G.R. No.

L-8385 March 24, 1914

LUCIO ALGARRA, plaintiff-appellant,

vs.
SIXTO SANDEJAS, defendant-appellee.

Southworth, Hargis & Springer for appellant.

Rohde & Wright for appellee.

TRENT, J.:

This is a civil action for personal injuries received from a collision with the defendant's
automobile due to the negligence of the defendant, who was driving the car. The negligence
of the defendant is not questioned and this case involves only the amount of damages which
should be allowed.

As a result of the injuries received, plaintiff was obliged to spend ten days in the hospital,
during the first four or five of which he could not leave his bed. After being discharged
from the hospital, he received medical attention from a private practitioner for several
days. The latter testified that after the last treatment the plaintiff described himself as
being well. On the trial the plaintiff testified that he had done no work since the accident,
which occurred on July 9, 1912, and that he was not yet entirely recovered. Plaintiff
testified that his earning capacity was P50 per month. It is not clear at what time plaintiff
became entirely well again, but as to the doctor to whom he described himself as being well
stated that this was about the last of July, and the trial took place September 19, two
months' pay would seem sufficient for the actual time lost from his work. Plaintiff further
testified that he paid the doctor P8 and expended P2 for medicines. This expenses,
amounting in all to P110 should also be allowed.

Plaintiff sold the products of a distillery on a 10 per cent commission and made an average
of P50 per month. He had about twenty regular customers who, it seems, purchased in
small quantities, necessitating regular and frequent deliveries. Since the accident his wife
had done something in a small way to keep up this business but the total orders taken by
her would not net them over P15. He lost all his regular customers but four, other agents
filing their orders since his accident. It took him about four years to build up the business
he had at the time of the accident, and he could not say how long it would take him to get
back the business he had lost.

Under this state of facts, the lower court, while recognizing the justness of he claim, refused
to allow him anything for injury to his business due to his enforced absence therefrom, on
the ground that the doctrine of Marcelo vs. Velasco (11 Phil., Rep., 277) is opposed t such
allowance. The trial court's opinion appears to be based upon the following quotation from
Viada (vol. 1 p. 539), quoted in that decision: ". . . with regard to the offense of lesiones, for
example, the civil liability is almost always limited to indemnity for damage to the party
aggrieved for the time during which he was incapacitated for work; . . ."
This statement, however, derives its force, not from any provision of the law applicable
to lesiones, but is a mere deduction from the operation of the law upon the cases arising
under it. That the interpretation placed upon this statement of Viada by the lower court is
either not correct, or that it does not apply to actions for personal injuries under article
1902 of the Civil Code, is apparent from the decisions of the supreme court of Spain of
January 8, 1906, January 15, 1902, and October 19, 1909, to which a more extended
reference will be made further on in this opinion. There is nothing said in the decision in
question prohibiting the allowance of compensatory damages, nor does there seem to be
anything contained therein opposed to the allowance of such damages occurring
subsequent to the institution of the action. In fact, it appears from the following quotation
that the court would have been disposed to consider favorably the plaintiff's claim for
injury to her business had the evidence presented it.

No evidence was then offered by the plaintiff to show that this slight lameness in any
way interfered with the conduct of her business or that she could make any less
amount therein than she could make if she did not suffer from this direct. The court,
therefore, did not err in allowing her no further damages on this account, because
there was no evidence that she had suffered any.

The alleged damages which the court refused to entertain in that case and under the
discussion of which appears the above quotation from Viada, were for pain and suffering
the plaintiff may have experienced. The court said: "For the profits which the plaintiff
failed to obtain, spoken of in the latter part of this article, the plaintiff was allowed to
recover, and the question is, whether the value of the loss which she suffered can be
extended to pain which she experienced by reason of the accident."

Actions for damages such as the case at bar are based upon article 1902 of the Civil Code,
which reads as follows: "A person who, by act or omission, causes damage to another
where there is fault or negligence shall be obliged to repair the damage so done."

Of this article, the supreme court of Spain, in its decision of February 7, 1900, in
considering the indemnity imposed by it, said: "It is undisputed that said reparation, to be
efficacious and substantial, must rationally include the generic idea of complete indemnity,
such as is defined and explained in article 1106 of the said (Civil) Code."

Articles 1106 and 1107 of the Civil Code read as follows:

1106. 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, reserving the provisions contained in the following articles.

1107. The losses and damages for which a debtor 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.
 In case of fraud, the debtor shall be liable for all those which clearly may originate
from the nonfulfillment of the obligation.

Fraud is not an element of the present case, and we are not therefore concerned with it. The
liability of the present defendant includes only those damages which were "foreseen or may
have been foreseen" at the time of the accident, and which are the necessary and immediate
consequences of his fault. In discussing the question of damages under the civil law,
Gutierrez (vol. 4, pp. 64, 65) says:

In the impossibility of laying down a surer rule, the Code understands known
damages to be those which in the prudent discernment of the judge merit such a
qualification, although their consequences may not be direct, immediate inevitable.

If it is a question of losses occasioned through other causes, except fraud, and the
contracting parties have not covenanted any indemnity for the case of
nonfulfillment, then the reparation of the losses or damages shall only comprise
those that fault. This rule may not be very clear, but is the only one possible in a
matter more of the domain of prudence than of law.

In its decision of April 18, 1901, the supreme court of Spain said: "Neither were the errors
incurred that are mentioned in the third assignment, since the indemnity for damages is
understood to apply to those caused the complainant directly, and not to those which,
indirectly and through more or less logical deductions, may affect the interests of
the Ayuntamiento de Viana, as occurs in the present case where the increase of wealth
concerns not only the Ayuntamiento but also the provide and the state, yet, not on this
account does any action lie in their behalf as derived from the contracts with Urioste."

This doctrine is also affirmed in the more recent decision of March 18, 1909, in the
following words: "For the calculation of the damages claimed, it is necessary, pursuant to
the provisions of article 924 of the Law of Civil Procedure, to give due regard to the nature
of the obligation that was unfulfilled and to the reasonable consequences of its
nonfulfillment, because the conviction sought can be imposed only when there exists a
natural and true relation between such nonfulfillment and damages, whatever, reason there
may be to demand them on another account."

In the case of Garcia Gamo vs. Compania Madrilena de Alumbrado, etc. (101 Juris, p., 662),
it appeared that an employee of the defendant company whose duty it was to clean and
light the street lamps left as stepladder leaning against a tree which stood in a public
promenade. The seven-year old son of the plaintiff climbed the tree by means of the ladder,
and while endeavoring to cut some branches fell to the ground, sustaining severe injuries
which eventually caused his death. The plaintiff lost in the lower courts and on appeal to
the supreme court the decision of those lower courts was affirmed with the following
statement;

That in this sense — aside from the fitness of the judgment appealed from,
inasmuch as the acquittal of the defendant party resolves all the issues argued at the
 trial, if no counterclaim was made — the assignments of error in the appeal cannot
be sustained, because, while the act of placing the stepladder against the tree in the
manner and for the purposes aforestated, was not permissible it was regularly
allowed by the local authorities, and that fact did not precisely determine the injury,
which was due first to the abandonment of the child by his parents and secondly to
his own imprudence, according to the findings of the trial court, not legally objected
to in the appeal; so it is beyond peradventure that the circumstances necessary for
imposing the obligations arising from guilt or negligence do not concur in the
present case.

The court here simply held that the injury to the child could not be considered as the
probable consequence of an injury which could have been foreseen from the act of the
company's employee in leaving the ladder leaning against the tree.

In De Alba vs. Sociedad Anonima de Tranvias (102 Juris, p., 928), a passenger was standing
on the platform of a street car while it was in motion when, on rounding a curve, the
plaintiff fell off and under the car, thereby sustaining severe injuries which took several
months to heal. He was not allowed to recover in the lower courts and on appeal the
supreme court sustained the inferior tribunals saying:

Whereas, considering the circumstances of the accident that happened to D. Antonio

Morales de Alba, such as they were held by the trail court to have been proved, the
evidence does not disclose that any liability whatever in the said accident, for acts or
omissions, may be charged against the employees of the street car, as being guilty
through fault or negligence, since it was shown that the car was not traveling at any
unusual speed nor was this increased on rounding the curve, but that the accident
was solely due to the fact that the car in turning made a movement which caused the
plaintiff to lose his balance; and whereas no act whatever has been proved of any
violation of the regulations, nor can it be required of street-car employees, who have
to attend to their respective duties, that they should foresee and be on the alert to
notify the possibility of danger when not greater than that which is more or less
inherent to this mode of travel; therefore the appeal can not be upheld, and with all
the more reason since the passenger who takes the risk of travelling on the platform,
especially when there is an unoccupied seat in the car, should be on his guard
against a contingency so natural as that of losing his balance to a greater or less
extent when the car rounds a curve.

In Crespo vs. Garcia (112 Jurisp., 796), the plaintiff, a servant woman, 72 years old, was
injured in the performance of her duties by the sudden and unexpected failure of the upper
floor of a house in which she was working. The owner and the architect of the building
were made defendants and after due trial it was held that no responsibility attached to
them for the failure of the floor, consequently the plaintiff was not allowed to recover. On
her appeal to the supreme court that tribunal said:

Whereas the trial court held, in view of all the evidence adduced, including the
expert and other testimony, that the act which occasioned the injury suffered by
 Doña Maria Alonso Crespo, was accidental, without fault of anybody, and
consequently fortuitous, and that, in so considering it to absolve the defendants, he
did not incur the second error assigned on the appeal, because, without overlooking
the import and legal value of the affidavit adduced at the trial, he held that the
defendants in their conduct were not liable for any omission that might constitute
such fault or negligence as would oblige them to indemnify the plaintiff; and to
support the error assigned no legal provision whatever was cited such as would
require a different finding, nor was any other authentic document produced than
the aforesaid affidavit which contained an account of the ocular inspection and the
expert's report, which, as well as the testimony of the witnesses, the trial court was
able to pass upon in accordance with its exclusive power-all points of proof which do
not reveal any mistake on the part of the judge, whose opinion the appellant would
substitute with his own by a different interpretation.

These authorities are sufficient to show that liability for acts ex delicto under the Civil Code
is precisely that embraced within the "proximate cause" of the Anglo-Saxon law of torts.

The general rule, as frequently stated, is that in order that an act omission may be
the proximate cause of an injury, the injury must be the natural and probable
consequence of the act or omission and such as might have been foreseen by an
ordinarily responsible and prudent man, in the light of the attendant circumstances,
as likely to result therefrom . . .

According to the latter authorities foreseeableness, as an element of proximate

cause, does not depend upon whether an ordinarily reasonable and prudent man
would or ought in advance to have anticipated the result which happened, but
whether, if such result and the chain of events connecting it with the act complained
of had occurred to his mind, the same would have seemed natural and probable and
according to the ordinary course of nature. Thus, as said in one case, "A person
guilty of negligence, or an unlawful act, should be held responsible for all the
consequences which a prudent and experienced man, fully acquainted with all the
circumstances which in fact existed, would at the time of the negligent or unlawful
act have thought reasonable to follow, if they had occurred to his mind." (Wabash
R. etc. Co. vs. Coker, 81 Ill. App. 660, 664; Cooley on Torts, sec. 15.)

The view which I shall endeavor to justify is that, for the purpose of civil liability,
those consequences, and those only, are deemed "immediate," "proximate," or, to
anticipate a little, "natural and probable," which a person of average competence
and knowledge, being in the like case with the person whose conduct is complained
of, and having the like opportunities of observation, might be expected to foresees as
likely to follow upon such conduct. This is only where the particular consequence is
not known to have been intended or foreseen by the actor. If proof of that be
forthcoming, whether the consequence was "immediate" or not does not matter.
That which a man actually foresees is to him, at all events, natural and probable.
(Webb's Pollock on Torts, p. 32.)
There is another line of definitions which have for their basis "the natural and probable
consequences" or "the direct and immediate consequences" of the defendant's act. (Joyce
on Damages, sec. 82.)

It will be observed that the supreme court of Spain, in the above decisions, has rather
inclined to this line of definitions of what results a defendant is liable for as a consequence
of his wrongful acts, while the Civil Code uses the phraseology, "those foreseen or which
may have been foreseen." From either viewpoint the method of arriving at the liability of
the wrongdoer under the Civil Code and under the Anglo Saxon law is the same. Such was
the holding of this court in Taylor vs. M. E. R. and L. Co. (16 Phil. Rep., 8, 15):

We agree with counsel for appellant that under the Civil Code, as under the
generally accepted doctrine in the United States, the plaintiff in an action such as
that under consideration, in order to establish his right to a recovery, must establish
by competent evidence:

(1) Damages to the plaintiff.

(2) Negligence by act or omission of which defendant personally, or some person for
whose acts it must respond, was guilty.

(3) The connection of cause and effect between the negligence and the damages.

These propositions are, of course, elementary, and do not admit of discussion, the
real difficulty arising in the application of these principles to the particular facts
developed in the case under consideration.

Parenthetically it may be said that we are not now dealing with the doctrine of comparative
(contributory) negligence which was established by Rakes vs. A. G. and P. Co. (7 Phil. Rep.,
359), and Eades vs. A. G. and P. Co. (19 Phil., Rep., 561.)

The rules for the measure of damages, once that liability is determined, are, however,
somewhat different. The Civil Code requires that the defendant repair the damage caused
by his fault or negligence. No distinction is made therein between damage caused
maliciously and intentionally and damages caused through mere negligence in so far as the
civil liability of the wrongdoer in concerned. Nor is the defendant required to do more than
repair the damage done, or, in other words, to put the plaintiff in the same position, so far
as pecuniary compensation can do so, that he would have been in had the damage not been
inflicted. In this respect there is a notable difference between the two systems. Under the
Anglo-SAxon law, when malicious or willful intention to cause the damage is an element of
the defendant's act, it is quite generally regarded as an aggravating circumstance for which
the plaintiff is entitled to more than mere compensation for the injury inflicted. These are
called exemplary or punitive damages, and no provision is made for them in article 1902 of
the Civil Code.
Again it is quite common under the English system to award what is called nominal
damages where there is only a technical violation of the plaintiff's rights resulting in no
substantial injury to him. This branch of damages is also unknown under the Civil Code. If
no damages have actually occurred there can be none to repair and the doctrine of nominal
damages is not applicable. Thus it has been often held by the supreme court of Spain that a
mere noncompliance with the obligations of a contract is not sufficient to sustain a
judgment for damages. It must be shown that damages actually existed. (Decision of
February 10, 1904.) Again, in its decision of January 9, 1897, that high tribunal said that as
a logical consequence of the requirements of articles 1101, 1718, and 1902 that he who
causes damages must repair them, their existence must be proved.

In at least one case decided by this court we held in effect that nominal damages could not
be allowed. (Mercado vs. Abangan, 10 Phil., Rep., 676.)

The purpose of the law in awarding actual damages is to repair the wrong that has
been done, to compensate for the injury inflicted, and not to impose a penalty.
Actual damages are not dependent on nor graded by the intent with which the
wrongful act is done." (Field vs. Munster, 11 Tex. Civ., Appl., 341, 32 S. W., 417.)
"The words "actual damages" shall be construed to include all damages that the
plaintiff may he has suffered in respect to his property, business, trade, profession,
or occupation, and no other damages whatever." (Gen Stat. Minn. 1894, sec., 5418.)
"Actual damages are compensatory only." (Lord, Owen and Co. vs. Wood, 120
Iowa, 303, 94 N. W., 842.) " `Compensatory damages' as indicated by the word
employed to characterize them, simply make good or replace the loss caused by the
wrong. They proceed from a sense of natural justice, and are designed to repair that
of which one has been deprived by the wrong of another." (Reid vs.Terwilliger, 116
N. Y., 530; 22 N. E., 1091.) "Compensatory damages' are such as awarded to
compensate the injured party for caused by the wrong, and must be only such as
make just and fair compensation, and are due when the wrong is established,
whether it was committed maliciously — that is, with evil intention — or not.
(Wimer vs. Allbaugh, 78 Iowa, 79; 42 N. W., 587; 16 Am. St. Rep., 422.)

Finally, this court has itself held that actual damages are the extent of the recovery allowed
to the plaintiff. In Marker vs. Garcia (5 Phil., Rep., 557), which was an action for damages
for breach of contract, this court said: "Except in those cases where the law authorizes the
imposition of punitive or exemplary damages, the party claiming damages must establish
by competent evidence the amount of such damages, and courts can not give judgment for
a greater amount than those actually proven."

We are of the opinion that the requirements of article 1902, that the defendant repair the
damage done can only mean what is set forth in the above definitions, Anything short of
that would not repair the damages and anything beyond that would be excessive. Actual
compensatory damages are those allowed for tortious wrongs under the Civil Code;
nothing more, nothing less.
According to the text of article 1106 of the Civil Code, which, according to the decision of
February 7, 1990 (referred to above), is the generic conception of what article 1902
embraces, actual damages include not only loss already suffered, but loss of profits which
may not have been realized. The allowance of loss of prospective profits could hardly be
more explicitly provided for. But it may not be amiss to refer to the decisions of the
supreme court of Spain for its interpretation of this article. The decisions are numerous
upon this point. The decisions are as epitomized by Sanchez Roman (vol. 1, 0. 281),
interprets article 1106 as follows:

Pursuant to articles 1106 and 1107 of the same Code, which govern in general the
matter of indemnity due for the nonfulfillment of obligations, the indemnity
comprises, not only the value of loss suffered, but also that of the prospective profit
that was not realized, and the obligation of the debtor in good faith is limited to such
losses and damages as were foreseen or might have been foreseen at the time the
obligation was incurred and which are a necessary consequence of his failure of
fulfillment. Losses and damages under such limitations and frustrated profits must,
therefore, be proved directly by means of the evidence the law authorizes.

The decisions of January 8, 1906 (published in 14 Jurisp. del Codigo Civil, 516) had to do
with the following case: The plaintiff, a painter by occupation, was engaged to paint the
poles from which were suspended the trolley wires of a traction company. While at work on
February 8, 1901, the electric current was negligently turned on by the company, whereby
plaintiff received a severe shock, causing him to fall to the ground. Plaintiff sustained
injuries which took several months to heal and his right arm was permanently disabled by
the accident. The age of the plaintiff is not stated. His daily wage was four pesetas. He was
awarded 25,000 pesetas by the trial court and this judgment was affirmed on appeal to the
supreme court. This was equivalent to approximately twenty year's salary.

In its decision of January 15, 1902 (published in 10 Jurisp. del Codigo Civil., 260), the
supreme court had the following case under consideration: Plaintiff's son was a travelling
salesman 48 years of age, who received an annual salary of 2,500 pesetas and expenses.
While travelling on defendant's train an accident occurred which caused his death. The
accident was held to be due to the failure of the defendant company to keep its track and
roadbed in good repair. Plaintiff was allowed 35,000 pesetas for the death of her son. this
would be equivalent to about fourteen years' salary.

in the case dated October 19, 1909 (published in 116 Jurisp. del Codigo Civil, 120), plaintiff
as suing for the death of his son caused from injuries inflicted by the defendant's bull while
plaintiff and his son were travelling along a public road. The age of the son is not given.
Plaintiff was awarded 3,000 pesetas damages.

In each of the above-mentioned cases the supreme court refused to pass on the amount of
damages which had been awarded. It appears to be the unvarying rule of the supreme
court of Spain to accept the amount of damages awarded by trial courts, its only inquiry
being as to whether damages have actually occurred as the result of the defendant's fault or
negligence. (Decision of July 5, 1909.) The reason why the supreme court of Spain refuses to
consider the amount of damages awarded is to be found in the great importance attached
by it to the provision of the Ley de Enjuiciamiento Civil, articles 659 and 1692, No. 7. In its
auto of March 16, 1900 (published in 8 Jurisp. del Codigo Civil, 503), the following
comment is made on these articles:

As this supreme court has repeatedly held, the weight given by the trial judge to the
testimony, with good discernment or otherwise, can not be a matter for reversal, not
even with the support of No. 7 of article 1692 of the Ley de Enjuiciamiento Civil, as it
is exclusively submitted to him, pursuant to the provisions of article 659 of the said
law and article 1248 of the Code.

The practice of this court, under our Code of Civil Procedure, does not permit of our going
to such lengths in sustaining the findings of fact in trial courts. We have repeatedly held
that due weight will be given in this court to the findings of fact by trial courts by reason of
their opportunities to see and hear the witnesses testify, note their demeanor and bearing
upon the stand, etc., but when the decision of the trial court, after permitting due allowance
for its superior advantages in weighing the evidence of the case, appears to us to be against
the fair preponderance of that evidence, it is our duty to reverse or set aside the findings of
fact made by the trial court and render such judgment as the facts of the same deem to us
to warrant. (Code of Civ., Proc., sec. 496.) We need go to no other branch of law than that
of damages to support this statement. In the following case the damages awarded by the
lower court were reduced after a consideration of the evidence; Sparrevohn vs. Fisher (2
Phil. Rep., 676); Campbell and Go-Tauco vs. Behn, Meyer and Co. (3 Phil., Rep., 590);
Causin vs. Jakosalem 95 Phil., Rep., 155); Marker vs.Garcia (5 Phil., Rep., 557); Uy
Piaoco vs. Osmeña (9 Phil., Rep., 299); Macleod vs. Phil. Pub. Co. (12 Phil., Rep., 427);
Orense vs. Jaucian (18 Phil. Rep., 553). In Rodriguez vs. Findlay and Co. (14 Phil. Rep.,
294); and Cordoba y Conde vs. Castle Bros. (18 Phil. Rep., 317), the damages awarded by
the lower court were increased on appeal after a consideration of the evidence. In
Brodek vs. Larson (18 Phil., Rep., 425), it was held that the damages awarded by the lower
court were base on too uncertain evidence, and the case was remanded for a new trial as to
the amount of damages sustained. Also in Saldivar vs. Municipality of Talisay (18 Phil.,
Rep., 362), where the lower court exonerated the defendant from liability, this court, after a
consideration of the evidence, held that the defendant was liable and remanded the case for
the purpose of a new trial in order to ascertain the amount of damages sustained.

In this respect the law of damages under article 1902, as laid down by the decisions of the
supreme court of Spain, has been indirectly modified by the present Code of Civil
Procedure so that the finding of the lower court as to the amount of damages is not
conclusive on appeal.

Actual damages, under the American system, include pecuniary recompense for pain and
suffering, injured feelings, and the like. Article 1902, as interpreted by this court
in Marcelo vs. Velasco (11 Phil., Rep., 287), does not extend to such incidents. Aside from
this exception, actual damages, in this jurisdiction, in the sense that they mean just
compensation for the loss suffered, are practically synonymous with actual damages under
the American system.
This court has already gone some distance in incorporating into our jurisprudence those
principles of the American law of actual damages which are of a general and abstract
nature. In Baer Senior and Co.'s Successors vs.Compañia Maritima (6 Phil. Rep., 215), the
American principle of admiralty law that the liability of the ship for a tow is not so great as
that for her cargo was applied in determining the responsibility of a ship, under the Code
of Commerce, for her tow. In Rodriguez, vs. Findlay and Co. (14 Phil., Rep., 294), which
was an action for breach of contract of warranty, the following principle, supported
entirely by American authority, was used in computing the amount of damages due the
plaintiff:

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 includes such consequential damages as are the direct, immediate,
and probable result of the breach.

In Aldaz vs. Gay (7 Phil., Rep., 268), it was held that the earnings or possible earnings of a
workman wrongfully discharged should be considered in mitigation of his damages for the
breach of contract by his employer, with the remark that nothing had been brought to our
attention to the contrary under Spanish jurisprudence.

In Fernandez vs. M. E. R. and L. Co. (14 Phil., Rep., 274), a release or compromise for
personal injury sustained by negligence attributed to the defendant company was held a
bar to an action for the recovery of further damages, on the strength of American
precedents.

In Taylor vs. M. E. R. and L. Co., supra, in the course of an extended reference to American
case law, the doctrine of the so-called "Turntable" and "Torpedo" cases was adopted by
this court as a factor in determining the question of liability for damages in such cases as
the one the court the then had under consideration.

In Martinez vs. Van Buskirk (18 Phil., 79), this court, after remarking that the rules under
the Spanish law by which the fact of negligence is determined are, generally speaking, the
same as they are in Anglo-Saxon countries, approved the following well-known rule of the
Anglo-Saxon law of negligence, relying exclusively upon American authorities: ". . . acts,
the performance of which has not proven destructive or injurious and which have been
generally acquiesced in by society for so long a time as to have ripened into a custom,
cannot be held to be unreasonable or imprudent and that, under the circumstances, the
driver was not guilty of negligence in so leaving his team while assisting in unloading his
wagon.

This court does not, as a rule, content itself in the determination of cases brought before it,
with a mere reference to or quotation of the articles of the codes or laws applicable to the
questions involved, for the reason that it is committed to the practice of citing precedents
for its rulings wherever practicable. (See Ocampo vs. Cabangis, 15 Phil Rep., 626.) No
better example of the necessity of amplifying the treatment of a subject given in the code is
afforded than article 1902 of the Civil Code. That article requires that the defendant repair
the damage done. There is, however, a world of difficulty in carrying out the legislative will
in this particular. The measure of damages is an ultimate fact, to be determined from the
evidence submitted to the court. The question is sometimes a nice one to determine,
whether the offered evidence in such as sought to be considered by the court in fixing the
quantum of damages; and while the complexity of human affairs is such that two cases are
seldom exactly alike, a thorough discussion of each case may permit of their more or less
definite classification, and develop leading principles which will be of great assistance to a
court in determining the question, not only of damages, but of the prior one of negligence.
We are of the opinion that as the Code is so indefinite (even though from necessity) on the
subject of damages arising from fault or negligence, the bench and bar should have access
to and avail themselves of those great, underlying principles which have been gradually
and conservatively developed and thoroughly tested in Anglo-Saxon courts. A careful and
intelligent application of these principles should have a tendency to prevent mistakes in the
rulings of the court on the evidence offered, and should assist in determining damages,
generally, with some degree of uniformity.

The law of damages has not, for some reason, proved as favorite a theme with the civil-law
writers as with those of the common-law school. The decisions of the supreme court of
Spain, though numerous on damages arising from contractual obligations, are exceedingly
few upon damages for personal injuries arising ex delicto. The reasons for this are not
important to the present discussion. It is sufficient to say that the law of damages has not
received the elaborate treatment that it has at the hands of the Anglo-Saxon jurists. If we in
this jurisdiction desire to base our conclusions in damage cases upon controlling principles,
we may develop those principles and incorporate them into our jurisprudence by that
difficult and tedious process which constitutes the centuries-old history of Anglo-Saxon
jurisprudence; or we may avail ourselves of these principles in their present state of
development without further effort than it costs to refer to the works and writings of many
eminent text-writers and jurists. We shall not attempt to say that all these principles will be
applicable in this jurisdiction. It must be constantly borne in mind that the law of damages
in this jurisdiction was conceived in the womb of the civil law and under an entirely
different form of government. These influences have had their effect upon the customs and
institutions of the country. Nor are the industrial and social conditions the same. An Act
which might constitute negligence or damage here, and vice versa. As stated in Story on
Bailments, section 12, "It will thence follow that, in different times and in different
countries, the standard (of diligence) is necessary variable with respect to the facts,
although it may be uniform with respect to the principle. So that it may happen that the
same acts which in one country or in one age may be deemed negligent acts, may at another
time or in another country be justly deemed an exercise of ordinary diligence."

The abstract rules for determining negligence and the measure of damages are, however,
rules of natural justice rather than man-made law, and are applicable under any
enlightened system of jurisprudence. There is all the more reason for our adopting the
abstract principles of the Anglo- Saxon law of damages, when we consider that there are at
least two important laws o n our statute books of American origin, in the application of
which we must necessarily be guided by American authorities: they are the Libel Law
(which, by the way, allows damages for injured feelings and reputation, as well as punitive
damages, in a proper case), and the Employer's Liability Act.

The case at bar involves actual incapacity of the plaintiff for two months, and loss of the
greater portion of his business. As to the damages resulting from the actual incapacity of
the plaintiff to attend to his business there is no question. They are, of course, to be allowed
on the basis of his earning capacity, which in this case, is P50 per month. the difficult
question in the present case is to determine the damage which has results to his business
through his enforced absence. In Sanz vs. Lavin Bros. (6 Phil. Rep., 299), this court, citing
numerous decisions of the supreme court of Spain, held that evidence of damages "must
rest upon satisfactory proof of the existence in reality of the damages alleged to have been
suffered." But, while certainty is an essential element of an award of damages, it need not
be a mathematical certainty. That this is true is adduced not only from the personal injury
cases from the supreme court of Spain which we have discussed above, but by many cases
decided by this court, reference to which has already been made. As stated in Joyce on
Damages, section 75, "But to deny the injured party the right to recover any actual
damages in cases f torts because they are of such a nature a cannot be thus certainly
measured, would be to enable parties to profit by and speculate upon their own wrongs;
such is not the law."

As to the elements to be considered in estimating the damage done to plaintiff's business by

reason of his accident, this same author, citing numerous authorities, has the following to
say: It is proper to consider the business the plaintiff is engaged in, the nature and extent of
such business, the importance of his personal oversight and superintendence in conducting
it, and the consequent loss arising from his inability to prosecure it.

The business of the present plaintiff required his immediate supervision. All the profits
derived therefrom were wholly due to his own exertions. Nor are his damages confined to
the actual time during which he was physically incapacitated for work, as is the case of a
person working for a stipulated daily or monthly or yearly salary. As to persons whose
labor is thus compensated and who completely recover from their injuries, the rule may be
said to be that their damages are confined to the duration of their enforced absence from
their occupation. But the present plaintiff could not resume his work at the same profit he
was making when the accident occurred. He had built up an establishing business which
included some twenty regular customers. These customers represented to him a regular
income. In addition to this he made sales to other people who were not so regular in their
purchases. But he could figure on making at least some sales each month to others besides
his regular customers. Taken as a whole his average monthly income from his business was
about P50. As a result of the accident, he lost all but four of his regular customers and his
receipts dwindled down to practically nothing. Other agents had invaded his territory, and
upon becoming physically able to attend to his business, he found that would be necessary
to start with practically no regular trade, and either win back his old customers from his
competitors or else secure others. During this process of reestablishing his patronage his
income would necessarily be less than he was making at the time of the accident and would
continue to be so for some time. Of course, if it could be mathematically determined how
much less he will earn during this rebuilding process than he would have earned if the
accident had not occurred, that would be the amount he would be entitled to in this action.
But manifestly this ideal compensation cannot be ascertained. The question therefore
resolves itself into whether this damage to his business can be so nearly ascertained as to
justify a court in awarding any amount whatever.

When it is shown that a plaintiff's business is a going concern with a fairly steady average
profit on the investment, it may be assumed that had the interruption to the business
through defendant's wrongful act not occurred, it would have continued producing this
average income "so long as is usual with things of that nature." When in addition to the
previous average income of the business it is further shown what the reduced receipts of the
business are immediately after the cause of the interruption has been removed, there can be
no manner of doubt that a loss of profits has resulted from the wrongful act of the
defendant. In the present case, we not only have the value of plaintiff's business to him just
prior to the accident, but we also have its value to him after the accident. At the trial, he
testified that his wife had earned about fifteen pesos during the two months that he was
disabled. That this almost total destruction of his business was directly chargeable to
defendant's wrongful act, there can be no manner of doubt; and the mere fact that the loss
can not be ascertained with absolute accuracy, is no reason for denying plaintiff's claim
altogether. As stated in one case, it would be a reproach to the law if he could not recover
damages at all. (Baldwin vs. Marquez, 91 Ga., 404)

Profits are not excluded from recovery because they are profits; but when excluded,
it is on the ground that there are no criteria by which to estimate the amount with
the certainty on which the adjudications of courts, and the findings of juries, should
be based. (Brigham vs. Carlisle (Ala.), 56 Am. Rep., 28, as quoted in
Wilson vs. Wernwag, 217 Pa., 82.)

The leading English case on the subject is Phillips vs. London and Southwestern Ry. Co. (5
Q. B. D., 788; 41 L.T., 121; 8 Eng. Rul. Cases, 447). The plaintiff was a physician with a
very lucrative practice. In one case he had received a fee of 5,000 guineas; but it appeared
that his average income was between 6,000 and 7,000 pounds sterling per year. The report
does not state definitely how serious plaintiff's injuries were, but apparently he was
permanently disabled. The following instruction to the jury was approved, and we think
should be set out in this opinion as applicable to the present case:

You cannot put the plaintiff back again into his original position, but you must bring
your reasonable common sense to bear, and you must always recollect that this is the
only occasion on which compensation can be given. Dr. Philips can never sue again
for it. You have, therefore, not to give him compensation a wrong at the hands of the
defendants, and you must take care o give him full, fair compensation. for that
which he has suffered.

The jury's award was seven thousand pounds. Upon a new trial, on the ground of the
insufficiency of the damages awarded, plaintiff received 16,000 pounds. On the second
appeal, Bramwell, L. J., put the case of a laborer earning 25 shillings a week, who, on
account of injury, was totally incapacitated for work for twenty-six weeks, and then for ten
weeks could not earn more than ten shillings a week, and was not likely to get into full
work for another twenty weeks. The proper measure of damages would be in that case 25
shillings a week twenty-six weeks, plus 15 shillings a week for the ten and twenty weeks,
and damages for bodily suffering and medical expenses. Damages for bodily suffering, of
course, are not, for reasons stated above, applicable to this jurisdiction; otherwise we
believe this example to be the ideal compensation for loss of profits which courts should
strike to reach, in cases like the present.

In Joslin vs. Grand Rapids Ice and Coal Co. (53 Mich., 322), the court said: "The plaintiff,
in making proof of his damages, offered testimony to the effect that he was an attorney at
law of ability and in good standing, and the extent and value of his practice, and that, in
substance, the injury had rendered him incapable of pursuing his profession. This was
objected to as irrelevant, immaterial and incompetent. We think this was competent. It was
within the declaration that his standing in his profession was such as to command respect,
and was proper to be shown, and his ability to earn, and the extent of his practice, were a
portion of the loss he had sustained by the injury complained of. There was no error in
permitting this proof, and we further think it was competent, upon the question of damages
under the evidence in this case, for the plaintiff to show, by Judge Hoyt, as was done, that
an interruption in his legal business and practice for eight months was a damage to him. It
seems to have been a part of the legitimate consequences of the plaintiff's injury."

In Luck vs. City of Ripon (52 Wis., 196), plaintiff was allowed to prevent that she was a
midwife and show the extent of her earnings prior to the accident in order to establish the
damage done to her business.

The pioneer case of Gobel vs. Hough (26 Minn., 252) contains perhaps one of the clearest
statements of the rule and is generally considered as one of the leading cases on this
subject. In that case the court said:

When a regular and established business, the value of which may be ascertained, has
been wrongfully interrupted, the true general rule for compensating the party
injured is to ascertain how much less valuable the business was by reason of the
interruption, and allow that as damages. This gives him only what the wrongful act
deprived him of. The value of such a business depends mainly on the ordinary
profits derived from it. Such value cannot be ascertained without showing what the
usual profits are; nor are the ordinary profits incident to such a business contingent
or speculative, in the sense that excludes profits from consideration as an element of
damages. What they would have been, in the ordinary course of the business, for a
period during which it was interrupted, may be shown with reasonable certainty.
What effect extraordinary circumstances would have had upon the business might
be contingent and conjectural, and any profits anticipated from such cause would be
obnoxious to the objection that they are merely speculative; but a history of the
business, for a reasonable time prior to a period of interruption, would enable the
jury to determine how much would be done under ordinary circumstances, and in
the usual course, during the given period; and the usual rate of profit being shown,
of course the aggregate becomes only a matter of calculation.
In the very recent case of Wellington vs. Spencer (Okla., 132 S. W., 675), plaintiff had
rented a building from the defendant and used it as a hotel. Defendant sued out a wrongful
writ of attachment upon the equipment of the plaintiff, which caused him to abandon his
hotel business. After remarking that the earlier cases held that no recovery could be had for
prospective profits, but that the later authorities have held that such damages may be
allowed when the amount is capable of proof, the court had the following to say:

Where the plaintiff has just made his arrangements to begin business, and he is
prevented from beginning either by tort or a breach of contract, or where the injury
is to a particular subject matter, profits of which are uncertain, evidence as to
expected profits must be excluded from the jury because of the uncertainty. There is
as much reason to believe that there will be no profits as to believe that there will be
no profits, but no such argument can be made against proving a usual profit of an
established business. In this case the plaintiff, according to his testimony, had an
established business, and was earning a profit in the business, and had been doing
that for a sufficient length of time that evidence as to prospective profits was not
entirely speculative. Men who have been engaged in business calculate with a
reasonable certainty the income from their business, make their plans to live
accordingly, and the value of such business is not a matter of speculation as to
exclude evidence from the jury.

A good example of a business not established for which loss of profits will be allowed may
be found in the States vs.Durkin (65 Kan., 101). Plaintiffs formed a partnership, and
entered the plumbing business in the city of Topeka in April. In July of the same year, they
brought an action against a plumbers' association on the ground that the latter had formed
an unlawful combination in restraint of trade and prevented them from securing supplies
for their business within a reasonable time. The court said:

In the present case the plaintiffs had only been in business a short time — not so
long that it can be said that they had an established business. they had contracted
three jobs of plumbing, had finished two, and lost money on both; not, however,
because of any misconduct or wrongful acts on the part of the defendants or either
of them. They carried no stock in trade, and their manner of doing business was to
secure a contract and then purchase the material necessary for its completion. It is
not shown that they had any means or capital invested in the business other than
their tools. Neither of them had prior thereto managed or carried on a similar
business. Nor was it shown that they were capable of so managing this business as to
make it earn a profit. There was little of that class of business being done at the
time, and little, if any, profit derived therefrom. The plaintiffs' business lacked
duration, permanency, and recognition. It was an adventure, as distinguished from
an established business. Its profits were speculative and remote, existing only in
anticipation. The law, with all its vigor and energy in its effort to right or wrongs
and damages for injuries sustained, may not enter into a domain of speculation or
conjecture. In view of the character and condition of the plaintiffs' business, the jury
had not sufficient evidence from which to ascertain profits.
Other cases which hold that the profits of an established business may be considered in
calculating the measure of damages for an interruption of it are: Wilkinson vs. Dunbar (149
N. C., 20); Kinney vs. Crocker (18 Wis., 80); Sachra vs. Manila (120 la., 562);
Kramer vs. City of Los Angeles (147 Cal., 668); Mugge vs. Erkman (161 Ill. App., 180);
Fredonia Gas Co. vs. Bailey 977 Kan., 296); Morrow vs. Mo. Pac. R. Co. (140 Mo. App.,
200); City of Indianapolis vs. Gaston (58 Ind., 24); National Fibre Board vs. Auburn
Electric Light Co. (95 Me., 318); Sutherland on Damages, sec. 70.

We have now outlined the principles which should govern the measure of damages in this
case. We are of the opinion that the lower court had before it sufficient evidence of the
damage to plaintiff's business in the way of prospective loss of profits to justify it in
calculating his damages as to his item. That evidence has been properly elevated to this
court of review. Under section 496 of the Code of Civil Procedure, we are authorized to
enter final judgment or direct a new trial, as may best subserve the ends of justice. We are
of the opinion that the evidence presented as to the damage done to plaintiff's business is
credible and that it is sufficient and clear enough upon which to base a judgment for
damages. Plaintiff having had four years' experience in selling goods on commission, it
must be presumed that he will be able to rebuild his business to its former proportions; so
that at some time in the future his commissions will equal those he was receiving when the
accident occurred. Aided by his experience, he should be able to rebuild this business to its
former proportions in much less time than it took to establish it as it stood just prior to the
accident. One year should be sufficient time in which to do this. The profits which plaintiff
will receive from the business in the course of its reconstruction will gradually increase.
The injury to plaintiff's business begins where these profits leave off, and, as a corollary,
there is where defendant's liability begins. Upon this basis, we fix the damages to plaintiff's
business at P250.

The judgment of the lower court is set aside, and the plaintiff is awarded the following
damages; ten pesos for medical expenses; one hundred pesos for the two months of his
enforced absence from his business; and two hundred and fifty pesos for the damage done
to his business in the way of loss of profits, or a total of three hundred and sixty pesos. No
costs will be allowed in this instance.
THIRD DIVISION

[G.R. No. 107518. October 8, 1998]

PNOC SHIPPING AND TRANSPORT CORPORATION, petitioner, vs. HONORABLE

COURT OF APPEALS and MARIA EFIGENIA FISHING CORPORATION, respondents.

DECISION

ROMERO, J.:

A party is entitled to adequate compensation only for such pecuniary loss actually suffered
and duly proved.[1] Indeed, basic is the rule that to recover actual damages, the amount of
loss must not only be capable of proof but must actually be proven with a reasonable
degree of certainty, premised upon competent proof or best evidence obtainable of the
actual amount thereof.[2] The claimant is duty-bound to point out specific facts that afford a
basis for measuring whatever compensatory damages are borne. [3] A court cannot merely
rely on speculations, conjectures, or guesswork as to the fact and amount of damages [4] as
well as hearsay[5] or uncorroborated testimony whose truth is suspect. [6] Such are the
jurisprudential precepts that the Court now applies in resolving the instant petition.

The records disclose that in the early morning of September 21, 1977, the M/V Maria
Efigenia XV, owned by private respondent Maria Efigenia Fishing Corporation, was
navigating the waters near Fortune Island in Nasugbu, Batangas on its way to Navotas,
Metro Manila when it collided with the vessel Petroparcel which at the time was owned by
the Luzon Stevedoring Corporation (LSC).

After investigation was conducted by the Board of Marine Inquiry, Philippine Coast Guard
Commandant Simeon N. Alejandro rendered a decision finding the Petroparcel at
fault. Based on this finding by the Board and after unsuccessful demands on petitioner,
[7]
private respondent sued the LSC and the Petroparcel captain, Edgardo Doruelo, before
the then Court of First Instance of Caloocan City, paying thereto the docket fee of one
thousand two hundred fifty-two pesos (P1,252.00) and the legal research fee of two pesos
(P2.00).[8] In particular, private respondent prayed for an award of P692,680.00, allegedly
representing the value of the fishing nets, boat equipment and cargoes of M/V Maria
Efigenia XV, with interest at the legal rate plus 25% thereof as attorneys fees. Meanwhile,
during the pendency of the case, petitioner PNOC Shipping and Transport Corporation
sought to be substituted in place of LSC as it had already acquired ownership of
the Petroparcel.[9]

For its part, private respondent later sought the amendment of its complaint on the ground
that the original complaint failed to plead for the recovery of the lost value of the hull
of M/V Maria Efigenia XV.[10] Accordingly, in the amended complaint, private respondent
averred that M/V Maria Efigenia XV had an actual value of P800,000.00 and that, after
deducting the insurance payment of P200,000.00, the amount of P600,000.00 should
likewise be claimed. The amended complaint also alleged that inflation resulting from the
devaluation of the Philippine peso had affected the replacement value of the hull of the
vessel, its equipment and its lost cargoes, such that there should be a reasonable
determination thereof. Furthermore, on account of the sinking of the vessel, private
respondent supposedly incurred unrealized profits and lost business opportunities that
would thereafter be proven.[11]

Subsequently, the complaint was further amended to include petitioner as a

defendant[12] which the lower court granted in its order of September 16, 1985. [13] After
petitioner had filed its answer to the second amended complaint, on February 5, 1987, the
lower court issued a pre-trial order[14] containing, among other things, a stipulations of
facts, to wit:

1. On 21 September 1977, while the fishing boat `M/V MARIA EFIGENIA owned by
plaintiff was navigating in the vicinity of Fortune Island in Nasugbu, Batangas, on its way
to Navotas, Metro Manila, said fishing boat was hit by the LSCO tanker Petroparcel
causing the former to sink.

2. The Board of Marine Inquiry conducted an investigation of this marine accident and on
21 November 1978, the Commandant of the Philippine Coast Guard, the Honorable
Simeon N. Alejandro, rendered a decision finding the cause of the accident to be the
reckless and imprudent manner in which Edgardo Doruelo navigated the LSCO
Petroparcel and declared the latter vessel at fault.

3. On 2 April 1978, defendant Luzon Stevedoring Corporation (LUSTEVECO), executed in

favor of PNOC Shipping and Transport Corporation a Deed of Transfer involving several
tankers, tugboats, barges and pumping stations, among which was the LSCO Petroparcel.

4. On the same date on 2 April 1979 (sic), defendant PNOC STC again entered into an
Agreement of Transfer with co-defendant Lusteveco whereby all the business properties
and other assets appertaining to the tanker and bulk oil departments including the motor
tanker LSCO Petroparcel of defendant Lusteveco were sold to PNOC STC.

5. The aforesaid agreement stipulates, among others, that PNOC-STC assumes, without
qualifications, all obligations arising from and by virtue of all rights it obtained over the
LSCO `Petroparcel.

6. On 6 July 1979, another agreement between defendant LUSTEVECO and PNOC-STC

was executed wherein Board of Marine Inquiry Case No. 332 (involving the sea accident of
21 September 1977) was specifically identified and assumed by the latter.
7. On 23 June 1979, the decision of Board of Marine Inquiry was affirmed by the Ministry
of National Defense, in its decision dismissing the appeal of Capt. Edgardo Doruelo and
Chief mate Anthony Estenzo of LSCO `Petroparcel.

8. LSCO `Petroparcel is presently owned and operated by PNOC-STC and likewise Capt.
Edgardo Doruelo is still in their employ.

9. As a result of the sinking of M/V Maria Efigenia caused by the reckless and imprudent
manner in which LSCO Petroparcel was navigated by defendant Doruelo, plaintiff suffered
actual damages by the loss of its fishing nets, boat equipments (sic) and cargoes, which
went down with the ship when it sank the replacement value of which should be left to the
sound discretion of this Honorable Court.

After trial, the lower court[15] rendered on November 18, 1989 its decision disposing of Civil
Case No. C-9457 as follows:

WHEREFORE, and in view of the foregoing, judgment is hereby rendered in favor of the
plaintiff and against the defendant PNOC Shipping & Transport Corporation, to pay the
plaintiff:

a. The sum of P6,438,048.00 representing the value of the fishing boat with interest from
the date of the filing of the complaint at the rate of 6% per annum;

b. The sum of P50,000.00 as and for attorneys fees; and

c. The costs of suit.

The counterclaim is hereby DISMISSED for lack of merit. Likewise, the case against
defendant Edgardo Doruelo is hereby DISMISSED, for lack of jurisdiction.

SO ORDERED.

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

(a) Exhibit A certified xerox copy of the certificate of ownership of M/V Maria Efigenia XV;

(b) Exhibit B a document titled Marine Protest executed by Delfin Villarosa, Jr. on
September 22, 1977 stating that as a result of the collision, the M/V Maria Efigenia
XV sustained a hole at its left side that caused it to sink with its cargo of
1,050 baeras valued at P170,000.00;

(c) Exhibit C a quotation for the construction of a 95-footer trawler issued by Isidoro A.
Magalong of I. A. Magalong Engineering and Construction on January 26, 1987 to Del
Rosario showing that construction of such trawler would cost P2,250,000.00;

(d) Exhibit D pro forma invoice No. PSPI-05/87-NAV issued by E.D. Daclan of Power
Systems, Incorporated on January 20, 1987 to Del Rosario showing that two (2) units of
CUMMINS Marine Engine model N855-M, 195 bhp. at 1800 rpm. would
cost P1,160,000.00;

(e) Exhibit E quotation of prices issued by Scan Marine Inc. on January 20, 1987 to Del
Rosario showing that a unit of Furuno Compact Daylight Radar, Model FR-604D, would
cost P100,000.00 while a unit of Furuno Color Video Sounder, Model FCV-501 would
cost P45,000.00 so that the two units would cost P145,000.00;

(f) Exhibit F quotation of prices issued by Seafgear Sales, Inc. on January 21, 1987 to Del
Rosario showing that two (2) rolls of nylon rope (5 cir. X 300fl.) would cost P140,000.00;
two (2) rolls of nylon rope (3 cir. X 240fl.), P42,750.00; one (1) binocular (7 x 50), P1,400.00,
one (1) compass (6), P4,000.00 and 50 pcs. of floats, P9,000.00 or a total of P197, 150.00;

(g) Exhibit G retainer agreement between Del Rosario and F. Sumulong Associates Law
Offices stipulating an acceptance fee of P5,000.00, per appearance fee of P400.00, monthly
retainer of P500.00, contingent fee of 20% of the total amount recovered and that attorneys
fee to be awarded by the court should be given to Del Rosario; and

(h) Exhibit H price quotation issued by Seafgear Sales, Inc. dated April 10, 1987 to Del
Rosario showing the cost of poly nettings as: 50 rolls of 400/18 3kts. 100md x
100mtrs., P70,000.00; 50 rolls of 400/18 5kts. 100md x 100mtrs., P81,500.00; 50 rolls of
400/18 8kts. 100md x 100mtrs., P116,000.00, and 50 rolls of 400/18 10kts. 100md x
100mtrs., P146,500 and banera (tub) at P65.00 per piece or a total of P414,065.00

The lower court held that the prevailing replacement value of P6,438,048.00 of the fishing
boat and all its equipment would regularly increase at 30% every year from the date the
quotations were given.
On the other hand, the lower court noted that petitioner only presented Lorenzo Lazaro,
senior estimator at PNOC Dockyard & Engineering Corporation, as sole witness and it did
not bother at all to offer any documentary evidence to support its position. Lazaro testified
that the price quotations submitted by private respondent were excessive and that as an
expert witness, he used the quotations of his suppliers in making his estimates. However, he
failed to present such quotations of prices from his suppliers, saying that he could not
produce a breakdown of the costs of his estimates as it was a sort of secret scheme. For this
reason, the lower court concluded:

Evidently, the quotation of prices submitted by the plaintiff relative to the replacement
value of the fishing boat and its equipments in the tune of P6,438,048.00 which were lost
due to the recklessness and imprudence of the herein defendants were not rebutted by the
latter with sufficient evidence. The defendants through their sole witness Lorenzo Lazaro
relied heavily on said witness bare claim that the amount afore-said is excessive or bloated,
but they did not bother at all to present any documentary evidence to substantiate such
claim. Evidence to be believed, must not only proceed from the mouth of the credible
witness, but it must be credible in itself. (Vda. de Bonifacio vs. B. L. T. Bus Co., Inc. L-
26810, August 31, 1970).

Aggrieved, petitioner filed a motion for the reconsideration of the lower courts decision
contending that: (1) the lower court erred in holding it liable for damages; that the lower
court did not acquire jurisdiction over the case by paying only P1,252.00 as docket fee; (2)
assuming that plaintiff was entitled to damages, the lower court erred in awarding an
amount greater than that prayed for in the second amended complaint; and (3) the lower
court erred when it failed to resolve the issues it had raised in its memorandum.
[16]
Petitioner likewise filed a supplemental motion for reconsideration expounding on
whether the lower court acquired jurisdiction over the subject matter of the case despite
therein plaintiffs failure to pay the prescribed docket fee.[17]

On January 25, 1990, the lower court declined reconsideration for lack of merit.
[18]
Apparently not having received the order denying its motion for reconsideration,
petitioner still filed a motion for leave to file a reply to private respondents opposition to
said motion.[19] Hence, on February 12, 1990, the lower court denied said motion for leave
to file a reply on the ground that by the issuance of the order of January 25, 1990, said
motion had become moot and academic.[20]

Unsatisfied with the lower courts decision, petitioner elevated the matter to the Court of
Appeals which, however, affirmed the same in toto on October 14, 1992.[21] On petitioners
assertion that the award of P6,438,048.00 was not convincingly proved by competent and
admissible evidence, the Court of Appeals ruled that it was not necessary to qualify Del
Rosario as an expert witness because as the owner of the lost vessel, it was well within his
knowledge and competency to identify and determine the equipment installed and the
cargoes loaded on the vessel. Considering the documentary evidence presented as in the
nature of market reports or quotations, trade journals, trade circulars and price lists, the
Court of Appeals held, thus:

Consequently, until such time as the Supreme Court categorically rules on the admissibility
or inadmissibility of this class of evidence, the reception of these documentary exhibits
(price quotations) as evidence rests on the sound discretion of the trial court. In fact, where
the lower court is confronted with evidence which appears to be of doubtful admissibility,
the judge should declare in favor of admissibility rather than of non-admissibility (The
Collector of Palakadhari, 124 [1899], p. 43, cited in Francisco, Revised Rules of Court,
Evidence, Volume VII, Part I, 1990 Edition, p. 18). Trial courts are enjoined to observe the
strict enforcement of the rules of evidence which crystallized through constant use and
practice and are very useful and effective aids in the search for truth and for the effective
administration of justice. But in connection with evidence which may appear to be of
doubtful relevancy or incompetency or admissibility, it is the safest policy to be liberal, not
rejecting them on doubtful or technical grounds, but admitting them unless plainly
irrelevant, immaterial or incompetent, for the reason that their rejection places them
beyond the consideration of the court. If they are thereafter found relevant or competent,
can easily be remedied by completely discarding or ignoring them. (Banaria vs. Banaria, et
al., C.A. No. 4142, May 31, 1950; cited in Francisco, Supra). [Underscoring supplied].

Stressing that the alleged inadmissible documentary exhibits were never satisfactorily
rebutted by appellants own sole witness in the person of Lorenzo Lazaro, the appellate
court found that petitioner ironically situated itself in an inconsistent posture by the fact
that its own witness, admittedly an expert one, heavily relies on the very same pieces of
evidence (price quotations) appellant has so vigorously objected to as inadmissible
evidence. Hence, it concluded:

x x x. The amount of P6,438,048.00 was duly established at the trial on the basis of
appellees documentary exhibits (price quotations) which stood uncontroverted, and which
already included the amount by way of adjustment as prayed for in the amended
complaint. There was therefore no need for appellee to amend the second amended
complaint in so far as to the claim for damages is concerned to conform with the evidence
presented at the trial. The amount of P6,438,048.00 awarded is clearly within the relief
prayed for in appellees second amended complaint.

On the issue of lack of jurisdiction, the respondent court held that following the ruling
in Sun Insurance Ltd. v. Asuncion,[22] the additional docket fee that may later on be declared
as still owing the court may be enforced as a lien on the judgment.

Hence, the instant recourse.

In assailing the Court of Appeals decision, petitioner posits the view that the award
of P6,438,048 as actual damages should have been in light of these considerations, namely:
(1) the trial court did not base such award on the actual value of the vessel and its
equipment at the time of loss in 1977; (2) there was no evidence on extraordinary inflation
that would warrant an adjustment of the replacement cost of the lost vessel, equipment and
cargo; (3) the value of the lost cargo and the prices quoted in respondents documentary
evidence only amount to P4,336,215.00; (4) private respondents failure to adduce evidence
to support its claim for unrealized profit and business opportunities; and (5) private
respondents failure to prove the extent and actual value of damages sustained as a result of
the 1977 collision of the vessels.[23]

Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded
in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense
of natural justice and are designed to repair the wrong that has been done, to compensate
for the injury inflicted and not to impose a penalty. [24] In actions based on torts or quasi-
delicts, actual damages include all the natural and probable consequences of the act or
omission complained of.[25] There are two kinds of actual or compensatory damages: one is
the loss of what a person already possesses (dao emergente), and the other is the failure to
receive as a benefit that which would have pertained to him (lucro cesante).[26] Thus:

Where goods are destroyed by the wrongful act of the defendant the plaintiff is entitled to
their value at the time of destruction, that is, normally, the sum of money which he would
have to pay in the market for identical or essentially similar goods, plus in a proper case
damages for the loss of use during the period before replacement. In other words, in the
case of profit-earning chattels, what has to be assessed is the value of the chattel to its
owner as a going concern at the time and place of the loss, and this means, at least in the
case of ships, that regard must be had to existing and pending engagements.x x x.

x x x. If the market value of the ship reflects the fact that it is in any case virtually certain
of profitable employment, then nothing can be added to that value in respect of charters
actually lost, for to do so would be pro tanto to compensate the plaintiff twice over. On the
other hand, if the ship is valued without reference to its actual future engagements and only
in the light of its profit-earning potentiality, then it may be necessary to add to the value
thus assessed the anticipated profit on a charter or other engagement which it was unable
to fulfill. What the court has to ascertain in each case is the `capitalised value of the vessel
as a profit-earning machine not in the abstract but in view of the actual circumstances,
without, of course, taking into account considerations which were too remote at the time of
the loss.[27] [Underscoring supplied].

As stated at the outset, to enable an injured party to recover actual or compensatory

damages, he is required to prove the actual amount of loss with reasonable degree of
certainty premised upon competent proof and on the best evidence available. [28] The burden
of proof is on the party who would be defeated if no evidence would be presented on either
side. He must establish his case by a preponderance of evidence which means that the
evidence, as a whole, adduced by one side is superior to that of the other. [29] In other words,
damages cannot be presumed and courts, in making an award must point out specific facts
that could afford a basis for measuring whatever compensatory or actual damages are
borne.[30]

In this case, actual damages were proven through the sole testimony of private respondents
general manager and certain pieces of documentary evidence. Except for Exhibit B where
the value of the 1,050 baeras of fish were pegged at their September 1977 value when the
collision happened, the pieces of documentary evidence proffered by private respondent
with respect to items and equipment lost show similar items and equipment with
corresponding prices in early 1987 or approximately ten (10) years after the
collision. Noticeably, petitioner did not object to the exhibits in terms of the time index for
valuation of the lost goods and equipment. In objecting to the same pieces of evidence,
petitioner commented that these were not duly authenticated and that the witness (Del
Rosario) did not have personal knowledge on the contents of the writings and neither was
he an expert on the subjects thereof. [31] Clearly ignoring petitioners objections to the
exhibits, the lower court admitted these pieces of evidence and gave them due weight to
arrive at the award of P6,438,048.00 as actual damages.

The exhibits were presented ostensibly in the course of Del Rosarios testimony. Private
respondent did not present any other witnesses especially those whose signatures appear in
the price quotations that became the bases of the award. We hold, however, that the price
quotations are ordinary private writings which under the Revised Rules of Court should
have been proffered along with the testimony of the authors thereof. Del Rosario could not
have testified on the veracity of the contents of the writings even though he was the
seasoned owner of a fishing fleet because he was not the one who issued the price
quotations. Section 36, Rule 130 of the Revised Rules of Court provides that a witness can
testify only to those facts that he knows of his personal knowledge.

For this reason, Del Rosarios claim that private respondent incurred losses in the total
amount of P6,438,048.00 should be admitted with extreme caution considering that,
because it was a bare assertion, it should be supported by independent evidence. Moreover,
because he was the owner of private respondent corporation [32] whatever testimony he
would give with regard to the value of the lost vessel, its equipment and cargoes should be
viewed in the light of his self-interest therein. We agree with the Court of Appeals that his
testimony as to the equipment installed and the cargoes loaded on the vessel should be
given credence[33] considering his familiarity thereto. However, we do not subscribe to the
conclusion that his valuationof such equipment, cargo and the vessel itself should be
accepted as gospel truth.[34] We must, therefore, examine the documentary evidence
presented to support Del Rosarios claim as regards the amount of losses.
The price quotations presented as exhibits partake of the nature of hearsay evidence
considering that the persons who issued them were not presented as witnesses. [35] Any
evidence, whether oral or documentary, is hearsay if its probative value is not based on the
personal knowledge of the witness but on the knowledge of another person who is not on
the witness stand. Hearsay evidence, whether objected to or not, has no probative value
unless the proponent can show that the evidence falls within the exceptions to the hearsay
evidence rule.[36] On this point, we believe that the exhibits do not fall under any of the
exceptions provided under Sections 37 to 47 of Rule 130.[37]

It is true that one of the exceptions to the hearsay rule pertains to commercial lists and the
like under Section 45, Rule 130 of the Revised Rules on Evidence. In this respect, the Court
of Appeals considered private respondents exhibits as commercial lists. It added, however,
that these exhibits should be admitted in evidence until such time as the Supreme Court
categorically rules on the admissibility or inadmissibility of this class of evidence because
the reception of these documentary exhibits (price quotations) as evidence rests on the
sound discretion of the trial court. [38] Reference to Section 45, Rule 130, however, would
show that the conclusion of the Court of Appeals on the matter was arbitrarily arrived
at. This rule states:

Commercial lists and the like. Evidence of statements of matters of interest to persons
engaged in an occupation contained in a list, register, periodical, or other published
compilation is admissible as tending to prove the truth of any relevant matter so stated if
that compilation is published for use by persons engaged in that occupation and is
generally used and relied upon by them there.

Under Section 45 of the aforesaid Rule, a document is a commercial list if: (1) it is
a statement of matters of interest to persons engaged in an occupation; (2) such statement
is contained in a list, register, periodical or other published compilation; (3) said
compilation is published for the use of persons engaged in that occupation, and (4) it is
generally used and relied upon by persons in the same occupation.

Based on the above requisites, it is our considered view that Exhibits B, C, D, E, F and
H[39] are not commercial lists for these do not belong to the category of other published
compilations under Section 45 aforequoted. Under the principle of ejusdem generis, (w)here
general words follow an enumeration of persons or things, by words of a particular and
specific meaning, such general words are not to be construed in their widest extent, but are
to be held as applying only to persons or things of the same kind or class as those
specifically mentioned.[40] The exhibits mentioned are mere price quotations issued
personally to Del Rosario who requested for them from dealers of equipment similar to the
ones lost at the collision of the two vessels. These are not published in any list, register,
periodical or other compilation on the relevant subject matter. Neither are these market
reports or quotations within the purview of commercial lists as these are not standard
handbooks or periodicals, containing data of everyday professional need and relied upon in
the work of the occupation. [41] These are simply letters responding to the queries of Del
Rosario. Thus, take for example Exhibit D which reads:

January 20, 1987

PROFORMA INVOICE NO. PSPI-05/87-NAV

MARIA EFIGINIA FISHING CORPORATION

Navotas, Metro Manila

Attention: MR. EDDIE DEL ROSARIO

Gentlemen:

In accordance to your request, we are pleased to quote our Cummins Marine Engine, to
wit.

Two (2) units CUMMINS Marine Engine model N855-M, 195 bhp.

at 1800 rpm., 6-cylinder in-line, 4-stroke cycle, natural aspirated, 5 in. x 6 in. bore and
stroke, 855 cu. In. displacement, keel-cooled, electric starting coupled with Twin-Disc
Marine gearbox model MG-509, 4.5:1 reduction ratio, includes oil cooler, companion
flange, manual and standard accessories as per attached sheet.

Price FOB Manila - - - - - - - - - - - - - - - P 580,000.00/unit

Total FOB Manila - - - - - - - - - - - - - - - P 1,160,000.00

vvvvvvvvv

T E R M S : CASH

DELIVERY : 60-90 days from date of order.

VALIDITY : Subject to our final confirmation.

WARRANTY : One (1) full year against factory defect.

Very truly yours,

POWER SYSTEMS, INC.

(Sgd.)

E. D. Daclan
To be sure, letters and telegrams are admissible in evidence but these are, however, subject
to the general principles of evidence and to various rules relating to documentary evidence.
[42]
Hence, in one case, it was held that a letter from an automobile dealer offering an
allowance for an automobile upon purchase of a new automobile after repairs had been
completed, was not a price current or commercial list within the statute which made such
items presumptive evidence of the value of the article specified therein. The letter was not
admissible in evidence as a commercial list even though the clerk of the dealer testified that
he had written the letter in due course of business upon instructions of the dealer. [43]

But even on the theory that the Court of Appeals correctly ruled on the admissibility of
those letters or communications when it held that unless plainly irrelevant, immaterial or
incompetent, evidence should better be admitted rather than rejected on doubtful or
technical grounds,[44] the same pieces of evidence, however, should not have been
given probative weight. This is a distinction we wish to point out. Admissibility of evidence
refers to the question of whether or not the circumstance (or evidence) is to considered at
all.[45] On the other hand, the probative value of evidence refers to the question of whether
or not it proves an issue. [46] Thus, a letter may be offered in evidence and admitted as such
but its evidentiary weight depends upon the observance of the rules on
evidence. Accordingly, the author of the letter should be presented as witness to provide the
other party to the litigation the opportunity to question him on the contents of the
letter. Being mere hearsay evidence, failure to present the author of the letter renders its
contents suspect. As earlier stated, hearsay evidence, whether objected to or not, has no
probative value. Thus:

The courts differ as to the weight to be given to hearsay evidence admitted without
objection. Some hold that when hearsay has been admitted without objection, the same
may be considered as any other properly admitted testimony. Others maintain that it is
entitled to no more consideration than if it had been excluded.

The rule prevailing in this jurisdiction is the latter one. Our Supreme Court held that
although the question of admissibility of evidence can not be raised for the first time on
appeal, yet if the evidence is hearsay it has no probative value and should be disregarded
whether objected to or not. `If no objection is made quoting Jones on Evidence - `it
(hearsay) becomes evidence by reason of the want of such objection even though its
admission does not confer upon it any new attribute in point of weight. Its nature and
quality remain the same, so far as its intrinsic weakness and incompetency to satisfy the
mind are concerned, and as opposed to direct primary evidence, the latter always prevails.

The failure of the defense counsel to object to the presentation of incompetent evidence, like
hearsay evidence or evidence that violates the rules of res inter alios acta, or his failure to
ask for the striking out of the same does not give such evidence any probative value. But
admissibility of evidence should not be equated with weight of evidence. Hearsay evidence
whether objected to or not has no probative value.[47]

Accordingly, as stated at the outset, damages may not be awarded on the basis of hearsay
evidence.[48]

Nonetheless, the non-admissibility of said exhibits does not mean that it totally deprives
private respondent of any redress for the loss of its vessel. This is because in Lufthansa
German Airlines v. Court of Appeals,[49] the Court said:

In the absence of competent proof on the actual damage suffered, private respondent is
`entitled to nominal damages which, as the law says, is adjudicated in order that a right of
the plaintiff, which has been violated or invaded by defendant, may be vindicated and
recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered.
[Underscoring supplied].

Nominal damages are awarded in every obligation arising from law, contracts, quasi-
contracts, acts or omissions punished by law, and quasi-delicts, or in every case where
property right has been invaded.[50] Under Article 2223 of the Civil Code, (t)he adjudication
of nominal damages shall preclude further contest upon the right involved and all
accessory questions, as between the parties to the suit, or their respective heirs and assigns.

Actually, nominal damages are damages in name only and not in fact. Where these are
allowed, they are not treated as an equivalent of a wrong inflicted but simply in recognition
of the existence of a technical injury.[51] However, the amount to be awarded as nominal
damages shall be equal or at least commensurate to the injury sustained by private
respondent considering the concept and purpose of such damages. [52] The amount of
nominal damages to be awarded may also depend on certain special reasons extant in the
case.[53]

Applying now such principles to the instant case, we have on record the fact that
petitioners vessel Petroparcel was at fault as well as private respondents complaint claiming
the amount of P692,680.00 representing the fishing nets, boat equipment and cargoes that
sunk with the M/V Maria Efigenia XV. In its amended complaint, private respondent
alleged that the vessel had an actual value of P800,000.00 but it had been paid insurance in
the amount of P200,000.00 and, therefore, it claimed only the amount
of P600,000.00. Ordinarily, the receipt of insurance payments should diminish the total
value of the vessel quoted by private respondent in his complaint considering that such
payment is causally related to the loss for which it claimed compensation. This Court
believes that such allegations in the original and amended complaints can be the basis for
determination of a fair amount of nominal damages inasmuch as a complaint alleges the
ultimate facts constituting the plaintiff's cause of action.[54] Private respondent should be
bound by its allegations on the amount of its claims.
With respect to petitioners contention that the lower court did not acquire jurisdiction over
the amended complaint increasing the amount of damages claimed to P600,000.00, we
agree with the Court of Appeals that the lower court acquired jurisdiction over the case
when private respondent paid the docket fee corresponding to its claim in its original
complaint. Its failure to pay the docket fee corresponding to its increased claim for
damages under the amended complaint should not be considered as having curtailed the
lower courts jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL) v.
Asuncion,[55] the unpaid docket fee should be considered as a lien on the judgment even
though private respondent specified the amount of P600,000.00 as its claim for damages in
its amended complaint.

Moreover, we note that petitioner did not question at all the jurisdiction of the lower court
on the ground of insufficient docket fees in its answers to both the amended complaint and
the second amended complaint. It did so only in its motion for reconsideration of the
decision of the lower court after it had received an adverse decision. As this Court held
in Pantranco North Express, Inc. v. Court of Appeals,[56] participation in all stages of the case
before the trial court, that included invoking its authority in asking for affirmative relief,
effectively barred petitioner by estoppel from challenging the courts jurisdiction. Notably,
from the time it filed its answer to the second amended complaint on April 16, 1985,
[57]
petitioner did not question the lower courts jurisdiction. It was only on December 29,
1989[58] when it filed its motion for reconsideration of the lower courts decision that
petitioner raised the question of the lower courts lack of jurisdiction. Petitioner thus
foreclosed its right to raise the issue of jurisdiction by its own inaction.

WHEREFORE, the challenged decision of the Court of Appeals dated October 14, 1992 in
CA-G. R. CV No. 26680 affirming that of the Regional Trial Court of Caloocan City,
Branch 121, is hereby MODIFIED insofar as it awarded actual damages to private
respondent Maria Efigenia Fishing Corporation in the amount of P6,438,048.00 for lack of
evidentiary bases therefor. Considering the fact, however, that: (1) technically petitioner
sustained injury but which, unfortunately, was not adequately and properly proved, and (2)
this case has dragged on for almost two decades, we believe that an award of Two Million
(P2,000,000.00)[59] in favor of private respondent as and for nominal damages is in order.

No pronouncement as to costs.

SO ORDERED.

SECOND DIVISION

[G.R. No. 115117. June 8, 2000]

INTEGRATED PACKAGING CORP., petitioner, vs. COURT OF APPEALS and FIL-
ANCHOR PAPER CO., INC. respondents.

DECISION

QUISUMBING, J.:

This is a petition to review the decision of the Court of Appeals rendered on April 20,
1994 reversing the judgment of the Regional Trial Court of Caloocan City in an action for
recovery of sum of money filed by private respondent against petitioner. In said decision,
the appellate court decreed:

"WHEREFORE, in view of all the foregoing, the appealed judgment is hereby

REVERSED and SET ASIDE. Appellee [petitioner herein] is hereby ordered to pay
appellant [private respondent herein] the sum of P763,101.70, with legal interest thereon,
from the date of the filing of the Complaint, until fully paid.

SO ORDERED."[1]

The RTC judgment reversed by the Court of Appeals had disposed of the complaint as
follows:

"WHEREFORE, judgment is hereby rendered:

Ordering plaintiff [herein private respondent] to pay defendant [herein petitioner] the sum
of P27,222.60 as compensatory and actual damages after deducting P763,101.70 (value of
materials received by defendant) from P790,324.30 representing compensatory damages as
defendants unrealized profits;

Ordering plaintiff to pay defendant the sum of P100,000.00 as moral damages;

Ordering plaintiff to pay the sum of P30,000.00 for attorneys fees; and to pay the costs of
suit.

SO ORDERED."[2]

The facts, as culled from the records, are as follows:

Petitioner and private respondent executed on May 5, 1978, an order agreement whereby
private respondent bound itself to deliver to petitioner 3,450 reams of printing paper,
coated, 2 sides basis, 80 lbs., 38" x 23", short grain, worth P1,040,060.00 under the
following schedule: May and June 1978450 reams at P290.00/ream; August and September
1978700 reams at P290/ream; January 1979575 reams at P307.20/ream; March 1979575
reams at P307.20/ream; July 1979575 reams at P307.20/ream; and October 1979575 reams
at P307.20/ream. In accordance with the standard operating practice of the parties, the
materials were to be paid within a minimum of thirty days and maximum of ninety days
from delivery.

Later, on June 7, 1978, petitioner entered into a contract with Philippine Appliance
Corporation (Philacor) to print three volumes of "Philacor Cultural Books" for delivery on
the following dates: Book VI, on or before November 1978; Book VII, on or before
November 1979 and; Book VIII, on or before November 1980, with a minimum of 300,000
copies at a price of P10.00 per copy or a total cost of P3,000,000.00.

As of July 30, 1979, private respondent had delivered to petitioner 1,097 reams of printing
paper out of the total 3,450 reams stated in the agreement. Petitioner alleged it wrote
private respondent to immediately deliver the balance because further delay would greatly
prejudice petitioner. From June 5, 1980 and until July 23, 1981, private respondent
delivered again to petitioner various quantities of printing paper amounting to
P766,101.70. However, petitioner encountered difficulties paying private respondent said
amount. Accordingly, private respondent made a formal demand upon petitioner to settle
the outstanding account. On July 23 and 31, 1981 and August 27, 1981, petitioner made
partial payments totalling P97,200.00 which was applied to its back accounts covered by
delivery invoices dated September 29-30, 1980 and October 1-2, 1980.[3]

Meanwhile, petitioner entered into an additional printing contract with Philacor.

