1
[G.R. No. 159352. April 14, 2004]
PREMIERE DEVELOPMENT BANK, petitioner, vs. COURT OF APPEALS,
PANACOR MARKETING CORPORATION and ARIZONA TRANSPORT
CORPORATION, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the 1997 Rules on Civil Procedure
seeking the annulment of the Decision dated June 18, 2003 of the Court of
Appeals[1] which affirmed the Decision of the Regional Trial Court [2] in Civil Case No.
65577.
The undisputed facts show that on or about October 1994, Panacor Marketing
Corporation (Panacor for brevity), a newly formed corporation, acquired an exclusive
distributorship of products manufactured by Colgate Palmolive Philippines, Inc.
(Colgate for short). To meet the capital requirements of the exclusive distributorship,
which required an initial inventory level of P7.5 million, Panacor applied for a loan of
P4.1 million with Premiere Development Bank. After an extensive study of Panacors
creditworthiness, Premiere Bank rejected the loan application and suggested that its
affiliate company, Arizona Transport Corporation (Arizona for short),[3] should instead
apply for the loan on condition that the proceeds thereof shall be made available to
Panacor. Eventually, Panacor was granted a P4.1 million credit line as evidenced by a
Credit Line Agreement.[4] As suggested, Arizona, which was an existing loan client,
applied for and was granted a loan of P6.1 million, P3.4 million of which would be
used to pay-off its existing loan accounts and the remaining P2.7 million as credit
line of Panacor. As security for the P6.1 million loan, Arizona, represented by its Chief
Executive Officer Pedro Panaligan and spouses Pedro and Marietta Panaligan in their
personal capacities, executed a Real Estate Mortgage against a parcel of land
covered by TCT No. T-3475 as per Entry No. 49507 dated October 2, 1995.[5]
Since the P2.7 million released by Premiere Bank fell short of the P4.1 million credit
line which was previously approved, Panacor negotiated for a take-out loan with Iba
Finance Corporation (hereinafter referred to as Iba-Finance) in the sum of P10
million, P7.5 million of which will be released outright in order to take-out the loan
from Premiere Bank and the balance of P2.5 million (to complete the needed capital
of P4.1 million with Colgate) to be released after the cancellation by Premiere of the
collateral mortgage on the property covered by TCT No. T-3475. Pursuant to the said
take-out agreement, Iba-Finance was authorized to pay Premiere Bank the prior
existing loan obligations of Arizona in an amount not to exceed P6 million.
On October 5, 1995, Iba-Finance sent a letter to Ms. Arlene R. Martillano, officer-in-
charge of Premiere Banks San Juan Branch, informing her of the approved loan in
favor of Panacor and Arizona, and requesting for the release of TCT No. T-
3475. Martillano, after reading the letter, affixed her signature of conformity thereto
and sent the original copy to Premiere Banks legal office. The full text of the letter
reads:[6]
Please be informed that we have approved the loan application of ARIZONA
TRANSPORT CORP. and PANACOR MARKETING CORPORATION. Both represented by
MR. PEDRO P. PANALIGAN (hereinafter the BORROWERS) in the principal amount of
PESOS: SEVEN MILLION FIVE HUNDRED THOUSAND ONLY (P7,500,000.00) Philippine
Currency. The loan shall be secured by a Real Estate Mortgage over a parcel of land
located at #777 Nueve de Pebrero St. Bo. Mauway, Mandaluyong City, Metro Manila
covered by TCT No. 3475 and registered under the name of Arizona Haulers, Inc.
which is presently mortgaged with your bank.
The borrowers have authorized IBA FINANCE CORP. to pay Premiere Bank from the
proceeds of their loan. The disbursement of the loan, however is subject to the
annotation of our mortgage lien on the said property and final verification that said
title is free from any other lien or encumbrance other than that of your company and
IBA Finance Corporation.
In order to register the mortgage, please entrust to us the owners duplicate copy of
TCT No. 3475, current tax declaration, realty tax receipts for the current year and
other documents necessary to affect annotation thereof.
Upon registration of our mortgage, we undertake to remit directly to you or your
authorized representative the amount equivalent to the Borrowers outstanding
indebtedness to Premiere Bank as duly certified by your goodselves provided such
an amount shall not exceed PESOS: SIX MILLION ONLY (P6,000,000.00) and any
amount in excess of the aforestated shall be for the account of the borrowers. It is
understood that upon receipt of payment, you will release to us the corresponding
cancellation of your mortgage within five (5) banking days therefrom.
If the foregoing terms and conditions are acceptable to you, please affix your
signature provided below and furnish us a copy of the Statement of Account of said
borrowers.
On October 12, 1995, Premiere Bank sent a letter-reply [7] to Iba-Finance, informing
the latter of its refusal to turn over the requested documents on the ground
that Arizona had existing unpaid loan obligations and that it was the banks policy to
require full payment of all outstanding loan obligations prior to the release of
mortgage documents. Thereafter, Premiere Bank issued to Iba-Finance a Final
Statement of Account[8] showing Arizonas total loan indebtedness. On October 19,
1995, Panacor and Arizona executed in favor of Iba-Finance a promissory note in the
amount of 7.5 million. Thereafter, Iba-Finance paid to Premiere Bank the amount of
P6,235,754.79 representing the full outstanding loan account of Arizona. Despite

such payment, Premiere Bank still refused to release the requested mortgage
documents specifically, the owners duplicate copy of TCT No. T-3475. [9]
On November 2, 1995, Panacor requested Iba-Finance for the immediate approval
and release of the remaining P2.5 million loan to meet the required monthly
purchases from Colgate. Iba-Finance explained however, that the processing of the
P2.5 million loan application was conditioned, among others, on the submission of
the owners duplicate copy of TCT No. 3475 and the cancellation by Premiere Bank
of Arizonas mortgage. Occasioned by Premiere Banks adamant refusal to release the
mortgage cancellation document, Panacor failed to generate the required capital to
meet its distribution and sales targets. On December 7, 1995, Colgate informed
Panacor of its decision to terminate their distribution agreement.
On March 13, 1996, Panacor and Arizona filed a complaint for specific performance
and damages against Premiere Bank before the Regional Trial Court of Pasig City,
docketed as Civil Case No. 65577.
On June 11, 1996, Iba-Finance filed a complaint-in-intervention praying that
judgment be rendered ordering Premiere Bank to pay damages in its favor.
On May 26, 1998, the trial court rendered a decision in favor of Panacor and Iba-
Finance, the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Panacor Marketing
Corporation and against the defendant Premiere Bank, ordering the latter to pay the
former the following sums, namely:
1) P4,520,000.00 in addition to legal interest from the time of filing of the
complaint until full payment;
2) P1,000,000.00 as and for exemplary damages;
3) P100,000.00 as and for reasonable attorneys fees; and
4) Costs of suit.
Similarly, judgment is hereby rendered in favor of plaintiff-in-intervention IBA-
Finance Corporation as against defendant Premiere bank, as follows, namely:
1) Ordering defendant Premiere Bank to release to plaintiff-intervenor
IBA-Finance Corporation the owners duplicate copy of Transfer Certificate
of Title No. 3475 registered in the name of Arizona Haulers, Inc. including
the deed of cancellation of the mortgage constituted thereon;
2
2) Ordering the defendant Premiere Bank to pay to Intervenor IBA-
Finance, the following sums, to wit:
3) P1,000,000.00 as and by way of exemplary damages; and
4) P100,000.00 as and for reasonable attorneys fees; and
5) Costs of suit.
For lack of sufficient legal and factual basis, the counterclaim of defendant Premiere
Bank is DISMISSED.
SO ORDERED.
Premiere Bank appealed to the Court of Appeals contending that the trial court erred
in finding, inter alia, that it had maliciously downgraded the credit-line of Panacor
from P4.1 million to P2.7 million.
In the meantime, a compromise agreement was entered into between Iba-Finance
and Premiere Bank whereby the latter agreed to return without interest the amount
of P6,235,754.79 which Iba-Finance earlier remitted to Premiere Bank to pay off the
unpaid loans of Arizona. On March 11, 1999, the compromise agreement was
approved.
On June 18, 2003, a decision was rendered by the Court of Appeals which affirmed
with modification the decision of the trial court, the dispositive portion of which
reads:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED, and the
decision appealed from in Civil Case No. 65577 is hereby AFFIRMED with
MODIFICATION in that the award of exemplary damages in favor of the appellees is
hereby reduced to P500,000.00. Needless to add, in view of the Compromise
Agreement plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE
between plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE as
approved by this Court per Resolution dated March 11, 1999, Our dispositive of the
present appeal is only with respect to the liability of appellant PREMIERE to the
plaintiff-appellees.
With costs against the defendant-appellant.
SO ORDERED.[10]
Hence the present petition for review, which raises the following issues: [11]

I copy of TCT No. T-3475 in order to register its mortgage, after which Iba-Finance
WHETHER OR NOT THE DECISION OF HONORABLE COURT OF APPEALS EXCEEDED
AND WENT BEYOND THE FACTS, THE ISSUES AND EVIDENCE PRESENTED IN THE
APPEAL TAKING INTO CONSIDERATION THE ARGUMENT OF PETITIONER BANK AND
ADVENT OF THE DULY APPROVED COMPROMISE AGREEMENT BETWEEN THE
PETITIONER BANK AND IBA FINANCE CORPORATION.
II
WHETHER OR NOT THE ISSUES THAT SHOULD HAVE BEEN RESOLVED BY THE
HONORABLE COURT OF APPEALS, BY REASON OF THE EXISTENCE OF THE
COMPROMISE AGREEMENT, IS LIMITED TO THE ISSUE OF ALLEGED BAD FAITH OF
PETITIONER BANK IN THE DOWNGRADING OF THE LOAN AND SHOULD NOT INCLUDE
THE RENDITION OF AN ADVERSE PRONOUNCEMENT TO AN ALREADY FAIT ACCOMPLI-
ISSUE ON THE REFUSAL OF THE BANK TO RECOGNIZE THE TAKE-OUT OF THE LOAN
AND THE RELEASE OF TCT NO. 3475.
III
WHETHER OR NOT PETITIONER ACTED IN BAD FAITH IN THE DOWNGRADING OF THE
LOAN OF RESPONDENTS TO SUPPORT AN AWARD OF ACTUAL AND EXEMPLARY
DAMAGES NOW REDUCED TO P500,000.00.
IV
WHETHER OR NOT THERE IS BASIS OR COMPETENT PIECE OF EVIDENCE PRESENTED
DURING THE TRIAL TO SUPPORT AN AWARD OF ACTUAL DAMAGES OF
P4,520,000.00.
Firstly, Premiere Bank argues that considering the compromise agreement it entered
with Iba-Finance, the Court of Appeals should have ruled only on the issue of its
alleged bad faith in downgrading Panacors credit line. It further contends that the
Court of Appeals should have refrained from making any adverse pronouncement on
the refusal of Premiere Bank to recognize the take-out and its subsequent failure to
release the cancellation of the mortgage because they were rendered fait
accompli by the compromise agreement.
We are not persuaded.
In a letter-agreement[12] dated October 5, 1995, Iba-Finance informed Premiere Bank
of its approval of Panacors loan application in the amount of P10 million to be
secured by a real estate mortgage over a parcel of land covered by TCT No. T-3475.
It was agreed that Premiere Bank shall entrust to Iba-Finance the owners duplicate
3
shall pay off Arizonas outstanding indebtedness. Accordingly, Iba-Finance remitted
P6,235,754.79 to Premiere Bank on the understanding that said amount represented
the full payment of Arizonas loan obligations. Despite performance by Iba-Finance of
its end of the bargain, Premiere Bank refused to deliver the mortgage document. As
a consequence, Iba-Finance failed to release the remaining P2.5 million loan it earlier
pledged to Panacor, which finally led to the revocation of its distributorship
agreement with Colgate.
Undeniably, the not-so-forthright conduct of Premiere Bank in its dealings with
respondent corporations caused damage to Panacor and Iba-Finance. It is error for
Premiere Bank to assume that the compromise agreement it entered with Iba-
Finance extinguished all direct and collateral incidents to the aborted take-out such
that it also cancelled its obligations to Panacor. The unjustified refusal by Premiere
Bank to release the mortgage document prompted Iba-Finance to withhold the
release of the P2.5 million earmarked for Panacor which eventually terminated the
distributorship agreement. Both Iba-Finance and Panacor, which are two separate
and distinct juridical entities, suffered damages due to the fault of Premiere
Bank. Hence, it should be held liable to each of them.
While the compromise agreement may have resulted in the satisfaction of Iba-
Finances legal claims, Premiere Banks liability to Panacor remains. We agree with the
Court of Appeals that the present appeal is only with respect to the liability of
appellant Premiere Bank to the plaintiffs-appellees (Panacor and Arizona)[13] taking
into account the compromise agreement.
For the foregoing reasons, we find that the Court of Appeals did not err in discussing
in the assailed decision the abortive take-out and the refusal by Premiere Bank to
release the cancellation of the mortgage document.
Secondly, Premiere Bank asserts that it acted in good faith when it downgraded the
credit line of Panacor from P4.1 million to P2.7 million. It cites the decision of the
trial court which, albeit inconsistent with its final disposition, expressly recognized
that the downgrading of the loan was not the proximate cause of the damages
suffered by respondents.
Under the Credit Line Agreement[14] dated September 1995, Premiere Bank agreed to
extend a loan of P4.1 million to Arizona to be used by its affiliate, Panacor, in its
operations. Eventually, Premiere approved in favor of Arizona a loan equivalent to
P6.1 million, P3.4 million of which was allotted for the payment of Arizonas existing
loan obligations and P2.7 million as credit line of Panacor. Since only P2.7 million was
made available to Panacor, instead of P4.1 million as previously approved, Panacor
applied for a P2.5 loan from Iba-Finance, which, as earlier mentioned, was not
released because of Premiere Banks refusal to issue the mortgage cancellation.

It is clear that Premiere Bank deviated from the terms of the credit line agreement
when it unilaterally and arbitrarily downgraded the credit line of Panacor from P4.1
million to P2.7 million. Having entered into a well-defined contractual relationship, it
is imperative that the parties should honor and adhere to their respective rights and
obligations thereunder. Law and jurisprudence dictate that obligations arising from
contracts have the force of law between the contracting parties and should be
complied with in good faith. [15] The appellate court correctly observed, and we agree,
that:
Appellants actuations, considering the actual knowledge of its officers of the tight
financial situation of appellee PANACOR brought about primarily by the appellant
banks considerable reduction of the credit line portion of the loan, in relation to the
bail-out efforts of IBA Finance, whose payment of the outstanding loan account of
appellee ARIZONA with appellant was readily accepted by the appellant, were truly
marked by bad faith and lack of due regard to the urgency of its compliance by
immediately releasing the mortgage cancellation document and delivery of the title
to IBA Finance. That time is of the essence in the requested release of the mortgage
cancellation and delivery of the subject title was only too well-known to appellant,
having only belatedly invoked the cross-default provision in the Real Estate
Mortgage executed in its favor by appellee ARIZONA to resist the plain valid and just
demand of IBA Finance for such compliance by appellant bank.[16]
Premiere Bank cannot justify its arbitrary act of downgrading the credit line on the
alleged finding by its project analyst that the distributorship was not financially
feasible. Notwithstanding the alleged forewarning, Premiere Bank still
extended Arizona the loan of P6.1 million, albeit in contravention of the credit line
agreement. This indubitably indicates that Premiere Bank had deliberately and
voluntarily granted the said loan despite its claim that the distributorship contract
was not viable.
Neither can Premiere Bank rely on the puerile excuse that it was the banks policy
not to release the mortgage cancellation prior to the settlement of outstanding loan
obligations. Needless to say, the Final Statement of Account dated October 17,
1995 showing in no uncertain terms Arizonas outstanding indebtedness, which was
subsequently paid by Iba-Finance, was the full payment of Arizonas loan obligations.
Equity demands that a party cannot disown it previous declaration to the prejudice
of the other party who relied reasonably and justifiably on such declaration.
Thirdly, Premiere Bank avers that the appellate courts reliance on the credit line
agreement as the basis of bad faith on its part was inadmissible or self-serving for
not being duly notarized, being unsigned in all of its left margins, and undated.
According to Premiere Bank, the irregularities in the execution of the credit line
agreement bolsters the theory that the same was the product of manipulation
orchestrated by respondent corporations through undue influence and pressure
exerted by its officers on Martillano.
4
Premiere Banks posture deserves scant consideration. As found by the lower court,
there are sufficient indicia that demonstrate that the alleged unjust pressure exerted
on Martillano was more imagined than real. In her testimony, Martillano claims that
she was persuaded and coaxed by Caday of Iba-Finance and Panaligan of Panacor to
sign the letter. It was she who provided Iba-Finance with the Final Statement of
Account and accepted its payment without objection or qualification. These acts
show that she was vested by Premiere Bank with sufficient authority to enter into
the said transactions.
If a private corporation intentionally or negligently clothes its officers or agents with
apparent power to perform acts for it, the corporation will be estopped to deny that
the apparent authority is real as to innocent third persons dealing in good faith with
such officers or agents.[17] As testified to by Martillano, after she received a copy of
the credit line agreement and affixed her signature in conformity thereto, she
forwarded the same to the legal department of the Bank at its Head Office. Despite
its knowledge, Premiere Bank failed to disaffirm the contract. When the officers or
agents of a corporation exceed their powers in entering into contracts or doing other
acts, the corporation, when it has knowledge thereof, must promptly disaffirm the
contract or act and allow the other party or third persons to act in the belief that it
was authorized or has been ratified. If it acquiesces, with knowledge of the facts, or
fails to disaffirm, ratification will be implied or else it will be estopped to deny
ratification.[18]
Finally, Premiere Bank argues that the finding by the appellate court that it was
liable for actual damages in the amount of P4,520,000.00 is without basis. It
contends that the evidence presented by Panacor in support of its claim for actual
damages are not official receipts but self-serving declarations.
To justify an award for actual damages, there must be competent proof of the actual
amount of loss. Credence can be given only to claims, which are duly supported by
receipts.[19] The burden of proof is on the party who will be defeated if no evidence is
presented on either side. He must establish his case by a preponderance of
evidence which means that the evidence, as a whole, adduced by one side is
superior to that of the other. In other words, damages cannot be presumed and
courts, in making an award, must point out specific facts that can afford a basis for
measuring whatever compensatory or actual damages are borne.
Under Article 2199 of the Civil Code, actual or compensatory damages are those
awarded in satisfaction of, or in recompense for, loss or injury sustained. They
proceed from a sense of natural justice and are designed to repair the wrong that
has been done, to compensate for the injury inflicted and not to impose a penalty.
In the instant case, the actual damages were proven through the sole testimony of
Themistocles Ruguero, the vice president for administration of Panacor. In his
testimony, the witness affirmed that Panacor incurred losses, specifically, in terms of
training and seminars, leasehold acquisition, procurement of vehicles and office
 5

equipment without, however, adducing receipts to substantiate the same. The
documentary evidence marked as exhibit W, which was an ordinary private writing
allegedly itemizing the capital expenditures and losses from the failed operation of
Panacor, was not testified to by any witness to ascertain the veracity of its contents.
Although the lower court fixed the sum of P4,520,000.00 as the total expenditures
incurred by Panacor, it failed to show how and in what manner the same were
substantiated by the claimant with reasonable certainty. Hence, the claim for actual
damages should be admitted with extreme caution since it is only based on bare
assertion without support from independent evidence. Premieres failure to prove
actual expenditure consequently conduces to a failure of its claim. In determining
actual damages, the court cannot rely on mere assertions, speculations, conjectures
or guesswork but must depend on competent proof and on the best evidence
obtainable regarding the actual amount of loss.[20]
Under the circumstances, the sum of P200,000.00 as temperate damages is
reasonable.
WHEREFORE, the petition is DENIED. The Decision dated June 18, 2003 of the Court
of Appeals in CA-G.R. CV No. 60750, ordering Premiere Bank to pay Panacor
Marketing Corporation P500,000.00 as exemplary damages, P100,000.00 as
attorneys fees, and costs, is AFFIRMED, with the MODIFICATION that the award of
P4,520,000.00 as actual damages is DELETED for lack of factual basis. In lieu
thereof, Premiere Bank is ordered to pay Panacor P200,000.00 as temperate
damages.
SO ORDERED.

Even if not recoverable as compensatory damages, Panacor may still be awarded

damages in the concept of temperate or moderate damages. When the court finds
that some pecuniary loss has been suffered but the amount cannot, from the nature
of the case, be proved with certainty, temperate damages may be recovered.
Temperate damages may be allowed in cases where from the nature of the case,
definite proof of pecuniary loss cannot be adduced, although the court is convinced
that the aggrieved party suffered some pecuniary loss.

The Code Commission, in explaining the concept of temperate damages under

Article 2224, makes the following comment:[21]

In some States of the American Union, temperate damages are allowed. There are
cases where from the nature of the case, definite proof of pecuniary loss cannot be
offered, although the court is convinced that there has been such loss. For instance,
injury to ones commercial credit or to the goodwill of a business firm is often hard to
show with certainty in terms of money. Should damages be denied for that reason?
The judge should be empowered to calculate moderate damages in such cases,
rather than that the plaintiff should suffer, without redress from the defendant's
wrongful act.

It is obvious that the wrongful acts of Premiere Bank adversely affected, in one way
or another, the commercial credit[22] of Panacor, greatly contributed to, if not,
decisively caused the premature stoppage of its business operations and the
consequent loss of business opportunity. Since these losses are not susceptible to
pecuniary estimation, temperate damages may be awarded. Article 2216 of the Civil
Code:

No proof of pecuniary loss is necessary in order that moral, nominal, temperate,

liquidated or exemplary damages may be adjudicated. The assessment of such
damages, except liquidated ones, is left to the discretion of the Court, according to
the circumstances of each case.

G.Q. GARMENTS, INC. VS. MIRANDA
G.R. No. 161722 July 20, 2006
Facts:
Angel Miranda is the registered owner of a 9,646 square meters parcel of land
located at Niog, Bacoor, Cavite (Property). The property was a verbal contract
leased with his son Angelito Miranda who established the Executive Machineries and
Equipment Corporation (EMECO). The lease was on a month-to-month basis for a
consideration of Php 8,000.00 per month. EMECO constructed its factory on the
property and paid the said rentals. However when Angelito died, EMECO failed to
pay the rentals but still continued possessing the leased premises. On 1989, the
factory of EMECO was totally razed by fire. Angel demanded the payment of accrued
rentals amounting to Php 280,000.00 as of May 1991 and also informed that the oral
contract of lease would be terminated effective June 30, 1991. After sending another
demand letter, EMECO vacated the leased premised but the accrued rentals
remained unpaid.
Sometime in November 1991, Florenda, Angelitos wife, arrived at the office of
petitioner and offered to sublease the property to Wilson Kho, the Officer-in Charge
of GQ garments. After visiting the property, Kho agreed to rent the area upon the
condition that its true and registered owner would personally sign the lease contract
in his presence. However, Florenda failed to present Angel for said purpose, Kho
turned down her proposal. Later, Kho was able to locate Angel and offered in behalf
of petitioner, to lease the property, as to which Angel agreed.
On December of that year, Davy John Barlin, the executive president representing
the corporation and Angel executed a contract of lease. The lease was for a period
of 15 years for a monthly rental of Php 30,000.00. Petitioner paid Php 90,000.00
representing two months deposit and advance rental for one month. As lessee, it
was authorized to introduce improvements, structures, and buildings on the property
as it may deem necessary and for the purpose for which it was leased.
Consequently, petitioner secured the necessary documents and permits. The
construction of a building and factory in the leased premises commenced. However,
on January 27, 1992, Florenda, together with several armed men who identified
themselves as policemen, forcibly evicted petitioner from the leased premises,
claiming that she was the owner and that the place was already covered by another
existing contract of lease. During the encounter, Florenda and her men took some
equipment, machinery and other properties belonging to petitioner, thereby causing
loss and damage to said properties. In the meantime, Angel secured a copy of the
alleged contract of leased with EMECO. He filed a complaint for declaration of nullity
of the contract before the Regional Trial Court because his signature was forged
praying for judgment to be rendered in his favour.
Meanwhile, petitioner sought the help of the Philippine National Police (PNP).
General Gerardo N. Flores, Deputy Director General and Chief Directorial Staff,
6
issued a Memorandum to Superintendent Wenceslao A. Soberano, Provincial Director
of the Cavite PNP Provincial Command, ordering the latter to prevent his men from
interfering with the pending civil case. As a result, petitioner regained possession
over the leased premises. However, Florenda and her group went back to the place
and ousted the guards and other personnel manning the corporations office, and
even removed their equipment, and ransacked anew their raw materials, electric
wire and other valuables inside.
On April 20, 1992, petitioner instituted an action for damages and recovery of
possession of the property before the RTC of Cavite City, Branch 17, with Angel,
EMECO and Florenda, as alternative defendants. Angel was impleaded since he has
the obligation to keep and maintain the plaintiff in peaceful possession of the leased
premises. On June 25, 1992, Angel and petitioner, as plaintiffs, filed a separate
complaint for ejectment against Florenda before the Municipal Trial Court (MTC) of
Bacoor, Cavite. After due proceedings, the court rendered judgment on July 2, 1993,
ordering the eviction of Florenda and all those claiming the property in her behalf.
The decision was appealed to the RTC. However, for failure to pay a supersedeas
bond, the decision was executed and Florenda was evicted from the property.
On November 26, 1993, the RTC rendered judgment dismissing the complaint
against all the alternative defendants without prejudice. It declared that plaintiff was
entitled to damages, but it had to dismiss the complaint because of the pendency of
other civil cases. However, the RTC resolved to deny the motion of petitioner
prompting it to appeal to the Court of Appeals. Angel Miranda also appealed the
decision. Meantime, on September 22, 1994, the RTC rendered judgment in favor of
Angel and declared the contract of lease purportedly executed by him and EMECO
void. On October 29, 2002, the CA rendered judgment reversing the decision of the
RTC. Accordingly, the judgment appealed was reversed and set aside dismissing the
complaint with prejudice against Angel and ordering Florenda to pay damages and
attorneys fees.
The appellate court absolved Angel of any liability due to the absence of evidence
showing that he had participated, directly or indirectly, in the looting of GQ
Garments properties and in forcibly ejecting the latter from the premises in
question. According to the CA anchored on Article 1653 and 1654 of the New Civil
Code, the evidence on record clearly showed that Florenda disturbed only the
physical possession of the leased premises, and not legal possession. Thus, the
complaint with respect to Angel Miranda should be dismissed with prejudice for lack
of cause of action. On cross-examination, Angel admitted that he received Php
360,000.00 from petitioner. In addition, the plaintiff asserts that the actual damages
sustained when its equipment and machineries were destroyed are valued at Php
10,000,000.00. With all of this, petitioner filed the instant petition for review on
certiorari.
Issue: Whether or not the respondents are liable to petitioner for the amount of Php
10,000,000.00 by way of actual damages?
Ruling:
 7

With regard to the claim for actual damages of Php 10,000,000.00, the Supreme
Court agreed with the ruling of the appellate court that petitioners claim for actual
damages was not properly substantiated by evidence. The alleged loss of articles,
machinery and equipment in the total sum of Php 9,960,000.00 was not proven by
clear and convincing evidence. Other than the bare testimony of Mr. Wilson Kho and
the witnesses he presented, there was no poof as to the existence of these items
prior to the taking over of Florenda over the property in question. To be entitled to
an award of actual damages, it is necessary to prove the precise amount of the loss
with a reasonable degree of certainty, premised upon competent proof and on the
best evidence obtainable by the injured party to justify such award. The award of
actual damages cannot be simply based on the mere allegation of a witness without
any tangible claim, such as receipts or other documentary proofs to support such
claim. Failing to satisfy the court that petitioner certainly suffered actual damages,
its claim must now fail.

No other proof was adduced to establish the value or price of the equipment,
machineries and valuables taken by respondent Florenda Miranda, as well as the
damage to petitioners building. The bare claim of Kho that the petitioner sustained
actual damages in the amount of Php 10,000,000.00 is utterly insufficient on which
to anchor a judgment for actual damages in the amount of Php 10,000,000.00; it is
speculative and merely a surmise.

With Florenda Mirandas admission of trespassing, she is clearly liable for damages
to the equipment, machineries and building of petitioner. We agree with the ruling of
the CA that respondent Angel Miranda is not liable for damages caused to
petitioners property. In case of noncompliance with the obligations stated in article
1654 of the NCC, the lessee may ask for the rescission of the lease contract and
indemnification for damages or only the latter, allowing the contract to remain in
force. It turned out that respondent Florenda Miranda attempted to hoodwink
petitioner and forged respondent Angel Mirandas signature on the contract of lease
she showed to petitioner. It appears that respondent Florenda Miranda tried to
coerce the petitioner into executing a contract of lease with EMECO over the
property, only to be rebuffed by the petitioner.

It bears stressing that respondent Angel Miranda was not content in adopting a mere
passive stance in the face of respondent Florenda Mirandas act of trespass. He and
the petitioner filed a case for forcible entry against Florenda Miranda; he also
succeeded in having the RTC, declare the contract of lease which respondent
Florenda Miranda showed petitioner as null and void, with the courts ruling that his
signature on the contract was a forgery. The petition is denied.

FIRST DIVISION
[G.R. No. L-35157. April 17, 1984.]
FRANCISCO A. PERFECTO, Petitioner-Appellant, v. HON. FELICIANO S.
GONZALES, Judge of the Court of First Instance of Catanduanes, and
JULIANA C. VISTA and VICENTE VISTA,Respondents-Appellees.
K.V. Faylona & Associates for Petitioner-Appellant.
Hon. Feliciano S. Gonzales, etc., Et. Al. for Respondents-Appellees.
SYLLABUS
1. CIVIL LAW; DAMAGES; ACTUAL DAMAGES; WHEN RECOVERABLE. Actual or
compensatory damages rae those recoverable because of pecuniary loss in
business, trade, property, profession, job or occupation, and the same must be
proved, otherwise, if the proff is flimsy and non-substantial, no damages will be
given.
2. ID.; ID.; ID.; IN CASES OF FILING OF CLEARLY UNFOUNDED SUITS; CASE AT BAR.
In the case of Malonzo v. Galang, 109 Phil. 16, the Court, speaking through Justice
J.B.L. Reyes, held that with respect to compensatory damages assuming that they
are recoverable under the theory that petitioner had filed a clearly unfounded suit
against respondent, the same constitutes a tort against the latter that makes the
former liable for all damages which are the natural and probable consequences of
the act or omissions complained of. These damages, cannot, however, be presumed
and must be duly proved (Article 2199, New Civil Code). Well settled is the rule that
even if the complaint filed by one against the other is clearly unfounded this does
not necessarily mean, in the absence of specific facts proving damages, that said
defendant really suffered actual damage over and above attorneys fees and costs.
The Court cannot rely on its speculations as to the fact and amount of damages. It
must depend on actual proof of the damages alleged to have been suffered.
Respondent judge found no basis for actual or compensatory damages and
exemplary damages when it said that "to slap a heavy damage upon the defendant
would be tantamount to imposing a prohibitive premium upon the filing of
complaints against public officials for misconduct in office, a policy that is neither
sound nor conducive to a healthy development of civic courage and public interest
so necessary and indispensable in the conduct of the affairs of the government."
DECISION
RELOVA, J.:
Private respondent Juliana C. Vista, a public school teacher of San Andres,
Catanduanes was appointed poll clerk by the Commission on Elections in Precinct
No. 25 of San Andres in the general elections of November 9, 1965.
8
Petitioner Francisco A. Perfecto, a retired public service commissioner, was a
candidate for congressman of the lone district of Catanduanes. He lost in that
election.
In August 1967, petitioner filed with the Commission on Elections an administrative
complaint against the members of the board of election inspectors of Precinct No. 25
of San Andres, namely: Roberto Reyes, Chairman; Felicidad Garcia, Nacionalista
Party inspector; Jorge Primo, Liberal Party inspector; and herein private respondent
Juliana C. Vista, poll clerk of said precinct. The complaint charged that the said
members of the board of election inspectors were guilty of non-feasance,
malfeasance and misfeasance for wilfull failure to comply with the instructions,
orders, decisions and rulings of the Commission in connection with the performance
of their duties relative to the conduct of the elections of 1965, committed in the
following manner, to wit:jgc:
"That during voting time on November 9, 1965, being an election day, in Precinct
No. 25 located at the Public School Building in the Barrio of Bislig, Municipality of San
Andres, Catanduanes, Philippines, and within the jurisdiction of this Honorable
Commission, the above-named respondents conspiring, confederating, collaborating
and mutually helping each other did then and there wilfully, criminally, feloniously
and unlawfully
"(a) tolerate, allow and permit numerous registered voters of said precinct to
prepare their ballots with the use of carbon paper or means for making copies of the
ballots to identify the votes of said voters in violation of Sec. 135 of the Revised
Election Code;
"(b) tolerate, allow and permit said voters to cast their unlawfully prepared ballots,
and further tolerate, allow and permit said voters to step out of the polling place
with the unlawfully made copies of the ballots, in their possession;
"(c) prevent the filing of protests and refuse to give protest forms to in spite of lawful
demands by the Nacionalista election watchers who wanted to file their protests,
against the manner of voting above-described;
"(d) accept the unlawfully prepared ballots and placed them in the box for valid
ballots and later read, counted and credited them in favor of the candidates whose
names were written thereon including Jose M. Alberto who was also a candidate for
the same position as the complainant;
"(e) falsify the truth by making it appear in their official records that there were no
anomalies in the voting and no protests against anomalies;
all of which unlawful acts violated the free and untrammeled expression of the
sovereign will of the people and cause damage to the complainant." (pp. 45-46,
Rollo)
As a consequence, private respondent Juliana Vista, assisted by her husband Vicente
Vista, filed an action for damages alleging that the above charges were false and
without basis and had been instituted maliciously in order to harass, annoy,
demean, degrade and expose her to public ridicule and because of which she
suffered "mental torture, anguish, sleepless nights, besmirched reputation, wounded
feelings, mental shock and social humiliation which may be assessed as moral
damages in the amount of P120,000.00." Further, she "claims the further sum of
 9

P15,000.00 as exemplary damages, and P10,000.00 for attorneys fees and of respondent judge in awarding private respondent compensatory damages in the
expenses in the prosecution of the suit." (p. 46, Rollo) amount of P2,000.00.

Answering the complaint for damages, herein petitioner Francisco A. Perfecto avers
that the filing of the administrative complaint against private respondent Vista and
the members of the board of election inspectors of Precinct No. 25 was done in good
faith with the highest motive of bringing to justice persons who have violated the
laws of the land; that he never had any personal grudge or ill-feeling against private
respondent previously and his only purpose in filing the administrative complaint
was to deter the commission of the acts charged for the sake of democracy; that he
even asked for the dismissal of all administrative cases he had filed against many
teachers in their conduct of the 1965 elections because he had no intention of
demeaning and degrading them and because he was satisfied with the action taken
by the Commission in connection with the election cases in the provinces of Batanes
and Cotabato.
Evidence shows that private respondent Vista was the poll clerk of Precinct No. 25 of
San Andres during the elections of 1965. However, it had been shown successfully
that she did not act as poll clerk on election day, November 9, 1965 because she
was ill and had been running with fever for several days prior to the election. In fact,
she was substituted by Nazaria B. Reyes, another public school teacher as poll clerk
on that day. The trial court on this point said:
". . . The best and most reliable proof showing the identities of the officials of
Precinct No. 25 who reported for duty on November 9, 1965, is the minutes of voting
which is supposed to be the authentic record of the proceedings in the precinct
during election day (Exhibit A) and the election return showing the result of the
canvass of the votes in the precinct which are all required to be accomplished and
signed by the chairman and members of the board of election inspectors including
the poll clerk. In both documents it appears that Mrs. Nazaria B. Reyes, the
substitute poll clerk, acted as poll clerk on election day in place of the regular poll
clerk, the plaintiff, who was absent and did not report for duty." (p. 49, Rollo)
There is merit in the petition. Respondent judge found no basis for actual or
compensatory damages and exemplary damages when it said that "to slap a heavy
damage upon the defendant would be tantamount to imposing a prohibitive
premium upon the filing of complaints against public officials for misconduct in
office, a policy that is neither sound nor conducive to a healthy development of civic
courage and public interest so necessary and indispensable in the conduct of the
affairs of the government (pp. 53-54, Rollo). Besides, actual or compensatory
damages are those recoverable because of pecuniary loss in business, trade,
property, profession, job, or occupation, and the same must be proved; otherwise, if
the proof is flimsy and non-substantial, no damages will be given. In the case of
Malonzo v. Galang, 109 Phil. 16, the Court, speaking through Justice J.B.L. Reyes,
held that with respect to compensatory damages assuming that they are
recoverable under the theory that petitioner had filed a clearly unfounded suit
against respondent, the same constitutes a tort against the latter that makes the
former liable for all damages which are the natural and probable consequences of
the act or omissions complained of. These damages, cannot, however, be presumed
and must be duly proved (Article 2199, New Civil Code). Well settled is the rule that
even if the complaint filed by one against the other is clearly unfounded this does
not necessarily mean, in the absence of specific facts proving damages, that said
defendant really suffered actual damage over and above attorneys fees and costs.
The Court cannot rely on its speculations as to the fact and amount of damages. It
must depend on actual proof of the damages alleged to have been suffered.
WHEREFORE, the petition is GRANTED and the order of respondent judge
condemning petitioner Francisco A. Perfecto to pay compensatory damages of
P2,000.00 is hereby SET ASIDE.
SO ORDERED

However, the lower court "failed to find sufficient proof to sustain the charge that in
filing the administrative complaint with the Commission on Elections the defendant
was acting with malice and for the sole purpose of degrading or besmirching the
reputation of the plaintiff and exposing her to public ridicule. The very complaint
itself shows upon itself that it was not directed solely at the plaintiff but was in fact
against all the members of the board of election inspectors of Precinct No. 25 of
which the plaintiff was only the poll clerk. In fact it would appear from a fair and
impartial appraisal of the charges that the major responsibility is lodged against the
chairman and the two other inspectors who by law control the proceedings in the
board. The poll clerk is comparatively a minor official in the board and there is
nothing in the complaint which will show that it was directed solely for the purpose
of harassing and injuring the reputation of the plaintiff. The chairman and the two
other election inspectors who were made respondents have not taken offense and
their conduct induces the impression that they either did not feel aggrieved or felt
that the dismissal of the complaint was enough vindication of their honor if in one
way or another it became involved as a result of the charges. . . . Under the
circumstances, the action taken by the defendant can hardly be construed as
motivated by malice and intended to harass and injure her reputation." (pp. 50-51,
Rollo) Notwithstanding, the lower court rendered judgment ordering herein petitioner
to indemnify private respondent the sum of P2,000.00 as compensatory damages.

Hence, the filing of this petition for review by way of certiorari to set aside the order
 10

GA Machineries v Yaptinchay (126 SCRA 78)
Facts:
Yaptinchay (Y) bought a Fordson engine from GA Machineries (GAMI) for
P7,560. He relied on the representations of the latters representative that the
engine was brand-new.
Y was engaged in the trucking business. The engine was installed in one of his
trucks.
Within a week from delivery, the engine started to have malfunctions
which necessitated successive trips to GAMIs repair shop.
o i l l e a k , c l u t c h d i s c , r e l e a s e b e a r i n g h u b a n d t r u n i o n b o l t , p r o p
e l l e r s h a f t L E M O N ! LEMON! LEMON!
Upon investigation, the ff were discovered:
1)Worn-out screw courtesy of Ys mechanic2)Tampered original motor number
courtesy of Capt. Garcias macro-etching test3)Two-tone paint (unlike brand-new
engine painted with single color)courtesy of Manila Trading Company
Y institutes action for indemnifi cation for damages. Trial Court orders
GAMI to pay Y P54k in actual damages, P7,590 as reimbursement for the purchase
price of the engine, and P2k in attorneys fees. CA affirms the decision. Hence,
this petition.
and the accompanying documentary evidence presented to prove the amount lost
are inadequate if not speculative. The document itself merely shows that everytime
a truck travels, Mr. Yaptinchay earns P369.88. This amount is then multiplied by the
number of trips which the truck was allegedly unable to make. The estimates were
prepared by a certain Dionisio M. Macasieb whose identity was not even revealed by
the respondent. Mr. Yaptinchay was in the freight truck business. He had several
freight trucks among them the truck with the subject Fordson diesel engine,
covering the route from Manila to Baguio. To prove actual damages, it would have
been easy to present the average actual profits realized by the other freight trucks
plying the Manila-Baguio route. With the presentation of such actual income the
court could have arrived with reasonable certainty at the amount of actual damages
suffered by the respondent. We rule that the award of actual damages in the amount
of P54,000.08 is not warranted by the evidence on record. [G.A. Machineries, Inc.
vs. Yaptinchay, 126 SCRA 78(1983)]

Issue: WON award of damages is justified

Held:

YES (reimbursement), NO (actual)

GAMI committed a breach of contract of sale. The misrepresentation
of the quality of the engine is tantamount to fraud or bad faith. Hence, the
award of P7,590 is justified.
ART 2200 CC entitles Y to recover compensatory damages for actual
loss suff ered and prospective profits while Art 2201 entitles him to recover all
damages which may be attributed to non-performance of the obligation. Such
damages, however, have to be proven.
BEST EVIDENCE TEST: A person claiming damages lucro cessante
must produce the best evidence of 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 defendants wrongful
act, he is entitled to recover.
Award of actual damages is unwarranted under best evidence test.
Projected profit prepared by a Mr. Macasieb (P369.88 profit per trip multiplied by
the number of trips the truck allegedly was unable to make)
Average actual profi ts of Ys trucks plying the Manila-Baguio route
would have provided a more reasonable basis for actual damages

DECISION MODIFIED: award of P54k deleted

Damages; Evidence; The amount representing profits which damaged party failed
to realize must be proved by the best evidence. Average actual profits of other
trucks of respondent should have been presented rather than a mere estimate on
"if-not-were-hired" basis.Applying the foregoing test to the instant case, we find
the evidence of the respondent insufficient to be considered within the purview of
"best evidence." The bare assertion of the respondent that he lost about P54,000.00

CARPIO v. VALMONTE
G.R. No. 151866; September 9, 2004;
FACTS:
Respondent Valmonte is a wedding coordinator. Michelle del Rosario and Jon Sierra
engaged her services for their church wedding. On that day, Valmonte went to the
Manila Hotel to where the bride and her family were billeted. When she arrived at
the Suite, several persons were already there including the petitioner Soledad
Carpio, an aunt of the bride who was preparing to dress up for the occasion.
After reporting to the bride, Valmonte went out of the suite carrying the
items needed fo rthe wedding rites and the gifts from the principal sponsors.
She proceeded to the Maynila Restaurant where the reception was to be held.
She went back to the suite after, and found several people staring at her when she
entered. . Itwas at this juncture that petitioner allegedly uttered the following words
to Valmonte: Ikaw lang ang lumabas ng kwarto, nasaan ang dala mong
bag? Saan ka pumunta? Ikaw lang ang lumabas ng kwarto, ikaw ang
kumuha. Petitioner then ordered one of the ladies to search Valmontes bag. It
turned out that after Valmonte left the room to attend to her duties, petitioner
discovered thatthe pieces of jewelry which she placed inside the comfort room in a
paper bag were lost. A few days after the incident, petitioner received a letter from
Valmonte demanding a formal letter of apology which she wanted to be circulated to
the newlyweds relatives and guests to redeem her smeared reputation as a result of
petitioners imputations against her. Petitioner did not respond to the letter. Thus, on
20February 1997, Valmonte filed a suit for damages against petitioner.
ISSUE: W/N respondent Valmonte is entitled to damages
RULING:
Valmonte is entitled to damages. In the case at bar, petitioners verbal
reproach against respondent was certainly uncalled for considering that by her own
account nobody knew that she brought such kind and amount of jewelry inside the
paper bag. True, petitioner had the right o ascertain the identity of the malefactor,
but to malign respondent without an iota of proof that she was the one who actually
stole the jewelry is an act which, by any standard or principle of law is
impermissible. Petitioner had willfully caused injury to respondent in a manner which
is contrary to morals and good customs. She did not act with justice and good faith
for apparently, she had no other purpose in mind but to prejudice respondent.
Certainly, petitioner transgressed the provisions of Article 19 in relation to Article 21
for which she should be held accountable.
11
General Enterprises v Lianga Bay Logging(11 SCRA 733)
Facts:
General Enterprises (GE) entered into a contract with Lianga Bay Logging (LB)
whereby the former was designated as distributor of the logs supplied by the latter.
GE is entitled to 13% of the gross f.o.b.value of the logs exported.
The contract was to remain effective for two years beginning June 1, 1959. On
October 27, 1959,however, LB sent written notice to GE stating that it wont be able
to supply logs for export due to unavailability of additional logging machinery and
restrictions imposed by the Phil. Govt. Within a four-month period, LB gave a total of
five notices to GE stating various reasons for non-performance of its obligation to
supply the logs. GE, on the other hand, reminded LB to fulfill its obligations under
the contract as otherwise it would be held liable for breach.
Par 8(b) of their agreement gives the valid causes for suspension of the contract,
among which are:
a) the enactment of national or local law or ordinance;
b) issuance of any prohibitive or restrictive order; and
c) any other cause not within the control of the party making relief from any of the
requirements of the contract.
GEs reminder was left unheeded. Hence, it filed an action for breach of contract
and recovery of damages with the CFI. The court ruled in its favor awarding P400k
as actual damages, P100k as exemplary damages, and P40k as attorneys fees and
litigation expenses. Hence, this appeal.
Issue: WON actual and exemplary damages and attorneys fees are justified
Held:
YES (actual and attorneys fees), NO (exemplary)
It should be noted that LB is guilty of breach of contract as the causes cited for
non-performance of its obligation are not among those expressly stated in the
contract. Moreover, LB mentioned that it had an excess of
1M logs per month. It also agreed to supply 200M brd ft of logs to Japanese buyers
over a five year period. Sinungaling!
 12

Art 2200 CC: indemnification for damages comprehends not only the value of the
loss suffered but also that of the profits which the creditor fails to obtain.

Over a five month period beginning June 1959, GE sold over 7M brd ft of logs to
Korea and earnedP79k in commissions. When LB failed to deliver the logs beginning
January 1960, GE ceased to earnany commission.

Had LB continued to deliver the logs as it was bound pursuant to the agreement, it is
reasonable to expect that GE would have continued to earn its commission in much
the same manner as it used to in connection with the previous shipment of logs,
which clearly indicated that it failed to earn its commissions it should during this
period of time, which is approximately P400k (17 months remaining in contract X 2M
brd ft per month X P0.01commission per brd ft). Mathematical genius not required!

P100k as exemplary damages is oppressive considering that LB did not act in a

wanton (noodles),oppressive, or malevolent manner. P50k is sufficient for its
reprehensible act of resorting to half-truths in order to justify its desistance from the
contract.

Attorneys fees justified considering the importance of the litigation and the
amount of time and effort involved.

DECISION MODIFIED
 13

FIRST DIVISION
the Regional Trial Court (RTC) of Manila in Filoil Marketing Corporation v. MYTC,
PETRON CORPORATION, G.R. No. 155683
Petitioner, Felipe Monserrat, and Rosario Vda. De Monserrat (the Manila case).[4] DBP
Present:
challenged the levy through a third-party claim asserting that the V. Mapa properties
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
were mortgaged to it and were, for that reason, exempt from levy or attachment.
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ. The RTC quashed it.
NATIONAL COLLEGE OF
BUSINESS AND ARTS, On June 18, 1981, MYTC and the Monserrats got DBP to accept
Respondent Promulgated: February 16, 2007
a dacion en pago arrangement whereby MYTC conveyed to the bank the four
x----------------------------------------------------x
mortgaged Quiapo properties as full settlement of their loan obligation. But despite
DECISION
this agreement, DBP did not release the V. Mapa properties from the mortgage.
CORONA, J.:

On May 21, 1982, Felipe, acting for himself and as Enriques attorney-in-fact, sold the
[1]
The sole question raised in this petition for review on certiorari is whether
V. Mapa properties to respondent NCBA. Part of the agreement was that Felipe and
petitioner Petron Corporation (Petron) should be held liable to pay attorneys fees
Enrique would secure the release of the titles to the properties free of all liens and
and exemplary damages to respondent National College of Business and Arts
encumbrances including DBPs mortgage lien and Filoils levy on or before July 31,
(NCBA).
1982. But the Monserrats failed to comply with this undertaking. Thus, on February

3, 1983, NCBA caused the annotation of an affidavit of adverse claim on

This case, however, is but part of a larger controversy over the lawful
the TCTs covering the V.Mapa properties.
ownership of seven parcels of land[2] in the V. Mapa area of Sta. Mesa, Manila (the
Shortly thereafter, NCBA filed a complaint against Felipe and Enrique for
V. Mapaproperties) that arose out of a series of events that began in 1969. [3]
specific performance with an alternative prayer for rescission and damages in the
Sometime in 1969, the V. Mapa properties, then owned by Felipe and
RTC of Manila. The case was raffled to Branch 30 and docketed as Civil Case No. 83-
Enrique Monserrat, Jr., were mortgaged to the Development Bank of the Philippines
16617. On March 30, 1983, NCBA had a notice of lis pendens inscribed on
(DBP) as part of the security for the P5.2 million loan of Manila Yellow Taxicab Co.,
the TCTs of the V.Mapa properties. A little over two years later, NCBA impleaded DBP
Inc. (MYTC) and Monserrat Enterprises Co. MYTC, for its part, mortgaged four parcels
as an additional defendant in order to compel it to release the V. Mapa properties
of land located inQuiapo, Manila.
from mortgage.
On March 31, 1975, however, Felipes undivided interest in the
On February 28, 1985, during the pendency of Civil Case No. 83-16617,
V. Mapa properties was levied upon in execution of a money judgment rendered by
Enriques undivided interest in the V. Mapa properties was levied on in execution of a

judgment of the RTC of Makati (the Makati case)[5] holding him liable to Petron (then
known as Petrophil Corporation) on a 1972 promissory note. On April 29, 1985, the
V. Mapa properties were sold at public auction to satisfy the judgments in the Manila
and Makati cases. Petron, the highest bidder, acquired both Felipes and Enriques
undivided interests in the property. The final deeds of sale of Enriques and Felipes
shares in the V. Mapa properties were awarded to Petron in 1986. Sometime later,
the Monserrats TCTs were cancelled and new ones were issued to Petron. Thus it was
that, towards the end of 1987, Petron intervened in NCBAs suit against Felipe,
Enrique and DBP (Civil Case No. 83-16617) to assert its right to
V. Mapa properties.
The RTC rendered judgment on March 11, 1996. [6] It ruled, among other things,
that Petron never acquired valid title to the V. Mapa properties as the levy and sale
thereof were void and that NCBA was now the lawful owner of the properties.
Moreover, the RTC held Petron, DBP, Felipe and Enrique jointly and severally liable to
NCBA for exemplary damages and attorneys fees for the following reasons:
FELIPE and ENRIQUE had no reason to renege on their undertaking
in the Deed of Absolute Sale to secure the release of the titles to
the properties xxx free from all the liens and encumbrances, and
to cause the lifting of the levy on execution of Commercial Credit
Corporation, Industrial Finance Corporation[,] and Filoil over the
V. Mapa [p]roperty. Moreover, ENRIQUE had no reason to repudiate
FELIPE and disavow authority he had [given] the latter to sell his
share in the V. Mapa property.
On the other hand, the mortgage in favor of DBP had been fully
extinguished thru dacion en pago as early as 18 June 1981 but it
unjustifiably and whimsically refused to release the mortgage and
to surrender to the buyer (NCBA) the owners duplicate copies of
Transfer Certificates of Title No[s]. 83621 to 83627, thereby
preventing NCBA from registering the sale in its favor.
Similarly, [Petron] has absolutely no reason to claim the
V. Mapa property. For, as shown above, the levy in execution and
sale of the shares of FELIPE and ENRIQUE in the V. Mapa property
were null and void.
14
Finally, in their Memorandum of Agreement dated 25 September
1992 with Technical Institute of the Philippines, [Petron] and DBP
attempted to pre-empt this Courts power to adjudicate on the
claim of ownership stipulating that to facilitate their defenses and
cause of action in Civil Case No. 83-16617, they agreed on the
disposition of the V. Mapa property among themselves. For obvious
reasons, this Court refused to give its imprimatur and denied their
prayer for dismissal of the complaint against DBP.
These acts of defendants and intervenor demonstrate their
wanton, fraudulent, reckless, oppressive and malevolent conduct
in their dealings with NCBA. Furthermore, they acted with gross
and evident bad faith in refusing to satisfy NCBAs plainly valid and
demandable claims. Assessment of exemplary damages and
attorneys fees in the amounts of P100,000.00 and P150,000.00,
respectively, is therefore in order (Arts. 2208 and 2232, Civil
Code).[7]
the
Enrique, DBP and Petron appealed to the Court of Appeals (CA). The appeal was
docketed as CAG.R. CV No. 53466. In a decision dated June 21, 2002, [8] the CA
affirmed the RTC decision in toto. On motion for reconsideration, Petron and DBP
tried to have the award of exemplary damages and attorneys fees deleted for lack of
legal and factual basis. The Philippine National Oil Company (PNOC), which had been
allowed to intervene in the appeal as transferee pendente lite of Petrons right to the
V. Mapa properties, moved for reconsideration of the ruling on ownership. In a
resolution dated October 16, 2002, [9] the CA denied these motions for lack of
merit. Thereupon, Petron and PNOC took separate appeals to this Court.
In this appeal, the only issue is Petrons liability for exemplary damages and
attorneys fees. And on this matter, we reverse the rulings of the trial and appellate
courts.
Article 2208 lays down the rule that in the absence of stipulation, attorneys fees
cannot be recovered except in the following instances:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to
litigate with third persons or to incur expense to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
 15

(4) In case of a clearly unfounded civil action or proceeding against the

plaintiff; court of law.[13] In fact, even a clearly untenable defense does not justify an award of
(5) Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiffs plainly valid, just and demandable claim; attorneys fees unless it amounts to gross and evident bad faith. [14]
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and
skilled workers; Petrons claim to the V. Mapa properties, founded as it was on final deeds of
(8) In actions for indemnity under workmens compensation and employers
liability laws;
(9) In a separate civil action to recover civil liability arising from a crime; sale on execution, was far from untenable. No gross and evident bad faith could be
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that imputed toPetron merely for intervening in NCBAs suit against DBP and
attorneys fees and expenses of litigation should be recovered.[10]
the Monserrats in order to assert what it believed (and had good reason to believe)
Here, the RTC held Petron liable to NCBA for attorneys fees under Article
were its rights and to have the disputed ownership of the V. Mapa properties settled
2208(5), which allows such an award where the defendant acted in gross and
decisively in a single lawsuit.
evident bad faith in refusing to satisfy the plaintiffs plainly valid, just, and
With respect to the award of exemplary damages, the rule in this
demandable claim. However, the only justification given for this verdict was
jurisdiction is that the plaintiff must show that he is entitled to moral, temperate or
that Petron had no reason to claim the V.Mapa properties because, in
compensatory damages before the court may even consider the question of whether
the RTCs opinion, the levy and sale thereof were void. [11] This was sorely inadequate
exemplary damages should be awarded.[15] In other words, no exemplary damages
and it was erroneous for the CA to have upheld that ruling built on such a flimsy
may be awarded without the plaintiffs right to moral, temperate, liquidated or
foundation.
compensatory damages having first been established. Therefore, in view of our
Article 2208(5) contemplates a situation where one refuses unjustifiably
ruling that Petron cannot be made liable to NCBA for compensatory damages (i.e.,
and in evident bad faith to satisfy anothers plainly valid, just and demandable claim,
attorneys fees), Petron cannot be held liable for exemplary damages either.
compelling the latter needlessly to seek redress from the courts. [12] In such a case,

the law allows recovery of money the plaintiff had to spend for a lawyers assistance WHEREFORE, the petition is hereby GRANTED. The imposition of liability

in suing the defendant expenses the plaintiff would not have incurred if not for the on Petron Corporation for exemplary damages and attorneys fees is REVOKED. The

defendants refusal to comply with the most basic rules of fair dealing. It does not June 21, 2002 decision and October 16, 2002 resolution of the Court of Appeals in

mean, however, that the losing party should be made to pay attorneys fees merely CAG.R. CV No. 53466 and the March 11, 1996 decision of the Regional Trial Court of

because the court finds his legal position to be erroneous and upholds that of the Manila in Civil Case No. 83-16617 are hereby MODIFIED accordingly.

other party, for that would be an intolerable transgression of the policy that no one SO ORDERED.

should be penalized for exercising the right to have contending claims settled by a
 16

EN BANC

For loss of profits on the sale of goods during the time the
G.R. No. L-8228 January 16, 1914
store was closed ...........................................................................

TAN TI (alias Tan Tico), plaintiff-appellee,

vs.
JUAN ALEVAR, as sheriff, ET AL., defendants-appellants.
Impairment of credit ..........................................................................
TRENT, J.:

Damages for wrongful attachment. Three cases were, by agreement of counsel, tried
together in the court below. Damages were awarded in each case and all were Counsel's fees ...................................................................................
appealed by the defendants. They will be considered together. Tan Ti, Tin Uco, and
Tiu Tiao et al., the respective plaintiffs, each owned a retail store in Dagupan. The
Court of First Instance of Manila issued execution on the effects of one Lim Kok Tiu,
and ordered notices of garnishment to be served on each of the above named
present plaintiffs. These notices were forwarded to the sheriff of Pangasinan. It Rent ....................................................................................................
appears that the sheriff himself was not in his office when the notices were received
and they were attended to by his deputy, Lopez.

Lopez delivered the notices to another deputy sheriff, Zulueta, for service. Zulueta,
instead of merely serving the notices, informed each of the present plaintiffs that Wages of employees ........................................................................
unless they submitted their respective bonds in the sum of P15,000, he would close
their stores. The respective owners asked for time to go to Manila to secure
bondsmen, which was granted them. On arriving at Manila the consulted their
lawyers, who informed them that the sheriff had no right to close their stores upon
garnishment process, and told them to return to Dagupan and so inform the sheriff Loss of profits from sales of cigarettes .........................................
and his deputies, which the further admonition that such action would render the
latter liable for damages. The three plaintiffs returned to Dagupan and notified
deputies Lopez and Zulueta accordingly, but the latter went ahead and closed the
stores on November 13, 1911, placing guards at each one.
Two trips to Manila ...........................................................................
The owners thereupon returned to Manila for further consultation with their lawyers.
Their attorneys consulted with attorney for the plaintiff in the case from which the
garnishment process had issued, and the latter sent a telegram to the sheriff on
November 14th instructing him not to close the stores but to proceed in accordance
with section 431 of the Code of Civil Procedure. At the same time he wrote a letter to Total .....................................................................................
the sheriff containing the same instructions. Notwithstanding the fact that the
contents of the notices which the sheriff's deputies had served on the owners of
these stores clearly showed that they were not writs of attachment, and the further
instructions from the counsel for the plaintiff in that civil case to the same effect, the
The loss of profits on cigarrette sales was fixed by stipulation of the parties. The two
deputy sheriffs refused to raise the attachment. The owners of the stores thereupon
items of rent for the building and wages of employees, being the pro rata parts of
filed the complaints in the present civil actions on November 17, 1911, after the
the plaintiff's monthly expenses for these services, should be allowed. It is argued
notification to the deputy sheriff that such was their intention. On November 21,
that as one of plaintiff's two trips to Manila was made before the wrongful
1911, the attachments were raised and the plaintiffs were allowed to resume
attachment of his property, this item should be cut in half. The first trip, however,
business.
was the direct result of defendant's representations to the plaintiff in their official
capacity. We are of the opinion that the defendants would been liable for this
The lower court awarded damages to the plaintiff Tan Ti as follows: expense even if they had followed the instructions which they received from Manila
as the result of plaintiff's first trip to Manila.

They had no right to make such representations to the plaintiff on the strength of
the notices which they were called upon to serve, and such representations were the
direct and proximate cause which induced plaintiff to make the trip. The expenses of
both trips should be allowed, and this item of damages is therefore approved. Loss
of profits from sales for the time the store was closed was based upon the record of
sales made by the plaintiff during the months of October, November, and December,
1911. The figures were as follows: October P1,517.54; November, P924,19; and
December, P1,651.54. Upon these figures, the reduction in gross sales was fixed at
P600 and profits allowed at 15 per cent, or P90. This seems to be a fair and
reasonable method of arriving at plaintiffs loss on this item and should be allowed.
We accept the statement of counsel for the defendants to the effect that of the item
of P500 for attorney's fees, P200 were paid for services rendered in securing the
release of the goods and P300 for prosecuting the present suit for damages.
That attorney's fees in excess of the amount fixed by statute cannot be taxed as
costs against the adverse party in any case is well settled. (Secs. 489 and 492, Code
Civ. Proc.; Mendiola vs. Villa, 15 Phil. Rep., 131; Orense vs. Jaucian, 18 Phil. Rep.,
553.) Can such fees be allowed in this jurisdiction as an element of damages?
The decisions of the State courts in the American Union on this question are not
uniform. They are irreconcilable some holding that reasonable counsel fees incurred
in procuring the dissolution of injunctions, attachments, and in recovering property
wrongfully seized is a proper element of damages, the amount being limited to fees
paid for procuring the dissolution or recovery and not for the general defense of the
case or for prosecuting suits for damages. These holdings proceed upon the idea
that the party has been compelled to employ counsel to rid himself of an unjust
restriction which his adversary has placed upon him. The courts which take the
opposite view say that it is difficult to see upon what ground counsel fees incurred
by the adverse party should be charged up to the defeated party any more in
attachment and injunction cases than in other litigations upon contracts or for
damages for torts. The litigation they say may be equally unjust and oppressive in
other cases as in cases of attachment, injunctions and replevin. It is true, however,
they reason, that attachments and injunctions are in some respects more summary
and may entail damages arising out of the seizure of defendant's property; but all of
this is provided for by the terms of the bond required to cover damages sustained.
But counsel fees are as necessary in the one class of cases as in the other and are
neither peculiar nor more erroneous in cases of attachments and injunctions than in
other cases.
The authorities on either side of this question are eminent and there is no middle
ground upon which to stand. The authorities pro and con may be found collated in
the case notes of the following cases; Littleton vs. Burgess (16 L. R. A., N. S. 49);
Lindeberg vs. Howard (1 Am. and Eng. Ann. Cas., 709, injunction); Plymouth Gold
Mining Co. vs. U. S. Fidelity and Guaranty Co. (10 Am. and Eng. Ann. Cas., 951
attachment); Lake s. Hargis, (30 L. R. A., N. S., 366, replevin); Winkler vs. Roeder, (8
Am. St. Rep., 155, attorney's fees as element of damages).
In the United States of Supreme Court and in the Federal Courts such fees are not
allowed. The case first decided by the United States Supreme Court upon this point
and which has been steadfastly adhered to ever since is Oelrichs vs. Spain (15 Wall.,
211, 221). In this case the court said:
17
The point here in question has never been in expressly decided by this
court, but it is clearly within the reasoning of the case last referred to, and
we think is substantially determined by that adjudication. In debt, covenant
and assumpsit damages are recovered, but counsel fees are never
included. So in equity cases, where there is not injunction bond, only the
taxable costs are allowed to the complainants. The same rule is applied to
the defendant, however unjust the litigation on the other side, and however
large the expensa litis to which he may have been subjected. The parties in
this respect standard by which the honorarium can be measured. Some
counsel demand much more than others. Some clients are willing to pay
more than others. More counsel may be employed than are necessary.
When both client and counsel, know that the fees are to be paid by the
other party there is danger of abuse. A reference to a master, or an issue to
a jury, might be necessary to ascertain the proper amount, and this grafted
litigation might possibly be more animated and protracted than that in the
original cause. It would be an office of some delicacy on the part of the
court to scale down the charges, as might sometimes be necessary.
Since the enunciation of this doctrine the Supreme Court of the United States has
had occasion to reverse several decisions of State courts where attorney's fees for
services in dissolving writs of injunction and attachment were allowed, the writs
having issued out of Federal courts and actions for damages brought in the State
courts. (Tullock vs. Mulvane, 184 U. S., 497, reversing 61 Kan., 650; 46 L. ed., 657;
Mo. etc. R. Co. vs. Elliott, 184 U. S., 530; 46 L. ed., 673, reversing 154 Mo., 300.)
The case at bar is one of replevin. In this country the damages must be determined
and assessed in the principal action. Two actions, one of replevin and the other for
damages, cannot be maintained. This makes the apportionment of attorney's fees
exceedingly difficult and in the absence of an agreement practically impossible. In
those jurisdictions where attorney's fees are allowed as an element of damages two
actions as a rule are required.
After an examination of all the available authorities we have concluded that sound
public policy demands that counsel fees in suits of the character of the one under
consideration should not be regarded as a proper element of damages, even where
they are capable of being apportioned so as to show the amount incurred for the
release of the necessary in the prosecution of the suit for damages. It is not sound
public policy to place a penalty on the right to litigate. To compel the defeated party
to pay the fees of counsel for his successful opponent would throw wide the door of
temptations to the opposing party and his counsel to swell the fees to undue
proportions, and to apportion them arbitrarily between those pertaining properly to
one branch of the case from the other.
This court has already placed itself on record as favoring the view taken by those
courts which hold that attorneys' fees are not a proper element of damages. In
Ortiga Bros. & Co. vs. Enage and Yap Tico (18 Phil. Rep., 345), a wrongful attachment
on the pier belonging to plaintiffs had issued at the request of Yap Tico. Ortiga Bros.
sued out an injunction preventing the attempted sale of the pier by the sheriff and
the matter was then held in status quo pending judgment of the court as to the right
of the sheriff to attach and sell the property. Judgment in the lower court was in
favor of the plaintiffs and damages were awarded in the amount of P600 which
proved to consist entirely of the fees of plaintiffs attorney. This court expressly
disallowed the same, awarding the plaintiffs only the usual statutory costs.
 18

As to the item of P500 for impairment of plaintiff's credit: Plaintiff testified that he
was conducting a credit business with wholesale houses in Manila, and that when his
stock of goods was seized by the sheriff he so informed these houses, who
thereupon stopped his credit; that on being restored to possession of his goods he
so advised them. Although he states that by stoppage of his credit he was unable to
secure merchandise for Christmas sales, it appears from his books, stated above,
that he sold P1,651.54 during the month of December, which was as much as, if not
more, than he had sold during the same month of the previous year.

The wrongfullness of the seizure was so apparent that a satisfactory explanation of

the same could easily have been given to the wholesale houses with which his sales
for the month of December. As we have allowed him the profits on P600 for sales
which he was prevented from making during the month of November, it appears that
damage from interruption to his business has been fully compensated. So that,
without touching upon the vexatious question of whether damages to credit might
be allowed in a proper case, we are of the opinion that such damages in this case, if
any, were so infinitesimal and speculative, that they cannot be allowed.

Our decision in the Tan Ti case disposes of the questions raised in the other two
cases. All the items allowed in those cases being of similar character and having
been computed in the same manner as those in the first case, should be allowed,
with the exception of the amounts allowed as attorney's fees and for impairment of
credit. In both cases these items are disallowed.

For the foregoing reasons, the judgments appealed from are modified as follows:
Damages in Tan Ti's case are reduced to P227.50; in Tiu Uco's case, to P460.50; and
in the case of Tiu Tiao et al., to P987. As thus modified, the judgments appealed
from are affirmed. Without costs in this instance.
 19

EN BANC suit. The amount of P400.00 shall be deducted from the total amount due
plaintiff in accordance with this judgment.
G.R. No. L-27033 October 31, 1969
Defendant appealed.
POLYTRADE CORPORATION, plaintiff-appellee,
vs. 1. The forefront question is whether or not venue was properly laid in the province of
VICTORIANO BLANCO, defendant-appellant. Bulacan where defendant is a resident.

SANCHEZ, J.:
Suit before the Court of First Instance of Bulacan on four causes of action to recover
the purchase price of rawhide delivered by plaintiff to defendant.1 Plaintiff
corporation has its principal office and place of business in Makati, Rizal. Defendant
is a resident of Meycauayan, Bulacan. Defendant moved to dismiss upon the ground
of improper venue. He claims that by contract suit may only be lodged in the courts
of Manila. The Bulacan court overruled him. He did not answer the complaint. In
consequence, a default judgment was rendered against him on September 21, 1966,
thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant ordering defendant to pay plaintiff the following amounts:
Section 2 (b), Rule 4 of the Rules of Court on venue of personal actions triable by
courts of first instance and this is one provides that such "actions may be
commenced and tried where the defendant or any of the defendants resides or may
be found, or where the plaintiff or any of the plaintiffs resides, at the election of the
plaintiff." Qualifying this provision in Section 3 of the same Rule which states that
venue may be stipulated by written agreement "By written agreement of the
parties the venue of an action may be changed or transferred from one province to
another."
Defendant places his case upon Section 3 of Rule 4 just quoted. According to
defendant, plaintiff and defendant, by written contracts covering the four causes of
action, stipulated that: "The parties agree to sue and be sued in the Courts of
Manila." This agreement is valid.3 Defendant says that because of such covenant he
can only be sued in the courts of Manila. We are thus called upon to shake meaning
from the terms of the agreement just quoted.

