VICTORY LINER, INC. vs. GAMMAD | G.R. No. 159636.

|November 25, 2004

FACTS: Respondent Gammad’s wife Marie Grace was on board an air-conditioned Victory
Liner bus bound for Tuguegarao, Cagayan from Manila. While running at a high speed, the bus
fell on a ravine which resulted in the death of Marie Grace and physical injuries to other
passengers. Respondent heirs of the deceased filed a complaint for damages arising from culpa
contractual against petitioner. In its answer, the petitioner claimed that the incident was purely
accidental and that it has always exercised extraordinary diligence in its 50 years of operation.
Judgment was made in favor of Gammad.
1. Actual Damages -------------------- P 122,000.00
2. Death Indemnity --------------------- 50,000.00
3. Exemplary and Moral Damages----- 400,000.00
4. Compensatory Damages ---------- 1,500,000.00
5. Attorneys Fees ------------ 10% of the total amount granted
6. Cost of the Suit

On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with
modification as follows: xxx 4. Attorneys fees equivalent to 10% of the sum of the actual,
compensatory, moral, and exemplary damages herein adjudged. Xxx

ISSUE: Whether the award of attorney’s fees was proper. – YES!

HELD: Pursuant to Article 2208 of the Civil Code, attorneys fees may also be recovered in
the case at bar where exemplary damages are awarded. The Court finds the award of
attorneys fees equivalent to 10% of the total amount adjudged against petitioner reasonable.

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

ASIAN TERMINALS, INC., vs. ALLIED GUARANTEE INSURANCE, CO., | G.R. No.
182208 | October 14, 2015

FACTS: Petitioner is an arrastre operator based in the South Harbor, Port Area, Manila. A
shipment was made of 72,322 lbs. of kraft linear board (a type of paperboard) loaded and
received from the ports of Lake Charles, LA, and Mobile, AL, U.S.A., for transport and delivery
to San Miguel Corporation (San Miguel) in Manila, Philippines.

The M/V Nicole arrived in Manila on April 8, 1989 and, shortly thereafter, the subject shipment
was offloaded from the vessel to the arrastre Marina until April 13, 1989. Thereafter, it was
assessed that a total of 158 rolls of the goods were "damaged" during shipping. Further, upon
the goods' withdrawal from the arrastre and their delivery, first, to San Miguel's customs broker,
Dynamic Brokerage Co. Inc. (Dynamic), and, eventually, to the consignee San Miguel, another
54 rolls were found to have been damaged, for a total of 212 rolls of damaged shipment worth
P755,666.84. Herein respondent Allied Guarantee Insurance, Co., Inc., (respondent Allied), was
the insurer of the shipment. Thus, it paid San Miguel P755,666.84 and was subrogated in the
latter's rights.

Allied filed a Complaint[10] (and later, an Amended Complaint) for maritime damages against
Transocean, Philippine Transmarine, Dynamic and Marina (petioner) seeking to be indemnified
for the P755,666.84 it lost in paying the consignee San Miguel. The suit alleged that the
shipment was loaded from the ports of origin "in good and complete order condition," and all
losses were due to the fault of the named defendants. In addition, the suit sought legal interest,
25% of the indemnity as attorney's fees, and costs of the suit.

RTC decided for respondents, CA affirmed.

Awards were:
a) the amount of P623,935.76 plus interest corresponding to the 158 rolls of kraft linear board
that was damaged while in the custody of defendant Transocean Inc. to be paid by the latter to
the plaintiff with legal rate of interest from the time when it was due and until fully paid;
b) the amount of P131,731.08 plus interest corresponding to the additional 54 rolls of kraft linear
board that was damaged, to be paid jointly and severally by defendants Marina Port Services
Inc. and Dynamic Brokerage Co. Inc. to the plaintiff with legal rate of interest from the time when
it was due until fully paid;
c) 25% of the aforesaid principal amounts as attorney's fees to be paid jointly and severally by
all the defendants.
d) plus costs of suit.

