SECOND DIVISION
[G.R. No. 224175. February 7, 2018.]
PACSPORTS PHILS., INC., petitioner,vs. NICCOLO SPORTS, INC., respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated07 February 2018which reads as follows:
"G.R. No. 224175 (Pacsports Phils., Inc. vs. Niccolo Sports, Inc.). — This Petition for Review seeks to reverse and set aside the Decision 1 dated March 19, 2015 and Resolution 2 dated April 20, 2016 of the Court of Appeals (CA) in CA-G.R. CV No. 98761, which affirmed with modification the Decision 3 dated September 19, 2011 of the Regional Trial Court (RTC) of Makati, Branch 66, in that, petitioner Pacsports Phils., Inc. (PPI) is liable to pay respondent Niccolo Sports, Inc. (NSI) the amount of P2,917,374.56 as liquidated damages, P600,000.00 as temperate damages, P200,000.00 as exemplary damages and 10% of the total amount as attorney's fees.
Facts
As culled from the records, the antecedent facts are as follows:
PPI and NSI entered into two Exclusive Retail Agreements on April 28, 1998. Under paragraph 6 of these agreements, PPI as the exclusive distributor in the Philippines of all products of the Bridgestone Sports Company of Japan (BSCJ) and Cross Creek International (CCI), authorized NSI to put up and operate a retail outlet, a.k.a. Concept Store, for these products; they were to be fitted out by NSI at its own expense and shall acquire their fitting for its own account. 4
Citing grievances against PPI arising from their agreements, NSI sent a letter to the former dated October 14, 1998. Thereafter, in a letter dated January 25, 1999, the agreements were terminated by NSI on the basis of certain incidents of customer usurpation and underselling by PPI which NSI claimed amounted to violations by PPI of the agreements. 5
PPI and NSI then pursued the possibility of reaching an amicable settlement but failed. Despite such failure to reach a settlement, NSI still allowed PPI to pull-out some of the consigned merchandise from the retail store. NSI withheld the release of the rest of the goods. 6
Aggrieved by NSI's unilateral act of pre-terminating the retail agreements and holding golf products and sales proceeds, PPI sued NSI before the RTC of Makati for damages and applied for a writ of replevin. When NSI filed its Answer, it incorporated its compulsory counterclaim. 7
NSI filed with the RTC of Quezon City an action for "Breach and Confirmation of Termination of Contracts and Damages" against PPI. 8
On February 26, 1999, PPI applied for the issuance of a writ of preliminary injunction to compel NSI to turn over goods and sales proceeds, which was granted by the RTC of Makati and eventually upheld by the Supreme Court on November 22, 2001 in Pacsports Phils., Inc. v. Niccolo Sports, Inc. 9 In said case, the Court likewise dismissed the case filed by NSI before the RTC of Quezon City but expressly stated therein that said dismissal was without prejudice to NSI's right to pursue its claims before the RTC of Makati. 10
In a Decision 11 dated September 19, 2011, the RTC of Makati ruled in favor of NSI, the dispositive portion of which states:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant (NSI) and against the plaintiff (PPI) as follows:
1. The instant complaint is DISMISSED. The Writ of Preliminary Mandatory Injunction dated April 27, 1999 issued against the defendant accordingly is deemed LIFTED/DISSOLVED.
2. The defendant's Compulsory Counterclaim is GRANTED and the plaintiff is adjudged to be liable to the former to pay the following amounts:
a. P2,917,374.56 as liquidated damages to reimburse the defendant for its operational, construction and renovation expenses.
b. P600,000.00 as temperate or moderate damages.
c. P200,000.00 as moral damages.
d. P200,000.00 as exemplary damages.
e. 10% of the total amount as attorney's fees and litigation expenses.
In addition, the total amount adjudged shall earn interest at the rate of six percent (6%) per annum from the date of this Decision.
Costs against the plaintiff.
SO ORDERED. 12
PPI filed a motion for reconsideration but the same was denied by the lower court.
Aggrieved, PPI appealed to the CA alleging among others that NSI was not an agent of the former; that PPI, as owner, was entitled to the consigned goods and sales proceeds withheld by NSI; that PPI did not commit a material/substantial breach of the Agreement thus pre-termination thereof by NSI was not proper; and that NSI was not entitled to damages.
