WBench1

THIRD DIVISION

[G.R. No. 109269. September 15, 2000]

BAYER PHILIPPINES, INC., petitioner, vs. THE HON. COURT OF APPEALS, FORMER THIRTEENTH DIVISION and CASIMIRO BOMPAT, respondents.

D E C I S I O N

GONZAGA-REYES, J.:

Petitioner seeks the review and reversal of the decision of respondent Court of Appeals dated August 21, 1992 in CA G.R. CV No. 21671[1]which affirmed with modification the decision of the Regional Trial Court, Branch 163, Pasig, dated January 25, 1989 in Civil Case No. 50746, entitled Bayer Philippines, Inc., plaintiff vs. Casimiro D. Bompat, defendant[2] for collection of sum of money and the resolution dated March 3, 1993, denying petitioner’s motion for reconsideration.[3]

The facts as found by the respondent Court of Appeals are as follows:[4]

Plaintiff-appellant, Bayer Philippines, Inc., appointed defendant-appellant, Casimiro D. Bompat (doing business as Kaiser Enterprises), as its exclusive distributor of Bayluscide 70% W.P. sometime in December, 1977, for a period of one year and automatically renewed every year thereafter unless earlier terminated or revoked by either party (Exh. “1”).

Pursuant to said distributorship agreement, defendant-appellant obtained, on credit, from plaintiff-appellant Bayluscide 70% W.P. valued at P741,250.00. Defendant-appellant was unable to pay P117,500.00 so that on January 22, 1982, he executed a promissory note promising to pay said P117,500.00 in 12 monthly installments (Exh. “A”). He promised therein that in case he defaults in the payment of any of the installments, he would pay 14% interest thereon per annum, and compounded monthly until fully paid; that in the event of default of any three (3) monthly installments, the whole obligation is accelerated and he is to pay the accelerated principal balance plus accrued interest in the amount of P43,310.82 together with the monthly compounded interest. Defendant-appellant was able to pay, though belatedly, four (4) installments in the total sum of P40,000.00 plus the sum of P25,000.00 after plaintiff-appellant’s lawyer’s demand.

As of January 31, 1984, defendant-appellant’s outstanding balance stood at P112,482.13, including interest. Because defendant-appellant failed to pay the same despite demand, plaintiff-appellant, on March 7, 1984, filed this collection suit praying that the former be ordered to pay aforesaid outstanding balance plus 14% interest thereon until fully paid, and 25% of the total amount due as attorney’s fees.

On May 4, 1984, defendant-appellant filed his answer admitting the liability sued upon, but put up the special and affirmative defenses that by reason of the distributorship agreement, plaintiff-appellant, on January 29, 1979 delivered 4,000 kilos of Bayluscide 70% W.P. to defendant-appellant who received them preparatory for distribution to the end-users whom he had already canvassed; that when defendant-appellant was already in a position to sell the chemicals to the end-users, more particularly to some government entities, plaintiff-appellant, without any cause whatsoever, withdrew the said chemicals on May 16, 1980 thereby leaving defendant-appellant with nothing to deliver to his customers; that without revoking the distributorship agreement, plaintiff-appellant withdrew the said chemicals and directly dealt with the end-users; that the appointment of defendant-appellant by the plaintiff-appellant as the latter’s exclusive distributor was merely a ploy just to get free storage fee from defendant-appellant’s bodega; and that defendant-appellant has paid to plaintiff-appellant P40,000.00, thus leaving an unpaid balance of P77,000.00, which is offset by the storage fee.

As his counterclaim, defendant-appellant claims that plaintiff-appellant, in dealing directly with the end-users despite the former’s appointment as exclusive distributor of Bayluscide 70% W.P., is guilty of breach of contract entitling defendant-appellant to damages in the amount of P100,000.00; that the delivery to defendant-appellant of some 4,000 kilos of Bayluscide 70% W.P., which was later withdrawn without any reason whatsoever after the lapse of 472 days, was a ploy just to get a free storage fee, for which defendant-appellant is entitled to collect from plaintiff-appellant storage fee in the amount of P1,888,000.00 computed at P1.00 per kilo per day; that to promote plaintiff-appellant’s product, he spent some P100,000.00 to which he is entitled to reimbursement when plaintiff-appellant violated said distributorship agreement; and, that for said violation, he is entitled to P100,000.00 as nominal damages, P20,000.00 as attorney’s fees, and P10,000.00 as litigation expenses.

