-appellee is ordered to pay defendant-appellant the amount of P306,000.00 as actual damages and P30,000.00 as attorney’s fees.

            SO ORDERED. ^[2]

The Facts

          Doing business under the name and style of N.N. B. Lighterage, respondent Nestor N. Barretto (Barretto) is the owner of the Barge “Antonieta”^[3] which was last licensed and permitted to engage in coastwise trading for a period of one year expiring on 21 August 1998.^[4]  On 27 November 1997, Barretto and petitioner Oceaneering Contractors (Phils.), Inc. (Oceaneering) entered into a Time Charter Agreement whereby, for the contract price of P306,000.00,^[5] the latter hired the aforesaid barge for a renewable period of thirty calendar days, for the purpose of transporting construction materials from Manila to Ayungon, Negros Oriental.^[6] Brokered by freelance ship broker Manuel Velasco,^[7] the agreement included Oceaneering’s acknowledgment of the seaworthiness of the barge as well as the following stipulations, to wit:

“a)       [Barreto] shall be responsible for the salaries, subsistence, SSS premium, medical, workmen’s compensation contribution and other legal expenses of the crew;

b)         [Oceaneering] shall be responsible for all port charges, insurance of all equipments, cargo loaded to the above mentioned deck barge against all risks (Total or Partial), or theft, security and stevedoring during loading and unloading operations and all other expenses pertinent to the assessment, fines and forfeiture for any violation that may be imposed in relation to the operation of the barge;

            x x x x

(f)        Delivery and re-delivery be made in Pasig River, Metro Manila;

(g)        Damage to deck barge caused by carelessness or negligence of stevedores hired by [Oceaneering] will be [Oceaneering’s] liability.  Upon clear findings by owners or barge patron of any damages to the barge that will endanger its seaworth(i)ness and stability, such damage/s shall be repaired first before loading and leaving port.  Under such conditions, the Barge Patron has the right to refuse loading and/or leaving port;

            x x x x

(i)                 [Barreto] reserves the right to stop, abort and deviate any voyage in case of imminent danger to the crew and/or  vessel that may be occasioned by any storm, typhoon, tidal wave or any similar events.”^[8]

In accordance with the agreement, Oceaneering’s hired stevedores who loaded the barge with pipe piles, steel bollards, concrete mixers, gravel, sand, cement and other construction materials in the presence of and under the direct supervision of the broker Manuel Velasco and Barretto’s Bargemen.^[9]   In addition to the polythene ropes with which they were lashed, the cargoes were secured by steel stanchions which Oceaneering caused to be welded on the port and starboard sides of the barge.^[10]   On 3 December 1997, the barge eventually left Manila for Negros Oriental, towed by the tug-boat “Ayalit” which, for said purpose, was likewise chartered by Oceaneering from Lea Mer Industries, Inc.^[11]   On 5 December 1997, however, Barretto’s Bargeman, Eddie La Chica, executed a Marine Protest,^[12] reporting the following circumstances under which the barge reportedly capsized in the vicinity of Cape Santiago, Batangas, viz.:

That on or about 1635 December 3, 1997, Barge ‘Antonieta’ departed Pico de Loro, Pasig River and towed by Tug-Boat ‘Ayalit’ bound for Ayungon, Negros Oriental with cargo onboard steel pipes and various construction materials.  While underway on or about 0245 December 4, 1997 encountered rough sea at the vicinity of Cape Santiago, Batangas and ma(d)e the barge x x x roll and pitch which caused the steel pipes and various construction materials to shift on the starboardside causing the breakdown of the steel stanch(i)ons welded on the deck of the barge leaving holes on the deck that cause(d) water to enter the hold.

That on or about 1529 December 5, 199[7], with the continuous entrance of sea water on the hold, the barge totally capsized touch(ed) bottom.

  On 9 December 1997, Barretto apprised Oceaneering of the supposed fact that the mishap was caused by the incompetence and negligence of the latter’s personnel in loading the cargo and that it was going to proceed with the salvage, refloating and repair of the barge.^[13]  In turn contending that the barge tilted because of the water which seeped through a hole in its hull, Oceaneering caused its counsel to serve Barretto a letter dated 12 March 1998, demanding the return of the unused portion of the charter payment amounting to P224,400.00 as well as the expenses in the sum of P125,000.00 it purportedly incurred in salvaging its construction materials.^[14]  In a letter dated 25 March 1998, however, Barretto’s counsel informed Oceaneering that its unused charter payment was withheld by his client who was likewise seeking reimbursement for the P836,425.00 he expended in salvaging, refloating and repairing the barge.^[15]  In response to Barretto’s 29 June 1998 formal demand for the payment of the same expenses,^[16] Oceaneering reiterated its demand for the return of the unused charter payment and the reimbursement of its salvaging expenses as aforesaid.^[17]

          On 6 October 1998, Barretto commenced the instant suit with the filing of his complaint for damages against Oceaneering, which was docketed as Civil Case No. LP-98-0244 before Branch 255 of the Regional Trial Court (RTC) of Las Piñas City. Contending that the accident was attributable to the incompetence and negligence which attended the loading of the cargo by Oceaneering’s hired employees, Barretto sought indemnities for expenses incurred and lost income in the aggregate sum ofP2,750,792.50 and attorney’s fees equivalent to 25% of said sum.^[18]  Specifically denying the material allegations of the foregoing complaint in its 26 January 1999 answer, Oceaneering, on the other hand, averred that the accident was caused by the negligence of Barretto’s employees and the dilapidated hull of the barge which rendered it unseaworthy. As a consequence, Oceaneering prayed for the grant of its counterclaims for the value of its cargo in the sum of P4,055,700.00, salvaging expenses in the sum ofP125,000.00, exemplary damages, attorney’s fees and litigation expenses.^[19]

