GR 113176; (July, 2001) (Digest)
G.R. No. 113176 & 113342, July 30, 2001
Case Parties:
HANIL DEVELOPMENT CO., LTD., petitioner, vs. COURT OF APPEALS AND M.R. ESCOBAR EXPLOSIVE ENGINEERS, INC., respondent. (G.R. No. 113176)
M.R. ESCOBAR EXPLOSIVE ENGINEERS, INC., petitioner, vs. COURT OF APPEALS AND HANIL DEVELOPMENT CO., LTD., respondents. (G.R. No. 113342)
FACTS
1. Hanil Development Co., Ltd. (Hanil) was awarded a contract by the Ministry of Public Works and Highways (MPWH) to construct the Iligan-Cagayan de Oro-Butuan Highway Project.
2. On November 14, 1976, Hanil subcontracted the rock-blasting portion to M.R. Escobar Explosive Engineers, Inc. (Escobar). The compensation was stipulated at P20.00 per cubic meter, with the quantity to be assessed: (a) based on cross-section if rocks were solid, or (b) based on a joint survey if rocks were soft and removable by ripper.
3. Escobar commenced work on January 3, 1977, and was terminated by Hanil on December 15, 1978. Escobar was fully paid for areas A-2 and B-4 but claimed a partial unpaid balance of P1,341,727.40 for areas B-2, B-3, and C-1. Escobar argued that the rocks in these areas were solid and should be paid based on the cross-section method (para. 9(a)), as Hanil was paid by MPWH using this method. Hanil had paid based on the joint survey method (para. 9(b)).
4. Escobar filed Civil Case No. 35966 for sum of money. The CFI ruled in favor of Escobar, ordering Hanil to pay P1,341,727.40, attorney’s fees, and costs.
5. The CFI issued garnishment and levy orders against Hanil’s assets. Hanil challenged these orders before the Court of Appeals, which voided them.
6. The CFI disapproved Hanil’s Amended Record on Appeal and dismissed its appeal, granting Escobar’s motion for execution. The Court of Appeals annulled these orders and reinstated Hanil’s appeal.
7. Upon reinstatement, Hanil filed an Application for Judgment against the Attachment Bond, seeking damages from the allegedly illegal writ of attachment. The Court of Appeals initially denied this and dismissed Hanil’s appeal, but the Supreme Court reversed and directed hearings on the application for damages.
8. The Court of Appeals, after hearings, rendered a Decision on August 23, 1993: (a) reversing the CFI decision and dismissing Escobar’s complaint; (b) ordering Escobar to pay Hanil P50,000 as attorney’s fees and P20,000 as nominal damages under the counterclaim; (c) ordering Escobar and its bondsman (Sanpiro Insurance) to jointly pay Hanil P57,507.90 as attorney’s fees and litigation expenses under the attachment bond; and (d) ordering Escobar to reimburse Sanpiro.
9. Both parties filed Motions for Reconsideration, denied on January 5, 1994, leading to separate Petitions for Review before the Supreme Court (G.R. Nos. 113176 and 113342).
ISSUE
1. Whether the Court of Appeals erred in reversing the trial court’s decision and dismissing Escobar’s complaint for payment of the alleged balance.
2. Whether the Court of Appeals erred in its awards of damages, attorney’s fees, and litigation expenses to Hanil.
RULING
1. On Escobar’s Claim (G.R. No. 113342): The Supreme Court found no merit in Escobar’s petition. The Court of Appeals correctly reversed the trial court. The subcontract agreement’s paragraph 9 was clear: payment was based on cross-section only if rocks were “solid in nature.” The burden of proof was on Escobar to establish that the rocks in areas B-2, B-3, and C-1 were solid. Escobar failed to present conclusive evidence, such as geological surveys or tests, to prove the rocks’ solid nature. Testimonies from Hanil’s witnesses indicated the rocks were soft and rippable. Furthermore, Escobar’s own engineer admitted during cross-examination that the joint survey method was used for measurement, and Escobar accepted payments based on this method without protest until the complaint was filed. Thus, Escobar’s claim for additional payment based on the cross-section method lacked factual and legal basis.
2. On Hanil’s Claims for Increased Damages (G.R. No. 113176): The Supreme Court modified the damages awarded.
* Actual/Temperate Damages: Hanil’s claim for P5,000,000 in temperate damages in lieu of actual damages was denied. The Court of Appeals correctly awarded only P20,000 as nominal damages. Hanil failed to substantiate with competent proof the actual damages it allegedly suffered from the wrongful attachment. Nominal damages are adjudicated when a legal right is violated but no actual loss is proven.
* Moral Damages: The claim for P1,000,000 in moral damages was denied. Moral damages are not recoverable in purely contractual obligations unless the breach was attended by fraud, bad faith, or wanton conduct. The Court found no such circumstance; Escobar’s action was a good faith effort to enforce a perceived right.
* Exemplary Damages: The claim for P5,000,000 in exemplary damages was denied. Exemplary damages require a showing of wrongful act coupled with bad faith or wanton conduct. Since Escobar’s suit was not found to be malicious or fraudulent, exemplary damages were not warranted.
* Attorney’s Fees (Principal Action): The award of P50,000 attorney’s fees under the counterclaim was affirmed. The amount was deemed reasonable and within the court’s discretion.
* Litigation Expenses (Attachment Bond): The award of P57,507.90 for attorney’s fees and litigation expenses under the attachment bond was INCREASED to P112,507.90. The Supreme Court found the Court of Appeals’ computation omitted the US$3,000 (equivalent to P57,000 at the time) incurred by Hanil for taking a deposition in the United States, which was a necessary litigation expense directly resulting from the wrongful attachment. This amount should be added to the original award.
* Procedural Note: The Supreme Court also noted that the Court of Appeals was improperly impleaded as a respondent in these Rule 45 appeals. Only the appellee should be named as respondent.
DISPOSITIVE:
The Supreme Court DENIED the petition in G.R. No. 113342 (Escobar’s petition). It PARTIALLY GRANTED the petition in G.R. No. 113176 (Hanil’s petition) solely to increase the award under the attachment bond. The Court of Appeals Decision was AFFIRMED with MODIFICATION: Escobar and Sanpiro Insurance were ordered to jointly and severally pay Hanil the increased amount of P112,507.90 as attorney’s fees and litigation expenses under the attachment bond, and Escobar was ordered to reimburse Sanpiro accordingly. All other aspects of the Court of Appeals Decision were affirmed.