QUINTOS, BRENDEN

SANCHEZ, KRISTEL
ACTUAL DAMAGES

adequate compensation only for such pecuniary loss suffered by him as he has duly
proved.
(Art 2199)

actual or compensatory damages are those awarded in satisfaction of, or in recompense for,
loss or injury sustained. They proceed from a sense of natural justice and are designed to
repair the wrong that has been done, to compensate for the injury inflicted and not to
impose a penalty.
GR No. 192446 Now Mountain vs GMA Vetarans

WHAT ARE THE DAMAGES THAT CAN BE CLAIMED?

1. Pecuniary loss suffered by the person

2. Profits which the obligee failed to obtain
3. Contracts and Quasi Contracts

Good Faith Bad Faith

Damages that Natural and Probable All damages
consequences of the breach of obligation
and damages that the parties have foreseen
or could have reasonably foreseen at the
time the obligation was constituted

4. Crimes And Quasi-delicts

Defendants shall be liable for all damages which are the natural and probable consequences
of the act or omission complained of. It is not necessary that such damages have been
foreseen or could have reasonably been foreseen by the defendant.

The damages to be adjudicated may be respectively increased or lessened according to the

aggravating or mitigating circumstances.

5. For loss or impairment of earning capacity in cases of temporary or permanent injury

the trial court has not allowed the plaintiff anything for the loss of his left foot, which has
incapacitated him from following his profession and we believe that this is an error. The
obligation to indemnify for injury caused by negligence under article 1902 of the Civil Code,
includes the two kinds of damages specified in article 1106 of the same Code; to wit,
damages for the loss actually sustained and for the profit which the injured party may have
failed to realized.

Taking into account the age of the plaintiff and the salary he derived from this profession
Page1

from the exercise of which he has been deprived, we fix this future damage at P2,000.
(Hugo Borromeo vs the Manila Electric Railroof and Light Company)
1
Tan Ti v. Alvear, 26 Phil.566
2
Aquino v. Casabar, G.R. No. 191470, January 26, 2015
3
Benedicto v. Villaflores, G.R. No. 185020, October 6, 2010
QUINTOS, BRENDEN
SANCHEZ, KRISTEL

6. Injury to the plaintiff’s business standing or commercial credit

RCPI the freight company claimed that due to "utter, patent, and wanton carelessness, gross
negligence and unpardonable fault" of the personnel of RCPI, the latter transmitted
erroneously a telegram which should have read " No truck available " but instead read "
Truck available ". As a consequence, the freight company suffered damages, and prayed for
an award of P100,000.00 as actual damages. In this particular case, the value of the actual
loss suffered by Yabut has been proven to be P132.12 (not P500.00,as held by respondent
Court). This is compensable. Compensatory damages were also awarded for injury to
Yabut's "business reputation or business standing", "loss of goodwill and loss of customers
or shippers who shifted their patronage to competitors".
( GR No. L-55194 RCPI vs CA)

CASES

1. PNOC vs MEFC

The trial Court rendered judgment in favor of MEFC and awarded P6,438,048.00 in actual
damages on the basis of the testimony of the ship captain and certain pieces of documentary
evidence: Market reports or qoutations, trade journals, trade circulars and price lists

On the issue of whether actual damages is proven, the Supreme Court held that:
(1) the trial court did not base such award on the actual value of the vessel and its equipment
at the time of loss in 1977;
(2) there was no evidence on extraordinary inflation that would warrant an adjustment of the
replacement cost of the lost vessel, equipment and cargo;
(3) the value of the lost cargo and the prices quoted in respondents documentary evidence
only amount to P4,336,215.00;
(4) private respondents failure to adduce evidence to support its claim for unrealized profit
and business opportunities; and
(5) private respondents failure to prove the extent and actual value of damages sustained as a
result of the 1977 collision of the vessels.

