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[G.R. No. 159352. April 14, 2004] favor of Panacor and Arizona, and requesting for the release of TCT No. T-
3475. Martillano, after reading the letter, affixed her signature of conformity thereto
PREMIERE DEVELOPMENT BANK, petitioner, vs. COURT OF APPEALS, and sent the original copy to Premiere Banks legal office. The full text of the letter
PANACOR MARKETING CORPORATION and ARIZONA TRANSPORT reads:[6]
CORPORATION, respondents.
Please be informed that we have approved the loan application of ARIZONA
DECISION TRANSPORT CORP. and PANACOR MARKETING CORPORATION. Both represented by
MR. PEDRO P. PANALIGAN (hereinafter the BORROWERS) in the principal amount of
PESOS: SEVEN MILLION FIVE HUNDRED THOUSAND ONLY (P7,500,000.00) Philippine
YNARES-SANTIAGO, J.:
Currency. The loan shall be secured by a Real Estate Mortgage over a parcel of land
located at #777 Nueve de Pebrero St. Bo. Mauway, Mandaluyong City, Metro Manila
This is a petition for review under Rule 45 of the 1997 Rules on Civil Procedure covered by TCT No. 3475 and registered under the name of Arizona Haulers, Inc.
seeking the annulment of the Decision dated June 18, 2003 of the Court of which is presently mortgaged with your bank.
Appeals[1] which affirmed the Decision of the Regional Trial Court [2] in Civil Case No.
65577.
The borrowers have authorized IBA FINANCE CORP. to pay Premiere Bank from the
proceeds of their loan. The disbursement of the loan, however is subject to the
The undisputed facts show that on or about October 1994, Panacor Marketing annotation of our mortgage lien on the said property and final verification that said
Corporation (Panacor for brevity), a newly formed corporation, acquired an exclusive title is free from any other lien or encumbrance other than that of your company and
distributorship of products manufactured by Colgate Palmolive Philippines, Inc. IBA Finance Corporation.
(Colgate for short). To meet the capital requirements of the exclusive distributorship,
which required an initial inventory level of P7.5 million, Panacor applied for a loan of
In order to register the mortgage, please entrust to us the owners duplicate copy of
P4.1 million with Premiere Development Bank. After an extensive study of Panacors
TCT No. 3475, current tax declaration, realty tax receipts for the current year and
creditworthiness, Premiere Bank rejected the loan application and suggested that its
other documents necessary to affect annotation thereof.
affiliate company, Arizona Transport Corporation (Arizona for short),[3] should instead
apply for the loan on condition that the proceeds thereof shall be made available to
Panacor. Eventually, Panacor was granted a P4.1 million credit line as evidenced by a Upon registration of our mortgage, we undertake to remit directly to you or your
Credit Line Agreement.[4] As suggested, Arizona, which was an existing loan client, authorized representative the amount equivalent to the Borrowers outstanding
applied for and was granted a loan of P6.1 million, P3.4 million of which would be indebtedness to Premiere Bank as duly certified by your goodselves provided such
used to pay-off its existing loan accounts and the remaining P2.7 million as credit an amount shall not exceed PESOS: SIX MILLION ONLY (P6,000,000.00) and any
line of Panacor. As security for the P6.1 million loan, Arizona, represented by its Chief amount in excess of the aforestated shall be for the account of the borrowers. It is
Executive Officer Pedro Panaligan and spouses Pedro and Marietta Panaligan in their understood that upon receipt of payment, you will release to us the corresponding
personal capacities, executed a Real Estate Mortgage against a parcel of land cancellation of your mortgage within five (5) banking days therefrom.
covered by TCT No. T-3475 as per Entry No. 49507 dated October 2, 1995.[5]
If the foregoing terms and conditions are acceptable to you, please affix your
Since the P2.7 million released by Premiere Bank fell short of the P4.1 million credit signature provided below and furnish us a copy of the Statement of Account of said
line which was previously approved, Panacor negotiated for a take-out loan with Iba borrowers.
Finance Corporation (hereinafter referred to as Iba-Finance) in the sum of P10
million, P7.5 million of which will be released outright in order to take-out the loan On October 12, 1995, Premiere Bank sent a letter-reply [7] to Iba-Finance, informing
from Premiere Bank and the balance of P2.5 million (to complete the needed capital the latter of its refusal to turn over the requested documents on the ground
of P4.1 million with Colgate) to be released after the cancellation by Premiere of the that Arizona had existing unpaid loan obligations and that it was the banks policy to
collateral mortgage on the property covered by TCT No. T-3475. Pursuant to the said require full payment of all outstanding loan obligations prior to the release of
take-out agreement, Iba-Finance was authorized to pay Premiere Bank the prior mortgage documents. Thereafter, Premiere Bank issued to Iba-Finance a Final
existing loan obligations of Arizona in an amount not to exceed P6 million. Statement of Account[8] showing Arizonas total loan indebtedness. On October 19,
1995, Panacor and Arizona executed in favor of Iba-Finance a promissory note in the
On October 5, 1995, Iba-Finance sent a letter to Ms. Arlene R. Martillano, officer-in- amount of 7.5 million. Thereafter, Iba-Finance paid to Premiere Bank the amount of
charge of Premiere Banks San Juan Branch, informing her of the approved loan in P6,235,754.79 representing the full outstanding loan account of Arizona. Despite
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such payment, Premiere Bank still refused to release the requested mortgage 2) Ordering the defendant Premiere Bank to pay to Intervenor IBA-
documents specifically, the owners duplicate copy of TCT No. T-3475. [9] Finance, the following sums, to wit:

On November 2, 1995, Panacor requested Iba-Finance for the immediate approval 3) P1,000,000.00 as and by way of exemplary damages; and
and release of the remaining P2.5 million loan to meet the required monthly
purchases from Colgate. Iba-Finance explained however, that the processing of the 4) P100,000.00 as and for reasonable attorneys fees; and
P2.5 million loan application was conditioned, among others, on the submission of
the owners duplicate copy of TCT No. 3475 and the cancellation by Premiere Bank
5) Costs of suit.
of Arizonas mortgage. Occasioned by Premiere Banks adamant refusal to release the
mortgage cancellation document, Panacor failed to generate the required capital to
meet its distribution and sales targets. On December 7, 1995, Colgate informed For lack of sufficient legal and factual basis, the counterclaim of defendant Premiere
Panacor of its decision to terminate their distribution agreement. Bank is DISMISSED.

On March 13, 1996, Panacor and Arizona filed a complaint for specific performance SO ORDERED.
and damages against Premiere Bank before the Regional Trial Court of Pasig City,
docketed as Civil Case No. 65577. Premiere Bank appealed to the Court of Appeals contending that the trial court erred
in finding, inter alia, that it had maliciously downgraded the credit-line of Panacor
On June 11, 1996, Iba-Finance filed a complaint-in-intervention praying that from P4.1 million to P2.7 million.
judgment be rendered ordering Premiere Bank to pay damages in its favor.
In the meantime, a compromise agreement was entered into between Iba-Finance
On May 26, 1998, the trial court rendered a decision in favor of Panacor and Iba- and Premiere Bank whereby the latter agreed to return without interest the amount
Finance, the decretal portion of which reads: of P6,235,754.79 which Iba-Finance earlier remitted to Premiere Bank to pay off the
unpaid loans of Arizona. On March 11, 1999, the compromise agreement was
approved.
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Panacor Marketing
Corporation and against the defendant Premiere Bank, ordering the latter to pay the
former the following sums, namely: On June 18, 2003, a decision was rendered by the Court of Appeals which affirmed
with modification the decision of the trial court, the dispositive portion of which
reads:
1) P4,520,000.00 in addition to legal interest from the time of filing of the
complaint until full payment;
WHEREFORE, premises considered, the present appeal is hereby DISMISSED, and the
decision appealed from in Civil Case No. 65577 is hereby AFFIRMED with
2) P1,000,000.00 as and for exemplary damages;
MODIFICATION in that the award of exemplary damages in favor of the appellees is
hereby reduced to P500,000.00. Needless to add, in view of the Compromise
3) P100,000.00 as and for reasonable attorneys fees; and Agreement plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE
between plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE as
4) Costs of suit. approved by this Court per Resolution dated March 11, 1999, Our dispositive of the
present appeal is only with respect to the liability of appellant PREMIERE to the
Similarly, judgment is hereby rendered in favor of plaintiff-in-intervention IBA- plaintiff-appellees.
Finance Corporation as against defendant Premiere bank, as follows, namely:
With costs against the defendant-appellant.
1) Ordering defendant Premiere Bank to release to plaintiff-intervenor
IBA-Finance Corporation the owners duplicate copy of Transfer Certificate SO ORDERED.[10]
of Title No. 3475 registered in the name of Arizona Haulers, Inc. including
the deed of cancellation of the mortgage constituted thereon; Hence the present petition for review, which raises the following issues: [11]
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I copy of TCT No. T-3475 in order to register its mortgage, after which Iba-Finance
shall pay off Arizonas outstanding indebtedness. Accordingly, Iba-Finance remitted
WHETHER OR NOT THE DECISION OF HONORABLE COURT OF APPEALS EXCEEDED P6,235,754.79 to Premiere Bank on the understanding that said amount represented
AND WENT BEYOND THE FACTS, THE ISSUES AND EVIDENCE PRESENTED IN THE the full payment of Arizonas loan obligations. Despite performance by Iba-Finance of
APPEAL TAKING INTO CONSIDERATION THE ARGUMENT OF PETITIONER BANK AND its end of the bargain, Premiere Bank refused to deliver the mortgage document. As
ADVENT OF THE DULY APPROVED COMPROMISE AGREEMENT BETWEEN THE a consequence, Iba-Finance failed to release the remaining P2.5 million loan it earlier
PETITIONER BANK AND IBA FINANCE CORPORATION. pledged to Panacor, which finally led to the revocation of its distributorship
agreement with Colgate.

II
Undeniably, the not-so-forthright conduct of Premiere Bank in its dealings with
respondent corporations caused damage to Panacor and Iba-Finance. It is error for
WHETHER OR NOT THE ISSUES THAT SHOULD HAVE BEEN RESOLVED BY THE
Premiere Bank to assume that the compromise agreement it entered with Iba-
HONORABLE COURT OF APPEALS, BY REASON OF THE EXISTENCE OF THE
Finance extinguished all direct and collateral incidents to the aborted take-out such
COMPROMISE AGREEMENT, IS LIMITED TO THE ISSUE OF ALLEGED BAD FAITH OF
that it also cancelled its obligations to Panacor. The unjustified refusal by Premiere
PETITIONER BANK IN THE DOWNGRADING OF THE LOAN AND SHOULD NOT INCLUDE
Bank to release the mortgage document prompted Iba-Finance to withhold the
THE RENDITION OF AN ADVERSE PRONOUNCEMENT TO AN ALREADY FAIT ACCOMPLI-
release of the P2.5 million earmarked for Panacor which eventually terminated the
ISSUE ON THE REFUSAL OF THE BANK TO RECOGNIZE THE TAKE-OUT OF THE LOAN
distributorship agreement. Both Iba-Finance and Panacor, which are two separate
AND THE RELEASE OF TCT NO. 3475.
and distinct juridical entities, suffered damages due to the fault of Premiere
Bank. Hence, it should be held liable to each of them.
III
While the compromise agreement may have resulted in the satisfaction of Iba-
WHETHER OR NOT PETITIONER ACTED IN BAD FAITH IN THE DOWNGRADING OF THE Finances legal claims, Premiere Banks liability to Panacor remains. We agree with the
LOAN OF RESPONDENTS TO SUPPORT AN AWARD OF ACTUAL AND EXEMPLARY Court of Appeals that the present appeal is only with respect to the liability of
DAMAGES NOW REDUCED TO P500,000.00. appellant Premiere Bank to the plaintiffs-appellees (Panacor and Arizona)[13] taking
into account the compromise agreement.
IV
For the foregoing reasons, we find that the Court of Appeals did not err in discussing
WHETHER OR NOT THERE IS BASIS OR COMPETENT PIECE OF EVIDENCE PRESENTED in the assailed decision the abortive take-out and the refusal by Premiere Bank to
DURING THE TRIAL TO SUPPORT AN AWARD OF ACTUAL DAMAGES OF release the cancellation of the mortgage document.
P4,520,000.00.
Secondly, Premiere Bank asserts that it acted in good faith when it downgraded the
Firstly, Premiere Bank argues that considering the compromise agreement it entered credit line of Panacor from P4.1 million to P2.7 million. It cites the decision of the
with Iba-Finance, the Court of Appeals should have ruled only on the issue of its trial court which, albeit inconsistent with its final disposition, expressly recognized
alleged bad faith in downgrading Panacors credit line. It further contends that the that the downgrading of the loan was not the proximate cause of the damages
Court of Appeals should have refrained from making any adverse pronouncement on suffered by respondents.
the refusal of Premiere Bank to recognize the take-out and its subsequent failure to
release the cancellation of the mortgage because they were rendered fait Under the Credit Line Agreement[14] dated September 1995, Premiere Bank agreed to
accompli by the compromise agreement. extend a loan of P4.1 million to Arizona to be used by its affiliate, Panacor, in its
operations. Eventually, Premiere approved in favor of Arizona a loan equivalent to
We are not persuaded. P6.1 million, P3.4 million of which was allotted for the payment of Arizonas existing
loan obligations and P2.7 million as credit line of Panacor. Since only P2.7 million was
made available to Panacor, instead of P4.1 million as previously approved, Panacor
In a letter-agreement[12] dated October 5, 1995, Iba-Finance informed Premiere Bank
applied for a P2.5 loan from Iba-Finance, which, as earlier mentioned, was not
of its approval of Panacors loan application in the amount of P10 million to be
released because of Premiere Banks refusal to issue the mortgage cancellation.
secured by a real estate mortgage over a parcel of land covered by TCT No. T-3475.
It was agreed that Premiere Bank shall entrust to Iba-Finance the owners duplicate
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It is clear that Premiere Bank deviated from the terms of the credit line agreement Premiere Banks posture deserves scant consideration. As found by the lower court,
when it unilaterally and arbitrarily downgraded the credit line of Panacor from P4.1 there are sufficient indicia that demonstrate that the alleged unjust pressure exerted
million to P2.7 million. Having entered into a well-defined contractual relationship, it on Martillano was more imagined than real. In her testimony, Martillano claims that
is imperative that the parties should honor and adhere to their respective rights and she was persuaded and coaxed by Caday of Iba-Finance and Panaligan of Panacor to
obligations thereunder. Law and jurisprudence dictate that obligations arising from sign the letter. It was she who provided Iba-Finance with the Final Statement of
contracts have the force of law between the contracting parties and should be Account and accepted its payment without objection or qualification. These acts
complied with in good faith. [15] The appellate court correctly observed, and we agree, show that she was vested by Premiere Bank with sufficient authority to enter into
that: the said transactions.

Appellants actuations, considering the actual knowledge of its officers of the tight If a private corporation intentionally or negligently clothes its officers or agents with
financial situation of appellee PANACOR brought about primarily by the appellant apparent power to perform acts for it, the corporation will be estopped to deny that
banks considerable reduction of the credit line portion of the loan, in relation to the the apparent authority is real as to innocent third persons dealing in good faith with
bail-out efforts of IBA Finance, whose payment of the outstanding loan account of such officers or agents.[17] As testified to by Martillano, after she received a copy of
appellee ARIZONA with appellant was readily accepted by the appellant, were truly the credit line agreement and affixed her signature in conformity thereto, she
marked by bad faith and lack of due regard to the urgency of its compliance by forwarded the same to the legal department of the Bank at its Head Office. Despite
immediately releasing the mortgage cancellation document and delivery of the title its knowledge, Premiere Bank failed to disaffirm the contract. When the officers or
to IBA Finance. That time is of the essence in the requested release of the mortgage agents of a corporation exceed their powers in entering into contracts or doing other
cancellation and delivery of the subject title was only too well-known to appellant, acts, the corporation, when it has knowledge thereof, must promptly disaffirm the
having only belatedly invoked the cross-default provision in the Real Estate contract or act and allow the other party or third persons to act in the belief that it
Mortgage executed in its favor by appellee ARIZONA to resist the plain valid and just was authorized or has been ratified. If it acquiesces, with knowledge of the facts, or
demand of IBA Finance for such compliance by appellant bank.[16] fails to disaffirm, ratification will be implied or else it will be estopped to deny
ratification.[18]
Premiere Bank cannot justify its arbitrary act of downgrading the credit line on the
alleged finding by its project analyst that the distributorship was not financially Finally, Premiere Bank argues that the finding by the appellate court that it was
feasible. Notwithstanding the alleged forewarning, Premiere Bank still liable for actual damages in the amount of P4,520,000.00 is without basis. It
extended Arizona the loan of P6.1 million, albeit in contravention of the credit line contends that the evidence presented by Panacor in support of its claim for actual
agreement. This indubitably indicates that Premiere Bank had deliberately and damages are not official receipts but self-serving declarations.
voluntarily granted the said loan despite its claim that the distributorship contract
was not viable. To justify an award for actual damages, there must be competent proof of the actual
amount of loss. Credence can be given only to claims, which are duly supported by
Neither can Premiere Bank rely on the puerile excuse that it was the banks policy receipts.[19] The burden of proof is on the party who will be defeated if no evidence is
not to release the mortgage cancellation prior to the settlement of outstanding loan presented on either side. He must establish his case by a preponderance of
obligations. Needless to say, the Final Statement of Account dated October 17, evidence which means that the evidence, as a whole, adduced by one side is
1995 showing in no uncertain terms Arizonas outstanding indebtedness, which was superior to that of the other. In other words, damages cannot be presumed and
subsequently paid by Iba-Finance, was the full payment of Arizonas loan obligations. courts, in making an award, must point out specific facts that can afford a basis for
Equity demands that a party cannot disown it previous declaration to the prejudice measuring whatever compensatory or actual damages are borne.
of the other party who relied reasonably and justifiably on such declaration.
Under Article 2199 of the Civil Code, actual or compensatory damages are those
Thirdly, Premiere Bank avers that the appellate courts reliance on the credit line awarded in satisfaction of, or in recompense for, loss or injury sustained. They
agreement as the basis of bad faith on its part was inadmissible or self-serving for proceed from a sense of natural justice and are designed to repair the wrong that
not being duly notarized, being unsigned in all of its left margins, and undated. has been done, to compensate for the injury inflicted and not to impose a penalty.
According to Premiere Bank, the irregularities in the execution of the credit line
agreement bolsters the theory that the same was the product of manipulation In the instant case, the actual damages were proven through the sole testimony of
orchestrated by respondent corporations through undue influence and pressure Themistocles Ruguero, the vice president for administration of Panacor. In his
exerted by its officers on Martillano. testimony, the witness affirmed that Panacor incurred losses, specifically, in terms of
training and seminars, leasehold acquisition, procurement of vehicles and office
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equipment without, however, adducing receipts to substantiate the same. The Under the circumstances, the sum of P200,000.00 as temperate damages is
documentary evidence marked as exhibit W, which was an ordinary private writing reasonable.
allegedly itemizing the capital expenditures and losses from the failed operation of
Panacor, was not testified to by any witness to ascertain the veracity of its contents. WHEREFORE, the petition is DENIED. The Decision dated June 18, 2003 of the Court
Although the lower court fixed the sum of P4,520,000.00 as the total expenditures of Appeals in CA-G.R. CV No. 60750, ordering Premiere Bank to pay Panacor
incurred by Panacor, it failed to show how and in what manner the same were Marketing Corporation P500,000.00 as exemplary damages, P100,000.00 as
substantiated by the claimant with reasonable certainty. Hence, the claim for actual attorneys fees, and costs, is AFFIRMED, with the MODIFICATION that the award of
damages should be admitted with extreme caution since it is only based on bare P4,520,000.00 as actual damages is DELETED for lack of factual basis. In lieu
assertion without support from independent evidence. Premieres failure to prove thereof, Premiere Bank is ordered to pay Panacor P200,000.00 as temperate
actual expenditure consequently conduces to a failure of its claim. In determining damages.
actual damages, the court cannot rely on mere assertions, speculations, conjectures
or guesswork but must depend on competent proof and on the best evidence
SO ORDERED.
obtainable regarding the actual amount of loss.[20]

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


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

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


Article 2224, makes the following comment:[21]

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

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

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


liquidated or exemplary damages may be adjudicated. The assessment of such
damages, except liquidated ones, is left to the discretion of the Court, according to
the circumstances of each case.
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G.Q. GARMENTS, INC. VS. MIRANDA issued a Memorandum to Superintendent Wenceslao A. Soberano, Provincial Director
of the Cavite PNP Provincial Command, ordering the latter to prevent his men from
G.R. No. 161722 July 20, 2006 interfering with the pending civil case. As a result, petitioner regained possession
over the leased premises. However, Florenda and her group went back to the place
Facts: and ousted the guards and other personnel manning the corporations office, and
even removed their equipment, and ransacked anew their raw materials, electric
Angel Miranda is the registered owner of a 9,646 square meters parcel of land wire and other valuables inside.
located at Niog, Bacoor, Cavite (Property). The property was a verbal contract
leased with his son Angelito Miranda who established the Executive Machineries and On April 20, 1992, petitioner instituted an action for damages and recovery of
Equipment Corporation (EMECO). The lease was on a month-to-month basis for a possession of the property before the RTC of Cavite City, Branch 17, with Angel,
consideration of Php 8,000.00 per month. EMECO constructed its factory on the EMECO and Florenda, as alternative defendants. Angel was impleaded since he has
property and paid the said rentals. However when Angelito died, EMECO failed to the obligation to keep and maintain the plaintiff in peaceful possession of the leased
pay the rentals but still continued possessing the leased premises. On 1989, the premises. On June 25, 1992, Angel and petitioner, as plaintiffs, filed a separate
factory of EMECO was totally razed by fire. Angel demanded the payment of accrued complaint for ejectment against Florenda before the Municipal Trial Court (MTC) of
rentals amounting to Php 280,000.00 as of May 1991 and also informed that the oral Bacoor, Cavite. After due proceedings, the court rendered judgment on July 2, 1993,
contract of lease would be terminated effective June 30, 1991. After sending another ordering the eviction of Florenda and all those claiming the property in her behalf.
demand letter, EMECO vacated the leased premised but the accrued rentals The decision was appealed to the RTC. However, for failure to pay a supersedeas
remained unpaid. bond, the decision was executed and Florenda was evicted from the property.

Sometime in November 1991, Florenda, Angelitos wife, arrived at the office of On November 26, 1993, the RTC rendered judgment dismissing the complaint
petitioner and offered to sublease the property to Wilson Kho, the Officer-in Charge against all the alternative defendants without prejudice. It declared that plaintiff was
of GQ garments. After visiting the property, Kho agreed to rent the area upon the entitled to damages, but it had to dismiss the complaint because of the pendency of
condition that its true and registered owner would personally sign the lease contract other civil cases. However, the RTC resolved to deny the motion of petitioner
in his presence. However, Florenda failed to present Angel for said purpose, Kho prompting it to appeal to the Court of Appeals. Angel Miranda also appealed the
turned down her proposal. Later, Kho was able to locate Angel and offered in behalf decision. Meantime, on September 22, 1994, the RTC rendered judgment in favor of
of petitioner, to lease the property, as to which Angel agreed. Angel and declared the contract of lease purportedly executed by him and EMECO
void. On October 29, 2002, the CA rendered judgment reversing the decision of the
On December of that year, Davy John Barlin, the executive president representing RTC. Accordingly, the judgment appealed was reversed and set aside dismissing the
the corporation and Angel executed a contract of lease. The lease was for a period complaint with prejudice against Angel and ordering Florenda to pay damages and
of 15 years for a monthly rental of Php 30,000.00. Petitioner paid Php 90,000.00 attorneys fees.
representing two months deposit and advance rental for one month. As lessee, it
was authorized to introduce improvements, structures, and buildings on the property The appellate court absolved Angel of any liability due to the absence of evidence
as it may deem necessary and for the purpose for which it was leased. showing that he had participated, directly or indirectly, in the looting of GQ
Garments properties and in forcibly ejecting the latter from the premises in
Consequently, petitioner secured the necessary documents and permits. The question. According to the CA anchored on Article 1653 and 1654 of the New Civil
construction of a building and factory in the leased premises commenced. However, Code, the evidence on record clearly showed that Florenda disturbed only the
on January 27, 1992, Florenda, together with several armed men who identified physical possession of the leased premises, and not legal possession. Thus, the
themselves as policemen, forcibly evicted petitioner from the leased premises, complaint with respect to Angel Miranda should be dismissed with prejudice for lack
claiming that she was the owner and that the place was already covered by another of cause of action. On cross-examination, Angel admitted that he received Php
existing contract of lease. During the encounter, Florenda and her men took some 360,000.00 from petitioner. In addition, the plaintiff asserts that the actual damages
equipment, machinery and other properties belonging to petitioner, thereby causing sustained when its equipment and machineries were destroyed are valued at Php
loss and damage to said properties. In the meantime, Angel secured a copy of the 10,000,000.00. With all of this, petitioner filed the instant petition for review on
alleged contract of leased with EMECO. He filed a complaint for declaration of nullity certiorari.
of the contract before the Regional Trial Court because his signature was forged
praying for judgment to be rendered in his favour. Issue: Whether or not the respondents are liable to petitioner for the amount of Php
10,000,000.00 by way of actual damages?
Meanwhile, petitioner sought the help of the Philippine National Police (PNP).
General Gerardo N. Flores, Deputy Director General and Chief Directorial Staff, Ruling:
7

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

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

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

It bears stressing that respondent Angel Miranda was not content in adopting a mere
passive stance in the face of respondent Florenda Mirandas act of trespass. He and
the petitioner filed a case for forcible entry against Florenda Miranda; he also
succeeded in having the RTC, declare the contract of lease which respondent
Florenda Miranda showed petitioner as null and void, with the courts ruling that his
signature on the contract was a forgery. The petition is denied.
8

FIRST DIVISION Petitioner Francisco A. Perfecto, a retired public service commissioner, was a
candidate for congressman of the lone district of Catanduanes. He lost in that
[G.R. No. L-35157. April 17, 1984.] election.

FRANCISCO A. PERFECTO, Petitioner-Appellant, v. HON. FELICIANO S. In August 1967, petitioner filed with the Commission on Elections an administrative
GONZALES, Judge of the Court of First Instance of Catanduanes, and complaint against the members of the board of election inspectors of Precinct No. 25
JULIANA C. VISTA and VICENTE VISTA,Respondents-Appellees. of San Andres, namely: Roberto Reyes, Chairman; Felicidad Garcia, Nacionalista
Party inspector; Jorge Primo, Liberal Party inspector; and herein private respondent
K.V. Faylona & Associates for Petitioner-Appellant. Juliana C. Vista, poll clerk of said precinct. The complaint charged that the said
members of the board of election inspectors were guilty of non-feasance,
Hon. Feliciano S. Gonzales, etc., Et. Al. for Respondents-Appellees. malfeasance and misfeasance for wilfull failure to comply with the instructions,
orders, decisions and rulings of the Commission in connection with the performance
of their duties relative to the conduct of the elections of 1965, committed in the
SYLLABUS following manner, to wit:jgc:

"That during voting time on November 9, 1965, being an election day, in Precinct
No. 25 located at the Public School Building in the Barrio of Bislig, Municipality of San
1. CIVIL LAW; DAMAGES; ACTUAL DAMAGES; WHEN RECOVERABLE. Actual or Andres, Catanduanes, Philippines, and within the jurisdiction of this Honorable
compensatory damages rae those recoverable because of pecuniary loss in Commission, the above-named respondents conspiring, confederating, collaborating
business, trade, property, profession, job or occupation, and the same must be and mutually helping each other did then and there wilfully, criminally, feloniously
proved, otherwise, if the proff is flimsy and non-substantial, no damages will be and unlawfully
given.
"(a) tolerate, allow and permit numerous registered voters of said precinct to
2. ID.; ID.; ID.; IN CASES OF FILING OF CLEARLY UNFOUNDED SUITS; CASE AT BAR. prepare their ballots with the use of carbon paper or means for making copies of the
In the case of Malonzo v. Galang, 109 Phil. 16, the Court, speaking through Justice ballots to identify the votes of said voters in violation of Sec. 135 of the Revised
J.B.L. Reyes, held that with respect to compensatory damages assuming that they Election Code;
are recoverable under the theory that petitioner had filed a clearly unfounded suit
against respondent, the same constitutes a tort against the latter that makes the "(b) tolerate, allow and permit said voters to cast their unlawfully prepared ballots,
former liable for all damages which are the natural and probable consequences of and further tolerate, allow and permit said voters to step out of the polling place
the act or omissions complained of. These damages, cannot, however, be presumed with the unlawfully made copies of the ballots, in their possession;
and must be duly proved (Article 2199, New Civil Code). Well settled is the rule that
even if the complaint filed by one against the other is clearly unfounded this does "(c) prevent the filing of protests and refuse to give protest forms to in spite of lawful
not necessarily mean, in the absence of specific facts proving damages, that said demands by the Nacionalista election watchers who wanted to file their protests,
defendant really suffered actual damage over and above attorneys fees and costs. against the manner of voting above-described;
The Court cannot rely on its speculations as to the fact and amount of damages. It
must depend on actual proof of the damages alleged to have been suffered. "(d) accept the unlawfully prepared ballots and placed them in the box for valid
Respondent judge found no basis for actual or compensatory damages and ballots and later read, counted and credited them in favor of the candidates whose
exemplary damages when it said that "to slap a heavy damage upon the defendant names were written thereon including Jose M. Alberto who was also a candidate for
would be tantamount to imposing a prohibitive premium upon the filing of the same position as the complainant;
complaints against public officials for misconduct in office, a policy that is neither
sound nor conducive to a healthy development of civic courage and public interest "(e) falsify the truth by making it appear in their official records that there were no
so necessary and indispensable in the conduct of the affairs of the government." anomalies in the voting and no protests against anomalies;

all of which unlawful acts violated the free and untrammeled expression of the
DECISION sovereign will of the people and cause damage to the complainant." (pp. 45-46,
Rollo)

As a consequence, private respondent Juliana Vista, assisted by her husband Vicente


RELOVA, J.:
Vista, filed an action for damages alleging that the above charges were false and
without basis and had been instituted maliciously in order to harass, annoy,
demean, degrade and expose her to public ridicule and because of which she
Private respondent Juliana C. Vista, a public school teacher of San Andres, suffered "mental torture, anguish, sleepless nights, besmirched reputation, wounded
Catanduanes was appointed poll clerk by the Commission on Elections in Precinct feelings, mental shock and social humiliation which may be assessed as moral
No. 25 of San Andres in the general elections of November 9, 1965. damages in the amount of P120,000.00." Further, she "claims the further sum of
9

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

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

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

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

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

Issue: WON award of damages is justified

Held:

YES (reimbursement), NO (actual)


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

DECISION MODIFIED: award of P54k deleted

Damages; Evidence; The amount representing profits which damaged party failed
to realize must be proved by the best evidence. Average actual profits of other
trucks of respondent should have been presented rather than a mere estimate on
"if-not-were-hired" basis.Applying the foregoing test to the instant case, we find
the evidence of the respondent insufficient to be considered within the purview of
"best evidence." The bare assertion of the respondent that he lost about P54,000.00
11

CARPIO v. VALMONTE

G.R. No. 151866; September 9, 2004;

FACTS: General Enterprises v Lianga Bay Logging(11 SCRA 733)

Respondent Valmonte is a wedding coordinator. Michelle del Rosario and Jon Sierra Facts:
engaged her services for their church wedding. On that day, Valmonte went to the
Manila Hotel to where the bride and her family were billeted. When she arrived at General Enterprises (GE) entered into a contract with Lianga Bay Logging (LB)
the Suite, several persons were already there including the petitioner Soledad whereby the former was designated as distributor of the logs supplied by the latter.
Carpio, an aunt of the bride who was preparing to dress up for the occasion. GE is entitled to 13% of the gross f.o.b.value of the logs exported.
After reporting to the bride, Valmonte went out of the suite carrying the
items needed fo rthe wedding rites and the gifts from the principal sponsors. The contract was to remain effective for two years beginning June 1, 1959. On
She proceeded to the Maynila Restaurant where the reception was to be held. October 27, 1959,however, LB sent written notice to GE stating that it wont be able
She went back to the suite after, and found several people staring at her when she to supply logs for export due to unavailability of additional logging machinery and
entered. . Itwas at this juncture that petitioner allegedly uttered the following words restrictions imposed by the Phil. Govt. Within a four-month period, LB gave a total of
to Valmonte: Ikaw lang ang lumabas ng kwarto, nasaan ang dala mong five notices to GE stating various reasons for non-performance of its obligation to
bag? Saan ka pumunta? Ikaw lang ang lumabas ng kwarto, ikaw ang supply the logs. GE, on the other hand, reminded LB to fulfill its obligations under
kumuha. Petitioner then ordered one of the ladies to search Valmontes bag. It the contract as otherwise it would be held liable for breach.
turned out that after Valmonte left the room to attend to her duties, petitioner
discovered thatthe pieces of jewelry which she placed inside the comfort room in a Par 8(b) of their agreement gives the valid causes for suspension of the contract,
paper bag were lost. A few days after the incident, petitioner received a letter from among which are:
Valmonte demanding a formal letter of apology which she wanted to be circulated to
the newlyweds relatives and guests to redeem her smeared reputation as a result of a) the enactment of national or local law or ordinance;
petitioners imputations against her. Petitioner did not respond to the letter. Thus, on
20February 1997, Valmonte filed a suit for damages against petitioner. b) issuance of any prohibitive or restrictive order; and

ISSUE: W/N respondent Valmonte is entitled to damages c) any other cause not within the control of the party making relief from any of the
requirements of the contract.
RULING:
GEs reminder was left unheeded. Hence, it filed an action for breach of contract
Valmonte is entitled to damages. In the case at bar, petitioners verbal and recovery of damages with the CFI. The court ruled in its favor awarding P400k
reproach against respondent was certainly uncalled for considering that by her own as actual damages, P100k as exemplary damages, and P40k as attorneys fees and
account nobody knew that she brought such kind and amount of jewelry inside the litigation expenses. Hence, this appeal.
paper bag. True, petitioner had the right o ascertain the identity of the malefactor,
but to malign respondent without an iota of proof that she was the one who actually Issue: WON actual and exemplary damages and attorneys fees are justified
stole the jewelry is an act which, by any standard or principle of law is
Held:
impermissible. Petitioner had willfully caused injury to respondent in a manner which
is contrary to morals and good customs. She did not act with justice and good faith
YES (actual and attorneys fees), NO (exemplary)
for apparently, she had no other purpose in mind but to prejudice respondent.
Certainly, petitioner transgressed the provisions of Article 19 in relation to Article 21
It should be noted that LB is guilty of breach of contract as the causes cited for
for which she should be held accountable.
non-performance of its obligation are not among those expressly stated in the
contract. Moreover, LB mentioned that it had an excess of

1M logs per month. It also agreed to supply 200M brd ft of logs to Japanese buyers
over a five year period. Sinungaling!
12

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

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

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

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


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

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

DECISION MODIFIED
13

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

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

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


This case, however, is but part of a larger controversy over the lawful
the TCTs covering the V.Mapa properties.
ownership of seven parcels of land[2] in the V. Mapa area of Sta. Mesa, Manila (the
Shortly thereafter, NCBA filed a complaint against Felipe and Enrique for
V. Mapaproperties) that arose out of a series of events that began in 1969. [3]
specific performance with an alternative prayer for rescission and damages in the
Sometime in 1969, the V. Mapa properties, then owned by Felipe and
RTC of Manila. The case was raffled to Branch 30 and docketed as Civil Case No. 83-
Enrique Monserrat, Jr., were mortgaged to the Development Bank of the Philippines
16617. On March 30, 1983, NCBA had a notice of lis pendens inscribed on
(DBP) as part of the security for the P5.2 million loan of Manila Yellow Taxicab Co.,
the TCTs of the V.Mapa properties. A little over two years later, NCBA impleaded DBP
Inc. (MYTC) and Monserrat Enterprises Co. MYTC, for its part, mortgaged four parcels
as an additional defendant in order to compel it to release the V. Mapa properties
of land located inQuiapo, Manila.
from mortgage.
On March 31, 1975, however, Felipes undivided interest in the
On February 28, 1985, during the pendency of Civil Case No. 83-16617,
V. Mapa properties was levied upon in execution of a money judgment rendered by
Enriques undivided interest in the V. Mapa properties was levied on in execution of a
14

judgment of the RTC of Makati (the Makati case)[5] holding him liable to Petron (then Finally, in their Memorandum of Agreement dated 25 September
1992 with Technical Institute of the Philippines, [Petron] and DBP
known as Petrophil Corporation) on a 1972 promissory note. On April 29, 1985, the attempted to pre-empt this Courts power to adjudicate on the
claim of ownership stipulating that to facilitate their defenses and
cause of action in Civil Case No. 83-16617, they agreed on the
V. Mapa properties were sold at public auction to satisfy the judgments in the Manila
disposition of the V. Mapa property among themselves. For obvious
reasons, this Court refused to give its imprimatur and denied their
and Makati cases. Petron, the highest bidder, acquired both Felipes and Enriques prayer for dismissal of the complaint against DBP.

undivided interests in the property. The final deeds of sale of Enriques and Felipes These acts of defendants and intervenor demonstrate their
wanton, fraudulent, reckless, oppressive and malevolent conduct
shares in the V. Mapa properties were awarded to Petron in 1986. Sometime later, in their dealings with NCBA. Furthermore, they acted with gross
and evident bad faith in refusing to satisfy NCBAs plainly valid and
the Monserrats TCTs were cancelled and new ones were issued to Petron. Thus it was demandable claims. Assessment of exemplary damages and
attorneys fees in the amounts of P100,000.00 and P150,000.00,
that, towards the end of 1987, Petron intervened in NCBAs suit against Felipe, respectively, is therefore in order (Arts. 2208 and 2232, Civil
Code).[7]
Enrique and DBP (Civil Case No. 83-16617) to assert its right to the
Enrique, DBP and Petron appealed to the Court of Appeals (CA). The appeal was
V. Mapa properties.
docketed as CAG.R. CV No. 53466. In a decision dated June 21, 2002, [8] the CA

The RTC rendered judgment on March 11, 1996. [6] It ruled, among other things, affirmed the RTC decision in toto. On motion for reconsideration, Petron and DBP

that Petron never acquired valid title to the V. Mapa properties as the levy and sale tried to have the award of exemplary damages and attorneys fees deleted for lack of

thereof were void and that NCBA was now the lawful owner of the properties. legal and factual basis. The Philippine National Oil Company (PNOC), which had been

Moreover, the RTC held Petron, DBP, Felipe and Enrique jointly and severally liable to allowed to intervene in the appeal as transferee pendente lite of Petrons right to the

NCBA for exemplary damages and attorneys fees for the following reasons: V. Mapa properties, moved for reconsideration of the ruling on ownership. In a

FELIPE and ENRIQUE had no reason to renege on their undertaking resolution dated October 16, 2002, [9] the CA denied these motions for lack of
in the Deed of Absolute Sale to secure the release of the titles to
the properties xxx free from all the liens and encumbrances, and merit. Thereupon, Petron and PNOC took separate appeals to this Court.
to cause the lifting of the levy on execution of Commercial Credit
Corporation, Industrial Finance Corporation[,] and Filoil over the In this appeal, the only issue is Petrons liability for exemplary damages and
V. Mapa [p]roperty. Moreover, ENRIQUE had no reason to repudiate
FELIPE and disavow authority he had [given] the latter to sell his attorneys fees. And on this matter, we reverse the rulings of the trial and appellate
share in the V. Mapa property.
courts.
On the other hand, the mortgage in favor of DBP had been fully
extinguished thru dacion en pago as early as 18 June 1981 but it
unjustifiably and whimsically refused to release the mortgage and Article 2208 lays down the rule that in the absence of stipulation, attorneys fees
to surrender to the buyer (NCBA) the owners duplicate copies of
Transfer Certificates of Title No[s]. 83621 to 83627, thereby cannot be recovered except in the following instances:
preventing NCBA from registering the sale in its favor.
(1) When exemplary damages are awarded;
Similarly, [Petron] has absolutely no reason to claim the (2) When the defendants act or omission has compelled the plaintiff to
V. Mapa property. For, as shown above, the levy in execution and litigate with third persons or to incur expense to protect his interest;
sale of the shares of FELIPE and ENRIQUE in the V. Mapa property (3) In criminal cases of malicious prosecution against the plaintiff;
were null and void.
15

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


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

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

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

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

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

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

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

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

EN BANC

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

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


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

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

Lopez delivered the notices to another deputy sheriff, Zulueta, for service. Zulueta,
instead of merely serving the notices, informed each of the present plaintiffs that Wages of employees ........................................................................
unless they submitted their respective bonds in the sum of P15,000, he would close
their stores. The respective owners asked for time to go to Manila to secure
bondsmen, which was granted them. On arriving at Manila the consulted their
lawyers, who informed them that the sheriff had no right to close their stores upon
garnishment process, and told them to return to Dagupan and so inform the sheriff Loss of profits from sales of cigarettes .........................................
and his deputies, which the further admonition that such action would render the
latter liable for damages. The three plaintiffs returned to Dagupan and notified
deputies Lopez and Zulueta accordingly, but the latter went ahead and closed the
stores on November 13, 1911, placing guards at each one.
Two trips to Manila ...........................................................................
The owners thereupon returned to Manila for further consultation with their lawyers.
Their attorneys consulted with attorney for the plaintiff in the case from which the
garnishment process had issued, and the latter sent a telegram to the sheriff on
November 14th instructing him not to close the stores but to proceed in accordance
with section 431 of the Code of Civil Procedure. At the same time he wrote a letter to Total .....................................................................................
the sheriff containing the same instructions. Notwithstanding the fact that the
contents of the notices which the sheriff's deputies had served on the owners of
these stores clearly showed that they were not writs of attachment, and the further
instructions from the counsel for the plaintiff in that civil case to the same effect, the
The loss of profits on cigarrette sales was fixed by stipulation of the parties. The two
deputy sheriffs refused to raise the attachment. The owners of the stores thereupon
items of rent for the building and wages of employees, being the pro rata parts of
filed the complaints in the present civil actions on November 17, 1911, after the
the plaintiff's monthly expenses for these services, should be allowed. It is argued
notification to the deputy sheriff that such was their intention. On November 21,
that as one of plaintiff's two trips to Manila was made before the wrongful
1911, the attachments were raised and the plaintiffs were allowed to resume
attachment of his property, this item should be cut in half. The first trip, however,
business.
was the direct result of defendant's representations to the plaintiff in their official
capacity. We are of the opinion that the defendants would been liable for this
The lower court awarded damages to the plaintiff Tan Ti as follows: expense even if they had followed the instructions which they received from Manila
as the result of plaintiff's first trip to Manila.
17

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

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

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


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

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

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

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

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

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

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

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

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

On this score, we find no error.

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

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

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

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


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

Polytrade Corp vs. Blanco 30 SCRA 187

Facts:

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


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

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

Held:

Yes.

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

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

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

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

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

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


1) The amount of P4,800,282.91 with interest thereof at the rate of one
agreement entitled "contract to sell and to buy," to Solid Homes six (6) parcels of
percent per month from February 23, 1981, until fully paid;
land in Quezon City and Marikina, with an area of 704,443 sq.m., for a total selling
price of P10,211,075.00 payable (in accordance with paragraph 1 thereof), as
follows: 2) The amount of P99,559.00 representing cost of science and transfer
taxes which defendant credited to its account with interest at the legal rate
from the filing of the complaint;
a) P100,000.00, Philippine Currency, as part down payment upon signing and
execution of this contract receipt of which in full is hereby acknowledged;
3) The amount of P250,000.00 to cover attorney's fees and litigation
expenses. 2
b) P2,042,215.00, Philippine Currency, as down payment payable on the following
dates:
On appeal, the Court of Appeals (CA-G.R. CV No. 13400), modified the trial court's
judgment and rendered its own decision, dated 21 January 1991, resolving thusly:
1 July 22, 1977 P400,000.00
2 October 22, 1977 711,107.50
3 January 22, 1978 711,107.50 PREMISES CONSIDERED, the judgment of the trial court is hereby modified
by ordering defendant-appellant to pay plaintiff the amount of
P4,800,282.91 with interest thereon at the rate of one percent per month
It is hereby agreed that the above down payment included the first down payment
from March 22, 1982. The amount of attorney's fees is hereby reduced from
of P199,000.00. Should the FIRST PARTY obtain titles to the properties above-
P250,000.00 to P50,000.00. The decision is AFFIRMED in all other aspects. 3
described after July 22, 1977, the due dates of the down payment and all
subsequent payments on the balance shall be adjusted accordingly.
In the instant petition for review, petitioner Solid Homes argues (a) that the Court of
Appeals should not have awarded attorney's fees, there being an absence of any
c) The balance of P8,188,860.00 shall be payable in ten (10) semi-annual
special finding of fact to justify such award, and (b) that it erred in declaring due and
installments for a period of five (5) years and shall earn interest at the rate of twelve
demandable the entire unpaid balance still owing to private respondents.
(12%) per annum, the first installment to be due on July 22, 1978. The installment
due together with the Schedule of Payments attached hereto as Schedule "A" and
made an integral part of this contract (Exh. A). 1
23

The Second Division of this Court required respondents to comment on the petition As of this late date, the Court has yet to hear from private respondents. Given the
in its Resolution of 22 April 1991. Meanwhile, Atty. Alejandro Barin withdrew as premises, and in order to permit this case to be finally resolved and terminated, the
counsel for respondents Investco, Inc., Angela Perez Staley and Antonio Perez, required comment on the petition for review should now be, as it is hereby,
Jr. 4 We required private respondents to submit the name and address of their new dispensed with.
counsel; to this day, no compliance has yet been made. In our resolution, dated 01
December 1993, we required the parties to move in the premises and to advise the Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when
Court whether "supervening events may have rendered this case moot and its claimant is compelled to litigate with third persons or to incur expenses to protect
academic." 5 his interest by reason of an unjustified act or omission of the party from whom it is
sought. While judicial discretion is here extant, an award thereof demands,
Petitioner submitted its compliance and manifested thusly: nevertheless, a factual, legal or equitable justification. The matter cannot and
should not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84 SCRA
In the meantime, on April 15, 1985 before judgment was rendered by the 337; Stronghold Insurance Company Inc. vs. Court of Appeals, 173 SCRA 619).
RTC in Civil Case No. 40615 Investco, Inc. (respondent herein) sold the very
same parcels of land involved in said case, in favor of Armed Forces of the In the case at bench, the records do not show enough basis for sustaining the award
Philippines Mutual Benefit Association, Inc. (AFPMBAI) for attorney's fees and to adjudge its payment by petitioner. On the contrary, the
appellate court itself has found that petitioner's act of withholding payment could
Solid Homes, Inc. (herein petitioner) filed Civil Case No. Q-46570 RTC not be said to be all that unjustified. The disagreement of the parties on the
Quezon City entitled 'Solid Homes, Inc., plaintiff versus AFPMBAI, Investco, demandability of the amount still due and the accrual date of interest has persisted
Inc. and the Register of Deeds of Quezon City covering titles registered in largely because of supervening circumstances and the perceived inexplicitness of
Quezon City and Civil Case No. 52999 Solid Homes, Inc., plaintiff versus the contract itself. The decision of the appellate court, has, in fact, reversed that of
AFPMBAI, Investco, Inc., and Register of Deeds for Pasig covering titles the trial court on the imposition of interest from 23 February 1981, thus upholding,
registered in Pasig, Metro Manila, both for nullification of the said second which we similarly find to be in order, the position of petitioner that the accrual
deed of sale over the same properties involved in the instant case. dated should instead start only on 28 March 1982.