First Cause of Action
But first to the facts. No such stipulation appears in the contracts covering the first
P60,845.67, with interest thereon at 1% a month from May 9, 1965 until the full amount
two causes of action. The general rule set forth in Section 2 (b), Rule 4, governs, and
is paid.
as to said two causes of action, venue was properly laid in Bulacan, the province of
defendant's residence.

The stipulation adverted to is only found in the agreements covering the third and
Second Cause of Action fourth
P51,952.55, with interest thereon at 1% a month from Marchcauses of action.
30, 1965 An full
until the accurate reading, however, of the stipulation, "The
amount is paid. parties agree to sue and be sued in the Courts of Manila," does not preclude the
filing of suits in the residence of plaintiff or defendant. The plain meaning is that the
parties merely consented to be sued in Manila. Qualifying or restrictive words which
would indicate that Manila and Manila alone is the venue are totally absent
therefrom. We cannot read into that clause that plaintiff and defendant bound
Third Cause of Action themselves
P53,973.07, with interest thereon at 1% a month from to until
July 3, 1965 file suits withamount
the full respectisto the last two transactions in question only or
paid. exclusively in Manila. For, that agreement did not change or transfer venue. It simply
is permissive. The parties solely agreed to add the courts of Manila as tribunals to
which they may resort. They did not waive their right to pursue remedy in the courts
specifically mentioned in Section 2(b) of Rule 4. Renuntiatio non praesumitur.

Fourth Cause of Action P41,075.22, with interest thereon at 1% a month
In addition, defendant shall pay plaintiff attorney's fees amounting to 25%
of the principal amount due in each cause of action, and the costs of the
Illuminating on this point is Engel vs. Shubert Theatrical Co., 151 N.Y.S. 593, 594.
And this, became there the stipulation as to venue is along lines similar to the
present. Said stipulation reads: "In case of dispute, both contracting parties agree to
submit to the jurisdiction of the Vienna courts." And the ruling is: "By the clause in
question the parties do not agree to submit their disputes to the jurisdiction of the
Viennese court, and to those courts only. There is nothing exclusive in the language
used. They do agree to submit to the Viennese jurisdiction, but they say not a word
in restriction of the jurisdiction of courts elsewhere; and whatever may be said on
 20

the subject of the legality of contracts to submit controversies to courts of certain
jurisdictions exclusively, it is entirely plain that such agreements should be strictly
construed, and should not be extended by implication."
Venue here was properly laid.
2. Defendant next challenges the lower court's grant to plaintiff of interest at the
rate of one per centum per month. Defendant says that no such stipulation as to
right of interest appears in the sales confirmation orders which provided: "TERMS
60 days after delivery with interest accruing on postdated cheques beyond 30 days."
The flaw in this argument lies in that the interest and the rate thereof are expressly
covenanted in the covering trust receipts executed by defendant in favor of plaintiff,
as follows: "All obligations of the undersigned under this agreement of trust shall
bear interest at the rate of one per centum (1%) per month from the date due until
paid."
for delay. The attorneys' fees awarded cannot be called iniquitous or
unconscionable.
In the very recent case of Universal Motors Corporation vs. Dy Hian Tat (1969), 28
SCRA 161, 170, we allowed attorneys' fees in the form of liquidated damages at the
rate of 25% of the total amount of the indebtedness. Here, the trial court has
already reduced the attorneys' fees from the stipulated 25% "of the total amount
involved, principal and interest, then unpaid" to only 25% of the principal amount
due. There is no reason why such judgment should be disturbed.
FOR THE REASON GIVEN, the appealed judgment is hereby affirmed, except that
interest granted, in reference to the fourth cause of action, should start from March
24, 1965.
Costs against defendant-appellant. So ordered.

On this score, we find no error.

3. Defendant protests the award of attorneys' fees which totals P51,961.63, i.e., 25%
of the total principal indebtedness of P207,846.51 (exclusive of interest).
Defendant's thesis is that the foregoing sum is "exorbitant and unconscionable."

To be borne in mind is that the attorneys' fees here provided is not, strictly speaking,
the attorneys' fees recoverable as between attorney and client spoken of and
regulated by the Rules of Court. Rather, the attorneys' fees here are in the nature of
liquidated damages and the stipulation therefor is aptly called a penal clause. 4 It has
been said that so long as such stipulation does not contravene law, morals, or public
order, it is strictly binding upon defendant.5 The attorneys' fees so provided are
awarded in favor of the litigant, not his counsel. It is the litigant, not counsel, who is
the judgment creditor entitled to enforce the judgment by execution. 6

The governing law then is Article 2227 of the Civil Code, viz.: "Liquidated damages,
whether intended as an indemnity or a penalty, shall be equitably reduced if they
are iniquitous or unconscionable." For this reason, we do not really have to strictly
view the reasonableness of the attorneys' fees in the light of such factors as the
amount and character of the services rendered, the nature and importance of the
litigation, and the professional character and the social standing of the attorney. We
do concede, however, that these factors may be an aid in the determination of the
iniquity or unconscionableness of attorneys' fees as liquidated damages.

May the attorneys' fees (P51,961.63) here granted be tagged as iniquitous or

unconscionable? Upon the circumstances, our answer is in the negative. Plaintiff's
lawyers concededly are of high standing. More important is that this case should not
have gone to court. It could have been easily avoided had defendant been faithful in
complying with his obligations. It is not denied that the rawhide was converted into
leather and sold by defendant. He raises no defense. In fact, he did not even answer
the complaint in the lower court, and was thus declared in default. Nor does he deny
the principal liability. Add to all these the fact that the writ of attachment issued
below upon defendant's properties yielded no more than P400 and the picture is
complete. The continued maintenance by defendant of the suit is plainly intended
 21

Polytrade Corp vs. Blanco 30 SCRA 187

Facts:

Polytrade wants to recover the purchase price of rawhide which it delivered to

Blanco, thus it instituted a suit against Blanco in the CFI of Bulacan. Polytrades
principal office is in Makati, Rizal. Blanco is a resident of Bulacan. Blanco filed a
motion to dismiss on the ground of improper venue. He alleges that the suit can only
be instituted in the courts of Manila since they had an agreement stating that the
parties agree to sue and be sued in the courts of Manila. Trial court denied the
motion to dismiss.

Issue: WON the denial of the motion to dismiss is proper.

Held:

Yes.

The stipulation that the parties agree to sue and be sued in the courts of Manila,
does not preclude the filing of suits in the residence of plaintiff or defendant. The
plain meaning is that the parties merely consented to be sued in Manila. Qualifying
or restrictive words which would indicate that Manila and Manila alone is the venue
are totally absent therefrom. For, that agreement did not change or transfer venue.
It simply is permissive. The parties solely agreed to add the courts of Manila as
tribunals to which they may resort. They did not waive their right to pursue remedy
in the courts specifically mentioned in Section 2(b) of Rule 4. Renuntiatio non
praesumitur.

The provisions of the Rules of Court on venue of personal actions provides that
actions may be commenced and tried where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff. By written agreement of the parties the
venue of an action may be changed or transferred from one province to another.
 22

THIRD DIVISION The second paragraph of Exhibit "A" stipulated that should Solid Homes fail to pay
any of the installments on their respective due dates, an interest of one percent
G.R. No. 97255 August 12, 1994 (1%) per month on the defaulted amount would be paid for up to two months or pro-
rata thereof; thereafter, should the installment due, as well as the interest thereon,
still remain unpaid, the entire balance of the purchase price would then become
SOLID HOMES, INC., petitioner,
immediately due and demandable. Such due and demandable sum would be
vs.
payable within thirty (30) days, counted from the expiration of the 2-month period,
HON. COURT OF APPEALS, INVESTCO, INC., ANGELA PEREZ STALEY, and
without further need for judicial action.
ANTONIO PEREZ, respondents.

Private respondents asserted that Solid Homes violated the terms of the agreement
RESOLUTION
by refusing to pay the balance of P4,800,282.91 and by failing to negotiate a
settlement with the tenants and squatters of the property despite its receipt from
VITUG, J.: Investco of P350,000.00 for that specific purpose.

An action for collection of sums of money, damages and attorney's fees was filed The trial court rendered judgment on 14 February 1985; the dispositive portion read:
with the Regional Trial Court (Civil Case No. 40615) of Pasig by private respondents
Investco, Angela Perez Staley and Antonio Perez Jr. against petitioner Solid Homes,
WHEREFORE, judgment is hereby rendered ordering the defendant to pay
Inc.
the plaintiffs:

Private respondents averred that, on 07 September 1976, they sold, under an

1) The amount of P4,800,282.91 with interest thereof at the rate of one
agreement entitled "contract to sell and to buy," to Solid Homes six (6) parcels of
percent per month from February 23, 1981, until fully paid;
land in Quezon City and Marikina, with an area of 704,443 sq.m., for a total selling
price of P10,211,075.00 payable (in accordance with paragraph 1 thereof), as
follows: 2) The amount of P99,559.00 representing cost of science and transfer
taxes which defendant credited to its account with interest at the legal rate
from the filing of the complaint;
a) P100,000.00, Philippine Currency, as part down payment upon signing and
execution of this contract receipt of which in full is hereby acknowledged;
3) The amount of P250,000.00 to cover attorney's fees and litigation
expenses. 2
b) P2,042,215.00, Philippine Currency, as down payment payable on the following
dates:
On appeal, the Court of Appeals (CA-G.R. CV No. 13400), modified the trial court's
judgment and rendered its own decision, dated 21 January 1991, resolving thusly:
1 July 22, 1977 P400,000.00
2 October 22, 1977 711,107.50
3 January 22, 1978 711,107.50 PREMISES CONSIDERED, the judgment of the trial court is hereby modified
by ordering defendant-appellant to pay plaintiff the amount of
P4,800,282.91 with interest thereon at the rate of one percent per month
It is hereby agreed that the above down payment included the first down payment
from March 22, 1982. The amount of attorney's fees is hereby reduced from
of P199,000.00. Should the FIRST PARTY obtain titles to the properties above-
P250,000.00 to P50,000.00. The decision is AFFIRMED in all other aspects. 3
described after July 22, 1977, the due dates of the down payment and all
subsequent payments on the balance shall be adjusted accordingly.
In the instant petition for review, petitioner Solid Homes argues (a) that the Court of
Appeals should not have awarded attorney's fees, there being an absence of any
c) The balance of P8,188,860.00 shall be payable in ten (10) semi-annual
special finding of fact to justify such award, and (b) that it erred in declaring due and
installments for a period of five (5) years and shall earn interest at the rate of twelve
demandable the entire unpaid balance still owing to private respondents.
(12%) per annum, the first installment to be due on July 22, 1978. The installment
due together with the Schedule of Payments attached hereto as Schedule "A" and
made an integral part of this contract (Exh. A). 1

The Second Division of this Court required respondents to comment on the petition
in its Resolution of 22 April 1991. Meanwhile, Atty. Alejandro Barin withdrew as
counsel for respondents Investco, Inc., Angela Perez Staley and Antonio Perez,
Jr. 4 We required private respondents to submit the name and address of their new
counsel; to this day, no compliance has yet been made. In our resolution, dated 01
December 1993, we required the parties to move in the premises and to advise the
Court whether "supervening events may have rendered this case moot and
academic." 5
Petitioner submitted its compliance and manifested thusly:
In the meantime, on April 15, 1985 before judgment was rendered by the
RTC in Civil Case No. 40615 Investco, Inc. (respondent herein) sold the very
same parcels of land involved in said case, in favor of Armed Forces of the
Philippines Mutual Benefit Association, Inc. (AFPMBAI)
Solid Homes, Inc. (herein petitioner) filed Civil Case No. Q-46570 RTC
Quezon City entitled 'Solid Homes, Inc., plaintiff versus AFPMBAI, Investco,
Inc. and the Register of Deeds of Quezon City covering titles registered in
Quezon City and Civil Case No. 52999 Solid Homes, Inc., plaintiff versus
AFPMBAI, Investco, Inc., and Register of Deeds for Pasig covering titles
registered in Pasig, Metro Manila, both for nullification of the said second
deed of sale over the same properties involved in the instant case.
Quezon City RTC Civil Case No. 46570 was decided in favor of plaintiffs,
Solid Homes, Inc.; on appeal, the Court of Appeals (CA G.R. No. 22365)
reversed the decision; same was elevated to the Supreme Court where it is
pending in SC G.R. No. 100437.
Pasig RTC, Civil Case No. 52999 was decided in favor of plaintiff Solid
Homes, Inc.; defendants appealed to the Court of Appeals (CA G.R. No.
27398), which affirmed the RTC Decision; on the main cause of action
Petition for Review by this to this Honorable Court is pending under G.R. No.
104769.
Under the circumstances, herein petitioner, in compliance with the
Resolution dated December 1, 1993, hereby manifests that supervening
events since the Petition herein was filed has not rendered this case as
moot and academic, considering that the issue involved is the amount to be
paid in SOLID HOMES, INC. as balance on the consideration of the original
sale by Investco, Inc. to it and the concomitant transfer of titles to the latter
upon payment thereof, whereas in G.R. No. 100437 and G.R. No. 104769,
the issue is whether the second buyer AFPMBAI had actual or constructive
notice of the prior sale by Investco, Inc. to herein Petitioner, Solid Homes,
Inc. 6
23
As of this late date, the Court has yet to hear from private respondents. Given the
premises, and in order to permit this case to be finally resolved and terminated, the
required comment on the petition for review should now be, as it is hereby,
dispensed with.
Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when
its claimant is compelled to litigate with third persons or to incur expenses to protect
his interest by reason of an unjustified act or omission of the party from whom it is
sought. While judicial discretion is here extant, an award thereof demands,
nevertheless, a factual, legal or equitable justification. The matter cannot and
should not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84 SCRA
337; Stronghold Insurance Company Inc. vs. Court of Appeals, 173 SCRA 619).
In the case at bench, the records do not show enough basis for sustaining the award
for attorney's fees and to adjudge its payment by petitioner. On the contrary, the
appellate court itself has found that petitioner's act of withholding payment could
not be said to be all that unjustified. The disagreement of the parties on the
demandability of the amount still due and the accrual date of interest has persisted
largely because of supervening circumstances and the perceived inexplicitness of
the contract itself. The decision of the appellate court, has, in fact, reversed that of
the trial court on the imposition of interest from 23 February 1981, thus upholding,
which we similarly find to be in order, the position of petitioner that the accrual
dated should instead start only on 28 March 1982.
Relative to the demandability of the entire unpaid balance, we agree with, and so
adopt as our own that of respondent court; viz:
The amount actually paid on account of the contract to buy and sell (Exh. A
or 1) is not an area of controversy in the first cause of action. The sum of
P2,042,215.00 corresponding to the down payment, as well as
P4,084,430.00 with respect to the first four semi-annual installments and a
portion of the fifth installment, had been received making a total of
P6,126,645.00. It is conceded that a balance of P4,800,282.91 is left
unpaid. The dispute is with respect to the period when defendant had
defaulted and, consequently, when payment of interest shall begin. The
plaintiffs claim that said period should start on February 23, 1981; while the
defendant contends that the period must be adjusted should the titles be
obtained by the plaintiff corporation after July 22, 1977, as provided in Par.
1(b) of the contract to sell and to buy. Considering that titles were actually
transferred to Investco, Inc. between March 21 to March 28, 1979, the
defendant avers that the original schedule of payment must not be
followed and the 5th installment shall only be due on March 22, 1982.
It is undisputed that appellant Solid Homes had made a total payment of
P6,126,645.00 leaving a balance of P4,800,282.91, which refers to the 6th
 24

to the 10th installments. Of the 5th installment due on July 22, 1980, the
following payments were made by appellant:
Oct. 30, 1980 to Nov. 10, 1980 P150,000.00
Nov. 18, 1980 to Dec. 10, 1980 270,000.00
Dec. 18, 1980 to Jan. 14, 1981 101,853.12
Jan. 20 to Feb. 12, 1981 95,000.00
Feb. 16 to Feb. 19, 1981 115,000.00
P731,853.12
Thereafter, no further payment was made by appellant contending that
under the provisions of paragraph 1(b) of the contract, the payment
schedule should be adjusted. The said provisions states as follows:
Par. 1, sub-par. (b)
Should the FIRST PARTY (plaintiff Investco) obtain titles to the
properties above-described after July 22, 1977, the due dates of
the downpayment and the subsequent payments on the balance
shall be adjusted accordingly.'
Admittedly, the subject titles were obtained during the period of March 21,
to March 28, 1979, or after July 22, 1977 (Exhs. D to 1 and Exhs. 2 to 10).
Thus, implementing par. 1(b) of the Contract, the due dates of payments
should have been adjusted as follows:
January 22, 1981 No. 6 September 28, 1982
July 22, 1981 No. 7 March 28, 1983
January 22, 1982 No. 8 September 28, 1983
July 22, 1982 No. 9 March 28, 1984
January 22, 1983 No. 10 September 28, 1984
In view of the adjustment of due dates in accordance with par. 1(b) of the
Contract payments made should correspond to the adjusted dates. Thus,
the payment on the 4th installment which is supposed to have been made
on January 22, 1980, should be credited on September 28, 1981, and the
next payment on the 5th installment which should have been made on July
22, 1981 under the contract would have to be credited on March 28, 1981,
the adjusted due date. 7
It is but proper, therefore, to indeed declare 28 March 1982 to be the due date for
the payment of the 5th installment. The total amount of P731,853.12, representing
payments for the 5th installment made by petitioner, should rightly be credited on
28 March 1982, the adjusted due date. Since no payment appears to have been
made after 1981, petitioner should thereby be likewise held in default in the
payment of the 6th to the 10th installments. Under the terms of the contract,
hereinbefore recited, petitioner's default has effectively activated the acceleration
clause of the contract, and we see no error on the part of the appellate court in
ordering petitioner to pay the entire unpaid balance of P4,800,282.91 with interest
thereon at the rate of 1% per month to be computed from 22 March 1982.
WHEREFORE, except on the award of attorney's fees which is hereby DELETED, the
decision of the Court of Appeals is AFFIRMED. No costs.

Due Dates
SO ORDERED.
Per Contract Installment Adjusted
Schedule A Number Due Dates

Downpayment

July 22, 1977 March 28, 1979

October 22, 1977 June 08, 1979
January 22, 1978 September 28, 1979

Balance

July 22, 1978 No. 1 March 08, 1980

January 22, 1979 No. 2 September 28, 1980
July 22, 1979 No. 3 March 28, 1981
January 22, 1981 No. 4 September 28, 1981
July 22, 1980 No. 5 March 28, 1982

FIRST DIVISION
G.R. No. 179491, January 14, 2015
ALEJANDRO C. ALMENDRAS, JR., Petitioner, v. ALEXIS C.
ALMENDRAS, Respondent.
DECISION
SERENO, C.J.:
We resolve the Petition for Review filed by petitioner Alejandro C. Almendras, Jr.,
from the 27 January 2006 Decision and 28 August 2007 Resolution of the Court of
Appeals (CA) in CA-G.R. CV No. 73088.1 The CA affirmed the Decision and Order of
the Regional Trial Court (RTC) in Civil Case No. 33432 finding petitioner liable for
damages.
THE FACTS
As culled from the CA, petitioner sent letters with similar contents on 7 February
1996 to House Speaker Jose de Venecia, Jr., and on 26 February 1996 to Dr. Nemesio
Prudente, President of Oil Carriers, Inc. The controversial portion of the first and
second letters reads as follows:
This is to notify your good self and your staff that one ALEXIS DODONG C.
ALMENDRAS, a brother, is not vested with any authority to liaison or transact any
business with any department, office, or bureau, public or otherwise, that has
bearing or relation with my office, mandates or functions. x x x.
Noteworthy to mention, perhaps, is the fact that Mr. Alexis Dodong C. Almendras,
a reknown blackmailer, is a bitter rival in the just concluded election of 1995 who
ran against the wishes of my father, the late Congressman Alejandro D. Almendras,
Sr. He has caused pain to the family when he filed cases against us: his brothers and
sisters, and worst against his own mother.
I deemed that his act of transacting business that affects my person and official
functions is malicious in purpose, done with ill motive and part of a larger plan of
harassment activities to perforce realise his egoistic and evil objectives.
May I therefore request the assistance of your office in circulating the above
information to concerned officials and secretariat employees of the House of
Representatives.
These letters were allegedly printed, distributed, circulated and published by
petitioner, assisted by Atty. Roberto Layug, in Digos, Davao del Sur and Quezon City,
with evident bad faith and manifest malice to destroy respondent Alexis C.
Almendras good name. Hence, the latter filed an action for damages arising from
libel and defamation against petitioner in the Regional Trial Court (RTC), Branch 19,
Digos City.
25
THE RTC RULING
In the course of trial at the lower court, petitioner failed to present any evidence,
except his Answer, despite several rescheduling of hearings at his instance. 4 The
trial court thus submitted the case for decision, and eventually ruled that
respondent was libeled and defamed. For the sufferings, social ridicule, defamation
and dishonor caused by petitioners letters, respondent was awarded damages, as
follows: P5,000,000.00 as moral damages; P100,000.00 as exemplary damages;
P10,000.00 for litigation expenses; and attorneys fees in the amount of 25% of
whatever amounts actually received by plaintiff for this judgment.
Petitioner moved for reconsideration and/or new trial,6 but the same was denied by
the trial court.
THE CA RULING
On intermediate appellate review, the CA ruled that petitioner was not denied due
process. It noted that petitioner was given full opportunity to present his evidence,
but he vehemently disregarded the proceedings by merely absenting himself from
trials without valid excuses. 8chanRoblesvirtualLawlibrary
The appellate court also ruled that the letters were not privileged communications,
since petitioner was not acting as a member of the Congress when he sent them. In
fact, his letter stated that he extends his apology for bringing this personal matter
in the open. He was, as maintained by the respondent, sending open libelous and
unsealed letters, duly published and circulated in Digos, Davao del Sur, and Quezon
City.9 Consequently, the CA upheld the damages awarded by the trial court, the
amounts being consistent with the social and financial standing of the parties
involved.
We now rule on the final review of the case.
THE ISSUES
From the foregoing, we reduce the issues to the following:
(1) Whether or not petitioner was deprived due process;
(2) Whether or not the letters are libelous in nature;
(3) Whether or not the letters fall within the purview of privileged communication;
and
(4) Whether or not respondent is entitled to moral and exemplary damages,
attorneys fees and litigation expenses.
OUR RULING
We deny the petition.
Petitioner anchors his appeal on the ground that his letters are covered by privileged
communications. He insists that he has the legal, moral, or social duty to make the

communication, or at least, had an interest to protect, being then a Congressman
duty-bound to insulate his office and his constituents from the dubious and
mistrustful pursuits of his elder brother.11 Moreover, the letters were also not meant
to be circulated or published. They were sent merely to warn the individuals of
respondents nefarious activities, and made in good faith and without any actual
malice. Respondents testimony that he learned the existence of the letter from
others cannot be countenanced, as no witness corroborated this. At best, it is only
hearsay.
On the denial of his motion for reconsideration and/or new trial, he maintains that
his own counsel Atty. Leonardo D. Suario categorically admitted that he did not know
of petitioners ailment and thus did not make the proper manifestations in Court. His
failure to attend the hearing was not of his own volition, but because of his doctors
strict advice since he earlier underwent a quadruple coronary artery bypass at the
St. Lukes Medical Center-Heart Institute in Quezon City on 16 July 2001, just a day
before the Motion for Reconsideration and/or New Trial was filed. While his counsel
represents him, the latters mistakes should not deprive him of his day in court to
present his side.
As to the damages, petitioner avers that since respondent never testified on any
suffering he sustained or why he is entitled to them, the same must not be awarded.
On the other hand, respondent asserts that petitioners letters do not fall within the
purview of privileged communication because it was published and read by the
secretariat of the House of the Representatives, and not exclusively communicated
to persons who have some interest or duty in the matter and who have the power to
furnish the protection sought by the author of the statement. Moreover, he was not
acting as a member of congress when he sent the letters. The writing of a personal
matter (which petitioner admitted in the letters), not relating to the functions of a
member of Congress cannot, by any stretch of imagination, be deemed to be
privileged and insulated from suit arising therefrom.
Malice has also been sufficiently proven because the language of the letters in fact
shows that the writer had some ill-feeling towards the respondent by using the
words such as reknown blackmailer and bitter rival. There is sufficient showing construed in their entirety and should be taken in their plain, natural, and ordinary
that petitioner bore a grudge against the respondent and that there was rivalry or ill-
feeling between them.
Anent the damages, respondent believes that they were rightly awarded, taking into
consideration his testimony in the lower court, 16 and the financial and social
standing of the parties herein.
First, we rule that petitioner was not deprived of his right to due process.
Settled is the rule that a client is bound by the mistakes of his counsel. The only
exception is when the negligence of the counsel is so gross, reckless and
inexcusable that the client is deprived of his day in court. In such instance, the
remedy is to reopen the case and allow the party who was denied his day in court to
adduce evidence. However, perusing the case at bar, we find no reason to depart
from the general rule.
Petitioner was given several opportunities to present his evidence or to clarify his
medical constraints in court, but he did not do so, despite knowing full well that he
had a pending case in court. For petitioner to feign and repeatedly insist upon a lack
of awareness of the progress of an important litigation is to unmask a penchant for
26
the ludicrous. Although he rightfully expected counsel to amply protect his interest,
he cannot just sit back, relax and await the outcome of the case. In keeping with the
normal course of events, he should have taken the initiative of making the proper
inquiries from his counsel and the trial court as to the status of his case. For his
failure to do so, he has only himself to blame.19 The Court cannot allow petitioner the
exception to the general rule just because his counsel admitted having no
knowledge of his medical condition. To do so will set a dangerous precedent of
never-ending suits, so long as lawyers could allege their own fault or negligence to
support the clients case and obtain remedies and reliefs already lost by the
operation of law.
Second, we find that petitioners letters are libelous in nature and do not
fall within the purview of privileged communication.
For an imputation to be libelous under Article 353 of the Revised Penal Code, the
following requisites must be present: (a) it must be defamatory; (b) it must be
malicious; (c) it must be given publicity; and (d) the victim must be identifiable.
Consequently, under Article 354, every defamatory imputation is presumed to be
malicious, even if true, if no good intention and justifiable motive is shown. As an
exception to the rule, the presumption of malice is done away with when the
defamatory imputation qualifies as privileged communication. 22 In order to qualify as
privileged communication under Article 354, Number 1,23 the following requisites
must concur: (1) the person who made the communication had a legal, moral, or
social duty to make the communication, or at least, had an interest to protect, which
interest may either be his own or of the one to whom it is made; (2) the
communication is addressed to an officer or a board, or superior, having some
interest or duty in the matter, and who has the power to furnish the protection
sought; and (3) the statements in the communication are made in good faith and
without malice.
Were petitioners letters defamatory in nature? We believe so.
In determining whether a statement is defamatory, the words used are to be
meaning as they would naturally be understood by the persons reading them, unless
it appears that they were used and understood in another sense.25 In the instant
case, the letters tag respondent as a reknown black mailer, a vengeful family
member who filed cases against his mother and siblings, and with nefarious designs.
Even an impartial mind reading these descriptions would be led to entertain doubts
on the persons character, thereby affecting that persons reputation.
Malice can also be presumed inasmuch as the letters are not privileged in nature.
Petitioners contention that he has the legal, moral or social duty to make the
communication cannot be countenanced because he failed to communicate the
statements only to the person or persons who have some interest or duty in the
matter alleged, and who have the power to furnish the protection sought by the
author of the statement. A written letter containing libelous matter cannot be
classified as privileged when it is published and circulated among the
public.26 Examination of the letters would reveal that petitioner himself intended for
the letters to be circulated (and they were so) when he said that:

May I therefore request the assistance of your office in circulating the above
information to concerned officials and secretariat employees of the House of
Representatives.27
This lack of selectivity on his part is indicative of malice and is anathema to his
claim of privileged communication because such publication created upon the minds
of the readers a circumstance which brought discredit and shame to respondents
reputation.
Lastly, having duly proved that all the elements of libel are present in this case, we
rule that the damages awarded by the trial court and affirmed by the
appellate court must be modified and equitably reduced.
In awarding damages in libel cases, the court is given ample discretion to determine
the amount, depending upon the facts of the particular case.29 Article 2219 of the
Civil Code expressly authorizes the recovery of moral damages in cases of libel,
slander or any other form of defamation. However, while no proof of pecuniary loss
is necessary in order that moral damages may be awarded, x x x it is nevertheless
essential that the claimant should satisfactorily show the existence of the factual
basis of damages and its causal connection to defendants acts. 30 Considering that
respondent sufficiently justified his claim for damages (i.e. he testified that he was
embarrassed by the said letters [and] ashamed to show his face in [sic]
government offices31), we find him entitled to moral and exemplary damages.
However, we equitably reduce the amounts32 awarded because even though the
letters were libellous, respondent has not suffered such grave or substantial damage
to his reputation to warrant receiving P5,000,000 as moral damages and
P100,000.00 as exemplary damages. In fact, he was able to successfully secure an
elected position in recent years. Accordingly, we reduce the award of moral
damages from P5,000,000 to P100,000 and exemplary damages from P100,000 to
P20,000.
The award of attorneys fees is not proper because respondent failed to justify
satisfactorily his claim, and both the trial and appellate courts failed to explicitly
state in their respective decisions the rationale for the award. 33 It is an accepted
doctrine that the award thereof as an item of damages is the exception rather than
the rule, and counsels fees are not to be awarded every time a party wins a suit.
The power of the court to award attorneys fees under Article 2208 of the Civil Code
demands factual, legal and equitable justification, without which the award is a
conclusion without a premise, its basis being improperly left to speculation and
conjecture. In all events, the court must explicitly state in the text of the decision,
and not only in the decretal portion thereof, the legal reason for the award of
attorneys fees.34 The same is true for the award of litigation expenses because
respondent failed to satisfactorily justify his claim.
WHEREFORE, we DENY the instant petition. The 27 January 2006 Decision and 28
August 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 73088 are
hereby MODIFIED, in that: (1) the award of moral damages is reduced from
P5,000,000 to P100,000; (2) the award of exemplary damages is reduced from
P100,000 to P20,000; and (3) litigation expenses and attorneys fees are deleted.
SO ORDERED.
27
ALEJANDRO C. ALMENDRAS, JR. -versus- ALEXIS C. ALMENDRAS
Facts:
Alejandro C. Almendras sent letters to House Speaker Jose De Venecia, Jr. and Dr.
Nemesio Prudente, President of Oil Carriers, Inc. These letters were allegedly
printed, distributed, circulated and published by Alejandro Almendras, Jr. in Davao
Del Sur and Quezon City, with evident bad faith and manifest malice to destroy
Alexis C. Almendras good name. Hence, the latter filed an action for damages
arising from libel and defamation against petitioner in RTC, Digos City. RTC granted
the complaint, awarding Alexis P5M as moral damages, P100T as exemplary
damages, P10T for litigation expenses and attorneys fees in the amount of 25% of
whatever amounts actually received by plaintff for this judgment. After the denial of
Motion for Reconsideration and/or new trial, the case was elevated to CA. CA
affirmed the decision of RTC.
Issues:
1. Whether or not petitioner was deprived due process.
2. Whether or not the letters are libelous in nature.
3. Whether of not the letters fall within the purview of privileged communication;
and 4. Whether or not respondent is entitled to moral and exemplary damages,
attorneys fees and litigation expenses.
Ruling:
1. Petitioner was given several opportunities to present his evidence or to clarify his
medical constraints in court, but he did not do so, despite knowing fully well that he
had a pending case in court. In keeping the normal course of events, he should have
taken the initiative of making the proper inquiries from his counsel and the trial
court as to the status of his case. For his failure to do so, he has only himself to
blame. The Court cannot allow petitioner the exception to the general rule just
because his counsel admitted having no knowledge of his medical condition. To do
so will sit a dangerous precedent of never ending suits, so long as lawyers could
allege their own fault or negligence to support the client s case and obtain
remedies and reliefs already lost by the operation of law.
2. For imputation to be libelous under Art. 353 of the Revised Penal Code, the
following requisites must be present: a) it must be defamatory; b)it must be
malicious; c) it must be given publicity; and d) the victim must be identifiable.
Consequently, under Art. 354, every defamatory imputation is presumed to be
malicious, even if true, if no good intention and justifiable motive is shown. In the
instant case, the letters tag respondent as a reknown black mailer a
vengeful family member who filed cases againts his mother and siblings, and with
nefarious designs. Even impartial mind reading these descriptions would be led to
 28

entertain doubts on the persons character thereby affecting that person s

reputation.

3. A written letter containing libelous matter cannot be classified as privileged when

it is published and circulated among the public. His intention is clearly stated on the
letter, when he requested the assistance of the office of the recipient to circulate the
information to concerned officials and secretariat employees of the House of the
Representatives. The publication brought discredit and shame to respondent s
reputation.

4. Considering that the respondent sufficiently justified his claim for damages, he is
entitled to moral and exemplary damages. The award on attorney s fees and
litigation expenses are not proper because the respondent failed to justify
satisfactorily his claim.

SECOND DIVISION
[G.R. No. 128452. November 16, 1999]
COMPANIA MARITIMA, INC., EL VARADERO DE MANILA, MINDANAO TERMIN
AL AND BROKERAGE SERVICES, CARLOS P. FERNANDEZ, VICENTET. FERNAN
DEZ, LUIS T. FERNANDEZ, and RAMON B. FERNANDEZ, petitioners, vs. COUR
T OF APPEALS and EXEQUIEL S. CONSULTA,. respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1]of the Court of Appeals, dat
ed February 27, 1996, affirming the decision of the Regional Trial Court, Branch 94,
Quezon City, dated March 16,1993, which ordered petitioners to pay private respond
ent, Atty. Exequiel S. Consulta, the total amount of P2,590,000.00, as attorneys fees,
and P21,856.40, as filing fees, in connection with three cases whichthe latter, as att
orney, handled for the former.
The facts are as follows:
Maritime Company of the Philippines was sued by Genstar Container Corporation bef
ore the Regional Trial Court, Branch 31, Manila. On November 29, 1985, it was order
ed to pay Genstar ContainerCorporation the following amounts:
a. $469,860.35, or its equivalent in pesos at the current exchange rate.
b. 25% of the total obligation, P2,000.00 as Acceptance Fee, and P250.00 per appear
ance - - as Attorneys Fees.
c. Costs of suit.
As a result, properties of petitioners Compania Maritima, Inc., El Varadero de Manila,
and Mindanao Terminal and Brokerage Services at Sangley Point, Cavite, were levied
upon in execution. Theproperties, consisting of the tugboats Dadiangas, Marinero, a
nd Timonel, the floating crane Northwest Murphy Diesel Engine, and the motorized l
aunch Sea Otter, were worth P51,000,000.00 in sum.However, the same were sold a
t public auction for only P1,235,000.00 to the highest bidder, a certain Rolando Patri
arca.[2]
Petitioners Compania Maritima, Inc., El Varadero de Manila, and Mindanao Terminal a
nd Brokerage Services engaged the services of private respondent, Atty. Exequiel S.
Consulta, who representedthem in the following cases: (1) Civil Case No. 85-30134,
entitled Genstar Container Corporation v. Maritime Company of the Philippines, wher
ein petitioners properties were levied upon although petitionershad not been implea
ded as defendants therein; (2) TBP Case No. 86-03662, entitled Compania Maritima,
Inc., v. Ramon C. Enriquez, which was a criminal case for falsification and for violatio
n of R.A. No.3019, otherwise known as the Anti-Graft and Corrupt Practices Act, agai
nst Deputy Sheriff Enriquez before the Tanodbayan; and (3) Civil Case No. 86-37196
entitled Compania Maritima v. GenstarContainer Corporation, an action for Injunction
, Annulment of Execution Proceedings, and Damages.[3]
29
The cases were eventually resolved in this wise: (1) in Civil Case No. 85-30134, the t
rial court dismissed the third-party claim and motion for the issuance of a writ of prel
iminary injunction filed by Atty.Consulta; (2) after Atty. Consulta filed the complaint
with the Tanodbayan in TBP Case No. 86-03662, petitioners transferred the handling
of the case to another lawyer; and (3) Civil Case No. 86-37196 waseventually dismis
sed on motion of both parties, but only after the trial courts denial of the motion to d
ismiss filed by Genstar Container Corporation was upheld on appeal by both the Cou
rt of Appeals and theSupreme Court.[4]
For his services in the three cases, Atty. Consulta billed petitioners as follows: (1) P1
00,000.00 for Civil Case No. 85-30134; (2) P50,000.00 for TBP Case No. 86-03662; a
nd (3) P5,000,000.00 for CivilCase No. 86-37196, including the subsequent appeals t
o the Court of Appeals and the Supreme Court. Petitioners did not pay the amount d
emanded but only P30,000.00 for Civil Case No. 85-30134 andP10,000.00 for TBP Ca
se No. 86-03662.[5]
Because of the failure of corporate petitioners to pay the balance of his attorneys fe
es, Atty. Consulta brought suit against petitioners in the Regional Trial Court, Branch
94, Quezon City. He sought therecovery of the following: (1) P70,000.00, as the bala
nce of the P100,000.00 attorneys fees billed for Civil Case No. 85-30134; (2) P40,00
0.00, as the balance of the P50,000.00 attorneys fees for TBP CaseNo. 86-03662, an
d (3) P5,000,000.00 as attorneys fees for Civil Case No. 86-37196, including the subs
equent appeals therefrom to the Court of Appeals and the Supreme Court. He likewis
e asked for moraland exemplary damages, attorneys fees, and the costs of suit.[6]
On March 16, 1993, the trial court rendered a decision which in part stated:
Considering all the circumstances as above set forth, this Court believes that the am
ount equivalent to five percent (5%) of the amount involved, or the amount of Two M
illion Five Hundred FiftyThousand Pesos (P2,550,000.00) would be reasonable attorn
eys fees for the services rendered by the plaintiff in Civil Case No. 37196 and the tw
o related proceedings in the Court of Appeals and the SupremeCourt.
As for the services rendered by the plaintiff in Civil Case No. 30134, for which he app
ears to have already been paid P30,000.00, the Court believes that an additional am
ount of P20,000.00 would bereasonable.
On plaintiffs demand of P40,000.00, in addition to the P10,000.00 he had initially rec
eived for services rendered in the Tanodbayan case No. 86-03662, the Court grants
him an additional P20,000.00.
WHEREFORE, judgment is hereby rendered for the plaintiff and orders the defendant
to pay the plaintiff, jointly and severally, damages as follows:
a. For services rendered by plaintiff in Civil Case No. 37196 and the related proceedi
ngs in the Court of Appeals and the Supreme Court - Two Million Five Hundred Fifty T
housand Pesos(P2,550,000.00).
b. For services rendered by plaintiff in Civil Case No. 30134 - Twenty Thousand Pesos
(P20,000.00).
c. For services rendered in the TBP Case No. 86-03662 - Twenty Thousand Pesos (P2
0,000.00).
d. Filing fees in the amount of P21,856.40.

The defendants counterclaim and plaintiffs counterclaim to defendants counterclaim
are both dismissed.
SO ORDERED.
On appeal, the Court of Appeals affirmed the decision of the trial court. Said th
e appellate court:
In Civil Case No. 37196, where appellee rendered his legal services, appellants prope
rty worth Fifty One Million Pesos (P51,000,000.00) was involved. Likewise, the afore
mentioned case was not asimple action for collection of money, considering that co
mplex legal issues were raised therein which reached until the Supreme Court. In the
course of such protracted legal battle to save the appellantsproperties, the appellee
prepared numerous pleadings and motions, which were diligently and effectively exe
cuted, as a result of which, the appellants properties were saved from execution and
theiroppositors were forced to settle by way of a compromise agreement.
It is a wellsettled rule that in the recovery of attorneys fees, whether as a main actio
n or as an incident of another action, the determination of the reasonableness is wit
hin the prerogative of the courts(Roldan vs. Court of Appeals, 218 SCRA 713; Radiow
ealth Finance Co., Inc. vs. International Corporate Bank, 182 SCRA 862; Panay Electri
c vs. Court of Appeals, 119 SCRA 456).
Based on the aforequoted ruling, We find that the court a quo did not commit any re
versible error in awarding attorneys fees equivalent to five percent (5%) of the total
value of properties involved inCivil Case No. 37196.
Hence, this appeal. Petitioners raise the following issues:
a) Whether or not the amount of attorneys fees awarded to the private respondent b
y the court a quo and affirmed by the Honorable Court is reasonable.
b) Whether or not the doctrine of piercing the veil of corporate fiction may be applie
d in the case at bar.
With respect to the first question, it is pertinent to note two concepts of attorneys fe
es in this jurisdiction. In the ordinary sense, attorneys fees represent the reasonable
compensation paid to a lawyer byhis client for the legal services he has rendered to
the latter. On the other hand, in its extraordinary concept, attorneys fees may be aw
arded by the court as indemnity for damages to be paid by the losing partyto the pr
evailing party.[7]
The issue in this case concerns attorneys fees in the ordinary concept. Generally, th
e amount of attorneys fees due is that stipulated in the retainer agreement which is
conclusive as to the amount of thelawyers compensation. In the absence thereof, th
e amount of attorneys fees is fixed on the basis of quantum meruit, i.e., the reasona
ble worth of his services.[8] In determining the amount of attorneys fees, thefollowing
factors are considered: (1) the time spent and extent of services rendered; (2) the n
ovelty and difficulty of the questions involved; (3) the importance of the subject mat
ter; (4) the skill demanded; (5)the probability of losing other employment as a result
of the acceptance of the proffered case; (6) the amount involved in the controversy
and the benefits resulting to the client; (7) the certainty ofcompensation; (8) the cha
racter of employment; and (9) the professional standing of the lawyer.[9]
Both the Court of Appeals and the trial court approved attorneys fees in the total am
ounts of P50,000.00 and P30,000.00 for the services of Atty. Consulta in Civil Case N
o. 85-30134 and TBP Case No.86-03662, respectively. Based on the above criteria, w
30
e think said amounts are reasonable, although the thirdparty claim and motion for th
e issuance of a writ of preliminary injunction filed by Atty. Consultain Civil Case No. 8
5-30134 was dismissed by the trial court, while TBP Case No. 86-03662 was given by
petitioners to another lawyer after Atty. Consulta had filed the complaint. On the oth
er hand, althoughthe order of the trial court in Civil Case No. 86-37196 granting the
motion to dismiss filed by both parties did not state the grounds therefor, it is reason
able to infer that petitioners agreed thereto inconsideration of some advantage. Hen
ce, the rulings of the Court of Appeals and the trial court that, because of the compl
exity of the issues involved and the work done by counsel, the amount ofP2,550,000
.00 was reasonable for Atty. Consultas services.
In addition, the value of the properties involved was considerable. As already stated,
to satisfy the judgment in favor of Genstar Container Corporation in Civil Case No. 8
5-30134, properties ofpetitioners worth P51,000,000.00 were sold at public auction.
Only P1,235,000.00 was realized from the sale and petitioners were in danger of losi
ng their properties. As the appellate court pointed out, Atty.Consulta rendered profes
sional services not only in the trial court but in the Court of Appeals and in this Court
. There is no question that through his efforts, properties owned by petitioners were
saved fromexecution.
It is settled that great weight, and even finality, is given to the factual conclusions of
the Court of Appeals which affirm those of the trial courts.[10] Only where it is shown t
hat such findings arewhimsical, capricious, and arbitrary can they be overturned. In t
he present case, the Court of Appeals affirmed the factual conclusions of the trial co
urt that: (1) the issues in Civil Case No. 86-03662,including the appeals taken therefr
om to the Court of Appeals and the Supreme Court, were quite complex; (2) the plea
dings filed by Atty. Consulta were well-researched; and (3) as a result of Atty. Consult
asefforts, the adverse parties were induced to agree to the dismissal of the case.
Petitioners contend, however, that: (1) the said cases merely involved simple issues;
(2) the pleadings filed by Atty. Consulta did not exhibit an extraordinary level of com
petence, effort, and skill; and (3)they did not benefit from the efforts of Atty. Consult
a. These allegations have not been proven. Petitioners have not shown that the fact
ual findings of both the Court of Appeals and the trial court are contraryto the evide
nce. Nor have they shown that they did not benefit from their representation by Atty.
Consulta.
With respect to the liability of individual petitioners Carlos P. Fernandez, Vicente T. Fe
rnandez, Luis T. Fernandez, and Ramon B. Fernandez, we hold that the mere fact tha
t they were stockholders anddirectors of corporate petitioners does not justify a findi
ng that they are liable for the obligations of the corporations.
It is wellsettled that as a legal entity, a corporation has a personality separate and di
stinct from its individual stockholders or members. The fiction of corporate entity will
be set aside and the individualstockholders will be held liable for its obligation only if
it is shown that it is being used for fraudulent, unfair, or illegal purposes.[11] In this ca
se, the Court of Appeals held that individual petitioners wereguilty of fraud, based o
n its finding that they refused to pay the attorneys fees demanded by Atty. Consulta.
It should be noted, however, that although petitioners Compania Maritima, Inc., El V
aradero deManila, and Mindanao Terminal and Brokerage Services have an obligatio
n to pay Atty. Consulta for his attorneys fees, the amount thereof was still in dispute.
It was therefore improper for the Court ofAppeals to conclude that individual petition
ers were guilty of fraud simply because corporate petitioners had refused to make th
e payments demanded. The fact remains that at the time of demand, the amountdu
e to Atty. Consulta had not been finally determined.
 31

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals, dated F
ebruary 27, 1996, is AFFIRMED with the modification that individual petitioners Carlo
s P. Fernandez, Vicente T.Fernandez, Luis T. Fernandez, and Ramon B. Fernandez are
absolved from personal liability for attorneys fees to Atty. Exequiel S. Consulta.

SO ORDERED.

Castelo vs Court of Appeals (244 SCRA 180)
FACTS
On 15 October 1982, petitioners Antonio Castelo, Bernabe Banson, Lourdes Banson
and Pompeyo Depante entered into a contract denominated as a "Deed of
Conditional Sale" with private respondent Milagros Dela Rosa involving a parcel of
land. The agreed price of the land was P269,408.00. Upon signing the contract,
private respondent paid petitioners P106,000.00 leaving a balance of P163,408.00.
The Deed of Conditional Sale also stipulated that:
b.)The balance of P163,408.00 to be paid on or before December 31, 1982 without
interest and penalty charges;
c.)Should the said balance [remain unpaid] by the VENDEE, the VENDORS hereby
agree to give the VENDEE a grace period of SIX (6) months or up to June 30, 1983 to
pay said balance provided that interest at the rate of 12% per annum shall be
charged and 1% penalty charge a month shall be imposed on the remaining
diminishing balance.
Private respondent Dela Rosa was unable to pay the remaining balance. Petitioners
filed an action for specific performance with damages. RTC rendered the decision
ordering the rescission of the Deed of Conditional Sale. Petitioners went on Certiorari
to CA. They claimed that rescission of the contract was only an alternative relief
available under the Civil Code, while they in their complaint before the RTC, had
asked for specific performance with damages.CA reversed the RTC decision. Writ of
execution was issued. Private respondent Dela Rosa was required to pay petitioners
a total of P197,723.68. Petitioners filed a motion for reconsideration and a separate
motion for alias writ of execution contending that the sum of P197,723.68 was
erroneous. They argued that the obligation of private respondent was to pay (a)
interest at the rate of twelve percent (12%) per annum plus (b) one percent (1%)
penalty charge per month, from default, i.e, from 1 January 1983; that the amount to
be paid by the Defendant should be P398,814.88 instead and not P197,723.68 or a
difference of P201,091.20.
RTC denied the motion. Further contends that the phrase "to pay interest" found in
the dispositive portion of the CAs November 21, 1986 decision did not refer to the
stipulation in the "Deed of Conditional Sale" but rather to the legal rate of interest
imposed by the CA which started to run from 12 February 1987, the date of entry of
judgment.
Petitioner filed on certiorari to CA. CA dismissed it. But stated that the part of the
dispositive portion, ordering the "defendant . . . to pay the balance of the conditional
sale in the amount of P163,408.00, to pay interest . . . ." Being a "new" judgment or
decision, the computation of the "interest" on the balance of the conditional sale
should commence from the date of its ENTRY on February 12, 1987, when the
decision became FINAL and EXECUTORY.
32
ISSUE: What is the correct interpretation of the phrase "to pay interest" set out in
the dispositive portion of the CA decision?
HELD:
The established doctrine is that when the dispositive portion of a judgment, which
has become final and executory, contains a clerical error or an ambiguity arising
from an inadvertent omission, such error or ambiguity may be clarified by reference
to the body of the decision itself.
SC believe and so hold that the phrase to pay interest, found in the dispositive
portion of the CA decision must, under applicable law, refer to the interest stipulated
by the parties in the Deed of Conditional Sale which they had entered into on 15
October 1982. SC note, in the first place, that the phrase to pay interest comes
close upon the heels of the preceding phrase "to comply with her obligation under
the conditional sale to pay the balance of P163,408.00." A strong inference thus
arises that the "interest" required to be paid is the interest stipulated as part of the
obligation [of private respondent dela Rosa] under the conditional sale [agreement]
to pay the balance of [the purchase price of the land.
In the computation for the amount to be paid, The question is whether, during the
period of 1 January 1983 up to 30 June 1983, 12% interest per annum plus 1%
penalty charge a month was payable "on the remaining diminishing balance;" or
whether during the period from 1 January 1983 to 30 June 1983, only 12% per
annum interest was payable while the 1% per month penalty charge would in
addition begin to accrue on any balance remaining unpaid as of 1 July 1983.
SC believed the parties intended the latter view. The interpretation SC adopted is
also supported by the principle that in case of ambiguity in contract language, that
interpretation which establishes a less onerous transmission of rights or imposition
of lesser burdens which permits greater reciprocity between the parties, is to be
adopted (Art. 1378).
WHEREFORE, the writ of certiorari is hereby GRANTED.
(2)ordering the defendant to comply with her obligation under the conditional sale
to pay the balance of the conditional sale in the amount of P163,408.00, to pay
interest on the amount of the balance remaining unpaid during the period from 1
January 1983 to 30 June 1983 at the rate of 12% per annum; and, from 1 July 1983
until full payment of the amount due, to pay interest at the rate of 12% per annum
plus another 12% per annum (i.e., 1% penalty charge per month), or a total of 24%
per annum, on the balance remaining unpaid; and
(3)in default thereof, the rescission of the "Deed of Conditional Sale" is the
alternative."
33
 34

Bataan Seedling vs Republic, GR No. 141009, 2 July 2002, 383 SCRA 590

FACTS:

Petitioner entered into a contract with respondent, represented by the DENR for the
reforestation of a forest land within a period of 3 years. Petitioner undertook to
report to DENR any event or condition which delays or may delay the project. With
the contract was the release of mobilization fund but the fund was to be returned
upon completion or deducted from periodic release of mhoneys to petitioner.
Believing that petitioners failed to comply with their obligations, respondent sent a
notice of cancellation. Petitioners failed to respond to the notice, thus, respondent
filed a complaint for damages against petitioners. The RTC held that respondent had
sufficient grounds to cancel the contract but saw no reason why the mobilization
fund and the cash advances should be refunded or that petitioners are liable for
liquidated damages. Both parties appealed to the CA, which affirmed the trial court
and that the balnce of the fund should be returned with 12% interest.

ISSUE: Whether the order to refund the balance of the fund with 12% interest pa is
proper.

HELD:

No. Interest at the rate of 12% pa is impossible if there is no stipulation in the

contract. Herein subject contract does not contain any stipulation as to interest.
However, the amount due to respondent does not represent a loan or forbearance of
money. The word forbearance is defined, within, the context of usury law, as a
contractual obligation of lender or creditor to refrain, during given period of time,
from requiring borrower or debtor to repay loan or debt then due and payable. In the
absence of stipulation, the legal interest is 6% pa on the amount finally adjudged by
the Court.

FIRST DIVISION
G.R. No. 147791 September 8, 2006
CONSTRUCTION DEVELOPMENT CORPORATION OF THE
PHILIPPINES, petitioner,
vs.
REBECCA G. ESTRELLA, RACHEL E. FLETCHER, PHILIPPINE PHOENIX SURETY
& INSURANCE INC., BATANGAS LAGUNA TAYABAS BUS CO., and WILFREDO
DATINGUINOO, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the March 29, 2001 Decision 1 of the Court of Appeals
in CA-G.R. CV No. 46896, which affirmed with modification the February 9, 1993
Decision2 of the Regional Trial Court of Manila, Branch 13, in Civil Case No. R-82-
2137, finding Batangas Laguna Tayabas Bus Co. (BLTB) and Construction
Development Corporation of the Philippines (CDCP) liable for damages.
The antecedent facts are as follows:
On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter,
Rachel E. Fletcher, boarded in San Pablo City, a BLTB bus bound for Pasay City.
However, they never reached their destination because their bus was rammed from
behind by a tractor-truck of CDCP in the South Expressway. The strong impact
pushed forward their seats and pinned their knees to the seats in front of them.
They regained consciousness only when rescuers created a hole in the bus and
extricated their legs from under the seats. They were brought to the Makati Medical
Center where the doctors diagnosed their injuries to be as follows:
Medical Certificate of Rebecca Estrella
Fracture, left tibia mid 3rd
Lacerated wound, chin
Contusions with abrasions, left lower leg
Fracture, 6th and 7th ribs, right3
Medical Certificate of Rachel Fletcher
Extensive lacerated wounds, right leg posterior aspect popliteal area
and antero-lateral aspect mid lower leg with severance of muscles.
Partial amputation BK left leg with severance of gastro-soleus and
antero-lateral compartment of lower leg.
Fracture, open comminuted, both tibial4
35
Thereafter, respondents filed a Complaint5 for damages against CDCP, BLTB,
Espiridion Payunan, Jr. and Wilfredo Datinguinoo before the Regional Trial Court of
Manila, Branch 13. They alleged (1) that Payunan, Jr. and Datinguinoo, who were the
drivers of CDCP and BLTB buses, respectively, were negligent and did not obey
traffic laws; (2) that BLTB and CDCP did not exercise the diligence of a good father of
a family in the selection and supervision of their employees; (3) that BLTB allowed
its bus to operate knowing that it lacked proper maintenance thus exposing its
passengers to grave danger; (4) that they suffered actual damages amounting to
P250,000.00 for Estrella and P300,000.00 for Fletcher; (5) that they suffered
physical discomfort, serious anxiety, fright and mental anguish, besmirched
reputation and wounded feelings, moral shock, and lifelong social humiliation; (6)
that defendants failed to act with justice, give respondents their due, observe
honesty and good faith which entitles them to claim for exemplary damage; and (7)
that they are entitled to a reasonable amount of attorney's fees and litigation
expenses.
CDCP filed its Answer6 which was later amended to include a third-party complaint
against Philippine Phoenix Surety and Insurance, Inc. (Phoenix).7
On February 9, 1993, the trial court rendered a decision finding CDCP and BLTB and
their employees liable for damages, the dispositive portion of which, states:
WHEREFORE, judgment is rendered:
In the Complaint
1. In favor of the plaintiffs and against the defendants BLTB, Wilfredo
Datinguinoo, Construction and Development Corporation of the Philippines
(now PNCC) and Espiridion Payunan, Jr., ordering said defendants, jointly
and severally to pay the plaintiffs the sum of P79,254.43 as actual damages
and to pay the sum of P10,000.00 as attorney's fees or a total of
P89,254.43;
2. In addition, defendant Construction and Development Corporation of the
Philippines and defendant Espiridion Payunan, Jr., shall pay the plaintiffs the
amount of Fifty Thousand (P50,000.00) Pesos to plaintiff Rachel Fletcher
and Twenty Five Thousand (P25,000.00) Pesos to plaintiff Rebecca Estrella;
3. On the counterclaim of BLTB Co. and Wilfredo Datinguinoo
Dismissing the counterclaim;
4. On the crossclaim against Construction and Development Corporation of
the Philippines (now PNCC) and Espiridion Payunan, Jr.
Dismissing the crossclaim;

5. On the counterclaim of Construction and Development Corporation of the
Philippines (now PNCC)
Dismissing the counterclaim;
6. On the crossclaim against BLTB
Dismissing the crossclaim;
7. On the Third Party Complaint by Construction and Development
Corporation of the Philippines against Philippine Phoenix Surety and
Insurance, Incorporated
Dismissing the Third Party Complaint.
SO ORDERED.8
The trial court held that BLTB, as a common carrier, was bound to observe
extraordinary diligence in the vigilance over the safety of its passengers. It must
carry the passengers safely as far as human care and foresight provide, using the
utmost diligence of very cautious persons, with a due regard for all the
circumstances. Thus, where a passenger dies or is injured, the carrier is presumed to
have been at fault or has acted negligently. BLTB's inability to carry respondents to
their destination gave rise to an action for breach of contract of carriage while its
failure to rebut the presumption of negligence made it liable to respondents for the
breach.9
Regarding CDCP, the trial court found that the tractor-truck it owned bumped the
BLTB bus from behind. Evidence showed that CDCP's driver was reckless and driving
very fast at the time of the incident. The gross negligence of its driver raised the
presumption that CDCP was negligent either in the selection or in the supervision of
its employees which it failed to rebut thus making it and its driver liable to
respondents.10
Unsatisfied with the award of damages and attorney's fees by the trial court,
respondents moved that the decision be reconsidered but was denied. Respondents
elevated the case11 to the Court of Appeals which affirmed the decision of the trial
court but modified the amount of damages, the dispositive portion of which
provides:
WHEREFORE, the assailed decision dated October 7, 1993 of the Regional
Trial Court, Branch 13, Manila is hereby AFFIRMED with the following
MODIFICATION:
1. The interest of six (6) percent per annum on the actual damages of
P79,354.43 should commence to run from the time the judicial demand was
made or from the filing of the complaint on February 4, 1980;
36
2. Thirty (30) percent of the total amount recovered is hereby awarded as
attorney's fees;
3. Defendants-appellants Construction and Development Corporation of the
Philippines (now PNCC) and Espiridion Payunan, Jr. are ordered to pay
plaintiff-appellants Rebecca Estrella and Rachel Fletcher the amount of
Twenty Thousand (P20,000.00) each as exemplary damages and
P80,000.00 by way of moral damages to Rachel Fletcher.
SO ORDERED.12
The Court of Appeals held that the actual or compensatory damage sought by
respondents for the injuries they sustained in the form of hospital bills were already
liquidated and were ascertained. Accordingly, the 6% interest per annum should
commence to run from the time the judicial demand was made or from the filing of
the complaint and not from the date of judgment. The Court of Appeals also
awarded attorney's fees equivalent to 30% of the total amount recovered based on
the retainer agreement of the parties. The appellate court also held that
respondents are entitled to exemplary and moral damages. Finally, it affirmed the
ruling of the trial court that the claim of CDCP against Phoenix had already
prescribed.
Hence, this petition raising the following issues:
I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT
HOLDING RESPONDENTS BLTB AND/OR ITS DRIVER WILFREDO
DATINGUINOO SOLELY LIABLE FOR THE DAMAGES SUSTAINED BY HEREIN
RESPONDENTS FLETCHER AND ESTRELLA.
II
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN AWARDING
EXCESSIVE OR UNFOUNDED DAMAGES, ATTORNEY'S FEES AND LEGAL
INTEREST TO RESPONDENTS FLETCHER AND ESTRELLA.
III
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT
HOLDING RESPONDENT PHOENIX LIABLE UNDER ITS INSURANCE POLICY ON
THE GROUND OF PRESCRIPTION.
The issues for resolution are as follows: (1) whether BLTB and its driver Wilfredo
Datinguinoo are solely liable for the damages sustained by respondents; (2) whether
the damages, attorney's fees and legal interest awarded by the CA are excessive
and unfounded; (3) whether CDCP can recover under its insurance policy from
Phoenix.
 37

Petitioner contends that since it was made solidarily liable with BLTB for actual
damages and attorney's fees in paragraph 1 of the trial court's decision, then it
should no longer be held liable to pay the amounts stated in paragraph 2 of the
same decision. Petitioner claims that the liability for actual damages and attorney's
fees is based on culpa contractual, thus, only BLTB should be held liable. As regards
paragraph 2 of the trial court's decision, petitioner claims that it is ambiguous and
arbitrary because the dispositive portion did not state the basis and nature of such
award.
Respondents, on the other hand, argue that petitioner is also at fault, hence, it was
properly joined as a party. There may be an action arising out of one incident where
questions of fact are common to all. Thus, the cause of action based on culpa
aquiliana in the civil suit they filed against it was valid.
The petition lacks merit.
case of injury to a passenger due to the negligence of the driver of the bus
on which he was riding and of the driver of another vehicle, the drivers as
well as the owners of the two vehicles are jointly and severally liable for
damages. x x x
As in the case of BLTB, private respondents in this case and her co-plaintiffs
did not stake out their claim against the carrier and the driver exclusively
on one theory, much less on that of breach of contract alone.After all, it
was permitted for them to allege alternative causes of action and
join as many parties as may be liable on such causes of action so
long as private respondent and her co-plaintiffs do not recover
twice for the same injury. What is clear from the cases is the intent of
the plaintiff there to recover from both the carrier and the driver, thus
justifying the holding that the carrier and the driver were jointly and
severally liable because their separate and distinct acts concurred to
produce the same injury.16(Emphasis supplied)

The case filed by respondents against petitioner is an action for culpa aquiliana or
In a "joint" obligation, each obligor answers only for a part of the whole liability; in a
quasi-delict under Article 2176 of the Civil Code.13 In this regard, Article 2180
"solidary" or "joint and several" obligation, the relationship between the active and
provides that the obligation imposed by Article 2176 is demandable for the acts or
the passive subjects is so close that each of them must comply with or demand the
omissions of those persons for whom one is responsible. Consequently, an action
fulfillment of the whole obligation. In Lafarge Cement v. Continental Cement
based on quasi-delict may be instituted against the employer for an employee's act
Corporation,17we reiterated that joint tort feasors are jointly and severally liable for
or omission. The liability for the negligent conduct of the subordinate
the tort which they commit. Citing Worcester v. Ocampo,18 we held that:
is direct and primary, but is subject to the defense of due diligence in the selection
and supervision of the employee.14 In the instant case, the trial court found that
petitioner failed to prove that it exercised the diligence of a good father of a family x x x The difficulty in the contention of the appellants is that they fail to
in the selection and supervision of Payunan, Jr. recognize that the basis of the present action is tort. They fail to recognize
the universal doctrine that each joint tort feasor is not only individually
liable for the tort in which he participates, but is also jointly liable with his
The trial court and the Court of Appeals found petitioner solidarily liable with BLTB
tort feasors. x x x
for the actual damages suffered by respondents because of the injuries they
sustained. It was established that Payunan, Jr. was driving recklessly because of the
skid marks as shown in the sketch of the police investigator. It may be stated as a general rule that joint tort feasors are all the persons
who command, instigate, promote, encourage, advise, countenance,
cooperate in, aid or abet the commission of a tort, or who approve of it
It is well-settled in Fabre, Jr. v. Court of Appeals,15 that the owner of the other vehicle
after it is done, if done for their benefit. They are each liable as principals,
which collided with a common carrier is solidarily liable to the injured passenger of
to the same extent and in the same manner as if they had performed the
the same. We held, thus:
wrongful act themselves. x x x

The same rule of liability was applied in situations where the negligence of
Joint tort feasors are jointly and severally liable for the tort which they
the driver of the bus on which plaintiff was riding concurred with the
commit. The persons injured may sue all of them or any number less than
negligence of a third party who was the driver of another vehicle, thus
all. Each is liable for the whole damages caused by all, and all together are
causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus
jointly liable for the whole damage. It is no defense for one sued alone, that
Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v.
the others who participated in the wrongful act are not joined with him as
Court of Appeals, the bus company, its driver, the operator of the
defendants; nor is it any excuse for him that his participation in the tort was
other vehicle and the driver of the vehicle were jointly and
insignificant as compared to that of the others. x x x
severally held liable to the injured passenger or the latter's
heirs. The basis of this allocation of liability was explained in Viluan v.
Court of Appeals, thus: Joint tort feasors are not liable pro rata. The damages can not be
apportioned among them, except among themselves. They cannot insist
upon an apportionment, for the purpose of each paying an aliquot part.
Nor should it make any difference that the liability of petitioner
They are jointly and severally liable for the whole amount. x x x
[bus owner] springs from contract while that of respondents
[owner and driver of other vehicle] arises from quasi-delict. As early
as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in

A payment in full for the damage done, by one of the joint tort feasors, of
course satisfies any claim which might exist against the others. There can
be but satisfaction. The release of one of the joint tort feasors by
agreement generally operates to discharge all. x x x
Of course the court during trial may find that some of the alleged tort
feasors are liable and that others are not liable. The courts may release
some for lack of evidence while condemning others of the alleged tort
feasors. And this is true even though they are charged jointly and
severally.19
Petitioner's claim that paragraph 2 of the dispositive portion of the trial court's
decision is ambiguous and arbitrary and also entitles respondents to recover twice is
without basis. In the body of the trial court's decision, it was clearly stated that
petitioner and its driver Payunan, Jr., are jointly and solidarily liable for moral
damages in the amount of P50,000.00 to respondent Fletcher and P25,000.00 to
respondent Estrella.20 Moreover, there could be no double recovery because the
award in paragraph 2 is for moral damages while the award in paragraph 1 is for
actual damages and attorney's fees.
Petitioner next claims that the damages, attorney's fees, and legal interest awarded
by the Court of Appeals are excessive.
Moral damages may be recovered in quasi-delicts causing physical injuries. 21 The
award of moral damages in favor of Fletcher and Estrella in the amount of
P80,000.00 must be reduced since prevailing jurisprudence fixed the same at
P50,000.00.22 While moral damages are not intended to enrich the plaintiff at the
expense of the defendant, the award should nonetheless be commensurate to the
suffering inflicted.23
The Court of Appeals correctly awarded respondents exemplary damages in the
amount of P20,000.00 each. Exemplary damages may be awarded in addition to
moral and compensatory damages.24 Article 2231 of the Civil Code also states that
in quasi-delicts, exemplary damages may be granted if the defendant acted with
gross negligence.25 In this case, petitioner's driver was driving recklessly at the time
its truck rammed the BLTB bus. Petitioner, who has direct and primary liability for
the negligent conduct of its subordinates, was also found negligent in the selection
and supervision of its employees. In Del Rosario v. Court of Appeals,26 we held, thus:
ART. 2229 of the Civil Code also provides that such damages may be
imposed, by way of example or correction for the public good. While
exemplary damages cannot be recovered as a matter of right, they need
not be proved, although plaintiff must show that he is entitled to moral,
temperate or compensatory damages before the court may consider the
question of whether or not exemplary damages should be awarded.
Exemplary Damages are imposed not to enrich one party or impoverish
another but to serve as a deterrent against or as a negative incentive to
curb socially deleterious actions.
Regarding attorney's fees, we held in Traders Royal Bank Employees Union-
Independent v. National Labor Relations Commission, 27 that:
38
There are two commonly accepted concepts of attorney's fees, the so-
called ordinary and extraordinary. In its ordinary concept, an attorney's fee
is the reasonable compensation paid to a lawyer by his client for the legal
services he has rendered to the latter. The basis of this compensation is the
fact of his employment by and his agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for
damages ordered by the court to be paid by the losing party in a
litigation. The basis of this is any of the cases provided by law where such
award can be made, such as those authorized in Article 2208, Civil Code,
and is payable not to the lawyer but to the client, unless they have
agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof.28 (Emphasis supplied)
In the instant case, the Court of Appeals correctly awarded attorney's fees and other
expenses of litigation as they may be recovered as actual or compensatory damages
when exemplary damages are awarded; when the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff's valid, just and demandable
claim; and in any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered.29
Regarding the imposition of legal interest at the rate of 6% from the time of the filing
of the complaint, we held inEastern Shipping Lines, Inc. v. Court of Appeals,30 that
when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for payment
of interest in the concept of actual and compensatory damages, 31 subject to the
following rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum
of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to
be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum.No interest,
however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed
to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.
 39

3. When the judgment of the court awarding a sum of money unsatisfied, the same shall earn interest at the rate of 12% per annum until its
becomes final and executory, the rate of legal interest, whether satisfaction. SO ORDERED.
the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance
of credit.32 (Emphasis supplied)

Accordingly, the legal interest of 6% shall begin to run on February 9, 1993 when the
trial court rendered judgment and not on February 4, 1980 when the complaint was
filed. This is because at the time of the filing of the complaint, the amount of the
damages to which plaintiffs may be entitled remains unliquidated and unknown,
until it is definitely ascertained, assessed and determined by the court and only
upon presentation of proof thereon.33 From the time the judgment becomes final and
executory, the interest rate shall be 12% until its satisfaction.

