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

Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction award of P4,520,000.00 as actual damages is DELETED for lack of factual basis. In lieu thereof, Premiere
of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are Bank is ordered to pay Panacor P200,000.00 as temperate damages.
designed to repair the wrong that has been done, to compensate for the injury inflicted and not to
impose a penalty. SO ORDERED.

In the instant case, the actual damages were proven through the sole testimony of Themistocles
Ruguero, the vice president for administration of Panacor. In his testimony, the witness affirmed that
Panacor incurred losses, specifically, in terms of training and seminars, leasehold acquisition,
procurement of vehicles and office equipment without, however, adducing receipts to substantiate the
same. The documentary evidence marked as exhibit W, which was an ordinary private writing allegedly
itemizing the capital expenditures and losses from the failed operation of Panacor, was not testified to
by any witness to ascertain the veracity of its contents. Although the lower court fixed the sum of
P4,520,000.00 as the total expenditures incurred by Panacor, it failed to show how and in what manner
the same were substantiated by the claimant with reasonable certainty. Hence, the claim for actual
damages should be admitted with extreme caution since it is only based on bare assertion without
support from independent evidence. Premieres failure to prove actual expenditure consequently
conduces to a failure of its claim. In determining actual damages, the court cannot rely on mere
assertions, speculations, conjectures or guesswork but must depend on competent proof and on the
best evidence obtainable regarding the actual amount of loss.[20]

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

The Code Commission, in explaining the concept of temperate damages under Article 2224, makes the
following comment:[21]

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

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

No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary
damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the
discretion of the Court, according to the circumstances of each case.

Under the circumstances, the sum of P200,000.00 as temperate damages is reasonable.

WHEREFORE, the petition is DENIED. The Decision dated June 18, 2003 of the Court of Appeals in CA-G.R.
CV No. 60750, ordering Premiere Bank to pay Panacor Marketing Corporation P500,000.00 as exemplary
damages, P100,000.00 as attorneys fees, and costs, is AFFIRMED, with the MODIFICATION that the

G.Q. GARMENTS, INC. VS. MIRANDA
G.R. No. 161722 July 20, 2006
Facts:
Angel Miranda is the registered owner of a 9,646 square meters parcel of land located at Niog, Bacoor,
Cavite (Property). The property was a verbal contract leased with his son Angelito Miranda who
established the Executive Machineries and Equipment Corporation (EMECO). The lease was on a month-
to-month basis for a consideration of Php 8,000.00 per month. EMECO constructed its factory on the
property and paid the said rentals. However when Angelito died, EMECO failed to pay the rentals but still
continued possessing the leased premises. On 1989, the factory of EMECO was totally razed by fire.
Angel demanded the payment of accrued rentals amounting to Php 280,000.00 as of May 1991 and also
informed that the oral contract of lease would be terminated effective June 30, 1991. After sending
another demand letter, EMECO vacated the leased premised but the accrued rentals remained unpaid.
Sometime in November 1991, Florenda, Angelitos wife, arrived at the office of petitioner and offered to
sublease the property to Wilson Kho, the Officer-in Charge of GQ garments. After visiting the property,
Kho agreed to rent the area upon the condition that its true and registered owner would personally sign
the lease contract in his presence. However, Florenda failed to present Angel for said purpose, Kho
turned down her proposal. Later, Kho was able to locate Angel and offered in behalf of petitioner, to
lease the property, as to which Angel agreed.
On December of that year, Davy John Barlin, the executive president representing the corporation and
Angel executed a contract of lease. The lease was for a period of 15 years for a monthly rental of Php
30,000.00. Petitioner paid Php 90,000.00 representing two months deposit and advance rental for one
month. As lessee, it was authorized to introduce improvements, structures, and buildings on the
property as it may deem necessary and for the purpose for which it was leased.
Consequently, petitioner secured the necessary documents and permits. The construction of a building
and factory in the leased premises commenced. However, on January 27, 1992, Florenda, together with
several armed men who identified themselves as policemen, forcibly evicted petitioner from the leased
premises, claiming that she was the owner and that the place was already covered by another existing
contract of lease. During the encounter, Florenda and her men took some equipment, machinery and
other properties belonging to petitioner, thereby causing loss and damage to said properties. In the
meantime, Angel secured a copy of the alleged contract of leased with EMECO. He filed a complaint for
declaration of nullity of the contract before the Regional Trial Court because his signature was forged
praying for judgment to be rendered in his favour.
Meanwhile, petitioner sought the help of the Philippine National Police (PNP). General Gerardo N. Flores,
Deputy Director General and Chief Directorial Staff, issued a Memorandum to Superintendent
Wenceslao A. Soberano, Provincial Director of the Cavite PNP Provincial Command, ordering the latter to
prevent his men from interfering with the pending civil case. As a result, petitioner regained possession
over the leased premises. However, Florenda and her group went back to the place and ousted the
guards and other personnel manning the corporations office, and even removed their equipment, and
ransacked anew their raw materials, electric wire and other valuables inside.
5
On April 20, 1992, petitioner instituted an action for damages and recovery of possession of the property
before the RTC of Cavite City, Branch 17, with Angel, EMECO and Florenda, as alternative defendants.
Angel was impleaded since he has the obligation to keep and maintain the plaintiff in peaceful
possession of the leased premises. On June 25, 1992, Angel and petitioner, as plaintiffs, filed a separate
complaint for ejectment against Florenda before the Municipal Trial Court (MTC) of Bacoor, Cavite. After
due proceedings, the court rendered judgment on July 2, 1993, ordering the eviction of Florenda and all
those claiming the property in her behalf. The decision was appealed to the RTC. However, for failure to
pay a supersedeas bond, the decision was executed and Florenda was evicted from the property.
On November 26, 1993, the RTC rendered judgment dismissing the complaint against all the alternative
defendants without prejudice. It declared that plaintiff was entitled to damages, but it had to dismiss the
complaint because of the pendency of other civil cases. However, the RTC resolved to deny the motion
of petitioner prompting it to appeal to the Court of Appeals. Angel Miranda also appealed the decision.
Meantime, on September 22, 1994, the RTC rendered judgment in favor of Angel and declared the
contract of lease purportedly executed by him and EMECO void. On October 29, 2002, the CA rendered
judgment reversing the decision of the RTC. Accordingly, the judgment appealed was reversed and set
aside dismissing the complaint with prejudice against Angel and ordering Florenda to pay damages and
attorneys fees.
The appellate court absolved Angel of any liability due to the absence of evidence showing that he had
participated, directly or indirectly, in the looting of GQ Garments properties and in forcibly ejecting the
latter from the premises in question. According to the CA anchored on Article 1653 and 1654 of the New
Civil Code, the evidence on record clearly showed that Florenda disturbed only the physical possession of
the leased premises, and not legal possession. Thus, the complaint with respect to Angel Miranda should
be dismissed with prejudice for lack of cause of action. On cross-examination, Angel admitted that he
received Php 360,000.00 from petitioner. In addition, the plaintiff asserts that the actual damages
sustained when its equipment and machineries were destroyed are valued at Php 10,000,000.00. With
all of this, petitioner filed the instant petition for review on certiorari.
Issue: Whether or not the respondents are liable to petitioner for the amount of Php 10,000,000.00 by
way of actual damages?
Ruling:
With regard to the claim for actual damages of Php 10,000,000.00, the Supreme Court agreed with the
ruling of the appellate court that petitioners claim for actual damages was not properly substantiated by
evidence. The alleged loss of articles, machinery and equipment in the total sum of Php 9,960,000.00
was not proven by clear and convincing evidence. Other than the bare testimony of Mr. Wilson Kho and
the witnesses he presented, there was no poof as to the existence of these items prior to the taking over
of Florenda over the property in question. To be entitled to an award of actual damages, it is necessary
to prove the precise amount of the loss with a reasonable degree of certainty, premised upon competent
proof and on the best evidence obtainable by the injured party to justify such award. The award of actual
damages cannot be simply based on the mere allegation of a witness without any tangible claim, such as
receipts or other documentary proofs to support such claim. Failing to satisfy the court that petitioner
certainly suffered actual damages, its claim must now fail.
 6

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

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

It bears stressing that respondent Angel Miranda was not content in adopting a mere passive stance in
the face of respondent Florenda Mirandas act of trespass. He and the petitioner filed a case for forcible
entry against Florenda Miranda; he also succeeded in having the RTC, declare the contract of lease which
respondent Florenda Miranda showed petitioner as null and void, with the courts ruling that his
signature on the contract was a forgery. The petition is denied.

FIRST DIVISION
[G.R. No. L-35157. April 17, 1984.]
FRANCISCO A. PERFECTO, Petitioner-Appellant, v. HON. FELICIANO S. GONZALES, Judge of the Court of
First Instance of Catanduanes, and JULIANA C. VISTA and VICENTE VISTA,Respondents-Appellees.
K.V. Faylona & Associates for Petitioner-Appellant.
Hon. Feliciano S. Gonzales, etc., Et. Al. for Respondents-Appellees.
SYLLABUS
1. CIVIL LAW; DAMAGES; ACTUAL DAMAGES; WHEN RECOVERABLE. Actual or compensatory damages
rae those recoverable because of pecuniary loss in business, trade, property, profession, job or
occupation, and the same must be proved, otherwise, if the proff is flimsy and non-substantial, no
damages will be given.
2. ID.; ID.; ID.; IN CASES OF FILING OF CLEARLY UNFOUNDED SUITS; CASE AT BAR. In the case of
Malonzo v. Galang, 109 Phil. 16, the Court, speaking through Justice J.B.L. Reyes, held that with respect
to compensatory damages assuming that they are recoverable under the theory that petitioner had filed
a clearly unfounded suit against respondent, the same constitutes a tort against the latter that makes
the former liable for all damages which are the natural and probable consequences of the act or
omissions complained of. These damages, cannot, however, be presumed and must be duly proved
(Article 2199, New Civil Code). Well settled is the rule that even if the complaint filed by one against the
other is clearly unfounded this does not necessarily mean, in the absence of specific facts proving
damages, that said defendant really suffered actual damage over and above attorneys fees and costs.
The Court cannot rely on its speculations as to the fact and amount of damages. It must depend on
actual proof of the damages alleged to have been suffered. Respondent judge found no basis for actual
or compensatory damages and exemplary damages when it said that "to slap a heavy damage upon the
defendant would be tantamount to imposing a prohibitive premium upon the filing of complaints against
public officials for misconduct in office, a policy that is neither sound nor conducive to a healthy
development of civic courage and public interest so necessary and indispensable in the conduct of the
affairs of the government."
DECISION
RELOVA, J.:
Private respondent Juliana C. Vista, a public school teacher of San Andres, Catanduanes was appointed
poll clerk by the Commission on Elections in Precinct No. 25 of San Andres in the general elections of
November 9, 1965.
Petitioner Francisco A. Perfecto, a retired public service commissioner, was a candidate for congressman
of the lone district of Catanduanes. He lost in that election.
7
In August 1967, petitioner filed with the Commission on Elections an administrative complaint against
the members of the board of election inspectors of Precinct No. 25 of San Andres, namely: Roberto
Reyes, Chairman; Felicidad Garcia, Nacionalista Party inspector; Jorge Primo, Liberal Party inspector; and
herein private respondent Juliana C. Vista, poll clerk of said precinct. The complaint charged that the said
members of the board of election inspectors were guilty of non-feasance, malfeasance and misfeasance
for wilfull failure to comply with the instructions, orders, decisions and rulings of the Commission in
connection with the performance of their duties relative to the conduct of the elections of 1965,
committed in the following manner, to wit:jgc:
"That during voting time on November 9, 1965, being an election day, in Precinct No. 25 located at the
Public School Building in the Barrio of Bislig, Municipality of San Andres, Catanduanes, Philippines, and
within the jurisdiction of this Honorable Commission, the above-named respondents conspiring,
confederating, collaborating and mutually helping each other did then and there wilfully, criminally,
feloniously and unlawfully
"(a) tolerate, allow and permit numerous registered voters of said precinct to prepare their ballots with
the use of carbon paper or means for making copies of the ballots to identify the votes of said voters in
violation of Sec. 135 of the Revised Election Code;
"(b) tolerate, allow and permit said voters to cast their unlawfully prepared ballots, and further tolerate,
allow and permit said voters to step out of the polling place with the unlawfully made copies of the
ballots, in their possession;
"(c) prevent the filing of protests and refuse to give protest forms to in spite of lawful demands by the
Nacionalista election watchers who wanted to file their protests, against the manner of voting above-
described;
"(d) accept the unlawfully prepared ballots and placed them in the box for valid ballots and later read,
counted and credited them in favor of the candidates whose names were written thereon including Jose
M. Alberto who was also a candidate for the same position as the complainant;
"(e) falsify the truth by making it appear in their official records that there were no anomalies in the
voting and no protests against anomalies;
all of which unlawful acts violated the free and untrammeled expression of the sovereign will of the
people and cause damage to the complainant." (pp. 45-46, Rollo)
As a consequence, private respondent Juliana Vista, assisted by her husband Vicente Vista, filed an
action for damages alleging that the above charges were false and without basis and had been instituted
maliciously in order to harass, annoy, demean, degrade and expose her to public ridicule and because of
which she suffered "mental torture, anguish, sleepless nights, besmirched reputation, wounded feelings,
mental shock and social humiliation which may be assessed as moral damages in the amount of
P120,000.00." Further, she "claims the further sum of P15,000.00 as exemplary damages, and
P10,000.00 for attorneys fees and expenses in the prosecution of the suit." (p. 46, Rollo)
Answering the complaint for damages, herein petitioner Francisco A. Perfecto avers that the filing of the
administrative complaint against private respondent Vista and the members of the board of election
inspectors of Precinct No. 25 was done in good faith with the highest motive of bringing to justice
persons who have violated the laws of the land; that he never had any personal grudge or ill-feeling
against private respondent previously and his only purpose in filing the administrative complaint was to
deter the commission of the acts charged for the sake of democracy; that he even asked for the dismissal
of all administrative cases he had filed against many teachers in their conduct of the 1965 elections
 8

because he had no intention of demeaning and degrading them and because he was satisfied with the
action taken by the Commission in connection with the election cases in the provinces of Batanes and
Cotabato.
Evidence shows that private respondent Vista was the poll clerk of Precinct No. 25 of San Andres during
the elections of 1965. However, it had been shown successfully that she did not act as poll clerk on
election day, November 9, 1965 because she was ill and had been running with fever for several days
prior to the election. In fact, she was substituted by Nazaria B. Reyes, another public school teacher as
poll clerk on that day. The trial court on this point said:
omissions complained of. These damages, cannot, however, be presumed and must be duly proved
(Article 2199, New Civil Code). Well settled is the rule that even if the complaint filed by one against the
other is clearly unfounded this does not necessarily mean, in the absence of specific facts proving
damages, that said defendant really suffered actual damage over and above attorneys fees and costs.
The Court cannot rely on its speculations as to the fact and amount of damages. It must depend on
actual proof of the damages alleged to have been suffered.
WHEREFORE, the petition is GRANTED and the order of respondent judge condemning petitioner
Francisco A. Perfecto to pay compensatory damages of P2,000.00 is hereby SET ASIDE.

". . . The best and most reliable proof showing the identities of the officials of Precinct No. 25 who SO ORDERED
reported for duty on November 9, 1965, is the minutes of voting which is supposed to be the authentic
record of the proceedings in the precinct during election day (Exhibit A) and the election return showing
the result of the canvass of the votes in the precinct which are all required to be accomplished and
signed by the chairman and members of the board of election inspectors including the poll clerk. In both
documents it appears that Mrs. Nazaria B. Reyes, the substitute poll clerk, acted as poll clerk on election
day in place of the regular poll clerk, the plaintiff, who was absent and did not report for duty." (p. 49,
Rollo)

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

Hence, the filing of this petition for review by way of certiorari to set aside the order of respondent judge
in awarding private respondent compensatory damages in the amount of P2,000.00.

There is merit in the petition. Respondent judge found no basis for actual or compensatory damages
and exemplary damages when it said that "to slap a heavy damage upon the defendant would be
tantamount to imposing a prohibitive premium upon the filing of complaints against public officials for
misconduct in office, a policy that is neither sound nor conducive to a healthy development of civic
courage and public interest so necessary and indispensable in the conduct of the affairs of the
government (pp. 53-54, Rollo). Besides, actual or compensatory damages are those recoverable because
of pecuniary loss in business, trade, property, profession, job, or occupation, and the same must be
proved; otherwise, if the proof is flimsy and non-substantial, no damages will be given. In the case of
Malonzo v. Galang, 109 Phil. 16, the Court, speaking through Justice J.B.L. Reyes, held that with respect
to compensatory damages assuming that they are recoverable under the theory that petitioner had filed
a clearly unfounded suit against respondent, the same constitutes a tort against the latter that makes
the former liable for all damages which are the natural and probable consequences of the act or
 9

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

Issue: WON award of damages is justified

Held:

YES (reimbursement), NO (actual)

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

DECISION MODIFIED: award of P54k deleted

Damages; Evidence; The amount representing profits which damaged party failed to realize must be
proved by the best evidence. Average actual profits of other trucks of respondent should have been
presented rather than a mere estimate on "if-not-were-hired" basis.Applying the foregoing test to
the instant case, we find the evidence of the respondent insufficient to be considered within the purview
of "best evidence." The bare assertion of the respondent that he lost about P54,000.00 and the
accompanying documentary evidence presented to prove the amount lost are inadequate if not
speculative. The document itself merely shows that everytime a truck travels, Mr. Yaptinchay earns
P369.88. This amount is then multiplied by the number of trips which the truck was allegedly unable to
make. The estimates were prepared by a certain Dionisio M. Macasieb whose identity was not even

CARPIO v. VALMONTE
G.R. No. 151866; September 9, 2004;
FACTS:
Respondent Valmonte is a wedding coordinator. Michelle del Rosario and Jon Sierra engaged her
services for their church wedding. On that day, Valmonte went to the Manila Hotel to where the bride
and her family were billeted. When she arrived at the Suite, several persons were already there
including the petitioner Soledad Carpio, an aunt of the bride who was preparing to dress up
for the occasion. After reporting to the bride, Valmonte went out of the suite carrying the items
needed fo rthe wedding rites and the gifts from the principal sponsors. She proceeded to the
Maynila Restaurant where the reception was to be held. She went back to the suite after, and found
several people staring at her when she entered. . Itwas at this juncture that petitioner allegedly uttered
the following words to Valmonte: Ikaw lang ang lumabas ng kwarto, nasaan ang dala mong
bag? Saan ka pumunta? Ikaw lang ang lumabas ng kwarto, ikaw ang kumuha. Petitioner then
ordered one of the ladies to search Valmontes bag. It turned out that after Valmonte left the room to
attend to her duties, petitioner discovered thatthe pieces of jewelry which she placed inside the comfort
room in a paper bag were lost. A few days after the incident, petitioner received a letter from Valmonte
demanding a formal letter of apology which she wanted to be circulated to the newlyweds relatives and
guests to redeem her smeared reputation as a result of petitioners imputations against her. Petitioner
did not respond to the letter. Thus, on 20February 1997, Valmonte filed a suit for damages against
petitioner.
ISSUE: W/N respondent Valmonte is entitled to damages
RULING:
Valmonte is entitled to damages. In the case at bar, petitioners verbal reproach against
respondent was certainly uncalled for considering that by her own account nobody knew that she
brought such kind and amount of jewelry inside the paper bag. True, petitioner had the right o ascertain
the identity of the malefactor, but to malign respondent without an iota of proof that she was the one
who actually stole the jewelry is an act which, by any standard or principle of law is impermissible.
Petitioner had willfully caused injury to respondent in a manner which is contrary to morals and good
customs. She did not act with justice and good faith for apparently, she had no other purpose in mind
but to prejudice respondent. Certainly, petitioner transgressed the provisions of Article 19 in relation to
Article 21 for which she should be held accountable.
10
General Enterprises v Lianga Bay Logging(11 SCRA 733)
Facts:
General Enterprises (GE) entered into a contract with Lianga Bay Logging (LB) whereby the former was
designated as distributor of the logs supplied by the latter. GE is entitled to 13% of the gross f.o.b.value
of the logs exported.
The contract was to remain effective for two years beginning June 1, 1959. On October 27,
1959,however, LB sent written notice to GE stating that it wont be able to supply logs for export due to
unavailability of additional logging machinery and restrictions imposed by the Phil. Govt. Within a four-
month period, LB gave a total of five notices to GE stating various reasons for non-performance of its
obligation to supply the logs. GE, on the other hand, reminded LB to fulfill its obligations under the
contract as otherwise it would be held liable for breach.
Par 8(b) of their agreement gives the valid causes for suspension of the contract, among which are:
a) the enactment of national or local law or ordinance;
b) issuance of any prohibitive or restrictive order; and
c) any other cause not within the control of the party making relief from any of the requirements of the
contract.
GEs reminder was left unheeded. Hence, it filed an action for breach of contract and recovery of
damages with the CFI. The court ruled in its favor awarding P400k as actual damages, P100k as
exemplary damages, and P40k as attorneys fees and litigation expenses. Hence, this appeal.
Issue: WON actual and exemplary damages and attorneys fees are justified
Held:
YES (actual and attorneys fees), NO (exemplary)
It should be noted that LB is guilty of breach of contract as the causes cited for non-performance of its
obligation are not among those expressly stated in the contract. Moreover, LB mentioned that it had an
excess of
1M logs per month. It also agreed to supply 200M brd ft of logs to Japanese buyers over a five year
period. Sinungaling!
Art 2200 CC: indemnification for damages comprehends not only the value of the loss suffered but also
that of the profits which the creditor fails to obtain.
Over a five month period beginning June 1959, GE sold over 7M brd ft of logs to Korea and earnedP79k
in commissions. When LB failed to deliver the logs beginning January 1960, GE ceased to earnany
commission.
 11

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

P100k as exemplary damages is oppressive considering that LB did not act in a wanton
(noodles),oppressive, or malevolent manner. P50k is sufficient for its reprehensible act of resorting to
half-truths in order to justify its desistance from the contract.

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

DECISION MODIFIED
 12

FIRST DIVISION
case).[4] DBP challenged the levy through a third-party claim asserting that the V. Mapa properties were
PETRON CORPORATION, G.R. No. 155683
Petitioner, mortgaged to it and were, for that reason, exempt from levy or attachment. The RTC quashed it.
Present:
On June 18, 1981, MYTC and the Monserrats got DBP to accept a dacion en pago arrangement whereby
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ, MYTC conveyed to the bank the four mortgaged Quiapo properties as full settlement of their loan
- v e r s u s - CORONA,
AZCUNA and obligation. But despite this agreement, DBP did not release the V. Mapa properties from the mortgage.
GARCIA, JJ.
NATIONAL COLLEGE OF
BUSINESS AND ARTS, On May 21, 1982, Felipe, acting for himself and as Enriques attorney-in-fact, sold the V. Mapa properties
Respondent Promulgated: February 16, 2007
to respondent NCBA. Part of the agreement was that Felipe and Enrique would secure the release of the
x----------------------------------------------------x
titles to the properties free of all liens and encumbrances including DBPs mortgage lien and Filoils levy
DECISION
on or before July 31, 1982. But the Monserrats failed to comply with this undertaking. Thus, on February
CORONA, J.:
3, 1983, NCBA caused the annotation of an affidavit of adverse claim on the TCTs covering the

V.Mapa properties.
The sole question raised in this petition for review on certiorari[1] is whether
Shortly thereafter, NCBA filed a complaint against Felipe and Enrique for specific performance
petitioner Petron Corporation (Petron) should be held liable to pay attorneys fees and exemplary
with an alternative prayer for rescission and damages in the RTC of Manila. The case was raffled to
damages to respondent National College of Business and Arts (NCBA).
Branch 30 and docketed as Civil Case No. 83-16617. On March 30, 1983, NCBA had a notice
This case, however, is but part of a larger controversy over the lawful ownership of seven
of lis pendens inscribed on the TCTs of the V.Mapa properties. A little over two years later,
parcels of land in the V. Mapa area of Sta. Mesa, Manila (the V. Mapaproperties) that arose out of a
[2]
NCBA impleaded DBP as an additional defendant in order to compel it to release the V. Mapa properties
series of events that began in 1969. [3]
from mortgage.
Sometime in 1969, the V. Mapa properties, then owned by Felipe and Enrique Monserrat, Jr.,
On February 28, 1985, during the pendency of Civil Case No. 83-16617, Enriques undivided
were mortgaged to the Development Bank of the Philippines (DBP) as part of the security for the P5.2
interest in the V. Mapa properties was levied on in execution of a judgment of the RTC
million loan of Manila Yellow Taxicab Co., Inc. (MYTC) and Monserrat Enterprises Co. MYTC, for its part,
of Makati (the Makati case)[5] holding him liable to Petron (then known as Petrophil Corporation) on a
mortgaged four parcels of land located inQuiapo, Manila.
1972 promissory note. On April 29, 1985, the V. Mapa properties were sold at public auction to satisfy
On March 31, 1975, however, Felipes undivided interest in the V. Mapa properties was levied
the judgments in the Manila and Makati cases. Petron, the highest bidder, acquired both Felipes and
upon in execution of a money judgment rendered by the Regional Trial Court (RTC) of Manila
Enriques undivided interests in the property. The final deeds of sale of Enriques and Felipes shares in the
in Filoil Marketing Corporation v. MYTC, Felipe Monserrat, and Rosario Vda. De Monserrat (the Manila
V. Mapa properties were awarded to Petron in 1986. Sometime later, the Monserrats TCTs were

cancelled and new ones were issued to Petron. Thus it was that, towards the end of

1987, Petron intervened in NCBAs suit against Felipe, Enrique and DBP (Civil Case No. 83-16617) to assert
its right to the V. Mapa properties.
The RTC rendered judgment on March 11, 1996.[6] It ruled, among other things, that Petron never
acquired valid title to the V. Mapa properties as the levy and sale thereof were void and that NCBA was
now the lawful owner of the properties. Moreover, the RTC held Petron, DBP, Felipe and Enrique jointly
and severally liable to NCBA for exemplary damages and attorneys fees for the following reasons:
FELIPE and ENRIQUE had no reason to renege on their undertaking in the Deed of
Absolute Sale to secure the release of the titles to the properties xxx free from all
the liens and encumbrances, and to cause the lifting of the levy on execution of
Commercial Credit Corporation, Industrial Finance Corporation[,] and Filoil over
the V. Mapa [p]roperty. Moreover, ENRIQUE had no reason to repudiate FELIPE
and disavow authority he had [given] the latter to sell his share in the
V. Mapa property.
On the other hand, the mortgage in favor of DBP had been fully extinguished
thru dacion en pago as early as 18 June 1981 but it unjustifiably and whimsically
refused to release the mortgage and to surrender to the buyer (NCBA) the owners
duplicate copies of Transfer Certificates of Title No[s]. 83621 to 83627, thereby
preventing NCBA from registering the sale in its favor.
Similarly, [Petron] has absolutely no reason to claim the V. Mapa property. For, as
shown above, the levy in execution and sale of the shares of FELIPE and ENRIQUE
in the V. Mapa property were null and void.
Finally, in their Memorandum of Agreement dated 25 September 1992 with
Technical Institute of the Philippines, [Petron] and DBP attempted to pre-empt this
Courts power to adjudicate on the claim of ownership stipulating that to facilitate
their defenses and cause of action in Civil Case No. 83-16617, they agreed on the
disposition of the V. Mapa property among themselves. For obvious reasons, this
Court refused to give its imprimatur and denied their prayer for dismissal of the
complaint against DBP.
These acts of defendants and intervenor demonstrate their wanton, fraudulent,
reckless, oppressive and malevolent conduct in their dealings with NCBA.
Furthermore, they acted with gross and evident bad faith in refusing to
satisfy NCBAs plainly valid and demandable claims. Assessment of exemplary
damages and attorneys fees in the amounts of P100,000.00 and P150,000.00,
respectively, is therefore in order (Arts. 2208 and 2232, Civil Code).[7]
Enrique, DBP and Petron appealed to the Court of Appeals (CA). The appeal was docketed as CAG.R. CV
No. 53466. In a decision dated June 21, 2002,[8] the CA affirmed the RTC decision in toto. On motion for
reconsideration, Petron and DBP tried to have the award of exemplary damages and attorneys fees
13
deleted for lack of legal and factual basis. The Philippine National Oil Company (PNOC), which had been
allowed to intervene in the appeal as transferee pendente lite of Petrons right to the V. Mapa properties,
moved for reconsideration of the ruling on ownership. In a resolution dated October 16, 2002,[9] the CA
denied these motions for lack of merit. Thereupon, Petron and PNOC took separate appeals to this
Court.
In this appeal, the only issue is Petrons liability for exemplary damages and attorneys fees. And on this
matter, we reverse the rulings of the trial and appellate courts.
Article 2208 lays down the rule that in the absence of stipulation, attorneys fees cannot be recovered
except in the following instances:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to litigate with third
persons or to incur expense to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmens compensation and employers liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorneys fees and
expenses of litigation should be recovered.[10]
Here, the RTC held Petron liable to NCBA for attorneys fees under Article 2208(5), which
allows such an award where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs plainly valid, just, and demandable claim. However, the only justification given for this verdict
was that Petron had no reason to claim the V.Mapa properties because, in the RTCs opinion, the levy and
sale thereof were void.[11] This was sorely inadequate and it was erroneous for the CA to have upheld
that ruling built on such a flimsy foundation.
Article 2208(5) contemplates a situation where one refuses unjustifiably and in evident bad
faith to satisfy anothers plainly valid, just and demandable claim, compelling the latter needlessly to seek
redress from the courts.[12] In such a case, the law allows recovery of money the plaintiff had to spend for
 14

SO ORDERED.
a lawyers assistance in suing the defendant expenses the plaintiff would not have incurred if not for the

defendants refusal to comply with the most basic rules of fair dealing. It does not mean, however, that

the losing party should be made to pay attorneys fees merely because the court finds his legal position

to be erroneous and upholds that of the other party, for that would be an intolerable transgression of

the policy that no one should be penalized for exercising the right to have contending claims settled by a

court of law.[13] In fact, even a clearly untenable defense does not justify an award of attorneys fees

unless it amounts to gross and evident bad faith.[14]

Petrons claim to the V. Mapa properties, founded as it was on final deeds of sale on

execution, was far from untenable. No gross and evident bad faith could be imputed toPetron merely for

intervening in NCBAs suit against DBP and the Monserrats in order to assert what it believed (and had

good reason to believe) were its rights and to have the disputed ownership of the V. Mapa properties

settled decisively in a single lawsuit.

With respect to the award of exemplary damages, the rule in this jurisdiction is that the

plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court

may even consider the question of whether exemplary damages should be awarded.[15] In other words,

no exemplary damages may be awarded without the plaintiffs right to moral, temperate, liquidated or

compensatory damages having first been established. Therefore, in view of our ruling that Petron cannot

be made liable to NCBA for compensatory damages (i.e., attorneys fees), Petron cannot be held liable for

exemplary damages either.

WHEREFORE, the petition is hereby GRANTED. The imposition of liability

on Petron Corporation for exemplary damages and attorneys fees is REVOKED. The June 21, 2002

decision and October 16, 2002 resolution of the Court of Appeals in CAG.R. CV No. 53466 and the March

11, 1996 decision of the Regional Trial Court of Manila in Civil Case No. 83-16617 are

hereby MODIFIED accordingly.


EN BANC
G.R. No. L-8228 January 16, 1914
TAN TI (alias Tan Tico), plaintiff-appellee,
vs.
JUAN ALEVAR, as sheriff, ET AL., defendants-appellants.
TRENT, J.:
Damages for wrongful attachment. Three cases were, by agreement of counsel, tried together in the
court below. Damages were awarded in each case and all were appealed by the defendants. They will be
considered together. Tan Ti, Tin Uco, and Tiu Tiao et al., the respective plaintiffs, each owned a retail
store in Dagupan. The Court of First Instance of Manila issued execution on the effects of one Lim Kok
Tiu, and ordered notices of garnishment to be served on each of the above named present plaintiffs.
These notices were forwarded to the sheriff of Pangasinan. It appears that the sheriff himself was not in
his office when the notices were received and they were attended to by his deputy, Lopez.
Lopez delivered the notices to another deputy sheriff, Zulueta, for service. Zulueta, instead of merely
serving the notices, informed each of the present plaintiffs that unless they submitted their respective
bonds in the sum of P15,000, he would close their stores. The respective owners asked for time to go to
Manila to secure bondsmen, which was granted them. On arriving at Manila the consulted their lawyers,
who informed them that the sheriff had no right to close their stores upon garnishment process, and told
them to return to Dagupan and so inform the sheriff and his deputies, which the further admonition that
such action would render the latter liable for damages. The three plaintiffs returned to Dagupan and
notified deputies Lopez and Zulueta accordingly, but the latter went ahead and closed the stores on
November 13, 1911, placing guards at each one.
The owners thereupon returned to Manila for further consultation with their lawyers. Their attorneys
consulted with attorney for the plaintiff in the case from which the garnishment process had issued, and
the latter sent a telegram to the sheriff on November 14th instructing him not to close the stores but to
proceed in accordance with section 431 of the Code of Civil Procedure. At the same time he wrote a
letter to the sheriff containing the same instructions. Notwithstanding the fact that the contents of the
notices which the sheriff's deputies had served on the owners of these stores clearly showed that they
were not writs of attachment, and the further instructions from the counsel for the plaintiff in that civil
case to the same effect, the deputy sheriffs refused to raise the attachment. The owners of the stores
thereupon filed the complaints in the present civil actions on November 17, 1911, after the notification
to the deputy sheriff that such was their intention. On November 21, 1911, the attachments were raised
and the plaintiffs were allowed to resume business.
The lower court awarded damages to the plaintiff Tan Ti as follows:
For loss of profits on the sale of goods during the time the
store was closed ...........................................................................
Impairment of credit ..........................................................................
15
Counsel's fees ...................................................................................
Rent ....................................................................................................
Wages of employees ........................................................................
Loss of profits from sales of cigarettes .........................................
Two trips to Manila ...........................................................................
Total .....................................................................................
The loss of profits on cigarrette sales was fixed by stipulation of the parties. The two items of rent for the
building and wages of employees, being the pro rata parts of the plaintiff's monthly expenses for these
services, should be allowed. It is argued that as one of plaintiff's two trips to Manila was made before the
wrongful attachment of his property, this item should be cut in half. The first trip, however, was the
direct result of defendant's representations to the plaintiff in their official capacity. We are of the
opinion that the defendants would been liable for this expense even if they had followed the instructions
which they received from Manila as the result of plaintiff's first trip to Manila.
They had no right to make such representations to the plaintiff on the strength of the notices which they
were called upon to serve, and such representations were the direct and proximate cause which induced
plaintiff to make the trip. The expenses of both trips should be allowed, and this item of damages is
therefore approved. Loss of profits from sales for the time the store was closed was based upon the
record of sales made by the plaintiff during the months of October, November, and December, 1911. The
figures were as follows: October P1,517.54; November, P924,19; and December, P1,651.54. Upon these
figures, the reduction in gross sales was fixed at P600 and profits allowed at 15 per cent, or P90. This
seems to be a fair and reasonable method of arriving at plaintiffs loss on this item and should be
allowed.
We accept the statement of counsel for the defendants to the effect that of the item of P500 for
attorney's fees, P200 were paid for services rendered in securing the release of the goods and P300 for
prosecuting the present suit for damages.
That attorney's fees in excess of the amount fixed by statute cannot be taxed as costs against the
adverse party in any case is well settled. (Secs. 489 and 492, Code Civ. Proc.; Mendiola vs. Villa, 15 Phil.
Rep., 131; Orense vs. Jaucian, 18 Phil. Rep., 553.) Can such fees be allowed in this jurisdiction as an
element of damages?
The decisions of the State courts in the American Union on this question are not uniform. They are
irreconcilable some holding that reasonable counsel fees incurred in procuring the dissolution of
injunctions, attachments, and in recovering property wrongfully seized is a proper element of damages,
the amount being limited to fees paid for procuring the dissolution or recovery and not for the general
defense of the case or for prosecuting suits for damages. These holdings proceed upon the idea that the
P90.00
party has been compelled to employ counsel to rid himself of an unjust restriction which his adversary
has placed upon him. The courts which take the opposite view say that it is difficult to see upon what
500.00
ground counsel fees incurred by the adverse party should be charged up to the defeated party any more
in attachment and injunction cases than in other litigations upon contracts or for damages for torts. The

litigation they say may be equally unjust and oppressive in other cases as in cases of attachment,
injunctions and replevin. It is true, however, they reason, that attachments and injunctions are in some
respects more summary and may entail damages arising out of the seizure of defendant's property; but
all of this is provided for by the terms of the bond required to cover damages sustained. But counsel fees
are as necessary in the one class of cases as in the other and are neither peculiar nor more erroneous in
cases of attachments and injunctions than in other cases.
The authorities on either side of this question are eminent and there is no middle ground upon which to
stand. The authorities pro and con may be found collated in the case notes of the following cases;
Littleton vs. Burgess (16 L. R. A., N. S. 49); Lindeberg vs. Howard (1 Am. and Eng. Ann. Cas., 709,
injunction); Plymouth Gold Mining Co. vs. U. S. Fidelity and Guaranty Co. (10 Am. and Eng. Ann. Cas., 951
attachment); Lake s. Hargis, (30 L. R. A., N. S., 366, replevin); Winkler vs. Roeder, (8 Am. St. Rep., 155,
attorney's fees as element of damages).
In the United States of Supreme Court and in the Federal Courts such fees are not allowed. The case first
decided by the United States Supreme Court upon this point and which has been steadfastly adhered to
ever since is Oelrichs vs. Spain (15 Wall., 211, 221). In this case the court said:
The point here in question has never been in expressly decided by this court, but it is clearly
within the reasoning of the case last referred to, and we think is substantially determined by
that adjudication. In debt, covenant and assumpsit damages are recovered, but counsel fees
are never included. So in equity cases, where there is not injunction bond, only the taxable
costs are allowed to the complainants. The same rule is applied to the defendant, however
unjust the litigation on the other side, and however large the expensa litis to which he may
have been subjected. The parties in this respect standard by which the honorarium can be
measured. Some counsel demand much more than others. Some clients are willing to pay
more than others. More counsel may be employed than are necessary. When both client and
counsel, know that the fees are to be paid by the other party there is danger of abuse. A
reference to a master, or an issue to a jury, might be necessary to ascertain the proper
amount, and this grafted litigation might possibly be more animated and protracted than that
in the original cause. It would be an office of some delicacy on the part of the court to scale
down the charges, as might sometimes be necessary.
Since the enunciation of this doctrine the Supreme Court of the United States has had occasion to
reverse several decisions of State courts where attorney's fees for services in dissolving writs of
injunction and attachment were allowed, the writs having issued out of Federal courts and actions for
damages brought in the State courts. (Tullock vs. Mulvane, 184 U. S., 497, reversing 61 Kan., 650; 46 L.
ed., 657; Mo. etc. R. Co. vs. Elliott, 184 U. S., 530; 46 L. ed., 673, reversing 154 Mo., 300.)
The case at bar is one of replevin. In this country the damages must be determined and assessed in the
principal action. Two actions, one of replevin and the other for damages, cannot be maintained. This
makes the apportionment of attorney's fees exceedingly difficult and in the absence of an agreement
practically impossible. In those jurisdictions where attorney's fees are allowed as an element of damages
two actions as a rule are required.
After an examination of all the available authorities we have concluded that sound public policy
demands that counsel fees in suits of the character of the one under consideration should not be
regarded as a proper element of damages, even where they are capable of being apportioned so as to
show the amount incurred for the release of the necessary in the prosecution of the suit for damages. It
16
is not sound public policy to place a penalty on the right to litigate. To compel the defeated party to pay
the fees of counsel for his successful opponent would throw wide the door of temptations to the
opposing party and his counsel to swell the fees to undue proportions, and to apportion them arbitrarily
between those pertaining properly to one branch of the case from the other.
This court has already placed itself on record as favoring the view taken by those courts which hold that
attorneys' fees are not a proper element of damages. In Ortiga Bros. & Co. vs. Enage and Yap Tico (18
Phil. Rep., 345), a wrongful attachment on the pier belonging to plaintiffs had issued at the request of
Yap Tico. Ortiga Bros. sued out an injunction preventing the attempted sale of the pier by the sheriff and
the matter was then held in status quo pending judgment of the court as to the right of the sheriff to
attach and sell the property. Judgment in the lower court was in favor of the plaintiffs and damages were
awarded in the amount of P600 which proved to consist entirely of the fees of plaintiffs attorney. This
court expressly disallowed the same, awarding the plaintiffs only the usual statutory costs.
As to the item of P500 for impairment of plaintiff's credit: Plaintiff testified that he was conducting a
credit business with wholesale houses in Manila, and that when his stock of goods was seized by the
sheriff he so informed these houses, who thereupon stopped his credit; that on being restored to
possession of his goods he so advised them. Although he states that by stoppage of his credit he was
unable to secure merchandise for Christmas sales, it appears from his books, stated above, that he sold
P1,651.54 during the month of December, which was as much as, if not more, than he had sold during
the same month of the previous year.
The wrongfullness of the seizure was so apparent that a satisfactory explanation of the same could easily
have been given to the wholesale houses with which his sales for the month of December. As we have
allowed him the profits on P600 for sales which he was prevented from making during the month of
November, it appears that damage from interruption to his business has been fully compensated. So
that, without touching upon the vexatious question of whether damages to credit might be allowed in a
proper case, we are of the opinion that such damages in this case, if any, were so infinitesimal and
speculative, that they cannot be allowed.
Our decision in the Tan Ti case disposes of the questions raised in the other two cases. All the items
allowed in those cases being of similar character and having been computed in the same manner as
those in the first case, should be allowed, with the exception of the amounts allowed as attorney's fees
and for impairment of credit. In both cases these items are disallowed.
For the foregoing reasons, the judgments appealed from are modified as follows: Damages in Tan Ti's
case are reduced to P227.50; in Tiu Uco's case, to P460.50; and in the case of Tiu Tiao et al., to P987. As
thus modified, the judgments appealed from are affirmed. Without costs in this instance.

EN BANC
G.R. No. L-27033 October 31, 1969
POLYTRADE CORPORATION, plaintiff-appellee,
vs.
VICTORIANO BLANCO, defendant-appellant.
SANCHEZ, J.:
Suit before the Court of First Instance of Bulacan on four causes of action to recover the purchase price
of rawhide delivered by plaintiff to defendant.1 Plaintiff corporation has its principal office and place of
business in Makati, Rizal. Defendant is a resident of Meycauayan, Bulacan. Defendant moved to dismiss
upon the ground of improper venue. He claims that by contract suit may only be lodged in the courts of
Manila. The Bulacan court overruled him. He did not answer the complaint. In consequence, a default
judgment was rendered against him on September 21, 1966, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant
ordering defendant to pay plaintiff the following amounts:
First Cause of Action P60,845.67, with interest thereon at 1% a month from May 9, 1965 theuntil theinfull
Second Cause of Action P51,952.55, with interest thereon at 1% a month from March 30,to 1965 untiltothe
Third Cause of Action P53,973.07, with interest thereon at 1% a month from July 3, 1965tountil theoffull
Fourth Cause of Action P41,075.22, with interest thereon at 1% a month2 until the full amount is paid.
In addition, defendant shall pay plaintiff attorney's fees amounting to 25% of the principal
amount due in each cause of action, and the costs of the suit. The amount of P400.00 shall be
deducted from the total amount due plaintiff in accordance with this judgment.
Defendant appealed.
1. The forefront question is whether or not venue was properly laid in the province of Bulacan where
defendant is a resident.
Section 2 (b), Rule 4 of the Rules of Court on venue of personal actions triable by courts of first instance
and this is one provides that such "actions may be commenced and tried where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at
the election of the plaintiff." Qualifying this provision in Section 3 of the same Rule which states that
venue may be stipulated by written agreement "By written agreement of the parties the venue of an
action may be changed or transferred from one province to another."
Defendant places his case upon Section 3 of Rule 4 just quoted. According to defendant, plaintiff and
defendant, by written contracts covering the four causes of action, stipulated that: "The parties agree to
17
sue and be sued in the Courts of Manila." This agreement is valid.3 Defendant says that because of such
covenant he can only be sued in the courts of Manila. We are thus called upon to shake meaning from
the terms of the agreement just quoted.
But first to the facts. No such stipulation appears in the contracts covering the first two causes of action.
The general rule set forth in Section 2 (b), Rule 4, governs, and as to said two causes of action, venue was
properly laid in Bulacan, the province of defendant's residence.
The stipulation adverted to is only found in the agreements covering the third and fourth causes of
action. An accurate reading, however, of the stipulation, "The parties agree to sue and be sued in the
Courts of Manila," does not preclude the filing of suits in the residence of plaintiff or defendant. The
plain meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive words
which would indicate that Manila and Manila alone is the venue are totally absent therefrom. We cannot
read into that clause that plaintiff and defendant bound themselves to file suits with respect to the last
two transactions in question only or exclusively in Manila. For, that agreement did not change or transfer
venue. It simply is permissive. The parties solely agreed to add the courts of Manila as tribunals to which
they may resort. They did not waive their right to pursue remedy in the courts specifically mentioned in
Section 2(b) of Rule 4. Renuntiatio non praesumitur.
Illuminating on this point is Engel vs. Shubert Theatrical Co., 151 N.Y.S. 593, 594. And this, became there
the stipulation as to venue is along lines similar to the present. Said stipulation reads: "In case of dispute,
both contracting parties agree to submit to the jurisdiction of the Vienna courts." And the ruling is: "By
clause amountthe
question is paid.
parties do not agree to submit their disputes to the jurisdiction of the
Viennese court, and to those courts only. There is nothing exclusive in the language used. They do agree
submit thefull amountjurisdiction,
Viennese is paid. but they say not a word in restriction of the jurisdiction of courts
elsewhere; and whatever may be said on the subject of the legality of contracts to submit controversies
courts amount
certain is paid. exclusively, it is entirely plain that such agreements should be strictly
jurisdictions
construed, and should not be extended by implication."
Venue here was properly laid.
2. Defendant next challenges the lower court's grant to plaintiff of interest at the rate of one per centum
per month. Defendant says that no such stipulation as to right of interest appears in the sales
confirmation orders which provided: "TERMS 60 days after delivery with interest accruing on
postdated cheques beyond 30 days." The flaw in this argument lies in that the interest and the rate
thereof are expressly covenanted in the covering trust receipts executed by defendant in favor of
plaintiff, as follows: "All obligations of the undersigned under this agreement of trust shall bear interest
at the rate of one per centum (1%) per month from the date due until paid."
On this score, we find no error.
3. Defendant protests the award of attorneys' fees which totals P51,961.63, i.e., 25% of the total
principal indebtedness of P207,846.51 (exclusive of interest). Defendant's thesis is that the foregoing
sum is "exorbitant and unconscionable."
To be borne in mind is that the attorneys' fees here provided is not, strictly speaking, the attorneys' fees
recoverable as between attorney and client spoken of and regulated by the Rules of Court. Rather, the
attorneys' fees here are in the nature of liquidated damages and the stipulation therefor is aptly called a
penal clause.4 It has been said that so long as such stipulation does not contravene law, morals, or public
 18

order, it is strictly binding upon defendant.5 The attorneys' fees so provided are awarded in favor of the
litigant, not his counsel. It is the litigant, not counsel, who is the judgment creditor entitled to enforce
the judgment by execution.6

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

May the attorneys' fees (P51,961.63) here granted be tagged as iniquitous or unconscionable? Upon the
circumstances, our answer is in the negative. Plaintiff's lawyers concededly are of high standing. More
important is that this case should not have gone to court. It could have been easily avoided had
defendant been faithful in complying with his obligations. It is not denied that the rawhide was
converted into leather and sold by defendant. He raises no defense. In fact, he did not even answer the
complaint in the lower court, and was thus declared in default. Nor does he deny the principal liability.
Add to all these the fact that the writ of attachment issued below upon defendant's properties yielded
no more than P400 and the picture is complete. The continued maintenance by defendant of the suit is
plainly intended for delay. The attorneys' fees awarded cannot be called iniquitous or unconscionable.

In the very recent case of Universal Motors Corporation vs. Dy Hian Tat (1969), 28 SCRA 161, 170, we
allowed attorneys' fees in the form of liquidated damages at the rate of 25% of the total amount of the
indebtedness. Here, the trial court has already reduced the attorneys' fees from the stipulated 25% "of
the total amount involved, principal and interest, then unpaid" to only 25% of the principal amount due.
There is no reason why such judgment should be disturbed.

FOR THE REASON GIVEN, the appealed judgment is hereby affirmed, except that interest granted, in
reference to the fourth cause of action, should start from March 24, 1965.

Costs against defendant-appellant. So ordered.

 19

Polytrade Corp vs. Blanco 30 SCRA 187

Facts:

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

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

Held:

Yes.

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

The provisions of the Rules of Court on venue of personal actions provides that actions may be
commenced and tried where the defendant or any of the defendants resides or may be found, or where
the plaintiff or any of the plaintiffs resides, at the election of the plaintiff. By written agreement of the
parties the venue of an action may be changed or transferred from one province to another.

THIRD DIVISION
G.R. No. 97255 August 12, 1994
SOLID HOMES, INC., petitioner,
vs.
HON. COURT OF APPEALS, INVESTCO, INC., ANGELA PEREZ STALEY, and ANTONIO PEREZ, respondents.
RESOLUTION
VITUG, J.:
An action for collection of sums of money, damages and attorney's fees was filed with the Regional Trial
Court (Civil Case No. 40615) of Pasig by private respondents Investco, Angela Perez Staley and Antonio
Perez Jr. against petitioner Solid Homes, Inc.
Private respondents averred that, on 07 September 1976, they sold, under an agreement entitled
"contract to sell and to buy," to Solid Homes six (6) parcels of land in Quezon City and Marikina, with an
area of 704,443 sq.m., for a total selling price of P10,211,075.00 payable (in accordance with paragraph 1
thereof), as follows:
a) P100,000.00, Philippine Currency, as part down payment upon signing and execution of this contract
receipt of which in full is hereby acknowledged;
b) P2,042,215.00, Philippine Currency, as down payment payable on the following dates:
1 July 22, 1977 P400,000.00
2 October 22, 1977 711,107.50
3 January 22, 1978 711,107.50
It is hereby agreed that the above down payment included the first down payment of P199,000.00.
Should the FIRST PARTY obtain titles to the properties above-described after July 22, 1977, the due dates
of the down payment and all subsequent payments on the balance shall be adjusted accordingly.
c) The balance of P8,188,860.00 shall be payable in ten (10) semi-annual installments for a period of five
(5) years and shall earn interest at the rate of twelve (12%) per annum, the first installment to be due on
July 22, 1978. The installment due together with the Schedule of Payments attached hereto as Schedule
"A" and made an integral part of this contract (Exh. A). 1
The second paragraph of Exhibit "A" stipulated that should Solid Homes fail to pay any of the
installments on their respective due dates, an interest of one percent (1%) per month on the defaulted
amount would be paid for up to two months or pro-rata thereof; thereafter, should the installment due,
as well as the interest thereon, still remain unpaid, the entire balance of the purchase price would then
become immediately due and demandable. Such due and demandable sum would be payable within
thirty (30) days, counted from the expiration of the 2-month period, without further need for judicial
action.
20
Private respondents asserted that Solid Homes violated the terms of the agreement by refusing to pay
the balance of P4,800,282.91 and by failing to negotiate a settlement with the tenants and squatters of
the property despite its receipt from Investco of P350,000.00 for that specific purpose.
The trial court rendered judgment on 14 February 1985; the dispositive portion read:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiffs:
1) The amount of P4,800,282.91 with interest thereof at the rate of one percent per month
from February 23, 1981, until fully paid;
2) The amount of P99,559.00 representing cost of science and transfer taxes which defendant
credited to its account with interest at the legal rate from the filing of the complaint;
3) The amount of P250,000.00 to cover attorney's fees and litigation expenses. 2
On appeal, the Court of Appeals (CA-G.R. CV No. 13400), modified the trial court's judgment and
rendered its own decision, dated 21 January 1991, resolving thusly:
PREMISES CONSIDERED, the judgment of the trial court is hereby modified by ordering
defendant-appellant to pay plaintiff the amount of P4,800,282.91 with interest thereon at the
rate of one percent per month from March 22, 1982. The amount of attorney's fees is hereby
reduced from P250,000.00 to P50,000.00. The decision is AFFIRMED in all other aspects. 3
In the instant petition for review, petitioner Solid Homes argues (a) that the Court of Appeals should not
have awarded attorney's fees, there being an absence of any special finding of fact to justify such award,
and (b) that it erred in declaring due and demandable the entire unpaid balance still owing to private
respondents.
The Second Division of this Court required respondents to comment on the petition in its Resolution of
22 April 1991. Meanwhile, Atty. Alejandro Barin withdrew as counsel for respondents Investco, Inc.,
Angela Perez Staley and Antonio Perez, Jr. 4 We required private respondents to submit the name and
address of their new counsel; to this day, no compliance has yet been made. In our resolution, dated 01
December 1993, we required the parties to move in the premises and to advise the Court whether
"supervening events may have rendered this case moot and academic." 5
Petitioner submitted its compliance and manifested thusly:
In the meantime, on April 15, 1985 before judgment was rendered by the RTC in Civil Case
No. 40615 Investco, Inc. (respondent herein) sold the very same parcels of land involved in
said case, in favor of Armed Forces of the Philippines Mutual Benefit Association, Inc.
(AFPMBAI)
Solid Homes, Inc. (herein petitioner) filed Civil Case No. Q-46570 RTC Quezon City entitled
'Solid Homes, Inc., plaintiff versus AFPMBAI, Investco, Inc. and the Register of Deeds of
Quezon City covering titles registered in Quezon City and Civil Case No. 52999 Solid Homes,
Inc., plaintiff versus AFPMBAI, Investco, Inc., and Register of Deeds for Pasig covering titles
 21

registered in Pasig, Metro Manila, both for nullification of the said second deed of sale over
the same properties involved in the instant case.
Quezon City RTC Civil Case No. 46570 was decided in favor of plaintiffs, Solid Homes, Inc.; on
appeal, the Court of Appeals (CA G.R. No. 22365) reversed the decision; same was elevated to
the Supreme Court where it is pending in SC G.R. No. 100437.
with respect to the period when defendant had defaulted and, consequently, when payment
of interest shall begin. The plaintiffs claim that said period should start on February 23, 1981;
while the defendant contends that the period must be adjusted should the titles be obtained
by the plaintiff corporation after July 22, 1977, as provided in Par. 1(b) of the contract to sell
and to buy. Considering that titles were actually transferred to Investco, Inc. between March
21 to March 28, 1979, the defendant avers that the original schedule of payment must not be
followed and the 5th installment shall only be due on March 22, 1982.

Pasig RTC, Civil Case No. 52999 was decided in favor of plaintiff Solid Homes, Inc.; defendants
It is undisputed that appellant Solid Homes had made a total payment of P6,126,645.00
appealed to the Court of Appeals (CA G.R. No. 27398), which affirmed the RTC Decision; on
leaving a balance of P4,800,282.91, which refers to the 6th to the 10th installments. Of the
the main cause of action Petition for Review by this to this Honorable Court is pending under
5th installment due on July 22, 1980, the following payments were made by appellant:
G.R. No. 104769.

Oct. 30, 1980 to Nov. 10, 1980 P150,000.00

Under the circumstances, herein petitioner, in compliance with the Resolution dated
Nov. 18, 1980 to Dec. 10, 1980 270,000.00
December 1, 1993, hereby manifests that supervening events since the Petition herein was
Dec. 18, 1980 to Jan. 14, 1981 101,853.12
filed has not rendered this case as moot and academic, considering that the issue involved is
Jan. 20 to Feb. 12, 1981 95,000.00
the amount to be paid in SOLID HOMES, INC. as balance on the consideration of the original
Feb. 16 to Feb. 19, 1981 115,000.00
sale by Investco, Inc. to it and the concomitant transfer of titles to the latter upon payment

thereof, whereas in G.R. No. 100437 and G.R. No. 104769, the issue is whether the second
P731,853.12
buyer AFPMBAI had actual or constructive notice of the prior sale by Investco, Inc. to herein
Petitioner, Solid Homes, Inc. 6
Thereafter, no further payment was made by appellant contending that under the provisions
of paragraph 1(b) of the contract, the payment schedule should be adjusted. The said
As of this late date, the Court has yet to hear from private respondents. Given the premises, and in order
provisions states as follows:
to permit this case to be finally resolved and terminated, the required comment on the petition for
review should now be, as it is hereby, dispensed with.
Par. 1, sub-par. (b)
Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when its claimant is
compelled to litigate with third persons or to incur expenses to protect his interest by reason of an Should the FIRST PARTY (plaintiff Investco) obtain titles to the properties above-
unjustified act or omission of the party from whom it is sought. While judicial discretion is here extant, described after July 22, 1977, the due dates of the downpayment and the
an award thereof demands, nevertheless, a factual, legal or equitable justification. The matter cannot subsequent payments on the balance shall be adjusted accordingly.'
and should not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold
Insurance Company Inc. vs. Court of Appeals, 173 SCRA 619).
Admittedly, the subject titles were obtained during the period of March 21, to March 28,
1979, or after July 22, 1977 (Exhs. D to 1 and Exhs. 2 to 10). Thus, implementing par. 1(b) of
In the case at bench, the records do not show enough basis for sustaining the award for attorney's fees the Contract, the due dates of payments should have been adjusted as follows:
and to adjudge its payment by petitioner. On the contrary, the appellate court itself has found that
petitioner's act of withholding payment could not be said to be all that unjustified. The disagreement of
Due Dates
the parties on the demandability of the amount still due and the accrual date of interest has persisted
Per Contract Installment Adjusted
largely because of supervening circumstances and the perceived inexplicitness of the contract itself. The
Schedule A Number Due Dates
decision of the appellate court, has, in fact, reversed that of the trial court on the imposition of interest
from 23 February 1981, thus upholding, which we similarly find to be in order, the position of petitioner
that the accrual dated should instead start only on 28 March 1982. Downpayment

Relative to the demandability of the entire unpaid balance, we agree with, and so adopt as our own that July 22, 1977 March 28, 1979
of respondent court; viz: October 22, 1977 June 08, 1979
January 22, 1978 September 28, 1979
The amount actually paid on account of the contract to buy and sell (Exh. A or 1) is not an
area of controversy in the first cause of action. The sum of P2,042,215.00 corresponding to Balance
the down payment, as well as P4,084,430.00 with respect to the first four semi-annual
installments and a portion of the fifth installment, had been received making a total of
P6,126,645.00. It is conceded that a balance of P4,800,282.91 is left unpaid. The dispute is
 22

July 22, 1978 No. 1 March 08, 1980

January 22, 1979 No. 2 September 28, 1980
July 22, 1979 No. 3 March 28, 1981
January 22, 1981 No. 4 September 28, 1981
July 22, 1980 No. 5 March 28, 1982
January 22, 1981 No. 6 September 28, 1982
July 22, 1981 No. 7 March 28, 1983
January 22, 1982 No. 8 September 28, 1983
July 22, 1982 No. 9 March 28, 1984
January 22, 1983 No. 10 September 28, 1984

In view of the adjustment of due dates in accordance with par. 1(b) of the Contract payments
made should correspond to the adjusted dates. Thus, the payment on the 4th installment
which is supposed to have been made on January 22, 1980, should be credited on September
28, 1981, and the next payment on the 5th installment which should have been made on July
22, 1981 under the contract would have to be credited on March 28, 1981, the adjusted due
date. 7

It is but proper, therefore, to indeed declare 28 March 1982 to be the due date for the payment of the
5th installment. The total amount of P731,853.12, representing payments for the 5th installment made
by petitioner, should rightly be credited on 28 March 1982, the adjusted due date. Since no payment
appears to have been made after 1981, petitioner should thereby be likewise held in default in the
payment of the 6th to the 10th installments. Under the terms of the contract, hereinbefore recited,
petitioner's default has effectively activated the acceleration clause of the contract, and we see no error
on the part of the appellate court in ordering petitioner to pay the entire unpaid balance of
P4,800,282.91 with interest thereon at the rate of 1% per month to be computed from 22 March 1982.

WHEREFORE, except on the award of attorney's fees which is hereby DELETED, the decision of the Court
of Appeals is AFFIRMED. No costs.

SO ORDERED.

