624 SUPREMECOURTREPORTSANNOTATED

NestlPhilippines,Inc.vs.FYSons,Incorporated
*
G.R.No.150780.May5,2006.

NESTL PHILIPPINES, INC., petitioner, vs. FY SONS,

INCORPORATED,respondent.

Remedial Law Appeals Docket Fees A court acquires jurisdiction

overtheclaimofdamagesuponpaymentofthecorrectdocketfees.Acourt
acquiresjurisdictionovertheclaimofdamagesuponpaymentofthecorrect
docket fees. In this case, it is not disputed that respondent paid docket fees
based on the amounts prayed for in its complaint. Respondent adduced
evidence to prove its losses. It was proper for the CA and the RTC to
consider this evidence and award the sum of P1,000,000. Had the courts
below awarded a sum more than P1,000,000, which was the amount prayed
for,anadditionalfilingfeewouldhavebeenassessedandimposedasalien
on the judgment. However, the courts limited their award to the amount
prayedfor.

_______________

*SECONDDIVISION.

625

VOL.489,MAY5,2006 625

NestlPhilippines,Inc.vs.FYSons,Incorporated

SameSameFindings of fact of the trial court when affirmed by the

CourtofAppealsarebindingupontheSupremeCourt.BoththeRTCand
CAfoundthatrespondenthadsatisfactorilyproventhefactualbasesforthe
damagesadjudgedagainstthepetitioner.Thisisafactualmatterbindingand
conclusive upon this Court. It is wellsettled that. . . findings of fact of
thetrialcourt,whenaffirmedbytheCourtofAppeals,arebindinguponthe
SupremeCourt.Thisrulemaybedisregardedonlywhenthefindingsoffact
of the Court of Appeals are contrary to the findings and conclusions of the
trial court, or are not supported by the evidence on record. But there is no
groundtoapplythisexceptiontotheinstantcase.ThisCourtwillnotassess
all over again the evidence adduced by the parties particularly where as in
this case the findings of both the trial court and the Court of Appeals
completelycoincide.

PETITIONforreviewoncertiorariofthedecisionandresolutionof
theCourtofAppeals.

ThefactsarestatedintheopinionoftheCourt.
Bustos,Villafuerte&Associatesforpetitioner.
MichaelElbiniasforrespondent.

CORONA,J.:

ThisisapetitionforreviewoncertiorariunderRule45oftheRules
1
ofCourtassailingthedecision oftheCourtofAppeals(CA)inCA
G.R.CVNo.57299datedJanuary11,2001whichinturnaffirmed
with modification the decision of Branch 57 of the Regional
2
Trial
Court(RTC)ofMakatiCityinCivilCaseNo.903169,
3
aswellas
theCAsresolution dated

_______________

1 Penned by Associate Justice Delilah VidallonMagtolis and concurred in by

Associate Justices Teodoro P. Regino and Josefina GuevaraSalonga of the 11th
DivisionoftheCourtofAppealsRollo,pp.2746.
2PennedbyJudgeOscarB.Pimentel.

