G.R. No. 203697. March 20, 2019.

* Same; Evidence; Res Ipsa Loquitur; Utilizing res ipsa loquitur is a

matter of evidence, a mode of proof, or a mere procedural convenience,
INTERPHIL LABORATORIES, INC., petitioner, vs. OEP PHILIPPINES, since it furnishes a substitute for, and relieves a plaintiff of the burden of
INC., respondent. producing a specific proof of negligence.—Utilizing res ipsa loquitur is a
Grave Abuse of Discretion; The Court of Appeals (CA) did not commit matter of evidence, a mode of proof, or a mere procedural convenience, since
any grave abuse of discretion in finding Interphil liable for the defective it furnishes a substitute for, and relieves a plaintiff of the burden of producing
packaging of the Diltelan capsules which caused much prejudice to OEP and a specific proof of negligence. It recognizes that parties may establish prima
the latter’s client Elan Taiwan.—In this case, Interphil admitted to the error facie negligence without direct proof, thus, it allows the principle to
and belatedly, yet subsequently, rectified the same by furnishing a copy to substitute for specific proof of negligence. It permits the plaintiff to present
the CA. In the mind of the Court, such an action, as well as the mantra of the along with proof of the accident, enough of the attending circumstances to
country’s courts to refrain from dismissing cases on mere technicalities, is invoice the doctrine, create an inference or presumption of negligence and
enough to overcome the slight procedural infirmity. The aforestated thereby place on the defendant the burden of proving that there was no
jurisprudence and the attendant facts bolster the Court’s finding. However, negligence on his part. In this case, as argued by OEP and as found valid by
despite the lack of any procedural bar, the Court finds that Interphil’s Petition both the RTC and the CA, the elements of res ipsa loquitor have been clearly
is unmeritorious. The CA did not commit any grave abuse of discretion in established by the facts on record.
finding Interphil liable for the defective packaging of the Diltelan capsules Civil Law; Culpa Contractual; Damages; On culpa contractual,
which caused much prejudice to OEP and the latter’s client Elan Taiwan. Article 1170 of the Civil Code states that 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.—
* THIRD DIVISION. On culpa contractual, Article 1170 of the Civil Code states that 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
498 damages. Explaining the same further, the Court, in RCPI v. Verchez, 481
498 SUPREME COURT REPORTS ANNOTATED SCRA 384 (2006), stated: In culpa contractual the mere proof of the
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. existence of the contract and the failure of its compliance justify, prima facie,
a corresponding right of relief. The law, recognizing the obligatory force of
Remedial Law; Civil Procedure; Appeals; Petition for Review on
contracts, will not permit a party to be set free from liability for any kind of
Certiorari; In a petition for review on certiorari, the scope of the Supreme
misperformance of the contractual undertaking or a contravention of the
Court’s (SC’s) judicial review is limited to reviewing only errors of law, not
tenor thereof. A breach upon the contract confers upon the injured party a
of fact.—The simple crux of this case lies in the question of whether or not
valid cause for recovering that which may have been lost or suffered. The
Interphil is the reason for the defective packaging that led to the prejudice of
remedy serves to preserve the interests of the promissee that may include his
OEP’s sales and its goodwill with its own client. After an examination of the
expectation interest, which is his interest in having the benefit of his bargain
pleadings of both parties, the Court finds it crystal clear that Interphil is the
by being put in as good a position as he would have been in had the contract
cause for the defective packaging, and, thus, must be held accountable for its
been performed, or his reliance interest, which is his interest in being
negligence. Consistent with the aforementioned conclusion, the Court takes
reimbursed for loss caused by reliance on the contract by being put in as
special notice that the findings of fact of both the RTC and the CA as to the
good a position as he would have been in had the contract not been made; or
liability of Interphil are the same without the slightest derogation. As such,
his restitution interest, which is his interest in having restored to him any
great weight must be given to these findings, and absent any showing that
benefit that he has conferred on the other party.
there was arbitrariness, the Court will refrain from opening up and reviewing
Same; Damages; Lucrum Cessans; The familiar rule is that damages
once again the facts of the case. This is in line with the rule that the Court is
consisting of unrealized profits, frequently referred as “ganacias frustradas”
not a trier of facts. In a petition for review on certiorari, the scope of the
or “lucrum cessans” are not to be granted on the basis of mere speculation,
Court’s judicial review is limited to reviewing only errors of law, not of fact.
conjecture, or surmise, but rather by reference to some reasonably definite
standard such as market value, established experience, or direct inference a vindication of undue sufferings and wanton invasion of the rights of an
from known circumstances.—Citing Producers Bank of the Philippines v. injured or a punishment for those guilty of outrageous conduct. These terms
CA, 365 SCRA 326 (2001), the Court, in the subsequent case of Terminal are generally, but not always, used interchangeably. In common law, there is
Facilities & Services Corp. v. Philippine Ports Authority, 378 SCRA 82 preference in the use of exemplary damages when the award is to account for
(2002), ruled: There are two kinds of actual or compensatory damages: one is injury to feelings and for the sense of indignity and humiliation suffered by a
the loss of what a person already possesses, and the other is the failure to person as a result of an injury that has been maliciously and wantonly
receive as a benefit that which would have pertained to him x x x. In the inflicted, the theory being that there should be compensation for the hurt
latter instance, the familiar rule is that damages consisting of unrealized caused by the highly reprehensible conduct of the defendant — associated
profits, frequently referred as “ganacias frustradas” or “lucrum cessans” are with such circumstances as willfulness, wantonness, malice, gross negligence
not to be granted on the basis of mere speculation, conjecture, or surmise, but or recklessness, oppression, insult or fraud or gross fraud — that intensifies
rather by reference to some reasonably definite standard such as market the injury. The terms punitive or vindictive damages are often used to refer to
value, established experience, or direct inference from known circumstances those species of damages that may be awarded against a person to punish him
x x x. Absolute certainty, however, is not necessary to establish the amount for his outrageous conduct. In either case, these damages are intended
of ganacias frus-