FIRST DIVISION
G.R. No. 179491, January 14, 2015
ALEJANDRO C. ALMENDRAS, JR., Petitioner, v. ALEXIS C. ALMENDRAS, Respondent.
DECISION
SERENO, C.J.:
We resolve the Petition for Review filed by petitioner Alejandro C. Almendras, Jr., from the 27 January
2006 Decision and 28 August 2007 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 73088.1 The
CA affirmed the Decision and Order of the Regional Trial Court (RTC) in Civil Case No. 33432 finding
petitioner liable for damages.
THE FACTS
As culled from the CA, petitioner sent letters with similar contents on 7 February 1996 to House Speaker
Jose de Venecia, Jr., and on 26 February 1996 to Dr. Nemesio Prudente, President of Oil Carriers, Inc. The
controversial portion of the first and second letters reads as follows:
This is to notify your good self and your staff that one ALEXIS DODONG C. ALMENDRAS, a brother, is
not vested with any authority to liaison or transact any business with any department, office, or bureau,
public or otherwise, that has bearing or relation with my office, mandates or functions. x x x.
Noteworthy to mention, perhaps, is the fact that Mr. Alexis Dodong C. Almendras, a reknown
blackmailer, is a bitter rival in the just concluded election of 1995 who ran against the wishes of my
father, the late Congressman Alejandro D. Almendras, Sr. He has caused pain to the family when he filed
cases against us: his brothers and sisters, and worst against his own mother.
I deemed that his act of transacting business that affects my person and official functions is malicious in
purpose, done with ill motive and part of a larger plan of harassment activities to perforce realise his
egoistic and evil objectives.
May I therefore request the assistance of your office in circulating the above information to concerned
officials and secretariat employees of the House of Representatives.
These letters were allegedly printed, distributed, circulated and published by petitioner, assisted by Atty.
Roberto Layug, in Digos, Davao del Sur and Quezon City, with evident bad faith and manifest malice to
destroy respondent Alexis C. Almendras good name. Hence, the latter filed an action for damages arising
from libel and defamation against petitioner in the Regional Trial Court (RTC), Branch 19, Digos City.
THE RTC RULING
In the course of trial at the lower court, petitioner failed to present any evidence, except his Answer,
despite several rescheduling of hearings at his instance.4 The trial court thus submitted the case for
decision, and eventually ruled that respondent was libeled and defamed. For the sufferings, social
ridicule, defamation and dishonor caused by petitioners letters, respondent was awarded damages, as
23
follows: P5,000,000.00 as moral damages; P100,000.00 as exemplary damages; P10,000.00 for litigation
expenses; and attorneys fees in the amount of 25% of whatever amounts actually received by plaintiff
for this judgment.
Petitioner moved for reconsideration and/or new trial,6 but the same was denied by the trial court.
THE CA RULING
On intermediate appellate review, the CA ruled that petitioner was not denied due process. It noted that
petitioner was given full opportunity to present his evidence, but he vehemently disregarded the
proceedings by merely absenting himself from trials without valid excuses. 8chanRoblesvirtualLawlibrary
The appellate court also ruled that the letters were not privileged communications, since petitioner was
not acting as a member of the Congress when he sent them. In fact, his letter stated that he extends his
apology for bringing this personal matter in the open. He was, as maintained by the respondent,
sending open libelous and unsealed letters, duly published and circulated in Digos, Davao del Sur, and
Quezon City.9 Consequently, the CA upheld the damages awarded by the trial court, the amounts being
consistent with the social and financial standing of the parties involved.
We now rule on the final review of the case.
THE ISSUES
From the foregoing, we reduce the issues to the following:
(1) Whether or not petitioner was deprived due process;
(2) Whether or not the letters are libelous in nature;
(3) Whether or not the letters fall within the purview of privileged communication; and
(4) Whether or not respondent is entitled to moral and exemplary damages, attorneys fees and
litigation expenses.
OUR RULING
We deny the petition.
Petitioner anchors his appeal on the ground that his letters are covered by privileged communications.
He insists that he has the legal, moral, or social duty to make the communication, or at least, had an
interest to protect, being then a Congressman duty-bound to insulate his office and his constituents from
the dubious and mistrustful pursuits of his elder brother.11 Moreover, the letters were also not meant to
be circulated or published. They were sent merely to warn the individuals of respondents nefarious
activities, and made in good faith and without any actual malice. Respondents testimony that he learned
the existence of the letter from others cannot be countenanced, as no witness corroborated this. At
best, it is only hearsay.
On the denial of his motion for reconsideration and/or new trial, he maintains that his own counsel Atty.
Leonardo D. Suario categorically admitted that he did not know of petitioners ailment and thus did not
make the proper manifestations in Court. His failure to attend the hearing was not of his own volition,
but because of his doctors strict advice since he earlier underwent a quadruple coronary artery bypass

at the St. Lukes Medical Center-Heart Institute in Quezon City on 16 July 2001, just a day before the
Motion for Reconsideration and/or New Trial was filed. While his counsel represents him, the latters
mistakes should not deprive him of his day in court to present his side.
As to the damages, petitioner avers that since respondent never testified on any suffering he sustained
or why he is entitled to them, the same must not be awarded.
On the other hand, respondent asserts that petitioners letters do not fall within the purview of
privileged communication because it was published and read by the secretariat of the House of the
Representatives, and not exclusively communicated to persons who have some interest or duty in the
matter and who have the power to furnish the protection sought by the author of the statement.
Moreover, he was not acting as a member of congress when he sent the letters. The writing of a
personal matter (which petitioner admitted in the letters), not relating to the functions of a member of
Congress cannot, by any stretch of imagination, be deemed to be privileged and insulated from suit
arising therefrom.
Malice has also been sufficiently proven because the language of the letters in fact shows that the writer
had some ill-feeling towards the respondent by using the words such as reknown blackmailer and
bitter rival. There is sufficient showing that petitioner bore a grudge against the respondent and that
there was rivalry or ill-feeling between them.
Anent the damages, respondent believes that they were rightly awarded, taking into consideration his
testimony in the lower court,16 and the financial and social standing of the parties herein.
First, we rule that petitioner was not deprived of his right to due process.
Settled is the rule that a client is bound by the mistakes of his counsel. The only exception is when the
negligence of the counsel is so gross, reckless and inexcusable that the client is deprived of his day in
court. In such instance, the remedy is to reopen the case and allow the party who was denied his day in
court to adduce evidence. However, perusing the case at bar, we find no reason to depart from the
general rule.
Petitioner was given several opportunities to present his evidence or to clarify his medical constraints in
court, but he did not do so, despite knowing full well that he had a pending case in court. For petitioner
to feign and repeatedly insist upon a lack of awareness of the progress of an important litigation is to
unmask a penchant for the ludicrous. Although he rightfully expected counsel to amply protect his
interest, he cannot just sit back, relax and await the outcome of the case. In keeping with the normal
course of events, he should have taken the initiative of making the proper inquiries from his counsel
and the trial court as to the status of his case. For his failure to do so, he has only himself to
blame.19 The Court cannot allow petitioner the exception to the general rule just because his counsel
admitted having no knowledge of his medical condition. To do so will set a dangerous precedent of
never-ending suits, so long as lawyers could allege their own fault or negligence to support the clients
case and obtain remedies and reliefs already lost by the operation of law.
Second, we find that petitioners letters are libelous in nature and do not fall within the purview of
privileged communication.
For an imputation to be libelous under Article 353 of the Revised Penal Code, the following requisites
must be present: (a) it must be defamatory; (b) it must be malicious; (c) it must be given publicity; and
(d) the victim must be identifiable.
Consequently, under Article 354, every defamatory imputation is presumed to be malicious, even if true,
24
if no good intention and justifiable motive is shown. As an exception to the rule, the presumption of
malice is done away with when the defamatory imputation qualifies as privileged communication.22 In
order to qualify as privileged communication under Article 354, Number 1,23 the following requisites
must concur: (1) the person who made the communication had a legal, moral, or social duty to make the
communication, or at least, had an interest to protect, which interest may either be his own or of the
one to whom it is made; (2) the communication is addressed to an officer or a board, or superior, having
some interest or duty in the matter, and who has the power to furnish the protection sought; and (3) the
statements in the communication are made in good faith and without malice.
Were petitioners letters defamatory in nature? We believe so.
In determining whether a statement is defamatory, the words used are to be construed in their entirety
and should be taken in their plain, natural, and ordinary meaning as they would naturally be understood
by the persons reading them, unless it appears that they were used and understood in another
sense.25 In the instant case, the letters tag respondent as a reknown black mailer, a vengeful family
member who filed cases against his mother and siblings, and with nefarious designs. Even an impartial
mind reading these descriptions would be led to entertain doubts on the persons character, thereby
affecting that persons reputation.
Malice can also be presumed inasmuch as the letters are not privileged in nature. Petitioners contention
that he has the legal, moral or social duty to make the communication cannot be countenanced because
he failed to communicate the statements only to the person or persons who have some interest or duty
in the matter alleged, and who have the power to furnish the protection sought by the author of the
statement. A written letter containing libelous matter cannot be classified as privileged when it is
published and circulated among the public.26 Examination of the letters would reveal that petitioner
himself intended for the letters to be circulated (and they were so) when he said that:
May I therefore request the assistance of your office in circulating the above information to concerned
officials and secretariat employees of the House of Representatives.27
This lack of selectivity on his part is indicative of malice and is anathema to his claim of privileged
communication because such publication created upon the minds of the readers a circumstance which
brought discredit and shame to respondents reputation.
Lastly, having duly proved that all the elements of libel are present in this case, we rule that the
damages awarded by the trial court and affirmed by the appellate court must be modified and
equitably reduced.
In awarding damages in libel cases, the court is given ample discretion to determine the amount,
depending upon the facts of the particular case.29 Article 2219 of the Civil Code expressly authorizes the
recovery of moral damages in cases of libel, slander or any other form of defamation. However, while
no proof of pecuniary loss is necessary in order that moral damages may be awarded, x x x it is
nevertheless essential that the claimant should satisfactorily show the existence of the factual basis of
damages and its causal connection to defendants acts.30 Considering that respondent sufficiently
justified his claim for damages (i.e. he testified that he was embarrassed by the said letters [and]
ashamed to show his face in [sic] government offices31), we find him entitled to moral and exemplary
damages.
However, we equitably reduce the amounts32 awarded because even though the letters were libellous,
respondent has not suffered such grave or substantial damage to his reputation to warrant receiving
P5,000,000 as moral damages and P100,000.00 as exemplary damages. In fact, he was able to
successfully secure an elected position in recent years. Accordingly, we reduce the award of moral
 25

damages from P5,000,000 to P100,000 and exemplary damages from P100,000 to P20,000.
The award of attorneys fees is not proper because respondent failed to justify satisfactorily his claim,
and both the trial and appellate courts failed to explicitly state in their respective decisions the rationale
for the award.33 It is an accepted doctrine that the award thereof as an item of damages is the exception
rather than the rule, and counsels fees are not to be awarded every time a party wins a suit. The power
of the court to award attorneys fees under Article 2208 of the Civil Code demands factual, legal and
equitable justification, without which the award is a conclusion without a premise, its basis being
improperly left to speculation and conjecture. In all events, the court must explicitly state in the text of
the decision, and not only in the decretal portion thereof, the legal reason for the award of attorneys
fees.34 The same is true for the award of litigation expenses because respondent failed to satisfactorily
justify his claim.
WHEREFORE, we DENY the instant petition. The 27 January 2006 Decision and 28 August 2007
Resolution of the Court of Appeals in CA-G.R. CV No. 73088 are hereby MODIFIED, in that: (1) the award
of moral damages is reduced from P5,000,000 to P100,000; (2) the award of exemplary damages is
reduced from P100,000 to P20,000; and (3) litigation expenses and attorneys fees are deleted.
SO ORDERED.
ALEJANDRO C. ALMENDRAS, JR. -versus- ALEXIS C. ALMENDRAS
his counsel and the trial court as to the status of his case. For his failure to do so, he has only himself
to blame. The Court cannot allow petitioner the exception to the general rule just because his counsel
admitted having no knowledge of his medical condition. To do so will sit a dangerous precedent of never
ending suits, so long as lawyers could allege their own fault or negligence to support the clients case
and obtain remedies and reliefs already lost by the operation of law.
2. For imputation to be libelous under Art. 353 of the Revised Penal Code, the following requisites must
be present: a) it must be defamatory; b)it must be malicious; c) it must be given publicity; and d) the
victim must be identifiable. Consequently, under Art. 354, every defamatory imputation is presumed to
be malicious, even if true, if no good intention and justifiable motive is shown. In the instant case, the
letters tag respondent as a reknown black mailer a vengeful family member who filed cases
againts his mother and siblings, and with nefarious designs. Even impartial mind reading these
descriptions would be led to entertain doubts on the persons character thereby affecting that
persons reputation.
3. A written letter containing libelous matter cannot be classified as privileged when it is published and
circulated among the public. His intention is clearly stated on the letter, when he requested the
assistance of the office of the recipient to circulate the information to concerned officials and secretariat
employees of the House of the Representatives. The publication brought discredit and shame to
respondents reputation.

Facts:
4. Considering that the respondent sufficiently justified his claim for damages, he is entitled to moral and
exemplary damages. The award on attorneys fees and litigation expenses are not proper because
Alejandro C. Almendras sent letters to House Speaker Jose De Venecia, Jr. and Dr. Nemesio Prudente,
the respondent failed to justify satisfactorily his claim.
President of Oil Carriers, Inc. These letters were allegedly printed, distributed, circulated and published
by Alejandro Almendras, Jr. in Davao Del Sur and Quezon City, with evident bad faith and manifest
malice to destroy Alexis C. Almendras good name. Hence, the latter filed an action for damages
arising from libel and defamation against petitioner in RTC, Digos City. RTC granted the complaint,
awarding Alexis P5M as moral damages, P100T as exemplary damages, P10T for litigation expenses and
attorneys fees in the amount of 25% of whatever amounts actually received by plaintff for this judgment.
After the denial of Motion for Reconsideration and/or new trial, the case was elevated to CA. CA
affirmed the decision of RTC.

Issues:

1. Whether or not petitioner was deprived due process.

2. Whether or not the letters are libelous in nature.

3. Whether of not the letters fall within the purview of privileged communication; and 4. Whether or not
respondent is entitled to moral and exemplary damages, attorneys fees and litigation expenses.

Ruling:

1. Petitioner was given several opportunities to present his evidence or to clarify his medical constraints
in court, but he did not do so, despite knowing fully well that he had a pending case in court. In keeping
the normal course of events, he should have taken the initiative of making the proper inquiries from

SECOND DIVISION
[G.R. No. 128452. November 16, 1999]
COMPANIA MARITIMA, INC., EL VARADERO DE MANILA, MINDANAO TERMINAL AND BROKERAGE SER
VICES, CARLOS P. FERNANDEZ, VICENTET. FERNANDEZ, LUIS T. FERNANDEZ, and RAMON B. FERNANDE
Z, petitioners, vs. COURT OF APPEALS and EXEQUIEL S. CONSULTA,. respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1]of the Court of Appeals, dated February 27, 199
6, affirming the decision of the Regional Trial Court, Branch 94, Quezon City, dated March 16,1993, whic
h ordered petitioners to pay private respondent, Atty. Exequiel S. Consulta, the total amount of P2,590,0
00.00, as attorneys fees, and P21,856.40, as filing fees, in connection with three cases whichthe latter, as
attorney, handled for the former.
The facts are as follows:
Maritime Company of the Philippines was sued by Genstar Container Corporation before the Regional Tri
al Court, Branch 31, Manila. On November 29, 1985, it was ordered to pay Genstar ContainerCorporation
the following amounts:
a. $469,860.35, or its equivalent in pesos at the current exchange rate.
b. 25% of the total obligation, P2,000.00 as Acceptance Fee, and P250.00 per appearance - -
as Attorneys Fees.
c. Costs of suit.
As a result, properties of petitioners Compania Maritima, Inc., El Varadero de Manila, and Mindanao Ter
minal and Brokerage Services at Sangley Point, Cavite, were levied upon in execution. Theproperties, con
sisting of the tugboats Dadiangas, Marinero, and Timonel, the floating crane Northwest Murphy Diesel E
ngine, and the motorized launch Sea Otter, were worth P51,000,000.00 in sum.However, the same were
sold at public auction for only P1,235,000.00 to the highest bidder, a certain Rolando Patriarca.[2]
Petitioners Compania Maritima, Inc., El Varadero de Manila, and Mindanao Terminal and Brokerage Servi
ces engaged the services of private respondent, Atty. Exequiel S. Consulta, who representedthem in the f
ollowing cases: (1) Civil Case No. 85-
30134, entitled Genstar Container Corporation v. Maritime Company of the Philippines, wherein petition
ers properties were levied upon although petitionershad not been impleaded as defendants therein; (2)
TBP Case No. 86-
03662, entitled Compania Maritima, Inc., v. Ramon C. Enriquez, which was a criminal case for falsification
and for violation of R.A. No.3019, otherwise known as the Anti-
Graft and Corrupt Practices Act, against Deputy Sheriff Enriquez before the Tanodbayan; and (3) Civil Cas
e No. 86-
37196 entitled Compania Maritima v. GenstarContainer Corporation, an action for Injunction, Annulment
of Execution Proceedings, and Damages.[3]
The cases were eventually resolved in this wise: (1) in Civil Case No. 85-
30134, the trial court dismissed the third-
party claim and motion for the issuance of a writ of preliminary injunction filed by Atty.Consulta; (2) afte
26
r Atty. Consulta filed the complaint with the Tanodbayan in TBP Case No. 86-
03662, petitioners transferred the handling of the case to another lawyer; and (3) Civil Case No. 86-
37196 waseventually dismissed on motion of both parties, but only after the trial courts denial of the mo
tion to dismiss filed by Genstar Container Corporation was upheld on appeal by both the Court of Appeal
s and theSupreme Court.[4]
For his services in the three cases, Atty. Consulta billed petitioners as follows: (1) P100,000.00 for Civil Ca
se No. 85-30134; (2) P50,000.00 for TBP Case No. 86-03662; and (3) P5,000,000.00 for CivilCase No. 86-
37196, including the subsequent appeals to the Court of Appeals and the Supreme Court. Petitioners did
not pay the amount demanded but only P30,000.00 for Civil Case No. 85-
30134 andP10,000.00 for TBP Case No. 86-03662.[5]
Because of the failure of corporate petitioners to pay the balance of his attorneys fees, Atty. Consulta br
ought suit against petitioners in the Regional Trial Court, Branch 94, Quezon City. He sought therecovery
of the following: (1) P70,000.00, as the balance of the P100,000.00 attorneys fees billed for Civil Case No.
85-30134; (2) P40,000.00, as the balance of the P50,000.00 attorneys fees for TBP CaseNo. 86-
03662, and (3) P5,000,000.00 as attorneys fees for Civil Case No. 86-
37196, including the subsequent appeals therefrom to the Court of Appeals and the Supreme Court. He li
kewise asked for moraland exemplary damages, attorneys fees, and the costs of suit.[6]
On March 16, 1993, the trial court rendered a decision which in part stated:
Considering all the circumstances as above set forth, this Court believes that the amount equivalent to fi
ve percent (5%) of the amount involved, or the amount of Two Million Five Hundred FiftyThousand Pesos
(P2,550,000.00) would be reasonable attorneys fees for the services rendered by the plaintiff in Civil Cas
e No. 37196 and the two related proceedings in the Court of Appeals and the SupremeCourt.
As for the services rendered by the plaintiff in Civil Case No. 30134, for which he appears to have already
been paid P30,000.00, the Court believes that an additional amount of P20,000.00 would bereasonable.
On plaintiffs demand of P40,000.00, in addition to the P10,000.00 he had initially received for services re
ndered in the Tanodbayan case No. 86-03662, the Court grants him an additional P20,000.00.
WHEREFORE, judgment is hereby rendered for the plaintiff and orders the defendant to pay the plaintiff,
jointly and severally, damages as follows:
a. For services rendered by plaintiff in Civil Case No. 37196 and the related proceedings in the Court of A
ppeals and the Supreme Court - Two Million Five Hundred Fifty Thousand Pesos(P2,550,000.00).
b. For services rendered by plaintiff in Civil Case No. 30134 - Twenty Thousand Pesos (P20,000.00).
c. For services rendered in the TBP Case No. 86-03662 - Twenty Thousand Pesos (P20,000.00).
d. Filing fees in the amount of P21,856.40.
The defendants counterclaim and plaintiffs counterclaim to defendants counterclaim are both dismissed.
SO ORDERED.
On appeal, the Court of Appeals affirmed the decision of the trial court. Said the appellate court:
In Civil Case No. 37196, where appellee rendered his legal services, appellants property worth Fifty One
Million Pesos (P51,000,000.00) was involved. Likewise, the aforementioned case was not asimple action f
or collection of money, considering that complex legal issues were raised therein which reached until the
Supreme Court. In the course of such protracted legal battle to save the appellantsproperties, the appell
ee prepared numerous pleadings and motions, which were diligently and effectively executed, as a result

of which, the appellants properties were saved from execution and theiroppositors were forced to settle
by way of a compromise agreement.
It is a wellsettled rule that in the recovery of attorneys fees, whether as a main action or as an incident of
another action, the determination of the reasonableness is within the prerogative of the courts(Roldan v
s. Court of Appeals, 218 SCRA 713; Radiowealth Finance Co., Inc. vs. International Corporate Bank, 182 S
CRA 862; Panay Electric vs. Court of Appeals, 119 SCRA 456).
Based on the aforequoted ruling, We find that the court a quo did not commit any reversible error in aw
arding attorneys fees equivalent to five percent (5%) of the total value of properties involved inCivil Case
No. 37196.
Hence, this appeal. Petitioners raise the following issues:
a) Whether or not the amount of attorneys fees awarded to the private respondent by the court a quo a
nd affirmed by the Honorable Court is reasonable.
b) Whether or not the doctrine of piercing the veil of corporate fiction may be applied in the case at bar.
With respect to the first question, it is pertinent to note two concepts of attorneys fees in this jurisdictio
n. In the ordinary sense, attorneys fees represent the reasonable compensation paid to a lawyer byhis cli
ent for the legal services he has rendered to the latter. On the other hand, in its extraordinary concept, a
ttorneys fees may be awarded by the court as indemnity for damages to be paid by the losing partyto the
prevailing party.[7]
The issue in this case concerns attorneys fees in the ordinary concept. Generally, the amount of attorney
s fees due is that stipulated in the retainer agreement which is conclusive as to the amount of thelawyers
compensation. In the absence thereof, the amount of attorneys fees is fixed on the basis of quantum me
ruit, i.e., the reasonable worth of his services.[8] In determining the amount of attorneys fees, thefollowin
g factors are considered: (1) the time spent and extent of services rendered; (2) the novelty and difficulty
of the questions involved; (3) the importance of the subject matter; (4) the skill demanded; (5)the proba
bility of losing other employment as a result of the acceptance of the proffered case; (6) the amount invo
lved in the controversy and the benefits resulting to the client; (7) the certainty ofcompensation; (8) the
character of employment; and (9) the professional standing of the lawyer.[9]
Both the Court of Appeals and the trial court approved attorneys fees in the total amounts of P50,000.00
and P30,000.00 for the services of Atty. Consulta in Civil Case No. 85-30134 and TBP Case No.86-
03662, respectively. Based on the above criteria, we think said amounts are reasonable, although the thi
rdparty claim and motion for the issuance of a writ of preliminary injunction filed by Atty. Consultain Civil
Case No. 85-30134 was dismissed by the trial court, while TBP Case No. 86-
03662 was given by petitioners to another lawyer after Atty. Consulta had filed the complaint. On the ot
her hand, althoughthe order of the trial court in Civil Case No. 86-
37196 granting the motion to dismiss filed by both parties did not state the grounds therefor, it is reason
able to infer that petitioners agreed thereto inconsideration of some advantage. Hence, the rulings of th
e Court of Appeals and the trial court that, because of the complexity of the issues involved and the work
done by counsel, the amount ofP2,550,000.00 was reasonable for Atty. Consultas services.
In addition, the value of the properties involved was considerable. As already stated, to satisfy the judgm
ent in favor of Genstar Container Corporation in Civil Case No. 85-
30134, properties ofpetitioners worth P51,000,000.00 were sold at public auction. Only P1,235,000.00 w
as realized from the sale and petitioners were in danger of losing their properties. As the appellate court
pointed out, Atty.Consulta rendered professional services not only in the trial court but in the Court of A
ppeals and in this Court. There is no question that through his efforts, properties owned by petitioners w
ere saved fromexecution.
27
It is settled that great weight, and even finality, is given to the factual conclusions of the Court of Appeals
which affirm those of the trial courts.[10] Only where it is shown that such findings arewhimsical, capricio
us, and arbitrary can they be overturned. In the present case, the Court of Appeals affirmed the factual c
onclusions of the trial court that: (1) the issues in Civil Case No. 86-
03662,including the appeals taken therefrom to the Court of Appeals and the Supreme Court, were quite
complex; (2) the pleadings filed by Atty. Consulta were well-
researched; and (3) as a result of Atty. Consultasefforts, the adverse parties were induced to agree to the
dismissal of the case.
Petitioners contend, however, that: (1) the said cases merely involved simple issues; (2) the pleadings file
d by Atty. Consulta did not exhibit an extraordinary level of competence, effort, and skill; and (3)they did
not benefit from the efforts of Atty. Consulta. These allegations have not been proven. Petitioners have
not shown that the factual findings of both the Court of Appeals and the trial court are contraryto the evi
dence. Nor have they shown that they did not benefit from their representation by Atty. Consulta.
With respect to the liability of individual petitioners Carlos P. Fernandez, Vicente T. Fernandez, Luis T. Fer
nandez, and Ramon B. Fernandez, we hold that the mere fact that they were stockholders anddirectors o
f corporate petitioners does not justify a finding that they are liable for the obligations of the corporation
s.
It is wellsettled that as a legal entity, a corporation has a personality separate and distinct from its individ
ual stockholders or members. The fiction of corporate entity will be set aside and the individualstockhold
ers will be held liable for its obligation only if it is shown that it is being used for fraudulent, unfair, or ille
gal purposes.[11] In this case, the Court of Appeals held that individual petitioners wereguilty of fraud, bas
ed on its finding that they refused to pay the attorneys fees demanded by Atty. Consulta. It should be no
ted, however, that although petitioners Compania Maritima, Inc., El Varadero deManila, and Mindanao T
erminal and Brokerage Services have an obligation to pay Atty. Consulta for his attorneys fees, the amou
nt thereof was still in dispute. It was therefore improper for the Court ofAppeals to conclude that individ
ual petitioners were guilty of fraud simply because corporate petitioners had refused to make the payme
nts demanded. The fact remains that at the time of demand, the amountdue to Atty. Consulta had not b
een finally determined.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals, dated February 27, 1996, is
AFFIRMED with the modification that individual petitioners Carlos P. Fernandez, Vicente T.Fernandez, Lui
s T. Fernandez, and Ramon B. Fernandez are absolved from personal liability for attorneys fees to Atty. E
xequiel S. Consulta.
SO ORDERED.

Castelo vs Court of Appeals (244 SCRA 180)
FACTS
On 15 October 1982, petitioners Antonio Castelo, Bernabe Banson, Lourdes Banson and Pompeyo
Depante entered into a contract denominated as a "Deed of Conditional Sale" with private respondent
Milagros Dela Rosa involving a parcel of land. The agreed price of the land was P269,408.00. Upon
signing the contract, private respondent paid petitioners P106,000.00 leaving a balance of P163,408.00.
The Deed of Conditional Sale also stipulated that:
b.)The balance of P163,408.00 to be paid on or before December 31, 1982 without interest and penalty
charges;
c.)Should the said balance [remain unpaid] by the VENDEE, the VENDORS hereby agree to give the
VENDEE a grace period of SIX (6) months or up to June 30, 1983 to pay said balance provided that
interest at the rate of 12% per annum shall be charged and 1% penalty charge a month shall be imposed
on the remaining diminishing balance.
Private respondent Dela Rosa was unable to pay the remaining balance. Petitioners filed an action for
specific performance with damages. RTC rendered the decision ordering the rescission of the Deed of
Conditional Sale. Petitioners went on Certiorari to CA. They claimed that rescission of the contract was
only an alternative relief available under the Civil Code, while they in their complaint before the RTC, had
asked for specific performance with damages.CA reversed the RTC decision. Writ of execution was
issued. Private respondent Dela Rosa was required to pay petitioners a total of P197,723.68. Petitioners
filed a motion for reconsideration and a separate motion for alias writ of execution contending that the
sum of P197,723.68 was erroneous. They argued that the obligation of private respondent was to pay (a)
interest at the rate of twelve percent (12%) per annum plus (b) one percent (1%) penalty charge per
month, from default, i.e, from 1 January 1983; that the amount to be paid by the Defendant should be
P398,814.88 instead and not P197,723.68 or a difference of P201,091.20.
RTC denied the motion. Further contends that the phrase "to pay interest" found in the dispositive
portion of the CAs November 21, 1986 decision did not refer to the stipulation in the "Deed of
Conditional Sale" but rather to the legal rate of interest imposed by the CA which started to run from 12
February 1987, the date of entry of judgment.
Petitioner filed on certiorari to CA. CA dismissed it. But stated that the part of the dispositive portion,
ordering the "defendant . . . to pay the balance of the conditional sale in the amount of P163,408.00, to
pay interest . . . ." Being a "new" judgment or decision, the computation of the "interest" on the balance
of the conditional sale should commence from the date of its ENTRY on February 12, 1987, when the
decision became FINAL and EXECUTORY.
ISSUE: What is the correct interpretation of the phrase "to pay interest" set out in the dispositive portion
of the CA decision?
28
HELD:
The established doctrine is that when the dispositive portion of a judgment, which has become final and
executory, contains a clerical error or an ambiguity arising from an inadvertent omission, such error or
ambiguity may be clarified by reference to the body of the decision itself.
SC believe and so hold that the phrase to pay interest, found in the dispositive portion of the CA
decision must, under applicable law, refer to the interest stipulated by the parties in the Deed of
Conditional Sale which they had entered into on 15 October 1982. SC note, in the first place, that the
phrase to pay interest comes close upon the heels of the preceding phrase "to comply with her
obligation under the conditional sale to pay the balance of P163,408.00." A strong inference thus
arises that the "interest" required to be paid is the interest stipulated as part of the obligation [of
private respondent dela Rosa] under the conditional sale [agreement] to pay the balance of [the
purchase price of the land.
In the computation for the amount to be paid, The question is whether, during the period of 1 January
1983 up to 30 June 1983, 12% interest per annum plus 1% penalty charge a month was payable "on the
remaining diminishing balance;" or whether during the period from 1 January 1983 to 30 June 1983, only
12% per annum interest was payable while the 1% per month penalty charge would in addition begin to
accrue on any balance remaining unpaid as of 1 July 1983.
SC believed the parties intended the latter view. The interpretation SC adopted is also supported by the
principle that in case of ambiguity in contract language, that interpretation which establishes a less
onerous transmission of rights or imposition of lesser burdens which permits greater reciprocity
between the parties, is to be adopted (Art. 1378).
WHEREFORE, the writ of certiorari is hereby GRANTED.
(2)ordering the defendant to comply with her obligation under the conditional sale to pay the balance of
the conditional sale in the amount of P163,408.00, to pay interest on the amount of the balance
remaining unpaid during the period from 1 January 1983 to 30 June 1983 at the rate of 12% per annum;
and, from 1 July 1983 until full payment of the amount due, to pay interest at the rate of 12% per annum
plus another 12% per annum (i.e., 1% penalty charge per month), or a total of 24% per annum, on the
balance remaining unpaid; and
(3)in default thereof, the rescission of the "Deed of Conditional Sale" is the alternative."
 29

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

FACTS:

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

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

HELD:

No. Interest at the rate of 12% pa is impossible if there is no stipulation in the contract. Herein subject
contract does not contain any stipulation as to interest. However, the amount due to respondent does
not represent a loan or forbearance of money. The word forbearance is defined, within, the context of
usury law, as a contractual obligation of lender or creditor to refrain, during given period of time, from
requiring borrower or debtor to repay loan or debt then due and payable. In the absence of stipulation,
the legal interest is 6% pa on the amount finally adjudged by the Court.
 30

FIRST DIVISION father of a family in the selection and supervision of their employees; (3) that BLTB allowed its bus to
operate knowing that it lacked proper maintenance thus exposing its passengers to grave danger; (4)
that they suffered actual damages amounting to P250,000.00 for Estrella and P300,000.00 for Fletcher;
G.R. No. 147791 September 8, 2006
(5) that they suffered physical discomfort, serious anxiety, fright and mental anguish, besmirched
reputation and wounded feelings, moral shock, and lifelong social humiliation; (6) that defendants failed
CONSTRUCTION DEVELOPMENT CORPORATION OF THE PHILIPPINES, petitioner, to act with justice, give respondents their due, observe honesty and good faith which entitles them to
vs. claim for exemplary damage; and (7) that they are entitled to a reasonable amount of attorney's fees
REBECCA G. ESTRELLA, RACHEL E. FLETCHER, PHILIPPINE PHOENIX SURETY & INSURANCE INC., and litigation expenses.
BATANGAS LAGUNA TAYABAS BUS CO., and WILFREDO DATINGUINOO, respondents.
CDCP filed its Answer6 which was later amended to include a third-party complaint against Philippine
DECISION Phoenix Surety and Insurance, Inc. (Phoenix).7

YNARES-SANTIAGO, J.: On February 9, 1993, the trial court rendered a decision finding CDCP and BLTB and their employees
liable for damages, the dispositive portion of which, states:
This petition for review assails the March 29, 2001 Decision1 of the Court of Appeals in CA-G.R. CV No.
46896, which affirmed with modification the February 9, 1993 Decision2 of the Regional Trial Court of WHEREFORE, judgment is rendered:
Manila, Branch 13, in Civil Case No. R-82-2137, finding Batangas Laguna Tayabas Bus Co. (BLTB) and
Construction Development Corporation of the Philippines (CDCP) liable for damages.
In the Complaint

The antecedent facts are as follows:

1. In favor of the plaintiffs and against the defendants BLTB, Wilfredo Datinguinoo,
Construction and Development Corporation of the Philippines (now PNCC) and Espiridion
On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter, Rachel E. Fletcher, Payunan, Jr., ordering said defendants, jointly and severally to pay the plaintiffs the sum of
boarded in San Pablo City, a BLTB bus bound for Pasay City. However, they never reached their P79,254.43 as actual damages and to pay the sum of P10,000.00 as attorney's fees or a total
destination because their bus was rammed from behind by a tractor-truck of CDCP in the South of P89,254.43;
Expressway. The strong impact pushed forward their seats and pinned their knees to the seats in front of
them. They regained consciousness only when rescuers created a hole in the bus and extricated their
2. In addition, defendant Construction and Development Corporation of the Philippines and
legs from under the seats. They were brought to the Makati Medical Center where the doctors
defendant Espiridion Payunan, Jr., shall pay the plaintiffs the amount of Fifty Thousand
diagnosed their injuries to be as follows:
(P50,000.00) Pesos to plaintiff Rachel Fletcher and Twenty Five Thousand (P25,000.00) Pesos
to plaintiff Rebecca Estrella;
Medical Certificate of Rebecca Estrella
3. On the counterclaim of BLTB Co. and Wilfredo Datinguinoo
Fracture, left tibia mid 3rd
Lacerated wound, chin
Dismissing the counterclaim;
Contusions with abrasions, left lower leg
Fracture, 6th and 7th ribs, right3
4. On the crossclaim against Construction and Development Corporation of the Philippines
(now PNCC) and Espiridion Payunan, Jr.
Medical Certificate of Rachel Fletcher

Dismissing the crossclaim;

Extensive lacerated wounds, right leg posterior aspect popliteal area
and antero-lateral aspect mid lower leg with severance of muscles.
Partial amputation BK left leg with severance of gastro-soleus and 5. On the counterclaim of Construction and Development Corporation of the Philippines (now
antero-lateral compartment of lower leg. PNCC)
Fracture, open comminuted, both tibial4
Dismissing the counterclaim;
Thereafter, respondents filed a Complaint5 for damages against CDCP, BLTB, Espiridion Payunan, Jr. and
Wilfredo Datinguinoo before the Regional Trial Court of Manila, Branch 13. They alleged (1) that
6. On the crossclaim against BLTB
Payunan, Jr. and Datinguinoo, who were the drivers of CDCP and BLTB buses, respectively, were
negligent and did not obey traffic laws; (2) that BLTB and CDCP did not exercise the diligence of a good

Dismissing the crossclaim;
7. On the Third Party Complaint by Construction and Development Corporation of the
Philippines against Philippine Phoenix Surety and Insurance, Incorporated
Dismissing the Third Party Complaint.
SO ORDERED.8
The trial court held that BLTB, as a common carrier, was bound to observe extraordinary diligence in the
vigilance over the safety of its passengers. It must carry the passengers safely as far as human care and
foresight provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances. Thus, where a passenger dies or is injured, the carrier is presumed to have been at fault
or has acted negligently. BLTB's inability to carry respondents to their destination gave rise to an action
for breach of contract of carriage while its failure to rebut the presumption of negligence made it liable
to respondents for the breach.9
Regarding CDCP, the trial court found that the tractor-truck it owned bumped the BLTB bus from behind.
Evidence showed that CDCP's driver was reckless and driving very fast at the time of the incident. The
gross negligence of its driver raised the presumption that CDCP was negligent either in the selection or in
the supervision of its employees which it failed to rebut thus making it and its driver liable to
respondents.10
Unsatisfied with the award of damages and attorney's fees by the trial court, respondents moved that
the decision be reconsidered but was denied. Respondents elevated the case11 to the Court of Appeals
which affirmed the decision of the trial court but modified the amount of damages, the dispositive
portion of which provides:
WHEREFORE, the assailed decision dated October 7, 1993 of the Regional Trial Court, Branch
13, Manila is hereby AFFIRMED with the following MODIFICATION:
1. The interest of six (6) percent per annum on the actual damages of P79,354.43 should
commence to run from the time the judicial demand was made or from the filing of the
complaint on February 4, 1980;
2. Thirty (30) percent of the total amount recovered is hereby awarded as attorney's fees;
3. Defendants-appellants Construction and Development Corporation of the Philippines (now
PNCC) and Espiridion Payunan, Jr. are ordered to pay plaintiff-appellants Rebecca Estrella and
Rachel Fletcher the amount of Twenty Thousand (P20,000.00) each as exemplary damages
and P80,000.00 by way of moral damages to Rachel Fletcher.
SO ORDERED.12
The Court of Appeals held that the actual or compensatory damage sought by respondents for the
injuries they sustained in the form of hospital bills were already liquidated and were ascertained.
Accordingly, the 6% interest per annum should commence to run from the time the judicial demand was
31
made or from the filing of the complaint and not from the date of judgment. The Court of Appeals also
awarded attorney's fees equivalent to 30% of the total amount recovered based on the retainer
agreement of the parties. The appellate court also held that respondents are entitled to exemplary and
moral damages. Finally, it affirmed the ruling of the trial court that the claim of CDCP against Phoenix
had already prescribed.
Hence, this petition raising the following issues:
I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING RESPONDENTS
BLTB AND/OR ITS DRIVER WILFREDO DATINGUINOO SOLELY LIABLE FOR THE DAMAGES
SUSTAINED BY HEREIN RESPONDENTS FLETCHER AND ESTRELLA.
II
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN AWARDING EXCESSIVE OR
UNFOUNDED DAMAGES, ATTORNEY'S FEES AND LEGAL INTEREST TO RESPONDENTS
FLETCHER AND ESTRELLA.
III
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING RESPONDENT
PHOENIX LIABLE UNDER ITS INSURANCE POLICY ON THE GROUND OF PRESCRIPTION.
The issues for resolution are as follows: (1) whether BLTB and its driver Wilfredo Datinguinoo are solely
liable for the damages sustained by respondents; (2) whether the damages, attorney's fees and legal
interest awarded by the CA are excessive and unfounded; (3) whether CDCP can recover under its
insurance policy from Phoenix.
Petitioner contends that since it was made solidarily liable with BLTB for actual damages and attorney's
fees in paragraph 1 of the trial court's decision, then it should no longer be held liable to pay the
amounts stated in paragraph 2 of the same decision. Petitioner claims that the liability for actual
damages and attorney's fees is based on culpa contractual, thus, only BLTB should be held liable. As
regards paragraph 2 of the trial court's decision, petitioner claims that it is ambiguous and arbitrary
because the dispositive portion did not state the basis and nature of such award.
Respondents, on the other hand, argue that petitioner is also at fault, hence, it was properly joined as a
party. There may be an action arising out of one incident where questions of fact are common to all.
Thus, the cause of action based on culpa aquiliana in the civil suit they filed against it was valid.
The petition lacks merit.
The case filed by respondents against petitioner is an action for culpa aquiliana or quasi-delict under
Article 2176 of the Civil Code.13 In this regard, Article 2180 provides that the obligation imposed by
Article 2176 is demandable for the acts or omissions of those persons for whom one is responsible.
Consequently, an action based on quasi-delict may be instituted against the employer for an employee's

act or omission. The liability for the negligent conduct of the subordinate is direct and primary, but is
subject to the defense of due diligence in the selection and supervision of the employee.14 In the instant
case, the trial court found that petitioner failed to prove that it exercised the diligence of a good father
of a family in the selection and supervision of Payunan, Jr.
The trial court and the Court of Appeals found petitioner solidarily liable with BLTB for the actual
damages suffered by respondents because of the injuries they sustained. It was established that
Payunan, Jr. was driving recklessly because of the skid marks as shown in the sketch of the police
investigator.
It is well-settled in Fabre, Jr. v. Court of Appeals,15 that the owner of the other vehicle which collided with
a common carrier is solidarily liable to the injured passenger of the same. We held, thus:
The same rule of liability was applied in situations where the negligence of the driver of the
bus on which plaintiff was riding concurred with the negligence of a third party who was the
driver of another vehicle, thus causing an accident. In Anuran v. Buo, Batangas Laguna
Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v.
Court of Appeals, the bus company, its driver, the operator of the other vehicle and the
driver of the vehicle were jointly and severally held liable to the injured passenger or the
latter's heirs. The basis of this allocation of liability was explained in Viluan v. Court of
Appeals, thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from
contract while that of respondents [owner and driver of other vehicle] arises from quasi-
delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case
of injury to a passenger due to the negligence of the driver of the bus on which he was riding
and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are
jointly and severally liable for damages. x x x
As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out
their claim against the carrier and the driver exclusively on one theory, much less on that of
breach of contract alone.After all, it was permitted for them to allege alternative causes of
action and join as many parties as may be liable on such causes of action so long as private
respondent and her co-plaintiffs do not recover twice for the same injury. What is clear
from the cases is the intent of the plaintiff there to recover from both the carrier and the
driver, thus justifying the holding that the carrier and the driver were jointly and severally
liable because their separate and distinct acts concurred to produce the same
injury.16(Emphasis supplied)
In a "joint" obligation, each obligor answers only for a part of the whole liability; in a "solidary" or "joint
and several" obligation, the relationship between the active and the passive subjects is so close that each
of them must comply with or demand the fulfillment of the whole obligation. In Lafarge Cement v.
Continental Cement Corporation,17we reiterated that joint tort feasors are jointly and severally liable for
the tort which they commit. Citing Worcester v. Ocampo,18 we held that:
x x x The difficulty in the contention of the appellants is that they fail to recognize that the
basis of the present action is tort. They fail to recognize the universal doctrine that each joint
tort feasor is not only individually liable for the tort in which he participates, but is also jointly
liable with his tort feasors. x x x
32
It may be stated as a general rule that joint tort feasors are all the persons who command,
instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for their benefit. They are
each liable as principals, to the same extent and in the same manner as if they had performed
the wrongful act themselves. x x x
Joint tort feasors are jointly and severally liable for the tort which they commit. The persons
injured may sue all of them or any number less than all. Each is liable for the whole damages
caused by all, and all together are jointly liable for the whole damage. It is no defense for one
sued alone, that the others who participated in the wrongful act are not joined with him as
defendants; nor is it any excuse for him that his participation in the tort was insignificant as
compared to that of the others. x x x
Joint tort feasors are not liable pro rata. The damages can not be apportioned among them,
except among themselves. They cannot insist upon an apportionment, for the purpose of
each paying an aliquot part. They are jointly and severally liable for the whole amount. x x x
A payment in full for the damage done, by one of the joint tort feasors, of course satisfies any
claim which might exist against the others. There can be but satisfaction. The release of one
of the joint tort feasors by agreement generally operates to discharge all. x x x
Of course the court during trial may find that some of the alleged tort feasors are liable and
that others are not liable. The courts may release some for lack of evidence while
condemning others of the alleged tort feasors. And this is true even though they are charged
jointly and severally.19
Petitioner's claim that paragraph 2 of the dispositive portion of the trial court's decision is ambiguous
and arbitrary and also entitles respondents to recover twice is without basis. In the body of the trial
court's decision, it was clearly stated that petitioner and its driver Payunan, Jr., are jointly and solidarily
liable for moral damages in the amount of P50,000.00 to respondent Fletcher and P25,000.00 to
respondent Estrella.20 Moreover, there could be no double recovery because the award in paragraph 2 is
for moral damages while the award in paragraph 1 is for actual damages and attorney's fees.
Petitioner next claims that the damages, attorney's fees, and legal interest awarded by the Court of
Appeals are excessive.
Moral damages may be recovered in quasi-delicts causing physical injuries.21 The award of moral
damages in favor of Fletcher and Estrella in the amount of P80,000.00 must be reduced since prevailing
jurisprudence fixed the same at P50,000.00.22 While moral damages are not intended to enrich the
plaintiff at the expense of the defendant, the award should nonetheless be commensurate to the
suffering inflicted.23
The Court of Appeals correctly awarded respondents exemplary damages in the amount of P20,000.00
each. Exemplary damages may be awarded in addition to moral and compensatory damages.24 Article
2231 of the Civil Code also states that in quasi-delicts, exemplary damages may be granted if the
defendant acted with gross negligence.25 In this case, petitioner's driver was driving recklessly at the time
its truck rammed the BLTB bus. Petitioner, who has direct and primary liability for the negligent conduct
of its subordinates, was also found negligent in the selection and supervision of its employees. In Del
Rosario v. Court of Appeals,26 we held, thus:

ART. 2229 of the Civil Code also provides that such damages may be imposed, by way of
example or correction for the public good. While exemplary damages cannot be recovered as
a matter of right, they need not be proved, although plaintiff must show that he is entitled to
moral, temperate or compensatory damages before the court may consider the question of
whether or not exemplary damages should be awarded. Exemplary Damages are imposed not
to enrich one party or impoverish another but to serve as a deterrent against or as a negative
incentive to curb socially deleterious actions.
Regarding attorney's fees, we held in Traders Royal Bank Employees Union-Independent v. National
Labor Relations Commission,27 that:
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid
to a lawyer by his client for the legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the
court to be paid by the losing party in a litigation. The basis of this is any of the cases
provided by law where such award can be made, such as those authorized in Article 2208,
Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that
the award shall pertain to the lawyer as additional compensation or as part
thereof.28 (Emphasis supplied)
In the instant case, the Court of Appeals correctly awarded attorney's fees and other expenses of
litigation as they may be recovered as actual or compensatory damages when exemplary damages are
awarded; when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's
valid, just and demandable claim; and in any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered.29
Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the complaint,
we held inEastern Shipping Lines, Inc. v. Court of Appeals,30 that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be
held liable for payment of interest in the concept of actual and compensatory damages,31 subject to the
following rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum.No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is
33
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.
3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.32 (Emphasis supplied)
Accordingly, the legal interest of 6% shall begin to run on February 9, 1993 when the trial court rendered
judgment and not on February 4, 1980 when the complaint was filed. This is because at the time of the
filing of the complaint, the amount of the damages to which plaintiffs may be entitled remains
unliquidated and unknown, until it is definitely ascertained, assessed and determined by the court and
only upon presentation of proof thereon.33 From the time the judgment becomes final and executory,
the interest rate shall be 12% until its satisfaction.
Anent the last issue of whether petitioner can recover under its insurance policy from Phoenix, we affirm
the findings of both the trial court and the Court of Appeals, thus:
As regards the liability of Phoenix, the court a quo correctly ruled that defendant-appellant
CDCP's claim against Phoenix already prescribed pursuant to Section 384 of P.D. 612, as
amended, which provides:
Any person having any claim upon the policy issued pursuant to this chapter shall,
without any unnecessary delay, present to the insurance company concerned a
written notice of claim setting forth the nature, extent and duration of the injuries
sustained as certified by a duly licensed physician. Notice of claim must be filed
within six months from date of the accident, otherwise, the claim shall be deemed
waived. Action or suit for recovery of damage due to loss or injury must be
brought in proper cases, with the Commissioner or Courts within one year from
denial of the claim, otherwise, the claimant's right of action shall prescribe. (As
amended by PD 1814, BP 874.)34
The law is clear and leaves no room for interpretation. A written notice of claim must be filed within six
months from the date of the accident. Since petitioner never made any claim within six months from the
date of the accident, its claim has already prescribed.
WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No.
46896 dated March 29, 2001, which modified the Decision of the Regional Trial Court of Manila, Branch
13, in Civil Case No. R-82-2137, is AFFIRMED with the MODIFICATIONS that petitioner is held jointly and
severally liable to pay (1) actual damages in the amount of P79,354.43; (2) moral damages in the amount
of P50,000.00 each for Rachel Fletcher and Rebecca Estrella; (3) exemplary damages in the amount of
P20,000.00 each for Rebecca Estrella and Rachel Fletcher; and (4) thirty percent (30%) of the total
amount recovered as attorney's fees. The total amount adjudged shall earn interest at the rate of 6% per
annum from the date of judgment of the trial court until finality of this judgment. From the time this
Decision becomes final and executory and the judgment amount remains unsatisfied, the same shall
earn interest at the rate of 12% per annum until its satisfaction. SO ORDERED.
 34

EN BANC On or about September 22 the manager of the plaintiff, one Lim Chiu, called upon the manager of Lo
Seng, one Simonson, and made inquiry as to the reason for the failure of Lo Seng & Co. to make
deliveries of the alcohol as agreed. Simonson told Lim Chiu that Lo Seng had departed from the
G.R. No. L-20923 February 25, 1924
Philippine Islands and would not be back for more than two weeks. Simonson further told Lim Chiu that
he (Simonson) personally knew nothing about the contract which Lim Chiu claimed to have with Lo Seng,
LIM SIENGCO, plaintiff-appellant, and that he (Simonson) could not, or would not, honor said contract. Nevertheless he suggested to Lim
vs. Chiu that if the plaintiff had to have alcohol immediately a certain amount would be supplied at a price
LO SENG, doing business under the style of Lo Seng and Co., defendant-appellant. greater than that stipulated but somewhat under the price then prevailing in the market, and that upon
Lo Seng's return the matter could be taken up with him by Lim Chiu and they could adjust it as they saw
fit.
STREET, J.:

One of the excuses made then, or at some other time, for the failure of Lo Seng & Co. to deliver the
Upon November 13, 1919, the present action was instituted in the Court of First Instance of Manila by
alcohol covered by said contracts was that a typhoon had lately prevailed in the province where the
Lim Siengco to recover of Lo Seng, upon the first cause of action stated in the complaint, the sum of
distillery was located and that on this account the distillery had not been operated lately with efficiency.
P15,282.28, consisting partly of money, advanced by the plaintiff to the defendant partly of a claim for
Another explanation, no doubt, is to be found in the condition of the market for alcohol, the price of
damages for breach of the contracts for the purchase of alcohol, and in his second cause of action the
which began to rise in August and September and which continued to progress upwards for several
sum of P818, the value of wine and demijohns alleged to have been sold and delivered to the defendant.
months, until fine alcohol was sold for P12 or P15 and crude alcohol for nearly P4.
In connection with the institution of this action, the plaintiff caused an attachment to be levied upon
certain property of the defendant, but this attachment was afterwards dissolved by the court. On
November 17, 1919, the defendant interposed an answer, in which he admitted liability to a certain It further appears that in the months of August and September, 1919, Lo Seng bought of the plaintiff a
extent, alleging, however, that the plaintiff on his part had breached the contract respecting the alcohol quantity of wine (vino tinto) and received also a number of empty demijohns, of the combined value of
by refusing to pay for the same as delivered. By way of counterclaim the defendant sought to recover P818.
the sum of P30,000, as damages for the wrongful suing out of the attachment. At the hearing the trial
judge absolved the defendant from the plaintiff's complaint and absolved the plaintiff from the
The first error assigned by the plaintiff-appellant has reference to the action of the court in dissolving the
defendant's counterclaim. From this judgment both parties appealed in so far as the decision was
preliminary attachment. We think that this assignment of error is not well taken, as it does not appear
prejudicial to each of them respectively.
that any sufficient ground of attachment in fact existed; and upon the facts appearing upon affidavits
before him the action taken by the trial judge in dissolving the attachment cannot be said to have been
It appears that in July, 1919, the defendant, Lo Seng, was doing business as a distiller of alcohol, under improper.
the name of Lo Seng & Co., with his office at 414 T. Pinpin Street, Manila, while the plaintiff, Lim Siengco,
was a merchant residing in the same city. On July 16, of said year, Lo Seng as manager of Lo Seng & Co.,
The second assignment of error has reference to the action of the trial court in failing to give judgment
contracted in writing to sell to Lim Siengco 1,000 arrobas of refined alcohol, 182 proof, at the price of P7
upon the second cause of action. This assignment of error is well taken, and the failure of the trial court
per arroba. The first delivery was stipulated to be made on August 15, 1919, with weekly deliveries of
to give judgment in favor of the plaintiff upon the item therein claimed was, we suppose, due to a mere
150 arrobas of said alcohol until delivery should be completed.
oversight on the part of his Honor. The account set forth in this cause is clearly proved by the plaintiff's
witness, Lim Chiu, manager of the business of Lim Siengco, and furthermore the answer admits that the
On the same day Lo Seng contracted in writing to sell to the same Lim Siengco 6,000 arrobas of crude wine and demijohns were received as claimed. It is true that the answer asserts that some of the
alcohol, of 80 proof, at the price of P3 per arroba. It was agreed that deliveries under this contract demijohns were returned, without saying how many or of what value; but no proof at all was submitted
should be made at the rate of P1,000 arrobas commencing July 30 and at intervals of about fifteen days by the defendant to sustain this assertion. The plaintiff should clearly have judgment for the sum of
thereafter until the entire quantity should be delivered. In connection with this contract for the sale of P818, being the amount claimed upon the second cause of action.
the crude alcohol Lim Siengco advanced the sum of P1,500 at the time of the making of the contract, and
another sum of P1,500 on July 24, thereafter. A little later Lim Siengco delivered another P1,000, making
The plaintiff-appellant's third assignment of error has reference to the refusal of the trial court to award
P4,000 in all advanced by the plaintiff upon this contract. It was also stipulated that upon each delivery
damages to the plaintiff for breach of contract by the defendant. This assignment of error also is well
of crude alcohol made by Lo Seng as per contract, the plaintiff should pay to Lo Seng only P2.50
taken, but not, we think, to the extent claimed in the plaintiff's brief upon appeal.
per arroba of the contract price, leaving 50 centavos of the value of each arroba to be credited upon the
advancements made as already stated.
It is proved not denied that the plaintiff advanced P4,000, upon the contract for crude oil. In return for
this he has received alcohol, both crude and fine, of a total value of P2,507.79, at the prices contracted
Some time after these contracts were made, Lo Seng & Co. delivered about 128 arrobas of fine alcohol
to be paid for the two sorts of alcohol respectively. Upon liquidation of accounts this leaves a balance
and about 468 arrobas of crude alcohol, after which no deliveries whatever were made upon the
due to the plaintiff of P1,429.21, which should undoubtedly be refunded. In the answer of the defendant
contract.
it is claimed that at a date subsequent to the making of the contract, the contracts referred to had been
changed by mutual agreement and that the plaintiff, in consideration of the difficulties in which Lo Seng
& Co. found itself, had agreed to pay higher prices for alcohol that the prices stated in the contract.
 35

There is no proof to support this contention, though it is admitted that the plaintiff did, after repudiation For the reasons stated, the action of the trial judge in absolving the defendant from the plaintiff's
of the contracts by Lo Seng & Co., pay for certain alcohol delivered by Lo Seng & Co. at prices agreed complaint will be reversed; and the plaintiff will recover of the defendant the sum of P6,000, with
upon by the parties, which prices were higher than the contract prices. Lim Chiu, the manager of the interest at 6 per cent from November 13, 1919. The action of the trial court in absolving the plaintiff
plaintiff's business, explains this by saying that his firm had to have alcohol and had to get it wherever from the counterclaim will be affirmed. No special pronouncement will be made as to costs. So ordered.
they could and furthermore that he bought some alcohol from Lo Seng & C0. for cash, as claimed and for
higher prices than was stipulated in the contract. But this he says was due to necessity. The incident is
also explained by Simonson's affidavit (used at the trial as deposition), wherein he states that he advised
Lim Chiu to take alcohol from Lo Seng & Co. upon prices then fixed by Simonson, with the understanding
that when Lo Seng should return the matter could be adjusted with him. At any rate there is no proof
whatever that the plaintiff ever waived his contracts or agreed to any change therein by which the price
of alcohol was changed from that stipulated. It results that the plaintiff is clearly entitled to recover this
item of P1,492.21, as the balance due upon the amount advanced by him upon the making of the
contracts referred to.

This brings us to consider the item of damages for breach of contract incident to the failure of the
defendant to supply alcohol upon the dates and in the amounts stated in the two contracts. In
connection with the claim for damages the plaintiff's manager prepared an exhibit on January 31, 1920,
in which he stated that the damages as representing the difference between the price stipulated in the
contract and the price of fine and crude alcohol in the market on the date the account was stated. This
mode of stating the damages resulting to the plaintiff is incorrect, the true measure of damages being
the difference between the contract price and the price prevailing in the market at the stipulated time
and place of delivery.

From something said in the appealed decision it seems that the trial judge entertained the idea that the
plaintiff could not recover any damages unless he should show that he was compelled to buy alcohol in
the open market to replace that which the defendant had contracted to deliver; and his Honor refused
to allow any damages because the plaintiff had not clearly shown that he had really purchased crude and
fine alcohol of the kind expressed in the contract and the prices paid therefor. This idea is entirely
unsound. If the plaintiff had in fact been compelled to buy alcohol like that contracted for from some
other person than the defendant, this would have been competent proof on the question of damages, if
the purchase was effected at a higher price than that stipulated in the contract with the defendant. But
the right of the plaintiff to recover damages was not absolutely dependent upon proof of this character.
As already stated the correct measure of damages is to be found in the difference between the contract
price and the price prevailing in the market at the time and place stipulated for the deliveries.

Now, as bearing upon the question of the true measure of damages, no note that a competent witness,
Mr. A. B. Powell, was examined with reference to the prices prevailing in Manila for crude and fine
alcohol of the quantity contracted for during the period from July to December, 1919 (transcript of
session, Dec. 13, 1922, p. 10). Taking the prices stated by him as approximately true, and estimating the
prices of the crude and fine alcohol at the times and in the amounts stipulated for delivery, we estimate
roughly that there was a loss to the plaintiff of about P4,160, by reason of the failure of the defendant to
make deliveries upon his contracts at the times agreed.

Summing up the three items above specified and deducting therefrom the amount of P909.84, which
represents, according to Simonson, the value of a delivery of alcohol of September 22, 1919, which the
plaintiff did not pay for, we have in round numbers the sum of P6,000, which in our opinion is proper to
be allowed the plaintiff upon the two causes of action set forth in the complaint.

There is no proof to sustain the claim for damages set forth in the defendant's counterclaim, and the trial
judge committed no error in absolving the plaintiff therefrom.