Anent the last issue of whether petitioner can recover under its insurance policy
from Phoenix, we affirm the findings of both the trial court and the Court of Appeals,
thus:

As regards the liability of Phoenix, the court a quo correctly ruled that
defendant-appellant CDCP's claim against Phoenix already prescribed
pursuant to Section 384 of P.D. 612, as amended, which provides:

Any person having any claim upon the policy issued pursuant to
this chapter shall, without any unnecessary delay, present to the
insurance company concerned a written notice of claim setting
forth the nature, extent and duration of the injuries sustained as
certified by a duly licensed physician. Notice of claim must be filed
within six months from date of the accident, otherwise, the claim
shall be deemed waived. Action or suit for recovery of damage due
to loss or injury must be brought in proper cases, with the
Commissioner or Courts within one year from denial of the claim,
otherwise, the claimant's right of action shall prescribe. (As
amended by PD 1814, BP 874.)34

The law is clear and leaves no room for interpretation. A written notice of claim must
be filed within six months from the date of the accident. Since petitioner never made
any claim within six months from the date of the accident, its claim has already
prescribed.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. CV No. 46896 dated March 29, 2001, which modified the Decision of the
Regional Trial Court of Manila, Branch 13, in Civil Case No. R-82-2137, is AFFIRMED
with the MODIFICATIONS that petitioner is held jointly and severally liable to pay
(1) actual damages in the amount of P79,354.43; (2) moral damages in the amount
of P50,000.00 each for Rachel Fletcher and Rebecca Estrella; (3) exemplary
damages in the amount of P20,000.00 each for Rebecca Estrella and Rachel
Fletcher; and (4) thirty percent (30%) of the total amount recovered as attorney's
fees. The total amount adjudged shall earn interest at the rate of 6% per annum
from the date of judgment of the trial court until finality of this judgment. From the
time this Decision becomes final and executory and the judgment amount remains

EN BANC
G.R. No. L-20923 February 25, 1924
LIM SIENGCO, plaintiff-appellant,
vs.
LO SENG, doing business under the style of Lo Seng and Co., defendant-
appellant.
STREET, J.:
Upon November 13, 1919, the present action was instituted in the Court of First
Instance of Manila by Lim Siengco to recover of Lo Seng, upon the first cause of
action stated in the complaint, the sum of P15,282.28, consisting partly of money,
advanced by the plaintiff to the defendant partly of a claim for damages for breach
of the contracts for the purchase of alcohol, and in his second cause of action the
sum of P818, the value of wine and demijohns alleged to have been sold and
delivered to the defendant. In connection with the institution of this action, the
plaintiff caused an attachment to be levied upon certain property of the defendant,
but this attachment was afterwards dissolved by the court. On November 17, 1919,
the defendant interposed an answer, in which he admitted liability to a certain
extent, alleging, however, that the plaintiff on his part had breached the contract
respecting the alcohol by refusing to pay for the same as delivered. By way of
counterclaim the defendant sought to recover the sum of P30,000, as damages for
the wrongful suing out of the attachment. At the hearing the trial judge absolved the
defendant from the plaintiff's complaint and absolved the plaintiff from the
defendant's counterclaim. From this judgment both parties appealed in so far as the
decision was prejudicial to each of them respectively.
It appears that in July, 1919, the defendant, Lo Seng, was doing business as a
distiller of alcohol, under the name of Lo Seng & Co., with his office at 414 T. Pinpin
Street, Manila, while the plaintiff, Lim Siengco, was a merchant residing in the same
city. On July 16, of said year, Lo Seng as manager of Lo Seng & Co., contracted in
writing to sell to Lim Siengco 1,000 arrobas of refined alcohol, 182 proof, at the price
of P7 per arroba. The first delivery was stipulated to be made on August 15, 1919,
with weekly deliveries of 150 arrobas of said alcohol until delivery should be
completed.
On the same day Lo Seng contracted in writing to sell to the same Lim Siengco
6,000 arrobas of crude alcohol, of 80 proof, at the price of P3 per arroba. It was
agreed that deliveries under this contract should be made at the rate of
P1,000 arrobas commencing July 30 and at intervals of about fifteen days thereafter
until the entire quantity should be delivered. In connection with this contract for the
sale of the crude alcohol Lim Siengco advanced the sum of P1,500 at the time of the
making of the contract, and another sum of P1,500 on July 24, thereafter. A little
later Lim Siengco delivered another P1,000, making P4,000 in all advanced by the
40
plaintiff upon this contract. It was also stipulated that upon each delivery of crude
alcohol made by Lo Seng as per contract, the plaintiff should pay to Lo Seng only
P2.50 per arroba of the contract price, leaving 50 centavos of the value of
each arroba to be credited upon the advancements made as already stated.
Some time after these contracts were made, Lo Seng & Co. delivered about
128 arrobas of fine alcohol and about 468 arrobas of crude alcohol, after which no
deliveries whatever were made upon the contract.
On or about September 22 the manager of the plaintiff, one Lim Chiu, called upon
the manager of Lo Seng, one Simonson, and made inquiry as to the reason for the
failure of Lo Seng & Co. to make deliveries of the alcohol as agreed. Simonson told
Lim Chiu that Lo Seng had departed from the Philippine Islands and would not be
back for more than two weeks. Simonson further told Lim Chiu that he (Simonson)
personally knew nothing about the contract which Lim Chiu claimed to have with Lo
Seng, and that he (Simonson) could not, or would not, honor said contract.
Nevertheless he suggested to Lim Chiu that if the plaintiff had to have alcohol
immediately a certain amount would be supplied at a price greater than that
stipulated but somewhat under the price then prevailing in the market, and that
upon Lo Seng's return the matter could be taken up with him by Lim Chiu and they
could adjust it as they saw fit.
One of the excuses made then, or at some other time, for the failure of Lo Seng &
Co. to deliver the alcohol covered by said contracts was that a typhoon had lately
prevailed in the province where the distillery was located and that on this account
the distillery had not been operated lately with efficiency. Another explanation, no
doubt, is to be found in the condition of the market for alcohol, the price of which
began to rise in August and September and which continued to progress upwards for
several months, until fine alcohol was sold for P12 or P15 and crude alcohol for
nearly P4.
It further appears that in the months of August and September, 1919, Lo Seng
bought of the plaintiff a quantity of wine (vino tinto) and received also a number of
empty demijohns, of the combined value of P818.
The first error assigned by the plaintiff-appellant has reference to the action of the
court in dissolving the preliminary attachment. We think that this assignment of
error is not well taken, as it does not appear that any sufficient ground of
attachment in fact existed; and upon the facts appearing upon affidavits before him
the action taken by the trial judge in dissolving the attachment cannot be said to
have been improper.
The second assignment of error has reference to the action of the trial court in
failing to give judgment upon the second cause of action. This assignment of error is
well taken, and the failure of the trial court to give judgment in favor of the plaintiff
upon the item therein claimed was, we suppose, due to a mere oversight on the part

of his Honor. The account set forth in this cause is clearly proved by the plaintiff's
witness, Lim Chiu, manager of the business of Lim Siengco, and furthermore the
answer admits that the wine and demijohns were received as claimed. It is true that
the answer asserts that some of the demijohns were returned, without saying how
many or of what value; but no proof at all was submitted by the defendant to sustain
this assertion. The plaintiff should clearly have judgment for the sum of P818, being
the amount claimed upon the second cause of action.
The plaintiff-appellant's third assignment of error has reference to the refusal of the
trial court to award damages to the plaintiff for breach of contract by the defendant.
This assignment of error also is well taken, but not, we think, to the extent claimed
in the plaintiff's brief upon appeal.
It is proved not denied that the plaintiff advanced P4,000, upon the contract for
crude oil. In return for this he has received alcohol, both crude and fine, of a total
value of P2,507.79, at the prices contracted to be paid for the two sorts of alcohol
respectively. Upon liquidation of accounts this leaves a balance due to the plaintiff of
P1,429.21, which should undoubtedly be refunded. In the answer of the defendant it
is claimed that at a date subsequent to the making of the contract, the contracts
referred to had been changed by mutual agreement and that the plaintiff, in
consideration of the difficulties in which Lo Seng & Co. found itself, had agreed to
pay higher prices for alcohol that the prices stated in the contract. There is no proof
to support this contention, though it is admitted that the plaintiff did, after
repudiation of the contracts by Lo Seng & Co., pay for certain alcohol delivered by Lo
Seng & Co. at prices agreed upon by the parties, which prices were higher than the
contract prices. Lim Chiu, the manager of the plaintiff's business, explains this by
saying that his firm had to have alcohol and had to get it wherever they could and
furthermore that he bought some alcohol from Lo Seng & C0. for cash, as claimed
and for higher prices than was stipulated in the contract. But this he says was due to
necessity. The incident is also explained by Simonson's affidavit (used at the trial as
deposition), wherein he states that he advised Lim Chiu to take alcohol from Lo Seng
& Co. upon prices then fixed by Simonson, with the understanding that when Lo
Seng should return the matter could be adjusted with him. At any rate there is no
proof whatever that the plaintiff ever waived his contracts or agreed to any change
therein by which the price of alcohol was changed from that stipulated. It results
that the plaintiff is clearly entitled to recover this item of P1,492.21, as the balance
due upon the amount advanced by him upon the making of the contracts referred
to.
This brings us to consider the item of damages for breach of contract incident to the
failure of the defendant to supply alcohol upon the dates and in the amounts stated
in the two contracts. In connection with the claim for damages the plaintiff's
manager prepared an exhibit on January 31, 1920, in which he stated that the
damages as representing the difference between the price stipulated in the contract
and the price of fine and crude alcohol in the market on the date the account was
stated. This mode of stating the damages resulting to the plaintiff is incorrect, the
41
true measure of damages being the difference between the contract price and the
price prevailing in the market at the stipulated time and place of delivery.
From something said in the appealed decision it seems that the trial judge
entertained the idea that the plaintiff could not recover any damages unless he
should show that he was compelled to buy alcohol in the open market to replace
that which the defendant had contracted to deliver; and his Honor refused to allow
any damages because the plaintiff had not clearly shown that he had really
purchased crude and fine alcohol of the kind expressed in the contract and the
prices paid therefor. This idea is entirely unsound. If the plaintiff had in fact been
compelled to buy alcohol like that contracted for from some other person than the
defendant, this would have been competent proof on the question of damages, if the
purchase was effected at a higher price than that stipulated in the contract with the
defendant. But the right of the plaintiff to recover damages was not absolutely
dependent upon proof of this character. As already stated the correct measure of
damages is to be found in the difference between the contract price and the price
prevailing in the market at the time and place stipulated for the deliveries.
Now, as bearing upon the question of the true measure of damages, no note that a
competent witness, Mr. A. B. Powell, was examined with reference to the prices
prevailing in Manila for crude and fine alcohol of the quantity contracted for during
the period from July to December, 1919 (transcript of session, Dec. 13, 1922, p. 10).
Taking the prices stated by him as approximately true, and estimating the prices of
the crude and fine alcohol at the times and in the amounts stipulated for delivery,
we estimate roughly that there was a loss to the plaintiff of about P4,160, by reason
of the failure of the defendant to make deliveries upon his contracts at the times
agreed.
Summing up the three items above specified and deducting therefrom the amount
of P909.84, which represents, according to Simonson, the value of a delivery of
alcohol of September 22, 1919, which the plaintiff did not pay for, we have in round
numbers the sum of P6,000, which in our opinion is proper to be allowed the plaintiff
upon the two causes of action set forth in the complaint.
There is no proof to sustain the claim for damages set forth in the defendant's
counterclaim, and the trial judge committed no error in absolving the plaintiff
therefrom.
For the reasons stated, the action of the trial judge in absolving the defendant from
the plaintiff's complaint will be reversed; and the plaintiff will recover of the
defendant the sum of P6,000, with interest at 6 per cent from November 13, 1919.
The action of the trial court in absolving the plaintiff from the counterclaim will be
affirmed. No special pronouncement will be made as to costs. So ordered.

EN BANC
G.R. No. L-11037 December 29, 1960
EDGARDO CARIAGA, ET AL., plaintiffs-appellants,
vs.
LAGUNA TAYABAS BUS COMPANY, defendant-appellant.
MANILA RAILROAD COMPANY, defendant-appellee.
DIZON, J.:
At about 1:00 p.m. on June 18, 1952, Bus No. 133 of the Laguna Tayabas Bus
Co. hereinafter referred to as the LTB driven by Alfredo Moncada, left its station
at Azcarraga St., Manila, for Lilio, Laguna, with Edgardo Cariaga, a fourth-year
medical student of the University of Santo Tomas, as one of its passengers. At about
3:00 p.m., as the bus reached that part of the poblacion of Bay, Laguna, where the
national highway crossed a railroad track, it bumped against the engine of a train
then passing by with such terrific force that the first six wheels of the latter were
derailed, the engine and the front part of the body of the bus was wrecked, the
driver of the bus died instantly, while many of its passengers, Edgardo among them,
were severely injured. Edgardo was first confined at the San Pablo City Hospital from
5:00 p.m., June 18, 1952, to 8:25 a.m., June 20 of the same year when he was taken
to the De los Santos Clinic, Quezon City. He left that clinic on October 14 to be
transferred to the University of Santo Tomas Hospital where he stayed up to
November 15. On this last date he was taken back to the De los Santos Clinic where
he stayed until January 15, 1953. He was unconscious during the first 35 days after
the accident; at the De los Santos Clinic Dr. Gustilo removed the fractured bones
which lacerated the right frontal lobe of his brain and at the University of Santo
Tomas Hospital Dr. Gustilo performed another operation to cover a big hole on the
right frontal part of the head with a tantalum plate.
The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous
expenses incurred from June 18, 1952 to April, 1953. From January 15, 1953 up to
April of the same year Edgardo stayed in a private house in Quezon, City, the LTB
having agreed to give him a subsistence allowance of P10.00 daily during his
convalescence, having spent in this connection the total sum of P775.30 in addition
to the amount already referred to.
On April 24, 1953 the present action was filed to recover for Edgardo Cariaga, from
the LTB and the MRR Co., and total sum of P312,000.00 as actual, compensatory,
moral and exemplary damages, and for his parents, the sum of P18,00.00 in the
same concepts. The LTB disclaimed liability claiming that the accident was due to
the negligence of its co-defendant, the Manila Railroad Company, for not providing a
crossing bar at the point where the national highway crossed the railway track, and
for this reason filed the corresponding cross-claim against the latter company to
recover the total sum of P18,194.75 representing the expenses paid to Edgardo
42
Cariaga. The Manila Railroad Company, in turn, denied liability upon the complaint
and cross-claim alleging that it was the reckless negligence of the bus driver that
caused the accident.
The lower court held that it was the negligence of the bus driver that caused the
accident and, as a result, rendered judgment sentencing the LTB to pay Edgardo
Cariaga the sum of P10,490.00 as compensatory damages, with interest at the legal
rate from the filing of the complaint, and dismissing the cross-claim against the
Manila Railroad Company. From this decision the Cariagas and the LTB appealed.
The Cariagas claim that the trial court erred: in awarding only P10,490.00 as
compensatory damages to Edgardo; in not awarding them actual and moral
damages, and in not sentencing appellant LTB to pay attorney's fees.
On the other hand, the LTB's principal contention in this appeal is that the trial court
should have held that the collision was due to the fault of both the locomotive driver
and the bus driver and erred, as a consequence, in not holding the Manila Railroad
Company liable upon the cross-claim filed against it.
We shall first dispose of the appeal of the bus company. Its first contention is that
the driver of the train locomotive, like the bus driver, violated the law, first, in
sounding the whistle only when the collision was about to take place instead of at a
distance at least 300 meters from the crossing, and second, in not ringing the
locomotive bell at all. Both contentions are without merits.
After considering the evidence presented by both parties the lower court expressly
found:
. . . While the train was approximately 300 meters from the crossing, the
engineer sounded two long and two short whistles and upon reaching a
point about 100 meters from the highway, he sounded a long whistle which
lasted up to the time the train was about to cross it. The bus proceeded on
its way without slackening its speed and it bumped against the train
engine, causing the first six wheels of the latter to be derailed.
. . . that the train whistle had been sounded several times before it reached
the crossing. All witnesses for the plaintiffs and the defendants are uniform
in stating that they heard the train whistle sometime before the impact and
considering that some of them were in the bus at the time, the driver
thereof must have heard it because he was seated on the left front part of
the bus and it was his duty and concern to observe such fact in connection
with the safe operation of the vehicle. The other L.T.B. bus which arrived
ahead at the crossing, heeded the warning by stopping and allowing the
train to pass and so nothing happened to said vehicle. On the other hand,
the driver of the bus No. 133 totally ignored the whistle and noise produced

by the approaching train and instead he tried to make the bus pass the
crossing before the train by not stopping a few meters from the railway
track and in proceeding ahead.
The above findings of the lower court are predicated mainly upon the testimony of
Gregorio Ilusondo, a witness for the Manila Railroad Company. Notwithstanding the
efforts exerted by the LTB to assail his credibility, we do not find in the record any
fact or circumstance sufficient to discredit his testimony. We have, therefore, no
other alternative but to accept the findings of the trial court to the effect, firstly, that
the whistle of locomotive was sounded four times two long and two short "as
the train was approximately 300 meters from the crossing"; secondly, that another
LTB bus which arrived at the crossing ahead of the one where Edgardo Cariaga was a
passenger, paid heed to the warning and stopped before the "crossing", while as
the LTB itself now admits (Brief p. 5) the driver of the bus in question totally
disregarded the warning.
But to charge the MRR Co. with contributory negligence, the LTB claims that the
engineer of the locomotive failed to ring the bell altogether, in violation of the
section 91 of Article 1459, incorporated in the charter of the said MRR Co. This
contention as is obvious is the very foundation of the cross-claim interposed by
the LTB against its
co-defendant. The former, therefore, had the burden of proving it affirmatively
because a violation of law is never presumed. The record discloses that this burden
has not been satisfactorily discharged.
The Cariagas, as appellants, claim that the award of P10,000.00 compensatory
damages to Eduardo is inadequate considering the nature and the after effects of
the physical injuries suffered by him. After a careful consideration of the evidence on
this point we find their contentions to be well-founded.
From the deposition of Dr. Romeo Gustilo, a neurosurgeon, it appears that, as a
result of the injuries suffered by Edgardo, his right forehead was fractured
necessitating the removal of practically all of the right frontal lobe of his brain. From
the testimony of Dr. Jose A. Fernandez, a psychiatrist, it may be gathered that,
because of the physical injuries suffered by Edgardo, his mentality has been so
reduced that he can no longer finish his studies as a medical student; that he has
become completely misfit for any kind of work; that he can hardly walk around
without someone helping him, and has to use a brace on his left leg and feet.
Upon the whole evidence on the matter, the lower court found that the removal of
the right frontal lobe of the brain of Edgardo reduced his intelligence by about 50%;
that due to the replacement of the right frontal bone of his head with a tantalum
plate Edgardo has to lead a quite and retired life because "if the tantalum plate is
pressed in or dented it would cause his death."
43
The impression one gathers from this evidence is that, as a result of the physical
injuries suffered by Edgardo Cariaga, he is now in a helpless condition, virtually an
invalid, both physically and mentally.
Appellant LTB admits that under Art. 2201 of the Civil Code the damages for which
the obligor, guilty of a breach of contract but who acted in good faith, is liable shall
be those that are the natural and probable consequences of the breach and which
the parties had forseen or could have reasonably forseen at the time the obligation
was constituted, provided such damages, according to Art. 2199 of the same Code,
have been duly proved. Upon this premise it claims that only the actual damages
suffered by Edgardo Cariaga consisting of medical, hospital and other expenses in
the total sum of P17,719.75 are within this category. We are of the opinion, however,
that the income which Edgardo Cariaga could earn if he should finish the medical
course and pass the corresponding board examinations must be deemed to be
within the same category because they could have reasonably been foreseen by the
parties at the time he boarded the bus No. 133 owned and operated by the LTB. At
that time he was already a fourth-year student in medicine in a reputable university.
While his scholastic may not be first rate (Exhibits 4, 4-A to 4-C), it is, nevertheless,
sufficient to justify the assumption that he could have passed the board test in due
time. As regards the income that he could possibly earn as a medical practitioner, it
appears that, according to Dr. Amado Doria, a witness for the LTB, the amount of
P300.00 could easily be expected as the minimum monthly income of Edgardo had
he finished his studies.
Upon consideration of all the facts mentioned heretofore this Court is of the opinion,
and so holds, that the compensatory damages awarded to Edgardo Cariaga should
be increased to P25,000.00.
Edgardo Cariaga's claim for moral damages and attorney's fees was denied by the
trial court, the pertinent portion of its decision reading as follows:
Plaintiffs' claim for moral damages cannot also be granted. Article 2219 of
the Civil Code enumerates the instances when moral damages may be
covered and the case under consideration does not fall under any one of
them. The present action cannot come under paragraph 2 of said article
because it is not one of the quasi-delict and cannot be considered as such
because of the pre-existing contractual relation between the Laguna
Tayabas Bus Company and Edgardo Cariaga. Neither could defendant
Laguna Tayabas Bus Company be held liable to pay moral damages to
Edgardo Cariaga under Article 2220 of the Civil Code on account of breach
of its contract of carriage because said defendant did not act fraudulently
or in bad faith in connection therewith. Defendant Laguna Tayabas Bus
Company had exercised due diligence in the selection and supervision of its
employees like the drivers of its buses in connection with the discharge of
their duties and so it must be considered an obligor in good faith.

The plaintiff Edgardo Cariaga is also not entitled to recover for attorney's
fees, because this case does not fall under any of the instances
enumerated in Article 2208 of the Civil Code.
We agree with the trial court and, to the reason given above, we add those given by
this Court in Cachero vs. Manila Yellow Taxicab Co., Inc.(101 Phil., 523, 530, 533):
A mere perusal of plaintiff's complaint will show that this action against the
defendant is predicated on an alleged breach of contract of carriage, i.e.,
the failure of the defendants to bring him "safely and without mishaps" to
his destination, and it is to be noted that the chauffeur of defendant's
taxicab that plaintiff used when he received the injuries involved herein,
Gregorio Mira, has not even made a party defendant to this case.
Considering, therefore, the nature of plaintiff's action in this case, is he
entitled to compensation for moral damages? Article 2219 of the Civil Code
says the following:
Art. 2219. Moral damages may be recovered in the following and analogous
cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34,
and 35.
44
Of course enumerated in the just quoted Article 2219 only the first two may
have any bearing on the case at bar. We find, however, with regard to the
first that the defendant herein has not committed in connection with this
case any "criminal offense resulting in physical injuries". The one that
committed the offense against the plaintiff is Gregorio Mira, and that is why
he has been already prosecuted and punished therefor. Altho (a) owners
and managers of an establishment and enterprise are responsible for
damages caused by their employees in the service of the branches in which
the latter are employed or on the occasion of their functions; (b) employers
are likewise liable for damages caused by their employees and household
helpers acting within the scope of their assigned task (Article 218 of the
Civil Code); and (c) employers and corporations engaged in any kind of
industry are subsidiary civilly liable for felonies committed by their
employees in the discharge of their duties (Art. 103, Revised Penal Code),
plaintiff herein does not maintain this action under the provisions of any of
the articles of the codes just mentioned and against all the persons who
might be liable for the damages caused, but as a result of an admitted
breach of contract of carriage and against the defendant employer alone.
We, therefore, hold that the case at bar does not come within the exception
of paragraph 1, Article 2219 of the Civil Code.
The present complaint is not based either on a "quasi-delict causing
physical injuries" (Art. 2219, par. 2 of the Civil Code). From the report of the
Code Commission on the new Civil Code. We copy the following:
A question of nomenclature confronted the Commission. After a careful
deliberation, it was agreed to use the term "quasi-delict" for those
obligations which do not arise from law, contracts, quasi-contracts, or
criminal offenses. They are known in Spanish legal treaties as "culpa
aquiliana", "culpa-extra-contractual" or "cuasi-delitos". The phrase "culpa-
extra-contractual" or its translation "extra-contractual-fault" was eliminated
because it did not exclude quasi-contractual or penal obligations. "Aquilian
fault" might have been selected, but it was thought inadvisable to refer to
so ancient a law as the "Lex Aquilia". So "quasi-delict" was chosen, which
more nearly corresponds to the Roman Law classification of the obligations
and is in harmony with the nature of this kind of liability.
The Commission also thought of the possibility of adopting the word "tort"
from Anglo-American law. But "tort" under that system is much broader
than the Spanish-Philippine concept of obligations arising from non-
contractual negligence. "Tort" in Anglo-American jurisprudence includes not
only negligence, but also intentional criminal act, such as assault and
battery, false imprisonment and deceit. In the general plan of the Philippine
legal system, intentional and malicious acts are governed by the Penal
Code, although certain exceptions are made in the Project. (Report of the
Code Commission, pp. 161-162).
 45

In the case of Cangco, vs. Manila Railroad, 38 Phil. 768, We established the
distinction between obligation derived from negligence and obligation as a
result of a breach of contract. Thus, we said:

It is important to note that the foundation of the legal liability of the

defendant is the contract of carriage, and that the obligation to respond for
the damage which plaintiff has suffered arises, if at all, from the breach of
that contract by reason of the failure of defendant to exercise due care in
its performance. That is to say, its liability is direct and immediate, differing
essentially in the legal viewpoint from the presumptive responsibility for
the negligence of its servants, imposed by Article 1903 of the Civil Code
(Art. 2180 of the new), which can be rebutted by proof of the exercise of
due care in their selection of supervision. Article 1903 is not applicable to
obligations arising EX CONTRACTU, but only to extra-contractual
obligations or to use the technical form of expression, that article relates
only to CULPA AQUILIANA' and not to CULPA CONTRACTUAL.lawphil.net

The decisions in the cases of Castro vs. Acro Taxicab Co., (82 Phil., 359; 46
Off. Gaz., No. 5, p. 2023); Lilius, et al. vs. Manila Railroad, 59 Phil., 758) and
others, wherein moral damages were awarded to the plaintiffs, are not
applicable to the case at bar because said decision were rendered before
the effectivity of the new Civil Code (August 30, 1950) and for the further
reason that the complaints filed therein were based on different causes of
action.

In view of the foregoing the sum of P2,000 was awarded as moral damages
by the trial court has to be eliminated, for under the law it is not a
compensation awardable in a case like the one at bar.

What has been said heretofore relative to the moral damages claimed by Edgardo
Cariaga obviously applies with greater force to a similar claim (4th assignment of
error) made by his parents.

The claim made by said spouses for actual and compensatory damages is likewise
without merits. As held by the trial court, in so far as the LTB is concerned, the
present action is based upon a breach of contract of carriage to which said spouses
were not a party, and neither can they premise their claim upon the negligence
or quasi-delictof the LTB for the simple reason that they were not themselves injured
as a result of the collision between the LTB bus and train owned by the Manila
Railroad Company.

Wherefore, modified as above indicated, the appealed judgement is hereby affirmed

in all other respects, with costs against appellant LTB.

SECOND DIVISION
[G.R. No. 152134. June 4, 2004]
ENDREO MAGBANUA, VALLACAR TRANSIT, INC., and its Present Corporate
Official RICARDO YANSON, petitioners, vs. JOSE TABUSARES, JR.,
EVA T. LAFIGUERA, NONA C. TABUSARES, JUN C. TABUSARES, FE C.
TABUSARES and JAX C. TABUSARES, respondents.
DECISION
PUNO, J.:
The case at bar arose from the complaint for damages filed by spouses Jose
Tabusares, Sr. and Rebecca Tabusares against petitioners, Endreo A. Magbanua,
Vallacar Transit, Inc., and/or its corporate officials for the tragic death of their son,
Jury Tabusares, in a vehicular mishap involving a Ceres Liner Bus owned and
operated by petitioners. The case was docketed as Civil Case No. 4654 before the
Regional Trial Court of Negros Occidental, Branch 48, Bacolod City.
The facts, as found by the trial court, are as follows:
At about 4:30 oclock in the afternoon of October 25, 1986, a Ceres Liner Bus No. 154
with Plate No. GVG 469, driven by Endreo Magbanua and owned and operated by
Vallacar Transit, Inc., and an Amante Type Jeepney bearing Plate No. FBN 996, driven
by Felipe Palacios and owned by Salvador Algara, Sr. figured in a vehicular accident
along the national road at Hda. Mabuhay, Gil Montilla,
Sipalay, NegrosOccidental. The Ceres Liner Bus bumped the rear portion of the
Amante Type Jeepney while both vehicles were running downhill on the same
direction towards the town of Sipalay from the North. Due to the impact, several
passengers of the Amante Type Jeepney were thrown out and ran over by the Ceres
Liner Bus and died as a result of the injuries they sustained. (O)ne of those killed
was Jury Tabusares, 27 years of age, single, an employee of the Maricalum Copper
Mines as Oiler 2B and was then receiving P1,256.00 monthly salary plus P510.00
cost of living allowance (COLA) or a total monthly income ofP1,766.00. Jury
Tabusares was the son of the plantiffs Jose Tabusares, Sr. and Rebecca
Tabusares. Immediately before the bumping accident, the Ceres Liner Buss driver,
Endreo Magbanua, was trying to overtake the Amante Type Jeepney ahead of him
and he said that he did not apply his brakes because he cannot overtake if he will
slow down. The Amante Type Jeepney was overloaded with 35 passengers and some
of them clinging on its sides and some were riding on the roof. While the Ceres Liner
(B)us was about one and a half (1) meters from the Amante Type Jeepney, the bus
driver saw that the jeepney went zigzagging on the middle of the road and since he
could not control the bus anymore it bumped the rear portion of the jeep.
46
After a careful perusal of the circumstances of the case, the (c)ourt finds that the
Amante Type Jeepney, as testified to by its own driver, Felipe Palacios, was not a
passenger jeepney but a private vehicle which is used by its owner Salvador Algara,
Sr., who is an ambulant peddler in his peddling business. But, although not for
passengers, it was carrying 35 passengers at the time of the bumping accident
onOctober 25, 1986 as testified to by Traffic Investigator Pfc. Praxedes Campillanos
of the Sipalay Police Command, Sipalay, Negros Occidental. This jeep had a seating
capacity of only 16 passengers but it was made to accommodate passengers on its
roof and some were clinging on its side. This act is not only gross negligence but it
was violative of the traffic rules and regulations. On the other hand, the (c)ourt also
finds that the driver of the Ceres Liner Bus was driving his vehicle negligently and
recklessly because Endreo Magbanua testified and admitted that while driving the
bus downhill and following the Amante type Jeepney ahead of him, he did not apply
his brakes because he was trying to overtake when he bumped the jeep on its rear
portion. This act was negligent and reckless because Endreo Magbanua could have
avoided the bumping of the jeepney had he applied his brakes considering that he
has the last clear chance to prevent a collision by slowing down and reducing speed.
[1]
The trial court found that the negligent acts of the drivers of both the jeepney
and the Ceres Liner Bus combined in directly causing the death of Jury Tabusares. It
therefore held both drivers solidarily liable for damages. The court ruled:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered
ordering and condemning the defendants Endreo A. Magbanua, Vallacar Transit, Inc.,
thru and represented by its corporate official Ricardo Yanson, Felipe T. Palacios and
Salvador Algara, Sr. to pay jointly and severally to the plantiffs, as follows:
1. The sum of P50,000.00 as indemnity for the death of Jury Tabusares;
2. The amount of P699,336.00 as indemnity for the loss of the earning capacity of
the late Jury Tabusares;
3. The amount of P27,600.00 as reimbursement for actual expenses in connection
with the death and burial of the said deceased;
4. The amount of P10,000.00 as moral damages; and
5. The sum of P10,000.00 as reasonable attorneys fees.
The cross-claim of defendant Salvador Algara, Sr. against the defendants Endreo A.
Magbanua and Vallacar Transit, Inc., represented by its corporate official Ricardo
Yanson, is hereby allowed and defendants Endreo A. Magbanua and Vallacar Transit,
Inc., represented by it (sic) corporate official Ricardo Yanson are hereby ordered to

indemnify Salvador Algara, Sr. in such amount as he may be required to pay as
damages to the herein plaintiffs.
The counterclaims of the defendants against the plaintiffs are hereby dismissed for
lack or merit.
SO ORDERED.[2]
Petitioners appealed to the Court of Appeals. They prayed that the decision of
the trial court be reversed insofar as their liabilities are concerned. [3]
During the pendency of the appeal, Jose Tabusares, Sr. and his wife, Rebecca,
passed away. On May 18, 1999, the Court of Appeals approved the substitution of
the late spouses by their heirs, namely: Jose Tabusares, Jr., Eva T. Lafiguera, Nona C.
Tabusares, Jun C. Tabusares, Fe C. Tabusares and Jax C. Tabusares. [4]
On March 13, 2001, the Court of Appeals rendered its decision. It affirmed the
factual findings of the trial court, but modified the award of damages, reducing the
amount of lost earning to P374,392.00. It made the following computation:
In the case at bar, the victim Jury Tabusares was twenty- seven (27) years old at the
time of death. With 65 years as the given life expectancy in the Philippines, the
victim was expected to live for another thirty-eight (38) years. In respect of income,
the victim was receiving the amount of P1,766.00 as total monthly income or a gross
yearly income of P21,192.00. Multiplied by 38, the number of years the victim is
expected to continue living, the amount arrived at is P748,784.00 using the formula
2/3 x [80-27] x 21,192.00. From the said figure must be deducted the reasonable
amount of P374,392.00 or 50% thereof representing the living and other necessary
expenses of the deceased had he continued to live. Hence, the lost earnings of the
deceased should be P374,392.00.[5]
Petitioners filed a partial motion for reconsideration of the decision of the Court
of Appeals, praying for a reduction of the amount of damages for loss of earning
capacity. The Court of Appeals denied the motion.[6] Hence, this petition.
Petitioners, while accepting the factual findings of the trial court and the
appellate court, now assail the latters computation of the award of damages for loss
of earning capacity. They contend that there are varying computations used in the
decisions of this Court. In People vs. Lopez,[7] the Court applied the following
formula:
2/3 x (80-27) x P21,192.00 50%
However, the following formula was employed in People vs. Muyco, et al.:[8]
47
2/3 x (80 27) x P21,192.00 80%
The difference lies in the computation of the net income of the victim. In
the Lopez case, net income was derived by deducting 50% of the gross annual
income, while in the Muycocase, the amount deducted was 80% of the gross annual
income. The Court of Appeals followed the computation in People vs. Lopez as it
was the prevailing case law at the time of the decision appealed from was
promulgated and unmistakably more favorable to the heirs of the deceased xxx.
[9]
Petitioners argue that the instant case was decided by the Court of Appeals one
year and six months after the promulgation of People vs. Muyco, therefore, the
Court should apply the computation in the latter case. [10]
On the other hand, the respondents, in their comment, cite other cases
decided after the Muyco case where the Court applied the formula in
the Lopez case. They submit that the computation in People vs. Lopez should be
applied in this case.[11]
The petition is devoid of merit.
Article 2205 of the New Civil Code allows the recovery of damages for loss or
impairment of earning capacity in cases of temporary or permanent personal
injury. Such damages covers the loss sustained by the dependents or heirs of the
deceased, consisting of the support they would have received from him had he not
died because of the negligent act of another. The loss is not equivalent to the entire
earnings of the deceased, but only that portion that he would have used to support
his dependents or heirs. Hence, we deduct from his gross earnings the necessary
expenses supposed to be used by the deceased for his own needs. The Court
explained in Villa Rey Transit, Inc. vs. Court of Appeals [12] that:
(the award of damages for loss of earning capacity is) concerned with the
determination of the losses or damages sustained by the private respondents, as
dependents and intestate heirs of the deceased, and that said damages
consist, not of the full amount of his earnings, but of the support they received or
would have received from him had he not died in consequence of the negligence of
petitioners agent. In fixing the amount of that support, we must reckon with the
necessary expenses of his own living, which should be deducted from his
earnings. Thus, it has been consistently held that earning capacity, as an element of
damages to ones estate for his death by wrongful act is necessarily his net earning
capacity or his capacity to acquire money, less the necessary expense for his own
living. Stated otherwise, the amount recoverable is not loss of the entire earning,
but rather the loss of that portion of the earnings which the beneficiary would have
received. In other words, only net earnings, not gross earning are to be considered
that is, the total of the earnings less expenses necessary in the creation of such
earnings or income and less living and other incidental expenses.
 48

Aside from the loss sustained by the heirs of the deceased, another factor SO ORDERED.
considered in determining the award of loss of earning capacity is the life
expectancy of the deceased which takes into account his work, lifestyle, age and
state of health prior to the accident.[13]

Thus, the formula for the computation of unearned income is:

Net life gross living

Earning = expectancy x annual less expenses

Capacity income

Life expectancy is determined in accordance with the formula:

2/3 x [80 age of deceased]

The bone of contention in this case is the amount of living expenses that
should be deducted from the deceaseds gross annual income - whether 50% or 80%.

A survey of more recent jurisprudence shows that the Court consistently

pegged the amount at 50% of the gross annual income. [14] We held in Smith Bell
Dodwell Shipping Agency Corp. vs. Borja [15] that when there is no showing that
the living expenses constituted a smaller percentage of the gross income, we fix the
living expenses at half of the gross income, thus:

In other words, only net earnings, not gross earnings, are to be considered; that is,
the total of the earnings less expenses necessary in the creation of such earnings or
income, less living and other incidental expenses. When there is no showing that
the living expenses constituted a smaller percentage of the gross income,
we fix the living expenses at half of the gross income. To hold that one
would have used only a small part of the income, with the larger part
going to the support of ones children, would be conjectural and
unreasonable. (emphasis supplied)

There is no evidence in the case at bar whether the living expenses of the
victim, Jury Tabusares, constituted a bigger or smaller percentage of his gross
income. In such case, it is fair to assume that it is 50% of his gross annual
income. Hence, we find that the Court of Appeals did not err in its computation of
the award of loss of unearned income to petitioner.

IN VIEW WHEREOF, the petition is DENIED. The assailed decision of the Court
of Appeals is AFFIRMED.
 49

FIRST DIVISION Petitioners motion to reset the presentation of its evidence to March 25,
1998[16] was granted. However, on March 24, 1998, the counsel of petitioner sent the
[G.R. No. 159636. November 25, 2004] court a telegram[17]requesting postponement but the telegram was received by the
trial court on March 25, 1998, after it had issued an order considering the case
VICTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. submitted for decision for failure of petitioner and counsel to appear. [18]
GAMMAD, ROI ROZANO P. GAMMAD and DIANA FRANCES P.
GAMMAD,respondents. On November 6, 1998, the trial court rendered its decision in favor of
respondents, the dispositive portion of which reads:
DECISION
WHEREFORE, premises considered and in the interest of justice, judgment is hereby
YNARES-SANTIAGO, J.: rendered in favor of the plaintiffs and against the defendant Victory Liner,
Incorporated, ordering the latter to pay the following:

Assailed in this petition for review on certiorari is the April 11, 2003
decision[1] of the Court of Appeals in CA-G.R. CV No. 63290 which affirmed with 1. Actual Damages -------------------- P 122,000.00
modification the November 6, 1998 decision [2] of the Regional Trial Court of
Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for breach 2. Death Indemnity --------------------- 50,000.00
of contract of carriage in Civil Case No. 5023.
3. Exemplary and Moral Damages----- 400,000.00
The facts as testified by respondent Rosalito Gammad show that on March 14,
1996, his wife Marie Grace Pagulayan-Gammad, [3] was on board an air-conditioned 4. Compensatory Damages ---------- 1,500,000.00
Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m.,
the bus while running at a high speed fell on a ravine somewhere in Barangay
Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and 5. Attorneys Fees ------------ 10% of the total amount granted
physical injuries to other passengers.[4]
6. Cost of the Suit.
[5]
On May 14, 1996, respondent heirs of the deceased filed a complaint for
damages arising from culpa contractual against petitioner. In its answer, [6] the SO ORDERED.[19]
petitioner claimed that the incident was purely accidental and that it has always
exercised extraordinary diligence in its 50 years of operation. On appeal by petitioner, the Court of Appeals affirmed the decision of the trial
court with modification as follows:
After several re-settings,[7] pre-trial was set on April 10, 1997. [8] For failure to
appear on the said date, petitioner was declared as in default. [9] However, on [T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the
petitioners motion[10] to lift the order of default, the same was granted by the trial following are hereby adjudged in favor of plaintiffs-appellees:
court.[11]

1. Actual Damages in the amount of P88,270.00;

At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed
stipulation that the deceased was a passenger of the Victory Liner Bus which fell on
2. Compensatory Damages in the amount of P1,135,536,10;
the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for
their part, did not accept petitioners proposal to pay P50,000.00.[12]
3. Moral and Exemplary Damages in the amount of P400,000.00; and
After respondent Rosalito Gammad completed his direct testimony, cross-
examination was scheduled for November 17, 1997 [13] but moved to December 8, 4. Attorneys fees equivalent to 10% of the sum of the actual,
1997,[14] because the parties and the counsel failed to appear. On December 8, compensatory, moral, and exemplary damages herein adjudged.
1997, counsel of petitioner was absent despite due notice and was deemed to have
waived right to cross-examine respondent Rosalito. [15]

The court a quos judgment of the cost of the suit against defendant-appellant is
hereby AFFIRMED.
SO ORDERED.[20]
Represented by a new counsel, petitioner on May 21, 2003 filed a motion for
reconsideration praying that the case be remanded to the trial court for cross-
examination of respondents witness and for the presentation of its evidence; or in
the alternative, dismiss the respondents complaint. [21] Invoking APEX Mining, Inc. v.
Court of Appeals,[22] petitioner argues, inter alia, that the decision of the trial court
should be set aside because the negligence of its former counsel, Atty. Antonio B.
Paguirigan, in failing to appear at the scheduled hearings and move for
reconsideration of the orders declaring petitioner to have waived the right to cross-
examine respondents witness and right to present evidence, deprived petitioner of
its day in court.
On August 21, 2003, the Court of Appeals denied petitioners motion for
reconsideration.[23]
Hence, this petition for review principally based on the fact that the mistake or
gross negligence of its counsel deprived petitioner of due process of law. Petitioner
also argues that the trial courts award of damages were without basis and should be
deleted.
The issues for resolution are: (1) whether petitioners counsel was guilty of
gross negligence; (2) whether petitioner should be held liable for breach of contract
of carriage; and (3) whether the award of damages was proper.
It is settled that the negligence of counsel binds the client. This is based on the
rule that any act performed by a counsel within the scope of his general or implied
authority is regarded as an act of his client. Consequently, the mistake or negligence
of counsel may result in the rendition of an unfavorable judgment against the client.
However, the application of the general rule to a given case should be looked into
and adopted according to the surrounding circumstances obtaining. Thus,
exceptions to the foregoing have been recognized by the court in cases where
reckless or gross negligence of counsel deprives the client of due process of law, or
when its application will result in outright deprivation of the clients liberty or
property or where the interests of justice so require, and accord relief to the client
who suffered by reason of the lawyers gross or palpable mistake or negligence. [24]
The exceptions, however, are not present in this case. The record shows that
Atty. Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially
declared as in default, Atty. Paguirigan successfully moved for the setting aside of
the order of default. In fact, petitioner was represented by Atty. Paguirigan at the
pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed to
50
file motions for reconsideration of the orders declaring petitioner to have waived the
right to cross-examine respondents witness and to present evidence, he
nevertheless, filed a timely appeal with the Court of Appeals assailing the decision of
the trial court. Hence, petitioners claim that it was denied due process lacks basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order
declaring it as in default for not appearing at the pre-trial, three notices (dated
October 23, 1996,[25] January 30, 1997,[26] and March 26, 1997,[27]) requiring
attendance at the pre-trial were sent and duly received by petitioner. However, it
was only on April 27, 1997, after the issuance of the April 10, 1997 order of default
for failure to appear at the pre-trial when petitioner, through its finance and
administrative manager, executed a special power of attorney [28] authorizing Atty.
Paguirigan or any member of his law firm to represent petitioner at the pre-trial.
Petitioner is guilty, at the least, of contributory negligence and fault cannot be
imputed solely on previous counsel.
The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the
case at bar. In APEX, the negligent counsel not only allowed the adverse decision
against his client to become final and executory, but deliberately misrepresented in
the progress report that the case was still pending with the Court of Appeals when
the same was dismissed 16 months ago. [29] These circumstances are absent in this
case because Atty. Paguirigan timely filed an appeal from the decision of the trial
court with the Court of Appeals.
In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted with
the issue of whether or not the client should bear the adverse consequences of its
counsels negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer
failed to appear at the pre-trial despite notice and was declared as in default. After
the plaintiffs presentation of evidence ex parte, the trial court rendered decision
ordering Gold Line to pay damages to the heirs of its deceased passenger. The
decision became final and executory because counsel of Gold Line did not file any
appeal. Finding that Goldline was not denied due process of law and is thus bound
by the negligence of its lawyer, the Court held as follows
This leads us to the question of whether the negligence of counsel was so gross and
reckless that petitioner was deprived of its right to due process of law. We do not
believe so. It cannot be denied that the requirements of due process were observed
in the instant case. Petitioner was never deprived of its day in court, as in fact it was
afforded every opportunity to be heard. Thus, it is of record that notices were sent to
petitioner and that its counsel was able to file a motion to dismiss the complaint, an
answer to the complaint, and even a pre-trial brief. What was irretrievably lost by
petitioner was its opportunity to participate in the trial of the case and to adduce
evidence in its behalf because of negligence.
In the application of the principle of due process, what is sought to be safeguarded
against is not the lack of previous notice but the denial of the opportunity to be
 51

heard. The question is not whether petitioner succeeded in defending its rights and
interests, but simply, whether it had the opportunity to present its side of the
controversy. Verily, as petitioner retained the services of counsel of its choice, it
should, as far as this suit is concerned, bear the consequences of its choice of a
faulty option. Its plea that it was deprived of due process echoes on hollow ground
and certainly cannot elicit approval nor sympathy.
To cater to petitioners arguments and reinstate its petition for relief from judgment
would put a premium on the negligence of its former counsel and encourage the
non-termination of this case by reason thereof. This is one case where petitioner has
to bear the adverse consequences of its counsels act, for a client is bound by the
action of his counsel in the conduct of a case and he cannot thereafter be heard to
complain that the result might have been different had his counsel proceeded
differently. The rationale for the rule is easily discernible. If the negligence of counsel
be admitted as a reason for opening cases, there would never be an end to a suit so
long as a new counsel could be hired every time it is shown that the prior counsel
had not been sufficiently diligent, experienced or learned.[31]
it is presumed that the common carrier was at fault or was negligent when a
passenger dies or is injured. Unless the presumption is rebutted, the court
need not even make an express finding of fault or negligence on the part
of the common carrier. This statutory presumption may only be overcome by
evidence that the carrier exercised extraordinary diligence.[34]
In the instant case, there is no evidence to rebut the statutory presumption
that the proximate cause of Marie Graces death was the negligence of petitioner.
Hence, the courts below correctly ruled that petitioner was guilty of breach of
contract of carriage.
Nevertheless, the award of damages should be modified.
Article 1764[35] in relation to Article 2206[36] of the Civil Code, holds the common
carrier in breach of its contract of carriage that results in the death of a passenger
liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning
capacity, and (3) moral damages.

Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation

In the present case, respondent heirs of the deceased are entitled to indemnity
employee charged with dishonesty was not able to file an answer and position
for the death of Marie Grace which under current jurisprudence is fixed at
paper. He was found guilty solely on the basis of complainants evidence and was
P50,000.00.[37]
dismissed with forfeiture of all benefits and disqualification from government
service. Challenging the decision of the Ombudsman, the employee contended that
the gross negligence of his counsel deprived him of due process of law. In debunking The award of compensatory damages for the loss of the deceaseds earning
his contention, the Court said capacity should be deleted for lack of basis. As a rule, documentary evidence should
be presented to substantiate the claim for damages for loss of earning capacity. By
way of exception, damages for loss of earning capacity may be awarded despite the
Neither can he claim that he is not bound by his lawyers actions; it is only in case of
absence of documentary evidence when (1) the deceased is self-employed earning
gross or palpable negligence of counsel when the courts can step in and accord
less than the minimum wage under current labor laws, and judicial notice may be
relief to a client who would have suffered thereby. If every perceived mistake, failure
taken of the fact that in the deceaseds line of work no documentary evidence is
of diligence, lack of experience or insufficient legal knowledge of the lawyer would
available; or (2) the deceased is employed as a daily wage worker earning less than
be admitted as a reason for the reopening of a case, there would be no end to
the minimum wage under current labor laws.[38]
controversy. Fundamental to our judicial system is the principle that every litigation
must come to an end. It would be a clear mockery if it were otherwise. Access to the
courts is guaranteed, but there must be a limit to it. In People v. Oco,[39] the evidence presented by the prosecution to recover
damages for loss of earning capacity was the bare testimony of the deceaseds wife
that her husband was earning P8,000.00 monthly as a legal researcher of a private
Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument
corporation. Finding that the deceased was neither self-employed nor employed as a
that it was denied due process of law due to negligence of its counsel would set a
daily-wage worker earning less than the minimum wage under the labor laws
dangerous precedent. It would enable every party to render inutile any adverse
existing at the time of his death, the Court held that testimonial evidence alone is
order or decision through the simple expedient of alleging gross negligence on the
insufficient to justify an award for loss of earning capacity.
part of its counsel. The Court will not countenance such a farce which contradicts
long-settled doctrines of trial and procedure. [33]
Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not
awarded because the circumstances of the 3 deceased did not fall within the
Anent the second issue, petitioner was correctly found liable for breach of
recognized exceptions, and except for the testimony of their wives, no documentary
contract of carriage. A common carrier is bound to carry its passengers safely as far
proof about their income was presented by the prosecution. Thus
as human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard to all the circumstances. In a contract of carriage,

The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio
Castro Jr. were not self-employed or employed as daily-wage workers earning less
than the minimum wage under the labor laws existing at the time of their
death. Placido Agustin was a Social Security System employee who
received a monthly salary of P5,000. Roberto Raagas was the President of
Sinclair Security and Allied Services, a family owned corporation, with a
monthly compensation of P30,000. Melencio Castro Jr. was a taxi driver of
New Rocalex with an average daily earning of P500 or a monthly earning of
P7,500. Clearly, these cases do not fall under the exceptions where indemnity for
loss of earning capacity can be given despite lack of documentary evidence.
Therefore, for lack of documentary proof, no indemnity for loss of earning capacity
can be given in these cases. (Emphasis supplied)
Here, the trial court and the Court of Appeals computed the award of
compensatory damages for loss of earning capacity only on the basis of the
testimony of respondent Rosalito that the deceased was 39 years of age and a
Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a
salary of P83,088.00 per annum when she died. [41] No other evidence was presented.
The award is clearly erroneous because the deceaseds earnings does not fall within
the exceptions.
However, the fact of loss having been established, temperate damages in the
amount of P500,000.00 should be awarded to respondents. Under Article 2224 of
the Civil Code, temperate or moderate damages, which are more than nominal but
less than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount can not, from the nature of the
case, be proved with certainty.
In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of
P200,000.00 as temperate damages in lieu of actual damages for loss of earning
capacity because the income of the victim was not sufficiently proven, thus
The trial court based the amounts of damages awarded to the petitioner on the
following circumstances:
As to the loss or impairment of earning capacity, there is no doubt that Pleno is an
ent[re]preneur and the founder of his own corporation, the Mayon Ceramics
Corporation. It appears also that he is an industrious and resourceful person with
several projects in line, and were it not for the incident, might have pushed them
through. On the day of the incident, Pleno was driving homeward with geologist
Longley after an ocular inspection of the site of the Mayon Ceramics Corporation. His
actual income however has not been sufficiently established so that this Court
cannot award actual damages, but, an award of temperate or moderate damages
may still be made on loss or impairment of earning capacity. That Pleno sustained a
permanent deformity due to a shortened left leg and that he also suffers from
double vision in his left eye is also established. Because of this, he suffers from
52
some inferiority complex and is no longer active in business as well as in social life.
In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage,
et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et
al., L-11394, Sept. 9, 1958, the proper award of damages were given.
We rule that the lower courts awards of damages are more consonant with the
factual circumstances of the instant case. The trial courts findings of facts are clear
and well-developed. Each item of damages is adequately supported by evidence on
record.
Article 2224 of the Civil Code was likewise applied in the recent cases
of People v. Singh[43] and People v. Almedilla,[44] to justify the award of temperate
damages in lieu of damages for loss of earning capacity which was not substantiated
by the required documentary proof.
Anent the award of moral damages, the same cannot be lumped with
exemplary damages because they are based on different jural foundations. [45] These
damages are different in nature and require separate determination. [46] In culpa
contractual or breach of contract, moral damages may be recovered when the
defendant acted in bad faith or was guilty of gross negligence (amounting to bad
faith) or in wanton disregard of contractual obligations and, as in this case, when the
act of breach of contract itself constitutes the tort that results in physical injuries.
By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral
damages may also be awarded in case the death of a passenger results from a
breach of carriage.[47] On the other hand, exemplary damages, which are awarded
by way of example or correction for the public good may be recovered in contractual
obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.[48]
Respondents in the instant case should be awarded moral damages to
compensate for the grief caused by the death of the deceased resulting from the
petitioners breach of contract of carriage. Furthermore, the petitioner failed to prove
that it exercised the extraordinary diligence required for common carriers, it is
presumed to have acted recklessly. [49] Thus, the award of exemplary damages is
proper. Under the circumstances, we find it reasonable to award respondents the
amount of P100,000.00 as moral damages and P100,000.00 as exemplary damages.
These amounts are not excessive.[50]
The actual damages awarded by the trial court reduced by the Court of
Appeals should be further reduced. In People v. Duban,[51] it was held that only
substantiated and proven expenses or those that appear to have been genuinely
incurred in connection with the death, wake or burial of the victim will be
recognized. A list of expenses (Exhibit J), [52] and the contract/receipt for the
construction of the tomb (Exhibit F) [53] in this case, cannot be considered competent
proof and cannot replace the official receipts necessary to justify the award. Hence,
 53

actual damages should be further reduced to P78,160.00,[54] which was the amount
supported by official receipts.
Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be
recovered in the case at bar where exemplary damages are awarded. The Court
finds the award of attorneys fees equivalent to 10% of the total amount adjudged
against petitioner reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held that
when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for payment
of interest in the concept of actual and compensatory damages, subject to the
following rules, to wit
WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED.
The April 11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which
modified the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil
Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory
Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as indemnity
for the death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral
damages; (3) P100,000.00 as exemplary damages; (4) P78,160.00 as actual
damages; (5) P500,000.00 as temperate damages; (6) 10% of the total amount as
attorneys fees; and the costs of suit.
Furthermore, the total amount adjudged against petitioner shall earn interest
at the rate of 12% per annum computed from the finality of this decision until fully
paid.

1. When the obligation is breached, and it consists in the payment of a sum of SO ORDERED.
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,

VICTORY LINER V GAMMAD
an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum.No interest, however, shall be adjudged on
G.R. No. 159636. NOVEMBER 25, 2004
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
Facts:
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
Marie Grace Pagulayan-Gammad was on board an air-conditioned Victory Liner bus
so reasonably established at the time the demand is made, the interest shall begin
bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while
to run only from the date the judgment of the court is made (at which time the
running at a high speed fell on a ravine which resulted in the death of Marie Grace
quantification of damages may be deemed to have been reasonably ascertained).
and physical injuries to other passengers. On May 14, 1996, respondent heirs of the
The actual base for the computation of legal interest shall, in any case, be on the
deceased filed a complaint for damages arising from culpa contractual against
amount finally adjudged.
petitioner. in its answer, the petitioner claimed that the incident was purely
accidental and that it has always exercised extraordinary diligence in its 50 years of
3. When the judgment of the court awarding a sum of money becomes final operation.
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such Issue: Whether petitioner should be held liable for breach of contract of carriage.
finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit. (Emphasis supplied). Ruling:

Petitioner was correctly found liable for breach of contract of carriage. A common
In the instant case, petitioner should be held liable for payment of interest as
carrier is bound to carry its passengers safely as far as human care and foresight
damages for breach of contract of carriage. Considering that the amounts payable
can provide, using the utmost diligence of very cautious persons, with due regard to
by petitioner has been determined with certainty only in the instant petition, the
all the circumstances. In a contract of carriage, it is presumed that the common
interest due shall be computed upon the finality of this decision at the rate of 12%
carrier was at fault or was negligent when a passenger dies or is injured. Unless the
per annum until satisfaction, per paragraph 3 of the aforecited rule. [57]
 54

presumption is rebutted, the court need not even make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only
be overcome by evidence that the carrier exercised extraordinary diligence.

In the instant case, there is no evidence to rebut the statutory presumption that the
proximate cause of Marie Graces death was the negligence of petitioner. Hence, the
courts below correctly ruled that petitioner was guilty of breach of contract of
carriage.

N BANC
G.R. No. 124392 February 7, 2003
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
FEDERICO ABRAZALDO @ "PEDING," accused-appellant.
DECISION
SANDOVAL-GUTIERREZ, J.:
For automatic review is the Decision1 dated November 15, 1995 of the Regional Trial
Court, Branch 44, Dagupan City in Criminal Case No. 95-01052-D, finding accused-
appellant Federico Abrazaldo guilty beyond reasonable doubt of the crime of murder
and sentencing him to suffer the supreme penalty of death and to indemnify the
heirs of the deceased Delfin Guban the amount of P50,000.00 as indemnity
and P27,000.00 as actual damages, plus costs.
In the Information dated August 3, 1995 filed with the trial court, accused-appellant
was charged with the crime of murder committed as follows:
"That on or about July 15, 1995 in the evening at barangay Pogo, Municipality of
Mangaldan, province of Pangasinan, Philippines and within the jurisdiction of this
Honorable Court, the above-named accused armed with a bolo, with intent to kill,
treachery and evident premeditation, did, then and there wilfully, unlawfully and
feloniously stabbed DELFIN GUBAN Y GUINTO inflicting upon him a stab wound which
caused his death to the damage and prejudice of his heirs.
"CONTRARY to Art. 248, Revised Penal Code, as amended by R.A. 7659." 2
Upon arraignment, accused-appellant entered a plea of not guilty. 3 Forthwith, trial on
the merits ensued. The prosecution presented as its witnesses Rosendo Fajardo,
SPO1 Ramie Petrache, SP02 Roberto Fernandez, Dr. Alberto Gonzales and Gregorio
Guban. Accused-appellant and his sister, Marites Abrazaldo, took the witness stand
for the defense.
The facts of the case as presented by the prosecution witnesses are as follows:
On July 15, 1995, at about 10:00 oclock in the evening, at Barangay Pogo,
Mangaldan, Pangasinan, accused-appellant, then intoxicated, 4 attempted to hack his
uncle, Bernabe Quinto, but instead, hit the post of the latters house. 5 The incident
was reported to the barangay authorities, prompting Delfin Guban, Rosendo Fajardo,
Sr., Alejandro Loceste (all are members of the barangay tanod), and Cesar Manaois
55
to rush to the scene. Upon reaching the place, Fajardo heard accused-appellant
shouting at his uncle, "I will kill you!" Thereafter, he saw accused-appellant coming
out of Quintos house with blood oozing from his forehead.6 At that time, the place
was well lighted by a flourescent lamp. Guban tried to assist accused-appellant.
However, for unknown reason, accused-apellant and Guban shouted at each other
and grappled "face to face." Accused-appellant pulled out his knife, stabbed Guban
at the abdomen7 and ran away. When Fajardo got hold of Guban, the latter said, "I
was stabbed by Feding Abrazaldo."8 Fajardo, together with the other barangay
tanod, rushed Guban to the Gov. Teofilo Sison Memorial Hospital where he was
operated by Dr. Alberto Gonzales, a Medical Officer III. But after a few hours, Guban
died. Dr. Gonzales issued a Medico-Legal Certificate stating that the cause of death
was "stab wound, epigastrium, massive hemothorax right." 9
Gregorio Guban, the victims father, testified that he was the one who spent for his
sons funeral expenses. For the burial, he spent P10,000.00;10 for the 10-day funeral
wake, P10,000.00;11 for the 9th day novena,P3,000.00;12 and for the
hospitalization, P4,000.00,13 or a total of P27,000.00.
On July 16, 1995, Fajardo learned that the knife used by accused-appellant in
stabbing Guban was in Salay, Pangasinan. Together with SPO2 Roberto Fernandez,
Fajardo went to the house of Francisca Velasquez, accused-appellants aunt, and
recovered the knife. 14
Invoking self-defense, accused-appellant presented a different version. On July 15,
1995 at about 10:00 in the evening, he was making fans inside his house at
Barangay Pogo, Mangaldan, Pangasinan.15 His wife Lydia and children Mary Jane,
Melvin and Christelle were with him. Suddenly, Delfin Guban, who was then drunk,
went to his house and shouted at him, saying, "Get out Feding I will kill you!" 16 When
accused-appellant went out, Guban hit him with an iron pipe. Accused-appellant ran
towards his house and got his two children. Guban, now armed with a knife, followed
him and they grappled for its possession. In the course thereof, both fell down. 17 It
was then that the knife held by Guban accidentally hit him. Accused-appellant did
not know which part of Gubans body was hit. Thereafter, he got the knife in order to
surrender it to the police.18
Marites Abrazaldo testified that accused-appellant is his brother.19 On July 15, 1992,
at about 6:00 in the evening, accused-appellant, Guban and Juan Quinto were
engaged in a "drinking spree."20 At about 10:00 oclock in that evening, accused-
appellant caused trouble at the house of his uncle, Bernabe Quinto.21 He attempted
to hack his uncle, but instead hit the post of the latters house. 22 While running away
from his uncles place, he bumped an artesian well, causing a wound on his
forehead.23 Afterwards, accused-appellant killed Guban.24
On November 15, 1995, the trial court rendered a Decision, the decretal portion of
which reads:
 56

"WHEREFORE, premises considered, the Court finds accused Federico Abrazaldo @
Peding guilty beyond reasonable doubt of the crime of Murder under Article 248 of
the Revised Penal Code, as amended by Republic 7659, and in view of the presence
of the aggravating circumstances that the crime was committed while the public
authorities were engaged in the discharge of their duties and that the crime was
committed at nighttime, which aggravating circumstances are not offset by any
mitigating circumstance, accused Federico Abrazaldo is hereby sentenced to suffer
the penalty of Death.
"Accused Federico Abrazaldo is ordered to pay an indemnity of P50,000.00 to the
heirs of the deceased Delfin Guban. Accused is also ordered to pay the heirs of the
deceased Delfin Guban the total sum of P27,000.00 as actual expenses, plus costs.
THE HONORABLE TRIAL COURT ERRED IN NOT APPRECIATING THE CLAIM OF SELF-
DEFENSE BY THE ACCUSED TAKING INTO CONSIDERATION THE CIRCUMSTANCE OF
THE CASE.
II
THE HONORABLE TRIAL COURT ERRED IN FINDING THAT THE RECOVERY OF THE
ALLEGED WEAPON USED IN STABBING VICTIM AT THE HOUSE OF THE AUNT OF
ACCUSED BOLSTERED THE CASE AGAINST HIM DESPITE LACK OF SUFFICIENT
EVIDENCE TO PROVE ITS VERACITY.
III

"SO ORDERED."
In appreciating treachery and the aggravating circumstances under paragraphs (5)
and (6) of Article 14,25Revised Penal Code, the trial court held:
THE HONORABLE TRIAL COURT ERRED IN APPRECIATING THE TESTIMONY
EXTRACTED BY THE PROSECUTION FROM DEFENSE WITNESS MARITESS ABRAZALDO
WHICH HAD NO SUFFICIENT BASIS AT ALL.

IV
"We now come to the issue of whether or not evident premeditation was present.
The prosecutions evidence is wanting on this point. However, there is no
THE HONORABLE TRIAL COURT ERRED IN FINDING THAT TREACHERY ATTENDED THE
question that there was treachery as the accused embraced Delfin Guban
STABBING OF THE VICTIM WITHOUT SUFFICIENT BASIS TO PROVE THE SAME.
and suddenly stabbed him with a knife. The victim was not in a position to
defend himself at the time of the attack. The deceased was stabbed
without any warning. He was given no chance to defend himself. Treachery, V
therefore, qualifies the killing of the victim and raises it to the category of
murder. THE HONORABLE TRIAL COURT ERRED IN ASSUMING THAT ACCUSED-APPELLANT
TOOK ADVANTAGE OF NIGHTTIME IN CONSUMING THE ACT.
"The prosecution has established thru the testimony of Gregorio Guban that at the
time of the incident on July 15, 1995, the members of the barangay tanod, namely: VI
Rosendo Fajardo, Sr., Delfin Guban and Alfredo Laceste were performing their duties
as members of the barangay tanod. (See p. 6 tsn September 18, 1995). This is an
THE HONORABLE TRIAL COURT ERRED IN FINDING THAT THE CHARGE AGAINST
aggravating circumstance under paragraph 5, Article 14 of the Revised
ACCUSED-APPELLANT IS AGGRAVATED BY THE FACT THAT THE VICTIM WAS IN THE
Penal Code. The members of the barangay tanod who are public
PERFORMANCE OF HIS DUTY."
authorities were engaged in the discharge of their duties at the time of the
stabbing incident. Besides, the incident was committed during nighttime, that was
10:00 in the evening. Accused took advantage of the darkness of the night for the The Solicitor General, in the Appellees Brief, asserts that in pleading self-defense,
successful consummation of his plan to kill Delfin Guban." accused-appellant admitted he killed the victim and, therefore, he must rely on the
strength of his own evidence and not on the weakness of that of the prosecution.
Moreover, accused-appellants version of the incident is completely contradicted by
Accused-appellant, in his Appellants Brief, ascribes to the trial court the following
the testimony of his sister. Also, the aggravating circumstance, under par. (5) of
errors:
Article 14, Revised Penal Code, was clearly established because during the incident,
Guban, as the Assistant Chief Tanod, was on duty and engaged in the maintenance
"I of peace and order.

