G.R. No.
114118            August 28, 2001
HEIRS OF SIMEON BORLADO, namely, ADELAIDA BORLADO,
LORETO BORLADO, REYNALDO BORLADO, RICARDO
BORLADO, FRANCISCO BORLADO and ALADINO
DORADO, petitioners,  from them.
vs.
COURT OF APPEALS, and SALVACION VDA. DE BULAN,
BIENVENIDO BULAN, JR., NORMA B. CLARITO and THE
PROVINCIAL SHERIFF OF CAPIZ, respondents.
PARDO, J.:
The case is an appeal via certiorari from a decision 1 of the Court of
Appeals affirming the decision of the trial court, the dispositive
portion of which reads:
"WHEREFORE, judgment is rendered dismissing
plaintiffs' complaint for lack of cause of action and
ordering as vacated the restraining order and writ of
preliminary injunction issued in this case; and
"1. Plaintiffs to be jointly and solidarily liable to
defendants the quantity of one hundred (100) cavans of
palay every year from 1972 until plaintiffs vacate the
premises of the land in question;
"2. Declaring defendants as owner of the land and
entitled to possession;
"3. Ordering plaintiffs to pay defendants the sum of
P5,000.00 as attorney's fees and the sum of P5,000.00 as
litigation expenses; and
"4. To pay the costs of the suit.
"SO ORDERED.
"Roxas City, Philippines, March 18, 1988.
"(Sgd.) JONAS A. ABELLAR
"Judge"2
The Facts
The facts, as found by the Court of Appeals, are as follows:
"The records show that plaintiffs-appellants 3 (petitioners)
are the heirs of Simeon Borlado whose parents were
Serapio Borlado and Balbina Bulan. The original owner
of the lot in question, Lot No. 2097 of the Pontevedra
Cadastre, Maayon, Capiz, was Serapio Borlado,
grandfather of petitioners.
"On 15 April 1942, Serapio sold the lot to Francisco
Bacero (Exh. "C", p. 247, MTC Record) for Three Hundred
Pesos (P300.00). After the death of Francisco on 26
February 1948, his widow Amparo Dionisio Vda. de
Bacero, in her capacity as legal guardian of her minor
children, namely: Nicolas, Valentin and Luzviminda, all
surnamed Bacero and forced heirs of Francisco Bacero
sold it (the lot) to the Spouses Bienvenido Bulan and
Salvacion Borbon, through a Deed of Absolute Sale dated
27 August 1954 (Exh. 65, pp. 243-245, id.).
"Upon the execution of the Deed of Sale and even prior
thereto, actual possession of Lot No. 2057 was with the
vendees-spouses Bulans in view of a loan obtained by
Francisco Bacero from them in December 1947 (Exh.
"65", supra). Exercising their right of ownership under
the Deed of Sale, Salvacion Borbon Vda. de Bulan
declared the lot in her name in 1900 for taxation
purposes under Tax Declaration No. 2232 (Exh. "F", p.
254, Record [MTC]). She paid the corresponding taxes as
evidenced by the Tax Receipts marked as Exhibits "K",
"J", "I", "G", "F" and "H" (pp. 248-253, Record, id.).
Salvacion and her co-defendants-appellees' 4possession of
the lot was continuous, peaceful, uninterrupted, adverse
and exclusive until November 4, 1972, when petitioners
forcibly entered and wrested physical possession thereof
"On 23 November 1972, respondents filed with the
Municipal Court of Maayon, Capiz a complaint for
ejectment docketed as Civil Case No. A-1, against
petitioners (p. 1, id.). The ejectment case was decided in
favor of the respondents whereby the petitioners, their
agents, tenants, privies and members of their families
were ordered to vacate Lot No. 2079 and deliver
possession to the respondents together with all
improvements and standing crops; to pay said
respondents One Hundred (100) cavans of palay
annually from 1972 to the present or in the total amount
of One Thousand One Hundred (1,100) cavans of palay;
and to pay the sum of Five Thousand (P5,000.00) Pesos
as reimbursement for the amount respondents had paid
their lawyer to protect their rights; and, the costs of suit
(Exh. "57", pp. 256-261, id.). Instead of appealing the
adverse decision to the Court of First Instance (now
RTC), on 8 November 1983, petitioners filed the present
case with the Regional Trial Court, Branch 18, Roxas
City, docketed as Civil Case No. V-4887. This case was
dismissed for lack of cause of action in a decision, the
decretal portion of which was quoted earlier."5
On 24 November 1993, the Court of Appeals promulgated its
decision affirming in toto the appealed decision.6
Hence, this appeal.7
The Issue
The issue raised is whether the Court of Appeals erred in ruling
that respondents were the owners of the lot in question.
The Court's Ruling
We deny the petition. The issue is factual. In an appeal via
certiorari, we may not review the findings of fact of the Court of
Appeals.8 When supported by substantial evidence, the findings of
fact of the Court of Appeals are conclusive and binding on the
parties and are not reviewable by this Court, 9 unless the case falls
under any of the exceptions to the rule.10
Petitioner failed to prove that the case falls within the
exceptions.11 The Supreme Court is not a trier of facts. 12 It is not
our function to review, examine and evaluate or weigh the
probative value of the evidence presented. 13 A question of fact
would arise in such event.14 Questions of fact cannot be raised in
an appeal via certiorari before the Supreme Court and are not
proper for its consideration.15
Nevertheless, as a matter of law, the trial court and the Court of
Appeals erred in holding petitioners liable to pay respondents one
hundred (100) cavans of palay every year from 1972 until they
vacate the premises of the land in question.
The one hundred cavans of palay was awarded as a form of
damages. We cannot sustain the award. "Palay" is not legal tender
currency in the Philippines.
El Fallo del Tribunal
WHEREFORE, the Court DENIES the petition and AFFIRMS the
decision of the Court of Appeals in CA-G.R. CV No. 18980 with
modification that petitioners' liability to pay respondents one
hundred (100) cavans of palay every year from 1972 until
petitioners vacate the land in question is deleted, for lack of basis.
No costs.
G.R. No. 116100             February 9, 1996
SPOUSES CRISTINO and BRIGIDA CUSTODIO and SPOUSES
LITO and MARIA CRISTINA SANTOS,petitioners,  mentioned some other inconveniences of having (at) the
vs.
COURT OF APPEALS, HEIRS OF PACIFICO C. MABASA and
REGIONAL TRIAL COURT OF PASIG, METRO MANILA,
BRANCH 181, respondents.
DECISION
REGALADO, J.:
This petition for review on certiorari assails the decision of
respondent Court of Appeals in CA-G.R. CV No. 29115,
promulgated on November 10, 1993, which affirmed with
modification the decision of the trial court, as well as its resolution
dated July 8, 1994 denying petitioner's motion for
reconsideration.1
On August 26, 1982, Civil Case No. 47466 for the grant of an
easement of right of way was filed by Pacifico Mabasa against
Cristino Custodio, Brigida R. Custodio, Rosalina R. Morato, Lito
Santos and Maria Cristina C. Santos before the Regional Trial
Court of Pasig and assigned to Branch 22 thereof. 2
The generative facts of the case, as synthesized by the trial court
and adopted by the Court of Appeals, are as follows:
Perusing the record, this Court finds that the original
plaintiff Pacifico Mabasa died during the pendency of this
case and was substituted by Ofelia Mabasa, his surviving
spouse [and children].
The plaintiff owns a parcel of land with a two-door
apartment erected thereon situated at Interior P. Burgos
St., Palingon, Tipas, Tagig, Metro Manila. The plaintiff
was able to acquire said property through a contract of
sale with spouses Mamerto Rayos and Teodora Quintero
as vendors last September 1981. Said property may be
described to be surrounded by other immovables
pertaining to defendants herein. Taking P. Burgos Street
as the point of reference, on the left side, going to
plaintiff's property, the row of houses will be as follows:
That of defendants Cristino and Brigido Custodio, then
that of Lito and Maria Cristina Santos and then that of
Ofelia Mabasa. On the right side (is) that of defendant
Rosalina Morato and then a Septic Tank (Exhibit "D"). As
an access to P. Burgos Street from plaintiff's property,
there are two possible passageways. The first passageway
is approximately one meter wide and is about 20 meters
distan(t) from Mabasa's residence to P. Burgos Street.
Such path is passing in between the previously
mentioned row of houses. The second passageway is
about 3 meters in width and length from plaintiff
Mabasa's residence to P. Burgos Street; it is about 26
meters. In passing thru said passageway, a less than a
meter wide path through the septic tank and with 5-6
meters in length, has to be traversed.
When said property was purchased by Mabasa, there
were tenants occupying the remises and who were
acknowledged by plaintiff Mabasa as tenants. However,
sometime in February, 1982, one of said tenants vacated
the apartment and when plaintiff Mabasa went to see the
premises, he saw that there had been built an adobe
fence in the first passageway making it narrower in width.
Said adobe fence was first constructed by defendants
Santoses along their property which is also along the first
passageway. Defendant Morato constructed her adobe
fence and even extended said fence in such a way that
the entire passageway was enclosed. (Exhibit "1-Santoses
and Custodios, Exh. "D" for plaintiff, Exhs. "1-C", "1-D"
and "1-E") And it was then that the remaining tenants of
said apartment vacated the area. Defendant Ma. Cristina
Santos testified that she constructed said fence because
there was an incident when her daughter was dragged by
a bicycle pedalled by a son of one of the tenants in said
apartment along the first passageway. She also
front of her house a pathway such as when some of the
tenants were drunk and would bang their doors and
windows. Some of their footwear were even lost. . . .
3 
(Emphasis in original text; corrections in parentheses
supplied)
On February 27, 1990, a decision was rendered by the trial court,
with this dispositive part:
Accordingly, judgment is hereby rendered as follows:
1) Ordering defendants Custodios and Santoses to give
plaintiff permanent access ingress and egress, to the
public street;
2) Ordering the plaintiff to pay defendants Custodios and
Santoses the sum of Eight Thousand Pesos (P8,000) as
indemnity for the permanent use of the passageway.
The parties to shoulder their respective litigation
expenses.4
Not satisfied therewith, therein plaintiff represented by his heirs,
herein private respondents, went to the Court of Appeals raising
the sole issue of whether or not the lower court erred in not
awarding damages in their favor. On November 10, 1993, as
earlier stated, the Court of Appeals rendered its decision affirming
the judgment of the trial court with modification, the decretal
portion of which disposes as follows:
WHEREFORE, the appealed decision of the lower court is
hereby AFFIRMED WITH MODIFICATION only insofar as
the herein grant of damages to plaintiffs-appellants. The
Court hereby orders defendants-appellees to pay
plaintiffs-appellants the sum of Sixty Five Thousand
(P65,000) Pesos as Actual Damages, Thirty Thousand
(P30,000) Pesos as Moral Damages, and Ten Thousand
(P10,000) Pesos as Exemplary Damages. The rest of the
appealed decision is affirmed to all respects. 5
On July 8, 1994, the Court of Appeals denied petitioner's motion
for reconsideration.6 Petitioners then took the present recourse to
us, raising two issues, namely, whether or not the grant of right of
way to herein private respondents is proper, and whether or not
the award of damages is in order.
With respect to the first issue, herein petitioners are already
barred from raising the same. Petitioners did not appeal from the
decision of the court a quo granting private respondents the right
of way, hence they are presumed to be satisfied with the
adjudication therein. With the finality of the judgment of the trial
court as to petitioners, the issue of propriety of the grant of right
of way has already been laid to rest.
For failure to appeal the decision of the trial court to the Court of
Appeals, petitioners cannot obtain any affirmative relief other than
those granted in the decision of the trial court. That decision of
the court below has become final as against them and can no
longer be reviewed, much less reversed, by this Court. The rule in
this jurisdiction is that whenever an appeal is taken in a civil case,
an appellee who has not himself appealed may not obtain from the
appellate court any affirmative relief other than what was granted
in the decision of the lower court. The appellee can only advance
any argument that he may deem necessary to defeat the
appellant's claim or to uphold the decision that is being disputed,
and he can assign errors in his brief if such is required to
strengthen the views expressed by the court a quo. These assigned
errors, in turn, may be considered by the appellate court solely to
maintain the appealed decision on other grounds, but not for the
purpose of reversing or modifying the judgment in the appellee's
favor and giving him other affirmative reliefs. 7
However, with respect to the second issue, we agree with
petitioners that the Court of Appeals erred in awarding damages
in favor of private respondents. The award of damages has no
substantial legal basis. A reading of the decision of the Court of
Appeals will show that the award of damages was based solely on
the fact that the original plaintiff, Pacifico Mabasa, incurred losses
in the form of unrealized rentals when the tenants vacated the
leased premises by reason of the closure of the passageway.
of private respondents, either by law or by contract. The fact that
private respondents had no existing right over the said
passageway is confirmed by the very decision of the trial court
granting a compulsory right of way in their favor after payment of
just compensation. It was only that decision which gave private
respondents the right to use the said passageway after payment of
the compensation and imposed a corresponding duty on
petitioners not to interfere in the exercise of said right.

However, the mere fact that the plaintiff suffered losses does not
give rise to a right to recover damages. To warrant the recovery of
damages, there must be both a right of action for a legal wrong
inflicted by the defendant, and damage resulting to the plaintiff
therefrom. Wrong without damage, or damage without wrong, does
not constitute a cause of action, since damages are merely part of
the remedy allowed for the injury caused by a breach or wrong. 8
Hence, prior to said decision, petitioners had an absolute right
over their property and their act of fencing and enclosing the same
was an act which they may lawfully perform in the employment
and exercise of said right. To repeat, whatever injury or damage
may have been sustained by private respondents by reason of the
rightful use of the said land by petitioners is damnum absque
injuria.17

There is a material distinction between damages and injury. Injury
is the illegal invasion of a legal right; damage is the loss, hurt, or
harm which results from the injury; and damages are the
recompense or compensation awarded for the damage suffered.
Thus, there can be damage without injury in those instances in
which the loss or harm was not the result of a violation of a legal
duty. These situations are often called damnum absque injuria.9
In order that a plaintiff may maintain an action for the injuries of
which he complains, he must establish that such injuries resulted
from a breach of duty which the defendant owed to the plaintiff a
concurrence of injury to the plaintiff and legal responsibility by
the person causing it.10 The underlying basis for the award of tort
damages is the premise that an individual was injured in
contemplation of law. Thus, there must first be the breach of some
duty and the imposition of liability for that breach before damages
may be awarded; it is not sufficient to state that there should be
tort liability merely because the plaintiff suffered some pain and
suffering.11
Many accidents occur and many injuries are inflicted by acts or
omissions which cause damage or loss to another but which
violate no legal duty to such other person, and consequently
create no cause of action in his favor. In such cases, the
consequences must be borne by the injured person alone. The law
affords no remedy for damages resulting from an act which does
not amount to a legal injury or wrong.12
A person has a right to the natural use and enjoyment of his own
property, according to his pleasure, for all the purposes to which
such property is usually applied. As a general rule, therefore,
there is no cause of action for acts done by one person upon his
own property in a lawful and proper manner, although such acts
incidentally cause damage or an unavoidable loss to another, as
such damage or loss is damnum absque injuria. 18 When the owner
of property makes use thereof in the general and ordinary manner
in which the property is used, such as fencing or enclosing the
same as in this case, nobody can complain of having been injured,
because the incovenience arising from said use can be considered
as a mere consequence of community life. 19
The proper exercise of a lawful right cannot constitute a legal
wrong for which an action will lie, 20 although the act may result in
damage to another, for no legal right has been invaded. 21 One may
use any lawful means to accomplish a lawful purpose and though
the means adopted may cause damage to another, no cause of
action arises in the latter's favor. An injury or damage occasioned
thereby is damnum absque injuria. The courts can give no redress
for hardship to an individual resulting from action reasonably
calculated to achieve a lawful means. 22
WHEREFORE, under the compulsion of the foregoing premises,
the appealed decision of respondent Court of Appeals is hereby
REVERSED and SET ASIDE and the judgment of the trial court is
correspondingly REINSTATED.

In other words, in order that the law will give redress for an act
causing damage, that act must be not only hurtful, but wrongful.
There must be damnum et injuria.13 If, as may happen in many
cases, a person sustains actual damage, that is, harm or loss to
his person or property, without sustaining any legal injury, that
is, an act or omission which the law does not deem an injury, the
damage is regarded as damnum absque injuria.14

In the case at bar, although there was damage, there was no legal
injury. Contrary to the claim of private respondents, petitioners
could not be said to have violated the principle of abuse of right.
In order that the principle of abuse of right provided in Article 21
of the Civil Code can be applied, it is essential that the following
requisites concur: (1) The defendant should have acted in a
manner that is contrary to morals, good customs or public policy;
(2) The acts should be willful; and (3) There was damage or injury
to the plaintiff.15

The act of petitioners in constructing a fence within their lot is a

valid exercise of their right as owners, hence not contrary to
morals, good customs or public policy. The law recognizes in the
owner the right to enjoy and dispose of a thing, without other
limitations than those established by law.16 It is within the right of
petitioners, as owners, to enclose and fence their property. Article
430 of the Civil Code provides that "(e)very owner may enclose or
fence his land or tenements by means of walls, ditches, live or
dead hedges, or by any other means without detriment to
servitudes constituted thereon."

At the time of the construction of the fence, the lot was not subject
to any servitudes. There was no easement of way existing in favor
G.R. No. 160273             January 18, 2008
CEBU COUNTRY CLUB, INC., SABINO R. DAPAT, RUBEN D.
ALMENDRAS, JULIUS Z. NERI, DOUGLAS L. LUYM, CESAR T.
LIBI, RAMONTITO* E. GARCIA and JOSE B.
SALA, petitioners,  plaintiff the amount of P5,000,000.00 as moral damages.
vs.
RICARDO F. ELIZAGAQUE, respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review
on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision1 dated January 31, 2003 and
Resolution dated October 2, 2003 of the Court of Appeals in CA-
G.R. CV No. 71506.
The facts are:
Cebu Country Club, Inc. (CCCI), petitioner, is a domestic
corporation operating as a non-profit and non-stock private
membership club, having its principal place of business in
Banilad, Cebu City. Petitioners herein are members of its Board of
Directors.
Sometime in 1987, San Miguel Corporation, a special company
proprietary member of CCCI, designated respondent Ricardo F.
Elizagaque, its Senior Vice President and Operations Manager for
the Visayas and Mindanao, as a special non-proprietary member.
The designation was thereafter approved by the CCCI’s Board of
Directors.
In 1996, respondent filed with CCCI an application for proprietary
membership. The application was indorsed by CCCI’s two (2)
proprietary members, namely: Edmundo T. Misa and Silvano
Ludo.
As the price of a proprietary share was around the P5 million
range, Benito Unchuan, then president of CCCI, offered to sell
respondent a share for only P3.5 million. Respondent, however,
purchased the share of a certain Dr. Butalid for only P3 million.
Consequently, on September 6, 1996, CCCI issued Proprietary
Ownership Certificate No. 1446 to respondent.
During the meetings dated April 4, 1997 and May 30, 1997 of the
CCCI Board of Directors, action on respondent’s application for
proprietary membership was deferred. In another Board meeting
held on July 30, 1997, respondent’s application was voted upon.
Subsequently, or on August 1, 1997, respondent received a letter
from Julius Z. Neri, CCCI’s corporate secretary, informing him
that the Board disapproved his application for proprietary
membership.
On August 6, 1997, Edmundo T. Misa, on behalf of respondent,
wrote CCCI a letter of reconsideration. As CCCI did not answer,
respondent, on October 7, 1997, wrote another letter of
reconsideration. Still, CCCI kept silent. On November 5, 1997,
respondent again sent CCCI a letter inquiring whether any
member of the Board objected to his application. Again, CCCI did
not reply.
Consequently, on December 23, 1998, respondent filed with the
Regional Trial Court (RTC), Branch 71, Pasig City a complaint for
damages against petitioners, docketed as Civil Case No. 67190.
After trial, the RTC rendered its Decision dated February 14, 2001
in favor of respondent, thus:
WHEREFORE, judgment is hereby rendered in favor of
plaintiff:
1. Ordering defendants to pay, jointly and severally,
plaintiff the amount of P2,340,000.00 as actual or
compensatory damages.
2. Ordering defendants to pay, jointly and severally,
3. Ordering defendants to pay, jointly and severally,
plaintiff the amount of P1,000,000.00 as exemplary
damages.
4. Ordering defendants to pay, jointly and severally,
plaintiff the amount of P1,000,000.00 as and by way of
attorney’s fees and P80,000.00 as litigation expenses.
5. Costs of suit.
Counterclaims are hereby DISMISSED for lack of merit.
SO ORDERED.2
On appeal by petitioners, the Court of Appeals, in its Decision
dated January 31, 2003, affirmed the trial court’s Decision with
modification, thus:
WHEREFORE, premises considered, the assailed
Decision dated February 14, 2001 of the Regional Trial
Court, Branch 71, Pasig City in Civil Case No. 67190 is
hereby AFFIRMED with MODIFICATION as follows:
1. Ordering defendants-appellants to pay, jointly and
severally, plaintiff-appellee the amount of P2,000,000.00
as moral damages;
2. Ordering defendants-appellants to pay, jointly and
severally, plaintiff-appellee the amount of P1,000,000.00
as exemplary damages;
3. Ordering defendants-appellants to pay, jointly and
severally, plaintiff-appellee the mount of P500,000.00 as
attorney’s fees and P50,000.00 as litigation expenses;
and
4. Costs of the suit.
The counterclaims are DISMISSED for lack of merit.
SO ORDERED.3
On March 3, 2003, petitioners filed a motion for reconsideration
and motion for leave to set the motion for oral arguments. In its
Resolution4 dated October 2, 2003, the appellate court denied the
motions for lack of merit.
Hence, the present petition.
The issue for our resolution is whether in disapproving
respondent’s application for proprietary membership with CCCI,
petitioners are liable to respondent for damages, and if so,
whether their liability is joint and several.
Petitioners contend, inter alia, that the Court of Appeals erred in
awarding exorbitant damages to respondent despite the lack of
evidence that they acted in bad faith in disapproving the latter’s
application; and in disregarding their defense of damnum absque
injuria.
For his part, respondent maintains that the petition lacks merit,
hence, should be denied.
CCCI’s Articles of Incorporation provide in part:
SEVENTH: That this is a non-stock corporation and
membership therein as well as the right of participation
in its assets shall be limited to qualified persons who are
 duly accredited owners of Proprietary Ownership
Certificates issued by the corporation in accordance with
its By-Laws.
Corollary, Section 3, Article 1 of CCCI’s Amended By-Laws
provides:
SECTION 3. HOW MEMBERS ARE ELECTED – The
procedure for the admission of new members of the Club
shall be as follows:
(a) Any proprietary member, seconded by another voting
proprietary member, shall submit to the Secretary a
written proposal for the admission of a candidate to the
"Eligible-for-Membership List";
(b) Such proposal shall be posted by the Secretary for a
period of thirty (30) days on the Club bulletin board
during which time any member may interpose objections
to the admission of the applicant by communicating the
same to the Board of Directors;
(c) After the expiration of the aforesaid thirty (30) days, if
no objections have been filed or if there are, the Board
considers the objections unmeritorious, the candidate
shall be qualified for inclusion in the "Eligible-for-
Membership List";
(d) Once included in the "Eligible-for-Membership List"
and after the candidate shall have acquired in his name
a valid POC duly recorded in the books of the corporation
as his own, he shall become a Proprietary Member, upon
a non-refundable admission fee of P1,000.00, provided
that admission fees will only be collected once from any
person.
On March 1, 1978, Section 3(c) was amended to read as follows:
(c) After the expiration of the aforesaid thirty (30) days,
the Board may, by unanimous vote of all directors
present at a regular or special meeting, approve the
inclusion of the candidate in the "Eligible-for-
Membership List".
As shown by the records, the Board adopted a secret balloting
known as the "black ball system" of voting wherein each member
will drop a ball in the ballot box. A white ball represents
conformity to the admission of an applicant, while a black ball
means disapproval. Pursuant to Section 3(c), as amended, cited
above, a unanimous vote of the directors is required. When
respondent’s application for proprietary membership was voted
upon during the Board meeting on July 30, 1997, the ballot box
contained one (1) black ball. Thus, for lack of unanimity, his
application was disapproved.
Obviously, the CCCI Board of Directors, under its Articles of
Incorporation, has the right to approve or disapprove an
application for proprietary membership. But such right should not
be exercised arbitrarily. Articles 19 and 21 of the Civil Code on the
Chapter on Human Relations provide restrictions, thus:
Article 19. Every person must, in the exercise of his
rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and
good faith.
Article 21. Any person who willfully causes loss or injury
to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for
the damage.
In GF Equity, Inc. v. Valenzona,5 we expounded Article 19 and
correlated it with Article 21, thus:
This article, known to contain what is commonly referred
to as the principle of abuse of rights, sets certain
standards which must be observed not only in the
exercise of one's rights but also in the performance of
one's duties. These standards are the following: to act
with justice; to give everyone his due; and to observe
honesty and good faith. The law, therefore, recognizes a
primordial limitation on all rights; that in their exercise,
the norms of human conduct set forth in Article 19 must
be observed. A right, though by itself legal because
recognized or granted by law as such, may nevertheless
become the source of some illegality. When a right is
exercised in a manner which does not conform with the
norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which
the wrongdoer must be held responsible. But while
Article 19 lays down a rule of conduct for the government
of human relations and for the maintenance of social
order, it does not provide a remedy for its violation.
Generally, an action for damages under either Article 20
or Article 21 would be proper. (Emphasis in the original)
In rejecting respondent’s application for proprietary membership,
we find that petitioners violated the rules governing human
relations, the basic principles to be observed for the rightful
relationship between human beings and for the stability of social
order. The trial court and the Court of Appeals aptly held that
petitioners committed fraud and evident bad faith in disapproving
respondent’s applications. This is contrary to morals, good custom
or public policy. Hence, petitioners are liable for damages
pursuant to Article 19 in relation to Article 21 of the same Code.
It bears stressing that the amendment to Section 3(c) of CCCI’s
Amended By-Laws requiring the unanimous vote of the directors
present at a special or regular meeting was not printed on the
application form respondent filled and submitted to CCCI. What
was printed thereon was the original provision of Section 3(c)
which was silent on the required number of votes needed for
admission of an applicant as a proprietary member.
Petitioners explained that the amendment was not printed on the
application form due to economic reasons. We find this excuse
flimsy and unconvincing. Such amendment, aside from being
extremely significant, was introduced way back in 1978 or almost
twenty (20) years before respondent filed his application. We
cannot fathom why such a prestigious and exclusive golf country
club, like the CCCI, whose members are all affluent, did not have
enough money to cause the printing of an updated application
form.
It is thus clear that respondent was left groping in the dark
wondering why his application was disapproved. He was not even
informed that a unanimous vote of the Board members was
required. When he sent a letter for reconsideration and an inquiry
whether there was an objection to his application, petitioners
apparently ignored him. Certainly, respondent did not deserve this
kind of treatment. Having been designated by San Miguel
Corporation as a special non-proprietary member of CCCI, he
should have been treated by petitioners with courtesy and civility.
At the very least, they should have informed him why his
application was disapproved.
The exercise of a right, though legal by itself, must nonetheless be
in accordance with the proper norm. When the right is exercised
arbitrarily, unjustly or excessively and results in damage to
another, a legal wrong is committed for which the wrongdoer must
be held responsible.6 It bears reiterating that the trial court and
the Court of Appeals held that petitioners’ disapproval of
respondent’s application is characterized by bad faith.
As to petitioners’ reliance on the principle of damnum absque
injuria or damage without injury, suffice it to state that the same
is misplaced. In Amonoy v. Gutierrez,7 we held that this principle
does not apply when there is an abuse of a person’s right, as in
this case.
As to the appellate court’s award to respondent of moral damages,
we find the same in order. Under Article 2219 of the New Civil
Code, moral damages may be recovered, among others, in acts
and actions referred to in Article 21. We believe respondent’s
testimony that he suffered mental anguish, social humiliation and
wounded feelings as a result of the arbitrary denial of his
application. However, the amount of P2,000,000.00 is excessive.
While there is no hard-and-fast rule in determining what would be
a fair and reasonable amount of moral damages, the same should
not be palpably and scandalously excessive. Moral damages are
not intended to impose a penalty to the wrongdoer, neither to
enrich the claimant at the expense of the defendant. 8 Taking into
consideration the attending circumstances here, we hold that an
award to respondent of P50,000.00, instead of P2,000,000.00, as
moral damages is reasonable.

Anent the award of exemplary damages, Article 2229 allows it by

way of example or correction for the public good. Nonetheless,
since exemplary damages are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a
negative incentive to curb socially deleterious actions, 9 we reduce
the amount from P1,000,000.00 to P25,000.00 only.

On the matter of attorney’s fees and litigation expenses, Article

2208 of the same Code provides, among others, that attorney’s
fees and expenses of litigation may be recovered in cases when
exemplary damages are awarded and where the court deems it
just and equitable that attorney’s fees and expenses of litigation
should be recovered, as in this case. In any event, however, such
award must be reasonable, just and equitable. Thus, we reduce
the amount of attorney’s fees (P500,000.00) and litigation
expenses (P50,000.00) to P50,000.00 and P25,000.00,
respectively.

Lastly, petitioners’ argument that they could not be held jointly

and severally liable for damages because only one (1) voted for the
disapproval of respondent’s application lacks merit.

Section 31 of the Corporation Code provides:

SEC. 31. Liability of directors, trustees or officers. —

Directors or trustees who willfully and knowingly vote for
or assent to patently unlawful acts of the corporation or
who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty
as such directors, or trustees shall be liable jointly and
severally for all damages resulting therefrom suffered by
the corporation, its stockholders or members and other
persons. (Emphasis ours)

WHEREFORE, we DENY the petition. The challenged Decision and

Resolution of the Court of Appeals in CA-G.R. CV No. 71506
are AFFIRMED with modification in the sense that (a) the award of
moral damages is reduced from P2,000,000.00 to P50,000.00; (b)
the award of exemplary damages is reduced from P1,000,000.00
to P25,000.00; and (c) the award of attorney’s fees and litigation
expenses is reduced from P500,000.00 and P50,000.00
to P50,000.00 and P25,000.00, respectively.

Costs against petitioners.

SO ORDERED.
G.R. No. 116100             February 9, 1996
SPOUSES CRISTINO and BRIGIDA CUSTODIO and SPOUSES
LITO and MARIA CRISTINA SANTOS,petitioners,  mentioned some other inconveniences of having (at) the
vs.
COURT OF APPEALS, HEIRS OF PACIFICO C. MABASA and
REGIONAL TRIAL COURT OF PASIG, METRO MANILA,
BRANCH 181, respondents.
DECISION
REGALADO, J.:
This petition for review on certiorari assails the decision of
respondent Court of Appeals in CA-G.R. CV No. 29115,
promulgated on November 10, 1993, which affirmed with
modification the decision of the trial court, as well as its resolution
dated July 8, 1994 denying petitioner's motion for
reconsideration.1
On August 26, 1982, Civil Case No. 47466 for the grant of an
easement of right of way was filed by Pacifico Mabasa against
Cristino Custodio, Brigida R. Custodio, Rosalina R. Morato, Lito
Santos and Maria Cristina C. Santos before the Regional Trial
Court of Pasig and assigned to Branch 22 thereof. 2
The generative facts of the case, as synthesized by the trial court
and adopted by the Court of Appeals, are as follows:
Perusing the record, this Court finds that the original
plaintiff Pacifico Mabasa died during the pendency of this
case and was substituted by Ofelia Mabasa, his surviving
spouse [and children].
The plaintiff owns a parcel of land with a two-door
apartment erected thereon situated at Interior P. Burgos
St., Palingon, Tipas, Tagig, Metro Manila. The plaintiff
was able to acquire said property through a contract of
sale with spouses Mamerto Rayos and Teodora Quintero
as vendors last September 1981. Said property may be
described to be surrounded by other immovables
pertaining to defendants herein. Taking P. Burgos Street
as the point of reference, on the left side, going to
plaintiff's property, the row of houses will be as follows:
That of defendants Cristino and Brigido Custodio, then
that of Lito and Maria Cristina Santos and then that of
Ofelia Mabasa. On the right side (is) that of defendant
Rosalina Morato and then a Septic Tank (Exhibit "D"). As
an access to P. Burgos Street from plaintiff's property,
there are two possible passageways. The first passageway
is approximately one meter wide and is about 20 meters
distan(t) from Mabasa's residence to P. Burgos Street.
Such path is passing in between the previously
mentioned row of houses. The second passageway is
about 3 meters in width and length from plaintiff
Mabasa's residence to P. Burgos Street; it is about 26
meters. In passing thru said passageway, a less than a
meter wide path through the septic tank and with 5-6
meters in length, has to be traversed.
When said property was purchased by Mabasa, there
were tenants occupying the remises and who were
acknowledged by plaintiff Mabasa as tenants. However,
sometime in February, 1982, one of said tenants vacated
the apartment and when plaintiff Mabasa went to see the
premises, he saw that there had been built an adobe
fence in the first passageway making it narrower in width.
Said adobe fence was first constructed by defendants
Santoses along their property which is also along the first
passageway. Defendant Morato constructed her adobe
fence and even extended said fence in such a way that
the entire passageway was enclosed. (Exhibit "1-Santoses
and Custodios, Exh. "D" for plaintiff, Exhs. "1-C", "1-D"
and "1-E") And it was then that the remaining tenants of
said apartment vacated the area. Defendant Ma. Cristina
Santos testified that she constructed said fence because
there was an incident when her daughter was dragged by
a bicycle pedalled by a son of one of the tenants in said
apartment along the first passageway. She also
front of her house a pathway such as when some of the
tenants were drunk and would bang their doors and
windows. Some of their footwear were even lost. . . .
3 
(Emphasis in original text; corrections in parentheses
supplied)
On February 27, 1990, a decision was rendered by the trial court,
with this dispositive part:
Accordingly, judgment is hereby rendered as follows:
1) Ordering defendants Custodios and Santoses to give
plaintiff permanent access ingress and egress, to the
public street;
2) Ordering the plaintiff to pay defendants Custodios and
Santoses the sum of Eight Thousand Pesos (P8,000) as
indemnity for the permanent use of the passageway.
The parties to shoulder their respective litigation
expenses.4
Not satisfied therewith, therein plaintiff represented by his heirs,
herein private respondents, went to the Court of Appeals raising
the sole issue of whether or not the lower court erred in not
awarding damages in their favor. On November 10, 1993, as
earlier stated, the Court of Appeals rendered its decision affirming
the judgment of the trial court with modification, the decretal
portion of which disposes as follows:
WHEREFORE, the appealed decision of the lower court is
hereby AFFIRMED WITH MODIFICATION only insofar as
the herein grant of damages to plaintiffs-appellants. The
Court hereby orders defendants-appellees to pay
plaintiffs-appellants the sum of Sixty Five Thousand
(P65,000) Pesos as Actual Damages, Thirty Thousand
(P30,000) Pesos as Moral Damages, and Ten Thousand
(P10,000) Pesos as Exemplary Damages. The rest of the
appealed decision is affirmed to all respects. 5
On July 8, 1994, the Court of Appeals denied petitioner's motion
for reconsideration.6 Petitioners then took the present recourse to
us, raising two issues, namely, whether or not the grant of right of
way to herein private respondents is proper, and whether or not
the award of damages is in order.
With respect to the first issue, herein petitioners are already
barred from raising the same. Petitioners did not appeal from the
decision of the court a quo granting private respondents the right
of way, hence they are presumed to be satisfied with the
adjudication therein. With the finality of the judgment of the trial
court as to petitioners, the issue of propriety of the grant of right
of way has already been laid to rest.
For failure to appeal the decision of the trial court to the Court of
Appeals, petitioners cannot obtain any affirmative relief other than
those granted in the decision of the trial court. That decision of
the court below has become final as against them and can no
longer be reviewed, much less reversed, by this Court. The rule in
this jurisdiction is that whenever an appeal is taken in a civil case,
an appellee who has not himself appealed may not obtain from the
appellate court any affirmative relief other than what was granted
in the decision of the lower court. The appellee can only advance
any argument that he may deem necessary to defeat the
appellant's claim or to uphold the decision that is being disputed,
and he can assign errors in his brief if such is required to
strengthen the views expressed by the court a quo. These assigned
errors, in turn, may be considered by the appellate court solely to
maintain the appealed decision on other grounds, but not for the
purpose of reversing or modifying the judgment in the appellee's
favor and giving him other affirmative reliefs. 7
However, with respect to the second issue, we agree with
petitioners that the Court of Appeals erred in awarding damages
in favor of private respondents. The award of damages has no
substantial legal basis. A reading of the decision of the Court of
Appeals will show that the award of damages was based solely on
the fact that the original plaintiff, Pacifico Mabasa, incurred losses
in the form of unrealized rentals when the tenants vacated the
leased premises by reason of the closure of the passageway.
of private respondents, either by law or by contract. The fact that
private respondents had no existing right over the said
passageway is confirmed by the very decision of the trial court
granting a compulsory right of way in their favor after payment of
just compensation. It was only that decision which gave private
respondents the right to use the said passageway after payment of
the compensation and imposed a corresponding duty on
petitioners not to interfere in the exercise of said right.

However, the mere fact that the plaintiff suffered losses does not
give rise to a right to recover damages. To warrant the recovery of
damages, there must be both a right of action for a legal wrong
inflicted by the defendant, and damage resulting to the plaintiff
therefrom. Wrong without damage, or damage without wrong, does
not constitute a cause of action, since damages are merely part of
the remedy allowed for the injury caused by a breach or wrong. 8
Hence, prior to said decision, petitioners had an absolute right
over their property and their act of fencing and enclosing the same
was an act which they may lawfully perform in the employment
and exercise of said right. To repeat, whatever injury or damage
may have been sustained by private respondents by reason of the
rightful use of the said land by petitioners is damnum absque
injuria.17

There is a material distinction between damages and injury. Injury
is the illegal invasion of a legal right; damage is the loss, hurt, or
harm which results from the injury; and damages are the
recompense or compensation awarded for the damage suffered.
Thus, there can be damage without injury in those instances in
which the loss or harm was not the result of a violation of a legal
duty. These situations are often called damnum absque injuria.9
In order that a plaintiff may maintain an action for the injuries of
which he complains, he must establish that such injuries resulted
from a breach of duty which the defendant owed to the plaintiff a
concurrence of injury to the plaintiff and legal responsibility by
the person causing it.10 The underlying basis for the award of tort
damages is the premise that an individual was injured in
contemplation of law. Thus, there must first be the breach of some
duty and the imposition of liability for that breach before damages
may be awarded; it is not sufficient to state that there should be
tort liability merely because the plaintiff suffered some pain and
suffering.11
Many accidents occur and many injuries are inflicted by acts or
omissions which cause damage or loss to another but which
violate no legal duty to such other person, and consequently
create no cause of action in his favor. In such cases, the
consequences must be borne by the injured person alone. The law
affords no remedy for damages resulting from an act which does
not amount to a legal injury or wrong.12
A person has a right to the natural use and enjoyment of his own
property, according to his pleasure, for all the purposes to which
such property is usually applied. As a general rule, therefore,
there is no cause of action for acts done by one person upon his
own property in a lawful and proper manner, although such acts
incidentally cause damage or an unavoidable loss to another, as
such damage or loss is damnum absque injuria. 18 When the owner
of property makes use thereof in the general and ordinary manner
in which the property is used, such as fencing or enclosing the
same as in this case, nobody can complain of having been injured,
because the incovenience arising from said use can be considered
as a mere consequence of community life. 19
The proper exercise of a lawful right cannot constitute a legal
wrong for which an action will lie, 20 although the act may result in
damage to another, for no legal right has been invaded. 21 One may
use any lawful means to accomplish a lawful purpose and though
the means adopted may cause damage to another, no cause of
action arises in the latter's favor. An injury or damage occasioned
thereby is damnum absque injuria. The courts can give no redress
for hardship to an individual resulting from action reasonably
calculated to achieve a lawful means. 22
WHEREFORE, under the compulsion of the foregoing premises,
the appealed decision of respondent Court of Appeals is hereby
REVERSED and SET ASIDE and the judgment of the trial court is
correspondingly REINSTATED.

In other words, in order that the law will give redress for an act Romero and Puno, JJ., concur.
causing damage, that act must be not only hurtful, but wrongful.
There must be damnum et injuria.13 If, as may happen in many
cases, a person sustains actual damage, that is, harm or loss to
his person or property, without sustaining any legal injury, that
is, an act or omission which the law does not deem an injury, the
damage is regarded as damnum absque injuria.14

In the case at bar, although there was damage, there was no legal
injury. Contrary to the claim of private respondents, petitioners
could not be said to have violated the principle of abuse of right.
In order that the principle of abuse of right provided in Article 21
of the Civil Code can be applied, it is essential that the following
requisites concur: (1) The defendant should have acted in a
manner that is contrary to morals, good customs or public policy;
(2) The acts should be willful; and (3) There was damage or injury
to the plaintiff.15

The act of petitioners in constructing a fence within their lot is a

valid exercise of their right as owners, hence not contrary to
morals, good customs or public policy. The law recognizes in the
owner the right to enjoy and dispose of a thing, without other
limitations than those established by law.16 It is within the right of
petitioners, as owners, to enclose and fence their property. Article
430 of the Civil Code provides that "(e)very owner may enclose or
fence his land or tenements by means of walls, ditches, live or
dead hedges, or by any other means without detriment to
servitudes constituted thereon."

At the time of the construction of the fence, the lot was not subject
to any servitudes. There was no easement of way existing in favor
G.R. No. 161188             June 13, 2008
Heirs of PURISIMA NALA, represented by their attorney-in-
fact EFEGENIA DIGNA DUYAN, petitioners,  exemplary damages in the amount of P10,000.00
vs.
ARTEMIO CABANSAG, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
This is a petition for review under Rule 45 of the Rules of Court
assailing the Court of Appeals (CA) Decision 1 dated December 19,
2002 and Resolution2 dated October 28, 2003, dismissing
petitioners' appeal and affirming with modification the Regional
Trial Court (RTC) Decision dated August 10, 1994 rendered in
Civil Case No. Q-91-10541.
The facts of the case are as follows:
Artemio Cabansag (respondent) filed Civil Case No. Q-91-10541
for damages in October 1991. According to respondent, he bought
a 50-square meter property from spouses Eugenio Gomez, Jr. and
Felisa Duyan Gomez on July 23, 1990. Said property is part of a
400-square meter lot registered in the name of the Gomez
spouses. In October 1991, he received a demand letter from Atty.
Alexander del Prado (Atty. Del Prado), in behalf of Purisima Nala
(Nala), asking for the payment of rentals from 1987 to 1991 until
he leaves the premises, as said property is owned by Nala, failing
which criminal and civil actions will be filed against him. Another
demand letter was sent on May 14, 1991. Because of such
demands, respondent suffered damages and was constrained to
file the case against Nala and Atty. Del Prado. 3
Atty. Del Prado claimed that he sent the demand letters in good
faith and that he was merely acting in behalf of his client, Nala,
who disputed respondent's claim of ownership. Nala alleged that
said property is part of an 800-square meter property owned by
her late husband, Eulogio Duyan, which was subsequently divided
into two parts. The 400-square meter property was conveyed to
spouses Gomez in a fictitious deed of sale, with the agreement
that it will be merely held by them in trust for the Duyan's
children. Said property is covered by Transfer Certificate of Title
(TCT) No. 281115 in the name of spouses Gomez. Nala also
claimed that respondent is only renting the property which he
occupies.4
After trial, the RTC of Quezon City, Branch 93, rendered its
Decision on August 10, 1994, in favor of respondent. The
dispositive portion of the Decision provides:
WHEREFORE, premises considered, by preponderance of
evidence, the Court finds in favor of the plaintiff and
hereby orders the defendants, jointly and severally, to
pay plaintiff the following:
1. P150,000.00 by way of moral damages;
2. P30,000.00 by way of exemplary damages;
3. P20,000.00 as and for reasonable attorney's
fees and other litigation expenses; and
4. to pay the costs.
SO ORDERED.5
Nala and Atty. Del Prado appealed to the CA. The herein assailed
CA Decision dated December 19, 2002 affirmed the RTC Decision
with modification, thus:
WHEREFORE, premises considered, the instant appeal is
hereby DISMISSED. The assailed decision of the Regional
Trial Court, Branch 93, Quezon City, in Civil Case No. Q-
91-10541 is heretofore AFFIRMED with MODIFICATION.
Defendants-appellants are ordered to pay, jointly and
severally, plaintiff-appellee the amount of P30,000.00 by
way of moral damages. It is further ordered to pay him
and P10,000.00, attorney's fees.
SO ORDERED.6
In affirming the RTC Decision, the CA took note of the Decision
dated September 5, 1994 rendered by the RTC of Quezon City,
Branch 80, dismissing Civil Case No. 91-8821, an action for
reconveyance of real property and cancellation of TCT No. 281115
with damages, filed by Nala against spouses Gomez. 7
Hence, herein petition by the heirs of Nala (petitioners) 8 with the
following assignment of errors:
a) Respondent Court of Appeals erred in not considering
the right of Purisima Nala to assert her rights and
interest over the property.
b) Respondent Court of Appeals erred in not considering
the Decision rendered by the Court of Appeals in the case
for reconveyance which upheld the rights and interest of
Purisima Nala and her children over a certain parcel of
land, a portion of which is subject of the present case.
c) Respondent Court of Appeals erred in awarding
damages and attorney's fees without any basis. 9
Atty. Del Prado filed a motion for extension of time to file his
separate petition but it was denied by the Court per its Resolution
dated January 19, 2004 issued in G.R. No. 160829.
Petitioners argue that their predecessor-in-interest had every right
to protect and assert her interests over the property. Nala had no
knowledge that the property was sold by spouses Gomez to
respondent when the demand letters were sent. What she was
aware of was the fact that spouses Gomez were managing the
rentals on the property by virtue of the implied trust created
between them and Eulogio Duyan. When spouses Gomez failed to
remit the rentals and claimed ownership of the property, it was
then that Nala decided to procure the services of legal counsel to
protect their rights over the property.
Petitioners also contend that it was error for the CA to take note of
the RTC Decision in Civil Case No. 91-8821 without further noting
that the CA had already reversed and set aside said RTC Decision
and ordered reconveyance of the property to Nala and her children
in a Decision dated March 8, 2000 rendered in CA-G.R. CV No.
49163. Petitioners also argue that respondent did not substantiate
his claim for damages.
Preliminarily, the Court notes that both the RTC and the CA failed
to indicate the particular provision of law under which it held
petitioners liable for damages. Nevertheless, based on the
allegations in respondent's complaint, it may be gathered that the
basis for his claim for damages is Article 19 of the Civil Code,
which provides:
Art. 19. Every person must, in the exercise of his rights
and in the performance of his duties, act with justice,
give everyone his due, and observe honesty and good
faith.
The foregoing provision sets the standards which may be observed
not only in the exercise of one's rights but also in the performance
of one's duties. When a right is exercised in a manner which does
not conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for which
the wrongdoer must be held responsible. But a right, though by
itself legal because recognized or granted by law as such, may
nevertheless become the source of some illegality. A person should
be protected only when he acts in the legitimate exercise of his
right; that is, when he acts with prudence and in good faith, but
not when he acts with negligence or abuse. There is an abuse of are NULLIFIED. Civil Case No. Q-91-10541 is DISMISSED for lack
right when it is exercised only for the purpose of prejudicing or of merit.
injuring another. The exercise of a right must be in accordance
with the purpose for which it was established, and must not be Costs against respondent.
excessive or unduly harsh; there must be no intention to injure
another.[10] SO ORDERED.

In order to be liable for damages under the abuse of rights

principle, the following requisites must concur: (a) the existence of
a legal right or duty; (b) which is exercised in bad faith; and (c) for
the sole intent of prejudicing or injuring another. 11

It should be stressed that malice or bad faith is at the core of

Article 19 of the Civil Code. Good faith is presumed, and he who
alleges bad faith has the duty to prove the same. 12 Bad faith, on
the other hand, does not simply connote bad judgment to simple
negligence, dishonest purpose or some moral obloquy and
conscious doing of a wrong, or a breach of known duty due to
some motives or interest or ill will that partakes of the nature of
fraud. Malice connotes ill will or spite and speaks not in response
to duty. It implies an intention to do ulterior and unjustifiable
harm.13

In the present case, there is nothing on record which will prove

that Nala and her counsel, Atty. Del Prado, acted in bad faith or
malice in sending the demand letters to respondent. In the first
place, there was ground for Nala's actions since she believed that
the property was owned by her husband Eulogio Duyan and that
respondent was illegally occupying the same. She had no
knowledge that spouses Gomez violated the trust imposed on
them by Eulogio and surreptitiously sold a portion of the property
to respondent. It was only after respondent filed the case for
damages against Nala that she learned of such sale. The bare fact
that respondent claims ownership over the property does not give
rise to the conclusion that the sending of the demand letters by
Nala was done in bad faith. Absent any evidence presented by
respondent, bad faith or malice could not be attributed to
petitioner since Nala was only trying to protect their interests over
the property.

Moreover, respondent failed to show that Nala and Atty. Del

Prado's acts were done with the sole intention of prejudicing and
injuring him. It may be true that respondent suffered mental
anguish, serious anxiety and sleepless nights when he received
the demand letters; however, there is a material distinction
between damages and injury. Injury is the legal invasion of a legal
right while damage is the hurt, loss or harm which results from
the injury.14Thus, there can be damage without injury in those
instances in which the loss or harm was not the result of a
violation of a legal duty. In such cases, the consequences must be
borne by the injured person alone; the law affords no remedy for
damages resulting from an act which does not amount to a legal
injury or wrong. These situations are often called damnum absque
injuria.15

Nala was acting well within her rights when she instructed Atty.
Del Prado to send the demand letters. She had to take all the
necessary legal steps to enforce her legal/equitable rights over the
property occupied by respondent. One who makes use of his own
legal right does no injury. 16 Thus, whatever damages are suffered
by respondent should be borne solely by him.

Nala's acts in protecting her rights over the property find further
solid ground in the fact that the property has already been ordered
reconveyed to her and her heirs. In its Decision dated March 8,
2000 in CA-G.R. CV No. 49163, the CA reversed and set aside the
RTC's Decision and ordered the reconveyance of the property to
petitioners, and TCT No. 281115 was declared canceled. Said CA
Decision was affirmed by this Court in its Decision dated March
18, 2005 in G.R. No. 144148, which became final and executory
on July 27, 2005.