Petitioner argues that the reports were allegedly made prior to the shipment's turnover from ATI
to Dynamic and they purportedly show that no additional loss or damage happened while the
shipment was in ATI's custody as the reports only mention the 158 rolls that were damaged
during shipping or prior to ATI's possession. ATI also assails the award of attorney's fees,
stating that no findings of fact or law were made to justify the grant of such an award.

ISSUE: Whether or not petitioner has been proven liable for the additional 54 rolls of damaged
goods to respondent and, if so, whether it is also liable for attorney's fees. – YES but not liable
for attorney’s fees

HELD: The court denies the petition with respect to the additional 54 rolls of damaged goods, as
petitioner's liability thereon was duly proven and well established during trial. The rulings of both the trial
and appellate courts in this respect are upheld.

Since the relationship of an arrastre operator and a consignee is akin to that between a warehouseman
and a depositor, then, in instances when the consignee claims any loss, the burden of proof is on the
arrastre operator to show that it complied with the obligation to deliver the goods and that the losses were
not due to its negligence or that of its employees.[51] ATI failed to dislodge this burden. Failing to present
the necessary evidence, ATI was unable to overcome the presumption of its own negligence while in the
custody of the goods. As it is now established that there was negligence in both petitioner ATI's and
Dynamic's performance of their duties in the handling, storage and delivery of the subject shipment to
San Miguel, resulting in the loss of 54 rolls of kraft linear board, both shall be solidarily liable for such loss.

Anent the grant of attorney's fees, the Court sustains the petitioner's stance that the same is
unjustified. The Court has held, with respect to the award of attorney's fees, as follows:

We have consistently held that an award of attorney's fees under Article 2208 demands
factual, legal, and equitable justification to avoid speculation and conjecture surrounding
the grant thereof. Due to the special nature of the award of attorney's fees, a rigid
standard is imposed on the courts before these fees could be granted. Hence, it is
imperative that they clearly and distinctly set forth in their decisions the basis for the
award thereof. It is not enough that they merely state the amount of the grant in the
dispositive portion of their decisions. It bears reiteration that the award of attorney's fees
is an exception rather than the general rule; thus, there must be compelling legal reason
to bring the case within the exceptions provided under Article 2208 of the Civil Code to
justify the award.

The court must always state the basis for the grant of attorney's fees before such is justified,
because the principle that is generally observed is that no premium should be placed on the
right to litigate. (See Art. 2208)

In the case at bar, other than a mere mention that "plaintiff was constrained to litigate to enforce
its valid claim" by the trial court, there is no other compelling reason cited that would make
the respondent entitled to attorney's fees as held in the trial court's as well as the appellate
court's decision. It has been previously held that the mere fact of "having been forced to
litigate to protect one's interest" does not amount to the compelling legal reason that
would make a case covered by any of the exceptions provided under Article 2208.
Although attorney's fees may be awarded when a claimant is "compelled to litigate with
third persons or incur expenses to protect his interest" by reason of an unjustified act or
omission on the part of the party from whom it is sought, but when there is a lack of
findings on the amount to be awarded, and since there is no sufficient showing of bad
faith in the defendant's refusal to pay other than an erroneous assertion of the
righteousness of its cause, attorney's fees cannot be awarded against the latter.

(Note: Petitioner’s defense was that he damaged occurred while the goods are outside the
custody of petitioner)

Hence, such an award in the case at bar is unjustified and must be deleted.

PADILLA MACHINE SHOP vs. JAVILGAS | GR No. 175960 | February 19, 2008

FACTS: Javilgas filed a complaint for illegal dismissal, underpayment of 13th month pay,
separation pay and non-remittance of SSS contributions against petitioners. Respondent
alleged that petitioners made regular deductions for his SSS contributions, but sometime in
2002, he found out that his employer was not remitting the contributions to the SSS; as a result,
he was not able to avail of the benefits thereof when his wife gave birth. When he complained
about the failure of his employer to remit his SSS contributions, the latter transferred him to the
Novaliches branch office. Respondent further alleged that in April 2002, Rodolfo Padilla called
him by telephone and told him to stop working, but without giving any reason therefor. He
stopped reporting for work and sued petitioners for illegal dismissal, with a prayer for the
payment of backwages, pro rated 13th month pay, separation pay, and moral and exemplary
damages.