501
500 VOL. 897, MARCH 20, 2019 501
500 SUPREME COURT REPORTS ANNOTATED Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. in good measure to deter the wrongdoer and others like him from
tradas or lucrum cessans. As the Court has said in Producers Bank of similar conduct in the future.
the Philippines: When the existence of a loss is established, absolute PETITION for review on certiorari of the decision and resolution of
certainty as to its amount is not required. The benefit to be derived from a the Court of Appeals.
contract which one of the parties has absolutely failed to perform is of The facts are stated in the opinion of the Court.
necessity to some extent, a matter of speculation, but the injured party is not Sebastian, Liganor, Galinato & Alamis for petitioner.
to be denied for that reason alone. He must produce the best evidence of
Gatmaytan, Yap, Patacsil, Gutierrez & Protacio for respondent.
which his case is susceptible and if that evidence warrants the inference that
he has been damaged by the loss of profits which he might with reasonable
certainty have anticipated but for the defendant’s wrongful act, he is entitled A. REYES, JR., J.:
to recover.
Same; Same; Exemplary Damages; Under Article 2232 of the Civil Challenged before this Court via this petition for review
Code, the Supreme Court (SC) may award exemplary damages if the on certiorari1 under Rule 45 of the Rules of Court are the
defendant in a contract or a quasi-contract acted in a wanton, fraudulent, Decision2 dated October 21, 2011 of the Court of Appeals (CA) and
reckless, oppressive, or malevolent manner.—Interphil is also liable for the Resolution3 dated September 26, 2012, in C.A.-G.R. CV No.
exemplary damages. Under Article 2232 of the Civil Code, the court may 92550, which affirmed the Decision 4 dated January 24, 2008 of the
award exemplary damages if the defendant in a contract or a quasi-contract Regional Trial Court (RTC) of Makati City, Branch 62, in Civil Case
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. No. 03-907.
In Arco Pulp and Paper Co., Inc., et al. v. Lim, 727 SCRA 275 (2014), the
Court expounded, thus: The purpose of exemplary damages is to serve as a The Antecedent Facts
deterrent to future and subsequent parties from the commission of a similar
offense. The case of People v. Rante citing People v. Dalisay held that: Also Petitioner Interphil Laboratories, Inc. (Interphil) is engaged in the
known as ‘punitive’ or ‘vindictive’ damages, exemplary or corrective business of processing and packaging of pharmaceutical and other projects.
damages are intended to serve as a deterrent to serious wrong doings, and as
Respondent OEP Philippines, Inc. (OEP) is a corporation in the business of V. TESTING AND INSPECTION:
trading, among others, 60-, 90-, 120-, and 180-milligram Diltelan capsules. 5

_______________ xxxx
_______________
1 Rollo, pp. 3-34.
2 Penned by Associate Justice Francisco P. Acosta, with Associate Justices Vicente 6 Id., at pp. 58-67.
S.E. Veloso and Angelita A. Gacutan, concurring; Id., at pp. 36-52. 7 Id., at p. 37.
3 Id., at pp. 55-56. 8 Note: Formerly known as ELAN PHARMACEUTICAL CORPORATION, and
4 Rendered by Judge Selma Palacio Alaras; Id., at pp. 270-278. referred to as ELAN in the Agreement. For purposes of consistency, the newest name
5 Id., at p. 37. OEP has been used for purposes of this Decision.

502 503
502 SUPREME COURT REPORTS ANNOTATED VOL. 897, MARCH 20, 2019 503
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
Sometime in 1998, OEP and Interphil entered into a Manufacturing INTERPHIL shall conduct quality control and other tests as
Agreement (Agreement)6 whereby Interphil undertook to process and [OEP] shall specify for each of the products at [OEP]’s cost
package 90- and 120-mg Diltelan capsules for OEP under the terms and expense. Costs of these tests and of any special analytical
and conditions stated in the Agreement.7 The pertinent provisions of equipment required shall be charged separately to [OEP].
the Agreement state: xxxx
III. INFORMATION:
VI. SUBSTANDARD PROCESSING OR PACKAGING:
[OEP] shall furnish to INTERPHIL at [OEP]’s expense,
8

descriptions and instructions concerning the methods, formulae, Should a batch or any of the Products fail to meet the
and standards to be employed by INTERPHIL in the processing or packaging standards specified by
processing and packaging of the Products, including such [OEP], INTERPHIL shall either correct the deficiency in such
written descriptions, flow sheets, work forms, testing methods batch or destroy the batch on [OEP]’s instructions. The
and specifications and other process data expenses incurred in the correction of a deficient batch or the
as INTERPHIL determines to be necessary or desirable for the loss and damages resulting from the destruction of the batch
proper performance of this Agreement. x x x. shall be for the account of [OEP] unless the failure of the batch
to meet [OEP]’s specifications can be attributed
IV. PROCESSING AND PACKAGING: to INTERPHIL’s failure to observe written instructions of
[OEP] or negligence or fault of INTERPHIL’s personnel.
All Products processed by INTERPHIL under INTERPHIL agrees that it will, at all times, maintain and
this Agreement shall be prepared and packed strictly in cause to be maintained, the highest standards of workmanship
accordance with the formulae, processes, standards, techniques, and care in its processing operations hereunder, to the end
and designs furnished by [OEP] to INTERPHIL from time to that INTERPHIL shall produce pure Products which meet the
time. All materials for packaging such products shall first be standards established by [OEP] or
approved by [OEP] and no change in any packaging materials such Products. INTERPHIL shall not be responsible
shall be made by INTERPHIL without the previous approval for Product defects arising from the use of ingredients which
in writing of [OEP]. have been supplied by [OEP]. (Emphases and underlining in
9