WHEREFORE, the petition is GRANTED. The Decision dated

December 19, 2002 and Resolution dated October 28, 2003
rendered by the Court of Appeals in CA-G.R. CV No. 48580
G.R. No. L-8385            March 24, 1914
LUCIO ALGARRA, plaintiff-appellant,  from this direct. The court, therefore, did not err in
vs.
SIXTO SANDEJAS, defendant-appellee.
Southworth, Hargis & Springer for appellant.
Rohde & Wright for appellee.
TRENT, J.:
This is a civil action for personal injuries received from a collision
with the defendant's automobile due to the negligence of the
defendant, who was driving the car. The negligence of the
defendant is not questioned and this case involves only the
amount of damages which should be allowed.
As a result of the injuries received, plaintiff was obliged to spend
ten days in the hospital, during the first four or five of which he
could not leave his bed. After being discharged from the hospital,
he received medical attention from a private practitioner for
several days. The latter testified that after the last treatment the
plaintiff described himself as being well. On the trial the plaintiff
testified that he had done no work since the accident, which
occurred on July 9, 1912, and that he was not yet entirely
recovered. Plaintiff testified that his earning capacity was P50 per
month. It is not clear at what time plaintiff became entirely well
again, but as to the doctor to whom he described himself as being
well stated that this was about the last of July, and the trial took
place September 19, two months' pay would seem sufficient for
the actual time lost from his work. Plaintiff further testified that
he paid the doctor P8 and expended P2 for medicines. This
expenses, amounting in all to P110 should also be allowed.
Plaintiff sold the products of a distillery on a 10 per cent
commission and made an average of P50 per month. He had about
twenty regular customers who, it seems, purchased in small
quantities, necessitating regular and frequent deliveries. Since the
accident his wife had done something in a small way to keep up
this business but the total orders taken by her would not net
them over P15. He lost all his regular customers but four, other
agents filing their orders since his accident. It took him about four
years to build up the business he had at the time of the accident,
and he could not say how long it would take him to get back the
business he had lost.
Under this state of facts, the lower court, while recognizing the
justness of he claim, refused to allow him anything for injury to
his business due to his enforced absence therefrom, on the
ground that the doctrine of Marcelo vs. Velasco (11 Phil., Rep.,
277) is opposed t such allowance. The trial court's opinion
appears to be based upon the following quotation from Viada (vol.
1 p. 539), quoted in that decision: ". . . with regard to the offense
of lesiones, for example, the civil liability is almost always limited
to indemnity for damage to the party aggrieved for the time during
which he was incapacitated for work; . . ."
This statement, however, derives its force, not from any provision
of the law applicable to lesiones, but is a mere deduction from the
operation of the law upon the cases arising under it. That the
interpretation placed upon this statement of Viada by the lower
court is either not correct, or that it does not apply to actions for
personal injuries under article 1902 of the Civil Code, is apparent
from the decisions of the supreme court of Spain of January 8,
1906, January 15, 1902, and October 19, 1909, to which a more
extended reference will be made further on in this opinion. There
is nothing said in the decision in question prohibiting the
allowance of compensatory damages, nor does there seem to be
anything contained therein opposed to the allowance of such
damages occurring subsequent to the institution of the action. In
fact, it appears from the following quotation that the court would
have been disposed to consider favorably the plaintiff's claim for
injury to her business had the evidence presented it.
No evidence was then offered by the plaintiff to show that
this slight lameness in any way interfered with the
conduct of her business or that she could make any less
amount therein than she could make if she did not suffer
allowing her no further damages on this
account, because there was no evidence that she had
suffered any.
The alleged damages which the court refused to entertain in that
case and under the discussion of which appears the above
quotation from Viada, were for pain and suffering the plaintiff may
have experienced. The court said: "For the profits which the
plaintiff failed to obtain, spoken of in the latter part of this article,
the plaintiff was allowed to recover, and the question is, whether
the value of the loss which she suffered can be extended to pain
which she experienced by reason of the accident."
Actions for damages such as the case at bar are based upon
article 1902 of the Civil Code, which reads as follows: "A person
who, by act or omission, causes damage to another where there is
fault or negligence shall be obliged to repair the damage so done."
Of this article, the supreme court of Spain, in its decision of
February 7, 1900, in considering the indemnity imposed by it,
said: "It is undisputed that said reparation, to be efficacious and
substantial, must rationally include the generic idea of complete
indemnity, such as is defined and explained in article 1106 of the
said (Civil) Code."
Articles 1106 and 1107 of the Civil Code read as follows:
1106. Indemnity for losses and damages includes not
only the amount of the loss which may have been
suffered, but also that of the profit which the creditor
may have failed to realize, reserving the provisions
contained in the following articles.
1107. The losses and damages for which a debtor in good
faith is liable, are those foreseen or which may have been
foreseen, at the time of constituting the obligation, and
which may be a necessary consequence of its
nonfulfillment.
In case of fraud, the debtor shall be liable for all those
which clearly may originate from the nonfulfillment of the
obligation.
Fraud is not an element of the present case, and we are not
therefore concerned with it. The liability of the present defendant
includes only those damages which were "foreseen or may have
been foreseen" at the time of the accident, and which are the
necessary and immediate consequences of his fault. In discussing
the question of damages under the civil law, Gutierrez (vol. 4, pp.
64, 65) says:
In the impossibility of laying down a surer rule, the Code
understands known damages to be those which in the
prudent discernment of the judge merit such a
qualification, although their consequences may not be
direct, immediate inevitable.
If it is a question of losses occasioned through other
causes, except fraud, and the contracting parties have
not covenanted any indemnity for the case of
nonfulfillment, then the reparation of the losses or
damages shall only comprise those that fault. This rule
may not be very clear, but is the only one possible in a
matter more of the domain of prudence than of law.
In its decision of April 18, 1901, the supreme court of Spain said:
"Neither were the errors incurred that are mentioned in the third
assignment, since the indemnity for damages is understood to
apply to those caused the complainant directly, and not to those
which, indirectly and through more or less logical deductions, may
affect the interests of the Ayuntamiento de Viana, as occurs in the
present case where the increase of wealth concerns not only
the Ayuntamiento but also the provide and the state, yet, not on
this account does any action lie in their behalf as derived from the
contracts with Urioste."
This doctrine is also affirmed in the more recent decision of March
18, 1909, in the following words: "For the calculation of the
damages claimed, it is necessary, pursuant to the provisions of
article 924 of the Law of Civil Procedure, to give due regard to the
nature of the obligation that was unfulfilled and to the reasonable
consequences of its nonfulfillment, because the conviction sought
can be imposed only when there exists a natural and true relation
between such nonfulfillment and damages, whatever, reason there
may be to demand them on another account."
In the case of Garcia Gamo vs. Compania Madrilena de Alumbrado,
etc. (101 Juris, p., 662), it appeared that an employee of the
defendant company whose duty it was to clean and light the street
lamps left as stepladder leaning against a tree which stood in a
public promenade. The seven-year old son of the plaintiff climbed
the tree by means of the ladder, and while endeavoring to cut
some branches fell to the ground, sustaining severe injuries which
eventually caused his death. The plaintiff lost in the lower courts
and on appeal to the supreme court the decision of those lower
courts was affirmed with the following statement;
That in this sense — aside from the fitness of the
judgment appealed from, inasmuch as the acquittal of
the defendant party resolves all the issues argued at the
trial, if no counterclaim was made — the assignments of
error in the appeal cannot be sustained, because, while
the act of placing the stepladder against the tree in the
manner and for the purposes aforestated, was not
permissible it was regularly allowed by the local
authorities, and that fact did not precisely determine the
injury, which was due first to the abandonment of the
child by his parents and secondly to his own
imprudence, according to the findings of the trial court,
not legally objected to in the appeal; so it is beyond
peradventure that the circumstances necessary for
imposing the obligations arising from guilt or negligence
do not concur in the present case.
The court here simply held that the injury to the child could not
be considered as the probable consequence of an injury which
could have been foreseen from the act of the company's employee
in leaving the ladder leaning against the tree.
In De Alba vs. Sociedad Anonima de Tranvias (102 Juris, p., 928),
a passenger was standing on the platform of a street car while it
was in motion when, on rounding a curve, the plaintiff fell off and
under the car, thereby sustaining severe injuries which took
several months to heal. He was not allowed to recover in the lower
courts and on appeal the supreme court sustained the inferior
tribunals saying:
Whereas, considering the circumstances of the accident
that happened to D. Antonio Morales de Alba, such as
they were held by the trail court to have been proved, the
evidence does not disclose that any liability whatever in
the said accident, for acts or omissions, may be charged
against the employees of the street car, as being guilty
through fault or negligence, since it was shown that the
car was not traveling at any unusual speed nor was this
increased on rounding the curve, but that the accident
was solely due to the fact that the car in turning made a
movement which caused the plaintiff to lose his balance;
and whereas no act whatever has been proved of any
violation of the regulations, nor can it be required of
street-car employees, who have to attend to their
respective duties, that they should foresee and be on the
alert to notify the possibility of danger when not greater
than that which is more or less inherent to this mode of
travel; therefore the appeal can not be upheld, and with
all the more reason since the passenger who takes the
risk of travelling on the platform, especially when there is
an unoccupied seat in the car, should be on his guard
against a contingency so natural as that of losing his
balance to a greater or less extent when the car rounds a
curve.
In Crespo vs. Garcia (112 Jurisp., 796), the plaintiff, a servant
woman, 72 years old, was injured in the performance of her duties
by the sudden and unexpected failure of the upper floor of a house
in which she was working. The owner and the architect of the
building were made defendants and after due trial it was held that
no responsibility attached to them for the failure of the floor,
consequently the plaintiff was not allowed to recover. On her
appeal to the supreme court that tribunal said:
Whereas the trial court held, in view of all the evidence
adduced, including the expert and other testimony, that
the act which occasioned the injury suffered by Doña
Maria Alonso Crespo, was accidental, without fault of
anybody, and consequently fortuitous, and that, in so
considering it to absolve the defendants, he did not incur
the second error assigned on the appeal, because,
without overlooking the import and legal value of the
affidavit adduced at the trial, he held that the defendants
in their conduct were not liable for any omission that
might constitute such fault or negligence as would oblige
them to indemnify the plaintiff; and to support the error
assigned no legal provision whatever was cited such as
would require a different finding, nor was any other
authentic document produced than the aforesaid
affidavit which contained an account of the ocular
inspection and the expert's report, which, as well as the
testimony of the witnesses, the trial court was able to
pass upon in accordance with its exclusive power-all
points of proof which do not reveal any mistake on the
part of the judge, whose opinion the appellant would
substitute with his own by a different interpretation.
These authorities are sufficient to show that liability for acts ex
delicto under the Civil Code is precisely that embraced within the
"proximate cause" of the Anglo-Saxon law of torts.
The general rule, as frequently stated, is that in order
that an act omission may be the proximate cause of an
injury, the injury must be the natural and probable
consequence of the act or omission and such as might
have been foreseen by an ordinarily responsible and
prudent man, in the light of the attendant
circumstances, as likely to result therefrom . . .
According to the latter authorities foreseeableness, as an
element of proximate cause, does not depend upon
whether an ordinarily reasonable and prudent man
would or ought in advance to have anticipated the result
which happened, but whether, if such result and the
chain of events connecting it with the act complained of
had occurred to his mind, the same would have seemed
natural and probable and according to the ordinary
course of nature. Thus, as said in one case, "A person
guilty of negligence, or an unlawful act, should be held
responsible for all the consequences which a prudent
and experienced man, fully acquainted with all the
circumstances which in fact existed, would at the time of
the negligent or unlawful act have thought reasonable to
follow, if they had occurred to his mind." (Wabash R. etc.
Co. vs. Coker, 81 Ill. App. 660, 664; Cooley on Torts, sec.
15.)
The view which I shall endeavor to justify is that, for the
purpose of civil liability, those consequences, and those
only, are deemed "immediate," "proximate," or, to
anticipate a little, "natural and probable," which a person
of average competence and knowledge, being in the like
case with the person whose conduct is complained of,
and having the like opportunities of observation, might
be expected to foresees as likely to follow upon such
conduct. This is only where the particular consequence is
not known to have been intended or foreseen by the
 actor. If proof of that be forthcoming, whether the
consequence was "immediate" or not does not matter.
That which a man actually foresees is to him, at all
events, natural and probable. (Webb's Pollock on Torts,
p. 32.)
There is another line of definitions which have for their basis "the
natural and probable consequences" or "the direct and immediate
consequences" of the defendant's act. (Joyce on Damages, sec. 82.)
It will be observed that the supreme court of Spain, in the above
decisions, has rather inclined to this line of definitions of what
results a defendant is liable for as a consequence of his wrongful
acts, while the Civil Code uses the phraseology, "those foreseen or
which may have been foreseen." From either viewpoint the method
of arriving at the liability of the wrongdoer under the Civil Code
and under the Anglo Saxon law is the same. Such was the holding
of this court in Taylor vs. M. E. R. and L. Co. (16 Phil. Rep., 8, 15):
We agree with counsel for appellant that under the Civil
Code, as under the generally accepted doctrine in the
United States, the plaintiff in an action such as that
under consideration, in order to establish his right to a
recovery, must establish by competent evidence:
(1) Damages to the plaintiff.
(2) Negligence by act or omission of which defendant
personally, or some person for whose acts it must
respond, was guilty.
(3) The connection of cause and effect between the
negligence and the damages.
These propositions are, of course, elementary, and do not
admit of discussion, the real difficulty arising in the
application of these principles to the particular facts
developed in the case under consideration.
Parenthetically it may be said that we are not now dealing with the
doctrine of comparative (contributory) negligence which was
established by Rakes vs. A. G. and P. Co. (7 Phil. Rep., 359),
and Eades vs. A. G. and P. Co. (19 Phil., Rep., 561.)
The rules for the measure of damages, once that liability is
determined, are, however, somewhat different. The Civil Code
requires that the defendant repair the damage caused by his fault
or negligence. No distinction is made therein between damage
caused maliciously and intentionally and damages caused
through mere negligence in so far as the civil liability of the
wrongdoer in concerned. Nor is the defendant required to do more
than repair the damage done, or, in other words, to put the
plaintiff in the same position, so far as pecuniary compensation
can do so, that he would have been in had the damage not been
inflicted. In this respect there is a notable difference between the
two systems. Under the Anglo-SAxon law, when malicious or
willful intention to cause the damage is an element of the
defendant's act, it is quite generally regarded as an aggravating
circumstance for which the plaintiff is entitled to more than mere
compensation for the injury inflicted. These are called exemplary
or punitive damages, and no provision is made for them in article
1902 of the Civil Code.
Again it is quite common under the English system to award what
is called nominal damages where there is only a technical violation
of the plaintiff's rights resulting in no substantial injury to him.
This branch of damages is also unknown under the Civil Code. If
no damages have actually occurred there can be none to repair
and the doctrine of nominal damages is not applicable. Thus it
has been often held by the supreme court of Spain that a mere
noncompliance with the obligations of a contract is not sufficient
to sustain a judgment for damages. It must be shown that
damages actually existed. (Decision of February 10, 1904.) Again,
in its decision of January 9, 1897, that high tribunal said that as
a logical consequence of the requirements of articles 1101, 1718,
and 1902 that he who causes damages must repair them, their
existence must be proved.
In at least one case decided by this court we held in effect that
nominal damages could not be allowed. (Mercado vs. Abangan, 10
Phil., Rep., 676.)
The purpose of the law in awarding actual damages is to
repair the wrong that has been done, to compensate for
the injury inflicted, and not to impose a penalty. Actual
damages are not dependent on nor graded by the intent
with which the wrongful act is done." (Field vs. Munster,
11 Tex. Civ., Appl., 341, 32 S. W., 417.) "The words
"actual damages" shall be construed to include all
damages that the plaintiff may he has suffered in respect
to his property, business, trade, profession, or
occupation, and no other damages whatever." (Gen Stat.
Minn. 1894, sec., 5418.) "Actual damages are
compensatory only." (Lord, Owen and Co. vs. Wood, 120
Iowa, 303, 94 N. W., 842.) " `Compensatory damages' as
indicated by the word employed to characterize them,
simply make good or replace the loss caused by the
wrong. They proceed from a sense of natural justice, and
are designed to repair that of which one has been
deprived by the wrong of another." (Reid vs. Terwilliger,
116 N. Y., 530; 22 N. E., 1091.) "Compensatory damages'
are such as awarded to compensate the injured party for
caused by the wrong, and must be only such as make
just and fair compensation, and are due when the wrong
is established, whether it was committed maliciously —
that is, with evil intention — or not. (Wimer vs. Allbaugh,
78 Iowa, 79; 42 N. W., 587; 16 Am. St. Rep., 422.)
Finally, this court has itself held that actual damages are the
extent of the recovery allowed to the plaintiff. In Marker vs.
Garcia (5 Phil., Rep., 557), which was an action for damages for
breach of contract, this court said: "Except in those cases where
the law authorizes the imposition of punitive or exemplary
damages, the party claiming damages must establish by
competent evidence the amount of such damages, and courts can
not give judgment for a greater amount than those actually
proven."
We are of the opinion that the requirements of article 1902, that
the defendant repair the damage done can only mean what is set
forth in the above definitions, Anything short of that would not
repair the damages and anything beyond that would be excessive.
Actual compensatory damages are those allowed for tortious
wrongs under the Civil Code; nothing more, nothing less.
According to the text of article 1106 of the Civil Code, which,
according to the decision of February 7, 1990 (referred to above),
is the generic conception of what article 1902 embraces, actual
damages include not only loss already suffered, but loss of profits
which may not have been realized. The allowance of loss of
prospective profits could hardly be more explicitly provided for.
But it may not be amiss to refer to the decisions of the supreme
court of Spain for its interpretation of this article. The decisions
are numerous upon this point. The decisions are as epitomized by
Sanchez Roman (vol. 1, 0. 281), interprets article 1106 as follows:
Pursuant to articles 1106 and 1107 of the same Code,
which govern in general the matter of indemnity due for
the nonfulfillment of obligations, the indemnity
comprises, not only the value of loss suffered, but also
that of the prospective profit that was not realized, and
the obligation of the debtor in good faith is limited to
such losses and damages as were foreseen or might have
been foreseen at the time the obligation was incurred and
which are a necessary consequence of his failure of
fulfillment. Losses and damages under such limitations
and frustrated profits must, therefore, be proved directly
by means of the evidence the law authorizes.
The decisions of January 8, 1906 (published in 14 Jurisp. del
Codigo Civil, 516) had to do with the following case: The plaintiff,
a painter by occupation, was engaged to paint the poles from
which were suspended the trolley wires of a traction company.
While at work on February 8, 1901, the electric current was
negligently turned on by the company, whereby plaintiff received a
severe shock, causing him to fall to the ground. Plaintiff sustained
injuries which took several months to heal and his right arm was
permanently disabled by the accident. The age of the plaintiff is
not stated. His daily wage was four pesetas. He was awarded
25,000 pesetas by the trial court and this judgment was affirmed
on appeal to the supreme court. This was equivalent to
approximately twenty year's salary.
In its decision of January 15, 1902 (published in 10 Jurisp. del
Codigo Civil., 260), the supreme court had the following case
under consideration: Plaintiff's son was a travelling salesman 48
years of age, who received an annual salary of 2,500 pesetas and
expenses. While travelling on defendant's train an accident
occurred which caused his death. The accident was held to be due
to the failure of the defendant company to keep its track and
roadbed in good repair. Plaintiff was allowed 35,000 pesetas for
the death of her son. this would be equivalent to about fourteen
years' salary.
in the case dated October 19, 1909 (published in 116 Jurisp. del
Codigo Civil, 120), plaintiff as suing for the death of his son
caused from injuries inflicted by the defendant's bull while
plaintiff and his son were travelling along a public road. The age of
the son is not given. Plaintiff was awarded 3,000 pesetas damages.
In each of the above-mentioned cases the supreme court refused
to pass on the amount of damages which had been awarded. It
appears to be the unvarying rule of the supreme court of Spain to
accept the amount of damages awarded by trial courts, its only
inquiry being as to whether damages have actually occurred as
the result of the defendant's fault or negligence. (Decision of July
5, 1909.) The reason why the supreme court of Spain refuses to
consider the amount of damages awarded is to be found in the
great importance attached by it to the provision of the Ley de
Enjuiciamiento Civil, articles 659 and 1692, No. 7. In its auto of
March 16, 1900 (published in 8 Jurisp. del Codigo Civil, 503), the
following comment is made on these articles:
As this supreme court has repeatedly held, the weight
given by the trial judge to the testimony, with good
discernment or otherwise, can not be a matter for
reversal, not even with the support of No. 7 of article
1692 of the Ley de Enjuiciamiento Civil, as it is
exclusively submitted to him, pursuant to the provisions
of article 659 of the said law and article 1248 of the
Code.
The practice of this court, under our Code of Civil Procedure, does
not permit of our going to such lengths in sustaining the findings
of fact in trial courts. We have repeatedly held that due weight will
be given in this court to the findings of fact by trial courts by
reason of their opportunities to see and hear the witnesses testify,
note their demeanor and bearing upon the stand, etc., but when
the decision of the trial court, after permitting due allowance for
its superior advantages in weighing the evidence of the case,
appears to us to be against the fair preponderance of that
evidence, it is our duty to reverse or set aside the findings of fact
made by the trial court and render such judgment as the facts of
the same deem to us to warrant. (Code of Civ., Proc., sec. 496.) We
need go to no other branch of law than that of damages to support
this statement. In the following case the damages awarded by the
lower court were reduced after a consideration of the evidence;
Sparrevohn vs. Fisher (2 Phil. Rep., 676); Campbell and Go-
Tauco vs. Behn, Meyer and Co. (3 Phil., Rep., 590);
Causin vs. Jakosalem 95 Phil., Rep., 155); Marker vs. Garcia (5
Phil., Rep., 557); Uy Piaoco vs. Osmeña (9 Phil., Rep., 299);
Macleod vs. Phil. Pub. Co. (12 Phil., Rep., 427);
Orense vs. Jaucian (18 Phil. Rep., 553). In Rodriguez vs. Findlay
and Co. (14 Phil. Rep., 294); and Cordoba y Conde vs. Castle Bros.
(18 Phil. Rep., 317), the damages awarded by the lower court were
increased on appeal after a consideration of the evidence. In
Brodek vs. Larson (18 Phil., Rep., 425), it was held that the
damages awarded by the lower court were base on too uncertain
evidence, and the case was remanded for a new trial as to the
amount of damages sustained. Also in Saldivar vs. Municipality of
Talisay (18 Phil., Rep., 362), where the lower court exonerated the
defendant from liability, this court, after a consideration of the
evidence, held that the defendant was liable and remanded the
case for the purpose of a new trial in order to ascertain the
amount of damages sustained.
In this respect the law of damages under article 1902, as laid
down by the decisions of the supreme court of Spain, has been
indirectly modified by the present Code of Civil Procedure so that
the finding of the lower court as to the amount of damages is not
conclusive on appeal.
Actual damages, under the American system, include pecuniary
recompense for pain and suffering, injured feelings, and the like.
Article 1902, as interpreted by this court in Marcelo vs.
Velasco (11 Phil., Rep., 287), does not extend to such incidents.
Aside from this exception, actual damages, in this jurisdiction, in
the sense that they mean just compensation for the loss suffered,
are practically synonymous with actual damages under the
American system.
This court has already gone some distance in incorporating into
our jurisprudence those principles of the American law of actual
damages which are of a general and abstract nature. In Baer
Senior and Co.'s Successors vs. Compañia Maritima (6 Phil. Rep.,
215), the American principle of admiralty law that the liability of
the ship for a tow is not so great as that for her cargo was applied
in determining the responsibility of a ship, under the Code of
Commerce, for her tow. In Rodriguez, vs. Findlay and Co. (14
Phil., Rep., 294), which was an action for breach of contract of
warranty, the following principle, supported entirely by American
authority, was used in computing the amount of damages due the
plaintiff:
The damages recoverable of a manufacturer or dealer for
the breach of warranty of machinery, which he contracts
to furnish, or place in operation for a known purpose are
not confined to the difference in value of the machinery
as warranted and as it proves to be, but includes such
consequential damages as are the direct, immediate, and
probable result of the breach.
In Aldaz vs. Gay (7 Phil., Rep., 268), it was held that the earnings
or possible earnings of a workman wrongfully discharged should
be considered in mitigation of his damages for the breach of
contract by his employer, with the remark that nothing had been
brought to our attention to the contrary under Spanish
jurisprudence.
In Fernandez vs. M. E. R. and L. Co. (14 Phil., Rep., 274), a release
or compromise for personal injury sustained by negligence
attributed to the defendant company was held a bar to an action
for the recovery of further damages, on the strength of American
precedents.
In Taylor vs. M. E. R. and L. Co., supra, in the course of an
extended reference to American case law, the doctrine of the so-
called "Turntable" and "Torpedo" cases was adopted by this court
as a factor in determining the question of liability for damages in
such cases as the one the court the then had under consideration.
In Martinez vs. Van Buskirk (18 Phil., 79), this court, after
remarking that the rules under the Spanish law by which the fact
of negligence is determined are, generally speaking, the same as
they are in Anglo-Saxon countries, approved the following well-
known rule of the Anglo-Saxon law of negligence, relying
exclusively upon American authorities: ". . . acts, the performance
of which has not proven destructive or injurious and which have
been generally acquiesced in by society for so long a time as to
have ripened into a custom, cannot be held to be unreasonable or
imprudent and that, under the circumstances, the driver was not
guilty of negligence in so leaving his team while assisting in
unloading his wagon.
This court does not, as a rule, content itself in the determination
of cases brought before it, with a mere reference to or quotation of
the articles of the codes or laws applicable to the questions
involved, for the reason that it is committed to the practice of
citing precedents for its rulings wherever practicable. (See
Ocampo vs. Cabangis, 15 Phil Rep., 626.) No better example of the
necessity of amplifying the treatment of a subject given in the code
is afforded than article 1902 of the Civil Code. That article
requires that the defendant repair the damage done. There is,
however, a world of difficulty in carrying out the legislative will in
this particular. The measure of damages is an ultimate fact, to be
determined from the evidence submitted to the court. The
question is sometimes a nice one to determine, whether the
offered evidence in such as sought to be considered by the court
in fixing the quantum of damages; and while the complexity of
human affairs is such that two cases are seldom exactly alike, a
thorough discussion of each case may permit of their more or less
definite classification, and develop leading principles which will be
of great assistance to a court in determining the question, not only
of damages, but of the prior one of negligence. We are of the
opinion that as the Code is so indefinite (even though from
necessity) on the subject of damages arising from fault or
negligence, the bench and bar should have access to and avail
themselves of those great, underlying principles which have been
gradually and conservatively developed and thoroughly tested in
Anglo-Saxon courts. A careful and intelligent application of these
principles should have a tendency to prevent mistakes in the
rulings of the court on the evidence offered, and should assist in
determining damages, generally, with some degree of uniformity.
The law of damages has not, for some reason, proved as favorite a
theme with the civil-law writers as with those of the common-law
school. The decisions of the supreme court of Spain, though
numerous on damages arising from contractual obligations, are
exceedingly few upon damages for personal injuries arising ex
delicto. The reasons for this are not important to the present
discussion. It is sufficient to say that the law of damages has not
received the elaborate treatment that it has at the hands of the
Anglo-Saxon jurists. If we in this jurisdiction desire to base our
conclusions in damage cases upon controlling principles, we may
develop those principles and incorporate them into our
jurisprudence by that difficult and tedious process which
constitutes the centuries-old history of Anglo-Saxon
jurisprudence; or we may avail ourselves of these principles in
their present state of development without further effort than it
costs to refer to the works and writings of many eminent text-
writers and jurists. We shall not attempt to say that all these
principles will be applicable in this jurisdiction. It must be
constantly borne in mind that the law of damages in this
jurisdiction was conceived in the womb of the civil law and under
an entirely different form of government. These influences have
had their effect upon the customs and institutions of the country.
Nor are the industrial and social conditions the same. An Act
which might constitute negligence or damage here, and vice versa.
As stated in Story on Bailments, section 12, "It will thence follow
that, in different times and in different countries, the standard (of
diligence) is necessary variable with respect to the facts, although
it may be uniform with respect to the principle. So that it may
happen that the same acts which in one country or in one age
may be deemed negligent acts, may at another time or in another
country be justly deemed an exercise of ordinary diligence."
The abstract rules for determining negligence and the measure of
damages are, however, rules of natural justice rather than man-
made law, and are applicable under any enlightened system of
jurisprudence. There is all the more reason for our adopting the
abstract principles of the Anglo- Saxon law of damages, when we
consider that there are at least two important laws o n our statute
books of American origin, in the application of which we must
necessarily be guided by American authorities: they are the Libel
Law (which, by the way, allows damages for injured feelings and
reputation, as well as punitive damages, in a proper case), and the
Employer's Liability Act.
The case at bar involves actual incapacity of the plaintiff for two
months, and loss of the greater portion of his business. As to the
damages resulting from the actual incapacity of the plaintiff to
attend to his business there is no question. They are, of course, to
be allowed on the basis of his earning capacity, which in this case,
is P50 per month. the difficult question in the present case is to
determine the damage which has results to his business through
his enforced absence. In Sanz vs. Lavin Bros. (6 Phil. Rep., 299),
this court, citing numerous decisions of the supreme court of
Spain, held that evidence of damages "must rest upon satisfactory
proof of the existence in reality of the damages alleged to have
been suffered." But, while certainty is an essential element of an
award of damages, it need not be a mathematical certainty. That
this is true is adduced not only from the personal injury cases
from the supreme court of Spain which we have discussed above,
but by many cases decided by this court, reference to which has
already been made. As stated in Joyce on Damages, section 75,
"But to deny the injured party the right to recover any actual
damages in cases f torts because they are of such a nature a
cannot be thus certainly measured, would be to enable parties to
profit by and speculate upon their own wrongs; such is not the
law."
As to the elements to be considered in estimating the damage
done to plaintiff's business by reason of his accident, this same
author, citing numerous authorities, has the following to say: It is
proper to consider the business the plaintiff is engaged in, the
nature and extent of such business, the importance of his
personal oversight and superintendence in conducting it, and the
consequent loss arising from his inability to prosecure it.
The business of the present plaintiff required his immediate
supervision. All the profits derived therefrom were wholly due to
his own exertions. Nor are his damages confined to the actual time
during which he was physically incapacitated for work, as is the
case of a person working for a stipulated daily or monthly or
yearly salary. As to persons whose labor is thus compensated and
who completely recover from their injuries, the rule may be said to
be that their damages are confined to the duration of their
enforced absence from their occupation. But the present plaintiff
could not resume his work at the same profit he was making when
the accident occurred. He had built up an establishing business
which included some twenty regular customers. These customers
represented to him a regular income. In addition to this he made
sales to other people who were not so regular in their purchases.
But he could figure on making at least some sales each month to
others besides his regular customers. Taken as a whole his
average monthly income from his business was about P50. As a
result of the accident, he lost all but four of his regular customers
and his receipts dwindled down to practically nothing. Other
agents had invaded his territory, and upon becoming physically
able to attend to his business, he found that would be necessary
to start with practically no regular trade, and either win back his
old customers from his competitors or else secure others. During
this process of reestablishing his patronage his income would
necessarily be less than he was making at the time of the accident
and would continue to be so for some time. Of course, if it could
be mathematically determined how much less he will earn during
this rebuilding process than he would have earned if the accident
had not occurred, that would be the amount he would be entitled
to in this action. But manifestly this ideal compensation cannot be
ascertained. The question therefore resolves itself into whether
this damage to his business can be so nearly ascertained as to
justify a court in awarding any amount whatever.
When it is shown that a plaintiff's business is a going concern
with a fairly steady average profit on the investment, it may be
assumed that had the interruption to the business through
defendant's wrongful act not occurred, it would have continued
producing this average income "so long as is usual with things of
that nature." When in addition to the previous average income of
the business it is further shown what the reduced receipts of the
business are immediately after the cause of the interruption has
been removed, there can be no manner of doubt that a loss of
profits has resulted from the wrongful act of the defendant. In the
present case, we not only have the value of plaintiff's business to
him just prior to the accident, but we also have its value to him
after the accident. At the trial, he testified that his wife had earned
about fifteen pesos during the two months that he was disabled.
That this almost total destruction of his business was directly
chargeable to defendant's wrongful act, there can be no manner of
doubt; and the mere fact that the loss can not be ascertained with
absolute accuracy, is no reason for denying plaintiff's claim
altogether. As stated in one case, it would be a reproach to the law
if he could not recover damages at all. (Baldwin vs. Marquez, 91
Ga., 404)
Profits are not excluded from recovery because they are
profits; but when excluded, it is on the ground that there
are no criteria by which to estimate the amount with the
certainty on which the adjudications of courts, and the
findings of juries, should be based. (Brigham vs. Carlisle
(Ala.), 56 Am. Rep., 28, as quoted in Wilson vs. Wernwag,
217 Pa., 82.)
The leading English case on the subject is Phillips vs. London and
Southwestern Ry. Co. (5 Q. B. D., 788; 41 L.T., 121; 8 Eng. Rul.
Cases, 447). The plaintiff was a physician with a very lucrative
practice. In one case he had received a fee of 5,000 guineas; but it
appeared that his average income was between 6,000 and 7,000
pounds sterling per year. The report does not state definitely how
serious plaintiff's injuries were, but apparently he was
permanently disabled. The following instruction to the jury was
approved, and we think should be set out in this opinion as
applicable to the present case:
You cannot put the plaintiff back again into his original
position, but you must bring your reasonable common
sense to bear, and you must always recollect that this is
the only occasion on which compensation can be given.
Dr. Philips can never sue again for it. You have,
therefore, not to give him compensation a wrong at the
hands of the defendants, and you must take care o give
him full, fair compensation. for that which he has
suffered.
The jury's award was seven thousand pounds. Upon a new trial,
on the ground of the insufficiency of the damages awarded,
plaintiff received 16,000 pounds. On the second appeal, Bramwell,
L. J., put the case of a laborer earning 25 shillings a week, who,
on account of injury, was totally incapacitated for work for twenty-
six weeks, and then for ten weeks could not earn more than ten
shillings a week, and was not likely to get into full work for
another twenty weeks. The proper measure of damages would be
in that case 25 shillings a week twenty-six weeks, plus 15
shillings a week for the ten and twenty weeks, and damages for
bodily suffering and medical expenses. Damages for bodily
suffering, of course, are not, for reasons stated above, applicable
to this jurisdiction; otherwise we believe this example to be the
ideal compensation for loss of profits which courts should strike to
reach, in cases like the present.
In Joslin vs. Grand Rapids Ice and Coal Co. (53 Mich., 322), the
court said: "The plaintiff, in making proof of his damages, offered
testimony to the effect that he was an attorney at law of ability
and in good standing, and the extent and value of his practice,
and that, in substance, the injury had rendered him incapable of
pursuing his profession. This was objected to as irrelevant,
immaterial and incompetent. We think this was competent. It was
within the declaration that his standing in his profession was
such as to command respect, and was proper to be shown, and
his ability to earn, and the extent of his practice, were a portion of
the loss he had sustained by the injury complained of. There was
no error in permitting this proof, and we further think it was
competent, upon the question of damages under the evidence in
this case, for the plaintiff to show, by Judge Hoyt, as was done,
that an interruption in his legal business and practice for eight
months was a damage to him. It seems to have been a part of the
legitimate consequences of the plaintiff's injury."
In Luck vs. City of Ripon (52 Wis., 196), plaintiff was allowed to
prevent that she was a midwife and show the extent of her
earnings prior to the accident in order to establish the damage
done to her business.
The pioneer case of Gobel vs. Hough (26 Minn., 252) contains
perhaps one of the clearest statements of the rule and is generally
considered as one of the leading cases on this subject. In that case
the court said:
When a regular and established business, the value of
which may be ascertained, has been wrongfully
interrupted, the true general rule for compensating the
party injured is to ascertain how much less valuable the
business was by reason of the interruption, and allow
that as damages. This gives him only what the wrongful
act deprived him of. The value of such a business
depends mainly on the ordinary profits derived from it.
Such value cannot be ascertained without showing what
the usual profits are; nor are the ordinary profits incident
to such a business contingent or speculative, in the
sense that excludes profits from consideration as an
element of damages. What they would have been, in the
ordinary course of the business, for a period during
which it was interrupted, may be shown with reasonable
certainty. What effect extraordinary circumstances would
have had upon the business might be contingent and
conjectural, and any profits anticipated from such cause
would be obnoxious to the objection that they are merely
speculative; but a history of the business, for a
reasonable time prior to a period of interruption, would
enable the jury to determine how much would be done
under ordinary circumstances, and in the usual course,
during the given period; and the usual rate of profit being
shown, of course the aggregate becomes only a matter of
calculation.
In the very recent case of Wellington vs. Spencer (Okla., 132 S. W.,
675), plaintiff had rented a building from the defendant and used
it as a hotel. Defendant sued out a wrongful writ of attachment
upon the equipment of the plaintiff, which caused him to abandon
his hotel business. After remarking that the earlier cases held that
no recovery could be had for prospective profits, but that the later
authorities have held that such damages may be allowed when the
amount is capable of proof, the court had the following to say:
Where the plaintiff has just made his arrangements to
begin business, and he is prevented from beginning
either by tort or a breach of contract, or where the injury
is to a particular subject matter, profits of which are
uncertain, evidence as to expected profits must be
excluded from the jury because of the uncertainty. There
is as much reason to believe that there will be no profits
as to believe that there will be no profits, but no such
argument can be made against proving a usual profit of
an established business. In this case the plaintiff,
according to his testimony, had an established business,
and was earning a profit in the business, and had been
doing that for a sufficient length of time that evidence as
to prospective profits was not entirely speculative. Men
who have been engaged in business calculate with a
reasonable certainty the income from their business,
make their plans to live accordingly, and the value of
such business is not a matter of speculation as to
exclude evidence from the jury.
A good example of a business not established for which loss of
profits will be allowed may be found in the States vs. Durkin (65
Kan., 101). Plaintiffs formed a partnership, and entered the
plumbing business in the city of Topeka in April. In July of the
same year, they brought an action against a plumbers' association
on the ground that the latter had formed an unlawful combination
in restraint of trade and prevented them from securing supplies
for their business within a reasonable time. The court said:
In the present case the plaintiffs had only been in
business a short time — not so long that it can be said
that they had an established business. they had
contracted three jobs of plumbing, had finished two, and
lost money on both; not, however, because of any
misconduct or wrongful acts on the part of the
 defendants or either of them. They carried no stock in
trade, and their manner of doing business was to secure
a contract and then purchase the material necessary for
its completion. It is not shown that they had any means
or capital invested in the business other than their tools.
Neither of them had prior thereto managed or carried on
a similar business. Nor was it shown that they were
capable of so managing this business as to make it earn
a profit. There was little of that class of business being
done at the time, and little, if any, profit derived
therefrom. The plaintiffs' business lacked duration,
permanency, and recognition. It was an adventure, as
distinguished from an established business. Its profits
were speculative and remote, existing only in
anticipation. The law, with all its vigor and energy in its
effort to right or wrongs and damages for injuries
sustained, may not enter into a domain of speculation or
conjecture. In view of the character and condition of the
plaintiffs' business, the jury had not sufficient evidence
from which to ascertain profits.

Other cases which hold that the profits of an established business

may be considered in calculating the measure of damages for an
interruption of it are: Wilkinson vs. Dunbar (149 N. C., 20);
Kinney vs. Crocker (18 Wis., 80); Sachra vs. Manila (120 la., 562);
Kramer vs. City of Los Angeles (147 Cal., 668); Mugge vs. Erkman
(161 Ill. App., 180); Fredonia Gas Co. vs. Bailey 977 Kan., 296);
Morrow vs. Mo. Pac. R. Co. (140 Mo. App., 200); City of
Indianapolis vs. Gaston (58 Ind., 24); National Fibre
Board vs. Auburn Electric Light Co. (95 Me., 318); Sutherland on
Damages, sec. 70.

We have now outlined the principles which should govern the

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

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

Arellano, C.J. and Araullo, J., concur.

Carson, J., concurs i
G.R. No. L-23882             February 17, 1968
M. D. TRANSIT & TAXI CO., INC., petitioner,  "subsidiary liable for all damages caused by the negligence of its
vs.
COURT OF APPEALS and DAVID EPSTEIN, respondents.
CONCEPCION, C.J.:
          Appeal by certiorari from a decision of the Court of
Appeals.
          While crossing Taft Avenue extension, near its intersection
with Castro Street, Manila, passing by the pedestrian lane on
August 18, 1958, about 8:30 a.m., and as he was about to reach
the island in the middle of the road, David Epstein — hereinafter
referred to as plaintiff — was hit by a Pasay bound bus of the MD
Transit & Taxi Co., Inc. — hereinafter referred to as appellant —
driven by Dominador Sembrano, in consequence of which
plaintiff's left femur and right fibula were fractured, apart from
sustaining lacerations in the scalp, occipital region. Prosecuted for
serious physical injuries through reckless imprudence, the Court
of First Instance of Manila found Sembrano guilty thereof beyond
reasonable doubt and sentenced him to suffer the corresponding
penalty of imprisonment, 1 but, refrained from making any
pronouncement on his civil liability, plaintiff having reserved the
right to file a separate civil action for damages. Although, from the
decision of said court, Sembrano appealed to the Court of Appeals,
he, later, withdrew the appeal. As a consequence, said decision
became final and executory on May 5, 1961.
          Meanwhile, or on January 23, 1959, plaintiff had
commenced the present action for damages against Sembrano and
appellant herein. Sembrano was declared in default, whereas
appellant filed its answer alleging that it had exercised due
diligence in the selection of its employees and in supervising them
in the performance of their duties, and that the accident was due
to plaintiff's recklessness or negligence. After appropriate
proceedings, the Court of First Instance of Manila rendered a
decision, the dispositive part of which reads:
          WHEREFORE, judgment is hereby rendered
finding defendant, Dominador Sembrano, primarily liable
to plaintiff, David Epstein, for the damages sustained by
the latter, and hereby orders the former to pay the latter
the following:
(1) Actual damages in the amount of P3,161.10;
(2) Compensatory damages in the amount of P12,000.00;
(3) Moral damages in the amount of P5,000.00; and
(4) Counsel fees in the amount of P1,000.00; and
          Finding defendant MD Transit and Taxi Co., Inc.,
subsidiarily liable to plaintiff, David Epstein, in the
amounts above-indicated, in the event that defendant,
Dominador Sembrano, fails to pay the same or is
insolvent. Costs against defendants.
          On appeal, said decision was affirmed by the Court of
Appeals. Hence, this petition for review by certiorari, filed by
appellant.
          The main issue raised by the latter refers to the nature of
the present action, namely, whether the liability sought to be
enforced therein arises from a crime, as contended by the plaintiff,
or from a quasi-delict, as urged by appellant. The importance of
this issue is due to the fact that appellant's alleged diligence in the
selection of its employees and in exercising supervision over them
would be a good defense should the action be based upon a quasi-
delict, but not if predicated upon a liability springing from a crime.
The trial court and the appellate court rejected appellant's
pretense and sustained that of the plaintiff, and, we think,
correctly.
          Indeed, in his complaint, plaintiff premised his action
against herein appellant upon the allegation that the latter is
employee in the performance of his duties," and, accordingly,
prayed that Sembrano be ordered and, "upon his inability,"
appellant herein, to pay the damages claimed in said pleading. In
other words, plaintiff maintained that Sembrano
is primarily liable for said damages, and that appellant's liability
therefor is purely secondary, which is typical of the civil liability
arising from crimes, pursuant to articles 102 and 103 of the
Revised Penal Code. The effect of said allegation and subsequent
prayer upon the nature of the present action is illustrated by the
case of De Leon Brokerage v. Court of Appeals  2 in which the
allegations of the complaint were not clear on whether or not the
damages sued for resulted from a crime or from a quasi-delict. The
issue was resolved in favor of the latter alternative, in view of
the prayer in said pleading to the effect that the employer be
hold "solidarily" liable with his employee. In fact, solidarity is one
of the main characteristics of obligations arising from quasi-
delicts. 3
          Another circumstance militating in favor of plaintiff's
contention is the fact that, in the criminal action, he had reserved
the right to seek indemnity in a separate civil action. There can be
no doubt that the present action was filed in pursuance of said
reservation, which would have been unnecessary had plaintiff not
based his right of action upon Sembrano's criminal liability.
Further corroboration is supplied by the fact that the first piece of
evidence offered by plaintiff herein, at trial of this case in the court
of origin, was the decision of conviction rendered in the criminal
case against Sembrano.
          Contrary to appellant's pretense, the absence of allegations,
in plaintiff's complaint, about Sembrano's conviction in the
criminal case, and about his insolvency, does not impair the
theory of the plaintiff, for such allegations are not indispensable in
an action for damages sustained on account of a crime committed
by the employee. Indeed, the law authorizing the commencement
of a civil action based upon a liability arising from a crime,
even before the institution of the criminal action, 4 necessarily
implies that the rendition of a judgment of conviction in the latter
need not be alleged in the civil complaint.
          Neither is an allegation of insolvency of the employee
essential to an action to enforce the subsidiary liability of the
employer, particularly when both are sued in the same action —
as in the case at bar — to exact the primary liability of the
employee, and the subsidiary liability of the employer. To be sure,
the secondary nature of the latter's obligation necessarily
connotes that his properties may not be levied upon, in pursuance
of a writ of execution of the judgment declaring the existence of
both liabilities, as long and so long as the employer can point out
properties of the employee which may be levied upon in
satisfaction of said judgment. 5 Thus, the employee's solvency is
merely a matter of defense which may be availed of by the
employer.
          It is next urged that the lower courts erred in considering in
this case the judgment of conviction in the criminal case, in which
appellant was not a party, and in disregarding appellant's
evidence on the alleged diligence exercised in selecting its
employees and in supervising them in the discharge of their
duties. Though relevant in an action based upon a quasi-delict,
said diligence is, however, immaterial in the case at bar, the same
being predicated upon a liability arising from a crime. Moreover, it
is already settled that the judgment of conviction in the criminal
case against an employee is, not only admissible in evidence in
the civil case against the employer, but, also, conclusive upon his
subsidiary liability arising from the employee's criminal liability.
Thus in Miranda v. Malate Garage & Taxicab, Inc. 6 we held:
          It is true that an employer, strictly speaking is not
a party to the criminal case instituted against his
employee but in substance and in effect he is, considering
the subsidiary liability imposed upon him by law. It is his
concern, as well as of his employee, to see to it that his
 interest be protected in the criminal case by taking
virtual participation in the defense of his employee. He
cannot leave him to his own fate because his failure is
also his. And if because of his indifference or inaction the
employee is convicted and damages are awarded against
him he cannot later be heard to complain if brought to
court for the enforcement of his subsidiary liability that he
was not given his day in court. (Emphasis
supplied.)1äwphï1.ñët
          The language used in Martinez v. Barredo 7 was:
          The important question is whether a judgment of
conviction sentencing the defendant to pay an indemnity
is conclusive in an action against his employer for the
enforcement of the latter's subsidiary liability under
Articles 102 and 103 of the Revised Penal Code. The
appealed decision makes reference to two earlier
decisions of this Court, namely, City of Manila vs. Manila
Electric Co., 52 Phil., 586, holding that such judgment of
conviction is not admissible, and Arambulo vs. Manila
Electric Co., 55 Phil., 75, in effect holding that it
is merely prima facie evidence, and to the prevailing view
in the United States to the effect that the person
subsidiarily liable is bound by the judgment if the former
had notice of the criminal case and could have defended it
had he seen fit to do so, and that otherwise such
judgment is only prima facie evidence.
          After very careful reflection, we have arrived at the
opinion that the judgment of conviction, in the absence of
any collusion between the defendant and the offended
party, should bind the person subsidiarily liable. The
stigma of a criminal conviction surpasses in effect and
implications mere civil liability. Common sense dictates
that a finding of guilt in a criminal case in which proof
beyond reasonable doubt is necessary, should not be
nullified in a subsequent civil action requiring
only preponderance of evidence to support a judgment,
unless those who support the contrary rule should also
hold that an absolution in a civil case will operate to
automatically set aside the verdict against the defendant
in the criminal case. It is anomalous, to say the least, to
suppose that the driver, excelling "Dr. Jekyl and Mr.
Hyde", could be guilty of reckless negligence in so far as
his obligation to pay indemnity is concerned, and at the
same time could be free from blame when said
indemnity is sought to be collected from his employer,
although the right to the indemnity arose from and was
based on one and the same act of the driver.
          The employer cannot be said to have been
deprived of his day in court, because the situation before
us is not one wherein the employer is sued for
a primary liability under article 1903 of the Civil Code,
but one in which enforcement is sought of
a subsidiary civil liability incident to and dependent
upon his driver's criminal negligence which is a proper
issue to be tried and decided only in a criminal action.
In other words, the employer becomes ipso facto
subsidiarily liable upon his driver's conviction and upon
proof of the latter's insolvency, in the same way that
acquittal wipes out not only the employee's primary civil
liability but also his employer's subsidiary liability for
such criminal negligence. . . . (Emphasis supplied.)
          These views were reiterated in Nagrampa v.
Mulvaney 8 and Orsal v. Alisbo. 9
          Although conceding that the sum of P3,161 awarded as
actual damages "is not too excessive," appellant maintains that it
is "unreasonable and ought to be reduced." Actual damages is,
however, a question of fact, and the findings thereon of the Court
of Appeals, adopting those of the trial court, are conclusive upon
us.
          Appellant likewise impugns the awards to plaintiff of
P5,000 as moral damages, P12,000 as compensatory damages and
P1,000 as attorney's fees. In connection therewith, the Court of
Appeals, after quoting the findings of the court of origin on the
facts and circumstances justifying said awards, had the following
to say:
          Bearing in mind that in crimes, the defendant is
liable for all damages which are the natural and probable
consequences of the act or omission complained of,
including loss or impairment of earning capacity of the
offended party and injury to his business standing or
commercial credit as well as compensation for physical
pain and suffering and mental anguish, which was a gap
in our legal system, filled in by the new Civil Code, and
that attorney's fees are recoverable in a separate action
to recover civil liability arising from crime, and
considering that appellant has not adduced compelling
reasons to justify us in disturbing the abovementioned
findings of the lower court, by substituting ours for its
sound discretion, exercised in the light of the facts and
circumstances obtaining in this case as observed by it,
the said last three assigned errors of appellant are
likewise declared without sufficient merit.
          Upon a review of the record, we do not feel justified in
disturbing the conclusions reached by the appellate court and the
court of origin.
          It may not be amiss to note that "actual" damages and
"consequential damages" are dealt with in the Civil Code of the
Philippines under the same Chapter; 10 thereof that the two (2)
terms are thus used therein as equivalent to one another; and
that the decision appealed had characterized as "actual damages"
the expenses incurred by the plaintiff for his medical treatment
and as "compensatory damages" the earnings he failed to make
due to his consequent "inability to pursue his normal work or
occupation." Considering, however, that — in the language of
Article 2200 of said Code, which is part of the aforementioned
Chapter 2 — "indemnification for damages shall comprehend not
only the value of the loss suffered" — otherwise known as
"damnum emergens," and alluded to in said decision as "actual
damages" — "but also that of the profits which the obligee failed to
obtain" — or "lucrum cessans" or "compensatory damages,"
pursuant to the same decision the distinction therein made
appears to be inconsequential, insofar as the law and this case is
concerned.
          WHEREFORE, the decision appealed from is hereby
affirmed, with costs against appellant, MD Transit & Taxi Co., Inc.
It is so ordered.
G.R. No. 107518 October 8, 1998
PNOC SHIPPING AND TRANSPORT CORPORATION, petitioner, 
vs.
HONORABLE COURT OF APPEALS and MARIA EFIGENIA
FISHING CORPORATION, respondents.
ROMERO, J.:
A party is entitled to adequate compensation only for such
pecuniary loss actually suffered and duly proved. 1Indeed, basic is
the rule that to recover actual damages, the amount of loss must
not only be capable of proof but must actually be proven with a
reasonable degree of certainty, premised upon competent proof or
best evidence obtainable of the actual amount thereof. 2 The
claimant is duty-bound to point out specific facts that afford a
basis for measuring whatever compensatory damages are
borne.3 A court cannot merely rely on speculations, conjectures, or
guesswork as to the fact and amount of damages4 as well as
hearsay5or uncorroborated testimony whose truth is
suspect.6 Such are the jurisprudential precepts that the Court
now applies in resolving the instant petition.
The records disclose that in the early morning of September 21,
1977, the M/V Maria Efigenia XV, owned by private respondent
Maria Efigenia Fishing Corporation, was navigating the waters
near Fortune Island in Nasugbu, Batangas on its way to Navotas,
Metro Manila when it collided with the vessel Petroparcel which at
the time was owned by the Luzon Stevedoring Corporation (LSC).
After investigation was conducted by the Board of Marine Inquiry,
Philippine Coast Guard Commandant Simeon N. Alejandro
rendered a decision finding the Petroparcel at fault. Based on this
finding by the Board and after unsuccessful demands on
petitioner, 7 private respondent sued the LSC and
the Petroparcel captain, Edgardo Doruelo, before the then Court of
First Instance of Caloocan City, paying thereto the docket fee of
one thousand two hundred fifty-two pesos (P1,252.00) and the
legal research fee of two pesos (P2.00). 8 In particular, private
respondent prayed for an award of P692,680.00, allegedly
representing the value of the fishing nets, boat equipment and
cargoes of M/V Maria Efigenia XV, with interest at the legal rate
plus 25% thereof as attorney's fees. Meanwhile, during the
pendency of the case, petitioner PNOC Shipping and Transport
Corporation sought to be substituted in place of LSC as it had
already acquired ownership of the Petroparcel. 9
For its part, private respondent later sought the amendment of its
complaint on the ground that the original complaint failed to plead
for the recovery of the lost value of the hull of M/V Maria Efigenia
XV.  10Accordingly, in the amended complaint, private respondent
averred that M/V Maria Efigenia XV had an actual value of
P800,000.00 and that, after deducting the insurance payment of
P200,000.00, the amount of P600,000.00 should likewise be
claimed. The amended complaint also alleged that inflation
resulting from the devaluation of the Philippine peso had affected
the replacement value of the hull of the vessel, its equipment and
its lost cargoes, such that there should be a reasonable
determination thereof. Furthermore, on account of the sinking of
the vessel, private respondent supposedly incurred unrealized
profits and lost business opportunities that would thereafter be
proven. 11
Subsequently, the complaint was further amended to include
petitioner as a defendant 12 which the lower court granted in its
order of September 16,
1985. 13 After petitioner had filed its answer to the second
amended complaint, on February 5, 1987, the lower court issued
a pre-trial order 14 containing, among other things, a stipulations
of facts, to wit:
1. On 21 September 1977, while the fishing
boat "M/V MARIA EFIGENIA" owned by plaintiff
was navigating in the vicinity of Fortune Island
in Nasugbu, Batangas, on its way to Navotas,
Metro Manila, said fishing boat was hit by the
LSCO tanker "Petroparcel" causing the former to
sink.
2. The Board of Marine Inquiry conducted an
investigation of this marine accident and on 21
November 1978, the Commandant of the
Philippine Coast Guard, the Honorable Simeon
N. Alejandro, rendered a decision finding the
cause of the accident to be the reckless and
imprudent manner in which Edgardo Doruelo
navigated the LSCO "Petroparcel" and declared
the latter vessel at fault.
3. On 2 April 1978, defendant Luzon
Stevedoring Corporation (LUSTEVECO),
executed in favor of PNOC Shipping and
Transport Corporation a Deed of Transfer
involving several tankers, tugboats, barges and
pumping stations, among which was the LSCO
Petroparcel.
4. On the same date on 2 April 1979 (sic),
defendant PNOC STC again entered into an
Agreement of Transfer with co-defendant
Lusteveco whereby all the business properties
and other assets appertaining to the tanker and
bulk oil departments including the motor tanker
LSCO Petroparcel of defendant Lusteveco were
sold to PNOC STC.
5. The aforesaid agreement stipulates, among
others, that PNOC-STC assumes, without
qualifications, all obligations arising from and
by virtue of all rights it obtained over the LSCO
"Petroparcel".
6. On 6 July 1979, another agreement between
defendant LUSTEVECO and PNOC-STC was
executed wherein Board of Marine Inquiry Case
No. 332 (involving the sea accident of 21
September 1977) was specifically identified and
assumed by the latter.
7. On 23 June 1979, the decision of Board of
Marine Inquiry was affirmed by the Ministry of
National Defense, in its decision dismissing the
appeal of Capt. Edgardo Doruelo and Chief
mate Anthony Estenzo of LSCO "Petroparcel".
8. LSCO "Petroparcel" is presently owned and
operated by PNOC-STC and likewise Capt.
Edgardo Doruelo is still in their employ.
9. As a result of the sinking of M/V Maria
Efigenia caused by the reckless and imprudent
manner in which LSCO Petroparcel was
navigated by defendant Doruelo, plaintiff
suffered actual damages by the loss of its
fishing nets, boat equipments (sic) and cargoes,
which went down with the ship when it sank
the replacement value of which should be left to
the sound discretion of this Honorable Court.
After trial, the lower court 15 rendered on November 18, 1989 its
decision disposing of Civil Case No. C-9457 as follows:
WHEREFORE, and in view of the foregoing,
judgment is hereby rendered in favor of the
plaintiff and against the defendant PNOC
Shipping & Transport Corporation, to pay the
plaintiff:
a. The sum of P6,438,048.00
representing the value of the
fishing boat with interest
 from the date of the filing of
the complaint at the rate of
6% per annum;
b. The sum of P50,000.00 as
and for attorney's fees; and
c. The costs of suit.
The counterclaim is hereby DISMISSED for lack
of merit. Likewise, the case against defendant
Edgardo Doruelo is hereby DISMISSED, for lack
of jurisdiction.
SO ORDERED.
In arriving at the above disposition, the lower court cited the
evidence presented by private respondent consisting of the
testimony of its general manager and sole witness, Edilberto del
Rosario. Private respondent's witness testified that M/V Maria
Efigenia XV was owned by private respondent per Exhibit A, a
certificate of ownership issued by the Philippine Coast Guard
showing that M/V Maria Efigenia XV was a wooden motor boat
constructed in 1965 with 128.23 gross tonnage. According to him,
at the time the vessel sank, it was then carrying 1,060 tubs
(bañeras) of assorted fish the value of which was never recovered.
Also lost with the vessel were two cummins engines (250
horsepower), radar, pathometer and compass. He further added
that with the loss of his flagship vessel in his fishing fleet of
fourteen (14) vessels, he was constrained to hire the services of
counsel whom he paid P10,000 to handle the case at the Board of
Marine Inquiry and P50,000.00 for commencing suit for damages
in the lower court.
As to the award of P6,438,048.00 in actual damages, the lower
court took into account the following pieces of documentary
evidence that private respondent proffered during trial:
(a) Exhibit A — certified xerox copy of the certificate of
ownership of M/V Maria Efigenia XV;
(b) Exhibit B — a document titled "Marine Protest"
executed by Delfin Villarosa, Jr. on September 22, 1977
stating that as a result of the collision, the M/V Maria
Efigenia XV sustained a hole at its left side that caused
it to sink with its cargo of 1,050 bañeras valued at
P170,000.00;
(c) Exhibit C — a quotation for the construction of a 95-
footer trawler issued by Isidoro A. Magalong of I. A.
Magalong Engineering and Construction on January
26, 1987 to Del Rosario showing that construction of
such trawler would cost P2,250,000.00;
(d) Exhibit D — pro forma invoice No. PSPI-05/87-NAV
issued by E.D. Daclan of Power Systems, Incorporated
on January 20, 1987 to Del Rosario showing that two
(2) units of CUMMINS Marine Engine model N855-M,
195 bhp. at 1800 rpm. would cost P1,160,000.00;
(e) Exhibit E — quotation of prices issued by Scan
Marine Inc. on January 20, 1987 to Del Rosario
showing that a unit of Furuno Compact Daylight
Radar, Model FR-604D, would cost P100,000.00 while
a unit of Furuno Color Video Sounder, Model FCV-501
would cost P45,000.00 so that the two units would cost
P145,000.00;
(f) Exhibit F — quotation of prices issued by Seafgear
Sales, Inc. on January 21, 1987 to Del Rosario showing
that two (2) rolls of nylon rope (5" cir. X 300fl.) would
cost P140,000.00; two (2) rolls of nylon rope (3" cir. X
240fl.), P42,750.00; one (1) binocular (7 x 50),
P1,400.00, one (1) compass (6"), P4,000.00 and 50 pcs.
of floats, P9,000.00 or a total of P197,150.00;
(g) Exhibit G — retainer agreement between Del Rosario
and F. Sumulong Associates Law Offices stipulating an
acceptance fee of P5,000.00, per appearance fee of
P400.00, monthly retainer of P500.00, contingent fee of
20% of the total amount recovered and that attorney's
fee to be awarded by the court should be given to Del
Rosario; and
(h) Exhibit H — price quotation issued by Seafgear
Sales, Inc. dated April 10, 1987 to Del Rosario showing
the cost of poly nettings as: 50 rolls of 400/18 3kts.
100md x 100mtrs., P70,000.00; 50 rolls of 400/18
5kts. 100md x 100mtrs., P81,500.00; 50 rolls of
400/18 8kts. 100md x 100mtrs., P116,000.00, and 50
rolls of 400/18 10kts. 100md x 100mtrs., P146,500
and bañera (tub) at P65.00 per piece or a total of
P414,065.00.
The lower court held that the prevailing replacement value of
P6,438,048.00 of the fishing boat and all its equipment would
regularly increase at 30% every year from the date the quotations
were given.
On the other hand, the lower court noted that petitioner only
presented Lorenzo Lazaro, senior estimator at PNOC Dockyard &
Engineering Corporation, as sole witness and it did not bother at
all to offer any documentary evidence to support its position.
Lazaro testified that the price quotations submitted by private
respondent were "excessive" and that as an expert witness, he
used the quotations of his suppliers in making his estimates.
However, he failed to present such quotations of prices from his
suppliers, saying that he could not produce a breakdown of the
costs of his estimates as it was "a sort of secret scheme." For this
reason, the lower court concluded:
Evidently, the quotation of prices submitted by
the plaintiff relative to the replacement value of
the fishing boat and its equipments in the tune
of P6,438,048.00 which were lost due to the
recklessness and imprudence of the herein
defendants were not rebutted by the latter with
sufficient evidence. The defendants through
their sole witness Lorenzo Lazaro relied heavily
on said witness' bare claim that the amount
afore-said is excessive or bloated, but they did
not bother at all to present any documentary
evidence to substantiate such claim. Evidence
to be believed must not only proceed from the
mouth of the credible witness, but it must be
credible in itself. (Vda. de Bonifacio vs. B. L. T.
Bus Co., Inc. L-26810, August 31, 1970).
Aggrieved, petitioner filed a motion for the reconsideration of the
lower court's decision contending that: (1) the lower court erred in
holding it liable for damages; that the lower court did not acquire
jurisdiction over the case by paying only P1,252.00 as docket fee;
(2) assuming that plaintiff was entitled to damages, the lower
court erred in awarding an amount greater than that prayed for in
the second amended complaint; and (3) the lower court erred
when it failed to resolve the issues it had raised in its
memorandum. 16Petitioner likewise filed a supplemental motion for
reconsideration expounding on whether the lower court acquired
jurisdiction over the subject matter of the case despite therein
plaintiff's failure to pay the prescribed docket fee. 17
On January 25, 1990, the lower court declined reconsideration for
lack of merit. 18 Apparently not having received the order denying
its motion for reconsideration, petitioner still filed a motion for
leave to file a reply to private respondent's opposition to said
motion. 19 Hence, on February 12, 1990, the lower court denied
said motion for leave to file a reply on the ground that by the
issuance of the order of January 25, 1990, said motion had
become moot and academic. 20
Unsatisfied with the lower court's decision, petitioner elevated the
matter to the Court of Appeals which, however, affirmed the
same in toto on October 14, 1992. 21 On petitioner's assertion that
the award of P6,438,048.00 was not convincingly proved by
competent and admissible evidence, the Court of Appeals ruled
that it was not necessary to qualify Del Rosario as an expert
witness because as the owner of the lost vessel, "it was well within
his knowledge and competency to identify and determine the
equipment installed and the cargoes loaded" on the vessel.
Considering the documentary evidence presented as in the nature
of market reports or quotations, trade journals, trade circulars
and price lists, the Court of Appeals held, thus:
Consequently, until such time as the Supreme Court
categorically rules on the admissibility or inadmissibility of
this class of evidence, the reception of these documentary
exhibits (price quotations) as evidence rests on the sound
discretion of the trial court. In fact, where the lower court
is confronted with evidence which appears to be of doubtful
admissibility, the judge should declare in favor of
admissibility rather than of non-admissibility (The
Collector of Palakadhari, 124 [1899], p. 13, cited in
Francisco, Revised Rules of Court, Evidence, Volume VII,
Part I, 1990 Edition, p. 18). Trial courts are enjoined to
observe the strict enforcement of the rules of evidence
which crystallized through constant use and practice and
are very useful and effective aids in the search for truth
and for the effective administration of justice. But in
connection with evidence which may appear to be of
doubtful relevancy or incompetency or admissibility, it is the
safest policy to be liberal, not rejecting them on doubtful or
technical grounds, but admitting them unless plainly
irrelevant, immaterial or incompetent, for the reason that
their rejection places them beyond the consideration of the
court. If they are thereafter found relevant or competent,
can easily be remedied by completely discarding or ignoring
them. (Banaria vs. Banaria, et al., C.A. No. 4142, May 31,
1950; cited in Francisco, Supra). [Emphasis supplied].
Stressing that the alleged inadmissible documentary exhibits were
never satisfactorily rebutted by appellant's own sole witness in the
person of Lorenzo Lazaro, the appellate court found that petitioner
ironically situated itself in an "inconsistent posture by the fact
that its own witness, admittedly an expert one, heavily relies on
the very same pieces of evidence (price quotations) appellant has
so vigorously objected to as inadmissible evidence." Hence, it
concluded:
. . . The amount of P6,438,048.00 was duly
established at the trial on the basis of appellee's
documentary exhibits (price quotations) which
stood uncontroverted, and which already
included the amount by way of adjustment as
prayed for in the amended complaint. There was
therefore no need for appellee to amend the
second amended complaint in so far as to the
claim for damages is concerned to conform with
the evidence presented at the trial. The amount
of P6,438,048.00 awarded is clearly within the
relief prayed for in appellee's second amended
complaint.
On the issue of lack of jurisdiction, the respondent court held that
following the ruling in Sun Insurance Ltd. v. Asuncion, 22 the
additional docket fee that may later on be declared as still owing
the court may be enforced as a lien on the judgment.
Hence, the instant recourse.
In assailing the Court of Appeals' decision, petitioner posits the
view that the award of P6,438,048 as actual damages should have
been in light of these considerations, namely: (1) the trial court did
not base such award on the actual value of the vessel and its
equipment at the time of loss in 1977; (2) there was no evidence
on extraordinary inflation that would warrant an adjustment of
the replacement cost of the lost vessel, equipment and cargo; (3)
the value of the lost cargo and the prices quoted in respondent's
documentary evidence only amount to P4,336,215.00; (4) private
respondent's failure to adduce evidence to support its claim for
unrealized profit and business opportunities; and (5) private
respondent's failure to prove the extent and actual value of
damages sustained as a result of the 1977 collision of the
vessels. 23
Under Article 2199 of the Civil Code, actual or compensatory
damages are those awarded in satisfaction of, or in recompense
for, loss or injury sustained. They proceed from a sense of natural
justice and are designed to repair the wrong that has been done,
to compensate for the injury inflicted and not to impose a
penalty. 24 In actions based on torts or quasi-delicts, actual
damages include all the natural and probable consequences of the
act or omission complained of. 25 There are two kinds of actual or
compensatory damages: one is the loss of what a person already
possesses (daño emergente), and the other is the failure to receive
as a benefit that which would have pertained to him (lucro
cesante). 26 Thus:
Where goods are destroyed by the wrongful act
of the defendant the plaintiff is entitled to
their value at the time of destruction, that is,
normally, the sum of money which he would
have to pay in the market for identical or
essentially similar goods, plus in a proper case
damages for the loss of use during the period
before replacement. In other words, in the case
of profit-earning chattels, what has to be
assessed is the value of the chattel to its owner
as a going concern at the time and place of the
loss, and this means, at least in the case of
ships, that regard must be had to existing and
pending engagements, . . .
. . . . If the market value of the ship reflects the
fact that it is in any case virtually certain of
profitable employment, then nothing can be
added to that value in respect of charters
actually lost, for to do so would be pro tanto to
compensate the plaintiff twice over. On the
other hand, if the ship is valued without
reference to its actual future engagements and
only in the light of its profit-earning potentiality,
then it may be necessary to add to the value
thus assessed the anticipated profit on a
charter or other engagement which it was
unable to fulfill. What the court has to ascertain
in each case is the "capitalised value of the
vessel as a profit-earning machine not in the
abstract but in view of the actual
circumstances," without, of course, taking into
account considerations which were too remote
at the time of the loss. 27 [Emphasis supplied].
As stated at the outset, to enable an injured party to recover
actual or compensatory damages, he is required to prove the
actual amount of loss with reasonable degree of certainty
premised upon competent proof and on the best evidence
available. 28 The burden of proof is on the party who would be
defeated if no evidence would be presented on either side. He must
establish his case by a preponderance of evidence which means
that the evidence, as a whole, adduced by one side is superior to
that of the other. 29 In other words, damages cannot be presumed
and courts, in making an award must point out specific facts that
could afford a basis for measuring whatever compensatory or
actual damages are borne. 30
In this case, actual damages were proven through the sole
testimony of private respondent's general manager and certain
pieces of documentary evidence. Except for Exhibit B where the
value of the 1,050 bañeras of fish were pegged at their September
1977 value when the collision happened, the pieces of
documentary evidence proffered by private respondent with
respect to items and equipment lost show similar items and
equipment with corresponding prices in early 1987 or
approximately ten (10) years after the collision. Noticeably,
petitioner did not object to the exhibits in terms of the time index
for valuation of the lost goods and equipment. In objecting to the
same pieces of evidence, petitioner commented that these were not
duly authenticated and that the witness (Del Rosario) did not have
personal knowledge on the contents of the writings and neither
was he an expert on the subjects thereof. 31 Clearly ignoring
petitioner's objections to the exhibits, the lower court admitted
these pieces of evidence and gave them due weight to arrive at the
award of P6,438,048.00 as actual damages.
The exhibits were presented ostensibly in the course of Del
Rosario's testimony. Private respondent did not present any other
witnesses especially those whose signatures appear in the price
quotations that became the bases of the award. We hold, however,
that the price quotations are ordinary private writings which
under the Revised Rules of Court should have been proffered
along with the testimony of the authors thereof. Del Rosario could
not have testified on the veracity of the contents of the writings
even though he was the seasoned owner of a fishing fleet because
he was not the one who issued the price quotations. Section 36,
Rule 130 of the Revised Rules of Court provides that a witness can
testify only to those facts that he knows of his personal
knowledge.
For this reason, Del Rosario's claim that private respondent
incurred losses in the total amount of P6,438,048.00 should be
admitted with extreme caution considering that, because it was a
bare assertion, it should be supported by independent evidence.
Moreover, because he was the owner of private respondent
corporation 32 whatever testimony he would give with regard to the
value of the lost vessel, its equipment and cargoes should be
viewed in the light of his self-interest therein. We agree with the
Court of Appeals that his testimony as to the equipment installed
and the cargoes loaded on the vessel should be given
credence 33 considering his familiarity thereto. However, we do not
subscribe to the conclusion that his valuation of such equipment,
cargo and the vessel itself should be accepted as gospel
truth. 34 We must, therefore, examine the documentary evidence
presented to support Del Rosario's claim as regards the amount of
losses.
The price quotations presented as exhibits partake of the nature of
hearsay evidence considering that the persons who issued them
were not presented as witnesses. 35 Any evidence, whether oral or
documentary, is hearsay if its probative value is not based on the
personal knowledge of the witness but on the knowledge of
another person who is not on the witness stand. Hearsay
evidence, whether objected to or not, has no probative value
unless the proponent can show that the evidence falls within the
exceptions to the hearsay evidence rule. 36 On this point, we
believe that the exhibits do not fall under any of the exceptions
provided under Sections 37 to 47 of Rule 130. 37
It is true that one of the exceptions to the hearsay rule pertains to
"commercial lists and the like" under Section 45, Rule 130 of the
Revised Rules on Evidence. In this respect, the Court of Appeals
considered private respondent's exhibits as "commercial lists." It
added, however, that these exhibits should be admitted in
evidence "until such time as the Supreme Court categorically rules
on the admissibility or inadmissibility of this class of evidence"
because "the reception of these documentary exhibits (price
quotations) as evidence rests on the sound discretion of the trial
court." 38 Reference to Section 45, Rule 130, however, would show
that the conclusion of the Court of Appeals on the matter was
arbitrarily arrived at. This rule states:
Commercial lists and the like. — Evidence of
statements of matters of interest to persons
engaged in an occupation contained in a list,
register, periodical, or other published
compilation is admissible as tending to prove
the truth of any relevant matter so stated if that
compilation is published for use by persons
engaged in that occupation and is generally
used and relied upon by them there.
Under Section 45 of the aforesaid Rule, a document is a
commercial list if: (1) it is a statement of matters of interest to
persons engaged in an occupation; (2) such statement is contained
in a list, register, periodical or other published compilation; (3)
said compilation is published for the use of persons engaged in
that occupation, and (4) it is generally used and relied upon by
persons in the same occupation.
Based on the above requisites, it is our considered view that
Exhibits B, C, D, E, F and H 39 are not "commercial lists" for these
do not belong to the category of "other published compilations"
under Section 45 aforequoted. Under the principle of ejusdem
generis, "(w)here general words follow an enumeration of persons
or things, by words of a particular and specific meaning, such
general words are not to be construed in their widest extent, but
are to be held as applying only to persons or things of the same
kind or class as those specifically mentioned." 40 The exhibits
mentioned are mere price quotations issued personally to Del
Rosario who requested for them from dealers of equipment similar
to the ones lost at the collision of the two vessels. These are not
published in any list, register, periodical or other compilation on
the relevant subject matter. Neither are these "market reports or
quotations" within the purview of "commercial lists" as these are
not "standard handbooks or periodicals, containing data of
everyday professional need and relied upon in the work of the
occupation." 41 These are simply letters responding to the queries
of Del Rosario. Thus, take for example Exhibit D which reads:
January 20, 1987
PROFORMA INVOICE NO. PSPI-05/87-NAV
MARIA EFIGINIA FISHING CORPORATION
Navotas, Metro Manila
Attention: MR. EDDIE DEL ROSARIO
Gentlemen:
In accordance to your request, we are pleated to
quote our Cummins Marine Engine, to wit.
Two (2) units CUMMINS Marine Engine model
N855-M, 195 bhp. at 1800 rpm., 6-cylinder in-line,
4-stroke cycle, natural aspirated, 5 1/2 in. x 6 in.
bore and stroke, 855 cu. In. displacement, keel-
cooled, electric starting coupled with Twin-Disc
Marine gearbox model MG-509, 4.5:1 reduction
ratio, includes oil cooler, companion flange, manual
and standard accessories as per attached sheet.
Price FOB Manila P580,000.00/unit
Total FOB Manila P1,160,000.00
TERMS : CASH
DELIVERY : 60-90 days from date of order.
VALIDITY : Subject to our final confirmation.
WARRANTY : One (1) full year against factory
defect.
Very truly yours,
 POWER SYSTEMS, INC.Sgd.)
E. D. Daclan
To be sure, letters and telegrams are admissible in evidence but
these are, however, subject to the general principles of evidence
and to various rules relating to documentary evidence. 42 Hence, in
one case, it was held that a letter from an automobile dealer
offering an allowance for an automobile upon purchase of a new
automobile after repairs had been completed, was not a "price
current" or "commercial list" within the statute which made such
items presumptive evidence of the value of the article specified
therein. The letter was not admissible in evidence as a
"commercial list" even though the clerk of the dealer testified that
he had written the letter in due course of business upon
instructions of the dealer. 43
But even on the theory that the Court of Appeals correctly ruled
on the admissibility of those letters or communications when it
held that unless "plainly irrelevant, immaterial or incompetent,"
evidence should better be admitted rather than rejected on
"doubtful or technical grounds," 44 the same pieces of evidence,
however, should not have been given probative weight. This is a
distinction we wish to point out. Admissibility of evidence refers to
the question of whether or not the circumstance (or evidence) is to
considered at all. 45 On the other hand, the probative value of
evidence refers to the question of whether or not it proves an
issue. 46 Thus, a letter may be offered in evidence and admitted as
such but its evidentiary weight depends upon the observance of
the rules on evidence. Accordingly, the author of the letter should
be presented as witness to provide the other party to the litigation
the opportunity to question him on the contents of the letter.
Being mere hearsay evidence, failure to present the author of the
letter renders its contents suspect. As earlier stated, hearsay
evidence, whether objected to or not, has no probative value.
Thus:
The courts differ as to the weight to be given to
hearsay evidence admitted without objection.
Some hold that when hearsay has been
admitted without objection, the same may be
considered as any other properly admitted
testimony. Others maintain that it is entitled to
no more consideration than if it had been
excluded.
The rule prevailing in this jurisdiction is the
latter one. Our Supreme Court held that
although the question of admissibility of
evidence can not be raised for the first time on
appeal, yet if the evidence is hearsay it has no
probative value and should be disregarded
whether objected to or not. "If no objection is
made" — quoting Jones on Evidence — "it
(hearsay) becomes evidence by reason of the
want of such objection even though its
admission does not confer upon it any new
attribute in point of weight. Its nature and
quality remain the same, so far as its intrinsic
weakness and incompetency to satisfy the mind
are concerned, and as opposed to direct primary
evidence, the latter always prevails.
The failure of the defense counsel to object to
the presentation of incompetent evidence, like
hearsay evidence or evidence that violates the
rules of res inter alios acta, or his failure to ask
for the striking out of the same does not give
such evidence any probative value. But
admissibility of evidence should not be equated
with weight of evidence. Hearsay evidence
whether objected to or not has no probative
value. 47
Accordingly, as stated at the outset, damages may not be awarded
on the basis of hearsay evidence. 48
Nonetheless, the non-admissibility of said exhibits does not mean
that it totally deprives private respondent of any redress for the
loss of its vessel. This is because in Lufthansa German Airlines v.
Court of Appeals, 49 the Court said:
In the absence of competent proof on the actual
damage suffered, private respondent is "entitled
to nominal damages which, as the law says, is
adjudicated in order that a right of the plaintiff,
which has been violated or invaded by
defendant, may be vindicated and recognized,
and not for the purpose of indemnifying the
plaintiff for any loss suffered." [Emphasis
supplied].
Nominal damages are awarded in every obligation arising from
law, contracts, quasi-contracts, acts or omissions punished by
law, and quasi-delicts, or in every case where property right has
been invaded. 50Under Article 2223 of the Civil Code, "(t)he
adjudication of nominal damages shall preclude further contest
upon the right involved and all accessory questions, as between
the parties to the suit, or their respective heirs and assigns."
Actually, nominal damages are damages in name only and not in
fact. Where these are allowed, they are not treated as an
equivalent of a wrong inflicted but simply in recognition of the
existence of a technical injury. 51 However, the amount to be
awarded as nominal damages shall be equal or at least
commensurate to the injury sustained by private respondent
considering the concept and purpose of such damages. 52 The
amount of nominal damages to be awarded may also depend on
certain special reasons extant in the case. 53
Applying now such principles to the instant case, we have on
record the fact that petitioner's vessel Petroparcel was at fault as
well as private respondent's complaint claiming the amount of
P692,680.00 representing the fishing nets, boat equipment and
cargoes that sunk with the M/V Maria Efigenia XV. In its amended
complaint, private respondent alleged that the vessel had an
actual value of P800,000.00 but it had been paid insurance in the
amount of P200,000.00 and, therefore, it claimed only the amount
of P600,000.00. Ordinarily, the receipt of insurance payments
should diminish the total value of the vessel quoted by private
respondent in his complaint considering that such payment is
causally related to the loss for which it claimed compensation.
This Court believes that such allegations in the original and
amended complaints can be the basis for determination of a fair
amount of nominal damages inasmuch as a complaint alleges the
ultimate facts constituting the plaintiffs cause of
action. 54 Private respondent should be bound by its allegations on
the amount of its claims.
With respect to petitioner's contention that the lower court did not
acquire jurisdiction over the amended complaint increasing the
amount of damages claimed to P600,000.00, we agree with the
Court of Appeals that the lower court acquired jurisdiction over
the case when private respondent paid the docket fee
corresponding to its claim in its original complaint. Its failure to
pay the docket fee corresponding to its increased claim for
damages under the amended complaint should not be considered
as having curtailed the lower court's jurisdiction. Pursuant to the
ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 55 the
unpaid docket fee should be considered as a lien on the judgment
even though private respondent specified the amount of
P600,000.00 as its claim for damages in its amended complaint.
Moreover, we note that petitioner did not question at all the
jurisdiction of the lower court on the ground of insufficient docket
fees in its answers to both the amended complaint and the second
amended complaint. It did so only in its motion for reconsideration
of the decision of the lower court after it had received an adverse
decision. As this Court held in Pantranco North Express, Inc. v.
Court of Appeals, 56 participation in all stages of the case before
the trial court, that included invoking its authority in asking for
affirmative relief, effectively barred petitioner by estoppel from
challenging the court's jurisdiction. Notably, from the time it filed
its answer to the second amended complaint on April 16,
1985, 57 petitioner did not question the lower court's jurisdiction.
It was only on December 29, 1989 58 when it filed its motion for
reconsideration of the lower court's decision that petitioner raised
the question of the lower court's lack of jurisdiction. Petitioner
thus foreclosed its right to raise the issue of jurisdiction by its own
inaction.