EN BANC
G.R. No. L-11037 December 29, 1960
EDGARDO CARIAGA, ET AL., plaintiffs-appellants,
vs.
LAGUNA TAYABAS BUS COMPANY, defendant-appellant.
MANILA RAILROAD COMPANY, defendant-appellee.
DIZON, J.:
At about 1:00 p.m. on June 18, 1952, Bus No. 133 of the Laguna Tayabas Bus
Co. hereinafter referred to as the LTB driven by Alfredo Moncada, left its station at Azcarraga St.,
Manila, for Lilio, Laguna, with Edgardo Cariaga, a fourth-year medical student of the University of Santo
Tomas, as one of its passengers. At about 3:00 p.m., as the bus reached that part of the poblacion of Bay,
Laguna, where the national highway crossed a railroad track, it bumped against the engine of a train
then passing by with such terrific force that the first six wheels of the latter were derailed, the engine
and the front part of the body of the bus was wrecked, the driver of the bus died instantly, while many of
its passengers, Edgardo among them, were severely injured. Edgardo was first confined at the San Pablo
City Hospital from 5:00 p.m., June 18, 1952, to 8:25 a.m., June 20 of the same year when he was taken to
the De los Santos Clinic, Quezon City. He left that clinic on October 14 to be transferred to the University
of Santo Tomas Hospital where he stayed up to November 15. On this last date he was taken back to the
De los Santos Clinic where he stayed until January 15, 1953. He was unconscious during the first 35 days
after the accident; at the De los Santos Clinic Dr. Gustilo removed the fractured bones which lacerated
the right frontal lobe of his brain and at the University of Santo Tomas Hospital Dr. Gustilo performed
another operation to cover a big hole on the right frontal part of the head with a tantalum plate.
The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous expenses incurred
from June 18, 1952 to April, 1953. From January 15, 1953 up to April of the same year Edgardo stayed in
a private house in Quezon, City, the LTB having agreed to give him a subsistence allowance of P10.00
daily during his convalescence, having spent in this connection the total sum of P775.30 in addition to
the amount already referred to.
On April 24, 1953 the present action was filed to recover for Edgardo Cariaga, from the LTB and the MRR
Co., and total sum of P312,000.00 as actual, compensatory, moral and exemplary damages, and for his
parents, the sum of P18,00.00 in the same concepts. The LTB disclaimed liability claiming that the
accident was due to the negligence of its co-defendant, the Manila Railroad Company, for not providing
a crossing bar at the point where the national highway crossed the railway track, and for this reason filed
the corresponding cross-claim against the latter company to recover the total sum of P18,194.75
representing the expenses paid to Edgardo Cariaga. The Manila Railroad Company, in turn, denied
liability upon the complaint and cross-claim alleging that it was the reckless negligence of the bus driver
that caused the accident.
The lower court held that it was the negligence of the bus driver that caused the accident and, as a
result, rendered judgment sentencing the LTB to pay Edgardo Cariaga the sum of P10,490.00 as
compensatory damages, with interest at the legal rate from the filing of the complaint, and dismissing
the cross-claim against the Manila Railroad Company. From this decision the Cariagas and the LTB
appealed.
36
The Cariagas claim that the trial court erred: in awarding only P10,490.00 as compensatory damages to
Edgardo; in not awarding them actual and moral damages, and in not sentencing appellant LTB to pay
attorney's fees.
On the other hand, the LTB's principal contention in this appeal is that the trial court should have held
that the collision was due to the fault of both the locomotive driver and the bus driver and erred, as a
consequence, in not holding the Manila Railroad Company liable upon the cross-claim filed against it.
We shall first dispose of the appeal of the bus company. Its first contention is that the driver of the train
locomotive, like the bus driver, violated the law, first, in sounding the whistle only when the collision was
about to take place instead of at a distance at least 300 meters from the crossing, and second, in not
ringing the locomotive bell at all. Both contentions are without merits.
After considering the evidence presented by both parties the lower court expressly found:
. . . While the train was approximately 300 meters from the crossing, the engineer sounded
two long and two short whistles and upon reaching a point about 100 meters from the
highway, he sounded a long whistle which lasted up to the time the train was about to cross
it. The bus proceeded on its way without slackening its speed and it bumped against the train
engine, causing the first six wheels of the latter to be derailed.
. . . that the train whistle had been sounded several times before it reached the crossing. All
witnesses for the plaintiffs and the defendants are uniform in stating that they heard the train
whistle sometime before the impact and considering that some of them were in the bus at
the time, the driver thereof must have heard it because he was seated on the left front part
of the bus and it was his duty and concern to observe such fact in connection with the safe
operation of the vehicle. The other L.T.B. bus which arrived ahead at the crossing, heeded the
warning by stopping and allowing the train to pass and so nothing happened to said vehicle.
On the other hand, the driver of the bus No. 133 totally ignored the whistle and noise
produced by the approaching train and instead he tried to make the bus pass the crossing
before the train by not stopping a few meters from the railway track and in proceeding
ahead.
The above findings of the lower court are predicated mainly upon the testimony of Gregorio Ilusondo, a
witness for the Manila Railroad Company. Notwithstanding the efforts exerted by the LTB to assail his
credibility, we do not find in the record any fact or circumstance sufficient to discredit his testimony. We
have, therefore, no other alternative but to accept the findings of the trial court to the effect, firstly, that
the whistle of locomotive was sounded four times two long and two short "as the train was
approximately 300 meters from the crossing"; secondly, that another LTB bus which arrived at the
crossing ahead of the one where Edgardo Cariaga was a passenger, paid heed to the warning and
stopped before the "crossing", while as the LTB itself now admits (Brief p. 5) the driver of the bus in
question totally disregarded the warning.
But to charge the MRR Co. with contributory negligence, the LTB claims that the engineer of the
locomotive failed to ring the bell altogether, in violation of the section 91 of Article 1459, incorporated in
the charter of the said MRR Co. This contention as is obvious is the very foundation of the cross-
claim interposed by the LTB against its
co-defendant. The former, therefore, had the burden of proving it affirmatively because a violation of
law is never presumed. The record discloses that this burden has not been satisfactorily discharged.
 37

The Cariagas, as appellants, claim that the award of P10,000.00 compensatory damages to Eduardo is account of breach of its contract of carriage because said defendant did not act fraudulently
inadequate considering the nature and the after effects of the physical injuries suffered by him. After a or in bad faith in connection therewith. Defendant Laguna Tayabas Bus Company had
careful consideration of the evidence on this point we find their contentions to be well-founded. exercised due diligence in the selection and supervision of its employees like the drivers of its
buses in connection with the discharge of their duties and so it must be considered an obligor
in good faith.
From the deposition of Dr. Romeo Gustilo, a neurosurgeon, it appears that, as a result of the injuries
suffered by Edgardo, his right forehead was fractured necessitating the removal of practically all of the
right frontal lobe of his brain. From the testimony of Dr. Jose A. Fernandez, a psychiatrist, it may be The plaintiff Edgardo Cariaga is also not entitled to recover for attorney's fees, because this
gathered that, because of the physical injuries suffered by Edgardo, his mentality has been so reduced case does not fall under any of the instances enumerated in Article 2208 of the Civil Code.
that he can no longer finish his studies as a medical student; that he has become completely misfit for
any kind of work; that he can hardly walk around without someone helping him, and has to use a brace
We agree with the trial court and, to the reason given above, we add those given by this Court in
on his left leg and feet.
Cachero vs. Manila Yellow Taxicab Co., Inc.(101 Phil., 523, 530, 533):

Upon the whole evidence on the matter, the lower court found that the removal of the right frontal lobe
A mere perusal of plaintiff's complaint will show that this action against the defendant is
of the brain of Edgardo reduced his intelligence by about 50%; that due to the replacement of the right
predicated on an alleged breach of contract of carriage, i.e., the failure of the defendants to
frontal bone of his head with a tantalum plate Edgardo has to lead a quite and retired life because "if the
bring him "safely and without mishaps" to his destination, and it is to be noted that the
tantalum plate is pressed in or dented it would cause his death."
chauffeur of defendant's taxicab that plaintiff used when he received the injuries involved
herein, Gregorio Mira, has not even made a party defendant to this case.
The impression one gathers from this evidence is that, as a result of the physical injuries suffered by
Edgardo Cariaga, he is now in a helpless condition, virtually an invalid, both physically and mentally.
Considering, therefore, the nature of plaintiff's action in this case, is he entitled to
compensation for moral damages? Article 2219 of the Civil Code says the following:
Appellant LTB admits that under Art. 2201 of the Civil Code the damages for which the obligor, guilty of a
breach of contract but who acted in good faith, is liable shall be those that are the natural and probable
Art. 2219. Moral damages may be recovered in the following and analogous cases:
consequences of the breach and which the parties had forseen or could have reasonably forseen at the
time the obligation was constituted, provided such damages, according to Art. 2199 of the same Code,
have been duly proved. Upon this premise it claims that only the actual damages suffered by Edgardo (1) A criminal offense resulting in physical injuries;
Cariaga consisting of medical, hospital and other expenses in the total sum of P17,719.75 are within this
category. We are of the opinion, however, that the income which Edgardo Cariaga could earn if he (2) Quasi-delicts causing physical injuries;
should finish the medical course and pass the corresponding board examinations must be deemed to be
within the same category because they could have reasonably been foreseen by the parties at the time
he boarded the bus No. 133 owned and operated by the LTB. At that time he was already a fourth-year (3) Seduction, abduction, rape, or other lascivious acts;
student in medicine in a reputable university. While his scholastic may not be first rate (Exhibits 4, 4-A to
4-C), it is, nevertheless, sufficient to justify the assumption that he could have passed the board test in (4) Adultery or concubinage;
due time. As regards the income that he could possibly earn as a medical practitioner, it appears that,
according to Dr. Amado Doria, a witness for the LTB, the amount of P300.00 could easily be expected as
the minimum monthly income of Edgardo had he finished his studies. (5) Illegal or arbitrary detention or arrest;

Upon consideration of all the facts mentioned heretofore this Court is of the opinion, and so holds, that (6) Illegal search;
the compensatory damages awarded to Edgardo Cariaga should be increased to P25,000.00.
(7) Libel, slander or any other form of defamation;
Edgardo Cariaga's claim for moral damages and attorney's fees was denied by the trial court, the
pertinent portion of its decision reading as follows: (8) Malicious prosecution;

Plaintiffs' claim for moral damages cannot also be granted. Article 2219 of the Civil Code (9) Acts mentioned in Article 309;
enumerates the instances when moral damages may be covered and the case under
consideration does not fall under any one of them. The present action cannot come under
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
paragraph 2 of said article because it is not one of the quasi-delict and cannot be considered
as such because of the pre-existing contractual relation between the Laguna Tayabas Bus
Company and Edgardo Cariaga. Neither could defendant Laguna Tayabas Bus Company be Of course enumerated in the just quoted Article 2219 only the first two may have any bearing
held liable to pay moral damages to Edgardo Cariaga under Article 2220 of the Civil Code on on the case at bar. We find, however, with regard to the first that the defendant herein has
 38

not committed in connection with this case any "criminal offense resulting in physical
injuries". The one that committed the offense against the plaintiff is Gregorio Mira, and that
is why he has been already prosecuted and punished therefor. Altho (a) owners and
managers of an establishment and enterprise are responsible for damages caused by their
employees in the service of the branches in which the latter are employed or on the occasion
of their functions; (b) employers are likewise liable for damages caused by their employees
and household helpers acting within the scope of their assigned task (Article 218 of the Civil
Code); and (c) employers and corporations engaged in any kind of industry are subsidiary
civilly liable for felonies committed by their employees in the discharge of their duties (Art.
103, Revised Penal Code), plaintiff herein does not maintain this action under the provisions
of any of the articles of the codes just mentioned and against all the persons who might be
liable for the damages caused, but as a result of an admitted breach of contract of carriage
and against the defendant employer alone. We, therefore, hold that the case at bar does not
come within the exception of paragraph 1, Article 2219 of the Civil Code.
The present complaint is not based either on a "quasi-delict causing physical injuries" (Art.
2219, par. 2 of the Civil Code). From the report of the Code Commission on the new Civil
Code. We copy the following:
A question of nomenclature confronted the Commission. After a careful deliberation, it was
agreed to use the term "quasi-delict" for those obligations which do not arise from law,
contracts, quasi-contracts, or criminal offenses. They are known in Spanish legal treaties as
"culpa aquiliana", "culpa-extra-contractual" or "cuasi-delitos". The phrase "culpa-extra-
contractual" or its translation "extra-contractual-fault" was eliminated because it did not
exclude quasi-contractual or penal obligations. "Aquilian fault" might have been selected, but
it was thought inadvisable to refer to so ancient a law as the "Lex Aquilia". So "quasi-delict"
was chosen, which more nearly corresponds to the Roman Law classification of the
obligations and is in harmony with the nature of this kind of liability.
contractual obligations or to use the technical form of expression, that article relates only
to CULPA AQUILIANA' and not to CULPA CONTRACTUAL.lawphil.net
The decisions in the cases of Castro vs. Acro Taxicab Co., (82 Phil., 359; 46 Off. Gaz., No. 5, p.
2023); Lilius, et al. vs. Manila Railroad, 59 Phil., 758) and others, wherein moral damages were
awarded to the plaintiffs, are not applicable to the case at bar because said decision were
rendered before the effectivity of the new Civil Code (August 30, 1950) and for the further
reason that the complaints filed therein were based on different causes of action.
In view of the foregoing the sum of P2,000 was awarded as moral damages by the trial court
has to be eliminated, for under the law it is not a compensation awardable in a case like the
one at bar.
What has been said heretofore relative to the moral damages claimed by Edgardo Cariaga obviously
applies with greater force to a similar claim (4th assignment of error) made by his parents.
The claim made by said spouses for actual and compensatory damages is likewise without merits. As
held by the trial court, in so far as the LTB is concerned, the present action is based upon a breach of
contract of carriage to which said spouses were not a party, and neither can they premise their claim
upon the negligence or quasi-delictof the LTB for the simple reason that they were not themselves
injured as a result of the collision between the LTB bus and train owned by the Manila Railroad
Company.
Wherefore, modified as above indicated, the appealed judgement is hereby affirmed in all other
respects, with costs against appellant LTB.

The Commission also thought of the possibility of adopting the word "tort" from Anglo-
American law. But "tort" under that system is much broader than the Spanish-Philippine
concept of obligations arising from non-contractual negligence. "Tort" in Anglo-American
jurisprudence includes not only negligence, but also intentional criminal act, such as assault
and battery, false imprisonment and deceit. In the general plan of the Philippine legal system,
intentional and malicious acts are governed by the Penal Code, although certain exceptions
are made in the Project. (Report of the Code Commission, pp. 161-162).

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

It is important to note that the foundation of the legal liability of the defendant is the
contract of carriage, and that the obligation to respond for the damage which plaintiff has
suffered arises, if at all, from the breach of that contract by reason of the failure of defendant
to exercise due care in its performance. That is to say, its liability is direct and immediate,
differing essentially in the legal viewpoint from the presumptive responsibility for the
negligence of its servants, imposed by Article 1903 of the Civil Code (Art. 2180 of the new),
which can be rebutted by proof of the exercise of due care in their selection of supervision.
Article 1903 is not applicable to obligations arising EX CONTRACTU, but only to extra-

SECOND DIVISION
[G.R. No. 152134. June 4, 2004]
ENDREO MAGBANUA, VALLACAR TRANSIT, INC., and its Present Corporate Official RICARDO
YANSON, petitioners, vs. JOSE TABUSARES, JR., EVA T. LAFIGUERA, NONA C. TABUSARES,
JUN C. TABUSARES, FE C. TABUSARES and JAX C. TABUSARES, respondents.
DECISION
PUNO, J.:
The case at bar arose from the complaint for damages filed by spouses Jose Tabusares, Sr. and
Rebecca Tabusares against petitioners, Endreo A. Magbanua, Vallacar Transit, Inc., and/or its corporate
officials for the tragic death of their son, Jury Tabusares, in a vehicular mishap involving a Ceres Liner Bus
owned and operated by petitioners. The case was docketed as Civil Case No. 4654 before the Regional
Trial Court of Negros Occidental, Branch 48, Bacolod City.
The facts, as found by the trial court, are as follows:
At about 4:30 oclock in the afternoon of October 25, 1986, a Ceres Liner Bus No. 154 with Plate No. GVG
469, driven by Endreo Magbanua and owned and operated by Vallacar Transit, Inc., and an Amante Type
Jeepney bearing Plate No. FBN 996, driven by Felipe Palacios and owned by Salvador Algara, Sr. figured
in a vehicular accident along the national road at Hda. Mabuhay, Gil Montilla,
Sipalay, NegrosOccidental. The Ceres Liner Bus bumped the rear portion of the Amante Type Jeepney
while both vehicles were running downhill on the same direction towards the town of Sipalay from the
North. Due to the impact, several passengers of the Amante Type Jeepney were thrown out and ran over
by the Ceres Liner Bus and died as a result of the injuries they sustained. (O)ne of those killed was Jury
Tabusares, 27 years of age, single, an employee of the Maricalum Copper Mines as Oiler 2B and was then
receiving P1,256.00 monthly salary plus P510.00 cost of living allowance (COLA) or a total monthly
income ofP1,766.00. Jury Tabusares was the son of the plantiffs Jose Tabusares, Sr. and Rebecca
Tabusares. Immediately before the bumping accident, the Ceres Liner Buss driver, Endreo Magbanua,
was trying to overtake the Amante Type Jeepney ahead of him and he said that he did not apply his
brakes because he cannot overtake if he will slow down. The Amante Type Jeepney was overloaded with
35 passengers and some of them clinging on its sides and some were riding on the roof. While the Ceres
Liner (B)us was about one and a half (1) meters from the Amante Type Jeepney, the bus driver saw that
the jeepney went zigzagging on the middle of the road and since he could not control the bus anymore it
bumped the rear portion of the jeep.
After a careful perusal of the circumstances of the case, the (c)ourt finds that the Amante Type Jeepney,
as testified to by its own driver, Felipe Palacios, was not a passenger jeepney but a private vehicle which
is used by its owner Salvador Algara, Sr., who is an ambulant peddler in his peddling business. But,
although not for passengers, it was carrying 35 passengers at the time of the bumping accident
onOctober 25, 1986 as testified to by Traffic Investigator Pfc. Praxedes Campillanos of the Sipalay Police
Command, Sipalay, Negros Occidental. This jeep had a seating capacity of only 16 passengers but it was
made to accommodate passengers on its roof and some were clinging on its side. This act is not only
gross negligence but it was violative of the traffic rules and regulations. On the other hand, the (c)ourt
also finds that the driver of the Ceres Liner Bus was driving his vehicle negligently and recklessly because
Endreo Magbanua testified and admitted that while driving the bus downhill and following the Amante
type Jeepney ahead of him, he did not apply his brakes because he was trying to overtake when he
39
bumped the jeep on its rear portion. This act was negligent and reckless because Endreo Magbanua
could have avoided the bumping of the jeepney had he applied his brakes considering that he has the
last clear chance to prevent a collision by slowing down and reducing speed.[1]
The trial court found that the negligent acts of the drivers of both the jeepney and the Ceres Liner
Bus combined in directly causing the death of Jury Tabusares. It therefore held both drivers solidarily
liable for damages. The court ruled:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered ordering and
condemning the defendants Endreo A. Magbanua, Vallacar Transit, Inc., thru and represented by its
corporate official Ricardo Yanson, Felipe T. Palacios and Salvador Algara, Sr. to pay jointly and severally
to the plantiffs, as follows:
1. The sum of P50,000.00 as indemnity for the death of Jury Tabusares;
2. The amount of P699,336.00 as indemnity for the loss of the earning capacity of the late Jury
Tabusares;
3. The amount of P27,600.00 as reimbursement for actual expenses in connection with the death and
burial of the said deceased;
4. The amount of P10,000.00 as moral damages; and
5. The sum of P10,000.00 as reasonable attorneys fees.
The cross-claim of defendant Salvador Algara, Sr. against the defendants Endreo A. Magbanua and
Vallacar Transit, Inc., represented by its corporate official Ricardo Yanson, is hereby allowed and
defendants Endreo A. Magbanua and Vallacar Transit, Inc., represented by it (sic) corporate official
Ricardo Yanson are hereby ordered to indemnify Salvador Algara, Sr. in such amount as he may be
required to pay as damages to the herein plaintiffs.
The counterclaims of the defendants against the plaintiffs are hereby dismissed for lack or merit.
SO ORDERED.[2]
Petitioners appealed to the Court of Appeals. They prayed that the decision of the trial court be
reversed insofar as their liabilities are concerned.[3]
During the pendency of the appeal, Jose Tabusares, Sr. and his wife, Rebecca, passed away.
On May 18, 1999, the Court of Appeals approved the substitution of the late spouses by their heirs,
namely: Jose Tabusares, Jr., Eva T. Lafiguera, Nona C. Tabusares, Jun C. Tabusares, Fe C. Tabusares and
Jax C. Tabusares.[4]
On March 13, 2001, the Court of Appeals rendered its decision. It affirmed the factual findings of
the trial court, but modified the award of damages, reducing the amount of lost earning
to P374,392.00. It made the following computation:

In the case at bar, the victim Jury Tabusares was twenty- seven (27) years old at the time of death. With
65 years as the given life expectancy in the Philippines, the victim was expected to live for another thirty-
eight (38) years. In respect of income, the victim was receiving the amount of P1,766.00 as total monthly
income or a gross yearly income of P21,192.00. Multiplied by 38, the number of years the victim is
expected to continue living, the amount arrived at is P748,784.00 using the formula 2/3 x [80-27] x
21,192.00. From the said figure must be deducted the reasonable amount of P374,392.00 or 50% thereof
representing the living and other necessary expenses of the deceased had he continued to live. Hence,
the lost earnings of the deceased should be P374,392.00.[5]
Petitioners filed a partial motion for reconsideration of the decision of the Court of Appeals,
praying for a reduction of the amount of damages for loss of earning capacity. The Court of Appeals
denied the motion.[6] Hence, this petition.
Petitioners, while accepting the factual findings of the trial court and the appellate court, now
assail the latters computation of the award of damages for loss of earning capacity. They contend that
there are varying computations used in the decisions of this Court. In People vs. Lopez,[7] the Court
applied the following formula:
2/3 x (80-27) x P21,192.00 50%
However, the following formula was employed in People vs. Muyco, et al.:[8]
2/3 x (80 27) x P21,192.00 80%
The difference lies in the computation of the net income of the victim. In the Lopez case, net
income was derived by deducting 50% of the gross annual income, while in the Muycocase, the amount
deducted was 80% of the gross annual income. The Court of Appeals followed the computation in People
vs. Lopez as it was the prevailing case law at the time of the decision appealed from was promulgated
and unmistakably more favorable to the heirs of the deceased xxx.[9] Petitioners argue that the instant
case was decided by the Court of Appeals one year and six months after the promulgation of People vs.
Muyco, therefore, the Court should apply the computation in the latter case.[10]
On the other hand, the respondents, in their comment, cite other cases decided after
the Muyco case where the Court applied the formula in the Lopez case. They submit that the
computation in People vs. Lopez should be applied in this case.[11]
The petition is devoid of merit.
Article 2205 of the New Civil Code allows the recovery of damages for loss or impairment of
earning capacity in cases of temporary or permanent personal injury. Such damages covers the loss
sustained by the dependents or heirs of the deceased, consisting of the support they would have
received from him had he not died because of the negligent act of another. The loss is not equivalent to
the entire earnings of the deceased, but only that portion that he would have used to support his
dependents or heirs. Hence, we deduct from his gross earnings the necessary expenses supposed to be
used by the deceased for his own needs. The Court explained in Villa Rey Transit, Inc. vs. Court of
Appeals[12] that:
(the award of damages for loss of earning capacity is) concerned with the determination of the losses or
damages sustained by the private respondents, as dependents and intestate heirs of the deceased, and
that said damages consist, not of the full amount of his earnings, but of the support they received or
40
would have received from him had he not died in consequence of the negligence of petitioners agent. In
fixing the amount of that support, we must reckon with the necessary expenses of his own living, which
should be deducted from his earnings. Thus, it has been consistently held that earning capacity, as an
element of damages to ones estate for his death by wrongful act is necessarily his net earning capacity or
his capacity to acquire money, less the necessary expense for his own living. Stated otherwise, the
amount recoverable is not loss of the entire earning, but rather the loss of that portion of the earnings
which the beneficiary would have received. In other words, only net earnings, not gross earning are to be
considered that is, the total of the earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses.
Aside from the loss sustained by the heirs of the deceased, another factor considered in
determining the award of loss of earning capacity is the life expectancy of the deceased which takes into
account his work, lifestyle, age and state of health prior to the accident.[13]
Thus, the formula for the computation of unearned income is:
Net life gross living
Earning = expectancy x annual less expenses
Capacity income
Life expectancy is determined in accordance with the formula:
2/3 x [80 age of deceased]
The bone of contention in this case is the amount of living expenses that should be deducted from
the deceaseds gross annual income - whether 50% or 80%.
A survey of more recent jurisprudence shows that the Court consistently pegged the amount at
50% of the gross annual income.[14] We held in Smith Bell Dodwell Shipping Agency Corp. vs.
Borja[15] that when there is no showing that the living expenses constituted a smaller percentage of the
gross income, we fix the living expenses at half of the gross income, thus:
In other words, only net earnings, not gross earnings, are to be considered; that is, the total of the
earnings less expenses necessary in the creation of such earnings or income, less living and other
incidental expenses. When there is no showing that the living expenses constituted a smaller
percentage of the gross income, we fix the living expenses at half of the gross income. To hold that
one would have used only a small part of the income, with the larger part going to the support of ones
children, would be conjectural and unreasonable. (emphasis supplied)
There is no evidence in the case at bar whether the living expenses of the victim, Jury Tabusares,
constituted a bigger or smaller percentage of his gross income. In such case, it is fair to assume that it is
50% of his gross annual income. Hence, we find that the Court of Appeals did not err in its computation
of the award of loss of unearned income to petitioner.
IN VIEW WHEREOF, the petition is DENIED. The assailed decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.

FIRST DIVISION
[G.R. No. 159636. November 25, 2004]
VICTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI ROZANO P.
GAMMAD and DIANA FRANCES P. GAMMAD,respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review on certiorari is the April 11, 2003 decision[1] of the Court of
Appeals in CA-G.R. CV No. 63290 which affirmed with modification the November 6, 1998 decision[2] of
the Regional Trial Court of Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for
breach of contract of carriage in Civil Case No. 5023.
The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife
Marie Grace Pagulayan-Gammad,[3] was on board an air-conditioned Victory Liner bus bound for
Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a
ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie
Grace and physical injuries to other passengers.[4]
On May 14, 1996, respondent heirs of the deceased filed a complaint[5] for damages arising
from culpa contractual against petitioner. In its answer,[6] the petitioner claimed that the incident was
purely accidental and that it has always exercised extraordinary diligence in its 50 years of operation.
After several re-settings,[7] pre-trial was set on April 10, 1997.[8] For failure to appear on the said
date, petitioner was declared as in default.[9] However, on petitioners motion[10] to lift the order of
default, the same was granted by the trial court.[11]
At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the
deceased was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued
Passenger Ticket No. 977785. Respondents, for their part, did not accept petitioners proposal to pay
P50,000.00.[12]
After respondent Rosalito Gammad completed his direct testimony, cross-examination was
scheduled for November 17, 1997[13] but moved to December 8, 1997,[14] because the parties and the
counsel failed to appear. On December 8, 1997, counsel of petitioner was absent despite due notice and
was deemed to have waived right to cross-examine respondent Rosalito.[15]
Petitioners motion to reset the presentation of its evidence to March 25, 1998[16] was granted.
However, on March 24, 1998, the counsel of petitioner sent the court a telegram[17]requesting
postponement but the telegram was received by the trial court on March 25, 1998, after it had issued an
order considering the case submitted for decision for failure of petitioner and counsel to appear.[18]
On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive
portion of which reads:
WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered in favor of
the plaintiffs and against the defendant Victory Liner, Incorporated, ordering the latter to pay the
following:
41
1. Actual Damages -------------------- P 122,000.00
2. Death Indemnity --------------------- 50,000.00
3. Exemplary and Moral Damages----- 400,000.00
4. Compensatory Damages ---------- 1,500,000.00
5. Attorneys Fees ------------ 10% of the total amount granted
6. Cost of the Suit.
SO ORDERED.[19]
On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with
modification as follows:
[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the following are hereby
adjudged in favor of plaintiffs-appellees:
1. Actual Damages in the amount of P88,270.00;
2. Compensatory Damages in the amount of P1,135,536,10;
3. Moral and Exemplary Damages in the amount of P400,000.00; and
4. Attorneys fees equivalent to 10% of the sum of the actual, compensatory, moral, and
exemplary damages herein adjudged.
The court a quos judgment of the cost of the suit against defendant-appellant is hereby AFFIRMED.
SO ORDERED.[20]
Represented by a new counsel, petitioner on May 21, 2003 filed a motion for reconsideration
praying that the case be remanded to the trial court for cross- examination of respondents witness and
for the presentation of its evidence; or in the alternative, dismiss the respondents
complaint.[21] Invoking APEX Mining, Inc. v. Court of Appeals,[22] petitioner argues, inter alia, that the
decision of the trial court should be set aside because the negligence of its former counsel, Atty. Antonio
B. Paguirigan, in failing to appear at the scheduled hearings and move for reconsideration of the orders
declaring petitioner to have waived the right to cross-examine respondents witness and right to present
evidence, deprived petitioner of its day in court.
On August 21, 2003, the Court of Appeals denied petitioners motion for reconsideration.[23]
Hence, this petition for review principally based on the fact that the mistake or gross negligence of
its counsel deprived petitioner of due process of law. Petitioner also argues that the trial courts award of
damages were without basis and should be deleted.
The issues for resolution are: (1) whether petitioners counsel was guilty of gross negligence; (2)
whether petitioner should be held liable for breach of contract of carriage; and (3) whether the award of
damages was proper.
It is settled that the negligence of counsel binds the client. This is based on the rule that any act
performed by a counsel within the scope of his general or implied authority is regarded as an act of his

client. Consequently, the mistake or negligence of counsel may result in the rendition of an unfavorable
judgment against the client. However, the application of the general rule to a given case should be
looked into and adopted according to the surrounding circumstances obtaining. Thus, exceptions to the
foregoing have been recognized by the court in cases where reckless or gross negligence of counsel
deprives the client of due process of law, or when its application will result in outright deprivation of the
clients liberty or property or where the interests of justice so require, and accord relief to the client who
suffered by reason of the lawyers gross or palpable mistake or negligence.[24]
The exceptions, however, are not present in this case. The record shows that Atty. Paguirigan filed
an Answer and Pre-trial Brief for petitioner. Although initially declared as in default, Atty. Paguirigan
successfully moved for the setting aside of the order of default. In fact, petitioner was represented by
Atty. Paguirigan at the pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan
failed to file motions for reconsideration of the orders declaring petitioner to have waived the right to
cross-examine respondents witness and to present evidence, he nevertheless, filed a timely appeal with
the Court of Appeals assailing the decision of the trial court. Hence, petitioners claim that it was denied
due process lacks basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it as in default
for not appearing at the pre-trial, three notices (dated October 23, 1996,[25] January 30, 1997,[26] and
March 26, 1997,[27]) requiring attendance at the pre-trial were sent and duly received by petitioner.
However, it was only on April 27, 1997, after the issuance of the April 10, 1997 order of default for
failure to appear at the pre-trial when petitioner, through its finance and administrative manager,
executed a special power of attorney[28] authorizing Atty. Paguirigan or any member of his law firm to
represent petitioner at the pre-trial. Petitioner is guilty, at the least, of contributory negligence and fault
cannot be imputed solely on previous counsel.
The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case at bar.
In APEX, the negligent counsel not only allowed the adverse decision against his client to become final
and executory, but deliberately misrepresented in the progress report that the case was still pending
with the Court of Appeals when the same was dismissed 16 months ago.[29] These circumstances are
absent in this case because Atty. Paguirigan timely filed an appeal from the decision of the trial court
with the Court of Appeals.
In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted with the issue of whether
or not the client should bear the adverse consequences of its counsels negligence. In that case, Gold Line
Transit, Inc. (Gold Line) and its lawyer failed to appear at the pre-trial despite notice and was declared as
in default. After the plaintiffs presentation of evidence ex parte, the trial court rendered decision
ordering Gold Line to pay damages to the heirs of its deceased passenger. The decision became final and
executory because counsel of Gold Line did not file any appeal. Finding that Goldline was not denied due
process of law and is thus bound by the negligence of its lawyer, the Court held as follows
This leads us to the question of whether the negligence of counsel was so gross and reckless that
petitioner was deprived of its right to due process of law. We do not believe so. It cannot be denied that
the requirements of due process were observed in the instant case. Petitioner was never deprived of its
day in court, as in fact it was afforded every opportunity to be heard. Thus, it is of record that notices
were sent to petitioner and that its counsel was able to file a motion to dismiss the complaint, an answer
to the complaint, and even a pre-trial brief. What was irretrievably lost by petitioner was its opportunity
to participate in the trial of the case and to adduce evidence in its behalf because of negligence.
In the application of the principle of due process, what is sought to be safeguarded against is not the lack
of previous notice but the denial of the opportunity to be heard. The question is not whether petitioner
succeeded in defending its rights and interests, but simply, whether it had the opportunity to present its
42
side of the controversy. Verily, as petitioner retained the services of counsel of its choice, it should, as far
as this suit is concerned, bear the consequences of its choice of a faulty option. Its plea that it was
deprived of due process echoes on hollow ground and certainly cannot elicit approval nor sympathy.
To cater to petitioners arguments and reinstate its petition for relief from judgment would put a
premium on the negligence of its former counsel and encourage the non-termination of this case by
reason thereof. This is one case where petitioner has to bear the adverse consequences of its counsels
act, for a client is bound by the action of his counsel in the conduct of a case and he cannot thereafter be
heard to complain that the result might have been different had his counsel proceeded differently. The
rationale for the rule is easily discernible. If the negligence of counsel be admitted as a reason for
opening cases, there would never be an end to a suit so long as a new counsel could be hired every time
it is shown that the prior counsel had not been sufficiently diligent, experienced or learned.[31]
Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation employee charged with
dishonesty was not able to file an answer and position paper. He was found guilty solely on the basis of
complainants evidence and was dismissed with forfeiture of all benefits and disqualification from
government service. Challenging the decision of the Ombudsman, the employee contended that the
gross negligence of his counsel deprived him of due process of law. In debunking his contention, the
Court said
Neither can he claim that he is not bound by his lawyers actions; it is only in case of gross or palpable
negligence of counsel when the courts can step in and accord relief to a client who would have suffered
thereby. If every perceived mistake, failure of diligence, lack of experience or insufficient legal
knowledge of the lawyer would be admitted as a reason for the reopening of a case, there would be no
end to controversy. Fundamental to our judicial system is the principle that every litigation must come to
an end. It would be a clear mockery if it were otherwise. Access to the courts is guaranteed, but there
must be a limit to it.
Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument that it was denied
due process of law due to negligence of its counsel would set a dangerous precedent. It would enable
every party to render inutile any adverse order or decision through the simple expedient of alleging
gross negligence on the part of its counsel. The Court will not countenance such a farce which
contradicts long-settled doctrines of trial and procedure.[33]
Anent the second issue, petitioner was correctly found liable for breach of contract of carriage. A
common carrier is bound to carry its passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard to all the circumstances. In a
contract of carriage, it is presumed that the common carrier was at fault or was negligent when a
passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an
express finding of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary diligence.[34]
In the instant case, there is no evidence to rebut the statutory presumption that the proximate
cause of Marie Graces death was the negligence of petitioner. Hence, the courts below correctly ruled
that petitioner was guilty of breach of contract of carriage.
Nevertheless, the award of damages should be modified.
Article 1764[35] in relation to Article 2206[36] of the Civil Code, holds the common carrier in breach
of its contract of carriage that results in the death of a passenger liable to pay the following: (1)
indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages.

In the present case, respondent heirs of the deceased are entitled to indemnity for the death of
Marie Grace which under current jurisprudence is fixed at P50,000.00.[37]
The award of compensatory damages for the loss of the deceaseds earning capacity should be
deleted for lack of basis. As a rule, documentary evidence should be presented to substantiate the claim
for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may
be awarded despite the absence of documentary evidence when (1) the deceased is self-employed
earning less than the minimum wage under current labor laws, and judicial notice may be taken of the
fact that in the deceaseds line of work no documentary evidence is available; or (2) the deceased is
employed as a daily wage worker earning less than the minimum wage under current labor laws.[38]
In People v. Oco,[39] the evidence presented by the prosecution to recover damages for loss of
earning capacity was the bare testimony of the deceaseds wife that her husband was earning P8,000.00
monthly as a legal researcher of a private corporation. Finding that the deceased was neither self-
employed nor employed as a daily-wage worker earning less than the minimum wage under the labor
laws existing at the time of his death, the Court held that testimonial evidence alone is insufficient to
justify an award for loss of earning capacity.
Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not awarded because the
circumstances of the 3 deceased did not fall within the recognized exceptions, and except for the
testimony of their wives, no documentary proof about their income was presented by the prosecution.
Thus
The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio Castro Jr. were not
self-employed or employed as daily-wage workers earning less than the minimum wage under the labor
laws existing at the time of their death. Placido Agustin was a Social Security System employee who
received a monthly salary of P5,000. Roberto Raagas was the President of Sinclair Security and Allied
Services, a family owned corporation, with a monthly compensation of P30,000. Melencio Castro Jr.
was a taxi driver of New Rocalex with an average daily earning of P500 or a monthly earning of P7,500.
Clearly, these cases do not fall under the exceptions where indemnity for loss of earning capacity can be
given despite lack of documentary evidence. Therefore, for lack of documentary proof, no indemnity for
loss of earning capacity can be given in these cases. (Emphasis supplied)
Here, the trial court and the Court of Appeals computed the award of compensatory damages for
loss of earning capacity only on the basis of the testimony of respondent Rosalito that the deceased was
39 years of age and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a
salary of P83,088.00 per annum when she died.[41] No other evidence was presented. The award is clearly
erroneous because the deceaseds earnings does not fall within the exceptions.
However, the fact of loss having been established, temperate damages in the amount of
P500,000.00 should be awarded to respondents. Under Article 2224 of the Civil Code, temperate or
moderate damages, which are more than nominal but less than compensatory damages, may be
recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from
the nature of the case, be proved with certainty.
In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of P200,000.00 as
temperate damages in lieu of actual damages for loss of earning capacity because the income of the
victim was not sufficiently proven, thus
The trial court based the amounts of damages awarded to the petitioner on the following circumstances:
43
As to the loss or impairment of earning capacity, there is no doubt that Pleno is an ent[re]preneur and
the founder of his own corporation, the Mayon Ceramics Corporation. It appears also that he is an
industrious and resourceful person with several projects in line, and were it not for the incident, might
have pushed them through. On the day of the incident, Pleno was driving homeward with geologist
Longley after an ocular inspection of the site of the Mayon Ceramics Corporation. His actual income
however has not been sufficiently established so that this Court cannot award actual damages, but, an
award of temperate or moderate damages may still be made on loss or impairment of earning capacity.
That Pleno sustained a permanent deformity due to a shortened left leg and that he also suffers from
double vision in his left eye is also established. Because of this, he suffers from some inferiority complex
and is no longer active in business as well as in social life. In similar cases as in Borromeo v. Manila
Electric Railroad Co., 44 Phil 165; Coriage, et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta,
et al. v. Arreglado, et al., L-11394, Sept. 9, 1958, the proper award of damages were given.
We rule that the lower courts awards of damages are more consonant with the factual circumstances of
the instant case. The trial courts findings of facts are clear and well-developed. Each item of damages is
adequately supported by evidence on record.
Article 2224 of the Civil Code was likewise applied in the recent cases of People v.
Singh[43] and People v. Almedilla,[44] to justify the award of temperate damages in lieu of damages for loss
of earning capacity which was not substantiated by the required documentary proof.
Anent the award of moral damages, the same cannot be lumped with exemplary damages
because they are based on different jural foundations.[45] These damages are different in nature and
require separate determination.[46] In culpa contractual or breach of contract, moral damages may be
recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad
faith) or in wanton disregard of contractual obligations and, as in this case, when the act of breach of
contract itself constitutes the tort that results in physical injuries. By special rule in Article 1764 in
relation to Article 2206 of the Civil Code, moral damages may also be awarded in case the death of a
passenger results from a breach of carriage.[47] On the other hand, exemplary damages, which are
awarded by way of example or correction for the public good may be recovered in contractual
obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.[48]
Respondents in the instant case should be awarded moral damages to compensate for the grief
caused by the death of the deceased resulting from the petitioners breach of contract of carriage.
Furthermore, the petitioner failed to prove that it exercised the extraordinary diligence required for
common carriers, it is presumed to have acted recklessly.[49] Thus, the award of exemplary damages is
proper. Under the circumstances, we find it reasonable to award respondents the amount of
P100,000.00 as moral damages and P100,000.00 as exemplary damages. These amounts are not
excessive.[50]
The actual damages awarded by the trial court reduced by the Court of Appeals should be further
reduced. In People v. Duban,[51] it was held that only substantiated and proven expenses or those that
appear to have been genuinely incurred in connection with the death, wake or burial of the victim will be
recognized. A list of expenses (Exhibit J),[52] and the contract/receipt for the construction of the tomb
(Exhibit F)[53] in this case, cannot be considered competent proof and cannot replace the official receipts
necessary to justify the award. Hence, actual damages should be further reduced to P78,160.00,[54] which
was the amount supported by official receipts.
Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be recovered in the case at
bar where exemplary damages are awarded. The Court finds the award of attorneys fees equivalent to
10% of the total amount adjudged against petitioner reasonable.
 44

Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held that when an obligation, VICTORY LINER V GAMMAD
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for payment of interest in the concept of actual and compensatory G.R. No. 159636. NOVEMBER 25, 2004
damages, subject to the following rules, to wit
Facts:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing. Marie Grace Pagulayan-Gammad was on board an air-conditioned Victory Liner bus bound for
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., ravine which resulted in the death of Marie Grace and physical injuries to other passengers. On May 14,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
1996, respondent heirs of the deceased filed a complaint for damages arising from culpa contractual
Code.
against petitioner. in its answer, the petitioner claimed that the incident was purely accidental and that it
has always exercised extraordinary diligence in its 50 years of operation.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
Issue: Whether petitioner should be held liable for breach of contract of carriage.
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 Ruling:
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 Petitioner was correctly found liable for breach of contract of carriage. A common carrier is bound to
made (at which time the quantification of damages may be deemed to have been reasonably carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount very cautious persons, with due regard to all the circumstances. In a contract of carriage, it is presumed
finally adjudged. that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the
presumption is rebutted, the court need not even make an express finding of fault or negligence on the
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of part of the common carrier. This statutory presumption may only be overcome by evidence that the
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum carrier exercised extraordinary diligence.
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to
a forbearance of credit. (Emphasis supplied).
In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of
Marie Graces death was the negligence of petitioner. Hence, the courts below correctly ruled that
In the instant case, petitioner should be held liable for payment of interest as damages for breach
petitioner was guilty of breach of contract of carriage.
of contract of carriage. Considering that the amounts payable by petitioner has been determined with
certainty only in the instant petition, the interest due shall be computed upon the finality of this decision
at the rate of 12% per annum until satisfaction, per paragraph 3 of the aforecited rule.[57]

WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The April 11, 2003
decision of the Court of Appeals in CA-G.R. CV No. 63290, which modified the decision of the Regional
Trial Court of Tuguegarao, Cagayan in Civil Case No. 5023, is AFFIRMED with MODIFICATION. As
modified, petitioner Victory Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as
indemnity for the death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3)
P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5) P500,000.00 as temperate
damages; (6) 10% of the total amount as attorneys fees; and the costs of suit.

Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12%
per annum computed from the finality of this decision until fully paid.

SO ORDERED.

N BANC
G.R. No. 124392 February 7, 2003
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
FEDERICO ABRAZALDO @ "PEDING," accused-appellant.
DECISION
SANDOVAL-GUTIERREZ, J.:
For automatic review is the Decision1 dated November 15, 1995 of the Regional Trial Court, Branch 44,
Dagupan City in Criminal Case No. 95-01052-D, finding accused-appellant Federico Abrazaldo guilty
beyond reasonable doubt of the crime of murder and sentencing him to suffer the supreme penalty of
death and to indemnify the heirs of the deceased Delfin Guban the amount of P50,000.00 as indemnity
and P27,000.00 as actual damages, plus costs.
In the Information dated August 3, 1995 filed with the trial court, accused-appellant was charged with
the crime of murder committed as follows:
"That on or about July 15, 1995 in the evening at barangay Pogo, Municipality of Mangaldan, province of
Pangasinan, Philippines and within the jurisdiction of this Honorable Court, the above-named accused
armed with a bolo, with intent to kill, treachery and evident premeditation, did, then and there wilfully,
unlawfully and feloniously stabbed DELFIN GUBAN Y GUINTO inflicting upon him a stab wound which
caused his death to the damage and prejudice of his heirs.
"CONTRARY to Art. 248, Revised Penal Code, as amended by R.A. 7659."2
Upon arraignment, accused-appellant entered a plea of not guilty.3 Forthwith, trial on the merits ensued.
The prosecution presented as its witnesses Rosendo Fajardo, SPO1 Ramie Petrache, SP02 Roberto
Fernandez, Dr. Alberto Gonzales and Gregorio Guban. Accused-appellant and his sister, Marites
Abrazaldo, took the witness stand for the defense.
The facts of the case as presented by the prosecution witnesses are as follows:
On July 15, 1995, at about 10:00 oclock in the evening, at Barangay Pogo, Mangaldan, Pangasinan,
accused-appellant, then intoxicated,4 attempted to hack his uncle, Bernabe Quinto, but instead, hit the
post of the latters house.5 The incident was reported to the barangay authorities, prompting Delfin
Guban, Rosendo Fajardo, Sr., Alejandro Loceste (all are members of the barangay tanod), and Cesar
Manaois to rush to the scene. Upon reaching the place, Fajardo heard accused-appellant shouting at his
uncle, "I will kill you!" Thereafter, he saw accused-appellant coming out of Quintos house with blood
oozing from his forehead.6 At that time, the place was well lighted by a flourescent lamp. Guban tried to
assist accused-appellant. However, for unknown reason, accused-apellant and Guban shouted at each
other and grappled "face to face." Accused-appellant pulled out his knife, stabbed Guban at the
abdomen7 and ran away. When Fajardo got hold of Guban, the latter said, "I was stabbed by Feding
Abrazaldo."8 Fajardo, together with the other barangay tanod, rushed Guban to the Gov. Teofilo Sison
45
Memorial Hospital where he was operated by Dr. Alberto Gonzales, a Medical Officer III. But after a few
hours, Guban died. Dr. Gonzales issued a Medico-Legal Certificate stating that the cause of death was
"stab wound, epigastrium, massive hemothorax right."9
Gregorio Guban, the victims father, testified that he was the one who spent for his sons funeral
expenses. For the burial, he spent P10,000.00;10 for the 10-day funeral wake, P10,000.00;11 for the 9th
day novena,P3,000.00;12 and for the hospitalization, P4,000.00,13 or a total of P27,000.00.
On July 16, 1995, Fajardo learned that the knife used by accused-appellant in stabbing Guban was in
Salay, Pangasinan. Together with SPO2 Roberto Fernandez, Fajardo went to the house of Francisca
Velasquez, accused-appellants aunt, and recovered the knife. 14
Invoking self-defense, accused-appellant presented a different version. On July 15, 1995 at about 10:00
in the evening, he was making fans inside his house at Barangay Pogo, Mangaldan, Pangasinan.15 His wife
Lydia and children Mary Jane, Melvin and Christelle were with him. Suddenly, Delfin Guban, who was
then drunk, went to his house and shouted at him, saying, "Get out Feding I will kill you!"16 When
accused-appellant went out, Guban hit him with an iron pipe. Accused-appellant ran towards his house
and got his two children. Guban, now armed with a knife, followed him and they grappled for its
possession. In the course thereof, both fell down.17 It was then that the knife held by Guban accidentally
hit him. Accused-appellant did not know which part of Gubans body was hit. Thereafter, he got the knife
in order to surrender it to the police.18
Marites Abrazaldo testified that accused-appellant is his brother.19 On July 15, 1992, at about 6:00 in the
evening, accused-appellant, Guban and Juan Quinto were engaged in a "drinking spree."20 At about
10:00 oclock in that evening, accused-appellant caused trouble at the house of his uncle, Bernabe
Quinto.21 He attempted to hack his uncle, but instead hit the post of the latters house.22 While running
away from his uncles place, he bumped an artesian well, causing a wound on his forehead.23 Afterwards,
accused-appellant killed Guban.24
On November 15, 1995, the trial court rendered a Decision, the decretal portion of which reads:
"WHEREFORE, premises considered, the Court finds accused Federico Abrazaldo @ Peding guilty beyond
reasonable doubt of the crime of Murder under Article 248 of the Revised Penal Code, as amended by
Republic 7659, and in view of the presence of the aggravating circumstances that the crime was
committed while the public authorities were engaged in the discharge of their duties and that the crime
was committed at nighttime, which aggravating circumstances are not offset by any mitigating
circumstance, accused Federico Abrazaldo is hereby sentenced to suffer the penalty of Death.
"Accused Federico Abrazaldo is ordered to pay an indemnity of P50,000.00 to the heirs of the deceased
Delfin Guban. Accused is also ordered to pay the heirs of the deceased Delfin Guban the total sum
of P27,000.00 as actual expenses, plus costs.
"SO ORDERED."
In appreciating treachery and the aggravating circumstances under paragraphs (5) and (6) of Article
14,25Revised Penal Code, the trial court held:
 46

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

Accused-appellant, in his Appellants Brief, ascribes to the trial court the following errors:
"I
THE HONORABLE TRIAL COURT ERRED IN NOT APPRECIATING THE CLAIM OF SELF-DEFENSE BY THE
ACCUSED TAKING INTO CONSIDERATION THE CIRCUMSTANCE OF THE CASE.
II
Consistent is the jurisprudence that where self-defense is invoked, it is incumbent upon the accused to
prove by clear and convincing evidence that (1) he is not the unlawful aggressor; (2) there was lack of
sufficient provocation on his part; and (3) he employed reasonable means to prevent and repel an
aggression. On appeal, the burden becomes even more difficult as the accused must show that the court
below committed reversible error in appreciating the evidence.26
Accused-appellant miserably failed to discharge the burden. To show that he was not the unlawful
aggressor, he testified that it was Guban who went to his house, threatened to kill him,27 hit him with an
iron pipe,28 and attacked him with a knife.29 We quote accused-appellants testimony, thus:

"ATTY. CAMPOS:
THE HONORABLE TRIAL COURT ERRED IN FINDING THAT THE RECOVERY OF THE ALLEGED WEAPON USED
IN STABBING VICTIM AT THE HOUSE OF THE AUNT OF ACCUSED BOLSTERED THE CASE AGAINST HIM
DESPITE LACK OF SUFFICIENT EVIDENCE TO PROVE ITS VERACITY. Q You said a while ago that on July 15, 1995 at about 10:00 in the evening you were in your house
engaging in fan making, do you know of any unusual incident that happened during that time?
III
A Delfin Guban came to my house and he was under the influence of liquor and he shouted at me, sir.
THE HONORABLE TRIAL COURT ERRED IN APPRECIATING THE TESTIMONY EXTRACTED BY THE
PROSECUTION FROM DEFENSE WITNESS MARITESS ABRAZALDO WHICH HAD NO SUFFICIENT BASIS AT Q And what did Delfin Guban shout at you?
ALL.
A He said, "Get out Feding I will kill you."
IV
Q After this Delfin Guban shouted at you, what happened next?
THE HONORABLE TRIAL COURT ERRED IN FINDING THAT TREACHERY ATTENDED THE STABBING OF THE
VICTIM WITHOUT SUFFICIENT BASIS TO PROVE THE SAME.
A When I went out of the house, I was already there infront of the house then he hit me, sir.

V
Q You said Delfin Guban hit you, what instrument did he use in hitting you?

THE HONORABLE TRIAL COURT ERRED IN ASSUMING THAT ACCUSED-APPELLANT TOOK ADVANTAGE OF
A He hit me with a pipe , sir.
NIGHTTIME IN CONSUMING THE ACT.

Q After Delfin Guban hit you with that pipe, what happened next?
VI

A I ran towards my house inside, then got my two children while Delfin Guban followed me inside my
house, sir.
Q When Delfin Guban followed you inside your house, what happened again?
A He was holding a knife and we grappled and during that time both of us fell down, sir.
Q When you grappled with Delfin Guban, who was holding a knife, what again happened?
A We grappled for the possession of the knife then we fell down and the knife he was then holding
pointed towards him and hit him. x x x.30" (Emphasis supplied)
The foregoing testimony bears not only the vice of falsity but also isolation. It is uncorroborated and
even opposed by Marites, accused-appellants own sister and lone witness. Contrary to his testimony
that Guban hit him on his forehead with a pipe, Marites declared that accused-appellant sustained the
wound on his forehead when he accidentally bumped an artesian well. Instead of fortifying her brothers
defense, she virtually affirmed the prosecutions story by testifying that he created trouble in their
compound, attempted to kill his uncle Bernabe Quinto and killed Guban. 31
Ingrained in our jurisprudence is the doctrine that the plea of self-defense cannot be justifiably
entertained where it is not only uncorroborated by any separate competent evidence but in itself is
extremely doubtful.32 In the present case, accused-appellants tendency to invoke a melange of defenses
renders his testimony dubious. While he admitted the commission of the crime in order to preserve his
own life, he maintained that Guban accidentally stabbed himself. This shows ambivalence. Accident
presupposes lack of intention to stab the victim, while self-defense presumes voluntariness, induced only
by necessity.33 Indeed, if there is truth to either of his claim, his natural course of action was to assist the
victim, or at the very least, report the incident to the authorities. Certainly, the justifying circumstance of
self-defense34 or the exempting circumstance of accident cannot be appreciated considering accused-
appellants flight from the crime scene and his failure to inform the authorities of the incident.
Furthermore, that he did not surrender the knife to the authorities is inconsistent with a clean
conscience and, instead, indicates his culpability of the crime charged.35
In a last-ditch effort to exculpate himself, accused-appellant assails Fajardos testimony as tainted with
inconsistencies and is "contrary to the normal course." Accused-appellant cannot invoke these alleged
weaknesses in view of the principle that one who pleads self-defense must rely on the strength of his
own evidence and not on the weakness of that of the prosecution. Even if the prosecutions evidence is
weak, it is still credible considering accused-appellants admission that he killed the victim. It bears
emphasis that Fajardos testimony clearly points to him as the culprit. Not only did he pull out his knife,
stabbed Guban36 and ran away.37Fajardo also reiterated what Guban uttered to him, i.e., "I was stabbed
by Feding Abrazaldo."38
As Guban had succumbed to death and his opportunity to divulge the truth on his demise had been lost,
we cannot but cast a quizzical glance on accused-appellants uncorroborated testimony. More so, when
such testimony was contradicted by his own witness who happened to be his sister. Standing alone
against the testimonies of the prosecution witnesses, accused-appellants own account of the killing
must necessarily fail. We hold that his guilt has been established to a degree of moral certainty. The trial
court did not err in relying on the testimony of Fajardo, an eyewitness. Time and again, we have said that
we will not interfere with the judgment of the trial court in determining the credibility of witnesses
unless there appears on record some facts or circumstances of weight and influence which have been
47
overlooked or the significance of which has been misinterpreted. This is so because the trial court has
the advantage of observing the witnesses through the different indicators of truthfulness or falsehood.39
However, we find that the trial court erred in concluding that treachery attended the commission of the
crime. There is treachery when the offender commits any of the crimes against persons employing
means, methods or forms in the execution thereof, which tend directly and specially to insure its
execution, without risk to himself arising from defense which the offended party might make. Treachery
cannot be presumed, it must be proved by clear and convincing evidence or as conclusively as the killing
itself. Fajardo testified that accused-appellant and Guban were "grappling with each other" and that
prior to the stabbing, they were shouting at each other. In this scenario, it cannot be said that Guban
was unprepared to put up a defense, such as hitting accused-appellant, or that the latters assault was
sudden. We quote in verbatim the testimony of Fajardo, thus:
"ATTY. CAMPOS:
Q They were not then fighting?
A They were grappling with each other and then he stabbed Delfin Guban.
Q In fact, they were shouting each other?
A Yes, sir.
Q What were they shouting against another?
A I could no longer understand because it was already night.
Q But they were shouting loudly, am I correct?
A Yes and there were many people."40 (Emphasis supplied)
The trial court likewise erred in appreciating the aggravating circumstance of nocturnity or nighttime. For
nocturnity to be properly appreciated, it must be shown that it facilitated the commission of the crime
and that it was purposely sought for by the offender. By and itself, nighttime is not an aggravating
circumstance.41 In the instant case, no sufficient evidence was offered to prove that accused-appellant
deliberately sought the cover of darkness to accomplish his criminal design. In fact, Fajardo testified that
there was a fluorescent lamp sufficiently illuminating the scene of the crime.42
Neither can we sustain the trial courts finding that the aggravating circumstance under paragraph (5) of
Article 14, Revised Penal Code, i.e., that the crime was committed in a place where public authorities
were engaged in the discharge of their duties, is present. It must be pointed out that this aggravating
circumstance is based on the greater perversity of the offender, as shown by the place of the
commission of the crime, which must be respected.43 In this case, the crime was committed at the
compound of the accused-appellant where no public function was being held. The arrival of the barangay
authorities was precisely due to the trouble that had commenced prior to the stabbing incident. Clearly,
the said aggravating circumstance cannot be considered. Moreover, under the present
Rules,44 aggravating circumstances must be alleged, otherwise, they cannot be appreciated. Being
 48

favorable to the accused, this new procedure may be given retroactive effect.45 Except treachery, the
other aggravating circumstances mentioned have not been alleged in the Information.

In the absence of any circumstance that would qualify the crime at bar to murder, accused-appellant can
only be held liable for homicide defined and penalized under Article 249 of the Revised Penal Code. The
prescribed penalty is reclusion temporal. Considering that there was neither mitigating nor aggravating
circumstance that attended the commission of the crime, the penalty has to be imposed in its medium
period, ranging from 14 years, 8 months and 1 day to 17 years and 4 months. Applying the provisions of
the Indeterminate Sentence Law, he should be sentenced to an indeterminate penalty, the minimum of
which is within the range of prision mayor, or 6 years and 1 day to 12 years. The maximum thereof is
within the range of reclusion temporal in its medium period, which is 14 years, 8 months and 1 day to 17
years and 4 months. 46

On the trial courts award of actual damages in the amount of P27,000.00, we find the same to be
unsubstantiated. To be entitled to such damages, it is necessary to prove the actual amount of loss with
a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable
to the injured party.47 In the case at bar, the prosecution failed to present any receipt to prove the claim
for expenses incurred.48 Gregorio Guban, the father of the victim, who shouldered the expenses for the
wake and burial failed to submit receipts to show the amount of such expenses.49 However, as the heirs
of Guban did actually incur funeral expenses, we are justified in awarding P25,000.00, not for purposes
of indemnification, but by way of temperate damages.50

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

WHEREFORE, the assailed judgment in Criminal Case No. 95-01052-D is AFFIRMED with MODIFICATION.
Accused-appellant Federico Abrazaldo is declared guilty beyond reasonable doubt of homicide defined
and penalized under Article 249 of the Revised Penal Code and is sentenced to suffer an indeterminate
penalty of six (6) years and 1 day of prision mayor, as minimum, to fourteen (14) years, eight (8) months
and one (1) day of reclusion temporal in its medium period, as maximum. He is ordered to pay the heirs
of the late Delfin GubanP50,000.00 as indemnity and P25,000.00 as temperate damages.

Costs de oficio.

SO ORDERED.

ECOND DIVISION
G.R. No. 197360 July 3, 2013
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
vs.
RONALD CREDO aka "ONTOG," RANDY CREDO and ROLANDO CREDO y SAN BUENA
VENTURA, Accused-Appellants.
DECISION
PEREZ, J.:
This is an appeal from the Decision1 of the Court of Appeals in CA-G.R. CR-HC No. 04113 promulgated on
28 February 2011. The decision of the Court of Appeals affirmed, with modifications, the Decision2 dated
14 July 2009 of the Regional Trial C6urt, Branch 31, Pili, Camarines Sur, in Criminal Case No. P-3819
finding accused-appellants Ronald Credo a.k.a. "Ontog," Randy Credo and Rolando Credo y San
Buenaventura guilty beyond reasonable doubt of murder for the death of Joseph Nicolas.
Factual Antecedents
The amended Information3 filed against appellants reads:
That on June 22, 2005 at around 10:30 in the evening at Zone 4 Barangay San JOSE, Municipality of Pili,
Province of Camarines Sur, Philippines and within the jurisdiction of this Honorable Court, the above-
named accused, conspiring, confederating and mutually helping one another, did then and there, with
intent to take the life of JOSEPH NICOLAS Y arroyo (sic), willfully, unlawfully and feloniously attack and
hack the latter with a bolo, wounding him in the different parts of the body, per autopsy report marked
as Annex "A" hereof, thereby causing the direct and immediate death of said JOSEPH NICOLAS y
ARROYO.
Abuse of superior strength being attendant in the commission of the crime, the same will qualify the
offense committed to murder.
ACTS CONTRARY TO LAW.
Based on the respective testimonies of the witnesses for the prosecution, the following sequence of
events was gathered:
On 22 June 2005, at around 10:30 in the evening, the victim, Joseph Nicolas (Joseph), was at a
"bingohan" in Zone 3 of Brgy. San Nicolas, Pili, Camarines Sur, together with his wife Maria and friends
Manuel Chica (Manuel) and Ramon Tirao. Randy Credo (Randy) arrived at the "bingohan," approached
Joseph and suddenly punched the latter on the chest, causing him to fall down. Randy then immediately
ran away towards the direction of their house located at Zone 4. Joseph, on the other hand, stood up,
gathered his things consisting of a lemon and an egg, and gave Randy a chase. The people at the
"bingohan" all scampered away as a result of the commotion.4Josephs friend Manuel proceeded
towards Zone 3. There, he met Randy, who was already accompanied by his co-appellants: his brother
49
Ronald Credo (Ronald) and their father Rolando Credo (Rolando). The three were each armed with a
bolo.5
Meanwhile, when Josephs children, Russel, Ramon, Roldan and Rea, heard that their father was in
trouble, they decided to look for him in Zone 3. On their way, they met appellants, who suddenly started
throwing stones at them, causing them to run away. Russel got separated from his siblings but he
continued to look for his father. He came across appellants again in Zone 2 where he saw them hacking
somebody with their bolos. That person later turned out to be their father. Russel saw that when all
three appellants were done hacking their victim, Randy and Rolando went back to where the victim was
lying and gave him another blow, saying in the Bicolano dialect, "pang-dulce" (for dessert).6
The scene was witnessed by another person, Francis Nicolas Credo (Francis), a resident of Zone
2.7 According to Francis, at the time of the incident, he was in his bedroom preparing to go to sleep when
he heard a commotion outside his house. He heard Roger Credo, the brother of Randy and Ronald,
shout: "Tama na Manoy, gadan na!" (Enough brother, he is already dead!) Upon hearing these words,
Francis went out of the bedroom, proceeded to their sala and peeped through the jalousies of the sala
window. He saw appellants, all armed with a bolo, repeatedly hacking Joseph to death.8 He saw the
hacking incident very clearly because the place was lighted by a lamppost and the moon was shining
brightly. Moreover, the distance between the crime scene and the window from where he was watching
is only about 3 to 4 meters.9 Francis was able to note that Joseph was unarmed and was, in fact, holding
a lemon in his right hand and an egg in his left hand.10
Joseph died on the same day of the incident. He obtained six (6) hack wounds: one on the right ear, two
on the left scapular area, one on the lumbar area, one on the right forearm and another one on the left
lateral neck area which, according to the doctor who conducted the autopsy on the body of Joseph, was
the most fatal wound.11
Rolando and Randy denied any participation in the hacking incident, claiming that it was Ronald alone
who killed Joseph. They also claimed that the killing was done in defense of Ronald and Randys mother
whom Joseph was, at the time of the incident, about to hack.12 Based on appellants testimony, when
Ronald heard of what happened between Randy and Joseph, Ronald left the house with a bolo in search
of Joseph. When their parents learned that Ronald left to confront Joseph, they followed Ronald to the
"bingohan."13 Rina Credo Hernandez, sister of Ronald and Randy, testified that while their parents and
Ronald were walking back towards their house from the "bingohan," Joseph suddenly emerged from the
back of their house with a bolo. She saw that Joseph was brandishing the bolo and was about to attack
their mother so she shouted a warning to their mother. Ronald came to her rescue and attacked
Joseph,14 resulting in the latters death.
Ruling of the Regional Trial Court
The trial court found that appellants conspired in the commission of the crime and that the killing of
Joseph was attended by abuse of superior strength. Hence, on 14 July 2009, the trial court rendered its
decision finding appellants guilty beyond reasonable doubt of the crime of murder, sentencing them to
suffer the penalty of reclusion perpetua, and ordering them to pay the widow of Joseph the amounts
of P14,000.00 as actual damages, P50,000.00 as civil indemnity, P50,000.00 as moral damages,
and P50,000.00 as exemplary damages.15
Ruling of the Court of Appeals

On appeal, the Court of Appeals affirmed the judgment of conviction but modified the award of damages
in the following manner: (1) civil indemnity was increased from P50,000.00 to P75,000.00; (2) the award
of moral damages was likewise increased from P50,000.00 to P75,000.00; (3) the amount of exemplary
damages was reduced from P50,000.00 to P30,000.00; and (4) temperate damages in the amount
of P25,000.00 was imposed in place of actual damages.16
The Issues
In their Brief17 filed before the Court of Appeals, appellants prayed or their acquittal, pleading the
following grounds:
I
THE TRIAL COURT GRAVELY ERRED IN NOT GIVING EXCULPATORY WEIGHT TO THE DEFENSE OF
RELATIVES INTERPOSED BY ACCUSED-APPELLANT RONALD CREDO.
II
THE TRIAL COURT GRAVELY ERRED IN FINDING THAT ACCUSED-APPELLANTS ROLANDO CREDO AND
RANDY CREDO ARE GUILTY OF THE CRIME CHARGED.
III
THE TRIAL COURT GRAVELY ERRED IN NOT FINDING THAT THE TESTIMONIES OF THE PROSECUTION
WITNESSES ARE FLAWED AND INCONSISTENT.
IV
THE TRIAL COURT GRAVELY ERRED IN APPRECIATING ABUSE OF SUPERIOR STRENGTH AS QUALIFYING
CIRCUMSTANCE DESPITE THE PROSECUTIONS FAILURE TO PROVE ITS ATTENDANCE.
Appellants subsequently filed a Supplemental Brief18 before this Court, alleging the following as
additional assignment of errors:
V hacking incident, the victim was left lying on the ground on his side. However, when again questioned by
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE ACCUSED-APPELLANTS CONSPIRED WITH
EACH OTHER IN THE COMMISSION OF THE CRIME CHARGED.
VI
THE COURT OF APPEALS GRAVELY ERRED IN INCREASING THE AWARD OF CIVIL INDEMNITY FROM FIFTY
THOUSAND PESOS (PHP50,000.00) TO SEVENTY-FIVE THOUSAND PESOS (PHP75,000.00).
50
Pending resolution of this appeal, the Court received a letter,19 dated 13 September 2011, from P/Supt.
Richard W. Schwarzkopf, Jr., Officer-in-Charge, Office of the Superintendent, New Bilibid Prison,
informing the Court that Rolando had died at the New Bilibid Prison Hospital on 23 June 2011. Attached
to his letter was a certified true copy of the certificate of death20 of Rolando listing "Cardio respiratory
Arrest" as the immediate cause of death.
As a consequence of Rolandos death while this case is pending appeal, both his criminal and civil liability
ex delicto were extinguished pursuant to Article 89 of the Revised Penal Code. The said provision of law
states that criminal liability is totally extinguished by "the death of the convict, as to the personal
penalties; and as to pecuniary penalties, liability therefor is extinguished only when the death of the
offender occurs before final judgment."
This appeal shall, as a result, be decided as against Randy and Ronald only.
Our Ruling
The appeal has no merit.
At the outset, it bears repeating that factual findings of the trial court, when affirmed by the Court of
Appeals, are generally binding and conclusive upon the Supreme Court.21 Except for compelling or
exceptional reasons, such as when they were sufficiently shown to be contrary to the evidence on
record, the findings of fact of the Regional Trial Court will not be disturbed by this Court.22 Thus, once a
guilty verdict has been rendered, the appellant has the burden of clearly proving on appeal that the
lower court committed errors in the appreciation of the evidence presented.23 Here, there is no showing
that the trial court or the Court of Appeals overlooked some material facts or committed any reversible
error in their factual findings.
Trial courts assessment of the credibility
of a witness accorded great weight
Appellants claim that the respective testimonies of Russel and Francis were marked with several
inconsistencies that cast doubt on their veracity, especially considering that they are the son and the
nephew, respectively, of the victim. They noted that Francis narrated that after Ronald hacked Joseph,
Rolando left with his wife followed by Ronald and Randy. Russel, on the other hand, testified that after
the three appellants hacked the victim, Randy and Rolando went back to where the victim was lying
down and gave him another blow, saying, "pang-dulce." Moreover, Francis initially stated that after the
the court as to what he saw, Francis gave a different answer, saying that the victim was lying flat on the
ground.24
This Court is not persuaded.
Corollary to the principle that appellate courts generally will not interfere with the factual findings of the
trial court is the rule that when the credibility of an eyewitness is at issue, due deference and respect is
given by the appellate courts to the assessment made by the trial courts, absent any showing that the
trial courts overlooked facts and circumstances of substance that would have affected the final outcome
of the case.25 "As consistently adhered to by this Court, the matter of assigning values to declarations on
the witness stand is best and most competently performed by the trial judge, who had the unmatched

opportunity to observe the witnesses and to assess their credibility by the various indicia available but
not reflected on the record."26
We agree with the findings of both the trial court and the Court of Appeals which gave weight to the
accounts of the two eyewitnesses, Russel and Francis. Their respective testimonies positively and
categorically identified appellants as the perpetrators of the crime. Their statements on the witness
stand also corroborate each other on material aspects. Both Russel and Francis testified that they saw
the appellants hacking a man. Although Francis was able to immediately recognize the victim as Joseph,
Russel was to learn only later on that the appellants victim was his own father. It is also worth noting
that the statement of Russel and Francis claiming that all three of the appellants were holding a bolo at
the time of the incident is corroborated by another witness: Manuel Chica. Manuel testified that after
Randy and Joseph left the "bingohan," he also left to follow the two. On his way, he met the three
appellants all armed with a bolo.27
The pertinent portions of the respective testimonies of Francis and Russel on the matter are as follows:
PROS. FAJARDO:
Q Now, lets clarify, Mr. witness. If you could demonstrate actually the distance from where you are
seated to anywhere of this courtroom, the place as you said the distance of that hacking incident
happened [sic], can you do that?
PROS. FAJARDO:
Three (3) meters.
ATTY. PREVOSA counsel for the defense:
Three (3) to four (4) meters, your Honor.
PROS. FAJARDO:
Q You mentioned the person being hacked by three (3) persons, right?
[FRANCIS N. CREDO]
A Yes, your Honor.
Q Who were these three (3) persons hacking this other person as you said?
A Rolando Credo, Ronald Credo, Randy Credo.
Q Why were you able to identify Rolando, Ronald, Randy Credo?
51
A I was able to identify the accused because other than the light there is a moonlight so I clearly
identified the three (3) persons.28 (Emphases supplied)
PROS. FAJARDO:
Q Now, after you were stoned, what did you and your group do?
[RUSSEL NICOLAS]
A We went on our separate way [sic] one of my brother Ramon went directly to our grandmothers
house x x x and then I saw something.
Q What was that you saw?
A Then I saw the three (3) Randy, Ontog, and Rolando [sic].
Q Now, what did you observe when you saw this Randy, Rolando and Ontog?
A I saw them hacking someone but I was not able to eye that someone because I was not yet near them
x x x.29(Emphases supplied)
It is worth mentioning as well that the following testimony of Russel confirms the statement of Francis
that the hacking incident occurred just in front of their house,30 giving him (Francis) a clear view of what
transpired:
PROS. FAJARDO:
Q Now, in what particular place did you see Randy and Rolando and Ontog hacked [sic] this person?
[RUSSEL NICOLAS]
A In front of the house of Lolita Credo.
Q How is this Lolita Credo related to Francisco Credo?
A Lolita is the mother of Francisco.31
Both Francis and Russel likewise support each others statement on the act of at least one of the
appellants of going back to where Joseph was lying on the ground to give him another blow with a bolo.
Thus:
PROS. FAJARDO:
Q When you peeped to [sic] your window, jalousie window, what was Rolando Credo doing?
 52

[FRANCIS N. CREDO]
A The three (3) of them hacked the man and the man fell on the ground, while on the ground he was
again hacked on the head by Ronald Credo.32 (Emphasis supplied)
Randy contends that the trial court misconstrued the facts of this case when it held that the defense he
interposed was self-defense. According to him, in view of the consistent and corroborating testimonies
of the defense witnesses that he merely stepped-in to protect his mother from being hacked by the
victim, the proper defense that should have been appreciated by the lower court is defense of relatives.

