Quiroz vs. Nalus

Unliquidated damages are not deemed admitted even if not specifically denied and must be established by actual proof; where liability is resolved by judgment on the pleadings but damages remain unproven and unstipulated, remand for reception of evidence on the extent of damages is proper.

Gloria F. Quiroz and Ramon R. Nalus were parties to a contractual arrangement obligating Nalus to deliver back to Quiroz the physical use and possession of a property. When Nalus failed to honor that obligation, Quiroz filed Civil Case No. 14-131611 before the Regional Trial Court of the City of Manila, Branch 52, and thereafter sought judgment on the pleadings.

According to the complaint as admitted for purposes of the motion, Nalus committed contractual breach by withholding the property's use and possession. Nalus did not specifically deny the breach, and liability was thus deemed established on the pleadings. The trial court also awarded Quiroz damages in the same judgment, without reception of evidence.

Thereafter, the property came to be leased out to Generika Drugstore, rendering Nalus's original obligation to restore physical use and possession to Quiroz allegedly incapable of performance. The Court of Appeals sustained the finding of breach but deleted the damages award for lack of evidentiary basis, a disposition initially affirmed in full by the Supreme Court on March 11, 2020.

• Judgment on the Pleadings as Admission of Damages: Petitioner argued that restoration of the trial court's damages award without further proof was warranted, citing Santiago vs. Basifan Lumber Co. and Tropical Homes, Inc. vs. CA for the proposition that defendants who did not object to judgment on the pleadings were deemed to have admitted the factual allegations of the complaints, dispensing with evidence on damages.
• Alternative Remand for Proof of Damages: Petitioner maintained that, in the alternative, the case should be remanded to the trial court for presentation of evidence on damages, considering that Nalus could no longer comply with the order to deliver back physical use and possession because the property was now leased to Generika Drugstore.

• Unliquidated Damages Not Deemed Admitted: Respondent countered that a claim for damages is not deemed admitted even if not specifically denied in the answer, and that Quiroz was required to present proof to establish her claim.
• Election of Judgment on the Pleadings: Respondent argued that Quiroz's failure of proof was fatal because she opted for judgment on the pleadings instead of adducing evidence on damages.

• Proof of Damages After Judgment on the Pleadings: Whether Quiroz should be allowed to prove the damages she claims to have suffered arising from Nalus's contractual breach.
• Applicability of Cited Damages Awards: Whether Santiago and Tropical Homes support an award of damages by judgment on the pleadings without evidence.

• Proof of Damages After Judgment on the Pleadings: Yes. Liability for breach was deemed admitted, but the extent of unliquidated damages was deemed specifically denied and must be proved, warranting remand for reception of evidence in the interest of substantial justice.
• Applicability of Cited Damages Awards: No. Santiago and Tropical Homes are inapplicable, both having involved a stipulation or recorded agreement fixing the amount owed, unlike the present case where no such stipulation or admission exists.

• Proof of Damages After Judgment on the Pleadings: Under Section 11, material averments other than the amount of unliquidated damages are deemed admitted when not specifically denied, while allegations of unliquidated damages are deemed specifically denied. Applied here, Nalus's contractual breach stood admitted, but the resulting damages claimed by Quiroz did not. Following Swim Phils., Inc. vs. CORS Retail Concept, Inc., which in turn applied Raagas vs. Traya, actual damages must be proved by actual evidence of fact and amount rather than speculation, conjecture, or guesswork. Remand to the trial court was therefore ordered to determine the precise extent of damages attributable to the breach.
• Applicability of Cited Damages Awards: Santiago was distinguished because the parties had stipulated on the value of the cut timber, which the trial court merely adopted in awarding actual damages by judgment on the pleadings. Tropical Homes was likewise distinguished because the actual damages were based on a reconstructed payment scheme the defendant himself had agreed to settle on record but later refused to pay. Absent any comparable stipulation or admission on the extent of actual damages here, presentation of evidence could not be dispensed with.

• Judgment on the pleadings; deemed admissions vs. unliquidated damages — Material averments in the complaint, other than those as to the amount of unliquidated damages, are deemed admitted when not specifically denied; allegations as to unliquidated damages are deemed specifically denied and require proof. Applied here, Nalus's breach was deemed admitted, but Quiroz's claimed damages were not, so damages could not be awarded by judgment on the pleadings alone.
• Actual damages must be proved — Actual damages cannot rest on speculation, conjecture, or guesswork but must depend on actual proof both that damages were suffered and of the actual amount. Applied through Raagas vs. Traya and Swim Phils., Inc. vs. CORS Retail Concept, Inc., Quiroz was required to adduce evidence establishing the exact pecuniary extent of loss caused by the breach.
• Remand in the higher interest of substantial justice — Where judgment on the pleadings properly resolves liability but leaves unliquidated damages unproven, the case may be remanded for reception of evidence to determine the actual extent of damages. Applied here, Civil Case No. 14-131611 was remanded to the Regional Trial Court for that limited purpose.

• "in a judgment on the pleadings, the award of moral damages must be justified. It cannot be granted, sans proof of its factual basis and causal connection to the act complained of." — This states the original basis for affirming the deletion of damages, and explains why exemplary damages were likewise withheld when moral damages could not be awarded.
• "Even if the allegations regarding the amount of damages in the complaint are not specifically denied in the answer, such damages are not deemed admitted, xxxx Actual damages must be proved, and that a court cannot rely on "speculation, conjecture or guesswork" as to the fact and amount of damages, but must depend on actual proof that damages had been suffered and on evidence of the actual amount." — This restates the Raagas vs. Traya rule adopted to hold that Quiroz's damages remained controverted and required evidence.
• "(m)aterial averment in the complaint, other than those as to the amount of unliguidated damages, shall be deemed admitted when not specifically denied, x x x." — This supplies the textual basis under Section 11 for distinguishing admitted breach from unadmitted unliquidated damages.

• Swim Phils., Inc. vs. CORS Retail Concept, Inc., G.R. No. 224194, June 19, 2019 — Followed as controlling precedent that judgment on the pleadings was improper for determining the extent of damages and that remand for reception of evidence was required.
• Raagas vs. Traya, 130 Phil. 846 (1968) — Followed for the rule that allegations of unliquidated damages are deemed specifically denied and that actual damages must be proved by actual evidence, not speculation.
• Santiago vs. Basifan Lumber Co., 118 Phil. 1191 (1963) — Distinguished because damages therein rested on the parties' stipulation on the value of cut timber adopted in the judgment on the pleadings.
• Tropical Homes, Inc. vs. CA, 33.8 Phil. 930 (1997) — Distinguished because actual damages therein rested on a reconstructed payment scheme the defendant had agreed to on record.

• Section 11, rule on deemed admissions — Provides that material averments in the complaint, other than those as to the amount of unliquidated damages, are deemed admitted when not specifically denied. Applied to treat Nalus's breach as admitted while treating Quiroz's claimed damages as specifically denied and therefore requiring proof.

Caguioa (Chairperson), M. Lopez, Rosario, and Singh, JJ., concur.