FIRST DIVISION [G.R. No. 114118.

August 28, 2001] HEIRS OF SIMEON BORLADO, namely, ADELAIDA BORLADO, LORETO BORLADO, REYNALDO BORLADO, RICARDO BORLADO, FRANCISCO BORLADO and ALADINO DORADO, petitioners, vs. COURT OF APPEALS, and SALVACION VDA. DE BULAN, BIENVENIDO BULAN, JR., NORMA B. CLARITO and THE PROVINCIAL SHERIFF OF CAPIZ, respondents. DECISION PARDO, J.: The case is an appeal via certiorari from a decisioni[1] of the Court of Appeals affirming the decision of the trial court, the dispositive portion of which reads: WHEREFORE, judgment is rendered dismissing plaintiffs complaint for lack of cause of action and ordering as vacated the restraining order and writ of preliminary injunction issued in this case; and 1. Plaintiffs to be jointly and solidarily liable to defendants the quantity of one hundred (100) cavans of palay every year from 1972 until plaintiffs vacate the premises of the land in question; 2. Declaring defendants as owner of the land and entitled to possession; 3. Ordering plaintiffs to pay defendants the sum of P5,000.00 as attorneys fees and the sum of P5,000.00 as litigation expenses; and 4. To pay the costs of the suit. SO ORDERED. Roxas City, Philippines, March 18, 1988. (Sgd.) JONAS A. ABELLAR J u d g eii[2] The Facts The facts, as found by the Court of Appeals, are as follows: The records show that plaintiffs-appellantsiii[3] (petitioners) are the heirs of Simeon Borlado whose parents were Serapio Borlado and Balbina Bulan. The original owner of the lot in

question, Lot No. 2097 of the Pontevedra Cadastre, Maayon, Capiz, was Serapio Borlado, grandfather of petitioners. On 15 April 1942, Serapio sold the lot to Francisco Bacero (Exh. C, p. 247, MTC Record) for Three Hundred Pesos (P300.00). After the death of Francsico on 26 February 1948, his widow Amparo Dionisio Vda. de Bacero, in her capacity as legal guardian of her minor children, namely: Nicolas, Valentin and Luzviminda, all surnamed Bacero and forced heirs of Francisco Bacero sold it (the lot) to the Spouses Bienvenido Bulan and Salvacion Borbon, through a Deed of Absolute Sale dated 27 August 1954 (Exh. 65, pp. 243-245, id.). Upon the execution of the Deed of Sale and even prior thereto, actual possession of Lot No. 2057 was with the vendees-spouses Bulans in view of a loan obtained by Francisco Bacero from them in December 1947 (Exh. 65, supra). Exercising their right of ownership under the Deed of Sale, Salvacion Borbon Vda. de Bulan declared the lot in her name in 1900 for taxation purposes under Tax Declaration No. 2232 (Exh. F, p. 254, Record [MTC]). She paid the corresponding taxes as evidenced by the Tax Receipts marked as Exhibits K, J, I, G, F and H (pp. 248-253, Record, id.). Salvacion and her co-defendants-appelleesiv[4] possession of the lot was continuous, peaceful, uninterrupted, adverse and exclusive until November 4, 1972, when petitioners forcibly entered and wrested physical possession thereof from them. On 23 November 1972, respondents filed with the Municipal Court of Maayon, Capiz a complaint for ejectment docketed as Civil Case No. A-1, against petitioners (p. 1, id.). The ejectment case was decided in favor of the respondents whereby the petitioners, their agents, tenants, privies and members of their families were ordered to vacate Lot No. 2079 and deliver possession to the respondents together with all improvements and standing crops; to pay said respondents One Hundred (100) cavans of palay annually from 1972 to the present or in the total amount of One Thousand One Hundred (1,100) cavans of palay; and to pay the sum of Five Thousand (P5,000.00) Pesos as reimbursement for the amount respondents had paid their lawyer to protect their rights; and, the costs of suit (Exh. 57, pp. 256-261, id.). Instead of appealing the adverse decision to the Court of First Instance (now RTC), on 8 November 1983, petitioners filed the present case with the Regional Trial Court, Branch 18, Roxas City, docketed as Civil Case No. V-4887. This case was dismissed for lack of cause of action in a decision, the decretal portion of which was quoted earlier.v[5] On 24 November 1993, the Court of Appeals promulgated its decision affirming in toto the appealed decision.vi[6] Hence, this appeal.vii[7] The Issue The issue raised is whether the Court of Appeals erred in ruling that respondents were the owners of the lot in question. The Courts Ruling

We deny the petition. The issue is factual. In an appeal via certiorari, we may not review the findings of fact of the Court of Appeals.viii[8] When supported by substantial evidence, the findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court,ix[9] unless the case falls under any of the exceptions to the rule.x[10] Petitioner failed to prove that the case falls within the exceptions.xi[11] The Supreme Court is not a trier of facts.xii[12] It is not our function to review, examine and evaluate or weigh the probative value of the evidence presented.xiii[13] A question of fact would arise in such event.xiv[14] Questions of fact cannot be raised in an appeal via certiorari before the Supreme Court and are not proper for its consideration.xv[15] Nevertheless, as a matter of law, the trial court and the Court of Appeals erred in holding petitioners liable to pay respondents one hundred (100) cavans of palay every year from 1972 until they vacate the premises of the land in question. The one hundred cavans of palay was awarded as a form of damages. We cannot sustain the award. Palay is not legal tender currency in the Philippines. El Fallo del Tribunal WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals in CA-G. R. CV No. 18980 with modification that petitioners liability to pay respondents one hundred (100) cavans of palay every year from 1972 until petitioners vacate the land in question is deleted, for lack of basis. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-18805 August 14, 1967

THE BOARD OF LIQUIDATORS1 representing THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. HEIRS OF MAXIMO M. KALAW,2 JUAN BOCAR, ESTATE OF THE DECEASED CASIMIRO GARCIA,3 and LEONOR MOLL, defendants-appellees. Simeon M. Gopengco and Solicitor General for plaintiff-appellant. L. H. Hernandez, Emma Quisumbing, Fernando and Quisumbing, Jr.; Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendants-appellees. SANCHEZ, J.: The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit governmental organization on May 7, 1940 by Commonwealth Act 518 avowedly for the protection, preservation and development of the coconut industry in the Philippines. On August 1, 1946, NACOCO's charter was amended [Republic Act 5] to grant that corporation the express power "to buy, sell, barter, export, and in any other manner deal in, coconut, copra, and dessicated coconut, as well as their by-products, and to act as agent, broker or commission merchant of the producers, dealers or merchants" thereof. The charter amendment was enacted to stabilize copra prices, to serve coconut producers by securing advantageous prices for them, to cut down to a minimum, if not altogether eliminate, the margin of middlemen, mostly aliens.4 General manager and board chairman was Maximo M. Kalaw; defendants Juan Bocar and Casimiro Garcia were members of the Board; defendant Leonor Moll became director only on December 22, 1947. NACOCO, after the passage of Republic Act 5, embarked on copra trading activities. Amongst the scores of contracts executed by general manager Kalaw are the disputed contracts, for the delivery of copra, viz: (a) July 30, 1947: Alexander Adamson & Co., for 2,000 long tons, $167.00: per ton, f. o. b., delivery: August and September, 1947. This contract was later assigned to Louis Dreyfus & Co. (Overseas) Ltd.

(b) August 14, 1947: Alexander Adamson & Co., for 2,000 long tons $145.00 per long ton, f.o.b., Philippine ports, to be shipped: September-October, 1947. This contract was also assigned to Louis Dreyfus & Co. (Overseas) Ltd. (c) August 22, 1947: Pacific Vegetable Co., for 3,000 tons, $137.50 per ton, delivery: September, 1947. (d) September 5, 1947: Spencer Kellog & Sons, for 1,000 long tons, $160.00 per ton, c.i.f., Los Angeles, California, delivery: November, 1947. (e) September 9, 1947: Franklin Baker Division of General Foods Corporation, for 1,500 long tons, $164,00 per ton, c.i.f., New York, to be shipped in November, 1947. (f) September 12, 1947: Louis Dreyfus & Co. (Overseas) Ltd., for 3,000 long tons, $154.00 per ton, f.o.b., 3 Philippine ports, delivery: November, 1947. (g) September 13, 1947: Juan Cojuangco, for 2,000 tons, $175.00 per ton, delivery: November and December, 1947. This contract was assigned to Pacific Vegetable Co. (h) October 27, 1947: Fairwood & Co., for 1,000 tons, $210.00 per short ton, c.i.f., Pacific ports, delivery: December, 1947 and January, 1948. This contract was assigned to Pacific Vegetable Co. (i) October 28, 1947: Fairwood & Co., for 1,000 tons, $210.00 per short ton, c.i.f., Pacific ports, delivery: January, 1948. This contract was assigned to Pacific Vegetable Co. An unhappy chain of events conspired to deter NACOCO from fulfilling these contracts. Nature supervened. Four devastating typhoons visited the Philippines: the first in October, the second and third in November, and the fourth in December, 1947. Coconut trees throughout the country suffered extensive damage. Copra production decreased. Prices spiralled. Warehouses were destroyed. Cash requirements doubled. Deprivation of export facilities increased the time necessary to accumulate shiploads of copra. Quick turnovers became impossible, financing a problem. When it became clear that the contracts would be unprofitable, Kalaw submitted them to the board for approval. It was not until December 22, 1947 when the membership was completed. Defendant Moll took her oath on that date. A meeting was then held. Kalaw made a full disclosure of the situation, apprised the board of the impending heavy losses. No action was taken on the contracts. Neither did the board vote thereon at the meeting of January 7, 1948 following. Then, on January 11, 1948, President Roxas made a statement that the NACOCO head did his best to avert the losses, emphasized that government concerns faced the same risks that confronted private companies, that NACOCO was recouping its losses, and that Kalaw was to remain in his post. Not long thereafter, that is, on January 30, 1948, the board met again with

Kalaw, Bocar, Garcia and Moll in attendance. They unanimously approved the contracts hereinbefore enumerated. As was to be expected, NACOCO but partially performed the contracts, as follows: Buyers Pacific Vegetable Oil Spencer Kellog Franklin Baker Louis Dreyfus Louis Dreyfus (Adamson contract of July 30, 1947) Tons Delivered Undelivered 2,386.45 None 1,000 800 1,150 4,613.55 1,000 500 2,200 850 245

Louis Dreyfus (Adamson Contract of August 14, 1947) 1,755

TOTALS

7,091.45

9,408.55

The buyers threatened damage suits. Some of the claims were settled, viz: Pacific Vegetable Oil Co., in copra delivered by NACOCO, P539,000.00; Franklin Baker Corporation, P78,210.00; Spencer Kellog & Sons, P159,040.00. But one buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact sue before the Court of First Instance of Manila, upon claims as follows: For the undelivered copra under the July 30 contract (Civil Case 4459); P287,028.00; for the balance on the August 14 contract (Civil Case 4398), P75,098.63; for that per the September 12 contract reduced to judgment (Civil Case 4322, appealed to this Court in L-2829), P447,908.40. These cases culminated in an out-of-court amicable settlement when the Kalaw management was already out. The corporation thereunder paid Dreyfus P567,024.52 representing 70% of the total claims. With particular reference to the Dreyfus claims, NACOCO put up the defenses that: (1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did not have license to do business here; and (2) failure to deliver was due to force majeure, the typhoons. To project the utter unreasonableness of this compromise, we reproduce in haec verba this finding below:

x x x However, in similar cases brought by the same claimant [Louis Dreyfus & Co. (Overseas) Ltd.] against Santiago Syjuco for non-delivery of copra also involving a claim of P345,654.68 wherein defendant set up same defenses as above, plaintiff accepted a promise of P5,000.00 only (Exhs. 31 & 32 Heirs.) Following the same proportion, the claim of Dreyfus against NACOCO should have been compromised for only P10,000.00, if at all. Now, why should defendants be held liable for the large sum paid as compromise by the Board of Liquidators? This is just a sample to show how unjust it would be to hold defendants liable for the readiness with which the Board of Liquidators disposed of the NACOCO funds, although there was much possibility of successfully resisting the claims, or at least settlement for nominal sums like what happened in the Syjuco case.5 All the settlements sum up to P1,343,274.52. In this suit started in February, 1949, NACOCO seeks to recover the above sum of P1,343,274.52 from general manager and board chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro Garcia and Leonor Moll. It charges Kalaw with negligence under Article 1902 of the old Civil Code (now Article 2176, new Civil Code); and defendant board members, including Kalaw, with bad faith and/or breach of trust for having approved the contracts. The fifth amended complaint, on which this case was tried, was filed on July 2, 1959. Defendants resisted the action upon defenses hereinafter in this opinion to be discussed. The lower court came out with a judgment dismissing the complaint without costs as well as defendants' counterclaims, except that plaintiff was ordered to pay the heirs of Maximo Kalaw the sum of P2,601.94 for unpaid salaries and cash deposit due the deceased Kalaw from NACOCO. Plaintiff appealed direct to this Court. Plaintiff's brief did not, question the judgment on Kalaw's counterclaim for the sum of P2,601.94. Right at the outset, two preliminary questions raised before, but adversely decided by, the court below, arrest our attention. On appeal, defendants renew their bid. And this, upon established jurisprudence that an appellate court may base its decision of affirmance of the judgment below on a point or points ignored by the trial court or in which said court was in error.6 1. First of the threshold questions is that advanced by defendants that plaintiff Board of Liquidators has lost its legal personality to continue with this suit. Accepted in this jurisdiction are three methods by which a corporation may wind up its affairs: (1) under Section 3, Rule 104, of the Rules of Court [which superseded Section 66 of the Corporation Law]7 whereby, upon voluntary dissolution of a corporation, the court may direct "such disposition of its assets as justice requires, and may appoint a receiver to collect such

assets and pay the debts of the corporation;" (2) under Section 77 of the Corporation Law, whereby a corporation whose corporate existence is terminated, "shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its capital stock, but not for the purpose of continuing the business for which it was established;" and (3) under Section 78 of the Corporation Law, by virtue of which the corporation, within the three year period just mentioned, "is authorized and empowered to convey all of its property to trustees for the benefit of members, stockholders, creditors, and others interested."8 It is defendants' pose that their case comes within the coverage of the second method. They reason out that suit was commenced in February, 1949; that by Executive Order 372, dated November 24, 1950, NACOCO, together with other government-owned corporations, was abolished, and the Board of Liquidators was entrusted with the function of settling and closing its affairs; and that, since the three year period has elapsed, the Board of Liquidators may not now continue with, and prosecute, the present case to its conclusion, because Executive Order 372 provides in Section 1 thereof that Sec.1. The National Abaca and Other Fibers Corporation, the National Coconut Corporation, the National Tobacco Corporation, the National Food Producer Corporation and the former enemyowned or controlled corporations or associations, . . . are hereby abolished. The said corporations shall be liquidated in accordance with law, the provisions of this Order, and/or in such manner as the President of the Philippines may direct; Provided, however, That each of the said corporations shall nevertheless be continued as a body corporate for a period of three (3) years from the effective date of this Executive Order for the purpose of prosecuting and defending suits by or against it and of enabling the Board of Liquidators gradually to settle and close its affairs, to dispose of and, convey its property in the manner hereinafter provided. Citing Mr. Justice Fisher, defendants proceed to argue that even where it may be found impossible within the 3 year period to reduce disputed claims to judgment, nonetheless, "suits by or against a corporation abate when it ceases to be an entity capable of suing or being sued" (Fisher, The Philippine Law of Stock Corporations, pp. 390-391). Corpus Juris Secundum likewise is authority for the statement that "[t]he dissolution of a corporation ends its existence so that there must be statutory authority for prolongation of its life even for purposes of pending litigation"9 and that suit "cannot be continued or revived; nor can a valid judgment be rendered therein, and a judgment, if rendered, is not only erroneous, but void and subject to collateral attack." 10 So it is, that abatement of pending actions follows as a matter of course upon the expiration of the legal period for liquidation, 11 unless the statute merely requires a commencement of suit within the added time. 12 For, the court cannot extend the time alloted by statute. 13

We, however, express the view that the executive order abolishing NACOCO and creating the Board of Liquidators should be examined in context. The proviso in Section 1 of Executive Order 372, whereby the corporate existence of NACOCO was continued for a period of three years from the effectivity of the order for "the purpose of prosecuting and defending suits by or against it and of enabling the Board of Liquidators gradually to settle and close its affairs, to dispose of and convey its property in the manner hereinafter provided", is to be read not as an isolated provision but in conjunction with the whole. So reading, it will be readily observed that no time limit has been tacked to the existence of the Board of Liquidators and its function of closing the affairs of the various government owned corporations, including NACOCO. By Section 2 of the executive order, while the boards of directors of the various corporations were abolished, their powers and functions and duties under existing laws were to be assumed and exercised by the Board of Liquidators. The President thought it best to do away with the boards of directors of the defunct corporations; at the same time, however, the President had chosen to see to it that the Board of Liquidators step into the vacuum. And nowhere in the executive order was there any mention of the lifespan of the Board of Liquidators. A glance at the other provisions of the executive order buttresses our conclusion. Thus, liquidation by the Board of Liquidators may, under section 1, proceed in accordance with law, the provisions of the executive order, "and/or in such manner as the President of the Philippines may direct." By Section 4, when any property, fund, or project is transferred to any governmental instrumentality "for administration or continuance of any project," the necessary funds therefor shall be taken from the corresponding special fund created in Section 5. Section 5, in turn, talks of special funds established from the "net proceeds of the liquidation" of the various corporations abolished. And by Section, 7, fifty per centum of the fees collected from the copra standardization and inspection service shall accrue "to the special fund created in section 5 hereof for the rehabilitation and development of the coconut industry." Implicit in all these, is that the term of life of the Board of Liquidators is without time limit. Contemporary history gives us the fact that the Board of Liquidators still exists as an office with officials and numerous employees continuing the job of liquidation and prosecution of several court actions. Not that our views on the power of the Board of Liquidators to proceed to the final determination of the present case is without jurisprudential support. The first judicial test before this Court is National Abaca and Other Fibers Corporation vs. Pore, L-16779, August 16, 1961. In that case, the corporation, already dissolved, commenced suit within the three-year extended period for liquidation. That suit was for recovery of money advanced to defendant for the purchase of hemp in behalf of the corporation. She failed to account for that money. Defendant moved to dismiss, questioned the corporation's capacity to sue. The lower court ordered plaintiff to include as coparty plaintiff, The Board of Liquidators, to which the corporation's liquidation was entrusted by Executive Order 372. Plaintiff failed to effect inclusion. The lower court dismissed the suit. Plaintiff moved to reconsider. Ground: excusable negligence, in that its counsel prepared the

amended complaint, as directed, and instructed the board's incoming and outgoing correspondence clerk, Mrs. Receda Vda. de Ocampo, to mail the original thereof to the court and a copy of the same to defendant's counsel. She mailed the copy to the latter but failed to send the original to the court. This motion was rejected below. Plaintiff came to this Court on appeal. We there said that "the rule appears to be well settled that, in the absence of statutory provision to the contrary, pending actions by or against a corporation are abated upon expiration of the period allowed by law for the liquidation of its affairs." We there said that "[o]ur Corporation Law contains no provision authorizing a corporation, after three (3) years from the expiration of its lifetime, to continue in its corporate name actions instituted by it within said period of three (3) years." 14 However, these precepts notwithstanding, we, in effect, held in that case that the Board of Liquidators escapes from the operation thereof for the reason that "[o]bviously, the complete loss of plaintiff's corporate existence after the expiration of the period of three (3) years for the settlement of its affairs is what impelled the President to create a Board of Liquidators, to continue the management of such matters as may then be pending." 15 We accordingly directed the record of said case to be returned to the lower court, with instructions to admit plaintiff's amended complaint to include, as party plaintiff, the Board of Liquidators. Defendants' position is vulnerable to attack from another direction. By Executive Order 372, the government, the sole stockholder, abolished NACOCO, and placed its assets in the hands of the Board of Liquidators. The Board of Liquidators thus became the trustee on behalf of the government. It was an express trust. The legal interest became vested in the trustee the Board of Liquidators. The beneficial interest remained with the sole stockholder the government. At no time had the government withdrawn the property, or the authority to continue the present suit, from the Board of Liquidators. If for this reason alone, we cannot stay the hand of the Board of Liquidators from prosecuting this case to its final conclusion. 16 The provisions of Section 78 of the Corporation Law the third method of winding up corporate affairs find application. We, accordingly, rule that the Board of Liquidators has personality to proceed as: party-plaintiff in this case. 2. Defendants' second poser is that the action is unenforceable against the heirs of Kalaw. Appellee heirs of Kalaw raised in their motion to dismiss, 17 which was overruled, and in their nineteenth special defense, that plaintiff's action is personal to the deceased Maximo M. Kalaw, and may not be deemed to have survived after his death.18 They say that the controlling statute is Section 5, Rule 87, of the 1940 Rules of Court.19 which provides that "[a]ll claims for money against the decedent, arising from contract, express or implied", must be filed in the estate proceedings of the deceased. We disagree.

The suit here revolves around the alleged negligent acts of Kalaw for having entered into the questioned contracts without prior approval of the board of directors, to the damage and prejudice of plaintiff; and is against Kalaw and the other directors for having subsequently approved the said contracts in bad faith and/or breach of trust." Clearly then, the present case is not a mere action for the recovery of money nor a claim for money arising from contract. The suit involves alleged tortious acts. And the action is embraced in suits filed "to recover damages for an injury to person or property, real or personal", which survive. 20 The leading expositor of the law on this point is Aguas vs. Llemos, L-18107, August 30, 1962. There, plaintiffs sought to recover damages from defendant Llemos. The complaint averred that Llemos had served plaintiff by registered mail with a copy of a petition for a writ of possession in Civil Case 4824 of the Court of First Instance at Catbalogan, Samar, with notice that the same would be submitted to the Samar court on February 23, 1960 at 8:00 a.m.; that in view of the copy and notice served, plaintiffs proceeded to the said court of Samar from their residence in Manila accompanied by their lawyers, only to discover that no such petition had been filed; and that defendant Llemos maliciously failed to appear in court, so that plaintiffs' expenditure and trouble turned out to be in vain, causing them mental anguish and undue embarrassment. Defendant died before he could answer the complaint. Upon leave of court, plaintiffs amended their complaint to include the heirs of the deceased. The heirs moved to dismiss. The court dismissed the complaint on the ground that the legal representative, and not the heirs, should have been made the party defendant; and that, anyway, the action being for recovery of money, testate or intestate proceedings should be initiated and the claim filed therein. This Court, thru Mr. Justice Jose B. L. Reyes, there declared: Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the Rules of Court, those concerning claims that are barred if not filed in the estate settlement proceedings (Rule 87, sec. 5) and those defining actions that survive and may be prosecuted against the executor or administrator (Rule 88, sec. 1), it is apparent that actions for damages caused by tortious conduct of a defendant (as in the case at bar) survive the death of the latter. Under Rule 87, section 5, the actions that are abated by death are: (1) claims for funeral expenses and those for the last sickness of the decedent; (2) judgments for money; and (3) "all claims for money against the decedent, arising from contract express or implied." None of these includes that of the plaintiffs-appellants; for it is not enough that the claim against the deceased party be for money, but it must arise from "contract express or implied", and these words (also used by the Rules in connection with attachments and derived from the common law) were construed in Leung Ben vs. O'Brien, 38 Phil. 182, 189-194, "to include all purely personal obligations other than those which have their source in delict or tort."