the original)
 11 Rollo, p. 145.
Likewise, in order to comply with Section 2.2.2.1 of the Department of 12 Id., at p. 40.
Health’s (DOH) Administrative Order (A.O.) No. 56, Series of 1989, 10 the
parties issued a letter to the Bureau of Food and Drugs (BFD), stating:
_______________ 505
VOL. 897, MARCH 20, 2019 505
9 Rollo, pp. 59-60.
10 2.2. Specific Requirements:
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
the former that Elan Taiwan had received several urgent phone calls
from certain hospitals in Taiwan regarding a defect in the packaging of
504 several 90-mg Diltelan capsules which had been sold and delivered by
504 SUPREME COURT REPORTS ANNOTATED Interphil. Elan Taiwan further reported that several 90-mg Diltelan
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. capsules were inadvertently wrapped in foils meant and labeled for
[P]arties hereby agree to be jointly responsible for the quality of 120-mg Diltelan capsules and then placed in boxes meant and labeled
the Product without prejudice to the liability after the determination for 90-mg Diltelan capsules.13
of the cause in case of defect in quality. OEP immediately informed Interphil of the packaging defect.
x x x [I]f the cause of the defect be the manufacturing process or Investigations conducted by both OEP and Interphil revealed that the
packaging, INTERPHIL should assume the liability and if the cause defectively packaged capsules belonged to a single batch, Lot No. 001369,
be the formulae, process, methods, instructions or raw materials which Interphil processed and packaged in April 2000.14
provided by [OEP], then the latter shall x x x assume the liability As a result of the defectively packaged capsules and the necessary
arising out of the defect. (Emphases in the original)
11 reworking of the same to the public due to the danger and health risks, OEP
alleges that it had no choice but to recall and destroy all capsules belonging
After the execution of the Agreement, Interphil agreed to inspect the type to the aforementioned Lot No. 001369. As a consequence, this resulted in the
and quality of the packaging supplies delivered to its plant, for which it incurring of numerous costs and expenses on the part of OEP.15
charged OEP a “packaging materials inspection fee.” From January 1999 to Due to the foregoing, OEP demanded that Interphil reimburse it the total
May 2000, Interphil accepted the delivery of several 90- and 120-mg Diltelan of P5,183,525.05 for the expenses that it had incurred for and in connection
capsules, as well as printed foils and boxes for these capsules, for purposes of with the recall and destruction of these capsules, including the costs of the
processing and packaging pursuant to the Agreement, while charging OEP materials destroyed.16 However, Interphil refused and did not pay the amount
for a packaging fee and the aforementioned packaging materials inspection demanded.
fee, in consideration of Interphil’s commitment to inspect the materials Due to Interphil’s refusal to pay the same, OEP filed a complaint
delivered. Thereafter, Interphil sorted, wrapped and boxed the capsules, and with the RTC of Makati City. After trial, the RTC rendered a
subsequently delivered the same to OEP. OEP, subsequently, delivered the Decision17 in favor of OEP, finding that on the basis of the doctrine
capsules to its client, Orient Eropharma Co., Ltd./Elan Pharma Ltd. of of res ipsa loquitor, Interphil was negligent in the performance of its
Taiwan (Elan Taiwan).12 obligations under the Agreement, and that
The conflict between the parties arose on August 8, 2000, when OEP
received a facsimile from Elan Taiwan informing _______________
_______________
13 Id.
Any entity applying for [an] LTO as a drug manufacturer, drug trader or drug 14 Id.
distributor shall be required to demonstrate its capacity to perform adequately as such in a 15 Id.
manner that satisfactorily assures the safety, efficacy and quality of its drug products. It 16 Id., at pp. 40-41.
shall be required to conform with the following relevant standards and requirements 17 Id., at pp. 270-278.
specific for each category, in addition to the above general requirements[.]
 VOL. 897, MARCH 20, 2019 507
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
506 erroneously packed the 90-mg Diltelan capsules in the 120-mg labeled foils,
506 SUPREME COURT REPORTS ANNOTATED an action which was in the exclusive hands and control of Interphil.22
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. The CA found that since Interphil failed to detect or rectify the erroneous
there was no merit in Interphil’s defense that OEP, likewise, breached the packaging despite multiple opportunities to do so, it was unnecessary to
Agreement in unilaterally destroying the complained-of products without delve into Interphil’s allegation as to OEP’s faults, since the former failed to
observing the agreed procedure for the recall and destruction in case a defect overcome its negligence as the immediate and proximate cause of the
in a certain batch of capsules is found. damage.23 Even if OEP’s possible fault would be considered, the CA held
The dispositive portion of said decision reads, to wit: that Interphil was unable to offer substantial proof that OEP was in bad faith
WHEREFORE, by preponderance of evidence, judgment is with its actions, and as such, the presumption of good faith will continue to
hereby rendered in favor of [OEP], ordering [INTERPHIL] to pay the stand unless proven otherwise.24
former the following: For the CA, OEP’s act of unilaterally recalling and destroying the
1. Five million one hundred eighty[-]three thousand five hundred products, far from being a breach of the contract, was a prudent move in
twenty[-]five & 5/100 (P5,183,525[.]05) Pesos as actual damages; order to prevent any further injury to the public, considering that in the event
2. Three hundred six thousand six hundred forty-eight & 81/100 that the products were reworked, the risk of contamination would still be
(P306.648.81) Pesos as compensatory damages; present, compromising, thus, the safety of the consumers or the end-users.25
3. One Hundred thousand (P100.000.00) Pesos as exemplary Interphil’s Motion for Reconsideration was denied in a Resolution 26 dated
damages; and September 26, 2012, as the CA found that no matter of substance was
4. Fifty thousand (P50,000.00) Pesos as attorney’s fees, costs and adduced by Interphil that would warrant the modification, much less the
expenses. 18 reversal, of the assailed decision.
Hence, this Petition, to which OEP filed a Comment/Opposition 27 on
Interphil’s Motion for Reconsideration was denied in an Order 19 issued by April 5, 2013, assailing not only the substantive issues brought up by
the RTC on August 20, 2008. On appeal to the CA, Interphil interposed the Interphil, but also decrying the alleged fact that the Petition was fatally
arguments that the RTC erred in both applying the res ipsa loquitor rule to defective for failure
_______________
find Interphil liable for the product conundrum, and in finding that OEP’s
action of unilaterally destroying the products was valid and was not imbued 22 Id., at p. 45.
with any bad faith.20 23 Id., at p. 46.
On the issue of whether or not Interphil was liable to OEP in the recall 24 Id., at p. 51.
and destruction of the defectively packaged Diltelan capsules, the CA ruled 25 Id.
in favor of OEP and affirmed the decision of the RTC. 21 The CA found that 26 Id., at pp. 55-56.
the proximate cause for the damage incurred by OEP was the fact that 27 Id., at pp. 432-456.
Interphil
_______________
508
18 Id., at p. 278. 508 SUPREME COURT REPORTS ANNOTATED
19 Id., at p. 311.
20 Id., at p. 43. Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
21 Id. of Interphil to serve the CA with a copy of the Petition. Interphil
responded via Reply28 on October 4, 2013.