The Labor Arbiter rendered a decision that Javilgas was illegally dismissed, awards are as
follows:
 P232,065.92 representing backwages;
 50,400.00 representing separation pay;
 18,571.00 representing 13th month pay
 Ten percent of the total award as attorneys fees.
 The claim of non-remittance of SSS contribution is dismissed for lack of jurisdiction.

Petitioners appealed the decision to the National Labor Relations Commission (NLRC) which reversed
the decision of the Labor Arbiter. The NLRC found no sufficient evidence to show that Javilgas was
dismissed or prevented from reporting for work; that Javilgas could not categorically state when he was
dismissed: in his complaint, he claimed to have been dismissed on February 27, 2002, but in subsequent
pleadings he alleged he was dismissed in mid-April, 2002. On appeal, the Court of Appeals reversed the
NLRC and reinstated the Decision of the Labor Arbiter. It held that the burden of proof is on the
petitioners, to show that Javilgas was dismissed for a valid and just cause. As to the inconsistency in the
dates of Javilgas termination, the appellate court noted that it was a case of miscommunication between
Javilgas and the person who filled up the entries in the pro forma labor complaint in his behalf; Javilgas
was found to be illiterate, as he did not even get to finish Grade School. Likewise, the delay of eight
months in the filing of the complaint should not work against respondent because it took time for him to
obtain the services of a counsel.

ISSUE: The Court of Appeals erred in awarding attorney’s fees to the respondent who was
being represented pro bono by the Office of Legal Aid of the U.P. College of Law.

HELD: In the instant case, petitioners failed to adduce evidence to rebut Javilgas claim of dismissal and
satisfy the burden of proof required.

Finally, there is no merit in petitioners claim that attorneys fees may not be awarded to the
respondent since his case was being handled pro bono by the U.P. Office of Legal Aid, which
provides free legal assistance to indigent litigants.
In this jurisdiction, there are TWO CONCEPTS OF ATTORNEY’S FEES. In the ORDINARY
SENSE, attorney’s fees represent the reasonable compensation paid to a lawyer by his
client for the legal services he has rendered to the latter . On the other hand, in its
EXTRAORDINARY CONCEPT, attorney’s fees may be awarded by the court as indemnity
for damages to be paid by the losing party to the prevailing party , and not counsel. In its
extraordinary sense, attorney’s fees as part of damages is awarded only in the instances
specified in Article 2208 of the Civil Code, among which are the following which obtain in the
instant case:

(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;

xxxx

(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated August 29,
2006 in CA-G.R. SP No. 89164 which reinstated the Decision of the Labor Arbiter finding that
respondent Rufino Javilgas was illegally dismissed from service and its Resolution of December
21, 2006 denying the motion for reconsideration are hereby AFFIRMED.

PETRON CORPORATION vs. NATIONAL COLLEGE OF BUSINESS AND ARTS

| G.R. NO. 155683 | February 16, 2007

FACTS: This case, however, is but part of a larger controversy over the lawful ownership of
seven parcels of land in the V. Mapa area of Sta. Mesa, Manila (the V. Mapa properties) that
arose out of a series of events that began in 1969.