Quezon City RTC Civil Case No. 46570 was decided in favor of plaintiffs, Relative to the demandability of the entire unpaid balance, we agree with, and so
Solid Homes, Inc.; on appeal, the Court of Appeals (CA G.R. No. 22365) adopt as our own that of respondent court; viz:
reversed the decision; same was elevated to the Supreme Court where it is
pending in SC G.R. No. 100437. The amount actually paid on account of the contract to buy and sell (Exh. A
or 1) is not an area of controversy in the first cause of action. The sum of
Pasig RTC, Civil Case No. 52999 was decided in favor of plaintiff Solid P2,042,215.00 corresponding to the down payment, as well as
Homes, Inc.; defendants appealed to the Court of Appeals (CA G.R. No. P4,084,430.00 with respect to the first four semi-annual installments and a
27398), which affirmed the RTC Decision; on the main cause of action portion of the fifth installment, had been received making a total of
Petition for Review by this to this Honorable Court is pending under G.R. No. P6,126,645.00. It is conceded that a balance of P4,800,282.91 is left
104769. unpaid. The dispute is with respect to the period when defendant had
defaulted and, consequently, when payment of interest shall begin. The
plaintiffs claim that said period should start on February 23, 1981; while the
Under the circumstances, herein petitioner, in compliance with the
defendant contends that the period must be adjusted should the titles be
Resolution dated December 1, 1993, hereby manifests that supervening
obtained by the plaintiff corporation after July 22, 1977, as provided in Par.
events since the Petition herein was filed has not rendered this case as
1(b) of the contract to sell and to buy. Considering that titles were actually
moot and academic, considering that the issue involved is the amount to be
transferred to Investco, Inc. between March 21 to March 28, 1979, the
paid in SOLID HOMES, INC. as balance on the consideration of the original
defendant avers that the original schedule of payment must not be
sale by Investco, Inc. to it and the concomitant transfer of titles to the latter
followed and the 5th installment shall only be due on March 22, 1982.
upon payment thereof, whereas in G.R. No. 100437 and G.R. No. 104769,
the issue is whether the second buyer AFPMBAI had actual or constructive
notice of the prior sale by Investco, Inc. to herein Petitioner, Solid Homes, It is undisputed that appellant Solid Homes had made a total payment of
Inc. 6 P6,126,645.00 leaving a balance of P4,800,282.91, which refers to the 6th
24

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

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

Downpayment

July 22, 1977 March 28, 1979


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

Balance

July 22, 1978 No. 1 March 08, 1980


January 22, 1979 No. 2 September 28, 1980
July 22, 1979 No. 3 March 28, 1981
January 22, 1981 No. 4 September 28, 1981
July 22, 1980 No. 5 March 28, 1982
25

FIRST DIVISION THE RTC RULING

In the course of trial at the lower court, petitioner failed to present any evidence,
G.R. No. 179491, January 14, 2015
except his Answer, despite several rescheduling of hearings at his instance. 4 The
trial court thus submitted the case for decision, and eventually ruled that
ALEJANDRO C. ALMENDRAS, JR., Petitioner, v. ALEXIS C. respondent was libeled and defamed. For the sufferings, social ridicule, defamation
ALMENDRAS, Respondent. and dishonor caused by petitioners letters, respondent was awarded damages, as
follows: P5,000,000.00 as moral damages; P100,000.00 as exemplary damages;
P10,000.00 for litigation expenses; and attorneys fees in the amount of 25% of
DECISION
whatever amounts actually received by plaintiff for this judgment.

SERENO, C.J.: Petitioner moved for reconsideration and/or new trial,6 but the same was denied by
the trial court.
We resolve the Petition for Review filed by petitioner Alejandro C. Almendras, Jr.,
from the 27 January 2006 Decision and 28 August 2007 Resolution of the Court of THE CA RULING
Appeals (CA) in CA-G.R. CV No. 73088.1 The CA affirmed the Decision and Order of
the Regional Trial Court (RTC) in Civil Case No. 33432 finding petitioner liable for On intermediate appellate review, the CA ruled that petitioner was not denied due
damages. process. It noted that petitioner was given full opportunity to present his evidence,
but he vehemently disregarded the proceedings by merely absenting himself from
trials without valid excuses. 8chanRoblesvirtualLawlibrary
THE FACTS
The appellate court also ruled that the letters were not privileged communications,
As culled from the CA, petitioner sent letters with similar contents on 7 February
since petitioner was not acting as a member of the Congress when he sent them. In
1996 to House Speaker Jose de Venecia, Jr., and on 26 February 1996 to Dr. Nemesio
fact, his letter stated that he extends his apology for bringing this personal matter
Prudente, President of Oil Carriers, Inc. The controversial portion of the first and
in the open. He was, as maintained by the respondent, sending open libelous and
second letters reads as follows:
unsealed letters, duly published and circulated in Digos, Davao del Sur, and Quezon
City.9 Consequently, the CA upheld the damages awarded by the trial court, the
This is to notify your good self and your staff that one ALEXIS DODONG C. amounts being consistent with the social and financial standing of the parties
ALMENDRAS, a brother, is not vested with any authority to liaison or transact any involved.
business with any department, office, or bureau, public or otherwise, that has
bearing or relation with my office, mandates or functions. x x x. We now rule on the final review of the case.

Noteworthy to mention, perhaps, is the fact that Mr. Alexis Dodong C. Almendras,
THE ISSUES
a reknown blackmailer, is a bitter rival in the just concluded election of 1995 who
ran against the wishes of my father, the late Congressman Alejandro D. Almendras,
From the foregoing, we reduce the issues to the following:
Sr. He has caused pain to the family when he filed cases against us: his brothers and
sisters, and worst against his own mother.
(1) Whether or not petitioner was deprived due process;
I deemed that his act of transacting business that affects my person and official
(2) Whether or not the letters are libelous in nature;
functions is malicious in purpose, done with ill motive and part of a larger plan of
harassment activities to perforce realise his egoistic and evil objectives.
(3) Whether or not the letters fall within the purview of privileged communication;
and
May I therefore request the assistance of your office in circulating the above
information to concerned officials and secretariat employees of the House of
(4) Whether or not respondent is entitled to moral and exemplary damages,
Representatives.
attorneys fees and litigation expenses.

OUR RULING
These letters were allegedly printed, distributed, circulated and published by
petitioner, assisted by Atty. Roberto Layug, in Digos, Davao del Sur and Quezon City, We deny the petition.
with evident bad faith and manifest malice to destroy respondent Alexis C.
Almendras good name. Hence, the latter filed an action for damages arising from Petitioner anchors his appeal on the ground that his letters are covered by privileged
libel and defamation against petitioner in the Regional Trial Court (RTC), Branch 19, communications. He insists that he has the legal, moral, or social duty to make the
Digos City.
26

communication, or at least, had an interest to protect, being then a Congressman the ludicrous. Although he rightfully expected counsel to amply protect his interest,
duty-bound to insulate his office and his constituents from the dubious and he cannot just sit back, relax and await the outcome of the case. In keeping with the
mistrustful pursuits of his elder brother.11 Moreover, the letters were also not meant normal course of events, he should have taken the initiative of making the proper
to be circulated or published. They were sent merely to warn the individuals of inquiries from his counsel and the trial court as to the status of his case. For his
respondents nefarious activities, and made in good faith and without any actual failure to do so, he has only himself to blame.19 The Court cannot allow petitioner the
malice. Respondents testimony that he learned the existence of the letter from exception to the general rule just because his counsel admitted having no
others cannot be countenanced, as no witness corroborated this. At best, it is only knowledge of his medical condition. To do so will set a dangerous precedent of
hearsay. never-ending suits, so long as lawyers could allege their own fault or negligence to
support the clients case and obtain remedies and reliefs already lost by the
On the denial of his motion for reconsideration and/or new trial, he maintains that operation of law.
his own counsel Atty. Leonardo D. Suario categorically admitted that he did not know
of petitioners ailment and thus did not make the proper manifestations in Court. His Second, we find that petitioners letters are libelous in nature and do not
failure to attend the hearing was not of his own volition, but because of his doctors fall within the purview of privileged communication.
strict advice since he earlier underwent a quadruple coronary artery bypass at the
St. Lukes Medical Center-Heart Institute in Quezon City on 16 July 2001, just a day For an imputation to be libelous under Article 353 of the Revised Penal Code, the
before the Motion for Reconsideration and/or New Trial was filed. While his counsel following requisites must be present: (a) it must be defamatory; (b) it must be
represents him, the latters mistakes should not deprive him of his day in court to malicious; (c) it must be given publicity; and (d) the victim must be identifiable.
present his side.
Consequently, under Article 354, every defamatory imputation is presumed to be
As to the damages, petitioner avers that since respondent never testified on any malicious, even if true, if no good intention and justifiable motive is shown. As an
suffering he sustained or why he is entitled to them, the same must not be awarded. exception to the rule, the presumption of malice is done away with when the
defamatory imputation qualifies as privileged communication. 22 In order to qualify as
On the other hand, respondent asserts that petitioners letters do not fall within the privileged communication under Article 354, Number 1,23 the following requisites
purview of privileged communication because it was published and read by the must concur: (1) the person who made the communication had a legal, moral, or
secretariat of the House of the Representatives, and not exclusively communicated social duty to make the communication, or at least, had an interest to protect, which
to persons who have some interest or duty in the matter and who have the power to interest may either be his own or of the one to whom it is made; (2) the
furnish the protection sought by the author of the statement. Moreover, he was not communication is addressed to an officer or a board, or superior, having some
acting as a member of congress when he sent the letters. The writing of a personal interest or duty in the matter, and who has the power to furnish the protection
matter (which petitioner admitted in the letters), not relating to the functions of a sought; and (3) the statements in the communication are made in good faith and
member of Congress cannot, by any stretch of imagination, be deemed to be without malice.
privileged and insulated from suit arising therefrom.
Were petitioners letters defamatory in nature? We believe so.
Malice has also been sufficiently proven because the language of the letters in fact
shows that the writer had some ill-feeling towards the respondent by using the In determining whether a statement is defamatory, the words used are to be
words such as reknown blackmailer and bitter rival. There is sufficient showing construed in their entirety and should be taken in their plain, natural, and ordinary
that petitioner bore a grudge against the respondent and that there was rivalry or ill- meaning as they would naturally be understood by the persons reading them, unless
feeling between them. it appears that they were used and understood in another sense.25 In the instant
case, the letters tag respondent as a reknown black mailer, a vengeful family
Anent the damages, respondent believes that they were rightly awarded, taking into member who filed cases against his mother and siblings, and with nefarious designs.
consideration his testimony in the lower court, 16 and the financial and social Even an impartial mind reading these descriptions would be led to entertain doubts
standing of the parties herein. on the persons character, thereby affecting that persons reputation.

First, we rule that petitioner was not deprived of his right to due process. Malice can also be presumed inasmuch as the letters are not privileged in nature.
Petitioners contention that he has the legal, moral or social duty to make the
Settled is the rule that a client is bound by the mistakes of his counsel. The only communication cannot be countenanced because he failed to communicate the
exception is when the negligence of the counsel is so gross, reckless and statements only to the person or persons who have some interest or duty in the
inexcusable that the client is deprived of his day in court. In such instance, the matter alleged, and who have the power to furnish the protection sought by the
remedy is to reopen the case and allow the party who was denied his day in court to author of the statement. A written letter containing libelous matter cannot be
adduce evidence. However, perusing the case at bar, we find no reason to depart classified as privileged when it is published and circulated among the
from the general rule. public.26 Examination of the letters would reveal that petitioner himself intended for
the letters to be circulated (and they were so) when he said that:
Petitioner was given several opportunities to present his evidence or to clarify his
medical constraints in court, but he did not do so, despite knowing full well that he
had a pending case in court. For petitioner to feign and repeatedly insist upon a lack
of awareness of the progress of an important litigation is to unmask a penchant for
27

May I therefore request the assistance of your office in circulating the above ALEJANDRO C. ALMENDRAS, JR. -versus- ALEXIS C. ALMENDRAS
information to concerned officials and secretariat employees of the House of
Representatives.27 Facts:

This lack of selectivity on his part is indicative of malice and is anathema to his
Alejandro C. Almendras sent letters to House Speaker Jose De Venecia, Jr. and Dr.
claim of privileged communication because such publication created upon the minds
of the readers a circumstance which brought discredit and shame to respondents Nemesio Prudente, President of Oil Carriers, Inc. These letters were allegedly
reputation. printed, distributed, circulated and published by Alejandro Almendras, Jr. in Davao
Del Sur and Quezon City, with evident bad faith and manifest malice to destroy
Lastly, having duly proved that all the elements of libel are present in this case, we Alexis C. Almendras good name. Hence, the latter filed an action for damages
rule that the damages awarded by the trial court and affirmed by the arising from libel and defamation against petitioner in RTC, Digos City. RTC granted
appellate court must be modified and equitably reduced. the complaint, awarding Alexis P5M as moral damages, P100T as exemplary
damages, P10T for litigation expenses and attorneys fees in the amount of 25% of
In awarding damages in libel cases, the court is given ample discretion to determine
the amount, depending upon the facts of the particular case.29 Article 2219 of the whatever amounts actually received by plaintff for this judgment. After the denial of
Civil Code expressly authorizes the recovery of moral damages in cases of libel, Motion for Reconsideration and/or new trial, the case was elevated to CA. CA
slander or any other form of defamation. However, while no proof of pecuniary loss affirmed the decision of RTC.
is necessary in order that moral damages may be awarded, x x x it is nevertheless
essential that the claimant should satisfactorily show the existence of the factual Issues:
basis of damages and its causal connection to defendants acts. 30 Considering that
respondent sufficiently justified his claim for damages (i.e. he testified that he was 1. Whether or not petitioner was deprived due process.
embarrassed by the said letters [and] ashamed to show his face in [sic]
government offices31), we find him entitled to moral and exemplary damages.
2. Whether or not the letters are libelous in nature.
However, we equitably reduce the amounts32 awarded because even though the
letters were libellous, respondent has not suffered such grave or substantial damage 3. Whether of not the letters fall within the purview of privileged communication;
to his reputation to warrant receiving P5,000,000 as moral damages and and 4. Whether or not respondent is entitled to moral and exemplary damages,
P100,000.00 as exemplary damages. In fact, he was able to successfully secure an attorneys fees and litigation expenses.
elected position in recent years. Accordingly, we reduce the award of moral
damages from P5,000,000 to P100,000 and exemplary damages from P100,000 to Ruling:
P20,000.
1. Petitioner was given several opportunities to present his evidence or to clarify his
The award of attorneys fees is not proper because respondent failed to justify
satisfactorily his claim, and both the trial and appellate courts failed to explicitly medical constraints in court, but he did not do so, despite knowing fully well that he
state in their respective decisions the rationale for the award. 33 It is an accepted had a pending case in court. In keeping the normal course of events, he should have
doctrine that the award thereof as an item of damages is the exception rather than taken the initiative of making the proper inquiries from his counsel and the trial
the rule, and counsels fees are not to be awarded every time a party wins a suit. court as to the status of his case. For his failure to do so, he has only himself to
The power of the court to award attorneys fees under Article 2208 of the Civil Code blame. The Court cannot allow petitioner the exception to the general rule just
demands factual, legal and equitable justification, without which the award is a
because his counsel admitted having no knowledge of his medical condition. To do
conclusion without a premise, its basis being improperly left to speculation and
conjecture. In all events, the court must explicitly state in the text of the decision, so will sit a dangerous precedent of never ending suits, so long as lawyers could
and not only in the decretal portion thereof, the legal reason for the award of allege their own fault or negligence to support the client s case and obtain
attorneys fees.34 The same is true for the award of litigation expenses because remedies and reliefs already lost by the operation of law.
respondent failed to satisfactorily justify his claim.
2. For imputation to be libelous under Art. 353 of the Revised Penal Code, the
WHEREFORE, we DENY the instant petition. The 27 January 2006 Decision and 28 following requisites must be present: a) it must be defamatory; b)it must be
August 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 73088 are malicious; c) it must be given publicity; and d) the victim must be identifiable.
hereby MODIFIED, in that: (1) the award of moral damages is reduced from
Consequently, under Art. 354, every defamatory imputation is presumed to be
P5,000,000 to P100,000; (2) the award of exemplary damages is reduced from
P100,000 to P20,000; and (3) litigation expenses and attorneys fees are deleted. malicious, even if true, if no good intention and justifiable motive is shown. In the
instant case, the letters tag respondent as a reknown black mailer a
SO ORDERED. vengeful family member who filed cases againts his mother and siblings, and with
nefarious designs. Even impartial mind reading these descriptions would be led to
28

entertain doubts on the persons character thereby affecting that person s


reputation.

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


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

4. Considering that the respondent sufficiently justified his claim for damages, he is
entitled to moral and exemplary damages. The award on attorney s fees and
litigation expenses are not proper because the respondent failed to justify
satisfactorily his claim.
29

SECOND DIVISION The cases were eventually resolved in this wise: (1) in Civil Case No. 85-30134, the t
rial court dismissed the third-party claim and motion for the issuance of a writ of prel
[G.R. No. 128452. November 16, 1999] iminary injunction filed by Atty.Consulta; (2) after Atty. Consulta filed the complaint
with the Tanodbayan in TBP Case No. 86-03662, petitioners transferred the handling
of the case to another lawyer; and (3) Civil Case No. 86-37196 waseventually dismis
COMPANIA MARITIMA, INC., EL VARADERO DE MANILA, MINDANAO TERMIN
sed on motion of both parties, but only after the trial courts denial of the motion to d
AL AND BROKERAGE SERVICES, CARLOS P. FERNANDEZ, VICENTET. FERNAN ismiss filed by Genstar Container Corporation was upheld on appeal by both the Cou
DEZ, LUIS T. FERNANDEZ, and RAMON B. FERNANDEZ, petitioners, vs. COUR rt of Appeals and theSupreme Court.[4]
T OF APPEALS and EXEQUIEL S. CONSULTA,. respondents.
For his services in the three cases, Atty. Consulta billed petitioners as follows: (1) P1
DECISION 00,000.00 for Civil Case No. 85-30134; (2) P50,000.00 for TBP Case No. 86-03662; a
nd (3) P5,000,000.00 for CivilCase No. 86-37196, including the subsequent appeals t
o the Court of Appeals and the Supreme Court. Petitioners did not pay the amount d
MENDOZA, J.:
emanded but only P30,000.00 for Civil Case No. 85-30134 andP10,000.00 for TBP Ca
se No. 86-03662.[5]
This is a petition for review on certiorari of the decision[1]of the Court of Appeals, dat
ed February 27, 1996, affirming the decision of the Regional Trial Court, Branch 94, Because of the failure of corporate petitioners to pay the balance of his attorneys fe
Quezon City, dated March 16,1993, which ordered petitioners to pay private respond es, Atty. Consulta brought suit against petitioners in the Regional Trial Court, Branch
ent, Atty. Exequiel S. Consulta, the total amount of P2,590,000.00, as attorneys fees, 94, Quezon City. He sought therecovery of the following: (1) P70,000.00, as the bala
and P21,856.40, as filing fees, in connection with three cases whichthe latter, as att nce of the P100,000.00 attorneys fees billed for Civil Case No. 85-30134; (2) P40,00
orney, handled for the former. 0.00, as the balance of the P50,000.00 attorneys fees for TBP CaseNo. 86-03662, an
d (3) P5,000,000.00 as attorneys fees for Civil Case No. 86-37196, including the subs
The facts are as follows: equent appeals therefrom to the Court of Appeals and the Supreme Court. He likewis
e asked for moraland exemplary damages, attorneys fees, and the costs of suit.[6]
Maritime Company of the Philippines was sued by Genstar Container Corporation bef
ore the Regional Trial Court, Branch 31, Manila. On November 29, 1985, it was order On March 16, 1993, the trial court rendered a decision which in part stated:
ed to pay Genstar ContainerCorporation the following amounts:
Considering all the circumstances as above set forth, this Court believes that the am
a. $469,860.35, or its equivalent in pesos at the current exchange rate. ount equivalent to five percent (5%) of the amount involved, or the amount of Two M
illion Five Hundred FiftyThousand Pesos (P2,550,000.00) would be reasonable attorn
b. 25% of the total obligation, P2,000.00 as Acceptance Fee, and P250.00 per appear eys fees for the services rendered by the plaintiff in Civil Case No. 37196 and the tw
ance - - as Attorneys Fees. o related proceedings in the Court of Appeals and the SupremeCourt.
c. Costs of suit. As for the services rendered by the plaintiff in Civil Case No. 30134, for which he app
ears to have already been paid P30,000.00, the Court believes that an additional am
As a result, properties of petitioners Compania Maritima, Inc., El Varadero de Manila, ount of P20,000.00 would bereasonable.
and Mindanao Terminal and Brokerage Services at Sangley Point, Cavite, were levied
upon in execution. Theproperties, consisting of the tugboats Dadiangas, Marinero, a On plaintiffs demand of P40,000.00, in addition to the P10,000.00 he had initially rec
nd Timonel, the floating crane Northwest Murphy Diesel Engine, and the motorized l eived for services rendered in the Tanodbayan case No. 86-03662, the Court grants
aunch Sea Otter, were worth P51,000,000.00 in sum.However, the same were sold a him an additional P20,000.00.
t public auction for only P1,235,000.00 to the highest bidder, a certain Rolando Patri
arca.[2] WHEREFORE, judgment is hereby rendered for the plaintiff and orders the defendant
to pay the plaintiff, jointly and severally, damages as follows:
Petitioners Compania Maritima, Inc., El Varadero de Manila, and Mindanao Terminal a
nd Brokerage Services engaged the services of private respondent, Atty. Exequiel S. a. For services rendered by plaintiff in Civil Case No. 37196 and the related proceedi
Consulta, who representedthem in the following cases: (1) Civil Case No. 85-30134, ngs in the Court of Appeals and the Supreme Court - Two Million Five Hundred Fifty T
entitled Genstar Container Corporation v. Maritime Company of the Philippines, wher housand Pesos(P2,550,000.00).
ein petitioners properties were levied upon although petitionershad not been implea
ded as defendants therein; (2) TBP Case No. 86-03662, entitled Compania Maritima, b. For services rendered by plaintiff in Civil Case No. 30134 - Twenty Thousand Pesos
Inc., v. Ramon C. Enriquez, which was a criminal case for falsification and for violatio (P20,000.00).
n of R.A. No.3019, otherwise known as the Anti-Graft and Corrupt Practices Act, agai
c. For services rendered in the TBP Case No. 86-03662 - Twenty Thousand Pesos (P2
nst Deputy Sheriff Enriquez before the Tanodbayan; and (3) Civil Case No. 86-37196
0,000.00).
entitled Compania Maritima v. GenstarContainer Corporation, an action for Injunction
, Annulment of Execution Proceedings, and Damages.[3] d. Filing fees in the amount of P21,856.40.
30

The defendants counterclaim and plaintiffs counterclaim to defendants counterclaim e think said amounts are reasonable, although the thirdparty claim and motion for th
are both dismissed. e issuance of a writ of preliminary injunction filed by Atty. Consultain Civil Case No. 8
5-30134 was dismissed by the trial court, while TBP Case No. 86-03662 was given by
SO ORDERED. petitioners to another lawyer after Atty. Consulta had filed the complaint. On the oth
er hand, althoughthe order of the trial court in Civil Case No. 86-37196 granting the
On appeal, the Court of Appeals affirmed the decision of the trial court. Said th
motion to dismiss filed by both parties did not state the grounds therefor, it is reason
e appellate court:
able to infer that petitioners agreed thereto inconsideration of some advantage. Hen
In Civil Case No. 37196, where appellee rendered his legal services, appellants prope ce, the rulings of the Court of Appeals and the trial court that, because of the compl
rty worth Fifty One Million Pesos (P51,000,000.00) was involved. Likewise, the afore exity of the issues involved and the work done by counsel, the amount ofP2,550,000
mentioned case was not asimple action for collection of money, considering that co .00 was reasonable for Atty. Consultas services.
mplex legal issues were raised therein which reached until the Supreme Court. In the
In addition, the value of the properties involved was considerable. As already stated,
course of such protracted legal battle to save the appellantsproperties, the appellee
to satisfy the judgment in favor of Genstar Container Corporation in Civil Case No. 8
prepared numerous pleadings and motions, which were diligently and effectively exe
5-30134, properties ofpetitioners worth P51,000,000.00 were sold at public auction.
cuted, as a result of which, the appellants properties were saved from execution and
Only P1,235,000.00 was realized from the sale and petitioners were in danger of losi
theiroppositors were forced to settle by way of a compromise agreement.
ng their properties. As the appellate court pointed out, Atty.Consulta rendered profes
It is a wellsettled rule that in the recovery of attorneys fees, whether as a main actio sional services not only in the trial court but in the Court of Appeals and in this Court
n or as an incident of another action, the determination of the reasonableness is wit . There is no question that through his efforts, properties owned by petitioners were
hin the prerogative of the courts(Roldan vs. Court of Appeals, 218 SCRA 713; Radiow saved fromexecution.
ealth Finance Co., Inc. vs. International Corporate Bank, 182 SCRA 862; Panay Electri
It is settled that great weight, and even finality, is given to the factual conclusions of
c vs. Court of Appeals, 119 SCRA 456).
the Court of Appeals which affirm those of the trial courts.[10] Only where it is shown t
Based on the aforequoted ruling, We find that the court a quo did not commit any re hat such findings arewhimsical, capricious, and arbitrary can they be overturned. In t
versible error in awarding attorneys fees equivalent to five percent (5%) of the total he present case, the Court of Appeals affirmed the factual conclusions of the trial co
value of properties involved inCivil Case No. 37196. urt that: (1) the issues in Civil Case No. 86-03662,including the appeals taken therefr
om to the Court of Appeals and the Supreme Court, were quite complex; (2) the plea
Hence, this appeal. Petitioners raise the following issues: dings filed by Atty. Consulta were well-researched; and (3) as a result of Atty. Consult
asefforts, the adverse parties were induced to agree to the dismissal of the case.
a) Whether or not the amount of attorneys fees awarded to the private respondent b
y the court a quo and affirmed by the Honorable Court is reasonable. Petitioners contend, however, that: (1) the said cases merely involved simple issues;
(2) the pleadings filed by Atty. Consulta did not exhibit an extraordinary level of com
b) Whether or not the doctrine of piercing the veil of corporate fiction may be applie petence, effort, and skill; and (3)they did not benefit from the efforts of Atty. Consult
d in the case at bar. a. These allegations have not been proven. Petitioners have not shown that the fact
ual findings of both the Court of Appeals and the trial court are contraryto the evide
With respect to the first question, it is pertinent to note two concepts of attorneys fe nce. Nor have they shown that they did not benefit from their representation by Atty.
es in this jurisdiction. In the ordinary sense, attorneys fees represent the reasonable Consulta.
compensation paid to a lawyer byhis client for the legal services he has rendered to
the latter. On the other hand, in its extraordinary concept, attorneys fees may be aw With respect to the liability of individual petitioners Carlos P. Fernandez, Vicente T. Fe
arded by the court as indemnity for damages to be paid by the losing partyto the pr rnandez, Luis T. Fernandez, and Ramon B. Fernandez, we hold that the mere fact tha
evailing party.[7] t they were stockholders anddirectors of corporate petitioners does not justify a findi
ng that they are liable for the obligations of the corporations.
The issue in this case concerns attorneys fees in the ordinary concept. Generally, th
e amount of attorneys fees due is that stipulated in the retainer agreement which is It is wellsettled that as a legal entity, a corporation has a personality separate and di
conclusive as to the amount of thelawyers compensation. In the absence thereof, th stinct from its individual stockholders or members. The fiction of corporate entity will
e amount of attorneys fees is fixed on the basis of quantum meruit, i.e., the reasona be set aside and the individualstockholders will be held liable for its obligation only if
ble worth of his services.[8] In determining the amount of attorneys fees, thefollowing it is shown that it is being used for fraudulent, unfair, or illegal purposes.[11] In this ca
factors are considered: (1) the time spent and extent of services rendered; (2) the n se, the Court of Appeals held that individual petitioners wereguilty of fraud, based o
ovelty and difficulty of the questions involved; (3) the importance of the subject mat n its finding that they refused to pay the attorneys fees demanded by Atty. Consulta.
ter; (4) the skill demanded; (5)the probability of losing other employment as a result It should be noted, however, that although petitioners Compania Maritima, Inc., El V
of the acceptance of the proffered case; (6) the amount involved in the controversy aradero deManila, and Mindanao Terminal and Brokerage Services have an obligatio
and the benefits resulting to the client; (7) the certainty ofcompensation; (8) the cha n to pay Atty. Consulta for his attorneys fees, the amount thereof was still in dispute.
racter of employment; and (9) the professional standing of the lawyer.[9] It was therefore improper for the Court ofAppeals to conclude that individual petition
ers were guilty of fraud simply because corporate petitioners had refused to make th
Both the Court of Appeals and the trial court approved attorneys fees in the total am e payments demanded. The fact remains that at the time of demand, the amountdu
ounts of P50,000.00 and P30,000.00 for the services of Atty. Consulta in Civil Case N e to Atty. Consulta had not been finally determined.
o. 85-30134 and TBP Case No.86-03662, respectively. Based on the above criteria, w
31

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

SO ORDERED.
32

Castelo vs Court of Appeals (244 SCRA 180) ISSUE: What is the correct interpretation of the phrase "to pay interest" set out in
the dispositive portion of the CA decision?
FACTS

On 15 October 1982, petitioners Antonio Castelo, Bernabe Banson, Lourdes Banson


and Pompeyo Depante entered into a contract denominated as a "Deed of HELD:
Conditional Sale" with private respondent Milagros Dela Rosa involving a parcel of
land. The agreed price of the land was P269,408.00. Upon signing the contract, The established doctrine is that when the dispositive portion of a judgment, which
private respondent paid petitioners P106,000.00 leaving a balance of P163,408.00. has become final and executory, contains a clerical error or an ambiguity arising
The Deed of Conditional Sale also stipulated that: from an inadvertent omission, such error or ambiguity may be clarified by reference
to the body of the decision itself.
b.)The balance of P163,408.00 to be paid on or before December 31, 1982 without
interest and penalty charges; SC believe and so hold that the phrase to pay interest, found in the dispositive
portion of the CA decision must, under applicable law, refer to the interest stipulated
c.)Should the said balance [remain unpaid] by the VENDEE, the VENDORS hereby by the parties in the Deed of Conditional Sale which they had entered into on 15
agree to give the VENDEE a grace period of SIX (6) months or up to June 30, 1983 to October 1982. SC note, in the first place, that the phrase to pay interest comes
pay said balance provided that interest at the rate of 12% per annum shall be close upon the heels of the preceding phrase "to comply with her obligation under
charged and 1% penalty charge a month shall be imposed on the remaining the conditional sale to pay the balance of P163,408.00." A strong inference thus
diminishing balance. arises that the "interest" required to be paid is the interest stipulated as part of the
obligation [of private respondent dela Rosa] under the conditional sale [agreement]
Private respondent Dela Rosa was unable to pay the remaining balance. Petitioners to pay the balance of [the purchase price of the land.
filed an action for specific performance with damages. RTC rendered the decision
ordering the rescission of the Deed of Conditional Sale. Petitioners went on Certiorari In the computation for the amount to be paid, The question is whether, during the
to CA. They claimed that rescission of the contract was only an alternative relief period of 1 January 1983 up to 30 June 1983, 12% interest per annum plus 1%
available under the Civil Code, while they in their complaint before the RTC, had penalty charge a month was payable "on the remaining diminishing balance;" or
asked for specific performance with damages.CA reversed the RTC decision. Writ of whether during the period from 1 January 1983 to 30 June 1983, only 12% per
execution was issued. Private respondent Dela Rosa was required to pay petitioners annum interest was payable while the 1% per month penalty charge would in
a total of P197,723.68. Petitioners filed a motion for reconsideration and a separate addition begin to accrue on any balance remaining unpaid as of 1 July 1983.
motion for alias writ of execution contending that the sum of P197,723.68 was
erroneous. They argued that the obligation of private respondent was to pay (a) SC believed the parties intended the latter view. The interpretation SC adopted is
interest at the rate of twelve percent (12%) per annum plus (b) one percent (1%) also supported by the principle that in case of ambiguity in contract language, that
penalty charge per month, from default, i.e, from 1 January 1983; that the amount to interpretation which establishes a less onerous transmission of rights or imposition
be paid by the Defendant should be P398,814.88 instead and not P197,723.68 or a of lesser burdens which permits greater reciprocity between the parties, is to be
difference of P201,091.20. adopted (Art. 1378).

RTC denied the motion. Further contends that the phrase "to pay interest" found in WHEREFORE, the writ of certiorari is hereby GRANTED.
the dispositive portion of the CAs November 21, 1986 decision did not refer to the
stipulation in the "Deed of Conditional Sale" but rather to the legal rate of interest (2)ordering the defendant to comply with her obligation under the conditional sale
imposed by the CA which started to run from 12 February 1987, the date of entry of to pay the balance of the conditional sale in the amount of P163,408.00, to pay
judgment. interest on the amount of the balance remaining unpaid during the period from 1
January 1983 to 30 June 1983 at the rate of 12% per annum; and, from 1 July 1983
Petitioner filed on certiorari to CA. CA dismissed it. But stated that the part of the until full payment of the amount due, to pay interest at the rate of 12% per annum
dispositive portion, ordering the "defendant . . . to pay the balance of the conditional plus another 12% per annum (i.e., 1% penalty charge per month), or a total of 24%
sale in the amount of P163,408.00, to pay interest . . . ." Being a "new" judgment or per annum, on the balance remaining unpaid; and
decision, the computation of the "interest" on the balance of the conditional sale
should commence from the date of its ENTRY on February 12, 1987, when the (3)in default thereof, the rescission of the "Deed of Conditional Sale" is the
decision became FINAL and EXECUTORY. alternative."
33
34

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

FACTS:

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

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

HELD:

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


contract. Herein subject contract does not contain any stipulation as to interest.
However, the amount due to respondent does not represent a loan or forbearance of
money. The word forbearance is defined, within, the context of usury law, as a
contractual obligation of lender or creditor to refrain, during given period of time,
from requiring borrower or debtor to repay loan or debt then due and payable. In the
absence of stipulation, the legal interest is 6% pa on the amount finally adjudged by
the Court.
35

FIRST DIVISION Thereafter, respondents filed a Complaint5 for damages against CDCP, BLTB,
Espiridion Payunan, Jr. and Wilfredo Datinguinoo before the Regional Trial Court of
Manila, Branch 13. They alleged (1) that Payunan, Jr. and Datinguinoo, who were the
G.R. No. 147791 September 8, 2006
drivers of CDCP and BLTB buses, respectively, were negligent and did not obey
traffic laws; (2) that BLTB and CDCP did not exercise the diligence of a good father of
CONSTRUCTION DEVELOPMENT CORPORATION OF THE a family in the selection and supervision of their employees; (3) that BLTB allowed
PHILIPPINES, petitioner, its bus to operate knowing that it lacked proper maintenance thus exposing its
vs. passengers to grave danger; (4) that they suffered actual damages amounting to
REBECCA G. ESTRELLA, RACHEL E. FLETCHER, PHILIPPINE PHOENIX SURETY P250,000.00 for Estrella and P300,000.00 for Fletcher; (5) that they suffered
& INSURANCE INC., BATANGAS LAGUNA TAYABAS BUS CO., and WILFREDO physical discomfort, serious anxiety, fright and mental anguish, besmirched
DATINGUINOO, respondents. reputation and wounded feelings, moral shock, and lifelong social humiliation; (6)
that defendants failed to act with justice, give respondents their due, observe
honesty and good faith which entitles them to claim for exemplary damage; and (7)
DECISION
that they are entitled to a reasonable amount of attorney's fees and litigation
expenses.
YNARES-SANTIAGO, J.:
CDCP filed its Answer6 which was later amended to include a third-party complaint
This petition for review assails the March 29, 2001 Decision 1 of the Court of Appeals against Philippine Phoenix Surety and Insurance, Inc. (Phoenix).7
in CA-G.R. CV No. 46896, which affirmed with modification the February 9, 1993
Decision2 of the Regional Trial Court of Manila, Branch 13, in Civil Case No. R-82-
On February 9, 1993, the trial court rendered a decision finding CDCP and BLTB and
2137, finding Batangas Laguna Tayabas Bus Co. (BLTB) and Construction
their employees liable for damages, the dispositive portion of which, states:
Development Corporation of the Philippines (CDCP) liable for damages.

WHEREFORE, judgment is rendered:


The antecedent facts are as follows:

In the Complaint
On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter,
Rachel E. Fletcher, boarded in San Pablo City, a BLTB bus bound for Pasay City.
However, they never reached their destination because their bus was rammed from 1. In favor of the plaintiffs and against the defendants BLTB, Wilfredo
behind by a tractor-truck of CDCP in the South Expressway. The strong impact Datinguinoo, Construction and Development Corporation of the Philippines
pushed forward their seats and pinned their knees to the seats in front of them. (now PNCC) and Espiridion Payunan, Jr., ordering said defendants, jointly
They regained consciousness only when rescuers created a hole in the bus and and severally to pay the plaintiffs the sum of P79,254.43 as actual damages
extricated their legs from under the seats. They were brought to the Makati Medical and to pay the sum of P10,000.00 as attorney's fees or a total of
Center where the doctors diagnosed their injuries to be as follows: P89,254.43;

Medical Certificate of Rebecca Estrella 2. In addition, defendant Construction and Development Corporation of the
Philippines and defendant Espiridion Payunan, Jr., shall pay the plaintiffs the
amount of Fifty Thousand (P50,000.00) Pesos to plaintiff Rachel Fletcher
Fracture, left tibia mid 3rd
and Twenty Five Thousand (P25,000.00) Pesos to plaintiff Rebecca Estrella;
Lacerated wound, chin
Contusions with abrasions, left lower leg
Fracture, 6th and 7th ribs, right3 3. On the counterclaim of BLTB Co. and Wilfredo Datinguinoo

Medical Certificate of Rachel Fletcher Dismissing the counterclaim;

Extensive lacerated wounds, right leg posterior aspect popliteal area 4. On the crossclaim against Construction and Development Corporation of
and antero-lateral aspect mid lower leg with severance of muscles. the Philippines (now PNCC) and Espiridion Payunan, Jr.
Partial amputation BK left leg with severance of gastro-soleus and
antero-lateral compartment of lower leg.
Dismissing the crossclaim;
Fracture, open comminuted, both tibial4
36

5. On the counterclaim of Construction and Development Corporation of the 2. Thirty (30) percent of the total amount recovered is hereby awarded as
Philippines (now PNCC) attorney's fees;

Dismissing the counterclaim; 3. Defendants-appellants Construction and Development Corporation of the


Philippines (now PNCC) and Espiridion Payunan, Jr. are ordered to pay
plaintiff-appellants Rebecca Estrella and Rachel Fletcher the amount of
6. On the crossclaim against BLTB
Twenty Thousand (P20,000.00) each as exemplary damages and
P80,000.00 by way of moral damages to Rachel Fletcher.
Dismissing the crossclaim;
SO ORDERED.12
7. On the Third Party Complaint by Construction and Development
Corporation of the Philippines against Philippine Phoenix Surety and
The Court of Appeals held that the actual or compensatory damage sought by
Insurance, Incorporated
respondents for the injuries they sustained in the form of hospital bills were already
liquidated and were ascertained. Accordingly, the 6% interest per annum should
Dismissing the Third Party Complaint. commence to run from the time the judicial demand was made or from the filing of
the complaint and not from the date of judgment. The Court of Appeals also
awarded attorney's fees equivalent to 30% of the total amount recovered based on
SO ORDERED.8
the retainer agreement of the parties. The appellate court also held that
respondents are entitled to exemplary and moral damages. Finally, it affirmed the
The trial court held that BLTB, as a common carrier, was bound to observe ruling of the trial court that the claim of CDCP against Phoenix had already
extraordinary diligence in the vigilance over the safety of its passengers. It must prescribed.
carry the passengers safely as far as human care and foresight provide, using the
utmost diligence of very cautious persons, with a due regard for all the
Hence, this petition raising the following issues:
circumstances. Thus, where a passenger dies or is injured, the carrier is presumed to
have been at fault or has acted negligently. BLTB's inability to carry respondents to
their destination gave rise to an action for breach of contract of carriage while its I
failure to rebut the presumption of negligence made it liable to respondents for the
breach.9
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT
HOLDING RESPONDENTS BLTB AND/OR ITS DRIVER WILFREDO
Regarding CDCP, the trial court found that the tractor-truck it owned bumped the DATINGUINOO SOLELY LIABLE FOR THE DAMAGES SUSTAINED BY HEREIN
BLTB bus from behind. Evidence showed that CDCP's driver was reckless and driving RESPONDENTS FLETCHER AND ESTRELLA.
very fast at the time of the incident. The gross negligence of its driver raised the
presumption that CDCP was negligent either in the selection or in the supervision of
II
its employees which it failed to rebut thus making it and its driver liable to
respondents.10
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN AWARDING
EXCESSIVE OR UNFOUNDED DAMAGES, ATTORNEY'S FEES AND LEGAL
Unsatisfied with the award of damages and attorney's fees by the trial court,
INTEREST TO RESPONDENTS FLETCHER AND ESTRELLA.
respondents moved that the decision be reconsidered but was denied. Respondents
elevated the case11 to the Court of Appeals which affirmed the decision of the trial
court but modified the amount of damages, the dispositive portion of which III
provides:
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT
WHEREFORE, the assailed decision dated October 7, 1993 of the Regional HOLDING RESPONDENT PHOENIX LIABLE UNDER ITS INSURANCE POLICY ON
Trial Court, Branch 13, Manila is hereby AFFIRMED with the following THE GROUND OF PRESCRIPTION.
MODIFICATION:
The issues for resolution are as follows: (1) whether BLTB and its driver Wilfredo
1. The interest of six (6) percent per annum on the actual damages of Datinguinoo are solely liable for the damages sustained by respondents; (2) whether
P79,354.43 should commence to run from the time the judicial demand was the damages, attorney's fees and legal interest awarded by the CA are excessive
made or from the filing of the complaint on February 4, 1980; and unfounded; (3) whether CDCP can recover under its insurance policy from
Phoenix.
37

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

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

The same rule of liability was applied in situations where the negligence of
Joint tort feasors are jointly and severally liable for the tort which they
the driver of the bus on which plaintiff was riding concurred with the
commit. The persons injured may sue all of them or any number less than
negligence of a third party who was the driver of another vehicle, thus
all. Each is liable for the whole damages caused by all, and all together are
causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus
jointly liable for the whole damage. It is no defense for one sued alone, that
Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v.
the others who participated in the wrongful act are not joined with him as
Court of Appeals, the bus company, its driver, the operator of the
defendants; nor is it any excuse for him that his participation in the tort was
other vehicle and the driver of the vehicle were jointly and
insignificant as compared to that of the others. x x x
severally held liable to the injured passenger or the latter's
heirs. The basis of this allocation of liability was explained in Viluan v.
Court of Appeals, thus: Joint tort feasors are not liable pro rata. The damages can not be
apportioned among them, except among themselves. They cannot insist
upon an apportionment, for the purpose of each paying an aliquot part.
Nor should it make any difference that the liability of petitioner
They are jointly and severally liable for the whole amount. x x x
[bus owner] springs from contract while that of respondents
[owner and driver of other vehicle] arises from quasi-delict. As early
as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in
38

A payment in full for the damage done, by one of the joint tort feasors, of There are two commonly accepted concepts of attorney's fees, the so-
course satisfies any claim which might exist against the others. There can called ordinary and extraordinary. In its ordinary concept, an attorney's fee
be but satisfaction. The release of one of the joint tort feasors by is the reasonable compensation paid to a lawyer by his client for the legal
agreement generally operates to discharge all. x x x services he has rendered to the latter. The basis of this compensation is the
fact of his employment by and his agreement with the client.
Of course the court during trial may find that some of the alleged tort
feasors are liable and that others are not liable. The courts may release In its extraordinary concept, an attorney's fee is an indemnity for
some for lack of evidence while condemning others of the alleged tort damages ordered by the court to be paid by the losing party in a
feasors. And this is true even though they are charged jointly and litigation. The basis of this is any of the cases provided by law where such
severally.19 award can be made, such as those authorized in Article 2208, Civil Code,
and is payable not to the lawyer but to the client, unless they have
agreed that the award shall pertain to the lawyer as additional
Petitioner's claim that paragraph 2 of the dispositive portion of the trial court's
compensation or as part thereof.28 (Emphasis supplied)
decision is ambiguous and arbitrary and also entitles respondents to recover twice is
without basis. In the body of the trial court's decision, it was clearly stated that
petitioner and its driver Payunan, Jr., are jointly and solidarily liable for moral In the instant case, the Court of Appeals correctly awarded attorney's fees and other
damages in the amount of P50,000.00 to respondent Fletcher and P25,000.00 to expenses of litigation as they may be recovered as actual or compensatory damages
respondent Estrella.20 Moreover, there could be no double recovery because the when exemplary damages are awarded; when the defendant acted in gross and
award in paragraph 2 is for moral damages while the award in paragraph 1 is for evident bad faith in refusing to satisfy the plaintiff's valid, just and demandable
actual damages and attorney's fees. claim; and in any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered.29
Petitioner next claims that the damages, attorney's fees, and legal interest awarded
by the Court of Appeals are excessive. Regarding the imposition of legal interest at the rate of 6% from the time of the filing
of the complaint, we held inEastern Shipping Lines, Inc. v. Court of Appeals,30 that
when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
Moral damages may be recovered in quasi-delicts causing physical injuries. 21 The
delicts or quasi-delicts is breached, the contravenor can be held liable for payment
award of moral damages in favor of Fletcher and Estrella in the amount of
of interest in the concept of actual and compensatory damages, 31 subject to the
P80,000.00 must be reduced since prevailing jurisprudence fixed the same at
following rules, to wit
P50,000.00.22 While moral damages are not intended to enrich the plaintiff at the
expense of the defendant, the award should nonetheless be commensurate to the
suffering inflicted.23 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
The Court of Appeals correctly awarded respondents exemplary damages in the
due shall itself earn legal interest from the time it is judicially demanded. In
amount of P20,000.00 each. Exemplary damages may be awarded in addition to
the absence of stipulation, the rate of interest shall be 12% per annum to
moral and compensatory damages.24 Article 2231 of the Civil Code also states that
be computed from default, i.e., from judicial or extrajudicial demand under
in quasi-delicts, exemplary damages may be granted if the defendant acted with
and subject to the provisions of Article 1169 of the Civil Code.
gross negligence.25 In this case, petitioner's driver was driving recklessly at the time
its truck rammed the BLTB bus. Petitioner, who has direct and primary liability for
the negligent conduct of its subordinates, was also found negligent in the selection 2. When an obligation, not constituting a loan or forbearance of money, is
and supervision of its employees. In Del Rosario v. Court of Appeals,26 we held, thus: 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
ART. 2229 of the Civil Code also provides that such damages may be
when or until the demand can be established with reasonable certainty.
imposed, by way of example or correction for the public good. While
Accordingly, where the demand is established with reasonable certainty,
exemplary damages cannot be recovered as a matter of right, they need
the interest shall begin to run from the time the claim is made judicially or
not be proved, although plaintiff must show that he is entitled to moral,
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
temperate or compensatory damages before the court may consider the
reasonably established at the time the demand is made, the interest
question of whether or not exemplary damages should be awarded.
shall begin to run only from the date the judgment of the court is
Exemplary Damages are imposed not to enrich one party or impoverish
made (at which time the quantification of damages may be deemed
another but to serve as a deterrent against or as a negative incentive to
to have been reasonably ascertained). The actual base for the
curb socially deleterious actions.
computation of legal interest shall, in any case, be on the amount finally
adjudged.
Regarding attorney's fees, we held in Traders Royal Bank Employees Union-
Independent v. National Labor Relations Commission, 27 that:
39

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

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

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

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

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

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

WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. CV No. 46896 dated March 29, 2001, which modified the Decision of the
Regional Trial Court of Manila, Branch 13, in Civil Case No. R-82-2137, is AFFIRMED
with the MODIFICATIONS that petitioner is held jointly and severally liable to pay
(1) actual damages in the amount of P79,354.43; (2) moral damages in the amount
of P50,000.00 each for Rachel Fletcher and Rebecca Estrella; (3) exemplary
damages in the amount of P20,000.00 each for Rebecca Estrella and Rachel
Fletcher; and (4) thirty percent (30%) of the total amount recovered as attorney's
fees. The total amount adjudged shall earn interest at the rate of 6% per annum
from the date of judgment of the trial court until finality of this judgment. From the
time this Decision becomes final and executory and the judgment amount remains
40

EN BANC plaintiff upon this contract. It was also stipulated that upon each delivery of crude
alcohol made by Lo Seng as per contract, the plaintiff should pay to Lo Seng only
G.R. No. L-20923 February 25, 1924 P2.50 per arroba of the contract price, leaving 50 centavos of the value of
each arroba to be credited upon the advancements made as already stated.
LIM SIENGCO, plaintiff-appellant,
vs. Some time after these contracts were made, Lo Seng & Co. delivered about
LO SENG, doing business under the style of Lo Seng and Co., defendant- 128 arrobas of fine alcohol and about 468 arrobas of crude alcohol, after which no
appellant. deliveries whatever were made upon the contract.