507 The Issues of the Case

 On the substantial merits, OEP argues first that this Petition improperly
A perusal of the parties’ pleadings will show the following issues and raises pure questions of facts, which are beyond the ambit of the Court’s
points of contention: jurisdiction. OEP asserts the time-honored doctrine that the Court is
First, whether or not the Petition must be dismissed outright due to restricted to reviewing only pure questions of law, and that the CA’s, as well
Interphil’s failure to timely serve the CA with a copy of the Petition, as as the trial court’s, findings of fact, evaluation and assessment of the
required under Rule 45 of the Rules of Court; evidence, which concur in this case, are binding and conclusive upon the
Second, whether or not Interphil was negligent based on the doctrine Court.31

of res ipsa loquitor; and Assuming, however, that the Court may resolve the factual questions in
Third, whether or not OEP can, likewise, be held liable for breach of the Interphil’s petition, OEP asserts that the arguments therein are, nevertheless,
Agreement due to its unilateral destruction of the products. erroneous, and have already been exhaustively addressed by both the trial
court and the CA.32 Both courts found that, under the doctrine of res ipsa
The Parties’ Arguments loquitor, Interphil was indeed negligent and, thus, liable for damages.
Likewise, both lower courts found that Interphil’s mispackaging was the
On the procedural aspect, OEP contends that Interphil failed to provide proximate cause of the injury sustained by OEP, 33 and that OEP did not
proof of service of the Petition on the CA, prior to its filing to the Court. This violate the Agreement when it unilaterally destroyed the defectively
was admitted to by Interphil in a Manifestation Ad Cautelam dated March 27, packaged capsules.34
2013 that it filed with the CA, stating that a copy of the Petition was served Interphil, on the other hand, asserts that it raises questions of law.
only on the undersigned counsel but not on the CA prior, or simultaneous, to However, even if questions of fact were raised, the same would be within the
its filing with the Court. OEP also adds that, as a result, Interphil’s failure to exception pronounced by the Court in the
serve the CA with a copy of the Petition prompted the CA to issue an Entry _______________
of Judgment on March 8, 2013. 29

30 Id., at p. 434.
Based on the foregoing, OEP submits that the Court should dismiss the
31 Id., at p. 436.
Petition outright for being fatally defective and for failing to comply with the 32 Id., at p. 441.
mandatory requirements of an appeal by certiorari to the Court. OEP also 33 Id., at p. 449.
points out that, 34 Id., at p. 450.
_______________