In a Decision 13 dated March 19, 2015, the CA denied the appeal and affirmed with modification the Decision dated September 19, 2011 of the RTC of Makati. The dispositive portion reads as follows:
WHEREFORE, the instant appeal is DENIED. The 19 September 2011 Decision of the [RTC] of Makati, Branch 66 is AFFIRMED with MODIFICATION, in that, [PPI] is liable to pay [NSI] the amount of P2,917,374.56 as liquidated damages, P600,000.00 as temperate damages, P200,000.00 as exemplary damages and 10% of the total amount as attorney's fees. The total amount adjudged shall earn interest at the rate of six percent (6%) per annum from the date of this Decision until fully paid.
Costs against [PPI].
SO ORDERED. 14
PPI filed a timely Motion for Reconsideration 15 but the same was denied 16 by the CA on the ground that the issues raised by PPI are mere reiteration of the previous arguments which have already been duly considered and passed upon by the appellate court.
Hence, this present petition.
The Issues
Whether the CA erred in ruling that:
I. NSI acted as an agent of PPI;
II. Pre-termination of the contract by PPI was proper;
III. The award of liquidated damages was proper ever when the contract did not provide for such liability in case of breach;
IV. Award of P2.9 Million worth of damages was proper;
V. The award of temperate and exemplary damages was in order; and
VI. Award of attorney's fees equivalent to 10% of the total monetary award was proper notwithstanding the fact that such relief was not prayed for.
Ruling of the Court
The petition is bereft of merit.
The Court reiterates the oft-stated doctrine that factual findings of the CA affirming those of the trial court are binding on this Court unless there is a clear showing that such findings are tainted with arbitrariness, capriciousness or palpable error. 17
The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; and (4) the agent acts within the scope of his authority. 18
As correctly found by both courts, PPI entrusted and undertook to supply NSI with large inventory products of BSCJ and CCI on consignment basis. In turn, NSI was obliged to promote and sell these products on behalf of PPI, the exclusive importer and distributor in the Philippines of the said products, for a commission derived from the pre-agreed percentage discounts which it could deduct from mutually approved retail price of any products sold, in the former's outlet at the EDSA Shangri-La Plaza Mall. This agreement was specifically stipulated in paragraph 9 of the parties' agreement. 19
In Eurotech Industrial Technologies, Inc. v. Cuizon, 20 the Court held that "[t]he underlying principle of the contract of agency is to accomplish results by using the services of others — to do a great variety of things like selling, buying, manufacturing, and transporting. Its purpose is to extend the personality of the principal or the party for who another acts and from whom he or she derives the authority to act."
From the wordings of the agreements entered into by the parties, it is clear that NSI, in undertaking the obligations stated therein, in effect became the agent or extension of PPI in the sale of BSCJ and CCI products. Although PPI maintains that NSI is not its agent, the corresponding obligations as stated in their Agreement implies otherwise. As properly observed by the trial court, there is nothing in the agreements which forbid the constitution of NSI as an agent of PPI to sell on commission basis. What is expressly prohibited is for the establishment of "any form of partnership or joint venture between the parties" (paragraph 13-b) which are two different kinds of contracts from a contract of agency. While the same agreements state that "neither party shall have the power to bind the other in any manner" such qualification is not absolute. 21
There are some provisions of the law which require certain formalities for particular contracts. The first is when the form is required for the validity of the contract; the second is when it is required to make the contract effective as against third parties such as those mentioned in Articles 1357 and 1358; and the third is when the form is required for the purpose of proving the existence of the contract, such as those provided in the Statute of Frauds in Article 1403. A contract of agency to sell on commission basis does not belong to any of these three categories, hence, it is valid and enforceable in whatever form it may be entered into. 22
PPI maintains that it did not commit material breach as would warrant NSI's right to pre-terminate the agreements. The Court has ruled time and again that parties to a contract may stipulate certain terms and conditions to which they may hold each other liable in case of breach thereof. Paragraph 12 of the subject agreement states that if PPI commits a material breach of any of the terms and conditions stated therein and fails to remedy the same within 60 days despite request to do so by NSI, the latter may validly pre-terminate the agreement, viz.:
TERMINATION
xxx xxx xxx
b. NSI shall have the right at any time to terminate this Agreement and shall be entitled to the reimbursement of all expenses during the operations of the Retail Outlet, including construction and/or renovation forthwith upon the occurrence of any of the following:
*If PPI is in material breach of the terms and conditions of this Agreement and shall have failed to remedy such breach within sixty (60) days after being requested to do so by NSI;
xxx xxx xxx 23
The CA correctly ruled that customer usurpation and repeated underselling by PPI constituted material breach and fundamentally defeats the object of the parties in entering into the agreements. In the case at bench, the declared "aim" between the parties was to establish a long-term cooperation founded on trust. Clearly, the repeated usurpation and underselling by PPI, without the consent of NSI betrayed the trust reposed by the latter in the former.