The Solicitor General though agrees with accused-appellant that there was no
treachery. Evidence shows that he and Guban shouted at each other and struggled

"face to face" before the stabbing incident. Thus, the assault was not sudden.
Likewise, the Solicitor General is convinced that accused-appellant did not purposely
and deliberately seek nighttime to perpetrate the commission of the crime.
Consistent is the jurisprudence that where self-defense is invoked, it is incumbent
upon the accused to prove by clear and convincing evidence that (1) he is not the
unlawful aggressor; (2) there was lack of sufficient provocation on his part; and (3)
he employed reasonable means to prevent and repel an aggression. On appeal, the
burden becomes even more difficult as the accused must show that the court below
committed reversible error in appreciating the evidence. 26
Accused-appellant miserably failed to discharge the burden. To show that he was not
the unlawful aggressor, he testified that it was Guban who went to his house,
threatened to kill him,27 hit him with an iron pipe,28 and attacked him with a
knife.29 We quote accused-appellants testimony, thus:
"ATTY. CAMPOS:
Q You said a while ago that on July 15, 1995 at about 10:00 in the evening you were
in your house engaging in fan making, do you know of any unusual incident that
happened during that time?
A Delfin Guban came to my house and he was under the influence of liquor
and he shouted at me, sir.
Q And what did Delfin Guban shout at you?
A He said, "Get out Feding I will kill you."
Q After this Delfin Guban shouted at you, what happened next?
A When I went out of the house, I was already there infront of the house then he hit
me, sir.
Q You said Delfin Guban hit you, what instrument did he use in hitting you?
A He hit me with a pipe , sir.
Q After Delfin Guban hit you with that pipe, what happened next?
A I ran towards my house inside, then got my two children while Delfin Guban
followed me inside my house, sir.
57
Q When Delfin Guban followed you inside your house, what happened again?
A He was holding a knife and we grappled and during that time both of us fell down,
sir.
Q When you grappled with Delfin Guban, who was holding a knife, what
again happened?
A We grappled for the possession of the knife then we fell down and the
knife he was then holding pointed towards him and hit him. x x x. 30"
(Emphasis supplied)
The foregoing testimony bears not only the vice of falsity but also isolation. It is
uncorroborated and even opposed by Marites, accused-appellants own sister and
lone witness. Contrary to his testimony that Guban hit him on his forehead with a
pipe, Marites declared that accused-appellant sustained the wound on his forehead
when he accidentally bumped an artesian well. Instead of fortifying her brothers
defense, she virtually affirmed the prosecutions story by testifying that he created
trouble in their compound, attempted to kill his uncle Bernabe Quinto and killed
Guban. 31
Ingrained in our jurisprudence is the doctrine that the plea of self-defense cannot be
justifiably entertained where it is not only uncorroborated by any separate
competent evidence but in itself is extremely doubtful.32 In the present case,
accused-appellants tendency to invoke a melange of defenses renders his
testimony dubious. While he admitted the commission of the crime in order to
preserve his own life, he maintained that Guban accidentally stabbed himself. This
shows ambivalence. Accident presupposes lack of intention to stab the victim, while
self-defense presumes voluntariness, induced only by necessity. 33 Indeed, if there is
truth to either of his claim, his natural course of action was to assist the victim, or at
the very least, report the incident to the authorities. Certainly, the justifying
circumstance of self-defense34 or the exempting circumstance of accident cannot be
appreciated considering accused-appellants flight from the crime scene and his
failure to inform the authorities of the incident. Furthermore, that he did not
surrender the knife to the authorities is inconsistent with a clean conscience and,
instead, indicates his culpability of the crime charged.35
In a last-ditch effort to exculpate himself, accused-appellant assails Fajardos
testimony as tainted with inconsistencies and is "contrary to the normal course."
Accused-appellant cannot invoke these alleged weaknesses in view of the principle
that one who pleads self-defense must rely on the strength of his own evidence and
not on the weakness of that of the prosecution. Even if the prosecutions evidence is
weak, it is still credible considering accused-appellants admission that he killed the
victim. It bears emphasis that Fajardos testimony clearly points to him as the
culprit. Not only did he pull out his knife, stabbed Guban 36 and ran away.37Fajardo

also reiterated what Guban uttered to him, i.e., "I was stabbed by Feding
Abrazaldo."38
As Guban had succumbed to death and his opportunity to divulge the truth on his
demise had been lost, we cannot but cast a quizzical glance on accused-appellants
uncorroborated testimony. More so, when such testimony was contradicted by his
own witness who happened to be his sister. Standing alone against the testimonies
of the prosecution witnesses, accused-appellants own account of the killing must
necessarily fail. We hold that his guilt has been established to a degree of moral
certainty. The trial court did not err in relying on the testimony of Fajardo, an
eyewitness. Time and again, we have said that we will not interfere with the
judgment of the trial court in determining the credibility of witnesses unless there
appears on record some facts or circumstances of weight and influence which have
been overlooked or the significance of which has been misinterpreted. This is so
because the trial court has the advantage of observing the witnesses through the
different indicators of truthfulness or falsehood.39
However, we find that the trial court erred in concluding that treachery attended the
commission of the crime. There is treachery when the offender commits any of the
crimes against persons employing means, methods or forms in the execution
thereof, which tend directly and specially to insure its execution, without risk to
himself arising from defense which the offended party might make. Treachery cannot
be presumed, it must be proved by clear and convincing evidence or as conclusively
as the killing itself. Fajardo testified that accused-appellant and Guban were
"grappling with each other" and that prior to the stabbing, they were shouting at
each other. In this scenario, it cannot be said that Guban was unprepared to put up a
defense, such as hitting accused-appellant, or that the latters assault was sudden.
We quote in verbatim the testimony of Fajardo, thus:
"ATTY. CAMPOS:
Q They were not then fighting?
A They were grappling with each other and then he stabbed Delfin Guban.
Q In fact, they were shouting each other?
A Yes, sir.
Q What were they shouting against another?
A I could no longer understand because it was already night.
Q But they were shouting loudly, am I correct?
58
A Yes and there were many people." 40 (Emphasis supplied)
The trial court likewise erred in appreciating the aggravating circumstance of
nocturnity or nighttime. For nocturnity to be properly appreciated, it must be shown
that it facilitated the commission of the crime and that it was purposely sought for
by the offender. By and itself, nighttime is not an aggravating circumstance. 41 In the
instant case, no sufficient evidence was offered to prove that accused-appellant
deliberately sought the cover of darkness to accomplish his criminal design. In fact,
Fajardo testified that there was a fluorescent lamp sufficiently illuminating the scene
of the crime.42
Neither can we sustain the trial courts finding that the aggravating circumstance
under paragraph (5) of Article 14, Revised Penal Code, i.e., that the crime was
committed in a place where public authorities were engaged in the discharge of
their duties, is present. It must be pointed out that this aggravating circumstance is
based on the greater perversity of the offender, as shown by the place of the
commission of the crime, which must be respected. 43 In this case, the crime was
committed at the compound of the accused-appellant where no public function was
being held. The arrival of the barangay authorities was precisely due to the trouble
that had commenced prior to the stabbing incident. Clearly, the said aggravating
circumstance cannot be considered. Moreover, under the present
Rules,44 aggravating circumstances must be alleged, otherwise, they cannot be
appreciated. Being favorable to the accused, this new procedure may be given
retroactive effect.45 Except treachery, the other aggravating circumstances
mentioned have not been alleged in the Information.
In the absence of any circumstance that would qualify the crime at bar to murder,
accused-appellant can only be held liable for homicide defined and penalized under
Article 249 of the Revised Penal Code. The prescribed penalty is reclusion temporal.
Considering that there was neither mitigating nor aggravating circumstance that
attended the commission of the crime, the penalty has to be imposed in its medium
period, ranging from 14 years, 8 months and 1 day to 17 years and 4 months.
Applying the provisions of the Indeterminate Sentence Law, he should be sentenced
to an indeterminate penalty, the minimum of which is within the range of prision
mayor, or 6 years and 1 day to 12 years. The maximum thereof is within the range
of reclusion temporal in its medium period, which is 14 years, 8 months and 1 day to
17 years and 4 months. 46
On the trial courts award of actual damages in the amount of P27,000.00, we find
the same to be unsubstantiated. To be entitled to such damages, it is necessary to
prove the actual amount of loss with a reasonable degree of certainty, premised
upon competent proof and on the best evidence obtainable to the injured party. 47 In
the case at bar, the prosecution failed to present any receipt to prove the claim for
expenses incurred.48 Gregorio Guban, the father of the victim, who shouldered the
expenses for the wake and burial failed to submit receipts to show the amount of
such expenses.49 However, as the heirs of Guban did actually incur funeral expenses,
 59

we are justified in awarding P25,000.00, not for purposes of indemnification, but by

way of temperate damages.50

Thus, we now hold that where the amount of the actual damages cannot be
determined because of the absence of receipts to prove the same, but it is shown
that the heirs are entitled thereto, temperate damages may be awarded. Such
temperate damages, taking into account the current jurisprudence fixing the
indemnity for death atP 50,000.00, should be one-half thereof, or P25,000.00. This
makes temperate damages equal to the award of exemplary damages, which is
likewise fixed at P25,000.00 in cases where its award is justified.

WHEREFORE, the assailed judgment in Criminal Case No. 95-01052-D is AFFIRMED

with MODIFICATION. Accused-appellant Federico Abrazaldo is declared guilty beyond
reasonable doubt of homicide defined and penalized under Article 249 of the
Revised Penal Code and is sentenced to suffer an indeterminate penalty of six (6)
years and 1 day of prision mayor, as minimum, to fourteen (14) years, eight (8)
months and one (1) day of reclusion temporal in its medium period, as maximum.
He is ordered to pay the heirs of the late Delfin GubanP50,000.00 as indemnity
and P25,000.00 as temperate damages.

Costs de oficio.

SO ORDERED.

ECOND DIVISION
G.R. No. 197360 July 3, 2013
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
vs.
RONALD CREDO aka "ONTOG," RANDY CREDO and ROLANDO CREDO y SAN
BUENA VENTURA, Accused-Appellants.
DECISION
PEREZ, J.:
This is an appeal from the Decision1 of the Court of Appeals in CA-G.R. CR-HC No.
04113 promulgated on 28 February 2011. The decision of the Court of Appeals
affirmed, with modifications, the Decision2 dated 14 July 2009 of the Regional Trial
C6urt, Branch 31, Pili, Camarines Sur, in Criminal Case No. P-3819 finding accused-
appellants Ronald Credo a.k.a. "Ontog," Randy Credo and Rolando Credo y San
Buenaventura guilty beyond reasonable doubt of murder for the death of Joseph
Nicolas.
Factual Antecedents
The amended Information3 filed against appellants reads:
That on June 22, 2005 at around 10:30 in the evening at Zone 4 Barangay San JOSE,
Municipality of Pili, Province of Camarines Sur, Philippines and within the jurisdiction
of this Honorable Court, the above-named accused, conspiring, confederating and
mutually helping one another, did then and there, with intent to take the life of
JOSEPH NICOLAS Y arroyo (sic), willfully, unlawfully and feloniously attack and hack
the latter with a bolo, wounding him in the different parts of the body, per autopsy
report marked as Annex "A" hereof, thereby causing the direct and immediate death
of said JOSEPH NICOLAS y ARROYO.
Abuse of superior strength being attendant in the commission of the crime, the
same will qualify the offense committed to murder.
ACTS CONTRARY TO LAW.
Based on the respective testimonies of the witnesses for the prosecution, the
following sequence of events was gathered:
On 22 June 2005, at around 10:30 in the evening, the victim, Joseph Nicolas
(Joseph), was at a "bingohan" in Zone 3 of Brgy. San Nicolas, Pili, Camarines Sur,
60
together with his wife Maria and friends Manuel Chica (Manuel) and Ramon Tirao.
Randy Credo (Randy) arrived at the "bingohan," approached Joseph and suddenly
punched the latter on the chest, causing him to fall down. Randy then immediately
ran away towards the direction of their house located at Zone 4. Joseph, on the other
hand, stood up, gathered his things consisting of a lemon and an egg, and gave
Randy a chase. The people at the "bingohan" all scampered away as a result of the
commotion.4Josephs friend Manuel proceeded towards Zone 3. There, he met
Randy, who was already accompanied by his co-appellants: his brother Ronald Credo
(Ronald) and their father Rolando Credo (Rolando). The three were each armed with
a bolo.5
Meanwhile, when Josephs children, Russel, Ramon, Roldan and Rea, heard that their
father was in trouble, they decided to look for him in Zone 3. On their way, they met
appellants, who suddenly started throwing stones at them, causing them to run
away. Russel got separated from his siblings but he continued to look for his father.
He came across appellants again in Zone 2 where he saw them hacking somebody
with their bolos. That person later turned out to be their father. Russel saw that
when all three appellants were done hacking their victim, Randy and Rolando went
back to where the victim was lying and gave him another blow, saying in the
Bicolano dialect, "pang-dulce" (for dessert).6
The scene was witnessed by another person, Francis Nicolas Credo (Francis), a
resident of Zone 2.7 According to Francis, at the time of the incident, he was in his
bedroom preparing to go to sleep when he heard a commotion outside his house. He
heard Roger Credo, the brother of Randy and Ronald, shout: "Tama na Manoy, gadan
na!" (Enough brother, he is already dead!) Upon hearing these words, Francis went
out of the bedroom, proceeded to their sala and peeped through the jalousies of the
sala window. He saw appellants, all armed with a bolo, repeatedly hacking Joseph to
death.8 He saw the hacking incident very clearly because the place was lighted by a
lamppost and the moon was shining brightly. Moreover, the distance between the
crime scene and the window from where he was watching is only about 3 to 4
meters.9 Francis was able to note that Joseph was unarmed and was, in fact, holding
a lemon in his right hand and an egg in his left hand.10
Joseph died on the same day of the incident. He obtained six (6) hack wounds: one
on the right ear, two on the left scapular area, one on the lumbar area, one on the
right forearm and another one on the left lateral neck area which, according to the
doctor who conducted the autopsy on the body of Joseph, was the most fatal
wound.11
Rolando and Randy denied any participation in the hacking incident, claiming that it
was Ronald alone who killed Joseph. They also claimed that the killing was done in
defense of Ronald and Randys mother whom Joseph was, at the time of the
incident, about to hack.12 Based on appellants testimony, when Ronald heard of
what happened between Randy and Joseph, Ronald left the house with a bolo in
search of Joseph. When their parents learned that Ronald left to confront Joseph,

they followed Ronald to the "bingohan." 13 Rina Credo Hernandez, sister of Ronald
and Randy, testified that while their parents and Ronald were walking back towards
their house from the "bingohan," Joseph suddenly emerged from the back of their
house with a bolo. She saw that Joseph was brandishing the bolo and was about to
attack their mother so she shouted a warning to their mother. Ronald came to her
rescue and attacked Joseph,14 resulting in the latters death.
Ruling of the Regional Trial Court
The trial court found that appellants conspired in the commission of the crime and
that the killing of Joseph was attended by abuse of superior strength. Hence, on 14
July 2009, the trial court rendered its decision finding appellants guilty beyond
reasonable doubt of the crime of murder, sentencing them to suffer the penalty of
reclusion perpetua, and ordering them to pay the widow of Joseph the amounts
of P14,000.00 as actual damages, P50,000.00 as civil indemnity, P50,000.00 as
moral damages, and P50,000.00 as exemplary damages.15
Ruling of the Court of Appeals
On appeal, the Court of Appeals affirmed the judgment of conviction but modified
the award of damages in the following manner: (1) civil indemnity was increased
from P50,000.00 to P75,000.00; (2) the award of moral damages was likewise
increased from P50,000.00 to P75,000.00; (3) the amount of exemplary damages
was reduced from P50,000.00 to P30,000.00; and (4) temperate damages in the
amount of P25,000.00 was imposed in place of actual damages.16
The Issues
In their Brief17 filed before the Court of Appeals, appellants prayed or their acquittal,
pleading the following grounds:
I
THE TRIAL COURT GRAVELY ERRED IN NOT GIVING EXCULPATORY WEIGHT TO THE
DEFENSE OF RELATIVES INTERPOSED BY ACCUSED-APPELLANT RONALD CREDO.
II
THE TRIAL COURT GRAVELY ERRED IN FINDING THAT ACCUSED-APPELLANTS
ROLANDO CREDO AND RANDY CREDO ARE GUILTY OF THE CRIME CHARGED.
III
61
THE TRIAL COURT GRAVELY ERRED IN NOT FINDING THAT THE TESTIMONIES OF THE
PROSECUTION WITNESSES ARE FLAWED AND INCONSISTENT.
IV
THE TRIAL COURT GRAVELY ERRED IN APPRECIATING ABUSE OF SUPERIOR
STRENGTH AS QUALIFYING CIRCUMSTANCE DESPITE THE PROSECUTIONS FAILURE
TO PROVE ITS ATTENDANCE.
Appellants subsequently filed a Supplemental Brief18 before this Court, alleging the
following as additional assignment of errors:
V
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE ACCUSED-
APPELLANTS CONSPIRED WITH EACH OTHER IN THE COMMISSION OF THE CRIME
CHARGED.
VI
THE COURT OF APPEALS GRAVELY ERRED IN INCREASING THE AWARD OF CIVIL
INDEMNITY FROM FIFTY THOUSAND PESOS (PHP50,000.00) TO SEVENTY-FIVE
THOUSAND PESOS (PHP75,000.00).
Pending resolution of this appeal, the Court received a letter, 19 dated 13 September
2011, from P/Supt. Richard W. Schwarzkopf, Jr., Officer-in-Charge, Office of the
Superintendent, New Bilibid Prison, informing the Court that Rolando had died at the
New Bilibid Prison Hospital on 23 June 2011. Attached to his letter was a certified
true copy of the certificate of death20 of Rolando listing "Cardio respiratory Arrest" as
the immediate cause of death.
As a consequence of Rolandos death while this case is pending appeal, both his
criminal and civil liability ex delicto were extinguished pursuant to Article 89 of the
Revised Penal Code. The said provision of law states that criminal liability is totally
extinguished by "the death of the convict, as to the personal penalties; and as to
pecuniary penalties, liability therefor is extinguished only when the death of the
offender occurs before final judgment."
This appeal shall, as a result, be decided as against Randy and Ronald only.
Our Ruling
The appeal has no merit.
 62

At the outset, it bears repeating that factual findings of the trial court, when affirmed
by the Court of Appeals, are generally binding and conclusive upon the Supreme
Court.21 Except for compelling or exceptional reasons, such as when they were
sufficiently shown to be contrary to the evidence on record, the findings of fact of
the Regional Trial Court will not be disturbed by this Court.22 Thus, once a guilty
verdict has been rendered, the appellant has the burden of clearly proving on appeal
that the lower court committed errors in the appreciation of the evidence
presented.23 Here, there is no showing that the trial court or the Court of Appeals
overlooked some material facts or committed any reversible error in their factual
findings.
that all three of the appellants were holding a bolo at the time of the incident is
corroborated by another witness: Manuel Chica. Manuel testified that after Randy
and Joseph left the "bingohan," he also left to follow the two. On his way, he met the
three appellants all armed with a bolo.27
The pertinent portions of the respective testimonies of Francis and Russel on the
matter are as follows:
PROS. FAJARDO:

Q Now, lets clarify, Mr. witness. If you could demonstrate actually the distance from
Trial courts assessment of the credibility
where you are seated to anywhere of this courtroom, the place as you said the
of a witness accorded great weight
distance of that hacking incident happened [sic], can you do that?

Appellants claim that the respective testimonies of Russel and Francis were marked
PROS. FAJARDO:
with several inconsistencies that cast doubt on their veracity, especially considering
that they are the son and the nephew, respectively, of the victim. They noted that
Francis narrated that after Ronald hacked Joseph, Rolando left with his wife followed Three (3) meters.
by Ronald and Randy. Russel, on the other hand, testified that after the three
appellants hacked the victim, Randy and Rolando went back to where the victim was ATTY. PREVOSA counsel for the defense:
lying down and gave him another blow, saying, "pang-dulce." Moreover, Francis
initially stated that after the hacking incident, the victim was left lying on the ground
Three (3) to four (4) meters, your Honor.
on his side. However, when again questioned by the court as to what he saw, Francis
gave a different answer, saying that the victim was lying flat on the ground. 24
PROS. FAJARDO:

This Court is not persuaded.

Q You mentioned the person being hacked by three (3) persons, right?

Corollary to the principle that appellate courts generally will not interfere with the
factual findings of the trial court is the rule that when the credibility of an [FRANCIS N. CREDO]
eyewitness is at issue, due deference and respect is given by the appellate courts to
the assessment made by the trial courts, absent any showing that the trial courts A Yes, your Honor.
overlooked facts and circumstances of substance that would have affected the final
outcome of the case.25 "As consistently adhered to by this Court, the matter of
Q Who were these three (3) persons hacking this other person as you said?
assigning values to declarations on the witness stand is best and most competently
performed by the trial judge, who had the unmatched opportunity to observe the
witnesses and to assess their credibility by the various indicia available but not A Rolando Credo, Ronald Credo, Randy Credo.
reflected on the record."26
Q Why were you able to identify Rolando, Ronald, Randy Credo?
We agree with the findings of both the trial court and the Court of Appeals which
gave weight to the accounts of the two eyewitnesses, Russel and Francis. Their A I was able to identify the accused because other than the light there is a moonlight
respective testimonies positively and categorically identified appellants as the so I clearly identified the three (3) persons. 28 (Emphases supplied)
perpetrators of the crime. Their statements on the witness stand also corroborate
each other on material aspects. Both Russel and Francis testified that they saw the PROS. FAJARDO:
appellants hacking a man. Although Francis was able to immediately recognize the
victim as Joseph, Russel was to learn only later on that the appellants victim was his
Q Now, after you were stoned, what did you and your group do?
own father. It is also worth noting that the statement of Russel and Francis claiming

[RUSSEL NICOLAS]
A We went on our separate way [sic] one of my brother Ramon went directly to our
grandmothers house x x x and then I saw something.
Q What was that you saw?
A Then I saw the three (3) Randy, Ontog, and Rolando [sic].
Q Now, what did you observe when you saw this Randy, Rolando and Ontog?
A I saw them hacking someone but I was not able to eye that someone because I
was not yet near them x x x.29(Emphases supplied)
It is worth mentioning as well that the following testimony of Russel confirms the
statement of Francis that the hacking incident occurred just in front of their
house,30 giving him (Francis) a clear view of what transpired:
PROS. FAJARDO:
Q Now, in what particular place did you see Randy and Rolando and Ontog hacked
[sic] this person?
[RUSSEL NICOLAS]
A In front of the house of Lolita Credo.
Q How is this Lolita Credo related to Francisco Credo?
A Lolita is the mother of Francisco.31
Both Francis and Russel likewise support each others statement on the act of at
least one of the appellants of going back to where Joseph was lying on the ground to
give him another blow with a bolo. Thus:
PROS. FAJARDO:
Q When you peeped to [sic] your window, jalousie window, what was Rolando Credo
doing?
[FRANCIS N. CREDO]
63
A The three (3) of them hacked the man and the man fell on the ground, while on
the ground he was again hacked on the head by Ronald Credo. 32 (Emphasis supplied)
PROS. FAJARDO:
Q Now, what did you observe when you saw this Randy, Rolando and Ontog?
[RUSSEL NICOLAS]
A I saw them hacking someone but I was not able to eye that someone because I
was not yet near them however, these Randy and Rolando returned back and said
"pang dulce" then hacked again.33 (Emphasis supplied)
The inconsistency in the respective statements of Francis and Russel with respect to
who among the three appellants actually dealt the final blow on the victim is
understandable considering that they witnessed the scene from different vantage
points. Francis definitely had a clearer view as he was nearer the scene of the crime
(3-4 meters) whereas Russel was much farther as evidenced by the fact that from
where he was watching, he was unable to recognize the victim as his father. All the
same, both were one in saying that at least one of the appellants returned to where
the victim was prostrate to give him another blow.
The aforementioned inconsistency is, moreover, a minor detail that does not affect
the credibility of Russel and Francis as eyewitnesses. Likewise, the other
inconsistencies pointed out by appellants pertain "only to collateral or trivial matters
and has no substantial effect on the nature of the offense." 34 The primordial
consideration is that both Russel and Francis were present at the scene of the crime
and that they positively identified appellants as the perpetrators of the crime
charged.35 This Court has been consistent in ruling that "although there may be
inconsistencies in the testimonies of witnesses on minor details, they do not impair
their credibility where there is consistency in relating the principal occurrence and
positive identification of the assailant."36
Finally, the attack of appellants on the credibility of Francis as a witness for the
prosecution on the ground that the victim is the brother of Francis mother making
Francis the nephew of the victim loses significance when the relationship of Francis
with the appellants is considered: appellant Rolando is his uncle, being the brother
of his father, thereby making appellants Randy and Ronald his first cousins. As held
by the Court of Appeals:
Considering that appellants are also his close relatives, it is difficult to believe that
Francis would point to appellants as the killers, if such were not true. Moreover, the
lack of proof of ill-motive on the part of Francis, indicate that he testified, not to
favor any of the parties in this case, but solely for the purpose of telling the truth
 64

and narrating what he actually witnessed. His testimony deserves full faith and Further, the following portions of the testimony of Flora Credo likewise clearly
credit.37 demonstrate that Ronald pleaded self-defense before the trial court:

Requisites for valid defense THE COURT:

of a relative not present
By the way, your son hacked for self-defense did you report that to the Police when
Randy contends that the trial court misconstrued the facts of this case when it held you surrendered your son?
that the defense he interposed was self-defense. According to him, in view of the
consistent and corroborating testimonies of the defense witnesses that he merely A No, your Honor, please.
stepped-in to protect his mother from being hacked by the victim, the proper
defense that should have been appreciated by the lower court is defense of
Q You even surrendered your son to the Police so why did you not immediately tell
relatives.
the Police that your son killed Joseph Nicolas for self-defense?

This argument is untenable.

A I said that, your Honor I directed that statement, your Honor.

The following excerpts from the Transcripts of Stenographic Notes (TSNs) of this case
Q When did you right then and there that you surrendered you [sic] son to tell the
categorically show that appellant Ronald interposed not just defense of relatives but
Police he hacked for self-defense?
self-defense as well:

A Yes, your Honor.

1. TSN of 12 August 2008:

Q Do you have proof to show that indeed you informed the Police that your son the
ATTY. PREVOSA [counsel for the defense]:
(sic) hacking is self-defense?

x x x. This witness [Flora O. Credo, mother of Randy and Ronald] will testify on the
A Yes, your Honor.41
theory of self-defense of the accused, x x x.38

Thus, appellant Ronald cannot now claim that the defense he pleaded is defense of
2. TSN of 27 August 2008:
relatives only and does not include self-defense and that the trial court
misappreciated the facts of this case when it considered self-defense instead of
ATTY. PREVOSA: defense of relatives.

The Witness [accused Rolando Credo] is being presented to testify that in order to In any case, even if the claim of defense of a relative is taken into consideration, the
safe [sic] himself and her [sic] mother, Ronald Nicolas [sic] was able to cause injury same would still not be valid.
to Joseph Nicolas x x x.39

Article 11 of the Revised Penal Code provides, in part, as follows:

3. TSN of 14 January 2009:

ART. 11. Justifying circumstances. The following do not incur any criminal liability:
ATTY. PREVOSA:

1. Anyone who acts in defense of his person or rights, provided that the following
We are offering the testimony of this witness [accused Ronald Credo] to prove the circumstances concur:
following;

First. Unlawful aggression;

That he was able to harm to death the private complainant [sic] Joseph Nicolasin
[sic] order to defend himself, relatives and his own family, x x x. 40
Second. Reasonable necessity of the means employed to prevent or repel it;

Third. Lack of sufficient provocation on the part of the person defending himself.
2. Anyone who acts in defense of the person or rights of his spouse, ascendants,
descendants, or legitimate, natural or adopted brothers or sisters, or of his relatives
by affinity in the same degrees, and those by consanguinity within the fourth civil
degree, provided that the first and second requisites prescribed in the next
preceding circumstance are present, and the further requisite, in case the
provocation was given by the person attacked, that the one making defense had no
part therein.
Based on the afore-quoted provision, both self-defense and defense of relatives
require that unlawful aggression be present in order to be held valid. "For the
accused to be entitled to exoneration based on self-defense or defense of relatives,
complete or incomplete, it is essential that there be unlawful aggression on the part
of the victim, for if there is no unlawful aggression, there would be nothing to
prevent or repel. For unlawful aggression to be appreciated, there must be an actual,
sudden and unexpected attack or imminent danger thereof, not merely a
threatening or intimidating attitude."42
As found by the trial court, there can be no unlawful aggression on the part of Joseph
because at the time of the incident, he was only holding a lemon and an egg.
According to the trial court, the fact that Joseph was unarmed effectively belied the
allegation of Ronald that he was prompted to retaliate in self-defense when Joseph
first hacked and hit him on his neck. The trial court further pointed out that if Joseph
indeed hacked Ronald on the neck, "it is surprising that the latter did not suffer any
injury when according to them (Ronald, Rolando and Flora Credo), Joseph was
running fast and made a hard thrust on Ronald, hitting the latters neck." 43
Since the criterion for determining whether there is a valid self-defense and a valid
defense of relatives require that there be unlawful aggression perpetrated by the
victim on the one making the defense or on his relative, it is safe to conclude that
when the trial court held that there can be no valid self-defense because there was
no unlawful aggression on the part of the victim, it was, in effect, likewise saying
that there can be no valid defense of a relative for lack of an essential requisite. In
other words, when the trial court made a ruling on the claim of self-defense, it, at
the same time, also necessarily passed upon the issue of defense of a relative.
Appellants acted in conspiracy with one
another in the execution of the crime
"Conspiracy is said to exist where two or more persons come to an agreement
concerning the commission of a felony and decide to commit it. Direct proof is not
essential to prove conspiracy for it may be deduced from the acts of the accused
before, during and after the commission of the crime charged, from which it may be
indicated that there is a common purpose to commit the crime." 44
65
In the present case, the prosecution witnesses were one in saying that prior to the
hacking incident, they saw all three appellants walking together towards the
direction of the "bingohan" and that all three were each carrying a bolo. Appellants,
therefore, deliberately sought Joseph out to confront him about the altercation
incident between him and Randy. Likewise, the two eyewitnesses confirm each
others respective statements that all three appellants were armed with a bolo with
which they repeatedly hacked the victim, who fell to the ground; after which,
appellants left the scene of the crime.
While no evidence was presented to show that appellants met beforehand and came
to an agreement to harm Joseph, their concerted acts before, during and after the
incident all point to a unity of purpose and design. Indeed, "proof of a previous
agreement and decision to commit the crime is not essential but the fact that the
malefactors acted in unison pursuant to the same objective suffices." 45 Such proof
"may be shown through circumstantial evidence, deduced from the mode and
manner in which the offense was perpetrated, or inferred from the acts of the
accused themselves when such lead to a joint purpose and design, concerted action
and community of interest."46
Abuse of superior strength attended
the commission of the crime
There is abuse of superior strength when the perpetrators of a crime deliberately
used excessive force, thereby rendering the victim incapable of defending
himself.47 "The notorious inequality of forces creates an unfair advantage for the
aggressor."48
Here, there can be no denying that appellants took advantage of their superior
strength to ensure the successful execution of their crime. This is evident from the
fact that there were three of them against the victim who was alone. More
importantly, their victim was unarmed while the three of them were each armed
with a bolo.
Award of damages
In People v. Anticamara,49 this Court laid down the standards in the proper award of
damages in criminal cases, as follows:
x x x the award of civil indemnity is mandatory and granted to the heirs of the victim
without need of proof other than the commission of the crime. In People v. Quiachon,
the Court held that even if the penalty of death is not to be imposed because of the
prohibition in R.A. 9346, the civil indemnity of P75,000.00 is proper, because it is not
dependent on the actual imposition of the death penalty but on the fact that
qualifying circumstances warranting the imposition of the death penalty attended
the commission of the offense. As explained in People v. Salome, while R.A. No. 9346
 66

prohibits the imposition of the death penalty, the fact remains that the penalty
provided for by law for a heinous offense is still death, and the offense is still
heinous. Accordingly, the award of civil indemnity in the amount of P75,000.00 is
proper.1wphi1

Anent moral damages, the same are mandatory in cases of murder, without need of
allegation and proof other than the death of the victim. However, consistent with
recent jurisprudence on heinous crimes where the imposable penalty is death but
reduced to reclusion perpetua pursuant to R.A. No. 9346, the award of moral
damages should be increased from P50,000.00 to P75,000.00.

Accordingly, the Court of Appeals was correct in increasing the lower courts award
of civil indemnity fromP50,000.00 to P75,000.00. Regardless of the penalty imposed
by the trial court, the correct amount of civil indemnity is P75,000.00, pursuant to
the ratiocination of the Court in the above-cited case of People v. Anticamara.

The Court of Appeals, however, erred when it increased the amount of moral
damages from P50,000.00 toP75,000.00. In accordance with the pronouncement of
the Court in the Anticamara Case, the correct sum should be P50,000.00.

In connection with the award of exemplary damages, the Court of Appeals correctly
reduced the amount fromP50,000.00 to P30,000.00 in line with current
jurisprudence.50

Finally, pursuant to the ruling of the Court in People v. Villanueva,51 "when actual
damages proven by receipts during the trial amount to less than P25,000, as in this
case, the award of temperate damages for P25,000 is justified in lieu of actual
damages of a lesser amount. Conversely, if the amount of actual damages proven
exceeds P25,000, then temperate damages may no longer be awarded; actual
damages based on the receipts presented during trial should instead be granted." As
a result, the Court of Appeals likewise correctly held that, since the receipted
expenses of Joseph's family amounted to only P14,300.00, temperate damages in
the amount of P25,000.00 in lieu of actual damages should be awarded.

WHEREFORE, the appeal is hereby DENIED. The Decision of the Court of Appeals
dated 28 February 2011 in CA-G.R. CR-HC No. 04113, finding appellants Ronald,
Randy and Rolando, all surnamed Credo, guilty beyond reasonable doubt of murder
is AFFIRMED with the MODIFICATION that the award of moral damages is reduced
from P75,000.00 to P50,000.00.

The appeal with respect to the deceased appellant Rolando Credo is DISMISSED.

SO ORDERED.

Industrial Timber v. Ababon
G.R. No. 164518 | January 25, 2006
FACTS:
1. August 30, 1985 Industrial Plywood Group Corporation (IPGC) leased its plywood
plant in Butuan City to Industrial Timber Corporation (ITC) for a period of 5 years.
2. March 6, 1990 ITC notified DOLE and its workers that it will cease operations
effective March 9, 1990 due to lack of raw materials. Operations will resume only
after logs for milling can be sourced. a. Around the same time IPG notified ITC of
the expiration of the lease in August 1990 and that it did not have intentions of
renewing the same.
3. June 26, 1990 ITC notifed DOLE and its workers of the plants shutdown due to
the non-renewal of anti-pollution permit that expired in April 1990. a. All 387 workers
were laid off until further notice. b. Final notice of closure was issued on August 17,
1990 with advice for all workers to collect the benefits due them under the law and
CBA.
4. October 15, 1990 IPGC took over the plant after being issued a business permit,
which included an anti-pollution permit from DENR that was coincidentally issued on
the same day ITC ceased operation of the plant (August 17, 1990).
5. Virgilio Ababon, et al. filed a complaint against both ITC and IPGC for illegal
dismissal, unfair labor practice and damages, alleging that ITCs closure was
intended to disband the union and that both corporations are one and the same,
controlled by one owner.
6. LA upheld the validity of the closure. Ababon appealed to the NLRC. NLRC ordered
the reinstatement of the employees and payment of full backwages, damages and
attorneys fees on May 20, 1993.
7. ITC and IPGC filed and MR, but it did not reach the NLRC on time because it had
been sent through JRS. A Petition for Relief/second MR was filed but denied due to
lack of merit.
8. ITC and IPGC filed a Notice of Appeal with the SC, but was dismissed for being a
wrong mode of appeal from the NLRC decicion. They also filed a MR/Second Petition
for Relief with the NLRC and was granted on May 24, 1995.
9. Ababon filed a Petition for Certiorari with the SC, but the petition was referred to
the CA for proper disposition. CA set aside the May 1995 NLRC decision and
reinstated its May 1993 decision.
67
ISSUE Procedural: WON the CA erred in liberally applying the rules of procedure
with respect to Ababon, et al but being rigid in its application as regards ITC and
IPGC. YES.
A careful scrutiny of the facts and circumstances of these consolidated cases
warrants liberality in the application of technical rules and procedure.
Substantive: WON the workers laid off by ITC were illegally dismissed due to the
closure of its business; WON they are entitled to separation pay, backwages, and
other monetary revwards. NO.
The closure of ITCs business was valid, but they are ordered to pay separation pay
equivalent to one month pay or to at least one-half month pay for every year of
service, whichever is higher, and P50,000.00 as nominal damages to each
employee.
RATIO LIBERALITY IN APPLYING TECHNICAL RULES AND PROCEDURE
1. ITC and IPGC concede that the 1993 NLRC decision had become immutable
because of their counsels failure to file the MR on time. However, they argue that
the CA should have relaxed technical rules in the paramount interest of justice.
2. Court: A great injustice would be done to ITC by ordering it to reinstate the
employees to their former positions that no longer exist due to valid and legitimate
cessation of business a. Labor Code, Art. 218. NLRC may correct, amend, or waive
any error, defect or irregularity whether in substance or in form. b. Labor Code, Art.
221. the rules of evidence prevailing in courts of law or equity shall not be
controlling and it is the spirit and intention of this Code that the Commission and its
members and the Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process.
ILLEGAL DISMISSAL
1. While labor is granted full protection by the Constitution, employers are also
accorded rights and privileges to assure their self-determination and independence,
and reasonable return of capital. These privileges are called management
prerogatives.
2. However, the State has the right to determine whether an employer's privilege is
exercised in a manner that complies with the legal requirements and does not offend
the protected rights of labor.
3. The right to close the operation of an establishment or undertaking is one of the
authorized causes in terminating employment of workers, the only limitation being
that the closure must not be for the purpose of circumventing the provisions on
termination of employment embodied in the Labor Code.
 68

a. Labor Code, Art. 283 Closure of establishment and reduction of personnel (see
codal). b. Three requirements necessary for valid cessation of business operations:
(a) service of a written notice to the employees and to the DOLE at least one month
before the intended date thereof; (b) the cessation of business must be bona fide in
character; and (c) payment to the employees of termination pay amounting to one
month pay or at least one-half month pay for every year of service, whichever is
higher.

4. Application to the case: ITCs closure was done in good faith for valid reasons. a.
The decision to permanently close was a confluence of the following events lack of
raw materials, expiry of anti-pollution permit, and the termination of the lease
contract with IPGC. b. ITC v NLRC: affirmed that ITC Butuan Logs Plant close in 1989
because of the lack of raw materials and that closure was the only remedy available
to prevent heavy losses. c. Shoppers Gain Supermarket v. NLRC: non-renewal of
petitioner corporations lease contract and its consequent closure and cessation of
operations may be considered an event beyond petitioners control, in the nature of a
force majeure situation.

5. While the closure was done in good faith, ITC did not comply with the notice
requirement (notify DOLE and employees at least one month before intended date of
closure). a. ITC only notified DOLE and its employees of the final closure on August
17, 1990 the same day the closure was to take effect. b. Court says: where the
dismissal is based on an authorized cause under Art. 283 of the Labor Code but the
employer failed to comply with the notice requirement, the sanction should be stiff
as the dismissal process was initiated by the employers exercise of his management
prerogative. c. Hence, ITC to pay damages P50,000 per employee. 6. Having been
dismissed legally, Ababon, et al. are not entitled to payment of backwages. They
are, however, entitled to separation pay equivalent to one month pay or at least
one-half month pay for every year of service, whichever is higher.

EN BANC
[G.R. No. L-8194. July 11, 1956.]
EMERENCIANA M. VDA. DE MEDINA, ET AL., Plaintiffs-Appellees, vs.
GUILLERMO CRESENCIA, ET AL., Defendants. GUILLERMO
CRESENCIA, Appellant.
DECISION
REYES, J.B.L., J.:
Appeal by Defendant Guillermo Cresencia from the judgment of the Court of First
Instance of Manila in its civil case No. 19890, sentencing Appellant, jointly and
severally with his co-DefendantBrigido Avorque, to pay Plaintiffs Emerencia M. Vda.
de Medina and her minor children damages in the total amount of P56,000, P5,000
attorneys fees, and costs.
It appears that on May 31, 1953, passenger jeepney bearing plate No. TPU-2232
(Manila), driven by Brigido Avorque, smashed into a Meralco post on Azcarraga
Street, resulting in the death of Vicente Medina, one of its passengers. A criminal
case for homicide through reckless imprudence was filed against Avorque (criminal
case No. 22775 of the Court of First Instance of Manila), to which he pleaded guilty
on September 9, 1953. The heirs of the deceased, however, reserved their right to
file a separate action for damages, and on June 16, 1953, brought suit against the
driver Brigido Avorque and Appellant Guillermo Cresencia, the registered owner and
operator of the jeepney in question. Defendant Brigido Avorque did not file any
answer; chan roblesvirtualawlibrarywhile DefendantCresencia answered, disclaiming
liability on the ground that he had sold the jeepney in question on October 14, 1950
to one Maria A. Cudiamat; chan roblesvirtualawlibrarythat the jeepney had been
repeatedly sold by one buyer after another, until the vehicle was purchased on
January 29, 1953 by Rosario Avorque, the absolute owner thereof at the time of the
accident. In view of Cresencias answer, Plaintiffsfiled leave, and was allowed, to
amend their complaint making Rosario Avorque a co-Defendant; chan
roblesvirtualawlibraryand the latter, by way of answer, admitted having purchased
the aforesaid jeepney on May 31, 1953, but alleged in defense that she was never
the public utility operator thereof. The case then proceeded to trial, during which,
after the Plaintiffs had presented their evidence, DefendantsGuillermo Cresencia and
Rosario Avorque made manifestations admitting that the former was still the
registered operator of the jeepney in question in the records of the Motor Vehicles
Office and the Public Service Commission, while the latter was the owner thereof at
the time of the accident;chan roblesvirtualawlibraryand submitted the case for the
decision on the question of who, as between the two, should be held liable
to Plaintiffs for damages. The lower court, by Judge Jose Zulueta, held that as far as
the public is concerned, Defendant Cresencia, in the eyes of the law, continued to be
the legal owner of the jeepney in question; chan roblesvirtualawlibraryand rendered
judgment against him, jointly and severally with the driver Brigido Avorque, for
P6,000 compensatory damages, P30,000 moral damages, P10,000 exemplary
damages, P10,000 nominal damages, P5,000 attorneys fees, and costs,
whileDefendant Rosario Avorque was absolved from liability. From this
judgment, Defendant Cresencia appealed.
We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182 (December
29, 1953), which the court below cited, that the law (section 20 [g], C. A. No. 146 as
amended) requires the approval of the Public Service Commission in order that a
69
franchise, or any privilege pertaining thereto, may be sold or leased without
infringing the certificate issued to the grantee; chan roblesvirtualawlibraryand that if
property covered by the franchise is transferred or leased without this requisite
approval, the transfer is not binding against the public or the Service
Commission; chan roblesvirtualawlibraryand in contemplation of law, the grantee of
record continues to be responsible under the franchise in relation to the Commission
and to the public. There we gave the reason for this rule to be as
follows:chanroblesvirtuallawlibrary
cralaw Since a franchise is personal in nature any transfer or lease thereof should
be notified to the Public Service Commission so that the latter may take proper
safeguards to protect the interest of the public. In fact, the law requires that, before
the approval is granted, there should be a public hearing, with notice to all
interested parties, in order that the Commission may determine if there are good
and reasonable grounds justifying the transfer or lease of the property covered by
the franchise, or if the sale or lease is detrimental to public interest cralaw .
The above ruling was later reiterated in the cases of Timbol vs. Osias, L-7547, April
30, 1955 and Roque vs. Malibay Transit Inc., L- 8561, November 18, 1955.
As the sale of the jeepney here in question was admittedly without the approval of
the Public Service Commission, Appellant herein, Guillermo Cresencia, who is the
registered owner and operator thereof, continued to be liable to the Commission and
the public for the consequences incident to its operation. Wherefore, the lower court
did not err in holding him, and not the buyer Rosario Avorque, responsible for the
damages sustained by Plaintiff by reason of the death of Vicente Medina resulting
from the reckless negligence of the jeepneys driver, Brigido Avorque.
Appellant also argues that the basis of Plaintiffs action being the employers
subsidiary liability under the Revised Penal Code for damages arising from his
employees criminal acts, it isDefendant Rosario Avorque who should answer
subsidiarily for the damages sustained byPlaintiffs, since she admits that she, and
not Appellant, is the employer of the negligent driver Brigido Avorque. The argument
is untenable, because Plaintiffs action for damages is independent of the criminal
case filed against Brigido Avorque, and based, not on the employers subsidiary
liability under the Revised Penal Code, but on a breach of the carriers contractual
obligation to carry his passengers safely to their destination (culpa contractual). And
it is also for this reason that there is no need of first proving the insolvency of the
driver Brigido Avorque before damages can be recovered from the carrier, for in
culpa contractual, the liability of the carrier is not merely subsidiary or secondary,
but direct and immediate (Articles 1755, 1756, and 1759, New Civil Code).
The propriety of the damages awarded has not been questioned, Nevertheless, it is
patent upon the record that the award of P10,000 by way of nominal damages is
untenable as a matter of law, since nominal damages cannot co-exist with
compensatory damages. The purpose of nominal damages is to vindicate or
recognize a right that has been violated, in order to preclude further contest
thereon; chan roblesvirtualawlibraryand not for the purpose of indemnifying
the Plaintiff for any loss suffered by him (Articles 2221, 2223, new Civil Code.)
Since the court below has already awarded compensatory and exemplary damages
that are in themselves a judicial recognition that Plaintiffs right was violated, the
award of nominal damages is unnecessary and improper. Anyway, ten thousand
pesos cannot, in common sense, be deemed nominal.
With the modification that the award of P10,000 nominal damages be eliminated,
the decision appealed from is affirmed. Costs against Appellant. SO ORDERED.
70

EN BANC
[G.R. No. L-22425. August 31, 1965.]
NORTHWEST AIRLINES, INC., Petitioner, v. NICOLAS L. CUENCA and COURT
OF APPEALS (SPECIAL SIXTH DIVISION), Respondents.
Ross, Selph & Carrascoso for Petitioner.
Bengzon, Villegas & Zarraga for Respondents.
SYLLABUS
1. AIR CARRIERS; LIABILITY UNDER THE WARSAW CONVENTION OF 1929 AND FOR
OTHER BREACHES OF CONTRACT. Articles 17, 18 and 19 of the Warsaw
Convention of 1929 merely declare the airlines liable for damage in the cases
enumerated therein, if the conditions specified are present. Neither the provisions of
said articles nor others regulate or exclude liability for other breaches of contract by
the air carriers.
2. ID.; ID.; ID.; LIABILITY FOR NOMINAL AND EXEMPLARY DAMAGES; CASE AT BAR.
Respondent boarded petitioners plane in Manila with a first class ticket to Tokyo.
Upon arrival at Okinawa, an agent of petitioner rudely compelled him, in the
presence of other passengers, to move to the tourist class. Respondent protested,
revealing that he was traveling in his official capacity as delegate of the Republic of
the Philippines to a conference in Tokyo. In order to reach the conference on time,
respondent obeyed. Held: Having been given first class accommodation as he took
petitioners plane in Manila, respondent was entitled to believe that this was a
confirmation of his first class reservation and that he would keep the same until his
ultimate destination, Tokyo. Since the offense had been committed with full
knowledge of the fact that respondent was an official representative of the Republic
of the Philippines, the sum of P20,000.00 awarded as damages may well be
considered as merely nominal. At any rate, considering that petitioners agent had
acted in a wanton, reckless and oppressive manner, said award may, also, be
considered as one for exemplary damages.
DECISION
CONCEPCION, J.:
This is an action for damages for alleged breach of contract. After appropriate
proceedings the Court of First Instance of Manila, in which the case was originally
filed, rendered judgment sentencing defendant Northwest Airlines, Inc.,
hereinafter referred to as petitioner to pay to plaintiff Cuenca hereinafter
referred to as respondent "the sum of P20,000 as moral damages, together with
the sum of P5,000 as exemplary damages, with legal interest thereon from the date
of the filing of the complaint" December 12, 1959 "until fully paid, plus the
further sum of P2,000 as attorneys fees and expenses of litigation." On appeal
71
taken by petitioner, said decision was affirmed by the Court of Appeals, except as to
the P50,000.00 exemplary damages, which was eliminated, and the P20,000.00
award for moral damages, which was converted into nominal damages. The case is
now before us on petition for review by certiorarifiled by petitioner, upon the ground
that the lower court has erred: (1) in holding that the Warsaw Convention of October
12, 1929, relative to transportation by air is not in force in the Philippines; (2) in not
holding that respondent has no cause of action; and (3) in awarding P20,000 as
nominal damages.
We deem it unnecessary to pass upon the first assignment of error because the
same is the basis of the second assignment of error, and the latter is devoid of
merit, even if we assumed the former to be well taken. Indeed, the second
assignment of error is predicated upon Articles 17, 18 and 19 of said Convention,
reading:
"ART. 17. The carrier shall be liable for damage sustained in the event of the death
or wounding of a passenger or any other bodily injury suffered by a passenger if the
accident which caused the damage so sustained took place on board the aircraft or
in the course of any of the operations of embarking or disembarking.
"ART. 18. (1) The carrier shall be liable for damage sustained in the event of the
destruction or loss of, or of damage to, any checked baggage, or any goods, if the
occurrence which caused the damage so sustained took place during the
transportation by air.
"(2) The transportation by air within the meaning of the preceding paragraph shall
comprise the period during which the baggage or goods are in charge of the carrier,
whether in an airport or on board an aircraft, or, in the case of a landing outside an
airport, in any place whatsoever.
"(3) The period of the transportation by air shall not extend to any transportation by
land, by sea, or by river performed outside an airport. If, however, such
transportation takes place in the performance of a contract for transportation by air,
for the purpose of loading, delivery, or transshipment, any damage is presumed,
subject to proof to the contrary, to have been the result of an event which took
place during the transportation by air.
"ART. 19. The carrier shall be liable for damage occasioned by delay in the
transportation by air of passengers, baggage, or goods."
Petitioner argues that pursuant to these provisions, an air "carrier is liable only" in
the event of death of a passenger or injury suffered by him, or of destruction or loss
of, or damage to any checked baggage or any goods, or of delay in the
transportation by air of passengers, baggage or goods. This pretense is not borne
out by the language of said Articles. The same merely declare the carrier liable for
damages in the enumerated cases, if the conditions therein specified are present.
Neither said provisions nor others in the aforementioned Convention regulate or
exclude liability for other breaches of contract by carrier. Under petitioners theory,
an air carrier would be exempt from any liability for damages in the event of its
absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.
The third assignment of error is based upon Medina v. Cresencia (52 Off. Gaz. 4606),
and Quijano v. Philippine Air Lines (CA-G.R. No. 21804). Neither case is, however, in
point, aside from the fact that the latter is not controlling upon us. In the first case,
this Court eliminated a P10,000 award for nominal damages, because the aggrieved
 72

party had already been awarded P6,000 as compensatory damages, P30,000 as

moral damages and P10,000 as exemplary damages, and "nominal damages cannot
co-exist with compensatory damages." In the case at bar, the Court of Appeals has
adjudicated no such compensatory, moral and exemplary damages to respondent
herein.

Moreover, there are special reasons why the P20,000.00 award in favor of
respondent herein is justified, even if said award were characterized as nominal
damages. When his contract of carriage was violated by the petitioner, respondent
held the office of Commissioner of Public Highways of the Republic of the Philippines.
Having boarded petitioners plane in Manila with a first class ticket to Tokyo, he was,
upon arrival at Okinawa, transferred to the tourist class compartment. Although he
revealed that he was traveling in his official capacity as official delegate of the
Republic to a conference in Tokyo, an agent of petitioner rudely compelled him, in
the presence of other passengers, to move, over his objection, to the tourist class,
under threat of otherwise leaving him in Okinawa. In order to reach the conference
on time, respondent had no choice but to obey.

It is true that said ticket was marked "W/L", but respondents attention was not
called thereto. Much less was he advised that "W/L" meant "wait listed." Upon the
other hand, having paid the first class fare in full and having been given first class
accommodation as he took petitioners plane in Manila, respondent was entitled to
believe that this was a confirmation of his first class reservation and that he would
keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not
tried to explain or even alleged that the person to whom respondents first class
seat was given had a better right thereto. In other words, since the offense had been
committed with full knowledge of the fact that respondent was an official
representative of the Republic of the Philippines, the sum of P20,000 awarded as
damages may well be considered as merely nominal. At any rate, considering that
petitioners agent had acted in a wanton, reckless and oppressive manner, said
award may, also, be considered as one for exemplary damages.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
petitioner. It is so ordered.

EN BANC
G.R. No. L-22425 August 31, 1965
NORTHWEST AIRLINES, INC., petitioner,
vs.
NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH
DIVISION), respondents.
CONCEPCION, J.:
This is an action for damages for alleged breach of contract. After appropriate
proceedings the Court of First Instance of Manila, in which the case was originally
filed, rendered judgment sentencing defendant Northwest Airlines, Inc.
hereinafter referred to as petitioner to pay to plaintiff Cuenca hereinafter
referred to as respondent the sum of P20,000 as moral damages, together with
the sum of P5,000 as exemplary damages, with legal interest thereon from the date
of the filing of complaint," December 12, 1959, "until fully paid, plus the further sum
of P2,000 as attorney's fees and expenses of litigation." On appeal taken by
petitioner, said decision was affirmed by the Court of Appeals, except as to the
P5,000.00 exemplary damages, which was eliminated, and the P20,000.00 award for
moral damages, which was converted into nominal damages. The case is now before
us on petition for review by certiorari filed by petitioner, upon the ground that the
lower court has erred: (1) in holding that the Warsaw Convention of October 12,
1929, relative to transportation by air is not in force in the Philippines; (2) in not
holding that respondent has no cause of action; and (3) in awarding P20,000 as
nominal damages.
We deem it unnecessary to pass upon the first assignment of error because the
same is the basis of the second assignment of error, and the latter is devoid of
merit, even if we assumed the former to be well-taken. Indeed the second
assignment of error is predicated upon Articles 17, 18 and 19 of said Convention,
reading:
ART. 17. The carrier shall be liable for damages sustained in the event of
the death or wounding of a passenger or any other bodily injury suffered by
a passenger, if the accident which caused the damage so sustained took
place on board the aircraft or in the course of any of the operations of
embarking or disembarking.
ART. 18. (1) The carrier shall be liable for damage sustained in the event of
the destruction or loss of, or of damage to, any checked baggage, or any
goods, if the occurrence which caused the damage so sustained took place
during the transportation by air.
73
(2) The transportation by air within the meaning of the preceding
paragraph shall comprise the period during which the baggage or goods are
in charge of the carrier, whether in an airport or on board an aircraft, or, in
the case of a landing outside an airport, in any place whatsoever.
(3) The period of the transportation by air shall not extend to any
transportation by land, by sea, or by river performed outside an airport. If,
however, such transportation takes place in the performance of a contract
for transportation by air, for the purpose of loading, delivery, or
transhipment, any damage is presumed, subject to proof to the contrary, to
have been the result of an event which took place during the transportation
by air.
ART. 19. The carrier shall be liable for damage occasioned by delay in the
transportation by air of passengers, baggage, or goods.
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in
the event of death of a passenger or injury suffered by him, or of destruction or loss
of, or damage to any checked baggage or any goods, or of delay in the
transportation by air of passengers, baggage or goods. This pretense is not borne
out by the language of said Articles. The same merely declare the carrier liable for
damages in the enumerated cases, if the conditions therein specified are present.
Neither said provisions nor others in the aforementioned Convention regulate or
exclude liability for other breaches of contract by the carrier. Under petitioner's
theory, an air carrier would be exempt from any liability for damages in the event of
its absolute refusal, in bad faith, to comply with a contract of carriage, which is
absurd.
The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz.
4606), and Quijano vs. Philippine Air Lines (CA-G.R. No. 21804-R). Neither case is,
however, in point, aside from the fact that the latter is not controlling upon us. In the
first case, this Court eliminated a P10,000 award for nominal damages, because the
aggrieved party had already been awarded P6,000 as compensatory damages,
P30,000 as moral damages and P10,000 as exemplary damages, and "nominal
damages cannot co-exist with compensatory damages." In the case at bar, the Court
of Appeals has adjudicated no such compensatory, moral and exemplary damages
to respondent herein.
Moreover, there are special reasons why the P20,000.00 award in favor of
respondent herein is justified, even if said award were characterized as nominal
damages. When his contract of carriage was violated by the petitioner, respondent
held the office of Commissioner of Public Highways of the Republic of the Philippines.
Having boarded petitioner's plane in Manila with a first class ticket to Tokyo, he was,
upon arrival at Okinawa, transferred to the tourist class compartment. Although he
revealed that he was traveling in his official capacity as official delegate of the
Republic to a conference in Tokyo, an agent of petitioner rudely compelled him in the
 74

presence of other passengers to move, over his objection, to the tourist class, under
threat of otherwise leaving him in Okinawa. In order to reach the conference on
time, respondent had no choice but to obey.

It is true that said ticket was marked "W/L," but respondent's attention was not
called thereto. Much less was he advised that "W/L" meant "wait listed." Upon the
other hand, having paid the first class fare in full and having been given first class
accommodation as he took petitioner's plane in Manila, respondent was entitled to
believe that this was a confirmation of his first class reservation and that he would
keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not
tried to explain or even alleged that the person to whom respondent's first class seat
was given had a better right thereto. In other words, since the offense had been
committed with full knowledge of the fact that respondent was an official
representative of the Republic of the Philippines, the sum of P20,000 awarded as
damages may well be considered as merely nominal. At any rate, considering that
petitioner's agent had acted in a wanton, reckless and oppressive manner, said
award may also be considered as one for exemplary damages.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
petitioner. It is so ordered.

SECOND DIVISION
[G.R. No. 152143. January 13, 2003]
ROMEL P. ALMEDA, in substitution of the late PONCIANO L. ALMEDA and/or
ALMEDA, INC., petitioners, vs. LEONOR A. CARIO, the surviving
spouse, and his children, namely: ROSARIO C. SANTOS, REMEDIOS
C. GALSIM, RAMON A. CARIO, REGINALDO A. CARIO, RANIEELA C.
DIONELA and RACHELLE C. SAMANIEGO, in substitution of the late
AVELINO G. CARIO, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision, [1] dated February 12,
2002, of the Court of Appeals in CA-G.R. CV No. 57778, affirming the decision [2] of
the Regional Trial Court of Laguna, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff [Avelino G. Cario] and against the defendants [Ponciano L. Almeda and
Almeda, Inc.] as follows:
1. Ordering the latter to pay the former jointly and severally the amount
of P477,589.47 with a 12% rate of interest per annum as agreed upon from the date
of demand on March [9], 1983 until fully paid;
2. Ordering the latter to pay the former jointly and severally the amount
of P150,000.00 as nominal damages; and
3. Ordering the latter to pay the former jointly and severally the amount
of P15,000.00 as and for attorneys fees plus costs of this suit.
Plaintiffs claim for moral and exemplary damages is hereby dismissed for want of
merit.
SO ORDERED.[3]
The facts of the case are undisputed:
On April 30, 1980, Ponciano L. Almeda and Avelino G. Cario, predecessors-in-
interest of petitioners and respondents, entered into two agreements to sell, one
covering eight titled properties[4] and another three untitled properties,[5] all of which
are located in Bian, Laguna. The agreed price of the eight titled properties
75
was P1,743,800.00, 20% of which was to be paid upon the signing and execution of
the agreement and the balance to be paid in four equal semi-annual installments,
beginning six months from the signing thereof, with the balance earning 12%
interest per annum. On the other hand, the purchase price of the three untitled
properties was P1,208,580.00, 15% of which was to be paid upon the signing and
execution of the agreement, and the balance, bearing a 12% annual interest from
the signing thereof, to be paid as follows: 15% of the purchase price plus interest to
be paid upon the issuance of titles to the lots, and the balance plus interests to be
paid in semi-annual installments starting from the date of issuance of the respective
certificates of title to the lots involved, which must be not later than March 30, 1982.
On April 3, 1982, Cario and Almeda executed an amendment to their
agreements to sell (a) extending the deadline for the production of the titles to the
untitled properties from March 31, 1982 to June 30, 1982, (b) providing for a partial
payment of P300,000.00 for the titled properties, (c) requiring Cario to render an
accounting of the proceeds of the sugar cane crop on the properties subject of the
sale up to the 1982 harvest season and (d) obliging the vendor (Cario) to pay the
vendee (Almeda) the sum of P10,000.00 a month in case of the failure of the former
to produce the certificates of title to the untitled properties by June 30, 1982.
Before the end of April 1982, Almeda asked Cario for the execution of a Deed
of Absolute Sale over the eight titled properties although they had not been fully
paid. Cario granted the request and executed on May 3, 1982 the deed of sale over
the eight titled lots in favor of Almeda, Inc. [6] On April 30, 1982, Almeda executed an
undertaking[7] to pay Cario the balance of the purchase price. Deeds of sale for two
of the three untitled lots were also executed on July 2, 1982 and October 9, 1982. [8]
Subsequently, Cario made demands for the full and final payment of the
balance due him in the amount of P477,589.47 and the interests thereon. Despite
demand letters sent to Almeda on March 9, 1983 and on July 20, 1983, however, the
balance was not paid. Hence, Cario filed before the RTC of Bian a complaint against
Almeda and Almeda, Inc., in whose name the titles to the properties had been
transferred. Cario prayed that Almeda and/or Almeda, Inc. be ordered to pay to him
the balance of P477,589.47, the legal interests thereon from demand until full
payment, 15% of all the amounts due, including interests as attorneys
fees, P10,000.00 as litigation expenses, P100,000.00 as moral, exemplary and
nominal damages and the costs of suit.
Almeda and Almeda, Inc. contended that the purchase price, including interest
charges, of the eight titled properties had been fully paid as of April 3, 1982. With
respect to the three untitled lots, they contended that the purchase price of Lot Nos.
2272 and 2268-B had likewise been fully paid, while that of Lot No. 3109 had only a
remaining balance of P167,522.70.
The RTC of Bian, Laguna found the claim of Cario to be well founded and gave
judgment in his favor as quoted at the beginning of this opinion.

Without questioning the amount of judgment debt for which they were held
liable, Ponciano Almeda and Almeda, Inc. appealed to the Court of Appeals for a
modification of judgment, contending that the lower court erred in awarding nominal
damages and attorneys fees in favor of Cario and imposing a 12% annual interest on
the judgment debt from the time of demand on March 9, 1983 until it was fully
paid. They maintained that they were not guilty of any unfair treatment or reckless
and malevolent actions so as to justify an award of nominal damages.They claimed
that they refused to pay the remaining balance because the proceeds of certain
harvests from the lands in question and liquidated damages were also due them. As
for the award of attorneys fees, they contended that there was no finding that they
acted in gross and evident bad faith in refusing to satisfy Carios demand so as to
justify its award under Art. 2208 (5) of the Civil Code, because they had acted on the
basis of what they honestly believed to be correct as their residual
obligations. Finally, they contended that the imposition of a 12% interest rate was
contrary to law and jurisprudence since Cario sought payment of legal interest,
which, under Central Bank Circular No. 416, was only 6%.
During the pendency of the case, Almeda died. He was substituted by his heirs,
namely, his wife Eufemia P. Almeda and their children, Elenita A. Cervantes, Susan A.
Alcazar, Florecita A. Datoc, Laurence P. Almeda, Edwin P. Almeda, Marlon P. Almeda,
Wenilda A. Diaz, Carolyn A. Santos, Alan P. Almeda and Romel P. Almeda, the last
having been designated to act as their representative.[9]
The Court of Appeals affirmed the decision of the lower court. It held that the
award of nominal damages was justified by the unjust refusal of Almeda and
Almeda, Inc. to settle and pay the balance of the purchase price in violation of the
rights of Cario. The award of attorneys fees was also affirmed, it being shown that
Cario was forced to litigate to protect his interests. Finally, the appeals court also
affirmed the 12% interest rate per annum, as agreed upon by the parties in their
contracts, following Art. 2209 of the Civil Code. The appeals court also ruled that the
amount of the unpaid purchase price, P477,589.47, should be awarded to Cario,
considering the failure of Almeda and/or Almeda, Inc. to respond to the two demand
letters and the computation sheet sent to them by Cario, as well as their failure to
rebut the correctness of the outstanding balance before the lower court.
Hence, this petition for review on certiorari under Rule 45 filed by Romel P.
Almeda, based on the following assignment of errors:
I. THE COURT OF APPEALS ERRED IN AWARDING NOMINAL DAMAGES IN
THE AMOUNT OF P150,000.00.
II. THE COURT OF APPEALS ERRED IN AWARDING ATTORNEYS FEES IN THE
AMOUNT OF P15,000.00 IN FAVOR OF THE RESPONDENT.
III. THE COURT OF APPEALS ERRED IN ORDERING THE PETITIONER TO PAY
JOINTLY AND SEVERALLY THE AMOUNT OF P477,589.47 WITH A 12%
76
RATE OF INTEREST PER ANNUM FROM THE DATE OF DEMAND ON
MARCH [9], 1983 UNTIL FULLY PAID.[10]
In this appeal, petitioners do not dispute the amount of the outstanding
balance on the purchase price of the lots. Petitioners only seek a modification of the
decision of the appeals court insofar as it upheld the trial courts award of nominal
damages, attorneys fees, and 12% interest. We find their appeal to be without merit
and, accordingly, affirm the decision of the Court of Appeals.
First. Petitioners contend that the trial court erred in awarding nominal
damages in favor of respondents since there was no showing that they acted in an
unfair, reckless or malevolent manner so as to justify such an award.
Petitioners argument is based on a misreading of the decision in FNCB Finance
v. Estavillo.[11] Contrary to petitioners claim, this Court did not award nominal
damages to the respondent in that case because of petitioners reckless action,
malevolent manner and lack of regard to the feelings and reputation of the other
party. Such factors were cited in that case to justify the award of exemplary, not
nominal, damages.
Indeed, nominal damages may be awarded to a plaintiff whose right has been
violated or invaded by the defendant, for the purpose of vindicating or recognizing
that right, and not for indemnifying the plaintiff for any loss suffered by him. [12] Its
award is thus not for the purpose of indemnification for a loss but for the recognition
and vindication of a right.[13] Indeed, nominal damages are damages in name only
and not in fact. When granted by the courts, they are not treated as an equivalent of
a wrong inflicted but simply a recognition of the existence of a technical injury. [14] A
violation of the plaintiffs right, even if only technical, is sufficient to support an
award of nominal damages. Conversely, so long as there is a showing of a violation
of the right of the plaintiff, an award of nominal damages is proper.
Applying such principles to the instant case, we have on record the fact that
petitioners have an unpaid balance on the purchase price of lots sold to them by
respondents. Their refusal to pay the remaining balance of the purchase price
despite repeated demands, even after they had sold the properties to third parties,
undoubtedly constitutes a violation of respondents right to the said amount under
their agreements. The facts show that the right of the vendor to receive the unpaid
balance to the lots sold was violated by petitioners, and this entitles respondents at
the very least to nominal damages.
Second. Petitioners claim that the imposition of a 12% annual interest rate is
erroneous because it is contrary to law and jurisprudence. According to them, the
applicable rate is 6% since the case does not involve a loan or forbearance of
money.
 77

This contention is without merit. Art. 2209 of the Civil Code provides: SO ORDERED.

If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the absence of stipulation, the
legal interest, which is six per cent per annum.

The contracts to sell of the parties stipulated that the balance of the purchase
price shall earn an interest rate of 12% per annum upon signing of the
contract. Such stipulations have the force of law between the contracting parties
and should be complied with by them in good faith. [15] The interest in this case
should be allowed to run from March 9, 1993, respondents extrajudicial demand for
payment of the remaining balance plus interest having begun on said date. [16]

In addition, in accordance with our decision in Eastern Shipping Lines, Inc. v.

Court of Appeals,[17] when the judgment of the court awarding the sum of money
becomes final and executory, a 12% legal interest per annum shall also be imposed
from such finality until satisfaction thereof, this interim period being deemed to be
by then an equivalent to a forbearance of credit.

Third. Nor is there any basis for petitioners claim that the appellate court erred
in awarding attorneys fees in favor of respondents. Under the Civil Code, attorneys
fees and litigation expenses can be recovered in cases where the court deems it just
and equitable.[18] We see no reason therefore to set aside the order of the trial court,
as affirmed by the appeals court, granting to respondents attorneys fees in the
amount of P15,000.00.

Fourth. We observe that this case has dragged on for more than a
decade. While the records reveal that respondents engaged the services of two
lawyers, petitioners had a total of sixteen counsels starting from January 24, 1984
up to December 22, 1997. Of the sixteen, one lawyer served for more than 2 years,
another for 8 days only, and still another entered his appearance and withdrew it
only to re-enter his appearance after some time. The records show that most of the
lawyers who entered their appearances either filed only motions to cancel hearings
or motions for postponements, claiming to have misplaced the calendar of court
hearings or to be staying abroad. These unduly delayed the disposition of the case
in violation of the right of respondents to claim what is rightfully due them. This fact
further justifies the award of nominal damages and supports the grant of attorneys
fees.

WHEREFORE, the petition for review on certiorari is DENIED and the decision
of the Court of Appeals is AFFIRMED. Interest at the rate of twelve percent (12%)
shall be imposed on the amount due upon finality of this decision until payment
thereof.

