immediately after its discovery.
Such ineptness comes
MORAL DAMAGES
SIMEX INTERNATIONAL V. CA (G.R. NO. 88013)
Facts: Petitioner, a private corporation engaged in the
exportation of food products, was a depositor
maintaining a checking account with respondent Traders
Royal Bank. Petitioner deposited to its account increasing
its balance and subsequently, issued several checks but
was surprised to learn that it had been dishonored for
insufficient funds. As a consequence, petitioner received
demand letters from its suppliers for the dishonored
checks. Investigation disclosed that the deposit was not
credited to it. The error was rectified and the dishonored
checks were consequently paid. Petitioner demanded
reparation from respondent bank for its gross and
wanton negligence but the later did not heed. Petitioner
then filed before the RTC which later held that
respondent bank was guilty of negligence but petitioner
nonetheless was not entitled to moral damages. CA
affirmed.
Issue: Whether or not petitioner is entitled to damages
due to respondent bank’s negligence.
Ruling: YES. As the Court sees it, the initial carelessness
of the respondent bank, aggravated by the lack of
promptitude in repairing its error, justifies the grant of
moral damages. This rather lackadaisical attitude toward
the complaining depositor constituted the gross
negligence, if not wanton bad faith, that the respondent
court said had not been established by the petitioner. We
shall recognize that the petitioner did suffer injury
because of the private respondent’s negligence that
caused the dishonor of the checks issued by it. The
immediate consequence was that its prestige was
impaired because of the bouncing checks and confidence
in it as a reliable debtor was diminished.
The point is that as a business affected with public interest
and because of the nature of its functions, the bank is
under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the
fiduciary nature of their relationship. In the case at bar, it
is obvious that the respondent bank was remiss in that
duty and violated that relationship. What is especially
deplorable is that, having been informed of its error in not
crediting the deposit in question to the petitioner, the
respondent bank did not immediately correct it but did so
only one week later or twenty-three days after the deposit
was made. It bears repeating that the record does not
contain any satisfactory explanation of why the error was
made in the first place and why it was not corrected
1|To r t s a n d D a ma g es | N I K K I S I A 0 4 1 4 2 0 1 8
under the concept of the wanton manner contemplated in
the Civil Code that calls for the imposition of exemplary
damages.
A bank may be held liable for damages by reason of its
unjustified dishonor of a check, which caused damage to
its client’s credit standing. The bank must record every
single transaction accurately, down to the last centavo,
and as promptly as possible. This has to be done if the
account is to reflect at any given time the amount of
money the depositor can dispose of as he sees fit,
confident that the bank will deliver it as and to
whomever he directs. The bank is a fiduciary of the
depositor’s money.
Facts: Simex International is a private corporation
engaged in the exportation of food products. It buys these
products from various local suppliers and then sells them
abroad to the Middle East and the United States. Most of
its exports are purchased by the petitioner on
credit. Simex was a depositor of the Far East Savings
Bank and maintained a checking account in its branch in
Cubao, Quezon City which issued several checks against
its deposit but was surprised to learn later that they had
been dishonored for insufficient funds. As a consequence,
several suppliers sent a letter of demand to the petitioner,
threatening prosecution if the dishonored check issued to
it was not made good and also withheld delivery of the
order made by the petitioner. One supplier also cancelled
the petitioner’s credit line and demanded that future
payments be made by it in cash or certified check. The
petitioner complained to the respondent bank.
Investigation disclosed that the sum of P100,000.00
deposited by the petitioner on May 25, 1981, had not been
credited to it. The error was rectified only a month after,
and the dishonored checks were paid after they were re-
deposited. The petitioner then filed a complaint in the
then Court of First Instance of Rizal against the bank for
its gross and wanton negligence.
Issue: Whether or not the bank can be held liable for
negligence by reason of its unjustified dishonor of a check
Held: The depositor expects the bank to treat his
account with the utmost fidelity whether such account
consists only of a few hundred pesos or of millions. The
bank must record every single transaction accurately,
down to the last centavo, and as promptly as possible.
This has to be done if the account is to reflect at any given
time the amount of money the depositor can dispose of as
he sees fit, confident that the bank will deliver it as and to
whomever he directs. A blunder on the part of the bank,
such as the dishonour of a check without good reason, can
cause the depositor not a little embarrassment if not also for the tour group they were supposed to meet at the
financial loss and perhaps even civil and criminal Manila International Airport. They likewise searched for
litigation. private respondent’s representative who would give
them final instructions on their trip to Hongkong. They
met neither private respondent’s tour group nor its
Article 2205 of the Civil Code provides that actual or
representative.
compensatory damages may be received “(2) for injury to
the plaintiff s business standing or commercial credit.”
When they were paged through the public address
There is no question that the petitioner did sustain actual
system to board their plane for Hongkong, they had no
injury as a result of the dishonored checks and that the
choice but to do so without receiving any instructions
existence of the loss having been established “absolute
from private respondent’s representative.
certainty as to its amount is not required.” 7 Such injury
should bolster all the more the demand of the petitioner
Inside the plane, petitioners did not meet anyone from the
for moral damages and justifies the examination by this
Baron Tour Group. They looked for and found a certain
Court of the validity and reasonableness of the said claim.
Mr. Arsenio Rosal who, to their embarrassment,
protested that he was not a tour guide but a business
GRNo.L-46877, Jan 22, 1988 ] executive working with International Harvester Macleod,
LOURDES CYNTHIA MAKABALI v. CA Inc. and who was going to Hongkong as a paying
241 Phil. 260
passenger. In fact, he knew no one from private
respondent Baron Travel Corporation and had nothing to
The sole issue in this petition for review is whether or not
do with it.
petitioners are entitled to more than the P5,000.00 moral
and exemplary damages, P1,000.00 attorney’s fees and
In Hongkong, nobody met petitioners at the airport. Mr.
costs awarded to them by the Court of Appeals in the
Rosal who was a member of the Abaya Tour Group,
light of the circumstances
requested their tour leader to accommodate petitioners
of the case.
provided they pay for all their expenses in Hongkong.
Petitioner Georgina Makabali had just graduated from
Thereafter, petitioners called up the President Hotel in
the College of Medicine, University of the Philippines,
Hongkong where private respondent promised to book
and as a graduation gift from her father, was given a trip
them but it had no accommodations for them. Petitioners
to Hongkong. Since she had never been abroad, her
lost no time in sending a cable to private respondent
parents insisted that she be accompanied by her sister and
informing it that they had no hotel accommodations.
co-petitioner Lourdes Cynthia Makabali, a schoolteacher
at the Colegio de San Agustin, Dasmarinas Village.
Left with no alternative, petitioners tagged along with the
Abaya Tour Group. Petitioners claimed public
An advertisement of private respondent Baron Travel
humiliation due to the fact that they had to pay for their
Corporation in the March 30, 1969 issue of the newspaper
lunch while the rest of the group had prepaid meals.
“The Sunday Times” offering a package tour to
They could not go shopping with the Abaya group for
Hongkong caught the attention of petitioner Georgina
fear that their limited funds would not be sufficient to pay
Makabali. In response to her inquiry, private respondent
for their hotel bills. There were times when breakfast
sent her the literature pertaining to its Hongkong package
consisted of hot dogs bought along the sidewalk while
tour together with the time schedule, description of the
lunch and supper consisted of apples and oranges.
tour, tour conditions and brochure.
On the third night, they tried to place a long-distance call
At private respondent’s office, petitioners were assured
to their home but could not get through. The next
that they would be going with a group of thirteen [13]
morning, petitioners sent a cable to their parents.
other travelers to be led by a tour guide, a certain Mr.
Arsenio Rosal, and that a representative of private
According to petitioners, they had to scrimp on their
respondent would see them off at the Manila
limited budget for fear that their meager pocket money
International Airport to give them final instructions.
would not be enough to pay for their hotel bills. All these
Petitioners were also assured that they would be lodged
caused them sleepless nights because of great worry,
at the President Hotel in Hongkong. These promises and
mental anguish and public humiliation.
representations convinced the petitioners to purchase the
Hongkong package tour offered by private respondent.
It was only at 9:00 in the morning of May 13, 1969 or on
the fourth day of the supposed five-day tour that
On the departure date, May 10, 1969, petitioners searched
2|T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
petitioners were notified that private respondent had
finally made arrangements for the payment of their bills.
By that time, the supposed tour was practically over.
Upon their return, petitioners complained to private
respondent who according to petitioners did not even
bother to apologize but simply ignored their complaint
and gave them the run around.
An action for moral and exemplary damages, attorney’s
fees and costs was filed by the petitioners in the then
Court of First Instance of Manila, Branch XVI and
docketed as Civil Case No. 76912. Petitioners in their
complaint prayed for an award of P100 as actual and
compensatory damages, P30,000.00 as moral damages,
P5,000.00 as exemplary damages plus attorney’s fees and
costs. The Court rendered judgment in petitioner’s favor
but awarded them only P500.00 as moral and exemplary
damages, P100.00 as attorney’s fees and costs, stating the
following as its justification for the award:
“Plaintiffs claim P35,000 for damages aside from
attorney’s fees. These are too much and too high. Travel
agents are only paid 10% commissions for the trips they
sell. Besides, Baron rectified on time its oversight and
made it possible for the plaintiffs to enjoy the rest of their
trip.”[1]
Unsatisfied, petitioners appealed to the Court of Appeals.
Private respondent likewise appealed. The Court of
Appeals made the following findings and ruling:
“It is a fact that the plaintiffs had to shift for themselves
upon arriving in Hongkong and that defendant arranged
for the hotel bills of plaintiffs only after said plaintiffs had
cabled it for confirmation. There is no doubt that the
plaintiffs suffered humiliation and anxiety during the
first days of their stay in Hongkong. The defendant was
remiss in the performance of its obligation to the
plaintiffs. It acted in wanton disregard of the rights of the
plaintiffs.
“The trial Court correctly stated that the amount of
damages claimed by the plaintiffs are too high. However,
the amounts awarded as damages and attorney's fees by
the trial court are inadequate. Under the established facts
and equity of the case, the plaintiffs are entitled to the
sum of P5,000.00 as moral and exemplary damages and
the amount of P1,000.00 as attorney’s fees.
“WHEREFORE, the decision appealed from is hereby
modified in that the defendant is ordered to pay the
plaintiffs the sum of P5,000.00 as moral and exemplary
damages and the sum of P1,000.00 as attorney’s fees and
the costs.
3|T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
“SO ORDERED.”[2]
Still unsatisfied, petitioners elevated this case to Us on a
petition for review on a lone assignment of error, to wit:
THE COURT OF APPEALS ERRED IN AWARDING
PETITIONERS THE PITIFUL SUMS OF P5,000.00 AS
MORAL AND EXEMPLARY DAMAGES AND P1,000.00
AS ATTORNEY’S FEES IN THE LIGHT OF THE SOCIAL
STANDING OF PETITIONER GEORGINA MAKABALI,
WHO IS A DOCTOR OF MEDICINE, AND OF
PETITIONER LOURDES CYNTHIA MAKABALI, WHO
IS A TEACHER; IN THE LIGHT OF THE SLEEPLESS
NIGHTS AND PUBLIC HUMILIATION THEY
SUFFERED FOR THREE DAYS AND THREE NIGHTS;
IN THE LIGHT OF THE CALLOUS FAILURE OF
PRIVATE RESPONDENT TO HAVE ANYONE ATTEND
TO PETITIONERS IN SPITE OF THE FACT THAT IT
RAKES IN MORE THAN HALF A MILLION PESOS A
MONTH FROM AIR FREIGHT ALONE.[3]
To begin with, there is no hard and fast rule in the
determination of what would be a fair amount of moral
damages, since each case must be governed by its own
peculiar circumstances.[4]
Article 2217 of the Civil Code recognizes that moral
damages which include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation and
similar injury, are incapable of pecuniary estimation.
As to exemplary damages, Article 2229 of the Civil Code
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,[5] 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.[6]
A review of related jurisprudence shows that We had
awarded moral damages in more or less similar cases
ranging from P20,000.00 [Northwest Airlines, Inc. v.
Cuenca],[7] P25,000.00 [Yutukv. Manila Electric Company,
Air France v. Carrascoso][8] P50,000.00 [KLM Royal Dutch
Airlines v. Court of Appeals],[9] P150,000.00 [Ortigas v.
Lufthansa German Airlines],[10] and P200,000.00 [Lopez v.
Pan American World Airways][11] to P500,000.00 [Zulueta v.
Pan American World Airways][12] As to exemplary
damages, We awarded in Yutuk and Air France
£10,000.00, in Lopez P75,000.00, in Ortigas P100,000.00 and
in Zulueta P200,000.00.
It will thus be noted that We have awarded moral and
exemplary damages depending upon the facts attendant
to each case. It will also be noted that We gave separate
awards for moral and exemplary damages. This is as it
should be because the nature and purposes of said
damages are different. While moral damages have to do
with injury personal to the awardee, such as physical
suffering and the like, exemplary damages are imposed
by way of example or correction for the public good.
It is essential however, in the award of damages that the
claimant must have satisfactorily proven during the trial
the existence of the factual basis of the damages and its
causal connection to defendant's acts. This is so because
moral damages, though incapable of pecuniary
estimation, 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,[13] and are
allowable only when specifically prayed for in the
complaint.[14]
As reflected in the records of the case, the Court of
Appeals was in agreement with the findings of the trial
court that petitioners suffered anguish, embarrassment
and mental sufferings due to failure of private respondent
to perform its obligation to the petitioners. According to
the Court of Appeals, private respondent acted in wanton
disregard of the rights of petitioners. These
pronouncements lay the basis and justification for this
Court to award petitioners moral and exemplary
damages.
In the light of the circumstances obtaining in the case at
bar, especially the social standing of petitioners and the
embarrassment and humiliation suffered by them, the
anxiety they must have felt in their first journey to a
foreign land under uncertain circumstances and with
meager funds which could run out any time, We are
inclined to award damages to the petitioner more than
what was awarded by the Court of Appeals.
It must be emphasized that moral damages are not
intended to enrich the complainant at the expense of a
defendant. They are awarded only to enable the injured
parties to obtain means, diversions or amusements that
will serve to alleviate the moral sufferings the injured
parties have undergone by reason of defendant's culpable
action. In other words, the award of moral damages is
aimed at a restoration within the limits of the possible, of
the spiritual status quo ante; and therefore it must be
proportionate to the suffering inflicted.[15] The amount of
P5,000.00 is minimal compared to the sufferings and
embarrassment of petitioners who left Manila with high
spirits and excitement hoping to enjoy their first trip to a
foreign land only to be met with uncertainties and
4|T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
humiliations.
We note however that petitioners limited their claim for
moral and exemplary damages in their complaint filed
with the Court of First Instance to a total of P35,000.00
plus attorney’s fees and costs. We feel that Our award
should not exceed the said amount.
WHEREFORE, the decision of the Court of Appeals
subject of the petition for review is hereby modified,
increasing the award to petitioners of moral and
exemplary damages to P35,000.00 and attorney’s fees to
P5,000.00 with costs. This decision is immediately
executory.
BURDEN OF PROOF, QUANTUM OF EVIDENCE
RAAGAS VS. TRAYA
FACTS: The complaint filed by the spouses Melquiades
Raagas and Adela Laudiano Raagas against Octavio
Traya, his wife, and Bienvenido Canciller, alleges in
essence that the latter was "recklessly" driving a truck
owned by his co-defendants along the public highway,
the said vehicle ran over the plaintiffs' three-year old son
Regino, causing his instantaneous death. The plaintiffs
ask for actual damages in the sum of P10,000, moral,
nominal and corrective damages in a sum to be
determined by the court, Pl,000 as attorney's fees, Pl,000
for expenses of litigation, plus costs.
The court sentenced the defendants, jointly and severally,
to pay "to the plaintiffs the sum of P10,000 for the death
of their child Regino Laudiano Raagas, P2,000 for moral
damages, Pl,000 actual damages, Pl,000 for attorney's
fees, and the costs.
ISSUE: Is the trial court correct?
HELD: NO. The trial court erred. Actual damages must
be proved, and that a court cannot rely on "speculation,
conjecture or guesswork" as to the fact and amount of
damages, but must depend on actual proof that damages
had been suffered and on evidence of the actual amount
(Tomassi v. Villa-Abrille; Suntay Tanjangco v. Jovellanos;
Delfin v. Court of Agrarian Relations). In Malonzo v.
Galang, the Supreme Court reaffirmed the rule that
although an allegation is not necessary in order that
moral damages may be awarded, "it is, nevertheless,
essential that the claimant satisfactorily prove the
existence of the factual basis of the damages and its causal
relation to defendant's acts."
G.R. No. L-21879 September 29, 1967
SAN MIGUEL BREWERY, INC., plaintiff-appellant,
vs. FRANCISCO MAGNO, defendant-appellee.
An appeal from a decision of the Court of First Instance
of Manila, in civil case No. 46039, dismissing the
complaint filed by the San Miguel Brewery, Inc., and
ordering it to pay to the defendant P2,000.00 in damages,
P1,000.00 as attorney's fees, and costs.
The appeal was originally lodged with the Court of
Appeals which certified the case to this Court, the issue
involved being purely one of law. From the stipulation of
facts submitted by the parties in the lower court and the
various annexes referred to therein, the facts of the case
that gave rise to the controversy are as follows:
On December 14, 1950, the Municipal Board of Butuan
City passed Ordinance No. 11 amending Ordinance No.
7 of said City, imposing a tax of two per cent (2%) on the
gross sales or receipts of those engaged in the sale, trading
in, or disposal of all alcoholic or malt beverages, wines
and mixed or fermented liquors, including tuba, basi and
tapuy. (Sec. 1 [e], Annex A.) On June 6, 1960, the same
Municipal Board passed Ordinance No. 110 amending
Ordinance No. 11, fixing instead a tax on the sale of beer
at the rate of P.25 per case of twenty-four bottles, and on
the sales of soft drinks at the rate of P.10 per case of
twenty-four bottles of Coca-Cola, Pepsi-Cola, Tru-
Orange, Seven-Up, Bireley, Soda Water, and any other
kind of soft drinks or carbonated drinks. (Sec. 2 [e] and
Sec. 3, respectively, Annex B.)
The San Miguel Brewery, Inc., a corporation organized
and existing under the laws of the Philippines with
principal offices at Manila, maintains a warehouse or
branch office in the City of Butuan and is engaged in the
sale of beer and soft drinks in said City. Although it
appears to have paid the required taxes under Ordinance
No. 11 promptly and religiously upon the effectivity of
the ordinance, the company stopped paying the taxes
thereafter (Annex D), and thereby incurred in back taxes.
Verbal demands were made by the City Treasurer of
Butuan on the representative of the San Miguel Brewery,
Inc. at Butuan City with warnings that a warrant of
5|T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
distraint and levy will be issued against its properties
unless it settles its tax liability under the ordinance
aforesaid. On September 23, 1960, counsel for the
company wrote a letter to the City Treasurer of Butuan
questioning the power of the city government of Butuan
to levy upon its properties pointing out, "that the power
of distraint and levy as embodied in your Charter
(Republic Act No. 523, as amended), can only be exercised
by your goodselves in respect to delinquencies in the
payment of real estate taxes". To this, the City Treasurer
of Butuan, in a letter dated September 29, 1960, promptly
answered and explained that he may issue warrants of
distraint and levy upon properties of delinquent
taxpayers under Ordinance No. 26 of the City of Butuan.
Thereafter, the San Miguel Brewery, Inc. received a
formal letter of demand for payment of its tax liability
from the City Treasurer of Butuan, to which the Branch
Manager of the company at Cagayan de Oro City who has
supervision of the company's warehouse at Butuan City,
answered on October 10, 1960, requesting more time
"within which to act on said demand and in order to refer
the matter to its Manila Office". Several other written
demands were thereafter made by the City Treasurer of
Butuan to officials of plaintiff's branch office in said city,
but failed to yield any concrete result. Accordingly, on
January 6, 1961, the city treasurer, with the approval of
the Mayor of Butuan City issued a warrant of distraint
and levy against the properties of the San Miguel
Brewery, Inc. at its branch office in that city to enforce the
collection of the taxes assessed against it, i.e., under
Ordinance Nos. 11 and 110, amounting to P9,129.42,
including penalties corresponding to the period from
May, 1957 to August 15, 1960, and under Ordinance No.
110, the amount of P15,618.96, including penalty, for the
period corresponding to June 6 up to October 30, 1960, or
a total of P24,747.32. On January 9, 1961, at about 9 o'clock
in the morning, a notice of seizure by virtue of the warrant
of distraint and levy was served on the company's Branch
Manager at Butuan City who, upon previous
arrangement with the representative of the City Treasurer
of Butuan, voluntarily surrendered the two (2) delivery
trucks of the company seized under the warrant to the
said City Treasurer at about 5 o'clock in the afternoon of
the same day.
On January 12, 1961, the San Miguel Brewery, Inc.
instituted the present action in the Court of First Instance
of Manila, praying for an order directing the defendant
Francisco Magno to release the delivery trucks seized and
impounded by the City Government of Butuan allegedly
"without authority and for reasons unknown to the
company", and to order the defendant to pay to the
plaintiff damages in the amount of P6,000.00
corresponding to the period from January 9, 1961 to
January 10, 1961, and P3,000.00 for each day thereafter
that the trucks remain impounded and unused by the
plaintiff, plus the costs of the suit. Parenthetically, the
action was brought against the defendant Francisco
Magno in his individual capacity, as disclosed in the
allegations in the complaint, and as expressly admitted in
the appellant's brief, thus — "As a matter of fact, plaintiff
filed this action against Francisco Magno, not in his
official capacity, but in his individual capacity, . . . ." (p.
13).
In his answer, defendant Francisco Marco interposed,
among others, the defense that in seizing the delivery
trucks of the San Miguel Brewery, Inc., he was acting, and
was in the performance of his official duty, as Treasurer
of Butuan City, and, can not be hold liable to pay to the
company any damages. He set up a counterclaim of
P40,000.00 and P10,000.00 as moral and exemplary
damages, respectively, allegedly sustained by him and
the members of his family on account of the shock, fright,
wounded feelings, mental anguish, besmirched
reputation, and social humiliation they suffered by
reason of the filing of the case against him by the plaintiff,
plus attorney's fees in the amount of P2,000.00.
During the pendency of the action, the San Miguel
Brewery, Inc. paid under protest the taxes assessed
against it by the City Treasurer of Butuan, and forthwith
the impounded trucks were released.
The parties submitted no testimonial evidence. Instead,
they submitted a stipulation of facts along with
documentary evidence on the basis of which the court a
quo, on April 2, 1962, rendered the decision appealed
from. A motion for reconsideration of the decision having
been denied, the plaintiff interposed the instant appeal.
Under the first assignment of error, appellant assails the
conclusion of the court that "the allegation in the
complaint (par. 5) that the seizure of plaintiff's trucks was
made for reasons unknown to the plaintiff, is false",
because it is not sustained by the evidence; said appellant
claiming that it was only at the time that the stipulation
6|T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
of facts was being prepared that the defendant-appellee
made mention for the first time of his alleged authority to
issue a warrant of distraint and levy against properties of
tax delinquents under Ordinance No. 26 of the City of
Butuan. The contention is untenable. In paragraph 8 of
the stipulation of facts, it is admitted that on September
29, 1960, in a letter of the City Treasurer of Butuan to
Attys. Ponce Enrile, Siguion Reyna, Montecillo & Belo,
counsel for the plaintiff, said counsel was informed that
the city government was exercising its power of levy and
distraint against properties of taxpayers under Ordinance
No. 26 of the city. Appellant, therefore, may not now feign
ignorance of such notice which appears in the records.
To the charge that Ordinance No. 26 of the City of Butuan
is ultra vires, suffice it to say that the same may not be
considered in this appeal. An examination of the
complaint filed in this case, reveals that except for the
general averment therein that its delivery trucks were
seized and impounded by order of the defendant
Francisco Magno "without authority of law and for
reasons unknown to the plaintiff", which is without
factual basis as pointed out above, no mention was made
in the stipulation of facts nor any evidence ever
introduced during the trial of the case in the lower court,
to show that it was the intention of the appellant to place
in issue the validity of the ordinance aforesaid.
In cases where the constitutionality of statutes are directly
put in issue, the general rule is, that the question of
constitutionality must be raised at the earliest
opportunity, so that if not raised by the pleadings,
ordinarily it may not be raised at the trial, and if not raised
in the trial court, it will not be considered on appeal
(People and Hongkong & Shanghai Banking Corporation
vs. Vera and Cu Unjieng. 37 O.G., 164 citing 12 C. J. p.
