CONSOLIDATED PLYWOOD INDUSTRIES INC. AND HENRY LEE, PETITIONERS, VS. THE HONORABLE COURT OF APPEALS, WILLIE KHO AND ALFRED C.H. KHO, RESPONDENTS.

This is a petition for review on certiorari of the
decision of the Court of Appeals in CA-G.R. No. 02784 entitled,
“Consolidated Plywood Industries, Inc. and Henry Wee v. Willie Kho and
Alfred C.H. Kho,” which modified the decision of the Court of First Instance
(now Regional Trial Court) of Baganga, Davao Oriental, by deleting the award
for moral damages, attorneys fees and actual damages in the sum of P350,000.00
for the unfulfilled import of logs, which were granted by the trial court.

Consolidated Plywood  Industries,
Inc. (Corporation) and Henry Wee filed an action for breach of contract and
damages against Willie Kho and Alfred C.H. Kho with the Court of First Instance
(now Regional Trial Court) of Baganga, Davao Oriental. The facts as summarized by the trial court
are as follows:

“x x x             x x x

“Sometime in February, 1978, the plaintiff Corporation of
which the plaintiff Henry Wee is the President, being in the business of
logging and manufacturing timber products at its logging concession at Baganga
and Caraga, Davao Oriental, on one hand, and the defendants, father and son,
who are operating a fleet of hauling trucks, entered into a verbal hauling
agreement with the following terms and conditions to wit: that defendants
shall haul the logs of the plaintiffs from the concession area to the logpond
at Baculin, Baganga, Davao Oriental, at a hauling fee of P1.25/cu.m./km. of all
species of timber, payable on weekly liquidation basis of all timber hauled and
scaled at the Baganga office of the plaintiffs.

“It was likewise agreed between the parties as a pre-condition
before defendants’ sending of the truck haulers to the jobsite that the
plaintiffs provide financial assistance to the defendants in the amount of
P180,000.00, cash, to defray cost of needed repairs and re-conditioning of the
trucks and other expenses necessary for the hauling operations.

It was understood that this financial assistance was in the nature
of cash advance obtained by the defendants from the Equitable Bank in the
aggregate amount of P180,000.00 on the
guaranty of plaintiff Henry Wee, payable by the defendants, and that the
hauling services shall continue unless and until this loan from the Equitable
Bank remain unpaid.

“After the defendants obtained the aggregate amount of
P180,000.00 from the Equitable Bank on the guaranty of plaintiff Henry Wee by
way of cash advance as financial assistance, the defendants proceeded to the
jobsite at Baculin, Baganga, Davao Oriental, to commence the hauling service
for the plaintiffs.

“However, after hauling logs for about a year, or so,
specifically on April 12, 1979, the defendants, without giving notice and
information to the plaintiffs, suddenly and surreptitiously at nighttime,
withdrew all its truck haulers from the
jobsite and returned to its base in Tagum, Davao del Norte, all in violation of
the terms of the hauling agreement, particularly, the repayment of the cash
advance to P180,000.00 obtained
from the Equitable Bank, and that the hauling should continue until the said
amount is fully paid.

“Evidence on record show that all hauling services had been
paid by the plaintiffs. In fact, it
appears that from cash vales in the course of the hauling operation, the
defendants have incurred an overdraft of P10,726.53 still unliquidated.

“Due to the sudden and surreptitious abandonment by the
defendants of its hauling obligation in bad faith several logs have been left
unhauled from the area which spawned serious and varied consequences to the
great damage and prejudice of the plaintiffs.

“The Aquarius Trading, a Taiwan log importer of the
plaintiffs, have charged the plaintiffs of P56,000.00 reimbursement representing cancellation fee of a chartered
vessel, LC extension fee and other charges due to plaintiffs’ unfulfilled
commitment of 1,500 cu. m. of logs because of the failure of hauling by the
defendants on the due date to the logpond. The plaintiffs, as a result, failed to realize a profit of P150,000.00

“During the interim period between the sudden abandonment by
the defendants in April, 1979 to May, 1979 when the plaintiffs have no
immediate replacement haulers, the plaintiffs could have produced 5,000 cu. m.
of logs, to fill other commitments, or a loss of P350,000.00, was suffered by
plaintiffs.