Unfortunately, petitioner failed to fully comply with its contract with Philacor for the
printing of books VIII, IX, X and XI. Thus, Philacor demanded compensation from
petitioner for the delay and damage it suffered on account of petitioners failure.

On August 14, 1981, private respondent filed with the Regional Trial Court of Caloocan
City a collection suit against petitioner for the sum of P766,101.70, representing the unpaid
purchase price of printing paper bought by petitioner on credit.

In its answer, petitioner denied the material allegations of the complaint. By way of
counterclaim, petitioner alleged that private respondent was able to deliver only 1,097
reams of printing paper which was short of 2,875 reams, in total disregard of their
agreement; that private respondent failed to deliver the balance of the printing paper
despite demand therefor, hence, petitioner suffered actual damages and failed to realize
expected profits; and that petitioners complaint was prematurely filed.

After filing its reply and answer to the counterclaim, private respondent moved for
admission of its supplemental complaint, which was granted. In said supplemental
complaint, private respondent alleged that subsequent to the enumerated purchase invoices
in the original complaint, petitioner made additional purchases of printing paper on credit
amounting to P94,200.00. Private respondent also averred that petitioner failed and refused
to pay its outstanding obligation although it made partial payments in the amount of
P97,200.00 which was applied to back accounts, thus, reducing petitioners indebtedness to
P763,101.70.

On July 5, 1990, the trial court rendered judgment declaring that petitioner should pay
private respondent the sum of P763,101.70 representing the value of printing paper
delivered by private respondent from June 5, 1980 to July 23, 1981. However, the lower
court also found petitioners counterclaim meritorious. It ruled that were it not for the
failure or delay of private respondent to deliver printing paper, petitioner could have sold
books to Philacor and realized profit of P790,324.30 from the sale. It further ruled that
petitioner suffered a dislocation of business on account of loss of contracts and goodwill as
a result of private respondents violation of its obligation, for which the award of moral
damages was justified.

On appeal, the respondent Court of Appeals reversed and set aside the judgment of the
trial court. The appellate court ordered petitioner to pay private respondent the sum of
P763,101.70 representing the amount of unpaid printing paper delivered by private
respondent to petitioner, with legal interest thereon from the date of the filing of the
complaint until fully paid.[4]However, the appellate court deleted the award of P790,324.30
as compensatory damages as well as the award of moral damages and attorneys fees, for
lack of factual and legal basis.

Expectedly, petitioner filed this instant petition contending that the appellate courts
judgment is based on erroneous conclusions of facts and law. In this recourse, petitioner
assigns the following errors:

[I]

"THE COURT OF APPEALS ERRED IN CONCLUDING THAT PRIVATE

RESPONDENT DID NOT VIOLATE THE ORDER AGREEMENT.

[II]

THE COURT OF APPEALS ERRED IN CONCLUDING THAT RESPONDENT IS NOT

LIABLE FOR PETITIONERS BREACH OF CONTRACT WITH PHILACOR.

[III]

THE COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER IS NOT

ENTITLED TO DAMAGES AGAINST PRIVATE RESPONDENT."[5]

In our view, the crucial issues for resolution in this case are as follows:

(1)....Whether or not private respondent violated the order agreement, and;

(2)....Whether or not private respondent is liable for petitioners breach of contract with
Philacor.

Petitioners contention lacks factual and legal basis, hence, bereft of merit.

Petitioner contends, firstly, that private respondent violated the order agreement when the
latter failed to deliver the balance of the printing paper on the dates agreed upon.

The transaction between the parties is a contract of sale whereby private respondent
(seller) obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds
itself to pay therefor a sum of money or its equivalent (price). [6] Both parties concede that
the order agreement gives rise to a reciprocal obligations [7] such that the obligation of one is
dependent upon the obligation of the other. Reciprocal obligations are to be performed
simultaneously, so that the performance of one is conditioned upon the simultaneous
fulfillment of the other.[8] Thus, private respondent undertakes to deliver printing paper of
various quantities subject to petitioners corresponding obligation to pay, on a maximum
90-day credit, for these materials. Note that in the contract, petitioner is not even required
to make any deposit, down payment or advance payment, hence, the undertaking of private
respondent to deliver the materials is conditional upon payment by petitioner within the
prescribed period. Clearly, petitioner did not fulfill its side of the contract as its last
payment in August 1981 could cover only materials covered by delivery invoices dated
September and October 1980.

There is no dispute that the agreement provides for the delivery of printing paper on
different dates and a separate price has been agreed upon for each delivery. It is also
admitted that it is the standard practice of the parties that the materials be paid within a
minimum period of thirty (30) days and a maximum of ninety (90) days from each delivery.
[9]
Accordingly, the private respondents suspension of its deliveries to petitioner whenever
the latter failed to pay on time, as in this case, is legally justified under the second
paragraph of Article 1583 of the Civil Code which provides that:

"When there is a contract of sale of goods to be delivered by stated installments, which are
to be separately paid for, and the seller makes defective deliveries in respect of one or more
installments, or the buyer neglects or refuses without just cause to take delivery of or pay
for one or more installments, it depends in each case on the terms of the contract and the
circumstances of the case, whether the breach of contract is so material as to justify the
injured party in refusing to proceed further and suing for damages for breach of the entire
contract, or whether the breach is severable, giving rise to a claim for compensation but not
to a right to treat the whole contract as broken." (Emphasis supplied)

In this case, as found a quo petitioners evidence failed to establish that it had paid for the
printing paper covered by the delivery invoices on time. Consequently, private respondent
has the right to cease making further delivery, hence the private respondent did not violate
the order agreement. On the contrary, it was petitioner which breached the agreement as it
failed to pay on time the materials delivered by private respondent. Respondent appellate
court correctly ruled that private respondent did not violate the order agreement.

On the second assigned error, petitioner contends that private respondent should be held
liable for petitioners breach of contract with Philacor. This claim is manifestly devoid of
merit.

As correctly held by the appellate court, private respondent cannot be held liable under the
contracts entered into by petitioner with Philacor. Private respondent is not a party to said
agreements. It is also not a contract pour autrui. Aforesaid contracts could not affect third
persons like private respondent because of the basic civil law principle of relativity of
contracts which provides that contracts can only bind the parties who entered into it, and it
cannot favor or prejudice a third person, [10] even if he is aware of such contract and has
acted with knowledge thereof.[11]

Indeed, the order agreement entered into by petitioner and private respondent has not been
shown as having a direct bearing on the contracts of petitioner with Philacor. As pointed
out by private respondent and not refuted by petitioner, the paper specified in the order
agreement between petitioner and private respondent are markedly different from the
paper involved in the contracts of petitioner with Philacor. [12] Furthermore, the demand
made by Philacor upon petitioner for the latter to comply with its printing contract is dated
February 15, 1984, which is clearly made long after private respondent had filed its
complaint on August 14, 1981. This demand relates to contracts with Philacor dated April
12, 1983 and May 13, 1983, which were entered into by petitioner after private respondent
filed the instant case.

To recapitulate, private respondent did not violate the order agreement it had with
petitioner. Likewise, private respondent could not be held liable for petitioners breach of
contract with Philacor. It follows that there is no basis to hold private respondent liable for
damages. Accordingly, the appellate court did not err in deleting the damages awarded by
the trial court to petitioner.

The rule on compensatory damages is well established. True, indemnification for damages
comprehends not only the loss suffered, that is to say actual damages (damnum emergens),
but also profits which the obligee failed to obtain, referred to as compensatory damages
(lucrum cessans). However, to justify a grant of actual or compensatory damages, it is
necessary to prove with a reasonable degree of certainty, premised upon competent proof
and on the best evidence obtainable by the injured party, the actual amount of loss. [13] In
the case at bar, the trial court erroneously concluded that petitioner could have sold books
to Philacor at the quoted selling price of P1,850,750.55 and by deducting the production
cost of P1,060,426.20, petitioner could have earned profit of P790,324.30. Admittedly, the
evidence relied upon by the trial court in arriving at the amount are mere estimates
prepared by petitioner.[14] Said evidence is highly speculative and manifestly hypothetical. It
could not provide sufficient legal and factual basis for the award of P790,324.30 as
compensatory damages representing petitioners self-serving claim of unrealized profit.

Further, the deletion of the award of moral damages is proper, since private respondent
could not be held liable for breach of contract. Moral damages may be awarded when in a
breach of contract the defendant acted in bad faith, or was guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual obligation. [15] Finally,
since the award of moral damages is eliminated, so must the award for attorneys fees be
also deleted.[16]

WHEREFORE, the instant petition is DENIED. The decision of the Court of Appeals is
AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 118342 January 5, 1998

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS and LYDIA CUBA, respondents.

G.R. No. 118367 January 5, 1998

LYDIA P. CUBA, petitioner,

vs.
COURT OF APPEALS, DEVELOPMENT BANK OF THE PHILIPPINES and
AGRIPINA P. CAPERAL, respondents.

DAVIDE, JR., J.:

These two consolidated cases stemmed from a complaint 1 filed against the Development
Bank of the Philippines (hereafter DBP) and Agripina Caperal filed by Lydia Cuba
(hereafter CUBA) on 21 May 1985 with the Regional Trial Court of Pangasinan, Branch 54.
The said complaint sought (1) the declaration of nullity of DBP's appropriation of CUBA's
rights, title, and interests over a 44-hectares fishpond located in Bolinao, Pangasinan, for
being violative of Article 2088 of the Civil Code; (2) the annulment of the Deed of
Conditional Sale executed in her favor by DBP; (3) the annulment of DBP's sale of the
subject fishpond to Caperal; (4) the restoration of her rights, title, and interests over the
fishpond; and (5) the recovery of damages, attorney's fees, and expenses of litigation.
After the joinder of issues following the filing by the parties of their respective pleadings,
the trial court conducted a pre-trial where CUBA and DBP agreed on the following facts,
which were embodied in the pre-trial order:2

1. Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No. 2083 (new) dated
May 13, 1974 from the Government;

2. Plaintiff Lydia P. Cuba obtained loans from the Development Bank of the Philippines in
the amounts of P109,000.00; P109,000.00; and P98,700.00 under the terms stated in the
Promissory Notes dated September 6, 1974; August 11, 1975; and April 4, 1977;

3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of
her Leasehold Rights;

4. Plaintiff failed to pay her loan on the scheduled dates thereof in accordance with the
terms of the Promissory Notes;

5. Without foreclosure proceedings, whether judicial or extra-judicial, defendant DBP

appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question;

6. After defendant DBP has appropriated the Leasehold Rights of plaintiff Lydia Cuba over
the fishpond in question, defendant DBP, in turn, executed a Deed of Conditional Sale of
the Leasehold Rights in favor of plaintiff Lydia Cuba over the same fishpond in question;

7. In the negotiation for repurchase, plaintiff Lydia Cuba addressed two letters to the
Manager DBP, Dagupan City dated November 6, 1979 and December 20, 1979. DBP
thereafter accepted the offer to repurchase in a letter addressed to plaintiff dated February
1, 1982;

8. After the Deed of Conditional Sale was executed in favor of plaintiff Lydia Cuba, a new
Fishpond Lease Agreement No. 2083-A dated March 24, 1980 was issued by the Ministry of
Agriculture and Food in favor of plaintiff Lydia Cuba only, excluding her husband;

9. Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the Deed of Conditional
Sale;

10. After plaintiff Lydia Cuba failed to pay the amortization as stated in Deed of
Conditional Sale, she entered with the DBP a temporary arrangement whereby in
consideration for the deferment of the Notarial Rescission of Deed of Conditional Sale,
plaintiff Lydia Cuba promised to make certain payments as stated in temporary
Arrangement dated February 23, 1982;

11. Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act dated March 13,
1984, and which was received by plaintiff Lydia Cuba;
12. After the Notice of Rescission, defendant DBP took possession of the Leasehold Rights
of the fishpond in question;

13. That after defendant DBP took possession of the Leasehold Rights over the fishpond in
question, DBP advertised in the SUNDAY PUNCH the public bidding dated June 24, 1984,
to dispose of the property;

14. That the DBP thereafter executed a Deed of Conditional Sale in favor of defendant
Agripina Caperal on August 16, 1984;

15. Thereafter, defendant Caperal was awarded Fishpond Lease Agreement No. 2083-A on
December 28, 1984 by the Ministry of Agriculture and Food.

Defendant Caperal admitted only the facts stated in paragraphs 14 and 15 of the pre-trial
order.3

Trial was thereafter had on other matters.

The principal issue presented was whether the act of DBP in appropriating to itself CUBA's
leasehold rights over the fishpond in question without foreclosure proceedings was
contrary to Article 2088 of the Civil Code and, therefore, invalid. CUBA insisted on an
affirmative resolution. DBP stressed that it merely exercised its contractual right under the
Assignments of Leasehold Rights, which was not a contract of mortgage. Defendant
Caperal sided with DBP.

The trial court resolved the issue in favor of CUBA by declaring that DBP's taking
possession and ownership of the property without foreclosure was plainly violative of
Article 2088 of the Civil Code which provides as follows:

Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage,
or dispose of them. Any stipulation to the contrary is null and void.

It disagreed with DBP's stand that the Assignments of Leasehold Rights were not contracts
of mortgage because (1) they were given as security for loans, (2) although the "fishpond
land" in question is still a public land, CUBA's leasehold rights and interest thereon are
alienable rights which can be the proper subject of a mortgage; and (3) the intention of the
contracting parties to treat the Assignment of Leasehold Rights as a mortgage was obvious
and unmistakable; hence, upon CUBA's default, DBP's only right was to foreclose the
Assignment in accordance with law.

The trial court also declared invalid condition no. 12 of the Assignment of Leasehold Rights
for being a clear case of pactum commissorium expressly prohibited and declared null and
void by Article 2088 of the Civil Code. It then concluded that since DBP never acquired
lawful ownership of CUBA's leasehold rights, all acts of ownership and possession by the
said bank were void. Accordingly, the Deed of Conditional Sale in favor of CUBA, the
notarial rescission of such sale, and the Deed of Conditional Sale in favor of defendant
Caperal, as well as the Assignment of Leasehold Rights executed by Caperal in favor of
DBP, were also void and ineffective.

As to damages, the trial court found "ample evidence on record" that in 1984 the
representatives of DBP ejected CUBA and her caretakers not only from the fishpond area
but also from the adjoining big house; and that when CUBA's son and caretaker went there
on 15 September 1985, they found the said house unoccupied and destroyed and CUBA's
personal belongings, machineries, equipment, tools, and other articles used in fishpond
operation which were kept in the house were missing. The missing items were valued at
about P550,000. It further found that when CUBA and her men were ejected by DBP for
the first time in 1979, CUBA had stocked the fishpond with 250,000 pieces of bangus fish
(milkfish), all of which died because the DBP representatives prevented CUBA's men from
feeding the fish. At the conservative price of P3.00 per fish, the gross value would have been
P690,000, and after deducting 25% of said value as reasonable allowance for the cost of
feeds, CUBA suffered a loss of P517,500. It then set the aggregate of the actual damages
sustained by CUBA at P1,067,500.

The trial court further found that DBP was guilty of gross bad faith in falsely representing
to the Bureau of Fisheries that it had foreclosed its mortgage on CUBA's leasehold rights.
Such representation induced the said Bureau to terminate CUBA's leasehold rights and to
approve the Deed of Conditional Sale in favor of CUBA. And considering that by reason of
her unlawful ejectment by DBP, CUBA "suffered moral shock, degradation, social
humiliation, and serious anxieties for which she became sick and had to be hospitalized"
the trial court found her entitled to moral and exemplary damages. The trial court also
held that CUBA was entitled to P100,000 attorney's fees in view of the considerable
expenses she incurred for lawyers' fees and in view of the finding that she was entitled to
exemplary damages.

In its decision of 31 January 1990,4 the trial court disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff:

1. DECLARING null and void and without any legal effect the act of defendant
Development Bank of the Philippines in appropriating for its own interest, without any
judicial or extra-judicial foreclosure, plaintiff's leasehold rights and interest over the
fishpond land in question under her Fishpond Lease Agreement No. 2083 (new);

2. DECLARING the Deed of Conditional Sale dated February 21, 1980 by and between the
defendant Development Bank of the Philippines and plaintiff (Exh. E and Exh. 1) and the
acts of notarial rescission of the Development Bank of the Philippines relative to said sale
(Exhs. 16 and 26) as void and ineffective;
3. DECLARING the Deed of Conditional Sale dated August 16, 1984 by and between the
Development Bank of the Philippines and defendant Agripina Caperal (Exh. F and Exh.
21), the Fishpond Lease Agreement No. 2083-A dated December 28, 1984 of defendant
Agripina Caperal (Exh. 23) and the Assignment of Leasehold Rights dated February 12,
1985 executed by defendant Agripina Caperal in favor of the defendant Development Bank
of the Philippines (Exh. 24) as void ab initio;

4. ORDERING defendant Development Bank of the Philippines and defendant Agripina

Caperal, jointly and severally, to restore to plaintiff the latter's leasehold rights and
interests and right of possession over the fishpond land in question, without prejudice to
the right of defendant Development Bank of the Philippines to foreclose the securities given
by plaintiff;

5. ORDERING defendant Development Bank of the Philippines to pay to plaintiff the

following amounts:

a) The sum of ONE MILLION SIXTY-SEVEN THOUSAND FIVE HUNDRED PESOS

(P1,067,500.00), as and for actual damages;

b) The sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as moral damages;

c) The sum of FIFTY THOUSAND (P50,000.00) PESOS, as and for exemplary damages;

d) And the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS, as and for
attorney's fees;

6. And ORDERING defendant Development Bank of the Philippines to reimburse and pay
to defendant Agripina Caperal the sum of ONE MILLION FIVE HUNDRED THIRTY-
TWO THOUSAND SIX HUNDRED TEN PESOS AND SEVENTY-FIVE CENTAVOS
(P1,532,610.75) representing the amounts paid by defendant Agripina Caperal to defendant
Development Bank of the Philippines under their Deed of Conditional Sale.

CUBA and DBP interposed separate appeals from the decision to the Court of Appeals. The
former sought an increase in the amount of damages, while the latter questioned the
findings of fact and law of the lower court.

In its decision5 of 25 May 1994, the Court of Appeals ruled that (1) the trial court erred in
declaring that the deed of assignment was null and void and that defendant Caperal could
not validly acquire the leasehold rights from DBP; (2) contrary to the claim of DBP, the
assignment was not a cession under Article 1255 of the Civil Code because DBP appeared to
be the sole creditor to CUBA — cession presupposes plurality of debts and creditors; (3)
the deeds of assignment represented the voluntary act of CUBA in assigning her property
rights in payment of her debts, which amounted to a novation of the promissory notes
executed by CUBA in favor of DBP; (4) CUBA was estopped from questioning the
assignment of the leasehold rights, since she agreed to repurchase the said rights under a
deed of conditional sale; and (5) condition no. 12 of the deed of assignment was an express
authority from CUBA for DBP to sell whatever right she had over the fishpond. It also
ruled that CUBA was not entitled to loss of profits for lack of evidence, but agreed with the
trial court as to the actual damages of P1,067,500. It, however, deleted the amount of
exemplary damages and reduced the award of moral damages from P100,000 to P50,000
and attorney's fees, from P100,000 to P50,000.

The Court of Appeals thus declared as valid the following: (1) the act of DBP in
appropriating Cuba's leasehold rights and interest under Fishpond Lease Agreement No.
2083; (2) the deeds of assignment executed by Cuba in favor of DBP; (3) the deed of
conditional sale between CUBA and DBP; and (4) the deed of conditional sale between DBP
and Caperal, the Fishpond Lease Agreement in favor of Caperal, and the assignment of
leasehold rights executed by Caperal in favor of DBP. It then ordered DBP to turn over
possession of the property to Caperal as lawful holder of the leasehold rights and to pay
CUBA the following amounts: (a) P1,067,500 as actual damages; P50,000 as moral
damages; and P50,000 as attorney's fees.

Since their motions for reconsideration were denied, 6 DBP and CUBA filed separate
petitions for review.

In its petition (G.R. No. 118342), DBP assails the award of actual and moral damages and
attorney's fees in favor of CUBA.

Upon the other hand, in her petition (G.R. No. 118367), CUBA contends that the Court of
Appeals erred (1) in not holding that the questioned deed of assignment was a pactum
commissorium contrary to Article 2088 of the Civil Code; (b) in holding that the deed of
assignment effected a novation of the promissory notes; (c) in holding that CUBA was
estopped from questioning the validity of the deed of assignment when she agreed to
repurchase her leasehold rights under a deed of conditional sale; and (d) in reducing the
amounts of moral damages and attorney's fees, in deleting the award of exemplary
damages, and in not increasing the amount of damages.

We agree with CUBA that the assignment of leasehold rights was a mortgage contract.

It is undisputed that CUBA obtained from DBP three separate loans totalling P335,000,
each of which was covered by a promissory note. In all of these notes, there was a provision
that: "In the event of foreclosure of the mortgage securing this notes, I/We further bind
myself/ourselves, jointly and severally, to pay the deficiency, if any."7

Simultaneous with the execution of the notes was the execution of "Assignments of
Leasehold Rights"8where CUBA assigned her leasehold rights and interest on a 44-hectare
fishpond, together with the improvements thereon. As pointed out by CUBA, the deeds of
assignment constantly referred to the assignor (CUBA) as "borrower"; the assigned rights,
as mortgaged properties; and the instrument itself, as mortgage contract. Moreover, under
condition no. 22 of the deed, it was provided that "failure to comply with the terms and
condition of any of the loans shall cause all other loans to become due and demandable
and all mortgages shall be foreclosed." And, condition no. 33 provided that if "foreclosure is
actually accomplished, the usual 10% attorney's fees and 10% liquidated damages of the
total obligation shall be imposed." There is, therefore, no shred of doubt that a mortgage
was intended.

Besides, in their stipulation of facts the parties admitted that the assignment was by way of
security for the payment of the loans; thus:

3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of
her Leasehold Rights.

In People's Bank & Trust Co. vs. Odom,9 this Court had the occasion to rule that an
assignment to guarantee an obligation is in effect a mortgage.

We find no merit in DBP's contention that the assignment novated the promissory notes in
that the obligation to pay a sum of money the loans (under the promissory notes) was
substituted by the assignment of the rights over the fishpond (under the deed of
assignment). As correctly pointed out by CUBA, the said assignment merely complemented
or supplemented the notes; both could stand together. The former was only an accessory to
the latter. Contrary to DBP's submission, the obligation to pay a sum of money remained,
and the assignment merely served as security for the loans covered by the promissory
notes. Significantly, both the deeds of assignment and the promissory notes were executed
on the same dates the loans were granted. Also, the last paragraph of the assignment
stated: "The assignor further reiterates and states all terms, covenants, and conditions
stipulated in the promissory note or notescovering the proceeds of this loan, making said
promissory note or notes, to all intent and purposes, an integral part hereof."

Neither did the assignment amount to payment by cession under Article 1255 of the Civil
Code for the plain and simple reason that there was only one creditor, the DBP. Article
1255 contemplates the existence of two or more creditors and involves the assignment of all
the debtor's property.

Nor did the assignment constitute dation in payment under Article 1245 of the civil Code,
which reads: "Dation in payment, whereby property is alienated to the creditor in
satisfaction of a debt in money, shall be governed by the law on sales." It bears stressing
that the assignment, being in its essence a mortgage, was but a security and not a
satisfaction of indebtedness.10
We do not, however, buy CUBA's argument that condition no. 12 of the deed of assignment
constitutedpactum commissorium. Said condition reads:

12. That effective upon the breach of any condition of this assignment, the Assignor hereby
appoints the Assignee his Attorney-in-fact with full power and authority to take actual
possession of the property above-described, together with all improvements thereon,
subject to the approval of the Secretary of Agriculture and Natural Resources, to lease the
same or any portion thereof and collect rentals, to make repairs or improvements thereon
and pay the same, to sell or otherwise dispose of whatever rights the Assignor has or might
have over said property and/or its improvements and perform any other act which the
Assignee may deem convenient to protect its interest. All expenses advanced by the
Assignee in connection with purpose above indicated which shall bear the same rate of
interest aforementioned are also guaranteed by this Assignment. Any amount received from
rents, administration, sale or disposal of said property may be supplied by the Assignee to
the payment of repairs, improvements, taxes, assessments and other incidental expenses
and obligations and the balance, if any, to the payment of interest and then on the capital of
the indebtedness secured hereby. If after disposal or sale of said property and upon
application of total amounts received there shall remain a deficiency, said Assignor hereby
binds himself to pay the same to the Assignee upon demand, together with all interest
thereon until fully paid. The power herein granted shall not be revoked as long as the
Assignor is indebted to the Assignee and all acts that may be executed by the Assignee by
virtue of said power are hereby ratified.

The elements of pactum commissorium are as follows: (1) there should be a property
mortgaged by way of security for the payment of the principal obligation, and (2) there
should be a stipulation for automatic appropriation by the creditor of the thing mortgaged
in case of non-payment of the principal obligation within the stipulated period.11

Condition no. 12 did not provide that the ownership over the leasehold rights would
automatically pass to DBP upon CUBA's failure to pay the loan on time. It merely provided
for the appointment of DBP as attorney-in-fact with authority, among other things, to sell
or otherwise dispose of the said real rights, in case of default by CUBA, and to apply the
proceeds to the payment of the loan. This provision is a standard condition in mortgage
contracts and is in conformity with Article 2087 of the Civil Code, which authorizes the
mortgagee to foreclose the mortgage and alienate the mortgaged property for the payment
of the principal obligation.

DBP, however, exceeded the authority vested by condition no. 12 of the deed of assignment.
As admitted by it during the pre-trial, it had "[w]ithout foreclosure proceedings, whether
judicial or extrajudicial, . . . appropriated the [l]easehold [r]ights of plaintiff Lydia Cuba
over the fishpond in question." Its contention that it limited itself to mere administration
by posting caretakers is further belied by the deed of conditional sale it executed in favor of
CUBA. The deed stated:

WHEREAS, the Vendor [DBP] by virtue of a deed of assignment executed in its favor by the
herein vendees [Cuba spouses] the former acquired all the right and interest of the latter
over the above-described property;

xxx xxx xxx

The title to the real estate property [sic] and all improvements thereon shall remain in the
name of the Vendor until after the purchase price, advances and interest shall have been
fully paid. (Emphasis supplied).

It is obvious from the above-quoted paragraphs that DBP had appropriated and taken
ownership of CUBA's leasehold rights merely on the strength of the deed of assignment.

DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its act of
appropriating the leasehold rights. As stated earlier, condition no. 12 did not provide that
CUBA's default would operate to vest in DBP ownership of the said rights. Besides, an
assignment to guarantee an obligation, as in the present case, is virtually a mortgage
and not an absolute conveyance of title which confers ownership on the assignee.12

At any rate, DBP's act of appropriating CUBA's leasehold rights was violative of Article
2088 of the Civil Code, which forbids a credit or from appropriating, or disposing of, the
thing given as security for the payment of a debt.

The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP did
not estop her from questioning DBP's act of appropriation. Estoppel is unavailing in this
case. As held by this Court in some cases, 13 estoppel cannot give validity to an act that is
prohibited by law or against public policy. Hence, the appropriation of the leasehold rights,
being contrary to Article 2088 of the Civil Code and to public policy, cannot be deemed
validated by estoppel.

Instead of taking ownership of the questioned real rights upon default by CUBA, DBP
should have foreclosed the mortgage, as has been stipulated in condition no. 22 of the deed
of assignment. But, as admitted by DBP, there was no such foreclosure. Yet, in its letter
dated 26 October 1979, addressed to the Minister of Agriculture and Natural Resources
and coursed through the Director of the Bureau of Fisheries and Aquatic Resources, DBP
declared that it "had foreclosed the mortgage and enforced the assignment of leasehold
rights on March 21, 1979 for failure of said spouses [Cuba spouces] to pay their loan
amortizations."14 This only goes to show that DBP was aware of the necessity of foreclosure
proceedings.
In view of the false representation of DBP that it had already foreclosed the mortgage, the
Bureau of Fisheries cancelled CUBA's original lease permit, approved the deed of
conditional sale, and issued a new permit in favor of CUBA. Said acts which were
predicated on such false representation, as well as the subsequent acts emanating from
DBP's appropriation of the leasehold rights, should therefore be set aside. To validate these
acts would open the floodgates to circumvention of Article 2088 of the Civil Code.

Even in cases where foreclosure proceedings were had, this Court had not hesitated to
nullify the consequent auction sale for failure to comply with the requirements laid down
by law, such as Act No. 3135, as amended. 15 With more reason that the sale of property
given as security for the payment of a debt be set aside if there was no prior fore closure
proceeding.

Hence, DBP should render an accounting of the income derived from the operation of the
fishpond in question and apply the said income in accordance with condition no. 12 of the
deed of assignment which provided: "Any amount received from rents, administration, . . .
may be applied to the payment of repairs, improvements, taxes, assessment, and other
incidental expenses and obligations and the balance, if any, to the payment of interest and
then on the capital of the indebtedness. . ."

We shall now take up the issue of damages.

Article 2199 provides:

Except as provided by law or by stipulation, one is entitled to an adequate compensation

only for such pecuniary loss suffered by him as he has duly proved. Such compensation is
referred to as actual or compensatory damages.

Actual or compensatory damages cannot be presumed, but must be proved with reasonable
degree of certainty.16 A court cannot rely on speculations, conjectures, or guesswork as to
the fact and amount of damages, but must depend upon competent proof that they have
been suffered by the injured party and on the best obtainable evidence of the actual
amount thereof.17 It must point out specific facts which could afford a basis for measuring
whatever compensatory or actual damages are borne.18

In the present case, the trial court awarded in favor of CUBA P1,067,500 as actual damages
consisting of P550,000 which represented the value of the alleged lost articles of CUBA and
P517,500 which represented the value of the 230,000 pieces of bangus allegedly stocked in
1979 when DBP first ejected CUBA from the fishpond and the adjoining house. This award
was affirmed by the Court of Appeals.

We find that the alleged loss of personal belongings and equipment was not proved by clear
evidence. Other than the testimony of CUBA and her caretaker, there was no proof as to
the existence of those items before DBP took over the fishpond in question. As pointed out
by DBP, there was not "inventory of the alleged lost items before the loss which is normal
in a project which sometimes, if not most often, is left to the care of other persons." Neither
was a single receipt or record of acquisition presented.

Curiously, in her complaint dated 17 May 1985, CUBA included "losses of property" as
among the damages resulting from DBP's take-over of the fishpond. Yet, it was only in
September 1985 when her son and a caretaker went to the fishpond and the adjoining
house that she came to know of the alleged loss of several articles. Such claim for "losses of
property," having been made before knowledge of the alleged actual loss, was therefore
speculative. The alleged loss could have been a mere afterthought or subterfuge to justify
her claim for actual damages.

With regard to the award of P517,000 representing the value of the alleged 230,000 pieces
of bangus which died when DBP took possession of the fishpond in March 1979, the same
was not called for. Such loss was not duly proved; besides, the claim therefor was delayed
unreasonably. From 1979 until after the filing of her complaint in court in May 1985,
CUBA did not bring to the attention of DBP the alleged loss. In fact, in her letter dated 24
October 1979,19 she declared:

1. That from February to May 1978, I was then seriously ill in Manila and within the same
period I neglected the management and supervision of the cultivation and harvest of the
produce of the aforesaid fishpond thereby resulting to the irreparable loss in the produce of
the same in the amount of about P500,000.00 to my great damage and prejudice due to
fraudulent acts of some of my fishpond workers.

Nowhere in the said letter, which was written seven months after DBP took possession of
the fishpond, did CUBA intimate that upon DBP's take-over there was a total of 230,000
pieces of bangus, but all of which died because of DBP's representatives prevented her men
from feeding the fish.

The award of actual damages should, therefore, be struck down for lack of sufficient basis.

In view, however, of DBP's act of appropriating CUBA's leasehold rights which was
contrary to law and public policy, as well as its false representation to the then Ministry of
Agriculture and Natural Resources that it had "foreclosed the mortgage," an award of
moral damages in the amount of P50,000 is in order conformably with Article 2219(10), in
relation to Article 21, of the Civil Code. Exemplary or corrective damages in the amount of
P25,000 should likewise be awarded by way of example or correction for the public
good.20 There being an award of exemplary damages, attorney's fees are also recoverable.21

WHEREFORE, the 25 May 1994 Decision of the Court of Appeals in CA-G.R. CV No.
26535 is hereby REVERSED, except as to the award of P50,000 as moral damages, which is
hereby sustained. The 31 January 1990 Decision of the Regional Trial Court of Pangasinan,
Branch 54, in Civil Case No. A-1574 is MODIFIED setting aside the finding that condition
no. 12 of the deed of assignment constituted pactum commissorium and the award of actual
damages; and by reducing the amounts of moral damages from P100,000 to P50,000; the
exemplary damages, from P50,000 to P25,000; and the attorney's fees, from P100,000 to
P20,000. The Development Bank of the Philippines is hereby ordered to render an
accounting of the income derived from the operation of the fishpond in question.

Let this case be REMANDED to the trial court for the reception of the income statement of
DBP, as well as the statement of the account of Lydia P. Cuba, and for the determination of
each party's financial obligation to one another.

SO ORDERED.

FIRST DIVISION

[G.R. No. 111692. February 9, 1996]

ALEJANDRO FUENTES, JR., petitioner, vs. COURT OF APPEALS and PEOPLE OF

THE PHILIPPINES, respondents.

DECISION

BELLOSILLO, J.:

Still professing innocence and insisting that he is a victim of mistaken identity, petitioner
Alejandro Fuentes, Jr., seeks reversal of the decision of the Court of Appeals affirming his
conviction for murder.[1]

At four o clock in the morning of 24 June 1989 Julieto Malaspina together with Godofredo
Llames, Honorio Osok and Alberto Toling, was at a benefit dance at Dump Site, Tudela,
Trento, Agusan del Sur. Petitioner called Malaspina and placed his right arm on the
shoulder of the latter saying, Before, I saw you with a long hair but now you have a short
hair.[2]Suddenly petitioner stabbed Malaspina in the abdomen with a hunting knife.
Malaspina fell to the ground and his companions rushed to his side. Petitioner fled. Before
the victim succumbed to the gaping wound on his abdomen he muttered that Alejandro
Fuentes, Jr., stabbed him.[3]

Dr. Porfirio L. Salubre, the Rural Health Physician who autopsied the cadaver of Julieto
Malaspina on 24 July 1989, reported that death was due to stab wound at left lumbar
region I V2 in. in length with extracavitation of the small and large intestines.[4]
Petitioner claims on the other hand that it was his cousin Zoilo Fuentes, Jr., alias Jonie who
knifed Malaspina; that when the victim was killed he was conversing with him; that he was
compelled to run away when he heard that somebody with a bolo and spear would kill all
those from San Isidro because Jonie, the killer, was from that place; that since he was also
from San Isidro he sought refuge in his brothers house where he met Jonie; that Jonie
admitted spontaneously that he stabbed Malaspina because after a boxing match before the
latter untied his gloves and punched him; that as there were many persons milling around
the house Jonie jumped out and escaped through the window; that he was arrested at eight
oclock in the morning of 24 June 1989 while he was in a store in the barangay.[5]

The Regional Trial Court of Prosperidad, Agusan del Sur, found petitioner guilty of
murder qualified by treachery and imposed on him an indeterminate prison term of ten
(10) years and one (1) day of prision mayor as minimum to seventeen (17) years and four (4)
months of reclusion temporal as maximum, to indemnify the heirs of the victim Julieto
Malaspina the amount of P50,000.00 and to pay P8,300.00 as actual damages plus costs.[6]

The Court of Appeals affirmed the judgment of the trial court; hence, this petition for
review.

Petitioner contends that the appellate court erred when it held that petitioner was
positively and categorically identified as the killer of Malaspina, in affirming the judgment
of conviction and in holding petitioner liable for damages to the heirs of the victim.

Petitioner points to an alleged inconsistency between the testimonies of prosecution

witnesses Alberto Toling and Honorio Osok to the effect that they saw petitioner stab
Malaspina on the right lumbar region, and the testimony of the attending physician that
the victim was stabbed on the left lumbar region.

This discrepancy is inconsequential. What is material is that Malaspina was stabbed to

death and that three (3) prosecution witnesses positively identified petitioner as the knife
wielder. It must be stressed that these witnesses had known petitioner for quite some time
and never had any personal misunderstanding nor altercation with the latter as to create
any suspicion that they were impelled by ill motives to falsely implicate him.

That it was another person who committed the offense is too incredible. No less than
petitioners own witness, Nerio Biscocho who claimed he also saw the killing, testified that
Alejandro Fuentes, Jr., the petitioner, and Jonie Fuentes are one and the same person. Thus
-

COURT:

Q. Who is this Joni Fuentes and Alejandro Fuentes?

A. That Joni Fuentes is the same of that or the accused Alejandro Fuentes. I do not know
his real name but he is called as Joni, sir, x x x[7]

On cross-examination witness Biscocho further admitted that he himself would call

petitioner Alejandro Fuentes, Jr., as Joni or Jonie Fuentes, as some of his friends did, but
victim Malaspina occasionally called petitioner Junior.[8]

Petitioner would make much of the alleged confession of Zoilo Fuentes, Jr., since it is a
declaration against penal interest and therefore an exception to the hearsay rule. The so-
called confession of Zoilo was allegedly given to Felicisimo Fuentes, the uncle of petitioner
and Zoilo, who in turn relayed the matter to P/Sgt. Benjamin Conde, Jr. Felicisimo testified
that on 24 June 1989 while he was at Barangay San Isidro, Zoilo Fuentes, Jr., confessed
that he killed Malaspina in retaliation; that he even showed him the knife he used and
asked his help in finding a lawyer, in securing bail and, if possible, in working out a
settlement with the relatives of the deceased. The following day however he learned that the
self-confessed killer was gone and that petitioner had been arrested for a crime he did not
commit.[9]

For his part, Station Commander P/Sgt. Conde, Jr., testified that after the criminal
information for murder was filed on 26 July 1989, petitioner met Felicisimo who informed
him of the disclosure by Zoilo. Conde then advised Felicisimo that if it was true that it was
Zoilo who fatally stabbed Malaspina Felicisimo must persuade Zoilo to surrender. Conde
then personally went to Barangay San Isidro to investigate. There he was told by the
townsfolk that Zoilo had already fled).[10]

One of the recognized exceptions to the hearsay rule is that pertaining to declarations made
against interest. Sec. 38 of Rule 130 of the Rules of Court provides that (t)he declaration
made by a person deceased, or unable to testify, against the interest of the declarant, if the
fact asserted in the declaration was at the time it was made so far contrary to declarants
own interest, that a reasonable man in his position would not have made the declaration
unless he believed it to be true, may be received in evidence against himself or his
successors in interest and against third persons. The admissibility in evidence of such
declaration is grounded on necessity and trustworthiness.[11]

There are three (3) essential requisites for the admissibility of a declaration against
interest: (a) the declarant must not be available to testify; (b) the declaration must concern
a fact cognizable by the declarant; and (c) the circumstances must render it improbable
that a motive to falsify existed.

In the instant case, we find that the declaration particularly against penal interest
attributed to Zoilo Fuentes Jr. is not admissible in evidence as an exception to the hearsay
rule. We are not unaware of People Toledo,[12] a 1928 case, where Justice Malcolm writing
for the Court endeavored to reexamine the declaration of third parties made contrary to
their penal interest. In that case, the protagonists Holgado and Morales engaged in a bob
duel. Morales was killed almost instantly. Holgado who was seriously wounded gave a
sworn statement (Exh. 1) before the municipal president declaring that when he and
Morales fought there was nobody else present. One (1) month later Holgado died from his
wounds. While the Court was agreed that Toledo, who reportedly intervened in the fight
and dealt the mortal blow, should be exonerated on reasonable doubt, the members did not
reach an accord on the admissibility of Exh. 1. One group would totally disregard Exh. 1
since there was ample testimonial evidence to support an acquittal. The second group
considered Exh. 1 as part of the res gestae as it was made on the same morning when the
fight occurred. A third group, to which Justice Malcolm belonged, opined that the court
below erred in not admitting Exh. 1 as the statement of a fact against penal interest.

For all its attempt to demonstrate the arbitrariness behind the rejection in certain cases of
declarations against penal interest, the Toledo case cannot be applied in the instant case
which is remarkably different. Consider this factual scenario: the alleged declarant Zoilo
Fuentes Jr., a cousin of accused-appellant, verbally admitted to the latter, and later to their
common uncle Felicisimo Fuentes, that he (Zoilo) killed the victim because of a grudge,
after which he disappeared. One striking feature that militates against the acceptance of
such a statement is its patent untrustworthiness. Zoilo who is related to accused-appellant
had every motive to prevaricate. The same can be said of accused-appellant and his uncle
Felicisimo. Secondly, we need not resort to legal rhetorics to find that the admission of such
a statement may likewise be, according to Wigmore, shocking to the sense of justice. [13] Let
us assume that the trial court did admit the statement of Zoilo and on that basis acquitted
accused-appellant. Let us assume further that Zoilo was subsequently captured and upon
being confronted with his admission of guilt readily repudiated the same. There is nothing,
absolutely nothing, that can bind Zoilo legally to that statement.

But more importantly, the far weightier reason why the admission against penal interest
cannot be accepted in the instant case is that the declarant is not unable to testify. There is
no showing that Zoilo is either dead, mentally incapacitated or physically incompetent
which Sec. 38 obviously contemplates. His mere absence from the jurisdiction does not
make him ipso facto unavailable under this rule.[14] For it is incumbent upon the defense to
produce each and every piece of evidence that can break the prosecution and assure the
acquittal of the accused. Other than the gratuitous statements of accused-appellant and his
uncle to the effect that Zoilo admitted having killed Malaspina, the records show that the
defense did not exert any serious effort to produce Zoilo as a witness. Lest we be
misunderstood, the Court is always for the admission of evidence that would let an
innocent declaration of guilt by the real culprit. But this can be open to abuse, as when the
extrajudicial statement is not even authenticated thus increasing the probability of its
fabrication; it is made to persons who have every reason to lie and falsify; and it is not
altogether clear that the declarant himself is unable to testify. Thus, for this case at least,
exclusion is the prudent recourse as explained in Toledo -The purpose of all evidence is to
get at the truth. The reason for the hearsay rule is that the extrajudicial and unsworn
statement of another is not the best method of serving this purpose. In other words, the
great possibility of the fabrication of falsehoods, and the inability to prove their untruth,
requires that the doors be closed to such evidence.[15]

The Court of Appeals as well as the trial court correctly determined the crime to be murder
qualified by treachery. The suddenness of the attack, without any provocation from the
unsuspecting victim, made the stabbing of Malaspina treacherous. [16] However, the court a
quo erred in imposing an indeterminate prison term of ten (10) years and one (1) day
of prision mayor as minimum to seventeen (17) years and four (4) months of reclusion
temporal as maximum. Murder under Art. 248 of The Revised Penal Code is punishable
by reclusion temporal in its maximum period to death. Since aside from treachery
qualifying the crime to murder there is no other modifying circumstance proved, the
medium period of the penalty, i.e. reclusion perpetua, should have been imposed on
petitioner.[17]

Petitioner maintains that assuming that he committed the crime it is error to hold him
answerable for P8,300.00 as actual damages on the basis of the mere testimony of the
victims sister, Angelina Serrano, without any tangible document to support such claim.
This is a valid point. In crimes and quasi-delicts, the defendant is liable for all damages
which are the natural and probable consequences of the act or omission complained of.
[18]
To seek recovery for actual damages it is essential that the injured party proves the
actual amount of loss with reasonable degree of certainty premised upon competent proof
and on the best evidence available. [19] Courts cannot simply rely on speculation, conjecture
or guesswork in determining the fact and amount of damages.[20]

The award by the court a quo of P8,300.00 as actual damages is not supported by the
evidence on record. We have only the testimony of the victims elder sister stating that she
incurred expenses of P8,300.00 in connection with the death of Malaspina. [21] However, no
proof of the actual damages was ever presented in court. Of the expenses alleged to have
been incurred, the Court can only give credence to those supported by receipts and which
appear to have been genuinely expended in connection with the death of the victim. Since
the actual amount was not substantiated, the same cannot be granted.[22]

WHEREFORE, the judgment appealed from finding petitioner ALEJANDRO FUENTES

JR. guilty of MURDER and directing him to indemnify the heirs of Julieto Malaspina in
the amount of P50,000.00 plus costs is AFFIRMED with the modification that the penalty
imposed should be as it is corrected to reclusion perpetua, and the award of actual damages
is deleted.

SO ORDERED.
G.R. No. 124354 December 29, 1999

ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural
guardians of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS and RON
RAYMOND RAMOS, petitioners,
vs.
COURT OF APPEALS, DELOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA
and DRA. PERFECTA GUTIERREZ, respondents.

KAPUNAN, J.:

The Hippocratic Oath mandates physicians to give primordial consideration to the health
and welfare of their patients. If a doctor fails to live up to this precept, he is made
accountable for his acts. A mistake, through gross negligence or incompetence or plain
human error, may spell the difference between life and death. In this sense, the doctor plays
God on his patient's fate. 1

In the case at bar, the Court is called upon to rule whether a surgeon, an anesthesiologist
and a hospital should be made liable for the unfortunate comatose condition of a patient
scheduled for cholecystectomy. 2

Petitioners seek the reversal of the decision 3 of the Court of Appeals, dated 29 May 1995,
which overturned the decision 4 of the Regional Trial Court, dated 30 January 1992, finding
private respondents liable for damages arising from negligence in the performance of their
professional duties towards petitioner Erlinda Ramos resulting in her comatose condition.

The antecedent facts as summarized by the trial court are reproduced hereunder:

Plaintiff Erlinda Ramos was, until the afternoon of June 17, 1985, a 47-year old (Exh. "A")
robust woman (TSN, October 19, 1989, p. 10). Except for occasional complaints of
discomfort due to pains allegedly caused by the presence of a stone in her gall bladder
(TSN, January 13, 1988, pp. 4-5), she was as normal as any other woman. Married to
Rogelio E. Ramos, an executive of Philippine Long Distance Telephone Company, she has
three children whose names are Rommel Ramos, Roy Roderick Ramos and Ron Raymond
Ramos (TSN, October 19, 1989, pp. 5-6).

Because the discomforts somehow interfered with her normal ways, she sought professional
advice. She was advised to undergo an operation for the removal of a stone in her gall
bladder (TSN, January 13, 1988, p. 5). She underwent a series of examinations which
included blood and urine tests (Exhs. "A" and "C") which indicated she was fit for
surgery.
Through the intercession of a mutual friend, Dr. Buenviaje (TSN, January 13, 1988, p. 7),
she and her husband Rogelio met for the first time Dr. Orlino Hozaka (should be
Hosaka; see TSN, February 20, 1990, p. 3), one of the defendants in this case, on June 10,
1985. They agreed that their date at the operating table at the DLSMC (another
defendant), would be on June 17, 1985 at 9:00 A.M.. Dr. Hosaka decided that she should
undergo a "cholecystectomy" operation after examining the documents (findings from the
Capitol Medical Center, FEU Hospital and DLSMC) presented to him. Rogelio E. Ramos,
however, asked Dr. Hosaka to look for a good anesthesiologist. Dr. Hosaka, in turn, assured
Rogelio that he will get a good anesthesiologist. Dr. Hosaka charged a fee of P16,000.00,
which was to include the anesthesiologist's fee and which was to be paid after the operation
(TSN, October 19, 1989, pp. 14-15, 22-23, 31-33; TSN, February 27, 1990, p. 13; and TSN,
November 9, 1989, pp. 3-4, 10, 17).

A day before the scheduled date of operation, she was admitted at one of the rooms of the
DLSMC, located along E. Rodriguez Avenue, Quezon City (TSN, October 19,1989, p. 11).

At around 7:30 A.M. of June 17, 1985 and while still in her room, she was prepared for the
operation by the hospital staff. Her sister-in-law, Herminda Cruz, who was the Dean of the
College of Nursing at the Capitol Medical Center, was also there for moral support. She
reiterated her previous request for Herminda to be with her even during the operation.
After praying, she was given injections. Her hands were held by Herminda as they went
down from her room to the operating room (TSN, January 13, 1988, pp. 9-11). Her
husband, Rogelio, was also with her (TSN, October 19, 1989, p. 18). At the operating room,
Herminda saw about two or three nurses and Dr. Perfecta Gutierrez, the other defendant,
who was to administer anesthesia. Although not a member of the hospital staff, Herminda
introduced herself as Dean of the College of Nursing at the Capitol Medical Center who
was to provide moral support to the patient, to them. Herminda was allowed to stay inside
the operating room.

At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka who
was not yet in (TSN, January 13, 1988, pp. 11-12). Dr. Gutierrez thereafter informed
Herminda Cruz about the prospect of a delay in the arrival of Dr. Hosaka. Herminda then
went back to the patient who asked, "Mindy, wala pa ba ang Doctor"? The former replied,
"Huwag kang mag-alaala, darating na iyon" (Ibid.).

Thereafter, Herminda went out of the operating room and informed the patient's husband,
Rogelio, that the doctor was not yet around (id., p. 13). When she returned to the operating
room, the patient told her, "Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor." So,
she went out again and told Rogelio about what the patient said (id., p. 15). Thereafter, she
returned to the operating room.
At around 10:00 A.M., Rogelio E. Ramos was "already dying [and] waiting for the arrival
of the doctor" even as he did his best to find somebody who will allow him to pull out his
wife from the operating room (TSN, October 19, 1989, pp. 19-20). He also thought of the
feeling of his wife, who was inside the operating room waiting for the doctor to arrive
(ibid.). At almost 12:00 noon, he met Dr. Garcia who remarked that he (Dr. Garcia) was
also tired of waiting for Dr. Hosaka to arrive (id., p. 21). While talking to Dr. Garcia at
around 12:10 P.M., he came to know that Dr. Hosaka arrived as a nurse remarked,
"Nandiyan na si Dr. Hosaka, dumating na raw." Upon hearing those words, he went down
to the lobby and waited for the operation to be completed (id., pp. 16, 29-30).

At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the patient,
heard somebody say that "Dr. Hosaka is already here." She then saw people inside the
operating room "moving, doing this and that, [and] preparing the patient for the
operation" (TSN, January 13, 1988, p. 16). As she held the hand of Erlinda Ramos, she
then saw Dr. Gutierrez intubating the hapless patient. She thereafter heard Dr. Gutierrez
say, "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan" (id.,
p. 17). Because of the remarks of Dra. Gutierrez, she focused her attention on what Dr.
Gutierrez was doing. She thereafter noticed bluish discoloration of the nailbeds of the left
hand of the hapless Erlinda even as Dr. Hosaka approached her. She then heard Dr. Hosaka
issue an order for someone to call Dr. Calderon, another anesthesiologist (id., p. 19). After
Dr. Calderon arrived at the operating room, she saw this anesthesiologist trying to intubate
the patient. The patient's nailbed became bluish and the patient was placed in a
trendelenburg position — a position where the head of the patient is placed in a position
lower than her feet which is an indication that there is a decrease of blood supply to the
patient's brain (Id., pp. 19-20). Immediately thereafter, she went out of the operating room,
and she told Rogelio E. Ramos "that something wrong was . . . happening" ( Ibid.). Dr.
Calderon was then able to intubate the patient (TSN, July 25, 1991, p. 9).

Meanwhile, Rogelio, who was outside the operating room, saw a respiratory machine being
rushed towards the door of the operating room. He also saw several doctors rushing
towards the operating room. When informed by Herminda Cruz that something wrong was
happening, he told her (Herminda) to be back with the patient inside the operating room
(TSN, October 19, 1989, pp. 25-28).

Herminda Cruz immediately rushed back, and saw that the patient was still in
trendelenburg position (TSN, January 13, 1988, p. 20). At almost 3:00 P.M. of that fateful
day, she saw the patient taken to the Intensive Care Unit (ICU).

About two days thereafter, Rogelio E. Ramos was able to talk to Dr. Hosaka. The latter
informed the former that something went wrong during the intubation. Reacting to what
was told to him, Rogelio reminded the doctor that the condition of his wife would not have
happened, had he (Dr. Hosaka) looked for a good anesthesiologist (TSN, October 19, 1989,
p. 31).

Doctors Gutierrez and Hosaka were also asked by the hospital to explain what happened to
the patient. The doctors explained that the patient had bronchospasm (TSN, November 15,
1990, pp. 26-27).

Erlinda Ramos stayed at the ICU for a month. About four months thereafter or on
November 15, 1985, the patient was released from the hospital.

During the whole period of her confinement, she incurred hospital bills amounting to
P93,542.25 which is the subject of a promissory note and affidavit of undertaking executed
by Rogelio E. Ramos in favor of DLSMC. Since that fateful afternoon of June 17, 1985, she
has been in a comatose condition. She cannot do anything. She cannot move any part of her
body. She cannot see or hear. She is living on mechanical means. She suffered brain damage
as a result of the absence of oxygen in her brain for four to five minutes (TSN, November 9,
1989, pp. 21-22). After being discharged from the hospital, she has been staying in their
residence, still needing constant medical attention, with her husband Rogelio incurring a
monthly expense ranging from P8,000.00 to P10,000.00 (TSN, October 19, 1989, pp. 32-34).
She was also diagnosed to be suffering from "diffuse cerebral parenchymal damage" (Exh.
"G"; see also TSN, December 21, 1989,
5
p. 6).

Thus, on 8 January 1986, petitioners filed a civil case 6 for damages with the Regional Trial
Court of Quezon City against herein private respondents alleging negligence in the
management and care of Erlinda Ramos.

During the trial, both parties presented evidence as to the possible cause of Erlinda's
injury. Plaintiff presented the testimonies of Dean Herminda Cruz and Dr. Mariano Gavino
to prove that the sustained by Erlinda was due to lack of oxygen in her brain caused by the
faulty management of her airway by private respondents during the anesthesia phase. On
the other hand, private respondents primarily relied on the expert testimony of Dr.
Eduardo Jamora, a pulmonologist, to the effect that the cause of brain damage was
Erlinda's allergic reaction to the anesthetic agent, Thiopental Sodium (Pentothal).

After considering the evidence from both sides, the Regional Trial Court rendered
judgment in favor of petitioners, to wit:

After evaluating the evidence as shown in the finding of facts set forth earlier, and applying
the aforecited provisions of law and jurisprudence to the case at bar, this Court finds and
so holds that defendants are liable to plaintiffs for damages. The defendants were guilty of,
at the very least, negligence in the performance of their duty to plaintiff-patient Erlinda
Ramos.
On the part of Dr. Perfecta Gutierrez, this Court finds that she omitted to exercise
reasonable care in not only intubating the patient, but also in not repeating the
administration of atropine (TSN, August 20, 1991, pp. 5-10), without due regard to the fact
that the patient was inside the operating room for almost three (3) hours. For after she
committed a mistake in intubating [the] patient, the patient's nailbed became bluish and
the patient, thereafter, was placed in trendelenburg position, because of the decrease of
blood supply to the patient's brain. The evidence further shows that the hapless patient
suffered brain damage because of the absence of oxygen in her (patient's) brain for
approximately four to five minutes which, in turn, caused the patient to become comatose.

On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of Dr.
Perfecta Gutierrez whom he had chosen to administer anesthesia on the patient as part of
his obligation to provide the patient a good anesthesiologist', and for arriving for the
scheduled operation almost three (3) hours late.

On the part of DLSMC (the hospital), this Court finds that it is liable for the acts of
negligence of the doctors in their "practice of medicine" in the operating room. Moreover,
the hospital is liable for failing through its responsible officials, to cancel the scheduled
operation after Dr. Hosaka inexcusably failed to arrive on time.

In having held thus, this Court rejects the defense raised by defendants that they have
acted with due care and prudence in rendering medical services to plaintiff-patient. For if
the patient was properly intubated as claimed by them, the patient would not have become
comatose. And, the fact that another anesthesiologist was called to try to intubate the
patient after her (the patient's) nailbed turned bluish, belie their claim. Furthermore, the
defendants should have rescheduled the operation to a later date. This, they should have
done, if defendants acted with due care and prudence as the patient's case was an elective,
not an emergency case.

xxx xxx xxx

WHEREFORE, and in view of the foregoing, judgment is rendered in favor of the plaintiffs
and against the defendants. Accordingly, the latter are ordered to pay, jointly and severally,
the former the following sums of money, to wit:

1) the sum of P8,000.00 as actual monthly expenses for the plaintiff Erlinda Ramos
reckoned from November 15, 1985 or in the total sum of P632,000.00 as of April 15, 1992,
subject to its being updated;

2) the sum of P100,000.00 as reasonable attorney's fees;

3) the sum of P800,000.00 by way of moral damages and the further sum of P200,000,00 by
way of exemplary damages; and,
4) the costs of the suit.

SO ORDERED. 7

Private respondents seasonably interposed an appeal to the Court of Appeals. The appellate
court rendered a Decision, dated 29 May 1995, reversing the findings of the trial court. The
decretal portion of the decision of the appellate court reads:

WHEREFORE, for the foregoing premises the appealed decision is hereby REVERSED,
and the complaint below against the appellants is hereby ordered DISMISSED. The
counterclaim of appellant De Los Santos Medical Center is GRANTED but only insofar as
appellees are hereby ordered to pay the unpaid hospital bills amounting to P93,542.25, plus
legal interest for justice must be tempered with mercy.

SO ORDERED. 8

The decision of the Court of Appeals was received on 9 June 1995 by petitioner Rogelio
Ramos who was mistakenly addressed as "Atty. Rogelio Ramos." No copy of the decision,
however, was sent nor received by the Coronel Law Office, then counsel on record of
petitioners. Rogelio referred the decision of the appellate court to a new lawyer, Atty.
Ligsay, only on 20 June 1995, or four (4) days before the expiration of the reglementary
period for filing a motion for reconsideration. On the same day, Atty. Ligsay, filed with the
appellate court a motion for extension of time to file a motion for reconsideration. The
motion for reconsideration was submitted on 4 July 1995. However, the appellate court
denied the motion for extension of time in its Resolution dated 25 July 1995. 9Meanwhile,
petitioners engaged the services of another counsel, Atty. Sillano, to replace Atty. Ligsay.
Atty. Sillano filed on 7 August 1995 a motion to admit the motion for reconsideration
contending that the period to file the appropriate pleading on the assailed decision had not
yet commenced to run as the Division Clerk of Court of the Court of Appeals had not yet
served a copy thereof to the counsel on record. Despite this explanation, the appellate court
still denied the motion to admit the motion for reconsideration of petitioners in its
Resolution, dated 29 March 1996, primarily on the ground that the fifteen-day (15) period
for filing a motion for reconsideration had already expired, to wit:

We said in our Resolution on July 25, 1995, that the filing of a Motion for Reconsideration
cannot be extended; precisely, the Motion for Extension (Rollo, p. 12) was denied. It is, on
the other hand, admitted in the latter Motion that plaintiffs/appellees received a copy of the
decision as early as June 9, 1995. Computation wise, the period to file a Motion for
Reconsideration expired on June 24. The Motion for Reconsideration, in turn, was received
by the Court of Appeals already on July 4, necessarily, the 15-day period already passed.
For that alone, the latter should be denied.
Even assuming admissibility of the Motion for the Reconsideration, but after considering
the Comment/Opposition, the former, for lack of merit, is hereby DENIED.

SO ORDERED. 10

A copy of the above resolution was received by Atty. Sillano on 11 April 1996. The next day,
or on 12 April 1996, Atty. Sillano filed before this Court a motion for extension of time to
file the present petition for certiorari under Rule 45. The Court granted the motion for
extension of time and gave petitioners additional thirty (30) days after the expiration of the
fifteen-day (15) period counted from the receipt of the resolution of the Court of Appeals
within which to submit the petition. The due date fell on 27 May 1996. The petition was
filed on 9 May 1996, well within the extended period given by the Court.

Petitioners assail the decision of the Court of Appeals on the following grounds:

IN PUTTING MUCH RELIANCE ON THE TESTIMONIES OF RESPONDENTS DRA.

GUTIERREZ, DRA. CALDERON AND DR. JAMORA;

II

IN FINDING THAT THE NEGLIGENCE OF THE RESPONDENTS DID NOT CAUSE

THE UNFORTUNATE COMATOSE CONDITION OF PETITIONER ERLINDA
RAMOS;

III

IN NOT APPLYING THE DOCTRINE OF RES IPSA LOQUITUR. 11

Before we discuss the merits of the case, we shall first dispose of the procedural issue on the
timeliness of the petition in relation to the motion for reconsideration filed by petitioners
with the Court of Appeals. In their
12
Comment, private respondents contend that the petition should not be given due course
since the motion for reconsideration of the petitioners on the decision of the Court of
Appeals was validly dismissed by the appellate court for having been filed beyond the
reglementary period. We do not agree.

A careful review of the records reveals that the reason behind the delay in filing the motion
for reconsideration is attributable to the fact that the decision of the Court of Appeals was
not sent to then counsel on record of petitioners, the Coronel Law Office. In fact, a copy of
the decision of the appellate court was instead sent to and received by petitioner Rogelio
Ramos on 9 June 1995 wherein he was mistakenly addressed as Atty. Rogelio Ramos. Based
on the other communications received by petitioner Rogelio Ramos, the appellate court
apparently mistook him for the counsel on record. Thus, no copy of the decision of the
counsel on record. Petitioner, not being a lawyer and unaware of the prescriptive period for
filing a motion for reconsideration, referred the same to a legal counsel only on 20 June
1995.

It is elementary that when a party is represented by counsel, all notices should be sent to
the party's lawyer at his given address. With a few exceptions, notice to a litigant without
notice to his counsel on record is no notice at all. In the present case, since a copy of the
decision of the appellate court was not sent to the counsel on record of petitioner, there can
be no sufficient notice to speak of. Hence, the delay in the filing of the motion for
reconsideration cannot be taken against petitioner. Moreover, since the Court of Appeals
already issued a second Resolution, dated 29 March 1996, which superseded the earlier
resolution issued on 25 July 1995, and denied the motion for reconsideration of petitioner,
we believed that the receipt of the former should be considered in determining the
timeliness of the filing of the present petition. Based on this, the petition before us was
submitted on time.

After resolving the foregoing procedural issue, we shall now look into the merits of the case.
For a more logical presentation of the discussion we shall first consider the issue on the
applicability of the doctrine of res ipsa loquiturto the instant case. Thereafter, the first two
assigned errors shall be tackled in relation to the res ipsa loquiturdoctrine.

Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction
speaks for itself." The phrase "res ipsa loquitur'' is a maxim for the rule that the fact of the
occurrence of an injury, taken with the surrounding circumstances, may permit an
inference or raise a presumption of negligence, or make out a plaintiff's prima facie case,
and present a question of fact for defendant to meet with an explanation. 13 Where the thing
which caused the injury complained of is shown to be under the management of the
defendant or his servants and the accident is such as in ordinary course of things does not
happen if those who have its management or control use proper care, it affords reasonable
evidence, in the absence of explanation by the defendant, that the accident arose from or
was caused by the defendant's want of care. 14

The doctrine of res ipsa loquitur is simply a recognition of the postulate that, as a matter of
common knowledge and experience, the very nature of certain types of occurrences may
justify an inference of negligence on the part of the person who controls the instrumentality
causing the injury in the absence of some explanation by the defendant who is charged with
negligence. 15 It is grounded in the superior logic of ordinary human experience and on the
basis of such experience or common knowledge, negligence may be deduced from the mere
occurrence of the accident itself. 16 Hence, res ipsa loquitur is applied in conjunction with
the doctrine of common knowledge.
However, much has been said that res ipsa loquitur is not a rule of substantive law and, as
such, does not create or constitute an independent or separate ground of liability. 17 Instead,
it is considered as merely evidentiary or in the nature of a procedural rule. 18 It is regarded
as a mode of proof, or a mere procedural of convenience since it furnishes a substitute for,
and relieves a plaintiff of, the burden of producing specific proof of negligence. 19 In other
words, mere invocation and application of the doctrine does not dispense with the
requirement of proof of negligence. It is simply a step in the process of such proof,
permitting the plaintiff to present along with the proof of the accident, enough of the
attending circumstances to invoke the doctrine, creating an inference or presumption of
negligence, and to thereby place on the defendant the burden of going forward with the
proof. 20 Still, before resort to the doctrine may be allowed, the following requisites must be
satisfactorily shown:

1. The accident is of a kind which ordinarily does not occur in the absence of someone's
negligence;

2. It is caused by an instrumentality within the exclusive control of the defendant or

defendants; and

3. The possibility of contributing conduct which would make the plaintiff responsible is
eliminated. 21

In the above requisites, the fundamental element is the "control of instrumentality" which
caused the damage. 22Such element of control must be shown to be within the dominion of
the defendant. In order to have the benefit of the rule, a plaintiff, in addition to proving
injury or damage, must show a situation where it is applicable, and must establish that the
essential elements of the doctrine were present in a particular incident. 23

Medical malpractice 24 cases do not escape the application of this doctrine. Thus, res ipsa
loquitur has been applied when the circumstances attendant upon the harm are themselves
of such a character as to justify an inference of negligence as the cause of that harm. 25 The
application of res ipsa loquitur in medical negligence cases presents a question of law since
it is a judicial function to determine whether a certain set of circumstances does, as a
matter of law, permit a given inference. 26

Although generally, expert medical testimony is relied upon in malpractice suits to prove
that a physician has done a negligent act or that he has deviated from the standard medical
procedure, when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for
expert medical testimony is dispensed with because the injury itself provides the proof of
negligence. 27 The reason is that the general rule on the necessity of expert testimony applies
only to such matters clearly within the domain of medical science, and not to matters that
are within the common knowledge of mankind which may be testified to by anyone familiar
with the facts. 28 Ordinarily, only physicians and surgeons of skill and experience are
competent to testify as to whether a patient has been treated or operated upon with a
reasonable degree of skill and care. However, testimony as to the statements and acts of
physicians and surgeons, external appearances, and manifest conditions which are
observable by any one may be given by non-expert witnesses. 29 Hence, in cases where
the res ipsa loquitur is applicable, the court is permitted to find a physician negligent upon
proper proof of injury to the patient, without the aid of expert testimony, where the court
from its fund of common knowledge can determine the proper standard of care. 30 Where
common knowledge and experience teach that a resulting injury would not have occurred
to the patient if due care had been exercised, an inference of negligence may be drawn
giving rise to an application of the doctrine of res ipsa loquitur without medical evidence,
which is ordinarily required to show not only what occurred but how and why it
occurred. 31 When the doctrine is appropriate, all that the patient must do is prove a nexus
between the particular act or omission complained of and the injury sustained while under
the custody and management of the defendant without need to produce expert medical
testimony to establish the standard of care. Resort to res ipsa loquitur is allowed because
there is no other way, under usual and ordinary conditions, by which the patient can obtain
redress for injury suffered by him.

Thus, courts of other jurisdictions have applied the doctrine in the following situations:
leaving of a foreign object in the body of the patient after an operation, 32 injuries sustained
on a healthy part of the body which was not under, or in the area, of treatment, 33 removal
of the wrong part of the body when another part was intended, 34 knocking out a tooth
while a patient's jaw was under anesthetic for the removal of his tonsils, 35 and loss of an
eye while the patient plaintiff was under the influence of anesthetic, during or following an
operation for appendicitis, 36 among others.

Nevertheless, despite the fact that the scope of res ipsa loquitur has been measurably
enlarged, it does not automatically apply to all cases of medical negligence as to
mechanically shift the burden of proof to the defendant to show that he is not guilty of the
ascribed negligence. Res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily
used but a rule to be cautiously applied, depending upon the circumstances of each case. It
is generally restricted to situations in malpractice cases where a layman is able to say, as a
matter of common knowledge and observation, that the consequences of professional care
were not as such as would ordinarily have followed if due care had been
exercised. 37 A distinction must be made between the failure to secure results, and the
occurrence of something more unusual and not ordinarily found if the service or treatment
rendered followed the usual procedure of those skilled in that particular practice. It must
be conceded that the doctrine of res ipsa loquitur can have no application in a suit against a
physician or surgeon which involves the merits of a diagnosis or of a scientific
treatment. 38 The physician or surgeon is not required at his peril to explain why any
particular diagnosis was not correct, or why any particular scientific treatment did not
produce the desired result. 39 Thus, res ipsa loquitur is not available in a malpractice suit if
the only showing is that the desired result of an operation or treatment was not
accomplished. 40The real question, therefore, is whether or not in the process of the
operation any extraordinary incident or unusual event outside of the routine performance
occurred which is beyond the regular scope of customary professional activity in such
operations, which, if unexplained would themselves reasonably speak to the average man as
the negligent cause or causes of the untoward consequence. 41 If there was such extraneous
interventions, the doctrine of res ipsa loquitur may be utilized and the defendant is called
upon to explain the matter, by evidence of exculpation, if he could. 42

We find the doctrine of res ipsa loquitur appropriate in the case at bar. As will hereinafter
be explained, the damage sustained by Erlinda in her brain prior to a scheduled gall
bladder operation presents a case for the application of res ipsa loquitur.

A case strikingly similar to the one before us is Voss vs. Bridwell, 43 where the Kansas
Supreme Court in applying the res ipsa loquitur stated:

The plaintiff herein submitted himself for a mastoid operation and delivered his person
over to the care, custody and control of his physician who had complete and exclusive
control over him, but the operation was never performed. At the time of submission he was
neurologically sound and physically fit in mind and body, but he suffered irreparable
damage and injury rendering him decerebrate and totally incapacitated. The injury was
one which does not ordinarily occur in the process of a mastoid operation or in the absence
of negligence in the administration of an anesthetic, and in the use and employment of an
endoctracheal tube. Ordinarily a person being put under anesthesia is not rendered
decerebrate as a consequence of administering such anesthesia in the absence of negligence.
Upon these facts and under these circumstances a layman would be able to say, as a matter
of common knowledge and observation, that the consequences of professional treatment
were not as such as would ordinarily have followed if due care had been exercised.

Here the plaintiff could not have been guilty of contributory negligence because he was
under the influence of anesthetics and unconscious, and the circumstances are such that the
true explanation of event is more accessible to the defendants than to the plaintiff for they
had the exclusive control of the instrumentalities of anesthesia.

Upon all the facts, conditions and circumstances alleged in Count II it is held that a cause
of action is stated under the doctrine of res ipsa loquitur. 44

Indeed, the principles enunciated in the aforequoted case apply with equal force here. In
the present case, Erlinda submitted herself for cholecystectomy and expected a routine
general surgery to be performed on her gall bladder. On that fateful day she delivered her
person over to the care, custody and control of private respondents who exercised complete
and exclusive control over her. At the time of submission, Erlinda was neurologically sound
and, except for a few minor discomforts, was likewise physically fit in mind and body.
However, during the administration of anesthesia and prior to the performance of
cholecystectomy she suffered irreparable damage to her brain. Thus, without undergoing
surgery, she went out of the operating room already decerebrate and totally incapacitated.
Obviously, brain damage, which Erlinda sustained, is an injury which does not normally
occur in the process of a gall bladder operation. In fact, this kind of situation does not in
the absence of negligence of someone in the administration of anesthesia and in the use of
endotracheal tube. Normally, a person being put under anesthesia is not rendered
decerebrate as a consequence of administering such anesthesia if the proper procedure was
followed. Furthermore, the instruments used in the administration of anesthesia, including
the endotracheal tube, were all under the exclusive control of private respondents, who are
the physicians-in-charge. Likewise, petitioner Erlinda could not have been guilty of
contributory negligence because she was under the influence of anesthetics which rendered
her unconscious.

Considering that a sound and unaffected member of the body (the brain) is injured or
destroyed while the patient is unconscious and under the immediate and exclusive control
of the physicians, we hold that a practical administration of justice dictates the application
of res ipsa loquitur. Upon these facts and under these circumstances the Court would be
able to say, as a matter of common knowledge and observation, if negligence attended the
management and care of the patient. Moreover, the liability of the physicians and the
hospital in this case is not predicated upon an alleged failure to secure the desired results of
an operation nor on an alleged lack of skill in the diagnosis or treatment as in fact no
operation or treatment was ever performed on Erlinda. Thus, upon all these initial
determination a case is made out for the application of the doctrine of res ipsa loquitur.

Nonetheless, in holding that res ipsa loquitur is available to the present case we are not
saying that the doctrine is applicable in any and all cases where injury occurs to a patient
while under anesthesia, or to any and all anesthesia cases. Each case must be viewed in its
own light and scrutinized in order to be within the res ipsa loquitur coverage.

Having in mind the applicability of the res ipsa loquitur doctrine and the presumption of
negligence allowed therein, the Court now comes to the issue of whether the Court of
Appeals erred in finding that private respondents were not negligent in the care of Erlinda
during the anesthesia phase of the operation and, if in the affirmative, whether the alleged
negligence was the proximate cause of Erlinda's comatose condition. Corollary thereto, we
shall also determine if the Court of Appeals erred in relying on the testimonies of the
witnesses for the private respondents.