STREET, J.: On or about September 22 the manager of the plaintiff, one Lim Chiu, called upon
the manager of Lo Seng, one Simonson, and made inquiry as to the reason for the
Upon November 13, 1919, the present action was instituted in the Court of First failure of Lo Seng & Co. to make deliveries of the alcohol as agreed. Simonson told
Instance of Manila by Lim Siengco to recover of Lo Seng, upon the first cause of Lim Chiu that Lo Seng had departed from the Philippine Islands and would not be
action stated in the complaint, the sum of P15,282.28, consisting partly of money, back for more than two weeks. Simonson further told Lim Chiu that he (Simonson)
advanced by the plaintiff to the defendant partly of a claim for damages for breach personally knew nothing about the contract which Lim Chiu claimed to have with Lo
of the contracts for the purchase of alcohol, and in his second cause of action the Seng, and that he (Simonson) could not, or would not, honor said contract.
sum of P818, the value of wine and demijohns alleged to have been sold and Nevertheless he suggested to Lim Chiu that if the plaintiff had to have alcohol
delivered to the defendant. In connection with the institution of this action, the immediately a certain amount would be supplied at a price greater than that
plaintiff caused an attachment to be levied upon certain property of the defendant, stipulated but somewhat under the price then prevailing in the market, and that
but this attachment was afterwards dissolved by the court. On November 17, 1919, upon Lo Seng's return the matter could be taken up with him by Lim Chiu and they
the defendant interposed an answer, in which he admitted liability to a certain could adjust it as they saw fit.
extent, alleging, however, that the plaintiff on his part had breached the contract
respecting the alcohol by refusing to pay for the same as delivered. By way of One of the excuses made then, or at some other time, for the failure of Lo Seng &
counterclaim the defendant sought to recover the sum of P30,000, as damages for Co. to deliver the alcohol covered by said contracts was that a typhoon had lately
the wrongful suing out of the attachment. At the hearing the trial judge absolved the prevailed in the province where the distillery was located and that on this account
defendant from the plaintiff's complaint and absolved the plaintiff from the the distillery had not been operated lately with efficiency. Another explanation, no
defendant's counterclaim. From this judgment both parties appealed in so far as the doubt, is to be found in the condition of the market for alcohol, the price of which
decision was prejudicial to each of them respectively. began to rise in August and September and which continued to progress upwards for
several months, until fine alcohol was sold for P12 or P15 and crude alcohol for
It appears that in July, 1919, the defendant, Lo Seng, was doing business as a nearly P4.
distiller of alcohol, under the name of Lo Seng & Co., with his office at 414 T. Pinpin
Street, Manila, while the plaintiff, Lim Siengco, was a merchant residing in the same It further appears that in the months of August and September, 1919, Lo Seng
city. On July 16, of said year, Lo Seng as manager of Lo Seng & Co., contracted in bought of the plaintiff a quantity of wine (vino tinto) and received also a number of
writing to sell to Lim Siengco 1,000 arrobas of refined alcohol, 182 proof, at the price empty demijohns, of the combined value of P818.
of P7 per arroba. The first delivery was stipulated to be made on August 15, 1919,
with weekly deliveries of 150 arrobas of said alcohol until delivery should be The first error assigned by the plaintiff-appellant has reference to the action of the
completed. court in dissolving the preliminary attachment. We think that this assignment of
error is not well taken, as it does not appear that any sufficient ground of
On the same day Lo Seng contracted in writing to sell to the same Lim Siengco attachment in fact existed; and upon the facts appearing upon affidavits before him
6,000 arrobas of crude alcohol, of 80 proof, at the price of P3 per arroba. It was the action taken by the trial judge in dissolving the attachment cannot be said to
agreed that deliveries under this contract should be made at the rate of have been improper.
P1,000 arrobas commencing July 30 and at intervals of about fifteen days thereafter
until the entire quantity should be delivered. In connection with this contract for the The second assignment of error has reference to the action of the trial court in
sale of the crude alcohol Lim Siengco advanced the sum of P1,500 at the time of the failing to give judgment upon the second cause of action. This assignment of error is
making of the contract, and another sum of P1,500 on July 24, thereafter. A little well taken, and the failure of the trial court to give judgment in favor of the plaintiff
later Lim Siengco delivered another P1,000, making P4,000 in all advanced by the upon the item therein claimed was, we suppose, due to a mere oversight on the part
41

of his Honor. The account set forth in this cause is clearly proved by the plaintiff's true measure of damages being the difference between the contract price and the
witness, Lim Chiu, manager of the business of Lim Siengco, and furthermore the price prevailing in the market at the stipulated time and place of delivery.
answer admits that the wine and demijohns were received as claimed. It is true that
the answer asserts that some of the demijohns were returned, without saying how From something said in the appealed decision it seems that the trial judge
many or of what value; but no proof at all was submitted by the defendant to sustain entertained the idea that the plaintiff could not recover any damages unless he
this assertion. The plaintiff should clearly have judgment for the sum of P818, being should show that he was compelled to buy alcohol in the open market to replace
the amount claimed upon the second cause of action. that which the defendant had contracted to deliver; and his Honor refused to allow
any damages because the plaintiff had not clearly shown that he had really
The plaintiff-appellant's third assignment of error has reference to the refusal of the purchased crude and fine alcohol of the kind expressed in the contract and the
trial court to award damages to the plaintiff for breach of contract by the defendant. prices paid therefor. This idea is entirely unsound. If the plaintiff had in fact been
This assignment of error also is well taken, but not, we think, to the extent claimed compelled to buy alcohol like that contracted for from some other person than the
in the plaintiff's brief upon appeal. defendant, this would have been competent proof on the question of damages, if the
purchase was effected at a higher price than that stipulated in the contract with the
It is proved not denied that the plaintiff advanced P4,000, upon the contract for defendant. But the right of the plaintiff to recover damages was not absolutely
crude oil. In return for this he has received alcohol, both crude and fine, of a total dependent upon proof of this character. As already stated the correct measure of
value of P2,507.79, at the prices contracted to be paid for the two sorts of alcohol damages is to be found in the difference between the contract price and the price
respectively. Upon liquidation of accounts this leaves a balance due to the plaintiff of prevailing in the market at the time and place stipulated for the deliveries.
P1,429.21, which should undoubtedly be refunded. In the answer of the defendant it
is claimed that at a date subsequent to the making of the contract, the contracts Now, as bearing upon the question of the true measure of damages, no note that a
referred to had been changed by mutual agreement and that the plaintiff, in competent witness, Mr. A. B. Powell, was examined with reference to the prices
consideration of the difficulties in which Lo Seng & Co. found itself, had agreed to prevailing in Manila for crude and fine alcohol of the quantity contracted for during
pay higher prices for alcohol that the prices stated in the contract. There is no proof the period from July to December, 1919 (transcript of session, Dec. 13, 1922, p. 10).
to support this contention, though it is admitted that the plaintiff did, after Taking the prices stated by him as approximately true, and estimating the prices of
repudiation of the contracts by Lo Seng & Co., pay for certain alcohol delivered by Lo the crude and fine alcohol at the times and in the amounts stipulated for delivery,
Seng & Co. at prices agreed upon by the parties, which prices were higher than the we estimate roughly that there was a loss to the plaintiff of about P4,160, by reason
contract prices. Lim Chiu, the manager of the plaintiff's business, explains this by of the failure of the defendant to make deliveries upon his contracts at the times
saying that his firm had to have alcohol and had to get it wherever they could and agreed.
furthermore that he bought some alcohol from Lo Seng & C0. for cash, as claimed
and for higher prices than was stipulated in the contract. But this he says was due to Summing up the three items above specified and deducting therefrom the amount
necessity. The incident is also explained by Simonson's affidavit (used at the trial as of P909.84, which represents, according to Simonson, the value of a delivery of
deposition), wherein he states that he advised Lim Chiu to take alcohol from Lo Seng alcohol of September 22, 1919, which the plaintiff did not pay for, we have in round
& Co. upon prices then fixed by Simonson, with the understanding that when Lo numbers the sum of P6,000, which in our opinion is proper to be allowed the plaintiff
Seng should return the matter could be adjusted with him. At any rate there is no upon the two causes of action set forth in the complaint.
proof whatever that the plaintiff ever waived his contracts or agreed to any change
therein by which the price of alcohol was changed from that stipulated. It results
There is no proof to sustain the claim for damages set forth in the defendant's
that the plaintiff is clearly entitled to recover this item of P1,492.21, as the balance
counterclaim, and the trial judge committed no error in absolving the plaintiff
due upon the amount advanced by him upon the making of the contracts referred
therefrom.
to.

For the reasons stated, the action of the trial judge in absolving the defendant from
This brings us to consider the item of damages for breach of contract incident to the
the plaintiff's complaint will be reversed; and the plaintiff will recover of the
failure of the defendant to supply alcohol upon the dates and in the amounts stated
defendant the sum of P6,000, with interest at 6 per cent from November 13, 1919.
in the two contracts. In connection with the claim for damages the plaintiff's
The action of the trial court in absolving the plaintiff from the counterclaim will be
manager prepared an exhibit on January 31, 1920, in which he stated that the
affirmed. No special pronouncement will be made as to costs. So ordered.
damages as representing the difference between the price stipulated in the contract
and the price of fine and crude alcohol in the market on the date the account was
stated. This mode of stating the damages resulting to the plaintiff is incorrect, the
42

EN BANC Cariaga. The Manila Railroad Company, in turn, denied liability upon the complaint
and cross-claim alleging that it was the reckless negligence of the bus driver that
G.R. No. L-11037 December 29, 1960 caused the accident.

EDGARDO CARIAGA, ET AL., plaintiffs-appellants, The lower court held that it was the negligence of the bus driver that caused the
vs. accident and, as a result, rendered judgment sentencing the LTB to pay Edgardo
LAGUNA TAYABAS BUS COMPANY, defendant-appellant. Cariaga the sum of P10,490.00 as compensatory damages, with interest at the legal
MANILA RAILROAD COMPANY, defendant-appellee. rate from the filing of the complaint, and dismissing the cross-claim against the
Manila Railroad Company. From this decision the Cariagas and the LTB appealed.

DIZON, J.:
The Cariagas claim that the trial court erred: in awarding only P10,490.00 as
compensatory damages to Edgardo; in not awarding them actual and moral
At about 1:00 p.m. on June 18, 1952, Bus No. 133 of the Laguna Tayabas Bus
damages, and in not sentencing appellant LTB to pay attorney's fees.
Co. hereinafter referred to as the LTB driven by Alfredo Moncada, left its station
at Azcarraga St., Manila, for Lilio, Laguna, with Edgardo Cariaga, a fourth-year
medical student of the University of Santo Tomas, as one of its passengers. At about On the other hand, the LTB's principal contention in this appeal is that the trial court
3:00 p.m., as the bus reached that part of the poblacion of Bay, Laguna, where the should have held that the collision was due to the fault of both the locomotive driver
national highway crossed a railroad track, it bumped against the engine of a train and the bus driver and erred, as a consequence, in not holding the Manila Railroad
then passing by with such terrific force that the first six wheels of the latter were Company liable upon the cross-claim filed against it.
derailed, the engine and the front part of the body of the bus was wrecked, the
driver of the bus died instantly, while many of its passengers, Edgardo among them, We shall first dispose of the appeal of the bus company. Its first contention is that
were severely injured. Edgardo was first confined at the San Pablo City Hospital from the driver of the train locomotive, like the bus driver, violated the law, first, in
5:00 p.m., June 18, 1952, to 8:25 a.m., June 20 of the same year when he was taken sounding the whistle only when the collision was about to take place instead of at a
to the De los Santos Clinic, Quezon City. He left that clinic on October 14 to be distance at least 300 meters from the crossing, and second, in not ringing the
transferred to the University of Santo Tomas Hospital where he stayed up to locomotive bell at all. Both contentions are without merits.
November 15. On this last date he was taken back to the De los Santos Clinic where
he stayed until January 15, 1953. He was unconscious during the first 35 days after After considering the evidence presented by both parties the lower court expressly
the accident; at the De los Santos Clinic Dr. Gustilo removed the fractured bones found:
which lacerated the right frontal lobe of his brain and at the University of Santo
Tomas Hospital Dr. Gustilo performed another operation to cover a big hole on the
. . . While the train was approximately 300 meters from the crossing, the
right frontal part of the head with a tantalum plate.
engineer sounded two long and two short whistles and upon reaching a
point about 100 meters from the highway, he sounded a long whistle which
The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous lasted up to the time the train was about to cross it. The bus proceeded on
expenses incurred from June 18, 1952 to April, 1953. From January 15, 1953 up to its way without slackening its speed and it bumped against the train
April of the same year Edgardo stayed in a private house in Quezon, City, the LTB engine, causing the first six wheels of the latter to be derailed.
having agreed to give him a subsistence allowance of P10.00 daily during his
convalescence, having spent in this connection the total sum of P775.30 in addition
. . . that the train whistle had been sounded several times before it reached
to the amount already referred to.
the crossing. All witnesses for the plaintiffs and the defendants are uniform
in stating that they heard the train whistle sometime before the impact and
On April 24, 1953 the present action was filed to recover for Edgardo Cariaga, from considering that some of them were in the bus at the time, the driver
the LTB and the MRR Co., and total sum of P312,000.00 as actual, compensatory, thereof must have heard it because he was seated on the left front part of
moral and exemplary damages, and for his parents, the sum of P18,00.00 in the the bus and it was his duty and concern to observe such fact in connection
same concepts. The LTB disclaimed liability claiming that the accident was due to with the safe operation of the vehicle. The other L.T.B. bus which arrived
the negligence of its co-defendant, the Manila Railroad Company, for not providing a ahead at the crossing, heeded the warning by stopping and allowing the
crossing bar at the point where the national highway crossed the railway track, and train to pass and so nothing happened to said vehicle. On the other hand,
for this reason filed the corresponding cross-claim against the latter company to the driver of the bus No. 133 totally ignored the whistle and noise produced
recover the total sum of P18,194.75 representing the expenses paid to Edgardo
43

by the approaching train and instead he tried to make the bus pass the The impression one gathers from this evidence is that, as a result of the physical
crossing before the train by not stopping a few meters from the railway injuries suffered by Edgardo Cariaga, he is now in a helpless condition, virtually an
track and in proceeding ahead. invalid, both physically and mentally.

The above findings of the lower court are predicated mainly upon the testimony of Appellant LTB admits that under Art. 2201 of the Civil Code the damages for which
Gregorio Ilusondo, a witness for the Manila Railroad Company. Notwithstanding the the obligor, guilty of a breach of contract but who acted in good faith, is liable shall
efforts exerted by the LTB to assail his credibility, we do not find in the record any be those that are the natural and probable consequences of the breach and which
fact or circumstance sufficient to discredit his testimony. We have, therefore, no the parties had forseen or could have reasonably forseen at the time the obligation
other alternative but to accept the findings of the trial court to the effect, firstly, that was constituted, provided such damages, according to Art. 2199 of the same Code,
the whistle of locomotive was sounded four times two long and two short "as have been duly proved. Upon this premise it claims that only the actual damages
the train was approximately 300 meters from the crossing"; secondly, that another suffered by Edgardo Cariaga consisting of medical, hospital and other expenses in
LTB bus which arrived at the crossing ahead of the one where Edgardo Cariaga was a the total sum of P17,719.75 are within this category. We are of the opinion, however,
passenger, paid heed to the warning and stopped before the "crossing", while as that the income which Edgardo Cariaga could earn if he should finish the medical
the LTB itself now admits (Brief p. 5) the driver of the bus in question totally course and pass the corresponding board examinations must be deemed to be
disregarded the warning. within the same category because they could have reasonably been foreseen by the
parties at the time he boarded the bus No. 133 owned and operated by the LTB. At
But to charge the MRR Co. with contributory negligence, the LTB claims that the that time he was already a fourth-year student in medicine in a reputable university.
engineer of the locomotive failed to ring the bell altogether, in violation of the While his scholastic may not be first rate (Exhibits 4, 4-A to 4-C), it is, nevertheless,
section 91 of Article 1459, incorporated in the charter of the said MRR Co. This sufficient to justify the assumption that he could have passed the board test in due
contention as is obvious is the very foundation of the cross-claim interposed by time. As regards the income that he could possibly earn as a medical practitioner, it
the LTB against its appears that, according to Dr. Amado Doria, a witness for the LTB, the amount of
co-defendant. The former, therefore, had the burden of proving it affirmatively P300.00 could easily be expected as the minimum monthly income of Edgardo had
because a violation of law is never presumed. The record discloses that this burden he finished his studies.
has not been satisfactorily discharged.
Upon consideration of all the facts mentioned heretofore this Court is of the opinion,
The Cariagas, as appellants, claim that the award of P10,000.00 compensatory and so holds, that the compensatory damages awarded to Edgardo Cariaga should
damages to Eduardo is inadequate considering the nature and the after effects of be increased to P25,000.00.
the physical injuries suffered by him. After a careful consideration of the evidence on
this point we find their contentions to be well-founded. Edgardo Cariaga's claim for moral damages and attorney's fees was denied by the
trial court, the pertinent portion of its decision reading as follows:
From the deposition of Dr. Romeo Gustilo, a neurosurgeon, it appears that, as a
result of the injuries suffered by Edgardo, his right forehead was fractured Plaintiffs' claim for moral damages cannot also be granted. Article 2219 of
necessitating the removal of practically all of the right frontal lobe of his brain. From the Civil Code enumerates the instances when moral damages may be
the testimony of Dr. Jose A. Fernandez, a psychiatrist, it may be gathered that, covered and the case under consideration does not fall under any one of
because of the physical injuries suffered by Edgardo, his mentality has been so them. The present action cannot come under paragraph 2 of said article
reduced that he can no longer finish his studies as a medical student; that he has because it is not one of the quasi-delict and cannot be considered as such
become completely misfit for any kind of work; that he can hardly walk around because of the pre-existing contractual relation between the Laguna
without someone helping him, and has to use a brace on his left leg and feet. Tayabas Bus Company and Edgardo Cariaga. Neither could defendant
Laguna Tayabas Bus Company be held liable to pay moral damages to
Upon the whole evidence on the matter, the lower court found that the removal of Edgardo Cariaga under Article 2220 of the Civil Code on account of breach
the right frontal lobe of the brain of Edgardo reduced his intelligence by about 50%; of its contract of carriage because said defendant did not act fraudulently
that due to the replacement of the right frontal bone of his head with a tantalum or in bad faith in connection therewith. Defendant Laguna Tayabas Bus
plate Edgardo has to lead a quite and retired life because "if the tantalum plate is Company had exercised due diligence in the selection and supervision of its
pressed in or dented it would cause his death." employees like the drivers of its buses in connection with the discharge of
their duties and so it must be considered an obligor in good faith.
44

The plaintiff Edgardo Cariaga is also not entitled to recover for attorney's Of course enumerated in the just quoted Article 2219 only the first two may
fees, because this case does not fall under any of the instances have any bearing on the case at bar. We find, however, with regard to the
enumerated in Article 2208 of the Civil Code. first that the defendant herein has not committed in connection with this
case any "criminal offense resulting in physical injuries". The one that
We agree with the trial court and, to the reason given above, we add those given by committed the offense against the plaintiff is Gregorio Mira, and that is why
this Court in Cachero vs. Manila Yellow Taxicab Co., Inc.(101 Phil., 523, 530, 533): he has been already prosecuted and punished therefor. Altho (a) owners
and managers of an establishment and enterprise are responsible for
damages caused by their employees in the service of the branches in which
A mere perusal of plaintiff's complaint will show that this action against the
the latter are employed or on the occasion of their functions; (b) employers
defendant is predicated on an alleged breach of contract of carriage, i.e.,
are likewise liable for damages caused by their employees and household
the failure of the defendants to bring him "safely and without mishaps" to
helpers acting within the scope of their assigned task (Article 218 of the
his destination, and it is to be noted that the chauffeur of defendant's
Civil Code); and (c) employers and corporations engaged in any kind of
taxicab that plaintiff used when he received the injuries involved herein,
industry are subsidiary civilly liable for felonies committed by their
Gregorio Mira, has not even made a party defendant to this case.
employees in the discharge of their duties (Art. 103, Revised Penal Code),
plaintiff herein does not maintain this action under the provisions of any of
Considering, therefore, the nature of plaintiff's action in this case, is he the articles of the codes just mentioned and against all the persons who
entitled to compensation for moral damages? Article 2219 of the Civil Code might be liable for the damages caused, but as a result of an admitted
says the following: breach of contract of carriage and against the defendant employer alone.
We, therefore, hold that the case at bar does not come within the exception
Art. 2219. Moral damages may be recovered in the following and analogous of paragraph 1, Article 2219 of the Civil Code.
cases:
The present complaint is not based either on a "quasi-delict causing
(1) A criminal offense resulting in physical injuries; physical injuries" (Art. 2219, par. 2 of the Civil Code). From the report of the
Code Commission on the new Civil Code. We copy the following:

(2) Quasi-delicts causing physical injuries;


A question of nomenclature confronted the Commission. After a careful
deliberation, it was agreed to use the term "quasi-delict" for those
(3) Seduction, abduction, rape, or other lascivious acts;
obligations which do not arise from law, contracts, quasi-contracts, or
criminal offenses. They are known in Spanish legal treaties as "culpa
(4) Adultery or concubinage; aquiliana", "culpa-extra-contractual" or "cuasi-delitos". The phrase "culpa-
extra-contractual" or its translation "extra-contractual-fault" was eliminated
(5) Illegal or arbitrary detention or arrest; because it did not exclude quasi-contractual or penal obligations. "Aquilian
fault" might have been selected, but it was thought inadvisable to refer to
so ancient a law as the "Lex Aquilia". So "quasi-delict" was chosen, which
(6) Illegal search;
more nearly corresponds to the Roman Law classification of the obligations
and is in harmony with the nature of this kind of liability.
(7) Libel, slander or any other form of defamation;

The Commission also thought of the possibility of adopting the word "tort"
(8) Malicious prosecution; from Anglo-American law. But "tort" under that system is much broader
than the Spanish-Philippine concept of obligations arising from non-
(9) Acts mentioned in Article 309; contractual negligence. "Tort" in Anglo-American jurisprudence includes not
only negligence, but also intentional criminal act, such as assault and
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, battery, false imprisonment and deceit. In the general plan of the Philippine
and 35. legal system, intentional and malicious acts are governed by the Penal
Code, although certain exceptions are made in the Project. (Report of the
Code Commission, pp. 161-162).
45

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

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


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

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

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

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

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

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


in all other respects, with costs against appellant LTB.
46

SECOND DIVISION After a careful perusal of the circumstances of the case, the (c)ourt finds that the
Amante Type Jeepney, as testified to by its own driver, Felipe Palacios, was not a
[G.R. No. 152134. June 4, 2004] passenger jeepney but a private vehicle which is used by its owner Salvador Algara,
Sr., who is an ambulant peddler in his peddling business. But, although not for
ENDREO MAGBANUA, VALLACAR TRANSIT, INC., and its Present Corporate passengers, it was carrying 35 passengers at the time of the bumping accident
Official RICARDO YANSON, petitioners, vs. JOSE TABUSARES, JR., onOctober 25, 1986 as testified to by Traffic Investigator Pfc. Praxedes Campillanos
EVA T. LAFIGUERA, NONA C. TABUSARES, JUN C. TABUSARES, FE C. of the Sipalay Police Command, Sipalay, Negros Occidental. This jeep had a seating
TABUSARES and JAX C. TABUSARES, respondents. capacity of only 16 passengers but it was made to accommodate passengers on its
roof and some were clinging on its side. This act is not only gross negligence but it
was violative of the traffic rules and regulations. On the other hand, the (c)ourt also
DECISION
finds that the driver of the Ceres Liner Bus was driving his vehicle negligently and
recklessly because Endreo Magbanua testified and admitted that while driving the
PUNO, J.: bus downhill and following the Amante type Jeepney ahead of him, he did not apply
his brakes because he was trying to overtake when he bumped the jeep on its rear
The case at bar arose from the complaint for damages filed by spouses Jose portion. This act was negligent and reckless because Endreo Magbanua could have
Tabusares, Sr. and Rebecca Tabusares against petitioners, Endreo A. Magbanua, avoided the bumping of the jeepney had he applied his brakes considering that he
Vallacar Transit, Inc., and/or its corporate officials for the tragic death of their son, has the last clear chance to prevent a collision by slowing down and reducing speed.
[1]
Jury Tabusares, in a vehicular mishap involving a Ceres Liner Bus owned and
operated by petitioners. The case was docketed as Civil Case No. 4654 before the
Regional Trial Court of Negros Occidental, Branch 48, Bacolod City. The trial court found that the negligent acts of the drivers of both the jeepney
and the Ceres Liner Bus combined in directly causing the death of Jury Tabusares. It
The facts, as found by the trial court, are as follows: therefore held both drivers solidarily liable for damages. The court ruled:

At about 4:30 oclock in the afternoon of October 25, 1986, a Ceres Liner Bus No. 154 WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered
with Plate No. GVG 469, driven by Endreo Magbanua and owned and operated by ordering and condemning the defendants Endreo A. Magbanua, Vallacar Transit, Inc.,
Vallacar Transit, Inc., and an Amante Type Jeepney bearing Plate No. FBN 996, driven thru and represented by its corporate official Ricardo Yanson, Felipe T. Palacios and
by Felipe Palacios and owned by Salvador Algara, Sr. figured in a vehicular accident Salvador Algara, Sr. to pay jointly and severally to the plantiffs, as follows:
along the national road at Hda. Mabuhay, Gil Montilla,
Sipalay, NegrosOccidental. The Ceres Liner Bus bumped the rear portion of the 1. The sum of P50,000.00 as indemnity for the death of Jury Tabusares;
Amante Type Jeepney while both vehicles were running downhill on the same
direction towards the town of Sipalay from the North. Due to the impact, several
2. The amount of P699,336.00 as indemnity for the loss of the earning capacity of
passengers of the Amante Type Jeepney were thrown out and ran over by the Ceres
the late Jury Tabusares;
Liner Bus and died as a result of the injuries they sustained. (O)ne of those killed
was Jury Tabusares, 27 years of age, single, an employee of the Maricalum Copper
Mines as Oiler 2B and was then receiving P1,256.00 monthly salary plus P510.00 3. The amount of P27,600.00 as reimbursement for actual expenses in connection
cost of living allowance (COLA) or a total monthly income ofP1,766.00. Jury with the death and burial of the said deceased;
Tabusares was the son of the plantiffs Jose Tabusares, Sr. and Rebecca
Tabusares. Immediately before the bumping accident, the Ceres Liner Buss driver, 4. The amount of P10,000.00 as moral damages; and
Endreo Magbanua, was trying to overtake the Amante Type Jeepney ahead of him
and he said that he did not apply his brakes because he cannot overtake if he will 5. The sum of P10,000.00 as reasonable attorneys fees.
slow down. The Amante Type Jeepney was overloaded with 35 passengers and some
of them clinging on its sides and some were riding on the roof. While the Ceres Liner
(B)us was about one and a half (1) meters from the Amante Type Jeepney, the bus The cross-claim of defendant Salvador Algara, Sr. against the defendants Endreo A.
driver saw that the jeepney went zigzagging on the middle of the road and since he Magbanua and Vallacar Transit, Inc., represented by its corporate official Ricardo
could not control the bus anymore it bumped the rear portion of the jeep. Yanson, is hereby allowed and defendants Endreo A. Magbanua and Vallacar Transit,
Inc., represented by it (sic) corporate official Ricardo Yanson are hereby ordered to
47

indemnify Salvador Algara, Sr. in such amount as he may be required to pay as 2/3 x (80 27) x P21,192.00 80%
damages to the herein plaintiffs.
The difference lies in the computation of the net income of the victim. In
The counterclaims of the defendants against the plaintiffs are hereby dismissed for the Lopez case, net income was derived by deducting 50% of the gross annual
lack or merit. income, while in the Muycocase, the amount deducted was 80% of the gross annual
income. The Court of Appeals followed the computation in People vs. Lopez as it
SO ORDERED.[2] was the prevailing case law at the time of the decision appealed from was
promulgated and unmistakably more favorable to the heirs of the deceased xxx.
[9]
Petitioners argue that the instant case was decided by the Court of Appeals one
Petitioners appealed to the Court of Appeals. They prayed that the decision of
year and six months after the promulgation of People vs. Muyco, therefore, the
the trial court be reversed insofar as their liabilities are concerned. [3]
Court should apply the computation in the latter case. [10]

During the pendency of the appeal, Jose Tabusares, Sr. and his wife, Rebecca,
On the other hand, the respondents, in their comment, cite other cases
passed away. On May 18, 1999, the Court of Appeals approved the substitution of
decided after the Muyco case where the Court applied the formula in
the late spouses by their heirs, namely: Jose Tabusares, Jr., Eva T. Lafiguera, Nona C.
the Lopez case. They submit that the computation in People vs. Lopez should be
Tabusares, Jun C. Tabusares, Fe C. Tabusares and Jax C. Tabusares. [4]
applied in this case.[11]

On March 13, 2001, the Court of Appeals rendered its decision. It affirmed the
The petition is devoid of merit.
factual findings of the trial court, but modified the award of damages, reducing the
amount of lost earning to P374,392.00. It made the following computation:
Article 2205 of the New Civil Code allows the recovery of damages for loss or
impairment of earning capacity in cases of temporary or permanent personal
In the case at bar, the victim Jury Tabusares was twenty- seven (27) years old at the
injury. Such damages covers the loss sustained by the dependents or heirs of the
time of death. With 65 years as the given life expectancy in the Philippines, the
deceased, consisting of the support they would have received from him had he not
victim was expected to live for another thirty-eight (38) years. In respect of income,
died because of the negligent act of another. The loss is not equivalent to the entire
the victim was receiving the amount of P1,766.00 as total monthly income or a gross
earnings of the deceased, but only that portion that he would have used to support
yearly income of P21,192.00. Multiplied by 38, the number of years the victim is
his dependents or heirs. Hence, we deduct from his gross earnings the necessary
expected to continue living, the amount arrived at is P748,784.00 using the formula
expenses supposed to be used by the deceased for his own needs. The Court
2/3 x [80-27] x 21,192.00. From the said figure must be deducted the reasonable
explained in Villa Rey Transit, Inc. vs. Court of Appeals [12] that:
amount of P374,392.00 or 50% thereof representing the living and other necessary
expenses of the deceased had he continued to live. Hence, the lost earnings of the
deceased should be P374,392.00.[5] (the award of damages for loss of earning capacity is) concerned with the
determination of the losses or damages sustained by the private respondents, as
dependents and intestate heirs of the deceased, and that said damages
Petitioners filed a partial motion for reconsideration of the decision of the Court
consist, not of the full amount of his earnings, but of the support they received or
of Appeals, praying for a reduction of the amount of damages for loss of earning
would have received from him had he not died in consequence of the negligence of
capacity. The Court of Appeals denied the motion.[6] Hence, this petition.
petitioners agent. In fixing the amount of that support, we must reckon with the
necessary expenses of his own living, which should be deducted from his
Petitioners, while accepting the factual findings of the trial court and the earnings. Thus, it has been consistently held that earning capacity, as an element of
appellate court, now assail the latters computation of the award of damages for loss damages to ones estate for his death by wrongful act is necessarily his net earning
of earning capacity. They contend that there are varying computations used in the capacity or his capacity to acquire money, less the necessary expense for his own
decisions of this Court. In People vs. Lopez,[7] the Court applied the following living. Stated otherwise, the amount recoverable is not loss of the entire earning,
formula: but rather the loss of that portion of the earnings which the beneficiary would have
received. In other words, only net earnings, not gross earning are to be considered
2/3 x (80-27) x P21,192.00 50% that is, the total of the earnings less expenses necessary in the creation of such
earnings or income and less living and other incidental expenses.

However, the following formula was employed in People vs. Muyco, et al.:[8]
48

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

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

Net life gross living

Earning = expectancy x annual less expenses

Capacity income

Life expectancy is determined in accordance with the formula:

2/3 x [80 age of deceased]

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

A survey of more recent jurisprudence shows that the Court consistently


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

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

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

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

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

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

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


At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed
stipulation that the deceased was a passenger of the Victory Liner Bus which fell on
2. Compensatory Damages in the amount of P1,135,536,10;
the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for
their part, did not accept petitioners proposal to pay P50,000.00.[12]
3. Moral and Exemplary Damages in the amount of P400,000.00; and
After respondent Rosalito Gammad completed his direct testimony, cross-
examination was scheduled for November 17, 1997 [13] but moved to December 8, 4. Attorneys fees equivalent to 10% of the sum of the actual,
1997,[14] because the parties and the counsel failed to appear. On December 8, compensatory, moral, and exemplary damages herein adjudged.
1997, counsel of petitioner was absent despite due notice and was deemed to have
waived right to cross-examine respondent Rosalito. [15]
50

The court a quos judgment of the cost of the suit against defendant-appellant is file motions for reconsideration of the orders declaring petitioner to have waived the
hereby AFFIRMED. right to cross-examine respondents witness and to present evidence, he
nevertheless, filed a timely appeal with the Court of Appeals assailing the decision of
SO ORDERED.[20] the trial court. Hence, petitioners claim that it was denied due process lacks basis.

Represented by a new counsel, petitioner on May 21, 2003 filed a motion for Petitioner too is not entirely blameless. Prior to the issuance of the order
reconsideration praying that the case be remanded to the trial court for cross- declaring it as in default for not appearing at the pre-trial, three notices (dated
examination of respondents witness and for the presentation of its evidence; or in October 23, 1996,[25] January 30, 1997,[26] and March 26, 1997,[27]) requiring
the alternative, dismiss the respondents complaint. [21] Invoking APEX Mining, Inc. v. attendance at the pre-trial were sent and duly received by petitioner. However, it
Court of Appeals,[22] petitioner argues, inter alia, that the decision of the trial court was only on April 27, 1997, after the issuance of the April 10, 1997 order of default
should be set aside because the negligence of its former counsel, Atty. Antonio B. for failure to appear at the pre-trial when petitioner, through its finance and
Paguirigan, in failing to appear at the scheduled hearings and move for administrative manager, executed a special power of attorney [28] authorizing Atty.
reconsideration of the orders declaring petitioner to have waived the right to cross- Paguirigan or any member of his law firm to represent petitioner at the pre-trial.
examine respondents witness and right to present evidence, deprived petitioner of Petitioner is guilty, at the least, of contributory negligence and fault cannot be
its day in court. imputed solely on previous counsel.

On August 21, 2003, the Court of Appeals denied petitioners motion for The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the
reconsideration.[23] case at bar. In APEX, the negligent counsel not only allowed the adverse decision
against his client to become final and executory, but deliberately misrepresented in
the progress report that the case was still pending with the Court of Appeals when
Hence, this petition for review principally based on the fact that the mistake or
the same was dismissed 16 months ago. [29] These circumstances are absent in this
gross negligence of its counsel deprived petitioner of due process of law. Petitioner
case because Atty. Paguirigan timely filed an appeal from the decision of the trial
also argues that the trial courts award of damages were without basis and should be
court with the Court of Appeals.
deleted.

In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted with
The issues for resolution are: (1) whether petitioners counsel was guilty of
the issue of whether or not the client should bear the adverse consequences of its
gross negligence; (2) whether petitioner should be held liable for breach of contract
counsels negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer
of carriage; and (3) whether the award of damages was proper.
failed to appear at the pre-trial despite notice and was declared as in default. After
the plaintiffs presentation of evidence ex parte, the trial court rendered decision
It is settled that the negligence of counsel binds the client. This is based on the ordering Gold Line to pay damages to the heirs of its deceased passenger. The
rule that any act performed by a counsel within the scope of his general or implied decision became final and executory because counsel of Gold Line did not file any
authority is regarded as an act of his client. Consequently, the mistake or negligence appeal. Finding that Goldline was not denied due process of law and is thus bound
of counsel may result in the rendition of an unfavorable judgment against the client. by the negligence of its lawyer, the Court held as follows
However, the application of the general rule to a given case should be looked into
and adopted according to the surrounding circumstances obtaining. Thus,
This leads us to the question of whether the negligence of counsel was so gross and
exceptions to the foregoing have been recognized by the court in cases where
reckless that petitioner was deprived of its right to due process of law. We do not
reckless or gross negligence of counsel deprives the client of due process of law, or
believe so. It cannot be denied that the requirements of due process were observed
when its application will result in outright deprivation of the clients liberty or
in the instant case. Petitioner was never deprived of its day in court, as in fact it was
property or where the interests of justice so require, and accord relief to the client
afforded every opportunity to be heard. Thus, it is of record that notices were sent to
who suffered by reason of the lawyers gross or palpable mistake or negligence. [24]
petitioner and that its counsel was able to file a motion to dismiss the complaint, an
answer to the complaint, and even a pre-trial brief. What was irretrievably lost by
The exceptions, however, are not present in this case. The record shows that petitioner was its opportunity to participate in the trial of the case and to adduce
Atty. Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially evidence in its behalf because of negligence.
declared as in default, Atty. Paguirigan successfully moved for the setting aside of
the order of default. In fact, petitioner was represented by Atty. Paguirigan at the
In the application of the principle of due process, what is sought to be safeguarded
pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed to
against is not the lack of previous notice but the denial of the opportunity to be
51

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

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


In the present case, respondent heirs of the deceased are entitled to indemnity
employee charged with dishonesty was not able to file an answer and position
for the death of Marie Grace which under current jurisprudence is fixed at
paper. He was found guilty solely on the basis of complainants evidence and was
P50,000.00.[37]
dismissed with forfeiture of all benefits and disqualification from government
service. Challenging the decision of the Ombudsman, the employee contended that
the gross negligence of his counsel deprived him of due process of law. In debunking The award of compensatory damages for the loss of the deceaseds earning
his contention, the Court said capacity should be deleted for lack of basis. As a rule, documentary evidence should
be presented to substantiate the claim for damages for loss of earning capacity. By
way of exception, damages for loss of earning capacity may be awarded despite the
Neither can he claim that he is not bound by his lawyers actions; it is only in case of
absence of documentary evidence when (1) the deceased is self-employed earning
gross or palpable negligence of counsel when the courts can step in and accord
less than the minimum wage under current labor laws, and judicial notice may be
relief to a client who would have suffered thereby. If every perceived mistake, failure
taken of the fact that in the deceaseds line of work no documentary evidence is
of diligence, lack of experience or insufficient legal knowledge of the lawyer would
available; or (2) the deceased is employed as a daily wage worker earning less than
be admitted as a reason for the reopening of a case, there would be no end to
the minimum wage under current labor laws.[38]
controversy. Fundamental to our judicial system is the principle that every litigation
must come to an end. It would be a clear mockery if it were otherwise. Access to the
courts is guaranteed, but there must be a limit to it. In People v. Oco,[39] the evidence presented by the prosecution to recover
damages for loss of earning capacity was the bare testimony of the deceaseds wife
that her husband was earning P8,000.00 monthly as a legal researcher of a private
Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument
corporation. Finding that the deceased was neither self-employed nor employed as a
that it was denied due process of law due to negligence of its counsel would set a
daily-wage worker earning less than the minimum wage under the labor laws
dangerous precedent. It would enable every party to render inutile any adverse
existing at the time of his death, the Court held that testimonial evidence alone is
order or decision through the simple expedient of alleging gross negligence on the
insufficient to justify an award for loss of earning capacity.
part of its counsel. The Court will not countenance such a farce which contradicts
long-settled doctrines of trial and procedure. [33]
Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not
awarded because the circumstances of the 3 deceased did not fall within the
Anent the second issue, petitioner was correctly found liable for breach of
recognized exceptions, and except for the testimony of their wives, no documentary
contract of carriage. A common carrier is bound to carry its passengers safely as far
proof about their income was presented by the prosecution. Thus
as human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard to all the circumstances. In a contract of carriage,
52

The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio some inferiority complex and is no longer active in business as well as in social life.
Castro Jr. were not self-employed or employed as daily-wage workers earning less In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage,
than the minimum wage under the labor laws existing at the time of their et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et
death. Placido Agustin was a Social Security System employee who al., L-11394, Sept. 9, 1958, the proper award of damages were given.
received a monthly salary of P5,000. Roberto Raagas was the President of
Sinclair Security and Allied Services, a family owned corporation, with a We rule that the lower courts awards of damages are more consonant with the
monthly compensation of P30,000. Melencio Castro Jr. was a taxi driver of factual circumstances of the instant case. The trial courts findings of facts are clear
New Rocalex with an average daily earning of P500 or a monthly earning of and well-developed. Each item of damages is adequately supported by evidence on
P7,500. Clearly, these cases do not fall under the exceptions where indemnity for record.
loss of earning capacity can be given despite lack of documentary evidence.
Therefore, for lack of documentary proof, no indemnity for loss of earning capacity
Article 2224 of the Civil Code was likewise applied in the recent cases
can be given in these cases. (Emphasis supplied)
of People v. Singh[43] and People v. Almedilla,[44] to justify the award of temperate
damages in lieu of damages for loss of earning capacity which was not substantiated
Here, the trial court and the Court of Appeals computed the award of by the required documentary proof.
compensatory damages for loss of earning capacity only on the basis of the
testimony of respondent Rosalito that the deceased was 39 years of age and a
Anent the award of moral damages, the same cannot be lumped with
Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a
exemplary damages because they are based on different jural foundations. [45] These
salary of P83,088.00 per annum when she died. [41] No other evidence was presented.
damages are different in nature and require separate determination. [46] In culpa
The award is clearly erroneous because the deceaseds earnings does not fall within
contractual or breach of contract, moral damages may be recovered when the
the exceptions.
defendant acted in bad faith or was guilty of gross negligence (amounting to bad
faith) or in wanton disregard of contractual obligations and, as in this case, when the
However, the fact of loss having been established, temperate damages in the act of breach of contract itself constitutes the tort that results in physical injuries.
amount of P500,000.00 should be awarded to respondents. Under Article 2224 of By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral
the Civil Code, temperate or moderate damages, which are more than nominal but damages may also be awarded in case the death of a passenger results from a
less than compensatory damages, may be recovered when the court finds that some breach of carriage.[47] On the other hand, exemplary damages, which are awarded
pecuniary loss has been suffered but its amount can not, from the nature of the by way of example or correction for the public good may be recovered in contractual
case, be proved with certainty. obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.[48]
In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of
P200,000.00 as temperate damages in lieu of actual damages for loss of earning Respondents in the instant case should be awarded moral damages to
capacity because the income of the victim was not sufficiently proven, thus compensate for the grief caused by the death of the deceased resulting from the
petitioners breach of contract of carriage. Furthermore, the petitioner failed to prove
The trial court based the amounts of damages awarded to the petitioner on the that it exercised the extraordinary diligence required for common carriers, it is
following circumstances: presumed to have acted recklessly. [49] Thus, the award of exemplary damages is
proper. Under the circumstances, we find it reasonable to award respondents the
As to the loss or impairment of earning capacity, there is no doubt that Pleno is an amount of P100,000.00 as moral damages and P100,000.00 as exemplary damages.
ent[re]preneur and the founder of his own corporation, the Mayon Ceramics These amounts are not excessive.[50]
Corporation. It appears also that he is an industrious and resourceful person with
several projects in line, and were it not for the incident, might have pushed them The actual damages awarded by the trial court reduced by the Court of
through. On the day of the incident, Pleno was driving homeward with geologist Appeals should be further reduced. In People v. Duban,[51] it was held that only
Longley after an ocular inspection of the site of the Mayon Ceramics Corporation. His substantiated and proven expenses or those that appear to have been genuinely
actual income however has not been sufficiently established so that this Court incurred in connection with the death, wake or burial of the victim will be
cannot award actual damages, but, an award of temperate or moderate damages recognized. A list of expenses (Exhibit J), [52] and the contract/receipt for the
may still be made on loss or impairment of earning capacity. That Pleno sustained a construction of the tomb (Exhibit F) [53] in this case, cannot be considered competent
permanent deformity due to a shortened left leg and that he also suffers from proof and cannot replace the official receipts necessary to justify the award. Hence,
double vision in his left eye is also established. Because of this, he suffers from
53