In answer to counterclaim, plaintiff-appellant merely stated that it “denies the allegations contained in defendant’s counterclaim the truth being those stated in the complaint.”

At the pre-trial conference no amicable settlement was reached, hence trial on the merits ensued.”

On January 25, 1989, the trial court rendered its decision finding that inasmuch as plaintiff Bayer’s claim against defendant Bompat was admitted, the only issue to be resolved was whether or not defendant Bompat can collect on his counterclaims against Bayer. The trial court stated that Bompat has shown that he spent more than P100,000.00 of his own money in promoting plaintiff’s products; that plaintiff’s answer to the counterclaim merely made a general denial of the allegations contained in Bompat’s counterclaim and just averred therein that the truth thereof are those stated in the complaint; however, the complaint itself did not contain allegations denying specifically Bompat’s counterclaim for breach of their exclusive distributorship agreement nor was there any allegation that could be pointed to as a defense to Bompat’s counterclaims; since allegations not specifically denied are deemed admitted, the counterclaims of defendant are deemed submitted without need of proof. Furthermore, the trial court also found that Plaintiff Bayer’s complaint did not contain allegations denying Bompat’s counterclaim for actual and moral damages, attorney’s fees and storage charges in the amount of P1,883,000.00 nor any statement on the unreasonableness of such claim for storage fees; that when plaintiff Bayer delivered the 4,000 kilos in 80 drums of 50 kilos to Bompat’s house, the latter had to construct a bodega to store the products and protect the same from the elements, hence, Bompat is entitled to the payment of storage fees. It, however, found that Bompat’s claim for storage fees of P1.00 per kilo per day or P50.00 per drum per day was exorbitant and concluded that a more reasonable figure would be P10 per day for 80 drums. The dispositive portion of the decision reads as follows:

“WHEREFORE, in the light of the foregoing, judgment is hereby rendered as follows:

I. On the complaint, sentencing defendant to pay plaintiff the sum of P52,500.00 compounded monthly as of March 7, 1984, which amount may be set off from the award in favor of the defendant.

II. On the counterclaims, sentencing plaintiff to pay defendant the following sums:

a. P377,600.00 for rental of the drums of bayluscide, with legal interest of 12% per annum from May 4, 1984, until fully paid;

b. P100,000.00 for actual damages, with similar interest;

c. P30,000.00 for moral damages;

d. P10,000.00 for attorney’s fees and litigation expenses.”

Both parties appealed to the respondent Court of Appeals. The respondent Court rendered its decision, the dispositive portion of which reads as follows:

“WHEREFORE, with the modification that: 1) defendant-appellant is ordered to pay plaintiff-appellant the sum of P112,482.13 plus interest thereon at 14% compounded per annum from default (March 7, 1984), until fully paid; and 2) plaintiff-appellant is ordered to pay defendant-appellant the sum of P50,000.00 as and for actual damages, the Decision appealed from is hereby AFFIRMED in all other respects.”

Motions for reconsideration filed respectively by both parties were denied by the respondent court in a resolution dated March 3, 1993. Dissatisfied, petitioner Bayer Philippines, Inc. filed this present petition submitting seven assignment of errors which may be simplified into whether or not the respondent court erred: (1) in awarding 14% compounded interest to petitioner only from March 7, 1984, the date of the filing of the complaint; (2) in not awarding attorney’s fees which was stipulated upon by the parties in their promissory note; (3) in treating respondent’s counterclaim as compulsory in nature which would not require payment of docket fees; and (4) in granting private respondent’s counterclaims.

Petitioner first contends that since the respondent Court found that private respondent’s indebtedness stood at P112,482.13 as of January 31, 1984, the computation of interest at 14% compounded per annum should start from January 31, 1984 and not from March 7, 1984 (the date of filing of the complaint).

We do not agree. Private respondent’s total outstanding obligation in the amount of P112,482.13 based on the statement of account dated January 31, 1984 prepared by petitioner, took into account among others, the stipulated 14% compounded interest; thus, the interest that accrued prior to the date of the filing of the complaint had been consolidated as of that date with the capital, after which the whole bears interest at the contract rate until the amount is paid. Thus, the respondent court did not err in computing the 14% compounded interest from judicial demand, i.e., the date when the complaint was filed, which was on March 7, 1984.