In sustaining the position of private respondents, the Court of Appeals relied on the
testimonies of Dra. Gutierrez, Dra. Calderon and Dr. Jamora. In giving weight to the
testimony of Dra. Gutierrez, the Court of Appeals rationalized that she was candid enough
to admit that she experienced some difficulty in the endotracheal intubation 45 of the
patient and thus, cannot be said to be covering her negligence with falsehood. The appellate
court likewise opined that private respondents were able to show that the brain damage
sustained by Erlinda was not caused by the alleged faulty intubation but was due to the
allergic reaction of the patient to the drug Thiopental Sodium (Pentothal), a short-acting
barbiturate, as testified on by their expert witness, Dr. Jamora. On the other hand, the
appellate court rejected the testimony of Dean Herminda Cruz offered in favor of
petitioners that the cause of the brain injury was traceable to the wrongful insertion of the
tube since the latter, being a nurse, was allegedly not knowledgeable in the process of
intubation. In so holding, the appellate court returned a verdict in favor of respondents
physicians and hospital and absolved them of any liability towards Erlinda and her family.

We disagree with the findings of the Court of Appeals. We hold that private respondents
were unable to disprove the presumption of negligence on their part in the care of Erlinda
and their negligence was the proximate cause of her piteous condition.

In the instant case, the records are helpful in furnishing not only the logical scientific
evidence of the pathogenesis of the injury but also in providing the Court the legal nexus
upon which liability is based. As will be shown hereinafter, private respondents' own
testimonies which are reflected in the transcript of stenographic notes are replete of
signposts indicative of their negligence in the care and management of Erlinda.

With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during the
anesthesia phase. As borne by the records, respondent Dra. Gutierrez failed to properly
intubate the patient. This fact was attested to by Prof. Herminda Cruz, Dean of the Capitol
Medical Center School of Nursing and petitioner's sister-in-law, who was in the operating
room right beside the patient when the tragic event occurred. Witness Cruz testified to this
effect:

ATTY. PAJARES:

Q: In particular, what did Dra. Perfecta Gutierrez do, if any on the patient?

A: In particular, I could see that she was intubating the patient.

Q: Do you know what happened to that intubation process administered by Dra.

Gutierrez?

ATTY. ALCERA:

She will be incompetent Your Honor.

COURT:

Witness may answer if she knows.

A: As have said, I was with the patient, I was beside the stretcher holding the left hand of
the patient and all of a sudden heard some remarks coming from Dra. Perfecta Gutierrez
herself. She was saying "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O
lumalaki ang tiyan.

xxx xxx xxx

ATTY. PAJARES:

Q: From whom did you hear those words "lumalaki ang tiyan"?

A: From Dra. Perfecta Gutierrez.

xxx xxx xxx

Q: After hearing the phrase "lumalaki ang tiyan," what did you notice on the person of the
patient?

A: I notice (sic) some bluish discoloration on the nailbeds of the left hand where I was at.

Q: Where was Dr. Orlino Ho[s]aka then at that particular time?

A: I saw him approaching the patient during that time.

Q: When he approached the patient, what did he do, if any?

A: He made an order to call on the anesthesiologist in the person of Dr. Calderon.

Q: Did Dr. Calderon, upon being called, arrive inside the operating room?

A: Yes sir.

Q: What did [s]he do, if any?

A: [S]he tried to intubate the patient.

Q: What happened to the patient?

A: When Dr. Calderon try (sic) to intubate the patient, after a while the patient's nailbed
became bluish and I saw the patient was placed in trendelenburg position.

xxx xxx xxx

Q: Do you know the reason why the patient was placed in that trendelenburg position?

A: As far as I know, when a patient is in that position, there is a decrease of blood supply to
the brain. 46
xxx xxx xxx

The appellate court, however, disbelieved Dean Cruz's testimony in the trial court by
declaring that:

A perusal of the standard nursing curriculum in our country will show that intubation is
not taught as part of nursing procedures and techniques. Indeed, we take judicial notice of
the fact that nurses do not, and cannot, intubate. Even on the assumption that she is fully
capable of determining whether or not a patient is properly intubated, witness Herminda
Cruz, admittedly, did not peep into the throat of the patient. (TSN, July 25, 1991, p. 13).
More importantly, there is no evidence that she ever auscultated the patient or that she
conducted any type of examination to check if the endotracheal tube was in its proper
place, and to determine the condition of the heart, lungs, and other organs. Thus, witness
Cruz's categorical statements that appellant Dra. Gutierrez failed to intubate the appellee
Erlinda Ramos and that it was Dra. Calderon who succeeded in doing so clearly suffer
from lack of sufficient factual bases. 47

In other words, what the Court of Appeals is trying to impress is that being a nurse, and
considered a layman in the process of intubation, witness Cruz is not competent to testify
on whether or not the intubation was a success.

We do not agree with the above reasoning of the appellate court. Although witness Cruz is
not an anesthesiologist, she can very well testify upon matters on which she is capable of
observing such as, the statements and acts of the physician and surgeon, external
appearances, and manifest conditions which are observable by any one. 48 This is precisely
allowed under the doctrine of res ipsa loquitur where the testimony of expert witnesses is
not required. It is the accepted rule that expert testimony is not necessary for the proof of
negligence in non-technical matters or those of which an ordinary person may be expected
to have knowledge, or where the lack of skill or want of care is so obvious as to render
expert testimony unnecessary. 49 We take judicial notice of the fact that anesthesia
procedures have become so common, that even an ordinary person can tell if it was
administered properly. As such, it would not be too difficult to tell if the tube was properly
inserted. This kind of observation, we believe, does not require a medical degree to be
acceptable.

At any rate, without doubt, petitioner's witness, an experienced clinical nurse whose long
experience and scholarship led to her appointment as Dean of the Capitol Medical Center
School at Nursing, was fully capable of determining whether or not the intubation was a
success. She had extensive clinical experience starting as a staff nurse in Chicago, Illinois;
staff nurse and clinical instructor in a teaching hospital, the FEU-NRMF; Dean of the
Laguna College of Nursing in San Pablo City; and then Dean of the Capitol Medical Center
School of Nursing. 50Reviewing witness Cruz' statements, we find that the same were
delivered in a straightforward manner, with the kind of detail, clarity, consistency and
spontaneity which would have been difficult to fabricate. With her clinical background as a
nurse, the Court is satisfied that she was able to demonstrate through her testimony what
truly transpired on that fateful day.

Most of all, her testimony was affirmed by no less than respondent Dra. Gutierrez who
admitted that she experienced difficulty in inserting the tube into Erlinda's trachea, to wit:

ATTY. LIGSAY:

Q: In this particular case, Doctora, while you were intubating at your first attempt (sic),
you did not immediately see the trachea?

DRA. GUTIERREZ:

A: Yes sir.

Q: Did you pull away the tube immediately?

A: You do not pull the . . .

Q: Did you or did you not?

A: I did not pull the tube.

Q: When you said "mahirap yata ito," what were you referring to?

A: "Mahirap yata itong i-intubate," that was the patient.

Q: So, you found some difficulty in inserting the tube?

A: Yes, because of (sic) my first attempt, I did not see right away. 51

Curiously in the case at bar, respondent Dra. Gutierrez made the haphazard defense that
she encountered hardship in the insertion of the tube in the trachea of Erlinda because it
was positioned more anteriorly (slightly deviated from the normal anatomy of a
person) 52 making it harder to locate and, since Erlinda is obese and has a short neck and
protruding teeth, it made intubation even more difficult.

The argument does not convince us. If this was indeed observed, private respondents
adduced no evidence demonstrating that they proceeded to make a thorough assessment of
Erlinda's airway, prior to the induction of anesthesia, even if this would mean postponing
the procedure. From their testimonies, it appears that the observation was made only as an
afterthought, as a means of defense.
The pre-operative evaluation of a patient prior to the administration of anesthesia is
universally observed to lessen the possibility of anesthetic accidents. Pre-operative
evaluation and preparation for anesthesia begins when the anesthesiologist reviews the
patient's medical records and visits with the patient, traditionally, the day before elective
surgery. 53 It includes taking the patient's medical history, review of current drug therapy,
physical examination and interpretation of laboratory data. 54 The physical examination
performed by the anesthesiologist is directed primarily toward the central nervous system,
cardiovascular system, lungs and upper airway. 55 A thorough analysis of the patient's
airway normally involves investigating the following: cervical spine mobility,
temporomandibular mobility, prominent central incisors, diseased or artificial teeth, ability
to visualize uvula and the thyromental distance. 56Thus, physical characteristics of the
patient's upper airway that could make tracheal intubation difficult should be
studied. 57 Where the need arises, as when initial assessment indicates possible problems
(such as the alleged short neck and protruding teeth of Erlinda) a thorough examination of
the patient's airway would go a long way towards decreasing patient morbidity and
mortality.

In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the first
time on the day of the operation itself, on 17 June 1985. Before this date, no prior
consultations with, or pre-operative evaluation of Erlinda was done by her. Until the day of
the operation, respondent Dra. Gutierrez was unaware of the physiological make-up and
needs of Erlinda. She was likewise not properly informed of the possible difficulties she
would face during the administration of anesthesia to Erlinda. Respondent Dra. Gutierrez'
act of seeing her patient for the first time only an hour before the scheduled operative
procedure was, therefore, an act of exceptional negligence and professional irresponsibility.
The measures cautioning prudence and vigilance in dealing with human lives lie at the core
of the physician's centuries-old Hippocratic Oath. Her failure to follow this medical
procedure is, therefore, a clear indicia of her negligence.

Respondent Dra. Gutierrez, however, attempts to gloss over this omission by playing
around with the trial court's ignorance of clinical procedure, hoping that she could get
away with it. Respondent Dra. Gutierrez tried to muddle the difference between an elective
surgery and an emergency surgery just so her failure to perform the required pre-operative
evaluation would escape unnoticed. In her testimony she asserted:

ATTY. LIGSAY:

Q: Would you agree, Doctor, that it is good medical practice to see the patient a day before
so you can introduce yourself to establish good doctor-patient relationship and gain the
trust and confidence of the patient?

DRA. GUTIERREZ:
A: As I said in my previous statement, it depends on the operative procedure of the
anesthesiologist and in my case, with elective cases and normal cardio-pulmonary clearance
like that, I usually don't do it except on emergency and on cases that have an abnormalities
(sic). 58

However, the exact opposite is true. In an emergency procedure, there is hardly enough
time available for the fastidious demands of pre-operative procedure so that an
anesthesiologist is able to see the patient only a few minutes before surgery, if at all.
Elective procedures, on the other hand, are operative procedures that can wait for days,
weeks or even months. Hence, in these cases, the anesthesiologist possesses the luxury of
time to be at the patient's beside to do a proper interview and clinical evaluation. There is
ample time to explain the method of anesthesia, the drugs to be used, and their possible
hazards for purposes of informed consent. Usually, the pre-operative assessment is
conducted at least one day before the intended surgery, when the patient is relaxed and
cooperative.

Erlinda's case was elective and this was known to respondent Dra. Gutierrez. Thus, she had
all the time to make a thorough evaluation of Erlinda's case prior to the operation and
prepare her for anesthesia. However, she never saw the patient at the bedside. She herself
admitted that she had seen petitioner only in the operating room, and only on the actual
date of the cholecystectomy. She negligently failed to take advantage of this important
opportunity. As such, her attempt to exculpate herself must fail.

Having established that respondent Dra. Gutierrez failed to perform pre-operative

evaluation of the patient which, in turn, resulted to a wrongful intubation, we now
determine if the faulty intubation is truly the proximate cause of Erlinda's comatose
condition.

Private respondents repeatedly hammered the view that the cerebral anoxia which led to
Erlinda's coma was due to bronchospasm 59 mediated by her allergic response to the drug,
Thiopental Sodium, introduced into her system. Towards this end, they presented Dr.
Jamora, a Fellow of the Philippine College of Physicians and Diplomate of the Philippine
Specialty Board of Internal Medicine, who advanced private respondents' theory that the
oxygen deprivation which led to anoxic encephalopathy, 60 was due to an unpredictable
drug reaction to the short-acting barbiturate. We find the theory of private respondents
unacceptable.

First of all, Dr. Jamora cannot be considered an authority in the field of anesthesiology
simply because he is not an anesthesiologist. Since Dr. Jamora is a pulmonologist, he could
not have been capable of properly enlightening the court about anesthesia practice and
procedure and their complications. Dr. Jamora is likewise not an allergologist and could
not therefore properly advance expert opinion on allergic-mediated processes. Moreover,
he is not a pharmacologist and, as such, could not have been capable, as an expert would, of
explaining to the court the pharmacologic and toxic effects of the supposed culprit,
Thiopental Sodium (Pentothal).

The inappropriateness and absurdity of accepting Dr. Jamora's testimony as an expert

witness in the anesthetic practice of Pentothal administration is further supported by his
own admission that he formulated his opinions on the drug not from the practical
experience gained by a specialist or expert in the administration and use of Sodium
Pentothal on patients, but only from reading certain references, to wit:

ATTY. LIGSAY:

Q: In your line of expertise on pulmonology, did you have any occasion to use pentothal as
a method of management?

DR. JAMORA:

A: We do it in conjunction with the anesthesiologist when they have to intubate our patient.

Q: But not in particular when you practice pulmonology?

A: No.

Q: In other words, your knowledge about pentothal is based only on what you have read
from books and not by your own personal application of the medicine pentothal?

A: Based on my personal experience also on pentothal.

Q: How many times have you used pentothal?

A: They used it on me. I went into bronchospasm during my appendectomy.

Q: And because they have used it on you and on account of your own personal experience
you feel that you can testify on pentothal here with medical authority?

A: No. That is why I used references to support my claims. 61

An anesthetic accident caused by a rare drug-induced bronchospasm properly falls within

the fields of anesthesia, internal medicine-allergy, and clinical pharmacology. The resulting
anoxic encephalopathy belongs to the field of neurology. While admittedly, many
bronchospastic-mediated pulmonary diseases are within the expertise of pulmonary
medicine, Dr. Jamora's field, the anesthetic drug-induced, allergic mediated bronchospasm
alleged in this case is within the disciplines of anesthesiology, allergology and
pharmacology. On the basis of the foregoing transcript, in which the pulmonologist himself
admitted that he could not testify about the drug with medical authority, it is clear that the
appellate court erred in giving weight to Dr. Jamora's testimony as an expert in the
administration of Thiopental Sodium.

The provision in the rules of evidence 62 regarding expert witnesses states:

Sec. 49. Opinion of expert witness. — The opinion of a witness on a matter requiring special
knowledge, skill, experience or training which he is shown to possess, may be received in
evidence.

Generally, to qualify as an expert witness, one must have acquired special knowledge of the
subject matter about which he or she is to testify, either by the study of recognized
authorities on the subject or by practical experience. 63Clearly, Dr. Jamora does not qualify
as an expert witness based on the above standard since he lacks the necessary knowledge,
skill, and training in the field of anesthesiology. Oddly, apart from submitting testimony
from a specialist in the wrong field, private respondents' intentionally avoided providing
testimony by competent and independent experts in the proper areas.

Moreover, private respondents' theory, that Thiopental Sodium may have produced
Erlinda's coma by triggering an allergic mediated response, has no support in evidence. No
evidence of stridor, skin reactions, or wheezing — some of the more common accompanying
signs of an allergic reaction — appears on record. No laboratory data were ever presented
to the court.

In any case, private respondents themselves admit that Thiopental induced, allergic-
mediated bronchospasm happens only very rarely. If courts were to accept private
respondents' hypothesis without supporting medical proof, and against the weight of
available evidence, then every anesthetic accident would be an act of God. Evidently, the
Thiopental-allergy theory vigorously asserted by private respondents was a mere
afterthought. Such an explanation was advanced in order to advanced in order to absolve
them of any and all responsibility for the patient's condition.

In view of the evidence at hand, we are inclined to believe petitioners' stand that it was the
faulty intubation which was the proximate cause of Erlinda's comatose condition.

Proximate cause has been defined as that which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces injury, and without which the result
would not have occurred. 64 An injury or damage is proximately caused by an act or a
failure to act, whenever it appears from the evidence in the case, that the act or omission
played a substantial part in bringing about or actually causing the injury or damage; and
that the injury or damage was either a direct result or a reasonably probable consequence
of the act or omission. 65 It is the dominant, moving or producing cause.
Applying the above definition in relation to the evidence at hand, faulty intubation is
undeniably the proximate cause which triggered the chain of events leading to Erlinda's
brain damage and, ultimately, her comatosed condition.

Private respondents themselves admitted in their testimony that the first intubation was a
failure. This fact was likewise observed by witness Cruz when she heard respondent Dra.
Gutierrez remarked, "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O
lumalaki ang tiyan." Thereafter, witness Cruz noticed abdominal distention on the body of
Erlinda. The development of abdominal distention, together with respiratory
embarrassment indicates that the endotracheal tube entered the esophagus instead of the
respiratory tree. In other words, instead of the intended endotracheal intubation what
actually took place was an esophageal intubation. During intubation, such distention
indicates that air has entered the gastrointestinal tract through the esophagus instead of the
lungs through the trachea. Entry into the esophagus would certainly cause some delay in
oxygen delivery into the lungs as the tube which carries oxygen is in the wrong place. That
abdominal distention had been observed during the first intubation suggests that the length
of time utilized in inserting the endotracheal tube (up to the time the tube was withdrawn
for the second attempt) was fairly significant. Due to the delay in the delivery of oxygen in
her lungs Erlinda showed signs of cyanosis. 66 As stated in the testimony of Dr. Hosaka, the
lack of oxygen became apparent only after he noticed that the nailbeds of Erlinda were
already blue. 67 However, private respondents contend that a second intubation was
executed on Erlinda and this one was successfully done. We do not think so. No evidence
exists on record, beyond private respondents' bare claims, which supports the contention
that the second intubation was successful. Assuming that the endotracheal tube finally
found its way into the proper orifice of the trachea, the same gave no guarantee of oxygen
delivery, the hallmark of a successful intubation. In fact, cyanosis was again observed
immediately after the second intubation. Proceeding from this event (cyanosis), it could not
be claimed, as private respondents insist, that the second intubation was accomplished.
Even granting that the tube was successfully inserted during the second attempt, it was
obviously too late. As aptly explained by the trial court, Erlinda already suffered brain
damage as a result of the inadequate oxygenation of her brain for about four to five
minutes. 68

The above conclusion is not without basis. Scientific studies point out that intubation
problems are responsible for one-third (1/3) of deaths and serious injuries associated with
anesthesia. 69 Nevertheless, ninety-eight percent (98%) or the vast majority of difficult
intubations may be anticipated by performing a thorough evaluation of the patient's
airway prior to the operation. 70 As stated beforehand, respondent Dra. Gutierrez failed to
observe the proper pre-operative protocol which could have prevented this unfortunate
incident. Had appropriate diligence and reasonable care been used in the pre-operative
evaluation, respondent physician could have been much more prepared to meet the
contingency brought about by the perceived anatomic variations in the patient's neck and
oral area, defects which would have been easily overcome by a prior knowledge of those
variations together with a change in technique. 71 In other words, an experienced
anesthesiologist, adequately alerted by a thorough pre-operative evaluation, would have
had little difficulty going around the short neck and protruding teeth. 72 Having failed to
observe common medical standards in pre-operative management and intubation,
respondent Dra. Gutierrez' negligence resulted in cerebral anoxia and eventual coma of
Erlinda.

We now determine the responsibility of respondent Dr. Orlino Hosaka as the head of the
surgical team. As the so-called "captain of the ship," 73 it is the surgeon's responsibility to
see to it that those under him perform their task in the proper manner. Respondent Dr.
Hosaka's negligence can be found in his failure to exercise the proper authority (as the
"captain" of the operative team) in not determining if his anesthesiologist observed proper
anesthesia protocols. In fact, no evidence on record exists to show that respondent Dr.
Hosaka verified if respondent Dra. Gutierrez properly intubated the patient. Furthermore,
it does not escape us that respondent Dr. Hosaka had scheduled another procedure in a
different hospital at the same time as Erlinda's cholecystectomy, and was in fact over three
hours late for the latter's operation. Because of this, he had little or no time to confer with
his anesthesiologist regarding the anesthesia delivery. This indicates that he was remiss in
his professional duties towards his patient. Thus, he shares equal responsibility for the
events which resulted in Erlinda's condition.

We now discuss the responsibility of the hospital in this particular incident. The unique
practice (among private hospitals) of filling up specialist staff with attending and visiting
"consultants," 74 who are allegedly not hospital employees, presents problems in
apportioning responsibility for negligence in medical malpractice cases. However, the
difficulty is only more apparent than real.

In the first place, hospitals exercise significant control in the hiring and firing of
consultants and in the conduct of their work within the hospital premises. Doctors who
apply for "consultant" slots, visiting or attending, are required to submit proof of
completion of residency, their educational qualifications; generally, evidence of
accreditation by the appropriate board (diplomate), evidence of fellowship in most cases,
and references. These requirements are carefully scrutinized by members of the hospital
administration or by a review committee set up by the hospital who either accept or reject
the application. 75 This is particularly true with respondent hospital.

After a physician is accepted, either as a visiting or attending consultant, he is normally

required to attend clinico-pathological conferences, conduct bedside rounds for clerks,
interns and residents, moderate grand rounds and patient audits and perform other tasks
and responsibilities, for the privilege of being able to maintain a clinic in the hospital,
and/or for the privilege of admitting patients into the hospital. In addition to these, the
physician's performance as a specialist is generally evaluated by a peer review committee
on the basis of mortality and morbidity statistics, and feedback from patients, nurses,
interns and residents. A consultant remiss in his duties, or a consultant who regularly falls
short of the minimum standards acceptable to the hospital or its peer review committee, is
normally politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending
and visiting "consultant" staff. While "consultants" are not, technically employees, a point
which respondent hospital asserts in denying all responsibility for the patient's condition,
the control exercised, the hiring, and the right to terminate consultants all fulfill the
important hallmarks of an employer-employee relationship, with the exception of the
payment of wages. In assessing whether such a relationship in fact exists, the control test is
determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of
allocating responsibility in medical negligence cases, an employer-employee relationship in
effect exists between hospitals and their attending and visiting physicians. This being the
case, the question now arises as to whether or not respondent hospital is solidarily liable
with respondent doctors for petitioner's condition. 76

The basis for holding an employer solidarily responsible for the negligence of its employee
is found in Article 2180 of the Civil Code which considers a person accountable not only for
his own acts but also for those of others based on the former's responsibility under a
relationship of patria potestas. 77 Such responsibility ceases when the persons or entity
concerned prove that they have observed the diligence of a good father of the family to
prevent damage. 78 In other words, while the burden of proving negligence rests on the
plaintiffs, once negligence is shown, the burden shifts to the respondents (parent, guardian,
teacher or employer) who should prove that they observed the diligence of a good father of
a family to prevent damage.

In the instant case, respondent hospital, apart from a general denial of its responsibility
over respondent physicians, failed to adduce evidence showing that it exercised the
diligence of a good father of a family in the hiring and supervision of the latter. It failed to
adduce evidence with regard to the degree of supervision which it exercised over its
physicians. In neglecting to offer such proof, or proof of a similar nature, respondent
hospital thereby failed to discharge its burden under the last paragraph of Article 2180.
Having failed to do this, respondent hospital is consequently solidarily responsible with its
physicians for Erlinda's condition.

Based on the foregoing, we hold that the Court of Appeals erred in accepting and relying on
the testimonies of the witnesses for the private respondents. Indeed, as shown by the above
discussions, private respondents were unable to rebut the presumption of negligence. Upon
these disquisitions we hold that private respondents are solidarily liable for damages under
Article 2176 79 of the Civil Code.

We now come to the amount of damages due petitioners. The trial court awarded a total of
P632,000.00 pesos (should be P616,000.00) in compensatory damages to the plaintiff,
"subject to its being updated" covering the period from 15 November 1985 up to 15 April
1992, based on monthly expenses for the care of the patient estimated at P8,000.00.

At current levels, the P8000/monthly amount established by the trial court at the time of its
decision would be grossly inadequate to cover the actual costs of home-based care for a
comatose individual. The calculated amount was not even arrived at by looking at the
actual cost of proper hospice care for the patient. What it reflected were the actual expenses
incurred and proved by the petitioners after they were forced to bring home the patient to
avoid mounting hospital bills.

And yet ideally, a comatose patient should remain in a hospital or be transferred to a

hospice specializing in the care of the chronically ill for the purpose of providing a proper
milieu adequate to meet minimum standards of care. In the instant case for instance,
Erlinda has to be constantly turned from side to side to prevent bedsores and hypostatic
pneumonia. Feeding is done by nasogastric tube. Food preparation should be normally
made by a dietitian to provide her with the correct daily caloric requirements and vitamin
supplements. Furthermore, she has to be seen on a regular basis by a physical therapist to
avoid muscle atrophy, and by a pulmonary therapist to prevent the accumulation of
secretions which can lead to respiratory complications.

Given these considerations, the amount of actual damages recoverable in suits arising from
negligence should at least reflect the correct minimum cost of proper care, not the cost of
the care the family is usually compelled to undertake at home to avoid bankruptcy.
However, the provisions of the Civil Code on actual or compensatory damages present us
with some difficulties.

Well-settled is the rule that actual damages which may be claimed by the plaintiff are those
suffered by him as he has duly proved. The Civil Code provides:

Art. 2199. — Except as provided by law or by stipulation, one is entitled to an adequate

compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages.

Our rules on actual or compensatory damages generally assume that at the time of
litigation, the injury suffered as a consequence of an act of negligence has been completed
and that the cost can be liquidated. However, these provisions neglect to take into account
those situations, as in this case, where the resulting injury might be continuing and possible
future complications directly arising from the injury, while certain to occur, are difficult to
predict.

In these cases, the amount of damages which should be awarded, if they are to adequately
and correctly respond to the injury caused, should be one which compensates for pecuniary
loss incurred and proved, up to the time of trial; and one which would meet pecuniary loss
certain to be suffered but which could not, from the nature of the case, be made with
certainty. 80 In other words, temperate damages can and should be awarded on top of
actual or compensatory damages in instances where the injury is chronic and continuing.
And because of the unique nature of such cases, no incompatibility arises when both actual
and temperate damages are provided for. The reason is that these damages cover two
distinct phases.

As it would not be equitable — and certainly not in the best interests of the administration
of justice — for the victim in such cases to constantly come before the courts and invoke
their aid in seeking adjustments to the compensatory damages previously awarded —
temperate damages are appropriate. The amount given as temperate damages, though to a
certain extent speculative, should take into account the cost of proper care.

In the instant case, petitioners were able to provide only home-based nursing care for a
comatose patient who has remained in that condition for over a decade. Having premised
our award for compensatory damages on the amount provided by petitioners at the onset
of litigation, it would be now much more in step with the interests of justice if the value
awarded for temperate damages would allow petitioners to provide optimal care for their
loved one in a facility which generally specializes in such care. They should not be
compelled by dire circumstances to provide substandard care at home without the aid of
professionals, for anything less would be grossly inadequate. Under the circumstances, an
award of P1,500,000.00 in temperate damages would therefore be reasonable. 81

In Valenzuela vs. Court of Appeals, 82 this Court was confronted with a situation where the
injury suffered by the plaintiff would have led to expenses which were difficult to estimate
because while they would have been a direct result of the injury (amputation), and were
certain to be incurred by the plaintiff, they were likely to arise only in the future. We
awarded P1,000,000.00 in moral damages in that case.

Describing the nature of the injury, the Court therein stated:

As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic amputation of

her left lower extremity at the distal left thigh just above the knee. Because of this,
Valenzuela will forever be deprived of the full ambulatory functions of her left extremity,
even with the use of state of the art prosthetic technology. Well beyond the period of
hospitalization (which was paid for by Li), she will be required to undergo adjustments in
her prosthetic devise due to the shrinkage of the stump from the process of healing.
These adjustments entail costs, prosthetic replacements and months of physical and
occupational rehabilitation and therapy. During the lifetime, the prosthetic devise will have
to be replaced and readjusted to changes in the size of her lower limb effected by the
biological changes of middle-age, menopause and aging. Assuming she reaches menopause,
for example, the prosthetic will have to be adjusted to respond to the changes in bone
resulting from a precipitate decrease in calcium levels observed in the bones of all post-
menopausal women. In other words, the damage done to her would not only be permanent
and lasting, it would also be permanently changing and adjusting to the physiologic
changes which her body would normally undergo through the years. The replacements,
changes, and adjustments will require corresponding adjustive physical and occupational
therapy. All of these adjustments, it has been documented, are painful.

xxx xxx xxx

A prosthetic devise, however technologically advanced, will only allow a reasonable amount
of functional restoration of the motor functions of the lower limb. The sensory functions are
forever lost. The resultant anxiety, sleeplessness, psychological injury, mental and physical
pain are inestimable. 83

The injury suffered by Erlinda as a consequence of private respondents' negligence is

certainly much more serious than the amputation in the Valenzuela case.

Petitioner Erlinda Ramos was in her mid-forties when the incident occurred. She has been
in a comatose state for over fourteen years now. The burden of care has so far been
heroically shouldered by her husband and children, who, in the intervening years have
been deprived of the love of a wife and a mother.

Meanwhile, the actual physical, emotional and financial cost of the care of petitioner would
be virtually impossible to quantify. Even the temperate damages herein awarded would be
inadequate if petitioner's condition remains unchanged for the next ten years.

We recognized, in Valenzuela that a discussion of the victim's actual injury would not even
scratch the surface of the resulting moral damage because it would be highly speculative to
estimate the amount of emotional and moral pain, psychological damage and injury
suffered by the victim or those actually affected by the victim's condition. 84 The husband
and the children, all petitioners in this case, will have to live with the day to day
uncertainty of the patient's illness, knowing any hope of recovery is close to nil. They have
fashioned their daily lives around the nursing care of petitioner, altering their long term
goals to take into account their life with a comatose patient. They, not the respondents, are
charged with the moral responsibility of the care of the victim. The family's moral injury
and suffering in this case is clearly a real one. For the foregoing reasons, an award of
P2,000,000.00 in moral damages would be appropriate.
Finally, by way of example, exemplary damages in the amount of P100,000.00 are hereby
awarded. Considering the length and nature of the instant suit we are of the opinion that
attorney's fees valued at P100,000.00 are likewise proper.

Our courts face unique difficulty in adjudicating medical negligence cases because
physicians are not insurers of life and, they rarely set out to intentionally cause injury or
death to their patients. However, intent is immaterial in negligence cases because where
negligence exists and is proven, the same automatically gives the injured a right to
reparation for the damage caused.

Established medical procedures and practices, though in constant flux are devised for the
purpose of preventing complications. A physician's experience with his patients would
sometimes tempt him to deviate from established community practices, and he may end a
distinguished career using unorthodox methods without incident. However, when failure to
follow established procedure results in the evil precisely sought to be averted by observance
of the procedure and a nexus is made between the deviation and the injury or damage, the
physician would necessarily be called to account for it. In the case at bar, the failure to
observe pre-operative assessment protocol which would have influenced the intubation in a
salutary way was fatal to private respondents' case.

WHEREFORE, the decision and resolution of the appellate court appealed from are
hereby modified so as to award in favor of petitioners, and solidarily against private
respondents the following: 1) P1,352,000.00 as actual damages computed as of the date of
promulgation of this decision plus a monthly payment of P8,000.00 up to the time that
petitioner Erlinda Ramos expires or miraculously survives; 2) P2,000,000.00 as moral
damages, 3) P1,500,000.00 as temperate damages; 4) P100,000.00 each as exemplary
damages and attorney's fees; and, 5) the costs of the suit.

SO ORDERED.

G.R. No. L-56487 October 21, 1991

REYNALDA GATCHALIAN, petitioner,

vs.
ARSENIO DELIM and the HON. COURT OF APPEALS, respondents.

Pedro G. Peralta for petitioner.

Florentino G. Libatique for private respondent.

FELICIANO, J.:

At noon time on 11 July 1973, petitioner Reynalda Gatchalian boarded, as a paying

passenger, respondent's "Thames" mini bus at a point in San Eugenio, Aringay, La Union,
bound for Bauang, of the same province. On the way, while the bus was running along the
highway in Barrio Payocpoc, Bauang, Union, "a snapping sound" was suddenly heard at
one part of the bus and, shortly thereafter, the vehicle bumped a cement flower pot on the
side of the road, went off the road, turned turtle and fell into a ditch. Several passengers,
including petitioner Gatchalian, were injured. They were promptly taken to Bethany
Hospital at San Fernando, La Union, for medical treatment. Upon medical examination,
petitioner was found to have sustained physical injuries on the leg, arm and forehead,
specifically described as follows: lacerated wound, forehead; abrasion, elbow, left;
abrasion, knee, left; abrasion, lateral surface, leg, left. 1

On 14 July 1973, while injured. passengers were confined in the hospital, Mrs. Adela Delim, wife of respondent, visited them and later paid for their

hospitalization and medical expenses. She also gave petitioner P12.00 with which to pay her transportation expense in going home from the hospital. However,

before Mrs. Delim left, she had the injured passengers, including petitioner, sign an already prepared Joint Affidavit which stated, among other things:

That we were passengers of Thames with Plate No. 52-222 PUJ Phil. 73 and victims after the said Thames met an accident at Barrio Payocpoc Norte, Bauang,

La Union while passing through the National Highway No. 3;

That after a thorough investigation the said Thames met the accident due to mechanical defect and went off the road and turned turtle to the east canal of the

road into a creek causing physical injuries to us;

xxx xxx xxx

That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the said Thames, because it was an accident and the said

driver and owner of the said Thames have gone to the extent of helping us to be treated upon our injuries.

xxx xxx xxx 2

(Emphasis supplied)
Notwithstanding this document, petitioner Gathalian filed with the then Court of First Instance of La Union an action extra contractu to recover

compensatory and moral damages. She alleged in the complaint that her injuries sustained from the vehicular mishap had left her with a conspicuous white

scar measuring 1 by 1/2 inches on the forehead, generating mental suffering and an inferiority complex on her part; and that as a result, she had to retire in

seclusion and stay away from her friends. She also alleged that the scar diminished her facial beauty and deprived her of opportunities for employment. She

prayed for an award of: P10,000.00 for loss of employment and other opportunities; P10,000.00 for the cost of plastic surgery for removal of the scar on her

forehead; P30,000.00 for moral damages; and P1,000.00 as attorney's fees.

In defense, respondent averred that the vehicular mishap was due to force majeure, and that petitioner had already been paid and moreover had waived any

right to institute any action against him (private respondent) and his driver, when petitioner Gatchalian signed the Joint Affidavit on 14 July 1973.

After trial, the trial court dismissed the complaint upon the ground that when petitioner Gatchalian signed the Joint Affidavit, she relinquished any right of

action (whether criminal or civil) that she may have had against respondent and the driver of the mini-bus.

On appeal by petitioner, the Court of Appeals reversed the trial court's conclusion that there had been a valid waiver, but affirmed the dismissal of the case by

denying petitioner's claim for damages:

We are not in accord, therefore, of (sic) the ground of the trial court's dismissal of the complaint, although we conform to the trial court's disposition of the

case — its dismissal.

IN VIEW OF THE FOREGOING considerations, there being no error committed by the lower court in dismissing the plaintiff-appellant's complaint, the

judgment of dismissal is hereby affirmed.

Without special pronouncement as to costs.

SO ORDERED. 3

In the present Petition for Review filed in forma pauperis, petitioner assails the decision of the Court of Appeals and ask this Court to award her actual or

compensatory damages as well as moral damages.

We agree with the majority of the Court of Appeals who held that no valid waiver of her cause of action had been made by petitioner. The relevant language

of the Joint Affidavit may be quoted again:

That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the said Thames, because it was an accident and the

said driver and owner of the said Thames have gone to the extent of helping us to be treated upon our injuries. (Emphasis supplied)
A waiver, to be valid and effective, must in the first place be couched in clear and unequivocal terms which leave no doubt as to the intention of a person to

give up a right or benefit which legally pertains to him. 4

A waiver may not casually be attributed to a person when
the terms thereof do not explicitly and clearly evidence an intent to abandon a right vested
in such person.

The degree of explicitness which this Court has required in purported waivers is illustrated
in Yepes and Susaya v. Samar Express Transit (supra), where the Court in reading and
rejecting a purported waiver said:

. . . It appears that before their transfer to the Leyte Provincial Hospital, appellees were
asked to sign as, in fact, they signed the document Exhibit I wherein they stated that "in
consideration of the expenses which said operator has incurred in properly giving us the
proper medical treatment, we hereby manifest our desire to waive any and all claims against
the operator of the Samar Express Transit."

xxx xxx xxx

Even a cursory examination of the document mentioned above will readily show
that appellees did not actually waive their right to claim damages from appellant for the
latter's failure to comply with their contract of carriage. All that said document proves is
that they expressed a "desire" to make the waiver — which obviously is not the same as
making an actual waiver of their right. A waiver of the kind invoked by appellant must be
clear and unequivocal (Decision of the Supreme Court of Spain of July 8, 1887) — which is
not the case of the one relied upon in this appeal. (Emphasis supplied)

If we apply the standard used in Yepes and Susaya, we would have to conclude that the
terms of the Joint Affidavit in the instant case cannot be regarded as a waiver cast in "clear
and unequivocal" terms. Moreover, the circumstances under which the Joint Affidavit was
signed by petitioner Gatchalian need to be considered. Petitioner testified that she was still
reeling from the effects of the vehicular accident, having been in the hospital for only three
days, when the purported waiver in the form of the Joint Affidavit was presented to her for
signing; that while reading the same, she experienced dizziness but that, seeing the other
passengers who had also suffered injuries sign the document, she too signed without
bothering to read the Joint Affidavit in its entirety. Considering these circumstances there
appears substantial doubt whether petitioner understood fully the import of the Joint
Affidavit (prepared by or at the instance of private respondent) she signed and whether she
actually intended thereby to waive any right of action against private respondent.

Finally, because what is involved here is the liability of a common carrier for injuries
sustained by passengers in respect of whose safety a common carrier must
exercise extraordinary diligence, we must construe any such purported waiver most strictly
against the common carrier. For a waiver to be valid and effective, it must not be contrary
to law, morals, public policy or good
customs. 5 To uphold a supposed waiver of any right to claim damages by an injured
passenger, under circumstances like those exhibited in this case, would be to dilute and
weaken the standard of extraordinary diligence exacted by the law from common carriers
and hence to render that standard unenforceable. 6 We believe such a purported waiver is
offensive to public policy.

Petitioner Gatchalian also argues that the Court of Appeals, having by majority vote held
that there was no enforceable waiver of her right of action, should have awarded her actual
or compensatory and moral damages as a matter of course.

We have already noted that a duty to exercise extraordinary diligence in protecting the
safety of its passengers is imposed upon a common carrier. 7 In case of death or injuries to
passengers, a statutory presumption arises that the common carrier was at fault or had
acted negligently "unless it proves that it [had] observed extraordinary diligence as
prescribed in Articles 1733 and 1755." 8 In fact, because of this statutory presumption, it
has been held that a court need not even make an express finding of fault or negligence on
the part of the common carrier in order to hold it liable. 9 To overcome this presumption,
the common carrier must slow to the court that it had exercised extraordinary diligence to
prevent the injuries. 10 The standard of extraordinary diligence imposed upon common
carriers is considerably more demanding than the standard of ordinary diligence, i.e., the
diligence of a good paterfamilias established in respect of the ordinary relations between
members of society. A common carrier is bound to carry its passengers safely" as far as
human care and foresight can provide, using the utmost diligence of a very cautious
person, with due regard to all the circumstances". 11
Thus, the question which must be addressed is whether or not private respondent has successfully proved that he had exercised extraordinary diligence to

prevent the mishap involving his mini-bus. The records before the Court are bereft of any evidence showing that respondent had exercised the extraordinary

diligence required by law. Curiously, respondent did not even attempt, during the trial before the court a quo, to prove that he had indeed exercised the

requisite extraordinary diligence. Respondent did try to exculpate himself from liability by alleging that the mishap was the result of force majeure. But

allegation is not proof and here again, respondent utterly failed to substantiate his defense offorce majeure. To exempt a common carrier from liability for

death or physical injuries to passengers upon the ground of force majeure, the carrier must clearly show not only that the efficient cause of the casualty was

entirely independent of the human will, but also that it was impossible to avoid. Any participation by the common carrier in the occurrence of the injury will

defeat the defense of force majeure. In Servando v. Philippine Steam Navigation Company, 12
the Court summed up the essential
characteristics of force majeure by quoting with approval from the Enciclopedia Juridica
Española:

Thus, where fortuitous event or force majeure is the immediate and proximate cause of the
loss, the obligor is exempt from liability non-performance. The Partidas, the antecedent of
Article 1174 of the Civil Code, defines "caso fortuito" as 'an event that takes place by
accident and could not have been foreseen. Examples of this are destruction of houses,
unexpected fire, shipwreck, violence of robber.
In its dissertation on the phrase "caso fortuito" the Enciclopedia Juridica Española says:
'In legal sense and, consequently, also in relation to contracts, a "caso fortuito" presents the
following essential characteristics: (1) the cause of the unforeseen and unexpected
occurence, or of the failure of the debtor to comply with his obligation, must be
independent of the human will; (2) it must be impossible to foresee the event which
constitutes the "caso fortuito", or if it can be foreseen, it must be impossible to avoid; (3)
the occurrence must be such as to render it impossible for the debtor to fulfill his obligation
in a normal manner; and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.

Upon the other hand, the record yields affirmative evidence of fault or negligence on the
part of respondent common carrier. In her direct examination, petitioner Gatchalian
narrated that shortly before the vehicle went off the road and into a ditch, a "snapping
sound" was suddenly heard at one part of the bus. One of the passengers, an old woman,
cried out, "What happened?" ("Apay addan samet nadadaelen?"). The driver replied,
nonchalantly, "That is only normal" ("Ugali ti makina dayta"). The driver did not stop to
check if anything had gone wrong with the bus. Moreover, the driver's reply necessarily
indicated that the same "snapping sound" had been heard in the bus on previous occasions.
This could only mean that the bus had not been checked physically or mechanically to
determine what was causing the "snapping sound" which had occurred so frequently that
the driver had gotten accustomed to it. Such a sound is obviously alien to a motor vehicle in
good operating condition, and even a modicum of concern for life and limb of passengers
dictated that the bus be checked and repaired. The obvious continued failure of respondent
to look after the roadworthiness and safety of the bus, coupled with the driver's refusal or
neglect to stop the mini-bus after he had heard once again the "snapping sound" and the
cry of alarm from one of the passengers, constituted wanton disregard of the physical
safety of the passengers, and hence gross negligence on the part of respondent and his
driver.

We turn to petitioner's claim for damages. The first item in that claim relates to revenue
which petitioner said she failed to realize because of the effects of the vehicular mishap.
Petitioner maintains that on the day that the mini-bus went off the road, she was supposed
to confer with the district supervisor of public schools for a substitute teacher's job, a job
which she had held off and on as a "casual employee." The Court of Appeals, however,
found that at the time of the accident, she was no longer employed in a public school since,
being a casual employee and not a Civil Service eligible, she had been laid off. Her
employment as a substitute teacher was occasional and episodic, contingent upon the
availability of vacancies for substitute teachers. In view of her employment status as such,
the Court of Appeals held that she could not be said to have in fact lost any employment
after and by reason of the accident. 13 Such was the factual finding of the Court of Appeals,
a finding entitled to due respect from this Court. Petitioner Gatchalian has not submitted
any basis for overturning this finding of fact, and she may not be awarded damages on the
basis of speculation or conjecture. 14
Petitioner's claim for the cost of plastic surgery for removal of the scar on her forehead, is another matter. A person is entitled to the physical integrity of his

or her body; if that integrity is violated or diminished, actual injury is suffered for which actual or compensatory damages are due and assessable. Petitioner

Gatchalian is entitled to be placed as nearly as possible in the condition that she was before the mishap. A scar, especially one on the face of the woman,

resulting from the infliction of injury upon her, is a violation of bodily integrity, giving raise to a legitimate claim for restoration to her conditio ante. If the

scar is relatively small and does not grievously disfigure the victim, the cost of surgery may be expected to be correspondingly modest. In Araneta, et al. vs.

Areglado, et al., 15 this Court awarded actual or compensatory damages for, among other things, the surgical removal of the scar on the face of a young boy

who had been injured in a vehicular collision. The Court there held:

We agree with the appellants that the damages awarded by the lower court for the injuries suffered by Benjamin Araneta are inadequate. In allowing not

more than P1,000.00 as compensation for the "permanent deformity and — something like an inferiority complex" as well as for the "pathological condition

on the left side of the jaw" caused to said plaintiff, the court below overlooked the clear evidence on record that to arrest the degenerative process taking

place in the mandible and restore the injured boy to a nearly normal condition, surgical intervention was needed, for which the doctor's charges would amount

to P3,000.00, exclusive of hospitalization fees, expenses and medicines. Furthermore, the operation, according to Dr. Diño, would probably have to be repeated in

order to effectuate a complete cure, while removal of the scar on the face obviously demanded plastic surgery.

xxx xxx xxx

The father's failure to submit his son to a plastic operation as soon as possible does not prove that such treatment is not called for. The damage to the jaw and

the existence of the scar in Benjamin Araneta's faceare physical facts that can not be reasoned out of existence. That the injury should be treated in order to

restore him as far as possible to his original condition is undeniable. The father's delay, or even his negligence, should not be allowed to prejudice the son who

has no control over the parent's action nor impair his right to a full indemnity.

. . . Still, taking into account the necessity and cost of corrective measures to fully repair the damage; the pain suffered by the injured party; his feelings of

inferiority due to consciousness of his present deformity, as well as the voluntary character of the injury inflicted; and further considering that a repair,

however, skillfully conducted, is never equivalent to the original state, we are of the opinion that the indemnity granted by the trial court should be increased to

a total of P18,000.00. (Emphasis supplied)

Petitioner estimated that the cost of having her scar surgically removed was somewhere between P10,000.00 to P15,000.00. 16
Upon the other
hand, Dr. Fe Tayao Lasam, a witness presented as an expert by petitioner, testified that the
cost would probably be between P5,000.00 to P10,000.00. 17 In view of this testimony, and
the fact that a considerable amount of time has lapsed since the mishap in 1973 which may
be expected to increase not only the cost but also very probably the difficulty of removing
the scar, we consider that the amount of P15,000.00 to cover the cost of such plastic surgery
is not unreasonable.

Turning to petitioner's claim for moral damages, the long-established rule is that moral
damages may be awarded where gross negligence on the part of the common carrier is
shown. 18 Since we have earlier concluded that respondent common carrier and his driver
had been grossly negligent in connection with the bus mishap which had injured petitioner
and other passengers, and recalling the aggressive manuevers of respondent, through his
wife, to get the victims to waive their right to recover damages even as they were still
hospitalized for their injuries, petitioner must be held entitled to such moral damages.
Considering the extent of pain and anxiety which petitioner must have suffered as a result
of her physical injuries including the permanent scar on her forehead, we believe that the
amount of P30,000.00 would be a reasonable award. Petitioner's claim for P1,000.00 as
atttorney's fees is in fact even more modest. 19

WHEREFORE, the Decision of the Court of Appeals dated 24 October 1980, as well as the
decision of the then Court of First Instance of La Union dated 4 December 1975 are hereby
REVERSED and SET ASIDE.Respondent is hereby ORDERED to pay petitioner Reynalda
Gatchalian the following sums: 1) P15,000.00 as actual or compensatory damages to cover
the cost of plastic surgery for the removal of the scar on petitioner's forehead; 2)
P30,000.00 as moral damages; and 3) P1,000.00 as attorney's fees, the aggregate amount to
bear interest at the legal rate of 6% per annum counting from the promulgation of this
decision until full payment thereof. Costs against private respondent.

SO ORDERED.

G.R. No. 73886 January 31, 1989

JOHN C. QUIRANTE and DANTE CRUZ, petitioners,

vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, MANUEL C. CASASOLA,
and ESTRELLITA C. CASASOLA, respondents.

Quirante & Associates Law Office for petitioners.

R.S. Bernaldo & Associates for private respondents.

REGALADO, J.:

This appeal by certiorari seeks to set aside the judgment' 1 of the former Intermediate
Appellate Court promulgated on November 6, 1985 in AC-G.R. No. SP-03640, 2 which
found the petition for certiorari therein meritorious, thus:

Firstly, there is still pending in the Supreme Court a petition which may or may
not ultimately result in the granting to the Isasola (sic) family of the total amount of
damages given by the respondent Judge. Hence the award of damages confirmed in the two
assailed Orders may be premature. Secondly, assuming that the grant of damages to the
family is eventually ratified, the alleged confirmation of attorney's fees will not and should
not adversely affect the non-signatories thereto.

WHEREFORE, in view of the grave abuse of discretion (amounting to lack of jurisdiction)

committed by the respondent Judge, We hereby SET ASIDE his questioned orders of
March 20, 1984 and May 25, 1984. The restraining order previously issued is made
permanent. 3

The challenged decision of respondent court succinctly sets out the factual origin of this
case as follows:

... Dr. Indalecio Casasola (father of respondents) had a contract with a building contractor
named Norman GUERRERO. The Philippine American General Insurance Co. Inc.
(PHILAMGEN, for short) acted as bondsman for GUERRERO. In view of GUERRERO'S
failure to perform his part of the contract within the period specified, Dr. Indalecio
Casasola, thru his counsel, Atty. John Quirante, sued both GUERRERO and
PHILAMGEN before the Court of first Instance of Manila, now the Regional Trial Court
(RTC) of Manila for damages, with PHILAMGEN filing a cross-claim against
GUERRERO for indemnification. The RTC rendered a decision dated October 16,
1981. ... 4

In said decision, the trial court ruled in favor of the plaintiff by rescinding the contract;
ordering GUERRERO and PHILAMGEN to pay the plaintiff actual damages in the
amount of P129,430.00, moral damages in the amount of P50,000.00, exemplary damages in
the amount of P40,000.00 and attorney's fees in the amount of P30,000.00; ordering
Guerrero alone to pay liquidated damages of P300.00 a day from December 15, 1978 to
July 16, 1979; and ordering PHILAMGEN to pay the plaintiff the amount of the surety
bond equivalent to P120,000.00. 5 A motion for reconsideration filed by PHILAMGEN was
denied by the trial court on November 4, 1982. 6
Not satisfied with the decision of the trial court, PHILAMGEN filed a notice of appeal but
the same was not given due course because it was allegedly filed out of time. The trial court
thereafter issued a writ of execution. 7

A petition was filed in AC-G.R. No. 00202 with the Intermediate Appellate Court for the
quashal of the writ of execution and to compel the trial court to give due course to the
appeal. The petition was dismissed on May 4, 1983 8 so the case was elevated to this Court
in G.R. No. 64334. 9 In the meantime, on November 16, 1981, Dr. Casasola died leaving his
widow and several children as survivors. 10

On June 18, 1983, herein petitioner Quirante filed a motion in the trial court for the
confirmation of his attorney's fees. According to him, there was an oral agreement between
him and the late Dr. Casasola with regard to his attorney's fees, which agreement was
allegedly confirmed in writing by the widow, Asuncion Vda. de Casasola, and the two
daughters of the deceased, namely Mely C. Garcia and Virginia C. Nazareno. Petitioner
avers that pursuant to said agreement, the attorney's fees would be computed as follows:

A. In case of recovery of the P120,000.00 surety bond, the attorney's fees of the undersigned
counsel (Atty. Quirante) shall be P30,000.00.

B. In case the Honorable Court awards damages in excess of the P120,000.00 bond, it shall
be divided equally between the Heirs of I. Casasola, Atty. John C. Quirante and Atty. Dante
Cruz.

The trial court granted the motion for confirmation in an order dated March 20, 1984,
despite an opposition thereto. It also denied the motion for reconsideration of the order of
confirmation in its second order dated May 25, 1984. 11

These are the two orders which are assailed in this case.

Well settled is the rule that counsel's claim for attorney's fees may be asserted either in the
very action in which the services in question have been rendered, or in a separate action. If
the first alternative is chosen, the Court may pass upon said claim, even if its amount were
less than the minimum prescribed by law for the jurisdiction of said court, upon the theory
that the right to recover attorney's fees is but an incident of the case in which the services
of counsel have been rendered ." 12 It also rests on the assumption that the court trying the
case is to a certain degree already familiar with the nature and extent of the lawyer's
services. The rule against multiplicity of suits will in effect be subserved. 13

What is being claimed here as attorney's fees by petitioners is, however, different from
attorney's fees as an item of damages provided for under Article 2208 of the Civil Code,
wherein the award is made in favor of the litigant, not of his counsel, and the litigant, not
his counsel, is the judgment creditor who may enforce the judgment for attorney's fees by
execution.14 Here, the petitioner's claims are based on an alleged contract for professional
services, with them as the creditors and the private respondents as the debtors.

In filing the motion for confirmation of attorney's fees, petitioners chose to assert their
claims in the same action. This is also a proper remedy under our jurisprudence.
Nevertheless, we agree with the respondent court that the confirmation of attorney's fees is
premature. As it correctly pointed out, the petition for review on certiorari filed by
PHILAMGEN in this Court (G.R. No. 64834) "may or may not ultimately result in the
granting to the Isasola (sic) family of the total amount of damages" awarded by the trial
court. This especially true in the light of subsequent developments in G.R. No. 64334. In a
decision promulgated on May 21, 1987, the Court rendered judgment setting aside the
decision of May 4, 1983 of the Intermediate Appellate Court in AC-G.R. No. 00202 and
ordering the respondent Regional Trial Court of Manila to certify the appeal of
PHILAMGEN from said trial court's decision in Civil Case No. 122920 to the Court of
Appeal. Said decision of the Court became final and executory on June 25, 1987.

Since the main case from which the petitioner's claims for their fees may arise has not yet
become final, the determination of the propriety of said fees and the amount thereof should
be held in abeyance. This procedure gains added validity in the light of the rule that the
remedy for recovering attorney's fees as an incident of the main action may be availed of
only when something is due to the client. Thus, it was ruled that:

... an attorney's fee cannot be determined until after the main litigation has been decided
and the subject of recovery is at the disposition of the court. The issue over attorney's fee
only arises when something has been recovered from which the fee is to be paid. 15

It is further observed that the supposed contract alleged by petitioners as the basis for their
fees provides that the recovery of the amounts claimed is subject to certain contingencies. It
is subject to the condition that the fee shall be P30,000.00 in case of recovery of the
P120,000.00 surety bond, plus an additional amount in case the award is in excess of said
P120,000.00 bond, on the sharing basis hereinbefore stated.

With regard to the effect of the alleged confirmation of the attorney's fees by some of the
heirs of the deceased. We are of the considered view that the orderly administration of
justice dictates that such issue be likewise determined by the court a quo inasmuch as it
also necessarily involves the same contingencies in determining the propriety and assessing
the extent of recovery of attorney's fees by both petitioners herein. The court below will be
in a better position, after the entire case shall have been adjudicated, inclusive of any
liability of PHILAMGEN and the respective participations of the heirs of Dr. Casasola in
the award, to determine with evidentiary support such matters like the basis for the
entitlement in the fees of petitioner Dante Cruz and as to whether the agreement allegedly
entered into with the late Dr. Casasola would be binding on all his heirs, as contended by
petitioner Quirante.

We, therefore, take exception to and reject that portion of the decision of the respondent
court which holds that the alleged confirmation to attorney's fees should not adversely
affect the non-signatories thereto, since it is also premised on the eventual grant of damages
to the Casasola family, hence the same objection of prematurity obtains and such a holding
may be pre-emptive of factual and evidentiary matters that may be presented for
consideration by the trial court.

WHEREFORE, with the foregoing observation, the decision of the respondent court
subject of the present recourse is hereby AFFIRMED.

SO ORDERED.

G.R. No. 128721 March 9, 1999

CRISMINA GARMENTS, INC., petitioner,

vs.
COURT OF APPEALS and NORMA SIAPNO, respondent.

PANGANIBAN, J.:

Interest shall be computed in accordance with the stipulation of the parties. In the absence
of such agreement, the rate shall be twelve percent (12%) per annum when the obligation
arises out of a loan or a forbearance of money, goods or credits. In other cases, it shall be
six percent (6%).

The Case

On May 5, 1997, Crismina Garments, Inc. filed a Petition for Review

on Certiorari 1 assailing the December 28, 1995 Decision 2 and March 17, 1997
Resolution 3 of the Court of Appeals in CA-GR CV No. 28973. On September 24, 1997, this
Court issued a minute Resolution 4 denying the petition "for its failure to show any
reversible error on the part of the Court of Appeals."

Petitioner then filed a Motion for Reconsideration, 5 arguing that the interest rate should be
computed at 6 percent per annum as provided under Article 2209 of the Civil Code, not 12
percent per annum as prescribed under Circular No. 416 of the Central Bank of the
Philippines. Acting on the Motion, the Court reinstated 6 the Petition, but only with respect
to the issue of which interest rate should be applied.7

The Facts

As the facts of the case are no longer disputed, we are reproducing hereunder the findings
of the appellate court:

During the period from February 1979 to April 1979, the [herein petitioner], which was
engaged in the export of girls' denim pants, contracted the services of the [respondent], the
sole proprietress of the D'Wilmar Garments, for the sewing of 20,762 pieces of assorted
girls['] denims supplied by the [petitioner] under Purchase Orders Nos. 1404, dated
February 15, 1979, 0430 dated February 1, 1979, 1453 dated April 30, 1979. The
[petitioner] was obliged to pay the [respondent], for her services, in the total amount of
P76,410.00. The [respondent] sew[ed] the materials and delivered the same to the
[petitioner] which acknowledged the same per Delivery Receipt Nos. 0030 dated February
9, 1979; 0032, dated February 15, 1979; 0033 dated February 21, 1979; 0034, dated
February 24, 1979; 0036, dated February 20, 1979; 0038, dated March 11, 1979[;] 0039,
dated March 24, 1979; 0040 dated March 27, 1979; 0041, dated March 29, 1979; 0044,
dated Marc[h] 25, 1979; 0101 dated May 18, 1979[;] 0037, dated March 10, 1979 and 0042
dated March 10, 1979, in good order condition. At first, the [respondent] was told that the
sewing of some of the pants w[as] defective. She offered to take delivery of the defective
pants. However, she was later told by [petitioner]'s representative that the goods were
already good. She was told to just return for her check of P76,410.00. However, the
[petitioner] failed to pay her the aforesaid amount. This prompted her to hire the services
of counsel who, on November 12, 1979, wrote a letter to the [petitioner] demanding
payment of the aforesaid amount within ten (10) days from receipt thereof. On February 7,
1990, the [petitioner]'s [v]ice-[p]resident-[c]omptroller, wrote a letter to [respondent]'s
counsel, averring, inter alia, that the pairs of jeans sewn by her, numbering 6,164 pairs,
were defective and that she was liable to the [petitioner] for the amount of P49,925.51
which was the value of the damaged pairs of denim pants and demanded refund of the
aforesaid amount.

On January 8, 1981, the [respondent] filed her complaint against the [petitioner] with the
[trial court] for the collection of the principal amount of P76,410.00. . . .

xxx xxx xxx

After due proceedings, the [trial court] rendered judgment, on February 28, 1989, in favor
of the [respondent] against the [petitioner], the dispositive portion of which reads as
follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant ordering the latter to pay the former:

(1) The sum of P76,140.00 with interest thereon at 12% per annum, to be counted from the
filing of this complaint on January 8, 1981, until fully paid;

(2) The sum of P5,000 as attorney[']s fees; and

(3) The costs of this suit;

(4) Defendant's counterclaim is hereby dismissed.8

The Court of Appeals (CA) affirmed the trial court's ruling, except for the award of
attorney's fees which was deleted. 9 Subsequently, the CA denied the Motion for
Reconsideration.10

Hence, this recourse to this Court11

Sole Issue

In light of the Court's Resolution dated April 27, 1998, petitioner submits for our
consideration this sole issue:

Whether or not it is proper to impose interest at the rate of twelve percent (12%) per
annum for an obligation that does not involve a loan or forbearance of money in the
absence of stipulation of the parties. 12

This Court's Ruling

We sustain petitioner's contention that the interest rate should be computed at six percent
(6%) per annum.

Sole Issue: Interest Rate

The controversy revolves around petitioner's payment of the price beyond the period
prescribed in a contract for a piece of work. Article 1589 on the Civil Code provides that
"[t]he vendee [herein petitioner] shall owe interest for the period between the delivery of
the thing and the payment of the price . . . should he be in default from the time of judicial
or extrajudicial demand for the payment of the price." The only issue now is the applicable
rate of interest for the late payment.

Because the case before us is "an action for the enforcement of an obligation for payment of
money arising from a contract for a piece of work," 13 petitioner submits that the interest
rate should be six percent (6%), pursuant to Article 2209 of the Civil Code, which states:
If the obligation consists in the payment 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." (Emphasis supplied.)

On the other hand, private respondent maintains that the interest rate should be twelve
percent (12 %) per annum, in accordance with Central Bank (CB) Circular No. 416, which
reads:

By virtue of the authority granted to it under Section 1 of Act No. 2655, as amended,
otherwise known as the "Usury Law", the Monetary Board, in its Resolution No. 1622
dated July 29, 1974, has prescribed that the rate of interest for the loan or forbearance of
any money, goods or credits and the rate allowed in judgments, in the absence of express
contract as to such rate of interest, shall be twelve per cent (12%) per annum." (Emphasis
supplied.)

She argues that the circular applies, since "the money sought to be recovered by her is in
the form of forbearance." 14

We agree with the petitioner. In Reformina v. Tomol Jr., 15 this Court stressed that the
interest rate under CB Circular No. 416 applies to (1) loans; (2) forbearance of money,
goods or credits; or (3) a judgment involving a loan or forbearance of money, goods or
credits. Cases beyond the scope of the said circular are governed by Article 2209 of the
Civil Code, 16 which considers interest a form of indemnity for the delay in the performance
of an obligation.17

In Eastern Shipping Lines, Inc. v. Court of Appeals,18 the Court gave the following guidelines
for the application of the proper interest rates:

I. 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 damages. The provisions
under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as
follows:

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

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

interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date the judgment of the court is made
(at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be . . .
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 forbearance of credit. 19

In Keng Hua Paper Products Co., Inc. v. CA, 20 we also ruled that the monetary award shall
earn interest at twelve percent (12%) per annum from the date of finality of the judgment
until its satisfaction, regardless of whether or not the case involves a loan of forbearance of
money. The interim period is deemed to be equivalent to a forbearance of a credit. 21

Because the amount due in this case arose from a contract for a piece of work, not from a
loan or forbearance of money, the legal interest of six percent (6%) per annum should be
applied. Furthermore, since the amount of the demand could be established with certainty
when the Complaint was filed, the six percent (6%) interest should be computed from the
filing of the said Complaint. But after the judgment becomes final and exuecutory until the
obligation is satisfied, the interest should be reckoned at twelve percent (%12) per year.

Private respondent maintains that the twelve percent (12%) interest should be imposed,
because the obligation arose from a forbearance of
22 23
money. This is erroneous. In Eastern Shipping, the Court observed that a
"forbearance" in the context of the usury law is a "contractual obligation of lender or
creditor to refrain, during a given period of time, from requiring the borrower or debtor to
repay a loan or debt then due and payable." Using this standard, the obligation in this case
was obviously not a forbearance of money, goods or credit.

WHEREFORE, the appealed Decision is MODIFIED. The rate of interest shall be six
percent (6%) per annum, computed from the time of the filing of the Complaint in the trial
court until the finality of the judgment. If the adjudged principal and the interest (or any
part thereof) remain unpaid thereafter, the interest rate shall be twelve percent (12%) per
annum computed from the time the judgment becomes final and executory until it is fully
satisfied. No pronouncement as to costs.

SO ORDERED.

G.R. No. L-12907 August 1, 1918

VIVENCIO CERRANO, plaintiff-appellee,

vs.
TAN CHUCO, defendant-appellant.

Gibbs, McDonough & Johnson for appellant.

Perfecto Gabriel for appellee.

FISHER, J.:

This is an action by plaintiff for damages alleged to have been caused by the breach of a
contract for the hiring of a casco. The trial court gave judgment for plaintiff. Defendant
excepted to the judgment, moved for a new trial, excepted to the order denying the motion,
and brought the case to this court by bill of exceptions.

The facts established by the evidence are that during the month of January, 1916, the
defendant, who was then the owner of casco No. 1033, rented it to the plaintiff at a monthly
rental of P70. The contract was made in Manila, and the casco was delivered to the plaintiff
in this city. There was no express agreement as regards the duration of the contract. The
rent was payable at the end of each month. Some time during the month of May, 1916, the
defendant notified plaintiff that in the following month it would be necessary to send the
casco to Malabon for repairs. Plaintiff then informed the defendant that he would like to
rent the casco again after the repairs had been completed. Defendant indicated that he was
willing to rent it, but would expect P80 a month for it. Plaintiff contends that it was agreed
that he was to take the casco at he increased rental while defendant insists that his offer to
lease it at the higher rate was never accepted. It is admitted, however, that there was no
agreement between the parties concerning the length of time for which the hire of the casco
was to continue. It is contended on behalf of plaintiff, and denied by defendant, that
according to the custom prevailing in the port of Manila, a contract for the rental of a
casco, when made by the owner, is deemed in the absence of an express stipulation to the
contrary, to run from the date of the contract until the casco has to be docked for its annual
overhauling and repair. In this case it is contended by plaintiff that the contract of hire was
to commence as soon as the casco came off the dock and that its term was to be ten months,
this being the period which is ordinarily allowed from one docking to another. Defendant,
on the contrary, contends that in the absence of an express stipulation regarding the
duration of the hire, it is deemed to be from month to month when a monthly rental is
agreed upon.

The casco was taken to Malabon by plaintiff in June, 1916, and delivered at the shipyard
selected by defendant. The casco remained there, undergoing repairs, until the 24th of July,
1916. About one week before the end of the repair period defendant sold the casco to Siy
Cong Bieng & Co. J. Santos, the man who had been employed by plaintiff as patron of the
casco while it was in his possession, upon hearing that it had been sold to Siy Cong Bieng &
Co. went to the office of the latter in Manila, and asked for employment in the same
capacity. He received from Siy Cong Bieng & Co. P5 on account of his wages, and was
instructed by them to go to Malabon and bring the casco to Manila, which he did, Siy Cong
Bieng & Co. supplying the launch by which the casco was towed. Upon the arrival of the
casco in Manila, however, the plaintiff, claiming that he was entitled to the possession of the
casco under his contract with the defendant, regardless of its sale to Siy Cong Bieng & Co.
induced Santos to refuse to take orders from the new owners. The result was that Siy Cong
Bieng & Co. were obliged to bring an action of replevin against Santos for the recovery of
the possession of their casco. The sheriff took possession of the casco under a writ of
replevin, but redelivered it to Santos upon a delivery bond executed by the present plaintiff
and his wife as sureties. After the casco had been in possession of Santos for some three
months, the replevin suit was submitted to the court for decision upon a written stipulation
in which it was admitted that the casco was the property of Siy Cong Bieng & Co. at the
time of the suit was commenced, and that the "illegal detention" of the casco by Santos had
caused damages to Siy Cong Bieng & Co. in the sum of P457.98. Upon this stipulation
judgment was entered for the delivery of the casco to Siy Cong Bieng & Co. and for
P457.98 as damages. Cerrano, the plaintiff in the present action, paid the judgment in favor
of Siy Cong Bieng & Co. in the replevin suit, for which he had become liable under the
terms of the delivery bond. The evidence shows that Santos was only a nominal defendant
in the replevin suit, which was entirely controlled by the present plaintiff. In addition to
paying the judgment for damages rendered in favor of Siy Cong Bieng & Co. in the
replevin suit, the present plaintiff, Cerrano, paid P500 to the attorney employed by him to
defend that action on behalf of the nominal defendant, Santos. Plaintiff testified that the
average profit derived by him from other cascos rented by him during the period during
which he contends he should have had possession of the casco in question was P60 a month
of each casco. Upon these facts, the trial court held that the defendant had rented the casco
in question to plaintiff for a term of ten months, and for the breach of contract he was
liable to plaintiff in the sum of P600 for the loss of the profits he would have derived from
the use of the casco, and that he is also liable to plaintiff for the sum of P457.98 paid by him
as damages to Siy Cong Bieng & Co. in the replevin suit, and for the sum of P500 paid to
the attorney employed by Cerrano to defend Santos in that action.
The first question which arises on this appeal is whether it was agreed between the plaintiff
and defendant that the casco was to be leased to the former again after it had been
repaired. It is contended by defendant that the while he offered to rent the casco to plaintiff
for P80 a month, this offer was never accepted. We are of the opinion, however, that the
evidence sustains the conclusion of the lower court that it was understood between the
parties, when the casco was taken to Malabon in June, that plaintiff was to have it again at
the increased rental as soon as the contemplated repairs had been completed. That such
was the understanding is shown by the fact that plaintiff paid for the towage of the casco to
the dry dock at Malabon; that he left his equipment in it; and that his patron stayed with
the casco in Malabon during the time it was on the dock. There can be no doubt, in our
opinion that the casco had been rented to plaintiff, and that its sale to Siy Cong Bieng &
Co. was a breach of the contract.

Having concluded that the casco was under hire to plaintiff at the time it was sold and
delivered to Siy Cong Bieng & Co. by defendant, the next inquiry relates to the duration of
the term. Plaintiff contends that in accordance with the custom of the port of Manila it was
to be ten months from July 24, 1916, when the repairs were completed. Defendant contends
that in the absence of express agreement for a definite period, when a monthly rent is
reversed, it is to be understood that the hiring is from month to month. The court below
found that the custom of Manila with regard to such agreements is as contended by
plaintiff. The evidence on this subject is very conflicting and unsatisfactory, however, and is
not sufficient, in our judgment, to warrant a finding of the existence of such a custom.
There is no definite season of the year, of necessity, when cascos are docked, nor is it
possible, in the nature of things, that the length of time which must transpire from one
overhauling to another can be fixed and invariable with respect to any particular vessel. It
must depend, of course, upon the age and condition of the vessel. If any such custom in fact
existed it would produce the absurd result that in one case the parties might be bound for a
year or more while in the next a contract in the same terms might not last a month.
Furthermore, there is obviously no definite standard by which to determine the precise
period at which it becomes necessary to dock a casco. One owner might deem it essential to
dock his casco and have her overhauled, while the same casco in the hands of another
owner might be kept at work for several months more. The uncertainty and the
unreasonable character of the alleged custom are such that we should be unwilling to fasten
it upon the port of Manila upon evidence so unsatisfactory as that relied upon in this case.

There being no rule of law, expressly applicable to the hiring of personal property in
general or of vessels in particular, by which the duration of such a contract is to be
determined, and no local custom having been satisfactorily proved, we are required to
apply the general principles of law. (Civil Code, art. 6.) Under this authorization we may
adopt and apply by analogy the general rules established by the Code relating to the lease
of real property. We find that article 1581 of the Civil Code provides that when no definite
agreement has been made regarding its duration, the lease of a house is deemed to have
been made from day to day, from month to month, or from year to year, according to
whether a daily, monthly, or yearly rent is to be paid. That is to say, this article establishes
the reasonable presumption that one who agrees to pay a monthly rent intends that his
tenancy is to endure for a like period, subject to indefinite tacit renewals at the end of each
month as long as the arrangement is agreeable to both parties. We are of the opinion that a
similar presumption arises under similar conditions with respect to the hire of personal
property, in the absence of special circumstances showing a contrary intention. This is the
rule of the French law, stated by Dalloz (Jur. Gen., vol. 30, p. 482) as follows:

In the absence of any circumstance . . . which indicate (s) that it was the intention of the
parties that the bailment should continue for a definite term, if a chattel — a horse, for
example — is hired by the day to day or by the week, the bailment ceases at the end of each
day, or of each week, if either of the parties so desires . . . .

Our conclusion is, therefore, that under the terms of his contract the defendant was bound
to deliver the casco to plaintiff for one month from the date upon which the repairs were
ended, but was under no obligation to renew the contract at the end of the month. By
selling the casco to Siy Cong Bieng & Co. he broke his contract with plaintiff and is
responsible for the damages caused by his failure to give plaintiff possession of the casco for
the term of one month. The only evidence on this subject is the testimony of plaintiff to the
effect that his average profits from the rented casco were P60 a month. The appellant
contends that this does not furnish the proper measure of damages, but that plaintiff's right
is limited to the recovery of the difference between the contract price at which the casco
was hired by him and such higher rate as he might have been compelled to pay for the hire
of a similar casco in the open market to take its place. Defendant further contends that it
was the duty of plaintiff to endeavor to obtain another casco at the best rate possible, as
soon as he was notified that defendant would not perform his contract, and that the burden
rests upon plaintiff to show that he did so. We are of opinion that the plaintiff is entitled to
recover, as damages for the breach of the contract by the defendant, the profit which he
would have been able to make had the contract been performed. He has testified, without
contradiction, that the average net profit made by him from the casco in question during
the time it was in his possession was P60 a month. During this period he was paying rent
for it at the rate of P70 a month. Under the terms of the contract now under consideration
he was to have paid P80 a month for it, which we must assume would have reduced the
profit to P50 a month. Article 1106 of the Civil Code establishes the rule that prospective
profits may be recovered as damages, while article 1107 of the same Code provides that the
damages recoverable for the breach of obligations not originating in fraud (dolo) are those
which were or might have been foreseen at the time the contract was entered into. Applying
these principles to the facts in this case, we think that it is unquestionable that defendant
must be deemed to have foreseen at the time he made contract that in the event of his
failure perform it, the plaintiff would be damaged by the loss of the profit he might
reasonably have expected to derive from its use.