2. MANZANARES vs MORETA

The plaintiff, having shown that the deceased was her son, 8 or 9 years of age at the time of
death, it was neither necessary nor possible to prove loss of services or support, or to prove
special damage;
The discretion of a jury, where there is a jury, or of the trial court, where the court possesses
such faculty, in fixing the amount of damages, will not be interfered with by the appellate
court unless this discretion has been palpably abused.
In order to give rise to the obligation imposed by article 1902 of the Civil Code, derived
from Partida 7, Title 15, Law 3, the coincidence of two distinct requisites is necessary, viz:
Page2

(1) That there exist an injury or damage not originating in acts or omissions of the prejudiced
person himself, and its existence be duly proven by the person demanding indemnification
1
Tan Ti v. Alvear, 26 Phil.566
2
Aquino v. Casabar, G.R. No. 191470, January 26, 2015
3
Benedicto v. Villaflores, G.R. No. 185020, October 6, 2010
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
therefor; (2) that said injury or damage be caused by the fault or negligence of a person other
than the sufferer.

Separate Opinion of J Malcolm:

To force the plaintiff to prove her loss exactly would be to ask the impossible — would be
in effect to return to the old common law rule which prohibits a recovery Physical and gross
criteria, as the hewing of wood and carrying of water, are indeed no standards at all. Even if
the case was to be reopened, the plaintiff could with extreme difficulty present any better
evidence than that now before us. As we have the basis of satisfactory facts from which to
infer the amount of damage, as the law presumes a pecuniary loss because of the death, and
as the trial judge has made an intelligent computation, we should rest here, with knowledge
that, within the ken of human wisdom, justice has been done.

The party suffering loss or injury must exercise the diligence of a good father of a family to
minimize the damage from the act or omission in question
Article 2204

ATTORNEY’S FEES AND EXPENSES OF LITIGATION

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or
to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly
valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of
litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

Concept of Attorney’s Fees as Damages

The attorney’s fees referred to in this article do not refer to the duty of a client to pay his own attorney.
The fees stated in the article apply rather to instances when a client may recover from the other party
the fees which the former may pay the former’s attorney.1
Page3

Two concepts of Attorney’s fees

1
Tan Ti v. Alvear, 26 Phil.566
2
Aquino v. Casabar, G.R. No. 191470, January 26, 2015
3
Benedicto v. Villaflores, G.R. No. 185020, October 6, 2010
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
1. Ordinary – reasonable compensation paid to a lawyer by this client for the legal services he has
rendered to the latter.
2. Extraordinary – awarded by the court to the successful litigant to be paid by the losing party as
indemnity for damages 2. They are actual damages due to the plaintiff.

Payable not only to the lawyer but to the client, unless they have agreed that the award shall pertain
to the lawyer as additional compensation or as part3.

ORDINARY EXTRAORDINARY
Nature
The reasonable compensation paid to a lawyer An indemnity for damages ordered by the court
for the legal services rendered to a client who has to be paid by the losing to the prevailing party in
engaged him. litigation.
Basis
The fact of employment of the lawyer by the In cases authorized by law.
client.
To whom payable
Lawyer Client

Page4

1
Tan Ti v. Alvear, 26 Phil.566
2
Aquino v. Casabar, G.R. No. 191470, January 26, 2015
3
Benedicto v. Villaflores, G.R. No. 185020, October 6, 2010
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
Generally Not Part of Damages

Generally, attorney’s fees, as understood in this article are not a proper element of damage, for it is
NOT sound public policy to place a penalty on the right to litigate. To compel the defeated party to
pay the fees of counsel for his successful opponent would throw wide the door of temptation to the
opposing party and his counsel to swell the fees to undue proportions.1

General Rule: Attorney’s fees cannot be recovered as actual damages.