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

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

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


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

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

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

In the instant case, there is no evidence to rebut the statutory presumption that the
proximate cause of Marie Graces death was the negligence of petitioner. Hence, the
courts below correctly ruled that petitioner was guilty of breach of contract of
carriage.
55

N BANC to rush to the scene. Upon reaching the place, Fajardo heard accused-appellant
shouting at his uncle, "I will kill you!" Thereafter, he saw accused-appellant coming
G.R. No. 124392 February 7, 2003 out of Quintos house with blood oozing from his forehead.6 At that time, the place
was well lighted by a flourescent lamp. Guban tried to assist accused-appellant.
However, for unknown reason, accused-apellant and Guban shouted at each other
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
and grappled "face to face." Accused-appellant pulled out his knife, stabbed Guban
vs.
at the abdomen7 and ran away. When Fajardo got hold of Guban, the latter said, "I
FEDERICO ABRAZALDO @ "PEDING," accused-appellant.
was stabbed by Feding Abrazaldo."8 Fajardo, together with the other barangay
tanod, rushed Guban to the Gov. Teofilo Sison Memorial Hospital where he was
DECISION operated by Dr. Alberto Gonzales, a Medical Officer III. But after a few hours, Guban
died. Dr. Gonzales issued a Medico-Legal Certificate stating that the cause of death
SANDOVAL-GUTIERREZ, J.: was "stab wound, epigastrium, massive hemothorax right." 9

For automatic review is the Decision1 dated November 15, 1995 of the Regional Trial Gregorio Guban, the victims father, testified that he was the one who spent for his
Court, Branch 44, Dagupan City in Criminal Case No. 95-01052-D, finding accused- sons funeral expenses. For the burial, he spent P10,000.00;10 for the 10-day funeral
appellant Federico Abrazaldo guilty beyond reasonable doubt of the crime of murder wake, P10,000.00;11 for the 9th day novena,P3,000.00;12 and for the
and sentencing him to suffer the supreme penalty of death and to indemnify the hospitalization, P4,000.00,13 or a total of P27,000.00.
heirs of the deceased Delfin Guban the amount of P50,000.00 as indemnity
and P27,000.00 as actual damages, plus costs. On July 16, 1995, Fajardo learned that the knife used by accused-appellant in
stabbing Guban was in Salay, Pangasinan. Together with SPO2 Roberto Fernandez,
In the Information dated August 3, 1995 filed with the trial court, accused-appellant Fajardo went to the house of Francisca Velasquez, accused-appellants aunt, and
was charged with the crime of murder committed as follows: recovered the knife. 14

"That on or about July 15, 1995 in the evening at barangay Pogo, Municipality of Invoking self-defense, accused-appellant presented a different version. On July 15,
Mangaldan, province of Pangasinan, Philippines and within the jurisdiction of this 1995 at about 10:00 in the evening, he was making fans inside his house at
Honorable Court, the above-named accused armed with a bolo, with intent to kill, Barangay Pogo, Mangaldan, Pangasinan.15 His wife Lydia and children Mary Jane,
treachery and evident premeditation, did, then and there wilfully, unlawfully and Melvin and Christelle were with him. Suddenly, Delfin Guban, who was then drunk,
feloniously stabbed DELFIN GUBAN Y GUINTO inflicting upon him a stab wound which went to his house and shouted at him, saying, "Get out Feding I will kill you!" 16 When
caused his death to the damage and prejudice of his heirs. accused-appellant went out, Guban hit him with an iron pipe. Accused-appellant ran
towards his house and got his two children. Guban, now armed with a knife, followed
him and they grappled for its possession. In the course thereof, both fell down. 17 It
"CONTRARY to Art. 248, Revised Penal Code, as amended by R.A. 7659." 2
was then that the knife held by Guban accidentally hit him. Accused-appellant did
not know which part of Gubans body was hit. Thereafter, he got the knife in order to
Upon arraignment, accused-appellant entered a plea of not guilty. 3 Forthwith, trial on surrender it to the police.18
the merits ensued. The prosecution presented as its witnesses Rosendo Fajardo,
SPO1 Ramie Petrache, SP02 Roberto Fernandez, Dr. Alberto Gonzales and Gregorio
Marites Abrazaldo testified that accused-appellant is his brother.19 On July 15, 1992,
Guban. Accused-appellant and his sister, Marites Abrazaldo, took the witness stand
at about 6:00 in the evening, accused-appellant, Guban and Juan Quinto were
for the defense.
engaged in a "drinking spree."20 At about 10:00 oclock in that evening, accused-
appellant caused trouble at the house of his uncle, Bernabe Quinto.21 He attempted
The facts of the case as presented by the prosecution witnesses are as follows: to hack his uncle, but instead hit the post of the latters house. 22 While running away
from his uncles place, he bumped an artesian well, causing a wound on his
On July 15, 1995, at about 10:00 oclock in the evening, at Barangay Pogo, forehead.23 Afterwards, accused-appellant killed Guban.24
Mangaldan, Pangasinan, accused-appellant, then intoxicated, 4 attempted to hack his
uncle, Bernabe Quinto, but instead, hit the post of the latters house. 5 The incident On November 15, 1995, the trial court rendered a Decision, the decretal portion of
was reported to the barangay authorities, prompting Delfin Guban, Rosendo Fajardo, which reads:
Sr., Alejandro Loceste (all are members of the barangay tanod), and Cesar Manaois
56

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

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

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

The Solicitor General though agrees with accused-appellant that there was no
treachery. Evidence shows that he and Guban shouted at each other and struggled
57

"face to face" before the stabbing incident. Thus, the assault was not sudden. Q When Delfin Guban followed you inside your house, what happened again?
Likewise, the Solicitor General is convinced that accused-appellant did not purposely
and deliberately seek nighttime to perpetrate the commission of the crime. A He was holding a knife and we grappled and during that time both of us fell down,
sir.
Consistent is the jurisprudence that where self-defense is invoked, it is incumbent
upon the accused to prove by clear and convincing evidence that (1) he is not the Q When you grappled with Delfin Guban, who was holding a knife, what
unlawful aggressor; (2) there was lack of sufficient provocation on his part; and (3) again happened?
he employed reasonable means to prevent and repel an aggression. On appeal, the
burden becomes even more difficult as the accused must show that the court below
A We grappled for the possession of the knife then we fell down and the
committed reversible error in appreciating the evidence. 26
knife he was then holding pointed towards him and hit him. x x x. 30"
(Emphasis supplied)
Accused-appellant miserably failed to discharge the burden. To show that he was not
the unlawful aggressor, he testified that it was Guban who went to his house,
The foregoing testimony bears not only the vice of falsity but also isolation. It is
threatened to kill him,27 hit him with an iron pipe,28 and attacked him with a
uncorroborated and even opposed by Marites, accused-appellants own sister and
knife.29 We quote accused-appellants testimony, thus:
lone witness. Contrary to his testimony that Guban hit him on his forehead with a
pipe, Marites declared that accused-appellant sustained the wound on his forehead
"ATTY. CAMPOS: when he accidentally bumped an artesian well. Instead of fortifying her brothers
defense, she virtually affirmed the prosecutions story by testifying that he created
Q You said a while ago that on July 15, 1995 at about 10:00 in the evening you were trouble in their compound, attempted to kill his uncle Bernabe Quinto and killed
in your house engaging in fan making, do you know of any unusual incident that Guban. 31
happened during that time?
Ingrained in our jurisprudence is the doctrine that the plea of self-defense cannot be
A Delfin Guban came to my house and he was under the influence of liquor justifiably entertained where it is not only uncorroborated by any separate
and he shouted at me, sir. competent evidence but in itself is extremely doubtful.32 In the present case,
accused-appellants tendency to invoke a melange of defenses renders his
Q And what did Delfin Guban shout at you? testimony dubious. While he admitted the commission of the crime in order to
preserve his own life, he maintained that Guban accidentally stabbed himself. This
shows ambivalence. Accident presupposes lack of intention to stab the victim, while
A He said, "Get out Feding I will kill you."
self-defense presumes voluntariness, induced only by necessity. 33 Indeed, if there is
truth to either of his claim, his natural course of action was to assist the victim, or at
Q After this Delfin Guban shouted at you, what happened next? the very least, report the incident to the authorities. Certainly, the justifying
circumstance of self-defense34 or the exempting circumstance of accident cannot be
A When I went out of the house, I was already there infront of the house then he hit appreciated considering accused-appellants flight from the crime scene and his
me, sir. failure to inform the authorities of the incident. Furthermore, that he did not
surrender the knife to the authorities is inconsistent with a clean conscience and,
instead, indicates his culpability of the crime charged.35
Q You said Delfin Guban hit you, what instrument did he use in hitting you?

In a last-ditch effort to exculpate himself, accused-appellant assails Fajardos


A He hit me with a pipe , sir.
testimony as tainted with inconsistencies and is "contrary to the normal course."
Accused-appellant cannot invoke these alleged weaknesses in view of the principle
Q After Delfin Guban hit you with that pipe, what happened next? that one who pleads self-defense must rely on the strength of his own evidence and
not on the weakness of that of the prosecution. Even if the prosecutions evidence is
A I ran towards my house inside, then got my two children while Delfin Guban weak, it is still credible considering accused-appellants admission that he killed the
followed me inside my house, sir. victim. It bears emphasis that Fajardos testimony clearly points to him as the
culprit. Not only did he pull out his knife, stabbed Guban 36 and ran away.37Fajardo
58

also reiterated what Guban uttered to him, i.e., "I was stabbed by Feding A Yes and there were many people." 40 (Emphasis supplied)
Abrazaldo."38
The trial court likewise erred in appreciating the aggravating circumstance of
As Guban had succumbed to death and his opportunity to divulge the truth on his nocturnity or nighttime. For nocturnity to be properly appreciated, it must be shown
demise had been lost, we cannot but cast a quizzical glance on accused-appellants that it facilitated the commission of the crime and that it was purposely sought for
uncorroborated testimony. More so, when such testimony was contradicted by his by the offender. By and itself, nighttime is not an aggravating circumstance. 41 In the
own witness who happened to be his sister. Standing alone against the testimonies instant case, no sufficient evidence was offered to prove that accused-appellant
of the prosecution witnesses, accused-appellants own account of the killing must deliberately sought the cover of darkness to accomplish his criminal design. In fact,
necessarily fail. We hold that his guilt has been established to a degree of moral Fajardo testified that there was a fluorescent lamp sufficiently illuminating the scene
certainty. The trial court did not err in relying on the testimony of Fajardo, an of the crime.42
eyewitness. Time and again, we have said that we will not interfere with the
judgment of the trial court in determining the credibility of witnesses unless there Neither can we sustain the trial courts finding that the aggravating circumstance
appears on record some facts or circumstances of weight and influence which have under paragraph (5) of Article 14, Revised Penal Code, i.e., that the crime was
been overlooked or the significance of which has been misinterpreted. This is so committed in a place where public authorities were engaged in the discharge of
because the trial court has the advantage of observing the witnesses through the their duties, is present. It must be pointed out that this aggravating circumstance is
different indicators of truthfulness or falsehood.39 based on the greater perversity of the offender, as shown by the place of the
commission of the crime, which must be respected. 43 In this case, the crime was
However, we find that the trial court erred in concluding that treachery attended the committed at the compound of the accused-appellant where no public function was
commission of the crime. There is treachery when the offender commits any of the being held. The arrival of the barangay authorities was precisely due to the trouble
crimes against persons employing means, methods or forms in the execution that had commenced prior to the stabbing incident. Clearly, the said aggravating
thereof, which tend directly and specially to insure its execution, without risk to circumstance cannot be considered. Moreover, under the present
himself arising from defense which the offended party might make. Treachery cannot Rules,44 aggravating circumstances must be alleged, otherwise, they cannot be
be presumed, it must be proved by clear and convincing evidence or as conclusively appreciated. Being favorable to the accused, this new procedure may be given
as the killing itself. Fajardo testified that accused-appellant and Guban were retroactive effect.45 Except treachery, the other aggravating circumstances
"grappling with each other" and that prior to the stabbing, they were shouting at mentioned have not been alleged in the Information.
each other. In this scenario, it cannot be said that Guban was unprepared to put up a
defense, such as hitting accused-appellant, or that the latters assault was sudden. In the absence of any circumstance that would qualify the crime at bar to murder,
We quote in verbatim the testimony of Fajardo, thus: accused-appellant can only be held liable for homicide defined and penalized under
Article 249 of the Revised Penal Code. The prescribed penalty is reclusion temporal.
"ATTY. CAMPOS: Considering that there was neither mitigating nor aggravating circumstance that
attended the commission of the crime, the penalty has to be imposed in its medium
Q They were not then fighting? period, ranging from 14 years, 8 months and 1 day to 17 years and 4 months.
Applying the provisions of the Indeterminate Sentence Law, he should be sentenced
to an indeterminate penalty, the minimum of which is within the range of prision
A They were grappling with each other and then he stabbed Delfin Guban.
mayor, or 6 years and 1 day to 12 years. The maximum thereof is within the range
of reclusion temporal in its medium period, which is 14 years, 8 months and 1 day to
Q In fact, they were shouting each other? 17 years and 4 months. 46

A Yes, sir. On the trial courts award of actual damages in the amount of P27,000.00, we find
the same to be unsubstantiated. To be entitled to such damages, it is necessary to
Q What were they shouting against another? prove the actual amount of loss with a reasonable degree of certainty, premised
upon competent proof and on the best evidence obtainable to the injured party. 47 In
the case at bar, the prosecution failed to present any receipt to prove the claim for
A I could no longer understand because it was already night.
expenses incurred.48 Gregorio Guban, the father of the victim, who shouldered the
expenses for the wake and burial failed to submit receipts to show the amount of
Q But they were shouting loudly, am I correct? such expenses.49 However, as the heirs of Guban did actually incur funeral expenses,
59

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


way of temperate damages.50

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

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


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

Costs de oficio.

SO ORDERED.
60

ECOND DIVISION together with his wife Maria and friends Manuel Chica (Manuel) and Ramon Tirao.
Randy Credo (Randy) arrived at the "bingohan," approached Joseph and suddenly
G.R. No. 197360 July 3, 2013 punched the latter on the chest, causing him to fall down. Randy then immediately
ran away towards the direction of their house located at Zone 4. Joseph, on the other
hand, stood up, gathered his things consisting of a lemon and an egg, and gave
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
Randy a chase. The people at the "bingohan" all scampered away as a result of the
vs.
commotion.4Josephs friend Manuel proceeded towards Zone 3. There, he met
RONALD CREDO aka "ONTOG," RANDY CREDO and ROLANDO CREDO y SAN
Randy, who was already accompanied by his co-appellants: his brother Ronald Credo
BUENA VENTURA, Accused-Appellants.
(Ronald) and their father Rolando Credo (Rolando). The three were each armed with
a bolo.5
DECISION
Meanwhile, when Josephs children, Russel, Ramon, Roldan and Rea, heard that their
PEREZ, J.: father was in trouble, they decided to look for him in Zone 3. On their way, they met
appellants, who suddenly started throwing stones at them, causing them to run
This is an appeal from the Decision1 of the Court of Appeals in CA-G.R. CR-HC No. away. Russel got separated from his siblings but he continued to look for his father.
04113 promulgated on 28 February 2011. The decision of the Court of Appeals He came across appellants again in Zone 2 where he saw them hacking somebody
affirmed, with modifications, the Decision2 dated 14 July 2009 of the Regional Trial with their bolos. That person later turned out to be their father. Russel saw that
C6urt, Branch 31, Pili, Camarines Sur, in Criminal Case No. P-3819 finding accused- when all three appellants were done hacking their victim, Randy and Rolando went
appellants Ronald Credo a.k.a. "Ontog," Randy Credo and Rolando Credo y San back to where the victim was lying and gave him another blow, saying in the
Buenaventura guilty beyond reasonable doubt of murder for the death of Joseph Bicolano dialect, "pang-dulce" (for dessert).6
Nicolas.
The scene was witnessed by another person, Francis Nicolas Credo (Francis), a
Factual Antecedents resident of Zone 2.7 According to Francis, at the time of the incident, he was in his
bedroom preparing to go to sleep when he heard a commotion outside his house. He
heard Roger Credo, the brother of Randy and Ronald, shout: "Tama na Manoy, gadan
The amended Information3 filed against appellants reads:
na!" (Enough brother, he is already dead!) Upon hearing these words, Francis went
out of the bedroom, proceeded to their sala and peeped through the jalousies of the
That on June 22, 2005 at around 10:30 in the evening at Zone 4 Barangay San JOSE, sala window. He saw appellants, all armed with a bolo, repeatedly hacking Joseph to
Municipality of Pili, Province of Camarines Sur, Philippines and within the jurisdiction death.8 He saw the hacking incident very clearly because the place was lighted by a
of this Honorable Court, the above-named accused, conspiring, confederating and lamppost and the moon was shining brightly. Moreover, the distance between the
mutually helping one another, did then and there, with intent to take the life of crime scene and the window from where he was watching is only about 3 to 4
JOSEPH NICOLAS Y arroyo (sic), willfully, unlawfully and feloniously attack and hack meters.9 Francis was able to note that Joseph was unarmed and was, in fact, holding
the latter with a bolo, wounding him in the different parts of the body, per autopsy a lemon in his right hand and an egg in his left hand.10
report marked as Annex "A" hereof, thereby causing the direct and immediate death
of said JOSEPH NICOLAS y ARROYO.
Joseph died on the same day of the incident. He obtained six (6) hack wounds: one
on the right ear, two on the left scapular area, one on the lumbar area, one on the
Abuse of superior strength being attendant in the commission of the crime, the right forearm and another one on the left lateral neck area which, according to the
same will qualify the offense committed to murder. doctor who conducted the autopsy on the body of Joseph, was the most fatal
wound.11
ACTS CONTRARY TO LAW.
Rolando and Randy denied any participation in the hacking incident, claiming that it
Based on the respective testimonies of the witnesses for the prosecution, the was Ronald alone who killed Joseph. They also claimed that the killing was done in
following sequence of events was gathered: defense of Ronald and Randys mother whom Joseph was, at the time of the
incident, about to hack.12 Based on appellants testimony, when Ronald heard of
what happened between Randy and Joseph, Ronald left the house with a bolo in
On 22 June 2005, at around 10:30 in the evening, the victim, Joseph Nicolas
search of Joseph. When their parents learned that Ronald left to confront Joseph,
(Joseph), was at a "bingohan" in Zone 3 of Brgy. San Nicolas, Pili, Camarines Sur,
61

they followed Ronald to the "bingohan." 13 Rina Credo Hernandez, sister of Ronald THE TRIAL COURT GRAVELY ERRED IN NOT FINDING THAT THE TESTIMONIES OF THE
and Randy, testified that while their parents and Ronald were walking back towards PROSECUTION WITNESSES ARE FLAWED AND INCONSISTENT.
their house from the "bingohan," Joseph suddenly emerged from the back of their
house with a bolo. She saw that Joseph was brandishing the bolo and was about to IV
attack their mother so she shouted a warning to their mother. Ronald came to her
rescue and attacked Joseph,14 resulting in the latters death.
THE TRIAL COURT GRAVELY ERRED IN APPRECIATING ABUSE OF SUPERIOR
STRENGTH AS QUALIFYING CIRCUMSTANCE DESPITE THE PROSECUTIONS FAILURE
Ruling of the Regional Trial Court TO PROVE ITS ATTENDANCE.

The trial court found that appellants conspired in the commission of the crime and Appellants subsequently filed a Supplemental Brief18 before this Court, alleging the
that the killing of Joseph was attended by abuse of superior strength. Hence, on 14 following as additional assignment of errors:
July 2009, the trial court rendered its decision finding appellants guilty beyond
reasonable doubt of the crime of murder, sentencing them to suffer the penalty of
V
reclusion perpetua, and ordering them to pay the widow of Joseph the amounts
of P14,000.00 as actual damages, P50,000.00 as civil indemnity, P50,000.00 as
moral damages, and P50,000.00 as exemplary damages.15 THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE ACCUSED-
APPELLANTS CONSPIRED WITH EACH OTHER IN THE COMMISSION OF THE CRIME
CHARGED.
Ruling of the Court of Appeals

VI
On appeal, the Court of Appeals affirmed the judgment of conviction but modified
the award of damages in the following manner: (1) civil indemnity was increased
from P50,000.00 to P75,000.00; (2) the award of moral damages was likewise THE COURT OF APPEALS GRAVELY ERRED IN INCREASING THE AWARD OF CIVIL
increased from P50,000.00 to P75,000.00; (3) the amount of exemplary damages INDEMNITY FROM FIFTY THOUSAND PESOS (PHP50,000.00) TO SEVENTY-FIVE
was reduced from P50,000.00 to P30,000.00; and (4) temperate damages in the THOUSAND PESOS (PHP75,000.00).
amount of P25,000.00 was imposed in place of actual damages.16
Pending resolution of this appeal, the Court received a letter, 19 dated 13 September
The Issues 2011, from P/Supt. Richard W. Schwarzkopf, Jr., Officer-in-Charge, Office of the
Superintendent, New Bilibid Prison, informing the Court that Rolando had died at the
New Bilibid Prison Hospital on 23 June 2011. Attached to his letter was a certified
In their Brief17 filed before the Court of Appeals, appellants prayed or their acquittal,
true copy of the certificate of death20 of Rolando listing "Cardio respiratory Arrest" as
pleading the following grounds:
the immediate cause of death.

I
As a consequence of Rolandos death while this case is pending appeal, both his
criminal and civil liability ex delicto were extinguished pursuant to Article 89 of the
THE TRIAL COURT GRAVELY ERRED IN NOT GIVING EXCULPATORY WEIGHT TO THE Revised Penal Code. The said provision of law states that criminal liability is totally
DEFENSE OF RELATIVES INTERPOSED BY ACCUSED-APPELLANT RONALD CREDO. extinguished by "the death of the convict, as to the personal penalties; and as to
pecuniary penalties, liability therefor is extinguished only when the death of the
II offender occurs before final judgment."

THE TRIAL COURT GRAVELY ERRED IN FINDING THAT ACCUSED-APPELLANTS This appeal shall, as a result, be decided as against Randy and Ronald only.
ROLANDO CREDO AND RANDY CREDO ARE GUILTY OF THE CRIME CHARGED.
Our Ruling
III
The appeal has no merit.
62

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

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

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

This Court is not persuaded.


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

Corollary to the principle that appellate courts generally will not interfere with the
factual findings of the trial court is the rule that when the credibility of an [FRANCIS N. CREDO]
eyewitness is at issue, due deference and respect is given by the appellate courts to
the assessment made by the trial courts, absent any showing that the trial courts A Yes, your Honor.
overlooked facts and circumstances of substance that would have affected the final
outcome of the case.25 "As consistently adhered to by this Court, the matter of
Q Who were these three (3) persons hacking this other person as you said?
assigning values to declarations on the witness stand is best and most competently
performed by the trial judge, who had the unmatched opportunity to observe the
witnesses and to assess their credibility by the various indicia available but not A Rolando Credo, Ronald Credo, Randy Credo.
reflected on the record."26
Q Why were you able to identify Rolando, Ronald, Randy Credo?
We agree with the findings of both the trial court and the Court of Appeals which
gave weight to the accounts of the two eyewitnesses, Russel and Francis. Their A I was able to identify the accused because other than the light there is a moonlight
respective testimonies positively and categorically identified appellants as the so I clearly identified the three (3) persons. 28 (Emphases supplied)
perpetrators of the crime. Their statements on the witness stand also corroborate
each other on material aspects. Both Russel and Francis testified that they saw the PROS. FAJARDO:
appellants hacking a man. Although Francis was able to immediately recognize the
victim as Joseph, Russel was to learn only later on that the appellants victim was his
Q Now, after you were stoned, what did you and your group do?
own father. It is also worth noting that the statement of Russel and Francis claiming
63

[RUSSEL NICOLAS] A The three (3) of them hacked the man and the man fell on the ground, while on
the ground he was again hacked on the head by Ronald Credo. 32 (Emphasis supplied)
A We went on our separate way [sic] one of my brother Ramon went directly to our
grandmothers house x x x and then I saw something. PROS. FAJARDO:

Q What was that you saw? Q Now, what did you observe when you saw this Randy, Rolando and Ontog?

A Then I saw the three (3) Randy, Ontog, and Rolando [sic]. [RUSSEL NICOLAS]

Q Now, what did you observe when you saw this Randy, Rolando and Ontog? A I saw them hacking someone but I was not able to eye that someone because I
was not yet near them however, these Randy and Rolando returned back and said
A I saw them hacking someone but I was not able to eye that someone because I "pang dulce" then hacked again.33 (Emphasis supplied)
was not yet near them x x x.29(Emphases supplied)
The inconsistency in the respective statements of Francis and Russel with respect to
It is worth mentioning as well that the following testimony of Russel confirms the who among the three appellants actually dealt the final blow on the victim is
statement of Francis that the hacking incident occurred just in front of their understandable considering that they witnessed the scene from different vantage
house,30 giving him (Francis) a clear view of what transpired: points. Francis definitely had a clearer view as he was nearer the scene of the crime
(3-4 meters) whereas Russel was much farther as evidenced by the fact that from
where he was watching, he was unable to recognize the victim as his father. All the
PROS. FAJARDO:
same, both were one in saying that at least one of the appellants returned to where
the victim was prostrate to give him another blow.
Q Now, in what particular place did you see Randy and Rolando and Ontog hacked
[sic] this person?
The aforementioned inconsistency is, moreover, a minor detail that does not affect
the credibility of Russel and Francis as eyewitnesses. Likewise, the other
[RUSSEL NICOLAS] inconsistencies pointed out by appellants pertain "only to collateral or trivial matters
and has no substantial effect on the nature of the offense." 34 The primordial
A In front of the house of Lolita Credo. consideration is that both Russel and Francis were present at the scene of the crime
and that they positively identified appellants as the perpetrators of the crime
charged.35 This Court has been consistent in ruling that "although there may be
Q How is this Lolita Credo related to Francisco Credo?
inconsistencies in the testimonies of witnesses on minor details, they do not impair
their credibility where there is consistency in relating the principal occurrence and
A Lolita is the mother of Francisco.31 positive identification of the assailant."36

Both Francis and Russel likewise support each others statement on the act of at Finally, the attack of appellants on the credibility of Francis as a witness for the
least one of the appellants of going back to where Joseph was lying on the ground to prosecution on the ground that the victim is the brother of Francis mother making
give him another blow with a bolo. Thus: Francis the nephew of the victim loses significance when the relationship of Francis
with the appellants is considered: appellant Rolando is his uncle, being the brother
PROS. FAJARDO: of his father, thereby making appellants Randy and Ronald his first cousins. As held
by the Court of Appeals:
Q When you peeped to [sic] your window, jalousie window, what was Rolando Credo
doing? Considering that appellants are also his close relatives, it is difficult to believe that
Francis would point to appellants as the killers, if such were not true. Moreover, the
lack of proof of ill-motive on the part of Francis, indicate that he testified, not to
[FRANCIS N. CREDO]
favor any of the parties in this case, but solely for the purpose of telling the truth
64

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

Requisites for valid defense THE COURT:


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

This argument is untenable.


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

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

A Yes, your Honor.


1. TSN of 12 August 2008:

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

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

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

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

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


3. TSN of 14 January 2009:

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

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

First. Unlawful aggression;


That he was able to harm to death the private complainant [sic] Joseph Nicolasin
[sic] order to defend himself, relatives and his own family, x x x. 40
Second. Reasonable necessity of the means employed to prevent or repel it;
65

Third. Lack of sufficient provocation on the part of the person defending himself. In the present case, the prosecution witnesses were one in saying that prior to the
hacking incident, they saw all three appellants walking together towards the
2. Anyone who acts in defense of the person or rights of his spouse, ascendants, direction of the "bingohan" and that all three were each carrying a bolo. Appellants,
descendants, or legitimate, natural or adopted brothers or sisters, or of his relatives therefore, deliberately sought Joseph out to confront him about the altercation
by affinity in the same degrees, and those by consanguinity within the fourth civil incident between him and Randy. Likewise, the two eyewitnesses confirm each
degree, provided that the first and second requisites prescribed in the next others respective statements that all three appellants were armed with a bolo with
preceding circumstance are present, and the further requisite, in case the which they repeatedly hacked the victim, who fell to the ground; after which,
provocation was given by the person attacked, that the one making defense had no appellants left the scene of the crime.
part therein.
While no evidence was presented to show that appellants met beforehand and came
Based on the afore-quoted provision, both self-defense and defense of relatives to an agreement to harm Joseph, their concerted acts before, during and after the
require that unlawful aggression be present in order to be held valid. "For the incident all point to a unity of purpose and design. Indeed, "proof of a previous
accused to be entitled to exoneration based on self-defense or defense of relatives, agreement and decision to commit the crime is not essential but the fact that the
complete or incomplete, it is essential that there be unlawful aggression on the part malefactors acted in unison pursuant to the same objective suffices." 45 Such proof
of the victim, for if there is no unlawful aggression, there would be nothing to "may be shown through circumstantial evidence, deduced from the mode and
prevent or repel. For unlawful aggression to be appreciated, there must be an actual, manner in which the offense was perpetrated, or inferred from the acts of the
sudden and unexpected attack or imminent danger thereof, not merely a accused themselves when such lead to a joint purpose and design, concerted action
threatening or intimidating attitude."42 and community of interest."46

As found by the trial court, there can be no unlawful aggression on the part of Joseph Abuse of superior strength attended
because at the time of the incident, he was only holding a lemon and an egg. the commission of the crime
According to the trial court, the fact that Joseph was unarmed effectively belied the
allegation of Ronald that he was prompted to retaliate in self-defense when Joseph There is abuse of superior strength when the perpetrators of a crime deliberately
first hacked and hit him on his neck. The trial court further pointed out that if Joseph used excessive force, thereby rendering the victim incapable of defending
indeed hacked Ronald on the neck, "it is surprising that the latter did not suffer any himself.47 "The notorious inequality of forces creates an unfair advantage for the
injury when according to them (Ronald, Rolando and Flora Credo), Joseph was aggressor."48
running fast and made a hard thrust on Ronald, hitting the latters neck." 43
Here, there can be no denying that appellants took advantage of their superior
Since the criterion for determining whether there is a valid self-defense and a valid strength to ensure the successful execution of their crime. This is evident from the
defense of relatives require that there be unlawful aggression perpetrated by the fact that there were three of them against the victim who was alone. More
victim on the one making the defense or on his relative, it is safe to conclude that importantly, their victim was unarmed while the three of them were each armed
when the trial court held that there can be no valid self-defense because there was with a bolo.
no unlawful aggression on the part of the victim, it was, in effect, likewise saying
that there can be no valid defense of a relative for lack of an essential requisite. In Award of damages
other words, when the trial court made a ruling on the claim of self-defense, it, at
the same time, also necessarily passed upon the issue of defense of a relative.
In People v. Anticamara,49 this Court laid down the standards in the proper award of
damages in criminal cases, as follows:
Appellants acted in conspiracy with one
another in the execution of the crime
x x x the award of civil indemnity is mandatory and granted to the heirs of the victim
without need of proof other than the commission of the crime. In People v. Quiachon,
"Conspiracy is said to exist where two or more persons come to an agreement the Court held that even if the penalty of death is not to be imposed because of the
concerning the commission of a felony and decide to commit it. Direct proof is not prohibition in R.A. 9346, the civil indemnity of P75,000.00 is proper, because it is not
essential to prove conspiracy for it may be deduced from the acts of the accused dependent on the actual imposition of the death penalty but on the fact that
before, during and after the commission of the crime charged, from which it may be qualifying circumstances warranting the imposition of the death penalty attended
indicated that there is a common purpose to commit the crime." 44 the commission of the offense. As explained in People v. Salome, while R.A. No. 9346
66

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

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

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

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

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

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

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

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

SO ORDERED.
67

Industrial Timber v. Ababon ISSUE Procedural: WON the CA erred in liberally applying the rules of procedure
with respect to Ababon, et al but being rigid in its application as regards ITC and
G.R. No. 164518 | January 25, 2006 IPGC. YES.

FACTS: A careful scrutiny of the facts and circumstances of these consolidated cases
warrants liberality in the application of technical rules and procedure.
1. August 30, 1985 Industrial Plywood Group Corporation (IPGC) leased its plywood
plant in Butuan City to Industrial Timber Corporation (ITC) for a period of 5 years. Substantive: WON the workers laid off by ITC were illegally dismissed due to the
closure of its business; WON they are entitled to separation pay, backwages, and
2. March 6, 1990 ITC notified DOLE and its workers that it will cease operations other monetary revwards. NO.
effective March 9, 1990 due to lack of raw materials. Operations will resume only
after logs for milling can be sourced. a. Around the same time IPG notified ITC of The closure of ITCs business was valid, but they are ordered to pay separation pay
the expiration of the lease in August 1990 and that it did not have intentions of equivalent to one month pay or to at least one-half month pay for every year of
renewing the same. service, whichever is higher, and P50,000.00 as nominal damages to each
employee.
3. June 26, 1990 ITC notifed DOLE and its workers of the plants shutdown due to
the non-renewal of anti-pollution permit that expired in April 1990. a. All 387 workers RATIO LIBERALITY IN APPLYING TECHNICAL RULES AND PROCEDURE
were laid off until further notice. b. Final notice of closure was issued on August 17,
1990 with advice for all workers to collect the benefits due them under the law and 1. ITC and IPGC concede that the 1993 NLRC decision had become immutable
CBA. because of their counsels failure to file the MR on time. However, they argue that
the CA should have relaxed technical rules in the paramount interest of justice.
4. October 15, 1990 IPGC took over the plant after being issued a business permit,
which included an anti-pollution permit from DENR that was coincidentally issued on 2. Court: A great injustice would be done to ITC by ordering it to reinstate the
the same day ITC ceased operation of the plant (August 17, 1990). employees to their former positions that no longer exist due to valid and legitimate
cessation of business a. Labor Code, Art. 218. NLRC may correct, amend, or waive
5. Virgilio Ababon, et al. filed a complaint against both ITC and IPGC for illegal any error, defect or irregularity whether in substance or in form. b. Labor Code, Art.
dismissal, unfair labor practice and damages, alleging that ITCs closure was 221. the rules of evidence prevailing in courts of law or equity shall not be
intended to disband the union and that both corporations are one and the same, controlling and it is the spirit and intention of this Code that the Commission and its
controlled by one owner. members and the Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to
6. LA upheld the validity of the closure. Ababon appealed to the NLRC. NLRC ordered technicalities of law or procedure, all in the interest of due process.
the reinstatement of the employees and payment of full backwages, damages and
attorneys fees on May 20, 1993. ILLEGAL DISMISSAL

7. ITC and IPGC filed and MR, but it did not reach the NLRC on time because it had 1. While labor is granted full protection by the Constitution, employers are also
been sent through JRS. A Petition for Relief/second MR was filed but denied due to accorded rights and privileges to assure their self-determination and independence,
lack of merit. and reasonable return of capital. These privileges are called management
prerogatives.
8. ITC and IPGC filed a Notice of Appeal with the SC, but was dismissed for being a
wrong mode of appeal from the NLRC decicion. They also filed a MR/Second Petition 2. However, the State has the right to determine whether an employer's privilege is
for Relief with the NLRC and was granted on May 24, 1995. exercised in a manner that complies with the legal requirements and does not offend
the protected rights of labor.
9. Ababon filed a Petition for Certiorari with the SC, but the petition was referred to
the CA for proper disposition. CA set aside the May 1995 NLRC decision and 3. The right to close the operation of an establishment or undertaking is one of the
reinstated its May 1993 decision. authorized causes in terminating employment of workers, the only limitation being
that the closure must not be for the purpose of circumventing the provisions on
termination of employment embodied in the Labor Code.
68

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

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

5. While the closure was done in good faith, ITC did not comply with the notice
requirement (notify DOLE and employees at least one month before intended date of
closure). a. ITC only notified DOLE and its employees of the final closure on August
17, 1990 the same day the closure was to take effect. b. Court says: where the
dismissal is based on an authorized cause under Art. 283 of the Labor Code but the
employer failed to comply with the notice requirement, the sanction should be stiff
as the dismissal process was initiated by the employers exercise of his management
prerogative. c. Hence, ITC to pay damages P50,000 per employee. 6. Having been
dismissed legally, Ababon, et al. are not entitled to payment of backwages. They
are, however, entitled to separation pay equivalent to one month pay or at least
one-half month pay for every year of service, whichever is higher.
69

EN BANC franchise, or any privilege pertaining thereto, may be sold or leased without
infringing the certificate issued to the grantee; chan roblesvirtualawlibraryand that if
[G.R. No. L-8194. July 11, 1956.] property covered by the franchise is transferred or leased without this requisite
EMERENCIANA M. VDA. DE MEDINA, ET AL., Plaintiffs-Appellees, vs. approval, the transfer is not binding against the public or the Service
GUILLERMO CRESENCIA, ET AL., Defendants. GUILLERMO Commission; chan roblesvirtualawlibraryand in contemplation of law, the grantee of
CRESENCIA, Appellant. record continues to be responsible under the franchise in relation to the Commission
and to the public. There we gave the reason for this rule to be as
follows:chanroblesvirtuallawlibrary
DECISION cralaw Since a franchise is personal in nature any transfer or lease thereof should
be notified to the Public Service Commission so that the latter may take proper
REYES, J.B.L., J.:
safeguards to protect the interest of the public. In fact, the law requires that, before
Appeal by Defendant Guillermo Cresencia from the judgment of the Court of First the approval is granted, there should be a public hearing, with notice to all
Instance of Manila in its civil case No. 19890, sentencing Appellant, jointly and interested parties, in order that the Commission may determine if there are good
severally with his co-DefendantBrigido Avorque, to pay Plaintiffs Emerencia M. Vda. and reasonable grounds justifying the transfer or lease of the property covered by
de Medina and her minor children damages in the total amount of P56,000, P5,000 the franchise, or if the sale or lease is detrimental to public interest cralaw .
attorneys fees, and costs. The above ruling was later reiterated in the cases of Timbol vs. Osias, L-7547, April
It appears that on May 31, 1953, passenger jeepney bearing plate No. TPU-2232 30, 1955 and Roque vs. Malibay Transit Inc., L- 8561, November 18, 1955.
(Manila), driven by Brigido Avorque, smashed into a Meralco post on Azcarraga As the sale of the jeepney here in question was admittedly without the approval of
Street, resulting in the death of Vicente Medina, one of its passengers. A criminal
the Public Service Commission, Appellant herein, Guillermo Cresencia, who is the
case for homicide through reckless imprudence was filed against Avorque (criminal registered owner and operator thereof, continued to be liable to the Commission and
case No. 22775 of the Court of First Instance of Manila), to which he pleaded guilty
the public for the consequences incident to its operation. Wherefore, the lower court
on September 9, 1953. The heirs of the deceased, however, reserved their right to did not err in holding him, and not the buyer Rosario Avorque, responsible for the
file a separate action for damages, and on June 16, 1953, brought suit against the
damages sustained by Plaintiff by reason of the death of Vicente Medina resulting
driver Brigido Avorque and Appellant Guillermo Cresencia, the registered owner and from the reckless negligence of the jeepneys driver, Brigido Avorque.
operator of the jeepney in question. Defendant Brigido Avorque did not file any
answer; chan roblesvirtualawlibrarywhile DefendantCresencia answered, disclaiming Appellant also argues that the basis of Plaintiffs action being the employers
liability on the ground that he had sold the jeepney in question on October 14, 1950 subsidiary liability under the Revised Penal Code for damages arising from his
to one Maria A. Cudiamat; chan roblesvirtualawlibrarythat the jeepney had been employees criminal acts, it isDefendant Rosario Avorque who should answer
repeatedly sold by one buyer after another, until the vehicle was purchased on subsidiarily for the damages sustained byPlaintiffs, since she admits that she, and
January 29, 1953 by Rosario Avorque, the absolute owner thereof at the time of the not Appellant, is the employer of the negligent driver Brigido Avorque. The argument
accident. In view of Cresencias answer, Plaintiffsfiled leave, and was allowed, to is untenable, because Plaintiffs action for damages is independent of the criminal
amend their complaint making Rosario Avorque a co-Defendant; chan case filed against Brigido Avorque, and based, not on the employers subsidiary
roblesvirtualawlibraryand the latter, by way of answer, admitted having purchased liability under the Revised Penal Code, but on a breach of the carriers contractual
the aforesaid jeepney on May 31, 1953, but alleged in defense that she was never obligation to carry his passengers safely to their destination (culpa contractual). And
the public utility operator thereof. The case then proceeded to trial, during which, it is also for this reason that there is no need of first proving the insolvency of the
after the Plaintiffs had presented their evidence, DefendantsGuillermo Cresencia and driver Brigido Avorque before damages can be recovered from the carrier, for in
Rosario Avorque made manifestations admitting that the former was still the culpa contractual, the liability of the carrier is not merely subsidiary or secondary,
registered operator of the jeepney in question in the records of the Motor Vehicles but direct and immediate (Articles 1755, 1756, and 1759, New Civil Code).
Office and the Public Service Commission, while the latter was the owner thereof at
the time of the accident;chan roblesvirtualawlibraryand submitted the case for the The propriety of the damages awarded has not been questioned, Nevertheless, it is
decision on the question of who, as between the two, should be held liable patent upon the record that the award of P10,000 by way of nominal damages is
to Plaintiffs for damages. The lower court, by Judge Jose Zulueta, held that as far as untenable as a matter of law, since nominal damages cannot co-exist with
the public is concerned, Defendant Cresencia, in the eyes of the law, continued to be compensatory damages. The purpose of nominal damages is to vindicate or
the legal owner of the jeepney in question; chan roblesvirtualawlibraryand rendered recognize a right that has been violated, in order to preclude further contest
judgment against him, jointly and severally with the driver Brigido Avorque, for thereon; chan roblesvirtualawlibraryand not for the purpose of indemnifying
P6,000 compensatory damages, P30,000 moral damages, P10,000 exemplary the Plaintiff for any loss suffered by him (Articles 2221, 2223, new Civil Code.)
damages, P10,000 nominal damages, P5,000 attorneys fees, and costs, Since the court below has already awarded compensatory and exemplary damages
whileDefendant Rosario Avorque was absolved from liability. From this that are in themselves a judicial recognition that Plaintiffs right was violated, the
judgment, Defendant Cresencia appealed. award of nominal damages is unnecessary and improper. Anyway, ten thousand
pesos cannot, in common sense, be deemed nominal.
We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182 (December
29, 1953), which the court below cited, that the law (section 20 [g], C. A. No. 146 as With the modification that the award of P10,000 nominal damages be eliminated,
amended) requires the approval of the Public Service Commission in order that a the decision appealed from is affirmed. Costs against Appellant. SO ORDERED.
70
71

EN BANC taken by petitioner, said decision was affirmed by the Court of Appeals, except as to
the P50,000.00 exemplary damages, which was eliminated, and the P20,000.00
[G.R. No. L-22425. August 31, 1965.] award for moral damages, which was converted into nominal damages. The case is
now before us on petition for review by certiorarifiled by petitioner, upon the ground
NORTHWEST AIRLINES, INC., Petitioner, v. NICOLAS L. CUENCA and COURT that the lower court has erred: (1) in holding that the Warsaw Convention of October
OF APPEALS (SPECIAL SIXTH DIVISION), Respondents. 12, 1929, relative to transportation by air is not in force in the Philippines; (2) in not
holding that respondent has no cause of action; and (3) in awarding P20,000 as
Ross, Selph & Carrascoso for Petitioner. nominal damages.

Bengzon, Villegas & Zarraga for Respondents. We deem it unnecessary to pass upon the first assignment of error because the
same is the basis of the second assignment of error, and the latter is devoid of
merit, even if we assumed the former to be well taken. Indeed, the second
SYLLABUS assignment of error is predicated upon Articles 17, 18 and 19 of said Convention,
reading:

"ART. 17. The carrier shall be liable for damage sustained in the event of the death
1. AIR CARRIERS; LIABILITY UNDER THE WARSAW CONVENTION OF 1929 AND FOR or wounding of a passenger or any other bodily injury suffered by a passenger if the
OTHER BREACHES OF CONTRACT. Articles 17, 18 and 19 of the Warsaw accident which caused the damage so sustained took place on board the aircraft or
Convention of 1929 merely declare the airlines liable for damage in the cases in the course of any of the operations of embarking or disembarking.
enumerated therein, if the conditions specified are present. Neither the provisions of
said articles nor others regulate or exclude liability for other breaches of contract by "ART. 18. (1) The carrier shall be liable for damage sustained in the event of the
the air carriers. destruction or loss of, or of damage to, any checked baggage, or any goods, if the
occurrence which caused the damage so sustained took place during the
2. ID.; ID.; ID.; LIABILITY FOR NOMINAL AND EXEMPLARY DAMAGES; CASE AT BAR. transportation by air.
Respondent boarded petitioners plane in Manila with a first class ticket to Tokyo.
Upon arrival at Okinawa, an agent of petitioner rudely compelled him, in the "(2) The transportation by air within the meaning of the preceding paragraph shall
presence of other passengers, to move to the tourist class. Respondent protested, comprise the period during which the baggage or goods are in charge of the carrier,
revealing that he was traveling in his official capacity as delegate of the Republic of whether in an airport or on board an aircraft, or, in the case of a landing outside an
the Philippines to a conference in Tokyo. In order to reach the conference on time, airport, in any place whatsoever.
respondent obeyed. Held: Having been given first class accommodation as he took
petitioners plane in Manila, respondent was entitled to believe that this was a "(3) The period of the transportation by air shall not extend to any transportation by
confirmation of his first class reservation and that he would keep the same until his land, by sea, or by river performed outside an airport. If, however, such
ultimate destination, Tokyo. Since the offense had been committed with full transportation takes place in the performance of a contract for transportation by air,
knowledge of the fact that respondent was an official representative of the Republic for the purpose of loading, delivery, or transshipment, any damage is presumed,
of the Philippines, the sum of P20,000.00 awarded as damages may well be subject to proof to the contrary, to have been the result of an event which took
considered as merely nominal. At any rate, considering that petitioners agent had place during the transportation by air.
acted in a wanton, reckless and oppressive manner, said award may, also, be
considered as one for exemplary damages. "ART. 19. The carrier shall be liable for damage occasioned by delay in the
transportation by air of passengers, baggage, or goods."