          The issues thus joined and the mandatory pre-trial conference subsequently terminated upon the agreement of the parties,^[20]the RTC proceeded to try the case on the merits.  In support of his complaint, Barretto took the witness stand to prove the seaworthiness of the barge as well as the alleged negligent loading of the cargo by Oceaneering’s employees.^[21]  Barretto also presented the following witnesses: (a) Toribio Barretto II, Vice President for Operations of N.B.B. Lighterage, who primarily testified on the effort exerted to salvage the barge;^[22] and, (b) Manuel Velasco, who testified on his participation in the execution of the Time Charter Agreement as well as the circumstances before and after the sinking of the barge.^[23]  By way of defense evidence, Oceaneering in turn presented the testimonies of the following witnesses: (a) Engr. Wenifredo Oracion, its Operation’s Manager, to prove, among other matters, the value of the cargo and the salvage operation it conducted in the premises;^[24] and, (b) Maria Flores Escaño, Accounting Staff at Castillo Laman Tan Pantaleon and San Jose Law Offices, to prove its claim for attorney’s fees and litigation expenses.^[25]

To disprove the rough sea supposedly encountered by the barge as well as the negligence imputed against its employees, Oceaneering further adduced the testimonies of the following witnesses: (a) Rosa Barba, a Senior Weather Specialist at the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA);^[26] (b) Cmdr. Herbert Catapang, Officer-in-Charge of the Hydrographic Division at the National Mapping Resource Information Authority (NAMRIA);^[27] and, (c) Engr. Carlos Gigante, a freelance marine surveyor and licensed naval architect.^[28]   Recalled as a rebuttal witness, Toribio Barretto II, in turn, asserted that the hull of the barge was not damaged and that the sinking of said vessel was attributable to the improper loading of Oceaneering’s construction materials.^[29]  Upon the formal offer respectively made by the parties, the pieces of documentary evidence identified and marked in the course of the testimonies of the above named witnesses^[30] were, accordingly, admitted by the RTC.^[31]

On 27 December 2005, the RTC rendered a decision, dismissing both Barretto’s complaint and Oceaneering’s counterclaims for lack of merit.  While finding that Barretto failed to adduce sufficient and convincing evidence to prove that the accident was due to the negligence of Oceaneering’s employees, the RTC nevertheless brushed aside the latter’s claim that the barge was not seaworthy as acknowledged in the Time Charter Agreement.  Alongside its claim for reimbursement of the sums expended for the salvage operation it conducted which was denied for lack of evidence to prove the same, Oceaneering’s claim for the value of its cargo was likewise denied on the ground, among other matters, that the same was not included in the demand letters it served Barretto; and, that it has no one but itself to blame for failing to insure its cargo against all risks, as provided in the parties’ agreement.  With its claims for exemplary damages and attorney’s fees further denied for lack of showing of bad faith on the part of Barretto,^[32] Oceaneering filed the motion for partial reconsideration of the foregoing decision^[33] which was denied for lack of merit in the RTC’s 28 April 2006 order.^[34]

Dissatisfied, Oceaneering perfected its appeal from the aforesaid 27 December 2005 decision on the ground that the RTC reversibly erred in not finding that the accident was caused by the unseaworthy condition of the barge and in denying its counterclaims for actual and exemplary damages as well as attorney’s fees and litigation expenses. Docketed before the CA as CA-G.R. CV No. 87168,^[35] the appeal was partially granted in the herein assailed 12 December 2007 decision upon the finding, among others, that the agreement executed by the parties, by its express terms, was a time charter where the possession and control of the barge was retained by Barretto; that the latter is, therefore, a common carrier legally charged with extraordinary diligence in the vigilance over the goods transported by him; and, that the sinking of the vessel created a presumption of negligence and/or unseaworthiness which Barretto failed to overcome and gave rise to his liability for Oceaneering’s lost cargo despite the latter’s failure to insure the same.  Applying the rule, however, that actual damages should be proved with a reasonable degree of certainty, the CA denied Oceaneering’s claim for the value of its lost cargo and merely ordered the refund of the P306,000.00 it paid for the time charter, with indemnity for attorney’s fees in the sum of P30,000.^[36]

Alongside that interposed by Barretto, the motion for reconsideration of the foregoing decision filed by Oceaneering’s^[37]was denied for lack of merit in the CA’s resolution dated 11 August 2008,^[38] hence, this petition. 

The Issues

Oceaneering urges the reversal of the assailed 12 December 2007 decision and 11 August 2008 resolution on the ground that the CA erred in the following wise:

I.       IN HOLDING THAT THERE WERE NO VALID DOCUMENTS SHOWING THE REAL VALUE OF THE MATERIALS LOST AND THOSE ACTUALLY RECOVERED.

II.      IN DENYING OCEANEERING’S COUNTERCLAIMS FOR ACTUAL DAMAGES AMOUNTING TO (A) P3,704,700.00 REPRESENTING THE VALUE OF THE MATERIALS IT LOST DUE TO THE SINKING OF [BARRETO’S] BARGE; AND (b) P125,000.00 REPRESENTING THE EXPENSES IT INCURRED FOR SALVAGING ITS CARGO.

III.    IN AWARDING OCEANEERING’S COUNTERCLAIM FOR ATTORNEY’S FEES IN THE REDUCED AMOUNT OF P30,000.00 ONLY.^[39]

The Court’s Ruling

          We find the modification of the assailed decision in order.

          Oceaneering argues that, having determined Barretto’s liability for presumed negligence as a common carrier, the CA erred in disallowing its counterclaims for the value of the construction materials which were lost as a consequence of the sinking of the barge.  Alongside the testimony elicited from its Operation’s Manager, Engr. Winifredo Oracion, Oceaneering calls attention to the same witness’ inventory which pegged the value of said construction materials at P4,055,700.00, as well as the various sales receipts, order slips, cash vouchers and invoices which were formally offered before and admitted in evidence by the RTC. Considering that it was able to salvage only nine steel pipes amounting to P351,000.00, Oceaneering insists that it should be indemnified the sum of P3,703,700.00 for the value of the lost cargo, with legal interest at 12% per annum, from the date of demand until fully paid.  In addition, Oceaneering maintains that Barretto should be held liable to refund the P306,000.00 it paid as consideration for the Time Charter Agreement and to pay the P125,000.00 it incurred by way of salvaging expenses as well as its claim for attorney’s fees in the sum of P750,000.00.

In finding Oceaneering’s petition impressed with partial merit, uppermost in our mind is the fact that actual or compensatory damages are those damages which the injured party is entitled to recover for the wrong done and injuries received when none were intended.^[40]  Pertaining as they do to such injuries or losses that are actually sustained and susceptible of measurement,^[41] they are intended to put the injured party in the position in which he was before he was injured.^[42]   Insofar as actual or compensatory damages are concerned, Article 2199 of the Civil Code of the Philippines provides as follows:

“Art. 2199.  Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved.  Such compensation is referred to as actual or compensatory damages.”