Exceptions:
1. Stipulation between parties;
2. Recovery of wages of household helpers, laborers and skilled workers;
3. Actions for indemnity under workmen's compensation and employer liability laws;
4. Legal support actions;
5. Separate civil action to recover civil liability arising from crime;
6. Malicious prosecution;
7. Clearly unfounded civil action or proceeding against plaintiff;
8. When double judicial costs are awarded;
9. When exemplary damages are awarded;
10. Defendant acted in gross & evident bad faith in refusing to satisfy plaintiff's just & demandable
claim; and
11. When defendant's act or omission compelled plaintiff to litigate with third persons or incur
expenses to protect his interest

NOTE: If not pleaded and prayed for in the complaint, attorney’s fees are barred.4
Furthermore, moral damages and attorney’s fees cannot be consolidated for they are different in
nature and each must be separately determined.5
Attorneys’ fees is not available when the defendant employer is not guilty of bad faith.6
Given to Party, Not to Counsel

The Court’s award of attorney’s fees is an indemnity to the party and NOT to counsel, and the fact
that the contract between the client and his counsel was on a CONTINGENT basis does not affect
the client’s right to counsel fees. A litigant who improvidently stipulates higher counsel fees than those
to which he is lawfully entitled, does NOT for that reason earn the right for a larger indemnity, but
by parity of reasoning, he should NOT be deprived of counsel fees if by law he is entitled to recover.7

Express Stipulation

(a) Note that aside from the eleven instances enumerated, attorney’s fees and expenses of
litigation may be recovered also should there be an express stipulation to that effect. However, if
despite an express stipulation for attorney’s fees, there is an implied WAIVER thereof (as
Page5

when instead of demanding specific fulfillment of an obligation — with attorney’s fees in

1
Tan Ti v. Alvear, 26 Phil.566
4
Tin Po v. Bautista, G.R. No. L-55514, March 17, 1981
5
Philippine Veterans Bank v. NLRC, G.R. No. 130439, October 26, 1999
6
Dalusong v. Eagle Clark Shipping Philippines, Inc., G.R. No. 204233, September 3,2014
7
Necesito, et al. v. Paras, et al., 104 Phil. 75
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
compelling such fulfillment — there is a demand for cancellation of a contract), attorney’s fees
cannot be recovered.8
(b) If the parties agree on attorney’s fees based on a certain percentage of the amount of the
principal obligation, the stipulation is valid.9
(c) Where the contract does not expressly stipulate that a fixed sum by way of attorney’s fees shall
be paid by defendant in case of collection even if the same is subsequently settled by
compromise, it is just and fair to reduce the amount of counsel’s fees in the court’s
discretionary power, where the case is partially or fully settled out of court.10
(d) Be it noted, however, that an agreement whereby a non-lawyer will be given part of the attorney’s
fees, is condemned by legal ethics, is immoral and cannot be justified.11

Defendant’s Act or Omission

If the litigation was caused not by the defendant’s failure to pay but by the plaintiff’s exorbitant charge,
the plaintiff cannot get attorney’s fees.12 Similarly, if the plaintiff goes to court after refusing an amicable
settlement by the guilty party, said plaintiff cannot recover attorney’s fees if it is proved that he was
asking “too much.” Here, the defendant was justifyed in resisting the unjust claim.13

Malicious Prosecution

(a) There is malicious prosecution only if the person concerned acted deliberately and knew that
his accusation was false or groundless.14

(b) Hence, if there is in the record no indication that the action was malicious and intended only
to prejudice the other party, attorney’s fees on this ground cannot be recovered.15

Unfounded Civil Action

(a) If A’s complaints against B are found to be insincere, baseless and intended to harass, annoy,
and defame B, B can now sue for and be granted attorney’s fees, for the “clearly unfounded
civil actions or proceedings against the plaintiff (A).16
(b) Paragraph 4 also applies in favor of a defendant under a counterclaim for attorney’s fees, because
a counterclaim is a complaint fi led by the defendant against the original plaintiff.17