DECISION Petitioner argues that pursuant to these provisions, an air "carrier is liable only" in
the event of death of a passenger or injury suffered by him, or of destruction or loss
of, or damage to any checked baggage or any goods, or of delay in the
transportation by air of passengers, baggage or goods. This pretense is not borne
CONCEPCION, J.:
out by the language of said Articles. The same merely declare the carrier liable for
damages in the enumerated cases, if the conditions therein specified are present.
Neither said provisions nor others in the aforementioned Convention regulate or
This is an action for damages for alleged breach of contract. After appropriate exclude liability for other breaches of contract by carrier. Under petitioners theory,
proceedings the Court of First Instance of Manila, in which the case was originally an air carrier would be exempt from any liability for damages in the event of its
filed, rendered judgment sentencing defendant Northwest Airlines, Inc., absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.
hereinafter referred to as petitioner to pay to plaintiff Cuenca hereinafter
referred to as respondent "the sum of P20,000 as moral damages, together with The third assignment of error is based upon Medina v. Cresencia (52 Off. Gaz. 4606),
the sum of P5,000 as exemplary damages, with legal interest thereon from the date and Quijano v. Philippine Air Lines (CA-G.R. No. 21804). Neither case is, however, in
of the filing of the complaint" December 12, 1959 "until fully paid, plus the point, aside from the fact that the latter is not controlling upon us. In the first case,
further sum of P2,000 as attorneys fees and expenses of litigation." On appeal this Court eliminated a P10,000 award for nominal damages, because the aggrieved
72

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


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

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

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

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
petitioner. It is so ordered.
73

EN BANC (2) The transportation by air within the meaning of the preceding
paragraph shall comprise the period during which the baggage or goods are
G.R. No. L-22425 August 31, 1965 in charge of the carrier, whether in an airport or on board an aircraft, or, in
the case of a landing outside an airport, in any place whatsoever.

NORTHWEST AIRLINES, INC., petitioner,


vs. (3) The period of the transportation by air shall not extend to any
NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH transportation by land, by sea, or by river performed outside an airport. If,
DIVISION), respondents. however, such transportation takes place in the performance of a contract
for transportation by air, for the purpose of loading, delivery, or
transhipment, any damage is presumed, subject to proof to the contrary, to
CONCEPCION, J.:
have been the result of an event which took place during the transportation
by air.
This is an action for damages for alleged breach of contract. After appropriate
proceedings the Court of First Instance of Manila, in which the case was originally
ART. 19. The carrier shall be liable for damage occasioned by delay in the
filed, rendered judgment sentencing defendant Northwest Airlines, Inc.
transportation by air of passengers, baggage, or goods.
hereinafter referred to as petitioner to pay to plaintiff Cuenca hereinafter
referred to as respondent the sum of P20,000 as moral damages, together with
the sum of P5,000 as exemplary damages, with legal interest thereon from the date Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in
of the filing of complaint," December 12, 1959, "until fully paid, plus the further sum the event of death of a passenger or injury suffered by him, or of destruction or loss
of P2,000 as attorney's fees and expenses of litigation." On appeal taken by of, or damage to any checked baggage or any goods, or of delay in the
petitioner, said decision was affirmed by the Court of Appeals, except as to the transportation by air of passengers, baggage or goods. This pretense is not borne
P5,000.00 exemplary damages, which was eliminated, and the P20,000.00 award for out by the language of said Articles. The same merely declare the carrier liable for
moral damages, which was converted into nominal damages. The case is now before damages in the enumerated cases, if the conditions therein specified are present.
us on petition for review by certiorari filed by petitioner, upon the ground that the Neither said provisions nor others in the aforementioned Convention regulate or
lower court has erred: (1) in holding that the Warsaw Convention of October 12, exclude liability for other breaches of contract by the carrier. Under petitioner's
1929, relative to transportation by air is not in force in the Philippines; (2) in not theory, an air carrier would be exempt from any liability for damages in the event of
holding that respondent has no cause of action; and (3) in awarding P20,000 as its absolute refusal, in bad faith, to comply with a contract of carriage, which is
nominal damages. absurd.

We deem it unnecessary to pass upon the first assignment of error because the The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz.
same is the basis of the second assignment of error, and the latter is devoid of 4606), and Quijano vs. Philippine Air Lines (CA-G.R. No. 21804-R). Neither case is,
merit, even if we assumed the former to be well-taken. Indeed the second however, in point, aside from the fact that the latter is not controlling upon us. In the
assignment of error is predicated upon Articles 17, 18 and 19 of said Convention, first case, this Court eliminated a P10,000 award for nominal damages, because the
reading: aggrieved party had already been awarded P6,000 as compensatory damages,
P30,000 as moral damages and P10,000 as exemplary damages, and "nominal
damages cannot co-exist with compensatory damages." In the case at bar, the Court
ART. 17. The carrier shall be liable for damages sustained in the event of
of Appeals has adjudicated no such compensatory, moral and exemplary damages
the death or wounding of a passenger or any other bodily injury suffered by
to respondent herein.
a passenger, if the accident which caused the damage so sustained took
place on board the aircraft or in the course of any of the operations of
embarking or disembarking. Moreover, there are special reasons why the P20,000.00 award in favor of
respondent herein is justified, even if said award were characterized as nominal
damages. When his contract of carriage was violated by the petitioner, respondent
ART. 18. (1) The carrier shall be liable for damage sustained in the event of
held the office of Commissioner of Public Highways of the Republic of the Philippines.
the destruction or loss of, or of damage to, any checked baggage, or any
Having boarded petitioner's plane in Manila with a first class ticket to Tokyo, he was,
goods, if the occurrence which caused the damage so sustained took place
upon arrival at Okinawa, transferred to the tourist class compartment. Although he
during the transportation by air.
revealed that he was traveling in his official capacity as official delegate of the
Republic to a conference in Tokyo, an agent of petitioner rudely compelled him in the
74

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

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

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
petitioner. It is so ordered.
75

SECOND DIVISION was P1,743,800.00, 20% of which was to be paid upon the signing and execution of
the agreement and the balance to be paid in four equal semi-annual installments,
[G.R. No. 152143. January 13, 2003] beginning six months from the signing thereof, with the balance earning 12%
interest per annum. On the other hand, the purchase price of the three untitled
ROMEL P. ALMEDA, in substitution of the late PONCIANO L. ALMEDA and/or properties was P1,208,580.00, 15% of which was to be paid upon the signing and
ALMEDA, INC., petitioners, vs. LEONOR A. CARIO, the surviving execution of the agreement, and the balance, bearing a 12% annual interest from
spouse, and his children, namely: ROSARIO C. SANTOS, REMEDIOS the signing thereof, to be paid as follows: 15% of the purchase price plus interest to
C. GALSIM, RAMON A. CARIO, REGINALDO A. CARIO, RANIEELA C. be paid upon the issuance of titles to the lots, and the balance plus interests to be
DIONELA and RACHELLE C. SAMANIEGO, in substitution of the late paid in semi-annual installments starting from the date of issuance of the respective
AVELINO G. CARIO, respondents. certificates of title to the lots involved, which must be not later than March 30, 1982.

DECISION On April 3, 1982, Cario and Almeda executed an amendment to their


agreements to sell (a) extending the deadline for the production of the titles to the
untitled properties from March 31, 1982 to June 30, 1982, (b) providing for a partial
MENDOZA, J.:
payment of P300,000.00 for the titled properties, (c) requiring Cario to render an
accounting of the proceeds of the sugar cane crop on the properties subject of the
This is a petition for review on certiorari of the decision, [1] dated February 12, sale up to the 1982 harvest season and (d) obliging the vendor (Cario) to pay the
2002, of the Court of Appeals in CA-G.R. CV No. 57778, affirming the decision [2] of vendee (Almeda) the sum of P10,000.00 a month in case of the failure of the former
the Regional Trial Court of Laguna, the dispositive portion of which reads: to produce the certificates of title to the untitled properties by June 30, 1982.

WHEREFORE, premises considered, judgment is hereby rendered in favor of the Before the end of April 1982, Almeda asked Cario for the execution of a Deed
plaintiff [Avelino G. Cario] and against the defendants [Ponciano L. Almeda and of Absolute Sale over the eight titled properties although they had not been fully
Almeda, Inc.] as follows: paid. Cario granted the request and executed on May 3, 1982 the deed of sale over
the eight titled lots in favor of Almeda, Inc. [6] On April 30, 1982, Almeda executed an
1. Ordering the latter to pay the former jointly and severally the amount undertaking[7] to pay Cario the balance of the purchase price. Deeds of sale for two
of P477,589.47 with a 12% rate of interest per annum as agreed upon from the date of the three untitled lots were also executed on July 2, 1982 and October 9, 1982. [8]
of demand on March [9], 1983 until fully paid;
Subsequently, Cario made demands for the full and final payment of the
2. Ordering the latter to pay the former jointly and severally the amount balance due him in the amount of P477,589.47 and the interests thereon. Despite
of P150,000.00 as nominal damages; and demand letters sent to Almeda on March 9, 1983 and on July 20, 1983, however, the
balance was not paid. Hence, Cario filed before the RTC of Bian a complaint against
Almeda and Almeda, Inc., in whose name the titles to the properties had been
3. Ordering the latter to pay the former jointly and severally the amount
transferred. Cario prayed that Almeda and/or Almeda, Inc. be ordered to pay to him
of P15,000.00 as and for attorneys fees plus costs of this suit.
the balance of P477,589.47, the legal interests thereon from demand until full
payment, 15% of all the amounts due, including interests as attorneys
Plaintiffs claim for moral and exemplary damages is hereby dismissed for want of fees, P10,000.00 as litigation expenses, P100,000.00 as moral, exemplary and
merit. nominal damages and the costs of suit.

SO ORDERED.[3] Almeda and Almeda, Inc. contended that the purchase price, including interest
charges, of the eight titled properties had been fully paid as of April 3, 1982. With
The facts of the case are undisputed: respect to the three untitled lots, they contended that the purchase price of Lot Nos.
2272 and 2268-B had likewise been fully paid, while that of Lot No. 3109 had only a
On April 30, 1980, Ponciano L. Almeda and Avelino G. Cario, predecessors-in- remaining balance of P167,522.70.
interest of petitioners and respondents, entered into two agreements to sell, one
covering eight titled properties[4] and another three untitled properties,[5] all of which The RTC of Bian, Laguna found the claim of Cario to be well founded and gave
are located in Bian, Laguna. The agreed price of the eight titled properties judgment in his favor as quoted at the beginning of this opinion.
76

Without questioning the amount of judgment debt for which they were held RATE OF INTEREST PER ANNUM FROM THE DATE OF DEMAND ON
liable, Ponciano Almeda and Almeda, Inc. appealed to the Court of Appeals for a MARCH [9], 1983 UNTIL FULLY PAID.[10]
modification of judgment, contending that the lower court erred in awarding nominal
damages and attorneys fees in favor of Cario and imposing a 12% annual interest on In this appeal, petitioners do not dispute the amount of the outstanding
the judgment debt from the time of demand on March 9, 1983 until it was fully balance on the purchase price of the lots. Petitioners only seek a modification of the
paid. They maintained that they were not guilty of any unfair treatment or reckless decision of the appeals court insofar as it upheld the trial courts award of nominal
and malevolent actions so as to justify an award of nominal damages.They claimed damages, attorneys fees, and 12% interest. We find their appeal to be without merit
that they refused to pay the remaining balance because the proceeds of certain and, accordingly, affirm the decision of the Court of Appeals.
harvests from the lands in question and liquidated damages were also due them. As
for the award of attorneys fees, they contended that there was no finding that they
First. Petitioners contend that the trial court erred in awarding nominal
acted in gross and evident bad faith in refusing to satisfy Carios demand so as to
damages in favor of respondents since there was no showing that they acted in an
justify its award under Art. 2208 (5) of the Civil Code, because they had acted on the
unfair, reckless or malevolent manner so as to justify such an award.
basis of what they honestly believed to be correct as their residual
obligations. Finally, they contended that the imposition of a 12% interest rate was
contrary to law and jurisprudence since Cario sought payment of legal interest, Petitioners argument is based on a misreading of the decision in FNCB Finance
which, under Central Bank Circular No. 416, was only 6%. v. Estavillo.[11] Contrary to petitioners claim, this Court did not award nominal
damages to the respondent in that case because of petitioners reckless action,
malevolent manner and lack of regard to the feelings and reputation of the other
During the pendency of the case, Almeda died. He was substituted by his heirs,
party. Such factors were cited in that case to justify the award of exemplary, not
namely, his wife Eufemia P. Almeda and their children, Elenita A. Cervantes, Susan A.
nominal, damages.
Alcazar, Florecita A. Datoc, Laurence P. Almeda, Edwin P. Almeda, Marlon P. Almeda,
Wenilda A. Diaz, Carolyn A. Santos, Alan P. Almeda and Romel P. Almeda, the last
having been designated to act as their representative.[9] Indeed, nominal damages may be awarded to a plaintiff whose right has been
violated or invaded by the defendant, for the purpose of vindicating or recognizing
that right, and not for indemnifying the plaintiff for any loss suffered by him. [12] Its
The Court of Appeals affirmed the decision of the lower court. It held that the
award is thus not for the purpose of indemnification for a loss but for the recognition
award of nominal damages was justified by the unjust refusal of Almeda and
and vindication of a right.[13] Indeed, nominal damages are damages in name only
Almeda, Inc. to settle and pay the balance of the purchase price in violation of the
and not in fact. When granted by the courts, they are not treated as an equivalent of
rights of Cario. The award of attorneys fees was also affirmed, it being shown that
a wrong inflicted but simply a recognition of the existence of a technical injury. [14] A
Cario was forced to litigate to protect his interests. Finally, the appeals court also
violation of the plaintiffs right, even if only technical, is sufficient to support an
affirmed the 12% interest rate per annum, as agreed upon by the parties in their
award of nominal damages. Conversely, so long as there is a showing of a violation
contracts, following Art. 2209 of the Civil Code. The appeals court also ruled that the
of the right of the plaintiff, an award of nominal damages is proper.
amount of the unpaid purchase price, P477,589.47, should be awarded to Cario,
considering the failure of Almeda and/or Almeda, Inc. to respond to the two demand
letters and the computation sheet sent to them by Cario, as well as their failure to Applying such principles to the instant case, we have on record the fact that
rebut the correctness of the outstanding balance before the lower court. petitioners have an unpaid balance on the purchase price of lots sold to them by
respondents. Their refusal to pay the remaining balance of the purchase price
despite repeated demands, even after they had sold the properties to third parties,
Hence, this petition for review on certiorari under Rule 45 filed by Romel P.
undoubtedly constitutes a violation of respondents right to the said amount under
Almeda, based on the following assignment of errors:
their agreements. The facts show that the right of the vendor to receive the unpaid
balance to the lots sold was violated by petitioners, and this entitles respondents at
I. THE COURT OF APPEALS ERRED IN AWARDING NOMINAL DAMAGES IN the very least to nominal damages.
THE AMOUNT OF P150,000.00.

Second. Petitioners claim that the imposition of a 12% annual interest rate is
II. THE COURT OF APPEALS ERRED IN AWARDING ATTORNEYS FEES IN THE erroneous because it is contrary to law and jurisprudence. According to them, the
AMOUNT OF P15,000.00 IN FAVOR OF THE RESPONDENT. applicable rate is 6% since the case does not involve a loan or forbearance of
money.
III. THE COURT OF APPEALS ERRED IN ORDERING THE PETITIONER TO PAY
JOINTLY AND SEVERALLY THE AMOUNT OF P477,589.47 WITH A 12%
77

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

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

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

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


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

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

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

WHEREFORE, the petition for review on certiorari is DENIED and the decision
of the Court of Appeals is AFFIRMED. Interest at the rate of twelve percent (12%)
shall be imposed on the amount due upon finality of this decision until payment
thereof.
78

SECOND DIVISION 3. The expenses you approved and incurred in connection with the
Dale Carnegie and Silva Mind Control Seminar;
[G.R. No. 143384. February 4, 2005]
4. The P3.7 million miscellaneous expenses appearing in our
DR. ERNESTO I. MAQUILING, petitioner, vs. PHILIPPINE TUBERCULOSIS financial statement; and
SOCIETY, INC., respondent.
5. Your reasons for renewing our service contract with Ultra. [6]
DECISION
Dr. Maquiling submitted his explanatory letter dated 11 April 1991 inviting
TINGA, J.: attention to PTS Finance Managers Report. On 15 April 1991, Dr. Maquiling had a
thirty (30) minute conversation with Soriano at the latters instance. No further
Before this Court is a Petition for Review on Certiorari of the Decision[1] of the related proceedings were undertaken before Dr. Maquiling received a letter-notice
Court of Appeals dated 28 March 2000 and its Resolution dated 22 May 2000, which dated 8 June 1991 informing him that the PTS Executive Committee approved
reversed the decision of the National Labor Relations Commission (NLRC) dated 15 Sorianos findings and recommendations calling for his dismissal effective
December 1997[2] and that of the Labor Arbiter dated 16 September 1993, [3] which immediately, without any retirement benefits. [7]
both found the dismissal from service of Dr. Ernesto I. Maquiling (Dr. Maquiling)
illegal. Despite Sorianos instruction for him not to report for work, Dr. Maquiling
manifested, through a letter to the OIC-Executive Director, his intention to continue
The factual antecedents are as follows: performing his duties as Deputy Executive Director. Dr. Maquiling continued to report
for work at the PTS daily. In the meantime, he elevated his case to the PTS Board of
Directors through a memorandum dated 28 June 1991 which sought to point out the
On 16 April 1968, petitioner Dr. Maquiling was employed by respondent
illegality of his dismissal from office and prayed for a resolution upholding his
Philippine Tuberculosis Society, Inc. (PTS). On 8 June 1991, Dr. Maquiling, then
position.[8]
earning a monthly salary of thirteen thousand nine hundred pesos (P13,900.00) was
dismissed from service as Deputy Executive Director after serving PTS for twenty-
three (23) years. Dr. Maquiling filed a complaint against PTS for reinstatement or, in On 17 July 1991, Dr. Maquiling, protesting non-payment of his salary for the
the alternative, for payment of full backwages and separation pay in accordance period of 15 July 1991, wrote the OIC Finance Department and formally demanded
with Article 279 of the Labor Code, as well as moral damages in the amount of five the release of his earned wages. PTS reacted through Soriano by informing Dr.
hundred thousand pesos (P500,000.00) and exemplary damages in the amount of Maquiling that there are no wages forthcoming inasmuch as the latters service had
one hundred thousand pesos (P100,000.00).[4] been terminated for cause since 7 June 1991.[9]

The complaint was assigned to Labor Arbiter Salimathar V. Nambi. After PTS In an effort to exhaust the remedies within PTS, Dr. Maquiling wrote the
failed to appear despite having requested for several postponements, Dr. Maquiling President of PTS a letter dated 5 August 1991 saying, among others: my counsels
was allowed to present his evidence ex parte consisting of his testimony on direct agree with me that if your Board does not act on my 28 June 1991 Memorandum
examination and documentary proof. On 31 August 1992, Dr. Maquiling moved for within fifteen (15) days from receipt of this letter, such omission will mean a
submission of the case for resolution, which motion was granted.[5] confirmation of Sorianos notice of my alleged termination from the service a
dismissal which is referable to the proper outside forum. [10]

The records disclose that Dr. Maquiling received a memo dated 2 April 1991
from the PTS OIC-Executive Director Andres B. Soriano (Soriano) directing him to Receiving no response from the PTS, Dr. Maquiling stopped reporting for work
submit within five (5) days from notice a written explanation on the following at the PTS in the last week of September 1991. Then, on 10 October 1991, Dr.
matters: Maquiling filed his complaint with the Labor Arbiter.

1. The delayed GSIS remittances; After considering the evidence adduced by the parties, the Labor Arbiter
rendered a decision ordering PTS to immediately reinstate Dr. Maquiling to the
position of Deputy Executive Director or its equivalent in rank and pay, without loss
2. The reported deficit of P7.3 million appearing in our financial
of seniority rights inclusive of all benefits attached to said position at the time of his
statement for 1990;
79

dismissal, and to pay Dr. Maquiling backwages computed from the time of his In its Comment[23] dated 9 October 2000, PTS contends that the dismissal of Dr.
dismissal on 7 June 1991 until his actual reinstatement but not to exceed three (3) Maquiling was based on a just cause, supported as it was by the evidence, law and
years at the rate of thirteen thousand nine hundred pesos (P13,900.00) per month jurisprudence. The termination of Dr. Maquilings employment was allegedly due to
or three hundred seventy-eight thousand seven hundred seventy-five pesos loss of trust and confidence. [24] It avers that for gross mismanagement, for acts
(P378,775.00).[11] He likewise ordered PTS to pay Dr. Maquiling five hundred inimical to the interest of PTS, and also for reason that PTS has lost its trust and
thousand pesos (P500,000.00) as moral damages and one hundred thousand pesos confidence in him, PTS terminated his services without any retirement benefit. [25]
(P100,000.00) as exemplary damages and to pay attorneys fees equivalent to ten
(10%) percent of the total amount due the complainant. PTS, however, alleges that it complied with the two-notice rule required for
termination of employment. According to PTS, the first notice was sent by Soriano to
Upon appeal by PTS to the NLRC, the Commission upheld the decision of the Dr. Maquiling by means of confidential memorandum [26] dated 2 April 1991 requiring
labor arbiter and dismissed the appeal. [12] However, PTS appealed the decision to the him to explain in writing, within five days from notice, the matters stated therein. Dr.
Court of Appeals which reversed the decisions of the NLRC and Labor Arbiter by Maquiling honored the first notice by submitting on 11 April 1991 a written reply to
ordering the dismissal of the complaint and declaring that his dismissal from Soriano. The second notice which allegedly informed Dr. Maquiling of the decision to
employment as legal and valid. It, however, ordered PTS to pay Dr. Maquiling the terminate his employment, stating reasons therefor, was sent to him by Soriano on 8
amount of ten thousand pesos (P10,000.00) as damages or indemnity for violation of June 1991.[27]
his right to procedural due process and separation pay in the amount of one
hundred fifty-nine thousand eight hundred fifty pesos (P159,850.00) in the interest A review of the factual milieu of the instant labor controversy and the
of social justice.[13] Hence, this petition for review on certiorari. jurisprudence on the subject leads us to modify the assailed decision of the
appellate court.
Dr. Maquiling argues that the appellate court should have applied the case
of Serrano v. NLRC[14] which was decided on 27 January 2000 since the assailed We agree with the appellate court that Dr. Maquiling was dismissed from
decision of the appellate court was promulgated subsequently on 28 March 2000. He employment for just cause consisting of loss of trust and confidence. The records
avers that PTS must pay him full backwages from the time his employment was reveal that he was Deputy Executive Director of PTS, a responsible position, at the
terminated on 7 June 1991 up to the time the decision becomes final. [15] In addition time of his dismissal. The following defines the extent of the power and
to backwages, he also prays that he be awarded separation pay for every year of responsibility attached to the position he occupied:
service, at the rate of one month pay for every year of service, [16]as well as
thirteenth month pay, sick leave and vacation leave and all monetary benefits
1. Directs, supervises, coordinates, and controls the general
including moral damages and attorneys fees. [17] Further, Dr. Maquiling points out that
administrative, finance and regional operations of PTS.
the appellate court gravely abused its discretion by changing the rules on pleadings
before the administrative body since it considered the position paper of PTS though
unverified.[18] PTS should have considered the twenty-three (23) years of service of 2. Formulates and executes plans and policies for operations activities
petitioner[19] and should not have ruled that the dismissal from service of Dr. under his charge.
Maquiling was for just cause. [20] He further contends that the appellate court did not
show any degree of clarity of causal connection between Dr. Maquilings acts and the 3. Signs corresponden[ce] and other documents relative to operational
supposed damage to PTS.[21] activities under his charge, within specified limits.

Moreover, Dr. Maquiling raised in his petition that the appellate court, which 4. Authorizes the hiring, promotion, transfer and termination of all PTS
agreed with the findings of the labor arbiter and the NLRC that the twin personnel below the supervisory level in accordance with the policies
requirements of notice and hearing are wanting, erred in adopting an abandoned prescribed by the Board of Directors.
doctrine by merely imposing a fine of ten thousand pesos (P10,000.00) against PTS
and in disregarding the present doctrine on termination of employment and
5. Reports regularly to the Executive Director on the individual operations
monetary benefits accorded by law to Dr. Maquiling, and in concluding with grave
and activities of departments and branches under his charge.
abuse of discretion that the dismissal of Dr. Maquiling, who had served PTS for
twenty-three (23) years, was for just cause.[22]
6. Executes and administers directives issued by the Executive Director.
80

7. Assists the Executive Director in the preparation of the [annual] budget his superior and may serve as a valid and sufficient basis to impose disciplinary
and operational plan of the Society. sanctions to an erring employee which may even result to dismissal from
employment if the gravity of the offense warrants as in the instant case.
8. Prepares and submits reports required by the Board of Directors,
government entities and other interested parties. Recent decisions of this Court distinguish the treatment of managerial from
that of rank-and-file personnel insofar as the application of the doctrine of loss of
9. Performs related functions as may be assigned by the Executive trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss
Director.[28] of trust and confidence as ground for valid dismissal requires proof of involvement in
the alleged events in question and that mere uncorroborated assertions and
accusations by the employer will not suffice.[33] But as regards a managerial
PTS imputes the delayed GSIS remittances to Dr. Maquilings failure to follow his
employee, mere existence of a basis for believing that such employee has breached
duties as prescribed by law. The records disclose that Dr. Maquiling was aware of the
the trust of his employer would suffice for his dismissal. [34]
problem but he failed to give priority thereto. This non-remittance was partially
brought about by a Guideline on the Releasing of Checks he issued, which placed
the GSIS account as a last priority. [29] The security of workers compensation was After careful perusal of the factual backdrop of the case, we rule that Dr.
undermined by his act which patently transgressed the constitutional injunction that Maquiling was indeed validly dismissed for just cause. However, PTS was remiss in
workers should be afforded full protection in their employment. Subsumed in said its duty to observe procedural due process in effecting the dismissal of Dr.
mandate is the protection of the right to workmens compensation to which a lowly Maquiling.
worker may be entitled. To rule otherwise would frustrate the policy that the State
shall promote and develop a tax-exempt employees compensation program whereby Under this second requirement, two notices must be sent to the employee who
employees and their dependents, in the event of work-connected disability or death, is the subject of an investigation for acts which may warrant his eventual dismissal
may promptly secure adequate income benefit, and medical or related benefits. [30] from employment. The notices required before an employee may be validly
dismissed are: (a) a written notice served on the employee specifying the
On the other hand, we are inclined to attribute the P7.3 million deficit in PTS grounds for termination and giving the employee reasonable opportunity
1990 financial statements to Dr. Maquilings failure to consider the realities of the to explain his/her side; (b) a hearing or conference wherein the employee, with
financial condition of the institution. Dr. Maquiling even aggravated such omission the assistance of counsel if so desired, is given opportunity to respond to the charge,
by insisting on the salary increase of both managerial and non-managerial personnel present his evidence or rebut evidence presented against him/her; and (c) written
despite the financial conundrum that puzzles the future fiscal stability of PTS. The notice of termination served on the employee indicating that upon due consideration
records show that he made representations during the Board meeting that sufficient of all the circumstances, grounds have been established to justify termination.
[35]
funds existed to meet the salary upgrading despite the presence of financial strains. The twin requirements of notice and hearing constitute elements of due process
[31]
Such a course of action falls short of his responsibility to safeguard the financial in cases of employees dismissal;the requirement of notice is intended to
stability of the institution he leads. Said responsibility cannot be outweighed by any inform the employee concerned of the employers intent to dismiss and the
magnanimous motive for the institutional existence will be rendered illusory if the reason for the proposed dismissal; upon the other hand the requirement of
very foundation of its financial stability will be ignored. We are solicitous of the hearing affords the employee an opportunity to answer his employers charges
primordial goal sought to be achieved by Dr. Maquiling but the wisdom of the timing against him and accordingly to defend himself therefrom before dismissal is
is questionable. effected.[36]

The renewal of the Ultra Clean contract with the PTS for janitorial services also Clearly, the first notice must inform outright the employee that an investigation
evinces a bad managerial move on the part of Dr. Maquiling. By reason of the will be conducted on the charges particularized therein which, if proven, will result to
contract, PTS was dragged into a labor controversy for illegal dismissal which his dismissal. Such notice must not only contain a plain statement of the charges of
eventually made it liable for backwages and differentials to employees of Ultra malfeasance or misfeasance but must categorically state the effect on his
Clean.[32] Worse is the renewal of the said contract despite the unsatisfactory employment if the charges are proven to be true.
performance of Ultra Clean without the approval of the Board or the Executive
Committee or any subsequent request for its ratification. The unnecessary This notice will afford the employee an opportunity to avail all defenses and
expending of funds in the administration and operation of PTS is evidently an act of exhaust all remedies to refute the allegations hurled against him for what is at stake
mismanagement which could bring PTS to severe financial distress. These acts if is his very life and limb his employment. Otherwise, the employee may just
committed by a responsible officer wither the trust and confidence lodged in him by disregard the notice as a warning without any disastrous consequence to be
81

anticipated. Absent such statement, the first notice falls short of the requirement of On 11 April 1991, Dr. Maquiling submitted his written reply. The second notice
due process. Ones work is everything, thus, it is not too exacting to impose this which informs Dr. Maquiling of the decision to terminate his employment was sent to
strict requirement on the part of the employer before the dismissal process be him on 8 June 1991. It must be noted that the first notice dated 2 April 1991 is a
validly effected. This is in consonance with the rule that all doubts in the mere instruction to explain the matters enumerated therein. It did not apprise Dr.
implementation and interpretation of the provisions of the Labor Code, including its Maquiling of any investigation to be conducted or being conducted that will warrant
implementing rules and regulations, shall be resolved in favor of labor. [37] his dismissal from service if found guilty of charges specified therein. Thus, such
notice fell short of the requirement of law that an employee must be afforded the
It is worthy to note that the Labor Arbiter, the NLRC and the Court of Appeals benefit of the two-notice rule in dismissal cases that will allow the employee to
all agree in concluding that procedural due process in the instant case was not substantiate the charges specified in the notice with full knowledge at the outset
observed. As revealed by the evidence on record, a confidential memorandum FN that the investigation to be conducted may result in his dismissal or suspension from
dated 2 April 1991 was sent to Dr. Maquiling by Soriano requiring him to explain in employment.
writing the matters contained therein. The text of the memorandum reads as
follows: Dr. Maquiling invokes our ruling in Serrano as basis for appropriate relief.
The Serrano ruling awarded full backwages and separation pay to the employee who
02 April 1991 was dismissed for just cause but without the observance of the procedural due
process requirement. However, in Agabon v. NLRC,[38] this Court modified
the Serrano ruling and awarded nominal damages in the amount of thirty thousand
CONFIDENTIAL MEMORANDUM FOR: DR. ERNESTO I. MAQUILING
pesos (P30,000.00) including holiday pay, service incentive leave and thirteenth
month pay to the petitioners in the said case. This case clarified the criticisms and
Pursuant to the directive of the Board of Directors issued in its answered the questions created by the Serrano ruling.
meeting on March 25, 1991, you are hereby instructed to report and
explain in writing to this office, within five (5) days from notice hereof, on
The Agabon doctrine enunciates the rule that if the dismissal is for just cause
the following matters:
but statutory due process was not observed, the dismissal should be upheld. While
the procedural infirmity cannot be cured, it should not invalidate the dismissal.
1. The delayed GSIS remittances; However, the employer should be held liable for non-compliance with the procedural
requirements of due process.[39]
2. The reported deficit of P7.3 million appearing in our
financial statement for 1990; Where the dismissal is for just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
3. The expenses you approved and incurred in connection ineffectual. However, the employer should indemnify the employee for the violation
with the Dale Carnegie and Silva Mind Control Seminar; of his statutory rights. The indemnity to be imposed should be stiffer to discourage
the abhorrent practice of dismiss now, pay later, which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or
4. The P3.7 million miscellaneous expenses appearing in
penalty and should depend on the facts of each case, taking into special
our financial statement; and
consideration the gravity of the due process violation of the employer. [40]

5. Your reasons for renewing our service contract with


The violation of the petitioners right to statutory due process by the private
Ultra.
respondent warrants the payment of indemnity in the form of nominal damages. The
amount of such damages is addressed to the sound discretion of the court, taking
For immediate compliance. into account the relevant circumstances. [41] Considering the prevailing circumstances
in the case at bar, we deem it proper to fix it at thirty thousand pesos (P30,000.00).
(SGD.) ATTY. ANDRES B. SORIANO We believe this form of damages would serve to deter employers from future
violations of the statutory due process rights of employees. At the very least, it
provides a vindication or recognition of this right granted to employees under the
OIC-Executive Director
Labor Code and its Implementing Rules.[42]
82

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

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

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

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

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


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

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

FACTS:

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


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

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

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

Issue: Whether or not Miclat was illegally dismissed

Held:

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


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

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

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

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

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

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

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

In Civil Case No. 1774 only


These three Rosenda and her two children above named are referred to in the
deed as the owners pro-indiviso of the properties sold. The truth, however, was that
there were other co-owners of the lands, namely, Erlinda D. Diaz, Ester Aida D. Bas, (1) Defendant Ildefonso D. Yap is hereby ordered to restore to the Mindanao
Rosalinda D. Belleza, and Luz Minda D. Dajao, children also of Rosenda by her Academy, Inc., all the books laboratory apparatus, furniture and other
deceased husband Sotero Dionisio, Sr., and that as far as the school building, equipments described in the Mutual Agreement and specified in the
equipment, books, furniture and fixtures were concerned, they were owned by the inventory attached to the Records of this case; or in default thereof, their
Mindanao Academy, Inc., a corporation operating both the Mindanao Academy in value in the amount of P23,500.00;
Oroquieta and the Misamis Academy in Ozamis City.
(2) To return all the Records of the Mindanao Academy and Misamis
The buyer, Ildefonso D. Yap, obtained possession of the properties by virtue of the Academy;
sale, took over the operation of the two schools and even changed their names to
Harvardian Colleges. In view thereof two actions were commenced in the Court of
85

(3) To pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the of the properties (Case No. 1646). Finally, bad faith on the part of Erlinda would not
amount of P10,000.00 as nominal damages, P3,000.00 as exemplary militate against the nullity of the sale, considering that it included not only the lands
damages; and P2,000.00 as attorney's fees. These damages shall be owned in common by Rosenda Nuqui and her six children but also the buildings and
apportioned to each of the stockholders named as plaintiffs in said case in school facilities owned by the Mindanao Academy, Inc., an entity which had nothing
proportion to their respective interests in the corporation. to do with the transaction and which could be represented solely by its Board of
Trustees.
Ildefonso D. Yap appealed from the foregoing judgment and has assigned five errors
therein. The first assignment of error is therefore without merit.

I. He first contends that the lower court erred "in declaring that the mutual II. The second and third errors are discussed jointly in appellant's brief. They read as
agreement dated May 10, 1954 ... is entirely void and legally non-existent in that the follows:
vendors therein ceded to defendant-appellant not only their interests, rights, shares
and participation in the property sold but also those that belonged to persons who THE LOWER COURT ERRED IN HOLDING DEFENDANT-APPELLANT LIABLE
were not parties thereto." FOR RENTS AND ATTORNEY'S FEES IN THE SUM OF P1,000.00 AFTER
DECLARING THAT ALL THE PLAINTIFFS-APPELLEES IN CIVIL CASE NO. 1907
The lower court did not rule categorically on the question of rescission considering it ACTED IN BAD FAITH.
unnecessary to do so in view of its conclusion that the contract of sale is null and
void. This conclusion is premised on two grounds: (a) the contract purported to sell THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS-APPELLEES IN
properties of which the sellers were not the only owners, since of the four parcels of SAID CIVIL CASE NO. 1907 ARE ENTITLED TO RECOVER ALL THE LANDS,
land mentioned in the deed their shares consisted only of 7/12, (6/12 for Rosenda BUILDINGS AND OTHER PERMANENT IMPROVEMENTS DESCRIBED IN THE
Nuqui and 1/12 for Sotero, Jr.), while in the buildings, laboratory equipment, books, MUTUAL AGREEMENT DATED MAY 10, 1954.
furniture and fixtures they had no participation at all, the owner being the Mindanao
Academy, Inc.; and (b) the prestation involved in the sale was indivisible, and
The lower court correctly found that both vendors and vendee in the sale acted in
therefore incapable of partial annulment, inasmuch as the buyer Yap, by his own
bad faith and therefore must be treated, vis-a-vis each other, as having acted in
admission, would not have entered into the transaction except to acquire all of the
good faith. The return of the properties by the vendee is a necessary consequence
properties purchased by him.
of the decree of annulment. No part of the purchase price having been paid, as far
as the record shows, the trial court correctly made no corresponding order for the
These premises are not challenged by appellant. But he calls attention to one point, restitution thereof.
namely, that the four children of Rosenda Nuqui who did not take part in the sale,
besides Erlinda Dionisio Diaz, quitclaimed in favor of the latter their interests in the
In regard to the rents the trial court found that prior to the sale the Mindanao
properties; and that the trial court held that Erlinda as well as her husband acted in
Academy, Inc., was paying P300.00 monthly for its occupancy of the lands on which
bad faith, because "having reasonable notice of defendants' having unlawfully taken
the buildings are situated. This is the amount the defendant has been ordered to pay
possession of the property, they failed to make reasonable demands for (him) to
to the plaintiffs in Civil Case No. 1907, beginning July 31, 1956, when he filed his
vacate the premises to respect their rights thereto." It is argued that being herself
"first pleading" in the case. There can be no doubt that Erlinda D. Diaz is entitled to
guilty of bad faith, Erlinda D. Diaz, as owner of 5/12 undivided interest in the
recover a share of the said rents in proportion to her own interests in the lands and
properties (including the 4/12 ceded to her by her four sisters), is in no position to
the interest in the four co-owners which she had acquired. Rosenda Nuqui and her
ask for annulment of the sale.
son Sotero, it is true, acted in bad faith when they sold the properties as theirs
alone, but so did the defendant Yap when he purchased them with knowledge of the
The argument does not convince us. In the first place the quitclaim, in the form of an fact that there were other co-owners. Although the bad faith of one party neutralizes
extrajudicial partition, was made on May 6, 1956, after the action for annulment was that of the other and hence as between themselves their rights would be as if both
filed, wherein the plaintiffs were not only Erlinda but also the other co-owners who of them had acted in good faith at the time of the transaction, this legal fiction of
took no part in the sale and to whom there has been no imputation of bad faith. Yap's good faith ceased when the complaint against him was filed, and consequently
Secondly, the trial court's finding of bad faith is an erroneous conclusion induced by the court's declaration of liability for the rents thereafter is correct and proper. A
a manifest oversight of an undisputed fact, namely, that on July 10, 1954, just a possessor in good faith is entitled to the fruits only so long as his possession is not
month after the deed of sale in question, Erlinda D. Diaz did file an action against legally interrupted, and such interruption takes place upon service of judicial
Ildefonso D. Yap and Rosenda Nuqui, among others, asserting her rights as co-owner summons (Arts. 544 and 1123, Civil Code).
86

In our opinion the award of attorney's fees to Erlinda D. Diaz and her husband is According to their second amended complaint they were joined merely pro forma,
erroneous. Civil Case No. 1907, in which said fees have been adjudged, is for and "for the sole purpose of the moral damage which has been all the time alleged
rescission (more properly resolution) of the so-called "mutual agreement" on the in the original complaint." Indeed the interests of the said stockholders, if any, were
ground that the defendant Yap failed to comply with certain undertakings specified already represented by the corporation itself, which was the proper party plaintiff;
therein relative to the payment of the purchase price. Erlinda Diaz was not a party to and no cause of action accruing to them separately from the corporation is alleged
that agreement and hence had no cause of action for rescission. in the complaint, other than that for moral damages due to "extreme mental
anguish, serious anxiety and wounded feelings." The trial court, however, ruled out
And as already stated, the trial court did not decide the matter of rescission because this claim for moral damages and no appeal from such ruling has been taken. The
of the decree of annulment it rendered in the other case (Civil Case No. 1774), award for nominal and exemplary damages should be eliminated in toto.
wherein the defendants are not only Ildefonso D. Yap but also Rosenda Nuqui and
her son Sotero. Erlinda D. Diaz could just as well have refrained from joining as The award for attorney's fees in the amount of P2,000.00 should be upheld, although
plaintiff in the action for rescission, not being a party to the contract sought to be the same should be for the account, not of the plaintiff stockholders of the Mindanao
rescission and being already one of the plaintiffs in the other action. In other words, Academy, Inc., but of the corporation itself, and payable to their common counsel as
it cannot be said with justification that she was constrained to litigate, in Civil Case prayed for in the complaint.
No. 1907, because of some cause attributable to the appellant.
IV. Under the fifth and last assignment of error the appellant insists on the warranty
The appellant claims reimbursement for the value of the improvements he allegedly provided for in clause VI of the deed of sale in view of the claims of the co-owners
introduced in the schools, consisting of a new building worth P8,000.00 and a toilet who did not take part therein. The said clause provides: "if any claim shall be filed
costing P800.00, besides laboratory equipment, furniture, fixtures and books for the against the properties or any right, share or interest which are in the possession of
libraries. It should be noted that the judgment of the trial court specifies, for delivery the party of the First Part (vendors) which had been hereby transferred, ceded and
to the plaintiffs (in Civil Case No. 1907), only "the buildings and grounds described conveyed unto the party of the Second Part (vendee) the party of the First Part
in the mutual agreement together with all the permanent improvements thereon." If assumes as it hereby holds itself answerable.
the defendant constructed a new building, as he alleges, he cannot recover its value
because the construction was done after the filing of the action for annulment, thus It is unnecessary to pass upon the question posed in this assignment of error in view
rendering him a builder in bad faith who is denied by law any right of of the total annulment of the sale on grounds concerning which both parties thereto
reimbursement. were at fault. The nullity of the contract precludes enforcement of any of its
stipulations.
In connection with the equipment, books, furniture and fixtures brought in by him,
he is not entitled to reimbursement either, because the judgment does not award WHEREFORE, the judgment appealed from is modified by eliminating therefrom the
them to any of the plaintiffs in these two actions. What is adjudged (in Civil Case No. award of attorney's fees of P1,000.00 in favor of Erlinda D. Diaz and her husband,
1774) is for the defendant to restore to the Mindanao Academy, Inc. all the books, plaintiffs in Civil Case No. 1907, and the award of nominal and exemplary damages
laboratory apparatus, furniture and other equipment "described in the Mutual in Civil Case No. 1774; and making the award of attorney's fees in the sum of
Agreement and specified in the Inventory attached to the records of this case; or in P2,000.00 payable to counsel for the account of the Mindanao Academy, Inc. instead
default thereof, their value in the amount of P23,500.00." In other words, whatever of the plaintiff stockholders. In all other respects the judgment appealed from is
has been brought in by the defendant is outside the scope of the judgment and may affirmed. No pronouncement as to costs.
be retained by him.