This argument is untenable.

PROS. FAJARDO:

The following excerpts from the Transcripts of Stenographic Notes (TSNs) of this case categorically show
Q Now, what did you observe when you saw this Randy, Rolando and Ontog?
that appellant Ronald interposed not just defense of relatives but self-defense as well:

[RUSSEL NICOLAS]
1. TSN of 12 August 2008:

A I saw them hacking someone but I was not able to eye that someone because I was not yet near them
ATTY. PREVOSA [counsel for the defense]:
however, these Randy and Rolando returned back and said "pang dulce" then hacked again.33 (Emphasis
supplied)
x x x. This witness [Flora O. Credo, mother of Randy and Ronald] will testify on the theory of self-defense
of the accused, x x x.38
The inconsistency in the respective statements of Francis and Russel with respect to who among the
three appellants actually dealt the final blow on the victim is understandable considering that they
witnessed the scene from different vantage points. Francis definitely had a clearer view as he was nearer 2. TSN of 27 August 2008:
the scene of the crime (3-4 meters) whereas Russel was much farther as evidenced by the fact that from
where he was watching, he was unable to recognize the victim as his father. All the same, both were one
ATTY. PREVOSA:
in saying that at least one of the appellants returned to where the victim was prostrate to give him
another blow.
The Witness [accused Rolando Credo] is being presented to testify that in order to safe [sic] himself and
her [sic] mother, Ronald Nicolas [sic] was able to cause injury to Joseph Nicolas x x x.39
The aforementioned inconsistency is, moreover, a minor detail that does not affect the credibility of
Russel and Francis as eyewitnesses. Likewise, the other inconsistencies pointed out by appellants pertain
"only to collateral or trivial matters and has no substantial effect on the nature of the offense."34 The 3. TSN of 14 January 2009:
primordial consideration is that both Russel and Francis were present at the scene of the crime and that
they positively identified appellants as the perpetrators of the crime charged.35 This Court has been ATTY. PREVOSA:
consistent in ruling that "although there may be inconsistencies in the testimonies of witnesses on minor
details, they do not impair their credibility where there is consistency in relating the principal occurrence
and positive identification of the assailant."36 We are offering the testimony of this witness [accused Ronald Credo] to prove the following;

Finally, the attack of appellants on the credibility of Francis as a witness for the prosecution on the
ground that the victim is the brother of Francis mother making Francis the nephew of the victim
loses significance when the relationship of Francis with the appellants is considered: appellant Rolando is
his uncle, being the brother of his father, thereby making appellants Randy and Ronald his first cousins.
As held by the Court of Appeals:
That he was able to harm to death the private complainant [sic] Joseph Nicolasin [sic] order to defend
himself, relatives and his own family, x x x.40
Further, the following portions of the testimony of Flora Credo likewise clearly demonstrate that Ronald
pleaded self-defense before the trial court:

Considering that appellants are also his close relatives, it is difficult to believe that Francis would point to THE COURT:
appellants as the killers, if such were not true. Moreover, the lack of proof of ill-motive on the part of
Francis, indicate that he testified, not to favor any of the parties in this case, but solely for the purpose of
telling the truth and narrating what he actually witnessed. His testimony deserves full faith and credit.37 By the way, your son hacked for self-defense did you report that to the Police when you surrendered
your son?

Requisites for valid defense

of a relative not present A No, your Honor, please.

Q You even surrendered your son to the Police so why did you not immediately tell the Police that your
son killed Joseph Nicolas for self-defense?

A I said that, your Honor I directed that statement, your Honor.
Q When did you right then and there that you surrendered you [sic] son to tell the Police he hacked for
self-defense?
A Yes, your Honor.
Q Do you have proof to show that indeed you informed the Police that your son the (sic) hacking is self-
defense?
A Yes, your Honor.41
Thus, appellant Ronald cannot now claim that the defense he pleaded is defense of relatives only and
does not include self-defense and that the trial court misappreciated the facts of this case when it
considered self-defense instead of defense of relatives.
In any case, even if the claim of defense of a relative is taken into consideration, the same would still not
be valid.
Article 11 of the Revised Penal Code provides, in part, as follows:
ART. 11. Justifying circumstances. The following do not incur any criminal liability:
1. Anyone who acts in defense of his person or rights, provided that the following circumstances concur:
First. Unlawful aggression;
Second. Reasonable necessity of the means employed to prevent or repel it;
Third. Lack of sufficient provocation on the part of the person defending himself.
2. Anyone who acts in defense of the person or rights of his spouse, ascendants, descendants, or
legitimate, natural or adopted brothers or sisters, or of his relatives by affinity in the same degrees, and
those by consanguinity within the fourth civil degree, provided that the first and second requisites
prescribed in the next preceding circumstance are present, and the further requisite, in case the
provocation was given by the person attacked, that the one making defense had no part therein.
Based on the afore-quoted provision, both self-defense and defense of relatives require that unlawful
aggression be present in order to be held valid. "For the accused to be entitled to exoneration based on
self-defense or defense of relatives, complete or incomplete, it is essential that there be unlawful
aggression on the part of the victim, for if there is no unlawful aggression, there would be nothing to
prevent or repel. For unlawful aggression to be appreciated, there must be an actual, sudden and
unexpected attack or imminent danger thereof, not merely a threatening or intimidating attitude."42
As found by the trial court, there can be no unlawful aggression on the part of Joseph because at the
time of the incident, he was only holding a lemon and an egg. According to the trial court, the fact that
53
Joseph was unarmed effectively belied the allegation of Ronald that he was prompted to retaliate in self-
defense when Joseph first hacked and hit him on his neck. The trial court further pointed out that if
Joseph indeed hacked Ronald on the neck, "it is surprising that the latter did not suffer any injury when
according to them (Ronald, Rolando and Flora Credo), Joseph was running fast and made a hard thrust
on Ronald, hitting the latters neck."43
Since the criterion for determining whether there is a valid self-defense and a valid defense of relatives
require that there be unlawful aggression perpetrated by the victim on the one making the defense or on
his relative, it is safe to conclude that when the trial court held that there can be no valid self-defense
because there was no unlawful aggression on the part of the victim, it was, in effect, likewise saying that
there can be no valid defense of a relative for lack of an essential requisite. In other words, when the
trial court made a ruling on the claim of self-defense, it, at the same time, also necessarily passed upon
the issue of defense of a relative.
Appellants acted in conspiracy with one
another in the execution of the crime
"Conspiracy is said to exist where two or more persons come to an agreement concerning the
commission of a felony and decide to commit it. Direct proof is not essential to prove conspiracy for it
may be deduced from the acts of the accused before, during and after the commission of the crime
charged, from which it may be indicated that there is a common purpose to commit the crime."44
In the present case, the prosecution witnesses were one in saying that prior to the hacking incident, they
saw all three appellants walking together towards the direction of the "bingohan" and that all three were
each carrying a bolo. Appellants, therefore, deliberately sought Joseph out to confront him about the
altercation incident between him and Randy. Likewise, the two eyewitnesses confirm each others
respective statements that all three appellants were armed with a bolo with which they repeatedly
hacked the victim, who fell to the ground; after which, appellants left the scene of the crime.
While no evidence was presented to show that appellants met beforehand and came to an agreement to
harm Joseph, their concerted acts before, during and after the incident all point to a unity of purpose
and design. Indeed, "proof of a previous agreement and decision to commit the crime is not essential but
the fact that the malefactors acted in unison pursuant to the same objective suffices."45 Such proof "may
be shown through circumstantial evidence, deduced from the mode and manner in which the offense
was perpetrated, or inferred from the acts of the accused themselves when such lead to a joint purpose
and design, concerted action and community of interest."46
Abuse of superior strength attended
the commission of the crime
There is abuse of superior strength when the perpetrators of a crime deliberately used excessive force,
thereby rendering the victim incapable of defending himself.47 "The notorious inequality of forces
creates an unfair advantage for the aggressor."48
Here, there can be no denying that appellants took advantage of their superior strength to ensure the
successful execution of their crime. This is evident from the fact that there were three of them against
the victim who was alone. More importantly, their victim was unarmed while the three of them were
each armed with a bolo.
 54

Award of damages SO ORDERED.

In People v. Anticamara,49 this Court laid down the standards in the proper award of damages in criminal
cases, as follows:

x x x the award of civil indemnity is mandatory and granted to the heirs of the victim without need of
proof other than the commission of the crime. In People v. Quiachon, the Court held that even if the
penalty of death is not to be imposed because of the prohibition in R.A. 9346, the civil indemnity
of P75,000.00 is proper, because it is not dependent on the actual imposition of the death penalty but on
the fact that qualifying circumstances warranting the imposition of the death penalty attended the
commission of the offense. As explained in People v. Salome, while R.A. No. 9346 prohibits the
imposition of the death penalty, the fact remains that the penalty provided for by law for a heinous
offense is still death, and the offense is still heinous. Accordingly, the award of civil indemnity in the
amount of P75,000.00 is proper.1wphi1

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

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

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

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

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

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

The appeal with respect to the deceased appellant Rolando Credo is DISMISSED.

Industrial Timber v. Ababon
G.R. No. 164518 | January 25, 2006
FACTS:
1. August 30, 1985 Industrial Plywood Group Corporation (IPGC) leased its plywood plant in Butuan City
to Industrial Timber Corporation (ITC) for a period of 5 years.
2. March 6, 1990 ITC notified DOLE and its workers that it will cease operations effective March 9, 1990
due to lack of raw materials. Operations will resume only after logs for milling can be sourced. a. Around
the same time IPG notified ITC of the expiration of the lease in August 1990 and that it did not have
intentions of renewing the same.
3. June 26, 1990 ITC notifed DOLE and its workers of the plants shutdown due to the non-renewal of
anti-pollution permit that expired in April 1990. a. All 387 workers were laid off until further notice. b.
Final notice of closure was issued on August 17, 1990 with advice for all workers to collect the benefits
due them under the law and CBA.
4. October 15, 1990 IPGC took over the plant after being issued a business permit, which included an
anti-pollution permit from DENR that was coincidentally issued on the same day ITC ceased operation of
the plant (August 17, 1990).
5. Virgilio Ababon, et al. filed a complaint against both ITC and IPGC for illegal dismissal, unfair labor
practice and damages, alleging that ITCs closure was intended to disband the union and that both
corporations are one and the same, controlled by one owner.
6. LA upheld the validity of the closure. Ababon appealed to the NLRC. NLRC ordered the reinstatement
of the employees and payment of full backwages, damages and attorneys fees on May 20, 1993.
7. ITC and IPGC filed and MR, but it did not reach the NLRC on time because it had been sent through
JRS. A Petition for Relief/second MR was filed but denied due to lack of merit.
8. ITC and IPGC filed a Notice of Appeal with the SC, but was dismissed for being a wrong mode of appeal
from the NLRC decicion. They also filed a MR/Second Petition for Relief with the NLRC and was granted
on May 24, 1995.
9. Ababon filed a Petition for Certiorari with the SC, but the petition was referred to the CA for proper
disposition. CA set aside the May 1995 NLRC decision and reinstated its May 1993 decision.
ISSUE Procedural: WON the CA erred in liberally applying the rules of procedure with respect to Ababon,
et al but being rigid in its application as regards ITC and IPGC. YES.
A careful scrutiny of the facts and circumstances of these consolidated cases warrants liberality in the
application of technical rules and procedure.
55
Substantive: WON the workers laid off by ITC were illegally dismissed due to the closure of its business;
WON they are entitled to separation pay, backwages, and other monetary revwards. NO.
The closure of ITCs business was valid, but they are ordered to pay separation pay equivalent to one
month pay or to at least one-half month pay for every year of service, whichever is higher, and
P50,000.00 as nominal damages to each employee.
RATIO LIBERALITY IN APPLYING TECHNICAL RULES AND PROCEDURE
1. ITC and IPGC concede that the 1993 NLRC decision had become immutable because of their counsels
failure to file the MR on time. However, they argue that the CA should have relaxed technical rules in the
paramount interest of justice.
2. Court: A great injustice would be done to ITC by ordering it to reinstate the employees to their former
positions that no longer exist due to valid and legitimate cessation of business a. Labor Code, Art. 218.
NLRC may correct, amend, or waive any error, defect or irregularity whether in substance or in form. b.
Labor Code, Art. 221. the rules of evidence prevailing in courts of law or equity shall not be controlling
and it is the spirit and intention of this Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest of due process.
ILLEGAL DISMISSAL
1. While labor is granted full protection by the Constitution, employers are also accorded rights and
privileges to assure their self-determination and independence, and reasonable return of capital. These
privileges are called management prerogatives.
2. However, the State has the right to determine whether an employer's privilege is exercised in a
manner that complies with the legal requirements and does not offend the protected rights of labor.
3. The right to close the operation of an establishment or undertaking is one of the authorized causes in
terminating employment of workers, the only limitation being that the closure must not be for the
purpose of circumventing the provisions on termination of employment embodied in the Labor Code.
a. Labor Code, Art. 283 Closure of establishment and reduction of personnel (see codal). b. Three
requirements necessary for valid cessation of business operations: (a) service of a written notice to the
employees and to the DOLE at least one month before the intended date thereof; (b) the cessation of
business must be bona fide in character; and (c) payment to the employees of termination pay
amounting to one month pay or at least one-half month pay for every year of service, whichever is
higher.
4. Application to the case: ITCs closure was done in good faith for valid reasons. a. The decision to
permanently close was a confluence of the following events lack of raw materials, expiry of anti-
pollution permit, and the termination of the lease contract with IPGC. b. ITC v NLRC: affirmed that ITC
Butuan Logs Plant close in 1989 because of the lack of raw materials and that closure was the only
remedy available to prevent heavy losses. c. Shoppers Gain Supermarket v. NLRC: non-renewal of
 56

petitioner corporations lease contract and its consequent closure and cessation of operations may be
considered an event beyond petitioners control, in the nature of a force majeure situation.

5. While the closure was done in good faith, ITC did not comply with the notice requirement (notify DOLE
and employees at least one month before intended date of closure). a. ITC only notified DOLE and its
employees of the final closure on August 17, 1990 the same day the closure was to take effect. b. Court
says: where the dismissal is based on an authorized cause under Art. 283 of the Labor Code but the
employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal
process was initiated by the employers exercise of his management prerogative. c. Hence, ITC to pay
damages P50,000 per employee. 6. Having been dismissed legally, Ababon, et al. are not entitled to
payment of backwages. They are, however, entitled to separation pay equivalent to one month pay or at
least one-half month pay for every year of service, whichever is higher.
 57

EN BANC cralaw Since a franchise is personal in nature any transfer or lease thereof should be notified to the
Public Service Commission so that the latter may take proper safeguards to protect the interest of the
[G.R. No. L-8194. July 11, 1956.] public. In fact, the law requires that, before the approval is granted, there should be a public hearing,
EMERENCIANA M. VDA. DE MEDINA, ET AL., Plaintiffs-Appellees, vs. GUILLERMO CRESENCIA, ET with notice to all interested parties, in order that the Commission may determine if there are good and
AL., Defendants. GUILLERMO CRESENCIA, Appellant. reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale
or lease is detrimental to public interest cralaw .
The above ruling was later reiterated in the cases of Timbol vs. Osias, L-7547, April 30, 1955 and Roque
DECISION vs. Malibay Transit Inc., L- 8561, November 18, 1955.
REYES, J.B.L., J.: As the sale of the jeepney here in question was admittedly without the approval of the Public Service
Commission, Appellant herein, Guillermo Cresencia, who is the registered owner and operator thereof,
Appeal by Defendant Guillermo Cresencia from the judgment of the Court of First Instance of Manila in
continued to be liable to the Commission and the public for the consequences incident to its operation.
its civil case No. 19890, sentencing Appellant, jointly and severally with his co-DefendantBrigido Avorque,
Wherefore, the lower court did not err in holding him, and not the buyer Rosario Avorque, responsible
to pay Plaintiffs Emerencia M. Vda. de Medina and her minor children damages in the total amount of
for the damages sustained by Plaintiff by reason of the death of Vicente Medina resulting from the
P56,000, P5,000 attorneys fees, and costs.
reckless negligence of the jeepneys driver, Brigido Avorque.
It appears that on May 31, 1953, passenger jeepney bearing plate No. TPU-2232 (Manila), driven by
Appellant also argues that the basis of Plaintiffs action being the employers subsidiary liability under
Brigido Avorque, smashed into a Meralco post on Azcarraga Street, resulting in the death of Vicente
the Revised Penal Code for damages arising from his employees criminal acts, it isDefendant Rosario
Medina, one of its passengers. A criminal case for homicide through reckless imprudence was filed
Avorque who should answer subsidiarily for the damages sustained byPlaintiffs, since she admits that
against Avorque (criminal case No. 22775 of the Court of First Instance of Manila), to which he pleaded
she, and not Appellant, is the employer of the negligent driver Brigido Avorque. The argument is
guilty on September 9, 1953. The heirs of the deceased, however, reserved their right to file a separate
untenable, because Plaintiffs action for damages is independent of the criminal case filed against Brigido
action for damages, and on June 16, 1953, brought suit against the driver Brigido Avorque
Avorque, and based, not on the employers subsidiary liability under the Revised Penal Code, but on a
and Appellant Guillermo Cresencia, the registered owner and operator of the jeepney in
breach of the carriers contractual obligation to carry his passengers safely to their destination (culpa
question. Defendant Brigido Avorque did not file any answer; chan
contractual). And it is also for this reason that there is no need of first proving the insolvency of the
roblesvirtualawlibrarywhile DefendantCresencia answered, disclaiming liability on the ground that he
driver Brigido Avorque before damages can be recovered from the carrier, for in culpa contractual, the
had sold the jeepney in question on October 14, 1950 to one Maria A. Cudiamat; chan
liability of the carrier is not merely subsidiary or secondary, but direct and immediate (Articles 1755,
roblesvirtualawlibrarythat the jeepney had been repeatedly sold by one buyer after another, until the
1756, and 1759, New Civil Code).
vehicle was purchased on January 29, 1953 by Rosario Avorque, the absolute owner thereof at the time
of the accident. In view of Cresencias answer, Plaintiffsfiled leave, and was allowed, to amend their The propriety of the damages awarded has not been questioned, Nevertheless, it is patent upon the
complaint making Rosario Avorque a co-Defendant; chan roblesvirtualawlibraryand the latter, by way of record that the award of P10,000 by way of nominal damages is untenable as a matter of law, since
answer, admitted having purchased the aforesaid jeepney on May 31, 1953, but alleged in defense that nominal damages cannot co-exist with compensatory damages. The purpose of nominal damages is to
she was never the public utility operator thereof. The case then proceeded to trial, during which, after vindicate or recognize a right that has been violated, in order to preclude further contest thereon; chan
the Plaintiffs had presented their evidence, DefendantsGuillermo Cresencia and Rosario Avorque made roblesvirtualawlibraryand not for the purpose of indemnifying the Plaintiff for any loss suffered by him
manifestations admitting that the former was still the registered operator of the jeepney in question in (Articles 2221, 2223, new Civil Code.) Since the court below has already awarded compensatory and
the records of the Motor Vehicles Office and the Public Service Commission, while the latter was the exemplary damages that are in themselves a judicial recognition that Plaintiffs right was violated, the
owner thereof at the time of the accident;chan roblesvirtualawlibraryand submitted the case for the award of nominal damages is unnecessary and improper. Anyway, ten thousand pesos cannot, in
decision on the question of who, as between the two, should be held liable to Plaintiffs for damages. The common sense, be deemed nominal.
lower court, by Judge Jose Zulueta, held that as far as the public is concerned, Defendant Cresencia, in
the eyes of the law, continued to be the legal owner of the jeepney in question; chan With the modification that the award of P10,000 nominal damages be eliminated, the decision
roblesvirtualawlibraryand rendered judgment against him, jointly and severally with the driver Brigido appealed from is affirmed. Costs against Appellant. SO ORDERED.
Avorque, for P6,000 compensatory damages, P30,000 moral damages, P10,000 exemplary damages,
P10,000 nominal damages, P5,000 attorneys fees, and costs, whileDefendant Rosario Avorque was
absolved from liability. From this judgment, Defendant Cresencia appealed.
We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182 (December 29, 1953), which the
court below cited, that the law (section 20 [g], C. A. No. 146 as amended) requires the approval of the
Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or
leased without infringing the certificate issued to the grantee; chan roblesvirtualawlibraryand that if
property covered by the franchise is transferred or leased without this requisite approval, the transfer is
not binding against the public or the Service Commission; chan roblesvirtualawlibraryand in
contemplation of law, the grantee of record continues to be responsible under the franchise in relation
to the Commission and to the public. There we gave the reason for this rule to be as
follows:chanroblesvirtuallawlibrary

EN BANC
[G.R. No. L-22425. August 31, 1965.]
NORTHWEST AIRLINES, INC., Petitioner, v. NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH
DIVISION), Respondents.
Ross, Selph & Carrascoso for Petitioner.
Bengzon, Villegas & Zarraga for Respondents.
SYLLABUS
1. AIR CARRIERS; LIABILITY UNDER THE WARSAW CONVENTION OF 1929 AND FOR OTHER BREACHES OF
CONTRACT. Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely declare the airlines liable
for damage in the cases enumerated therein, if the conditions specified are present. Neither the
provisions of said articles nor others regulate or exclude liability for other breaches of contract by the air
carriers.
2. ID.; ID.; ID.; LIABILITY FOR NOMINAL AND EXEMPLARY DAMAGES; CASE AT BAR. Respondent
boarded petitioners plane in Manila with a first class ticket to Tokyo. Upon arrival at Okinawa, an agent
of petitioner rudely compelled him, in the presence of other passengers, to move to the tourist class.
Respondent protested, revealing that he was traveling in his official capacity as delegate of the Republic
of the Philippines to a conference in Tokyo. In order to reach the conference on time, respondent
obeyed. Held: Having been given first class accommodation as he took petitioners plane in Manila,
respondent was entitled to believe that this was a confirmation of his first class reservation and that he
would keep the same until his ultimate destination, Tokyo. Since the offense had been committed with
full knowledge of the fact that respondent was an official representative of the Republic of the
Philippines, the sum of P20,000.00 awarded as damages may well be considered as merely nominal. At
any rate, considering that petitioners agent had acted in a wanton, reckless and oppressive manner, said
award may, also, be considered as one for exemplary damages.
DECISION
CONCEPCION, J.:
This is an action for damages for alleged breach of contract. After appropriate proceedings the Court of
First Instance of Manila, in which the case was originally filed, rendered judgment sentencing defendant
Northwest Airlines, Inc., hereinafter referred to as petitioner to pay to plaintiff Cuenca
hereinafter referred to as respondent "the sum of P20,000 as moral damages, together with the sum
of P5,000 as exemplary damages, with legal interest thereon from the date of the filing of the complaint"
December 12, 1959 "until fully paid, plus the further sum of P2,000 as attorneys fees and expenses
of litigation." On appeal taken by petitioner, said decision was affirmed by the Court of Appeals, except
as to the P50,000.00 exemplary damages, which was eliminated, and the P20,000.00 award for moral
damages, which was converted into nominal damages. The case is now before us on petition for review
by certiorarifiled by petitioner, upon the ground that the lower court has erred: (1) in holding that the
Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the
58
Philippines; (2) in not holding that respondent has no cause of action; and (3) in awarding P20,000 as
nominal damages.
We deem it unnecessary to pass upon the first assignment of error because the same is the basis of the
second assignment of error, and the latter is devoid of merit, even if we assumed the former to be well
taken. Indeed, the second assignment of error is predicated upon Articles 17, 18 and 19 of said
Convention, reading:
"ART. 17. The carrier shall be liable for damage sustained in the event of the death or wounding of a
passenger or any other bodily injury suffered by a passenger if the accident which caused the damage so
sustained took place on board the aircraft or in the course of any of the operations of embarking or
disembarking.
"ART. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction or loss of, or
of damage to, any checked baggage, or any goods, if the occurrence which caused the damage so
sustained took place during the transportation by air.
"(2) The transportation by air within the meaning of the preceding paragraph shall comprise the period
during which the baggage or goods are in charge of the carrier, whether in an airport or on board an
aircraft, or, in the case of a landing outside an airport, in any place whatsoever.
"(3) The period of the transportation by air shall not extend to any transportation by land, by sea, or by
river performed outside an airport. If, however, such transportation takes place in the performance of a
contract for transportation by air, for the purpose of loading, delivery, or transshipment, any damage is
presumed, subject to proof to the contrary, to have been the result of an event which took place during
the transportation by air.
"ART. 19. The carrier shall be liable for damage occasioned by delay in the transportation by air of
passengers, baggage, or goods."
Petitioner argues that pursuant to these provisions, an air "carrier is liable only" in the event of death of
a passenger or injury suffered by him, or of destruction or loss of, or damage to any checked baggage or
any goods, or of delay in the transportation by air of passengers, baggage or goods. This pretense is not
borne out by the language of said Articles. The same merely declare the carrier liable for damages in the
enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in
the aforementioned Convention regulate or exclude liability for other breaches of contract by carrier.
Under petitioners theory, an air carrier would be exempt from any liability for damages in the event of
its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.
The third assignment of error is based upon Medina v. Cresencia (52 Off. Gaz. 4606), and Quijano v.
Philippine Air Lines (CA-G.R. No. 21804). Neither case is, however, in point, aside from the fact that the
latter is not controlling upon us. In the first case, this Court eliminated a P10,000 award for nominal
damages, because the aggrieved party had already been awarded P6,000 as compensatory damages,
P30,000 as moral damages and P10,000 as exemplary damages, and "nominal damages cannot co-exist
with compensatory damages." In the case at bar, the Court of Appeals has adjudicated no such
compensatory, moral and exemplary damages to respondent herein.
Moreover, there are special reasons why the P20,000.00 award in favor of respondent herein is justified,
even if said award were characterized as nominal damages. When his contract of carriage was violated
by the petitioner, respondent held the office of Commissioner of Public Highways of the Republic of the
Philippines. Having boarded petitioners plane in Manila with a first class ticket to Tokyo, he was, upon
arrival at Okinawa, transferred to the tourist class compartment. Although he revealed that he was
 59

traveling in his official capacity as official delegate of the Republic to a conference in Tokyo, an agent of
petitioner rudely compelled him, in the presence of other passengers, to move, over his objection, to the
tourist class, under threat of otherwise leaving him in Okinawa. In order to reach the conference on
time, respondent had no choice but to obey.

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

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the petitioner. It is so
ordered.

EN BANC
G.R. No. L-22425 August 31, 1965
NORTHWEST AIRLINES, INC., petitioner,
vs.
NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH DIVISION), respondents.
CONCEPCION, J.:
This is an action for damages for alleged breach of contract. After appropriate proceedings the Court of
First Instance of Manila, in which the case was originally filed, rendered judgment sentencing defendant
Northwest Airlines, Inc. hereinafter referred to as petitioner to pay to plaintiff Cuenca
hereinafter referred to as respondent the sum of P20,000 as moral damages, together with the sum of
P5,000 as exemplary damages, with legal interest thereon from the date of the filing of complaint,"
December 12, 1959, "until fully paid, plus the further sum of P2,000 as attorney's fees and expenses of
litigation." On appeal taken by petitioner, said decision was affirmed by the Court of Appeals, except as
to the P5,000.00 exemplary damages, which was eliminated, and the P20,000.00 award for moral
damages, which was converted into nominal damages. The case is now before us on petition for review
by certiorari filed by petitioner, upon the ground that the lower court has erred: (1) in holding that the
Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the
Philippines; (2) in not holding that respondent has no cause of action; and (3) in awarding P20,000 as
nominal damages.
We deem it unnecessary to pass upon the first assignment of error because the same is the basis of the
second assignment of error, and the latter is devoid of merit, even if we assumed the former to be well-
taken. Indeed the second assignment of error is predicated upon Articles 17, 18 and 19 of said
Convention, reading:
ART. 17. The carrier shall be liable for damages sustained in the event of the death or
wounding of a passenger or any other bodily injury suffered by a passenger, if the accident
which caused the damage so sustained took place on board the aircraft or in the course of
any of the operations of embarking or disembarking.
ART. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction or
loss of, or of damage to, any checked baggage, or any goods, if the occurrence which caused
the damage so sustained took place during the transportation by air.
(2) The transportation by air within the meaning of the preceding paragraph shall comprise
the period during which the baggage or goods are in charge of the carrier, whether in an
airport or on board an aircraft, or, in the case of a landing outside an airport, in any place
whatsoever.
(3) The period of the transportation by air shall not extend to any transportation by land, by
sea, or by river performed outside an airport. If, however, such transportation takes place in
the performance of a contract for transportation by air, for the purpose of loading, delivery,
or transhipment, any damage is presumed, subject to proof to the contrary, to have been the
result of an event which took place during the transportation by air.
60
ART. 19. The carrier shall be liable for damage occasioned by delay in the transportation by air
of passengers, baggage, or goods.
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of
a passenger or injury suffered by him, or of destruction or loss of, or damage to any checked baggage or
any goods, or of delay in the transportation by air of passengers, baggage or goods. This pretense is not
borne out by the language of said Articles. The same merely declare the carrier liable for damages in the
enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in
the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier.
Under petitioner's theory, an air carrier would be exempt from any liability for damages in the event of
its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.
The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz. 4606), and Quijano vs.
Philippine Air Lines (CA-G.R. No. 21804-R). Neither case is, however, in point, aside from the fact that the
latter is not controlling upon us. In the first case, this Court eliminated a P10,000 award for nominal
damages, because the aggrieved party had already been awarded P6,000 as compensatory damages,
P30,000 as moral damages and P10,000 as exemplary damages, and "nominal damages cannot co-exist
with compensatory damages." In the case at bar, the Court of Appeals has adjudicated no such
compensatory, moral and exemplary damages to respondent herein.
Moreover, there are special reasons why the P20,000.00 award in favor of respondent herein is justified,
even if said award were characterized as nominal damages. When his contract of carriage was violated
by the petitioner, respondent held the office of Commissioner of Public Highways of the Republic of the
Philippines. Having boarded petitioner's plane in Manila with a first class ticket to Tokyo, he was, upon
arrival at Okinawa, transferred to the tourist class compartment. Although he revealed that he was
traveling in his official capacity as official delegate of the Republic to a conference in Tokyo, an agent of
petitioner rudely compelled him in the presence of other passengers to move, over his objection, to the
tourist class, under threat of otherwise leaving him in Okinawa. In order to reach the conference on
time, respondent had no choice but to obey.
It is true that said ticket was marked "W/L," but respondent's attention was not called thereto. Much
less was he advised that "W/L" meant "wait listed." Upon the other hand, having paid the first class fare
in full and having been given first class accommodation as he took petitioner's plane in Manila,
respondent was entitled to believe that this was a confirmation of his first class reservation and that he
would keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not tried to explain
or even alleged that the person to whom respondent's first class seat was given had a better right
thereto. In other words, since the offense had been committed with full knowledge of the fact that
respondent was an official representative of the Republic of the Philippines, the sum of P20,000 awarded
as damages may well be considered as merely nominal. At any rate, considering that petitioner's agent
had acted in a wanton, reckless and oppressive manner, said award may also be considered as one for
exemplary damages.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the petitioner. It is so
ordered.

SECOND DIVISION
[G.R. No. 152143. January 13, 2003]
ROMEL P. ALMEDA, in substitution of the late PONCIANO L. ALMEDA and/or ALMEDA,
INC., petitioners, vs. LEONOR A. CARIO, the surviving spouse, and his children, namely:
ROSARIO C. SANTOS, REMEDIOS C. GALSIM, RAMON A. CARIO, REGINALDO A. CARIO,
RANIEELA C. DIONELA and RACHELLE C. SAMANIEGO, in substitution of the late AVELINO G.
CARIO, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision, dated February 12, 2002, of the Court
[1]
of Appeals in CA-G.R. CV No. 57778, affirming the decision[2] of the Regional Trial Court of Laguna, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff [Avelino G.
Cario] and against the defendants [Ponciano L. Almeda and Almeda, Inc.] as follows:
1. Ordering the latter to pay the former jointly and severally the amount of P477,589.47 with a 12% rate
of interest per annum as agreed upon from the date of demand on March [9], 1983 until fully paid;
2. Ordering the latter to pay the former jointly and severally the amount of P150,000.00 as nominal
damages; and
3. Ordering the latter to pay the former jointly and severally the amount of P15,000.00 as and for
attorneys fees plus costs of this suit.
Plaintiffs claim for moral and exemplary damages is hereby dismissed for want of merit.
SO ORDERED.[3]
The facts of the case are undisputed:
On April 30, 1980, Ponciano L. Almeda and Avelino G. Cario, predecessors-in-interest of
petitioners and respondents, entered into two agreements to sell, one covering eight titled
properties[4] and another three untitled properties,[5] all of which are located in Bian, Laguna. The agreed
price of the eight titled properties was P1,743,800.00, 20% of which was to be paid upon the signing and
execution of the agreement and the balance to be paid in four equal semi-annual installments, beginning
six months from the signing thereof, with the balance earning 12% interest per annum. On the other
hand, the purchase price of the three untitled properties was P1,208,580.00, 15% of which was to be
paid upon the signing and execution of the agreement, and the balance, bearing a 12% annual interest
from the signing thereof, to be paid as follows: 15% of the purchase price plus interest to be paid upon
the issuance of titles to the lots, and the balance plus interests to be paid in semi-annual installments
starting from the date of issuance of the respective certificates of title to the lots involved, which must
be not later than March 30, 1982.
61
On April 3, 1982, Cario and Almeda executed an amendment to their agreements to sell (a)
extending the deadline for the production of the titles to the untitled properties from March 31, 1982 to
June 30, 1982, (b) providing for a partial payment of P300,000.00 for the titled properties, (c) requiring
Cario to render an accounting of the proceeds of the sugar cane crop on the properties subject of the
sale up to the 1982 harvest season and (d) obliging the vendor (Cario) to pay the vendee (Almeda) the
sum of P10,000.00 a month in case of the failure of the former to produce the certificates of title to the
untitled properties by June 30, 1982.
Before the end of April 1982, Almeda asked Cario for the execution of a Deed of Absolute Sale
over the eight titled properties although they had not been fully paid. Cario granted the request and
executed on May 3, 1982 the deed of sale over the eight titled lots in favor of Almeda, Inc.[6] On April 30,
1982, Almeda executed an undertaking[7] to pay Cario the balance of the purchase price. Deeds of sale
for two of the three untitled lots were also executed on July 2, 1982 and October 9, 1982.[8]
Subsequently, Cario made demands for the full and final payment of the balance due him in the
amount of P477,589.47 and the interests thereon. Despite demand letters sent to Almeda on March 9,
1983 and on July 20, 1983, however, the balance was not paid. Hence, Cario filed before the RTC of Bian
a complaint against Almeda and Almeda, Inc., in whose name the titles to the properties had been
transferred. Cario prayed that Almeda and/or Almeda, Inc. be ordered to pay to him the balance
of P477,589.47, the legal interests thereon from demand until full payment, 15% of all the amounts due,
including interests as attorneys fees, P10,000.00 as litigation expenses, P100,000.00 as moral, exemplary
and nominal damages and the costs of suit.
Almeda and Almeda, Inc. contended that the purchase price, including interest charges, of the
eight titled properties had been fully paid as of April 3, 1982. With respect to the three untitled lots, they
contended that the purchase price of Lot Nos. 2272 and 2268-B had likewise been fully paid, while that
of Lot No. 3109 had only a remaining balance of P167,522.70.
The RTC of Bian, Laguna found the claim of Cario to be well founded and gave judgment in his
favor as quoted at the beginning of this opinion.
Without questioning the amount of judgment debt for which they were held liable, Ponciano
Almeda and Almeda, Inc. appealed to the Court of Appeals for a modification of judgment, contending
that the lower court erred in awarding nominal damages and attorneys fees in favor of Cario and
imposing a 12% annual interest on the judgment debt from the time of demand on March 9, 1983 until it
was fully paid. They maintained that they were not guilty of any unfair treatment or reckless and
malevolent actions so as to justify an award of nominal damages.They claimed that they refused to pay
the remaining balance because the proceeds of certain harvests from the lands in question and
liquidated damages were also due them. As for the award of attorneys fees, they contended that there
was no finding that they acted in gross and evident bad faith in refusing to satisfy Carios demand so as to
justify its award under Art. 2208 (5) of the Civil Code, because they had acted on the basis of what they
honestly believed to be correct as their residual obligations. Finally, they contended that the imposition
of a 12% interest rate was contrary to law and jurisprudence since Cario sought payment of legal
interest, which, under Central Bank Circular No. 416, was only 6%.
During the pendency of the case, Almeda died. He was substituted by his heirs, namely, his wife
Eufemia P. Almeda and their children, Elenita A. Cervantes, Susan A. Alcazar, Florecita A. Datoc, Laurence
P. Almeda, Edwin P. Almeda, Marlon P. Almeda, Wenilda A. Diaz, Carolyn A. Santos, Alan P. Almeda and
Romel P. Almeda, the last having been designated to act as their representative.[9]
The Court of Appeals affirmed the decision of the lower court. It held that the award of nominal
damages was justified by the unjust refusal of Almeda and Almeda, Inc. to settle and pay the balance of
the purchase price in violation of the rights of Cario. The award of attorneys fees was also affirmed, it
being shown that Cario was forced to litigate to protect his interests. Finally, the appeals court also
 62

affirmed the 12% interest rate per annum, as agreed upon by the parties in their contracts, following Art.
2209 of the Civil Code. The appeals court also ruled that the amount of the unpaid purchase
price, P477,589.47, should be awarded to Cario, considering the failure of Almeda and/or Almeda, Inc. to
respond to the two demand letters and the computation sheet sent to them by Cario, as well as their
failure to rebut the correctness of the outstanding balance before the lower court.
Hence, this petition for review on certiorari under Rule 45 filed by Romel P. Almeda, based on the
following assignment of errors:
I. THE COURT OF APPEALS ERRED IN AWARDING NOMINAL DAMAGES IN THE AMOUNT
OF P150,000.00.
II. THE COURT OF APPEALS ERRED IN AWARDING ATTORNEYS FEES IN THE AMOUNT
OF P15,000.00 IN FAVOR OF THE RESPONDENT.
III. THE COURT OF APPEALS ERRED IN ORDERING THE PETITIONER TO PAY JOINTLY AND
SEVERALLY THE AMOUNT OF P477,589.47 WITH A 12% RATE OF INTEREST PER ANNUM
FROM THE DATE OF DEMAND ON MARCH [9], 1983 UNTIL FULLY PAID.[10]
In this appeal, petitioners do not dispute the amount of the outstanding balance on the purchase
price of the lots. Petitioners only seek a modification of the decision of the appeals court insofar as it
upheld the trial courts award of nominal damages, attorneys fees, and 12% interest. We find their appeal
to be without merit and, accordingly, affirm the decision of the Court of Appeals.
First. Petitioners contend that the trial court erred in awarding nominal damages in favor of
respondents since there was no showing that they acted in an unfair, reckless or malevolent manner so
as to justify such an award.
Petitioners argument is based on a misreading of the decision in FNCB Finance v.
Estavillo.[11] Contrary to petitioners claim, this Court did not award nominal damages to the respondent
in that case because of petitioners reckless action, malevolent manner and lack of regard to the feelings
and reputation of the other party. Such factors were cited in that case to justify the award of exemplary,
not nominal, damages.
Indeed, nominal damages may be awarded to a plaintiff whose right has been violated or invaded
by the defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the
plaintiff for any loss suffered by him.[12] Its award is thus not for the purpose of indemnification for a loss
but for the recognition and vindication of a right.[13] Indeed, nominal damages are damages in name only
and not in fact. When granted by the courts, they are not treated as an equivalent of a wrong inflicted
but simply a recognition of the existence of a technical injury.[14] A violation of the plaintiffs right, even if
only technical, is sufficient to support an award of nominal damages. Conversely, so long as there is a
showing of a violation of the right of the plaintiff, an award of nominal damages is proper.
If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.
The contracts to sell of the parties stipulated that the balance of the purchase price shall earn an
interest rate of 12% per annum upon signing of the contract. Such stipulations have the force of law
between the contracting parties and should be complied with by them in good faith.[15] The interest in
this case should be allowed to run from March 9, 1993, respondents extrajudicial demand for payment
of the remaining balance plus interest having begun on said date.[16]
In addition, in accordance with our decision in Eastern Shipping Lines, Inc. v. Court of
Appeals,[17] when the judgment of the court awarding the sum of money becomes final and executory, a
12% legal interest per annum shall also be imposed from such finality until satisfaction thereof, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
Third. Nor is there any basis for petitioners claim that the appellate court erred in awarding
attorneys fees in favor of respondents. Under the Civil Code, attorneys fees and litigation expenses can
be recovered in cases where the court deems it just and equitable.[18] We see no reason therefore to set
aside the order of the trial court, as affirmed by the appeals court, granting to respondents attorneys
fees in the amount of P15,000.00.
Fourth. We observe that this case has dragged on for more than a decade. While the records
reveal that respondents engaged the services of two lawyers, petitioners had a total of sixteen counsels
starting from January 24, 1984 up to December 22, 1997. Of the sixteen, one lawyer served for more
than 2 years, another for 8 days only, and still another entered his appearance and withdrew it only to
re-enter his appearance after some time. The records show that most of the lawyers who entered their
appearances either filed only motions to cancel hearings or motions for postponements, claiming to
have misplaced the calendar of court hearings or to be staying abroad. These unduly delayed the
disposition of the case in violation of the right of respondents to claim what is rightfully due them. This
fact further justifies the award of nominal damages and supports the grant of attorneys fees.
WHEREFORE, the petition for review on certiorari is DENIED and the decision of the Court of
Appeals is AFFIRMED. Interest at the rate of twelve percent (12%) shall be imposed on the amount due
upon finality of this decision until payment thereof.
SO ORDERED.

Applying such principles to the instant case, we have on record the fact that petitioners have an
unpaid balance on the purchase price of lots sold to them by respondents. Their refusal to pay the
remaining balance of the purchase price despite repeated demands, even after they had sold the
properties to third parties, undoubtedly constitutes a violation of respondents right to the said amount
under their agreements. The facts show that the right of the vendor to receive the unpaid balance to the
lots sold was violated by petitioners, and this entitles respondents at the very least to nominal damages.

Second. Petitioners claim that the imposition of a 12% annual interest rate is erroneous because it
is contrary to law and jurisprudence. According to them, the applicable rate is 6% since the case does not
involve a loan or forbearance of money.

This contention is without merit. Art. 2209 of the Civil Code provides:

SECOND DIVISION
[G.R. No. 143384. February 4, 2005]
DR. ERNESTO I. MAQUILING, petitioner, vs. PHILIPPINE TUBERCULOSIS SOCIETY, INC., respondent.
DECISION
TINGA, J.:
Before this Court is a Petition for Review on Certiorari of the Decision[1] of the Court of Appeals
dated 28 March 2000 and its Resolution dated 22 May 2000, which reversed the decision of the National
Labor Relations Commission (NLRC) dated 15 December 1997[2] and that of the Labor Arbiter dated 16
September 1993,[3] which both found the dismissal from service of Dr. Ernesto I. Maquiling (Dr.
Maquiling) illegal.
The factual antecedents are as follows:
On 16 April 1968, petitioner Dr. Maquiling was employed by respondent Philippine Tuberculosis
Society, Inc. (PTS). On 8 June 1991, Dr. Maquiling, then earning a monthly salary of thirteen thousand
nine hundred pesos (P13,900.00) was dismissed from service as Deputy Executive Director after serving
PTS for twenty-three (23) years. Dr. Maquiling filed a complaint against PTS for reinstatement or, in the
alternative, for payment of full backwages and separation pay in accordance with Article 279 of the
Labor Code, as well as moral damages in the amount of five hundred thousand pesos (P500,000.00) and
exemplary damages in the amount of one hundred thousand pesos (P100,000.00).[4]
The complaint was assigned to Labor Arbiter Salimathar V. Nambi. After PTS failed to appear
despite having requested for several postponements, Dr. Maquiling was allowed to present his
evidence ex parte consisting of his testimony on direct examination and documentary proof. On 31
August 1992, Dr. Maquiling moved for submission of the case for resolution, which motion was
granted.[5]
The records disclose that Dr. Maquiling received a memo dated 2 April 1991 from the PTS OIC-
Executive Director Andres B. Soriano (Soriano) directing him to submit within five (5) days from notice a
written explanation on the following matters:
1. The delayed GSIS remittances;
2. The reported deficit of P7.3 million appearing in our financial statement for
1990;
3. The expenses you approved and incurred in connection with the Dale Carnegie
and Silva Mind Control Seminar;
4. The P3.7 million miscellaneous expenses appearing in our financial statement;
and
5. Your reasons for renewing our service contract with Ultra.[6]
Dr. Maquiling submitted his explanatory letter dated 11 April 1991 inviting attention to PTS
Finance Managers Report. On 15 April 1991, Dr. Maquiling had a thirty (30) minute conversation with
Soriano at the latters instance. No further related proceedings were undertaken before Dr. Maquiling
received a letter-notice dated 8 June 1991 informing him that the PTS Executive Committee approved
63
Sorianos findings and recommendations calling for his dismissal effective immediately, without any
retirement benefits.[7]
Despite Sorianos instruction for him not to report for work, Dr. Maquiling manifested, through a
letter to the OIC-Executive Director, his intention to continue performing his duties as Deputy Executive
Director. Dr. Maquiling continued to report for work at the PTS daily. In the meantime, he elevated his
case to the PTS Board of Directors through a memorandum dated 28 June 1991 which sought to point
out the illegality of his dismissal from office and prayed for a resolution upholding his position.[8]
On 17 July 1991, Dr. Maquiling, protesting non-payment of his salary for the period of 15 July
1991, wrote the OIC Finance Department and formally demanded the release of his earned wages. PTS
reacted through Soriano by informing Dr. Maquiling that there are no wages forthcoming inasmuch as
the latters service had been terminated for cause since 7 June 1991.[9]
In an effort to exhaust the remedies within PTS, Dr. Maquiling wrote the President of PTS a letter
dated 5 August 1991 saying, among others: my counsels agree with me that if your Board does not act
on my 28 June 1991 Memorandum within fifteen (15) days from receipt of this letter, such omission will
mean a confirmation of Sorianos notice of my alleged termination from the service a dismissal which is
referable to the proper outside forum.[10]
Receiving no response from the PTS, Dr. Maquiling stopped reporting for work at the PTS in the
last week of September 1991. Then, on 10 October 1991, Dr. Maquiling filed his complaint with the Labor
Arbiter.
After considering the evidence adduced by the parties, the Labor Arbiter rendered a decision
ordering PTS to immediately reinstate Dr. Maquiling to the position of Deputy Executive Director or its
equivalent in rank and pay, without loss of seniority rights inclusive of all benefits attached to said
position at the time of his dismissal, and to pay Dr. Maquiling backwages computed from the time of his
dismissal on 7 June 1991 until his actual reinstatement but not to exceed three (3) years at the rate of
thirteen thousand nine hundred pesos (P13,900.00) per month or three hundred seventy-eight thousand
seven hundred seventy-five pesos (P378,775.00).[11] He likewise ordered PTS to pay Dr. Maquiling five
hundred thousand pesos (P500,000.00) as moral damages and one hundred thousand pesos
(P100,000.00) as exemplary damages and to pay attorneys fees equivalent to ten (10%) percent of the
total amount due the complainant.
Upon appeal by PTS to the NLRC, the Commission upheld the decision of the labor arbiter and
dismissed the appeal.[12] However, PTS appealed the decision to the Court of Appeals which reversed the
decisions of the NLRC and Labor Arbiter by ordering the dismissal of the complaint and declaring that his
dismissal from employment as legal and valid. It, however, ordered PTS to pay Dr. Maquiling the amount
of ten thousand pesos (P10,000.00) as damages or indemnity for violation of his right to procedural due
process and separation pay in the amount of one hundred fifty-nine thousand eight hundred fifty pesos
(P159,850.00) in the interest of social justice.[13] Hence, this petition for review on certiorari.
Dr. Maquiling argues that the appellate court should have applied the case of Serrano v.
NLRC[14] which was decided on 27 January 2000 since the assailed decision of the appellate court was
promulgated subsequently on 28 March 2000. He avers that PTS must pay him full backwages from the
time his employment was terminated on 7 June 1991 up to the time the decision becomes final.[15] In
addition to backwages, he also prays that he be awarded separation pay for every year of service, at the
rate of one month pay for every year of service,[16]as well as thirteenth month pay, sick leave and
vacation leave and all monetary benefits including moral damages and attorneys fees.[17] Further, Dr.
Maquiling points out that the appellate court gravely abused its discretion by changing the rules on
pleadings before the administrative body since it considered the position paper of PTS though
unverified.[18] PTS should have considered the twenty-three (23) years of service of petitioner[19] and
should not have ruled that the dismissal from service of Dr. Maquiling was for just cause.[20] He further

contends that the appellate court did not show any degree of clarity of causal connection between Dr.
Maquilings acts and the supposed damage to PTS.[21]
Moreover, Dr. Maquiling raised in his petition that the appellate court, which agreed with the
findings of the labor arbiter and the NLRC that the twin requirements of notice and hearing are wanting,
erred in adopting an abandoned doctrine by merely imposing a fine of ten thousand pesos (P10,000.00)
against PTS and in disregarding the present doctrine on termination of employment and monetary
benefits accorded by law to Dr. Maquiling, and in concluding with grave abuse of discretion that the
dismissal of Dr. Maquiling, who had served PTS for twenty-three (23) years, was for just cause.[22]
In its Comment[23] dated 9 October 2000, PTS contends that the dismissal of Dr. Maquiling was
based on a just cause, supported as it was by the evidence, law and jurisprudence. The termination of Dr.
Maquilings employment was allegedly due to loss of trust and confidence.[24] It avers that for gross
mismanagement, for acts inimical to the interest of PTS, and also for reason that PTS has lost its trust
and confidence in him, PTS terminated his services without any retirement benefit.[25]
PTS, however, alleges that it complied with the two-notice rule required for termination of
employment. According to PTS, the first notice was sent by Soriano to Dr. Maquiling by means of
confidential memorandum[26] dated 2 April 1991 requiring him to explain in writing, within five days from
notice, the matters stated therein. Dr. Maquiling honored the first notice by submitting on 11 April 1991
a written reply to Soriano. The second notice which allegedly informed Dr. Maquiling of the decision to
terminate his employment, stating reasons therefor, was sent to him by Soriano on 8 June 1991.[27]
A review of the factual milieu of the instant labor controversy and the jurisprudence on the
subject leads us to modify the assailed decision of the appellate court.
We agree with the appellate court that Dr. Maquiling was dismissed from employment for just
cause consisting of loss of trust and confidence. The records reveal that he was Deputy Executive
Director of PTS, a responsible position, at the time of his dismissal. The following defines the extent of
the power and responsibility attached to the position he occupied:
1. Directs, supervises, coordinates, and controls the general administrative, finance and
regional operations of PTS.
2. Formulates and executes plans and policies for operations activities under his charge.
3. Signs corresponden[ce] and other documents relative to operational activities under his
charge, within specified limits.
4. Authorizes the hiring, promotion, transfer and termination of all PTS personnel below the
supervisory level in accordance with the policies prescribed by the Board of Directors.
5. Reports regularly to the Executive Director on the individual operations and activities of
departments and branches under his charge.
6. Executes and administers directives issued by the Executive Director.
7. Assists the Executive Director in the preparation of the [annual] budget and operational
plan of the Society.
8. Prepares and submits reports required by the Board of Directors, government entities
and other interested parties.
9. Performs related functions as may be assigned by the Executive Director.[28]
64
PTS imputes the delayed GSIS remittances to Dr. Maquilings failure to follow his duties as
prescribed by law. The records disclose that Dr. Maquiling was aware of the problem but he failed to give
priority thereto. This non-remittance was partially brought about by a Guideline on the Releasing of
Checks he issued, which placed the GSIS account as a last priority.[29] The security of workers
compensation was undermined by his act which patently transgressed the constitutional injunction that
workers should be afforded full protection in their employment. Subsumed in said mandate is the
protection of the right to workmens compensation to which a lowly worker may be entitled. To rule
otherwise would frustrate the policy that the State shall promote and develop a tax-exempt employees
compensation program whereby employees and their dependents, in the event of work-connected
disability or death, may promptly secure adequate income benefit, and medical or related benefits.[30]
On the other hand, we are inclined to attribute the P7.3 million deficit in PTS 1990 financial
statements to Dr. Maquilings failure to consider the realities of the financial condition of the institution.
Dr. Maquiling even aggravated such omission by insisting on the salary increase of both managerial and
non-managerial personnel despite the financial conundrum that puzzles the future fiscal stability of PTS.
The records show that he made representations during the Board meeting that sufficient funds existed
to meet the salary upgrading despite the presence of financial strains.[31] Such a course of action falls
short of his responsibility to safeguard the financial stability of the institution he leads. Said responsibility
cannot be outweighed by any magnanimous motive for the institutional existence will be rendered
illusory if the very foundation of its financial stability will be ignored. We are solicitous of the primordial
goal sought to be achieved by Dr. Maquiling but the wisdom of the timing is questionable.
The renewal of the Ultra Clean contract with the PTS for janitorial services also evinces a bad
managerial move on the part of Dr. Maquiling. By reason of the contract, PTS was dragged into a labor
controversy for illegal dismissal which eventually made it liable for backwages and differentials to
employees of Ultra Clean.[32] Worse is the renewal of the said contract despite the unsatisfactory
performance of Ultra Clean without the approval of the Board or the Executive Committee or any
subsequent request for its ratification. The unnecessary expending of funds in the administration and
operation of PTS is evidently an act of mismanagement which could bring PTS to severe financial distress.
These acts if committed by a responsible officer wither the trust and confidence lodged in him by his
superior and may serve as a valid and sufficient basis to impose disciplinary sanctions to an erring
employee which may even result to dismissal from employment if the gravity of the offense warrants as
in the instant case.
Recent decisions of this Court distinguish the treatment of managerial from that of rank-and-file
personnel insofar as the application of the doctrine of loss of trust and confidence is concerned. Thus,
with respect to rank-and-file personnel, loss of trust and confidence as ground for valid dismissal
requires proof of involvement in the alleged events in question and that mere uncorroborated assertions
and accusations by the employer will not suffice.[33] But as regards a managerial employee, mere
existence of a basis for believing that such employee has breached the trust of his employer would
suffice for his dismissal.[34]
After careful perusal of the factual backdrop of the case, we rule that Dr. Maquiling was indeed
validly dismissed for just cause. However, PTS was remiss in its duty to observe procedural due process
in effecting the dismissal of Dr. Maquiling.
Under this second requirement, two notices must be sent to the employee who is the subject of
an investigation for acts which may warrant his eventual dismissal from employment. The notices
required before an employee may be validly dismissed are: (a) a written notice served on the employee
specifying the grounds for termination and giving the employee reasonable opportunity to explain
his/her side; (b) a hearing or conference wherein the employee, with the assistance of counsel if so
desired, is given opportunity to respond to the charge, present his evidence or rebut evidence presented
against him/her; and (c) written notice of termination served on the employee indicating that upon due

consideration of all the circumstances, grounds have been established to justify termination.[35] The twin
requirements of notice and hearing constitute elements of due process in cases of employees
dismissal;the requirement of notice is intended to inform the employee concerned of the employers
intent to dismiss and the reason for the proposed dismissal; upon the other hand the requirement of
hearing affords the employee an opportunity to answer his employers charges against him and
accordingly to defend himself therefrom before dismissal is effected.[36]
Clearly, the first notice must inform outright the employee that an investigation will be conducted
on the charges particularized therein which, if proven, will result to his dismissal. Such notice must not
only contain a plain statement of the charges of malfeasance or misfeasance but must categorically state
the effect on his employment if the charges are proven to be true.
This notice will afford the employee an opportunity to avail all defenses and exhaust all remedies
to refute the allegations hurled against him for what is at stake is his very life and limb his employment.
Otherwise, the employee may just disregard the notice as a warning without any disastrous consequence
to be anticipated. Absent such statement, the first notice falls short of the requirement of due process.
Ones work is everything, thus, it is not too exacting to impose this strict requirement on the part of the
employer before the dismissal process be validly effected. This is in consonance with the rule that all
doubts in the implementation and interpretation of the provisions of the Labor Code, including its
implementing rules and regulations, shall be resolved in favor of labor.[37]
It is worthy to note that the Labor Arbiter, the NLRC and the Court of Appeals all agree in
concluding that procedural due process in the instant case was not observed. As revealed by the
evidence on record, a confidential memorandum FN dated 2 April 1991 was sent to Dr. Maquiling by
Soriano requiring him to explain in writing the matters contained therein. The text of the memorandum
reads as follows:
02 April 1991
CONFIDENTIAL MEMORANDUM FOR: DR. ERNESTO I. MAQUILING
Pursuant to the directive of the Board of Directors issued in its meeting on March
25, 1991, you are hereby instructed to report and explain in writing to this office, within five
(5) days from notice hereof, on the following matters:
1. The delayed GSIS remittances;
2. The reported deficit of P7.3 million appearing in our financial
statement for 1990;
3. The expenses you approved and incurred in connection with the Dale
Carnegie and Silva Mind Control Seminar;
4. The P3.7 million miscellaneous expenses appearing in our financial
statement; and
5. Your reasons for renewing our service contract with Ultra.
For immediate compliance.
(SGD.) ATTY. ANDRES B. SORIANO
65
OIC-Executive Director
On 11 April 1991, Dr. Maquiling submitted his written reply. The second notice which informs Dr.
Maquiling of the decision to terminate his employment was sent to him on 8 June 1991. It must be noted
that the first notice dated 2 April 1991 is a mere instruction to explain the matters enumerated therein.
It did not apprise Dr. Maquiling of any investigation to be conducted or being conducted that will
warrant his dismissal from service if found guilty of charges specified therein. Thus, such notice fell short
of the requirement of law that an employee must be afforded the benefit of the two-notice rule in
dismissal cases that will allow the employee to substantiate the charges specified in the notice with full
knowledge at the outset that the investigation to be conducted may result in his dismissal or suspension
from employment.
Dr. Maquiling invokes our ruling in Serrano as basis for appropriate relief. The Serrano ruling
awarded full backwages and separation pay to the employee who was dismissed for just cause but
without the observance of the procedural due process requirement. However, in Agabon v. NLRC,[38] this
Court modified the Serrano ruling and awarded nominal damages in the amount of thirty thousand pesos
(P30,000.00) including holiday pay, service incentive leave and thirteenth month pay to the petitioners in
the said case. This case clarified the criticisms and answered the questions created by the Serrano ruling.
The Agabon doctrine enunciates the rule that if the dismissal is for just cause but statutory due
process was not observed, the dismissal should be upheld. While the procedural infirmity cannot be
cured, it should not invalidate the dismissal. However, the employer should be held liable for non-
compliance with the procedural requirements of due process.[39]
Where the dismissal is for just cause, as in the instant case, the lack of statutory due process
should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory rights. The indemnity to be imposed should be
stiffer to discourage the abhorrent practice of dismiss now, pay later, which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend
on the facts of each case, taking into special consideration the gravity of the due process violation of the
employer.[40]
The violation of the petitioners right to statutory due process by the private respondent warrants
the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to
the sound discretion of the court, taking into account the relevant circumstances.[41] Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it at thirty thousand pesos
(P30,000.00). We believe this form of damages would serve to deter employers from future violations of
the statutory due process rights of employees. At the very least, it provides a vindication or recognition
of this right granted to employees under the Labor Code and its Implementing Rules.[42]
It may be also argued that actual or compensatory damages may be recovered in employment
termination cases. Actual or compensatory damages are not available as a matter of right to an
employee dismissed for just cause but denied statutory due process. The award must be based on clear
factual and legal bases and correspond to such pecuniary loss suffered by the employee as duly proven.
Evidently, there is less degree of discretion to award actual or compensatory damages.
In the instant case, the records fail to show that Dr. Maquiling suffered pecuniary loss by reason of
his dismissal from service. It must be noted that he was dismissed for just cause but the procedural
aspect of dismissal was not complied with. Such non-compliance did not automatically result to any
pecuniary loss. Any such loss must be proved by Dr. Maquiling to be entitled to an award for actual
damages. Besides, the two-notice rule was not at all disregarded although it was observed defectively by
PTS. Thus, actual damages may not be awarded.
 66

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

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

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

SO ORDERED.
 67

CLARION PRINTING HOUSE, INC vs NLRC Case Digest

CLARION PRINTING HOUSE, INC vs. NATIONAL LABOR RELATIONS COMMISSION

461 SCRA 272 (2005)

FACTS:

Clarion Printing House (Clarion), a company owned by EYCO Group of Companies (EYCO) hired Michelle
Miclat (Miclat) as marketing assistant on a probationary basis. During that time, she was not informed of
the standards that she should meet to qualify as a regular employee.