When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has absolutely
failed to perform is of necessity to some extent, a matter of speculation, but the injured
party is not to be denied all remedy for that reason alone. He 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 defendant's wrongful act, he is entitled to recover. As stated in
Sedgwick on Damages (Ninth Ed., par. 177):

The general rule is, then, that a plaintiff may recover compensation for any gain which he
can make it appear with reasonable certainty the defendant's wrongful act prevented him
from acquiring, . . . . (See also Algarra vs. Sandejas, 27 Phil. Rep., 284, 289;
Hicks vs. Manila Hotel Co., 28 Phil. Rep., 325.)

The uncontradicted testimony of the plaintiff as regards the profits earned by him in the
past from the use of the casco in question is, in our judgment, sufficient to justify the
conclusion that had defendant complied with his agreement, plaintiff would have earned a
net profit of P50 from the use of the casco in the month during which he was entitled to its
possession. It is contended by defendant, however, that "it must be presumed" that plaintiff
could have secured another casco at the same price had he looked for it. It is a well-
recognized principle of law that damages resulting from avoidable consequences of the
breach of a contract or other legal duty are not recoverable. It is the duty of one injured by
the unlawful act of another to take such measures as prudent men usually take under such
circumstances to reduce the damages as much as possible. (Warren vs. Stoddart, 15 Otto,
224; Baird vs. U.S., 21 L. ed. [17 Wallace], 519, No. 1.)

It is equally well-settled, however, that the burden of proof rests upon the defendant to
show that the plaintiff might have reduced the damages. (Sedwick on Damages, Ninth Ed.,
par. 227.) In this case the defendant has made no effort whatever to show that any other
similar cascos were in fact available to plaintiff, or the price at which he would have been
able to obtain the use of one. In the absence of evidence it will not be presumed that plaintiff
could have secured another casco at the same price had he looked for one.

It is contended by appellant that the trial erred in holding him liable for the money which
plaintiff expended in connection with the litigation between Siy Cong Bieng & Co. and J.
Santos. We are of the opinion that this point is well-taken. The contract of lease or hiring
does not create a right in rem in favor of the lessee, except in the case of a recorded lease of
real estate. It is admitted that the casco was sold to Siy Cong Bieng & Co. and that Santos'
attempt to retain possession of it against the lawful owners by whom he had been placed in
charge of it, was unlawful. The present plaintiff was not a party to that suit. In becoming a
surety upon Santos' bond and in paying the attorney employed to defend the latter he acted
voluntarily and officiously. If he is unable to recover from Santos the money paid by him
upon latter's account — as to which the record is silent — that fact will not justify us in
imposing the burden of repaying this money upon the defendant. The latter is liable for the
damages which he might have foreseen as those reasonably to be anticipated as the natural
and probable consequence of the breach of the contract, but the damages suffered by
plaintiff by reason of his voluntary assumption of the liability incurred by Santos by reason
of his unlawful attempt to withhold possession of the casco from its owners, by whom he
was put in charge of it, are not attributable to defendant and he is not responsible for them.
The proximate cause of the loss incurred for the unlawful acts of Santos was not the breach
of his contract by defendant herein, but plaintiff's own imprudence.

The judgment of the lower court is therefore reversed, and it is adjudged and decreed that
the plaintiff recover from defendant P50 as damages, and his costs in the Court of First
Instance. No costs will be allowed in this court. So ordered.

G.R. No. 99301 March 13, 1997

VICTOR KIERULF, LUCILA H. KIERULF and PORFIRIO LEGASPI, petitioners,

vs.
THE COURT OF APPEALS and PANTRANCO NORTH EXPRESS,
INCORPORATED, respondents.

G.R. No. 99343 March 13, 1997

PANTRANCO NORTH EXPRESS, INCORPORATED, petitioner,

vs.
VICTOR KIERULF, LUCILA H. KIERULF and PORFIRIO LEGASPI, respondents.

PANGANIBAN, J.:

How much moral, exemplary and actual damages are victims of vehicular accidents
entitled to?

In G.R. No. 99301, the victims of the vehicular mishap pray for an increase in the award of
damages, over and above those granted by the appellate court. In this case, the husband of
the victim of the vehicular accident claims compensation/damages for the loss of his right to
marital consortium which, according to him, has been diminished due to the disfigurement
suffered by his wife. In G.R. No. 99343, the transport company which owned the bus that
collided with the victims' pickup truck, asks for exoneration by invoking an alleged
fortuitous event as the cause of the mishap.

Petitioners in both cases assail the Decision, 1 dated March 13, 1991, in CA-GR CV No.
23361 of the Court of Appeals, Sixth Division 2 ordering the following: 3

For reasons indicated and in the light of the law and jurisprudence applicable to the case at
bar, the judgment of the trial court is hereby modified as follows:

Under the first cause of action, the defendant is hereby ordered to pay Lucila H. Kierulf the
following:

(1) For actual damages incurred for hospitalization, medical case (sic) and doctor's fees, the
sum of P241,861.81;

(2) For moral damages the sum of P200,000.00;

(3) For exemplary damages the amount of P100,000.00.

Under the second cause of action, to pay Victor Kierulf, by way of indemnification damage
to the Isuzu Carry All with plate No. UV PGS 798, the amount of P96,825.15.

Under the third cause of action, to pay Porfirio Legaspi the following:

(1) For moral damages in the amount of P25,000.00;

(2) To reimburse the plaintiff the amount of P6,328.19 for actual damages incurred in the
treatment and hospitalization of the driver Porfirio Legaspi.

The defendant is further ordered to pay the amount of P50,000.00 as fair and reasonable
attorney's fees.

And to pay the costs of suit.

Respondent Court of Appeals modified the decision of the Regional Trial Court of Quezon
City, Branch 92, 4rendered on May 24, 1989 in Civil Case No. Q-50732 for damages. The
dispositive portion of the said decision is quoted below: 5

WHEREFORE, in view of the foregoing, judgment is hereby rendered against the

defendant, ordering Pantranco to pay:

Under the First Cause of Action

1. In favor of plaintiff Lucia H. Kierulf actual damages in the amount on ONE HUNDRED
SEVENTY FOUR THOUSAND ONE HUNDRED and 77/100 (P174,100.77) PESOS;
2. To pay said plaintiff moral damages in the amount of ONE HUNDRED THOUSAND
and 00/100 (P100,000.00) PESOS;

3. To pay exemplary damages in the amount of TEN THOUSAND and 00/100 (P10,000.00)
PESOS.

Under the Second Cause of Action

1. To pay plaintiff Victor Kierulf the amount of NINETY SIX THOUSAND EIGHT
HUNDRED TWENTY FIVE and 15/100 (P96,825.15) PESOS by way of indemnification
for the damages to the Isuzu Carry All with plate No. UV PGS 796 registered in his name.

Under the Third Cause of Action

1. To pay the plaintiff spouses by way of reimbursement for actual damages incurred for
the treatment of injuries sustained by their driver Porfirio Legaspi in the amount of SIX
THOUSAND THREE HUNDRED TWENTY EIGHT and 19/100 (P6,328.19) PESOS; and

2. To pay plaintiff Porfirio Legaspi moral damages in the amount of TEN THOUSAND and
00/100 (P10,000.00) PESOS.

Defendant is further ordered to pay the amount of P25,000.00 for and as attorney's fees,
and to pay costs.

All other claims and counterclaims are dismissed.

The Facts

The following may be culled from the undisputed factual findings of the trial court and
Respondent Court of Appeals:

The initial investigation conducted by Pfc. D.O. Cornelio disclosed that at about 7:45 p.m.
of 28 February 1987, the Pantranco bus, bearing plate number AVE-845 (TB PIL 86), was
traveling along Epifanio de los Santos Avenue (EDSA) from Congressional Avenue towards
Clover Leaf, Balintawak. Before it reached the corner of Oliveros Drive, the driver lost
control of the bus, causing it to swerve to the left, and then to fly over the center island
occupying the east-bound lane of EDSA. The front of the bus bumped the front portion of
an Isuzu pickup driven by Legaspi, which was moving along Congressional Avenue heading
towards Roosevelt Avenue. As a result, the points of contact of both vehicles were damaged
and physical injuries were inflicted on Legaspi and his passenger Lucila Kierulf, both of
whom were treated at the Quezon City General Hospital. The bus also hit and injured a
pedestrian who was then crossing EDSA.

Despite the impact, said bus continued to move forward and its front portion rammed
against a Caltex gasoline station, damaging its building and gasoline dispensing equipment.
As a consequence of the incident, Lucila suffered injuries, as stated in the medical
report 6 of the examining physician, Dr. Pedro P. Solis of the Quezon City General Hospital.
The injuries sustained by Lucila required major surgeries like "tracheotomy, open
reduction, mandibular fracture, intermaxillary repair of multiple laceration" and
prolonged treatment by specialists. Per medical report of Dr. Alex L. Castillo, Legaspi also
suffered injuries. 7

The front portion of the pickup truck, owned by Spouses Kierulf, bearing plate number UV
PGS 798, was smashed to pieces. The cost of repair was estimated at P107,583.50.

Pantranco, in its petition, 8 adds that on said day, the above-mentioned bus was driven by
Jose Malanum. While cruising along EDSA, a used engine differential accidentally and
suddenly dropped from a junk truck in front of the bus. Said differential hit the under
chassis of the bus, throwing Malanum off his seat and making him lose control of said bus.
The bus swerved to the left, hit the center island, and bumped the pickup of the spouses.

The Issues

Spouses Kierulf and their driver Legaspi raise the following assignment of errors in this
appeal: 9

The respondent court of appeals erred in awarding only P200,000.00 and P25,000.00 as and
for moral damages for the petitioners Kierulf and Legaspi respectively when it should at
least have been P1,000,000.00 and P100,000.00 respectively.

The respondent court of appeals erred in awarding only P100,000.00 to the petitioners
Kierulf and nothing to petitioner Legaspi as and for exemplary damages when it should
have at least been P500,000.00 and P50,000.00 respectively.

The respondent court of appeals erred in not awarding any amount for the lost income due
to the petitioner Lucila H. Kierulf.

The respondent court of appeals erred in not awarding the amount of P107,583.50 for the
damages sustained by the Isuzu carry-all pick-up truck.

E
The respondent court of appeals erred in not awarding any legal interest on the sums
awarded.

On the other hand, Pantranco raises the following assignment of errors: 10

4.1 The Honorable Court of Appeals erred in holding that the driver of Pantranco was
negligent.

4.2 The Honorable Court of Appeals erred in holding that the proximate cause of the
accident was the negligence of Pantranco and not a fortuitous event; and

4.2 (sic) The Honorable Court of Appeals erred in awarding excessive damages.

In sum, Spouses Kierulf and Legaspi argue that the damages awarded were inadequate
while Pantranco counters that they were astronomical, bloated and not duly proved. 11

The Court's Ruling

First Issue: Negligence and Proximate

Cause Are Factual Issues

Even on appeal, Pantranco insists that its driver was not negligent and that the mishap was
due to a fortuitous event. February 28, 1987, the date of the incident, was a Saturday;
hence, driving at the speed of 40-50 kilometers per hour (kph) was prudent. It contends
that the proximate cause was the accidental dropping of a used engine differential by a
junk truck immediately ahead of the bus. 12

As to what really caused the bus to careen to the opposite lane of EDSA and collide with the
pickup truck driven by Legaspi is a factual issue which this Court cannot pass upon. As a
rule, the jurisdiction of this Court is limited to the review of errors of law allegedly
committed by the appellate court. This Court is not bound to analyze and weigh all over
again the evidence already considered in the proceedings below. 13

Although the Court may review factual issues in some instances, 14 the case at bar does not
fall under any one of them. The fact that there is no conflict between the findings of the
trial court and respondent Court bolsters our position that a review of the facts found by
respondent Court is not necessary. 15 There being no conflict between the findings of the
Court of Appeals and the trial court that gross negligence was the real cause of the
collision, we see no reason to digress from the standard rule.

We quote with concurrence the factual findings of the appellate and trial courts, showing
that the accident was, contrary to the belief of Pantranco, the result of the gross negligence
of its driver. To wit: 16
The vehicular accident was certainly not due to a fortuitous event. We agree with the trial
court's findings that the proximate cause was the negligence of the defendant's driver, such
as: (1) Driving at that part of EDSA at 7:45 P.M. from Congressional Avenue towards
Clover Leaf overpass in the direction of Balintawak at 40-50 kph is certainly not a
manifestation of good driving habit of a careful and prudent man exercising the
extraordinary diligence required by law. Traffic in that place and at that time of the day is
always heavy. (2) Losing control of the wheel in such a place crowded with moving vehicles,
jumping over the island which separates the East bound from the West bound lane of
EDSA indicate that the defendant's bus was traveling at a speed limit beyond what a
prudent and careful driver is expected of, if such driver were exercising due diligence
required by law. (3) Finally, crossing over the island and traversing the opposite lane and
hitting an oncoming vehicle with such force as to smash the front of such vehicle and finally
being forced to stop by bumping against a Caltex service station — all show not only
negligence, but recklessness of the defendant's driver. (4) If defendant's driver was not
driving fast, was not recklessly negligent and had exercised due care and prudence, with
due respect to human life and to others travelling in the same place, the driver could have
stopped the bus the moment it crossed the island, and avoided crossing over to the other
lane and bumping against vehicles travelling in opposite direction. The defendant's driver
did not take any evasive action and utterly failed to adopt any measure to avoid injuries
and damage to others because he "lost control of the bus", which was like a juggernaut, let
loose in a big crowd, smashing everything on its path.

Second Issue: Moral Damages

Complainants aver that the moral damages awarded by Respondent Court are "clearly
and woefully not enough." The established guideline in awarding moral damages takes into
consideration several factors, some of which are the social and financial standing of the
injured parties and 17 their wounded moral feelings and personal pride. 18 The Kierulf
spouses add that the Respondent Court should have considered another factor: the loss of
their conjugal fellowship and the impairment or destruction of their sexual life. 19

The spouses aver that the disfigurement of Lucila's physical appearance cannot but affect
their marital right to "consortium" which would have remained normal were it not for the
accident. Thus, the moral damages awarded in favor of Lucila should be increased to
P1,000,000.00, not only for Lucila but also for her husband Victor who also suffered
"psychologically." A California case, Rodriguez vs. Bethlehem Steel Corporation, 20 is cited
as authority for the claim of damages by reason of loss or marital consortium, i.e. loss of
conjugal fellowship and sexual relations. 21

Pantranco rebuts that Victor's claim of moral damages on alleged loss of consortium is
without legal basis. Article 2219 of the Civil Code provides that only the person suffering
the injury may claim moral damages. Additionally, no evidence was adduced to show that
the consortium had indeed been impaired and the Court cannot presume that marital
relations disappeared with the accident. 22

The Courts notes that the Rodriguez case clearly reversed the original common law
view first enunciated in the case of Deshotel vs. Atchison, 23 that a wife could not recover for
the loss of her husband's services by the act of a third party. Rodriguez ruled that when a
person is injured to the extent that he/she is no longer capable of giving love, affection,
comfort and sexual relations to his or her spouse, that spouse has suffered a direct and real
personal loss. The loss is immediate and consequential rather than remote and
unforeseeable; it is personal to the spouse and separate and distinct from that of the
injured person.

Rodriguez involved a couple in their early 20s, who were married for only 16 months and
full of dreams of building a family of their own, when the husband was struck and almost
paralyzed by a falling 600-pound pipe. The wife testified how her life had deteriorated
because her husband became a lifelong invalid, confined to the home, bedridden and in
constant need of assistance for his bodily functions; and how her social, recreational and
sexual life had been severely restricted. It also deprived her of the chance to bear their
children. As a constant witness to her husband's pain, mental anguish and frustration, she
was always nervous, tense, depressed and had trouble sleeping, eating and concentrating.
Thus, the California court awarded her damages for loss of consortium.

Whether Rodriguez may be cited as authority to support the award of moral damages to
Victor and/or Lucila Kierulf for "loss of consortium," however, cannot be properly
considered in this case.

Victor's claim for deprivation of his right to consortium, although argued before
Respondent Court, is not supported by the evidence on record. His wife might have been
badly disfigured, but he had not testified that, in consequence thereof, his right to marital
consortium was affected. Clearly, Victor (and for that matter, Lucila) had failed to make
out a case for loss of consortium, unlike the Rodriguez spouse. Again, we emphasize that
this claim is factual in origin and must find basis not only in the evidence presented but
also in the findings of the Respondent Court. For lack of factual basis, such claim cannot be
ruled upon by this Court at this time.

Third Issue: No Consideration of Social and

Financial Standing in this Case

The social and financial standing of Lucila cannot be considered in awarding moral
damages. The factual circumstances prior to the accident show that no "rude and rough"
reception, no "menacing attitude," no "supercilious manner," no "abusive language and
highly scornful reference" was given her. The social and financial standing of a claimant of
moral damages may be considered in awarding moral damages only if he or she was
subjected to contemptuous conduct despite the offender's knowledge of his or her social
and financial standing. 24

Be that as it may, it is still proper to award moral damages to Petitioner Lucila for her
physical sufferings, mental anguish, fright, serious anxiety and wounded feelings. She
sustained multiple injuries on the scalp, limbs and ribs. She lost all her teeth. She had to
undergo several corrective operations and treatments. Despite treatment and surgery, her
chin was still numb and thick. She felt that she has not fully recovered from her injuries.
She even had to undergo a second operation on her gums for her dentures to fit. She
suffered sleepless nights and shock as a consequence of the vehicular accident. 25 In this
light and considering further the length of time spent in prosecuting the complaint and this
appeal, we find the sum of P400,000.00 as moral damages for Petitioner Lucila to be fair
and just under the circumstances.

Fourth Issue: Exemplary Damages

Complainants also pray for an increase of exemplary damages to P500,000.00 and P50,000
for Spouses Kierulf and Legaspi, respectively. This prayer is based on the pronouncement
of this Court in Batangas Transportation Company vs. Caguimbal 26 that "it is high time to
impress effectively upon public utility operators the nature and extent of their
responsibility in respect of the safety of their passengers and their duty to exercise greater
care in the selection of drivers and conductors . . . ."

Pantranco opposes this, for under Article 2231 of the Civil Code, "exemplary damages may
be granted if the defendant acted with gross negligence." And allegedly, gross negligence is
sorely lacking in the instant case.

Exemplary damages are designed to permit the courts to mould behavior that has socially
deleterious consequences, and its imposition is required by public policy to suppress the
wanton acts of an offender. 27However, it cannot be recovered as a matter of right. It is
based entirely on the discretion of the Court. 28Jurisprudence sets certain requirements
before exemplary damages may be awarded, to wit: 29

(1) (T)hey may be imposed by way of example or correction only in addition, among others,
to compensatory damages, and cannot be recovered as a matter of right, their
determination depending upon the amount of compensatory damages that may be awarded
to the claimant;

(2) the claimant must first establish his right to moral, temperate, liquidated or
compensatory damages; and
(3) the wrongful act must be accompanied by bad faith, and the award would be allowed
only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.

The claim of Lucila has been favorably considered in view of the finding of gross negligence
by Respondent Court on the part of Pantranco. This is made clear by Respondent Court in
granting Lucila's claim of exemplary damages: 30

(P)ublic utility operators like the defendant, have made a mockery of our laws, rules and
regulations governing operations of motor vehicles and have ignored either deliberately or
through negligent disregard of their duties to exercise extraordinary degree of diligence for
the safety of the travelling public and their passengers. . . . .

To give teeth to this warning, the exemplary damages awarded to Petitioner Lucila is
increased to P200,000.00. The fact of gross negligence duly proven, we believe that Legaspi,
being also a victim of gross negligence, should also receive exemplary damages. Under the
facts proven, the Court awards him P25,000 as exemplary damages.

Fifth Issue: Loss of Earnings as a Component of Damages

Lost income in the amount of P16,500.00 is also claimed by Legaspi stating that his "whole
future has been jeopardized." 31 This, in turn, is not rebutted by Pantranco.

It should be noted that Respondent Court already considered this when it stated that the
award of P25,000.00 included compensation for "mental anguish and emotional strain of
not earning anything with a family to support." Moral damages, though incapable of
pecuniary estimation, are in the category of an award designed to compensate the claimant
for actual injury and are not meant to enrich complainant at the expense of defendant. 32

We find, however, the claim of Legaspi to be duly substantiated. Pantranco failed to rebut
the claim of Porfirio that he had been incapacitated for ten (10) months and that during
said period he did not have any income. Considering that, prior to the accident, he was
employed as a driver and was earning P1,650.00 a month, his claim for P16,500.00 as
compensation for loss of earning capacity for said period is amply supported by the
records 33 and is demandable under Article 2205 of the Civil Code. 34

Complainants contend that Lucila is also entitled to damages for "loss or impairment of
earning capacity in cases of temporary or permanent personal injury" under Article 2205
of the Civil Code. Notably, both the trial court and public respondent denied this prayer
because of her failure to produce her income tax returns for the years 1985 and 1986,
notwithstanding the production of her 1983 and 1984 income tax returns.
Pantranco opposes the above claim for loss of earning capacity on the ground that there is
no proof "that for the two years immediately preceding the accident Lucila was indeed
deriving income from some source which was cut off by the accident. 35

We agree with the findings of Respondent Court that Lucila's claim of loss of earning
capacity has not been duly proven. The alleged loss must be established by factual evidence
for it partakes of actual damages. A party is entitled to adequate compensation for such
pecuniary loss actually suffered and duly proved. Such damages, to be recoverable, must
not only be capable of proof, but must actually be shown with a reasonable degree of
certainty. We have emphasized that these damages cannot be presumed, and courts in
making an award must point out specific facts which can serve as basis for measuring
whatever compensatory or actual damages are borne. 36 Mere proof of Lucila's earnings
consisting of her 1983 and 1984 income tax returns would not suffice to prove earnings for
the years 1985 and 1986. The incident happened on February 28, 1987. If indeed Lucila had
been earning P50,000.00 every month prior to the accident, as she alleged, there are
evidentiary proofs for such earnings other than income tax returns such as, bur not limited
to, payroll receipts, payments to the SSS, or withholding tax paid every month. Sad to say,
these other proofs have not been presented, and we cannot presume that they exist on the
strength of the word of Lucila alone.

Sixth Issue: Reduction of Actual Damages on

the Pickup Based on an Estimate

Complainants contend that the reduction of 10% from the written estimate of the cost of
repairs by the trial court is pure speculation. 37 Pantranco opposes this by pointing out that
judicial notice is made by respondent Court of the propensity of motor repair shops to
exaggerate their estimates. 38

An estimate, as it is categorized, is not an actual expense incurred or to be incurred in the

repair. The reduction made by respondent Court is reasonable considering that in this
instance such estimate was secured by the complainants themselves.

Epilogue

This Court cannot remind the bench and the bar often enough that in order that moral
damages may be awarded, there must be pleading and proof of moral suffering, mental
anguish, fright and the like. While no proof of pecuniary loss is necessary in order that
moral damages may be awarded, the amount of indemnity being left to the discretion of the
court, 39 it is nevertheless essential that the claimant should satisfactorily show the existence
of the factual basis of
40
damages and its causal connection to defendant's acts. This is so because moral damages,
though incapable of pecuniary estimation, are in the category of an award designed to
compensate the claimant for actual injury suffered and not to impose a penalty on the
wrongdoer. 41 In Francisco vs. GSIS, 42 the Court held that there must be clear testimony on
the anguish and other forms of mental suffering. Thus, if the plaintiff fails to take the
witness stand and testify as to his/her social humiliation, wounded feelings and anxiety,
moral damages cannot be awarded. In Cocoland Development Corporation vs. National
Labor Relations Commission, 43 the Court held that "additional facts must be pleaded and
proven to warrant the grant of moral damages under the Civil Code, these being, . . . social
humiliation, wounded feelings, grave anxiety, etc., that resulted therefrom."

Moral damages are awarded to enable the injured party to obtain means, diversions or
amusements that will serve to alleviate the moral suffering he/she has undergone, by reason
of the defendant's culpable action. 44 Its award is aimed at restoration, as much as possible,
of the spiritual status quo ante; thus, it must be proportionate to the suffering
inflicted. 45 Since each case must be governed by its own peculiar circumstances, there is no
hard and fast rule in determining the proper amount. The yardstick should be that the
amount awarded should not be so palpably and scandalously excessive as to indicate that it
was the result of passion, prejudice or corruption on the part of the trial judge. 46 Neither
should it be so little or so paltry that it rubs salt to the injury already inflicted on plaintiffs.

WHEREFORE, premises considered, the petition for review in G.R. No. 99301 is
PARTIALLY GRANTED, while that of Pantranco North Express, Inc., in G.R. No. 99343 is
DISMISSED. The Decision appealed from is AFFIRMED with MODIFICATION. The
award of moral damages to Lucila and Legaspi is hereby INCREASED to P400,000.00 and
P50,000.00 respectively; exemplary damages to Lucila is INCREASED to P200,000.00.
Legaspi is awarded exemplary damages of P50,000.00. The amount of P 16,500.00 as actual
or compensatory damages is also GRANTED to Legaspi. All other awards of Respondent
Court of Appeals are AFFIRMED. Pantranco shall also PAY legal interest of 6% per
annum on all sums awarded from the date of promulgation of the decision of the trial court,
May 24, 1989, until actual payment.

SO ORDERED.

G.R. No. L-49390 January 28, 1980

NICETA MIRANDA-RIBAYA and LUIS CARBONELL RIBAYA, petitioners,

vs.
MARINO BAUTISTA, ENCARNACION BAUTISTA and the COURT OF
APPEALS, respondents.

Quisumbing, Caparas, Tabios, Ilagan Alcantara & Mosqueda for petitioners.

Bienvenido Tan for respondents.

TEEHANKEE, J.:p

The Court modifies the decisions of the trial court and of the Court of Appeals insofar as
they denied petitioner's claim for damages and awards to petitioners moral and exemplary
damages in the amount of 25% of the principal sum adjudged in their favor for the mental
anguish and suffering undergone by them as a result of the defraudation wantonly,
oppressively and malevolently committed by private respondents and by way of example
and correction for the public good.

In the decision of the Court of Appeals, 1 the facts of the case as lifted from the decision of
the Court of First Instance are stated, as follows:

Mrs. Niceta Miranda-Ribaya was engaged sometime in 1968 in the pawnshop business and
in the buying and selling of jewelry.

Sometime prior to April 23, 1968 one of her agents, Mrs. Josefina Roco-Robles, informed
her that a millionaire logger by the name of Marino Bautista was interested to buy big
diamond stones. Acting upon this information, Mrs. Ribaya accompanied by her agent,
Mrs. Robles, decided to drop by the house of Mr. and Mrs. Marino Bautista on April 23,
1968 at La Salle Street, Greenhills Mandaluyong, Rizal. Mrs. Ribaya was impress by the
residence of the Bautista and included within herself that the Bautistas were millionaires as
represented by her agent, Josefina. On that occasion both Mr. and Mrs. Bautista were
present together with Gloria Duque, the secretary of Mr. Bautista, and the couple's
daughter, Teresita Mrs. Ribaya then offered to sell to the Bautistas ten (10) pieces of
jewelry described in paragraph 2 of the complaint for the total amount of P224,000.00.
After some haggling, the Bautista were able to convince Mrs. Ribaya to sell to them the
aforesaid pi of jewelry for the price of P222,000.00. Mr. Bautista acknowledged the receipt
of the jewelry as well as the agreed purchase price the f by signing the receipt marked as
Annex A and A-1 of the complaint Mrs. Ribaya in turn was paid in the form of the two (2)
Equitable Banking Corporation checks Nos. 10767485-A for P112,000.00 (Annex B of the
complaint) and No. 10755100-A for P110,000.00, both checks postdated June 23, 1968. Mrs.
Ribaya then executed a voucher evidencing said payment (Annex C of the complaint). The
next day, plaintiff, accompanied by Miss Narcisa Gosioco, went back to see defendant
Marino Bautista for the purpose of requesting the latter to break up the Equitable Banking
Corporation Check No. 107561,00-A for P110,000.00 into separate check inasmuch as part
of the jewelry sold to Bautista the previous day belonged to Mrs. Gosioco Bautista may
accommodated the t of Mm Ribaya by g said chink with four (4) Bank of Amerca DD-8112
for P14,000.00, DD-8113 for P34,000.00, DD- 8114 for P12,000.90 and DD-9115 for
P50,000.00 P110,000.00, all postdated June 23, 1968. On the four (4) checks Mrs. Ribaya
delivered Account Nos. 8113 for P34.000.00 and 8114 for P12.000.00 to Miss. Gosioco. Mrs.
Ribaya kept for herself checks Nos. 8115 and 8112 for the sum of P64,000.00. The four (4)
were a ed by Mrs. Ribaya in the debit-credit memo form of the Bautista Logging Company
Inc. (Annex F of the complaint).

On the same day, April 24, 1968, Mrs. Ribaya again sold to the defendants four, (4) pieces
of worth P94,000.00. The pieces of jewelry sold are described in paragraph 3 of the
complaint and the delivery of said pieces of jewelry was acknowledged by defendant
Bautista under receipt marked Annex G of the complaint. While defendant Bautista issued
Bank of America Checks Nos. DD-8106 forP12,000.00, DD-8111 for P12,000.00, DD-8110
for P35,000.00, and DD-8107 for P35,000.00, all post dated June 23, 1968, plaintiff Ribaya
in turn was made to sign another voucher dated April 24, 1968 covering the said payment
amounting to P94,000.00 (Annex F of the complaint). This transaction took place at the
office of defendant Bautista at the Bank of Philippine Islands Building in Manila. During
the transaction, Gloria Duque, secretary of Mr. Bautista, and Mr. Bautista himself were
present aside from the plaintiff Mrs. Ribaya, Mrs. Bautista was not present on this
occasion.

As some of the owners of the jewelry sold to the defendants by Mrs. Ribaya on April 23,
1968 and April 24, 1968 wanted to get back their jewelry, Mrs. Ribaya on May 15, 1968
went back to the house of the Bautistas accompanied by Gloria Duque bringing with her
three (3) pieces of jewelry more particularly described in Annex L of the complaint which
she showed to Mr. Bautista for the purpose of giving said three (3) pieces of jewelry in
exchange for some pieces previously sold to defendant Bautista. As Mrs. Bautista and her
daughter, however, were not at home, she was requested by Mr. Bautista to leave said
jewelry so that he can show them to his wife and daughter. Instead of returning the jewelry
with which she offered to exchange for others previously sold, defendant Bautista sent Mrs.
Ribaya two (2) days later another Bank of America check No. DD-8130 for P45,000.00
postdated July 17, 1968 issued by defendant Bautista. She was informed by Josefina Robles
that the said check was in payment of the three (3) pieces of jewelry which plaintiff had left
in the possession of the defendant Marino Bautista. She was further informed that the three
(3) pieces of jewelry had been given away by Bautista as presents to some bank officials.

When the maturity dates of the various postdated checks given to Mrs. Ribaya in payment
of the different pieces of jewelry arrived, Mrs. Ribaya tried several times to contact
defendant Marino Bautista pursuant to their agreement but all her efforts were in vain as
she was informed that the Bautistas were in the mountains atten ding to their logging
concession.

Unable to contact the defendants, Mrs. Ribaya then deposited to her account at the
Continental Bank the checks in her possession. All the checks paid by the defendant
Bautista were dishonored by the bank for the reason that the accounts of the defendant
were closed.
As a former pawnshop operator, she know that Pawnshop owners were required to report
their daily transactions with the Manila Police Department. Suspecting that the Bautistas
might have pawned the pieces of jewelry purchased from her, she went to the pawnshop
section of the Manila Police Department to verify her suspicion and to her chagrin she
discovered that most of the jewelry she had sold to the defendants were pledged to various
pawnshops in Manila.

Armed with this discovery she was finally able to comfort the defendant Marino Bautista
with her findings. Defendant assured Mrs. Ribaya that he would pay her their obligation in
connection with the jewelry transactions. After failing to keep these promises from week to
week, Mrs. Ribaya demanded from the defendant Marino Bautista the surrender of the
pawnshop tickets covering the pledge of the different pieces of jewelry he had obtained
from her. Mrs. Ribaya was able to secure these tickets from the defendant Bautista one by
one. The pawnshop tickets were issued in the names of the driver of the Bautista family,
their secretary Gloria Duque, Mrs. Bautista, and a certain Balagot. With these pawnshop
tickets in her possession, Mrs. Ribaya was able to redeem part of the jewelry she had
delivered to the Bautistas after spending P52,900.00 for the redemption price of said
jewelry plus interest in the amount of P760.79.

There were, however, three (3) pawnshop tickets covering jewelry which did not belong to
Mrs. Ribaya included among the tickets delivered to Mrs. Ribaya and (for) which
defendant Bautista wanted to value at P11,000.00 (Exhibits p. 4 and p. 5). These were
pawnshop tickets Nos. 95716, 95719 and 95851, all issued in the name of his driver Narciso
Amaya and pertaining to the Aguirre Pawnshop. Mrs. Ribaya assessed the jewelry covered
by these three (3) tickets at P25,000.00 and after paying P17,000.00 for the redemption of
said pieces of jewelry she credited the Bautistas with P8,000.00.

xxx xxx xxx

After computing the value of the pieces of jewelry recovered by Mrs. Ribaya and the
disbursements made by her for the redemption of said jewelry and the unrecovered pieces,
Mrs. Ribaya concluded that the balance of the account of the Bautistas for the purchase
price of the various pieces of jewelry amounts to P125,460.79. She added that this amount
does not include the amount of the checks delivered by her to Miss Gosioco. She also
testified that she has agreed to pay her lawyers an amount equivalent to 25% of the
obligation unpaid by the Bautistas.

In the light of the above factual findings, the trial court rendered judgment sentencing
respondents-defendants to pay petitioners- plaintiffs the sum of P125,460.79 with interest
and 25% thereof for attorney's fees and expenses of litigation. On petitioners' claim for
moral and exemplary damages, respondents had pleaded that respondent Marino Bautista
had acted "in utmost good faith" and that damages in any concept could not be assessed
against them, and the trial court upheld them ruling that "the evidence adduced by the
plaintiffs [was] insufficient to warrant its grant.

Herein petitioners interposed an appeal to the Court of Appeals insofar as the trial court
failed to grant their claim for moral and exemplary damages, but respondent appellate
court rejected their appeal and affirmed the appealed decision, finding that (1) as to moral
damages, petitioner (therein appellant) Niceta Ribaya had not mentioned in her testimony
in the trial court that she has suffered "mental anguish, serious anxiety, wounded feelings
and moral shock"; and (2) as to exemplary damages, these damages cannot be recovered as
a matter of right and it was not prepared to disturb the lower court's exercise of discretion
in this regard.

Hence this petition for review, which we find to be meritorious.

Parenthetically, the petition has been submitted without a comment or answer from
respondents-spouses despite the fact that on December 8, 1978, they were given through
counsel ten (10) days from notice thereof to comment. On March 27, 1979, Zosimo T. Fama,
a brother of Atty. Bienvenido T. Fama who was the counsel of record for herein
respondents-spouses, explained in a letter that his brother, the counsel, could not file the
required comment since he had immigrated to the United states in 1972 and that he could
not despite diligent efforts ascertain the whereabouts of his brother's clients and that their
house had long been foreclosed by their creditors and the family had been long ejected
therefrom. Per resolution of May 91 1979, this Court, at petitioner's instance, ordered that
copy of its resolution of December 8, 1978 requiring comment be sent directly to
respondents at their last known address of record at 599 La Salle St., Greenhills
Subdivision, Mandaluyong Metro Manila, but the papers were returned unserved.
Petitioners were further required to ascertain the correct address of respondents to no
avail. It is noted further that in the trial court, the case was submitted for decision on the
basis of petitioners-plaintiffs' evidence, since respondents-defendants failed to appear on
the date set for the continuation of the hearing and reception of their evidence. It thus
clearly appears that respondents have either absconded or have entirely given up their
fdefence. Their failure to answer or to comment or to be reached by court processes are
declared a waiver on their part and cannot deter the Court from rendering judgment on
the issue properly raised by petitioners, since they had been duly summoned at the
commencement of the case and placed under the jurisdiction of our courts in this case.

Respondent court quoted in its appealed decision petitioner Niceta's testimony, as follows:

Q Now, because of Mr. Bautista's default and your looking around in the pawnshops for
those pieces of jewelries, what was the effect on you and your business?

A I had to close my pawnshop and I had to sell some of my personal jewelries and to
borrow money.
Q Why do you have to do that?

A Because I have also to pay the persons from whom I got the jewelries Mr. Bautista got
from me.

Q And you have all paid them now?

A Yes, air.

Q And how about you, yourself, what happened?

A We are in debt now, up to our head.

Q And what is the effect of your indebtedness to yourself

A Extreme. For three months I could not sleep.

(t.s.n., pp. 26-28, on Nov. 25, 1969).

and then erroneously "noted that it was her indebtedness that caused her to have sleepless
nights for three months. She did not mention in her testimony that she suffered mental
anguish, serious anxiety or wounded feelings."

Respondent court, from its wrong premise, then as erroneously concluded that "(I)n order
that moral damages may be awarded, there must be pleading and proof of moral suffering,
mental anguish, fright and the like (San Miguel Brewery, Inc. vs. Magno, 21 SCRA 292).
While in the complaint of plaintiffs-appellants there is an allegation of mental anguish,
serious anxiety, wounded feelings and moral shock, there is no proof of the alleged mental
anguish, serious anxiety, wounded feelings and moral shock. There must be clear testimony
on the mental anguish, serious anxiety, wounded feelings and similar injuries. Plaintiff
must testify to his said injury (Francisco vs. Government Service Insurance System, 7
SCRA 577). It would seem that 'physical suffering, mental anguish, fright, serious anxiety,
wounded feelings, moral shock, and similar injury must be testified to by the plaintiff, and
not merely inferred from certain proven facts, like having sleepless nights. Having
sleepness nights is not necessarily due to mental anguish, serious anxiety and the like.

In denying petitioner's claim for damages because of petitioner Niceta's failure to "mention
in her testimony that she suffered mental anguish, serious anxiety or wounded feelings"
respondent court misread the case of Francisco vs. Government Service Insurance System
cited by it. There, this Court had sustained the trial court's appealed decision denying the
therein prevailing plaintiff's claim for moral and exemplary damages "not only on account
of the plaintiff's failure to take the witness stand and testify to her social humiliation,
wounded feelings, anxiety, etc., but primarily because a breach of contract like that of
defendant, not being malicious or fraudulent, does not warrant the award of moral
damages. 2
Here, the facts and circumstances are totally different. In that case, therein
plaintiff failed to take the witness stand and defendant's breach of contract was held to be
not malicious and fraudulent. In the present case, petitioner Niceta took the witness stand
and established by uncontradicted testimony that due to respondents' deceitful and
malevolent acts of defraudation, she had suffered "extreme" anguish (without using the
word anguish) and "could not sleep for three months," since she was forced to close her
pawnshop, sell some of her personal jewelries and borrow money in order to pay off the
owners of the j ewelries wrongfully gotten by respondents from her. The evidence of record
shows the magnitude of respondents' wanton, fraudulent and malevolent acts of
defraudation.

Thus, we find from the appealed decision that petitioner Niceta was misled into believing
that respondent Marino Bautista was a millionaire when she saw their residence and was
told that he was in the logging business and that he could easily pay for the jewelry because
he had log shipments every two months; that all the checks issued by him is in payment of
the jewelries bounced with a note "Account Closed" or were dishonored; that some of the
pieces of jewelry were pawned on the very same day that he got them from petitioners; that
after discovering that the jewelries had been pawned with different pawnshops, petitioner
Niceta "pleaded" with respondents to give her the pawnshop tickets so that she could
redeem them and after weeks of anguished waiting and pleading, Bautista gave her the
pawnshop tickets "one by one", which were issued in the names of the driver of the
Bautista family, their secretary Gloria Duque, Mrs. Bautista and a certain Balagot; that
petitioners, besides not having been paid, had to raise P82,800.00 plus interest in redeeming
the jewelries covered by the pawnshop tickets, and were now in debt up to their heads; as a
result of which petitioner Niceta suffered "extremely" and she "could not sleep for three
months."

All this was preceded by a long period of serious anxiety: before respondent Bautista
returned to her the pawnshop tickets one by one, petitioner Niceta had tried to see
respondents in vain; they were always out and did not answer or return her calls; she was
given the run-around at the maturity dates of the various postdated checks give a her in
payment of the different pieces of jewelry, she tried several times to contact them pursuant
to their agreement, but an her efforts ended in frustration, as she was informed that
respondents were in the mountains attending to their logging concession.

We do not share respondent court's narrow view that petitioner Niceta's failure to use in
her testimony the precise legal terms or "sacramental phrases" of "mental anguish, fright,
serious anxiety, wounded feelings or moral shock" and the like justifies the denial of the
claim for damages. It is sufficient that these exact terms have been pleaded in the
complaint 3 and evidence has been adduced, as cited above, amply supporting the
averments of the complaint. Indeed, petitioner Niceta vividly portrayed in simple terms the
moral shock and suffering she underwent as a result of respondents' wanton abuse of her
good faith and confidence.

Thus, petitioners' testimonial evidence to the effect that petitioner Niceta suffered
"extremely" and that for three months she could not sleep was a clear demonstration of her
physical suffering, mental anguish and serious anxiety and similar injury, resulting from
respondents' malevolent acts that show her to be clearly entitled to moral damages. 4

Petitioners having established the more damages, are entitled in addition thereto, to
exemplary damages.The wantonness and malevolence through which respondents
defrauded petitioners, deceitfully incurring and then evading settlement of their just
liability certainly justifies the award of exemplary damages by way of example and
correction for the public good and also to serve as a deterrent to the commission of similar
misdeeds by others, 5even if the transaction were viewed as a breach of civil contract.

In Pan Pacific Company (Phil.) vs. Phil. Advertising Corporation, 6 this Court awarded
moral and exemplary damages, in addition to other kinds of damages, to the plaintiff upon
ample demonstration that the defendant therein, in utter disregard of the contractual
rights of therein plaintiff, had refused deliberately and wantonly to pay the latter what was
justly due under their contract for installation of bowling alleys and for taking advantage
of the plaintiff's good faith, "notwithstanding that the defendant had promised to pay the
balance of the price of the bowling alleys. Defendant, taking advantage of the plaintiff's
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." Here, of course, there
was more than wanton refusal to pay a plainly valid and just contractual debt, but a
malicious defraudation and gross abuse of petitioners' good faith, whereby petitioners were
wantonly "paid" with bouncing postdated checks and besides not being paid what was due
them, had to undergo trauma and travail to redeem with their own and borrowed funds
from the pawnshops some of the jewelries in order to return them to their owners.

ACCORDINGLY, the decision of respondent court insofar as it denies petitioners' claim for
damages is hereby set aside. In addition to the amounts awarded in the affirmed judgment
of the lower court, petitioners are further awarded moral and exemplary damages
equivalent to twenty-five per cent (25%) of the principal sum of P125,460.79 adjudged in
their favor by the lower court. With costs.

SO ORDERED.

G.R. No. L-18287 March 30, 1963

TRINIDAD J. FRANCISCO, plaintiff-appellee,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellant.

-----------------------------

G.R. No. L-18155 March 30, 1963

TRINIDAD J. FRANCISCO, plaintiff-appellant,

vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellee.

Vicente J. Francisco for plaintiff-appellee.

The Government Corporate Counsel for defendant-appellant.

REYES, J.B.L., J.:

Appeal by the Government Service Insurance System from the decision of the Court of
First Instance of Rizal (Hon. Angel H. Mojica, presiding), in its Civil Case No. 2088-P,
entitled "Trinidad J. Francisco, plaintiff, vs. Government Service Insurance System,
defendant", the dispositive part of which reads as follows:

WHEREFORE, judgment is hereby rendered: (a) Declaring null and void the consolidation
in the name of the defendant, Government Service Insurance System, of the title of the
VIC-MARI Compound; said title shall be restored to the plaintiff; and all payments made
by the plaintiff, after her offer had been accepted by the defendant, must be credited as
amortizations on her loan; and (b) Ordering the defendant to abide by the terms of the
contract created by plaintiff's offer and it's unconditional acceptance, with costs against the
defendant.

The plaintiff, Trinidad J. Francisco, likewise appealed separately (L-18155), because the
trial court did not award the P535,000.00 damages and attorney's fees she claimed. Both
appeals are, therefore, jointly treated in this decision.

The following facts are admitted by the parties: On 10 October 1956, the plaintiff, Trinidad
J. Francisco, in consideration of a loan in the amount of P400,000.00, out of which the sum
of P336,100.00 was released to her, mortgaged in favor of the defendant, Government
Service Insurance System (hereinafter referred to as the System) a parcel of land
containing an area of 18,232 square meters, with twenty-one (21) bungalows, known as Vic-
Mari Compound, located at Baesa, Quezon City, payable within ten (10) years in monthly
installments of P3,902.41, and with interest of 7% per annum compounded monthly.

On 6 January 1959, the System extrajudicially foreclosed the mortgage on the ground that
up to that date the plaintiff-mortgagor was in arrears on her monthly installments in the
amount of P52,000.00. Payments made by the plaintiff at the time of foreclosure amounted
to P130,000.00. The System itself was the buyer of the property in the foreclosure sale.

On 20 February 1959, the plaintiff's father, Atty. Vicente J. Francisco, sent a letter to the
general manager of the defendant corporation, Mr. Rodolfo P. Andal, the material portion
of which recited as follows:

Yesterday, I was finally able to collect what the Government owed me and I now propose to
pay said amount of P30,000 to the GSIS if it would agree that after such payment the
foreclosure of my daughter's mortgage would be set aside. I am aware that the amount of
P30,000 which I offer to pay will not cover the total arrearage of P52,000 but as regards the
balance, I propose this arrangement: for the GSIS to take over the administration of the
mortgaged property and to collect the monthly installments, amounting to about P5,000,
due on the unpaid purchase price of more than 31 lots and houses therein and the monthly
installments collected shall be applied to the payment of Miss Francisco's arrearage until
the same is fully covered. It is requested, however, that from the amount of the monthly
installments collected, the sum of P350.00 be deducted for necessary expenses, such as to
pay the security guard, the street-caretaker, the Meralco Bill for the street lights and
sundry items.

It will be noted that the collectible income each month from the mortgaged property, which
as I said consists of installments amounting to about P5,000, is more than enough to cover
the monthly amortization on Miss Francisco's loan. Indeed, had she not encountered
difficulties, due to unforeseen circumstances, in collecting the said installments, she could
have paid the amortizations as they fell due and there would have been really no need for
the GSIS to resort to foreclosure.

The proposed administration by the GSIS of the mortgaged property will continue even
after Miss Francisco's account shall have been kept up to date. However, once the arrears
shall have been paid, whatever amount of the monthly installments collected in excess of
the amortization due on the loan will be turned over to Miss Francisco.

I make the foregoing proposal to show Francisco's sincere desire to work out any fair
arrangement for the settlement of her obligation. I trust that the GSIS, under the
broadminded policies of your administration, would give it serious consideration.

Sincerely,.

s/ Vicente J. Francisco
t/ VICENTE J. FRANCISCO

On the same date, 20 February 1959, Atty. Francisco received the following telegram:.
VICENTE FRANCISCO
SAMANILLO BLDG. ESCOLTA.

GSIS BOARD APPROVED YOUR REQUEST RE REDEMPTION OF FORECLOSED

PROPERTY OF YOUR DAUGHTER

ANDAL"

On 28 February 1959, Atty. Francisco remitted to the System, through Andal, a check for
P30,000.00, with an accompanying letter, which reads:

I am sending you herewith BPI Check No. B-299484 for Thirty Thousand Pesos
(P30,000.00) in accordance with my letter of February 20th and your reply thereto of the
same date, which reads:

GSIS BOARD APPROVED YOUR REQUEST RE REDEMPTION OF FORECLOSED

PROPERTY OF YOUR DAUGHTER

xxx xxx xxx

The defendant received the amount of P30,000.00, and issued therefor its official receipt
No. 1209874, dated 4 March 1959. It did not, however, take over the administration of the
compound. In the meantime, the plaintiff received the monthly payments of some of the
occupants thereat; then on 4 March 1960, she remitted, through her father, the amount of
P44,121.29, representing the total monthly installments that she received from the
occupants for the period from March to December 1959 and January to February 1960,
minus expenses and real estate taxes. The defendant also received this amount, and issued
the corresponding official receipt.

Remittances, all accompanied by letters, corresponding to the months of March, April,

May, and June, 1960 and totalling P24,604.81 were also sent by the plaintiff to the
defendant from time to time, all of which were received and duly receipted for.

Then the System sent three (3) letters, one dated 29 January 1960, which was signed by its
assistant general manager, and the other two letters, dated 19 and 26 February 1960,
respectively, which were signed by Andal, asking the plaintiff for a proposal for the
payment of her indebtedness, since according to the System the one-year period for
redemption had expired.

In reply, Atty. Francisco sent a letter, dated 11 March 1960, protesting against the System's
request for proposal of payment and inviting its attention to the concluded contract
generated by his offer of 20 February 1959, and its acceptance by telegram of the same
date, the compliance of the terms of the offer already commenced by the plaintiff, and the
misapplication by the System of the remittances she had made, and requesting the proper
corrections.

By letter, dated 31 May 1960, the defendant countered the preceding protest that, by all
means, the plaintiff should pay attorney's fees of P35,644.14, publication expenses, filing fee
of P301.00, and surcharge of P23.64 for the foreclosure work done; that the telegram
should be disregarded in view of its failure to express the contents of the board resolution
due to the error of its minor employees in couching the correct wording of the telegram. A
copy of the excerpts of the resolution of the Board of Directors (No. 380, February 20, 1959)
was attached to the letter, showing the approval of Francisco's offer —

... subject to the condition that Mr. Vicente J. Francisco shall pay all expenses incurred by
the GSIS in the foreclosure of the mortgage.

Inasmuch as, according to the defendant, the remittances previously made by Atty.
Francisco were allegedly not sufficient to pay off her daughter's arrears, including
attorney's fees incurred by the defendant in foreclosing the mortgage, and the one-year
period for redemption has expired, said defendant, on 5 July 1960, consolidated the title to
the compound in its name, and gave notice thereof to the plaintiff on 26 July 1960 and to
each occupant of the compound.

Hence, the plaintiff instituted the present suit, for specific performance and damages. The
defendant answered, pleading that the binding acceptance of Francisco's offer was the
resolution of the Board, and that Andal's telegram, being erroneous, should be disregarded.
After trial, the court below found that the offer of Atty. Francisco, dated 20 February 1959,
made on behalf of his daughter, had been unqualifiedly accepted, and was binding, and
rendered judgment as noted at the start of this opinion.

The defendant-appellant corporation assigns six (6) errors allegedly committed by the
lower court, all of which, however, are resolvable on the single issue as to whether or not
the telegram generated a contract that is valid and binding upon the parties.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët

We find no reason for altering the conclusion reached by the court below that the offer of
compromise made by plaintiff in the letter, Exhibit "A", had been validly accepted, and
was binding on the defendant. The terms of the offer were clear, and over the signature of
defendant's general manager, Rodolfo Andal, plaintiff was informed telegraphically that
her proposal had been accepted. There was nothing in the telegram that hinted at any
anomaly, or gave ground to suspect its veracity, and the plaintiff, therefore, can not be
blamed for relying upon it. There is no denying that the telegram was within Andal's
apparent authority, but the defense is that he did not sign it, but that it was sent by the
Board Secretary in his name and without his knowledge. Assuming this to be true, how was
appellee to know it? Corporate transactions would speedily come to a standstill were every
person dealing with a corporation held duty-bound to disbelieve every act of its responsible
officers, no matter how regular they should appear on their face. This Court has observed
in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that —

In passing upon the liability of a corporation in cases of this kind it is always well to keep in
mind the situation as it presents itself to the third party with whom the contract is made.
Naturally he can have little or no information as to what occurs in corporate meetings; and
he must necessarily rely upon the external manifestations of corporate consent. The
integrity of commercial transactions can only be maintained by holding the corporation
strictly to the liability fixed upon it by its agents in accordance with law; and we would be
sorry to announce a doctrine which would permit the property of a man in the city of Paris
to be whisked out of his hands and carried into a remote quarter of the earth without
recourse against the corporation whose name and authority had been used in the manner
disclosed in this case. As already observed, it is familiar doctrine that if a corporation
knowingly permits one of its officers, or any other agent, to do acts within the scope of an
apparent authority, and thus holds him out to the public as possessing power to do those
acts, the corporation will, as against any one who has in good faith dealt with the
corporation through such agent, be estopped from denying his authority; and where it is
said "if the corporation permits" this means the same as "if the thing is permitted by the
directing power of the corporation."

It has also been decided that —

A very large part of the business of the country is carried on by corporations. It certainly is
not the practice of persons dealing with officers or agents who assume to act for such
entities to insist on being shown the resolution of the board of directors authorizing the
particular officer or agent to transact the particular business which he assumes to conduct.
A person who knows that the officer or agent of the corporation habitually transacts
certain kinds of business for such corporation under circumstances which necessarily show
knowledge on the part of those charged with the conduct of the corporate business
assumes, as he has the right to assume, that such agent or officer is acting within the scope
of his authority. (Curtis Land & Loan Co. vs. Interior Land Co., 137 Wis. 341, 118 N.W.
853, 129 Am. St. Rep. 1068; as cited in 2 Fletcher's Encyclopedia, Priv. Corp. 263, perm.
Ed.)

Indeed, it is well-settled that —

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 such
apparent authority is real, as to innocent third persons dealing in good faith with such
officers or agents. (2 Fletcher's Encyclopedia, Priv. Corp. 255, Perm. Ed.)

Hence, even if it were the board secretary who sent the telegram, the corporation could not
evade the binding effect produced by the telegram..

The defendant-appellant does not disown the telegram, and even asserts that it came from
its offices, as may be gleaned from the letter, dated 31 May 1960, to Atty. Francisco, and
signed "R. P. Andal, general manager by Leovigildo Monasterial, legal counsel", wherein
these phrases occur: "the telegram sent ... by this office" and "the telegram we sent your"
(emphasis supplied), but it alleges mistake in couching the correct wording. This alleged
mistake cannot be taken seriously, because while the telegram is dated 20 February 1959,
the defendant informed Atty. Francisco of the alleged mistake only on 31 May 1960, and all
the while it accepted the various other remittances, starting on 28 February 1959, sent by
the plaintiff to it in compliance with her performance of her part of the new contract.

The inequity of permitting the System to deny its acceptance become more patent when
account is taken of the fact that in remitting the payment of P30,000 advanced by her
father, plaintiff's letter to Mr. Andal quoted verbatim the telegram of acceptance. This was
in itself notice to the corporation of the terms of the allegedly unauthorized telegram, for as
Ballentine says:

Knowledge of facts acquired or possessed by an officer or agent of a corporation in the

course of his employment, and in relation to matters within the scope of his authority, is
notice to the corporation, whether he communicates such knowledge or not. (Ballentine,
Law on Corporations, section 112.)

since a corporation cannot see, or know, anything except through its officers.

Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept
silent about the telegram not being in accordance with the true facts, as it now alleges. This
silence, taken together with the unconditional acceptance of three other subsequent
remittances from plaintiff, constitutes in itself a binding ratification of the original
agreement (Civil Code, Art. 1393).

ART. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a
tacit ratification if, with knowledge of the reason which renders the contract voidable and
such reason having ceased, the person who has a right to invoke it should execute an act
which necessarily implies an intention to waive his right.

Nowhere else do the circumstances call more insistently for the application of the equitable
maxim that between two innocent parties, the one who made it possible for the wrong to be
done should be the one to bear the resulting loss..
The defendant's assertion that the telegram came from it but that it was incorrectly worded
renders unnecessary to resolve the other point on controversy as to whether the said
telegram constitutes an actionable document..

Since the terms offered by the plaintiff in the letter of 20 February 1959 (Exhibit "A")
provided for the setting aside of the foreclosure effected by the defendant System, the
acceptance of the offer left the account of plaintiff in the same condition as if no foreclosure
had taken place. It follows, as the lower court has correctly held, that the right of the
System to collect attorneys' fees equivalent to 10% of the due (P35,694.14) and the expenses
and charges of P3,300.00 may no longer be enforced, since by the express terms of the
mortgage contract, these sums were collectible only "in the event of foreclosure."

The court a quo also called attention to the unconscionability of defendant's charging the
attorney's fees, totalling over P35,000.00; and this point appears well-taken, considering
that the foreclosure was merely extra-judicial, and the attorneys' work was limited to
requiring the sheriff to effectuate the foreclosure. However, in view of the parties'
agreement to set the same aside, with the consequential elimination of such incidental
charges, the matter of unreasonableness of the counsel fees need not be labored further.

Turning now to the plaintiff's separate appeal (Case G.R. No. L-18155): Her prayer for an
award of actual or compensatory damages for P83,333.33 is predicated on her alleged
unrealized profits due to her inability to sell the compound for the price of P750,000.00
offered by one Vicente Alunan, which sale was allegedly blocked because the System
consolidated the title to the property in its name. Plaintiff reckons the amount of
P83,333.33 by placing the actual value of the property at P666,666.67, a figure arrived at by
assuming that the System's loan of P400,000.00 constitutes 60% of the actual value of the
security. The court a quo correctly refused to award such actual or compensatory damages
because it could not determine with reasonable certainty the difference between the offered
price and the actual value of the property, for lack of competent evidence. Without proof
we cannot assume, or take judicial notice, as suggested by the plaintiff, that the practice of
lending institutions in the country is to give out as loan 60% of the actual value of the
collateral. Nor should we lose sight of the fact that the price offered by Alunan was payable
in installments covering five years, so that it may not actually represent true market values.

Nor was there error in the appealed decision in denying moral damages, not only on
account of the plaintiff's failure to take the witness stand and testify to her social
humiliation, wounded feelings, anxiety, etc., as the decision holds, but primarily because a
breach of contract like that of defendant, not being malicious or fraudulent, does not
warrant the award of moral damages under Article 2220 of the Civil Code (Ventanilla vs.
Centeno, L-14333, 28 Jan. 1961; Fores vs. Miranda, L-12163, 4 March 1959).
There is no basis for awarding exemplary damages either, because this species of damages
is only allowed in addition to moral, temperate, liquidated, or compensatory damages, none
of which have been allowed in this case, for reasons herein before discussed (Art. 2234,
Civil Code; Velayo vs. Shell Co. of P.I., L-7817, Res. July 30, 1957; Singson, et al. vs.
Aragon and Lorza, L-5164, Jan. 27, 1953, 49 O.G. No. 2, 515).

As to attorneys' fees, we agree with the trial court's stand that in view of the absence of
gross and evident bad faith in defendant's refusal to satisfy the plaintiff's claim, and there
being none of the other grounds enumerated in Article 2208 of the Civil Code, such absence
precludes a recovery. The award of attorneys' fees is essentially discretionary in the trial
court, and no abuse of discretion has been shown.

FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with costs
against the defendant Government Service Insurance System, in G.R. No.L-18287.

G.R. No. 130030 June 25, 1999

EXPERTRAVEL & TOURS, INC., petitioner,

vs.
THE HON. COURT OF APPEALS and RICARDO LO, respondents.

VITUG, J.:

Petitioner, Expertravel and Tours, Inc., seeks in the instant petition for review
on certiorari a modification of the decision, dated 20 March 1997, of the Court of Appeals
affirming in toto the 07th November 1994 judgment of the Regional Trial Court (Branch 5)
of Manila, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, judgment is rendered declaring the instant suit
DISMISSED, and hereby orders the plaintiff to pay defendant Ricardo Lo moral damages
in the amount of P30,000.00; attorney's fees in the amount of P10,000.00, and to pay the
costs of the suit.

No pronouncement as to other damages for lack of evidence to warrant the same. 1

The factual and case settings of the controversy are culled from the pleadings on record
and the assailed decision of the appellate court and that of the court a quo.

On 07 October 1987, Expertravel & Tours, Inc., ("Expertravel"), a domestic corporation

engaged in the travel agency business, issued to private respondent Ricardo Lo four round-
trip plane tickets for Hongkong, together with hotel accommodations and transfers, for a
total cost of P39,677.20. Alleging that Lo had failed to pay the amount due, Expertravel
caused several demands to be made. Since the demands were ignored by Lo, Expertravel
filed a court complaint for recovery of the amount claimed plus damages.

Respondent Lo explained, in his answer, that his account with Expertravel had already
been fully paid. The outstanding account was remitted to Expertravel through its then
Chairperson, Ms. Ma. Rocio de Vega, who was theretofore authorized to deal with the
clients of Expertravel. The payment was evidenced by a Monte de Piedad Check No.
291559, dated 06 October 1987, for P42,175.20 for which Ms. de Vega, in turn, issued City
Trust Check No. 417920 in favor of Expertravel for the amount of P50,000.00, with the
notation "placement advance for Ricardo Lo, etc." Per its own invoice, Expertravel
received the sum on 10 October 1987.

The trial court, affirmed by the appellate court, held that the payment made by Lo was
valid and bidding on petitioner Expertravel. Even on the assumption that Ms. de Vera had
not been specifically authorized by Expertravel, both courts said, the fact that the amount
"delivered to the latter remain(ed) in its possession up to the present, mean(t) that the
amount redounded to the benefit of petitioner Expertravel, in view of the second paragraph
of Article 1241 of the Civil Code to the effect that payment made to a third person shall also
be valid in so far as it has rebounded to the benefit of the creditor."

In this recourse, petitioner confines itself to the following related legal issues; viz.:

I. Can moral damages be recovered in a clearly unfounded suit?

II. Can moral damages be awarded for negligence or quasi-delict that did not result to
physical injury to the offended party?2

There is merit in the petition.

Moral damages are not punitive in nature but are designed to

3
compensate and alleviate in some way the physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar injury unjustly caused to a person. Although incapable of pecuniary
computation, moral damages, nevertheless, must somehow be proportional to and in
approximation of the suffering inflicted. 4 Such damages, to be recoverable, must be the
proximate result of a wrongful act or omission the factual basis for which is satisfactorily
established by the aggrieved party.5 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 a 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. 6 Under the provisions of
this law, in culpa contractual or breach of contract, moral damages may be recovered when
the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith)
or in wanton disregard of his contractual obligation and, exceptionally, when the act of
breach of contract itself is constitutive of tort resulting in physical injuries. 7 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. In culpa
aquiliana, or quasi-delict, (a) when an act or omission causes physical injuries, or (b) where
the defendant is guilty of intentional tort,8 moral damages may aptly be recovered. This
rule also applies, as aforestated, to contracts when breached by tort. In culpa criminal,
moral damages could be lawfully due when the accused is found guilty of physical injuries,
lascivious acts, adultery or concubinage, illegal or arbitrary detention, illegal arrest, illegal
search, or defamation. Malicious prosecution can also give rise to a claim for moral
damages. The term "analogous cases," referred to in Article 2219, following the ejusdem
generis rule, must be held similar to those expressly enumerated by the law. 9

Although the institution of a clearly unfounded civil suit can at times be a legal justification
for an award of attorney's fees, 10 such filing, however, has almost invariably been held not
to be a ground for an award of moral
11
damages. The rationale for the rule is that the law could not have meant to impose a
penalty on the right to litigate. The anguish suffered by a person for having been made a
defendant in a civil suit would be no different from the usual worry and anxiety suffered by
anyone who is haled to court, a situation that cannot by itself be a cogent reason for the
award of moral damages. 12 If the rule were otherwise, then moral damages must every
time be awarded in favor of the prevailing defendant against an unsuccessful plaintiff. 13

The Court confirms, once again, the foregoing rules.

WHEREFORE, the petition is GRANTED and the award of moral damages to respondent
Ricardo Lo under the assailed decision is DELETED. In its other aspects, the appealed
decision shall remain undisturbed. No costs.1âwphi1.nêt

SO ORDERED.
[G.R. No. 127823. January 29, 1998]

J MARKETING CORPORATION represented by HECTOR L.

CALUDAC, petitioner vs. FELICIDAD SIA, JR. and COURT OF APPEALS, respondents.

DECISION

FRANCISCO, J.:

This is a case of damages and attorneys fees. The undisputed facts are as follows:

(Petitioner) J. Marketing Corporation, a company engaged in the business of appliances

and motorcycles, received on April 24, 1983 from Kawasaki Motors (Phils.) a brand new
Kawasaki motorcycle, color Blue, Mode HD-11 (1985) with Engine No. G7E-04848 and
Chassis No. KG-805535. Upon receipt, petitioners representative placed motorcycle in the
bodega of YKS Bldg., Rizal Avenue, Tacloban City. However, on April 20, 1987, (Petitioner)
found out that the motorcycle unit was missing in the bodega and the loss immediately
reported to the police authorities specifically to the Headquarters Constabulary Highway
Patrol District No. 8, Tacloban City. Subsequently, (petitioner) tried to trace the lost motor
cycle to one Felicidad Sia, Jr., herein (private respondent), who bought a motorcycle from
one Renato Pelande, Jr. on May 25, 1987. Allegedly, petitioners representative went to the
house of the private respondent and examined the chassis and motor numbers of the
motorcycle in his (private respondent) possession, and found out that the chassis and motor
numbers of the motorcycle in private respondents possession have been tampered to jibe
with the chassis and motor numbers of the motorcycle unit previously purchased by Renato
Pelande, Jr. from petitioner. When petitioners representative confronted private
respondent at the Constabulary Highway Patrol Group office anent the questionable
motorcycle, private respondent refused to return the said motorcycle to petitioner and
instead told petitioners representative to file a case in court. Hence, on September 24, 1987,
petitioner filed a complaint for replevin with damages against private respondent Felicidad
C. Sia, Jr. before the Regional Trial Court of Tacloban City, Branch 8.

On April 14, 1988, private respondent Felicidad C. Sia Jr. filed a third party complaint
against Renato Pelante Jr. from whom he purchased his motorcycle. Said third party
defendant was subsequently declared as in default.[1]

After trial, the lower court rendered a decision dismissing petitioners complaint but
awarded damages and attorneys fees to private respondent. [2] On appeal, the CA affirmed
the decision of the court a quo.[3] Hence this petition where the sole issue raised is whether
the award of attorneys fees and damages (moral and exemplary) is proper.

A persons right to litigate should not be penalized by holding him liable for damages. This
is especially true when the filing of the case is to enforce what he believes to be his rightful
claim against another although found to be erroneous. In this case, petitioner precisely
instituted the replevin case against private respondent based on the latters own challenge to
the former that if they really had a right on the motorcycle, then they should institute the
necessary case in court. When petitioner did sue private respondent and filed a third party
complaint against the person from whom private respondent claims to have brought the
motorcycle, it cannot be said that the institution of the replevin suit was tainted with gross
and evident bad faith or was done maliciously to harass, embarrass, annoy or ridicule
private respondent.

Moreover, the adverse result of an action dismissal of petitioners complaint does not per
se make an act unlawful and subject the actor to the payment of moral damages. It is not a
sound public policy to place a premium on the right to litigate. [4] No damages can be
charged on those who may exercise such precious right in good faith, even if done
erroneously.[5]

The award of exemplary damages has likewise no factual basis. It is a requisite that the act
must be accompanied by bad faith or done in wanton, fraudulent or malevolent manner [6] -
circumstances which are absent in this case. In addition, exemplary damages cannot be
awarded as the requisite element of compensatory damages was not present.[7]

With respect to the attorneys fees, an adverse decision does not ipso facto justify the award
thereof to the winning party.[8] All indications point to the fact that petitioner honestly
thought that they had a good cause of action, so notwithstanding the dismissal of their case,
no attorneys fees can be granted to private respondent. [9] Considering that the latter claims
to be the owner of the motorcycle, petitioner was compelled to sue him. When the former
necessarily became a party defendant no attorneys fees and litigation expenses can
automatically be recovered even if he should win, a it is not the fact of winning alone that
entitles recovery of such items but rather the attendance of special circumstances [10] - the
enumerated exceptions in Article 2208 of the New Civil Code. [11] There being no bad faith
reflected in petitioners persistence in pursuing its case, other than an erroneous conviction
of the righteousness of its cause, attorneys fees cannot be recovered as cost.[12]

WHEREFORE, premises considered, the decision of the Court of Appeals is AFFIRMED

WITH THE MODIFICATION that the award of damages, attorneys fees and cost to
private respondent is deleted.

SO ORDERED.

[G.R. No. 124062. January 21, 1999]

REYNALDO T. COMETA and STATE INVESTMENT TRUST, INC., petitioners, vs.
COURT OF APPEALS, HON.GEORGE MACLI-ING, in his capacity as Presiding Judge,
Regional Trial Court, Quezon City Branch 100, REYNALDO S. GUEVARA and
HONEYCOMB BUILDERS, INC. respondents.

DECISION

MENDOZA, J.:

This is a petition for review of the decision[1] of the Court of Appeals, dated July 28, 1995,
affirming the trial courts order denying petitioners Motion to Dismiss Civil Case No. Q-93-
15691 for alleged failure of private respondents to state in their complaint a cause of action
against petitioners and the appellate courts resolution, dated March 1, 1996, denying
reconsideration of the same.

Petitioner State Investment Trust, Inc. (SITI), formerly State Investment House, Inc.
(SIHI), is an investment house engaged in quasi-banking activities. Petitioner Reynaldo
Cometa is its president. Private respondent Honeycomb Builders, Inc. (HBI), on the other
hand, is a corporation engaged in the business of developing, constructing, and selling
townhouses and condominium units. Private respondent Reynaldo Guevara is president of
HBI and chairman of the board of directors of Guevent Industrial Development Corp.
(GIDC).

Sometime in 1979, petitioner SITI extended loans in various amounts to GIDC which the
latter failed to pay on the dates they became due. For this reason, a rehabilitation plan was
agreed upon for GIDC under which it mortgaged several parcels of land to petitioner SITI.
Among those mortgaged was a Mandaluyong lot covered by TCT No. 462855
(20510). However, GIDC again defaulted. Hence, petitioner SITI foreclosed the mortgages
and, in the foreclosure sale, acquired the properties as highest bidder.[2]

Alleging irregularities in the foreclosure of the mortgages and the sale of properties to
petitioner SITI, GIDC filed a case entitled Guevent Industrial Development Corp. et al.,
plaintiffs v. State Investment House Inc. et al., defendants, in the Regional Trial Court of
Pasig. The case was eventually settled through a compromise agreement which became the
basis of the trial courts judgment. A dispute later arose concerning the interpretation of the
compromise agreement, as respondent HBI offered to purchase from GIDC the lot covered
by TCT No. 462855 (20510) and the latter agreed but petitioner SITI (the mortgagee)
refused to give its consent to the sale and release its lien on the property. [3] For this reason,
GIDC asked the trial court for a clarification of its decision.[4]

Subsequently, the trial court directed petitioner SITI to accept the offer of respondent HBI
to purchase the property covered by TCT No. 462855 (20510). Petitioner SITI appealed the
order to the Court of Appeals which affirmed the same. On appeal to this Court, the
decision of the Court of Appeals was affirmed.[5]

Meanwhile, respondent HBI applied to the Housing and Land Use Regulatory Board for a
permit to develop the property in question. Its application was granted, on account of
which respondent HBI built a condominium on the property called RSG Condominium
Gueventville II. When respondent HBI applied for a license to sell the condominium units it
was required by the HLURB to submit an Affidavit of Undertaking which in effect stated
that the mortgagee (SITI) of the property to be developed agrees to release the mortgage on
the said property as soon as the full purchase price of the same is paid by the
buyer. Respondent HBI submitted the required affidavit purportedly executed by
petitioner Cometa as president of SITI (mortgagee).