786). (See also Cadwallader-Gibson Lumber Co. vs. Del
Rosario, 26 Phil. 192; Robb and Hilscher vs. People of the
Philippines, 68 Phil., 320; Macondray & Co. vs. Benito and
Ocampo, 62 Phil., 137; Sofronio L. Quimson vs. P. L. de
Guzman, L-18240, January 31, 1963.) The exceptions are,
as stated in Hongkong etc. vs. Cu Unjieng, supra, in
criminal cases, where the question may be raised at any
stage of the proceedings, either in the trial court or on
appeal; in civil cases, it has been held that it is the duty of
the court to pass on the constitutional question, though
raised for the first time on appeal, if it appears that a
determination of the question is necessary to a decision of
the case; and it has been held that a constitutional
question will be considered by an appellate court at any
time, where it involves the jurisdiction of the court below.
The same rule should apply where the validity of a
municipal ordinance is questioned. We do not find any of
the exceptions aforementioned applicable to this case to
justify a conclusion that the validity of Ordinance No. 26
of the City of Butuan may be properly passed upon in this
appeal.1awphîl.nèt
Moreover, Francisco Magno is sued in this case not in his
capacity as City Treasurer of Butuan but in his individual
capacity. He is not the proper party against whom the
alleged invalidity of the ordinance in question should be
pleaded, nor is this the proper proceeding wherein the
alleged infirmity of the said ordinance may be raised. A
municipal ordinance is not subject to collateral attack.
Public policy forbids collateral impeachment of
legislative acts (43 C. J., 555-556).
Under the second assignment of error, it is contended that
the trial court fell into error in not ordering the defendant-
appellee to pay to the appellant in damages the amount
of P2,160.00, notwithstanding the admission of the
defendant in the stipulation of facts that the San Miguel
Brewery, Inc. incurred damages in that amount,
representing the hire of two (2) trucks at the rate of P80.00
per day which the plaintiff was compelled to secure and
use for the period from January 9, 1961 to February 8,
1961, during which time the two delivery trucks of the
plaintiff were impounded by the appellee. The argument
is based on a wrong premise. It erroneously assumes that
the defendant is personally liable for damages to the
appellant, disregarding the established fact that the
defendant had issued the warrant of distraint and levy
against plaintiff's properties in his capacity as City
Treasurer of Butuan who, under the law, is empowered
to issue the warrant. Ordinance No. 26 of the City of
Butuan provides, among others, as follows:
Sec. 1. — Upon the failure of any person owing any
delinquent tax or delinquent revenue to pay the same, at
the time required under existing ordinance, the City
Treasurer, his deputy, or any of his clerks duly authorized
in writing by the City Treasurer may seize or distraint any
goods, chattels or effects, and other personal property,
including stocks and other securities, debts, credits, bank
accounts and any interest in and rights to personal
property, of such person in sufficient quantity to satisfy
7|T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
the tax, or charge, together with any increment thereto
incident to delinquency, and the expenses of the distraint.
Since there is no dispute that the appellee issued the
warrant of distraint and levy against the delivery trucks
of the appellant on January 9, 1961, in his capacity as City
Treasurer of Butuan, and as there is no disagreement that
defendant-appellee issued said warrant by virtue of
Ordinance No. 26 of the City of Butuan above-quoted
(Par. 15, Stipulation of Facts), and not having been shown
that the defendant, either as a private citizen or as City
Treasurer of Butuan, had acted in bad faith, there can be
no question that appellee Francisco Magno, who was
merely performing a duty enjoined by law to be
performed when he issued the warrant of distraint and
levy, cannot be made to answer personally for damages
to the appellant.
Finally, under the third assignment of error, appellant
maintains that the trial court should not have awarded
damages in favor of the appellee under the counterclaim
of the latter, for the reason that no evidence was
introduced by the appellee in support of the moral and
exemplary damages he and his family allegedly suffered.
It argues further that attorney's fees should not have been
assessed against it.
In respect of the appellee's counterclaim for moral and
exemplary damages, the trial court said:
With respect to the counterclaim of defendant, it appears
that defendant introduced no evidence to support his
claim for P40,000.00 moral damages, P10,000 exemplary
damages and P2,000.00 attorney's fees.
Nevertheless, the trial court sentenced the plaintiff to pay
to the defendant, damages in the sum of P2,000.00, and
costs.
In order that moral damages may be awarded, there must
be pleading and proof of moral suffering, mental anguish,
fright and the like (Darang vs. Belizar, L-19487, January
31, 1967). While no proof of pecuniary loss is necessary in
order that moral damages may be awarded, the amount
of indemnity being left to the discretion of the court
(Article 2216), it is, nevertheless, essential that the
claimant should satisfactorily prove the existence of the
factual basis of the damages (Article 2217) and its causal
connection to defendant's acts. This is so, because moral
damages, though incapable of pecuniary estimation, are
in the category of an award, designed to compensate the
claimant for actual injury suffered and not to impose a
penalty on the wrong-doer (Algarra vs. Sandejas, 27 Phil.
284; Malonzo vs. Galang, L-13851, July 27, 1960). Neither
may we consider the award as exemplary damages,
because the mere findings that certain allegations in the
complaint are not true, and the plaintiff committed a
mistake in instituting the action against the wrong party,
do not justify the award of this kind of damages. It
infringes upon the right of a citizen to have access to the
courts. The portals of the courts of justice should not be
closed to litigants who ask for the protection of their
rights. Penalty in the concept of damages should not be
imposed simply because a complaint is found
unmeritorious by the courts.
The amount of attorney's fees, on the other hand, is
addressed to the sound discretion of the court. It may be
awarded along with expenses of litigation, other than
judicial costs, in cases where the court deems it just and
equitable under the circumstances of the case. And when
as in this case, the defendant public officer was sued in
his private capacity for acts done in the performance of
official duty required by law, and was forced to employ
the services of private counsel to defend his rights, it is
but proper that attorney's fees be charged against the
plaintiff. Nominal damages may also be adjudicated. We
believe the award of P2,000.00 attorney's fees and P100.00
nominal damages, is just and equitable in the premises.
WHEREFORE, the decision appealed from is modified,
setting aside the award of P2,000.00 to the defendant in
concept of damages, but increasing the attorney's fees to
P2,000.00, and ordering the plaintiff to pay to the
defendant P100.00 as nominal damages. Judgment is
affirmed in all other respects. Costs against plaintiff-
appellant.
8|T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
Filinvest Credit vs. IAC |
G.R. No. L-65935, September 30, 1988 | 166 SCRA 155
FACTS
• A case for damages was filed by Nestor B. Sunga Jr., a
businessman and owner of the NBS Machineries
Marketing and the NAP-NAP Transit.
• Plaintiff alleged that he purchased a passenger minibus
Mazda from the Motor center, Inc and for which he
executed a promissory note to cover the amount of
P62,592.00 payable monthly in the amount of P2,608.00
for 24 months due and payable the 1st day of each month
starting May 1, 1978 thru and inclusive of May 1, 1980.
• On the same date, however, a chattel mortgage was
executed by him in favor of the Motor center, Inc
• The Chattel Mortgage and Assignment was assigned to
the Filinvest Credit Corporation with the conformity of
the plaintiff.
• Nestor Sunga claimed that on October 21, 1978, the
minibus was seized by two (2) employees of the
defendant Filinvest Credit Corporation upon orders of
the branch manager Mr. Gaspar de los Santos, without
any receipt, who claimed that he was delinquent in the
payments of his vehicle.
• The plaintiff reported the loss to the PC and after proper
verification from the office of the Filinvest, the said
vehicle was recovered from the Crisologo Compound
which was later released by Rosario Fronda Assistant
Manager of the Filinvest
• The police blotter shows that Nestor Sunga sought the
assistance of the Dagupan police and one Florence Onia
of the Filinvest explained that the minibus was
confiscated because the balance was already past due.
• After verification that his accounts are all in order,
Florence Onia admitted it was their fault. The motor
vehicle was returned to the plaintiff upon proper receipt.
• The court a quo rendered its decision ordering
defendant Filinvest to pay the plaintiff Nestor Sunga Jr.
the following damages, to wit: (a) Moral Damages
P30,000.00(b) Loss on Income of the minibus for three
days 600.00 (c) Actual damages 500.00(d) Litigation
expenses 5,000.00(e) Attorney's Fees 10,000.00
• IAC affirmed the same in toto except with regard to the
moral damages which, under the circumstances of the
accounting error incurred by Filinvest, was increased
from P30,000.00 to P50,000.00.
ISSUES & ARGUMENTS
• W/N respondent court erred in increasing the amount
of moral damages
HOLDING & RATIO DECIDENDI
YES
Respondent court committed a grave abuse of discretion
in increasing extravagantly the award of moral damages
and in granting litigation expenses.
Plaintiff-appellee (respondent Sunga) did not appeal
from the decision of the court a quo which awarded him
the sum of P30,000.00 by way of moral damages.
Well settled is the rule in this jurisdiction that whenever
an appeal is taken in a civil case, an appellee who has not
himself appealed cannot obtain from the appellate court
any affirmative relief other than the ones granted in the
decision of the court below
Verily the respondent court disregarded such a well
settled rule when it increased the award for moral
damages from P30,000.00 to P50,000.00, notwithstanding
the fact that the private respondent did not appeal from
the judgment of the trial court.
There is no dispute that the private respondent, a
businessman and owner of the NBS Machineries
Marketing and NAP-NAP Transit, is entitled to moral
damages due to the unwarranted seizure of the minibus
Mazda, allegedly because he was delinquent in the
payment of its monthly amortizations, which as stated
above, turned out to be incorrect
Such intent tainted private respondent Sunga's
reputation in the business community, thus causing him
mental anguish, serious anxiety, besmirched reputation,
wounded feelings, moral shock, and social humiliation.
Considering, however, that respondent Sunga was
dispossessed of his motor vehicle for barely three days
and possession of which was restored to him soon after
the accounting errors were ironed out, SC ruled that the
award of moral damages even in the sum of P30,000.00 is
excessive for it must be emphasized that "damages are not
intended to enrich the complainant at the expense of a
defendant”.
The award of moral damages is aimed at a restoration
within the limits of the possible, of the spiritual status quo
9|T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
ante; and therefore it must be proportionate to the
suffering inflicted.
Therefore, petition is partially GRANTED. The award of
moral damages is REDUCED to P10,000.00 and the grant
of litigation expenses is ELIMINATED. The rest of the
judgment is AFFIRMED.
Guilatco vs. City of Dagupan|
G.R. No. 61516, March 21, 1989 |171 SCRA 382
FACTS
• On July 25, 1978, plaintiff Florentina A. Guilatco, a
Court Interpreter of Branch III CFI – Dagupan City, while
she was about to board a motorized tricycle at a sidewalk
located at Perez Blvd. (a National Road under the control
and supervision of the City of Dagupan) accidentally fell
into a manhole located on the sidewalk, thereby causing
her right leg to be fractured. The manhole was partially
covered by a concrete flower pot leaving a gaping hole
about 2ft. long by 1 ½ feet wide or 42 cm wide by 75 cm
long by 150 cm deep.
• As a result thereof, she had to be hospitalized first at
Pangasinan Provincial Hospital where she incurred
expenses of P8,053.65. The pain has persisted even after
her discharge from the Medical City General Hospital to
the present. She still wears crutches and she has not yet
reported for duty as a court interpreter as she has
difficulty of locomotion in going up the stairs of her office.
• Defendant Alfredo Tangco, City Engineer of Dagupan
City and admittedly exofficio Highway Engineer, City
Engineer of the Public Works and Building Official for
DAgupan City, admitted the existence of the manhole
and that said manhole is owned by the National
Government. In his answer, he expressly admitted that he
exercises supervision and control over National roads
including the Perez Blvd.
• The Lower Court found in favor of Guilatco but on
appeal, the appellate court reversed the lower court
findings on the ground that no evidence was presented
by the plaintiff to prove that the City of Dagupan had
“control or supervision” over Perez Blvd.
ISSUES & ARGUMENTS
• W/N control or supervision over a national road by the
city of Dagupan exists, in effect binding the city to answer
for damages in accordance with Article 2189.
o Respondent City: Perez Blvd. is a national road that is
not under the control or supervision of the City of
Dagupan hence no liability should attach
HOLDING & RATIO DECIDENDI
YES, THE CITY OF DAGUPAN IS LIABLE.
• Art. 2189 provides that “Provinces, cities and
municipalities shall be liable for damages for the death of,
or injuries suffered by, any person by reason of the
defective condition of roads, streets, bridges, public
buildings, and other public works under their control or
supervision.”
• It is not even necessary for the defective road or street
to belong to the province, city, or municipality for liability
to attach. The article only requires that either control or
supervision is exercised over the defective road or street.
• This control or supervision is provided for in the charter
of Dagupan exercised through the City Engineer who
according to Section 22 has the following duties, “xxx He
shall have the care and custody of the public system of
waterworks and sewers xxx”
• The same charter also provides that the laying out,
construction and improvement of streets and regulation
of the use thereof may be legislated by the Municipal
Board. Thus the charter clearly indicates that the city
indeed has supervision and control over the sidewalk.
• The city cannot be excused from liability by the
argument that the duty of the City Engineer to supervise
or control the said road belongs more to his functions as
an ex-officio Highway Engineer or the Ministry of Public
Highway than as a city officer. This is because while he is
entitled to an honorarium from the Ministry, his salary
from the city government substantially exceeds the
honorarium.
Lopez v. Pan American World Airways
Facts: Reservation for first class accommodation in Pan
American Airlines from Tokyo to San Francisco was
made by Delfin Faustino for then Senator Fernando
Lopez and company. First class tickets were issued and
paid for. The party left Manila for Tokyo as scheduled.
Senator Lopez requested Minister Busuego to contact the
airlines regarding their accommodation. However, they
were informed that there was no accommodation for
them. Because of some urgent matters to attend to in San
Francisco, they were constrained to take the tourist flight
“under protest”.
10 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
Issues: (1) Whether the defendant acted in bad faith for
deliberate refusal to comply with its contract to provide
first-class accommodation to the plaintiff
(2) Whether moral and exemplary damages should be
awarded
Held:
(1) From the evidence of defendant it is in effect admitted
that defendant - through its agents - first cancelled
plaintiffs, reservations by mistake and thereafter
deliberately and intentionally withheld from plaintiffs or
their travel agent the fact of said cancellation, letting them
go on believing that their first class reservations stood
valid and confirmed. In so misleading plaintiffs into
purchasing first class tickets in the conviction that they
had confirmed reservations for the same, when in fact
they had none, defendant wilfully and knowingly placed
itself into the position of having to breach its a foresaid
contracts with plaintiffs should there be no last-minute
cancellation by other passengers before flight time, as it
turned out in this case. Such actuation of defendant may
indeed have been prompted by nothing more than the
promotion of its self-interest in holding on to Senator
Lopez and party as passengers in its flight and foreclosing
on their chances to seek the services of other airlines that
may have been able to afford them first class
accommodations. All the time, in legal contemplation
such conduct already amounts to action in bad faith. For
bad faith means a breach of a known duty through some
motive of interest or ill-will.
At the time plaintiffs bought their tickets, defendant,
therefore, in breach of its known duty, made plaintiffs
believe that their reservation had not been cancelled. Such
willful-non-disclosure of the cancellation or pretense that
the reservations for plaintiffs stood - and not simply the
erroneous cancellation itself - is the factor to which is
attributable the breach of the resulting contracts. And, as
above-stated, in this respect defendant clearly acted in
bad faith.
(2) First, then, as to moral damages. As a proximate result
of defendant's breach in bad faith of its contracts with
plaintiffs, the latter suffered social humiliation, wounded
feelings, serious anxiety and mental anguish. For
plaintiffs were travelling with first class tickets issued by
defendant and yet they were given only the tourist class.
At stop-overs, they were expected to be among the first-
class passengers by those awaiting to welcome them, only
to be found among the tourist passengers. It may not be
humiliating to travel as tourist passengers; it is
humiliating to be compelled to travel as such, contrary to
what is rightfully to be expected from the contractual
undertaking.
The rationale behind exemplary or corrective damages is,
as the name implies, to provide an example or correction
for public good. Defendant having breached its contracts
in bad faith, the court, as stated earlier, may award
exemplary damages in addition to moral damages. In
view of its nature, it should be imposed in such an
amount as to sufficiently and effectively deter similar
breach of contracts in the future by defendant or other
airlines. In this light, we find it just to award P75,000.00
as exemplary or corrective damages.
LOPEZ V PAN AM WORLD AIRWAYS
16 SCRA 431BENGZON; March 30, 1966
FACTS- Sen Fernando Lopez, his wife, his son-in-law,
and his daughter made reservations, through their
agency, for first class accommodations in the Tokyo – San
Francisco flight of PAN-AM. PAN-AM's SF head office
confirmed the reservations. First class tickets were
subsequently issued, with the total fare having been fully
paid before this.- As scheduled, they left Manila and as
soon as they arrived in Tokyo, they contacted PAN-AM's
Tokyo office regarding their accommodations. For the
given reason that the first class seats were all booked up,
PAN-AM's Tokyo office informed them that they could
not go in that flight unless they took the tourist class. Due
to pressing engagements in the US, they were constrained
to take PAN-AM's flight as tourist passengers.- Sen Lopez
filed suit for damages alleging breach of contracts in bad
faith by defendant out of racial prejudice against
Orientals. He asked for P500T actual and moral damages,
P100T exemplary damages, P25Tattorney's fees plus
costs.- PAN-AM asserted that its failure to provide first
class accommodations to plaintiffs was due to honest
error of its employees. It interposed a counterclaim for
atty's fees of P25T.- CFI Rizal decision: in favor of plaintiff
and granted (a) P100Tmoral damages;
(b)P20T,exemplarydamages; (c)
P25T, atty's fees, and costs of the action.- Plaintiffs filed
MFR asking that moral damages be increased to P400T
and for 6% interest per annum on amount to be granted.-
CFI modified decision: (a)P150T, moral damages; (b)
P25T, exemplary damages; with legal interest on both
from date of filing of complaint until paid; (c)P25T,atty's
11 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
fees; and costs of the action.- Both appealed: PAN-AM
contended that there was NO bad faith; Lopez et al
wanted a total of P650T as award for damages.
ISSUES
1. WON there was bad faith on the part of PAN-AM
2. WON the amount of damages should be increased
HELD
1. YES
Reasoning-
Defendant — through its agents — first cancelled
plaintiffs, reservations by mistake and thereafter
deliberately and intentionally withheld from plaintiffs
their travel agent such information. In so misleading
plaintiffs into purchasing first class tickets in the
conviction that they had confirmed reservations, when in
fact they had none, defendant wilfully and knowingly
placed itself into the position of having to breach its
contracts with plaintiffs should there be no last-minute
cancellation by other passengers before flight time, as it
turned out in this case. Bad faith means a breach of a
known duty through some motive of interest or ill-will. -
At any rate, granting all the mistakes advanced by the
defendant, there would at least be negligence so gross
and reckless as to amount to malice or bad faith.
2. YES
Ratio
Moral damages are recoverable in breach of contracts
where the defendant acted fraudulently or in bad faith
(Art. 2220). Exemplary or corrective damages may be
imposed by way of example or correction for the public
good, in breach of contract where the defendant acted in
a wanton, fraudulent, reckless, oppressive or malevolent
manner (Art. 2229, 2232). A written contract for an
attorney's services shall control the amount to be paid
there for unless found by the court to be unconscionable
or unreasonable (Sec. 24,Rule 138, ROC).
- Factors in determining Amount for Moral Damages:
The amount of damages awarded in this appeal has been
determined by adequately considering the official,
political, social, and financial standing of the offended
parties on one hand, and the business and financial
position of the offender on the other. The present rate of
exchange and the terms at which the amount of damages
awarded would approximately be in U.S. dollars has also
been considered.
(a) MORAL DAMAGES
- As a proximate result of defendant's breach in bad faith
of its contracts with plaintiffs, the latter suffered social
humiliation, wounded feelings, serious anxiety and
mental anguish. It may not be humiliating to travel as
tourist passengers; it is humiliating to be compelled to
travel as such, contrary to what is rightfully to be
expected from the contractual undertaking.
- Sen Lopez was then Senate President Pro Tempore.
International carriers like defendant know the prestige of
such an office. For the Senate is not only the Upper
Chamber of the Philippine Congress, but the nation's
treaty-ratifying body. He was also former Vice-President
of the Philippines. (MD = P100T)- Mrs. Maria Lopez, as
wife of the Senator, shared his prestige and therefore his
humiliation. In addition she suffered physical discomfort
during the 13-hour trip; her reason for going to the US
was actually for medical check-up and relaxation. The
fact that the seating spaces in the tourist class are quite
narrower than in first class will suffice to show that she
indeed experienced physical suffering during the trip.
(MD =P50T)- Mr. and Mrs. Alfredo Montelibano, Jr., were
travelling as immediate members of the family of Sen
Lopez. Even if they initially wanted to change their
seatreservations from first class to tourist class,
theyeventually paid for first class seats. Hence, they also
suffered social humiliation. (MD = P25T each)
(b) EXEMPLARY DAMAGES
- In view of its nature, it should be imposed in such an
amount as to effectively deter similar breach of contracts
in the future by defendant or other airlines.(ED = P75T)
(c) ATTORNEY’S FEES
- Record shows a written contract of services wherein
plaintiffs engaged the services of their counsel — Atty.
Francisco — and agreed to pay the sum of P25T upon the
termination of the case in the CFI, and anotherP25T if case
is appealed to the SC. This is reasonableconsidering the
subject matter of the presentcontroversy, the professional
standing of the attorney or plaintiffs-appellants, and the
extent of the service rendered by him.
Disposition
Judgment appealed from is hereby MODIFIED so as to
award in favor of plaintiffs and against defendant, the
following:(1) P200T as moral damages, divided among
12 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
plaintiffs;(2) P75T as exemplary or corrective damages;(3)
Interest at the legal rate of 6% per annum on the moral
and exemplary damages, from date of amended CFI
decision, until said damages are fully paid;(4) P50T as
attorney's fees; and(5) Costs of action. Counterclaim
dismissed.
G.R. No. 82808 July 11, 1991
DENNIS L. LAO, petitioner, vs.
HON. COURT OF APPEALS, JUDGE FLORENTINO
FLOR, Regional Trial Court, Branch 89 of Morong,
Rizal, BENJAMIN L. ESPIRITU, MANUEL QUERUBIN
and CHAN TONG, respondents.
For being a witness in an unsuccessful estafa case which
his employer filed against a debtor who had defaulted in
paying his just obligation, the petitioner was sued,
together with his employer, for damages for malicious
prosecution. The issue in this case is whether the damages
awarded to the defaulting debtor may be satisfied by
execution against the employee's property since his
employer's business has already folded up.
Petitioner Dennis Lao was an employee of the New St.
Joseph Lumber & Hardware Supply, hereinafter called St.
Joseph Lumber, owned by the private respondent, Chan
Tong. In January 1981, St. Joseph Lumber filed a
collection suit against a customer, the private respondent,
Benjamin Espiritu, for unpaid purchases of construction
materials from St. Joseph Lumber.
In November 1981, upon the advice of its lawyer, St.
Joseph Lumber filed a criminal complaint for estafa
against Espiritu, based on the same transaction. Since the
petitioner was the employee who transacted business
with Espiritu, he was directed by his employer, the firm's
owner, Chan Tong, to sign the affidavit or complaint
prepared by the firm's, lawyer, Attorney Manuel
Querubin.
Finding probable cause after conducting a preliminary
investigation of the charge, the investigating fiscal filed
an information for estafa in the Court of First Instance of
Quezon City against Espiritu. The case was however later
dismissed because the court believed that Espiritu's
liability was only civil, not criminal.
On April 12, 1984, Espiritu filed a complaint for malicious
prosecution against the petitioner and St. Joseph Lumber,
praying that the defendants be ordered to pay him
P500,000 as moral damages, P10,000 as actual damages,
and P100,000 as attorney's fees.
 2. in not holding that he was deprived of a day in
court due to the gross ignorance, negligence and
In his answer to the complaint, the petitioner alleged that
dereliction of duty of the lawyer whom his employer
he acted only as agent or employee of St. Joseph Lumber
hired as his and the company's counsel, but who failed to
when he executed the affidavit which his employer
protect his interest and even acted in a manner inimical
submitted to the investigating fiscal who conducted the
to him; and
preliminary investigation of his employer's estafa charge
against Espiritu. 3. in not partially annulling the decision of the trial
court dated January 22, 1985 insofar as he is concerned.
The pre-trial of the case was set on October 30, 1984. Since
the defendants and their counsel failed to appear in court,
they were declared in default.
The petition is meritorious.
On November 11, 1984, the defendants filed a motion for
reconsideration of the order of default.