As to the award of liquidated damages, there was no specific sum expressly stated in the agreement entered into by the parties. There was no predetermined amount. The CA awarded liquidated damages pursuant to paragraph 12 (b) of the retail agreements which states that NSI shall be entitled to the reimbursement of all expenses during the operations of the Retail Outlet, including, construction and/or renovation, if it terminates the agreement due to PPI's breach of the terms thereof. Based on the testimonial and documentary evidence on record, the net total amount of all operational, construction and renovation expenses to be reimbursed by PPI to NSI is P2,917,374.56.
Liquidated damages should not have been awarded by the CA in the absence of a stipulated amount in their agreement. Article 2216 of the Civil Code states:
ART. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages, may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case.
Liquidated damages are akin to penalties, previously fixed and agreed upon by the parties, to be paid in case of breach of certain provisions in the contract. The pertinent provisions of the Civil Code allow recovery thereof but subject to the condition that a specific sum must have been stipulated in the contract.
Since there was no specific sum agreed upon in the contract but NSI was able to sufficiently establish its claim for reimbursement for operational, construction and renovation expenses, the amount awarded as liquidated damages should have been awarded as actual or compensatory damages. The Court finds that it is more in accord with the pertinent provisions of the Civil Code on Damages to award actual or compensatory damages in the amount of P2,917,374.56 (previously awarded as liquidated damages) representing NSI's loss of income and reimbursement for expenses incurred.
The award of temperate damages is likewise deleted. Temperate damages are awarded only when the Court is convinced that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. Since actual or compensatory damages are to be awarded, temperate damages are no longer necessary since the Court can determine, more or less, the amount of pecuniary loss suffered by NSI — P2,917,374.56 (representing the operational, construction and renovation expenses incurred by NSI due to PPI's fault).
WHEREFORE, the petition is DENIED. The Decision dated March 19, 2015 and Resolution dated April 20, 2016 of the Court of Appeals in CA-G.R. CV No. 98761, are AFFIRMED with MODIFICATION, in that, petitioner Pacsports Phils., Inc. is liable to pay respondent Niccolo Sports, Inc. P2,917,374.56 as actual or compensatory damages, P200,000.00 as exemplary damages and ten percent (10%) of the total amount as attorney's fees. The total amount of the damages adjudged shall earn interest at the rate of six percent (6%) per annum from the date of this Resolution until fully paid. Costs against petitioner Pacsports Phils., Inc.
SO ORDERED."
Very truly yours,
MA. LOURDES C. PERFECTODivision Clerk of Court
By:
(SGD.) TERESITA AQUINO TUAZONDeputy Division Clerk of Court
Footnotes
1. Penned by Associate Justice Elihu A. Ybañez, with Associate Justices Isaias P. Dicdican and Victoria Isabel A. Paredes concurring; rollo, pp. 66-82.
2.Id. at 133.
3. Rendered by Presiding Judge Joselito Villarosa; id. at 236.
4.Id. at 68.
5.Id. at 237.
6.Id. at 68.
7.Id.
8.Id.
9. 421 Phil. 1019 (2001).
10.Rollo, p. 69.
11.Id. at 236.
12.Id. at 247.
13.Id. at 66-82.
14.Id. at 81-82.
15.Id. at 133.
16.Id. at 134.
17.Fuentes v. CA, 335 Phil. 1163, 1164 (1997).
18.Spouses Viloria v. Continental Airlines, Inc., 679 Phil. 61, 75-76 (2012).
19.Rollo, p. 317.
20. 550 Phil. 165, 172 (2007).
21.Rollo, p. 246.
22.Rosa Lim v. Court of Appeals and People of the Philippines, 324 Phil. 400, 410-411 (1996).
23.Rollo, p. 242.