Page6

8 Luneta Motor Co. v. Baguio Bus Co., L-15157, Jun. 30, 1960
9 Luneta Motor v. Mora Limlengco, 73 Phil. 80
10 Santiago v. Dimayuga, L-17833, Dec. 30, 1961
11 PAFLU v. Binalbagan Isabela Sugar Co., 42 SCRA 302
12 Cachero v. Manila Yellow Taxicab Co., 101 Phil. 523 and Globe Assurance Co. v. Arcache, L-12378, May 28, 1958
13 Juana Soberano & Jose B. Soberano v. The Manila Railroad Co., L-19407, Nov. 23, 1966
14 Buenaventura v. Sto. Domingo, 54 O.G. 8439
15 Mercader v. Manila Polo Club, L-8373, Sep.28, 1956
16 Heirs of Justiva v. Court of Appeals, L-16396, Jan. 31, 1963 and Suntay Tanjangco v. Jovellanos, et al., L-12332, Jun. 30, 1960; See also Enervida v. De la Torre
17Malonzo v. Galang, et al., L-13851, Jul. 27, 1960
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
Bad Faith of Defendant

(a) Here, the defendant (in the suit for attorney’s fees) must have acted in GROSS and EVIDENT
BAD FAITH in refusing to satisfy plaintiff’s claim.18
(b) Therefore, where the defendant’s refusal to pay the amount claimed was due not to malice but
to the fact that the plaintiff demanded more than what it should, and consequently, the
defendant had the right to refuse it, plaintiff is not entitled to attorney’s fees.19
(c) Similarly, where the defendant did not deny the debt but merely pleaded for adjustment in
accordance with the Ballantine Scale, the refusal is not done in bad faith.20 As a matter of fact,
even clearly untenable defenses would be no ground for awarding attorney’s fees unless the plea
thereof amounts to gross and evident bad faith.20
(d) Indeed, mere failure of the defendant to pay his obligation without bad faith does not warrant
recovery of attorney’s fees.21

Workmen’s Compensation and Employer’s Liability

Because Sec. 31 of the Workmen’s Compensation Act does not govern attorney’s fees recoverable
from the adverse party, Art. 2208(8) of the Civil Code will apply — to supply the deficiency in the
said Act, in accordance with Art. 18 of the new Civil Code.22

Civil Liability Arising from a Crime

Attorney’s fees by express provision of law may be awarded in a separate civil action to recover the
civil liability arising from a crime. (Art. 2208, par. 9). Moreover, an award of attorney’s fees granted by
a trial court can envisage the services of counsel only up to the date of its judgment.
Therefore, if the decision is appealed, attorney’s fees should perhaps be at least doubled.23

Any Other Case

1. Paragraph 11 does not apply if the case was instituted before the effectivity of the new Civil
Code. This was the ruling in the case of Bureau of Lands v. Samia (L-8068, Aug. 26, 1956), where
the court said that unless authorized by statute, attorney’s fees cannot be recovered from the
government if it abandons expropriation proceedings.
It would be otherwise if the abandoner is a private entity or a quasi-public corporation.
Thus also, if the award of attorney’s fees would be just and equitable, still if the suit was
brought before the new Civil Code became effective, attorney’s fees (other than those allowed
as costs under the Rules of Court) could not be recovered as damages against the losing party
(otherwise, there would be a sort of penalty on the right to litigate).24
2. Attorney’s fees and expenses of litigation may be recovered when deemed by the court as just
and equitable as when the defendant never questioned the correctness and legality of the
plaintiff’s case but based its defense and appeal entirely on a pure technicality which took up
the time of two appellate courts, and delayed giving of appropriate relief to plaintiff for more
than three years.25 Indeed, the award of attorney’s fees is essentially discretionary in the trial
Page7