          Conformably with the foregoing provision, the rule is long and well settled that there must be pleading and proof of actual damages suffered for the same to be recovered.^[43]  In addition to the fact that the amount of loss must be capable of proof, it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable.^[44]  The burden of proof of the damage suffered is, consequently, imposed on the party claiming the same^[45] who should adduce the best evidence available in support thereof, like sales and delivery receipts, cash and check vouchers and other pieces of documentary evidence of the same nature.  In the absence of corroborative evidence, it has been held that self-serving statements of account are not sufficient basis for an award of actual damages.^[46]  Corollary to the principle that a claim for actual damages cannot be predicated on flimsy, remote, speculative, and insubstantial proof,^[47] courts are, likewise, required to state the factual bases of the award.^[48]

          Applying the just discussed principles to the case at bench, we find that Oceaneering correctly fault the CA for not granting its claim for actual damages or, more specifically, the portions thereof which were duly pleaded and adequately proved before the RTC.  While concededly not included in the demand letters dated 12 March 1998^[49] and 13 July 1998^[50] Oceaneering served Barretto, the former’s counterclaims for the value of its lost cargo in the sum of P4,055,700.00 and salvaging expenses in the sum of P125,000.00 were distinctly pleaded and prayed for in the 26 January 1999 answer it filed a quo.^[51]  Rather than the entireP4,055,700.00 worth of construction materials reflected in the inventory^[52] which Engr. Oracion claims to have prepared on 29 November 1997, based on the delivery and official receipts from Oceaneering’s suppliers,^[53] we are, however, inclined to grant only the following items which were duly proved by the vouchers and receipts on record, viz.:  (a) P1,720,850.00 worth of spiral welded pipes with coal tar epoxy procured on 22 November 1997;^[54] (b) P629,640.00 worth of spiral welded steel pipes procured on 28 October 1997;^[55] (c) P155,500.00 worth of various stainless steel materials procured on 27 November 1997;^[56]  (d)P66,750.00 worth of gaskets and shackles procured on 20 November 1997;^[57] and, (e) P4,880.00 worth of anchor bolt procured on 27 November 1997.^[58]

          The foregoing sums all add up to of P2,577,620.00 from which should be deducted the sum of P351,000.00 representing the value of the nine steel pipes salvaged by Oceaneering, or a total of  P2,226,620.00 in actual damages representing the value of the latter’s lost cargo.  Excluded from the computation are the following items which, on account of the dates of their procurement, could not have possibly been included in the 29 November 1997 inventory prepared by Engr. Oracion, to wit: (a) P1,129,640.00 worth of WO#1995 and PO#OCPI-060-97 procured on 9 December 1997;^[59] and, (b) P128,000.00 worth of bollard procured on 16 December 1997.^[60]  Likewise excluded are the anchor bolt with nut Oceaneering claims to have procured for an unspecified amount on 3 November 1997^[61] and the P109,018.50 worth of Petron oil it procured on 28 November 1997^[62] which does not fit into the categories of lost cargo and/or salvaging expenses for which it interposed counterclaims a quo.  Although included in its demand letters as aforesaid and pleaded in its answer, Oceaneering’s claim for salvaging expenses in the sum of P125,000.00 cannot, likewise, be granted for lack of credible evidence to support the same.

Tested alongside the twin requirements of pleading and proof for the grant of actual damages, on the other hand, we find that the CA also erred in awarding the full amount of P306,000.00 in favor of Oceaneering, as and by way of refund of the consideration it paid Barretto for the Time Charter Agreement.  Aside from not being clearly pleaded in the answer it filed a quo, said refund was claimed in Oceaneering’s demand letters only to the extent of the unused charter payment in the reduced sum of P224,400.00^[63]which, to our mind, should be the correct measure of the award.  Having breached an obligation which did not constitute a loan or forbearance of money, moreover, Barretto can only be held liable for interest at the rate of 6% per annum on said amount as well as the P2,226,620.00 value of the lost cargo instead of the 12% urged by Oceaneering.   Although the lost cargo was not included in the demand letters the latter served the former, said interest rate of 6% per annum shall be imposed from the time of the filing of the complaint which is equivalent to a judicial demand.^[64]  Upon the finality of this decision, said sums shall earn a further interest of 12% per annum until full payment in accordance with the following pronouncements handed down in Eastern Shipping Lines, Inc. vs. Court of Appeals,^[65] to wit:

“2.       When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount of finally adjudged.

3.         When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.”

          For lack of sufficient showing of bad faith on the part of Barretto, we find that the CA, finally, erred in granting Oceaneering’s claim for attorney’s fees, albeit in the much reduced sum of P30,000.00.  In the absence of stipulation, after all, the rule is settled that there can be no recovery of attorney’s fees and expenses of litigation other than judicial costs except in the instances enumerated under Article 2208 of the Civil Code.^[66] Being the exception rather than the rule,^[67] attorney’s fees are not awarded every time a party prevails in a suit,^[68] in view of the policy that no premium should be placed on the right to litigate.^[69]Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorney’s fees may not be awarded where, as here, no sufficient showing of bad faith can be reflected in the party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.^[70]

          WHEREFORE, premises considered, the petition is PARTIALLY GRANTED and the assailed 12 December 2007 Decision is, accordingly, MODIFIED: (a) to GRANT Oceaneering’s claim for the value of its lost cargo in the sum ofP2,226,620.00 with 6% interest per annum computed from the filing of the complaint and to earn further interest at the rate of 12% per annum from finality of the decision until full payment; (b) to REDUCE the refund of the consideration for the Time Charter Agreement from P306,000.00 to P224,400.00, with 6% interest per annum computed from 12 March 1998,  likewise to earn further interest at the rate of 12% per annum from finality of this decision; and, (c) to DELETE the CA’s award of salvaging expenses and attorney’s fees, for lack of factual and legal basis.  The rest is AFFIRMED in toto.

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                      RENATO C. CORONA

                                                                                Chief Justice

^[1]               CA rollo, CV No. 87168, pp. 165-183.

^[2]               Id. at 183.

^[3]               Exhibit “A,” Records, Civil Case No. 87168, p. 199.

^[4]               Exhibit “C”, id. at 201.