Lao had a valid defense to the action for malicious
On November 13, 1984, the motion was granted, and the
prosecution (Civil Case No. 84-M) because it was his
order of default was set aside.
employer, St. Joseph Lumber, not himself, that was the
On January 16, 1985, the defendants, including herein complainant in the estafa case against Espiritu. It was
petition petitioner Lao, and their counsel, again failed to Chan Tong, the owner of the St. Joseph Lumber, who,
attend the pretrial despite due notice to the latter who, upon advice of his counsel, filed the criminal complaint
however, failed to notify Lao. They were once more against Espiritu. Lao was only a witness in the case. He
declared in default. The private respondent was allowed had no personal interest in the prosecution of Espiritu for
to present his evidence ex parte. he was not the party defrauded by Espiritu. He executed
the affidavit which was used as basis of the criminal
On January 22, 1985, a decision was rendered by the trial
charge against Espiritu because he was the salesman who
court in favor of Espiritu ordering the defendants Lao and
sold the construction materials to Espiritu. He was only
St. Joseph Lumber to pay jointly and severally to Espiritu
an agent of St. Joseph Lumber, hence, not personally
the sums of P100,000 as moral damages, P5,000 as
liable to the party with whom he contracted (Art. 1897,
attorney's fees, and costs.
Civil Code; Philippine Products Co. vs. Primateria Societe
Petitioner's motion for reconsideration of the decision Anonyme, 122 Phil. 698).
was denied by the trial court.

On February 25, 1985, Lao filed a motion for new trial on

the ground of accident and insufficiency of evidence, but
it was denied by the trial court.
He appealed to the Court of Appeals (CA-G.R. CV No.
06796, "Benjamin L. Espiritu, plaintiff-appellee vs. Dennis
Lao and New St. Joseph Lumber and Hardware Supply,
defendants-appellant"). The appellate court dismissed his
appeal on May 21, 1987. He filed this special civil action
of certiorari and prohibition to partially annul the
appellate court's decision and to enjoin the execution of
said decision against him. The petitioner avers that the
Court of Appeals erred:
1. in not holding that he (petitioner Lao) has a valid
defense to the action for malicious prosecution in Civil
Case No. 84-M;
To maintain an action for damages based on malicious
prosecution, three elements must be present: First, the
fact of the prosecution and the further fact that the
defendant was himself the prosecutor, and that the action
was finally terminated with an acquittal; second, that in
bringing the action, the prosecutor acted without
probable cause; and third, the prosecutor was actuated or
impelled by legal malice (Ferrer vs. Vergara, 52 O.G. 291).
Lao was only a witness, not the prosecutor in the estafa
case. The prosecutor was his employer, Chan Tong or the
St. Joseph Lumber.
There was probable cause for the charge of estafa against
Espiritu, as found and certified by the investigating fiscal
himself.1âwphi1
Lao was not motivated by malice in making the affidavit
upon which the fiscal based the filing of the information
against Espiritu. He executed it as an employee, a

13 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
salesman of the St. Joseph Lumber from whom Espiritu
made his purchases of construction materials and who,
therefore, had personal knowledge of the transaction.
Although the prosecution of Espiritu for estafa did not
prosper, the unsuccessful prosecution may not be
labelled as malicious. "Sound principles of justice and
public policy dictate that persons shall have free resort to
the courts for redress of wrongs and vindication of their
rights without later having to stand trial for instituting
prosecutions in good faith" (Buenaventura vs. Sto.
Domingo, 103 Phil. 239).
There is merit in petitioner's contention that he was
deprived of his day in court in the damage suit filed by
Espiritu, due to the gross ignorance, negligence, and
dereliction of duty of Attorney Manuel Querubin whom
his employer had hired to act as counsel for him and the
St. Joseph Lumber. However, Attorney Querubin
neglected to defend Lao. He concentrated on the defense
of the company and completely forgot his duty to defend
Lao as well. He never informed Lao about the pre-trial
conferences. In fact, he (Attorney Querubin) neglected to
attend other pre-trial conferences set by the court.
When adverse judgment was entered by the court against
Lao and the lumber company, Attorney Querubin did not
file a motion for reconsideration of the decision. He
allowed it to become final, because anyway Espiritu
would not be able to satisfy his judgment against Chan
Tong who had informed his lawyer that the St. Joseph
Lumber was insolvent, had gone out of business, and did
not have any leviable assets. As a result, Espiritu levied
on the petitioner's car to satisfy the judgment in his favor
since the company itself had no more assets that he could
seize.
In view of the foregoing circumstances, the judgment
against Lao was a nullity and should be set aside. Its
execution against the petitioner cannot be allowed to
proceed.
WHEREFORE, judgment is hereby rendered partially
setting aside the decision of the Court of Appeals dated
May 21, 1987, insofar as it declared the petitioner, Dennis
Lao, solidarily liable with St. Joseph Lumber to pay the
damages awarded to the private respondent Benjamin
Espiritu. Said petitioner is hereby absolved from any
14 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
liability to the private respondent arising from the
unsuccessful prosecution of Criminal Case No. Q-20086
for estafa against said private respondent. Costs against
the private respondent.
SO ORDERED.
RAMOS VS. RAMOS
61 SCRA 284
FACTS: Spouses Martin Ramos and Candida Tanate died
on October 4, 1906 and October 26, 1880, respectively.
They were survived by their 3 children. Moreover, Martin
was survived by his 7 natural children. In December 1906,
a special proceeding for the settlement of the intestate
estate of said spouses was conducted. Rafael Ramos, a
brother of Martin, administered the estate for more than
6 years. Eventually, a partition project was submitted
which was signed by the 3 legitimate children and 2 of the
7 natural children. A certain Timoteo Zayco signed in
representation of the other 5 natural children who were
minors. The partition was sworn to before a justice of
peace.
The conjugal hereditary estate was appraised at
P74,984.93, consisting of 18 parcels of land, some head of
cattle and the advances to the legitimate children. ½
thereof represented the estate of Martin. 1/3 thereof was
the free portion or P12,497.98. The shares of the 7 natural
children were to be taken from that 1/3 free portion.
Indeed, the partition was made in accordance with the
Old Civil code. Thereafter, Judge Richard Campbell
approved the partition project. The court declared that
the proceeding will be considered closed and the record
should be archived as soon as proof was submitted that
each he3ir had received the portion adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the
administrator to submit a report showing that the shares
of the heirs had been delivered to them as required by the
previous decision. Nevertheless, the manifestation was
not in strict conformity with the terms of the judge’s order
and with the partition project itself. 8 lots of the
Himamaylan Cadastre were registered in equal shares in
the names of Gregoria (widow of Jose Ramos) and her
daughter, when in fact the administrator was supposed
to pay the cash adjudications to each of them as enshrined
in the partition project. Plaintiffs were then constrained to
bring the suit before the court seeking for the
reconveyance in their favor their corresponding
participations in said parcels of land in accordance with
Article 840 of the old Civil Code. Note that 1/6 of the
subject lots represents the 1/3 free portion of martin’s
shares which will eventually redound to the shares of his
7 legally acknowledged natural children. The petitioners’
action was predicated on the theory that their shares were
merely held in trust by defendants. Nonetheless, no Deed
of Trust was alleged and proven. Ultimately, the lower
court dismissed the complaint on the grounds of res
judicata, prescription and laches.
ISSUE: Whether or not the plaintiffs’ action was barred
by prescription, laches and res judicata to the effect that
they were denied of their right to share in their father’s
estate.
RULING: YES, there was inexcusable delay thereby
making the plaintiffs’ action unquestionably barred by
prescription and laches and also by res judicata.
Inextricably interwoven with the questions of
prescription and res judicata is the question on the
existence of a trust. It is noteworthy that the main thrust
of plaintiffs’ action is the alleged holding of their shares
in trust by defendants. Emanating from such, the
Supreme Court elucidated on the nature of trusts and the
availability of prescription and laches to bar the action for
reconveyance of property allegedly held in trust. It is said
that trust is the right, enforceable solely in equity to the
beneficial enjoyment of property, the legal title to which
is vested in another. It may either be express or implied.
The latter ids further subdivided into resulting and
constructive trusts. Applying it now to the case at bar, the
plaintiffs did not prove any express trust. Neither did
they specify the kind of implied trust contemplated in
their action. Therefore, its enforcement maybe barred by
laches and prescription whether they contemplate a
resulting or a constructive trust.
Lao vs. CA | Grino-Aquino
G.R. No. 82808, July 11, 1991 | 199 SCRA 58
FACTS
• Dennis Lao was an employee of New St. Joseph Lumber
owned by Chan Tong
• St. Joseph filed a collection suit and an Estafa case
against Benjamin Espiritu, a customer for unpaid
purchases of construction supplies
• Lao was ordered by Tong to sign an affidavit prepared
by Atty. Querubin
• Espiritu filed a case of malicious persecution against
Lao and St. Joseph
• The trial court rendered judgment against Lao and St.
Joseph who were ordered to pay Espiritu jointly and
severally P100,00 as moral damages, P5,000 as Attorney’s
15 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
fees and costs
• Espiritu levied on petitioner’s car because no more
assets could be seized
ISSUES & ARGUMENTS
W/N Lao can be held liable for damages and such sums
may be satisfied by execution against employee’s
property because St. Joseph is closed
HOLDING & RATIO DECIDENDI
NO. LAO SHOULD NOT BE HELD LIABLE AS HE HAD
A VALID
DEFENSE. HIS EMPLOYER FORCED HIM TO SIGN
THE COMPLAINT.
• Elements to maintain action for damages based on
malicious prosecution:
• The fact of prosecution and the further fact that plaintiff
himself was the prosecutor and the action was finally
terminated with an acquittal
• That in bringing the action, the prosecutor acted
without probable cause
• The prosecutor was actuated or impelled by legal
malice
• Lao was only witness and not prosecutor in the Estafa
case.Lao made the affidavit as an employee who had
personal knowledge of the transaction. The prosecution
for Estafa did not prosper but the unsuccessful
prosecution may be labeled as libelous.
Hence, the judgment against Lao is a nullity and should
be set aside.
BEATRIZ GALANG, petitioner vs. COURT OF
APPEALS, respondent
NO.L-17248.January 29, 1962
FACTS:
Plaintiff Beatriz Galang and Rodrigo Quinit were
engaged, but Rodrigo’s parents were strongly opposed to
their marriage. They lived as husband and wife in the
house of one Adolfo Dagawan until Rodrigo left and
never returned. The evidence on other pertinent facts is
however conflicting. Plaintiff tried to prove that she and
Rodrigo were engaged despite the opposition of the
latter’s mother and that the father of Rodrigo agreed to
give dowry and defray the expenses of the marriage. The
father even took them to the house of Dagawan for them
to stay as husband and wife. However when Rodrigo was
not able to secure a marriage license for lack of a
residence certificate, he went back to his hometown to get
such certificate but never returned.
On the other hand, the defendants sough to establish that
he and plaintiff were engaged but his parents were
opposed to the marriage. Rodrigo was agreeable
to marry the plaintiff after his graduation but the latter
was impatient and wanted the marriage to take place
sooner. Because of continued relationships with the
plaintiff, Rodrigo’s parents told him to leave the parental
home. He later told this to plaintiff. The plaintiff
convinced him to go to Dagawan’s house where she
followed and stayed thereafter. Because of his continued
refusal to marry the plaintiff, the latter’s relatives,
accompanied by policemen and constabulary soldiers
intimidated him. He was allowed to go home and was
then placed under the custody of a town mayor by his
parents. He refused to acknowledge the marriage
application, which was provided by Dagawan for him to
sign, when he did not appear before a notary public.
Plaintiff filed an action against Rodrigo and his father
Maximo Quinit to recover damages for breach of promise
on the part of Rodrigo to marry her. The trial court
rendered judgment in favor of plaintiff, which on appeal,
was reversed by the Court of Appeals.
ISSUE: Whether or not plaintiff may recover damages for
breach of promise to marry.
RULING:
It is urged by the plaintiff that said Court had erred in not
awarding moral damages to her. She insists that moral
damages for breach of promise to marry are collectible
under our laws, but this question has already been settled
adversely to plaintiff’s pretense in Hemosisima vs. Court
of Appeals. Moral damages for breach of promise
to marry are not collectible.
G.R. Nos. L-13328-29 September 29, 1961
GONZALO MERCADO, ET AL., petitioners,
vs.
RAMON LIRA and JUANA C. DE LIRA, respondents.
Gonzalo Mercado and others were the owners and
operators of the Laguna Transportation Company. In the
afternoon of April 21, 1951, while its passenger bus No.
39 was making the trip from Batangas to Manila on the
concrete highway at barrio Tulo, Calamba, Laguna, the
left front tire of the bus blew out and sent it swerving
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gradually toward the left side of the road, over the
shoulder and into a ravine some 270 meters away. From
the wreckage, the bodies of the passengers, several dead,
others injured, were recovered, and among the fatalities
was Ramon Lira, Jr. (24), son of Mr. and Mrs. Ramon Lira,
Sr. and injured Nita Lira. Two cases for recovery of
damages were commenced against the owners and
operators in the Court of First Instance of Batangas: No.
104 (now G.R. Nos. L-13326-29, in this Court) by the
parents of deceased Ramon Lira, Jr. and No. 107 (now
G.R. No. L-13358, in this Court) by Nita Lira. After a joint-
trial, defendants, Mercado and others were sentenced to
pay the following sums: In Civil Case No. 104:
For the death of Ramon Lira, Jr. P10,000.00
including funeral and church expenses
For loss of earning capacity of Ramon 18,000.00
Lira, Jr. for ten (10) years at P1,800.00
per annum
Moral damages for mental anguish 4,000.00
For expenses of litigation and 4,000.00
attorney's fees
TOTAL
P36,000.00
In Civil Case No. 107:
For hospitalization and medical 970.20
treatment of Nita Lira
For the impairment of earning capacity 1,000.00
Moral damages for her physical and 2,000.00
mental suffering
For expenses of litigation and attorney's 1,000.00
fees
TOTAL
P4,970.20
Defendants appealed in both cases and plaintiff Nita Lira
appealed in No. 107 (being cases CA-G.R. No. 15422 and
CA-G.R. No. 15423-R). The Court of Appeals render
judgment as follows:
As far as the other items are concerned, we find them to
be reasonable and fully supported by the evidence.
Wherefore, the judgment appealed from is
hereby modified by reducing the amount
awarded for the death of Ramon Lira, Jr.
including funeral and church services from
P10,000.00 to P5,062.50; reducing the amount
awarded for loss of earning capacity from
P18,000.00 to P2,000.00 and increasing the
 amount awarded to plaintiff-appellant Nita Lira
for moral damages from P2,000.00 to P5,000.00. In
Civil Case No. 104 (CA-G.R. No. 15422-R),
therefore, defendant should pay a total of
P25,032.56; and in civil case No. 107 (CA-G.R. No.
15422-R), they should pay a total of P7,970.20. In
all other respects the said judgment is affirmed,
without pronouncement as to costs this instance.
On December 19, 1957, and in pursuance of a motion for
reconsideration, the Court of Appeals issued the
following resolution:
In view of the foregoing considerations, the
judgment heretofore rendered is hereby
modified by eliminating therefrom the award of
P5,000.00 by way of moral damages to plaintiff
Nita Lira in case CA-G.R. No. 15422-R,
maintaining said judgment in all other respects.
In other words, in the case CA-G.R. No. 15422-R,
involving the death of Ramon Lira, Jr., the Court of
Appeals granted moral damages, and in the case of CA-
G.R. No. 15422-R, involving physical injuries caused
upon Nita Lira, moral damages of P5,000.00 awarded her,
were eliminated.
Hence, a petition for certiorari to review the decision of
the Court of Appeals was filed by Gonzalo Mercado, et
al., petitioners, against Ramon Lira, et al., (G.R. No. L-
13328-29), and another similar petition was filed by Nita
Lira, petitioner vs. Gonzalo Mercado, et al., respondents
(G.R. No. L-13358).
Counsel for the Mercados, defined their position as
follows:
Article 2206 of the Civil Code fixes the amount of
damages for death at only P3,000.00. The heirs of
the deceased may also claim for moral damages,
although awarding it is not obligatory like the
damages for loss of earning capacity. Paragraph
3 of Art. 2206 states that the heirs may demand
for moral damages for mental anguish by reason
of the death of the deceased. The amount of
moral damages, therefore, should be made only
nominal if the heirs have already been
compensated very substantially for the death of
the deceased, which in this case has been set by
the Court of Appeals at P5,052.50 and loss of
earning at P12,000.00 and the attorney's fees at
P4,000.00 which already amount to P21,052.50.
We respectfully submit, therefore, that, even if
granting that the respondents are entitled to
moral damages, yet the same should not be fixed
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in such an amount as to kill the entire business of
the respondents who are public service
operators, by the enormous amounts they have to
pay on account of the negligence of one driver. In
this case, we respectfully submit that the amount
of P500.00 is a reasonable moral damage
considering that the other damages already
awarded are excessive. In the same way that the
attorney's fees should also be reduced to only
P1,500.00.
and ended with a prayer that "the decision of the Court of
Appeals be modified so that the respondents should pay
only the sum of P500.00 as moral damages and P1,500.00
for attorney's fees.
The pertinent provisions of the new Civil Code state: —
Art. 1764. — Damages in cases comprised in this
Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages. Article
2206 shall also apply to the death of a passenger
caused by the breach of contract by a common
carrier.
Art. 2206. — The amount of damages for death
caused by a crime or quasi delict shall be at least
three thousand pesos, even though there may
have been mitigating circumstances. In addition: .
..
(3) The spouses, legitimate and illegitimate
descendants and ascendants of the deceased may
demand moral damages for mental anguish by
reason of the death of the deceased.
It is thus seen that Article 2206 of the new Civil Code,
expressly provides that the amount of damages for death
shall be "at least three thousand pesos, even though there
may have been mitigating circumstances." In other
words, the amount of damages to be awarded for the
death of a passenger may be more than P3,000.00. It is
argued that the award for moral damages for mental
anguish caused by the death of a passenger is not
obligatory, and that the amount should only be nominal
if the heirs have already been compensated substantially
for the death of the deceased. Article 2206 states further
that "In addition" to the amount of at least P3,000.00 to be
awarded for the death of a passenger, the spouse,
legitimate and illegitimate descendants and ascendants of
the deceased may demand moral damages as a
consequence of the death of their deceased kin, which
simply means that once the above-mentioned heirs of the
deceased claim compensation for moral damages and are
able to prove that they are entitled to such award, it
becomes the duty of the court to award moral damages to
the claimant in an amount commensurate with the mental
anguish suffered by them. In the Civil Code, nominal
damages are treated separately from moral damages. Any
amount that should be awarded as nominal damages,
should not be confused or interlinked with moral
damages which, by itself, is a distinct class of damages.
Of course, the amount of moral damages to be awarded,
should be such as may be reasonable and just under the
circumstances in a given case. Petitioners' claim that as
the other damages awarded to said respondents are
already excessive, the award for moral damages should
be reduced to P500.00. But the Court of Appeals found
the other damages not to be excessive, and as far as this
factual finding is concerned, we are not authorized to rule
otherwise. Moreover, petitioners never assailed in their
motion for reconsideration of the decision of the Court of
Appeals, dated July 11, 1957, as well as in their instant
petition for certiorari, the reasonableness of the amount of
the other damages awarded to herein respondents. In fact,
the petition limits the issues only to the reasonableness of
the P4,000.00 awarded by the Court of Appeals as moral
damages and the other amount of P4,000.00 as attorney's
fees. Considering the mental anguish and sorrow that
must accompany and overwhelm the parents upon the
tragic death of a son, and considering the nature and
extent of the services rendered by counsel for
respondents and other circumstances of the case, we
believe the awards given by the Court of Appeals to
respondents in the sum of P4,000.00 as moral damages for
the death of Ramon Lira, Jr. and the amount of P4,000.00
for attorney's fees and other expenses of litigation, fair
and reasonable (par. 11, Art. 2208, N.C.C.).1awphîl.nèt
With respect to G.R. No. L-13358, it is alleged that the
respondent Court of Appeals erred in its resolution dated
December 19, 1957, in not awarding moral damages to
petitioner Nita Lira for physical injuries and mental
suffering sustained by her, resulting from breach of the
special contract of carriage caused by the negligence of
the respondents, contending that her case is analogous to
cases of "quasi delicts causing physical injuries" for which
the new Civil Code authorizes indemnification for moral
damages in favor of the injured party (par. 2, Art. 2219
N.C.C.).
Petitioner contends that in the case of Cachero v. Manila
Yellow Taxicab Co., G.R. No. L-5721, May 23, 1957; (54 Off.
Gaz. No. 26, p. 6599), this Court had not expressly
declared or impliedly stated that the award of moral
damages to a passenger who has sustained physical
injuries is not an "analogous case". And Cachero in said
case, did not invoke the analogous applicability of said
provision of law, (par. 2, Art. 2219) to his case. Much
space was allotted by petitioner in her brief, in support of
18 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
her theme, stating that the issue raised by her was of first
impression. Since the submission of her brief on February
21, 1958, however, several cases have reached this Court
raising the same question, among them is the case of Paz
Fores v. Irene Miranda, G.R. No. L-12163, March 4, 1959
— the facts of which are identical to those of the present
one. This Court, speaking thru Mr. Justice J.B.L. Reyes,
said —
. . . .. Anent the moral damages ordered to be paid to the
respondent, the same must be discarded. We have
repeatedly ruled (Cachero v. Manila Yellow Taxicab Co.
Inc., G.R. No. L-8721, May 23, 1957; Necesito, et al. v.
Paras, G.R. Nos. L-10605-10606, June 30, 1958), that moral
damages are not recoverable in damage actions
predicated on a breach of the contract of transportation,
in view of Articles 2219 and 2220 of the new Civil Code,
which provide as follows:
"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;
xxx xxx xxx
"Art. 2220. Willful injury to property may be a
legal ground for awarding moral damages if the
court should find that, under the circumstances,
such damages are justly due. The same rule
applies to breaches of contract where the
defendant acted fraudulently or in bad faith."
By contrasting the provisions of these two articles
it immediately becomes apparent that:
(a) In cases of breach of contract
(including one transportation) proof of
bad faith or fraud (dolus), i.e., wanton or
deliberately injurious conduct, is
essential to justify an award of moral
damages; and
(b) That a breach of contract can not be
considered included in the descriptive
term 'analogous cases used in Art. 2219;
not only because Art. 2220 specifically
provides for the damages that are caused
by contractual breach, but because the
definition of quasi-delict in Art. 2176 of
 the Code expresslyexcludes the cases
where there is a 'preexisting contractual
relation between the parties.'
Art. 2176. Whoever by act or omission causes
damage to another, there being fault or
negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no
preexisting contractual relation between the
parties, is called a quasi-delict and is governed by
the provisions of this Chapter.'
The exception to the basic rule of damages now
under consideration is a mishap resulting in the
death of a passenger, in which case Art. 1764
makes the common carrier expressly subject to
the rule of Art. 2206, that entitles the spouse,
descendants and ascendants of the deceased
passenger to 'demand moral damages for mental
anguish by reason of the death of the deceased'
(Necesito v. Paras, G.R. No. L-10605, Resolution
on motion to reconsider, Sept. 11, 1958). But the
exceptional rule of Art. 1764 makes it all the more
evident that where the injured passenger does
not die, moral damages are not recoverable
unless it is proved that the carrier was guilty of
malice or bad faith. We think it is clear that the
mere carelessness of the carrier's driver does not
per se constitute or justify an inference of malice
or bad faith on the part of the carrier; and in the
case at bar there is no other evidence of such
malice to support the award of moral damages by
the Court of Appeals. To award moral damages
for breach of contract, therefore, without proof of
bad faith or malice on the part of the defendant,
as required by Art. 2220 would be to violate the
clear provisions of the law, and constitute
unwarranted judicial legislation.
The Court of Appeals has invoked our rulings
in Castro v. Acro Taxicab Co., G.R. No. L-49155,
Dec. 14, 1948 and Layda v. Court of Appeals, G.R.
No. L-4487, Jan. 29, 1952, but these doctrines were
predicated upon our former law of damages,
before judicial discretion in fixing them became
limited by the express provisions of the new Civil
Code (previously quoted). Hence, the aforesaid
rulings are now inapplicable.
Upon the other hand, the advantageous position
of a party suing a carrier for breach of the contract
of transportation explains, to some extent, the
limitations imposed by the new Code on the
amount of the recovery. The action for the breach
of contract imposes on the defendant carrier a
19 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
presumption of liability upon mere proof of
injury to the passenger; the latter is relieved from
the duty to establish the fault of the carrier or of
his employees; and the burden is placed on the
carrier to prove that it was due to an unforeseen
event or to force majeure (Cangco v. Manila
Railroad Co., 38 Phil. 768, 777). Moreover, the
carrier, unlike in suits for quasi-delict, may not
escape liability by proving that it has exercised
due diligence in the selection and supervision of
its employees (Art. 1759, new Civ. Code; Cangco
v. Manila Railroad Co., supra; Prado v. Manila
Elec. Co., 51 Phil. 900).
The difference in conditions, defenses and proof,
as well as the codal concept of quasi-delict as
essentiallyextra-contractual negligence, compel us
to differentiate between actions excontractu, and
actions quasi ex delicto, and, prevent us from
viewing the action for breach of contract as
simultaneously embodying an action on tort.
Neither can this action be taken as one to enforce
on employer's liability under Art. 103 of the Rev.