Upon the other hand, Rule 88, section 1, enumerates actions that survive against a decedent's executors or administrators, and they are: (1) actions to recover real and personal property from the estate; (2) actions to enforce a lien thereon; and (3) actions to recover damages for an injury to person or property. The present suit is one for damages under the last class, it having been held that "injury to property" is not limited to injuries to specific property, but extends to other wrongs by which personal estate is injured or diminished (Baker vs. Crandall, 47 Am. Rep. 126; also 171 A.L.R., 1395). To maliciously cause a party to incur unnecessary expenses, as charged in this case, is certainly injury to that party's property (Javier vs. Araneta, L-4369, Aug. 31, 1953). The ruling in the preceding case was hammered out of facts comparable to those of the present. No cogent reason exists why we should break away from the views just expressed. And, the conclusion remains: Action against the Kalaw heirs and, for the matter, against the Estate of Casimiro Garcia survives. The preliminaries out of the way, we now go to the core of the controversy. 3. Plaintiff levelled a major attack on the lower court's holding that Kalaw justifiedly entered into the controverted contracts without the prior approval of the corporation's directorate. Plaintiff leans heavily on NACOCO's corporate by-laws. Article IV (b), Chapter III thereof, recites, as amongst the duties of the general manager, the obligation: "(b) To perform or execute on behalf of the Corporation upon prior approval of the Board, all contracts necessary and essential to the proper accomplishment for which the Corporation was organized." Not of de minimis importance in a proper approach to the problem at hand, is the nature of a general manager's position in the corporate structure. A rule that has gained acceptance through the years is that a corporate officer "intrusted with the general management and control of its business, has implied authority to make any contract or do any other act which is necessary or appropriate to the conduct of the ordinary business of the corporation. 21 As such officer, "he may, without any special authority from the Board of Directors perform all acts of an ordinary nature, which by usage or necessity are incident to his office, and may bind the corporation by contracts in matters arising in the usual course of business. 22 The problem, therefore, is whether the case at bar is to be taken out of the general concept of the powers of a general manager, given the cited provision of the NACOCO by-laws requiring prior directorate approval of NACOCO contracts. The peculiar nature of copra trading, at this point, deserves express articulation. Ordinary in this enterprise are copra sales for future delivery. The movement of the market requires that sales agreements be entered into, even though the goods are not yet in the hands of the seller. Known in business parlance as forward sales, it is concededly the practice of the trade. A certain amount of speculation is inherent in the undertaking. NACOCO was much more conservative than the

exporters with big capital. This short-selling was inevitable at the time in the light of other factors such as availability of vessels, the quantity required before being accepted for loading, the labor needed to prepare and sack the copra for market. To NACOCO, forward sales were a necessity. Copra could not stay long in its hands; it would lose weight, its value decrease. Above all, NACOCO's limited funds necessitated a quick turnover. Copra contracts then had to be executed on short notice at times within twenty-four hours. To be appreciated then is the difficulty of calling a formal meeting of the board. Such were the environmental circumstances when Kalaw went into copra trading. Long before the disputed contracts came into being, Kalaw contracted by himself alone as general manager for forward sales of copra. For the fiscal year ending June 30, 1947, Kalaw signed some 60 such contracts for the sale of copra to divers parties. During that period, from those copra sales, NACOCO reaped a gross profit of P3,631,181.48. So pleased was NACOCO's board of directors that, on December 5, 1946, in Kalaw's absence, it voted to grant him a special bonus "in recognition of the signal achievement rendered by him in putting the Corporation's business on a self-sufficient basis within a few months after assuming office, despite numerous handicaps and difficulties." These previous contract it should be stressed, were signed by Kalaw without prior authority from the board. Said contracts were known all along to the board members. Nothing was said by them. The aforesaid contracts stand to prove one thing: Obviously, NACOCO board met the difficulties attendant to forward sales by leaving the adoption of means to end, to the sound discretion of NACOCO's general manager Maximo M. Kalaw. Liberally spread on the record are instances of contracts executed by NACOCO's general manager and submitted to the board after their consummation, not before. These agreements were not Kalaw's alone. One at least was executed by a predecessor way back in 1940, soon after NACOCO was chartered. It was a contract of lease executed on November 16, 1940 by the then general manager and board chairman, Maximo Rodriguez, and A. Soriano y Cia., for the lease of a space in Soriano Building On November 14, 1946, NACOCO, thru its general manager Kalaw, sold 3,000 tons of copra to the Food Ministry, London, thru Sebastian Palanca. On December 22, 1947, when the controversy over the present contract cropped up, the board voted to approve a lease contract previously executed between Kalaw and Fidel Isberto and Ulpiana Isberto covering a warehouse of the latter. On the same date, the board gave its nod to a contract for renewal of the services of Dr. Manuel L. Roxas. In fact, also on that date, the board requested Kalaw to report for action all copra contracts signed by him "at the meeting immediately following the signing of the contracts." This practice was observed in a later instance when, on January 7, 1948, the board approved two previous contracts for the sale of 1,000 tons of copra each to a certain "SCAP" and a certain "GNAPO".

And more. On December 19, 1946, the board resolved to ratify the brokerage commission of 2% of Smith, Bell and Co., Ltd., in the sale of 4,300 long tons of copra to the French Government. Such ratification was necessary because, as stated by Kalaw in that same meeting, "under an existing resolution he is authorized to give a brokerage fee of only 1% on sales of copra made through brokers." On January 15, 1947, the brokerage fee agreements of 1-1/2% on three export contracts, and 2% on three others, for the sale of copra were approved by the board with a proviso authorizing the general manager to pay a commission up to the amount of 1-1/2% "without further action by the Board." On February 5, 1947, the brokerage fee of 2% of J. Cojuangco & Co. on the sale of 2,000 tons of copra was favorably acted upon by the board. On March 19, 1947, a 2% brokerage commission was similarly approved by the board for Pacific Trading Corporation on the sale of 2,000 tons of copra. It is to be noted in the foregoing cases that only the brokerage fee agreements were passed upon by the board, not the sales contracts themselves. And even those fee agreements were submitted only when the commission exceeded the ceiling fixed by the board. Knowledge by the board is also discernible from other recorded instances.1wph1.t When the board met on May 10, 1947, the directors discussed the copra situation: There was a slow downward trend but belief was entertained that the nadir might have already been reached and an improvement in prices was expected. In view thereof, Kalaw informed the board that "he intends to wait until he has signed contracts to sell before starting to buy copra."23 In the board meeting of July 29, 1947, Kalaw reported on the copra price conditions then current: The copra market appeared to have become fairly steady; it was not expected that copra prices would again rise very high as in the unprecedented boom during January-April, 1947; the prices seemed to oscillate between $140 to $150 per ton; a radical rise or decrease was not indicated by the trends. Kalaw continued to say that "the Corporation has been closing contracts for the sale of copra generally with a margin of P5.00 to P7.00 per hundred kilos." 24 We now lift the following excerpts from the minutes of that same board meeting of July 29, 1947: 521. In connection with the buying and selling of copra the Board inquired whether it is the practice of the management to close contracts of sale first before buying. The General Manager replied that this practice is generally followed but that it is not always possible to do so for two reasons: (1) The role of the Nacoco to stabilize the prices of copra requires that it should not cease buying even when it does not have actual contracts of sale since the suspension of buying by the Nacoco will result in middlemen taking advantage of the temporary inactivity of the Corporation to lower the prices to the detriment of the producers.

(2) The movement of the market is such that it may not be practical always to wait for the consummation of contracts of sale before beginning to buy copra. The General Manager explained that in this connection a certain amount of speculation is unavoidable. However, he said that the Nacoco is much more conservative than the other big exporters in this respect.25 Settled jurisprudence has it that where similar acts have been approved by the directors as a matter of general practice, custom, and policy, the general manager may bind the company without formal authorization of the board of directors. 26 In varying language, existence of such authority is established, by proof of the course of business, the usage and practices of the company and by the knowledge which the board of directors has, or must be presumed to have, of acts and doings of its subordinates in and about the affairs of the corporation. 27 So also, x x x authority to act for and bind a corporation may be presumed from acts of recognition in other instances where the power was in fact exercised. 28 x x x Thus, when, in the usual course of business of a corporation, an officer has been allowed in his official capacity to manage its affairs, his authority to represent the corporation may be implied from the manner in which he has been permitted by the directors to manage its business.29 In the case at bar, the practice of the corporation has been to allow its general manager to negotiate and execute contracts in its copra trading activities for and in NACOCO's behalf without prior board approval. If the by-laws were to be literally followed, the board should give its stamp of prior approval on all corporate contracts. But that board itself, by its acts and through acquiescence, practically laid aside the by-law requirement of prior approval. Under the given circumstances, the Kalaw contracts are valid corporate acts. 4. But if more were required, we need but turn to the board's ratification of the contracts in dispute on January 30, 1948, though it is our (and the lower court's) belief that ratification here is nothing more than a mere formality. Authorities, great in number, are one in the idea that "ratification by a corporation of an unauthorized act or contract by its officers or others relates back to the time of the act or contract ratified, and is equivalent to original authority;" and that " [t]he corporation and the other party to the transaction are in precisely the same position as if the act or contract had been authorized at the time." 30 The language of one case is expressive: "The adoption or ratification of a contract by a corporation is nothing more or less than the making of an original contract. The theory of corporate ratification is predicated on the right of a corporation to contract, and any ratification or adoption is equivalent to a grant of prior authority." 31

Indeed, our law pronounces that "[r]atification cleanses the contract from all its defects from the moment it was constituted." 32 By corporate confirmation, the contracts executed by Kalaw are thus purged of whatever vice or defect they may have. 33 In sum, a case is here presented whereunder, even in the face of an express by-law requirement of prior approval, the law on corporations is not to be held so rigid and inflexible as to fail to recognize equitable considerations. And, the conclusion inevitably is that the embattled contracts remain valid. 5. It would be difficult, even with hostile eyes, to read the record in terms of "bad faith and/or breach of trust" in the board's ratification of the contracts without prior approval of the board. For, in reality, all that we have on the government's side of the scale is that the board knew that the contracts so confirmed would cause heavy losses. As we have earlier expressed, Kalaw had authority to execute the contracts without need of prior approval. Everybody, including Kalaw himself, thought so, and for a long time. Doubts were first thrown on the way only when the contracts turned out to be unprofitable for NACOCO. Rightfully had it been said that bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty thru some motive or interest or ill will; it partakes of the nature of fraud.34 Applying this precept to the given facts herein, we find that there was no "dishonest purpose," or "some moral obliquity," or "conscious doing of wrong," or "breach of a known duty," or "Some motive or interest or ill will" that "partakes of the nature of fraud." Nor was it even intimated here that the NACOCO directors acted for personal reasons, or to serve their own private interests, or to pocket money at the expense of the corporation. 35 We have had occasion to affirm that bad faith contemplates a "state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purposes." 36 Briggs vs. Spaulding, 141 U.S. 132, 148-149, 35 L. ed. 662, 669, quotes with approval from Judge Sharswood (in Spering's App., 71 Pa. 11), the following: "Upon a close examination of all the reported cases, although there are many dicta not easily reconcilable, yet I have found no judgment or decree which has held directors to account, except when they have themselves been personally guilty of some fraud on the corporation, or have known and connived at some fraud in others, or where such fraud might have been prevented had they given ordinary attention to their duties. . . ." Plaintiff did not even dare charge its defendant-directors with any of these malevolent acts. Obviously, the board thought that to jettison Kalaw's contracts would contravene basic dictates of fairness. They did not think of raising their voice in protest against past contracts which brought in enormous profits to the corporation. By the same token, fair dealing disagrees with the idea that similar contracts, when unprofitable, should not merit the same treatment. Profit or

loss resulting from business ventures is no justification for turning one's back on contracts entered into. The truth, then, of the matter is that in the words of the trial court the ratification of the contracts was "an act of simple justice and fairness to the general manager and the best interest of the corporation whose prestige would have been seriously impaired by a rejection by the board of those contracts which proved disadvantageous." 37 The directors are not liable." 38 6. To what then may we trace the damage suffered by NACOCO. The facts yield the answer. Four typhoons wreaked havoc then on our copra-producing regions. Result: Copra production was impaired, prices spiralled, warehouses destroyed. Quick turnovers could not be expected. NACOCO was not alone in this misfortune. The record discloses that private traders, old, experienced, with bigger facilities, were not spared; also suffered tremendous losses. Roughly estimated, eleven principal trading concerns did run losses to about P10,300,000.00. Plaintiff's witness Sisenando Barretto, head of the copra marketing department of NACOCO, observed that from late 1947 to early 1948 "there were many who lost money in the trade." 39 NACOCO was not immune from such usual business risk. The typhoons were known to plaintiff. In fact, NACOCO resisted the suits filed by Louis Dreyfus & Co. by pleading in its answers force majeure as an affirmative defense and there vehemently asserted that "as a result of the said typhoons, extensive damage was caused to the coconut trees in the copra producing regions of the Philippines and according to estimates of competent authorities, it will take about one year until the coconut producing regions will be able to produce their normal coconut yield and it will take some time until the price of copra will reach normal levels;" and that "it had never been the intention of the contracting parties in entering into the contract in question that, in the event of a sharp rise in the price of copra in the Philippine market produce by force majeure or by caused beyond defendant's control, the defendant should buy the copra contracted for at exorbitant prices far beyond the buying price of the plaintiff under the contract." 40 A high regard for formal judicial admissions made in court pleadings would suffice to deter us from permitting plaintiff to stray away therefrom, to charge now that the damage suffered was because of Kalaw's negligence, or for that matter, by reason of the board's ratification of the contracts. 41 Indeed, were it not for the typhoons, 42 NACOCO could have, with ease, met its contractual obligations. Stock accessibility was no problem. NACOCO had 90 buying agencies spread throughout the islands. It could purchase 2,000 tons of copra a day. The various contracts involved delivery of but 16,500 tons over a five-month period. Despite the typhoons, NACOCO was still able to deliver a little short of 50% of the tonnage required under the contracts.

As the trial court correctly observed, this is a case of damnum absque injuria. Conjunction of damage and wrong is here absent. There cannot be an actionable wrong if either one or the other is wanting. 43 7. On top of all these, is that no assertion is made and no proof is presented which would link Kalaw's acts ratified by the board to a matrix for defraudation of the government. Kalaw is clear of the stigma of bad faith. Plaintiff's corporate counsel 44 concedes that Kalaw all along thought that he had authority to enter into the contracts, that he did so in the best interests of the corporation; that he entered into the contracts in pursuance of an overall policy to stabilize prices, to free the producers from the clutches of the middlemen. The prices for which NACOCO contracted in the disputed agreements, were at a level calculated to produce profits and higher than those prevailing in the local market. Plaintiff's witness, Barretto, categorically stated that "it would be foolish to think that one would sign (a) contract when you are going to lose money" and that no contract was executed "at a price unsafe for the Nacoco." 45 Really, on the basis of prices then prevailing, NACOCO envisioned a profit of around P752,440.00. 46 Kalaw's acts were not the result of haphazard decisions either. Kalaw invariably consulted with NACOCO's Chief Buyer, Sisenando Barretto, or the Assistant General Manager. The dailies and quotations from abroad were guideposts to him. Of course, Kalaw could not have been an insurer of profits. He could not be expected to predict the coming of unpredictable typhoons. And even as typhoons supervened Kalaw was not remissed in his duty. He exerted efforts to stave off losses. He asked the Philippine National Bank to implement its commitment to extend a P400,000.00 loan. The bank did not release the loan, not even the sum of P200,000.00, which, in October, 1947, was approved by the bank's board of directors. In frustration, on December 12, 1947, Kalaw turned to the President, complained about the bank's short-sighted policy. In the end, nothing came out of the negotiations with the bank. NACOCO eventually faltered in its contractual obligations. That Kalaw cannot be tagged with crassa negligentia or as much as simple negligence, would seem to be supported by the fact that even as the contracts were being questioned in Congress and in the NACOCO board itself, President Roxas defended the actuations of Kalaw. On December 27, 1947, President Roxas expressed his desire "that the Board of Directors should reelect Hon. Maximo M. Kalaw as General Manager of the National Coconut Corporation." 47 And, on January 7, 1948, at a time when the contracts had already been openly disputed, the board, at its regular meeting, appointed Maximo M. Kalaw as acting general manager of the corporation. Well may we profit from the following passage from Montelibano vs. Bacolod-Murcia Milling Co., Inc., L-15092, May 18, 1962:

"They (the directors) hold such office charged with the duty to act for the corporation according to their best judgment, and in so doing they cannot be controlled in the reasonable exercise and performance of such duty. Whether the business of a corporation should be operated at a loss during a business depression, or closed down at a smaller loss, is a purely business and economic problem to be determined by the directors of the corporation, and not by the court. It is a well known rule of law that questions of policy of management are left solely to the honest decision of officers and directors of a corporation, and the court is without authority to substitute its judgment for the judgment of the board of directors; the board is the business manager of the corporation, and so long as it acts in good faith its orders are not reviewable by the courts." (Fletcher on Corporations, Vol. 2, p. 390.) 48 Kalaw's good faith, and that of the other directors, clinch the case for defendants. 49 Viewed in the light of the entire record, the judgment under review must be, as it is hereby, affirmed. Without costs. So ordered. THIRD DIVISION [G.R. No. 107518. October 8, 1998] PNOC SHIPPING AND TRANSPORT CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS and MARIA EFIGENIA FISHING CORPORATION, respondents. DECISION ROMERO, J.: A party is entitled to adequate compensation only for such pecuniary loss actually suffered and duly proved.ix[1] Indeed, 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 a reasonable degree of certainty, premised upon competent proof or best evidence obtainable of the actual amount thereof.ix[2] The claimant is duty-bound to point out specific facts that afford a basis for measuring whatever compensatory damages are borne.ix[3] A court cannot merely rely on speculations, conjectures, or guesswork as to the fact and amount of damagesix[4] as well as hearsayix[5] or uncorroborated testimony whose truth is suspect.ix[6] Such are the jurisprudential precepts that the Court now applies in resolving the instant petition. The records disclose that in the early morning of September 21, 1977, the M/V Maria Efigenia XV, owned by private respondent Maria Efigenia Fishing Corporation, was navigating the waters near Fortune Island in Nasugbu, Batangas on its way to Navotas, Metro Manila when it collided

with the vessel Petroparcel which at the time was owned by the Luzon Stevedoring Corporation (LSC). After investigation was conducted by the Board of Marine Inquiry, Philippine Coast Guard Commandant Simeon N. Alejandro rendered a decision finding the Petroparcel at fault. Based on this finding by the Board and after unsuccessful demands on petitioner,ix[7] private respondent sued the LSC and the Petroparcel captain, Edgardo Doruelo, before the then Court of First Instance of Caloocan City, paying thereto the docket fee of one thousand two hundred fiftytwo pesos (P1,252.00) and the legal research fee of two pesos (P2.00).ix[8] In particular, private respondent prayed for an award of P692,680.00, allegedly representing the value of the fishing nets, boat equipment and cargoes of M/V Maria Efigenia XV, with interest at the legal rate plus 25% thereof as attorneys fees. Meanwhile, during the pendency of the case, petitioner PNOC Shipping and Transport Corporation sought to be substituted in place of LSC as it had already acquired ownership of the Petroparcel.ix[9] For its part, private respondent later sought the amendment of its complaint on the ground that the original complaint failed to plead for the recovery of the lost value of the hull of M/V Maria Efigenia XV.ix[10] Accordingly, in the amended complaint, private respondent averred that M/V Maria Efigenia XV had an actual value of P800,000.00 and that, after deducting the insurance payment of P200,000.00, the amount of P600,000.00 should likewise be claimed. The amended complaint also alleged that inflation resulting from the devaluation of the Philippine peso had affected the replacement value of the hull of the vessel, its equipment and its lost cargoes, such that there should be a reasonable determination thereof. Furthermore, on account of the sinking of the vessel, private respondent supposedly incurred unrealized profits and lost business opportunities that would thereafter be proven.ix[11] Subsequently, the complaint was further amended to include petitioner as a defendantix[12] which the lower court granted in its order of September 16, 1985.ix[13] After petitioner had filed its answer to the second amended complaint, on February 5, 1987, the lower court issued a pretrial orderix[14] containing, among other things, a stipulations of facts, to wit: 1. On 21 September 1977, while the fishing boat `M/V MARIA EFIGENIA owned by plaintiff was navigating in the vicinity of Fortune Island in Nasugbu, Batangas, on its way to Navotas, Metro Manila, said fishing boat was hit by the LSCO tanker Petroparcel causing the former to sink. 2. The Board of Marine Inquiry conducted an investigation of this marine accident and on 21 November 1978, the Commandant of the Philippine Coast Guard, the Honorable Simeon N. Alejandro, rendered a decision finding the cause of the accident to be the reckless and imprudent manner in which Edgardo Doruelo navigated the LSCO Petroparcel and declared the latter vessel at fault.

3. On 2 April 1978, defendant Luzon Stevedoring Corporation (LUSTEVECO), executed in favor of PNOC Shipping and Transport Corporation a Deed of Transfer involving several tankers, tugboats, barges and pumping stations, among which was the LSCO Petroparcel. 4. On the same date on 2 April 1979 (sic), defendant PNOC STC again entered into an Agreement of Transfer with co-defendant Lusteveco whereby all the business properties and other assets appertaining to the tanker and bulk oil departments including the motor tanker LSCO Petroparcel of defendant Lusteveco were sold to PNOC STC. 5. The aforesaid agreement stipulates, among others, that PNOC-STC assumes, without qualifications, all obligations arising from and by virtue of all rights it obtained over the LSCO `Petroparcel. 6. On 6 July 1979, another agreement between defendant LUSTEVECO and PNOC-STC was executed wherein Board of Marine Inquiry Case No. 332 (involving the sea accident of 21 September 1977) was specifically identified and assumed by the latter. 7. On 23 June 1979, the decision of Board of Marine Inquiry was affirmed by the Ministry of National Defense, in its decision dismissing the appeal of Capt. Edgardo Doruelo and Chief mate Anthony Estenzo of LSCO `Petroparcel. 8. LSCO `Petroparcel is presently owned and operated by PNOC-STC and likewise Capt. Edgardo Doruelo is still in their employ. 9. As a result of the sinking of M/V Maria Efigenia caused by the reckless and imprudent manner in which LSCO Petroparcel was navigated by defendant Doruelo, plaintiff suffered actual damages by the loss of its fishing nets, boat equipments (sic) and cargoes, which went down with the ship when it sank the replacement value of which should be left to the sound discretion of this Honorable Court. After trial, the lower courtix[15] rendered on November 18, 1989 its decision disposing of Civil Case No. C-9457 as follows: WHEREFORE, and in view of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendant PNOC Shipping & Transport Corporation, to pay the plaintiff: a. The sum of P6,438,048.00 representing the value of the fishing boat with interest from the date of the filing of the complaint at the rate of 6% per annum; b. c. The sum of P50,000.00 as and for attorneys fees; and The costs of suit.

The counterclaim is hereby DISMISSED for lack of merit. Likewise, the case against defendant Edgardo Doruelo is hereby DISMISSED, for lack of jurisdiction. SO ORDERED. In arriving at the above disposition, the lower court cited the evidence presented by private respondent consisting of the testimony of its general manager and sole witness, Edilberto del Rosario. Private respondents witness testified that M/V Maria Efigenia XV was owned by private respondent per Exhibit A, a certificate of ownership issued by the Philippine Coast Guard showing that M/V Maria Efigenia XV was a wooden motor boat constructed in 1965 with 128.23 gross tonnage. According to him, at the time the vessel sank, it was then carrying 1,060 tubs (baeras) of assorted fish the value of which was never recovered. Also lost with the vessel were two cummins engines (250 horsepower), radar, pathometer and compass. He further added that with the loss of his flagship vessel in his fishing fleet of fourteen (14) vessels, he was constrained to hire the services of counsel whom he paid P10,000 to handle the case at the Board of Marine Inquiry and P50,000.00 for commencing suit for damages in the lower court. As to the award of P6,438,048.00 in actual damages, the lower court took into account the following pieces of documentary evidence that private respondent proffered during trial: (a) XV; Exhibit A certified xerox copy of the certificate of ownership of M/V Maria Efigenia

(b) Exhibit B a document titled Marine Protest executed by Delfin Villarosa, Jr. on September 22, 1977 stating that as a result of the collision, the M/V Maria Efigenia XV sustained a hole at its left side that caused it to sink with its cargo of 1,050 baeras valued at P170,000.00; (c) Exhibit C a quotation for the construction of a 95-footer trawler issued by Isidoro A. Magalong of I. A. Magalong Engineering and Construction on January 26, 1987 to Del Rosario showing that construction of such trawler would cost P2,250,000.00; (d) Exhibit D pro forma invoice No. PSPI-05/87-NAV issued by E.D. Daclan of Power Systems, Incorporated on January 20, 1987 to Del Rosario showing that two (2) units of CUMMINS Marine Engine model N855-M, 195 bhp. at 1800 rpm. would cost P1,160,000.00; (e) Exhibit E quotation of prices issued by Scan Marine Inc. on January 20, 1987 to Del Rosario showing that a unit of Furuno Compact Daylight Radar, Model FR-604D, would cost P100,000.00 while a unit of Furuno Color Video Sounder, Model FCV-501 would cost P45,000.00 so that the two units would cost P145,000.00; (f) Exhibit F quotation of prices issued by Seafgear Sales, Inc. on January 21, 1987 to Del Rosario showing that two (2) rolls of nylon rope (5 cir. X 300fl.) would cost P140,000.00; two