^[5]               Exhibit “2”, id. at 448.

^[6]               Exhibits “E” to “E-2”, id. at 203-205.

^[7]               TSN, 20 April 2001, pp. 5-6.

^[8]               Records, pp. 204-205.

^[9]               TSN, 27 March 2003, pp. 18-24.

^[10]             Id. at 19-20.

^[11]             Exhibit “3,” Records, Civil Case No. 87168, p. 449.

^[12]             Exhibit “F”, id. at 206.

^[13]             Exhibit “21”, id. at 465.

^[14]             Exhibit “23”, id. at 468-469.

^[15]             Exhibit “22”, id. at 466-467.

^[16]             Exhibit “M”, id. at 215.

^[17]             Exhibit “25”, id. at 471.

^[18]             Id. at 1-26.

^[19]             Id. at 51-59.

^[20]             Id. at 104.

^[21]             TSN, 10 December 1999; 12 January, 2001; 4 April 2000; 1 September 2000.

^[22]             TSN, 8 December 2000.

^[23]             TSN, 20 April 2001.

^[24]             TSN, 24 October 2002; 27 March 2003; 8 May 2003.

^[25]             TSN, 15 May 2003.

^[26]             TSN, 3 July 2003.

^[27]             TSN, 14 August 2003.

^[28]             TSN, 28 August 2003.

^[29]             TSN, 4 December 2003.

^[30]             Records, Civil Case No. 87168, pp. 195-217; 434-506; 539-543.

^[31]             Id. at 229; 512; 553; 560-561.

^[32]             Id. at 635-663.

^[33]             Id. at 668-679.

^[34]             Id. at 686-689.

^[35]             CA rollo, CV No.  87168, pp. 40-82.

^[36]             Id. at 165-183.

^[37]             Id. at 185-203.

^[38]             Id. at 227-230.

^[39]             Rollo, p. 18.

^[40]             Empire East Land Holdings, Inc. vs. Capitol Industrial Construction Groups, Inc., 566 SCRA 473, 485.

^[41]             Spouses Ong vs. Court of Appeals, 361 Phil. 338, 353 (1999).

^[42]             Filipinas (Pre-Fab Bldg.) Systems, Inc. vs. MRT Development Corporation, G.R. No. 167829-30, 13 November 2007, 537 SCRA 609, 640, citing Development Bank of the Philippines v. Court of Appeals, G.R. No. 11053, 16 October 1996, 249 SCRA 331.

^[43]             Canada vs. All Commodities Marketing Corporation, G.R. No. 146141, 17 October 2008, 569 SCRA 321, 329.

^[44]             Manila Electric Corporation vs. T.E.A.M. Electronics Corporation, G.R. No. 131723, 13 December 2007, 540 SCRA 62, 79.

^[45]             Luxuria Homes, Inc. vs. Court of Appeals, 361 Phil. 989, 1001-1002, (1999).

^[46]             MCC Industrial Sales Corporation vs. Ssangayong Corporation, G.R. No. 153051, 18 October 2007, 536 SCRA 408, 467-468.

^[47]             Hanjin Heavy Industries and Construction Co., Ltd. v. Dynamic Planners and Construction Corp., G.R. Nos. 169408 & 170144, 30 April 2008, 553 SCRA 541, 567 .

^[48]             Santiago vs. Court of Appeals, G.R. No. 127440, 26 January 2007, 513 SCRA 69, 86.

^[49]             Exhibit “23”, Records, Civil Case No. 87168, pp. 468-469.

^[50]             Exhibit “25”, id. at 471.

^[51]             Id. at 56-57.

^[52]             Exhibit “5”, id. at 451.

^[53]             TSN, 27 March 2003, pp. 7-8.

^[54]             Exhibits “5” and “6”, Records, Civil Case No. 87168, pp. 451-452.

^[55]             Exhibit “10”, id. at 454.

^[56]             Exhibits “11” and “12”, id. at 455-456.

^[57]             Exhibit “15”, id. at 458.

^[58]             Exhibits “16” and “17”, id. at 459.

^[59]             Exhibits “8” and “9”, id. at 453.

^[60]             Exhibits “13” and “14”, id. at 457, Exhibit “27”; id. at 472.

^[61]             Exhibit “28”, id. at 473.

^[62]             Exhibit “29” and submarkings, id. at 474-475.

^[63]             Exhibit “25”, id. at 471.

^[64]             Philippine Airlines vs. Court of Appeals, G.R. No. L-46558, 31 July 1981, 106 SCRA, 391, 412.

^[65]             G.R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97.

^[66]             Scott Consultants & Resource Development Corporation, Inc. vs. CA, 312 Phil. 466, 480 (1995).

^[67]             Philippine National Bank vs. Court of Appeals, 326 Phil. 504, 518-519 (1996).

^[68]             Philippine Phosphate Fertilizer Corporation vs. Kamalig Resources, Inc., G.R. No. 165608, 13 December 2007, 540 SCRA 139, 159.    

^[69]             Frias vs. San Diego-Sison, G.R. No. 155223, 3 April 2007, 520 SCRA 244, 259-260.

^[70]             Felsan Realty & Development Corporation vs. Commonwealth of Australia, G.R. No. 169656, 11 October 2007, 535 SCRA 618, 632.

CASE  2011-0070: SPOUSES LUIGI M. GUANIO AND ANNA HERNANDEZ-GUANIO VS. MAKATI SHANGRI-LA HOTEL AND RESORT, INC., ALSO DOING BUSINESS UNDER THE NAME OF SHANGRI-LA MANILA (G.R. NO. 190601, 7 FEBRUARY 2011, CARPIO MORALES, J.) SUBJECTS: BREACH OF CONTRACT; PROXIMATE CAUSE; NOMINAL DAMAGES. (BRIEF TITLE: SPOUSES GUANIO VS. MAKATI SHANGRI-LA).

THIRD DIVISION

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D E C I S I O N

CARPIO MORALES, J.

For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna Hernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel).

          Prior to the event, Makati Shangri-La Hotel & Resort, Inc. (respondent) scheduled an initial food tasting.  Petitioners claim that they requested the hotel to prepare for seven persons ─ the two of them, their respective parents, and the wedding coordinator. At the scheduled food tasting, however, respondent prepared for only six.  