Penal Code, since the responsibility is not alleged
to be subsidiary, nor is there on record any
averment or proof that the driver of appellant
was insolvent. In fact, he is not even made a party
to the suit.
It is also suggested that a carrier's violation of its
engagement to safely transport the passenger
involves a breach of the passenger's confidence,
and therefore should be regarded as a breach of
contract in bad faith, justifying recovery of moral
damages under Art. 2220. This theory is
untenable, for under it the carrier would always
be deemed in bad faith, in every case its
obligation to the passenger is infringed, and it
would never be accountable for simple
negligence; while under the law (Art. 1756), the
presumption is that common carriers
acted negligently (and not maliciously), and Art.
1762 speaks of negligence of the common carrier.
xxx xxx xxx
"Art. 1756. In case of death of or injuries to
passengers common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as prescribed in articles
1733 and 1755."
"Art. 1762. The contributory negligence of the
passenger does not bar recovery of damages for
 his death or injuries, if the proximate cause
thereof is the negligence of the common carrier,
but the amount of damages shall be equitably
reduced."
The distinction between fraud, bad faith or
malice (in the sense of deliberate or wanton
wrongdoing) and negligence (as mere
carelessness) is too fundamental in our law to be
ignored (Arts. 1170-1172); their consequences
being clearly differentiated by the Code.
"Art. 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.
In case of fraud, bad faith, malice or wanton
attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to
the non-performance of the obligation."
It is to be presumed, in the absence of statutory
provision to the contrary, that this difference was
in the mind of the lawmakers when in Art. 2220
they limited recovery of moral damages to
breaches of contract in bad faith. It is true that
negligence may be occasionally so gross as to
amount to malice; but that fact must be shown in
evidence, and a carrier's bad faith is not to be
lightly inferred from a mere finding that the
contract was breached through negligence of the
carrier's employees.
(See also Tamayo v. Aquino, L-12634 & L-12720,
May 29, 1959; (56 O.G. #36, p. 5617); Cariaga v.
L.T. Bus, L-11037, Dec. 29, 1960; Versoza v.
Baytan L-14092, Apr. 29, 1960; Rex Taxicab Inc. v.
Bautista, L-15392, Sept. 30, 1960).
We gleaned, therefore, from the above mentioned
decisions, (1) that the case of a passenger of a carrier who
suffered physical injuries "because of the carrier's
negligence (culpa contractual), cannot be considered in the
descriptive expression 'analogous cases', used in Art.
2219"; and (2) that in cases of breach of contract (including
one of transportation) proof of bad faith or fraud (dolus)
i.e., wanton or deliberate injurious conduct is essential to
justify an award of moral damages. There being no
evidence of fraud, malice or bad faith, contemplated by
law, on the part of the respondents, because the cause of
the accident was merely the bursting of a tire while the
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bus was overspeeding, the cause of petitioner Nita Lira
should fail, as far as moral damages is concerned. Moral
damages was, therefore, correctly eliminated by the
Court of Appeals.
IN VIEW OF THE FOREGOING CONSIDERATIONS,
the decision of the Court of Appeals in G.R. Nos. L-13328-
29 and L-13358 (Court of Appeals resolution dated
December 19, 1957), hereby is affirmed, without costs in
this instance.
G.R. No. 125031. January 24, 2000]
PERMEX INC. and/or JANE (JEAN) PUNZALAN,
PERSONNEL MANAGER and EDGAR LIM,
MANAGER, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and EMMANUEL
FILOTEO, respondents.
This special civil action for certiorari impugns the
Resolution of the National Labor Relations Commission,
Fifth Division, dated March 14, 1996, which reversed the
decision of the Labor Arbiter in NLRC Case No. RAB-09-
09-00259-94, as well as its Resolution, dated April 17,
1996, denying the motion for reconsideration.
Petitioner, Permex Producer and Exporter Corporation
(hereinafter Permex), is a company engaged in the
business of canning tuna and sardines, both for export
and domestic consumption. Its office and factory are both
located in Zamboanga City.
Co-petitioners Edgar Lim and Jean Punzalan[1] are its
Manager and Personnel Manager, respectively.
Private respondent Emmanuel Filoteo, an employee of
Permex, was terminated by petitioners allegedly for
flagrantly and deliberately violating company rules and
regulations. More specifically, he was dismissed
allegedly for falsifying his daily time record.
The pertinent facts, as found by both the NLRC and the
Labor Arbiter, are as follows:
Permex initially hired Emmanuel Filoteo on October 1,
1990, as a mechanic. Eventually, Filoteo was promoted to
water treatment operator, a position he held until his
termination on August 29, 1994. As water treatment
operator, Filoteo did not have a fixed working schedule.
His hours of work were dependent upon the company's
shifting production schedules.
On July 31, 1994, Filoteo was scheduled for the night shift
from 7:00 p.m. to 7:00 a.m. the following day. That night
he reported for work together with his co-workers, Felix
Pelayo and Manuel Manzan. They logged in at the main
gate and guardhouse of the petitioner's factory. Filoteo
entered his time-in at 8:45 p.m. and since he was
scheduled to work until 7:00 a.m. the next day, he wrote
7:00 a.m. in his scheduled time-out. This practice of
indicating the time out at the moment they time in, was
customarily done by most workers for convenience and
practicality since at the end of their work shift, they were
often tired and in a hurry to catch the available service
vehicle for their trip home, so they often forgot to log out.
There were times also when the Log Book was brought to
the Office of the Personnel Manager and they could not
enter their time out. The company had tolerated the
practice.
On the evening of July 31,1994, at around 9:20 p.m.,
Filoteo, together with Pelayo, went to see the Assistant
Production Manager to inquire if "butchering" of fish
would be done that evening so they could start operating
the boiler. They were advised to wait from 9:30 p.m. to
10:00 p.m. for confirmation.
At or about 10:00 p.m., Filoteo and Pelayo went back to
the Assistant Production Manager's office. There they
were informed that there would be no "butchering" of
tuna that night. Filoteo then sought permission to go
home, which was granted. Filoteo then hurriedly got his
things and dashed off to the exit gate to catch the service
jeep provided by Permex.
The next day, August 1, 1994, Filoteo reported for work
as usual. He then remembered that he had to make a re-
entry in his daily time record for the previous day. He
proceeded to the Office of the Personnel Manager to
retime his DTR entry. Later, he received a memorandum
from the Assistant Personnel Officer asking him to
explain, in writing, the entry he made in his DTR. Filoteo
complied and submitted his written explanation that
same evening.
On August 8, 1994, Filoteo was suspended indefinitely.
His explanation was found unsatisfactory. He was
dismissed from employment on August 23, 1994.
The dismissal arose from Filoteo's alleged violation of
Article 2 of the company rules and regulations. The
offense charged was entering in his DTR that he had
worked from 8:45 p.m. of July 31, 1994 to 7:00 a.m. of
August 1,1994, when in fact he had worked only up to
10:00 p.m.
On September 5, 1994, Filoteo filed a complaint for illegal
dismissal with claims for separation pay, damages, and
attorney's fees with the Labor Arbiter. His complaint was
21 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
docketed as NLRC Case No. RAB 09-09-00259-
94.
On June 9, 1995, the Labor Arbiter dismissed the
complaint for lack of merit. The decretal portion of the
decision reads:
"WHEREFORE, in view of the foregoing
considerations, judgment is hereby rendered
dismissing the complaint for lack of merit. However,
for violation of compliance of (sic) procedural due
process, the respondent is hereby ordered thru its
Authorized Officer to pay complainant P1,000.00 by
way of indemnity pay. Furthermore, complainant's
claims for damages and attorney's fees be dismissed
for lack of merit.
"SO ORDERED."[2]
Filoteo appealed to the NLRC. Finding merit therein, the
Commission's Fifth Division promulgated its resolution,
reversing and setting aside the Labor Arbiter's decision,
by disposing as follows:
"WHEREFORE, the decision appealed from, is
Vacated and Set Aside and a new one entered
declaring the complainant to have been illegally
dismissed by respondent company. Accordingly,
respondent Permex, Inc., through its corporate
officers, is hereby ordered and directed to pay
complainant, Emmanuel Filoteo, separation pay at
the rate of one (1) month salary for every year of
service or in the equivalent of four (4) months
separation pay and backwages effective August 23,
1994 up to the promulgation of this decision,
inclusive of fringe benefits, if any. Further,
respondent company is ordered to pay complainant
moral and exemplary damages in the sum of
P10,000.00 and P5,000.00, respectively, as well as
attorney's fees equivalent to ten (10%) percent of the
total monetary award after computation thereof at
the execution stage.
"SO ORDERED."[3]
On April 3, 1996, petitioners filed a motion for
reconsideration. It was denied for lack of merit by the
NLRC in a resolution dated April 17, 1996.
Hence, the present petition, assigning the following
errors:
I - PUBLIC RESPONDENT'S RESOLUTIONS ARE
CONTRARY TO THE EVIDENCE ON RECORD AND
ADMITTED FACTS.
II - PUBLIC RESPONDENT ERRED WHEN IT RULED
THAT PRIVATE RESPONDENT WAS ILLEGALLY
DISMISSED.
III - PUBLIC RESPONDENT ERRED WHEN IT
AWARDED PRIVATE RESPONDENT SEPARATION
PAY, BACKWAGES, DAMAGES AND ATTORNEY'S
FEES SANS FACTUAL AND LEGAL BASIS.
We will now consider these assigned errors to resolve the
principal issue of whether or not private respondent was
illegally terminated from his employment.
Note that, firstly, petitioners seek a reversal of the public
respondent's findings of the facts. But as the Court has
repeatedly ruled the findings of facts of the NLRC,
particularly where the NLRC and the Labor Arbiter are in
agreement, are deemed binding and conclusive upon the
Court.[4] For the Court is not a trier of facts.[5] Second,
resort to judicial review of the decisions of the NLRC in a
special civil action for certiorari under Rule 65 of the Rules
of Court, is limited only to the question generally of grave
abuse of discretion amounting to lack or excess of
jurisdiction.[6] Thirdly, in this case, the NLRC's factual
findings are supported by the evidence on record. We are
therefore constrained not to disturb said findings of fact.
Whether private respondent was illegally dismissed or
not is governed by Article 282 of the Labor Code.[7] To
constitute a valid dismissal from employment, two
requisites must concur: (a) the dismissal must be for any
of the causes provided for in Article 282 of the Labor
Code; and (b) the employee must be afforded an
opportunity to be heard and defend himself.[8] This
means that an employer can terminate the services of an
employee for just and valid causes, which must be
supported by clear and convincing evidence.[9] It also
means that, procedurally, the employee must be given
notice, with adequate opportunity to be heard,[10] before
he is notified of his actual dismissal for cause.
In the present case, the NLRC found that the two-fold
requirements for a valid dismissal were not satisfied by
the petitioners.
First, petitioner's charge of serious misconduct of
falsification or deliberate misrepresentation was not
supported by the evidence on the record contrary to Art.
277 of the Labor Code which provides that:
22 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
"Art. 277. Miscellaneous provisions. -
xxx
(b) Subject to the constitutional right of workers to
security of tenure and their right to be protected against
dismissal except for a just and authorized cause...The
burden of proving that the termination was for a valid
or authorized cause shall rest on the employer..."
Second, the private respondent was not afforded an
opportunity to be heard. As found by the
NLRC:
"... Aside from the fact that there was no valid and
justifiable cause for his outright dismissal from the
service, complainant's dismissal as correctly held by the
Labor Arbiter was tainted with arbitrariness for failure
of respondent company (petitioner herein) to observe
procedural due process in effecting his dismissal.
Admittedly, complainant was suspended indefinitely
on August 8, 1994 and subsequently dismissed on
August 23, 1994 without any formal investigation to
enable complainant to defend himself."[11]
Such dismissal, in our view, was too harsh a penalty for
an unintentional infraction, not to mention that it was his
first offense committed without malice, and committed
also by others who were not equally
penalized.[12]
It is clear that the alleged false entry in private
respondent's DTR was actually the result of having
logged his scheduled time-out in advance on July 31,
1994. But it appears that when he timed in, he had no idea
that his work schedule (night shift) would be cancelled.
When it was confirmed at 10:00 p.m. that there was no
"butchering" of tuna to be done, those who reported for
work were allowed to go home, including private
respondent. In fact, Filoteo even obtained permission to
leave from the Assistant Production Manager.
Considering the factory practice which management
tolerated, we are persuaded that Filoteo, in his rush to
catch the service vehicle, merely forgot to correct his
initial time-out entry. Nothing is shown to prove he
deliberately falsified his daily time record to deceive the
company. The NLRC found that even management's own
evidence reflected that a certain Felix Pelayo, a co-worker
of private respondent, was also allowed to go home that
night and like private respondent logged in advance 7:00
a.m. as his time-out. This supports Filoteo's claim that it
was common practice among night-shift workers to log in
their usual time-out in advance in the daily time
record.
Moreover, as early as Tide Water Associated Oil Co.
v. Victory Employees and Laborers Association, 85 Phil. 166
(1949), we ruled that, where a violation of company
policy or breach of company rules and regulations was
found to have been tolerated by management, then the
same could not serve as a basis for termination.
All told we see no reason to find that the NLRC gravely
abused its discretion when it ruled that private
respondent was illegally dismissed. Hence we concur in
that ruling. Nonetheless, we find that the award of moral
and exemplary damages by the public respondent is not
in order and must be deleted. Moral damages are
recoverable only where the dismissal of the employee
was tainted by bad faith or fraud, or where it constituted
an act oppressive to labor, and done in a manner contrary
to morals, good customs, or public policy.[13] Exemplary
damages may be awarded only if the dismissal was done
in a wanton, oppressive, or malevolent manner.[14] None
of these circumstances exist in the present
case.
WHEREFORE, the petition is DENIED. The assailed
resolutions of the National Labor Relations Commission
dated March 14, 1996 and April 17, 1996 in NLRC CA No.
M-002808-95 are AFFIRMED with
MODIFICATION. Petitioner Permex, through its
corporate officers, is ORDERED to pay jointly and
solidarily the private respondent separation pay at the
rate of one (1) month salary for every year of service as
well as backwages effective August 23, 1994, inclusive of
fringe benefits if any, with legal interest until fully paid,
and attorney's fees equivalent to ten (10%) percent of the
total monetary award computed at the execution stage
hereof. The award of moral and exemplary damages,
however, is DELETED. Costs against petitioners.
SO ORDERED.[G.R. No. 156339. October 6, 2004]
MS. VIOLETA YASOA, , petitioners, vs. RODENCIO
and JOVENCIO, both surnamed DE
RAMOS, respondents.
Before this Court is a petition for review
on certiorari seeking the reversal of the decision[1] of the
Court of Appeals dated June 14, 2002 and its resolution
dated December 12, 2002 in CA-G.R. SP No. 69300.
The records disclose that in November 1971, Aurea
Yasoa and her son, Saturnino, went to the house of
Jovencio de Ramos to ask for financial assistance in
paying their loans to Philippine National Bank (PNB),
otherwise their residential house and lot, covered by TCT
23 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
No. T-32810, would be foreclosed. Inasmuch as Aurea
was his aunt, Jovencio acceded to the request. They
agreed that, upon payment by Jovencio of the loan to
PNB, half of Yasoas subject property would be sold to
him.
On December 29, 1971, Jovencio paid Aureas bank
loan. As agreed upon, Aurea executed a deed of absolute
sale in favor of Jovencio over half of the lot consisting of
123 square meters. Thereafter, the lot was surveyed and
separate titles were issued by the Register of Deeds of Sta.
Cruz, Laguna in the names of Aurea (TCT No. 73252) and
Jovencio (TCT No. 73251).
Twenty-two years later, in August 1993, Aurea filed
an estafa complaint against brothers Jovencio and
Rodencio de Ramos on the ground that she was deceived
by them when she asked for their assistance in 1971
concerning her mortgaged property. In her complaint,
Aurea alleged that Rodencio asked her to sign a blank
paper on the pretext that it would be used in the
redemption of the mortgaged property. Aurea signed the
blank paper without further inquiry because she trusted
her nephew, Rodencio. Thereafter, they heard nothing
from Rodencio and this prompted Nimpha Yasoa Bondoc
to confront Rodencio but she was told that the title was
still with the Register of Deeds. However, when Nimpha
inquired from the Register of Deeds, she was shocked to
find out that the lot had been divided into two, pursuant
to a deed of sale apparently executed by Aurea in favor of
Jovencio. Aurea averred that she never sold any portion
of her property to Jovencio and never executed a deed of
sale. Aurea was thus forced to seek the advice of Judge
Enrique Almario, another relative, who suggested filing a
complaint for estafa.
On February 21, 1994, Assistant Provincial
Prosecutor Rodrigo B. Zayenis dismissed the criminal
complaint for estafa for lack of evidence. On account of
this dismissal, Jovencio and Rodencio filed a complaint
for damages on the ground of malicious prosecution with
the Regional Trial Court of Sta. Cruz, Laguna, Branch
91,[2] which was docketed as Civil Case No. SC-3230. They
alleged that the filing of the estafa complaint against them
was done with malice and it caused irreparable injury to
their reputation, as Aurea knew fully well that she had
already sold half of the property to Jovencio.
On October 5, 2000, the trial court rendered a
decision in favor of Jovencio and Rodencio. The
dispositive portion stated:
WHEREFORE, premises considered, finding that
plaintiffs have established their case by preponderance of
evidence, judgment is hereby rendered in their favor and
against the defendants ordering the latter to pay the
former as follows:
A) P150,000.00 by way of moral damages;
B) P30,000.00 as exemplary damages;
C) P10,000.00 as attorneys fees incurred in defending
themselves from the criminal complaint for estafa;
D) P10,000.00 as attorneys fees and cost of litigation, and
to pay the costs.
There being no sufficient evidence established to prove
the claim for actual damages the same is hereby
dismissed.
SO ORDERED.[3]
Petitioner Violeta Yasoa, personally and on behalf of
her brothers and sisters and mother Aurea, filed a petition
for certiorari under Rule 65 with the Court of Appeals
which dismissed the same on June 14, 2002 on the ground
that petitioners availed of the wrong remedy. Their
subsequent motion for reconsideration was likewise
denied on December 12, 2000.
Hence, the instant petition.
We agree with the appellate court that the remedy
availed of by petitioners was inappropriate as Rule 65 of
the Rules of Court cannot be a substitute for a lost
appeal,[4] and that, in any event, petitioners are liable for
malicious prosecution.
The principal question to be resolved is whether the
filing of the criminal complaint for estafa by petitioners
against respondents constituted malicious prosecution.
In this jurisdiction, the term malicious
prosecution has been defined as an action for damages
brought by one against whom a criminal prosecution,
civil suit, or other legal proceeding has been instituted
maliciously and without probable cause, after the
termination of such prosecution, suit, or other proceeding
in favor of the defendant therein. To constitute malicious
prosecution, there must be proof that the prosecution was
prompted by a sinister design to vex or humiliate a
person, and that it was initiated deliberately by the
defendant knowing that his charges were false and
groundless.[5] Concededly, the mere act of submitting a
case to the authorities for prosecution does not make one
liable for malicious prosecution.[6]
In this case, however, there is reason to believe that
a malicious intent was behind the filing of the complaint
for estafa against respondents. The records show that the
sale of the property was evidenced by a deed of sale duly
notarized and registered with the local Register of Deeds.
After the execution of the deed of sale, the property was
24 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
surveyed and divided into two portions. Separate titles
were then issued in the names of Aurea Yasoa (TCT No.
73252) and Jovencio de Ramos (TCT No. 73251). Since
1973, Jovencio had been paying the realty taxes of the
portion registered in his name. In 1974, Aurea even
requested Jovencio to use his portion as bond for the
temporary release of her son who was charged with
malicious mischief. Also, when Aurea borrowed money
from the Rural Bank of Lumban in 1973 and the PNB in
1979, only her portion covered by TCT No. 73252 was
mortgaged.
All these pieces of evidence indicate that Aurea had
long acknowledged Jovencios ownership of half of the
property. Furthermore, it was only in 1993 when
petitioners decided to file the estafa complaint against
respondents. If petitioners had honestly believed that
they still owned the entire property, it would not have
taken them 22 years to question Jovencios ownership of
half of the property. The only conclusion that can be
drawn from the circumstances is that Aurea knew all
along that she was no longer the owner of Jovencios
portion after having sold it to him way back in 1971.
Likewise, other than petitioners bare allegations, no other
evidence was presented by them to substantiate their
claim.
Malicious prosecution, both in criminal and civil
cases, requires the elements of (1) malice and (2) absence
of probable cause.[7] These two elements are present in the
present controversy. Petitioners were completely aware
that Jovencio was the rightful owner of the lot covered by
TCT No. 73251, clearly signifying that they were impelled
by malice and avarice in bringing the unfounded action.
That there was no probable cause at all for the filing of the
estafa case against respondents led to the dismissal of the
charges filed by petitioners with the Provincial
Prosecutors Office in Siniloan, Laguna.
Petitioners reliance on Drilon vs. Court of Appeals[8] is
misplaced. It must be noted that in Drilon, the
investigating panel found that there was probable cause
to hold private respondent Homobono Adaza for trial for
the crime of rebellion with murder and frustrated
murder. Thus, petitioner (now Senate President) Franklin
Drilon could not be held liable for malicious prosecution
as there existed probable cause for the criminal case.
Here, the complaint for estafa was dismissed outright as
the prosecutor did not find any probable cause against
respondents. A suit for malicious prosecution will
prosper where legal prosecution is carried out without
probable cause.
In sum, we find no reversible error on the part of the
appellate court in dismissing the petition and in effect
affirming the trial courts decision holding petitioners
liable for damages for the malicious prosecution of
respondents.
WHEREFORE, the decision declaring petitioners
liable for malicious prosecution is hereby AFFIRMED in
toto.
SO ORDERED.
Moral Damages: When awardable; when not
EQUITABLE BANKING CORPORATION
CALDERON
2004 Dec 14 G. R. No. 156168
Facts:
Jose Calderon, a prominent businessman,
applied and was issued an Equitable International Visa
card which can be used for both peso and dollar
transactions within and outside the Philippines. In its
dollar transactions, respondent is required to maintain a
dollar account with a minimum deposit of $3, 000.00, the
balance shall serve as a credit limit. In one of his trips to
Hongkong, together with a friend, he went to a Gucci
Department Store where he tried to purchase several
Gucci items (which amounted to HK$4,030.00 or
equivalent to US$523.00) using his Visa card. The
saleslady informed him in front of his friend and other
shoppers that the transaction failed because his Visa card
was blacklisted. Upon his return to the Philippines,
Calderon filed a complaint for damages claiming he
suffered much torment and embarrassment on account of
EBC’s wrongful act of blacklisting/suspending his Visa
card while at the Gucci Store in Hongkong. The trial court
ruled in favor of Caldeon. On appeal, the CA affirmed the
ruling of the lower court but reducing the moral damages
awarded by the latter and justified that EBC was
negligent in not informing Calderon that his credit card
was already suspended even before he left for Hongkong,
ratiocinating that petitioner’s right to automatically
suspend a cardholder’s privileges without notice should
not have been indiscriminately used in the case of
respondent because the latter has already paid his past
obligations and has an existing dollar deposit in an
amount more than the required minimum for credit card
at the time he made his purchases in Hongkong.
Issue:
Whether or not the Court of Appeals erred in
holding that the respondent is entitled to moral damages
notwithstanding its finding that petitioner’s actions have
not been attended with any malice or bad faith?
25 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
Ruling:
In law, moral damages include physical
suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock,
social humiliation and similar injury. However, to be
entitled to the award thereof, it is not enough that one
merely suffered sleepless nights, mental anguish or
serious anxiety as a result of the actuations of the other
party.
v. Conditions to be met in order that moral
damages may be recovered:
1) Evidence of besmirched reputation, or
physical, mental or psychological suffering
sustained by the claimant;
2) A culpable act or omission factually
established;
3) Proof that the wrongful act or omission of the
defendant is the proximate cause of the
damages sustained by the claimant; and
4) That the case is predicated on any of the
instances expressed or envisioned by Articles
2219 and 2220 of the Civil Code. (Philippine
Telegraph & Telephone Corporation vs. Court of
Appeals)
Particularly, in culpa contractual or breach of
contract, moral damages are recoverable only if the
defendant has acted fraudulently or in bad faith, or is
found guilty of gross negligence amounting to bad
faith, or in wanton disregard of his contractual
obligations. Verily, the breach must be wanton, reckless,
malicious or in bad faith, oppressive or abusive.
In the present case, the CA ruled, and rightly so,
that no malice or bad faith attended petitioner’s dishonor
of respondent’s credit card. For, as found no less by the
same court, petitioner was justified in doing so under the
provisions of its Credit Card Agreement with respondent,
paragraph 3 of which states:
xxx the CARDHOLDER agrees not
to exceed his/her approved credit limit,
otherwise, all charges incurred including
charges incurred through the use of the
extension CARD/S, if any in excess of
credit limit shall become due and
demandable and the credit privileges
shall be automatically suspended
without notice to the CARDHOLDER in
accordance with Section 11 hereof.