WHEREFORE, the challenged decision of the Court of Appeals

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

No pronouncement as to costs.

SO ORDERED.
G.R. No. 172122              June 22, 2007
MERCURY DRUG CORPORATION and ROLANDO J. DEL
ROSARIO, petitioners, 
vs.
SPOUSES RICHARD HUANG and CARMEN HUANG, and
STEPHEN HUANG, respondents.
DECISION
PUNO, C.J.:
On appeal are the Decision1 and Resolution2 of the Court of
Appeals in CA-G.R. CV No. 83981, dated February 16, 2006 and
March 30, 2006, respectively which affirmed with modification the
Decision3 of the Regional Trial Court (RTC) of Makati City, dated
September 29, 2004. The trial court found petitioners jointly and
severally liable to pay respondents damages for the injuries
sustained by respondent Stephen Huang, son of respondent
spouses Richard and Carmen Huang.
First, the facts:
Petitioner Mercury Drug Corporation (Mercury Drug) is the
registered owner of a six-wheeler 1990 Mitsubishi Truck with plate
number PRE 641 (truck). It has in its employ petitioner Rolando J.
del Rosario as driver. Respondent spouses Richard and Carmen
Huang are the parents of respondent Stephen Huang and own the
red 1991 Toyota Corolla GLI Sedan with plate number PTT 775
(car).
These two vehicles figured in a road accident on December 20,
1996 at around 10:30 p.m. within the municipality of Taguig,
Metro Manila. Respondent Stephen Huang was driving the car,
weighing 1,450 kg., while petitioner Del Rosario was driving the
truck, weighing 14,058 kg. Both were traversing the C-5 Highway,
north bound, coming from the general direction of Alabang going
to Pasig City. The car was on the left innermost lane while the
truck was on the next lane to its right, when the truck suddenly
swerved to its left and slammed into the front right side of the car.
The collision hurled the car over the island where it hit a
lamppost, spun around and landed on the opposite lane. The
truck also hit a lamppost, ran over the car and zigzagged towards,
and finally stopped in front of Buellah Land Church.
At the time of the accident, petitioner Del Rosario only had a
Traffic Violation Receipt (TVR). His driver’s license had been
confiscated because he had been previously apprehended for
reckless driving.
The car, valued at ₱300,000.00, was a total wreck. Respondent
Stephen Huang sustained massive injuries to his spinal cord,
head, face, and lung. Despite a series of operations, respondent
Stephen Huang is paralyzed for life from his chest down and
requires continuous medical and rehabilitation treatment.
Respondents fault petitioner Del Rosario for committing gross
negligence and reckless imprudence while driving, and petitioner
Mercury Drug for failing to exercise the diligence of a good father
of a family in the selection and supervision of its driver.
In contrast, petitioners allege that the immediate and proximate
cause of the accident was respondent Stephen Huang’s
recklessness. According to petitioner Del Rosario, he was driving
on the left innermost lane when the car bumped the truck’s front
right tire. The truck then swerved to the left, smashed into an
electric post, crossed the center island, and stopped on the other
side of the highway. The car likewise crossed over the center
island and landed on the same portion of C-5. Further, petitioner
Mercury Drug claims that it exercised due diligence of a good
father of a family in the selection and supervision of all its
employees.
The trial court, in its Decision dated September 29, 2004, found
petitioners Mercury Drug and Del Rosario jointly and severally
liable to pay respondents actual, compensatory, moral and
exemplary damages, attorney’s fees, and litigation expenses. The
dispositive portion reads:
WHEREFORE, judgment is rendered finding defendants Mercury
Drug Corporation, Inc. and Rolando del Rosario, jointly and
severally liable to pay plaintiffs Spouses Richard Y. Huang and
Carmen G. Huang, and Stephen Huang the following amounts:
1. Two Million Nine Hundred Seventy Three Thousand Pesos
(₱2,973,000.00) actual damages;
2. As compensatory damages:
a. Twenty Three Million Four Hundred Sixty One Thousand, and
Sixty-Two Pesos (₱23,461,062.00) for life care cost of Stephen;
b. Ten Million Pesos (₱10,000,000.00) as and for lost or impaired
earning capacity of Stephen;
3. Four Million Pesos (₱4,000,000.00) as moral damages;
4. Two Million Pesos (₱2,000,000.00) as exemplary damages; and
5. One Million Pesos (₱1,000,000.00) as attorneys fees and
litigation expense.4
On February 16, 2006, the Court of Appeals affirmed the decision
of the trial court but reduced the award of moral damages to
₱1,000,000.00. The appellate court also denied the motion for
reconsideration filed by petitioners.
Hence, this appeal.
Petitioners cite the following grounds for their appeal:
1. That the subject Decision which dismissed the appeal of
petitioners herein but AFFIRMED WITH MODIFICATION the
decision of the Regional Trial Court, Branch 64, Makati City, in
that the award of moral damages was reduced to ₱1,000,000.00
and its Resolution dated March 30, 2006, which dismissed
outright the Motion for Reconsideration must be set aside because
the Honorable Court of Appeals committed reversible error:
A. IN DENYING OUTRIGHTLY THE MOTION FOR
RECONSIDERATION ON ALLEGEDLY BEING FILED OUT OF
TIME FOR ONE DAY;
B. IN ACCORDING GREATER WEIGHT TO THE EVIDENCE
ADDUCED BY THE RESPONDENTS HEREIN AND COMPLETELY
DISREGARDING THE DEFENSE INTERPOSED BY THE
PETITIONERS HEREIN;
C. IN DISREGARDING COMPLETELY ALL EVIDENCES
PRESENTED BY THE PETITIONERS HEREIN AND PROCEEDED
TO RENDER ITS DECISION BASED ON PRESUMPTIONS AND
PERSONAL OPINIONS OF PEOPLE WHO ARE NOT WITNESSES
TO THE ACCIDENT;
D. IN AWARDING DAMAGES IN FAVOR OF RESPONDENTS
HEREIN;
E. IN FINDING THAT MERCURY DRUG CORPORATION FAILED
TO EXERCISE THE DILIGENCE REQUIRED IN SUPERVISING ITS
EMPLOYEES DESPITE OVERWHELMING EVIDENCE
PRESENTED BY PETITIONER COMPANY;
F. IN FINDING THAT PETITIONER ROLANDO DEL ROSARIO WAS
NEGLIGENT IN DRIVING THE TRUCK AT THE TIME OF
ACCIDENT AND TOTALLY DISREGARDING THE EVIDENCES
PRESENTED DURING THE TRIAL OF THE CASE.
G. IN PRESENTING ONLY IN THE DECISION TESTIMONIES
FAVORABLE TO THE RESPONDENTS HEREIN AND
COMPLETELY DISREGARDING THE EVIDENCES PRESENTED BY
THE PETITIONERS HEREIN WHICH CONTRADICTED SUCH ATTY. DIAZ:
TESTIMONIES NOT ONLY THROUGH ORAL TESTIMONIES BUT
AS WELL AS DOCUMENTARY EVIDENCES.5 Because as you said you lost control, correct sir?

We affirm the findings of the trial court and the appellate court WITNESS:
that petitioner Del Rosario was negligent. The evidence does not
support petitioners’ claim that at the time of the accident, the Yes, sir.
truck was at the left inner lane and that it was respondent
Stephen Huang’s car, at its right, which bumped the right front ATTY. DIAZ:
side of the truck. Firstly, petitioner Del Rosario could not precisely
tell which part of the truck was hit by the car, 6 despite the fact In other words, sir from the time your truck was hit according to
that the truck was snub-nosed and a lot higher than the car. you up to the time you rested on the shoulder, you traveled fifty
Petitioner Del Rosario could not also explain why the car landed meters?
on the opposite lane of C-5 which was on its left side. He said that
"the car did not pass in front of him after it hit him or under him WITNESS:
or over him or behind him."7 If the truck were really at the left lane
and the car were at its right, and the car hit the truck at its front Yes, sir, about that distance.
right side, the car would not have landed on the opposite side, but
would have been thrown to the right side of the C-5 Highway.
ATTY. DIAZ:
Noteworthy on this issue is the testimony of Dr. Marlon Rosendo
H. Daza, an expert in the field of physics. He conducted a study
And this was despite the fact that you were only traveling at the
based on the following assumptions provided by respondents:
speed of seventy five kilometers per hour, jumped over the island,
hit the lamppost, and traveled the three lanes of the opposite lane
1. Two vehicles collided;
of C-5 highway, is that what you want to impress upon this court?
2. One vehicle is ten times heavier, more massive than the other;
WITNESS:
3. Both vehicles were moving in the same direction and at the
Yes, sir.10
same speed of about 85 to 90 kilometers per hour;
We therefore find no cogent reason to disturb the findings of the
4. The heavier vehicle was driving at the innermost left lane, while
RTC and the Court of Appeals. The evidence proves petitioner Del
the lighter vehicle was at its right.
Rosario’s negligence as the direct and proximate cause of the
injuries suffered by respondent Stephen Huang. Petitioner Del
Dr. Daza testified that given the foregoing assumptions, if the Rosario failed to do what a reasonable and prudent man would
lighter vehicle hits the right front portion of the heavier vehicle, have done under the circumstances.
the general direction of the light vehicle after the impact would be
to the right side of the heavy vehicle, not the other way around.
We now come to the liability of petitioner Mercury Drug as
The truck, he opined, is more difficult to move as it is heavier. It is
employer of Del Rosario. Articles 2176 and 2180 of the Civil Code
the car, the lighter vehicle, which would move to the right of, and
provide:
away from the truck. Thus, there is very little chance that the car
will move towards the opposite side, i.e., to the left of the truck.
Art. 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage
Dr. Daza also gave a further study on the basis of the same
done. Such fault or negligence, if there is no pre-existing
assumptions except that the car is on the left side of the truck, in
contractual relation between the parties, is called a quasi-delict
accordance with the testimony of respondent Stephen Huang. Dr.
and is governed by the provisions of this Chapter.
Daza concluded that the general direction of the car after impact
would be to the left of the truck. In this situation, the middle
Art. 2180. The obligation imposed by article 2176 is demandable
island against which the car was pinned would slow down the car,
not only for one’s own acts or omissions, but also for those of
and enable the truck to catch up and hit the car again, before
persons for whom one is responsible.
running over it.8
xxx
To support their thesis, petitioners tried to show the damages that
the truck sustained at its front right side. The attempt does not
The owners and managers of an establishment or enterprise are
impress. The photographs presented were taken a month after the
likewise responsible for damages caused by their employees in the
accident, and Rogelio Pantua, the automechanic who repaired the
service of the branches in which the latter are employed or on the
truck and authenticated the photographs, admitted that there
occasion of their functions.
were damages also on the left side of the truck. 9
xxx
Worse still, petitioner Del Rosario further admitted that after the
impact, he lost control of the truck and failed to apply his brakes.
Considering that the car was smaller and lighter than the six- The liability of the employer under Art. 2180 of the Civil Code is
wheeler truck, the impact allegedly caused by the car when it hit direct or immediate. It is not conditioned on a prior recourse
the truck could not possibly be so great to cause petitioner to lose against the negligent employee, or a prior showing of insolvency of
all control that he failed to even step on the brakes. He testified, such employee. It is also joint and solidary with the employee. 11
as follows:
To be relieved of liability, petitioner Mercury Drug should show
ATTY. DIAZ: that it exercised the diligence of a good father of a family, both in
the selection of the employee and in the supervision of the
performance of his duties. Thus, in the selection of its prospective
May I proceed, Your Honor. You were able to apply the brakes,
employees, the employer is required to examine them as to their
were you sir?
qualifications, experience, and service records. 12 With respect to
the supervision of its employees, the employer should formulate
WITNESS:
standard operating procedures, monitor their implementation, and
impose disciplinary measures for their breach. To establish
No more, sir, because I went over the island.
compliance with these requirements, employers must submit
concrete proof, including documentary evidence. 13
In the instant case, petitioner Mercury Drug presented testimonial
evidence on its hiring procedure. According to Mrs. Merlie Caamic,
the Recruitment and Training Manager of petitioner Mercury
Drug, applicants are required to take theoretical and actual
driving tests, and psychological examination. In the case of
petitioner Del Rosario, however, Mrs. Caamic admitted that he
took the driving tests and psychological examination when he
applied for the position of Delivery Man, but not when he applied
for the position of Truck Man. Mrs. Caamic also admitted that
petitioner Del Rosario used a Galant which is a light vehicle,
instead of a truck during the driving tests. Further, no tests were
conducted on the motor skills development, perceptual speed,
visual attention, depth visualization, eye and hand coordination
and steadiness of petitioner Del Rosario. No NBI and police
clearances were also presented. Lastly, petitioner Del Rosario
attended only three driving seminars – on June 30, 2001,
February 5, 2000 and July 7, 1984. In effect, the only seminar he
attended before the accident which occurred in 1996 was held
twelve years ago in 1984.
It also appears that petitioner Mercury Drug does not provide for a
back-up driver for long trips. At the time of the accident, petitioner
Del Rosario has been out on the road for more than thirteen
hours, without any alternate. Mrs. Caamic testified that she does
not know of any company policy requiring back-up drivers for long
trips.14
Petitioner Mercury Drug likewise failed to show that it exercised
due diligence on the supervision and discipline over its employees.
In fact, on the day of the accident, petitioner Del Rosario was
driving without a license. He was holding a TVR for reckless
driving. He testified that he reported the incident to his superior,
but nothing was done about it. He was not suspended or
reprimanded.15 No disciplinary action whatsoever was taken
against petitioner Del Rosario. We therefore affirm the finding that
petitioner Mercury Drug has failed to discharge its burden of
proving that it exercised due diligence in the selection and
supervision of its employee, petitioner Del Rosario.
We now consider the damages which respondents should recover
from the petitioners.
The trial court awarded the following amounts:
1. Two Million Nine Hundred Seventy-Three Thousand Pesos
(₱2,973,000.00) actual damages;
2. As compensatory damages:
a. Twenty-Three Million Four Hundred Sixty One Thousand, and
Sixty-Two Pesos (₱23,461,062.00) for life care cost of Stephen;
b. Ten Million Pesos (₱10,000,000.00) as and for lost or impaired
earning capacity of Stephen;
3. Four Million Pesos (₱4,000,000.00) as moral damages;
4. Two Million Pesos (₱2,000,000.00) as exemplary damages; and
5. One Million Pesos (₱1,000,000.00) as attorney’s fees and
litigation expense.
The Court of Appeals affirmed the decision of the trial court but
reduced the award of moral damages to ₱1,000,000.00.
With regard to actual damages, Art. 2199 of the Civil Code
provides that "[E]xcept as provided by law or by stipulation one is
entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved x x x." In the instant case,
we uphold the finding that the actual damages claimed by
respondents were supported by receipts. The amount of
₱2,973,000.00 represented cost of hospital expenses, medicines,
medical services and supplies, and nursing care services provided
respondent Stephen from December 20, 1996, the day of the
accident, until December 1998.
Petitioners are also liable for all damages which are the natural
and probable consequences of the act or omission complained
of.16 The doctors who attended to respondent Stephen are one in
their prognosis that his chances of walking again and performing
basic body functions are nil. For the rest of his life, he will need
continuous rehabilitation and therapy to prevent further
complications such as pneumonia, bladder and rectum 
infection, renal failure, sepsis and severe bed sores, osteoporosis
and fractures, and other spinal cord injury-related conditions. He
will be completely dependent on the care and support of his
family. We thus affirm the award of ₱23,461,062.00 for the life
care cost of respondent Stephen Huang, based on his average
monthly expense and the actuarial computation of the remaining
years that he is expected to live; and the conservative amount of
₱10,000,000.00, as reduced by the trial court, for the loss or
impairment of his earning capacity, 17 considering his age,
probable life expectancy, the state of his health, and his mental
and physical condition before the accident. He was only seventeen
years old, nearly six feet tall and weighed 175 pounds. He was in
fourth year high school, and a member of the school varsity
basketball team. He was also class president and editor-in-chief of
the school annual. He had shown very good leadership qualities.
He was looking forward to his college life, having just passed the
entrance examinations of the University of the Philippines, De La
Salle University, and the University of Asia and the Pacific. The
University of Sto. Tomas even offered him a chance to obtain an
athletic scholarship, but the accident prevented him from
attending the basketball try-outs. Without doubt, he was an
exceptional student. He excelled both in his academics and
extracurricular undertakings. He is intelligent and motivated, a
go-getter, as testified by Francisco Lopez, respondent Stephen
Huang’s godfather and a bank executive.18 Had the accident not
happened, he had a rosy future ahead of him. He wanted to
embark on a banking career, get married and raise children.
Taking into account his outstanding abilities, he would have
enjoyed a successful professional career in banking. But, as Mr.
Lopez stated, it is highly unlikely for someone like respondent to
ever secure a job in a bank. To his knowledge, no bank has ever
hired a person suffering with 
the kind of disability as Stephen Huang’s. 19
We likewise uphold the award of moral and exemplary damages
and attorney’s fees.
"The award of moral damages is aimed at a restoration, within the
limits of the possible, of the spiritual status quo ante." 20 Moral
damages are designed to compensate and alleviate in some way
the physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury unjustly caused a person.
Although incapable of pecuniary computation, they must be
proportionate to the suffering inflicted. 21 The amount of the award
bears no relation whatsoever with the wealth or means of the
offender.
In the instant case, respondent Stephen Huang and respondent
spouses Richard and Carmen Huang testified to the intense
suffering they continue to experience as a result of the accident.
Stephen recounted the nightmares and traumas he suffers almost
every night when he relives the accident. He also gets depression
when he thinks of his bleak future. He feels frustration and
embarrassment in needing to be helped with almost everything
and in his inability to do simple things he used to do. Similarly,
respondent spouses and the rest of the family undergo their own
private suffering. They live with the day-to-day uncertainty of
respondent Stephen Huang’s condition. They know that the
chance of full recovery is nil. Moreover, respondent Stephen
Huang’s paralysis has made him prone to many other illnesses.
His family, especially respondent spouses, have to make
themselves available for Stephen twenty-four hours a day. They
have patterned their daily life around taking care of him,
ministering to his daily needs, altering the lifestyle to which they
had been accustomed.
Respondent Carmen Huang’s brother testified on the insensitivity
of petitioner Mercury Drug towards the plight of respondent.
Stephen, viz.:

Maybe words cannot describe the anger that we feel towards the
defendants. All the time that we were going through the crisis,
there was none (sic) a single sign of nor offer of help, any
consolation or anything whatsoever. It is funny because, you
know, I have many colleagues, business associates, people even as
far as United States, Japan, that I probably met only once, when
they found out, they make a call, they sent card, they write small
notes, but from the defendant, absolute silence. They didn’t care,
and worst, you know, this is a company that have (sic) all the
resources to help us. They were (sic) on our part, it was doubly
painful because we have no choice but to go back to them and buy
the medicines that we need for Stephen. So, I don’t know how
someone will really have no sense of decency at all to at least find
out what happened to my son, what is his condition, or if there is
anything that they can do to help us.22

On the matter of exemplary damages, Art. 2231 of the Civil Code

provides that in cases of quasi-delicts, exemplary damages may be
granted if the defendant acted with gross negligence. The records
show that at the time of the accident, petitioner Del Rosario was
driving without a license because he was previously ticketed for
reckless driving. The evidence also shows that he failed to step on
his brakes immediately after the impact. Had petitioner Del
Rosario done so, the injuries which respondent Stephen sustained
could have been greatly reduced. Wanton acts such as that
committed by petitioner Del Rosario need be suppressed; and
employers like petitioner Mercury Drug should be more
circumspect in the observance of due diligence in the selection
and supervision of their employees. The award of exemplary
damages in favor of the respondents is therefore justified.

With the award of exemplary damages, we also affirm the grant of

attorney’s fees to respondents.23 In addition, attorney’s fees may
be granted when a party is compelled to litigate or incur expenses
to protect his interest by reason of an unjustified act of the other
party.24

Cost against petitioners.

IN VIEW THEREOF, the petition is DENIED. The Decision and

Resolution of the Court of Appeals dated February 16, 2006 and
March 30, 2006, respectively, in CA-G.R. CV No. 83981, are
AFFIRMED.

SO ORDERED.
GR L-25499 FEB, 18, 1970
VILLA REY TRANSIT INC. VS CA AND QUINTOS ET. AL
Petitioner, Villa Rey Transit, Inc., seeks the review by certiorari of
a decision of the Court of Appeals affirming that of the Court of
First Instance of Pangasinan. The basic facts are set forth in said
decision of the Court of Appeals, from which We quote:
At about 1:30 in the morning of March 17,
1960, an Izuzu First Class passenger bus
owned and operated by the defendant, bearing
Plate No. TPU-14871-Bulacan and driven by
Laureano Casim, left Lingayen, Pangasinan, for
Manila. Among its paying passengers was the
deceased, Policronio Quintos, Jr. who sat on the
first seat, second row, right side of the bus. At
about 4:55 o'clock a.m. when the vehicle was
nearing the northern approach of the Sadsaran
Bridge on the national highway in barrio Sto.
Domingo, municipality of Minalin, Pampanga, it
frontally hit the rear side of a bullcart filled with
hay. As a result the end of a bamboo pole
placed on top of the hayload and tied to the cart
to hold it in place, hit the right side of the
windshield of the bus. The protruding end of the
bamboo pole, about 8 feet long from the rear of
the bullcart, penetrated through the glass
windshield and landed on the face of Policronio
Quintos, Jr. who, because of the impact, fell
from his seat and was sprawled on the floor.
The pole landed on his left eye and the bone of
the left side of his face was fractured. He
suffered other multiple wounds and was
rendered unconscious due, among other causes
to severe cerebral concussion. A La Mallorca
passenger bus going in the opposite direction
towards San Fernando, Pampanga, reached the
scene of the mishap and it was stopped by
Patrolman Felino Bacani of the municipal police
force of Minalin who, in the meantime, had gone
to the scene to investigate. Patrolman Bacani
placed Policronio Quintos, Jr. and three other
injured men who rode on the bullcart aboard
the La Mallorca bus and brought them to the
provincial hospital of Pampanga at San
Fernando for medical assistance.
Notwithstanding such assistance, Policronio
Quintos, Jr. died at 3:15 p.m. on the same day,
March 17, 1960, due to traumatic shock due to
cerebral injuries.
The private respondents, Trinidad, Prima and Julita, all surnamed
Quintos, are the sisters and only surviving heirs of Policronio
Quintos Jr., who died single, leaving no descendants nor
ascendants. Said respondents herein brought this action against
herein petitioner, Villa Rey Transit, Inc., as owner and operator of
said passenger bus, bearing Plate No. TPU-14871-Bulacan, for
breach of the contract of carriage between said petitioner and the
deceased Policronio Quintos, Jr., to recover the aggregate sum of
P63,750.00 as damages, including attorney's fees. Said petitioner
— defendant in the court of first instance — contended that the
mishap was due to a fortuitous event, but this pretense was
rejected by the trial court and the Court of Appeals, both of which
found that the accident and the death of Policronio had been due
to the negligence of the bus driver, for whom petitioner was liable
under its contract of carriage with the deceased. In the language
of His Honor, the trial Judge:
The mishap was not the result of any
unforeseeable fortuitous event or emergency but
was the direct result of the negligence of the
driver of the defendant. The defendant must,
therefore, respond for damages resulting from
its breach of contract for carriage. As the
complaint alleged a total damage of only
P63,750.00 although as elsewhere shown in
this decision the damages for wake and burial
expenses, loss of income, death of the victim,
and attorneys fee reach the aggregate of
P79,615.95, this Court finds it just that said
damages be assessed at total of only P63,750.00
as prayed for in plaintiffs' amended complaint.
The despositive part of the decision of the trial Court reads:
WHEREFORE, judgment is hereby rendered
ordering the defendant to pay to the plaintiffs
the amount of P63,750.00 as damages for
breach of contract of carriage resulting from the
death of Policronio Quintos, Jr.
which, as above indicated, was affirmed by the Court of Appeals.
Hence, the present petition for review on certiorari, filed by Villa
Rey Transit, Inc.
The only issue raised in this appeal is the amount of damages
recoverable by private respondents herein. The determination of
such amount depends, mainly upon two (2) factors, namely: (1)
the number of years on the basis of which the damages shall be
computed and (2) the rate at which the losses sustained by said
respondents should be fixed.
The first factor was based by the trial court — the view of which
was concurred in by the Court of Appeals — upon the life
expectancy of Policronio Quintos, Jr., which was placed at 33-1/3
years — he being over 29 years of age (or around 30 years for
purposes of computation) at the time of his demise — by applying
the formula (2/3 x [80-301 = life expectancy) adopted in the
American Expectancy Table of Mortality or the actuarial of
Combined Experience Table of Mortality. Upon the other hand,
petitioner maintains that the lower courts had erred in adopting
said formula and in not acting in accordance with Alcantara v.
Surro1 in which the damages were computed on a four (4) year
basis, despite the fact that the victim therein was 39 years old, at
the time of his death, and had a life expectancy of 28.90 years.
The case cited is not, however, controlling in the one at bar. In the
Alcantara case, none of the parties had questioned the propriety of
the four-year basis adopted by the trial court in making its award
of damages. Both parties appealed, but only as regards
the amount thereof. The plaintiffs assailed the non-inclusion, in its
computation, of the bonus that the corporation, which was the
victim's employer, had awarded to deserving officers and
employees, based upon the profits earned less than two (2)
months before the accident that resulted in his death. The
defendants, in turn, objected to the sum awarded for the fourth
year, which was treble that of the previous years, based upon the
increases given, in that fourth year, to other employees of the
same corporation. Neither this objection nor said claim for
inclusion of the bonus was sustained by this Court. Accordingly,
the same had not thereby laid down any rule on the length of time
to be used in the computation of damages. On the contrary, it
declared:
The determination of the indemnity to be
awarded to the heirs of a deceased person has
therefore no fixed basis. Much is left to the
discretion of the court considering the moral and
material damages involved, and so it has been
said that "(t)here can be no exact or uniform rule
for measuring the value of a human life and the
measure of damages cannot be arrived at by
precise mathematical calculation, but the amount
recoverable depends on the particular facts and
circumstances of each case. The life expectancy
of the deceased or of the beneficiary, whichever
is shorter, is an important factor.' (25 C.J.S.
1241.) Other factors that are usually considered
are: (1) pecuniary loss to plaintiff or beneficiary
(25 C.J.S. 1243-1250) ; (2) loss of support (25
C.J.S., 1250-1251); (3) loss of service (25 C.J.S.
 1251-1254); (4) loss of society (25 C.J.S. 1254- thereon, at the legal rate, from December 29, 1961, date of the
1255); (5) mental suffering of beneficiaries (25 promulgation of the decision of the trial court.
C.J.S., 1258-1259) ; and (6) medical and
funeral expenses (26 C.J.S., 1254-1260)."2 Thus modified, said decision and that of the Court of Appeals are
hereby affirmed, in all other respects, with costs against
Thus, life expectancy is, not only relevant, but, also, petitioner, Villa Rey Transit, Inc. It is so ordered.
an important element in fixing the amount recoverable by private
respondents herein. Although it is not the sole element
determinative of said amount, no cogent reason has been given to
warrant its disregard and the adoption, in the case at bar, of a
purely arbitrary standard, such as a four-year rule. In short, the
Court of Appeals has not erred in basing the computation of
petitioner's liability upon the life expectancy of Policronio Quintos,
Jr.

With respect to the rate at which the damages shall be computed,

petitioner impugns the decision appealed from upon the ground
that the damages awarded therein will have to be paid now,
whereas most of those sought to be indemnified will be
suffered years later. This argument is basically true, and this is,
perhaps, one of the reasons why the Alcantara case points out the
absence of a "fixed basis" for the ascertainment of the damages
recoverable in litigations like the one at bar. Just the same, the
force of the said argument of petitioner herein is offset by the fact
that, although payment of the award in the case at bar will have to
take place upon the finality of the decision therein, the liability of
petitioner herein had been fixed at the rate only of P2,184.00 a
year, which is the annual salary of Policronio Quintos, Jr. at the
time of his death, as a young "training assistant" in the Bacnotan
Cement Industries, Inc. In other words, unlike the Alcantara case,
on which petitioner relies, the lower courts did not consider, in the
present case, Policronio's potentiality and capacity to increase his
future income. Indeed, upon the conclusion of his training period,
he was supposed to have a better job and be promoted from time
to time, and, hence, to earn more, if not — considering the
growing importance of trade, commerce and industry and the
concomitant rise in the income level of officers and employees 
therein — much more.

At this juncture, it should be noted, also, that We are mainly

concerned with the determination of the losses or damages
sustained by the private respondents, as dependents and intestate
heirs of the deceased, and that said damages consist, not of the
full amount of his earnings, but of the support, they received or
would have received from him had he not died in consequence of
the negligence of petitioner's agent. In fixing the amount of that
support, We must reckon with the "necessary expenses of his own
living", which should be deducted from his earnings. Thus, it has
been consistently held that earning capacity, as an element of
damages to one's estate for his death by wrongful act is
necessarily his net earning capacity or his capacity to acquire
money, "less the necessary expense for his own living.3 Stated
otherwise, the amount recoverable is not loss of the entire earning,
but rather the loss of that portion of the earnings which the
beneficiary would have received.4 In other words, only net
earnings, not gross earning, are to be considered 5 that is, the total
of the earnings less expenses necessary in the creation of such
earnings or income6 and less living and other incidental expenses. 7

All things considered, We are of the opinion that it is fair and

reasonable to fix the deductible living and other expenses of the
deceased at the sum of P1,184.00 a year, or about P100.00 a
month, and that, consequently, the loss sustained by his sisters
may be roughly estimated at P1,000.00 a year or P33,333.33 for
the 33-1/3 years of his life expectancy. To this sum of P33,333.33,
the following should be added: (a) P12,000.00, pursuant to Arts.
104 and 107 of the Revised Penal Code, in relation to Article 2206
of our Civil Code, as construed and applied by this Court; 8 (b)
P1,727.95, actually spent by private respondents for medical and
burial expenses; and (c) attorney's fee, which was fixed by the trial
court, at P500.00, but which, in view of the appeal taken by
petitioner herein, first to the Court of Appeals and later to this
Supreme Court, should be increased to P2,500.00. In other words,
the amount adjudged in the decision appealed from should be
reduced to the aggregate sum of P49,561.28, with interest
G.R. No. 143008           June 10, 2002
SMITH BELL DODWELL SHIPPING AGENCY
CORPORATION, petitioner, 
vs.
CATALINO BORJA and INTERNATIONAL TO WAGE AND
TRANSPORT CORPORATION, respondents.
PANGANIBAN, J.:
The owner or the person in possession and control of a vessel is
liable for all natural and proximate damages caused to persons
and property by reason of negligence in its management or
navigation. The liability for the loss of the earning capacity of the
deceased is fixed by taking into account the net income of the
victim at the time of death -- of the incident in this case -- and
that person's probable life expectancy.1âwphi1.nêt
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court, challenging the March 6, 2000 Decision 1 and
the April 25, 2000 Resolution 2 of the Court of Appeals3 (CA) in CA-
GR CV No. 57470. The assailed Decision disposed as follows:
"WHEREFORE, premises considered, the instant appeal
is hereby DENIED. The questioned decision of the lower
court is hereby AFFIRMED in toto. No pronouncement as
to costs."4
Reconsideration was denied in the assailed Resolution.
The Facts
The facts of the case are set forth by the CA as follows:
"It appears that on September 23, 1987, Smith Bell
[herein petitioner] filed a written request with the Bureau
of Customs for the attendance of the latter's inspection
team on vessel M/T King Family which was due to arrive
at the port of Manila on September 24, 1987.
"Said vessel contained 750 metric tons of alkyl benzene
and methyl methacrylate monomer.
"On the same day, Supervising Customs Inspector
Manuel Ma. D. Nalgan instructed [Respondent Catalino
Borja] to board said vessel and perform his duties as
inspector upon the vessel's arrival until its departure. At
that time, [Borja] was a customs inspector of the Bureau
of Customs receiving a salary of P31,188.25 per annum.
"At about 11 o'clock in the morning on September 24,
1987, while M/T King Family was unloading chemicals
unto two (2) barges [--] ITTC 101 and CLC-1002 [--]
owned by [Respondent] ITTC, a sudden explosion
occurred setting the vessels afire. Upon hearing the
explosion, [Borja], who was at that time inside the cabin
preparing reports, ran outside to check what happened.
Again, another explosion was heard.
"Seeing the fire and fearing for his life, [Borja] hurriedly
jumped over board to save himself. However, the [water]
[was] likewise on fire due mainly to the spilled chemicals.
Despite the tremendous heat, [Borja] swam his way for
one (1) hour until he was rescued by the people living in
the squatters' area and sent to San Juan De Dios
Hospital.
"After weeks of intensive care at the hospital, his
attending physician diagnosed [Borja] to be permanently
disabled due to the incident. [Borja] made demands
against Smith Bell and ITTC for the damages caused by
the explosion. However, both denied liabilities and
attributed to each other negligence."5
The trial court6 (RTC) ruled in favor of Respondent Borja and held
petitioner liable for damages and loss of income. The RTC
disposed as follows:
"WHEREFORE, premises considered, judgment is hereby
rendered ordering [Petitioner] Smith Bell Dodwell
[S]hipping Agency Corporation to pay [Borja]:
1. The amount of P495,360.00 as actual
damages for loss of earning capacity:
2. The amount of P100,000.00 for moral
damages; and
3. The amount of P50,000.00 for and as
reasonable attorney's fees.
"The cross-claim of [Petitioner] Smith Bell Dodwell
Shipping Agency Corporation against co-defendant
International Towage and Transport Corporation and the
latter's counterclaim against [Borja] and cross-claim with
compulsory counterclaim against Smith Bell are hereby
ordered dismissed."7
Ruling of the Court of Appeals
Affirming the trial court, the CA rejected the plea of petitioner that
it be exonerated from liability for Respondent Borja's injuries.
Contrary to the claim of petitioner that no physical evidence was
shown to prove that the explosion had originated from its vessel,
the CA held that the fire had originated from M/T King
Family. This conclusion was amply supported by the testimonies
of Borja and Eulogio Laurente (the eyewitness of International
Towage and Transport Corporation or ITTC) as well as by the
investigation conducted by the Special Board of Marine Inquiry
and affirmed by the secretary of the Department of National
Defense. On the other hand, the RTC, which the CA sustained,
had not given probative value to the evidence of petitioner, whose
sole eyewitness had not shown up for cross-examination.
Hence, this Petition.8
The Issues
In its Memorandum,9 petitioner raises the following issues:
"1. Whether petitioner should be held liable for the
injuries of Respondent Catalino Borja.
"2. Whether Respondent ITTC should be held liable for
the injuries of Respondent Catalino Borja.
"3. Assuming without admitting that Respondent
Catalino Borja is entitled to damages, whether
Respondent Borja is entitled to the amount of damages
awarded to him by the trial court."10
Simply put, these issues can be summed up in these two
questions: (1) Who, if any, is liable for Borja's injuries? (2) What is
the proper amount of liability?
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Responsibility for Injuries
Petitioner avers that both lower courts labored under a
misapprehension of the facts. It claims that the documents
adduced in the RTC conclusively revealed that the explosion that
caused the fire on M/T King Family had originated from the
barge ITTC-101, a conclusion based on three grounds. First, the
Survey Report (Exh. "10") dated October 21, 1987 submitted by
the Admiral Surveyors and Adjusters, Inc., showed that no part
of M/T King Family sustained any sharp or violent damage that
would otherwise be observed if indeed an explosion had occurred
on it. On the other hand, the fact that the vessel sustained cracks
on its shell plating was noted in two Survey Reports from
Greutzman Divers Underwater Specialist, dated October 6, 1987
(Exh. "11"), and during the underwater inspection on the sunken
barge ITTC-101.
Second, external fire damage on the hull of M/T King
Family indicated that the fire had started from outside the vessel
and from ITTC-101. The port side of the vessel to which the ITTC
barge was tied was completely gutted by fire, while the starboard
side to which the barge CLC-1002 was tied sustained only slight
fire damage.
Third, testimonial evidence proved that the explosion came from
the barge of the ITTC and not from its vessel. Security Guard
Vivencio Estrella testified that he had seen the sudden explosion
of monomer on the barge with fire that went up to about 60
meters. Third Mate Choi Seong Hwan and Second Mate Nam Bang
Choun of M/T King Family narrated that while they were
discharging the chemicals, they saw and heard an explosion from
the barge ITTC-101. Chief Security Guard Reynaldo Patron, in
turn, testified that he was 7 to 10 meters away from the barge
when he heard the explosion from the port side of M/T King
Family and saw the barge already on fire.
We are not persuaded. Both the RTC and the CA ruled that the
fire and the explosion had originated from petitioner's vessel. Said
the trial court:
"The attempts of [Petitioner] Smith Bell to shift the blame
on x x x ITTC were all for naught. First, the testimony of
its alleged eyewitness was stricken off the record for his
failure to appear for cross-examination (p. 361, Record).
Second, the documents offered to prove that the fire
originated from barge ITTC-101 were all denied
admission by the [c]ourt for being, in effect, hearsay (pp.
335 and 362). x x x Thus, there is nothing in the record
to support [petitioner's] contention that the fire and
explosion originated from barge ITTC-101." 11
We find no cogent reason to overturn these factual findings.
Nothing is more settled in jurisprudence than that this Court is
bound by the factual findings of the Court of Appeals when these
are supported by substantial evidence and are not under any of
the exceptions in Fuentes v. Court of Appeals; 12  more so, when
such findings affirm those of the trial court. 13 Verily, this Court
reviews only issues of law.
Negligence is conduct that creates undue risk of harm to another.
It is the failure to observe that degree of care, precaution and
vigilance that the circumstances justly demand, whereby that
other person suffers injury.14Petitioner's vessel was carrying
chemical cargo -- alkyl benzene and methyl methacrylate
monomer.15 While knowing that their vessel was carrying
dangerous inflammable chemicals, its officers and crew failed to
take all the necessary precautions to prevent an accident.
Petitioner was, therefore, negligent.
The three elements of quasi delict are: (a) damages suffered by the
plaintiff, (b) fault or negligence of the defendant, and (c) the
connection of cause and effect between the fault or negligence of
the defendant and the damages inflicted on the plaintiff. 16 All
these elements were established in this case. Knowing fully well
that it was carrying dangerous chemicals, petitioner was negligent
in not taking all the necessary precautions in transporting the
cargo.
As a result of the fire and the explosion during the unloading of
the chemicals from petitioner's vessel, Respondent Borja suffered
the following damage: and injuries: "(1) chemical burns of the face
and arms; (2) inhalation of fumes from burning chemicals; (3)
exposure to the elements [while] floating in sea water for about
three (3) hours; (4) homonymous hemianopsia or blurring of the
right eye [which was of] possible toxic origin; and (5) [c]erebral
infract with neo-vascularization, left occipital region with right
sided headache and the blurring of vision of right eye." 17
Hence, the owner or the person in possession and control of a
vessel and the vessel are liable for all natural and proximate
damage caused to persons and property by reason of negligent
management or navigation.18
Second Issue:
Amount of Liability
Petitioner insists that Borja is not entitled to the full amount of
damages awarded by the lower courts. It disputes the use of his
gross earning as basis for the computation of the award for loss of
earning capacity. Both courts, in computing the value of such
loss, used the remaining years of the victim as a government
employee and the amount he had been receiving per annum at the
time of the incident.
Counsel for Respondent Borja, on the other hand, claims that
petitioner had no cause to complain, because the miscomputation
had ironically been in its favor. The multiplier used in the
computation was erroneously based on the remaining years in
government service, instead of the life expectancy, of the victim.
Borja's counsel also points out that the award was based on the
former's meager salary in 1987, or about 23 years ago when the
foreign exchange was still P14 to $1. Hence, the questioned award
is consistent with the primary purpose of giving what is just,
moral and legally due the victim as the aggrieved party.
Both parties have a point. In determining the reasonableness of
the damages awarded under Article 1764 in conjunction with
Article 2206 of the Civil Code, the factors to be considered are: (1)
life expectancy (considering the health of the victim and the
mortality table which is deemed conclusive) and loss of earning
capacity; (b) pecuniary loss, loss of support and service; and (c)
moral and mental sufferings.19 The loss of earning capacity is
based mainly on the number of years remaining in the person's
expected life span. In turn, this number is the basis of the
damages that shall be computed and the rate at which the loss
sustained by the heirs shall be fixed.20
The formula for the computation of loss of earning capacity is as
follows:21
Net earning capacity       =       Life expectancy x [Gross
Annual Income - Living Expenses (50% of gross annual
income)], where life expectancy       =       2/3 (80 - the
age of the deceased).22
Petitioner is correct in arguing that it is net income (or gross
income less living expenses) which is to be used in the
computation of the award for loss of income. Villa Rey Transit v.
Court of Appeals23 explained that "the amount recoverable is not
the loss of the entire earning, but rather the loss of that portion of
the earnings which the beneficiary would have received." Hence, in
fixing the amount of the said damages, the necessary expenses of
the deceased should be deducted from his earnings.
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 one's children, would
be conjectural and unreasonable.24
Counsel for Respondent Borja is also correct in saying that life
expectancy should not be based on the retirement age of
government employees, which is pegged at 65. In Negros
Navigation Co, Inc. v. CA,25 the Court resolved that in calculating
the life expectancy of an individual for the purpose of determining
loss of earning capacity under Article 2206(1) of the Civil Code, it
is assumed that the deceased would have earned income even
after retirement from a particular job.1âwphi1.nêt

Respondent Borja should not be situated differently just because

he was a government employee. Private employees, given the
retirement packages provided by their companies, usually retire
earlier than government employees; yet, the life expectancy of the
former is not pegged at 65 years.