          Petitioners initially chose a set menu which included black cod, king prawns and angel hair pasta with wild mushroom sauce for the main course which cost P1,000.00 per person. They were, however, given an option in which salmon, instead of king prawns, would be in the menu at P950.00 per person. They in fact partook of the salmon.   

          Three days before the event, a final food tasting took place. Petitioners aver that the salmon served was half the size of what they were served during the initial food tasting; and when queried about it, the hotel quoted a much higher price (P1,200.00) for the size that was initially served to them.   The parties eventually agreed on a final price ─ P1,150 per person.

           A day before the event or on July 27, 2001, the parties finalized and forged their contract.^[1] 

Petitioners claim that during the reception, respondent’s representatives, Catering Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurance that they would;  their guests complained of the delay in the service of the dinner;  certain items listed in the published menu were unavailable; the hotel’s waiters were rude and unapologetic when confronted about the delay; and despite Alvarez’s promise that there would be no charge for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for the three-hour extension of the event up to 4:00 A.M. the next day.  

          Petitioners further claim that they brought wine and liquor in accordance with their open bar arrangement, but these were not served to the guests who were forced to pay for their drinks.

          Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc. (respondent) and received an apologetic reply from Krister Svensson, the hotel’s Executive Assistant Manager in charge of Food and Beverage.  They nevertheless filed a complaint for breach of contract and damages before the Regional Trial Court (RTC) of Makati City.

In its Answer, respondent claimed that petitioners requested a combination of king prawns and salmon, hence, the price was increased to P1,200.00 per person, but discounted at P1,150.00; that contrary to petitioners’ claim, Marquez and Alvarez were present during the event, albeit they were not permanently stationed thereat as there were three other hotel functions; that while there was a delay in the service of the meals, the same was occasioned by the sudden increase of guests to 470 from the guaranteed expected minimum number of guests of 350 to a maximum of 380, as stated in the Banquet Event Order (BEO);^[2] and that Isaac Albacea, Banquet Service Director, in fact relayed the delay in the service of the meals to petitioner Luigi’s father, Gil Guanio.

          Respecting the belated service of meals to some guests, respondent attributed it to the insistence of petitioners’ wedding coordinator that certain guests be served first.

          On Svensson’s letter, respondent, denying it as an admission of liability, claimed that it was meant to maintain goodwill to its customers.

          By Decision of August 17, 2006, Branch 148 of the Makati RTC rendered judgment in favor of petitioners, disposing as follows:

          WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendant ordering the defendants to pay the plaintiff the following:

1)      The amount of P350,000.00 by way of actual damages;

2)      The amount of P250,000.00 for and as moral damages;

3)      The amount of P100,000.00 as exemplary damages;

4)      The amount of P100,000.00 for and as attorney’s fees.

With costs against the defendant.

SO ORDERED.^[3]

          In finding for petitioners, the trial court relied heavily on the letter of  Svensson which is partly quoted below:

Upon receiving your comments on our service rendered during your reception here with us, we are in fact, very distressed. Right from minor issues pappadums served in the soup instead of the creutons, lack of valet parkers, hard rolls being too hard till a major one – slow service, rude and arrogant waiters, we have disappointed you in all means.

Indeed, we feel as strongly as you do that the services you received were unacceptable and definitely not up to our standards. We understand that it is our job to provide excellent service and in this instance, we have fallen short of your expectations. We ask you please to accept our profound apologies for causing such discomfort and annoyance. ^[4]  (underscoring supplied)

          The trial court observed that from “the tenor of the letter . . . the defendant[-herein respondent] admits that the services the plaintiff[-herein petitioners] received were unacceptable and definitely not up to their standards.”^[5]

          On appeal, the Court of Appeals, by Decision of July 27, 2009,^[6] reversed the trial court’s decision, it holding that the proximate cause of petitioners’ injury was an unexpected increase in their guests:

x x x Hence, the alleged damage or injury brought about by the confusion, inconvenience and disarray during the wedding reception may not be attributed to defendant-appellant Shangri-la.

            We find that the said proximate cause, which is entirely attributable to plaintiffs-appellants, set the chain of events which resulted in the alleged inconveniences, to the plaintiffs-appellants. Given the circumstances that obtained, only the Sps. Guanio may bear whatever consequential damages that they may have allegedly suffered.^[7]  (underscoring supplied)

          Petitioners’ motion for reconsideration having been denied by Resolution of November 19, 2009, the present petition for review was filed.

          The Court finds that since petitioners’ complaint arose from a contract, the doctrine of proximate cause finds no application to it:

The doctrine of proximate cause is applicable only in actions for quasi-delicts, not in actions involving breach of contract. x x x The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created.^[8] (emphasis and underscoring supplied)

What applies in the present case is Article 1170 of the Civil Code which reads:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

RCPI v. Verchez, et al. ^[9] enlightens:

In culpa contractual x x x the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief.  The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof.  A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered.  The remedy serves to preserve the interests of the promissee that may include his “expectation interest,” which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his “reliance interest,” which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or his “restitution interest,” which is his interest in having restored to him any benefit that he has conferred on the other party.  Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis for action.  The effect of every infraction is to create a new duty, that is, to make RECOMPENSE to the one who has been injured by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence x x x or of the attendance of fortuitous event, to excuse him from his ensuing liability. (emphasis and underscoring in the original; capitalization supplied)

The pertinent provisions of the Banquet and Meeting Services Contract between the parties read:

4.3 The ENGAGER shall be billed in accordance with the prescribed rate for the minimum guaranteed number of persons contracted for, regardless of under attendance or non-appearance of the expected number of guests, except where the ENGAGER cancels the Function in accordance with its Letter of Confirmation with the HOTEL. Should the attendance exceed the minimum guaranteed attendance, the ENGAGER shall also be billed at the actual rate per cover in excess of the minimum guaranteed attendance.

x x x x

4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the scheduled date and time of the Function of any change in the minimum guaranteed covers. In the absence of such notice, paragraph 4.3 shall apply in the event of under attendance. In case the actual  number  of attendees exceed the minimum guaranteed number

by ten percent (10%), the HOTEL shall not in any way be held liable for any damage or inconvenience which may be caused thereby. The ENGAGER shall also undertake to advise the guests of the situation and take positive steps to remedy the same.^[10]  (emphasis, italics and underscoring supplied)

Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the [f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract.^[11]

The appellate court, and even the trial court, observed that petitioners were remiss in their obligation to inform respondent of the change in the expected number of guests.  The observation is reflected in the records of the case.  Petitioners’ failure to discharge such obligation thus excused, as the above-quoted paragraph 4.5 of the parties’ contract provide, respondent from liability for “any damage or inconvenience” occasioned thereby. 

