FIRST DIVISION
[G.R. No. 198913. November 18, 2021.]
DIAMOND LABORATORIES, INC., petitionervs. TOPY INDUSTRIES, INC., respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, First Division, issued a Resolution datedNovember 18, 2021which reads as follows:
"G.R. No. 198913 (Diamond Laboratories, Inc., petitioner v. Topy Industries, Inc., respondent).
This is an appeal by certiorari filed by petitioner Diamond Laboratories, Inc. (Diamond) assailing the July 28, 2011 Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 61298 which reversed and set aside the June 24, 1998 Decision 2 of the Regional Trial Court of Quezon City, Branch 215 (RTC), in Civil Case No. Q-92-11321, ordering respondent Topy Industries, Inc. (Topy) to pay Diamond actual and exemplary damages, attorney's fees, litigation expenses, and costs of suit. Likewise assailed in the petition is the October 5, 2011 Resolution 3 of the CA denying petitioner's motion for reconsideration of the assailed decision.
Antecedents
Topy manufactures plastic products in the Philippines, and supplies plastic housing with roll-on balls used for deodorant products. While it manufactures the plastic housing, it imports the roll-on ball abroad. Its clients include Unilever Philippines, Gillette Philippines, and Splash, to which it supplies either every component of a roll-on deodorant product, i.e., the bottle, housing, roll-on ball and cap, or only the housing and roll-on ball. 4
In the early part of 1989, Rodelio Reyes (Reyes), Diamond's Purchasing Manager, inquired about the plastic housing with roll-on ball that was being supplied by Topy. In response, Topy sent its Sales Manager, Benny Sy (Benny), to a meeting with Diamond. In the meeting, Diamond presented Benny with samples of plastic bottles being supplied by Armel Manufacturing Corporation (Armel). 5 Diamond intended to use these bottles for the roll-on deodorant that it planned to introduce in the market. Benny examined the bottles and fitted them into the plastic housing with roll-on balls made by Topy. He then assured Diamond that Topy's plastic housing is perfectly fitted for the sample bottles. 6
Relying on the expertise of and the assurance made by Benny, Diamond made an initial purchase of 20,000 pieces of plastic housing with roll-on balls for use on its new product, Vibes Roll-On Deodorant. The plastic bottles and caps it used were manufactured by Armel. 7 After conducting tests to check the viability, stability, and storage capacity of the new deodorant product, as well as an initial market test which translated into positive results, Diamond launched Vibes Roll-On Deodorant in January 1990. 8
On March 26, 1990 and May 5, 1990, Diamond ordered an additional 10,500 and 10,000 pieces, respectively, of plastic housing with roll-on balls from Topy. After four months, however, Diamond telephoned Topy to inform it that Diamond had received complaints from its customers and dealers regarding several instances of cracking of the plastic housing that Topy supplied for Vibes Roll-On Deodorant. 9
In a meeting arranged by Diamond, the latter showed Alfonso Sy (Alfonso), the President and General Manager of Topy, a sample of the cracked housing. Alfonso offered to conduct tests to find out what caused the cracking, and advised Diamond to withdraw Vibes Roll-On Deodorant from the market in the meantime. 10
Based on the tests conducted by Topy, the defect lies not in the plastic housing but in the bottle and cap which Armel manufactured. The neck of the bottle supplied by Armel was too long and did not fit perfectly in the plastic housing. Also, the cap does not have a stopper, making it possible to overtighten it. These defects allegedly caused the undue pressure on the plastic housing which resulted in its cracking. 11
As a remedial measure, Topy suggested that the bottles be trimmed. Diamond consequently sent another 5,000 bottle samples manufactured by Armel to Topy for trimming. After Topy trimmed some bottles, it tested the plastic housing with the roll-on balls to check whether cracking would occur. None of the plastic housings cracked. Thus, Topy delivered some 900 pieces of trimmed bottles to Diamond, with a written explanation that no incident of cracking occurred during the tests done after the bottles were trimmed. 12