 We are thus at a loss to understand why, despite
its very own finding of absence of bad faith or malice on
the part of the petitioner, the CA nonetheless adjudged it
liable for moral damages to respondent.
Calderon’s card privileges for dollar transactions
were suspended because of his past due and demandable
obligations. He made a deposit of US$14,000.00 in his
dollar account but did not bother to request the petitioner
for the reinstatement of his credit card privileges for
dollar transactions, thus the same remained under
suspension. On account of this, and with the express
provision on automatic suspension without notice under
paragraph 3 of the parties’ Credit Card Agreement, there
is simply no basis for holding petitioner negligent for not
notifying respondent of the suspended status of his credit
card privileges. And, certainly, respondent could not
have justifiably assumed that petitioner must have
reinstated his card by reason alone of his having
deposited US$14,000.00 a day before he left for
Hongkong. As issuer of the card, petitioner has the
option to decide whether to reinstate or altogether
terminate a credit card previously suspended on
considerations which the petitioner deemed proper, not
the least of which are the cardholder’s payment record,
capacity to pay and compliance with any additional
requirements imposed by it.
Even on the aspect of negligence, therefore,
petitioner could not have been properly adjudged liable
for moral damages.
Unquestionably, respondent suffered damages
as a result of the dishonor of his card. There is, however,
a material distinction between damages and injury. To
quote from the decision in BPI Express Card Corporation vs.
Court of Appeals:
Injury is the illegal invasion of a legal right; damage is the
loss, hurt or harm which results from the injury; and
damages are the recompense or compensation awarded
for the damage suffered. Thus, there can be damage
without injury in those instances in which the loss or
harm was not the result of a violation of a legal duty. In
such cases the consequences must be borne by the injured
person alone, the law affords no remedy for damages
resulting from an act which does not amount to a legal
injury or wrong. These situations are often called
damnum absque injuria.
In other words, in order that a plaintiff may
maintain an action for the injuries of which he complains,
he must establish that such injuries resulted from a breach
of duty which the defendant owed to the plaintiff- a
26 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
concurrence of injury to the plaintiff and legal
responsibility by the person causing it. The underlying
basis for the award of tort damages is the premise that an
individual was injured in contemplation of law. Thus,
there must first be a breach of some duty and the
imposition of liability for that breach before damages may
be awarded; and the breach of such duty should be the
proximate cause of the injury.
In the situation in which respondent finds
himself, his is a case of damnum absque injuria.
On a final note, x x x “moral damages are in the
category of an award designed to compensate the claim
for actual injury suffered and not to impose a penalty on
the wrongdoer.”
MAMBULAO LUMBER COMPANY V. PNB (G.R.
NO. L-22973)
Facts: Petitioner Mambulao Lumber applied for an
industrial loan with herein respondent PNB and was
approved with its real estate, machinery and equipments
as collateral. PNB released the approved loan but
petitioner failed to pay and was later discovered to have
already stopped in its operation. PNB then moved for the
foreclosure and sale of the mortgaged properties. The
properties were sold and petitioner sent a bank draft to
PNB to settle the balance of the obligation. PNB however
alleges that a remaining balance stands and a foreclosure
sale would still be held unless petitioner remits said
amount. The foreclosure sale proceeded and petitioner’s
properties were taken out of its compound. Petitioner
filed actions before the court and claims among others,
moral damages.
Issue: Whether or not petitioner corporation, who has
already ceased its operation, may claim for moral
damages.
Ruling: NO.
Herein appellant’s claim for moral damages, however,
seems to have no legal or factual basis. Obviously, an
artificial person like herein appellant corporation cannot
experience physical sufferings, mental anguish, fright,
serious anxiety, wounded feelings, moral shock or social
humiliation which are basis of moral damages. A
corporation may have a good reputation which, if
besmirched, may also be a ground for the award of moral
damages. The same cannot be considered under the facts
of this case, however, not only because it is admitted that
herein appellant had already ceased in its business
operation at the time of the foreclosure sale of the chattels,
but also for the reason that whatever adverse effects of the
foreclosure sale of the chattels could have upon its
reputation or business standing would undoubtedly be
the same whether the sale was conducted at Jose
Panganiban, Camarines Norte, or in Manila which is the
place agreed upon by the parties in the mortgage contract.
TOPIC: (Entitlement to moral damages)
Mambulao Lumber Co. vs PNB GR L-22973
30 January 1968
FACTS: Petitioner (P) applied for industrial loan and
granted by Respondent bank (R). To secure payment of
loan, P mortgaged a parcel of land together with various
sawmill equipment, rolling units and other fixed assets
situated therein.
P failed to pay the amortization and the amounts released
to and received by it. Repeated demands were made but
upon inspection it was found that P stopped operation. R
sent a letter to R sheriff of Camarines Norte requesting
him to take possession of the parcel of land and the
chattels and to sell them at public auction. R sheriff issued
corresponding notice of extrajudicial sale and sent copy
to P.
P sent a bank draft for to PNB allegedly full settlement of
the obligation after the application of the sum
representing the proceeds of the foreclosure sale of the
parcel of land. P averred that the foreclosure of chattel
mortgage is no longer needed for being fully paid and
that it could not be legally effected at a place other than
City of Manila, the place agreed and stipulated in their
contract.
R’s counsel wrote to P that the remitted amount was not
enough for its liability to which should be added the
expenses for guarding the mortgaged of chattels,
attorney’s fees and expenses of the sale. Notwithstanding,
the foreclosure of both land and the chattels were held.
ISSUE: Whether P is entitled to moral damages.
DECISION: No. Even if the R bank and R sheriff
committed several infractions/errors, to wit:
1. R sheriff’s actual work performed should be
compensated pursuant to Sec 4 of Act 3135, which is
the governing law for extrajudicial foreclosure and
not Sec 7 of Rule 130, which is applicable for judicial
foreclosure;
2. Atty’s fees was found to be excessive and
unconscionable;
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3. Foreclosure should be conducted in the City of
Manila, as agreed in the contract. Ergo, R is guilty of
conversion when he sells under the mortgage but not
in accordance with its terms; and
4. The amount of sale of the chattels is spurious/
grossly unfair to P.
However, P’s claim for moral damages seems to have no
legal or factual basis. Obviously, an artificial person like
herein P corporation cannot experience physical
sufferings, mental anguish, fright, serious anxiety,
wounded feelings, moral shock or social humiliation
which are basis of moral damages. A corporation may
have a good reputation which, if besmirched, may also be
a ground for the award of moral damages. The same
cannot be considered under the facts of this case,
however, not only because it is admitted that herein
appellant had already ceased in its business operation at
the time of the foreclosure sale of the chattels, but also for
the reason that whatever adverse effects of the foreclosure
sale of the chattels could have upon its reputation or
business standing would undoubtedly be the same
whether the sale was conducted at Jose Panganiban,
Camarines Norte, or in Manila which is the place agreed
upon by the parties in the mortgage contract.
But for the wrongful acts of herein R bank and the
R sheriff of Camarines Norte in proceeding with the sale
in utter disregard of the agreement to have the chattels
sold in Manila as provided for in the mortgage contract,
to which their attentions were timely called by herein
appellant, and in disposing of the chattels in gross for the
miserable amount of P4,200.00, herein appellant should
be awarded exemplary damages in the sum of P10,000.00.
Case: ABS-CBN BROADCASTING CORP. v. CA,
REPUBLIC BROADCASTING CORP., VIVA
PRODUCTIONS, INC., and VICENTE DEL ROSARIO
(301 SCRA 589)
Date: January 21, 1999
Ponente: C.J. Davide, Jr.
Facts:
In 1990, ABS-CBN and VIVA executed a Film
Exhibition Agreement whereby VIVA gave ABS-CBN an
exclusive right to exhibit some VIVA films. According to
the agreement, ABS-CBN shall have the right of first
refusal to the next 24 VIVA films for TV telecast under
such terms as may be agreed upon by the parties,
however, such right shall be exercised by ABS-CBN from
the actual offer in writing.
Sometime in December 1991, VIVA, through
Vicente Del Rosario (Executive Producer), offered ABS-
CBN through VP Charo Santos-Concio, a list of 3 film
packages from which ABS-CBN may exercise its right of
first refusal. ABS-CBN, however through Mrs. Concio,
tick off only 10 titles they can purchase among which is
the film “Maging Sino Ka Man” which is one of the
subjects of the present case, therefore, it did not accept the
said list as per the rejection letter authored by Mrs. Concio
sent to Del Rosario.
Subsequently, Del Rosario approached Mrs.
Concio with another list consisting of 52 original movie
titles and 104 re-runs, proposing to sell to ABS-CBN
airing rights for P60M (P30M in cash and P30M worth of
television spots). Del Rosario and ABS-CBN’s General
Manager, Eugenio Lopez III, met at the Tamarind Grill
Restaurant in QC to discuss the package proposal but to
no avail.
Four days later, Del Rosario and Mr. Graciano
Gozon, Senior VP of Finance of Republic Broadcasting
Corporation (RBS/Channel 7) discussed the terms and
conditions of VIVA’s offer. A day after that, Mrs. Concio
sent the draft of the contract between ABS-CBN and
VIVA which contained a counter-proposal covering 53
films for P35M. VIVA’s Board of Directors rejected the
counter-proposal as it would not sell anything less than
the package of 104 films for P60M. After said rejection,
ABS-CBN closed a deal with RBS including the 14 films
previously ticked off by ABS-CBN.
Consequently, ABS-CBN filed a complaint for
specific performance with prayer for a writ of preliminary
injunction and/or TRO against RBS, VIVA and Del
Rosario. RTC then enjoined the latter from airing the
subject films. RBS posted a P30M counterbond to dissolve
the injunction. Later on, the trial court as well as the CA
dismissed the complaint holding that there was no
meeting of minds between ABS-CBN and VIVA, hence,
there was no basis for ABS-CBN’s demand, furthermore,
the right of first refusal had previously been exercised.
Hence, the present petition, ABS-CBN argued
that an agreement was made during the meeting of Mr.
Lopez and Del Rosario jotted down on a “napkin” (this
was never produced in court). Moreover, it had yet to
fully exercise its right of first refusal since only 10 titles
were chosen from the first list. As to actual, moral and
exemplary damages, there was no clear basis in awarding
the same.
Issue: WON a contract was perfected between ABS-CBN
and VIVA and WON moral damages may be awarded to
a corporation
Held: Both NO.
Ratio: Contracts that are consensual in nature are
perfected upon mere meeting of the minds. Once there is
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concurrence between the offer and the acceptance upon
the subject matter, consideration, and terms of payment a
contract is produced. The offer must be certain. To
convert the offer into a contract, the acceptance must be
absolute and must not qualify the terms of the offer; it
must be plain, unequivocal, unconditional, and without
variance of any sort from the proposal. A qualified
acceptance, or one that involves a new proposal,
constitutes a counter-offer and is a rejection of the original
offer. Consequently, when something is desired which is
not exactly what is proposed in the offer, such acceptance
is not sufficient to generate consent because any
modification or variation from the terms of the offer
annuls the offer.
After Mr. Del Rosario of Viva met Mr. Lopez of
ABS-CBN to discuss the package of films, ABS-CBN, sent
through Ms. Concio, counter-proposal in the form a draft
contract. This counter-proposal could be nothing less
than the counter-offer of Mr. Lopez during his conference
with Del Rosario. Clearly, there was no acceptance of
VIVA’s offer, for it was met by a counter-offer which
substantially varied the terms of the offer.
In the case at bar, VIVA through its Board of
Directors, rejected such counter-offer. Even if it be
conceded arguendo that Del Rosario had accepted the
counter-offer, the acceptance did not bind VIVA, as
there was no proof whatsoever that Del Rosario had the
specific authority to do so.
Under the Corporation Code, unless otherwise
provided by said Code, corporate powers, such as the
power to enter into contracts, are exercised by the Board
of Directors. However, the Board may delegate such
powers to either an executive committee or officials or
contracted managers. The delegation, except for the
executive committee, must be for specific purposes.
Delegation to officers makes the latter agents of the
corporation; accordingly, the general rules of agency as to
the binding effects of their acts would apply. For such
officers to be deemed fully clothed by the corporation to
exercise a power of the Board, the latter must specially
authorize them to do so. That Del Rosario did not have
the authority to accept ABS-CBN’s counter-offer was
best evidenced by his submission of the draft contract
to VIVA’s Board of Directors for the latter’s
approval. In any event, there was between Del Rosario
and Lopez III no meeting of minds.
The testimony of Mr. Lopez and the allegations
in the complaint are clear admissions that what was
supposed to have been agreed upon at the Tamarind Grill
between Mr. Lopez and Del Rosario was not a binding
agreement. It is as it should be because corporate power
to enter into a contract is lodged in the Board of
Directors. (Sec. 23, Corporation Code). Without such
board approval by the Viva board, whatever agreement
Lopez and Del Rosario arrived at could not ripen into a
valid contact binding upon Viva.
However, the Court find for ABS-CBN on the
issue of damages. 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. The award of moral damages cannot be
granted in favor of a corporation because, being
an artificial person and having existence only in legal
contemplation, it has no feelings, no emotions, no
senses. It cannot, therefore, experience physical
suffering and mental anguish, which can be
experienced only by one having a nervous system. The
statement that a corporation may recover moral damages
if it “has a good reputation that is debased, resulting in
social humiliation” is an obiter dictum. On this score
alone the award for damages must be set aside, since RBS
is a corporation.
NPC vs. PHILIPP BROTHERS OCEANIC, INC. G.R.
No. 126204 November 20, 2001
FACTS: On May 14, 1987, the NPC issued invitations to
bid for the supply and delivery of 120,000 metric tons of
imported coal for its Batangas Coal-Fired Thermal Power
Plant in Calaca, Batangas. The Philipp Brothers Oceanic,
Inc. (PHIBRO) participated as one of the bidders which
PHIBRO's bid was accepted. NPC's acceptance was
conveyed in a letter dated July 8, 1987, which was
received by PHIBRO on July 15, 1987.The "Bidding Terms
and Specifications" provide for the manner of shipment
of coals, which states that the winning TENDERER who
then becomes the SELLER shall arrange and provide gearless
bulk carrier for the shipment of coal to arrive at discharging port
on or before thirty (30) calendar days after receipt of the Letter
of Credit by the SELLER or its nominee as per Section XIV
hereof to meet the vessel arrival schedules at Calaca, Batangas,
Philippines as follows: 60,000 +/ - 10 % July 20, 1987; 60,000
+/ - 10% September 4, 1987.
On July 10, 1987, PHIBRO sent word to NPC that
industrial disputes might soon plague Australia, which
could seriously hamper PHIBRO's ability to supply the
needed coal. From July 23 to July 31, 1987, PHIBRO again
explained NPC that the ship owners therein are not
willing to load cargo unless a "strike-free" clause is
incorporated in the charter party or the contract of
carriage and that they equally share the burden of a
"strike-free" clause. NPC refused. On August 6, 1987,
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PHIBRO received from NPC a confirmed and workable
letter of credit. However, PHIBRO effected its first
shipment only on November 17, 1987.
In October 1987, NPC once more advertised for the
delivery of coal to its Calaca thermal plant. PHIBRO
participated anew but was disapproved. PHIBRO found
that the real reason for the disapproval was its purported
failure to satisfy NPC's demand for damages due to the
delay in the delivery of the first coal shipment. PHIBRO
filed an action for damages with application for
injunction against NPC with the RTC Makati
City. PHIBRO alleged that NPC's act of disqualifying it in
the October bidding and in all subsequent biddings was
tainted with malice and bad faith. PHIBRO prayed for
actual, moral and exemplary damages and attorney's fees.
In its answer, NPC averred that the strikes could not be
the reason for the since PHIBRO admitted on July 28, 1987
those strikes had already ceased. And, even assuming
that the strikes were still ongoing, PHIBRO should have
shouldered the burden of a "strike-free" clause because
their contract was "C and F Calaca, Batangas,
Philippines," meaning, the cost and freight from the point
of origin until the point of destination would be for the
account of PHIBRO. Furthermore, due to PHIBRO's
failure to deliver the coal on time, it was compelled to
purchase coal from ASEA at a higher price. NPC claimed
for actual damages in the amount of P12,436,185.73,
representing the increase in the price of coal, and a claim
of P500,000.00 as litigation expenses.
RTC rendered a decision in favor of PHIBRO, which
ordered NPC to reinstate PHIBRO in the list of accredited
bidders and allow to participate in any and all future
tenders of NPC for the supply and delivery of imported
steam coal; and to pay PHIBRO actual damages, moral
damages, exemplary damages, reimbursement for
expenses, cost of litigation, attorney's fees; and costs of
suit. The counterclaims of dNPC are dismissed for lack of
merit.
Unsatisfied, NPC, through the Sol Gen, elevated the case
to the CA. On August 27, 1996, the CA rendered a
Decision affirming in toto the Decision of the RTC. It
ratiocinated that PHIBRO's delivery of the shipment of
coal was delayed through NPC's own delay in opening a
workable letter of credit; and b) the strikes are included
in the definition of force majeure in Section XVII of the
Bidding Terms and Specifications, (supra), so Phibro is not
liable for any delay caused thereby.
NPC filed a petition for review ascribing to the CA the
following errors:
ISSUES:
I. WON, CA gravely erred in concluding that PHIBRO's
delay in the delivery of imported coal was due to NPC's
alleged delay in opening a letter of credit and to force
majeure, and not to PHIBRO's own deliberate acts and
faults.
II. WON, CA gravely erred in concluding that NPC acted
maliciously and unjustifiably in disqualifying PHIBRO
from participating in the December 8, 1987 and future
biddings.
III. WON, CA gravely erred in concluding that PHIBRO
was entitled to injunctive relief, to actual or
compensatory, moral and exemplary damages, attorney's
fees and litigation expenses despite the clear absence of
legal and factual bases for such award.
IV. WON, CA gravely erred in absolving PHIBRO from
any liability for damages to NPC for its unjustified and
deliberate refusal and/or failure to deliver the contracted
imported coal within the stipulated period.
V. WON, CA gravely erred in dismissing NPC's
counterclaims for damages and litigation expenses.
RULE:
The CA is justified in sustaining the RTC's decision
exonerating PHIBRO from any liability for damages to
NPC. It is worthy to note that PHIBRO and NPC explicitly
agreed in Section XVII of the "Bidding Terms and
Specifications" that "neither seller (PHIBRO) nor buyer
(NPC) shall be liable for any delay in or failure of the
performance of its obligations, other than the payment of
money due, if any such delay or failure is due to
Force Majeure." Specifically, they defined force majeure as
"any disabling cause beyond the control of and without
fault or negligence of the party, which causes may include
but are not restricted to Acts of God or of the public
enemy; acts of the Government in either its sovereign or
contractual capacity; governmental restrictions; strikes,
fires, floods, wars, typhoons, storms, epidemics and
quarantine restrictions." The law is clear and so is the
contract between NPC and PHIBRO. Therefore, we have
no reason to rule otherwise.
However, does it necessarily follow that NPC acted
unjustly, capriciously, and unfairly in disapproving
PHIBRO's application for pre-qualification to bid? First, it
must be stressed that NPC was not bound under any
contract to approve PHIBRO's pre-qualification
requirements. In fact, NPC had expressly reserved its
right to reject bids which is found in the "Post-
Qualification Documents/Specifications for the Supply
and Delivery of Coal for the Batangas Coal-Fired Thermal
30 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
Power Plant I at Calaca, Batangas Philippines,"25 is
explicit, thus: NPC reserves the right to reject any or all bids,
to waive any minor informality in the bids received.The right is
also reserved to reject the bids of any bidder who has previously
failed to properly perform or complete on time any and all
contracts for delivery of coal or any supply undertaken by a
bidder.
This Court has held that where the right to reject is so
reserved, the lowest bid or any bid for that matter may be
rejected on a mere technicality. And where the
government as advertiser, availing itself of that right,
makes its choice in rejecting any or all bids, the losing
bidder has no cause to complain nor right to dispute that
choice unless an unfairness or injustice is shown.
Accordingly, a bidder has no ground of action to compel
the Government to award the contract in his favor, nor to
compel it to accept his bid. Even the lowest bid or any bid
may be rejected.
Did NPC abuse its right or act unjustly in disqualifying
PHIBRO from the public bidding? We rule in the
negative. In practice, courts, in the sound exercise of their
discretion, will have to determine under all the facts and
circumstances when the exercise of a right is unjust, or
when there has been an abuse of right. We are convinced
that NPC's act of disapproving PHIBRO's application for
pre-qualification to bid was without any intent to injure
or a purposive motive to perpetrate damage. Apparently,
NPC acted on the strong conviction that PHIBRO had a
"seriously-impaired" track record. NPC cannot be faulted
from believing so. At this juncture, it is worth mentioning
that at the time NPC issued its subsequent Invitation to
Bid, i.e., October 1987, PHIBRO had not yet delivered the
first shipment of coal under the July 1987 contract, which
was due on or before September 5, 1987. Naturally, NPC
is justified in entertaining doubts on PHIBRO's
qualification or capability to assume an obligation under
a new contract.
That NPC believed all along that PHIBRO's failure to
deliver on time was unfounded is manifest from its
letters reminding PHIBRO that it was bound to deliver
the coal within 30 days from its (PHIBRO's) receipt of the
Letter of Credit, otherwise it would be constrained to take
legal action.
Thus, one who acted pursuant to the sincere belief that
another willfully committed an act prejudicial to the
interest of the government cannot be considered to have
acted in bad faith. Bad faith has always been a question of
intention. It is that corrupt motive that operates in the
mind. As understood in law, it contemplates a state of
mind affirmatively operating with furtive design or with
some motive of self-interest or ill-will or for ulterior
purpose. While confined in the realm of thought, its
presence may be ascertained through the party's
actuation or through circumstantial evidence. The
circumstances under which NPC disapproved PHIBRO's
pre-qualification to bid do not show an intention to cause
damage to the latter. The measure it adopted was one of
self-protection. Consequently, we cannot penalize NPC
for the course of action it took. NPC cannot be made liable
for actual, moral and exemplary damages.
Corollarily, in awarding to PHIBRO actual damages in
the amount of $864,000, the RTC computed what could
have been the profits of PHIBRO had NPC allowed it to
participate in the subsequent public bidding. It ruled that
"PHIBRO would have won the tenders for the supply of
about 960,000 metric tons out of at least 1,200,000 metric
tons" from the public bidding of December 1987 to 1990.
We find this to be erroneous. Basic is the rule that to
recover actual damages, the amount of loss must not only
be capable of proof but must actually be proven with
reasonable degree of certainty, premised upon competent
proof or best evidence obtainable of the actual amount
thereof. A court cannot merely rely on speculations,
conjectures, or guesswork as to the fact and amount of
damages. Thus, while indemnification for damages shall
comprehend not only the value of the loss suffered, but
also that of the profits which the obligee failed to obtain, it
is imperative that the basis of the alleged unearned profits
is not too speculative and conjectural as to show the
actual damages which may be suffered on a future
period. In Pantranco North Express, Inc. v. CA, this Court
denied the plaintiff's claim for actual damages which was
premised on a contract he was about to negotiate on the
ground that there was still the requisite public bidding to
be complied with.
The award of moral damages is likewise improper. To
reiterate, NPC did not act in bad faith. Moreover, moral
damages are not, as a general rule, granted to a
corporation. While it is true that besmirched reputation is
included in moral damages, it cannot cause mental
anguish to a corporation, unlike in the case of a natural
person, for a corporation has no reputation in the sense
that an individual has, and besides, it is inherently
impossible for a corporation to suffer mental
anguish. In LBC Express, Inc. v. CA, we ruled: "Moral
damages are granted in recompense for physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
injury. A corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no
emotions, no senses; therefore, it cannot experience physical
suffering and mental anguish. Mental suffering can be
experienced only by one having a nervous system and it flows
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from real ills, sorrows, and griefs of life — all of which cannot
be suffered by respondent bank as an artificial person."
Neither can we award exemplary damages under Article
2234 of the Civil Code. Before the court may consider the
question of whether or not exemplary damages should be
awarded, the plaintiff must show that he is entitled to
moral, temperate, or compensatory damages. NPC, in
this petition, likewise contests the judgment of the lower
courts awarding PHIBRO the amount of $73,231.91 as
reimbursement for expenses, cost of litigation and
attorney's fees. We agree with NPC.
This Court has laid down the rule that in the absence of
stipulation, a winning party may be awarded attorney's
fees only in case plaintiff's action or defendant's stand is
so untenable as to amount to gross and evident bad
faith. This cannot be said of the case at bar. NPC is
justified in resisting PHIBRO's claim for damages. As a
matter of fact, we partially grant the prayer of NPC as we
find that it did not act in bad faith in disapproving
PHIBRO's pre-qualification to bid.