As for petitioners’ claim that respondent departed from its verbal agreement with petitioners, the same fails, given that the written contract which the parties entered into the day before the event, being the law between them.  

Respecting the letter of Svensson on which the trial court heavily relied as admission of respondent’s liability but which the appellate court brushed aside, the Court finds the appellate court’s stance in order.   It is not uncommon in the hotel industry to receive comments, criticisms or feedback on the service it delivers. It is also customary for hotel management to try to smooth ruffled feathers to preserve goodwill among its clientele.

Kalalo v. Luz holds:^[12]

            Statements which are not estoppels nor judicial admissions have no quality of conclusiveness, and an opponent whose admissions have been offered against him may offer any evidence which serves as an explanation for his former assertion of what he now denies as a fact.

Respondent’s Catering Director, Bea Marquez, explained the hotel’s procedure on receiving and processing complaints, viz:

ATTY. CALMA:

Q         You mentioned that the letter indicates an acknowledgement of the concern and that there was-the first letter there was an acknowledgment of the concern and an apology, not necessarily indicating that such or admitting fault?

A         Yes.

Q         Is this the letter that you are referring to?

            If I may, Your Honor, that was the letter dated August 4, 2001, previously marked as plaintiff’s exhibits, Your Honor.  What is the procedure of the hotel with respect to customer concern?

A         Upon receipt of the concern from the guest or client, we acknowledge receipt of such concern, and as part of procedure in service industry particularly Makati Shangri-la we apologize for whatever inconvenience but at the same time saying, that of course, we would go through certain investigation and get back to them for the feedback with whatever concern they may have.

Q         Your Honor, I just like at this point mark the exhibits, Your Honor, the letter dated August 4, 2001 identified by the witness, Your Honor, to be marked as Exhibit 14 and the signature of Mr. Krister Svensson be marked as Exhibit 14-A.^[13]

x x x x

Q         In your opinion, you just mentioned that there is a procedure that the hotel follows with respect to the complaint, in your opinion was this procedure followed in this particular concern?

A         Yes, ma’am.

Q         What makes you say that this procedure was followed?

A         As I mentioned earlier, we proved that we did acknowledge the concern of the client in this case and we did emphatize from the client and apologized, and at the same time got back to them in whatever investigation we have.

Q         You said that you apologized, what did you apologize for?

A         Well, first of all it is a standard that we apologize, right?  Being in the service industry, it is a practice that we apologize if there is any inconvenience, so the purpose for apologizing is mainly to show empathy and to ensure the client that we are hearing them out and that we will do a better investigation and it is not in any way that we are admitting any fault.^[14]  (underscoring supplied)

To the Court, the foregoing explanation of the hotel’s Banquet Director overcomes any presumption of admission of breach which Svensson’s letter might have conveyed.

The exculpatory clause notwithstanding, the Court notes that respondent could have managed the “situation” better, it being held in high esteem in the hotel and service industry. Given respondent’s vast experience, it is safe to presume that this is not its first encounter with booked events exceeding the guaranteed cover. It is not audacious to expect that certain measures have been placed in case this predicament crops up. That regardless of these measures, respondent still received complaints as in the present case, does not amuse.

Respondent admitted that three hotel functions coincided with petitioners’ reception. To the Court, the delay in service might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get married twice in their lifetimes.

In the present petition, under considerations of equity, the Court deems it just to award the amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they were subjected to during to the event.^[15] The Court recognizes that every person is entitled to respect of his dignity, personality, privacy and peace of mind.^[16] Respondent’s lack of prudence is an affront to this right.

WHEREFORE, the Court of Appeals Decision dated July 28, 2009 is PARTIALLY REVERSED. Respondent is, in light of the foregoing discussion, ORDERED to pay the amount of P50,000.00 to petitioners by way of nominal damages.

SO ORDERED.

                                                CONCHITA CARPIO MORALES

                                                                Associate Justice

WE CONCUR:

ATTESTATION

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                  CONCHITA CARPIO MORALES

                                      Associate Justice

                                   Chairperson

CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                     RENATO C. CORONA

                                                                Chief Justice

^[1]               The Banquet and Meeting Services Contract dated July 26, 2001 was faxed to petitioners, while the Banquet Event Order was signed on July 25, 2001.  As per RTC Decision, the final price for the menu was only finalized on July 27, 2001.

^[2]               Rollo, pp. 159-161.

^[3]               Id. at 407.

^[4]               Id. at 141.

^[5]               Id. at 405.

^[6]               Penned by Associate Justice Apolinario D. Bruselas, Jr., with the concurrence of Associate Justices Andres B. Reyes, Jr. and Pampio A. Abarintos, id. at 8-26.

^[7]               Id. at 20-21.

^[8]               Calalas v. Court of Appeals, G.R. No. 122039, May 31, 2000, 332 SCRA 356, 357.

^[9]               G.R. No. 164349, January 31, 2006, citing FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation, 435 Phil. 333, 341-342 (2002).

^[10]             Vide Banquet and Meeting Services Contract, rollo, pp. 138-141, 140.

^[11]           Cathay Pacific Airways Ltd. v. Spouses Vazquez, G.R. No. 150843. March 14, 2003.

^[12]        L-27782, July 31, 1970, 34 SCRA 337, 348.

^[13]        TSN, March 16, 2005, pp. 21-23.

^[14]             TSN, March 16, 2005, pp. 24-26.

^[15]             CIVIL CODE, Article 2222. The court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in every case where any property right has been invaded.

^[16]             Id. at Article 26.

CASE 2011-0068: PLASTIMER INDUSTRIAL CORPORATION AND TEO KEE BIN VS. NATALIA C. GOPO, KLEENIA R. VELEZ, FILEDELFA T. AMPARADO, MIGNON H. JOSEPH, AMELIA L. CANDA, MARISSA D. LABUNOS, MELANIE T. CAYABYAB, MA. CORAZON DELA CRUZ AND LUZVIMINDA CABASA (G.R. NO. 183390, 16 FEBRUARY 2011, CARPIO, J.)  SUBJECTS: FINDINGS OF FACT OF LABOR ARBITER AND NLRC ACCORDED FINALITY; ONE MONTH NOTICE OF TERMINATION; RETRENCHMENT; WAIVER. (BRIEF TITLE: PLASTIMER ET AL VS. GOPO ET AL.)