(2) rolls of nylon rope (3 cir. X 240fl.), P42,750.00; one (1) binocular (7 x 50), P1,400.00, one (1) compass (6), P4,000.00 and 50 pcs. of floats, P9,000.00 or a total of P197, 150.00; (g) Exhibit G retainer agreement between Del Rosario and F. Sumulong Associates Law Offices stipulating an acceptance fee of P5,000.00, per appearance fee of P400.00, monthly retainer of P500.00, contingent fee of 20% of the total amount recovered and that attorneys fee to be awarded by the court should be given to Del Rosario; and (h) Exhibit H price quotation issued by Seafgear Sales, Inc. dated April 10, 1987 to Del Rosario showing the cost of poly nettings as: 50 rolls of 400/18 3kts. 100md x 100mtrs., P70,000.00; 50 rolls of 400/18 5kts. 100md x 100mtrs., P81,500.00; 50 rolls of 400/18 8kts. 100md x 100mtrs., P116,000.00, and 50 rolls of 400/18 10kts. 100md x 100mtrs., P146,500 and banera (tub) at P65.00 per piece or a total of P414,065.00 The lower court held that the prevailing replacement value of P6,438,048.00 of the fishing boat and all its equipment would regularly increase at 30% every year from the date the quotations were given. On the other hand, the lower court noted that petitioner only presented Lorenzo Lazaro, senior estimator at PNOC Dockyard & Engineering Corporation, as sole witness and it did not bother at all to offer any documentary evidence to support its position. Lazaro testified that the price quotations submitted by private respondent were excessive and that as an expert witness, he used the quotations of his suppliers in making his estimates. However, he failed to present such quotations of prices from his suppliers, saying that he could not produce a breakdown of the costs of his estimates as it was a sort of secret scheme. For this reason, the lower court concluded: Evidently, the quotation of prices submitted by the plaintiff relative to the replacement value of the fishing boat and its equipments in the tune of P6,438,048.00 which were lost due to the recklessness and imprudence of the herein defendants were not rebutted by the latter with sufficient evidence. The defendants through their sole witness Lorenzo Lazaro relied heavily on said witness bare claim that the amount afore-said is excessive or bloated, but they did not bother at all to present any documentary evidence to substantiate such claim. Evidence to be believed, must not only proceed from the mouth of the credible witness, but it must be credible in itself. (Vda. de Bonifacio vs. B. L. T. Bus Co., Inc. L-26810, August 31, 1970). Aggrieved, petitioner filed a motion for the reconsideration of the lower courts decision contending that: (1) the lower court erred in holding it liable for damages; that the lower court did not acquire jurisdiction over the case by paying only P1,252.00 as docket fee; (2) assuming that plaintiff was entitled to damages, the lower court erred in awarding an amount greater than that prayed for in the second amended complaint; and (3) the lower court erred when it failed to resolve the issues it had raised in its memorandum.ix[16] Petitioner likewise filed a supplemental

motion for reconsideration expounding on whether the lower court acquired jurisdiction over the subject matter of the case despite therein plaintiffs failure to pay the prescribed docket fee.ix[17] On January 25, 1990, the lower court declined reconsideration for lack of merit.ix[18] Apparently not having received the order denying its motion for reconsideration, petitioner still filed a motion for leave to file a reply to private respondents opposition to said motion.ix[19] Hence, on February 12, 1990, the lower court denied said motion for leave to file a reply on the ground that by the issuance of the order of January 25, 1990, said motion had become moot and academic.ix[20] Unsatisfied with the lower courts decision, petitioner elevated the matter to the Court of Appeals which, however, affirmed the same in toto on October 14, 1992.ix[21] On petitioners assertion that the award of P6,438,048.00 was not convincingly proved by competent and admissible evidence, the Court of Appeals ruled that it was not necessary to qualify Del Rosario as an expert witness because as the owner of the lost vessel, it was well within his knowledge and competency to identify and determine the equipment installed and the cargoes loaded on the vessel. Considering the documentary evidence presented as in the nature of market reports or quotations, trade journals, trade circulars and price lists, the Court of Appeals held, thus: Consequently, until such time as the Supreme Court categorically rules on the admissibility or inadmissibility of this class of evidence, the reception of these documentary exhibits (price quotations) as evidence rests on the sound discretion of the trial court. In fact, where the lower court is confronted with evidence which appears to be of doubtful admissibility, the judge should declare in favor of admissibility rather than of non-admissibility (The Collector of Palakadhari, 124 [1899], p. 43, cited in Francisco, Revised Rules of Court, Evidence, Volume VII, Part I, 1990 Edition, p. 18). Trial courts are enjoined to observe the strict enforcement of the rules of evidence which crystallized through constant use and practice and are very useful and effective aids in the search for truth and for the effective administration of justice. But in connection with evidence which may appear to be of doubtful relevancy or incompetency or admissibility, it is the safest policy to be liberal, not rejecting them on doubtful or technical grounds, but admitting them unless plainly irrelevant, immaterial or incompetent, for the reason that their rejection places them beyond the consideration of the court. If they are thereafter found relevant or competent, can easily be remedied by completely discarding or ignoring them. (Banaria vs. Banaria, et al., C.A. No. 4142, May 31, 1950; cited in Francisco, Supra). [Underscoring supplied]. Stressing that the alleged inadmissible documentary exhibits were never satisfactorily rebutted by appellants own sole witness in the person of Lorenzo Lazaro, the appellate court found that petitioner ironically situated itself in an inconsistent posture by the fact that its own witness,

admittedly an expert one, heavily relies on the very same pieces of evidence (price quotations) appellant has so vigorously objected to as inadmissible evidence. Hence, it concluded: x x x. The amount of P6,438,048.00 was duly established at the trial on the basis of appellees documentary exhibits (price quotations) which stood uncontroverted, and which already included the amount by way of adjustment as prayed for in the amended complaint. There was therefore no need for appellee to amend the second amended complaint in so far as to the claim for damages is concerned to conform with the evidence presented at the trial. The amount of P6,438,048.00 awarded is clearly within the relief prayed for in appellees second amended complaint. On the issue of lack of jurisdiction, the respondent court held that following the ruling in Sun Insurance Ltd. v. Asuncion,ix[22] the additional docket fee that may later on be declared as still owing the court may be enforced as a lien on the judgment. Hence, the instant recourse. In assailing the Court of Appeals decision, petitioner posits the view that the award of P6,438,048 as actual damages should have been in light of these considerations, namely: (1) the trial court did not base such award on the actual value of the vessel and its equipment at the time of loss in 1977; (2) there was no evidence on extraordinary inflation that would warrant an adjustment of the replacement cost of the lost vessel, equipment and cargo; (3) the value of the lost cargo and the prices quoted in respondents documentary evidence only amount to P4,336,215.00; (4) private respondents failure to adduce evidence to support its claim for unrealized profit and business opportunities; and (5) private respondents failure to prove the extent and actual value of damages sustained as a result of the 1977 collision of the vessels.ix[23] 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.ix[24] In actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of the act or omission complained of.ix[25] There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses (dao emergente), and the other is the failure to receive as a benefit that which would have pertained to him (lucro cesante).ix[26] Thus: Where goods are destroyed by the wrongful act of the defendant the plaintiff is entitled to their value at the time of destruction, that is, normally, the sum of money which he would have to pay in the market for identical or essentially similar goods, plus in a proper case damages for the loss of use during the period before replacement. In other words, in the case of profit-earning chattels, what has to be assessed is the value of the chattel to its owner as a going concern at the

time and place of the loss, and this means, at least in the case of ships, that regard must be had to existing and pending engagements.x x x. x x x. If the market value of the ship reflects the fact that it is in any case virtually certain of profitable employment, then nothing can be added to that value in respect of charters actually lost, for to do so would be pro tanto to compensate the plaintiff twice over. On the other hand, if the ship is valued without reference to its actual future engagements and only in the light of its profit-earning potentiality, then it may be necessary to add to the value thus assessed the anticipated profit on a charter or other engagement which it was unable to fulfill. What the court has to ascertain in each case is the `capitalised value of the vessel as a profit-earning machine not in the abstract but in view of the actual circumstances, without, of course, taking into account considerations which were too remote at the time of the loss.ix[27] [Underscoring supplied]. As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is required to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available.ix[28] The burden of proof is on the party who would be defeated if no evidence would be 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.ix[29] In other words, damages cannot be presumed and courts, in making an award must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne.ix[30] In this case, actual damages were proven through the sole testimony of private respondents general manager and certain pieces of documentary evidence. Except for Exhibit B where the value of the 1,050 baeras of fish were pegged at their September 1977 value when the collision happened, the pieces of documentary evidence proffered by private respondent with respect to items and equipment lost show similar items and equipment with corresponding prices in early 1987 or approximately ten (10) years after the collision. Noticeably, petitioner did not object to the exhibits in terms of the time index for valuation of the lost goods and equipment. In objecting to the same pieces of evidence, petitioner commented that these were not duly authenticated and that the witness (Del Rosario) did not have personal knowledge on the contents of the writings and neither was he an expert on the subjects thereof.ix[31] Clearly ignoring petitioners objections to the exhibits, the lower court admitted these pieces of evidence and gave them due weight to arrive at the award of P6,438,048.00 as actual damages. The exhibits were presented ostensibly in the course of Del Rosarios testimony. Private respondent did not present any other witnesses especially those whose signatures appear in the price quotations that became the bases of the award. We hold, however, that the price quotations are ordinary private writings which under the Revised Rules of Court should have been proffered along with the testimony of the authors thereof. Del Rosario could not have testified on the veracity of the contents of the writings even though he was the seasoned owner of a fishing fleet

because he was not the one who issued the price quotations. Section 36, Rule 130 of the Revised Rules of Court provides that a witness can testify only to those facts that he knows of his personal knowledge. For this reason, Del Rosarios claim that private respondent incurred losses in the total amount of P6,438,048.00 should be admitted with extreme caution considering that, because it was a bare assertion, it should be supported by independent evidence. Moreover, because he was the owner of private respondent corporationix[32] whatever testimony he would give with regard to the value of the lost vessel, its equipment and cargoes should be viewed in the light of his selfinterest therein. We agree with the Court of Appeals that his testimony as to the equipment installed and the cargoes loaded on the vessel should be given credenceix[33] considering his familiarity thereto. However, we do not subscribe to the conclusion that his valuation of such equipment, cargo and the vessel itself should be accepted as gospel truth.ix[34] We must, therefore, examine the documentary evidence presented to support Del Rosarios claim as regards the amount of losses. The price quotations presented as exhibits partake of the nature of hearsay evidence considering that the persons who issued them were not presented as witnesses.ix[35] Any evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of another person who is not on the witness stand. Hearsay evidence, whether objected to or not, has no probative value unless the proponent can show that the evidence falls within the exceptions to the hearsay evidence rule.ix[36] On this point, we believe that the exhibits do not fall under any of the exceptions provided under Sections 37 to 47 of Rule 130.ix[37] It is true that one of the exceptions to the hearsay rule pertains to commercial lists and the like under Section 45, Rule 130 of the Revised Rules on Evidence. In this respect, the Court of Appeals considered private respondents exhibits as commercial lists. It added, however, that these exhibits should be admitted in evidence until such time as the Supreme Court categorically rules on the admissibility or inadmissibility of this class of evidence because the reception of these documentary exhibits (price quotations) as evidence rests on the sound discretion of the trial court.ix[38] Reference to Section 45, Rule 130, however, would show that the conclusion of the Court of Appeals on the matter was arbitrarily arrived at. This rule states: Commercial lists and the like. Evidence of statements of matters of interest to persons engaged in an occupation contained in a list, register, periodical, or other published compilation is admissible as tending to prove the truth of any relevant matter so stated if that compilation is published for use by persons engaged in that occupation and is generally used and relied upon by them there.

Under Section 45 of the aforesaid Rule, a document is a commercial list if: (1) it is a statement of matters of interest to persons engaged in an occupation; (2) such statement is contained in a list, register, periodical or other published compilation; (3) said compilation is published for the use of persons engaged in that occupation, and (4) it is generally used and relied upon by persons in the same occupation. Based on the above requisites, it is our considered view that Exhibits B, C, D, E, F and Hix[39] are not commercial lists for these do not belong to the category of other published compilations under Section 45 aforequoted. Under the principle of ejusdem generis, (w)here general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned.ix[40] The exhibits mentioned are mere price quotations issued personally to Del Rosario who requested for them from dealers of equipment similar to the ones lost at the collision of the two vessels. These are not published in any list, register, periodical or other compilation on the relevant subject matter. Neither are these market reports or quotations within the purview of commercial lists as these are not standard handbooks or periodicals, containing data of everyday professional need and relied upon in the work of the occupation.ix[41] These are simply letters responding to the queries of Del Rosario. Thus, take for example Exhibit D which reads: January 20, 1987 PROFORMA INVOICE NO. PSPI-05/87-NAV MARIA EFIGINIA FISHING CORPORATION Navotas, Metro Manila Attention: MR. EDDIE DEL ROSARIO Gentlemen: In accordance to your request, we are pleased to quote our Cummins Marine Engine, to wit. Two (2) units CUMMINS Marine Engine model N855-M, 195 bhp. at 1800 rpm., 6-cylinder in-line, 4-stroke cycle, natural aspirated, 5 in. x 6 in. bore and stroke, 855 cu. In. displacement, keel-cooled, electric starting coupled with Twin-Disc Marine gearbox model MG-509, 4.5:1 reduction ratio, includes oil cooler, companion flange, manual and standard accessories as per attached sheet. Price FOB Manila - - - - - - - - - - - - - - - P 580,000.00/unit

Total FOB Manila - - - - - - - - - - - - - - - P 1,160,000.00 vvvvvvvvv TERMS : CASH 60-90 days from date of order. : Subject to our final confirmation. One (1) full year against factory defect.

DELIVERY : VALIDITY

WARRANTY : Very truly yours,

POWER SYSTEMS, INC. (Sgd.) E. D. Daclan To be sure, letters and telegrams are admissible in evidence but these are, however, subject to the general principles of evidence and to various rules relating to documentary evidence.ix[42] Hence, in one case, it was held that a letter from an automobile dealer offering an allowance for an automobile upon purchase of a new automobile after repairs had been completed, was not a price current or commercial list within the statute which made such items presumptive evidence of the value of the article specified therein. The letter was not admissible in evidence as a commercial list even though the clerk of the dealer testified that he had written the letter in due course of business upon instructions of the dealer.ix[43] But even on the theory that the Court of Appeals correctly ruled on the admissibility of those letters or communications when it held that unless plainly irrelevant, immaterial or incompetent, evidence should better be admitted rather than rejected on doubtful or technical grounds,ix[44] the same pieces of evidence, however, should not have been given probative weight. This is a distinction we wish to point out. Admissibility of evidence refers to the question of whether or not the circumstance (or evidence) is to considered at all.ix[45] On the other hand, the probative value of evidence refers to the question of whether or not it proves an issue.ix[46] Thus, a letter may be offered in evidence and admitted as such but its evidentiary weight depends upon the observance of the rules on evidence. Accordingly, the author of the letter should be presented as witness to provide the other party to the litigation the opportunity to question him on the contents of the letter. Being mere hearsay evidence, failure to present the author of the letter renders its contents suspect. As earlier stated, hearsay evidence, whether objected to or not, has no probative value. Thus:

The courts differ as to the weight to be given to hearsay evidence admitted without objection. Some hold that when hearsay has been admitted without objection, the same may be considered as any other properly admitted testimony. Others maintain that it is entitled to no more consideration than if it had been excluded. The rule prevailing in this jurisdiction is the latter one. Our Supreme Court held that although the question of admissibility of evidence can not be raised for the first time on appeal, yet if the evidence is hearsay it has no probative value and should be disregarded whether objected to or not. `If no objection is made quoting Jones on Evidence - `it (hearsay) becomes evidence by reason of the want of such objection even though its admission does not confer upon it any new attribute in point of weight. Its nature and quality remain the same, so far as its intrinsic weakness and incompetency to satisfy the mind are concerned, and as opposed to direct primary evidence, the latter always prevails. The failure of the defense counsel to object to the presentation of incompetent evidence, like hearsay evidence or evidence that violates the rules of res inter alios acta, or his failure to ask for the striking out of the same does not give such evidence any probative value. But admissibility of evidence should not be equated with weight of evidence. Hearsay evidence whether objected to or not has no probative value.ix[47] Accordingly, as stated at the outset, damages may not be awarded on the basis of hearsay evidence.ix[48] Nonetheless, the non-admissibility of said exhibits does not mean that it totally deprives private respondent of any redress for the loss of its vessel. This is because in Lufthansa German Airlines v. Court of Appeals,ix[49] the Court said: In the absence of competent proof on the actual damage suffered, private respondent is `entitled to nominal damages which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered. [Underscoring supplied]. Nominal damages are awarded in every obligation arising from law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or in every case where property right has been invaded.ix[50] Under Article 2223 of the Civil Code, (t)he adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns. Actually, nominal damages are damages in name only and not in fact. Where these are allowed, they are not treated as an equivalent of a wrong inflicted but simply in recognition of the existence of a technical injury.ix[51] However, the amount to be awarded as nominal damages shall be equal or at least commensurate to the injury sustained by private respondent considering

the concept and purpose of such damages.ix[52] The amount of nominal damages to be awarded may also depend on certain special reasons extant in the case.ix[53] Applying now such principles to the instant case, we have on record the fact that petitioners vessel Petroparcel was at fault as well as private respondents complaint claiming the amount of P692,680.00 representing the fishing nets, boat equipment and cargoes that sunk with the M/V Maria Efigenia XV. In its amended complaint, private respondent alleged that the vessel had an actual value of P800,000.00 but it had been paid insurance in the amount of P200,000.00 and, therefore, it claimed only the amount of P600,000.00. Ordinarily, the receipt of insurance payments should diminish the total value of the vessel quoted by private respondent in his complaint considering that such payment is causally related to the loss for which it claimed compensation. This Court believes that such allegations in the original and amended complaints can be the basis for determination of a fair amount of nominal damages inasmuch as a complaint alleges the ultimate facts constituting the plaintiff's cause of action.ix[54] Private respondent should be bound by its allegations on the amount of its claims. With respect to petitioners contention that the lower court did not acquire jurisdiction over the amended complaint increasing the amount of damages claimed to P600,000.00, we agree with the Court of Appeals that the lower court acquired jurisdiction over the case when private respondent paid the docket fee corresponding to its claim in its original complaint. Its failure to pay the docket fee corresponding to its increased claim for damages under the amended complaint should not be considered as having curtailed the lower courts jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion,ix[55] the unpaid docket fee should be considered as a lien on the judgment even though private respondent specified the amount of P600,000.00 as its claim for damages in its amended complaint. Moreover, we note that petitioner did not question at all the jurisdiction of the lower court on the ground of insufficient docket fees in its answers to both the amended complaint and the second amended complaint. It did so only in its motion for reconsideration of the decision of the lower court after it had received an adverse decision. As this Court held in Pantranco North Express, Inc. v. Court of Appeals,ix[56] participation in all stages of the case before the trial court, that included invoking its authority in asking for affirmative relief, effectively barred petitioner by estoppel from challenging the courts jurisdiction. Notably, from the time it filed its answer to the second amended complaint on April 16, 1985,ix[57] petitioner did not question the lower courts jurisdiction. It was only on December 29, 1989ix[58] when it filed its motion for reconsideration of the lower courts decision that petitioner raised the question of the lower courts lack of jurisdiction. Petitioner thus foreclosed its right to raise the issue of jurisdiction by its own inaction. WHEREFORE, the challenged decision of the Court of Appeals dated October 14, 1992 in CAG. R. CV No. 26680 affirming that of the Regional Trial Court of Caloocan City, Branch 121, is

hereby MODIFIED insofar as it awarded actual damages to private respondent Maria Efigenia Fishing Corporation in the amount of P6,438,048.00 for lack of evidentiary bases therefor. Considering the fact, however, that: (1) technically petitioner sustained injury but which, unfortunately, was not adequately and properly proved, and (2) this case has dragged on for almost two decades, we believe that an award of Two Million (P2,000,000.00)ix[59] in favor of private respondent as and for nominal damages is in order. No pronouncement as to costs. SO ORDERED. SECOND DIVISION [G.R. No. 115117. June 8, 2000] INTEGRATED PACKAGING CORP., petitioner, vs. COURT OF APPEALS and FILANCHOR PAPER CO., INC. respondents. DECISION QUISUMBING, J.: This is a petition to review the decision of the Court of Appeals rendered on April 20, 1994 reversing the judgment of the Regional Trial Court of Caloocan City in an action for recovery of sum of money filed by private respondent against petitioner. In said decision, the appellate court decreed: "WHEREFORE, in view of all the foregoing, the appealed judgment is hereby REVERSED and SET ASIDE. Appellee [petitioner herein] is hereby ordered to pay appellant [private respondent herein] the sum of P763,101.70, with legal interest thereon, from the date of the filing of the Complaint, until fully paid. SO ORDERED."ix[1] The RTC judgment reversed by the Court of Appeals had disposed of the complaint as follows: "WHEREFORE, judgment is hereby rendered: Ordering plaintiff [herein private respondent] to pay defendant [herein petitioner] the sum of P27,222.60 as compensatory and actual damages after deducting P763,101.70 (value of materials received by defendant) from P790,324.30 representing compensatory damages as defendants unrealized profits; Ordering plaintiff to pay defendant the sum of P100,000.00 as moral damages;

Ordering plaintiff to pay the sum of P30,000.00 for attorneys fees; and to pay the costs of suit. SO ORDERED."ix[2] The facts, as culled from the records, are as follows: Petitioner and private respondent executed on May 5, 1978, an order agreement whereby private respondent bound itself to deliver to petitioner 3,450 reams of printing paper, coated, 2 sides basis, 80 lbs., 38" x 23", short grain, worth P1,040,060.00 under the following schedule: May and June 1978450 reams at P290.00/ream; August and September 1978700 reams at P290/ream; January 1979575 reams at P307.20/ream; March 1979575 reams at P307.20/ream; July 1979575 reams at P307.20/ream; and October 1979575 reams at P307.20/ream. In accordance with the standard operating practice of the parties, the materials were to be paid within a minimum of thirty days and maximum of ninety days from delivery. Later, on June 7, 1978, petitioner entered into a contract with Philippine Appliance Corporation (Philacor) to print three volumes of "Philacor Cultural Books" for delivery on the following dates: Book VI, on or before November 1978; Book VII, on or before November 1979 and; Book VIII, on or before November 1980, with a minimum of 300,000 copies at a price of P10.00 per copy or a total cost of P3,000,000.00. As of July 30, 1979, private respondent had delivered to petitioner 1,097 reams of printing paper out of the total 3,450 reams stated in the agreement. Petitioner alleged it wrote private respondent to immediately deliver the balance because further delay would greatly prejudice petitioner. From June 5, 1980 and until July 23, 1981, private respondent delivered again to petitioner various quantities of printing paper amounting to P766,101.70. However, petitioner encountered difficulties paying private respondent said amount. Accordingly, private respondent made a formal demand upon petitioner to settle the outstanding account. On July 23 and 31, 1981 and August 27, 1981, petitioner made partial payments totalling P97,200.00 which was applied to its back accounts covered by delivery invoices dated September 29-30, 1980 and October 1-2, 1980.ix[3] Meanwhile, petitioner entered into an additional printing contract with Philacor. Unfortunately, petitioner failed to fully comply with its contract with Philacor for the printing of books VIII, IX, X and XI. Thus, Philacor demanded compensation from petitioner for the delay and damage it suffered on account of petitioners failure. On August 14, 1981, private respondent filed with the Regional Trial Court of Caloocan City a collection suit against petitioner for the sum of P766,101.70, representing the unpaid purchase price of printing paper bought by petitioner on credit. In its answer, petitioner denied the material allegations of the complaint. By way of counterclaim, petitioner alleged that private respondent was able to deliver only 1,097 reams of

printing paper which was short of 2,875 reams, in total disregard of their agreement; that private respondent failed to deliver the balance of the printing paper despite demand therefor, hence, petitioner suffered actual damages and failed to realize expected profits; and that petitioners complaint was prematurely filed. After filing its reply and answer to the counterclaim, private respondent moved for admission of its supplemental complaint, which was granted. In said supplemental complaint, private respondent alleged that subsequent to the enumerated purchase invoices in the original complaint, petitioner made additional purchases of printing paper on credit amounting to P94,200.00. Private respondent also averred that petitioner failed and refused to pay its outstanding obligation although it made partial payments in the amount of P97,200.00 which was applied to back accounts, thus, reducing petitioners indebtedness to P763,101.70. On July 5, 1990, the trial court rendered judgment declaring that petitioner should pay private respondent the sum of P763,101.70 representing the value of printing paper delivered by private respondent from June 5, 1980 to July 23, 1981. However, the lower court also found petitioners counterclaim meritorious. It ruled that were it not for the failure or delay of private respondent to deliver printing paper, petitioner could have sold books to Philacor and realized profit of P790,324.30 from the sale. It further ruled that petitioner suffered a dislocation of business on account of loss of contracts and goodwill as a result of private respondents violation of its obligation, for which the award of moral damages was justified. On appeal, the respondent Court of Appeals reversed and set aside the judgment of the trial court. The appellate court ordered petitioner to pay private respondent the sum of P763,101.70 representing the amount of unpaid printing paper delivered by private respondent to petitioner, with legal interest thereon from the date of the filing of the complaint until fully paid.ix[4] However, the appellate court deleted the award of P790,324.30 as compensatory damages as well as the award of moral damages and attorneys fees, for lack of factual and legal basis. Expectedly, petitioner filed this instant petition contending that the appellate courts judgment is based on erroneous conclusions of facts and law. In this recourse, petitioner assigns the following errors: [I] "THE COURT OF APPEALS ERRED IN CONCLUDING THAT PRIVATE RESPONDENT DID NOT VIOLATE THE ORDER AGREEMENT. [II] THE COURT OF APPEALS ERRED IN CONCLUDING THAT RESPONDENT IS NOT LIABLE FOR PETITIONERS BREACH OF CONTRACT WITH PHILACOR.