We also do not find merit in petitioner’s claim that it is entitled to the award of attorney’s fees. We uphold private respondent’s contention that petitioner did not raise this as an error on appeal before the respondent Court despite the fact that there was no award made by the trial court. The purpose of an assignment of errors is to point out to the appellate court the specific portions of the decision appealed from which the appellant seeks to controvert,[5] which petitioner failed to do.

Petitioner further alleges that private respondent’s counterclaims are permissive in nature and not compulsory, and thus payment of docket fees is required. We are not persuaded. We hold that private respondent’s counterclaims are compulsory. A counterclaim is compulsory if: (a) it arises out of or is necessarily connected with, the transaction or occurrence which is the subject matter of opposing party’s claim; (b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (c) subject to the qualification on the jurisdictional amount with regard to counterclaims raised in the Regional Trial Courts, the court has jurisdiction to entertain the claim.[6] of the Rules of Civil Procedure; Regalado, Remedial Law Compendium, Volume I, pp. 129-130.6 As explained in a case:[7]

“It has been postulated that while a number of criteria have been advanced for the determination of whether the counterclaim is compulsory or permissive, the “one compelling test of compulsoriness” is the logical relationship between the claim alleged in the complaint and that in the counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time, as where they involve many of the same factual and/or legal issues.

The phrase” logical relationship” is given meaning by the purpose of the rule which it was disputed to implement. Thus, a counterclaim is logically related to the opposing party’s claim where, as already stated, separate trials of each of their respective claims would involve a substantial duplication of effort and time by the parties and the courts. Where multiple claims involve many of the same factual issues, or where they are offshoots of the same basic controversy between the parties, fairness and considerations of convenience and of economy require that the counter claimant be permitted to maintain his cause of action.”

Notably, petitioner’s complaint was for collection of sum of money based on a promissory note executed by private respondent arising out of the non-payment of the products obtained on credit by virtue of the exclusive distributorship agreement. On the other hand, private respondent’s counterclaims were for storage fees and damages premised on a violation of the same distributorship agreement. The claims of petitioner and private respondent arose from the same exclusive distributorship agreement, and the rights and obligations of the parties, as well as their potential liability emanated from the same contractual relation.[8] Considering that the counterclaims of private respondent are compulsory in nature, payment of docket fees is not required and the trial court had jurisdiction to rule on the same.

We also sustain the findings of the respondent court that private respondent is entitled to recover on his counterclaims for breach of the exclusive distributorship agreement and storage fees. The respondent court correctly found that petitioner failed to adduce evidence to refute the material allegations in the counterclaims as well as the evidence presented in support thereto.

Private respondent had sufficiently established that petitioner violated the terms of their exclusive distributorship agreement. The distributorship agreement provides that private respondent is appointed as exclusive distributor for government account of Bayer chemical product, namely Bayluscide 70% W.P., and shall be effective for one (1) calendar year and automatically renewed every year thereafter unless earlier terminated or revoked by either party.[9] Private respondent had presented the certification dated April 30, 1979 certifying and confirming the appointment of Kaiser enterprises as the exclusive distributor of Bayluscide for government requirements[10] and the petitioner’s letter dated May 13, 1980 addressed to the Department of Health, Schistosomiasis Control and Research Service, Manila, confirming Bompat’s exclusive distributorship agreement.[11] Private respondent Bompat testified that neither party terminated nor revoked the agreement, and this is not controverted by petitioner. Petitioner’s own witness, Mr. Vidal Lingan, admitted that the distributorship agreement was not terminated[12]and stated that when petitioner withdrew the 2,600 kilos out of the 4,000 kilos of Bayluscide from Bompat on May 15, 1980, private respondent was not informed that he was no longer the exclusive distributor of the product Bayluscide.[13] Private respondent continued selling the remaining products in his possession and subsequently sold seven hundred (700) kilos of Bayluscide to his customers.[14] Petitioner, however, without revoking their agreement, dealt directly with the Schistosomiasis Control and Research Service (SCRS) of the Ministry of Health, an exclusive customer of Bompat; SCRS’s purchase order dated November 22, 1983 made directly to petitioner Bayer contained a certification that petitioner Bayer is the exclusive distributor of product Bayluscide.[15] Private respondent’s evidence has adequately proven that petitioner committed a breach of the exclusive distributorship agreement by directly dealing with the private respondent’s customer. We accordingly find no cogent justification to disturb the ruling of respondent court that private respondent is entitled to the award of moral damages[16] in light of private respondent’s testimony that he suffered from embarrassment in the presence of the Executive Director with whom he had been dealing with for the last 13 years as a result of petitioner’s violation of their exclusive distributorship agreement.[17] We also affirm the finding of the trial court that private respondent has shown that it is entitled to the payment of storage fees. The respondent court affirmed the trial court’s award of storage fees in the form of rentals in the amount of P377,600.00 plus interest rationalizing in this wise:

“The award of storage fee may be based on equity and on the principle of unjust enrichment. Defendant-appellant was not, under the distributorship agreement, obliged to provide free storage of the Baylusicde 70% W.P. And according to defendant-appellant, the practice and/or procedure was for plaintiff-appellant to effect deliveries to the project site upon its (defendant) instruction. But with respect to the 80 drums of Bayluscide 70% W.P. they were delivered to the residence of defendant-appellant, compelling the latter to construct a structure to house said chemicals and thereby protecting them from the elements. However, after having stored said chemicals for about 472 days, plaintiff-appellant, without revoking the agreement, withdrew them from defendant-appellant’s warehouse. Under these circumstances, equity dictates that plaintiff-appellant is obligated to pay storage fee, otherwise it is enriching itself at the expense of defendant-appellant.”

Petitioner, however, contends that the award of storage fees to private respondent on the ground of equity should not be sustained since the latter cannot be considered without fault in dealing with petitioner, asseverating that he who comes to court to demand equity must come with clean hands. Petitioner posits that private respondent has no right to seek equity since he made a “killing” selling to the government at exorbitant prices; that the award cannot be justified on the ground of unjust enrichment since petitioner was not benefited at all by the storage of its own products as petitioner has enough storage facilities; that the arrangement between the parties was one for distributorship, not storage, so that the product was meant to be sold and not to be stored for an extended period of time only to be returned to Germany in its decomposing state.

We find the argument devoid of merit.

Private respondent testified that when petitioner delivered the 4,000 kilos consisting of 80 drums of Bayluscide to his house sometime in January 1979, he was hesitant to accept them since he had no requirement yet for the 4,000 kilos and the usual delivery site of the products is the Schitosomiasis Control, Ministry of Health.[18] Nevertheless, the products were still delivered to his house and since he had no place in his house to store the products, he had to construct a bodega for the 4,000 kilos.[19] In fact, Ofelia Castillo, an employee of petitioner who handled the documentation of the sales department, was presented by private respondent as his sur-rebuttal witness, and she confirmed that when she advised private respondent by telephone that they will be delivering the 4,000 kilos of product Bayluscide to him, the latter objected since there was no requirement yet;[20] nevertheless, the stocks were still delivered to private respondent upon the advice of the sales manager, Mr. Vidal Lingan.[21] Castillo corroborated private respondent’s testimony that the usual procedure was to deliver the product direct to the project, i.e. the Schistosomiasis project at San Lazaro. The testimonies of private respondent and Ofelia Castillo were never rebutted by petitioner during the trial of this case; there was no opposition or controverting evidence presented by petitioner on the matter of storage charges nor any allegation that it was unreasonable. In sum, private respondent Bompat had sufficiently proven that he was obliged to construct a bodega spending a substantial amount of money to house the products and protect them from the elements, however, after private respondent Bompat stored the products for 472 days, petitioner without revoking the distributorship agreement withdrew the products from the bodega. Bompat was not under any contractual obligation under the agreement to provide free storage for the products of petitioner; but an implied contract of storage had arisen by the conduct of the parties, and we find no reversible error committed by the respondent court in affirming the award of storage fees.

However, we find no legal nor factual basis for the award of compensatory damages in favor of private respondent in the amount of P50,000.00 for the amount allegedly spent for promoting the product. In awarding actual damages, the respondent court stated that “except for the mere allegations contained in the former’s (private respondent’s) counterclaim as well as his oral testimony thereto, there was no strong and persuasive documentary evidence presented in support thereto” and concluded ”that private respondent must have spent some money and effort in promoting plaintiff-appellant’s product.” While the testimony of private respondent that he had made promotions of the product in some provinces was not rebutted by petitioner, no receipts covering such expenditures were adduced in evidence and Bompat’s testimony was not corroborated. Actual or compensatory damages cannot be presumed, but must be duly proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof.[22] WHEREFORE, the decision of the Court of Appeals is Affirmed with Modification that the award of P50,000.00 as actual and compensatory damages in favor of private respondent is DELETED. The judgment under review is affirmed in all other respects.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.