28 Id., at pp. 473-481.

510
29 Id., at p. 433.
510 SUPREME COURT REPORTS ANNOTATED
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
509 case of Spouses Alcaraz v. Arante,35 the same applying when “the CA
VOL. 897, MARCH 20, 2019 509 fails to notice certain relevant facts, which, if properly considered, will
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. justify a different conclusion.”36
despite Interphil attempting to excuse the omission by reason of Critical to the case, Interphil advocates its stance that the requisites of res
supposed time constraints, it served a copy of the Petition to the CA ipsa loquitor are not applicable to it. It asserts that while it had the exclusive
control over the plant where the packaging was effected, it, nevertheless, had
almost five (5) months after the time that it should have served the
no exclusive control over the packaging materials supplied by OEP, and that
same, or only on March 25, 2013.30 the cause of the injury was the mis-splicing of the foil and, therefore, the
In answer to OEP’s contentions, Interphil submits that the Petition should defects in the packaging materials supplied by OEP.37
not be dismissed on the basis of a technicality, considering that the same had Interphil stresses that it could not have discovered the mis-splicing of the
been rectified through its furnishing of a copy to the CA on March 25, 2013. foil even after investigation, as attested to by Mr. Francisco R. Billano, 38 and
that the inspection of the packaging materials was limited to whether the regulations relating to the proper destruction of the subject products, namely,
same were not deformed or in such sufficient quantity as indicated. 39 For A.O. No. 43, Series of 1999 as issued by the DOH.44
Interphil, OEP failed to exercise due care in providing distinguishable On the other hand, OEP states that, as aptly found by both the RTC and
packaging materials to the former, and that the packaging materials were the CA, Interphil was proven clearly negligent based on the doctrine of res
defective to begin with.40 ipsa loquitor. For OEP, there is no doubt that the error was committed at the
As a consequence of the alleged inapplicability of the res ipsa time of the packaging and within the control of Interphil. OEP also alleges
loquitor doctrine, Interphil asserts that OEP failed to overcome its burden of that there is nothing in the records to show that it contributed to the incident,
proof to establish that Interphil was negligent in performing its contractual and that the fact of mis-splicing was never established with clear and
obligations. OEP only offered the David Beff Report that points to the preponderant evidence. On the contrary, the processing and packaging of said
similarity of design of the packaging materials, which, Interphil also points products were all in the hands of Interphil, and the latter even maintained that
out, actually emphasized that the mix up could have been initiated at the upon delivery of the materials to its plant, its personnel in-
printing stage of the packaging materials.41 _______________
_______________
42 Id., at p. 21.
35 700 Phil. 614; 687 SCRA 507 (2012). 43 Id., at p. 22.
36 Id., at pp. 624-625; p. 516. 44 Id., at p. 24.
37 Rollo, pp. 12-13.
38 Id., at p. 13.
39 Id., at p. 14. 512
40 Id., at p. 17.
41 Id., at pp. 17-18. 512 SUPREME COURT REPORTS ANNOTATED
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
spected the same through the procedures and using the specifications
511 imposed by OEP.45
VOL. 897, MARCH 20, 2019 511 On the matter of OEP allegedly violating the Agreement by unilaterally
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. destroying the defectively packaged Diltelan capsules, OEP points to the
Interphil, likewise, states that, even if for the sake of argument, Agreement itself which says that the same does not bar OEP from correcting
or destroying the subject capsules. OEP points out that the Agreement
such failure to detect the mis-splicing in the foil is indeed negligence
recognizes that it is OEP that has the absolute discretion in terms of deciding
on the part of the petitioner, such negligent act is still not the what to do with the subject capsules.46 And, contrary to Interphil’s allegations
proximate cause of the injury.42 Any failure on the part of Interphil is of bad faith on the part of OEP, as found by the lower courts, OEP was able
argued to be due to the acts on the part of OEP that came prior to the to satisfactorily explain the danger and health risks posed by the defectively
packaging, i.e., the similarity in design of the packaging materials of packaged capsules.47 All in all, OEP asserts that Interphil’s arguments are all
90- and 120-mg Diltelan capsules, the mis-splicing in the foil, and the baseless, groundless, and not supported by evidence, as found by the lower
alleged failure to properly flag the splices. As such, Interphil argues courts in their appreciation of the facts on record.
that its failure to detect the mix up is part of the natural and continuous
sequence of events. Ruling of the Court
Finally, Interphil accuses OEP of unilaterally destroying the products
instead of possibly reworking or repackaging the same, which went contrary The Court first seeks to lay to rest the procedural matter as to whether or
to the provisions of the Agreement, and without even informing Interphil or not the Petition must be dismissed outright for failure to subscribe to the
giving the latter any chance to rectify the situation. 43 This allegedly did not requirements under Rule 45 of the Rules of Court. As previously mentioned,
only run counter to the Agreement, but also violated the law and the OEP argues in its Comment/Opposition that the Petition filed by Interphil
with the Court is fatally defective for failure of Interphil to serve the CA with
a copy of the Petition, an omission of its responsibility under Rule 45 of the In a later case, Sunrise Manning Agency, Inc. v. NLRC,50 the Court took
Rules of Court, and which would necessitate the denial of the same. the opportunity to reiterate the relaxation of the rule for excusable reasons:
The pertinent provisions of Rule 43 of the Rules of Court read: _______________
Section 3. Docket and other lawful fees; proof of service of petition.
—Unless he has theretofore done so, the peti- 48 212 Phil. 426; 127 SCRA 463 (1984).
_______________ 49 Id., at p. 430; p. 467.
50 485 Phil. 426; 443 SCRA 35 (2004).
45 Id., at pp. 443-445.
46 Id., at p. 451.
47 Id., at p. 453. 514
514 SUPREME COURT REPORTS ANNOTATED
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
513
[T]he appellant’s failure to furnish copy of his memorandum appeal to
VOL. 897, MARCH 20, 2019 513 respondent is not a jurisdictional defect, and does not justify dismissal
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. of the appeal. x x x
tioner shall pay the corresponding docket and other lawful fees to the
clerk of court of the Supreme Court and deposit the amount of xxxx
P500.00 for costs at the time of the filing of the petition. Proof of Jurisprudential support is not absent to sustain Our action.
service of a copy thereof on the lower court concerned and on the In Estrada v. National Labor Relations Commission, G.R.
adverse party shall be submitted together with the petition. 57735, March 19, 1982, 112 SCRA 688, this Court set aside the
Section 5. Dismissal or denial of petition.—The failure of the order of the NLRC which dismissed an appeal on the sole
petitioner to comply with any of the foregoing requirements regarding ground that the appellant had not furnished the appellee a
the payment of the docket and other lawful fees, deposit for costs, memorandum of appeal contrary to the requirements of Article
proof of service of the petition, and the contents of and the documents 223 of the New Labor Code and Section 9, Rule XIII of its
which should accompany the petition shall be sufficient ground for the Implementing Rules and Regulations.
dismissal thereof.
The Supreme Court may on its own initiative deny the petition on the The same rule was reiterated in Carnation Phil. Employees Labor
ground that the appeal is without merit, or is prosecuted manifestly for Union-FFW v. NLRC x x x. (Italics in the original)
51