[III] THE COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER IS NOT ENTITLED TO DAMAGES AGAINST PRIVATE RESPONDENT."ix[5] In our view, the crucial issues for resolution in this case are as follows: (1)....Whether or not private respondent violated the order agreement, and; (2)....Whether or not private respondent is liable for petitioners breach of contract with Philacor. Petitioners contention lacks factual and legal basis, hence, bereft of merit. Petitioner contends, firstly, that private respondent violated the order agreement when the latter failed to deliver the balance of the printing paper on the dates agreed upon. The transaction between the parties is a contract of sale whereby private respondent (seller) obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds itself to pay therefor a sum of money or its equivalent (price).ix[6] Both parties concede that the order agreement gives rise to a reciprocal obligationsix[7] such that the obligation of one is dependent upon the obligation of the other. Reciprocal obligations are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other.ix[8] Thus, private respondent undertakes to deliver printing paper of various quantities subject to petitioners corresponding obligation to pay, on a maximum 90-day credit, for these materials. Note that in the contract, petitioner is not even required to make any deposit, down payment or advance payment, hence, the undertaking of private respondent to deliver the materials is conditional upon payment by petitioner within the prescribed period. Clearly, petitioner did not fulfill its side of the contract as its last payment in August 1981 could cover only materials covered by delivery invoices dated September and October 1980. There is no dispute that the agreement provides for the delivery of printing paper on different dates and a separate price has been agreed upon for each delivery. It is also admitted that it is the standard practice of the parties that the materials be paid within a minimum period of thirty (30) days and a maximum of ninety (90) days from each delivery.ix[9] Accordingly, the private respondents suspension of its deliveries to petitioner whenever the latter failed to pay on time, as in this case, is legally justified under the second paragraph of Article 1583 of the Civil Code which provides that: "When there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more installments, or the buyer neglects or refuses without just cause to take delivery of or pay for one or more installments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to justify the injured party in refusing

to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken." (Emphasis supplied) In this case, as found a quo petitioners evidence failed to establish that it had paid for the printing paper covered by the delivery invoices on time. Consequently, private respondent has the right to cease making further delivery, hence the private respondent did not violate the order agreement. On the contrary, it was petitioner which breached the agreement as it failed to pay on time the materials delivered by private respondent. Respondent appellate court correctly ruled that private respondent did not violate the order agreement. On the second assigned error, petitioner contends that private respondent should be held liable for petitioners breach of contract with Philacor. This claim is manifestly devoid of merit. As correctly held by the appellate court, private respondent cannot be held liable under the contracts entered into by petitioner with Philacor. Private respondent is not a party to said agreements. It is also not a contract pour autrui. Aforesaid contracts could not affect third persons like private respondent because of the basic civil law principle of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person,ix[10] even if he is aware of such contract and has acted with knowledge thereof.ix[11] Indeed, the order agreement entered into by petitioner and private respondent has not been shown as having a direct bearing on the contracts of petitioner with Philacor. As pointed out by private respondent and not refuted by petitioner, the paper specified in the order agreement between petitioner and private respondent are markedly different from the paper involved in the contracts of petitioner with Philacor.ix[12] Furthermore, the demand made by Philacor upon petitioner for the latter to comply with its printing contract is dated February 15, 1984, which is clearly made long after private respondent had filed its complaint on August 14, 1981. This demand relates to contracts with Philacor dated April 12, 1983 and May 13, 1983, which were entered into by petitioner after private respondent filed the instant case. To recapitulate, private respondent did not violate the order agreement it had with petitioner. Likewise, private respondent could not be held liable for petitioners breach of contract with Philacor. It follows that there is no basis to hold private respondent liable for damages. Accordingly, the appellate court did not err in deleting the damages awarded by the trial court to petitioner. The rule on compensatory damages is well established. True, indemnification for damages comprehends not only the loss suffered, that is to say actual damages (damnum emergens), but also profits which the obligee failed to obtain, referred to as compensatory damages (lucrum cessans). However, to justify a grant of actual or compensatory damages, it is necessary to prove

with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party, the actual amount of loss.ix[13] In the case at bar, the trial court erroneously concluded that petitioner could have sold books to Philacor at the quoted selling price of P1,850,750.55 and by deducting the production cost of P1,060,426.20, petitioner could have earned profit of P790,324.30. Admittedly, the evidence relied upon by the trial court in arriving at the amount are mere estimates prepared by petitioner.ix[14] Said evidence is highly speculative and manifestly hypothetical. It could not provide sufficient legal and factual basis for the award of P790,324.30 as compensatory damages representing petitioners self-serving claim of unrealized profit. Further, the deletion of the award of moral damages is proper, since private respondent could not be held liable for breach of contract. Moral damages may be awarded when in a breach of contract the defendant acted in bad faith, or was guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligation.ix[15] Finally, since the award of moral damages is eliminated, so must the award for attorneys fees be also deleted.ix[16] WHEREFORE, the instant petition is DENIED. The decision of the Court of Appeals is AFFIRMED. Costs against petitioner. SO ORDERED. FIRST DIVISION [G.R. No. 118342. January 5, 1998] DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and LYDIA CUBA, respondents. [G.R. No. 118367. January 5, 1998] LYDIA P. CUBA, petitioner, vs. COURT OF APPEALS, DEVELOPMENT BANK OF THE PHILIPPINES and AGRIPINA P. CAPERAL, respondents. DECISION DAVIDE, JR., J.: These two consolidated cases stemmed from a complaintix[1] filed against the Development Bank of the Philippines (hereafter DBP) and Agripina Caperal filed by Lydia Cuba (hereafter CUBA) on 21 May 1985 with the Regional Trial Court of Pangasinan, Branch 54. The said complaint sought (1) the declaration of nullity of DBPs appropriation of CUBAs rights, title, and interests over a 44-hectare fishpond located in Bolinao, Pangasinan, for being violative of Article 2088 of the Civil Code; (2) the annulment of the Deed of Conditional Sale executed in her favor by DBP; (3) the annulment of DBPs sale of the subject fishpond to Caperal; (4) the

restoration of her rights, title, and interests over the fishpond; and (5) the recovery of damages, attorneys fees, and expenses of litigation. After the joinder of issues following the filing by the parties of their respective pleadings, the trial court conducted a pre-trial where CUBA and DBP agreed on the following facts, which were embodied in the pre-trial order:ix[2] 1. Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No. 2083 (new) dated May 13, 1974 from the Government; 2. Plaintiff Lydia P. Cuba obtained loans from the Development Bank of the Philippines in the amounts of P109,000.00; P109,000.00; and P98,700.00 under the terms stated in the Promissory Notes dated September 6, 1974; August 11, 1975; and April 4, 1977; 3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold Rights; 4. Plaintiff failed to pay her loan on the scheduled dates thereof in accordance with the terms of the Promissory Notes; 5. Without foreclosure proceedings, whether judicial or extra-judicial, defendant DBP appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question; 6. After defendant DBP has appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question, defendant DBP, in turn, executed a Deed of Conditional Sale of the Leasehold Rights in favor of plaintiff Lydia Cuba over the same fishpond in question; 7. In the negotiation for repurchase, plaintiff Lydia Cuba addressed two letters to the Manager DBP, Dagupan City dated November 6, 1979 and December 20, 1979. DBP thereafter accepted the offer to repurchase in a letter addressed to plaintiff dated February 1, 1982; 8. After the Deed of Conditional Sale was executed in favor of plaintiff Lydia Cuba, a new Fishpond Lease Agreement No. 2083-A dated March 24, 1980 was issued by the Ministry of Agriculture and Food in favor of plaintiff Lydia Cuba only, excluding her husband; 9. Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the Deed of Conditional Sale; 10. After plaintiff Lydia Cuba failed to pay the amortization as stated in Deed of Conditional Sale, she entered with the DBP a temporary arrangement whereby in consideration for the deferment of the Notarial Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba promised to make certain payments as stated in temporary Arrangement dated February 23, 1982;

11. Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act dated March 13, 1984, and which was received by plaintiff Lydia Cuba; 12. After the Notice of Rescission, defendant DBP took possession of the Leasehold Rights of the fishpond in question; 13. That after defendant DBP took possession of the Leasehold Rights over the fishpond in question, DBP advertised in the SUNDAY PUNCH the public bidding dated June 24, 1984, to dispose of the property; 14. That the DBP thereafter executed a Deed of Conditional Sale in favor of defendant Agripina Caperal on August 16, 1984; 15. Thereafter, defendant Caperal was awarded Fishpond Lease Agreement No. 2083-A on December 28, 1984 by the Ministry of Agriculture and Food. Defendant Caperal admitted only the facts stated in paragraphs 14 and 15 of the pre-trial order. ix[3] Trial was thereafter had on other matters. The principal issue presented was whether the act of DBP in appropriating to itself CUBAs leasehold rights over the fishpond in question without foreclosure proceedings was contrary to Article 2088 of the Civil Code and, therefore, invalid. CUBA insisted on an affirmative resolution. DBP stressed that it merely exercised its contractual right under the Assignments of Leasehold Rights, which was not a contract of mortgage. Defendant Caperal sided with DBP. The trial court resolved the issue in favor of CUBA by declaring that DBPs taking possession and ownership of the property without foreclosure was plainly violative of Article 2088 of the Civil Code which provides as follows: ART. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void. It disagreed with DBPs stand that the Assignments of Leasehold Rights were not contracts of mortgage because (1) they were given as security for loans, (2) although the fishpond land in question is still a public land, CUBAs leasehold rights and interest thereon are alienable rights which can be the proper subject of a mortgage; and (3) the intention of the contracting parties to treat the Assignment of Leasehold Rights as a mortgage was obvious and unmistakable; hence, upon CUBAs default, DBPs only right was to foreclose the Assignment in accordance with law. The trial court also declared invalid condition no. 12 of the Assignment of Leasehold Rights for being a clear case of pactum commissorium expressly prohibited and declared null and void by

Article 2088 of the Civil Code. It then concluded that since DBP never acquired lawful ownership of CUBAs leasehold rights, all acts of ownership and possession by the said bank were void. Accordingly, the Deed of Conditional Sale in favor of CUBA, the notarial rescission of such sale, and the Deed of Conditional Sale in favor of defendant Caperal, as well as the Assignment of Leasehold Rights executed by Caperal in favor of DBP, were also void and ineffective. As to damages, the trial court found ample evidence on record that in 1984 the representatives of DBP ejected CUBA and her caretakers not only from the fishpond area but also from the adjoining big house; and that when CUBAs son and caretaker went there on 15 September 1985, they found the said house unoccupied and destroyed and CUBAs personal belongings, machineries, equipment, tools, and other articles used in fishpond operation which were kept in the house were missing. The missing items were valued at about P550,000. It further found that when CUBA and her men were ejected by DBP for the first time in 1979, CUBA had stocked the fishpond with 250,000 pieces of bangus fish (milkfish), all of which died because the DBP representatives prevented CUBAs men from feeding the fish. At the conservative price of P3.00 per fish, the gross value would have been P690,000, and after deducting 25% of said value as reasonable allowance for the cost of feeds, CUBA suffered a loss of P517,500. It then set the aggregate of the actual damages sustained by CUBA at P1,067,500. The trial court further found that DBP was guilty of gross bad faith in falsely representing to the Bureau of Fisheries that it had foreclosed its mortgage on CUBAs leasehold rights. Such representation induced the said Bureau to terminate CUBAs leasehold rights and to approve the Deed of Conditional Sale in favor of CUBA. And considering that by reason of her unlawful ejectment by DBP, CUBA suffered moral shock, degradation, social humiliation, and serious anxieties for which she became sick and had to be hospitalized the trial court found her entitled to moral and exemplary damages. The trial court also held that CUBA was entitled to P100,000 attorneys fees in view of the considerable expenses she incurred for lawyers fees and in view of the finding that she was entitled to exemplary damages. In its decision of 31 January 1990, ix[4] the trial court disposed as follows: WHEREFORE, judgment is hereby rendered in favor of plaintiff: 1. DECLARING null and void and without any legal effect the act of defendant Development Bank of the Philippines in appropriating for its own interest, without any judicial or extrajudicial foreclosure, plaintiffs leasehold rights and interest over the fishpond land in question under her Fishpond Lease Agreement No. 2083 (new); 2. DECLARING the Deed of Conditional Sale dated February 21, 1980 by and between the defendant Development Bank of the Philippines and plaintiff (Exh. E and Exh. 1) and the acts of

notarial rescission of the Development Bank of the Philippines relative to said sale (Exhs. 16 and 26) as void and ineffective; 3. DECLARING the Deed of Conditional Sale dated August 16, 1984 by and between the Development Bank of the Philippines and defendant Agripina Caperal (Exh. F and Exh. 21), the Fishpond Lease Agreement No. 2083-A dated December 28, 1984 of defendant Agripina Caperal (Exh. 23) and the Assignment of Leasehold Rights dated February 12, 1985 executed by defendant Agripina Caperal in favor of the defendant Development Bank of the Philippines (Exh. 24) as void ab initio; 4. ORDERING defendant Development Bank of the Philippines and defendant Agripina Caperal, jointly and severally, to restore to plaintiff the latters leasehold rights and interests and right of possession over the fishpond land in question, without prejudice to the right of defendant Development Bank of the Philippines to foreclose the securities given by plaintiff; 5. ORDERING defendant Development Bank of the Philippines to pay to plaintiff the following amounts: a) The sum of ONE MILLION SIXTY-SEVEN THOUSAND FIVE HUNDRED PESOS (P1,067,500.00), as and for actual damages; b) The sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as moral damages; c) The sum of FIFTY THOUSAND (P50,000.00) PESOS, as and for exemplary damages; d) And the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS, as and for attorneys fees; 6. And ORDERING defendant Development Bank of the Philippines to reimburse and pay to defendant Agripina Caperal the sum of ONE MILLION FIVE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED TEN PESOS AND SEVENTY-FIVE CENTAVOS (P1,532,610.75) representing the amounts paid by defendant Agripina Caperal to defendant Development Bank of the Philippines under their Deed of Conditional Sale. CUBA and DBP interposed separate appeals from the decision to the Court of Appeals. The former sought an increase in the amount of damages, while the latter questioned the findings of fact and law of the lower court. In its decision ix[5] of 25 May 1994, the Court of Appeals ruled that (1) the trial court erred in declaring that the deed of assignment was null and void and that defendant Caperal could not validly acquire the leasehold rights from DBP; (2) contrary to the claim of DBP, the assignment was not a cession under Article 1255 of the Civil Code because DBP appeared to be the sole creditor to CUBA - cession presupposes plurality of debts and creditors; (3) the deeds of

assignment represented the voluntary act of CUBA in assigning her property rights in payment of her debts, which amounted to a novation of the promissory notes executed by CUBA in favor of DBP; (4) CUBA was estopped from questioning the assignment of the leasehold rights, since she agreed to repurchase the said rights under a deed of conditional sale; and (5) condition no. 12 of the deed of assignment was an express authority from CUBA for DBP to sell whatever right she had over the fishpond. It also ruled that CUBA was not entitled to loss of profits for lack of evidence, but agreed with the trial court as to the actual damages of P1,067,500. It, however, deleted the amount of exemplary damages and reduced the award of moral damages from P100,000 to P50,000 and attorneys fees, from P100,000 to P50,000. The Court of Appeals thus declared as valid the following: (1) the act of DBP in appropriating Cubas leasehold rights and interest under Fishpond Lease Agreement No. 2083; (2) the deeds of assignment executed by Cuba in favor of DBP; (3) the deed of conditional sale between CUBA and DBP; and (4) the deed of conditional sale between DBP and Caperal, the Fishpond Lease Agreement in favor of Caperal, and the assignment of leasehold rights executed by Caperal in favor of DBP. It then ordered DBP to turn over possession of the property to Caperal as lawful holder of the leasehold rights and to pay CUBA the following amounts: (a) P1,067,500 as actual damages; P50,000 as moral damages; and P50,000 as attorneys fees. Since their motions for reconsideration were denied,ix[6] DBP and CUBA filed separate petitions for review. In its petition (G.R. No. 118342), DBP assails the award of actual and moral damages and attorneys fees in favor of CUBA. Upon the other hand, in her petition (G.R. No. 118367), CUBA contends that the Court of Appeals erred (1) in not holding that the questioned deed of assignment was a pactum commissorium contrary to Article 2088 of the Civil Code; (b) in holding that the deed of assignment effected a novation of the promissory notes; (c) in holding that CUBA was estopped from questioning the validity of the deed of assignment when she agreed to repurchase her leasehold rights under a deed of conditional sale; and (d) in reducing the amounts of moral damages and attorneys fees, in deleting the award of exemplary damages, and in not increasing the amount of damages. We agree with CUBA that the assignment of leasehold rights was a mortgage contract. It is undisputed that CUBA obtained from DBP three separate loans totalling P335,000, each of which was covered by a promissory note. In all of these notes, there was a provision that: In the event of foreclosure of the mortgage securing this notes, I/We further bind myself/ourselves, jointly and severally, to pay the deficiency, if any. ix[7]

Simultaneous with the execution of the notes was the execution of Assignments of Leasehold Rights ix[8] where CUBA assigned her leasehold rights and interest on a 44-hectare fishpond, together with the improvements thereon. As pointed out by CUBA, the deeds of assignment constantly referred to the assignor (CUBA) as borrower; the assigned rights, as mortgaged properties; and the instrument itself, as mortgage contract. Moreover, under condition no. 22 of the deed, it was provided that failure to comply with the terms and condition of any of the loans shall cause all other loans to become due and demandable and all mortgages shall be foreclosed. And, condition no. 33 provided that if foreclosure is actually accomplished, the usual 10% attorneys fees and 10% liquidated damages of the total obligation shall be imposed. There is, therefore, no shred of doubt that a mortgage was intended. Besides, in their stipulation of facts the parties admitted that the assignment was by way of security for the payment of the loans; thus: 3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold Rights. In Peoples Bank & Trust Co. vs. Odom,ix[9] this Court had the occasion to rule that an assignment to guarantee an obligation is in effect a mortgage. We find no merit in DBPs contention that the assignment novated the promissory notes in that the obligation to pay a sum of money the loans (under the promissory notes) was substituted by the assignment of the rights over the fishpond (under the deed of assignment). As correctly pointed out by CUBA, the said assignment merely complemented or supplemented the notes; both could stand together. The former was only an accessory to the latter. Contrary to DBPs submission, the obligation to pay a sum of money remained, and the assignment merely served as security for the loans covered by the promissory notes. Significantly, both the deeds of assignment and the promissory notes were executed on the same dates the loans were granted. Also, the last paragraph of the assignment stated: The assignor further reiterates and states all terms, covenants, and conditions stipulated in the promissory note or notes covering the proceeds of this loan, making said promissory note or notes, to all intent and purposes, an integral part hereof. Neither did the assignment amount to payment by cession under Article 1255 of the Civil Code for the plain and simple reason that there was only one creditor, the DBP. Article 1255 contemplates the existence of two or more creditors and involves the assignment of all the debtors property. Nor did the assignment constitute dation in payment under Article 1245 of the civil Code, which reads: Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law on sales. It bears stressing that the assignment, being in its essence a mortgage, was but a security and not a satisfaction of indebtedness.ix[10]

We do not, however, buy CUBAs argument that condition no. 12 of the deed of assignment constituted pactum commissorium. Said condition reads: 12. That effective upon the breach of any condition of this assignment, the Assignor hereby appoints the Assignee his Attorney-in-fact with full power and authority to take actual possession of the property above-described, together with all improvements thereon, subject to the approval of the Secretary of Agriculture and Natural Resources, to lease the same or any portion thereof and collect rentals, to make repairs or improvements thereon and pay the same, to sell or otherwise dispose of whatever rights the Assignor has or might have over said property and/or its improvements and perform any other act which the Assignee may deem convenient to protect its interest. All expenses advanced by the Assignee in connection with purpose above indicated which shall bear the same rate of interest aforementioned are also guaranteed by this Assignment. Any amount received from rents, administration, sale or disposal of said property may be supplied by the Assignee to the payment of repairs, improvements, taxes, assessments and other incidental expenses and obligations and the balance, if any, to the payment of interest and then on the capital of the indebtedness secured hereby. If after disposal or sale of said property and upon application of total amounts received there shall remain a deficiency, said Assignor hereby binds himself to pay the same to the Assignee upon demand, together with all interest thereon until fully paid. The power herein granted shall not be revoked as long as the Assignor is indebted to the Assignee and all acts that may be executed by the Assignee by virtue of said power are hereby ratified. The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by way of security for the payment of the principal obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of nonpayment of the principal obligation within the stipulated period.ix[11] Condition no. 12 did not provide that the ownership over the leasehold rights would automatically pass to DBP upon CUBAs failure to pay the loan on time. It merely provided for the appointment of DBP as attorney-in-fact with authority, among other things, to sell or otherwise dispose of the said real rights, in case of default by CUBA, and to apply the proceeds to the payment of the loan. This provision is a standard condition in mortgage contracts and is in conformity with Article 2087 of the Civil Code, which authorizes the mortgagee to foreclose the mortgage and alienate the mortgaged property for the payment of the principal obligation. DBP, however, exceeded the authority vested by condition no. 12 of the deed of assignment. As admitted by it during the pre-trial, it had [w]ithout foreclosure proceedings, whether judicial or extrajudicial, appropriated the [l]easehold [r]ights of plaintiff Lydia Cuba over the fishpond in question. Its contention that it limited itself to mere administration by posting caretakers is further belied by the deed of conditional sale it executed in favor of CUBA. The deed stated:

WHEREAS, the Vendor [DBP] by virtue of a deed of assignment executed in its favor by the herein vendees [Cuba spouses] the former acquired all the rights and interest of the latter over the above-described property; The title to the real estate property [sic] and all improvements thereon shall remain in the name of the Vendor until after the purchase price, advances and interest shall have been fully paid. (Emphasis supplied). It is obvious from the above-quoted paragraphs that DBP had appropriated and taken ownership of CUBAs leasehold rights merely on the strength of the deed of assignment. DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its act of appropriating the leasehold rights. As stated earlier, condition no. 12 did not provide that CUBAs default would operate to vest in DBP ownership of the said rights. Besides, an assignment to guarantee an obligation, as in the present case, is virtually a mortgage and not an absolute conveyance of title which confers ownership on the assignee.ix[12] At any rate, DBPs act of appropriating CUBAs leasehold rights was violative of Article 2088 of the Civil Code, which forbids a creditor from appropriating, or disposing of, the thing given as security for the payment of a debt. The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP did not estop her from questioning DBPs act of appropriation. Estoppel is unavailing in this case. As held by this Court in some cases,ix[13] estoppel cannot give validity to an act that is prohibited by law or against public policy. Hence, the appropriation of the leasehold rights, being contrary to Article 2088 of the Civil Code and to public policy, cannot be deemed validated by estoppel. Instead of taking ownership of the questioned real rights upon default by CUBA, DBP should have foreclosed the mortgage, as has been stipulated in condition no. 22 of the deed of assignment. But, as admitted by DBP, there was no such foreclosure. Yet, in its letter dated 26 October 1979, addressed to the Minister of Agriculture and Natural Resources and coursed through the Director of the Bureau of Fisheries and Aquatic Resources, DBP declared that it had foreclosed the mortgage and enforced the assignment of leasehold rights on March 21, 1979 for failure of said spouses [Cuba spouces] to pay their loan amortizations.ix[14] This only goes to show that DBP was aware of the necessity of foreclosure proceedings. In view of the false representation of DBP that it had already foreclosed the mortgage, the Bureau of Fisheries cancelled CUBAs original lease permit, approved the deed of conditional sale, and issued a new permit in favor of CUBA. Said acts which were predicated on such false representation, as well as the subsequent acts emanating from DBPs appropriation of the

leasehold rights, should therefore be set aside. To validate these acts would open the floodgates to circumvention of Article 2088 of the Civil Code. Even in cases where foreclosure proceedings were had, this Court had not hesitated to nullify the consequent auction sale for failure to comply with the requirements laid down by law, such as Act No. 3135, as amended.ix[15] With more reason that the sale of property given as security for the payment of a debt be set aside if there was no prior foreclosure proceeding. Hence, DBP should render an accounting of the income derived from the operation of the fishpond in question and apply the said income in accordance with condition no. 12 of the deed of assignment which provided: Any amount received from rents, administration, may be applied to the payment of repairs, improvements, taxes, assessment, and other incidental expenses and obligations and the balance, if any, to the payment of interest and then on the capital of the indebtedness. We shall now take up the issue of damages. Article 2199 provides: Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. Actual or compensatory damages cannot be presumed, but must be proved with reasonable degree of certainty.ix[16] A court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof.ix[17] It must point out specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne.ix[18] In the present case, the trial court awarded in favor of CUBA P1,067,500 as actual damages consisting of P550,000 which represented the value of the alleged lost articles of CUBA and P517,500 which represented the value of the 230,000 pieces of bangus allegedly stocked in 1979 when DBP first ejected CUBA from the fishpond and the adjoining house. This award was affirmed by the Court of Appeals. We find that the alleged loss of personal belongings and equipment was not proved by clear evidence. Other than the testimony of CUBA and her caretaker, there was no proof as to the existence of those items before DBP took over the fishpond in question. As pointed out by DBP, there was not inventory of the alleged lost items before the loss which is normal in a project which sometimes, if not most often, is left to the care of other persons. Neither was a single receipt or record of acquisition presented.