III. The appellant's fourth assignment of error refers to the nominal and exemplary
damages, as well as the attorney's fees, granted to the stockholders of the
Mindanao Academy, Inc. The trial court awarded no compensatory damages
because the Mindanao Academy, Inc. had been operating the two schools at a loss
before the sale in question, and the defendant himself was no more successful after
he took over. Are the stockholders of the said corporation who joined as plaintiffs in
Civil Case No. 1774 entitled to nominal and exemplary damages? We do not believe
so.
87

EN BANC First National City Bank with the request that the amount thereof be credited back to
the Bank of America. In turn, the First National City Bank wrote to the depositor of
G.R. No. L-25414 July 30, 1971 the check, Rufina Saldana, informing her about its return with the notation "Account
Closed" and asking her consent to the deduction of its amount from her deposit.
However, before Mrs. Saldana's reply could be received, the Bank of America
LEOPOLDO ARANETA, petitioner,
recalled the check from the First National City Bank and honored it.
vs.
BANK of AMERICA, respondent.
In view of the foregoing incidents, Araneta, through counsel, sent a letter to the
Bank of America demanding damages in the sum of $20,000. While admitting
MAKALINTAL, J.:
responsibility for the inconvenience caused to Araneta, the bank claimed that the
amount demanded was excessive, and offered to pay the sum of P2,000.00. The
Petition for review by certiorari of the decision of Court of Appeals in CA-G.R. No. L- offer was rejected.
34508-R modifying that of the Court of First Instance of Manila in the Case No.
52442.
On December 11, 1962 Araneta filed the complaint in this case against the Bank of
America for the recovery of the following:
Leopoldo Araneta, the petitioner herein, was a local merchant engaged in the import
and export business. On June 30, 1961 he issued a check for $500 payable to cash
1. Actual or compensatory damages P30,000.00
and drawn against the San Francisco main office of the Bank of America, where he
2. Moral damages 20,000.00
had been maintaining a dollar current account since 1948. At that time he had a
3. Temperate damages 50,000.00
credit balance of $523.81 in his account, confirmed by the bank's assistant cashier
4. Exemplary damages 10,000.00
in a letter to Araneta dated September 7, 1961. However, when the check was
5. Attorney's fees 10,000.00
received by the bank on September 8, 1961, a day after the date of the letter, it was
dishonored and stamped with the notation "Account Closed."
TOTAL P120,000.00

Upon inquiry by Araneta as to why his check had been dishonored, the Bank of
America acknowledged that it was an error, explaining that for some reason the The judgment of the trial court awarded all the item prayed for, but on appeal by the
check had been encoded with wrong account number, and promising that "we shall defendant the Court of Appeals eliminated the award of compensatory and
make every effort to see that this does not reoccur." The bank sent a letter of temperate damages and reduced the moral damages to P8,000.00, the exemplary
apology to the payee of the check, a Mr. Harry Gregory of Hongkong, stating that damages to P1,000.00 and the attorney's fees to P1,000.00.
"the check was returned through an error on our part and should not reflect
adversely upon Mr. Araneta." In all probability the matter would have been Not satisfied with the decision of the appellate court the plaintiff filed the instant
considered closed, but another incident of a similar nature occurred later. petition for review, alleging two reasons why it should be allowed, as follows:

On May 25, and 31, 1962 Araneta issued Check No. 110 for $500 and Check No. 111 (1) The Court of Appeals erred in holding that temperate damages
for $150, respectively, both payable to cash and drawn against the Bank of America. cannot be awarded without proof of actual pecuniary loss. There is
These two checks were received by the bank on June 3, 1962. The first check absolutely no legal basis for this ruling; worse yet, it runs counter
appeared to have come into the hands of Rufina Saldana, who deposited it to her to the very provisions of ART. 2216 of the New Civil Code and to
account the First National City Bank of New York, which in turn cleared it through the the established jurisprudence on the matter;
Federal Reserve Bank. The second check appeared to have been cleared through the
Wells Fargo Bank. Despite the sufficiency of Araneta's deposit balance to cover both (2) The Court of Appeals erred in not holding that moral damages
checks, they were again stamped with the notation "Account Closed" and returned may be recovered as an item separate and distinct from the
to the respective clearing banks. damages recoverable for injury to business standing and
commercial credit. This involves the application of paragraph (2) of
In the particular case of Check No. 110, it was actually paid by the Bank of America Art. 2205 of the New Civil Code which up to now has not yet
to the First National City Bank. Subsequently, however, the Bank of America, received an authoritative interpretation from the Supreme
claiming that the payment had been inadvertently made, returned the check to the Court. ... .
88

In his brief, however, the petitioner assigned five (5) errors committed by the be adjudicated. The assessment of such damages, except
appellate court, namely: (1) in concluding that the petitioner, on the basis of the liquidated ones, is left to the discretion of the court, according to
evidence, had not sufficiently proven his claim for actual damages, where such the circumstances of each case.
evidence, both testimonial and documentary, stands uncontradicted on the record;
(2) in holding that temperate damages cannot be awarded to the petitioner without Also invoked by the petitioner is the case of Atlanta National Bank vs. Davis, 96 Ga
proof of actual pecuniary loss; (3) in not granting moral damages for mental 334, 23 SE 190; 1 and the following citations in American Jurisprudence:
anguish, besmirched reputation, wounded feelings, social humiliation, etc., separate
and distinct from the damages recoverable for injury to business reputation; (4) in
In some states what are called "temperate damages" are allowed
reducing, without any ostensible reason, the award of exemplary damages granted
in certain classes of cases, without proof of actual or special
by the lower court; and (5) in reducing, without special reason, the award of
damages, where the wrong done must in fact have caused actual
attorney's fees by the lower court.
damage to the plaintiff, though from the nature of the case, he
cannot furnish independent, distinct proof thereof. Temperate
We consider the second and third errors, as they present the issues raised in the damages are more than nominal damages, and, rather, are such
petition for review and on the basis of which it was given due course. as would be a reasonable compensation for the injury sustained. ...
. (15 Am. Jur. 400)
In disallowing the award of temperate damages, the Court of Appeals ruled:
... . It has been generally, although not universally, held, in an
In view of all the foregoing considerations we hold that the plaintiff action based upon the wrongful act of a bank dishonoring checks
has not proven his claim that the two checks for $500 each were of a merchant or trader having sufficient funds on deposit with the
in partial payment of two orders for jewels worth P50,000 each. He bank, that substantial damages will be presumed to follow such
has likewise not proven the actual damage which he claims he has act as a necessary and natural consequence, and accordingly, that
suffered. And in view of the fact that he has not proven the special damages need not be shown. One of the reasons given for
existence of the supposed contract for himself to buy jewels at a this rule is that the dishonor of a merchant's or trader's check is
profit there is not even an occasion for an award of temperate tantamount or analogous, to a slander of his trade or business,
damages on this score. imputing to him insolvency or bad faith. ... . (10 Am. Jur. 2d. 545)

This ruling is now assailed as erroneous and without legal basis. The petitioner On the other hand the respondent argues that since the petitioner invokes Article
maintains that in an action by a depositor against a bank for damages resulting from 2205 of the Civil Code, which speaks of actual or compensatory damages for injury
the wrongful dishonor of the depositor's checks, temperate damages for injury to to business standing or commercial credit, he may not claim them as temperate
business standing or commercial credit may be recovered even in the absence of damages and thereby dispense with proof of pecuniary loss under Article 2216. The
definite proof of direct pecuniary loss to the plaintiff, a finding as it was found by respondent cites Article 2224, which provides that "temperate or moderate
the Court of Appeals that the wrongful acts of the respondent had adversely damages, which are more than nominal but less than compensatory damages may
affected his credit being sufficient for the purpose. The following provisions of the be recovered when the court finds that some pecuniary loss has been suffered but
Civil Code are invoked: its amount cannot, from the nature of the case, proved with certainty," and contends
that the petitioner failed to show any such loss in this case.
ART. 2205. Damages may be recovered:
The question, therefore, is whether or not on the basis of the findings of the Court of
(1) For loss or impairment of earning capacity in cases of Appeals, there is reason to conclude that the petitioner did sustain some pecuniary
temporary or permanent personal injury; loss although no sufficient proof of the amount thereof has been adduced. In
rejecting the claim for temperate damages the said Court referred specifically to the
petitioner's failure to prove "the existence of a supposed contract for him to buy
(2) For injury to the plaintiff's business standing or commercial
jewels at a profit," in connection with which he issued the two checks which were
credit.
dishonored by the respondent. This may be true as far as it goes, that is, with
particular reference to the alleged loss in that particular transaction. But it does not
ART. 2216. No proof of pecuniary loss is necessary in order that detract from the finding of the same Court that actual damages had been suffered,
moral, nominal, temperate, liquidated or exemplary damages may thus:
89

... Obviously, the check passed the hands of other banks since it Under the third error assigned by the petitioner in his brief, which is the second of
was cleared in the United States. The adverse reflection against the two reasons relieve upon in his petition for review, he contends that moral
the credit of Araneta with said banks was not cured nor explained damages should have been granted for the injury to his business standing or
by the letter of apology to Mr. Gregory. commercial credit, separately from his wounded feelings and mental anguish. It is
true that under Article 2217 of the Civil Code. "besmirched reputation" is a ground
... This incident obviously affected the credit of Araneta with Miss upon which moral damages may be claimed, but the Court of Appeals did take this
Saldana. element into consideration in adjudging the sum of P8,000 in his favor. We quote
from the decision:

However, in so far as the credit of Araneta with the First National


City Bank, with Miss Rufina Saldana and with any other persons ... the damages to his reputation as an established and well known
who may have come to know about the refusal of the defendant to international trader entitled himself to recover moral damages.
honor said checks, the harm was done ...
... It was likewise established that when plaintiff learned that his
The financial credit of a businessman is a prized and valuable asset, it being a checks were not honored by the drawee Bank, his wounded
significant part of the foundation of his business. Any adverse reflection thereon feelings and the mental anguish suffered by him caused his blood
constitutes some material loss to him. As stated in the case Atlanta National Bank pressure to rise beyond normal limits, thereby necessitating
vs. Davis, supra, citing 2 Morse Banks, Sec. 458, "it can hardly be possible that a medical attendance for an extended period.
customer's check can be wrongfully refused payment without some impeachment of
his credit, which must in fact be an actual injury, though he cannot, from the nature The trial court awarded attorney's fees in the amount of P10,000. This was reduced
of the case, furnish independent, distinct proof thereof." by the Court of Appeals to only P1,000. Considering the nature and extent of the
services rendered by the petitioner's counsel both in the trial and appellate courts,
The Code Commission, in explaining the concept of temperate damages under the amount should be increased to P4,000. This may be done motu propio by this
Article 2224, makes the following comment: Court under Article 2208 of the Civil Code, which provides that attorney's fees may
be recovered in the instances therein enumerated and "in any other case where the
Court deems, it first and equitable that attorney's fees ... should be recovered,"
In some States of the American Union, temperate damages are
provided the amount thereof be reasonable in all cases.
allowed. There are cases where from the nature of the case,
definite proof of pecuniary loss cannot be offered, although the
court is convinced that there has been such loss. For instance, We do not entertain the first and fourth errors assigned by the petitioner. Neither of
injury to one's commercial credit or to the goodwill of a business them was raised and ruled upon as reasons for the allowance of his petition for
firm is often hard to show with certainty in terms of money. Should review, as required by Section 2 of Rule 45. Besides, the first error involves a
damages be denied for that reason? The judge should be question of fact and calls for a review of the evidence and a reappraisal of its
empowered to calculate moderate damages in such cases, rather probative value a task not within the appellate jurisdiction of this case. And with
than that the plaintiff should suffer, without redress from the respect to the fourth error, while there was gross negligence on the part of the
defendant's wrongful act. respondent, the record shows, as hereinbefore observed, that it tried to rectify its
error soon after the same was discovered, although not in time to prevent the
damage to the petitioner.
The petitioner, as found by the Court of Appeals, is a merchant of long standing and
good reputation in the Philippines. Some of his record is cited in the decision
appealed from. We are of the opinion that his claim for temperate damages is legally WHEREFORE, the judgment of the Court of Appeals is modified by awarding
justified. Considering all the circumstances, including the rather small size of the temperate damages to the petitioner in the sum of P5,000 and increasing the
petitioner's account with the respondent, the amounts of the checks which were attorney's fees to P4,000; and is affirmed in all other respects. Costs against the
wrongfully dishonored, and the fact that the respondent tried to rectify the error respondent.
soon after it was discovered, although the rectification came after the damage had
been caused, we believe that an award of P5,000 by way of temperate damages is
sufficient.
90

FIRST DIVISION However, personnel of the GSIS were not able to release the owners duplicate of the
title as it could not be found despite diligent search. [12] As stated earlier, the spouses
[G.R. No. 135644. September 17, 2001] as mortgagors deposited the owners duplicate copy of the title with the GSIS located
at its office in San Fernando, Pampanga.[13]
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. SPOUSES
GONZALO and MATILDE LABUNG-DEANG, respondents. Satisfied that the owners duplicate copy of the title was really lost, in 1979, GSIS
commenced the reconstitution proceedings with the Court of First Instance of
DECISION Pampanga for the issuance of a new owners copy of the same. [14]

PARDO, J.: On June 22, 1979, GSIS issued a certificate of release of mortgage. [15]

The petitioner in the case is the Government Service Insurance System (hereafter, On June 26, 1979, after the completion of judicial proceedings, GSIS finally secured
GSIS). Having lost the case in the trial court and the Court of Appeals, it now comes and released the reconstituted copy of the owners duplicate of Transfer Certificate of
to this Court for redress. Title No. 14926-R to the spouses Deang.[16]

At the onset, we state that the issue is not suability or whether GSIS may be sued On July 6, 1979, the spouses Deang filed with the Court of First Instance, Angeles
despite the doctrine of state immunity from suit, but liability, whether or not GSIS City a complaint against GSIS for damages, claiming that as result of the delay in
may be liable to pay damages to respondent spouses given the applicable law and releasing the duplicate copy of the owners title, they were unable to secure a loan
the circumstances of the case.[1] from Milagros Runes, the proceeds of which could have been used in defraying the
estimated cost of the renovation of their residential house and which could have
been invested in some profitable business undertaking.[17]
The Case

In its defense, GSIS explained that the owners duplicate copy of the title was
The case is a petition[2] for review on certiorari of the decision of the Court of
released within a reasonable time since it had to conduct standard pre-audit and
Appeals[3] affirming the decision of the Regional Trial Court, Angeles City [4] ordering
post-audit procedures to verify if the spouses Deangs account had been fully settled.
GSIS to pay respondents Gonzalo (now deceased) [5] and Matilde Labung-Deang [18]
(hereafter, spouses Deang) temperate damages, attorneys fees, legal interests and
costs of suit for the loss of their title to real property mortgaged to the GSIS.
On July 31, 1995, the trial court rendered a decision ruling for the spouses
Deang. The trial court reasoned that the loss of the owners duplicate copy of the
The Facts
title in the possession of GSIS as security for the mortgage... without justifiable
cause constitutes negligence on the part of the employee of GSIS who lost it, making
Sometime in December 1969, the spouses Deang obtained a housing loan from the GSIS liable for damages.[19] We quote the dispositive portion of the decision:[20]
GSIS in the amount of eight thousand five hundred pesos (P8,500.00). Under the
agreement, the loan was to mature on December 23, 1979. The loan was secured by
IN VIEW OF THE FOREGOING, the Court renders judgment ordering the GSIS:
a real estate mortgage constituted over the spouses property covered by Transfer
Certificate of Title No. 14926-R issued by the Register of Deeds of Pampanga. [6] As
required by the mortgage deed, the spouses Daeng deposited the owners duplicate a) To pay the plaintiffs-spouses the amount of P20,000.00 as temperate
copy of the title with the GSIS.[7] damages;

On January 19, 1979, eleven (11) months before the maturity of the loan, the b) To pay plaintiffs-spouses the amount of P15,000.00 as attorneys fees;
spouses Deang settled their debt with the GSIS [8] and requested for the release of
the owners duplicate copy of the title since they intended to secure a loan from a c) To pay legal interest on the award in paragraphs a) and b) from the filing of
private lender and use the land covered by it as collateral security for the loan of the complaint; and,
fifty thousand pesos (P50,000.00)[9] which they applied for with one Milagros Runes.
[10]
They would use the proceeds of the loan applied for the renovation of the spouses d) To pay cost of the suit.
residential house and for business.[11]
91

SO ORDERED. The argument is untenable. The cited provision of the Civil Code is not applicable to
the case at bar. However, the trial court and the Court of Appeals erred in citing it as
On August 30, 1995, GSIS appealed the decision to the Court of Appeals. [21] the applicable law. Nonetheless, the conclusion is the same. As heretofore stated,
we find that GSIS is liable for damages.

On September 21, 1998, the Court of Appeals promulgated a decision affirming the
appealed judgment, ruling: First, since government owned and controlled The trial court and the Court of Appeals treated the obligation of GSIS as one
corporations (hereafter, GOCCs) whose charters provide that they can sue and be springing from quasi-delict.[27] We do not agree. Article 2176 of the Civil Code
sued have a legal personality separate and distinct from the government, GSIS is not defines quasi-delict as follows:
covered by Article 2180[22] of the Civil Code, and it is liable for damages caused by
their employees acting within the scope of their assigned tasks. Second, the GSIS is Whoever by act or omission causes damages to another, there being fault or
liable to pay a reasonable amount of damages and attorneys fees, which the negligence, is obliged to pay for the damage done. Such fault or negligence, if there
appellate court will not disturb. We quote the dispositive portion:[23] is no pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter (underscoring ours).
WHEREFORE, finding no reversible error in the appealed judgment, the same is
hereby AFFIRMED. Under the facts, there was a pre-existing contract between the parties. GSIS and the
spouses Deang had a loan agreement secured by a real estate mortgage. The duty
SO ORDERED. to return the owners duplicate copy of title arose as soon as the mortgage was
released.[28] GSIS insists that it was under no obligation to return the owners
duplicate copy of the title immediately. This insistence is not warranted. Negligence
Hence, this appeal.[24]
is obvious as the owners duplicate copy could not be returned to the owners. Thus,
the more applicable provisions of the Civil Code are:
The Issue
Article 1170. Those who in the performance of their obligations are guilty of fraud,
Whether the GSIS, as a GOCC primarily performing governmental functions, is liable negligence, or delay and those who in any manner contravene the tenor thereof are
for a negligent act of its employee acting within the scope of his assigned tasks. [25] liable for damages.

The Courts Ruling Article 2201. In contracts and quasi-contracts, the damages for which the obligor
who acted in good faith is liable shall be those that are the natural and probable
We rule that the GSIS is liable for damages. We deny the petition for lack of merit. consequences of the breach of the obligation, and which the parties have foreseen
or could have reasonably foreseen at the time the obligation was constituted xxx.

GSIS, citing the sixth paragraph of Article 2180 of the Civil Code argues that as a
GOCC, it falls within the term State and cannot be held vicariously liable for Since good faith is presumed and bad faith is a matter of fact which should be
negligence committed by its employee acting within his functions. [26] proved,[29] we shall treat GSIS as a party who defaulted in its obligation to return the
owners duplicate copy of the title. As an obligor in good faith, GSIS is liable for all
the natural and probable consequences of the breach of the obligation. The inability
Article 2180. The obligation imposed by Article 2176 is demandable not only for
of the spouses Deang to secure another loan and the damages they suffered
ones own acts or omissions, but also for those of persons for whom one is
thereby has its roots in the failure of the GSIS to return the owners duplicate copy of
responsible.
the title.

Employers shall be liable for the damages caused by their employees and household
We come now to the amount of damages. In a breach of contract, moral damages
helpers acting within the scope of their assigned tasks, even though the former are
are not awarded if the defendant is not shown to have acted fraudulently or with
not engaged in any business of industry.
malice or bad faith.[30] The fact that the complainant suffered economic
hardship[31] or worries and mental anxiety[32] is not enough.
The State is responsible in like manner when it acts though a special agent, but not
when the damage has been caused by the official to whom the task was done
properly pertains, in which case what is provided in Article 2176 shall be applicable.
92

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

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

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

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

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


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

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

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

The Fallo

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


Appeals in CA-G.R. CV No. 51240 with the MODIFICATION that award of attorneys
fees is DELETED. No costs. SO ORDERED.
93

FIRST DIVISION As a consequence, private respondent claimed that he suffered humiliation and
embarrassment due to the bank's gross negligence. Complaint was filed in court
G.R. No. L-66123 August 22, 1984 which awarded private respondent damages, as follows:

THE MANILA BANKING CORPORATION, petitioner, 1) P75,000.00 as actual damages, to compensate plaintiff for the loss of
vs. business and business opportunities;
INTERMEDIATE APPELLATE COURT AND WILFREDO J. RIVERA, respondents.
2) P25,000.00 as moral damages, to compensate plaintiff for the
RELOVA, J.: embarrassment, humiliation and mental anguish suffered;

Appeal from the judgment of the Intermediate Appellate Court in AC-G.R. CV No. 3) P10,000.00 as exemplary damages;
64721, entitled: Wilfredo J. Rivera, plaintiff-appellee vs. The Manila Banking
Corporation, defendant-appellant, which reads: 4) P25,000.00 as and for attorney's fees; and

WHEREFORE, except as modified in the sense that the award of actual 5) Cost of suit. (pages 25-26, rollo).
damage in the sum of P75,000.00 be eliminated and instead the sum of Ten
Thousand (P10,000.00) Pesos be awarded as temperate damage and the
reduction of the award of attomey's fees to the sum of Fifteen Thousand On appeal to the Intermediate Appellate Court, the judgment of the trial court was
(P15.000.00) Pesos, the decision is affirmed in toto in all other respects. modified in the sense that

Costs against the appellant. (page 28, rollo). ... the award of actual damage in the sum of P75,000.00 be eliminated and
instead the sum of Ten Thousand (P10,000.00) Pesos be awarded as
temperate damage and the reduction of the award of attorney's fees to the
Records show that in the morning of July 10, 1975 herein private respondent sum of Fifteen Thousand (P15,000.00) Pesos, the decision is affirmed in toto
Wilfredo J. Rivera deposited with petitioner bank the sum of P80,189.19. In the in all other respects. (page 28, rollo).
afternoon of the same day, private respondent Rivera issued a Manila Banking
Corporation Check No. 16756626 in the amount of P80,000.00 under Current
Account No. 6-05350-5 payable to Collins Philippines with whom he had a business Upon the foregoing facts, respondent court ruled that
transaction. Thereafter, private respondent's wife received a letter of demand from
Collins Philippines, dated July 15, 1975, saying that The award for actual damages has no factual basis. How the sum of
P75,000.00 in the form of actual and compensatory damages was arrived
Quite frankly, we are surprised why this has to happen considering our at, was not at all shown by any means before the Court a quo. While actual
pleasant business relationship in the past and the representations and damages may have been suffered, the law requires that such damages be
commitments you made to us prior to the issuance of the above check. At proven by facts and figures. Indeed, while the appellee overlooked
any rate, just to be sure, we are redepositing the same check with the fair presenting adequate proof of actual and compensatory damages. We,
warning that if the said check will again be dishonored, we shall close our however, find and so hold that there may indeed have been actual
business dealings and institute proper action for the protection of our damages although the amount thereof was not established. We merely
interest. (p. 26, rollo). award the sum of P10,000.00 in the form of temperate damage in favor of
the appellee.

His wife immediately informed him in the province about the letter of demand. Upon
receipt of the message, Mr. Rivera complained to the Public Relations Officer of The appellant belittle the negligence of the bank especially so since the
petitioner bank, inviting attention to the letter received by him from Collins appellee's check was ultimately encashed. The argument is specious. It
Philippines complaining against the dishonor of his check. The Public Relations does not require too much imagination to visualize the possibility that the
Officer of the bank, upon investigation, found that the money deposited was appellee could have died right after the deposit was made. Then the
credited into another account and that was the reason why the check issued by him appellee could not have issued the check in question. The appellee could
could not be encashed upon presentation. not have complained to the appellant about his check that was dishonored.
94

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

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

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

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


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

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

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

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


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

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

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

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

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


Later, appellant entrusted a bag of womans personal belongings to barangay
pleaded not guilty. Pre-trial was conducted on March 1, 2001 and trial ensued
tanod Allan Castaares and told the latter that it belonged to his woman companion.
thereafter.
He allegedly could not bring it home because his wife might see them. [11]
96

By February 11, 2000, neighbors started smelling the rotten odor of ordered him to close the door. Pacot told appellant that he was going to be
Rosemaries already decomposing body.[12] implicated just the same so he closed the door as ordered and helped Pacot (hold)
the feet of the woman as her feet kept hitting the walls.[17]
At 5:00 p.m. the same day, witnesses Roche, Resna, and Rachel were gathering
seashells under appellants house when they saw droplets of blood and pus dripping The two men stopped only when Rosemarie was already motionless. Pacot
from appellants comfort room. They immediately reported it to their aunt who in wanted to dump the body into the sea but appellant told him it was low tide.
turn instructed her husband to get a stick and poke the sacks covering the comfort Appellant then suggested that they entomb the body in cement for which Pacot
room. However, the husband instead climbed up the house and was greeted by the gave appellant P500.
stink emanating from the corner where he saw a tomb-like structure. They
immediately reported the matter to barangay officials who called the police.[13] Pacot left the house at dawn the following day, February 7, 2000. At past 10:00
a.m., appellant brought the concrete mixture and cast the dead body in
At about 10:00 p.m., policemen arrived at appellants house, accompanied by cement. After finishing the job in the afternoon of that day, appellant reported for
his wife, and forcibly opened the lock. They proceeded to where the tomb was work at DUCC.
located.
When the body was discovered in the evening of February 11, 2000, appellant
When cracked open, the tomb revealed the decomposing body of a woman. [14] immediately left for Cebu City, arriving there the next day, February 12, 2000. He
stayed in Cebu City until his arrest the following year.
The corpse was brought to the Rivera Funeral Parlor where it was identified by
the victims mother Charlita Tallada and aunt Patricia Turlao as that of Rosemarie, On May 31, 2001, the trial court rendered judgment finding appellant guilty of
through the keloid scar on her forearm. murder and imposed upon him the supreme penalty of death:

Dr. Danilo Ledesma conducted an autopsy on Rosemaries remains. His WHEREFORE, this Court finds the accused Francisco Dacillo GUILTY beyond
necropsy report revealed that Rosemarie died from a stab wound in the abdomen. reasonable doubt of the crime of MURDER for the death of Rosemarie Tallada, as
The report further disclosed that she suffered contusions in the anterior chest wall defined and penalized under Art. 248 of the Revised Penal Code, as
and her right hand; an incised wound on her left middle finger; a stab wound on the amended. Considering the aggravating circumstance of recidivism with no
left side of the face and fractures on the 2nd, 3rd, 4th, 5th, 6th and 7th ribs on her side.[15] mitigating circumstance to offset the same, he is hereby sentenced to the extreme
penalty of DEATH,
Dr. Ledesma testified that the wounds suffered by Rosemarie indicated that
she put up a struggle and the wounds were inflicted before her death.[16] He is further ordered to indemnify the heirs of the offended party in the amount
of P50,000.00, plus the sum of P50,000.00 as moral damages, and the sum
In his defense, appellant admitted complicity in the crime but minimized his of P50,000.00 as exemplary damages.
participation. Appellant alleged that he only held down Rosemaries legs to prevent
her from struggling and, after the latter was killed by another man he identified as His immediate confinement to the national penitentiary is hereby ordered.
Joselito Pacot, he encased the corpse in cement.
Costs de oficio.
He claimed that Pacot, a co-worker at Davao Union Cement Corporation
(DUCC), was looking for a house where he and his girlfriend Rosemarie could spend SO ORDERED.[18]
the night. He offered his brothers house which was under his care. In the evening of
February 6, 2000, he and Joselito Pacot brought Rosemarie to the house at Purok No.
Thus, this automatic review.
3, New Society Village, Ilang, Davao City.

In his brief, appellant raises the following errors allegedly committed by the
After accompanying the couple there, he went home to take supper. Later that
trial court:
evening, he returned to the house with the bottle of Sprite Pacot had ordered. When
he arrived, Pacot and Rosemarie were already grappling with each other and Pacot
was strangling the girl. He told Pacot to stop but instead of heeding him, the latter I
97

THE COURT A QUO GRAVELY ERRED IN FINDING THE APPELLANT GUILTY BEYOND already dead. The two men planned how to dispose of the victims body; it was in
REASONABLE DOUBT OF THE CRIME OF MURDER. fact appellants idea to pour concrete on the body, prevailing over Pacots suggestion
to just dump the body into the sea. It was appellant himself who encased the body
II in cement and made sure that there were no leaks from which foul odor could
emanate. He was a conspirator in the killing and, whether or not he himself did the
strangling or the stabbing, he was also liable for the acts of the other accused.
THE COURT A QUO GRAVELY ERRED IN AWARDING THE HEIRS OF THE OFFENDED
PARTY THE AMOUNT OF PHP50,000.00, WHICH APPEARS AS PAYMENT FOR ACTUAL
DAMAGES.[19] It is well-settled that a person may be convicted for the criminal act of another
where, between them, there is conspiracy or unity of purpose and intention in the
commission of the crime charged.[22] Conspiracy need not be proved by direct
Appellant admitted that he had a hand in the killing of Rosemarie but
evidence of prior agreement on the commission of the crime as the same can be
attempted to downgrade his participation in the crime by claiming he only held
inferred from the conduct of the accused before, during, and after the commission of
Rosemaries legs as Pacot was strangulating her. The rule is that any admission made
the crime showing that they acted in unison with each other pursuant to a common
by a party in the course of the proceedings in the same case does not require proof
purpose or design.[23]
to hold him liable therefor. Such admission may be contradicted only by showing
that it was made through palpable mistake or no such admission was in fact
made. There was never any such disclaimer by appellant. We are convinced beyond doubt of the joint and concerted effort between
appellant and the man he identified as Pacot in the killing of Rosemarie.

Moreover, despite appellants self-serving, exculpatory statement limiting his


involvement in the crime, all circumstances pointed to his guilt. His declaration Appellant likewise contends that the trial court erred in ruling that the presence
faltered in the face of the testimonies of eyewitnesses positively identifying him as of the aggravating circumstance of abuse of superior strength qualified the killing to
one of the two men who were with Rosemarie when she was killed. Witness Roche murder. He contends that the qualifying circumstance of abuse of superior strength
Abregon pointed to appellant as the one who strangled Rosemarie. He was was not specifically alleged in the information. Nothing can be farther from the
established to be inside the house at the time the witnesses heard a woman being truth. A cursory reading of the information reveals that appellant was sufficiently
battered. Thus, assuming for the sake of argument that Pacot was the mastermind, informed of the charges against him, including the use of superior strength in killing
appellants admission that he participated in its commission by holding Rosemaries the hapless and defenseless female victim.
legs made him a principal by direct participation.
The aggravating circumstance of abuse of superior strength necessitates a
Two or more persons taking part in the commission of a crime are considered showing of the relative disparity in the physical characteristics of the aggressor and
principals by direct participation if the following requisites are present: the victim such as age, gender, physical size and strength. We agree with the trial
court that the killing of Rosemarie was committed with abuse of superior strength.
As found by the court a quo, two grown-up men against a young fragile woman
1. they participated in the criminal resolution and
whose ability to defend herself had been effectively restrained revealed a shocking
inequality of physical strength. The victim was much weaker in constitution and
2. they carried out their plan and personally took part in its execution by acts could not have possibly defended herself from her stronger assailants. [24] Such
which directly tended to the same end.[20] disparity was manifest in the contusions in the chest and hands, wounds on the
fingers, a stab wound on the left side of the face and multiple fractures in the ribs of
Both requisites were met in this case. Two or more persons are said to have the victim.[25] The abuse of superior strength was obvious in the way Rosemarie was
participated in the criminal resolution when they were in conspiracy at the time of mercilessly beaten to a pulp.
the commission of the crime. To establish conspiracy, it is not essential that there be
proof of the previous agreement and decision to commit the crime, it being sufficient The killing of Rosemarie was thus correctly qualified to murder by the abuse of
that the malefactors acted in concert pursuant to the same objective. [21] superior strength, a circumstance specifically pleaded in the information and proved
beyond reasonable doubt.
The prosecution was able to prove appellants participation in the criminal
resolve by his own admission that, right after he was told by Pacot to close the door, The Court, however, finds that the trial court erred in imposing the death
he held down Rosemaries legs. He was pinpointed as the one who throttled the penalty on the ground that appellant admitted during re-cross examination that he
victim. He admitted that they only stopped when they were sure that Rosemarie was had a prior conviction for the death of his former live-in partner. The fact that
98

appellant was a recidivist was appreciated by the trial court as a generic circumstances. Such damages are separate and distinct from fines and shall be paid
aggravating circumstance which increased the imposable penalty from reclusion to the offended party.
perpetua to death.
In People vs. Catubig,[31] we explained that:
In order to appreciate recidivism as an aggravating circumstance, it is
necessary to allege it in the information and to attach certified true copies of the The term aggravating circumstances used by the Civil Code, the law not having
sentences previously meted out to the accused. [26] This is in accord with Rule 110, specified otherwise, is to be understood in its broad or generic sense. The
Section 8 of the Revised Rules of Criminal Procedure which states: commission of an offense has a two-pronged effect, one on the public as it breaches
the social order and the other upon the private victim as it causes personal
SEC. 8. Designation of the offense. - The complaint or information shall state the sufferings, each of which is addressed by, respectively, the prescription of heavier
designation of the offense given by the statute, aver the acts or omissions punishment for the accused and by an award of additional damages to the
constituting the offense, and specify its qualifying and aggravating victim. The increase of the penalty or a shift to a graver felony underscores the
circumstances. If there is no designation of the offense, reference shall be made to exacerbation of the offense by the attendance of aggravating circumstances,
the section or subsection of the statute punishing it. (Emphasis supplied) whether ordinary or qualifying, in its commission. Unlike the criminal liability which
is basically a State concern, the award of damages, however, is likewise, if not
The aggravating circumstance of recidivism was not alleged in the information primarily, intended for the offended party who suffers thereby. It would make little
and therefore cannot be appreciated against appellant. Hence the imposable penalty sense for an award of exemplary damages to be due the private offended party
should be reduced to reclusion perpetua. when the aggravating circumstance is ordinary but to be withheld when it is
qualifying. Withal, the ordinary or qualifying nature of an aggravating circumstance
is a distinction that should only be of consequence to the criminal, rather than to the
Regarding the award of P50,000 as civil indemnity to the heirs of the victim,
civil, liability of the offender. In fine, relative to the civil aspect of the case, an
appellant claims that said amount was awarded by the trial court as payment for
aggravating circumstance, whether ordinary or qualifying, should entitle the
actual damages. This claim is misleading. As aptly pointed out by the Solicitor
offended party to an award of exemplary damages within the unbridled meaning of
General, the amount was granted by the trial court by way of indemnity ex delicto to
Article 2230 of the Civil Code.
compensate for the death of the victim which prevailing jurisprudence fixes
at P50,000.[27] The award of such indemnity requires no proof other than the death of
the victim and the accuseds responsibility therefor. [28] Thus, the award of exemplary damages is warranted under Art. 2230 of the
Civil Code in view of the presence of the aggravating circumstance of abuse of
superior strength. Imposition of exemplary damages is also justified under Art. 2229
The award of P50,000 as moral damages is proper, supported as it was by the
of the Civil Code in order to set an example for the public good. [32] For this purpose,
testimony of Charlita Tallada, the victims mother, that Rosemaries death caused her
we believe that the amount of P25,000 may be appropriately awarded.
immeasurable pain.[29]

WHEREFORE, the assailed judgment in Criminal Case No. 45,283-2000 of the


In addition, the Court awards P25,000 in temperate damages, said amount
Regional Trial Court of Davao City, Branch 31, is hereby AFFIRMED with
being awarded in homicide or murder cases when no evidence of burial and funeral
MODIFICATION. Appellant Francisco Dacillo y Timtim alias Dodoy is declared guilty
expenses is presented in the trial court.[30]
beyond reasonable doubt of murder as defined and penalized under Article 248 of
the Revised Penal Code. There being neither aggravating nor mitigating
With regard to the award of exemplary damages, the Civil Code of the circumstances, appellant is hereby sentenced to reclusion perpetua and is further
Philippines provides: ordered to indemnify the heirs of Rosemarie Tallada the sum of P50,000 as civil
indemnity, P50,000 as moral damages, P25,000 as temperate damages and P25,000
ART. 2229. Exemplary or corrective damages are imposed, by way of example of as exemplary damages.
correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages. Costs de oficio.

ART. 2230. In criminal offenses, exemplary damages as a part of the civil liability SO ORDERED.
may be imposed when the crime was committed with one or more aggravating
99
100

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

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


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

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

The prosecutions version of the incident is as follows:

PEOPLE OF THE PHILIPPINES,


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

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

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

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

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

Ernesto Garces, being an accessory to the commission of the


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

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

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

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

WHEREFORE, premises considered, the appealed Decision


After trial on the merits, the trial court rendered its decision finding Pacursa guilty of convicting accused ROSENDO PACURSA as principal and
Forcible Abduction with Rape while petitioner Garces was found guilty as an accused-appellant ERNESTO GARCES as accessory of the crime
of forcible abduction with rape is AFFIRMED.
accessory to the crime. Antonio Pira, Jr. and Aurelio Pira were acquitted for
insufficiency of evidence.[11] However, accused-appellant Ernesto Garces sentence
is MODIFIED in that he is to suffer the indeterminate penalty of
imprisonment ranging from FOUR (4) YEARS of prision
The dispositive portion of the decision reads:
correccional, as minimum,
to EIGHT (8) YEARS and ONE (1) DAY of prision mayor, as
WHEREFORE, PREMISES CONSIDERED, accused ROSENDO PACURSA and maximum.
ERNESTO GARCES are hereby found guilty of the crime of Forcible
SO ORDERED.[13]
Abduction With Rape punishable under the Revised Penal Code committed
upon the person of AAA. The other accused ANTONIO PIRA, JR. and AURELIO
Petitioner filed a motion for reconsideration but same was denied. Hence, the instant
PIRA are hereby ACQUITTED as accessory for the crime of Forcible
petition for review on certiorari.
Abduction With Rape.
Petitioner claims that no rape was committed and that there is no evidence to show
ROSENDO PACURSA, the principal accused in this case is hereby
sentenced to one degree lower than that prescribed by law for the that he covered the mouth of the complainant when he brought her out of the barn.
offense, for being 16 years old at the time of the commission of
the crime pursuant to Art. 68 of the Revised Penal Code. Taking The petition lacks merit.
into consideration the aggravating circumstances of uninhabited
place and nighttime, he is hereby sentenced to suffer an
It has been established that Pacursa forcibly took AAA against her will and by use of
indeterminate penalty of 11 years of prision mayor as minimum to
18 years of reclusion temporal as maximum. force and intimidation, had carnal knowledge of her. The trial court found
102

complainants testimony to be credible, consistent and unwavering even during there is no other evidence that the peculiar advantage of nighttime was purposely
cross-examination. and deliberately sought by the accused.

Regarding the letter she wrote to Pacursa asking him to elope with her, she The aggravating circumstance of uninhabited place cannot likewise be appreciated
explained that she felt uncertain at that time and was trying to avoid the possible in the absence of evidence that the accused actually sought an isolated place to
[14]
trouble or scandal the incident might bring upon her, which we find plausible. In better execute their purpose.[22] The records do not show that solitude was purposely
pursuing the case, she had to transfer to another school because of the threats of sought or taken advantage of to facilitate the commission of the crime.
her assailants and their persistence in settling the case. Furthermore, no improper
Although Pacursa has withdrawn his appeal, the Courts ruling that the crime
motive was shown why she would accuse and testify against Pacursa who was her
committed is simple rape and not forcible abduction with rape, shall apply to him.
boyfriend, and the other accused, who are her relatives. [15]
Section 11 (a), Rule 122 of the Rules of Court specifically provides that an appeal
Prosecution witness Grace Liberto likewise corroborated the testimony of taken by one or more of several accused shall not affect those who did not appeal,
complainant when she testified that she saw the latter crying, wearing only one except insofar as the judgment of the appellate court is favorable and applicable to
[16]
slipper, and her hair disheveled, immediately after the incident. The medico-legal the latter.
findings of Dr. Herminio Venus also showed that there was a laceration in
As regards petitioners complicity, his defense of alibi cannot prevail over
complainants private parts possibly caused by sexual contact. [17]
complainants positive identification of her assailants. Denial and alibi are inherently
Pacursa, however, could not be convicted of the crime of forcible abduction with weak defenses and constitute self-serving negative evidence which can not be
rape because the crime committed was only simple rape. Forcible abduction is accorded greater evidentiary weight than the positive declaration of credible
absorbed in the crime of rape if the real objective of the accused is to rape the witnesses.[23]
victim.[18] Based on the evidence presented, the accused intended to rape the victim
For alibi to prosper, the accused must establish by clear and convincing evidence (a)
when he took her to the tobacco barn. Hence, forcible abduction is absorbed in the
his presence at another place at the time of the perpetration of the offense and (b)
crime of rape.[19]
the physical impossibility of his presence at the scene of the crime. [24] Petitioner
alleged he was watching television at Aurelio Piras house, which is about 20 meters
away from the barn at the time of the incident. However, it will only take one minute
We also note that the trial court failed to make any definitive finding as to the
for him to reach the barn from the house. [25] Thus, it was not physically impossible
existence of aggravating circumstances. However, we find that the aggravating
for him to be at the scene of the crime at the time of its commission.
circumstances of nighttime and uninhabited place did not attend the commission of
the crime.

Nocturnity is aggravating when it is deliberately sought to prevent the accused from Contrary to petitioners contention, there is proof that petitioner covered AAAs mouth
[20]
being recognized or to ensure his unmolested escape. The mere fact that the rape when he dragged her out of the barn. Complainant executed a sworn statement
was committed at nighttime does not make nocturnity an aggravating circumstance. recounting her harrowing experience which she identified during her direct
[21]
In the instant case, other than the fact that the crime was committed at night, examination and offered as Exhibits A, A-1, and A-2[26] for the prosecution and
admitted by the trial court.[27] In her sworn statement, AAA narrated thus:
103

Q - Will you relate carefully the manner by which Rosendo Pacursa declarations must be evaluated and examined together in toto so
raped you? that a full and thorough determination of the merits of the case
may be achieved. Giving weight to a witness oral testimony during
A - x x x Then someone came inside the barn, shut-off my mouth, the trial should not mean being oblivious to the other pieces of
then brought me out and away southward and when we available evidence such as the sworn statement. In like manner,
reach the house of Florentino Garces he released me and the court cannot give probative value to the sworn statement to
as I walked down the path my uncle Bartolome Florendo the exclusion of the oral testimony. In every case, the court should
was able to light me with his flashlight review, assess and weigh the totality of the evidence presented by
the parties. It should not confine itself to oral testimony during
Q - Who was that person who later came inside the barn who trial. x x x[30]
brought you out shutting-off your mouth then took you
away southward?
Petitioner also faults the court a quo in finding that he threatened AAA while leading
A - Ernesto Garces also from our place, sir. her out of the barn. He argues that complainant failed to positively identify the
person who issued the threats because she vaguely referred to said person merely
Q - Why, has Rosendo Pacursa other companions?
as they.
A - He has, sir. They are Ernesto Garces, Senando Garces, Antonio
Pira, Jr. and Aurelio Pira. The contention lacks merit.

Q - What did these companions of Rosendo Pacursa do?


The use of the word they in referring to the person who threatened complainant is of
A - They stayed outside the barn but it was Ernesto Garces who no moment. When the threats were issued, both Pacursa and petitioner were inside
brought me out, sir.[28]
the barn; thus, it is logical to conclude that the threats came from both of them.

Complainants failure to testify during her direct examination that her mouth was
Petitioner likewise cannot take refuge in the acquittal of Antonio and Aurelio
covered by petitioner when she was pulled out of the barn does not preclude resort
Pira. Both were acquitted because there was no evidence to show their participation
to her sworn statement to provide the missing details, since said sworn statement
in the crime. Complainant only testified that she heard their voices which the trial
forms part of her testimony. As held in People v. Servano:[29]
court considered insufficient. However, in the case of petitioner, complainant
Evidence in criminal cases is not limited to the declarations made positively identified him as one of the companions of Pacursa who remained outside
in open court; it includes all documents, affidavits or sworn
the barn and who eventually entered upon noting the presence of AAAs relatives
statements of the witnesses, and other supporting evidence.It
comprehends something more than just the mere testimony of a nearby. He thereafter covered complainants mouth and led her out of the barn. All
witness. Thus, when a sworn statement has been formally offered these circumstances demonstrate petitioners complicity.
as evidence, it forms an integral part of the prosecution evidence
which should not be ignored for it complements and completes the
We do not agree, however, that petitioner should be convicted as an accessory to
testimony on the witness stand. A sworn statement is a written
declaration of facts to which the declarant has sworn before an the crime.
officer authorized to administer oaths. This oath vests credibility
and trustworthiness on the document. The fact that a witness fails It is a settled rule that an appeal in a criminal proceeding throws the whole case
to reiterate, during trial, the contents of his sworn statement
should not affect his credibility and render the sworn statement open for review and it becomes the duty of the Court to correct any error in the
useless and insignificant, as long as it is presented as evidence in appealed judgment, whether it is made the subject of an assignment of error or
open court. This is not to say, however, that the sworn statement
not. Such an appeal confers upon the appellate court full jurisdiction and renders it
should be given more probative value than the actual
testimony. Rather, the sworn statement and the open court
104

competent to examine the records, revise the judgment appealed from, increase the degree, which is prision mayor, ranging from six (6) years and one (1) day to twelve
[31]
penalty and cite the proper provision of the penal law. (12) years.[37]

In finding petitioner guilty as an accessory, the Court of Appeals found that his With respect to petitioner, the penalty imposed upon accomplices in a consummated
participation was after or subsequent to the rape and that his acts were employed crime is the penalty next lower in degree than that prescribed for the felony. [38] Since
as a means of concealing the commission of the crime and assisting Rosendo to simple rape is punishable with reclusion perpetua, the penalty of reclusion temporal
escape. should also be imposed on petitioner in its medium period in the absence of any
aggravating or mitigating circumstances. Applying the Indeterminate Sentence Law,
We find otherwise. The facts show that petitioner participated in the commission of
the imposable penalty should range from prision mayor, as minimum, to reclusion
the crime even before complainant was raped. He was present when Pacursa
temporal in its medium period, as maximum.
abducted complainant and when he brought her to the barn. He positioned himself
outside the barn together with the other accused as a lookout. When he heard the Every person criminally liable for a felony is also civilly liable. [39] If there are two or
shouts of people looking for complainant, he entered the barn and took complainant more persons civilly liable for a felony, as in this case, the court shall determine the
away from Pacursa. amount for which each must respond [40] to be enforced in accordance with Article
110 of the Revised Penal Code. Thus, the amount of damages to be awarded must
Having known of the criminal design and thereafter acting as a lookout, petitioner is
be apportioned according to the respective responsibilities of the accused to be paid
liable as an accomplice,[32] there being insufficient evidence to prove conspiracy,
by them solidarily within their respective class and subsidiarily for the others. [41]
[33]
and not merely as an accessory. As defined in the Revised Penal Code,
accomplices are those who, not being included in Article 17, cooperate in the Consistent with prevailing jurisprudence, the complainant in rape cases is entitled to
[34]
execution of the offense by previous or simultaneous acts. The two elements an award of P50,000.00 as civil indemnity ex delicto and another P50,000.00 as
necessary to hold petitioner liable as an accomplice are present: (1) community of moral damages. Civil indemnity ex delicto is mandatory upon finding of the fact of
criminal design, that is, knowing the criminal design of the principal by direct rape which is distinct from moral damages awarded upon such finding without need
participation, he concurs with the latter in his purpose; and (2) performance of of further proof because it is assumed that a rape victim has actually suffered moral
previous or simultaneous acts that are not indispensable to the commission of the injuries entitling the victim to such award.[42]
crime.[35]
In determining the civil liability of petitioner, a clarification of the trial courts
The crime committed in the case at bar is simple rape, the penalty for which under decision is necessary. The dispositive portion of the trial courts decision held Pacursa
the Revised Penal Code is reclusion perpetua. Since Pacursa was a minor when the and petitioner jointly and solidarily liable to pay the victim the amount of P50,000.00
crime was committed, the penalty must be reduced by one degree, to reclusion as and by way of actual and moral damages plus the cost of suit. For our purposes,
temporal.[36] Applying the Indeterminate Sentence Law and in the absence of we shall treat the amount of P50,000.00 awarded by the trial court as the civil
aggravating and mitigating circumstances, the maximum of the penalty shall be indemnity ex delicto for which, as an accomplice, petitioner should be solidarily
within the medium range of reclusion temporal, or fourteen (14) years, eight (8) liable with Pacursa only for one-half of the said amount, or P25,000.00, and is
months and one (1) day to seventeen (17) years and four (4) months. The minimum subsidiarily liable for the other P25,000.00 in case the principal is found insolvent. [43]
of the indeterminate penalty shall be within the range of the penalty next lower in
105

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


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

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

Rosendo Pacursa and Petitioner Ernesto Garces are ORDERED to pay


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

SO ORDERED.
106

THIRD DIVISION Bukidnon, Philippines and within the jurisdiction of this Honorable
Court, the above-named [appellant] together with two other
persons whose identities are not yet known, conspiring,
confederating and mutually helping one another, with intent to kill
by means of treachery, evidence (sic) premeditation and abuse of
superior strength with the use of firearm with which they were
conveniently provided, did then and there willfully, unlawfully and
PEOPLE OF THE PHILIPPINES, G.R. No. 181632 criminally attack, assault and shoot QUADRITO COSIERO, mortally
wounding the latter which injury caused the death of QUADRITO
Plaintiff-Appellee, Promulgated: COSIERO to the damage and prejudice of the legal heirs of (sic)
QUADRITO COSIERO in such amount as may be allowed by law. [6]
- versus - September 25, 2008

JESSIE BALLESTA, When arraigned, appellant, with the assistance of counsel de oficio,
pleaded NOT GUILTY to the crime charged. Accordingly, trial on the merits
Accused-Appellant. ensued.