Petitioner Cometa denied, however, that he ever executed the affidavit. He asked the
National Bureau of Investigation for assistance to determine the authenticity of the
signature on the affidavit. The NBI found Cometas signature on the Affidavit of
Undertaking to be a forgery on the basis of which a complaint for falsification of public
document was filed against HBI president Guevara.[6] However, the Rizal Provincial
Prosecutors Office found no probable cause against private respondent Guevara and
accordingly dismissed the complaint in its resolution of September 25, 1989.[7]

Petitioners appealed the matter to then Secretary of Justice Franklin Drilon who reversed
the Provincial Prosecutors Office and ordered it to file an information against private
respondent Guevara for falsification of public document.[8] Private respondent Guevara
moved for a reconsideration of the aforesaid resolution, but his motion was denied. [9]

An information for Falsification of Public Document was thus filed against private
respondent Guevara in the Regional Trial Court of Makati where it was docketed as
Criminal Case No. 90-3018.[10]After the prosecution presented its evidence, Guevara filed a
demurrer to evidence which the trial court, presided over by Judge Fernando V. Gorospe,
Jr., granted.[11]

Following the dismissal of the criminal case against him, private respondents Reynaldo S.
Guevara and HBI filed a complaint for malicious prosecution against petitioners Cometa
and SITI in the Regional Trial Court of Quezon City.[12]

Petitioners SITI and Cometa filed their respective answers. After the pre-trial of the case,
they filed a joint motion to dismiss with alternative motion to drop respondent HBI as a
party plaintiff, upon the following grounds:[13]

1. The complaint states no cause of action.

2. Secretary Drilon, Undersecretary Bello and the prosecutor, not impleaded herein, are the
real parties in-interest-defendants, which again makes the complaint lack a cause of
action. At the least, the above public official are indispensable parties, and their non-
inclusion renders this court without jurisdiction over the case.

3. The action seeks to impose a penalty on the right to litigate and for that reason is
unconstitutional and against settled public policy.

On May 30, 1994, the trial court, through Judge George Macli-ing, denied petitioners joint
motion for the following reasons:

Acting on the MOTION TO DISMISS With Alternative Motion to Drop Honeycomb

Builders, Inc. as Party Plaintiff filed by Defendants Reynaldo T. Cometa and State
Investment House, Inc. (SIHI) thru counsel, together with the OPPOSITION filed by
Plaintiffs thru counsel, after a thorough perusal of the contents embodied in said pleadings,
the Court in the exercise of its sound judicial discretion finds that there are sufficient
allegations of cause of action in the Complaint, and in the interest of justice, the Plaintiff
thru counsel should be given an opportunity to introduce proof in support of his
allegations, which could at best be attained thru a full blown hearing on the merits of the
case. The defense of lack of cause of action, and that defendants are not the real parties in
interest, in the considered opinion of this Court, are matters of defense, which will be
considered, after the contending parties thru counsel shall have rested their cases, and the
case submitted for Decision.

As regards the Alternative Motion to Drop Honeycomb Builders, Inc. as Party Plaintiff, the
Complaint shows that Reynaldo Guevara, is the President, Chairman of the Board and
Majority Stockholder of HBI, the same will likewise be taken into consideration when
proofs will be introduced for or against this particular matter. At this point in time, let
Honeycomb Builders, Inc. remain as party plaintiff.[14]

Petitioners, in separate motions, asked for a reconsideration but their motions were denied
on August 12, 1994.[15] They then filed a petition for certiorari and prohibition. The Court of
Appeals immediately issued a temporary restraining order on September 22, 1994 and, on
October 28, 1994, upon petitioners posting of a P1,000.00 bond, issued a writ of preliminary
injunction enjoining the trial court from conducting further proceedings in the case. On
July 28, 1995, the Court of Appeals rendered its decision [16] denying the petition
for certiorari and prohibition of petitioners. Petitioners filed a motion for reconsideration
but the appellate court denied their motion in a resolution,[17] dated March 1, 1996.

Hence, this petition. The principal question for decision is whether the complaint filed by
private respondents against petitioners in the Regional Trial Court states a cause of
action. First, petitioners maintain it does not as the allegations in the complaint are
insufficient and indispensable parties were not impleaded in the case. Secondly, they
contend that private respondent HBI should have been dropped as a party plaintiff upon
petitioners motion therefor.

Both contentions are without merit.

First. A complaint for malicious prosecution states a cause of action if it alleges

1. that the defendant was himself the prosecutor or that at least he instigated the
prosecution;

2. that the prosecution finally terminated in the plaintiffs acquittal;

3. that in bringing the action the prosecutor acted without probable cause; and

4. that the prosecutor was actuated by malice, i.e., by improper and sinister motives.[18]

Thus, the question is: whether the facts pleaded and the substantive law entitle plaintiff to a
judgment.[19] Otherwise stated, can a judgment be rendered upon the facts alleged and
deemed admitted, in accordance with the prayer in the complaint? [20] To resolve this, the
allegations of the complaint must be examined.

Paragraphs 12 to 13[21] of the complaint allege that SITI and Cometa (petitioners herein)
filed a complaint against respondent Guevara which led to the filing by the provincial
prosecutor of an information for falsification of public documents against him (Guevara) in
the RTC. It is thus alleged that petitioners instigated the prosecution of private
respondents.[22]

Paragraph 17[23] of the complaint alleges that the trial court granted respondent Guevaras
demurrer to the evidence and ordered the dismissal of the criminal case against him as
shown in the order of the trial court acquitting respondent Guevara, a copy of which is
made part of the complaint.[24] The second requisite, namely, that the criminal case
terminated in plaintiffs (private respondent Guevara) acquittal is thus alleged.

With regard to the requirement of malice, paragraphs 7 to 12 and paragraph 18 [25] of the
complaint allege:

1) that a compromise agreement was entered into between GIDC and SITI in connection
with contracts of loan;

2) that in the course of implementing the agreement, HBI offered to purchase from GIDC
one of the mortgaged properties;

3) that GIDC accepted the offer but despite tender of the purchase price, SITI refused to
approve the sale and the release of its mortgage lien on the property;
4) that a dispute arose between the parties regarding the interpretation and
implementation of the compromise agreement;

5) that GIDC filed a Motion for Clarification and to Suspend Sales in the Regional Trial
Court (which had approved the Compromise Agreement), while SITI filed a Motion for
Execution praying for consolidation in its favor of the titles over GIDCs remaining
properties;

6) that the trial court granted GIDCs motion and ordered SITI to accept HBIs offer to
purchase one of the mortgaged properties;

7) that SITI appealed the order to the Court of Appeals and, when it lost, appealed the
matter to the Supreme Court which sustained both the appellate court and the lower court;

8) that while SITIs appeal was still pending, SITI and its president, Cometa, filed a
criminal case against Guevara; and

9) that petitioners filed the aforesaid case with the sole intent of harassing and pressuring
Guevara, in his capacity as chairman of GIDC, to give in to their illicit and malicious desire
to appropriate the remaining unsold properties of GIDC.

The foregoing statements sufficiently allege malice. These allegations are averments of
malice in accordance with Rule 6, 5 of the Rules of Civil Procedure which provides:

Sec. 5. Fraud, mistake, condition of mind. - In all averments of fraud or mistake, the
circumstances constituting fraud or mistake must be stated with particularity. Malice,
intent, knowledge or other condition of the mind of a person may be averred
generally (emphasis added).

Contrary to petitioners contention, they are not mere conclusions.

As regards the requirement of lack of probable cause, paragraph 18 [26] of the complaint
alleges that the criminal case filed had absolutely no basis in fact and in law in light of the
factual allegations mentioned earlier and that a reading of the order [27] of the trial court in
the criminal case, a copy of which is annexed to the complaint and made an integral part
thereof, will show that the prosecution failed to establish even a prima facie case against
Guevara. Clearly, the complaint alleges that there was no probable cause for respondent
Guevaras prosecution.

As held in Far East Marble (Phils.), Inc. v. Court of Appeals, [28] a complaint is sufficient if it
contains sufficient notice of the cause of action even though the allegations may be vague or
indefinite, for, in such case, the recourse of the defendant is to file a motion for a bill of
particulars. Pleadings should be liberally construed so that litigants can have ample
opportunity to prove their claims and thus prevent a denial of justice due to legal
technicalities.

It is nonetheless pointed out that the complaint itself alleges that a preliminary
investigation was conducted, that the Secretary of Justice ordered the filing of the
information, and that the trial court issued a warrant of arrest against private respondent
Guevara. Such allegations in the complaint, petitioners claim, negate the existence of
probable cause. Petitioners cite the case of Martinez v. UFC[29] in which this Court sustained
the dismissal of a complaint for malicious prosecution for failure to state a cause of action
on the basis of similar allegations in the complaint and the findings of the criminal court in
acquitting the plaintiff, which this Court ruled belied the allegations of malice and want of
probable cause in the complaint.

The mere allegation in a complaint for malicious prosecution that an information was filed
after preliminary investigation and that a warrant of arrest was thereafter issued does not
by itself negate allegations in the same complaint that the prosecution was malicious. All
criminal prosecutions are by direction and control of the public prosecutor. [30] To sustain
petitioners stand that an allegation in a complaint for malicious prosecution that the
information in the criminal case was filed after appropriate preliminary investigation
negates a contrary allegation that the filing of the case was malicious would result in the
dismissal of every action for malicious prosecution.

What was decisive in Martinez was the finding in the criminal case that complainant had
acted in good faith in bringing the charge against accused. For the fact in that case was that
accused was acquitted because, although it was true he had disposed of properties, he did
not do so prior to or simultaneously with the fraud. There was deceit, but it was not the
efficient cause of the defraudation. On this basis, this Court found that in bringing the case
the complainant in that case acted in good faith.

Said this Court:[31]

The findings of fact made by the Court in its decision of acquittal bear materially on the
question of malice and want of probable cause. The evidence, said the court, showed that
when the plaintiff executed the chattel mortgage on the stock inventory in his store on
November 29, 1960 he was the owner thereof, and therefore made no false representation
when he executed said mortgage to secure the loan of P58,381.13 he obtained from the
defendant; but that some weeks or months after November 29, 1960, with intent to defraud
the complainant United Finance Corporation, the accused succeeded in disposing of the
whole or a part of said store and stock merchandise in favor of a third party, to the
complainants prejudice... The basis of the acquittal, according to the court, was that deceit,
to constitute estafa, should be the efficient cause of the defraudation and as such should
either be prior to, or simultaneous with the act of fraud, citing People vs. Fortune, 73 Phil.
407.

The foregoing facts, alleged in the complaint for malicious prosecution either directly or by
reference to its annexes, show that in filing the criminal charge the defendant was not
actuated by malice, nor was there want of probable cause. It had been the victim of deceit
committed by the plaintiff, and whether or not such deceit constituted estafa was a legal
question properly submitted first to the City Fiscal and then to the court after the
necessary preliminary investigation was conducted. The very fact that the plaintiffs
acquittal was based on reasonable doubt as to his guilt demonstrates that the defendant
was justified in submitting its grievances to the said authorities for ruling and possible
redress.

In contrast, the decision of the criminal court in the present case indicates that there was
not even prima facie evidence to prove the alleged guilt of the accused. Consequently, a trial
was in fact unnecessary and the criminal court dismissed the case against private
respondent Guevara on the basis of a demurrer to evidence.

A court, dealing with a motion to dismiss an action for malicious prosecution, has only to
determine whether the allegations of the complaint, assuming them to be true, entitle the
plaintiff to a judgment.The trial court is not to inquire into the truth of the
allegations. Indeed, it cannot do so without depriving the plaintiff an opportunity to be
heard on his allegations.[32]

The case of Martinez is exceptional. This is not the first time we are clarifying its scope.
In Ventura v. Bernabe,[33] we stated:

It is true that in that case of Martinez, this Court sustained the order of dismissal of the
complaint for malicious prosecution partly because a preliminary investigation had been
conducted by the fiscal who had found probable cause for the filing of an estafa case
against Martinez, but the main consideration for such action of this Court was the fact that
from the recitals in the judgment acquitting the plaintiff, it appeared that although the
court found that said plaintiff had been guilty of deceit, the issue resolved by the court was
that in law such deceit did not constitute estafa, a matter which had been passed upon by
the fiscal in a different way, naturally, without any fault on the part of the defendant. In
other words, in Martinez case, the findings of the criminal court in the decision of acquittal
negatived the imputation of malice on the part of the defendant in charging plaintiff with
estafa before the fiscal.

...

For the rest, it might just as well be clarified here, lest some statements in Martinez and
Buenaventura relative to the materiality of the fiscals having filed an information on the
question of malice of the accuser may be misunderstood, that such participation of the
fiscal is not decisive and that malice may still be shown, the holding of a preliminary
investigation and the finding of probable cause by the fiscal notwithstanding. The same
may be said of cases where preliminary investigations are conducted by judges. The
determination of the issue of malice must always be made to rest on all the attendant
circumstances, including the possibility of the fiscal or judge being somehow misled by the
accusers evidence. No doubt, the very purpose of preliminary investigations is to avoid
baseless and malicious prosecutions, still, whether or not in a particular case such an
objective has been duly pursued is a matter of proof. . . .

It is hardly necessary to say that to allow the present action to proceed is not to impose a
penalty on the right to litigate. For trial is still to be conducted and liability is not
automatic. It is only to acknowledge the truism that

Just as it is bad to encourage the indiscriminate filing of actions for damages by accused
persons after they have been acquitted, whether correctly or incorrectly, a blanket
clearance of all who may be minded to charge others with offenses, fancied or otherwise,
without any chance of the aggrieved parties in the appropriate cases of false accusation to
obtain relief, is in Our Opinion short of being good law.[34]

Second. Petitioners contend that the Secretary and the Undersecretary of the Department
of Justice and the Assistant Provincial Prosecutor should have been included in the case for
malicious prosecution because it was they who found probable cause against private
respondents and under the law the prosecution of criminal actions is vested in the public
prosecutor. According to petitioners, they did not conduct the preliminary investigation or
order the filing of an information and their participation was limited to initiating the
investigation in the NBI and testifying.[35] In support of their contention, they cite the ruling
in Lagman v. Intermediate Appellate Court[36] which expounded on the ruling
in Buenaventura v. Sto. Domingo:[37]

The mere act of submitting a case to the authorities for prosecution does not make one
liable for malicious prosecution for generally, it is the Government or representative of the
State that takes charge of the prosecution of the offense. There must be proof that the
prosecution was prompted by a sinister design to vex and humiliate a person for if the rule
were otherwise, every acquitted person can turn against the complainant in a civil action
for damages.

There is no merit in this contention. The issue in those cases was not whether the complaint
stated a cause of action against defendants who were complainants in the criminal cases
which led to the filing of civil cases for damages but whether they were liable to the
plaintiffs. The Court merely ruled in those cases that the complainant in the criminal case
is not necessarily liable simply because he initiated the criminal case which eventually was
dismissed. It is noteworthy that, in the case at bar, private respondents do not only allege
that petitioners initiated the filing of the criminal case against them but that because of the
evidence they (petitioners) presented, the Department of Justice could have been induced to
order the filing of a criminal case in court.[38]

Third. It is contended that HBI is not a real-party-in-interest, whatever interest it may have
being purely speculative.[39] On this point, we think the Court of Appeals correctly ruled:[40]

Section 11 of Rule 3 of the Rules of Court provides:

Misjoinder and non-joinder of parties. Misjoinder of parties is not a ground for dismissal of
an action. Parties may be dropped or added by order of the court or on motion of any party
or on its own initiative at any stage of the action and on such terms as are just.

....

Given (1) the foregoing rule, (2), the fact that Guevara, in his capacity as president of HBI,
filed HBIs application to sell at the HLURB and it was in the same capacity and in
connection with the application that he was criminally charged, and (3) the allegations in
the complaint including that stating that by the filing of the criminal case against Guevara,
the application of HBI with the HLURB for a regularlicense to sell the condominium units .
. . had been delayed, resulting in the corresponding delay in the sale thereof on account of
which plaintiffs incurred over runs in development, marketing and financial costs and
charges, resulting in actual damages, the deferral by public respondent of petitioners
motion to drop HBI as party plaintiff cannot be said to have been attended with grave
abuse of discretion. It bears emphasis that the phraseology of Section 11 of Rule 3 is that
parties may be dropped . . . at any stage of the action.

It is true that a criminal case can only be filed against the officers of a corporation and not
against the corporation itself.[41] It does not follow from this, however, that the corporation
cannot be a real-party-in-interest for the purpose of bringing a civil action for malicious
prosecution.

Lastly, the statement of the judge in the assailed order of May 30, 1994 that [t]he defense of
lack of cause of action and that the defendants are not the real parties in interest .... are
matters of defense was correctly held by the appellate court as mere dictum, said judge
having earlier stated in the same order that there are sufficient allegations of causes of
action in the Complaint.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

[G.R. No. 129584. December 3, 1998]

TRIPLE EIGHT INTEGRATED SERVICES, INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, HON. LABOR ARBITER POTENCIANO S. CANIZARES,
JR. and ERLINDA R. OSDANA, respondents.

DECISION

ROMERO, J.:

In this petition for certiorari now before us, petitioner Triple Eight Integrated Services Inc.
seeks to annul the decision [1] of public respondent National Labor Relations Commission
(First Division, Quezon City) dated March 11, 1997 affirming the August 20, 1996
decision[2] of Labor Arbiter Potenciano Canizares. Petitioner was ordered to pay private
respondent Erlinda Osdana her salaries for the unexpired portion of her employment
contract, unpaid salaries, salary differential, moral and exemplary damages, as well as
attorneys fees. On April 28, 1997, the NLRC denied petitioners motion for reconsideration.
[3]

The antecedent facts follow.

Sometime in August 1992, private respondent Osdana was recruited by petitioner for
employment with the latters principal, Gulf Catering Company (GCC), a firm based in the
Kingdom of Saudi Arabia. Under the original employment contract, Osdana was engaged
to work as Food Server for a period of thirty-six (36) months with a salary of five hundred
fifty Saudi rials (SR550).

Osdana claims she was required by petitioner to pay a total of eleven thousand nine
hundred fifty pesos (P11,950.00) in placement fees and other charges, for which no receipt
was issued. She was likewise asked to undergo a medical examination conducted by the
Philippine Medical Tests System, a duly accredited clinic for overseas workers, which
found her to be Fit of Employment.

Subsequently, petitioner asked Osdana to sign another Contractor-Employee

Agreement[4] which provided that she would be employed as a waitress for twelve (12)
months with a salary of two hundred eighty US dollars ($280). It was this employment
agreement which was approved by the Philippine Overseas Employment Administration
(POEA).

On September 16, 1992, Osdana left for Riyadh, Saudi Arabia, and commenced working
for GCC. She was assigned to the College of Public Administration of the Oleysha
University and, contrary to the terms and conditions of the employment contract, was
made to wash dishes, cooking pots, and utensils, perform janitorial work and other tasks
which were unrelated to her job designation as waitress. Making matters worse was the
fact that she was made to work a gruelling twelve-hour shift, from six oclock in the
morning to six oclock in the evening, without overtime pay.

Because of the long hours and the strenuous nature of her work, Osdana suffered from
numbness and pain in her arms. The pain was such that she had to be confined at the
Ladies Villa, a housing facility of GCC, from June 18 to August 22, 1993, during which
period, she was not paid her salaries.

After said confinement, Osdana was allowed to resume work, this time as Food Server and
Cook at the Hota Bani Tameem Hospital, where she worked seven days a week from
August 22 to October 5, 1993. Again, she was not compensated.

Then, from October 6 to October 23, 1993, Osdana was again confined at the Ladies Villa
for no apparent reason. During this period, she was still not paid her salary.

On October 24, 1993, she was re-assigned to the Oleysha University to wash dishes and do
other menial tasks. As with her previous assignment at the said University, Osdana worked
long hours and under harsh conditions. Because of this, she was diagnosed as having
Bilateral Carpal Tunnel Syndrome, a condition precipitated by activities requiring
repeated flexion, pronation, and supination of the wrist and characterized by excruciating
pain and numbness in the arms.[5]

As the pain became unbearable, Osdana had to be hospitalized. She underwent two
surgical operations, one in January 1994, another on April 23, 1994. Between these
operations, she was not given any work assignments even if she was willing and able to do
light work in accordance with her doctors advice. Again,
Osdana was not paid any compensation for the period between February to April 22, 1994.

After her second operation, Osdana was discharged from the hospital on April 25,
1994. The medical report stated that she had very good improvement of the symptoms and
she was discharged on the second day of the operation.[6]

Four days later, however, she was dismissed from work, allegedly on the ground of illness.
She was not given any separation pay nor was she paid her salaries for the periods when
she was not allowed to work.

Upon her return to the Philippines, Osdana sought the help of petitioner, but to no avail.
She was thus constrained to file a complaint before the POEA against petitioner, praying
for unpaid and underpaid salaries, salaries for the unexpired portion of the employment
contract, moral and exemplary damages and attorneys fees, as well as the revocation,
cancellation, suspension and/or imposition of administrative sanctions against petitioner.
Pursuant to Republic Act No. 8042, otherwise known as the Migrant Workers and
Overseas Filipinos Act of 1995, the case was transferred to the arbitration branch of the
NLRC and assigned to Labor Arbiter Canizares.

In a decision dated August 20, 1996, the labor arbiter ruled in favor of Osdana. The
dispositive portion of the decision follows:

Wherefore, the respondent is hereby ordered to pay the complainant US$2,499.00 as

salaries for the unexpired portion of the contract, and US$1,076.00 as unpaid salary and
salary differential, or its equivalent in Philippine Peso.

The respondent is likewise ordered to pay the complainant P50,000 moral damages,
and P20,000 exemplary damages.

The respondent is further ordered to pay the complainant 10% of the monetary award as
attorneys fee.

Other claims are hereby dismissed for lack of sufficient evidence.

SO ORDERED.

Aggrieved by the labor arbiters decision, petitioner appealed to the NLRC, which affirmed
the decision in question on March 11, 1997. Petitioners motion for reconsideration was
likewise denied by the NLRC in its order dated April 28, 1997.

Hence, this petition for certiorari.

Petitioner alleges grave abuse of discretion on the part of the public respondents for the
following reasons: (a) ruling in favor of Osdana even if there was no factual or legal basis
for the award and, (b) holding petitioner solely liable for her claims despite the fact that its
liability is joint and several with its principal, GCC.

At the outset, petitioner argues that public respondent Labor Arbiter gravely abused his
discretion when he rendered the questioned decision dated August 20, 1996 without stating
the facts and the law where he derived his conclusions. [7] In support of this argument,
petitioner cites the first paragraph of Article VIII, Section 14 of the Constitution: No
decision shall be rendered by any court without expressing therein clearly and distinctly
the facts and the law on which it is based.

On this point, it is enough to note that the decisions of both the labor arbiter and the NLRC
were based mainly on the facts and allegations in Osdanas position paper and supporting
documents. We find these sufficient to constitute substantial evidence to support the
questioned decisions. Generally, findings of facts of quasi-judicial agencies like the NLRC
are accorded great respect and, at times, even finality if supported by substantial
evidence. Substantial evidence is such amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion.[8]

Moreover, well-settled is the rule that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter. Thus,
in controversies between a worker and her employer, doubts reasonably arising from the
evidence or in the interpretation of agreements should be resolved in favor of the former.

Petitioner, for its part, was given the same opportunity to file its own position paper but
instead, it opted to file a two-page Answer With Special And Affirmative Defenses, denying
generally the allegations of the complaint.[9]

As observed by the labor arbiter, The record shows the complainant filed complaint (sic),
position paper, and supporting documents, and prosecuted her case diligently; while the
respondent merely tried to settle the case amicably, failing even to file its position paper.
[10]
The present case being one for illegal dismissal, it was incumbent upon petitioner
employer to show by substantial evidence that the termination was validly made. In
termination cases, the burden of proof rests on the employer to show that the dismissal is
for a just cause.[11] Having failed to file its position paper and to support its denials and
affirmative defenses in its answer, petitioner cannot now fault the labor arbiter and the
NLRC for relying on the facts as laid down by Osdana in her position paper and supported
by other documents. The essence of due process is that a party be afforded reasonable
opportunity to be heard and to submit any evidence he may have in support of his defense,
[12]
and this is exactly what petitioner was accorded, although it chose not to fully avail
thereof.

This Court, therefore, upholds the finding of herein public respondents that the facts and
the evidence on record adduced by Osdana and taken in relation to the answer of petitioner
show that indeed there was breach of the employment contract and illegal dismissal
committed by petitioners principal.

Petitioner claims that public respondents committed grave abuse of discretion when they
ruled that Osdana had been illegally dismissed by GCC. It maintains that the award for
salaries for the unexpired portion of the contract was improper because Osdana was
validly dismissed on the ground of illness.

The argument must fail.

In its Answer, Memorandum of Appeal, [13] Petition for Certiorari,[14] and Consolidated
Reply,[15] petitioner consistently asserted that Osdana was validly repatriated for medical
reasons, but it failed to substantiate its claim that such repatriation was justified and done
in accordance with law.
Article 284 of the Labor Code is clear on the matter of termination by reason of disease or
illness, viz:

Art. 284. Disease as a ground for termination An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or prejudicial to his health as well as the health of his co-
employees: x x x.

Specifically, Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor
Code provides:

Sec. 8. Disease as a ground for dismissal Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of
his co-employees, the employer shall not terminate his employment unless there is a
certification by competent public authority that the disease is of such nature or at such a
stage that it cannot be cured within a period of six (6) months with proper medical
treatment. If the disease or ailment can be cured within the period, the employer shall not
terminate the employee but shall ask the employee to take a leave. The employer shall
reinstate such employee to his former position immediately upon the restoration of his
normal health. (Underscoring supplied)

Viewed in the light of the foregoing provisions, the manner by which Osdana was
terminated was clearly in violation of the Labor Code and its implementing rules and
regulations.

In the first place, Osdanas continued employment despite her illness was
not prohibited by law nor was it prejudicial to her health, as well as that of her co-
employees. In fact, the medical report issued after her second operation stated that she had
very good improvement of the symptoms. Besides, Carpal Tunnel Syndrome is not a
contagious disease.

Petitioner attributes good faith on the part of its principal, claiming that It was the concern
for the welfare and physical well being (sic) of private respondent that drove her employer
to take the painful decision of terminating her from the service and having her repatriated
to the Philippines at its expense. The employer did not want to risk the aggravation of the
illness of private respondent which could have been the logical consequence were private
respondent allowed to continue with her job.[16]

The Court notes, however, that aside from these bare allegations, petitioner has not
presented any medical certificate or similar document from a competent public health
authority in support of its claims.
On the medical certificate requirement, petitioner erroneously argues that private
respondent was employed in Saudi Arabia and not here in the Philippines. Hence, there
was a physical impossibility to secure from a Philippine public health authority the alluded
medical certificate that public respondents illness will not be cured within a period of six
months.[17]

Petitioner entirely misses the point, as counsel for private respondent states in the
Comment.[18] The rule simply prescribes a certification by a competent public health
authority and not a Philippine public health authority.

If, indeed, Osdana was physically unfit to continue her employment, her employer could
have easily obtained a certification to that effect from a competent public health authority
in Saudi Arabia, thereby heading off any complaint for illegal dismissal.

The requirement for a medical certificate under Article 284 of the Labor Code cannot be
dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by
the employer of the gravity or extent of the employees illness and thus defeat the public
policy on the protection of labor. As the Court observed in Prieto v. NLRC, [19] The Court is
not unaware of the many abuses suffered by our overseas workers in the foreign land
where they have ventured, usually with heavy hearts, in pursuit of a more fulfilling
future. Breach of contract, maltreatment, rape, insufficient nourishment, sub-human
lodgings, insults and other forms of debasement, are only a few of the inhumane acts to
which they are subjected by their foreign employers, who probably feel they can do as they
please in their country. While these workers may indeed have relatively little defense
against exploitation while they are abroad, that disadvantage must not continue to burden
them when they return to their own territory to voice their muted complaint. There is no
reason why, in their own land, the protection of our own laws cannot be extended to them
in full measure for the redress of their grievances.

Petitioner likewise attempts to sidestep the medical certificate requirement by contending

that since Osdana was working in Saudi Arabia, her employment was subject to the laws of
the host country.Apparently, petitioner hopes to make it appear that the labor laws of
Saudi Arabia do not require any certification by a competent public health authority in the
dismissal of employees due to illness.

Again, petitioners argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the contract
is made) governs in this jurisdiction. There is no question that the contract of employment
in this case was perfected here in the Philippines. Therefore, the Labor Code, its
implementing rules and regulations, and other laws affecting labor apply in this
case. Furthermore, settled is the rule that the courts of the forum will not enforce any
foreign claim obnoxious to the forums public policy. [20] Here in the Philippines, employment
agreements are more than contractual in nature. The Constitution itself, in Article XIII
Section 3, guarantees the special protection of workers, to wit:

The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for
all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.

x x x x x x x x x.

This public policy should be borne in mind in this case because to allow foreign employers
to determine for and by themselves whether an overseas contract worker may be dismissed
on the ground of illness would encourage illegal or arbitrary pre-termination of
employment contracts.

As regards the monetary award of salaries for the unexpired portion of the employment
contract, unpaid salaries and salary differential granted by public respondents to Osdana,
petitioner assails the same for being contrary to law, evidence and existing jurisprudence,
all of which therefore constitutes grave abuse of discretion.

Although this contention is without merit, the award for salaries for the unexpired portion
of the contract must, however, be reduced. Paragraph 5, Section 10 of R.A. No. 8042,
applies in this case, thus:

In case of termination of overseas employment without just, valid or authorized cause as

defined by law or contract, the worker shall be entitled to the full reimbursement of his
placement fee with interest at twelve percent (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

In the case at bar, while it would appear that the employment contract approved by the
POEA was only for a period of twelve months, Osdanas actual stint with the foreign
principal lasted for one year and seven-and-a-half months. It may be inferred, therefore,
that the employer renewed her employment contract for another year. Thus, the award for
the unexpired portion of the contract should have been US$1,260 (US$280 x 4 months) or
its equivalent in Philippine pesos, not US$2,499 as adjudged by the labor arbiter and
affirmed by the NLRC.
As for the award for unpaid salaries and differential amounting to US$1,076 representing
seven months unpaid salaries and one month underpaid salary, the same is proper because,
as correctly pointed out by Osdana, the no work, no pay rule relied upon by petitioner does
not apply in this case. In the first place, the fact that she had not worked from June 18 to
August 22, 1993 and then from January 24 to April 29, 1994, was due to her illness which
was clearly work-related. Second, from August 23 to October 5, 1993, Osdana actually
worked as food server and cook for seven days a week at the Hota Bani Tameem Hospital,
but was not paid any salary for the said period. Finally, from October 6 to October 23,
1993, she was confined to quarters and was not given any work for no reason at all.

Now, with respect to the award of moral and exemplary damages, the same is likewise
proper but should be reduced. Worth reiterating is the rule that moral damages are
recoverable where the dismissal of the employee was attended by bad faith or fraud or
constituted an act oppressive to labor, or was done in a manner contrary to morals, good
customs, or public policy.[21] Likewise, exemplary damages may be awarded if the dismissal
was effected in a wanton, oppressive or malevolent manner.[22]

According to the facts of the case as stated by public respondent, Osdana was made to
perform such menial chores, as dishwashing and janitorial work, among others, contrary
to her job designation as waitress. She was also made to work long hours without overtime
pay. Because of such arduous working conditions, she developed Carpal Tunnel
Syndrome. Her illness was such that she had to undergo surgery twice. Since her employer
determined for itself that she was no longer fit to continue working, they sent her home
posthaste without as much as separation pay or compensation for the months when she was
unable to work because of her illness. Since the employer is deemed to have acted in bad
faith, the award for attorneys fees is likewise upheld.

Finally, petitioner alleges grave abuse of discretion on the part of public respondents for
holding it solely liable for the claims of Osdana despite the fact that its liability with the
principal is joint and several.

Petitioner misunderstands the decision in question. It should be noted that contrary to

petitioners interpretation, the decision of the labor arbiter which was affirmed by the
NLRC did not really absolve the foreign principal.

Petitioner was the only one held liable for Osdanas monetary claims because it was the only
respondent named in the complaint and it does not appear that petitioner took steps to
have its principal included as co-respondent. Thus, the POEA, and later the labor arbiter,
did not acquire jurisdiction over the foreign principal.

This is not to say, however, that GCC may not be held liable at all. Petitioner can still claim
reimbursement or contribution from it for the amounts awarded to the illegally-dismissed
employee.
WHEREFORE, in view of the foregoing, the instant petition is DISMISSED. Accordingly,
the decisions of the labor arbiter dated August 20, 1996, and of the NLRC dated March 11,
1997, are AFFIRMED with the MODIFICATION that the award to private respondent
Osdana should be one thousand two hundred sixty US dollars (US$1,260), or its equivalent
in Philippine pesos, as salaries for the unexpired portion of the employment contract, and
one thousand seventy six US dollars (US$1,076), or its equivalent in Philippine pesos,
representing unpaid salaries for seven (7) months and underpaid salary for one (1) month,
plus interest.

Petitioner is likewise ordered to pay private respondent P30,000.00 in moral

damages, P10,000.00 in exemplary damages and 10% attorneys fees.

This decision is without prejudice to any remedy or claim for reimbursement or

contribution petitioner may institute against its foreign principal, Gulf Catering
Company. No pronouncement as to costs.

SO ORDERED.

G.R. No. 121998 March 9, 2000

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
TEODORICO CLEOPAS and FLORENCIO PIRAME, accused, FLORENCIO
PIRAME, accused-appellant.

QUISUMBING, J.:

On appeal is the decision dated January 5, 1995, of the Regional Trial Court of Tagbilaran
City, Branch 1, in Criminal Case No. 8343 finding the accused Teodorico Cleopas and
Florencio Pirame guilty of murder beyond reasonable doubt.1

The facts of the case, as found by the trial court, are as follows:

The factual findings of the Court based on the testimony of the witnesses for the
prosecution and the defense are, as follows, to wit:

a) That in morning of March 18, 1993 near the house of Demetrio Cleopas, father of the
accused Teodorico Cleopas and Epifanio Cleopas at Barangay Tubog, Ubay, Bohol, the eye-
witness Cipriano Supero saw the victim in the instant case Pedro Torrenueva while being
held by the accused Florencio Perame (sic) the accused Epifanio Cleopas struck him with
an iron pipe and by the accused Teodorico Cleopas with a piece of wood, hitting the
aforementioned victim Pedro Torrenueva on the forehead, which, as a consequence, fell on
the ground dead;
b) That to cover the discovery of the commission of the crime the dead body of the victim
Pedro Torrenueva was buried in the well near the house of Demetrio Cleopas father of the
accused Epifanio Cleopas who is still at large and the accused Teodorico Cleopas;

c) That the testimony of the other witnesses for the prosecution SPO2 Sabeniano Atopan,
Candida Cosip, Evelyn Torrenueva and Pedro Acquiat viewed in their totality with the
testimony of the eye-witness Cipriano Supero points to the accused Teodorico Cleopas,
Epifanio Cleopas and Florencio Pirame as the perepetrators (sic) of the crime as charged. 2

On May 13, 1993, the three accused, Teodorico Cleopas, Epifanio Cleopas and Florencio
Pirame, were charged with the crime of murder under the following information:

That on or about the 18th day of March, 1993, in the municipality of Ubay, province of
Bohol, Philippines, and within the jurisdiction of this Honorable Court, the abovenamed
accused conspiring, confederating and mutually helping one another, with intent to kill,
armed with stainless pipe and a piece of wood, with treachery, evident premeditation and
abuse of superior strength, did then and there willfully, unlawfully and feloniously, attack,
assault and strike one Pedro Torrenueva who was unarmed and unaware thereof with the
said stainless pipe and piece of wood thereby inflicting fatal injuries on the different parts
of the victim's body which resulted to his immediate death; to the damage and prejudice of
the heirs of the deceased to be proved during the trial of the case.1âwphi1.nêt

Acts committed contrary to the provisions of Art. 248 of the Revised Penal Code.3

Upon arraignment, Florencio Pirame and Teodorico Cleopas entered a plea of not guilty.
Epifanio Cleopas was not arraigned, being at large.4 Thereafter, trial on the merits ensued.

The prosecution presented the following witnesses: (1) SPO2 Sabiniano Atupan, who led
the police team that conducted the investigation of the killing: (2) Dr. Arnold Cagulada, the
Municipal Health Officer of Ubay, Bohol, who examined the cavader of the victim; (3)
Candida Cusip,5 an aunt of the victim ventured towards the house of accused Teodorico
Cleopas on the day of the incident; (4) Evelyn Torrenueva, the wife of the victim, who
corroborated the testimony of Cusip and testified as to the damages incurred by her due to
her husband's death; (5) Pedro Acquiat, who joined the police in the search for the victim's
body; and (6) Cipriano Supero, the alleged eyewitness to the killing who identified all the
three accused as the victim's assailants.

In turn, the defense presented accused Teodorico Cleopas and appellant Florencio Pirame,
who both testified on their behalf.

On January 5, 1995, the Regional Trial Court of Tagbilaran City, Branch I, rendered its
decision finding Teodorico Cleopas and Florencio Pirame guilty of the crime of murder. It
disposed:
PREMISES, CONSIDERED, the Court finds the accused Teodorico Cleopas and Florencio
Pirame guilty of the crime of Murder punished under Article 248 of the Revised Penal
Code and hereby sentences each one of them to suffer an imprisonment of RECLUSION
PERPETUA, with the accessories of the law and to pay the cost.

The accused Teodorico Cleopas and Florencio Pirame are further ordered to indemnify the
surviving spouse of the deceased victim Pedro Torrenueva in the amount of Fifty Thousand
Pesos (P50,000.00) each and the amount of Twenty Three Thousand Fourteen (sic) Pesos
(23,214.00) representing burial and incidental expenses and Fifty Thousand Pesos each
(P50,000) representing moral and exemplary damages and in all instances without
subsidiary imprisonment in case of insolvency.

It appearing that the accused in the instant case Teodorico Cleopas and Florencio Pirame
have undergone preventive imprisonment they are entitled to the full time of their
preventive imprisonment to be deducted from their term of sentence if they have not
executed a waiver otherwise they will only be entitled to 4/5 of the time have undergone
preventive imprisonment to be deducted from their term of sentence if they have not
executed a waiver.

The foregoing separate Decision does not affect the accused Epifanio Cleopas who is still at
large who will be tried separately as soon as he shall have been arrested.

SO ORDERED.6

Only Florencio Pirame appealed from the decision of the trial court. He assigns the
following errors in his brief:

THE TRIAL COURT COMMITTED GRAVE ERROR IN RELYING ON THE

WEAKNESS OF THE DEFENSE EVIDENCE RATHER THAN ON THE STRENGTH
OF THE EVIDENCE FOR THE PROSECUTION IN FINDING THE ACCUSED-
APPELLANT PIRAME GUILTY OF MURDER BEYOND REASONABLE DOUBT.

II

THE TRIAL COURT COMMITTED GRAVE ERROR IN GIVING CREDENCE TO THE

TESTIMONY OF PROSECUTION WITNESSES CIPRIANO SUPERO AND CANDIDA
CUCIP IMPLICATING ACCUSED-APPELLANT FLORENCIO PIRAME IN THE
CRIME OF MURDER DESPITE THEIR MANIFEST UNBELIEVABLE, IMPROBABLE
AND UNRELIABLE TESTIMONY.7

In his brief, appellant alleges that the declaration of Demetrio Cleopas, both in the course
of police investigation and in a sworn statement, to the effect that his two sons were
responsible for the killing did not make any mention of him, hence, he should not have been
implicated. Such declaration, appellant contends, as made in the sworn statement, should
have been considered by the trial court as part of the res gestae. In addition, he urges that
the trial court should have considered the testimony of accused Teodorico Cleopas, who
testified that he did not see appellant on the date of the incident. He also contends that
contrary to the trial court's view, there was no "uniting point" or corroboration between
the testimonies of Cipriano Supero, the alleged eyewitness to the incident, and that of the
other prosecution witnesses. Supero's testimony, he further claims, should not have been
considered by the trial court as this witness was a coached and rehearsed witness, who
testified only two months after the incident, and whose testimony is allegedly not worthy of
belief. Appellant also asserts that while he invokes the weak defense of alibi, the evidence
against him is likewise weak, and did not prove his guilt beyond reasonable doubt. Lastly,
appellant contends that the trial court erred in finding him to be a co-conspirator of the
other two accused.

In its brief, the Office of the Solicitor General contends that the positive identification by
prosecution witness Cipriano Supero of appellant at the scene of the crime should prevail
over appellant's denial and alibi. It further argues that a conspiracy to kill the victim was
present.

Taken together, these contentions of appellant and the appellee point to one, issue, which is
the credibility of witnesses in this case. We find that credibility preponderates in favor of
the prosecution, and against the appellant.

Appellant makes much of the testimony of prosecution witness SPO2 Atupan. This witness
testified that in the course of police investigation, Demetrio Cleopas, father of accused
Teodorico and Epifanio Cleopas, said that his two sons were responsible for the killing,
Demetrio reiterated the same allegation in a sworn statement made before the Ubay Police
on March 24, 1993, 8 which appellant also relies upon to support his claim of innocence.
This particular allegation in the sworn statement, appellant urges, should be considered as
part of the res gestae, as it "grew out of the main fact, shed light upon it, and which are (sic)
unpremeditated, spontaneous, and made at a time so near, subsequent to the main act, as to
exclude the idea of deliberation and fabrication.9

This assertion made by Demetrio Cleopas in his sworn statement is not part of the res
gestae. Res gestae refers to those exclamations and statements made by either the
participants, victims, or spectators immediately before, during, or immediately after the
commission of the crime, when the circumstances are such that the statements were made
as a spontaneous reaction or utterance inspired by the excitement of the occasion and there
was no opportunity for the declarant to deliberate and to fabricate a false statement. 10 The
allegations made by Demetrio Cleopas in his sworn statement were not made immediately
after the killing of the victim. They were made on March 24, 1993, or six days after the
killing of the victim on March 18. As we have held that a statement given a day after the
incident in answer to questions propounded in an investigation cannot be considered part
of the res gestae, 11 so too with the declarations of Demetrio Cleopas in his sworn statement.

Moreover, resort to the very sworn statement invoked by appellant would reveal that
Demetrio Cleopas himself was in no position to identify all the perpetrators of the crime.
The pertinent portion of the statement reads as follows:

Q: Do you remember where were you on March 18, 1993?

A: Yes, I was in our nipa hut near our house.

Q: What were (sic) the unusual incident that you have witness (sic) on that day; (sic)

A: On March 18, 1993 at 10:00 o'clock in the morning more or less. I heard a shout from
my wife that's why I went near to her and what I have seen was a man lying on the ground
which in my belief was already dead.

Q: What was the cause of death of that person?

A: When I asked my son Epifanio Cleopas alias "Paning" what was that incident and he
answered that they mutually struck him because he boxed one on (sic) my son named
Teodorico Cleopas @ "Tidoy". 12

It is clear that Demetrio Cleopas did not see the actual killing of the victim. He only learned
of the details of the killing from his son Epifanio. Thus, SPO2 Atupan's testimony that
Demetrio Cleopas named his sons as the perpetrators of the crime, without mention of
appellant Florencio Pirame, and which declaration was based on Epifanio Cleopas'
admission of guilt for the killing, is in effect hearsay twice removed. It cannot be used to
absolve appellant of his participation in the crime. Further still, the testimony of used
Teodorico Cleopas that he never saw appellant on the date of the incident, 13 does not
support the declarations of Demetrio Cleopas, as Teodorico's testimony cannot be expected
to implicate a co-accused, being self-serving as it is.

Appellant next assails the trial court's dictum to the effect that the testimonies of the
prosecution witnesses, viewed in their totality, point to the guilt of all three accused,
including appellant. 14 He claims that it was only Cipriano Supero who testified that he saw
appellant hold the arms of the victim while the other two accused hit him on the head with
a stick and a not steel pipe. This, he asserts, was not corroborated by any other prosecution
witness, hence there was no "unifying point" in their testimonies.

That the testimony of Supero was not corroborated by any other witness is no moment. It is
axiomatic that the testimonies of witnesses are weighed, not numbered, and the testimony
of a single witness may suffice for conviction if found trustworthy and reliable. That the
prosecution had only one eyewitness to implicate appellant hardly negates its cause. There
is no law, which requires that the testimony of a single witness needs corroboration except
where the law expressly mandates such corroboration. 15 Indeed, the testimony of a single
witness, when positive and credible, is sufficient to support a conviction even of murder.
Hence, a finding of guilt may be based on the uncorroborated testimony of a single witness
when the trial court finds such testimony positive and credible. 16

On this score, appellant that the testimony of Cipriano Supero should not have been
considered by the trial court, as Supero is allegedly a coached and rehearsed witness. In
effect, appellant assails Supero's credibility. He points out that on direct examination,
Supero initially stated that the killing took place "inside the house of Demetrio Cleopas",
but later on modified his answer to clarify that the victim was killed "outside the
house." 17 In addition, appellant emphasizes that it took Supero two months after the death
of the victim to come out and volunteer to two testify as to what he had seen transpire on
the morning of March 18, 1993. Appellant asserts that this delay further proves that Supero
was a rehearsed witness.

These contentions are without merit. The initial lapse in Supero's testimony as to whether
the crime was committed inside or outside of the house of Demetrio Cleopas was eventually
settled by the trial court when it asked clarificatory questions. Supero was nonetheless able
to testify on the actual killing of the victim, as well as identify all the perpetrators of the
crime. The earlier inconsistency in his testimony, slight as it is, cannot suffice to impeach
this witness. Settled is the rule that inconsistencies in the testimonies of witnesses when
referring only to minor details and collateral matters do not affect either the substance of
their declaration, their veracity, or the weight of their testimony. Although there may be
inconsistencies on minor details, the same do not impair the credibility of the witnesses
where there is consistency in relating the principal occurrence and positive identification of
the assailants. Slight contradictions in fact even serve to strengthen the sincerity of the
witness and prove that his testimony is not rehearsed. They are safeguards against
memorized perjury. 18

Further still, the delay of Supero in volunteering to testify on the incident is of little
consequence. At the time Supero witnessed the killing, all he saw was the striking of the
victim by the assailants while appellant held the victim's arms. The victim then fell to the
ground, motionless. Thereafter, Supero left, fearful of what he had seen. 19 He did not
divulge this to anyone else except his mother, for they were afraid of being involved in that
matter. 20

At the time he witnessed the incident, Supero was not aware that the victim had died as a
result of the assault. He came to know that the victim died only two months after, when
word spread that the body of the victim was discovered in the well of Demetrio
Cleopas. 21 Upon learning of the victim's fate, he came forward to reveal what he had seen
when he testified in open court. Hence, appellant cannot claim that Supero's report and
testimony on the incident was belatedly made. Thus, the two-month delay in reporting the
account of the eyewitness in this case does not give rise to any doubt on the veracity thereof.
As we have held, the belated report and the reluctance of witnesses to testify in criminal
actions is a matter of judicial notice. 22

Against Supero's positive identification of appellant as the person who held the hands of
the victim while accused Teodorico and Epifanio Cleopas struck him, appellant advanced
the defense of alibi. He testified that he was harvesting palay the whole day at Barangay
Corazon, San Miguel, Bohol on March 18, 1993. 23 The distance of the house of Demetrio
Cleopas from his house, which is located at the center of Barangay Corazon, 24 was
estimated by him to be seven kilometers. 25 We find this distance of seven kilometers to be
less than sufficient for purposes of an air-tight alibi. Alibi is an affirmative defense and,
considering that it is easy to conduct, when an accused relies thereon, he has the burden of
proving it, i.e., that he could not have been at the scene of the crime at the time of its
commission. For alibi to prosper, an accused must prove that not only was he absent at the
scene of the crime at the time of its commission, but also that it was physically impossible
for him to be so situated at said instance. 26This, appellant failed to do, more so when his
claim that he was harvesting palay on the day the killing took place was not corroborated
by anyone else.

Appellant asserts that the trial erred in finding appellant a conspirator, hence guilty of
murder beyond reasonable doubt. We find the trial court's finding of the existence of a
conspiracy to kill the victim well-taken. Cipriano Supero's testimony discloses that
appellant held the victim's arms in a cross-wise manner while Epifanio and Teodorico
Cleopas struck the victim on the forehead with a steel pipe and a long piece of wood,
respectively. Thereafter, the victim fell to the ground. 27 These concurrent actions of
appellant and his co-accused reveal a mutual intention and determination to kill the victim,
an indicator of conspiracy. Conspiracy, in order to exist, does not require an agreement for
an appreciable period prior to the commission of the crime; it exists if, at the time of the
commission of the offense, the accused had the same purpose and was united in its
execution. 28 The fact that appellant conspired in the commission of the crime charged was
sufficiently and convincingly shown by his active participation in holding the victim to
render him immobile, thus enabling the other two accused to consummate their dastardly
act of killing the victim. 29

We note, however, that the trial court in its decision did not make any definitive finding on
the circumstances which qualified the crime to murder. While the information charging
appellant and the other accused alleged that the commission of the crime was attended by
treachery, evident premeditation and abuse of superior strength, the court did not expound
upon or point to the existence of these aggravating circumstances in the case at bar. In
other words, it did not state its basis for qualifying the crime to murder. We are thus
required to determine if the crime at bar could be qualified to murder, to resolve this
appeal. It is axiomatic that an appeal, once accepted by this Court, throws the entire case
open to review, and that this Court has the authority to review matters, not specifically
raised or assigned as errors by the parties, if their consideration is necessary in arriving at
a just resolution of the case. 30

In the present case, the prosecution alleged the attendance of treachery in the commission
of the crime. The requisites for treachery to be a qualifying circumstance are: (1) the
employment means, method, or manner of execution which will ensure the safety of the
malefactor from defensive or retaliating acts on the part of the victim, no opportunity being
given to the latter to defend himself or to retaliate; and (2) deliberate or conscious adoption
of such means, method, or manner of execution. 31

Cipriano Supero testified that appellant Florencio Pirame held the arms of the victim while
Epifanio and Teodorico Cleopas struck the victim on the head, causing his death. The
victim was defenseless during the attack as his hands were restrained by appellant,
facilitating the beating of the victim by the other perpetrators. Clearly, the manner by
which the victim was restrained and assaulted was deliberately and consciously adopted by
his assailants to ensure. Thus, there was treachery in the killing of the victim, as the
offenders employed means, methods or forms in the execution thereof which tended
directly and specially to insure its execution, without risk to themselves arising from the
defense which the victim might take. 32

The attendance of evident premeditation in the commission of the crime, though alleged in
the information, is not supported by the evidence, as there is no showing as to when
appellant and his co-accused determined to kill the victim. Likewise, abuse of superior
strength, being absorbed by treachery, 33 cannot be considered as an aggravating
circumstance in this case.

As treachery was resent when the victim as killed, we find that the crime of murder was
committed by appellant and his co-accused. At the time of the commission of the crime, the
imposable penalty for murder was reclusion temporal in its maximum period to death.
There being no aggravating or mitigating circumstances attending the killing, the
applicable penalty would thus be the medium period of the imposable penalty, which
is reclusion perpetua. 34

We concur with the trial court's award of P50,000.00 each from appellant Florencio Pirame
and co-accused Teodorico Cleopas as death indemnity to the victim's heirs, which is in line
with current jurisprudence. We also find the amount of P23,214.00 awarded by the trial
court as "burial and incidental expenses" supported by the records. 35The award of
P50,000.00 from each accused as moral and exemplary damages, however, is unsupported.
The widow of the victim did not testify on any mental anguish or emotional distress, which
she suffered as a result of her husband's death. The absence of any generic aggravating
circumstance attending the crime likewise precludes the award of exemplary damages.

WHEREFORE, the instant appeal is DENIED. The decision of the Regional Trial Court
convicting appellant Florencio Pirame of the crime of murder and sentencing him
to reclusion perpetua, and to pay the widow of the victim P50,000.00 as civil indemnity and
P23,214.00 as actual damages, as well as the costs is AFFIRMED, but the award of
P50,000.00 as moral and exemplary damages is hereby DELETED, there being no legal and
factual basis therefor.1âwphi1.nêt

SO ORDERED.

[G.R. No. 152457 : April 30, 2008]

RODOLFO R. MAHINAY, Petitioner, v. COURT OF APPEALS, CIVIL SERVICE

COMMISSION & PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondents.

DECISION

AZCUNA, J.:

This is a Petition for Certiorari1 alleging that the Court of Appeals (CA) acted with grave
abuse of discretion amounting to lack or excess of jurisdiction in issuing the Resolutions
dated October 30, 2000, April 6, 2001 and March 6, 2002, dismissing petitioner's Petition
for Certiorari, which in effect sustained the Decision of the Civil Service Commission (CSC)
dismissing petitioner from the service.

The facts are as follows:

On June 10, 1998, the Philippine Economic Zone Authority (PEZA), through Officer-in-
charge Jesus S. Sirios, charged its employee, petitioner Rodolfo R. Mahinay, for receiving
unofficial fees from FRITZ Logistics Phils. Inc. by reason of his office and in consideration
of the latter's rendering escort service to FRITZ' trucks from Baguio City to Manila and
vice-versa. The formal charge reads:

That from 1996 to receipt by the BCEZ Police Station Command of P/Major JOSE C.
PANOPIO's February 19, 1998 directive prohibiting all BCEZ Policemen from accepting
unofficial fees from FRITZ Logistics Phils. Inc., respondent P/Capt. RODOLDO R.
MAHINAY of the BCEZ Station Command received unofficial fees from FRITZ Logistics
Phils. Inc. by reason of his office and in consideration of the latter's rendering escort
service to FRITZ' trucks . . . from Baguio City to Manila and vice-versa, and whose
presence during such escort service is to help lessen delay in the scheduled trip of FRITZ'
cargo by police checkpoints and unscrupulous traffic enforcers encountered along the way,
particularly during implementation of the truck ban policy in Metro Manila.2

The said conduct of petitioner was alleged to be in violation of Sec. 46 (b) (9), Chapter 6,
Subtitle A, Title I, Book V of the Administrative Code of 1987 in relation to Sec. 22 (i), Rule
XIV of the Omnibus Civil Service Rules and Regulations.3

In his Answer, petitioner admitted receiving the fees from Fritz Logistics Phils., Inc., thus:

xxx

3. That respondent hereby states that the very purpose on why he, or any other special
PEZA Police Officer for that matter, is escorting freight trucks from Baguio City to their
point of destination is to ensure that the goods will be intact and safely and completely
delivered to their destinations; that it would therefore be inaccurate to state that their
rendering escort duty is purposely to "lessen delay in the scheduled trip xxx by police
checkpoints and unscrupulous traffic enforcers encountered along the way, particularly
during the implementation of the truck ban policy in Metro Manila," that the latter act
would just be incidental and relative to their main task above-mentioned;

4. That anent the charge, respondent hereby admits that before the directive by SPL.
P/MAJOR JOSE C. PANOPIO dated February 19, 1998, ALL police officers stationed at
the Baguio City Economic Zone (BCEZ) were receiving and amount of P300
VOLUNTARILY GIVEN by the FRITZ LOGISTICS PHILS., INC. (FRITZ, for brevity) as
and by way of traveling and meal allowance of an escort in proceeding back to Baguio City
after coming from NAIA; that hereto attached and made an integral part hereof as Annex
"I" is a copy of a confirmation letter by JERRY H. STEHMEIER, Managing Director of
FRITZ;

5. That herein respondent declares that his, as well as the other police officers' receipt of
the aforesaid amount of PhP 300.00 was done in all good faith with no intention whatsoever
of enriching themselves therefrom;

6. That, concededly, there is remitted by FRITZ to the BCEZ an amount of P500 for the
escorts as escort fee resulting into receipt by the escort in the amount of P400 NET; that is,
however, indisputable that the same will be received by the particular police officer who
went on escort duty after he shall have arrived from Manila and upon presentation of the
Certificate of Appearance secured from the Security Services Department of the Philippine
Economic Zone Authority x x x;

7. That, at first, there was no such thing as additional allowance from FRITZ but after the
transportation fare from Manila/Pasay City to Baguio City increased substantially by half,
as well as the costs of other incidental expenses ballooned, FRITZ voluntarily offered the
additional allowance after understanding very well that the P400 escort fee is not
reasonably sufficient; simple mathematics applied;

8. That, without being repetitive, it must be straightened for the record, that the giving of
the P300 by FRITZ was on its own volition without any demand from the escorts;

9. That after receipt of the DIRECTIVE from SPL. P/MAJOR PANOPIO, herein
respondent no longer received the P300.00 tendered by FRITZ through its drivers
whenever he does escort duty, that in fact, herein respondent directed all his men to stop
receiving the P300 allowance from FRITZ in compliance with the directive of their
superior, SPL. P/MAJOR PANOPIO;

10. That, like himself, respondent could very well say that all of the other Police Officers in
the BCEZ Force never received the additional allowance from FRITZ thereafter, that
almost every after an escort duty by a Police Officer, he silently complains that the P400
escort duty received from the Financial Services Division as remitted officially by FRITZ to
BCEZ was not sufficient in covering all the incidental expenses he incurred in escorting;

11. That it would not be amiss to state even that considering that these FRITZ closed trucks
being escorted leave Baguio City at 2:00 o'clock in the morning, more or less; that
considering the time, the escorts could not make cash advances for their expenses and
really have to shell out their personal money in the meantime to be reimbursed only after
the duty;

12. That on another point, herein respondent feels that this charge against him was only
maliciously hurled by some officers who take in slight the prudent and conscientious acts of
the respondent in protecting foremost the interest of PEZA;

13. That more particularly, BCEZ Officer-in-Charge Digna D. Torres maliciously imputed
these things to malign my reputation and personality after having learned that herein
respondent filed several criminal charges against her before the Office of the City
Prosecutor, Baguio City solely for the purpose of redressing a wrong committed against his
person and honor by Mrs. Torres.4

At the hearing of September 30, 1998, petitioner appeared with two counsels who
manifested that they were reiterating the defenses stated in petitioner's Answer. The
Hearing Committee required petitioner to put the manifestation in writing because it was,
in effect, a waiver of his right to be present and to be heard. Petitioner and his counsels left
after submitting the written waiver.

Thereafter, the Special Prosecutor presented his lone witness, Mr. Jerry H. Stehmeier,
managing director of FRITZ, who affirmed the contents of his Affidavit 5 dated September
9, 1998. He testified that the "extra amount" of P300 was in fact actually received by
petitioner, who exacted the same from FRITZ, for escorting their "trucks all the way to the
airport or all the way to our FRITZ office in Manila." The testimony was a recantation of
his earlier statement contained in a letter dated February 10, 1998 that the extra amount
was voluntarily given by FRITZ.

On January 8, 1999, the PEZA rendered a decision finding petitioner guilty of the offense
charged. The dispositive portion of the Decision reads:

VIEWED IN THE LIGHT OF THE FOREGOING, the Authority finds the Respondent
guilty of the offense as charged and is hereby meted out the penalty of forced resignation
without prejudice to the grant of monetary and other fringe benefits, as allowed by existing
law and the Civil Service Rules and Regulations.6

The PEZA held that all the elements of the offense charged were present in the case. The
testimony of Jerry H. Stehmeier proved that the amount of P300 per escort was received by
petitioner, and that the receipt of the money was done in the course of official duties.
Petitioner's receipt of P300 per escort from FRITZ was over and above what was officially
paid by PEZA to petitioner for escort services rendered.

Petitioner's motion for reconsideration was denied by the PEZA in a Resolution dated
March 11, 1999.

Petitioner appealed to the CSC. In Resolution No. 000878 dated March 30, 2000, the CSC
upheld the PEZA's decision, but modified the penalty of forced resignation to dismissal
from the service in accordance with Sec. 52 (A.9), Rule IV, Uniform Rules on
Administrative Cases in the Civil Service and Sec. 22 (i), 7 Rule XIV of the Omnibus Civil
Service Rules and Regulations. The dispositive portion of the CSC Decision reads:

WHEREFORE, the appeal of Rodolfo Mahinay is hereby dismissed. Accordingly, the

decision dated January 8, 1999 of PEZA finding Mahinay guilty of violating Sec. 46 (b) No.
9, Book V of E.O. 292 is affirmed. However the penalty of Forced Resignation is modified
to Dismissal pursuant to section 52, Rule IV of the Uniform Rules on Administrative Cases
in the Civil Service.8

Petitioner's motion for reconsideration was denied by the CSC in Resolution No. 001698
dated July 21, 2000. Petitioner received a copy of the resolution on August 11, 2000.

On September 12, 2000, petitioner filed with the CA a Motion for Extension of Time to File
a Petition for Certiorari, requesting for a period of up to November 10, 2000 within which
to file his petition.

On October 30, 2000, the CA issued a Resolution denying the said motion for being the
wrong mode of appeal and for being filed out of time. The CA stated that since the assailed
Resolution was rendered by a quasi-judicial body, the proper mode of appeal is a Petition
for Review under Rule 43 of the Rules of Court, which petition should be filed within 15
days from notice of the resolution.

On November 9, 2000, petitioner filed the Petition for Certiorariunder Rule 65 of the Rules
of Court, seeking the nullification of the CSC Resolution dismissing him from the service.

On April 6, 2001, the CA issued a Resolution stating that it had promulgated the Resolution
dated October 30, 2000 dismissing the Petition for Certiorari, and that the Judicial Records
Division Report showed that neither a motion for reconsideration nor a Supreme Court
petition on the resolution had been filed. Consequently, the CA ordered the issuance of the
corresponding entry of judgment, and noted without action the Petition for Certiorari filed
on November 9, 2000.

Petitioner's motion for reconsideration was denied by the CA of Appeals in a Resolution

dated March 6, 2002.

Hence, this petition.

The issue in this case is whether or not the CA acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in dismissing petitioner's appeal by way of
special civil action for certiorari on the ground that it was the wrong mode of appeal and
that the appeal was filed out of time.

Petitioner contends that the CA erred in ruling that the Petition for Certiorari was made to
substitute a lost appeal because while a Petition for Review under Rule 43 was available, it
was not an adequate remedy for petitioner considering that he was dismissed from the
service on June 9, 1999 by PEZA even before the case was appealed to the Civil Service on
June 22, 1999.

The contention is without merit.

As provided by Rule 43 of the Rules of Court, the proper mode of appeal from the decision
of a quasi-judicial agency, like the CSC, is a Petition for Review filed with the CA.

The special civil action of certiorari under Rule 65 of the Rules of Court may be resorted to
only when any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its/his jurisdiction or with grave abuse of discretion amounting
to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law.

In this case, petitioner clearly had the remedy of appeal provided by Rule 43 of the Rules of
Court. Madrigal Transport, Inc. v. Lapanday Holdings Corporation9 held:
Where appeal is available to the aggrieved party, the action for certiorari will not be
entertained. Remedies of appeal (including petitions for review) and certiorari are mutually
exclusive, not alternative or successive. Hence, certiorari is not and cannot be a substitute
for an appeal, especially if one's own negligence or error in one's choice of remedy
occasioned such loss or lapse. One of the requisites of certiorari is that there be no available
appeal or any plain, speedy and adequate remedy. Where an appeal is
available, certiorari will not prosper, even if the ground therefor is grave abuse of
discretion.

The Court is aware of instances when the special civil action of certiorarimay be resorted to
despite the availability of an appeal, such as when public welfare and the advancement of
public policy dictate; when the broader interests of justice so require; when the writs issued
are null; and when the questioned order amounts to an oppressive exercise of judicial
authority.10 However, the circumstances in this case do not warrant the application of the
exception to the general rule provided by Rule 43 of the Rules of Court.

The CA, therefore, properly denied petitioner's Motion for Extension of Time to File a
Petition for Certiorari, which in effect dismissed his Petition for Certiorari.

There have been instances when a Petition for Certiorariwould be treated as a Petition for
Review if filed within the reglementary period. In this case, the petition was filed beyond
the reglementary period for filing an appeal under Rule 43, which period is within 15 days
from notice of the judgment. Petitioner received a copy of the CSC Resolution dated July
21, 2000 on August 11, 2000, so his last day to file an appeal would be August 26, 2000.
However, petitioner filed his Motion for Extension of Time to File a Petition
for Certiorari on September 12, 2000, while the petition was actually filed on November 9,
2000. Thus, the Court of Appeals correctly held that the appeal was filed out of time.

Consequently, the decision of the CSC dismissing petitioner from the service stands. The
Court deems it proper to reiterate that dismissal from the service carries with it
disqualification for reemployment in the government service, and forfeiture of retirement
benefits except leave credits. Petitioner is, therefore, entitled to receive the monetary
equivalent of his accrued leave credits.11

WHEREFORE, the Petition is DISMISSED for lack of merit.

No costs.

SO ORDERED.
[G.R. No. 127473. December 8, 2003]

PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS, JUDY AMOR,

JANE GAMIL, minors GIAN CARLO AMOR represented by ATTY. OWEN AMOR, and
CARLO BENITEZ represented by JOSEPHINE BENITEZ, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking
the reversal of the decision[1] dated August 12, 1996, in CA-G.R. CV No. 38327 [2] and the
Resolution dated November 15, 1996 denying the motion for reconsideration of Philippine
Airlines, Inc. (petitioner for brevity).

Private respondents Judy Amor, Jane Gamil, minor Gian Carlo Amor, represented by his
father, Atty. Owen Amor, and, minor Carlo Benitez, represented by his mother, Josephine
Benitez, filed with the Regional Trial Court (Branch 53), Sorsogon, Sorsogon, a
complaint[3] for damages against petitioner due to the latters failure to honor their
confirmed tickets.

In support of their claim, private respondents presented evidence establishing the following
facts:

Private respondent Judy Amor purchased three confirmed plane tickets for her and her
infant son, Gian Carlo Amor as well as her sister Jane Gamil for the May 8, 1988, 7:10
a.m.flight, PR 178, bound for Manila from defendants branch office
in Legaspi City. Judy Amor, a dentist and a member of the Board of Directors of
the Sorsogon Dental Association, was scheduled to attend the National Convention of the
Philippine Dental Association from May 8 to 14, 1988 at the Philippine International
Convention Center. [4]

On May 8, 1988, Judy with Gian, Jane and minor Carlo Benitez, nephew of Judy and Jane,
arrived at the Legaspi Airport at 6:20 a.m. for PR 178. Carlo Benitez was supposed to use
the confirmed ticket of a certain Dra. Emily Chua.[5] They were accompanied by Atty.
Owen Amor and the latters cousin, Salvador Gonzales who fell in line at the check-in
counter with four persons ahead of him and three persons behind him [6] while plaintiff
Judy went to the office of the station manager to request that minor plaintiff Carlo Benitez
be allowed to use the ticket of Dra. Chua.[7] While waiting for his turn, Gonzales was asked
by Lloyd Fojas, the check-in clerk on duty, to approach the counter. Fojas wrote something
on the tickets which Gonzales later read as late check-in 7:05. When Gonzales turn
came, Fojas gave him the tickets of private respondents Judy, Jane and Gian and told him
to proceed to the cashier to make arrangements.[8]
Salvador then went to Atty. Amor and told him about the situation. Atty. Amor pleaded
with Fojas, pointing out that it is only 6:45 a.m., but the latter did not even look at him or
utter any word. Atty. Amor then tried to plead with Delfin Canonizado and
George Carranza, employees of petitioner, but still to no avail. Private respondents were
not able to board said flight. The plane left at 7:30 a.m., twenty minutes behind the original
schedule.[9]

Private respondents went to the bus terminals hoping to catch a ride for Manila. Finding
none, they went back to the airport and tried to catch an afternoon flight. [10] Unfortunately,
the 2:30 p.m. flight, PR 278, was cancelled due to aircraft situation. [11] Private respondents
were told to wait for the 5:30 p.m. flight, PR 180. They checked-in their bags and were told
to hand in their tickets. Later, a PAL employee at the check-in counter called out the name
of private respondent minor Carlo Benitez. Plaintiff Judy approached the counter and was
told by the PAL personnel that they cannot be accommodated. Fojas who was also at the
counter then removed the boarding passes inserted in private respondents tickets as well as
the tags from their luggages.[12]

Manuel Baltazar, a former Acting Manager of petitioner in Legaspi City in May 1988,
testified that based on his investigation, the private respondents, although confirmed
passengers, were not able to board PR 178 in the morning of May 8, 1988 because there
were go-show or waitlisted and non-revenue passengers who were accommodated in said
flight. He also noted that there was overbooking for PR 178.[13]

On the other hand, petitioner contends that private respondents are not entitled to their
claim for damages because they were late in checking-in for PR 178; and that they were
only chance or waitlisted passengers for PR 180 and were not accommodated because all
confirmed passengers of the flight had checked-in. In support thereof, petitioner presented
Lloyd Fojas, who testified, as follows:

In the morning of May 8, 1988, he was on duty at the check-in counter of

the Legaspi Airport. He was the one who attended to the tickets of private respondents
which were tendered by Salvador Gonzales at 7:05 a.m. when the counter was already
closed. The clock at the check-in counter showed that it was already 7:05 and so he told
Gonzales that they are already late and wrote late check-in, 7:05 on private respondents
tickets. The flight was scheduled to leave at 7:10 a.m. and checking-in is allowed only until
30 minutes before departure time. At the time private respondents went to the check-in
counter, passengers were already leaving the pre-departure area and going towards the
plane and there were no more passengers in the check-in area, not even waitlisted
passengers. The baggages of the passengers have been loaded in the aircraft. Gonzales left
and later came back with Atty. Amor who pleaded that plaintiffs be accommodated in the
flight. He told Atty. Amor to go to his supervisor to re-book the tickets because there were
no more boarding passes and it was already time for boarding the plane. Atty. Amor then
left the counter. [14]

On cross-examination, Fojas testified that he did not know how many waitlisted or non-
revenue passengers were accommodated or issued boarding passes in the 7:00 a. m. and in
the afternoon flight of May 8, 1988.[15]

After trial, the RTC rendered judgment upholding the evidence presented by private
respondents, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

(a) ordering the defendant to reimburse the plaintiffs the amount of P1,171.60 representing
the purchase price of the four (4) plane tickets;

(b) condemning the defendant to pay plaintiffs Judy Amor and Jane Gamil the amount
of P250,000.00 each as moral damages, P200,000.00 as exemplary damages,
plus P100,000.00 as actual damages;

(c) for the defendant to pay plaintiffs the amount of P30,000.00 as attorneys fees,
plus P500.00 for every appearance, or a total of P10,500.00 for 21 actual appearance (sic) in
court, P2,000.00 as incidental litigation expenses, and to pay the cost of the suit.

SO ORDERED.[16]

Aggrieved, petitioner appealed to the Court of Appeals (CA for brevity) which affirmed the
judgment of the trial court in toto and denied petitioners motion for reconsideration.

Hence, the present petition of PAL, raising the following issues:

WHETHER PRIVATE RESPONDENTS WERE LATE CHECKED-IN PASSENGERS

AND WHETHER THE FAILURE OF AN AIRLINE TO ACCOMMODATE A
PASSENGER WHO CHECKED IN LATE IS ACTIONABLE SO AS TO ENTITLE
THEM TO DAMAGES.

II

ASSUMING ARGUENDO THAT PETITIONER IS LIABLE, WHETHER THE AMOUNT

OF DAMAGES AWARDED TO PRIVATE RESPONDENTS IS EXCESSIVE,
UNCONSCIONABLE AND UNREASONABLE.[17]

In support of the first issue, petitioner argues:

(1) While ordinarily, the findings of the CA are accepted as conclusive by this Court, there
are instances when the Court may make its own findings such as when the appellate court
based its findings on speculation, surmises or conjectures. The appellate court erroneously
gave too much reliance on the testimony of Baltazar who is a disgruntled former employee
and relative of private respondent Amor. He was not present at the time of the
incident. Baltazar merely interpreted the flight manifest and made a lot of speculations
which is undeserving of attention and merit.

(2) Its employees are adequately trained and service oriented that they would not dare
violate company rules and regulations. They are aware of the drastic consequences that
may befall them as what happened to Baltazar.

(3) As to PR 180, private respondents were merely waitlisted in said flight hence it was
known to them that their accommodation in said flight was dependent upon the failure of
any confirmed passenger to check-in within the regulation check-in time. Unfortunately for
them, all the confirmed passengers on PR 180 checked-in on time.

In support of the second issue, petitioner contends:

(1) The award of actual, moral and exemplary damages to private respondents have no
factual nor legal basis at all. Its failure to accommodate private respondents on Flights PR
178, 278 and 180 was not motivated by bad faith or malice but due to a situation which
private respondents brought upon themselves. It had exerted utmost and sincere effort to
lessen the agony and predicament of private respondents. They immediately made
protective bookings for private respondents on the 2:30 p.m. flight, PR 278, which
unfortunately was cancelled due to aircraft situation. Upon cancellation of PR 278, they
made special arrangements to enable private respondents to have first priority in PR 180 in
case of a no show confirmed passenger.

(2) To award damages to a passenger who checked-in late would place a premium or
reward for breach of contract that would encourage passengers to intentionally check-in
late with the expectation of an award of damages.

(3) Moral and exemplary damages as well as attorneys fees are not recoverable in damage
suits predicated on breach of contract of carriage unless there is evidence of fraud, malice
or bad faith on the part of the carrier. Even assuming arguendo that petitioner is liable for
damages, the amounts awarded in favor of private respondents are excessive, unreasonable
and unconscionable. The primary object of an award of damages in a civil action is
compensation or indemnity or to repair the wrong that has been done. Damages awarded
should be equal to, and commensurate with, the injury sustained.