Petitioner avers that Respondent Borja died nine years after the
incident and, hence, his life expectancy of 80 years should yield to
the reality that he was only 59 when he actually died.

We disagree. The Court uses the American

Experience/Expectancy Table of Mortality or the Actuarial or
Combined Experience Table of Mortality, which consistently pegs
the life span of the average Filipino at 80 years, from which it
extrapolates the estimated income to be earned by the deceased
had he or she not been killed.26

Respondent Borja's demise earlier than the estimated life span is

of no moment. For purposes of determining loss of earning
capacity, life expectancy remains at 80. Otherwise, the
computation of loss of earning capacity will never become final,
being always subject to the eventuality of the victim's death. The
computation should not change even if Borja lived beyond 80
years. Fair is fair.

Based on the foregoing discussion, the award for loss of earning

capacity should be computed as follows:

Loss of earning = [2 (80-50)] x [(P2,752x12)-16,512]

capacity        3

= P330,240

Having been duly proven, the moral damages and attorney's fees
awarded are justified under the Civil Code's Article 2219,
paragraph 2; and Article 2208, paragraph 11, respectively.

WHEREFORE, the Petition is PARTLY GRANTED. The assailed

Decision is AFFIRMED with the
following MODIFICATIONS: petitioner is ordered to pay the heirs
of the victim damages in the amount of P320,240 as loss of
earning capacity, moral damages in the amount of P100,000, plus
another P50,000 as attorney's fees. Costs against petitioner.

SO ORDERED.
G.R. No. 116617 November 16, 1998
METRO MANILA TRANSIT CORPORATION (MMTC), PEDRO A.
MUSA, CONRADO TOLENTINO, FELICIANA CELEBRADO and
THE GOVERNMENT SERVICE INSURANCE
SYSTEM, petitioners,  ran over the girl victim who died as a result
vs.
COURT OF APPEALS, SPS. RODOLFO V. ROSALES and LILY R.
ROSALES, respondents.
G.R. No. 126395 November 16, 1998
RODOLFO V. ROSALES, and LILY R. ROSALES, petitioners,  Celebrado, a dispatcher of the MMTC, as a defendant therein. The
vs.
THE COURT OF APPEALS, METRO MANILA TRANSIT
CORPORATION, (MMTC) PEDRO A. MUSA, CONRADO
TOLENTINO, FELICIANA CELEBRADO and THE GOVERNMENT
SERVICE INSURANCE SYSTEM, respondents.
These are appeals brought, on the one hand, by the Metro Manila
Transit Corporation (MMTC) and Pedro Musa and, on the other, by
the spouses Rodolfo V. Rosales and Lily R. Rosales from the
decision,1 dated August 5, 1994, of the Court of Appeals, which
affirmed with modification the judgment of the Regional Trial
Court of Quezon City holding MMTC and Musa liable to the
spouses Rosales for actual, moral, and exemplary damages,
attorney's fees, and the costs of suit for the death of the latter's
daughter. MMTC and Musa in G.R. No. 116617 appeal insofar as
they are held liable for damages, while the spouses Rosales in
G.R. No. 126395 appeal insofar as the amounts awarded are
concerned.
The facts are as follows:
MMTC is the operator of a fleet of passenger buses within the
Metro Manila area. Musa was its driver assigned to MMTC Bus No.
27. The spouses Rosales were parents of Liza Rosalie, a third-year
high school student at the University of the Philippines Integrated
School.
At around a quarter past one in the afternoon of August 9, 1986,
MMTC Bus No. 27, which was driven by Musa, hit Liza Rosalie
who was then crossing Katipunan Avenue in Quezon City. An eye
witness said the girl was already near the center of the street
when the bus, then bound for the south, hit her. 2 She fell to the
ground upon impact, rolled between the two front wheels of the
bus, and was run over by the left rear tires thereof. 3 Her body was
dragged several meters away from the point of impact. Liza Rosalie
was taken to the Philippine Heart Center,4 but efforts to revive her
proved futile.
Pedro Musa was found guilty of reckless imprudence resulting in
homicide and sentenced to imprisonment for a term of 2 years and
4 months, as minimum, to 6 years, as maximum, by the Regional
Trial Court of Quezon
City.5 The trial court found:
All told, this Court, therefore, holds that the
accused, who was then, the driver of MMTC Bus
No. 027, is criminally responsible for the death
of the girl victim in violation of Article 365 (2) of
the Revised Penal Code. For, in the light of the
evidence that the girl victim was already at the
center of the Katipunan Road when she was
bumped, and, therefore, already past the right
lane when the MMTC Bus No. 027 was
supposed to have passed; and, since the said
bus was then running at a speed of about 25
kilometers per hour which is inappropriate
since Katipunan road is a busy street, there is,
consequently, sufficient proof to show that the
accused was careless, reckless and imprudent
in the operation of his MMTC Bus No. 027,
which is made more evident by the
circumstance that the accused did not blow his
horn at the time of the accident, and he did not
even know that he had bumped the girl victim
and had ran over her, demonstrating thereby
that he did not exercise diligence and take the
necessary precaution to avoid injury to persons
in the operation of his vehicle, as, in fact, he
thereof. 6
The spouses Rosales filed an independent civil action for damages
against MMTC, Musa, MMTC Acting General Manager Conrado
Tolentino, and the Government Service Insurance System (GSIS).
They subsequently amended their complaint to include Feliciana
counsel of MMTC and Musa attempted to introduce testimony that
Musa was not negligent in driving Bus No. 27 but was told by the
trial judge:
COURT:
That is it. You can now limit your question to
the other defendant here but to re-try again the
actual facts of the accident, this Court would
not be in the position. It would be improper for
this Court to make any findings with respect to
the negligence of herein driver. You ask
questions only regarding the civil aspect as to
the other defendant but not as to the
accused. 7
The counsel submitted to the ruling of the court. 8
In a decision rendered on March 6, 1990, the Regional Trial Court
of Quezon City found MMTC and Musa guilty of negligence and
ordered them to pay damages and attorney's fees, as follows:
WHEREFORE, foregoing premises considered,
judgment is hereby rendered ordering defendant
Metro Manila Transit Corporation primarily and
defendant Pedro Musa subsidiarily liable to
plaintiffs-spouses Rodolfo V. Rosales and Lily R.
Rosales as follows:
1. Actual damages in the amount of
P150,000.00;
2. Moral damages in the amount of
P500,000.00;
3. Exemplary damages in the amount of
P100,000.00;
4. Attorney's fees in the amount of P50,000.00;
and
5. Costs of suit.9
Both parties appealed to the Court of Appeals. On August 5, 1994,
the Court of Appeals affirmed the decision of the trial court with
the following modification:
WHEREFORE, except for the modification
deleting the award of P150,000.00 as actual
damages and awarding in lieu thereof the
amount of P30,000.00 as death indemnity, the
decision appealed from is, in all other aspects,
hereby AFFIRMED. 10
The spouses Rosales filed a motion for reconsideration, which the
appellate court, in a resolution, dated September 12, 1996, partly
granted by increasing the indemnity for the death of Liza Rosalie
from P30,000.00 to P50,000.00. Hence, these appeals.
In G.R. No. 116617, MMTC and Musa assail the decision of the
Court of Appeals on the following grounds:
 PUBLIC RESPONDENT COURT OF APPEALS
ERRED IN AFFIRMING THE COURT A
QUO'S DECISION PARTICULARLY IN NOT
HOLDING THAT APPELLANT MMTC
EXERCISED THE DILIGENCE OF A GOOD
FATHER OF A FAMILY IN THE SELECTION
AND SUPERVISION OF ITS DRIVERS. THIS
BEING THE CASE, APPELLANT MMTC IS
ENTITLED TO BE ABSOLVED FROM ANY
LIABILITY OR AT LEAST TO A REDUCTION OF
THE RECOVERABLE DAMAGES.
THE PUBLIC RESPONDENT COURT OF
APPEALS, JUST LIKE THE COURT A QUO,
OVERLOOKED THE FACT THAT PETITIONER
MMTC, A GOVERNMENT-OWNED
CORPORATION, COMMITTED NO FRAUD,
MALICE, BAD FAITH, NOR WANTON,
FRAUDULENT, OPPRESSIVE AND
MALEVOLENT ACTUATIONS AGAINST HEREIN
RESPONDENTS-APPELLEES.
THE PUBLIC RESPONDENT COURT OF
APPEALS ERRED IN AFFIRMING THE
COURT A QUO'S DECISION TO HOLD
PETITIONER-APPELLANT MMTC PRIMARILY
LIABLE TO PRIVATE RESPONDENTS-
APPELLEES IN THE AMOUNT OF P500,000 AS
MORAL DAMAGES, P100,000 AS EXEMPLARY
DAMAGES AND P30,000 BY WAY OF DEATH
INDEMNITY.
THE PUBLIC RESPONDENT COURT OF
APPEALS ERRED IN AFFIRMING THE
COURT A QUO'S DECISION IN RENDERING
JUDGMENT FOR ATTORNEY'S FEES IN THE
AMOUNT OF P50,000.00 IN FAVOR OF
PRIVATE RESPONDENTS-APPELLEES.
On the other hand, in G.R. No. 126395, the spouses Rosales
contend:
The Court of Appeals erred in:
First, considering that death indemnity which
this Honorable Court set at P50,000.00 is akin
to actual damages;
Second, not increasing the amount of damages
awarded;
Third, refusing to hold all the defendants, now
private respondents, solidarily liable.
MMTC and Musa do not specifically question the findings of the
Court of Appeals and the Regional Trial Court of Quezon City that
Liza Rosalie was hit by MMTC Bus No. 27. Nonetheless, their
petition contains discussions which cast doubts on this
point. 11 Not only can they not do this as the rule is that an
appellant may not be heard on a question not specifically assigned
as error, but the rule giving great weight, and even finality, to the
factual conclusions of the Court of Appeals which affirm those of
the trial court bars a reversal of the finding of liability against
petitioners MMTC and Musa. Only where it is shown that such
findings are whimsical, capricious, and arbitrary can they be
overturned. To the contrary, the findings of both the Court of
Appeals and the Regional Trial Court are solidly anchored on the
evidence submitted by the parties. We, therefore, regard them as
conclusive in resolving the petitions at bar. 12 Indeed, as already
stated, petitioners' counsel submitted to the ruling of the court
that the finding of the trial court in the criminal case was
conclusive on them with regard to the questions of whether Liza
Rosalie was hit by MMTC Bus No. 27 and whether its driver was
negligent. Rather, the issue in this case turns on Art. 2180 of the
Civil Code, which provides that "employers shall be liable for the
damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former
are not engaged in any business or industry." The responsibility of
employers for the negligence of their employees in the performance
of their duties is primary, that is, the injured party may recover
from the employers directly, regardless of the solvency of their
employees. 13 The rationale for the rule on vicarious liability has
been adumbrated thus:
What has emerged as the modern justification
for vicarious liability is a rule of policy, a
deliberate allocation of a risk. The losses caused
by the torts of employees, which as a practical
matter are sure to occur in the conduct of the
employer's enterprise, are placed upon that
enterprise itself, as a required cost of doing
business. They are placed upon the employer
because, having engaged in an enterprise,
which will on the basis of all past experience
involve harm to others through the tort of
employees, and sought to profit by it, it is just
that he, rather than the innocent injured
plaintiff, should bear them; and because he is
better able to absorb them, and to distribute
them, through prides, rates or liability
insurance, to the public, and so to shift them to
society, to the community at large. Added to
this is the makeweight argument that an
employer who is held strictly liable is under the
greatest incentive to be careful in the selection,
instruction and supervision of his servants, and
to take every precaution to see that the
enterprise is conducted safely. 14
In Campo v. Camarote, 15 we explained the basis of the
presumption of negligence in this wise:
The reason for the law is obvious. It is indeed
difficult for any person injured by the
carelessness of a driver to prove the negligence
or lack of due diligence of the owner of the
vehicle in the choice of the driver. Were we to
require the injured party to prove the owner's
lack of diligence, the right will in many cases
prove illusory, as seldom does a person in the
community, especially in the cities, have the
opportunity to observe the conduct of all
possible car owners therein. So the law imposes
the burden of proof of innocence on the vehicle
owner. If the driver is negligent and causes
damage, the law presumes that the owner was
negligent and imposes upon him the burden of
proving the contrary.
Employers may be relieved of responsibility for the negligent acts
of their employees within the scope of their assigned tasks only if
they can show that "they observed all the diligence of a good father
of a family to prevent
damage."16 For this purpose, they have the burden of proving that
they have indeed exercised such diligence, both in the selection of
the employee who committed the quasi-delict and in the
supervision of the performance of his duties.
In the selection of prospective employees, employers are required
to examine them as to their qualifications, experience, and service
records. 17 On the other hand, with respect to the supervision of
employees, employers should formulate standard operating,
procedures, monitor their implementation, and impose
disciplinary measures for breaches thereof. 18 To establish these
factors in a trial involving the issue of vicarious liability,
employers must submit concrete proof, including documentary
evidence. 19
In this case, MMTC sought to prove that it exercised the diligence
of a good father of a family with respect to the selection of
employees by presenting mainly testimonial evidence on its hiring
procedure. According to MMTC, applicants are required to submit
professional driving licenses, certifications of work experience, and
clearances from the National Bureau of Investigation; to undergo
tests of their driving skills, concentration, reflexes, and vision;
and, to complete training programs on traffic rules, vehicle
maintenance, and standard operating procedures during
emergency cases. 20
MMTC's evidence consists entirely of testimonial evidence (1) that
transport supervisors are assigned to oversee field operations in
designated areas; (2) that the maintenance department daily
inspects the engines of the vehicles; and, (3) that for infraction of
company rules there are corresponding penalties. 21Although
testimonies were offered that in the case of Pedro Musa all these
precautions were followed, 22 the records of his interview, of the
results of his examinations, and of his service were not presented.
MMTC submitted brochures and programs of seminars for
prospective employees on vehicle maintenance, traffic regulations,
and driving skills and claimed that applicants are given tests to
determine driving skills, concentration, reflexes, and vision, 23 but
there is no record that Musa attended such training programs and
passed the said examinations before he was employed. No proof
was presented that Musa did not have any record of traffic
violations. Nor were records of daily inspections, allegedly
conducted by supervisors, ever presented.
Normally, employers' keep files concerning the qualifications, work
experience, training evaluation, and discipline of their employees.
The failure of MMTC to present such documentary proof puts in
doubt the credibility of its witnesses. What was said in Central
Taxicab Corporation v. Ex-Meralco Employees Transportation
Corporation  24 applies to this case:
This witness spoke of an affidavit of experience
which a driver-applicant must accomplish
before he is employed by the company, a written
time schedule for each bus, and a record of the
inspections and thorough checks pertaining to
each bus before it leaves the car barn; yet no
attempt was ever made to present in evidence
any of these documents, despite the fact that
they were obviously in the possession and
control of the defendant company.
....
Albert also testified that he kept records of the
preliminary and final tests given by him as well
as a record of the qualifications and experience
of each of the drivers of the company. It is
rather' strange, therefore, that he failed to
produce in court the all important record of
Roberto, the driver involved in this case.
The failure of the defendant company to
produce in court any record or other
documentary proof tending to establish that it
had exercised all the diligence of a good father
of a family in the selection and supervision of its
drivers and buses, notwithstanding the calls
therefor by both the trial court and the
opposing counsel, argues strongly against its
pretensions.
It is noteworthy that, in another case involving MMTC, testimonial
evidence of identical content, which MMTC presented to show that
it exercised the diligence of a good father of a family in the
selection and supervision of employees and thus avoid vicarious
liability for the negligent acts of its employees, was held to be
insufficient to overcome the presumption of negligence against it.
In Metro Manila Transit Corp. v. Court of Appeals, 25 this Court
said:
Coming now to the case at bar, while there is no
rule which requires that testimonial evidence, to
hold sway, must be corroborated by
documentary evidence, or even object evidence
for that matter, inasmuch as the witnesses'
testimonies dwelt on mere generalities, we
cannot consider the same as sufficiently
persuasive proof that there was observance of
due diligence in the selection and supervision of
employees. Petitioner's attempt to prove
its diligentissimi patris familias in the selection
and supervision of employees through oral
evidence must fail as it was unable to buttress
the same with any other evidence, object or
documentary, which might obviate the apparent
biased nature of the testimony.
Having found both MMTC and its driver Pedro Musa liable for
negligence for the death of Liza Rosalie on August 9, 1986; we now
consider the question of damages which her parents, the spouses
Rosales, are entitled to recover, which is the subject of the appeal
in G.R. No. 126395.
Indemnity for Death. Art. 2206 provides for the payment of
indemnity for death caused by a crime or quasi-delict. Initially
fixed in said article of the Civil Code at P3,000.00, the amount of
the indemnity has through the years been gradually increased
based on the value of the peso. At present, it is fixed at
P50,000.00. 26 To conform to this new ruling, the Court of Appeals
correctly increased the indemnity it had originally ordered the
spouses Rosales to be paid from P30,000.00 to P50,000.00 in its
resolution, dated September 12, 1996.
Actual Damages. Art. 2199 provides that "except as provided by
law or by stipulation, one is entitled to an adequate compensation
only for such pecuniary loss suffered by him as he has duly
proved." The spouses Rosales are claiming actual damages in the
amount of P239,245.40. However, during the trial, they submitted
receipts showing that expenses for the funeral, wake, and
interment of Liza Rosalie amounted only to P60,226.65 itemized
as follows: 27
Medical Attendance P 739.65
Funeral Services 5,100.00
Wreaths 2,500.00
Embalment 1,000.00
Obituaries 7,125.00
Interment fees 2,350.00
Expenses during wake 14,935.00
Mourning clothes 5,000.00
Photography 3,500.00
Video Coverage 10,000.00
Printing of invitation cards 7,977.00
TOTAL
60,226.65
Hence, apart from the indemnity for death, the spouses Rosales
are entitled to recover the above amount as actual damages.
Moral Damages. Under Art. 2206, the "spouse, legitimate and
illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death
of the deceased." The reason for the grant of moral damages has
been explained thus:
. . . the award of moral damages is aimed at a
restoration, within the limits of the possible, of
 the spiritual status quo ante; and therefore, it
must be proportionate to the suffering inflicted.
The intensity of the pain experienced by the
relatives of the victim is proportionate to the
intensity of affection for him and bears no
relation whatsoever with the wealth or means of
the offender. 28
In the instant case, the spouses Rosales presented evidence of the
intense moral suffering they had gone through as a result of the
loss of Liza Rosalie who was their youngest child. Rodolfo Rosales
recounted the place of Liza Rosalie in the family and their
relationship with her in the following words:
Q: Mr. Rosales, how was Liza to you as a daughter?
A: Well, Liza as a daughter was the greatest joy of the
family; she was our pride, and everybody loved her —
all her brothers and sisters — because she was sweet
and unspoiled. . . . She was soft-spoken to all of us;
and she still slept with us at night although she had
her own room. Sometimes in the middle of the night
she would open our door and ask if she could sleep
with us. So we let her sleep with us, as she was the
youngest. 29
The death of Liza Rosalie left a void in their lives. Rodolfo Rosales
testified on the devastating effect of the death of Liza Rosalie:
Q: And after she died, what changes, if any, did you feel
in your family?
A: Well, there is something hollow in our family,
something is missing. She used to greet me when I
came home and smell if I was drunk and would tell me
to dress up and take a shower before her mommy could
see me. She would call me up at the office and say:
"Daddy, come home, please help me with my
homework." Now, all these things, I am missing, you
know. . . I do not feel like going home early. Sometimes
my wife would complain and ask: "Where did you go?"
But I cannot explain to her how I feel. 30
Lily Rosales described life without Liza Rosalie thus:
Q: Now, your life without Liza, how would you describe
it, Dr. Rosales?
A: You know it is very hard to describe. The family was
broken apart. We could not go together because we
remember Liza. Every time we go to the cemetery we try
as much as possible not to go together. So, we go to the
cemetery one at a time, sometimes, my husband and I,
or my son and another one, but we never go together
because we remember Liza. But before her death we
would always be together, the whole family on
weekends and on our days off. My husband works very
hard, I also work very hard and my children go to
school. They study very hard. Now we cannot go
together on outings because of the absence of Liza. 31
The spouses Rosales claim moral damages in the amount of
P5,000,000.00. In People v. Teehankee, Jr.,32this Court awarded
P1 million as moral damages to the heirs of a seventeen-year-old
girl who was murdered. This amount seems reasonable to us as
moral damages for the loss of a minor child, whether he or she
was a victim of a crime or a quasi-delict. Hence, we hold that the
MMTC and Musa are solidarily liable to the spouses Rosales in the
amount of P1,000,000.00 as moral damages for the death of Liza
Rosalie.
Exemplary Damages. Art. 2231 provides that exemplary damages
may be recovered in cases involving quasi-delicts if "the defendant
acted with gross negligence." This circumstance obtains in the
instant case. The records indicate that at the time of the mishap,
there was a pending criminal case against Musa for reckless
imprudence resulting in slight physical injuries with another
branch of the Regional Trial Court, Quezon City. 33 The evidence
also shows that he failed to stop his vehicle at once even after eye
witnesses shouted at him. The spouses Rosales claim exemplary
damages in the amount of P5,000,000.00. Under the
circumstances, we deem it reasonable to award the spouses
Rosales exemplary damages in the amount of five hundred
thousand pesos (P500,000.00).
Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be
recovered when, as in the instant case, exemplary damages are
awarded. In the recent case of Sulpicio Lines, Inc. v. Court of
Appeals, 34 which involved the death of a minor child in the
sinking of a vessel, we held an award of P50,000.00 as attorney's
fees to be reasonable. Hence, we affirm the award of attorney's
fees made by the Court of Appeals to the spouses Rosales in that
amount.
Compensation for Loss of Earning Capacity. Art. 2206 of the Civil
Code provides that in addition to the indemnity for death caused
by a crime or quasi delict, the "defendant shall be liable for the
loss of the earning capacity of the deceased, and the indemnity
shall be paid to the heirs of the latter; . . ." Compensation of this
nature is awarded not for loss of earnings but for loss of capacity
to earn money. 35Evidence must be presented that the victim, if
not yet employed at the time of death, was reasonably certain to
complete training for a specific profession. 36 In People v.
Teehankee  37 no award of compensation for loss of earning
capacity was granted to the heirs of a college freshman because
there was no sufficient evidence on record to show that the victim
would eventually become a professional pilot. 38 But compensation
should be allowed for loss of earning capacity resulting from the
death of a minor who has not yet commenced employment or
training for a specific profession if sufficient evidence is presented
to establish the amount thereof. In the United States it has been
observed:
This raises the broader question of the proper
measure of damages in death cases involving
children, housewives, the old, and others who
do not have market income so that there is no
pecuniary loss to survivors or to the estate of
the decedent. The traditional approach was to
award no or merely nominal damages in such
cases. . . . Increasingly, however, courts allow
expert testimony to be used to project those lost
earnings. 39
Thus, in Haumersen v. Ford Motor Co., 40 the court allowed the
heirs of a seven-year-old boy who was killed in a car accident to
recover compensation for loss of earning capacity:
Considerable evidence was presented by
plaintiffs in an effort to give the jury a
foundation on which to make an award. Briefly
stated, this evidence showed Charles
Haumersen was a seven-year-old of above
average characteristics. He was described as
"very intelligent" and "all-American." He received
high marks in school. He was active in church
affairs and participated in recreational and
athletic events, often with, children older than
himself. In addition, he had an unusual talent
for creating numerous cartoons and other
drawings, some of which plaintiffs introduced at
trial.
The record does not disclose passion and
prejudice. The key question is whether the
verdict of $100,000 has support in the evidence.
Upon analysis of the record, we conclude that
we should not disturb the award.
The argument for allowing compensation for loss of earning
capacity of a minor is even stronger if he or she was a student,
whether already training for a specific profession or still engaged
in general studies. In Krohmer v. Dahl, 41 the court, in affirming
the award by the jury of $85,000.00 to the heirs of an eighteen-
year-old college freshman who died of carbon monoxide poisoning,
stated as follows:
There are numerous cases that have held
admissible evidence of prospective earnings of a
student or trainee. . . . The appellants contend
that such evidence is not admissible unless the
course under study relates to a given
occupation or profession and it is shown that
the student is reasonably certain to follow that
occupation or profession. It is true that the
majority of these decisions deal with students
who are studying for a specific occupation or
profession. However, not one of these cases
indicate that evidence of one's education as a
guide to future earnings is not admissible where
the student is engaged in general studies or
whose education does not relate to a specific
occupation.
In sharp contrast with the situation obtaining in People v.
Teehankee, where the prosecution merely presented evidence to
show the fact of the victim's graduation from high school and the
fact of his enrollment in a flying school, spouses Rosales did not
content themselves with simply establishing Liza Rosalie's
enrollment at UP Integrated School. They presented evidence to
show that Liza Rosalie was a good student, promising artist, and
obedient child. She consistently performed well in her studies
since grade school. 42 A survey taken in 1984 when Liza Rosalie
was twelve years old showed that she had good study habits and
attitudes. 43 Cleofe Chi, guidance counselor of the University of the
Philippines Integrated School, described Liza Rosalie as
personable, well-liked, and with a balanced
personality. 44 Professor Alfredo Rebillon, a faculty member of the
University of the Philippines College of Fine Arts, who organized
workshops which Liza Rosalie attended in 1982 and 1983,
testified that Liza Rosalie had the potential of eventually becoming
an artist. 45 Professor Rebillon's testimony is more than
sufficiently established by the 51 samples of Liza Rosalie's
watercolor, charcoal, and pencil drawings submitted as exhibits
by the spouses Rosales. 46 Neither MMTC nor Pedro Musa
controverted this evidence.
Considering her good academic record, extra-curricular activities,
and varied interests, it is reasonable to assume that Liza Rosalie
would have enjoyed a successful professional career had it not
been for her untimely death. Hence, it is proper that
compensation for loss of earning capacity should be awarded to
her heirs in accordance with the formula established in decided
cases 47 for computing net earning capacity, to wit:
Net Earning = Life [Gross Necessary
Capacity Expectancy x [Annual — Living
[Income Expenses
Life expectancy is equivalent to two thirds (2/3) multiplied by the
difference of eighty (80) and the age of the deceased. 48 Since Liza
Rosalie was 16 at the time of her death, her life expectancy was 44
more years. 49 Her projected gross annual income, computed
based on the minimum wage for workers in the non-agricultural
sector in effect at the time of her death, 50 then fixed at
P37.00, 51 is P14,630.46. 52 Allowing for necessary living expenses
of fifty percent (50%) of her projected gross annual income, 53 her
total net earning capacity amounts to P321,870.12. 54
Finally, the spouses Rosales argue that the Court of Appeals erred
in absolving Conrado Tolentino, Feliciana Celebrado, and the GSIS
of liability. The Spouses Rosales alleged that Tolentino, as Acting
General Manager of the MMTC, and Celebrado, as a dispatcher
thereof, were charged with the supervision of Musa and should,
therefore, be held vicariously liable under Art. 2180 of the Civil
Code. With respect to the GSIS, they contend that it was the
insurer in a contract for third party liability it had with the MMTC.
Although the fourth paragraph of Art. 2180 mentions "managers"
among those made responsible for the negligent acts of others, it
is settled that this term is used in the said provision in the sense
of "employers." 55 Thus, Tolentino and Celebrado cannot be held
liable for the tort of Pedro Musa.
In Vda. de Maglana v. Consolacion, 56 it was ruled that an insurer
in an indemnity contract for third party liability is directly liable to
the injured party up to the extent specified in the agreement, but
it cannot be held solidarily liable beyond that amount. The GSIS
admitted in its answer that it was the insurer of the MMTC for
third party liability with respect to MMTC Bus No. 27 to the extent
of P50,000.00. 57 Hence, the spouses Rosales have the option
either to claim the said amount from the GSIS and the balance of
the award from MMTC and Musa or to enforce the entire judgment
against the latter, subject to reimbursement from the former to
the extent of the insurance coverage. 58
One last word. The Regional Trial Court of Quezon City erred in
holding MMTC primarily and Musa secondarily liable for damages
arising from the death of Liza Rosalie. It was error for the
appellate court to affirm this aspect of the trial court's decision.
As already stated, MMTC is primarily liable for damages for the
negligence of its employee in view of Art. 2180. Pursuant to Art.
2181, it can recover from its employee what it may pay. This does
not make the employee's liability subsidiary. It only means that if
the judgment for damages is satisfied by the common carrier, the
latter has a right to recover what it has paid from its employee
who committed the fault or negligence which gave rise to the
action based on quasi-delict. 59 Hence, the spouses Rosales have
the option of enforcing the judgment against either MMTC or
Musa.
From another point of view, Art. 2194 provides that "the
responsibility of two or more persons who are liable for a quasi-
delict is solidary." We ruled in Gelisan v. Alday  60 that "the
registered owner/operator of a public service vehicle is jointly and
severally liable with the driver for damages incurred by passengers
or third persons as a consequence of injuries sustained in the
operation of said vehicle." In Baliwag Transit Inc. v. Court of
Appeals 61 it was held that "to escape solidary liability for
a quasi-delict committed by an employee, the employer must
adduce sufficient proof that it exercised such degree of care."
Finally, we held in the recent case of Philtranco Service
Enterprises, Inc. v. Court of Appeals  62 that "the liability of the
registered owner of a public service vehicle . . . for damages arising
from the tortious acts of the driver is primary, direct, and joint
and several or solidary with the driver."
WHEREFORE, the decision of the Court of Appeals is SET ASIDE
and another one is RENDERED holding the Metro Manila Transit
Corporation and Pedro Musa jointly and severally liable for the
death of Liza Rosalie R. Rosales and ORDERING them as such to
pay to the spouses Rodolfo V. Rosales and Lily R. Rosales the
following amounts:
1) death indemnity in the amount of fifty-thousand pesos
(P50,000,00);
2) actual damages in the amount of sixty thousand two hundred
twenty six pesos and sixty five centavos (P60,226.65);
3) moral damages in the amount of one million pesos
(P1,000,000.00);
4) exemplary damages in the amount of five hundred thousand
pesos (P500,000.00);
5) attorney's fees in the amount of fifty thousand pesos
(P50,000.00);

6) compensation for loss of earning capacity in the amount of

three hundred twenty-one thousand eight hundred seventy pesos
and twelve centavos (P321,870.12); and

7) the costs of suit.

SO ORDERED.

G.R. No. 148974               July 2, 2010
OMC CARRIERS, INC. and JERRY AÑALUCAS y
PITALINO, Petitioners, 
vs.
SPOUSES ROBERTO C. NABUA and ROSARIO T.
NABUA, Respondents.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari, 1 under Rule
45 of the Rules of Court, seeking to set aside the December 28,
1999 Decision2 and July 3, 2001 Resolution 3 of the Court of
Appeals (CA) in CA-G.R. CV No. 60034. The CA affirmed, with
modification, the Decision4 of the Regional Trial Court (RTC),
National Capital Judicial Region, Branch 224, Quezon City, in
Civil Case No. Q-95-24838, which found petitioners liable to
respondents for damages.
The facts of the case are as follows:
On August 4, 1995, at about 3:00 p.m., an Isuzu private tanker
with plate no. PCH 612, owned by and registered in the name of
petitioner OMC Carriers, Inc. and then being driven by its
employee Jerry P. Añalucas (Añalucas), was cruising along
Quirino Highway towards the general direction of Lagro, Quezon
City. At Barangay Pasong Putik, Novaliches, Quezon City, the
aforesaid private tanker hit a private vehicle, an Isuzu Gemini
with plate no. NDF 372, which was making a left turn towards a
nearby Caltex gasoline station. The impact heavily damaged the
right side portion of the latter motor and mortally injured its 18-
year-old driver, Reggie T. Nabua, who was later pronounced dead
on arrival at the Fairview Polymedic Hospital. 5
Respondent spouses Berlino and Rosario Nabua, the parents of
the victim, filed a Complaint6 for damages against petitioners and
the General Manager of OMC Carriers, Chito Calauag, 7 before the
RTC of Quezon City, Branch 224. The complaint was docketed as
Civil Case No. Q-95-24838 and entitled, Spouses Berlino C. Nabua
and Rosario T. Nabua, Plaintiffs, vs. OMC Carriers, Inc., its
General Manager, Chito Calauag, and Jerry Añalucas y Pitalino,
Defendants.
On January 19, 1998, the RTC rendered a Decision, 8 the
dispositive portion of which reads:
Accordingly, therefore, the Court finds and renders judgment in
favor of the plaintiffs as against defendants and ordering the latter
to pay the plaintiffs, jointly and solidarily, the following:
1. P110,000.00 for actual damages, or for money spent
during the funeral, wake and burial of the deceased
Regie Nabua;
2. P2,000,000.00 for compensatory damages and the
amount of P60,000.00 as indemnity for the death of
Reggie Nabua;
3. P100,000.00 as moral damages and another
P100,000.00 as exemplary damages; and
4. P50,000.00 as attorney’s fees;
5. Costs of the suit.
IT IS SO ORDERED.9
Aggrieved, petitioners appealed the RTC Decision to the CA. On
December 28, 1999, the CA rendered a Decision, partially granting
the petition, the dispositive portion of which states:
WHERFORE, the appealed decision is AFFIRMED subject to the
following modifications:
1. Absolving appellant Chito Calauag from liability for the
death of Regie Nabua; and
2. Deleting, for want of basis, the following damages
awarded by the court a quo, viz:
a. P2,000,000.00 as lost earnings of the
deceased; and
b. P100,000.00 as exemplary damages.
SO ORDERED.10
Not satisfied with the CA’s disposition of their petition, petitioners
filed a Partial Motion for Reconsideration. 11 On July 3, 2001, the
CA issued a Resolution denying petitioners’ motion for
reconsideration.
Hence, herein petition, with petitioners raising the following
assignment of errors, to wit:
I. THE COURT OF APPEALS, WITH DUE RESPECT,
COMMITTED ERROR IN ITS DECISION WHEN IT
DISREGARDED OR REFUSED TO FOLLOW AND APPLY
THE APPLICABLE RULINGS OF THIS HONORABLE
COURT WHICH NOW FORM THE LAW OF THE LAND.
II. AS A RESULT OF THE COURT OF APPEALS’
REFUSAL TO FOLLOW AND APPLY THE
JURISPRUDENCE LAID DOWN BY THIS HONORABLE
COURT, ITS DECISION TENDS TO MODIFY, AMEND OR
REJECT THE JURISPRUDENCE APPLICABLE TO THE
CASE AT BAR.12
The petition is partly meritorious.
Prefatorily, this Court shall address petitioners’ position that the
proximate and immediate cause of the accident was the negligence
of the victim, Reggie Nabua. 13 This Court is not persuaded as the
same is a question of fact.
A petition for review on certiorari under Rule 45 of the Rules of
Court should include only questions of law questions of fact are
not reviewable. A question of law exists when the doubt centers on
what the law is on a certain set of facts, while a question of fact
exists when the doubt centers on the truth or falsity of the alleged
facts. There is a question of law if the issue raised is capable of
being resolved without need of reviewing the probative value of the
evidence. Once the issue invites a review of the evidence, the
question is one of fact.14
Factual findings of the Court of Appeals are binding on the Court.
Absent grave abuse of discretion, the Court will not disturb the
factual findings of the Court of Appeals.15 In Encarnacion v. Court
of Appeals,16 the Court held that, "unless there is a clearly grave or
whimsical abuse on its part, findings of fact of the appellate court
will not be disturbed. The Supreme Court will only exercise its
power of review in known exceptions such as gross
misappreciation of evidence or a total void of evidence."
After a painstaking review of the records of the case at bar, this
Court holds that petitioners’ stand is bereft of any evidence to
support it as both the RTC and CA had correctly found that the
proximate cause of the accident was the negligence of petitioner
Añalucas. The testimony of eyewitness Marlon Betiranta shows
that the victim, Reggie Nabua, was driving at a slow pace when he
was entering the Caltex station, to wit:
Q - You mean to say that you were immediately behind
this Gemini car?
A - Yes, sir.
 Q- Now, when this Gemini car was about to go to the
direction of the Caltex Station coming from the right
portion, what did you notice this car or the driver did?
A - He gave a sign that he was going at (sic)the left, sir.
Q - And did you notice the manner by which this driver
was driving at that time, when he made the sign?
A - Yes, sir.
Q - What?
A - He were (sic) just in a slow pace, sir.
Q - Now, Mr. Witness, when this vehicle Gemini met an
accident and have (sic) a collision you said, with the
other vehicle, please explain to the Court the type of
vehicle that had a collision with this Gemini?
A - It was a large tanker truck, sir.17
In addition, another eyewitness corroborated the testimony of
Betiranta that the victim was slowly driving his car towards the
gas station. He also emphasized that the truck which bumped the
Gemini car was very fast. Second eyewitness Teddy Villarama
testified, thus:
"Q - Now, you said, Mr. Witness that you saw this car
entering the gasoline station, can you tell the Court how
fast or the speed of this vehicle or at what phase (sic)
were they moving?
A - Very[,] very slow.
Q - How about the truck, did you notice what is the
phase (sic) of the truck?
A – The truck was very fast that it suddenly came in."18
Lastly, even petitioners’ own witness, PO3 Edgardo Talacay,
testified that petitioners’ truck left skid marks, which would not
be present if the truck was running in a normal speed, to wit:
Q - Do you know, as a traffic investigator, Mr. Witness,
what causes skid marks?
A - Well, the cause of skid marks is (sic), if the vehicle is
running in a speed greater that what the law is being
regulated (sic), it cause skid marks when you apply the
breaks.
Q - What about sudden application of breaks upon notice
of danger ahead, will it cause skid marks?
A- It will cause skid marks because your intention is to
stop your driven vehicle right then and there.
Q- Although the vehicle may not be running necessarily
beyond the lawful speed?
A - I think, if the vehicle is running in a normal speed,
skid marks would not be present in the mishap.
Q- Notwithstanding, the sudden application of breaks?
A- Yes, sir.
Court
Q - The skid marks, Mr. Witness, refer to the skid marks
made by the truck or the Isuzu Gemini?
A - Made by the truck, your Honor.
x x x x19
All told, this Court is convinced, and thus affirms the findings of
fact of the RTC and the CA that the proximate cause of the
accident was the negligence of petitioner Añalucas.
Having resolved the same, this Court shall now address the
defense of petitioner company that they exercised due diligence in
the selection and supervision of their employees. On this note, the
CA ruled that petitioners had failed to overturn the presumption of
negligence on the part of the employer, to wit:
In their defense, the appellants’ witnesses have admittedly
testified at length regarding the hiring and supervisory policies of
the appellant company. While they were able to amply
demonstrate the implantation of the company’s hiring procedure
insofar as appellant Jerry Añalucas was concerned, the same
witnesses failed to similarly individualize the company’s purported
supervisory policies. The introduction of evidence showing the
employer exercised the required amount of care in selecting its
employees is only half of the employer’s burden is (sic) overcome.
The question of diligent supervision depends on the circumstances
of employment, which, in the instant case was not sufficiently
proved by the appellants. In discounting merit from the
appellants’ second assignment of error, this Court is,
consequently, guided by the principle that the existence of hiring
procedure and supervisory policies cannot be casually invoked to
overturn the presumption of negligence on the part of the
employer.20
Article 2180 of the Civil Code provides:
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
xxxx
The responsibility treated in this article shall cease when the
persons herein mentioned prove they observed all the diligence of
a good father of a family to prevent damage.
It is thus clear that the employer of a negligent employee is liable
for the damages caused by the latter. When an injury is caused by
the negligence of an employee, there instantly arises a
presumption of the law that there was negligence on the part of
the employer, either in the selection of his employee or in the
supervision over him after such selection. However, the
presumption may be overcome by a clear showing on the part of
the employer that he has exercised the care and diligence of a
good father of a family in the selection and supervision of his
employee.21In other words, the burden of proof is on the
employer.22 Thus, petitioners must prove two things: first, that
they had exercised due diligence in the selection of petitioner
Añalucas, and second, that after hiring Añalucas, petitioners had
exercised due diligence in supervising him.
The question is: how does an employer prove that he indeed
exercised the diligence of a good father of a family in the selection
and supervision of his employee? The case of Metro Manila Transit
Corporation v. Court of Appeals23is instructive:
In fine, the party, whether plaintiff or defendant, who asserts the
affirmative of the issue has the burden of presenting at the trial
such amount of evidence required by law to obtain a favorable
judgment….In making proof in its or his case, it is paramount that
the best and most complete evidence is formally entered.
Coming now to the case at bar, while there is no rule which
requires that testimonial evidence, to hold sway, must be
corroborated by documentary evidence, inasmuch as the
witnesses’ testimonies dwelt on mere generalities, we cannot
consider the same as sufficiently persuasive proof that there was
observance of due diligence in the selection and supervision of
employees. Petitioner’s attempt to prove its "deligentissimi patris
familias" in the selection and supervision of employees through oral
evidence must fail as it was unable to buttress the same with any
other evidence, object or documentary, which might obviate the
apparent biased nature of the testimony.
Our view that the evidence for petitioner MMTC falls short of the
required evidentiary quantum as would convincingly and
undoubtedly prove its observance of the diligence of a good father
of a family has its precursor in the underlying rationale
pronounced in the earlier case of Central Taxicab Corp. vs. Ex-
Meralco Employees Transportation Co., et al., set amidst an almost
identical factual setting, where we held that:
xxxx
The failure of the defendant company to produce in court any
‘record’ or other documentary proof tending to establish that it
had exercised all the diligence of a good father of a family in the
selection and supervision of its drivers and buses,
notwithstanding the calls therefore by both the trial court and the
opposing counsel, argues strongly against its pretensions.
We are fully aware that there is no hard-and-fast rule on the
quantum of evidence needed to prove due observance of all the
diligence of a good father of a family as would constitute a valid
defense to the legal presumption of negligence on the part of an
employer or master whose employee has by his negligence, caused
damage to another. x x x (R)educing the testimony of Albert to its
proper proportion, we do not have enough trustworthy evidence left
to go by. We are of the considerable opinion, therefore, that the
believable evidence on the degree of care and diligence that has
been exercised in the selection and supervision of Roberto Leon y
Salazar, is not legally sufficient to overcome the presumption of
negligence against the defendant company. (Italics supplied.) 24
In the case at bar, while this Court may be satisfied that petitioner
company had exercised due diligence in the selection of petitioner
Añalucas, the focus now shifts as to whether or not petitioner
company had satisfied the test of due supervision.
Petitioner company’s attempt to prove that it had exercised due
diligence of a good father of a family in the supervision of
petitioner Añalucas is summarized in its Memorandum 25 and was
testified to by its Operations Manager, Chito Calauag, to wit:
1. The new employee was given formal/written papers as
to things expected from him as a driver; about driving
habits, about things he should do just in case and was
issued guidelines, circulars both from OMC Carriers
(Exhs. 6, 6-A, 6-B, 6-C, 6-D, 6-E) and from Petron (Exhs.
8, 8-A to 8-A-5);
2. That the circulars and guidelines are placed in each of
the tankers to see to it that they are brought to the
knowledge and attention of the drivers and helpers;
3. That every carbarn time, the Chief Mechanic and Asst.
Operations Manager check the tanker for any sign of
damage to ascertain if the driver had been involved in an
accident;
4. That every weekend, when the drivers are paid their
salaries/wages, the Cashier is made to examine the
licenses of the drivers to know if they had been issued
Traffic Violation Tickets;
5. That if the license has expired or a ticket had been
issued and has expired, the driver is grounded until the
licenses is (sic) renewed or the license, if confiscated has
been redeemed;
6. That, in the meantime, a substitute driver is assigned
to the tanker to temporarily take the place of the
grounded driver.26
After a thorough and extensive review of the records, this Court is
unconvinced that petitioner company had satisfactorily discharged
its burden. The alleged Memorandum (Exhibit 6) alluded to by
petitioner company amounts to nothing more than a "reminder
memo on offenses punishable by dismissal,"27 wherein specific
offenses are spelled out to which erring employees may be
punished by the company. Likewise, the alleged circulars 28 from
Petron amount to nothing more than minutes of the "Haulers
Meeting," a list of "Hot Spots" and a "Table of Penalties." These
circulars do not, in any way, concern safety procedures to prevent
accident or damage to property or injury to people on the road. It
bears to stress that the existence of supervisory policies cannot be
casually invoked to overturn the presumption of negligence on the
part of the employer.29
The testimonies relating to the checking of damages during
carbarn time, the inspection if drivers were given traffic violation
tickets and inspection of the validity of the drivers’ licenses are all
oral evidence without any object or documentary evidence to
support them. Like in Metro Transit, this Court is unable to
accept the self-serving nature of the testimonies without any other
evidence. The alleged daily inspections conducted were not
supported by any evidence on record. Moreover, even the seminars
regarding safety and driving,30 allegedly conducted by petitioners’
witness, Max Pagsaligan, were not satisfactorily established in
evidence. Specifically, there is no record that petitioner Añalucas
attended such seminars.
Normally, employers keep files concerning the qualifications, work
experience, training, evaluation, and discipline of their
employees.31 The failure of petitioners to put forth evidence to
substantiate the testimonies of the witnesses is certainly fatal to
its cause.
Having resolved the same, this Court shall now address the issue
of damages. Petitioners contend that the CA erred when it affirmed
the RTC’s award of P60,000.00 as death indemnity and
P100,000.00 as moral damages. Petitioners contend that such an
award was contrary to prevailing jurisprudence. In addition,
petitioners also argue that the award of attorney’s fees was
without legal basis.
The same is meritorious.
Death indemnity has been fixed by jurisprudence at
P50,000.00.32 Hence, the amount awarded by the RTC and the CA
must be reduced accordingly. On the issue of moral damages,
prevailing jurisprudence fixes moral damages of P50,000.00 for
death.33 It must be stressed that moral damages are not intended
to enrich a plaintiff at the expense of the defendant. 34 They are
awarded to allow the plaintiff to obtain means, diversion or
amusements that will serve to alleviate the moral suffering he/she
has undergone due to the defendant’s culpable action and must,
perforce, be proportional to the suffering inflicted. 35 Thus, given
the circumstances of the case at bar, an award of P50,000.00 as
moral damages is proper.
Next, the rule on the award of attorney's fees is that there must be
a justification for the same. In the absence of a statement why
attorney's fees were awarded, the same should be disallowed. 36 On
this note, after reading through the text of the CA decision, this
Court finds that the same is bereft of any findings of fact and law
to justify the award of attorney's fees. While it may be safe to
surmise that the RTC granted attorney’s fees as a consequence of
its grant of exemplary damages, such cannot be said for the CA,
since the same deleted the award of exemplary damages after
finding that petitioner Añalucas was not grossly negligent. The CA
did not explain why it was still awarding attorney’s fees to
respondents, therefore, such an award must be deleted.
While petitioners did not put in error the award of actual
damages, this Court feels that the same should nevertheless be
reviewed as an appellate court is clothed with ample authority to
review rulings even if they are not assigned as errors. This is
especially so if the court finds that their consideration is
necessary in arriving at a just decision of the case before it. 37
For one to be entitled to actual damages, it is necessary to prove
the actual amount of loss with a reasonable degree of certainty,
premised upon competent proof and the best evidence obtainable
by the injured party. 38 Actual damages are such compensation or
damages for an injury that will put the injured party in the
position in which he had been before he was injured. They pertain
to such injuries or losses that are actually sustained and
susceptible of measurement. To justify an award of actual
damages, there must be competent proof of the actual amount of
loss. Credence can be given only to claims which are duly
supported by receipts.39
In the case at bar, respondents only submitted the following
evidence to substantiate their claim for actual damages:
Provisional Receipt No. 773, dated August 13, 1995, issued
by La Funeraria Novaliches. (Exhibit "A")
xxxx
In sharp contrast with the situation obtaining in People v.
Teehankee, where the prosecution merely presented evidence to
show the fact of the victim's graduation from high school and the
fact of his enrollment in a flying school, the spouses Rosales did
not content themselves with simply establishing Liza Rosalie's
enrollment at UP Integrated School. They presented evidence to
show that Liza Rosalie was a good student, promising artist, and
obedient child. She consistently performed well in her studies
since grade school. A survey taken in 1984 when Liza Rosalie was
twelve years old showed that she had good study habits and
attitudes. Cleofe Chi, guidance counselor of the University of the
Philippines Integrated School, described Liza Rosalie as
personable, well-liked, and with a balanced personality. Professor
Alfredo Rebillon, a faculty member of the University of the
Philippines College of Fine Arts, who organized workshops which
Liza Rosalie attended in 1982 and 1983, testified that Liza Rosalie
had the potential of eventually becoming an artist. Professor
Rebillon's testimony is more than sufficiently established by the
51 samples of Liza Rosalie's watercolor, charcoal, and pencil
drawings submitted as exhibits by the spouses Rosales. Neither
MMTC nor Pedro Musa controverted this evidence. 44

Official Receipt Nos. 105675, dated August 12, 1995, issued In the case at bar, respondents only testified to the fact that the
by Philippine Memorial Park Inc. for payment of interment victim, Reggie Nabua, was a freshman taking up Industrial
fees received from respondents. (Exhibit "B") Engineering at the Technological Institute of the Philippines in
Cubao.45 Unlike in Metro Transit where evidence of good academic
record, extra-curricular activities, and varied interests were
Official Receipt No. 105656, dated August 8, 1995, issued by presented in court, herein respondents offered no such evidence.
Philippine Memorial Park Inc. for payment of interment fees Hence, the CA was correct when it deleted the award of
received from respondents. (Exhibit "B-1") compensatory damages amounting to P2,000,000.00, as the same
is without any basis.
Letter-Certification, dated August 17, 1995 from Philippine
WHEREFORE, the instant petition is PARTIALLY GRANTED. The
Memorial Park, Inc. to certify the amount of the lot used for
Decision of the Court of Appeals in CA-G.R. CV No. 60034
the burial of Mr. Reggie Nabua. (Exhibit "C")
is AFFIRMED with MODIFICATION. The award of death indemnity
is REDUCED to P50,000.00. The award of actual damages is
Official Receipt No. 10596, dated August 4, 1995, issued by hereby REDUCED to P59,173.50. The award of moral damages is
Fairview Polymedic Clinic for emergency treatment of Reggie likewise REDUCED to P50,000.00. The award of attorney’s fees is
Nabua. (Exhibit "D") DELETED. All other awards of the Court of Appeals
are AFFIRMED. Following jurisprudence,46 petitioners are ordered
to PAY legal interest of 6% per annum from the date of
TOTAL promulgation of the Decision dated January 19, 1998 of the
Regional Trial Court, National Capital Judicial Region, Branch
Based on the foregoing, the RTC erred when it awarded the 224, Quezon City and 12% per annum from the time the Decision
amount of P110,000.00 as actual damages, as the said amount of this Court attains finality, on all sums awarded until their full
was not duly substantiated with receipts. Hence, the amount of satisfaction.
actual damages that can only be recovered is P59,173.50.
SO ORDERED.
Lastly, although respondents did not appeal the CA Decision, they
now pray in their Memorandum40 that this Court reinstate the
RTC award of P2,000,000.00 as compensatory damages which
was deleted by the CA.41Respondents point out that the victim,
Reggie Nabua, was 18 years old and at the time of his death, a
freshman taking up Industrial Engineering. On this point, Metro
Manila Transit Corporation v. Court of Appeals 42 is instructive, to
wit:

x x x Art. 2206 of the Civil Code provides that in addition to the

indemnity for death caused by a crime or quasi delict, the
"defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the
latter; . . ." Compensation of this nature is awarded not for loss of
earnings but for loss of capacity to earn money. Evidence must be
presented that the victim, if not yet employed at the time of death,
was reasonably certain to complete training for a specific
profession. In  People v. Teehankee,  no award of compensation for
loss of earning capacity was granted to the heirs of a college
freshman because there was no sufficient evidence on record to
show that the victim would eventually become a professional
pilot. But compensation should be allowed for loss of earning
capacity resulting from the death of a minor who has not yet
commenced employment or training for a specific profession if
sufficient evidence is presented to establish the amount thereof x
x x.431avvphi1
G.R. No. 84751 June 6, 1990
SPOUSES EDUARDO and ANN AGUSTIN, petitioners,  P128,000.00 after reassessment. Under date of
vs.
HON. COURT OF APPEALS and LABRADOR DEVELOPMENT
CORPORATION, respondents.
This petition for review on certiorari impugns the decision of the
Court of Appeals, dated March 28, 1988, with the following
decretal portion:
WHEREFORE, the present appeal is accordingly
resolved deleting the adjudicated award of
P20,000.00 as exemplary damages, and
otherwise by AFFIRMING the Decision dated
October 10, 1985 in Civil Case No. Q-42390
entitled "Labrador Development Corporation vs.
Sps. Eduardo Agustin, et al." in all other
respects.
Without pronouncement as to costs. 1
Said judgment of respondent court is based on the findings of fact
set out in its decision thus:
Plaintiff-appellee, being a subdivision developer,
owned Lot 14, Block 1 of the San Pedro
Compound IV at Tandang Sora, Quezon City,
under Transfer Certificate of Title No. 277209.
On November 7, 1981, plaintiff-appellee agreed
to sell said parcel of land to defendants-
appellants on a package deal together with a
residential house per House Plan Model B-203
to be constructed thereon for the sum of
P202,980.00 (Exh. 'B'). As therein stipulated,
the defendants-appellants were to pay
P42,980.00 as equity-P30,133.00 as down
payment and the balance of P12,847.00 upon
completion and de very of the property, the
other P160,000.00 to have been funded through
a Pag-Ibig Fund loan to be applied for by
defendants-appellants. Central to the above was
a stipulation that in the event the housing loan
be insufficient to pay the full contract price
owing, they shall pay the same in cash on or
before occupancy and acceptance of the
housing unit (ref. Exh. 'B', para. [e]). The
agreement further provided —
(f) Failure of the Vendee to comply with any or
all of the above stipulations shall ipso facto
cancel this contract to sell; and thereupon, this
contract to sell or any other contract executed
in connection thereof, shall be of no further
force and effect; and the title to the property, if
already transferred in the name of the Vendee,
shall automatically revert to the Vendor.
The foregoing stipulation encompassed the
necessity of transferring title to the lot to
defendants-appellants as an accommodation to
enable their application for a housing loan in
their names.
Hence, plaintiff-appellee executed a deed of sale
over the lot (Exh. 'C') in favor of defendants-
appellants, without additional consideration
beyond the P30,133.00 down payment adverted
to, and the issuance to said defendants-
appellants of Transfer Certificate of title No.
29435 * (Exh. 'D'). Thusly accommodated,
defendants-appellants applied for a
P160,000.00 housing loan with the First
Summa Savings and Mortgage Bank as an
accredited financing institution.
After initial approval in the amount applied for,
the Pag-ibig housing loan was downgraded to
December 18, 1982, plaintiff-appellee apprised
defendants-appellants of said development
(Exh. 'F') enclosing the formal bank December
16, 1982 letter (Exh. 'E') requiring a co-
borrower related within the fourth degree of
consanguinity should the defendants-appellants
desire approval of an increased loan amount.
Defendants-appellants appear to have disdained
a reply to plaintiff-appellee's said letter. Thus,
under date of December 28, 1982, plaintiff-
appellee again wrote a follow- up letter to
defendants-appellants (Exh. 'G') affording the
latter time to decide on their options, on pain of
enforcement of the terms of the contract to sell.
Failing reaction from defendants-appellants
thereto, plaintiff-appellee resorted to
enforcement of the contractual stipulations
under date of March 1, 1983 (Exh. 'H') and
remitted an enclosed check for P30,133.00
(Exh. 'I') representing the equity paid in by
defendants-appellants. The latter accepted said
check and deposited same into their account.
Instead of reconveyance of title to the lot,
defendants-appellants however sought time to
buy the property; plaintiff-appellee agreed
provided that payment be effected in cash.
Defendants-appellants failed to make such
payment in cash, despite the lapse of a second
30-day period afforded therefor. Thereupon,
plaintiff-appellee demanded anew for
reconveyance in a July 27, 1984 letter (Exh. 'J').
On August 8, 1984, plaintiff-appellee filed Civil
Case No. Q42390 for reconveyance and damage.
In answer, defendants-appellants maintained
inter alia that approval of a P160,000.00
housing loan had been assured upon
completion of the house with proof of its
delivery and acceptance, but that acceptance
could not be reasonably given by them in that
certain specifications for the housing unit had
not been complied with. 2
After trial on the merits, the lower court rendered judgment in
favor of private respondent, the dispositive part whereof reads:
WHEREFORE, judgment is hereby rendered
ordering defendants, jointly and severally:
a) to reconvey to plaintiff the parcel of land
covered by Transfer Certificate of Title No.
284735 ** of the Register of Deeds, Quezon
City;
b) to pay plaintiff the sum of P20,000.00 as
exemplary damages;
c) to pay plaintiff the sum of P5,000.00 as
attorney's fees, plus costs of the suit. 3
which judgment, as earlier stated, was affirmed by respondent
court but with the deletion of the award of exemplary damages.
On August 22, 1988, respondent court denied petitioners' motion
for reconsideration, hence this present petition raising the
following issues:
I
 The 'Contract to Sell' dated November 7, 1981
creates a reciprocal obligation between Labrador
Development Corporation, as seller, and
spouses Eduardo and Ann Agustin, as buyer, of
the questioned house and lot.
II
The failure of Labrador Development
Corporation (LADECO) to complete construction
of the housing unit pursuant to the 'Contract to
Sell' constitutes a substantial and serious
breach thereof as would bar LADECO from
executing the option of cancellation (rescission)
of the 'Contract to Sell' under Article 1191 of
the Civil Code.
III
The justifiable refusal of Spouses Agustin to
sign the 'House Acceptance Form' certifying that
they accept the house as 100% complete
constitutes merely a slight or casual breach of
the 'Contract to Sell' which does not warrant the
unilateral cancellation (rescission,) of the
contract under par. 4 (f) thereof and Article
1191 of the Civil Code.
IV
The remedy of reconveyance of title of the
property in question cannot be availed of by
LADECO as there was no valid, binding and
effective cancellation (rescission) of the
'Contract to Sell'.
V unpaid amount of P160,000.00, clearly indicate their intention not
Private respondent LADECO is not entitled to
attorney's fees of P5,000.00 under the facts and
circumstances of the case. 4
We agree with the Court of Appeals that reconveyance is proper in
this case. Herein petitioners are already barred from questioning
the validity of the cancellation of the contract to sell by their
acquiescence thereto. Their acceptance and encashment of the
checks representing the total amount paid by them to private
respondent as equity, coupled by their failure to object or file an
action, despite due notice, to question the validity of the
extrajudicial cancellation of said contract and to ask for specific
performance for more than one year, clearly show that they
assented to the same.
Furthermore, after receiving the check refunding their equity
payment incident to the reconveyance desired by private
respondents, petitioners, disregarding the original agreement of
the parties, offered to purchase anew the property in question to
which private respondent agreed. This novatory agreement,
however, was not consummated as petitioners again failed to raise
and pay the purchase price despite two 30-day extensions. They
never at that juncture questioned the propriety of the rescission
and reconveyance desired by private respondent. Obviously,
extrajudicial rescission produces legal effects where the other
party does not oppose it. 5
Moreover, even assuming that there was no implied assent to the
cancellation of the contract to sell, reconveyance is still proper.
The non-fulfillment by petitioners of their obligation to pay, which
is a suspensive condition to the obligation of private respondent to
sell and deliver the house and lot, rendered the contract to sell
and the subsequent contract executed pursuant thereto ineffective
and without force and effect.
The contract between petitioners and private respondent is not an
absolute sale but a conditional sale or contract to sell, whereby
ownership is retained by the vender until full payment of the
purchase price. Without such full payment, there is no obligation
to sell and deliver. The subsequent execution of the deed of
absolute sale and the transfer and registration of the title of the lot
in the name of petitioners is of no moment, considering that the
same, by mutual agreement of the parties, was made without
consideration and solely for the purpose of facilitating the
approval and release of the PAG-IBIG loan and not for the purpose
of actually transferring ownership.
Under the contract to sell, the obligation of petitioners to
completely pay the purchase price is a condition precedent to the
obligation of private respondent to sell and deliver the house as
provided in the contract to sell, which specifically states:
5. Upon complete payment of the VENDEE/S of
the purchase price herein above stated, and
faithful compliance with all his obligations
stipulated therein, the VENDOR, agrees to
execute a valid deed of sale in favor of the
VENDEE/S and cause the issuance of the
Certificate of Title in the name of the latter, free
from all liens and encumbrances except those
provided for in the Land Registration Act and
other laws, Presidential Decrees, General
Orders, Letters of Instruction, Zoning
Ordinances, and the attached Deed of
Restrictions, which form part of this
Contract; ... 6
The repeated failure and refusal of petitioners, despite due notice,
to look for a co- borrower related to them within the fourth degree
of consanguinity as required by the bank in order to prevent the
downgrading of the loan, nor to communicate to private
respondent the arrangement they intended to make regarding the
difference between the approved loan of P128,000.00 and the
to perform their obligations under the contract. This constituted
not only a substantial or serious breach, but prevented the
happening of the condition precedent which would give rise to the
obligation of private respondent to sell and transfer ownership of
the house and lot to petitioners.
We have repeatedly ruled that:
In contracts to sell, where ownership is retained
by the seller and is not to pass until the full
payment of the price, such payment, as we said
is a positive suspensive condition, the failure of
which is not a breach, casual or serious, but
simply an event that prevented the obligation of
the vendor to convey title from acquiring
binding force, in accordance with Article 1117
of the Old Civil Code. To argue that there was
only a casual breach is to proceed from the
assumption that the contract is one of absolute
sale, where non-payment is a resolutory
condition, which is not the case.
... appellant overlooks that its contract with
appellee Myers is not the ordinary sale
envisaged by Article 1592, transferring
ownership simultaneously with the delivery of
the real property sold, but one in which the
vendor retained ownership of the immovable
object of the sale, merely undertaking to convey
it provided the buyer strictly complied with the
terms of the contract (see paragraph [d], ante,
page 5). In suing to recover possession of the
building from Maritime, appellee Myers is not
after the resolution or setting aside of the
contract and the restoration of the parties to the
status quo ante, as contemplated by Article
1592, but precisely enforcing the provisions of
the agreement that it is no longer obligated to
part with the ownership or possession of the
 property because Maritime failed to comply with
the specific condition precedent, which is to pay
the installment as they fell due.