delay, or that the questions raised therein are too unsubstantial to

require consideration. In this case, Interphil admitted to the error and belatedly, yet
subsequently, rectified the same by furnishing a copy to the CA. In the mind
The Court invokes liberality and rules in favor of allowing the of the Court, such an action, as well as the mantra of the country’s courts to
Petition. As cited by Interphil in its Reply, in Pagdonsalan v. NLRC, refrain from dismissing cases on mere technicalities, is enough to overcome
et al.:48 the slight procedural infirmity. The aforestated jurisprudence and the
The failure to give a copy of the appeal to the adverse party was a attendant facts bolster the Court’s finding.
mere formal lapse, an excusable neglect. Time and again[,] We have However, despite the lack of any procedural bar, the Court finds that
acted on petitions to review decisions of the [CA] even in the absence Interphil’s Petition is unmeritorious. The CA did not commit any grave abuse
of proof of service of a copy thereof to the [CA] as required by of discretion in finding Interphil liable for the defective packaging of the
Section 1 of Rule 45, Rules of Court. We act on the petitions and Diltelan capsules which caused much prejudice to OEP and the latter’s client
simply require the petitioners to comply with the rule.49 Elan Taiwan.
_______________
 51 Id., at p. 431; p. 40. 516
516 SUPREME COURT REPORTS ANNOTATED
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
515
The [CA] must have gravely abused its discretion in its
VOL. 897, MARCH 20, 2019 515 appreciation of the evidence presented by the parties and in its factual
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. findings to warrant a review of factual issues by this court.
Interphil is liable for the x x x[.] (Citations omitted)
53

wrong packaging of Dilte-

lan capsules. Thus, absent any finding that the CA showed any unfairness and
arbitrariness in holding that Interphil was responsible for the defective
The simple crux of this case lies in the question of whether or not packaging, the Court is bound by the findings of fact which, at the pain of
reiteration, is consistent with that of the RTC that res ipsa loquitor applies in
Interphil is the reason for the defective packaging that led to the
this case.
prejudice of OEP’s sales and its goodwill with its own client. After an The doctrine of res ipsa loquitor as a matter of evidentiary proof for
examination of the pleadings of both parties, the Court finds it crystal negligence was aptly explained and expounded on in Cortel, et al. v.
clear that Interphil is the cause for the defective packaging, and, thus, Gepaya-Lim: 54

must be held accountable for its negligence. While negligence is not ordinarily inferred or presumed, and while
Consistent with the aforementioned conclusion, the Court takes the mere happening of an accident or injury will not generally give
special notice that the findings of fact of both the RTC and the CA as rise to an inference or presumption that it was due to negligence on
to the liability of Interphil are the same without the slightest defendant’s part, under the doctrine of res ipsa loquitur, which means,
derogation. As such, great weight must be given to these findings, and literally, the thing or transaction speaks for itself, or in one
absent any showing that there was arbitrariness, the Court will refrain jurisdiction, that the thing or instrumentality speaks for itself, the facts
from opening up and reviewing once again the facts of the case. This is or circumstances accompanying an injury may be such as to raise a
presumption, or at least permit an inference of negligence on the part
in line with the rule that the Court is not a trier of facts. In a petition
of the defendant, or some other person who is charged with
for review on certiorari, the scope of the Court’s judicial review is negligence.
limited to reviewing only errors of law, not of fact. x x x Where it is shown that the thing or instrumentality which
In Pascual v. Burgos, et al.,52 the Court explained: caused the injury complained of was under the control or management
Only questions of law may be raised in a petition for review of the defendant, and that the occurrence resulting in the injury was
on certiorari. The factual findings of the [CA] bind this court. such as in the ordinary course of things would not hap-
Although jurisprudence has provided several exceptions to these rules, _______________
exceptions must be alleged, substantiated, and proved by the parties so
this court may evaluate and review the facts of the case. In any event, 53 Id., at pp. 169, 185; pp. 191, 208.
even in such cases, this court retains full discretion on whether to 54 802 Phil. 779; 813 SCRA 518 (2016).
review the factual findings of the [CA].

xxxx 517
_______________ VOL. 897, MARCH 20, 2019 517
52 776 Phil. 167; 778 SCRA 189 (2016).
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
pen if those who had its control or management used proper
care, there is sufficient evidence, or, as sometimes stated,
reasonable evidence, in the absence of explanation by the
 defendant, that the injury arose from or was caused by the plant, its personnel inspected the same through the procedures and
defendant’s want of care. using the specifications imposed by OEP. 57 As the records of the case
xxxx show, it was Interphil’s negligence that directly and proximately
contributed to the incident.
The elements of res ipsa loquitur are: (1) the accident is of such Second, Interphil had exclusive management and control at the time of
character as to warrant an inference that it would not have happened the packaging, and as to all the processes appurtenant to the same. While
except for the defendant’s negligence; (2) the accident must have been Interphil argues that at least one roll of 90-mg printed foil was already mis-
caused by an agency or instrumentality within the exclusive spliced with the 120-mg foil when it received the same from OEP, the
management or control of the person charged with the negligence records are bereft of any proof of this other than the bare assertion of
complained of; and (3) the accident must not have been due to any Interphil. As already mentioned, it was admitted by Interphil that its
voluntary action or contribution on the part of the person personnel inspected the packages upon delivery, in line with its standard
injured. (Citation omitted)
55
operating procedure which enjoins its personnel to note or report any defect
found in the course of inspection.58
Utilizing res ipsa loquitur is a matter of evidence, a mode of proof, or a Interphil even charged OEP for “packaging materials inspection fees” in
mere procedural convenience, since it furnishes a substitute for, and relieves consideration of the former’s commitment to properly inspect the materials
a plaintiff of the burden of producing a specific proof of negligence. It delivered to them, which means that any argument on the part of Interphil as
recognizes that parties may establish prima facie negligence without direct to the quality of the goods received before their faulty packaging goes
proof, thus, it allows the principle to substitute for specific proof of contrary to their own manifestations.
negligence. It permits the plaintiff to present along with proof of the accident, Third, there is no contributory fault on the part of OEP. While Interphil
enough of the attending circumstances to invoice the doctrine, create an alleges that OEP was at fault for supplying and delivering the reel/s of foils
inference or presumption of negligence and thereby place on the defendant which are similar in appearance and which were not distinctly labeled with
the burden of proving that there was no negligence on his part.56 colored tape, the Court agrees with the CA that any fault there is not the
In this case, as argued by OEP and as found valid by both the RTC and proximate and immediate cause of the damage, as it was
the CA, the elements of res ipsa loquitor have been clearly established by the _______________
facts on record.
First, it is uncontroverted that Interphil had exclusive control in the 57 Rollo, p. 445.
packaging of the materials, before the company 58 Id., at p. 444.
_______________