Curiously, in her complaint dated 17 May 1985, CUBA included losses of property as among the damages resulting from DBPs take-over of the fishpond. Yet, it was only in September 1985 when her son and a caretaker went to the fishpond and the adjoining house that she came to know of the alleged loss of several articles. Such claim for losses of property, having been made before knowledge of the alleged actual loss, was therefore speculative. The alleged loss could have been a mere afterthought or subterfuge to justify her claim for actual damages. With regard to the award of P517,000 representing the value of the alleged 230,000 pieces of bangus which died when DBP took possession of the fishpond in March 1979, the same was not called for. Such loss was not duly proved; besides, the claim therefor was delayed unreasonably. From 1979 until after the filing of her complaint in court in May 1985, CUBA did not bring to the attention of DBP the alleged loss. In fact, in her letter dated 24 October 1979,ix[19] she declared: 1. That from February to May 1978, I was then seriously ill in Manila and within the same period I neglected the management and supervision of the cultivation and harvest of the produce of the aforesaid fishpond thereby resulting to the irreparable loss in the produce of the same in the amount of about P500,000.00 to my great damage and prejudice due to fraudulent acts of some of my fishpond workers. Nowhere in the said letter, which was written seven months after DBP took possession of the fishpond, did CUBA intimate that upon DBPs take-over there was a total of 230,000 pieces of bangus, but all of which died because of DBPs representatives prevented her men from feeding the fish. The award of actual damages should, therefore, be struck down for lack of sufficient basis. In view, however, of DBPs act of appropriating CUBAs leasehold rights which was contrary to law and public policy, as well as its false representation to the then Ministry of Agriculture and Natural Resources that it had foreclosed the mortgage, an award of moral damages in the amount of P50,000 is in order conformably with Article 2219(10), in relation to Article 21, of the Civil Code. Exemplary or corrective damages in the amount of P25,000 should likewise be awarded by way of example or correction for the public good.ix[20] There being an award of exemplary damages, attorneys fees are also recoverable.ix[21] WHEREFORE, the 25 May 1994 Decision of the Court of Appeals in CA-G.R. CV No. 26535 is hereby REVERSED, except as to the award of P50,000 as moral damages, which is hereby sustained. The 31 January 1990 Decision of the Regional Trial Court of Pangasinan, Branch 54, in Civil Case No. A-1574 is MODIFIED setting aside the finding that condition no. 12 of the deed of assignment constituted pactum commissorium and the award of actual damages; and by reducing the amounts of moral damages from P100,000 to P50,000; the exemplary damages, from P50,000 to P25,000; and the attorneys fees, from P100,000 to P20,000. The Development

Bank of the Philippines is hereby ordered to render an accounting of the income derived from the operation of the fishpond in question. Let this case be REMANDED to the trial court for the reception of the income statement of DBP, as well as the statement of the account of Lydia P. Cuba, and for the determination of each partys financial obligation to one another. SO ORDERED. FIRST DIVISION [G.R. No. 116181. April 17, 1996] PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and CARMELO H. FLORES, respondents. SYLLABUS 1. REMEDIAL LAW; EVIDENCE; DOCUMENTARY EVIDENCE; RECEIPT; ADMISSIBILITY. A receipt is defined as: A written and signed acknowledgment that money has been paid or goods have been delivered. A receipt is merely presumptive evidence and is not conclusive. A written acknowledgment that money or a thing of value has been received. Since a receipt is a mere acknowledgement of payment, it may be subject to explanation or contradiction. A receipt may be used as evidence against one just as any other declaration or admission. A simple receipt not under seal is presumptive evidence only and may be rebutted or explained by other evidence of mistake in giving it, or of non-payment or of the circumstances under which it was given. 2. ID.; ID.; ID.; ID.; AFFORDS THE BEST PROOF OF PAYMENT. - Although a receipt is not conclusive evidence, in the case at bench, an exhaustive review of the records fails to disclose any other evidence sufficient and strong enough to overturn the acknowledgment embodied in petitioners own receipt (as to the amount of money it actually received). Petitioner contends that it offered in court evidence of the particulars or the actual denominations of the money it received from Flores in exchange for its managerial checks. However, aside from the self-serving testimonies of petitioners witnesses, we fail to discover any such evidence in the records. In the words of the trial court: After having thoroughly evaluated the evidences (sic) on record, the Court finds and so believes that plaintiff indeed paid defendant the amount of P 1,000,040.00 when he purchased the two (2) managers checks worth (sic) P 1,000,000.00. This is clearly manifested from the receipt issued by the defendant wherein it explicitly admits that the amount stated therein is what plaintiff actually paid. While the defendant does not dispute the receipt it issued to the plaintiff, it endeavored to prove that the actual amount involved in the entire transaction is only P900,000.00 that is P450,000.00 managers check and P450,000.00 cash by submitting in evidence, the application forms filled up by the plaintiff, Exhibits 1, 2, 3 and 4. As may be readily seen these application forms relied upon by the defendant have no probative value for they do not yield any direct proof of payment. Besides defendant even failed

to adduce concrete evidence showing that these forms which were crumpled and retrieved from the waste basket were made the basis of the approval of the purchased (sic) made. At any rate, the Court finds such pieces of evidence not only unconvincing but also self-defeating in the light of the receipt, the accuracy, correctness and due execution of which was indubitably established. It is a cardinal rule in the law on evidence that the best proof of payment is the receipt. 3. CIVIL LAW; DAMAGES; NEGLIGENCE; ISSUANCE THEREOF CREATES A FIDUCIARY RELATIONSHIP BETWEEN THE BANK AND THE PURCHASER OF THE CHECK AND THEREFORE ANY BREACH THEREOF MUST BE BORNE BY THE NEGLIGENT PARTY. - Since there is no doubt as to the fact that the plaintiff purchased from the defendant bank two (2) managers check worth P500,000.00 each as this was evidenced by an official receipt, then, following the above jurisprudential ruling, the existence of the managers check (sic) created as (sic) fiduciary relationship between the defendant bank and the plaintiff and therefore any breach thereof must be borne by the negligent party. In this case, the money counter who, among her other duties, is in charge of counting the money received from a client purchasing a managers check did not perform her duty with diligence and due care. This may be gathered from her testimony that she did not wait for the counting machine to finish counting the money for the plaintiff is a VIP client and he was in a hurry as he was tapping the window. Equally negligent is Reynaldo Castor for not doing anything when he noticed that their money counters who entertained the plaintiff were rattled. From these unfolded facts, the socalled honest mistake pleaded is therefore misplaced and perforced, defendant must suffer the consequences of its own negligent acts. 4. ID.; ID.; MORAL DAMAGES; GRANTED WHERE THE PLAINTIFFS INTEGRITY AS A BUSINESSMAN WAS TARNISHED DUE TO DEFENDANTS BAD FAITH. - Appellee Flores narrated his woes to the lower court when appellant bank refused to honor his Managers Checks worth P1 Million because of the alleged shortage in appellees payment to the effect that he had to go back and forth the bank to encash said checks, and that he lost a deal of (sic) a house for sale in Baguio City worth P1 Million as he could not produce said amount withheld by the appellant bank. Appellee Flores further testified as to the effect of the incident on his integrity as a businessman. In the case of Makabali v. C. A., 157 SCRA 253, the Supreme Court reiterated the doctrine on the grant of moral and exemplary damages, as follows: 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. 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. 5. ID.; ID.; ID.; MUST BE COMMENSURATE WITH THE LOSS OR INJURY SUFFERED. - Second, the award of moral damages in the amount of P1,000,000.00 is obviously not proportionate to the actual losses of P 100,000.00 sustained by Flores. In RCPI v. Rodriguez, (182 SCRA 899 [1990) we ruled thus: x x x. Nevertheless, we find the award of P 100,000.00 as moral damages in favor of respondent Rodriguez excessive and unconscionable. In the case of Prudenciado v. Alliance Transport System, Inc. (148 SCRA 440 [1987]) we said: x x x [I]t is undisputed that the trial courts are given discretion to determine the amount of

moral damages (Alcantara v. Surro, 93 Phil. 472) and that the Court of Appeals can only modify or change the amount awarded when they are palpably and scandalously excessive so as to indicate that it was the result of passion, prejudice or corruption on the part of the trial court (Gellada v. Warner Barnes & Co., Inc., 57 O.G. [4] 7347, 7358; and other cases cited). But in more recent cases where the awards of moral and exemplary damages are far too excessive compared to the actual losses sustained by the aggrieved party, this Court ruled that they should be reduced to more reasonable amounts. x x x. In other words, the moral damages awarded must be commensurate with the loss or injury suffered. 6. ID.; ID.; EXEMPLARY DAMAGES; GRANTED ONLY IF THE PLAINTIFF CAN PROVE THAT HE IS ENTITLED TO MORAL, TEMPERATE OR COMPENSATORY DAMAGES. - 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, 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. 7. ID.; ID.; ATTORNEYS FEES; GRANTED IF PLAINTIFF IS COMPELLED TO LITIGATE DUE TO DEFENDANTS NON-COMPLIANCE WITH HIS OBLIGATION. We see no reason to disturb the award of attorneys fees in the amount of P50,000.00. We concur with the findings of the Court of Appeals on this matter: As for the award of attorneys fees, We find the same in order considering that defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim (Art. 2208 [5], New Civil Code), and it is just and equitable to award plaintiff-appellee his attorneys fees (Art. 2208 [11], id.). Since plaintiff was compelled to litigate to protect its interest due to the noncompliance of defendants obligation, he is therefore entitled to attorneys. fees (pars. 5, Article 2208, Civil Code of the Philippines). APPEARANCES OF COUNSEL The Chief Legal Counsel for petitioner. Law Firm of Raymundo A. Armovit for private respondent. DECISION KAPUNAN, J.: This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the decision and resolution of the respondent Court of Appeals in CA-G.R. CV No. 38281 dated 31 January 1994 and 5 July 1994, respectively, which affirmed the decision of the Regional Trial Court in Civil Case No. Q-89-4033 declaring Philippine National Bank liable to Carmelo H. Flores for damages.

The facts of the case are as follows: On 11 July 1989, private respondent Carmelo H. Flores (Flores) purchased from petitioner at its Manila Pavilion Hotel unit, two (2) managers checks worth P500,000.00 each, paying a total of P1,000,040.00, including the service charge.1 A receipt for said amount was issued by the petitioner.2 On 12 July 1989, Flores presented these checks at the Baguio Hyatt Casino unit of petitioner. Petitioner refused to encash the checks but after a lengthy discussion, it agreed to encash one (1) of the checks.3 However, it deferred the payment of the other check until after Flores agreed that it be broken down to five (5) managers checks of P 100,000.00 each. Furthermore, petitioner refused to encash one of the five checks until after it is cleared by the Manila Pavilion Hotel unit.4 Having no other option, Flores agreed to such an arrangement. However, upon his return to Manila, he made representations to petitioner through its Malate Branch so that the check may be encashed but to no avail.5 Flores, thereafter, wrote a letter to his counsel informing the latter of the aforementioned events.6 A Formal Demand was made by private respondents counsel but petitioner persisted in its refusal to honor the check.7 Left with no other choice, Flores filed a case with the Regional Trial Court of Quezon City, Branch 100, docketed as Civil Case No. Q-89-4033.8 In its Answer with Compulsory Counterclaim, petitioner insisted that only P900,000.00 and P40.00 bank charges were actually paid by Flores when he purchased the two (2) managers checks worth P1,000,000.00. It alleged that due to Flores demanding attitude and temper, petitioners money counter, Rowena Montes, who, at that time was still new at her job, made an error in good faith in issuing the receipt for P1,000,040.00.9 The actuations of Flores allegedly distracted the personnel manning the unit.10 After trial, the court rendered its decision on 5 May 1992, the dispositive portion of which states: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant Philippine National Bank as follows: a.) ordering the defendant to pay plaintiff the sum of P 100,000.00 representing the amount of the check dishonored with interest thereon at the legal rate per annum from November 16, 1989 until fully paid; b.) ordering defendant to pay plaintiff for the embarrassment caused him the amount of P1,000,000.00 as moral damages; c.) ordering defendant to pay plaintiff the amount of P1,000,000.00 as exemplary damages brought about by the malevolent and malicious acts of the former; d.) ordering defendant to pay plaintiff the sum of P50,000.00 as attorneys fees; and

e.) ordering defendant to pay the costs of the suit. SO ORDERED.11 Petitioner interposed an appeal with the respondent court, docketed as CA-G.R. CV No. 38281 assigning the following errors, to wit: I THE TRIAL COURT ERRED IN HOLDING ON THE BASIS OF THE RECEIPT MARKED EXH. A THAT IN PURCHASING THE TWO MANAGERS CHECKS ON JULY 11, 1989, APPELLEE FLORES PAID PNB P1,000,040.00 DESPITE (1) THAT THE SAID RECEIPT DOES NOT SHOW, OR AFFORD THE BEST PROOF OF THE CORRECT AMOUNT PAID BY FLORES TO PNB AND (2) THAT AS SHOWN BY PREPONDERANT AND CONCLUSIVE EVIDENCE, APPELLEE PAID PNB P900,040 ONLY IN ONE MANAGERS CHECK AND MONETARY BILLS. II THE TRIAL COURT ERRED IN AWARDING FLORES P1 MILLION MORAL DAMAGES, P1 MILLION EXEMPLARY DAMAGES, AND P500,000 (sic) ATTORNEYS FEES DESPITE (1) THAT PNBS REFUSAL TO ENCASH THE P100,000 MANAGERS CHECK (EXH. B) WAS JUSTIFIED, AS FLORES WAS NEVER ENTITLED TO THE MONEY; (2) THAT THERE IS ABJECT ABSENCE OF EVIDENCE THAT PNB ACTED FRAUDULENTLY OR MALICIOUSLY, EVEN AS GOOD FAITH IS PRESUMED; AND (3) THAT FLORES ALLEGED EMBARRASSMENT FOR HIS FAILURE TO PURCHASE A HOUSE AND LOT DUE TO PNBS REFUSAL TO ENCASH THE WHOLE P1 MILLION IS UNFOUNDED.12 On 31 January 1994, the Court of Appeals rendered the questioned decision, the dispositive portion of which reads: WHEREFORE, the appealed decision of the lower court in Civil Case No. Q-89-4033 is hereby AFFIRMED by the Court. Costs against defendant-appellant. SO ORDERED.13 A motion for reconsideration was filed but it was likewise denied in a resolution dated 5 July 1994,14 thus, the present action with petitioner raising the following issues, to wit: I

WHETHER OR NOT THE CA ERRED IN LAW IN HOLDING THAT, THE BEST EVIDENCE TO SHOW WHETHER MR. FLORES PAID THE PNB CASINO UNIT P900,040 OR P1,000,040 IN PURCHASING THE TWO MANAGERS CHECKS EACH WORTH P500,000 IS THE RECEIPT FOR P1,000,040. II WHETHER OR NOT PNB CAN PRESENT COMPETENT AND RELEVANT EVIDENCE TO SUPPORT ITS ALLEGATION IN THE ANSWER THAT MR. FLORES ACTUALLY PAID P900,040 AND NOT P1,000,040 FOR THE SUBJECT MANAGERS CHECKS. III WHETHER OR NOT THE AWARD FOR P1 MILLION MORAL DAMAGES, P1 MILLION EXEMPLARY DAMAGES, AND P50,000 ATTORNEYS FEES, AS COMPARED TO THE ACTUAL CLAIM OF P100,000 IS DISPROPORTIONATE AND UNCONSCIONABLE.15 We shall deal with the first and second issues raised by petitioner together as they are interrelated. Petitioner concedes that it issued the subject receipt for P1,000,040.00 to Flores; yet, in the same breath, it immediately counters that said receipt is not the best evidence to prove how much money Flores actually paid for the purchase of petitioners managers checks. Further, petitioner insists that the issue in the instant case is not the contents of the subject receipt but the exact amount of money Flores paid to PNB, an inquiry which, petitioner avers, allows the presentation of evidence aliunde. Petitioners contentions are unmeritorious. A receipt is defined as: A written and signed acknowledgment that money has been paid or goods have been delivered. A receipt is merely presumptive evidence and is not conclusive. A written acknowledgment that money or a thing of value has been received. Since a receipt is a mere acknowledgment of payment, it may be subject to explanation or contradiction. A receipt may be used as evidence against one just as any other declaration or admission. A simple receipt not under seal is presumptive evidence only and may be rebutted or explained by other evidence of mistake in giving it, or of non-payment or of the circumstances under which it was given.16 (Italics ours.) Although a receipt is not conclusive evidence, in the case at bench, an exhaustive review of the records fails to disclose any other evidence sufficient and strong enough to overturn the

acknowledgment embodied in petitioners own receipt (as to the amount of money it actually received). Petitioner contends that it offered in court evidence of the particulars or the actual denominations of the money it received from Flores in exchange for its managerial checks. However, aside from the self-serving testimonies of petitioners witnesses, we fail to discover any such evidence in the records. In the words of the trial court: After having thoroughly evaluated the evidences (sic) on record, the Court finds and so believes that plaintiff indeed paid defendant the amount of P1,000,040.00 when he purchased the two (2) managers checks worth (sic) P1,000,000.00. This is clearly manifested from the receipt issued by the defendant wherein it explicitly admits that the amount stated therein is what plaintiff actually paid. While the defendant does not dispute the receipt it issued to the plaintiff it endeavored to prove that the actual amount involved in the entire transaction is only P900,000.00 that is P450,000.00 managers check and P450,000.00 cash by submitting in evidence, the application forms filled up by the plaintiff Exhibits 1, 2, 3 and 4. As may be readily seen these application forms relied upon by the defendant have no probative value for they do not yield any direct proof of payment. Besides defendant even failed to adduce concrete evidence showing that these forms which were crumpled and retrieved from the waste basket were made the basis of the approval of the purchased (sic) made. At any rate, the Court finds such pieces of evidence not only unconvincing but also self-defeating in the light of the receipt, the accuracy, correctness and due execution of which was indubitably established. It is a cardinal rule in the law on evidence that the best proof of payment is the receipt.17 (Italics ours.) In Monfort v. Aguinaldo,18 the receipts of payment, although not exclusive, were deemed to be the best evidence. Thus: That the best evidence for proving payment is by the evidence of receipts showing the same is also admitted. What respondents claim is that there is no rule which provides that payment can only be proved by receipts. While receipts are deemed to be the best evidence, they are not exclusive. Other evidence may be presented in lieu thereof if they are not available, as in case of loss, destruction or disappearance. The fact of payment may be established not only by documentary evidence, but also by parol evidence (48 C.J. 727; Greenleaf, Law of Evidence, Vol. II, p. 486; Jones on Evidence [1913] Vol. II, p. 193), specially in civil cases where preponderance of evidence is the rule. Here respondents presented documentary as well as oral evidence which the Court of Appeals found to be sufficient, and this finding is final. In the instant case, petitioners contention that Flores paid P900,000.00 only instead of P1,000,000.00 (exclusive of bank charges) in the following denominations: a managers check worth P450,000.00; P430,000.00 in P100.00 bills; and P20,000.00 in P500.00 bills, was based solely on the testimonies of petitioners bank employees - the very ones involved in the fiasco,19 and not on any other independent evidence. Hence, having failed to adduce sufficient rebuttal evidence, petitioner is bound by the contents of the receipt it issued to Flores. The subject receipt

remains to be the primary or best evidence or that which affords the greatest certainty of the fact in question.20 On the issue of damages, we concur with the findings of the trial court and the Court of Appeals, respectively: Since there is no doubt as to the fact that the plaintiff purchased from the defendant bank two (2) managers check worth P500,000.00 each as this was evidenced by an official receipt (Exhibit A), then, following the above jurisprudential ruling, the existence of the managers check (sic) created as (sic) fiduciary relationship between the defendant bank and the plaintiff and therefore any breach thereof must be borne by the negligent party. In this case, the money counter who, among her other duties, is in charge of counting the money received from a client purchasing a managers check did not perform her duty with diligence and due care. This may be gathered from her testimony that she did not wait for the counting machine to finish counting the money for the plaintiff is a VIP client and he was in a hurry as he was tapping the window (p. 37, T.S.N., August 28, 1990). Equally negligent is Reynaldo Castor for not doing anything when he noticed that their money counters who entertained the plaintiff were rattled. From these unfolded facts, the so-called honest mistake pleaded is therefore misplaced and perforced, defendant must suffer the consequences of its own negligent acts. The records further show that plaintiff is a prominent businessman, licensed and engaged in the real estate business, buying and selling houses and lots under the business name and style CMS Commercial. He is at the same time a consultant of Dizon-Esguerra Real Estate Company. Defendant treated him as a valued and VIP client. Because of the banks refusal to encash the entire one million face amount of his managers checks, he was so embarrassed for he was not able to purchase a house and lot in Monterroza Subdivision, Baguio City. Significantly, the foregoing undisputed facts made even more untenable defendants implicit supposition that the subject managers checks were not intended for the purchase of a house or for any business transaction but for gambling. Finally, since plaintiff was compelled to litigate to protect its interest due to the non-compliance of defendants obligation, he is therefore entitled to attorneys fees (pars. 5, Article 2208, Civil Code of the Philippines).21 xxx xxx xxx.

Appellee Flores narrated his woes to the lower court when appellant bank refused to honor his Managers Checks worth P1 Million because of the alleged shortage in appellees payment to the effect that he had to go back and forth the bank to encash said checks (pp. 16-18, t.s.n., July 2, 1990), and that he lost a deal of (sic) a house for sale in Baguio City worth P1 Million as he could not produce said amount withheld by the appellant bank (p. 22, id.). Appellee Flores further testified as to the effect of the incident on his integrity as a businessman as follows: Yes, my integrity and dependability as a businessman is highly doubted in Baguio because of the PNB refusal to honor the two (2) managers checks inspite of them issuing me the receipt.

So, whenever I make a deal in house and they would now even doubt whether I have the money to buy the house that I am buying, it greatly affected my integrity as a businessman in Baguio. (p. 25, t.s.n., Id.) In the case of Makabali v. C. A., 157 SCRA 253, the Supreme Court reiterated the doctrine on the grant of moral and exemplary damages, as follows: 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. 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, 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.22 However, we give consideration to petitioners allegation that the award of P1,000,000.00 moral damages and P1,000,000.00 exemplary damages in addition to Flores actual claim of P100,000.00 is inordinately disproportionate and unconscionable.23 Under the circumstances obtaining in the case at bench, we rule that the award of moral and exemplary damages is patently excessive and should be reduced to a reasonable amount. We take into consideration the following factors: First, Flores contention that he lost the opportunity to purchase a house and lot in Baguio City due to petitioners gross negligence is based solely on his own testimony and a mere general statement at that. The broker he named during his cross-examination on 10 July 1990, a Mr. Nick Buendia was not even presented to confirm the aforementioned allegation: xxx xxx xxx

Q. You also stated that this amount was intended for the purchase of the real estate property in Baguio, is that right? A. Q. A. Yes. Can you tell this Honorable Court where is this specific property located in Baguio? It is located in Monterosa Subdivision.

Q. A. Q. A.

Can you tell us the number of the street? It is within the Monterosa. Can you identify the name of the person with whom you transacted? Your Honor, I have the papers and during the next hearing I will bring it.

ATTY. D. VALDEZ: Is that mean, Your Honor that we are continuing the cross examination on the next hearing considering that he will show a certain document. Q. A. Can you not reveal to us the name of the person with whom you transacted? As I have said I could not be guessing because it was coursed through another broker.

And, this broker usually did not tell you who is the owner. Q. What I am asking you is the person whom you transacted and not necessarily the owner? We are supposed to know, Your Honor. COURT: The name of the broker. A. The name of the broker, Your Honor is Nick Buendia.

Q. Do you know what subsequently happened if there was anything happened to that property that was being sold? A. Q. A. It was sold. To someone else? Yes.

Q. At the time you were purchasing the managers checks for one (1 M) million you intended this as a payment for the property? A. Yes.24 xxx xxx xxx.

Second, the award of moral damages in the amount of P 1,000,000.00 is obviously not proportionate to the actual losses of P100,000.00 sustained by Flores. In RCPI v. Rodriguez,25 we ruled thus: x x x. Nevertheless, we find the award of P 100,000.00 as moral damages in favor of respondent Rodriguez excessive and unconscionable. In the case of Prudenciado v. Alliance Transport System, Inc. (148 SCRA 440 [1987]) we said: x x x [I]t is undisputed that the trial courts are given discretion to determine the amount of moral damages (Alcantara v. Surro, 93 Phil. 472) and that the Court of Appeals can only modify or change the amount awarded when they are palpably and scandalously excessive so as to indicate that it was the result of passion, prejudice or corruption on the part of the trial court, (Gellada v. Warner Barnes & Co., Inc., 57 O.G. [4] 7347, 7358; Sadie v. Bachrach Motors Co., Inc., 57 O.G. [4] 636 and Adone v. Bachrach Motor Co., Inc., 57 O.G. 656). But in more recent cases where the awards of moral and exemplary damages are far too excessive compared to the actual losses sustained by the aggrieved Party, this Court ruled that they should be reduced to more reasonable amounts. x x x (Italics Ours.) In other words, the moral damages awarded must be commensurate with the loss or injury suffered. Similarly, we have consistently declared that: 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 on the wrongdoer (San Andres v. Court of Appeals, 116 SCRA 85 [1982] cited in Prudenciado v. Alliance Transport System, Inc. supra).26 We, likewise, take this opportunity to stress that: [M]oral damages are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of the defendants culpable action. Its award is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the suffering inflicted.27 (Italics ours.) It is because of the foregoing reasons that we have had to constantly remind the courts to desist from awarding excessive damages disproportionate to the peculiar circumstances of the case. Judicial discretion granted to the courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity.28 Finally, we find petitioners act of issuing the managers checks and corresponding receipt before payment thereof was completely counted reckless and grossly negligent. It is an appalling breach of bank procedures and must never be repeated. In Bautista v. Mangaldan Rural Bank, Inc.,29 we stated, thus:

The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, most of all, confidence. (Simex International [Manila], Inc. vs. Court of Appeals, G.R. No. 88013, March 19, 1990, 183 SCRA 360). However, the award of P1,000,000.00 exemplary damages is also far too excessive and should likewise be reduced to an equitable level. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions.30 Therefore, based on the foregoing discussion, the award of moral damages is reduced to P 100,000.00 and the exemplary damages is likewise reduced to P25,000.00. We see no reason to disturb the award of attorneys fees in the amount of P50,000.00. We concur with the findings of the Court of Appeals on this matter: As for the award of attorneys fees, We find the same in order considering that defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim (Art. 2208 [5], New Civil Code), and it is just and equitable to award plaintiff-appellee his attorneys fees (Art. 2208 [11], id.).31 WHEREFORE, premises considered, the assailed decision is hereby MODIFIED as follows: 1. The award of moral damages is reduced from P1,000,000.00 to P100,000.00; and 2. The award of exemplary damages is reduced from P1,000,000.00 to P25,000.00. In all other respects, the assailed decision is hereby AFFIRMED. SO ORDERED. Padilla, Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.

THIRD DIVISION [G.R. No. 123404. February 26, 1997] AURELIO SUMALPONG, petitioner, vs. COURT OF APPEALS, and PEOPLE OF THE PHILIPPINES, respondents.