The V. Mapa properties, then owned by Felipe and Enrique Monserrat, Jr., were mortgaged to
the Development Bank of the Philippines (DBP). However, Felipe's - undivided interest in the V.
Mapa properties was levied upon in execution of a money judgment rendered by the Regional
Trial Court (RTC) of Manila in Filoil Marketing Corporation v. MYTC, Felipe Monserrat, and
Rosario Vda. De Monserrat (the Manila case). DBP challenged the levy through a third-party
claim asserting that the V. Mapa properties were mortgaged to it and were, for that reason,
exempt from levy or attachment. The RTC quashed it. MYTC and the Monserrats got DBP to
accept a dacion en pago arrangement whereby MYTC conveyed to the bank the four mortgaged
Quiapo properties as full settlement of their loan obligation. But despite this agreement, DBP did
not release the V. Mapa properties from the mortgage.

Felipe, acting for himself and as Enrique's attorney-in-fact, sold the V. Mapa properties to
respondent NCBA. Part of the agreement was that Felipe and Enrique would secure the release
of the titles to the properties free of all liens and encumbrances including DBP's mortgage lien
and Filoil's levy on or before July 31, 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 the TCTs covering the V. Mapa properties. NCBA filed a complaint against Felipe and
Enrique for specific performance with an alternative prayer for rescission and damages in the
RTC.

During the pendency of Civil Case, Enrique's - undivided interest in the V. Mapa properties was
levied on in execution of a judgment of the RTC of Makati (the Makati case) holding him liable to
Petron (then known as Petrophil Corporation). The V. Mapa properties were sold at public
auction to satisfy the judgments in the Manila and Makati cases. Petron, the highest bidder,
acquired both Felipe's and Enrique's undivided interests in the property. The final deeds of sale
of Enrique's and Felipe's shares in the V. Mapa properties were awarded to Petron in 1986.
Sometime later, the Monserrats' TCTs were cancelled and new ones were issued to Petron.
Thus it was that, towards the end of 1987, Petron intervened in NCBA's suit against Felipe,
Enrique and DBP (Civil Case No. 83-16617) to assert its right to the V. Mapa properties.

The RTC rendered judgment on March 11, 1996. It ruled, among other things, that Petron
never acquired valid title to the V. Mapa properties as the levy and sale thereof were void
and that NCBA was now the lawful owner of the properties. Moreover, the RTC held
Petron, DBP, Felipe and Enrique jointly and severally liable to NCBA for exemplary
damages and attorney's fees.

ISSUE: whether petitioner Petron Corporation (Petron) should be held liable to pay attorney's
fees and exemplary damages to respondent National College of Business and Arts (NCBA). –
NO!

HELD: In this appeal, the only issue is Petron's liability for exemplary damages and attorney's
fees and on this matter, we reverse the rulings of the trial and appellate courts. (Cites Art. 2208)

Here, the RTC held Petron liable to NCBA for attorney's fees under Article 2208(5), which
allows such an award "where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiff's plainly valid, just, and demandable claim." However, the
only justification given for this verdict was that Petron had no reason to claim the V. Mapa
properties because, in the RTC's opinion, the levy and sale thereof were void . This was sorely
inadequate and it was erroneous for the CA to have upheld that ruling built on such a flimsy
foundation.

Article 2208(5) contemplates a situation where one refuses unjustifiably and in evident bad
faith to satisfy another's plainly valid, just and demandable claim, compelling the latter
needlessly to seek redress from the courts. In such a case, the law allows recovery of
money the plaintiff had to spend for a lawyer's assistance in suing the defendant -
expenses the plaintiff would not have incurred if not for the defendant's refusal to
comply with the most basic rules of fair dealing. It does not mean, however, that the
losing party should be made to pay attorney's fees merely because the court finds his
legal position to be erroneous and upholds that of the other party, for that would be an
intolerable transgression of the policy that no one should be penalized for exercising the
right to have contending claims settled by a court of law. In fact, even a clearly untenable
defense does not justify an award of attorney's fees unless it amounts to gross and evident bad
faith.

Petron's claim to the V. Mapa properties, founded as it was on final deeds of sale on execution, was far
from untenable. No gross and evident bad faith could be imputed to Petron merely for intervening in
NCBA's suit against DBP and the Monserrats in order to assert what it believed (and had good reason to
believe) were its rights and to have the disputed ownership of the V. Mapa properties settled decisively in
a single lawsuit.

