DIGEST: Pryce Properties Corporation v. Sps. Octobre

Specific performance, revocation of certificate of registration, refund of payments, damages and attorney's fees

PRYCE PROPERTIES CORPORATION v. SPOUSES SOTERO OCTOBRE, JR. AND HENRISSA A. OCTOBRE, AND CHINA BANKING CORPORATION

G.R. No. 186976

Third Division

December 07, 2016

Jardeleza, J.

Facts:

The Respondents Spouses Octobre entered into a Contract to Sell with Petitioner Pryce Properties Corporation for the purchase of two lots located in Puerto Heights, Cagayan de Oro City. The Spouses Octobre was able to fully pay the purchase price and all other charges in relation to the property. However, despite repeated demands, Pryce failed to deliver the certificate of titles to the Spouses. The latter then filed a complaint before the Housing and Land Use Regulatory Board (HLURB) for specific performance, revocation of certificate of registration, refund of payments, damages and attorney's fees.

It was later on found out that the reason why Pryce was unable to deliver the titles to Spouses Octobre is because it had previously transferred custody of the titles, along with others pertaining to the same development project, to China Bank as security for the P200 Million credit facility extended by the latter. The titles to the lots purchased by Spouses Octobre were among those held in custody by China Bank. When Pryce defaulted in its loan obligations to China Bank, China Bank refused to return the titles to Pryce.

The HLURB Arbiter rendered a ordering Pryce to refund the payments made by the spouses with legal interest and to pay the latter compensatory damages amounting to P30,000.00, attorney's fees and costs of suit. On appeal to the CA, it held that Pryce acted in bad faith because it "did not disclose that the titles were in the custody of China Bank to respondents Spouses Octobre until the latter demanded delivery of the titles." The Court of Appeals held that Pryce's contractual breach justified the award of compensatory damages as well as the payment of attorney's fees and costs of suit.

Issue:

1.            Whether Pryce may be held liable for compensatory damages.

2.            Whether the grant of attorney’s fees is proper.

Ruling:

1.            No, The Supreme Court held that the award of compensatory damages was not proper. However, the SC awarded nominal damages in the amount of P30,000.00 in lieu of compensatory damages.

Article 2199 of the Civil Code defines actual or compensatory damages:

Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

To be entitled to compensatory damages, the amount of loss must therefore be capable of proof and must be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. The burden of proof of the damage suffered is imposed on the party claiming the same, who should adduce the best evidence available in support thereof. Its award must be based on the evidence presented, not on the personal knowledge of the court; and certainly not on flimsy, remote, speculative and non-substantial proof.

It is clear that the amount paid by Spouses Octobre to Pryce as purchase price for the lots has been adequately proved. There is no dispute that Spouses Octobre are entitled to such amount with legal interest. The issue being raised by Pryce is only with respect to the P30,000.00 awarded as compensatory damages.

The records of this case are bereft of any evidentiary basis for the award of P30,000.00 as compensatory damages. When the HLURB Arbiter initially awarded the amount, it merely mentioned that "[Spouses Octobre] are entitled to compensatory damages, which is just and equitable in the circumstances, even against an obligor in good faith since said damages are the natural and probable consequences of the contractual breach committed." On the other hand, the Court of Appeals justified the award of compensatory damages by stating that "it is undisputed that petitioner Pryce committed breach of contract in failing to deliver the titles to respondents [Spouses] Octobre which necessitated the award of compensatory damages." In their comment, Spouses Octobre emphasized that they were "forced to litigate and seek the intervention of the courts because of Pryce's failure to comply with its contractual and legal obligation" without so much as mentioning any proof that would tend to prove any pecuniary loss they suffered.

In the absence of adequate proof, compensatory damages should not have been awarded. Nonetheless, we find that nominal damages, in lieu of compensatory damages, are proper in this case. Under Article 2221, nominal damages may be awarded in order that the plaintiff’s right, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered. Nominal damages are "recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown." So long as there is a violation of the right of the plaintiff—whether based on law, contract, or other sources of obligations—an award of nominal damages is proper. Proof of bad faith is not required. The HLURB Arbiter and the Court of Appeals appear to have confused nominal damages with compensatory damages, since their justifications more closely fit the former.

It is undisputed that Pryce failed to deliver the titles to the lots subject of the Contract to Sell even as Spouses Octobre had already fully settled the purchase price. Its inability to deliver the titles despite repeated demands undoubtedly constitutes a violation of Spouses Octobre's right under their contract. That Pryce had transferred custody of the titles to China Bank pursuant to a Deed of Assignment is irrelevant, considering that Spouses Octobre were not privy to such agreement.

In fine, contractual breach is sufficient to justify an award for nominal damages but not compensatory damages.

2.            The SC held that the award of attorney’s fees is proper.

Pryce questions the award of attorney's fees and costs of suit because no exemplary damages were awarded. This contention, however, is clearly unmeritorious because under Article 2208,37 the award of exemplary damages is just one of 11 instances where attorney's fees and expenses of litigation are recoverable.

Article 2208(2) allows the award of attorney's fees when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. The Court has interpreted that this provision requires a showing of bad faith and not mere erroneous conviction of the righteousness of a defendant's cause.38 In this case, the Court of Appeals found that Pryce acted in bad faith when it did not disclose to Spouses Octobre the fact that the certificates of title to the properties purchased were in the custody of China Bank until Spouses Octobre had fully paid the price and had demanded delivery of the titles. We agree with this finding and therefore sustain the award of attorney's fees and costs of suit in favor of Spouses Octobre.