Trial courts must be reminded that attorney's fees may
not be awarded to a party simply because the judgment
is favorable to him, for it may amount to imposing a
premium on the right to redress grievances in court. We
adopt the same policy with respect to the expenses of
litigation. A winning party may be entitled to expenses of
litigation only where he, by reason of plaintiff's clearly
unjustifiable claims or defendant's unreasonable refusal
to his demands, was compelled to incur said
expenditures. Evidently, the facts of this case do not
warrant the granting of such litigation expenses to
PHIBRO.
At this point, we believe that, in the interest of fairness,
NPC should give PHIBRO another opportunity to
participate in future public bidding. As earlier
mentioned, the delay on its part was due to a fortuitous
event.
But before we dispose of this case, we take this occasion
to remind PHIBRO of the indispensability of coal to a
coal-fired thermal plant. With the deleterious possible
consequences that may result from failure to deliver the
needed coal, we believe there is greater strain of
commitment in this kind of obligation.
WHEREFORE, the decision of the CA in CA-G.R. CV No.
126204 dated August 27, 1996 is hereby MODIFIED. The
award, in favor of PHIBRO, of actual, moral and
exemplary damages, reimbursement for expenses, cost of
litigation and attorney's fees, and costs of suit, is
DELETED.
SO ORDERED.
G.R. No. 141994. January 17, 2005
FILIPINAS BROADCASTING NETWORK,
INC., petitioner, vs. AGO MEDICAL AND
EDUCATIONAL CENTER-BICOL
CHRISTIAN COLLEGE OF MEDICINE,
(AMEC-BCCM) and ANGELITA F.
AGO, respondents.
Facts: Expos is a radio documentary program hosted by
Carmelo Mel Rima (Rima) and Hermogenes Jun Alegre
(Alegre). Expos is aired every morning over DZRC-AM
which is owned by Filipinas Broadcasting Network, Inc.
(FBNI). Expos is heard over Legazpi City, the Albay
municipalities and other Bicol areas.
In the morning of 14 and 15 December 1989, Rima
and Alegre exposed various alleged complaints from
students, teachers and parents against Ago Medical and
Educational Center-Bicol Christian College of Medicine
(AMEC) and its administrators. Claiming that the
broadcasts were defamatory, AMEC and Angelita Ago
(Ago), as Dean of AMECs College of Medicine, filed a
complaint for damages against FBNI, Rima and Alegre on
27 February 1990.
The complaint further alleged that AMEC is a
reputable learning institution. With the supposed expose,
FBNI, Rima and Alegre transmitted malicious
imputations, and as such, destroyed plaintiffs (AMEC
and Ago) reputation. AMEC and Ago included FBNI as
defendant for allegedly failing to exercise due diligence
in the selection and supervision of its employees,
particularly Rima and Alegre.
On 14 December 1992, the trial court rendered a
Decision] finding FBNI and Alegre liable for libel except
Rima. In holding FBNI liable for libel, the trial court found
that FBNI failed to exercise diligence in the selection and
supervision of its employees.
The Court of Appeals affirmed the trial courts
judgment with modification. The appellate court made
Rima solidarily liable with FBNI and Alegre.
Issues:
1. Whether or not the broadcasts are libelous.
2. Whether or not AMEC is entitled to moral damages.
3. Whether or not the award of attorneys fees is proper.
Ruling: A libel is a public and malicious imputation of a
crime, or of a vice or defect, real or imaginary, or any act
or omission, condition, status, or circumstance tending to
cause the dishonor, discredit, or contempt of a natural or
32 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
juridical person, or to blacken the memory of one who is
dead.
Every defamatory imputation is presumed
malicious. Rima and Alegre failed to show adequately
their good intention and justifiable motive in airing the
supposed gripes of the students. As hosts of a
documentary or public affairs program, Rima and Alegre
should have presented the public issues free
from inaccurate and misleading information. Hearing the
students alleged complaints a month before the
expos, they had sufficient time to verify their sources and
information. However, Rima and Alegre hardly made a
thorough investigation of the students alleged gripes.
Neither did they inquire about nor confirm the purported
irregularities in AMEC from the Department of
Education, Culture and Sports. Alegre testified that he
merely went to AMEC to verify his report from an alleged
AMEC official who refused to disclose any information.
Alegre simply relied on the words of the students because
they were many and not because there is proof that what
they are saying is true. This plainly shows Rima and
Alegres reckless disregard of whether their report was
true or not.
Had the comments been an expression of opinion
based on established facts, it is immaterial that the
opinion happens to be mistaken, as long as it might
reasonably be inferred from the facts. However, the
comments of Rima and Alegre were not backed up by
facts. Therefore, the broadcasts are not privileged and
remain libelous per se.
The broadcasts also violate the Radio Code of
the Kapisanan ng mga Brodkaster sa Pilipinas, Ink. (Radio
Code). Item I(B) of the Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND
COMMENTARIES
1. x x x
4. Public affairs program shall present public
issues free from personal bias, prejudice
and inaccurate and misleading
information. x x x Furthermore, the station
shall strive to present balanced discussion
of issues. x x x.
xxx
7. The station shall be responsible at all times in
the supervision of public affairs, public
issues and commentary programs so that
 they conform to the provisions and
standards of this code.
8. It shall be the responsibility of the newscaster,
commentator, host and announcer to
protect public interest, general welfare and
good order in the presentation of public
affairs and public issues.[36]
The broadcasts fail to meet the standards prescribed
in the Radio Code, which lays down the code of ethical
conduct governing practitioners in the radio broadcast
industry. The Radio Code is a voluntary code of conduct
imposed by the radio broadcast industry on its own
members. The Radio Code is a public warranty by the
radio broadcast industry that radio broadcast
practitioners are subject to a code by which their conduct
are measured for lapses, liability and sanctions.
The public has a right to expect and demand that
radio broadcast practitioners live up to the code of
conduct of their profession, just like other professionals.
A professional code of conduct provides the standards for
determining whether a person has acted justly, honestly
and with good faith in the exercise of his rights and
performance of his duties as required by Article 19 of the
Civil Code. A professional code of conduct also provides
the standards for determining whether a person who
willfully causes loss or injury to another has acted in a
manner contrary to morals or good customs under Article
21 of the Civil Code.
1. FBNI contends that AMEC is not entitled to
moral damages because it is a corporation.
A juridical person is generally not entitled to moral
damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as
wounded feelings, serious anxiety, mental anguish or
moral shock. The Court of Appeals cites Mambulao
Lumber Co. v. PNB, et al. to justify the award of moral
damages. However, the Courts statement
in Mambulao that a corporation may have a good
reputation which, if besmirched, may also be a ground for
the award of moral damages is an obiter dictum.
Nevertheless, AMECs claim for moral damages falls
under item 7 of Article 2219 of the Civil Code. This
provision expressly authorizes the recovery of moral
damages in cases of libel, slander or any other form of
defamation. Article 2219(7) does not qualify whether the
plaintiff is a natural or juridical person. Therefore, a
juridical person such as a corporation can validly
complain for libel or any other form of defamation and
claim for moral damages.
33 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
Moreover, where the broadcast is libelous per se, the
law implies damages. In such a case, evidence of an
honest mistake or the want of character or reputation of
the party libeled goes only in mitigation of
damages.[46] Neither in such a case is the plaintiff required
to introduce evidence of actual damages as a condition
precedent to the recovery of some damages. In this case,
the broadcasts are libelousper se. Thus, AMEC is entitled
to moral damages.
However, we find the award of P300,000 moral
damages unreasonable. The record shows that even
though the broadcasts were libelous per se, AMEC has not
suffered any substantial or material damage to its
reputation. Therefore, we reduce the award of moral
damages from P300,000 to P150,000.
2. The award of attorney’s fees is not proper.
AMEC failed to justify satisfactorily its claim for
attorney’s fees. AMEC did not adduce evidence to
warrant the award of attorney’s fees. Moreover, both the
trial and appellate courts failed to explicitly state in their
respective decisions the rationale for the award of
attorney’s fees.
In Inter-Asia Investment Industries, Inc. v. Court of
Appeals, we held that:
[I]t 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 attorney’s fees.[51] (Emphasis
supplied) Petition denied.
G.R. No. L-68138 May 13, 1991
AGUSTIN Y. GO and THE CONSOLIDATED BANK
AND TRUST CORPORATION
(Solidbank), petitioners,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT
and FLOVERTO JAZMIN, respondents.
The instant petition for review on certiorari questions the
propriety of the respondent appellate court's award of
nominal damages and attorney's fees to private
respondent whose name was used by a syndicate in
encashing two U.S. treasury checks at petitioner bank.
Floverto Jazmin is an American citizen and retired
employee of the United States Federal Government. He
had been a visitor in the Philippines since 1972 residing
at 34 Maravilla Street, Mangatarem, Pangasinan.
As pensionado of the U.S. government, he received
annuity checks in the amounts of $ 67.00 for disability and
$ 620.00 for retirement through the Mangatarem post
office. He used to encash the checks at the Prudential
Bank branch at Clark Air Base, Pampanga.
In January, 1975, Jazmin failed to receive one of the checks
on time thus prompting him to inquire from the post
offices at Mangatarem and Dagupan City. As the result of
his inquiries proved unsatisfactory, on March 4, 1975,
Jazmin wrote the U.S. Civil Service Commission, Bureau
of Retirement at Washington, D.C. complaining about the
delay in receiving his check. Thereafter, he received a
substitute check which he encashed at the Prudential
Bank at Clark Air Base.
Meanwhile, on April 22, 1975, Agustin Go, in his capacity
as branch manager of the then Solidbank (which later
became the Consolidated Bank and Trust Corporation) in
Baguio City, allowed a person named "Floverto Jazmin"
to open Savings Account No. BG 5206 by depositing two
(2) U. S. treasury checks Nos. 5-449-076 and 5-448-890 in
the respective amounts of $1810.00 and
$913.40 equivalent to the total amount of P 20,565.69,
1
both payable to the order of Floverto Jasmin
of Maranilla St., Mangatarem, Pangasinan and drawn on
the First National City Bank, Manila.
The savings account was opened in the ordinary course
of business. Thus, the bank, through its manager Go,
required the depositor to fill up the information sheet for
new accounts to reflect his personal circumstances. The
depositor indicated therein that he was
Floverto Jazmin with mailing address at Mangatarem,
Pangasinan and home address at Maravilla St.,
Mangatarem, Pangasinan; that he was a Filipino citizen
and a security officer of the US Army with the rank of a
sergeant bearing AFUS Car No. H-2711659; that he was
married to Milagros Bautista; and that his initial deposit
was P3,565.35. He wrote CSA No. 138134 under remarks
or instructions and left blank the spaces under telephone
number, residence certificate/alien certificate of
registration/passport, bank and trade performance and
as to who introduced him to the bank.2 The depositor's
signature specimens were also taken.
Thereafter, the deposited checks were sent to the drawee
bank for clearance. Inasmuch as Solidbank did not receive
any word from the drawee bank, after three (3) weeks, it
allowed the depositor to withdraw the amount indicated
in the checks.
34 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
On June 29, 1976 or more than a year later, the two dollar
cheeks were returned to Solidbank with the notation that
the amounts were altered.3 Consequently, Go reported
the matter to the Philippine Constabulary in Baguio City.
On August 3, 1976, Jazmin received radio messages
requiring him to appear before the Philippine
Constabulary headquarters in Benguet on September 7,
1976 for investigation regarding the complaint filed by Go
against him for estafa by passing altered dollar checks.
Initially, Jazmin was investigated by constabulary officers
in Lingayen, Pangasinan and later, at Camp Holmes, La
Trinidad, Benguet. He was shown xerox copies of U.S.
Government checks Nos. 5-449-076 and 5-448-890
payable to the order of Floverto Jasmin in the respective
amounts of $1,810.00 and $913.40. The latter amount was
actually for only $13.40; while the records do not show
the unaltered amount of the other treasury check.
Jazmin denied that he was the person whose name
appeared on the checks; that he received the same and
that the signature on the indorsement was his. He
likewise denied that he opened an account with
Solidbank or that he deposited and encashed therein the
said checks. Eventually, the investigators found that the
person named "Floverto Jazmin" who made the deposit
and withdrawal with Solidbank was an impostor.
On September 24, 1976, Jazmin filed with the then Court
of First Instance of Pangasinan, Branch II at Lingayen a
complaint against Agustin Y. Go and the Consolidated
Bank and Trust Corporation for moral and exemplary
damages in the total amount of P90,000 plus attorney's
fees of P5,000. He alleged therein that Go allowed the
deposit of the dollar checks and the withdrawal of their
peso equivalent "without ascertaining the identity of the
depositor considering the highly suspicious
circumstances under which said deposit was made; that
instead of taking steps to establish the correct identity of
the depositor, Go "immediately and recklessly filed (the)
complaint for estafa through alteration of dollar check"
against him; that Go's complaint was "an act of vicious
and wanton recklessness and clearly intended for no
other purpose than to harass and coerce the plaintiff into
paying the peso equivalent of said dollar checks to the
CBTC branch office in Baguio City" so that Go would not
be "disciplined by his employer;" that by reason of said
complaint, he was "compelled to present and submit
himself" to investigations by the constabulary authorities;
and that he suffered humiliation and embarrassment as a
result of the filing of the complaint against him as well as
"great inconvenience" on account of his age (he was a
septuagenarian) and the distance between his residence
and the constabulary headquarters. He averred that his
peace of mind and mental and emotional tranquility as a
respected citizen of the community would not have
suffered had Go exercised "a little prudence" in
ascertaining the identity of the depositor and, for the
"grossly negligent and reckless act" of its employee, the
defendant CBTC should also be held responsible. 4
In their answer, the defendants contended that the
plaintiff had no cause of action against them because they
acted in good faith in seeking the "investigative
assistance" of the Philippine Constabulary on the
swindling operations against banks by a syndicate which
specialized in the theft, alteration and encashment of
dollar checks. They contended that contrary to plaintiff s
allegations, they verified the signature of the depositor
and their tellers conducted an Identity check. As
counterclaim, they prayed for the award of P100,000 as
compensatory and moral damages; P20,000 as exemplary
damages; P20,000 as attorney's fees and P5,000 as
litigation, incidental expenses and costs.5
In its decision of March 27, 19786 the lower court found
that Go was negligent in failing to exercise "more care,
caution and vigilance" in accepting the checks for deposit
and encashment. It noted that the checks were payable to
the order of Floverto Jasmin, Maranilla St., Mangatarem,
Pangasinan and not to Floverto Jazmin, Maravilla St.,
Mangatarem, Pangasinan and that the differences in
name and address should have put Go on guard. It held
that more care should have been exercised by Go in the
encashment of the U.S. treasury checks as there was no
time limit for returning them for clearing unlike in
ordinary checks wherein a two to three-week limit is
allowed.
Emphasizing that the main thrust of the complaint was
"the failure of the defendants to take steps to ascertain the
identity of the depositor," the court noted that the
depositor was allegedly a security officer while the
plaintiff was a retiree-pensioner. It considered as
"reckless" the defendants' filing of the complaint with the
Philippine Constabulary noting that since the article on a
fake dollar check ring appeared on July 18, 1976 in the
Baguio Midland Courier, it was only on August 24, 1976
or more than a month after the bank had learned of the
altered checks that it filed the complaint and therefore, it
had sufficient time to ascertain the identity of the
depositor.
The court also noted that instead of complying with the
Central Bank Circular Letter of January 17, 1973
requesting all banking institutions to report to the Central
Bank all crimes involving their property within 48 hours
from knowledge of the crime, the bank reported the
matter to the Philippine Constabulary.
35 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
Finding that the plaintiff had sufficiently shown that
prejudice had been caused to him in the form of mental
anguish, moral shock and social humiliation on account
of the defendants' gross negligence, the court, invoking
Articles 2176, 2217 and 2219 (10) in conjunction with
Article 21 of the Civil Code, ruled in favor of the plaintiff.
The dispositive portion of the decision states:
WHEREFORE, this Court finds for plaintiff and
that he is entitled to the reliefs prayed for in the
following manner: Defendant Agustin Y. Co and
the CONSOLIDATED BANK AND TRUST
CORPORATION are hereby ordered to pay,
jointly and severally, to the plaintiff the amount
of SIX THOUSAND PESOS (P6,000.00) as moral
damages; ONE THOUSAND PESOS (P1,000.00)
as attorney's fees and costs of litigation and to
pay the costs and defendant AGUSTIN Y. Go in
addition thereto in his sole and personal capacity
to pay the plaintiff the amount of THREE
THOUSAND PESOS (P3,000.00) as exemplary
damages, all with interest at six (6) percent per
annum until fully paid.
SO ORDERED.
The defendants appealed to the Court of Appeals. On
January 24, 1984, said court (then named Intermediate
Appellate Court) rendered a decision7 finding as evident
negligence Go's failure to notice the substantial difference
in the identity of the depositor and the payee in the check,
concluded that Go's negligence in the performance of his
duties was "the proximate cause why appellant bank was
swindled" and that denouncing the crime to the
constabulary authorities "merely aggravated the
situation." It ruled that there was a cause of action against
the defendants although Jazmin had nothing to do with
the alteration of the checks, because he suffered damages
due to the negligence of Go. Hence, under Article 2180 of
the Civil Code, the bank shall be held liable for its
manager's negligence.
The appellate court, however, disallowed the award of
moral and exemplary damages and granted nominal
damages instead. It explained thus:
While it is true that denouncing a crime is not
negligence under which a claim for moral
damages is available, still appellants are liable
under the law for nominal damages. The fact that
appellee did not suffer from any loss is of no
moment for nominal damages are adjudicated in
order that a right of the plaintiff, which has been
violated or invaded by the defendant, maybe
vindicated or recognized and not for the purpose
 of indemnifying the plaintiff for any loss suffered
by him (Article 2221, New Civil Code). These are
damages 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 (Elgara vs. Sandijas, 27 Phil. 284). They are
not intended for indemnification of loss suffered
but for the vindication or recognition of a right
violated or invaded (Ventanilla vs. Centeno, L-
14333, January 28, 1961). And, where the plaintiff
as in the case at bar, the herein appellee has
established a cause of action, but was not able to
adduce evidence showing actual damages then
nominal damages may be recovered (Sia vs.
Espenilla CA-G.R. Nos. 45200-45201-R, April 21,
1975). Consequently, since appellee has no right
to claim for moral damages, then he may not
likewise be entitled to exemplary damages
(Estopa vs. Piansay, No. L-14503, September 30,
1960). Considering that he had to defend himself
in the criminal charges filed against him, and that
he was constrained to file the instant case, the
attorney's fees to be amended (sic) to plaintiff
should be increased to P3,000.00.
Accordingly, the appellate court ordered Go and
Consolidated Bank and Trust Corporation to pay jointly
and severally Floverto Jazmin only NOMINAL
DAMAGES in the sum of Three Thousand Pesos (P
3,000.00) with interest at six (6%) percent per annum until
fully paid and One Thousand Pesos (P 1,000.00) as
attorney's fees and costs of litigation.
Go and the bank filed a motion for the reconsideration of
said decision contending that in view of the finding of the
appellate court that "denouncing a crime is not negligence
under which a claim for moral damages is available," the
award of nominal damages is unjustified as they did not
violate or invade Jazmin's rights. Corollarily, there being
no negligence on the part of Go, his employer may not be
held liable for nominal damages.
The motion for reconsideration having been denied, Go
and the bank interposed the instant petition for review
on certiorari arguing primarily that the employer bank
may not be held "co-equally liable" to pay nominal
damages in the absence of proof that it was negligent in
the selection of and supervision over its employee.8
The facts of this case reveal that damages in the form of
mental anguish, moral shock and social humiliation were
suffered by private respondent only after the filing of the
36 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
petitioners' complaint with the Philippine Constabulary.
It was only then that he had to bear the inconvenience of
travelling to Benguet and Lingayen for the investigations
as it was only then that he was subjected to
embarrassment for being a suspect in the unauthorized
alteration of the treasury checks. Hence, it is
understandable why petitioners appear to have
overlooked the facts antecedent to the filing of the
complaint to the constabulary authorities and to have put
undue emphasis on the appellate court's statement that
"denouncing a crime is not negligence."
Although this Court has consistently held that there
should be no penalty on the right to litigate and that error
alone in the filing of a case be it before the courts or the
proper police authorities, is not a ground for moral
damages,9 we hold that under the peculiar circumstances
of this case, private respondent is entitled to an award of
damages.
Indeed, it would be unjust to overlook the fact that
petitioners' negligence was the root of all the
inconvenience and embarrassment experienced by the
private respondent albeit they happened after the filing
of the complaint with the constabulary authorities.
Petitioner Go's negligence in fact led to the swindling of
his employer. Had Go exercised the diligence expected of
him as a bank officer and employee, he would have
noticed the glaring disparity between the payee's name
and address on the treasury checks involved and the
name and address of the depositor appearing in the
bank's records. The situation would have been different if
the treasury checks were tampered with only as to their
amounts because the alteration would have been
unnoticeable and hard to detect as the herein altered
check bearing the amount of $ 913.40 shows. But the error
in the name and address of the payee was very patent and
could not have escaped the trained eyes of bank officers
and employees. There is therefore, no other conclusion
than that the bank through its employees (including the
tellers who allegedly conducted an identification check
on the depositor) was grossly negligent in handling the
business transaction herein involved.1âwphi1
While at that stage of events private respondent was still
out of the picture, it definitely was the start of his
consequent involvement as his name was illegally used in
the illicit transaction. Again, knowing that its viability
depended on the confidence reposed upon it by the
public, the bank through its employees should have
exercised the caution expected of it.
In crimes and quasi-delicts, the defendant shall be liable
for all damages which are the natural and probable
consequences of the act or omission complained of. It is
not necessary that such damages have been foreseen or
could have reasonably been foreseen by the
defendant.10 As Go's negligence was the root cause of the
complained inconvenience, humiliation and
embarrassment, Go is liable to private respondents for
damages.
Anent petitioner bank's claim that it is not "co-equally
liable" with Go for damages, under the fifth paragraph of
Article 2180 of the Civil Code, "(E)mployers shall be liable
for the damages caused by their employees . . . acting
within the scope of their assigned tasks." Pursuant to this
provision, the bank is responsible for the acts of its
employee unless there is proof that it exercised the
diligence of a good father of a family to prevent the
damage.11Hence, the burden of proof lies upon the bank
and it cannot now disclaim liability in view of its own
failure to prove not only that it exercised due diligence to
prevent damage but that it was not negligent in the
selection and supervision of its employees.
WHEREFORE, the decision of the respondent appellate
court is hereby affirmed. Costs against the petitioners.
SO ORDERED.
Pleno vs. Court of Appeals| Gutierrez, Jr.
G.R. No. L-56505, June 16, 1992 | 161 SCRA 208
FACTS
• Florante de Luna was driving a delivery truck owned
by Philippine Paper Products Inc. at great speed along
South Super Highway in Taguig when he bumped the
van which was being driven by Maximo Pleno.
• The bump caused Pleno’s van to swerve to the right and
crash into a parked truck.
• As a result, Pleno was hospitalized and his van was
wrecked.
• Pleno sued and was awarded actual, temperate, moral,
exemplary damages and attorney’s fees by the trial court.
• However, the CA reduced the amount of temperate and
moral damages given because they were ‘too high’.
ISSUES & ARGUMENTS
W/N the CA erred in reducing the amount of temperate
damages awarded?
HOLDING & RATIO DECIDENDI
The CA erred in reducing the award of temperate
damages.
37 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
Temperate damages are included within the context of
compensatory damages. In arriving at a reasonable level
of temperate damages to be awarded, trial courts are
guided by our ruling that 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 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.
As to the loss or impairment of earning capacity, there is
no doubt that Pleno is an entrepreneur 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. 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 some inferiority complex and is no longer
active in business as well as in social life.
[G.R. No. 126524. November 29, 2001.] BPI
INVESTMENT CORPORATION, petitioner, vs. D. G.
CARREON COMMERCIAL CORPORATION,
DANIEL G. CARREON, AURORA J. CARREON, AND
JOSEFA M. JECIEL, respondents.
SYNOPSIS
On November 15, 1979, respondents placed P318,981.59
in the money market operated by petitioner. The same
was to mature on December 17, 1979 at a value of
P323,518.22. On December 12, 1979, it appeared that an
amount of P323,518.22 was also due to respondents but
allegedly respondents did not make any money
placement maturing on said date. Petitioner claimed that
there was an error in the posting of dates and petitioner
paid respondents twice for a single placement made. As
the amount paid on December 12, 1979 was rolled over
several times, petitioner professed that it made an over-
payment of a total of P410,937.09. There is no sufficient
evidence to prove that respondents indeed received disregard of his contractual obligation. With the
money in excess of what was due them. Petitioner elimination of award of moral damages, so must the
admitted that the alleged payments made to respondents award of attorney's fees be deleted."
were withdrawals from validly issued commercial papers
5. ID.; ID.; TEMPERATE DAMAGES; WHEN PROPER.
duly verified and signed. The appellate court awarded
— The damages sustained by respondents were due to
respondents moral, compensatory and exemplary
petitioner's fault or negligence, short of gross negligence.
damages, and attorney's fees. The Court, however,
Temperate or moderate damages may be recovered when
deleted them all for lack of basis. Petitioner cannot be
the court finds that some pecuniary loss has been suffered
blamed for the wrongful attachment made by the sheriff
but its amount cannot, from the nature of the case, be
and the death of two of the respondents. At any rate,
proved with certainty. The Court deems it prudent to
respondents are entitled to temperate damages for the
award reasonable temperate damages to respondents
injuries sustained because of petitioner's fault.
under the circumstances.