With respect to the award of exemplary damages, the rule in this jurisdiction is that the plaintiff
must show that he is entitled to moral, temperate or compensatory damages before the court
may even consider the question of whether exemplary damages should be awarded. In other
words, no exemplary damages may be awarded without the plaintiff's right to moral,
temperate, liquidated or compensatory damages having first been established. Therefore,
in view of our ruling that Petron cannot be made liable to NCBA for compensatory damages
(i.e., attorney's fees), Petron cannot be held liable for exemplary damages either.

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

Corporation for exemplary damages and attorney's fees is REVOKED. The June 21, 2002
decision and October 16, 2002 resolution of the Court of Appeals in CA G.R. CV No. 53466 and
the March 11, 1996 decision of the Regional Trial Court of Manila in Civil Case No. 83-16617
are hereby MODIFIED accordingly.

BUAN vs. CAMAGANACAN | G.R. No. L-21569 | February 28, 1966

FACTS: Priscillo Camaganacan, a pay passenger bound for Rizal took at San Fernando,
Pampanga, Philippine Rabbit Bus belonging to the Estate of Mr. and Mrs. Florencio P. Buan, of
which defendants are the administrators. In Malolos, Bulacan, the bus tried to overtake a La
Mallorca bus. The two buses ran a race. As it overtook the La Mallorca bus and while driven at
a fast clip, the Philippine Rabbit bus ran smack into a Delbros trailer travelling in the opposite
direction.

In consequence, Priscillo Camaganacan suffered a fracture of the right wrist, a crushing injury
on the second finger of the left hand, a lacerated wound on the right leg. He then started suit for
damages. The judgment below ordered defendants to pay plaintiff P2,680.00 as actual
damages, plus P2,000.00 as attorneys' fees, or a total of P4,680.00, and the costs. Defendants
appealed.

ISSUE: W/N the Court of Appeals erred in sentencing the herein petitioners to pay the herein
respondent the sum of P2,000.00 for attorney's fees – YES

HELD: The trial court did not state in its decision why it was awarding attorney's fees against
the defendants therein, the matter of such fees was touched but once and appears already in
the dispositive portion of the decision.

The Court of Appeals, passing also upon this point, and nowhere else in its decision, merely
stated: “On the matter of attorneys' fees, the lower court in the exercise of ample discretion
under Article 2208 (11), Civil Code, fixed the amount of P2,000.00. No justification exists why
this amount should be disturbed. In fact, we find in appellants' counterclaim that they placed
their counsel's fees also at that amount.”

The text of the decision should state the reason why attorneys' fees are being awarded,
otherwise, the award is disallowed. The very opening paragraph of Article 2208 reveals that
the award of attorneys' fees remains exceptional in our law, and it is up to the court to make an
express finding of the facts that bring the case within the execution and justify the grant of
counsel fees:

ART. 2208. In the absence of stipulation, attorneys' fees and expenses of litigation, other than
judicial costs cannot be recovered, except: . . . (Emphasis supplied).
The general rule being still that it is not sound public policy to place a penalty on the right
to litigate nor should counsel fees be awarded every time a party wins a lawsuit.

It is true that, in No. 11 of Article 2208, recovery of counsel fees is allowed "where the
court deems it just and equitable that attorneys' fees and expenses of litigation should
be recovered", but even in such cases the conclusion must be borne out by findings of
facts and law. What is just and equitable in a given case is not a mere matter of feeling but of
demonstration. This is specially true since the last part of Article 2208 expressly adds that the
"attorneys' fees and expenses of litigation must be reasonable". In the present case, for the
award of P2,680.00 in actual damages the appealed decisions awards no less than P2,000.00
in counsel fees, which is hardly reasonable. Hence, the exercise of judicial discretion in the
award of attorneys' fees under Article 2208 (11) of the Civil Code demands a factual, legal, or
equitable justification upon the basis of which the court exercises its discretion. Without such
justification, the award is a conclusion without a premise, as basis being improperly left to
speculation and conjecture.