3 Penned by Associate Justice Delilah VidallonMagtolis and concurred in by

AssociateJusticesTeodoroP.ReginoandJosefina

626

626 SUPREMECOURTREPORTSANNOTATED
NestlPhilippines,Inc.vs.FYSons,Incorporated

November 14, 2001 which denied petitioners motion for

reconsideration.
Theantecedentfactsfollow.
Petitioner is a corporation engaged in the manufacture and
distribution of all Nestl products nationwide. Respondent, on the
other hand, is a corporation engaged in trading, marketing, selling
and distributing food items to restaurants and food service outlets.
On December 23, 1998, petitioner and respondent entered into a
distributorship agreement (agreement) whereby petitioner would
supply its products for respondent to distribute to its food service
outlets. A deed of assignment was also executed by respondent in
favorofpetitioneronDecember13,1988,assigningthetimedeposit
of a certain Calixto Laureano in the amount of P500,000 to secure
respondents credit purchases from petitioner. A special power of
attorney was likewise executed by Laureano authorizing the
respondenttousethetimedepositascollateral.
The areas covered by the agreement were Baguio, Dagupan,
Angeles, Bulacan, Pampanga, Urdaneta, La Union, Tarlac and
Olongapo.Attheendof1989,theagreementexpiredandtheparties
executedarenewalagreementonJanuary22,1990.Asupplemental
agreementwasexecutedonJune27,1990,totakeeffectonJuly1,
1990.
On July 2, 1990, petitioner fined respondent P20,000 for
allegedlyselling50casesofKremTopliquidcoffeecreamertoLu
Hing Market, a retail outlet in Tarlac. This was purportedly
proscribed by the agreement. Respondent paid the fine. In
September 1990, KremTop liquid coffee creamer was sold to
AugustusBakeryandGrocery,anactagainallegedlyinviolationof
theagreement.PetitionerimposedaP40,000finewhichrespondent
refusedtopay.
On October 19, 1990, respondent, through counsel, wrote
petitionertocomplainaboutthelattersbreachesoftheir

_______________

GuevaraSalongaoftheFormer11thDivisionoftheCourtofAppealsRollo,p.48.

627

VOL.489,MAY5,2006 627
NestlPhilippines,Inc.vs.FYSons,Incorporated

agreementandthevariousactsofbadfaithcommittedbypetitioner
againstrespondent.Respondentdemandedthepaymentofdamages.
Inturn,onNovember5,1990,petitionersentrespondentademand
letter and notice of termination, alleging that the latter had
outstanding accounts of P995,319.81. When the alleged accounts
were not settled, petitioner applied the P500,000 time deposit as
partialpayment.
Respondent filed
4
a complaint for damages against petitioner,
allegingbadfaith. Accordingtorespondent:

. . . [petitioner] made representations and promises of rendering support,

including marketing support, assignment of representatives by way of
assistance in its development efforts, and assurances of income in a
marketingareanotpreviouslydeveloped.Thus,[respondent]wasluredinto
executingadistributorshipagreementwiththe[petitioner]....[Respondent]
thereby invested huge sums of money, time and efforts to abide by such
distributorship agreement, and to develop market areas for [petitioners]
products. Thereafter, the [petitioner] breached the distributorship agreement
by committing various acts of bad faith such as: failing to provide
promotionalsupportdeliberatelyfailingtopromptlysupplythe[respondent]
with the stocks for its orders intentionally diminishing the [respondents]
sales by supporting a nondistributor and concocting falsified charges to
causetheterminationofthedistributorshipagreementwithoutjustcause.By
suchtermination,[petitioner]wouldbeabletoobtainthemarketgainsmade
by[respondent]atthelattersowneffortsandexpenses.When[respondent]
complained to [petitioner] about the latters acts of bad faith, the latter
terminated the agreement on the allegation that [respondent] did not pay its
accounts. [Petitioner] also seized [respondents] time deposit collateral
without basis penalized [respondent] with monetary penalty for the
concocted charge
5
and unilaterally suspended the supply of stocks to
[respondent].

_______________

4CivilCaseNo.903169.

5Rollo,pp.2829.

628

628 SUPREMECOURTREPORTSANNOTATED
NestlPhilippines,Inc.vs.FYSons,Incorporated

RespondentsoughtactualdamagesofP1,000,000,moraldamagesof
P200,000, exemplary damages of P100,000, attorneys fees of
P100,000,plusthereturnoftheP500,000timedepositandcostsof
suit. In its answer, petitioner interposed a counterclaim for
P495,319.81 representing the balance of respondents overdue
accounts, with interest of 2% per month from the date of default
untilfullypaid,moraldamagesofP100,000,exemplarydamagesof
P200,000,attorneysfeesofP120,000andcostsofsuit.
In a decision dated November 10, 1997, the Makati City RTC
ruledinfavoroftherespondent:

WHEREFORE,premisesconsidered,judgmentisherebyrenderedinfavor
of the plaintiff and against the defendant ordering the defendant to pay
plaintiffthefollowing:

1. The amount of P1,000,000.00 as actual damages sustained by the

plaintiff by reason of the unwarranted and illegal acts of the
defendantinterminatingthedistributorshipagreement
2. TheamountofP100,000.00asexemplarydamages
3. TheamountofP100,000.00asattorneysfees