Diamond, however, maintained that trimming the bottles failed to solve the problem since the housing still cracked when used for Vibes Roll-On Deodorant. Claiming that Topy refused to communicate with it further, Diamond hired the services of counsel, who, in turn sent a demand letter to Topy dated August 16, 1991. 13
The demand letter, which Topy received on September 27, 1991, stated that the defective roll-on ball and housing resulted in the suspension of the production of Vibes Roll-On Deodorant, the return and/or removal of the remaining stocks from market outlets, the cancellation and cessation of booking orders both locally and abroad, and the complete cessation of distribution and withdrawal from further marketing of what was a very promising product. 14
The demand letter also alleged that Alfonso accepted the fault for the defective roll-on housing, and that under the law the vendor is responsible for warranty against hidden defects that the thing sold may have. Diamond thus made a final demand for Topy to pay actual damages within five (5) days from notice, and threatened to file an action in court in case of its failure to do so. The damages that Diamond claimed comprised of the following: a) Production cost — P755,027.85; b) Reprocessing cost — P18,193.28, c) Raw materials inventory — P120,581.45, d) Packaging materials — P214,073.96, e) Promotions as of November — P827,240.28, f) RM and PM used on trial batches — P3,709.28, and g) pre-operating expenditures — P30,544.12. 15
In response, Topy sent Diamond a letter dated October 7, 1991 rejecting Diamond's claims. It averred that with the exception of Diamond, Topy never received any complaints from any of its buyers. Topy also denied any hidden defects in the housing it manufactured, and clarified that Alfonso never accepted fault on the cracking of the housing. On the contrary, Alfonso explained that it was the design of the Armel bottle that was faulty. Topy maintained that it agreed to Diamond's request for replacement of the housing only as a sign of goodwill, on the condition that Diamond will replace the Armel bottle and cap that caused the housing to crack. 16
The RTC Ruling
On February 11, 1992, Diamond filed a complaint for damages before the RTC, praying for an award of damages estimated at P1,000,000.00, plus legal interest, attorney's fees, expenses of litigation, cost of suit, and exemplary damages. 17 Topy asked for the dismissal of the complaint for lack of merit, and prayed for an award of exemplary damages, attorney's fees, and expenses of litigation as counterclaim. 18
On June 24, 1998, the RTC promulgated its Decision 19 in favor of Diamond. It held that Topy failed to sufficiently explain why the cracking occurred only in the second and third deliveries of the housing. There were no reported incidents of cracking in its initial delivery to Diamond, the reason for the latter ordering an additional 10,500 and 10,000 pieces, respectively, of plastic housing with roll-on balls. It is too late for Topy to claim that the specification and dimension of the bottle were not right, since it had the opportunity to check them at the time Diamond presented samples of the bottle to be fitted in the housing. 20 Moreover, the trimming of the bottle did not solve the problem, contrary to Topy's claim, but only proved that Topy did not exercise prudence when it fitted the housing on the bottle. The RTC found Topy liable for damages for its failure to observe Articles 19 21 and 1170 22 of the Civil Code, 23 and disposed of the case as follows:
WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff. The defendant is ordered to pay the plaintiff the following sums:
1) P1,000,000.00 as actual damages and the legal interest thereof [from the] time the complaint was filed until the same is fully paid;
2) Attorney's fees, expenses of litigation and cost of suit equivalent to 10% of the total amount due from the defendant; and
3) P20,000.00 as exemplary damages.
SO ORDERED. 24
Both parties appealed to the CA. However, since Diamond failed to pay docket and other fees, its appeal was dismissed. 25 The CA tackled only Topy's appeal and partially granted it.