DECISION FRANCISCO, J.: The petitioner AURELIO SUMALPONG was charged with the crime of attempted homicide allegedly committed as follows: "That on or about August 6, 1982, in the City of Iligan, Philippines, and within the jurisdiction of this Honorable Court, the said accused, armed with a .38 caliber revolver and with intent to kill, did then and there willfully, unlawfully end feloniously attack, assault and shot (sic) one Arsolo Ramos, thus the said accused having commenced the commission of Homicide directly by overt acts and did not perform all acts of execution which should have produced the felony by reason of some cause or accident other than his own spontaneous desistance."ix[1] After the petitioner pleaded not guilty on arraignment, trial on the merits followed. The prosecution presented the complainant Arsolo Ramos, and his wife, Leonarda who both testified to the following facts: At around 10:00 o'clock in the evening of August 6, 1992, while complainant and his wife were on their way home from their ricefield in the interior, they saw the petitioner standing by the road beside a house under construction. When they came near him, the petitioner inquired from Leonarda if she knew the identity of the persons who had stoned his house, and when the latter denied any knowledge thereof, the petitioner told her that the people from the interior were abusive. To that comment Leonarda retorted that the petitioner should first identify the persons responsible for stoning his house, otherwise, she will bring the matter to the attention of the Barangay Captain.ix[2] Angered by Leonarda's reply, the petitioner asked, "why are you angry, are you the wife of that person"?ix[3], and simultaneously slapped Leonarda's face causing the latter to fall to the ground. While Leonarda was on her hands and knees, the petitioner drew his gun and shot her at the back of her head. The complainant then rushed towards the petitioner who shot him twice but missed. The petitioner and the complainant grappled for the possession of the gun and fell into a nearby canal. In the course of the struggle, the petitioner bit the complainant's right forearm and left ear thereby causing a mutilation of the latter.ix[4] The foregoing was corroborated by another witness for the prosecution, Francisco Manugas, who happened to be in a nearby waiting shed when the incident occurred. Manugas testified that he was resting and talking to one Alberto Vilasan in the waiting shed when he saw the petitioner station himself by an electric post while the complainant and Leonarda were nearing the vicinity of the latter. According to Manugas, the petitioner approached Leonarda and shortly thereafter, he saw the former slap the latter's left cheek causing her to stagger. Manugas then saw the petitioner shoot Leonarda prompting the complainant to rush to her aid. The petitioner aimed his gun at the complainant and fired twice but missed. A scuffle between the petitioner and the complainant ensued, and it was at this juncture that Manugas and Vilasan approached Leonarda who was then lying on the ground. Their efforts to help Leonarda were thwarted by two unknown persons, both armed with guns, who appeared from the dark and ordered them not to move. Threatened, Manugas and Vilasan retreated and ran away. They went to the Barangay

Captain to report the incident to him, and the latter immediately responded by going to the scene of the crime.ix[5] On the other hand, the defense would have us believe that it was the complainant who had a gun which he intended to use against the petitioner after the latter's heated altercation with Leonarda. The defense's version of the incident relied heavily on the testimony of the petitioner, the substance of which was succinctly summarized in the trial court's decision as follows: "According to him (petitioner), on August 6, 1992, at around 6:00 P.M. he went to the upper part of the place where his house is located to inquire from the four housing contractors who were in the carport of a vacant housing unit if they have any knowledge of the identity of the persons who stoned his house and was informed that some drunken youths from the interior would pass by and throw stones. He then noticed a couple approaching from a distance and one of the contractors called the couple, whom he identified as the complainant and his wife, and the two approached them. He then asked the complainant if he knows the youths throwing stones at his house but was told by the complainant that he does not. He then asked the complainant that if he knows these youths to advise them not to throw stones. However, he was told that he could not catch these youths in the act of throwing stones as they would be in the upper level of the place. He then retorted that 'perhaps you know these people by the way you talk' and the wife of the complainant intervened saying 'you better identify these people before you make any accusation or I'll go to the barangay captain.' Their discussion became heated and the four contractors went inside the house. He was then threatened by the complainant to leave, otherwise something would happen to him with the complainant further telling him that he has a gun inside his bag and he is not afraid since he even had a fight a month before. He did not leave and their discussion continued and the complainant then got a gun inside his bag. The accused then took hold of the hand of Leonarda Ramos and using her as a shield brought her to the road. The complainant followed and grabbed his wife and the accused then grabbed the hand of the complainant holding the gun and the gun fired. He pushed the wife aside and they grappled with each other with his right hand holding the right hand of the complainant holding the gun and with his left arm encircling the neck of the complainant. He was bitten by the complainant on the left arm and he also bit the left ear and the right forearm of the complainant. While they were grappling with each other, the gun fired four times and when they fell with the complainant underneath him, he noticed someone whom he came to know as the wife of the complainant kicking him on the head several times. Later, someone whom he identified as Rogelio Omiter separated them and brought him home. x x x"ix[6] In an attempt to lend some degree of persuasiveness to the petitioner's story, Rogelio Omiter was presented as a witness for the defense. Rogelio testified that on the said date and time of the incident, he was at his house when he heard a discussion taking place some ten meters away. He listened to the conversation and was able to identify one of the voices as that of the petitioner's. Suddenly, he heard a gunshot which propelled him to run towards the place where the voices were coming from. While running, he again heard successive gunshots. From a distance he could see the petitioner and the complainant wrestling with each other. He then approached and tried to separate the two from each other's hold, and while doing so, he observed that Leonarda was repeatedly kicking the petitioner's head.ix[7]

According full faith and credence to the testimonies of the prosecution witnesses, the trial court rendered a decision convicting the petitioner of the crime of attempted homicide and sentenced him to suffer the penalty of imprisonment from six (6) months and one (1) day of arresto mayor as minimum to two (2) years, four (4) months and one (1) day of prision correccional as maximum. The petitioner was likewise ordered to indemnify the complainant in the amount of: (a) P16,800.00 for the loss of his crops due to his failure to attend to his farmwork because of the injuries inflicted upon him by the petitioner; (b) P2,000.00 for hospitalization expenses; and (c) P5,000.00 by way of moral damages.ix[8] The petitioner's conviction was affirmed on appeal to the Court of Appeals which, however, modified the award of damages to the complainant, deleting the awards for loss of crops and hospitalization expenses, increasing the moral damages to P10,000.00, and awarding nominal damages in the same amount. Before this Court is the petitioner's appeal where he endeavors to weaken the complainant's credibility by pointing out an alleged inconsistency between the latter's sworn statement and his testimony in open court. The petitioner contends that a material discrepancy exists between the complainant's sworn statement that the petitioner fired at him first before shooting Leonarda, and his oral testimony that the petitioner shot his wife, Leonarda, before firing at him twice. Time and again this Court has held that inconsistencies in the testimony of witnesses when referring only to minor details and collateral matters do not affect either the substance of their declaration, their veracity, or the weight of their testimony. Such inconsistencies reinforce rather than weaken their credibility and suggest that they are telling the truth.ix[9] The aforesaid rule finds application to the case at bench for the matter of who was shot first by the petitioner is clearly insignificant and does not change the established fact that the petitioner had indeed fired at both the complainant and the latter's wife. Although there may be inconsistencies on minor details, the same do not impair the credibility of the witness where there is consistency in relating the principal occurrence and positive identification of the assailant.ix[10] Furthermore, a contradiction between a witness' affidavit and his testimony in open court may almost always be explained by the fact that being taken ex parte, an affidavit is often incomplete and inaccurate, sometimes from partial suggestions, and sometimes from the want of suggestions and inquiries. An affidavit is not a complete reproduction of what the declarant has in mind because it is generally prepared by the administering officer and the affiant simply signs it after it has been read to him.ix[11] The same is especially true when after having prepared the affidavit, the administering officer falls to translate the statements contained therein in the vernacular for the full comprehension of the affiant who is not well versed in the English language. On this point, the Court of Appeals noted that the complainant's sworn statement which was written in English was never translated or interpreted to the complainant in the Visayan dialect, the language known and spoken by him, before the latter affixed his signature thereto.ix[12] This is, manifest from the following testimony of the complainant: "Q. And this sworn statement is written in the English language and this was translated to you prior to your signature? A. This was not translated to me in Visayan dialect.

Q. Where did you sign this sworn statement? A. At the police headquarters, sir. Q. In other words, this sworn statement was made in the police headquarters and the investigating officer were (sic) asking you questions at that time? A. Yes, sir. Q. And your answers were translated or typewritten by that investigating officer? A. Yes, sir. Q. How was the questioning done, was it in the Visayan dialect (or) in English language? A. Visayan dialect, sir. Q. And after the questioning by the police officer, you were asked to sign your name at the bottom portion of this statement? A. Yes, sir." ix[13] In any event, the complainant's open court declaration that the petitioner shot Leonarda prior to shooting him should already be deemed a clarification or a rectification of the contradictory statement in his affidavit. During cross-examination, the complainant unhesitatingly clarified the correct sequence of events: "Q. In your testimony, Mr. Ramos, you said the accused first shot your wife and later shot you for (sic) two times? A. Yes, sir. Q. Is it not the reverse that you were first shot by the accused and later your wife was shot by said accused? A. First my wife was shot, then later on I was the one. Q. Are you sure of that, Mr. Ramos? A. Yes, sir. Q. And you would not change your answer whatsoever? A. No, sir.

Q. I am again confronting (sic) your statement you have given in the police station and I would like to quote question No. 9 of this statement of yours. I quote: 'What happened after then (sic)?' Answer: He pinpointed me to be the person who stoned his house, at that juncture a heated argument ensued end immediately took his handgun and shot me for (sic) two times, but luckily I was not hit.' Is that not a fact that this was your (sic) statement you have given in the police station? A. What I can say is my wife was the one first shot and then I was the one shot later on. Q. But in this sworn statement of yours, it appears that your wife was the (sic) first shot-that you were shot first and then your wife? A. What I said is that my wife was first shot and later on I was shot." ix[14] As the issue raised ultimately boils down to a question of credibility, it bears reiterating that findings and conclusions of the trial court on the credibility of witnesses enjoy a badge of respect for the reason that trial courts have the advantage of observing the demeanor of witnesses as they testify.ix[15] Entitled to great weight and respect, therefore, is the following observation of the trial court: "x x x The complainant and his wife are simple farmers and could not be prone to violence as insinuated by the accused. Their demeanor and appearance impressed the court as people dedicated more to their livelihood, as shown by the fact that they had to go home as late as 10:00 P.M. in working their farm. Their meekness and docility is shown, if accused's version is to be believed, by the fact that when allegedly called, they readily approached. x x x "On the other hand, from the evidence presented, the court finds the accused (herein petitioner) to be hot tempered, prone to sudden anger and impulsiveness which lead (sic) to his shooting the couple even on a trifling matter. It was apparent that the accused that evening was very angry and ready for trouble. He was looking for persons who had thrown stones at his house x x x" ix[16] In view of the foregoing, this Court cannot but concur with the trial court and the Court of Appeals in finding the petitioner guilty beyond reasonable doubt of the crime charged. Anent the award of damages, however, this Court upholds the Court of Appeals' ruling on the matter. Eliminating the award of actual or compensatory damages in the form of hospitalization expenses and loss of income, the Court of Appeals cited the failure of the complainant to offer any proof of the same. To justify a grant of actual or compensatory damages, it is necessary to prove with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party, the actual amount of loss.ix[17] The petitioner belabors the increase in the amount of moral damages to P10,000.00 and the award of nominal damages in an equivalent amount when the complainant did not appeal the decision of the trial court to the Court of Appeals. This contention deserves scant consideration. An appeal in a criminal case opens the whole case for review and this includes the review of the

penalty, indemnity and damages.ix[18] Squarely applicable to the instant case is this Court's pronouncement in Quemel vs. Court of Appeals,ix[19] that. "[a]lthough the authority to assess damages or indemnity in criminal cases is vested in trial courts, it is only in the first instance. On appeal, such authority passes to the appellate court. Thus, this Court has, in many cases, increased the damages awarded by the trial court, although the offended party had not appealed from said award, and the only party who sought a review of the decision of said court was the accused."ix[20] The Court finds the award of nominal and moral damages both in the amount of P10,000.00 justified under the circumstances. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.ix[21] In other words, whenever there has been a violation of an ascertained legal right, although no actual damages resulted or none are shown, the award of nominal damages is proper.ix[22] There is no room to doubt that some species of injury was caused to the complainant because of the medical expenses he incurred in having his wounds treated, and the loss of income due to his failure to work during his hospitalization. However, in the absence of competent proof of the amount of actual damages, the complainant is entitled only to nominal damages.ix[23] Anent the increase in the amount of moral damages suffice it to state that the nature of the injuries and the degree of physical suffering endured by the complainant warrants the same. The tragic incident caused a mutilation of complainant's left ear and a permanent scar on his right forearm. These injuries have left indelible marks on the complainant's body and will serve as a constant reminder of this traumatic experience. WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED in toto. SO ORDERED. SECOND DIVISION [G.R. No. 120262. July 17, 1997] PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS and LEOVIGILDO A. PANTEJO, respondents. DECISION REGALADO, J.: In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) seeks to set aside the decision of respondent Court of Appeals,ix[1] promulgated on December 29, 1994, which affirmed the award for damages made by the trial court in favor of herein private respondent Leovegildo A. Pantejo.

On October 23, 1988, private respondent Pantejo, then City Fiscal of Surigao City, boarded a PAL plane in Manila and disembarked in Cebu City where he was supposed to take his connecting flight to Surigao City. However, due to typhoon Osang, the connecting flight to Surigao City was cancelled. To accommodate the needs of its stranded passengers, PAL initially gave out cash assistance of P100.00 and, the next day, P200.00, for their expected stay of two days in Cebu. Respondent Pantejo requested instead that he be billeted in a hotel at PALs expense because he did not have cash with him at that time, but PAL refused. Thus, respondent Pantejo was forced to seek and accept the generosity of a co-passenger, an engineer named Andoni Dumlao, and he shared a room with the latter at Sky View Hotel with the promise to pay his share of the expenses upon reaching Surigao. On October 25, 1988 when the flight for Surigao was resumed, respondent Pantejo came to know that the hotel expenses of his co-passengers, one Superintendent Ernesto Gonzales and a certain Mrs. Gloria Rocha, an auditor of the Philippine National Bank, were reimbursed by PAL. At this point, respondent Pantejo informed Oscar Jereza, PALs Manager for Departure Services at Mactan Airport and who was in charge of cancelled flights, that he was going to sue the airline for discriminating against him. It was only then that Jereza offered to pay respondent Pantejo P300.00 which, due to the ordeal and anguish he had undergone, the latter declined. On March 18, 199l, the Regional Trial Court of Surigao City, Branch 30, rendered judgment in the action for damages filed by respondent Pantejo against herein petitioner, Philippine Airlines, Inc., ordering the latter to pay Pantejo P300.00 for actual damages, P150,000.00 as moral damages, P100,000.00 as exemplary damages, P15,000.00 as attorneys fees, and 6% interest from the time of the filing of the complaint until said amounts shall have been fully paid, plus costs of suit.ix[2] On appeal, respondent court affirmed the decision of the court a quo, but with the exclusion of the award of attorneys fees and litigation expenses. The main issue posed for resolution is whether petitioner airlines acted in bad faith when it failed and refused to provide hotel accommodations for respondent Pantejo or to reimburse him for hotel expenses incurred by reason of the cancellation of its connecting flight to Surigao City due to force majeure. To begin with, it must be emphasized that a contract to transport passengers is quite different in kind and degree from any other contractual relation, and this is because of the relation which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carriers employees naturally could give ground for an action for damages.ix[3] In ruling for respondent Pantejo, both the trial court and the Court of Appeals found that herein petitioner acted in bad faith in refusing to provide hotel accommodations for respondent Pantejo or to reimburse him for hotel expenses incurred despite and in contrast to the fact that other passengers were so favored.

In declaring that bad faith existed, respondent court took into consideration the following factual circumstances: 1. Contrary to petitioners claim that cash assistance was given instead because of nonavailability of rooms in hotels where petitioner had existing tie-ups, the evidence shows that Sky View Hotel, where respondent Pantejo was billeted, had plenty of rooms available. 2. It is not true that the P300.00 paid to Ernesto Gonzales, a co-passenger of respondent, was a refund for his plane ticket, the truth being that it was a reimbursement for hotel and meal expenses. 3. It is likewise not denied that said Gonzales and herein respondent came to know about the reimbursements only because another passenger, Mrs. Rocha, informed them that she was able to obtain the refund for her own hotel expenses. 4. Petitioner offered to pay P300.00 to private respondent only after he had confronted the airlines manager about the discrimination committed against him, which the latter realized was an actionable wrong. 5. Service Voucher No. 199351, presented by petitioner to prove that it gave cash assistance to its passengers, was based merely on the list of passengers already given cash assistance and was purportedly prepared at around 10:00 A.M. of October 23, 1988. This was two hours before respondent came to know of the cancellation of his flight to Surigao, hence private respondent could not have possibly refused the same.ix[4] It must be stressed that these factual findings, which are supported by substantial evidence, are binding, final and conclusive upon this Court absent any reason, and we find none, why this settled evidential rule should not apply. Petitioner theorizes that the hotel accommodations or cash assistance given in case a flight is cancelled is in the nature of an amenity and is merely a privilege that may be extended at its own discretion, but never a right that may be demanded by its passengers. Thus, when respondent Pantejo was offered cash assistance and he refused it, petitioner cannot be held liable for whatever befell respondent Pantejo on that fateful day, because it was merely exercising its discretion when it opted to just give cash assistance to its passengers. Assuming arguendo that the airline passengers have no vested right to these amenities in case a flight is cancelled due to force majeure, what makes petitioner liable for damages in this particular case and under the facts obtaining herein is its blatant refusal to accord the so-called amenities equally to all its stranded passengers who were bound for Surigao City. No compelling or justifying reason was advanced for such discriminatory and prejudicial conduct. More importantly, it has been sufficiently established that it is petitioners standard company policy, whenever a flight has been cancelled, to extend to its hapless passengers cash assistance or to provide them accommodations in hotels with which it has existing tie-ups. In fact,

petitioners Mactan Airport Manager for departure services, Oscar Jereza, admitted that PAL has an existing arrangement with hotels to accommodate stranded passengers,ix[5] and that the hotel bills of Ernesto Gonzales were reimbursedix[6] obviously pursuant to that policy. Also, two witnesses presented by respondent, Teresita Azarcon and Nerie Bol, testified that sometime in November, 1988, when their flight from Cebu to Surigao was cancelled, they were billeted at Rajah Hotel for two nights and three days at the expense of PAL.ix[7] This was never denied by PAL. Further, Ernesto Gonzales, the aforementioned co-passenger of respondent on that fateful flight, testified that based on his previous experience hotel accommodations were extended by PAL to its stranded passengers either in Magellan or Rajah Hotels, or even in Cebu Plaza. Thus, we view as impressed with dubiety PALs present attempt to represent such emergency assistance as being merely ex gratia and not ex debito. While petitioner now insists that the passengers were duly informed that they would be reimbursed for their hotel expenses, it miserably and significantly failed to explain why the other passengers were given reimbursements while private respondent was not. Although Gonzales was subsequently given a refund, this was only so because he came to know about it by accident through Mrs. Rocha, as earlier explained. Petitioner could only offer the strained and flimsy pretext that possibly the passengers were not listening when the announcement was made. This is absurd because when respondent Pantejo came to know that his flight had been cancelled, he immediately proceeded to petitioners office and requested for hotel accommodations. He was not only refused accommodations, but he was not even informed that he may later on be reimbursed for his hotel expenses. This explains why his co-passenger, Andoni Dumlao, offered to answer for respondents hotel bill and the latter promised to pay him when they arrive in Surigao. Had both known that they would be reimbursed by the airline, such arrangement would not have been necessary. Respondent Court of Appeals thus correctly concluded that the refund of hotel expenses was surreptitiously and discriminatorily made by herein petitioner since the same was not made known to everyone, except through word of mouth to a handful of passengers. This is a sad commentary on the quality of service and professionalism of an airline company, which is the countrys flag carrier at that. On the bases of all the foregoing, the inescapable conclusion is that petitioner acted in bad faith in disregarding its duties as a common carrier to its passengers and in discriminating against herein respondent Pantejo. It was even oblivious to the fact that this respondent was exposed to humiliation and embarrassment especially because of his government position and social prominence, which altogether necessarily subjected him to ridicule, shame and anguish. It remains uncontroverted that at the time of the incident, herein respondent was then the City Prosecutor of Surigao City, and that he is a member of the Philippine Jaycee Senate, past Lt. Governor of the Kiwanis Club of Surigao, a past Master of the Mount Diwata Lodge of Free

Masons of the Philippines, member of the Philippine National Red Cross, Surigao Chapter, and past Chairman of the Boy Scouts of the Philippines, Surigao del Norte Chapter.ix[8] It is likewise claimed that the moral and exemplary damages awarded to respondent Pantejo are excessive and unwarranted on the ground that respondent is not totally blameless because of his refusal to accept the P100.00 cash assistance which was inceptively offered to him. It bears emphasis that respondent Pantejo had every right to make such refusal since it evidently could not meet his needs and that was all that PAL claimed it could offer. His refusal to accept the P300.00 proffered as an afterthought when he threatened suit was justified by his resentment when he belatedly found out that his co-passengers were reimbursed for hotel expenses and he was not. Worse, he would not even have known about it were it not for a co-passenger who verbally told him that she was reimbursed by the airline for hotel and meal expenses. It may even be said that the amounts, the time and the circumstances under which those amounts were offered could not salve the moral wounds inflicted by PAL on private respondent but even approximated insult added to injury. The discriminatory act of petitioner against respondent ineludibly makes the former liable for moral damages under Article 21 in relation to Article 2219 (10) of the Civil Code.ix[9] As held in Alitalia Airways vs. CA, et al.,ix[10] such inattention to and lack of care by petitioner airline for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are awarded only to allow the former to obtain means, diversion, or amusements that will serve to alleviate the moral suffering he has undergone due to the defendants culpable action and must, perforce, be proportional to the suffering inflicted.ix[11] However, substantial damages do not translate into excessive damages.ix[12] Except for attorneys fees and costs of suit, it will be noted that the Court of Appeals affirmed point by point the factual findings of the lower court upon which the award of damages had been based.ix[13] We, therefore, see no reason to modify the award of damages made by the trial court. Under the peculiar circumstances of this case, we are convinced that the awards for actual, moral and exemplary damages granted in the judgment of respondent court, for the reasons meticulously analyzed and thoroughly explained in its decision, are just and equitable. It is high time that the travelling public is afforded protection and that the duties of common carriers, long detailed in our previous laws and jurisprudence and thereafter collated and specifically catalogued in our Civil Code in 1950, be enforced through appropriate sanctions. We agree, however, with the contention that the interest of 6% imposed by respondent court should be computed from the date of rendition of judgment and not from the filing of the complaint. The rule has been laid down in Eastern Shipping Lines, Inc. vs. Court of Appeals, et al.ix[14] that:

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. This is because at the time of the filing of the complaint, the amount of damages to which plaintiff may be entitled remains unliquidated and not known, until it is definitely ascertained, assessed and determined by the court, and only after the presentation of proof thereon.ix[15] WHEREFORE, the challenged judgment of respondent Court of Appeals is hereby AFFIRMED, subject to the MODIFICATION regarding the computation of the 6% legal rate of interest on the monetary awards granted therein to private respondent. SO ORDERED. THIRD DIVISION [G.R. No. 126204. November 20, 2001] NATIONAL POWER CORPORATION, petitioner, vs. PHILIPP BROTHERS OCEANIC, INC., respondent. DECISION SANDOVAL-GUTIERREZ, J.: Where a person merely uses a right pertaining to him, without bad faith or intent to injure, the fact that damages are thereby suffered by another will not make him liable.ix[1] This principle finds useful application to the present case. Before us is a petition for review of the Decisionix[2] dated August 27, 1996 of the Court of Appeals affirming in toto the Decisionix[3] dated January 16, 1992 of the Regional Trial Court, Branch 57, Makati City. The facts are: On May 14, 1987, the National Power Corporation (NAPOCOR) 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) prequalified and was allowed to participate as one of the bidders. After the public bidding was conducted, PHIBROs bid was accepted. NAPOCORs acceptance was conveyed in a letter dated July 8, 1987, which was received by PHIBRO on July 15, 1987. The Bidding Terms and Specificationsix[4] provide for the manner of shipment of coals, thus: SECTION V SHIPMENT 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, 1987ix[5]

On July 10, 1987, PHIBRO sent word to NAPOCOR that industrial disputes might soon plague Australia, the shipments point of origin, which could seriously hamper PHIBROs ability to supply the needed coal.ix[6] From July 23 to July 31, 1987, PHIBRO again apprised NAPOCOR of the situation in Australia, particularly informing the latter 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.ix[7] In order to hasten the transfer of coal, PHIBRO proposed to NAPOCOR that they equally share the burden of a strike-free clause. NAPOCOR refused. On August 6, 1987, PHIBRO received from NAPOCOR a confirmed and workable letter of credit. Instead of delivering the coal on or before the thirtieth day after receipt of the Letter of Credit, as agreed upon by the parties in the July contract, PHIBRO effected its first shipment only on November 17, 1987. Consequently, in October 1987, NAPOCOR once more advertised for the delivery of coal to its Calaca thermal plant. PHIBRO participated anew in this subsequent bidding. On November 24, 1987, NAPOCOR disapproved PHIBROs application for pre-qualification to bid for not meeting the minimum requirements.ix[8] Upon further inquiry, PHIBRO found that the real reason for the disapproval was its purported failure to satisfy NAPOCORs demand for damages due to the delay in the delivery of the first coal shipment. This prompted PHIBRO to file an action for damages with application for injunction against NAPOCOR with the Regional Trial Court, Branch 57, Makati City.ix[9] In its complaint, PHIBRO alleged that NAPOCORs act of disqualifying it in the October 1987 bidding and in all

subsequent biddings was tainted with malice and bad faith. PHIBRO prayed for actual, moral and exemplary damages and attorneys fees. In its answer, NAPOCOR averred that the strikes in Australia could not be invoked as reason for the delay in the delivery of coal because PHIBRO itself admitted that as of 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, NAPOCOR claimed that due to PHIBROs failure to deliver the coal on time, it was compelled to purchase coal from ASEA at a higher price. NAPOCOR 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.ix[10] Thereafter, trial on the merits ensued. On January 16, 1992, the trial court rendered a decision in favor of PHIBRO, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff Philipp Brothers Oceanic Inc. (PHIBRO) and against the defendant National Power Corporation (NAPOCOR) ordering the said defendant NAPOCOR: 1. To reinstate Philipp Brothers Oceanic, Inc. (PHIBRO) in the defendant National Power Corporations list of accredited bidders and allow PHIBRO to participate in any and all future tenders of National Power Corporation for the supply and delivery of imported steam coal; 2 To pay Philipp Brothers Oceanic, Inc. (PHIBRO); a. The peso equivalent at the time of payment of $864,000 as actual damages; The peso equivalent at the time of payment of $100,000 as moral damages; The peso equivalent at the time of payment of $ 50,000 as exemplary damages; The peso equivalent at the time of payment of $73,231.91 as reimbursement for expenses, cost of litigation and attorneys fees;

b.

c.

d.