(4) It was erroneous to award damages in favor of Jane Gamil when she never appeared
before the trial court to prove her claim for damages.
In their Comment, private respondents stress that the fact they were not late in checking-in
for PR 178 has been substantially established in the hearing before the trial court and
affirmed by the CA. They maintain that, contrary to the assertion of petitioner, they have
established their case not only by a preponderance of evidence but by proof that is more
than what is required by law justifying the factual findings of the trial court and the CA.

Private respondents point out that since the issues raised by this petition are factual and do
not fall under exceptional circumstances, there is nothing left to be reviewed or examined
by the Supreme Court.

As to the damages awarded, private respondents contend that the amounts awarded are
not excessive, unconscionable or unreasonable because of the high-handed, malicious,
dictatorial and savage act of petitioners employee which caused them untold mental
anguish, excruciating pain, public contempt and ridicule, sleepless nights and other forms
of moral suffering.

In its Reply, petitioner reiterates its earlier points and questions once more the credibility
of private respondents witnesses, particularly Atty. Owen Amor, Salvador Gonzales and
Manuel Baltazar who are related to the respondents by blood or affinity.

In their Rejoinder, private respondents aver that the findings of facts of the courts a
quo were based not only on the testimonies of their witnesses but also on petitioners own
employee, Lloyd Fojas, who testified that there were non-revenue, go-show and waitlisted
passengers who were accommodated in PR 178. They reiterate their position that where
there is a question regarding the credibility of witnesses, the findings of trial courts are
generally not disturbed by appellate courts. Finally, as to the damages awarded, private
respondents claim that there was substantial basis in awarding such amounts.

Evidently, in resolving the two issues raised in the present petition, it is inevitable and most
crucial that we first determine the question whether or not the CA erred in upholding the
RTC ruling that private respondents were late in checking-in. Both issues call for a review
of the factual findings of the lower courts.

In petitions for review on certiorari under Rule 45 of the Rules of Court, the general rule is
that only questions of law may be raised by the parties and passed upon by this Court.
[18]
Factual findings of the appellate court are generally binding on us especially when in
complete accord with the findings of the trial court. [19] This is because it is not our function
to analyze or weigh the evidence all over again.[20] However, this general rule admits of
exceptions, to wit:

(a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on
speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken,
absurd or impossible; (d) when the judgment of the Court of Appeals was based on a
misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court
of Appeals, in making its findings, went beyond the issues of the case and the same are
contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties and which, if
properly considered, would justify a different conclusion; and, (h) where the findings of
fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions
without citation of specific evidence, or where the facts set forth by the petitioner are not
disputed by the respondent, or where the findings of fact of the Court of Appeals are
premised on the absence of evidence and are contradicted by the evidence on record. [21]

Petitioner invokes exception (b).

As to the first issue: Whether or not private respondents checked-in on time for PR
178. The determination of this issue is necessary because it is expressly stipulated in the
airline tickets issued to private respondents that PAL will consider the reserved seat
cancelled if the passenger fails to check-in at least thirty minutes before the published
departure time.[22]

After a careful review of the records, we find no reason to disturb the affirmance by the CA
of the findings of the trial court that the private respondents have checked-in on time; that
they reached the airport at 6:20 a.m., based on the testimonies of private respondent
Judy Amor, and witnesses Salvador Gonzales and Atty. Owen Amor who were consistent in
their declarations on the witness stand and corroborated one anothers statements; and that
the testimony of petitioners lone witness, Lloyd Fojas is not sufficient to overcome private
respondents evidence.

We have repeatedly held that the truth is established not by the number of witnesses but by
the quality of their testimonies. [23] In the present case, it cannot be said that the quality of
the testimony of petitioners lone witness is greater than those of the private
respondents. Fojas testified that when respondents went to the check-in counter, there were
no more persons in that area since all the passengers already boarded the plane.
[24]
However, the testimonies of Manuel Baltazar and Judy Amor together with the manifest,
Exhibits E, E-1 and E-2, point to the fact that many passengers were not able to board said
flight, including confirmed passengers, because of overbooking.[25]

It is a well-entrenched principle that absent any showing of grave abuse of discretion or

any palpable error in its findings, this Court will not question the probative weight
accorded by the lower courts to the various evidence presented by the parties. As we
explained in Superlines Transportation Co. Inc., vs. ICC Leasing & Financing Corporation:
[26]

The Court is not tasked to calibrate and assess the probative weight of evidence adduced by
the parties during trial all over againSo long as the findings of facts of the Court of Appeals
are consistent with or are not palpably contrary to the evidence on record, this Court shall
decline to embark on a review on the probative weight of the evidence of the parties.
[27]
(Emphasis supplied)

It is also well established that findings of trial courts on the credibility of witnesses is
entitled to great respect and will not be disturbed on appeal except on very strong and
cogent grounds.[28] Petitioner failed to demonstrate that the trial court committed any error
in upholding the testimonies of private respondents witnesses. We find that the CA
committed no reversible error in sustaining the findings of facts of the trial court.

Private respondents who had confirmed tickets for PR 178 were bumped-off in favor of
non-revenue passengers. Witness Manuel Baltazar, a former Acting Manager of petitioner,
evaluated the manifest for PR 178 and found that there were non-revenue passengers
allowed to go on board. He specifically identified the family of Labanda, a certain Mr. Luz,
petitioners former branch manager, and, a certain Mr. Moyo. [29] Although petitioner had
every opportunity to refute such testimony, it failed to present any countervailing
evidence. Instead, petitioner merely focused on assailing the credibility of Baltazar on the
ground that he was a disgruntled employee and a relative of private respondents. Apart
from the bare allegations in petitioners pleadings, no evidence was ever presented in court
to substantiate its claim that Baltazar was a disgruntled employee that impelled him to
testify against petitioner.

As to his relationship with private respondents, this Court has repeatedly held that a
witness relationship to the victim does not automatically affect the veracity of his or her
testimony.[30]While this principle is often applied in criminal cases, we deem that the same
principle may apply in this case, albeit civil in nature. If a witness relationship with a party
does not ipso factorender him a biased witness in criminal cases where the quantum of
evidence required is proof beyond reasonable doubt, there is no reason why the same
principle should not apply in civil cases where the quantum of evidence is only
preponderance of evidence.

As aptly observed by the CA which we hereby adopt:

Ironically for the defendant, aside from appellants assumption that Baltazar could be a
disgruntled former employee of their company and could be biased (which same reason
could be attributed to Lloyd Fojas) due to a distant relationship with the plaintiff, it offered
no proof or evidence to rebut, demean and contradict the substance of the testimony
of Baltazar on the crucial point that plaintiffs-appellees were bumped off to accommodate
non-revenue, waitlisted or go-show passengers. On this fact alone, defendants position
weakens while credibly establishing that indeed plaintiffs arrived at the airport on time to
check-in for Flight PR 178. Further emphasis must be made that Lloyd Fojas even affirmed
in court that he can not recall how many PR 178 boarding passes he had at the check-in
counter because management has authority to accommodate in any flight and
correspondingly issue boarding passes to non-revenue passengers (pages 15-16,
TSN, January 24, 1990).[31]

Indeed, petitioner, through its lone witness Fojas, could only answer during his
examination on the witness stand that he is unable to recall the circumstances
recommending the issuances of boarding passes to waitlisted and that it is the management
which has the authority to issue boarding passes to non-revenue passengers. [32] Even in the
afternoon flight, PR 180, Fojas could not squarely deny that confirmed paying passengers
were bumped-off in favor of non-revenue ones.[33]

The CA likewise correctly concluded that there was overbooking in the morning flight on
the basis of the testimony of private respondents witness Manuel Baltazar, to wit:

ATTY. CALICA:

Q- There was a memorandum order of the PAL prohibiting overbooking. Are you aware of
CAB Regulation No. 7 on boarding passengers?

WITNESS:

A- Yes.

ATTY. CALICA:

Q- You will agree with me that this regulation allows only overbooking by 10%?

WITNESS:

A- Yes, that is a government regulation and the company regulation is different.

COURT:

Q- But in the morning flight of May 8, 1988, granting that the government regulation
allows only 10% overbooking, can you tell the Court from the manifest itself whether it
exceeded the 10% overbooking allowed by the regulation reckoning from the 109
passenger seater?

WITNESS:

A- With the capacity of 109, 10% of it will be 10 or 11, so if we add this it will not exceed
120 passengers.

COURT:

Q- In that flight how many were confirmed?

WITNESS:

Q- In that flight those passengers that were confirmed have a total of 126.

COURT:

Q- Even if when allowed the government regulation of overbooking, you will still exceed the
allowable overbooking number?

WITNESS:

A- Yes.[34] (Emphasis supplied)

This fact of overbooking, again, was not adequately refuted by petitioners evidence.

The appellate court aptly sustained the trial court in giving probative weight to the
testimony of private respondent Judy Amor that there were other passengers who were not
accommodated in flight PR 178, to wit:

Q: And how about you, what did you do when you arrived at
the Legaspi Airport at 6:20 while Salvador Gonzales was at the check-in counter to pay the
tickets?

A: I went to the Office of the OIC Manager at the right side of the Legaspi Terminal.

Q: Who was that Manager?

A: I was able to know his name as Delfin Canonizado.

Q: There were also people there near the table of Mr. Canonizado, do you know what were
they doing?

A: They were making complaints also because they were also scheduled for flight on that
day. They were not accommodated.[35] (Emphasis supplied)

We have noted an inconsistency in the testimony of private respondents witness, Salvador

Gonzales in the direct and cross-examinations. In his direct testimony, Gonzales stated that
while he was waiting in line at the check-in counter, with four persons still ahead of him,
Lloyd Fojas asked him to approach the counter, took private respondents tickets and wrote
something on them. It was only later on when his turn came, that he found out that
what Fojas wrote on the tickets was late check-n 7:05. On cross-examination, Gonzales
testified that it was only after the four persons ahead of him were accommodated
that Fojas wrote on the tickets late check-in 7:05. However, upon clarificatory questions
propounded by the trial court, Gonzales was able to clarify that Fojas had written the time
on the ticket before the four persons ahead of him were entertained at the counter.
[36]
Understandably, the lower courts found no cogent reason to discredit the testimony of
witness Gonzales.

We have held in an earlier case that a witness may contradict himself on the circumstances
of an act or different acts due to a long series of questions on cross-examination during
which the mind becomes tired to such a degree that the witness does not understand what
he is testifying about, especially if the questions, in their majority are leading and tend to
make him ratify a former contrary declaration.[37]

In fine, the findings of fact of the trial court, as sustained by the CA, have to be
respected. As we have consistently held, trial courts enjoy the unique advantage of
observing at close range the demeanor, deportment and conduct of witnesses as they give
their testimonies. Thus, assignment to declarations on the witness stand is best done by
them who, unlike appellate magistrates, can weigh firsthand the testimony of a witness.[38]

Anent the second issue as to whether or not the damages awarded are excessive, we rule in
the affirmative. The Court of Appeals committed an error in sustaining the ruling of the
trial court requiring petitioner to reimburse private respondents the amount of four plane
tickets, including the ticket for private respondent minor Carlo Benitez.

As admitted by private respondent Judy in her testimony, the only confirmed tickets for the
morning flight (PR 178) are the tickets for herself, her infant son, Gian Carlo and her sister
Jane Gamil. They had another ticket which Judy bought for a certain Dra. Emily Chua
who backed out and whose ticket they had intended to be transferred to Carlo Benitez.
[39]
Although it is clearly stated in the ticket that the same is non-transferrable, [40] Judy
testified that a PAL employee issued another ticket in the name of Carlo Benitez in lieu of
the ticket issued for Dra. Chua. However, an examination of the ticket issued, Exhibit C,
discloses that it does not state therein the flight number or time of departure. Consequently,
in the absence of competent evidence, private respondent Carlo Benitez complaint should
be dismissed.

We find no justifiable reason that warrants the award of P100,000.00 as actual damages in
favor of all private respondents. Article 2199 of the Civil Code, provides that actual or
compensatory damages may only be given for such pecuniary loss suffered by him as he has
duly proved. We explained in Chan vs. Maceda[41] that:

A court cannot rely on speculations, conjectures or guesswork as to the fact and amount of
damages, but must depend upon competent proof that they have been suffered by the
injured party and on the best obtainable evidence of the actual amount thereof. It must
point out specific facts which could afford a basis for measuring whatever compensatory or
actual damages are borne.[42]
All that was proved by herein private respondents was the amount of the purchase price of
the plane tickets of private respondents Judy, Jane and Gian Carlo. Only said amounts
should therefore be considered in awarding actual damages. As borne by the records,
private respondent Judy Amor paid P466.00 each for her ticket and that of Jane; while she
paid P46.60 for her infant Gian Carlo.[43] The amount of actual damages should therefore
be reduced to P978.60, payable to private respondent Judy Amor.

As to moral damages.

It should be stressed that moral damages are not intended to enrich a plaintiff at he
expense of the defendant but are awarded only to allow the former to obtain means,
diversion or amusements that will serve to alleviate the moral suffering he has undergone
due to the defendants culpable action. [44] We emphasized in Philippine National Bank vs.
Court of Appeals that moral damages are not punitive in nature but are designed to
somehow alleviate the physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar
injury unjustly caused to a person. We have held that even though moral damages are
incapable of pecuniary computation, it should nevertheless be proportional to and in
approximation of the suffering inflicted. And, to be recoverable, such damage must be the
proximate result of a wrongful act or omission the factual basis for which is satisfactorily
established by the aggrieved party. [45]

In the case at bar, private respondent Judy Amor testified that she felt ashamed when the
plane took off and they were left at the airport since there were many people there who saw
them including dentists like her. She also related that she missed the Philippine Dental
Convention scheduled on the 8th of May, 1988 where she was supposed to attend as a dentist
and officer of the Sorsogon Dental Association. They tried to look for buses bound
for Manila but missed those scheduled in the morning. They went back to the airport but
still failed to take an afternoon flight. Hence, she was forced to take a bus that evening
for Manila which did not allow her to sleep that night. [46] Private respondent Judy however
did not miss the whole convention as she was able to leave on the night of the first day of
the week-long convention.

While there is no hard and fast rule for determining what would be a fair amount of moral
damages, generally, the amount awarded should be commensurate with the actual loss or
injury suffered.[47]

The CA erred in upholding the trial courts award of moral damages based on
Judy Amors claim that there was a denigration of her social and financial standing. Private
respondent Judy failed to show that she was treated rudely or disrespectfully by petitioners
employees despite her stature as a dentist. As we held in Kierulf vs. Court of Appeals[48]
The social and financial standing of Lucila cannot be considered in awarding moral
damages. The factual circumstances prior to the accident show that no rude and rough
reception, no menacing attitude, no supercilious manner, no abusive language and highly
scornful reference was given her. The social and financial standing of a claimant of moral
damages may be considered in awarding moral damages only if he or she was subjected to
contemptuous conduct despite the offenders knowledge of his or her social and financial
standing.[49] (Emphasis supplied)

Nevertheless, we hold that private respondent Judy Amor is entitled to moral damages. In
a number of cases, we have pronounced that air carriage is a business possessed with
special qualities. In Singson vs. Court of Appeals,[50] we explained that:

A contract of air carriage is a peculiar one. Imbued with public interest, common carriers
are required by law to carry passengers safely as far as human care and foresight can
provide, using the utmost diligence of a very cautious person, with due regard for all the
circumstances. A contract to transport passengers is quite different in kind and degree
from any other contractual relation. And this because its business is mainly with the
traveling public. It invites people to avail of the comforts and advantages it offers. The
contract of carriage, therefore, generates a relation attended with a public duty. Failure of
the carrier to observe this high degree of care and extraordinary diligence renders it liable
for any damage that may be sustained by its passengers.[51]

As the lower courts have found, evidence positively show that petitioner has accommodated
waitlisted and non-revenue passengers and had overbooked more than what is allowed by
law, to the prejudice of private respondents who had confirmed tickets. Overbooking
amounts to bad faith[52] and therefore petitioner is liable to pay moral damages to
respondent Judy Amor.

Considering all the foregoing, we deem that the award of P250,000.00 as moral damages in
favor of private respondent Judy Amor is exorbitant. Where the damages awarded are far
too excessive compared to the actual losses sustained by the aggrieved party, the same
should be reduced to a more reasonable amount. [53] We find the amount of P100,000.00 to
be sufficient, just and reasonable.

We consider the award of actual damages in favor of private respondent Jane Gamil to be
inappropriate considering the testimony of Judy Amor that she was the one who paid for
the tickets.[54] Likewise, the appellate court erred in sustaining the award of moral damages
in favor of Jane Gamil as she never testified in court. It has been held that where the
plaintiff fails to take the witness stand and testify as to his social humiliation, wounded
feelings and anxiety, moral damages cannot be recovered.[55]

As to the award of exemplary damages, Article 2234 of the Civil Code provides that the
claimant must show that he would be entitled to moral, temperate or compensatory
damages before the court may consider the question whether or not exemplary damages
should be awarded.

Consequently, private respondent Jane Gamil, not being entitled to actual and moral
damages, is not entitled to exemplary damages.

The award of exemplary damages in favor of private respondent Judy Amor is warranted
in this case.[56] Waitlisted and non-revenue passengers were accommodated while private
respondent Judy Amor who had fully paid her fare and was a confirmed passenger was
unduly deprived of enplaning. Petitioner was guilty of overbooking its flight to the
prejudice of its confirmed passengers. This practice cannot be countenanced especially
considering that the business of air carriage is imbued with public character. We have
ruled that where in breaching the contract of carriage, the airline is shown to have acted in
bad faith, as in this case,[57] the award of exemplary damages in addition to moral and
actual damages is proper.[58] However, as in the matter of the moral damages awarded by
the trial court, we consider the amount of P200,000.00 as exemplary damages to be far too
excessive. The amount of P25,000.00 is just and proper.

We find the award of attorneys fees in this case to be in order since it is well settled that the
same may be awarded when the defendants act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest. [59]

WHEREFORE, we affirm the decision of the Court of Appeals with the following
MODIFICATIONS:

1. Petitioner is ordered to pay private respondent Judy Amor the amount of P978.60 as and
for actual damages; P100,000.00 as moral damages; P25,000.00 as exemplary damages; and
attorneys fees in the amount of P30,000.00 plus P500.00 for every appearance of private
respondents lawyer, or a total of P10,500.00 for 21 actual appearances in court; P2,000.00
as incidental litigation expenses; and costs of suit.

2. The claim for damages of private respondent Jane Gamil is DENIED for lack of
evidence.

3. The complaint of private respondent Carlo Benitez is DISMISSED for lack of cause of
action.

No pronouncement as to costs.

SO ORDERED.
G.R. No. L-22415 March 30, 1966

FERNANDO LOPEZ, ET AL., plaintiffs-appellants,

vs.
PAN AMERICAN WORLD AIRWAYS, defendant-appellant.

Ross, Selph and Carrascoso for the defendant-appellant.

Vicente J. Francisco for the plaintiffs-appellants.

BENGZON, J.P., J.:

Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal.
Since the value in controversy exceeds P200,000 the appeals were taken directly to this
Court upon all questions involved (Sec. 17, par. 3[5], Judiciary Act).

Stated briefly the facts not in dispute are as follows: Reservations for first class
accommodations in Flight No. 2 of Pan American World Airways — hereinafter otherwise
called PAN-AM — from Tokyo to San Francisco on May 24, 1960 were made with
PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin
Faustino, for then Senator Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo
Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano, Jr., (Milagros Lopez
Montelibano). PAN-AM's San Francisco head office confirmed the reservations on March
31, 1960.

First class tickets for the abovementioned flight were subsequently issued by
PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of
P9,444 for all of them was fully paid before the tickets were issued.

As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960,
arriving in Tokyo at 5:30 P.M. of that day. As soon as they arrived Senator Lopez requested
Minister Busuego of the Philippine Embassy to contact PAN-AM's Tokyo office regarding
their first class accommodations for that evening's flight. For the given reason that the first
class seats therein were all booked up, however, PAN-AM's Tokyo office informed Minister
Busuego that PAN-AM could not accommodate Senator Lopez and party in that trip as
first class passengers. Senator Lopez thereupon gave their first class tickets to Minister
Busuego for him to show the same to PAN-AM's Tokyo office, but the latter firmly
reiterated that there was no accommodation for them in the first class, stating that they
could not go in that flight unless they took the tourist class therein.

Due to pressing engagements awaiting Senator Lopez and his wife, in the United States —
he had to attend a business conference in San Francisco the next day and she had to
undergo a medical check-up in Mayo Clinic, Rochester, Minnesota, on May 28, 1960 and
needed three days rest before that in San Francisco — Senator Lopez and party were
constrained to take PAN-AM's flight from Tokyo to San Francisco as tourist passengers.
Senator Lopez however made it clear, as indicated in his letter to PAN-AM's Tokyo office
on that date (Exh. A), that they did so "under protest" and without prejudice to further
action against the airline.1äwphï1.ñët

Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM on
June 2, 1960 in the Court of First Instance of Rizal. Alleging breach of contracts in bad
faith by defendant, plaintiffs asked for P500,000 actual and moral damages, P100,000
exemplary damages, P25,000 attorney's fees plus costs. PAN-AM filed its answer on June
22, 1960, asserting that its failure to provide first class accommodations to plaintiffs was
due to honest error of its employees. It also interposed a counterclaim for attorney's fees of
P25,000.

Subsequently, further pleadings were filed, thus: plaintiffs' answer to the counterclaim, on
July 25, 1960; plaintiffs' reply attached to motion for its admittance, on December 2, 1961;
defendant's supplemental answer, on March 8, 1962; plaintiffs' reply to supplemental
answer, on March 10, 1962; and defendant's amended supplemental answer, on July 10,
1962.

After trial — which took twenty-two (22) days ranging from November 25, 1960 to January
5, 1963 — the Court of First Instance rendered its decision on November 13, 1963, the
dispositive portion stating:

In view of the foregoing considerations, judgment is hereby rendered in favor of the

plaintiffs and against the defendant, which is accordingly ordered to pay the plaintiffs the
following: (a) P100,000.00 as moral damages; (b) P20,000.00 as exemplary damages; (c)
P25,000.00 as attorney's fees, and the costs of this action.

So ordered.

Plaintiffs, however, on November 21, 1963, moved for reconsideration of said judgment,
asking that moral damages be increased to P400,000 and that six per cent (6%) interest per
annum on the amount of the award be granted. And defendant opposed the same. Acting
thereon the trial court issued an order on December 14, 1963, reconsidering the dispositive
part of its decision to read as follows:

In view of the foregoing considerations, judgment is hereby rendered in favor of the

plaintiffs and against the defendant, which is accordingly ordered to pay the plaintiffs the
following: (a) P150,000.00 as moral damages; (b) P25,000.00 as exemplary damages; with
legal interest on both from the date of the filing of the complaint until paid; and (c)
P25,000.00 as attorney's fees; and the costs of this action.

So ordered.
It is from said judgment, as thus reconsidered, that both parties have appealed.

Defendant, as stated, has from the start admitted that it breached its contracts with
plaintiffs to provide them with first class accommodations in its Tokyo-San Francisco flight
of May 24, 1960. In its appeal, however, it takes issue with the finding of the court a
quo that it acted in bad faith in the branch of said contracts. Plaintiffs, on the other hand,
raise questions on the amount of damages awarded in their favor, seeking that the same be
increased to a total of P650,000.

Anent the issue of bad faith the records show the respective contentions of the parties as
follows.

According to plaintiffs, defendant acted in bad faith because it deliberately refused to

comply with its contract to provide first class accommodations to plaintiffs, out of racial
prejudice against Orientals. And in support of its contention that what was done to
plaintiffs is an oftrepeated practice of defendant, evidence was adduced relating to two
previous instances of alleged racial discrimination by defendant against Filipinos in favor
of "white" passengers. Said previous occasions are what allegedly happened to (1) Benito
Jalbuena and (2) Cenon S. Cervantes and his wife.

And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first class
ticket from PAN-AM on April 13, 1960; he confirmed it on April 15, 1960 as to the Tokyo-
Hongkong flight of April 20, 1960; PAN-AM similarly confirmed it on April 20, 1960. At the
airport he and another Oriental — Mr. Tung — were asked to step aside while other
passengers - including "white" passengers — boarded PAN-AM's plane. Then PAN-AM
officials told them that one of them had to stay behind. Since Mr. Tung was going all the
way to London, Jalbuena was chosen to be left behind. PAN-AM's officials could only
explain by saying there was "some mistake". Jalbuena thereafter wrote PAN-AM to protest
the incident (Exh. B).

As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on September

29, 1958 from Bangkok to Hongkong, he and his wife had to take tourist class, although
they had first class tickets, which they had previously confirmed, because their seats in first
class were given to "passengers from London."

Against the foregoing, however, defendant's evidence would seek to establish its theory of
honest mistake, thus:

The first class reservations of Senator Lopez and party were made on March 29, 1960
together with those of four members of the Rufino family, for a total of eight (8) seats, as
shown in their joint reservation card (Exh. 1). Subsequently on March 30, 1960, two other
Rufinos secured reservations and were given a separate reservation card (Exh. 2). A new
reservation card consisting of two pages (Exhs. 3 and 4) was then made for the original of
eight passengers, namely, Senator Lopez and party and four members of the Rufino family,
the first page (Exh. 3) referring to 2 Lopezes, 2 Montelibanos and 1 Rufino and the second
page (Exh. 4) referring to 3 Rufinos. On April 18, 1960 "Your Travel Guide" agency
cancelled the reservations of the Rufinos. A telex message was thereupon sent on that date
to PAN-AM's head office at San Francisco by Mariano Herranz, PAN-AM's reservations
employee at its office in Escolta, Manila. (Annex A-Acker's to Exh. 6.) In said message,
however, Herranz mistakenly cancelled all the seats that had been reserved, that is,
including those of Senator Lopez and party.

The next day — April 1960 — Herranz discovered his mistake, upon seeing the reservation
card newly prepared by his co-employee Pedro Asensi for Sen. Lopez and party to the
exclusion of the Rufinos (Exh. 5). It was then that Herranz sent another telex wire to the
San Francisco head office, stating his error and asking for the reinstatement of the four (4)
first class seats reserved for Senator Lopez and party (Annex A-Velasco's to Exh. 6). San
Francisco head office replied on April 22, 1960 that Senator Lopez and party are waitlisted
and that said office is unable to reinstate them (Annex B-Velasco's to Exh. 6).

Since the flight involved was still more than a month away and confident that
reinstatement would be made, Herranz forgot the matter and told no one about it except
his co-employee, either Armando Davila or Pedro Asensi or both of them (Tsn., 123-124,
127, Nov. 17, 1961).

Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations employee

working in the same Escolta office as Herranz, phoned PAN-AM's ticket sellers at its other
office in the Manila Hotel, and confirmed the reservations of Senator Lopez and party.

PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's mistake after "Your
Travel Guide" phone on May 18, 1960 to state that Senator Lopez and party were going to
depart as scheduled. Accordingly, Jose sent a telex wire on that date to PAN-AM's head
office at San Francisco to report the error and asked said office to continue holding the
reservations of Senator Lopez and party (Annex B-Acker's to Exh. 6). Said message was
reiterated by Jose in his telex wire of May 19, 1960 (Annex C-Acker's to Exh. 6). San
Francisco head office replied on May 19, 1960 that it regrets being unable to confirm
Senator Lopez and party for the reason that the flight was solidly booked (Exh. 7). Jose
sent a third telex wire on May 20, 1960 addressed to PAN-AM's offices at San Francisco,
New York (Idlewild Airport), Tokyo and Hongkong, asking all-out assistance towards
restoring the cancelled spaces and for report of cancellations at their end (Annex D-Acker's
to Exh. 6). San Francisco head office reiterated on May 20, 1960 that it could not reinstate
the spaces and referred Jose to the Tokyo and Hongkong offices (Exh. 8). Also on May 20,
the Tokyo office of PAN-AM wired Jose stating it will do everything possible (Exh. 9).
Expecting that some cancellations of bookings would be made before the flight time, Jose
decided to withhold from Senator Lopez and party, or their agent, the information that
their reservations had been cancelled.

Armando Davila having previously confirmed Senator Lopez and party's first class
reservations to PAN-AM's ticket sellers at its Manila Hotel office, the latter sold and issued
in their favor the corresponding first class tickets on the 21st and 23rd of May, 1960.

From the foregoing evidence of defendant it is in effect admitted that defendant — through
its agents — first cancelled plaintiffs, reservations by mistake and thereafter deliberately
and intentionally withheld from plaintiffs or their travel agent the fact of said cancellation,
letting them go on believing that their first class reservations stood valid and confirmed. In
so misleading plaintiffs into purchasing first class tickets in the conviction that they had
confirmed reservations for the same, when in fact they had none, defendant wilfully and
knowingly placed itself into the position of having to breach its a foresaid contracts with
plaintiffs should there be no last-minute cancellation by other passengers before flight time,
as it turned out in this case. Such actuation of defendant may indeed have been prompted
by nothing more than the promotion of its self-interest in holding on to Senator Lopez and
party as passengers in its flight and foreclosing on their chances to seek the services of
other airlines that may have been able to afford them first class accommodations. All the
time, in legal contemplation such conduct already amounts to action in bad faith. For bad
faith means a breach of a known duty through some motive of interest or ill-will (Spiegel vs.
Beacon Participations, 8 NE 2d 895, 907). As stated in Kamm v. Flink, 113 N.J.L. 582, 175
A. 62, 99 A.L.R. 1, 7: "Self-enrichment or fraternal interest, and not personal ill-will, may
well have been the motive; but it is malice nevertheless."

As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew that plaintiffs'
reservations had been cancelled. As of May 20 he knew that the San Francisco head office
stated with finality that it could not reinstate plaintiffs' cancelled reservations. And yet said
reservations supervisor made the "decision" — to use his own, word — to withhold the
information from the plaintiffs. Said Alberto Jose in his testimony:

Q Why did you not notify them?

A Well, you see, sir, in my fifteen (15) years of service with the air lines business my
experience is that even if the flights are solidly booked months in advance, usually the flight
departs with plenty of empty seats both on the first class and tourist class. This is due to
late cancellation of passengers, or because passengers do not show up in the airport, and it
was our hope others come in from another flight and, therefore, are delayed and, therefore,
missed their connections. This experience of mine, coupled with that wire from Tokyo that
they would do everything possible prompted me to withhold the information, but
unfortunately, instead of the first class seat that I was hoping for and which I anticipated
only the tourists class was open on which Senator and Mrs. Lopez, Mr. and Mrs.
Montelibano were accommodated. Well, I fully realize now the gravity of my decision in not
advising Senator and Mrs. Lopez, Mr. and Mrs. Montelibano nor their agents about the
erroneous cancellation and for which I would like them to know that I am very sorry.

xxx xxx xxx

Q So it was not your duty to notify Sen. Lopez and parties that their reservations had been
cancelled since May 18, 1960?

A As I said before it was my duty. It was my duty but as I said again with respect to that
duty I have the power to make a decision or use my discretion and judgment whether I
should go ahead and tell the passenger about the cancellation. (Tsn., pp. 17-19, 28-29,
March 15, 1962.)

At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty,
made plaintiffs believe that their reservation had not been cancelled. An additional
indication of this is the fact that upon the face of the two tickets of record, namely, the
ticket issued to Alfredo Montelibano, Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs.
Alfredo Montelibano, Jr., on May 23, 1960 (Exh. 23), the reservation status is stated as
"OK". Such willful-non-disclosure of the cancellation or pretense that the reservations for
plaintiffs stood — and not simply the erroneous cancellation itself — is the factor to which
is attributable the breach of the resulting contracts. And, as above-stated, in this respect
defendant clearly acted in bad faith.

As if to further emphasize its bad faith on the matter, defendant subsequently promoted the
employee who cancelled plaintiffs' reservations and told them nothing about it. The record
shows that said employee — Mariano Herranz — was not subjected to investigation and
suspension by defendant but instead was given a reward in the form of an increase of
salary in June of the following year (Tsn., 86-88, Nov. 20, 1961).

At any rate, granting all the mistakes advanced by the defendant, there would at least be
negligence so gross and reckless as to amount to malice or bad faith (Fores vs. Miranda, L-
12163, March 4, 1959; Necesito v. Paras, L-10605-06, June 30, 1958). Firstly,
notwithstanding the entries in the reservation cards (Exhs. 1 & 3) that the reservations
cancelled are those of the Rufinos only, Herranz made the mistake, after reading said
entries, of sending a wire cancelling all the reservations, including those of Senator Lopez
and party (Tsn., pp. 108-109, Nov. 17, 1961). Secondly, after sending a wire to San
Francisco head office on April 19, 1960 stating his error and asking for reinstatement,
Herranz simply forgot about the matter. Notwithstanding the reply of San Francisco head
Office on April 22, 1960 that it cannot reinstate Senator Lopez and party (Annex B-
Velasco's to Exh. 6), it was assumed and taken for granted that reinstatement would be
made. Thirdly, Armando Davila confirmed plaintiff's reservations in a phone call on April
27, 1960 to defendant's ticket sellers, when at the time it appeared in plaintiffs' reservation
card (Exh. 5) that they were only waitlisted passengers. Fourthly, defendant's ticket sellers
issued plaintiffs' tickets on May 21 and 23, 1960, without first checking their reservations
just before issuing said tickets. And, finally, no one among defendant's agents notified
Senator Lopez and party that their reservations had been cancelled, a precaution that
could have averted their entering with defendant into contracts that the latter had already
placed beyond its power to perform.

Accordingly, there being a clear admission in defendant's evidence of facts amounting to a

bad faith on its part in regard to the breach of its contracts with plaintiffs, it becomes
unnecessary to further discuss the evidence adduced by plaintiffs to establish defendant's
bad faith. For what is admitted in the course of the trial does not need to be proved (Sec. 2,
Rule 129, Rules of Court).

Addressing ourselves now to the question of damages, it is well to state at the outset those
rules and principles. First, moral damages are recoverable in breach of contracts where the
defendant acted fraudulently or in bad faith (Art. 2220, New Civil Code). Second, in
addition to moral damages, exemplary or corrective damages may be imposed by way of
example or correction for the public good, in breach of contract where the defendant acted
in a wanton, fraudulent, reckless, oppressive or malevolent manner (Articles 2229, 2232,
New Civil Code). And, third, a written contract for an attorney's services shall control the
amount to be paid therefor unless found by the court to be unconscionable or unreasonable
(Sec. 24, Rule 138, Rules of Court).

First, then, as to moral damages. As a proximate result of defendant's breach in bad faith
of its contracts with plaintiffs, the latter suffered social humiliation, wounded feelings,
serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets
issued by defendant and yet they were given only the tourist class. At stop-overs, they were
expected to be among the first-class passengers by those awaiting to welcome them, only to
be found among the tourist passengers. It may not be humiliating to travel as tourist
passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully
to be expected from the contractual undertaking.

Senator Lopez was then Senate President Pro Tempore. International carriers like
defendant know the prestige of such an office. For the Senate is not only the Upper
Chamber of the Philippine Congress, but the nation's treaty-ratifying body. It may also be
mentioned that in his aforesaid office Senator Lopez was in a position to preside in
impeachment cases should the Senate sit as Impeachment Tribunal. And he was former
Vice-President of the Philippines. Senator Lopez was going to the United States to attend a
private business conference of the Binalbagan-Isabela Sugar Company; but his aforesaid
rank and position were by no means left behind, and in fact he had a second engagement
awaiting him in the United States: a banquet tendered by Filipino friends in his honor as
Senate President Pro Tempore (Tsn., pp. 14-15, Nov. 25, 1960). For the moral damages
sustained by him, therefore, an award of P100,000.00 is appropriate.

Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and therefore his
humiliation. In addition she suffered physical discomfort during the 13-hour trip,(5 hours
from Tokyo to Honolulu and 8 hours from Honolulu to San Francisco). Although Senator
Lopez stated that "she was quite well" (Tsn., p. 22, Nov. 25, 1960) — he obviously meant
relatively well, since the rest of his statement is that two months before, she was attackedby
severe flu and lost 10 pounds of weight and that she was advised by Dr. Sison to go to the
United States as soon as possible for medical check-up and relaxation, (Ibid). In fact,
Senator Lopez stated, as shown a few pages after in the transcript of his testimony, that
Mrs. Lopez was sick when she left the Philippines:

A. Well, my wife really felt very bad during the entire trip from Tokyo to San Francisco. In
the first place, she was sick when we left the Philippines, and then with that discomfort
which she [experienced] or suffered during that evening, it was her worst experience. I
myself, who was not sick, could not sleep because of the discomfort. (Tsn., pp. 27-28, Nov.
25, 1960).

It is not hard to see that in her condition then a physical discomfort sustained for thirteen
hours may well be considered a physical suffering. And even without regard to the noise
and trepidation inside the plane — which defendant contends, upon the strengh of expert
testimony, to be practically the same in first class and tourist class — the fact that the
seating spaces in the tourist class are quite narrower than in first class, there beingsix seats
to a row in the former as against four to a row in the latter, and that in tourist class there is
very little space for reclining in view of the closer distance between rows (Tsn., p. 24, Nov.
25, 1960), will suffice to show that the aforesaid passenger indeed experienced physical
suffering during the trip. Added to this, of course, was the painfull thought that she was
deprived by defendant — after having paid for and expected the same — of the most
suitable, place for her, the first class, where evidently the best of everything would have
been given her, the best seat, service, food and treatment. Such difference in comfort
between first class and tourist class is too obvious to be recounted, is in fact the reason for
the former's existence, and is recognized by the airline in charging a higher fare for it and
by the passengers in paying said higher rate Accordingly, considering the totality of her
suffering and humiliation, an award to Mrs. Maria J. Lopez of P50,000.00 for moral
damages will be reasonable.

Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate members of the
family of Senator Lopez. They formed part of the Senator's party as shown also by the
reservation cards of PAN-AM. As such they likewise shared his prestige and humiliation.
Although defendant contends that a few weeks before the flight they had asked their
reservations to be charged from first class to tourist class — which did not materialize due
to alleged full booking in the tourist class — the same does not mean they suffered no
shared in having to take tourist class during the flight. For by that time they had already
been made to pay for first class seats and therefore to expect first class accommodations. As
stated, it is one thing to take the tourist class by free choice; a far different thing to be
compelled to take it notwithstanding having paid for first class seats. Plaintiffs-appellants
now ask P37,500.00 each for the two but we note that in their motion for reconsideration
filed in the court a quo, they were satisfied with P25,000.00 each for said persons. (Record
on Appeal, p. 102). For their social humiliation, therefore, the award to them of P25,000.00
each is reasonable.

The rationale behind exemplary or corrective damages is, as the name implies, to provide
an example or correction for public good. Defendant having breached its contracts in bad
faith, the court, as stated earlier, may award exemplary damages in addition to moral
damages (Articles 2229, 2232, New Civil Code).

In view of its nature, it should be imposed in such an amount as to sufficiently and

effectively deter similar breach of contracts in the future by defendant or other airlines. In
this light, we find it just to award P75,000.00 as exemplary or corrective damages.

Now, as to attorney's fees, the record shows a written contract of services executed on June
1, 1960 (Exh. F) whereunder plaintiffs-appellants engaged the services of their counsel —
Atty. Vicente J. Francisco — and agreedto pay the sum of P25,000.00 as attorney's fees
upon the termination of the case in the Court of First Instance, and an additional sum of
P25,000.00 in the event the case is appealed to the Supreme Court. As said earlier, a written
contract for attorney's services shall control the amount to be paid therefor unless found by
the court to be unconscionable or unreasonable. A consideration of the subject matter of
the present controversy, of the professional standing of the attorney for plaintiffs-
appellants, and of the extent of the service rendered by him, shows that said amount
provided for in the written agreement is reasonable. Said lawyer — whose prominence in
the legal profession is well known — studied the case, prepared and filed the complaint,
conferred with witnesses, analyzed documentary evidence, personally appeared at the trial
of the case in twenty-two days, during a period of three years, prepared four sets of cross-
interrogatories for deposition taking, prepared several memoranda and the motion for
reconsideration, filed a joint record on appeal with defendant, filed a brief for plaintiffs as
appellants consisting of 45 printed pages and a brief for plaintiffs as appellees consisting of
265 printed pages. And we are further convinced of its reasonableness because defendant's
counsel likewise valued at P50,000.00 the proper compensation for his services rendered to
defendant in the trial court and on appeal.

In concluding, let it be stressed that the amount of damages awarded in this appeal has
been determined by adequately considering the official, political, social, and financial
standing of the offended parties on one hand, and the business and financial position of the
offender on the other (Domingding v. Ng, 55 O.G. 10). And further considering the present
rate of exchange and the terms at which the amount of damages awarded would
approximately be in U.S. dollars, this Court is all the more of the view that said award is
proper and reasonable.

Wherefore, the judgment appealed from is hereby modified so as to award in favor of

plaintiffs and against defendant, the following: (1) P200,000.00 as moral damages, divided
among plaintiffs, thus: P100,000.00 for Senate President Pro Tempore Fernando Lopez;
P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his son-in-law Alfredo Montelibano,
Jr.; and P25,000.00 for his daughter Mrs. Alfredo Montelibano, Jr.; (2) P75,000.00 as
exemplary or corrective damages; (3) interest at the legal rate of 6% per annum on the
moral and exemplary damages aforestated, from December 14, 1963, the date of the
amended decision of the court a quo, until said damages are fully paid; (4) P50,000.00 as
attorney's fees; and (5) the costs. Counterclaim dismissed. So ordered.

G.R. No. 111584 September 17, 2001

PRODUCERS BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS and SPOUSES SALVADOR Y. CHUA and EMILIA U.
CHUA, respondents.

MELO, J.:

The instant petition assails the decision of the Court of Appeals in its CA G.R.CV No.
20220, dated October 31, 1991, affirming with modification the decision of Branch 48 of the
Regional Trial Court of the 6th Judicial Region stationed in Bacolod City, as well as the
resolution dated August 12, 1993 denying petitioner's motion for partial consideration.
Undersigned ponente was given this case in pursuance of A. M. No. 00-9-03-SC dated
February 27, 2001 distributing the so-called back-log cases.

The generative facts of the case may be chronicled as follows:

Sometime in April, 1982, respondent Salvador Chua was offered by Mr. Jimmy Rojas,
manager of petitioner bank, to transfer his account from Pacific Banking Corporation to
herein petitioner Producers Bank of the Philippines. In view of Rojas' assurances of longer
loan terms and lower rates of interest, respondent spouses opened and maintained
substantial savings and current deposits with the Bacolod branch of petitioner bank.
Likewise, private respondents obtained various loans from petitioner bank, one of which
was a loan for P2,000,000.00 which was secured by a real estate mortgage and payable
within a period of three (3) years or from 1982 to 1985. On January 20, 1984, private
respondents deposited with petitioner bank the total sum of P960,000.00, which was duly
entered in private respondents' savings account passbook. However, petitioner bank failed
to credit this deposit in private respondents' savings account due to the fact that its Branch
Manager, Sixto Castillo, absconded with the money of the bank's depositors. Also,
petitioner bank dishonored the checks drawn out by private respondents in favor of their
various creditors on the ground of insufficient funds, despite the fact that at that time, the
balance of private respondents' deposit was in the amount of P1,051,051.19. These events
prompted private respondents to request for copies of their ledgers covering their savings
and current accounts, but petitioner bank refused. Due to petitioner bank's refusal to
furnish private respondents copies of their ledgers, private respondents instituted on
January 30, 1984 an action for damages against petitioner bank which was docketed as
Civil Case No. 2718. On the other hand, petitioner bank filed with the City Sheriff of
Bacolod a petition for extrajudicial foreclosure of the real estate mortgage during the
pendency of Civil Case No. 2718. As a result, private respondents filed a complaint for
injunction and damages docketed as Civil Case No. 3276, alleging that the petition for
extrajudicial foreclosure was without basis and was instituted maliciously in order to
harass private respondents. On April 26, 1988, the trial court rendered its decision on the
latter case, the dispositive portion of which reads:

WHEREFORE, from the evidence adduced, judgment is hereby rendered in favor of

plaintiff ordering the defendant as follows:

1) To pay plaintiff the sum of P2,000,000.00 as moral damages, with legal rate of interest;
the sum of P90,000.00 per month and P18,000.00 per month representing plaintiff's
unrealized profits from his cement and gasoline station business, respectively, to commence
from October 16, 1984, with legal rate of interest until fully paid; the sum of P250,000.00 as
exemplary damages;

2) To off-set the sum of P960,000.00 deposited by plaintiff on January 20, 1984 and entered
in his Passbook No. 38240, together with its incremental interests computed at banking rate
and to commence from January 20, 1984 with his agricultural loan account in the sum of
P1,300,000.00 with interest thereon computed at fourteen (14%) percent per annum, to
commence from January 4, 1984, covered by a real estate mortgage, both of which shall
have a cut-off time frame on the date of this decision;

3) That should the said savings deposit and its interest be sufficient to cover the off-setting,
compensation shall take place and to be taken from the amounts awarded to plaintiff in the
form of moral, actual and compensatory damages;

4) That the time loan in the sum of P175,000.00 and the clean loan of P400,000.00, both
without interest, shall be off-settled by the moral, actual and compensatory damages herein
awarded to plaintiff;
5) That after compensation or set-off had taken place, to pay plaintiff the balance of the
adjudged moral, actual and compensatory damages, with legal rate of interest until fully
paid;

6) To render an accounting to plaintiff with respect to his Account Nos. 0142-0014-0 and
042-0014-1 for the period covering January to December, 1982;

7) That in order to make the bank's record complete, to reform the deed of real estate
mortgage conformably with the agreement by stipulating in the said document that the
maturity date of the agricultural loan is April 5, 1987 at the same rate of interest of
fourteen (14%) percent per annum, deducting from the original amount of the loan the
payments made on the principal and interests; this reformation shall take place
simultaneously with the off-setting of accounts;

8) To pay plaintiff the sum equivalent to fifteen (15%) percent of the amount representing
the balance of the sums awarded as moral, actual and compensatory damages as attorney's
fees;

9) To pay plaintiff the costs of suit;

10) The writ of preliminary injunction issued by this Court is rendered permanent; and

11) The counterclaim is hereby dismissed.

SO ORDERED.

(Rollo, pp. 261-263.)

On October 31, 1991, upon appeal by petitioner bank, the Court of Appeals modified the
decision of the trial court as follows:

WHEREFORE, from the evidence adduced, judgment is hereby rendered as follows:

1. Ordering the defendant —

a. To pay plaintiff the sum of P500,000.00 as moral and exemplary damages;

b. To pay the sum of P18,000.00 per month representing plaintiffs' unrealized profits from
his gasoline station business to commence from October 16, 1984, with legal rate of interest,
until fully paid;

c. To allow the plaintiffs to offset their financial obligation with the defendant bank by the
moral, exemplary, actual and compensatory damages herein awarded in favor of the
aforesaid plaintiffs;
d. If, after the off-setting, a balance remains in favor of the plaintiffs, to pay the said
plaintiffs such balance of the adjudged moral, exemplary, actual and compensatory
damages, with legal rate of interest until fully paid, as of the time of off-setting;

e. To render an accounting to plaintiffs with respect to their Account Nos. 0142-0014-0 and
042-0014-1 for the period covering January to December, 1982;

f. To pay plaintiffs the sum of P100,000.00 as attorney's fees.

g. To pay the costs of suit.

2. Ordering the plaintiffs —

a. To settle their loan obligation with the defendant bank within 90 days from the finality of
this decision, subject to the resolution of this Court to the effect that they shall be relieved
from the payment of penalties and surcharges on their outstanding balance starting
January 20, 1984;

3. The plaintiffs' prayer for reformation of their mortgage contract or annulment thereof is
hereby denied;

4. The counterclaim of defendant-appellant are hereby dismissed.

SO ORDERED.

(Rollo, pp. 86-87.)

Petitioner moved for a partial reconsideration of the above decision but the same was
denied on August 12, 1993. Hence, the instant petition with the following submissions which
allegedly warrant our review of the assailed decision, viz.:

1. The Court of Appeals erred in not ruling that the application for extrajudicial
foreclosure of real estate mortgage is legal and valid;

2. The Court of Appeals erred in not granting petitioner bank its right to foreclose
extrajudicially the real estate mortgage and to proceed with its application for extrajudicial
foreclosure of real estate mortgage;

3. The Court of Appeals erred in ruling that private respondents be relieved from the
payment of penalties and surcharges on their outstanding balance starting January 20,
1984;

4. The Court of Appeals erred in awarding moral and exemplary damages of P500,000.00,
unrealized profit of P18,000.00 per month, and attorney's fees of P100,000.00 against
petitioner bank;
5. The Court of Appeals erred in ordering an accounting to private respondents with
respect to their Account Nos. 0142-0014-0 and 042-0014-1 for the period covering January
to December, 1982.

It should at once be apparent that except for the first and second imputed errors which
involve petitioner bank's right to foreclose extrajudicially the real estate mortgage, the
resolution of the assigned errors entails a review of the factual conclusions of the appellate
court and the evidentiary bases thereof. Such an assessment is not, as a rule, proper in
appeals from the Court of Appeals which should be confined to a consideration and
determination only of issues of law as its findings of fact are deemed conclusive (Villanueva
vs. Court of Appeals, 294 SCRA 90 [1998]) especially so in this case because the findings of
fact of the appellate court concur with those of the trial court. To reiterate, this Court's
jurisdiction is only limited to reviewing errors of law in the absence of any showing that the
findings complained of are totally devoid of support in the record or they are glaringly
erroneous as to constitute serious abuse of discretion. Nonetheless, considering the amount
involved, as well as for the satisfaction of the parties who have vigorously pursued this case
since 1984, the Court, in the exercise of its discretion, examined the factual bases,
particularly with respect to the propriety of the damages awarded to private respondents.

The first and second assignments of error, being interrelated, shall be jointly discussed.

Petitioner contends that it has the right to foreclose the real estate mortgage executed by
private respondents in its favor as the loan under the real estate mortgage contract had
become due and demandable. This argument is not well-taken. Foreclosure is but a
necessary consequence of non-payment of a mortgage indebtedness. As a rule, the mortgage
can be foreclosed only when the debt remains unpaid at the time it is due (Gov't. of the P.I.
vs. Espejo, 57 Phil. 496 [1932]). As found by the trial court and the Court of Appeals, and as
borne by the evidence on record, private respondents were constantly paying their loan
obligations with petitioner bank. In fact the amount of P960,000.00 was properly deposited
with petitioner bank as evidenced by the corresponding deposit slip and the entry made in
private respondents' savings account passbook. It is, therefore, not the fault of private
respondents that their payment amounting to P960,000.00 was not credited to their
account. Thus, it is certain that the loan which was secured by a real estate mortgage
cannot be considered as unpaid so as to warrant foreclosure on the mortgage.

Clearly, private respondents have not yet defaulted on the payment of their loans.
Moreover, the term of the loan, as agreed upon by the parties, is three years, or from 1982
to 1985. But petitioner filed its application for extrajudicial foreclosure on October 15,
1984. Indisputably, the application for foreclosure of the mortgage on October 15, 1984 was
premature because by then, private respondents' loan was not yet due and demandable.
Likewise, both the Court of Appeals and the trial court found that private respondents are
entitled to moral and exemplary damages. We agree. Moral and exemplary damages may
be awarded without proof of pecuniary loss. In awarding such damages, the court shall
take into account the circumstances obtaining in the case and assess damages according to
its discretion. As borne out by the record of this case, private respondents are engaged in
several businesses, such as rice and corn trading, cement dealership, and gasoline
proprietorship. The dishonor of private respondents' checks and the foreclosure initiated
by petitioner adversely affected the credit standing as well as the business dealings of
private respondents as their suppliers discontinued credit lines resulting in the collapse of
their businesses. In the case of Leopoldo Araneta vs. Bank of America (40 SCRA 144 [1971]),
we held that:

"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
financial loss to him."

The damage to private respondents' reputation and social standing entitles them to moral
damages. Article 2217, in relation to Article 2220, of the Civil Code explicitly provides that
"moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury." Obviously, petitioner bank's wrongful act caused serious anxiety, embarrassment,
and humiliation to private respondents for which they are entitled to recover moral
damages in the amount of P300,000.00 which we deem to be reasonable.

The award of exemplary damages is in order in view of the malicious and unwarranted
application for extrajudicial foreclosure by petitioner which was obviously done to harass,
embarrass, annoy, or ridicule private respondents. Likewise, petitioner, in its application
for extrajudicial foreclosure, included the other loans of private respondents which were
not covered by the real estate mortgage agreement, such as the loan of P175,000.00 which
was a time loan, and the amount of P400,000.00 which was a clean loan. Moreover,
petitioner unjustifiably refused to give private respondents copies of their account ledgers
which would show the deposits made by them. Also, petitioner bank's failure to credit the
deposit in the account of private respondents constituted gross negligence in the
performance of its contractual obligation which amounts to evident bad faith. Verily, all
these acts of petitioner were accompanied by bad faith and done in wanton, fraudulent and
malevolent manner warranting the award of exemplary damages in favor of private
respondents, in accordance with Article 2232 of the Civil Code which provides:

ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Of course, a plaintiff need not prove the actual extent of exemplary damages, for its
determination is addressed to the sound discretion of the court upon proof of the plaintiff's
entitlement to moral, temperate, or compensatory damages (Article 2234, Civil Code). In
the instant case, exemplary damages in the amount of P150,000.00 are proper.

Anent the award of actual damages, the Court of Appeals granted private respondents the
amount of P18,000.00 per month representing private respondents' unrealized profits from
his gasoline station business, to commence from October 16, 1984. Under Articles 2199 and
2200 of the Civil Code, actual or compensatory damages are those awarded in satisfaction
of, or in recompense for, loss or injury sustained. They proceed from a sense of natural
justice and are designed to repair the wrong that has been done. There are two kinds of
actual or compensatory damages one is the loss of what a person already possesses, and the
other is the failure to receive as a benefit that which would have pertained to him
(Tolentino, Civil Code of the Phil., Vol. V, 1992 ed., pp. 633-636). In the latter instance, the
familiar rule is that damages consisting of unrealized profits, frequently referred as
"ganacias frustradas" or "lucrum cessans," are not to be granted on the basis of mere
speculation, conjecture, or surmise, but rather by reference to some reasonably definite
standard such as market value, established experienced, or direct inference from known
circumstances (Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultores de Talisay-Silay,
Inc., 247 SCRA 361 [1995])

In the case at bar, actual damages in the form of unrealized profits were awarded on the
basis of the sole testimony of private respondent Salvador Chua, to wit:

Atty. Chua:

Q: You mentioned earlier during your direct testimony that you are engaged in
gasoline business. Do you have a gasoline station?

A: Yes, sir.

Q: Where is that located?

A: It is located at Corner Araneta-San Sebastian Sts.

Q: Before the filing of the Extra Judicial Foreclosure, how much more or less, you
earned from that gasoline station by way of conservative estimate?

A: In my gasoline business, based on my record, I have an average of 114,000 liters.

Q: Do you mean to say you can dispose 114,000 liters a month?

A: Yes, sir.

Q: How much is the mark up per liter?

A: Before the publication of the Extra Judicial Foreclosure the markup is P0.27 per
liter. So, it comes out that the profit is P30,78.00 (sic).

Q: How much is your overhead for disposing that much liters of gasoline every
month?

A: The overhead is about 12,280.00.

Q: That will give you an average of P18,000.00 a month?

A: Yes, sir.

Q: After the filing of the Extra Judicial Foreclosure, what happened to your gasoline
business?

A: Because of the publication of the Extra Judicial Foreclosure I did not have credit
line anymore. Since I have no capital I was forced to sell my right to operate to my
relatives.

(tsn, March 25, 1986, pp. 9-12)

However, other than the testimony of Salvador Chua, private respondents failed to present
documentary evidence which is necessary to substantiate their claim for actual or
compensatory damages. In order to recover this kind of damages, the injured party must
prove his case, thus:

When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has absolutely
failed to perform is of necessity to some extent, a matter of speculation, but the injured
party is not to be denied for that reason alone. He 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
defendant's wrongful act, he is entitled to recover. (Cerreno vs. Tan Chuco, 28 Phil. 312
[1914] quoted in Central Bank of the Philippines vs. Court of Appeals, 63 SCRA 431 [1975])

Applying the foregoing test to the instant case, the Court finds the evidence of private
respondents insufficient to be considered within the purview of "best evidence." The bare
assertion of private respondent Salvador Chua that he lost an average of P18,000.00 per
month is inadequate if not speculative and should be admitted with extreme caution
especially because it is not supported by independent evidence. Private respondents could
have presented such evidence as reports on the average actual profits earned by their
gasoline business, their financial statements, and other evidence of profitability which could
aid the court in arriving with reasonable certainty at the amount of profits which private
respondents failed to earn. Private respondents did not even present any instrument or
deed evidencing their claim that they have transferred their right to operate their gasoline
station to their relatives. We cannot, therefore, sustain the award of P18,000.00 a month as
unrealized profits commencing from October 16, 1984 because this amount is not amply
justified by the evidence on record.

Further, well-settled is the rule that even if the petition for extrajudicial foreclosure filed by
petitioner against private respondents is clearly unfounded, this does not necessarily mean,
in the absence of specific facts proving damages, that actual damage has been sustained.
The Court cannot rely on speculations as to the fact and amount of damages. It must
depend on actual proof of the damages alleged to have been suffered (Perfecto vs. Gonzales,
128 SCRA 635 [1984]).

Finally, the award of attorney's fees as part of damages is deemed just and equitable under
the circumstances. Attorney's fees may be awarded when a party is compelled to litigate or
to incur expenses to protect his interest by reason of an unjustified act of the other party
(Ching Sen Ben vs. Court of Appeals, 314 SCRA 762 [1999]). In this case, petitioner bank's
act of not crediting private respondents' deposit of P960,000.00, as well as the premature
filing of the extrajudicial foreclosure, have compelled private respondents to institute an
action for injunction and damages primarily in order to protect their rights and interests.
The award of attorney's fees is also justified under Article 2208 of the Civil Code which
provides:

ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:

(1) when exemplary damages are awarded;

(2) when the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;

WHEREFORE, the decision of the Court of Appeals in its CA-G.R. CV No. 20220 is
affirmed with MODIFICATION only as to the award of damages in that petitioner bank is
ordered to pay private respondents the following:

1. Three Hundred Thousand Pesos (P300,000.00) as moral damages;

2. One Hundred Fifty Thousand Pesos (P150,000.00) as exemplary damages; and

3. One Hundred Thousand Pesos (P100,000.00) as attorney's fees and litigation expenses.

In all other respects, the said judgment is affirmed.

SO ORDERED.
G.R. No. 128690 January 21, 1999

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA
PRODUCTION, INC., and VICENTE DEL ROSARIO, respondents.

DAVIDE, JR., CJ.:

In this petition for review on certiorari, petitioner ABS-CBN Broadcasting Corp. (hereafter
ABS-CBN) seeks to reverse and set aside the decision 1 of 31 October 1996 and the
resolution 2 of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The
former affirmed with modification the decision 3 of 28 April 1993 of the Regional Trial
Court (RTC) of Quezon City, Branch 80, in Civil Case No. Q-92-12309. The latter denied
the motion to reconsider the decision of 31 October 1996.

The antecedents, as found by the RTC and adopted by the Court of Appeals, are as follows:

In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement (Exh. "A") whereby
Viva gave ABS-CBN an exclusive right to exhibit some Viva films. Sometime in December
1991, in accordance with paragraph 2.4 [sic] of said agreement stating that —.

1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) Viva films for
TV telecast under such terms as may be agreed upon by the parties hereto, provided,
however, that such right shall be exercised by ABS-CBN from the actual offer in writing.

Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-president Charo
Santos-Concio, a list of three(3) film packages (36 title) from which ABS-CBN may exercise
its right of first refusal under the afore-said agreement (Exhs. "1" par, 2, "2," "2-A'' and
"2-B"-Viva). ABS-CBN, however through Mrs. Concio, "can tick off only ten (10) titles"
(from the list) "we can purchase" (Exh. "3" - Viva) and therefore did not accept said list
(TSN, June 8, 1992, pp. 9-10). The titles ticked off by Mrs. Concio are not the subject of the
case at bar except the film ''Maging Sino Ka Man."

For further enlightenment, this rejection letter dated January 06, 1992 (Exh "3" - Viva) is
hereby quoted:

6 January 1992

Dear Vic,
This is not a very formal business letter I am writing to you as I would like to express my
difficulty in recommending the purchase of the three film packages you are offering ABS-
CBN.

From among the three packages I can only tick off 10 titles we can purchase. Please see
attached. I hope you will understand my position. Most of the action pictures in the list do
not have big action stars in the cast. They are not for primetime. In line with this I wish to
mention that I have not scheduled for telecast several action pictures in out very first
contract because of the cheap production value of these movies as well as the lack of big
action stars. As a film producer, I am sure you understand what I am trying to say as Viva
produces only big action pictures.

In fact, I would like to request two (2) additional runs for these movies as I can only
schedule them in our non-primetime slots. We have to cover the amount that was paid for
these movies because as you very well know that non-primetime advertising rates are very
low. These are the unaired titles in the first contract.

1. Kontra Persa [sic].

2. Raider Platoon.

3. Underground guerillas

4. Tiger Command

5. Boy de Sabog

6. Lady Commando

7. Batang Matadero

8. Rebelyon

I hope you will consider this request of mine.

The other dramatic films have been offered to us before and have been rejected because of
the ruling of MTRCB to have them aired at 9:00 p.m. due to their very adult themes.

As for the 10 titles I have choosen [sic] from the 3 packages please consider including all the
other Viva movies produced last year. I have quite an attractive offer to make.

Thanking you and with my warmest regards.

(Signed)

Charo Santos-Concio
On February 27, 1992, defendant Del Rosario approached ABS-CBN's Ms. Concio, with a
list consisting of 52 original movie titles (i.e. not yet aired on television) including the 14
titles subject of the present case, as well as 104 re-runs (previously aired on television) from
which ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to
ABS-CBN airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00
of which P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots (Exh.
"4" to "4-C" Viva; "9" -Viva).

On April 2, 1992, defendant Del Rosario and ABS-CBN general manager, Eugenio Lopez
III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal
of Viva. What transpired in that lunch meeting is the subject of conflicting versions. Mr.
Lopez testified that he and Mr. Del Rosario allegedly agreed that ABS-CRN was granted
exclusive film rights to fourteen (14) films for a total consideration of P36 million; that he
allegedly put this agreement as to the price and number of films in a "napkin'' and signed
it and gave it to Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8, 1992). On the
other hand, Del Rosario denied having made any agreement with Lopez regarding the 14
Viva films; denied the existence of a napkin in which Lopez wrote something; and insisted
that what he and Lopez discussed at the lunch meeting was Viva's film package offer of 104
films (52 originals and 52 re-runs) for a total price of P60 million. Mr. Lopez promising
[sic]to make a counter proposal which came in the form of a proposal contract Annex "C"
of the complaint (Exh. "1"·- Viva; Exh. "C" - ABS-CBN).

On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for
Finance discussed the terms and conditions of Viva's offer to sell the 104 films, after the
rejection of the same package by ABS-CBN.

On April 07, 1992, defendant Del Rosario received through his secretary, a handwritten
note from Ms. Concio, (Exh. "5" - Viva), which reads: "Here's the draft of the contract. I
hope you find everything in order," to which was attached a draft exhibition agreement
(Exh. "C''- ABS-CBN; Exh. "9" - Viva, p. 3) a counter-proposal covering 53 films, 52 of
which came from the list sent by defendant Del Rosario and one film was added by Ms.
Concio, for a consideration of P35 million. Exhibit "C" provides that ABS-CBN is granted
films right to 53 films and contains a right of first refusal to "1992 Viva Films." The said
counter proposal was however rejected by Viva's Board of Directors [in the] evening of the
same day, April 7, 1992, as Viva would not sell anything less than the package of 104 films
for P60 million pesos (Exh. "9" - Viva), and such rejection was relayed to Ms. Concio.

On April 29, 1992, after the rejection of ABS-CBN and following several negotiations and
meetings defendant Del Rosario and Viva's President Teresita Cruz, in consideration of P60
million, signed a letter of agreement dated April 24, 1992. granting RBS the exclusive right
to air 104 Viva-produced and/or acquired films (Exh. "7-A" - RBS; Exh. "4" - RBS)
including the fourteen (14) films subject of the present case. 4
On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with
a prayer for a writ of preliminary injunction and/or temporary restraining order against
private respondents Republic Broadcasting Corporation 5 (hereafter RBS ), Viva
Production (hereafter VIVA), and Vicente Del Rosario. The complaint was docketed as
Civil Case No. Q-92-12309.

On 27 May 1992, RTC issued a temporary restraining order 6 enjoining private

respondents from proceeding with the airing, broadcasting, and televising of the fourteen
VIVA films subject of the controversy, starting with the film Maging Sino Ka Man, which
was scheduled to be shown on private respondents RBS' channel 7 at seven o'clock in the
evening of said date.

On 17 June 1992, after appropriate proceedings, the RTC issued an

order 7 directing the issuance of a writ of preliminary injunction upon ABS-CBN's posting
of P35 million bond. ABS-CBN moved for the reduction of the bond, 8 while private
respondents moved for reconsideration of the order and offered to put up a
counterbound. 9
10
In the meantime, private respondents filed separate answers with counterclaim. RBS also
set up a cross-claim against VIVA..

On 3 August 1992, the RTC issued an order 11 dissolving the writ of preliminary injunction
upon the posting by RBS of a P30 million counterbond to answer for whatever damages
ABS-CBN might suffer by virtue of such dissolution. However, it reduced petitioner's
injunction bond to P15 million as a condition precedent for the reinstatement of the writ of
preliminary injunction should private respondents be unable to post a counterbond.

At the pre-trial 12 on 6 August 1992, the parties, upon suggestion of the court, agreed to
explore the possibility of an amicable settlement. In the meantime, RBS prayed for and was
granted reasonable time within which to put up a P30 million counterbond in the event that
no settlement would be reached.

As the parties failed to enter into an amicable settlement RBS posted on 1 October 1992 a
counterbond, which the RTC approved in its Order of 15 October 1992.13
14
On 19 October 1992, ABS-CBN filed a motion for reconsideration of the 3 August and 15
October 1992 Orders, which RBS opposed. 15

On 29 October 1992, the RTC conducted a pre-trial. 16

Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of
Appeals a petition17challenging the RTC's Orders of 3 August and 15 October 1992 and
praying for the issuance of a writ of preliminary injunction to enjoin the RTC from
enforcing said orders. The case was docketed as CA-G.R. SP No. 29300.
On 3 November 1992, the Court of Appeals issued a temporary restraining order 18 to enjoin
the airing, broadcasting, and televising of any or all of the films involved in the controversy.

On 18 December 1992, the Court of Appeals promulgated a decision 19 dismissing the

petition in CA -G.R. No. 29300 for being premature. ABS-CBN challenged the dismissal in
a petition for review filed with this Court on 19 January 1993, which was docketed as G.R.
No. 108363.

In the meantime the RTC received the evidence for the parties in Civil Case No. Q-192-
1209. Thereafter, on 28 April 1993, it rendered a decision 20 in favor of RBS and VIVA and
against ABS-CBN disposing as follows:

WHEREFORE, under cool reflection and prescinding from the foregoing, judgments is
rendered in favor of defendants and against the plaintiff.

(1) The complaint is hereby dismissed;

(2) Plaintiff ABS-CBN is ordered to pay defendant RBS the following:

a) P107,727.00, the amount of premium paid by RBS to the surety which issued defendant
RBS's bond to lift the injunction;

b) P191,843.00 for the amount of print advertisement for "Maging Sino Ka Man" in
various newspapers;

c) Attorney's fees in the amount of P1 million;

d) P5 million as and by way of moral damages;

e) P5 million as and by way of exemplary damages;

(3) For defendant VIVA, plaintiff ABS-CBN is ordered to pay P212,000.00 by way of
reasonable attorney's fees.

(4) The cross-claim of defendant RBS against defendant VIVA is dismissed.

(5) Plaintiff to pay the costs.

According to the RTC, there was no meeting of minds on the price and terms of the offer.
The alleged agreement between Lopez III and Del Rosario was subject to the approval of
the VIVA Board of Directors, and said agreement was disapproved during the meeting of
the Board on 7 April 1992. Hence, there was no basis for ABS-CBN's demand that VIVA
signed the 1992 Film Exhibition Agreement. Furthermore, the right of first refusal under
the 1990 Film Exhibition Agreement had previously been exercised per Ms. Concio's letter
to Del Rosario ticking off ten titles acceptable to them, which would have made the 1992
agreement an entirely new contract.
On 21 June 1993, this Court denied 21 ABS-CBN's petition for review in G.R. No. 108363, as
no reversible error was committed by the Court of Appeals in its challenged decision and
the case had "become moot and academic in view of the dismissal of the main action by the
court a quo in its decision" of 28 April 1993.

Aggrieved by the RTC's decision, ABS-CBN appealed to the Court of Appeals claiming that
there was a perfected contract between ABS-CBN and VIVA granting ABS-CBN the
exclusive right to exhibit the subject films. Private respondents VIVA and Del Rosario also
appealed seeking moral and exemplary damages and additional attorney's fees.

In its decision of 31 October 1996, the Court of Appeals agreed with the RTC that the
contract between ABS-CBN and VIVA had not been perfected, absent the approval by the
VIVA Board of Directors of whatever Del Rosario, it's agent, might have agreed with Lopez
III. The appellate court did not even believe ABS-CBN's evidence that Lopez III actually
wrote down such an agreement on a "napkin," as the same was never produced in court. It
likewise rejected ABS-CBN's insistence on its right of first refusal and ratiocinated as
follows:

As regards the matter of right of first refusal, it may be true that a Film Exhibition
Agreement was entered into between Appellant ABS-CBN and appellant VIVA under
Exhibit "A" in 1990, and that parag. 1.4 thereof provides:

1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) VIVA films for
TV telecast under such terms as may be agreed upon by the parties hereto, provided,
however, that such right shall be exercised by ABS-CBN within a period of fifteen (15) days
from the actual offer in writing (Records, p. 14).

[H]owever, it is very clear that said right of first refusal in favor of ABS-CBN shall still be
subject to such terms as may be agreed upon by the parties thereto, and that the said right
shall be exercised by ABS-CBN within fifteen (15) days from the actual offer in writing.

Said parag. 1.4 of the agreement Exhibit "A" on the right of first refusal did not fix the
price of the film right to the twenty-four (24) films, nor did it specify the terms thereof. The
same are still left to be agreed upon by the parties.

In the instant case, ABS-CBN's letter of rejection Exhibit 3 (Records, p. 89) stated that it
can only tick off ten (10) films, and the draft contract Exhibit "C" accepted only fourteen
(14) films, while parag. 1.4 of Exhibit "A'' speaks of the next twenty-four (24) films.

The offer of V1VA was sometime in December 1991 (Exhibits 2, 2-A. 2-B; Records, pp. 86-
88; Decision, p. 11, Records, p. 1150), when the first list of VIVA films was sent by Mr. Del
Rosario to ABS-CBN. The Vice President of ABS-CBN, Ms. Charo Santos-Concio, sent a
letter dated January 6, 1992 (Exhibit 3, Records, p. 89) where ABS-CBN exercised its right
of refusal by rejecting the offer of VIVA.. As aptly observed by the trial court, with the said
letter of Mrs. Concio of January 6, 1992, ABS-CBN had lost its right of first refusal. And
even if We reckon the fifteen (15) day period from February 27, 1992 (Exhibit 4 to 4-C)
when another list was sent to ABS-CBN after the letter of Mrs. Concio, still the fifteen (15)
day period within which ABS-CBN shall exercise its right of first refusal has already
expired.22

Accordingly, respondent court sustained the award of actual damages consisting in the cost
of print advertisements and the premium payments for the counterbond, there being
adequate proof of the pecuniary loss which RBS had suffered as a result of the filing of the
complaint by ABS-CBN. As to the award of moral damages, the Court of Appeals found
reasonable basis therefor, holding that RBS's reputation was debased by the filing of the
complaint in Civil Case No. Q-92-12309 and by the non-showing of the film "Maging Sino
Ka Man." Respondent court also held that exemplary damages were correctly imposed by
way of example or correction for the public good in view of the filing of the complaint
despite petitioner's knowledge that the contract with VIVA had not been perfected, It also
upheld the award of attorney's fees, reasoning that with ABS-CBN's act of instituting Civil
Case No, Q-92-1209, RBS was "unnecessarily forced to litigate." The appellate court,
however, reduced the awards of moral damages to P2 million, exemplary damages to P2
million, and attorney's fees to P500, 000.00.

On the other hand, respondent Court of Appeals denied VIVA and Del Rosario's appeal
because it was "RBS and not VIVA which was actually prejudiced when the complaint was
filed by ABS-CBN."

Its motion for reconsideration having been denied, ABS-CBN filed the petition in this case,
contending that the Court of Appeals gravely erred in

. . . RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN

PETITIONER AND PRIVATE RESPONDENT VIVA NOTWITHSTANDING
PREPONDERANCE OF EVIDENCE ADDUCED BY PETITIONER TO THE
CONTRARY.

II

. . . IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR OF

PRIVATE RESPONDENT RBS.