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

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

Issue: Whether or not Miclat was illegally dismissed

Held:

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

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

That the SEC, mandated by law to have regulatory functions over corporations, partnerships or
associations, appointed an interim receiver for the EYCO Group of Companies on its petition in light of,
as quoted above, the therein enumerated "factors beyond the control and anticipation of the
management" rendering it unable to meet its obligation as they fall due, and thus resulting to
"complications and problems . . . to arise that would impair and affect [its] operations . . ." shows that
CLARION, together with the other member-companies of the EYCO Group of Companies, was suffering
business reverses justifying, among other things, the retrenchment of its employees.

EN BANC
G.R. No. L-17681 February 26, 1965
MINDANAO ACADEMY, INC., MAURICIO O. BAS, ERLINDA D. DIAZ, accompanied by her husband
ANTOLIN DIAZ, ESTER AIDA D. BAS, accompanied by her husband MAURICIO O. BAS, ROSALINDA D.
BELLEZA, accompanied by her husband APOLINARIO BELLEZA, LUZ MINDA D. DAJAO, accompanied by
her husband ELIGIO C. DAJAO, ADELAIDA D. NUESA, accompanied by her husband WILSON NUESA,
PEDRO N. ABUTON, SY PAOCO, JOSEFA DIGNUM, and PERFECTO VELASQUEZ, plaintiffs-appellees,
vs.
ILDEFONSO D. YAP, ROSENDA A. DE NUQUI, and SOTERO A. DIONISIO, JR., defendants,
ILDEFONSO D. YAP, defendant-appellant.
MAKALINTAL, J.:
By deed entitled "Mutual Agreement," executed on May 10, 1964, Rosenda A. de Nuqui (widow of
deceased Sotero Dionisio) and her son Sotero Dionisio, Jr. sold three parcels of residential land in
Oroquieta, Misamis Occidental, and another parcel in Ozamis City in favor of Ildefonso D. Yap. Included
in the sale were certain buildings situated on said lands as well as laboratory equipment, books, furniture
and fixtures used by two schools established in the respective properties, the Mindanao Academy in
Oroquieta and the Misamis Academy in Ozamis City. The aggregate price stated in the deed was
P100,700.00, to be paid according to the terms and conditions specified in the contract.
Besides Rosenda and her son Sotero, Jr., both of whom signed the instrument, Adelaida Dionisio-Nuesa
(a daughter of Rosenda) is also named therein as co-vendor, but actually did not take part either
personally or through her uncle and supposed attorney-in-fact, Restituto Abuton.
These three Rosenda and her two children above named are referred to in the deed as the owners
pro-indiviso of the properties sold. The truth, however, was that there were other co-owners of the
lands, namely, Erlinda D. Diaz, Ester Aida D. Bas, Rosalinda D. Belleza, and Luz Minda D. Dajao, children
also of Rosenda by her deceased husband Sotero Dionisio, Sr., and that as far as the school building,
equipment, books, furniture and fixtures were concerned, they were owned by the Mindanao Academy,
Inc., a corporation operating both the Mindanao Academy in Oroquieta and the Misamis Academy in
Ozamis City.
The buyer, Ildefonso D. Yap, obtained possession of the properties by virtue of the sale, took over the
operation of the two schools and even changed their names to Harvardian Colleges. In view thereof two
actions were commenced in the Court of First Instance of Misamis Occidental. The first was for
annulment of the sale and recovery of rents and damages (Civil Case No. 1774, filed May 3, 1955) with
the Mindanao Academy, Inc., the five children of Rosenda Nuqui who did not take part in the deed of
sale, and several other persons who were stockholders of the said corporation, as plaintiffs, and the
parties who signed the deed of sale as defendants. The second action was for rescission (Civil Case No.
1907, filed July 17, 1956) with Rosenda Nuqui, Sotero Dionisio, Jr. and Erlinda D. Diaz (and the latter's
husband Antolin Diaz) as plaintiffs, and Ildefonso D. Yap as lone defendant. The other four children of
Rosenda did not join, having previously ceded and quitclaimed their shares in the litigated properties in
favor of their sister Erlinda D. Diaz.
The two actions were tried jointly and on March 31, 1960 the court a quo rendered judgment as follows:
68
In both Cases
(1) The Mutual Agreement is hereby declared null and void ab initio;
(2) Defendant Ildefonso D. Yap is hereby ordered to pay the costs of the proceedings in both
cases.
In Civil Case No. 1907 only
(1) Defendant Ildefonso D. Yap is hereby ordered to restore to the plaintiffs in said case all the
buildings and grounds described in the Mutual Agreement together with all the permanent
improvements thereon;
(2) To pay to the plaintiffs therein the amount of P300.00 monthly from July 31, 1956 up to
the time he shall have surrendered the properties in question to the plaintiffs herein, plus
P1,000.00 as attorney's fees to plaintiffs Antolin and Erlinda D. Diaz.
In Civil Case No. 1774 only
(1) Defendant Ildefonso D. Yap is hereby ordered to restore to the Mindanao Academy, Inc.,
all the books laboratory apparatus, furniture and other equipments described in the Mutual
Agreement and specified in the inventory attached to the Records of this case; or in default
thereof, their value in the amount of P23,500.00;
(2) To return all the Records of the Mindanao Academy and Misamis Academy;
(3) To pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the amount of
P10,000.00 as nominal damages, P3,000.00 as exemplary damages; and P2,000.00 as
attorney's fees. These damages shall be apportioned to each of the stockholders named as
plaintiffs in said case in proportion to their respective interests in the corporation.
Ildefonso D. Yap appealed from the foregoing judgment and has assigned five errors therein.
I. He first contends that the lower court erred "in declaring that the mutual agreement dated May 10,
1954 ... is entirely void and legally non-existent in that the vendors therein ceded to defendant-appellant
not only their interests, rights, shares and participation in the property sold but also those that belonged
to persons who were not parties thereto."
The lower court did not rule categorically on the question of rescission considering it unnecessary to do
so in view of its conclusion that the contract of sale is null and void. This conclusion is premised on two
grounds: (a) the contract purported to sell properties of which the sellers were not the only owners,
since of the four parcels of land mentioned in the deed their shares consisted only of 7/12, (6/12 for
Rosenda Nuqui and 1/12 for Sotero, Jr.), while in the buildings, laboratory equipment, books, furniture
and fixtures they had no participation at all, the owner being the Mindanao Academy, Inc.; and (b) the
prestation involved in the sale was indivisible, and therefore incapable of partial annulment, inasmuch as
the buyer Yap, by his own admission, would not have entered into the transaction except to acquire all
of the properties purchased by him.
 69

These premises are not challenged by appellant. But he calls attention to one point, namely, that the the complaint against him was filed, and consequently the court's declaration of liability for the rents
four children of Rosenda Nuqui who did not take part in the sale, besides Erlinda Dionisio Diaz, thereafter is correct and proper. A possessor in good faith is entitled to the fruits only so long as his
quitclaimed in favor of the latter their interests in the properties; and that the trial court held that possession is not legally interrupted, and such interruption takes place upon service of judicial summons
Erlinda as well as her husband acted in bad faith, because "having reasonable notice of defendants' (Arts. 544 and 1123, Civil Code).
having unlawfully taken possession of the property, they failed to make reasonable demands for (him) to
vacate the premises to respect their rights thereto." It is argued that being herself guilty of bad faith,
In our opinion the award of attorney's fees to Erlinda D. Diaz and her husband is erroneous. Civil Case
Erlinda D. Diaz, as owner of 5/12 undivided interest in the properties (including the 4/12 ceded to her by
No. 1907, in which said fees have been adjudged, is for rescission (more properly resolution) of the so-
her four sisters), is in no position to ask for annulment of the sale.
called "mutual agreement" on the ground that the defendant Yap failed to comply with certain
undertakings specified therein relative to the payment of the purchase price. Erlinda Diaz was not a party
The argument does not convince us. In the first place the quitclaim, in the form of an extrajudicial to that agreement and hence had no cause of action for rescission.
partition, was made on May 6, 1956, after the action for annulment was filed, wherein the plaintiffs
were not only Erlinda but also the other co-owners who took no part in the sale and to whom there has
And as already stated, the trial court did not decide the matter of rescission because of the decree of
been no imputation of bad faith. Secondly, the trial court's finding of bad faith is an erroneous
annulment it rendered in the other case (Civil Case No. 1774), wherein the defendants are not only
conclusion induced by a manifest oversight of an undisputed fact, namely, that on July 10, 1954, just a
Ildefonso D. Yap but also Rosenda Nuqui and her son Sotero. Erlinda D. Diaz could just as well have
month after the deed of sale in question, Erlinda D. Diaz did file an action against Ildefonso D. Yap and
refrained from joining as plaintiff in the action for rescission, not being a party to the contract sought to
Rosenda Nuqui, among others, asserting her rights as co-owner of the properties (Case No. 1646).
be rescission and being already one of the plaintiffs in the other action. In other words, it cannot be said
Finally, bad faith on the part of Erlinda would not militate against the nullity of the sale, considering that
with justification that she was constrained to litigate, in Civil Case No. 1907, because of some cause
it included not only the lands owned in common by Rosenda Nuqui and her six children but also the
attributable to the appellant.
buildings and school facilities owned by the Mindanao Academy, Inc., an entity which had nothing to do
with the transaction and which could be represented solely by its Board of Trustees.
The appellant claims reimbursement for the value of the improvements he allegedly introduced in the
schools, consisting of a new building worth P8,000.00 and a toilet costing P800.00, besides laboratory
The first assignment of error is therefore without merit.
equipment, furniture, fixtures and books for the libraries. It should be noted that the judgment of the
trial court specifies, for delivery to the plaintiffs (in Civil Case No. 1907), only "the buildings and
II. The second and third errors are discussed jointly in appellant's brief. They read as follows: grounds described in the mutual agreement together with all the permanent improvements thereon." If
the defendant constructed a new building, as he alleges, he cannot recover its value because the
construction was done after the filing of the action for annulment, thus rendering him a builder in bad
THE LOWER COURT ERRED IN HOLDING DEFENDANT-APPELLANT LIABLE FOR RENTS AND
faith who is denied by law any right of reimbursement.
ATTORNEY'S FEES IN THE SUM OF P1,000.00 AFTER DECLARING THAT ALL THE PLAINTIFFS-
APPELLEES IN CIVIL CASE NO. 1907 ACTED IN BAD FAITH.
In connection with the equipment, books, furniture and fixtures brought in by him, he is not entitled to
reimbursement either, because the judgment does not award them to any of the plaintiffs in these two
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS-APPELLEES IN SAID CIVIL CASE NO.
actions. What is adjudged (in Civil Case No. 1774) is for the defendant to restore to the Mindanao
1907 ARE ENTITLED TO RECOVER ALL THE LANDS, BUILDINGS AND OTHER PERMANENT
Academy, Inc. all the books, laboratory apparatus, furniture and other equipment "described in the
IMPROVEMENTS DESCRIBED IN THE MUTUAL AGREEMENT DATED MAY 10, 1954.
Mutual Agreement and specified in the Inventory attached to the records of this case; or in default
thereof, their value in the amount of P23,500.00." In other words, whatever has been brought in by the
The lower court correctly found that both vendors and vendee in the sale acted in bad faith and defendant is outside the scope of the judgment and may be retained by him.
therefore must be treated, vis-a-vis each other, as having acted in good faith. The return of the
properties by the vendee is a necessary consequence of the decree of annulment. No part of the
III. The appellant's fourth assignment of error refers to the nominal and exemplary damages, as well as
purchase price having been paid, as far as the record shows, the trial court correctly made no
the attorney's fees, granted to the stockholders of the Mindanao Academy, Inc. The trial court awarded
corresponding order for the restitution thereof.
no compensatory damages because the Mindanao Academy, Inc. had been operating the two schools at
a loss before the sale in question, and the defendant himself was no more successful after he took over.
In regard to the rents the trial court found that prior to the sale the Mindanao Academy, Inc., was paying Are the stockholders of the said corporation who joined as plaintiffs in Civil Case No. 1774 entitled to
P300.00 monthly for its occupancy of the lands on which the buildings are situated. This is the amount nominal and exemplary damages? We do not believe so.
the defendant has been ordered to pay to the plaintiffs in Civil Case No. 1907, beginning July 31, 1956,
when he filed his "first pleading" in the case. There can be no doubt that Erlinda D. Diaz is entitled to
According to their second amended complaint they were joined merely pro forma, and "for the sole
recover a share of the said rents in proportion to her own interests in the lands and the interest in the
purpose of the moral damage which has been all the time alleged in the original complaint." Indeed the
four co-owners which she had acquired. Rosenda Nuqui and her son Sotero, it is true, acted in bad faith
interests of the said stockholders, if any, were already represented by the corporation itself, which was
when they sold the properties as theirs alone, but so did the defendant Yap when he purchased them
the proper party plaintiff; and no cause of action accruing to them separately from the corporation is
with knowledge of the fact that there were other co-owners. Although the bad faith of one party
alleged in the complaint, other than that for moral damages due to "extreme mental anguish, serious
neutralizes that of the other and hence as between themselves their rights would be as if both of them
anxiety and wounded feelings." The trial court, however, ruled out this claim for moral damages and no
had acted in good faith at the time of the transaction, this legal fiction of Yap's good faith ceased when
 70

appeal from such ruling has been taken. The award for nominal and exemplary damages should be
eliminated in toto.

The award for attorney's fees in the amount of P2,000.00 should be upheld, although the same should
be for the account, not of the plaintiff stockholders of the Mindanao Academy, Inc., but of the
corporation itself, and payable to their common counsel as prayed for in the complaint.

IV. Under the fifth and last assignment of error the appellant insists on the warranty provided for in
clause VI of the deed of sale in view of the claims of the co-owners who did not take part therein. The
said clause provides: "if any claim shall be filed against the properties or any right, share or interest
which are in the possession of the party of the First Part (vendors) which had been hereby transferred,
ceded and conveyed unto the party of the Second Part (vendee) the party of the First Part assumes as it
hereby holds itself answerable.

It is unnecessary to pass upon the question posed in this assignment of error in view of the total
annulment of the sale on grounds concerning which both parties thereto were at fault. The nullity of the
contract precludes enforcement of any of its stipulations.

WHEREFORE, the judgment appealed from is modified by eliminating therefrom the award of attorney's
fees of P1,000.00 in favor of Erlinda D. Diaz and her husband, plaintiffs in Civil Case No. 1907, and the
award of nominal and exemplary damages in Civil Case No. 1774; and making the award of attorney's
fees in the sum of P2,000.00 payable to counsel for the account of the Mindanao Academy, Inc. instead
of the plaintiff stockholders. In all other respects the judgment appealed from is affirmed. No
pronouncement as to costs.
 71

EN BANC to Araneta, the bank claimed that the amount demanded was excessive, and offered to pay the sum of
P2,000.00. The offer was rejected.
G.R. No. L-25414 July 30, 1971
On December 11, 1962 Araneta filed the complaint in this case against the Bank of America for the
recovery of the following:
LEOPOLDO ARANETA, petitioner,
vs.
BANK of AMERICA, respondent. 1. Actual or compensatory damages P30,000.00
2. Moral damages 20,000.00
3. Temperate damages 50,000.00
MAKALINTAL, J.:
4. Exemplary damages 10,000.00
5. Attorney's fees 10,000.00
Petition for review by certiorari of the decision of Court of Appeals in CA-G.R. No. L-34508-R modifying
that of the Court of First Instance of Manila in the Case No. 52442.
TOTAL P120,000.00

Leopoldo Araneta, the petitioner herein, was a local merchant engaged in the import and export
The judgment of the trial court awarded all the item prayed for, but on appeal by the defendant the
business. On June 30, 1961 he issued a check for $500 payable to cash and drawn against the San
Court of Appeals eliminated the award of compensatory and temperate damages and reduced the moral
Francisco main office of the Bank of America, where he had been maintaining a dollar current account
damages to P8,000.00, the exemplary damages to P1,000.00 and the attorney's fees to P1,000.00.
since 1948. At that time he had a credit balance of $523.81 in his account, confirmed by the bank's
assistant cashier in a letter to Araneta dated September 7, 1961. However, when the check was received
by the bank on September 8, 1961, a day after the date of the letter, it was dishonored and stamped Not satisfied with the decision of the appellate court the plaintiff filed the instant petition for review,
with the notation "Account Closed." alleging two reasons why it should be allowed, as follows:

Upon inquiry by Araneta as to why his check had been dishonored, the Bank of America acknowledged
that it was an error, explaining that for some reason the check had been encoded with wrong account
number, and promising that "we shall make every effort to see that this does not reoccur." The bank
sent a letter of apology to the payee of the check, a Mr. Harry Gregory of Hongkong, stating that "the
check was returned through an error on our part and should not reflect adversely upon Mr. Araneta." In
all probability the matter would have been considered closed, but another incident of a similar nature
occurred later.
On May 25, and 31, 1962 Araneta issued Check No. 110 for $500 and Check No. 111 for $150,
respectively, both payable to cash and drawn against the Bank of America. These two checks were
received by the bank on June 3, 1962. The first check appeared to have come into the hands of Rufina
Saldana, who deposited it to her account the First National City Bank of New York, which in turn cleared
it through the Federal Reserve Bank. The second check appeared to have been cleared through the Wells
Fargo Bank. Despite the sufficiency of Araneta's deposit balance to cover both checks, they were again
stamped with the notation "Account Closed" and returned to the respective clearing banks.
In the particular case of Check No. 110, it was actually paid by the Bank of America to the First National
City Bank. Subsequently, however, the Bank of America, claiming that the payment had been
inadvertently made, returned the check to the First National City Bank with the request that the amount
thereof be credited back to the Bank of America. In turn, the First National City Bank wrote to the
depositor of the check, Rufina Saldana, informing her about its return with the notation "Account
Closed" and asking her consent to the deduction of its amount from her deposit. However, before Mrs.
Saldana's reply could be received, the Bank of America recalled the check from the First National City
Bank and honored it.
(1) The Court of Appeals erred in holding that temperate damages cannot be
awarded without proof of actual pecuniary loss. There is absolutely no legal basis
for this ruling; worse yet, it runs counter to the very provisions of ART. 2216 of the
New Civil Code and to the established jurisprudence on the matter;
(2) The Court of Appeals erred in not holding that moral damages may be
recovered as an item separate and distinct from the damages recoverable for
injury to business standing and commercial credit. This involves the application of
paragraph (2) of Art. 2205 of the New Civil Code which up to now has not yet
received an authoritative interpretation from the Supreme Court. ... .
In his brief, however, the petitioner assigned five (5) errors committed by the appellate court, namely:
(1) in concluding that the petitioner, on the basis of the evidence, had not sufficiently proven his claim
for actual damages, where such evidence, both testimonial and documentary, stands uncontradicted on
the record; (2) in holding that temperate damages cannot be awarded to the petitioner without proof of
actual pecuniary loss; (3) in not granting moral damages for mental anguish, besmirched reputation,
wounded feelings, social humiliation, etc., separate and distinct from the damages recoverable for injury
to business reputation; (4) in reducing, without any ostensible reason, the award of exemplary damages
granted by the lower court; and (5) in reducing, without special reason, the award of attorney's fees by
the lower court.
We consider the second and third errors, as they present the issues raised in the petition for review and
on the basis of which it was given due course.

In disallowing the award of temperate damages, the Court of Appeals ruled:

In view of the foregoing incidents, Araneta, through counsel, sent a letter to the Bank of America
demanding damages in the sum of $20,000. While admitting responsibility for the inconvenience caused

In view of all the foregoing considerations we hold that the plaintiff has not proven
his claim that the two checks for $500 each were in partial payment of two orders
for jewels worth P50,000 each. He has likewise not proven the actual damage
which he claims he has suffered. And in view of the fact that he has not proven the
existence of the supposed contract for himself to buy jewels at a profit there is not
even an occasion for an award of temperate damages on this score.
This ruling is now assailed as erroneous and without legal basis. The petitioner maintains that in an
action by a depositor against a bank for damages resulting from the wrongful dishonor of the depositor's
checks, temperate damages for injury to business standing or commercial credit may be recovered even
in the absence of definite proof of direct pecuniary loss to the plaintiff, a finding as it was found by the
Court of Appeals that the wrongful acts of the respondent had adversely affected his credit being
sufficient for the purpose. The following provisions of the Civil Code are invoked:
ART. 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or permanent
personal injury;
(2) For injury to the plaintiff's business standing or commercial credit.
ART. 2216. No proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be adjudicated. The assessment
of such damages, except liquidated ones, is left to the discretion of the court,
according to the circumstances of each case.
Also invoked by the petitioner is the case of Atlanta National Bank vs. Davis, 96 Ga 334, 23 SE 190; 1 and
the following citations in American Jurisprudence:
In some states what are called "temperate damages" are allowed in certain classes
of cases, without proof of actual or special damages, where the wrong done must
in fact have caused actual damage to the plaintiff, though from the nature of the
case, he cannot furnish independent, distinct proof thereof. Temperate damages
are more than nominal damages, and, rather, are such as would be a reasonable
compensation for the injury sustained. ... . (15 Am. Jur. 400)
... . It has been generally, although not universally, held, in an action based upon
the wrongful act of a bank dishonoring checks of a merchant or trader having
sufficient funds on deposit with the bank, that substantial damages will be
presumed to follow such act as a necessary and natural consequence, and
accordingly, that special damages need not be shown. One of the reasons given for
this rule is that the dishonor of a merchant's or trader's check is tantamount or
analogous, to a slander of his trade or business, imputing to him insolvency or bad
faith. ... . (10 Am. Jur. 2d. 545)
On the other hand the respondent argues that since the petitioner invokes Article 2205 of the Civil Code,
which speaks of actual or compensatory damages for injury to business standing or commercial credit,
he may not claim them as temperate damages and thereby dispense with proof of pecuniary loss under
72
Article 2216. The respondent cites Article 2224, which provides that "temperate or moderate damages,
which are more than nominal but less than compensatory damages may be recovered when the court
finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case,
proved with certainty," and contends that the petitioner failed to show any such loss in this case.
The question, therefore, is whether or not on the basis of the findings of the Court of Appeals, there is
reason to conclude that the petitioner did sustain some pecuniary loss although no sufficient proof of
the amount thereof has been adduced. In rejecting the claim for temperate damages the said Court
referred specifically to the petitioner's failure to prove "the existence of a supposed contract for him to
buy jewels at a profit," in connection with which he issued the two checks which were dishonored by the
respondent. This may be true as far as it goes, that is, with particular reference to the alleged loss in that
particular transaction. But it does not detract from the finding of the same Court that actual damages
had been suffered, thus:
... Obviously, the check passed the hands of other banks since it was cleared in the
United States. The adverse reflection against the credit of Araneta with said banks
was not cured nor explained by the letter of apology to Mr. Gregory.
... This incident obviously affected the credit of Araneta with Miss Saldana.
However, in so far as the credit of Araneta with the First National City Bank, with
Miss Rufina Saldana and with any other persons who may have come to know
about the refusal of the defendant to honor said checks, the harm was done ...
The financial credit of a businessman is a prized and valuable asset, it being a significant part of the
foundation of his business. Any adverse reflection thereon constitutes some material loss to him. As
stated in the case Atlanta National Bank vs. Davis, supra, citing 2 Morse Banks, Sec. 458, "it can hardly be
possible that a customer's check can be wrongfully refused payment without some impeachment of his
credit, which must in fact be an actual injury, though he cannot, from the nature of the case, furnish
independent, distinct proof thereof."
The Code Commission, in explaining the concept of temperate damages under Article 2224, makes the
following comment:
In some States of the American Union, temperate damages are allowed. There are
cases where from the nature of the case, definite proof of pecuniary loss cannot
be offered, although the court is convinced that there has been such loss. For
instance, injury to one's commercial credit or to the goodwill of a business firm is
often hard to show with certainty in terms of money. Should damages be denied
for that reason? The judge should be empowered to calculate moderate damages
in such cases, rather than that the plaintiff should suffer, without redress from the
defendant's wrongful act.
The petitioner, as found by the Court of Appeals, is a merchant of long standing and good reputation in
the Philippines. Some of his record is cited in the decision appealed from. We are of the opinion that his
claim for temperate damages is legally justified. Considering all the circumstances, including the rather
small size of the petitioner's account with the respondent, the amounts of the checks which were
wrongfully dishonored, and the fact that the respondent tried to rectify the error soon after it was
 73

discovered, although the rectification came after the damage had been caused, we believe that an award
of P5,000 by way of temperate damages is sufficient.

Under the third error assigned by the petitioner in his brief, which is the second of the two reasons
relieve upon in his petition for review, he contends that moral damages should have been granted for
the injury to his business standing or commercial credit, separately from his wounded feelings and
mental anguish. It is true that under Article 2217 of the Civil Code. "besmirched reputation" is a ground
upon which moral damages may be claimed, but the Court of Appeals did take this element into
consideration in adjudging the sum of P8,000 in his favor. We quote from the decision:

... the damages to his reputation as an established and well known international
trader entitled himself to recover moral damages.

... It was likewise established that when plaintiff learned that his checks were not
honored by the drawee Bank, his wounded feelings and the mental anguish
suffered by him caused his blood pressure to rise beyond normal limits, thereby
necessitating medical attendance for an extended period.

The trial court awarded attorney's fees in the amount of P10,000. This was reduced by the Court of
Appeals to only P1,000. Considering the nature and extent of the services rendered by the petitioner's
counsel both in the trial and appellate courts, the amount should be increased to P4,000. This may be
done motu propio by this Court under Article 2208 of the Civil Code, which provides that attorney's fees
may be recovered in the instances therein enumerated and "in any other case where the Court deems, it
first and equitable that attorney's fees ... should be recovered," provided the amount thereof be
reasonable in all cases.

We do not entertain the first and fourth errors assigned by the petitioner. Neither of them was raised
and ruled upon as reasons for the allowance of his petition for review, as required by Section 2 of Rule
45. Besides, the first error involves a question of fact and calls for a review of the evidence and a
reappraisal of its probative value a task not within the appellate jurisdiction of this case. And with
respect to the fourth error, while there was gross negligence on the part of the respondent, the record
shows, as hereinbefore observed, that it tried to rectify its error soon after the same was discovered,
although not in time to prevent the damage to the petitioner.

WHEREFORE, the judgment of the Court of Appeals is modified by awarding temperate damages to the
petitioner in the sum of P5,000 and increasing the attorney's fees to P4,000; and is affirmed in all other
respects. Costs against the respondent.

FIRST DIVISION
[G.R. No. 135644. September 17, 2001]
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. SPOUSES GONZALO and MATILDE
LABUNG-DEANG, respondents.
DECISION
PARDO, J.:
The petitioner in the case is the Government Service Insurance System (hereafter, GSIS). Having lost the
case in the trial court and the Court of Appeals, it now comes to this Court for redress.
At the onset, we state that the issue is not suability or whether GSIS may be sued despite the doctrine of
state immunity from suit, but liability, whether or not GSIS may be liable to pay damages to respondent
spouses given the applicable law and the circumstances of the case.[1]
The Case
The case is a petition[2] for review on certiorari of the decision of the Court of Appeals[3] affirming the
decision of the Regional Trial Court, Angeles City[4] ordering GSIS to pay respondents Gonzalo (now
deceased)[5] and Matilde Labung-Deang (hereafter, spouses Deang) temperate damages, attorneys fees,
legal interests and costs of suit for the loss of their title to real property mortgaged to the GSIS.
The Facts
Sometime in December 1969, the spouses Deang obtained a housing loan from the GSIS in the amount
of eight thousand five hundred pesos (P8,500.00). Under the agreement, the loan was to mature on
December 23, 1979. The loan was secured by a real estate mortgage constituted over the spouses
property covered by Transfer Certificate of Title No. 14926-R issued by the Register of Deeds of
Pampanga.[6] As required by the mortgage deed, the spouses Daeng deposited the owners duplicate copy
of the title with the GSIS.[7]
On January 19, 1979, eleven (11) months before the maturity of the loan, the spouses Deang settled
their debt with the GSIS[8] and requested for the release of the owners duplicate copy of the title since
they intended to secure a loan from a private lender and use the land covered by it as collateral security
for the loan of fifty thousand pesos (P50,000.00)[9] which they applied for with one Milagros
Runes.[10]They would use the proceeds of the loan applied for the renovation of the spouses residential
house and for business.[11]
However, personnel of the GSIS were not able to release the owners duplicate of the title as it could not
be found despite diligent search.[12] As stated earlier, the spouses as mortgagors deposited the owners
duplicate copy of the title with the GSIS located at its office in San Fernando, Pampanga.[13]
74
Satisfied that the owners duplicate copy of the title was really lost, in 1979, GSIS commenced the
reconstitution proceedings with the Court of First Instance of Pampanga for the issuance of a new
owners copy of the same.[14]
On June 22, 1979, GSIS issued a certificate of release of mortgage.[15]
On June 26, 1979, after the completion of judicial proceedings, GSIS finally secured and released the
reconstituted copy of the owners duplicate of Transfer Certificate of Title No. 14926-R to the spouses
Deang.[16]
On July 6, 1979, the spouses Deang filed with the Court of First Instance, Angeles City a complaint against
GSIS for damages, claiming that as result of the delay in releasing the duplicate copy of the owners title,
they were unable to secure a loan from Milagros Runes, the proceeds of which could have been used in
defraying the estimated cost of the renovation of their residential house and which could have been
invested in some profitable business undertaking.[17]
In its defense, GSIS explained that the owners duplicate copy of the title was released within a
reasonable time since it had to conduct standard pre-audit and post-audit procedures to verify if the
spouses Deangs account had been fully settled.[18]
On July 31, 1995, the trial court rendered a decision ruling for the spouses Deang. The trial court
reasoned that the loss of the owners duplicate copy of the title in the possession of GSIS as security for
the mortgage... without justifiable cause constitutes negligence on the part of the employee of GSIS who
lost it, making GSIS liable for damages.[19] We quote the dispositive portion of the decision:[20]
IN VIEW OF THE FOREGOING, the Court renders judgment ordering the GSIS:
a) To pay the plaintiffs-spouses the amount of P20,000.00 as temperate damages;
b) To pay plaintiffs-spouses the amount of P15,000.00 as attorneys fees;
c) To pay legal interest on the award in paragraphs a) and b) from the filing of the complaint; and,
d) To pay cost of the suit.
SO ORDERED.
On August 30, 1995, GSIS appealed the decision to the Court of Appeals.[21]
On September 21, 1998, the Court of Appeals promulgated a decision affirming the appealed judgment,
ruling: First, since government owned and controlled corporations (hereafter, GOCCs) whose charters
provide that they can sue and be sued have a legal personality separate and distinct from the
government, GSIS is not covered by Article 2180[22] of the Civil Code, and it is liable for damages caused
by their employees acting within the scope of their assigned tasks. Second, the GSIS is liable to pay a
reasonable amount of damages and attorneys fees, which the appellate court will not disturb. We quote
the dispositive portion:[23]
WHEREFORE, finding no reversible error in the appealed judgment, the same is hereby AFFIRMED.
SO ORDERED.

Hence, this appeal.[24]
The Issue
Whether the GSIS, as a GOCC primarily performing governmental functions, is liable for a negligent act of
its employee acting within the scope of his assigned tasks.[25]
The Courts Ruling
We rule that the GSIS is liable for damages. We deny the petition for lack of merit.
GSIS, citing the sixth paragraph of Article 2180 of the Civil Code argues that as a GOCC, it falls within the
term State and cannot be held vicariously liable for negligence committed by its employee acting within
his functions.[26]
Article 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or
omissions, but also for those of persons for whom one is responsible.
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business of
industry.
The State is responsible in like manner when it acts though a special agent, but not when the damage
has been caused by the official to whom the task was done properly pertains, in which case what is
provided in Article 2176 shall be applicable.
The argument is untenable. The cited provision of the Civil Code is not applicable to the case at
bar. However, the trial court and the Court of Appeals erred in citing it as the applicable
law. Nonetheless, the conclusion is the same. As heretofore stated, we find that GSIS is liable for
damages.
The trial court and the Court of Appeals treated the obligation of GSIS as one springing from quasi-
delict.[27] We do not agree. Article 2176 of the Civil Code defines quasi-delict as follows:
Whoever by act or omission causes damages to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the provisions of this Chapter
(underscoring ours).
Under the facts, there was a pre-existing contract between the parties. GSIS and the spouses Deang had
a loan agreement secured by a real estate mortgage. The duty to return the owners duplicate copy of
title arose as soon as the mortgage was released.[28] GSIS insists that it was under no obligation to return
the owners duplicate copy of the title immediately. This insistence is not warranted. Negligence is
75
obvious as the owners duplicate copy could not be returned to the owners. Thus, the more applicable
provisions of the Civil Code are:
Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay
and those who in any manner contravene the tenor thereof are liable for damages.
Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith
is liable shall be those that are the natural and probable consequences of the breach of the obligation,
and which the parties have foreseen or could have reasonably foreseen at the time the obligation was
constituted xxx.
Since good faith is presumed and bad faith is a matter of fact which should be proved,[29] we shall treat
GSIS as a party who defaulted in its obligation to return the owners duplicate copy of the title. As an
obligor in good faith, GSIS is liable for all the natural and probable consequences of the breach of the
obligation. The inability of the spouses Deang to secure another loan and the damages they suffered
thereby has its roots in the failure of the GSIS to return the owners duplicate copy of the title.
We come now to the amount of damages. In a breach of contract, moral damages are not awarded if the
defendant is not shown to have acted fraudulently or with malice or bad faith.[30] The fact that the
complainant suffered economic hardship[31] or worries and mental anxiety[32] is not enough.
There is likewise no factual basis for an award of actual damages. Actual damages to be compensable
must be proven by clear evidence.[33] A court can not rely on speculation, conjecture or guess work as to
the fact and amount of damages, but must depend on actual proof.[34]
However, it is also apparent that the spouses Deang suffered financial damage because of the loss of the
owners duplicate copy of the title. Temperate damages may be granted.
Article 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty.
GSIS submits that there must be proof of pecuniary loss. This is untenable. The rationale
behind temperate damages is precisely that from the nature of the case, definite proof of pecuniary loss
cannot be offered. When the court is convinced that there has been such loss, the judge is empowered
to calculate moderate damages, rather than let the complainant suffer without redress from the
defendants wrongful act.[35]
The award of twenty thousand pesos (P20,000.00) in temperate damages is reasonable considering that
GSIS spent for the reconstitution of the owners duplicate copy of the title.
Next, the attorneys fees. Attorneys fees which are granted as an item of damages are generally not
recoverable.[36] The award of attorneys fees is the exception rather than the rule and counsels fees are
not to be awarded every time a party wins a suit. The award of attorneys fees demands factual, legal and
equitable justification; its basis cannot be left to speculation or conjecture.[37]
We find no circumstance to justify the award of attorneys fees. We delete the same.
The Fallo
WHEREFORE, we DENY the petition. We AFFIRM the decision of the Court of Appeals in CA-G.R. CV No.
51240 with the MODIFICATION that award of attorneys fees is DELETED. No costs. SO ORDERED.

FIRST DIVISION
G.R. No. L-66123 August 22, 1984
THE MANILA BANKING CORPORATION, petitioner,
vs.
INTERMEDIATE APPELLATE COURT AND WILFREDO J. RIVERA, respondents.
RELOVA, J.:
Appeal from the judgment of the Intermediate Appellate Court in AC-G.R. CV No. 64721, entitled:
Wilfredo J. Rivera, plaintiff-appellee vs. The Manila Banking Corporation, defendant-appellant, which
reads:
WHEREFORE, except as modified in the sense that the award of actual damage in the sum of
P75,000.00 be eliminated and instead the sum of Ten Thousand (P10,000.00) Pesos be
awarded as temperate damage and the reduction of the award of attomey's fees to the sum
of Fifteen Thousand (P15.000.00) Pesos, the decision is affirmed in toto in all other respects.
Costs against the appellant. (page 28, rollo).
Records show that in the morning of July 10, 1975 herein private respondent Wilfredo J. Rivera
deposited with petitioner bank the sum of P80,189.19. In the afternoon of the same day, private
respondent Rivera issued a Manila Banking Corporation Check No. 16756626 in the amount of
P80,000.00 under Current Account No. 6-05350-5 payable to Collins Philippines with whom he had a
business transaction. Thereafter, private respondent's wife received a letter of demand from Collins
Philippines, dated July 15, 1975, saying that
Quite frankly, we are surprised why this has to happen considering our pleasant business
relationship in the past and the representations and commitments you made to us prior to
the issuance of the above check. At any rate, just to be sure, we are redepositing the same
check with the fair warning that if the said check will again be dishonored, we shall close our
business dealings and institute proper action for the protection of our interest. (p. 26, rollo).
His wife immediately informed him in the province about the letter of demand. Upon receipt of the
message, Mr. Rivera complained to the Public Relations Officer of petitioner bank, inviting attention to
the letter received by him from Collins Philippines complaining against the dishonor of his check. The
Public Relations Officer of the bank, upon investigation, found that the money deposited was credited
into another account and that was the reason why the check issued by him could not be encashed upon
presentation.
As a consequence, private respondent claimed that he suffered humiliation and embarrassment due to
the bank's gross negligence. Complaint was filed in court which awarded private respondent damages, as
follows:
1) P75,000.00 as actual damages, to compensate plaintiff for the loss of business and business
opportunities;
76
2) P25,000.00 as moral damages, to compensate plaintiff for the embarrassment, humiliation
and mental anguish suffered;
3) P10,000.00 as exemplary damages;
4) P25,000.00 as and for attorney's fees; and
5) Cost of suit. (pages 25-26, rollo).
On appeal to the Intermediate Appellate Court, the judgment of the trial court was modified in the sense
that
... the award of actual damage in the sum of P75,000.00 be eliminated and instead the sum of
Ten Thousand (P10,000.00) Pesos be awarded as temperate damage and the reduction of the
award of attorney's fees to the sum of Fifteen Thousand (P15,000.00) Pesos, the decision is
affirmed in toto in all other respects. (page 28, rollo).
Upon the foregoing facts, respondent court ruled that
The award for actual damages has no factual basis. How the sum of P75,000.00 in the form of
actual and compensatory damages was arrived at, was not at all shown by any means before
the Court a quo. While actual damages may have been suffered, the law requires that such
damages be proven by facts and figures. Indeed, while the appellee overlooked presenting
adequate proof of actual and compensatory damages. We, however, find and so hold that
there may indeed have been actual damages although the amount thereof was not
established. We merely award the sum of P10,000.00 in the form of temperate damage in
favor of the appellee.
The appellant belittle the negligence of the bank especially so since the appellee's check was
ultimately encashed. The argument is specious. It does not require too much imagination to
visualize the possibility that the appellee could have died right after the deposit was made.
Then the appellee could not have issued the check in question. The appellee could not have
complained to the appellant about his check that was dishonored. The Bank may not have
known about the wrong entry to the irreparable loss of the appellee. Indeed, the appellee is
entitled to temperate damage.
Regarding the award of attorney's fees, we find no reason to disturb it except as to the
amount awarded which We find quite exorbitant and which We accordingly reduce to the
sum of P15,000.00. Appellee is obviously entitled to it. (Art. 2208, New Civil Code)
We, however, find no merit in the challenge against the award for moral and exemplary
damages. The appellant argues that no moral damage should have been awarded because no
court action was taken by Collins Philippines against the appellee for issuing a check that was
dishonored. Moreover, the check was encashed the second time it was presented. This being
so, whatever warning or threat the Collins' letter posed the same was rendered moot and
academic when the check was ultimately honored. We do not agree. When the Collins' letter
(Exhibit "C") was received by the appellee, the latter immediately felt embarrassed and
 77

humiliated. The mere fact that the check was honored afterwards, did not repair the harm
done. It may have only mitigated it.

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

It is the submission of petitioner that (1) there is no evidence on record to support an award of
temperate damages in favor of respondent Rivera; (2) private respondent is not entitled to moral
damages because his credit and business standing was not impaired and he did not suffer serious anxiety
and/or mental anguish; and (3) petitioner should not be made to pay exemplary damages, attorney's
fees and the costs of suit.

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

We agree with petitioner that private respondent is not entitled to moral damages considering that in a
matter of four hours the mistake was rectified and the payee, Collins Philippines, was paid the full
amount of the check. In the case of Singson vs. Bank of Philippine Island, 23 SCRA 1117, the plaintiffs
commenced the action against the bank and its President, Santiago Freixas for damages (P100,000.00 as
moral damages, P20,000.00 as exemplary damages, P20,000.00 as nominal damages, and P10,000.00 for
attorney's fees and expenses of litigation, plus the costs) in consequence of illegal freezing of plaintiff's
account. This Court held that since "the wrong done to the plaintiffs was remedied as soon as the
President of the bank realized the mistake he and his subordinate employee had committed, the Court
finds that an award of nominal damages the amount of which need not be proven in the sum of
P1,000.00, in addition to attorney's fees in the sum of P500.00, would suffice to vindicate plaintiff's
rights."

In the case at bar, temperate or moderate damages are proper not for indemnification of loss suffered
but for the vindication or recognition of a right violated or invaded. Considering the facts of the case
under appeal, the sum of P5,000.00 as temperate or moderate damages would suffice, plus attorney's
fees of P5,000.00.

WHEREFORE, the judgment appealed from is modified in the sense that petitioner bank is hereby
sentenced to pay private respondent Wilfredo J. Rivera the sums of P5,000.00, as temperate or
moderate damages and P5,000.00, as attorney's fees, apart from the costs.

SO ORDERED.

EN BANC
[G.R. No. 149368. April 14, 2004]
PEOPLE OF THE PHILIPPINES, appellee, vs. FRANCISCO DACILLO alias DODOY AND JOSELITO PACOT y
IBARRA (case provisionally dismissed),accused,
FRANCISCO DACILLO alias DODOY, appellant.
DECISION
CORONA, J.:
Before us on automatic review is the decision[1] of the Regional Trial Court of Davao City, Branch
31, in Criminal Case No. 45,283-2000 convicting appellant Francisco Dacillo y Timtimalias Dodoy of the
crime of murder and sentencing him to suffer the penalty of death.
Appellant Dacillo together with Joselito Pacot y Ibarra were indicted for murder in an information
that read:
The undersigned accuses the above-named accused of the crime of Murder, under Art. 248 of the
Revised Penal Code, as amended by R.A. 7659, committed as follows:
That on or about February 6, 2000, in the City of Davao, Philippines, and within the jurisdiction of this
Honorable Court, the above-mentioned accused, conspiring, confederating together and helping one
another, with treachery and evident premeditation, and with intent to kill, willfully, unlawfully and
feloniously attacked, assaulted and stabbed one Rosemarie B. Tallada with a bladed weapon, thereby
inflicting upon the latter mortal wounds which caused her death.
That the commission of the foregoing offense was attended by the aggravating circumstance of abuse of
superior strength.
CONTRARY TO LAW.[2]
The case against appellants co-accused, Joselito Pacot, was provisionally dismissed for lack of
sufficient evidence to identify him with certainty.
Appellant was arraigned on February 21, 2001 and, assisted by counsel, pleaded not guilty. Pre-
trial was conducted on March 1, 2001 and trial ensued thereafter.
To establish appellants guilt, the prosecution presented the following witnesses: Charlita Tallada,
the victims mother; Patricia Turlao, the victims aunt; appellant Dacillos neighbors, Jovelyn Dagmil,
Augusto Cesar Arara, Roche Abregon, Resna Abregon, Allan Castanares, Jupiter Campaner; police officers
SPO2 Rodolfo Taburda and SPO1 Avelino Alcobus, and medico-legal officer Dr. Danilo P. Ledesma.
The facts, as established by the prosecution witnesses collective testimonies, follow.
The victim, seventeen-year-old Rosemarie B. Tallada, was last seen alive at dusk on February 6,
2000, on the bridge near appellants house at Purok No. 3, New Society Village, Ilang, Davao City.
78
Around 7:45 p.m. that evening, witness Jovelyn Dagmil, who was living with her aunt in the house
adjacent to appellants, was looking for her cousin when she saw the victim Rosemarie on the bridge.
Because it was drizzling, she invited Rosemarie inside their house but the latter declined and told her she
was waiting for someone.[3]
After a while, Jovelyn heard a man inside appellants house calling Psst, psst . . . Thinking the call
was meant for her, she turned but instead saw Rosemarie walking towards and entering appellants
house.[4]
Not long after Rosemarie went inside the house, a struggle was heard therein. Witnesses Roche
and Resna Abregon, who were in the adjacent house singing with a karaoke machine, suddenly felt the
floor shaking as if a scuffle was going on at the other side of the wall. The houses were built on stilts
above the seashore, adjoining one another with mere wooden partitions in between. Roche Abregon
peeped through a hole on the wall and saw appellant and another man grappling with a woman who was
gagged with a handkerchief.[5] When Roche saw appellant choking the woman, she informed her aunt
about the commotion in appellants house but the aunt brushed it aside as a simple family quarrel.[6] For
a while they heard the sound of a woman being beaten up. Then everything became quiet. Later that
evening, they saw appellant leaving his house.[7]
The following day, February 7, 2000, at around 8:00 a.m., appellant was seen entering his house
carrying lumber and screen.[8] He was observed going in and out of his house several times, each time
carefully locking the gate as he left.[9] At around 9:00 a.m., appellant was seen with ready-mixed cement
in a plastic pail and, when asked what he was going to do with the cement, replied that it was for the
sink he was constructing.[10]
Later, appellant entrusted a bag of womans personal belongings to barangay tanod Allan
Castaares and told the latter that it belonged to his woman companion. He allegedly could not bring it
home because his wife might see them.[11]
By February 11, 2000, neighbors started smelling the rotten odor of Rosemaries already
decomposing body.[12]
At 5:00 p.m. the same day, witnesses Roche, Resna, and Rachel were gathering seashells under
appellants house when they saw droplets of blood and pus dripping from appellants comfort room. They
immediately reported it to their aunt who in turn instructed her husband to get a stick and poke the
sacks covering the comfort room. However, the husband instead climbed up the house and was greeted
by the stink emanating from the corner where he saw a tomb-like structure. They immediately reported
the matter to barangay officials who called the police.[13]
At about 10:00 p.m., policemen arrived at appellants house, accompanied by his wife, and forcibly
opened the lock. They proceeded to where the tomb was located.
When cracked open, the tomb revealed the decomposing body of a woman.[14]
The corpse was brought to the Rivera Funeral Parlor where it was identified by the victims mother
Charlita Tallada and aunt Patricia Turlao as that of Rosemarie, through the keloid scar on her forearm.
Dr. Danilo Ledesma conducted an autopsy on Rosemaries remains. His necropsy report revealed
that Rosemarie died from a stab wound in the abdomen. The report further disclosed that she suffered
contusions in the anterior chest wall and her right hand; an incised wound on her left middle finger; a
stab wound on the left side of the face and fractures on the 2nd, 3rd, 4th, 5th, 6th and 7th ribs on her side.[15]
Dr. Ledesma testified that the wounds suffered by Rosemarie indicated that she put up a struggle
and the wounds were inflicted before her death.[16]

In his defense, appellant admitted complicity in the crime but minimized his participation.
Appellant alleged that he only held down Rosemaries legs to prevent her from struggling and, after the
latter was killed by another man he identified as Joselito Pacot, he encased the corpse in cement.
He claimed that Pacot, a co-worker at Davao Union Cement Corporation (DUCC), was looking for a
house where he and his girlfriend Rosemarie could spend the night. He offered his brothers house which
was under his care. In the evening of February 6, 2000, he and Joselito Pacot brought Rosemarie to the
house at Purok No. 3, New Society Village, Ilang, Davao City.
After accompanying the couple there, he went home to take supper. Later that evening, he
returned to the house with the bottle of Sprite Pacot had ordered. When he arrived, Pacot and
Rosemarie were already grappling with each other and Pacot was strangling the girl. He told Pacot to
stop but instead of heeding him, the latter ordered him to close the door. Pacot told appellant that he
was going to be implicated just the same so he closed the door as ordered and helped Pacot (hold) the
feet of the woman as her feet kept hitting the walls.[17]
The two men stopped only when Rosemarie was already motionless. Pacot wanted to dump the
body into the sea but appellant told him it was low tide. Appellant then suggested that they entomb the
body in cement for which Pacot gave appellant P500.
Pacot left the house at dawn the following day, February 7, 2000. At past 10:00 a.m., appellant
brought the concrete mixture and cast the dead body in cement. After finishing the job in the afternoon
of that day, appellant reported for work at DUCC.
When the body was discovered in the evening of February 11, 2000, appellant immediately left for
Cebu City, arriving there the next day, February 12, 2000. He stayed in Cebu City until his arrest the
following year.
On May 31, 2001, the trial court rendered judgment finding appellant guilty of murder and
imposed upon him the supreme penalty of death:
WHEREFORE, this Court finds the accused Francisco Dacillo GUILTY beyond reasonable doubt of the
crime of MURDER for the death of Rosemarie Tallada, as defined and penalized under Art. 248 of the
Revised Penal Code, as amended. Considering the aggravating circumstance of recidivism with no
mitigating circumstance to offset the same, he is hereby sentenced to the extreme penalty of DEATH,
He is further ordered to indemnify the heirs of the offended party in the amount of P50,000.00, plus the
sum of P50,000.00 as moral damages, and the sum of P50,000.00 as exemplary damages.
His immediate confinement to the national penitentiary is hereby ordered.
Costs de oficio.
SO ORDERED.[18]
Thus, this automatic review.
In his brief, appellant raises the following errors allegedly committed by the trial court:
I commission of the crime showing that they acted in unison with each other pursuant to a common
79
THE COURT A QUO GRAVELY ERRED IN FINDING THE APPELLANT GUILTY BEYOND REASONABLE DOUBT
OF THE CRIME OF MURDER.
II
THE COURT A QUO GRAVELY ERRED IN AWARDING THE HEIRS OF THE OFFENDED PARTY THE AMOUNT
OF PHP50,000.00, WHICH APPEARS AS PAYMENT FOR ACTUAL DAMAGES.[19]
Appellant admitted that he had a hand in the killing of Rosemarie but attempted to downgrade his
participation in the crime by claiming he only held Rosemaries legs as Pacot was strangulating her. The
rule is that any admission made by a party in the course of the proceedings in the same case does not
require proof to hold him liable therefor. Such admission may be contradicted only by showing that it
was made through palpable mistake or no such admission was in fact made. There was never any such
disclaimer by appellant.
Moreover, despite appellants self-serving, exculpatory statement limiting his involvement in the
crime, all circumstances pointed to his guilt. His declaration faltered in the face of the testimonies of
eyewitnesses positively identifying him as one of the two men who were with Rosemarie when she was
killed. Witness Roche Abregon pointed to appellant as the one who strangled Rosemarie. He was
established to be inside the house at the time the witnesses heard a woman being battered. Thus,
assuming for the sake of argument that Pacot was the mastermind, appellants admission that he
participated in its commission by holding Rosemaries legs made him a principal by direct participation.
Two or more persons taking part in the commission of a crime are considered principals by direct
participation if the following requisites are present:
1. they participated in the criminal resolution and
2. they carried out their plan and personally took part in its execution by acts which directly
tended to the same end.[20]
Both requisites were met in this case. Two or more persons are said to have participated in the
criminal resolution when they were in conspiracy at the time of the commission of the crime. To
establish conspiracy, it is not essential that there be proof of the previous agreement and decision to
commit the crime, it being sufficient that the malefactors acted in concert pursuant to the same
objective.[21]
The prosecution was able to prove appellants participation in the criminal resolve by his own
admission that, right after he was told by Pacot to close the door, he held down Rosemaries legs. He was
pinpointed as the one who throttled the victim. He admitted that they only stopped when they were
sure that Rosemarie was already dead. The two men planned how to dispose of the victims body; it was
in fact appellants idea to pour concrete on the body, prevailing over Pacots suggestion to just dump the
body into the sea. It was appellant himself who encased the body in cement and made sure that there
were no leaks from which foul odor could emanate. He was a conspirator in the killing and, whether or
not he himself did the strangling or the stabbing, he was also liable for the acts of the other accused.
It is well-settled that a person may be convicted for the criminal act of another where, between
them, there is conspiracy or unity of purpose and intention in the commission of the crime
charged.[22] Conspiracy need not be proved by direct evidence of prior agreement on the commission of
the crime as the same can be inferred from the conduct of the accused before, during, and after the
purpose or design.[23]

We are convinced beyond doubt of the joint and concerted effort between appellant and the man
he identified as Pacot in the killing of Rosemarie.
Appellant likewise contends that the trial court erred in ruling that the presence of the
aggravating circumstance of abuse of superior strength qualified the killing to murder. He contends that
the qualifying circumstance of abuse of superior strength was not specifically alleged in the information.
Nothing can be farther from the truth. A cursory reading of the information reveals that appellant was
sufficiently informed of the charges against him, including the use of superior strength in killing the
hapless and defenseless female victim.
The aggravating circumstance of abuse of superior strength necessitates a showing of the relative
disparity in the physical characteristics of the aggressor and the victim such as age, gender, physical size
and strength. We agree with the trial court that the killing of Rosemarie was committed with abuse of
superior strength. As found by the court a quo, two grown-up men against a young fragile woman whose
ability to defend herself had been effectively restrained revealed a shocking inequality of physical
strength. The victim was much weaker in constitution and could not have possibly defended herself from
her stronger assailants.[24] Such disparity was manifest in the contusions in the chest and hands, wounds
on the fingers, a stab wound on the left side of the face and multiple fractures in the ribs of the
victim.[25] The abuse of superior strength was obvious in the way Rosemarie was mercilessly beaten to a
pulp.
The killing of Rosemarie was thus correctly qualified to murder by the abuse of superior strength,
a circumstance specifically pleaded in the information and proved beyond reasonable doubt.
The Court, however, finds that the trial court erred in imposing the death penalty on the ground
that appellant admitted during re-cross examination that he had a prior conviction for the death of his
former live-in partner. The fact that appellant was a recidivist was appreciated by the trial court as a
generic aggravating circumstance which increased the imposable penalty from reclusion perpetua to
death.
In order to appreciate recidivism as an aggravating circumstance, it is necessary to allege it in the
information and to attach certified true copies of the sentences previously meted out to the
accused.[26] This is in accord with Rule 110, Section 8 of the Revised Rules of Criminal Procedure which
states:
SEC. 8. Designation of the offense. - The complaint or information shall state the designation of the
offense given by the statute, aver the acts or omissions constituting the offense, and specify its
qualifying and aggravating circumstances. If there is no designation of the offense, reference shall be
made to the section or subsection of the statute punishing it. (Emphasis supplied)
The aggravating circumstance of recidivism was not alleged in the information and therefore
cannot be appreciated against appellant. Hence the imposable penalty should be reduced to reclusion
perpetua.
Regarding the award of P50,000 as civil indemnity to the heirs of the victim, appellant claims that
said amount was awarded by the trial court as payment for actual damages. This claim is misleading. As
aptly pointed out by the Solicitor General, the amount was granted by the trial court by way of
indemnity ex delicto to compensate for the death of the victim which prevailing jurisprudence fixes
at P50,000.[27] The award of such indemnity requires no proof other than the death of the victim and the
accuseds responsibility therefor.[28]
The award of P50,000 as moral damages is proper, supported as it was by the testimony of
Charlita Tallada, the victims mother, that Rosemaries death caused her immeasurable pain.[29]
80
In addition, the Court awards P25,000 in temperate damages, said amount being awarded in
homicide or murder cases when no evidence of burial and funeral expenses is presented in the trial
court.[30]
With regard to the award of exemplary damages, the Civil Code of the Philippines provides:
ART. 2229. Exemplary or corrective damages are imposed, by way of example of correction for the public
good, in addition to the moral, temperate, liquidated or compensatory damages.
ART. 2230. In criminal offenses, exemplary damages as a part of the civil liability may be imposed when
the crime was committed with one or more aggravating circumstances. Such damages are separate and
distinct from fines and shall be paid to the offended party.
In People vs. Catubig,[31] we explained that:
The term aggravating circumstances used by the Civil Code, the law not having specified otherwise, is to
be understood in its broad or generic sense. The commission of an offense has a two-pronged effect, one
on the public as it breaches the social order and the other upon the private victim as it causes personal
sufferings, each of which is addressed by, respectively, the prescription of heavier punishment for the
accused and by an award of additional damages to the victim. The increase of the penalty or a shift to a
graver felony underscores the exacerbation of the offense by the attendance of aggravating
circumstances, whether ordinary or qualifying, in its commission. Unlike the criminal liability which is
basically a State concern, the award of damages, however, is likewise, if not primarily, intended for the
offended party who suffers thereby. It would make little sense for an award of exemplary damages to be
due the private offended party when the aggravating circumstance is ordinary but to be withheld when it
is qualifying. Withal, the ordinary or qualifying nature of an aggravating circumstance is a distinction that
should only be of consequence to the criminal, rather than to the civil, liability of the offender. In fine,
relative to the civil aspect of the case, an aggravating circumstance, whether ordinary or qualifying,
should entitle the offended party to an award of exemplary damages within the unbridled meaning of
Article 2230 of the Civil Code.
Thus, the award of exemplary damages is warranted under Art. 2230 of the Civil Code in view of
the presence of the aggravating circumstance of abuse of superior strength. Imposition of exemplary
damages is also justified under Art. 2229 of the Civil Code in order to set an example for the public
good.[32] For this purpose, we believe that the amount of P25,000 may be appropriately awarded.
WHEREFORE, the assailed judgment in Criminal Case No. 45,283-2000 of the Regional Trial Court
of Davao City, Branch 31, is hereby AFFIRMED with MODIFICATION. Appellant Francisco Dacillo y
Timtim alias Dodoy is declared guilty beyond reasonable doubt of murder as defined and penalized
under Article 248 of the Revised Penal Code. There being neither aggravating nor mitigating
circumstances, appellant is hereby sentenced to reclusion perpetua and is further ordered to indemnify
the heirs of Rosemarie Tallada the sum of P50,000 as civil indemnity, P50,000 as moral
damages, P25,000 as temperate damages and P25,000 as exemplary damages.
Costs de oficio.
SO ORDERED.
 81

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

ERNESTO GARCES, G.R. No. 173858 The prosecutions version of the incident is as follows:
Petitioner,
Present:
On August 2, 1992, between 8:00 and 9:00 oclock in the evening, AAA was on her way to the chapel
- versus -
when the five accused suddenly appeared and approached her.Rosendo Pacursa covered her mouth with
his hands and told her not to shout or she will be killed. He then brought her inside a nearby tobacco
PEOPLE OF THE PHILIPPINES,
barn while his four companions stood guard outside.[5]
Respondent. Promulgated:
Inside the barn, Pacursa started kissing AAA. Private complainant fought back but to no avail. Thereafter,
July 17, 2007
Pacursa succeeded in having carnal knowledge of her. After a while, they heard people shouting and
x ---------------------------------------------------------------------------------------- x calling the name of AAA. At this point, petitioner Ernesto Garces entered the barn, covered AAAs mouth,
then dragged her outside. He also threatened to kill her if she reports the incident.[6]
DECISION
YNARES-SANTIAGO, J.:
Upon reaching the house of Florentino Garces, petitioner released AAA. Shortly afterwards, AAAs
This Petition for Review on Certiorari assails the Decision[1] dated January 31, 2006 of the Court of relatives found her crying, wearing only one slipper and her hair was disheveled. They brought her home
Appeals which affirmed with modification the Judgment[2] rendered by Branch 1 of the Regional Trial
Court of Bangued, Abra, finding petitioner Ernesto Garces guilty as an accessory to the crime of Forcible but when asked what happened, AAA could not answer because she was in a state of shock. After a
Abduction with Rape. Also assailed is the Resolution[3] dated July 27, 2006 denying petitioners motion for while, she was able to recount the incident.[7]
reconsideration.
Rosendo Pacursa denied that he raped the victim, while his co-accused presented alibis as their defense.
In an Information dated December 10, 1992, Rosendo Pacursa, Senando Garces, Antonio Pira, Jr., Aurelio
Pira, and petitioner Ernesto Garces, were charged with Forcible Abduction with Rape committed as Pacursa testified that he and AAA were sweethearts for almost a year prior to the incident. On the night

follows: of August 2, 1992, he was on his way to the house of Antonio Pira, Jr. to watch a televised basketball
game when he saw AAA. The latter allegedly wanted to have a talk with him so he led her to the tobacco
That on or about the 2nd day of August, 1992, in the evening, at x x x, Province of
Abra, Philippines and within the jurisdiction of this Honorable Court, the said barn about 15 meters away, so that no one might see them. They were alone by the door of the barn
accused, conspiring, confederating and mutually helping one another, with talking, embracing and kissing. They only parted ways when he saw the relatives of AAA. He denied
criminal and carnal intent, with lewd design and by means of force, accused
having sexual intercourse with her. After the incident, he received a letter[8] from AAA asking him to
Rosendo Pacursa, did, then and there, willfully, unlawfully and feloniously, after
covering her mouth, forcibly abduct, pull and take away one AAA while walking to elope.[9]
the church to the tobacco flue-curing barn and while inside the barn lie and
succeeded in having sexual intercourse and carnal knowledge of the offended On the other hand, petitioner, Antonio Pira, Jr., and Aurelio Pira, testified that they were watching a
party; that accused Ernesto Garces later on covered the mouth of AAA and take televised basketball game at the house of Antonio Pira, Jr. at the time the alleged rape transpired. They
her out of the barn; that accused Senando Garces, Antonio Pira, Jr. and Aurelio
denied seeing Pacursa that night.[10]
Pira stand guard outside the barn while Rosendo Pacursa is raping AAA; to the
damage and prejudice of the offended party.