“The defendants’ violation of its undertaking also resulted in
exposing the plaintiff Henry Wee to liability to the Equitable Bank for the
loans he guaranteed in favor of the defendants in the total amount of
P180,000.00 which have become due, and demands for payment resulted in unduly
annoying and vexing said plaintiff which entitles him to moral damages in the
amount of P200,000.00.” (pp. 302-305, Rollo)

The evidence of the plaintiffs showed that they sent two (2)
letters to the defendants demanding the
return to the area of the six (6) hauler trucks to be used in hauling
the logs (pp. 103-104, Rollo) but the defendants did not heed the
demand.

The defendants waived their right to present evidence. Hence, on January 3, 1983, a decision was
rendered on the basis of plaintiffs’ evidence, the dispositive portion of which
reads:

“WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendants ordering the defendants, jointly and
severally to:

(1) pay the plaintiffs the sum of P10,726.53,
unpaid overdraft cash vales;

(2) pay the plaintiffs the
sum of P56,000.00 reimbursement of charges of Aquarius Trading paid by the
plaintiffs;

(3) pay the plaintiffs the
sum of P150,000.00 unrealized profit in the Aquarius Trading transaction
unfulfilled;

(4) pay the plaintiffs the
sum of P350,000.00 unfulfilled import of logs after the sudden withdrawal of
defendants’ trucks;

(5) pay the
plaintiffs P200,000.00 moral damages caused by the anxiety and annoyance as a
consequence of the demands of the Equitable Bank on the defendants’ unpaid cash
advance of P180,000.00;

(6) pay the plaintiffs
attorneys’ fees of P20,000.00;

(7) to pay the plaintiffs
litigation expenses of P40,000.00; and

(8) pay the costs.

“SO ORDERED.” (pp. 306-307, Rollo)

From the decision of the trial court, the defendants appealed to
the Court of Appeals questioning the
amount of damages awarded to the plaintiffs on the ground that the awards were
not supported by sufficient evidence. The other grounds assigned by the defendants as errors were improper
venue and lack of cause of action, in the latter case, because there was
allegedly no contract to be enforced.

On August 30, 1991, as already mentioned, the Court of Appeals
rendered a decision modifying the trial court’s decision. While the awards for the unpaid overdraft
cash vales of P10,726.53; the sum of P56,000.00 as reimbursement of charges by
Aquarius Trading paid by the plaintiff
and the sum of P150,000.00 for unrealized profit in the
Aquarius Trading transaction were affirmed, all the other awards of damages for
unfulfilled import of logs, attorney’s fees and litigation expenses were deleted. The dispositive portion of the decision
reads:

“WHEREFORE, and in the light of all the foregoing, the
appealed judgment is affirmed except the award of damages for ‘unfulfilled
import of logs,’ moral damages and attorney’s fees which are hereby denied and
ordered deleted.” (p. 354, Rollo)

In this petition before Us, the petitioners Corporation and Henry
Wee question the deletion of the awards for unfulfilled import of logs, moral
damages and attorneys fees.

We agree with the appellate court when it deleted the award of
P350,000.00 granted by the trial court for actual damages allegedly incurred by
petitioners for the unfulfilled import of logs. It correctly held that there
was no evidence to support such claim. This claim apparently refers to an alleged commitment to a certain Ching
Kee Trading of Taiwan scheduled in June 1979 as distinguished from the claim
for actual damages incurred in connection with its Aquarius Trading
transaction. Henry Wee testified on the
actual damages they incurred, as
follows:

“Q.
Let us go to the business of the corporation for which you said that it has a
contract for shipment of logs, where are these contracts of shipments go (sic)?

“A. The company has a commitment of exporting logs and wood products
in foreign countries like Hongkong and other foreign buyer on monthly basis and
on that month on (sic) April to May, there was a contracted shipment of 1,500
anticipating to be hauled by the services of the Willie Kho trucking, so that
the company has to reach their shipment on May 15, which was fully contracted with the buyer.