III

. . . IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF PRIVATE

RESPONDENT RBS.
IV

. . . IN AWARDING ATTORNEY'S FEES IN FAVOR OF RBS.

ABS-CBN claims that it had yet to fully exercise its right of first refusal over twenty-four
titles under the 1990 Film Exhibition Agreement, as it had chosen only ten titles from the
first list. It insists that we give credence to Lopez's testimony that he and Del Rosario met
at the Tamarind Grill Restaurant, discussed the terms and conditions of the second list (the
1992 Film Exhibition Agreement) and upon agreement thereon, wrote the same on a paper
napkin. It also asserts that the contract has already been effective, as the elements thereof,
namely, consent, object, and consideration were established. It then concludes that the
Court of Appeals' pronouncements were not supported by law and jurisprudence, as per
our decision of 1 December 1995 in Limketkai Sons Milling, Inc. v. Court of
Appeals, 23 which cited Toyota Shaw, Inc. v. Court of Appeals, 24 Ang Yu Asuncion v. Court of
Appeals, 25 and Villonco Realty Company v. Bormaheco. Inc.26

Anent the actual damages awarded to RBS, ABS-CBN disavows liability therefor. RBS
spent for the premium on the counterbond of its own volition in order to negate the
injunction issued by the trial court after the parties had ventilated their respective positions
during the hearings for the purpose. The filing of the counterbond was an option available
to RBS, but it can hardly be argued that ABS-CBN compelled RBS to incur such expense.
Besides, RBS had another available option, i.e., move for the dissolution or the injunction;
or if it was determined to put up a counterbond, it could have presented a cash bond.
Furthermore under Article 2203 of the Civil Code, the party suffering loss or injury is also
required to exercise the diligence of a good father of a family to minimize the damages
resulting from the act or omission. As regards the cost of print advertisements, RBS had
not convincingly established that this was a loss attributable to the non showing "Maging
Sino Ka Man"; on the contrary, it was brought out during trial that with or without the
case or the injunction, RBS would have spent such an amount to generate interest in the
film.

ABS-CBN further contends that there was no clear basis for the awards of moral and
exemplary damages. The controversy involving ABS-CBN and RBS did not in any way
originate from business transaction between them. The claims for such damages did not
arise from any contractual dealings or from specific acts committed by ABS-CBN against
RBS that may be characterized as wanton, fraudulent, or reckless; they arose by virtue
only of the filing of the complaint, An award of moral and exemplary damages is not
warranted where the record is bereft of any proof that a party acted maliciously or in bad
faith in filing an action. 27 In any case, free resort to courts for redress of wrongs is a matter
of public policy. The law recognizes the right of every one to sue for that which he honestly
believes to be his right without fear of standing trial for damages where by lack of sufficient
evidence, legal technicalities, or a different interpretation of the laws on the matter, the case
would lose ground. 28 One who makes use of his own legal right does no injury. 29 If damage
results front the filing of the complaint, it is damnum absque injuria. 30 Besides, moral
damages are generally not awarded in favor of a juridical person, unless it enjoys a good
reputation that was debased by the offending party resulting in social humiliation. 31

As regards the award of attorney's fees, ABS-CBN maintains that the same had no factual,
legal, or equitable justification. In sustaining the trial court's award, the Court of Appeals
acted in clear disregard of the doctrines laid down in Buan v. Camaganacan 32 that the text
of the decision should state the reason why attorney's fees are being awarded; otherwise,
the award should be disallowed. Besides, no bad faith has been imputed on, much less
proved as having been committed by, ABS-CBN. It has been held that "where no sufficient
showing of bad faith would be reflected in a party' s persistence in a case other than an
erroneous conviction of the righteousness of his cause, attorney's fees shall not be recovered
as cost." 33

On the other hand, RBS asserts that there was no perfected contract between ABS-CBN
and VIVA absent any meeting of minds between them regarding the object and
consideration of the alleged contract. It affirms that the ABS-CBN's claim of a right of first
refusal was correctly rejected by the trial court. RBS insist the premium it had paid for the
counterbond constituted a pecuniary loss upon which it may recover. It was obliged to put
up the counterbound due to the injunction procured by ABS-CBN. Since the trial court
found that ABS-CBN had no cause of action or valid claim against RBS and, therefore not
entitled to the writ of injunction, RBS could recover from ABS-CBN the premium paid on
the counterbond. Contrary to the claim of ABS-CBN, the cash bond would prove to be
more expensive, as the loss would be equivalent to the cost of money RBS would forego in
case the P30 million came from its funds or was borrowed from banks.

RBS likewise asserts that it was entitled to the cost of advertisements for the cancelled
showing of the film "Maging Sino Ka Man" because the print advertisements were put out
to announce the showing on a particular day and hour on Channel 7, i.e., in its entirety at
one time, not a series to be shown on a periodic basis. Hence, the print advertisement were
good and relevant for the particular date showing, and since the film could not be shown on
that particular date and hour because of the injunction, the expenses for the advertisements
had gone to waste.

As regards moral and exemplary damages, RBS asserts that ABS-CBN filed the case and
secured injunctions purely for the purpose of harassing and prejudicing RBS. Pursuant
then to Article 19 and 21 of the Civil Code, ABS-CBN must be held liable for such
damages. Citing Tolentino,34 damages may be awarded in cases of abuse of rights even if the
act done is not illicit and there is abuse of rights were plaintiff institutes and action purely
for the purpose of harassing or prejudicing the defendant.
In support of its stand that a juridical entity can recover moral and exemplary damages,
private respondents RBS cited People v. Manero,35 where it was stated that such entity may
recover moral and exemplary damages if it has a good reputation that is debased resulting
in social humiliation. it then ratiocinates; thus:

There can be no doubt that RBS' reputation has been debased by ABS-CBN's acts in this
case. When RBS was not able to fulfill its commitment to the viewing public to show the
film "Maging Sino Ka Man" on the scheduled dates and times (and on two occasions that
RBS advertised), it suffered serious embarrassment and social humiliation. When the
showing was canceled, late viewers called up RBS' offices and subjected RBS to verbal
abuse ("Announce kayo nang announce, hindi ninyo naman ilalabas," "nanloloko yata
kayo") (Exh. 3-RBS, par. 3). This alone was not something RBS brought upon itself. it was
exactly what ABS-CBN had planned to happen.

The amount of moral and exemplary damages cannot be said to be excessive. Two reasons
justify the amount of the award.

The first is that the humiliation suffered by RBS is national extent. RBS operations as a
broadcasting company is [sic] nationwide. Its clientele, like that of ABS-CBN, consists of
those who own and watch television. It is not an exaggeration to state, and it is a matter of
judicial notice that almost every other person in the country watches television. The
humiliation suffered by RBS is multiplied by the number of televiewers who had
anticipated the showing of the film "Maging Sino Ka Man" on May 28 and November 3,
1992 but did not see it owing to the cancellation. Added to this are the advertisers who had
placed commercial spots for the telecast and to whom RBS had a commitment in
consideration of the placement to show the film in the dates and times specified.

The second is that it is a competitor that caused RBS to suffer the humiliation. The
humiliation and injury are far greater in degree when caused by an entity whose ultimate
business objective is to lure customers (viewers in this case) away from the competition. 36

For their part, VIVA and Vicente del Rosario contend that the findings of fact of the trial
court and the Court of Appeals do not support ABS-CBN's claim that there was a perfected
contract. Such factual findings can no longer be disturbed in this petition for review under
Rule 45, as only questions of law can be raised, not questions of fact. On the issue of
damages and attorneys fees, they adopted the arguments of RBS.

The key issues for our consideration are (1) whether there was a perfected contract
between VIVA and ABS-CBN, and (2) whether RBS is entitled to damages and attorney's
fees. It may be noted that the award of attorney's fees of P212,000 in favor of VIVA is not
assigned as another error.

I.
The first issue should be resolved against ABS-CBN. A contract is a meeting of minds
between two persons whereby one binds himself to give something or to render some
service to another 37 for a consideration. there is no contract unless the following requisites
concur: (1) consent of the contracting parties; (2) object certain which is the subject of the
contract; and (3) cause of the obligation, which is established. 38 A contract undergoes three
stages:

(a) preparation, conception, or generation, which is the period of negotiation and

bargaining, ending at the moment of agreement of the parties;

(b) perfection or birth of the contract, which is the moment when the parties come to agree
on the terms of the contract; and

(c) consummation or death, which is the fulfillment or performance of the terms agreed
upon in the contract. 39

Contracts that are consensual in nature are perfected upon mere meeting of the minds,
Once there is concurrence between the offer and the acceptance upon the subject matter,
consideration, and terms of payment a contract is produced. The offer must be certain. To
convert the offer into a contract, the acceptance must be absolute and must not qualify the
terms of the offer; it must be plain, unequivocal, unconditional, and without variance of
any sort from the proposal. A qualified acceptance, or one that involves a new proposal,
constitutes a counter-offer and is a rejection of the original offer. Consequently, when
something is desired which is not exactly what is proposed in the offer, such acceptance is
not sufficient to generate consent because any modification or variation from the terms of
the offer annuls the offer.40

When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN at the Tamarind Grill on
2 April 1992 to discuss the package of films, said package of 104 VIVA films was VIVA's
offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent,
through Ms. Concio, a counter-proposal in the form of a draft contract proposing
exhibition of 53 films for a consideration of P35 million. This counter-proposal could be
nothing less than the counter-offer of Mr. Lopez during his conference with Del Rosario at
Tamarind Grill Restaurant. Clearly, there was no acceptance of VIVA's offer, for it was met
by a counter-offer which substantially varied the terms of the offer.

ABS-CBN's reliance in Limketkai Sons Milling, Inc. v. Court of

41 42
Appeals and Villonco Realty Company v. Bormaheco, Inc., is misplaced. In these cases, it
was held that an acceptance may contain a request for certain changes in the terms of the
offer and yet be a binding acceptance as long as "it is clear that the meaning of the
acceptance is positively and unequivocally to accept the offer, whether such request is
granted or not." This ruling was, however, reversed in the resolution of 29 March
1996, 43 which ruled that the acceptance of all offer must be unqualified and absolute, i.e., it
"must be identical in all respects with that of the offer so as to produce consent or meeting
of the minds."

On the other hand, in Villonco, cited in Limketkai, the alleged changes in the revised
counter-offer were not material but merely clarificatory of what had previously been
agreed upon. It cited the statement in Stuart v. Franklin Life Insurance Co.44 that "a
vendor's change in a phrase of the offer to purchase, which change does not essentially
change the terms of the offer, does not amount to a rejection of the offer and the tender of a
counter-offer." 45However, when any of the elements of the contract is modified upon
acceptance, such alteration amounts to a counter-offer.

In the case at bar, ABS-CBN made no unqualified acceptance of VIVA's offer. Hence, they
underwent a period of bargaining. ABS-CBN then formalized its counter-proposals or
counter-offer in a draft contract, VIVA through its Board of Directors, rejected such
counter-offer, Even if it be conceded arguendo that Del Rosario had accepted the counter-
offer, the acceptance did not bind VIVA, as there was no proof whatsoever that Del Rosario
had the specific authority to do so.

Under Corporation Code,46 unless otherwise provided by said Code, corporate powers,
such as the power; to enter into contracts; are exercised by the Board of Directors.
However, the Board may delegate such powers to either an executive committee or officials
or contracted managers. The delegation, except for the executive committee, must be for
specific purposes, 47 Delegation to officers makes the latter agents of the corporation;
accordingly, the general rules of agency as to the bindings effects of their acts would
apply. 48 For such officers to be deemed fully clothed by the corporation to exercise a power
of the Board, the latter must specially authorize them to do so. That Del Rosario did not
have the authority to accept ABS-CBN's counter-offer was best evidenced by his
submission of the draft contract to VIVA's Board of Directors for the latter's approval. In
any event, there was between Del Rosario and Lopez III no meeting of minds. The
following findings of the trial court are instructive:

A number of considerations militate against ABS-CBN's claim that a contract was

perfected at that lunch meeting on April 02, 1992 at the Tamarind Grill.

FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind Grill referred to the
price and the number of films, which he wrote on a napkin. However, Exhibit "C"
contains numerous provisions which, were not discussed at the Tamarind Grill, if Lopez
testimony was to be believed nor could they have been physically written on a napkin.
There was even doubt as to whether it was a paper napkin or a cloth napkin. In short what
were written in Exhibit "C'' were not discussed, and therefore could not have been agreed
upon, by the parties. How then could this court compel the parties to sign Exhibit "C"
when the provisions thereof were not previously agreed upon?
SECOND, Mr. Lopez claimed that what was agreed upon as the subject matter of the
contract was 14 films. The complaint in fact prays for delivery of 14 films. But Exhibit "C"
mentions 53 films as its subject matter. Which is which If Exhibits "C" reflected the true
intent of the parties, then ABS-CBN's claim for 14 films in its complaint is false or if what it
alleged in the complaint is true, then Exhibit "C" did not reflect what was agreed upon by
the parties. This underscores the fact that there was no meeting of the minds as to the
subject matter of the contracts, so as to preclude perfection thereof. For settled is the rule
that there can be no contract where there is no object which is its subject matter (Art. 1318,
NCC).

THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony (Exh. "D") states:

We were able to reach an agreement. VIVA gave us the exclusive license to show these
fourteen (14) films, and we agreed to pay Viva the amount of P16,050,000.00 as well as
grant Viva commercial slots worth P19,950,000.00. We had already earmarked this P16,
050,000.00.

which gives a total consideration of P36 million (P19,950,000.00 plus P16,050,000.00. equals
P36,000,000.00).

On cross-examination Mr. Lopez testified:

Q. What was written in this napkin?

A. The total price, the breakdown the known Viva movies, the 7 blockbuster movies and
the other 7 Viva movies because the price was broken down accordingly. The none [sic]
Viva and the seven other Viva movies and the sharing between the cash portion and the
concerned spot portion in the total amount of P35 million pesos.

Now, which is which? P36 million or P35 million? This weakens ABS-CBN's claim.

FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she transmitted Exhibit "C" to
Mr. Del Rosario with a handwritten note, describing said Exhibit "C" as a "draft." (Exh.
"5" - Viva; tsn pp. 23-24 June 08, 1992). The said draft has a well defined meaning.

Since Exhibit "C" is only a draft, or a tentative, provisional or preparatory writing

prepared for discussion, the terms and conditions thereof could not have been previously
agreed upon by ABS-CBN and Viva Exhibit "C'' could not therefore legally bind Viva, not
having agreed thereto. In fact, Ms. Concio admitted that the terms and conditions
embodied in Exhibit "C" were prepared by ABS-CBN's lawyers and there was no
discussion on said terms and conditions. . . .

As the parties had not yet discussed the proposed terms and conditions in Exhibit "C," and
there was no evidence whatsoever that Viva agreed to the terms and conditions thereof,
said document cannot be a binding contract. The fact that Viva refused to sign Exhibit "C"
reveals only two [sic] well that it did not agree on its terms and conditions, and this court
has no authority to compel Viva to agree thereto.

FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del Rosario agreed upon at the
Tamarind Grill was only provisional, in the sense that it was subject to approval by the
Board of Directors of Viva. He testified:

Q. Now, Mr. Witness, and after that Tamarind meeting ... the second meeting wherein you
claimed that you have the meeting of the minds between you and Mr. Vic del Rosario, what
happened?

A. Vic Del Rosario was supposed to call us up and tell us specifically the result of the
discussion with the Board of Directors.

Q. And you are referring to the so-called agreement which you wrote in [sic] a piece of
paper?

A. Yes, sir.

Q. So, he was going to forward that to the board of Directors for approval?

A. Yes, sir. (Tsn, pp. 42-43, June 8, 1992)

Q. Did Mr. Del Rosario tell you that he will submit it to his Board for approval?

A. Yes, sir. (Tsn, p. 69, June 8, 1992).

The above testimony of Mr. Lopez shows beyond doubt that he knew Mr. Del Rosario had
no authority to bind Viva to a contract with ABS-CBN until and unless its Board of
Directors approved it. The complaint, in fact, alleges that Mr. Del Rosario "is the Executive
Producer of defendant Viva" which "is a corporation." (par. 2, complaint). As a mere agent
of Viva, Del Rosario could not bind Viva unless what he did is ratified by its Board of
Directors. (Vicente vs. Geraldez, 52 SCRA 210; Arnold vs. Willetsand Paterson, 44 Phil. 634).
As a mere agent, recognized as such by plaintiff, Del Rosario could not be held liable jointly
and severally with Viva and his inclusion as party defendant has no legal basis. (Salonga
vs. Warner Barner [sic] , COLTA , 88 Phil. 125; Salmon vs. Tan, 36 Phil. 556).

The testimony of Mr. Lopez and the allegations in the complaint are clear admissions that
what was supposed to have been agreed upon at the Tamarind Grill between Mr. Lopez
and Del Rosario was not a binding agreement. It is as it should be because corporate power
to enter into a contract is lodged in the Board of Directors. (Sec. 23, Corporation Code).
Without such board approval by the Viva board, whatever agreement Lopez and Del
Rosario arrived at could not ripen into a valid contract binding upon Viva (Yao Ka Sin
Trading vs. Court of Appeals, 209 SCRA 763). The evidence adduced shows that the Board
of Directors of Viva rejected Exhibit "C" and insisted that the film package for 140 films be
maintained (Exh. "7-1" - Viva ). 49

The contention that ABS-CBN had yet to fully exercise its right of first refusal over twenty-
four films under the 1990 Film Exhibition Agreement and that the meeting between Lopez
and Del Rosario was a continuation of said previous contract is untenable. As observed by
the trial court, ABS-CBN right of first refusal had already been exercised when Ms. Concio
wrote to VIVA ticking off ten films, Thus:

[T]he subsequent negotiation with ABS-CBN two (2) months after this letter was sent, was
for an entirely different package. Ms. Concio herself admitted on cross-examination to
having used or exercised the right of first refusal. She stated that the list was not acceptable
and was indeed not accepted by ABS-CBN, (TSN, June 8, 1992, pp. 8-10). Even Mr. Lopez
himself admitted that the right of the first refusal may have been already exercised by Ms.
Concio (as she had). (TSN, June 8, 1992, pp. 71-75). Del Rosario himself knew and
understand [sic] that ABS-CBN has lost its rights of the first refusal when his list of 36 titles
were rejected (Tsn, June 9, 1992, pp. 10-11) 50

II

However, we find for ABS-CBN on the issue of damages. We shall first take up actual
damages. Chapter 2, Title XVIII, Book IV of the Civil Code is the specific law on actual or
compensatory damages. Except as provided by law or by stipulation, one is entitled to
compensation for actual damages only for such pecuniary loss suffered by him as he has
duly proved. 51 The indemnification shall comprehend not only the value of the loss
suffered, but also that of the profits that the obligee failed to obtain. 52 In contracts and
quasi-contracts the damages which may be awarded are dependent on whether the obligor
acted with good faith or otherwise, It case of good faith, the damages recoverable are those
which are the natural and probable consequences of the breach of the obligation and which
the parties have foreseen or could have reasonably foreseen at the time of the constitution
of the obligation. If the obligor acted with fraud, bad faith, malice, or wanton attitude, he
shall be responsible for all damages which may be reasonably attributed to the non-
performance of the obligation. 53 In crimes and quasi-delicts, the defendant shall be liable
for all damages which are the natural and probable consequences of the act or omission
complained of, whether or not such damages has been foreseen or could have reasonably
been foreseen by the defendant.54

Actual damages may likewise be recovered for loss or impairment of earning capacity in
cases of temporary or permanent personal injury, or for injury to the plaintiff's business
standing or commercial credit.55

The claim of RBS for actual damages did not arise from contract, quasi-contract, delict, or
quasi-delict. It arose from the fact of filing of the complaint despite ABS-CBN's alleged
knowledge of lack of cause of action. Thus paragraph 12 of RBS's Answer with
Counterclaim and Cross-claim under the heading COUNTERCLAIM specifically alleges:

12. ABS-CBN filed the complaint knowing fully well that it has no cause of action RBS. As
a result thereof, RBS suffered actual damages in the amount of P6,621,195.32. 56

Needless to state the award of actual damages cannot be comprehended under the above
law on actual damages. RBS could only probably take refuge under Articles 19, 20, and 21
of the Civil Code, which read as follows:

Art. 19. Every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.

Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to
another, shall indemnify the latter for tile same.

Art. 21. Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.

It may further be observed that in cases where a writ of preliminary injunction is issued,
the damages which the defendant may suffer by reason of the writ are recoverable from the
injunctive bond. 57 In this case, ABS-CBN had not yet filed the required bond; as a matter
of fact, it asked for reduction of the bond and even went to the Court of Appeals to
challenge the order on the matter, Clearly then, it was not necessary for RBS to file a
counterbond. Hence, ABS-CBN cannot be held responsible for the premium RBS paid for
the counterbond.

Neither could ABS-CBN be liable for the print advertisements for "Maging Sino Ka Man"
for lack of sufficient legal basis. The RTC issued a temporary restraining order and later, a
writ of preliminary injunction on the basis of its determination that there existed sufficient
ground for the issuance thereof. Notably, the RTC did not dissolve the injunction on the
ground of lack of legal and factual basis, but because of the plea of RBS that it be allowed
to put up a counterbond.

As regards attorney's fees, the law is clear that in the absence of stipulation, attorney's fees
may be recovered as actual or compensatory damages under any of the circumstances
provided for in Article 2208 of the Civil Code. 58

The general rule is that attorney's fees cannot be recovered as part of damages because of
the policy that no premium should be placed on the right to litigate. 59 They are not to be
awarded every time a party wins a suit. The power of the court to award attorney's fees
under Article 2208 demands factual, legal, and equitable justification. 60Even when claimant
is compelled to litigate with third persons or to incur expenses to protect his rights, still
attorney's fees may not be awarded where no sufficient showing of bad faith could be
reflected in a party's persistence in a case other than erroneous conviction of the
righteousness of his cause. 61

As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the Civil
Code. Article 2217 thereof defines what are included in moral damages, while Article 2219
enumerates the cases where they may be recovered, Article 2220 provides that moral
damages may be recovered in breaches of contract where the defendant acted fraudulently
or in bad faith. RBS's claim for moral damages could possibly fall only under item (10) of
Article 2219, thereof which reads:

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

Moral damages are in the category of an award designed to compensate the claimant for
actual injury suffered. and not to impose a penalty on the wrongdoer. 62 The award is not
meant to enrich the complainant at the expense of the defendant, but to enable the injured
party to obtain means, diversion, or amusements that will serve to obviate then moral
suffering he has undergone. It is aimed at the restoration, within the limits of the possible,
of the spiritual status quo ante, and should be proportionate to the suffering
inflicted.63 Trial courts must then guard against the award of exorbitant damages; they
should exercise balanced restrained and measured objectivity to avoid suspicion that it was
due to passion, prejudice, or corruption on the part of the trial court. 64

The award of moral damages cannot be granted in favor of a corporation because, being an
artificial person and having existence only in legal contemplation, it has no feelings, no
emotions, no senses, It cannot, therefore, experience physical suffering and mental anguish,
which call be experienced only by one having a nervous system. 65 The statement in People
v. Manero 66 and Mambulao Lumber Co. v. PNB 67 that a corporation may recover moral
damages if it "has a good reputation that is debased, resulting in social humiliation" is
an obiter dictum. On this score alone the award for damages must be set aside, since RBS is
a corporation.

The basic law on exemplary damages is Section 5, Chapter 3, Title XVIII, Book IV of the
Civil Code. These are imposed by way of example or correction for the public good, in
addition to moral, temperate, liquidated or compensatory damages. 68 They are recoverable
in criminal cases as part of the civil liability when the crime was committed with one or
more aggravating circumstances; 69 in quasi-contracts, if the defendant acted with gross
negligence; 70 and in contracts and quasi-contracts, if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner. 71

It may be reiterated that the claim of RBS against ABS-CBN is not based on contract,
quasi-contract, delict, or quasi-delict, Hence, the claims for moral and exemplary damages
can only be based on Articles 19, 20, and 21 of the Civil Code.
The elements of abuse of right under Article 19 are the following: (1) the existence of a legal
right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or
injuring another. Article 20 speaks of the general sanction for all other provisions of law
which do not especially provide for their own sanction; while Article 21 deals with
acts contra bonus mores, and has the following elements; (1) there is an act which is legal,
(2) but which is contrary to morals, good custom, public order, or public policy, and (3) and
it is done with intent to injure. 72

Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or bad faith
implies a conscious and intentional design to do a wrongful act for a dishonest purpose or
moral obliquity. 73 Such must be substantiated by evidence. 74

There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was
honestly convinced of the merits of its cause after it had undergone serious negotiations
culminating in its formal submission of a draft contract. Settled is the rule that the adverse
result of an action does not per se make the action wrongful and subject the actor to
damages, for the law could not have meant to impose a penalty on the right to litigate. If
damages result from a person's exercise of a right, it is damnum absque injuria.75

WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of
Appeals in CA-G.R. CV No, 44125 is hereby REVERSED except as to unappealed award of
attorney's fees in favor of VIVA Productions, Inc.1âwphi1.nêt

No pronouncement as to costs.

SO ORDERED.

G.R. No. 126204 November 20, 2001

NATIONAL POWER CORPORATION, petitioner,

vs.
PHILIPP BROTHERS OCEANIC, INC., respondent.

SANDOVAL-GUTIERREZ, J.:

Where a person merely uses a right pertaining to him, without bad faith or intent to injure,
the fact that damages are thereby suffered by another will not make him liable. 1
This principle finds useful application to the present case.

Before us is a petition for review of the Decision 2 dated August 27, 1996 of the Court of
Appeals affirming in toto the Decision 3 dated January 16, 1992 of the Regional Trial Court,
Branch 57, Makati City.

The facts are:

On May 14, 1987, the National Power Corporation (NAPOCOR) issued invitations to bid
for the supply and delivery of 120,000 metric tons of imported coal for its Batangas Coal-
Fired Thermal Power Plant in Calaca, Batangas. The Philipp Brothers Oceanic, Inc.
(PHIBRO) prequalified and was allowed to participate as one of the bidders. After the
public bidding was conducted, PHIBRO's bid was accepted. NAPOCOR's acceptance was
conveyed in a letter dated July 8, 1987, which was received by PHIBRO on July 15,
1987.The "Bidding Terms and Specifications" 4provide for the manner of shipment of coals,
thus:

"SECTION V

SHIPMENT

The winning TENDERER who then becomes the SELLER shall arrange and provide
gearless bulk carrier for the shipment of coal to arrive at discharging port on or before
thirty (30) calendar days after receipt of the Letter of Credit by the SELLER or its nominee
as per Section XIV hereof to meet the vessel arrival schedules at Calaca, Batangas,
Philippines as follows:

60,000 +/ - 10 % July 20, 1987

60,000 +/ - 10% September 4, 1987"5

On July 10, 1987, PHIBRO sent word to NAPOCOR that industrial disputes might soon
plague Australia, the shipment's point of origin, which could seriously hamper PHIBRO's
ability to supply the needed coal.6 From July 23 to July 31, 1987, PHIBRO again apprised
NAPOCOR of the situation in Australia, particularly informing the latter that the ship
owners therein are not willing to load cargo unless a "strike-free" clause is incorporated in
the charter party or the contract of carriage.7 In order to hasten the transfer of coal,
PHIBRO proposed to NAPOCOR that they equally share the burden of a "strike-free"
clause. NAPOCOR refused.

On August 6, 1987, PHIBRO received from NAPOCOR a confirmed and workable letter of
credit. Instead of delivering the coal on or before the thirtieth day after receipt of the Letter
of Credit, as agreed upon by the parties in the July contract, PHIBRO effected its first
shipment only on November 17, 1987.
Consequently, in October 1987, NAPOCOR once more advertised for the delivery of coal to
its Calaca thermal plant. PHIBRO participated anew in this subsequent bidding. On
November 24, 1987, NAPOCOR disapproved PHIBRO's application for pre-qualification
to bid for not meeting the minimum requirements. 8 Upon further inquiry, PHIBRO found
that the real reason for the disapproval was its purported failure to satisfy NAPOCOR's
demand for damages due to the delay in the delivery of the first coal shipment.

This prompted PHIBRO to file an action for damages with application for injunction
against NAPOCOR with the Regional Trial Court, Branch 57, Makati City. 9 In its
complaint, PHIBRO alleged that NAPOCOR's act of disqualifying it in the October 1987
bidding and in all subsequent biddings was tainted with malice and bad faith. PHIBRO
prayed for actual, moral and exemplary damages and attorney's fees.

In its answer, NAPOCOR averred that the strikes in Australia could not be invoked as
reason for the delay in the delivery of coal because PHIBRO itself admitted that as of July
28, 1987 those strikes had already ceased. And, even assuming that the strikes were still
ongoing, PHIBRO should have shouldered the burden of a "strike-free" clause because
their contract was "C and F Calaca, Batangas, Philippines," meaning,
the cost and freight from the point of origin until the point of destination would be for the
account of PHIBRO. Furthermore, NAPOCOR claimed that due to PHIBRO's failure to
deliver the coal on time, it was compelled to purchase coal from ASEA at a higher price.
NAPOCOR claimed for actual damages in the amount of P12,436,185.73, representing the
increase in the price of coal, and a claim of P500,000.00 as litigation expenses.10

Thereafter, trial on the merits ensued.

On January 16, 1992, the trial court rendered a decision in favor of PHIBRO, the
dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff Philipp Brothers

Oceanic Inc. (PHIBRO) and against the defendant National Power Corporation
(NAPOCOR) ordering the said defendant NAPOCOR:

1. To reinstate Philipp Brothers Oceanic, Inc. (PHIBRO) in the defendant National Power
Corporation's list of accredited bidders and allow PHIBRO to participate in any and all
future tenders of National Power Corporation for the supply and delivery of imported
steam coal;

2. To pay Philipp Brothers Oceanic, Inc. (PHIBRO);

a. The peso equivalent at the time of payment of $864,000 as actual damages,

b. The peso equivalent at the time of payment of $100,000 as moral damages;

c. The peso equivalent at the time of payment of $50,000 as exemplary damages;

d. The peso equivalent at the time of payment of $73,231.91 as reimbursement for expenses,
cost of litigation and attorney's fees;

3. To pay the costs of suit;

4. The counterclaims of defendant NAPOCOR are dismissed for lack of merit.

SO ORDERED."11

Unsatisfied, NAPOCOR, through the Solicitor General, elevated the case to the Court of
Appeals. On August 27, 1996, the Court of Appeals rendered a Decision affirming in toto
the Decision of the Regional Trial Court. It ratiocinated that:

"There is ample evidence to show that although PHIBRO's delivery of the shipment of coal
was delayed, the delay was in fact caused by a) Napocor's own delay in opening a workable
letter of credit; and b) the strikes which plaqued the Australian coal industry from the first
week of July to the third week of September 1987. Strikes are included in the definition of
force majeure in Section XVII of the Bidding Terms and Specifications, (supra), so Phibro is
not liable for any delay caused thereby.

Phibro was informed of the acceptance of its bid on July 8, 1987. Delivery of coal was to be
effected thirty (30) days from Napocor's opening of a confirmed and workable letter of
credit. Napocor was only able to do so on August 6, 1987.

By that time, Australia's coal industry was in the middle of a seething controversy and
unrest, occasioned by strikes, overtime bans, mine stoppages. The origin, the scope and the
effects of this industrial unrest are lucidly described in the uncontroverted testimony of
James Archibald, an employee of Phibro and member of the Export Committee of the
Australian Coal Association during the time these events transpired.

xxx xxx xxx

The records also attest that Phibro periodically informed Napocor of these developments as
early as July 1, 1987, even before the bid was approved. Yet, Napocor did not forthwith
open the letter of credit in order to avoid delay which might be caused by the strikes and
their after-effects.

"Strikes" are undoubtedly included in the force majeure clause of the Bidding Terms and
Specifications (supra). The renowned civilist, Prof. Arturo Tolentino, defines
force majeure as "an event which takes place by accident and could not have been
foreseen." (Civil Code of the Philippines, Volume IV, Obligations and Contracts, 126,
[1991]) He further states:
"Fortuitous events may be produced by two general causes: (1) by Nature, such as
earthquakes, storms, floods, epidemics, fires, etc., and (2) by the act of man, such as an
armed invasion, attack by bandits, governmental prohibitions, robbery, etc."

Tolentino adds that the term generally applies, broadly speaking, to natural accidents. In
order that acts of man such as a strike, may constitute fortuitous event, it is necessary that
they have the force of an imposition which the debtor could not have resisted. He cites a
parallel example in the case of Philippine National Bank v. Court of Appeals, 94 SCRA 357
(1979), wherein the Supreme Court said that the outbreak of war which prevents
performance exempts a party from liability.

Hence, by law and by stipulation of the parties, the strikes which took place in Australia
from the first week of July to the third week of September, 1987, exempted Phibro from the
effects of delay of the delivery of the shipment of coal."12

Twice thwarted, NAPOCOR comes to us via a petition for review ascribing to the Court of
Appeals the following errors:

"Respondent Court of Appeals gravely and seriously erred in concluding and so holding
that PHIBRO's delay in the delivery of imported coal was due to NAPOCOR's alleged
delay in opening a letter of credit and to force majeure, and not to PHIBRO's own
deliberate acts and faults."13

II

"Respondent Court of Appeals gravely and seriously erred in concluding and so holding
that NAPOCOR acted maliciously and unjustifiably in disqualifying PHIBRO from
participating in the December 8, 1987 and future biddings for the supply of imported coal
despite the existence of valid grounds therefor such as serious impairment of its track
record."14

III

"Respondent Court of Appeals gravely and seriously erred in concluding and so holding
that PHIBRO was entitled to injunctive relief, to actual or compensatory, moral and
exemplary damages, attorney's fees and litigation expenses despite the clear absence of
legal and factual bases for such award."15

IV

"Respondent Court of Appeals gravely and seriously erred in absolving PHIBRO from any
liability for damages to NAPOCOR for its unjustified and deliberate refusal and/or failure
to deliver the contracted imported coal within the stipulated period."16
V

"Respondent Court of Appeals gravely and seriously erred in dismissing NAPOCOR's

counterclaims for damages and litigation expenses."17

It is axiomatic that only questions of law, not questions of fact, may be raised before this
Court in a petition for review under Rule 45 of the Rules of Court. 18 The findings of facts of
the Court of Appeals are conclusive and binding on this Court 19 and they carry even more
weight when the said court affirms the factual findings of the trial court. 20 Stated
differently, the findings of the Court of .Appeals, by itself, which are supported by
substantial evidence, are almost beyond the power of review by this Court.21

With the foregoing settled jurisprudence, we find it pointless to delve lengthily on the
factual issues raised by petitioner. The existence of strikes in Australia having been duly
established in the lower courts, we are left only with the burden of determining whether or
not NAPOCOR acted wrongfully or with bad faith in disqualifying PHIBRO from
participating in the subsequent public bidding.

Let us consider the case in its proper perspective.

The Court of Appeals is justified in sustaining the Regional Trial Court's decision
exonerating PHIBRO from any liability for damages to NAPOCOR as it was clearly
established from the evidence, testimonial and documentary, that what prevented PHIBRO
from complying with its obligation under the July 1987 contract was the industrial disputes
which besieged Australia during that time. Extant in our Civil Code is the rule that no
person shall be responsible for those events which could not be foreseen, or which, though
foreseen, were inevitable.22 This means that when an obligor is unable to fulfill his
obligation because of a fortuitous event or force majeure, he cannot be held liable for
damages for non-performance.23

In addition to the above legal precept, it is worthy to note that PHIBRO and NAPOCOR
explicitly agreed in Section XVII of the "Bidding Terms and Specifications" 24 that "neither
seller (PHIBRO) nor buyer (NAPOCOR) shall be liable for any delay in or failure of the
performance of its obligations, other than the payment of money due, if any such delay or
failure is due to Force Majeure." Specifically, they defined force majeure as "any disabling
cause beyond the control of and without fault or negligence of the party, which causes may
include but are not restricted to Acts of God or of the public enemy; acts of the
Government in either its sovereign or contractual capacity; governmental restrictions;
strikes, fires, floods, wars, typhoons, storms, epidemics and quarantine restrictions."

The law is clear and so is the contract between NAPOCOR and PHIBRO. Therefore, we
have no reason to rule otherwise.
However, proceeding from the premise that PHIBRO was prevented by force majeure from
complying with its obligation, does it necessarily follow that NAPOCOR acted unjustly,
capriciously, and unfairly in disapproving PHIBRO's application for pre-qualification to
bid?

First, it must be stressed that NAPOCOR was not bound under any contract to approve
PHIBRO's pre-qualification requirements. In fact, NAPOCOR had expressly reserved its
right to reject bids. The Instruction to Bidders found in the "Post-Qualification
Documents/Specifications for the Supply and Delivery of Coal for the Batangas Coal-Fired
Thermal Power Plant I at Calaca, Batangas Philippines,"25 is explicit, thus:

"IB-17 RESERVATION OF NAPOCOR TO REJECT BIDS

NAPOCOR reserves the right to reject any or all bids, to waive any minor informality in
the bids received. The right is also reserved to reject the bids of any bidder who has previously
failed to properly perform or complete on time any and all contracts for delivery of coal or any
supply undertaken by a bidder."26(Emphasis supplied)

This Court has held that where the right to reject is so reserved, the lowest bid or any bid
for that matter may be rejected on a mere technicality. 27 And where the government as
advertiser, availing itself of that right, makes its choice in rejecting any or all bids, the
losing bidder has no cause to complain nor right to dispute that choice unless an unfairness
or injustice is shown. Accordingly, a bidder has no ground of action to compel the
Government to award the contract in his favor, nor to compel it to accept his bid. Even the
lowest bid or any bid may be rejected. 28In Celeste v. Court of Appeals,29 we had the occasion
to rule:

"Moreover, paragraph 15 of the Instructions to Bidders states that 'the Government hereby
reserves the right to reject any or all bids submitted.' In the case of A.C. Esguerra and Sons v.
Aytona, 4 SCRA 1245, 1249 (1962), we held:

'x x x [I]n the invitation to bid, there is a condition imposed upon the bidders to the effect
that the bidders shall be subject to the right of the government to reject any and all bids
subject to its discretion. Here the government has made its choice, and unless an unfairness
or injustice is shown, the losing bidders have no cause to complain, nor right to dispute that
choice.'

Since there is no evidence to prove bad faith and arbitrariness on the part of the petitioners in
evaluating the bids, we rule that the private respondents are not entitled to damages
representing lost profits." (Emphasis supplied)

Verily, a reservation of the government of its right to reject any bid, generally vests in the
authorities a wide discretion as to who is the best and most advantageous bidder. The
exercise of such discretion involves inquiry, investigation, comparison, deliberation and
decision, which are quasi-judicial functions, and when honestly exercised, may not be
reviewed by the court.30 In Bureau Veritas v. Office of the President,31 we decreed:

"The discretion to accept or reject a bid and award contracts is vested in the Government
agencies entrusted with that function. The discretion given to the authorities on this matter is
of such wide latitude that the Courts will not interfere therewith, unless it is apparent that it is
used as a shield to a fraudulent award. (Jalandoni v. NARRA, 108 Phil. 486 [1960]) x x x. The
exercise of this discretion is a policy decision that necessitates prior inquiry, investigation,
comparison, evaluation, and deliberation. This task can best be discharged by the
Government agencies concerned, not by the Courts. The role of the Courts is to ascertain
whether a branch or instrumentality of the Government has transgresses its constitutional
boundaries. But the Courts will not interfere with executive or legislative discretion
exercised within those boundaries. Otherwise, it strays into the realm of policy decision-
making. x x x." (Emphasis supplied)

Owing to the discretionary character of the right involved in this case, the propriety of
NAPOCOR's act should therefore be judged on the basis of the general principles
regulating human relations, the forefront provision of which is Article 19 of the Civil Code
which provides that "every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and
good faith."32Accordingly, a person will be protected only when he acts in the legitimate
exercise of his right, that is, when he acts with prudence and in good faith; but not when he
acts with negligence or abuse.33

Did NAPOCOR abuse its right or act unjustly in disqualifying PHIBRO from the public
bidding?

We rule in the negative.

In practice, courts, in the sound exercise of their discretion, will have to determine under
all the facts and circumstances when the exercise of a right is unjust, or when there has
been an abuse of right.34

We went over the record of the case with painstaking solicitude and we are convinced that
NAPOCOR's act of disapproving PHIBRO's application for pre-qualification to bid was
without any intent to injure or a purposive motive to perpetrate damage. Apparently,
NAPOCOR acted on the strong conviction that PHIBRO had a "seriously-impaired" track
record. NAPOCOR cannot be faulted from believing so. At this juncture, it is worth
mentioning that at the time NAPOCOR issued its subsequent Invitation to Bid, i.e.,
October 1987, PHIBRO had not yet delivered the first shipment of coal under the July 1987
contract, which was due on or before September 5, 1987. Naturally, NAPOCOR is justified
in entertaining doubts on PHIBRO's qualification or capability to assume an obligation
under a new contract.

Moreover, PHIBRO's actuation in 1987 raised doubts as to the real situation of the coal
industry in Australia. It appears from the records that when NAPOCOR was constrained
to consider an offer from another coal supplier (ASEA) at a price of US$33.44 per metric
ton, PHIBRO unexpectedly offered the immediate delivery of 60,000 metric tons of Ulan
steam coal at US$31.00 per metric ton for arrival at Calaca, Batangas on September 20-21,
1987."35 Of course, NAPOCOR had reason to ponder — how come PHIBRO could assure
the immediate delivery of 60,000 metric tons of coal from the same source to arrive at Calaca
not later than September 20/21, 1987 but it could not deliver the coal it had undertaken under
its contract?

Significantly, one characteristic of a fortuitous event, in a legal sense, and consequently in

relations to contracts, is that "the concurrence must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner." 36 Faced with the above
circumstance, NAPOCOR is justified in assuming that, may be, there was really no
fortuitous event or force majeure which could render it impossible for PHIBRO to effect
the delivery of coal. Correspondingly, it is also justified in treating PHIBRO's failure to
deliver a serious impairment of its track record. That the trial court, thereafter, found
PHIBRO's unexpected offer actually a result of its desire to minimize losses on the part of
NAPOCOR is inconsequential. In determining the existence of good faith, the yardstick is
the frame of mind of the actor at the time he committed the act, disregarding actualities or
facts outside his knowledge. We cannot fault NAPOCOR if it mistook PHIBRO's
unexpected offer a mere attempt on the latter's part to undercut ASEA or an indication of
PHIBRO's inconsistency. The circumstances warrant such contemplation.

That NAPOCOR believed all along that PHIBRO's failure to deliver on time was
unfounded is manifest from its letters 37 reminding PHIBRO that it was bound to deliver the
coal within 30 days from its (PHIBRO's) receipt of the Letter of Credit, otherwise it would
be constrained to take legal action. The same honest belief can be deduced from
NAPOCOR's Board Resolution, thus:

"On the legal aspect, Management stressed that failure of PBO to deliver under the contract
makes them liable for damages, considering that the reasons invoked were not valid. The
measure of the damages will be limited to actual and compensatory damages. However, it was
reported that Philipp Brothers advised they would like to have continuous business relation
with NPC so they are willing to sit down or even proposed that the case be submitted to the
Department of Justice as to avoid a court action or arbitration.

xxx xxx xxx

On the technical-economic aspect, Management claims that if PBO delivers in November
1987 and January 1988, there are some advantages. If PBO reacts to any legal action and
fails to deliver, the options are: one, to use 100% Semirara and second, to go into urgent
coal order. The first option will result in a 75 MW derating and oil will be needed as
supplement. We will stand to lose around P30 M. On the other hand, if NPC goes into an
urgent coal order, there will be an additional expense of $786,000 or P16.11 M, considering
the price of the latest purchase with ASEA. On both points, reliability is decreased."38

The very purpose of requiring a bidder to furnish the awarding authority its pre-
qualification documents is to ensure that only those "responsible" and "qualified" bidders
could bid and be awarded with government contracts. It bears stressing that the award of a
contract is measured not solely by the smallest amount of bid for its performance, but also
by the "responsibility" of the bidder. Consequently, the integrity, honesty, and
trustworthiness of the bidder is to be considered. An awarding official is justified in
considering a bidder not qualified or not responsible if he has previously defrauded the
public in such contracts or if, on the evidence before him, the official bona fide believes the
bidder has committed such fraud, despite the fact that there is yet no judicial determination
to that effect.39Otherwise stated, if the awarding body bona fide believes that a bidder has
seriously impaired its track record because of a particular conduct, it is justified in
disqualifying the bidder. This policy is necessary to protect the interest of the awarding
body against irresponsible bidders.

Thus, one who acted pursuant to the sincere belief that another willfully committed an act
prejudicial to the interest of the government cannot be considered to have acted in bad
faith. Bad faith has always been a question of intention. It is that corrupt motive that
operates in the mind. As understood in law, it contemplates a state of mind affirmatively
operating with furtive design or with some motive of self-interest or ill-will or for ulterior
purpose.40While confined in the realm of thought, its presence may be ascertained through
the party's actuation or through circumstantial evidence. 41 The circumstances under which
NAPOCOR disapproved PHIBRO's pre-qualification to bid do not show an intention to
cause damage to the latter. The measure it adopted was one of self-protection.
Consequently, we cannot penalize NAPOCOR for the course of action it took. NAPOCOR
cannot be made liable for actual, moral and exemplary damages.

Corollarily, in awarding to PHIBRO actual damages in the amount of $864,000, the

Regional Trial Court computed what could have been the profits of PHIBRO had
NAPOCOR allowed it to participate in the subsequent public bidding. It ruled that
"PHIBRO would have won the tenders for the supply of about 960,000 metric tons out of at
least 1,200,000 metric tons" from the public bidding of December 1987 to 1990. We quote
the trial court's ruling, thus:
". . . PHIBRO was unjustly excluded from participating in at least five (5) tenders
beginning December 1987 to 1990, for the supply and delivery of imported coal with a total
volume of about 1,200,000 metric tons valued at no less than US$32 Million. (Exhs. "AA,"
"AA-1-1," to "AA-2"). The price of imported coal for delivery in 1988 was quoted in June
1988 by bidders at US$41.35 to US$43.95 per metric ton (Exh. "JJ"); in September 1988 at
US$41.50 to US$49.50 per metric ton (Exh. "J-1"); in November 1988 at US$39.00 to
US$48.50 per metric ton (Exh. "J-2") and for the 1989 deliveries, at US$44.35 to US$47.35
per metric ton (Exh. "J-3") and US$38.00 to US$48.25 per metric ton in September 1990
(Exh. "JJ-6" and "JJ-7"). PHIBRO would have won the tenders for the supply and
delivery of about 960,000 metric tons of coal out of at least 1,200,000 metric tons awarded
during said period based on its proven track record of 80%. The Court, therefore finds that
as a result of its disqualification, PHIBRO suffered damages equivalent to its standard 3%
margin in 960,000 metric tons of coal at the most conservative price of US$30,000 per metric
ton, or the total of US$864,000 which PHIBRO would have earned had it been allowed to
participate in biddings in which it was disqualified and in subsequent tenders for supply and
delivery of imported coal."

We find this to be erroneous.

Basic is the rule that to recover actual damages, the amount of loss must not only be
capable of proof but must actually be proven with reasonable degree of certainty, premised
upon competent proof or best evidence obtainable of the actual amount thereof. 42 A court
cannot merely rely on speculations, conjectures, or guesswork as to the fact and amount of
damages. Thus, while indemnification for damages shall comprehend not only the value of
the loss suffered, but also that of the profits which the obligee failed to obtain, 43 it is
imperative that the basis of the alleged unearned profits is not too speculative and
conjectural as to show the actual damages which may be suffered on a future period.

In Pantranco North Express, Inc. v. Court of Appeals,44 this Court denied the plaintiff's
claim for actual damages which was premised on a contract he was about to negotiate on
the ground that there was still the requisite public bidding to be complied with, thus:

"As to the alleged contract he was about to negotiate with Minister Hipolito, there is no
showing that the same has been awarded to him. If Tandoc was about to negotiate a
contract with Minister Hipolito, there was no assurance that the former would get it or that
the latter would award the contract to him since there was the requisite public bidding. The
claimed loss of profit arising out of that alleged contract which was still to be negotiated is a
mere expectancy. Tandoc's claim that he could have earned P2 million in profits is highly
speculative and no concrete evidence was presented to prove the same. The only unearned
income to which Tandoc is entitled to from the evidence presented is that for the one-month
period, during which his business was interrupted, which is P6,125.00, considering that his
annual net income was P73,500.00."
In Lufthansa German Airlines v. Court of Appeals,45 this Court likewise disallowed the trial
court's award of actual damages for unrealized profits in the amount of US$75,000.00 for
being highly speculative. It was held that "the realization of profits by respondent . . . was
not a certainty, but depended on a number of factors, foremost of which was his ability to
invite investors and to win the bid." This Court went further saying that actual or
compensatory damages cannot be presumed, but must be duly proved, and proved with
reasonable degree of certainty.

And in National Power Corporation v. Court of Appeals,46 the Court, in denying the bidder's
claim for unrealized commissions, ruled that even if NAPOCOR does not deny its
(bidder's) claims for unrealized commissions, and that these claims have been transmuted
into judicial admissions, these admissions cannot prevail over the rules and regulations
governing the bidding for NAPOCOR contracts, which necessarily and inherently include
the reservation by the NAPOCOR of its right to reject any or all bids.

The award of moral damages is likewise improper. To reiterate, NAPOCOR did not act in
bad faith. Moreover, moral damages are not, as a general rule, granted to a
corporation.47 While it is true that besmirched reputation is included in moral damages, it
cannot cause mental anguish to a corporation, unlike in the case of a natural person, for a
corporation has no reputation in the sense that an individual has, and besides, it is
inherently impossible for a corporation to suffer mental anguish. 48 In LBC Express, Inc. v.
Court of Appeals,49 we ruled:

"Moral damages are granted in recompense for physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar injury. A corporation, being an artificial person and having existence only in
legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience
physical suffering and mental anguish. Mental suffering can be experienced only by one
having a nervous system and it flows from real ills, sorrows, and griefs of life — all of
which cannot be suffered by respondent bank as an artificial person."

Neither can we award exemplary damages under Article 2234 of the Civil Code. Before the
court may consider the question of whether or not exemplary damages should be awarded,
the plaintiff must show that he is entitled to moral, temperate, or compensatory damages.

NAPOCOR, in this petition, likewise contests the judgment of the lower courts awarding
PHIBRO the amount of $73,231.91 as reimbursement for expenses, cost of litigation and
attorney's fees.

We agree with NAPOCOR.

This Court has laid down the rule that in the absence of stipulation, a winning party may
be awarded attorney's fees only in case plaintiff's action or defendant's stand is so
untenable as to amount to gross and evident bad faith. 50This cannot be said of the case at
bar. NAPOCOR is justified in resisting PHIBRO's claim for damages. As a matter of fact,
we partially grant the prayer of NAPOCOR as we find that it did not act in bad faith in
disapproving PHIBRO's pre-qualification to bid.

Trial courts must be reminded that attorney's fees may not be awarded to a party simply
because the judgment is favorable to him, for it may amount to imposing a premium on the
right to redress grievances in court. We adopt the same policy with respect to the expenses
of litigation. A winning party may be entitled to expenses of litigation only where he, by
reason of plaintiff's clearly unjustifiable claims or defendant's unreasonable refusal to his
demands, was compelled to incur said expenditures. Evidently, the facts of this case do not
warrant the granting of such litigation expenses to PHIBRO.

At this point, we believe that, in the interest of fairness, NAPOCOR should give PHIBRO
another opportunity to participate in future public bidding. As earlier mentioned, the delay
on its part was due to a fortuitous event.

But before we dispose of this case, we take this occasion to remind PHIBRO of the
indispensability of coal to a coal-fired thermal plant. With households and businesses being
entirely dependent on the electricity supplied by NAPOCOR, the delivery of coal cannot be
venturesome. Indeed, public interest demands that one who offers to deliver coal at an
appointed time must give a reasonable assurance that it can carry through. With the
deleterious possible consequences that may result from failure to deliver the needed coal,
we believe there is greater strain of commitment in this kind of obligation.

WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 126204 dated
August 27, 1996 is hereby MODIFIED. The award, in favor of PHIBRO, of actual, moral
and exemplary damages, reimbursement for expenses, cost of litigation and attorney's fees,
and costs of suit, is DELETED.

SO ORDERED.

G.R. No. L-14333 January 28, 1961

OSCAR VENTANILLA, plaintiff-appellant,

vs.
GREGORIO CENTENO, defendant-appellee.

Espinosa and Ventanilla for plaintiff-appellant.

Artemio R. Pascual for defendant-appellee.

PADILLA, J.:
This is an action to recover damages claimed to have been suffered by the plaintiff due to
the defendant's neglect in perfecting within the reglementary period his appeal from an
adverse judgment rendered by the Court of First Instance of Manila in civil case No. 18833,
attorney's fees and costs (civil No. 2063, Court of First Instance of Nueva Ecija). After trial,
the Court rendered judgment in favor of the plaintiff and against the defendant, ordering
the latter to pay the former the sum of P200 as nominal damages and the costs. The
plaintiff appealed to the Court of Appeals, which certified the case to this Court on the
ground that only questions of law are raised. The defendant did not appeal.

The facts, as found by the trial court, are:

In Civil Case No. 18833 of the Court of First Instance of Manila, entitled Oscar Ventanilla
vs. Edilberto Alejandrino and Aida G. Alejandrino, plaintiff retained the service of Atty.
Gregorio Centeno to represent him and prosecute the case. Civil Case No. 19833 was an
action for the recovery of P4,000.00 together with damages. Decision unfavorable to the
plaintiff was received by Atty. Gregorio Centeno on July 21, 1955, and a notice of appeal
was filed by Atty. Centeno on July 25, 1955. On July 30, 1955, Atty. Centeno wrote to the
plaintiff the letter, Exhibit A, enclosing copies of the decision and that notice of appeal, and
stating that he was not conformable to the decision and had not hesitated to file the notice
of appeal. Plaintiff Oscar Ventanilla after receiving the letter and copy of the decision went
to see Atty. Centeno in his office in Manila about August 5, 1955. Atty. Centeno informed
him that he intended to appeal and plaintiff agreed. Plaintiff, however, did not leave with
Atty. Centeno at that time the amount for the appeal bond. About the middle of Aug. 1955,
Atty. Centeno wrote a letter to the plaintiff enclosing therein forms for an appeal bond. The
plaintiff Ventanilla, however, instead of executing an appeal bond, and because use of his
reluctance to pay the premium on the appeal bond, decided to file a cash appeal bond of
P60.00. He went to the office of Atty. Centeno at about 4 o'clock on August 18,1955, but was
informed by the clerk, Leonardo Sanchez, that Atty. Centeno was in Laguna campaigning
for his candidacy as member of the Provincial Board. Plaintiff then issued the check
Exhibit 1, for P60.00 as appeal bond and delivered the same to Leonardo Sanchez with
instruction to give the same to Atty. Centeno upon his arrival. The Court does not believe
plaintiff's testimony that Sanchez had contacted Atty. Centeno by telephone and that he
issued the cheek upon instruction of Atty. Centeno. Leonardo Sanchez had informed the
plaintiff that Atty. Centeno was in Laguna, and if he were in Manila, Sanchez could not
have known the whereabouts of Atty, Centeno. It was therefore improbable that he could
contact Atty. Centeno that afternoon. On August 17, Atty. Centeno prepared the motion for
extension of time to file the record on appeal, Exhibit D, which was filed only on August 20,
1955. Atty. Centeno returned to Manila and went to his office at about 10 o'clock in the
morning of August 22. He cash the check, Exhibit 1, with the Marvel Building Corporation
and then went to the office of the Clerk of Court to file the appeal bond. According to Atty.
Centeno it was not accepted because the period of appeal had already expired, and that it
was only at that time he came to know that the period of appeal had expired. The court
does not likewise believe the testimony of Atty. Centeno. Neither the Clerk of Court, or any
of the employees had the right to refuse an appeal bond that is being filed, for it is not in his
power to determine whether or not the appeal bond has been filed within the time
prescribed by law. In fact the record on appeal was accepted and filed on September 5,
1955, but no appeal bond has been filed by Atty. Centeno. The fact that the record on
appeal was admitted for filing is the best evidence that Atty. Centeno had not in fact filed
any appeal bond. The record on appeal was disapproved because it was filed out of time
and no appeal bond had been filed by the plaintiff. (pp. 33-36, rec. on app.)

The appellant claims that the trial court erred in not ordering the appellee to pay him
actual or compensatory, moral, temperate or moderate, and exemplary or corrective
damages; in ordering the appellee to pay the appellant only the sum of P200, and not
P2,000 as nominal damages; and in not ordering the appellee to pay the appellant the sum
of P500 as attorney's fee.

Article 2199 of the new Civil Code provides:

Except as provided by law or by stipulation, one is entitled to an adequate compensation

only for such pecuniary loss suffered by him as he has duly proved. Such compensation is
referred to as actual or compensatory damages.

He who claims actual or compensatory damages must establish and prove by competent
evidence actual pecuniary loss.1 The appellant's bare allegation that by reason of the
appellee's indifference, negligence and failure to perfect within the reglementary period his
appeal from an adverse judgment rendered in civil case No. 18833, by not paying the
appeal bond of P60, he lost his chance to recover from the defendants therein the sum of
P4,000 and moral and actual damages, which he could have recovered if the appeal had
duly been perfected, indicates that his claim for actual or compensatory damages is highly
speculative. Hence he is not entitled to such damages.

The appellant claims that he suffered mental anguish upon learning that his appeal had not
been perfected within the reglementary period due to the appellee's negligence; serious
anxiety upon learning that his adversary had won by a mere technicality; besmirched
reputation for losing the opportunity to substantiate his claim made while testifying in open
court that he was entitled to collect the sum of P4,000 and damages from the defendants in
civil No. 18833; and wounded feelings for the appellee's failure to remain faithful to his
client and worthy of his trust and confidence. The provisions of the new Civil Code on
moral damages state:

Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shocks, social humiliation, and
similar injury. Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant's wrongful act or omission.

Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries; .

(2) Quasi-delicts causing physical injuries; .

(3) Seduction, abduction, rape, or other lascivious acts; .

(4) Adultery or concubinage; .

(5) Illegal or arbitrary detention or arrest; .

(6) Illegal search; .

(7) Libel, slander or any other form of defamation; .

(8) Malicious prosecution .

(9) Acts mentioned in article 309; .

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this
article, may also recover moral damages.

The spouse, descendants, ascendants, and brothers and sister may bring action mentioned
in No. 9 of this article, in the order named.

Art. 2220. Willful injury to property may be legal ground for awarding moral damages if
the court should find that, under the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

Moral damages are recoverable only when physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shocks, social humiliation,
and similar injury are the proximate result of a criminal offense resulting in physical
injuries, quasi-delicts causing physical injuries, seduction, abduction, rape or other
lascivious acts, adultery or concubinage, illegal or arbitrary detention or arrest, illegal
search, libel, slander or any other form of defamation, malicious prosecution, disrespect for
the dead or wrongful interference with funerals, violation of specific provisions of the Civil
Code on human relations, and willful injury to property. To this we may add that where a
mishap occurs resulting in the death of a passenger being transported by a common
carrier, the spouse, descendants and ascendants of the deceased passenger are entitled to
demand moral damages for mental anguish by reason of the passenger's
death.2 In Malonzo vs. Galang, supra, this Court categorically stated that —

. . .Art. 2219 specifically mentions "quasi-delicts causing physical injuries," as an instance

when moral damages may be allowed, thereby implying that all other quasi-delicts not
resulting in physical injuries are excluded (Strebel vs. Figueras, G.R. L-4722, Dec. 29,
1954), excepting, of course, the special torts referred to in Art. 309 (par. 9, Art. 2219) and in
Arts. 21, 26, 27, 28, 29, 30, 32, 34 and 35 on the chapter on human relations (par. 10, Art.
2219).3

Since the appellant's cause of action for recovery of moral damages is not predicated upon
any of those specifically enumerated, the trial court did not err in declining to award moral
damages to him.

Concerning temperate or moderate damages claimed by the appellant, considering that he

is not entitled to actual or compensatory damages but has been awarded nominal damages
by the trial court, such award precludes the recovery of temperate or moderate
damages,4 and so the trial court did not err in refusing to award temperate or moderate
damages to the appellant .

As regards exemplary or corrective damages also claimed by the appellant, since it cannot
be recovered as a matter of right and the court will decide whether or not they should be
adjudicated,5 if the defendant acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner,6 the trial court has judiciously, wisely and correctly exercised its
discretion in not awarding them to the appellant.

Relative to the sufficiency of the sum of P200 as nominal damages awarded by the trial
court to the appellant, article 2221 of the new Civil Code provides:

Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.

The assessment of nominal damages is left to the discretion of the court, according to the
circumstances of the case.7 Considering the circumstances, as found by the trial court, and
the degree of negligence committed by the appellee, a lawyer, in not depositing on time the
appeal bond and filing the record on appeal within the extension period granted by the
court, which brought about the refusal by the trial court to allow the record on appeal, the
amount of P200 awarded by the trial court to the appellant as nominal damages may seem
exiguous. Nevertheless, considering that nominal damages are not for indemnification of
loss suffered but for the vindication or recognition of a right violated or invaded; and that
even if the appeal in civil case No. 18833 had been duly perfected, it was not an assurance
that the appellant would succeed in recovering the amount he had claimed in his complaint,
the amount of P2,000 the appellant seeks to recover as nominal damages is excessive. After
weighing carefully all the considerations, the amount awarded to the appellant for nominal
damages should not be disturbed.

As regards attorney's fees, since the appellant's claim does not fall under any of those
enumerated in article 2208, new Civil Code, the appellee may not be compelled to satisfy it.

The judgment appealed from is affirmed, without special pronouncement as to costs.

G.R. No. 88561 April 20, 1990

DR. HERMAN ARMOVIT, DORA ARMOVIT and JACQUELINE

ARMOVIT, petitioners,
vs.
COURT OF APPEALS, and NORTHWEST AIRLINES, INC., respondents.

Law Firm of Raymundo A. Armovit for petitioners.

Quisumbing, Torres & Evangelista for private respondent.

GANGAYCO, J.:

This is a case which involves a Filipino physician and his family residing in the United
States who came home to the Philippines on a Christmas visit. They were bumped off at the
Manila International Airport on their return flight to the U.S. because of an erroneous
entry in their plane tickets relating to their time of departure.

In October 1981, the petitioners decided to spend their Christmas holidays with relatives
and friends in the Philippines, so they purchased from private respondent, (Northwest
Airlines, Inc.) three (3) round trip airline tickets from the U.S. to Manila and back, plus
three (3) tickets for the rest of the children, though not involved in the suit. Each ticket of
the petitioners which was in the handwriting of private respondent's tickets sales agent
contains the following entry on the Manila to Tokyo portion of the return flight:

from Manila to Tokyo, NW flight 002, date 17 January, time 10:30 A.M. Status, OK. 1

On their return trip from Manila to the U.S. scheduled on January 17, 1982, petitioner
arrived at the check-in counter of private respondent at the Manila International Airport
at 9:15 in the morning, which is a good one (1) hour and fifteen (15) minutes ahead of the
10:30 A.M. scheduled flight time recited in their tickets. Petitioners were rudely informed
that they cannot be accommodated inasmuch as Flight 002 scheduled at 9:15 a.m. was
already taking off and the 10:30 A.M. flight time entered in their plane tickets was
erroneous.

Previous to the said date of departure petitioners re-confirmed their reservations through
their representative Ernesto Madriaga who personally presented the three (3) tickets at the
private respondent's Roxas Boulevard office. 2 The departure time in the three (3) tickets of
petitioners was not changed when re-confirmed. The names of petitioners appeared in the
passenger manifest and confirmed as Passenger Nos. 306, 307, and 308, Flight 002. 3

Herein petitioner Dr. Armovit protested in extreme agitation that because of the bump-off
he will not be able to keep his appointments with his patients in the U.S. Petitioners
suffered anguish, wounded feelings, and serious anxiety day and night of January 17th
until the morning of January 18th when they were finally informed that seats will be
available for them on the flight that day.

Because of the refusal of the private respondent to heed the repeated demands of the
petitioners for compensatory damages arising from the aforesaid breach of their air-
transport contracts, 4 petitioners were compelled to file an action for damages in the
Regional Trial Court of Manila.

After trial on the merits, a decision was rendered on July 2, 1985, the dispositive part of
which reads as follows:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered

ordering defendant to pay plaintiffs actual, moral, exemplary and nominal damages, plus
attorney's fees, as follows:

a) Actual damages in favor of Dr. Herman Armovit in the sum of P1,300.00, with interest at
the legal rate from January 17, 1982;

b) Moral damages of P500,000.00, exemplary damages of P500,000.00, and nominal

damages of P100,000.00 in favor of Dr. Herman Armovit;

c) Moral damages of P300,000.00, exemplary damages of P300,000.00, and nominal

damages of P50,000.00 in favor of Mrs. Dora Armovit;

d) Moral damages of P300,000.00, exemplary damages of P300,000.00, and nominal

damages of P50,000.00 in favor of Miss Jacqueline Armovit; and

e) Attorney's fees of 5% of the total awards under the above paragraphs.

plus costs of suit. 5

Not satisfied therewith, private respondent interposed an appeal to the Court of Appeals
wherein in due course a decision was rendered on June 20, 1989, the relevant portion and
dispositive part of which read as follows:

Plaintiffs-appellees had complied with the "72-hour reconfirmation rule." They had
obtained reconfirmation from defendant-appellant of the time and date of their flight, as
indicated in their tickets. The trial court said so and We find nothing significance to
warrant a disturbance of such finding.

On the allowance of damages, the trial court has discretion to grant and fix the amounts to
be paid the prevailing party. In this case, there was gross negligence on the part of
defendant-appellant in reconfirming the time and date of departure of Flight No. 002 as
indicated in the three (3) tickets (Exhibits A, A-1 and A-2). And, as admitted by defendant-
appellant, plaintiffs-appellees had arrived at the airport at 9:15 A.M. or one (1) hour before
departure time of 10:30 A.M.

Appellees' actual damages in the amount of P1,300.00 is maintained for being unrebutted
by the Appellant.

However, We modify the allowance of the other awards made by the trial court.

The moral damages of P900,000.00 awarded to Appellees must be eliminated considering

the following:

1. That the appellees did not take the witness stand to testify on their "social humiliation,
wounded feelings and anxiety" and the breach of contract was not malicious or fraudulent.
(Art. 2220, Civil Code). It has been held that:

Nor was there error in the appealed decision in denying moral damages, not only on
account of the plaintiffs failure to take the witness stand and testify to her social
humiliation, wounded feelings, anxiety, etc., as the decision holds, but primarily because a
breach of contract like that of defendant not being malicious or fraudulent, does not
warrant the award of moral damages under Article 2220 of the Civil Code (Ventilla vs.
Centeno, L-14333, 28 Jan. 1961; Fores vs. Miranda, L-12163; 4 March 1959 Francisco vs.
GSIS, 7 SCRA 577).

2. Furthermore, moral damages, though incapable of pecuniary estimation, are in the

category of an award designed to compensate the claimant for actual injury suffered and
not to impose a penalty on the wrongdoer (San Andres vs. Court of Appeals, 116 SCRA 85).
In a later case, the Supreme Court held that moral damages are emphatically not intended
to enrich a complainant at the expense of the defendant (R & B Surety vs. IAC, 129 SCRA
745) citing Grand Union Supermarket, Inc. vs. Espino, Jr. 94 SCRA 966).
However, there is no question that appellant acted with negligence in not informing
appellees about the change of hour of departure. To provide an example or correction for
the public good, therefore, the award of exemplary damages is proper (Art. 2229 & 2231
Civil Code; Lopez v. Pan American World Airways, 16 SCRA 431; Prudenciado vs. Alliance
Transport, 148 SCRA 440). Nonetheless, the awards granted by the trial court are far too
exhorbitant and excessive compared to the actual loss of P1,300.00. The authority of the
Court of Appeals to modify or change the amounts of awards has been upheld in a long line
of decisions. We reduce the award of exemplary damages from P500,000.00 to P100,000.00
in favor of Dr. Herman Armovit, from P500,000.00 to P50,000.00 in favor of Mrs. Dora
Armovit; and from P300,000.00 to P20,000.00 in favor of Miss Jacqueline Armovit.
(Gellada vs. Warner Barnes, 57 O.G. (4) 7347, Sadie vs. Bachrach, 57 O.G. (4) 636,
Prudenciado vs. Alliance Transport, supra). The award of nominal damages has to be
eliminated since we are already awarding actual loss. Nominal damages cannot co-exist
with actual or compensatory damages (Vda. de Medina, et al. v. Cresencia, et al., 99 Phil.
506).

The award of 5% of the total damages as attorney's fees is reasonable.

3. WHEREFORE, with the above modifications, the decision appealed from is hereby
AFFIRMED in all other respects. 6

A motion for reconsideration thereof filed by the petitioners was denied in a resolution
dated May 29, 1989. 7

Both petitioners and private respondent elevated the matter to this Court for review
by certiorari.

The petition of private respondent was docketed as G.R. No. 86776. It was denied in a
resolution of this Court dated July 10, 1989, and the motion for reconsideration thereof was
denied in a resolution dated September 6, 1989. On October 12, 1989 this Court ordered
the entry of judgment in this case and for the records to be remanded to the court of origin
for prompt execution of the judgment.

In the herein petition for review on certiorari filed by petitioner they claim that the
questioned decision and resolution of the Court of Appeals should be struck down as an
unlawful, unjust and reasonless departure from the decisions of this Court as far as the
award for moral damages and the drastic reduction of the exemplary damages are
concerned.

The petition is impressed with merit.

The appellate court observed that private respondent was guilty of gross negligence not
only in the issuance of the tickets by the erroneous entry of the date of departure and
without changing or correcting the error when the said three (3) tickets were presented for
re-confirmation. Nevertheless it deleted the award of moral damages on the ground that
petitioners did not take the witness stand to testify on "their social humiliation, wounded
feelings and anxiety, and that the breach of contract was not malicious or fraudulent." 8

We disagree.

In Air France vs. Carrascoso, 9 Lopez vs. Pan American World Airways, 10 and Zulueta
vs. Pan American World Airways, 11 this Court awarded damages for the gross negligence of
the airline which amounted to malice and bad faith and which tainted the breach of air
transportation contract.

Thus in Air France, this Court observed:

A contract to transport passengers is quite different in kind and degree from any other
contractual relation. And this, because of the relation which an air carrier sustains with the
public. Its business is mainly with the traveling public. It invites people to avail of the
comforts and advantages it offers. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the carrier's employees,
naturally, could give ground for an action for damages.

Passengers do not contract merely for transportation. They have the right to be treated by
the carrier's employees with kindness, respect, courtesy and due consideration. They are
entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees. So it is, that any rude or discourteous conduct on the part of
employees towards a passenger gives the latter an action for damages against the carrier.12

The gross negligence committed by private respondent in the issuance of the tickets with
entries as to the time of the flight, the failure to correct such erroneous entries and the
manner by which petitioners were rudely informed that they were bumped off are
clear indicia of such malice and bad faith and establish that private respondent committed
a breach of contract which entitles petitioners to moral damages.

The appellate court observed that the petitioners failed to take the witness stand and testify
on the matter.1âwphi1 It overlooked however, that the failure of the petitioner to appear in
court to testify was explained by them. The assassination of Senator Benigno Aquino, Jr. on
August 21, 1983 following the year they were bumped off caused a turmoil in the country.
This turmoil spilled over to the year 1984 when they were scheduled to testify. However, the
violent demonstrations in the country were sensationalized in the U.S. media so petitioners
were advised to refrain from returning to the Philippines at the time.

Nevertheless, Atty. Raymund Armovit, brother of petitioner Dr. Armovit, took the witness
stand as he was with the petitioners from the time they checked in up to the time of their
ultimate departure. He was a witness when the check-in officer rudely informed the
petitioners that their flight had already taken off, while petitioner Dr. Armovit
remonstrated that their tickets reflected their flight time to be 10:30 A.M.; that in anger
and frustration, Dr. Armovit told the said check-in-officer that he had to be accommodated
that morning so that he could attend to all his appointments in the U.S.; that petitioner
Jacqueline Armovit also complained about not being able to report for work at the
expiration of her leave of absence; that while petitioner had to accept private respondent's
offer for hotel accommodations at the Philippine Village Hotel so that they could follow up
and wait for their flight out of Manila the following day, petitioners did not use their meal
coupons supplied because of the limitations thereon so they had to spend for lunch, dinner,
and breakfast in the sum of P1,300.00 while waiting to be flown out of Manila; that Dr.
Armovit had to forego the professional fees for the medical appointments he missed due to
his inability to take the January 17 flight; that the petitioners were finally able to fly out of
Manila on January 18, 1982, but were assured of this flight only on the very morning of
that day, so that they experienced anxiety until they were assured seats for that flight. 13

No doubt Atty. Raymund Armovit's testimony adequately and sufficiently established the
serious anxiety, wounded feelings and social humiliation that petitioners suffered upon
having been bumped off. However, considering the circumstances of this case whereby the
private respondent attended to the plight of the petitioners, taking care of their
accommodations while waiting and boarding them in the flight back to the U.S. the
following day, the Court finds that the petitioners are entitled to moral damages in the
amount of P100,000.00 each.