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
The prosecution presented the following witnesses: (1) Leonisa Cosiero (Leonisa),

DECISION wife of the deceased-victim; (2) Mailene Cosiero (Mailene), daughter of the
CHICO-NAZARIO, J.: deceased-victim; and (3) Atty. Alex Cabornay (Atty. Cabornay), a Senior Investigation
Agent of the NBI, Cagayan de Oro City.
This is an appeal from the Decision[1] dated 28 September 2007 of the Court of
Appeals in CA-G.R. CR-HC No. 00121, which affirmed with modification the Decision, Leonisa testified that at about 6:30 in the evening of 19 April 1997, her husband,
[2]
dated 18 January 2000 of the Regional Trial Court (RTC), 10 th Judicial Region, Quadrito Cosiero, the deceased victim, was inside their family-owned store located
Branch 8, Malaybalay City, convicting the appellant Jessie Ballesta of the crime of at the New Public Market, Don Carlos, Bukidnon, transacting with a customer. As
murder and sentencing him to suffer the penalty of reclusion perpetua. their store usually closed at 6:30 in the evening, she, their children and sales
personnel were already outside the store waiting for her husband to signal their
A criminal Complaint[3] charging Raul Colongan, John Doe and Peter Doe with the
departure. A few minutes thereafter, her husband went out of their store and said
crime of murder was filed before the Municipal Circuit Trial Court (MCTC), Don Carlos,
Let us go. He then proceeded towards the drivers seat of their pick-up truck which
Bukidnon, for preliminary investigation. Further investigation conducted by the
was parked just outside their store. Leonisa also walked towards the front passenger
National Bureau of Investigation (NBI), Cagayan de Oro City, resulted, however, in
seat of their pick-up truck. However, before she could even reach the front
certain significant discoveries such that after preliminary investigation, the MCTC
passenger seat of the said vehicle, she heard a gunshot coming from the other side
issued an Order[4] dropping Raul Colongan from the Complaint. Instead, it ordered
of their vehicle. Out of fear, she immediately opened the door of the pick up, sat on
the inclusion of the appellant as one of the accused therein.
the front passenger seat and turned to the drivers seat to look for her husband, but

Resultantly, appellant was charged with the crime of murder in an Information, [5] the she did not find him there. Hastily, the appellant pulled her out of the vehicle

accusatory portion of which reads: causing her to stagger and fall. She stood up and ran towards the pharmacy where
her children were. The appellant then sat in the front passenger seat of the
That on or about the 19th day of April 1997, in the evening, particularly at
New Market, Poblacion, [M]unicipality of Don Carlos, [P]rovince of
107

deceased-victims pick-up truck and searched the compartment of the same. Failing therewith, he filed an amended complaint incorporating the name of the appellant
[7]
to find anything, the appellant ran away from the scene. as one of the suspects therein and thereby removed the name of Raul Colongan. [12]

Shortly thereafter, Leonisa saw her blooded husband on the ground, and she For its part, the defense presented the lone testimony of the appellant
shouted for help. Her husband was boarded into a tricycle and brought who interposed the defense of alibi.
[8]
to Simbolan Hospital, Don Carlos, Bukidnon, where he died. The cause of her
The appellant claimed that at about 6:30 in the evening of 18 April 1997, he was at
husbands death was cardio-respiratory arrest secondary to intracranial hemorrhage
his house in Pinamaloy, Don Carlos, Bukidnon. Thereafter, his wife called his
due to gunshot wound sustained at theocciput, right to supraorbital bone within the
attention because there were three persons, whom he later identified as Edon, Alias
area of the left eye, nasal side.[9]
Abu and Alias Makung, all from Maguindanao, looking for Joel Bacalso (Joel),
Mailene corroborated the testimony of her mother in all aspects, particularly as his kumpare. He then accompanied the three to Joels house. After dinner, he and
regards the identity of the appellant. She stated that at about 6:30 in the evening Joel accompanied the three visitors to the house of his aunt, where the three visitors
of 19 April 1997, while she was playing with her siblings in front of their store which slept for the night.[13]
was adjacent to a pharmacy, she saw the appellant scouring their displayed rice for
The next day, or on 19 April 1997, immediately after he woke up, he went to the
sale. She disclosed that it was also the appellant who pulled her mother out of their
house of his aunt and found Joel talking to the three visitors. One of the visitors
pick-up truck. She then saw the appellant sit in the front passenger seat. Afterwards,
told him that they were going to kidnap a person named Joe Caring from
the appellant searched the compartment of their vehicle. Thereafter, she did not see
Don Carlos, Bukidnon, and that he and Joel would only need to point to
where the appellant went.[10]
them Joe Caring and the two of them would be given one million
Atty. Cabornay stated that it was the police officers of Don Carlos, Bukidnon, who pesos. They immediately proceeded to Joe Carings house at Don Carlos,
made the initial investigation regarding the killing of Quadrito Cosiero. The initial Bukidnon. Upon arrival thereat, appellant inquired as to the whereabouts of Joe
investigation disclosed that it was a certain Raul Colongan who shot the Caring, but he was told that Joe Caring went to Cagayan de Oro City. [14] After learning
victim. When the case was forwarded to their office, Raul Colongan was already in that their intended victim was out of town, the three visitors planned to kidnap just
their custody, so they immediately forwarded the records to the MCTC for anyone else, considering that they had already used all their supplies in going to
preliminary investigation. In the course of a follow-up investigation, it turned out Don Carlos, Bukidnon.[15] The appellant then told Joel that he would go ahead to the
that it was the appellant and not Raul Colongan who was positively identified by the New Market, Don Carlos, Bukidnon, where he worked as a dispatcher of Speed Zone
wife and the daughter of the deceased victim as the person present at the crime buses. He stayed there until 5:00 p.m. Thereafter, he went to the place of a certain
scene. Considering that the case was already forwarded to the MCTC for preliminary Paalam to eat. Then, he proceeded to the billiard hall near the place of Paalam. Upon
investigation, Atty. Cabornay then moved for the incorporation of the name of the his arrival at the billiard hall, he was called by a police officer and was asked to
appellant as one of the suspects in the killing of Quadrito Cosiero. The MCTC acted slaughter the latters pig. Later, he went to the new market site to pay his
on his motion and ordered the filing of an amended complaint so as to include the debt. While on his way there, Eddie Acop and Tatay Polgo invited him for a
name of the appellant as one of the suspects therein and the dropping of the name drink. After a few minutes, he left and looked for a ride going to the new
of Raul Colongan, as there was no iota of evidence that could be used as basis to market. Again, he was called by a friend for a drink at the Lily Palomares store. It
[11]
implicate him as among the perpetrators in the killing of the victim. In compliance was already about 6:45 p.m. or 7:00 p.m. at that time. While drinking thereat, he
108

MURDER DESPITE THE INSUFFICIENCY OF EVIDENCE TO


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

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

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


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

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

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

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

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

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

Court cannot cast any doubt on the credibility of the said witnesses. Here we quote Q: Who (sic) is his name?
the testimonies of the wife and the daughter of the victim:
A: I know him to be Jessie Ballesta.[24]
Direct testimony of the victims wife:
Direct testimony of the victims daughter:
110

Q: Now, at 6:30 oclock in the evening, you said that was the usual time that
bound by the trial courts assessment of the credibility of witnesses. [28] In this case,
your business closes, where was your mother located at that precise
time, 6:30 in the evening? there was no cogent reason to deviate from the findings of both lower courts.

A: Outside our store. Moreover, there was no indication that the wife and the daughter of the deceased

Q: How about your father, where was he? victim were improperly motivated when they testified against the appellant. As a
rule, absent any evidence showing any reason or motive for prosecution witnesses
A: He was inside the store.
to perjure, the logical conclusion is that no such improper motive exists, and their
Q: Now, at a particular time before your store close few minutes before testimonies are thus worthy of full faith and credit. [29] Leonisa was the wife of the
your store, can you recall if there was somebody who was standing near
deceased victim while Mailene was his daughter; thus, it would be
the place where you were selling your rice?
unnatural for them, being relatives and interested in vindicating the crime,
A: Yes.
to implicate someone other than the real culprit, lest the guilty go

Q: What was he doing, if you know? unpunished. The earnest desire to seek justice for a dead kin is not served should
the witness abandon his conscience and prudence, and blame one who is innocent
A: He was scouring the displayed rice for sale.
of the crime.[30] In this case, Leonisa and Mailenes act of testifying against
Q: Can you still recall his face even until this moment? the appellant was motivated only by no other motive than their strong

A: Yes. desire to seek justice for what had happened to the deceased victim.

Q: You said awhile ago that you identified that person scouring rice at the To at least downgrade the crime charged against him, the appellant argues that the
place where the rice situated on that particular date, [19 April 1997], at
qualifying circumstance of treachery was not sufficiently proven by the prosecution.
6:30 oclock in the evening, if that fellow is around within the four corners
of this sala of the Honorable Court, will you please point to him?
It is settled that treachery cannot be presumed, but must be proved by clear and
A: (Witness is pointing to a person inside the courtroom who has already convincing evidence as conclusively as the killing itself. To appreciate treachery, two
identified himself as Dioscoro Ballesta).[25]
(2) conditions must be present, namely, (a) the employment of means of execution
that give the person attacked no opportunity to defend himself or retaliate, and (b)
Based on the foregoing, it cannot be said that the positive identification of the
the means of execution were deliberately or consciously adopted. This Court has
appellant was a product of an afterthought.
also previously held that where treachery is alleged, the manner of attack
It is well-entrenched that the findings of the trial court on the credibility of witness must be proven. Where no particulars are shown as to the manner in which the
deserve great weight, given the clear advantage of a trial judge in the appreciation aggression was made or how the act which resulted in the death of the deceased
of testimonial evidence. We have recognized that the trial court is in the best began and developed, treachery cannot be appreciated as a qualifying
position to assess the credibility of witnesses and their testimonies because of their circumstance. [31]

unique opportunity to observe the witnesses first-hand; and to note their demeanor,
In the instant case, treachery cannot be appreciated, considering that the wife and
conduct and attitude under grueling examination. These are significant factors in
the daughter of the victim did not see the initial stage and particulars of the attack
evaluating the sincerity of witnesses, in the process of unearthing the truth. [26] The
on the victim.This Court has held that where all indicia tend to support the
rule finds an even more stringent application where the said findings are sustained
conclusion that the attack was sudden and unexpected, but there are no precise
by the Court of Appeals.[27] Thus, except for compelling reasons, we are doctrinally
111

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

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

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

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

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


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

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

SO ORDERED.
114

covered by the CONTRACTORs Proposal of Complete Supply and


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

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

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

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

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

2.1. The CONTRACTOR shall complete the civil/structural and h) ROOFING WORKS Steel Trusses/Purlins, Rib Type pre-painted
masonry works of the building based on the works (sic) items roofing sheets, Insulation
115

i) Garbage Chutes Sixth, the parties agreed: that the items of work or any part
thereof not completed by the respondent as of February 28, 1999
2.3. The work of the CONTRACTOR shall include but not be limited should be deleted from its contract, except demobilization;the
to, preparing the bill of materials, canvassing of prices, requisition punch list items under respondents scope of responsibility not yet
of materials for purchase by OWNER, following up of orders, made good/corrected as of the same period shall be done by
checking the quality and quantity of the materials within the others at a fixed cost to be agreed upon by all concerned; and
premises of the construction site and returning defective respondent should be compensated for the cost of utilities it
materials.[6] installed but were still needed by other contractors to complete
their work.[14]
Respondent further agreed that the construction work would be completed within
Lastly, they agreed that a joint quantification should be done to
330 calendar days from Day 1, upon the Construction Managers confirmation. establish the bottom line figures as to what were to be deleted
[7]
Petitioner initially considered February 20, 1997 as Day 1 of the project. However, from the respondents contract and the cost of completing the
punch list items which were deductible from respondents
when respondent entered the project site, it could not start work due to the on-going receivables.[15]
bulk excavation by another contractor. Respondent thus asked petitioner to move
Day 1 to a later date, when the bulk excavation contractor would have completely In view of the limitation on the target accomplishment to P1 million worth of work
[8]
turned over the site. per month, respondent asked that the topping-off be moved to February
1999.Respondent likewise requested a price adjustment with respect to overhead
After a series of correspondence between petitioner and respondent, February 25,
and equipment expenses and legislated additional labor cost. These requests were
1997 was proposed as Day 1. Accordingly, respondents completion date of the
not, however, acted upon by petitioner.[16]
project was fixed on January 21, 1998.[9]
After the completion of the side trimmings and excavation of the buildings
Prior to and during the construction period, changes in circumstances arose,
foundation, respondent demanded the payment of P2,248,507.70
prompting the parties to make adjustments in the initial terms of their contract. The
and P1,805,225.90, respectively. Instead of paying the amount, petitioner agreed
following pertinent changes were mutually agreed upon by the parties:
with the respondent on a negotiated amount of P900,000.00 for side trimmings.
First, as the bulk excavation contractor refused to return to the [17]
However, respondents claim for foundation excavation was not acted upon.
project site, petitioner directed respondent to continue the [18]
During the construction period, petitioner granted, on separate occasions,
excavation work;[10]
respondents requests for payroll and material accommodations.[19]
Second, in addition to respondents scope of work, it was made to
perform side trimmings. On March 13, 1999, respondent submitted its final billing, amounting

Third, petitioner directed respondent to reduce the monthly target to P4,442,430.90 representing its work accomplishment and retention, less all
accomplishment to P1 million worth of work and up to one (1) floor deductions. On March 23, 1999, a punch list was drawn as a result of the joint
only.[11]
inspection undertaken by the parties. Petitioner, on the other hand, refused to issue
Fourth, the following were deleted from respondents scope of a certificate of completion. It, instead, sent a letter to respondent informing the
work: a) Masonry works and all related items from 6 th floor to roof
latter that it was already in default.[20]
deck; b) All exterior masonry works from 4 th floor to roof deck; and
c) Garbage chute.[12]
On September 14, 1999, respondent was constrained to file a Request for
Fifth, as a consequence of the deletion of the above works, the Adjudication[21] with the CIAC. Respondent specifically prayed, thus:
contract price was reduced to P62,828,826.53.[13]
116

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


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

Total due the Respondent P248,350.00

a. PhP4,442,430.90 as unpaid amount from


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

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

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

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

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

4. Labor Costs Escalation 308,226.57


117

III.
Aggrieved, petitioner elevated the matter to the CA via a petition for review under
Rule 43 of the Rules of Court. On November 3, 2004, the CA affirmed the CIACs WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT AFFIRMED CIACS AWARD FOR THE
findings of fact and conclusions of law with a slight modification, and ruled:
PAYMENT OF ALLEGED OVERHEAD EXPENSES.
WHEREFORE, the Decision, dated 16 May 2000, of the
Construction Industry Arbitration Commission Arbitral Tribunal is IV.
hereby AFFIRMED WITH MODIFICATION in that CIACs award on
Labor Cost Escalation is hereby DELETED for lack of factual basis WHETHER OR NOT THE COURT OF APPEALS COMMITTED
and, consequently, for lack of cause of action and CIACs award on REVERSIBLE ERROR WHEN IT DENIED EMPIRE EASTS CLAIM FOR
Additional Work for Foundation Excavation is hereby equitably MASONRY AND OTHER WORKS, LIQUIDATED DAMAGES, AND COST
REDUCED to P980,376.34. All other awards, as well as the rates of OF MONEY FOR PAYROLL ASSISTANCE AND MATERIALS
interest, are hereby AFFIRMED. ACCOMMODATION.[31]

Accordingly, the total amount due to CICG is P6,880,905.68. While The petition is partly meritorious.
EELH is entitled P248,350.00. Offsetting the award of EELH from
the amount due to CICG, EELH is hereby ORDERED to pay CICG
On the Release of Retention Money
the total amount of SIX MILLION SIX HUNDRED THIRTY-TWO
THOUSAND FIVE HUNDRED FIFTY-FIVE PESOS (P6,632,555.00). No
costs at this instance. Petitioner contends that both the CIAC and the CA erred in ordering the release of
the retention money despite respondents failure to comply with the conditions for its
SO ORDERED.[28]
release as set forth in the contract.

We find for the petitioner.

In the construction industry, the ten percent (10%) retention money is a portion of
In deleting respondents claim for labor cost escalation and reducing its claim for the
the contract price automatically deducted from the contractors billings, as security
cost of the excavation of foundation, the appellate court said that respondent failed
for the execution of corrective work if any becomes necessary. [32]
to show that it in fact paid said wage increase pursuant to the New Wage Order,
[29]
while the reduction of the cost of foundation excavation was the result of the The construction contract gave petitioner the right to retain 10% of each progress
reduction of its cost per cubic meter. [30]
payment until completion and acceptance of all works. [33] Undoubtedly, as will be
discussed hereunder, respondent complied fully with its obligations, save only those
Hence, the present petition, raising the following issues:
items of work which were mutually deleted by the parties from its scope of
I. work. However, apart from the completion and acceptance of all works, the following
requisites were set as pre-conditions for the release of the retention money:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT ORDERED THE RELEASE OF a) Contractors Sworn Statement showing that all taxes
RETENTION MONEY IN FAVOR OF CICG. due from the CONTRACTOR, and all obligations on materials used
and labor employed in connection with this contract have been
II.
duly paid;

WHETHER OR NOT THE COURT OF APPEALS COMMITTED


REVERSIBLE ERROR WHEN IT AWARDED THE CLAIM OF CICG FOR
THE EXCAVATION OF FOUNDATION.
118

b) Guarantee Bond to answer for faulty and/or defective


arisen. We would like to emphasize, though, that this is without prejudice to
materials or workmanship as stated in Article IX Section 9.3 of this
Contract; respondents compliance with the unfulfilled conditions, after which, release of the
retention money must, perforce, follow.

c) Original and signed and sealed Three (3) sets of On Respondents Right to Additional Overhead Costs
prints of As Built drawings.[34]
Respondent claimed P13,976,427.00 as additional overhead expenses brought
The CA affirmed the CIACs decision to order the release of the retention money about by the delay in the completion of the project due to petitioners own acts. The
despite respondents failure to establish the fulfillment of the aforementioned CIAC, however, awarded only a nominal amount which is 10% of respondents claim
conditions, as both tribunals merely focused on the non-issuance of the certificate of because of its failure to present supporting documents to prove such additional
completion, which, according to respondent, was a pre-requisite to the issuance of a expenses. The arbitral tribunal observed that respondent only presented its own
guarantee bond. The CA concluded that the conditions were deemed fulfilled computation without any other document to substantiate its claim. The CA, in turn,
because the creditor voluntarily prevented their fulfillment. affirmed the CIAC findings, ratiocinating that petitioners failure to present
countervailing evidence was an implied admission on its part that the computation
To this, we cannot agree.
made by respondent was correct.

The record of the case is bereft of any evidence to show that conditions (a) and (c)
We beg to differ.
were complied with. Petitioner categorically stated in all its pleadings that they were
not.Surprisingly, respondent did not squarely argue this point. It relied solely on It is undisputed that the only piece of evidence presented by respondent in support
petitioners failure to issue the certificate of completion, which prevented the of its claim for additional overhead cost was its own computation of the said
acquisition of a guarantee bond and thus resulted in the non-release of the retention expenses. It failed to adduce actual receipts, invoices, contracts and similar
money. While it is true that respondent was entitled to a certificate of completion as documents. To be sure, respondents claim for overhead cost may be classified as a
the issuance thereof was just a ministerial duty of petitioner considering that the claim for actual damages.Actual damages are those damages which the injured
project had already been completed, the certificate was not the only condition for party is entitled to recover for the wrong done and injuries received when none
said release. It was simply a pre-requisite for the issuance of the guarantee were intended. They indicate such losses as are actually sustained and are
bond. And there was no showing that the absence of the certificate of completion susceptible of measurement. As such, they must be proven with a reasonable
was the only reason why no guarantee bond was issued. degree of certainty.[35]

This is not the first time that a contractors claim for additional overhead costs was
denied because of insufficiency or absence of evidence to support the same.
If we were to apply the civil law rule of constructive fulfillment the condition shall be
In Filipinas (Pre Fab Bldg.) Systems, Inc. v. MRT Development Corporation, [36] we
deemed fulfilled if the creditor voluntarily prevented its fulfillment then the
denied FSIs claim because only summaries, and not actual receipts, were presented
submission of a guarantee bond may be deemed to have been complied with. But
during the hearing.Similarly, in the instant case, respondent, by presenting only its
we cannot apply the rule to conditions (a) and (c), which remain as unfulfilled
own computation to substantiate its claim, is not entitled even to the reduced
conditions-precedent. Since no proof was adduced that these two conditions were
complied with, petitioners obligation to release the retention money had not, as yet,
119

amount of P1,397,642.70 which is 10% of its original claim. Instead, we altogether instead, claimed that the only modification it approved was the reduction by three
deny its prayer for additional overhead costs. floors of the total number of floors to be constructed by respondent. [40]

On Respondents Right to the Cost of Foundation Excavation After a thorough review of the documents presented by both parties, both the CIAC
and the CA concluded that the unfinished works, i.e., masonry works, were actually
As to respondents entitlement to the cost of excavation of foundation, we find no
recognized and accepted by petitioner. It thus agreed to take over, through its new
cogent reason to disturb the CIACs conclusion, as modified by the CA.
contractor, the balance of work. The only consequence of such acceptance was the
deduction of the value of the unfinished works from the total contract price. [41] This
Side trimmings and the excavation of foundation were not included in respondents
was the reason why the contract price was reduced from P84 million
original scope of work. They were, however, undertaken by the respondent upon the
to P62,828,826.53. The deletion was, likewise, confirmed by respondent in a letter
directive of petitioner, due to the previous contractors refusal to resume its
dated August 21, 1998.[42]
excavation work. These works, therefore, constitute an additional claim of
respondent over and above the original contract price. A confirmation of these works
Applying Article 1235[43] of the Civil Code, petitioners act exempted respondent from
had, in fact, been given by petitioner through Change Order Nos. 3 [37] and 4[38] where liability for the unfinished works. A person entering into a contract has a right to
it agreed to pay P250,000.00 andP650,000.00, respectively. This P900,000.00 insist on its performance in all particulars, according to its meaning and spirit. But if
negotiated amount referred specifically to side trimmings and hauling out of adobe he chooses to waive any of the terms introduced for his own benefit, he may do so.
[44]
soil. It is unfortunate, though, that the parties failed to arrive at a settlement as to When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection, the obligation is
respondents claim for the cost of excavation of foundation.
deemed fully complied with.

The additional works having been undertaken by respondent, and the fact of non-
payment thereof having been established, we find no reason to disturb the CIACs
conclusion that respondent is entitled to its claim for the cost of excavation of
In the instant case, petitioner was aware of the unfinished work of respondent; yet,
foundation. As to the propriety of the award, both the CIAC and the CA were in a it did not raise any objection or protest. It, instead, voluntarily hired another
better position to compute the same considering that said issue is factual in contractor to perform the unfinished work, and opted to reduce the contract

nature. Significantly, jurisprudence teaches that mathematical computations, as well price. By removing from the contract price the value of the works deleted, it is as if
[39]
said items were not included in the original terms, in the first place. Thus, as
as the propriety of arbitral awards, are factual determinations which are better
correctly concluded by the CIAC, and as affirmed by the CA, petitioner is not entitled
examined by the lower courts as trier of facts. Thus, we affirm the award to reimbursement from respondent for the expenses it incurred to complete the
of P980,376.34 for foundation excavation. unfinished works.

On Petitioners Counterclaim for the Cost of Unfinished Works

During the construction period, the parties mutually agreed that some items of work
On Petitioners Counterclaim for Liquidated Damages
be deleted from respondents scope of work. Specifically, as claimed by respondent,
the following were deleted: a) masonry works and all related items from the 6th floor In addition to its claim for the cost of masonry and other works, petitioner
th
to the roof deck; b) all exterior masonry works from the 4 floor to the roof deck; demanded the payment of liquidated damages on the ground that respondent was
and c) the garbage chute. This deletion was, however, denied by petitioner. It, in default in the performance of its obligation.
120

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


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

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

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

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


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

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


completion in order to enable the latter to obtain the corresponding guarantee
bond. In view of the non-fulfillment of the conditions-precedent, the release of the
retention money is hereby held in abeyance. Thus, respondent is ordered to pay the
petitioner P875,601.31 subject to the return of the amount when respondent shall
have complied with the conditions aforesaid.
122

FIRST DIVISION and perfected his appeal.

[G.R. No. 4606. October 19, 1909. ] On the 19th of September, 1907, the plaintiff was the owner of a freight ship called
the Constancia, then in course of construction in plaintiffs shops in the city of
JUAN RODRIGUEZ, Plaintiff-Appellant, v. FINDLAY & CO., Defendant- Manila. The vessel was designed for the coastwise trade in the Philippine Islands. On
Appellee. that date, and for some time prior thereto, one William Swann was the consulting
engineer of the defendant, in charge of its machinery department. Swann was at
Basilio R. Mapa for Appellant. that time an engineer and naval architect and had been working as an engineer
substantially all his life. On the date mentioned he was, and for some time
Kinney & Lawrence, and John W. Sleeper for Appellee. theretofore had been, a naval architect, a member of the Institute of Engineers and
Shipbuilders of Scotland, and a member of the Institute of Naval Architects of Great
SYLLABUS Britain. The plaintiff was acquainted with Swann and knew him to be an engineer
and naval architect of long experience. On the date referred to Rogaciano Rodriguez,
1. SHIPS AND SHIPPING; BREACH OF CONTRACT; DAMAGES. Where a contract to acting for and on behalf of the plaintiff and as his agent, made a written contract
furnish the machinery complete, including a propeller, for a freight ship for with Swann, acting for and on behalf of the defendant and as its agent, wherein an
coastwise trade in these Islands contained the following: "One brass propeller of 8 whereby the plaintiff agreed to purchase of the defendant, and the defendant
diameter and suitable pitch for an expected speed of ship about 9 1/2 knots," and agreed to sell and deliver to the plaintiff, certain machinery, complete, for the ship
also the following specification applying to the machinery as a whole: "The whole to Constancia already referred to. Prior to the making of the contract on the date
be suitable for a wooden ship of 150 ft. long by 24 ft. beam and 14 ft. depth, as per referred to, and during the negotiations leading up to the contract and in connection
plan supplied by Sr. Juan Rodriguez;" it appearing that the person who was to furnish with them, Swann, the agent of the defendant, visited the shipyard of the plaintiff
such machinery knew the purpose for which the ship was to be used and its general and inspected the steamship Constancia, then being constructed. This he did several
form and construction. Held, That the propeller must be such as to give to such ship different times. The inspections were made for the purpose of determining the kind
a speed of about 9 1/2 knots per hour, and that furnishing a propeller which gave and nature of the machinery which would be suitable to the ship referred to. Neither
the ship a speed of only about 7 knots an hour was not a compliance with the terms the plaintiff nor his agent, Rogaciano Rodriguez, was a marine or other engineer and
of the contract: And, Held further, That the damages recoverable of a manufacturer they knew little or nothing about the kind of machinery which should be placed in
or dealer for the breach of warranty of a sale of goods which he knew at the time of the ship they were building. They relied entirely upon the recommendations,
the sale were intended to be used for a particular purpose or to accomplish a knowledge, and experience of the engineer Swann. The plaintiff had in mind and
particular result, the measure of damages is not confined to the difference in value stated to Swann, among other things, the speed which it was necessary that the
of the machinery as warranted and as it proves to be, but includes such Constancia should have in order to be available as a coastwise vessel, and left the
consequential damages as are the direct, immediate, and probable result of the kind, nature, and construction of the machinery to the greater knowledge and
breach. experience of Swann. This is particularly true of the propeller placed in that vessel,
the questions relative to which are the main issues of this case. The contract, so far
as its interpretation is disputed, reads as follows:jgc:
DECISION "One brass propeller of 8 diameter and suitable pitch for an expected speed of ship
about 9 1/2 knots.

MORELAND, J. : "The whole to be suitable for a wooden ship of 150 ft. long by 24 ft. beam and 14 ft.
depth, as per plan supplied by Sr. Juan Rodriguez."cralaw virtua1aw library

The complaint asks damages for breach of a written contract between plaintiff and Before the contract was entered into, the plaintiff delivered to Swann, as the
defendant for the delivery of the machinery, complete, for a ship in process of defendants agent, a plan of the hull of said vessel. Thereafter Swann delivered to
construction belonging to the plaintiff. the plaintiff a plan of the entire vessel, showing the machinery placed therein. The
plans in question showed length and breadth of the hull, its general outline and the
The defendant, in its answer, denies the allegations of the complaint generally, and number of feet of water which it drew. These plans also showed location and outline
sets up as a counterclaim the balance due from plaintiff on the purchase price of the of the sternpost and rudderpost of said ship.
machinery aforesaid, and asks for an affirmative judgment against the plaintiff
accordingly. In the process of manufacturing the propeller the defendant thought it discovered
that the propeller described in the contract would not give the speed required by the
The defendant secured in the court below an affirmative judgment against the contract and notified the plaintiff to that effect, and at the same time asked
plaintiff for the sum of P9,216.60, with interest thereon, at the rate of 6 per cent per permission to put in its place a propeller 10 feet in diameter. This the plaintiff
annum, from February 28, 1907. The plaintiff made a motion for a new trial upon the declined to permit.
grounds that the evidence does not justify the decision of the court and that the
decision is contrary to law. This motion was denied, and the plaintiff duly excepted The machinery, so purchased, was delivered, except certain items which were
required to be upon all vessels by the rules of the customs officials of the city of
123

Manila and about which there is little or no dispute. Certain other articles of small
value, necessary for the completion of the machinery, seem not to have been Swann was a naval architect and marine engineer of long experience, which fact
delivered, but concerning these there is very little dispute between the parties. was known to the plaintiff and his agent, and the general details relative to the kind
and character of the machinery were left to the defendant. The thing mainly insisted
The machinery was duly installed in the vessel upon its delivery. Upon the trial of the upon by the plaintiff was the result that should be produced. The plaintiff himself
ship, after the installation of its machinery, it was found that all of the machinery testifies, and this is undisputed by the defendant, that he relied upon Swann in
worked well except the propeller. This, instead of giving the ship a speed of about 9 these particulars, especially in reference to the propeller and the pitch which it
1/2 knots an hour, gave a speed of less than 7 knots an hour. The failure of the should have; and, by reason of that reliance, the pitch in feet and inches which the
propeller to give the required speed to the vessel is substantially the only point in propeller should have when placed in the ship was not stated in the contract.
controversy in this case. Instead, the plaintiff placed in the contract what the propeller should do, rather than
what it should be. The diameter of the propeller was fixed by the structure of the
The contention of the plaintiff is that, under the terms of the contract, the defendant vessel and could not exceed 8 feet or 8 1/2 feet. The pitch which the propeller
was obliged to furnish a propeller 8 feet in diameter which would give the should have in order to give 9 1/2 knots an hour to the steamship was left to the
Constancia a speed of 9 1/2 knots an hour, and that, failing in that, the contract was greater knowledge and experience of the defendants agent, Swann. The plaintiff
broken and the defendant should be held liable for all damages resulting. placed the condition only that it should produce a certain result when attached to
the ship Constancia.
The defendant contends that the machinery was to be according to the
specifications in the contract and that, if these specifications were complied with, it The words of the contract clearly demand, upon the part of the defendant, that it
does not matter what may be the actual speed of the vessel. It claims that it had furnish a propeller with a pitch proper to give the steamship Constancia a speed of
nothing to do with the construction of the steamship or the placing therein of the about 9 1/2 knots per hour. Language for that purpose could scarcely be made
machinery. The defendant also claims that, under the terms of the contract, there plainer than the language used.
was no guaranty of speed, and that, if the propeller was 8 feet in diameter and of
brass, it would fulfill the terms of the contract even though the speed of the vessel The defendant contends that "the machinery was to be according to the
should not exceed a knot per hour. specifications in the contract and that, if these specifications were complied with, it
does not matter what may be the actual speed of the vessel." The trouble with this
The contract, by its words, expressly requires that the defendant must furnish a contention is that one of the specifications of the contract is speed, namely, a speed
propeller which shall give to the steamship Constancia a speed of about 9 1/2 knots of 9 1/2 knots per hour, and the specifications of the contract can not be complied
per hour. with unless a speed of 9 1/2 knots an hour, or thereabouts, is given. Simply because
the specific pitch in feet and inches is not stated in the contract does not mean that
The language of the contract is so plain, and the negotiations leading up to the there is no specification upon that point. The contract provides that the defendants
execution of the contract point in one direction so clearly, that there ought to be shall supply to the plaintiff, among other things, one brass propeller 8 feet in
little need of discussion. But the parties have insisted so strongly upon the justice of diameter with suitable pitch for an expected speed of ship about 9 1/2 knots. The
their several contentions that a detailed discussion is considered advisable. word "suitable" has reference to two objects, the antecedent subject, "pitch" of the
propeller, and the subsequent object, "ship;" and the meaning of the word requires
The language is without ambiguity. The defendant agrees therein to furnish "One that the subject, "pitch" of the propeller, shall have qualities which will harmonize so
brass propeller of 8 diameter and suitable pitch for an expected speed of ship about perfectly with the qualities of the object, "ship," that a certain and specified result,
9 1/2 knots;" and "The whole to be suitable for a wooden ship 150 ft. long by 24 ft. viz, a speed of 9 1/2 knots, shall be produced. The word "suitable," referring to the
beam and 14 ft. depth, as per plan supplied by Sr. Juan Rodriguez." vessel in which the propeller is to be placed as well as to the propeller itself, the
pitch of the propeller must, therefore, be suitable to that vessel, and it is not suitable
The ship for which the machinery, including the propeller, was designed, is to that vessel, under the terms of the contract, unless with the other machinery
specifically described in the contract and is identified without question. That ship is mentioned in the contract it gives to that vessel a speed of about 9 1/2 knots an
the Constancia, a coastwise vessel 150 feet long, 24 feet wide and 14 feet deep. hour. Therefore, the specifications contained in the contract are not complied with
These are the measurements contained in the contract. This was the only ship for until the vessel shall have received from the machinery installed a speed of about 9
which the plaintiff needed machinery. It was the only ship he was constructing. 1/2 knots an hour. The word "suitable" is perfectly definite and clear in its meaning
During the course of the negotiations the defendants agent, Swann, its engineer and its reference is undoubted.
and naval architect, in company with the plaintiff or the plaintiffs agent, several
times visited the yard wherein the ship was being built and examined it for the The defendant, in the contract, not only agrees to furnish a propeller 8 feet in
purpose of making the contract for the machinery. During these different visits the diameter and of brass, but also agrees to furnish a propeller with certain other
kind of machinery, its purpose and value were discussed by the parties. This is characteristics, among them being a pitch suitable to produce a certain speed in a
conceded. Plans of the hull and the interior of the vessel were exchanged by the certain vessel. If the pitch of the propeller was suitable to do that, it would do it. The
parties at various times, either before or after the making of the contract. The failure of the propeller to give a speed anything like 9 1/2 knots an hour indicates
plaintiff, in particular, delivered to the defendant, prior to the execution of the clearly and beyond question that the pitch of the propeller was not suitable for the
contract, a plan of the hull of the vessel, with its measurements. Later the defendant purposes specified in the contract.
delivered to the plaintiff a plan, in considerable detail, showing the vessel with the
machinery figured as having been already placed in it. The contention of the defendant is, further, that the pitch of the propeller as
124

furnished, viz, 15 1/2 feet, was suitable to give a speed of more than 9 1/2 knots an speed of about 9 1/2 knots per hour and that the machinery furnished for the vessel
hour; and in its argument it quotes the expert, Swann, who testifies, in relation to should be arranged to that end, particularly the propeller.
the pitch of the propeller, that with the pitch of 15 1/2 feet the propeller would have
a speed of a little over 11 knots per hour. The defect in this contention is that a The defendant not only asserts that it furnished a propeller with a speed of more
propeller has no such quality as speed; that the thing which Swann figures out as 11 than 9 1/2 knots an hour, but also contends that the reason why the vessel did not
knots an hour is not speed but pitch. A propeller has, aside from the material of its have a speed of 9 1/2 knots an hour after the installation of the machinery was
construction, three qualities diameter, area, and pitch. A propeller has no such because the propeller was, by the construction of the vessel, forced to work in a
quality as speed. The pitch of the propeller is described by Swann and Gilchrist as position where it could not display its properties adequately. To this end, it asserts,
the distance which it would travel if it were turned one revolution in a substance through its expert witness Swann, "that the propeller was, so to speak, too close to
which, although yielding sufficiently to permit the passage of the propeller, would both the stern and the rudder posts, so that the propeller could not receive the
admit of no slip. In other words, if a propeller were immersed in wax and then given water or throw it away from it in the manner wanted; that is, in a line with the boats
a turn amounting to one revolution, the pitch of the propeller would be the distance keel more or less. It could not do anything else because it was practically watertight,
which it would travel through the wax in that one revolution. The expert Swann says so to speak, that is, to all intents and purposes, watertight between these two large
that the way to determine the speed of a propeller is to "take the pitch, multiply it chocks of timber, the rudder and stern posts, and hence could not throw the water
by the revolutions, which would give me the distance the propeller would advance in off or receive the water from forward in the manner it should, and hence would
any one minute; then multiply that by sixty, which would give me the amount in one throw it sideways; that is the effect. The propeller could not get a chance to
hour; then divide by 6,080, which is the number of feet in a knot, and that would work."cralaw virtua1aw library
give me the number of knots per hour which the propeller would advance;" and then
says that the speed of the propeller would be more than 11 knots. The mere fact The expert then goes on to assert that the pitch had nothing to do with it, that the
that Swann multiplies the pitch of the propeller by a number of figures, and then diameter of the propeller had nothing to do with it, and that the sole and only reason
divides that product by other figures, does not change pitch into speed. It remains why the vessel did not receive a speed of 9 1/2 knots an hour from the propeller
pitch still. In other words, the 11 knots per hour which Swann refers to as the speed furnished was because of the sternpost and the rudderpost.
of the propeller is the distance which the propeller, unattached to any vessel, would
travel, in wax in one hour if it was turned at the rate of 84 revolutions per minute. It should be noted, however, that, before the contract was signed, the defendant,
But this is the acknowledged definition of pitch, not speed. It is manifestly absurd to and its agent, Swann, were furnished with a plan or plans of the hull of the vessel,
contend that the propeller can have a speed independent of the vessel to which it showing the sternpost and the rudderpost fully and fairly; that Swann had himself
may be attached. Speed is a quality of the vessel itself and not a quality of the inspected the vessel several times at the yard where it was being built and knew all
propeller. To be sure, the propeller, operated by the engine, is able to give speed to about the said sternpost and rudderpost and their relative locations. Yet, with that
the vessel, but in and of itself it has no such quality. plan in his hand and with that knowledge in his head, he, nevertheless, made a
contract in which he agreed to furnish a propeller which would give a speed of 9 1/2
It is apparent, therefore, that the contention of the defendant that the propeller was knots an hour to that very ship. It must also be remembered that the events proved
so constructed as to have a speed of 11 knots an hour is absurd. In other words, the the contention of the expert Swann to be wholly unfounded when he claimed that
contention of the defendant is that a guaranty in a contract to give a ship a speed of the reason why the propeller would not work was because of its position between
20 knots an hour is complied with if there is furnished to that ship a propeller with a the sternpost and the rudderpost. The trial of the propeller furnished by the
pitch, which, multiplied by certain figures and divided by others, would produce defendant having demonstrated that it was ineffective and that its pitch was too
twenty something at the conclusion of the calculation, and this absolutely regardless coarse and its area too great for the purposes specified in the contract, the plaintiff
of whether the ship on which the propeller is to be placed is a war ship or a pleasure placed in the steamship another propeller in exactly the same position in the vessel
yacht, whether it is 100 or 1,000 feet long, 10 feet or 100 feet wide, whether it as the other, i. e., between the sternpost and the rudderpost, with a diameter only 6
draws 5 feet or 60 feet of water and wholly regardless of the form of the vessels inches more than the diameter of the propeller furnished by the defendant, and the
hull. It is recognized by all authorities upon the construction of steamships that "the vessel immediately attained a speed of 9 knots, or thereabouts, per hour. It is thus
most important point to be considered in propulsive efficiency is the shape of the apparent that the expert Swann again made a serious mistake in claiming that the
vessels hull." In respect of speed this is one of the greatest problems and one of the failure of speed was due solely to the place in which the propeller worked.
most perplexing with which marine engineers have to deal. The defendant, by its
contention, avoids all the trouble of figuring out this difficult problem by simply The defendant also maintains that the plaintiff ought not to recover in this case
giving a speed to its propeller. because before the propeller was constructed the defendant notified him that a
propeller 8 feet in diameter would not produce the results specified in the contract
It was a condition, and not a theory, which confronted the plaintiff when he and that in order to attain those results it would be necessary to place in that ship a
purchased the machinery in question including the propeller. He had a vessel which propeller 10 feet in diameter; that the plaintiff rejected this proposal and refused to
was designed for the coastwise trade and, in order to be useful and efficient in that accept a propeller of any dimensions different from that specified in the contract,
connection, it was necessary that it should have a speed of about 9 1/2 knots an and that, therefore, he brought his misfortune on his own head. In reply to this
hour. All of this the defendant knew. Speed being so important in a vessel carrying contention it is sufficient to state that, by reason of the construction of the vessel,
freight in competition with other vessels having a speed of 9 1/2 knots an hour, the which Swann knew perfectly before hand, the placing of a propeller 10 feet in
parties placed in the contract a specification by which this vessel should receive diameter in the ship in question would necessitate cutting away a large portion of
machinery of such a character that it would be able to compete with other vessels in the rear part of the vessels hull. The plaintiff was perfectly justified in refusing to
a similar occupation. These specifications required that the vessel should have a change the whole structure of the rear of his vessel in order to accommodate the
125

defendant. His refusal was justified by subsequent events; for, later, as before bought it said propeller to be and remain the property of the defendant, with the
stated, a propeller 8 1/2 feet in diameter, but of different pitch and area, was placed right to retake the same if it has not already done so.
in the ship, without any change in the construction of the hull, and the vessel
immediately attained a speed of 9 knots, or thereabouts, per hour. The defendant failed to deliver to the plaintiff the following machinery and materials
which it agreed to deliver under the contract, which said machinery and materials
There seems to be no question that the expert witness for the plaintiff was entirely the plaintiff was obliged to purchase of other parties, paying therefor the following
correct when he stated that the fault of the propeller furnished by the defendant was prices, which this court finds reasonable in amount, to wit:chanrob1es virtual 1aw
in its pitch and area. He testified that the pitch of the propeller was too coarse and library
the area was too great for the kind of vessel in which it was placed.
One brass cock with flange for the donkey feed, weight 57
It is thus apparent that the defendant failed to comply with the terms of the contract
in respect to the propeller therein described, and the plaintiff, in consequence, is pounds P144.00
entitled to recover appropriate damages by reason thereof.
One do. do. check valve for the engine, weight 62 pounds 124.00
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 One do. do. 3/4-inch blow-off for the boiler 7.50
are not confined to the difference in value of the machinery as warranted and as it
proves to be, but include such consequential damages as are the direct, immediate, One cast brass elbow for the steam valve, weight 97 pounds 145.50
and probable result of the breach. (30 Am. and Eng. Ency. of Law, p. 217, and cases
there cited.) One new 1 1/4-inch tube with flange for the blow-off cock of the donkey boiler 7.00

The loss of the buyers time and of that of his laborers resulting from the breach is One brass cock with flanges, connections, and strainer for
recoverable where the circumstances of the sale were such as to have put the seller
upon notice that such a loss would probably result from a breach. the surface blow-off 166.00

Indemnity for losses and damages includes not only the amount of the loss which For turning the two covers of the high and low pressure
may have been suffered, but also that of the profit which the creditor may have
failed to realize. (Art. 1106, Civil Code.) cylinders, and placing new bushes with 5/8 x 9 1/2-inch studs and nuts 85.00

The losses and damages for which a creditor in good faith is liable are those Three cast-iron pistons, turned, with rod and spiral steel
foreseen, or which may have been foreseen, at the time of constituting the
obligation, and which may be a necessary consequence of its nonfulfillment. (Art. springs, brass covers and valves for the cylinders 185.00
1107, Civil Code.)
Four cast-iron seatings for the boiler 217.00
In an action against a manufacturer or dealer for a breach of warranty upon a sale of
goods, which he knew at the time of the sale were intended to be used for a Five 1/4-inch pet cocks for the donkey pump and two for the
particular purpose, the measure of damages is not limited to the difference in value
of the goods as warranted, and as they prove to be, as in cases where like articles cylinder blow-off 15.00
are sold as merchandise for general purposes; but profits lost and expenses
incurred, because of the breach, may be recovered. (Swain v. Schieffelin, 134 N. Y., One 1/8-inch air-cock for the donkey pump 1.80
471; New York and Colorado Mining Syndicate and Company v. Fraser, 130 U. S.,
611; Accumulator Company v. Dubuque Street Railway Company, 64 Fed. Rep., 70.) Two 1/2-inch test cocks with stuffing boxes for the steam

It is apparent from the authorities above cited that the plaintiff is entitled to recover gauges on boiler 9.00
P375, the value of 30 tons of coal consumed in the trials necessarily made to
determine whether or not the propeller had the qualities specified in the contract; Two straight 1/2-inch test cocks with stuffing box for the
also the sum of P707, the wages of employees and other necessary expenses
incurred during said trials. boiler and donkey boiler 9.00

The plaintiff not having presented competent proof as to the loss he sustained by One lubricator with a 3/8 x 1 1/2-inch male thread for the donkey 3.40
reason of his ship being out of commission during the time intervening between the
trial of the first propeller and the installation of the second, nothing can be awarded One 1-inch check valve with test cock and hand wheel for the
him as damages in relation thereto. He is, however, entitled to be allowed as
damages the sum of P2,770.36, the amount paid by him for the first propeller, as its donkey boiler 26.25
purchase price, the same being worthless to him for the purpose for which he
126

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

_______

Total 1,133.45

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

The judgment of the lower court is, therefore, modified to the extent and in the
particulars above enumerated, and, as modified, affirmed, with costs against the
defendant.
127

SECOND DIVISION
3. ID.; ID.; ID.; THE RULE THAT EVERY PERSON DEALING WITH AN AGENT IS PUT
[G.R. Nos. L-33819 and L-33897. October 23, 1982.] UPON AN INQUIRY AND MUST DISCOVER UPON HIS PERIL THE AUTHORITY OF THE
AGENT IS NOT APPLICABLE WHERE THE AGENT, NOT THE PRINCIPAL, IS SOUGHT TO
NATIONAL POWER CORPORATION, Plaintiff-Appellant, v. NATIONAL BE HELD LIABLE ON THE CONTRACT. The rule that every person dealing with an
MERCHANDISING CORPORATION and DOMESTIC INSURANCE COMPANY OF agent is put upon inquiry and must discover upon his peril the authority of the agent
THE PHILIPPINES, Defendants-Appellants. would apply only in cases where the principal is sought to be held liable on the
contract entered into by the agent. The said rule is not applicable in the instant case
The Solicitor General, for Plaintiff-Appellant. since it is the agent, not the principal, that is sought to be held liable on the contract
of sale which was expressly repudiated by the principal because the agent took
Sycip, Salazar, Luna Manalo & Feliciano, for Defendants-Appellants. chances, it exceeded its authority and, in effect. it acted in its own name.