The CA Ruling
First, the CA upheld Topy's argument that since the RTC ordered the submission of the parties' respective memoranda, it should have waited for them before deciding the case pursuant to Section 15 (2) of the 1987 Constitution. 26 It was premature for the RTC to render its decision without the parties' memoranda. 27
On the main issue, the CA held that Diamond was not able to establish its case by preponderance of evidence. The witnesses it presented were not competent and were not in a position to determine what caused the cracking of the plastic housing. 28 The plastic housing with roll-on balls supplied by Topy to Diamond were the same as those supplied to other corporations, but only Diamond complained. Moreover, Diamond failed to probe deeper into the cause of the cracking, as it did not make any examination on whether the caps and bottles supplied by Armel had the same specifications and measurements as those used in the initial batch. 29 It maintained that they were the same, but failed to show how it arrived at that conclusion. Hence, the CA found Topy's explanation on the cause of the cracking more acceptable. 30
On the issue of damages, the CA held that Topy failed to show that Diamond acted in bad faith when it filed the complaint. Thus, it is not entitled to attorney's fees. Neither is it entitled to exemplary damages as there was no showing that Diamond acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. 31 However, the CA awarded costs to Topy in an undetermined amount, under Sec. 8, Rule 142 of the Rules of Court. 32 The dispositive portion of the CA Decision states:
WHEREFORE, the appeal is PARTLY GRANTED. The assailed June 24, 1998 Decision of the Regional Trial Court, Branch 215, Quezon City in Civil Case No. Q-92-11321, "Diamond Laboratories, Inc. v. Topy Industries, Inc." is REVERSED and SET ASIDE. The Complaint and the Counterclaim are DISMISSED. However, Topy Industries, Inc., as a matter of course is entitled to recover the costs of suit.
SO ORDERED.33
Issues
Diamond's motion for reconsideration having been denied by the CA through its assailed October 5, 2011 Resolution, 34 it filed the present Petition 35 raising the following grounds for the Court's review:
A.
In ruling that [Diamond's] witnesses were incompetent, the Court of Appeals disregarded the findings of fact of the trial court and the evidence on record. In addition, the Court of Appeals likewise disregarded settled jurisprudence and ignored the applicable case law on competence of a witness;
B.
In ruling that [Diamond], as the plaintiff, failed to overcome the burden of proof, the Court of Appeals overlooked the fact that it had already established a [prima facie] case of fault and negligence on the part of Topy, which the latter failed to refute. 36
Diamond argues that the CA seriously and gravely erred when it ruled that its witnesses were incompetent and not in a position to determine the cause of the cracking of the plastic housing supplied by Topy. 37 It cited the testimony of Rodelio Reyes, who personally participated in the tests conducted to determine the cracking of the housing. 38 Likewise, it asserted that its other witness, Liza Barahan, conducted a simultaneous test on the housing units supplied by Topy, giving her personal knowledge of the defect. The CA allegedly committed serious error in overlooking these facts. 39
Diamond further claims that there can be no serious question that the housing units delivered by Topy to Diamond for the second and third batches had cracked and were thus unfit for the use they were ordered. The cracking raised a prima facie case that there was negligence or fault on the part of Topy. The thing speaks for itself. Consequently, Topy had the burden of explaining why it had no fault or negligence in the cracking. 40
The Court's Ruling
The petition lacks merit.
Diamond raises questions of fact in the petition, even as it recognizes that a petition for review under Rule 45 should raise only questions of law. It asserts that since the findings of fact of the RTC and the CA are conflicting, then the case falls under the recognized exceptions to the rule and the Court may take cognizance of the case.