For the foregoing reasons, the decision under review is hereby modified by deleting therefrom
the award of attorney's fees. No pronouncement as to costs.

VILLANUEVA vs. SALVADOR | G.R. No. 139436 | January 25, 2006

FACTS: The respondent spouses Salvador secured a loan of P7,650.00 from petitioner Ever
Pawnshop owned and managed by co-petitioner Enrico B. Villanueva. the Salvadors took out a
second loan of P5,400.00 pledging, just like in the first loan transaction, jewelry items.

The separate redemption periods came and went, but the Salvadors failed to redeem the
pawned pieces of jewelry. Nonetheless, on June 1, 1992, their son paid Ever Pawnshop
P7,000.00, the amount to be applied against the first loan of P7,650.00. On account of this
development, Pawnshop Ticket No. 29919 was cancelled and replaced by Pawnshop Ticket No.
34932. Vis--vis the second loan, Ever Pawnshop agreed to the extension of the maturity date to
June 30, 1992, provided the Salvadors pay 20% of their second loan obligation on or before
June 4, 1992, failing which the securing items shall be auctioned as scheduled. Unlike in the
first loan, however, a new pawn ticket was not issued for the second loan.

In the meantime, Ever Pawnshop issued a notice announcing the public auction sale on June 4,
1992 of all January 1 to 31, 1992 unredeemed pledges. The notice appeared in the Classified
Ads Section of the Manila Bulletin on June 4, 1992, the very day of the auction itself. On July 1,
1992, the Salvadors repaired to the pawnshop in a bid to renew the second loan by tendering
the aforesaid 20% of the amount due thereon, only to be informed that the pledged jewelry had
already been auctioned as scheduled on June 4, 1992. As found by the CA, however, pieces of
the pawned jewelry items were still in the shop, indicating that Ever Pawnshop either bought
some of the unredeemed pledges or did not sell them.
On August 7, 1992, Mr. Salvador tendered payment of the amount due on both loans, with a
demand for the return of the jewelry thus pledged. Ever Pawnshop, however, refused to accept
the tender.

Such was the state of things when, on August 11, 1992, at the RTC-Pasig City, the Salvadors
filed a complaint for damages against Villanueva and Ever Pawnshop arising from the sale
without notice of the two (2) sets of jewelry pledged as security for both loans. Barely two days
after Villanueva et al., received summons, their counsel informed the Salvadors of his clients
willingness to accept payment heretofore tendered for the redemption of the jewelry pledged to
secure the first loan. The Salvadors, however, turned down this belated offer.

ISSUE: Whether the award of P20,000.00 as moral damages and P5,000.00 as attorney’s fees
are proper – NO!

HELD: The CA cannot really be faulted for making short shrift of petitioners posture respecting their
alleged compliance with the notice requirement in question. As it were, petitioner Ever Pawnshop, as
determined by the CA, only caused publication of the auction in one newspaper, i.e., the Manila Bulletin,
and on the very day of the scheduled auction sale itself, instead of a week preceding the sale as
prescribed by Section 15 of P.D. 114 (Pawnshop Regulation Act). Verily, a notice of an auction sale made
on the very scheduled auction day itself defeats the purpose of the notice, which is to inform a pawner
beforehand that a sale is to occur so that he may have that last chance to redeem his pawned items.

This brings us to the issue of the award of moral damages which petitioners correctly tag as
erroneous, and, therefore, should be deleted.

While proof of pecuniary loss is unnecessary to justify an award of moral damages, the amount
of indemnity being left to the sound discretion of the court, it is, nevertheless, essential that
the claimant satisfactorily proves the existence of the factual basis of the damages and
its causal connection to defendants wrongful act or omission . This is so because moral
damages, albeit incapable of pecuniary estimation, are designed to compensate the claimant for
actual injury suffered and not to impose a penalty on the wrongdoer. There is thus merit on
petitioners assertion that proof of moral suffering must precede a moral damage award.