SYNOPSIS 4. ID.; ID.; ID.; THE CONTRACT ENTERED INTO BY AN AGENT WHO ACTED BEYOND
HIS POWERS IS UNENFORCEABLE ONLY AS AGAINST THE PRINCIPAL BUT NOT
Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant AGAINST THE AGENT AND ITS SURETY. Article 1403 of the Civil Code which
National Merchandising Corporation (NAMERCO), the Philippine representative of provides that a contract entered into in the name of another person by one who has
New York-based International Commodities Corporation, executed a contract of sale acted beyond his powers is unenforceable, refers to the unenforceability of the
of sulfur with a stipulation for liquidated damages in case of breach. Defendant- contract against the principal. In the instant case, the contract containing the
appellant Domestic Insurance Company executed a performance bond in favor of stipulation for liquidated damages is not being enforced against its principal but
NPC to guarantee the sellers obligation. In entering into the contract, Namerco, against the agent and its surety. It being enforced against the agent because Article
however, did not disclose to NPC that Namercos principal, in a cabled instruction, 1897 implies that the agent who acts in excess of his authority is personally liable to
stated that the sale was subject to availability of a steamer, and contrary to its the party with whom he contracted. And that rule is complimented by Article 1898 of
principals instruction, Namerco agreed that non-availability of a steamer was not a the Civil Code which provides that "if the agent contracts, in the name of the
justification for non-payment of liquidated damages. The New York supplier was not principal, exceeding the scope of his authority, and the principal does not ratify the
able to deliver the sulfur due to its inability to secure shipping space. Consequently, contract, it shall be void if the party with whom the agent contracted is aware of the
the Government Corporate Counsel rescinded the contract of sale due to the limits of the powers granted by the principal." Namerco never disclosed to the NPC
suppliers non-performance of its obligations, and demanded payment of liquidated the cabled or written instructions of its principal. For that reason and because
damages from both Namerco and the surety. Thereafter, NPC sued for recovery of Namerco exceeded the limits of its authority, it virtually acted in its own name and
the stipulated liquidated damages. After trial, the Court of First Instance rendered not as agent and it is, therefore, bound by the contract of sale which, however, it not
judgment ordering defendants-appellants to pay solidarity to the NPC reduced enforceable against its principal. If, as contemplated in Articles 1897 and 1898,
liquidated damages with interest. Namerco is bound under the contract of sale, then it follows that it is bound by the
stipulation for liquidated damages in that contract.
The Supreme Court held that Namerco is liable fur damages because under Article
1897 of the Civil Code the agent who exceeds the limits of his authority without 5. ID.; ID.; ID.; THE LIABILITY OF AN AGENT WHO EXCEEDS THE LIMITS OF HIS
giving the party with whom he contracts sufficient notice of his powers is personally AUTHORITY IS BASED ON CONTRACT AND NOT ON TORT OR QUASI-DELICT; CASE AT
liable to such party. The Court, however, further reduced the solidary liability of BAR. Defendants contention that Namercos liability should be based on tort or
defendants-appellants for liquidated damages. quasi-delict, as held in some American cases, like Mendelson v. Holton, 149 N.E.
38,42 ACR 1307, is not well-taken. As correctly argued by the NPC, it would be
unjust and inequitable for Namerco to escape liability of the contract after it had
deceived the NPC by not disclosing the limits of its powers and entering into the
SYLLABUS
contract with stipulations contrary to its principals instructions.

6. ID.; ID.; ID.; LIABILITY OF THE SURETY ON THE OBLIGATION CONTRACTED BY AN


1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; AN AGENT WHO EXCEEDS AGENT WHO EXCEEDED HIS AUTHORITY IS NOT AFFECTED THEREBY. The
THE LIMITS OF HIS AUTHORITY IS PERSONALLY LIABLE. Under Article 1897 of the contention of the defendants that the Domestic Insurance Company is not liable to
Civil Code the agent who exceeds the limits of his authority without giving the party the NPC because its bond was posted, not to Namerco, the agent, but for the New
with whom he contracts sufficient notice of his powers is personally liable to such York firm which is not liable on the contract of sale, cannot be sustained because it
party. was Namerco that actually solicited the bond from the Domestic Insurance Company
and, Namerco is being held liable under the contract of sale because it virtually
2. ID.; ID.; ID.; ID.; CASE AT BAR. In the present case, Namerco, the agent of a acted in its own name. In the last analysis, the Domestic Insurance Company acted
New York-based principal, entered into a contract of sale with the National Power as surety for Namerco. The rule is that "want of authority of the person who
Corporation without disclosing to the NPC the limits of its powers and, contrary to its executes an obligation as the agent or representative of the principal will not, as a
principals prior cabled instructions that the sale should be subject to availability of a general rule, affect the surety thereon, especially in the absence of fraud, even
steamer, it agreed that non-availability of a steamer was not a justification for though the obligation is not binding on the principal." (72 C.J.S. 525).
nonpayment of the liquidated damages. Namerco. therefore, is liable for damages.
128

7. CIVIL LAW; DAMAGES; IMPOSITION OF INTEREST THEREON NOT WARRANTED City at a total price of (450,716 (Exh. E).
WHERE THE DISPOSITION OF THE CASE HAS BEEN DELAYED DUE TO NO FAULT OF
DEFENDANTS. With respect to the imposition of the legal rate of interest on the On that same date, a performance bond in the sum of P90,143.20 was executed by
damages from the filing of the complaint in 1957, or a quarter of a century ago, the Domestic Insurance Company in favor of the NPC to guarantee the sellers
defendants contention that interest should not be collected on the amount of obligations (Exh. F).
damages is meritorious. It should be manifestly iniquitous to collect interest on the
damages especially considering that the disposition of this case has been It was stipulated in the contract of sale that the seller would deliver the sulfur at
considerably delayed due to no fault of the defendants Iligan City within sixty days from notice of the establishment in its favor of a letter of
credit for $212,120 and that failure to effect delivery would subject the seller and its
8. ID.; ID.; LIQUIDATED DAMAGES; NO PROOF OF PECUNIARY LOSS IS REQUIRED FOR surety to the payment of liquidated damages at the rate of two-fifth of one percent
RECOVERY THEREOF. No proof of pecuniary lost is required for the recovery of of the full contract price for the first thirty days of default and four-fifth of one
liquited damages. The stipulatian for liquidated damages is intended to obviate percent for every day thereafter until complete delivery is made (Art. 8, p. 111,
controversy on the amount of damages. There can be no question that the NPC Defendants Record on Appeal).
suffered damages because its production of fertilizer was disrupted or diminished by
reason of the non-delivery of the sulfur. The parties foresaw that it might be difficult In a letter dated November 12, 1956, the NPC advised John Z. Sycip, the president of
to ascertain the exact amount of damages for non-delivey of the sulfur. So, they Namerco, of the opening on November 8 of a letter of credit for $212,120 in favor of
fixed the liquidated damages to be paid as indemnity to the NPC. International Commodities Corporation which would expire on January 31, 1957
(Exh. I). Notice of that letter of credit was, received by cable by the New York firm on
9. ID.; ID.; NOMINAL DAMAGES; NOT A CASE OF. Nominal damages are damages in November 15, 1956 (Exh. 80-Wallick). Thus, the deadline for the delivery of the
name only or are in fact the same as no damages (25 C.J.S. 466). It would not be sulfur was January 15, 1957.
correct to hold in this case that the NPC suffered damages in name only or that the
breach of contract "as merely technical in character since the NPC suffered damages The New York supplier was not able to deliver the sulfur due to its inability to secure
because its production of fertilizer "as disrupted or diminished by reason of the non- shipping space. During the period from January 20 to 26, 1957 there was a shutdown
delivery of the sulfur. of the NPCs fertilizer plant because there was no sulfur. No fertilizer was produced
(Exh. K).

DECISION In a letter dated February 27, 1957, the general manager of the NPC advised
Namerco and the Domestic Insurance Company that under Article 9 of the contract
of sale "non-availability of bottom or vessel" was not a fortuitous event that would
excuse non-performance and that the NPC would resort to legal remedies to enforce
AQUINO, J.: its rights (Exh. L and M).

The Government Corporate Counsel in his letter to Sycip dated May 8, 1957
This case is about the recovery of liquidated damages from a sellers agent that rescinded the contract of sale due to the New York suppliers non-performance of its
allegedly exceeded its authority in negotiating the sale. obligations (Exh. G). The same counsel in his letter of June 8, 1957 demanded from
Namerco the payment of P360,572.80 as liquidated damages. He explained that
Plaintiff National Power Corporation appealed on questions of law from the decision time was of the essence of the contract. A similar demand was made upon the
of the Court of First Instance of Manila dated October 10, 1966, ordering defendants surety (Exh. H and H-1).
National Merchandising Corporation and Domestic Insurance Company of the
Philippines to pay solidarily to the National Power Corporation reduced liquidated The liquidated damages were computed on the basis of the 115-day period between
damages in the sum of P72,114.66 plus legal, rate of interest from the filing of the January 15, 1957, the deadline for the delivery of the sulfur at Iligan City, and May 9,
complaint and the costs (Civil Case No. 33114). 1957 when Namerco was notified of the rescission of the contract, or P54,085.92 for
the first thirty days and P306,486.88 for the remaining eighty-five days. Total:
The two defendants appealed from the same decision allegedly because it is P360,572.80.
contrary to law and the evidence. As the amount originally involved is P360,572.80
and defendants appeal is tied up with plaintiffs appeal on questions of law, On November 5, 1957, the NPC sued the New York firm, Namerco and the Domestic
defendants appeal can be entertained under Republic Act No. 2613 which amended Insurance Company for the recovery of the stipulated liquidated damages (Civil Case
section 17 of the Judiciary Law. No. 33114).

On October 17, 1956, the National Power Corporation and National Merchandising The trial court in its order of January 17, 1958 dismissed the case as to the New York
Corporation (Namerco) of 3111 Nagtahan Street, Manila, as the representative of the firm for lack of jurisdiction because it was not doing business in the Philippines (p.
International Commodities Corporation of 11 Mercer Street, New York City (Exh. C), 60, Defendants Record on Appeal).
executed in Manila a contract for the purchase by the NPC from the New York firm of
four thousand long tons of crude sulfur for its Maria Cristina Fertilizer Plant in Iligan On the other hand, Melvin Wallick, as the assignee of the New York corporation and
after the latter was dropped as a defendant in Civil Case No. 33114, sued Namerco
129

for damages in connection with the same sulfur transaction (Civil Case No. 37019). Namerco did not disclose that cable to the NPC and, contrary to its principals
The two cases, both filed in the Court of First Instance of Manila, were consolidated. instruction, it agreed that nonavailability of a steamer was not a justification for
A joint trial was held. The lower court rendered separate decisions in the two cases nonpayment of the liquidated damages.
on the same date.
The trial court rightly concluded that Namerco acted beyond the bounds of its
In Civil Case No. 37019, the trial court dismissed Wallicks action for damages authority because it violated its principals cabled instructions (1) that the delivery
against Namerco because the assignment in favor of Wallick was champertous in of the sulfur should be "C & F Manila", not "C & F Iligan City" ; (2) that the sale be
character. Wallick appealed to this Court. The appeal was dismissed because the subject to the availability of a steamer and (3) that the seller should be allowed to
record on appeal did not disclose that the appeal was perfected on time (Res. of July withdraw right away the full amount of the letter of credit and not merely eighty
11, 1972 in L-33893).In this Civil Case No. 33114, although the records on appeal percent thereof (pp- 123-124, Record on Appeal).
were approved in 1967, inexplicably, they were elevated to this Court in 1971. That
anomaly initially contributed to the delay in the adjudication of this case. The defendants argue that it was incumbent upon the NPC to inquire into the extent
of the agents authority and, for its failure to do so, it could not claim any liquidated
Defendants appeal L-33819. They contend that the delivery of the sulfur was damages which, according to the defendants, were provided for merely to make the
conditioned on the availability of a vessel to carry the shipment and that Namerco seller more diligent in looking for a steamer to transport the sulfur.
acted within the scope of its authority as agent in signing the contract of sale.
The NPC counter-argues that Namerco should have advised the NPC of the
The documentary evidence belies these contentions. The invitation to bid issued by limitations on its authority to negotiate the sale.
the NPC provides that non-availability of a steamer to transport the sulfur is not a
ground for non-payment of the liquidated damages in case of non-performance by We agree with the trial court that Namerco is liable for damages because under
the seller. article 1897 of the Civil Code the agent who exceeds the limits of his authority
without giving the party with whom he contracts sufficient notice of his powers is
"4. Responsibility for availability of vessel. The availability of vessel to transport personally liable to such party.
the quantity of sulfur within the time specified in item 14 of this specification shall
be the responsibility of the bidder. In case of award of contract, failure to ship on The truth is that even before the contract of sale was signed Namerco was already
time allegedly due to non-availability of vessels shall not exempt the Contractor aware that its principal was having difficulties in booking shipping space. In a cable
from payment of liquidated damages provided in item 15 of this dated October 16, 1956, or one day before the contract of sale was signed, the New
specification."cralaw virtua1aw library York supplier advised Namerco that the latter should not sign the contract unless it
(Namerco) wished to assume sole responsibility for the shipment (Exh. T).
"15. Liquidated damages. . . .
Sycip, Namercos president, replied in his letter to the seller dated also October 16,
"Availability of vessel being a responsibility of the Contractor as specified in item 4 1956, that he had no choice but to finalize the contract of sale because the NPC
of this specification, the terms unforeseeable causes beyond the control and would forfeit Namercos bidders bond in the sum of P45,100 posted by the Domestic
without the fault or negligence of the Contractor and force majeure as used herein Insurance Company if the contract was not formalized (Exh. 14, 14-A and Exh. V).
shall not be deemed to embrace or include lack or nonavailability of bottom or
vessel. It is agreed that prior to making his bid, a bidder shall have made previous Three days later, or on October 19, the New York firm cabled Namerco that the firm
arrangements regarding shipments within the required time. It is clearly understood did not consider itself bound by the contract of sale and that Namerco signed the
that in no event shall the Contractor be exempt from the payment of liquidated contract on its own responsibility (Exh. W).
damages herein specified for reason of lack of bottom or vessel. Lack of bottom or
nonavailability of vessel shall, in no case, be considered as a ground for extension of In its letters dated November 8 and 19, 1956, the New York corporation informed
time. . . . ." Namerco that since the latter acted contrary to the formers cabled instructions, the
former disclaimed responsibility for the contract and that the responsibility for the
Namercos bid or offer is even more explicit. It provides that it was "responsible for sale rested on Namerco (Exh. Y and Y-1).
the availability of bottom or vessel" and that it "guarantees the availability of
bottom or vessel to ship the quantity of sulfur within the time specified in this bid" The letters of the New York firm dated November 26 and December 11, 1956 were
(Exh. B, p. 22, Defendants Record on Appeal). even more revealing. It bluntly told Namerco that the latter was never authorized to
enter into the contract and that it acted contrary to the repeated instructions of the
In the contract of sale itself item 15 of the invitation to bid is reproduced in Article 9 former (Exh. U and Z). Said the vice-president of the New York firm to Namerco:
which provides that "it is clearly understood that in no event shall the seller be
entitled to an extension of time or be exempt from the payment of liquidated "As we have pointed out to you before, you have acted strictly contrary to our
damages herein specified for reason of lack of bottom or vessel" (Exh. E, p. 36, repeated instructions and, however regretfully, you have no one but yourselves to
Record on Appeal). blame."cralaw virtua1aw library

It is true that the New York corporation in its cable to Namerco dated August 9, 1956 The rule relied upon by the defendants-appellants that every person dealing with an
stated that the sale was subject to availability of a steamer (Exh. N). However, agent is put upon inquiry and must discover upon his peril the authority of the agent
130

would apply in this case if the principal is sought to be held liable on the contract
entered into by the agent. And the rule is complemented by article 1898 of the Civil Code which provides that
"if the agent contracts in the name of the principal, exceeding the scope of his
That is not so in this case. Here, it is the agent that it sought to be held liable on a authority, and the principal does not ratify the contract, it shall be void if the party
contract of sale which was expressly repudiated by the principal because the agent with whom the agent contracted is aware of the limits of the powers granted by the
took chances, it exceeded its authority, and, in effect, it acted in its own name. principal."

As observed by Castan Tobeas, an agent "que haya traspasado los limites dew As priorly discussed, namerco, as agent, exceeded the limits of its authority in
mandato, lo que equivale a obrar sin mandato" (4 Derecho Civil Espaol, 8th Ed., contracting with the NPC in the name of its principal. The NPC was unaware of the
1956, p. 520). limitations on the powers granted by the New York firm to Namerco.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
As opined by Olivieri, "si el mandante contesta o impugna el negocio juridico
concluido por el mandatario con el tercero, aduciendo el exceso de los limites The New York corporation in its letter of April 26, 1956 said:
impuestos, es justo que el mandatario, que ha tratado con engao al tercero, sea "We hereby certify that National Merchandising Corporation . . . are our exclusive
responsable personalmente respecto de el des las consecuencias de tal falta de representatives in the Philippines for the sale of our products.
aceptacion por parte del mandate. Tal responsabilidad del mandatario se informa en
el principio de la falta de garantia de la existencia del mandato y de la cualidad de "Furthermore, we certify that they are empowered to present our offers in our behalf
mandatario, garantia impuesta coactivamente por la ley, que quire que aquel que in accordance with our cabled or written instructions." (Exh. C).
contrata como mandatario este obligado a garantizar al tercero la efectiva
existencia de los poderes que afirma se halla investido, siempre que el tercero Namerco never disclosed to the NPC the cabled or written instructions of its
mismo sea de buena fe. Efecto de tal garantia es el resarcimiento de los daos principal. For that reason and because Namerco exceeded the limits of its authority,
causados al tercero como consecuencia de la negativa del mandante a reconocer lo it virtually acted in its own name and not as agent and it is, therefore, bound by the
actuado por el mandatario." (26, part II, Scaveola, Codigo Civil, 1951, pp. 358-9). contract of sale which, however, is not enforceable against its principal.

Manresa says that the agent who exceeds the limits of his authority is personally If, as contemplated in articles 1897 and 1898, Namerco is bound under the contract
liable "porque realmente obra sin poderes" and the third person who contracts with of sale, then it follows that it is bound by the stipulation for liquidated damages in
the agent in such a case would be defrauded if he would not be allowed to sue the that contract.
agent (11 Codigo Civil, 6th Ed., 1972, p. 725).
Defendants contention that Namercos liability should be based on tort or quasi-
The defendants also contend that the trial court erred in holding as enforceable the delict, as held in some American cases, like Mendelsohn v. Holton, 149 N.E. 38, 42
stipulation for liquidated damages despite its finding that the contract was executed ALR 1307, is not well-taken. As correctly argued by the NPC, it would be unjust and
by the agent in excess of its authority and is, therefore, allegedly unenforceable. inequitable for Namerco to escape liability after it had deceived the NPC.

In support of that contention, the defendants cite article 1403 of the Civil Code Another contention of the defendants is that the Domestic Insurance Company is not
which provides that a contract entered into in the name of another person by one liable to the NPC because its bond was posted, not for Namerco, the agent, but for
who has acted beyond his powers is unenforceable. the New York firm which is not liable on the contract of sale.

We hold that defendants contention is untenable because article 1403 refers to the That contention cannot be sustained because it was Namerco that actually solicited
unenforceability of the contract against the principal. In the instant case, the the bond from the Domestic Insurance Company and, as explained already, Namerco
contract containing the stipulation for liquidated damages is not being enforced is being held liable under the contract of sale because it virtually acted in its own
against it principal but against the agent and its surety. name. It became the principal in the performance bond. In the last analysis, the
Domestic Insurance Company acted as surety for Namerco.
It is being enforced against the agent because article 1807 implies that the agent
who acts in excess of his authority is personally liable to the party with whom he The rule is that "want of authority of the person who executes an obligation as the
contracted. agent or representative of the principal will not, as a general rule, affect the suretys
liability thereon, especially in the absence of fraud, even though the obligation is not
And that rule is complemented by article 1898 of the Civil Code which provides that binding on the principal" (72 C.J.S. 525).
"if the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party Defendants other contentions are that they should be held liable only for nominal
with whom the agent contracted is aware of the limits of the powers granted by the damages, that interest should not be collected on the amount of damages and that
principal." the damages should be computed on the basis of a forty-five day period and not for
a period of one hundred fifteen days.
It is being enforced against the agent because article 1897 implies that the agent
who acts in excess of his authority is personally liable to the party with whom he With respect to the imposition of the legal rate of interest on the damages from the
contracted. filing of the complaint in 1957, or a quarter of a century ago, defendants contention
131

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

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

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

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

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


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

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

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

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

Radiowealth Finance Company v. Del Rosario


G.R. No. 138739 July 6, 2000

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


Penalty, Interest (Credit Transactions)

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

FACTS:

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

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

HELD:

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


plus 2.5 percent penalty charge per month beginning April 2, 1991 until fully paid,
and 10 percent of the amount due as attorneys fees.
133

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

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

The obligation of the respondents had matured and they clearly defaulted when WHEREFORE, the assailed decision is hereby MODIFIED, as follows:
their checks bounced.Per the acceleration clause, the whole debt became due one
month after the date of the PN because the checkrepresenting their first installment
1. Ordering [petitioners] to jointly and severally pay the [respondent] the amount
bounced.The Note already stipulated a late payment penalty of 2.5 percent monthly
of P128,074.40 as actual damages, and P50,000.00 as liquidated damages;
to be added to each unpaid installmentuntil fully paid. Payment of interest was not
expressly stipulated in the Note. Thus, it should be deemed included insuch
penalty.In addition, the Note also provided that the debtors would be liable for 2. Dismissing the third party complaint against the third party defendants;
attorneys fees equivalent to 25 percent of the amount due in case a legal action
was instituted and 10 percent of the same amount as liquidated damages. 3. Upholding the counterclaims of the third party defendants against the
[petitioners. Petitioners] are hereby required to pay [the] third party defendants the
Liquidated damages, however, should no longer be imposed for being sum of P30,000.00 as moral damages for the clearly unfounded suit;
unconscionable. Such damagesshould also be deemed included in the 2.5 percent
monthly penalty.
4. Requiring the [petitioners] to reimburse the third party defendants the sum
of P10,000.00 in the concept of attorneys fees and appearance fees of P300.00 per
Petitioner is entitled to attorneys fees,but only in a sum equal to 10 percent of the
appearance;
amount due which we deem reasonable under the proven facts.The Court deems it
improper to discuss respondents' claim for moral and other damages. Not having
appealed theCA Decision, they are not entitled to affirmative relief, as already 5. Requiring the [petitioners] to reimburse the third party defendants the sum
explained earlier. of P10,000.00 as exemplary damages pro bono publico and litigation expenses
including costs, in the sum of P5,000.00.[4]
135

The assailed Resolution denied petitioners Motion for Reconsideration. 7. Any violation of the terms and conditions herein provided, more particularly the
warranties above-mentioned, the parties of this Contract responsible thereof shall
pay liquidated damages in the amount of not less than P50,000.00 to the offended
party of this Contract; in case the LESSORS violated therefor, they bound
themselves jointly and severally liable to the LESSEE;
The Facts

On June 2, 1988, Cebu RTC Sheriffs Gumersindo Gimenez and Arturo Cabigon
On February 28, 1986, a Contract of Lease was executed by Jose S. Menchavez,
demolished the fishpond dikes constructed by respondent and delivered possession
Juan S. Menchavez Sr., Juan S. Menchavez Jr., Rodolfo Menchavez, Simeon
of the subject property to other parties.[6] As a result, he filed a Complaint for
Menchavez, Reynaldo Menchavez, Cesar Menchavez, Charito M. Maga, Fe M. Potot,
damages with application for preliminary attachment against petitioners. In his
Thelma R. Reroma, Myrna Ybaez, Sonia S. Menchavez, Sarah Villaver, Alma S.
Complaint, he alleged that the lessors had violated their Contract of Lease,
Menchavez, and Elma S. Menchavez, as lessors; and Florentino Teves Jr. as lessee.
specifically the peaceful and adequate enjoyment of the property for the entire
The pertinent portions of the Contract are herein reproduced as follows:
duration of the Contract. He claimed P157,184.40 as consequential damages for the
demolition of the fishpond dikes, P395,390.00 as unearned income, and an amount
WHEREAS, the LESSORS are the absolute and lawful co-owners of that area covered not less than P100,000.00 for rentals paid.[7]
by FISHPOND APPLICATION No. VI-1076 of Juan Menchavez, Sr., filed on September
20, 1972, at Fisheries Regional Office No. VII, Cebu City covering an area of 10.0
Respondent further asserted that the lessors had withheld from him the
hectares more or less located at Tabuelan, Cebu;
findings of the trial court in Civil Case No. 510-T, entitled Eufracia Colongan and
Paulino Pamplona v. Juan Menchavez Sr. and Sevillana S. Menchavez. In that case
NOW, THEREFORE, for and in consideration of the mutual covenant and stipulations involving the same property, subject of the lease, the Menchavez spouses were
hereinafter set forth, the LESSORS and the LESSEE have agreed and hereby agree as ordered to remove the dikes illegally constructed and to pay damages and attorneys
follows: fees.[8]

1. The TERM of this LEASE is FIVE (5) YEARS, from and after the execution of this Petitioners filed a Third Party Complaint against Benny and Elizabeth Allego,
Contract of Lease, renewable at the OPTION of the LESSORS; Albino Laput, Adrinico Che and Charlemagne Arendain Jr., as agents of Eufracia
Colongan and Paulino Pamplona. The third-party defendants maintained that the
2. The LESSEE agrees to pay the LESSORS at the residence of JUAN MENCHAVEZ SR., Complaint filed against them was unfounded. As agents of their elderly parents, they
one of the LESSORS herein, the sum of FORTY THOUSAND PESOS (P40,000.00) could not be sued in their personal capacity. Thus, they asserted their own
Philippine Currency, annually x x x; counterclaims.[9]

3. The LESSORS hereby warrant that the above-described parcel of land is fit and After trial on the merits, the RTC ruled thus:
good for the intended use as FISHPOND;
[The court must resolve the issues one by one.] As to the question of whether the
4. The LESSORS hereby warrant and assure to maintain the LESSEE in the peaceful contract of lease between Teves and the [petitioners] is valid, we must look into the
and adequate enjoyment of the lease for the entire duration of the contract; present law on the matter of fishponds. And this is Pres. Decree No. 704 which
provides in Sec. 24:

5. The LESSORS hereby further warrant that the LESSEE can and shall enjoy the
intended use of the leased premises as FISHPOND FOR THE ENTIRE DURATION OF Lease of fishponds-Public lands available for fishpond development including those
THE CONTRACT; earmarked for family-size fishponds and not yet leased prior to November 9, 1972
shall be leased only to qualified persons, associations, cooperatives or corporations,
subject to the following conditions.
6. The LESSORS hereby warrant that the above-premises is free from all liens and
encumbrances, and shall protect the LESSEE of his right of lease over the said
premises from any and all claims whatsoever; 1. The lease shall be for a period of twenty five years (25), renewable for another
twenty five years;
136

2. Fifty percent of the area leased shall be developed and be producing in damage[s] thereby. As a consequence, when Teves leased the fishpond area from
commercial scale within three years and the remaining portion shall be developed [petitioners]- who were mere holders or possessors thereof, he took the risk that it
and be producing in commercial scale within five years; both periods begin from the may turn out later that his application for lease may not be approved.
execution of the lease contract;
Unfortunately however, even granting that the lease of [petitioners] and [their]
3. All areas not fully developed within five years from the date of the execution of application in 1972 were to be approved, still [they] could not sublease the same. In
the lease contract shall automatically revert to the public domain for disposition of view therefore of these, the parties must be left in the same situation in which the
the bureau; provided that a lessee who failed to develop the area or any portion court finds them, under the principle IN PARI DELICTO NON ORITOR ACTIO,
thereof shall not be permitted to reapply for said area or any portion thereof or any meaning[:] Where both are at fault, no one can found a claim.
public land under this decree; and/or any portion thereof or any public land under
this decree; On the third issue of whether the third party defendants are liable for demolishing
the dikes pursuant to a writ of execution issued by the lower court[, t]his must be
4. No portion of the leased area shall be subleased. resolved in the negative, that the third party defendants are not liable. First,
because the third party defendants are mere agents of Eufracia Colongan and
The Constitution, (Sec. 2 & 3, Art. XII of the 1987 Constitution) states: Eufenio Pamplona, who are the ones who should be made liable if at all, and
considering that the demolition was pursuant to an order of the court to restore the
prevailing party in that Civil Case 510-T, entitled: Eufracia Colongan v. Menchavez.
Sec. 2 - All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, forests, or timber, wild life, flora
and fauna and other natural resources are owned by the state. After the court has ruled that the contract of lease is null and void ab-initio, there is
no right of the [respondent] to protect and therefore[,] there is no basis for
questioning the Sheriffs authority to demolish the dikes in order to restore the
Sec. 3 - Lands of the public domain are classified into agricultural, forest or timber,
prevailing party, under the principle VIDETUR NEMO QUISQUAM ID CAPERE QUOD EI
mineral lands and national parks. Agricultural lands of the public domain may be
NECESSE EST ALII RESTITUERE - He will not be considered as using force who
further classified by law according to the uses to which they may be devoted.
exercise his rights and proceeds by the force of law.
Alienable lands of the public domain shall be limited to agricultural lands x x x.

WHEREFORE, in view of all foregoing [evidence] and considerations, this court


As a consequence of these provisions, and the declared public policy of the State
hereby renders judgment as follows:
under the Regalian Doctrine, the lease contract between Florentino Teves, Jr. and
Juan Menchavez Sr. and his family is a patent nullity. Being a patent nullity,
[petitioners] could not give any rights to Florentino Teves, Jr. under the 1. Dismissing the x x x complaint by the [respondent] against the [petitioners];
principle: NEMO DAT QUOD NON HABET - meaning ONE CANNOT GIVE WHAT HE
DOES NOT HAVE, considering that this property in litigation belongs to the State and 2. Dismissing the third party complaint against the third party defendants;
not to [petitioners]. Therefore, the first issue is resolved in the negative, as the court
declares the contract of lease as invalid and void ab-initio. 3. Upholding the counterclaims of the third party defendants against the
[petitioners. The petitioners] are hereby required to pay third party defendants the
On the issue of whether [respondent] and [petitioners] are guilty of mutual fraud, sum of P30,000.00 as moral damages for this clearly unfounded suit;
the court rules that the [respondent] and [petitioners] are in pari-delicto. As a
consequence of this, the court must leave them where they are found. x x x. 4. Requiring the [petitioners] to reimburse the third party defendants the sum
of P10,000.00 in the concept of attorneys fees and appearance fees of P300.00 per
x x x. Why? Because the defendants ought to have known that they cannot lease appearance;
what does not belong to them for as a matter of fact, they themselves are still
applying for a lease of the same property under litigation from the government. 5. Requiring the [petitioners] to pay to the third party defendants the sum
of P10,000.00 as exemplary damages probono publico and litigation expenses
On the other hand, Florentino Teves, being fully aware that [petitioners were] not yet including costs, in the sum of P5,000.00.[10](Underscoring in the original)
the owner[s], had assumed the risks and under the principle of VOLENTI NON FIT
INJURIA NEQUES DOLUS - He who voluntarily assumes a risk, does not suffer
137

Respondent elevated the case to the Court of Appeals, where it was docketed Were the Parties in Pari Delicto?
as CA-GR CV No. 51144.
The Court shall discuss the two issues simultaneously.
Ruling of the Court of Appeals
In Pari Delicto Rule
The CA disagreed with the RTCs finding that petitioners and respondent were in
pari delicto. It contended that while there was negligence on the part of respondent on Void Contracts
for failing to verify the ownership of the subject property, there was no evidence that
he had knowledge of petitioners lack of ownership.[11] It held as follows:
The parties do not dispute the finding of the trial and the appellate courts that
the Contract of Lease was void.[17] Indeed, the RTC correctly held that it was the
x x x. Contrary to the findings of the lower court, it was not duly proven and State, not petitioners, that owned the fishpond. The 1987 Constitution specifically
established that Teves had actual knowledge of the fact that [petitioners] merely declares that all lands of the public domain, waters, fisheries and other natural
usurped the property they leased to him. What Teves admitted was that he did not resources belong to the State.[18] Included here are fishponds, which may not be
ask for any additional document other than those shown to him, one of which was alienated but only leased.[19] Possession thereof, no matter how long, cannot ripen
the fishpond application. In fact, [Teves] consistently claimed that he did not bother into ownership.[20]
to ask the latter for their title to the property because he relied on their
representation that they are the lawful owners of the fishpond they are holding for
Being merely applicants for the lease of the fishponds, petitioners had no
lease. (TSN, July 11, 1991, pp. 8-11)[12]
transferable right over them. And even if the State were to grant their application,
the law expressly disallowed sublease of the fishponds to respondent. [21] Void are all
The CA ruled that respondent could recover actual damages in the amount contracts in which the cause, object or purpose is contrary to law, public order or
of P128,074.40. Citing Article 1356[13] of the Civil Code, it further awarded liquidated public policy.[22]
damages in the amount of P50,000, notwithstanding the nullity of the Contract. [14]

A void contract is equivalent to nothing; it produces no civil effect. [23] It does


Hence, this Petition.[15] not create, modify or extinguish a juridical relation. [24] Parties to a void agreement
cannot expect the aid of the law; the courts leave them as they are, because they
The Issues are deemed in pari delicto or in equal fault.[25] To this rule, however, there are
exceptions that permit the return of that which may have been given under a void
Petitioners raise the following issues for our consideration: contract.[26] One of the exceptions is found in Article 1412 of the Civil Code, which
states:

1. The Court of Appeals disregarded the evidence, the law and jurisprudence when it
modified the trial courts decision when it ruled in effect that the trial court erred in Art. 1412. If the act in which the unlawful or forbidden cause consists does not
holding that the respondent and petitioners are in pari delicto, and the courts must constitute a criminal offense, the following rules shall be observed:
leave them where they are found;
(1) When the fault is on the part of both contracting parties, neither may recover
2. The Court of Appeals disregarded the evidence, the law and jurisprudence in what he has given by virtue of the contract, or demand the performance of the
modifying the decision of the trial court and ruled in effect that the Regional Trial others undertaking;
Court erred in dismissing the respondents Complaint. [16]
(2) When only one of the contracting parties is at fault, he cannot recover what he
The Courts Ruling has given by reason of the contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may demand the return of what he has
given without any obligation to comply with his promise.
The Petition has merit.

Main Issue:
138

On this premise, respondent contends that he can recover from petitioners, fishpond lease application would be approved. [37] This circumstance should have
because he is an innocent party to the Contract of Lease. [27] Petitioners allegedly been sufficient to place him on notice. It should have compelled him to determine
induced him to enter into it through serious misrepresentation.[28] their right over the fishpond, including their right to lease it.

Finding of In Pari Delicto: The Contract itself stated that the area was still covered by a fishpond
application.[38] Nonetheless, although petitioners declared in the Contract that they
A Question of Fact co-owned the property, their erroneous declaration should not be used against
them. A cursory examination of the Contract suggests that it was drafted to favor
the lessee. It can readily be presumed that it was he or his counsel who prepared it
The issue of whether respondent was at fault or whether the parties were
-- a matter supported by petitioners evidence. [39] The ambiguity should therefore be
in pari delicto is a question of fact not normally taken up in a petition for review on
resolved against him, being the one who primarily caused it.[40]
certiorari under Rule 45 of the Rules of Court. [29] The present case, however, falls
under two recognized exceptions to this rule. [30] This Court is compelled to review
the facts, since the CAs factual findings are (1) contrary to those of the trial court; The CA erred in finding that petitioners had failed to prove actual knowledge of
[31]
and (2) premised on an absence of evidence, a presumption that is contradicted respondent of the ownership status of the property that had been leased to him. On
by the evidence on record.[32] the contrary, as the party alleging the fact, it was he who had the burden of proving
through a preponderance of evidence[41] -- that they misled him regarding the
ownership of the fishpond. His evidence fails to support this contention. Instead, it
Unquestionably, petitioners leased out a property that did not belong to them,
reveals his fault in entering into a void Contract. As both parties are equally at fault,
one that they had no authority to sublease. The trial court correctly observed that
neither may recover against the other.[42]
petitioners still had a pending lease application with the State at the time they
entered into the Contract with respondent.[33]
Liquidated Damages

Respondent, on the other hand, claims that petitioners misled him into
executing the Contract.[34] He insists that he relied on their assertions regarding their Not Proper
ownership of the property. His own evidence, however, rebuts his contention that he
did not know that they lacked ownership. At the very least, he had notice of their The CA erred in awarding liquidated damages, notwithstanding its finding that
doubtful ownership of the fishpond. the Contract of Lease was void. Even if it was assumed that respondent was entitled
to reimbursement as provided under paragraph 1 of Article 1412 of the Civil Code,
Respondent himself admitted that he was aware that the petitioners lease the award of liquidated damages was contrary to established legal principles.
application for the fishpond had not yet been approved. [35] Thus, he knowingly
entered into the Contract with the risk that the application might be disapproved. Liquidated damages are those agreed upon by the parties to a contract, to be
Noteworthy is the fact that the existence of a fishpond lease application necessarily paid in case of a breach thereof. [43] Liquidated damages are identical to penalty
contradicts a claim of ownership. That respondent did not know of petitioners lack of insofar as legal results are concerned.[44] Intended to ensure the performance of the
ownership is therefore incredible. principal obligation, such damages are accessory and subsidiary obligations. [45] In
the present case, it was stipulated that the party responsible for the violation of the
The evidence of respondent himself shows that he negotiated the lease of the terms, conditions and warranties of the Contract would pay not less than P50,000 as
fishpond with both Juan Menchavez Sr. and Juan Menchavez Jr. in the office of his liquidated damages. Since the principal obligation was void, there was no contract
lawyer, Atty. Jorge Esparagoza.[36] His counsels presence during the negotiations, that could have been breached by petitioners; thus, the stipulation on liquidated
prior to the parties meeting of minds, further debunks his claim of lack of damages was inexistent. The nullity of the principal obligation carried with it the
knowledge. Lawyers are expected to know that fishponds belong to the State and nullity of the accessory obligation of liquidated damages.[46]
are inalienable. It was reasonably expected of the counsel herein to advise his client
regarding the matter of ownership. As explained earlier, the applicable law in the present factual milieu is Article
1412 of the Civil Code. This law merely allows innocent parties to recover what they
Indeed, the evidence presented by respondent demonstrates the contradictory have given without any obligation to comply with their prestation. No damages may
claims of petitioners regarding their alleged ownership of the fishpond. On the one be recovered on the basis of a void contract; being nonexistent, the agreement
hand, they claimed ownership and, on the other, they assured him that their produces no juridical tie between the parties involved. Since there is no contract, the
139

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

MENCHAVEZ v. TEVES

G.R. No. 153201 January 26, 2005

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

Facts:

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

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

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

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

Respondent elevated the case to CA.

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

Hence, this petition.

Issue

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

Held
140

EN BANC

[G.R. No. L-22050. June 13, 1968.] CONCEPCION, C.J.:


PAN PACIFIC COMPANY (PHILIPPINES), Plaintiff-Appellee, v. PHILIPPINE
ADVERTISING CORPORATION and JOHN W. MEARS, Defendants, PHILIPPINE
ADVERTISING CORPORATION,Defendant-Appellant. Appeal by defendant Philippine Advertising Corporation from a decision of the Court
of First Instance of Manila, the dispositive part of which reads:jgc:chanrobles.com.ph
Taada Carreon & Taada for Plaintiff-Appellee.
"WHEREFORE, judgment is rendered in favor of the plaintiff and against the
Felix S. Falgui, for Defendant-Appellant. defendant Philippine Advertising Corporation under the first cause of action,
P92,406.73 with interest at the rate of 8% per annum from January 22, 1951, until
paid; P23,622.90 under the second, third, and fourth causes of action, with interest
at the rate of 12% per annum from May 1, 1951, until paid; P20,000.00 by way of
SYLLABUS moral and exemplary damages under the fifth cause of action; and P15,000.00 by
way of attorneys fees, and the costs of the suit. Defendants counterclaims are
hereby dismissed for lack of merit." (Record on Appeal, pp. 556-657.).
1. CIVIL LAW; SALE; SALES INVOICE; PROVISION FOR ATTORNEYS FEES AND
INTERESTS IN DELIVERY INVOICES, BINDING UPON BUYER. Where the delivery This is an action for the recovery, from said Corporation and its president, defendant
invoices carry a provision for interests and attorneys fees at 12% and 25% John W. Mears, of several sums of money under five (5) causes of action, namely;
respectively, in addition to the costs for overdue accounts and for costs of collection, 1)P92,406.73, as the alleged balance of the cost of eighteen (18) bowling alleys and
the acceptance of the equipment, supplies and accessories mentioned in said additional equipment thereof, and the installation thereof; 2) P11,703.00, as the
invoices by the buyer and the latters use of them is an implied conformity to the price of two (2) carom and three (3) pocket tables, with their equipment, together
terms of the invoices and he is bound thereby. with two (2) sets of ivory balls and one (1) revolving cue rack; 3) P3,369.90, as the
costs of miscellaneous billiard and bowling accessories and equipment; 4)
2. ID.; DAMAGES; MORAL DAMAGES; RECOVERABLE FOR WANTON REFUSAL TO PAY P8,550.00, as the cost of 168 sets of duck pins; and 5) 25% of the aggregate amount
JUST OBLIGATION. Where the defendants, in utter disregard of the rights of the due under the first four (4) causes of action, as exemplary or corrective damages.
plaintiff, had refused deliberately and wantonly to pay the plaintiff what is justly due Plaintiff prays, also, that the defendants be sentenced to pay interest, attorneys
the latter, they are liable for moral damages. fees, and the costs.

3. ID.; ID.; EXEMPLARY OR CORRECTIVE DAMAGES, RECOVERABLE IN INSTANT CASE. In their answer, the defendants admitted some allegations of the complaint, denied
Under Article 2232 of the Civil Code, the court may award exemplary damages in other allegations thereof, and set up special defenses, as well as four (4)
contracts and quasi-contracts if the defendant acted in a wanton, fraudulent, counterclaims. They prayed that plaintiffs complaint be dismissed and that plaintiff
reckless, oppressive or malevolent manner. Thus where the defendant, aside from be sentenced to pay damages in the aggregate sum of P763,000.00.
the down payment he had made on the installation of the bowling alleys, had
refused to pay the balance thereof and the cost of the howling and billiard The factual background of the first cause of action is set forth in the appealed
accessories despite his promise to pay such balance in installments, and where his decision, from which we quote:jgc:
attitude towards plaintiff was characterized by arrogance as reflected in his letters
which were replete with unsavory and discourteous remarks, the plaintiff is entitled "The defendants had payments coming to them from the War Damage Commission.
to moral and exemplary damages. Wilfred Hurst had worked together with John W. Mears of the defendant corporation
prior to the war. In 1950, Hurst and Mears met, and the question of defendant war
4. ATTORNEY AND CLIENT; ATTORNEYS FEES; DEMANDABLE WHERE PLAINTIFF IS damage payments in the Philippines came up in the conversation. Hurst, who was
AWARDED EXEMPLARY DAMAGES. Plaintiff is entitled to attorneys fees in then Vice-President of the plaintiff corporation 1 suggested to Mears that the
accordance with Article 2208 of the Civil Code where he has been awarded defendant reinvest part of the war damage payment due defendant corporation in
exemplary damages because the defendant had acted in gross and evident bad faith bowling alleys. The plaintiff was then distributor of Brunswick-Balke-Collender
in refusing to satisfy the plaintiffs plainly valid, just and demandable claim. Company of the United States, manufacturer of bowling alleys. Mears was
interested, and, accordingly, secured the approval of the War Damage Commission
5. ID.; ID.; BASES FOR. Considering the lengthy pleadings, the voluminous to re-invest part of the war damage payment due the defendant Philippine
records, the lengthy and protracted trial and the professional standing of counsel, Advertising Corporation in bowling alleys. After continuous negotiations, plaintiff,
attorneys fees in the amount of P15,000.00 may be charged against the thru Hurst, and defendant, thru Mears, finally came into an agreement. This was in
defendants. the form of a letter addressed by the plaintiff to the defendant and which was
approved and accepted by the defendant corporation, thru Mears.

DECISION The pertinent portion of the letter-agreement marked Exhibit A 2 and which is one of
the subjects of the controversy between the plaintiff and the defendant reads as
141

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

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

1. Cost of 12 bowling
LESS:chanrob1es virtual 1aw library
alleys & add. equip-
1. Paid in advance P67,027.83
ment, including
2. Cost of 5 sets
installation P85,948.42
of bowling settees
2. Cost of 6 bowling
142

included in defendants "Plaintiffs contention is that the prices listed in Exhibit A were a firm quotation,
f.o.b., that is, delivered in the United States, and this price is the same as that stated
orders but not installed in the breakdown attached to Exhibit A. In fact, defendant does not deny that the
price quoted in Exhibit A is a firm quotation and the fact is confirmed by the letter,
by plaintiff 6,520.00 Exhibit D, dated October 2, 1950, in which Hurst stated that they could no longer
offer a firm quotation as they had received advice from the Brunswick-Balke-
3. 2% Luxury Tax Collender Company that all prices were subject to existing prices at the time the
merchandise leaves the factory. When Hurst stated in Exhibit D that they could no
thereon 943.28 longer offer a firm quotation, he was evidently referring to the quotation in the letter
Exhibit A. As stated by Hurst, he could not at the time have been given a quotation
4. Bowling score crayons 8.77 74,499.88 which would include freight charges, taxes and other charges which might be
imposed by the government, because he did not know exactly at that time what the