The distinction between contracts of sale and

contracts to sell with reserved title has been
recognized by this Court in repeated decisions
upholding the power of promissors under
contracts to sell in case of failure of the other
party to complete payment, to extrajudicially
terminate the operation of the contract, refuse
conveyance and retain the sums or installments
already received, where such rights are
expressly provided for, as in the case at bar. 7

We repeat, the obligation of petitioners to fully comply with their

undertakings was necessarily determinative of the obligation of
private respondent to complete the construction of the house.
Where one of the parties to a contract did not perform the
undertaking which he was bound by the terms of the agreement to
perform, he is not entitled to insist upon the performance of the
other party. 8 For failure of one party to assume and perform the
obligation imposed on him, the other patty does not incur in
delay. 9

Correspondingly, we reject the argument of petitioners that the

failure of private respondent to complete the construction of the
house constitutes a substantial breach as would bar the latter
from cancelling the contract. Instead, the facts of this case
persuade us to hold that petitioners were merely posturing when,
after being required to reconvey the premises, they came up with
belated complaints about the imperfections or incompleteness of
the house involved, in the same manner that they also pretended
to be interested in purchasing the property but failed to do so after
importuning private respondents to grant them extensions of time
for that purpose.

With the foregoing circumstances, reconveyance is proper and

exigible pursuant to Paragraph 4 (f) of the contract to sell quoted
in the decision of respondent court, supra, and on the basic
principle that when an obligation has been extinguished or
resolved, it is the duty of the court to require the parties to
surrender whatever they may have received from the other, and
the parties must be restored, as far as practicable, to their original
situation. 10

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 aimed 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. 11

WHEREFORE, except for the award of attorney's fees which is

hereby deleted, the decision of respondent Court of Appeals is
hereby AFFIRMED.

SO ORDERED.
G.R. No. 164749
ROMULO ABROGAR and ERLINDA ABROGAR, Petitioners  participation had been limited to providing financial assistance to
vs
COSMOS BOTTLING COMPANY and INTERGAMES, INC.,
Respondents
DECISION
BERSAMIN, J.:
This case involves a claim for damages arising from the negligence
causing the death of a participant in an organized marathon
bumped by a passenger jeepney on the route of the race. The
issues revolve on whether the organizer and the sponsor of the
marathon were guilty of negligence, and, if so, was their
negligence the proximate cause of the death of the participant; on
whether the negligence of the driver of the passenger jeepney was
an efficient intervening cause; on whether the doctrine of
assumption of risk was applicable to the fatality; and on whether
the heirs of the fatality can recover damages for loss of earning
capacity of the latter who, being then a minor, had no gainful
employment.
The Case
By this appeal, the parents of the late Rommel Abrogar (Rommel),
a marathon runner, seek the review and reversal of the decision
promulgated on March l 0, 2004,1 whereby the Court of Appeals
(CA) reversed and set aside the judgment rendered in their favor
on May 10, 1991 by the Regional Trial Court (RTC), Branch 83, in
Quezon City2finding and declaring respondents Cosmos Bottling
Company (Cosmos), a domestic soft-drinks company whose
products included Pop Cola, and Intergames, Inc. (Intergames),
also a domestic corporation organizing and supervising the 1st
Pop Cola Junior Marathon" held on June 15, 1980 in Quezon City,
solidarily liable for damages arising from the untimely death of
Rommel, then a minor 18 years of age,3 after being bumped by a
recklessly driven passenger jeepney along the route of the
marathon.
Antecedents
The CA narrated the antecedents in the assailed judgment, 4 viz.:
[T]o promote the sales of "Pop Cola", defendant Cosmos, jointly
with Intergames, organized an endurance running contest billed
as the "1st Pop Cola Junior Marathon" scheduled to be held on
June 15, 1980. The organizers plotted a 10-kilometer course
starting from the premises of the Interim Batasang Pambansa (IBP
for brevity), through public roads and streets, to end at the
Quezon Memorial Circle. Plaintiffs' son Rommel applied with the
defendants to be allowed to participate in the contest and after
complying with defendants' requirements, his application was
accepted and he was given an official number. Consequently, on
June 15, 1980 at the designated time of the marathon, Rommel
joined the other participants and ran the course plotted by the
defendants. As it turned out, the plaintiffs' (sic) further alleged,
the defendants failed to provide adequate safety and precautionary
measures and to exercise the diligence required of them by the
nature of their undertaking, in that they failed to insulate and
protect the participants of the marathon from the vehicular and
other dangers along the marathon route. Rommel was bumped by
a jeepney that was then running along the route of the marathon
on Don Mariano Marcos A venue (DMMA for brevity), and in spite
of medical treatment given to him at the Ospital ng Bagong
Lipunan, he died later that same day due to severe head injuries.
On October 28, 1980, the petitioners sued the respondents in the
then Court of First Instance of Rizal (Quezon City) to recover
various damages for the untimely death of Rommel (i.e., actual
and compensatory damages, loss of earning capacity, moral
damages, exemplary damages, attorney's fees and expenses
oflitigation).5
Cosmos denied liability, insisting that it had not been the
organizer of the marathon, but only its sponsor; that its
Intergames;6 that the financial assistance it had extended to
Intergames, the sole organizer of the marathon, had been in
answer to the Government's call to the private sector to help
promote sports development and physical fitness; 7 that the
petitioners had no cause of action against it because there was no
privity of contract between the participants in the marathon and
Cosmos; and that it had nothing to do with the organization,
operation and running of the event.8
As counterclaim, Cosmos sought attorney's fees and expenses of
litigation from the petitioners for their being unwarrantedly
included as a defendant in the case. It averred a cross-claim
against Intergames, stating that the latter had guaranteed to hold
Cosmos "completely free and harmless from any claim or action
for liability for any injuries or bodily harm which may be
sustained by any of the entries in the '1st Pop Cola Junior
Marathon' or for any damage to the property or properties of third
parties, which may likewise arise in the course of the race." 9 Thus,
Cosmos sought to hold Intergames solely liable should the claim of
the petitioners prosper.10
On its part, Intergames asserted that Rommel's death had been an
accident exclusively caused by the negligence of the jeepney
driver; that it was not responsible for the accident; that as the
marathon organizer, it did not assume the responsibilities of an
insurer of the safety of the participants; that it nevertheless
caused the participants to be covered with accident insurance, but
the petitioners refused to accept the proceeds thereof; 11 that there
could be no cause of action against it because the acceptance and
approval of Rommel's application to join the marathon had been
conditioned on his waiver of all rights and causes of action arising
from his participation in the marathon; 12 that it exercised due
diligence in the conduct of the race that the circumstances called
for and was appropriate, it having availed of all its know-how and
expertise, including the adoption and implementation of all known
and possible safety and precautionary measures in order to
protect the participants from injuries arising from vehicular and
other forms of accidents;13 and, accordingly, the complaint should
be dismissed.
In their reply and answer to counterclaim, the petitioners averred
that contrary to its claims, Intergames did not provide adequate
measures for the safety and protection of the race participants,
considering that motor vehicles were traversing the race route and
the participants were made to run along the flow of traffic, instead
of against it; that Intergames did not provide adequate traffic
marshals to secure the safety and protection of the
participants;14that Intergames could not limit its liability on the
basis of the accident insurance policies it had secured to cover the
race participants; that the waiver signed by Rommel could not be
a basis for denying liability because the same was null and void
for being contrary to law, morals, customs and public
policy;15 that their complaint sufficiently stated a cause of action
because in no way could they be held liable for attorney's fees,
litigation expenses or any other relief due to their having abided
by the law and having acted honestly, fairly, in good faith by
according to Intergames its due, as demanded by the facts and
circumstances.16
At the pre-trial held on April 12, 1981, the parties agreed that the
principal issue was whether or not Cosmos and lntergames were
liable for the death of Rommel because of negligence in conducting
the marathon.17
Judgment of the RTC
In its decision dated May 10, 1991,18 the RTC ruled as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs-
spouses Romulo Abrogar and Erlinda Abrogar and against
defendants Cosmos Bottling Company, Inc. and Intergames, Inc.,
ordering both defendants, jointly and severally, to pay and deliver
to the plaintiffs the amounts of Twenty Eight Thousand Sixty One
Pesos and Sixty Three Centavos (₱28,061.63) as actual damages;
One Hundred Thousand Pesos (₱100,000.00) as moral damages;
Fifty Thousand Pesos (₱50,000.00) as exemplary damages and Ten
Percent (10%) of the total amount of One Hundred Seventy Eight
Thousand Sixty One Pesos and Sixty Three Centavos
(₱178,061,63) or Seventeen Thousand Eight Hundred Six Pesos
and Sixteen Centavos (₱17,806.16) as attorney's fees.
On the cross-claim of defendant Cosmos Bottling Company, Inc.,
defendant Intergames, Inc, is hereby ordered to reimburse to the
former any and all amounts which may be recovered by the
plaintiffs from it by virtue of this Decision.
SO ORDERED.
The RTC observed that the safeguards allegedly instituted by
Intergames in conducting the marathon had fallen short of the
yardstick to satisfy the requirements of due diligence as called for
by and appropriate under the circumstances; that the accident
had happened because of inadequate preparation and Intergames'
failure to exercise due diligence;19 that the respondents could not
be excused from liability by hiding behind the waiver executed by
Rommel and the permission given to him by his parents because
the waiver could only be effective for risks inherent in the
marathon, such a:s stumbling, heat stroke, heart attack during
the race, severe exhaustion and similar occurrences; 20 that the
liability of the respondents towards the participants and third
persons was solidary, because Cosmos, the sponsor of the event,
had been the principal mover of the event, and, as such, had
derived benefits from the marathon that in turn had carried
responsibilities towards the participants and the public; that the
respondents' agreement to free Cosmos from any liability had been
an agreement binding only between them, and did not bind third
persons; and that Cosmos had a cause of action against
Intergames for whatever could be recovered by the petitioners from
Cosmos.21
Decision of the CA
All the parties appealed to the CA.
The petitioners contended that the RTC erred in not awarding
damages for loss of earning capacity on the part of Rommel for the
reason that such damages were not recoverable due to Rommel
not yet having finished his schooling; and that it would be
premature to award such damages upon the assumption that he
would finish college and be gainfully employed. 22
On their part, Cosmos and Intergames separately raised
essentially similar errors on the part of the RTC, to wit: (1) in
holding them liable for the death of Rommel; (2) in finding them
negligent in conducting the marathon; (3) in holding that Rommel
and his parents did not assume the risks of the marathon; (4) in
not holding that the sole and proximate cause of the death of
Rommel was the negligence of the jeepney driver; and (5) in
making them liable, jointly and solidarily, for damages, attorney's
fees and expenses of litigation. 23
The CA reduced the issues to four, namely:
1. Whether or not appellant Intergames was negligent in its
conduct of the "1st Pop Cola Junior Marathon" held on June 15,
1980 and if so, whether its negligence was the proximate cause of
the death of Rommel Abrogar.
2. Whether or not appellant Cosmos can be held jointly and
solidarily liable with appellant Intergames for the death of Rommel
Abrogar, assuming that appellant Intergames is found to have
been negligent in the conduct of the Pop Cola marathon and such
negligence was the proximate cause of the death of Rommel
Abrogar.
3. Whether or not the appellants Abrogar are entitled to be
compensated for the "loss of earning capacity" of their son
Rommel.
4. Whether or not the appellants Abrogar are entitled to the
actual, moral, and exemplary damages granted to them by the
Trial Court.24
In its assailed judgment promulgated on March 10, 2004, 25 the CA
ruled as follows:
As to the first issue, this Court finds that appellant Intergames
was not negligent in organizing the said marathon.
Negligence is the omission to do something which a reasonable
man, guided upon those considerations which ordinarily regulate
the conduct to human affairs, would do, or doing something which
a prudent and reasonable man would not do.
The whole theory of negligence presuppose some uniform standard
of behavior which must be an external and objective one, rather
than the individual judgment good or bad, of the particular actor;
it must be, as far as possible, the same for all persons; and at the
same time make proper allowance for the risk apparent to the
actor for his capacity to meet it, and for the circumstances under
which he must act.
The question as to what would constitute the conduct of a prudent
man in a given situation must of course be always determined in
the light of human experience and of the acts involved in the
particular case.
In the case at bar, the trial court erred in finding that the
appellant Intergames failed to satisfy the requirements of due
diligence in the conduct of the race.
The trial court in its decision said that the accident in question
could have been avoided if the route of the marathon was blocked
off from the regular traffic, instead of allowing the runners to run
together with the flow of traffic. Thus, the said court considered
the appellant Intergames at fault for proceeding with the
marathon despite the fact that the Northern Police District, MPF,
Quezon City did not allow the road to be blocked off from traffic.
This Court finds that the standard of conduct used by the trial
court is not the ordinary conduct of a prudent man in such a
given situation. According to the said court, the only way to
conduct a safe road race is to block off the traffic for the duration
of the event and direct the cars and public utilities to take
alternative routes in the meantime that the marathon event is
being held. Such standard is too high and is even inapplicable in
the case at bar because, there is no alternative route from IBP to
Don Mariano Marcos to Quezon City Hall.
The Civil Code provides that if the law or contract does not state
the diligence which is to be observed in the performance of an
obligation that which is expected of a good father of the family
shall only be required. Accordingly, appellant Intergames is only
bound to exercise the degree of care that would be exercised by an
ordinarily careful and prudent man in the same position and
circumstances and not that of the cautious man of more than
average prudence. Hence, appellant Intergames is only expected to
observe ordinary diligence and not extraordinary diligence.
In this case, the marathon was allowed by the Northern Police
District, MPF, Quezon City on the condition that the road should
not be blocked off from traffic. Appellant Intergames had no
choice. It had to comply with it or else the said marathon would
not be allowed at all.
The trial court erred in contending that appellant Intergames
should have looked for alternative places in Metro Manila given
the condition set by the Northern Police District, MPF, Quezon
City; precisely because as Mr. Jose Castro has testified the said
route was found to be the best route after a careful study and
consideration of all the factors involved. Having conducted several
marathon events in said route, appellant Intergames as well as the
volunteer groups and the other agencies involved were in fact
familiar with the said route. And assuming that there was an
alternative place suitable for the said race, the question is would
they be allowed to block off the said road from traffic?
Also, the trial court erred in stating that there was no adequate
number of marshals, police officers and personnel to man the race
so as to prevent injury to the participants.
The general rule is that the party who relies on negligence for his
cause of action has the burden of proving the existence of the
same, otherwise his action fails.
Here, the appellants-spouses failed to prove that there was
inadequate number of marshals, police officers, and personnel
because they failed to prove what number is considered adequate.
This court considers that seven (7) traffic operatives, five (5)
motorcycle policemen, fifteen (15) patrolmen deployed along the
route, fifteen (15) boyscouts, twelve (12) CA Ts, twenty (20)
barangay tanods, three (3) ambulances and three (3) medical
teams were sufficient to stage a safe marathon.
Moreover, the failure of Mr. Jose R. Castro, Jr. to produce records
of the lists of those constituting the volunteer help during the
marathon is not fatal to the case considering that one of the
volunteers, Victor Landingin of the Citizens Traffic Action (CTA)
testified in court that CTA fielded five units on June 15, 1980,
assigned as follows: (1) at the sphere head; (2) at the finish line;
(3) tail ender; (4) & (5) roving.
The trial court again erred in concluding that the admission of
P/Lt. Jesus Lipana, head of the traffic policemen assigned at the
marathon, that he showed up only at the finish line means that he
did not bother to check on his men and did not give them
appropriate instructions. P/Lt. Lipana in his testimony explained
that he did not need to be in the start of the race because he had
predesignated another capable police officer to start the race.
In addition, this Court finds that the precautionary measures and
preparations adopted by appellant Intergames were sufficient
considering the circumstances surrounding the case.
Appellant Intergames, using its previous experiences in
conducting safe and successful road races, took all the necessary
precautions and made all the preparations for the race. The initial
preparations included: determination of the route to be taken; and
an ocular inspection of the same to see if it was well-paved,
whether it had less corners for easy communication and
coordination, and whether it was wide enough to accommodate
runners and transportation. Appellant Intergames choose the Don
Mariano Marcos Avenue primarily because it was well-paved; had
wide lanes to accommodate runners and vehicular traffic; had less
corners thus facilitating easy communication and coordination
among the organizers and cooperating agencies; and was familiar
to the race organizers and operating agencies. The race covered a
ten-kilometer course from the IBP lane to the Quezon City Hall
Compound passing through the Don Mariano Marcos A venue,
which constituted the main stretch of the route. Appellant
Intergames scheduled the marathon on a Sunday morning, when
traffic along the route was at its lightest. Permission was sought
from the then Quezon City Mayor Adelina Rodriguez for the use of
the Quezon City Hall Grandstand and the street fronting it as the
finish line. Police assistance was also obtained to control and
supervise the traffic. The Quezon City Traffic Detachment took
charge of traffic control by assigning policemen to the traffic route.
The particular unit assigned during the race underwent extensive
training and had been involved in past marathons, including
marathons in highly crowded areas. The Philippine Boy Scouts
tasked to assist the police and monitor the progress of the race;
and Citizens Traffic Action Group tasked with the monitoring of
the race, which assigned five units consisting of ten operatives, to
provide communication and assistance were likewise obtained.
Finally, medical equipments and personnel were also requested
from Camp Aguinaldo, the Philippine Red Cross and the Hospital
ng Bagong Lipunan.
Neither does this Court find the appellant Intergames' conduct of
the marathon the proximate cause of the death of Rommel
Abrogar. Proximate cause has been defined as that which, in
natural and continuous sequence, unbroken by any efficient
intervening cause, produces injury, and without which the result
would not have occurred.
It appears that Rommel Abrogar, while running on Don Mariano
Marcos A venue and after passing the Philippine Atomic Energy
Commission Building, was bumped by a jeepney which apparently
was racing against a minibus and the two vehicles were trying to
crowd each other. In fact, a criminal case was filed against the
jeepney driver by reason of his having killed Rommel Abrogar.
This proves that the death of Rommel Abrogar was caused by the
negligence of the jeepney driver. Rommel Abrogar cannot be
faulted because he was performing a legal act; the marathon was
conducted with the permission and approval of all the city officials
involved. He had the right to be there. Neither can the appellant
Intergames be faulted, as the organizer of the said marathon,
because it was not negligent in conducting the marathon.
Given the facts of this case, We believe that no amount of
precaution can prevent such an accident. Even if there were
fences or barriers to separate the lanes for the runners and for the
vehicles, it would not prevent such an accident in the event that a
negligent driver loses control of his vehicle. And even if the road
was blocked off from traffic, it would still not prevent such an
accident, if a jeepney driver on the other side of the road races
with another vehicle loses control of his wheel and as a result hits
a person on the other side of the road. Another way of saying this
is: A defendant's tort cannot be considered a legal cause of
plaintiffs damage if that damage would have occurred just the
same even though the defendant's tort had not been committed.
This Court also finds the doctrine of assumption of risk applicable
in the case at bar. As explained by a well-known authority on
torts:
"The general principle underlying the defense of assumption of
risk is that a plaintiff who voluntarily assumes a risk of harm
arising from the negligent or reckless conduct of the defendant
cannot recover for such harm. The defense may arise where a
plaintiff, by contract or otherwise, expressly agrees to accept a risk
or harm arising from the defendant's conduct, or where a plaintiff
who fully understands a risk or harm caused by the defendant's
conduct, or by a condition created by the defendant, voluntarily
chooses to enter or remain, or to permit his property to enter or
remain, within the area of such risk, under circumstances
manifesting his willingness to accept the risk.
xxxx
"Assumption of the risk in its primary sense arises by assuming
through contract, which may be implied, the risk of a known
danger. Its essence is venturousness. It implies intentional
exposure to a known danger; It embraces a mental state of
willingness; It pertains to the preliminary conduct of getting into a
dangerous employment or relationship, it means voluntary
incurring the risk of an accident, which may or may not occur,
and which the person assuming the risk may be careful to avoid;
and it defeats recovery because it is a previous abandonment of
the right to complain if an accident occurs.
"Of course, if the defense is predicated upon an express agreement
the agreement must be valid, and in the light of this qualification
the rule has been stated that a plaintiff who, by contract or
otherwise, expressly agreed to accept a risk of harm arising from
the defendant's negligent or reckless conduct, cannot recover for
such harm unless the agreement is invalid as contrary to public
policy.
xxxx
"The defense of assumption of risk presupposes: (1) that the
plaintiff had actual knowledge of the danger; (2) that he
understood and appreciated the risk from the danger; and (3) that
he voluntarily exposed himself to such risk. x x x
"The term 'risk' as used in this connection applies to known
dangers, and not to things from which danger may possibly flow.
The risk referred to is the particular risk, or one of the risks,
which the plaintiff accepted within the context of the situation in
which he placed himself and the question is whether the specific
conduct or condition which caused the injury was such a risk."
In this case, appellant Romulo Abrogar himself admitted that his
son, Rommel Abrogar, surveyed the route of the marathon and
even attended a briefing before the race. Consequently, he was
aware that the marathon would pass through a national road and
that the said road would not be blocked off from traffic. And
considering that he was already eighteen years of age, had
voluntarily participated in the marathon, with his parents'
consent, and was well aware of the traffic hazards along the route,
he thereby assumed all the risks of the race. This is precisely why
permission from the participant's parents, submission of a
medical certificate and a waiver of all rights and causes of action
arising from the participation in the marathon which the
participant or his heirs may have against appellant Intergames
were required as conditions in joining the marathon.
In the decision of the trial court, it stated that the risk mentioned
in the waiver signed by Rommel Abrogar only involved risks such
as stumbling, suffering heatstroke, heart attack and other similar
risks. It did not consider vehicular accident as one of the risks
included in the said waiver.
This Court does not agree. With respect to voluntary participation
in a sport, the doctrine of assumption of risk applies to any facet
of the activity inherent in it and to any open and obvious condition
of the place where it is carried on. We believe that the waiver
included vehicular accidents for the simple reason that it was a
road race run on public roads used by vehicles. Thus, it cannot be
denied that vehicular accidents are involved. It was not a track
race which is held on an oval and insulated from vehicular traffic.
In a road race, there is always the risk of runners being hit by
motor vehicles while they train or compete. That risk is inherent in
the sport and known to runners. It is a risk they assume every
time they voluntarily engage in their sport.
Furthermore, where a person voluntarily participates in a lawful
game or contest, he assumes the ordinary risks of such game or
contest so as to preclude recovery from the promoter or operator
of the game or contest for injury or death resulting therefrom.
Proprietors of amusements or of places where sports and games
are played are not insurers of safety of the public nor of their
patrons.
In McLeod Store v. Vinson 213 Ky 667, 281 SW 799 (1926), it was
held that a boy, seventeen years of age, of ordinary intelligence
and physique, who entered a race conducted by a department
store, the purpose of which was to secure guinea fowl which could
be turned in for cash prizes, had assumed the ordinary risks
incident thereto and was barred from recovering against the
department store for injuries suffered when, within catching
distance, he stopped to catch a guinea, and was tripped or
stumbled and fell to the pavement, six or eight others falling upon
him. The court further said: "In this (the race) he was a voluntary
participant. xxx The anticipated danger was as obvious to him as
it was to appellant (the department store). While not an adult, he
was practically 17 years of age, of ordinary intelligence, and
perfectly able to determine the risks ordinarily incident to such
games. An ordinary boy of that age is practically as well advised as
to the hazards of baseball, basketball, football, foot races and
other games of skill and endurance as is an adult
x x x."
In the case at bar, the "1st Pop Cola Junior Marathon" held on
June 15, 1980 was a race the winner of which was to represent
the country in the annual Spirit of Pheidippides Marathon Classic
in Greece, if he equals or breaks the 29-minute mark for the 10-
km. race. Thus, Rommel Abrogar having voluntarily participated
in the race, with his parents' consent, assumed all the risks of the
race.
Anent the second issue, this Court finds that appellant Cosmos
must also be absolved from any liability in the instant case.
This Court finds that the trial court erred in holding appellant
Cosmos liable for being the principal mover and resultant
beneficiary of the event.
In its decision it said that in view of the fact that appellant
Cosmos will be deriving certain benefits from the marathon event,
it has the responsibility to ensure the safety of all the participants
and the public. It further said that the stipulations in the contract
entered into by the two appellants, Cosmos and Intergames,
relieving the former from any liability does not bind third persons.
This Court does not agree with the reasoning of the trial court.
The sponsorship contract entered between appellant Cosmos and
appellant Intergames specifically states that:
1. COSMOS BOTTLING CORPORATION shall pay INTERGAMES
the amount of FIFTY FIVE THOUSAND PESOS (₱55,000.00)
representing full sponsorship fee and in consideration thereof,
INTERGAMES shall organize and stage a marathon race to be
called '1st POP COLA JUNIOR MARATHON.
xxxx
3. INTER GAMES shall draw up all the rules of the marathon race,
eligibility requirements of participants as well as provide all the
staff required in the organization and actual staging of the race. It
is understood that all said staff shall be considered under the
direct employ of INTERGAMES which shall have full control over
them.
xxxx
5. INTERGAMES shall secure all the necessary permits,
clearances, traffic and police assistance in all the areas covered by
the entire route of the '1st POP COLA JUNIOR MARATHON.
12. INTERGAMES shall hold COSMOS BOTTLING CORPORATION,
completely free and harmless from any claim or action for liability
for any injuries or bodily harm which may be sustained by any of
the entries in the '1st POP COLA JUNIOR MARATHON', or for any
damages to the property or properties of third parties, which may
likewise arise in the course of the race.
From the foregoing, it is crystal clear that the role of the appellant
Cosmos was limited to providing financial assistance in the form
of sponsorship. Appellant Cosmos' sponsorship was merely in
pursuance to the company's commitment for spo1is development
of the youth as well as for advertising purposes. The use of the
name Cosmos was done for advertising purposes only; it did not
mean that it was an organizer of the said marathon. As pointed
out by Intergames' President, Jose Castro Jr., appellant Cosmos
did not even have the right to suggest the location and the number
of runners.
To hold a defendant liable for torts, it must be clearly shown that
he is the proximate cause of the harm done to the plaintiff. The
nexus or connection of the cause and effect, between a negligent
act and the damage done, must be established by competent
evidence.
In this case, appellant Cosmos was not negligent in entering into a
contract with the appellant Intergames considering that the record
of the latter was clean and that it has conducted at least thirty
(30) road races.
Also there is no direct or immediate causal connection between
the financial sponsorship and the death of Rommel Abrogar. The
singular act of providing financial assistance without participating
in any manner in the conduct of the marathon cannot be palmed
off as such proximate cause. In fact, the appellant spouses never
relied on any representation that Cosmos organized the race. It
was not even a factor considered by the appellants-spouses in
allowing their son to join said marathon.
In view of the fact that both defendants are not liable for the death
of Rommel Abrogar, appellants-spouses are not entitled to actual,
moral, exemplary damages as well as for the "loss of earning
capacity" of their son. The third and fourth issues are thus moot
and academic.
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the judgment
appealed from must be, as it hereby is, REVERSED and SET
ASIDE, and another entered DISMISSING the complaint a quo.
The appellants shall bear their respective costs.
SO ORDERED.26
Issues
In this appeal, the petitioners submit that the CA gravely erred:
A.
x x x in reversing the RTC Decision, (and) in holding that
respondent Intergames was not negligent considering that:
1. Respondent Intergames failed to exercise the diligence of a good
father of the family in the conduct of the marathon in that it did
not block off from traffic the marathon route; and
2. Respondent Intergames' preparations for the race, including the
number of marshal during the marathon, were glaringly
inadequate to prevent the happening of the injury to its
participants.
B.
x x x in reversing the RTC Decision, (and) in holding that the
doctrine of assumption of risk finds application to the case at bar
even though getting hit or run over by a vehicle is not an inherent
risk in a marathon race. Even assuming arguendo that deceased
Abrogar made such waiver as claimed, still there can be no valid
waiver of one's right to life and limb for being against public
policy.
C.
x x x in reversing the RTC Decision, (and) in absolving respondent
Cosmos from liability to petitioners on the sole ground that
respondent Cosmos' contract with respondent Intergames
contained a stipulation exempting the former from liability.
D.
x x x m reversing the RTC Decision and consequently holding
respondents free from liability, (and) in not awarding petitioners
with actual, moral and exemplary damages for the death of their
child, Rommel Abrogar. 27
Ruling of the Court
The appeal is partly meritorious.
I reference to the personal judgment of the actor in the situation
Review of factual issues is allowed because of
the conflict between the findings of fact
by the RTC and the CA on the issue of negligence
The petitioners contend that Intergames was negligent; that
Cosmos as the sponsor and Intergames as the organizer of the
marathon both had the obligation to provide a reasonably safe
place for the conduct of the race byblocking the route of the race
from vehicular traffic and by providing adequate manpower and
personnel to ensure the safety of the participants; and that
Intergames had foreseen the harm posed by the situation but had
not exercised the diligence of a good father of a family to avoid the
risk;28 hence, for such omission, Intergames was negligent. 29
Refuting, Cosmos and Intergames submit that the latter as the
organizer was not negligent because it had undertaken all the
precautionary measures to ensure the safety of the race; and that
there was no duty on the part of the latter as the organizer to keep
a racecourse "free and clear from reasonably avoidable elements
that would [occasion] or have the probable tendency, to occasion
injury."30
The issue of whether one or both defendants were negligent is a
mixed issue of fact and law. Does this not restrict the Court
against reviewing the records in this appeal on certiorari in order
to settle the issue?
The Court can proceed to review the factual findings of the CA as
an exception to the general rule that it should not review issues of
fact on appeal on certiorari. We have recognized exceptions to the
rule that the findings of fact of the CA are conclusive and binding
in the following instances: (1) when the findings are grounded
entirely on speculation, surmises or conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3)
when there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of facts
are conflicting; (6) when in making its findings the CA went
beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the
findings are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the
respondent; (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on
record; and (11) when the CA manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion. 31 Considering that
the CA arrived at factual findings contrary to those of the trial
court, our review of the records in this appeal should have to be
made.
Negligence is the failure to observe for the protection of the
interests of another person that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such
other person suffers injury.32 Under Article 1173 of the Civil
Code, it consists of the "omission of that diligence which is
required by the nature of the obligation and corresponds with the
circumstances of the person, of the time and of the
place."33 The Civil Code makes liability for negligence clear under
Article 2176,34 and Article 20.35
To determine the existence of negligence, the following time-
honored test has been set in Picart v. Smith:36
The test by which to determine the existence of negligence in a
particular case may be stated as follows: Did the defendant in
doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence. The law
here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law.
The existence of negligence in a given case is not determined by
before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent
man in a given situation must of course be always determined in
the light of human experience and in view of the facts involved in
the particular case. Abstract speculation cannot here be of much
value but this much can be profitably said: Reasonable men
govern their conduct by the circumstances which are before them
or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care
only when there is something before them to suggest or warn of
danger. Could a prudent man, in the case under consideration,
foresee harm as a result of the course actually pursued? If so, it
was the duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by the ignoring of
the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper
criterion for determining the existence of negligence in a given
case is this: Conduct is said to be negligent when a prudent man
in the position of the tortfeasor would have foreseen that an effect
harmful to another was sufficiently probable to warrant his
foregoing the conduct or guarding against its
consequences.37 (bold underscoring supplied for emphasis)
A careful review of the evidence presented, particularly the
testimonies of the relevant witnesses, in accordance with the
foregoing guidelines reasonably leads to the conclusion that the
safety and precautionary measures undertaken by Intergames
were short of the diligence demanded by the circumstances of
persons, time and place under consideration. Hence, Intergames
as the organizer was guilty of negligence.
The race organized by Intergames was a junior marathon
participated in by young persons aged 14 to 18 years. It was
plotted to cover a distance of 10 kilometers, starting from the IBP
Lane,38 then going towards the Batasang Pambansa, and on to the
circular route towards the Don Mariano Marcos Highway, 39 and
then all the way back to the Quezon City Hall compound where
the finish line had been set.40 In staging the event, Intergames had
no employees of its own to man the race,41 and relied only on the
"cooperating agencies" and volunteers who had worked with it in
previous races.42 The cooperating agencies included the Quezon
City police, barangay tanods, volunteers from the Boy Scouts of
the Philippines, the Philippine National Red Cross, the Citizens
Traffic Action Group, and the medical teams of doctors and nurses
coming from the Office of the Surgeon General and the Ospital ng
Bagong Lipunan.43 According to Jose R. Castro, Jr., the President
of Intergames, the preparations for the event included conducting
an ocular inspection of the route of the race, 44 sending out letters
to the various cooperating agencies,45 securing permits from
proper authorities,46 putting up directional signs,47 and setting up
the water stations.48
We consider the "safeguards" employed and adopted by
Intergames not adequate to meet the requirement of due diligence.
For one, the police authorities specifically prohibited Intergames
from blocking Don Mariano Marcos Highway in order not to impair
road accessibility to the residential villages located beyond the IBP
Lanc.49
However, contrary to the findings of the CA, 50 Intergames had a
choice on where to stage the marathon, considering its admission
of the sole responsibility for the conduct of the event, including
the choice of location.
Moreover, the CA had no basis for holding that "the said route was
found to be the best route after a careful study and consideration
of all the factors involved."51 Castro, Jr. himself attested that the
route had been the best one only within the vicinity of the
Batasan Pambansa, to wit:
COURT
q Was there any specific reason from ... Was there any specific
reason why you used this route from Batasan to City Hall? Was
there any special reason?
a We have, your Honor, conducted for example the Milo Marathon
in that area in the Batasan Pambansa and we found it to be
relatively safer than any other areas within the vicinity. As a
matter of fact, we had more runners in the Milo Marathon at that
time and nothing happened, your Honor.52
The chosen route (IBP Lane, on to Don Mariano Marcos Highway,
and then to Quezon City Hall) was not the only route appropriate
for the marathon. In fact, Intergames came under no obligation to
use such route especially considering that the participants, who
were young and inexperienced runners, would be running
alongside moving vehicles.
Intergames further conceded that the marathon could have been
staged on a blocked-off route like Roxas Boulevard in Manila
where runners could run against the flow of vehicular
traffic.53 Castro, Jr. stated in that regard:
COURT TO WITNESS
q What law are you talking about when you say I cannot violate
the law?
a The police authority, your Honor, would not grant us permit
because that is one of the conditions that if we are to conduct a
race we should run the race in accordance with the flow of traffic.
q Did you not inform the police this is in accordance with the
standard safety measures for a marathon race?
a I believed we argued along that line but but (sic) again, if we
insist the police again would not grant us any permit like ... except
in the case of Roxas Boulevard when it is normally closed from 8
a.m. when you can run against the flow of traffic.
q You were aware for a runner to run on the same route of the
traffic would be risky because he would not know what is coming
behind him?
a I believed we talked of the risk, your Honor when the risk has
been minimized to a certain level. Yes, there is greater risk when
you run with the traffic than when you run against the traffic to a
certain level, it is correct but most of the races in Manila or
elsewhere are being run in accordance with the flow of the traffic.
xxxx
ATTY. VINLUAN
q Following the observation of the Court, considering the local
condition, you will agree with me the risks here are greater than in
the United States where drivers on the whole follow traffic rules?
a That is correct.
q And because of that fact, it is with all the more reason that you
should take all necessary precautions to insure the safety of the
runners?
a That is correct.54
xxxx
COURT:
xxxx
Q In your case in all the marathons that you had managed, how
many cases have you encountered where the routes are blocked
off for vehicular traffic?
A These are the International Marathon, Philippines Third World
Marathon and the Milo Marathon. We are blocking them to a
certain length of time.
Q What was the purpose of blocking the routes? Is it for the safety
of the runners or just a matter of convenience?
A In blocking off the route, Your Honor, it is light easier for the
runners to run without impediments to be rendered by the people
or by vehicles and at the same time it would be also advantageous
if the road will be blocked off for vehicle traffic permitted to us by
the traffic authorities.
Q So, in this case, you actually requested for the traffic authorities
to block off the route?
A As far as I remember we asked Sgt. Pascual to block off the
route but considering that it is the main artery to Fairview Village,
it would not be possible to block off the route since it will cause a
lot of inconvenience for the other people in those areas and
jeepney drivers.
Q In other words, if you have your way you would have opted to
block off the route.
A Yes, Your Honor.
Q But the fact is that the people did not agree.
A Yes, Your Honor, and it is stated in the permit given to us. 55
Based on the foregoing testimony of Castro, Jr., Intergames had
full awareness of the higher risks involved in staging the race
alongside running vehicles, and had the option to hold the race in
a route where such risks could be minimized, if not eliminated.
But it did not heed the danger already foreseen, if not expected,
and went ahead with staging the race along the plotted route on
Don Mariano Marcos Highway on the basis of its supposedly
familiarity with the route. Such familiarity of the organizer with
the route and the fact that previous races had been conducted
therein without any untoward incident56 were not in themselves
sufficient safeguards. The standards for avoidance of injury
through negligence further required Intergames to establish that it
did take adequate measures to avert the foreseen danger, but it
failed to do so.
Another failing on the part of Intergames was the patent
inadequacy of the personnel to man the route. As borne by the
records, Intergames had no personnel of its own for that purpose,
and relied exclusively on the assistance of volunteers, that is,
"seven (7) traffic operatives, five (5) motorcycle policemen, fifteen
(15) patrolmen deployed along the route, fifteen (15) boy scouts,
twelve (12) CATs, twenty (20) barangay tanods, three (3)
ambulances and three (3) medical teams" 57 to ensure the safety of
the young runners who would be running alongside moving
vehicular traffic, to make the event safe and well coordinated.
Although the party relying on negligence as his cause of action
had the burden of proving the existence of the same, Intergames'
coordination and supervision of the personnel sourced from the
cooperating agencies did not satisfy the diligence required by the
relevant circumstances. In this regard, it can be pointed out that
the number of deployed personnel, albeit sufficient to stage the
marathon, did not per se ensure the safe conduct of the race
without proof that such deployed volunteers had been properly
coordinated and instructed on their tasks.
That the proper coordination and instruction were crucial
elements for the safe conduct of the race was well known to
Intergames. Castro, Jr. stated as much, to wit:
ATTY. LOMBOS:
xxxx
Q You also said that if you block off one side of the road, it is
possible that it would be more convenient to hold the race in that
matter. Will you tell the Honorable Court if it is possible also to
hold a race safely if the road is not blocked off?
A Yes, sir.
Q How is it done.
A You can still run a race safely even if it is partially blocked off as
long as you have the necessary cooperation with the police
authorities, and the police assigned along the route of the race
and the police assigned would be there, this will contribute the
safety of the participants, and also the vehicular division, as long
as there are substantial publicities in the newspapers, normally
they will take the precautions in the use of the particular route of
the race.
Q Let me clarify this. Did you say that it is possible to hold a
marathon safely if you have this traffic assistance or coordination
even if the route is blocked or not blocked?
A It is preferable to have the route blocked but in some cases, it
would be impossible for the portions of the road to be blocked
totally. The route of the race could still be safe for runners if a
proper coordination or the agencies are notified especially police
detailees to man the particular stage.58
Sadly, Intergames' own evidence did not establish the conduct of
proper coordination and instruction. Castro, Jr. described the
action plan adopted by Intergames in the preparation for the race,
as follows:
COURT
a Did you have any rehearsal let us say the race was conducted on
June 15, now before June 15 you call a meeting of all these
runners so you can have more or less a map-up and you would
indicate or who will be stationed in their places etc. Did you have
such a rehearsal?
WITNESS
a It is not being done, your honor, but you have to specify them.
You meet with the group and you tell them that you wanted them
to be placed in their particular areas which we pointed out to
them for example in the case of the Barangay Tanod, I specifically
assigned them in the areas and we sat down and we met.
COURT
q Did you have any action, plan or brochure which would indicate
the assignment of each of the participating group?
WITNESS
a Normally, sir, many of the races don't have that except when
they called them to meeting either as a whole group or the entire
cooperating agency or meet them per group.
COURT
q Did you have a check list of the activities that would have to be
entered before the actual marathon some kind of system where
you will indicate this particular activity has to be checked etc. You
did not have that?
WITNESS
q Are you asking, your honor, as a race director of I will check this
because if I do that, I won't have a race because that is not being
done by any race director anywhere in the world?
COURT
I am interested in your planning activities.
q In other words, what planning activities did you perform before
the actual marathon?
a The planning activities we had, your honor, was to coordinate
with the different agencies involved informing them where they
would be more or less placed.
COURT
q Let us go to ... Who was supposed to be coordinating with you as
to the citizens action group who was your ... you were referring to
a person who was supposed to be manning these people and who
was the person whom you coordinate with the Traffic Action
Group?
WITNESS
a I can only remember his name ... his family name is Esguerra.
q How about with the Tanods?
a With the Tanods his name is Pedring Serrano.
q And with the Boys Scouts? (sic)
a And with the Boys Scouts of the Phils. (sic) it is Mr. Greg Panelo.
COURT
q When did you last meet rather how many times did you meet
with Esguerra before the marathon on June 15?
WITNESS
a The Citizens Traffic Action Group, your honor, had been with me
m previous races.
COURT
q I am asking you a specific question. I am not interested in the
Citizen Traffic Action Group. The marathon was on June 15, did
you meet with him on June 14, June 13 or June 12?
a We met once, your honor, I cannot remember the date.
q You don't recall how many days before?
a I cannot recall at the moment.
q How about with Mr. Serrano, how many times did you meet with
him before the race?
a If my mind does not fail me, your honor, I met him twice
because he lives just within our area and we always see each
other.
q How about with Panelo, how many times did you meet him?
a With Mr. Panelo, I did not meet with them, your honor.
q Was there an occasion where before the race you met with these
three people together since you did not meet with Panelo anytime?
Was there anytime where you met with Serrano and Esguerra
together?
WITNESS
a No, your honor.
COURT
g When you met once with Esguerra, where did you meet? What
place?
a I cannot recall at the moment, your honor, since it was already
been almost six years ago.
g How about Serrano, where did you meet him?
a We met in my place.
q From your house? He went in your house?
a Yes, your honor.
q So you did not have let us say a ... you don't have records of
your meetings with these people?
WITNESS
a With the Citizens Traffic Action, your honor?
COURT
a Yes.
WITNESS
a I don't have, your honor.
COURT
q Because you are familiar, I was just thinking this is an activity
which requires planning etc., what I was thinking when you said
this was never done in any part of the world but all activities it
has to be planned. There must be some planning, now are you
saying that in this particular case you had no written plan or
check list of activities what activities have to be implemented on a
certain point and time, who are the persons whom you must meet
in a certain point and time.
WITNESS
a Normally, we did not have that, your honor, except the check list
of all the things that should be ready at a particular time prior to
the race and the people to be involved and we have a check list to
see to it that everything would be in order before the start of the
race.
COURT
Proceed.
ATTY. VINLUAN
q Following the question of the Court Mr. Castro, did you meet
with Lt. Depano of the Police Department who were supposed to
supervise the police officers assigned to help during the race?
a I did not meet with him, sir.
q You did not meet with him?
a I did not meet with him.
q In fact, ever before or during the race you had no occasion to
talk to Lt. Depano. Is that correct?
a That is correct, sir.
ATTY. VINLUAN
Based on the question of the Court and your answer to the
question of the Court, are you trying to say that this planning
before any race of all these groups who have committed to help in
the race, this is not done in any part of the world?
WITNESS
a In the latter years when your race became bigger and bigger,
this is being done now slowly.
ATTY. VINLUAN
q But for this particular race you will admit that you failed to do it
when you have to coordinate and even have a dry run of the race
you failed to do all of that in this particular race, yes or no?
a Because there was ...
COURT
It was already answered by him when I asked him. The Court
has ... Everybody has a copy how of this time planner. Any activity
or even meeting a girlfriend or most people plan.
A TTY. F .M. LOMBOS
If your honor please, before we proceed ...
WITNESS
In the latter years, your honor, when your race became bigger and
bigger, this is being done now slowly.
q For this particular race you will admit that you failed to do it?
a Because there was no need, sir.59
Probably sensing that he might have thereby contradicted himself,
Castro, Jr. clarified on re-direct examination:
ATTY. LOMBOS
Q Now, you also responded to a question during the same hearing
and this appears on page 26 of the transcript that you did not
hold any rehearsal or dry run for this particular marathon. Could
you tell the Court why you did not hold any such rehearsal or dry
run?
A Because I believe there was no need for us to do that since we
have been doing this for many years and we have been the same
people, same organization with us for so many years conducting
several races including some races in that area consisting of
longer distances and consisting of more runners, a lot more
runners in that areay (sic) so these people, they know exactly what
to do and there was no need for us to have a rehearsal. I believe
this rehearsal would only be applicable if I am new and these
people are new then, we have to rehearse.
ATTY. LOMBOS
q You also stated Mr. Castro that you did not have any action plan
or brochure which you would indicate, an assignment of each of
the participating group as to what to do during the race. Will you
please explain what you meant when you said you have no action
plan or brochure?
WITNESS
a What I mean of action plan, I did not have any written action
plan but I was fully aware of what to do. I mean, those people did
not just go there out of nowhere. Obviously, there was an action
on my part because I have to communicate with them previously
and to tell them exactly what the race is all about; where to start;
where it would end, and that is the reason why we have the
ambulances, we have the Boy Scouts, we have the CT A, we have
the police, so it was very obvious that there was a plan of action
but not written because I know pretty well exactly what to do. I
was dealing with people who have been doing this for a long period
of time.60
While the level of trust Intergames had on its volunteers was
admirable, the coordination among the cooperating agencies was
predicated on circumstances unilaterally assumed by Intergames.
It was obvious that Intergames' inaction had been impelled by its
belief that it did not need any action plan because it had been
dealing with people who had been manning similar races for a
long period of time.
The evidence presented undoubtedly established that Intergames'
notion of coordination only involved informing the cooperating
agencies of the date of the race, the starting and ending points of
the route, and the places along the route to man. Intergames did
not conduct any general assembly with all of them, being content
with holding a few sporadic meetings with the leaders of the
coordinating agencies. It held no briefings of any kind on the
actual duties to be performed by each group of volunteers prior to
the race. It did not instruct the volunteers on how to minimize, if
not avert, the risks of danger in manning the race, despite such
being precisely why their assistance had been obtained in the first
place.
Intergames had no right to assume that the volunteers had
already been aware of what exactly they would be doing during the
race. It had the responsibility and duty to give to them the proper
instructions despite their experience from the past races it had
organized considering that the particular race related to runners
of a different level of experience, and involved different weather
and environmental conditions, and traffic situations. It should
have remembered that the personnel manning the race were not
its own employees paid to perform their tasks, but volunteers
whose nature of work was remotely associated with the safe
conduct of road races. Verily, that the volunteers showed up and
assumed their proper places or that they were sufficient in
number was not really enough. It is worthy to stress that proper
coordination in the context of the event did not consist in the mere
presence of the volunteers, but included making sure that they
had been properly instructed on their duties and tasks in order to
ensure the safety of the young runners.
It is relevant to note that the participants of the 1st Pop Cola
Junior Marathon were mostly minors aged 14 to 18 years joining a
race of that kind for the first time. The combined factors of their
youth, eagerness and inexperience ought to have put a reasonably
prudent organizer on higher guard as to their safety and security
needs during the race, especially considering Intergames'
awareness of the risks already foreseen and of other risks already
known to it as of similar events in the past organizer. There was
no question at all that a higher degree of diligence was required
given that practically all of the participants were children or
minors like Rommel; and that the law imposes a duty of care
towards children and minors even if ordinarily there was no such
duty under the same circumstances had the persons involved
been adults of sufficient discretion.61 In that respect, Intergames
did not observe the degree of care necessary as the organizer,
rendering it liable for negligence. As the Court has emphasized
in Corliss v. The Manila Railroad Company,62 where the danger is
great, a high degree of care is necessary, and the failure to observe
it is a want of ordinary care under the circumstances. 63
The circumstances of the persons, time and place required far
more than what Intergames undertook in staging the race. Due
diligence would have made a reasonably prudent organizer of the
race participated in by young, inexperienced or beginner runners
to conduct the race in a route suitably blocked off from vehicular
traffic for the safety and security not only of the participants but
the motoring public as well. Since the marathon would be run
alongside moving vehicular traffic, at the very least, Intergames
ought to have seen to the constant and closer coordination among
the personnel manning the route to prevent the foreseen risks
from befalling the participants. But this it sadly failed to do.
II
The negligence of Intergames as the organizer
was the proximate cause of the death of Rommel
As earlier mentioned, the CA found that Rommel, while running
the marathon on Don Mariano Marcos A venue and after passing
the Philippine Atomic Energy Commission Building, was bumped
by a passenger jeepney that was racing with a minibus and two
other vehicles as if trying to crowd each other out. As such, the
death of Rommel was caused by the negligence of the jeepney
driver.
Intergames staunchly insists that it was not liable, maintaining
that even assuming arguendo that it was negligent, the
negligence of the jeepney driver was the proximate cause of the
death of Rommel; hence, it should not be held liable.
Did the negligence of Intergames give rise to its liability for the
death of ommel notwithstanding the negligence of the jeepney
driver?
In order for liability from negligence to arise, there must be not
only proof of damage and negligence, but also proof that the
damage was the consequence of the negligence. The Court has
said in Vda. de Gregorio v. Go Chong Bing:64
x x x Negligence as a source of obligation both under the civil law
and in American cases was carefully considered and it was held:
We agree with counsel for appellant that under the Civil Code, as
under the generally accepted doctrine in the United States, the
plaintiff in an action such as that under consideration, in order to
establish his right to a recovery, must establish by competent
evidence:
(1) Damages to the plaintiff.
(2) Negligence by act or omission of which defendant personally or
some person for whose acts it must respond, was guilty.
(3) The connection of cause and effect between the negligence and
the damage." (Taylor vs. Manila Electric Railroad and Light
Co., supra, p. 15.)
In accordance with the decision of the Supreme Court of Spain, in
order that a person may be held guilty for damage through
negligence, it is necessary that there be an act or omission on the
part of the person who is to be charged with the liability and that
damage is produced by the said act or omission. 65 (Emphasis
supplied)
We hold that the negligence of Intergames was the proximate
cause despite the intervening negligence of the jeepney driver.
Proximate cause is "that which, in natural and continuous
sequence, unbroken by any new cause, produces an event, and
without which the event would not have occurred." 66 In Vda. de
Bataclan, et al. v. Medina,67 the Court, borrowing from American
Jurisprudence, has more extensively defined proximate
cause thusly:
"* * * 'that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury
and without which the result would not have occurred.' And more
comprehensively, 'the proximate legal cause is that acting first and
producing the injury, either immediately or by setting other events
in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate
predecessor, the final event in the chain immediately effecting the
injury as a natural and probable result of the cause which first
acted, under such circumstances that the person responsible for
the first event should, as an ordinarily prudent and intelligent
person, have reasonable ground to expect at the moment of his act
or default that an injury to some person might probably result
therefrom."68
To be considered the proximate cause of the injury, the negligence
need not be the event closest in time to the injury; a cause is still
proximate, although farther in time in relation to the injury, if the
happening of it set other foreseeable events into motion resulting
ultimately in the damage.69 According to an authority on civil
law:70"A prior and remote cause cannot be made the basis of an
action, if such remote cause did nothing more than furnish the
condition or give rise to the occasion by which the injury was made
possible, if there intervened between such prior or remote cause
and the injury a distinct, successive, unrelated and efficient cause,
even though such injury would not have happened but for such
condition or occasion. If no damage exists in the condition except
because of the independent cause, such condition was not the
proximate cause. And if an independent negligent act or defective
condition sets into operation the circumstances which result in
injury because of the prior defective condition, such act or condition
is the proximate cause."
Bouvier adds:
In many cases important questions arise as to which, in the chain
of acts tending to the production of a given state of things, is to be
considered the responsible cause. It is not merely distance of place
or of causation that renders a cause remote. The cause nearest in
the order of causation, without any efficient concurring cause to
produce the result, may be considered the direct cause. In the
course of decisions of cases in which it is necessary to determine
which of several causes is so far responsible for the happening of
the act or injury complained of, what is known as the doctrine of
proximate cause is constantly resorted to in order to ascertain
whether the act, omission, or negligence of the person whom it is
sought to hold liable was in law and in fact responsible for the
result which is the foundation of the action. 71
xxxx
The question of proximate cause is said to be determined, not by
the existence or non-existence of intervening events, but by their
character and the natural connection between the original act or
omission and the injurious consequences. When the intervening
cause is set in operation by the original negligence, such
negligence is still the proximate cause; x x x If the party guilty of
the first act of negligence might have anticipated the intervening
cause, the connection is not broken; x x x. Any number of causes
and effects may intervene, and if they arc such as might with
reasonable diligence have been foreseen, the last result is to be
considered as the proximate result. But whenever a new cause
intervenes, which is not a consequence of the first wrongful cause,
which is not under control of the wrongdoer, which could not have
been foreseen by the exercise of reasonable diligence, and except
for which the final injurious consequence could not have
happened, then such injurious consequence must be deemed too
remote; x x x.72 (bold underscoring supplied for emphasis)
An examination of the records in accordance with the foregoing
concepts supports the conclusions that the negligence of
Intergames was the proximate cause of the death of Rommel; and
that the negligence of the jeepney driver was not an efficient
intervening cause.
First of all, Intergames' negligence in not conducting the race in a
road blocked off from vehicular traffic, and in not properly
coordinating the volunteer personnel manning the marathon route
effectively set the stage for the injury complained of. The
submission that Intergames had previously conducted numerous
safe races did not persuasively demonstrate that it had exercised
due diligence because, as the trial court pointedly observed,
"[t]hey were only lucky that no accident occurred during the
previous marathon races but still the danger was there."73
Secondly, injury to the participants arising from an unfortunate
vehicular accident on the route was an event known to and
foreseeable by Intergames, which could then have been avoided if
only Intergames had acted with due diligence by undertaking the
race on a blocked-off road, and if only Intergames had enforced
and adopted more efficient supervision of the race through its
volunteers.
And, thirdly, the negligence of the jeepney driver, albeit an
intervening cause, was not efficient enough to break the chain of
connection between the negligence of Intergames and the
injurious consequence suffered by Rommel. An intervening cause,
to be considered efficient, must be "one not produced by a
wrongful act or omission, but independent of it, and adequate to
bring the injurious results. Any cause intervening between the first
wrongful cause and the final injury which might reasonably have
been foreseen or anticipated by the original wrongdoer is not such
an efficient intervening cause as will relieve the original wrong of its
character as the proximate cause of the final injury." 74
In fine, it was the duty of Intergames to guard Rommel against the
foreseen risk, but it failed to do so.
III
The doctrine of assumption of risk
had no application to Rommel
Unlike the R TC, the CA ruled that the doctrine of assumption of
risk applied herein; hence, it declared Intergames and Cosmos not
liable. The CA rendered the following rationalization to buttress its
ruling, to wit:
In this case, appellant Romulo Abrogar himself admitted that his
son, Rommel Abrogar, surveyed the route of the marathon and
even attended a briefing before the race. Consequently, he was
aware that the marathon would pass through a national road and
that the said road would not be blocked off from traffic. And
considering that he was already eighteen years of age, had
voluntarily participated in the marathon, with his parents'
consent, and was well aware of the traffic hazards along the route,
he thereby assumed all the risks of the race. This is precisely why
permission from the participant's parents, submission of a
medical certificate and a waiver of all rights and causes of action
arising from the participation in the marathon which the
participant or his heirs may have against appellant Intergames
were required as conditions in joining the marathon.
In the decision of the trial court, it stated that the risk mentioned
in the waiver signed by Rommel Abrogar only involved risks such
as stumbling, suffering heatstroke, heart attack and other similar
risks. It did not consider vehicular accident as one of the risks
included in the said waiver.
This Court does not agree. With respect to voluntary participation
in a sport, the doctrine of assumption of risk applies to any facet
of the activity inherent in it and to any open and obvious condition
of the place where it is carried on. We believe that the waiver
included vehicular accidents for the simple reason that it was a
road race run on public roads used by vehicles. Thus, it cannot be
denied that vehicular accidents are involved. It was not a track
race which is held on an oval and insulated from vehicular traffic.
In a road race, there is always the risk of runners being hit by
motor vehicles while they train or compete. That risk is inherent in
the sport and known to runners. It is a risk they assume every
time they voluntarily engage in their sport.
Furthermore, where a person voluntarily participates in a lawful
game or contest, he assumes the ordinary risks of such game or
contest so as to preclude recovery from the promoter or operator
of the game or contest for injury or death resulting therefrom.
Proprietors of amusements or of places where sports and games
are played are not insurers of safety of the public nor of their
patrons.
In Mc Leod Store v. Vinson 213 Ky 667, 281 SW 799 (1926), it was
held that a boy, seventeen years of age, of ordinary intelligence
and physique, who entered a race conducted by a department
store, the purpose of which was to secure guinea fowl which could
be turned in for cash prizes, had assumed the ordinary risks
incident thereto and was barred from recovering against the
department store for injuries suffered when, within catching
distance, he stopped to catch a guinea, and was tripped or
stumbled and fell to the pavement, six or eight others falling upon
him. The comi further said: "In this (the race) he was a voluntary
participant. x x x The anticipated danger was as obvious to him as
it was to appellant (the department store). While not an adult, he
was practically 17 years of age, of ordinary intelligence, and
perfectly able to determine the risks ordinarily incident to such
games. An ordinary boy of that age is practically as well advised as
to the hazards of baseball, basketball, football, foot races and
other games of skill and endurance as is an adult
x x x."
In the case at bar, the "1st Pop Cola Junior Marathon" held on
June 15, 1980 was a race the winner of which was to represent
the country in the annual Spirit of Pheidippides Marathon Classic
in Greece, if he equals or breaks the 29-minute mark for the 19-
km. race. Thus, Rommel Abrogar having voluntarily participated
in the race, with his parents' consent, assumed all the risks of the
race.75
The doctrine of assumption of risk means that one who voluntarily
exposes himself to an obvious, known and appreciated danger
assumes the risk of injury that may result therefrom. 76 It rests on
the fact that the person injured has consented to relieve the
defendant of an obligation of conduct toward him and to take his
chance of injury from a known risk, and whether the former has
exercised proper caution or not is immaterial. 77 In other words, it
is based on voluntary consent, express or implied, to accept
danger of a known and appreciated risk; it may sometimes include
acceptance of risk arising from the defendant's negligence, but one
does not ordinarily assume risk of any negligence which he does
not know and appreciate.78 As a defense in negligence cases,
therefore, the doctrine requires the concurrence of three elements,
namely: (1) the plaintiff must know that the risk is present; (2) he
must further understand its nature; and (3) his choice to incur it
must be free and voluntary. 79 According to Prosser:80"Knowledge of
the risk is the watchword of assumption of risk."
Contrary to the notion of the CA, the concurrence of the three
elements was not shown to exist. Rommel could not have assumed
the risk of death when he participated in the race because death
was neither a known nor normal risk incident to running a race.
Although he had surveyed the route prior to the race and should
be presumed to know that he would be running the race alongside
moving vehicular traffic, such knowledge of the general danger
was not enough, for some authorities have required that the
knowledge must be of the specific risk that caused the harm to
him.81 In theory, the standard to be applied is a subjective one,
and should be geared to the particular plaintiff and his situation,
rather than that of the reasonable person of ordinary prudence
who appears in contributory negligence.82 He could not have
appreciated the risk of being fatally struck by any moving vehicle
while running the race. Instead, he had every reason to believe
that the organizer had taken adequate measures to guard all
participants against any danger from the fact that he was
participating in an organized marathon. Stated differently, nobody
in his right mind, including minors like him, would have joined
the marathon if he had known of or appreciated the risk of harm
or even death from vehicular accident while running in the
organized running event. Without question, a marathon route safe
and free from foreseeable risks was the reasonable expectation of
every runner participating in an organized running event.
Neither was the waiver by Rommel, then a minor, an effective form
of express or implied consent in the context of the doctrine of
assumption of risk. There is ample authority, cited in Prosser, 83 to
the effect that a person does not comprehend the risk involved in
a known situation because of his youth,84 or lack of information or
experience,85 and thus will not be taken to consent to assume the
risk.
Clearly, the doctrine of assumption of risk does not apply to bar
recovery by the petitioners.
IV
Cosmos is not liable for the negligence
of Intergames as the organizer
Nonetheless, the CA did not err in absolving Cosmos from liability.
The sponsorship of the marathon by Cosmos was limited to
financing the race. Cosmos did nothing beyond that, and did not
involve itself at all in the preparations for the actual conduct of
the race. This verity was expressly confirmed by Intergames,
through Castro, Jr., who declared as follows:
COURT
q Do you discuss all your preparation with Cosmos Bottling
Company?
a As far as the Cosmos Bottling Company (sic) was a sponsor as to
the actual conduct of the race, it is my responsibility. The conduct
of the race is my responsibility. The sponsor has nothing to do as
well as its code of the race because they are not the ones running.
I was the one running. The responsibility of Cosmos was just to
provide the sponsor's money.
COURT
q They have no right to who (sic) suggest the location, the number
of runners, you decide these yourself without consulting them?
a Yes, your honor.86
We uphold the finding by the CA that the role of Cosmos was to
pursue its corporate commitment to sports development of the
youth as well as to serve the need for advertising its business. In
the absence of evidence showing that Cosmos had a hand in the
organization of the race, and took part in the determination of the
route for the race and the adoption of the action plan, including
the safety and security measures for the benefit of the runners, we
cannot but conclude that the requirement for the direct or
immediate causal connection between the financial sponsorship of
Cosmos and the death of Rommel simply did not exist. Indeed,
Cosmos' mere sponsorship of the race was, legally speaking, too
remote to be the efficient and proximate cause of the injurious
consequences.
V the heirs of a deceased non-working victim simply because
Damages
Article 2202 of the Civil Code lists the damages that the plaintiffs
in a suit upon crimes and quasi-delicts can recover from the
defendant, viz.:
Art. 2202. In crimes and quasi-delicts, the defendant shall be
liable for all damages which are the natural and probable
consequences of the act or omission complained of. It is not
necessary that such damages have been foreseen or could have
reasonably been foreseen by the defendant.
Accordingly, Intergames was liable for all damages that were the
natural and probable consequences of its negligence. In its
judgment, the RTC explained the award of damages in favor of the
petitioners, as follows:
As borne by the evidence on record, the plaintiffs incurred
medical, hospitalization and burial expenses for their son in this
aggregate amount of ₱28,061.65 (Exhibits "D'', "D-1" and "D-2"). In
instituting this case, they have paid their lawyer ₱5,000 as initial
deposit, their arrangement being that they would pay attorney's
fees to the extent of 10% of whatever amount would be awarded to
them in this case.
For the loss of a son, it is unquestionable that plaintiffs suffered
untold grief which should entitle them to recover moral damages,
and this Court believes that if only to assuage somehow their
untold grief but not necessarily to compensate them to the fullest,
the nominal amount of ₱l00,00.00 should be paid by the
defendants.
For failure to adopt elementary and basic precautionary measure
to insure the safety of the participants so that sponsors and
organizers of sports events should exercise utmost diligence in
preventing injury to the participants and the public as well,
exemplary damages should also be paid by the defendants and
this Court considers the amount of ₱50,000.00
as reasonable.87
Although we will not disturb the foregoing findings and
determinations, we need to add to the justification for the grant of
exemplary damages. Article 2231 of the Civil Code stipulates that
exemplary damages are to be awarded in cases of quasi-delict if
the defendant acted with gross negligence. The foregoing
characterization by the RTC indicated that Intergames' negligence
was gross. We agree with the characterization. Gross negligence,
according to Mendoza v. Spouses Gomez,88 is the absence of care
or diligence as to amount to a reckless disregard of the safety of
persons or property; it evinces a thoughtless disregard of
consequences without exerting any effort to avoid them. Indeed,
the failure of Intergames to adopt the basic precautionary
measures for the safety of the minor participants like Rommel was
in reckless disregard of their safety. Conduct is reckless when it is
an extreme departure from ordinary care, in a situation in which a
high degree of danger is apparent; it must be more than any mere
mistake resulting from inexperience, excitement, or confusion,
and more than mere thoughtlessness or inadvertence, or simple
inattention.89 The RTC did not recognize the right of the petitioners
to recover the loss of earning capacity of Rommel. It should have,
for doing so would have conformed to jurisprudence whereby the
Court has unhesitatingly allowed such recovery in respect of
children, students and other non-working or still unemployed
victims. The legal basis for doing so is Article 2206 (l) of the Civil
Code, which stipulates that the defendant "shall be liable for the
loss of the earning capacity of the deceased, and the indemnity
shall be paid to the heirs of the latter; such indemnity shall in every
case be assessed and awarded by the court, unless the deceased
on account of permanent physical disability not caused by the
defendant, had no earning capacity at the time of his death."
Indeed, damages for loss of earning capacity may be awarded to
earning capacity, not necessarily actual earning, may be lost.
In Metro Manila Transit Corporation v. Court of Appeals, 90 damages
for loss of earning capacity were granted to the heirs of a third-
year high school student of the University of the Philippines
Integrated School who had been killed when she was hit and run
over by the petitioner's passenger bus as she crossed Katipunan
Avenue in Quezon City. The Court justified the grant in this wise:
Compensation of this nature is awarded not for loss of earnings
but for loss of capacity to earn money. Evidence must be
presented that the victim, if not yet employed at the time of death,
was reasonably certain to complete training for a specific
profession. In People v. Teehankee, no award of compensation for
loss of earning capacity was granted to the heirs of a college
freshman because there was no sufficient evidence on record to
show that the victim would eventually become a professional pilot.
But compensation should be allowed for loss of earning capacity
resulting from the death of a minor who has not yet commenced
employment or training for a specific profession if sufficient
evidence is presented to establish the amount thereor. 91 (bold
underscoring supplied for emphasis)
In People v. Sanchez,92 damages for loss of earning capacity was
also allowed to the heirs of the victims of rape with homicide
despite the lack of sufficient evidence to establish what they would
have earned had they not been killed. The Court rationalized its
judgment with the following observations:
Both Sarmenta and Gomez were senior agriculture students at
UPLB, the country's leading educational institution in
agriculture.1âwphi1 As reasonably assumed by the trial court,
both victims would have graduated in due course. Undeniably,
their untimely death deprived them of their future time and
earning capacity. For these deprivation, their heirs are entitled to
compensation. xxxx. However, considering that Sarmenta and
Gomez would have graduated in due time from a reputable
university, it would not be unreasonable to assume that in 1993
they would have earned more than the minimum wage. All factors
considered, the Court believes that it is fair and reasonable to fix
the monthly income that the two would have earned in 1993 at
₱8,000.000 per month (or ₱96,000.00/year) and their deductible
living and other incidental expenses at ₱3,000.00 per month (or
₱36,000.00/year).93 (bold underscoring supplied for emphasis)
In Perena v. Zarate,94 the Court fixed damages for loss of earning
capacity to be paid to the heirs of the 15-year-old high school
student of Don Bosco Technical Institute killed when a moving
train hit the school van ferrying him to school while it was
traversing the railroad tracks. The RTC and the CA had awarded
damages for loss of earning capacity computed on the basis of the
minimum wage in effect at the time of his death. Upholding said
findings, the Court opined:
absolved COSMOS BOTTLING COMPANY, INC. from
liability; REVERSES and SETS ASIDE the decision as
to INTERGAMES, INC., and REINSTATES as to it the judgment
rendered on May 10, 1991 by the Regional Trial Court, Branch 83,
in Quezon City subject to
the MODIFICATIONS that INTERGAMES, INC. is ORDERED TO
PAY to the petitioners, in addition to the aw3:rds thereby allowed:
(a) the sum of ₱l13,484.52 as damages for the loss of Rommel
Abrogar's earning capacity; (b) interest of 6% per annum on the
actual damages, moral damages, exemplary damages and loss of
earning capacity reckoned from May 10, 1991 until full payment;
(c) compounded interest of 6% per annum from the finality of this
decision until full payment; and (d) costs of suit.
SO ORDERED.