55 Id., at pp. 787-788; pp. 527-528. 519

56 Del Carmen, Jr. v. Bacoy, 686 Phil. 799, 814-815; 671 SCRA 91, 107-108 (2012).
VOL. 897, MARCH 20, 2019 519
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
518 clearly the erroneous packaging that caused OEP to recall and destroy
518 SUPREME COURT REPORTS ANNOTATED the products, causing much expense.
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. Interphil cannot escape the finding of negligence by attempting to
delivered the same to OEP, sealed and warranted to be ready for cast shade on the possible liability of OEP, especially after its own
delivery to the latter’s client, Elan Taiwan. Not only did the warranties as to the pristine condition of the packaging. The letter the
Agreement itself serve to place Interphil’s responsibilities and the parties issued to the BFD itself states that if the cause of the defect be
degree of diligence that it must abide by, for this particular transaction, the manufacturing process or packaging, it will be Interphil which
Interphil itself mentioned that upon delivery of the materials to its shall assume the liability.
 Absent any showing of infirmity in the appreciation of evidence of interest, which is his interest in being reimbursed for loss caused by
the lower courts in this regard, the Court cannot subscribe to the reliance on the contract by being put in as good a position as he would
version of events as posited by Interphil, especially, as this has been have been in had the contract not been made; or his restitution interest,
soundly rebutted by the actual evidence on record. which is his interest in having restored to him any benefit that he has
conferred on the other party. 60

No bad faith or contributory

In this case, the Court finds that OEP sufficiently rebutted the
fault can be attributed to presumption of fault and/or negligence. Not only is the finding of the CA
OEP due to its unilateral correct that the provisions cited by Interphil do not bar OEP from exercising
destruction of the products. discretion when it comes to the destruction of defectively packaged capsules
as in this case, OEP was able to show that it needed to do so immediately
Notwithstanding its own negligence, Interphil accuses OEP for because of the danger and health risks posed to the public due to the wrong
unilaterally destroying the products without informing Interphil nor packaging. What was at stake is not only the good reputation of a company,
giving a chance to the latter to rectify the same, in contravention of the but also the possibility of prejudicing consumers who could be adversely
Agreement. In effect, Interphil pins liability on OEP on the basis affected by the incorrect content of the capsules, and it would be a matter of
of culpa contractual, or a breach of contract, particularly Section VI of recklessness to do anything but urgently recall the same from public
the Agreement. distribution. If OEP would have spent precious time corresponding with
Interphil or allowing the latter to fix the matter, it would have just aggravated
On culpa contractual, Article 1170 of the Civil Code states that
an already precarious situation.
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. Explaining the same further, the Court, 60 Id., at p. 735; p. 393.
in RCPI v. Verchez,59 stated:
_______________
521
59 516 Phil. 725; 481 SCRA 384 (2006).
VOL. 897, MARCH 20, 2019 521
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
520 Thus, the CA did not err in treating OEP’s action as a prudent move
520 SUPREME COURT REPORTS ANNOTATED to prevent against the risk of contamination, contamination which
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. would compromise the safety of the consumers or end-users. No bad
In culpa contractual the mere proof of the existence of the contract
faith is present in OEP’s decision to recall and destroy the products.
and the failure of its compliance justify, prima facie, a corresponding The Court reminds the parties of the statutory presumption of good
right of relief. The law, recognizing the obligatory force of contracts, faith, and, absent any valid rebuttal of the same on the part of Interphil,
will not permit a party to be set free from liability for any kind of that presumption will stand. As with its previous arguments, Interphil
misperformance of the contractual undertaking or a contravention of has been unable to validly counter nor adduce evidence which would
the tenor thereof. A breach upon the contract confers upon the injured militate against its clear fault and liability, and in doing so overcome
party a valid cause for recovering that which may have been lost or its burden to show that the findings of fact and conclusions of law
suffered. The remedy serves to preserve the interests of the promissee from the RTC and the CA were found wanting.
that may include his expectation interest, which is his interest in
having the benefit of his bargain by being put in as good a position as Interphil is liable for
he would have been in had the contract been performed, or his reliance
damages.
 reasonably definite standard such as market value, established
The Court finds that Interphil is liable for actual damages to OEP, experience, or direct inference from known circumstances x x x.66
the latter pleading in its complaint and able to substantiate the amounts
owed to them as a result of the costs and expenses it incurred in the Absolute certainty, however, is not necessary to establish the amount
amount of P5,183,525.05 and the profits it failed to realize due to the of ganacias frustradas or lucrum cessans. As the Court has said
in Producers Bank of the Philippines:67
gross negligence of Interphil in the amount of P306,648.81 as
When the existence of a loss is established, absolute certainty as to
compensatory damages.61 its amount is not required. The benefit to be derived from a contract
While OEP incorrectly distinguished the damages as two separate
which one of the parties has absolutely failed to perform is of
entities, as in this jurisdiction actual and compensatory damages are one and
necessity to some extent, a matter of speculation, but the injured party
the same, this is largely a matter of semantics and the Court finds that OEP
is not to be denied for that reason alone. He must produce the best
was able to prove the amounts owed to them, as found by the RTC and
evidence of which his case is susceptible and if
concurred in by the CA. In Casiño, Jr. v. CA,62 the Court ruled that actual or _______________
compensatory damages may be awarded to reimburse an awardee for either
loss or the failure to receive a benefit that would have pertained to said 63 Id., at pp. 72-73; p. 70.
awardee, such as loss of profits. To wit: 64 417 Phil. 646; 365 SCRA 326 (2001).
_______________ 65 428 Phil. 99; 378 SCRA 82 (2002).
66 Id., at p. 138; p. 114.
61 Rollo, p. 273. 67 Producers Bank of the Philippines v. Court of Appeals, supra.
62 507 Phil. 59; 470 SCRA 57 (2005).