3. 4.

To pay the costs of suit; The counterclaims of defendant NAPOCOR are dismissed for lack of merit.

SO ORDERED.ix[11] Unsatisfied, NAPOCOR, through the Solicitor General, elevated the case to the Court of Appeals. On August 27, 1996, the Court of Appeals rendered a Decision affirming in toto the Decision of the Regional Trial Court. It ratiocinated that: There is ample evidence to show that although PHIBROs delivery of the shipment of coal was delayed, the delay was in fact caused by a) Napocors own delay in opening a workable letter of credit; and b) the strikes which plaqued the Australian coal industry from the first week of July to the third week of September 1987. 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. Phibro was informed of the acceptance of its bid on July 8, 1987. Delivery of coal was to be effected thirty (30) days from Napocors opening of a confirmed and workable letter of credit. Napocor was only able to do so on August 6, 1987. By that time, Australias coal industry was in the middle of a seething controversy and unrest, occasioned by strikes, overtime bans, mine stoppages. The origin, the scope and the effects of this industrial unrest are lucidly described in the uncontroverted testimony of James Archibald, an employee of Phibro and member of the Export Committee of the Australian Coal Association during the time these events transpired. xxx xxx

The records also attest that Phibro periodically informed Napocor of these developments as early as July 1, 1987, even before the bid was approved. Yet, Napocor did not forthwith open the letter of credit in order to avoid delay which might be caused by the strikes and their aftereffects. Strikes are undoubtedly included in the force majeure clause of the Bidding Terms and Specifications (supra). The renowned civilist, Prof. Arturo Tolentino, defines force majeure as an event which takes place by accident and could not have been foreseen. (Civil Code of the Philippines, Volume IV, Obligations and Constracts, 126, [1991]) He further states: Fortuitous events may be produced by two general causes: (1) by Nature, such as earthquakes, storms, floods, epidemics, fires, etc., and (2) by the act of man, such as an armed invasion, attack by bandits, governmental prohibitions, robbery, etc. Tolentino adds that the term generally applies, broadly speaking, to natural accidents. In order that acts of man such as a strike, may constitute fortuitous event, it is necessary that they have the force of an imposition which the debtor could not have resisted. He cites a parallel example in the case of Philippine National Bank v. Court of Appeals, 94 SCRA 357 (1979), wherein the Supreme Court said that the outbreak of war which prevents performance exempts a party from liability.

Hence, by law and by stipulation of the parties, the strikes which took place in Australia from the first week of July to the third week of September, 1987, exempted Phibro from the effects of delay of the delivery of the shipment of coal.ix[12] Twice thwarted, NAPOCOR comes to us via a petition for review ascribing to the Court of Appeals the following errors: I Respondent Court of Appeals gravely and seriously erred in concluding and so holding that PHIBROs delay in the delivery of imported coal was due to NAPOCORs alleged delay in opening a letter of credit and to force majeure, and not to PHIBROs own deliberate acts and faults.ix[13] II Respondent Court of Appeals gravely and seriously erred in concluding and so holding that NAPOCOR acted maliciously and unjustifiably in disqualifying PHIBRO from participating in the December 8, 1987 and future biddings for the supply of imported coal despite the existence of valid grounds therefor such as serious impairment of its track record.ix[14] III Respondent Court of Appeals gravely and seriously erred in concluding and so holding that PHIBRO was entitled to injunctive relief, to actual or compensatory, moral and exemplary damages, attorneys fees and litigation expenses despite the clear absence of legal and factual bases for such award.ix[15] IV Respondent Court of Appeals gravely and seriously erred in absolving PHIBRO from any liability for damages to NAPOCOR for its unjustified and deliberate refusal and/or failure to deliver the contracted imported coal within the stipulated period.ix[16] V Respondent Court of Appeals gravely and seriously erred in dismissing NAPOCORs counterclaims for damages and litigation expenses.ix[17] It is axiomatic that only questions of law, not questions of fact, may be raised before this Court in a petition for review under Rule 45 of the Rules of Court.ix[18] The findings of facts of the Court of Appeals are conclusive and binding on this Courtix[19] and they carry even more weight when the said court affirms the factual findings of the trial court.ix[20] Stated differently,

the findings of the Court of Appeals, by itself, which are supported by substantial evidence, are almost beyond the power of review by this Court.ix[21] With the foregoing settled jurisprudence, we find it pointless to delve lengthily on the factual issues raised by petitioner. The existence of strikes in Australia having been duly established in the lower courts, we are left only with the burden of determining whether or not NAPOCOR acted wrongfully or with bad faith in disqualifying PHIBRO from participating in the subsequent public bidding. Let us consider the case in its proper perspective. The Court of Appeals is justified in sustaining the Regional Trial Courts decision exonerating PHIBRO from any liability for damages to NAPOCOR as it was clearly established from the evidence, testimonial and documentary, that what prevented PHIBRO from complying with its obligation under the July 1987 contract was the industrial disputes which besieged Australia during that time. Extant in our Civil Code is the rule that no person shall be responsible for those events which could not be foreseeen, or which, though foreseen, were inevitable.ix[22] This means that when an obligor is unable to fulfill his obligation because of a fortuitous event or force majeure, he cannot be held liable for damages for non-performance.ix[23] In addition to the above legal precept, it is worthy to note that PHIBRO and NAPOCOR explicitly agreed in Section XVII of the Bidding Terms and Specificationsix[24] that neither seller (PHIBRO) nor buyer (NAPOCOR) 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 NAPOCOR and PHIBRO. Therefore, we have no reason to rule otherwise. However, proceeding from the premise that PHIBRO was prevented by force majeure from complying with its obligation, does it necessarily follow that NAPOCOR acted unjustly, capriciously, and unfairly in disapproving PHIBROs application for pre-qualification to bid? First, it must be stressed that NAPOCOR was not bound under any contract to approve PHIBROs pre-qualification requirements. In fact, NAPOCOR had expressly reserved its right to reject bids. The Instruction to Bidders found in the Post-Qualification Documents/ Specifications for the Supply and Delivery of Coal for the Batangas Coal-Fired Thermal Power Plant I at Calaca, Batangas Philippines,ix[25] is explicit, thus: IB-17 RESERVATION OF NAPOCOR TO REJECT BIDS

NAPOCOR 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.ix[26] (Emphasis supplied) 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.ix[27] 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.ix[28] In Celeste v. Court of Appeals,ix[29] we had the occasion to rule: Moreover, paragraph 15 of the Instructions to Bidders states that the Government hereby reserves the right to reject any or all bids submitted. In the case of A.C. Esguerra and Sons v. Aytona, 4 SCRA 1245, 1249 (1962), we held: x x x [I]n the invitation to bid, there is a condition imposed upon the bidders to the effect that the bidders shall be subject to the right of the government to reject any and all bids subject to its discretion. Here the government has made its choice, and unless an unfairness or injustice is shown, the losing bidders have no cause to complain, nor right to dispute that choice. Since there is no evidence to prove bad faith and arbitrariness on the part of the petitioners in evaluating the bids, we rule that the private respondents are not entitled to damages representing lost profits. (Emphasis supplied) Verily, a reservation of the government of its right to reject any bid, generally vests in the authorities a wide discretion as to who is the best and most advantageous bidder. The exercise of such discretion involves inquiry, investigation, comparison, deliberation and decision, which are quasi-judicial functions, and when honestly exercised, may not be reviewed by the court.ix[30] In Bureau Veritas v. Office of the President,ix[31] we decreed: The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere therewith, unless it is apparent that it is used as a shield to a fraudulent award. (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x. The exercise of this discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation, and deliberation. This task can best be discharged by the Government agencies concerned, not by the Courts. The role of the Courts is to ascertain whether a branch or instrumentality of the Government has transgresses its constitutional boundaries. But the Courts will not interfere with executive or legislative discretion exercised within those boundaries. Otherwise, it strays into the realm of policy decision-making. x x x. (Emphasis supplied)

Owing to the discretionary character of the right involved in this case, the propriety of NAPOCORs act should therefore be judged on the basis of the general principles regulating human relations, the forefront provision of which is Article 19 of the Civil Code which provides that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.ix[32] Accordingly, a person will be protected only when he acts in the legitimate exercise of his right, that is, when he acts with prudence and in good faith; but not when he acts with negligence or abuse.ix[33] Did NAPOCOR 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.ix[34] We went over the record of the case with painstaking solicitude and we are convinced that NAPOCORs 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, NAPOCOR acted on the strong conviction that PHIBRO had a seriously-impaired track record. NAPOCOR cannot be faulted from believing so. At this juncture, it is worth mentioning that at the time NAPOCOR 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, NAPOCOR is justified in entertaining doubts on PHIBROs qualification or capability to assume an obligation under a new contract. Moreover, PHIBROs actuation in 1987 raised doubts as to the real situation of the coal industry in Australia. It appears from the records that when NAPOCOR was constrained to consider an offer from another coal supplier (ASEA) at a price of US$33.44 per metric ton, PHIBRO unexpectedly offered the immediate delivery of 60,000 metric tons of Ulan steam coal at US$31.00 per metric ton for arrival at Calaca, Batangas on September 20-21, 1987.ix[35] Of course, NAPOCOR had reason to ponder-- how come PHIBRO could assure the immediate delivery of 60,000 metric tons of coal from the same source to arrive at Calaca not later than September 20/21, 1987 but it could not deliver the coal it had undertaken under its contract? Significantly, one characteristic of a fortuitous event, in a legal sense, and consequently in relations to contracts, is that the concurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner.ix[36] Faced with the above circumstance, NAPOCOR is justified in assuming that, may be, there was really no fortuitous event or force majeure which could render it impossible for PHIBRO to effect the delivery of coal. Correspondingly, it is also justified in treating PHIBROs failure to deliver a serious impairment of its track record. That the trial court, thereafter, found PHIBROs unexpected offer actually a result of its desire to minimize losses on the part of NAPOCOR is inconsequential. In determining the existence of good faith, the yardstick is the frame of mind of the actor at the time

he committed the act, disregarding actualities or facts outside his knowledge. We cannot fault NAPOCOR if it mistook PHIBROs unexpected offer a mere attempt on the latters part to undercut ASEA or an indication of PHIBROs inconsistency. The circumstances warrant such contemplation. That NAPOCOR believed all along that PHIBROs failure to deliver on time was unfounded is manifest from its lettersix[37] reminding PHIBRO that it was bound to deliver the coal within 30 days from its (PHIBROs) receipt of the Letter of Credit, otherwise it would be constrained to take legal action. The same honest belief can be deduced from NAPOCORs Board Resolution, thus: On the legal aspect, Management stressed that failure of PBO to deliver under the contract makes them liable for damages, considering that the reasons invoked were not valid. The measure of the damages will be limited to actual and compensatory damages. However, it was reported that Philipp Brothers advised they would like to have continuous business relation with NPC so they are willing to sit down or even proposed that the case be submitted to the Department of Justice as to avoid a court action or arbitration. xxx xxx

On the technical-economic aspect, Management claims that if PBO delivers in November 1987 and January 1988, there are some advantages. If PBO reacts to any legal action and fails to deliver, the options are: one, to use 100% Semirara and second, to go into urgent coal order. The first option will result in a 75 MW derating and oil will be needed as supplement. We will stand to lose around P30 M. On the other hand, if NPC goes into an urgent coal order, there will be an additional expense of $786,000 or P16.11 M, considering the price of the latest purchase with ASEA. On both points, reliability is decreased.ix[38] The very purpose of requiring a bidder to furnish the awarding authority its pre-qualification documents is to ensure that only those responsible and qualified bidders could bid and be awarded with government contracts. It bears stressing that the award of a contract is measured not solely by the smallest amount of bid for its performance, but also by the responsibility of the bidder. Consequently, the integrity, honesty, and trustworthiness of the bidder is to be considered. An awarding official is justified in considering a bidder not qualified or not responsible if he has previously defrauded the public in such contracts or if, on the evidence before him, the official bona fide believes the bidder has committed such fraud, despite the fact that there is yet no judicial determination to that effect.ix[39] Otherwise stated, if the awarding body bona fide believes that a bidder has seriously impaired its track record because of a particular conduct, it is justified in disqualifying the bidder. This policy is necessary to protect the interest of the awarding body against irresponsible bidders. 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.ix[40] While confined in the realm of thought, its presence may be ascertained through the partys actuation or through circumstantial evidence.ix[41] The circumstances under which NAPOCOR 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 NAPOCOR for the course of action it took. NAPOCOR cannot be made liable for actual, moral and exemplary damages. Corollarily, in awarding to PHIBRO actual damages in the amount of $864,000, the Regional Trial Court computed what could have been the profits of PHIBRO had NAPOCOR 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 quote the trial courts ruling, thus: x x x. PHIBRO was unjustly excluded from participating in at least five (5) tenders beginning December 1987 to 1990, for the supply and delivery of imported coal with a total volume of about 1,200,000 metric tons valued at no less than US$32 Million. (Exhs. AA, AA-1, to AA-2). The price of imported coal for delivery in 1988 was quoted in June 1988 by bidders at US$ 41.35 to US $ 43.95 per metric ton (Exh. JJ); in September 1988 at US$41.50 to US$49.50 per metric ton (Exh. J-1); in November 1988 at US$ 39.00 to US$ 48.50 per metric ton (Exh. J-2) and for the 1989 deliveries, at US$ 44.35 to US$ 47.35 per metric ton (Exh. J3) and US$38.00 to US$48.25 per metric ton in September 1990 (Exh. JJ-6 and JJ-7). PHIBRO would have won the tenders for the supply and delivery of about 960,000 metric tons of coal out of at least 1,200,000 metric tons awarded during said period based on its proven track record of 80%. The Court, therefore finds that as a result of its disqualification, PHIBRO suffered damages equivalent to its standard 3% margin in 960,000 metric tons of coal at the most conservative price of US$ 30.000 per metric ton, or the total of US$ 864,000 which PHIBRO would have earned had it been allowed to participate in biddings in which it was disqualified and in subsequent tenders for supply and delivery of imported coal. 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.ix[42] 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,ix[43] 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. Court of Appeals,ix[44] this Court denied the plaintiffs 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, thus:

As to the alleged contract he was about to negotiate with Minister Hipolito, there is no showing that the same has been awarded to him. If Tandoc was about to negotiate a contract with Minister Hipolito, there was no assurance that the former would get it or that the latter would award the contract to him since there was the requisite public bidding. The claimed loss of profit arising out of that alleged contract which was still to be negotiated is a mere expectancy. Tandocs claim that he could have earned P2 million in profits is highly speculative and no concrete evidence was presented to prove the same. The only unearned income to which Tandoc is entitled to from the evidence presented is that for the one-month period, during which his business was interrupted, which is P6,125.00, considering that his annual net income was P73, 500.00. In Lufthansa German Airlines v. Court of Appeals,ix[45] this Court likewise disallowed the trial court's award of actual damages for unrealized profits in the amount of US$75,000.00 for being highly speculative. It was held that the realization of profits by respondent x x x was not a certainty, but depended on a number of factors, foremost of which was his ability to invite investors and to win the bid. This Court went further saying that actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of certainty. And in National Power Corporation v. Court of Appeals,ix[46] the Court, in denying the bidders claim for unrealized commissions, ruled that even if NAPOCOR does not deny its (bidder's) claims for unrealized commissions, and that these claims have been transmuted into judicial admissions, these admissions cannot prevail over the rules and regulations governing the bidding for NAPOCOR contracts, which necessarily and inherently include the reservation by the NAPOCOR of its right to reject any or all bids. The award of moral damages is likewise improper. To reiterate, NAPOCOR did not act in bad faith. Moreover, moral damages are not, as a general rule, granted to a corporation.ix[47] 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.ix[48] In LBC Express, Inc. v. Court of Appeals,ix[49] 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 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.

NAPOCOR, 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 attorneys fees. We agree with NAPOCOR. 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.ix[50] This cannot be said of the case at bar. NAPOCOR is justified in resisting PHIBROs claim for damages. As a matter of fact, we partially grant the prayer of NAPOCOR as we find that it did not act in bad faith in disapproving PHIBRO's prequalification 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, NAPOCOR 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 households and businesses being entirely dependent on the electricity supplied by NAPOCOR, the delivery of coal cannot be venturesome. Indeed, public interest demands that one who offers to deliver coal at an appointed time must give a reasonable assurance that it can carry through. 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 Court of Appeals 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 attorneys fees, and costs of suit, is DELETED. SO ORDERED. FIRST DIVISION [G.R. No. 128690. January 21, 1999]

ABS-CBN BROADCASTING CORPORATION, petitioners, vs. HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP., VIVA PRODUCTIONS, INC., and VICENTE DEL ROSARIO, respondents. DECISION DAVIDE, JR., C.J.: In this petition for review on certiorari, petitioners ABS-CBN Broadcasting Corp. (hereinafter ABS-CBN) seeks to reverse and set aside the decisionix[1] of 31 October 1996 and the resolutionix[2] of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The former affirmed with modification the decisionix[3] of 28 April 1993 of the Regional Trial Court (RTC) of Quezon City, Branch 80, in Civil Case No. Q-12309. The latter denied the motion to reconsider the decision of 31 October 1996. The antecedents, as found by the RTC and adopted by the Court of Appeals, are as follows: In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement (Exh. A) whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva films. Sometime in December 1991, in accordance with paragraph 2.4 [sic] of said agreement stating that1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) Viva films for TV telecast under such terms as may be agreed upon by the parties hereto, provided, however, that such right shall be exercised by ABS-CBN from the actual offer in writing. Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-president Charo Santos-Concio, a list of three (3) film packages (36 title) from which ABS-CBN may exercise its right of first refusal under the afore-said agreement (Exhs. 1 par. 2, 2, 2-A and 2-B Viva). ABS-CBN, however through Mrs. Concio, can tick off only ten (10) titles (from the list) we can purchase (Exh. 3 Viva) and therefore did not accept said list (TSN, June 8, 1992, pp. 9-10). The titles ticked off by Mrs. Concio are not the subject of the case at bar except the film Maging Sino Ka Man. For further enlightenment, this rejection letter dated January 06, 1992 (Exh 3 Viva) is hereby quoted: 6 January 1992 Dear Vic, This is not a very formal business letter I am writing to you as I would like to express my difficulty in recommending the purchase of the three film packages you are offering ABS-CBN. From among the three packages I can only tick off 10 titles we can purchase. Please see attached. I hope you will understand my position. Most of the action pictures in the list do not

have big action stars in the cast. They are not for primetime. In line with this I wish to mention that I have not scheduled for telecast several action pictures in our very first contract because of the cheap production value of these movies as well as the lack of big action stars. As a film producer, I am sure you understand what I am trying to say as Viva produces only big action pictures. In fact, I would like to request two (2) additional runs for these movies as I can only schedule them in out non-primetime slots. We have to cover the amount that was paid for these movies because as you very well know that non-primetime advertising rates are very low. These are the unaired titles in the first contract. 1. Kontra Persa [sic] 2. Raider Platoon 3. Underground guerillas 4. Tiger Command 5. Boy de Sabog 6. lady Commando 7. Batang Matadero 8. Rebelyon I hope you will consider this request of mine. The other dramatic films have been offered to us before and have been rejected because of the ruling of MTRCB to have them aired at 9:00 p.m. due to their very adult themes. As for the 10 titles I have choosen [sic] from the 3 packages please consider including all the other Viva movies produced last year, I have quite an attractive offer to make. Thanking you and with my warmest regards. (Signed) Charo Santos-Concio On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms. Concio, with a list consisting of 52 original movie titles (i.e., not yet aired on television) including the 14 titles subject of the present case, as well as 104 re-runs (previously aired on television) from which ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of which P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots (Exh. 4 to 4-C Viva; 9 Viva). On April 2, 1992, defendant Del Rosario and ABS-CBNs general manager, Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal of VIVA. What transpired in that lunch meeting is the subject of conflicting versions. Mr. Lopez testified that he and Mr. Del Rosario allegedly agreed that ABS-CBN was granted exclusive film rights to

fourteen (14) films for a total consideration of P36 million; that he allegedly put this agreement as to the price and number of films in a napkin and signed it and gave it to Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8, 1992). On the other hand. Del Rosario denied having made any agreement with Lopez regarding the 14 Viva films; denied the existence of a napkin in which Lopez wrote something; and insisted that what he and Lopez discussed at the lunch meeting was Vivas film package offer of 104 films (52 originals and 52 re-runs) for a total price of P60 million. Mr. Lopez promising [sic]to make a counter proposal which came in the form of a proposal contract Annex C of the complaint (Exh. 1 Viva; Exh C ABS-CBN). On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for Finance discussed the terms and conditions of Vivas offer to sell the 104 films, after the rejection of the same package by ABS-CBN. On April 07, 1992, defendant Del Rosario received through his secretary , a handwritten note from Ms. Concio, (Exh. 5 Viva), which reads: Heres the draft of the contract. I hope you find everything in order, to which was attached a draft exhibition agreement (Exh. C ABSCBN; Exh. 9 Viva p. 3) a counter-proposal covering 53 films, 52 of which came from the list sent by defendant Del Rosario and one film was added by Ms. Concio, for a consideration of P35 million. Exhibit C provides that ABS-CBN is granted film rights to 53 films and contains a right of first refusal to 1992 Viva Films. The said counter proposal was however rejected by Vivas Board of Directors [in the] evening of the same day, April 7, 1992, as Viva would not sell anything less than the package of 104 films for P60 million pesos (Exh. 9 Viva), and such rejection was relayed to Ms. Concio. On April 29, 1992, after the rejection of ABS-CBN and following several negotiations and meetings defendant Del Rosario and Vivas President Teresita Cruz, in consideration of P60 million, signed a letter of agreement dated April 24, 1992, granting RBS the exclusive right to air 104 Viva-produced and/or acquired films (Exh. 7-A - RBS; Exh. 4 RBS) including the fourteen (14) films subject of the present case.ix[4] On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with a prayer for a writ of preliminary injunction and/or temporary restraining order against private respondents Republic Broadcasting Corporationix[5] (hereafter RBS), Viva Production (hereafter VIVA), and Vicente del Rosario. The complaint was docketed as Civil Case No. Q92-12309. On 28 May 1992, the RTC issued a temporary restraining orderix[6] enjoining private respondents from proceeding with the airing, broadcasting, and televising of the fourteen VIVA films subject of the controversy, starting with the film Maging Sino Ka Man, which was scheduled to be shown on private respondent RBS channel 7 at seven oclock in the evening of said date. On 17 June 1992, after appropriate proceedings, the RTC issued an orderix[7] directing the issuance of a writ of preliminary injunction upon ABS-CBNs posting of a P35 million bond.

ABS-CBN moved for the reduction of the bond,ix[8] while private respondents moved for reconsideration of the order and offered to put up a counterbond.ix[9] In the meantime, private respondents filed separate answer with counterclaim.ix[10] RBS also set up a cross-claim against VIVA. On 3 August 1992, the RTC issued an orderix[11] dissolving the writ of preliminary injunction upon the posting by RBS of a P30 million counterbond to answer for whatever damages ABSCBN might suffer by virtue of such dissolution. However, it reduced petitioners injunction bond to P15 million as a condition precedent for the reinstatement of the writ of preliminary injunction should private respondents be unable to post a counterbond. At the pre-trialix[12] on 6 August 1992, the parties upon suggestion of the court, agreed to explore the possibility of an amicable settlement. In the meantime, RBS prayed for and was granted reasonable time within which to put up a P30 million counterbond in the event that no settlement would be reached. As the parties failed to enter into an amicable settlement, RBS posted on 1 October 1992 a counterbond, which the RTC approved in its Order of 15 October 1992.ix[13] On 19 October 1992, ABS-CBN filed a motion for reconsiderationix[14] of the 3 August and 15 October 1992 Orders, which RBS opposed.ix[15] On 29 October, the RTC conducted a pre-trial.ix[16] Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of Appeals a petitionix[17] challenging the RTCs Order of 3 August and 15 October 1992 and praying for the issuance of a writ of preliminary injunction to enjoin the RTC from enforcing said orders. The case was docketed as CA-G.R. SP No. 29300. On 3 November 1992, the Court of Appeals issued a temporary restraining orderix[18] to enjoin the airing, broadcasting, and televising of any or all of the films involved in the controversy. On 18 December 1992, the Court of Appeals promulgated a decisionix[19] dismissing the petition in CA-G.R. SP No. 29300 for being premature. ABS-CBN challenged the dismissal in a petition for review filed with this Court on 19 January 1993, which was docketed s G.R. No. 108363. In the meantime the RTC received the evidence for the parties in Civil Case No. Q-92-12309. Thereafter, on 28 April 1993, it rendered a decisionix[20] in favor of RBS and VIVA and against ABS-CBN disposing as follows: WHEREFORE, under cool reflection and prescinding from the foregoing, judgment is rendered in favor of defendants and against the plaintiff.

