G.R. No. 192446 November 19, 2014
NOW MOUNTAIN DAIRY CORPORATION, Petitioner, vs. GMA VETERANS FORCE, INC., Respondent.

FACTS

Petitioner Snow Mountain Dairy Corporation and respondent GMA Veterans Force, Inc. entered into a security service agreement on March 11, 2005. The contract was for one year, from January 3, 2005 to January 3, 2006, and stipulated that respondent would provide seven security guards at a rate of ₱16,014.00 per guard per month. The contract could only be terminated for a just cause upon a 30-day prior notice. On April 13, 2005, petitioner informed respondent of its decision to replace the security personnel effective April 15, 2005. Respondent demanded payment for the remaining 8.5 months of the contract, amounting to ₱952,833.00, as it had not committed any violation. Respondent filed a complaint for damages. The Regional Trial Court awarded respondent ₱952,833.50 as compensatory damages for the unserved portion of the contract, plus attorney’s fees. The Court of Appeals affirmed the award of actual damages but deleted the attorney’s fees and dismissed the case against petitioner’s president, Teodoro T. Po. Petitioner sought a modification of the actual damages award, arguing that the contracted amount per guard was not pure profit for respondent, as it included the guards’ wages, and that respondent failed to prove its actual loss.

ISSUE

Whether the Court of Appeals erred in affirming the award of ₱952,833.50 as actual/compensatory damages.

RULING

The Supreme Court partially granted the petition. It held that while petitioner’s pre-termination of the contract without just cause and without the required 30-day notice was illegal, the award of actual damages in the amount of ₱952,833.50 was not supported by sufficient evidence. Actual damages require proof of the actual pecuniary loss suffered with reasonable certainty. The contracted amount of ₱16,014.00 per guard per month represented gross billing, not net profit for the respondent agency, as it included the guards’ salaries. Respondent failed to present evidence, such as receipts or documentation, to establish the actual net income it lost or the expenses it was compelled to incur due to the pre-termination. However, the Court recognized that respondent undoubtedly suffered some pecuniary loss from the illegal termination, including expenses for recruitment, training, and equipment for the guards. Following precedent, where definite proof of pecuniary loss cannot be adduced but some loss is evident, temperate damages may be awarded. Consequently, the Supreme Court modified the appealed decision by deleting the award of actual damages and awarding temperate damages in the amount of ₱200,000.00, with legal interest of 6% per annum from the finality of the decision until full satisfaction. The rest of the Court of Appeals decision was affirmed.