HACORPHIL CORPORATION, PETITIONER, V. MANUEL MEDINA, RESPONDENT.

Hacorphil Corporation versus Medina

The Case

This is a petition for review brought by Hacorphil Corporation against its former trainee, Manuel Medina. Hacorphil sues to recover the sum of 245,447 pesos and 50 centavos, which it claims it spent to train Medina in Korea under a Training Agreement, on the theory that Medina breached that agreement by refusing to work for the company after his training. The case matters because it gathers into one decision two rules every practitioner must carry: the Regional Trial Court, sitting as an appellate court over a municipal trial court, decides the whole case on the entire record and is not chained to the errors assigned in the appellant's memorandum; and actual damages must be pleaded and proved with competent proof, not estimated on a piece of paper. It also illustrates when an employee's refusal to sign new contracts is not a breach of the contract he already had.

Procedural History

Hacorphil filed its complaint for sum of money and damages before the Metropolitan Trial Court in Cities of Olongapo City. After trial, that court dismissed the complaint on the ground of lack of legal capacity to represent the plaintiff corporation, because the lone witness Hacorphil presented, Jhona Grace Esguerra, had no board resolution authorizing her to act for the corporation. Hacorphil moved for reconsideration; the motion was denied; Hacorphil then filed a notice of appeal with the Regional Trial Court of Olongapo City.

In the Regional Trial Court, Hacorphil argued in its appellant's memorandum that Esguerra was presented merely as a witness at trial and needed no board resolution for that purpose. The Regional Trial Court agreed that Esguerra was a competent witness, but still dismissed the appeal, this time on a different ground: Medina had not refused to be employed in gross and evident bad faith, so no damages were due. Hacorphil's motion for reconsideration was denied. Hacorphil then came to the Supreme Court by petition for review under Rule 42 of the Rules of Court.

Facts

In June 2006, Medina applied for work at Hacorphil. The parties entered into a Training Agreement: Hacorphil would bear the cost of Medina's training in Korea, and after completing it Medina would work for Hacorphil or any of its affiliates for a minimum period of three years. Medina left for Korea on 12 July 2006 and returned to the Philippines on 6 October 2006 to begin working.

Upon his return, management handed Medina two documents: a Contract of Employment with KCTech, an affiliate of Hacorphil, and an Amendment to the Training Agreement. Medina refused to sign either, because the amendment lengthened his required service from three years to five, and the new contract changed his position from foreman to skilled worker. On 21 October 2006, he met with management, aired his objections, and asked for additional housing and license allowances on top of the 20,000 peso monthly salary. In the middle of the talks, Mr. J.Y. Hwang told him not to report for work until management called him. Medina tried to report for work several times afterward, but he was not allowed to resume until he signed the KCTech contracts.

Hacorphil then sent a demand letter dated 19 December 2006 for 245,447 pesos and 50 centavos in training expenses. Medina replied in a letter dated 17 January 2007, saying he intended to abide by his contract, that he had never rejected the 20,000 peso salary, and that he had been told not to report for work. Hacorphil sued. Its only evidence of the training expenses was a list called Estimated Expenses Incurred During Training, prepared by Esguerra, not supported by receipts.

Issues

• Whether or not the Regional Trial Court, in deciding a civil appeal from the municipal trial court, may rule on a ground other than the error assigned in the appellant's memorandum.
• Whether or not the Regional Trial Court erred in sustaining the dismissal of Hacorphil's complaint, that is, whether or not Medina breached the Training Agreement and whether or not Hacorphil is entitled to actual damages.

Applicable Provisions

Section 7, Rule 40 of the Rules of Court, on procedure in the Regional Trial Court, provides:

SEC. 7. Procedure in the Regional Trial Court. - xxx (c) upon the filing of the memorandum of the appellee, or the expiration of the period to do so, the case shall be considered submitted for decision. The Regional Trial Court shall decide the case on the basis of the entire record of the proceedings had in the court of origin and such memoranda as are filed.

This is the provision that empowers the Regional Trial Court to go beyond the assigned error and decide the appeal on the merits from the whole record, which disposes of Hacorphil's first issue.

Ruling

On the first issue, the Court held that the Regional Trial Court did not err. Under Section 7, Rule 40, the Regional Trial Court decides the case on the basis of the entire record of the proceedings in the court of origin and the memoranda filed. It is not strictly confined to the matters raised in the appeal memorandum. The Court quoted its earlier teaching in Macaslang versus Zamora that the Regional Trial Court, in exercising appellate jurisdiction, was not limited to the errors assigned in the appellant's appeal memorandum but could decide on the basis of the entire record. Having used the entire record, the Regional Trial Court committed no error.

On the second issue, the Court held that the claim for actual damages must fail on two independent grounds. First, actual damages must be pleaded and proved, and cannot rest on speculation, conjecture, or guess work. The Court quoted its ruling in Comsavings Bank versus Spouses Capistrano:

To justify an award for actual damages, there must be competent proof of the actual amount of loss. Credence can be given only to claims duly supported by receipts.

Hacorphil's lone evidence was an estimate prepared by its own witness, not a receipt, so no actual damages could be awarded. Second, even assuming proper proof, Medina did not breach the Training Agreement. The KCTech Contract of Employment and the Amendment to the Training Agreement were separate and distinct from the original Training Agreement, as Hacorphil itself admitted, so Medina's rejection of them had no effect on his existing agreement. Medina never spurned the 20,000 peso salary, as his letter showed; he merely negotiated for allowances and was willing to give up the license allowance for the boarding allowance. And he did report for work several times, but was not allowed to resume until he signed the KCTech contracts. Absent any breach by Medina, an award of actual damages had no leg to stand on.

Doctrine

First, under Section 7, Rule 40 of the Rules of Court, a Regional Trial Court hearing an appeal from a municipal trial court decides the case on the basis of the entire record of the proceedings in the court of origin and the memoranda filed, and is not limited to the errors assigned by the appellant. It may therefore affirm on a ground other than the assigned error.

Second, actual damages must be pleaded and proved with competent proof of the actual amount of loss, such as receipts; they cannot be based on speculation, conjecture, or guess work. A self-prepared estimate of expenses is not competent proof.

Third, a party claiming damages for breach of contract must show that the other party actually breached it. Where the employee rejects new contracts that are separate and distinct from his original agreement, and shows willingness to perform the original agreement, there is no breach, and the claim for training expenses has no basis.

Disposition

The Supreme Court dismissed Hacorphil's petition for lack of merit and affirmed the Regional Trial Court's judgment and order dismissing the appeal; Medina prevailed, and Hacorphil recovered nothing.

Remember This

Memorize this line: the Regional Trial Court on appeal decides on the entire record, not only on the assigned errors, and actual damages need competent proof, not estimates. Examiners use this case in civil procedure on the scope of the Regional Trial Court's appellate power under Rule 40, and in damages on the strict proof required for actual damages.