Food Terminal, Inc. v. Court of Appeals

G.R. No. 120097 (September 23, 1996)

Food Terminal, Inc. held liable for onion damage; interest set at 6% then 12% post-finality.

Facts:

Petitioner Food Terminal, Inc. (FTI) is a government-owned and controlled corporation that provides storage services and bonded warehousing. In early 1984, FTI entered into a storage contract with private respondent TAO Development, Inc., wherein TAO deposited a significant quantity of onions intended for export to Japan. Specifically, the deposit included 22,716 bags of yellow granex onions and 2,853 bags of red creole onions.

In May 1984, an ammonia leak occurred in FTI's storage facility, damaging the onions and rendering them unfit for export. As a result, TAO filed a complaint against FTI, seeking damages for the actual value of the goods, unrealized profits, exemplary damages, and attorney's fees. The lower court found FTI negligent in its duty to safeguard the goods and ruled in favor of TAO, awarding substantial damages.

The lower court's judgment included:

  1. P2,429,055.00 as actual damages for the loss of goods.
  2. P800,000.00 for interest on a cash advance from TAO's Japanese buyer.
  3. P1,534,005.00 for unearned profits.
  4. P100,000.00 for attorney's fees.

The amounts were to earn interest at 12% per annum from May 15, 1984, until fully satisfied. FTI appealed the decision, and the Court of Appeals affirmed the lower court's ruling with some modifications, particularly in the amount of actual damages awarded.

Legal Issues:

  1. Was FTI negligent in the performance of its duties regarding the storage of TAO's goods?
  2. Did the Court of Appeals err in affirming the rate of interest imposed by the lower court?

Arguments:

  • Petitioner (FTI): FTI contended that the damage to the onions was not due to its negligence but rather to the poor quality of the onions and TAO's delay in their disposal. FTI argued that the factual findings of the lower court and the Court of Appeals were erroneous and should be reviewed.

  • Respondent (TAO): TAO maintained that FTI was negligent in its duty to protect the goods, leading to the damage caused by the ammonia leak. TAO supported the lower court's findings and the awarded damages.

Court's Decision and Legal Reasoning:

The Supreme Court upheld the findings of negligence by both the lower court and the Court of Appeals, stating that the factual findings of these courts are generally respected and not easily disturbed on appeal. The Court found sufficient evidence supporting the conclusion that FTI's negligence led to the damage of TAO's goods.

Regarding the interest rate, the Court agreed with FTI that the 12% interest rate applied by the Court of Appeals was incorrect. The Court clarified that the Central Bank Circular No. 416 pertains to loans or forbearance of money and does not apply to damages awarded for breach of obligation. Therefore, the proper interest rate for the damages awarded should be 6% per annum until the judgment becomes final. However, from the date of finality of the judgment until full payment, the interest rate would be 12%.

Significant Legal Principles Established:

  1. The factual findings of lower courts are generally given great weight and will not be disturbed unless exceptional circumstances exist.
  2. The proper interest rate for damages awarded in cases not involving loans or forbearance of money is 6% per annum, while a higher rate of 12% applies from the finality of the judgment until full payment.
  3. The distinction between obligations involving loans and those involving damages is crucial in determining the applicable interest rate.