SECOND DIVISION
[G.R. No. 143384. February 4, 2005]
DR. ERNESTO I. MAQUILING, petitioner, vs. PHILIPPINE TUBERCULOSIS
SOCIETY, INC., respondent.
DECISION
TINGA, J.:
Before this Court is a Petition for Review on Certiorari of the Decision[1] of the
Court of Appeals dated 28 March 2000 and its Resolution dated 22 May 2000, which
reversed the decision of the National Labor Relations Commission (NLRC) dated 15
December 1997[2] and that of the Labor Arbiter dated 16 September 1993, [3] which
both found the dismissal from service of Dr. Ernesto I. Maquiling (Dr. Maquiling)
illegal.
The factual antecedents are as follows:
On 16 April 1968, petitioner Dr. Maquiling was employed by respondent
Philippine Tuberculosis Society, Inc. (PTS). On 8 June 1991, Dr. Maquiling, then
earning a monthly salary of thirteen thousand nine hundred pesos (P13,900.00) was
dismissed from service as Deputy Executive Director after serving PTS for twenty-
three (23) years. Dr. Maquiling filed a complaint against PTS for reinstatement or, in
the alternative, for payment of full backwages and separation pay in accordance
with Article 279 of the Labor Code, as well as moral damages in the amount of five
hundred thousand pesos (P500,000.00) and exemplary damages in the amount of
one hundred thousand pesos (P100,000.00).[4]
The complaint was assigned to Labor Arbiter Salimathar V. Nambi. After PTS
failed to appear despite having requested for several postponements, Dr. Maquiling
was allowed to present his evidence ex parte consisting of his testimony on direct
examination and documentary proof. On 31 August 1992, Dr. Maquiling moved for
submission of the case for resolution, which motion was granted.[5]
The records disclose that Dr. Maquiling received a memo dated 2 April 1991
from the PTS OIC-Executive Director Andres B. Soriano (Soriano) directing him to
submit within five (5) days from notice a written explanation on the following
matters:
1. The delayed GSIS remittances;
2. The reported deficit of P7.3 million appearing in our financial
statement for 1990;
78
3. The expenses you approved and incurred in connection with the
Dale Carnegie and Silva Mind Control Seminar;
4. The P3.7 million miscellaneous expenses appearing in our
financial statement; and
5. Your reasons for renewing our service contract with Ultra. [6]
Dr. Maquiling submitted his explanatory letter dated 11 April 1991 inviting
attention to PTS Finance Managers Report. On 15 April 1991, Dr. Maquiling had a
thirty (30) minute conversation with Soriano at the latters instance. No further
related proceedings were undertaken before Dr. Maquiling received a letter-notice
dated 8 June 1991 informing him that the PTS Executive Committee approved
Sorianos findings and recommendations calling for his dismissal effective
immediately, without any retirement benefits. [7]
Despite Sorianos instruction for him not to report for work, Dr. Maquiling
manifested, through a letter to the OIC-Executive Director, his intention to continue
performing his duties as Deputy Executive Director. Dr. Maquiling continued to report
for work at the PTS daily. In the meantime, he elevated his case to the PTS Board of
Directors through a memorandum dated 28 June 1991 which sought to point out the
illegality of his dismissal from office and prayed for a resolution upholding his
position.[8]
On 17 July 1991, Dr. Maquiling, protesting non-payment of his salary for the
period of 15 July 1991, wrote the OIC Finance Department and formally demanded
the release of his earned wages. PTS reacted through Soriano by informing Dr.
Maquiling that there are no wages forthcoming inasmuch as the latters service had
been terminated for cause since 7 June 1991.[9]
In an effort to exhaust the remedies within PTS, Dr. Maquiling wrote the
President of PTS a letter dated 5 August 1991 saying, among others: my counsels
agree with me that if your Board does not act on my 28 June 1991 Memorandum
within fifteen (15) days from receipt of this letter, such omission will mean a
confirmation of Sorianos notice of my alleged termination from the service a
dismissal which is referable to the proper outside forum. [10]
Receiving no response from the PTS, Dr. Maquiling stopped reporting for work
at the PTS in the last week of September 1991. Then, on 10 October 1991, Dr.
Maquiling filed his complaint with the Labor Arbiter.
After considering the evidence adduced by the parties, the Labor Arbiter
rendered a decision ordering PTS to immediately reinstate Dr. Maquiling to the
position of Deputy Executive Director or its equivalent in rank and pay, without loss
of seniority rights inclusive of all benefits attached to said position at the time of his

dismissal, and to pay Dr. Maquiling backwages computed from the time of his
dismissal on 7 June 1991 until his actual reinstatement but not to exceed three (3)
years at the rate of thirteen thousand nine hundred pesos (P13,900.00) per month
or three hundred seventy-eight thousand seven hundred seventy-five pesos
(P378,775.00).[11] He likewise ordered PTS to pay Dr. Maquiling five hundred
thousand pesos (P500,000.00) as moral damages and one hundred thousand pesos
(P100,000.00) as exemplary damages and to pay attorneys fees equivalent to ten
(10%) percent of the total amount due the complainant.
Upon appeal by PTS to the NLRC, the Commission upheld the decision of the
labor arbiter and dismissed the appeal. [12] However, PTS appealed the decision to the
Court of Appeals which reversed the decisions of the NLRC and Labor Arbiter by
ordering the dismissal of the complaint and declaring that his dismissal from
employment as legal and valid. It, however, ordered PTS to pay Dr. Maquiling the
amount of ten thousand pesos (P10,000.00) as damages or indemnity for violation of
his right to procedural due process and separation pay in the amount of one
hundred fifty-nine thousand eight hundred fifty pesos (P159,850.00) in the interest
of social justice.[13] Hence, this petition for review on certiorari.
Dr. Maquiling argues that the appellate court should have applied the case
of Serrano v. NLRC[14] which was decided on 27 January 2000 since the assailed
decision of the appellate court was promulgated subsequently on 28 March 2000. He
avers that PTS must pay him full backwages from the time his employment was
terminated on 7 June 1991 up to the time the decision becomes final. [15] In addition
to backwages, he also prays that he be awarded separation pay for every year of
service, at the rate of one month pay for every year of service, [16]as well as
thirteenth month pay, sick leave and vacation leave and all monetary benefits
including moral damages and attorneys fees. [17] Further, Dr. Maquiling points out that
the appellate court gravely abused its discretion by changing the rules on pleadings
before the administrative body since it considered the position paper of PTS though
unverified.[18] PTS should have considered the twenty-three (23) years of service of
petitioner[19] and should not have ruled that the dismissal from service of Dr.
Maquiling was for just cause. [20] He further contends that the appellate court did not
show any degree of clarity of causal connection between Dr. Maquilings acts and the
supposed damage to PTS.[21]
Moreover, Dr. Maquiling raised in his petition that the appellate court, which
agreed with the findings of the labor arbiter and the NLRC that the twin
requirements of notice and hearing are wanting, erred in adopting an abandoned
doctrine by merely imposing a fine of ten thousand pesos (P10,000.00) against PTS
and in disregarding the present doctrine on termination of employment and
monetary benefits accorded by law to Dr. Maquiling, and in concluding with grave
abuse of discretion that the dismissal of Dr. Maquiling, who had served PTS for
twenty-three (23) years, was for just cause.[22]
79
In its Comment[23] dated 9 October 2000, PTS contends that the dismissal of Dr.
Maquiling was based on a just cause, supported as it was by the evidence, law and
jurisprudence. The termination of Dr. Maquilings employment was allegedly due to
loss of trust and confidence. [24] It avers that for gross mismanagement, for acts
inimical to the interest of PTS, and also for reason that PTS has lost its trust and
confidence in him, PTS terminated his services without any retirement benefit. [25]
PTS, however, alleges that it complied with the two-notice rule required for
termination of employment. According to PTS, the first notice was sent by Soriano to
Dr. Maquiling by means of confidential memorandum [26] dated 2 April 1991 requiring
him to explain in writing, within five days from notice, the matters stated therein. Dr.
Maquiling honored the first notice by submitting on 11 April 1991 a written reply to
Soriano. The second notice which allegedly informed Dr. Maquiling of the decision to
terminate his employment, stating reasons therefor, was sent to him by Soriano on 8
June 1991.[27]
A review of the factual milieu of the instant labor controversy and the
jurisprudence on the subject leads us to modify the assailed decision of the
appellate court.
We agree with the appellate court that Dr. Maquiling was dismissed from
employment for just cause consisting of loss of trust and confidence. The records
reveal that he was Deputy Executive Director of PTS, a responsible position, at the
time of his dismissal. The following defines the extent of the power and
responsibility attached to the position he occupied:
1. Directs, supervises, coordinates, and controls the general
administrative, finance and regional operations of PTS.
2. Formulates and executes plans and policies for operations activities
under his charge.
3. Signs corresponden[ce] and other documents relative to operational
activities under his charge, within specified limits.
4. Authorizes the hiring, promotion, transfer and termination of all PTS
personnel below the supervisory level in accordance with the policies
prescribed by the Board of Directors.
5. Reports regularly to the Executive Director on the individual operations
and activities of departments and branches under his charge.
6. Executes and administers directives issued by the Executive Director.

7. Assists the Executive Director in the preparation of the [annual] budget
and operational plan of the Society.
8. Prepares and submits reports required by the Board of Directors,
government entities and other interested parties.
9. Performs related functions as may be assigned by the Executive
Director.[28]
PTS imputes the delayed GSIS remittances to Dr. Maquilings failure to follow his
duties as prescribed by law. The records disclose that Dr. Maquiling was aware of the
problem but he failed to give priority thereto. This non-remittance was partially
brought about by a Guideline on the Releasing of Checks he issued, which placed
the GSIS account as a last priority. [29] The security of workers compensation was
undermined by his act which patently transgressed the constitutional injunction that
workers should be afforded full protection in their employment. Subsumed in said
mandate is the protection of the right to workmens compensation to which a lowly
worker may be entitled. To rule otherwise would frustrate the policy that the State
shall promote and develop a tax-exempt employees compensation program whereby
employees and their dependents, in the event of work-connected disability or death,
may promptly secure adequate income benefit, and medical or related benefits. [30]
On the other hand, we are inclined to attribute the P7.3 million deficit in PTS
1990 financial statements to Dr. Maquilings failure to consider the realities of the
financial condition of the institution. Dr. Maquiling even aggravated such omission
by insisting on the salary increase of both managerial and non-managerial personnel
despite the financial conundrum that puzzles the future fiscal stability of PTS. The
records show that he made representations during the Board meeting that sufficient
funds existed to meet the salary upgrading despite the presence of financial strains.
[31]
Such a course of action falls short of his responsibility to safeguard the financial
stability of the institution he leads. Said responsibility cannot be outweighed by any
magnanimous motive for the institutional existence will be rendered illusory if the
very foundation of its financial stability will be ignored. We are solicitous of the
primordial goal sought to be achieved by Dr. Maquiling but the wisdom of the timing
is questionable.
The renewal of the Ultra Clean contract with the PTS for janitorial services also
evinces a bad managerial move on the part of Dr. Maquiling. By reason of the
contract, PTS was dragged into a labor controversy for illegal dismissal which
eventually made it liable for backwages and differentials to employees of Ultra
Clean.[32] Worse is the renewal of the said contract despite the unsatisfactory
performance of Ultra Clean without the approval of the Board or the Executive
Committee or any subsequent request for its ratification. The unnecessary
expending of funds in the administration and operation of PTS is evidently an act of
mismanagement which could bring PTS to severe financial distress. These acts if
committed by a responsible officer wither the trust and confidence lodged in him by
80
his superior and may serve as a valid and sufficient basis to impose disciplinary
sanctions to an erring employee which may even result to dismissal from
employment if the gravity of the offense warrants as in the instant case.
Recent decisions of this Court distinguish the treatment of managerial from
that of rank-and-file personnel insofar as the application of the doctrine of loss of
trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss
of trust and confidence as ground for valid dismissal requires proof of involvement in
the alleged events in question and that mere uncorroborated assertions and
accusations by the employer will not suffice.[33] But as regards a managerial
employee, mere existence of a basis for believing that such employee has breached
the trust of his employer would suffice for his dismissal. [34]
After careful perusal of the factual backdrop of the case, we rule that Dr.
Maquiling was indeed validly dismissed for just cause. However, PTS was remiss in
its duty to observe procedural due process in effecting the dismissal of Dr.
Maquiling.
Under this second requirement, two notices must be sent to the employee who
is the subject of an investigation for acts which may warrant his eventual dismissal
from employment. The notices required before an employee may be validly
dismissed are: (a) a written notice served on the employee specifying the
grounds for termination and giving the employee reasonable opportunity
to explain his/her side; (b) a hearing or conference wherein the employee, with
the assistance of counsel if so desired, is given opportunity to respond to the charge,
present his evidence or rebut evidence presented against him/her; and (c) written
notice of termination served on the employee indicating that upon due consideration
of all the circumstances, grounds have been established to justify termination.
[35]
The twin requirements of notice and hearing constitute elements of due process
in cases of employees dismissal;the requirement of notice is intended to
inform the employee concerned of the employers intent to dismiss and the
reason for the proposed dismissal; upon the other hand the requirement of
hearing affords the employee an opportunity to answer his employers charges
against him and accordingly to defend himself therefrom before dismissal is
effected.[36]
Clearly, the first notice must inform outright the employee that an investigation
will be conducted on the charges particularized therein which, if proven, will result to
his dismissal. Such notice must not only contain a plain statement of the charges of
malfeasance or misfeasance but must categorically state the effect on his
employment if the charges are proven to be true.
This notice will afford the employee an opportunity to avail all defenses and
exhaust all remedies to refute the allegations hurled against him for what is at stake
is his very life and limb his employment. Otherwise, the employee may just
disregard the notice as a warning without any disastrous consequence to be

anticipated. Absent such statement, the first notice falls short of the requirement of
due process. Ones work is everything, thus, it is not too exacting to impose this
strict requirement on the part of the employer before the dismissal process be
validly effected. This is in consonance with the rule that all doubts in the
implementation and interpretation of the provisions of the Labor Code, including its
implementing rules and regulations, shall be resolved in favor of labor. [37]
It is worthy to note that the Labor Arbiter, the NLRC and the Court of Appeals
all agree in concluding that procedural due process in the instant case was not
observed. As revealed by the evidence on record, a confidential memorandum FN
dated 2 April 1991 was sent to Dr. Maquiling by Soriano requiring him to explain in
writing the matters contained therein. The text of the memorandum reads as
follows:
02 April 1991
CONFIDENTIAL MEMORANDUM FOR: DR. ERNESTO I. MAQUILING
Pursuant to the directive of the Board of Directors issued in its
meeting on March 25, 1991, you are hereby instructed to report and
explain in writing to this office, within five (5) days from notice hereof, on
the following matters:
1. The delayed GSIS remittances;
2. The reported deficit of P7.3 million appearing in our
financial statement for 1990;
3. The expenses you approved and incurred in connection
with the Dale Carnegie and Silva Mind Control Seminar;
4. The P3.7 million miscellaneous expenses appearing in
our financial statement; and
5. Your reasons for renewing our service contract with
Ultra.
For immediate compliance.
(SGD.) ATTY. ANDRES B. SORIANO
OIC-Executive Director
81
On 11 April 1991, Dr. Maquiling submitted his written reply. The second notice
which informs Dr. Maquiling of the decision to terminate his employment was sent to
him on 8 June 1991. It must be noted that the first notice dated 2 April 1991 is a
mere instruction to explain the matters enumerated therein. It did not apprise Dr.
Maquiling of any investigation to be conducted or being conducted that will warrant
his dismissal from service if found guilty of charges specified therein. Thus, such
notice fell short of the requirement of law that an employee must be afforded the
benefit of the two-notice rule in dismissal cases that will allow the employee to
substantiate the charges specified in the notice with full knowledge at the outset
that the investigation to be conducted may result in his dismissal or suspension from
employment.
Dr. Maquiling invokes our ruling in Serrano as basis for appropriate relief.
The Serrano ruling awarded full backwages and separation pay to the employee who
was dismissed for just cause but without the observance of the procedural due
process requirement. However, in Agabon v. NLRC,[38] this Court modified
the Serrano ruling and awarded nominal damages in the amount of thirty thousand
pesos (P30,000.00) including holiday pay, service incentive leave and thirteenth
month pay to the petitioners in the said case. This case clarified the criticisms and
answered the questions created by the Serrano ruling.
The Agabon doctrine enunciates the rule that if the dismissal is for just cause
but statutory due process was not observed, the dismissal should be upheld. While
the procedural infirmity cannot be cured, it should not invalidate the dismissal.
However, the employer should be held liable for non-compliance with the procedural
requirements of due process.[39]
Where the dismissal is for just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the violation
of his statutory rights. The indemnity to be imposed should be stiffer to discourage
the abhorrent practice of dismiss now, pay later, which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer. [40]
The violation of the petitioners right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal damages. The
amount of such damages is addressed to the sound discretion of the court, taking
into account the relevant circumstances. [41] Considering the prevailing circumstances
in the case at bar, we deem it proper to fix it at thirty thousand pesos (P30,000.00).
We believe this form of damages would serve to deter employers from future
violations of the statutory due process rights of employees. At the very least, it
provides a vindication or recognition of this right granted to employees under the
Labor Code and its Implementing Rules.[42]
 82

It may be also argued that actual or compensatory damages may be recovered SO ORDERED.
in employment termination cases. Actual or compensatory damages are not
available as a matter of right to an employee dismissed for just cause but denied
statutory due process. The award must be based on clear factual and legal bases
and correspond to such pecuniary loss suffered by the employee as duly proven.
Evidently, there is less degree of discretion to award actual or compensatory
damages.

In the instant case, the records fail to show that Dr. Maquiling suffered
pecuniary loss by reason of his dismissal from service. It must be noted that he was
dismissed for just cause but the procedural aspect of dismissal was not complied
with. Such non-compliance did not automatically result to any pecuniary loss. Any
such loss must be proved by Dr. Maquiling to be entitled to an award for actual
damages. Besides, the two-notice rule was not at all disregarded although it was
observed defectively by PTS. Thus, actual damages may not be awarded.

Neither will an award for moral damages nor exemplary damages prosper. The
instant controversy fails to show that the dismissal of the employee was attended by
bad faith, fraud, or was done in a manner contrary to morals, good customs or public
policy, or that the employer committed an act oppressive to labor to warrant an
award for moral damages. Exemplary damages may avail if the dismissal was
effected in a wanton, oppressive or malevolent manner to warrant an award for
exemplary damages. Hence, Dr. Maquiling shall only be entitled to an award for
nominal damages.

On the other hand, Dr. Maquiling argues that PTS should have considered his
twenty-three (23) years of service in the institution before he was dismissed from
service. Such ratiocination is not quite convincing. The jurisprudential law [43] is not
bereft of cases which disregarded length of service of an employee for breach of
trust and confidence. Although length of service may be considered in reaching a
decision in employment termination cases, the same alone is not controlling for
other considerations must be taken into account such as the nature of the position
he was holding, performance of an employee, quality of work, character and work
attitude. Worth stressing is the fact that Dr. Maquiling is holding a managerial
position being a Deputy Executive Director. Hence, trust and confidence is an
essential factor in determining his eligibility to continue holding his position. The
crucial nature of his position in PTS is exacting as to such qualification which cannot
be outweighed by any length of service he earned.

WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals

dated 28 March 2000 is hereby MODIFIED pursuant to the Agabon ruling as the
latest jurisprudential rule on the matter. For the dismissal from employment of Dr.
Maquiling with a just cause but without observing procedural due process, PTS is
ORDERED to pay Dr. Maquiling nominal damages in the amount of thirty thousand
pesos (P30,000.00). No costs.
 83

CLARION PRINTING HOUSE, INC vs NLRC Case Digest CLARION, together with the other member-companies of the EYCO Group of
Companies, was suffering business reverses justifying, among other things, the
CLARION PRINTING HOUSE, INC vs. NATIONAL LABOR RELATIONS retrenchment of its employees.
COMMISSION
461 SCRA 272 (2005)

FACTS:

Clarion Printing House (Clarion), a company owned by EYCO Group of Companies

(EYCO) hired Michelle Miclat (Miclat) as marketing assistant on a probationary basis.
During that time, she was not informed of the standards that she should meet to
qualify as a regular employee.

EYCO subsequently filed a petition for petition for suspension of payment as well as
an appointment of a rehabilitation receivership committee before SEC on the ground
that they are suffering financial difficulty. Pursuant to this, a retrenchment occurred,
thus terminating Miclat.

Conversely, Miclat filed a complaint for illegal dismissal before the NLRC. Miclat
contends that assuming her termination is necessary, it was not done in a proper
manner; there was no notice that was given to her. On the other hand, Clarion
contends that they are not liable for retrenching some employees because EYCO is
being placed under receivership, and a memorandum was given to employees,
hence they substantially complied with the notice requirement. NLRC rendered its
decision in favor of Miclat and found that she was illegally dismissed. On appeal, the
Court of Appeals held that Clarion failed to prove its ground for retrenchment as well
as compliance with the mandated procedure. It further ruled that Miclat should be
reinstated and paid backwages. Hence, this petition.

Issue: Whether or not Miclat was illegally dismissed

Held:

It is likewise well-settled that for retrenchment to be justified, any claim of actual or

potential business losses must satisfy the following standards: (1) the losses are
substantial and not de minimis; (2) the losses are actual or reasonably imminent; (3)
the retrenchment is reasonably necessary and is likely to be effective in preventing
expected losses; and (4) the alleged losses, if already incurred, or the expected
imminent losses sought to be forestalled, are proven by sufficient and convincing
evidence.

From the provisions of P.D. No. 902-A, as amended, the appointment of a receiver or
management committee by the SEC presupposes a finding that, inter alia, a
company possesses sufficient property to cover all its debts but "foresees the
impossibility of meeting them when they respectively fall due" and "there is
imminent danger of dissipation, loss, wastage or destruction of assets of other
properties or paralization of business operations."

That the SEC, mandated by law to have regulatory functions over corporations,
partnerships or associations, appointed an interim receiver for the EYCO Group of
Companies on its petition in light of, as quoted above, the therein enumerated
"factors beyond the control and anticipation of the management" rendering it unable
to meet its obligation as they fall due, and thus resulting to "complications and
problems . . . to arise that would impair and affect [its] operations . . ." shows that
 84

EN BANC
G.R. No. L-17681 February 26, 1965
MINDANAO ACADEMY, INC., MAURICIO O. BAS, ERLINDA D. DIAZ,
accompanied by her husband ANTOLIN DIAZ, ESTER AIDA D. BAS,
accompanied by her husband MAURICIO O. BAS, ROSALINDA D. BELLEZA,
accompanied by her husband APOLINARIO BELLEZA, LUZ MINDA D. DAJAO,
accompanied by her husband ELIGIO C. DAJAO, ADELAIDA D. NUESA,
accompanied by her husband WILSON NUESA, PEDRO N. ABUTON, SY
PAOCO, JOSEFA DIGNUM, and PERFECTO VELASQUEZ, plaintiffs-appellees,
vs.
ILDEFONSO D. YAP, ROSENDA A. DE NUQUI, and SOTERO A. DIONISIO,
JR., defendants,
ILDEFONSO D. YAP, defendant-appellant.
First Instance of Misamis Occidental. The first was for annulment of the sale and
recovery of rents and damages (Civil Case No. 1774, filed May 3, 1955) with the
Mindanao Academy, Inc., the five children of Rosenda Nuqui who did not take part in
the deed of sale, and several other persons who were stockholders of the said
corporation, as plaintiffs, and the parties who signed the deed of sale as defendants.
The second action was for rescission (Civil Case No. 1907, filed July 17, 1956) with
Rosenda Nuqui, Sotero Dionisio, Jr. and Erlinda D. Diaz (and the latter's husband
Antolin Diaz) as plaintiffs, and Ildefonso D. Yap as lone defendant. The other four
children of Rosenda did not join, having previously ceded and quitclaimed their
shares in the litigated properties in favor of their sister Erlinda D. Diaz.
The two actions were tried jointly and on March 31, 1960 the court a quo rendered
judgment as follows:
In both Cases

MAKALINTAL, J.: (1) The Mutual Agreement is hereby declared null and void ab initio;

By deed entitled "Mutual Agreement," executed on May 10, 1964, Rosenda A. de (2) Defendant Ildefonso D. Yap is hereby ordered to pay the costs of the
Nuqui (widow of deceased Sotero Dionisio) and her son Sotero Dionisio, Jr. sold three proceedings in both cases.
parcels of residential land in Oroquieta, Misamis Occidental, and another parcel in
Ozamis City in favor of Ildefonso D. Yap. Included in the sale were certain buildings In Civil Case No. 1907 only
situated on said lands as well as laboratory equipment, books, furniture and fixtures
used by two schools established in the respective properties, the Mindanao Academy
(1) Defendant Ildefonso D. Yap is hereby ordered to restore to the plaintiffs
in Oroquieta and the Misamis Academy in Ozamis City. The aggregate price stated in
in said case all the buildings and grounds described in the Mutual
the deed was P100,700.00, to be paid according to the terms and conditions
Agreement together with all the permanent improvements thereon;
specified in the contract.

(2) To pay to the plaintiffs therein the amount of P300.00 monthly from July
Besides Rosenda and her son Sotero, Jr., both of whom signed the instrument,
31, 1956 up to the time he shall have surrendered the properties in
Adelaida Dionisio-Nuesa (a daughter of Rosenda) is also named therein as co-
question to the plaintiffs herein, plus P1,000.00 as attorney's fees to
vendor, but actually did not take part either personally or through her uncle and
plaintiffs Antolin and Erlinda D. Diaz.
supposed attorney-in-fact, Restituto Abuton.

In Civil Case No. 1774 only

These three Rosenda and her two children above named are referred to in the
deed as the owners pro-indiviso of the properties sold. The truth, however, was that
there were other co-owners of the lands, namely, Erlinda D. Diaz, Ester Aida D. Bas, (1) Defendant Ildefonso D. Yap is hereby ordered to restore to the Mindanao
Rosalinda D. Belleza, and Luz Minda D. Dajao, children also of Rosenda by her Academy, Inc., all the books laboratory apparatus, furniture and other
deceased husband Sotero Dionisio, Sr., and that as far as the school building, equipments described in the Mutual Agreement and specified in the
equipment, books, furniture and fixtures were concerned, they were owned by the inventory attached to the Records of this case; or in default thereof, their
Mindanao Academy, Inc., a corporation operating both the Mindanao Academy in value in the amount of P23,500.00;
Oroquieta and the Misamis Academy in Ozamis City.
(2) To return all the Records of the Mindanao Academy and Misamis
The buyer, Ildefonso D. Yap, obtained possession of the properties by virtue of the Academy;
sale, took over the operation of the two schools and even changed their names to
Harvardian Colleges. In view thereof two actions were commenced in the Court of

(3) To pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the
amount of P10,000.00 as nominal damages, P3,000.00 as exemplary
damages; and P2,000.00 as attorney's fees. These damages shall be
apportioned to each of the stockholders named as plaintiffs in said case in
proportion to their respective interests in the corporation.
Ildefonso D. Yap appealed from the foregoing judgment and has assigned five errors
therein.
I. He first contends that the lower court erred "in declaring that the mutual
agreement dated May 10, 1954 ... is entirely void and legally non-existent in that the
vendors therein ceded to defendant-appellant not only their interests, rights, shares
and participation in the property sold but also those that belonged to persons who
were not parties thereto."
The lower court did not rule categorically on the question of rescission considering it
unnecessary to do so in view of its conclusion that the contract of sale is null and
void. This conclusion is premised on two grounds: (a) the contract purported to sell
properties of which the sellers were not the only owners, since of the four parcels of
land mentioned in the deed their shares consisted only of 7/12, (6/12 for Rosenda
Nuqui and 1/12 for Sotero, Jr.), while in the buildings, laboratory equipment, books,
furniture and fixtures they had no participation at all, the owner being the Mindanao
Academy, Inc.; and (b) the prestation involved in the sale was indivisible, and
therefore incapable of partial annulment, inasmuch as the buyer Yap, by his own
admission, would not have entered into the transaction except to acquire all of the
properties purchased by him.
These premises are not challenged by appellant. But he calls attention to one point,
namely, that the four children of Rosenda Nuqui who did not take part in the sale,
besides Erlinda Dionisio Diaz, quitclaimed in favor of the latter their interests in the
properties; and that the trial court held that Erlinda as well as her husband acted in
bad faith, because "having reasonable notice of defendants' having unlawfully taken
possession of the property, they failed to make reasonable demands for (him) to
vacate the premises to respect their rights thereto." It is argued that being herself
guilty of bad faith, Erlinda D. Diaz, as owner of 5/12 undivided interest in the
properties (including the 4/12 ceded to her by her four sisters), is in no position to
ask for annulment of the sale.
The argument does not convince us. In the first place the quitclaim, in the form of an
extrajudicial partition, was made on May 6, 1956, after the action for annulment was
filed, wherein the plaintiffs were not only Erlinda but also the other co-owners who
took no part in the sale and to whom there has been no imputation of bad faith.
Secondly, the trial court's finding of bad faith is an erroneous conclusion induced by
a manifest oversight of an undisputed fact, namely, that on July 10, 1954, just a
month after the deed of sale in question, Erlinda D. Diaz did file an action against
Ildefonso D. Yap and Rosenda Nuqui, among others, asserting her rights as co-owner
85
of the properties (Case No. 1646). Finally, bad faith on the part of Erlinda would not
militate against the nullity of the sale, considering that it included not only the lands
owned in common by Rosenda Nuqui and her six children but also the buildings and
school facilities owned by the Mindanao Academy, Inc., an entity which had nothing
to do with the transaction and which could be represented solely by its Board of
Trustees.
The first assignment of error is therefore without merit.
II. The second and third errors are discussed jointly in appellant's brief. They read as
follows:
THE LOWER COURT ERRED IN HOLDING DEFENDANT-APPELLANT LIABLE
FOR RENTS AND ATTORNEY'S FEES IN THE SUM OF P1,000.00 AFTER
DECLARING THAT ALL THE PLAINTIFFS-APPELLEES IN CIVIL CASE NO. 1907
ACTED IN BAD FAITH.
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS-APPELLEES IN
SAID CIVIL CASE NO. 1907 ARE ENTITLED TO RECOVER ALL THE LANDS,
BUILDINGS AND OTHER PERMANENT IMPROVEMENTS DESCRIBED IN THE
MUTUAL AGREEMENT DATED MAY 10, 1954.
The lower court correctly found that both vendors and vendee in the sale acted in
bad faith and therefore must be treated, vis-a-vis each other, as having acted in
good faith. The return of the properties by the vendee is a necessary consequence
of the decree of annulment. No part of the purchase price having been paid, as far
as the record shows, the trial court correctly made no corresponding order for the
restitution thereof.
In regard to the rents the trial court found that prior to the sale the Mindanao
Academy, Inc., was paying P300.00 monthly for its occupancy of the lands on which
the buildings are situated. This is the amount the defendant has been ordered to pay
to the plaintiffs in Civil Case No. 1907, beginning July 31, 1956, when he filed his
"first pleading" in the case. There can be no doubt that Erlinda D. Diaz is entitled to
recover a share of the said rents in proportion to her own interests in the lands and
the interest in the four co-owners which she had acquired. Rosenda Nuqui and her
son Sotero, it is true, acted in bad faith when they sold the properties as theirs
alone, but so did the defendant Yap when he purchased them with knowledge of the
fact that there were other co-owners. Although the bad faith of one party neutralizes
that of the other and hence as between themselves their rights would be as if both
of them had acted in good faith at the time of the transaction, this legal fiction of
Yap's good faith ceased when the complaint against him was filed, and consequently
the court's declaration of liability for the rents thereafter is correct and proper. A
possessor in good faith is entitled to the fruits only so long as his possession is not
legally interrupted, and such interruption takes place upon service of judicial
summons (Arts. 544 and 1123, Civil Code).

In our opinion the award of attorney's fees to Erlinda D. Diaz and her husband is
erroneous. Civil Case No. 1907, in which said fees have been adjudged, is for
rescission (more properly resolution) of the so-called "mutual agreement" on the
ground that the defendant Yap failed to comply with certain undertakings specified
therein relative to the payment of the purchase price. Erlinda Diaz was not a party to
that agreement and hence had no cause of action for rescission.
And as already stated, the trial court did not decide the matter of rescission because
of the decree of annulment it rendered in the other case (Civil Case No. 1774),
wherein the defendants are not only Ildefonso D. Yap but also Rosenda Nuqui and
her son Sotero. Erlinda D. Diaz could just as well have refrained from joining as
plaintiff in the action for rescission, not being a party to the contract sought to be
rescission and being already one of the plaintiffs in the other action. In other words,
it cannot be said with justification that she was constrained to litigate, in Civil Case
No. 1907, because of some cause attributable to the appellant.
The appellant claims reimbursement for the value of the improvements he allegedly
introduced in the schools, consisting of a new building worth P8,000.00 and a toilet
costing P800.00, besides laboratory equipment, furniture, fixtures and books for the
libraries. It should be noted that the judgment of the trial court specifies, for delivery
to the plaintiffs (in Civil Case No. 1907), only "the buildings and grounds described
in the mutual agreement together with all the permanent improvements thereon." If
the defendant constructed a new building, as he alleges, he cannot recover its value
because the construction was done after the filing of the action for annulment, thus
rendering him a builder in bad faith who is denied by law any right of
reimbursement.
In connection with the equipment, books, furniture and fixtures brought in by him,
he is not entitled to reimbursement either, because the judgment does not award
them to any of the plaintiffs in these two actions. What is adjudged (in Civil Case No.
1774) is for the defendant to restore to the Mindanao Academy, Inc. all the books,
laboratory apparatus, furniture and other equipment "described in the Mutual
Agreement and specified in the Inventory attached to the records of this case; or in
default thereof, their value in the amount of P23,500.00." In other words, whatever
has been brought in by the defendant is outside the scope of the judgment and may
be retained by him.
III. The appellant's fourth assignment of error refers to the nominal and exemplary
damages, as well as the attorney's fees, granted to the stockholders of the
Mindanao Academy, Inc. The trial court awarded no compensatory damages
because the Mindanao Academy, Inc. had been operating the two schools at a loss
before the sale in question, and the defendant himself was no more successful after
he took over. Are the stockholders of the said corporation who joined as plaintiffs in
Civil Case No. 1774 entitled to nominal and exemplary damages? We do not believe
so.
86
According to their second amended complaint they were joined merely pro forma,
and "for the sole purpose of the moral damage which has been all the time alleged
in the original complaint." Indeed the interests of the said stockholders, if any, were
already represented by the corporation itself, which was the proper party plaintiff;
and no cause of action accruing to them separately from the corporation is alleged
in the complaint, other than that for moral damages due to "extreme mental
anguish, serious anxiety and wounded feelings." The trial court, however, ruled out
this claim for moral damages and no appeal from such ruling has been taken. The
award for nominal and exemplary damages should be eliminated in toto.
The award for attorney's fees in the amount of P2,000.00 should be upheld, although
the same should be for the account, not of the plaintiff stockholders of the Mindanao
Academy, Inc., but of the corporation itself, and payable to their common counsel as
prayed for in the complaint.
IV. Under the fifth and last assignment of error the appellant insists on the warranty
provided for in clause VI of the deed of sale in view of the claims of the co-owners
who did not take part therein. The said clause provides: "if any claim shall be filed
against the properties or any right, share or interest which are in the possession of
the party of the First Part (vendors) which had been hereby transferred, ceded and
conveyed unto the party of the Second Part (vendee) the party of the First Part
assumes as it hereby holds itself answerable.
It is unnecessary to pass upon the question posed in this assignment of error in view
of the total annulment of the sale on grounds concerning which both parties thereto
were at fault. The nullity of the contract precludes enforcement of any of its
stipulations.
WHEREFORE, the judgment appealed from is modified by eliminating therefrom the
award of attorney's fees of P1,000.00 in favor of Erlinda D. Diaz and her husband,
plaintiffs in Civil Case No. 1907, and the award of nominal and exemplary damages
in Civil Case No. 1774; and making the award of attorney's fees in the sum of
P2,000.00 payable to counsel for the account of the Mindanao Academy, Inc. instead
of the plaintiff stockholders. In all other respects the judgment appealed from is
affirmed. No pronouncement as to costs.

EN BANC
G.R. No. L-25414 July 30, 1971
LEOPOLDO ARANETA, petitioner,
vs.
BANK of AMERICA, respondent.
MAKALINTAL, J.:
Petition for review by certiorari of the decision of Court of Appeals in CA-G.R. No. L-
34508-R modifying that of the Court of First Instance of Manila in the Case No.
52442.
Leopoldo Araneta, the petitioner herein, was a local merchant engaged in the import
and export business. On June 30, 1961 he issued a check for $500 payable to cash
and drawn against the San Francisco main office of the Bank of America, where he
had been maintaining a dollar current account since 1948. At that time he had a
credit balance of $523.81 in his account, confirmed by the bank's assistant cashier
in a letter to Araneta dated September 7, 1961. However, when the check was
received by the bank on September 8, 1961, a day after the date of the letter, it was
dishonored and stamped with the notation "Account Closed."
Upon inquiry by Araneta as to why his check had been dishonored, the Bank of
America acknowledged that it was an error, explaining that for some reason the
check had been encoded with wrong account number, and promising that "we shall
make every effort to see that this does not reoccur." The bank sent a letter of
apology to the payee of the check, a Mr. Harry Gregory of Hongkong, stating that
"the check was returned through an error on our part and should not reflect
adversely upon Mr. Araneta." In all probability the matter would have been
considered closed, but another incident of a similar nature occurred later.
On May 25, and 31, 1962 Araneta issued Check No. 110 for $500 and Check No. 111
for $150, respectively, both payable to cash and drawn against the Bank of America.
These two checks were received by the bank on June 3, 1962. The first check
appeared to have come into the hands of Rufina Saldana, who deposited it to her
account the First National City Bank of New York, which in turn cleared it through the
Federal Reserve Bank. The second check appeared to have been cleared through the
Wells Fargo Bank. Despite the sufficiency of Araneta's deposit balance to cover both
checks, they were again stamped with the notation "Account Closed" and returned
to the respective clearing banks.
In the particular case of Check No. 110, it was actually paid by the Bank of America
to the First National City Bank. Subsequently, however, the Bank of America,
claiming that the payment had been inadvertently made, returned the check to the
87
First National City Bank with the request that the amount thereof be credited back to
the Bank of America. In turn, the First National City Bank wrote to the depositor of
the check, Rufina Saldana, informing her about its return with the notation "Account
Closed" and asking her consent to the deduction of its amount from her deposit.
However, before Mrs. Saldana's reply could be received, the Bank of America
recalled the check from the First National City Bank and honored it.
In view of the foregoing incidents, Araneta, through counsel, sent a letter to the
Bank of America demanding damages in the sum of $20,000. While admitting
responsibility for the inconvenience caused to Araneta, the bank claimed that the
amount demanded was excessive, and offered to pay the sum of P2,000.00. The
offer was rejected.
On December 11, 1962 Araneta filed the complaint in this case against the Bank of
America for the recovery of the following:
1. Actual or compensatory damages P30,000.00
2. Moral damages 20,000.00
3. Temperate damages 50,000.00
4. Exemplary damages 10,000.00
5. Attorney's fees 10,000.00
TOTAL P120,000.00
The judgment of the trial court awarded all the item prayed for, but on appeal by the
defendant the Court of Appeals eliminated the award of compensatory and
temperate damages and reduced the moral damages to P8,000.00, the exemplary
damages to P1,000.00 and the attorney's fees to P1,000.00.
Not satisfied with the decision of the appellate court the plaintiff filed the instant
petition for review, alleging two reasons why it should be allowed, as follows:
(1) The Court of Appeals erred in holding that temperate damages
cannot be awarded without proof of actual pecuniary loss. There is
absolutely no legal basis for this ruling; worse yet, it runs counter
to the very provisions of ART. 2216 of the New Civil Code and to
the established jurisprudence on the matter;
(2) The Court of Appeals erred in not holding that moral damages
may be recovered as an item separate and distinct from the
damages recoverable for injury to business standing and
commercial credit. This involves the application of paragraph (2) of
Art. 2205 of the New Civil Code which up to now has not yet
received an authoritative interpretation from the Supreme
Court. ... .

In his brief, however, the petitioner assigned five (5) errors committed by the
appellate court, namely: (1) in concluding that the petitioner, on the basis of the
evidence, had not sufficiently proven his claim for actual damages, where such
evidence, both testimonial and documentary, stands uncontradicted on the record;
(2) in holding that temperate damages cannot be awarded to the petitioner without
proof of actual pecuniary loss; (3) in not granting moral damages for mental
anguish, besmirched reputation, wounded feelings, social humiliation, etc., separate
and distinct from the damages recoverable for injury to business reputation; (4) in
reducing, without any ostensible reason, the award of exemplary damages granted
by the lower court; and (5) in reducing, without special reason, the award of
attorney's fees by the lower court.
We consider the second and third errors, as they present the issues raised in the
petition for review and on the basis of which it was given due course.
In disallowing the award of temperate damages, the Court of Appeals ruled:
In view of all the foregoing considerations we hold that the plaintiff
has not proven his claim that the two checks for $500 each were
in partial payment of two orders for jewels worth P50,000 each. He
has likewise not proven the actual damage which he claims he has
suffered. And in view of the fact that he has not proven the
existence of the supposed contract for himself to buy jewels at a
profit there is not even an occasion for an award of temperate
damages on this score.
This ruling is now assailed as erroneous and without legal basis. The petitioner
maintains that in an action by a depositor against a bank for damages resulting from
the wrongful dishonor of the depositor's checks, temperate damages for injury to
business standing or commercial credit may be recovered even in the absence of
definite proof of direct pecuniary loss to the plaintiff, a finding as it was found by
the Court of Appeals that the wrongful acts of the respondent had adversely
affected his credit being sufficient for the purpose. The following provisions of the
Civil Code are invoked:
ART. 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of
temporary or permanent personal injury;
(2) For injury to the plaintiff's business standing or commercial
credit.
ART. 2216. No proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages may
88
be adjudicated. The assessment of such damages, except
liquidated ones, is left to the discretion of the court, according to
the circumstances of each case.
Also invoked by the petitioner is the case of Atlanta National Bank vs. Davis, 96 Ga
334, 23 SE 190; 1 and the following citations in American Jurisprudence:
In some states what are called "temperate damages" are allowed
in certain classes of cases, without proof of actual or special
damages, where the wrong done must in fact have caused actual
damage to the plaintiff, though from the nature of the case, he
cannot furnish independent, distinct proof thereof. Temperate
damages are more than nominal damages, and, rather, are such
as would be a reasonable compensation for the injury sustained. ...
. (15 Am. Jur. 400)
... . It has been generally, although not universally, held, in an
action based upon the wrongful act of a bank dishonoring checks
of a merchant or trader having sufficient funds on deposit with the
bank, that substantial damages will be presumed to follow such
act as a necessary and natural consequence, and accordingly, that
special damages need not be shown. One of the reasons given for
this rule is that the dishonor of a merchant's or trader's check is
tantamount or analogous, to a slander of his trade or business,
imputing to him insolvency or bad faith. ... . (10 Am. Jur. 2d. 545)
On the other hand the respondent argues that since the petitioner invokes Article
2205 of the Civil Code, which speaks of actual or compensatory damages for injury
to business standing or commercial credit, he may not claim them as temperate
damages and thereby dispense with proof of pecuniary loss under Article 2216. The
respondent cites Article 2224, which provides that "temperate or moderate
damages, which are more than nominal but less than compensatory damages may
be recovered when the court finds that some pecuniary loss has been suffered but
its amount cannot, from the nature of the case, proved with certainty," and contends
that the petitioner failed to show any such loss in this case.
The question, therefore, is whether or not on the basis of the findings of the Court of
Appeals, there is reason to conclude that the petitioner did sustain some pecuniary
loss although no sufficient proof of the amount thereof has been adduced. In
rejecting the claim for temperate damages the said Court referred specifically to the
petitioner's failure to prove "the existence of a supposed contract for him to buy
jewels at a profit," in connection with which he issued the two checks which were
dishonored by the respondent. This may be true as far as it goes, that is, with
particular reference to the alleged loss in that particular transaction. But it does not
detract from the finding of the same Court that actual damages had been suffered,
thus:

... Obviously, the check passed the hands of other banks since it
was cleared in the United States. The adverse reflection against
the credit of Araneta with said banks was not cured nor explained
by the letter of apology to Mr. Gregory.
... This incident obviously affected the credit of Araneta with Miss
Saldana.
However, in so far as the credit of Araneta with the First National
City Bank, with Miss Rufina Saldana and with any other persons
who may have come to know about the refusal of the defendant to
honor said checks, the harm was done ...
The financial credit of a businessman is a prized and valuable asset, it being a
significant part of the foundation of his business. Any adverse reflection thereon
constitutes some material loss to him. As stated in the case Atlanta National Bank
vs. Davis, supra, citing 2 Morse Banks, Sec. 458, "it can hardly be possible that a
customer's check can be wrongfully refused payment without some impeachment of
his credit, which must in fact be an actual injury, though he cannot, from the nature
of the case, furnish independent, distinct proof thereof."
The Code Commission, in explaining the concept of temperate damages under
Article 2224, makes the following comment:
In some States of the American Union, temperate damages are
allowed. There are cases where from the nature of the case,
definite proof of pecuniary loss cannot be offered, although the
court is convinced that there has been such loss. For instance,
injury to one's commercial credit or to the goodwill of a business
firm is often hard to show with certainty in terms of money. Should
damages be denied for that reason? The judge should be
empowered to calculate moderate damages in such cases, rather
than that the plaintiff should suffer, without redress from the
defendant's wrongful act.
The petitioner, as found by the Court of Appeals, is a merchant of long standing and
good reputation in the Philippines. Some of his record is cited in the decision
appealed from. We are of the opinion that his claim for temperate damages is legally
justified. Considering all the circumstances, including the rather small size of the
petitioner's account with the respondent, the amounts of the checks which were
wrongfully dishonored, and the fact that the respondent tried to rectify the error
soon after it was discovered, although the rectification came after the damage had
been caused, we believe that an award of P5,000 by way of temperate damages is
sufficient.
89
Under the third error assigned by the petitioner in his brief, which is the second of
the two reasons relieve upon in his petition for review, he contends that moral
damages should have been granted for the injury to his business standing or
commercial credit, separately from his wounded feelings and mental anguish. It is
true that under Article 2217 of the Civil Code. "besmirched reputation" is a ground
upon which moral damages may be claimed, but the Court of Appeals did take this
element into consideration in adjudging the sum of P8,000 in his favor. We quote
from the decision:
... the damages to his reputation as an established and well known
international trader entitled himself to recover moral damages.
... It was likewise established that when plaintiff learned that his
checks were not honored by the drawee Bank, his wounded
feelings and the mental anguish suffered by him caused his blood
pressure to rise beyond normal limits, thereby necessitating
medical attendance for an extended period.
The trial court awarded attorney's fees in the amount of P10,000. This was reduced
by the Court of Appeals to only P1,000. Considering the nature and extent of the
services rendered by the petitioner's counsel both in the trial and appellate courts,
the amount should be increased to P4,000. This may be done motu propio by this
Court under Article 2208 of the Civil Code, which provides that attorney's fees may
be recovered in the instances therein enumerated and "in any other case where the
Court deems, it first and equitable that attorney's fees ... should be recovered,"
provided the amount thereof be reasonable in all cases.
We do not entertain the first and fourth errors assigned by the petitioner. Neither of
them was raised and ruled upon as reasons for the allowance of his petition for
review, as required by Section 2 of Rule 45. Besides, the first error involves a
question of fact and calls for a review of the evidence and a reappraisal of its
probative value a task not within the appellate jurisdiction of this case. And with
respect to the fourth error, while there was gross negligence on the part of the
respondent, the record shows, as hereinbefore observed, that it tried to rectify its
error soon after the same was discovered, although not in time to prevent the
damage to the petitioner.
WHEREFORE, the judgment of the Court of Appeals is modified by awarding
temperate damages to the petitioner in the sum of P5,000 and increasing the
attorney's fees to P4,000; and is affirmed in all other respects. Costs against the
respondent.

FIRST DIVISION
[G.R. No. 135644. September 17, 2001]
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. SPOUSES
GONZALO and MATILDE LABUNG-DEANG, respondents.
DECISION
PARDO, J.:
The petitioner in the case is the Government Service Insurance System (hereafter,
GSIS). Having lost the case in the trial court and the Court of Appeals, it now comes
to this Court for redress.
At the onset, we state that the issue is not suability or whether GSIS may be sued
despite the doctrine of state immunity from suit, but liability, whether or not GSIS
may be liable to pay damages to respondent spouses given the applicable law and
the circumstances of the case.[1]
The Case
The case is a petition[2] for review on certiorari of the decision of the Court of
Appeals[3] affirming the decision of the Regional Trial Court, Angeles City [4] ordering
GSIS to pay respondents Gonzalo (now deceased) [5] and Matilde Labung-Deang
(hereafter, spouses Deang) temperate damages, attorneys fees, legal interests and
costs of suit for the loss of their title to real property mortgaged to the GSIS.
The Facts
Sometime in December 1969, the spouses Deang obtained a housing loan from the
GSIS in the amount of eight thousand five hundred pesos (P8,500.00). Under the
agreement, the loan was to mature on December 23, 1979. The loan was secured by
a real estate mortgage constituted over the spouses property covered by Transfer
Certificate of Title No. 14926-R issued by the Register of Deeds of Pampanga. [6] As
required by the mortgage deed, the spouses Daeng deposited the owners duplicate
copy of the title with the GSIS.[7]
On January 19, 1979, eleven (11) months before the maturity of the loan, the
spouses Deang settled their debt with the GSIS [8] and requested for the release of
the owners duplicate copy of the title since they intended to secure a loan from a
private lender and use the land covered by it as collateral security for the loan of
fifty thousand pesos (P50,000.00)[9] which they applied for with one Milagros Runes.
[10]
They would use the proceeds of the loan applied for the renovation of the spouses
residential house and for business.[11]
90
However, personnel of the GSIS were not able to release the owners duplicate of the
title as it could not be found despite diligent search. [12] As stated earlier, the spouses
as mortgagors deposited the owners duplicate copy of the title with the GSIS located
at its office in San Fernando, Pampanga.[13]
Satisfied that the owners duplicate copy of the title was really lost, in 1979, GSIS
commenced the reconstitution proceedings with the Court of First Instance of
Pampanga for the issuance of a new owners copy of the same. [14]
On June 22, 1979, GSIS issued a certificate of release of mortgage. [15]
On June 26, 1979, after the completion of judicial proceedings, GSIS finally secured
and released the reconstituted copy of the owners duplicate of Transfer Certificate of
Title No. 14926-R to the spouses Deang.[16]
On July 6, 1979, the spouses Deang filed with the Court of First Instance, Angeles
City a complaint against GSIS for damages, claiming that as result of the delay in
releasing the duplicate copy of the owners title, they were unable to secure a loan
from Milagros Runes, the proceeds of which could have been used in defraying the
estimated cost of the renovation of their residential house and which could have
been invested in some profitable business undertaking.[17]
In its defense, GSIS explained that the owners duplicate copy of the title was
released within a reasonable time since it had to conduct standard pre-audit and
post-audit procedures to verify if the spouses Deangs account had been fully settled.
[18]
On July 31, 1995, the trial court rendered a decision ruling for the spouses
Deang. The trial court reasoned that the loss of the owners duplicate copy of the
title in the possession of GSIS as security for the mortgage... without justifiable
cause constitutes negligence on the part of the employee of GSIS who lost it, making
GSIS liable for damages.[19] We quote the dispositive portion of the decision:[20]
IN VIEW OF THE FOREGOING, the Court renders judgment ordering the GSIS:
a) To pay the plaintiffs-spouses the amount of P20,000.00 as temperate
damages;
b) To pay plaintiffs-spouses the amount of P15,000.00 as attorneys fees;
c) To pay legal interest on the award in paragraphs a) and b) from the filing of
the complaint; and,
d) To pay cost of the suit.

SO ORDERED.
On August 30, 1995, GSIS appealed the decision to the Court of Appeals. [21]
On September 21, 1998, the Court of Appeals promulgated a decision affirming the
appealed judgment, ruling: First, since government owned and controlled
corporations (hereafter, GOCCs) whose charters provide that they can sue and be
sued have a legal personality separate and distinct from the government, GSIS is not
covered by Article 2180[22] of the Civil Code, and it is liable for damages caused by
their employees acting within the scope of their assigned tasks. Second, the GSIS is
liable to pay a reasonable amount of damages and attorneys fees, which the
appellate court will not disturb. We quote the dispositive portion:[23]
WHEREFORE, finding no reversible error in the appealed judgment, the same is
hereby AFFIRMED.
SO ORDERED.
Hence, this appeal.[24]
The Issue
Whether the GSIS, as a GOCC primarily performing governmental functions, is liable
for a negligent act of its employee acting within the scope of his assigned tasks. [25]
The Courts Ruling
We rule that the GSIS is liable for damages. We deny the petition for lack of merit.
GSIS, citing the sixth paragraph of Article 2180 of the Civil Code argues that as a
GOCC, it falls within the term State and cannot be held vicariously liable for
negligence committed by its employee acting within his functions. [26]
Article 2180. The obligation imposed by Article 2176 is demandable not only for
ones own acts or omissions, but also for those of persons for whom one is
responsible.
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are
not engaged in any business of industry.
The State is responsible in like manner when it acts though a special agent, but not
when the damage has been caused by the official to whom the task was done
properly pertains, in which case what is provided in Article 2176 shall be applicable.
91
The argument is untenable. The cited provision of the Civil Code is not applicable to
the case at bar. However, the trial court and the Court of Appeals erred in citing it as
the applicable law. Nonetheless, the conclusion is the same. As heretofore stated,
we find that GSIS is liable for damages.
The trial court and the Court of Appeals treated the obligation of GSIS as one
springing from quasi-delict.[27] We do not agree. Article 2176 of the Civil Code
defines quasi-delict as follows:
Whoever by act or omission causes damages to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter (underscoring ours).
Under the facts, there was a pre-existing contract between the parties. GSIS and the
spouses Deang had a loan agreement secured by a real estate mortgage. The duty
to return the owners duplicate copy of title arose as soon as the mortgage was
released.[28] GSIS insists that it was under no obligation to return the owners
duplicate copy of the title immediately. This insistence is not warranted. Negligence
is obvious as the owners duplicate copy could not be returned to the owners. Thus,
the more applicable provisions of the Civil Code are:
Article 1170. 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.
Article 2201. In contracts and quasi-contracts, the damages for which the obligor
who acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen
or could have reasonably foreseen at the time the obligation was constituted xxx.
Since good faith is presumed and bad faith is a matter of fact which should be
proved,[29] we shall treat GSIS as a party who defaulted in its obligation to return the
owners duplicate copy of the title. As an obligor in good faith, GSIS is liable for all
the natural and probable consequences of the breach of the obligation. The inability
of the spouses Deang to secure another loan and the damages they suffered
thereby has its roots in the failure of the GSIS to return the owners duplicate copy of
the title.
We come now to the amount of damages. In a breach of contract, moral damages
are not awarded if the defendant is not shown to have acted fraudulently or with
malice or bad faith.[30] The fact that the complainant suffered economic
hardship[31] or worries and mental anxiety[32] is not enough.
 92

There is likewise no factual basis for an award of actual damages. Actual damages to
be compensable must be proven by clear evidence. [33] A court can not rely on
speculation, conjecture or guess work as to the fact and amount of damages, but
must depend on actual proof.[34]

However, it is also apparent that the spouses Deang suffered financial damage
because of the loss of the owners duplicate copy of the title. Temperate damages
may be granted.

Article 2224. Temperate or moderate damages, which are more than nominal but
less than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case,
be proved with certainty.

GSIS submits that there must be proof of pecuniary loss. This is untenable. The
rationale behind temperate damages is precisely that from the nature of the case,
definite proof of pecuniary loss cannot be offered. When the court is convinced that
there has been such loss, the judge is empowered to calculate moderate damages,
rather than let the complainant suffer without redress from the defendants wrongful
act.[35]

The award of twenty thousand pesos (P20,000.00) in temperate damages is

reasonable considering that GSIS spent for the reconstitution of the owners
duplicate copy of the title.

Next, the attorneys fees. Attorneys fees which are granted as an item of damages
are generally not recoverable.[36] The award of attorneys fees is the exception rather
than the rule and counsels fees are not to be awarded every time a party wins a
suit. The award of attorneys fees demands factual, legal and equitable justification;
its basis cannot be left to speculation or conjecture.[37]

We find no circumstance to justify the award of attorneys fees. We delete the same.

The Fallo

WHEREFORE, we DENY the petition. We AFFIRM the decision of the Court of

Appeals in CA-G.R. CV No. 51240 with the MODIFICATION that award of attorneys
fees is DELETED. No costs. SO ORDERED.

FIRST DIVISION
G.R. No. L-66123 August 22, 1984
THE MANILA BANKING CORPORATION, petitioner,
vs.
INTERMEDIATE APPELLATE COURT AND WILFREDO J. RIVERA, respondents.
RELOVA, J.:
Appeal from the judgment of the Intermediate Appellate Court in AC-G.R. CV No.
64721, entitled: Wilfredo J. Rivera, plaintiff-appellee vs. The Manila Banking
Corporation, defendant-appellant, which reads:
WHEREFORE, except as modified in the sense that the award of actual
damage in the sum of P75,000.00 be eliminated and instead the sum of Ten
Thousand (P10,000.00) Pesos be awarded as temperate damage and the
reduction of the award of attomey's fees to the sum of Fifteen Thousand
(P15.000.00) Pesos, the decision is affirmed in toto in all other respects.
Costs against the appellant. (page 28, rollo).
Records show that in the morning of July 10, 1975 herein private respondent
Wilfredo J. Rivera deposited with petitioner bank the sum of P80,189.19. In the
afternoon of the same day, private respondent Rivera issued a Manila Banking
Corporation Check No. 16756626 in the amount of P80,000.00 under Current
Account No. 6-05350-5 payable to Collins Philippines with whom he had a business
transaction. Thereafter, private respondent's wife received a letter of demand from
Collins Philippines, dated July 15, 1975, saying that
Quite frankly, we are surprised why this has to happen considering our
pleasant business relationship in the past and the representations and
commitments you made to us prior to the issuance of the above check. At
any rate, just to be sure, we are redepositing the same check with the fair
warning that if the said check will again be dishonored, we shall close our
business dealings and institute proper action for the protection of our
interest. (p. 26, rollo).
His wife immediately informed him in the province about the letter of demand. Upon
receipt of the message, Mr. Rivera complained to the Public Relations Officer of
petitioner bank, inviting attention to the letter received by him from Collins
Philippines complaining against the dishonor of his check. The Public Relations
Officer of the bank, upon investigation, found that the money deposited was
credited into another account and that was the reason why the check issued by him
could not be encashed upon presentation.
93
As a consequence, private respondent claimed that he suffered humiliation and
embarrassment due to the bank's gross negligence. Complaint was filed in court
which awarded private respondent damages, as follows:
1) P75,000.00 as actual damages, to compensate plaintiff for the loss of
business and business opportunities;
2) P25,000.00 as moral damages, to compensate plaintiff for the
embarrassment, humiliation and mental anguish suffered;
3) P10,000.00 as exemplary damages;
4) P25,000.00 as and for attorney's fees; and
5) Cost of suit. (pages 25-26, rollo).
On appeal to the Intermediate Appellate Court, the judgment of the trial court was
modified in the sense that
... the award of actual damage in the sum of P75,000.00 be eliminated and
instead the sum of Ten Thousand (P10,000.00) Pesos be awarded as
temperate damage and the reduction of the award of attorney's fees to the
sum of Fifteen Thousand (P15,000.00) Pesos, the decision is affirmed in toto
in all other respects. (page 28, rollo).
Upon the foregoing facts, respondent court ruled that
The award for actual damages has no factual basis. How the sum of
P75,000.00 in the form of actual and compensatory damages was arrived
at, was not at all shown by any means before the Court a quo. While actual
damages may have been suffered, the law requires that such damages be
proven by facts and figures. Indeed, while the appellee overlooked
presenting adequate proof of actual and compensatory damages. We,
however, find and so hold that there may indeed have been actual
damages although the amount thereof was not established. We merely
award the sum of P10,000.00 in the form of temperate damage in favor of
the appellee.
The appellant belittle the negligence of the bank especially so since the
appellee's check was ultimately encashed. The argument is specious. It
does not require too much imagination to visualize the possibility that the
appellee could have died right after the deposit was made. Then the
appellee could not have issued the check in question. The appellee could
not have complained to the appellant about his check that was dishonored.
 94

The Bank may not have known about the wrong entry to the irreparable
loss of the appellee. Indeed, the appellee is entitled to temperate damage.
Regarding the award of attorney's fees, we find no reason to disturb it
except as to the amount awarded which We find quite exorbitant and which
We accordingly reduce to the sum of P15,000.00. Appellee is obviously
entitled to it. (Art. 2208, New Civil Code)
moral damages, P20,000.00 as exemplary damages, P20,000.00 as nominal
damages, and P10,000.00 for attorney's fees and expenses of litigation, plus the
costs) in consequence of illegal freezing of plaintiff's account. This Court held that
since "the wrong done to the plaintiffs was remedied as soon as the President of the
bank realized the mistake he and his subordinate employee had committed, the
Court finds that an award of nominal damages the amount of which need not be
proven in the sum of P1,000.00, in addition to attorney's fees in the sum of
P500.00, would suffice to vindicate plaintiff's rights."

We, however, find no merit in the challenge against the award for moral
and exemplary damages. The appellant argues that no moral damage
should have been awarded because no court action was taken by Collins
Philippines against the appellee for issuing a check that was dishonored.
Moreover, the check was encashed the second time it was presented. This
being so, whatever warning or threat the Collins' letter posed the same was
rendered moot and academic when the check was ultimately honored. We
do not agree. When the Collins' letter (Exhibit "C") was received by the
appellee, the latter immediately felt embarrassed and humiliated. The mere
fact that the check was honored afterwards, did not repair the harm done.
It may have only mitigated it.
In the case at bar, temperate or moderate damages are proper not for
indemnification of loss suffered but for the vindication or recognition of a right
violated or invaded. Considering the facts of the case under appeal, the sum of
P5,000.00 as temperate or moderate damages would suffice, plus attorney's fees of
P5,000.00.
WHEREFORE, the judgment appealed from is modified in the sense that petitioner
bank is hereby sentenced to pay private respondent Wilfredo J. Rivera the sums of
P5,000.00, as temperate or moderate damages and P5,000.00, as attorney's fees,
apart from the costs.

Insofar as the award for the exemplary damage is concerned, suffice it to SO ORDERED.
say that Banks are required to safeguard public interest as mandated by
Banking Laws, practices and procedure. They are called upon to protect the
faith of the people in the banking system. The bank was remiss with its
sworn duty. The Court a quo correctly awarded the sum of P10,000.00 by
way of exemplary damages. (pp. 27-28, rollo).

It is the submission of petitioner that (1) there is no evidence on record to support

an award of temperate damages in favor of respondent Rivera; (2) private
respondent is not entitled to moral damages because his credit and business
standing was not impaired and he did not suffer serious anxiety and/or mental
anguish; and (3) petitioner should not be made to pay exemplary damages,
attorney's fees and the costs of suit.

It will be noted that in respondent appellate court's decision, judgment was rendered
eliminating the award of actual damages and, instead, the amount of P10,000.00
was awarded the private respondent by way of temperate damages and attorney's
fees in the reduced amount of P15,000.00, and affirming the lower court's decision
in all other respects. This would mean that the amount of P25,000.00 as moral
damages and P10,000.00 as exemplary damages still stay.

We agree with petitioner that private respondent is not entitled to moral damages
considering that in a matter of four hours the mistake was rectified and the payee,
Collins Philippines, was paid the full amount of the check. In the case of Singson vs.
Bank of Philippine Island, 23 SCRA 1117, the plaintiffs commenced the action
against the bank and its President, Santiago Freixas for damages (P100,000.00 as
 95

EN BANC To establish appellants guilt, the prosecution presented the following

witnesses: Charlita Tallada, the victims mother; Patricia Turlao, the victims aunt;
[G.R. No. 149368. April 14, 2004] appellant Dacillos neighbors, Jovelyn Dagmil, Augusto Cesar Arara, Roche Abregon,
Resna Abregon, Allan Castanares, Jupiter Campaner; police officers SPO2 Rodolfo
PEOPLE OF THE PHILIPPINES, appellee, vs. FRANCISCO Taburda and SPO1 Avelino Alcobus, and medico-legal officer Dr. Danilo P. Ledesma.
DACILLO alias DODOY AND JOSELITO PACOT y IBARRA (case
provisionally dismissed),accused, The facts, as established by the prosecution witnesses collective testimonies,
follow.
FRANCISCO DACILLO alias DODOY, appellant.
The victim, seventeen-year-old Rosemarie B. Tallada, was last seen alive at
DECISION dusk on February 6, 2000, on the bridge near appellants house at Purok No. 3, New
Society Village, Ilang, Davao City.

CORONA, J.:
Around 7:45 p.m. that evening, witness Jovelyn Dagmil, who was living with her
[1]
aunt in the house adjacent to appellants, was looking for her cousin when she saw
Before us on automatic review is the decision of the Regional Trial Court of
the victim Rosemarie on the bridge. Because it was drizzling, she invited Rosemarie
Davao City, Branch 31, in Criminal Case No. 45,283-2000 convicting appellant
inside their house but the latter declined and told her she was waiting for someone.
Francisco Dacillo y Timtimalias Dodoy of the crime of murder and sentencing him to [3]
suffer the penalty of death.