SYLLABUS

CIVIL LAW; DAMAGES; GROSS NEGLIGENCE;

DEFINED. — We find petitioner not guilty of gross
negligence in the handling of the money market
placement of respondents. "Gross negligence implies a
want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting
any effort to avoid them."
3. ID.; ID.; EXEMPLARY DAMAGES; NOT PROPER
AGAINST PARTY EXERCISING LEGAL OPTION IN
CASE OF WRONGFUL ATTACHMENT BY THE
SHERIFF. — The law on exemplary damages is found in
Section 5, Chapter 3, Title XVIII, Book IV of the Civil
Code. These are imposed by way of example or correction
for the public good, in addition to moral, temperate,
liquidated, or compensatory damages. They are
recoverable in criminal cases as part of the civil liability
when the crime was committed with one or more
aggravating circumstances; in quasi-delicts, if the
defendant acted with gross negligence; and in contracts
and quasi-contracts, if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
BPI Investments did not act in a wanton, fraudulent,
reckless, oppressive, or malevolent manner, when it
asked for preliminary attachment. It was just exercising a
legal option. The sheriff of the issuing court did the
execution and the attachment. Hence, BPI Investments is
not to be blamed for the excessive and wrongful
attachment.
4. ID.; ID.; MORAL DAMAGES AND ATTORNEY'S
FEES; AWARD THEREOF, NOT PROPER IN CASE AT
BAR. — The award of moral damages and attorney's fees
is also not in keeping with existing jurisprudence. Moral
damages may be awarded in a breach of contract when
the defendant acted in bad faith, or was guilty of gross
negligence amounting to bad faith, or in wanton
38 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
DECISION
Before the Court is a petition for review on certiorari of
the decision 1 of the Court of Appeals reversing the ruling
of the Regional Trial Court, Makati, dismissing
petitioner's complaint for recovery of a sum of money
alleged as overpayment of money market placements.
The Facts Petitioner BPI Investment Corporation (BPI
Investments), formerly known as "Ayala Investment and
Development Corporation," was engaged in money
market operations. Respondent D. G. Commercial
Corporation was a client of petitioner and started its
money market placements in September, 1978. The
individual respondents, spouses Daniel and Aurora
Carreon and Josefa M. Jeceil also placed with BPI
Investments their personal CD Technologies Asia, Inc. ©
2016 cdasiaonline.com money in money market
placements. On November 15, 1979, D. G. Carreon
Commercial Corporation (D. G. Carreon, for brevity)
placed with BPI Investments P318,981.59 in money
market placement with a maturity term of thirty two
days, or up to December 17, 1979, at a maturity value of
P323,518.22. BPI Investments issued the corresponding
sales order slip for straight sale and confirmation slip. On
December 12, 1979, there appeared in BPI Investments
ledger due D. G. Carreon an amount of P323,518.22,
which is the exact amount to mature on December 17,
1979. D. G. Carreon did not make any money placement
maturing on December 12, 1979. As a result of this, Mr.
Celso Abrantes, an officer of BPI Investments called up
Aurora Carreon about the money market placement
supposedly maturing on December 12, 1979. Aurora
Carreon instructed Abrantes to roll over the amount of
P323,518.22, for another thirty days at 19% interest to
mature on January 11, 1980. A sales order slip and a
confirmation slip were executed dated December 12,
1979. On December 17, 1979, BPI Investments credited D.
G. Carreon with another P323,518.22 via roll over of
P300,000.00, for a term of one hundred twenty days at
19% interest maturing on April 15, 1980, and P23,518.22,
paid out in cash. A sales order slip for straight sale and a
confirmation slip were executed. BPI Investments paid
the money placement on April 16, 1980. The money
placement in the amount of P319,000.00 that matured on
April 16, 1980 was again rolled over for a term of sixty one
days at 19% interest maturing on June 16, 1980, with a
maturity value of P329,443.81. The amount was again
rolled over for a term of thirty days at 18% interest
maturing on July 16, 1980, and again rolled over for
another thirty days at 18% interest. BPI Investments paid
D. G. Carreon twice in interest of the amount of
P323,518.22, representing a single money market
placement, the first on December 12, 1979, and the second
on December 17, 1979. According to petitioner, their
bookkeeper made an error in posting "12-17" on the sales
order slip for "12-12." BPI Investments claimed that the
same placement was also booked as maturing on
December 12, 1979. Aurora Carreon instructed BPI
Investments to roll over the whole amount of P323,518.22
for another thirty days, or up to January 11, 1980, at 19%
interest. BPI Investments claimed that roll overs were
subsequently made from maturing payments on which
BPI Investments had made over payments at a total
amount of P410,937.09, as follows: April 14, 1980
P14,371.74 June 18, 1980 P9,648.38 August 12, 1980
P100,000.00 March 19, 1981 P66,259.88 October 19, 1981
P220,657.64 —————— TOTAL P410,937.09
All the above payments were evidenced by checks issued
by BPI Investments to respondents. On April 21, 1982, BPI
Investments wrote respondents Daniel Carreon and
Aurora Carreon, demanding the return of the
overpayment of P410,937.09. 2 They discussed the matter
CD Technologies Asia, Inc. © 2016 cdasiaonline.com with
BPI Investments. The respondents asserted that there was
no overpayment and asked for time to look for the papers.
Upon the request of BPI Investments, the spouses Daniel
and Aurora Carreon sent to BPI Investments a proposed
memorandum of agreement, dated May 7, 1982, stating
that: "NOW, THEREFORE, and for (sic) in consideration
of the foregoing, the parties herein agree as follows: "1.
Because of the age and retrieval difficulty of the
transactions on this placement, the Company has a five-
year option to determine if the said placement referred to
as funded, and if so, to submit to AIDC (Now BPI
Investments) documents to this effect. And if such
documents support the funding of side placement, AIDC
39 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
(BPI Investments) shall pay the company the stated
amount being temporarily reimbursed by the Company
with a 12% p.a. interest. In the spirit of goodwill the
company hereby agrees to temporarily reimburse AIDC
the amount of FOUR HUNDRED TEN THOUSAND
NINE HUNDRED THIRTY SEVEN and 9/100 PESOS
(P410,937.09) representing the full amount of the claim of
AIDC as mentioned above." 3 On May 10, 1982, BPI
Investments, without responding to the memorandum
and proposal of D. G. Carreon filed with the Court of First
Instance of Rizal, Branch 36, Makati, a complaint 4 for
recovery of a sum of money against D. G. Carreon with
preliminary attachment. On May 14, 1982, the trial court
issued an order 5 for preliminary attachment after
submission of affidavit of merit to support the petition,
and the posting of a bond in the amount of P200,000.00.
However, on October 8, 1982, the trial court lifted the writ
of attachment. 6 On October 28, 1982, BPI Investments
moved for reconsideration, but the trial court denied the
motion after finding the absence of double payment to the
defendants. CcAHEI On July 30, 1982, respondents D. G.
Carreon filed with the trial court an answer 7 to the
complaint, with counterclaim. D. G. Carreon asked for
compensatory damages in an amount to be proven
during the trial; spouses Daniel and Aurora Carreon
asked for moral damages of P1,000,000.00 because of the
humiliation, great mental anguish, sleepless nights and
deterioration of health due to the filing of the complaint
and indiscriminate and wrongful attachment of their
property, especially their residential house and payment
of their money market placement of P109,283.75. Josefa
Jeceil asked for moral damages of P500,000.00, because of
sleepless nights and mental anguish, and payment of her
money market placement of P73,857.57; all defendants
claimed for exemplary damages and attorney's fees of
P100,000.00. On May 25, 1993, the trial court rendered a
decision, the pertinent portions of which read as follows:
"Plaintiff's case is unmeritorious." "The court agrees with
defendants' counsel's observation that plaintiff did not
prove by clear and convincing evidence that defendants
indeed received money in excess of what is due them as
it utterly failed to show and present any proof what was
actually due defendants. As pointed out by the same
counsel, the summary of the money market placement
submitted as evidence by plaintiff (Exh. A) is at best self-
serving as it was admittedly prepared by plaintiff's own
accounting department without any participation of
defendants. (TSN of October 15, 1985, p. 4) CD
Technologies Asia, Inc. © 2016 cdasiaonline.com
"Moreover, the alleged payments in the complaint were
admitted by plaintiff itself to be withdrawals from validly
issued commercial papers (TSN of August 12, 1986, pp. 3-
5) for value received (Exhs. 1-B, 2-B up to 11-B) duly
verified and signed by at least two (2) authorized high
ranking officers of plaintiff's corporation. Again, as
correctly stated by defendants, Art. 1431 of the New Civil
Code provides that through estoppel an admission or
representation is rendered conclusive upon the person
making it, and cannot be denied or disapproved as
against the person relying thereon. Accordingly, plaintiff
having thus clearly stated in several documents duly
signed by its responsible officers cannot now vary their
contents and claim that they were received without value
having been received for the same. "Lastly, it is
incumbent upon plaintiff corporation to provide for
competent employees possessed with adequate skills in
implementing effective safeguards and measures that
ensure the non-occurrence of errors of this nature, it
would be gross negligence on the part of plaintiff if it fails
to provide for the same considering that it is primarily
engaged in the solicitation of money market placements.
"In view of the foregoing, the case is hereby DISMISSED
with cost against plaintiff. The attachment previously
issued is likewise lifted. "It appearing that plaintiff was
not motivated by malice in filing this case, the
counterclaim is likewise DISMISSED. "SO ORDERED."
Both parties appealed the above decision to the Court of
Appeals. 9 After due proceedings, on July 19, 1996, the
Court of Appeals promulgated a decision, the dispositive
portion of which reads as follows: "WHEREFORE, the
appealed judgment of the trial court dismissing the
plaintiff's complaint is hereby AFFIRMED while its
dismissal of the counterclaim of defendants is
REVERSED and SET ASIDE and judgment is hereby
rendered as follows: "1. Ordering plaintiff BPI to pay the
following amounts of damages: "Moral Damages — "a)
P1,000,000.00 to the late Daniel G. Carreon or his estate
represented by Aurora J. Carreon; "b) P1,000,000.00 to
Aurora J. Carreon; P500,000.00 to the late Josefa M. Jeceil
or her estate represented by Aurora J. Carreon;
"Compensatory Damages — "P1,500,000.00 to D. G.
Carreon Commercial Corporation; "Exemplary Damages
— P1,000,000.00 to all defendants; "Attorney's Fees
P500,000.00 to all defendants CD Technologies Asia, Inc.
© 2016 cdasiaonline.com "2. Ordering plaintiff BPI to pay
to the estate of Daniel G. Carreon, represented by Aurora
J. Carreon, the money market placement of P109,238.75
with 12% interest per annum from June 3, 1982 until fully
paid; "3. Ordering plaintiff BPI to pay to the estate of
Josefa M. Jeceil, represented by Aurora J. Carreon, the
money market placement in the amount of P73,857.57 at
12% interest per annum from maturity on July 12, 1982
40 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
until fully paid; "4. Ordering plaintiff BPI to pay for the
costs of the suit. "SO ORDERED" 10 Hence, this appeal.
11 Petitioner BPI Investments raises the following issues:
1. Whether there was an over payment of respondents'
money market placements. 2. Whether petitioner abused
its right in implementing the writ of preliminary
attachment; 3. Whether the Court of Appeals awarded
excessive moral and exemplary damages as well as
attorney's fees to respondents; and 4. Whether petitioner
was obliged to pay the estate of Josefa Jeceil the amount
of her money market placement. 12 Petitioner's
Submissions First, BPI Investments submits that the
summary of the money market placements and the
checks issued to D. G. Carreon are sufficient to show that
one renewal or "roll over" of the money market placement
dated November 15, 1979, for a period of thirty-two days
gave rise to two placements maturing on two dates, that
is, December 12, 1979 and December 17, 1979. 13 After
several roll overs and withdrawals by D. G. Carreon, BPI
Investments discovered that respondent corporation has
overpaid P410,937.09 since the December 12, 1979
placement was not funded. BPI Investments stressed that
in a money market transaction an official receipt must
support maturing placements. The December 12, 1979
placement was unsupported by any fund. 14 Second, a
mistake caused the overpayment in the posting of the
maturity date of "12-12" instead of "12-17." The mistake in
the posting of the maturity date benefited D. G. Carreon.
And as soon as petitioner discovered the wrong posting,
it immediately wrote D. G. Carreon to inform the latter of
the error in the posting of the maturity dates on its money
market placements. 15 Third, the manner of execution of
the writ of attachment is not the fault of BPI Investments.
The sheriff of the trial court implemented the writ. The
only participation BPI Investments had in the process was
the application for a writ of preliminary attachment. BPI
Investments did not have a hand in its implementation.
16 Fourth, the Court of Appeals blamed BPI Investments
for the deterioration of the health of two respondents who
died pendente lite. The award of moral and exemplary
damages and attorney's fees in favor of respondents is
bereft of factual and legal bases. 17 Petitioner filed the
case below to recover the overpayment arising from an
unfunded CD Technologies Asia, Inc. © 2016
cdasiaonline.com placement. The respondents failed to
show proof that the December 12, 1979 placement was
different from the December 17, 1979 placement. The
Court of Appeals ruling that the filing of the case
aggravated and caused the death of respondents Daniel
Carreon and Josefa Jeceil is completely unfounded and
farfetched. Daniel Carreon, prior to the filing of the case,
was suffering from nasopharyngeal cancer from which he
died in 1984. Whereas Josefa Jeceil died from various
heart ailments in 1987, almost five years since the case
was filed. No causal relation whatsoever was established
between the health of the respondents and the filing of
the case. 18 The award of damages in favor of the
respondent corporation was also without basis. There
was no proof adduced that the credit standing of the
respondent corporation was affected by the filing of the
case. There was no proof of bad faith or malice on the part
of BPI Investments. What happened was an honest
mistake. 19 Fifth, the order of the Court of Appeals for BPI
Investments to pay the money market placement of Josefa
Jeceil was also without basis. The amount of P73,857.57
was placed and deposited by BPI Investments with the
sheriff of the Court of First Instance of Rizal in compliance
with the order of the court. Respondent Jeceil knew of this
fact but she failed to withdraw the amount in the custody
of the trial court. 20 Respondents' Position Respondents
submit that the issues raised are factual, hence, not
reviewable in this case. Only questions of law, distinctly
set forth, may be raised in a petition for review on
certiorari, subject to clearly settled exceptions in case law.
The case at bar does not fall within any of the exceptions.
21 BPI Investments was guilty of bad faith, malice and
gross negligence in the management of respondent's
money market placements. According to respondents,
this is not a mere case of "misreading" "12-17" as "12-12."
The sloppy accounting and recording of the ledger was a
clear case of gross negligence in the exercise of
petitioner's primary business of accepting money market
placements. BPI Investments was remiss in its duty to
treat respondents' money market placements with the
highest degree of care, considering the fiduciary nature of
their relationship. 22 The Court of Appeals correctly ruled
that petitioner abused its right in executing the writ of
attachment against respondents. Notwithstanding the
fact that petitioner's claim amounted only up to
P410,937.09, petitioner caused the levy on property of
respondents valued at more than P40,000,000.00, in a
harsh, unjust, inhuman and oppressive manner. This
constitutes an abuse that justifies the award of damages
to the respondents. Articles 19, 20 and 21 of the Civil Code
constitute the legal basis for the award of damages to
respondents. 23 As to the alleged excessive award of
moral and exemplary damages as well as attorney's fees,
respondents submit that the same is supported by proofs.
As to the moral damages awarded to Daniel G. Carreon
and Aurora J. Carreon, both in the amount of
P1,000,000.00, and to Josefa M. Jeceil in the amount of
P500,000.00, the awards are reasonable and supported by
41 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
evidence. All the respondents are persons of high
reputation in the community. Each of them CD
Technologies Asia, Inc. © 2016 cdasiaonline.com suffered
mental anguish, embarrassment and humiliation due to
the case filed by petitioner and two of them deteriorated
in their health and died during the pendency of the case.
As to the compensatory damages awarded to the
corporation, the same is proper. It was proved that D. G.
Carreon is a reputable corporation with good credit
standing in the business community and this reputation
was damaged due to the malicious charges filed by
petitioner. 24 As to the award of exemplary damages, the
same is not excessive. It must be stressed that the amount
of P1,000,000.00 was awarded to four respondents. The
attorney's fees in the amount of P500,000.00 is not
excessive considering that the case dragged on from 1981
up to the present, over fifteen years. 25 As to the order to
pay the long overdue money market placement of the late
Josefa Jeceil, petitioner's contention that respondent
failed to withdraw the amount deposited with the sheriff
is not correct. First, the deposit does not amount to
payment; indeed, consignation was not proper. Josefa
Jeceil had no right to withdraw such deposit because of
the pending litigation. As a consequence, the Court of
Appeals directed the petitioner to pay the matured
money market placement of the late Josefa Jeceil. 26 The
Court's Ruling After a careful consideration of the facts
and the evidence presented by both parties, we consider
the petition partly meritorious. "There are instances when
the findings of fact of the trial court and/or Court of
Appeals may be reviewed by the Supreme Court, such as
(1) when the conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2) when the
inference made is manifestly mistaken, absurd or
impossible; (3) where there is a grave abuse of discretion;
(4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6)
when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to
the admissions of both appellant and appellee; (7) when
the findings are contrary to those of the trial court; (8)
when the findings of fact are conclusions without citation
of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioners'
main and reply briefs are not disputed by the
respondents; and (10) the findings of fact of the Court of
Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record." 27
In the case at bar, the Court of Appeals committed errors
in the apprehension of the facts of the case, hence, we
review its findings of facts. We find petitioner not guilty
of gross negligence in the handling of the money market
placement of respondents. "Gross negligence implies a
want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting
any effort to avoid them." 28 However, while petitioner
BPI Investments may not be guilty of gross negligence, it
failed to prove by clear and convincing evidence that D.
G. Carreon indeed received money in excess of what was
due them. "The alleged payments in the complaint were
admitted by plaintiff itself to be withdrawals from validly
issued commercial papers, duly verified and signed by at
least two authorized high-ranking officers of BPI
Investments." 29 The law on exemplary damages is found
in Section 5, Chapter 3, Title XVIII, Book IV of the Civil
Code. These are imposed by way of example or correction
for the public good, in CD Technologies Asia, Inc. © 2016
cdasiaonline.com addition to moral, temperate,
liquidated, or compensatory damages. They are
recoverable in criminal cases as part of the civil liability
when the crime was committed with one or more
aggravating circumstances; in quasi-delicts, if the
defendant acted with gross negligence; and in contracts
and quasi-contracts, if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
30 BPI Investments did not act in a wanton, fraudulent,
reckless, oppressive, or malevolent manner, when it
asked for preliminary attachment. It was just exercising a
legal option. The sheriff of the issuing court did the
execution and the attachment. Hence, BPI Investments is
not to be blamed for the excessive and wrongful
attachment. As to the finding of the appellate court that
the filing of the case aggravated and eventually caused
the death of two of the respondents, we agree with the
petitioner that such correlation is bereft of basis and is far
fetched. The award of moral damages and attorney's fees
is also not in keeping with existing jurisprudence. Moral
damages may be awarded in a breach of contract 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. Finally, with the
elimination of award of moral damages, so must the
award of attorney's fees be deleted. 31 There is no doubt,
however, that the damages sustained by respondents
were due to petitioner's fault or negligence, short of gross
negligence. Temperate or moderate 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. 32 The Court deems
it prudent to award reasonable temperate damages to
respondents under the circumstances. 33 As to the claim
42 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
for payment of the money market placement of Josefa
Jeceil, the trial court may release the deposited amount of
P73,857.57 to petitioner as the consignation was not
proper or warranted. The Fallo IN VIEW WHEREOF, the
decision of the Court of Appeals is hereby AFFIRMED
with MODIFICATION. The award of moral,
compensatory and exemplary damages and attorney's
fees are deleted. BPI Investments is ordered to pay to the
estate of Daniel G. Carreon and Aurora J. Carreon the
money market placement of P109,238.75, with legal
interest of twelve (12%) percent per annum from June 3,
1982, until fully paid; to pay the estate of Josefa M. Jeceil,
the money market placement in the amount of P73,857.57,
with legal interest at twelve (12%) percent per annum
from maturity on July 12, 1982, until fully paid. The
petitioner may withdraw its deposit from the lower court
at its peril. BPI Investments is likewise ordered to pay
temperate damages to the estate of the late Daniel G.
Carreon in the amount of P300,000.00, and to the estate of
Aurora J. Carreon in the amount of P300,000.00, and to
the estate of Josefa M. Jeceil in the amount of P150,000.00.
No costs. SO ORDERED.
[G.R. No. 135644. September 17, 2001] GOVERNMENT
SERVICE INSURANCE SYSTEM, petitioner, vs.
SPOUSES GONZALO and MATILDE LABUNG-
DEANG, respondents.
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]
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-
43 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
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.
xxx
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.
xxx (underscoring ours)
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
44 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
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.
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.
[G.R. No. 130415. October 11, 2001]
PEOPLE OF THE PHILIPPINES, plaintiff-
appellee, vs. ALVIN YRAT y BUGAHOD and
RAUL JIMENA y POLLESCAS Alias
Bobong, accused-appellant.
For the death of Benjamin Aca-ac, appellants Alvin
Yrat and Raul Jimena were charged with the crime of
murder based on an Information which reads:
That on or about the 27th day of December, 1995, at about
6:45 oclock in the evening, in barangay Biasong,
municipality of Lopez Jaena, province of Misamis
Occidental, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, conspiring,
confederating and helping one another, with intent to kill,
with treachery and with abuse of their superior strength,
did then and there willfully, unlawfully and feloniously
attack, assault, hit, box and shot one BENJAMIN ACA-
AC, thereby inflicting upon the latter fatal gunshot
wounds which caused his immediate death.
45 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
CONTRARY TO LAW, with the presence of the
qualifying circumstance of treachery and generic
aggravating circumstance of abuse of superior strength.[1]
Arraigned on May 21, 1996, accused Jimena, assisted
by counsel, entered a plea of not guilty. As accused Alvin
Yrat was then still at large, the case with respect to
accused Jimena proceeded to trial with the prosecution
presenting Dr. Rachel T. Micarandayo, eyewitnesses
Virginia and Violeta Singcay, Allan Garganera, Roger
Rebosura, victims wife, Julia Aca-ac and rebuttal witness
Avelino Barbajo.
For his part, accused Jimena presented Nercua,
Henry Yabo and Emma Jimena.
On September 3, 1996, appellant Yrat was
arrested. Upon arraignment, with the assistance of
counsel, on September 6, 1996, he also pleaded not
guilty. For his defense, appellant adopted all the
evidence, both testimonial and documentary, presented
by accused Jimena. He was likewise utilized by accused
Jimena as witness.
The prosecutions case established that on December
27, 1995, on the eve of the town fiesta of Biasong, Lopez
Jaena, Misamis Occidental, Benjamin Aca-ac, together
with his wife, Julia and one Father Naron, were in the
house of Avelino Boy Barbajo. At about 1 oclock that
afternoon, appellant, accused Jimena and his wife Emma
arrived. (As Father Naron had another appointment,) the
three bade their host goodbye and proceeded to the video
house operated by Violeta and Virginia Singcay. At
around 2 oclock, Benjamin returned to Barbajos house
and joined appellant and accused Jimena. In the course of
their conversation, Benjamin and accused Jimena had an
altercation regarding the local game masiao, or jai-alai,
and nearly engaged in a fistfight were it not for the timely
intervention of Barbajo. Appellant was heard saying to
Benjamin, you cannot even reach this New Year. To avoid
trouble in his house, Barbajo requested the group to
leave,[2] who proceeded to the videoke bar. They saw
Julia Aca-ac talking to Violeta Singcay, approached her
and told her that Benjamin is ill-mannered. Appellant
likewise said that you tell your husband that he will not
reach the morning.[3] Thereafter, the two left the
place. Alarmed by the threats of appellant, Julia left the
videoke bar to warn her husband. Not having seen him,
she proceeded home.[4]
Between five and six oclock in the evening, appellant
returned to the videoke bar and ordered a bottle of
beer. Later, accused Jimena and his wife Emma
arrived. While accused Raul Jimena was looking for a
place to park his motorcycle, Emma approached
appellant and told the latter that Benjamin was following
them.[5] When Benjamin arrived, accused Raul stopped
the former and talked to him. Benjamin did not alight
from the motorcycle.[6] Upon seeing Benjamin, appellant
proceeded towards the two men at the same time pulling
out a pistol. Walking behind Benjamin, appellant hit him
at the right side of the neck with the butt of his
gun. Simultaneously, accused Jimena hit Benjamin on the
cheek causing the latter to tilt a little backward. At that
instance, appellant Yrat pointed his pistol and fired, but
the gun did not explode. He then went in front of
Benjamin and fired two more shots hitting him on the
middle portion of his breast and on the face. Benjamin fell
down, and was pinned by his motorcycle.[7] After the
incident, spouses Jimena left the place while appellant
threw the gun towards the bushes and camote
plantation. He went back to the videoke bar and ordered
beer and cigarettes. He warned Virginia not to report to
the authorities.[8]
The body of Benjamin Aca-ac was examined by Dr.