x x x, the fact that Aaron was then without a history of earnings

should not be taken against his parents and in favor of the
defendants whose negligence not only cost Aaron his life and his
right to work and earn money, but also deprived his parents of
their right to his presence and his services as well. x x x.
Accordingly, we emphatically hold in favor of the indemnification
for Aaron's loss of earning capacity despite him having been
unemployed, because compensation of this nature is awarded not
for loss of time or earnings but for loss of the deceased's power or
ability to earn money.

The petitioners sufficiently showed that Rommel was, at the time

of his untimely but much lamented death, able-bodied, in good
physical and mental state, and a student in good standing. 95 It
should be reasonable to assume that Rommel would have finished
his schooling and would turn out to be a useful and productive
person had he not died. Under the foregoing jurisprudence, the
petitioners should be compensated for losing Rommel's power or
ability to earn. The basis for the computation of earning capacity
is not what he would have become or what he would have wanted
to be if not for his untimely death, but the minimum wage in effect
at the time of his death. The formula for this purpose is:

Net Earning Capacity = Life Expectancy x [Gross Annual Income

less Necessary Living Expenses ]96

Life expectancy is equivalent to 2/3 multiplied by the difference of

80 and the age of the deceased. Since Rommel was 18 years of age
at the time of his death, his life expectancy was 41 years. His
projected gross annual income, computed based on the minimum
wage for workers in the non-agricultural sector in effect at the
time of his death,97then fixed at ₱l4.00/day, is ₱5,535.83. Allowing
for necessary living expenses of 50% of his projected gross annual
income, his total net earning capacity is ₱l13,484.52.

Article 2211 of the Civil Code expressly provides that interest, as

a part of damages, may be awarded in crimes and quasi-delicts at
the discretion of the court. The rate of interest provided under
Article 2209 of the Civil Code is 6% per annum in the absence of
stipulation to the contrary. The legal interest rate of 6% per
annum is to be imposed upon the total amounts herein awarded
from the time of the judgment of the RTC on May 10, 1991 until
finality of judgment.98 Moreover, pursuant to Article 221299 of
the Civil Code, the legal interest rate of 6o/o per annum is to be
further imposed on the interest earned up to the time this
judgment of the Court becomes final and executory until its full
satisfaction.100

Article 2208 of the Civil Code expressly allows the recovery of

attorney's fees and expenses of litigation when exemplary damages
have been awarded.1âwphi1 Thus, we uphold the RTC's allocation
of attorney's fees in favor of the petitioners equivalent to 10% of
the total amount to be recovered, inclusive of the damages for loss
of earning capacity and interests, which we consider to be
reasonable under the circumstances.

WHEREFORE, the Court PARTLY AFFIRMS the decision

promulgated on March 10, 2004 to the extent that it

G.R. No. 160110               June 18, 2014
MARIANO C. MENDOZA and ELVIRA LIM, Petitioners,  Petitioners, on the other hand, presented Teresita Gutierrez
vs.
SPOUSES LEONORA J. GOMEZ and GABRIEL V.
GOMEZ, Respondents.
DECISION
PEREZ, J.:
Assailed in the present appeal by certiorari is the Decision 1 dated
29 September 2003 of the Special Fourth Division of the Court of
Appeals (CA) in CA-G.R. CV No. 71877, which affirmed with
modification the Decision2 dated 31 January 2001 of the Regional
Trial Court (RTC), Branch 172, Valenzuela City in Civil Case No.
5352-V-97, and which effectively allowed the award of actual,
moral, and exemplary damages, as well as attorney's fees and
costs of the suit in favor of respondent Spouses Leonora and
Gabriel Gomez (respondents).
Antecedent Facts
On 7 March 1997, an Isuzu Elf truck (Isuzu truck) with plate
number UAW 582,3 owned by respondent Leonora J. Gomez
(Leonora)4 and driven by Antenojenes Perez (Perez), 5 was hit by a
Mayamy Transportation bus (Mayamy bus) with temporary plate
number 1376-1280,6 registered under the name of petitioner
Elvira Lim (Lim)7 and driven by petitioner Mariano C. Mendoza
(Mendoza).8
Owing to the incident, an Information for reckless imprudence
resulting in damage to property and multiple physical injuries was
filed against Mendoza. 9 Mendoza, however, eluded arrest, thus,
respondents filed a separate complaint for damages against
Mendoza and Lim, seeking actual damages, compensation for lost
income, moral damages, exemplary damages, attorney’s fees and
costs of the suit.10 This was docketed as Civil Case No. 5352-V-97.
According to PO1 Melchor F. Rosales (PO1 Rosales), investigating
officer of the case, at around 5:30 a.m., the Isuzu truck, coming
from Katipunan Road and heading towards E. Rodriguez, Sr.
Avenue, was travelling along the downward portion of Boni
Serrano Avenue when, upon reaching the corner of Riviera Street,
fronting St. Ignatius Village, its left front portion was hit by the
Mayamy bus.11 According to PO1 Rosales, the Mayamy bus, while
traversing the opposite lane, intruded on the lane occupied by the
Isuzu truck.12
PO1 Rosales also reported that Mendoza tried to escape by
speeding away, but he was apprehended in Katipunan Road
corner C. P. Garcia Avenue by one Traffic Enforcer Galante and a
security guard of St. Ignatius Village.13
As a result of the incident, Perez,as well as the helpers on board
the Isuzu truck, namely Melchor V. Anla (Anla), Romeo J. Banca
(Banca), and Jimmy Repisada (Repisada), sustained injuries
necessitating medical treatment amounting to ₱11,267.35,which
amount was shouldered by respondents. Moreover, the Isuzu
truck sustained extensive damages on its cowl, chassis, lights and
steering wheel, amounting to ₱142,757.40.14
Additionally, respondents averred that the mishap deprived them
of a daily income of ₱1,000.00. Engaged in the business of buying
plastic scraps and delivering them to recycling plants,
respondents claimed that the Isuzu truck was vital in the
furtherance of their business.
For their part, petitioners capitalized on the issue of ownership of
the bus in question. Respondents argued that although the
registered owner was Lim, the actual owner of the bus was SPO1
Cirilo Enriquez (Enriquez), who had the bus attached with
Mayamy Transportation Company (Mayamy Transport) under the
so-called "kabit system." Respondents then impleaded both Lim
and Enriquez.
(Gutierrez), whose testimony was offered to prove that Mayamy
Bus or Mayamy Transport is a business name registered under
her name, and that such business is a sole proprietorship. Such
was presented by petitioners to rebut the allegation of respondents
that Mayamy Transport is a corporation;15 and to show, moreover,
that although Gutierrez is the sole proprietor of Mayamy
Transport, she was not impleaded by respondents in the case at
bar.16
After weighing the evidence, the RTC found Mendoza liable for
direct personal negligence under Article 2176 of the Civil Code,
and it also found Lim vicariously liable under Article 2180 of the
same Code.
As regards Lim, the RTC relied on the Certificate of Registration
issued by the Land Transportation Office on 9 December 1996 17 in
concluding that she is the registered owner of the bus in question.
Although actually owned by Enriquez, following the established
principle in transportation law, Lim, as the registered owner, is
the one who can be held liable.
Thus, the RTC disposed of the case as follows:
WHEREFORE, judgment is hereby rendered in favor of the
[respondents] and against the [petitioners]:
1. Ordering the [petitioners] except Enriquez to pay
[respondents], jointly and severally, the costs of repair of
the damaged vehicle in the amount of ₱142,757.40;
2. Ordering the defendants except Enriquez to pay
[respondents], jointly and severally, the amount of
₱1,000.00 per day from March 7, 1997 up to November
1997 representing the unrealized income of the
[respondents] when the incident transpired up to the
time the damaged Isuzu truck was repaired;
3. Ordering the [petitioners] except Enriquez to pay
[respondents], jointly and severally, the amount of
₱100,000.00 as moral damages, plus a separate amount
of ₱50,000.00 as exemplary damages;
4. Ordering the [petitioners] except Enriquez to pay
[respondents], jointly and severally, the amount of
₱50,000.00 as attorney’s fees; 5. Ordering the
[petitioners] except Enriquez to pay [respondents] the
costs of suit.18
Displeased, petitioners appealed to the CA, which appeal was
docketed as CA-G.R. CV No. 71877. After evaluating the damages
awarded by the RTC, such were affirmed by the CA with the
exception of the award of unrealized income which the CA ordered
deleted, viz:
WHEREFORE, premises considered, the appeal is PARTLY
GRANTED. The judgment of the Regional Trial Court of Valenzuela
City, Branch 172 dated January 31, 2001, is MODIFIED, in that
the award of ₱1,000.00 per day from March 1997 up to November
1997 representing unrealized income is DELETED. The award of
₱142,757.40 for the cost of repair of the damaged vehicle, the
award of ₱100,000.00 as moral damages, the award of ₱50,000.00
as exemplary damages, the award of ₱50,000.00 as attorney’s fees
and the costs of the suit are hereby MAINTAINED. 19
The Present Petition
Unsatisfied with the CA ruling, petitioners filed an appeal by
certiorari before the Court, raising the following issues: 20
1. The court a quo has decided questions of substance in
a way not in accord with law or with the applicable
decisions of the Supreme Court when it awarded:
a. Moral damages in spite of the fact that the
[respondents’] cause of action is clearly based
on quasi-delict and [respondents] did not
sustain physical injuries to be entitled thereto
pursuant to Article 2219 (2) of the New Civil
Code and pertinent decisions of the Supreme
Court to that effect. The court a quo
erroneously concluded that the driver acted in
bad faith and erroneously applied the provision
of Article 21 of the same code to justify the
award for bad faith is not consistent with quasi-
delict which is founded on fault or negligence.
b. Exemplary damages in spite of the fact that
there is no finding that the vehicular accident
was due to petitioner-driver’s gross negligence
to be entitled thereto pursuant to Article 2231
of the New Civil Code and pertinent decisions of
the Supreme Court to that effect. The factual
basis of the court a quo that "the act of the
driver of the bus in attempting to escape after
causing the accident in wanton disregard of the
consequences of his negligent act is such gross
negligence that justifies an award of exemplary
damages" is an act after the fact which is not
within the contemplation of Article 2231 of the
New Civil Code.
c. Attorney’s fees in spite of the fact that the
assailed decisions of the trial court and the
court a quo are bereft with jurisdictions for the
award of attorney’s fees pursuant to the
pertinent decisions of the Supreme Court on the
matter and provision Article 2208 of the New
Civil Code. The court a quo erroneously applied
the decision of the Supreme Court in Bañas, Jr.
vs. Court of Appeals, 325 SCRA 259.
The Court’s Ruling
The petition is partially meritorious.
Respondents anchor their claim for damages on Mendoza’s
negligence, banking on Article 2176 of the Civil Code, to wit:
Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
In impleading Lim, on the other hand, respondents invoke the
latter’s vicarious liability as espoused in Article 2180 of the same
Code:
The obligation imposed by Article 2176 is demandable not only for
one’s own acts or omissions, but also for those of persons for
whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business of industry.
The first question to address, then, is whether or not Mendoza’s
negligence was duly proven. Negligence is defined as the failure to
observe for the protection of the interests of another person, that
degree of care, precaution and vigilance which the circumstances
justly demand, whereby such other person suffers injury. 21
As found by the RTC, and affirmed by the CA, Mendoza was
negligent in driving the subject Mayamy bus, as demonstrated by
the fact that, at the time of the collision, the bus intruded on the
lane intended for the Isuzu truck. Having encroached on the
opposite lane, Mendoza was clearly in violation of traffic laws.
Article2185 of the Civil Code provides that unless there is proof to
the contrary, it is presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap, he was violating
any traffic regulation. In the case at bar, Mendoza’s violation of
traffic laws was the proximate cause of the harm.
Proximate cause is defined as that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening
cause, produces the injury, and without which the result would
not have occurred. And more comprehensively, the proximate legal
cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a
natural and continuous chain of events, each having a close
causal connection with its immediate predecessor, the final event
in the chain immediately effecting the injury as a natural and
probable result of the cause which first acted, under such
circumstances that the person responsible for the first event
should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default
that an injury to some person might probably result therefrom. 22
The evidence on record shows that before the collision, the Isuzu
truck was in its rightful lane, and was even at a stop, having been
flagged down by a security guard of St. Ignatius Village. 23 The
mishap occurred when the Mayamy bus, travelling at a fast speed
as shown by the impact of the collision, and going in the opposite
direction as that of the Isuzu truck, encroached on the lane
rightfully occupied by said Isuzu truck, and caused the latter to
spin, injuring Perez, Anla, Banca, and Repisada, and considerably
damaging the Isuzu truck.
Having settled the fact of Mendoza’s negligence, then, the next
question that confronts us is who may beheld liable. According to
Manresa, liability for personal acts and omissions is founded on
that indisputable principle of justice recognized by all legislations
that when a person by his act or omission causes damage or
prejudice to another, a juridical relation is created by virtue of
which the injured person acquires a right to be indemnified and
the person causing the damage is charged with the corresponding
duty of repairing the damage. The reason for this is found in the
obvious truth that man should subordinate his acts to the
precepts of prudence and if he fails to observe them and causes
damage to another, he must repair the damage.24 His negligence
having caused the damage, Mendoza is certainly liable to repair
said damage.
Additionally, Mendoza’s employer may also be held liable under
the doctrine of vicarious liability or imputed negligence. Under
such doctrine, a person who has not committed the act or
omission which caused damage or injury to another may
nevertheless be held civilly liable to the latter either directly or
subsidiarily under certain circumstances. 25 In our jurisdiction,
vicarious liability or imputed negligence is embodied in Article
2180 of the Civil Code and the basis for damages in the action
under said article is the direct and primary negligence of the
employer in the selection or supervision, or both, of his
employee.26
In the case at bar, who is deemed as Mendoza’s employer? Is it
Enriquez, the actual owner of the bus or Lim, the registered owner
of the bus?
In Filcar Transport Services v. Espinas, 27 we held that the
registered owner is deemed the employer of the negligent driver,
and is thus vicariously liable under Article 2176, in relation to
Article 2180, of the Civil Code. Citing Equitable Leasing
Corporation v. Suyom,28 the Court ruled that in so far as third
persons are concerned, the registered owner of the motor vehicle
is the employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner. Thus, whether there
is an employer-employee relationship between the registered
owner and the driver is irrelevant in determining the liability of the
registered owner who the law holds primarily and directly
responsible for any accident, injury or death caused by the
operation of the vehicle in the streets and highways. 29
As early as Erezo v. Jepte,30 the Court, speaking through Justice
Alejo Labrador summarized the justification for holding the
registered owner directly liable, to wit:
x x x The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or
injury is caused by the vehicles on the public highways,
responsibility therefore can be fixed on a definite individual, the
registered owner. Instances are numerous where vehicle running
on public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages
or injuries caused on public highways.
"‘One of the principal purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of
accident; and another is that the knowledge that means of
detection are always available may act as a deterrent from lax
observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it
certain that the violator of the law or of the rules of safety shall
not escape because of lack of means to discover him." The purpose
of the statute is thwarted, and the displayed number becomes a
"snare and delusion," if courts will entertain such defenses as that
put forward by appellee in this case. No responsible person or
corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to place a "middleman"
between them and the public, and escape liability by the manner
in which they recompense their servants. 31
Generally, when an injury is caused by the negligence of a servant
or employee, there instantly arises a presumption of law that there
was negligence on the part of the master or employer either in the
selection of the servant or employee (culpa in eligiendo) or in the
supervision over him after the selection (culpa vigilando), or both.
The presumption is juris tantum and not juris et de jure;
consequently, it may be rebutted. Accordingly, the general rule is
that if the employer shows to the satisfaction of the court that in
the selection and supervision of his employee he has exercised the
care and diligence of a good father of a family, the presumption is
overcome and he is relieved of liability. 32 However, with the
enactment of the motor vehicle registration law, the defenses
available under Article 2180 of the Civil Code - that the employee
acts beyond the scope of his assigned task or that it exercised the
due diligence of a good father of a family to prevent damage – are
no longer available to the registered owner of the motor vehicle,
because the motor vehicle registration law, to a certain extent,
modified Article 2180.33
As such, there can be no other conclusion but to hold Lim
vicariously liable with Mendoza.
This does not mean, however, that Lim is left without any recourse
against Enriquez and Mendoza. Under the civil law principle of
unjust enrichment, the registered owner of the motor vehicle has a
right to be indemnified by the actual employer of the driver; and
under Article 2181 of the Civil Code, whoever pays for the damage
caused by his dependents or employees may recover from the
latter what he has paid or delivered in satisfaction of the claim.
Having identified the persons liable, our next question is what
may be awarded.
Actual or Compensatory Damages. Actual or compensatory
damages are those awarded in satisfaction of, or in recompense
for, loss or injury sustained. They simply make good or replace the
loss caused by the wrong.34
Article 2202 of the Civil Code provides that in crimes and quasi
delicts, the defendant shall be liable for all damages which are the
natural and probable consequences of the act or omission
complained of. It is not necessary that such damages have been
foreseen or could have reasonably been foreseen by the defendant.
Article 2199 of the same Code, however, sets the limitation that,
except as provided by law or by stipulation, one is entitled to an
adequate compensation only for such pecuniary loss suffered by
him as he has duly proved. As such, to warrant an award of actual
or compensatory damages, the claimant must prove that the
damage sustained is the natural and probable consequences of
the negligent act and, moreover, the claimant must adequately
prove the amount of such damage.
In the case at bar, the RTC, basing on the receipts submitted by
respondents and which receipts petitioners had the opportunity to
examine, found that the total repairs on the Isuzu truck amounted
to ₱142,757.40, and that the full hospitalization and medical
expenses of Perez, Anla, Banca, and Repisada amounted to
₱11,267.35. As such, these are the amounts that respondents are
entitled to as actual and compensatory damages.
Although respondents alleged in their complaint that the damage
to their Isuzu truck caused them the loss of a daily income of
₱1,000.00, such claim was not duly substantiated by any evidence
on record, and thus cannot be awarded in their favor.
Moral Damages. Moral damages are awarded to enable the injured
party to obtain means, diversions or amusements that will serve to
alleviate the moral suffering he has undergone, by reason of the
defendant's culpable action.35
In prayers for moral damages, however, recovery is more an
exception rather than the rule. Moral damages are not meant to be
punitive but are designed to compensate and alleviate the physical
suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation,
and similar harm unjustly caused to a person. To be entitled to
such an award, the claimant must satisfactorily prove that he has
suffered damages and that the injury causing it has sprung from
any of the cases listed in Articles 2219 and 2220 of the Civil Code.
Moreover, the damages must be shown to be the proximate result
of a wrongful act or omission. The claimant must thus establish
the factual basis of the damages and its causal tie with the acts of
the defendant.36
In fine, an award of moral damages calls for the presentation of 1)
evidence of besmirched reputation or physical, mental or
psychological suffering sustained by the claimant; 2)a culpable act
or omission factually established; 3) proof that the wrongful act or
omission of the defendant is the proximate cause of the damages
sustained by the claimant; and 4) the proof that the act is
predicated on any of the instances expressed or envisioned by
Article 2219 and Article 2220 of the Civil Code. 37
A review of the complaint and the transcript of stenographic notes
yields the pronouncement that respondents neither alleged nor
offered any evidence of besmirched reputation or physical, mental
or psychological suffering incurred by them. All that Leonora and
her counsel had to say on the matter of damages other than
actual or compensatory damages is this:38
Q: Did you ever spend covering attorney’s fees?
A: Yes, sir. ₱50,000.00.
Q: Aside from the actual damage that you have mentioned x x x,
how much more would you like this Court to award you by way of
moral damages?
A: ₱100,000.00, sir.
Q: How about exemplary damages?
A: ₱50,000.00, sir.
Q: What happened to you, what did you feel when the defendants
failed to immediately repair your vehicle that was damaged
Madam Witness?
A: I have incurred expenses and I was forced to apply for a loan,
sir.
39
In Kierulf v. CA,  we observed that this Court cannot remind the
bench and the bar often enough that in order that moral damages
may be awarded, there must be pleading and proof of moral
suffering, mental anguish, fright and the like. Citing Francisco v.
GSIS,40 the Court held that there must be clear testimony on the
anguish and other forms of mental suffering. Thus, if the plaintiff
fails to take the witness stand and testify as to his social
humiliation, wounded feelings and anxiety, moral damages cannot
be awarded.
Moreover, respondents were not able to show that their claim
properly falls under Articles 2219 and 2220 of the Civil Code.
Respondents cannot rely on Article 2219 (2) of the Civil Code
which allows moral damages in quasi-delicts causing physical
injuries because in physical injuries, moral damages are
recoverable only by the injured party, 41and in the case at bar,
herein respondents were not the ones who were actually injured.
In B.F. Metal (Corp.) v. Sps. Lomotan, et al., 42 the Court, in a
claim for damages based on quasi-delict causing physical injuries,
similarly disallowed an award of moral damages to the owners of
the damaged vehicle, when neither of them figured in the accident
and sustained injuries.
Neither can respondents rely on Article 21 of the Civil Code as the
RTC erroneously did. Article 21 deals with acts contra bonus
mores, and has the following elements: (1) There is an act which is
legal; (2) but which is contrary to morals, good custom, public
order, or public policy; (3) and it is done with intent to injure. 43 In
the present case, it can hardly be said that Mendoza’s negligent
driving and violation of traffic laws are legal acts. Moreover, it was
not proven that Mendoza intended to injure Perez, et al. Thus,
Article 21 finds no application to the case at bar. All in all, we find
that the RTC and the CA erred in granting moral damages to
respondents. Exemplary Damages. Article 2229 of the Civil Code
provides that exemplary or corrective damages are imposed, by
way of example or correction for the public good, in addition to
moral, temperate, liquidated or compensatory damages. Article
2231 of the same Code further states that in quasi-delicts,
exemplary damages may be granted if the defendant acted with
gross negligence.
Our jurisprudence sets certain conditions when exemplary
damages may be awarded: First, they may be imposed by way of
example or correction only in addition, among others, to
compensatory damages, and cannot be recovered as a matter of
right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant.
Second, the claimant must first establish his right to moral,
temperate, liquidated or compensatory damages. Third, the
wrongful act must be accompanied by bad faith, and the award
would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. 44
In motor vehicle accident cases, exemplary damages may be
awarded where the defendant’s misconduct is so flagrant as to
transcend simple negligence and be tantamount to positive or
affirmative misconduct rather than passive or negative
misconduct. In characterizing the requisite positive misconduct
which will support a claim for punitive damages, the courts have
used such descriptive terms as willful, wanton, grossly negligent,
reckless, or malicious, either alone or in combination. 45
Gross negligence is the absence of care or diligence as to amount
to a reckless disregard of the safety of persons or property. It
evinces a thoughtless disregard of consequences without exerting
any effort to avoid them.46
In the case at bar, having established respondents’ right to
compensatory damages, exemplary damages are also in order,
given the fact that Mendoza was grossly negligent in driving the
Mayamy bus. His act of intruding or encroaching on the lane
rightfully occupied by the Isuzu truck shows his reckless
disregard for safety.
In Baño v. Bachelor Express, Inc., et al., 47 where an erring bus, in
the process of overtaking a jeepney, also encroached on the
opposite lane, and consequently collided with a dump truck, the
Court held the driver of the bus grossly negligent and affirmed the
award of exemplary damages. Attorney’s Fees. Article 2208 of the
Civil Code enumerates the instances when attorney’s fees may be
recovered:
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 valid 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.
From the very opening sentence of Article 2208 of the Civil Code, it
is clearly intended to retain the award of attorney’s fees as the
exception in our law, as the general rule remains that attorney’s
fees are not recoverable in the absence of a stipulation thereto, the
reason being that it is not sound policy to set a premium on the
right to litigate.48
As such, in Spouses Agustin v. CA,49 we held that, 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. Thus, 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.
In the case at bar, the RTC Decision had nil discussion on the 7) MAINTAIN the award of costs of suit.
propriety of attorney’s fees, and it merely awarded such in the
dispositive. The CA Decision, on the other hand, merely stated SO ORDERED.
that the award of attorney’s fees is merited as such is allowed
when exemplary damages are awarded.50 Following established
jurisprudence,51however, the CA should have disallowed on appeal
said award of attorney’s fees as the RTC failed to substantiate said
award. Costs of suit. The Rules of Court provide that, generally,
costs shall be allowed to the prevailing party as a matter of course,
thus:52

Section 1. Costs ordinarily follow results of suit.- Unless otherwise

provided in these rules, costs shall be allowed to the prevailing
party as a matter of course, but the court shall have power, for
special reasons, to adjudge that either party shall pay the costs of
an action, or that the same be divided, as may be equitable. No
costs shall be allowed against the Republic of the Philippines,
unless otherwise provided by law.

In the present case, the award of costs of suit to respondents, as

the prevailing party, is in order. Interests.1âwphi1 Interest by way
of damages has been defined as interest allowed in actions for
breach of contractor tort for the unlawful detention of money
already due. This type of interest is frequently called "moratory
interest." Interest as a part of damage, is allowed, not by
application of arbitrary rules, but as a result of the justice of the
individual case and as compensation to the injured party. 53

The legal provision on interests in quasi-delicts is Article 2211 of

the Civil Code which provides that in crimes and quasi-delicts,
interest as part of the damage, may, in a proper case, be
adjudicated in the discretion of the court.

Generally, interest is allowed as a matter of right for failure to pay

liquidated claims when due.54 For unliquidated claims, however,
Article 2213 of the Civil Code provides that interest cannot be
recovered upon unliquidated claims or damages, except when the
demand can be established with reasonable certainty.

In the case at bar, although the award of exemplary damages is

unliquidated in the sense that petitioners cannot know for sure,
before judgment, the exact amount that they are required to pay
to respondents, the award of actual or compensatory damages,
however, such as the truck repairs and medical expenses, is
arguably liquidated in that they can be measured against a
reasonably certain standard.55 Moreover, justice would seem to
require that the delay in paying for past losses which can be made
reasonably certain should be compensated through an award of
interest.56

WHEREFORE, premises considered, the Court Resolves to

PARTIALLY GRANT the appeal by certiorari, as follows:

1) DECLARE Mariano Mendoza and Elvira Lim solidarily

liable to respondent Spouses Leonora and Gabriel
Gomez;

2) MAINTAIN the award of actual or compensatory

damages in the amount of ₱142,757.40 for the repair of
the Isuzu Elf truck, with legal interest beginning 31
January 2001 until fully paid;

3) GRANT additional actual or compensatory damages in

the amount of ₱11,267.35 for the medical expenses
shouldered by respondent Spouses Leonora and Gabriel
Gomez, with legal interest beginning 31 January 2001
until fully paid;

4) DELETE the award of moral damages;

5) MAINTAIN the award of exemplary damages at

₱50,000.00;

6) DELETE the award of attorney's fees; and


G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner,  shipment was turned over to the latter, is no longer its
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE
COMPANY, INC., respondents.
VITUG, J.:
The issues, albeit not completely novel, are: (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%).
The findings of the court a quo, adopted by the Court of Appeals,
on the antecedent and undisputed facts that have led to the
controversy are hereunder reproduced:
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.
On December 4, 1981, two fiber drums of riboflavin were
shipped from Yokohama, Japan for delivery vessel "SS
EASTERN COMET" owned by defendant Eastern Shipping
Lines under Bill of Lading  the Bill of Lading and Commercial Invoice which do not
No. YMA-8 (Exh. B). The shipment was insured under
plaintiff's Marine Insurance Policy No. 81/01177 for
P36,382,466.38.
Upon arrival of the shipment in Manila on December 12,
1981, it was discharged unto the custody of defendant
Metro Port Service, Inc. The latter excepted to one drum,
said to be in bad order, which damage was unknown to
plaintiff.
On January 7, 1982 defendant Allied Brokerage
Corporation received the shipment from defendant Metro
Port Service, Inc., one drum opened and without seal (per
"Request for Bad Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage
Corporation made deliveries of the shipment to the
consignee's warehouse. The latter excepted to one drum
which contained spillages, while the rest of the contents
was adulterated/fake (per "Bad Order Waybill" No. 10649,
Exh. E).
Plaintiff contended that due to the losses/damage
sustained by said drum, the consignee suffered losses
totaling P19,032.95, due to the fault and negligence of
defendants. Claims were presented against defendants who
failed and refused to pay the same (Exhs. H, I, J, K, L).
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 (per "Form of Subrogation", "Release"
and Philbanking check, Exhs. M, N, and O). (pp. 85-
86, Rollo.)
There were, to be sure, other factual issues that confronted
both courts. Here, the appellate court said:
Defendants filed their respective answers, traversing the
material allegations of the complaint contending that: As
for defendant Eastern Shipping it alleged that the shipment
was discharged in good order from the vessel unto the
custody of Metro Port Service so that any damage/losses
incurred after the shipment was incurred after the
liability (p. 17, Record); Metroport averred that although
subject shipment was discharged unto its custody, portion
of the same was already in bad order (p. 11, Record); Allied
Brokerage alleged that plaintiff has no cause of action
against it, not having negligent or at fault for the shipment
was already in damage and bad order condition when
received by it, but nonetheless, it still exercised extra
ordinary care and diligence in the handling/delivery of the
cargo to consignee in the same condition shipment was
received by it.
From the evidence the court found the following:
The issues are:
1. Whether or not the shipment sustained losses/damages;
2. Whether or not these losses/damages were sustained
while in the custody of defendants (in whose respective
custody, if determinable);
3. Whether or not defendant(s) should be held liable for the
losses/damages (see plaintiff's pre-Trial Brief, Records, p.
34; Allied's pre-Trial Brief, adopting plaintiff's Records, p.
38).
As to the first issue, there can be no doubt that the
shipment sustained losses/damages. The two drums were
shipped in good order and condition, as clearly shown by
indicate any damages drum that was shipped (Exhs. B and
C). But when on December 12, 1981 the shipment was
delivered to defendant Metro Port Service, Inc., it excepted
to one drum in bad order.
Correspondingly, as to the second issue, it follows that 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). This becomes evident when the Marine
Cargo Survey Report (Exh. G), with its "Additional Survey
Notes", are considered. In the latter notes, it is stated that
when the shipment was "landed on vessel" to dock of Pier #
15, South Harbor, Manila on December 12, 1981, it was
observed that "one (1) fiber drum (was) in damaged
condition, covered by the vessel's Agent's Bad Order Tally
Sheet No. 86427." The report further states that when
defendant Allied Brokerage withdrew the shipment from
defendant arrastre operator's custody on January 7, 1982,
one drum was found opened without seal, cello bag partly
torn but contents intact. Net unrecovered spillages was 
15 kgs. The report went on to state that when the drums
reached the consignee, one drum was found with
adulterated/faked contents. It is obvious, therefore, that
these losses/damages occurred before the shipment
reached the consignee while under the successive
custodies of defendants. Under Art. 1737 of the New Civil
Code, the common carrier's duty to observe extraordinary
diligence in the vigilance of goods remains in full force and
effect even if the goods are temporarily unloaded and
stored in transit in the warehouse of the carrier at the
place of destination, until the consignee has been advised
and has had reasonable opportunity to remove or dispose
of the goods (Art. 1738, NCC). Defendant Eastern
Shipping's own exhibit, the "Turn-Over Survey of Bad
Order Cargoes" (Exhs. 3-Eastern) states that on December
12, 1981 one drum was found "open".
and thus held:
 WHEREFORE, PREMISES CONSIDERED, judgment is
hereby rendered:
A. Ordering defendants to pay plaintiff, jointly and
severally:
1. The amount of P19,032.95, with the present legal
interest of 12% per annum from October 1, 1982, the date
of filing of this complaints, until fully paid (the liability of
defendant Eastern Shipping, Inc. shall not exceed US$500
per case or the CIF value of the loss, whichever is lesser,
while the liability of defendant Metro Port Service, Inc.
shall be to the extent of the actual invoice value of each
package, crate box or container in no case to exceed
P5,000.00 each, pursuant to Section 6.01 of the
Management Contract);
2. P3,000.00 as attorney's fees, and
3. Costs.
B. Dismissing the counterclaims and crossclaim of
defendant/cross-claimant Allied Brokerage Corporation.
SO ORDERED. (p. 207, Record).
Dissatisfied, defendant's recourse to US.
The appeal is devoid of merit.
After a careful scrutiny of the evidence on record. We find
that the conclusion drawn therefrom is correct. As there is
sufficient evidence that the shipment sustained damage
while in the successive possession of appellants, and
therefore they are liable to the appellee, as subrogee for the
amount it paid to the consignee. (pp. 87-89, Rollo.)
The Court of Appeals thus affirmed in toto the judgment of
the court 
a quo.
In this petition, Eastern Shipping Lines, Inc., the common
carrier, attributes error and grave abuse of discretion on
the part of the appellate court when —
I. IT HELD PETITIONER CARRIER JOINTLY AND
SEVERALLY LIABLE WITH THE ARRASTRE OPERATOR
AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE
RESPONDENT AS GRANTED IN THE QUESTIONED
DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE
CLAIM OF PRIVATE RESPONDENT SHOULD COMMENCE
FROM THE DATE OF THE FILING OF THE COMPLAINT AT
THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD
OF FROM THE DATE OF THE DECISION OF THE TRIAL
COURT AND ONLY AT THE RATE OF SIX PERCENT PER
ANNUM, PRIVATE RESPONDENT'S CLAIM BEING
INDISPUTABLY UNLIQUIDATED.
The petition is, in part, granted.
In this decision, we have begun by saying that the questions
raised by petitioner carrier are not all that novel. Indeed, we do
have a fairly good number of previous decisions this Court can
merely tack to.
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 (Art. 1735, Civil Code;
Philippine National Railways vs. Court of Appeals, 139 SCRA 87;
Metro Port Service vs. Court of Appeals, 131 SCRA 365). There
are, of course, exceptional cases when such presumption of fault
is not observed but these cases, enumerated in Article 1734 1 of
the Civil Code, are exclusive, not one of which can be applied to
this case.
The question of charging both the carrier and the arrastre
operator with the obligation of properly delivering the goods to the
consignee has, too, been passed upon by the Court. In Fireman's
Fund Insurance vs. Metro Port Services (182 SCRA 455), we have
explained, in holding the carrier and the arrastre operator liable
in solidum, thus:
The legal relationship between the consignee
and the arrastre operator is akin to that of a
depositor and warehouseman (Lua Kian v.
Manila Railroad Co., 19 SCRA 5 [1967]. The
relationship between the consignee and the
common carrier is similar to that of the
consignee and the arrastre operator (Northern
Motors, Inc. v. Prince Line, et al., 107 Phil. 253
[1960]). 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.
We do not, of course, imply by the above pronouncement that the
arrastre operator and the customs broker are themselves always
and necessarily liable solidarily with the carrier, or vice-versa, nor
that attendant facts in a given case may not vary the rule. The
instant petition has been brought solely by Eastern Shipping
Lines, which, being the carrier and not having been able to rebut
the presumption of fault, is, in any event, to be held liable in this
particular case. A factual finding of both the court a quo and the
appellate court, we take note, is that "there is sufficient evidence
that the shipment sustained damage while in the successive
possession of appellants" (the herein petitioner among them).
Accordingly, the liability imposed on Eastern Shipping Lines, Inc.,
the sole petitioner in this case, is inevitable regardless of whether
there are others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court
that deserves more than just a passing remark.
Let us first see a chronological recitation of the major rulings of
this Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port 
Service,2 decided3 on 15 May 1969, involved a suit for recovery of
money arising out of short deliveries and pilferage of goods. In this
case, appellee Malayan Insurance (the plaintiff in the lower court)
averred in its complaint that the total amount of its claim for the
value of the undelivered goods amounted to P3,947.20. This
demand, however, was neither established in its totality nor
definitely ascertained. In the stipulation of facts later entered into
by the parties, in lieu of proof, the amount of P1,447.51 was
agreed upon. The trial court rendered judgment ordering the
appellants (defendants) Manila Port Service and Manila Railroad
Company to pay appellee Malayan Insurance the sum of
P1,447.51 with legal interest thereon from the date the complaint
was filed on 28 December 1962 until full payment thereof. The
appellants then assailed, inter alia, the award of legal interest. In
sustaining the appellants, this Court ruled:
Interest upon an obligation which calls for the
payment of money, absent a stipulation, is the
legal rate. Such interest normally is allowable
from the date of demand, judicial or
 extrajudicial. The trial court opted for judicial
demand as the starting point.
But then upon the provisions of Article 2213 of
the Civil Code, interest "cannot be recovered
upon unliquidated claims or damages, except
when the demand can be established with
reasonable certainty." And as was held by this
Court in Rivera vs. Perez,4 L-6998, February
29, 1956, if the suit were for
damages, "unliquidated and not known until
definitely ascertained, assessed and determined
by the courts after proof (Montilla c. Corporacion
de P.P. Agustinos, 25 Phil. 447; Lichauco
v. Guzman,  much less forbearances of any money, goods or
38 Phil. 302)," then, interest "should be from
the date of the decision." (Emphasis supplied)
The case of Reformina vs. Tomol,5 rendered on 11 October 1985,
was for "Recovery of Damages for Injury to Person and Loss of
Property." After trial, the lower court decreed:
WHEREFORE, judgment is hereby rendered in
favor of the plaintiffs and third party defendants
and against the defendants and third party
plaintiffs as follows:
Ordering defendants and third party plaintiffs
Shell and Michael, Incorporated to pay jointly
and severally the following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco
Reformina the sum of P131,084.00 which is the
value of the boat F B Pacita III together with its
accessories, fishing gear and equipment minus
P80,000.00 which is the value of the insurance
recovered and the amount of P10,000.00 a
month as the estimated monthly loss suffered
by them as a result of the fire of May 6, 1969 up
to the time they are actually paid or already the
total sum of P370,000.00 as of June 4, 1972
with legal interest from the filing of the complaint
until paid and to pay attorney's fees of
P5,000.00 with costs against defendants and
third party plaintiffs. (Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the
amount of damages awarded but sustained the trial
court in adjudging legal interest from the filing of the
complaint until fully paid. When the appellate court's
decision became final, the case was remanded to the
lower court for execution, and this was when the trial
court issued its assailed resolution which applied the 6%
interest per annum prescribed in Article 2209 of the Civil
Code. In their petition for review on certiorari, the
petitioners contended that Central Bank Circular  the exception of Roman Ozaeta) a solidary (Art.
No. 416, providing thus —
By virtue of the authority granted to it under
Section 1 of Act 2655, as amended, Monetary
Board in its Resolution No. 1622 dated July 29,
1974, has prescribed that the rate of interest for
the loan, or forbearance of any money, goods, or
credits and the rate allowed in judgments, in
the absence of express contract as to such rate
of interest, shall be twelve (12%) percent per
annum. This Circular shall take effect
immediately. (Emphasis found in the text) —
should have, instead, been applied. This Court 6 ruled:
The judgments spoken of and referred to are
judgments in litigations involving loans or
forbearance of any money, goods or credits. Any
other kind of monetary judgment which has
nothing to do with, nor involving loans or
forbearance of any money, goods or credits does
not fall within the coverage of the said law for it
is not within the ambit of the authority granted
to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein
sought to be executed is one rendered in an
Action for Damages for injury to persons and
loss of property and does not involve any loan,
credits. As correctly argued by the private
respondents, the law applicable to the said case
is Article 2209 of the New Civil Code which
reads —
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 interest agreed upon, and in
the absence of stipulation, the legal interest
which is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc.,
v. Cruz,7 promulgated on 28 July 1986. The case was for damages
occasioned by an injury to person and loss of property. The trial
court awarded private respondent Pedro Manabat actual and
compensatory damages in the amount of P72,500.00 with legal
interest thereon from the filing of the complaint until fully paid.
Relying on the Reformina v. Tomol case, this Court8 modified the
interest award from 12% to 6% interest per annum but sustained
the time computation thereof, i.e., from the filing of the complaint
until fully paid.
In Nakpil and Sons vs. Court of Appeals,9 the trial court, in an
action for the recovery of damages arising from the collapse of a
building, ordered, 
inter alia, the "defendant United Construction Co., Inc. (one of the
petitioners) 
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest
at the legal rate from November 29, 1968, the date of the filing of
the complaint until full payment . . . ." Save from the modification
of the amount granted by the lower court, the Court of Appeals
sustained the trial court's decision. When taken to this Court for
review, the case, on 03 October 1986, was decided, thus:
WHEREFORE, the decision appealed from is
hereby MODIFIED and considering the special
and environmental circumstances of this case,
we deem it reasonable to render a decision
imposing, as We do hereby impose, upon the
defendant and the third-party defendants (with
1723, Civil Code, Supra. 
p. 10) indemnity in favor of the Philippine Bar
Association of FIVE MILLION (P5,000,000.00)
Pesos to cover all damages (with the exception
to attorney's fees) occasioned by the loss of the
building (including interest charges and lost
rentals) and an additional ONE HUNDRED
THOUSAND (P100,000.00) Pesos as and for
attorney's fees, the total sum being payable
upon the finality of this decision. Upon failure to
pay on such finality, twelve (12%) per cent
interest per annum shall be imposed upon
aforementioned amounts from finality until paid.
Solidary costs against the defendant and third-
party defendants (Except Roman Ozaeta).
(Emphasis supplied)
 A motion for reconsideration was filed by United
Construction, contending that "the interest of twelve
(12%) per cent per annum imposed on the total amount
of the monetary award was in contravention of law." The
Court10 ruled out the applicability of the Reformina and
Philippine Rabbit Bus Lines cases and, in its resolution
of 15 April 1988, it explained:
There should be no dispute that the imposition
of 12% interest pursuant to Central Bank
Circular No. 416 . . . is applicable only in the
following: (1) loans; (2) forbearance of any
money, goods or credit; and  Circular No. 416] does not apply to actions
(3) rate allowed in judgments (judgments
spoken of refer to judgments involving loans or
forbearance of any money, goods or credits.
(Philippine Rabbit Bus Lines Inc. v. Cruz, 143
SCRA 160-161 [1986]; Reformina v. Tomol, Jr.,
139 SCRA 260 [1985]). It is true that in the
instant case, there is neither a loan or a
forbearance, but then no interest is actually
imposed provided the sums referred to in the
judgment are paid upon the finality of the
judgment. It is delay in the payment of such
final judgment, that will cause the imposition of
the interest.
It will be noted that in the cases already
adverted to, the rate of interest is imposed on
the total sum, from the filing of the complaint
until paid; in other words, as part of the
judgment for damages. Clearly, they are not
applicable to the instant case. (Emphasis
supplied.)
The subsequent case of American Express International, Inc.,
vs. Intermediate Appellate Court11 was a petition for review
on certiorari from the decision, dated 27 February 1985, of the
then Intermediate Appellate Court reducing the amount of moral
and exemplary damages awarded by the trial court, to
P240,000.00 and P100,000.00, respectively, and its resolution,
dated 29 April 1985, restoring the amount of damages awarded by
the trial court, i.e., P2,000,000.00 as moral damages and
P400,000.00 as exemplary damages with interest thereon at 12%
per annum from notice of judgment, plus costs of suit. In a decision
of 09 November 1988, this Court, while recognizing the right of the
private respondent to recover damages, held the award, however,
for moral damages by the trial court, later sustained by the IAC, to
be inconceivably large. The Court12 thus set aside the decision of
the appellate court and rendered a new one, "ordering the
petitioner to pay private respondent the sum of One Hundred
Thousand (P100,000.00) Pesos as moral damages, with  corresponding rulings rendered by the court. The "first group"
six (6%) percent interest thereon computed from the finality of this
decision until paid. (Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case
of Florendo v. Ruiz13 which arose from a breach of employment
contract. For having been illegally dismissed, the petitioner was
awarded by the trial court moral and exemplary damages without,
however, providing any legal interest thereon. When the decision
was appealed to the Court of Appeals, the latter held:
WHEREFORE, except as modified hereinabove
the decision of the CFI of Negros Oriental dated
October 31, 1972 is affirmed in all respects,
with the modification that defendants-
appellants, except defendant-appellant Merton
Munn, are ordered to pay, jointly and severally,
the amounts stated in the dispositive portion of
the decision, including the sum of P1,400.00 in
concept of compensatory damages, with interest
at the legal rate from the date of the filing of the
complaint until fully paid (Emphasis supplied.)
The petition for review to this Court was denied. The
records were thereupon transmitted to the trial court,
and an entry of judgment was made. The writ of
execution issued by the trial court directed that only
compensatory damages should earn interest at 6% per
annum from the date of the filing of the complaint.
Ascribing grave abuse of discretion on the part of the
trial judge, a petition for certiorari assailed the said
order. This Court said:
. . . , it is to be noted that the Court of Appeals
ordered the payment of interest "at the legal
rate" from the time of the filing of the
complaint. . . Said circular [Central Bank
based on a breach of employment contract like
the case at bar. (Emphasis supplied)
The Court reiterated that the 6% interest per annum on
the damages should be computed from the time the
complaint was filed until the amount is fully paid.
Quite recently, the Court had another occasion to rule on the
matter. National Power Corporation vs. Angas,14decided on 08
May 1992, involved the expropriation of certain parcels of land.
After conducting a hearing on the complaints for eminent
domain, the trial court ordered the petitioner to pay the private
respondents certain sums of money as just compensation for their
lands so expropriated "with legal interest thereon . . . until fully
paid." Again, in applying the 6% legal interest per annum under
the Civil Code, the Court15 declared:
. . . , (T)he transaction involved is clearly not a
loan or forbearance of money, goods or credits
but expropriation of certain parcels of land for a
public purpose, the payment of which is
without stipulation regarding interest, and the
interest adjudged by the trial court is in the
nature of indemnity for damages. The legal
interest required to be paid on the amount of
just compensation for the properties
expropriated is manifestly in the form of
indemnity for damages for the delay in the
payment thereof. Therefore, since the kind of
interest involved in the joint judgment of the
lower court sought to be enforced in this case is
interest by way of damages, and not by way of
earnings from loans, etc. Art. 2209 of the Civil
Code shall apply.
Concededly, there have been seeming variances in the above
holdings. The cases can perhaps be classified into two groups
according to the similarity of the issues involved and the
would consist of the cases of Reformina v. Tomol (1985),
Philippine Rabbit Bus Lines v. Cruz (1986), Florendo
v. Ruiz (1989) 
and National Power Corporation v. Angas (1992). In the "second
group" would be Malayan Insurance Company v. Manila Port
Service (1969), Nakpil and Sons v. Court of
Appeals (1988), and American Express International
v. Intermediate Appellate Court (1988).
In the "first group", the basic issue focuses on the application of
either the 6% (under the Civil Code) or 12% (under the Central
Bank Circular) interest per annum. It is easily discernible in these
cases that there has been a consistent holding that the Central
Bank Circular imposing the 12% interest per annum applies only
to loans or forbearance16 of money, goods or credits, as well as to
judgments involving such loan or forbearance of money, goods or
credits, and that the 6% interest under the Civil Code governs
when the transaction involves the payment of indemnities in the
concept of damage arising from the breach or a delay in the
performance of obligations in general. Observe, too, that in these
cases, a common time frame in the computation of the 6%
interest per annum has been applied, i.e., from the time the
complaint is filed until the adjudged amount is fully paid.
The "second group", did not alter the pronounced rule on the 03 February 1988, of the court a quo. A TWELVE PERCENT (12%)
application of the 6% or 12% interest per annum,17depending on interest, in lieu of SIX PERCENT (6%), shall be imposed on such
whether or not the amount involved is a loan or forbearance, on amount upon finality of this decision until the payment thereof.
the one hand, or one of indemnity for damage, on the other hand.
Unlike, however, the "first group" which remained consistent in SO ORDERED.
holding that the running of the legal interest should be from the
time of the filing of the complaint until fully paid, the "second
group" varied on the commencement of the running of the legal
interest.