(1) The complaint is hereby dismissed; (2) Plaintiff ABS-CBN is ordered to pay defendant RBS the following: a) P107,727.00 the amount of premium paid by RBS to the surety which issued defendants RBSs bond to lift the injunction; b) P191,843.00 for the amount of print advertisement for Maging Sino Ka Man in various newspapers; c) Attorneys fees in the amount of P1 million; d) P5 million as and by way of moral damages; e) P5 million as and by way of exemplary damages; (3) For the defendant VIVA, plaintiff ABS-CBN is ordered to pay P212,000.00 by way of reasonable attorneys fees. (4) The cross-claim of defendant RBS against defendant VIVA is dismissed. (5) Plaintiff to pay the costs. According to the RTC, there was no meeting of minds on the price and terms of the offer. The alleged agreement between Lopez III and Del Rosario was subject to the approval of the VIVA Board of Directors, and said agreement was disapproved during the meeting of the Board on 7 April 1992. Hence, there was no basis for ABS-CBNs demand that VIVA signed the 1992 Film Exhibition Agreement. Furthermore, the right of first refusal under the 1990 Film Exhibition Agreement had previously been exercised per Ms. Concios letter to Del Rosario ticking off ten titles acceptable to them, which would have made the 1992 agreement an entirely new contract. On 21 June 1993, this Court deniedix[21] ABS-CBNs petition for review in G.R. No. 108363, as no reversible error was committed by the Court of Appeals in its challenged decision and the case had become moot and academic in view of the dismissal of the main action by the court a quo in its decision of 28 April 1993. Aggrieved by the RTCs decision, ABS-CBN appealed to the Court of Appeals claiming that there was a perfected contract between ABS-CBN and VIVA granting ABS-CBN the exclusive right to exhibit the subject films. Private respondents VIVA and Del Rosario also appealed seeking moral and exemplary damages and additional attorneys fees. In its decision of 31 October 1996, the Court of Appeals agreed with the RTC that the contract between ABS-CBN and VIVA had not been perfected, absent the approval by the VIVA Board of Directors of whatever Del Rosario, its agent, might have agreed with Lopez III. The appellate court did not even believe ABS-CBNs evidence that Lopez III actually wrote down

such an agreement on a napkin, as the same was never produced in court. It likewise rejected ABS-CBNs insistence on its right of first refusal and ratiocinated as follows: As regards the matter of right of first refusal, it may be true that a Film Exhibition Agreement was entered into between Appellant ABS-CBN and appellant VIVA under Exhibit A in 1990 and that parag. 1.4 thereof provides: 1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) VIVA films for TV telecast under such terms as may be agreed upon by the parties hereto, provided, however, that such right shall be exercised by ABS-CBN within a period of fifteen (15) days from the actual offer in writing (Records, p. 14). [H]owever, it is very clear that said right of first refusal in favor of ABS-CBN shall still be subjected to such terms as may be agreed upon by the parties thereto, and that the said right shall be exercised by ABS-CBN within fifteen (15) days from the actual offer in writing. Said parag. 1.4 of the agreement Exhibit A on the right of first refusal did not fix the price of the film right to the twenty-four (24) films, nor did it specify the terms thereof. The same are still left to be agreed upon by the parties. In the instant case, ABS-CBNs letter of rejection Exhibit 3 (Records, p. 89) stated that it can only tick off ten (10) films, and the draft contract Exhibit C accepted only fourteen (14) films, while parag. 1.4 of Exhibit A speaks of the next twenty-four (24) films. The offer of VIVA was sometime in December 1991, (Exhibits 2, 2-A, 2-B; Records, pp. 86-88; Decision, p. 11, Records, p. 1150), when the first list of VIVA films was sent by Mr. Del Rosario to ABS-CBN. The Vice President of ABS-CBN, Mrs. Charo Santos-Concio, sent a letter dated January 6, 1992 (Exhibit 3, Records, p. 89) where ABS-CBN exercised its right of refusal by rejecting the offer of VIVA. As aptly observed by the trial court, with the said letter of Mrs. Concio of January 6, 1992, ABS-CBN had lost its right of first refusal. And even if We reckon the fifteen (15) day period from February 27, 1992 (Exhibit 4 to 4-C) when another list was sent to ABS-CBN after the letter of Mrs. Concio, still the fifteen (15) day period within which ABSCBN shall exercise its right of first refusal has already expired.ix[22] Accordingly, respondent court sustained the award factual damages consisting in the cost of print advertisements and the premium payments for the counterbond, there being adequate proof of the pecuniary loss which RBS has suffered as a result of the filing of the complaint by ABS-CBN. As to the award of moral damages, the Court of Appeals found reasonable basis therefor, holding that RBSs reputation was debased by the filing of the complaint in Civil Case No. Q-92-12309 and by the non-showing of the film Maging Sino Ka Man. Respondent court also held that exemplary damages were correctly imposed by way of example or correction for the public good in view of the filing of the complaint despite petitioners knowledge that the contract with VIVA had not been perfected. It also upheld the award of attorneys fees, reasoning that with ABSCBNs act of instituting Civil Case No. Q-92-12309, RBS was unnecessarily forced to litigate.

The appellate court, however, reduced the awards of moral damages to P 2 million, exemplary damages to P2 million, and attorneys fees to P500,000.00. On the other hand, respondent Court of Appeals denied VIVA and Del Rosarios appeal because it was RBS and not VIVA which was actually prejudiced when the complaint was filed by ABS-CBN. Its motion for reconsideration having been denied, ABS-CBN filed the petition in this case, contending that the Court of Appeals gravely erred in I RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN PETITIONER AND PRIVATE RESPONDENT VIVA NOTWITHSTANDING PREPONFERANCE OF EVIDENCE ADDUCED BY PETITIONER TO THE CONTRARY. II IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR OF PRIVATE RESPONDENT RBS. III IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF PRIVATE RESPONDENT RBS. IV IN AWARDING ATORNEYS FEES OF RBS. ABS-CBN claims that it had yet to fully exercise its right of first refusal over twenty-four titles under the 1990 Film Exhibition Agreement, as it had chosen only ten titles from the first list. It insists that we give credence to Lopezs testimony that he and Del Rosario met at the Tamarind Grill Restaurant, discussed the terms and conditions of the second list (the 1992 Film Exhibition Agreement) and upon agreement thereon, wrote the same on a paper napkin. It also asserts that the contract has already been effective, as the elements thereof, namely, consent, object, and consideration were established. It then concludes that the Court of Appeals pronouncements were not supported by law and jurisprudence, as per our decision of 1 December 1995 in Limketkai Sons Milling, Inc. v. Court of Appeals,ix[23] which cited Toyota Shaw, Inc. v. Court of Appeals;ix[24] Ang Yu Asuncion v. Court of Appeals,ix[25] and Villonco Realty Company v. Bormaheco, Inc.ix[26] Anent the actual damages awarded to RBS, ABS-CBN disavows liability therefor. RBS spent for the premium on the counterbond of its own volition in order to negate the injunction issued by the trial court after the parties had ventilated their respective positions during the hearings for

the purpose. The filing of the counterbond was an option available to RBS, but it can hardly be argued that ABS-CBN compelled RBS to incur such expense. Besides, RBS had another available option, i.e., move for the dissolution of the injunction; or if it was determined to put up a counterbond, it could have presented a cash bond. Furthermore under Article 2203 of the Civil Code, the party suffering loss injury is also required to exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission. As regards the cost of print advertisements, RBS had not convincingly established that this was a loss attributable to the nonshowing of Maging Sino Ka Man; on the contrary, it was brought out during trial that with or without the case or injunction, RBS would have spent such an amount to generate interest in the film. ABS-CBN further contends that there was no other clear basis for the awards of moral and exemplary damages. The controversy involving ABS-CBN and RBS did not in any way originate from business transaction between them. The claims for such damages did not arise from any contractual dealings or from specific acts committed by ABS-CBN against RBS that may be characterized as wanton, fraudulent, or reckless; they arose by virtue only of the filing of the complaint. An award of moral and exemplary damages is not warranted where the record is bereft of any proof that a party acted maliciously or in bad faith in filing an action.ix[27] In any case, free resort to courts for redress of wrongs is a matter of public policy. The law recognizes the right of every one to sue for that which he honestly believes to be his right without fear of standing trial for damages where by lack of sufficient evidence, legal technicalities, or a different interpretation of the laws on the matter, the case would lose ground.ix[28] One who, makes use of his own legal right does no injury.ix[29] If damage results from filing of the complaint, it is damnum absque injuria.ix[30] Besides, moral damages are generally not awarded in favor of a juridical person, unless it enjoys a good reputation that was debased by the offending party resulting in social humiliation.ix[31] As regards the award of attorneys fees, ABS-CBN maintains that the same had no factual, legal, or equitable justification. In sustaining the trial courts award, the Court of Appeals acted in clear disregard of the doctrine laid down in Buan v. Camaganacanix[32] that the text of the decision should state the reason why attorneys fees are being awarded; otherwise, the award should be disallowed. Besides, no bad faith has been imputed on, much less proved as having been committed by, ABS-CBN. It has been held that where no sufficient showing of bad faith would be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause, attorneys fees shall not be recovered as cost.ix[33] On the other hand, RBS asserts that there was no perfected contract between ABS-CBN and VIVA absent meeting of minds between them regarding the object and consideration of the alleged contract. It affirms that ABS-CBNs claim of a right of first refusal was correctly rejected by the trial court. RBS insists the premium it had paid for the counterbond constituted a pecuniary loss upon which it may recover. It was obliged to put up the counterbond due to the injunction procured by ABS-CBN. Since the trial court found that ABS-CBN had no cause of action or valid claim against RBS and, therefore not entitled to the writ of injunction, RBS could recover from ABS-CBN the premium paid on the counterbond. Contrary to the claim of ABSCBN, the cash bond would prove to be more expensive, as the loss would be equivalent to the

cost of money RBS would forego in case the P30 million came from its funds or was borrowed from banks. RBS likewise asserts that it was entitled to the cost of advertisements for the cancelled showing of the film Maging Sino Ka Man because the print advertisements were out to announce the showing on a particular day and hour on Channel 7, i.e., in its entirety at one time, not as series to be shown on a periodic basis. Hence, the print advertisements were good and relevant for the particular date of showing, and since the film could not be shown on that particular date and hour because of the injunction, the expenses for the advertisements had gone to waste. As regards moral and exemplary damages, RBS asserts that ABS-CBN filed the case and secured injunctions purely for the purpose of harassing and prejudicing RBS. Pursuant then to Articles 19 and 21 of the Civil Code, ABS-CBN must be held liable for such damages. Citing Tolentino,ix[34] damages may be awarded in cases of abuse of rights even if the done is not illicit, and there is abuse of rights where a plaintiff institutes an action purely for the purpose of harassing or prejudicing the defendant. In support of its stand that a juridical entity can recover moral and exemplary damages, private respondent RBS cited People v. Manero,ix[35] where it was stated that such entity may recover moral and exemplary damages if it has a good reputation that is debased resulting in social humiliation. It then ratiocinates; thus: There can be no doubt that RBS reputation has been debased by ABS-CBNs acts in this case. When RBS was not able to fulfill its commitment to the viewing public to show the film Maging Sino Ka Man on the scheduled dates and times (and on two occasions that RBS advertised), it suffered serious embarrassment and social humiliation. When the showing was cancelled, irate viewers called up RBS offices and subjected RBS to verbal abuse (Announce kayo ng announce, hindi ninyo naman ilalabas, nanloloko yata kayo) (Exh. 3-RBS, par.3). This alone was not something RBS brought upon itself. It was exactly what ABS-CBN had planted to happen. The amount of moral and exemplary damages cannot be said to be excessive. Two reasons justify the amount of the award. The first is that the humiliation suffered by RBS, is national in extent. RBS operations as a broadcasting company is [sic] nationwide. Its clientele, like that of ABS-CBN, consists of those who own and watch television. It is not an exaggeration to state, and it is a matter of judicial notice that almost every other person in the country watches television. The humiliation suffered by RBS is multiplied by the number of televiewers who had anticipated the showing of the film, Maging Sino Ka Man on May 28 and November 3, 1992 but did not see it owing to the cancellation. Added to this are the advertisers who had placed commercial spots for the telecast and to whom RBS had a commitment in consideration of the placement to show the film in the dates and times specified.

The second is that it is a competitor that caused RBS suffer the humiliation. The humiliation and injury are far greater in degree when caused by an entity whose ultimate business objective is to lure customers (viewers in this case) away from the competition.ix[36] For their part, VIVA and Vicente del Rosario contend that the findings of fact of the trial court and the Court of Appeals do not support ABS-CBNs claim that there was a perfected contract. Such factual findings can no longer be disturbed in this petition for review under Rule 45, as only questions of law can be raised, not questions of fact. On the issue of damages and attorneys fees, they adopted the arguments of RBS. The key issues for our consideration are (1) whether there was a perfected contract between VIVA and ABS-CBN, and (2) whether RBS is entitled to damages and attorneys fees. It may be noted that that award of attorneys fees of P212,000 in favor of VIVA is not assigned as another error. I The first issue should be resolved against ABS-CBN. A contract is a meeting of minds between two persons whereby one binds himself to give something or render some service to anotherix[37] for a consideration. There is no contract unless the following requisites concur: (1) consent of the contracting parties; (2) object certain which is the subject of the contract; and (3) cause of the obligation, which is established.ix[38] A contract undergoes three stages: (a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties; (b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract.ix[39] Contracts that are consensual in nature are perfected upon mere meeting of the minds. Once there is 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.ix[40] When Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the Tamarind Grill on 2 April 1992 to discuss the package of films, said package of 104 VIVA films was VIVAs offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent through Ms.

Concio, counter-proposal in the form a draft contract proposing exhibition of 53 films for a consideration of P35 million. This counter-proposal could be nothing less than the counter-offer of Mr. Lopez during his conference with Del Rosario at Tamarind Grill Restaurant. Clearly, there was no acceptance of VIVAs offer, for it was met by a counter-offer which substantially varied the terms of the offer. ABS-CBNs reliance in Limketkai Sons Milling, Inc. v. Court of Appealsix[41] and Villonco Realty Company v. Bormaheco, Inc.,ix[42] is misplaced. In these cases, it was held that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance as long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not. This ruling was, however, reversed in the resolution of 29 March 1996,ix[43] which ruled that the acceptance of an offer must be unqualified and absolute, i.e., it must be identical in all respects with that of the offer so as to produce consent or meetings of the minds. On the other hand, in Villonco, cited in Limketkai, the alleged changes in the revised counteroffer were not material but merely clarificatory of what had previously been agreed upon. It cited the statement in Stuart v. Franklin Life Insurance Co.ix[44] that a vendors change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender of a counter-offer.ix[45] However, when any of the elements of the contract is modified upon acceptance, such alteration amounts to a counter-offer. In the case at bar, ABS-CBN made no unqualified acceptance of VIVAs offer hence, they underwent period of bargaining. ABS-CBN then formalized its counter-proposals or counteroffer in a draft contract. 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,ix[46] 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.ix[47] 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.ix[48] 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-CBNs counter-offer was best evidenced by his submission of the draft contract to VIVAs Board of Directors for the latters approval. In any event, there was between Del Rosario and Lopez III no meeting of minds. The following findings of the trial court are instructive: A number of considerations militate against ABS-CBNs claim that a contract was perfected at that lunch meeting on April 02, 1992 at the Tamarind Grill.

FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind Grill referred to the price and the number of films, which he wrote on a napkin. However, Exhibit C contains numerous provisions which were not discussed at the Tamarind Grill, if Lopez testimony was to be believed nor could they have been physically written on a napkin. There was even doubt as to whether it was a paper napkin or cloth napkin. In short what were written in Exhibit C were not discussed, and therefore could not have been agreed upon, by the parties. How then could this court compel the parties to sign Exhibit C when the provisions thereof were not previously agreed upon? SECOND, Mr. Lopez claimed that what was agreed upon as the subject matter of the contract was 14 films. The complaint in fact prays for delivery of 14 films. But Exhibit C mentions 53 films as its subject matter. Which is which? If Exhibit C reflected the true intent of the parties, then ABS-CBNs claim for 14 films in its complaint is false or if what it alleged in the complaint is true, then Exhibit C did not reflect what was agreed upon by the parties. This underscores the fact that there was no meeting of the minds as to the subject matter of the contract, so as to preclude perfection thereof. For settled is the rule that there can be no contract where there is no object certain which is its subject matter (Art. 1318, NCC). THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony (Exh. D) States: We were able to reach an agreement. VIVA gave us the exclusive license to show these fourteen (14) films, and we agreed to pay Viva the amount of P16,050,000.00 as well as grant Viva commercial slots worth P19,950,000.00. We had already earmarked this P16,050,000.00. which gives a total consideration of P36 million (P19,951,000.00 plus P16,050,000.00 equals P36,000,000.00). On cross-examination Mr. Lopez testified: Q What was written in this napkin?

A The total price, the breakdown the known Viva movies, the 7 blockbuster movies and the other 7 Viva movies because the price was broken down accordingly. The none [sic] Viva and the seven other Viva movies and the sharing between the cash portion and the concerned spot portion in the total amount of P35 million pesos. Now, which is which? P36 million or P35 million? This weakens ABS-CBNs claim. FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she transmitted Exhibit C to Mr. Del Rosario with a handwritten note, describing said Exhibit C as a draft. (Exh. 5 Viva; tsn pp. 23-24, June 08, 1992). The said draft has a well defined meaning.

Since Exhibit C is only a draft, or a tentative, provisional or preparatory writing prepared for discussion, the terms and conditions thereof could not have been previously agreed upon by ABS-CBN and Viva. Exhibit C could not therefore legally bind Viva, not having agreed thereto. In fact, Ms. Concio admitted that the terms and conditions embodied in Exhibit C were prepared by ABS-CBNs lawyers and there was no discussion on said terms and conditions. As the parties had not yet discussed the proposed terms and conditions in Exhibit C, and there was no evidence whatsoever that Viva agreed to the terms and conditions thereof, said document cannot be a binding contract. The fact that Viva refused to sign Exhibit C reveals only two [sic] well that it did not agree on its terms and conditions, and this court has no authority to compel Viva to agree thereto. FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del Rosario agreed upon at the Tamarind Grill was only provisional, in the sense that it was subject to approval by the Board of Directors of Viva. He testified: Q Now, Mr. Witness, and after that Tamarinf meeting the second meeting wherein you claimed that you have the meeting of the minds between you and Mr. Vic del Rosario, what happened? A Vic Del Rosario was supposed to call us up and tell us specifically the result of the discussion with the Board of Directors. Q And you are referring to the so-called agreement which you wrote in [sic] a piece of paper? A Q A Yes, sir. So, he was going to forward that to the board of Directors for approval? Yes, sir (Tsn, pp. 42-43, June 8, 1992) Q A Did Mr. Del Rosario tell you that he will submit it to his Board for approval? Yes, sir. (Tsn, p. 69, June 8, 1992).

The above testimony of Mr. Lopez shows beyond doubt that he knew Mr. Del Rosario had no authority to bind Viva to a contract with ABS-CBN until and unless its Board of Directors approved it. The complaint, in fact, alleges that Mr. Del Rosario is the Executive Producer of defendant Viva which is a corporation. (par. 2, complaint). As a mere agent of Viva, Del Rosario could not bind Viva unless what he did is ratified by its Directors. (Vicente vs.Geraldez, 52 SCRA 210; Arnold vs. Willets and Paterson, 44 Phil. 634). As a mere agent, recognized as

such by plaintiff, Del Rosario could not be held liable jointly and severally with Viva and his inclusion as party defendant has no legal basis. (Salonga vs. Warner Barnes [sic],COLTA, 88 Phil. 125; Salmon vs. Tan, 36 Phil. 556). 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 binding upon Viva (Yao Ka Sin Trading vs. Court of Appeals, 209 SCRA 763). The evidence adduced shows that the Board of Directors of Viva rejected Exhibit C and insisted that the film package for 104 films be maintained (Exh. 7-1 Cica).ix[49] The contention that ABS-CBN had yet to fully exercise its right of first refusal over twenty-four films under the 1990 Film Exhibition Agreement and that the meeting between Lopez and Del Rosario was a continuation of said previous contract is untenable. As observed by the trial court, ABS-CBNs right of first refusal had already been exercised when Ms. Concio wrote to Viva ticking off ten films. Thus: [T]he subsequent negotiation with ABS-CBN two (2) months after this letter was sent, was for an entirely different package. Ms. Concio herself admitted on cross-examination to having used or exercised the right of first refusal. She stated that the list was not acceptable and was indeed not accepted by ABS-CBN, (Tsn, June 8, 1992, pp. 8-10). Even Mr. Lopez himself admitted that the right of first refusal may have been already exercised by Ms. Concio (as she had). (TSN, June 8, 1992, pp. 71-75). Del Rosario himself knew and understand [sic] that ABS-CBN has lost its right of first refusal when his list of 36 titles were rejected (Tsn, June 9, 1992, pp. 10-11).ix[50] II However, we find for ABS-CBN on the issue of damages. We shall first take up actual damages. Chapter 2, Title XVIII, Book IV of the Civil Code is the specific law on actual or compensatory damages. Except as provided by law or by stipulation, one is entitled to compensation for actual damages only for such pecuniary loss suffered by him as he has duly proved.ix[51] The indemnification shall comprehend not only the value of the loss suffered, but also that of the profits that the obligee failed to obtain.ix[52] In contracts and quasi-contracts the damages which may be awarded are dependent on whether the obligor acted with good faith or otherwise. In case of good faith, the damages recoverable are those which 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 of the constitution of the obligation. If the obligor acted with fraud, bad faith, malice, or wanton attitude, he shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.ix[53] In crimes and quasi-delicts, the defendants shall be liable for all damages which are the natural and probable consequences of the act or omission complained of, whether or not such damages have been foreseen or could have reasonably been foreseen by the defendant.ix[54]

Actual damages may likewise be recovered for loss or impairment of earning capacity in cases of temporary or permanent personal injury, or for injury to the plaintiffs business standing or commercial credit.ix[55] The claim of RBS for actual damages did not arise from contract, quasi-contract, delict, or quasidelict. It arose from the fact of filing of the complaint despite ABS-CBNs alleged knowledge of lack of cause of action. Thus paragraph 12 of RBSs Answer with Counterclaim and Crossclaim under the heading COUNTERCLAIM specifically alleges: 12. ABS-CBN filed the complaint knowing fully well that it has no cause of action against RBS. As a result thereof, RBS suffered actual damages in the amount of P6,621,195.32.ix[56] Needless to state the award of actual damages cannot be comprehended under the above law on actual damages. RBS could only probably take refuge under Articles 19, 20, and 21 of the Civil Code, which read as follows: ART. 19. Every person must, in the exercise of hid rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. ART. 20. Every person who, contrary to law, wilfully or negligently causes damage to another shall indemnify the latter for the same. ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. It may further be observed that in cases where a writ of preliminary injunction is issued, the damages which the defendant may suffer by reason of the writ are recoverable from the injunctive bond.ix[57] In this case, ABS-CBN had not yet filed the required bond; as a matter of fact, it asked for reduction of the bond and even went to the Court of Appeals to challenge the order on the matter. Clearly then, it was not necessary for RBS to file a counterbond. Hence, ABS-CBN cannot be held responsible for the premium RBS paid for the counterbond. Neither could ABS-CBN be liable for the print advertisements for Maging Sino Ka Man for lack of sufficient legal basis. The RTC issued a temporary restraining order and later, a writ of preliminary injunction on the basis of its determination that there existed sufficient ground for the issuance thereof. Notably, the RTC did not dissolve the injunction on the ground of lack of legal and factual basis, but because of the plea of RBS that it be allowed to put up a counterbond. As regards attorneys fees, the law is clear that in the absence of stipulation, attorneys fees may be recovered as actual or compensatory damages under any of the circumstances provided for in Article 2208 of the Civil Code.ix[58] The general rule is that attorneys fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate.ix[59] They are not to be awarded every time a party wins a suit. The power of the court t award attorneys fees under

Article 2208 demands factual, legal, and equitable justification.ix[60] Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorneys fees may not be awarded where no sufficient showing of bad faith could be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause.ix[61] As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the Civil Code. Article 2217 thereof defines what are included in moral damages, while Article 2219 enumerates the cases where they may be recovered. Article 2220 provides that moral damages may be recovered in breaches of contract where the defendant acted fraudulently or in bad faith. RBSs claim for moral damages could possibly fall only under item (10) of Article 2219, thereof which reads: (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35. 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.ix[62] The award is not meant to enrich the complainant at the expense of the defendant, but to enable the injured party to obtain means, diversion, or amusements that will serve to obviate the moral suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and should be proportionate to the suffering inflicted.ix[63] Trial courts must then guard against the award of exorbitant damages; they should exercise balanced restrained and measured objectivity to avoid suspicion that it was due to passion, prejudice, or corruption or the part of the trial court.ix[64] 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.ix[65] The statement in People v. Maneroix[66] and Mambulao Lumber Co. v. PNBix[67] 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. The basic law on exemplary damages is 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.ix[68] They are recoverable in criminal cases as part of the civil liability when the crime was committed with one or more aggravating circumstances;ix[69] in quasi-delicts, if the defendant acted with gross negligence;ix[70] and in contracts and quasi-contracts, if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.ix[71] It may be reiterated that the claim of RBS against ABS-CBN is not based on contract, quasicontract, delict, or quasi-delict. Hence, the claims for moral and exemplary damages can only be based on Articles 19, 20, and 21 of the Civil Code.

The elements of abuse of right under Article 19 are the following: (1) the existence of a legal right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or injuring another. Article 20 speaks of the general sanction for all provisions of law which do not especially provide for their own sanction; while Article 21 deals with acts contra bonus mores, and has the following elements: (1) there is an act which is legal, (2) but which is contrary to morals, good custom, public order, or public policy, and (3) and it is done with intent to injure.ix[72] Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.ix[73] Such must be substantiated by evidence.ix[74] There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was honestly convinced of the merits of its cause after it had undergone serious negotiations culminating in its formal submission of a draft contract. Settled is the rule that the adverse result of an action does not per se make the action wrongful and subject the actor to damages, for the law could not have meant impose a penalty on the right to litigate. If damages result from a persons exercise of a right, it is damnum absque injuria.ix[75] WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R. CV No. 44125 is hereby REVERSED except as to unappealed award of attorneys fees in favor of VIVA Productions, Inc. No pronouncement as to costs. SO ORDERED.