CONTRARY TO LAW with the aggravating circumstances of: (1) uninhabited place,
and (2) nighttime.[4] (Emphasis supplied) After trial on the merits, the trial court rendered its decision finding Pacursa guilty of Forcible Abduction

with Rape while petitioner Garces was found guilty as an accessory to the crime. Antonio Pira, Jr. and
Aurelio Pira were acquitted for insufficiency of evidence.[11]
The dispositive portion of the decision reads:
WHEREFORE, PREMISES CONSIDERED, accused ROSENDO PACURSA and ERNESTO GARCES are
hereby found guilty of the crime of Forcible Abduction With Rape punishable under the
Revised Penal Code committed upon the person of AAA. The other accused ANTONIO PIRA,
JR. and AURELIO PIRA are hereby ACQUITTED as accessory for the crime of Forcible Abduction
With Rape.
ROSENDO PACURSA, the principal accused in this case is hereby sentenced to one
degree lower than that prescribed by law for the offense, for being 16 years old at
the time of the commission of the crime pursuant to Art. 68 of the Revised Penal
Code. Taking into consideration the aggravating circumstances of uninhabited
place and nighttime, he is hereby sentenced to suffer an indeterminate penalty of
11 years of prision mayor as minimum to 18 years of reclusion temporal as
maximum.
Ernesto Garces, being an accessory to the commission of the crime is hereby
penalized two degrees lower than that prescribed by law for the
offense. Accordingly, he is hereby sentenced to suffer an indeterminate penalty of
4 years of prision correccional as minimum to 8 years of prision mayor as
maximum.
Both accused are jointly and solidarily liable to pay the victim the amount
of P50,000.00 as and by way of actual and moral damages plus the cost of this
suit.
SO ORDERED.[12]
Both Pacursa and petitioner appealed the decision with the Court of Appeals. However, Pacursa
subsequently withdrew his appeal.
On January 31, 2006, the Court of Appeals rendered its Decision affirming with modification the decision
of the trial court, thus:
WHEREFORE, premises considered, the appealed Decision convicting
accused ROSENDO PACURSA as principal and accused-appellant ERNESTO
GARCES as accessory of the crime of forcible abduction with rape is AFFIRMED.
82
However, accused-appellant Ernesto Garces sentence is MODIFIED in that he is to
suffer the indeterminate penalty of imprisonment ranging
from FOUR (4) YEARS of prision correccional, as minimum,
to EIGHT (8) YEARS and ONE (1) DAY of prision mayor, as maximum.
SO ORDERED.[13]
Petitioner filed a motion for reconsideration but same was denied. Hence, the instant petition for review
on certiorari.
Petitioner claims that no rape was committed and that there is no evidence to show that he covered the
mouth of the complainant when he brought her out of the barn.
The petition lacks merit.
It has been established that Pacursa forcibly took AAA against her will and by use of force and
intimidation, had carnal knowledge of her. The trial court found complainants testimony to be credible,
consistent and unwavering even during cross-examination.
Regarding the letter she wrote to Pacursa asking him to elope with her, she explained that she felt
uncertain at that time and was trying to avoid the possible trouble or scandal the incident might bring
upon her,[14] which we find plausible. In pursuing the case, she had to transfer to another school because
of the threats of her assailants and their persistence in settling the case. Furthermore, no improper
motive was shown why she would accuse and testify against Pacursa who was her boyfriend, and the
other accused, who are her relatives.[15]
Prosecution witness Grace Liberto likewise corroborated the testimony of complainant when she
testified that she saw the latter crying, wearing only one slipper, and her hair disheveled,[16] immediately
after the incident. The medico-legal findings of Dr. Herminio Venus also showed that there was a
laceration in complainants private parts possibly caused by sexual contact.[17]
Pacursa, however, could not be convicted of the crime of forcible abduction with rape because the crime
committed was only simple rape. Forcible abduction is absorbed in the crime of rape if the real objective
of the accused is to rape the victim.[18] Based on the evidence presented, the accused intended to rape
the victim when he took her to the tobacco barn. Hence, forcible abduction is absorbed in the crime of
rape.[19]

We also note that the trial court failed to make any definitive finding as to the existence of aggravating
circumstances. However, we find that the aggravating circumstances of nighttime and uninhabited place
did not attend the commission of the crime.
Nocturnity is aggravating when it is deliberately sought to prevent the accused from being recognized or
to ensure his unmolested escape.[20] The mere fact that the rape was committed at nighttime does not
make nocturnity an aggravating circumstance.[21] In the instant case, other than the fact that the crime
was committed at night, there is no other evidence that the peculiar advantage of nighttime was
purposely and deliberately sought by the accused.
The aggravating circumstance of uninhabited place cannot likewise be appreciated in the absence of
evidence that the accused actually sought an isolated place to better execute their purpose.[22] The
records do not show that solitude was purposely sought or taken advantage of to facilitate the
commission of the crime.
Although Pacursa has withdrawn his appeal, the Courts ruling that the crime committed is simple rape
and not forcible abduction with rape, shall apply to him. Section 11 (a), Rule 122 of the Rules of Court
specifically provides that an appeal taken by one or more of several accused shall not affect those who
did not appeal, except insofar as the judgment of the appellate court is favorable and applicable to the
latter.
As regards petitioners complicity, his defense of alibi cannot prevail over complainants positive
identification of her assailants. Denial and alibi are inherently weak defenses and constitute self-serving
negative evidence which can not be accorded greater evidentiary weight than the positive declaration of
credible witnesses.[23]
For alibi to prosper, the accused must establish by clear and convincing evidence (a) his presence at
another place at the time of the perpetration of the offense and (b) the physical impossibility of his
presence at the scene of the crime.[24] Petitioner alleged he was watching television at Aurelio Piras
house, which is about 20 meters away from the barn at the time of the incident. However, it will only
take one minute for him to reach the barn from the house.[25] Thus, it was not physically impossible for
him to be at the scene of the crime at the time of its commission.
83
Contrary to petitioners contention, there is proof that petitioner covered AAAs mouth when he dragged
her out of the barn. Complainant executed a sworn statement recounting her harrowing experience
which she identified during her direct examination and offered as Exhibits A, A-1, and A-2[26] for the
prosecution and admitted by the trial court.[27] In her sworn statement, AAA narrated thus:
Q - Will you relate carefully the manner by which Rosendo Pacursa raped you?
A - x x x Then someone came inside the barn, shut-off my mouth, then brought me
out and away southward and when we reach the house of Florentino
Garces he released me and as I walked down the path my uncle
Bartolome Florendo was able to light me with his flashlight
Q - Who was that person who later came inside the barn who brought you out
shutting-off your mouth then took you away southward?
A - Ernesto Garces also from our place, sir.
Q - Why, has Rosendo Pacursa other companions?
A - He has, sir. They are Ernesto Garces, Senando Garces, Antonio Pira, Jr. and
Aurelio Pira.
Q - What did these companions of Rosendo Pacursa do?
A - They stayed outside the barn but it was Ernesto Garces who brought me out,
sir.[28]
Complainants failure to testify during her direct examination that her mouth was covered by petitioner
when she was pulled out of the barn does not preclude resort to her sworn statement to provide the
missing details, since said sworn statement forms part of her testimony. As held in People v. Servano:[29]
Evidence in criminal cases is not limited to the declarations made in open court; it
includes all documents, affidavits or sworn statements of the witnesses, and other
supporting evidence.It comprehends something more than just the mere
testimony of a witness. Thus, when a sworn statement has been formally offered
as evidence, it forms an integral part of the prosecution evidence which should not
be ignored for it complements and completes the testimony on the witness
stand. A sworn statement is a written declaration of facts to which the declarant
has sworn before an officer authorized to administer oaths. This oath vests
credibility and trustworthiness on the document. The fact that a witness fails to
reiterate, during trial, the contents of his sworn statement should not affect his
credibility and render the sworn statement useless and insignificant, as long as it is
presented as evidence in open court. This is not to say, however, that the sworn
statement should be given more probative value than the actual

testimony. Rather, the sworn statement and the open court declarations must be
evaluated and examined together in toto so that a full and thorough
determination of the merits of the case may be achieved. Giving weight to a
witness oral testimony during the trial should not mean being oblivious to the
other pieces of available evidence such as the sworn statement. In like manner,
the court cannot give probative value to the sworn statement to the exclusion of
the oral testimony. In every case, the court should review, assess and weigh the
totality of the evidence presented by the parties. It should not confine itself to oral
testimony during trial. x x x[30]
Petitioner also faults the court a quo in finding that he threatened AAA while leading her out of the
barn. He argues that complainant failed to positively identify the person who issued the threats because
she vaguely referred to said person merely as they.
The contention lacks merit.
The use of the word they in referring to the person who threatened complainant is of no moment. When
the threats were issued, both Pacursa and petitioner were inside the barn; thus, it is logical to conclude
that the threats came from both of them.
Petitioner likewise cannot take refuge in the acquittal of Antonio and Aurelio Pira. Both were acquitted
because there was no evidence to show their participation in the crime. Complainant only testified that
she heard their voices which the trial court considered insufficient. However, in the case of petitioner,
complainant positively identified him as one of the companions of Pacursa who remained outside the
barn and who eventually entered upon noting the presence of AAAs relatives nearby. He thereafter
covered complainants mouth and led her out of the barn. All these circumstances demonstrate
petitioners complicity.
We do not agree, however, that petitioner should be convicted as an accessory to the crime.
It is a settled rule that an appeal in a criminal proceeding throws the whole case open for review and it
becomes the duty of the Court to correct any error in the appealed judgment, whether it is made the
subject of an assignment of error or not. Such an appeal confers upon the appellate court full jurisdiction
and renders it competent to examine the records, revise the judgment appealed from, increase the
penalty and cite the proper provision of the penal law.[31]
84
In finding petitioner guilty as an accessory, the Court of Appeals found that his participation was after or
subsequent to the rape and that his acts were employed as a means of concealing the commission of the
crime and assisting Rosendo to escape.
We find otherwise. The facts show that petitioner participated in the commission of the crime even
before complainant was raped. He was present when Pacursa abducted complainant and when he
brought her to the barn. He positioned himself outside the barn together with the other accused as a
lookout. When he heard the shouts of people looking for complainant, he entered the barn and took
complainant away from Pacursa.
Having known of the criminal design and thereafter acting as a lookout, petitioner is liable as an
accomplice,[32] there being insufficient evidence to prove conspiracy,[33]and not merely as an
accessory. As defined in the Revised Penal Code, accomplices are those who, not being included in
Article 17, cooperate in the execution of the offense by previous or simultaneous acts.[34] The two
elements necessary to hold petitioner liable as an accomplice are present: (1) community of criminal
design, that is, knowing the criminal design of the principal by direct participation, he concurs with the
latter in his purpose; and (2) performance of previous or simultaneous acts that are not indispensable to
the commission of the crime.[35]
The crime committed in the case at bar is simple rape, the penalty for which under the Revised Penal
Code is reclusion perpetua. Since Pacursa was a minor when the crime was committed, the penalty must
be reduced by one degree, to reclusion temporal.[36] Applying the Indeterminate Sentence Law and in the
absence of aggravating and mitigating circumstances, the maximum of the penalty shall be within the
medium range of reclusion temporal, or fourteen (14) years, eight (8) months and one (1) day to
seventeen (17) years and four (4) months. The minimum of the indeterminate penalty shall be within the
range of the penalty next lower in degree, which is prision mayor, ranging from six (6) years and one (1)
day to twelve (12) years.[37]
With respect to petitioner, the penalty imposed upon accomplices in a consummated crime is the
penalty next lower in degree than that prescribed for the felony.[38] Since simple rape is punishable
with reclusion perpetua, the penalty of reclusion temporal should also be imposed on petitioner in its
medium period in the absence of any aggravating or mitigating circumstances. Applying the
Indeterminate Sentence Law, the imposable penalty should range from prision mayor, as minimum,
to reclusion temporal in its medium period, as maximum.
 85

Every person criminally liable for a felony is also civilly liable.[39] If there are two or more persons civilly
liable for a felony, as in this case, the court shall determine the amount for which each must
respond [40] to be enforced in accordance with Article 110 of the Revised Penal Code. Thus, the amount of
damages to be awarded must be apportioned according to the respective responsibilities of the accused
to be paid by them solidarily within their respective class and subsidiarily for the others.[41]
Rosendo Pacursa and Petitioner Ernesto Garces are ORDERED to pay complainant P50,000.00 as civil
indemnity ex delicto. Being an accomplice, petitioner is held solidarily liable with the principal only for
half of the amount or P25,000.00 and their subsidiary liability shall be enforced in accordance with
Article 110 of the Revised Penal Code. Petitioner is likewise ordered to pay complainant P50,000.00 as
moral damages.

Consistent with prevailing jurisprudence, the complainant in rape cases is entitled to an award
of P50,000.00 as civil indemnity ex delicto and another P50,000.00 as moral damages. Civil indemnity ex
SO ORDERED.
delicto is mandatory upon finding of the fact of rape which is distinct from moral damages awarded upon
such finding without need of further proof because it is assumed that a rape victim has actually suffered
moral injuries entitling the victim to such award.[42]

In determining the civil liability of petitioner, a clarification of the trial courts decision is necessary. The
dispositive portion of the trial courts decision held Pacursa and petitioner jointly and solidarily liable to
pay the victim the amount of P50,000.00 as and by way of actual and moral damages plus the cost of
suit. For our purposes, we shall treat the amount of P50,000.00 awarded by the trial court as the civil
indemnity ex delicto for which, as an accomplice, petitioner should be solidarily liable with Pacursa only
for one-half of the said amount, or P25,000.00, and is subsidiarily liable for the other P25,000.00 in case
the principal is found insolvent.[43]

In addition, complainant must be awarded another P50,000.00 as moral damages. However, this
additional award should not apply to Pacursa who has withdrawn his appeal as the same is not favorable
to him.[44] Hence, the additional monetary award can only be imposed upon petitioner who pursued the
present appeal.[45]

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals finding Rosendo Pacursa guilty
as principal by direct participation, and petitioner Ernesto Garces as an accessory, to the crime of
Forcible Abduction with Rape, is MODIFIED. Accused Rosendo Pacursa is found GUILTY beyond
reasonable doubt of the crime of RAPE, and being a minor at the time the crime was committed, is
sentenced to suffer an indeterminate penalty ranging from eight (8) years and one (1) day of prision
mayor, as minimum, to 15 years of reclusion temporal, as maximum. Petitioner Ernesto Garces is found
guilty as an accomplice to the crime of rape, and is also sentenced to suffer an indeterminate penalty
ranging from eight (8) years and one (1) day of prision mayor, as minimum, to 15 years of reclusion
temporal, as maximum.
 86

THIRD DIVISION
When arraigned, appellant, with the assistance of counsel de oficio, pleaded NOT GUILTY to
the crime charged. Accordingly, trial on the merits ensued.
PEOPLE OF THE PHILIPPINES, G.R. No. 181632

The prosecution presented the following witnesses: (1) Leonisa Cosiero (Leonisa), wife of the deceased-
Plaintiff-Appellee, Promulgated:
victim; (2) Mailene Cosiero (Mailene), daughter of the deceased-victim; and (3) Atty. Alex Cabornay
- versus - September 25, 2008 (Atty. Cabornay), a Senior Investigation Agent of the NBI, Cagayan de Oro City.

JESSIE BALLESTA,
Leonisa testified that at about 6:30 in the evening of 19 April 1997, her husband, Quadrito Cosiero, the
Accused-Appellant. deceased victim, was inside their family-owned store located at the New Public Market, Don Carlos,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Bukidnon, transacting with a customer. As their store usually closed at 6:30 in the evening, she, their

DECISION children and sales personnel were already outside the store waiting for her husband to signal their
CHICO-NAZARIO, J.: departure. A few minutes thereafter, her husband went out of their store and said Let us go. He then
proceeded towards the drivers seat of their pick-up truck which was parked just outside their
This is an appeal from the Decision[1] dated 28 September 2007 of the Court of Appeals in CA-G.R. CR-HC
store. Leonisa also walked towards the front passenger seat of their pick-up truck. However, before she
No. 00121, which affirmed with modification the Decision,[2] dated 18 January 2000 of the Regional Trial
could even reach the front passenger seat of the said vehicle, she heard a gunshot coming from the
Court (RTC), 10th Judicial Region, Branch 8, Malaybalay City, convicting the appellant Jessie Ballesta of the
other side of their vehicle. Out of fear, she immediately opened the door of the pick up, sat on the front
crime of murder and sentencing him to suffer the penalty of reclusion perpetua.
passenger seat and turned to the drivers seat to look for her husband, but she did not find him
there. Hastily, the appellant pulled her out of the vehicle causing her to stagger and fall. She stood up
A criminal Complaint[3] charging Raul Colongan, John Doe and Peter Doe with the crime of murder was
and ran towards the pharmacy where her children were. The appellant then sat in the front passenger
filed before the Municipal Circuit Trial Court (MCTC), Don Carlos, Bukidnon, for preliminary
seat of the deceased-victims pick-up truck and searched the compartment of the same. Failing to find
investigation. Further investigation conducted by the National Bureau of Investigation (NBI), Cagayan de
anything, the appellant ran away from the scene.[7]
Oro City, resulted, however, in certain significant discoveries such that after preliminary investigation,
the MCTC issued an Order[4] dropping Raul Colongan from the Complaint. Instead, it ordered the
Shortly thereafter, Leonisa saw her blooded husband on the ground, and she shouted for help. Her
inclusion of the appellant as one of the accused therein.
husband was boarded into a tricycle and brought to Simbolan Hospital, Don Carlos, Bukidnon, where he
died.[8] The cause of her husbands death was cardio-respiratory arrest secondary to intracranial
Resultantly, appellant was charged with the crime of murder in an Information,[5] the accusatory portion
hemorrhage due to gunshot wound sustained at theocciput, right to supraorbital bone within the area of
of which reads:
the left eye, nasal side.[9]
That on or about the 19th day of April 1997, in the evening, particularly at New Market,
Poblacion, [M]unicipality of Don Carlos, [P]rovince of Bukidnon, Philippines and
Mailene corroborated the testimony of her mother in all aspects, particularly as regards the identity of
within the jurisdiction of this Honorable Court, the above-named [appellant]
together with two other persons whose identities are not yet known, conspiring, the appellant. She stated that at about 6:30 in the evening of 19 April 1997, while she was playing with
confederating and mutually helping one another, with intent to kill by means of her siblings in front of their store which was adjacent to a pharmacy, she saw the appellant scouring
treachery, evidence (sic) premeditation and abuse of superior strength with the
their displayed rice for sale. She disclosed that it was also the appellant who pulled her mother out of
use of firearm with which they were conveniently provided, did then and there
willfully, unlawfully and criminally attack, assault and shoot QUADRITO COSIERO, their pick-up truck. She then saw the appellant sit in the front passenger seat. Afterwards, the appellant
mortally wounding the latter which injury caused the death of QUADRITO COSIERO searched the compartment of their vehicle. Thereafter, she did not see where the appellant went.[10]
to the damage and prejudice of the legal heirs of (sic) QUADRITO COSIERO in such
amount as may be allowed by law.[6]

Atty. Cabornay stated that it was the police officers of Don Carlos, Bukidnon, who made the initial
investigation regarding the killing of Quadrito Cosiero. The initial investigation disclosed that it was a
certain Raul Colongan who shot the victim. When the case was forwarded to their office, Raul Colongan
was already in their custody, so they immediately forwarded the records to the MCTC for preliminary
investigation. In the course of a follow-up investigation, it turned out that it was the appellant and not
Raul Colongan who was positively identified by the wife and the daughter of the deceased victim as the
person present at the crime scene. Considering that the case was already forwarded to the MCTC for
preliminary investigation, Atty. Cabornay then moved for the incorporation of the name of the appellant
as one of the suspects in the killing of Quadrito Cosiero. The MCTC acted on his motion and ordered the
filing of an amended complaint so as to include the name of the appellant as one of the suspects therein
and the dropping of the name of Raul Colongan, as there was no iota of evidence that could be used as
basis to implicate him as among the perpetrators in the killing of the victim.[11] In compliance therewith,
he filed an amended complaint incorporating the name of the appellant as one of the suspects therein
and thereby removed the name of Raul Colongan.[12]
For its part, the defense presented the lone testimony of the appellant who interposed the defense of
alibi.
The appellant claimed that at about 6:30 in the evening of 18 April 1997, he was at his house in
Pinamaloy, Don Carlos, Bukidnon. Thereafter, his wife called his attention because there were three
persons, whom he later identified as Edon, Alias Abu and Alias Makung, all from Maguindanao, looking
for Joel Bacalso (Joel), his kumpare. He then accompanied the three to Joels house. After dinner, he and
Joel accompanied the three visitors to the house of his aunt, where the three visitors slept for the
night.[13]
The next day, or on 19 April 1997, immediately after he woke up, he went to the house of his aunt and
found Joel talking to the three visitors. One of the visitors told him that they were going to kidnap a
person named Joe Caring from Don Carlos, Bukidnon, and that he and Joel would only need to point to
them Joe Caring and the two of them would be given one million pesos. They immediately proceeded
to Joe Carings house at Don Carlos, Bukidnon. Upon arrival thereat, appellant inquired as to the
whereabouts of Joe Caring, but he was told that Joe Caring went to Cagayan de Oro City.[14] After
learning that their intended victim was out of town, the three visitors planned to kidnap just anyone
else, considering that they had already used all their supplies in going to Don Carlos, Bukidnon.[15] The
appellant then told Joel that he would go ahead to the New Market, Don Carlos, Bukidnon, where he
worked as a dispatcher of Speed Zone buses. He stayed there until 5:00 p.m. Thereafter, he went to the
87
place of a certain Paalam to eat. Then, he proceeded to the billiard hall near the place of Paalam. Upon
his arrival at the billiard hall, he was called by a police officer and was asked to slaughter the latters
pig. Later, he went to the new market site to pay his debt. While on his way there, Eddie Acop and Tatay
Polgo invited him for a drink. After a few minutes, he left and looked for a ride going to the new
market. Again, he was called by a friend for a drink at the Lily Palomares store. It was already about 6:45
p.m. or 7:00 p.m. at that time. While drinking thereat, he heard a commotion outside the store. After a
short while, he learned that Quadrito Cosiero was robbed and shot.[16]
On his way home, Joel informed him that the three visitors from Maguindanao were the persons who
shot Quadrito Cosiero. Joel likewise requested that he and the three visitors be accompanied by the
appellant to the highway to wait for a bus as the three visitors were already leaving to which appellant
acceded.[17]
The appellant similarly alleged that from 6 October 1997 until 16 November 1997, he stayed
in Bohol because his maternal grandmother died. When he returned home, he was arrested by the NBI
at the port of Cagayan de Oro City for the death of the victim.[18]
On 18 January 2000, the trial court rendered its Decision finding the appellant guilty beyond reasonable
doubt of the crime charged, the dispositive portion of which is quoted as follows:
WHEREFORE, judgment is entered finding [appellant] Jessie Ballesta GUILTY of the crime of
murder as charged. He is hereby sentenced to suffer the penalty of reclusion perpetua and to
indemnify the heirs of his victim Quadrito Cosiero the sum of P50,000.00 and moral damages
of P30,000.00.[19]
The records of this case were originally transmitted to this Court on appeal. Pursuant to People v.
Mateo,[20] the records were transferred to the Court of Appeals for appropriate action and disposition.
In his brief, appellant raises the following errors, viz:
I. THE TRIAL COURT ERRED IN NOT FINDING THAT THE POSITIVE
IDENTIFICATION OF THE [APPELLANT] BY THE PROSECUTION
WITNESSES WAS A PRODUCT OF AN AFTERTHOUGHT.
II. THE TRIAL COURT ERRED IN REJECTING [APPELLANTS] DEFENSE OF
ALIBI.
III. ASSUMING ARGUENDO, THAT THE APPELLANT CONSPIRED WITH THE
KILLER OF THE VICTIM, THE TRIAL COURT ERRED IN CONVICTING THE
[APPELLANT] OF MURDER DESPITE THE INSUFFICIENCY OF EVIDENCE TO
 88

PROVE THAT THE KILLING WAS ATTENDED BY THE QUALIFYING

somebody saw Raul Colongan shoot her husband. She was sure, though, that she did not see him at the
CIRCUMSTANCE OF TREACHERY.[21]
crime scene.

On 28 September 2007, the Court of Appeals rendered its Decision affirming with modification the
Upon the other hand, the records revealed that during further investigation conducted by the NBI, the
Decision of the trial court, the decretal portion of which reads:
wife of the deceased victim categorically and repeatedly stated that she saw the appellant at the crime
WHEREFORE, the appeal is DENIED. The Decision of the RTC is hereby AFFIRMED, but with scene right after she heard the gunshot. She maintained that the person who pulled her out of their
the MODIFICATION that [appellant] Jessie Ballesta is liable only as an
pick-up truck was the appellant himself. This statement was corroborated by her daughter, who
ACCOMPLICE, and not as a principal, to the crime of Murder. His sentence is
therefore REDUCED to 12 years of prision mayor as minimum, to 17 years and 4 disclosed that the very person whom she saw scouring their displayed rice for sale was the same
months of reclusion temporal as maximum. Moreover, while the award person who pulled her mother out of their vehicle and thereafter searched the compartment thereof.
of P50,000.00 as indemnity for the death of the victim is also affirmed, the award
of moral damages is hereby increased to P50,000.00.[22]
It bears emphasis that the pictures of the appellant shown to the daughter of the victim show that the
appellant posed with four to five other persons. Upon being shown the pictures, she directly and
The appellant is before this Court seeking a reversal of his conviction.
unhesitatingly pointed to the appellant as the person who scoured their displayed rice for sale, and as
The appellant contends that the failure of Leonisa, the wife of the deceased victim, to mention his name the one who pulled her mother out of the vehicle.These circumstances led to the amendment of the
as the person who pulled her from the inside of the pick-up truck when she was investigated by the complaint for murder by dropping Raul Colongan as one of the suspects and including the name of the
police, as well as during preliminary investigation, makes her testimony before the court a appellant in his stead.
quo doubtful. In the same way, Mailene, the daughter of the victim, had not properly and positively
Also, during the testimony of the wife and the daughter of the victim before the trial court, they similarly
identified him during the investigation as he was only identified by Mailene through the pictures
identified positively the appellant as the person whom they actually saw at the crime scene immediately
furnished by the NBI, which pictures were taken from his house. Thus, he should be acquitted of the
after the gunshot. As found by both lower courts, the testimonies of the wife and the daughter of the
crime charged as his positive identification by the prosecution witnesses was a product of an
victim as regards the identity of the appellant were categorical, consistent and candid. Thus, this Court
afterthought.
cannot cast any doubt on the credibility of the said witnesses. Here we quote the testimonies of the wife
Appellant further argues that the trial court erred in rejecting his defense of alibi because it was clearly and the daughter of the victim:
established that during the killing of the deceased victim, he was somewhere else.
Direct testimony of the victims wife:

Finally, appellant claims that assuming arguendo that he conspired in the killing of the deceased victim, Q: And were you able to reach the seat at the front seat?
treachery should not be appreciated as a qualifying circumstance to change the crime committed to
A: Before I reached, there was a gun burst.
murder. He alleges that there was no direct proof that treachery was employed to insure the execution
of the crime, as none of the prosecution witnesses saw how the deceased victim was shot. Q: And what did you do when you heard the shot?

A: I opened the door of the pick-up and sat down.

Originally, the appellant was not considered as a suspect because the result of the initial investigation
conducted by the police officers of Don Carlos, Bukidnon, pointed to a certain Raul Colongan as the Q: And what happened next?
person who shot the victim. It appears, however, that the wife of the victim mentioned the name of Raul
A: When I sat down, I looked at where my husband was supposed to be, but I did not find
Colongan in her affidavit only because of the information given to her by the police officers that him.
 89

Q: And after that, what happened next? A: Yes.

A: After turning to look for my husband, there was a person who pulled me strongly which Q: What was he doing, if you know?
caused me to stagger and fell down.
A: He was scouring the displayed rice for sale.
Q: And when you fell, what happened?
Q: Can you still recall his face even until this moment?
A: I immediately stood up and stood beside the post near our store and then ran towards the
pharmacy near our store. A: Yes.

Q: You said you were pulled by a man which caused you to stagger and fell and you said you Q: You said awhile ago that you identified that person scouring rice at the place where the
were able to hold a post near the store, do you know who this person who pulled you? rice situated on that particular date, [19 April 1997], at 6:30 oclock in the evening, if that
fellow is around within the four corners of this sala of the Honorable Court, will you please
A: Yes. point to him?

Q: Will you please look and at present you said you know, if he is around could you identify A: (Witness is pointing to a person inside the courtroom who has already identified himself as
him? Dioscoro Ballesta).[25]

Q: By pointing your finger to anybody here, please tell who that person who pulled you out of
Based on the foregoing, it cannot be said that the positive identification of the appellant was a product
the vehicle?
of an afterthought.
A: (Witness is pointing to a person inside the courtroom who identifies himself as Dioscoro
Ballesta).[23] It is well-entrenched that the findings of the trial court on the credibility of witness deserve great weight,
given the clear advantage of a trial judge in the appreciation of testimonial evidence. We have
Q: Do you know his name?
recognized that the trial court is in the best position to assess the credibility of witnesses and their
A: Yes.
testimonies because of their unique opportunity to observe the witnesses first-hand; and to note their

Q: Who (sic) is his name? demeanor, conduct and attitude under grueling examination. These are significant factors in evaluating
the sincerity of witnesses, in the process of unearthing the truth.[26] The rule finds an even more
A: I know him to be Jessie Ballesta.[24]
stringent application where the said findings are sustained by the Court of Appeals.[27] Thus, except for
Direct testimony of the victims daughter: compelling reasons, we are doctrinally bound by the trial courts assessment of the credibility of
witnesses.[28] In this case, there was no cogent reason to deviate from the findings of both lower courts.
Q: Now, at 6:30 oclock in the evening, you said that was the usual time that your business
closes, where was your mother located at that precise time, 6:30 in the evening?
Moreover, there was no indication that the wife and the daughter of the deceased victim were
A: Outside our store. improperly motivated when they testified against the appellant. As a rule, absent any evidence showing

Q: How about your father, where was he? any reason or motive for prosecution witnesses to perjure, the logical conclusion is that no such
improper motive exists, and their testimonies are thus worthy of full faith and credit.[29] Leonisa was the
A: He was inside the store.
wife of the deceased victim while Mailene was his daughter; thus, it would be unnatural for them,

Q: Now, at a particular time before your store close few minutes before your store, can you being relatives and interested in vindicating the crime, to implicate someone other than the real
recall if there was somebody who was standing near the place where you were selling your culprit, lest the guilty go unpunished. The earnest desire to seek justice for a dead kin is not served
rice?
should the witness abandon his conscience and prudence, and blame one who is innocent of the

crime.[30] In this case, Leonisa and Mailenes act of testifying against the appellant was motivated only
by no other motive than their strong desire to seek justice for what had happened to the deceased
victim.
To at least downgrade the crime charged against him, the appellant argues that the qualifying
circumstance of treachery was not sufficiently proven by the prosecution.
It is settled that treachery cannot be presumed, but must be proved by clear and convincing evidence as
conclusively as the killing itself. To appreciate treachery, two (2) conditions must be present, namely, (a)
the employment of means of execution that give the person attacked no opportunity to defend himself
or retaliate, and (b) the means of execution were deliberately or consciously adopted. This Court has
also previously held that where treachery is alleged, the manner of attack must be proven. Where no
particulars are shown as to the manner in which the aggression was made or how the act which resulted
in the death of the deceased began and developed, treachery cannot be appreciated as a qualifying
circumstance. [31]
In the instant case, treachery cannot be appreciated, considering that the wife and the daughter of the
victim did not see the initial stage and particulars of the attack on the victim.This Court has held that
where all indicia tend to support the conclusion that the attack was sudden and unexpected, but there
are no precise data on this point, treachery cannot be taken into account. Treachery cannot be
established from mere suppositions, drawn from the circumstances prior to the moment of the
aggression, that the accused perpetrated the killing with treachery. When the witnesses did not see how
the attack was carried out and cannot testify on how it began, the trial court cannot presume from the
circumstances of the case that there was treachery. Circumstances which qualify criminal responsibility
cannot rest on mere conjectures, no matter how reasonable or probable, but must be based on facts of
unquestionable existence.[32]
The Information also alleged that evident premeditation and abuse of superior strength attended the
killing.
For evident premeditation to be appreciated, the following elements must be established: (1) the time
when the accused decided to commit the crime; (2) an overt act manifestly indicating that he has clung
to his determination; and (3) sufficient lapse of time between decision and execution to allow the
accused to reflect upon the consequences of his act.[33] Like any other circumstance that qualifies a killing
as murder, evident premeditation must be established by clear and positive proof; that is, by proof
90
beyond reasonable doubt.[34] The essence of premeditation is that the execution of the criminal act was
preceded by cool thought and reflection upon the resolution to carry out the criminal intent during a
space of time sufficient to arrive at a calm judgment.[35]
In this case, the prosecution failed to show the presence of any of these elements. The record is bereft of
any evidence to show evident premeditation. It was not shown that the appellant and his two other co-
accused, who remain at large, meditated and reflected upon their decision to kill the victim. Likewise,
there is a dearth of evidence that the appellant, as well as his two co-accused, persisted in their plan to
kill the victim. As this Court has repeatedly held, the premeditation to kill must be plain, notorious and
sufficiently proven by evidence of outward acts showing the intent to kill.[36] In the absence of clear and
positive evidence, mere presumptions and inferences of evident premeditation, no matter how logical
and probable, are insufficient.[37]
The qualifying circumstance of abuse of superior strength cannot also be appreciated. This aggravating
circumstance is present when the aggressors purposely use excessive force out of proportion to the
means of defense available to the person attacked.[38] In this case, however, the prosecution failed to
prove that the appellant purposely used an excessive force in attacking the victim, considering that the
prosecution witnesses did not actually see how the victim was shot.
Absent the qualifying circumstances of treachery, evident premeditation and abuse of superior strength,
the appellant could only be liable for homicide.
We now proceed to determine the liability of the appellant.
This Court agrees with the appellate court that the appellant can only be held liable as an
accomplice. As the appellate court observed, there was lack of sufficient evidence of conspiracy between
the appellant and the three visitors, such that doubt could not be removed as to whether the appellant
was a principal in the killing of the victim.As found by the Court of Appeals, a closely-[knit] connection
existed between the events such that [appellants] previous and simultaneous acts were not isolated
from the [killing of the victim]. He positioned himself in front of the store, possibly to act as a lookout,
but in any case ready to enter the truck to search and rob items inside. There could be no other
conclusion that [appellant] knew of the criminal design of the perpetrators, and that he assented to, and
cooperated in the accomplishment of the crime.[39] However, the testimonies and evidence of the
prosecution were not sufficient to prove with moral certainty appellants participation as principal in the
killing of the victim.
 91

There is also lack of sufficient evidence of conspiracy between the appellant and the three the crime. More so, such defense of alibi interposed by the appellant becomes weaker because it is
visitors. Conspiracy exists when two or more persons come to an agreement concerning the commission uncorroborated. Despite the fact that he mentioned several people in his testimony, he never presented
of a felony and decide to commit it. It may be deduced from the manner in which the offense is any of those people to testify on his behalf. In view of our finding that the prosecution witnesses have
committed, as when the accused acted in concert to achieve the same objective. In order to hold an no motive to falsely testify against the appellant, the defense of alibi, in this case uncorroborated by
accused liable as co-principal by reason of conspiracy, he must be shown to have performed an overt act other witnesses, should be completely disregarded.
in pursuance or in furtherance of conspiracy. The overt act may consist of active participation in the
All told, the appellant is guilty as an accomplice in the crime of homicide. Under Article 249 of the
actual commission of the crime itself or moral assistance to co-conspirators by exerting moral
Revised Penal Code, as amended, the penalty imposed for the crime of homicide is reclusion
ascendancy over them by moving them to execute or implement the conspiracy. Mere presence at the
temporal. Since appellant is only an accomplice, the imposable penalty is one degree lower than that
scene of the incident, knowledge of the plan and acquiescence thereto are not sufficient grounds to hold
imposable for the principal, i.e., prision mayor. There being neither aggravating nor mitigating
a person liable as a conspirator.[40] As testified to by the daughter of the victim, the appellant was not
circumstances, the said penalty shall be imposed in its medium period.[46] Applying the Indeterminate
actually seen to have shot the victim, as he was only seen pulling her mother out of the vehicle
Sentence Law, appellant is accordingly sentenced to suffer the prison term of 4 years, 2 months and 1
immediately after the shooting incident. Lacking sufficient evidence of conspiracy and there being doubt
day of prision correccional, as minimum, to 8 years and 1 day of prision mayor, as maximum.
as to whether appellant acted as a principal or just a mere accomplice, the doubt should be resolved in
his favor and is thus held liable only as an accomplice.[41]
We now go to the award of damages. When death occurs due to a crime, the following damages may be
awarded: (1) civil indemnity ex delicto for the death of the victim; (2) actual or compensatory damages;
The failure of the prosecution to prove the existence of conspiracy does not eliminate any criminal
(3) moral damages; (4) exemplary damages; and (5) temperate damages.[47]
liability on the part of the appellant. Although he cannot be convicted as a co-principal by reason of the
conspiracy, he can still be liable as an accomplice. Where the quantum of proof required to establish
Civil indemnity is mandatory and granted to the heirs of the victim without need of proof other than the
conspiracy is lacking, the doubt created as to whether the appellant acted as principal or as accomplice
commission of the crime.[48] We affirm the award of civil indemnity given by the trial court and the Court
will always be resolved in favor of the milder form of criminal liability - that of a mere
of Appeals. Under prevailing jurisprudence,[49] the award of P50,000.00 to the heirs of the victim as civil
accomplice.[42] Thus, it is only proper to hold the appellant guilty as an accomplice of the crime of
indemnity is proper.
homicide.
As to actual damages, the heirs of the victim are not entitled thereto, because said damages were not
The appellant interposed the defense of alibi as a futile attempt to exonerate himself from the crime
duly proved with reasonable degree of certainty.[50] Similarly, the heirs of the victim are not entitled to
charged. Settled is the principle that alibi is one of the weakest defenses that can be resorted to by an
exemplary damages in the amount of P25,000.00, since the qualifying circumstance of treachery was not
accused, not only because it is inherently weak and unreliable, but also because it can be easily
properly established.[51]
fabricated.[43] Unless substantiated by clear and convincing proof, such defense is negative, self-serving,
and undeserving of any weight in law.[44] For alibi to succeed as a defense, the accused must establish by Anent moral damages, the same is mandatory in cases of murder and homicide, without need of
clear and convincing evidence (a) his presence at another place at the time of the perpetration of the allegation and proof other than the death of the victim.[52] The award ofP50,000.00 as moral damages is
offense and (b) the physical impossibility of his presence at the scene of the crime. [45] likewise in order.

In the case at bar, the appellant insists that at the time of the shooting incident, he was at the Lily The award of P25,000.00 as temperate damages in homicide or murder cases is proper when no
Palomares store at the new market drinking with a friend. The appellant failed to notice that the evidence of burial and funeral expenses is presented in the trial court.[53]Under Article 2224 of the Civil
shooting incident also happened in the new market, the very same place where he was at the time of the Code, temperate damages may be recovered, as it cannot be denied that the heirs of the victim suffered
shooting incident. Thus, it was not physically impossible for the appellant to be present at the scene of
 92

pecuniary loss although the exact amount was not proved.[54] Thus, this Court similarly
awards P25,000.00 as temperate damages to the heirs of the deceased victim.

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

SO ORDERED.

THIRD DIVISION
EMPIRE EAST LAND HOLDINGS, INC., G.R. No. 168074
Petitioner,
Promulgated:
- versus -
September 26, 2008
CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC.,
Respondent.
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of the Court of
Appeals (CA) Decision[1] dated November 3, 2004 and its Resolution[2]dated May 10, 2005, in CA-G.R. SP
No. 58980. The assailed decision modified the Decision[3] of the Construction Industry Arbitration
Commission (CIAC) dated May 16, 2000in CIAC No. 39-99.
The facts of the case, as found by the CIAC and affirmed by the CA, follow:
On February 12, 1997, petitioner Empire East Land Holdings, Inc. and respondent Capitol Industrial
Corporation Groups, Inc. entered into a Construction Agreement[4]whereby the latter bound itself to
undertake the complete supply and installation of the building shell wet construction of the formers
building known as Gilmore Heights Phase I, located at Gilmore cor. Castilla St., San Juan, Metro
Manila.[5] The pertinent portion of the aforesaid agreement is quoted hereunder for easy reference:
ARTICLE II - SCOPE OF WORK
2.1. The CONTRACTOR shall complete the civil/structural and masonry works of
the building based on the works (sic) items covered by the CONTRACTORs
Proposal of Complete Supply and Installation of Building Shell Wet Construction
Works as indicated in the plans and specifications at the Contract Price and
within the Contract time herein stipulated and in accordance with the plans and
specifications. The CONTRACTOR shall furnish and supply all necessary labor,
93
equipment and tools, supervision and other facilities needed and shall perform
everything necessary for the complete and successful masonry works of the
building described hereof, provided that it pertains to or is part of the above
mentioned work or items covered by the Contract documents.
2.2. The scope of works as stated hereunder but not limited to the following:
a) CONCRETE WORKS foundation and footings, tie beams, walls, columns, beams,
girders, slabs, stairs, stair slabs, cement floor topping, ramps, rubbed concrete.
b) MASONRY WORKS interior and exterior walls including stiffeners, CHB laying,
interior and exterior plastering, non-skid tile installation and scratch coating for
tile installation.
c) FORMWORKS
d) OTHER CONCRETE WORKS trenches, platform for transformers, ger sets and
aircons
e) METAL WORKS trench grating, I-beam separator, manhole cover, ladder rungs
of tanks, stair railings and stair nosing
f) MISCELLANEOUS WORKS
- installation of Doors and Jambs (metal and wood)
- Lintel Beams/Stiffener Columns
- Installation of Hardwares and accessories
- Window and Door Openings
g) MISCELLANEOUS ITEMS column guard, wheel guard, waterstop, vapor barrier,
incidental embeds, floor hardener, dustproofer, sealant, soil treatment, elevator
block-outs for call button, block-outs for electro-mechanical works and concrete
landing sills.
h) ROOFING WORKS Steel Trusses/Purlins, Rib Type pre-painted roofing sheets,
Insulation
i) Garbage Chutes
2.3. The work of the CONTRACTOR shall include but not be limited to, preparing
the bill of materials, canvassing of prices, requisition of materials for purchase by
OWNER, following up of orders, checking the quality and quantity of the materials
within the premises of the construction site and returning defective materials.[6]

Respondent further agreed that the construction work would be completed within 330 calendar days
from Day 1, upon the Construction Managers confirmation.[7] Petitioner initially considered February 20,
1997 as Day 1 of the project. However, when respondent entered the project site, it could not start work
due to the on-going bulk excavation by another contractor. Respondent thus asked petitioner to move
Day 1 to a later date, when the bulk excavation contractor would have completely turned over the
site.[8]
After a series of correspondence between petitioner and respondent, February 25, 1997 was proposed
as Day 1. Accordingly, respondents completion date of the project was fixed on January 21, 1998.[9]
Prior to and during the construction period, changes in circumstances arose, prompting the parties to
make adjustments in the initial terms of their contract. The following pertinent changes were mutually
agreed upon by the parties:
First, as the bulk excavation contractor refused to return to the project site,
petitioner directed respondent to continue the excavation work;[10]
Second, in addition to respondents scope of work, it was made to perform side
trimmings.
Third, petitioner directed respondent to reduce the monthly target
accomplishment to P1 million worth of work and up to one (1) floor only.[11]
Fourth, the following were deleted from respondents scope of work: a) Masonry
works and all related items from 6th floor to roof deck; b) All exterior masonry
works from 4th floor to roof deck; and c) Garbage chute.[12]
Fifth, as a consequence of the deletion of the above works, the contract price was
reduced to P62,828,826.53.[13]
Sixth, the parties agreed: that the items of work or any part thereof not completed
by the respondent as of February 28, 1999 should be deleted from its contract,
except demobilization;the punch list items under respondents scope of
responsibility not yet made good/corrected as of the same period shall be done by
others at a fixed cost to be agreed upon by all concerned; and respondent should
be compensated for the cost of utilities it installed but were still needed by other
contractors to complete their work.[14]
Lastly, they agreed that a joint quantification should be done to establish the
bottom line figures as to what were to be deleted from the respondents contract
and the cost of completing the punch list items which were deductible from
respondents receivables.[15]
94
In view of the limitation on the target accomplishment to P1 million worth of work per month,
respondent asked that the topping-off be moved to February 1999.Respondent likewise requested a
price adjustment with respect to overhead and equipment expenses and legislated additional labor
cost. These requests were not, however, acted upon by petitioner.[16]
After the completion of the side trimmings and excavation of the buildings foundation, respondent
demanded the payment of P2,248,507.70 and P1,805,225.90, respectively. Instead of paying the
amount, petitioner agreed with the respondent on a negotiated amount of P900,000.00 for side
trimmings.[17] However, respondents claim for foundation excavation was not acted upon.[18] During the
construction period, petitioner granted, on separate occasions, respondents requests for payroll and
material accommodations.[19]
On March 13, 1999, respondent submitted its final billing, amounting to P4,442,430.90 representing its
work accomplishment and retention, less all deductions. On March 23, 1999, a punch list was drawn as a
result of the joint inspection undertaken by the parties. Petitioner, on the other hand, refused to issue a
certificate of completion. It, instead, sent a letter to respondent informing the latter that it was already
in default.[20]
On September 14, 1999, respondent was constrained to file a Request for Adjudication[21] with the
CIAC. Respondent specifically prayed, thus:
WHEREFORE, premises considered, the Claimant-Contractor prays that this
Honorable Commission render judgment against Respondent-Owner EMPIRE EAST
LAND HOLDINGS, INC., ordering said Respondents to pay the Claimant the amount
of PhP22,770,976.66 plus costs of suit, broken down as follows:
a. PhP4,442,430.90 as unpaid amount from the contract
price;
b. PhP3,153,733.60 as the amount remaining unpaid for
additional works;
c. PhP13,976,427.00 as overhead expenses; and
d. PhP1,198,385.16 as additional costs due to wage
escalation;
Other reliefs equitable under the premises are also prayed for.[22]
 95

On May 16, 2000, the CIAC rendered a decision[23] in favor of the respondent, disposing, as OFFSETTING the lesser amount due from Claimant with the bigger amount from
follows: the Respondent, EMPIRE EAST LAND HOLDINGS, INC. is hereby ordered to pay
CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC. the net amount of SEVEN
MILLION SEVEN HUNDRED SIXTY-FIVE THOUSAND SIX HUNDRED THIRTY-ONE AND
WHEREFORE, judgment is hereby rendered and AWARD of monetary claims is hereby made as follows:
81/100 (P7,765,631.81) with 6% legal interest from the time the request for
FOR THE CLAIMANT: adjudication was filed with the CIAC on September 14, 1999 up to the time this
Decision becomes final and executory.

1. Retention Money P4,502,886.64 Thereafter, interest at the rate of 12% per annum shall accrue on the final
judgment until it is fully paid.
Unpaid Billings (P1,607,627.65)
The arbitration fees and expenses shall be paid on a pro rata basis as initially
Retention Money (6,110,514.29) shared by the parties.

SO ORDERED.[24]

As to petitioners counterclaim, the CIAC denied those which referred to masonry and other works that it
2. Additional Work: Excavation for Foundations 1,805,225.90
took over, considering that they were formally deleted from respondents scope of work, which in turn
caused the reduction of their total contract price.[25] Petitioners claim for liquidated damages was
likewise found unmeritorious because it allowed respondent to complete the works despite knowledge
3. Overhead Expenses 1,397,642.70 that the latter was already in default.[26] On the other hand, as the punch list was drawn after the joint
inspection by the parties, CIAC found for the petitioner and thus awarded a total amount
of P248,350.00[27]
4. Labor Costs Escalation 308,226.57

Aggrieved, petitioner elevated the matter to the CA via a petition for review under Rule 43 of the Rules
of Court. On November 3, 2004, the CA affirmed the CIACs findings of fact and conclusions of law with a
Total due the Claimant P8,013,981.81
slight modification, and ruled:

WHEREFORE, the Decision, dated 16 May 2000, of the Construction Industry

Arbitration Commission Arbitral Tribunal is hereby AFFIRMED WITH
FOR THE RESPONDENT:
MODIFICATION in that CIACs award on Labor Cost Escalation is hereby DELETED for
lack of factual basis and, consequently, for lack of cause of action and CIACs award
1. Punch List Items P248,350.00 on Additional Work for Foundation Excavation is hereby equitably REDUCED
to P980,376.34. All other awards, as well as the rates of interest, are hereby
AFFIRMED.

Total due the Respondent
All other claims and counterclaims are dismissed.
P248,350.00 Accordingly, the total amount due to CICG is P6,880,905.68. While EELH is
entitled P248,350.00. Offsetting the award of EELH from the amount due to CICG,
EELH is hereby ORDERED to pay CICG the total amount of SIX MILLION SIX
HUNDRED THIRTY-TWO THOUSAND FIVE HUNDRED FIFTY-FIVE PESOS
(P6,632,555.00). No costs at this instance.

SO ORDERED.[28]

In deleting respondents claim for labor cost escalation and reducing its claim for the cost of the
excavation of foundation, the appellate court said that respondent failed to show that it in fact paid said
wage increase pursuant to the New Wage Order,[29] while the reduction of the cost of foundation
excavation was the result of the reduction of its cost per cubic meter.[30]
Hence, the present petition, raising the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT ORDERED THE RELEASE OF RETENTION MONEY IN FAVOR OF CICG.
II.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT AWARDED THE CLAIM OF CICG FOR THE EXCAVATION OF FOUNDATION.
III.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT AFFIRMED CIACS AWARD FOR THE PAYMENT OF ALLEGED OVERHEAD
EXPENSES.
IV.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT DENIED EMPIRE EASTS CLAIM FOR MASONRY AND OTHER WORKS,
LIQUIDATED DAMAGES, AND COST OF MONEY FOR PAYROLL ASSISTANCE AND
MATERIALS ACCOMMODATION.[31]
The petition is partly meritorious.
On the Release of Retention Money
Petitioner contends that both the CIAC and the CA erred in ordering the release of the retention money
despite respondents failure to comply with the conditions for its release as set forth in the contract.
We find for the petitioner.
96
In the construction industry, the ten percent (10%) retention money is a portion of the contract price
automatically deducted from the contractors billings, as security for the execution of corrective work if
any becomes necessary.[32]
The construction contract gave petitioner the right to retain 10% of each progress payment until
completion and acceptance of all works.[33] Undoubtedly, as will be discussed hereunder, respondent
complied fully with its obligations, save only those items of work which were mutually deleted by the
parties from its scope of work. However, apart from the completion and acceptance of all works, the
following requisites were set as pre-conditions for the release of the retention money:
a) Contractors Sworn Statement showing that all taxes due from the
CONTRACTOR, and all obligations on materials used and labor employed in
connection with this contract have been duly paid;
b) Guarantee Bond to answer for faulty and/or defective materials or
workmanship as stated in Article IX Section 9.3 of this Contract;
c) Original and signed and sealed Three (3) sets of prints of As Built
drawings.[34]
The CA affirmed the CIACs decision to order the release of the retention money despite respondents
failure to establish the fulfillment of the aforementioned conditions, as both tribunals merely focused on
the non-issuance of the certificate of completion, which, according to respondent, was a pre-requisite to
the issuance of a guarantee bond. The CA concluded that the conditions were deemed fulfilled because
the creditor voluntarily prevented their fulfillment.
To this, we cannot agree.
The record of the case is bereft of any evidence to show that conditions (a) and (c) were complied with.
Petitioner categorically stated in all its pleadings that they were not.Surprisingly, respondent did not
squarely argue this point. It relied solely on petitioners failure to issue the certificate of completion,
which prevented the acquisition of a guarantee bond and thus resulted in the non-release of the
retention money. While it is true that respondent was entitled to a certificate of completion as the
issuance thereof was just a ministerial duty of petitioner considering that the project had already been
completed, the certificate was not the only condition for said release. It was simply a pre-requisite for

the issuance of the guarantee bond. And there was no showing that the absence of the certificate of
completion was the only reason why no guarantee bond was issued.
If we were to apply the civil law rule of constructive fulfillment the condition shall be deemed fulfilled if
the creditor voluntarily prevented its fulfillment then the submission of a guarantee bond may be
deemed to have been complied with. But we cannot apply the rule to conditions (a) and (c), which
remain as unfulfilled conditions-precedent. Since no proof was adduced that these two conditions were
complied with, petitioners obligation to release the retention money had not, as yet, arisen. We would
like to emphasize, though, that this is without prejudice to respondents compliance with the unfulfilled
conditions, after which, release of the retention money must, perforce, follow.
On Respondents Right to Additional Overhead Costs
Respondent claimed P13,976,427.00 as additional overhead expenses brought about by the delay in the
completion of the project due to petitioners own acts. The CIAC, however, awarded only a nominal
amount which is 10% of respondents claim because of its failure to present supporting documents to
prove such additional expenses. The arbitral tribunal observed that respondent only presented its own
computation without any other document to substantiate its claim. The CA, in turn, affirmed the CIAC
findings, ratiocinating that petitioners failure to present countervailing evidence was an implied
admission on its part that the computation made by respondent was correct.
We beg to differ.
It is undisputed that the only piece of evidence presented by respondent in support of its claim for
additional overhead cost was its own computation of the said expenses. It failed to adduce actual
receipts, invoices, contracts and similar documents. To be sure, respondents claim for overhead cost
may be classified as a claim for actual damages.Actual damages are those damages which the injured
party is entitled to recover for the wrong done and injuries received when none were intended. They
indicate such losses as are actually sustained and are susceptible of measurement. As such, they must
be proven with a reasonable degree of certainty.[35]
This is not the first time that a contractors claim for additional overhead costs was denied because of
insufficiency or absence of evidence to support the same. In Filipinas (Pre Fab Bldg.) Systems, Inc. v. MRT
Development Corporation,[36] we denied FSIs claim because only summaries, and not actual receipts,
97
were presented during the hearing.Similarly, in the instant case, respondent, by presenting only its own
computation to substantiate its claim, is not entitled even to the reduced amount of P1,397,642.70
which is 10% of its original claim. Instead, we altogether deny its prayer for additional overhead costs.
On Respondents Right to the Cost of Foundation Excavation
As to respondents entitlement to the cost of excavation of foundation, we find no cogent reason to
disturb the CIACs conclusion, as modified by the CA.
Side trimmings and the excavation of foundation were not included in respondents original scope of
work. They were, however, undertaken by the respondent upon the directive of petitioner, due to the
previous contractors refusal to resume its excavation work. These works, therefore, constitute an
additional claim of respondent over and above the original contract price. A confirmation of these works
had, in fact, been given by petitioner through Change Order Nos. 3[37] and 4[38] where it agreed to
pay P250,000.00 andP650,000.00, respectively. This P900,000.00 negotiated amount referred specifically
to side trimmings and hauling out of adobe soil. It is unfortunate, though, that the parties failed to arrive
at a settlement as to respondents claim for the cost of excavation of foundation.
The additional works having been undertaken by respondent, and the fact of non-payment thereof
having been established, we find no reason to disturb the CIACs conclusion that respondent is entitled to
its claim for the cost of excavation of foundation. As to the propriety of the award, both the CIAC and the
CA were in a better position to compute the same considering that said issue is factual in
nature. Significantly, jurisprudence teaches that mathematical computations, as well as the propriety of
arbitral awards, are factual determinations[39] which are better examined by the lower courts as trier of
facts. Thus, we affirm the award of P980,376.34 for foundation excavation.
On Petitioners Counterclaim for the Cost of Unfinished Works
During the construction period, the parties mutually agreed that some items of work be deleted from
respondents scope of work. Specifically, as claimed by respondent, the following were deleted: a)
masonry works and all related items from the 6th floor to the roof deck; b) all exterior masonry works
from the 4th floor to the roof deck; and c) the garbage chute. This deletion was, however, denied by
petitioner. It, instead, claimed that the only modification it approved was the reduction by three floors
of the total number of floors to be constructed by respondent.[40]

After a thorough review of the documents presented by both parties, both the CIAC and the CA
concluded that the unfinished works, i.e., masonry works, were actually recognized and accepted by
petitioner. It thus agreed to take over, through its new contractor, the balance of work. The only
consequence of such acceptance was the deduction of the value of the unfinished works from the total
contract price.[41] This was the reason why the contract price was reduced from P84 million
to P62,828,826.53. The deletion was, likewise, confirmed by respondent in a letter dated August 21,
1998.[42]
Applying Article 1235 [43] of the Civil Code, petitioners act exempted respondent from liability for the
unfinished works. A person entering into a contract has a right to insist on its performance in all
particulars, according to its meaning and spirit. But if he chooses to waive any of the terms introduced
for his own benefit, he may do so.[44]When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or objection, the obligation is
deemed fully complied with.
In the instant case, petitioner was aware of the unfinished work of respondent; yet, it did not raise any
objection or protest. It, instead, voluntarily hired another contractor to perform the unfinished work,
and opted to reduce the contract price. By removing from the contract price the value of the works
deleted, it is as if said items were not included in the original terms, in the first place. Thus, as correctly
concluded by the CIAC, and as affirmed by the CA, petitioner is not entitled to reimbursement from
respondent for the expenses it incurred to complete the unfinished works.
On Petitioners Counterclaim for Liquidated Damages
In addition to its claim for the cost of masonry and other works, petitioner demanded the payment of
liquidated damages on the ground that respondent was in default in the performance of its obligation.
Liquidated damages are those that the parties agree to be paid in case of a breach. As worded, the
amount agreed upon answers for damages suffered by the owner due to delays in the completion of the
project. Under Philippine laws, they are in the nature of penalties. They are attached to the obligation in
order to ensure performance.[45] As a pre-condition to such award, however, there must be proof of the
fact of delay in the performance of the obligation.
Thus, the resolution of the issue of petitioners entitlement to liquidated damages hinges on whether
respondent was in default in the performance of its obligation.
The completion date of the construction project was initially fixed on January 21, 1998. However, due to
causes beyond the control of respondent, the latter failed to perform its obligation as scheduled. The
98
CIAC[46] and the CA enumerated the causes of the delay, viz., the delayed issuance of building
permit;[47] additional work undertaken by respondent, i.e., bulk excavation and side
trimmings; [48] delayed payment of progress billings; [49] delayed delivery of owner-supplied construction
materials; [50] and limitation of monthly accomplishment.[51] All these causes of respondents failure to
complete the project on time were attributable to petitioners fault.
Still, petitioner contends that even at the start and for the entire duration of the construction,
respondent was guilty of delay due to insufficient manpower and lack of technical know-how.[52] Yet,
petitioner allowed respondent to proceed with the project; thus, petitioner cannot now be permitted to
raise anew respondents alleged delay. More importantly, respondent is not guilty of breach of the
obligation; hence, it cannot be held liable for liquidated damages.
On Petitioners Counterclaim for the Cost of Payroll Assistance and Materials Accommodation
Finally, as to petitioners counterclaim for payroll assistance and materials accommodation, we quote
with approval the CAs observation in this wise:
[W]ith respect to EELHs [petitioners] claim for payroll and material assistance, a
perusal of CIACs questioned Decision reveals that these were already taken into
consideration and, were in fact, deducted from CICGs [respondents] retention
money itemized as unpaid billings amounting to P1,607,627.65.
On page 9 of CIACs Decision, the arbitral tribunal found that the total amount of
payroll accommodation advanced by EELH [petitioner] for (sic) CICG [respondent]
is P10,044,966.16, while the material assistance advanced by EELH [petitioner]
is P2,837,645.26. These amounts were added together with other items and were
deducted from the reduced contract price. Hence, as can be gleaned from page 13
of the CIACs Decision, EELHs [petitioners] overpayment amounting
to P1,607,627.65 already included EELHs [petitioners] payroll accommodation and
material accommodations.[53]
As can be gleaned from the appealed CA decision, the appellate court had reviewed the case based on
the petition and annexes, and weighed them against the Comment of respondent and the decision of the
arbitral tribunal to arrive at the conclusion that the latter decision was based on substantial evidence. In
administrative or quasi-judicial bodies like the CIAC, a fact may be established if supported by substantial
evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion.[54]
 99

It is well established that under Rule 45 of the Rules of Court, only questions of law, not of fact, may be
raised before the Supreme Court. It must be stressed that this Court is not a trier of facts and it is not its
function to re-examine and weigh anew the respective evidence of the parties.[55] To be sure, findings of
fact of lower courts are deemed conclusive and binding upon the Supreme Court, save only in clear
exceptional cases.[56]

In view of the foregoing, after deducting from the final contract price the retention money (that is yet to
be released), the payments as well as the payroll and material accommodations made by the petitioner,
there was an overpayment to respondent in the total amount of P1,607,627.65. From said amount shall
be deducted P980,376.34 due the respondent for the cost of foundation excavation. On the other hand,
as held by the CIAC and affirmed by the CA, petitioner is entitled to its claim for punch list items
amounting to P248,350.00.

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

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

The petitioner is directed to issue to respondent the required certificate of completion in order to
enable the latter to obtain the corresponding guarantee bond. In view of the non-fulfillment of the
conditions-precedent, the release of the retention money is hereby held in abeyance. Thus, respondent
is ordered to pay the petitioner P875,601.31 subject to the return of the amount when respondent shall
have complied with the conditions aforesaid.