Theplaintiffhowever,isherebyorderedtopaythedefendanttheamount
of P53,214,26 (sic) which amount has been established as the amount the
defendantisentitledfromtheplaintiff.
Threefourthscostsagainstthedefendant.
6
SOORDERED.
PetitionerappealedthedecisiontotheCA.OnJanuary11,2001,the
CA rendered a decision affirming the RTCs decision with
modification:

WHEREFORE, the judgment appealed from is AFFIRMED with the

followingMODIFICATIONS:(1)theactualdamagesisINCREASEDfrom
7
P1,000,000.00toP1,500,000.00 and(2)the

_______________

6Rollo,pp.2728.

7ConsistingoftheP1,000,000awardedbytheRTCplustheP500,000timedeposit.

629

VOL.489,MAY5,2006 629
NestlPhilippines,Inc.vs.FYSons,Incorporated

amountofP53,214.26payablebytheappelleetotheappellantisDELETED.
8
SOORDERED.

Both the CA and the RTC found, among others, that petitioner
indeed failed to provide support to respondent, its distributor that
petitionerunjustifiablyrefusedtodeliverstockstorespondentthat
theimpositionoftheP20,000finewasvoidforhavingnobasisthat
petitioner failed to prove respondents alleged outstanding
obligation that petitioner terminated the agreement without
sufficientbasisinlaworequityandinbadfaithandthatpetitioner
shouldbeheldliablefordamages.
Hencethispetitionraisingthefollowinggrounds:

(1)

THE [CA] COMMITTED A GRAVE ERROR IN LAW WHEN IT

RULEDTHAT:THERATIOCINATIONSOFTHEAPPELLANTASTO
THEAPPELLEESALLEGEDVIOLATIONOFTHECONTRACTARE
THUS WEAK AND UNCONVINCING AND THE APPELLEES
ALLEGED NONPAYMENT AND OUTSTANDING BALANCE OF
P995,319.81 WAS NOT SUFFICIENTLY PROVEN DESPITE THE
FACT THAT FLORENTINO YUE, JR., THE MANAGER OF THE
RESPONDENT ADMITTED IN OPEN COURT IN ANSWER TO THE
QUESTION OF THEN PRESIDING JUDGE PHINNY C. ARAQUIL
THAT THE DISTRIBUTORSHIP AGREEMENT WAS TERMINATED
BY YOUR PETITIONER BECAUSE OF THE UNPAID BALANCE OF
THERESPONDENTOFAROUNDP900,000.00.

(2)
 THE [CA] COMMITTED A GRAVE ERROR IN LAW IN
DISREGARDING THE TESTIMONY OF THE WITNESS FOR THE
PETITIONER, CRISTINA RAYOS WHO PREPARED THE
STATEMENTOFACCOUNT(EXHIBIT11)ONTHEGROUNDSTHAT
SHEWASNOTINVOLVEDINTHEDELIVERYASSHE

_______________

8Id.,p.46.

630

630 SUPREMECOURTREPORTSANNOTATED
NestlPhilippines,Inc.vs.FYSons,Incorporated

WAS ONLY IN CHARGE OF THE RECORDS AND DOCUMENTS OF

ALL ACCOUNTS RECEIVABLES AS PART OF HER DUTIES AS
CREDIT AND COLLECTION MANAGER CONSIDERING THAT THE
EVIDENCE PRESENTED WAS AN EXCEPTION TO THE HEARSAY
RULE UNDER SECTION 45 (SIC), RULE 130, OF THE REVISED
RULESONEVIDENCE.

(3)