SECOND DIVISION

PLASTIMER INDUSTRIAL                                G.R. No. 183390

CORPORATION and

TEO KEE BIN,                                                    Present:

Petitioners,

CARPIO, J., Chairperson,

NACHURA,

– versus –                                                               PERALTA,

ABAD, and

MENDOZA, JJ.

NATALIA C. GOPO, KLEENIA

R. VELEZ, FILEDELFA T.

AMPARADO, MIGNON H.

JOSEPH, AMELIA L. CANDA,

MARISSA D. LABUNOS,

MELANIE T. CAYABYAB,

MA. CORAZON DELA CRUZ,                           Promulgated:

and LUZVIMINDA CABASA,

Respondents.                                                         February 16, 2011

x- – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

CARPIO, J.:

The Case

Before the Court is a petition for review¹ assailing the 13 August 2007 Decision² and 5 June 2008 Resolution³ of the Court of Appeals in CA-G.R. SP No. 97271.

The Antecedent Facts

On 7 May 2004, the Personnel and Administration Manager of Plastimer Industrial Corporation (Plastimer) issued a Memorandum informing all its employees of the decision of the Board of Directors to downsize and reorganize its business operations due to withdrawal of investments and shares of stocks which resulted in the change of its corporate structure. On 14 May 2004, the employees of Plastimer, including Natalia C. Gopo, Kleenia R. Velez, Filedelfa T. Amparado, Mignon H. Joseph, Amelia L. Canda, Marissa D.Labunos, Melanie T. Cayabyab, Ma. Corazon dela Cruz and Luzviminda Cabasa (respondents) were served written notices of their termination effective 13 June 2004. On 24 May 2004, Plastimer and Plastimer Industrial Corporation Christian Brotherhood (PICCB), the incumbent sole and exclusive collective bargaining representative of all rank and file employees, entered into a Memorandum of Agreement (MOA) relative to the terms and conditions that would govern the retrenchment of the affected employees. On 26 May 2004, Plastimer submitted to the Department of Labor and Employment (DOLE) an Establishment Termination Report containing the list of the employees affected by the reorganization and downsizing. On 28 May 2004, the affected employees, including respondents, signed individual “Release Waiver and Quitclaim.”

Thereafter, respondents filed a complaint against Plastimer and its President Teo Kee Bin (petitioners) before the Labor Arbiter for illegal dismissal with prayer for reinstatement and full backwages, underpayment of separation pay, moral and exemplary damages and attorney’s fees. Respondents alleged that they did not voluntarily relinquish their jobs and that they were required to sign the waivers and quitclaims without giving them an opportunity to read them and without explaining their contents. Respondents further alleged thatPlastimer failed to establish the causes/valid reasons for the retrenchment and to comply with the one-month notice to the DOLE as well as the standard prescribed under the Collective Bargaining Agreement between Plastimer and the employees. Petitioners countered that the retrenchment was a management prerogative and that respondents got their retrenchment or separation pay even before the effective date of their separation from service.

The Decisions of the Labor Arbiter and the NLRC

In its 22 August 2005 Decision,⁴ the Labor Arbiter ruled that petitioners were able to prove that there was a substantial withdrawal of stocks that led to the downsizing of the workforce. The Labor Arbiter ruled that notice to the affected employees were given on 14 May 2004, 30 days before its effective date on 14 June 2004. It was only the notice to the DOLE that was filed short of the 30-day period. The Labor Arbiter further ruled that respondents claimed their separation pay in accordance with the MOA. The Labor Arbiter further ruled that respondents could not claim ignorance of the contents of the waivers and quitclaims because they were assisted by the union President and their counsel in signing them.

Respondents appealed the Labor Arbiter’s decision before the National Labor Relations Commission (NLRC).

In its 29 December 2005 Resolution,⁵ the NLRC affirmed the Labor Arbiter’s decision. The NLRC noted that respondents did not signify any protest to the MOA entered into between Plastimer and PICCB. The NLRC held that there was no proof that respondents were intimidated or coerced into signing the waivers and quitclaims because they were assisted by the union President and their counsel. The NLRC ruled that the filing of the complaint was just an afterthought on the part of respondents.

Respondents filed a motion for reconsideration.

In its 25 October 2006 Resolution,⁶ the NLRC denied the motion.

Respondents filed a petition for certiorari before the Court of Appeals.

The Decision of the Court of Appeals

In its 13 August 2007 Decision, the Court of Appeals reversed the NLRC decision. The Court of Appeals ruled that there was no valid cause for retrenchment. The Court of Appeals noted that the change of management and majority stock ownership was brought about by execution of deeds of assignment by several stockholders in favor of other stockholders. Further, the Court of Appeals noted that while Plastimer claimed financial losses from 2001 to 2004, records showed an improvement of its finances in 2003.

The Court of Appeals further ruled that Plastimer failed to use a reasonable and fair standard or criteria in ascertaining who would be dismissed and who would be retained among its employees. The Court of Appeals ruled that the MOA between Plastimer and PICCB only recognized the need for partial retrenchment and the computation of retrenchment pay without disclosing the criteria in the selection of the employees to be retrenched.

Finally, the Court of Appeals ruled that the union President and the PICCB’s counsel were not present when the retrenched employees were made to sign the waivers and quitclaims.

The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the instant petition is GRANTED. The assailed Resolutions of the NLRC in NLRC-NCR CA No. 046013-05 are hereby REVERSED AND SET ASIDE and a new judgment is entered finding petitioners to have been illegally dismissed. Plastimer Industrial Corporation is hereby ordered to reinstate petitioners to their former positions, without loss of seniority rights and other privileges, and to pay them theirbackwages from June 14, 2004 up to the time of actual reinstatement less the amounts they respectively received as separation pay.

SO ORDERED.⁷

Petitioners filed a motion for reconsideration.

In its 5 June 2008 Resolution, the Court of Appeals denied the motion.

Hence, the petition before this Court.

The Issue

The only issue in this case is whether respondents were illegally retrenched by petitioners.