court26, and in the absence of abuse of discretion, the same should not be disturbed.27 The
18 Art. 2208, No. 5
19 Globe Assurance Co., Inc. v. Arcache, L-12378, May 28, 1958
20 Jimenez v. Bucoy, L- 10221, Feb. 28, 1958 and Intestate Estate of Luther Young v. Bucoy, 54 O.G. 7560
21 Lasedeco v. Gaston, L-8938, Oct. 31, 1956; Koster, Inc. v. Zulueta, 99 Phil. 945 and Francisco v. GSIS, L18155, Mar. 30, 1963
22 MRR v. Manalang, L-20845, Nov. 29, 1965 and Nat. Development Corp. v. WCC, L-19863, Apr. 29, 1964
23 Bantoto, et al. v. Bobis, et al. & Vallejo, L-18966, Nov. 22, 1966
24 Receiver for North Negros Sugar Co., Inc. v. Ybanez, L-22183, Aug. 30, 1968 and Koster v. Zulueta, 99 Phil. 945
25 Phil. Milling Co. v. Court of Appeals, L-9404, Dec. 27, 1956
26 Francisco v. GSIS, L-18165, Mar. 30, 1963
27 Lopez, et al. v. Gonzaga, L-18788, Jan. 31, 1964
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
allowance, for example, of counsel’s fees in probate proceedings rests largely on the sound
discretion of the Court which shall not be interfered with except for manifest abuse.28

SPOUSES EDUARDO and ANN AGUSTIN, vs. HON. COURT OF APPEALS and
LABRADOR DEVELOPMENT CORPORATION, G.R. No. 84751 June 6, 1990

FACTS:
Labrador Development Corporation (LADECO), a subdivision developer, agreed to sell a parcel of
land covered under TCT No. 277209 to Spouses Agustin on a package deal together with a
residential house yet to be constructed thereon for the sum of P202, 980.00. Aside from payment of
equity and for the down payment and balance, P160,000.00 was to be funded through a Pag-Ibig
Fund loan to be applied by the spouses. They further agreed that failure to comply with any or all of
the above stipulations shall ipso facto cancel the contract and if title has been transferred already,
such shall revert to LADECO.
A deed of sale over the lot was executed in favor of spouses Agustin. The latter applied for a
P160,000.00 housing loan with the First Summa Savings and Mortgage Bank as an accredited financing
institution. The bank required them to fulfill some conditions needed for the approval of the loan
amount. While LADECO sought to enforce the contractual stipulations, the spouses sought time to
buy the property. The latter failed to make payment thus the private respondent demanded for
reconveyance through institution of a civil case for reconveyance and damages. The trial court ruled
in favor of LADECO. On appeal, the decision was affirmed by the respondent court but with the
deletion of the award of exemplary damages.

ISSUE:
Whether or not private respondent LADECO is not entitled to attorney’s fees of P5,000.00 under the
facts and circumstances of the case.

RULING:
The award to private respondent of attorney’s fees, however, must be disallowed considering that the
award of exemplary damages was eliminated by respondent court and the text of the decision of the
trial court, which was affirmed by the Court of Appeals, is bereft of any findings of fact and law to
justify such award. The accepted rule is that the reason for the award of attorney’s fees must be stated
in the text of the court’s decision; otherwise, if it is stated only in the dispositive portion of the
decision, the same must be disallowed on appeal. The award of attorney’s fees being an exception
rather than the general rule, it is necessary for the court to make findings of facts and law that would
bring the case within the exception and justify the grant of such award.
Page8

28
In Re Estate of Raquel, L-16349, Jan. 31, 1964
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
d. INTEREST

Art. 2209. 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.

Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach
of contract.

Art. 2211. In crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be
adjudicated in the discretion of the court.

Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the
obligation may be silent upon this point.

Art. 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the
demand can be established with reasonable certainty.

INTEREST ACCRUES WHEN:

(1) The obligation consists in the payment of a sum of money

(2) Debtor incurs in delay
(3) There being no stipulation to the contrary

No interest may be recovered on unliquidated (not fixed in amount) claims or damages, except when
the demand can be established with reasonable certainty at the Court’s discretion.

COMPOUNDING OF INTEREST

Interest due shall earn legal interest from the time it is judicially demanded, although the obligation
may be silent on the point. Note that interest due can earn only at 6%, whether the rate of interest
of the principal is greater than 6%.