THE [CA] COMMITTED A GRAVE ERROR IN LAW IN

AWARDING TO THE RESPONDENT ACTUAL DAMAGES IN THE
AMOUNT OF P1,000,000.00 AND ORDERING THE REFUND OF THE
AMOUNT OF P500,000.00 REPRESENTING THE TIME DEPOSIT OF
THE RESPONDENT WHICH WAS ASSIGNED AS SECURITY FOR
THE RESPONDENTS CREDIT LINE BECAUSE THE PETITIONER
HAD THE RIGHT TO TERMINATE THE DISTRIBUTORSHIP
AGREEMENT UNDER ART. 1191 OF THE CIVIL CODE AND
PARAGRAPHS 5 AND 22 OF THE DISTRIBUTORSHIP AGREEMENT
BECAUSEOFTHEFAILUREOFTHERESPONDENTTOSETTLEITS
ACCOUNT IN THE AMOUNT OF P995,319.81 AND THAT THE
EVIDENCESUBMITTEDBYTHERESPONDENTONTHEALLEGED
ACTUAL DAMAGES IT SUSTAINED AS A RESULT OF THE
TERMINATION OF THE DISTRIBUTORSHIP AGREEMENT
(EXHIBIT 5) AND COMPANION EXHIBITS WERE MERELY
SPECULATIVEANDDIDNOTHAVEPROBATIVEVALUE.

(4)

THE [CA] COMMITTED A GRAVE ERROR IN LAW9 FOR NOT

AWARDINGTOTHEPETITIONERITSCOUNTERCLAIM.

On the first issue, petitioner asserts that respondents witness,

FlorentinoYue,Jr.,adirectorandofficerofrespondentcorporation,
admittedinopencourtthattherespondenthadanunpaidobligation
10
topetitionerintheamountofaroundP900,000.

_______________

9Rollo,pp.1113.

10Id.,p.14.

631

VOL.489,MAY5,2006 631
NestlPhilippines,Inc.vs.FYSons,Incorporated

Respondentcountersthatthisstatementwasmerelyinanswertothe
question of the presiding judge on what ground petitioner
supposedly terminated the agreement. The witness was not being
asked,norwasheaddressing,thetruthofsuchground.Infact,this
witness later testified that (petitioner) wrote us back saying that
they(had)terminatedmycontractandthatIowe(d)themsomething
11
likeP900,000.
Petitioners argument is palpably without merit and deserves
scantconsideration.ItquotedMr.Yuesstatementinisolationfrom
therestofhistestimonyandtookitoutofcontext.Obviously,Yues
statementcannotbeconsideredajudicialadmissionthatrespondent
had an unpaid obligation of P900,000 and that the agreement had
beenterminatedforthisreason.
On the second issue, petitioner argues that the CA should not
have disregarded the testimony of petitioners witness, Cristina
Rayos, who prepared the statement of account on the basis of the
invoices and delivery orders
12
corresponding to the alleged overdue
accountsofrespondent. TheCAruledthatpetitionerwasnotable
toprovethatrespondentindeedhadunpaidaccounts,saying,among
others, that the testimony of Rayos constituted incompetent
evidence:

x x x the appellees alleged nonpayment and outstanding balance of

P995,319.81wasnotsufficientlyproven.
xxxxxxxxx
Anyway, the appellants Statement of Account showing such alleged
unpaid balance is undated, and it does not show receipt thereof by the
appellee, and when, if such indeed was received. Moreover, there are no
supporting documents to sustain such unpaid accounts. The witness for the
appellant who prepared the Statement, Cristina Rayos, in fact admitted that
the Invoices corresponding to the alleged overdue accounts are not signed.
Her explanation was that there were DOs or Delivery Orders covering the
transactions.

_______________
 11Id.,pp.7980.

12Rollo,p.15.

632

632 SUPREMECOURTREPORTSANNOTATED
NestlPhilippines,Inc.vs.FYSons,Incorporated

However, she did not identify the signatures appearing on the Delivery
Orders marked as Exhibits 13A, 14A, 15A and 16A as the
personswhoreceivedthegoodsfortheappellant.Inanycase,shecouldnot
haveidentifiedthesame,forshewasnotinvolvedinthedelivery,assheis
only in charge of the records and documents on all13accounts receivables as
partofherdutiesasCreditandCollectionManager.

PetitionercontendsthatthetestimonyofRayoswasanexceptionto
14
thehearsayruleunderSection43,Rule130oftheRulesofCourt:

Entriesinthecourseofbusiness.Entriesmadeat,ornearthetimeofthe
transactions to which they refer, by a person deceased, or unable to testify,
who was in a position to know the facts therein stated, may be received as
prima facie evidence, if such person made the entries in his professional
capacityorintheperformanceofdutyandintheordinaryorregularcourse
ofbusinessorduty.