Malayan held that the amount awarded should bear legal interest

from the date of the decision of the court a quo, explaining that "if
the suit were for damages, 'unliquidated and not known until
definitely ascertained, assessed and determined by the courts
after proof,' then, interest 'should be from the date of the
decision.'" American Express International v. IAC, introduced a
different time frame for reckoning the 6% interest by ordering it to
be "computed from the finality of (the) decision until paid." The
Nakpil and Sons case ruled that 12% interest per annum should
be imposed from the finality of the decision until the judgment
amount is paid.

The ostensible discord is not difficult to explain. The factual

circumstances may have called for different applications, guided
by the rule that the courts are vested with discretion, depending
on the equities of each case, on the award of interest. Nonetheless,
it may not be unwise, by way of clarification and reconciliation, to
suggest the following rules of thumb for future guidance.

I. When an obligation, regardless of its source, i.e., law, contracts,

quasi-contracts, delicts or quasi-delicts18 is breached, the
contravenor can be held liable for damages. 19 The provisions
under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages. 20

II. With regard particularly to an award of interest in the concept

of actual and compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment

of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in
writing.21 Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. 22 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 23 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 court24 at the rate
of 6% per annum.25 No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. 26 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.

WHEREFORE, the petition is partly GRANTED. The appealed

decision is AFFIRMED with the MODIFICATION that the legal
interest to be paid is SIX PERCENT (6%) on the amount due
computed from the decision, dated 
 WHEREFORE, premises considered, judgment is hereby rendered
finding respondents guilty of constructive dismissal and are
therefore, ordered:

To pay jointly and severally the complainant the amount of sixty-

two thousand nine hundred eighty-six pesos and 56/100
G.R. No. 189871               August 13, 2013 (₱62,986.56) Pesos representing his separation pay;

DARIO NACAR, PETITIONER,  To pay jointly and severally the complainant the amount of nine
vs. (sic) five thousand nine hundred thirty-three and 36/100
GALLERY FRAMES AND/OR FELIPE BORDEY, (₱95,933.36) representing his backwages; and
JR., RESPONDENTS.
All other claims are hereby dismissed for lack of merit.
DECISION
SO ORDERED.4
PERALTA, J.:
Respondents appealed to the NLRC, but it was dismissed for lack
This is a petition for review on certiorari assailing the of merit in the Resolution5 dated February 29, 2000. Accordingly,
Decision1 dated September 23, 2008 of the Court of Appeals (CA) the NLRC sustained the decision of the Labor Arbiter.
in CA-G.R. SP No. 98591, and the Resolution 2 dated October 9, Respondents filed a motion for reconsideration, but it was denied. 6
2009 denying petitioner’s motion for reconsideration.
Dissatisfied, respondents filed a Petition for Review on Certiorari
The factual antecedents are undisputed. before the CA. On August 24, 2000, the CA issued a Resolution
dismissing the petition. Respondents filed a Motion for
Petitioner Dario Nacar filed a complaint for constructive dismissal Reconsideration, but it was likewise denied in a Resolution dated
before the Arbitration Branch of the National Labor Relations May 8, 2001.7
Commission (NLRC) against respondents Gallery Frames (GF)
and/or Felipe Bordey, Jr., docketed as NLRC NCR Case No. 01- Respondents then sought relief before the Supreme Court,
00519-97. docketed as G.R. No. 151332. Finding no reversible error on the
part of the CA, this Court denied the petition in the Resolution
On October 15, 1998, the Labor Arbiter rendered a Decision 3 in dated April 17, 2002.8
favor of petitioner and found that he was dismissed from
employment without a valid or just cause. Thus, petitioner was An Entry of Judgment was later issued certifying that the
awarded backwages and separation pay in lieu of reinstatement in resolution became final and executory on May 27, 2002. 9The case
the amount of ₱158,919.92. The dispositive portion of the was, thereafter, referred back to the Labor Arbiter. A pre-execution
decision, reads: conference was consequently scheduled, but respondents failed to
appear.10
With the foregoing, we find and so rule that respondents failed to
discharge the burden of showing that complainant was dismissed On November 5, 2002, petitioner filed a Motion for Correct
from employment for a just or valid cause. All the more, it is clear Computation, praying that his backwages be computed from the
from the records that complainant was never afforded due process date of his dismissal on January 24, 1997 up to the finality of the
before he was terminated. As such, we are perforce constrained to Resolution of the Supreme Court on May 27, 2002. 11 Upon
grant complainant’s prayer for the payments of separation pay in recomputation, the Computation and Examination Unit of the
lieu of reinstatement to his former position, considering the NLRC arrived at an updated amount in the sum of ₱471,320.31.12
strained relationship between the parties, and his apparent
reluctance to be reinstated, computed only up to promulgation of On December 2, 2002, a Writ of Execution 13 was issued by the
this decision as follows: Labor Arbiter ordering the Sheriff to collect from respondents the
total amount of ₱471,320.31. Respondents filed a Motion to
Quash Writ of Execution, arguing, among other things, that since
SEPARATION PAY
the Labor Arbiter awarded separation pay of ₱62,986.56 and
Date Hired = August 1990 limited backwages of ₱95,933.36, no more recomputation is
required to be made of the said awards. They claimed that after
Rate = ₱198/day the decision becomes final and executory, the same cannot be
Date of Decision = Aug. 18, 1998 altered or amended anymore.14 On January 13, 2003, the Labor
Arbiter issued an Order15 denying the motion. Thus, an Alias Writ
Length of Service = 8 yrs. & 1 month of Execution16 was issued on January 14, 2003.
₱198.00 x 26 days x 8 months = ₱41,184.00 Respondents again appealed before the NLRC, which on June 30,
BACKWAGES 2003 issued a Resolution 17 granting the appeal in favor of the
respondents and ordered the recomputation of the judgment
Date Dismissed = January 24, 1997 award.
Rate per day = ₱196.00
On August 20, 2003, an Entry of Judgment was issued declaring
Date of Decisions = Aug. 18, 1998 the Resolution of the NLRC to be final and executory.
Consequently, another pre-execution conference was held, but
a) 1/24/97 to 2/5/98 = 12.36 mos. respondents failed to appear on time. Meanwhile, petitioner moved
₱196.00/day x 12.36 mos. = ₱62,986.56 that an Alias Writ of Execution be issued to enforce the earlier
recomputed judgment award in the sum of ₱471,320.31.18
b) 2/6/98 to 8/18/98 = 6.4 months
The records of the case were again forwarded to the Computation
Prevailing Rate per day = ₱62,986.00
and Examination Unit for recomputation, where the judgment
₱198.00 x 26 days x 6.4 mos. = ₱32,947.20 award of petitioner was reassessed to be in the total amount of
only ₱147,560.19.
TOTAL = ₱95.933.76
xxxx
Petitioner then moved that a writ of execution be issued ordering
respondents to pay him the original amount as determined by the
Labor Arbiter in his Decision dated October 15, 1998, pending the
final computation of his backwages and separation pay.
On January 14, 2003, the Labor Arbiter issued an Alias Writ of
Execution to satisfy the judgment award that was due to
petitioner in the amount of ₱147,560.19, which petitioner
eventually received.
Petitioner then filed a Manifestation and Motion praying for the re-
computation of the monetary award to include the appropriate
interests.19
On May 10, 2005, the Labor Arbiter issued an Order 20 granting
the motion, but only up to the amount of ₱11,459.73. The Labor
Arbiter reasoned that it is the October 15, 1998 Decision that
should be enforced considering that it was the one that became
final and executory. However, the Labor Arbiter reasoned that
since the decision states that the separation pay and backwages
are computed only up to the promulgation of the said decision, it
is the amount of ₱158,919.92 that should be executed. Thus,
since petitioner already received ₱147,560.19, he is only entitled
to the balance of ₱11,459.73.
Petitioner then appealed before the NLRC, 21 which appeal was
denied by the NLRC in its Resolution22 dated September 27, 2006.
Petitioner filed a Motion for Reconsideration, but it was likewise
denied in the Resolution23dated January 31, 2007.
Aggrieved, petitioner then sought recourse before the CA, docketed
as CA-G.R. SP No. 98591.
On September 23, 2008, the CA rendered a Decision 24 denying the
petition. The CA opined that since petitioner no longer appealed
the October 15, 1998 Decision of the Labor Arbiter, which already
became final and executory, a belated correction thereof is no
longer allowed. The CA stated that there is nothing left to be done
except to enforce the said judgment. Consequently, it can no
longer be modified in any respect, except to correct clerical errors
or mistakes.
Petitioner filed a Motion for Reconsideration, but it was denied in
the Resolution25 dated October 9, 2009.
Hence, the petition assigning the lone error:
I because it has been confirmed with finality. This is the finding of
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS
SERIOUSLY ERRED, COMMITTED GRAVE ABUSE OF
DISCRETION AND DECIDED CONTRARY TO LAW IN UPHOLDING
THE QUESTIONED RESOLUTIONS OF THE NLRC WHICH, IN
TURN, SUSTAINED THE MAY 10, 2005 ORDER OF LABOR
ARBITER MAGAT MAKING THE DISPOSITIVE PORTION OF THE
OCTOBER 15, 1998 DECISION OF LABOR ARBITER LUSTRIA
SUBSERVIENT TO AN OPINION EXPRESSED IN THE BODY OF
THE SAME DECISION.26
Petitioner argues that notwithstanding the fact that there was a
computation of backwages in the Labor Arbiter’s decision, the
same is not final until reinstatement is made or until finality of
the decision, in case of an award of separation pay. Petitioner
maintains that considering that the October 15, 1998 decision of
the Labor Arbiter did not become final and executory until the
April 17, 2002 Resolution of the Supreme Court in G.R. No.
151332 was entered in the Book of Entries on May 27, 2002, the
reckoning point for the computation of the backwages and
separation pay should be on May 27, 2002 and not when the
decision of the Labor Arbiter was rendered on October 15, 1998.
Further, petitioner posits that he is also entitled to the payment of
interest from the finality of the decision until full payment by the
respondents.
On their part, respondents assert that since only separation pay
and limited backwages were awarded to petitioner by the October
15, 1998 decision of the Labor Arbiter, no more recomputation is
required to be made of said awards. Respondents insist that since
the decision clearly stated that the separation pay and backwages
are "computed only up to [the] promulgation of this decision," and
considering that petitioner no longer appealed the decision,
petitioner is only entitled to the award as computed by the Labor
Arbiter in the total amount of ₱158,919.92. Respondents added
that it was only during the execution proceedings that the
petitioner questioned the award, long after the decision had
become final and executory. Respondents contend that to allow
the further recomputation of the backwages to be awarded to
petitioner at this point of the proceedings would substantially vary
the decision of the Labor Arbiter as it violates the rule on
immutability of judgments.
The petition is meritorious.
The instant case is similar to the case of Session Delights Ice
Cream and Fast Foods v. Court of Appeals (Sixth
Division),27 wherein the issue submitted to the Court for resolution
was the propriety of the computation of the awards made, and
whether this violated the principle of immutability of judgment.
Like in the present case, it was a distinct feature of the judgment
of the Labor Arbiter in the above-cited case that the decision
already provided for the computation of the payable separation
pay and backwages due and did not further order the computation
of the monetary awards up to the time of the finality of the
judgment. Also in Session Delights, the dismissed employee failed
to appeal the decision of the labor arbiter. The Court clarified,
thus:
In concrete terms, the question is whether a re-computation in the
course of execution of the labor arbiter's original computation of
the awards made, pegged as of the time the decision was rendered
and confirmed with modification by a final CA decision, is legally
proper. The question is posed, given that the petitioner did not
immediately pay the awards stated in the original labor arbiter's
decision; it delayed payment because it continued with the
litigation until final judgment at the CA level.
A source of misunderstanding in implementing the final decision
in this case proceeds from the way the original labor arbiter
framed his decision. The decision consists essentially of two parts.
The first is that part of the decision that cannot now be disputed
the illegality of the dismissal and the awards of separation pay in
lieu of reinstatement, backwages, attorney's fees, and legal
interests.
The second part is the computation of the awards made. On its
face, the computation the labor arbiter made shows that it was
time-bound as can be seen from the figures used in the
computation. This part, being merely a computation of what the
first part of the decision established and declared, can, by its
nature, be re-computed. This is the part, too, that the petitioner
now posits should no longer be re-computed because the
computation is already in the labor arbiter's decision that the CA
had affirmed. The public and private respondents, on the other
hand, posit that a re-computation is necessary because the relief
in an illegal dismissal decision goes all the way up to
reinstatement if reinstatement is to be made, or up to the finality
of the decision, if separation pay is to be given in lieu
reinstatement.
That the labor arbiter's decision, at the same time that it found
that an illegal dismissal had taken place, also made a
computation of the award, is understandable in light of Section 3,
Rule VIII of the then NLRC Rules of Procedure which requires that
a computation be made. This Section in part states:
[T]he Labor Arbiter of origin, in cases involving monetary awards
and at all events, as far as practicable, shall embody in any such
decision or order the detailed and full amount awarded.
Clearly implied from this original computation is its currency up
to the finality of the labor arbiter's decision. As we noted above,
this implication is apparent from the terms of the computation
itself, and no question would have arisen had the parties
terminated the case and implemented the decision at that point.
However, the petitioner disagreed with the labor arbiter's findings
on all counts - i.e., on the finding of illegality as well as on all the
consequent awards made. Hence, the petitioner appealed the case
to the NLRC which, in turn, affirmed the labor arbiter's decision.
By law, the NLRC decision is final, reviewable only by the CA on
jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision
on jurisdictional grounds through a timely filed Rule 65 petition
for certiorari. The CA decision, finding that NLRC exceeded its
authority in affirming the payment of 13th month pay and
indemnity, lapsed to finality and was subsequently returned to the
labor arbiter of origin for execution.
It was at this point that the present case arose. Focusing on the
core illegal dismissal portion of the original labor arbiter's
decision, the implementing labor arbiter ordered the award re-
computed; he apparently read the figures originally ordered to be
paid to be the computation due had the case been terminated and
implemented at the labor arbiter's level. Thus, the labor arbiter re-
computed the award to include the separation pay and the
backwages due up to the finality of the CA decision that fully
terminated the case on the merits. Unfortunately, the labor
arbiter's approved computation went beyond the finality of the CA
decision (July 29, 2003) and included as well the payment for
awards the final CA decision had deleted - specifically, the
proportionate 13th month pay and the indemnity awards. Hence,
the CA issued the decision now questioned in the present petition.
We see no error in the CA decision confirming that a re-
computation is necessary as it essentially considered the labor
arbiter's original decision in accordance with its basic component
parts as we discussed above. To reiterate, the first part contains
the finding of illegality and its monetary consequences; the second
part is the computation of the awards or monetary consequences
of the illegal dismissal, computed as of the time of the labor
arbiter's original decision.28
Consequently, from the above disquisitions, under the terms of
the decision which is sought to be executed by the petitioner, no
essential change is made by a recomputation as this step is a
necessary consequence that flows from the nature of the illegality
of dismissal declared by the Labor Arbiter in that decision. 29 A
recomputation (or an original computation, if no previous
computation has been made) is a part of the law – specifically,
Article 279 of the Labor Code and the established jurisprudence
on this provision – that is read into the decision. By the nature of
an illegal dismissal case, the reliefs continue to add up until full
satisfaction, as expressed under Article 279 of the Labor Code.
The recomputation of the consequences of illegal dismissal upon
execution of the decision does not constitute an alteration or
amendment of the final decision being implemented. The illegal
dismissal ruling stands; only the computation of monetary
consequences of this dismissal is affected, and this is not a
violation of the principle of immutability of final judgments. 30
That the amount respondents shall now pay has greatly increased
is a consequence that it cannot avoid as it is the risk that it ran
when it continued to seek recourses against the Labor Arbiter's
decision. Article 279 provides for the consequences of illegal
dismissal in no uncertain terms, qualified only by jurisprudence
in its interpretation of when separation pay in lieu of
reinstatement is allowed. When that happens, the finality of the
illegal dismissal decision becomes the reckoning point instead of
the reinstatement that the law decrees. In allowing separation pay,
the final decision effectively declares that the employment
relationship ended so that separation pay and backwages are to
be computed up to that point.31
Finally, anent the payment of legal interest. In the landmark case
of Eastern Shipping Lines, Inc. v. Court of Appeals, 32 the Court
laid down the guidelines regarding the manner of computing legal
interest, to wit:
II. With regard particularly to an award of interest in the concept
of actual and compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly,
where the demand is established with reasonable
certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169,
Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made,
the interest shall begin to run only from the date the
judgment of the court is made (at which time the
quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be 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.33
Recently, however, the Bangko Sentral ng Pilipinas Monetary
Board (BSP-MB), in its Resolution No. 796 dated May 16, 2013,
approved the amendment of Section 234 of Circular No. 905, Series
of 1982 and, accordingly, issued Circular No. 799, 35 Series of
2013, effective July 1, 2013, the pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May
2013, approved the following revisions governing the rate of
interest in the absence of stipulation in loan contracts, thereby
amending Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any
money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be
six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 36 of the Manual
of Regulations for Banks and Sections 4305Q.1, 37 4305S.338 and
4303P.139 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation
as to the rate of interest that would govern the parties, the rate of
legal interest for loans or forbearance of any money, goods or
credits and the rate allowed in judgments shall no longer be twelve
percent (12%) per annum - as reflected in the case of Eastern
Shipping Lines40and Subsection X305.1 of the Manual of
Regulations for Banks and Sections 4305Q.1, 4305S.3 and
4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions, before its amendment by BSP-MB Circular No. 799 -
but will now be six percent (6%) per annum effective July 1, 2013.
It should be noted, nonetheless, that the new rate could only be
applied prospectively and not retroactively. Consequently, the
twelve percent (12%) per annum legal interest shall apply only
until June 30, 2013. Come July 1, 2013 the new rate of six
percent (6%) per annum shall be the prevailing rate of interest
when applicable.
Corollarily, in the recent case of Advocates for Truth in Lending,
Inc. and Eduardo B. Olaguer v. Bangko Sentral Monetary
Board,41 this Court affirmed the authority of the BSP-MB to set
interest rates and to issue and enforce Circulars when it ruled
that "the BSP-MB may prescribe the maximum rate or rates of
interest for all loans or renewals thereof or the forbearance of any
money, goods or credits, including those for loans of low priority
such as consumer loans, as well as such loans made by
pawnshops, finance companies and similar credit institutions. It
even authorizes the BSP-MB to prescribe different maximum rate
or rates for different types of borrowings, including deposits and
deposit substitutes, or loans of financial intermediaries."
Nonetheless, with regard to those judgments that have become
final and executory prior to July 1, 2013, said judgments shall not
be disturbed and shall continue to be implemented applying the
rate of interest fixed therein.1awp++i1
To recapitulate and for future guidance, the guidelines laid down
in the case of Eastern Shipping Lines42 are accordingly modified to
embody BSP-MB Circular No. 799, as follows:
period being deemed to be by then an equivalent to a forbearance
of credit.
And, in addition to the above, judgments that have become final
and executory prior to July 1, 2013, shall not be disturbed and
shall continue to be implemented applying the rate of interest
fixed therein.
WHEREFORE, premises considered, the Decision dated September
23, 2008 of the Court of Appeals in CA-G.R. SP No. 98591, and
the Resolution dated October 9, 2009 are REVERSED and SET
ASIDE. Respondents are Ordered to Pay petitioner:
(1) backwages computed from the time petitioner was
illegally dismissed on January 24, 1997 up to May 27,
2002, when the Resolution of this Court in G.R. No.
151332 became final and executory;
(2) separation pay computed from August 1990 up to
May 27, 2002 at the rate of one month pay per year of
service; and
(3) interest of twelve percent (12%) per annum of the total
monetary awards, computed from May 27, 2002 to June
30, 2013 and six percent (6%) per annum from July 1,
2013 until their full satisfaction.
The Labor Arbiter is hereby ORDERED to make another
recomputation of the total monetary benefits awarded and due to
petitioner in accordance with this Decision.
SO ORDERED.

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.1âwphi1

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:

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 6% 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.

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.

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 6%
per annum from such finality until its satisfaction, this interim

G.R. No. 175773               June 17, 2013
MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES
UNION (MMPSEU), Petitioner,  insurance premium for the above coverage with the balance of the
vs.
MITSUBISHI MOTORS PHILIPPINES
CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
The Collective Bargaining Agreement (CBA) of the parties in this
case provides that the company shoulder the hospitalization
expenses of the dependents of covered employees subject to
certain limitations and restrictions. Accordingly, covered
employees pay part of the hospitalization insurance premium
through monthly salary deduction while the company, upon
hospitalization of the covered employees' dependents, shall pay
the hospitalization expenses incurred for the same. The conflict
arose when a portion of the hospitalization expenses of the
covered employees' dependents were paid/shouldered by the
dependent's own health insurance. While the company refused to
pay the portion of the hospital expenses already shouldered by the
dependents' own health insurance, the union insists that the
covered employees are entitled to the whole and undiminished
amount of said hospital expenses.
By this Petition for Review on Certiorari, 1 petitioner Mitsubishi
Motors Philippines Salaried Employees Union (MMPSEU) assails
the March 31, 2006 Decision2 and December 5, 2006
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 75630,
which reversed and set aside the Voluntary Arbitrator’s December
3, 2002 Decision4 and declared respondent Mitsubishi Motors
Philippines Corporation (MMPC) to be under no legal obligation to
pay its covered employees’ dependents’ hospitalization expenses
which were already shouldered by other health insurance
companies.
Factual Antecedents
The parties’ CBA5 covering the period August 1, 1996 to July 31,
1999 provides for the hospitalization insurance benefits for the
covered dependents, thus:
SECTION 4. DEPENDENTS’ GROUP HOSPITALIZATION
INSURANCE – The COMPANY shall obtain group hospitalization
insurance coverage or assume under a self-insurance basis
hospitalization for the dependents of regular employees up to a
maximum amount of forty thousand pesos (₱40,000.00) per
confinement subject to the following:
a. The room and board must not exceed three hundred
pesos (₱300.00) per day up to a maximum of thirty-one
(31) days. Similarly, Doctor’s Call fees must not exceed
three hundred pesos (₱300.00) per day for a maximum of
thirty-one (31) days. Any excess of this amount shall be
borne by the employee.
b. Confinement must be in a hospital designated by the
COMPANY. For this purpose, the COMPANY shall
designate hospitals in different convenient places to be
availed of by the dependents of employees. In cases of
emergency where the dependent is confined without the
recommendation of the company doctor or in a hospital
not designated by the COMPANY, the COMPANY shall
look into the circumstances of such confinement and
arrange for the payment of the amount to the extent of
the hospitalization benefit.
c. The limitations and restrictions listed in Annex "B"
must be observed.
d. Payment shall be direct to the hospital and doctor and
must be covered by actual billings.
Each employee shall pay one hundred pesos (₱100.00) per month
through salary deduction as his share in the payment of the
premium to be paid by the COMPANY. If the COMPANY is self-
insured the one hundred pesos (₱100.00) per employee monthly
contribution shall be given to the COMPANY which shall shoulder
the expenses subject to the above level of benefits and subject to
the same limitations and restrictions provided for in Annex "B"
hereof.
The hospitalization expenses must be covered by actual hospital
and doctor’s bills and any amount in excess of the above
mentioned level of benefits will be for the account of the employee.
For purposes of this provision, eligible dependents are the covered
employees’ natural parents, legal spouse and legitimate or legally
adopted or step children who are unmarried, unemployed who
have not attained twenty-one (21) years of age and wholly
dependent upon the employee for support.
This provision applies only in cases of actual confinement in the
hospital for at least six (6) hours.
Maternity cases are not covered by this section but will be under
the next succeeding section on maternity benefits. 6
When the CBA expired on July 31, 1999, the parties executed
another CBA7 effective August 1, 1999 to July 31, 2002
incorporating the same provisions on dependents’ hospitalization
insurance benefits but in the increased amount of ₱50,000.00.
The room and board expenses, as well as the doctor’s call fees,
were also increased to ₱375.00.
On separate occasions, three members of MMPSEU, namely,
Ernesto Calida (Calida), Hermie Juan Oabel (Oabel) and Jocelyn
Martin (Martin), filed claims for reimbursement of hospitalization
expenses of their dependents.
MMPC paid only a portion of their hospitalization insurance
claims, not the full amount. In the case of Calida, his wife, Lanie,
was confined at Sto. Tomas University Hospital from September 4
to 9, 1998 due to Thyroidectomy. The medical expenses incurred
totalled ₱29,967.10. Of this amount, ₱9,000.00 representing
professional fees was paid by MEDICard Philippines, Inc.
(MEDICard) which provides health maintenance to Lanie. 8 MMPC
only paid ₱12,148.63.9 It did not pay the ₱9,000.00 already paid
by MEDICard and the ₱6,278.47 not covered by official receipts. It
refused to give to Calida the difference between the amount of
medical expenses of ₱27,427.1010 which he claimed to be entitled
to under the CBA and the ₱12,148.63 which MMPC directly paid
to the hospital.
In the case of Martin, his father, Jose, was admitted at The
Medical City from March 26 to 27, 2000 due to Acid Peptic
Disease and incurred medical expenses amounting to
₱9,101.30.14 MEDICard paid ₱8,496.00.15Consequently, MMPC
only paid ₱288.40,16 after deducting from the total medical
expenses the amount paid by MEDICard and the ₱316.90
discount given by the hospital.
Claiming that under the CBA, they are entitled to hospital benefits
amounting to ₱27,427.10, ₱6,769.35 and ₱8,123.80, respectively,
which should not be reduced by the amounts paid by MEDICard
and by Prosper, Calida, Oabel and Martin asked for
reimbursement from MMPC. However, MMPC denied the claims
contending that double insurance would result if the said
employees would receive from the company the full amount of
hospitalization expenses despite having already received payment
of portions thereof from other health insurance providers.
This prompted the MMPSEU President to write the MMPC
President17 demanding full payment of the hospitalization benefits.
Alleging discrimination against MMPSEU union members, she
pointed out that full reimbursement was given in a similar claim
filed by Luisito Cruz (Cruz), a member of the Hourly Union. In a
letter-reply,18 MMPC, through its Vice-President for Industrial
Relations Division, clarified that the claims of the said MMPSEU
members have already been paid on the basis of official receipts
submitted. It also denied the charge of discrimination and
explained that the case of Cruz involved an entirely different
matter since it concerned the admissibility of certified true copies
of documents for reimbursement purposes, which case had been
settled through voluntary arbitration.
On August 28, 2000, MMPSEU referred the dispute to the
National Conciliation and Mediation Board and requested for
preventive mediation.19
Proceedings before the Voluntary Arbitrator
On October 3, 2000, the case was referred to Voluntary Arbitrator
Rolando Capocyan for resolution of the issue involving the
interpretation of the subject CBA provision. 20
MMPSEU alleged that there is nothing in the CBA which prohibits
an employee from obtaining other insurance or declares that
medical expenses can be reimbursed only upon presentation of
original official receipts. It stressed that the hospitalization
benefits should be computed based on the formula indicated in
the CBA without deducting the benefits derived from other
insurance providers. Besides, if reduction is permitted, MMPC
would be unjustly benefited from the monthly premium
contributed by the employees through salary deduction. MMPSEU
added that its members had legitimate claims under the CBA and
that any doubt as to any of its provisions should be resolved in
favor of its members. Moreover, any ambiguity should be resolved
in favor of labor.21
On the other hand, MMPC argued that the reimbursement of the
entire amounts being claimed by the covered employees, including
those already paid by other insurance companies, would
constitute double indemnity or double insurance, which is
circumscribed under the Insurance Code. Moreover, a contract of
insurance is a contract of indemnity and the employees cannot be
allowed to profit from their dependents’ loss. 22
Meanwhile, the parties separately sought for a legal opinion from
the Insurance Commission relative to the issue at hand. In its
letter23 to the Insurance Commission, MMPC requested for
confirmation of its position that the covered employees cannot
claim insurance benefits for a loss that had already been covered
or paid by another insurance company. However, the Office of the
Insurance Commission opted not to render an opinion on the
matter as the same may become the subject of a formal complaint
before it.24 On the other hand, when queried by MMPSEU, 25the
Insurance Commission, through Atty. Richard David C. Funk II
(Atty. Funk) of the Claims Adjudication Division, rendered an
opinion contained in a letter, 26 viz:
Ms. Cecilia L. ParasPresident
Mitsubishi Motors Phils.
[Salaried] Employees Union
Ortigas Avenue Extension,
Cainta, Rizal
Madam:
We acknowledge receipt of your letter which, to our impression,
basically poses the question of whether or not recovery of medical
expenses from a Health Maintenance Organization bars recovery
of the same reimbursable amount of medical expenses under a
contract of health or medical insurance.
We wish to opine that in cases of claims for reimbursement of
medical expenses where there are two contracts providing benefits
to that effect, recovery may be had on both simultaneously. In the
absence of an Other Insurance provision in these coverages, the
courts have uniformly held that an insured is entitled to receive
the insurance benefits without regard to the amount of total
benefits provided by other insurance. (INSURANCE LAW, A Guide
to Fundamental Principles, Legal Doctrines, and Commercial
Practices; Robert E. Keeton, Alau I. Widiss, p. 261). The result is
consistent with the public policy underlying the collateral source
rule – that is, x x x the courts have usually concluded that the
liability of a health or accident insurer is not reduced by other
possible sources of indemnification or compensation. (ibid).
Very truly yours,
RICHARD DAVID C. FUNK II
Officer-in-Charge
Claims Adjudication Division
(SGD.)
Attorney IV
On December 3, 2002, the Voluntary Arbitrator rendered a
Decision27 finding MMPC liable to pay or reimburse the amount of
hospitalization expenses already paid by other health insurance
companies. The Voluntary Arbitrator held that the employees may
demand simultaneous payment from both the CBA and their
dependents’ separate health insurance without resulting to double
insurance, since separate premiums were paid for each contract.
He also noted that the CBA does not prohibit reimbursement in
case there are other health insurers.
Proceedings before the Court of Appeals
MMPC filed a Petition for Review with Prayer for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary
Injunction28 before the CA. It claimed that the Voluntary Arbitrator
committed grave abuse of discretion in not finding that recovery
under both insurance policies constitutes double insurance as
both had the same subject matter, interest insured and risk or
peril insured against; in relying solely on the unauthorized legal
opinion of Atty. Funk; and in not finding that the employees will
be benefited twice for the same loss. In its Comment, 29 MMPSEU
countered that MMPC will unjustly enrich itself and profit from
the monthly premiums paid if full reimbursement is not made.
On March 31, 2006, the CA found merit in MMPC’s Petition. It
ruled that despite the lack of a provision which bars recovery in
case of payment by other insurers, the wordings of the subject
provision of the CBA showed that the parties intended to make
MMPC liable only for expenses actually incurred by an employee’s
qualified dependent. In particular, the provision stipulates that
payment should be made directly to the hospital and that the
claim should be supported by actual hospital and doctor’s bills.
These mean that the employees shall only be paid amounts not
covered by other health insurance and is more in keeping with the
principle of indemnity in insurance contracts. Besides, a contrary
interpretation would "allow unscrupulous employees to unduly
profit from the x x x benefits" and shall "open the floodgates to
questionable claims x x x."30
The dispositive portion of the CA Decision 31 reads:
WHEREFORE, the instant petition is GRANTED. The decision of
the voluntary arbitrator dated December 3, 2002 is REVERSED
and SET ASIDE and judgment is rendered declaring that under
Art. XI, Sec. 4 of the Collective Bargaining Agreement between
petitioner and respondent effective August 1, 1999 to July 31,
2002, the former’s obligation to reimburse the Union members for
the hospitalization expenses incurred by their dependents is
exclusive of those paid by the Union members to the hospital.
SO ORDERED.32
In its Motion for Reconsideration,33 MMPSEU pointed out that the
alleged oppression that may be committed by abusive employees is
a mere possibility whereas the resulting losses to the employees
are real. MMPSEU cited Samsel v. Allstate Insurance
Co.,34 wherein the Arizona Supreme Court explicitly ruled that an
insured may recover from separate health insurance providers,
regardless of whether one of them has already paid the medical
expenses incurred. On the other hand, MMPC argued in its
Comment35 that the cited foreign case involves a different set of
facts.
36
The CA, in its Resolution  dated December 5, 2006, denied
MMPSEU’s motion.
Hence, this Petition.
Issues
MMPSEU presented the following grounds in support of its
Petition:
A.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT
REVERSED THE DECISION DATED 03 [DECEMBER] 2002 OF
THE VOLUNTARY ARBITRATOR BELOW WHEN THE SAME WAS
SUPPORTED BY SUBSTANTIAL EVIDENCE, INCLUDING THE
OPINION OF THE INSURANCE COMMISSION THAT RECOVERY
FROM BOTH THE CBA AND SEPARATE HEALTH CARDS IS NOT
PROHIBITED IN THE ABSENCE OF ANY SPECIFIC PROVISION IN
THE CBA.
B.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
OVERTURNING THE DECISION OF THE VOLUNTARY
ARBITRATOR WITHOUT EVEN GIVING ANY LEGAL OR
JUSTIFIABLE BASIS FOR SUCH REVERSAL.
C.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN
REFUSING TO CONSIDER OR EVEN MENTION ANYTHING
ABOUT THE AMERICAN AUTHORITIES CITED IN THE RECORDS
THAT DO NOT PROHIBIT, BUT IN FACT ALLOW, RECOVERY
FROM TWO SEPARATE HEALTH PLANS.
D.
THE COURT OF APPEALS GRAVELY ERRED IN GIVING MORE
IMPORTANCE TO A POSSIBLE, HENCE MERELY SPECULATIVE,
ABUSE BY EMPLOYEES OF THE BENEFITS IF DOUBLE
RECOVERY WERE ALLOWED INSTEAD OF THE REAL INJURY TO
THE EMPLOYEES WHO ARE PAYING FOR THE CBA
HOSPITALIZATION BENEFITS THROUGH MONTHLY SALARY
DEDUCTIONS BUT WHO MAY NOT BE ABLE TO AVAIL OF THE
SAME IF THEY OR THEIR DEPENDENTS HAVE OTHER HEALTH
INSURANCE.37
MMPSEU avers that the Decision of the Voluntary Arbitrator
deserves utmost respect and finality because it is supported by
substantial evidence and is in accordance with the opinion
rendered by the Insurance Commission, an agency equipped with
vast knowledge concerning insurance contracts. It maintains that
under the CBA, member-employees are entitled to full
reimbursement of medical expenses incurred by their dependents
regardless of any amounts paid by the latter’s health insurance
provider. Otherwise, non-recovery will constitute unjust
enrichment on the part of MMPC. It avers that recovery from both
the CBA and other insurance companies is allowed under their
CBA and not prohibited by law nor by jurisprudence.
Our Ruling
The Petition has no merit.
Atty. Funk erred in applying the
collateral source rule.
The Voluntary Arbitrator based his ruling on the opinion of Atty.
Funk that the employees may recover benefits from different
insurance providers without regard to the amount of benefits paid
by each. According to him, this view is consistent with the theory
of the collateral source rule.
As part of American personal injury law, the collateral source rule
was originally applied to tort cases wherein the defendant is
prevented from benefiting from the plaintiff’s receipt of money
from other sources.38 Under this rule, if an injured person receives
compensation for his injuries from a source wholly independent of
the tortfeasor, the payment should not be deducted from the
damages which he would otherwise collect from the tortfeasor. 39 In
a recent Decision40 by the Illinois Supreme Court, the rule has
been described as "an established exception to the general rule
that damages in negligence actions must be compensatory." The
Court went on to explain that although the rule appears to allow a
double recovery, the collateral source will have a lien or
subrogation right to prevent such a double recovery. 41 In Mitchell
v. Haldar,42 the collateral source rule was rationalized by the
Supreme Court of Delaware:
The collateral source rule is ‘predicated on the theory that a
tortfeasor has no interest in, and therefore no right to benefit from
monies received by the injured person from sources unconnected
with the defendant’. According to the collateral source rule, ‘a
tortfeasor has no right to any mitigation of damages because of
payments or compensation received by the injured person from an
independent source.’ The rationale for the collateral source rule is
based upon the quasi-punitive nature of tort law liability. It has
been explained as follows:
The collateral source rule is designed to strike a balance between
two competing principles of tort law: (1) a plaintiff is entitled to
compensation sufficient to make him whole, but no more; and (2)
a defendant is liable for all damages that proximately result from
his wrong. A plaintiff who receives a double recovery for a single
tort enjoys a windfall; a defendant who escapes, in whole or in
part, liability for his wrong enjoys a windfall. Because the law
must sanction one windfall and deny the other, it favors the victim
of the wrong rather than the wrongdoer.
Thus, the tortfeasor is required to bear the cost for the full value
of his or her negligent conduct even if it results in a windfall for
the innocent plaintiff. (Citations omitted)
As seen, the collateral source rule applies in order to place the
responsibility for losses on the party causing them. 43Its
application is justified so that "'the wrongdoer should not benefit
from the expenditures made by the injured party or take
advantage of contracts or other relations that may exist between
the injured party and third persons."44Thus, it finds no application
to cases involving no-fault insurances under which the insured is
indemnified for losses by insurance companies, regardless of who
was at fault in the incident generating the losses. 45 Here, it is clear
that MMPC is a no-fault insurer. Hence, it cannot be obliged to
pay the hospitalization expenses of the dependents of its
employees which had already been paid by separate health
insurance providers of said dependents.
The Voluntary Arbitrator therefore erred in adopting Atty. Funk’s
view that the covered employees are entitled to full payment of the
hospital expenses incurred by their dependents, including the
amounts already paid by other health insurance companies based
on the theory of collateral source rule.
The conditions set forth in the CBA provision indicate an intention
to limit MMPC’s liability only to actual expenses incurred by the
employees’ dependents, that is, excluding the amounts paid by
dependents’ other health insurance providers.
The Voluntary Arbitrator ruled that the CBA has no express
provision barring claims for hospitalization expenses already paid
by other insurers. Hence, the covered employees can recover from
both. The CA did not agree, saying that the conditions set forth in
the CBA implied an intention of the parties to limit MMPC’s
liability only to the extent of the expenses actually incurred by
their dependents which excludes the amounts shouldered by other
health insurance companies.
We agree with the CA. The condition that payment should be
direct to the hospital and doctor implies that MMPC is only liable
to pay medical expenses actually shouldered by the employees’
dependents. It follows that MMPC’s liability is limited, that is, it
does not include the amounts paid by other health insurance
providers. This condition is obviously intended to thwart not only
fraudulent claims but also double claims for the same loss of the
dependents of covered employees.
Moreover, since the subject CBA provision is an insurance
contract, the rights and obligations of the parties must be
determined in accordance with the general principles of insurance
law.52 Being in the nature of a non-life insurance contract and
essentially a contract of indemnity, the CBA provision obligates
MMPC to indemnify the covered employees’ medical expenses
incurred by their dependents but only up to the extent of the
expenses actually incurred.53 This is consistent with the principle
of indemnity which proscribes the insured from recovering greater
than the loss.54 Indeed, to profit from a loss will lead to unjust
enrichment and therefore should not be countenanced. As aptly
ruled by the CA, to grant the claims of MMPSEU will permit
possible abuse by employees.
WHEREFORE, the Petition is DENIED. The Decision dated March
31, 2006 and Resolution dated December 5, 2006 of the Court of
Appeals in CA-G.R. SP No. 75630, are AFFIRMED.

It is well to note at this point that the CBA constitutes a contract SO ORDERED.
between the parties and as such, it should be strictly construed
for the purpose of limiting the amount of the employer’s MARIANO C. DEL 
liability.46 The terms of the subject provision are clear and provide
no room for any other interpretation. As there is no ambiguity, the
terms must be taken in their plain, ordinary and popular
sense.47 Consequently, MMPSEU cannot rely on the rule that a
contract of insurance is to be liberally construed in favor of the
insured. Neither can it rely on the theory that any doubt must be
resolved in favor of labor.

Samsel v. Allstate Insurance Co. is not

on all fours with the case at bar.

MMPSEU cannot rely on Samsel v. Allstate Insurance Co. where

the Supreme Court of Arizona allowed the insured to enjoy
medical benefits under an automobile policy insurance despite
being able to also recover from a separate health insurer. In that
case, the Allstate automobile policy does not contain any clause
restricting medical payment coverage to expenses actually paid by
the insured nor does it specifically provide for reduction of medical
payments benefits by a coordination of benefits. 48 However, in the
case before us, the dependents’ group hospitalization insurance
provision in the CBA specifically contains a condition which limits
MMPC’s liability only up to the extent of the expenses that should
be paid by the covered employee’s dependent to the hospital and
doctor. This is evident from the portion which states that
"payment by MMPC shall be direct to the hospital and doctor." 49 In
contrast, the Allstate automobile policy expressly gives Allstate the
authority to pay directly to the insured person or on the latter’s
behalf all reasonable expenses actually incurred. Therefore,
reliance on Samsel is unavailing because the facts therein are
different and not decisive of the issues in the present case.

To allow reimbursement of amounts paid

under other insurance policies shall
constitute double recovery which is not
sanctioned by law.

MMPSEU insists that MMPC is also liable for the amounts covered
under other insurance policies; otherwise, MMPC will unjustly
profit from the premiums the employees contribute through
monthly salary deductions.

This contention is unmeritorious.

To constitute unjust enrichment, it must be shown that a party

was unjustly enriched in the sense that the term unjustly could
mean illegally or unlawfully. 50 A claim for unjust enrichment fails
when the person who will benefit has a valid claim to such
benefit.51

The CBA has provided for MMPC’s limited liability which extends
only up to the amount to be paid to the hospital and doctor by the
employees’ dependents, excluding those paid by other insurers.
Consequently, the covered employees will not receive more than
what is due them; neither is MMPC under any obligation to give
more than what is due under the CBA.