The Ruling of this Court

The petition has merit.

Petitioners assail the Court of Appeals in substituting its own findings of facts to the findings of the Labor Arbiter and the NLRC. Petitioners argue that the findings of fact of the Labor Arbiter and the NLRC are accorded with respect if not finality. Petitioners allege that the Court of Appeals did not find any arbitrariness or grave abuse of discretion on the part of the NLRC and thus, it had no basis in reversing the NLRC resolutions which affirmed the Labor Arbiter’s decision.

In a special civil action for certiorari, the Court of Appeals has ample authority to make its own factual determination.⁸ Thus, the Court of Appeals can grant a petition for certiorari when it finds that the NLRC committed grave abuse of discretion by disregarding evidence material to the controversy.⁹ To make this finding, the Court of Appeals necessarily has to look at the evidence and make its own factual determination.¹⁰ In the same manner, this Court is not precluded from reviewing the factual issues when there are conflicting findings by the Labor Arbiter, the NLRC and the Court of Appeals.¹¹ In this case, we find that the findings of the Labor Arbiter and the NLRC are more in accord with the evidence on record.

One-Month Notice of Termination of Employment

Article 283 of the Labor Code provides:

ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

In this case, Plastimer submitted the notice of termination of employment to the DOLE on 26 May 2004. However, notice to the affected employees were given to them on 14 May 2004 or 30 days before the effectivity of their termination from employment on 13 June 2004. While notice to the DOLE was short of the one-month notice requirement, the affected employees were sufficiently informed of their retrenchment 30 days before its effectivity. Petitioners’ failure to comply with the one-month notice to the DOLE is only a procedural infirmity and does not render the retrenchment illegal. In Agabon v. NLRC,¹² we ruled that when the dismissal is for a just cause, the absence of proper notice should not nullify the dismissal or render it illegal or ineffectual. Instead, the employer should indemnify the employee for the violation of his statutory rights.¹³ Here, the failure to fully comply with the one-month notice of termination of employment did not render the retrenchment illegal but it entitles respondents to nominal damages.

Validity of Retrenchment

The Court of Appeals ruled that there was no valid cause for retrenchment. The Court of Appeals noted that while Plastimer claimed financial losses from 2001 to 2004, records showed an improvement of its finances in 2003.

We do not agree.

The Court of Appeals acknowledged that an independent auditor confirmed petitioners’ losses for the years 2001 and 2002.¹⁴ The fact that there was a net income in 2003 does not justify the Court of Appeals’ ruling that there was no valid reason for the retrenchment. Records showed that the net income of P6,185,707.05 for 2003 was not even enough for petitioners to recover from theP52,904,297.88 loss in 2002.¹⁵ Article 283 of the Labor Code recognizes retrenchment to prevent losses as a right of the management to meet clear and continuing economic threats or during periods of economic recession to prevent losses.¹⁶ There is no need for the employer to wait for substantial losses to materialize before exercising ultimate and drastic option to prevent such losses.¹⁷

Validity of Waivers and Quitclaims

The Court has ruled that a waiver or quitclaim is a valid and binding agreement between the parties, provided that it constitutes a credible and reasonable settlement, and that the one accomplishing it has done so voluntarily and with a full understanding of its import.¹⁸

We agree with the Labor Arbiter and the NLRC that respondents were sufficiently apprised of their rights under the waivers and quitclaims that they signed. Each document contained the signatures of Edward Marcaida (Marcaida), PICCB President, and Atty.Bayani Diwa, the counsel for the union, which proved that respondents were duly assisted when they signed the waivers and quitclaims. Further, Marcaida’s letter to Teo Kee Bin, dated 28 May 2004, proved that proper assistance was extended upon respondents, thus:

Nais po naming iparating sa inyo na ginagampanan ng pamamahala ng unyon ang kanilang tungkulin lalo na sa pag “assist” ng mga miyembrongkasali sa retrenchment program at tumanggap ng kanilang separation pay sa ilalim ng napagkasunduang “Memorandum of Agreement.”

Naipaliwanag po sa bawat miyembro ang epekto ng kanilang pagtanggap ng kanilang mga separation pay. Wala kaming natanggap na masamangreaksiyon nang sila ay aming makausap at kanilang naiintindihan ang sitwasyon ng kumpanya.¹⁹

Hence, we rule that the waivers and quitclaims that respondents signed were valid.

WHEREFORE, we SET ASIDE the 13 August 2007 Decision and 5 June 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97271. We REINSTATE the 22 August 2005 Decision of the Labor Arbiter and the 29 December 2005 Resolution of the NLRC upholding the validity of respondents’ retrenchment with MODIFICATION that petitioners pay each of the respondents the amount of P30,000 as nominal damages for non-compliance with statutory due process.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice

WE CONCUR:

ANTONIO EDUARDO B. NACHURA

Associate Justice

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE C. MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

Chief Justice

1 Under Rule 45 of the 1997 Rules of Civil Procedure.

2 Rollo, pp. 249-255. Penned by Associate Justice Estela M. Perlas-Bernabe with Associate Justices Portia Aliño-Hormachuelos and Lucas P. Bersamin, concurring.

3 Id. at 272.

4 Id. at 176-183. Penned by Labor Arbiter Salimathar V. Nambi.

5 Id. at 219-227. Penned by Commissioner Romeo C. Lagman with Commissioner Tito F. Genilo, concurring.

6 Id. at 246-247. Penned by Commissioner Gregorio O. Bilog III with Commissioners Lourdes C. Javier and Tito F. Genilo, concurring.

7 Id. at 255.

8 Maralit v. Philippine National Bank, G.R. No. 163788, 24 August 2009, 596 SCRA 662.

9 Id.

10 Id., citing Marival Trading, Inc. v. National Labor Relations Commission, G.R. No. 169600, 26 June 2007, 525 SCRA 708.

11 Philamlife v. Gramaje, 484 Phil. 880 (2004).

12 485 Phil. 248 (2004).

13 Id.

14 Rollo, p. 252.

15 Id. at 244.

16 Mendros, Jr. v. Mitsubishi Motors Phils. Corporation (MMPC), G.R. No. 169780, 16 February 2009, 579 SCRA 529.

17 Id.

18 Alabang Country Club, Inc. v. NLRC, 503 Phil. 937 (2005).

19 CA rollo, p. 183.