DETERMINATION OF LEGAL INTEREST

(1) When an obligation, regardless of its source (i.e. law, contracts, quasi-contracts, delicts or
quasidelicts) is breached, the contravenor can be held liable for damages.
(2) With regard particularly to an AWARD OF INTEREST in the concept of actual and compensatory
damages, the RATE of interest, as well as the ACCRUAL thereof, is imposed, as follows:29
Page9

29
Eastern Shipping Lines vs. CA, 1994
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
Base Rate Accrual
(a) When the obligation is (a) That which may to be computed from default, i.e.,
breached, and it consists in the have from JUDICIAL or
PAYMENT OF A SUM OF Been stipulated in EXTRAJUDICIAL demand under
MONEY, i.e., a loan or writing. and subject to the provisions of
forbearance of money, the b) In the absence of Article 1169 of the
interest due should be stipulation, Civil Code.
the rate of interest shall
be 6% per annum
(legal interest)
(b) Furthermore, the INTEREST legal interest from the time it is JUDICIALLY
DUE shall itself earn demanded.
(c) When an obligation, NOT at the rate of 6% per If claim or damages are
constituting a loan or forbearance annum. LIQUIDATED, from default, i.e.,
of money, is breached, an interest from judicial or extrajudicial demand.
on the AMOUNT OF (Art. 1169, Civil Code)
DAMAGES awarded may be If UNLIQUIDATED, from the time
imposed at the discretion of the the demand can be established with
court. The actual base for the reasonable certainty. Hence, the
computation of legal interest shall interest shall begin to run only
be on the amount finally FROM THE DATE THE
adjudged. JUDGMENT
OF THE COURT IS MADE (at
which time the quantification of
damages may be deemed to have
been reasonably ascertained).
(d) When the JUDGMENT of the rate of legal from FINALITY UNTIL ITS
the court awarding a sum of interest, whether the SATISFACTION, this period being
money becomes final case falls deemed to be an equivalent to a
and executory under a, b, or c, above, forbearance of credit.
shall
be 6% per annum

Page10

29
Eastern Shipping Lines vs. CA, 1994
QUINTOS, BRENDEN
SANCHEZ, KRISTEL
EASTERN SHIPPING LINES VS. CA, G.R. NO. 97412 JULY 12, 1994

Facts:
This is an action against defendants shipping company, arrastre operator and broker-forwarder for
damages sustained by a shipment while in defendants' custody, filed by the insurer-subrogee who paid
the consignee the value of such losses/damages.

the losses/damages were sustained while in the respective and/or successive custody and possession
of defendants carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage).

As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95
under the aforestated marine insurance policy, so that it became subrogated to all the rights of action
of said consignee against defendants.

DECISION OF LOWER COURTS: * trial court: ordered payment of damages, jointly and severally
* CA: affirmed trial court.

Issues:
(a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint
and several, liability of the common carrier, the arrastre operator and the customs broker;
(b) whether the payment of legal interest on an award for loss or damage is to be computed from
the time the complaint is filed or from the date the decision appealed from is rendered; and
(c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent
(6%)

Held:
(a) YES, it is solidary. Since it is the duty of the ARRASTRE to take good care of the goods that
are in its custody and to deliver them in good condition to the consignee, such responsibility
also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore
charged with the obligation to deliver the goods in good condition to the consignee.
The common carrier's duty to observe the requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or unconditionally placed in the possession of,
and received by, the carrier for transportation until delivered to, or until the lapse of a
reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738,
Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines,
52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need
not be an express finding of negligence to hold it liable.

(b) FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE SUPREME

COURT)

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII
on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
Page11

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

29
Eastern Shipping Lines vs. CA, 1994
QUINTOS, BRENDEN
SANCHEZ, KRISTEL

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

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

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

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

(c) SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February
1988, of the court a quo (Court of Appeals) AND A TWELVE PERCENT (12%) interest, in
lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of the Supreme
Court decision until the payment thereof.

RATIO: when the judgment awarding a sum of money becomes final and executory, the monetary
award shall earn interest at 12% per annum from the date of such finality until its satisfaction,
regardless of whether the case involves a loan or forbearance of money. The reason is that this interim
period is deemed to be by then equivalent to a forbearance of credit.

Page12

29
Eastern Shipping Lines vs. CA, 1994