Rachel Micarandayo and was found to have sustained the
following wounds:
1. Gunshot wound, entrance, 1 inch in diameter lacerated
in character, left cheek.
2. Gunshot wound, entrance, inch, oval, along the left
sternal line, at the level of the 5th intercostal space.
3. Gunshot wound, exit, inch diameter, everted, at the
level of the 7th intercostals space, back, left.[9]
Appellant Yrat admitted shooting Benjamin but
claims that he only acted in self-defense. He narrated that
on December 27, 1995, he was invited to the house of Boy
Barbajo. Benjamin Aca-ac, who was with them, allegedly
drunk, left the place together with a certain Father Naron
and returned shortly thereafter on a motorcycle with a
policeman. Without any provocation on his part,
Benjamin slapped him. He did not retaliate, instead, he
left the house and headed for his house in Barangay
Canubay, Oroquieta City. He took his firearm and
returned to Lopez Jaena. He proceeded to the videoke bar
operated by Violeta Singcay, knowing that Benjamin will
pass by that place. After waiting for about two hours, he
saw Benjamin.[10] He approached the latter and asked
why he slapped him. Benjamin allegedly pulled out a gun
so he stepped back, drew his firearm and shot Benjamin
twice.
Accused Raul Jimena, on the other hand, claimed
that on December 27, 1995 at about 3 oclock in the
afternoon, he, together with his wife, went to Boy
Barbajos house in Biasong, Lopez Jaena. From the house
of Boy Barbajo, they proceeded to the residence of Boy
Bulawin. As the latter was not yet ready to serve them
food, they went home, returned later in the afternoon to
46 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
Bulawins house. At about 5 oclock, they left the house
and passed by the videoke bar owned by Virginia
Singcay. Emma went inside while accused Jimena looked
for a place to park his motorcycle. He saw Santos, an ex-
barangay captain of Barangay Dampalan. While talking,
they heard a gun explosion. Accused Jimena looked for
his wife and then left the place. While the remains of the
deceased was brought to his house, Julia Aca-ac shouted
to accused Jimena who resides nearby, Bong, where is the
man whom you wanted to be killed.[11]
After weighing the evidence presented by the
parties, the trial court rendered a decision the decretal
portion of which reads:
WHEREFORE, finding accused Alvin Yrat, as principal,
and Raul Jimena, as an accomplice, guilty beyond
reasonable doubt of the crime of Murder, committed
without an aggravating or mitigating circumstance
present and applying the provisions of the Indeterminate
Sentence Law as regards Raul Jimena, the Court thereby
sentences accused Alvin Yrat to suffer the penalty of
RECLUSION PERPETUA, and accused Raul Jimena to
suffer an indeterminate penalty of imprisonment from
SIX (6) YEARS and ONE (1) DAY of prision mayor as its
minimum to FOURTEEN (14) YEARS, EIGHT (8)
MONTHS and ONE (1) DAY of reclusion temporal as
maximum, both to indemnify jointly and severally the
heirs of Benjamin Aca-ac P50,000.00 as death indemnity,
P20,000.00 for funeral expenses, P50,000.00 for the loss of
earning capacity of the deceased and P60,000.00 for moral
damages and to pay the costs.
SO ORDERED.[12]
Both accused appealed the decision to this Court.
On June 10, 1998, accused Raul Jimena filed a motion
to withdraw the appeal which was granted by this Court
per Resolution dated September 20, 1999.[13]
In his appeal, appellant made a lone assignment of
error-
THAT THE TRIAL COURT ERRED IN NOT FINDING
ACCUSED-APPELLANT GUILTY ONLY OF
HOMICIDE.
Appellant argues that he cannot be sentenced to
murder because of the absence of the qualifying
circumstance of treachery. He argues that the deceased
Benjamin Aca-ac was shot by him frontally.
We find no cogent reason to reverse the decision of
the trial court. The trial court correctly
appreciated aleviosa as having qualified the killing of the
victim to murder.
Treachery is present when the offender employs
means, methods, or forms in the execution of the crime
which tend directly and especially to insure its execution
without risk to himself arising from any defensive or
retaliatory act which the victim might make.[14] Thus,
for treachery to be considered, two (2) elements must
concur, to wit: (1) the employment of means of execution
that gives the person attacked no opportunity to defend
himself or retaliate; and (2) the means of execution were
deliberately or consciously adopted.[15]
Benjamin Aca-ac was talking to accused Jimena
when appellant approached him from behind. With the
butt of his gun, appellant hit Benjamin from
behind. Almost simultaneously, accused Jimena boxed
Benjamin on the face. The latter has not yet recovered
from such sudden attack when appellant went in front of
Benjamin and shot him face to face. Under this situation,
Benjamin was not given any time at all to react. The
suddenness of the attack made it impossible for him to
defend himself. He was unarmed and totally defenseless
when appellant shot him.[16] Appellant employed means
of execution which gave Benjamin no opportunity at all
to defend himself and that the manner of execution was
deliberately and consciously adapted. While Benjamin
was assaulted frontally, this does not make such attack
less treacherous. Treachery exists even if the attack is
frontal if it is sudden and unexpected, giving the victim
no opportunity to repel it or defend himself. What is
decisive is that the execution of the attack, without the
slightest provocation from the victim who was unarmed,
made it impossible for the victim to defend himself or to
retaliate.[17]
Going now to the trial courts award of damages, we
find the award of loss of earning capacity not in order. It
bears stressing that compensation for loss of income is in
the nature of damages and as such requires due proof of
the damages suffered.[18] The prosecution failed to
present evidence to show the deceaseds monthly
earnings. What was presented in evidence was only the
testimony of the wife that the deceased was earning
P50,000.00. We have held that for lost income due to
death, there must be unbiased proof of the deceaseds
average income. Self-serving, hence, unreliable statement
is not enough.[19]
The award of P20,000.00 for funeral expenses should
likewise be deleted in the absence of evidence to prove
the same. To justify a grant of actual damages, it is
necessary to show the amount of actual loss with the best
evidence obtainable.[20] The testimony of Julia Aca-ac that
she spent P20,000.00 for the wake and burial of her
husband, without presenting any receipts, is not
47 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
sufficient to support the claim for funeral expenses. We
have consistently ruled that only expenses supported by
receipts and which appear to have been actually incurred
shall be allowed.[21] It is a settled rule that there must be
proof that actual or compensatory damages have been
suffered, and evidence of its actual amount. In the present
case, since no receipt was presented to support the claim
for funeral expenses, the same cannot be allowed.[22]
In lieu of the aforesaid damages, the heirs of the
deceased Benjamin Aca-ac should be awarded the
amount of P15,000.00 as temperate damages pursuant to
Article 2224 of the Civil Code which provides that
temperate 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.[23]
We, however, sustain the award of P50,000.00 as civil
indemnity (ex delicto) which requires no proof other than
the fact of death of the victim and assailants responsibility
therefor.[24] Article 2206 of the Civil Code provides that
when death occurs as a result of the crime, the heirs of the
deceased are entitled to be indemnified for the death of
the victim without need of any evidence or proof
thereof. The award of moral damages in the amount of
P60,000.00 should also be sustained taking into
consideration the pain and anguish of the victims family.
WHEREFORE, the decision of the Regional Trial
Court of Oroquieta City, Branch 12, is hereby AFFIRMED
with the MODIFICATION that the awards of P50,000.00
for loss of earning capacity of the deceased, and
P20,000.00 for funeral expenses, be deleted.
SO ORDERED.
[G.R. No. 159352. April 14, 2004]
PREMIERE DEVELOPMENT BANK, petitioner,
vs. COURT OF APPEALS, PANACOR MARKETING
CORPORATION and ARIZONA TRANSPORT
CORPORATION, respondents.
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
48 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
(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
49 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
cancellation of the mortgage constituted
thereon;
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 Finance informed Premiere Bank of its approval of
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.
50 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
We are not persuaded.
In a letter-agreement[12] dated October 5, 1995, Iba-
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
copy of TCT No. T-3475 in order to register its mortgage,
after which Iba-Finance 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.
51 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
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.
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
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]
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
52 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
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.
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.
G.R. No. L-7991 January 29, 1914
LEON J. LAMBERT, plaintiff-appellant,
vs.
T. J. FOX, defendant-appellee.
This is an action brought to recover a penalty prescribed
on a contract as punishment for the breach thereof.
Early in 1911 the firm known as John R. Edgar & Co.,
engaged in the retail book and stationery business, found
itself in such condition financially that its creditors,
including the plaintiff and the defendant, together with
many others, agreed to take over the business,
incorporate it and accept stock therein in payment of their
respective credits. This was done, the plaintiff and the
defendant becoming the two largest stockholders in the
new corporation called John R. Edgar & Co.,
Incorporated. A few days after the incorporation was
completed plaintiff and defendant entered into the
following agreement:
Whereas the undersigned are, respectively,
owners of large amounts of stock in John R. Edgar
and Co, Inc; and,
Whereas it is recognized that the success of said
corporation depends, now and for at least one
year next following, in the larger stockholders
retaining their respective interests in the business
of said corporation:
Therefore, the undersigned mutually and
reciprocally agree not to sell, transfer, or
otherwise dispose of any part of their present
holdings of stock in said John R. Edgar & Co. Inc.,
till after one year from the date hereof.
Either party violating this agreement shall pay to
the other the sum of one thousand (P1,000) pesos
as liquidated damages, unless previous consent
in writing to such sale, transfer, or other
disposition be obtained.
Notwithstanding this contract the defendant Fox on
October 19, 1911, sold his stock in the said corporation to
E. C. McCullough of the firm of E. C. McCullough & Co.
of Manila, a strong competitor of the said John R. Edgar
& Co., Inc.
This sale was made by the defendant against the protest
of the plaintiff and with the warning that he would be
held liable under the contract hereinabove set forth and
in accordance with its terms. In fact, the defendant Foz
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offered to sell his shares of stock to the plaintiff for the
same sum that McCullough was paying them less P1,000,
the penalty specified in the contract.
The learned trial court decided the case in favor of the
defendant upon the ground that the intention of the
parties as it appeared from the contract in question was
to the effect that the agreement should be good and
continue only until the corporation reached a sound
financial basis, and that that event having occurred some
time before the expiration of the year mentioned in the
contract, the purpose for which the contract was made
and had been fulfilled and the defendant accordingly
discharged of his obligation thereunder. The complaint
was dismissed upon the merits.
It is argued here that the court erred in its construction of
the contract. We are of the opinion that the contention is
sound. The intention of parties to a contract must be
determined, in the first instance, from the words of the
contract itself. It is to be presumed that persons mean
what they say when they speak plain English.
Interpretation and construction should by the
instruments last resorted to by a court in determining
what the parties agreed to. Where the language used by
the parties is plain, then construction and interpretation
are unnecessary and, if used, result in making a contract
for the parties. (Lizarraga Hermanos vs. Yap Tico, 24 Phil.
Rep., 504.)
In the case cited the court said with reference to the
construction and interpretation of statutes: "As for us, we
do not construe or interpret this law. It does not need it.
We apply it. By applying the law, we conserve both
provisions for the benefit of litigants. The first and
fundamental duty of courts, in our judgment, is
to apply the law. Construction and interpretation come
only after it has been demonstrated that application is
impossible or inadequate without them. They are the very
last functions which a court should exercise. The majority
of the law need no interpretation or construction. They
require only application, and if there were more
application and less construction, there would be more
stability in the law, and more people would know what
the law is."
What we said in that case is equally applicable to
contracts between persons. In the case at bar the parties
expressly stipulated that the contract should last one year.
No reason is shown for saying that it shall last only nine
months. Whatever the object was in specifying the year, it
was their agreement that the contract should last a year
and it was their judgment and conviction that their
purposes would not be subversed in any less time. What
reason can give for refusing to follow the plain words of
the men who made the contract? We see none.
The appellee urges that the plaintiff cannot recover for the
reason that he did not prove damages, and cites
numerous American authorities to the effect that because
stipulations for liquidated damages are generally in
excess of actual damages and so work a hardship upon
the party in default, courts are strongly inclined to treat
all such agreements as imposing a penalty and to allow a
recovery for actual damages only. He also cites
authorities holding that a penalty, as such, will not be
enforced and that the party suing, in spite of the penalty
assigned, will be put to his proof to demonstrate the
damages actually suffered by reason of defendants
wrongful act or omission.
In this jurisdiction penalties provided in contracts of this
character are enforced . It is the rule that parties who are
competent to contract may make such agreements within
the limitations of the law and public policy as they desire,
and that the courts will enforce them according to their
terms. (Civil Code, articles 1152, 1153, 1154, and 1155;
Fornow vs. Hoffmeister, 6 Phil. Rep., 33; Palacios vs.
Municipality of Cavite, 12 Phil. Rep., 140; Gsell vs. Koch,
16 Phil. Rep., 1.) The only case recognized by the Civil
Code in which the court is authorized to intervene for the
purpose of reducing a penalty stipulated in the contract
is when the principal obligation has been partly or
irregularly fulfilled and the court can see that the person
demanding the penalty has received the benefit of such or
irregular performance. In such case the court is
authorized to reduce the penalty to the extent of the
benefits received by the party enforcing the penalty.
In this jurisdiction, there is no difference between a
penalty and liquidated damages, so far as legal results are
concerned. Whatever differences exists between them as
a matter of language, they are treated the same legally. In
either case the party to whom payment is to be made is
entitled to recover the sum stipulated without the
necessity of proving damages. Indeed one of the primary
purposes in fixing a penalty or in liquidating damages, is
to avoid such necessity.
It is also urged by the appelle in this case that the
stipulation in the contract suspending the power to sell
the stock referred to therein is an illegal stipulation, is in
restraint of trade and, therefore, offends public policy. We
do not so regard it. The suspension of the power to sell
has a beneficial purpose, results in the protection of the
corporation as well as of the individual parties to the
contract, and is reasonable as to the length of time of the
suspension. We do not here undertake to discuss the
limitations to the power to suspend the right of alienation
54 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
of stock, limiting ourselves to the statement that the
suspension in this particular case is legal and valid.
The judgment is reversed, the case remanded with
instructions to enter a judgment in favor of the plaintiff
and against the defendant for P1,000, with interest;
without costs in this instance.
De Leon v CA | Paras
G.R. No. L-31931 August 31, 1988 |
FACTS
• Sps. Briones (Juan Briones and Magdalena Bernardo)
were former registered owners of the fishpond situated at
San Roque, Paombong, Bulacan. Said property was
mortgaged twice to secure a loan obtained from, initially
Hermogenes Tantoco but was later on assigned to, Dr.
Cornelio Tantoco, Hermogenes’ father, in the amounts of
P20,000 and P68,824 (the later having a 10% interest per
annum). Both mortgages were duly registered in the
Office of the Register of Deeds of Bulacan and duly
annotated at the back of the TCT.
• While these two mortgages were still subsisting the Sps.
Briones sold the fishpond, which is the subject matter of
said two mortgages, to plaintiff Sps. De Leon (Fortunato
de Leon and Juana F. Gonzales de Leon) in the amount of
P120,000.00. Of the amount of P120,000.00, the Sps.
Briones actually received only the amount of P31,000.00
on June 2, 1959, as the amount of P89,000.00 was withheld
by the Fortunato de Leon who assumed to answer the
mortgage indebtedness of the Briones to the Tantocos.
After the sale Sps. De Leon satisfied the mortgage loan of
P20,000.00 including 10% interest per annum to
Hermogenes Tantoco who then accordingly executed a
deed of discharge of mortgage, but the mortgage in favor
of Cornelio S. Tantoco in the amount of P68,824 was not
satisfied. On February 5, 1962 plaintiffs made payment of
P29,382.50 to the Dr. Cornelio.
• Trying to set the record straight, Dr. Cornelio made the
clarification that the principal obligation of the Briones as
of May 25, 1959 was P68,824.00 and on January 26, 1962
when a letter of demand was sent to them their total
obligation including the agreed interest amounted to
P88,888.98. Hence the above mentioned PNB check will
be held in abeyance pending remittance of the total
obligation after which the necessary document will be
executed.
• On May 8, 1962 the Sps. De Leon filed a complaint with
the Court of First Instance of Bulacan against defendant
Cornelio S. Tantoco for discharge of mortgage. On May
31, 1962 Dr. Cornelio filed his answer with counterclaim
and third party complaint against the Sps. Briones with
petition for leave to file third party complaint. He alleged
by way of special and affirmative defenses, among others,
that the true and real amount of obligation of the Sps.
Briones is the sum of P68,824.00, Philippine currency,
with 10% interest secured by a second mortgage in favor
of defendant, executed and signed by the Briones spouses
on May 26,1959, which deed of second mortgage was
duly registered in the Office of the Register of Deeds of
Malolos, Bulacan on May 27, 1959 and properly
annotated at the back of Transfer Certificate of Title No.
28296 issued in the names of Juan Briones and Magdalena
Bernardo; that the amount of P29,382.50 sent by Sps.
DeLeon as alleged counsel of the spouses Juan Briones
and Magdalena Bernardo was accepted by Dr. Cornelio
as part payment or partial extinguishment of the
mortgage loan of P68,824.00 with 10% interest thereon per
annum from May 22, 1959, and Sps. De Leon have been
informed of the tenor of said acceptance and application
and, that the latter did not accede to the demand of the
former to have the mortgage lien on the property in
question cancelled or discharged because the full amount
of the mortgage debt of P68,824.00 plus the 10% interest
thereon from May 22, 1959 has not yet been fully paid
either by the plaintiffs or by the spouses Juan Briones and
Magdalena Bernardo.
• RTC dismissed the complaint and ordered for Sps. De
Leon to pay Dr. Cornelio the sum of P64,921.60 with
interest thereon at 10% per annum from February 5, 1962
until fully paid; payment of the sum of P100,000 as moral
and exemplary damages, and further sum of P10,000 as
attorney’s fees
• On appeal, CA affirmed the judgment of trial court with
modification respecting the award of moral and
exemplary damages as well as attorney’s fees.
ISSUES & ARGUMENTS
W/N the award of P60,000 in the concept of moral and
exemplary damages is proper?
HOLDING & RATIO DECIDENDI
YES. Respondent Court found malice in De Leon's
refusal to satisfy Dr. Tantoco’s lawful claim and in their
subsequent filing of the present case against the latter,
and took into consideration the worries and mental
anxiety of latter as a result thereof.
• Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation and
similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they
are the proximate result of the defendant's wrongful act
or omission.
55 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8
• On the other hand, jurisprudence sets certain conditions
when exemplary damages may be awarded, to wit: (1)
They may be imposed by way of example or correction
only in addition, among others, to compensatory
damages and cannot be recovered as a matter of right,
their determination depending upon the amount of
compensatory damages that may be awarded to the
claimant; (2) the claimant must first establish his right to
moral, temperate, liquidated or compensatory damages;
and (3) the wrongful act must be accompanied by bad
faith, and the award would be allowed only if the guilty
party acted in a wanton, fraudulent, reckless, oppressive
or malevolant manner.
• As a lawyer in the practice of law since his admission to
the Bar in 1929, who has held several important positions
in the government petitioner Fortunato de Leon could not
have missed the import of the annotation at the back of
TCT regarding the second mortgage for the sum of sixty
eight thousand eight hundred twenty-four pesos
(P68,824.00) of the property he was buying, in favor of
respondent Cornelio Tantoco. The same annotation was
transferred to the new TCT issued in the name of De Leon
after the sale of the property was effected and entered in
the registry of deeds of Bulacan on June 3, 1959.
Furthermore, Sps. De Leon cannot deny having assumed
the mortgage debts of the Sps. Briones amounting to
P89,000.00 in favor of the Tantocos. The "Patunay"
executed by the Sps. Briones on June 3, 1959 gives the
information that their property, and fishpond, was sold
by them to the spouses Fortunato de Leon and Juana F.
Gonzales for the amount of one hundred twenty
thousand pesos (Pl20,000.00), payment made to them, as
follows:
Pinanagutan na aming pagkakautang kay
G. Hermogenes Tantoco hanggang Mayo 1959 P 89,000.00
Cash na tinanggap namin PBC Check No. 57040 11,000.00
Pagare No. 1 Junio 1, 1959 10,000.00
Pagare No. 2 Junio 1, 1959 10,000.00
Kabuuan P 120,000.00
• At the bottom of the "Patunay" in the handwriting of
petitioner Fortunato de Leon is a statement signed by him
signifying that he was assuming the spouses'debt of
P89,000.00 to respondent Tantoco, in the following
words:
Ang pagkautang na P89,000.00 sa mga Tantoco ay aking
inaasumihan.
• The entitlement to moral damages having been
established the award of exemplary damages is proper.
And while the award of moral and exemplary damages
in an aggregate amount may not be the usual way of
awarding said damages there is no question of Dr.
Tantoco's entitlement to moral and exemplary damage.
The amount should be reduced, however, for being
excessive compared to the actual losses sustained by the
aggrieved party. Moral damages though incapable of
pecuniary estimations, are in the category of an award
designed to compensate the claimant for actual injury
suffered and not to impose a penalty of the wrongdoer.
Regional Office and accomplish the necessary papers for
his reinstatement, but he delayed doing so
ISSUE: Whether or not petitioner is entitled to his claim
for backwages from the date of his dismissal in 1975 up to
the date of reinstatement and damages.

• In the case of Miranda Ribaya v. Bautista, this Court HELD:

considered 25% of the principal amount as reasonable. In
the case at bar, the Court of Appeals found on February
21, 1970 that the outstanding balance of the disputed loan
was P64,921.69.
Twenty five percent thereof is P16,230.00 but considering
the depreciation of the Philippine peso today, it is
believed that the award of moral and exemplary damages
in the amount of P25,000.00 is reasonable.
In the absence of Proof that respondent Regional
Director acted in bad faith and with grave abuse of
discretion, petitioner is not entitled to backwages and
consequently cannot claim for damages. The record
manifests that respondents officials were not motivated
by ill will or personal malice in dismissing petitioner but
only by their desire to comply with the mandates of
Presidential Decree No. 6.

DIOSDADO OCTOT vs. JOSE R. YBAÑEZ The Court likewise denies petitioner's claim for
moral damages, because if there was any delay in his
G.R.No. L-48643 January 18, 1982
reinstatement, it was attributed to his own fault and
negligence. It is clear that since the separation of
petitioner from the government service had not been
FACTS: Petitioner Diosdado Octot was shown to be in bad faith, an award for damages under the
employed as Security Guard since 1970 and at the time of circumstances would not be just and proper. Neither is it
his separation from the service was receiving a salary of among the cases mentioned in Articles 2219 and 2220 of
P4,632 per annum plus P50.00 per month as cost of living the Civil Code wherein moral damages may be
allowance. In 1975, petitioner was summarily dismissed recovered.
“for being notoriously undesirable” pursuant to P.D. No.
6 and LOI Nos. 14 and 14-A, having been convicted by the
Court of First Instance of the crime of libel, but his appeal
Thus, our jurisprudence sets certain conditions
therefrom was pending in the Court of Appeals.
when exemplary damages may be awarded, as follows:
Believing that his dismissal was illegal, petitioner
First: They may be imposed by way of example or
continued reporting for work the whole month of October
correction only in addition, among others, to
1975 but respondent Regional Director refused to order
compensatory damages, and cannot be recovered as a
the release of his salary for the period and instead ordered
matter of right, their determination depending upon the
that his name be deleted from the office payroll
amount of compensatory damages that may be awarded
When petitioner was acquitted by the Court of to the claimant.
Appeals, and made a request for his reinstatement,
Second: The claimant must first establish his right to
respondents readily took him back and recommended to
moral, temperate, liquidated or compensatory damages.
the authorities concerned his reinstatement.
Third: The wrongful act must be accompanied by bad
Petitioner's papers were likewise favorably acted
faith, 8 and the award would be allowed only if the guilty
upon by the Presidential Executive Assistant but in
party acted in a wanton, fraudulent, reckless, oppressive
returning the papers to the Secretary of Health, attention
or malevolent manner.
was invited to the provision of LOI No. 647, dated
December 27, 1977.

After his reinstatement was authorized by the

Office of the President, respondents promptly
communicated with him, directing him to report to the

56 | T o r t s a n d D a m a g e s | N I K K I S I A 0 4 1 4 2 0 1 8