Petitionerscontentionhasnomerit.
The provision does not apply to this case because it does not
involveentriesmadeinthecourseofbusiness.Rayostestifiedona
statement of account she prepared on the basis of invoices and
deliveryorderswhichshe,however,knewnothingabout.Shehadno
personalknowledge of the facts on which the accounts were based
since,admittedly,shewasnotinvolvedinthedeliveryofgoodsand
wasmerelyinchargeoftherecordsanddocumentsofallaccounts 15
receivable as part of her duties as credit and collection manager.
Shethusknewnothingofthetruthorfalsityofthefactsstatedinthe
invoices and delivery orders, i.e., whether such deliveries were in
fact made in the amounts and on the dates stated, or whether they
were actually received by respondent. She was not even the credit
andcollectionmanagerduringtheperiod

_______________

13Rollo,p.39.

14Id.,p.16.

15Thatis,atthetimeshetestifiedRollo,p.16.

633

VOL.489,MAY5,2006 633
 NestlPhilippines,Inc.vs.FYSons,Incorporated
16
the agreement was in effect. This can only mean that she merely
obtained these documents from another without any personal
knowledgeoftheircontents.
The foregoing shows that Rayos was incompetent to testify on
whether or not the invoices and delivery orders turned over to her
correctlyreflectedthe details of the deliveries made. Thus, the CA
correctlydisregardedhertestimony.
Furthermore, the invoices and delivery orders presented by
petitioner were selfserving. Having generated these documents,
petitioner could have easily fabricated them. Petitioners failure to
present any competent witness to identify the signatures and other
informationinthoseinvoicesanddeliveryorderscastdoubtontheir
veracity.
Petitioner next argues that respondent did not deny during the
trial that it received the goods covered by17 the invoices and was
thereforedeemedtohaveadmittedthesame. Thisargumentcannot
be taken seriously. From the very beginning, respondents position
was that petitioner concocted falsified charges 18
of nonpayment to
justify the termination of their agreement. In no way could
respondentbedeemedtohaveadmittedthosedeliveries.
On the third issue, petitioner questions the award of actual
damages in the amount of P1,000,000 and the refund of the
P500,000 time deposit, contending that it validly terminated the
agreement because of respondents failure to pay its overdue
accounts.
Asdiscussedabove,theCAdeclaredthatpetitionerwasnotable
to prove that respondent had unpaid accounts, thus debunking the
claim of a valid termination. The CA also held petitioner guilty of19
various acts which violated the provisions of the agreement.
Consequently,forpetitionersbreachof

_______________

16Id.,p.78.

17Rollo,p.16.

18Rollo,p.28.

19Id.,pp.1118.

634

634 SUPREMECOURTREPORTSANNOTATED
NestlPhilippines,Inc.vs.FYSons,Incorporated

theagreement,theCAawardedactualdamagestorespondentinthe
amountofP1,000,000.Petitioner,otherthanclaimingthatitvalidly
terminatedtheagreement,didnotchallengethefindingsoftheCA
thatitcommittedvariousviolationsoftheagreement.Hence,there
waslegalbasisforthegrantofactualdamages.
Petitioner asserts that the documentary evidence presented by
respondenttoproveactualdamagesintheamountofP4,246,015.60
should not have been considered because respondents complaint
onlyprayedforanawardofP1,000,000.Itfurthercontendsthatthe
courtacquiresjurisdictionovertheclaimonlyuponpaymentofthe
20
prescribeddocketfee.
Indeed, a court acquires jurisdiction over
21
the claim of damages
upon payment of the correct docket fees. In this case, it is not
disputed that respondent paid docket fees based on the amounts
prayedforinitscomplaint.Respondentadducedevidencetoprove
its losses. It was proper for the CA and the RTC to consider this
evidence and award the sum of P1,000,000. Had the courts below
awardedasummorethanP1,000,000,whichwastheamountprayed
for,anadditionalfilingfeewouldhavebeenassessedandimposed
22
asalienonthejudgment. However,thecourtslimitedtheiraward
totheamountprayedfor.

_______________

20Rollo,pp.1617.