By the same token to provide an example for the public good, an award of exemplary
damages is also proper. 14The award of the appellate court is adequate.

Nevertheless, the deletion of the nominal damages by the appellate court is well-taken since
there is an award of actual damages. Nominal damages cannot co-exist with actual or
compensatory damages. 15

WHEREFORE, the petition is GRANTED. The questioned judgment of the Court of

Appeals is hereby modified such that private respondent shall pay the following:

(a) actual damages in favor of Dr. Armovit in the sum of P1,300.00 with interest at the legal
rate from January 17, 1982;

(b) moral damages at P100,000.00 and exemplary damages and P100,000.00 in favor of Dr.
Armovit;

(c) moral damages of P100,000.00 and exemplary damages of P50,000.00 in favor of Mrs.
Dora Armovit;
(d) moral damages of P100,000.00 and exemplary damages in the amount of P20,000.00 in
favor of Miss Jacqueline Armovit; and

(e) attorney's fees at 5% of the total awards under the above paragraphs, plus the cost of
suit.

SO ORDERED.

G.R. No. 129782 June 29, 2001

PEOPLE OF THE PHILIPPINES, plaintiff and appellee,

vs.
BALWINDER SINGH, GURMOK SINGH, DALVIR SINGH, DIAL SINGH, AMARJIT
SINGH, MOHINDER SINGH, MALKIT SINGH DHILLON, JOHINDER SINGH and
KULDIP SINGH, defendant,
BALWINDER SINGH, MALKIT, SINGH, MOHINDER SINGH and DALVIR
SINGH, defendants-appellants.

BUENA, J.:

Appellants Balwinder, Malkit, Mohinder and Dalvir, all surnamed Singh, were convicted of
the crime of Murder in Criminal Case No. 8683 for killing Surinder Singh, and Frustrated
Murder in Criminal Cases No. 8682 for stabbing Dilbag Singh. Each of them were
sentenced to suffer the penalty of reclusion perpetua for murder, and the indeterminate
penalty of 8 years and one (1) day of prision mayor as minimum, to twelve (12) years and
one (1) day of reclusion temporal as maximum for frustrated murder.

It appears that these four (4) appellants, who are Indian nationals, were charged with
murder and frustrated murder along with their six (6) compatriots, namely: Gurmok,
Dalvir, Dial, Johinder, Kuldip and Amarjit Singh. Only these four (4) appellants were
prosecuted because the rest of their co-accused are at-large, except for Dial Singh, who died
while under detention.

Dilbag Singh, private complainant for frustrated murder in Criminal Case No. 8682,
recounts that on November 26, 1993, at around 7:30 in the morning while he was cleaning
his motorbike in front of the Mendiola Apartment in Barangay Canlalay, Biñan, Laguna,
Dalvir, Balwinder, Gurmok, Jarnail, Amarjit, Mohinder, Dial, Kuldip- all surnamed Singh-
Johander Singh Dhillon, and Malkit Singh Dhillon arrived, shouting foul remarks in their
native language and demanding Surinder Singh to come out of the apartment. When
Surinder Singh came out of his apartment, Dalvir Singh tried to stab him but Surinder
Singh was able to move away. Dalvir Singh told his companions to hold Surinder Singh as
he will kill him. Thereafter, Dial Singh and Johinder Singh each held the right and left
arms of Surinder Singh, with Kuldip Singh pushing Surinder Singh on his back. Dalvir
Singh then stabbed Surinder Singh, hitting him on the right side of his stomach, and
causing him to fall on the ground. Dial Singh remarked that Surinder Singh failed to give
money and if others will likewise refuse, the same fate will befall them. As Surinder Singh
tried to get up, Malkit Singh Dhillon and Jarnail Singh started hitting him with lead pipes
all over his body, while Johinder Singh and Dial Singh punched and kicked Surinder.
Amarjit Singh, who was holding a gun, warned everyone not to help Surinder Singh or else
he will shoot. Thereat, when all these things were going on, private complainant Dilbag
Singh tried to stop them but Balwinder Singh stabbed him on the left side of his back.
Gurmok Singh likewise stabbed him with a bolo, but he was not hit as he was able to move
to one side. After that, the ten (10) accused Indians left.

Dilbag Singh and Surinder Singh, both injured, were brought to the Perpetual Help
Hospital, Biñan, Laguna, by Jaswinder Singh, Johinder Singh Gill, Balwinder Singh Gill
and Alwan Singh, for treatment. There, Surinder Singh was pronounced dead on arrival.

From the hospital, private complainant Dilbag Singh, Jaswinder Singh, Balwinder Singh
Gill, a lady named Vilma, and other companions went to the police station in Biñan,
Laguna, and reported the incident. Both Dilbag Singh and Jaswinder Singh executed a
sworn statement.

On the basis of the sworn statement, the Chief Investigator of the Biñan Police Station filed
on November 28, 1993, a complaint for the crime of homicide with the Municipal Trial
Court (MTC) of Biñan, Laguna for purposes of preliminary investigation.

On January 7, 1994,1 after finding probable cause, the MTC recommended to upgrade the
charges to "Murder" and "Frustrated Murder", and forwarded the records of the case to
the Provincial Prosecutor.2

On February 17, 1994, 3rd Assistant Prosecutor of Laguna, Fernando V. Balinado,

rendered a resolution recommending that only Dalvir Singh be charged with homicide, and
that frustrated homicide be filed against Balwinder and Gurmok Singh. 3 Thereafter, the
Information for homicide was filed against Dalvir Singh, and frustrated homicide against
Balwinder and Gurmok Singh4 with the Regional Trial Court of Laguna. Before
arraignment, private complainants Dilbag Singh and their heirs of Surinder Singh, thru
their counsel, moved for reinvestigation.5

On June 30, 1994, a "resolution on reinvestigation" 6 resulted in the filing of two (2)
Informations – for Murder and Frustrated Murder – against all ten (10) Indian nationals,
to wit:
"CRIMINAL CASE No. 86837 ‘For Murder’

"That on or about November 26, 1993, in the Municipality of Biñan, Province of Laguna,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused
conspiring, confederating and mutually helping with one another, and armed with a fan
knife, hand gun and lead pipes, did then and there willfully, unlawfully and feloniously
attack, assault, stab and wound and hit with said knife and lead pipes one SURINDER
SINGH thereby inflicting upon him fatal wounds, with abuse of superior strength,
treachery and with evident premeditation, the said accused, having inflicted the wounds
upon SURINDER SINGH while being held by the other accused, and as a result thereof,
the said wounds being necessarily mortal/fatal, thereby causing the direct and immediate
death of said SURINDER SINGH, to the damage and prejudice of his surviving heirs.

"All contrary to law and with the qualifying/aggravating circumstances of abuse of

superior strength, evident premeditation and alevosia, and the generic aggravating
circumstance of known conspiracy.

"Criminal Case No. 86828 ‘Frustrated Murder’

"That on or about November 26, 1993 in the Municipality of Biñan, Province of Laguna,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused
conspiring, confederating and mutually helping with one another, did then and there
willfully, unlawfully and feloniously, with abuse of superior strength, treachery and evident
premeditation, while armed with bolos, lead pipes, fan knife and hand-gun, with the intent
of taking the life of DILBAG SINGH, attack, assault thereby inflicting upon him mortal
wound on the left side of his body directly by overt acts thus, performing all the acts of
execution which would have nevertheless did not produce it, by reason of causes
independent of their will, that is: the able and timely medical assistance given the said
DILBAG SINGH which prevented his death.

"CONTRARY TO LAW."

Initially, the case was filed with the Regional Trial Court of Biñan, Laguna and was raffled
to Branch 24. Both cases were tried jointly.

Upon arraignment, on September 23, 1994, three (3) appellants, Balwinder, Malkit and
Mohinder Singh, manifested that they are not entering any plea. Thus, the court entered
for them a plea of not guilty pursuant to Section 1(c), Rule 116 of the Rules of Court. 9 The
arraignment of Dalvir and Dial Singh followed on October 25, 1994.10

On October 6, 1994, appellants filed a petition for bail. 11 While hearing the petition for bail,
appellants filed a motion to inhibit and a petition for change of venue. 12 Subsequently, on
May 30, 1995, the hearing on the petition for bail was continued before the Regional Trial
Court of San Pedro, Laguna. On December 13, 1995, RTC of San Pedro, Laguna denied the
petition for bail.13

The evidence presented during the bail hearings were automatically reproduced at the
trial.

The events, according to appellants, happened in this wise. Appellant Dalvir Singh testified
that on November 26, 1993, at around 7:30 in the morning, he was conducting his buy and
sell business along Brgy. Canlalay, Biñan, Laguna. While collecting from his customers, he
was accosted by Jaswinder, Dilbag and Surinder Singh to stop at the corner of the street.
When he stopped, he alighted from his motorcycle. Jaswinder, Dilbag and Surinder Singh
accused him of squealing their status to the immigration authorities. Then, Jaswinder
Singh punched him. Appellant Dalvir Singh retaliated by slapping Jaswinder Singh
afterwhich, Jaswinder Singh, went inside his apartment to get a pipe. When Surinder Singh
was about to stab him, he wrestled the knife from him and, in the process, private
complainant Dilbag Singh was stabbed on his back with the same knife. 14 As Dalvir Singh
grappled for the possession of the knife from Surinder Singh, both of them fell down, with
him landing on top of Surinder Singh and that was the time when Surinder Singh was
stabbed on the right portion of his stomach. Then, Surinder Singh lost his grip and
appellant Dalvir Singh was able to get hold of the knife. Appellant Dalvir Singh was so
nervous that he left the place on his motorcycle while holding the knife. He threw the knife
along the highway of Biñan, Laguna.15

To bolster this version, appellants offered the testimonies of Wilfredo Rivera and SPO4
Manuel Francisco. Wilfredo Rivera corroborated the testimonies of appellant Dalvir Singh.
According to him, he testified in court in exchange for the favor extended to him by an
Indian national who is a friend of appellant Dalvir Singh. With respect to the testimonies of
SPO4 Manuel Francisco, then chief investigator of the PNP, Biñan, Laguna, the same were
confined to the fact that private complainants Dilbag Singh and Jaswinder Singh executed
their respective sworn statements of the incident.

After trial, appellants were convicted of the crime charged, thus –

"WHEREFORE, the guilt of accused Balwinder Singh, Malkit Singh Dhillon, Mohinder
Singh, Dalvir Singh and Dial Singh having been established beyond reasonable doubt of the
crimes of frustrated murder in Criminal Case No. 8282 and murder in Criminal Case 8683
defined and penalized in Articles 248 and 250 of the Revised Penal Code, this Court hereby
sentences them (except Dial Singh who died during the presentation of defense evidence on
the main case) as follows:

"Criminal Case No. 8682

"1. each to suffer an indeterminate penalty of imprisonment of from eight (8) years and one
(1) day of prision mayor as minimum, to twelve (12) years and one (1) day of reclusion
temporal maximum;

"2. jointly and severally, to pay private complainant Dilbag Singh the amounts of P16,000
representing his hospitalization and medical expenses, and P30,000 for and as attorney’s
fees; and

"3. jointly and severally, to pay the costs of suit.

"Criminal Case No. 8683

"1. each to suffer the penalty of reclusion perpetua;

"2. jointly and severally, to pay the heirs of Surinder Singh the following sums:

a) P50,000.00 as civil indemnity;

b) P41,500.00 representing funeral, wake and transportation expenses;

c) P5,760,000.00 for lost earnings/income;

d) P400.00 for hospitalization expenses;

e) P50,000.00 for moral damages; and

f) P500,000.00 for and as attorney’s fees; and

"3. jointly and severally, to pay the costs of suit.

"Since accused Jarnail Singh, Gurmok Singh, Amarjit Singh, Johinder Singh and Kuldip
Singh have remained at-large to date, in order not to clog the docket of this court, let the
records of these two cases be sent to the files and warrant be issued for their immediate
arrest.

"SO ORDERED."16

Due to the penalty of reclusion perpetua imposed in murder, the case is now before us on
appeal.

Appellants challenge their conviction and interpose the following errors allegedly
committed by the trial court-17

"1. The court a quo erred in sanctioning errors and irregularities of procedure which
resulted in denial of due process to accused-appellants.
"2. The court a quo erred in accepting the prosecution’s version of the incident which gave
rise to these cases, overlooking the testimonies of the three (3) unbiased witnesses thereto.

"3. The court a quo erred in awarding excessive damages against accused-appellants.

First error

According to appellants, an irregularity attended the admission of the amended

Informations. They claim that the prosecution failed to conduct a preliminary investigation
for the upgraded crime of murder and frustrated murder. This claim lacks basis.

Evidence on record reveals that when private complainants filed a motion for re-
investigation to upgrade the charge to murder and frustrated murder, in the course
thereof, the prosecutor who handled the reinvestigation 18 conducted another preliminary
investigation. "Subpoenas were issued and sent to both contending parties requiring them
to appear and be present on the scheduled date and time for the said re-investigation, and
to present, or submit, their evidence in support of their complaints and defense,
respectively."19 The prosecutor propounded clarificatory questions to the prosecution
witnesses revealing the necessity to raise the category of the criminal charge to murder and
frustrated murder.

Appellants likewise alleged that the procedure followed by the trial court in resolving their
petitions for bail departed from the usual course of judicial proceedings, because the
prosecution presented its evidence ahead of appellants, and the presentation of the
prosecution took 10 months from January 27 to October 30, 1995, while the accused were
afforded only two days to rebut the prosecution evidence. This allegation is misplaced.

In hearing the petition for bail, the prosecution has the burden of showing that the evidence
of guilt is strong. Section 8, Rule 114 of the Rules of Court specifically provides that the
burden of proof in bail application lies in the prosecution, thus-

"Section 8, Burden of proof in bail application.- At the hearing of an application for

admission to bail filed by any person who is in custody for the commission of an offense
punishable by death, reclusion perpetua or life imprisonment, the prosecution has the
burden of showing that evidence of guilt is strong. The evidence presented during the bail
hearings shall be considered automatically reproduced at the trial, but upon motion of
either party, the court may recall any witness for additional examination unless the witness
is dead, outside of the Philippines or otherwise unable to testify."

In bail proceedings, the prosecution must be given ample opportunity to show that the
evidence of guilt is strong. While the proceeding is conducted as a regular trial, it must be
limited to the determination of the bailability of the accused. It should be brief and speedy,
lest the purpose for which it is available is rendered nugatory. Antecedents of this case show
that the case was initially raffled to Branch 24, RTC, Biñan, Laguna, and then transferred
to RTC San Pedro, Laguna. From the filing of the two (2) criminal Informations, several
motions and petitions were received by the trial court, which include, among others,
application for bail, motion for re-investigation, motion to inhibit and change of venue,
motion to transfer appellants from the municipal jail to Sta. Cruz provincial jail, petition
for review filed with the Department of Justice and motion for postponements. In the
course of hearing the petition for bail, several petitions and motions cluttered the records of
the trial court. In fact, the records of the case were not immediately forwarded to RTC San
Pedro, Laguna when the hearing was transferred. We have scoured the records of this case
and we found that the delay was caused by these factors. These, however, did not justify the
length of time consumed by the prosecution in the presentation of its evidence because the
trial court, exercising its discretion, ought to control the course of bail proceedings,
"avoiding unnecessary thoroughness in the examination and cross-examination of
witnesses, and reducing to a reasonable minimum the amount of corroboration particularly
on details that are not essential to the purpose of the hearing." 20 While the prosecution
tarried too long, such fact did not amount to a denial of due process because bail is granted
only "where it is uncertain whether the accused is guilty or innocent," 21 which is not
attendant in this case.

Appellants also challenge their transfer from the municipal jail in Biñan, Laguna, to the
provincial jail in Sta. Cruz, Laguna. The transfer of appellants to the Sta. Cruz provincial
jail was sought for because during the scheduled hearings, appellants were always
late.22 Considering that the jail guards in the municipal jail at Biñan reasoned that they are
undermanned, thus, late in going to court, the trial court deemed it best to transfer
appellants to the provincial jail. Besides, the trial court took cognizance of the fact that
appellants complained of poor jail facilities in Biñan, Laguna. 23 Circumstances surrounding
this case justify appellants’ transfer to the provincial jail for the purpose of insuring the
speedy disposition of the case.

Appellants claim that no evidence was presented by the prosecution to prove the allegations
in the amended information, and that "there is nothing in the records of these cases which
support the statement of the court a quothat "the documentary evidence, as well as the
testimonies of the xxx witnesses presented by the prosecution in a petition for bail, was
considered as automatically reproduced at the trial on the main cases",24 is misleading.

On May 30, 1995, the trial court declared that the evidence presented during the bail
hearings are considered automatically reproduced at the trial of the main case. 25 In fact,
Section 8, Rule 114 of the Rules of Court specifically provides that "the evidence presented
during the bail hearings shall be considered automatically reproduced at the trial." The
mandate of the Rules is clear and there is no need for the trial court to issue an order so
that the evidence presented in the bail proceedings may be considered automatically
reproduced at the trial.
Appellants contend that they were deprived of their rights to be heard and to present
evidence with the issuance of the trial court Order dated February 24, 1997. As culled from
the records, appellants were protracting the trial by filing motions for postponement on
scheduled hearings. On February 24,1997, the scheduled date for appellants’ presentation
of additional evidence, appellants filed a motion for leave to file demurrer to evidence and
set the same for hearing on that same day. 26 It bears stressing that judicial action on a
motion to dismiss, or demurrer to evidence, is left to the exercise of sound judicial
discretion.27 The trial court, mindful of the violation of the three-day notice rule by
appellants, declared that the trial court must be given time to resolve the motion, and
ordered the parties to proceed with the hearing, without prejudice to the outcome of the
motion. The trial court emphasized that there should be a limitation or an end to
unnecessary postponements. Thus, it disclosed that when the Court of Appeals denied
appellants’ "Petition for Certiorari" with a prayer for temporary restraining order, 28 no
legal hindrance existed to defer the scheduled hearings. Appellants were given all the
opportunity to be heard and defend their cause but opted not to utilize the same by its
continued refusal to proceed with the trial. Nevertheless, appellants were given time to file
their formal offer of exhibits to bolster their defense.29 This negates the appellants’ claim of
denial of due process.

Second error

Appellants fault the trial court in accepting the prosecution’s version. This Court is
convinced that appellants are guilty of the crime charged. Appellants Dalvir Singh
admitted stabbing the deceased and wounding Dilbag Singh, which was claimed to have
been caused while grappling for the possession of the knife. This version invoking the
justifying circumstance of self-defense must be proven by clear and convincing
evidence.30 After invoking self-defense, for exculpation, appellants have the burden of
proving their allegation to substantiate such assertion, which they failed to do so. In
addition, their imputation of alleged discrepancy between the sworn statement executed by
private complainants Dilbag and Jaswinder Singh on November 26, 1993, and their joint
sworn statement executed on December 13, 1993, 31 is not impressed with merit. Reviews of
both sworn statements negate any inconsistency. Immediately after the incident, private
complainants Dilbag and Jaswinder Singh, reported the circumstances surrounding the
death of Surinder Singh, and the stab wound sustained by Dilbag Singh to police
authorities.32 Both of them revealed the presence of all the appellants and disclosed their
participation in the incident. On November 26, 1993, their narrations collectively and
individually demonstrate appellants’ concerted action to inflict injury upon private
complainant Dilbag Singh and the deceased Surinder Singh. In fine, we quote with
approval, the trial court’s findings, holding all the appellants guilty of murder and
frustrated murder, thus-
" x x x prosecution evidence has established that Surinder Singh was stabbed in the
stomach by accused Dalvir Singh while the former was being held on his arms by accused
Dial Singh and Johinder Singh, and pushed on his back by accused Kuldip Singh. At that
juncture, accused Malkit Singh Dhillon and Jarnail Singh held lead pipes, accused
Balwinder Singh, a big bolo-like knife, accused Gurmok Singh, a small bolo-like knife, and
Amarjit Singh, a hand gun. Also, accused Mohinder Singh shouted ‘kill him, I’m
responsible, I will bring you out of trouble’ in Punjabi and the rest of the accused remarked
‘come on, kill him, kill him’ also in Punjabi. While all these acts were transpiring, accused
Amarjit Singh threatened to shoot anybody who will help with the gun that he was holding.
After he was stabbed, Surinder Singh was still hit with lead pipes by accused Malkit Singh
Dhillon and Jarnail Singh and boxed and kicked by Johinder Singh and Dial Singh and
pushed at his back by Kuldip Singh. When Dilbag pleaded with the accused not to hit
anymore (sic) Surinder Singh, he, too, was stabbed on his back by Balwinder Singh
followed by an attempt to stab him also by Gurmok Singh. Evidently, the foregoing
concerted acts sufficiently demonstrated a common purpose or design to kill Surinder
Singh and Dilbag Singh with treachery. As held in a number of cases, there is treachery
when offender commits any of the crimes against person, employing means, methods or
forms in the execution thereof, without risk to himself from the defense which the offended
party might make. xxx xxx xxx Thus, treachery which was alleged in the informations,
qualifies the killing of Surinder Singh to murder and the inflicting of a mortal wound on
Dilbag Singh with intent to kill to frustrated murder. Where criminal conspiracy is shown
to exist, all the conspirators are liable as co-principals regardless of the extent and
character of their participation, in contemplation of law, the act of one conspirator is the
act of all xxx xxx xxx and the participation in all details of execution of the crime is not
necessary for such a finding. xxx xxx xxx Although superior strength is found to be
attendant in the killing of Surinder Singh and wounding of Dilbag Singh, it is deemed
absorbed in treachery and is not appreciated as a separate aggravating circumstances. As
regards the circumstance of evident premeditation, prosecution evidence failed to show
when accused meditated and reflected upon their decision to kill their victims. In short, it
cannot also be appreciated because there is wanting of any direct evidence of the planning
and the preparation to kill."33

The other errors allegedly committed by the trial court call for the calibration of credibility
of witnesses, which we find no reason to disturb since it is best left to the trial court to pass
upon, having had the opportunity to observe firsthand the demeanor and actuation of the
witnesses while on the witness stand.34

Third error

In Criminal Case No. 8682 for frustrated murder, the trial court awarded private
complainant Dilbag Singh the amount of P16,000.00 representing his hospitalization and
medical expenses, and P 30,000.00 as attorney’s fees. For his hospitalization and medical
expenses, the receipts submitted to support said claim amounted only to P370.50. 35 Hence,
private complainant Dilbag Singh is entitled only to the said amount. 36 The award of
attorney’s fees is hereby deleted.37 Nonetheless, private complaint is entitled to moral
damages38 in the amount of P50,000.00 for the suffering he endured from appellants’
felonious acts.

In Criminal Case No. 8683 for murder, the following amount of actual damages were duly
proven – P16,500.00 funeral expenses39 and air ticket/freight of the cadaver – $600.27. 40 The
amount of P400.00 for hospitalization expenses should be deleted for not being supported
by evidence. The trial court’s award of P50,000.00 as civil indemnity, and P50,000.00 moral
damages are affirmed. The award of P500,000.00 as attorneys’ fees 41 and P5,760,000 as
compensation for loss of earning capacity, are likewise deleted for lack of basis. Awards for
loss of earning capacity partake of damages which must be proven not only by credible and
satisfactory evidence, but also by unbiased proof. 42 The testimony of Balwinder Singh Gill,
first cousin of the deceased, on the alleged income of the deceased while in the Philippines,
is not enough. The best evidence to substantiate income earned by foreigners while in the
Philippines is the payment of taxes with the Bureau of Internal Revenue. Absent such
proof, bare allegation is insufficient. Nevertheless, considering that the definite proof of
pecuniary loss cannot be offered, and the fact of loss has been established, appellants shall
pay the heirs of Surinder Singh temperate damages43 in the amount of P200,000.00.

WHEREFORE, in accordance with the foregoing disquisition, the decision appealed from
is hereby affirmed subject to the following modifications-

1. In Criminal Case No. 8682 for frustrated murder, appellants shall only be liable to pay –

a. P370.50 for hospitalization expenses;

b. P50,000.00, as moral damages, plus costs; and,

2. In Criminal Case No. 8683 for murder, in addition to the civil indemnity, moral damages
and attorney’s fees awarded by the trial court, appellants shall pay-

a. P16,500.00, as funeral expenses;

b. $600.27, as air ticket/freight of the cadaver, to be computed at the prevailing rate of

exchange at the time of the promulgation of this decision; and,

c. P200,000.00, as temperate damages, plus costs. SO ORDERED.

G.R. No. 120547 January 29, 2001

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
EDISON PLAZO,1 accused-appellant.
QUISUMBING, J.:

On appeal is the decision 2 dated January 16, 1995 of the Regional Trial Court of San Jose,
Camarines Sur, Branch 30, convicting appellant of the crime of murder, sentencing him to
suffer the penalty of reclusion perpetua, and to pay the heirs of the victim P50,000.00 as
indemnity, P15,712.00 as actual damages, P10,000.00 as moral damages, and to pay the
costs.1âwphi1.nêt

The facts, based on the records, are as follows:

On August 8, 1989, at around 4:00 in the afternoon, Leonor Fabula went out of her house
in May-anao, Tigaon, Camarines Sur to buy sugar at a nearby store. When she reached the
store, she saw appellant boxing her son Romeo Fabula and banging his head on the post of
the store, while asking him why he told the police about his brother and the location of
appellant's house. When Leonor sought to intervene, appellant got angry at her. She
became afraid and asked for help but nobody went near them. Romeo freed himself from
the hold of appellant and ran away. Appellant chased Romeo with a small bolo known
locally as "gatab." Leonor shouted at appellant to stop but the latter did not heed her
pleas. Appellant caught up with Romeo and stabbed him at the back causing Romeo to fall
on the ground. Appellant continued to stab Romeo in the upper and lower chest area.
Leonor continued shouting for help and eventually someone came to help. However, when
she saw her son no longer moving, she told the people not to touch or move him because she
was going to the Poblacion of Tigaon to get a policeman.

When Patrolmen Virgilio Azucena and Jose Madera arrived at the scene of the crime, they
saw the fallen body of Romeo with a small bolo imbedded on his chest and the detached
handle of the bolo on the ground near his body. The policemen brought the body to the
Municipal Building where the Municipal Health Officer, Dr. Constancio Tam, conducted an
autopsy.3

On June 10, 1991, appellant was charged with the crime of murder under the following
Information:4

"That on or about the 8th day of August, 1989 at Barangay May-Anao, Municipality of
Tigaon, Province of Camarines Sur, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, armed with a knife, with intent to kill, with
treachery and evident premeditation, did then and there wilfully, unlawfully and
feloneously (sic) attack, assault and stab one Romeo Fabula directing the blow on the vital
parts of his body which was the direct and immediate cause of his death, to the damage and
prejudice of his heirs in such amount as maybe awarded by the Court.

Acts Contrary To Law."

On arraignment appellant, assisted by counsel de oficio, pleaded not guilty.5

During trial, the prosecution presented the following witnesses: (1) Leonor Fabula, the
mother of the victim; (2) SPO1 Jose Madera and SPO4 Virgilio Azucena, both members of
the Philippine National Police (PNP) of Tigaon, Camarines Sur, and (4) Dr. Constancio A.
Tam, Municipal Health Officer of Tigaon, Camarines Sur.

Leonor Fabula testified that she witnessed the stabbing incident and identified appellant as
the assailant of her son. She said that the police were looking for appellant's brother who
had a pending case for robbery in Manila. The police asked her son where the house of
appellant's brother was. Her son, who knew nothing of the case, pointed out the house to
the police leading to the arrest of appellant's brother. This angered appellant who sought
out and killed her son. She also testified on damages sustained as a result of her son's
death.6

SPO1 Jose Madera testified that he was present during the autopsy and that Dr. Tam
turned over to him the bolo which was imbedded in the body of the victim. He identified
the same bolo in court.7

SPO4 Virgilio Azucena testified that upon the report of Leonor Fabula of the stabbing
incident, he and four others immediately went to the place of the incident in May-anao,
Tigaon. They found the body of the victim in the ricefield some 50 meters away from the
road. The bolo was embedded in the victim's chest and the handle lying beside him. 8

Dr. Constancio A. Tam testified that the victim sustained four stab wounds in the left upper
abdomen, right eliac part of the abdomen, upper part of the left chest, and upper part of
the left back. The weapon was still embedded in the upper left abdomen when he examined
the body.9 Dr. Tam testified that this wound was fatal since it pierced the heart. He said that
the stab wounds could have been caused by a sharp-bladed, sharp-pointed instrument,
locally known as"gatab".10

The defense presented as its witnesses the appellant himself and his cousin, Alfredo Siso.
Appellant's version is as follows:

In the afternoon of August 8, 1989, appellant was at a billiard hall in May-anao, Tigaon,
serving as a spotter in a game between Celso Plazo and Alfredo Siso. The victim suddenly
arrived drunk, placed a ball on top of the table, and said that he wanted to put a bet
against Alfredo Siso. Insulted, Alfredo told appellant to pacify the victim. However, the
victim became angry and struck appellant with a billiard stick. Alfredo and Celso helped
pacify the victim who became even angrier, and then drew a bladed weapon saying he
would use it on appellant. Appellant ran away followed by the victim. Appellant slipped
and injured his foot and the victim caught up with him. The two grappled with the small
bolo and suddenly, the bolo was already imbedded in the chest of the victim. Appellant fled
and eventually went to Manila because of the threats of relatives of the victim. Appellant's
cousin, Alfredo, merely testified that after the two protagonists ran away, he already went
home.11

After trial, the trial court rendered its decision12 finding appellant guilty of the crime of
murder, disposing thus –

"WHEREFORE, the accused Edison Plazo is hereby sentenced to suffer the penalty of
reclusion perpetua with the inherent accessories provided by law, to indemnify the heirs of
the late Romeo Fabula for the latter's death the sum of Fifty Thousand Pesos (P50,000.00);
the sum of Fifteen Thousand Seven Hundred Twelve Pesos (P15,712.00) as actual damages;
and the sum of Ten Thousand Pesos (P10,000.00) as moral damages, all of Philippine
Currency and for the said accused to pay the costs.

The accused Edison Plazo shall be entitled to full credit of his preventive imprisonment if
he agreed to abide with the rules imposed upon convicted persons, otherwise, he shall only
be entitled to four-fifth (4/5) credit thereof.

SO ORDERED."

Appellant assigns the sole error that - 13

THE TRIAL COURT GRAVELY ERRED IN FINDING THE ACCUSED-APPELLANT

GUILTY BEYOND REASONABLE DOUBT OF THE CRIME OF MURDER.

In his brief,14 appellant assails the credibility of the testimony of Leonor Fabula, the
victim's mother, considering that (1) contrary to her testimony, the medical findings did not
indicate that the victim was boxed nor his head banged on the store post; (2) her testimony
that her son was stabbed dead on a ditch did not jibe with the testimony of SPO4 Azucena
that the body of the victim was recovered from the ricefield; and (3) her actions after seeing
her son dead and getting a policeman instead of comforting him was contrary to normal
human conduct. Further, appellant claims that his testimony that he acted in self-defense
was corroborated by the testimony of his cousin, Alfredo Siso. Lastly, appellant claims
there was no treachery because there was no proof as to how the attack began.

For the State,15 the Office of the Solicitor General (OSG) contends that appellant failed to
establish the elements of self-defense considering the number and location of the wounds of
the deceased. Further, the testimony of defense witness Alfredo Siso should not be given
credence because he did not actually witness the stabbing incident. The OSG asserts that
treachery attended the killing because appellant unleashed two separate attacks on the
victim, the first consisted only of fist blows, and the second consisted of the stabbing.
The issues for our consideration pertain to (1) the assessment of credibility of witnesses, (2)
the existence of valid self-defense, and (3) the sufficiency of the evidence to convict
appellant of the crime of murder.

Well-entrenched is the rule that findings of the trial court as to the credibility of witnesses
are accorded great weight, even finality, on appeal, unless the trial court has failed to
appreciate certain facts and circumstances which, if taken into account, would materially
affect the result of the case. Having had the opportunity to personally observe the
witnessess' demeanor and manner of testifying, the trial judge is in a better position to pass
judgment on their credibility.16 As observed by the trial court, "Leonor Fabula testified in a
straightforward, spontaneous and frank manner." 17 A review of the records and transcript
of stenographic notes leads us to agree with that conclusion.

As to the alleged inconsistencies in Fabula's testimony, the fact that the medical findings
did not indicate that the victim was boxed nor his head banged does not negate the
possibility of such acts. The defense failed to question the medico-legal officer on the stand
and it cannot now raise such factual matter before this court. As to the location of the body
of the victim, while Leonor Fabula testified that her son was stabbed "just by the ditch of
the road of May-anao,"18 SPO4 Azucena testified that they found the body "in the
ricefield." The records show, however, that on cross-examination, SPO4 Azucena clarified
that they found the body on the "embankment of the rice-field (bas-og)." 19 Hence, there is
no inconsistency between their testimonies on the matter.

The testimony of witnesses to a crime could not be expected to be error-free throughout.

Different persons have different impressions and recollections of the same
incident.20 Likewise, we find nothing extraordinary or unusual about a mother seeking help
from the authorities first before rushing to help her son. As repeatedly stressed, there is no
standard form of human behavioral response when one is confronted with a strange,
startling, or frightful experience.21 Witnessing a crime is an unusual experience that elicits
different reactions from the witnesses, and for which no clear-cut standard form of
behavior can be drawn.22

Further, while it was only the mother of the victim who testified on the events leading to the
stabbing incident, we have held that the testimony of a single eyewitness is sufficient to
support conviction so long as it is clear, straightforward, and found worthy of credence by
the trial court.23 The mere fact that she is the mother of the victim does not impair her
credibility. Blood relationship between a witness and victim does not, by itself, impair the
credibility of the witness.24 On the contrary, relationship strengthens credibility, for it is
unnatural for an aggrieved relative to falsely accuse someone other than the actual
culprit.25 The earnest desire to seek justice for a dead kin is not served should the witness
abandon his conscience and prudence and blame one who is innocent of the crime. 26More
importantly, Leonor Fabula's version of the stabbing incident, that appellant repeatedly
stabbed her son in the "upper and lower chest area," 27 is duly supported by the findings of
the medico-legal officer that the victim sustained four stab wounds in the chest and
abdomen area.

As to appellant's claim of self-defense, there is no evidence to support such assertion. Self-

defense as a justifying circumstance must satisfy the following requirements: (1) unlawful
aggression on the part of the victim; (2) reasonable necessity of the means employed to
repel the aggression; and (3) lack of sufficient provocation on the part of the accused. 28 The
burden of proving by clear and convincing evidence that the killing was justified is on the
accused.29 In doing so, he must rely on the strength of his own evidence and not on the
weakness of that of the prosecution. 30 Appellant herein failed to prove any of the elements
of self-defense. As correctly pointed out by the trial court, the number of wounds on the
body of the victim negates self-defense. If indeed, the victim was stabbed while the two
protagonists were grappling with the small bolo, then why did the victim sustain four stab
wounds? The nature, location and number of wounds inflicted on the victim negate the
claim of self-defense31 and, instead, indicate a determined effort to kill the victim.32

Further, the flight of the appellant after the incident betrays the existence of his guilty
conscience.33 According to his testimony, he went to Manila because his relatives and
residents of their barangay advised him to take care of himself because the relatives of the
victim were running after him.34 Appellant himself admitted that he did "for several
years." This conduct is inconsistent with his protestations of self-defense.

While the information alleged the attendance of the qualifying circumstances of treachery
and evident premeditation, these were not proven by the prosecution's evidence.
Circumstances which qualify criminal responsibility must in no case rest upon mere
presumptions, no matter how reasonable or probable, but must be based on facts of
unquestioned existence. It is settled that circumstances which qualify killing to murder
must be proved as indubitably as the crime itself.35

There was no treachery because there was no proof in this case as to how the attack started.
For treachery to be present, two conditions must be shown: (1) the employment of means of
execution that give the person attacked no opportunity to defend or retaliate and (2) the
deliberate or conscious adoption of the means of execution. Treachery cannot be presumed;
it must be proven as fully and as convincingly as the crime itself. The sole eyewitness
testified that when she arrived at the scene, appellant was already boxing her son. 36 Hence,
she could not have possibly witnessed the inception of the attack. Any doubt as to the
existence of treachery must be resolved in favor of the accused. Where no particulars are
known regarding the manner in which the aggression was made or how the act which
resulted in the death of the victim began and developed, it cannot be established from mere
supposition that an accused perpetrated the killing with treachery. 37
Likewise, the prosecution failed to prove the following requisites of evident premeditation:
(1) the time when the offender determined to commit the crime; (2) an act manifestly
indicating that the culprit clung to his determination; and (3) sufficient lapse of time
between the determination and execution to allow him to reflect upon the consequences of
his act.38

Hence, in the absence of any circumstance which would qualify the crime to murder, we
find that appellant should be found liable only for the crime of homicide.

Under Article 249 of the Revised Penal Code, the penalty for the crime of homicide
is reclusion temporal. There being no mitigating nor aggravating circumstance, the penalty
of reclusion temporal should be imposed in its medium period. 39 Applying the indeterminate
sentence law, the minimum of the indeterminate sentence should be taken from the penalty
next lower in degree, which is prision mayor.

The trial court correctly awarded the amount of P50,000.00 as indemnity. However, the
award of actual damages in the amount of P15,712.00 was based solely on the bare
assertions of the mother of the victim. The Court can only grant such amount for expenses
if they are supported by receipts. 40 In the absence thereof, no actual damages can be
awarded. However, in lieu of actual damages, temperate damages under Art. 2224 of the
Civil Code may be recovered where it has been shown that the victim's family suffered
some pecuniary loss but the amount thereof cannot be proved with certainty. 41 We find the
award of P15,000.00 as temperate damages reasonable. Moral damages cannot be awarded
in the absence of any evidence to support its award.42

WHEREFORE, the decision of the Regional Trial Court of San Jose, Camarines Sur,
Branch 30, in Criminal Case No. T-1009, is hereby MODIFIED. Appellant Edison Plazo is
found guilty of the crime of homicide, and sentenced to a minimum of eight (8) years, eight
(8) months, and one (1) day of prision mayor medium as minimum, to fifteen (15) years, six
(6) months, and twenty (20) days of reclusion temporal medium as maximum, and to pay
the heirs of the victim the amount of P50,000.00 as indemnity and P15,000.00 as temporate
damages, and the costs.1âwphi1.nêt

SO ORDERED.

[G.R. No. 108630. April 2, 1996]

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and
LORETO TAN,respondents.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; A DEBT IS PAID BY COMPLETE

DELIVERY OF THE THING OR RENDITION OF SERVICE. - There is no question that
no payment had ever been made to private respondent as the check was never delivered to
him. When the court ordered petitioner to pay private respondent the amount of
P32,480.00, it had the obligation to deliver the same to him. Under Art. 1233 of the Civil
Code, a debt shall not be understood to have been paid unless the thing or service in which
the obligation consists has been completely delivered or rendered, as the case may be.

2. REMEDIAL LAW; EVIDENCE; BURDEN OF PROOF OF PAYMENT OF

OBLIGATION LIES WITH THE DEBTOR; PAYMENT NOT PROVED IN CASE AT
BAR. - The burden of proof of such payment lies with the debtor. In the instant case,
neither the SPA nor the check issued by petitioner was ever presented in court. The
testimonies of petitioners own witnesses regarding the check were conflicting. Tagamolila
testified that the check was issued to the order of Sonia Gonzaga as attorney-in-fact of
Loreto Tan, while Elvira Tibon, assistant cashier of PNB (Bacolod Branch), stated that the
check was issued to the order of Loreto Tan. Furthermore, contrary to petitioners
contention that all that is needed to be proved is the existence of the SPA, it is also
necessary for evidence to be presented regarding the nature and extent of the alleged
powers and authority granted to Sonia Gonzaga; more specifically, to determine whether
the document indeed authorized her to receive payment intended for private respondent.
However, no such evidence was ever presented.

3. ID.; ID.; BEST EVIDENCE RULE; WHEN SECONDARY EVIDENCE IS ALLOWED.

- Section 4, Rule 130 of the Rules of Court allows the presentation of secondary evidence
when the original is lost or destroyed.

4. ID.; ID.; ID.; PAYMENT OF OBLIGATION NEGATED BY FAILURE TO PRESENT

SPECIAL POWER OF ATTORNEY IN CASE AT BAR. - Considering that the contents of
the SPA are also in issue here, the best evidence rule applies. Hence, only the original
document (which has not been presented at all) is the best evidence of the fact as to whether
or not private respondent indeed authorized Sonia Gonzaga to receive the check from
petitioner. In the absence of such document, petitioners arguments regarding due payment
must fail.

5. CIVIL LAW; DAMAGES; ATTORNEYS FEES; AVAILABLE TO PARTY WHO WAS

COMPELLED TO LITIGATE. - Regarding the award of attorneys fees, we hold that
private respondent Tan is entitled to the same. Art. 2208 of the Civil Code allows attorneys
fees to be awarded if the claimant is compelled to litigate with third persons or to incur
expenses to protect his interest by reason of an unjustified act or omission of the party from
whom it is sought.

6. ID.; ID.; EXEMPLARY DAMAGES; WHEN RECOVERABLE. - Under Art. 2232 of the
Civil Code, exemplary damages may be awarded if a party acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner. However, they cannot be recovered as a matter
of right; the court has yet to decide whether or not they should be adjudicated.

7. ID.; ID.; ID.; REQUIREMENTS FOR GRANT. - Jurisprudence has set down the
requirements for exemplary damages to be awarded: 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. they cannot 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.

8. ID.; ID.; ID.; CANNOT BE RECOVERED WHERE THERE IS NO CLEAR BREACH

OF OBLIGATION TO PAY OR THAT A PARTY ACTED IN FRAUDULENT, WANTON,
RECKLESS OR OPPRESSIVE MANNER. - As for the award of exemplary damages, we
agree with the appellate court that the same should be deleted. In the case at bench, while
there is a clear breach of petitioners obligation to pay private respondents, there is no
evidence that it acted in a fraudulent, wanton, reckless or oppressive manner. Furthermore,
there is no award of compensatory damages which is a prerequisite before exemplary
damages may be awarded. Therefore, the award by the trial court of P5,000.00 as
exemplary damages is baseless.

APPEARANCES OF COUNSEL

Santiago, Jr., Vidad, Corpus & Associates for petitioner.

Jose G. Jover, Jr. for private respondent.

DECISION

ROMERO, J.:

Petitioner Philippine National Bank (PNB) questions the decision 1 of the Court of Appeals
partially affirming the judgment of the Regional Trial Court, Branch 44, Bacolod City. The
dispositive portion of the trial courts decision states:

WHEREFORE, premises considered, the Court hereby renders judgment in favor of the
plaintiff and against the defendants as follows:
1) Ordering defendants to pay plaintiff jointly and severally the sum of P32,480.00, with
legal rate of interest to be computed from May 2, 1979, date of filing of this complaint until
fully paid;

2) Ordering defendants to pay plaintiff jointly and severally the sum of P5,000.00 as
exemplary damages;

3) Ordering defendants to pay plaintiff jointly and severally the sum of P5,000.00 as
attorneys fees;

4) To pay the costs of this suit.

SO ORDERED.2

The facts are the following:

Private respondent Loreto Tan (Tan) is the owner of a parcel of land abutting the national
highway in Mandalagan, Bacolod City. Expropriation proceedings were instituted by the
government against private respondent Tan and other property owners before the then
Court of First Instance of Negros Occidental, Branch IV, docketed as Civil Case No. 12924.

Tan filed a motion dated May 10, 1978 requesting issuance of an order for the release to
him of the expropriation price of P3 2,480.00.

On May 22, 1978, petitioner PNB (Bacolod Branch) was required by the trial court to
release to Tan the amount of P32,480.00 deposited with it by the government.

On May 24, 1978, petitioner, through its Assistant Branch Manager Juan Tagamolila,
issued a managers check for P3 2,480.00 and delivered the same to one Sonia Gonzaga
without Tans knowledge, consent or authority. Sonia Gonzaga deposited it in her account
with Far East Bank and Trust Co. (FEBTC) and later on withdrew the said amount.

Private respondent Tan subsequently demanded payment in the amount of P32,480.00 from
petitioner, but the same was refused on the ground that petitioner had already paid and
delivered the amount to Sonia Gonzaga on the strength of a Special Power of Attorney
(SPA) allegedly executed in her favor by Tan.

On June 8, 1978, Tan executed an affidavit before petitioners lawyer, Alejandro S. Somo,
stating that:

1) he had never executed any Special Power of Attorney in favor of Sonia S. Gonzaga;

2) he had never authorized Sonia Gonzaga to receive the sum of P32,480.00 from
petitioner;
3) he signed a motion for the court to issue an Order to release the said sum of money to
him and gave the same to Mr. Nilo Gonzaga (husband of Sonia) to be filed in court.
However, after the Order was subsequently issued by the court, a certain Engineer Decena
of the Highway Engineers Office issued the authority to release the funds not to him but to
Mr. Gonzaga.

When he failed to recover the amount from PNB, private respondent filed a motion with
the court to require PNB to pay the same to him.

Petitioner filed an opposition contending that Sonia Gonzaga presented to it a copy of the
May 22, 1978 order and a special power of attorney by virtue of which petitioner delivered
the check to her.

The matter was set for hearing on July 21, 1978 and petitioner was directed by the court to
produce the said special power of attorney thereat. However, petitioner failed to do so.

The court decided that there was need for the matter to be ventilated in a separate civil
action and thus private respondent

filed a complaint with the Regional Trial Court in Bacolod City (Branch 44) against
petitioner and Juan Tagamolila, PNBs Assistant Branch Manager, to recover the said
amount.

In its defense, petitioner contended that private respondent had duly authorized Sonia
Gonzaga to act as his agent.

On September 28, 1979, petitioner filed a third-party complaint against the spouses Nilo
and Sonia Gonzaga praying that they be ordered to pay private respondent the amount of
P32,480.00. However, for failure of petitioner to have the summons served on the Gonzagas
despite opportunities given to it, the third-party complaint was dismissed.

Tagamolila, in his answer, stated that Sonia Gonzaga presented a Special Power of Attorney
to him but borrowed it later with the promise to return it, claiming that she needed it to
encash the check.

On June 7, 1989, the trial court rendered judgment ordering petitioner and Tagamolila to
pay private respondent jointly and severally the amount of P32,480.00 with legal interest,
damages and attorneys fees.

Both petitioner and Tagamolila appealed the case to the Court of Appeals.

In a resolution dated April 8, 1991, the appellate court dismissed Tagamolilas appeal for
failure to pay the docket fee within the reglementary period.
On August 31, 1992, the Court of Appeals affirmed the decision of the trial court against
petitioner, with the modification that the award of P5,000.00 for exemplary damages and
P5,000.00 for attorneys fees by the trial court was deleted.

Hence, this petition.

Petitioner PNB states that the issue in this case is whether or not the SPA ever existed. It
argues that the existence of the SPA need not be proved by it under the best evidence rule
because it already proved the existence of the SPA from the testimonies of its witnesses and
by the certification issued by the Far East Bank and Trust Company that it allowed Sonia
Gonzaga to encash Tans check on the basis of the SPA.

We find the petition unmeritorious.

There is no question that no payment had ever been made to private respondent as the
check was never delivered to him. When the court ordered petitioner to pay private
respondent the amount of P3 2,480.00, it had the obligation to deliver the same to him.
Under Art. 1233 of the Civil Code, a debt shall not be understood to have been paid unless
the thing or service in which the obligation consists has been completely delivered or
rendered, as the case may be.

The burden of proof of such payment lies with the debtor. 3 In the instant case, neither the
SPA nor the check issued by petitioner was ever presented in court.

The testimonies of petitioners own witnesses regarding the check were conflicting.
Tagamolila testified that the check was issued to the order of Sonia Gonzaga as attorney-in-
fact of Loreto Tan,4 while Elvira Tibon, assistant cashier of PNB (Bacolod Branch), stated
that the check was issued to the order of Loreto Tan.5

Furthermore, contrary to petitioners contention that all that is needed to be proved is the
existence of the SPA, it is also necessary for evidence to be presented regarding the nature
and extent of the alleged powers and authority granted to Sonia Gonzaga; more
specifically, to determine whether the document indeed authorized her to receive payment
intended for private respondent. However, no such evidence was ever presented.

Section 2, Rule 130 of the Rules of Court states that:

SEC. 2. Original writing must be produced; exceptions.

- There can be no evidence of a writing the contents of which is the subject of inquiry, other
than the original writing itself, except in the following cases:

(a) When the original has been lost, destroyed, or cannot be produced in court;
(b) When the original is in the possession of the party against whom the evidence is offered,
and the latter fails to produce it after reasonable notice;

(c) When the original is a record or other document in the custody of a public officer;

(d) When the original has been recorded in an existing record a certified copy of which is
made evidence by law;

(e) When the original consists of numerous accounts or other documents which cannot be
examined in court without great loss of time and the fact sought to be established from
them is only the general result of the whole.

Section 4, Rule 130 of the Rules of Court allows the presentation of secondary evidence
when the original is lost or destroyed, thus:

SEC. 4. Secondary evidence when original is lost or destroyed. - When the original writing
has been lost or destroyed, or cannot be produced in court, upon proof of its execution and
loss or destruction, or unavailability, its contents may be proved by a copy, or by a recital of
its contents in some authentic document, or by the recollection of witnesses.

Considering that the contents of the SPA are also in issue here, the best evidence rule
applies. Hence, only the original document (which has not been presented at all) is the best
evidence of the fact as to whether or not private respondent indeed authorized Sonia
Gonzaga to receive the check from petitioner. In the absence of such document, petitioners
arguments regarding due payment must fail.

Regarding the award of attorneys fees, we hold that private respondent Tan is entitled to
the same. Art. 2208 of the Civil Code allows attorneys fees to be awarded if the claimant is
compelled to litigate with third persons or to incur expenses to protect his interest by
reason of an unjustified act or omission of the party from whom it is sought.6

In Rasonable v. NLRC, et al.,7 we held that when a party is forced to litigate to protect his
rights, he is entitled to an award of attorneys fees.

As for the award of exemplary damages, we agree with the appellate court that the same
should be deleted.

Under Art. 2232 of the Civil Code, exemplary damages may be awarded if a party acted in
a wanton, fraudulent, reckless, oppressive, or malevolent manner. However, they cannot be
recovered as a matter of right; the court has yet to decide whether or not they should be
adjudicated.8

Jurisprudence has set down the requirements for exemplary damages to be awarded:
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. they cannot 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.9

In the case at bench, while there is a clear breach of petitioners obligation to pay private
respondents, there is no evidence that it acted in a fraudulent, wanton, reckless or
oppressive manner. Furthermore, there is no award to compensatory damages which is a
prerequisite before exemplary damages may be awarded. Therefore, the award by the trial
court of P5,000.00 as exemplary damages is baseless.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification
that the award by the Regional Trial Court of P5,000.00 as attorneys fees is REINSTATED.

SO ORDERED.

[G.R. No. 118325. January 29, 1997]

VIRGILIO M. DEL ROSARIO and CORAZON PAREDES-DEL ROSARIO, petitioners,

vs. COURT OF APPEALS and METAL FORMING CORPORATION, respondents.

DECISION

NARVASA, C.J.:

On August 28, 1995, the Court En Banc promulgated judgment in the case of Metal
Forming Corporation v. Office of the President, etc., et al.,[1] dismissing the petitioner's
appeal and affirming the decision of the Office of the President dated April 30, 1993. The
latter decision in turn affirmed that of the Department of Trade and Industry rendered on
May 29, 1991 in an administrative case initiated against Metal Forming Corporation
(hereafter MFC) by complaint of the spouses Virgilio M. del Rosario and Corazon Paredes-
del Rosario."

The Del Rosarios' complaint, filed on November 21, 1990, charged MFC with violation of
Section 3 of Act No. 3740, "An Act to Penalize Fraudulent Advertising, Mislabeling or
Misbranding of Any Product, Stocks, Bonds, etc." It alleged that;[2]
1) "in selling to the public roofing materials known 'Banawe' shingles,** (MFC) made
representations on the durability of the product and sturdiness of its installation through
massive advertisements in print media and television**(and) brochures ;"

2) these representation -- particularly those characterizing the shingles as

"STRUCTURALLY SAFE AND STRONG" and that the "BANAWE METAL TILE structure
acts as a single unit against wind and storm pressure due to the strong hook action on its
overlaps"-- "pompted ** (the Del Rosarios) to buy the 'Banawe' shingles and ** (have)
them installed at their residence;" but

3) "(b)arely two (2) months after completion of the installation, portions of the roof of **
(the Del Rosarios) were blown away by strong wind brought about by typhoon "Ruping."'

After due proceedings, the DTI rendered judgment declaring that MCF had indeed
misrepresented its product because "as the records showed," strong winds actually blew off
part of the structure/roof of the Del Rosario Spouses and the same acted in parts (instead of
as a single unit) when strong winds blew, a part remaining while another part was blown
off. MFC was accordingly sentenced to pay an "administrative fine of P10,000.00" (within
ten [10] days from finally of the decision), otherwise its "business name and registration **
would be deemed suspended and its establishment closed until the fine was fully paid."

As already stated, the decision of the DTI (of May 29, 1991) was, on appeal, affirmed in
toto by the Office of the President on April 30, 1993; and the latter judgment was in turn
affirmed by this Court on August 28, 1995 with a modification solely as to the fine, which
was reduced to P5,000.00. In said judgment of August 28, 1995, this Court, stressing that
the factual findings of such administrative bodies as the Office of the President are
generally to be accorded respect, if not indeed invested with finality, pronounced as correct
that Office's ruling, among others, that :

"** (A)lthough the occurrence of a typhoon is a fortuitous event which by itself might have
exempted petitioner from liability to private respondents -

" ** it cannot efface the fundamental fact that (petitioner) acted in bad faith and/or with
gross negligence in falling to deliver the necessary accessories for the proper installation of
the structure ** and actually installed inferior roofing materials at (private respondents')
residence, in violation of the proper installation procedure expressly specified in the
former's brochures and advertisements for installation, i,e., the metal tile attached to the
roof panels should be two (2) self-drilling screws for one (1) metal cleat. However, instead of
conforming with this procedure, (petitioner) attached some of the metal cleats with this one
(1)-inch ordinary nail each and others were fastened with only one (10) wood screw each.**
"
It appears that MFC replaced and repaired the roof free of charge, evidently
acknowledging that the damage was covered by its one-year warranty on the materials and
the installation. The repair work was observed and analyzed by Esteban Adjusters and
Valuer's, Inc., which was engaged by the Del Rosarios to determine the cause of the
destruction.[3] The repair work was begun on October 23, 1989, with the delivery of
replacement tiles, and completed on November 7, 1989. Thereafter the Esteban Adjusters
and Valuers, Inc. submitted its report to the Del Rosarios, dated November 8, 1989, [4] in
which it made the following conclusion:

"The 'Banawe' metal tiles which were detached from the roof trusses were not fastened
with two (2) wood screws on each metal cleat as required but only with single wood screw
or a combination of a single wood screw and a 1-inch nail which is contrary to the design
and specification. We have observed during the course of repai(r) works that some
'Banawe' metal tiles installed were no longer than the roof span, hence there is overlapping
on the ridged roll/hip. It is very evident that the original subcontractor (which we were not
able to identify) were in haste to complete the project.** '"

MFC however declined to concede liability for the other damages claimed by the Del
Rosario Spouses to have been caused to the interior of their home. This prompted the latter
to commence a civil action against MFC on April 16, 1990 in the Regional Trial Court of
Manila.[5] In this suit, docketed as Civil Case No. 90-52734, the spouses sought to recover
from MFC, damages resulting from the events just narrated, contending that aside from
the destruction of the roof of their house, injury was also caused to its electrical wiring,
ceiling, fixtures, walls, wall paper, wood parquet flooring and furniture. [6] The plaintiff
spouses reckoned their actual damages at P1,008,003.00 -- "representing the estimated cost
of the repair, restoration and/or replacement of the damaged areas and items in plaintiffs'
house and the cost of the inspection conducted by the independent adjuster (engaged by
them), with legal interests thereon from 21 February 1990 when defendant (MFL) received
the formal demand from plaintiffs until fully paid." [7] They also prayed for an award to
them of moral damages in the sum of P3,000,000.00, exemplary damages in the amount of
P1,000,000.00, and attorney's fees in the sum of P1,000,000.00.

MFC moved to dismiss the complaint for lack of cause of action. It stated that it had no
contractual relationship with the Del Rosarios since the contract for the purchase and
installation of the roofing, upon which the latter's claims were based, was actually entered
into between it and another person, Jesus M. Puno (an engineer identified as the Del
Rosarios' contractor).The Trial Court denied the motion. MFC assailed that denial in the
Court of Appeals, but was rebuffed; and its recourse to this Court (G.R. No. 95514) was
also unsuccessful.[8]
Trial then ensued after which judgment was rendered on November 18, 1991 by the
Regional Trial Court in favor of the Del Rosarios,[9] the dispositive portion of which reads
as follows:[10]

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant, to pay: -

"a) Actual Damages in the amount of ONE MILLION EIGHT THOUSAND THREE
(P1,008,003.00) PESOS, with legal interest thereon, from June 31, 1990 until fully paid;

"b) Moral Damages in the amount of FIVE HUNDRED THOUSAND (P500,000.00)

PESOS;

"c) Exemplary Damages in the amount of THREE HUNDRED THOUSAND (P300,000.00)

PESOS; and

"d) Attorney's fees and expenses of litigation in the amount of ONE HUNDRED FIFTY
THOUSAND (P150,000.00) PESOS

Counter claims filed by the defendant are dismissed.

SO ORDERED."

The Trial Court held the corporation liable for breach of its contract for the supply and
installation of the roofing materials in the Del Rosarios' residence. According to the the
Court:[11]

"The following facts were duly established from the evidence supporting plaintiffs' claim
for damages:

"1. There was actually serious damages caused on plaintiffs' house on account of faulty or
inferior installation;

"2. Defendant himself admitted its liability by making partial repairs of the roofing of
'Banawe' shingles, free of charge, after the typhoon ** (Ruping) ;

"3. There was an expressed warranty specified in the brochure that there should be two (2)
metal screws for one (1) cleat but the same was violated by the defendant who only used (1)
1-inch nail or a combination of one (1) metal screw to one (1) cleat;

"4. There is ample evidence including the testimony of Engr. Puno that it was defendant
Metal Forming Corporation who ** (had) a contract with the plaintiffs for the supply and
installation of roofing materials in plaintiffs' residential house located at No. 17 Tabuena
Street, Corinthian Gardens, Quezon City; and
"5. There was a declared warranty by the defedants relied upon by the plaintiffs and that
the defendant was guilty of fraud and/or breach of warranty."

Parenthetically, these conclusions are substantially the same as those made by the
Department of Trade and Industry in its own judgement rendered on May 29, 1991 --
affirmed by the Office of the President in a decision dated April 30, 1993, and ultimately by
this Court En Banc in its decision promulgated on August 28, 1995. [12] The Trial Court
ruled that there was privity of contract between the Del Rosarios and MFC; Engineer Puno
acted as MFC's agent in the signing of the contracts for the supply and installation of the
"Banawe" shingles; hence, the contract was really between the Del Rosarios and that
company.[13]

MFC appealed to the Court of Appeals. In its Decision promulgated on June 29, 1994,
[14]
said Court reversed the Trial Court's judgement. It ruled that there was no privity of
contract between the Del Rosarios and MFC, for the following reasons:[15]

a. The contracts for the supply of materials and installation of the roof were signed by
Engr. Puno. On the face of the contracts, it does not appear that the Del Rosarios were
parties to it or that it was entered into for their benefit. It does not also appear that Engr.
Puno acted as agent of the Del Rosarios nor of the corporation.

b. The holding of the trial court that Engr. Puno was an agent of the corporation is not
borne out by the records. There is no evidence apart from Engr. Puno's testimony, to show
that any agency exists.

c. The nature of the relationship between the Del Rosarios and Engr. Puno is also not clear
from the records of the case.

d. While it may be implicit in the complaint of the Del Rosarios that there was contract
between them and the corporation, this is not supported by the evidence presented.

There being no such privity, according to the Court of Appeals, the Del Rosarios and had
no cause of action against MFC for breach of warranties, there being no law allowing them
to proceed directly against those whom their contractor had subcontracted to furnish
materials and do part of the work that the latter was engaged to perform.[16]

The Del Rosarios appealed, and in this Court expectedly present for resolution, [17] the issue
of "WHETHER OR NOT THERE IS A PRIVITY OF CONTRACT BETWEEN THE
PARTIES.'"

There is merit in the petition. The essential issue is whether or not upon the facts
established by the evidence, MFC is answerable to the Del Rosarios for the damage caused
to the latter's residence when its roof, made of shingles purchased from and installed by the
former, was blown away by a typhoon. The Court rules that it is.
The facts on record -- including those set forth in the final judgement of the Court En
Banc involving the same parties, adverted to in the opening paragraph of this
opinion, supra,[18] of which judgement official cognizance may properly be, as it is hereby,
taken -- constitute adequate basis for a verdict against MFC. These are the following:

1. MFC was engaged in the business of selling to the public roofing materials known
as 'Banawe' shingles or metal tiles, and through extensive advertisements in media and in
its brochures, made representations respecting the durability of its tiles and the sturdiness
of roofing installed in accordance with its particularly described method. These
representations included statements that the shingles are "STRUCTURALLY SAFE AND
STRONG" and that the "BANAWE METAL TILE structure acts as a single unit against
wind and storm pressure due to the strong hook action on its overlaps."

2. After reading MFC's brochures and advertisements, the Del Rosario Spouses instructed
their contractor, Engineer Puno, to use the "Banawe" shingles or metal tiles in the roofing
of their house then under construction.[19]

3. In other words, paraphrasing Article 1546 of the Civil Code, MFC, as seller to the
general public, had made affirmations of fact and promises relating to its advertised product,
the "Banawe" tiles, the natural tendency of which was induce the buyers, as in fact it did
induce the Del Rosarios, to purchase the same, relying thereon.

4. Pursuant to the Del Rosarios' instructions, Puno placed orders with MFC and signed the
pertinent contracts for the purchase of the shingles, accepted deliveries thereof and signed
corresponding invoices, and made payments thereon with the spouses' funds.[20]

5. Deliveries of the "Banawe" metal tiles or shingles were made by MFC's employees to the
construction site of the Del Rosarios' residence; and installation of the metal tiles in the
roof of the Del Rosario's house was made by MFC's workers.

6. MFC "acted in bad faith and/or with gross negligence in failing to deliver the necessary
accessories for the proper installation of the structure ** and actually installed inferior
roofing materials at (private respondents') residence, in violation of the proper installation
procedure expressly specified in the former's brochures and advertisements for installation,
i.e., the metal tile attached to the roof panels should be by two (2) self -drilling screws for
one (1) metal cleat ** (but) instead of conforming with this procedure, (petitioner) attached
some of the metal cleats with only one (1)-inch ordinary nail each and others were fastened
with only one (1) wood screw each **."[21]

7. As a result, barely two (2) months after completion of the installation of the roof by
MFC's workers, portions thereof were blown away by the winds of typhoon "Ruping."
8. MFC replaced the roof free of charge, in acknowledgement of its one-year warranty on
the materials and their installation.

All the quibbling about whether Engineer Puno acted as agent of MFC or of the spouses, is
pointless. The matter is not a factor in determining MFC's liability for its workers' use of
inferior materials and their defective installation of the "Banawe" metal tiles in the roof of
the latter's residence. Prescinding from the persuasive proof on record that at all times
material and with regard to the acquisition and installation of the metal tiles or shingles,
Puno was in truth acting as contractor of the Del Rosarios and on their instructions,
[22]
ascertainment of the definite identity of the person who actually ordered the shingles
from MFC is utterly inconsequential -- it might just as well have been a construction
foreman, a trusted domestic, or any friend or acquaintance of the Del Rosarios -- in view of
the indisputable fact not only (1) that the tiles were delivered to the Del Rosarios and used
in fabricating the roof of their home, but also (2) that it was the employees and workers of
MFC who (a) delivered the shingles or metal tiles to the construction site of the Del
Rosarios' home, and (b) undertook and completed the installation thereof. These they did
in bad faith, using inferior materials and assembling them in a manner contrary to MFC's
express representations in its brochures and advertisements circulated and broadcast to the
general public -- which representations had, in the first place, induced the Del Rosarios to
choose the metal tiles in question for their roofing. In fine, since MFC, in bad faith and
with gross negligence, infringed the express warranty made by it to the general public in
connection with the "Banawe" tiles brought to and set up in the house of the Del Rosarios
who had relied on the warranty, and thereby caused them considerable injury, the identity
of the individual who actually dealt with MFC and asked the latter to make such delivery
and installation is of little moment.

Turning now to the matter of damages, it is the Del Rosarios' contention that the pecuniary
detriment to their home amounted to P1,008,003.00, covering not only the destruction of
the roof, but also substantial harm to the electrical wiring, ceiling, fixtures, walls,
wallpaper, wood parquet flooring and furniture. [23] They rely on the Report of the Esteban
Adjusters and Valuers, Inc.,[24] to which the Regional Trial Court accorded full credit. But
that report contains no statement whatever of the amount of the damage. Indeed, the
testimony of Engineer Abril, the representative of the Esteban Adjusters and Valuers, Inc.,
is that his firm had been retained only to determine the cause of the damage, not to
estimate and assess it.[25] A similar aridity as to the amount of the damage, unfortunately
characterizes the testimony of Atty. Virgilio Del Rosario and the rest of the spouses'
proofs. There is therefore no evidentiary foundation upon which to lay an award of actual
damages. The Trial Court's grant thereof must be struck down. Lufthansa German Airlines
vs. CA, et al., promulgated on April 21, 1995,[26] inter alia ruled that:

"Actual or compensatory damages cannot be presumed, but must be duly proved and
proved with reasonable degree of certainty. A court cannot rely on speculations,
conjectures or guesswork as to the fact and amount of damages, but must depend upon
competent proof that they have (been) suffered and on evidence of the actual amount
thereof."

Its grant of moral and exemplary damages was justified by the Trial Court as follows:[27]

"From the evidence presented, plaintiffs' sufferings have been duly and substantially
proven by the defendant's fraudulent actuation and breach of warranty, and thereby
entitled for the claim of damages and litigations costs as enunciated by the testimony of the
plaintiff * that the damages to his house caused sufferings and feelings of shock,
helplessness, fears, embarrassment and anger, thereby entitling him to Moral Damages
which should be assessed at P500,000.00."

"The moral damages ** (are awarded) for indemnity or reparation not punishment or
correction, that is, an award to entitle the injured party to obtain means (of) diversions and
amusement that will serve to alleviate the moral suffering he has undergone by reason of
defendant's culpable action. (RNB Surety and Ins. Co. v. IAC, G.R. No. 64515, June 22,
1984, 129 SCRA 745)."

That MFC did in truth act with bad faith, in flagrant breach of its express warranties made
to the general public and in wanton disregard of the rights of the Del Rosarios who relied
on those warranties, is adequately demonstrated by the recorded proofs. The law explicitly
authorizes the award of moral damages "in breaches of contract where the defendant acted
fraudulently or in bad faith."[28] There being, moreover, satisfactory evidence of the
psychological and mental trauma actually suffered by the Del Rosarios, the grant to them
of moral damages is warranted. Over a period of about a month, they experienced "feelings
of shock, helplessness, fear, embarrassment and anger." [29] As declared by this Court
in Makabili v. Court of Appeals,[30] among other precedents:

It is essential ** in the award of damages that the claimant must have satisfactorily proven
during the trial the existence of the factual basis of the damages and its causal connection
to defendant's acts. This is so because moral damages though incapable of pecuniary
estimation, are in the category of an award designed to compensate the claimant for actual
injury suffered and not to impose a penalty on the wrongdoer (Enervida v. De la Torre, 55
SCRA 340 [1974].) and are allowable only when specifically prayed for in the complaint.
(San Miguel Brewery, Inc. v. Magno, 21 SCRA 292[1968])

As reflected in the records of the case, the Court of Appeals was in agreement with the
findings of the trial court that petitioners suffered anguish, embarrassment and mental
sufferings due to the failure of private respondents to perform its obligation to
petitioners. According to the Court of Appeals, private respondents acted in wanton
disregard of the rights of petitioners. These pronouncements lay the basis and justification
for this Court to award petitioners moral and exemplary damages."
This Court also agrees with the Trial Court that exemplary damages are properly exigible
of MFC, "Article 2229 of the Civil Code provides that such damages may be imposed by
way of example or correction for the public good. While exemplary damages cannot be
recovered as a matter of right, they need not be proved, although plaintiff must show that
he is entitled to moral, temperate or compensatory damages before the court may consider
the question of whether or not exemplary damages should be awarded." [31] "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."[32]

However, the same statutory and jurisprudential standards just mentioned dictate
reduction of the amounts of moral and exemplary damages fixed by the Trial Court. There
is, to be sure, no hard and fast rule for determining what would be a fair amount of moral
(or exemplary) damages, each case having to be governed by its attendant particulars.
Generally, the amount of moral damages should be commensurate with the actual loss or
injury suffered. In the case of PNB v. C.A just cited, [33] this Court quoted with approval the
following observation from RCPI v Rodriguez,[34] viz.:

"** ** Nevertheless, we find the award of P100,000.00 as moral damages in favor of

respondent Rodriguez excessive and unconscionable. In the case Prudenciado v. Alliance
Transport System, Inc.(148 SCRA 440 [1987]) we said: "x x x [I]t is undisputed that the
trial courts are given discretion to determine the amount of moral damages (Alcantara v.
Surro, 93 Phil. 472) and that the Court of Appeals can only modify or change the amount
awarded when they are palpably and scandalously excessive so as to indicate that it was the
result of passion, prejudice or corruption on the part of the trial court' (Gellada v. Warner
Barnes & Co., Inc., 57 O.G.[4] 7347, 7358; Saddie v. Bacharach Motors Co. Inc., 57 O.G.
[4] 636 and Adone v. Bacharach Motor Co., Inc., 57 O.G. 656). But in more recent cases
where the awards of moral and exemplary damages are far too excessive compared to the
actual loses sustained by the aggrieved party; this Court ruled that they should be reduced
to more reasonable amounts. xxx. (Underscoring ours.)'"

" In other words, the moral damages awarded must be commensurate with the loss or
injury suffered."

In the same case (PNB v. CA), this Court[35] found the amount of exemplary damages
required to be paid (P1,000,000.00) "too excessive and reduced it to an "equitable
level"(P25,000.00)

** (T)he award of P1,000,000.00 exemplary damages is also far too excessive and should
likewise be reduced to an equitable level. Exemplary damages are imposed not to enrich
one party or impoverish another but to serve as a deterrent against or as a negative
incentive to curb socially deleterious actions
In another case involving strikingly analogous facts decided in 1994, Geraldez vs. C.A.,
[36]
where no actual damages were adjudicated but moral and exemplary damages in similar
amounts (P500,000.00) and P300,000.00, respectively) were awarded by the Trial Court, as
in this case, this Court reduced the amount of moral damages to P100,000.00 and of
exemplary damages to P50,000.00. The Court sees no reason to adopt a different treatment
in the case at bar, and accordingly reduces the moral damages from P500,000.00
to P100,000.00, and the exemplary damages from P300,000.00 to P50,000.00.

Finally, like the adjudication of actual or compensatory damages, the award of attorney's
fees must be deleted. The matter was dealt with only in the dispositive portion of the Trial
Court's decision. Since the judgement does not say why attorney's fees are awarded, there
is no basis for such award which should consequently be removed. So did this Court rule,
for instance, in Scott Consultants and Resource Development Corp., Inc. vs. CA, et al. :[37]

" It is settled that the award of attorney's fees is the exception rather than the rule and
counsel's fees are not to be awarded every time a party wins. The power of the court to
award attorney's fees under Article 2208 of the Civil Code demands factual, legal, and
equitable justification; its basis cannot be left to speculation or conjecture. Where granted,
the court must explicitly state in the body of the decision, and not only in the dispositive
portion thereof, the legal reason for the award of attorney's fees."

WHEREFORE, the challenged Decision of the Court of Appeals of June 29, 1994 is
REVERSED and SET ASIDE; and the Decision of the Regional Trial Court of November
18, 1991 is REINSTATED AND AFFIRMED, with the modification that the award of
actual damages and attorney's fees is deleted, and the moral and exemplary damages
awarded are reduced from P500,000.00 to P100,000.00, and from P300,000.00 to
P50,000.00, respectively.

IT IS SO ORDERED.