“Q. I show to you this letter of Aquarius
Trading Company, duly confirmed and accepted by Consolidated Plywood Industries
by Mr. Henry Wee, president, please tell the Court what relation has this to
the commitment of the shipment of logs?

“A. This is the commitment of shipment of logs
for 1,400 on May 15, for Aquarious Trading.

“Q. Other than this commitment, do you have
other commitment to other buyer?

“A. Yes, we have commitment to Ching Kee Trading
in Taiwan scheduled on June (TSN, 12 Jan. 1982, pp. 45-48; pp. 158-160, Rollo)

The commitment to Aquarius Trading was sufficiently substantiated
by documents (Exhs. “H” and “I”). Petitioners were able to present the papers evidencing their
transaction with said entity including the amount demanded from them as reimbursement
for damages it incurred due to by petitioners’ failure to ship the ordered logs on time. In contrast, the alleged commitment
of petitioner to Ching Kee Trading in Taiwan was not supported by evidence
other than the self?serving statement of Wee. Nor did they present any other evidence which would show that they
had other unfulfilled shipments for which they incurred damages because of the
pull-out of private respondents’ hauler trucks. But even granting for the sake of argument that there was in fact
a commitment to Chingkee Trading, the shipment was scheduled some two (2)
months after the private respondents pulled out their trucks from petitioners’
jobsite on April 12, 1979. That would
have left the petitioners with sufficient time to find other trucks which could
be used for the job.

The petitioners insist that if the appellate court did not
consider the P350,000.00 damages for unfulfilled shipments, it should have
awarded this amount as a form of temperate or moderate damages.

Article 2224 of the Civil Code provides: “Temperate or moderate damages, which
are more than nominal but less than compensatory damages, may be recovered when
the Court finds that some pecuniary loss has been suffered but its amount can
not, from the nature of the case, be proved with certainty.” The grant
thereof is proper under the provision of Article 2205 of the Civil Code, which
provides that damages may be recovered. In this case however, there was no showing nor proof that petitioner was
entitled to an award of this kind of damages in addition to the actual damages
it suffered as a direct consequence of private respondents’ act. The nature of the contract between the
parties is such that damages which the innocent party may have incurred can be
substantiated by evidence.

The Court, however, believes that petitioner is entitled to an
award for moral damages. However, the
award granted by the trial court in the amount of P200,000.00 is
excessive. It should be stated here
that the hauling agreement between the petitioners and the private respondent
had no fixed date of termination. It
was a verbal agreement where the private respondents bound themselves until the
loan with Equitable Bank in the personal account of petitioners had been fully
paid. There was substantial compliance
by the private respondents of their obligations in the contract for about a
year. The record showed that the
remaining balance owing to the bank was only P30,000.00 which was not due until
one (1) year and five (5) months after the breach by the private respondents or
on September 4, 1980 (p. 109, Rollo). However, the trial court found that private respondents acted with bad
faith when it surreptitiously pulled out their hauler trucks from petitioner’s
jobsite before the termination of the contract. The trial court held:

“The act of defendants in suddenly and surreptitiously
withdrawing its hauler trucks from the jobsite and abandoning its obligation of
hauling the logs is indubitably a wanton violation
of its obligation, under the contract, a neglect to perform its
obligation in bad faith more particularly, in its
stipulation to liquidate the cash advance obtained from Equitable Bank, for the
law would not permit said defendants to enrich themselves at the expense of the
plaintiffs.” (p. 305, Rollo)

Thus, an award of P50,000.00 for moral damages
is sufficient.

The award for attorneys fees by the trial court in the amount of
P20,000.00 is likewise
proper. Petitioner was forced to
litigate in court for the recovery of actual damages incurred by him because the
private respondent ignored petitioners’ letters demanding that they return to
the area and perform their obligations.

ACCORDINGLY, the decision of the Court of Appeals is MODIFIED. The award of P50,000.00 as moral
damages and P20,000.00 as attorney’s fees are hereby granted in addition to the
damages awarded by the appellate court.

SO ORDERED.

Griño-Aquino and
Bellosillo, JJ., concur.

Cruz, J., (Chairman),on leave.