21Ballatanv.CourtofAppeals,363Phil.408, 416417 304 SCRA 34, 42 (1999),

citingTacay v. RTC of Tagum, Davao del Norte,G.R. Nos. 8807577, 20 December

1989,180SCRA433,444Sun Insurance Office, Ltd. (SIOL) v. Asuncion,G.R. Nos.
7993738, 13 February 1989, 170 SCRA 274, 285 Manchester Development
Corporationv.CourtofAppeals,No.L75919,7May1987,149SCRA562,568569.
22Benguet Electric Cooperative, Inc. v. Court of Appeals, 378 Phil. 1137, 1150

1151321SCRA524,533536(1999),citingAyalaCorporationv.Madayag,G.R.No.
88421, 30 January 1990, 181 SCRA 687 Ng Soon v. Alday, G.R. No. 85879, 29
September1989,178SCRA221.

635

VOL.489,MAY5,2006 635
NestlPhilippines,Inc.vs.FYSons,Incorporated

Both the RTC and CA found that respondent had satisfactorily

proven the factual bases for the damages adjudged against the
petitioner.Thisisafactualmatterbindingandconclusiveuponthis
23
Court. Itiswellsettledthat

. . . findings of fact of the trial court, when affirmed by the Court of

Appeals,arebindingupontheSupremeCourt.Thisrulemaybedisregarded
only when the findings of fact of the Court of Appeals are contrary to the
findings and conclusions of the trial court, or are not supported by the
evidence on record. But there is no ground to apply this exception to the
instantcase.ThisCourtwillnotassessalloveragaintheevidenceadduced
bythepartiesparticularlywhereasinthiscasethefindingsofboththetrial
24
courtandtheCourtofAppealscompletelycoincide.

Likewise, the determination of the amount of damages

commensurate with the factual findings 25
upon which it is based is
primarily the task of the trial court. Considering that the amount
adjudgedisnotexcessive,weaffirmitscorrectness.
Moreover, given that petitioner was not able to prove that
respondent had unpaid accounts in the amount of P995,319.81, the
seizureoftheP500,000timedepositwasimproper.Asaresult,the
refundofthisamountwithinterestisalsocalledfor.
Finally,petitionerscounterclaimsarenecessarilywithoutmerit.
Itfailedtoprovetheallegedoutstandingaccountsof

_______________

23China Airlines v. Chiok,G.R. No. 152122, 30 July 2003, 407 SCRA 432, 445,

citingGuerrerov.CourtofAppeals,349Phil.605285SCRA670(1998)Batingalv.
CourtofAppeals,1February2001,351SCRA60.
24BankofthePhilippineIslandsv.Leobrera,G.R.No.137147,18November2003,

416SCRA15,2122,citingMercadov.People,G.R.No.149375,26November2002,
392SCRA687.
25Tocaov.CourtofAppeals,G.R.No.127405,4October2000,342SCRA20,38,

citingAirFrancev.Carrascoso,124Phil.772,74218SCRA155,171(1966).

636

636 SUPREMECOURTREPORTSANNOTATED
NestlPhilippines,Inc.vs.FYSons,Incorporated

respondent. Accordingly, it is not entitled to the supposed unpaid

balanceofP495,319.81withinterest.
Petitioner, being at fault and in bad faith, and there being no
proof that respondent was guilty of any wrongdoing, cannot claim
moralandexemplarydamagesandattorneysfeesfromrespondent.
Infine,wefindnoerrorintheassaileddecisionandresolutionof
theCA.Wethereforeaffirmthem.
WHEREFORE,thepetitionisherebyDENIEDforlackofmerit.
The decision of the Court of Appeals dated January 11, 2001 and
resolutiondatedNovember14,2001inCAG.R.CVNo.57299are
herebyAFFIRMED.
Costsagainstpetitioner.
SOORDERED.

SandovalGutierrez (Actg. Chairperson), Azcuna and

Garcia,JJ.,concur.
Puno(Chairperson),J.,OnLeave.
 Petitiondenied,judgmentandresolutionaffirmed.

Note.Factual findings of the Court of Appeals are conclusive

onthepartiesandcarryevenmoreweightwhensuchfindingsaffirm
thoseofthetrialcourt.(Bonvs.People,419SCRA101[2004])

o0o

637

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