523
522 VOL. 897, MARCH 20, 2019 523
522 SUPREME COURT REPORTS ANNOTATED Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
Interphil Laboratories, Inc. vs. OEP Philippines, Inc. that evidence warrants the inference that he has been damaged by the
Under Articles 2199 and 2200 of the Civil Code, actual or loss of profits which he might with reasonable certainty have
compensatory damages are those awarded in satisfaction of or in anticipated but for the defendant’s wrongful act, he is entitled to
recompense for loss or injury sustained. They proceed from a sense of recover. x x x. 68

natural justice and are designed to repair the wrong that has been
done. (Citation omitted)
63
Interphil is also liable for exemplary damages. Under Article 2232 of the
Civil Code, the court may award exemplary damages if the defendant in a
Citing Producers Bank of the Philippines v. CA,64 the Court, in the contract or a quasi-contract acted in a wanton, fraudulent, reckless,
subsequent case of Terminal Facilities & Services Corp. v. Philippine Ports oppressive, or malevolent manner. In Arco Pulp and Paper Co., Inc., et al. v.
Authority,65 ruled: Lim69 the Court expounded, thus:
There are two kinds of actual or compensatory damages: one is the The purpose of exemplary damages is to serve as a deterrent to
loss of what a person already possesses, and the other is the failure to future and subsequent parties from the commission of a similar
receive as a benefit that which would have pertained to him x x x. In offense. The case of People v. Rante citing People v. Dalisay held
the latter instance, the familiar rule is that damages consisting of that:
unrealized profits, frequently referred as “ganacias frustradas” or
“lucrum cessans,” are not to be granted on the basis of mere Also known as ‘punitive’ or ‘vindictive’ damages,
speculation, conjecture, or surmise, but rather by reference to some exemplary or corrective damages are intended to serve as a
deterrent to serious wrong doings, and as a vindication of undue
 sufferings and wanton invasion of the rights of an injured or a WHEREFORE, the Decision dated October 21, 2011, and the
punishment for those guilty of outrageous conduct. These terms Resolution dated September 26, 2012, of the Court of Appeals in C.A.-G.R.
are generally, but not always, used interchangeably. In common CV No. 92550, affirming the Decision dated January 24, 2008 of the
law, there is preference in the use of exemplary damages when Regional Trial Court of Makati City, Branch 62, in Civil Case No. 03-907,
the award is to account for injury to feelings and for the sense are AFFIRMED WITH MODIFICATION in that an interest rate of six
of indignity and humiliation suffered by a person as a result of percent (6%) per annum is imposed on all damages awarded from the date of
an injury that has been maliciously and wantonly inflicted, the finality of this Decision until fully paid.
theory being that there should be compensation for the hurt SO ORDERED.
caused by the highly reprehensible conduct of the defendant — _______________
associated with such circumstances as willfulness, wantonness,
malice, gross negligence or recklessness, 70 Id., at pp. 152-153; pp. 297-298.
_______________

68 Id., at p. 660; pp. 338-339, citing Central Bank of the Phil. v. Court of Appeals, 525
159-A Phil. 21, 50-51; 63 SCRA 431, 457 (1975). VOL. 897, MARCH 20, 2019 525
69 737 Phil. 133; 727 SCRA 275 (2014).
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
Peralta (Chairperson), Leonen, Hernando and Carandang,** JJ.,
524 concur.
524 SUPREME COURT REPORTS ANNOTATED Judgment and resolution affirmed with modification.
Notes.—Res ipsa loquitur, literally, “the thing speaks for itself”; is a rule
Interphil Laboratories, Inc. vs. OEP Philippines, Inc.
of evidence that presumes negligence from the very nature of the accident
oppression, insult or fraud or gross fraud —that intensifies the
itself using common human knowledge or experience. (Borromeo vs. Family
injury. The terms punitive or vindictive damages are often used
Care Hospital, Inc., 781 SCRA 527 [2016])
to refer to those species of damages that may be awarded
In culpa contractual or breach of contract, like in the present case, moral
against a person to punish him for his outrageous conduct. In
damages are recoverable only if the defendant has acted fraudulently or in
either case, these damages are intended in good measure to
bad faith, or is found guilty of gross negligence amounting to bad faith, or in
deter the wrongdoer and others like him from similar conduct
wanton disregard of his contractual obligations. (Oliver vs. Philippine
in the future. x x x (Citation and emphases in the original
70
Savings Bank, 788 SCRA 189 [2016])
deleted)
——o0o——
While Interphil did not necessarily act in a willful, malicious, or wanton _______________
manner, it is clear that it was grossly negligent in its defective packaging.
This gross negligence not only prejudiced the contractual relationship ** Designated additional member per Special Order No. 2624 dated November 28,
between the parties, but also endangered the health of the end consumers 2018.
who received the packages, seen in the fact that the hospitals themselves sent © Copyright 2021 Central Book Supply, Inc. All rights reserved.
notice of the infirmity after receiving the defective items. Therefore, the
Court adheres to the findings of the lower courts that Interphil is also liable
for exemplary damages to serve as a warning to the public to be more
circumspect when it comes to product handling, particularly those involving
the health and safety of the consumers.
On the matter of attorney’s fees, OEP’s entitlement thereto is beyond
caveat as it was compelled to litigate and, thus, incurred expenses thereto.