After a while, Jovelyn heard a man inside appellants house calling Psst, psst . . .
Appellant Dacillo together with Joselito Pacot y Ibarra were indicted for murder
Thinking the call was meant for her, she turned but instead saw Rosemarie walking
in an information that read:
towards and entering appellants house.[4]

The undersigned accuses the above-named accused of the crime of Murder, under
Art. 248 of the Revised Penal Code, as amended by R.A. 7659, committed as follows:
That on or about February 6, 2000, in the City of Davao, Philippines, and within the
jurisdiction of this Honorable Court, the above-mentioned accused, conspiring,
confederating together and helping one another, with treachery and evident
premeditation, and with intent to kill, willfully, unlawfully and feloniously attacked,
assaulted and stabbed one Rosemarie B. Tallada with a bladed weapon, thereby
inflicting upon the latter mortal wounds which caused her death.
That the commission of the foregoing offense was attended by the aggravating
circumstance of abuse of superior strength.
CONTRARY TO LAW.[2]
The case against appellants co-accused, Joselito Pacot, was provisionally
dismissed for lack of sufficient evidence to identify him with certainty.
Not long after Rosemarie went inside the house, a struggle was heard
therein. Witnesses Roche and Resna Abregon, who were in the adjacent house
singing with a karaoke machine, suddenly felt the floor shaking as if a scuffle was
going on at the other side of the wall. The houses were built on stilts above the
seashore, adjoining one another with mere wooden partitions in between. Roche
Abregon peeped through a hole on the wall and saw appellant and another man
grappling with a woman who was gagged with a handkerchief. [5] When Roche saw
appellant choking the woman, she informed her aunt about the commotion in
appellants house but the aunt brushed it aside as a simple family quarrel. [6] For a
while they heard the sound of a woman being beaten up. Then everything became
quiet. Later that evening, they saw appellant leaving his house.[7]
The following day, February 7, 2000, at around 8:00 a.m., appellant was seen
entering his house carrying lumber and screen. [8] He was observed going in and out
of his house several times, each time carefully locking the gate as he left. [9] At
around 9:00 a.m., appellant was seen with ready-mixed cement in a plastic pail and,
when asked what he was going to do with the cement, replied that it was for the sink
he was constructing.[10]

Appellant was arraigned on February 21, 2001 and, assisted by counsel,

Later, appellant entrusted a bag of womans personal belongings to barangay
pleaded not guilty. Pre-trial was conducted on March 1, 2001 and trial ensued
tanod Allan Castaares and told the latter that it belonged to his woman companion.
thereafter.
He allegedly could not bring it home because his wife might see them. [11]

By February 11, 2000, neighbors started smelling the rotten odor of
Rosemaries already decomposing body.[12]
At 5:00 p.m. the same day, witnesses Roche, Resna, and Rachel were gathering
seashells under appellants house when they saw droplets of blood and pus dripping
from appellants comfort room. They immediately reported it to their aunt who in
turn instructed her husband to get a stick and poke the sacks covering the comfort
room. However, the husband instead climbed up the house and was greeted by the
stink emanating from the corner where he saw a tomb-like structure. They
immediately reported the matter to barangay officials who called the police.[13]
At about 10:00 p.m., policemen arrived at appellants house, accompanied by
his wife, and forcibly opened the lock. They proceeded to where the tomb was
located.
When cracked open, the tomb revealed the decomposing body of a woman. [14]
The corpse was brought to the Rivera Funeral Parlor where it was identified by
the victims mother Charlita Tallada and aunt Patricia Turlao as that of Rosemarie,
through the keloid scar on her forearm.
Dr. Danilo Ledesma conducted an autopsy on Rosemaries remains. His
necropsy report revealed that Rosemarie died from a stab wound in the abdomen.
The report further disclosed that she suffered contusions in the anterior chest wall
and her right hand; an incised wound on her left middle finger; a stab wound on the
left side of the face and fractures on the 2nd, 3rd, 4th, 5th, 6th and 7th ribs on her side.[15]
Dr. Ledesma testified that the wounds suffered by Rosemarie indicated that
she put up a struggle and the wounds were inflicted before her death.[16]
In his defense, appellant admitted complicity in the crime but minimized his
participation. Appellant alleged that he only held down Rosemaries legs to prevent
her from struggling and, after the latter was killed by another man he identified as
Joselito Pacot, he encased the corpse in cement.
He claimed that Pacot, a co-worker at Davao Union Cement Corporation
(DUCC), was looking for a house where he and his girlfriend Rosemarie could spend
the night. He offered his brothers house which was under his care. In the evening of
February 6, 2000, he and Joselito Pacot brought Rosemarie to the house at Purok No.
3, New Society Village, Ilang, Davao City.
After accompanying the couple there, he went home to take supper. Later that
evening, he returned to the house with the bottle of Sprite Pacot had ordered. When
he arrived, Pacot and Rosemarie were already grappling with each other and Pacot
was strangling the girl. He told Pacot to stop but instead of heeding him, the latter
96
ordered him to close the door. Pacot told appellant that he was going to be
implicated just the same so he closed the door as ordered and helped Pacot (hold)
the feet of the woman as her feet kept hitting the walls.[17]
The two men stopped only when Rosemarie was already motionless. Pacot
wanted to dump the body into the sea but appellant told him it was low tide.
Appellant then suggested that they entomb the body in cement for which Pacot
gave appellant P500.
Pacot left the house at dawn the following day, February 7, 2000. At past 10:00
a.m., appellant brought the concrete mixture and cast the dead body in
cement. After finishing the job in the afternoon of that day, appellant reported for
work at DUCC.
When the body was discovered in the evening of February 11, 2000, appellant
immediately left for Cebu City, arriving there the next day, February 12, 2000. He
stayed in Cebu City until his arrest the following year.
On May 31, 2001, the trial court rendered judgment finding appellant guilty of
murder and imposed upon him the supreme penalty of death:
WHEREFORE, this Court finds the accused Francisco Dacillo GUILTY beyond
reasonable doubt of the crime of MURDER for the death of Rosemarie Tallada, as
defined and penalized under Art. 248 of the Revised Penal Code, as
amended. Considering the aggravating circumstance of recidivism with no
mitigating circumstance to offset the same, he is hereby sentenced to the extreme
penalty of DEATH,
He is further ordered to indemnify the heirs of the offended party in the amount
of P50,000.00, plus the sum of P50,000.00 as moral damages, and the sum
of P50,000.00 as exemplary damages.
His immediate confinement to the national penitentiary is hereby ordered.
Costs de oficio.
SO ORDERED.[18]
Thus, this automatic review.
In his brief, appellant raises the following errors allegedly committed by the
trial court:
I

THE COURT A QUO GRAVELY ERRED IN FINDING THE APPELLANT GUILTY BEYOND
REASONABLE DOUBT OF THE CRIME OF MURDER.
II
THE COURT A QUO GRAVELY ERRED IN AWARDING THE HEIRS OF THE OFFENDED
PARTY THE AMOUNT OF PHP50,000.00, WHICH APPEARS AS PAYMENT FOR ACTUAL
DAMAGES.[19]
Appellant admitted that he had a hand in the killing of Rosemarie but
attempted to downgrade his participation in the crime by claiming he only held
Rosemaries legs as Pacot was strangulating her. The rule is that any admission made
by a party in the course of the proceedings in the same case does not require proof
to hold him liable therefor. Such admission may be contradicted only by showing
that it was made through palpable mistake or no such admission was in fact
made. There was never any such disclaimer by appellant.
Moreover, despite appellants self-serving, exculpatory statement limiting his
involvement in the crime, all circumstances pointed to his guilt. His declaration
faltered in the face of the testimonies of eyewitnesses positively identifying him as
one of the two men who were with Rosemarie when she was killed. Witness Roche
Abregon pointed to appellant as the one who strangled Rosemarie. He was
established to be inside the house at the time the witnesses heard a woman being
battered. Thus, assuming for the sake of argument that Pacot was the mastermind,
appellants admission that he participated in its commission by holding Rosemaries
legs made him a principal by direct participation.
Two or more persons taking part in the commission of a crime are considered
principals by direct participation if the following requisites are present:
1. they participated in the criminal resolution and
2. they carried out their plan and personally took part in its execution by acts
which directly tended to the same end.[20]
Both requisites were met in this case. Two or more persons are said to have
participated in the criminal resolution when they were in conspiracy at the time of
the commission of the crime. To establish conspiracy, it is not essential that there be
proof of the previous agreement and decision to commit the crime, it being sufficient
that the malefactors acted in concert pursuant to the same objective. [21]
The prosecution was able to prove appellants participation in the criminal
resolve by his own admission that, right after he was told by Pacot to close the door,
he held down Rosemaries legs. He was pinpointed as the one who throttled the
victim. He admitted that they only stopped when they were sure that Rosemarie was
97
already dead. The two men planned how to dispose of the victims body; it was in
fact appellants idea to pour concrete on the body, prevailing over Pacots suggestion
to just dump the body into the sea. It was appellant himself who encased the body
in cement and made sure that there were no leaks from which foul odor could
emanate. He was a conspirator in the killing and, whether or not he himself did the
strangling or the stabbing, he was also liable for the acts of the other accused.
It is well-settled that a person may be convicted for the criminal act of another
where, between them, there is conspiracy or unity of purpose and intention in the
commission of the crime charged.[22] Conspiracy need not be proved by direct
evidence of prior agreement on the commission of the crime as the same can be
inferred from the conduct of the accused before, during, and after the commission of
the crime showing that they acted in unison with each other pursuant to a common
purpose or design.[23]
We are convinced beyond doubt of the joint and concerted effort between
appellant and the man he identified as Pacot in the killing of Rosemarie.
Appellant likewise contends that the trial court erred in ruling that the presence
of the aggravating circumstance of abuse of superior strength qualified the killing to
murder. He contends that the qualifying circumstance of abuse of superior strength
was not specifically alleged in the information. Nothing can be farther from the
truth. A cursory reading of the information reveals that appellant was sufficiently
informed of the charges against him, including the use of superior strength in killing
the hapless and defenseless female victim.
The aggravating circumstance of abuse of superior strength necessitates a
showing of the relative disparity in the physical characteristics of the aggressor and
the victim such as age, gender, physical size and strength. We agree with the trial
court that the killing of Rosemarie was committed with abuse of superior strength.
As found by the court a quo, two grown-up men against a young fragile woman
whose ability to defend herself had been effectively restrained revealed a shocking
inequality of physical strength. The victim was much weaker in constitution and
could not have possibly defended herself from her stronger assailants. [24] Such
disparity was manifest in the contusions in the chest and hands, wounds on the
fingers, a stab wound on the left side of the face and multiple fractures in the ribs of
the victim.[25] The abuse of superior strength was obvious in the way Rosemarie was
mercilessly beaten to a pulp.
The killing of Rosemarie was thus correctly qualified to murder by the abuse of
superior strength, a circumstance specifically pleaded in the information and proved
beyond reasonable doubt.
The Court, however, finds that the trial court erred in imposing the death
penalty on the ground that appellant admitted during re-cross examination that he
had a prior conviction for the death of his former live-in partner. The fact that

appellant was a recidivist was appreciated by the trial court as a generic
aggravating circumstance which increased the imposable penalty from reclusion
perpetua to death.
In order to appreciate recidivism as an aggravating circumstance, it is
necessary to allege it in the information and to attach certified true copies of the
sentences previously meted out to the accused. [26] This is in accord with Rule 110,
Section 8 of the Revised Rules of Criminal Procedure which states:
SEC. 8. Designation of the offense. - The complaint or information shall state the
designation of the offense given by the statute, aver the acts or omissions
constituting the offense, and specify its qualifying and aggravating
circumstances. If there is no designation of the offense, reference shall be made to
the section or subsection of the statute punishing it. (Emphasis supplied)
The aggravating circumstance of recidivism was not alleged in the information
and therefore cannot be appreciated against appellant. Hence the imposable penalty
should be reduced to reclusion perpetua.
Regarding the award of P50,000 as civil indemnity to the heirs of the victim,
appellant claims that said amount was awarded by the trial court as payment for
actual damages. This claim is misleading. As aptly pointed out by the Solicitor
General, the amount was granted by the trial court by way of indemnity ex delicto to
compensate for the death of the victim which prevailing jurisprudence fixes
at P50,000.[27] The award of such indemnity requires no proof other than the death of
the victim and the accuseds responsibility therefor. [28]
The award of P50,000 as moral damages is proper, supported as it was by the
testimony of Charlita Tallada, the victims mother, that Rosemaries death caused her
immeasurable pain.[29]
In addition, the Court awards P25,000 in temperate damages, said amount
being awarded in homicide or murder cases when no evidence of burial and funeral
expenses is presented in the trial court.[30]
With regard to the award of exemplary damages, the Civil Code of the
Philippines provides:
ART. 2229. Exemplary or corrective damages are imposed, by way of example of
correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.
ART. 2230. In criminal offenses, exemplary damages as a part of the civil liability
may be imposed when the crime was committed with one or more aggravating
98
circumstances. Such damages are separate and distinct from fines and shall be paid
to the offended party.
In People vs. Catubig,[31] we explained that:
The term aggravating circumstances used by the Civil Code, the law not having
specified otherwise, is to be understood in its broad or generic sense. The
commission of an offense has a two-pronged effect, one on the public as it breaches
the social order and the other upon the private victim as it causes personal
sufferings, each of which is addressed by, respectively, the prescription of heavier
punishment for the accused and by an award of additional damages to the
victim. The increase of the penalty or a shift to a graver felony underscores the
exacerbation of the offense by the attendance of aggravating circumstances,
whether ordinary or qualifying, in its commission. Unlike the criminal liability which
is basically a State concern, the award of damages, however, is likewise, if not
primarily, intended for the offended party who suffers thereby. It would make little
sense for an award of exemplary damages to be due the private offended party
when the aggravating circumstance is ordinary but to be withheld when it is
qualifying. Withal, the ordinary or qualifying nature of an aggravating circumstance
is a distinction that should only be of consequence to the criminal, rather than to the
civil, liability of the offender. In fine, relative to the civil aspect of the case, an
aggravating circumstance, whether ordinary or qualifying, should entitle the
offended party to an award of exemplary damages within the unbridled meaning of
Article 2230 of the Civil Code.
Thus, the award of exemplary damages is warranted under Art. 2230 of the
Civil Code in view of the presence of the aggravating circumstance of abuse of
superior strength. Imposition of exemplary damages is also justified under Art. 2229
of the Civil Code in order to set an example for the public good. [32] For this purpose,
we believe that the amount of P25,000 may be appropriately awarded.
WHEREFORE, the assailed judgment in Criminal Case No. 45,283-2000 of the
Regional Trial Court of Davao City, Branch 31, is hereby AFFIRMED with
MODIFICATION. Appellant Francisco Dacillo y Timtim alias Dodoy is declared guilty
beyond reasonable doubt of murder as defined and penalized under Article 248 of
the Revised Penal Code. There being neither aggravating nor mitigating
circumstances, appellant is hereby sentenced to reclusion perpetua and is further
ordered to indemnify the heirs of Rosemarie Tallada the sum of P50,000 as civil
indemnity, P50,000 as moral damages, P25,000 as temperate damages and P25,000
as exemplary damages.
Costs de oficio.
SO ORDERED.
99
 100

THIRD DIVISION Rosendo Pacursa, did, then and there, willfully, unlawfully and
feloniously, after covering her mouth, forcibly abduct, pull and
take away one AAA while walking to the church to the tobacco
flue-curing barn and while inside the barn lie and succeeded in
having sexual intercourse and carnal knowledge of the offended
party; that accused Ernesto Garces later on covered the
mouth of AAA and take her out of the barn; that accused
ERNESTO GARCES, G.R. No. 173858 Senando Garces, Antonio Pira, Jr. and Aurelio Pira stand guard
outside the barn while Rosendo Pacursa is raping AAA; to the
Petitioner, damage and prejudice of the offended party.

CONTRARY TO LAW with the aggravating circumstances of: (1)

Present: uninhabited place, and (2) nighttime.[4] (Emphasis supplied)

- versus - All the accused, except Senando Garces who is still at large, pleaded not guilty.

The prosecutions version of the incident is as follows:

PEOPLE OF THE PHILIPPINES,

On August 2, 1992, between 8:00 and 9:00 oclock in the evening, AAA was on her
Respondent. Promulgated: way to the chapel when the five accused suddenly appeared and approached

July 17, 2007 her.Rosendo Pacursa covered her mouth with his hands and told her not to shout or
she will be killed. He then brought her inside a nearby tobacco barn while his four
x ---------------------------------------------------------------------------------------- x
companions stood guard outside.[5]

DECISION
Inside the barn, Pacursa started kissing AAA. Private complainant fought back but to

YNARES-SANTIAGO, J.: no avail. Thereafter, Pacursa succeeded in having carnal knowledge of her. After a
while, they heard people shouting and calling the name of AAA. At this point,
This Petition for Review on Certiorari assails the Decision [1] dated January 31, 2006 of
petitioner Ernesto Garces entered the barn, covered AAAs mouth, then dragged her
the Court of Appeals which affirmed with modification the Judgment [2] rendered by
Branch 1 of the Regional Trial Court of Bangued, Abra, finding petitioner Ernesto outside. He also threatened to kill her if she reports the incident.[6]
Garces guilty as an accessory to the crime of Forcible Abduction with Rape. Also
assailed is the Resolution[3] dated July 27, 2006 denying petitioners motion for Upon reaching the house of Florentino Garces, petitioner released AAA. Shortly
reconsideration.
afterwards, AAAs relatives found her crying, wearing only one slipper and her hair
was disheveled. They brought her home but when asked what happened, AAA could
In an Information dated December 10, 1992, Rosendo Pacursa, Senando Garces,
not answer because she was in a state of shock. After a while, she was able to
Antonio Pira, Jr., Aurelio Pira, and petitioner Ernesto Garces, were charged with
recount the incident.[7]
Forcible Abduction with Rape committed as follows:

That on or about the 2nd day of August, 1992, in the evening, at x x Rosendo Pacursa denied that he raped the victim, while his co-accused presented
x, Province of Abra, Philippines and within the jurisdiction of this
alibis as their defense.
Honorable Court, the said accused, conspiring, confederating
and mutually helping one another, with criminal and carnal
intent, with lewd design and by means of force, accused
 101

Ernesto Garces, being an accessory to the commission of the

Pacursa testified that he and AAA were sweethearts for almost a year prior to the
incident. On the night of August 2, 1992, he was on his way to the house of Antonio
Pira, Jr. to watch a televised basketball game when he saw AAA. The latter allegedly
wanted to have a talk with him so he led her to the tobacco barn about 15 meters
away, so that no one might see them. They were alone by the door of the barn
talking, embracing and kissing. They only parted ways when he saw the relatives of
AAA. He denied having sexual intercourse with her. After the incident, he received a
letter[8] from AAA asking him to elope.[9]
crime is hereby penalized two degrees lower than that prescribed
by law for the offense. Accordingly, he is hereby sentenced to
suffer an indeterminate penalty of 4 years of prision correccional
as minimum to 8 years of prision mayor as maximum.
Both accused are jointly and solidarily liable to pay the victim the
amount of P50,000.00 as and by way of actual and moral damages
plus the cost of this suit.
SO ORDERED.[12]

On the other hand, petitioner, Antonio Pira, Jr., and Aurelio Pira, testified that they Both Pacursa and petitioner appealed the decision with the Court of

were watching a televised basketball game at the house of Antonio Pira, Jr. at the Appeals. However, Pacursa subsequently withdrew his appeal.

time the alleged rape transpired. They denied seeing Pacursa that night.[10]
On January 31, 2006, the Court of Appeals rendered its Decision affirming with
modification the decision of the trial court, thus:

WHEREFORE, premises considered, the appealed Decision

After trial on the merits, the trial court rendered its decision finding Pacursa guilty of convicting accused ROSENDO PACURSA as principal and
Forcible Abduction with Rape while petitioner Garces was found guilty as an accused-appellant ERNESTO GARCES as accessory of the crime
of forcible abduction with rape is AFFIRMED.
accessory to the crime. Antonio Pira, Jr. and Aurelio Pira were acquitted for
insufficiency of evidence.[11] However, accused-appellant Ernesto Garces sentence
is MODIFIED in that he is to suffer the indeterminate penalty of
imprisonment ranging from FOUR (4) YEARS of prision
The dispositive portion of the decision reads:
correccional, as minimum,
to EIGHT (8) YEARS and ONE (1) DAY of prision mayor, as
WHEREFORE, PREMISES CONSIDERED, accused ROSENDO PACURSA and maximum.
ERNESTO GARCES are hereby found guilty of the crime of Forcible
SO ORDERED.[13]
Abduction With Rape punishable under the Revised Penal Code committed
upon the person of AAA. The other accused ANTONIO PIRA, JR. and AURELIO
Petitioner filed a motion for reconsideration but same was denied. Hence, the instant
PIRA are hereby ACQUITTED as accessory for the crime of Forcible
petition for review on certiorari.
Abduction With Rape.
Petitioner claims that no rape was committed and that there is no evidence to show
ROSENDO PACURSA, the principal accused in this case is hereby
sentenced to one degree lower than that prescribed by law for the that he covered the mouth of the complainant when he brought her out of the barn.
offense, for being 16 years old at the time of the commission of
the crime pursuant to Art. 68 of the Revised Penal Code. Taking The petition lacks merit.
into consideration the aggravating circumstances of uninhabited
place and nighttime, he is hereby sentenced to suffer an
It has been established that Pacursa forcibly took AAA against her will and by use of
indeterminate penalty of 11 years of prision mayor as minimum to
18 years of reclusion temporal as maximum. force and intimidation, had carnal knowledge of her. The trial court found

complainants testimony to be credible, consistent and unwavering even during
cross-examination.
Regarding the letter she wrote to Pacursa asking him to elope with her, she
explained that she felt uncertain at that time and was trying to avoid the possible
[14]
trouble or scandal the incident might bring upon her, which we find plausible. In
pursuing the case, she had to transfer to another school because of the threats of
her assailants and their persistence in settling the case. Furthermore, no improper
motive was shown why she would accuse and testify against Pacursa who was her
boyfriend, and the other accused, who are her relatives. [15]
Prosecution witness Grace Liberto likewise corroborated the testimony of
complainant when she testified that she saw the latter crying, wearing only one
[16]
slipper, and her hair disheveled, immediately after the incident. The medico-legal
findings of Dr. Herminio Venus also showed that there was a laceration in
complainants private parts possibly caused by sexual contact. [17]
Pacursa, however, could not be convicted of the crime of forcible abduction with
rape because the crime committed was only simple rape. Forcible abduction is
absorbed in the crime of rape if the real objective of the accused is to rape the
victim.[18] Based on the evidence presented, the accused intended to rape the victim
when he took her to the tobacco barn. Hence, forcible abduction is absorbed in the
crime of rape.[19]
We also note that the trial court failed to make any definitive finding as to the
existence of aggravating circumstances. However, we find that the aggravating
circumstances of nighttime and uninhabited place did not attend the commission of
the crime.
Nocturnity is aggravating when it is deliberately sought to prevent the accused from
[20]
being recognized or to ensure his unmolested escape. The mere fact that the rape
was committed at nighttime does not make nocturnity an aggravating circumstance.
[21]
In the instant case, other than the fact that the crime was committed at night,
102
there is no other evidence that the peculiar advantage of nighttime was purposely
and deliberately sought by the accused.
The aggravating circumstance of uninhabited place cannot likewise be appreciated
in the absence of evidence that the accused actually sought an isolated place to
better execute their purpose.[22] The records do not show that solitude was purposely
sought or taken advantage of to facilitate the commission of the crime.
Although Pacursa has withdrawn his appeal, the Courts ruling that the crime
committed is simple rape and not forcible abduction with rape, shall apply to him.
Section 11 (a), Rule 122 of the Rules of Court specifically provides that an appeal
taken by one or more of several accused shall not affect those who did not appeal,
except insofar as the judgment of the appellate court is favorable and applicable to
the latter.
As regards petitioners complicity, his defense of alibi cannot prevail over
complainants positive identification of her assailants. Denial and alibi are inherently
weak defenses and constitute self-serving negative evidence which can not be
accorded greater evidentiary weight than the positive declaration of credible
witnesses.[23]
For alibi to prosper, the accused must establish by clear and convincing evidence (a)
his presence at another place at the time of the perpetration of the offense and (b)
the physical impossibility of his presence at the scene of the crime. [24] Petitioner
alleged he was watching television at Aurelio Piras house, which is about 20 meters
away from the barn at the time of the incident. However, it will only take one minute
for him to reach the barn from the house. [25] Thus, it was not physically impossible
for him to be at the scene of the crime at the time of its commission.
Contrary to petitioners contention, there is proof that petitioner covered AAAs mouth
when he dragged her out of the barn. Complainant executed a sworn statement
recounting her harrowing experience which she identified during her direct
examination and offered as Exhibits A, A-1, and A-2[26] for the prosecution and
admitted by the trial court.[27] In her sworn statement, AAA narrated thus:

Q - Will you relate carefully the manner by which Rosendo Pacursa
raped you?
A - x x x Then someone came inside the barn, shut-off my mouth,
then brought me out and away southward and when we
reach the house of Florentino Garces he released me and
as I walked down the path my uncle Bartolome Florendo
was able to light me with his flashlight
Q - Who was that person who later came inside the barn who
brought you out shutting-off your mouth then took you
away southward?
A - Ernesto Garces also from our place, sir.
Q - Why, has Rosendo Pacursa other companions?
A - He has, sir. They are Ernesto Garces, Senando Garces, Antonio
Pira, Jr. and Aurelio Pira.
Q - What did these companions of Rosendo Pacursa do?
A - They stayed outside the barn but it was Ernesto Garces who
brought me out, sir.[28]
Complainants failure to testify during her direct examination that her mouth was
covered by petitioner when she was pulled out of the barn does not preclude resort
to her sworn statement to provide the missing details, since said sworn statement
forms part of her testimony. As held in People v. Servano:[29]
Evidence in criminal cases is not limited to the declarations made
in open court; it includes all documents, affidavits or sworn
statements of the witnesses, and other supporting evidence.It
comprehends something more than just the mere testimony of a
witness. Thus, when a sworn statement has been formally offered
as evidence, it forms an integral part of the prosecution evidence
which should not be ignored for it complements and completes the
testimony on the witness stand. A sworn statement is a written
declaration of facts to which the declarant has sworn before an
officer authorized to administer oaths. This oath vests credibility
and trustworthiness on the document. The fact that a witness fails
to reiterate, during trial, the contents of his sworn statement
should not affect his credibility and render the sworn statement
useless and insignificant, as long as it is presented as evidence in
open court. This is not to say, however, that the sworn statement
should be given more probative value than the actual
testimony. Rather, the sworn statement and the open court
103
declarations must be evaluated and examined together in toto so
that a full and thorough determination of the merits of the case
may be achieved. Giving weight to a witness oral testimony during
the trial should not mean being oblivious to the other pieces of
available evidence such as the sworn statement. In like manner,
the court cannot give probative value to the sworn statement to
the exclusion of the oral testimony. In every case, the court should
review, assess and weigh the totality of the evidence presented by
the parties. It should not confine itself to oral testimony during
trial. x x x[30]
Petitioner also faults the court a quo in finding that he threatened AAA while leading
her out of the barn. He argues that complainant failed to positively identify the
person who issued the threats because she vaguely referred to said person merely
as they.
The contention lacks merit.
The use of the word they in referring to the person who threatened complainant is of
no moment. When the threats were issued, both Pacursa and petitioner were inside
the barn; thus, it is logical to conclude that the threats came from both of them.
Petitioner likewise cannot take refuge in the acquittal of Antonio and Aurelio
Pira. Both were acquitted because there was no evidence to show their participation
in the crime. Complainant only testified that she heard their voices which the trial
court considered insufficient. However, in the case of petitioner, complainant
positively identified him as one of the companions of Pacursa who remained outside
the barn and who eventually entered upon noting the presence of AAAs relatives
nearby. He thereafter covered complainants mouth and led her out of the barn. All
these circumstances demonstrate petitioners complicity.
We do not agree, however, that petitioner should be convicted as an accessory to
the crime.
It is a settled rule that an appeal in a criminal proceeding throws the whole case
open for review and it becomes the duty of the Court to correct any error in the
appealed judgment, whether it is made the subject of an assignment of error or
not. Such an appeal confers upon the appellate court full jurisdiction and renders it

competent to examine the records, revise the judgment appealed from, increase the
[31]
penalty and cite the proper provision of the penal law.
In finding petitioner guilty as an accessory, the Court of Appeals found that his
participation was after or subsequent to the rape and that his acts were employed
as a means of concealing the commission of the crime and assisting Rosendo to
escape.
We find otherwise. The facts show that petitioner participated in the commission of
the crime even before complainant was raped. He was present when Pacursa
abducted complainant and when he brought her to the barn. He positioned himself
outside the barn together with the other accused as a lookout. When he heard the
shouts of people looking for complainant, he entered the barn and took complainant
away from Pacursa.
Having known of the criminal design and thereafter acting as a lookout, petitioner is
liable as an accomplice,[32] there being insufficient evidence to prove conspiracy,
[33]
and not merely as an accessory. As defined in the Revised Penal Code,
accomplices are those who, not being included in Article 17, cooperate in the
[34]
execution of the offense by previous or simultaneous acts. The two elements
necessary to hold petitioner liable as an accomplice are present: (1) community of
criminal design, that is, knowing the criminal design of the principal by direct
participation, he concurs with the latter in his purpose; and (2) performance of
previous or simultaneous acts that are not indispensable to the commission of the
crime.[35]
The crime committed in the case at bar is simple rape, the penalty for which under
the Revised Penal Code is reclusion perpetua. Since Pacursa was a minor when the
crime was committed, the penalty must be reduced by one degree, to reclusion
temporal.[36] Applying the Indeterminate Sentence Law and in the absence of
aggravating and mitigating circumstances, the maximum of the penalty shall be
within the medium range of reclusion temporal, or fourteen (14) years, eight (8)
months and one (1) day to seventeen (17) years and four (4) months. The minimum
of the indeterminate penalty shall be within the range of the penalty next lower in
104
degree, which is prision mayor, ranging from six (6) years and one (1) day to twelve
(12) years.[37]
With respect to petitioner, the penalty imposed upon accomplices in a consummated
crime is the penalty next lower in degree than that prescribed for the felony. [38] Since
simple rape is punishable with reclusion perpetua, the penalty of reclusion temporal
should also be imposed on petitioner in its medium period in the absence of any
aggravating or mitigating circumstances. Applying the Indeterminate Sentence Law,
the imposable penalty should range from prision mayor, as minimum, to reclusion
temporal in its medium period, as maximum.
Every person criminally liable for a felony is also civilly liable. [39] If there are two or
more persons civilly liable for a felony, as in this case, the court shall determine the
amount for which each must respond [40] to be enforced in accordance with Article
110 of the Revised Penal Code. Thus, the amount of damages to be awarded must
be apportioned according to the respective responsibilities of the accused to be paid
by them solidarily within their respective class and subsidiarily for the others. [41]
Consistent with prevailing jurisprudence, the complainant in rape cases is entitled to
an award of P50,000.00 as civil indemnity ex delicto and another P50,000.00 as
moral damages. Civil indemnity ex delicto is mandatory upon finding of the fact of
rape which is distinct from moral damages awarded upon such finding without need
of further proof because it is assumed that a rape victim has actually suffered moral
injuries entitling the victim to such award.[42]
In determining the civil liability of petitioner, a clarification of the trial courts
decision is necessary. The dispositive portion of the trial courts decision held Pacursa
and petitioner jointly and solidarily liable to pay the victim the amount of P50,000.00
as and by way of actual and moral damages plus the cost of suit. For our purposes,
we shall treat the amount of P50,000.00 awarded by the trial court as the civil
indemnity ex delicto for which, as an accomplice, petitioner should be solidarily
liable with Pacursa only for one-half of the said amount, or P25,000.00, and is
subsidiarily liable for the other P25,000.00 in case the principal is found insolvent. [43]
 105

In addition, complainant must be awarded another P50,000.00 as moral

damages. However, this additional award should not apply to Pacursa who has
withdrawn his appeal as the same is not favorable to him. [44] Hence, the additional
monetary award can only be imposed upon petitioner who pursued the present
appeal.[45]

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals finding
Rosendo Pacursa guilty as principal by direct participation, and petitioner Ernesto
Garces as an accessory, to the crime of Forcible Abduction with Rape,
is MODIFIED. Accused Rosendo Pacursa is found GUILTY beyond reasonable doubt
of the crime of RAPE, and being a minor at the time the crime was committed, is
sentenced to suffer an indeterminate penalty ranging from eight (8) years and one
(1) day of prision mayor, as minimum, to 15 years of reclusion temporal, as
maximum. Petitioner Ernesto Garces is found guilty as an accomplice to the crime of
rape, and is also sentenced to suffer an indeterminate penalty ranging from eight (8)
years and one (1) day of prision mayor, as minimum, to 15 years of reclusion
temporal, as maximum.

Rosendo Pacursa and Petitioner Ernesto Garces are ORDERED to pay

complainant P50,000.00 as civil indemnity ex delicto. Being an accomplice,
petitioner is held solidarily liable with the principal only for half of the amount
or P25,000.00 and their subsidiary liability shall be enforced in accordance with
Article 110 of the Revised Penal Code. Petitioner is likewise ordered to pay
complainant P50,000.00 as moral damages.

SO ORDERED.

THIRD DIVISION
PEOPLE OF THE PHILIPPINES, G.R. No. 181632
Plaintiff-Appellee, Promulgated:
- versus - September 25, 2008
JESSIE BALLESTA,
Accused-Appellant.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
This is an appeal from the Decision[1] dated 28 September 2007 of the Court of
Appeals in CA-G.R. CR-HC No. 00121, which affirmed with modification the Decision,
[2]
dated 18 January 2000 of the Regional Trial Court (RTC), 10 th Judicial Region,
Branch 8, Malaybalay City, convicting the appellant Jessie Ballesta of the crime of
murder and sentencing him to suffer the penalty of reclusion perpetua.
A criminal Complaint[3] charging Raul Colongan, John Doe and Peter Doe with the
crime of murder was filed before the Municipal Circuit Trial Court (MCTC), Don Carlos,
Bukidnon, for preliminary investigation. Further investigation conducted by the
National Bureau of Investigation (NBI), Cagayan de Oro City, resulted, however, in
certain significant discoveries such that after preliminary investigation, the MCTC
issued an Order[4] dropping Raul Colongan from the Complaint. Instead, it ordered
the inclusion of the appellant as one of the accused therein.
Resultantly, appellant was charged with the crime of murder in an Information, [5] the
accusatory portion of which reads:
That on or about the 19th day of April 1997, in the evening, particularly at
New Market, Poblacion, [M]unicipality of Don Carlos, [P]rovince of
106
Bukidnon, Philippines and within the jurisdiction of this Honorable
Court, the above-named [appellant] together with two other
persons whose identities are not yet known, conspiring,
confederating and mutually helping one another, with intent to kill
by means of treachery, evidence (sic) premeditation and abuse of
superior strength with the use of firearm with which they were
conveniently provided, did then and there willfully, unlawfully and
criminally attack, assault and shoot QUADRITO COSIERO, mortally
wounding the latter which injury caused the death of QUADRITO
COSIERO to the damage and prejudice of the legal heirs of (sic)
QUADRITO COSIERO in such amount as may be allowed by law. [6]
When arraigned, appellant, with the assistance of counsel de oficio,
pleaded NOT GUILTY to the crime charged. Accordingly, trial on the merits
ensued.
The prosecution presented the following witnesses: (1) Leonisa Cosiero (Leonisa),
wife of the deceased-victim; (2) Mailene Cosiero (Mailene), daughter of the
deceased-victim; and (3) Atty. Alex Cabornay (Atty. Cabornay), a Senior Investigation
Agent of the NBI, Cagayan de Oro City.
Leonisa testified that at about 6:30 in the evening of 19 April 1997, her husband,
Quadrito Cosiero, the deceased victim, was inside their family-owned store located
at the New Public Market, Don Carlos, Bukidnon, transacting with a customer. As
their store usually closed at 6:30 in the evening, she, their children and sales
personnel were already outside the store waiting for her husband to signal their
departure. A few minutes thereafter, her husband went out of their store and said
Let us go. He then proceeded towards the drivers seat of their pick-up truck which
was parked just outside their store. Leonisa also walked towards the front passenger
seat of their pick-up truck. However, before she could even reach the front
passenger seat of the said vehicle, she heard a gunshot coming from the other side
of their vehicle. Out of fear, she immediately opened the door of the pick up, sat on
the front passenger seat and turned to the drivers seat to look for her husband, but
she did not find him there. Hastily, the appellant pulled her out of the vehicle
causing her to stagger and fall. She stood up and ran towards the pharmacy where
her children were. The appellant then sat in the front passenger seat of the

deceased-victims pick-up truck and searched the compartment of the same. Failing
[7]
to find anything, the appellant ran away from the scene.
Shortly thereafter, Leonisa saw her blooded husband on the ground, and she
shouted for help. Her husband was boarded into a tricycle and brought
[8]
to Simbolan Hospital, Don Carlos, Bukidnon, where he died. The cause of her
husbands death was cardio-respiratory arrest secondary to intracranial hemorrhage
due to gunshot wound sustained at theocciput, right to supraorbital bone within the
area of the left eye, nasal side.[9]
Mailene corroborated the testimony of her mother in all aspects, particularly as
regards the identity of the appellant. She stated that at about 6:30 in the evening
of 19 April 1997, while she was playing with her siblings in front of their store which
was adjacent to a pharmacy, she saw the appellant scouring their displayed rice for
sale. She disclosed that it was also the appellant who pulled her mother out of their
pick-up truck. She then saw the appellant sit in the front passenger seat. Afterwards,
the appellant searched the compartment of their vehicle. Thereafter, she did not see
where the appellant went.[10]
Atty. Cabornay stated that it was the police officers of Don Carlos, Bukidnon, who
made the initial investigation regarding the killing of Quadrito Cosiero. The initial
investigation disclosed that it was a certain Raul Colongan who shot the
victim. When the case was forwarded to their office, Raul Colongan was already in
their custody, so they immediately forwarded the records to the MCTC for
preliminary investigation. In the course of a follow-up investigation, it turned out
that it was the appellant and not Raul Colongan who was positively identified by the
wife and the daughter of the deceased victim as the person present at the crime
scene. Considering that the case was already forwarded to the MCTC for preliminary
investigation, Atty. Cabornay then moved for the incorporation of the name of the
appellant as one of the suspects in the killing of Quadrito Cosiero. The MCTC acted
on his motion and ordered the filing of an amended complaint so as to include the
name of the appellant as one of the suspects therein and the dropping of the name
of Raul Colongan, as there was no iota of evidence that could be used as basis to
[11]
implicate him as among the perpetrators in the killing of the victim. In compliance
107
therewith, he filed an amended complaint incorporating the name of the appellant
as one of the suspects therein and thereby removed the name of Raul Colongan. [12]
For its part, the defense presented the lone testimony of the appellant
who interposed the defense of alibi.
The appellant claimed that at about 6:30 in the evening of 18 April 1997, he was at
his house in Pinamaloy, Don Carlos, Bukidnon. Thereafter, his wife called his
attention because there were three persons, whom he later identified as Edon, Alias
Abu and Alias Makung, all from Maguindanao, looking for Joel Bacalso (Joel),
his kumpare. He then accompanied the three to Joels house. After dinner, he and
Joel accompanied the three visitors to the house of his aunt, where the three visitors
slept for the night.[13]
The next day, or on 19 April 1997, immediately after he woke up, he went to the
house of his aunt and found Joel talking to the three visitors. One of the visitors
told him that they were going to kidnap a person named Joe Caring from
Don Carlos, Bukidnon, and that he and Joel would only need to point to
them Joe Caring and the two of them would be given one million
pesos. They immediately proceeded to Joe Carings house at Don Carlos,
Bukidnon. Upon arrival thereat, appellant inquired as to the whereabouts of Joe
Caring, but he was told that Joe Caring went to Cagayan de Oro City. [14] After learning
that their intended victim was out of town, the three visitors planned to kidnap just
anyone else, considering that they had already used all their supplies in going to
Don Carlos, Bukidnon.[15] The appellant then told Joel that he would go ahead to the
New Market, Don Carlos, Bukidnon, where he worked as a dispatcher of Speed Zone
buses. He stayed there until 5:00 p.m. Thereafter, he went to the place of a certain
Paalam to eat. Then, he proceeded to the billiard hall near the place of Paalam. Upon
his arrival at the billiard hall, he was called by a police officer and was asked to
slaughter the latters pig. Later, he went to the new market site to pay his
debt. While on his way there, Eddie Acop and Tatay Polgo invited him for a
drink. After a few minutes, he left and looked for a ride going to the new
market. Again, he was called by a friend for a drink at the Lily Palomares store. It
was already about 6:45 p.m. or 7:00 p.m. at that time. While drinking thereat, he
 108

MURDER DESPITE THE INSUFFICIENCY OF EVIDENCE TO

heard a commotion outside the store. After a short while, he learned that Quadrito
PROVE THAT THE KILLING WAS ATTENDED BY THE
Cosiero was robbed and shot.[16] QUALIFYING CIRCUMSTANCE OF TREACHERY.[21]

On his way home, Joel informed him that the three visitors from On 28 September 2007, the Court of Appeals rendered its Decision affirming with
Maguindanao were the persons who shot Quadrito Cosiero. Joel likewise modification the Decision of the trial court, the decretal portion of which reads:
requested that he and the three visitors be accompanied by the appellant
WHEREFORE, the appeal is DENIED. The Decision of the RTC is
to the highway to wait for a bus as the three visitors were already leaving hereby AFFIRMED, but with the MODIFICATION that [appellant]
to which appellant acceded.[17] Jessie Ballesta is liable only as an ACCOMPLICE, and not as a
principal, to the crime of Murder. His sentence is
therefore REDUCED to 12 years of prision mayor as minimum, to
The appellant similarly alleged that from 6 October 1997 until 16 November 1997,
17 years and 4 months of reclusion temporal as
he stayed in Bohol because his maternal grandmother died. When he returned maximum. Moreover, while the award of P50,000.00 as indemnity
home, he was arrested by the NBI at the port of Cagayan de Oro City for the death for the death of the victim is also affirmed, the award of moral
damages is hereby increased to P50,000.00.[22]
of the victim.[18]

The appellant is before this Court seeking a reversal of his conviction.

On 18 January 2000, the trial court rendered its Decision finding the appellant guilty
beyond reasonable doubt of the crime charged, the dispositive portion of which is The appellant contends that the failure of Leonisa, the wife of the deceased victim,
quoted as follows: to mention his name as the person who pulled her from the inside of the pick-up
WHEREFORE, judgment is entered finding [appellant] Jessie Ballesta GUILTY truck when she was investigated by the police, as well as during preliminary
of the crime of murder as charged. He is hereby sentenced to suffer the investigation, makes her testimony before the court a quo doubtful. In the same
penalty of reclusion perpetua and to indemnify the heirs of his victim
Quadrito Cosiero the sum of P50,000.00 and moral damages of P30,000.00. way, Mailene, the daughter of the victim, had not properly and positively identified
[19]
him during the investigation as he was only identified by Mailene through the
pictures furnished by the NBI, which pictures were taken from his house. Thus, he
The records of this case were originally transmitted to this Court on appeal. Pursuant
should be acquitted of the crime charged as his positive identification by the
to People v. Mateo,[20] the records were transferred to the Court of Appeals for
prosecution witnesses was a product of an afterthought.
appropriate action and disposition.
Appellant further argues that the trial court erred in rejecting his defense of alibi
In his brief, appellant raises the following errors, viz:
because it was clearly established that during the killing of the deceased victim, he
I. THE TRIAL COURT ERRED IN NOT FINDING was somewhere else.
THAT THE POSITIVE IDENTIFICATION OF THE [APPELLANT]
BY THE PROSECUTION WITNESSES WAS A PRODUCT OF
Finally, appellant claims that assuming arguendo that he conspired in the killing of
AN AFTERTHOUGHT.
the deceased victim, treachery should not be appreciated as a qualifying
II. THE TRIAL COURT ERRED IN REJECTING circumstance to change the crime committed to murder. He alleges that there was
[APPELLANTS] DEFENSE OF ALIBI.
no direct proof that treachery was employed to insure the execution of the crime, as
III. ASSUMING ARGUENDO, THAT THE APPELLANT none of the prosecution witnesses saw how the deceased victim was shot.
CONSPIRED WITH THE KILLER OF THE VICTIM, THE TRIAL
COURT ERRED IN CONVICTING THE [APPELLANT] OF
 109

Q: And were you able to reach the seat at the front seat?
Originally, the appellant was not considered as a suspect because the result of the
initial investigation conducted by the police officers of Don Carlos, Bukidnon, pointed A: Before I reached, there was a gun burst.
to a certain Raul Colongan as the person who shot the victim. It appears, however,
Q: And what did you do when you heard the shot?
that the wife of the victim mentioned the name of Raul Colongan in her affidavit only
because of the information given to her by the police officers that somebody saw A: I opened the door of the pick-up and sat down.

Raul Colongan shoot her husband. She was sure, though, that she did not see him at Q: And what happened next?
the crime scene.
A: When I sat down, I looked at where my husband was supposed to be, but
I did not find him.
Upon the other hand, the records revealed that during further investigation
conducted by the NBI, the wife of the deceased victim categorically and
repeatedly stated that she saw the appellant at the crime scene right after
Q: And after that, what happened next?
she heard the gunshot. She maintained that the person who pulled her out
A: After turning to look for my husband, there was a person who pulled me
of their pick-up truck was the appellant himself. This statement was
strongly which caused me to stagger and fell down.
corroborated by her daughter, who disclosed that the very person whom
she saw scouring their displayed rice for sale was the same person who Q: And when you fell, what happened?

pulled her mother out of their vehicle and thereafter searched the A: I immediately stood up and stood beside the post near our store and
compartment thereof. then ran towards the pharmacy near our store.

It bears emphasis that the pictures of the appellant shown to the daughter of the
victim show that the appellant posed with four to five other persons. Upon being
shown the pictures, she directly and unhesitatingly pointed to the appellant as the
person who scoured their displayed rice for sale, and as the one who pulled her
mother out of the vehicle.These circumstances led to the amendment of the
complaint for murder by dropping Raul Colongan as one of the suspects and
including the name of the appellant in his stead.
Q: You said you were pulled by a man which caused you to stagger and fell
and you said you were able to hold a post near the store, do you know who
this person who pulled you?
A: Yes.
Q: Will you please look and at present you said you know, if he is around
could you identify him?
Q: By pointing your finger to anybody here, please tell who that person who
pulled you out of the vehicle?

Also, during the testimony of the wife and the daughter of the victim before the trial
A: (Witness is pointing to a person inside the courtroom who identifies
court, they similarly identified positively the appellant as the person whom they himself as Dioscoro Ballesta).[23]
actually saw at the crime scene immediately after the gunshot. As found by both
Q: Do you know his name?
lower courts, the testimonies of the wife and the daughter of the victim as regards
the identity of the appellant were categorical, consistent and candid. Thus, this A: Yes.

Court cannot cast any doubt on the credibility of the said witnesses. Here we quote Q: Who (sic) is his name?
the testimonies of the wife and the daughter of the victim:
A: I know him to be Jessie Ballesta.[24]
Direct testimony of the victims wife:
Direct testimony of the victims daughter:

Q: Now, at 6:30 oclock in the evening, you said that was the usual time that
your business closes, where was your mother located at that precise
time, 6:30 in the evening?
A: Outside our store.
Q: How about your father, where was he?
A: He was inside the store.
Q: Now, at a particular time before your store close few minutes before
your store, can you recall if there was somebody who was standing near
the place where you were selling your rice?
A: Yes.
Q: What was he doing, if you know?
A: He was scouring the displayed rice for sale.
Q: Can you still recall his face even until this moment?
A: Yes.
Q: You said awhile ago that you identified that person scouring rice at the
place where the rice situated on that particular date, [19 April 1997], at
6:30 oclock in the evening, if that fellow is around within the four corners
of this sala of the Honorable Court, will you please point to him?
A: (Witness is pointing to a person inside the courtroom who has already
identified himself as Dioscoro Ballesta).[25]
Based on the foregoing, it cannot be said that the positive identification of the
appellant was a product of an afterthought.
It is well-entrenched that the findings of the trial court on the credibility of witness
deserve great weight, given the clear advantage of a trial judge in the appreciation
of testimonial evidence. We have recognized that the trial court is in the best
position to assess the credibility of witnesses and their testimonies because of their
unique opportunity to observe the witnesses first-hand; and to note their demeanor,
conduct and attitude under grueling examination. These are significant factors in
evaluating the sincerity of witnesses, in the process of unearthing the truth. [26] The
rule finds an even more stringent application where the said findings are sustained
by the Court of Appeals.[27] Thus, except for compelling reasons, we are doctrinally
110
bound by the trial courts assessment of the credibility of witnesses. [28] In this case,
there was no cogent reason to deviate from the findings of both lower courts.
Moreover, there was no indication that the wife and the daughter of the deceased
victim were improperly motivated when they testified against the appellant. As a
rule, absent any evidence showing any reason or motive for prosecution witnesses
to perjure, the logical conclusion is that no such improper motive exists, and their
testimonies are thus worthy of full faith and credit. [29] Leonisa was the wife of the
deceased victim while Mailene was his daughter; thus, it would be
unnatural for them, being relatives and interested in vindicating the crime,
to implicate someone other than the real culprit, lest the guilty go
unpunished. The earnest desire to seek justice for a dead kin is not served should
the witness abandon his conscience and prudence, and blame one who is innocent
of the crime.[30] In this case, Leonisa and Mailenes act of testifying against
the appellant was motivated only by no other motive than their strong
desire to seek justice for what had happened to the deceased victim.
To at least downgrade the crime charged against him, the appellant argues that the
qualifying circumstance of treachery was not sufficiently proven by the prosecution.
It is settled that treachery cannot be presumed, but must be proved by clear and
convincing evidence as conclusively as the killing itself. To appreciate treachery, two
(2) conditions must be present, namely, (a) the employment of means of execution
that give the person attacked no opportunity to defend himself or retaliate, and (b)
the means of execution were deliberately or consciously adopted. This Court has
also previously held that where treachery is alleged, the manner of attack
must be proven. Where no particulars are shown as to the manner in which the
aggression was made or how the act which resulted in the death of the deceased
began and developed, treachery cannot be appreciated as a qualifying
circumstance. [31]
In the instant case, treachery cannot be appreciated, considering that the wife and
the daughter of the victim did not see the initial stage and particulars of the attack
on the victim.This Court has held that where all indicia tend to support the
conclusion that the attack was sudden and unexpected, but there are no precise
 111

data on this point, treachery cannot be taken into account. Treachery cannot be
established from mere suppositions, drawn from the circumstances prior to the
moment of the aggression, that the accused perpetrated the killing with treachery.
When the witnesses did not see how the attack was carried out and cannot testify on
how it began, the trial court cannot presume from the circumstances of the case
that there was treachery. Circumstances which qualify criminal responsibility cannot
rest on mere conjectures, no matter how reasonable or probable, but must be based
on facts of unquestionable existence.[32]
The Information also alleged that evident premeditation and abuse of superior
strength attended the killing.
The qualifying circumstance of abuse of superior strength cannot also be
appreciated. This aggravating circumstance is present when the aggressors
purposely use excessive force out of proportion to the means of defense available to
the person attacked.[38] In this case, however, the prosecution failed to prove that
the appellant purposely used an excessive force in attacking the victim, considering
that the prosecution witnesses did not actually see how the victim was shot.
Absent the qualifying circumstances of treachery, evident premeditation and abuse
of superior strength, the appellant could only be liable for homicide.
We now proceed to determine the liability of the appellant.

This Court agrees with the appellate court that the appellant can only be
For evident premeditation to be appreciated, the following elements must be
held liable as an accomplice. As the appellate court observed, there was lack of
established: (1) the time when the accused decided to commit the crime; (2) an
sufficient evidence of conspiracy between the appellant and the three visitors, such
overt act manifestly indicating that he has clung to his determination; and (3)
that doubt could not be removed as to whether the appellant was a principal in the
sufficient lapse of time between decision and execution to allow the accused to
killing of the victim.As found by the Court of Appeals, a closely-[knit] connection
reflect upon the consequences of his act. [33] Like any other circumstance that
existed between the events such that [appellants] previous and simultaneous acts
qualifies a killing as murder, evident premeditation must be established by clear and
were not isolated from the [killing of the victim]. He positioned himself in front of the
positive proof; that is, by proof beyond reasonable doubt. [34] The essence of
store, possibly to act as a lookout, but in any case ready to enter the truck to search
premeditation is that the execution of the criminal act was preceded by cool thought
and rob items inside. There could be no other conclusion that [appellant] knew of
and reflection upon the resolution to carry out the criminal intent during a space of
the criminal design of the perpetrators, and that he assented to, and cooperated in
time sufficient to arrive at a calm judgment.[35]
the accomplishment of the crime.[39] However, the testimonies and evidence of the
In this case, the prosecution failed to show the presence of any of these prosecution were not sufficient to prove with moral certainty appellants participation
elements. The record is bereft of any evidence to show evident premeditation. It was as principal in the killing of the victim.
not shown that the appellant and his two other co-accused, who remain at large,
There is also lack of sufficient evidence of conspiracy between the appellant and the
meditated and reflected upon their decision to kill the victim. Likewise, there is a
three visitors. Conspiracy exists when two or more persons come to an agreement
dearth of evidence that the appellant, as well as his two co-accused, persisted in
concerning the commission of a felony and decide to commit it. It may be deduced
their plan to kill the victim. As this Court has repeatedly held, the premeditation to
from the manner in which the offense is committed, as when the accused acted in
kill must be plain, notorious and sufficiently proven by evidence of outward acts
concert to achieve the same objective. In order to hold an accused liable as co-
showing the intent to kill.[36] In the absence of clear and positive evidence,
principal by reason of conspiracy, he must be shown to have performed an overt act
mere presumptions and inferences of evident premeditation, no matter
in pursuance or in furtherance of conspiracy. The overt act may consist of active
how logical and probable, are insufficient.[37]
participation in the actual commission of the crime itself or moral assistance to co-
conspirators by exerting moral ascendancy over them by moving them to execute or
 112

implement the conspiracy. Mere presence at the scene of the incident, knowledge of several people in his testimony, he never presented any of those people to testify on
the plan and acquiescence thereto are not sufficient grounds to hold a person liable his behalf. In view of our finding that the prosecution witnesses have no
[40]
as a conspirator. As testified to by the daughter of the victim, the appellant was motive to falsely testify against the appellant, the defense of alibi, in this
not actually seen to have shot the victim, as he was only seen pulling her mother case uncorroborated by other witnesses, should be completely
out of the vehicle immediately after the shooting incident. Lacking sufficient disregarded.
evidence of conspiracy and there being doubt as to whether appellant acted as a
All told, the appellant is guilty as an accomplice in the crime of homicide. Under
principal or just a mere accomplice, the doubt should be resolved in his favor
Article 249 of the Revised Penal Code, as amended, the penalty imposed for the
and is thus held liable only as an accomplice.[41]
crime of homicide is reclusion temporal. Since appellant is only an accomplice, the
The failure of the prosecution to prove the existence of conspiracy does not imposable penalty is one degree lower than that imposable for the
eliminate any criminal liability on the part of the appellant. Although he cannot be principal, i.e., prision mayor. There being neither aggravating nor mitigating
convicted as a co-principal by reason of the conspiracy, he can still be liable as an circumstances, the said penalty shall be imposed in its medium period. [46] Applying
accomplice. Where the quantum of proof required to establish conspiracy is lacking, the Indeterminate Sentence Law, appellant is accordingly sentenced to suffer the
the doubt created as to whether the appellant acted as principal or as accomplice prison term of 4 years, 2 months and 1 day of prision correccional, as minimum, to 8
will always be resolved in favor of the milder form of criminal liability - that of a years and 1 day of prision mayor, as maximum.
mere accomplice.[42] Thus, it is only proper to hold the appellant guilty as an
We now go to the award of damages. When death occurs due to a crime, the
accomplice of the crime of homicide.
following damages may be awarded: (1) civil indemnity ex delicto for the death of
The appellant interposed the defense of alibi as a futile attempt to exonerate himself the victim; (2) actual or compensatory damages; (3) moral damages; (4) exemplary
from the crime charged. Settled is the principle that alibi is one of the weakest damages; and (5) temperate damages.[47]
defenses that can be resorted to by an accused, not only because it is inherently
Civil indemnity is mandatory and granted to the heirs of the victim without need of
weak and unreliable, but also because it can be easily fabricated. [43] Unless
proof other than the commission of the crime. [48] We affirm the award of civil
substantiated by clear and convincing proof, such defense is negative, self-serving,
indemnity given by the trial court and the Court of Appeals. Under prevailing
and undeserving of any weight in law. [44] For alibi to succeed as a defense, the
jurisprudence,[49] the award of P50,000.00 to the heirs of the victim as civil
accused must establish by clear and convincing evidence (a) his presence at
indemnity is proper.
another place at the time of the perpetration of the offense and (b) the physical
impossibility of his presence at the scene of the crime. [45]
As to actual damages, the heirs of the victim are not entitled thereto, because said
damages were not duly proved with reasonable degree of certainty. [50] Similarly, the
In the case at bar, the appellant insists that at the time of the shooting
heirs of the victim are not entitled to exemplary damages in the amount
incident, he was at the Lily Palomares store at the new market drinking with
of P25,000.00, since the qualifying circumstance of treachery was not properly
a friend. The appellant failed to notice that the shooting incident also happened in
established.[51]
the new market, the very same place where he was at the time of the shooting
incident. Thus, it was not physically impossible for the appellant to be present at the
scene of the crime. More so, such defense of alibi interposed by the appellant
becomes weaker because it is uncorroborated. Despite the fact that he mentioned
 113

Anent moral damages, the same is mandatory in cases of murder and homicide,
without need of allegation and proof other than the death of the victim. [52] The award
ofP50,000.00 as moral damages is likewise in order.

The award of P25,000.00 as temperate damages in homicide or murder cases is

proper when no evidence of burial and funeral expenses is presented in the trial
court.[53]Under Article 2224 of the Civil Code, temperate damages may be recovered,
as it cannot be denied that the heirs of the victim suffered pecuniary loss although
the exact amount was not proved.[54] Thus, this Court similarly awards P25,000.00 as
temperate damages to the heirs of the deceased victim.

WHEREFORE, all the foregoing considered, the Decision of the Court of Appeals
in CA-G.R. CR-HC No. 00121 is hereby MODIFIED as follows: (1) appellant Jessie
Ballesta is hereby found GUILTY beyond reasonable doubt as an accomplice in the
crime of homicide; (2) there being neither aggravating nor mitigating circumstances
in the commission of the crime, the appellant is hereby sentenced to suffer the
penalty of 4 years, 2 months and 1 day of prision correccional, as minimum, to 8
years and 1 day ofprision mayor, as maximum; (3) the appellant is
likewise ORDERED to pay the heirs of Quadrito Cosiero the amount of P25,000.00
as temperate damages. The amount ofP50,000.00 as civil indemnity and P50,000.00
as moral damages, already awarded by the appellate court, are MAINTAINED.

SO ORDERED.
 114

covered by the CONTRACTORs Proposal of Complete Supply and

THIRD DIVISION
Installation of Building Shell Wet Construction Works as indicated
in the plans and specifications at the Contract Price and within
the Contract time herein stipulated and in accordance with the
plans and specifications. The CONTRACTOR shall furnish and
EMPIRE EAST LAND HOLDINGS, INC., G.R. No. 168074 supply all necessary labor, equipment and tools, supervision and
other facilities needed and shall perform everything necessary for
Petitioner,
the complete and successful masonry works of the building
Promulgated: described hereof, provided that it pertains to or is part of the
- versus -
above mentioned work or items covered by the Contract
September 26, 2008 documents.
CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC.,
2.2. The scope of works as stated hereunder but not limited to the
Respondent.
following:
x------------------------------------------------------------------------------------x
a) CONCRETE WORKS foundation and footings, tie beams, walls,
columns, beams, girders, slabs, stairs, stair slabs, cement floor
topping, ramps, rubbed concrete.
DECISION
b) MASONRY WORKS interior and exterior walls including
NACHURA, J.: stiffeners, CHB laying, interior and exterior plastering, non-skid tile
installation and scratch coating for tile installation.

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of c) FORMWORKS
the Court of Appeals (CA) Decision[1] dated November 3, 2004 and its
d) OTHER CONCRETE WORKS trenches, platform for transformers,
Resolution[2]dated May 10, 2005, in CA-G.R. SP No. 58980. The assailed decision
ger sets and aircons
modified the Decision[3] of the Construction Industry Arbitration Commission (CIAC)
e) METAL WORKS trench grating, I-beam separator, manhole
dated May 16, 2000in CIAC No. 39-99.
cover, ladder rungs of tanks, stair railings and stair nosing

The facts of the case, as found by the CIAC and affirmed by the CA, follow: f) MISCELLANEOUS WORKS

On February 12, 1997, petitioner Empire East Land Holdings, Inc. and respondent - installation of Doors and Jambs (metal and wood)

Capitol Industrial Corporation Groups, Inc. entered into a Construction - Lintel Beams/Stiffener Columns
[4]
Agreement whereby the latter bound itself to undertake the complete supply and
- Installation of Hardwares and accessories
installation of the building shell wet construction of the formers building known as
Gilmore Heights Phase I, located at Gilmore cor. Castilla St., San Juan, Metro Manila. - Window and Door Openings
[5]
The pertinent portion of the aforesaid agreement is quoted hereunder for easy
g) MISCELLANEOUS ITEMS column guard, wheel guard, waterstop,
reference: vapor barrier, incidental embeds, floor hardener, dustproofer,
sealant, soil treatment, elevator block-outs for call button, block-
ARTICLE II - SCOPE OF WORK outs for electro-mechanical works and concrete landing sills.

2.1. The CONTRACTOR shall complete the civil/structural and h) ROOFING WORKS Steel Trusses/Purlins, Rib Type pre-painted
masonry works of the building based on the works (sic) items roofing sheets, Insulation

i) Garbage Chutes
2.3. The work of the CONTRACTOR shall include but not be limited
to, preparing the bill of materials, canvassing of prices, requisition
of materials for purchase by OWNER, following up of orders,
checking the quality and quantity of the materials within the
premises of the construction site and returning defective
materials.[6]
Respondent further agreed that the construction work would be completed within
330 calendar days from Day 1, upon the Construction Managers confirmation.
[7]
Petitioner initially considered February 20, 1997 as Day 1 of the project. However,
when respondent entered the project site, it could not start work due to the on-going
bulk excavation by another contractor. Respondent thus asked petitioner to move
Day 1 to a later date, when the bulk excavation contractor would have completely
[8]
turned over the site.
After a series of correspondence between petitioner and respondent, February 25,
1997 was proposed as Day 1. Accordingly, respondents completion date of the
project was fixed on January 21, 1998.[9]
Prior to and during the construction period, changes in circumstances arose,
prompting the parties to make adjustments in the initial terms of their contract. The
following pertinent changes were mutually agreed upon by the parties:
First, as the bulk excavation contractor refused to return to the
project site, petitioner directed respondent to continue the
excavation work;[10]
Second, in addition to respondents scope of work, it was made to
perform side trimmings.
Third, petitioner directed respondent to reduce the monthly target
accomplishment to P1 million worth of work and up to one (1) floor
only.[11]
Fourth, the following were deleted from respondents scope of
work: a) Masonry works and all related items from 6 th floor to roof
deck; b) All exterior masonry works from 4 th floor to roof deck; and
c) Garbage chute.[12]
Fifth, as a consequence of the deletion of the above works, the
contract price was reduced to P62,828,826.53.[13]
115
Sixth, the parties agreed: that the items of work or any part
thereof not completed by the respondent as of February 28, 1999
should be deleted from its contract, except demobilization;the
punch list items under respondents scope of responsibility not yet
made good/corrected as of the same period shall be done by
others at a fixed cost to be agreed upon by all concerned; and
respondent should be compensated for the cost of utilities it
installed but were still needed by other contractors to complete
their work.[14]
Lastly, they agreed that a joint quantification should be done to
establish the bottom line figures as to what were to be deleted
from the respondents contract and the cost of completing the
punch list items which were deductible from respondents
receivables.[15]
In view of the limitation on the target accomplishment to P1 million worth of work
per month, respondent asked that the topping-off be moved to February
1999.Respondent likewise requested a price adjustment with respect to overhead
and equipment expenses and legislated additional labor cost. These requests were
not, however, acted upon by petitioner.[16]
After the completion of the side trimmings and excavation of the buildings
foundation, respondent demanded the payment of P2,248,507.70
and P1,805,225.90, respectively. Instead of paying the amount, petitioner agreed
with the respondent on a negotiated amount of P900,000.00 for side trimmings.
[17]
However, respondents claim for foundation excavation was not acted upon.
[18]
During the construction period, petitioner granted, on separate occasions,
respondents requests for payroll and material accommodations.[19]
On March 13, 1999, respondent submitted its final billing, amounting
to P4,442,430.90 representing its work accomplishment and retention, less all
deductions. On March 23, 1999, a punch list was drawn as a result of the joint
inspection undertaken by the parties. Petitioner, on the other hand, refused to issue
a certificate of completion. It, instead, sent a letter to respondent informing the
latter that it was already in default.[20]
On September 14, 1999, respondent was constrained to file a Request for
Adjudication[21] with the CIAC. Respondent specifically prayed, thus:
 116

2. Additional Work: Excavation for Foundations 1,805,225.90

Total due the Claimant P8,013,981.81
WHEREFORE, premises considered, the Claimant-Contractor prays
that this Honorable Commission render judgment against
Respondent-Owner EMPIRE EAST LAND HOLDINGS, INC., ordering
said Respondents to pay the Claimant the amount of FOR THE RESPONDENT:
PhP22,770,976.66 plus costs of suit, broken down as follows:
1. Punch List Items P248,350.00

Total due the Respondent P248,350.00

a. PhP4,442,430.90 as unpaid amount from

the contract price;
All other claims and counterclaims are dismissed.
b. PhP3,153,733.60 as the amount remaining
unpaid for additional works; OFFSETTING the lesser amount due from Claimant with the bigger
amount from the Respondent, EMPIRE EAST LAND HOLDINGS, INC.
c. PhP13,976,427.00 as overhead expenses; is hereby ordered to pay CAPITOL INDUSTRIAL CONSTRUCTION
and GROUPS, INC. the net amount of SEVEN MILLION SEVEN HUNDRED
SIXTY-FIVE THOUSAND SIX HUNDRED THIRTY-ONE AND 81/100
d. PhP1,198,385.16 as additional costs due (P7,765,631.81) with 6% legal interest from the time the request
to wage escalation; for adjudication was filed with the CIAC on September 14, 1999 up
to the time this Decision becomes final and executory.
Other reliefs equitable under the premises are also prayed for.[22]
Thereafter, interest at the rate of 12% per annum shall accrue on
the final judgment until it is fully paid.

On May 16, 2000, the CIAC rendered a decision [23] in favor of the The arbitration fees and expenses shall be paid on a pro rata basis
respondent, disposing, as follows: as initially shared by the parties.

SO ORDERED.[24]
1. Retention Money P4,502,886.64

Unpaid Billings (P1,607,627.65) As to petitioners counterclaim, the CIAC denied those which referred to masonry
and other works that it took over, considering that they were formally deleted from
Retention Money (6,110,514.29)
respondents scope of work, which in turn caused the reduction of their total
WHEREFORE, judgment is hereby rendered and AWARD of monetary claims is
contract price.[25] Petitioners claim for liquidated damages was likewise found
hereby made as follows:
unmeritorious because it allowed respondent to complete the works despite
FOR THE CLAIMANT: knowledge that the latter was already in default. [26] On the other hand, as the punch
list was drawn after the joint inspection by the parties, CIAC found for the petitioner

3. Overhead Expenses 1,397,642.70 and thus awarded a total amount of P248,350.00[27]

4. Labor Costs Escalation 308,226.57


Aggrieved, petitioner elevated the matter to the CA via a petition for review under
Rule 43 of the Rules of Court. On November 3, 2004, the CA affirmed the CIACs
findings of fact and conclusions of law with a slight modification, and ruled:
WHEREFORE, the Decision, dated 16 May 2000, of the
Construction Industry Arbitration Commission Arbitral Tribunal is
hereby AFFIRMED WITH MODIFICATION in that CIACs award on
Labor Cost Escalation is hereby DELETED for lack of factual basis
and, consequently, for lack of cause of action and CIACs award on
Additional Work for Foundation Excavation is hereby equitably
REDUCED to P980,376.34. All other awards, as well as the rates of
interest, are hereby AFFIRMED.
Accordingly, the total amount due to CICG is P6,880,905.68. While
EELH is entitled P248,350.00. Offsetting the award of EELH from
the amount due to CICG, EELH is hereby ORDERED to pay CICG
the total amount of SIX MILLION SIX HUNDRED THIRTY-TWO
THOUSAND FIVE HUNDRED FIFTY-FIVE PESOS (P6,632,555.00). No
costs at this instance.
SO ORDERED.[28]
In deleting respondents claim for labor cost escalation and reducing its claim for the
cost of the excavation of foundation, the appellate court said that respondent failed
to show that it in fact paid said wage increase pursuant to the New Wage Order,
[29]
while the reduction of the cost of foundation excavation was the result of the
reduction of its cost per cubic meter. [30]
Hence, the present petition, raising the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT ORDERED THE RELEASE OF
RETENTION MONEY IN FAVOR OF CICG.
II.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT AWARDED THE CLAIM OF CICG FOR
THE EXCAVATION OF FOUNDATION.
117
III.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT AFFIRMED CIACS AWARD FOR THE
PAYMENT OF ALLEGED OVERHEAD EXPENSES.
IV.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT DENIED EMPIRE EASTS CLAIM FOR
MASONRY AND OTHER WORKS, LIQUIDATED DAMAGES, AND COST
OF MONEY FOR PAYROLL ASSISTANCE AND MATERIALS
ACCOMMODATION.[31]
The petition is partly meritorious.
On the Release of Retention Money
Petitioner contends that both the CIAC and the CA erred in ordering the release of
the retention money despite respondents failure to comply with the conditions for its
release as set forth in the contract.
We find for the petitioner.
In the construction industry, the ten percent (10%) retention money is a portion of
the contract price automatically deducted from the contractors billings, as security
for the execution of corrective work if any becomes necessary. [32]
The construction contract gave petitioner the right to retain 10% of each progress
payment until completion and acceptance of all works. [33] Undoubtedly, as will be
discussed hereunder, respondent complied fully with its obligations, save only those
items of work which were mutually deleted by the parties from its scope of
work. However, apart from the completion and acceptance of all works, the following
requisites were set as pre-conditions for the release of the retention money:
a) Contractors Sworn Statement showing that all taxes
due from the CONTRACTOR, and all obligations on materials used
and labor employed in connection with this contract have been
duly paid;

b) Guarantee Bond to answer for faulty and/or defective
materials or workmanship as stated in Article IX Section 9.3 of this
Contract;
c) Original and signed and sealed Three (3) sets of
prints of As Built drawings.[34]
The CA affirmed the CIACs decision to order the release of the retention money
despite respondents failure to establish the fulfillment of the aforementioned
conditions, as both tribunals merely focused on the non-issuance of the certificate of
completion, which, according to respondent, was a pre-requisite to the issuance of a
guarantee bond. The CA concluded that the conditions were deemed fulfilled
because the creditor voluntarily prevented their fulfillment.
To this, we cannot agree.
The record of the case is bereft of any evidence to show that conditions (a) and (c)
were complied with. Petitioner categorically stated in all its pleadings that they were
not.Surprisingly, respondent did not squarely argue this point. It relied solely on
petitioners failure to issue the certificate of completion, which prevented the
acquisition of a guarantee bond and thus resulted in the non-release of the retention
money. While it is true that respondent was entitled to a certificate of completion as
the issuance thereof was just a ministerial duty of petitioner considering that the
project had already been completed, the certificate was not the only condition for
said release. It was simply a pre-requisite for the issuance of the guarantee
bond. And there was no showing that the absence of the certificate of completion
was the only reason why no guarantee bond was issued.
If we were to apply the civil law rule of constructive fulfillment the condition shall be
deemed fulfilled if the creditor voluntarily prevented its fulfillment then the
submission of a guarantee bond may be deemed to have been complied with. But
we cannot apply the rule to conditions (a) and (c), which remain as unfulfilled
conditions-precedent. Since no proof was adduced that these two conditions were
complied with, petitioners obligation to release the retention money had not, as yet,
118
arisen. We would like to emphasize, though, that this is without prejudice to
respondents compliance with the unfulfilled conditions, after which, release of the
retention money must, perforce, follow.
On Respondents Right to Additional Overhead Costs
Respondent claimed P13,976,427.00 as additional overhead expenses brought
about by the delay in the completion of the project due to petitioners own acts. The
CIAC, however, awarded only a nominal amount which is 10% of respondents claim
because of its failure to present supporting documents to prove such additional
expenses. The arbitral tribunal observed that respondent only presented its own
computation without any other document to substantiate its claim. The CA, in turn,
affirmed the CIAC findings, ratiocinating that petitioners failure to present
countervailing evidence was an implied admission on its part that the computation
made by respondent was correct.
We beg to differ.
It is undisputed that the only piece of evidence presented by respondent in support
of its claim for additional overhead cost was its own computation of the said
expenses. It failed to adduce actual receipts, invoices, contracts and similar
documents. To be sure, respondents claim for overhead cost may be classified as a
claim for actual damages.Actual damages are those damages which the injured
party is entitled to recover for the wrong done and injuries received when none
were intended. They indicate such losses as are actually sustained and are
susceptible of measurement. As such, they must be proven with a reasonable
degree of certainty.[35]
This is not the first time that a contractors claim for additional overhead costs was
denied because of insufficiency or absence of evidence to support the same.
In Filipinas (Pre Fab Bldg.) Systems, Inc. v. MRT Development Corporation, [36] we
denied FSIs claim because only summaries, and not actual receipts, were presented
during the hearing.Similarly, in the instant case, respondent, by presenting only its
own computation to substantiate its claim, is not entitled even to the reduced

amount of P1,397,642.70 which is 10% of its original claim. Instead, we altogether
deny its prayer for additional overhead costs.
On Respondents Right to the Cost of Foundation Excavation
As to respondents entitlement to the cost of excavation of foundation, we find no
cogent reason to disturb the CIACs conclusion, as modified by the CA.
Side trimmings and the excavation of foundation were not included in respondents
original scope of work. They were, however, undertaken by the respondent upon the
directive of petitioner, due to the previous contractors refusal to resume its
excavation work. These works, therefore, constitute an additional claim
respondent over and above the original contract price. A confirmation of these works
had, in fact, been given by petitioner through Change Order Nos. 3 [37] and 4[38] where
it agreed to pay P250,000.00 andP650,000.00, respectively. This P900,000.00
negotiated amount referred specifically to side trimmings and hauling out of adobe
soil. It is unfortunate, though, that the parties failed to arrive at a settlement as to
respondents claim for the cost of excavation of foundation.
The additional works having been undertaken by respondent, and the fact of non-
payment thereof having been established, we find no reason to disturb the CIACs
conclusion that respondent is entitled to its claim for the cost of excavation of
foundation. As to the propriety of the award, both the CIAC and the CA were in a
better position to compute the same considering that said issue is factual in
nature. Significantly, jurisprudence teaches that mathematical computations, as well
[39]
as the propriety of arbitral awards, are factual determinations which are better
examined by the lower courts as trier of facts. Thus, we affirm the award
of P980,376.34 for foundation excavation.
On Petitioners Counterclaim for the Cost of Unfinished Works
During the construction period, the parties mutually agreed that some items of work
be deleted from respondents scope of work. Specifically, as claimed by respondent,
the following were deleted: a) masonry works and all related items from the 6th floor
th
to the roof deck; b) all exterior masonry works from the 4 floor to the roof deck;
and c) the garbage chute. This deletion was, however, denied by petitioner. It,
119
instead, claimed that the only modification it approved was the reduction by three
floors of the total number of floors to be constructed by respondent. [40]
After a thorough review of the documents presented by both parties, both the CIAC
and the CA concluded that the unfinished works, i.e., masonry works, were actually
recognized and accepted by petitioner. It thus agreed to take over, through its new
contractor, the balance of work. The only consequence of such acceptance was the
deduction of the value of the unfinished works from the total contract price. [41] This
was the reason why the contract price was reduced from P84 million
to P62,828,826.53. The deletion was, likewise, confirmed by respondent in a letter
dated August 21, 1998.[42]
of
Applying Article 1235[43] of the Civil Code, petitioners act exempted respondent from
liability for the unfinished works. A person entering into a contract has a right to
insist on its performance in all particulars, according to its meaning and spirit. But if
he chooses to waive any of the terms introduced for his own benefit, he may do so.
[44]
When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection, the obligation is
deemed fully complied with.
In the instant case, petitioner was aware of the unfinished work of respondent; yet,
it did not raise any objection or protest. It, instead, voluntarily hired another
contractor to perform the unfinished work, and opted to reduce the contract
price. By removing from the contract price the value of the works deleted, it is as if
said items were not included in the original terms, in the first place. Thus, as
correctly concluded by the CIAC, and as affirmed by the CA, petitioner is not entitled
to reimbursement from respondent for the expenses it incurred to complete the
unfinished works.
On Petitioners Counterclaim for Liquidated Damages
In addition to its claim for the cost of masonry and other works, petitioner
demanded the payment of liquidated damages on the ground that respondent was
in default in the performance of its obligation.
 120

[W]ith respect to EELHs [petitioners] claim for payroll and material

Liquidated damages are those that the parties agree to be paid in case of a
assistance, a perusal of CIACs questioned Decision reveals that
breach. As worded, the amount agreed upon answers for damages suffered by the these were already taken into consideration and, were in fact,
owner due to delays in the completion of the project. Under Philippine laws, they deducted from CICGs [respondents] retention money itemized as
unpaid billings amounting to P1,607,627.65.
are in the nature of penalties. They are attached to the obligation in order to ensure
performance.[45] As a pre-condition to such award, however, there must be proof of On page 9 of CIACs Decision, the arbitral tribunal found that the
total amount of payroll accommodation advanced by EELH
the fact of delay in the performance of the obligation.
[petitioner] for (sic) CICG [respondent] is P10,044,966.16, while
the material assistance advanced by EELH [petitioner]
Thus, the resolution of the issue of petitioners entitlement to liquidated damages is P2,837,645.26. These amounts were added together with other
hinges on whether respondent was in default in the performance of its obligation. items and were deducted from the reduced contract price. Hence,
as can be gleaned from page 13 of the CIACs Decision, EELHs
[petitioners] overpayment amounting to P1,607,627.65 already
The completion date of the construction project was initially fixed on January 21, included EELHs [petitioners] payroll accommodation and material
1998. However, due to causes beyond the control of respondent, the latter failed to accommodations.[53]
perform its obligation as scheduled. The CIAC[46] and the CA enumerated the causes
As can be gleaned from the appealed CA decision, the appellate court had reviewed
of the delay, viz., the delayed issuance of building permit; [47] additional work
the case based on the petition and annexes, and weighed them against the
undertaken by respondent, i.e., bulk excavation and side trimmings; [48] delayed
Comment of respondent and the decision of the arbitral tribunal to arrive at the
payment of progress billings;[49] delayed delivery of owner-supplied construction
conclusion that the latter decision was based on substantial evidence. In
materials;[50] and limitation of monthly accomplishment. [51] All these causes of
administrative or quasi-judicial bodies like the CIAC, a fact may be established if
respondents failure to complete the project on time were attributable to petitioners
supported by substantial evidence, or that amount of relevant evidence which a
fault.
reasonable mind might accept as adequate to justify a conclusion. [54]
Still, petitioner contends that even at the start and for the entire duration of the
It is well established that under Rule 45 of the Rules of Court, only questions of law,
construction, respondent was guilty of delay due to insufficient manpower and lack
not of fact, may be raised before the Supreme Court. It must be stressed that this
of technical know-how.[52] Yet, petitioner allowed respondent to proceed with the
Court is not a trier of facts and it is not its function to re-examine and weigh anew
project; thus, petitioner cannot now be permitted to raise anew respondents alleged
the respective evidence of the parties. [55] To be sure, findings of fact of lower courts
delay. More importantly, respondent is not guilty of breach of the obligation; hence,
are deemed conclusive and binding upon the Supreme Court, save only in clear
it cannot be held liable for liquidated damages.
exceptional cases.[56]

In view of the foregoing, after deducting from the final contract price the retention
On Petitioners Counterclaim for the Cost of Payroll Assistance and
Materials Accommodation money (that is yet to be released), the payments as well as the payroll and material
accommodations made by the petitioner, there was an overpayment to respondent
Finally, as to petitioners counterclaim for payroll assistance and materials
accommodation, we quote with approval the CAs observation in this wise: in the total amount of P1,607,627.65. From said amount shall be
deducted P980,376.34 due the respondent for the cost of foundation excavation. On
the other hand, as held by the CIAC and affirmed by the CA, petitioner is entitled to
its claim for punch list items amounting to P248,350.00.
 121

Considering that the conditions set forth in the contract have not yet been complied
with, the release of the retention money shall be held in abeyance. Thus,
respondent is liable to petitioner for the payment of P875,601.31, which is the
difference between the overpayment and the cost of foundation excavation, plus
the cost of punch list items.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The

Decision of the Court of Appeals dated November 3, 2004 and its Resolution
datedMay 10, 2005 in CA-G.R. SP No. 58980, are MODIFIED by deleting the award
of additional overhead cost amounting to P1,397,642.70.