The settled rule is that the jurisdiction of the Court under Rule 45, Sec. 1 is limited to errors of law, as the Court is not a trier of facts. Questions of fact, which would require a re-evaluation of the evidence, are inappropriate under the said provision. 41 Concededly, Rule 45, Sec. 1 is not absolute. The Court may review factual issues under certain recognized exceptions, one of which is, as pointed out by Diamond, when factual findings of the CA and RTC are conflicting. 42
The Court has ruled, however, that this exception must be invoked and applied only with great circumspection and upon a clear showing that manifestly correct findings have been unwarrantedly rejected or reversed. On one hand, the trial court's findings of fact are entitled to great weight and respect; on another, the CA is, in general, the ultimate judge of the facts in a case appealed to it. Thus, while a conflict in their findings may prima facie provide basis for a recourse to this Court, only a showing, on the face of the record, of gross or extraordinary misperception or manifest bias in the CA's reading of the evidence will justify this Court's intervention. Here, there is no showing of such exceptional circumstances. In other words, nothing in the record warrants this Court's substitution of its own assessment of the evidence for that of the CA in contravention of the general rule that the Court may review CA decisions only on questions of law. 43
The CA's finding that Diamond's witnesses were not competent in determining the cause of the cracking of the plastic housing supplied by Topy 44 is supported by the evidence. Reyes testified that he did not know the technology behind the production of the housing, and that he merely concluded that Topy's housing was of inferior quality. 45 On the other hand, Lisa Barahan, Diamond's other witness, testified that Diamond presumed that the defect was in the housing supplied by Topy because it was the one that cracked. However, she does not know the reason why it cracked. 46
The CA also correctly held that Diamond failed to probe deeper into the cause of the cracking, as it did not examine whether the caps and bottles supplied by Armel were of the same specifications and measurements as those it used in the initial batch. 47 The evidence shows that a typical anti-perspirant pack consists of four components, namely: 1) the bottle, 2) roll-on ball housing, 3) the ball, and 4) the cap. 48 In the case of Vibes Roll-on Deodorant, the housing and roll-on ball were supplied by Topy, 49 while the bottle and cap were supplied by Armel. 50 The cracking of the housing occurred when the components supplied by both Topy and Armel were put together. Diamond immediately assumed that it was Topy's products that were defective as they were the ones that cracked. However, Diamond should have first ascertained whether Topy and Armel supplied products with the same specifications or dimensions as the first delivery, which did not encounter any issues, to determine which party may have been remiss. As it is, Diamond attributed fault to Topy without showing that Armel was blameless. There is no sufficient evidence to hold Topy liable.
In all, the Court finds no compelling reason to review the factual findings of the CA.
WHEREFORE, the petition is DENIED. The assailed July 28, 2011 Decision and October 5, 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 61298 are AFFIRMED with MODIFICATION that each party shall bear their own costs.
SO ORDERED." Lopez, M., J., on official leave.
By authority of the Court:
(SGD.) LIBRADA C. BUENADivision Clerk of Court
By:
MARIA TERESA B. SIBULODeputy Division Clerk of Court
Footnotes
1.Rollo, pp. 12-39; penned by Associate Justice Agnes Reyes-Carpio, with Associate Justices Fernanda Lampas-Peralta and Priscilla J. Baltazar-Padilla, concurring.
2.Id. at 467-473; penned by Judge Marcelino F. Bautista, Jr.
3.Id. at 41-42.
4.Id. at 13.
5.Id.
6.Id. at 13-14.
7.Id. at 14.
8.Id.
9.Id.
10.Id. at 15.
11.Id.
12.Id.
13.Id. at 15-16.
14.Id. at 17.
15.Id. at 17-18.
16.Id. at 18-19.
17.Id. at 19-20.
18.Id. at 20.
19.Supra note 2.
20.Rollo, pp. 471-472.
21. Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.
22. Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or delay and those who in any manner contravene the tenor thereof, are liable for damages.
23.Rollo, p. 472.
24.Id. at 473.
25.Id. at 30.
26. Section 15 (2), Article VIII states: A case or matter shall be deemed submitted for decision or resolution upon the filing of the last pleading, brief, or memorandum required by the Rules of Court or by the court itself.
27.Rollo, p. 32.
28.Id. at 21.
29.Id. at 34.
30.Id. at 34-A.
31.Id. at 36-37.
32.Id. at 38.
33.Id. at 39.
34.Supra note 3.
35.Rollo, pp. 45-78.
36.Id. at 61.
37.Id. at 62.
38.Id. at 65.
39.Id. at 66.
40.Id. at 70.
41.Gatan v. Vinarao, 820 Phil. 257, 265 (2017).
42. See NGEI Multi-Purpose Cooperative, Inc. v. Filipinas Palmoil Plantation, Inc., 697 Phil. 433, 444 (2012).
43. See Fernan v. Court of Appeals, 260 Phil. 594, 597-598 (1990).
44.Rollo, p. 105.
45.Id. at 33-34.
46.Id. at 276-277.
47.Id. at 34-34-A.
48.Id. at 26.
49.Id. at 137-138.
50.Id. at 174.