FIRST DIVISION
[G.R. No. 4606. October 19, 1909. ]
JUAN RODRIGUEZ, Plaintiff-Appellant, v. FINDLAY & CO., Defendant-Appellee.
Basilio R. Mapa for Appellant.
Kinney & Lawrence, and John W. Sleeper for Appellee.
SYLLABUS
1. SHIPS AND SHIPPING; BREACH OF CONTRACT; DAMAGES. Where a contract to furnish the
machinery complete, including a propeller, for a freight ship for coastwise trade in these Islands
contained the following: "One brass propeller of 8 diameter and suitable pitch for an expected speed of
ship about 9 1/2 knots," and also the following specification applying to the machinery as a whole: "The
whole to be suitable for a wooden ship of 150 ft. long by 24 ft. beam and 14 ft. depth, as per plan
supplied by Sr. Juan Rodriguez;" it appearing that the person who was to furnish such machinery knew
the purpose for which the ship was to be used and its general form and construction. Held, That the
propeller must be such as to give to such ship a speed of about 9 1/2 knots per hour, and that furnishing
a propeller which gave the ship a speed of only about 7 knots an hour was not a compliance with the
terms of the contract: And, Held further, That the damages recoverable of a manufacturer or dealer for
the breach of warranty of a sale of goods which he knew at the time of the sale were intended to be
used for a particular purpose or to accomplish a particular result, the measure of damages is not
confined to the difference in value of the machinery as warranted and as it proves to be, but includes
such consequential damages as are the direct, immediate, and probable result of the breach.
DECISION
MORELAND, J. :
The complaint asks damages for breach of a written contract between plaintiff and defendant for the
delivery of the machinery, complete, for a ship in process of construction belonging to the plaintiff.
The defendant, in its answer, denies the allegations of the complaint generally, and sets up as a
counterclaim the balance due from plaintiff on the purchase price of the machinery aforesaid, and asks
for an affirmative judgment against the plaintiff accordingly.
The defendant secured in the court below an affirmative judgment against the plaintiff for the sum of
P9,216.60, with interest thereon, at the rate of 6 per cent per annum, from February 28, 1907. The
plaintiff made a motion for a new trial upon the grounds that the evidence does not justify the decision
of the court and that the decision is contrary to law. This motion was denied, and the plaintiff duly
excepted and perfected his appeal.
On the 19th of September, 1907, the plaintiff was the owner of a freight ship called the Constancia, then
in course of construction in plaintiffs shops in the city of Manila. The vessel was designed for the
coastwise trade in the Philippine Islands. On that date, and for some time prior thereto, one William
Swann was the consulting engineer of the defendant, in charge of its machinery department. Swann was
at that time an engineer and naval architect and had been working as an engineer substantially all his
100
life. On the date mentioned he was, and for some time theretofore had been, a naval architect, a
member of the Institute of Engineers and Shipbuilders of Scotland, and a member of the Institute of
Naval Architects of Great Britain. The plaintiff was acquainted with Swann and knew him to be an
engineer and naval architect of long experience. On the date referred to Rogaciano Rodriguez, acting for
and on behalf of the plaintiff and as his agent, made a written contract with Swann, acting for and on
behalf of the defendant and as its agent, wherein an whereby the plaintiff agreed to purchase of the
defendant, and the defendant agreed to sell and deliver to the plaintiff, certain machinery, complete, for
the ship Constancia already referred to. Prior to the making of the contract on the date referred to, and
during the negotiations leading up to the contract and in connection with them, Swann, the agent of the
defendant, visited the shipyard of the plaintiff and inspected the steamship Constancia, then being
constructed. This he did several different times. The inspections were made for the purpose of
determining the kind and nature of the machinery which would be suitable to the ship referred to.
Neither the plaintiff nor his agent, Rogaciano Rodriguez, was a marine or other engineer and they knew
little or nothing about the kind of machinery which should be placed in the ship they were building. They
relied entirely upon the recommendations, knowledge, and experience of the engineer Swann. The
plaintiff had in mind and stated to Swann, among other things, the speed which it was necessary that the
Constancia should have in order to be available as a coastwise vessel, and left the kind, nature, and
construction of the machinery to the greater knowledge and experience of Swann. This is particularly
true of the propeller placed in that vessel, the questions relative to which are the main issues of this
case. The contract, so far as its interpretation is disputed, reads as follows:jgc:
"One brass propeller of 8 diameter and suitable pitch for an expected speed of ship about 9 1/2 knots.
"The whole to be suitable for a wooden ship of 150 ft. long by 24 ft. beam and 14 ft. depth, as per plan
supplied by Sr. Juan Rodriguez."cralaw virtua1aw library
Before the contract was entered into, the plaintiff delivered to Swann, as the defendants agent, a plan
of the hull of said vessel. Thereafter Swann delivered to the plaintiff a plan of the entire vessel, showing
the machinery placed therein. The plans in question showed length and breadth of the hull, its general
outline and the number of feet of water which it drew. These plans also showed location and outline of
the sternpost and rudderpost of said ship.
In the process of manufacturing the propeller the defendant thought it discovered that the propeller
described in the contract would not give the speed required by the contract and notified the plaintiff to
that effect, and at the same time asked permission to put in its place a propeller 10 feet in diameter. This
the plaintiff declined to permit.
The machinery, so purchased, was delivered, except certain items which were required to be upon all
vessels by the rules of the customs officials of the city of Manila and about which there is little or no
dispute. Certain other articles of small value, necessary for the completion of the machinery, seem not to
have been delivered, but concerning these there is very little dispute between the parties.
The machinery was duly installed in the vessel upon its delivery. Upon the trial of the ship, after the
installation of its machinery, it was found that all of the machinery worked well except the propeller.
This, instead of giving the ship a speed of about 9 1/2 knots an hour, gave a speed of less than 7 knots an
hour. The failure of the propeller to give the required speed to the vessel is substantially the only point in
controversy in this case.
The contention of the plaintiff is that, under the terms of the contract, the defendant was obliged to
furnish a propeller 8 feet in diameter which would give the Constancia a speed of 9 1/2 knots an hour,
and that, failing in that, the contract was broken and the defendant should be held liable for all damages
resulting.

The defendant contends that the machinery was to be according to the specifications in the contract and
that, if these specifications were complied with, it does not matter what may be the actual speed of the
vessel. It claims that it had nothing to do with the construction of the steamship or the placing therein of
the machinery. The defendant also claims that, under the terms of the contract, there was no guaranty
of speed, and that, if the propeller was 8 feet in diameter and of brass, it would fulfill the terms of the
contract even though the speed of the vessel should not exceed a knot per hour.
The contract, by its words, expressly requires that the defendant must furnish a propeller which shall
give to the steamship Constancia a speed of about 9 1/2 knots per hour.
The language of the contract is so plain, and the negotiations leading up to the execution of the contract
point in one direction so clearly, that there ought to be little need of discussion. But the parties have
insisted so strongly upon the justice of their several contentions that a detailed discussion is considered
advisable.
The language is without ambiguity. The defendant agrees therein to furnish "One brass propeller of 8
diameter and suitable pitch for an expected speed of ship about 9 1/2 knots;" and "The whole to be
suitable for a wooden ship 150 ft. long by 24 ft. beam and 14 ft. depth, as per plan supplied by Sr. Juan
Rodriguez."
The ship for which the machinery, including the propeller, was designed, is specifically described in the
contract and is identified without question. That ship is the Constancia, a coastwise vessel 150 feet long,
24 feet wide and 14 feet deep. These are the measurements contained in the contract. This was the only
ship for which the plaintiff needed machinery. It was the only ship he was constructing. During the
course of the negotiations the defendants agent, Swann, its engineer and naval architect, in company
with the plaintiff or the plaintiffs agent, several times visited the yard wherein the ship was being built
and examined it for the purpose of making the contract for the machinery. During these different visits
the kind of machinery, its purpose and value were discussed by the parties. This is conceded. Plans of the
hull and the interior of the vessel were exchanged by the parties at various times, either before or after
the making of the contract. The plaintiff, in particular, delivered to the defendant, prior to the execution
of the contract, a plan of the hull of the vessel, with its measurements. Later the defendant delivered to
the plaintiff a plan, in considerable detail, showing the vessel with the machinery figured as having been
already placed in it.
Swann was a naval architect and marine engineer of long experience, which fact was known to the
plaintiff and his agent, and the general details relative to the kind and character of the machinery were
left to the defendant. The thing mainly insisted upon by the plaintiff was the result that should be
produced. The plaintiff himself testifies, and this is undisputed by the defendant, that he relied upon
Swann in these particulars, especially in reference to the propeller and the pitch which it should have;
and, by reason of that reliance, the pitch in feet and inches which the propeller should have when placed
in the ship was not stated in the contract. Instead, the plaintiff placed in the contract what the propeller
should do, rather than what it should be. The diameter of the propeller was fixed by the structure of the
vessel and could not exceed 8 feet or 8 1/2 feet. The pitch which the propeller should have in order to
give 9 1/2 knots an hour to the steamship was left to the greater knowledge and experience of the
defendants agent, Swann. The plaintiff placed the condition only that it should produce a certain result
when attached to the ship Constancia.
The words of the contract clearly demand, upon the part of the defendant, that it furnish a propeller
with a pitch proper to give the steamship Constancia a speed of about 9 1/2 knots per hour. Language
for that purpose could scarcely be made plainer than the language used.
101
The defendant contends that "the machinery was to be according to the specifications in the contract
and that, if these specifications were complied with, it does not matter what may be the actual speed of
the vessel." The trouble with this contention is that one of the specifications of the contract is speed,
namely, a speed of 9 1/2 knots per hour, and the specifications of the contract can not be complied with
unless a speed of 9 1/2 knots an hour, or thereabouts, is given. Simply because the specific pitch in feet
and inches is not stated in the contract does not mean that there is no specification upon that point. The
contract provides that the defendants shall supply to the plaintiff, among other things, one brass
propeller 8 feet in diameter with suitable pitch for an expected speed of ship about 9 1/2 knots. The
word "suitable" has reference to two objects, the antecedent subject, "pitch" of the propeller, and the
subsequent object, "ship;" and the meaning of the word requires that the subject, "pitch" of the
propeller, shall have qualities which will harmonize so perfectly with the qualities of the object, "ship,"
that a certain and specified result, viz, a speed of 9 1/2 knots, shall be produced. The word "suitable,"
referring to the vessel in which the propeller is to be placed as well as to the propeller itself, the pitch of
the propeller must, therefore, be suitable to that vessel, and it is not suitable to that vessel, under the
terms of the contract, unless with the other machinery mentioned in the contract it gives to that vessel a
speed of about 9 1/2 knots an hour. Therefore, the specifications contained in the contract are not
complied with until the vessel shall have received from the machinery installed a speed of about 9 1/2
knots an hour. The word "suitable" is perfectly definite and clear in its meaning and its reference is
undoubted.
The defendant, in the contract, not only agrees to furnish a propeller 8 feet in diameter and of brass, but
also agrees to furnish a propeller with certain other characteristics, among them being a pitch suitable to
produce a certain speed in a certain vessel. If the pitch of the propeller was suitable to do that, it would
do it. The failure of the propeller to give a speed anything like 9 1/2 knots an hour indicates clearly and
beyond question that the pitch of the propeller was not suitable for the purposes specified in the
contract.
The contention of the defendant is, further, that the pitch of the propeller as furnished, viz, 15 1/2 feet,
was suitable to give a speed of more than 9 1/2 knots an hour; and in its argument it quotes the expert,
Swann, who testifies, in relation to the pitch of the propeller, that with the pitch of 15 1/2 feet the
propeller would have a speed of a little over 11 knots per hour. The defect in this contention is that a
propeller has no such quality as speed; that the thing which Swann figures out as 11 knots an hour is not
speed but pitch. A propeller has, aside from the material of its construction, three qualities diameter,
area, and pitch. A propeller has no such quality as speed. The pitch of the propeller is described by
Swann and Gilchrist as the distance which it would travel if it were turned one revolution in a substance
which, although yielding sufficiently to permit the passage of the propeller, would admit of no slip. In
other words, if a propeller were immersed in wax and then given a turn amounting to one revolution,
the pitch of the propeller would be the distance which it would travel through the wax in that one
revolution. The expert Swann says that the way to determine the speed of a propeller is to "take the
pitch, multiply it by the revolutions, which would give me the distance the propeller would advance in
any one minute; then multiply that by sixty, which would give me the amount in one hour; then divide by
6,080, which is the number of feet in a knot, and that would give me the number of knots per hour which
the propeller would advance;" and then says that the speed of the propeller would be more than 11
knots. The mere fact that Swann multiplies the pitch of the propeller by a number of figures, and then
divides that product by other figures, does not change pitch into speed. It remains pitch still. In other
words, the 11 knots per hour which Swann refers to as the speed of the propeller is the distance which
the propeller, unattached to any vessel, would travel, in wax in one hour if it was turned at the rate of 84
revolutions per minute. But this is the acknowledged definition of pitch, not speed. It is manifestly
absurd to contend that the propeller can have a speed independent of the vessel to which it may be
attached. Speed is a quality of the vessel itself and not a quality of the propeller. To be sure, the
propeller, operated by the engine, is able to give speed to the vessel, but in and of itself it has no such
quality.

It is apparent, therefore, that the contention of the defendant that the propeller was so constructed as
to have a speed of 11 knots an hour is absurd. In other words, the contention of the defendant is that a
guaranty in a contract to give a ship a speed of 20 knots an hour is complied with if there is furnished to
that ship a propeller with a pitch, which, multiplied by certain figures and divided by others, would
produce twenty something at the conclusion of the calculation, and this absolutely regardless of whether
the ship on which the propeller is to be placed is a war ship or a pleasure yacht, whether it is 100 or
1,000 feet long, 10 feet or 100 feet wide, whether it draws 5 feet or 60 feet of water and wholly
regardless of the form of the vessels hull. It is recognized by all authorities upon the construction of
steamships that "the most important point to be considered in propulsive efficiency is the shape of the
vessels hull." In respect of speed this is one of the greatest problems and one of the most perplexing
with which marine engineers have to deal. The defendant, by its contention, avoids all the trouble of
figuring out this difficult problem by simply giving a speed to its propeller.
It was a condition, and not a theory, which confronted the plaintiff when he purchased the machinery in
question including the propeller. He had a vessel which was designed for the coastwise trade and, in
order to be useful and efficient in that connection, it was necessary that it should have a speed of about
9 1/2 knots an hour. All of this the defendant knew. Speed being so important in a vessel carrying freight
in competition with other vessels having a speed of 9 1/2 knots an hour, the parties placed in the
contract a specification by which this vessel should receive machinery of such a character that it would
be able to compete with other vessels in a similar occupation. These specifications required that the
vessel should have a speed of about 9 1/2 knots per hour and that the machinery furnished for the vessel
should be arranged to that end, particularly the propeller.
The defendant not only asserts that it furnished a propeller with a speed of more than 9 1/2 knots an
hour, but also contends that the reason why the vessel did not have a speed of 9 1/2 knots an hour after
the installation of the machinery was because the propeller was, by the construction of the vessel,
forced to work in a position where it could not display its properties adequately. To this end, it asserts,
through its expert witness Swann, "that the propeller was, so to speak, too close to both the stern and
the rudder posts, so that the propeller could not receive the water or throw it away from it in the
manner wanted; that is, in a line with the boats keel more or less. It could not do anything else because
it was practically watertight, so to speak, that is, to all intents and purposes, watertight between these
two large chocks of timber, the rudder and stern posts, and hence could not throw the water off or
receive the water from forward in the manner it should, and hence would throw it sideways; that is the
effect. The propeller could not get a chance to work."cralaw virtua1aw library
The expert then goes on to assert that the pitch had nothing to do with it, that the diameter of the
propeller had nothing to do with it, and that the sole and only reason why the vessel did not receive a
speed of 9 1/2 knots an hour from the propeller furnished was because of the sternpost and the
rudderpost.
It should be noted, however, that, before the contract was signed, the defendant, and its agent, Swann,
were furnished with a plan or plans of the hull of the vessel, showing the sternpost and the rudderpost
fully and fairly; that Swann had himself inspected the vessel several times at the yard where it was being
built and knew all about the said sternpost and rudderpost and their relative locations. Yet, with that
plan in his hand and with that knowledge in his head, he, nevertheless, made a contract in which he
agreed to furnish a propeller which would give a speed of 9 1/2 knots an hour to that very ship. It must
also be remembered that the events proved the contention of the expert Swann to be wholly unfounded
when he claimed that the reason why the propeller would not work was because of its position between
the sternpost and the rudderpost. The trial of the propeller furnished by the defendant having
demonstrated that it was ineffective and that its pitch was too coarse and its area too great for the
purposes specified in the contract, the plaintiff placed in the steamship another propeller in exactly the
102
same position in the vessel as the other, i. e., between the sternpost and the rudderpost, with a
diameter only 6 inches more than the diameter of the propeller furnished by the defendant, and the
vessel immediately attained a speed of 9 knots, or thereabouts, per hour. It is thus apparent that the
expert Swann again made a serious mistake in claiming that the failure of speed was due solely to the
place in which the propeller worked.
The defendant also maintains that the plaintiff ought not to recover in this case because before the
propeller was constructed the defendant notified him that a propeller 8 feet in diameter would not
produce the results specified in the contract and that in order to attain those results it would be
necessary to place in that ship a propeller 10 feet in diameter; that the plaintiff rejected this proposal
and refused to accept a propeller of any dimensions different from that specified in the contract, and
that, therefore, he brought his misfortune on his own head. In reply to this contention it is sufficient to
state that, by reason of the construction of the vessel, which Swann knew perfectly before hand, the
placing of a propeller 10 feet in diameter in the ship in question would necessitate cutting away a large
portion of the rear part of the vessels hull. The plaintiff was perfectly justified in refusing to change the
whole structure of the rear of his vessel in order to accommodate the defendant. His refusal was
justified by subsequent events; for, later, as before stated, a propeller 8 1/2 feet in diameter, but of
different pitch and area, was placed in the ship, without any change in the construction of the hull, and
the vessel immediately attained a speed of 9 knots, or thereabouts, per hour.
There seems to be no question that the expert witness for the plaintiff was entirely correct when he
stated that the fault of the propeller furnished by the defendant was in its pitch and area. He testified
that the pitch of the propeller was too coarse and the area was too great for the kind of vessel in which it
was placed.
It is thus apparent that the defendant failed to comply with the terms of the contract in respect to the
propeller therein described, and the plaintiff, in consequence, is entitled to recover appropriate damages
by reason thereof.
The damages recoverable of a manufacturer or dealer for the breach of warranty of machinery which he
contracts to furnish or place in operation for a known purpose are not confined to the difference in value
of the machinery as warranted and as it proves to be, but include such consequential damages as are the
direct, immediate, and probable result of the breach. (30 Am. and Eng. Ency. of Law, p. 217, and cases
there cited.)
The loss of the buyers time and of that of his laborers resulting from the breach is recoverable where
the circumstances of the sale were such as to have put the seller upon notice that such a loss would
probably result from a breach.
Indemnity for losses and damages includes not only the amount of the loss which may have been
suffered, but also that of the profit which the creditor may have failed to realize. (Art. 1106, Civil Code.)
The losses and damages for which a creditor in good faith is liable are those foreseen, or which may have
been foreseen, at the time of constituting the obligation, and which may be a necessary consequence of
its nonfulfillment. (Art. 1107, Civil Code.)
In an action against a manufacturer or dealer for a breach of warranty upon a sale of goods, which he
knew at the time of the sale were intended to be used for a particular purpose, the measure of damages
is not limited to the difference in value of the goods as warranted, and as they prove to be, as in cases
where like articles are sold as merchandise for general purposes; but profits lost and expenses incurred,
because of the breach, may be recovered. (Swain v. Schieffelin, 134 N. Y., 471; New York and Colorado
Mining Syndicate and Company v. Fraser, 130 U. S., 611; Accumulator Company v. Dubuque Street
 103

Railway Company, 64 Fed. Rep., 70.) Two 1/2-inch test cocks with stuffing boxes for the steam

It is apparent from the authorities above cited that the plaintiff is entitled to recover P375, the value of gauges on boiler 9.00
30 tons of coal consumed in the trials necessarily made to determine whether or not the propeller had
the qualities specified in the contract; also the sum of P707, the wages of employees and other Two straight 1/2-inch test cocks with stuffing box for the
necessary expenses incurred during said trials.
boiler and donkey boiler 9.00
The plaintiff not having presented competent proof as to the loss he sustained by reason of his ship
being out of commission during the time intervening between the trial of the first propeller and the One lubricator with a 3/8 x 1 1/2-inch male thread for the donkey 3.40
installation of the second, nothing can be awarded him as damages in relation thereto. He is, however,
entitled to be allowed as damages the sum of P2,770.36, the amount paid by him for the first propeller, One 1-inch check valve with test cock and hand wheel for the
as its purchase price, the same being worthless to him for the purpose for which he bought it said
propeller to be and remain the property of the defendant, with the right to retake the same if it has not donkey boiler 26.25
already done so.
One 1 1/4-inch globe valve with flange and wheel for the steam winch 18.00
The defendant failed to deliver to the plaintiff the following machinery and materials which it agreed to
deliver under the contract, which said machinery and materials the plaintiff was obliged to purchase of _______
other parties, paying therefor the following prices, which this court finds reasonable in amount, to
wit:chanrob1es virtual 1aw library Total 1,133.45

One brass cock with flange for the donkey feed, weight 57
pounds P144.00
One do. do. check valve for the engine, weight 62 pounds 124.00
One do. do. 3/4-inch blow-off for the boiler 7.50
One cast brass elbow for the steam valve, weight 97 pounds 145.50
We find, therefore, that the defendant is entitled to recover in this action of the plaintiff the sum of
P5,213.54, that being the difference between the balance remaining due from plaintiff to the defendant
on the purchase price of said machinery, viz, P10,199.35, and the aggregate amount of the damages
herein allowed to the plaintiff by reason of the breach of said contract by the defendant, as aforesaid,
viz, P4,985.81, with interest on said P5,213.54 at the rate of 6 per cent per annum from February 28,
1907, and he is hereby given judgment for that amount.
The judgment of the lower court is, therefore, modified to the extent and in the particulars above
enumerated, and, as modified, affirmed, with costs against the defendant.

One new 1 1/4-inch tube with flange for the blow-off cock of the donkey boiler 7.00

One brass cock with flanges, connections, and strainer for

the surface blow-off 166.00

For turning the two covers of the high and low pressure

cylinders, and placing new bushes with 5/8 x 9 1/2-inch studs and nuts 85.00

Three cast-iron pistons, turned, with rod and spiral steel

springs, brass covers and valves for the cylinders 185.00

Four cast-iron seatings for the boiler 217.00

Five 1/4-inch pet cocks for the donkey pump and two for the

cylinder blow-off 15.00

One 1/8-inch air-cock for the donkey pump 1.80


SECOND DIVISION
[G.R. Nos. L-33819 and L-33897. October 23, 1982.]
NATIONAL POWER CORPORATION, Plaintiff-Appellant, v. NATIONAL MERCHANDISING CORPORATION
and DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES, Defendants-Appellants.
The Solicitor General, for Plaintiff-Appellant.
Sycip, Salazar, Luna Manalo & Feliciano, for Defendants-Appellants.
SYNOPSIS
Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant National Merchandising
Corporation (NAMERCO), the Philippine representative of New York-based International Commodities
Corporation, executed a contract of sale of sulfur with a stipulation for liquidated damages in case of
breach. Defendant-appellant Domestic Insurance Company executed a performance bond in favor of
NPC to guarantee the sellers obligation. In entering into the contract, Namerco, however, did not
disclose to NPC that Namercos principal, in a cabled instruction, stated that the sale was subject to
availability of a steamer, and contrary to its principals instruction, Namerco agreed that non-availability
of a steamer was not a justification for non-payment of liquidated damages. The New York supplier was
not able to deliver the sulfur due to its inability to secure shipping space. Consequently, the Government
Corporate Counsel rescinded the contract of sale due to the suppliers non-performance of its
obligations, and demanded payment of liquidated damages from both Namerco and the surety.
Thereafter, NPC sued for recovery of the stipulated liquidated damages. After trial, the Court of First
Instance rendered judgment ordering defendants-appellants to pay solidarity to the NPC reduced
liquidated damages with interest.
The Supreme Court held that Namerco is liable fur damages because under Article 1897 of the Civil Code
the agent who exceeds the limits of his authority without giving the party with whom he contracts
sufficient notice of his powers is personally liable to such party. The Court, however, further reduced the
solidary liability of defendants-appellants for liquidated damages.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; AN AGENT WHO EXCEEDS THE LIMITS OF HIS
AUTHORITY IS PERSONALLY LIABLE. Under Article 1897 of the Civil Code the agent who exceeds the
limits of his authority without giving the party with whom he contracts sufficient notice of his powers is
personally liable to such party.
2. ID.; ID.; ID.; ID.; CASE AT BAR. In the present case, Namerco, the agent of a New York-based
principal, entered into a contract of sale with the National Power Corporation without disclosing to the
NPC the limits of its powers and, contrary to its principals prior cabled instructions that the sale should
be subject to availability of a steamer, it agreed that non-availability of a steamer was not a justification
for nonpayment of the liquidated damages. Namerco. therefore, is liable for damages.
3. ID.; ID.; ID.; THE RULE THAT EVERY PERSON DEALING WITH AN AGENT IS PUT UPON AN INQUIRY AND
MUST DISCOVER UPON HIS PERIL THE AUTHORITY OF THE AGENT IS NOT APPLICABLE WHERE THE
AGENT, NOT THE PRINCIPAL, IS SOUGHT TO BE HELD LIABLE ON THE CONTRACT. The rule that every
104
person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent would apply only in cases where the principal is sought to be held liable on the contract entered
into by the agent. The said rule is not applicable in the instant case since it is the agent, not the principal,
that is sought to be held liable on the contract of sale which was expressly repudiated by the principal
because the agent took chances, it exceeded its authority and, in effect. it acted in its own name.
4. ID.; ID.; ID.; THE CONTRACT ENTERED INTO BY AN AGENT WHO ACTED BEYOND HIS POWERS IS
UNENFORCEABLE ONLY AS AGAINST THE PRINCIPAL BUT NOT AGAINST THE AGENT AND ITS SURETY.
Article 1403 of the Civil Code which provides that a contract entered into in the name of another person
by one who has acted beyond his powers is unenforceable, refers to the unenforceability of the contract
against the principal. In the instant case, the contract containing the stipulation for liquidated damages is
not being enforced against its principal but against the agent and its surety. It being enforced against the
agent because Article 1897 implies that the agent who acts in excess of his authority is personally liable
to the party with whom he contracted. And that rule is complimented by Article 1898 of the Civil Code
which provides that "if the agent contracts, in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent
contracted is aware of the limits of the powers granted by the principal." Namerco never disclosed to the
NPC the cabled or written instructions of its principal. For that reason and because Namerco exceeded
the limits of its authority, it virtually acted in its own name and not as agent and it is, therefore, bound
by the contract of sale which, however, it not enforceable against its principal. If, as contemplated in
Articles 1897 and 1898, Namerco is bound under the contract of sale, then it follows that it is bound by
the stipulation for liquidated damages in that contract.
5. ID.; ID.; ID.; THE LIABILITY OF AN AGENT WHO EXCEEDS THE LIMITS OF HIS AUTHORITY IS BASED ON
CONTRACT AND NOT ON TORT OR QUASI-DELICT; CASE AT BAR. Defendants contention that
Namercos liability should be based on tort or quasi-delict, as held in some American cases, like
Mendelson v. Holton, 149 N.E. 38,42 ACR 1307, is not well-taken. As correctly argued by the NPC, it
would be unjust and inequitable for Namerco to escape liability of the contract after it had deceived the
NPC by not disclosing the limits of its powers and entering into the contract with stipulations contrary to
its principals instructions.
6. ID.; ID.; ID.; LIABILITY OF THE SURETY ON THE OBLIGATION CONTRACTED BY AN AGENT WHO
EXCEEDED HIS AUTHORITY IS NOT AFFECTED THEREBY. The contention of the defendants that the
Domestic Insurance Company is not liable to the NPC because its bond was posted, not to Namerco, the
agent, but for the New York firm which is not liable on the contract of sale, cannot be sustained because
it was Namerco that actually solicited the bond from the Domestic Insurance Company and, Namerco is
being held liable under the contract of sale because it virtually acted in its own name. In the last analysis,
the Domestic Insurance Company acted as surety for Namerco. The rule is that "want of authority of the
person who executes an obligation as the agent or representative of the principal will not, as a general
rule, affect the surety thereon, especially in the absence of fraud, even though the obligation is not
binding on the principal." (72 C.J.S. 525).
7. CIVIL LAW; DAMAGES; IMPOSITION OF INTEREST THEREON NOT WARRANTED WHERE THE
DISPOSITION OF THE CASE HAS BEEN DELAYED DUE TO NO FAULT OF DEFENDANTS. With respect to
the imposition of the legal rate of interest on the damages from the filing of the complaint in 1957, or a
quarter of a century ago, defendants contention that interest should not be collected on the amount of
damages is meritorious. It should be manifestly iniquitous to collect interest on the damages especially
considering that the disposition of this case has been considerably delayed due to no fault of the
defendants
8. ID.; ID.; LIQUIDATED DAMAGES; NO PROOF OF PECUNIARY LOSS IS REQUIRED FOR RECOVERY
THEREOF. No proof of pecuniary lost is required for the recovery of liquited damages. The stipulatian

for liquidated damages is intended to obviate controversy on the amount of damages. There can be no
question that the NPC suffered damages because its production of fertilizer was disrupted or diminished
by reason of the non-delivery of the sulfur. The parties foresaw that it might be difficult to ascertain the
exact amount of damages for non-delivey of the sulfur. So, they fixed the liquidated damages to be paid
as indemnity to the NPC.
9. ID.; ID.; NOMINAL DAMAGES; NOT A CASE OF. Nominal damages are damages in name only or are
in fact the same as no damages (25 C.J.S. 466). It would not be correct to hold in this case that the NPC
suffered damages in name only or that the breach of contract "as merely technical in character since the
NPC suffered damages because its production of fertilizer "as disrupted or diminished by reason of the
non-delivery of the sulfur.
DECISION
AQUINO, J.:
This case is about the recovery of liquidated damages from a sellers agent that allegedly exceeded its
authority in negotiating the sale.
Plaintiff National Power Corporation appealed on questions of law from the decision of the Court of First
Instance of Manila dated October 10, 1966, ordering defendants National Merchandising Corporation
and Domestic Insurance Company of the Philippines to pay solidarily to the National Power Corporation
reduced liquidated damages in the sum of P72,114.66 plus legal, rate of interest from the filing of the
complaint and the costs (Civil Case No. 33114).
The two defendants appealed from the same decision allegedly because it is contrary to law and the
evidence. As the amount originally involved is P360,572.80 and defendants appeal is tied up with
plaintiffs appeal on questions of law, defendants appeal can be entertained under Republic Act No.
2613 which amended section 17 of the Judiciary Law.
On October 17, 1956, the National Power Corporation and National Merchandising Corporation
(Namerco) of 3111 Nagtahan Street, Manila, as the representative of the International Commodities
Corporation of 11 Mercer Street, New York City (Exh. C), executed in Manila a contract for the purchase
by the NPC from the New York firm of four thousand long tons of crude sulfur for its Maria Cristina
Fertilizer Plant in Iligan City at a total price of (450,716 (Exh. E).
On that same date, a performance bond in the sum of P90,143.20 was executed by the Domestic
Insurance Company in favor of the NPC to guarantee the sellers obligations (Exh. F).
It was stipulated in the contract of sale that the seller would deliver the sulfur at Iligan City within sixty
days from notice of the establishment in its favor of a letter of credit for $212,120 and that failure to
effect delivery would subject the seller and its surety to the payment of liquidated damages at the rate
of two-fifth of one percent of the full contract price for the first thirty days of default and four-fifth of
one percent for every day thereafter until complete delivery is made (Art. 8, p. 111, Defendants Record
on Appeal).
In a letter dated November 12, 1956, the NPC advised John Z. Sycip, the president of Namerco, of the
opening on November 8 of a letter of credit for $212,120 in favor of International Commodities
Corporation which would expire on January 31, 1957 (Exh. I). Notice of that letter of credit was, received
105
by cable by the New York firm on November 15, 1956 (Exh. 80-Wallick). Thus, the deadline for the
delivery of the sulfur was January 15, 1957.
The New York supplier was not able to deliver the sulfur due to its inability to secure shipping space.
During the period from January 20 to 26, 1957 there was a shutdown of the NPCs fertilizer plant
because there was no sulfur. No fertilizer was produced (Exh. K).
In a letter dated February 27, 1957, the general manager of the NPC advised Namerco and the Domestic
Insurance Company that under Article 9 of the contract of sale "non-availability of bottom or vessel" was
not a fortuitous event that would excuse non-performance and that the NPC would resort to legal
remedies to enforce its rights (Exh. L and M).
The Government Corporate Counsel in his letter to Sycip dated May 8, 1957 rescinded the contract of
sale due to the New York suppliers non-performance of its obligations (Exh. G). The same counsel in his
letter of June 8, 1957 demanded from Namerco the payment of P360,572.80 as liquidated damages. He
explained that time was of the essence of the contract. A similar demand was made upon the surety
(Exh. H and H-1).
The liquidated damages were computed on the basis of the 115-day period between January 15, 1957,
the deadline for the delivery of the sulfur at Iligan City, and May 9, 1957 when Namerco was notified of
the rescission of the contract, or P54,085.92 for the first thirty days and P306,486.88 for the remaining
eighty-five days. Total: P360,572.80.
On November 5, 1957, the NPC sued the New York firm, Namerco and the Domestic Insurance Company
for the recovery of the stipulated liquidated damages (Civil Case No. 33114).
The trial court in its order of January 17, 1958 dismissed the case as to the New York firm for lack of
jurisdiction because it was not doing business in the Philippines (p. 60, Defendants Record on Appeal).
On the other hand, Melvin Wallick, as the assignee of the New York corporation and after the latter was
dropped as a defendant in Civil Case No. 33114, sued Namerco for damages in connection with the same
sulfur transaction (Civil Case No. 37019). The two cases, both filed in the Court of First Instance of
Manila, were consolidated. A joint trial was held. The lower court rendered separate decisions in the two
cases on the same date.
In Civil Case No. 37019, the trial court dismissed Wallicks action for damages against Namerco because
the assignment in favor of Wallick was champertous in character. Wallick appealed to this Court. The
appeal was dismissed because the record on appeal did not disclose that the appeal was perfected on
time (Res. of July 11, 1972 in L-33893).In this Civil Case No. 33114, although the records on appeal were
approved in 1967, inexplicably, they were elevated to this Court in 1971. That anomaly initially
contributed to the delay in the adjudication of this case.
Defendants appeal L-33819. They contend that the delivery of the sulfur was conditioned on the
availability of a vessel to carry the shipment and that Namerco acted within the scope of its authority as
agent in signing the contract of sale.
The documentary evidence belies these contentions. The invitation to bid issued by the NPC provides
that non-availability of a steamer to transport the sulfur is not a ground for non-payment of the
liquidated damages in case of non-performance by the seller.
"4. Responsibility for availability of vessel. The availability of vessel to transport the quantity of sulfur
within the time specified in item 14 of this specification shall be the responsibility of the bidder. In case

of award of contract, failure to ship on time allegedly due to non-availability of vessels shall not exempt
the Contractor from payment of liquidated damages provided in item 15 of this specification."cralaw
virtua1aw library
"15. Liquidated damages. . . .
"Availability of vessel being a responsibility of the Contractor as specified in item 4 of this specification,
the terms unforeseeable causes beyond the control and without the fault or negligence of the
Contractor and force majeure as used herein shall not be deemed to embrace or include lack or
nonavailability of bottom or vessel. It is agreed that prior to making his bid, a bidder shall have made
previous arrangements regarding shipments within the required time. It is clearly understood that in no
event shall the Contractor be exempt from the payment of liquidated damages herein specified for
reason of lack of bottom or vessel. Lack of bottom or nonavailability of vessel shall, in no case, be
considered as a ground for extension of time. . . . ."
Namercos bid or offer is even more explicit. It provides that it was "responsible for the availability of
bottom or vessel" and that it "guarantees the availability of bottom or vessel to ship the quantity of
sulfur within the time specified in this bid" (Exh. B, p. 22, Defendants Record on Appeal).
In the contract of sale itself item 15 of the invitation to bid is reproduced in Article 9 which provides that
"it is clearly understood that in no event shall the seller be entitled to an extension of time or be exempt
from the payment of liquidated damages herein specified for reason of lack of bottom or vessel" (Exh. E,
p. 36, Record on Appeal).
It is true that the New York corporation in its cable to Namerco dated August 9, 1956 stated that the sale
was subject to availability of a steamer (Exh. N). However, Namerco did not disclose that cable to the
NPC and, contrary to its principals instruction, it agreed that nonavailability of a steamer was not a
justification for nonpayment of the liquidated damages.
The trial court rightly concluded that Namerco acted beyond the bounds of its authority because it
violated its principals cabled instructions (1) that the delivery of the sulfur should be "C & F Manila", not
"C & F Iligan City" ; (2) that the sale be subject to the availability of a steamer and (3) that the seller
should be allowed to withdraw right away the full amount of the letter of credit and not merely eighty
percent thereof (pp- 123-124, Record on Appeal).
The defendants argue that it was incumbent upon the NPC to inquire into the extent of the agents
authority and, for its failure to do so, it could not claim any liquidated damages which, according to the
defendants, were provided for merely to make the seller more diligent in looking for a steamer to
transport the sulfur.
The NPC counter-argues that Namerco should have advised the NPC of the limitations on its authority to
negotiate the sale.
We agree with the trial court that Namerco is liable for damages because under article 1897 of the Civil
Code the agent who exceeds the limits of his authority without giving the party with whom he contracts
sufficient notice of his powers is personally liable to such party.
The truth is that even before the contract of sale was signed Namerco was already aware that its
principal was having difficulties in booking shipping space. In a cable dated October 16, 1956, or one day
before the contract of sale was signed, the New York supplier advised Namerco that the latter should not
sign the contract unless it (Namerco) wished to assume sole responsibility for the shipment (Exh. T).
106
Sycip, Namercos president, replied in his letter to the seller dated also October 16, 1956, that he had no
choice but to finalize the contract of sale because the NPC would forfeit Namercos bidders bond in the
sum of P45,100 posted by the Domestic Insurance Company if the contract was not formalized (Exh. 14,
14-A and Exh. V).
Three days later, or on October 19, the New York firm cabled Namerco that the firm did not consider
itself bound by the contract of sale and that Namerco signed the contract on its own responsibility (Exh.
W).
In its letters dated November 8 and 19, 1956, the New York corporation informed Namerco that since
the latter acted contrary to the formers cabled instructions, the former disclaimed responsibility for the
contract and that the responsibility for the sale rested on Namerco (Exh. Y and Y-1).
The letters of the New York firm dated November 26 and December 11, 1956 were even more revealing.
It bluntly told Namerco that the latter was never authorized to enter into the contract and that it acted
contrary to the repeated instructions of the former (Exh. U and Z). Said the vice-president of the New
York firm to Namerco:
"As we have pointed out to you before, you have acted strictly contrary to our repeated instructions and,
however regretfully, you have no one but yourselves to blame."cralaw virtua1aw library
The rule relied upon by the defendants-appellants that every person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent would apply in this case if the
principal is sought to be held liable on the contract entered into by the agent.
That is not so in this case. Here, it is the agent that it sought to be held liable on a contract of sale which
was expressly repudiated by the principal because the agent took chances, it exceeded its authority, and,
in effect, it acted in its own name.
As observed by Castan Tobeas, an agent "que haya traspasado los limites dew mandato, lo que equivale
a obrar sin mandato" (4 Derecho Civil Espaol, 8th Ed., 1956, p. 520).
As opined by Olivieri, "si el mandante contesta o impugna el negocio juridico concluido por el
mandatario con el tercero, aduciendo el exceso de los limites impuestos, es justo que el mandatario, que
ha tratado con engao al tercero, sea responsable personalmente respecto de el des las consecuencias
de tal falta de aceptacion por parte del mandate. Tal responsabilidad del mandatario se informa en el
principio de la falta de garantia de la existencia del mandato y de la cualidad de mandatario, garantia
impuesta coactivamente por la ley, que quire que aquel que contrata como mandatario este obligado a
garantizar al tercero la efectiva existencia de los poderes que afirma se halla investido, siempre que el
tercero mismo sea de buena fe. Efecto de tal garantia es el resarcimiento de los daos causados al
tercero como consecuencia de la negativa del mandante a reconocer lo actuado por el mandatario." (26,
part II, Scaveola, Codigo Civil, 1951, pp. 358-9).
Manresa says that the agent who exceeds the limits of his authority is personally liable "porque
realmente obra sin poderes" and the third person who contracts with the agent in such a case would be
defrauded if he would not be allowed to sue the agent (11 Codigo Civil, 6th Ed., 1972, p. 725).
The defendants also contend that the trial court erred in holding as enforceable the stipulation for
liquidated damages despite its finding that the contract was executed by the agent in excess of its
authority and is, therefore, allegedly unenforceable.
In support of that contention, the defendants cite article 1403 of the Civil Code which provides that a

contract entered into in the name of another person by one who has acted beyond his powers is
unenforceable.
We hold that defendants contention is untenable because article 1403 refers to the unenforceability of
the contract against the principal. In the instant case, the contract containing the stipulation for
liquidated damages is not being enforced against it principal but against the agent and its surety.
It is being enforced against the agent because article 1807 implies that the agent who acts in excess of
his authority is personally liable to the party with whom he contracted.
And that rule is complemented by article 1898 of the Civil Code which provides that "if the agent
contracts in the name of the principal, exceeding the scope of his authority, and the principal does not
ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of
the powers granted by the principal."
It is being enforced against the agent because article 1897 implies that the agent who acts in excess of
his authority is personally liable to the party with whom he contracted.
And the rule is complemented by article 1898 of the Civil Code which provides that "if the agent
contracts in the name of the principal, exceeding the scope of his authority, and the principal does not
ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of
the powers granted by the principal."
As priorly discussed, namerco, as agent, exceeded the limits of its authority in contracting with the NPC
in the name of its principal. The NPC was unaware of the limitations on the powers granted by the New
York firm to Namerco.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
The New York corporation in its letter of April 26, 1956 said:
"We hereby certify that National Merchandising Corporation . . . are our exclusive representatives in the
Philippines for the sale of our products.
"Furthermore, we certify that they are empowered to present our offers in our behalf in accordance with
our cabled or written instructions." (Exh. C).
Namerco never disclosed to the NPC the cabled or written instructions of its principal. For that reason
and because Namerco exceeded the limits of its authority, it virtually acted in its own name and not as
agent and it is, therefore, bound by the contract of sale which, however, is not enforceable against its
principal.
If, as contemplated in articles 1897 and 1898, Namerco is bound under the contract of sale, then it
follows that it is bound by the stipulation for liquidated damages in that contract.
Defendants contention that Namercos liability should be based on tort or quasi-delict, as held in some
American cases, like Mendelsohn v. Holton, 149 N.E. 38, 42 ALR 1307, is not well-taken. As correctly
argued by the NPC, it would be unjust and inequitable for Namerco to escape liability after it had
deceived the NPC.
Another contention of the defendants is that the Domestic Insurance Company is not liable to the NPC
because its bond was posted, not for Namerco, the agent, but for the New York firm which is not liable
on the contract of sale.
That contention cannot be sustained because it was Namerco that actually solicited the bond from the
107
Domestic Insurance Company and, as explained already, Namerco is being held liable under the contract
of sale because it virtually acted in its own name. It became the principal in the performance bond. In
the last analysis, the Domestic Insurance Company acted as surety for Namerco.
The rule is that "want of authority of the person who executes an obligation as the agent or
representative of the principal will not, as a general rule, affect the suretys liability thereon, especially in
the absence of fraud, even though the obligation is not binding on the principal" (72 C.J.S. 525).
Defendants other contentions are that they should be held liable only for nominal damages, that
interest should not be collected on the amount of damages and that the damages should be computed
on the basis of a forty-five day period and not for a period of one hundred fifteen days.
With respect to the imposition of the legal rate of interest on the damages from the filing of the
complaint in 1957, or a quarter of a century ago, defendants contention is meritorious. It would be
manifestly inequitable to collect interest on the damages especially considering that the disposition of
this case has been considerably delayed due to no fault of the defendants.
The contention that only nominal damages should be adjudged is contrary to the intention of the parties
(NPC, Namerco and its surety) because it is clearly provided that liquidated damages are recoverable for
delay in the delivery of the sulfur and, with more reason, for nondelivery.
No proof of pecuniary loss is required for the recovery of liquidated damages. the stipulation for
liquidated damages is intended to obviate controversy on the amount of damages. There can be no
question that the NPC suffered damages because its production of fertilizer was disrupted or diminished
by reason of the nondelivery of the sulfur.:
The parties foresaw that it might be difficult to ascertain the exact amount of damages for nondelivery of
the sulfur. So, they fixed the liquidated damages to be paid as indemnity to the NPC.
On the other hand, nominal damages are damages in name only or are in fact the same as no damages
(25 C.J.S. 466). It would not be correct to hold in this case that the NPC suffered damages in name only
or that the breach of contract was merely technical in character.
As to the contention that the damages should be computed on the basis of forty-five days, the period
required by a vessel leaving Galveston, Texas to reach Iligan City, that point need not be resolved in view
of our conclusion that the liquidated damages should be equivalent to the amount of the bidders bond
posted by Namerco.
NPCs appeal, L-33897. The trial court reduced the liquidated damages to twenty percent of the
stipulated amount. the NPC contends the it is entitled to the full amount of liquidated damages in the
sum of P360,572.80.
In reducing the liquidated damages, the trial court relied on article 2227 of the Civil Code which provides
that "liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if
they are iniquitous or unconscionable."
Apparently, the trial court regarded as an equitable consideration the persistent efforts of Namerco and
its principal to charter a steamer and that the failure of the New York firm to secure shipping space was
not attributable to its fault or negligence.
The trial court also took into account the fact that the selling price of the sulfur was P450,716 and that to
award as liquidated damages more than eighty percent of the price would not be altogether reasonable.
 108

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

On the other hand, the defendants argue that Namerco having acted as a mere agent, was not liable for
the liquidated damages stipulated in the alleged unenforceable contract of sale; that, as already noted,
Namercos liability should be based on tort or quasi-delict and not on the contract of sale; that if
Namerco is not liable, then the insurance company, its surety, is likewise not liable; that the NPC is
entitled only to nominal damages because it was able to secure the sulfur from another source (58-59
tsn November 10, 1960) and that the reduced award of stipulated damages is highly iniquitous,
considering that Namerco acted in good faith and that the NPC did not suffer any actual
damages.chanrobles law library : red

These contentions have already been resolved in the preceding discussion. We find no sanction or
justification for NPCs claim that it is entitled to the full payment of the liquidated damages computed by
its official.

Ruling on the amount of damages. A painstaking evaluation of the equities of the case in the light of
the arguments of the parties as expounded in their five briefs leads to the conclusion that the damages
due from the defendants should be further reduced to P45,100 which is equivalent to their bidders
bond or to about ten percent of the selling price of the sulfur.

WHEREFORE, the lower courts judgment is modified and defendants National Merchandising
Corporation and Domestic Insurance Company of the Philippines are ordered to pay solidarily to the
National Power Corporation the sum of P45,100.00 as liquidated damages. No costs.

SO ORDERED.

Radiowealth Finance Company v. Del Rosario
G.R. No. 138739 July 6, 2000
Lessons Applicable: Demurrer to Evidence, Promissory Note, When Demandable, Penalty, Interest (Credit
Transactions)
Laws Applicable: Rule 33 of the 1997 Rules of Court (Civil Procedure)
FACTS:
March 2, 1991: Spouses Vicente and Maria Sumilang del Rosario jointly and severally executed,
signed and delivered in favor of Radiowealth Finance Company a Promissory Note for P138,948 without
need of notice or demand, in instalments of P11,579.00 payable for 12 consecutive months leaving the
period for the instalments blank. Upon default, the late payment, 2.5% penalty charge per month shall
be added to each unpaid installment from due date thereof until fully paid.
June 7, 1993: Radiowealth filed a complaint for the collection of a sum of money before the Regional
Trial Court of Manila. During the trial, Jasmer Famatico, the credit and collection officer of Radiowealth,
presented in evidence the Spouses check payments, the demand letter dated July 12, 1991, Spouses
customers ledger card, another demand letter and Metropolitan Bank dishonor slips. Famatico
admitted that he did not have personal knowledge of the transaction or the execution of any of these
pieces of documentary evidence, which had merely been endorsed to him.
July 29, 1994: Spouses filed a Demurrer to Evidence for alleged lack of cause of action
RTC: Dismissed for Radiowealths failure to substantiate the claims, the evidence it had presented
being merely hearsay
CA: reversed and remanded the case for further proceedings
o During the pretrial, through judicial admissions or the spouses admitted the genuineness of the
Promissory Note and demand letter dated July 12, 1991. Their only defense was the absence of an
agreement on when the installment payments were to begin
ISSUES:
1. W/N the spouses can still present evidence after the appellate courts reversal of the dismissal on
demurer of evidence (Civil Procedure)
2. W/N the obligation is due and demandable (Credit Transaction)
HELD:
Petition is GRANTED. Appealed Decision is MODIFIED. Ordered to PAY P138,948, plus 2.5 percent
penalty charge per month beginning April 2, 1991 until fully paid, and 10 percent of the amount due as
attorneys fees.
1. NO.
Rule 33 of the 1997 Rules
o SECTION 1. Demurrer to evidence.After the plaintiff has completed the presentation of his
evidence, the defendant may move for dismissal on the ground that upon the facts and the law the
109
plaintiff has shown no right to relief. If his motion is denied, he shall have the right to present evidence.
If the motion is granted but on appeal the order of dismissal is reversed he shall be deemed to have
waived the right to present evidence.
Defendants who present a demurrer to the plaintiffs evidence retain the right to present their own
evidence, if the trial court disagrees with them; if the trial court agrees with them, but on appeal, the
appellate court disagrees with both of them and reverses the dismissal order, the defendants lose the
right to present their own evidence
The appellate court shall resolve the case and render judgment on the merits, inasmuch as a
demurrer aims to discourage prolonged litigations
2. Yes.
The act of leaving blank the due date of the first installment did NOT necessarily mean that the
debtors were allowed to pay as and when they could. While the specific date on which each installment
would be due was left blank, the Note clearly provided that each installment should be payable each
month. It also provided for an acceleration clause and a late payment penalty, both of which showed the
intention of the parties that the installments should be paid at a definite date. Per the acceleration
clause, the whole debt became due one month (April 2, 1991) after the date of the Note because the
check representing their first installment bounced.
Respondents started paying installments on the Promissory Note, even if the checks were dishonored
by their drawee bank.
The Note already stipulated a late payment penalty of 2.5 percent monthly to be added to each
unpaid installment until fully paid. Payment of interest was not expressly stipulated in the Note. Thus, it
should be deemed included in such penalty. Liquidated damages, however, should no longer be
imposed for being unconscionable. Such damages should also be deemed included in the 2.5 percent
monthly penalty. Furthermore, we hold that petitioner is entitled to attorneys fees, but only in a sum
equal to 10 percent of the amount due which we deem reasonable under the proven facts.
RADIOWEALTH v. DEL ROSARIO
Facts:
On March 2, 1991, Spouses Vicente and Maria Sumilang del Rosario (defendants), jointly and
severallyexecuted, signed and delivered in favor of Radiowealth Finance Company (plaintiff), a
Promissory Note (PN) for P138,948. The parties agreed that if default be made in the payment of any of
the installments or late paymentcharges thereon as and when the same becomes due and payable, the
total principal sum then remaining unpaid,together with the agreed late payment charges, shall at once
become due and payable without need of notice or demand.Defendants defaulted on the monthly
installments. Despite repeated demands, they failed to pay their obligationsunder their PN.
On June 7, 1993, plaintiff filed a Complaint for the collection of a sum of money before the RTCManila.
During the trial, Jasmer Famatico, the credit and collection officer of plaintiff, presented in evidence
thedefendants' check payments, the demand letter, the customers ledger card, another demand letter
andMetropolitan Bank dishonor slips. Famatico admitted that he did not have personal knowledge of the
transaction or the execution of any of these pieces of documentary evidence, which had merely been
endorsed to him.plaintiff formally offered its evidence and exhibits and rested its case. defendants filed
on a Demurrer to Evidencefor alleged lack of cause of action.
 110

The trial court dismissed the complaint for failure of petitioner to substantiate itsclaims, the evidence it this case, the conclusion that the installmentshad already became due and demandable is bolstered by
had presented being merely hearsay.On appeal, the CA reversed the trial court and remanded the case the fact that respondents started paying installments onthe PN, even if the checks were dishonored by
for further proceedings. According to theappellate court, the judicial admissions of respondents their drawee bank. Neither by their avowals that the obligation hadnot yet matured nor by their claim
established their indebtedness to the petitioner, on thegrounds that they admitted the due execution of that a period for payment should be fixed by a court.Petitioner has established not only a cause of action
the PN, and that their only defense was the absence of anagreement on when the installment payments against the respondents, but also a due and demandableobligation.
were to begin. Indeed, during the pretrial, they admitted thegenuineness not only of the PN, but also of
the demand letter. The obligation of the respondents had matured and they clearly defaulted when their checks
bounced.Per the acceleration clause, the whole debt became due one month after the date of the PN
Even if plaintiff's witness had no personalknowledge of these documents, they would still be admissible because the checkrepresenting their first installment bounced.The Note already stipulated a late
if the purpose for which they are produced is merelyto establish the fact that the statement or payment penalty of 2.5 percent monthly to be added to each unpaid installmentuntil fully paid. Payment
document was in fact made or to show its tenor, and such fact or tenor isof independent of interest was not expressly stipulated in the Note. Thus, it should be deemed included insuch
relevance.Besides, Articles 19 and 22 of the Civil Code require that every person must -- in the exercise penalty.In addition, the Note also provided that the debtors would be liable for attorneys fees
of rights and in theperformance of duties -- act with justice, give all else their due, and observe honesty equivalent to 25 percent of the amount due in case a legal action was instituted and 10 percent of the
and good faith. Further, therules on evidence are to be liberally construed in order to promote their same amount as liquidated damages.
objective and to assist the parties inobtaining just, speedy and inexpensive determination of an action.
Liquidated damages, however, should no longer be imposed for being unconscionable. Such
Issue: W/N the CA patently erred in ordering the remand of this case to the trial court instead of damagesshould also be deemed included in the 2.5 percent monthly penalty.
rendering judgment on the basis of petitioners evidence?
Petitioner is entitled to attorneys fees,but only in a sum equal to 10 percent of the amount due which
Held: we deem reasonable under the proven facts.The Court deems it improper to discuss respondents' claim
for moral and other damages. Not having appealed theCA Decision, they are not entitled to affirmative
Yes. While the CA correctly reversed the trial court, it erred in remanding the case "for further relief, as already explained earlier.
proceedings."Consequences of a Reversal, on Appeal, of a Demurrer to Evidence The old Rule 35 of the
Rules of Court was reworded under Rule 33 of the 1997 Rules, but the consequence onappeal of a
demurrer to evidence was not changed. Defendants who present a demurrer to the plaintiffs
evidenceretain the right to present their own evidence, if the trial court disagrees with them; if the trial
court agrees withthem, but on appeal, the appellate court disagrees with both of them and reverses the
dismissal order, thedefendants lose the right to present their own evidence. The appellate court shall, in
addition, resolve the case andrender judgment on the merits, inasmuch as a demurrer aims to
discourage prolonged litigations.In the case at bar, the trial court, acting on defendants' demurrer to
evidence, dismissed the Complaint on theground that plaintiff had adduced mere hearsay evidence.
However, on appeal, the appellate court reversed thetrial court because the genuineness and the due
execution of the disputed pieces of evidence had in fact beenadmitted by defendants.

Due and Demandable ObligationThe act of leaving blank the due date of the first installment did not
necessarily mean that the debtors were allowedto pay as and when they could. If this was the intention
of the parties, they should have so indicated in the PN.However, it did not reflect any such intention. The
Note expressly stipulated that the debt should be amortizedmonthly in installments of P11,579 for
twelve consecutive months. While the specific date on which eachinstallment would be due was left
blank, the Note clearly provided that each installment should be payable each month. Furthermore, it
also provided for an acceleration clause and a late payment penalty, both of which showedthe intention
of the parties that the installments should be paid at a definite date.

Had they intended that thedebtors could pay as and when they could, there would have been no need
for these two clauses.Verily, the contemporaneous and subsequent acts of the parties manifest their
intention and knowledge that themonthly installments would be due and demandable each month. In

THIRD DIVISION
[G.R. No. 153201. January 26, 2005]
JOSE MENCHAVEZ, JUAN MENCHAVEZ JR., SIMEON MENCHAVEZ, RODOLFO MENCHAVEZ, CESAR
MENCHAVEZ, REYNALDO, MENCHAVEZ, ALMA MENCHAVEZ, ELMA MENCHAVEZ, CHARITO
M. MAGA, FE M. POTOT, THELMA M. REROMA, MYRNA M. YBAEZ, and SARAH M.
VILLABER,petitioners, vs. FLORENTINO TEVES JR., respondent.
DECISION
PANGANIBAN, J.:
Avoid contract is deemed legally nonexistent. It produces no legal effect. As a general rule, courts
leave parties to such a contract as they are, because they are in pari delicto or equally at fault. Neither
party is entitled to legal protection.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the February 28,
2001 Decision[2] and the April 16, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 51144.
The challenged Decision disposed as follows:
WHEREFORE, the assailed decision is hereby MODIFIED, as follows:
1. Ordering [petitioners] to jointly and severally pay the [respondent] the amount of P128,074.40 as
actual damages, and P50,000.00 as liquidated damages;
2. Dismissing the third party complaint against the third party defendants;
3. Upholding the counterclaims of the third party defendants against the [petitioners. Petitioners] are
hereby required to pay [the] third party defendants the sum of P30,000.00 as moral damages for the
clearly unfounded suit;
4. Requiring the [petitioners] to reimburse the third party defendants the sum of P10,000.00 in the
concept of attorneys fees and appearance fees of P300.00 per appearance;
5. Requiring the [petitioners] to reimburse the third party defendants the sum of P10,000.00 as
exemplary damages pro bono publico and litigation expenses including costs, in the sum of P5,000.00.[4]
The assailed Resolution denied petitioners Motion for Reconsideration.
111
The Facts
On February 28, 1986, a Contract of Lease was executed by Jose S. Menchavez, Juan S. Menchavez
Sr., Juan S. Menchavez Jr., Rodolfo Menchavez, Simeon Menchavez, Reynaldo Menchavez, Cesar
Menchavez, Charito M. Maga, Fe M. Potot, Thelma R. Reroma, Myrna Ybaez, Sonia S. Menchavez, Sarah
Villaver, Alma S. Menchavez, and Elma S. Menchavez, as lessors; and Florentino Teves Jr. as lessee. The
pertinent portions of the Contract are herein reproduced as follows:
WHEREAS, the LESSORS are the absolute and lawful co-owners of that area covered by FISHPOND
APPLICATION No. VI-1076 of Juan Menchavez, Sr., filed on September 20, 1972, at Fisheries Regional
Office No. VII, Cebu City covering an area of 10.0 hectares more or less located at Tabuelan, Cebu;
NOW, THEREFORE, for and in consideration of the mutual covenant and stipulations hereinafter set
forth, the LESSORS and the LESSEE have agreed and hereby agree as follows:
1. The TERM of this LEASE is FIVE (5) YEARS, from and after the execution of this Contract of Lease,
renewable at the OPTION of the LESSORS;
2. The LESSEE agrees to pay the LESSORS at the residence of JUAN MENCHAVEZ SR., one of the LESSORS
herein, the sum of FORTY THOUSAND PESOS (P40,000.00) Philippine Currency, annually x x x;
3. The LESSORS hereby warrant that the above-described parcel of land is fit and good for the intended
use as FISHPOND;
4. The LESSORS hereby warrant and assure to maintain the LESSEE in the peaceful and adequate
enjoyment of the lease for the entire duration of the contract;
5. The LESSORS hereby further warrant that the LESSEE can and shall enjoy the intended use of the
leased premises as FISHPOND FOR THE ENTIRE DURATION OF THE CONTRACT;
6. The LESSORS hereby warrant that the above-premises is free from all liens and encumbrances, and
shall protect the LESSEE of his right of lease over the said premises from any and all claims whatsoever;
7. Any violation of the terms and conditions herein provided, more particularly the warranties above-
mentioned, the parties of this Contract responsible thereof shall pay liquidated damages in the amount
of not less than P50,000.00 to the offended party of this Contract; in case the LESSORS violated therefor,
they bound themselves jointly and severally liable to the LESSEE;
On June 2, 1988, Cebu RTC Sheriffs Gumersindo Gimenez and Arturo Cabigon demolished the
fishpond dikes constructed by respondent and delivered possession of the subject property to other
parties.[6] As a result, he filed a Complaint for damages with application for preliminary attachment
against petitioners. In his Complaint, he alleged that the lessors had violated their Contract of Lease,
specifically the peaceful and adequate enjoyment of the property for the entire duration of the Contract.
He claimed P157,184.40 as consequential damages for the demolition of the fishpond dikes, P395,390.00
as unearned income, and an amount not less than P100,000.00 for rentals paid.[7]

Respondent further asserted that the lessors had withheld from him the findings of the trial court
in Civil Case No. 510-T, entitled Eufracia Colongan and Paulino Pamplona v. Juan Menchavez Sr. and
Sevillana S. Menchavez. In that case involving the same property, subject of the lease, the Menchavez
spouses were ordered to remove the dikes illegally constructed and to pay damages and attorneys
fees.[8]
Petitioners filed a Third Party Complaint against Benny and Elizabeth Allego, Albino Laput,
Adrinico Che and Charlemagne Arendain Jr., as agents of Eufracia Colongan and Paulino Pamplona. The
third-party defendants maintained that the Complaint filed against them was unfounded. As agents of
their elderly parents, they could not be sued in their personal capacity. Thus, they asserted their own
counterclaims.[9]
After trial on the merits, the RTC ruled thus:
[The court must resolve the issues one by one.] As to the question of whether the contract of lease
between Teves and the [petitioners] is valid, we must look into the present law on the matter of
fishponds. And this is Pres. Decree No. 704 which provides in Sec. 24:
Lease of fishponds-Public lands available for fishpond development including those earmarked for
family-size fishponds and not yet leased prior to November 9, 1972 shall be leased only to qualified
persons, associations, cooperatives or corporations, subject to the following conditions.
1. The lease shall be for a period of twenty five years (25), renewable for another twenty five years;
2. Fifty percent of the area leased shall be developed and be producing in commercial scale within three
years and the remaining portion shall be developed and be producing in commercial scale within five
years; both periods begin from the execution of the lease contract;
3. All areas not fully developed within five years from the date of the execution of the lease contract
shall automatically revert to the public domain for disposition of the bureau; provided that a lessee who
failed to develop the area or any portion thereof shall not be permitted to reapply for said area or any
portion thereof or any public land under this decree; and/or any portion thereof or any public land under
this decree;
4. No portion of the leased area shall be subleased.
The Constitution, (Sec. 2 & 3, Art. XII of the 1987 Constitution) states:
Sec. 2 - All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces
of potential energy, fisheries, forests, or timber, wild life, flora and fauna and other natural resources are
owned by the state.
Sec. 3 - Lands of the public domain are classified into agricultural, forest or timber, mineral lands and
national parks. Agricultural lands of the public domain may be further classified by law according to the
uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural
lands x x x.
112
As a consequence of these provisions, and the declared public policy of the State under the Regalian
Doctrine, the lease contract between Florentino Teves, Jr. and Juan Menchavez Sr. and his family is a
patent nullity. Being a patent nullity, [petitioners] could not give any rights to Florentino Teves, Jr. under
the principle: NEMO DAT QUOD NON HABET - meaning ONE CANNOT GIVE WHAT HE DOES NOT HAVE,
considering that this property in litigation belongs to the State and not to [petitioners]. Therefore, the
first issue is resolved in the negative, as the court declares the contract of lease as invalid and void ab-
initio.
On the issue of whether [respondent] and [petitioners] are guilty of mutual fraud, the court rules that
the [respondent] and [petitioners] are in pari-delicto. As a consequence of this, the court must leave
them where they are found. x x x.
x x x. Why? Because the defendants ought to have known that they cannot lease what does not belong
to them for as a matter of fact, they themselves are still applying for a lease of the same property under
litigation from the government.
On the other hand, Florentino Teves, being fully aware that [petitioners were] not yet the owner[s], had
assumed the risks and under the principle of VOLENTI NON FIT INJURIA NEQUES DOLUS - He who
voluntarily assumes a risk, does not suffer damage[s] thereby. As a consequence, when Teves leased the
fishpond area from [petitioners]- who were mere holders or possessors thereof, he took the risk that it
may turn out later that his application for lease may not be approved.
Unfortunately however, even granting that the lease of [petitioners] and [their] application in 1972 were
to be approved, still [they] could not sublease the same. In view therefore of these, the parties must be
left in the same situation in which the court finds them, under the principle IN PARI DELICTO NON
ORITOR ACTIO, meaning[:] Where both are at fault, no one can found a claim.
On the third issue of whether the third party defendants are liable for demolishing the dikes pursuant to
a writ of execution issued by the lower court[, t]his must be resolved in the negative, that the third party
defendants are not liable. First, because the third party defendants are mere agents of Eufracia Colongan
and Eufenio Pamplona, who are the ones who should be made liable if at all, and considering that the
demolition was pursuant to an order of the court to restore the prevailing party in that Civil Case 510-T,
entitled: Eufracia Colongan v. Menchavez.
After the court has ruled that the contract of lease is null and void ab-initio, there is no right of the
[respondent] to protect and therefore[,] there is no basis for questioning the Sheriffs authority to
demolish the dikes in order to restore the prevailing party, under the principle VIDETUR NEMO
QUISQUAM ID CAPERE QUOD EI NECESSE EST ALII RESTITUERE - He will not be considered as using force
who exercise his rights and proceeds by the force of law.
WHEREFORE, in view of all foregoing [evidence] and considerations, this court hereby renders judgment
as follows:
1. Dismissing the x x x complaint by the [respondent] against the [petitioners];
2. Dismissing the third party complaint against the third party defendants;

3. Upholding the counterclaims of the third party defendants against the [petitioners. The petitioners]
are hereby required to pay third party defendants the sum of P30,000.00 as moral damages for this
clearly unfounded suit;
4. Requiring the [petitioners] to reimburse the third party defendants the sum of P10,000.00 in the
concept of attorneys fees and appearance fees of P300.00 per appearance;
5. Requiring the [petitioners] to pay to the third party defendants the sum of P10,000.00 as exemplary
damages probono publico and litigation expenses including costs, in the sum
of P5,000.00.[10](Underscoring in the original)
Respondent elevated the case to the Court of Appeals, where it was docketed as CA-GR CV No.
51144.
Ruling of the Court of Appeals
The CA disagreed with the RTCs finding that petitioners and respondent were in pari delicto. It
contended that while there was negligence on the part of respondent for failing to verify the ownership
of the subject property, there was no evidence that he had knowledge of petitioners lack of
ownership.[11] It held as follows:
x x x. Contrary to the findings of the lower court, it was not duly proven and established that Teves had
actual knowledge of the fact that [petitioners] merely usurped the property they leased to him. What
Teves admitted was that he did not ask for any additional document other than those shown to him, one
of which was the fishpond application. In fact, [Teves] consistently claimed that he did not bother to ask
the latter for their title to the property because he relied on their representation that they are the lawful
owners of the fishpond they are holding for lease. (TSN, July 11, 1991, pp. 8-11)[12]
The CA ruled that respondent could recover actual damages in the amount of P128,074.40. Citing
Article 1356[13] of the Civil Code, it further awarded liquidated damages in the amount of P50,000,
notwithstanding the nullity of the Contract.[14]
Hence, this Petition.[15]
The Issues
Petitioners raise the following issues for our consideration:
1. The Court of Appeals disregarded the evidence, the law and jurisprudence when it modified the trial
courts decision when it ruled in effect that the trial court erred in holding that the respondent and
petitioners are in pari delicto, and the courts must leave them where they are found;
113
2. The Court of Appeals disregarded the evidence, the law and jurisprudence in modifying the decision of
the trial court and ruled in effect that the Regional Trial Court erred in dismissing the respondents
Complaint.[16]
The Courts Ruling
The Petition has merit.
Main Issue:
Were the Parties in Pari Delicto?
The Court shall discuss the two issues simultaneously.
In Pari Delicto Rule
on Void Contracts
The parties do not dispute the finding of the trial and the appellate courts that the Contract of
Lease was void.[17] Indeed, the RTC correctly held that it was the State, not petitioners, that owned the
fishpond. The 1987 Constitution specifically declares that all lands of the public domain,
waters, fisheries and other natural resources belong to the State.[18] Included here are fishponds, which
may not be alienated but only leased.[19] Possession thereof, no matter how long, cannot ripen into
ownership.[20]
Being merely applicants for the lease of the fishponds, petitioners had no transferable right over
them. And even if the State were to grant their application, the law expressly disallowed sublease of the
fishponds to respondent.[21] Void are all contracts in which the cause, object or purpose is contrary to
law, public order or public policy.[22]
A void contract is equivalent to nothing; it produces no civil effect.[23] It does not create, modify or
extinguish a juridical relation.[24] Parties to a void agreement cannot expect the aid of the law; the courts
leave them as they are, because they are deemed in pari delicto or in equal fault.[25] To this rule,
however, there are exceptions that permit the return of that which may have been given under a void
contract.[26] One of the exceptions is found in Article 1412 of the Civil Code, which states:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by
virtue of the contract, or demand the performance of the others undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason
of the contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault,
may demand the return of what he has given without any obligation to comply with his promise.
On this premise, respondent contends that he can recover from petitioners, because he is an
innocent party to the Contract of Lease.[27] Petitioners allegedly induced him to enter into it through
serious misrepresentation.[28]

Finding of In Pari Delicto:
A Question of Fact
The issue of whether respondent was at fault or whether the parties were in pari delicto is a
question of fact not normally taken up in a petition for review on certiorari under Rule 45 of the Rules of
Court.[29] The present case, however, falls under two recognized exceptions to this rule.[30] This Court is
compelled to review the facts, since the CAs factual findings are (1) contrary to those of the trial
court;[31] and (2) premised on an absence of evidence, a presumption that is contradicted by the
evidence on record.[32]
Unquestionably, petitioners leased out a property that did not belong to them, one that they had
no authority to sublease. The trial court correctly observed that petitioners still had a pending lease
application with the State at the time they entered into the Contract with respondent.[33]
Respondent, on the other hand, claims that petitioners misled him into executing the
Contract.[34] He insists that he relied on their assertions regarding their ownership of the property. His
own evidence, however, rebuts his contention that he did not know that they lacked ownership. At the
very least, he had notice of their doubtful ownership of the fishpond.
Respondent himself admitted that he was aware that the petitioners lease application for the
fishpond had not yet been approved.[35] Thus, he knowingly entered into the Contract with the risk that
the application might be disapproved. Noteworthy is the fact that the existence of a fishpond lease
application necessarily contradicts a claim of ownership. That respondent did not know of petitioners
lack of ownership is therefore incredible.
The evidence of respondent himself shows that he negotiated the lease of the fishpond with both
Juan Menchavez Sr. and Juan Menchavez Jr. in the office of his lawyer, Atty. Jorge Esparagoza.[36] His
counsels presence during the negotiations, prior to the parties meeting of minds, further debunks his
claim of lack of knowledge. Lawyers are expected to know that fishponds belong to the State and are
inalienable. It was reasonably expected of the counsel herein to advise his client regarding the matter of
ownership.
Indeed, the evidence presented by respondent demonstrates the contradictory claims of
petitioners regarding their alleged ownership of the fishpond. On the one hand, they claimed ownership
and, on the other, they assured him that their fishpond lease application would be approved.[37] This
circumstance should have been sufficient to place him on notice. It should have compelled him to
determine their right over the fishpond, including their right to lease it.
The Contract itself stated that the area was still covered by a fishpond application.[38] Nonetheless,
although petitioners declared in the Contract that they co-owned the property, their erroneous
declaration should not be used against them. A cursory examination of the Contract suggests that it was
drafted to favor the lessee. It can readily be presumed that it was he or his counsel who prepared it -- a
matter supported by petitioners evidence.[39] The ambiguity should therefore be resolved against him,
being the one who primarily caused it.[40]
The CA erred in finding that petitioners had failed to prove actual knowledge of respondent of the
ownership status of the property that had been leased to him. On the contrary, as the party alleging the
fact, it was he who had the burden of proving through a preponderance of evidence[41] -- that they
misled him regarding the ownership of the fishpond. His evidence fails to support this contention.
Instead, it reveals his fault in entering into a void Contract. As both parties are equally at fault, neither
may recover against the other.[42]
Liquidated Damages
Not Proper
114
The CA erred in awarding liquidated damages, notwithstanding its finding that the Contract of
Lease was void. Even if it was assumed that respondent was entitled to reimbursement as provided
under paragraph 1 of Article 1412 of the Civil Code, the award of liquidated damages was contrary to
established legal principles.
Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of a
breach thereof.[43] Liquidated damages are identical to penalty insofar as legal results are
concerned.[44] Intended to ensure the performance of the principal obligation, such damages are
accessory and subsidiary obligations.[45] In the present case, it was stipulated that the party responsible
for the violation of the terms, conditions and warranties of the Contract would pay not less than P50,000
as liquidated damages. Since the principal obligation was void, there was no contract that could have
been breached by petitioners; thus, the stipulation on liquidated damages was inexistent. The nullity of
the principal obligation carried with it the nullity of the accessory obligation of liquidated damages.[46]
As explained earlier, the applicable law in the present factual milieu is Article 1412 of the Civil
Code. This law merely allows innocent parties to recover what they have given without any obligation to
comply with their prestation. No damages may be recovered on the basis of a void contract; being
nonexistent, the agreement produces no juridical tie between the parties involved. Since there is no
contract, the injured party may only recover through other sources of obligations such as a law or a
quasi-contract.[47] A party recovering through these other sources of obligations may not claim liquidated
damages, which is an obligation arising from a contract.
WHEREFORE, the Petition is GRANTED and the assailed Decision and Resolution SET ASIDE. The
Decision of the trial court is hereby REINSTATED.
No pronouncement as to costs.
SO ORDERED.
MENCHAVEZ v. TEVES
G.R. No. 153201 January 26, 2005
This is a case to recover damages from a lease contract between the parties.
Facts:
February 28, 1986: Menchavez (lessors) and Florentino Teves Jr. (lessee) executed a contract of lease.
June 2, 1988: Cebu RTC Sheriffs demolished the fishpond dikes constructed by the the respondent and
delivered the possession of the subject roperty to the plaintiffs.
Respondent filed a complaint for damages and alleged that the lessors have violated their contract,
specifically the peaceful and adequate enjoyment of the property for the entire duration of the contract
RTC declared the contract of lease between the parties as void ab initio as it is owned by the state
based on the Regalian Doctrine. RTC ruled in favor of the Petitioners.
Respondent elevated the case to CA.
 115

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

Hence, this petition.