The petitioner is directed to issue to respondent the required certificate of

completion in order to enable the latter to obtain the corresponding guarantee
bond. In view of the non-fulfillment of the conditions-precedent, the release of the
retention money is hereby held in abeyance. Thus, respondent is ordered to pay the
petitioner P875,601.31 subject to the return of the amount when respondent shall
have complied with the conditions aforesaid.

FIRST DIVISION
[G.R. No. 4606. October 19, 1909. ]
JUAN RODRIGUEZ, Plaintiff-Appellant, v. FINDLAY & CO., Defendant-
Appellee.
Basilio R. Mapa for Appellant.
Kinney & Lawrence, and John W. Sleeper for Appellee.
SYLLABUS
1. SHIPS AND SHIPPING; BREACH OF CONTRACT; DAMAGES. Where a contract to
furnish the machinery complete, including a propeller, for a freight ship for
coastwise trade in these Islands contained the following: "One brass propeller of 8
diameter and suitable pitch for an expected speed of ship about 9 1/2 knots," and
also the following specification applying to the machinery as a whole: "The whole to
be suitable for a wooden ship of 150 ft. long by 24 ft. beam and 14 ft. depth, as per
plan supplied by Sr. Juan Rodriguez;" it appearing that the person who was to furnish
such machinery knew the purpose for which the ship was to be used and its general
form and construction. Held, That the propeller must be such as to give to such ship
a speed of about 9 1/2 knots per hour, and that furnishing a propeller which gave
the ship a speed of only about 7 knots an hour was not a compliance with the terms
of the contract: And, Held further, That the damages recoverable of a manufacturer
or dealer for the breach of warranty of a sale of goods which he knew at the time of
the sale were intended to be used for a particular purpose or to accomplish a
particular result, the measure of damages is not confined to the difference in value
of the machinery as warranted and as it proves to be, but includes such
consequential damages as are the direct, immediate, and probable result of the
breach.
DECISION
MORELAND, J. :
The complaint asks damages for breach of a written contract between plaintiff and
defendant for the delivery of the machinery, complete, for a ship in process of
construction belonging to the plaintiff.
The defendant, in its answer, denies the allegations of the complaint generally, and
sets up as a counterclaim the balance due from plaintiff on the purchase price of the
machinery aforesaid, and asks for an affirmative judgment against the plaintiff
accordingly.
The defendant secured in the court below an affirmative judgment against the
plaintiff for the sum of P9,216.60, with interest thereon, at the rate of 6 per cent per
annum, from February 28, 1907. The plaintiff made a motion for a new trial upon the
grounds that the evidence does not justify the decision of the court and that the
decision is contrary to law. This motion was denied, and the plaintiff duly excepted
122
and perfected his appeal.
On the 19th of September, 1907, the plaintiff was the owner of a freight ship called
the Constancia, then in course of construction in plaintiffs shops in the city of
Manila. The vessel was designed for the coastwise trade in the Philippine Islands. On
that date, and for some time prior thereto, one William Swann was the consulting
engineer of the defendant, in charge of its machinery department. Swann was at
that time an engineer and naval architect and had been working as an engineer
substantially all his life. On the date mentioned he was, and for some time
theretofore had been, a naval architect, a member of the Institute of Engineers and
Shipbuilders of Scotland, and a member of the Institute of Naval Architects of Great
Britain. The plaintiff was acquainted with Swann and knew him to be an engineer
and naval architect of long experience. On the date referred to Rogaciano Rodriguez,
acting for and on behalf of the plaintiff and as his agent, made a written contract
with Swann, acting for and on behalf of the defendant and as its agent, wherein an
whereby the plaintiff agreed to purchase of the defendant, and the defendant
agreed to sell and deliver to the plaintiff, certain machinery, complete, for the ship
Constancia already referred to. Prior to the making of the contract on the date
referred to, and during the negotiations leading up to the contract and in connection
with them, Swann, the agent of the defendant, visited the shipyard of the plaintiff
and inspected the steamship Constancia, then being constructed. This he did several
different times. The inspections were made for the purpose of determining the kind
and nature of the machinery which would be suitable to the ship referred to. Neither
the plaintiff nor his agent, Rogaciano Rodriguez, was a marine or other engineer and
they knew little or nothing about the kind of machinery which should be placed in
the ship they were building. They relied entirely upon the recommendations,
knowledge, and experience of the engineer Swann. The plaintiff had in mind and
stated to Swann, among other things, the speed which it was necessary that the
Constancia should have in order to be available as a coastwise vessel, and left the
kind, nature, and construction of the machinery to the greater knowledge and
experience of Swann. This is particularly true of the propeller placed in that vessel,
the questions relative to which are the main issues of this case. The contract, so far
as its interpretation is disputed, reads as follows:jgc:
"One brass propeller of 8 diameter and suitable pitch for an expected speed of ship
about 9 1/2 knots.
"The whole to be suitable for a wooden ship of 150 ft. long by 24 ft. beam and 14 ft.
depth, as per plan supplied by Sr. Juan Rodriguez."cralaw virtua1aw library
Before the contract was entered into, the plaintiff delivered to Swann, as the
defendants agent, a plan of the hull of said vessel. Thereafter Swann delivered to
the plaintiff a plan of the entire vessel, showing the machinery placed therein. The
plans in question showed length and breadth of the hull, its general outline and the
number of feet of water which it drew. These plans also showed location and outline
of the sternpost and rudderpost of said ship.
In the process of manufacturing the propeller the defendant thought it discovered
that the propeller described in the contract would not give the speed required by the
contract and notified the plaintiff to that effect, and at the same time asked
permission to put in its place a propeller 10 feet in diameter. This the plaintiff
declined to permit.
The machinery, so purchased, was delivered, except certain items which were
required to be upon all vessels by the rules of the customs officials of the city of

Manila and about which there is little or no dispute. Certain other articles of small
value, necessary for the completion of the machinery, seem not to have been
delivered, but concerning these there is very little dispute between the parties.
The machinery was duly installed in the vessel upon its delivery. Upon the trial of the
ship, after the installation of its machinery, it was found that all of the machinery
worked well except the propeller. This, instead of giving the ship a speed of about 9
1/2 knots an hour, gave a speed of less than 7 knots an hour. The failure of the
propeller to give the required speed to the vessel is substantially the only point in
controversy in this case.
The contention of the plaintiff is that, under the terms of the contract, the defendant
was obliged to furnish a propeller 8 feet in diameter which would give the
Constancia a speed of 9 1/2 knots an hour, and that, failing in that, the contract was
broken and the defendant should be held liable for all damages resulting.
The defendant contends that the machinery was to be according to the
specifications in the contract and that, if these specifications were complied with, it
does not matter what may be the actual speed of the vessel. It claims that it had
nothing to do with the construction of the steamship or the placing therein of the
machinery. The defendant also claims that, under the terms of the contract, there
was no guaranty of speed, and that, if the propeller was 8 feet in diameter and of
brass, it would fulfill the terms of the contract even though the speed of the vessel
should not exceed a knot per hour.
The contract, by its words, expressly requires that the defendant must furnish a
propeller which shall give to the steamship Constancia a speed of about 9 1/2 knots
per hour.
The language of the contract is so plain, and the negotiations leading up to the
execution of the contract point in one direction so clearly, that there ought to be
little need of discussion. But the parties have insisted so strongly upon the justice of
their several contentions that a detailed discussion is considered advisable.
The language is without ambiguity. The defendant agrees therein to furnish "One
brass propeller of 8 diameter and suitable pitch for an expected speed of ship about
9 1/2 knots;" and "The whole to be suitable for a wooden ship 150 ft. long by 24 ft.
beam and 14 ft. depth, as per plan supplied by Sr. Juan Rodriguez."
The ship for which the machinery, including the propeller, was designed, is
specifically described in the contract and is identified without question. That ship is
the Constancia, a coastwise vessel 150 feet long, 24 feet wide and 14 feet deep.
These are the measurements contained in the contract. This was the only ship for
which the plaintiff needed machinery. It was the only ship he was constructing.
During the course of the negotiations the defendants agent, Swann, its engineer
and naval architect, in company with the plaintiff or the plaintiffs agent, several
times visited the yard wherein the ship was being built and examined it for the
purpose of making the contract for the machinery. During these different visits the
kind of machinery, its purpose and value were discussed by the parties. This is
conceded. Plans of the hull and the interior of the vessel were exchanged by the
parties at various times, either before or after the making of the contract. The
plaintiff, in particular, delivered to the defendant, prior to the execution of the
contract, a plan of the hull of the vessel, with its measurements. Later the defendant
delivered to the plaintiff a plan, in considerable detail, showing the vessel with the
machinery figured as having been already placed in it.
123
Swann was a naval architect and marine engineer of long experience, which fact
was known to the plaintiff and his agent, and the general details relative to the kind
and character of the machinery were left to the defendant. The thing mainly insisted
upon by the plaintiff was the result that should be produced. The plaintiff himself
testifies, and this is undisputed by the defendant, that he relied upon Swann in
these particulars, especially in reference to the propeller and the pitch which it
should have; and, by reason of that reliance, the pitch in feet and inches which the
propeller should have when placed in the ship was not stated in the contract.
Instead, the plaintiff placed in the contract what the propeller should do, rather than
what it should be. The diameter of the propeller was fixed by the structure of the
vessel and could not exceed 8 feet or 8 1/2 feet. The pitch which the propeller
should have in order to give 9 1/2 knots an hour to the steamship was left to the
greater knowledge and experience of the defendants agent, Swann. The plaintiff
placed the condition only that it should produce a certain result when attached to
the ship Constancia.
The words of the contract clearly demand, upon the part of the defendant, that it
furnish a propeller with a pitch proper to give the steamship Constancia a speed of
about 9 1/2 knots per hour. Language for that purpose could scarcely be made
plainer than the language used.
The defendant contends that "the machinery was to be according to the
specifications in the contract and that, if these specifications were complied with, it
does not matter what may be the actual speed of the vessel." The trouble with this
contention is that one of the specifications of the contract is speed, namely, a speed
of 9 1/2 knots per hour, and the specifications of the contract can not be complied
with unless a speed of 9 1/2 knots an hour, or thereabouts, is given. Simply because
the specific pitch in feet and inches is not stated in the contract does not mean that
there is no specification upon that point. The contract provides that the defendants
shall supply to the plaintiff, among other things, one brass propeller 8 feet in
diameter with suitable pitch for an expected speed of ship about 9 1/2 knots. The
word "suitable" has reference to two objects, the antecedent subject, "pitch" of the
propeller, and the subsequent object, "ship;" and the meaning of the word requires
that the subject, "pitch" of the propeller, shall have qualities which will harmonize so
perfectly with the qualities of the object, "ship," that a certain and specified result,
viz, a speed of 9 1/2 knots, shall be produced. The word "suitable," referring to the
vessel in which the propeller is to be placed as well as to the propeller itself, the
pitch of the propeller must, therefore, be suitable to that vessel, and it is not suitable
to that vessel, under the terms of the contract, unless with the other machinery
mentioned in the contract it gives to that vessel a speed of about 9 1/2 knots an
hour. Therefore, the specifications contained in the contract are not complied with
until the vessel shall have received from the machinery installed a speed of about 9
1/2 knots an hour. The word "suitable" is perfectly definite and clear in its meaning
and its reference is undoubted.
The defendant, in the contract, not only agrees to furnish a propeller 8 feet in
diameter and of brass, but also agrees to furnish a propeller with certain other
characteristics, among them being a pitch suitable to produce a certain speed in a
certain vessel. If the pitch of the propeller was suitable to do that, it would do it. The
failure of the propeller to give a speed anything like 9 1/2 knots an hour indicates
clearly and beyond question that the pitch of the propeller was not suitable for the
purposes specified in the contract.
The contention of the defendant is, further, that the pitch of the propeller as

furnished, viz, 15 1/2 feet, was suitable to give a speed of more than 9 1/2 knots an
hour; and in its argument it quotes the expert, Swann, who testifies, in relation to
the pitch of the propeller, that with the pitch of 15 1/2 feet the propeller would have
a speed of a little over 11 knots per hour. The defect in this contention is that a
propeller has no such quality as speed; that the thing which Swann figures out as 11
knots an hour is not speed but pitch. A propeller has, aside from the material of its
construction, three qualities diameter, area, and pitch. A propeller has no such
quality as speed. The pitch of the propeller is described by Swann and Gilchrist as
the distance which it would travel if it were turned one revolution in a substance
which, although yielding sufficiently to permit the passage of the propeller, would
admit of no slip. In other words, if a propeller were immersed in wax and then given
a turn amounting to one revolution, the pitch of the propeller would be the distance
which it would travel through the wax in that one revolution. The expert Swann says
that the way to determine the speed of a propeller is to "take the pitch, multiply it
by the revolutions, which would give me the distance the propeller would advance in
any one minute; then multiply that by sixty, which would give me the amount in one
hour; then divide by 6,080, which is the number of feet in a knot, and that would
give me the number of knots per hour which the propeller would advance;" and then
says that the speed of the propeller would be more than 11 knots. The mere fact
that Swann multiplies the pitch of the propeller by a number of figures, and then
divides that product by other figures, does not change pitch into speed. It remains
pitch still. In other words, the 11 knots per hour which Swann refers to as the speed
of the propeller is the distance which the propeller, unattached to any vessel, would
travel, in wax in one hour if it was turned at the rate of 84 revolutions per minute.
But this is the acknowledged definition of pitch, not speed. It is manifestly absurd to
contend that the propeller can have a speed independent of the vessel to which it
may be attached. Speed is a quality of the vessel itself and not a quality of the
propeller. To be sure, the propeller, operated by the engine, is able to give speed to
the vessel, but in and of itself it has no such quality.
It is apparent, therefore, that the contention of the defendant that the propeller was
so constructed as to have a speed of 11 knots an hour is absurd. In other words, the
contention of the defendant is that a guaranty in a contract to give a ship a speed of
20 knots an hour is complied with if there is furnished to that ship a propeller with a
pitch, which, multiplied by certain figures and divided by others, would produce
twenty something at the conclusion of the calculation, and this absolutely regardless
of whether the ship on which the propeller is to be placed is a war ship or a pleasure
yacht, whether it is 100 or 1,000 feet long, 10 feet or 100 feet wide, whether it
draws 5 feet or 60 feet of water and wholly regardless of the form of the vessels
hull. It is recognized by all authorities upon the construction of steamships that "the
most important point to be considered in propulsive efficiency is the shape of the
vessels hull." In respect of speed this is one of the greatest problems and one of the
most perplexing with which marine engineers have to deal. The defendant, by its
contention, avoids all the trouble of figuring out this difficult problem by simply
giving a speed to its propeller.
It was a condition, and not a theory, which confronted the plaintiff when he
purchased the machinery in question including the propeller. He had a vessel which
was designed for the coastwise trade and, in order to be useful and efficient in that
connection, it was necessary that it should have a speed of about 9 1/2 knots an
hour. All of this the defendant knew. Speed being so important in a vessel carrying
freight in competition with other vessels having a speed of 9 1/2 knots an hour, the
parties placed in the contract a specification by which this vessel should receive
machinery of such a character that it would be able to compete with other vessels in
a similar occupation. These specifications required that the vessel should have a
124
speed of about 9 1/2 knots per hour and that the machinery furnished for the vessel
should be arranged to that end, particularly the propeller.
The defendant not only asserts that it furnished a propeller with a speed of more
than 9 1/2 knots an hour, but also contends that the reason why the vessel did not
have a speed of 9 1/2 knots an hour after the installation of the machinery was
because the propeller was, by the construction of the vessel, forced to work in a
position where it could not display its properties adequately. To this end, it asserts,
through its expert witness Swann, "that the propeller was, so to speak, too close to
both the stern and the rudder posts, so that the propeller could not receive the
water or throw it away from it in the manner wanted; that is, in a line with the boats
keel more or less. It could not do anything else because it was practically watertight,
so to speak, that is, to all intents and purposes, watertight between these two large
chocks of timber, the rudder and stern posts, and hence could not throw the water
off or receive the water from forward in the manner it should, and hence would
throw it sideways; that is the effect. The propeller could not get a chance to
work."cralaw virtua1aw library
The expert then goes on to assert that the pitch had nothing to do with it, that the
diameter of the propeller had nothing to do with it, and that the sole and only reason
why the vessel did not receive a speed of 9 1/2 knots an hour from the propeller
furnished was because of the sternpost and the rudderpost.
It should be noted, however, that, before the contract was signed, the defendant,
and its agent, Swann, were furnished with a plan or plans of the hull of the vessel,
showing the sternpost and the rudderpost fully and fairly; that Swann had himself
inspected the vessel several times at the yard where it was being built and knew all
about the said sternpost and rudderpost and their relative locations. Yet, with that
plan in his hand and with that knowledge in his head, he, nevertheless, made a
contract in which he agreed to furnish a propeller which would give a speed of 9 1/2
knots an hour to that very ship. It must also be remembered that the events proved
the contention of the expert Swann to be wholly unfounded when he claimed that
the reason why the propeller would not work was because of its position between
the sternpost and the rudderpost. The trial of the propeller furnished by the
defendant having demonstrated that it was ineffective and that its pitch was too
coarse and its area too great for the purposes specified in the contract, the plaintiff
placed in the steamship another propeller in exactly the same position in the vessel
as the other, i. e., between the sternpost and the rudderpost, with a diameter only 6
inches more than the diameter of the propeller furnished by the defendant, and the
vessel immediately attained a speed of 9 knots, or thereabouts, per hour. It is thus
apparent that the expert Swann again made a serious mistake in claiming that the
failure of speed was due solely to the place in which the propeller worked.
The defendant also maintains that the plaintiff ought not to recover in this case
because before the propeller was constructed the defendant notified him that a
propeller 8 feet in diameter would not produce the results specified in the contract
and that in order to attain those results it would be necessary to place in that ship a
propeller 10 feet in diameter; that the plaintiff rejected this proposal and refused to
accept a propeller of any dimensions different from that specified in the contract,
and that, therefore, he brought his misfortune on his own head. In reply to this
contention it is sufficient to state that, by reason of the construction of the vessel,
which Swann knew perfectly before hand, the placing of a propeller 10 feet in
diameter in the ship in question would necessitate cutting away a large portion of
the rear part of the vessels hull. The plaintiff was perfectly justified in refusing to
change the whole structure of the rear of his vessel in order to accommodate the

defendant. His refusal was justified by subsequent events; for, later, as before
stated, a propeller 8 1/2 feet in diameter, but of different pitch and area, was placed
in the ship, without any change in the construction of the hull, and the vessel
immediately attained a speed of 9 knots, or thereabouts, per hour.
There seems to be no question that the expert witness for the plaintiff was entirely
correct when he stated that the fault of the propeller furnished by the defendant was
in its pitch and area. He testified that the pitch of the propeller was too coarse and
the area was too great for the kind of vessel in which it was placed.
It is thus apparent that the defendant failed to comply with the terms of the contract
in respect to the propeller therein described, and the plaintiff, in consequence, is
entitled to recover appropriate damages by reason thereof.
The damages recoverable of a manufacturer or dealer for the breach of warranty of
machinery which he contracts to furnish or place in operation for a known purpose
are not confined to the difference in value of the machinery as warranted and as it
proves to be, but include such consequential damages as are the direct, immediate,
and probable result of the breach. (30 Am. and Eng. Ency. of Law, p. 217, and cases
there cited.)
The loss of the buyers time and of that of his laborers resulting from the breach is
recoverable where the circumstances of the sale were such as to have put the seller
upon notice that such a loss would probably result from a breach.
Indemnity for losses and damages includes not only the amount of the loss which
may have been suffered, but also that of the profit which the creditor may have
failed to realize. (Art. 1106, Civil Code.)
The losses and damages for which a creditor in good faith is liable are those
foreseen, or which may have been foreseen, at the time of constituting the
obligation, and which may be a necessary consequence of its nonfulfillment. (Art.
1107, Civil Code.)
In an action against a manufacturer or dealer for a breach of warranty upon a sale of
goods, which he knew at the time of the sale were intended to be used for a
particular purpose, the measure of damages is not limited to the difference in value
of the goods as warranted, and as they prove to be, as in cases where like articles
are sold as merchandise for general purposes; but profits lost and expenses
incurred, because of the breach, may be recovered. (Swain v. Schieffelin, 134 N. Y.,
471; New York and Colorado Mining Syndicate and Company v. Fraser, 130 U. S.,
611; Accumulator Company v. Dubuque Street Railway Company, 64 Fed. Rep., 70.)
It is apparent from the authorities above cited that the plaintiff is entitled to recover
P375, the value of 30 tons of coal consumed in the trials necessarily made to
determine whether or not the propeller had the qualities specified in the contract;
also the sum of P707, the wages of employees and other necessary expenses
incurred during said trials.
The plaintiff not having presented competent proof as to the loss he sustained by
reason of his ship being out of commission during the time intervening between the
trial of the first propeller and the installation of the second, nothing can be awarded
him as damages in relation thereto. He is, however, entitled to be allowed as
damages the sum of P2,770.36, the amount paid by him for the first propeller, as its
purchase price, the same being worthless to him for the purpose for which he
125
bought it said propeller to be and remain the property of the defendant, with the
right to retake the same if it has not already done so.
The defendant failed to deliver to the plaintiff the following machinery and materials
which it agreed to deliver under the contract, which said machinery and materials
the plaintiff was obliged to purchase of other parties, paying therefor the following
prices, which this court finds reasonable in amount, to wit:chanrob1es virtual 1aw
library
One brass cock with flange for the donkey feed, weight 57
pounds P144.00
One do. do. check valve for the engine, weight 62 pounds 124.00
One do. do. 3/4-inch blow-off for the boiler 7.50
One cast brass elbow for the steam valve, weight 97 pounds 145.50
One new 1 1/4-inch tube with flange for the blow-off cock of the donkey boiler 7.00
One brass cock with flanges, connections, and strainer for
the surface blow-off 166.00
For turning the two covers of the high and low pressure
cylinders, and placing new bushes with 5/8 x 9 1/2-inch studs and nuts 85.00
Three cast-iron pistons, turned, with rod and spiral steel
springs, brass covers and valves for the cylinders 185.00
Four cast-iron seatings for the boiler 217.00
Five 1/4-inch pet cocks for the donkey pump and two for the
cylinder blow-off 15.00
One 1/8-inch air-cock for the donkey pump 1.80
Two 1/2-inch test cocks with stuffing boxes for the steam
gauges on boiler 9.00
Two straight 1/2-inch test cocks with stuffing box for the
boiler and donkey boiler 9.00
One lubricator with a 3/8 x 1 1/2-inch male thread for the donkey 3.40
One 1-inch check valve with test cock and hand wheel for the
donkey boiler 26.25
 126

One 1 1/4-inch globe valve with flange and wheel for the steam winch 18.00

_______

Total 1,133.45

We find, therefore, that the defendant is entitled to recover in this action of the
plaintiff the sum of P5,213.54, that being the difference between the balance
remaining due from plaintiff to the defendant on the purchase price of said
machinery, viz, P10,199.35, and the aggregate amount of the damages herein
allowed to the plaintiff by reason of the breach of said contract by the defendant, as
aforesaid, viz, P4,985.81, with interest on said P5,213.54 at the rate of 6 per cent
per annum from February 28, 1907, and he is hereby given judgment for that
amount.

The judgment of the lower court is, therefore, modified to the extent and in the
particulars above enumerated, and, as modified, affirmed, with costs against the
defendant.

SECOND DIVISION
[G.R. Nos. L-33819 and L-33897. October 23, 1982.]
NATIONAL POWER CORPORATION, Plaintiff-Appellant, v. NATIONAL
MERCHANDISING CORPORATION and DOMESTIC INSURANCE COMPANY OF
THE PHILIPPINES, Defendants-Appellants.
The Solicitor General, for Plaintiff-Appellant.
Sycip, Salazar, Luna Manalo & Feliciano, for Defendants-Appellants.
SYNOPSIS
Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant
National Merchandising Corporation (NAMERCO), the Philippine representative of
New York-based International Commodities Corporation, executed a contract of sale
of sulfur with a stipulation for liquidated damages in case of breach. Defendant-
appellant Domestic Insurance Company executed a performance bond in favor of
NPC to guarantee the sellers obligation. In entering into the contract, Namerco,
however, did not disclose to NPC that Namercos principal, in a cabled instruction,
stated that the sale was subject to availability of a steamer, and contrary to its
principals instruction, Namerco agreed that non-availability of a steamer was not a
justification for non-payment of liquidated damages. The New York supplier was not
able to deliver the sulfur due to its inability to secure shipping space. Consequently,
the Government Corporate Counsel rescinded the contract of sale due to the
suppliers non-performance of its obligations, and demanded payment of liquidated
damages from both Namerco and the surety. Thereafter, NPC sued for recovery of
the stipulated liquidated damages. After trial, the Court of First Instance rendered
judgment ordering defendants-appellants to pay solidarity to the NPC reduced
liquidated damages with interest.
The Supreme Court held that Namerco is liable fur damages because under Article
1897 of the Civil Code the agent who exceeds the limits of his authority without
giving the party with whom he contracts sufficient notice of his powers is personally
liable to such party. The Court, however, further reduced the solidary liability of
defendants-appellants for liquidated damages.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; AN AGENT WHO EXCEEDS
THE LIMITS OF HIS AUTHORITY IS PERSONALLY LIABLE. Under Article 1897 of the
Civil Code the agent who exceeds the limits of his authority without giving the party
with whom he contracts sufficient notice of his powers is personally liable to such
party.
2. ID.; ID.; ID.; ID.; CASE AT BAR. In the present case, Namerco, the agent of a
New York-based principal, entered into a contract of sale with the National Power
Corporation without disclosing to the NPC the limits of its powers and, contrary to its
principals prior cabled instructions that the sale should be subject to availability of a
steamer, it agreed that non-availability of a steamer was not a justification for
nonpayment of the liquidated damages. Namerco. therefore, is liable for damages.
127
3. ID.; ID.; ID.; THE RULE THAT EVERY PERSON DEALING WITH AN AGENT IS PUT
UPON AN INQUIRY AND MUST DISCOVER UPON HIS PERIL THE AUTHORITY OF THE
AGENT IS NOT APPLICABLE WHERE THE AGENT, NOT THE PRINCIPAL, IS SOUGHT TO
BE HELD LIABLE ON THE CONTRACT. The rule that every person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of the agent
would apply only in cases where the principal is sought to be held liable on the
contract entered into by the agent. The said rule is not applicable in the instant case
since it is the agent, not the principal, that is sought to be held liable on the contract
of sale which was expressly repudiated by the principal because the agent took
chances, it exceeded its authority and, in effect. it acted in its own name.
4. ID.; ID.; ID.; THE CONTRACT ENTERED INTO BY AN AGENT WHO ACTED BEYOND
HIS POWERS IS UNENFORCEABLE ONLY AS AGAINST THE PRINCIPAL BUT NOT
AGAINST THE AGENT AND ITS SURETY. Article 1403 of the Civil Code which
provides that a contract entered into in the name of another person by one who has
acted beyond his powers is unenforceable, refers to the unenforceability of the
contract against the principal. In the instant case, the contract containing the
stipulation for liquidated damages is not being enforced against its principal but
against the agent and its surety. It being enforced against the agent because Article
1897 implies that the agent who acts in excess of his authority is personally liable to
the party with whom he contracted. And that rule is complimented by Article 1898 of
the Civil Code which provides that "if the agent contracts, in the name of the
principal, exceeding the scope of his authority, and the principal does not ratify the
contract, it shall be void if the party with whom the agent contracted is aware of the
limits of the powers granted by the principal." Namerco never disclosed to the NPC
the cabled or written instructions of its principal. For that reason and because
Namerco exceeded the limits of its authority, it virtually acted in its own name and
not as agent and it is, therefore, bound by the contract of sale which, however, it not
enforceable against its principal. If, as contemplated in Articles 1897 and 1898,
Namerco is bound under the contract of sale, then it follows that it is bound by the
stipulation for liquidated damages in that contract.
5. ID.; ID.; ID.; THE LIABILITY OF AN AGENT WHO EXCEEDS THE LIMITS OF HIS
AUTHORITY IS BASED ON CONTRACT AND NOT ON TORT OR QUASI-DELICT; CASE AT
BAR. Defendants contention that Namercos liability should be based on tort or
quasi-delict, as held in some American cases, like Mendelson v. Holton, 149 N.E.
38,42 ACR 1307, is not well-taken. As correctly argued by the NPC, it would be
unjust and inequitable for Namerco to escape liability of the contract after it had
deceived the NPC by not disclosing the limits of its powers and entering into the
contract with stipulations contrary to its principals instructions.
6. ID.; ID.; ID.; LIABILITY OF THE SURETY ON THE OBLIGATION CONTRACTED BY AN
AGENT WHO EXCEEDED HIS AUTHORITY IS NOT AFFECTED THEREBY. The
contention of the defendants that the Domestic Insurance Company is not liable to
the NPC because its bond was posted, not to Namerco, the agent, but for the New
York firm which is not liable on the contract of sale, cannot be sustained because it
was Namerco that actually solicited the bond from the Domestic Insurance Company
and, Namerco is being held liable under the contract of sale because it virtually
acted in its own name. In the last analysis, the Domestic Insurance Company acted
as surety for Namerco. The rule is that "want of authority of the person who
executes an obligation as the agent or representative of the principal will not, as a
general rule, affect the surety thereon, especially in the absence of fraud, even
though the obligation is not binding on the principal." (72 C.J.S. 525).

7. CIVIL LAW; DAMAGES; IMPOSITION OF INTEREST THEREON NOT WARRANTED
WHERE THE DISPOSITION OF THE CASE HAS BEEN DELAYED DUE TO NO FAULT OF
DEFENDANTS. With respect to the imposition of the legal rate of interest on the
damages from the filing of the complaint in 1957, or a quarter of a century ago,
defendants contention that interest should not be collected on the amount of
damages is meritorious. It should be manifestly iniquitous to collect interest on the
damages especially considering that the disposition of this case has been
considerably delayed due to no fault of the defendants
8. ID.; ID.; LIQUIDATED DAMAGES; NO PROOF OF PECUNIARY LOSS IS REQUIRED FOR
RECOVERY THEREOF. No proof of pecuniary lost is required for the recovery of
liquited damages. The stipulatian for liquidated damages is intended to obviate
controversy on the amount of damages. There can be no question that the NPC
suffered damages because its production of fertilizer was disrupted or diminished by
reason of the non-delivery of the sulfur. The parties foresaw that it might be difficult
to ascertain the exact amount of damages for non-delivey of the sulfur. So, they
fixed the liquidated damages to be paid as indemnity to the NPC.
9. ID.; ID.; NOMINAL DAMAGES; NOT A CASE OF. Nominal damages are damages in
name only or are in fact the same as no damages (25 C.J.S. 466). It would not be
correct to hold in this case that the NPC suffered damages in name only or that the
breach of contract "as merely technical in character since the NPC suffered damages
because its production of fertilizer "as disrupted or diminished by reason of the non-
delivery of the sulfur.
DECISION
AQUINO, J.:
This case is about the recovery of liquidated damages from a sellers agent that
allegedly exceeded its authority in negotiating the sale.
Plaintiff National Power Corporation appealed on questions of law from the decision
of the Court of First Instance of Manila dated October 10, 1966, ordering defendants
National Merchandising Corporation and Domestic Insurance Company of the
Philippines to pay solidarily to the National Power Corporation reduced liquidated
damages in the sum of P72,114.66 plus legal, rate of interest from the filing of the
complaint and the costs (Civil Case No. 33114).
The two defendants appealed from the same decision allegedly because it is
contrary to law and the evidence. As the amount originally involved is P360,572.80
and defendants appeal is tied up with plaintiffs appeal on questions of law,
defendants appeal can be entertained under Republic Act No. 2613 which amended
section 17 of the Judiciary Law.
On October 17, 1956, the National Power Corporation and National Merchandising
Corporation (Namerco) of 3111 Nagtahan Street, Manila, as the representative of the
International Commodities Corporation of 11 Mercer Street, New York City (Exh. C),
executed in Manila a contract for the purchase by the NPC from the New York firm of
four thousand long tons of crude sulfur for its Maria Cristina Fertilizer Plant in Iligan
128
City at a total price of (450,716 (Exh. E).
On that same date, a performance bond in the sum of P90,143.20 was executed by
the Domestic Insurance Company in favor of the NPC to guarantee the sellers
obligations (Exh. F).
It was stipulated in the contract of sale that the seller would deliver the sulfur at
Iligan City within sixty days from notice of the establishment in its favor of a letter of
credit for $212,120 and that failure to effect delivery would subject the seller and its
surety to the payment of liquidated damages at the rate of two-fifth of one percent
of the full contract price for the first thirty days of default and four-fifth of one
percent for every day thereafter until complete delivery is made (Art. 8, p. 111,
Defendants Record on Appeal).
In a letter dated November 12, 1956, the NPC advised John Z. Sycip, the president of
Namerco, of the opening on November 8 of a letter of credit for $212,120 in favor of
International Commodities Corporation which would expire on January 31, 1957
(Exh. I). Notice of that letter of credit was, received by cable by the New York firm on
November 15, 1956 (Exh. 80-Wallick). Thus, the deadline for the delivery of the
sulfur was January 15, 1957.
The New York supplier was not able to deliver the sulfur due to its inability to secure
shipping space. During the period from January 20 to 26, 1957 there was a shutdown
of the NPCs fertilizer plant because there was no sulfur. No fertilizer was produced
(Exh. K).
In a letter dated February 27, 1957, the general manager of the NPC advised
Namerco and the Domestic Insurance Company that under Article 9 of the contract
of sale "non-availability of bottom or vessel" was not a fortuitous event that would
excuse non-performance and that the NPC would resort to legal remedies to enforce
its rights (Exh. L and M).
The Government Corporate Counsel in his letter to Sycip dated May 8, 1957
rescinded the contract of sale due to the New York suppliers non-performance of its
obligations (Exh. G). The same counsel in his letter of June 8, 1957 demanded from
Namerco the payment of P360,572.80 as liquidated damages. He explained that
time was of the essence of the contract. A similar demand was made upon the
surety (Exh. H and H-1).
The liquidated damages were computed on the basis of the 115-day period between
January 15, 1957, the deadline for the delivery of the sulfur at Iligan City, and May 9,
1957 when Namerco was notified of the rescission of the contract, or P54,085.92 for
the first thirty days and P306,486.88 for the remaining eighty-five days. Total:
P360,572.80.
On November 5, 1957, the NPC sued the New York firm, Namerco and the Domestic
Insurance Company for the recovery of the stipulated liquidated damages (Civil Case
No. 33114).
The trial court in its order of January 17, 1958 dismissed the case as to the New York
firm for lack of jurisdiction because it was not doing business in the Philippines (p.
60, Defendants Record on Appeal).
On the other hand, Melvin Wallick, as the assignee of the New York corporation and
after the latter was dropped as a defendant in Civil Case No. 33114, sued Namerco

for damages in connection with the same sulfur transaction (Civil Case No. 37019).
The two cases, both filed in the Court of First Instance of Manila, were consolidated.
A joint trial was held. The lower court rendered separate decisions in the two cases
on the same date.
In Civil Case No. 37019, the trial court dismissed Wallicks action for damages
against Namerco because the assignment in favor of Wallick was champertous in
character. Wallick appealed to this Court. The appeal was dismissed because the
record on appeal did not disclose that the appeal was perfected on time (Res. of July
11, 1972 in L-33893).In this Civil Case No. 33114, although the records on appeal
were approved in 1967, inexplicably, they were elevated to this Court in 1971. That
anomaly initially contributed to the delay in the adjudication of this case.
Defendants appeal L-33819. They contend that the delivery of the sulfur was
conditioned on the availability of a vessel to carry the shipment and that Namerco
acted within the scope of its authority as agent in signing the contract of sale.
The documentary evidence belies these contentions. The invitation to bid issued by
the NPC provides that non-availability of a steamer to transport the sulfur is not a
ground for non-payment of the liquidated damages in case of non-performance by
the seller.
"4. Responsibility for availability of vessel. The availability of vessel to transport
the quantity of sulfur within the time specified in item 14 of this specification shall
be the responsibility of the bidder. In case of award of contract, failure to ship on
time allegedly due to non-availability of vessels shall not exempt the Contractor
from payment of liquidated damages provided in item 15 of this
specification."cralaw virtua1aw library
"15. Liquidated damages. . . .
"Availability of vessel being a responsibility of the Contractor as specified in item 4
of this specification, the terms unforeseeable causes beyond the control and
without the fault or negligence of the Contractor and force majeure as used herein
shall not be deemed to embrace or include lack or nonavailability of bottom or
vessel. It is agreed that prior to making his bid, a bidder shall have made previous
arrangements regarding shipments within the required time. It is clearly understood
that in no event shall the Contractor be exempt from the payment of liquidated
damages herein specified for reason of lack of bottom or vessel. Lack of bottom or
nonavailability of vessel shall, in no case, be considered as a ground for extension of
time. . . . ."
Namercos bid or offer is even more explicit. It provides that it was "responsible for
the availability of bottom or vessel" and that it "guarantees the availability of
bottom or vessel to ship the quantity of sulfur within the time specified in this bid"
(Exh. B, p. 22, Defendants Record on Appeal).
In the contract of sale itself item 15 of the invitation to bid is reproduced in Article 9
which provides that "it is clearly understood that in no event shall the seller be
entitled to an extension of time or be exempt from the payment of liquidated
damages herein specified for reason of lack of bottom or vessel" (Exh. E, p. 36,
Record on Appeal).
It is true that the New York corporation in its cable to Namerco dated August 9, 1956
stated that the sale was subject to availability of a steamer (Exh. N). However,
129
Namerco did not disclose that cable to the NPC and, contrary to its principals
instruction, it agreed that nonavailability of a steamer was not a justification for
nonpayment of the liquidated damages.
The trial court rightly concluded that Namerco acted beyond the bounds of its
authority because it violated its principals cabled instructions (1) that the delivery
of the sulfur should be "C & F Manila", not "C & F Iligan City" ; (2) that the sale be
subject to the availability of a steamer and (3) that the seller should be allowed to
withdraw right away the full amount of the letter of credit and not merely eighty
percent thereof (pp- 123-124, Record on Appeal).
The defendants argue that it was incumbent upon the NPC to inquire into the extent
of the agents authority and, for its failure to do so, it could not claim any liquidated
damages which, according to the defendants, were provided for merely to make the
seller more diligent in looking for a steamer to transport the sulfur.
The NPC counter-argues that Namerco should have advised the NPC of the
limitations on its authority to negotiate the sale.
We agree with the trial court that Namerco is liable for damages because under
article 1897 of the Civil Code the agent who exceeds the limits of his authority
without giving the party with whom he contracts sufficient notice of his powers is
personally liable to such party.
The truth is that even before the contract of sale was signed Namerco was already
aware that its principal was having difficulties in booking shipping space. In a cable
dated October 16, 1956, or one day before the contract of sale was signed, the New
York supplier advised Namerco that the latter should not sign the contract unless it
(Namerco) wished to assume sole responsibility for the shipment (Exh. T).
Sycip, Namercos president, replied in his letter to the seller dated also October 16,
1956, that he had no choice but to finalize the contract of sale because the NPC
would forfeit Namercos bidders bond in the sum of P45,100 posted by the Domestic
Insurance Company if the contract was not formalized (Exh. 14, 14-A and Exh. V).
Three days later, or on October 19, the New York firm cabled Namerco that the firm
did not consider itself bound by the contract of sale and that Namerco signed the
contract on its own responsibility (Exh. W).
In its letters dated November 8 and 19, 1956, the New York corporation informed
Namerco that since the latter acted contrary to the formers cabled instructions, the
former disclaimed responsibility for the contract and that the responsibility for the
sale rested on Namerco (Exh. Y and Y-1).
The letters of the New York firm dated November 26 and December 11, 1956 were
even more revealing. It bluntly told Namerco that the latter was never authorized to
enter into the contract and that it acted contrary to the repeated instructions of the
former (Exh. U and Z). Said the vice-president of the New York firm to Namerco:
"As we have pointed out to you before, you have acted strictly contrary to our
repeated instructions and, however regretfully, you have no one but yourselves to
blame."cralaw virtua1aw library
The rule relied upon by the defendants-appellants that every person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of the agent

would apply in this case if the principal is sought to be held liable on the contract
entered into by the agent.
That is not so in this case. Here, it is the agent that it sought to be held liable on a
contract of sale which was expressly repudiated by the principal because the agent
took chances, it exceeded its authority, and, in effect, it acted in its own name.
As observed by Castan Tobeas, an agent "que haya traspasado los limites dew
mandato, lo que equivale a obrar sin mandato" (4 Derecho Civil Espaol, 8th Ed.,
1956, p. 520).
As opined by Olivieri, "si el mandante contesta o impugna el negocio juridico
concluido por el mandatario con el tercero, aduciendo el exceso de los limites
impuestos, es justo que el mandatario, que ha tratado con engao al tercero, sea
responsable personalmente respecto de el des las consecuencias de tal falta de
aceptacion por parte del mandate. Tal responsabilidad del mandatario se informa en
el principio de la falta de garantia de la existencia del mandato y de la cualidad de
mandatario, garantia impuesta coactivamente por la ley, que quire que aquel que
contrata como mandatario este obligado a garantizar al tercero la efectiva
existencia de los poderes que afirma se halla investido, siempre que el tercero
mismo sea de buena fe. Efecto de tal garantia es el resarcimiento de los daos
causados al tercero como consecuencia de la negativa del mandante a reconocer lo
actuado por el mandatario." (26, part II, Scaveola, Codigo Civil, 1951, pp. 358-9).
Manresa says that the agent who exceeds the limits of his authority is personally
liable "porque realmente obra sin poderes" and the third person who contracts with
the agent in such a case would be defrauded if he would not be allowed to sue the
agent (11 Codigo Civil, 6th Ed., 1972, p. 725).
The defendants also contend that the trial court erred in holding as enforceable the
stipulation for liquidated damages despite its finding that the contract was executed
by the agent in excess of its authority and is, therefore, allegedly unenforceable.
In support of that contention, the defendants cite article 1403 of the Civil Code
which provides that a contract entered into in the name of another person by one
who has acted beyond his powers is unenforceable.
We hold that defendants contention is untenable because article 1403 refers to the
unenforceability of the contract against the principal. In the instant case, the
contract containing the stipulation for liquidated damages is not being enforced
against it principal but against the agent and its surety.
It is being enforced against the agent because article 1807 implies that the agent
who acts in excess of his authority is personally liable to the party with whom he
contracted.
And that rule is complemented by article 1898 of the Civil Code which provides that
"if the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party
with whom the agent contracted is aware of the limits of the powers granted by the
principal."
It is being enforced against the agent because article 1897 implies that the agent
who acts in excess of his authority is personally liable to the party with whom he
contracted.
130
And the rule is complemented by article 1898 of the Civil Code which provides that
"if the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party
with whom the agent contracted is aware of the limits of the powers granted by the
principal."
As priorly discussed, namerco, as agent, exceeded the limits of its authority in
contracting with the NPC in the name of its principal. The NPC was unaware of the
limitations on the powers granted by the New York firm to Namerco.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
The New York corporation in its letter of April 26, 1956 said:
"We hereby certify that National Merchandising Corporation . . . are our exclusive
representatives in the Philippines for the sale of our products.
"Furthermore, we certify that they are empowered to present our offers in our behalf
in accordance with our cabled or written instructions." (Exh. C).
Namerco never disclosed to the NPC the cabled or written instructions of its
principal. For that reason and because Namerco exceeded the limits of its authority,
it virtually acted in its own name and not as agent and it is, therefore, bound by the
contract of sale which, however, is not enforceable against its principal.
If, as contemplated in articles 1897 and 1898, Namerco is bound under the contract
of sale, then it follows that it is bound by the stipulation for liquidated damages in
that contract.
Defendants contention that Namercos liability should be based on tort or quasi-
delict, as held in some American cases, like Mendelsohn v. Holton, 149 N.E. 38, 42
ALR 1307, is not well-taken. As correctly argued by the NPC, it would be unjust and
inequitable for Namerco to escape liability after it had deceived the NPC.
Another contention of the defendants is that the Domestic Insurance Company is not
liable to the NPC because its bond was posted, not for Namerco, the agent, but for
the New York firm which is not liable on the contract of sale.
That contention cannot be sustained because it was Namerco that actually solicited
the bond from the Domestic Insurance Company and, as explained already, Namerco
is being held liable under the contract of sale because it virtually acted in its own
name. It became the principal in the performance bond. In the last analysis, the
Domestic Insurance Company acted as surety for Namerco.
The rule is that "want of authority of the person who executes an obligation as the
agent or representative of the principal will not, as a general rule, affect the suretys
liability thereon, especially in the absence of fraud, even though the obligation is not
binding on the principal" (72 C.J.S. 525).
Defendants other contentions are that they should be held liable only for nominal
damages, that interest should not be collected on the amount of damages and that
the damages should be computed on the basis of a forty-five day period and not for
a period of one hundred fifteen days.
With respect to the imposition of the legal rate of interest on the damages from the
filing of the complaint in 1957, or a quarter of a century ago, defendants contention
 131

is meritorious. It would be manifestly inequitable to collect interest on the damages
especially considering that the disposition of this case has been considerably
delayed due to no fault of the defendants.
The contention that only nominal damages should be adjudged is contrary to the
intention of the parties (NPC, Namerco and its surety) because it is clearly provided
that liquidated damages are recoverable for delay in the delivery of the sulfur and,
with more reason, for nondelivery.
No proof of pecuniary loss is required for the recovery of liquidated damages. the
stipulation for liquidated damages is intended to obviate controversy on the amount
of damages. There can be no question that the NPC suffered damages because its
production of fertilizer was disrupted or diminished by reason of the nondelivery of
the sulfur.:
The parties foresaw that it might be difficult to ascertain the exact amount of
damages for nondelivery of the sulfur. So, they fixed the liquidated damages to be
paid as indemnity to the NPC.
On the other hand, nominal damages are damages in name only or are in fact the
same as no damages (25 C.J.S. 466). It would not be correct to hold in this case that
the NPC suffered damages in name only or that the breach of contract was merely
technical in character.
liable, then the insurance company, its surety, is likewise not liable; that the NPC is
entitled only to nominal damages because it was able to secure the sulfur from
another source (58-59 tsn November 10, 1960) and that the reduced award of
stipulated damages is highly iniquitous, considering that Namerco acted in good
faith and that the NPC did not suffer any actual damages.chanrobles law library : red
These contentions have already been resolved in the preceding discussion. We find
no sanction or justification for NPCs claim that it is entitled to the full payment of
the liquidated damages computed by its official.
Ruling on the amount of damages. A painstaking evaluation of the equities of the
case in the light of the arguments of the parties as expounded in their five briefs
leads to the conclusion that the damages due from the defendants should be further
reduced to P45,100 which is equivalent to their bidders bond or to about ten
percent of the selling price of the sulfur.
WHEREFORE, the lower courts judgment is modified and defendants National
Merchandising Corporation and Domestic Insurance Company of the Philippines are
ordered to pay solidarily to the National Power Corporation the sum of P45,100.00 as
liquidated damages. No costs.
SO ORDERED.

As to the contention that the damages should be computed on the basis of forty-five
days, the period required by a vessel leaving Galveston, Texas to reach Iligan City,
that point need not be resolved in view of our conclusion that the liquidated
damages should be equivalent to the amount of the bidders bond posted by
Namerco.

NPCs appeal, L-33897. The trial court reduced the liquidated damages to twenty
percent of the stipulated amount. the NPC contends the it is entitled to the full
amount of liquidated damages in the sum of P360,572.80.

In reducing the liquidated damages, the trial court relied on article 2227 of the Civil
Code which provides that "liquidated damages, whether intended as an indemnity or
a penalty, shall be equitably reduced if they are iniquitous or unconscionable."

Apparently, the trial court regarded as an equitable consideration the persistent

efforts of Namerco and its principal to charter a steamer and that the failure of the
New York firm to secure shipping space was not attributable to its fault or
negligence.

The trial court also took into account the fact that the selling price of the sulfur was
P450,716 and that to award as liquidated damages more than eighty percent of the
price would not be altogether reasonable.

The NPC contends that Namerco was an obligor in bad faith and, therefore, it should
be responsible for all damages which could be reasonably attributed to its
nonperformance of the obligation as provided in article 2201 of the Civil Code.

On the other hand, the defendants argue that Namerco having acted as a mere
agent, was not liable for the liquidated damages stipulated in the alleged
unenforceable contract of sale; that, as already noted, Namercos liability should be
based on tort or quasi-delict and not on the contract of sale; that if Namerco is not
 132

Radiowealth Finance Company v. Del Rosario

G.R. No. 138739 July 6, 2000

Lessons Applicable: Demurrer to Evidence, Promissory Note, When Demandable,

Penalty, Interest (Credit Transactions)

Laws Applicable: Rule 33 of the 1997 Rules of Court (Civil Procedure)

FACTS:

March 2, 1991: Spouses Vicente and Maria Sumilang del Rosario jointly and
severally executed, signed and delivered in favor of Radiowealth Finance Company a
Promissory Note for P138,948 without need of notice or demand, in instalments of
P11,579.00 payable for 12 consecutive months leaving the period for the
instalments blank. Upon default, the late payment, 2.5% penalty charge per month
shall be added to each unpaid installment from due date thereof until fully paid.
June 7, 1993: Radiowealth filed a complaint for the collection of a sum of money
before the Regional Trial Court of Manila. During the trial, Jasmer Famatico, the
credit and collection officer of Radiowealth, presented in evidence the Spouses
check payments, the demand letter dated July 12, 1991, Spouses customers ledger
card, another demand letter and Metropolitan Bank dishonor slips. Famatico
admitted that he did not have personal knowledge of the transaction or the
execution of any of these pieces of documentary evidence, which had merely been
endorsed to him.
July 29, 1994: Spouses filed a Demurrer to Evidence for alleged lack of cause of
action
RTC: Dismissed for Radiowealths failure to substantiate the claims, the evidence
it had presented being merely hearsay
CA: reversed and remanded the case for further proceedings
o During the pretrial, through judicial admissions or the spouses admitted the
genuineness of the Promissory Note and demand letter dated July 12, 1991. Their
only defense was the absence of an agreement on when the installment payments
were to begin

ISSUES:
1. W/N the spouses can still present evidence after the appellate courts reversal
of the dismissal on demurer of evidence (Civil Procedure)
2. W/N the obligation is due and demandable (Credit Transaction)

HELD:

Petition is GRANTED. Appealed Decision is MODIFIED. Ordered to PAY P138,948,

plus 2.5 percent penalty charge per month beginning April 2, 1991 until fully paid,
and 10 percent of the amount due as attorneys fees.

1. NO.
Rule 33 of the 1997 Rules
o SECTION 1. Demurrer to evidence.After the plaintiff has completed the
presentation of his evidence, the defendant may move for dismissal on the ground
that upon the facts and the law the plaintiff has shown no right to relief. If his
motion is denied, he shall have the right to present evidence. If the motion is
granted but on appeal the order of dismissal is reversed he shall be deemed to have
waived the right to present evidence.
Defendants who present a demurrer to the plaintiffs evidence retain the right to
present their own evidence, if the trial court disagrees with them; if the trial court
agrees with them, but on appeal, the appellate court disagrees with both of them
and reverses the dismissal order, the defendants lose the right to present their own
evidence
The appellate court shall resolve the case and render judgment on the merits,
inasmuch as a demurrer aims to discourage prolonged litigations
2. Yes.
The act of leaving blank the due date of the first installment did NOT necessarily
mean that the debtors were allowed to pay as and when they could. While the
specific date on which each installment would be due was left blank, the Note clearly
provided that each installment should be payable each month. It also provided for
an acceleration clause and a late payment penalty, both of which showed the
intention of the parties that the installments should be paid at a definite date. Per
the acceleration clause, the whole debt became due one month (April 2, 1991) after
the date of the Note because the check representing their first installment bounced.
Respondents started paying installments on the Promissory Note, even if the
checks were dishonored by their drawee bank.
The Note already stipulated a late payment penalty of 2.5 percent monthly to be
added to each unpaid installment until fully paid. Payment of interest was not
expressly stipulated in the Note. Thus, it should be deemed included in such
penalty. Liquidated damages, however, should no longer be imposed for being
unconscionable. Such damages should also be deemed included in the 2.5 percent
monthly penalty. Furthermore, we hold that petitioner is entitled to attorneys fees,
but only in a sum equal to 10 percent of the amount due which we deem reasonable
under the proven facts.
RADIOWEALTH v. DEL ROSARIO
Facts:
On March 2, 1991, Spouses Vicente and Maria Sumilang del Rosario (defendants),
jointly and severallyexecuted, signed and delivered in favor of Radiowealth Finance
Company (plaintiff), a Promissory Note (PN) for P138,948. The parties agreed that if
default be made in the payment of any of the installments or late paymentcharges
thereon as and when the same becomes due and payable, the total principal sum
then remaining unpaid,together with the agreed late payment charges, shall at once
become due and payable without need of notice or demand.Defendants defaulted
133
on the monthly installments. Despite repeated demands, they failed to pay their
obligationsunder their PN.
On June 7, 1993, plaintiff filed a Complaint for the collection of a sum of money
before the RTCManila. During the trial, Jasmer Famatico, the credit and collection
officer of plaintiff, presented in evidence thedefendants' check payments, the
demand letter, the customers ledger card, another demand letter andMetropolitan
Bank dishonor slips. Famatico admitted that he did not have personal knowledge of
the transaction or the execution of any of these pieces of documentary evidence,
which had merely been endorsed to him.plaintiff formally offered its evidence and
exhibits and rested its case. defendants filed on a Demurrer to Evidencefor alleged
lack of cause of action.
The trial court dismissed the complaint for failure of petitioner to substantiate
itsclaims, the evidence it had presented being merely hearsay.On appeal, the CA
reversed the trial court and remanded the case for further proceedings. According to
theappellate court, the judicial admissions of respondents established their
indebtedness to the petitioner, on thegrounds that they admitted the due execution
of the PN, and that their only defense was the absence of anagreement on when the
installment payments were to begin. Indeed, during the pretrial, they admitted
thegenuineness not only of the PN, but also of the demand letter.
Even if plaintiff's witness had no personalknowledge of these documents, they would
still be admissible if the purpose for which they are produced is merelyto establish
the fact that the statement or document was in fact made or to show its tenor, and
such fact or tenor isof independent relevance.Besides, Articles 19 and 22 of the
Civil Code require that every person must -- in the exercise of rights and in
theperformance of duties -- act with justice, give all else their due, and observe
honesty and good faith. Further, therules on evidence are to be liberally construed in
order to promote their objective and to assist the parties inobtaining just, speedy
and inexpensive determination of an action.
Issue: W/N the CA patently erred in ordering the remand of this case to the trial
court instead of rendering judgment on the basis of petitioners evidence?
Held:
Yes. While the CA correctly reversed the trial court, it erred in remanding the case
"for further proceedings."Consequences of a Reversal, on Appeal, of a Demurrer to
Evidence The old Rule 35 of the Rules of Court was reworded under Rule 33 of the
1997 Rules, but the consequence onappeal of a demurrer to evidence was not
changed. Defendants who present a demurrer to the plaintiffs evidenceretain the
right to present their own evidence, if the trial court disagrees with them; if the trial
court agrees withthem, but on appeal, the appellate court disagrees with both of
them and reverses the dismissal order, thedefendants lose the right to present their
own evidence. The appellate court shall, in addition, resolve the case andrender
judgment on the merits, inasmuch as a demurrer aims to discourage prolonged
litigations.In the case at bar, the trial court, acting on defendants' demurrer to
 134

evidence, dismissed the Complaint on theground that plaintiff had adduced mere
hearsay evidence. However, on appeal, the appellate court reversed thetrial court
because the genuineness and the due execution of the disputed pieces of evidence
had in fact beenadmitted by defendants.
Due and Demandable ObligationThe act of leaving blank the due date of the first
installment did not necessarily mean that the debtors were allowedto pay as and
when they could. If this was the intention of the parties, they should have so
indicated in the PN.However, it did not reflect any such intention. The Note expressly
stipulated that the debt should be amortizedmonthly in installments of P11,579 for
twelve consecutive months. While the specific date on which eachinstallment would
be due was left blank, the Note clearly provided that each installment should be
payable each month. Furthermore, it also provided for an acceleration clause and a
late payment penalty, both of which showedthe intention of the parties that the
installments should be paid at a definite date.
Had they intended that thedebtors could pay as and when they could, there would
have been no need for these two clauses.Verily, the contemporaneous and
subsequent acts of the parties manifest their intention and knowledge that
themonthly installments would be due and demandable each month. In this case,
the conclusion that the installmentshad already became due and demandable is
bolstered by the fact that respondents started paying installments onthe PN, even if
the checks were dishonored by their drawee bank. Neither by their avowals that the
obligation hadnot yet matured nor by their claim that a period for payment should
be fixed by a court.Petitioner has established not only a cause of action against the
respondents, but also a due and demandableobligation.
THIRD DIVISION
[G.R. No. 153201. January 26, 2005]
JOSE MENCHAVEZ, JUAN MENCHAVEZ JR., SIMEON MENCHAVEZ, RODOLFO
MENCHAVEZ, CESAR MENCHAVEZ, REYNALDO, MENCHAVEZ, ALMA
MENCHAVEZ, ELMA MENCHAVEZ, CHARITO M. MAGA, FE M. POTOT,
THELMA M. REROMA, MYRNA M. YBAEZ, and SARAH M.
VILLABER,petitioners, vs. FLORENTINO TEVES JR., respondent.
DECISION
PANGANIBAN, J.:
Avoid contract is deemed legally nonexistent. It produces no legal effect. As a
general rule, courts leave parties to such a contract as they are, because they
are in pari delicto or equally at fault. Neither party is entitled to legal protection.
The Case
Before us is a Petition for Review [1] under Rule 45 of the Rules of Court,
assailing the February 28, 2001 Decision [2] and the April 16, 2002 Resolution [3] of the
Court of Appeals (CA) in CA-GR CV No. 51144. The challenged Decision disposed as
follows:

The obligation of the respondents had matured and they clearly defaulted when WHEREFORE, the assailed decision is hereby MODIFIED, as follows:
their checks bounced.Per the acceleration clause, the whole debt became due one
month after the date of the PN because the checkrepresenting their first installment
1. Ordering [petitioners] to jointly and severally pay the [respondent] the amount
bounced.The Note already stipulated a late payment penalty of 2.5 percent monthly
of P128,074.40 as actual damages, and P50,000.00 as liquidated damages;
to be added to each unpaid installmentuntil fully paid. Payment of interest was not
expressly stipulated in the Note. Thus, it should be deemed included insuch
penalty.In addition, the Note also provided that the debtors would be liable for 2. Dismissing the third party complaint against the third party defendants;
attorneys fees equivalent to 25 percent of the amount due in case a legal action
was instituted and 10 percent of the same amount as liquidated damages. 3. Upholding the counterclaims of the third party defendants against the
[petitioners. Petitioners] are hereby required to pay [the] third party defendants the
Liquidated damages, however, should no longer be imposed for being sum of P30,000.00 as moral damages for the clearly unfounded suit;
unconscionable. Such damagesshould also be deemed included in the 2.5 percent
monthly penalty.
4. Requiring the [petitioners] to reimburse the third party defendants the sum
of P10,000.00 in the concept of attorneys fees and appearance fees of P300.00 per
Petitioner is entitled to attorneys fees,but only in a sum equal to 10 percent of the
appearance;
amount due which we deem reasonable under the proven facts.The Court deems it
improper to discuss respondents' claim for moral and other damages. Not having
appealed theCA Decision, they are not entitled to affirmative relief, as already 5. Requiring the [petitioners] to reimburse the third party defendants the sum
explained earlier. of P10,000.00 as exemplary damages pro bono publico and litigation expenses
including costs, in the sum of P5,000.00.[4]

The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
On February 28, 1986, a Contract of Lease was executed by Jose S. Menchavez,
Juan S. Menchavez Sr., Juan S. Menchavez Jr., Rodolfo Menchavez, Simeon
Menchavez, Reynaldo Menchavez, Cesar Menchavez, Charito M. Maga, Fe M. Potot,
Thelma R. Reroma, Myrna Ybaez, Sonia S. Menchavez, Sarah Villaver, Alma S.
Menchavez, and Elma S. Menchavez, as lessors; and Florentino Teves Jr. as lessee.
The pertinent portions of the Contract are herein reproduced as follows:
WHEREAS, the LESSORS are the absolute and lawful co-owners of that area covered
by FISHPOND APPLICATION No. VI-1076 of Juan Menchavez, Sr., filed on September
20, 1972, at Fisheries Regional Office No. VII, Cebu City covering an area of 10.0
hectares more or less located at Tabuelan, Cebu;
NOW, THEREFORE, for and in consideration of the mutual covenant and stipulations
hereinafter set forth, the LESSORS and the LESSEE have agreed and hereby agree as
follows:
1. The TERM of this LEASE is FIVE (5) YEARS, from and after the execution of this
Contract of Lease, renewable at the OPTION of the LESSORS;
2. The LESSEE agrees to pay the LESSORS at the residence of JUAN MENCHAVEZ SR.,
one of the LESSORS herein, the sum of FORTY THOUSAND PESOS (P40,000.00)
Philippine Currency, annually x x x;
3. The LESSORS hereby warrant that the above-described parcel of land is fit and
good for the intended use as FISHPOND;
4. The LESSORS hereby warrant and assure to maintain the LESSEE in the peaceful
and adequate enjoyment of the lease for the entire duration of the contract;
5. The LESSORS hereby further warrant that the LESSEE can and shall enjoy the
intended use of the leased premises as FISHPOND FOR THE ENTIRE DURATION OF
THE CONTRACT;
6. The LESSORS hereby warrant that the above-premises is free from all liens and
encumbrances, and shall protect the LESSEE of his right of lease over the said
premises from any and all claims whatsoever;
135
7. Any violation of the terms and conditions herein provided, more particularly the
warranties above-mentioned, the parties of this Contract responsible thereof shall
pay liquidated damages in the amount of not less than P50,000.00 to the offended
party of this Contract; in case the LESSORS violated therefor, they bound
themselves jointly and severally liable to the LESSEE;
On June 2, 1988, Cebu RTC Sheriffs Gumersindo Gimenez and Arturo Cabigon
demolished the fishpond dikes constructed by respondent and delivered possession
of the subject property to other parties.[6] As a result, he filed a Complaint for
damages with application for preliminary attachment against petitioners. In his
Complaint, he alleged that the lessors had violated their Contract of Lease,
specifically the peaceful and adequate enjoyment of the property for the entire
duration of the Contract. He claimed P157,184.40 as consequential damages for the
demolition of the fishpond dikes, P395,390.00 as unearned income, and an amount
not less than P100,000.00 for rentals paid.[7]
Respondent further asserted that the lessors had withheld from him the
findings of the trial court in Civil Case No. 510-T, entitled Eufracia Colongan and
Paulino Pamplona v. Juan Menchavez Sr. and Sevillana S. Menchavez. In that case
involving the same property, subject of the lease, the Menchavez spouses were
ordered to remove the dikes illegally constructed and to pay damages and attorneys
fees.[8]
Petitioners filed a Third Party Complaint against Benny and Elizabeth Allego,
Albino Laput, Adrinico Che and Charlemagne Arendain Jr., as agents of Eufracia
Colongan and Paulino Pamplona. The third-party defendants maintained that the
Complaint filed against them was unfounded. As agents of their elderly parents, they
could not be sued in their personal capacity. Thus, they asserted their own
counterclaims.[9]
After trial on the merits, the RTC ruled thus:
[The court must resolve the issues one by one.] As to the question of whether the
contract of lease between Teves and the [petitioners] is valid, we must look into the
present law on the matter of fishponds. And this is Pres. Decree No. 704 which
provides in Sec. 24:
Lease of fishponds-Public lands available for fishpond development including those
earmarked for family-size fishponds and not yet leased prior to November 9, 1972
shall be leased only to qualified persons, associations, cooperatives or corporations,
subject to the following conditions.
1. The lease shall be for a period of twenty five years (25), renewable for another
twenty five years;

2. Fifty percent of the area leased shall be developed and be producing in
commercial scale within three years and the remaining portion shall be developed
and be producing in commercial scale within five years; both periods begin from the
execution of the lease contract;
3. All areas not fully developed within five years from the date of the execution of
the lease contract shall automatically revert to the public domain for disposition of
the bureau; provided that a lessee who failed to develop the area or any portion
thereof shall not be permitted to reapply for said area or any portion thereof or any
public land under this decree; and/or any portion thereof or any public land under
this decree;
4. No portion of the leased area shall be subleased.
The Constitution, (Sec. 2 & 3, Art. XII of the 1987 Constitution) states:
Sec. 2 - All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, forests, or timber, wild life, flora
and fauna and other natural resources are owned by the state.
Sec. 3 - Lands of the public domain are classified into agricultural, forest or timber,
mineral lands and national parks. Agricultural lands of the public domain may be
further classified by law according to the uses to which they may be devoted.
Alienable lands of the public domain shall be limited to agricultural lands x x x.
As a consequence of these provisions, and the declared public policy of the State
under the Regalian Doctrine, the lease contract between Florentino Teves, Jr. and
Juan Menchavez Sr. and his family is a patent nullity. Being a patent nullity,
[petitioners] could not give any rights to Florentino Teves, Jr. under the
principle: NEMO DAT QUOD NON HABET - meaning ONE CANNOT GIVE WHAT HE
DOES NOT HAVE, considering that this property in litigation belongs to the State and
not to [petitioners]. Therefore, the first issue is resolved in the negative, as the court
declares the contract of lease as invalid and void ab-initio.
On the issue of whether [respondent] and [petitioners] are guilty of mutual fraud,
the court rules that the [respondent] and [petitioners] are in pari-delicto. As a
consequence of this, the court must leave them where they are found. x x x.
x x x. Why? Because the defendants ought to have known that they cannot lease
what does not belong to them for as a matter of fact, they themselves are still
applying for a lease of the same property under litigation from the government.
On the other hand, Florentino Teves, being fully aware that [petitioners were] not yet
the owner[s], had assumed the risks and under the principle of VOLENTI NON FIT
INJURIA NEQUES DOLUS - He who voluntarily assumes a risk, does not suffer
136
damage[s] thereby. As a consequence, when Teves leased the fishpond area from
[petitioners]- who were mere holders or possessors thereof, he took the risk that it
may turn out later that his application for lease may not be approved.
Unfortunately however, even granting that the lease of [petitioners] and [their]
application in 1972 were to be approved, still [they] could not sublease the same. In
view therefore of these, the parties must be left in the same situation in which the
court finds them, under the principle IN PARI DELICTO NON ORITOR ACTIO,
meaning[:] Where both are at fault, no one can found a claim.
On the third issue of whether the third party defendants are liable for demolishing
the dikes pursuant to a writ of execution issued by the lower court[, t]his must be
resolved in the negative, that the third party defendants are not liable. First,
because the third party defendants are mere agents of Eufracia Colongan and
Eufenio Pamplona, who are the ones who should be made liable if at all, and
considering that the demolition was pursuant to an order of the court to restore the
prevailing party in that Civil Case 510-T, entitled: Eufracia Colongan v. Menchavez.
After the court has ruled that the contract of lease is null and void ab-initio, there is
no right of the [respondent] to protect and therefore[,] there is no basis for
questioning the Sheriffs authority to demolish the dikes in order to restore the
prevailing party, under the principle VIDETUR NEMO QUISQUAM ID CAPERE QUOD EI
NECESSE EST ALII RESTITUERE - He will not be considered as using force who
exercise his rights and proceeds by the force of law.
WHEREFORE, in view of all foregoing [evidence] and considerations, this court
hereby renders judgment as follows:
1. Dismissing the x x x complaint by the [respondent] against the [petitioners];
2. Dismissing the third party complaint against the third party defendants;
3. Upholding the counterclaims of the third party defendants against the
[petitioners. The petitioners] are hereby required to pay third party defendants the
sum of P30,000.00 as moral damages for this clearly unfounded suit;
4. Requiring the [petitioners] to reimburse the third party defendants the sum
of P10,000.00 in the concept of attorneys fees and appearance fees of P300.00 per
appearance;
5. Requiring the [petitioners] to pay to the third party defendants the sum
of P10,000.00 as exemplary damages probono publico and litigation expenses
including costs, in the sum of P5,000.00.[10](Underscoring in the original)

Respondent elevated the case to the Court of Appeals, where it was docketed
as CA-GR CV No. 51144.
Ruling of the Court of Appeals
The CA disagreed with the RTCs finding that petitioners and respondent were in
pari delicto. It contended that while there was negligence on the part of respondent
for failing to verify the ownership of the subject property, there was no evidence that
he had knowledge of petitioners lack of ownership.[11] It held as follows:
x x x. Contrary to the findings of the lower court, it was not duly proven and
established that Teves had actual knowledge of the fact that [petitioners] merely
usurped the property they leased to him. What Teves admitted was that he did not
ask for any additional document other than those shown to him, one of which was
the fishpond application. In fact, [Teves] consistently claimed that he did not bother
to ask the latter for their title to the property because he relied on their
representation that they are the lawful owners of the fishpond they are holding for
lease. (TSN, July 11, 1991, pp. 8-11)[12]
The CA ruled that respondent could recover actual damages in the amount
of P128,074.40. Citing Article 1356[13] of the Civil Code, it further awarded liquidated
damages in the amount of P50,000, notwithstanding the nullity of the Contract. [14]
Hence, this Petition.[15]
The Issues
Petitioners raise the following issues for our consideration:
1. The Court of Appeals disregarded the evidence, the law and jurisprudence when it
modified the trial courts decision when it ruled in effect that the trial court erred in
holding that the respondent and petitioners are in pari delicto, and the courts must
leave them where they are found;
2. The Court of Appeals disregarded the evidence, the law and jurisprudence in
modifying the decision of the trial court and ruled in effect that the Regional Trial
Court erred in dismissing the respondents Complaint. [16]
The Courts Ruling
The Petition has merit.
Main Issue:
137
Were the Parties in Pari Delicto?
The Court shall discuss the two issues simultaneously.
In Pari Delicto Rule
on Void Contracts
The parties do not dispute the finding of the trial and the appellate courts that
the Contract of Lease was void.[17] Indeed, the RTC correctly held that it was the
State, not petitioners, that owned the fishpond. The 1987 Constitution specifically
declares that all lands of the public domain, waters, fisheries and other natural
resources belong to the State.[18] Included here are fishponds, which may not be
alienated but only leased.[19] Possession thereof, no matter how long, cannot ripen
into ownership.[20]
Being merely applicants for the lease of the fishponds, petitioners had no
transferable right over them. And even if the State were to grant their application,
the law expressly disallowed sublease of the fishponds to respondent. [21] Void are all
contracts in which the cause, object or purpose is contrary to law, public order or
public policy.[22]
A void contract is equivalent to nothing; it produces no civil effect. [23] It does
not create, modify or extinguish a juridical relation. [24] Parties to a void agreement
cannot expect the aid of the law; the courts leave them as they are, because they
are deemed in pari delicto or in equal fault.[25] To this rule, however, there are
exceptions that permit the return of that which may have been given under a void
contract.[26] One of the exceptions is found in Article 1412 of the Civil Code, which
states:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
others undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he
has given by reason of the contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may demand the return of what he has
given without any obligation to comply with his promise.