The conditions required in awarding moral damages are: (1) there must be an injury,
whether physical, mental or psychological, clearly sustained by the claimant; (2) there must be a
culpable act or omission factually established; (3) the wrongful act or omission of the defendant
must be the proximate cause of the injury sustained by the claimant; and (4) the award of
damages is predicated on any of the cases stated in Article 2219 of the Civil Code.

While there need not be a showing that the defendant acted in a wanton or malevolent manner,
as this is a requirement for an award of exemplary damages, there must still be proof of
fraudulent action or bad faith for a claim for moral damages to succeed. Then, too, moral
damages are generally not recoverable in culpa contractual except when bad faith
supervenes and is proven.

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose
or some moral obliquity and conscious doing of a wrong, a breach of known duty through some
motive or interest or ill-will that partakes of the nature of the fraud. And to the person claiming
moral damages rests the onus of proving by convincing evidence the existence of bad faith, for
good faith is presumed.

As aptly pointed out by petitioners, the trial court concluded that the respondents cause of
action arose merely from the negligence of the herein [petitioners]. It may be that gross
negligence may sometimes amount to bad faith. But what is before us is a matter of simple
negligence only, it being the trial courts categorical finding that the case came about owing to
petitioners mistake in renewing the loan when the sale of the article to secure the loan had
already been effected. Wrote the trial court: What must have happened next was that the
jewelry under the first loan was sold, as scheduled, on 7 May 1992. Due to an oversight, the
defendants mistakenly renewed the first loan on 1 June 1992, issuing pawn ticket number
34932 in the process.

The CAs reliance on Article 2220 of the Civil Code in affirming the award of moral damages is
misplaced. Said article provides: Art. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the circumstances, such damages
are justly due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith.

Clear it is from the above that before moral damages may be assessed thereunder, the
defendants act must be vitiated by bad faith or that there is willful intent to injure. Simply put,
moral damages cannot arise from simple negligence.

The award of attorneys fees should, likewise, be struck down, both the CA and trial court having
failed to explain respondents entitlement thereto.

As a matter of sound practice, an award of attorneys fee has always been regarded as
the exception rather than the rule. Counsels fees are, to be sure, not awarded every time
a party prevails in a suit because of the policy that no premium should be placed on the
right to litigate. Attorney’s fees, as part of damages, are assessed only in the instances
specified in Article 2208 of the Civil Code. And it is necessary for the trial court to make express
findings of fact and law that would bring the case within the exception. In short, the FACTUAL,
LEGAL or EQUITABLE justification for the award must be set forth in the text of the
decision.

The matter of attorneys fees cannot be touched only in the fallo of the decision, else the
award should be thrown out for being speculative and conjectural.

Certainly not lost on the Court is the fact that petitioners, after being served with summons,
made an attempt to obviate litigation by offering to accept tender of payment and return the
jewelry. This offer, however belated, could have saved much expense on the part of both
parties, as well as the precious time of the court itself. The respondents chose to turn down this
offer and pursue judicial recourse. With this in mind, it hardly seems fair to award them
attorneys fees at petitioners expense.
The final issue relating to the question of whether or not both respondents are liable for damages has, for
all intent and purposes, been rendered moot and academic by the disposition just made. We need not
dwell on it any further. Besides, this particular issue has only made its debut in the present recourse. And
it is a well-entrenched rule that issues not raised below cannot be resolved on review in higher courts. A
question that was never raised in the court below cannot be allowed to be raised for the first time on
appeal without offending basic rules of fair play, justice and due process.

WHEREFORE, with the MODIFICATION that the awards of moral damages and attorneys fees
are deleted, the decision under review is hereby AFFIRMED.