Issue

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

Held

No. It was the state who owned the fishpond. The 1987 Constitution specifically declares that all lands of
the public domain, waters, fisheries and other natural resources belong to the State. Included here are
fishponds, which may not be alienated but only leased. Possession thereof, no matter how long, cannot
ripen into ownership. Being merely applicants for the lease of the fishponds, petitioners had no
transferable right over them. And even if the State were to grant their application, the law expressly
disallowed sublease of the fishponds to respondent. The contract of lease is void ab initio. No damages
may be recovered from a void contract.

WHEREFORE, the Petition is GRANTED and the assailed Decision and Resolution SET ASIDE. The Decision
of the trial court is hereby REINSTATED

EN BANC
[G.R. No. L-22050. June 13, 1968.]
PAN PACIFIC COMPANY (PHILIPPINES), Plaintiff-Appellee, v. PHILIPPINE ADVERTISING CORPORATION
and JOHN W. MEARS, Defendants, PHILIPPINE ADVERTISING CORPORATION,Defendant-Appellant.
Taada Carreon & Taada for Plaintiff-Appellee.
Felix S. Falgui, for Defendant-Appellant.
SYLLABUS
1. CIVIL LAW; SALE; SALES INVOICE; PROVISION FOR ATTORNEYS FEES AND INTERESTS IN DELIVERY
INVOICES, BINDING UPON BUYER. Where the delivery invoices carry a provision for interests and
attorneys fees at 12% and 25% respectively, in addition to the costs for overdue accounts and for costs
of collection, the acceptance of the equipment, supplies and accessories mentioned in said invoices by
the buyer and the latters use of them is an implied conformity to the terms of the invoices and he is
bound thereby.
2. ID.; DAMAGES; MORAL DAMAGES; RECOVERABLE FOR WANTON REFUSAL TO PAY JUST OBLIGATION.
Where the defendants, in utter disregard of the rights of the plaintiff, had refused deliberately and
wantonly to pay the plaintiff what is justly due the latter, they are liable for moral damages.
3. ID.; ID.; EXEMPLARY OR CORRECTIVE DAMAGES, RECOVERABLE IN INSTANT CASE. Under Article
2232 of the Civil Code, the court may award exemplary damages in contracts and quasi-contracts if the
defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. Thus where the
defendant, aside from the down payment he had made on the installation of the bowling alleys, had
refused to pay the balance thereof and the cost of the howling and billiard accessories despite his
promise to pay such balance in installments, and where his attitude towards plaintiff was characterized
by arrogance as reflected in his letters which were replete with unsavory and discourteous remarks, the
plaintiff is entitled to moral and exemplary damages.
4. ATTORNEY AND CLIENT; ATTORNEYS FEES; DEMANDABLE WHERE PLAINTIFF IS AWARDED EXEMPLARY
DAMAGES. Plaintiff is entitled to attorneys fees in accordance with Article 2208 of the Civil Code
where he has been awarded exemplary damages because the defendant had acted in gross and evident
bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim.
5. ID.; ID.; BASES FOR. Considering the lengthy pleadings, the voluminous records, the lengthy and
protracted trial and the professional standing of counsel, attorneys fees in the amount of P15,000.00
may be charged against the defendants.
DECISION
CONCEPCION, C.J.:
116
Appeal by defendant Philippine Advertising Corporation from a decision of the Court of First Instance of
Manila, the dispositive part of which reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendant Philippine
Advertising Corporation under the first cause of action, P92,406.73 with interest at the rate of 8% per
annum from January 22, 1951, until paid; P23,622.90 under the second, third, and fourth causes of
action, with interest at the rate of 12% per annum from May 1, 1951, until paid; P20,000.00 by way of
moral and exemplary damages under the fifth cause of action; and P15,000.00 by way of attorneys fees,
and the costs of the suit. Defendants counterclaims are hereby dismissed for lack of merit." (Record on
Appeal, pp. 556-657.).
This is an action for the recovery, from said Corporation and its president, defendant John W. Mears, of
several sums of money under five (5) causes of action, namely; 1)P92,406.73, as the alleged balance of
the cost of eighteen (18) bowling alleys and additional equipment thereof, and the installation thereof;
2) P11,703.00, as the price of two (2) carom and three (3) pocket tables, with their equipment, together
with two (2) sets of ivory balls and one (1) revolving cue rack; 3) P3,369.90, as the costs of miscellaneous
billiard and bowling accessories and equipment; 4) P8,550.00, as the cost of 168 sets of duck pins; and 5)
25% of the aggregate amount due under the first four (4) causes of action, as exemplary or corrective
damages. Plaintiff prays, also, that the defendants be sentenced to pay interest, attorneys fees, and the
costs.
In their answer, the defendants admitted some allegations of the complaint, denied other allegations
thereof, and set up special defenses, as well as four (4) counterclaims. They prayed that plaintiffs
complaint be dismissed and that plaintiff be sentenced to pay damages in the aggregate sum of
P763,000.00.
The factual background of the first cause of action is set forth in the appealed decision, from which we
quote:jgc:
"The defendants had payments coming to them from the War Damage Commission. Wilfred Hurst had
worked together with John W. Mears of the defendant corporation prior to the war. In 1950, Hurst and
Mears met, and the question of defendant war damage payments in the Philippines came up in the
conversation. Hurst, who was then Vice-President of the plaintiff corporation 1 suggested to Mears that
the defendant reinvest part of the war damage payment due defendant corporation in bowling alleys.
The plaintiff was then distributor of Brunswick-Balke-Collender Company of the United States,
manufacturer of bowling alleys. Mears was interested, and, accordingly, secured the approval of the War
Damage Commission to re-invest part of the war damage payment due the defendant Philippine
Advertising Corporation in bowling alleys. After continuous negotiations, plaintiff, thru Hurst, and
defendant, thru Mears, finally came into an agreement. This was in the form of a letter addressed by the
plaintiff to the defendant and which was approved and accepted by the defendant corporation, thru
Mears.
The pertinent portion of the letter-agreement marked Exhibit A 2 and which is one of the subjects of the
controversy between the plaintiff and the defendant reads as follows:
With reference to our verbal conversations regarding bowling alleys, we hereby submit our firm
quotation of P85,948.42 to cover the cost of installing twelve (12) Brunswick Bowling Alleys in any
location acquired by you in the City of Manila or its immediate suburbs. This quotation includes the cost
of the alleys, additional equipment and installation cost but does not include freight charges for
accessories that will have to be ordered from the United States. Such freight charges will be charged to
you at actual cost upon the arrival of the shipment. Then follows a detailed list of the materials which
were included and additional equipment for 6 months maintenance of alleys and the terms of payment.
 117

The price was payable 50% upon the signing of the agreement and the balance in six (6) monthly
installments, the first installment falling due on the first day of work on the installation of alleys. 3 The 6. Sales Tax 10,430.30 30,661.90
one-year guarantee against materials and defective workmanship was allowed by the plaintiff company.
This was, as stated above, accepted by the Philippine Advertising Corporation, thru John W. Mears,
President. Attached to the letter, Exhibit A, was, according to Hurst, a breakdown of the bowling alley
quotation. Subsequently, the defendants ordered and the plaintiff supplied to the defendants another 7. Additional items subse-
six (6) Brunswick bowling alleys. The agreement with respect to them is embodied in the letter-
agreement Annex B, 4 dated October 2, 1950. The pertinent portion of this letter reads as follows: quently ordered by

As explained to you verbally we can no longer offer a firm quotation as we have received advice from defendants:chanrob1es virtual 1aw library
the Brunswick-Balke-Collender Company that all prices are subject to existing price at time merchandise
leaves the factory. For this reason we are submitting to you our tentative quotation of P48,107.24 to a. 10 opera chairs 215.00
cover the cost of installing 6 additional alleys in your acquired location. It is understood that any
adjustments necessary will be made upon receipt of final invoices from the Brunswick-Balke-Collender b. Score pencils 20.25
Company.The above tentative quotation includes the cost of the alleys, cost of additional equipment
and installation cost but does not include any freight charges for accessories that will have to be ordered c. Graphite refills 3.80 239.05
from the United States. Such freight charges will be charged to you at actual cost upon arrival of the
shipment.

"Then follows a detailed list of the items that the supplier included in the quotation and additional 8. Difference between cost of:
equipment for 6 months maintenance of alleys. According to the letter, it was also agreed that
defendants were to pay 8% interest on the monthly payment and it was also understood that any luxury Upholstered seats
or additional sales tax that might be imposed by the government would be for defendants account. This
letter was also accepted by defendant corporation thru John W. Mears." installed by

The sum of P92,406.73 sought to be recovered by the plaintiff, under its first cause of action, allegedly plaintiff 4,100.00
represents the unpaid balance of the cost of 18 bowling alleys and additional equipment under the
agreements Exhibits A and D, computed as follows: and Veneer seats originally

1. Cost of 12 bowling ordered by defendants 2,150.00 1,950.00 P166,906.61

alleys & add. equip-

ment, including LESS:chanrob1es virtual 1aw library

installation P85,948.42 1. Paid in advance P67,027.83

2. Cost of 6 bowling 2. Cost of 5 sets

alleys & add. equip- of bowling settees

ment, including included in defendants

installation 48,107.24 P134,055.66 orders but not installed

by plaintiff 6,520.00

3. Inland Freight 8,991.98 3. 2% Luxury Tax

4. Ocean Freight 10,392.98 thereon 943.28

5. Arrastre 846.84 4. Bowling score crayons 8.77 74,499.88


the drafting of contracts. But that evidence and circumstances proved, in the mind of the Court, that, as
192,406.73
Appellant denies plaintiffs right to collect this balance upon the ground that: 1) the sum of P30,661.90,
representing the aggregate amount of inland freight, ocean freight, arrastre and sales tax, should be
deemed included in the price agreed upon; 2) eight (8) of the bowling alleys installed by the plaintiff
were "second-hand", not the new ones ordered by the defendants; 3) the bowling alleys installed by the
plaintiff were of a lower quality than those ordered by the defendants; and 4) the installations made by
the plaintiff were defective.
As regards inland and ocean freights, the arrastre and the sales tax, plaintiff alleges that these charges
are due from the defendants, because Exhibits A and D explicitly provide that the prices therein quoted
include "the cost of the alleys, additional equipment and installation cost but does not include freight
charges for accessories that will have to be ordered from the U.S." Moreover, Exhibit D explicitly declares
"that any luxury or additional sales tax that may be imposed by the Philippine Government upon the
arrival of the merchandise" would be for defendants account. Upon the other hand, appellant asserts
that none of the goods supplied by plaintiff are "accessories" covered by the aforementioned provision
in Exhibits A and D, and that in resolving the issue as to what are "accessories", the Court cannot go
beyond the terms of said exhibits.
As correctly noted in the decision appealed from,.
". . . defendants contention would be correct if the plaintiff had not alleged in its complaint that the true
and real agreement of the parties was that such charges and taxes were not included in the firm
quotation expressed in Exhibits A and D, but that it was understood between the parties that such
freight charges would be borne by the defendants. . . .
x x x"
". . . plaintiffs interpretation or, to be exact, Hursts understanding of the term accessories, includes all
the parts of the bowling alley the alleys itself, the pinballs, the pins, the ball, the pinspotters, etc., as
enumerated in detail in the letter-agreement, Exhibit A. On the other hand, neither the defendant nor its
President, Mears, had given the definition of the term accessories. As a matter of fact, defendant
Mears, in spite of his long deposition and defendants, in spite of the voluminous evidence, had not
stated for what arrastre charges or what freight charges defendant is liable to the plaintiff.
"Plaintiffs contention is that the prices listed in Exhibit A were a firm quotation, f.o.b., that is, delivered
in the United States, and this price is the same as that stated in the breakdown attached to Exhibit A. In
fact, defendant does not deny that the price quoted in Exhibit A is a firm quotation and the fact is
confirmed by the letter, Exhibit D, dated October 2, 1950, in which Hurst stated that they could no
longer offer a firm quotation as they had received advice from the Brunswick-Balke-Collender Company
that all prices were subject to existing prices at the time the merchandise leaves the factory. When Hurst
stated in Exhibit D that they could no longer offer a firm quotation, he was evidently referring to the
quotation in the letter Exhibit A. As stated by Hurst, he could not at the time have been given a
quotation which would include freight charges, taxes and other charges which might be imposed by the
government, because he did not know exactly at that time what the freight charges and other charges
would amount to and that it was not their intention to make money on these charges. It was for that
reason that Hurst, in his letter, said that the quotation did not include freight charges for the accessories
which were to be imported from the Unites States. In contending that the quotation in the letters
Exhibits A and D defendant has clung to the ambiguity in the letters-agreement. This ambiguity arises
118
from the fact that the letter were hurriedly done by a man who is not a lawyer and with no experience in
contended by the plaintiff, the quotations stated in the letter-agreement were from quotations f.o.b.
and did not include freight charges, taxes, and other charges which might be imposed by the
government and which must be borne by the defendants." (Record on Appeal, pp. 635-637.)
We find no plausible reason to disturb the foregoing finding. To begin with, it connotes a determination
of the relative credibility of the testimony of plaintiffs witness, Wilfred Hurst, when contrasted with that
of defendant John W. Mears, which the lower court, in effect, found unworthy of credence and on which
we agree.
Moreover, strictly speaking, the term "bowling alley" does not apply except to one already installed.
Prior thereto, the materials necessary to install and operate a "bowling alley" do not constitute such
"alley." They are merely "parts" of, and, in this sense, "accessories" to, the principal, namely, the
"bowling alley", once said "parts" or "accessories" have been duly assembled. The goods ordered by and
delivered to the defendants included, aside from alley beds, pinspotters, standard bell return sections,
bottom storage rails for standard ball return, pit cushions, pit mats, duck pins, duck pin balls, score
sheets, marking pencils, pin balls, crown ten pins, bowlers settees, spectators opera chairs, bowling
shoes, floor machines, square bottom hand chalk, special league record books, etc. If none of these
goods were "accessories", as contended by the defendants, then the proviso under consideration would
be meaningless.
Again, it has been satisfactorily established that the prices quoted for each of the goods specified in the
lists attached to Exhibits A and D are those charged "f.o.b." in the catalogue of Brunswick-Balke-
Collender Co., of which plaintiff is a distributor. Hence, plaintiff made in Exhibit A a "firm" offer, whereas
in Exhibit B it stated that the prices therein were merely "tentative" and that a "firm" offer could not be
made therein, owing to the fact that "all prices are subject to the existing price at the time the
merchandise leaves the factory." It is thus clear that the "firm offer" made in Exhibit A and the prices
quoted in the "breakdown" lists attached thereto and to Exhibit D, refer to the prices "at the time the
merchandise leaves the factory" and, accordingly, to the f.o.b prices quoted in the catalogue of the
manufacturer not to the prices of the goods placed at the premises of its buyer, over 8,000 miles away
from the factory.
This conclusion is bolstered up by the fact that plaintiff had some goods available on hand, such as those
involved in the second, third and fourth causes of action. Indeed, the defendants have introduced
evidence to the effect that plaintiff, likewise, had some second-hand bowling alleys in stock. The subject-
matter of Exhibits A and D were, however, new bowling alleys and additional equipment, practically all of
which had still to be ordered by the plaintiff from the United States. Hence, the proviso in Exhibits A and
D: "This quotation includes the cost of the alleys, additional equipment and installation cost but does not
include freight charges" not for all accessories, but only "for accessories that will have to be
ordered in the United States." Consequently Exhibits A and D continue "such freight charges will be
charged to you at actual cost upon the arrival of the shipment." In other words, the freight charges for all
goods shipped from the United States would be on defendants account.
Needless to say, there is every reason to believe that defendants would not have agreed to the prices
specified in Exhibits A and B without first ascertaining the prices prevailing in the United States, from
which the goods ordered would come, and, hence, without finding that said Exhibits A and B were based
upon said "f.o.b." prices.
It is next argued that eight (8) of the eighteen (18) alleys installed by plaintiff were used or second-hand
bowling alleys, not the new ones ordered by appellant; that, sometime in August, 1950, plaintiff
purchased from Clark Field several second-hand bowling alleys which were brought to plaintiffs

workshop at Sta. Mesa, Manila; that these second-hand bowling alleys were repaired and painted in said
workshop in January and February, 1951; and that eight (8) of the bowling alleys installed by the plaintiff
in appellants premises came from this stock of second-hand bowling alleys purchased from Clark Field.
In support of this contention, defendants introduced the testimony of Vicente Aquino, a former
carpenter of the plaintiff, who said that he was one of those who had repaired second-hand bowling
alleys in plaintiffs workshop at Sta. Mesa; that he was, also, on board the trailer that allegedly brought
second-hand bowling alleys to appellants premises at Isaac Peral Street; and that, while these second-
hand bowling alleys were being installed in said premises, defendant Mears complained to Hurst that
said bowling alleys were not new.
The lower court found the evidence for the defense on this point unworthy of credence for, despite said
alleged discovery that eight (8) of the bowling alleys installed by plaintiff were second-hand, "Mears
made no official or written complaint or protest to the plaintiff" about it. The court added:jgc:
". . . The only complaint of Mears was that they might not be able to open and inaugurate the bowling
alleys on March 1, 1951, the target date set by the parties, a fear aggravated by the fact that invitations
had already been sent out by the defendants. Nowhere in his long letter, consisting of almost three
pages of typewritten, single space, Exhibit O, was there any mention that second-hand bowling alleys
were installed by the plaintiff . The long letter was devoted to the fear that they might not be able to
open the bowling alleys on March 1, 1951. In the letter of Mears dated April 28, 1951, Exhibit S, or
almost two months after the opening of the bowling alleys, he complained about the defects and faults
of bowling alley No. 8 and demanded that repairs be immediately made. Nowhere again in his letter did
Mears complain that second-hand bowling alleys had been installed by the plaintiff. And in the letter of
John W. Mears to Brunswick-Balke-Collender Company dated February 17, 1951, Exhibit U- 2, his
complaint was that the installation was not being given the proper attention by the plaintiff. Nowhere
did he complain that second-hand bowling alleys were installed by the plaintiff.
"Considering the character of John W. Mears, who, as it appears to the Court, complains about almost
everything to justify the non- payment of the balance still due from him, the Court cannot understand
why he had not mentioned to the plaintiff or the Brunswick-Balke- Collender Company that second-hand
bowling alleys had been installed by the plaintiff. Moreover, it seems to the Court that it was quite
improbable, if not impossible, for the plaintiff to bring eight bowling alleys in two truckloads to
defendants premises in Isaac Peral and re-load eight bowling alleys, without the same coming to the
knowledge of Mears, who, by his own admission, was at the bowling alley every day, and in the presence
of the men who were constructing the building for the bowling alley, considering that the second-hand
bowling alleys were not crated and that new ones which came from the United States and delivered
directly to Isaac Peral were crated." (Record on Appeal, pp. 640-641. Emphasis supplied.)
Upon the other hand, apart from refuting the testimony of Aquino and other witnesses for the defense
thereon, plaintiffs witnesses testified that each and every one of the 18 bowling alleys it had installed in
appellants premises were new. This was confirmed by J.E. Whitaker, for many years export manager of
Brunswick-Balke-Collender Co., and an expert in the installation and maintenance of bowling alleys, who
inspected defendants alleys in November 1951. In his deposition, which was duly introduced as part of
plaintiffs evidence and fully corroborated by his report on the result of his aforementioned inspection,
Whitaker positively declared that said alleys were new ones, not second-hand alleys, as now claimed by
the defendants. What is more, he found them to be" first class Brunswick pre-fabricated sectional alleys,
properly installed, but, unfortunately, not properly maintained."cralaw virtua1aw library
As regards the quality of the bowling alleys installed by the plaintiff, appellant says they were of the
Liberty type, although their agreement allegedly called for bowling alleys of the Centennial type. This
pretense is not borne out by Exhibits A and D, which do not specify the type of bowling alleys ordered by
119
the defendants.
After arguing that, as regards the meaning of the term "accessories", said exhibits contain everything
agreed upon, defendants would have us believe that there had been representations by the plaintiff and
an oral understanding with the defendants that they would have the finest type of bowling alleys, and
that these were of the Centennial type. If this pretense were true, appellant would have surely protested
in writing against the alleged violation of said understanding; but its correspondence with the plaintiff is
significantly silent thereon.
Again, the aforementioned J. E. Whitaker affirmed that "Liberty alleys are the standard alleys as
manufactured by Brunswick before the war and up to the present;" that "the name Liberty . . . was
assigned to the alleys during the war, to go along with the trend of times" and was "applied to bowling
alley beds manufactured by Brunswick;" that "this was done as a matter of sales appeal, and for no other
reason;" that Brunswick, likewise, manufactures bowling alleys of the so-called Centennial type, the main
characteristic of which is that it has "tongued and groved" bedstocks; that this is "merely a sales
feature," which "adds nothing to the life and serviceability of the product;" that "to equal the wearing
qualities of the Liberty alleys," the Centennial alleys "had to be manufactured out of thicker bedstock;"
and that, in fact, Liberty alleys last longer than Centennial alleys.
In a vain attempt to offset this evidence, the defense merely introduced the testimony of defendant
Mears, who did no more than indulge in surmises and speculations, which are devoid of probative value.
Lastly, appellant brands the installation made by the plaintiff as defective and tried to prove that within
the first months of the operation of the alleys in question, as many as twenty-eight (28) defects had been
noticed therein. Upon the other hand, the evidence for the plaintiff sufficiently shows that said alleys
had been installed in accordance with the standard requirements therefor. As stated by Whitaker, in his
aforementioned deposition and report, "Mears had complained about boards popping up on the alleys,"
although this is "normal in all new bowling installations;" that "all bowling alleys have a tendency to
settle the first year, and require re-aligning and re-finishing;" that this is the reason for the one- year
guaranty given by plaintiff herein; that the defects pointed out by Mears were of "minor" character and
were mostly due to poor or "bad maintenance." At any rate, said minor defects were remedied and/or
repaired in conformity with plaintiffs aforementioned guaranty.
We find, therefore, that the lower court has not erred in rendering judgment for the plaintiff, under its
first cause of action.
Appellant next maintains that "the trial court erred in not finding that" plaintiff "had violated its verbal
agreement with appellant" as to the price to be charged (1)." . . on pocket and carom tables and
accessories sued upon in the second cause of action.. (2)." . . for the miscellaneous billiard tables,
accessories and equipment sued upon in the third cause of action . . .;" and (3) for the 168 sets of "duck
pins sued upon in the fourth cause of action . . ."cralaw virtua1aw library
Appellant objects to the sum of P11,703.00 claimed under the second cause of action, upon the ground
that plaintiff charges P2,150.00 for each table for which the Army & Navy Club of Manila had paid only
P1,800.00. It has been established, however, that said club had twice purchased from the plaintiff,
namely, in August 1948 and April 5, 1950, and that, although the first tables had cost P1,800.00 each, the
club paid P2,150.00 for each table acquired in 1950, or the same price charged herein appellant for the
tables it acquired in February 1951.
Regarding the sum of P3,369.00 sought to be collected under plaintiffs third cause of action, for
miscellaneous billiard and bowling accessories sold to the defendants from February 22 to March 7,
1951, defendants contend that these goods had been ordered with the understanding that they would
 120

pay the prices thereof as set forth in the Catalogue of Brunswick-Balke-Collender Co. We are more
inclined to believe, however, as the lower court did, plaintiffs evidence to the effect that there had
been, and there could have been no such understanding, because the catalogue prices are factory prices
in the United States, whereas the goods involved in the third assignment of error were part of plaintiffs
stock available on hand.
In other words, having defrayed the cost of bringing said goods from the United States, plaintiff could
not have possibly agreed to charge therefor said factory prices.
The fourth cause of action refers to 168 sets of duck pins sold by the plaintiff to the defendants, who
allegedly agreed to pay the current price thereof, or P50.00 for each set. Appellant insists that it could
not have entered into such agreement, for the reason that, while in the United States, defendant Mears
had bought duck pins at $9.25 a set, or from P18.00 to P19.00 a set. Appellants records showed,
however, that the duck pins bought by Mears in the United States had cost from P27.04 to P30.27 a set,
or, at the rate of exchange then prevailing, from $13.52 to $15.13 a set.
Plaintiff seeks, also, to recover interests and attorneys fees at the rates of 12% and 25%, respectively,
under a provision in its invoices, attesting to the delivery of its goods to the buyers thereof, in addition to
the costs, reading:jgc:chanrobles.com.ph
"Interest of 12% per annum is to be charged on all accounts overdue. An additional sum equal to 25% of
the amount will be charged by vendors for attorneys fees and costs of collection in case of suit."
(Plaintiffs brief, pp. 47-48.).
Appellant asserts that it is under no obligation to pay the interest and attorneys fees referred to in said
invoices, because it had not agreed to the above-quoted provision, the invoices for the goods having
been signed by Prudencia Arboleda, a mere clerk of appellant herein, and because, in fact, Mears had
written on appellants copy of one of said invoices Exhibit G-1 the words "Received copy but not
conformed." Appellants witness, Miss Arboleda declared, however, that she had authority to receive
said invoices or copies thereof; that she, thereupon, turned them over to defendant Mears; and that the
latter received said copies, without expressing any objection thereto. Then, also, it appears that the
note, expressing his non-conformity with the provisions of Exhibit G-1, was written by him on said copy,
dated March 15, 1951, about a month and a half later, or on April 27, 1951. Again, defendants did not try
to cause a similar entry to be made in plaintiffs original invoice, or to otherwise advise the plaintiff of
defendants objection to the provisions of said invoice. Worse still, appellant kept and used the billiard
tables, the bowling alleys and the accessories or equipment described in the aforementioned invoices,
without offering either to pay the amounts thereof or to return said goods. In the language of His Honor,
the trial Judge, "His acceptance of the equipment and supplies and accessories, and the use he made of
them is an implied conformity to the terms of the invoices and he is bound thereby."cralaw virtua1aw
library
what is justly due. The installation of the bowling alleys, together with their equipment, and the billiard
tables had brought the defendant a lucrative income from the year of its opening in 1951, to the present;
and yet outside of the down payment which defendant had paid on the 18 bowling alleys, defendant had
absolutely refused, which the Court has found without just cause, to pay the balance thereof and the
cost of the bowling and billiard accessories this notwithstanding that the defendant had promised to
pay the balance of the price of the bowling alleys in installments, the first installment to be paid on the
day that the plaintiff would commence work on the bowling alleys. Defendant, taking advantage of the
plaintiffs good faith, requested a deferment of the payment until the installation shall have been
completed; but the installation having been completed, defendants under one pretext or another,
refused without just cause to pay what is due the plaintiff. Not only that, but defendant Mears attitude
towards the plaintiff was characterized by arrogance and his letters are replete with unsavory and
discourteous remarks, which demonstrate not only the character of the man but reveal his lack of
intention to pay defendants just obligation.
"Plaintiff is entitled to actual damages consisting in the payment of interest and attorneys fees, and
considering that the defendants had acted wantonly, oppressively, if not fraudulently, in the
performance of their obligation, plaintiff is likewise entitled to moral and exemplary damages, which the
Court fixes in the amount of P20,000.00. Under the first cause of action, plaintiff is entitled to attorneys
fees, since plaintiff in accordance with Article 2208 of the New Civil Code, has been awarded exemplary
damages, and because defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs
plainly valid, just and demandable claim, and it is just and equitable that attorneys fees and expenses of
litigation should be recovered. Considering the lengthy pleadings, the voluminous records, the lengthy
and protracted trial, and the professional standing of counsel, the Court hereby charges the defendants
with the payment of attorneys fees in the amount of P15,000.00." (Record on Appeal, pp. 649-652.)
We are fully in accord with the foregoing view, which we adopt as ours.
WHEREFORE, the decision appealed from should be, as it is hereby, affirmed, with costs against
defendant-appellant, Philippine Advertising Corporation.

Passing upon plaintiffs claim for damages and attorneys fees, the lower court awarded therefor
P20,000.00 and P15,000.00, respectively, upon the following grounds:

"Under the fifth cause of action, plaintiff seeks to recover moral damages for the alleged wanton refusal
of the defendants to pay their just obligation to the plaintiff and for taking advantage of the plaintiffs
good faith. Article 2229 of the New Civil Code provides that exemplary or corrective damages are
imposed, by way of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages. And Article 2232 provides that in contracts and quasi-contracts,
the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner. The records of this case amply demonstrate that the defendants, in
utter disregard of the rights of the plaintiff, had refused deliberately and wantonly to pay the plaintiff

FIRST DIVISION
[G.R. No. 142029. February 28, 2001]
ERLINDA FRANCISCO, doing business in the name and style of Cebu Fountainhead Bakeshop and
JULIANA PAMAONG, petitioners, vs. RICARDO FERRER, JR., ANNETTE FERRER, ERNESTO LO
AND REBECCA LO, respondents.
DECISION
PARDO, J.:
Appeal via certiorari[1] taken by petitioners from the decision of the Court of Appeals[2] increasing
the trial courts award of moral damages to Ricardo Ferrer, Jr., Annette Ferrer, Ernesto Lo and Rebecca Lo
to two hundred fifty thousand pesos (P250,000.00) and awarding exemplary damages in the amount of
one hundred thousand pesos (P100,000.00), in addition to the following:
1. The cost of the wedding cake in the amount of P3,175.00;
2. Attorneys fees in the amount of P10,000.00; and
3. Cost of litigation.
The facts, as found by the Court of Appeals,[3] are as follows:
On November 19, 1992 Mrs. Rebecca Lo and her daughter Annette Ferrer ordered a three layered cake
from Fountainhead Bakeshop, Mango Avenue Branch. It was then agreed that the wedding cake shall be
delivered at 5:00 oclock in the afternoon at the Cebu Country Club, Cebu City, stating clearly that the
wedding is scheduled on December 14, 1992.
Plaintiffs made their first deposit in the amount of P1,000.00 on November 19, 1992 and two weeks
thereafter made a full payment on the remaining balance.
On the day of the wedding, December 14, 1992, plaintiffs arrived at the Cebu Country club around 6:00
oclock in the evening. They immediately notice the absence of the wedding cake.
At 7:00 oclock in the evening they made a follow-up call to Fountainhead Bakeshop and was informed
that it was probably late because of the traffic.
At 8:00 oclock they were informed that no wedding cake will be delivered because the order slip got
lost. Plaintiffs were then compelled to buy the only available cake at the Cebu Country Club which was a
sans rival. Even though they felt that it was a poor substitute to a wedding cake, the cutting of the cake is
always a part of the ceremony.
At 10:00 oclock in the evening, the wedding cake arrived but plaintiffs declined to accept it, besides their
order was a three-layered cake and what was actually delivered was a two-layered one.
Subsequently, defendant Erlinda Francisco sent a letter of apology accompanied with a P5,000.00 check,
however, the same was declined by plaintiffs because they felt it was inadequate.
121
Two weeks after the wedding, defendant Erlinda Francisco called Mrs. Rebecca Lo and apologized.
Ricardo Ferrer, son-in-law of Rebecca Lo corroborated the latters testimony, stating that two weeks after
the wedding, as a result of the non-delivery of the wedding cake, Ramon Montinola, the son-in-law of
Erlinda Francisco, went to Rebecca Los residence and offered the sum of P5,000.00 to indemnify for the
damage done, but it was rejected.[4]
On March 12, 1993, respondents filed with the Regional Trial Court, Cebu City an action for breach
of contract with damages against petitioners.[5]
After due trial, on May 19, 1995, the trial court rendered a decision in favor of plaintiffs [herein
defendants], the dispositive portion of which reads as follows:
THE FOREGOING CONSIDERED, judgment is hereby rendered in favor of the plaintiffs and against Erlinda
Francisco.
Directing the latter to pay the former the following:
1. The cost of the wedding cake in the amount of P3,175.00;
2. Moral damages in the amount of P30,000.00;
3. Attorneys fees in the amount of P10,000.00; and
4. Cost of litigation.
SO ORDERED.[6]
On May 25, 1995, petitioners appealed to the Court of Appeals.[7]
After due proceedings, on July 05, 1999, the Court of Appeals promulgated its decision modifying
the appealed decision as set out in the opening paragraph of this opinion.[8]
Hence, this appeal.[9]
The issues raised are (1) whether the Court of Appeals erred in affirming the trial courts award of
moral damages and increasing the amount from thirty thousand (P30,000.00) to two hundred fifty
thousand pesos (P250,000.00); and (2) whether the Court of Appeals was justified in awarding in
addition to moral damages, exemplary damages of one hundred thousand pesos (P100,000.00).
Petitioners submit that the Court of Appeals and the trial court erred in awarding moral damages
in favor of respondents because moral damages are recoverable in breach of contract cases only where
the breach was palpably wanton, reckless, malicious, in bad faith, oppressive or abusive.[10]
We agree. To recover moral damages in an action for breach of contract, the breach must be
palpably wanton, reckless, malicious, in bad faith, oppressive or abusive.[11]
Under the provisions of this law,[12] in culpa contractual or breach of contract, moral damages may
be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad
 122

faith) or in wanton disregard of his contractual obligation and, exceptionally, when the act of breach of
contract itself is constitutive of tort resulting in physical injuries.[13]
Moral damages may be awarded in breaches of contracts where the defendant acted fraudulently
or in bad faith.[14]
WHEREFORE, the Court GRANTS the petition. The Court REVERSES the decision of the Court of
Appeals in CA-G. R. CV No. 50894, and in lieu thereof, sentences petitioners to pay respondents, as
follows:
1. The cost of the wedding cake in the amount of P3, 175.00;

Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or 2. Nominal damages in the amount of P10,000.00;
some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or
interest or ill will that partakes of the nature of fraud.[15] 3. Attorneys fees in the amount of P10,000.00; and

In this case, [w]e find no such fraud or bad faith.[16] 4. Costs of litigation.

Moral damages are in the category of an award designed to compensate the claimant for actual No costs in this instance.
injury suffered and not to impose a penalty on the wrongdoer.[17]
SO ORDERED.
The person claiming moral damages must prove the existence of bad faith by clear and convincing
evidence for the law always presumes good faith. It is not enough that one merely suffered sleepless
nights, mental anguish, serious anxiety as the result of the actuations of the other party. Invariably such
action must be shown to have been willfully done in bad faith or with ill motive.[18] Mere allegations of
besmirched reputation, embarrassment and sleepless nights are insufficient to warrant an award for
moral damages. It must be shown that the proximate cause thereof was the unlawful act or omission of
the [private respondent] petitioners.[19]

An award of moral damages would require certain conditions to be met, to wit: (1) first, there
must be an injury, whether physical, mental or psychological, clearly sustained by the claimant;
(2) second, there must be culpable act or omission factually established; (3) third, the wrongful act or
omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) fourth,
the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 21

It must again stressed that moral damages are emphatically not intended to enrich a plaintiff at
the expense of the defendant. 22 When awarded, moral damages must not be palpably and scandalously
excessive as to indicate that it was the result of passion, prejudice or corruption on the part of the trial
court judge23 or appellate court justices. 24

In the same fashion, to warrant the award of exemplary damages, [t]he wrongful act must be
accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in a
wanton, fraudulent, reckless or malevolent manner. 25

The requirements of an award of exemplary damages are: (1) they may be imposed by way of
example in addition to compensatory damages, and only after the claimants right to them has been
established; (2) that they can not be recovered as a matter of right, their determination depending upon
the amount of compensatory damages that may be awarded to the claimant; (3) the act must be
accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner. 26

Nevertheless, the facts show that when confronted with their failure to deliver on the wedding
day the wedding cake ordered and paid for, petitioners gave the lame excuse that delivery was probably
delayed because of the traffic, when in truth, no cake could be delivered because the order slip got
lost. For such prevarication, petitioners must be held liable for nominal damages for insensitivity,
inadvertence or inattention to their customers anxiety and need of the hour. Nominal damages are
recoverable where a legal right is technically violated and must be vindicated against an invasion that has
produced no actual present loss of any kind or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be shown. 27Nominal damages may be
awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of
vindicating or recognizing that right, not for indemnifying the plaintiff for any loss suffered. 28

SECOND DIVISION
G.R. No. 208462 December 10, 2014
SPOUSES CARLOS J. SUNTAY and ROSARIO R. SUNTAY, Petitioners,
vs.
KEYSER MERCANTILE, INC., Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the September 7, 2012
Decision1 and the August 8, 2013 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 94677,
entitled Keyser Mercantile, Inc., v. Spouses Carlos and Rosario Suntay" involving the ownership of Unit G
and two (2) parking slots in Bayfront's Tmver Condominium.
The Facts
On October 20, 1989, Eugenia Gocolay, chairperson and president of respondent Keyser Mercantile, Inc.
(Keyser), entered into a contract to sell with Bayfront Development Corporation (Baxfront) for the
purchase on installment basis of a condominium unit in Bayfront Tower Condominium located at A.
Mabini Street, Malate, Manila. The subject of the sale was Unit G of the said condominium project
consisting of 163.59 square meters with the privilege to use two (2) parking slots covered by
Condominium Certificate of Title (CCT)No. 15802. This Contract to Sell3 was not registered with the
Register of Deeds ofManila. Thus, the subject unit remained in the name of Bayfront with a clean title.
On July 7, 1990, petitioner spouses Carlos and Rosario Suntay (Spouses Suntay) also purchased several
condominium units on the 4th floor of Bayfront Tower Condominium through another contract to sell.
Despite payment of the full purchase price, however, Bayfront failed to deliver the condominium units.
When Bayfront failed to reimburse the full purchase price, Spouses Suntay filed an action against it
before the Housing and Land Use Regulatory Board (HLURB) for violation of Presidential Decree (P.D.)
No. 957 and P.D. No. 1344, rescission of contract, sum of money, and damages.
In its decision, dated April 23 1994, the HLURB rescinded the Contract to Sell between Bayfront and
Spouses Suntay and ordered Bayfront to pay Spouses Suntay the total amount of 2,752,068.60 as
purchase price with interest. Consequently, on November 16, 1994, the HLURB issued a writ of
execution.4
Upon the application of Spouses Suntay, the Sheriffs of the Regional Trial Court (RTC) of Manila levied
Bayfronts titled properties, including the subject condominium Unit G and the two parking slots.
Considering that CCT No. 15802 was still registered under Bayfront with a clean title, the sheriffs deemed
it proper to be levied. The levy on execution5 in favor of Spouses Suntay was duly recorded in the
Register of Deeds of Manila on January 18, 1995.
The auction sale was conducted on February 23, 1995, and Spouses Suntay were the highest bidder.
Consequently, on March 1, 1995, the Certificate of Sale6 in favor of Spouses Suntay was issued. This was
123
duly annotated at the back of CCT No. 15802 on April 7, 1995. Meanwhile, the Deed of Absolute
Sale7 between Bayfront and Keyser involving the subject property was finally executed on November 9,
1995. The latter allegedly paid the full purchase price sometime in 1991. When Keyser was about to
register the said deed of absolute sale in February 1996, it discovered the Notice of Levy and the
Certificate of Sale annotated at the back of CCT No. 15802 in favor of Spouses Suntay. Nevertheless, on
March 12, 1996, the Register of Deeds cancelled the title of Bayfront and issued CCT No. 264748 in the
name of Keyser but carried over the annotation of the Suntays.9
Subsequently, the sheriffs Final Deed of Sale10 was executed on April 16, 1996 in favor of the Suntays
upon the expiration of the one (1) year period of redemption from the earlier auction sale. CCT No.
26474 of Keyser was cancelled and, thereafter, CCT No. 34250-A11 was issued in the name of Spouses
Suntay.
Keyser then filed a complaint for annulment of auction sale and cancellation of notice of levy before the
HLURB, docketed as HLURB Case No. REM 032196-9152. In its decision, dated November 18, 1996, the
HLURB ruled in favor of Keyser. Spouses Suntay appealed the decision to the Office of the Presidentand
later to the CA but both affirmed the HLURB judgment.
On appeal before this Court, however, the HLURB decision was set aside. In its September 23, 2005
Decision, the Court ruled that the HLURB had no jurisdiction over controversies between condominium
unit owners and the issue of ownership, possession or interest in the disputed condominium units could
not be adjudicated by the HLURB due to its limited jurisdiction under P.D. No. 957 and P.D. No. 1344.
RTC Ruling
Undaunted, on March 24, 2006, Keyser filed before the RTC of Manila a new complaint for annulment of
auction sale, writ of execution, declaration of nullity of title, and reconveyance of property with damages
against Spouses Suntay, docketed asCivil Case No. 06-114716. In their answer, Spouses Suntay denied
the material allegations of the complaint and interposed special and affirmative defenses of res judicata,
forum shopping, prescription, and lack of cause of action.
On October 19, 2009, the RTC rendered a Decision12 in favor of Keyser. It explained that when Spouses
Suntay registered the Certificate of Sale, the condominium unit was already registered in the name of
Keyser. It also held that the auction sale was irregular due to lack of posting and publication of notices.
The RTC thus disposed:
WHEREFORE, premises considered, the Court hereby declares the auction sale as null and void, orders
the Registry of Deeds to reinstate the title of Keyser Mercantile Inc. and to pay the costs.
SO ORDERED.13
CA Ruling
Spouses Suntay elevated the decision to the CA. In its September 7, 2012 Decision, the CA denied the
appealas it found that Spouses Suntay did not acquire the subject property because at the time it was
levied, Bayfront had already sold the condominium unit to Keyser. Considering that the judgment debtor
had no interest in the property, Spouses Suntay, as purchasers at the auction sale, also acquired no
interest. The decretal portion of the CA decision reads: WHEREFORE,in view of the foregoing

considerations, the Decision dated October 19, 2009 of the Regional Trial Court (RTC) of Manila, Branch
21, in Civil Case No. 06-114716, is AFFIRMED.
SO ORDERED.14
Spouses Suntay filed a motion for reconsideration, but it was denied in the August 8, 2013 Resolution of
the CA.
Hence, this petition, anchored on the following
STATEMENT OF ISSUES
I was filed in the RTC; and that a period of more or less twelve (12) years had lapsed and the action had
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN SUSTAINING THE TRIAL
COURTS DECISION BY NOT DISMISSINGTHE COMPLAINT CASE OF HEREIN RESPONDENT ON GROUND OF
PRESCRIPTION OF ACTIONS UNDER ARTICLE 1146 OFTHE CIVIL CODE OF THE PHILIPPINES, AS WELL AS,
DUE TO ESTOPPEL BY LACHES;
II
WHETHER OR NOT THE COURT OFAPPEALS IN SUSTAINING THE DECISION OF THE COURT A QUO
COMMITTED A SERIOUS REVERSIBLE ERROR IN NOT APPLYING SECTION 52 OF P.D. 1529 AND ARTICLE
1544 OF THE CIVIL CODE OF THE PHILIPPINES BY FINDING THAT HEREIN PETITIONERS HAVE BETTER
RIGHTS OF OWNERSHIP OVER THE SUBJECT CONDOMINIUM PROPERTY IN LITIGATION;
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN SUSTAINING THE TRIAL
COURTS DECISION BY NOT DISMISSINGTHE COMPLAINT FOR LACK OF VALID AND LEGITIMATE CAUSEOF
ACTION OF HEREIN RESPONDENT AGAINST HEREIN PETITIONERS;
IV
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN SUSTAINING THE TRIAL
COURTS DECISION BY NOT DISMISSING THE COMPLAINT ON GROUND OF FORUM SHOPPING;
V As to the procedural matters, the Court finds that the grounds invoked by Spouses Suntay are
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN SUSTAINING THE TRIAL
COURTS DECISION BY NOT DISMISSING THE COMPLAINT [ON] GROUND OF RES JUDICATA;
VI
124
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN SUSTAINING THE TRIAL
COURTS DECISION BY NOT AWARDING DAMAGES AND ATTORNEYS FEES IN FAVOR OF HEREIN
PETITIONERS.15
Spouses Suntay contend that res judicata existed. They assert that HLURB Case No. REM-032196-9152
involved the same cause of action, parties and subject matter with Civil Case No. 06-114716 before the
RTC. Considering that the former case had been decided on appeal by this Court, then there was already
res judicata in the RTC case. They likewise claim the existence of forum shopping in the refiling of the
case with the RTC for the second time on March 24, 2006.
Spouses Suntay also raise the issue of prescription because Article 1146 of the New Civil Code16 provides
that actions resulting in injury prescribe after four (4) years. The resulting injury started on January 18,
1995. They argue that the correct reckoning period was March 24, 2006 when Civil Case No. 06-114716
already prescribed. HLURB Case No. REM-032196-9152 filed on March 21, 1996 should not have been
considered to have tolled the prescriptive period because it had a null and void judgment due to lack of
jurisdiction.
Spouses Suntay argue that the CA erred in not applying Section 52 of P.D. No. 1529 and Article 1544 of
the New Civil Code. Their right as purchasers in a public action should havebeen preferred because their
right acquired thereunder retroacts to the date of registration of the Notice of Levy on January 18, 1995
and the subsequent auction sale on February 23, 1995. They claim that their right over the subject
property is superior over that of Keyser because they purchased the subject property in a legitimate
auction sale prior to Keysers registration of the deed of absolute sale.
Spouses Suntay also pray for moral, exemplary damages and attorneys fees. They allegedly experienced
mental anguish, besmirched reputation, sleepless nights, and wounded feelings warranting moral
damages. They contend that exemplary damages should also be awarded in view of the reckless and
wanton attitude of Keyser in instituting a groundless action against them. Furthermore, Spouses Suntay
were constrained to hire the services of counsel to defend their right against a baseless action.
The Courts Ruling
The petition is meritorious.
No res judicata, forum
shopping and prescription in
this case
inapplicable. First, the defense of res judicata must fail. The doctrine of res judicatais a fundamental
principle of law which precludes parties from re-litigating issues actually litigated and determined by a
prior and final judgment.17 Res judicata constituting bar by prior judgment occurs when the following
requisites concur: (1) the former judgment is final; (2) it is rendered by a court having jurisdiction over
the subject matter and the parties; (3) it isa judgment or an order on the merits; and (4) there is identity
of parties, of subject matter, and of causes of action.18
 125

The previous case instituted by Keyser in the HLURB was denied on appeal by this Court based on lack of
jurisdiction. Thus, the third requisite of res judicata is not present because the previous case was not
adjudicated on the merits as it was denied on jurisdictional grounds.
There is no forum shopping either in this case. To determine whether a party violated the rule against
forum shopping, the elements of litis pendentiamust be present, or the final judgment in one case
amounts to res judicata in another.19 Since there is no res judicata in this case, then there is no forum
shopping either.
Because "the act of registration is the operative act to convey or affect the land insofar as third persons
are concerned,"24 it follows that where there is nothing in the certificate of title toindicate any cloud or
vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to
explore farther than what the Torrens title upon its face indicates in quest for any hidden defect or
inchoate right thatmay subsequently defeat his right thereto. If the rule were otherwise, the efficacy and
conclusiveness of the certificate of title which the Torrens system seeks to insure would entirely be futile
and nugatory. The public shall then be denied of its foremost motivation for respecting and observing
the Torrens system of registration.25

When the notice of levy and certificate of sale were annotated on the title, the subject property was
The defense of prescription is likewise unavailing. In Fulton Insurance Company v. Manila Railroad
unoccupied and no circumstance existed that might suggest to Spouses Suntay that it was owned by
Company,20this Court ruled that the filing of the first action interrupted the running of the period, and
another individual.26Records reveal that it was only later, on January 6, 1999, that the subject property
then declared that, at any rate, the second action was filed within the balance of the remaining period.
was discovered by the sheriffs to be padlocked.27 The administrator of the condominium did not even
Applying Article 1155 of the New Civil Code in that case,21 the interruption took place when the first
knowthe whereabouts of the alleged owner.28 To reiterate, absent any peculiar circumstance, Spouses
action was filed in the Court of First Instance of Manila. The interruption lasted during the pendency of
Suntay could not be required to disregard the clean title of Bayfront and invest their time, effort and
the action until the order of dismissal for alleged lack of jurisdiction became final.
resources to scrutinize every square feet of the subject property. This Court is convinced that Spouses
Suntay properly relied on the genuineness and legitimacy of Bayfronts Torrens certificate of title when
In the present case, the prescriptive period was interrupted when HLURB Case No. REM-032196-9152 they had their liens annotated thereon.
was filed on March 21, 1996. The interruption lasted during the pendency of the action and until the
judgment of dismissal due to lack of jurisdiction was rendered on the September 23, 2005. Thus, the
Levy on execution is superior to
filing of Civil Case No. 06-114716 on March 24, 2006 was squarely within the prescriptive period of four
the subsequent registration of
(4) years.
the deed of absolute sale.

Spouses Suntay properly relied

on the Certificate of Title of
Bayfront
Now, the Court proceeds to the substantial issues. This Court finds that the petition is meritorious
applying the Torrens System of Land Registration. The main purpose of the Torrens system is to avoid
possible conflicts of title to real estate and to facilitate transactions relative thereto by giving the public
the right to rely upon the face of a Torrens certificate of title and to dispense with the need of inquiring
further, except when the party concerned has actual knowledge of facts and circumstances that should
impel a reasonably cautious man to makesuch further inquiry. Every person dealing with a registered
land may safely rely on the correctness of the certificate of title issued therefor and the law will in no
way oblige him to go beyond the certificate to determine the condition of the property.22
Again to stress, any buyer or mortgagee of realty covered by a Torrens certificate of title, in the absence
of any suspicion, is not obligated to look beyond the certificate to investigate the title of the seller
appearing on the face of the certificate. And, heis charged with notice only of such burdens and claims as
are annotated on the title.23
In the case at bench, the subject property was registered land under the Torrens System covered by CCT
No. 15802 with Bayfront as the registered owner. At the time that the Notice of Levy was annotated on
January 18, 1995, the title had no previous encumbrances and liens. Evidently, it was a clean title. The
Certificate of Sale, pursuant to an auction sale, was also annotated on April 7,1995, with Bayfront still as
the registered owner.
The CA stated in its decision that when the subject property was levied and subjected to an execution
sale, Bayfront had already sold it to Keyser. As such, Spouses Suntay no longer acquired the right over
the subject property from Bayfront because the latter, as judgment debtor, had nothing more to
pass.29 Earlier, the RTC held that at the time Spouses Suntay were to register the auction sale, the subject
property was already registered in Keysers name and, thus, they were fully aware of the earlier sale. It
was too late for Spouses Suntayto deny their knowledge of Keysers title. The RTC also found the auction
sale questionable due to the lack of posting and publication of notice.30
The Court disagrees with the lower courts. They had completely overlooked the significance of a levy on
execution. The doctrine is wellsettled that a levy on execution duly registered takes preference over a
prior unregistered sale. Even if the prior salewas subsequently registered before the sale in execution
but after the levy was duly made, the validity of the execution sale should be maintained because it
retroacts to the date of the levy. Otherwise, the preference created by the levy would be meaningless
and illusory.31
In this case, the contract to sell between Keyser and Bayfront was executed on October 20, 1989, but the
deed of absolute sale was only made on November 9, 1995 and registered on March 12, 1996. The
Notice of Levy in favor of Spouses Suntay was registered on January 18, 1995, while the Certificate of
Sale on April 7, 1995, both dates clearly ahead of Keysers registration of its Deed of Absolute Sale.
Evidently, applying the doctrine of primus tempore, potior jure(first in time, stronger in right), Spouses
Suntay have a better right than Keyser.
In the case of Uy v. Spouses Medina32 which dealt with essentially the same issues, the Court wrote:

It was only on March 12, 1996, almosta year later, that Keyser was able to register its Deed of Absolute
Considering that the sale was not registered earlier, the right of petitioner over the land became
Sale with Bayfront. Prior to such date, Spouses Suntay appropriately relied on the Torrens title of
subordinate and subject to the preference created over the earlier annotated levy in favor of Swift. The
Bayfront to enforce the latters judgment debt.
 126

levy of execution registered and annotated on September 1, 1998 takes precedence over the sale of the SO ORDERED.
land to petitioner on February 16, 1997, despite the subsequent registration on September 14, 1998 of
the prior sale. Such preference in favor of the levy on execution retroacts to the date of levy for to hold
otherwise will render the preference

The settled rule is that levyon attachment, duly registered, takes preference over a prior unregistered
sale. This result is a necessary consequence of the fact that the property involved was duly covered by
the Torrens system which works under the fundamental principle that registration is the operative act
which gives validity to the transfer or creates a lien upon the land. The preference created by the levy on
attachment is not diminished even by the subsequent registration of the prior sale. This is so because an
attachment is a proceeding in rem. It is against the particular property, enforceable against the whole
world. The attaching creditor acquires a specific lien on the attached property which nothing can
subsequently destroy except the very dissolution of the attachment or levy itself. Such a proceeding, in
effect, means that the property attached is an indebted thing and a virtual condemnation of it to pay the
owners debt. The lien continues until the debt is paid, or sale is had under execution issued on the
judgment, or until the judgment is satisfied, or the attachment discharged or vacated in some manner
provided by law.

[Emphases supplied]

The Court does not agree with the RTC either that the auction sale had glaring irregularities. Assisting
Sheriff Rufo Bernardo Jr., testifying as Keysers witness, categorically stated that they had posted notices
of the auction sale and had conducted the bidding.33 The documentary evidence of S pouses Suntay also
shows that publication of the auction sale was indeed complied with.34

No award of actual, moral and

exemplary damages

Finally, the Court cannot grant the claim for damages by Spouses Suntay. The filing alone of a civil action
should not be a ground for an award of moral damages in the same way that a clearly unfounded civil
action is not among the grounds for moral damages.35 Spouses Suntay failed to show a compelling
reason to warrant the award of moral damages aside from their bare allegations.

As to the award of exemplary damages, Article 2229 of the New Civil Code provides that exemplary
damages may be imposed by way of example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.36 The claimant, however, must first establish his right
to moral, temperate, liquidated or compensatory damages. In this case, because Spouses Suntay failed
to prove their entitlement to moral or compensatory damages, there could be no award of exemplary
damages.

Spouses Suntay are not entitled to attorney's fees either.1wphi1 The settled rule is that no premium
should be placed on the right to litigate and that not every winning party is entitled to an automatic
grant of attorney's fees.37

WHEREFORE, the petition is GRANTED. The September 7, 2012 Decision and the August 8, 2013
Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 94677 are REVERSED and SET ASIDE.
Accordingly, the Court hereby declares the auction sale as valid and binding on Keyser Mercantile, Inc.
and all other subsequent registrants.