On this premise, respondent contends that he can recover from petitioners,
because he is an innocent party to the Contract of Lease. [27] Petitioners allegedly
induced him to enter into it through serious misrepresentation.[28]
Finding of In Pari Delicto:
A Question of Fact
The issue of whether respondent was at fault or whether the parties were
in pari delicto is a question of fact not normally taken up in a petition for review on
certiorari under Rule 45 of the Rules of Court. [29] The present case, however, falls
under two recognized exceptions to this rule. [30] This Court is compelled to review
the facts, since the CAs factual findings are (1) contrary to those of the trial court;
[31]
and (2) premised on an absence of evidence, a presumption that is contradicted
by the evidence on record.[32]
Unquestionably, petitioners leased out a property that did not belong to them,
one that they had no authority to sublease. The trial court correctly observed that
petitioners still had a pending lease application with the State at the time they
entered into the Contract with respondent.[33]
Respondent, on the other hand, claims that petitioners misled him into
executing the Contract.[34] He insists that he relied on their assertions regarding their
ownership of the property. His own evidence, however, rebuts his contention that he
did not know that they lacked ownership. At the very least, he had notice of their
doubtful ownership of the fishpond.
Respondent himself admitted that he was aware that the petitioners lease
application for the fishpond had not yet been approved. [35] Thus, he knowingly
entered into the Contract with the risk that the application might be disapproved.
Noteworthy is the fact that the existence of a fishpond lease application necessarily
contradicts a claim of ownership. That respondent did not know of petitioners lack of
ownership is therefore incredible.
The evidence of respondent himself shows that he negotiated the lease of the
fishpond with both Juan Menchavez Sr. and Juan Menchavez Jr. in the office of his
lawyer, Atty. Jorge Esparagoza.[36] His counsels presence during the negotiations,
prior to the parties meeting of minds, further debunks his claim of lack of
knowledge. Lawyers are expected to know that fishponds belong to the State and
are inalienable. It was reasonably expected of the counsel herein to advise his client
regarding the matter of ownership.
Indeed, the evidence presented by respondent demonstrates the contradictory
claims of petitioners regarding their alleged ownership of the fishpond. On the one
hand, they claimed ownership and, on the other, they assured him that their
138
fishpond lease application would be approved. [37] This circumstance should have
been sufficient to place him on notice. It should have compelled him to determine
their right over the fishpond, including their right to lease it.
The Contract itself stated that the area was still covered by a fishpond
application.[38] Nonetheless, although petitioners declared in the Contract that they
co-owned the property, their erroneous declaration should not be used against
them. A cursory examination of the Contract suggests that it was drafted to favor
the lessee. It can readily be presumed that it was he or his counsel who prepared it
-- a matter supported by petitioners evidence. [39] The ambiguity should therefore be
resolved against him, being the one who primarily caused it.[40]
The CA erred in finding that petitioners had failed to prove actual knowledge of
respondent of the ownership status of the property that had been leased to him. On
the contrary, as the party alleging the fact, it was he who had the burden of proving
through a preponderance of evidence[41] -- that they misled him regarding the
ownership of the fishpond. His evidence fails to support this contention. Instead, it
reveals his fault in entering into a void Contract. As both parties are equally at fault,
neither may recover against the other.[42]
Liquidated Damages
Not Proper
The CA erred in awarding liquidated damages, notwithstanding its finding that
the Contract of Lease was void. Even if it was assumed that respondent was entitled
to reimbursement as provided under paragraph 1 of Article 1412 of the Civil Code,
the award of liquidated damages was contrary to established legal principles.
Liquidated damages are those agreed upon by the parties to a contract, to be
paid in case of a breach thereof. [43] Liquidated damages are identical to penalty
insofar as legal results are concerned.[44] Intended to ensure the performance of the
principal obligation, such damages are accessory and subsidiary obligations. [45] In
the present case, it was stipulated that the party responsible for the violation of the
terms, conditions and warranties of the Contract would pay not less than P50,000 as
liquidated damages. Since the principal obligation was void, there was no contract
that could have been breached by petitioners; thus, the stipulation on liquidated
damages was inexistent. The nullity of the principal obligation carried with it the
nullity of the accessory obligation of liquidated damages.[46]
As explained earlier, the applicable law in the present factual milieu is Article
1412 of the Civil Code. This law merely allows innocent parties to recover what they
have given without any obligation to comply with their prestation. No damages may
be recovered on the basis of a void contract; being nonexistent, the agreement
produces no juridical tie between the parties involved. Since there is no contract, the
 139

injured party may only recover through other sources of obligations such as a law or
a quasi-contract.[47] A party recovering through these other sources of obligations
may not claim liquidated damages, which is an obligation arising from a contract.
WHEREFORE, the Petition is GRANTED and the assailed Decision and
Resolution SET ASIDE. The Decision of the trial court is hereby REINSTATED.
No pronouncement as to costs.
SO ORDERED.
No. It was the state who owned the fishpond. The 1987 Constitution specifically
declares that all lands of the public domain, waters, fisheries and other natural
resources belong to the State. Included here are fishponds, which may not be
alienated but only leased. Possession thereof, no matter how long, cannot ripen into
ownership. Being merely applicants for the lease of the fishponds, petitioners had no
transferable right over them. And even if the State were to grant their application,
the law expressly disallowed sublease of the fishponds to respondent. The contract
of lease is void ab initio. No damages may be recovered from a void contract.
WHEREFORE, the Petition is GRANTED and the assailed Decision and Resolution SET
ASIDE. The Decision of the trial court is hereby REINSTATED

MENCHAVEZ v. TEVES

G.R. No. 153201 January 26, 2005

This is a case to recover damages from a lease contract between the parties.

Facts:

February 28, 1986: Menchavez (lessors) and Florentino Teves Jr. (lessee) executed a
contract of lease.

June 2, 1988: Cebu RTC Sheriffs demolished the fishpond dikes constructed by the
the respondent and delivered the possession of the subject roperty to the plaintiffs.

Respondent filed a complaint for damages and alleged that the lessors have
violated their contract, specifically the peaceful and adequate enjoyment of the
property for the entire duration of the contract

RTC declared the contract of lease between the parties as void ab initio as it is
owned by the state based on the Regalian Doctrine. RTC ruled in favor of the
Petitioners.

Respondent elevated the case to CA.

CA disagreed with RTCs finding that petitioners and respondent were in pari delicto.
It contended that while there was negligence on the part of the respondent for
failing to verify the ownership of the property, there was no evidence that he had
knowledge of petitiones lack of ownership

Hence, this petition.

Issue

Whether or not the subject property (fishponds) can be leased by the petitioners.

Held

EN BANC
[G.R. No. L-22050. June 13, 1968.]
PAN PACIFIC COMPANY (PHILIPPINES), Plaintiff-Appellee, v. PHILIPPINE
ADVERTISING CORPORATION and JOHN W. MEARS, Defendants, PHILIPPINE
ADVERTISING CORPORATION,Defendant-Appellant.
Taada Carreon & Taada for Plaintiff-Appellee.
Felix S. Falgui, for Defendant-Appellant.
SYLLABUS
1. CIVIL LAW; SALE; SALES INVOICE; PROVISION FOR ATTORNEYS FEES AND
INTERESTS IN DELIVERY INVOICES, BINDING UPON BUYER. Where the delivery
invoices carry a provision for interests and attorneys fees at 12% and 25%
respectively, in addition to the costs for overdue accounts and for costs of collection,
the acceptance of the equipment, supplies and accessories mentioned in said
invoices by the buyer and the latters use of them is an implied conformity to the
terms of the invoices and he is bound thereby.
2. ID.; DAMAGES; MORAL DAMAGES; RECOVERABLE FOR WANTON REFUSAL TO PAY
JUST OBLIGATION. Where the defendants, in utter disregard of the rights of the
plaintiff, had refused deliberately and wantonly to pay the plaintiff what is justly due
the latter, they are liable for moral damages.
3. ID.; ID.; EXEMPLARY OR CORRECTIVE DAMAGES, RECOVERABLE IN INSTANT CASE.
Under Article 2232 of the Civil Code, the court may award exemplary damages in
contracts and quasi-contracts if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner. Thus where the defendant, aside from
the down payment he had made on the installation of the bowling alleys, had
refused to pay the balance thereof and the cost of the howling and billiard
accessories despite his promise to pay such balance in installments, and where his
attitude towards plaintiff was characterized by arrogance as reflected in his letters
which were replete with unsavory and discourteous remarks, the plaintiff is entitled
to moral and exemplary damages.
4. ATTORNEY AND CLIENT; ATTORNEYS FEES; DEMANDABLE WHERE PLAINTIFF IS
AWARDED EXEMPLARY DAMAGES. Plaintiff is entitled to attorneys fees in
accordance with Article 2208 of the Civil Code where he has been awarded
exemplary damages because the defendant had acted in gross and evident bad faith
in refusing to satisfy the plaintiffs plainly valid, just and demandable claim.
5. ID.; ID.; BASES FOR. Considering the lengthy pleadings, the voluminous
records, the lengthy and protracted trial and the professional standing of counsel,
attorneys fees in the amount of P15,000.00 may be charged against the
defendants.
DECISION
140
CONCEPCION, C.J.:
Appeal by defendant Philippine Advertising Corporation from a decision of the Court
of First Instance of Manila, the dispositive part of which reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is rendered in favor of the plaintiff and against the
defendant Philippine Advertising Corporation under the first cause of action,
P92,406.73 with interest at the rate of 8% per annum from January 22, 1951, until
paid; P23,622.90 under the second, third, and fourth causes of action, with interest
at the rate of 12% per annum from May 1, 1951, until paid; P20,000.00 by way of
moral and exemplary damages under the fifth cause of action; and P15,000.00 by
way of attorneys fees, and the costs of the suit. Defendants counterclaims are
hereby dismissed for lack of merit." (Record on Appeal, pp. 556-657.).
This is an action for the recovery, from said Corporation and its president, defendant
John W. Mears, of several sums of money under five (5) causes of action, namely;
1)P92,406.73, as the alleged balance of the cost of eighteen (18) bowling alleys and
additional equipment thereof, and the installation thereof; 2) P11,703.00, as the
price of two (2) carom and three (3) pocket tables, with their equipment, together
with two (2) sets of ivory balls and one (1) revolving cue rack; 3) P3,369.90, as the
costs of miscellaneous billiard and bowling accessories and equipment; 4)
P8,550.00, as the cost of 168 sets of duck pins; and 5) 25% of the aggregate amount
due under the first four (4) causes of action, as exemplary or corrective damages.
Plaintiff prays, also, that the defendants be sentenced to pay interest, attorneys
fees, and the costs.
In their answer, the defendants admitted some allegations of the complaint, denied
other allegations thereof, and set up special defenses, as well as four (4)
counterclaims. They prayed that plaintiffs complaint be dismissed and that plaintiff
be sentenced to pay damages in the aggregate sum of P763,000.00.
The factual background of the first cause of action is set forth in the appealed
decision, from which we quote:jgc:
"The defendants had payments coming to them from the War Damage Commission.
Wilfred Hurst had worked together with John W. Mears of the defendant corporation
prior to the war. In 1950, Hurst and Mears met, and the question of defendant war
damage payments in the Philippines came up in the conversation. Hurst, who was
then Vice-President of the plaintiff corporation 1 suggested to Mears that the
defendant reinvest part of the war damage payment due defendant corporation in
bowling alleys. The plaintiff was then distributor of Brunswick-Balke-Collender
Company of the United States, manufacturer of bowling alleys. Mears was
interested, and, accordingly, secured the approval of the War Damage Commission
to re-invest part of the war damage payment due the defendant Philippine
Advertising Corporation in bowling alleys. After continuous negotiations, plaintiff,
thru Hurst, and defendant, thru Mears, finally came into an agreement. This was in
the form of a letter addressed by the plaintiff to the defendant and which was
approved and accepted by the defendant corporation, thru Mears.
The pertinent portion of the letter-agreement marked Exhibit A 2 and which is one of
the subjects of the controversy between the plaintiff and the defendant reads as
 141

follows:
alleys & add. equip-
With reference to our verbal conversations regarding bowling alleys, we hereby
submit our firm quotation of P85,948.42 to cover the cost of installing twelve (12) ment, including
Brunswick Bowling Alleys in any location acquired by you in the City of Manila or its
immediate suburbs. This quotation includes the cost of the alleys, additional installation 48,107.24 P134,055.66
equipment and installation cost but does not include freight charges for accessories
that will have to be ordered from the United States. Such freight charges will be
charged to you at actual cost upon the arrival of the shipment. Then follows a
detailed list of the materials which were included and additional equipment for 6 3. Inland Freight 8,991.98
months maintenance of alleys and the terms of payment. The price was payable
50% upon the signing of the agreement and the balance in six (6) monthly 4. Ocean Freight 10,392.98
installments, the first installment falling due on the first day of work on the
installation of alleys. 3 The one-year guarantee against materials and defective 5. Arrastre 846.84
workmanship was allowed by the plaintiff company. This was, as stated above,
accepted by the Philippine Advertising Corporation, thru John W. Mears, President. 6. Sales Tax 10,430.30 30,661.90
Attached to the letter, Exhibit A, was, according to Hurst, a breakdown of the
bowling alley quotation. Subsequently, the defendants ordered and the plaintiff
supplied to the defendants another six (6) Brunswick bowling alleys. The agreement
with respect to them is embodied in the letter-agreement Annex B, 4 dated October 7. Additional items subse-
2, 1950. The pertinent portion of this letter reads as follows:
quently ordered by
As explained to you verbally we can no longer offer a firm quotation as we have
received advice from the Brunswick-Balke-Collender Company that all prices are defendants:chanrob1es virtual 1aw library
subject to existing price at time merchandise leaves the factory. For this reason we
are submitting to you our tentative quotation of P48,107.24 to cover the cost of a. 10 opera chairs 215.00
installing 6 additional alleys in your acquired location. It is understood that any
adjustments necessary will be made upon receipt of final invoices from the b. Score pencils 20.25
Brunswick-Balke-Collender Company.The above tentative quotation includes the
cost of the alleys, cost of additional equipment and installation cost but does not c. Graphite refills 3.80 239.05
include any freight charges for accessories that will have to be ordered from the
United States. Such freight charges will be charged to you at actual cost upon arrival
of the shipment.
8. Difference between cost of:
"Then follows a detailed list of the items that the supplier included in the quotation
and additional equipment for 6 months maintenance of alleys. According to the Upholstered seats
letter, it was also agreed that defendants were to pay 8% interest on the monthly
payment and it was also understood that any luxury or additional sales tax that installed by
might be imposed by the government would be for defendants account. This letter
was also accepted by defendant corporation thru John W. Mears." plaintiff 4,100.00

The sum of P92,406.73 sought to be recovered by the plaintiff, under its first cause and Veneer seats originally
of action, allegedly represents the unpaid balance of the cost of 18 bowling alleys
and additional equipment under the agreements Exhibits A and D, computed as ordered by defendants 2,150.00 1,950.00 P166,906.61
follows:

1. Cost of 12 bowling
LESS:chanrob1es virtual 1aw library
alleys & add. equip-
1. Paid in advance P67,027.83
ment, including
2. Cost of 5 sets
installation P85,948.42
of bowling settees
2. Cost of 6 bowling

included in defendants
orders but not installed
by plaintiff 6,520.00
3. 2% Luxury Tax
thereon 943.28
4. Bowling score crayons 8.77 74,499.88
freight charges and other charges would amount to and that it was not their
192,406.73
Appellant denies plaintiffs right to collect this balance upon the ground that: 1) the
sum of P30,661.90, representing the aggregate amount of inland freight, ocean
freight, arrastre and sales tax, should be deemed included in the price agreed upon;
2) eight (8) of the bowling alleys installed by the plaintiff were "second-hand", not
the new ones ordered by the defendants; 3) the bowling alleys installed by the
plaintiff were of a lower quality than those ordered by the defendants; and 4) the
installations made by the plaintiff were defective.
As regards inland and ocean freights, the arrastre and the sales tax, plaintiff alleges
that these charges are due from the defendants, because Exhibits A and D explicitly
provide that the prices therein quoted include "the cost of the alleys, additional
equipment and installation cost but does not include freight charges for accessories
that will have to be ordered from the U.S." Moreover, Exhibit D explicitly declares
"that any luxury or additional sales tax that may be imposed by the Philippine
Government upon the arrival of the merchandise" would be for defendants account.
Upon the other hand, appellant asserts that none of the goods supplied by plaintiff
are "accessories" covered by the aforementioned provision in Exhibits A and D, and
that in resolving the issue as to what are "accessories", the Court cannot go beyond
the terms of said exhibits.
As correctly noted in the decision appealed from,.
". . . defendants contention would be correct if the plaintiff had not alleged in its
complaint that the true and real agreement of the parties was that such charges and
taxes were not included in the firm quotation expressed in Exhibits A and D, but that
it was understood between the parties that such freight charges would be borne by
the defendants. . . .
x x x"
". . . plaintiffs interpretation or, to be exact, Hursts understanding of the term
accessories, includes all the parts of the bowling alley the alleys itself, the
pinballs, the pins, the ball, the pinspotters, etc., as enumerated in detail in the
letter-agreement, Exhibit A. On the other hand, neither the defendant nor its
President, Mears, had given the definition of the term accessories. As a matter of
fact, defendant Mears, in spite of his long deposition and defendants, in spite of the
voluminous evidence, had not stated for what arrastre charges or what freight
charges defendant is liable to the plaintiff.
142
"Plaintiffs contention is that the prices listed in Exhibit A were a firm quotation,
f.o.b., that is, delivered in the United States, and this price is the same as that stated
in the breakdown attached to Exhibit A. In fact, defendant does not deny that the
price quoted in Exhibit A is a firm quotation and the fact is confirmed by the letter,
Exhibit D, dated October 2, 1950, in which Hurst stated that they could no longer
offer a firm quotation as they had received advice from the Brunswick-Balke-
Collender Company that all prices were subject to existing prices at the time the
merchandise leaves the factory. When Hurst stated in Exhibit D that they could no
longer offer a firm quotation, he was evidently referring to the quotation in the letter
Exhibit A. As stated by Hurst, he could not at the time have been given a quotation
which would include freight charges, taxes and other charges which might be
imposed by the government, because he did not know exactly at that time what the
intention to make money on these charges. It was for that reason that Hurst, in his
letter, said that the quotation did not include freight charges for the accessories
which were to be imported from the Unites States. In contending that the quotation
in the letters Exhibits A and D defendant has clung to the ambiguity in the letters-
agreement. This ambiguity arises from the fact that the letter were hurriedly done
by a man who is not a lawyer and with no experience in the drafting of contracts.
But that evidence and circumstances proved, in the mind of the Court, that, as
contended by the plaintiff, the quotations stated in the letter-agreement were from
quotations f.o.b. and did not include freight charges, taxes, and other charges which
might be imposed by the government and which must be borne by the defendants."
(Record on Appeal, pp. 635-637.)
We find no plausible reason to disturb the foregoing finding. To begin with, it
connotes a determination of the relative credibility of the testimony of plaintiffs
witness, Wilfred Hurst, when contrasted with that of defendant John W. Mears, which
the lower court, in effect, found unworthy of credence and on which we agree.
Moreover, strictly speaking, the term "bowling alley" does not apply except to one
already installed. Prior thereto, the materials necessary to install and operate a
"bowling alley" do not constitute such "alley." They are merely "parts" of, and, in this
sense, "accessories" to, the principal, namely, the "bowling alley", once said "parts"
or "accessories" have been duly assembled. The goods ordered by and delivered to
the defendants included, aside from alley beds, pinspotters, standard bell return
sections, bottom storage rails for standard ball return, pit cushions, pit mats, duck
pins, duck pin balls, score sheets, marking pencils, pin balls, crown ten pins, bowlers
settees, spectators opera chairs, bowling shoes, floor machines, square bottom hand
chalk, special league record books, etc. If none of these goods were "accessories",
as contended by the defendants, then the proviso under consideration would be
meaningless.
Again, it has been satisfactorily established that the prices quoted for each of the
goods specified in the lists attached to Exhibits A and D are those charged "f.o.b." in
the catalogue of Brunswick-Balke-Collender Co., of which plaintiff is a distributor.
Hence, plaintiff made in Exhibit A a "firm" offer, whereas in Exhibit B it stated that
the prices therein were merely "tentative" and that a "firm" offer could not be made
therein, owing to the fact that "all prices are subject to the existing price at the time
the merchandise leaves the factory." It is thus clear that the "firm offer" made in
Exhibit A and the prices quoted in the "breakdown" lists attached thereto and to
Exhibit D, refer to the prices "at the time the merchandise leaves the factory"
and, accordingly, to the f.o.b prices quoted in the catalogue of the manufacturer
not to the prices of the goods placed at the premises of its buyer, over 8,000 miles
away from the factory.

This conclusion is bolstered up by the fact that plaintiff had some goods available on
hand, such as those involved in the second, third and fourth causes of action.
Indeed, the defendants have introduced evidence to the effect that plaintiff,
likewise, had some second-hand bowling alleys in stock. The subject-matter of
Exhibits A and D were, however, new bowling alleys and additional equipment,
practically all of which had still to be ordered by the plaintiff from the United States.
Hence, the proviso in Exhibits A and D: "This quotation includes the cost of the
alleys, additional equipment and installation cost but does not include freight
charges" not for all accessories, but only "for accessories that will have to be
ordered in the United States." Consequently Exhibits A and D continue "such
freight charges will be charged to you at actual cost upon the arrival of the
shipment." In other words, the freight charges for all goods shipped from the United
States would be on defendants account.
Needless to say, there is every reason to believe that defendants would not have
agreed to the prices specified in Exhibits A and B without first ascertaining the prices
prevailing in the United States, from which the goods ordered would come, and,
hence, without finding that said Exhibits A and B were based upon said "f.o.b."
prices.
It is next argued that eight (8) of the eighteen (18) alleys installed by plaintiff were
used or second-hand bowling alleys, not the new ones ordered by appellant; that,
sometime in August, 1950, plaintiff purchased from Clark Field several second-hand
bowling alleys which were brought to plaintiffs workshop at Sta. Mesa, Manila; that
these second-hand bowling alleys were repaired and painted in said workshop in
January and February, 1951; and that eight (8) of the bowling alleys installed by the
plaintiff in appellants premises came from this stock of second-hand bowling alleys
purchased from Clark Field.
In support of this contention, defendants introduced the testimony of Vicente
Aquino, a former carpenter of the plaintiff, who said that he was one of those who
had repaired second-hand bowling alleys in plaintiffs workshop at Sta. Mesa; that he
was, also, on board the trailer that allegedly brought second-hand bowling alleys to
appellants premises at Isaac Peral Street; and that, while these second-hand
bowling alleys were being installed in said premises, defendant Mears complained to
Hurst that said bowling alleys were not new.
The lower court found the evidence for the defense on this point unworthy of
credence for, despite said alleged discovery that eight (8) of the bowling alleys
installed by plaintiff were second-hand, "Mears made no official or written complaint
or protest to the plaintiff" about it. The court added:jgc:
". . . The only complaint of Mears was that they might not be able to open and
inaugurate the bowling alleys on March 1, 1951, the target date set by the parties, a
fear aggravated by the fact that invitations had already been sent out by the
defendants. Nowhere in his long letter, consisting of almost three pages of
typewritten, single space, Exhibit O, was there any mention that second-hand
bowling alleys were installed by the plaintiff . The long letter was devoted to the fear
that they might not be able to open the bowling alleys on March 1, 1951. In the
letter of Mears dated April 28, 1951, Exhibit S, or almost two months after the
opening of the bowling alleys, he complained about the defects and faults of bowling
alley No. 8 and demanded that repairs be immediately made. Nowhere again in his
letter did Mears complain that second-hand bowling alleys had been installed by the
plaintiff. And in the letter of John W. Mears to Brunswick-Balke-Collender Company
143
dated February 17, 1951, Exhibit U- 2, his complaint was that the installation was
not being given the proper attention by the plaintiff. Nowhere did he complain that
second-hand bowling alleys were installed by the plaintiff.
"Considering the character of John W. Mears, who, as it appears to the Court,
complains about almost everything to justify the non- payment of the balance still
due from him, the Court cannot understand why he had not mentioned to the
plaintiff or the Brunswick-Balke- Collender Company that second-hand bowling alleys
had been installed by the plaintiff. Moreover, it seems to the Court that it was quite
improbable, if not impossible, for the plaintiff to bring eight bowling alleys in two
truckloads to defendants premises in Isaac Peral and re-load eight bowling alleys,
without the same coming to the knowledge of Mears, who, by his own admission,
was at the bowling alley every day, and in the presence of the men who were
constructing the building for the bowling alley, considering that the second-hand
bowling alleys were not crated and that new ones which came from the United
States and delivered directly to Isaac Peral were crated." (Record on Appeal, pp.
640-641. Emphasis supplied.)
Upon the other hand, apart from refuting the testimony of Aquino and other
witnesses for the defense thereon, plaintiffs witnesses testified that each and every
one of the 18 bowling alleys it had installed in appellants premises were new. This
was confirmed by J.E. Whitaker, for many years export manager of Brunswick-Balke-
Collender Co., and an expert in the installation and maintenance of bowling alleys,
who inspected defendants alleys in November 1951. In his deposition, which was
duly introduced as part of plaintiffs evidence and fully corroborated by his report on
the result of his aforementioned inspection, Whitaker positively declared that said
alleys were new ones, not second-hand alleys, as now claimed by the defendants.
What is more, he found them to be" first class Brunswick pre-fabricated sectional
alleys, properly installed, but, unfortunately, not properly maintained."cralaw
virtua1aw library
As regards the quality of the bowling alleys installed by the plaintiff, appellant says
they were of the Liberty type, although their agreement allegedly called for bowling
alleys of the Centennial type. This pretense is not borne out by Exhibits A and D,
which do not specify the type of bowling alleys ordered by the defendants.
After arguing that, as regards the meaning of the term "accessories", said exhibits
contain everything agreed upon, defendants would have us believe that there had
been representations by the plaintiff and an oral understanding with the defendants
that they would have the finest type of bowling alleys, and that these were of the
Centennial type. If this pretense were true, appellant would have surely protested in
writing against the alleged violation of said understanding; but its correspondence
with the plaintiff is significantly silent thereon.
Again, the aforementioned J. E. Whitaker affirmed that "Liberty alleys are the
standard alleys as manufactured by Brunswick before the war and up to the
present;" that "the name Liberty . . . was assigned to the alleys during the war, to go
along with the trend of times" and was "applied to bowling alley beds manufactured
by Brunswick;" that "this was done as a matter of sales appeal, and for no other
reason;" that Brunswick, likewise, manufactures bowling alleys of the so-called
Centennial type, the main characteristic of which is that it has "tongued and groved"
bedstocks; that this is "merely a sales feature," which "adds nothing to the life and
serviceability of the product;" that "to equal the wearing qualities of the Liberty
alleys," the Centennial alleys "had to be manufactured out of thicker bedstock;" and
that, in fact, Liberty alleys last longer than Centennial alleys.

In a vain attempt to offset this evidence, the defense merely introduced the
testimony of defendant Mears, who did no more than indulge in surmises and
speculations, which are devoid of probative value.
Lastly, appellant brands the installation made by the plaintiff as defective and tried
to prove that within the first months of the operation of the alleys in question, as
many as twenty-eight (28) defects had been noticed therein. Upon the other hand,
the evidence for the plaintiff sufficiently shows that said alleys had been installed in
accordance with the standard requirements therefor. As stated by Whitaker, in his
aforementioned deposition and report, "Mears had complained about boards
popping up on the alleys," although this is "normal in all new bowling installations;"
that "all bowling alleys have a tendency to settle the first year, and require re-
aligning and re-finishing;" that this is the reason for the one- year guaranty given by
plaintiff herein; that the defects pointed out by Mears were of "minor" character and
were mostly due to poor or "bad maintenance." At any rate, said minor defects were
remedied and/or repaired in conformity with plaintiffs aforementioned guaranty.
We find, therefore, that the lower court has not erred in rendering judgment for the
plaintiff, under its first cause of action.
Appellant next maintains that "the trial court erred in not finding that" plaintiff "had
violated its verbal agreement with appellant" as to the price to be charged (1)." . .
on pocket and carom tables and accessories sued upon in the second cause of
action.. (2)." . . for the miscellaneous billiard tables, accessories and equipment
sued upon in the third cause of action . . .;" and (3) for the 168 sets of "duck pins
sued upon in the fourth cause of action . . ."cralaw virtua1aw library
Appellant objects to the sum of P11,703.00 claimed under the second cause of
action, upon the ground that plaintiff charges P2,150.00 for each table for which the
Army & Navy Club of Manila had paid only P1,800.00. It has been established,
however, that said club had twice purchased from the plaintiff, namely, in August
1948 and April 5, 1950, and that, although the first tables had cost P1,800.00 each,
the club paid P2,150.00 for each table acquired in 1950, or the same price charged
herein appellant for the tables it acquired in February 1951.
Regarding the sum of P3,369.00 sought to be collected under plaintiffs third cause
of action, for miscellaneous billiard and bowling accessories sold to the defendants
from February 22 to March 7, 1951, defendants contend that these goods had been
ordered with the understanding that they would pay the prices thereof as set forth in
the Catalogue of Brunswick-Balke-Collender Co. We are more inclined to believe,
however, as the lower court did, plaintiffs evidence to the effect that there had
been, and there could have been no such understanding, because the catalogue
prices are factory prices in the United States, whereas the goods involved in the
third assignment of error were part of plaintiffs stock available on hand.
In other words, having defrayed the cost of bringing said goods from the United
States, plaintiff could not have possibly agreed to charge therefor said factory
prices.
The fourth cause of action refers to 168 sets of duck pins sold by the plaintiff to the
defendants, who allegedly agreed to pay the current price thereof, or P50.00 for
each set. Appellant insists that it could not have entered into such agreement, for
the reason that, while in the United States, defendant Mears had bought duck pins
at $9.25 a set, or from P18.00 to P19.00 a set. Appellants records showed, however,
144
that the duck pins bought by Mears in the United States had cost from P27.04 to
P30.27 a set, or, at the rate of exchange then prevailing, from $13.52 to $15.13 a
set.
Plaintiff seeks, also, to recover interests and attorneys fees at the rates of 12% and
25%, respectively, under a provision in its invoices, attesting to the delivery of its
goods to the buyers thereof, in addition to the costs, reading:jgc:chanrobles.com.ph
"Interest of 12% per annum is to be charged on all accounts overdue. An additional
sum equal to 25% of the amount will be charged by vendors for attorneys fees and
costs of collection in case of suit." (Plaintiffs brief, pp. 47-48.).
Appellant asserts that it is under no obligation to pay the interest and attorneys
fees referred to in said invoices, because it had not agreed to the above-quoted
provision, the invoices for the goods having been signed by Prudencia Arboleda, a
mere clerk of appellant herein, and because, in fact, Mears had written on
appellants copy of one of said invoices Exhibit G-1 the words "Received copy
but not conformed." Appellants witness, Miss Arboleda declared, however, that she
had authority to receive said invoices or copies thereof; that she, thereupon, turned
them over to defendant Mears; and that the latter received said copies, without
expressing any objection thereto. Then, also, it appears that the note, expressing his
non-conformity with the provisions of Exhibit G-1, was written by him on said copy,
dated March 15, 1951, about a month and a half later, or on April 27, 1951. Again,
defendants did not try to cause a similar entry to be made in plaintiffs original
invoice, or to otherwise advise the plaintiff of defendants objection to the provisions
of said invoice. Worse still, appellant kept and used the billiard tables, the bowling
alleys and the accessories or equipment described in the aforementioned invoices,
without offering either to pay the amounts thereof or to return said goods. In the
language of His Honor, the trial Judge, "His acceptance of the equipment and
supplies and accessories, and the use he made of them is an implied conformity to
the terms of the invoices and he is bound thereby."cralaw virtua1aw library
Passing upon plaintiffs claim for damages and attorneys fees, the lower court
awarded therefor P20,000.00 and P15,000.00, respectively, upon the following
grounds:
"Under the fifth cause of action, plaintiff seeks to recover moral damages for the
alleged wanton refusal of the defendants to pay their just obligation to the plaintiff
and for taking advantage of the plaintiffs good faith. Article 2229 of the New Civil
Code provides that exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages. And Article 2232 provides that in contracts
and quasi-contracts, the court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The
records of this case amply demonstrate that the defendants, in utter disregard of the
rights of the plaintiff, had refused deliberately and wantonly to pay the plaintiff what
is justly due. The installation of the bowling alleys, together with their equipment,
and the billiard tables had brought the defendant a lucrative income from the year
of its opening in 1951, to the present; and yet outside of the down payment which
defendant had paid on the 18 bowling alleys, defendant had absolutely refused,
which the Court has found without just cause, to pay the balance thereof and the
cost of the bowling and billiard accessories this notwithstanding that the
defendant had promised to pay the balance of the price of the bowling alleys in
installments, the first installment to be paid on the day that the plaintiff would
commence work on the bowling alleys. Defendant, taking advantage of the plaintiffs
 145

good faith, requested a deferment of the payment until the installation shall have
been completed; but the installation having been completed, defendants under one
pretext or another, refused without just cause to pay what is due the plaintiff. Not
only that, but defendant Mears attitude towards the plaintiff was characterized by
arrogance and his letters are replete with unsavory and discourteous remarks, which
demonstrate not only the character of the man but reveal his lack of intention to pay
defendants just obligation.

"Plaintiff is entitled to actual damages consisting in the payment of interest and

attorneys fees, and considering that the defendants had acted wantonly,
oppressively, if not fraudulently, in the performance of their obligation, plaintiff is
likewise entitled to moral and exemplary damages, which the Court fixes in the
amount of P20,000.00. Under the first cause of action, plaintiff is entitled to
attorneys fees, since plaintiff in accordance with Article 2208 of the New Civil Code,
has been awarded exemplary damages, and because defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and
demandable claim, and it is just and equitable that attorneys fees and expenses of
litigation should be recovered. Considering the lengthy pleadings, the voluminous
records, the lengthy and protracted trial, and the professional standing of counsel,
the Court hereby charges the defendants with the payment of attorneys fees in the
amount of P15,000.00." (Record on Appeal, pp. 649-652.)

We are fully in accord with the foregoing view, which we adopt as ours.

WHEREFORE, the decision appealed from should be, as it is hereby, affirmed, with
costs against defendant-appellant, Philippine Advertising Corporation.

FIRST DIVISION
[G.R. No. 142029. February 28, 2001]
ERLINDA FRANCISCO, doing business in the name and style of Cebu
Fountainhead Bakeshop and JULIANA PAMAONG, petitioners,
vs. RICARDO FERRER, JR., ANNETTE FERRER, ERNESTO LO AND
REBECCA LO, respondents.
DECISION
PARDO, J.:
Appeal via certiorari[1] taken by petitioners from the decision of the Court of
Appeals[2] increasing the trial courts award of moral damages to Ricardo Ferrer, Jr.,
Annette Ferrer, Ernesto Lo and Rebecca Lo to two hundred fifty thousand pesos
(P250,000.00) and awarding exemplary damages in the amount of one hundred
thousand pesos (P100,000.00), in addition to the following:
1. The cost of the wedding cake in the amount of P3,175.00;
2. Attorneys fees in the amount of P10,000.00; and
3. Cost of litigation.
The facts, as found by the Court of Appeals,[3] are as follows:
On November 19, 1992 Mrs. Rebecca Lo and her daughter Annette Ferrer ordered a
three layered cake from Fountainhead Bakeshop, Mango Avenue Branch. It was then
agreed that the wedding cake shall be delivered at 5:00 oclock in the afternoon at
the Cebu Country Club, Cebu City, stating clearly that the wedding is scheduled on
December 14, 1992.
Plaintiffs made their first deposit in the amount of P1,000.00 on November 19, 1992
and two weeks thereafter made a full payment on the remaining balance.
On the day of the wedding, December 14, 1992, plaintiffs arrived at the Cebu
Country club around 6:00 oclock in the evening. They immediately notice the
absence of the wedding cake.
At 7:00 oclock in the evening they made a follow-up call to Fountainhead Bakeshop
and was informed that it was probably late because of the traffic.
146
At 8:00 oclock they were informed that no wedding cake will be delivered because
the order slip got lost. Plaintiffs were then compelled to buy the only available cake
at the Cebu Country Club which was a sans rival. Even though they felt that it was a
poor substitute to a wedding cake, the cutting of the cake is always a part of the
ceremony.
At 10:00 oclock in the evening, the wedding cake arrived but plaintiffs declined to
accept it, besides their order was a three-layered cake and what was actually
delivered was a two-layered one.
Subsequently, defendant Erlinda Francisco sent a letter of apology accompanied
with a P5,000.00 check, however, the same was declined by plaintiffs because they
felt it was inadequate.
Two weeks after the wedding, defendant Erlinda Francisco called Mrs. Rebecca Lo
and apologized.
Ricardo Ferrer, son-in-law of Rebecca Lo corroborated the latters testimony, stating
that two weeks after the wedding, as a result of the non-delivery of the wedding
cake, Ramon Montinola, the son-in-law of Erlinda Francisco, went to Rebecca Los
residence and offered the sum of P5,000.00 to indemnify for the damage done, but it
was rejected.[4]
On March 12, 1993, respondents filed with the Regional Trial Court, Cebu City
an action for breach of contract with damages against petitioners. [5]
After due trial, on May 19, 1995, the trial court rendered a decision in favor of
plaintiffs [herein defendants], the dispositive portion of which reads as follows:
THE FOREGOING CONSIDERED, judgment is hereby rendered in favor of the plaintiffs
and against Erlinda Francisco.
Directing the latter to pay the former the following:
1. The cost of the wedding cake in the amount of P3,175.00;
2. Moral damages in the amount of P30,000.00;
3. Attorneys fees in the amount of P10,000.00; and
4. Cost of litigation.
SO ORDERED.[6]

On May 25, 1995, petitioners appealed to the Court of Appeals.[7]
After due proceedings, on July 05, 1999, the Court of Appeals promulgated its
decision modifying the appealed decision as set out in the opening paragraph of this
opinion.[8]
Hence, this appeal.[9]
The issues raised are (1) whether the Court of Appeals erred in affirming the
trial courts award of moral damages and increasing the amount from thirty thousand
(P30,000.00) to two hundred fifty thousand pesos (P250,000.00); and (2) whether
the Court of Appeals was justified in awarding in addition to moral damages,
exemplary damages of one hundred thousand pesos (P100,000.00).
Petitioners submit that the Court of Appeals and the trial court erred in
awarding moral damages in favor of respondents because moral damages are
recoverable in breach of contract cases only where the breach was palpably wanton,
reckless, malicious, in bad faith, oppressive or abusive. [10]
We agree. To recover moral damages in an action for breach of contract, the
breach must be palpably wanton, reckless, malicious, in bad faith, oppressive or
abusive.[11]
Under the provisions of this law,[12] in culpa contractual or breach of contract,
moral damages may be recovered when the defendant acted in bad faith or was
guilty of gross negligence (amounting to bad faith) or in wanton disregard of his
contractual obligation and, exceptionally, when the act of breach of contract itself is
constitutive of tort resulting in physical injuries.[13]
Moral damages may be awarded in breaches of contracts where the defendant
acted fraudulently or in bad faith.[14]
Bad faith does not simply connote bad judgment or negligence, it imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach
of known duty through some motive or interest or ill will that partakes of the nature
of fraud.[15]
In this case, [w]e find no such fraud or bad faith.[16]
Moral damages are in the category of an award designed to compensate the
claimant for actual injury suffered and not to impose a penalty on the wrongdoer. [17]
The person claiming moral damages must prove the existence of bad faith by
clear and convincing evidence for the law always presumes good faith. It is not
147
enough that one merely suffered sleepless nights, mental anguish, serious anxiety
as the result of the actuations of the other party. Invariably such action must be
shown to have been willfully done in bad faith or with ill motive. [18] Mere allegations
of besmirched reputation, embarrassment and sleepless nights are insufficient to
warrant an award for moral damages. It must be shown that the proximate cause
thereof was the unlawful act or omission of the [private respondent] petitioners. [19]
An award of moral damages would require certain conditions to be met, to
wit: (1) first, there must be an injury, whether physical, mental or psychological,
clearly sustained by the claimant; (2) second, there must be culpable act or
omission factually established; (3) third, the wrongful act or omission of the
defendant is the proximate cause of the injury sustained by the claimant; and
(4) fourth, the award of damages is predicated on any of the cases stated in Article
2219 of the Civil Code. 21
It must again stressed that moral damages are emphatically not intended to
enrich a plaintiff at the expense of the defendant. 22 When awarded, moral damages
must not be palpably and scandalously excessive as to indicate that it was the result
of passion, prejudice or corruption on the part of the trial court judge 23 or appellate
court justices. 24
In the same fashion, to warrant the award of exemplary damages, [t]he
wrongful act must be accompanied by bad faith, and an award of damages would be
allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent
manner. 25
The requirements of an award of exemplary damages are: (1) they may be
imposed by way of example in addition to compensatory damages, and only after
the claimants right to them has been established; (2) that they can not be recovered
as a matter of right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant; (3) the act must be
accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent
manner. 26
Nevertheless, the facts show that when confronted with their failure to deliver
on the wedding day the wedding cake ordered and paid for, petitioners gave the
lame excuse that delivery was probably delayed because of the traffic, when in
truth, no cake could be delivered because the order slip got lost. For such
prevarication, petitioners must be held liable for nominal damages for insensitivity,
inadvertence or inattention to their customers anxiety and need of the hour.
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. 27Nominal damages may
be awarded to a plaintiff whose right has been violated or invaded by the defendant,
 148

for the purpose of vindicating or recognizing that right, not for indemnifying the
plaintiff for any loss suffered. 28

WHEREFORE, the Court GRANTS the petition. The Court REVERSES the
decision of the Court of Appeals in CA-G. R. CV No. 50894, and in lieu thereof,
sentences petitioners to pay respondents, as follows:

1. The cost of the wedding cake in the amount of P3, 175.00;

2. Nominal damages in the amount of P10,000.00;

3. Attorneys fees in the amount of P10,000.00; and

4. Costs of litigation.

No costs in this instance.

SO ORDERED.

SECOND DIVISION
G.R. No. 208462 December 10, 2014
SPOUSES CARLOS J. SUNTAY and ROSARIO R. SUNTAY, Petitioners,
vs.
KEYSER MERCANTILE, INC., Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the
September 7, 2012 Decision1 and the August 8, 2013 Resolution2 of the Court of
Appeals (CA) in CA-G.R. CV No. 94677, entitled Keyser Mercantile, Inc., v. Spouses
Carlos and Rosario Suntay" involving the ownership of Unit G and two (2) parking
slots in Bayfront's Tmver Condominium.
The Facts
On October 20, 1989, Eugenia Gocolay, chairperson and president of respondent
Keyser Mercantile, Inc. (Keyser), entered into a contract to sell with Bayfront
Development Corporation (Baxfront) for the purchase on installment basis of a
condominium unit in Bayfront Tower Condominium located at A. Mabini Street,
Malate, Manila. The subject of the sale was Unit G of the said condominium project
consisting of 163.59 square meters with the privilege to use two (2) parking slots
covered by Condominium Certificate of Title (CCT)No. 15802. This Contract to
Sell3 was not registered with the Register of Deeds ofManila. Thus, the subject unit
remained in the name of Bayfront with a clean title.
On July 7, 1990, petitioner spouses Carlos and Rosario Suntay (Spouses Suntay) also
purchased several condominium units on the 4th floor of Bayfront Tower
Condominium through another contract to sell. Despite payment of the full purchase
price, however, Bayfront failed to deliver the condominium units. When Bayfront
failed to reimburse the full purchase price, Spouses Suntay filed an action against it
before the Housing and Land Use Regulatory Board (HLURB) for violation of
Presidential Decree (P.D.) No. 957 and P.D. No. 1344, rescission of contract, sum of
money, and damages.
In its decision, dated April 23 1994, the HLURB rescinded the Contract to Sell
between Bayfront and Spouses Suntay and ordered Bayfront to pay Spouses Suntay
the total amount of 2,752,068.60 as purchase price with interest. Consequently, on
November 16, 1994, the HLURB issued a writ of execution.4
149
Upon the application of Spouses Suntay, the Sheriffs of the Regional Trial Court (RTC)
of Manila levied Bayfronts titled properties, including the subject condominium Unit
G and the two parking slots. Considering that CCT No. 15802 was still registered
under Bayfront with a clean title, the sheriffs deemed it proper to be levied. The levy
on execution5 in favor of Spouses Suntay was duly recorded in the Register of Deeds
of Manila on January 18, 1995.
The auction sale was conducted on February 23, 1995, and Spouses Suntay were the
highest bidder. Consequently, on March 1, 1995, the Certificate of Sale 6 in favor of
Spouses Suntay was issued. This was duly annotated at the back of CCT No. 15802
on April 7, 1995. Meanwhile, the Deed of Absolute Sale7 between Bayfront and
Keyser involving the subject property was finally executed on November 9, 1995.
The latter allegedly paid the full purchase price sometime in 1991. When Keyser was
about to register the said deed of absolute sale in February 1996, it discovered the
Notice of Levy and the Certificate of Sale annotated at the back of CCT No. 15802 in
favor of Spouses Suntay. Nevertheless, on March 12, 1996, the Register of Deeds
cancelled the title of Bayfront and issued CCT No. 26474 8 in the name of Keyser but
carried over the annotation of the Suntays.9
Subsequently, the sheriffs Final Deed of Sale10 was executed on April 16, 1996 in
favor of the Suntays upon the expiration of the one (1) year period of redemption
from the earlier auction sale. CCT No. 26474 of Keyser was cancelled and,
thereafter, CCT No. 34250-A11 was issued in the name of Spouses Suntay.
Keyser then filed a complaint for annulment of auction sale and cancellation of
notice of levy before the HLURB, docketed as HLURB Case No. REM 032196-9152. In
its decision, dated November 18, 1996, the HLURB ruled in favor of Keyser. Spouses
Suntay appealed the decision to the Office of the Presidentand later to the CA but
both affirmed the HLURB judgment.
On appeal before this Court, however, the HLURB decision was set aside. In its
September 23, 2005 Decision, the Court ruled that the HLURB had no jurisdiction
over controversies between condominium unit owners and the issue of ownership,
possession or interest in the disputed condominium units could not be adjudicated
by the HLURB due to its limited jurisdiction under P.D. No. 957 and P.D. No. 1344.
RTC Ruling
Undaunted, on March 24, 2006, Keyser filed before the RTC of Manila a new
complaint for annulment of auction sale, writ of execution, declaration of nullity of
title, and reconveyance of property with damages against Spouses Suntay, docketed
asCivil Case No. 06-114716. In their answer, Spouses Suntay denied the material
allegations of the complaint and interposed special and affirmative defenses of res
judicata, forum shopping, prescription, and lack of cause of action.

On October 19, 2009, the RTC rendered a Decision 12 in favor of Keyser. It explained
that when Spouses Suntay registered the Certificate of Sale, the condominium unit
was already registered in the name of Keyser. It also held that the auction sale was
irregular due to lack of posting and publication of notices. The RTC thus disposed:
WHEREFORE, premises considered, the Court hereby declares the auction sale as
null and void, orders the Registry of Deeds to reinstate the title of Keyser Mercantile
Inc. and to pay the costs.
SO ORDERED.13
CA Ruling
Spouses Suntay elevated the decision to the CA. In its September 7, 2012 Decision,
the CA denied the appealas it found that Spouses Suntay did not acquire the subject
property because at the time it was levied, Bayfront had already sold the
condominium unit to Keyser. Considering that the judgment debtor had no interest in
the property, Spouses Suntay, as purchasers at the auction sale, also acquired no
interest. The decretal portion of the CA decision reads: WHEREFORE,in view of the
foregoing considerations, the Decision dated October 19, 2009 of the Regional Trial
Court (RTC) of Manila, Branch 21, in Civil Case No. 06-114716, is AFFIRMED.
SO ORDERED.14
Spouses Suntay filed a motion for reconsideration, but it was denied in the August 8,
2013 Resolution of the CA.
Hence, this petition, anchored on the following
STATEMENT OF ISSUES
I been decided on appeal by this Court, then there was already res judicata in the RTC
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
SUSTAINING THE TRIAL COURTS DECISION BY NOT DISMISSINGTHE COMPLAINT
CASE OF HEREIN RESPONDENT ON GROUND OF PRESCRIPTION OF ACTIONS UNDER
ARTICLE 1146 OFTHE CIVIL CODE OF THE PHILIPPINES, AS WELL AS, DUE TO
ESTOPPEL BY LACHES;
II
WHETHER OR NOT THE COURT OFAPPEALS IN SUSTAINING THE DECISION OF THE
COURT A QUO COMMITTED A SERIOUS REVERSIBLE ERROR IN NOT APPLYING
SECTION 52 OF P.D. 1529 AND ARTICLE 1544 OF THE CIVIL CODE OF THE
150
PHILIPPINES BY FINDING THAT HEREIN PETITIONERS HAVE BETTER RIGHTS OF
OWNERSHIP OVER THE SUBJECT CONDOMINIUM PROPERTY IN LITIGATION;
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
SUSTAINING THE TRIAL COURTS DECISION BY NOT DISMISSINGTHE COMPLAINT FOR
LACK OF VALID AND LEGITIMATE CAUSEOF ACTION OF HEREIN RESPONDENT
AGAINST HEREIN PETITIONERS;
IV
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
SUSTAINING THE TRIAL COURTS DECISION BY NOT DISMISSING THE COMPLAINT ON
GROUND OF FORUM SHOPPING;
V
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
SUSTAINING THE TRIAL COURTS DECISION BY NOT DISMISSING THE COMPLAINT
[ON] GROUND OF RES JUDICATA;
VI
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
SUSTAINING THE TRIAL COURTS DECISION BY NOT AWARDING DAMAGES AND
ATTORNEYS FEES IN FAVOR OF HEREIN PETITIONERS.15
Spouses Suntay contend that res judicata existed. They assert that HLURB Case No.
REM-032196-9152 involved the same cause of action, parties and subject matter
with Civil Case No. 06-114716 before the RTC. Considering that the former case had
case. They likewise claim the existence of forum shopping in the refiling of the case
with the RTC for the second time on March 24, 2006.
Spouses Suntay also raise the issue of prescription because Article 1146 of the New
Civil Code16 provides that actions resulting in injury prescribe after four (4) years.
The resulting injury started on January 18, 1995. They argue that the correct
reckoning period was March 24, 2006 when Civil Case No. 06-114716 was filed in the
RTC; and that a period of more or less twelve (12) years had lapsed and the action
had already prescribed. HLURB Case No. REM-032196-9152 filed on March 21, 1996
should not have been considered to have tolled the prescriptive period because it
had a null and void judgment due to lack of jurisdiction.

Spouses Suntay argue that the CA erred in not applying Section 52 of P.D. No. 1529
and Article 1544 of the New Civil Code. Their right as purchasers in a public action
should havebeen preferred because their right acquired thereunder retroacts to the
date of registration of the Notice of Levy on January 18, 1995 and the subsequent
auction sale on February 23, 1995. They claim that their right over the subject
property is superior over that of Keyser because they purchased the subject
property in a legitimate auction sale prior to Keysers registration of the deed of
absolute sale.
Spouses Suntay also pray for moral, exemplary damages and attorneys fees. They
allegedly experienced mental anguish, besmirched reputation, sleepless nights, and
wounded feelings warranting moral damages. They contend that exemplary
damages should also be awarded in view of the reckless and wanton attitude of
Keyser in instituting a groundless action against them. Furthermore, Spouses Suntay
were constrained to hire the services of counsel to defend their right against a
baseless action.
The Courts Ruling
The petition is meritorious.
No res judicata, forum
shopping and prescription in
this case
As to the procedural matters, the Court finds that the grounds invoked by Spouses
Suntay are inapplicable. First, the defense of res judicata must fail. The doctrine of
res judicatais a fundamental principle of law which precludes parties from re-
litigating issues actually litigated and determined by a prior and final
judgment.17 Res judicata constituting bar by prior judgment occurs when the
following requisites concur: (1) the former judgment is final; (2) it is rendered by a
court having jurisdiction over the subject matter and the parties; (3) it isa judgment
or an order on the merits; and (4) there is identity of parties, of subject matter, and
of causes of action.18
The previous case instituted by Keyser in the HLURB was denied on appeal by this
Court based on lack of jurisdiction. Thus, the third requisite of res judicata is not
present because the previous case was not adjudicated on the merits as it was
denied on jurisdictional grounds.
There is no forum shopping either in this case. To determine whether a party
violated the rule against forum shopping, the elements of litis pendentiamust be
present, or the final judgment in one case amounts to res judicata in another. 19 Since
there is no res judicata in this case, then there is no forum shopping either.
151
The defense of prescription is likewise unavailing. In Fulton Insurance Company v.
Manila Railroad Company,20this Court ruled that the filing of the first action
interrupted the running of the period, and then declared that, at any rate, the
second action was filed within the balance of the remaining period. Applying Article
1155 of the New Civil Code in that case,21 the interruption took place when the first
action was filed in the Court of First Instance of Manila. The interruption lasted
during the pendency of the action until the order of dismissal for alleged lack of
jurisdiction became final.
In the present case, the prescriptive period was interrupted when HLURB Case No.
REM-032196-9152 was filed on March 21, 1996. The interruption lasted during the
pendency of the action and until the judgment of dismissal due to lack of jurisdiction
was rendered on the September 23, 2005. Thus, the filing of Civil Case No. 06-
114716 on March 24, 2006 was squarely within the prescriptive period of four (4)
years.
Spouses Suntay properly relied
on the Certificate of Title of
Bayfront
Now, the Court proceeds to the substantial issues. This Court finds that the petition
is meritorious applying the Torrens System of Land Registration. The main purpose of
the Torrens system is to avoid possible conflicts of title to real estate and to facilitate
transactions relative thereto by giving the public the right to rely upon the face of a
Torrens certificate of title and to dispense with the need of inquiring further, except
when the party concerned has actual knowledge of facts and circumstances that
should impel a reasonably cautious man to makesuch further inquiry. Every person
dealing with a registered land may safely rely on the correctness of the certificate of
title issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property. 22
Again to stress, any buyer or mortgagee of realty covered by a Torrens certificate of
title, in the absence of any suspicion, is not obligated to look beyond the certificate
to investigate the title of the seller appearing on the face of the certificate. And, heis
charged with notice only of such burdens and claims as are annotated on the title. 23
In the case at bench, the subject property was registered land under the Torrens
System covered by CCT No. 15802 with Bayfront as the registered owner. At the
time that the Notice of Levy was annotated on January 18, 1995, the title had no
previous encumbrances and liens. Evidently, it was a clean title. The Certificate of
Sale, pursuant to an auction sale, was also annotated on April 7,1995, with Bayfront
still as the registered owner.
It was only on March 12, 1996, almosta year later, that Keyser was able to register
its Deed of Absolute Sale with Bayfront. Prior to such date, Spouses Suntay

appropriately relied on the Torrens title of Bayfront to enforce the latters judgment
debt.
Because "the act of registration is the operative act to convey or affect the land
insofar as third persons are concerned," 24 it follows that where there is nothing in the
certificate of title toindicate any cloud or vice in the ownership of the property, or
any encumbrance thereon, the purchaser is not required to explore farther than
what the Torrens title upon its face indicates in quest for any hidden defect or
inchoate right thatmay subsequently defeat his right thereto. If the rule were
otherwise, the efficacy and conclusiveness of the certificate of title which the Torrens
system seeks to insure would entirely be futile and nugatory. The public shall then
be denied of its foremost motivation for respecting and observing the Torrens
system of registration.25
When the notice of levy and certificate of sale were annotated on the title, the
subject property was unoccupied and no circumstance existed that might suggest to
Spouses Suntay that it was owned by another individual.26Records reveal that it was
only later, on January 6, 1999, that the subject property was discovered by the
sheriffs to be padlocked.27 The administrator of the condominium did not even
knowthe whereabouts of the alleged owner.28 To reiterate, absent any peculiar
circumstance, Spouses Suntay could not be required to disregard the clean title of
Bayfront and invest their time, effort and resources to scrutinize every square feet of
the subject property. This Court is convinced that Spouses Suntay properly relied on
the genuineness and legitimacy of Bayfronts Torrens certificate of title when they
had their liens annotated thereon.
Levy on execution is superior to
the subsequent registration of
the deed of absolute sale.
The CA stated in its decision that when the subject property was levied and
subjected to an execution sale, Bayfront had already sold it to Keyser. As such,
Spouses Suntay no longer acquired the right over the subject property from Bayfront
because the latter, as judgment debtor, had nothing more to pass. 29 Earlier, the RTC
held that at the time Spouses Suntay were to register the auction sale, the subject
property was already registered in Keysers name and, thus, they were fully aware of
the earlier sale. It was too late for Spouses Suntayto deny their knowledge of
Keysers title. The RTC also found the auction sale questionable due to the lack of
posting and publication of notice.30
152
The Court disagrees with the lower courts. They had completely overlooked the
significance of a levy on execution. The doctrine is wellsettled that a levy on
execution duly registered takes preference over a prior unregistered sale. Even if the
prior salewas subsequently registered before the sale in execution but after the levy
was duly made, the validity of the execution sale should be maintained because it
retroacts to the date of the levy. Otherwise, the preference created by the levy
would be meaningless and illusory.31
In this case, the contract to sell between Keyser and Bayfront was executed on
October 20, 1989, but the deed of absolute sale was only made on November 9,
1995 and registered on March 12, 1996. The Notice of Levy in favor of Spouses
Suntay was registered on January 18, 1995, while the Certificate of Sale on April 7,
1995, both dates clearly ahead of Keysers registration of its Deed of Absolute Sale.
Evidently, applying the doctrine of primus tempore, potior jure(first in time, stronger
in right), Spouses Suntay have a better right than Keyser.
In the case of Uy v. Spouses Medina32 which dealt with essentially the same issues,
the Court wrote:
Considering that the sale was not registered earlier, the right of petitioner over the
land became subordinate and subject to the preference created over the earlier
annotated levy in favor of Swift. The levy of execution registered and annotated on
September 1, 1998 takes precedence over the sale of the land to petitioner on
February 16, 1997, despite the subsequent registration on September 14, 1998 of
the prior sale. Such preference in favor of the levy on execution retroacts to the date
of levy for to hold otherwise will render the preference
The settled rule is that levyon attachment, duly registered, takes preference over a
prior unregistered sale. This result is a necessary consequence of the fact that the
property involved was duly covered by the Torrens system which works under the
fundamental principle that registration is the operative act which gives validity to
the transfer or creates a lien upon the land. The preference created by the levy on
attachment is not diminished even by the subsequent registration of the prior sale.
This is so because an attachment is a proceeding in rem. It is against the particular
property, enforceable against the whole world. The attaching creditor acquires a
specific lien on the attached property which nothing can subsequently destroy
except the very dissolution of the attachment or levy itself. Such a proceeding, in
effect, means that the property attached is an indebted thing and a virtual
condemnation of it to pay the owners debt. The lien continues until the debt is paid,
or sale is had under execution issued on the judgment, or until the judgment is
satisfied, or the attachment discharged or vacated in some manner provided by law.
[Emphases supplied]
The Court does not agree with the RTC either that the auction sale had glaring
irregularities. Assisting Sheriff Rufo Bernardo Jr., testifying as Keysers witness,

categorically stated that they had posted notices of the auction sale and had
conducted the bidding.33 The documentary evidence of S pouses Suntay also shows
that publication of the auction sale was indeed complied with. 34
No award of actual, moral and
exemplary damages
Finally, the Court cannot grant the claim for damages by Spouses Suntay. The filing
alone of a civil action should not be a ground for an award of moral damages in the
same way that a clearly unfounded civil action is not among the grounds for moral
damages.35 Spouses Suntay failed to show a compelling reason to warrant the award
of moral damages aside from their bare allegations.
As to the award of exemplary damages, Article 2229 of the New Civil Code provides
that exemplary damages may be imposed by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory
damages.36 The claimant, however, must first establish his right to moral,
153
temperate, liquidated or compensatory damages. In this case, because Spouses
Suntay failed to prove their entitlement to moral or compensatory damages, there
could be no award of exemplary damages.
Spouses Suntay are not entitled to attorney's fees either.1wphi1 The settled rule is
that no premium should be placed on the right to litigate and that not every winning
party is entitled to an automatic grant of attorney's fees.37
WHEREFORE, the petition is GRANTED. The September 7, 2012 Decision and the
August 8, 2013 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 94677 are
REVERSED and SET ASIDE. Accordingly, the Court hereby declares the auction sale
as valid and binding on Keyser Mercantile, Inc. and all other subsequent registrants.
SO ORDERED.