G.R. No. 137873       April 20, 2001
D. M. CONSUNJI, INC., petitioner,  
vs.
COURT OF APPEALS and MARIA J. JUEGO, respondents.
KAPUNAN, J.:
At around 1:30 p.m., November 2, 1990, Jose Juego, a
construction worker of D. M. Consunji, Inc., fell 14 floors from the
Renaissance Tower, Pasig City to his death.
PO3 Rogelio Villanueva of the Eastern Police District investigated
the tragedy and filed a report dated November 25, 1990, stating
that:
x x x. [The] [v]ictim was rushed to [the] Rizal Medical
Center in Pasig, Metro Manila where he was pronounced
dead on arrival (DOA) by the attending physician, Dr.
Errol de Yzo[,] at around 2:15 p.m. of the same date.
Investigation disclosed that at the given time, date and
place, while victim Jose A. Juego together with Jessie
Jaluag and Delso Destajo [were] performing their work as
carpenter[s] at the elevator core of the 14 th floor of the
Tower D, Renaissance Tower Building on board a
[p]latform made of channel beam (steel) measuring 4.8
meters by 2 meters wide with pinulid plywood flooring
and cable wires attached to its four corners and hooked
at the 5 ton chain block, when suddenly, the bolt or pin
which was merely inserted to connect the chain block
with the [p]latform, got loose xxx causing the whole
[p]latform assembly and the victim to fall down to the
basement of the elevator core, Tower D of the building
under construction thereby crushing the victim of death,
save his two (2) companions who luckily jumped out for
safety.
It is thus manifest that Jose A. Juego was crushed to
death when the [p]latform he was then on board and
performing work, fell. And the falling of the [p]latform
was due to the removal or getting loose of the pin which
was merely inserted to the connecting points of the chain
block and [p]latform but without a safety lock. 1
On May 9, 1991, Jose Juego’s widow, Maria, filed in the Regional
Trial Court (RTC) of Pasig a complaint for damages against the
deceased’s employer, D.M. Consunji, Inc. The employer raised,
among other defenses, the widow’s prior availment of the benefits
from the State Insurance Fund.
After trial, the RTC rendered a decision in favor of the widow
Maria Juego. The dispositive portion of the RTC decision reads:
WHEREFORE, judgment is hereby rendered ordering
defendant to pay plaintiff, as follows:
1. P50,000.00 for the death of Jose A. Juego.
2. P10,000.00 as actual and compensatory
damages.
3. P464,000.00 for the loss of Jose A. Juego’s
earning capacity.
4. P100,000.00 as moral damages.
5. P20,000.00 as attorney’s fees, plus the costs
of suit.
SO ORDERED.2
On appeal by D. M. Consunji, the Court of Appeals (CA) affirmed
the decision of the RTC in toto.
D. M. Consunji now seeks the reversal of the CA decision on the
following grounds:
THE APPELLATE COURT ERRED IN HOLDING
THAT THE POLICE REPORT WAS ADMISSIBLE
EVIDENCE OF THE ALLEGED NEGLIGENCE
OF PETITIONER.
 THE APPELLATE COURT ERRED IN HOLDING
THAT THE DOCTRINE OF RES IPSA
LOQUITOR [sic] IS APPLICABLE TO PROVE
NEGLIGENCE ON THE PART OF PETITIONER.
 THE APPELLATE COURT ERRED IN HOLDING
THAT PETITIONER IS PRESUMED NEGLIGENT
UNDER ARTICLE 2180 OF THE CIVIL CODE,
AND
 THE APPELLATE COURT ERRED IN HOLDING
THAT RESPONDENT IS NOT PRECLUDED
FROM RECOVERING DAMAGES UNDER THE
CIVIL CODE.3
Petitioner maintains that the police report reproduced above is
hearsay and, therefore, inadmissible. The CA ruled otherwise. It
held that said report, being an entry in official records, is an
exception to the hearsay rule.
The Rules of Court provide that a witness can testify only to those
facts which he knows of his personal knowledge, that is, which are
derived from his perception.4 A witness, therefore, may not testify
as what he merely learned from others either because he was told
or read or heard the same. Such testimony is considered hearsay
and may not be received as proof of the truth of what he has
learned.5 This is known as the hearsay rule.
Hearsay is not limited to oral testimony or statements; the general
rule that excludes hearsay as evidence applies to written, as well
as oral statements.6
The theory of the hearsay rule is that the many possible
deficiencies, suppressions, sources of error and
untrustworthiness, which lie underneath the bare untested
assertion of a witness, may be best brought to light and exposed
by the test of cross-examiantion.7 The hearsay rule, therefore,
excludes evidence that cannot be tested by cross-examination. 8
The Rules of Court allow several exceptions to the rule, 9 among
which are entries in official records. Section 44, Rule 130
provides:
Entries in official records made in the performance of his
duty made in the performance of his duty by a public
officer of the Philippines, or by a person in the
performance of a duty specially enjoined by law
are prima facie evidence of the facts therein stated.
In Africa, et al. vs. Caltex (Phil.), Inc., et al.,10 this Court, citing the
work of Chief Justice Moran, enumerated the requisites for
admissibility under the above rule:
(a) that the entry was made by a public officer or by
another person specially enjoined by law to do so;
(b) that it was made by the public officer in the
performance of his duties, or by such other person in the
performance of a duty specially enjoined by law; and
(c) that the public officer or other person had sufficient
knowledge of the facts by him stated, which must have
 been acquired by him personally or through official
information.
The CA held that the police report meets all these requisites.
Petitioner contends that the last requisite is not present.
The Court notes that PO3 Villanueva, who signed the report in
question, also testified before the trial court. In Rodriguez vs.
Court of Appeals,11 which involved a Fire Investigation Report, the
officer who signed the fire report also testified before the trial
court. This Court held that the report was inadmissible for the
purpose of proving the truth of the statements contained in the
report but admissible insofar as it constitutes part of the
testimony of the officer who executed the report.
x x x. Since Major Enriquez himself took the witness
stand and was available for cross-examination, the
portions of the report which were of his personal
knowledge or which consisted of his perceptions and
conclusions were not hearsay. The rest of the report,
such as the summary of the statements of the parties
based on their sworn statements (which were annexed to
the Report) as well as the latter, having been included in
the first purpose of the offer [as part of the testimony of
Major Enriquez], may then be considered
as independently relevant statements which were
gathered in the course of the investigation and may thus
be admitted as such, but not necessarily to prove the
truth thereof. It has been said that:
"Where regardless of the truth or falsity of a
statement, the fact that it has been made is
relevant, the hearsay rule does not apply, but
the statement may be shown. Evidence as to the
making of such statement is not secondary but
primary, for the statement itself may constitute
a fact in issue, or be circumstantially relevant
as to the existence of such a fact."
When Major Enriquez took the witness stand, testified for
petitioners on his Report and made himself available for
cross-examination by the adverse party, the Report,
insofar as it proved that certain utterances were made
(but not their truth), was effectively removed from the
ambit of the aforementioned Section 44 of Rule 130.
Properly understood, this section does away with the
testimony in open court of the officer who made the
official record, considers the matter as an exception to
the hearsay rule and makes the entries in said official
record admissible in evidence as prima facie evidence of
the facts therein stated. The underlying reasons for this
exceptionary rule are necessity and trustworthiness, as
explained in Antillon v. Barcelon.
The litigation is unlimited in which testimony by
officials is daily needed; the occasions in which
the officials would be summoned from his
ordinary duties to declare as a witness are
numberless. The public officers are few in
whose daily work something is not done in
which testimony is not needed from official
sources. Were there no exception for official
statements, hosts of officials would be found
devoting the greater part of their time to
attending as witnesses in court or delivering
deposition before an officer. The work of
administration of government and the interest
of the public having business with officials
would alike suffer in consequence. For these
reasons, and for many others, a certain verity is
accorded such documents, which is not
extended to private documents. (3 Wigmore on
Evidence, Sec. 1631).
The law reposes a particular confidence in
public officers that it presumes they will
discharge their several trusts with accuracy and
fidelity; and, therefore, whatever acts they do in
discharge of their duty may be given in evidence
and shall be taken to be true under such a
degree of caution as to the nature and
circumstances of each case may appear to
require.
It would have been an entirely different matter if Major
Enriquez was not presented to testify on his report. In
that case the applicability of Section 44 of Rule 143
would have been ripe for determination, and this Court
would have agreed with the Court of Appeals that said
report was inadmissible since the aforementioned third
requisite was not satisfied. The statements given by the
sources of information of Major Enriquez failed to qualify
as "official information," there being no showing that, at
the very least, they were under a duty to give the
statements for record.
Similarly, the police report in this case is inadmissible for the
purpose of proving the truth of the statements contained therein
but is admissible insofar as it constitutes part of the testimony of
PO3 Villanueva.
In any case, the Court holds that portions of PO3 Villanueva’s
testimony which were of his personal knowledge suffice to prove
that Jose Juego indeed died as a result of the elevator crash. PO3
Villanueva had seen Juego’s remains at the morgue, 12 making the
latter’s death beyond dispute. PO3 Villanueva also conducted an
ocular inspection of the premises of the building the day after the
incident13 and saw the platform for himself.14 He observed that the
platform was crushed15 and that it was totally damaged.16 PO3
Villanueva also required Garcia and Fabro to bring the chain
block to the police headquarters. Upon inspection, he noticed that
the chain was detached from the lifting machine, without any pin
or bolt.17
What petitioner takes particular exception to is PO3 Villanueva’s
testimony that the cause of the fall of the platform was the
loosening of the bolt from the chain block. It is claimed that such
portion of the testimony is mere opinion. Subject to certain
exceptions,18 the opinion of a witness is generally not admissible. 19
Petitioner’s contention, however, loses relevance in the face of the
application of res ipsa loquitur by the CA. The effect of the doctrine
is to warrant a presumption or inference that the mere fall of the
elevator was a result of the person having charge of the
instrumentality was negligent. As a rule of evidence, the doctrine
of res ipsa loquitur is peculiar to the law of negligence which
recognizes that prima facie negligence may be established without
direct proof and furnishes a substitute for specific proof of
negligence.20
The concept of res ipsa loquitur has been explained in this wise:
While negligence is not ordinarily inferred or presumed,
and while the mere happening of an accident or injury
will not generally give rise to an inference or presumption
that it was due to negligence on defendant’s part, under
the doctrine of res ipsa loquitur, which means, literally,
the thing or transaction speaks for itself, or in one
jurisdiction, that the thing or instrumentality speaks for
itself, the facts or circumstances accompanying an injury
may be such as to raise a presumption, or at least permit
an inference of negligence on the part of the defendant,
or some other person who is charged with negligence.
x x x where it is shown that the thing or instrumentality
which caused the injury complained of was under the
control or management of the defendant, and that the
occurrence resulting in the injury was such as in the
ordinary course of things would not happen if those who
had its control or management used proper care, there is
sufficient evidence, or, as sometimes stated, reasonable
evidence, in the absence of explanation by the defendant,
 that the injury arose from or was caused by the
defendant’s want of care.21
One of the theoretical based for the doctrine is its necessity, i.e.,
that necessary evidence is absent or not available. 22
The res ipsa loquitur doctrine is based in part upon the
theory that the defendant in charge of the
instrumentality which causes the injury either knows the
cause of the accident or has the best opportunity of
ascertaining it and that the plaintiff has no such
knowledge, and therefore is compelled to allege
negligence in general terms and to rely upon the proof of
the happening of the accident in order to establish
negligence. The inference which the doctrine permits is
grounded upon the fact that the chief evidence of the
true cause, whether culpable or innocent, is practically
accessible to the defendant but inaccessible to the
injured person.
It has been said that the doctrine of res ipsa loquitur
furnishes a bridge by which a plaintiff, without
knowledge of the cause, reaches over to defendant who
knows or should know the cause, for any explanation of
care exercised by the defendant in respect of the matter
of which the plaintiff complains. The res ipsa loquitur
doctrine, another court has said, is a rule of necessity, in
that it proceeds on the theory that under the peculiar
circumstances in which the doctrine is applicable, it is
within the power of the defendant to show that there was
no negligence on his part, and direct proof of defendant’s
negligence is beyond plaintiff’s power. Accordingly, some
court add to the three prerequisites for the application of
the res ipsa loquitur doctrine the further requirement
that for the res ipsa loquitur doctrine to apply, it must
appear that the injured party had no knowledge or
means of knowledge as to the cause of the accident, or
that the party to be charged with negligence has superior
knowledge or opportunity for explanation of the
accident.23
The CA held that all the requisites of res ipsa loquitur are present
in the case at bar:
There is no dispute that appellee’s husband fell down
from the 14th floor of a building to the basement while he
was working with appellant’s construction project,
resulting to his death. The construction site is within the
exclusive control and management of appellant. It has a
safety engineer, a project superintendent, a carpenter
leadman and others who are in complete control of the
situation therein. The circumstances of any accident that
would occur therein are peculiarly within the knowledge
of the appellant or its employees. On the other hand, the
appellee is not in a position to know what caused the
accident. Res ipsa loquitur is a rule of necessity and it
applies where evidence is absent or not readily available,
provided the following requisites are present: (1) the
accident was of a kind which does not ordinarily occur
unless someone is negligent; (2) the instrumentality or
agency which caused the injury was under the exclusive
control of the person charged with negligence; and (3) the
injury suffered must not have been due to any voluntary
action or contribution on the part of the person injured.
x x x.
No worker is going to fall from the 14th floor of a building
to the basement while performing work in a construction
site unless someone is negligent[;] thus, the first
requisite for the application of the rule of res ipsa
loquitur is present. As explained earlier, the construction
site with all its paraphernalia and human resources that
likely caused the injury is under the exclusive control
and management of appellant[;] thus[,] the second
requisite is also present. No contributory negligence was
attributed to the appellee’s deceased husband[;] thus[,]
the last requisite is also present. All the requisites for the
application of the rule of res ipsa loquitur are present,
thus a reasonable presumption or inference of
appellant’s negligence arises. x x x. 24
Petitioner does not dispute the existence of the requisites for the
application of res ipsa loquitur, but argues that the presumption or
inference that it was negligent did not arise since it "proved that it
exercised due care to avoid the accident which befell respondent’s
husband."
Petitioner apparently misapprehends the procedural effect of the
doctrine. As stated earlier, the defendant’s negligence is presumed
or inferred25 when the plaintiff establishes the requisites for the
application of res ipsa loquitur. Once the plaintiff makes out a
prima facie case of all the elements, the burden then shifts to
defendant to explain.26 The presumption or inference may be
rebutted or overcome by other evidence and, under appropriate
circumstances disputable presumption, such as that of due care
or innocence, may outweigh the inference. 27 It is not for the
defendant to explain or prove its defense to prevent the
presumption or inference from arising. Evidence by the defendant
of say, due care, comes into play only after the circumstances for
the application of the doctrine has been established.1âwphi1.nêt
In any case, petitioner cites the sworn statement of its leadman
Ferdinand Fabro executed before the police investigator as
evidence of its due care. According to Fabro’s sworn statement,
the company enacted rules and regulations for the safety and
security of its workers. Moreover, the leadman and
the bodegero inspect the chain block before allowing its use.
It is ironic that petitioner relies on Fabro’s sworn statement as
proof of its due care but, in arguing that private respondent failed
to prove negligence on the part of petitioner’s employees, also
assails the same statement for being hearsay.
Petitioner is correct. Fabro’s sworn statement is hearsay and
inadmissible. Affidavits are inadmissible as evidence under the
hearsay rule, unless the affiant is placed on the witness stand to
testify thereon.28 The inadmissibility of this sort of evidence is
based not only on the lack of opportunity on the part of the
adverse party to cross-examine the affiant, but also on the
commonly known fact that, generally, an affidavit is not prepared
by the affiant himself but by another who uses his own language
in writing the affiant’s statements which may either be omitted or
misunderstood by the one writing them.29 Petitioner, therefore,
cannot use said statement as proof of its due care any more than
private respondent can use it to prove the cause of her husband’s
death. Regrettably, petitioner does not cite any other evidence to
rebut the inference or presumption of negligence arising from the
application of res ipsa loquitur, or to establish any defense relating
to the incident.
Next, petitioner argues that private respondent had previously
availed of the death benefits provided under the Labor Code and
is, therefore, precluded from claiming from the deceased’s
employer damages under the Civil Code.
Article 173 of the Labor Code states:
Article 173. Extent of liability. – Unless otherwise
provided, the liability of the State Insurance Fund under
this Title shall be exclusive and in place of all other
liabilities of the employer to the employee, his
dependents or anyone otherwise entitled to receive
damages on behalf of the employee or his dependents.
The payment of compensation under this Title shall not
bar the recovery of benefits as provided for in Section
699 of the Revised Administrative Code, Republic Act
Numbered Eleven hundred sixty-one, as amended,
Republic Act Numbered Six hundred ten, as amended,
Republic Act Numbered Forty-eight hundred sixty-four
as amended, and other laws whose benefits are
administered by the System or by other agencies of the
government.
The precursor of Article 173 of the Labor Code, Section 5 of the
Workmen’s Compensation Act, provided that:
Section 5. Exclusive right to compensation. – The rights
and remedies granted by this Act to an employee by
reason of a personal injury entitling him to compensation
shall exclude all other rights and remedies accruing to
the employee, his personal representatives, dependents
or nearest of kin against the employer under the Civil
Code and other laws because of said injury x x x.
Whether Section 5 of the Workmen’s Compensation Act allowed
recovery under said Act as well as under the Civil Code used to be
the subject of conflicting decisions. The Court finally settled the
matter in Floresca vs.Philex Mining Corporation,30 which involved a
cave-in resulting in the death of the employees of the Philex
Mining Corporation. Alleging that the mining corporation, in
violation of government rules and regulations, failed to take the
required precautions for the protection of the employees, the heirs
of the deceased employees filed a complaint against Philex Mining
in the Court of First Instance (CFI). Upon motion of Philex Mining,
the CFI dismissed the complaint for lack of jurisdiction. The heirs
sought relief from this Court.
Addressing the issue of whether the heirs had a choice of
remedies, majority of the Court En Banc,31 following the rule
in Pacaña vs. Cebu Autobus Company, held in the affirmative.
WE now come to the query as to whether or not the
injured employee or his heirs in case of death have a
right of selection or choice of action between availing
themselves of the worker’s right under the Workmen’s
Compensation Act and suing in the regular courts under
the Civil Code for higher damages (actual, moral and
exemplary) from the employers by virtue of the negligence
or fault of the employers or whether they may avail
themselves cumulatively of both actions, i.e., collect the
limited compensation under the Workmen’s
Compensation Act and sue in addition for damages in the
regular courts.
In disposing of a similar issue, this Court in Pacaña vs.
Cebu Autobus Company, 32 SCRA 442, ruled that an
injured worker has a choice of either to recover from the
employer the fixed amounts set by the Workmen’s
Compensation Act or to prosecute an ordinary civil action
against the tortfeasor for higher damages but he cannot
pursue both courses of action simultaneously.
[Underscoring supplied.]
Nevertheless, the Court allowed some of the petitioners in said
case to proceed with their suit under the Civil Code despite having
availed of the benefits provided under the Workmen’s
Compensation Act. The Court reasoned:
With regard to the other petitioners, it was alleged by
Philex in its motion to dismiss dated May 14, 1968 before
the court a quo, that the heirs of the deceased
employees, namely Emerito Obra, Larry Villar, Jr.,
Aurelio Lanuza, Lorenzo Isla and Saturnino submitted
notices and claims for compensation to the Regional
Office No. 1 of the then Department of Labor and all of
them have been paid in full as of August 25, 1967,
except Saturnino Martinez whose heirs decided that they
be paid in installments x x x. Such allegation was
admitted by herein petitioners in their opposition to the
motion to dismiss dated may 27, 1968 x x x in the lower
court, but they set up the defense that the claims were
filed under the Workmen’s Compensation Act before they
learned of the official report of the committee created to
investigate the accident which established the criminal
negligence and violation of law by Philex, and which
report was forwarded by the Director of Mines to then
Executive Secretary Rafael Salas in a letter dated October
19, 1967 only x x x.
WE hold that although the other petitioners had received
the benefits under the Workmen’s Compensation Act,
such my not preclude them from bringing an action
before the regular court because they became cognizant
of the fact that Philex has been remiss in its contractual
obligations with the deceased miners only after receiving
compensation under the Act. Had petitioners been aware
of said violation of government rules and regulations by
Philex, and of its negligence, they would not have sought
redress under the Workmen’s Compensation Commission
which awarded a lesser amount for compensation. The
choice of the first remedy was based on ignorance or a
mistake of fact, which nullifies the choice as it was not
an intelligent choice. The case should therefore be
remanded to the lower court for further proceedings.
However, should the petitioners be successful in their bid
before the lower court, the payments made under the
Workmen’s Compensation Act should be deducted from
the damages that may be decreed in their favor.
[Underscoring supplied.]
The ruling in Floresca providing the claimant a choice of remedies
was reiterated in Ysmael Maritime Corporation vs. Avelino,32 Vda.
De Severo vs. Feliciano-Go,33 and Marcopper Mining Corp. vs.
Abeleda.34 In the last case, the Court again recognized that a
claimant who had been paid under the Act could still sue under
the Civil Code. The Court said:
In the Robles case, it was held that claims for damages
sustained by workers in the course of their employment
could be filed only under the Workmen’s Compensation
Law, to the exclusion of all further claims under other
laws. In Floresca, this doctrine was abrogated in favor of
the new rule that the claimants may invoke either the
Workmen’s Compensation Act or the provisions of the
Civil Code, subject to the consequence that the choice of
one remedy will exclude the other and that the
acceptance of compensation under the remedy chosen
will preclude a claim for additional benefits under the
other remedy. The exception is where a claimant who has
already been paid under the Workmen’s Compensation
Act may still sue for damages under the Civil Code on the
basis of supervening facts or developments occurring
after he opted for the first remedy. (Underscoring
supplied.)
Here, the CA held that private respondent’s case came under the
exception because private respondent was unaware of petitioner’s
negligence when she filed her claim for death benefits from the
State Insurance Fund. Private respondent filed the civil complaint
for damages after she received a copy of the police investigation
report and the Prosecutor’s Memorandum dismissing the criminal
complaint against petitioner’s personnel. While stating that there
was no negligence attributable to the respondents in the
complaint, the prosecutor nevertheless noted in the Memorandum
that, "if at all," the "case is civil in nature." The CA thus applied
the exception in Floresca:
x x x We do not agree that appellee has knowledge of the
alleged negligence of appellant as early as November 25,
1990, the date of the police investigator’s report. The
appellee merely executed her sworn statement before the
police investigator concerning her personal
circumstances, her relation to the victim, and her
knowledge of the accident. She did not file the complaint
for "Simple Negligence Resulting to Homicide" against
appellant’s employees. It was the investigator who
recommended the filing of said case and his supervisor
referred the same to the prosecutor’s office. This is a
standard operating procedure for police investigators
which appellee may not have even known. This may
explain why no complainant is mentioned in the
preliminary statement of the public prosecutor in her
memorandum dated February 6, 1991, to wit:
"Respondent Ferdinand Fabro x x x are being charged by
complainant of "Simple Negligence Resulting to
 Homicide." It is also possible that the appellee did not
have a chance to appear before the public prosecutor as
can be inferred from the following statement in said
memorandum: "Respondents who were notified pursuant
to Law waived their rights to present controverting
evidence," thus there was no reason for the public
prosecutor to summon the appellee. Hence, notice of
appellant’s negligence cannot be imputed on appellee
before she applied for death benefits under ECC or before
she received the first payment therefrom. Her using the
police investigation report to support her complaint filed
on May 9, 1991 may just be an afterthought after
receiving a copy of the February 6, 1991 Memorandum of
the Prosecutor’s Office dismissing the criminal complaint
for insufficiency of evidence, stating therein that: "The
death of the victim is not attributable to any negligence
on the part of the respondents. If at all and as shown by
the records this case is civil in nature." (Underscoring
supplied.) Considering the foregoing, We are more
inclined to believe appellee’s allegation that she learned
about appellant’s negligence only after she applied for
and received the benefits under ECC. This is a mistake of
fact that will make this case fall under the exception held
in the Floresca ruling.35
The CA further held that not only was private respondent ignorant
of the facts, but of her rights as well:
x x x. Appellee [Maria Juego] testified that she has
reached only elementary school for her educational
attainment; that she did not know what damages could
be recovered from the death of her husband; and that
she did not know that she may also recover more from
the Civil Code than from the ECC. x x x.36
Petitioner impugns the foregoing rulings. It contends that private
respondent "failed to allege in her complaint that her application
and receipt of benefits from the ECC were attended by ignorance
or mistake of fact. Not being an issue submitted during the trial,
the trial court had no authority to hear or adjudicate that issue."
Petitioner also claims that private respondent could not have been
ignorant of the facts because as early as November 28, 1990,
private respondent was the complainant in a criminal complaint
for "Simple Negligence Resulting to Homicide" against petitioner’s
employees. On February 6, 1991, two months before the filing of
the action in the lower court, Prosecutor Lorna Lee issued a
resolution finding that, although there was insufficient evidence
against petitioner’s employees, the case was "civil in nature."
These purportedly show that prior to her receipt of death benefits
from the ECC on January 2, 1991 and every month thereafter,
private respondent also knew of the two choices of remedies
available to her and yet she chose to claim and receive the benefits
from the ECC.
When a party having knowledge of the facts makes an election
between inconsistent remedies, the election is final and bars any
action, suit, or proceeding inconsistent with the elected remedy, in
the absence of fraud by the other party. The first act of election
acts as a bar.37 Equitable in nature, the doctrine of election of
remedies is designed to mitigate possible unfairness to both
parties. It rests on the moral premise that it is fair to hold people
responsible for their choices. The purpose of the doctrine is not to
prevent any recourse to any remedy, but to prevent a double
redress for a single wrong.38
The choice of a party between inconsistent remedies results in
a waiver by election. Hence, the rule in Floresca that a claimant
cannot simultaneously pursue recovery under the Labor Code and
prosecute an ordinary course of action under the Civil Code. The
claimant, by his choice of one remedy, is deemed to have waived
the other.
Waiver is the intentional relinquishment of a known right.39
[It] is an act of understanding that presupposes that a
party has knowledge of its rights, but chooses not to
assert them. It must be generally shown by the party
claiming a waiver that the person against whom the
waiver is asserted had at the time knowledge, actual or
constructive, of the existence of the party’s rights or of all
material facts upon which they depended. Where one
lacks knowledge of a right, there is no basis upon which
waiver of it can rest. Ignorance of a material fact negates
waiver, and waiver cannot be established by a consent
given under a mistake or misapprehension of fact.
A person makes a knowing and intelligent waiver when
that person knows that a right exists and has adequate
knowledge upon which to make an intelligent decision.
Waiver requires a knowledge of the facts basic to the
exercise of the right waived, with an awareness of its
consequences. That a waiver is made knowingly and
intelligently must be illustrated on the record or by the
evidence.40
That lack of knowledge of a fact that nullifies the election of a
remedy is the basis for the exception in Floresca.
It is in light of the foregoing principles that we address petitioner’s
contentions.
Waiver is a defense, and it was not incumbent upon private
respondent, as plaintiff, to allege in her complaint that she had
availed of benefits from the ECC. It is, thus, erroneous for
petitioner to burden private respondent with raising waiver as an
issue. On the contrary, it is the defendant who ought to plead
waiver, as petitioner did in pages 2-3 of its Answer; 41 otherwise,
the defense is waived. It is, therefore, perplexing for petitioner to
now contend that the trial court had no jurisdiction over the issue
when petitioner itself pleaded waiver in the proceedings before the
trial court.
Does the evidence show that private respondent knew of the facts
that led to her husband’s death and the rights pertaining to a
choice of remedies?
It bears stressing that what negates waiver is lack of knowledge or
a mistake of fact. In this case, the "fact" that served as a basis for
nullifying the waiver is the negligence of petitioner’s employees, of
which private respondent purportedly learned only after the
prosecutor issued a resolution stating that there may be civil
liability. In Floresca, it was the negligence of the mining
corporation and its violation of government rules and regulations.
Negligence, or violation of government rules and regulations, for
that matter, however, is not a fact, but a conclusion of law, over
which only the courts have the final say. Such a conclusion binds
no one until the courts have decreed so. It appears, therefore, that
the principle that ignorance or mistake of fact nullifies a waiver
has been misapplied in Floresca and in the case at bar.
In any event, there is no proof that private respondent knew that
her husband died in the elevator crash when on November 15,
1990 she accomplished her application for benefits from the ECC.
The police investigation report is dated November 25, 1990, 10
days after the accomplishment of the form. Petitioner filed the
application in her behalf on November 27, 1990.
There is also no showing that private respondent knew of the
remedies available to her when the claim before the ECC was filed.
On the contrary, private respondent testified that she was not
aware of her rights.
Petitioner, though, argues that under Article 3 of the Civil Code,
ignorance of the law excuses no one from compliance therewith.
As judicial decisions applying or interpreting the laws or the
Constitution form part of the Philippine legal system (Article 8,
Civil Code), private respondent cannot claim ignorance of this
Court’s ruling in Floresca allowing a choice of remedies.
The argument has no merit. The application of Article 3 is limited
to mandatory and prohibitory laws.42 This may be deduced from
the language of the provision, which, notwithstanding a person’s
ignorance, does not excuse his or her compliance with the laws.
The rule in Floresca allowing private respondent a choice of
remedies is neither mandatory nor prohibitory. Accordingly, her
ignorance thereof cannot be held against her.

Finally, the Court modifies the affirmance of the award of

damages. The records do not indicate the total amount private
respondent ought to receive from the ECC, although it appears
from Exhibit "K"43 that she received P3,581.85 as initial payment
representing the accrued pension from November 1990 to March
1991. Her initial monthly pension, according to the same Exhibit
"K," was P596.97 and present total monthly pension was P716.40.
Whether the total amount she will eventually receive from the ECC
is less than the sum of P644,000.00 in total damages awarded by
the trial court is subject to speculation, and the case is remanded
to the trial court for such determination. Should the trial court
find that its award is greater than that of the ECC, payments
already received by private respondent under the Labor Code shall
be deducted from the trial court'’ award of damages. Consistent
with our ruling in Floresca, this adjudication aims to prevent
double compensation.

WHEREFORE, the case is REMANDED to the Regional Trial Court

of Pasig City to determine whether the award decreed in its
decision is more than that of the ECC. Should the award decreed
by the trial court be greater than that awarded by the ECC,
payments already made to private respondent pursuant to the
Labor Code shall be deducted therefrom. In all other respects, the
Decision of the Court of Appeals is AFFIRMED.

SO ORDERED.
G.R. No. L-30642 April 30, 1985
PERFECTO S. FLORESCA, in his own behalf and on behalf of
the minors ROMULO and NESTOR S. FLORESCA; and
ERLINDA FLORESCA-GABUYO, PEDRO S. FLORESCA, JR.,
CELSO S. FLORESCA, MELBA S. FLORESCA, JUDITH S.
FLORESCA and CARMEN S. FLORESCA;
LYDIA CARAMAT VDA. DE MARTINEZ in her own behalf and
on behalf of her minor children LINDA, ROMEO, ANTONIO
JEAN and ELY, all surnamed Martinez; and DANIEL
MARTINEZ and TOMAS MARTINEZ;
SALUSTIANA ASPIRAS VDA. DE OBRA, in her own behalf and
on behalf of her minor children JOSE, ESTELA, JULITA
SALUD and DANILO, all surnamed OBRA;
LYDIA CULBENGAN VDA. DE VILLAR, in her own behalf and on
behalf of her minor children EDNA, GEORGE and LARRY III,
all surnamed VILLAR;
DOLORES LOLITA ADER VDA. DE LANUZA, in her own behalf
and on behalf of her minor children EDITHA, ELIZABETH,
DIVINA, RAYMUNDO, NESTOR and AURELIO, JR. all surnamed
LANUZA;
EMERENCIANA JOSE VDA. DE ISLA, in her own behalf and on
behalf of her minor children JOSE, LORENZO, JR., MARIA,
VENUS and FELIX, all surnamed ISLA, petitioners,  ended December 31, 1966, and with aggregate assets
vs.
PHILEX MINING CORPORATION and HON. JESUS P. MORFE,
Presiding Judge of Branch XIII, Court of First Instance of
Manila, respondents.
MAKASIAR, J.:
This is a petition to review the order of the former Court of First
Instance of Manila, Branch XIII, dated December 16, 1968
dismissing petitioners' complaint for damages on the ground of
lack of jurisdiction.
Petitioners are the heirs of the deceased employees of Philex
Mining Corporation (hereinafter referred to as Philex), who, while
working at its copper mines underground operations at Tuba,
Benguet on June 28, 1967, died as a result of the cave-in that
buried them in the tunnels of the mine. Specifically, the complaint
alleges that Philex, in violation of government rules and
regulations, negligently and deliberately failed to take the required
precautions for the protection of the lives of its men working
underground. Portion of the complaint reads:
xxx xxx xxx
9. That for sometime prior and up to June 28,1967, the
defendant PHILEX, with gross and reckless negligence and
imprudence and deliberate failure to take the required
precautions for the due protection of the lives of its men
working underground at the time, and in utter violation of
the laws and the rules and regulations duly promulgated
by the Government pursuant thereto, allowed great
amount of water and mud to accumulate in an open pit
area at the mine above Block 43-S-1 which seeped through
and saturated the 600 ft. column of broken ore and rock
below it, thereby exerting tremendous pressure on the
working spaces at its 4300 level, with the result that, on
the said date, at about 4 o'clock in the afternoon, with the
collapse of all underground supports due to such
enormous pressure, approximately 500,000 cubic feet of
broken ores rocks, mud and water, accompanied by
surface boulders, blasted through the tunnels and flowed
out and filled in, in a matter of approximately five (5)
minutes, the underground workings, ripped timber
supports and carried off materials, machines and
equipment which blocked all avenues of exit, thereby
trapping within its tunnels of all its men above referred to,
including those named in the next preceding paragraph,
represented by the plaintiffs herein;
10. That out of the 48 mine workers who were then
working at defendant PHILEX's mine on the said date, five
(5) were able to escape from the terrifying holocaust; 22
were rescued within the next 7 days; and the rest, 21 in
number, including those referred to in paragraph 7
hereinabove, were left mercilessly to their fate,
notwithstanding the fact that up to then, a great many of
them were still alive, entombed in the tunnels of the mine,
but were not rescued due to defendant PHILEX's decision
to abandon rescue operations, in utter disregard of its
bounden legal and moral duties in the premises;
xxx xxx xxx
13. That defendant PHILEX not only violated the law and
the rules and regulations duly promulgated by the duly
constituted authorities as set out by the Special Committee
above referred to, in their Report of investigation, pages 7-
13, Annex 'B' hereof, but also failed completely to provide
its men working underground the necessary security for
the protection of their lives notwithstanding the fact that it
had vast financial resources, it having made, during the
year 1966 alone, a total operating income of P
38,220,254.00, or net earnings, after taxes of
P19,117,394.00, as per its llth Annual Report for the year
totalling P 45,794,103.00 as of December 31, 1966;
xxx xxx xxx
(pp. 42-44, rec.)
A motion to dismiss dated May 14, 1968 was filed by Philex
alleging that the causes of action of petitioners based on an
industrial accident are covered by the provisions of the Workmen's
Compensation Act (Act 3428, as amended by RA 772) and that the
former Court of First Instance has no jurisdiction over the case.
Petitioners filed an opposition dated May 27, 1968 to the said
motion to dismiss claiming that the causes of action are not based
on the provisions of the Workmen's Compensation Act but on the
provisions of the Civil Code allowing the award of actual, moral
and exemplary damages, particularly:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is
no pre- existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter.
Art. 2178. The provisions of articles 1172 to 1174 are also
applicable to a quasi-delict.
(b) Art. 1173—The fault or negligence of the obligor
consists in the omission of that diligence which is required
by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place.
When negligence shows bad faith, the provisions of Articles
1171 and 2201, paragraph 2 shall apply.
Art. 2201. x x x x x x x x x
In case of fraud, bad faith, malice or wanton attitude, the
obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the
obligation.
Art. 2231. In quasi-delicts, exemplary damages may be
granted if the defendant acted with gross negligence.
After a reply and a rejoinder thereto were filed, respondent Judge
issued an order dated June 27, 1968 dismissing the case on the
ground that it falls within the exclusive jurisdiction of the
Workmen's Compensation Commission. On petitioners' motion for
reconsideration of the said order, respondent Judge, on
September 23, 1968, reconsidered and set aside his order of June
27, 1968 and allowed Philex to file an answer to the complaint.
Philex moved to reconsider the aforesaid order which was opposed
by petitioners.
On December 16, 1968, respondent Judge dismissed the case for
lack of jurisdiction and ruled that in accordance with the
established jurisprudence, the Workmen's Compensation
Commission has exclusive original jurisdiction over damage or
compensation claims for work-connected deaths or injuries of
workmen or employees, irrespective of whether or not the
employer was negligent, adding that if the employer's negligence
results in work-connected deaths or injuries, the employer shall,
pursuant to Section 4-A of the Workmen's Compensation Act, pay
additional compensation equal to 50% of the compensation fixed
in the Act.
Petitioners thus filed the present petition.
In their brief, petitioners raised the following assignment of errors:
I the employer fails to comply with the requirements of safety as
THE LOWER COURT ERRED IN DISMISSING
THE PLAINTIFFS- PETITIONERS' COMPLAINT
FOR LACK OF JURISDICTION.
II
THE LOWER COURT ERRED IN FAILING TO
CONSIDER THE CLEAR DISTINCTION
BETWEEN CLAIMS FOR DAMAGES UNDER
THE CIVIL CODE AND CLAIMS FOR
COMPENSATION UNDER THE WORKMEN'S
COMPENSATION ACT.
A
In the first assignment of error, petitioners argue that the lower
court has jurisdiction over the cause of action since the complaint
is based on the provisions of the Civil Code on damages,
particularly Articles 2176, 2178, 1173, 2201 and 2231, and not
on the provisions of the Workmen's Compensation Act. They point
out that the complaint alleges gross and brazen negligence on the
part of Philex in failing to take the necessary security for the
protection of the lives of its employees working underground. They
also assert that since Philex opted to file a motion to dismiss in
the court a quo, the allegations in their complaint including those
contained in the annexes are deemed admitted.
In the second assignment of error, petitioners asseverate that
respondent Judge failed to see the distinction between the claims
for compensation under the Workmen's Compensation Act and the
claims for damages based on gross negligence of Philex under the
Civil Code. They point out that workmen's compensation refers to
liability for compensation for loss resulting from injury, disability
or death of the working man through industrial accident or
disease, without regard to the fault or negligence of the employer,
while the claim for damages under the Civil Code which
petitioners pursued in the regular court, refers to the employer's
liability for reckless and wanton negligence resulting in the death
of the employees and for which the regular court has jurisdiction
to adjudicate the same.
On the other hand, Philex asserts that work-connected injuries
are compensable exclusively under the provisions of Sections 5
and 46 of the Workmen's Compensation Act, which read:
SEC. 5. Exclusive right to compensation.—The
rights and remedies granted by this Act to an
employee by reason of a personal injury
entitling him to compensation shall exclude all
other rights and remedies accruing to the
employee, his personal representatives,
dependents or nearest of kin against the
employer under the Civil Code and other laws
because of said injury ...
SEC. 46. Jurisdiction.— The Workmen's
Compensation Commissioner shall have
exclusive jurisdiction to hear and decide claims
for compensation under the Workmen's
Compensation Act, subject to appeal to the
Supreme Court, ...
Philex cites the case of Manalo vs. Foster Wheeler (98 Phil. 855
[1956]) where it was held that "all claims of workmen against their
employer for damages due to accident suffered in the course of
employment shall be investigated and adjudicated by the
Workmen's Compensation Commission," subject to appeal to the
Supreme Court.
Philex maintains that the fact that an employer was negligent,
does not remove the case from the exclusive character of
recoveries under the Workmen's Compensation Act; because
Section 4-A of the Act provides an additional compensation in case
imposed by law to prevent accidents. In fact, it points out that
Philex voluntarily paid the compensation due the petitioners and
all the payments have been accepted in behalf of the deceased
miners, except the heirs of Nazarito Floresca who insisted that
they are entitled to a greater amount of damages under the Civil
Code.
In the hearing of this case, then Undersecretary of Labor Israel
Bocobo, then Atty. Edgardo Angara, now President of the
University of the Philippines, Justice Manuel Lazaro, as corporate
counsel and Assistant General Manager of the GSIS Legal Affairs
Department, and Commissioner on Elections, formerly UP Law
Center Director Froilan Bacungan, appeared as amici curiae and
thereafter, submitted their respective memoranda.
The issue to be resolved as WE stated in the resolution of
November 26, 1976, is:
Whether the action of an injured employee or
worker or that of his heirs in case of his death
under the Workmen's Compensation Act is
exclusive, selective or cumulative, that is to say,
whether his or his heirs' action is exclusively
restricted to seeking the limited compensation
provided under the Workmen's Compensation
Act or whether they have a right of selection or
choice of action between availing of the worker's
right under the Workmen's Compensation Act
and suing in the regular courts under the Civil
Code for higher damages (actual, moral and/or
exemplary) from the employer by virtue of
negligence (or fault) of the employer or of his
other employees or whether they may avail
cumulatively of both actions, i.e., collect the
limited compensation under the Workmen's
Compensation Act and sue in addition for
damages in the regular courts.
There are divergent opinions in this case. Justice Lazaro is of the
opinion that an injured employee or worker, or the heirs in case of
his death, may initiate a complaint to recover damages (not
compensation under the Workmen's Compensation Act) with the
regular court on the basis of negligence of an employer pursuant
to the Civil Code provisions. Atty. Angara believes otherwise. He
submits that the remedy of an injured employee for work-
connected injury or accident is exclusive in accordance with
Section 5 of the Workmen's Compensation Act, while Atty.
Bacungan's position is that the action is selective. He opines that
the heirs of the employee in case of his death have a right of
choice to avail themselves of the benefits provided under the
Workmen's Compensation Act or to sue in the regular court under
the Civil Code for higher damages from the employer by virtue of
negligence of the latter. Atty. Bocobo's stand is the same as that of
Atty. Bacungan and adds that once the heirs elect the remedy
provided for under the Act, they are no longer entitled to avail
themselves of the remedy provided for under the Civil Code by
filing an action for higher damages in the regular court, and vice
versa.
On August 3, 1978, petitioners-heirs of deceased employee
Nazarito Floresca filed a motion to dismiss on the ground that
they have amicably settled their claim with respondent Philex. In
the resolution of September 7, 1978, WE dismissed the petition
only insofar as the aforesaid petitioners are connected, it
appearing that there are other petitioners in this case.
WE hold that the former Court of First Instance has jurisdiction to
try the case,
It should be underscored that petitioners' complaint is not for
compensation based on the Workmen's Compensation Act but a
complaint for damages (actual, exemplary and moral) in the total
amount of eight hundred twenty-five thousand (P825,000.00)
pesos. Petitioners did not invoke the provisions of the Workmen's
Compensation Act to entitle them to compensation thereunder. In
fact, no allegation appeared in the complaint that the employees
died from accident arising out of and in the course of their
employments. The complaint instead alleges gross and reckless
negligence and deliberate failure on the part of Philex to protect
the lives of its workers as a consequence of which a cave-in
occurred resulting in the death of the employees working
underground. Settled is the rule that in ascertaining whether or
not the cause of action is in the nature of workmen's
compensation claim or a claim for damages pursuant to the
provisions of the Civil Code, the test is the averments or
allegations in the complaint (Belandres vs. Lopez Sugar Mill, Co.,
Inc., 97 Phil. 100).
In the present case, there exists between Philex and the deceased
employees a contractual relationship. The alleged gross and
reckless negligence and deliberate failure that amount to bad faith
on the part of Philex, constitute a breach of contract for which it
may be held liable for damages. The provisions of the Civil Code
on cases of breach of contract when there is fraud or bad faith,
read:
Art. 2232. In contracts and quasi-contracts, the
court may award exemplary damages if the
defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.
Art. 2201. In contracts and quasi-contracts, the
damages for which the obligor who acted in
good faith is able shall be those that are the
natural and probable consequences of the
breach of the obligation, and which the parties
have foreseen or could have reasonably foreseen
at the time the obligation was constituted.
In cases of fraud, bad faith, malice or wanton
attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to
the non-performance of the obligation.
Furthermore, Articles 2216 et seq., Civil Code, allow the payment
of all kinds of damages, as assessed by the court.
The rationale in awarding compensation under the Workmen's
Compensation Act differs from that in giving damages under the
Civil Code. The compensation acts are based on a theory of
compensation distinct from the existing theories of damages,
payments under the acts being made as compensation and not as
damages (99 C.J.S. 53). Compensation is given to mitigate the
harshness and insecurity of industrial life for the workman and
his family. Hence, an employer is liable whether negligence exists
or not since liability is created by law. Recovery under the Act is
not based on any theory of actionable wrong on the part of the
employer (99 C.J.S. 36).
In other words, under the compensation acts, the employer is
liable to pay compensation benefits for loss of income, as long as
the death, sickness or injury is work-connected or work-
aggravated, even if the death or injury is not due to the fault of the
employer (Murillo vs. Mendoza, 66 Phil. 689). On the other hand,
damages are awarded to one as a vindication of the wrongful
invasion of his rights. It is the indemnity recoverable by a person
who has sustained injury either in his person, property or relative
rights, through the act or default of another (25 C.J.S. 452).
The claimant for damages under the Civil Code has the burden of
proving the causal relation between the defendant's negligence
and the resulting injury as well as the damages suffered. While
under the Workmen's Compensation Act, there is a presumption
in favor of the deceased or injured employee that the death or
injury is work-connected or work-aggravated; and the employer
has the burden to prove otherwise (De los Angeles vs. GSIS, 94
SCRA 308; Carino vs. WCC, 93 SCRA 551; Maria Cristina
Fertilizer Corp. vs. WCC, 60 SCRA 228).
The claim of petitioners that the case is not cognizable by the
Workmen's Compensation Commission then, now Employees
Compensation Commission, is strengthened by the fact that
unlike in the Civil Code, the Workmen's Compensation Act did not
contain any provision for an award of actual, moral and exemplary
damages. What the Act provided was merely the right of the heirs
to claim limited compensation for the death in the amount of six
thousand (P6,000.00) pesos plus burial expenses of two hundred
(P200.00) pesos, and medical expenses when incurred (Sections 8,
12 and 13, Workmen's Compensation Act), and an additional
compensation of only 50% if the complaint alleges failure on the
part of the employer to "install and maintain safety appliances or
to take other precautions for the prevention of accident or
occupational disease" (Section 4-A, Ibid.). In the case at bar, the
amount sought to be recovered is over and above that which was
provided under the Workmen's Compensation Act and which
cannot be granted by the Commission.
Moreover, under the Workmen's Compensation Act, compensation
benefits should be paid to an employee who suffered an accident
not due to the facilities or lack of facilities in the industry of his
employer but caused by factors outside the industrial plant of his
employer. Under the Civil Code, the liability of the employer,
depends on breach of contract or tort. The Workmen's
Compensation Act was specifically enacted to afford protection to
the employees or workmen. It is a social legislation designed to
give relief to the workman who has been the victim of an accident
causing his death or ailment or injury in the pursuit of his
employment (Abong vs. WCC, 54 SCRA 379).
WE now come to the query as to whether or not the injured
employee or his heirs in case of death have a right of selection or
choice of action between availing themselves of the worker's right
under the Workmen's Compensation Act and suing in the regular
courts under the Civil Code for higher damages (actual, moral and
exemplary) from the employers by virtue of that negligence or fault
of the employers or whether they may avail themselves
cumulatively of both actions, i.e., collect the limited compensation
under the Workmen's Compensation Act and sue in addition for
damages in the regular courts.
In disposing of a similar issue, this Court in Pacana vs. Cebu
Autobus Company, 32 SCRA 442, ruled that an injured worker
has a choice of either to recover from the employer the fixed
amounts set by the Workmen's Compensation Act or to prosecute
an ordinary civil action against the tortfeasor for higher damages
but he cannot pursue both courses of action simultaneously.
In Pacaña WE said:
In the analogous case of Esguerra vs. Munoz Palma,
involving the application of Section 6 of the Workmen's
Compensation Act on the injured workers' right to sue
 third- party tortfeasors in the regular courts, Mr.
Justice J.B.L. Reyes, again speaking for the Court,
pointed out that the injured worker has the choice of
remedies but cannot pursue both courses of action
simultaneously and thus balanced the relative
advantage of recourse under the Workmen's
Compensation Act as against an ordinary action.
As applied to this case, petitioner Esguerra cannot
maintain his action for damages against the
respondents (defendants below), because he has elected
to seek compensation under the Workmen's
Compensation Law, and his claim (case No. 44549 of
the Compensation Commission) was being processed at
the time he filed this action in the Court of First
Instance. It is argued for petitioner that as the damages
recoverable under the Civil Code are much more
extensive than the amounts that may be awarded
under the Workmen's Compensation Act, they should
not be deemed incompatible. As already indicated, the
injured laborer was initially free to choose either to
recover from the employer the fixed amounts set by the
Compensation Law or else, to prosecute an ordinary
civil action against the tortfeasor for higher damages.
While perhaps not as profitable, the smaller indemnity
obtainable by the first course is balanced by the
claimant's being relieved of the burden of proving the
causal connection between the defendant's negligence
and the resulting injury, and of having to establish the
extent of the damage suffered; issues that are apt to be
troublesome to establish satisfactorily. Having staked
his fortunes on a particular remedy, petitioner is
precluded from pursuing the alternate course, at least
until the prior claim is rejected by the Compensation
Commission. Anyway, under the proviso of Section 6
aforequoted, if the employer Franklin Baker Company
recovers, by derivative action against the alleged
tortfeasors, a sum greater than the compensation he
may have paid the herein petitioner, the excess accrues
to the latter.
Although the doctrine in the case of Esguerra vs. Munoz Palma
(104 Phil. 582), applies to third-party tortfeasor, said rule should
likewise apply to the employer-tortfeasor.
Insofar as the heirs of Nazarito Floresca are concerned, as already
stated, the petition has been dismissed in the resolution of
September 7, 1978 in view of the amicable settlement reached by
Philex and the said heirs.
With regard to the other petitioners, it was alleged by Philex in its
motion to dismiss dated May 14, 1968 before the court a quo, that
the heirs of the deceased employees, namely Emerito Obra, Larry
Villar, Jr., Aurelio Lanuza, Lorenzo Isla and Saturnino Martinez
submitted notices and claims for compensation to the Regional
Office No. 1 of the then Department of Labor and all of them have
been paid in full as of August 25, 1967, except Saturnino Martinez
whose heirs decided that they be paid in installments (pp. 106-
107, rec.). Such allegation was admitted by herein petitioners in
their opposition to the motion to dismiss dated May 27, 1968 (pp.
121-122, rec.) in the lower court, but they set up the defense that
the claims were filed under the Workmen's Compensation Act
before they learned of the official report of the committee created
to investigate the accident which established the criminal
negligence and violation of law by Philex, and which report was
forwarded by the Director of Mines to the then Executive Secretary
Rafael Salas in a letter dated October 19, 1967 only (p. 76, rec.).
WE hold that although the other petitioners had received the
benefits under the Workmen's Compensation Act, such may not
preclude them from bringing an action before the regular court
because they became cognizant of the fact that Philex has been
remiss in its contractual obligations with the deceased miners
only after receiving compensation under the Act. Had petitioners
been aware of said violation of government rules and regulations
by Philex, and of its negligence, they would not have sought
redress under the Workmen's Compensation Commission which
awarded a lesser amount for compensation. The choice of the first
remedy was based on ignorance or a mistake of fact, which
nullifies the choice as it was not an intelligent choice. The case
should therefore be remanded to the lower court for further
proceedings. However, should the petitioners be successful in
their bid before the lower court, the payments made under the
Workmen's Compensation Act should be deducted from the
damages that may be decreed in their favor.
B
Contrary to the perception of the dissenting opinion, the Court
does not legislate in the instant case. The Court merely applies
and gives effect to the constitutional guarantees of social justice
then secured by Section 5 of Article 11 and Section 6 of Article XIV
of the 1935 Constitution, and now by Sections 6, 7, and 9 of
Article 11 of the DECLARATION OF PRINCIPLES AND STATE
POLICIES of the 1973 Constitution, as amended, and as
implemented by Articles 2176, 2177, 2178, 1173, 2201, 2216,
2231 and 2232 of the New Civil Code of 1950.
To emphasize, the 1935 Constitution declares that:
Sec. 5. The promotion of social justice to insure
the well-being and economic security of all the
people should be the concern of the State (Art.
II).
Sec. 6. The State shall afford protection to
labor, especially to working women, and minors,
and shall regulate the relations between
landowner and tenant, and between labor and
capital in industry and in agriculture. The State
may provide for compulsory arbitration (Art.
XIV).
The 1973 Constitution likewise commands the State to "promote
social justice to insure the dignity, welfare, and security of all the
people "... regulate the use ... and disposition of private property
and equitably diffuse property ownership and profits "establish,
maintain and ensure adequate social services in, the field
of education, health, housing, employment, welfare and social
security to guarantee the enjoyment by the people of a decent
standard of living" (Sections 6 and 7, Art. II, 1973 Constitution);
"... afford protection to labor, ... and regulate the relations between
workers and employers ..., and assure the rights of workers to ...
just and humane conditions of work" (Sec. 9, Art. II, 1973
Constitution, emphasis supplied).
The foregoing constitutional guarantees in favor of labor
institutionalized in Section 9 of Article 11 of the 1973 Constitution
and re-stated as a declaration of basic policy in Article 3 of the
New Labor Code, thus:
Art. 3. Declaration of basic policy.—The
State shall afford protection to labor, promote full
employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the
relations between workers and employers. The
State shall assure the rights of workers to self-
organization, collective bargaining, security of
tenure, and just and humane conditions of work.
(emphasis supplied).
The aforestated constitutional principles as implemented by the
aforementioned articles of the New Civil Code cannot be impliedly
repealed by the restrictive provisions of Article 173 of the New
Labor Code. Section 5 of the Workmen's Compensation Act (before
it was amended by R.A. No. 772 on June 20, 1952), predecessor of
Article 173 of the New Labor Code, has been superseded by the
aforestated provisions of the New Civil Code, a subsequent law,
which took effect on August 30, 1950, which obey the
constitutional mandates of social justice enhancing as they do the
rights of the workers as against their employers. Article 173 of the
New Labor Code seems to diminish the rights of the workers and
therefore collides with the social justice guarantee of the
Constitution and the liberal provisions of the New Civil Code.
The guarantees of social justice embodied in Sections 6, 7 and 9 of
Article II of the 1973 Constitution are statements of legal
principles to be applied and enforced by the courts. Mr. Justice
Robert Jackson in the case of West Virginia State Board of
Education vs. Barnette, with characteristic eloquence, enunciated:
The very purpose of a Bill of Rights was to
withdraw certain subjects from the vicissitudes
of political controversy, to place them beyond
the reach of majorities and officials and to
establish them as legal principles to be applied
by the courts. One's right to life, liberty, and
property, to free speech, a free press, freedom of
worship and assembly, and other fundamental
rights may not be submitted to vote; they
depend on the outcome of no elections (319 U.S.
625, 638, 87 L.ed. 1638, emphasis supplied).
In case of any doubt which may be engendered by Article 173 of
the New Labor Code, both the New Labor Code and the Civil Code
direct that the doubts should be resolved in favor of the workers
and employees.
Thus, Article 4 of the New Labor Code, otherwise known as
Presidential Decree No. 442, as amended, promulgated on May 1,
1974, but which took effect six months thereafter, provides that
"all doubts in the implementation and interpretation of the
provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor" (Art. 2, Labor
Code).
Article 10 of the New Civil Code states: "In case of doubt in the
interpretation or application of laws, it is presumed that the law-
making body intended right and justice to prevail. "
More specifically, Article 1702 of the New Civil Code likewise
directs that. "In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent
living of the laborer."
Before it was amended by Commonwealth Act No. 772 on June
20, 1952, Section 5 of the Workmen's Compensation Act provided:
Sec. 5. Exclusive right to compensation.- The
rights and remedies granted by this Act to an
employee by reason of a personal injury
entitling him to compensation shall exclude all
other rights and remedies accruing to the
employee, his personal representatives,
dependents or nearest of kin against the
employer under the Civil Code and other laws,
because of said injury (emphasis supplied).
Employers contracting laborecsrs in the
Philippine Islands for work outside the same
may stipulate with such laborers that the
remedies prescribed by this Act shall apply
exclusively to injuries received outside the
Islands through accidents happening in and
during the performance of the duties of the
employment; and all service contracts made in
the manner prescribed in this section shall be
presumed to include such agreement.
Only the second paragraph of Section 5 of the Workmen's
Compensation Act No. 3428, was amended by Commonwealth Act
No. 772 on June 20, 1952, thus:
Sec. 5. Exclusive right to compensation.- The
rights and remedies granted by this Act to an
employee by reason of a personal injury
entitling him to compensation shall exclude all
other rights and remedies accruing to the
employee, his personal representatives,
dependents or nearest of kin against the
employer under the Civil Code and other laws,
because of said injury.
Employers contracting laborers in the Philippine
Islands for work outside the same shall
stipulate with such laborers that the remedies
prescribed by this Act shall apply to injuries
received outside the Island through accidents
happening in and during the performance of the
duties of the employment. Such stipulation
shall not prejudice the right of the laborers to
the benefits of the Workmen's Compensation
Law of the place where the accident occurs,
should such law be more favorable to them (As
amended by section 5 of Republic Act No. 772).
Article 173 of the New Labor Code does not repeal expressly nor
impliedly the applicable provisions of the New Civil Code, because
said Article 173 provides:
Art. 173. Exclusiveness of liability.- Unless
otherwise provided, the liability of the State
Insurance Fund under this Title shall be
exclusive and in place of all other liabilities of
the employer to the employee, his dependents or
anyone otherwise entitled to receive damages on
behalf of the employee or his dependents. The
payment of compensation under this Title shall
bar the recovery of benefits as provided for in
Section 699 of the Revised Administrative Code,
Republic Act Numbered Eleven hundred sixty-
one, as amended, Commonwealth Act
Numbered One hundred eighty- six, as
amended, Commonwealth Act Numbered Six
hundred ten, as amended, Republic Act
Numbered Forty-eight hundred Sixty-four, as
amended, and other laws whose benefits are
administered by the System during the period of
such payment for the same disability or death,
and conversely (emphasis supplied).
As above-quoted, Article 173 of the New Labor Code expressly
repealed only Section 699 of the Revised Administrative Code, R.A.
No. 1161, as amended, C.A. No. 186, as amended, R.A. No. 610,
as amended, R.A. No. 4864, as amended, and all other laws whose
benefits are administered by the System (referring to the GSIS or
SSS).
Unlike Section 5 of the Workmen's Compensation Act as
aforequoted, Article 173 of the New Labor Code does not even
remotely, much less expressly, repeal the New Civil Code
provisions heretofore quoted.
It is patent, therefore, that recovery under the New Civil Code for
damages arising from negligence, is not barred by Article 173 of
the New Labor Code. And the damages recoverable under the New
Civil Code are not administered by the System provided for by the
New Labor Code, which defines the "System" as referring to the
Government Service Insurance System or the Social Security
System (Art. 167 [c], [d] and [e] of the New Labor Code).
Furthermore, under Article 8 of the New Civil Code, decisions of
the Supreme Court form part of the law of the land.
Article 8 of the New Civil Code provides:
Art. 8. Judicial decisions applying or
interpreting the laws or the Constitution shall
form a part of the legal system of the
Philippines.
The Court, through the late Chief Justice Fred Ruiz Castro, in
People vs. Licera ruled:
Article 8 of the Civil Code of the Philippines
decrees that judicial decisions applying or
interpreting the laws or the Constitution form
part of this jurisdiction's legal system. These
decisions, although in themselves not laws,
constitute evidence of what the laws mean. The
application or interpretation placed by the
Court upon a law is part of the law as of the
date of the enactment of the said law since the
Court's application or interpretation merely
establishes the contemporaneous legislative
intent that the construed law purports to carry
into effect" (65 SCRA 270, 272-273 [1975]).
WE ruled that judicial decisions of the Supreme Court assume the
same authority as the statute itself (Caltex vs. Palomer, 18 SCRA
247; 124 Phil. 763).
The aforequoted provisions of Section 5 of the Workmen's
Compensation Act, before and after it was amended by
Commonwealth Act No. 772 on June 20, 1952, limited the right of
recovery in favor of the deceased, ailing or injured employee to the
compensation provided for therein. Said Section 5 was not
accorded controlling application by the Supreme Court in the
1970 case of Pacana vs. Cebu Autobus Company (32 SCRA 442)
when WE ruled that an injured worker has a choice of either to
recover from the employer the fixed amount set by the Workmen's
Compensation Act or to prosecute an ordinary civil action against
the tortfeasor for greater damages; but he cannot pursue both
courses of action simultaneously. Said Pacana case penned by Mr.
Justice Teehankee, applied Article 1711 of the Civil Code as
against the Workmen's Compensation Act, reiterating the 1969
ruling in the case of Valencia vs. Manila Yacht Club (28 SCRA
724, June 30,1969) and the 1958 case of Esguerra vs. Munoz
Palma (104 Phil. 582), both penned by Justice J.B.L. Reyes. Said
Pacana case was concurred in by Justices J.B.L. Reyes, Dizon,
Makalintal, Zaldivar, Castro, Fernando and Villamor.
Since the first sentence of Article 173 of the New Labor Code is
merely a re-statement of the first paragraph of Section 5 of the
Workmen's Compensation Act, as amended, and does not even
refer, neither expressly nor impliedly, to the Civil Code as Section
5 of the Workmen's Compensation Act did, with greater reason
said Article 173 must be subject to the same interpretation
adopted in the cases of Pacana, Valencia and Esguerra
aforementioned as the doctrine in the aforesaid three (3) cases is
faithful to and advances the social justice guarantees enshrined in
both the 1935 and 1973 Constitutions.
It should be stressed likewise that there is no similar provision on
social justice in the American Federal Constitution, nor in the
various state constitutions of the American Union. Consequently,
the restrictive nature of the American decisions on the Workmen's
Compensation Act cannot limit the range and compass of OUR
interpretation of our own laws, especially Article 1711 of the New
Civil Code, vis-a-vis Article 173 of the New Labor Code, in relation
to Section 5 of Article II and Section 6 of Article XIV of the 1935
Constitution then, and now Sections 6, 7 and 9 of the Declaration
of Principles and State Policies of Article II of the 1973
Constitution.
The dissent seems to subordinate the life of the laborer to the
property rights of the employer. The right to life is guaranteed
specifically by the due process clause of the Constitution. To
relieve the employer from liability for the death of his workers
arising from his gross or wanton fault or failure to provide safety
devices for the protection of his employees or workers against the
dangers which are inherent in underground mining, is to deprive
the deceased worker and his heirs of the right to recover
indemnity for the loss of the life of the worker and the consequent
loss to his family without due process of law. The dissent in effect
condones and therefore encourages such gross or wanton neglect
on the part of the employer to comply with his legal obligation to
provide safety measures for the protection of the life, limb and
health of his worker. Even from the moral viewpoint alone, such
attitude is un-Christian.
It is therefore patent that giving effect to the social justice
guarantees of the Constitution, as implemented by the provisions
of the New Civil Code, is not an exercise of the power of law-
making, but is rendering obedience to the mandates of the
fundamental law and the implementing legislation
aforementioned.
The Court, to repeat, is not legislating in the instant case.
It is axiomatic that no ordinary statute can override a
constitutional provision.
The words of Section 5 of the Workmen's Compensation Act and of
Article 173 of the New Labor Code subvert the rights of the
petitioners as surviving heirs of the deceased mining employees.
Section 5 of the Workmen's Compensation Act and Article 173 of
the New Labor Code are retrogressive; because they are a
throwback to the obsolete laissez-faire doctrine of Adam Smith
enunciated in 1776 in his treatise Wealth of Nations (Collier's
Encyclopedia, Vol. 21, p. 93, 1964), which has been discarded
soon after the close of the 18th century due to the Industrial
Revolution that generated the machines and other mechanical
devices (beginning with Eli Whitney's cotton gin of 1793 and
Robert Fulton's steamboat of 1807) for production and
transportation which are dangerous to life, limb and health. The
old socio-political-economic philosophy of live-and-let-live is now
superdesed by the benign Christian shibboleth of live-and-help
others to live. Those who profess to be Christians should not
adhere to Cain's selfish affirmation that he is not his brother's
keeper. In this our civilization, each one of us is our brother's
keeper. No man is an island. To assert otherwise is to be as
atavistic and ante-deluvian as the 1837 case of Prisley vs. Fowler
(3 MN 1,150 reprint 1030) invoked by the dissent, The Prisley case
was decided in 1837 during the era of economic royalists and
robber barons of America. Only ruthless, unfeeling capitalistics
and egoistic reactionaries continue to pay obeisance to such un-
Christian doctrine. The Prisley rule humiliates man and debases
him; because the decision derisively refers to the lowly worker as
"servant" and utilizes with aristocratic arrogance "master" for
"employer." It robs man of his inherent dignity and dehumanizes
him. To stress this affront to human dignity, WE only have to
restate the quotation from Prisley, thus: "The mere relation of the
master and the servant never can imply an obligation on the part
of the master to take more care of the servant than he may
reasonably be expected to do himself." This is the very selfish
doctrine that provoked the American Civil War which generated so
much hatred and drew so much precious blood on American
plains and valleys from 1861 to 1864.
"Idolatrous reverence" for the letter of the law sacrifices the
human being. The spirit of the law insures man's survival and
ennobles him. In the words of Shakespeare, "the letter of the law
killeth; its spirit giveth life."
C
It is curious that the dissenting opinion clings to the myth that
the courts cannot legislate.
That myth had been exploded by Article 9 of the New Civil Code,
which provides that "No judge or court shall decline to render
judgment by reason of the silence, obscurity or insufficiency of the
laws. "
Hence, even the legislator himself, through Article 9 of the New
Civil Code, recognizes that in certain instances, the court, in the
language of Justice Holmes, "do and must legislate" to fill in the
gaps in the law; because the mind of the legislator, like all human
beings, is finite and therefore cannot envisage all possible cases to
which the law may apply Nor has the human mind the infinite
capacity to anticipate all situations.
But about two centuries before Article 9 of the New Civil Code, the
founding fathers of the American Constitution foresaw and
recognized the eventuality that the courts may have to legislate to
supply the omissions or to clarify the ambiguities in the American
Constitution and the statutes.
'Thus, Alexander Hamilton pragmatically admits that judicial
legislation may be justified but denies that the power of the
Judiciary to nullify statutes may give rise to Judicial tyranny (The
Federalist, Modern Library, pp. 503-511, 1937 ed.). Thomas
Jefferson went farther to concede that the court is even
independent of the Nation itself (A.F.L. vs. American Sash
Company, 1949 335 US 538).
Many of the great expounders of the American Constitution
likewise share the same view. Chief Justice Marshall pronounced:
"It is emphatically the province and duty of the Judicial
department to say what the law is (Marbury vs. Madison I Cranch
127 1803), which was re-stated by Chief Justice Hughes when he
said that "the Constitution is what the judge says it is (Address on
May 3, 1907, quoted by President Franklin Delano Roosevelt on
March 9, 1937). This was reiterated by Justice Cardozo who
pronounced that "No doubt the limits for the judge are narrower.
He legislates only between gaps. He fills the open spaces in the
law. " (The Nature of the Judicial Process, p. 113). In the language
of Chief Justice Harlan F. Stone, "The only limit to the judicial
legislation is the restraint of the judge" (U.S. vs. Butler 297 U.S. 1
Dissenting Opinion, p. 79), which view is also entertained by
Justice Frankfurter and Justice Robert Jackson. In the rhetoric of
Justice Frankfurter, "the courts breathe life, feeble or strong, into
the inert pages of the Constitution and all statute books."
It should be stressed that the liability of the employer under
Section 5 of the Workmen's Compensation Act or Article 173 of the
New Labor Code is limited to death, ailment or injury caused by
the nature of the work, without any fault on the part of the
employers. It is correctly termed no fault liability. Section 5 of the
Workmen's Compensation Act, as amended, or Article 173 of the
New Labor Code, does not cover the tortious liability of the
employer occasioned by his fault or culpable negligence in failing
to provide the safety devices required by the law for the protection
of the life, limb and health of the workers. Under either Section 5
or Article 173, the employer remains liable to pay compensation
benefits to the employee whose death, ailment or injury is work-
connected, even if the employer has faithfully and diligently
furnished all the safety measures and contrivances decreed by the
law to protect the employee.
The written word is no longer the "sovereign talisman." In the
epigrammatic language of Mr. Justice Cardozo, "the law has
outgrown its primitive stage of formalism when the precise word
was the sovereign talisman, and every slip was fatal" (Wood vs.
Duff Gordon 222 NW 88; Cardozo, The Nature of the Judicial
Process 100). Justice Cardozo warned that: "Sometimes the
conservatism of judges has threatened for an interval to rob the
legislation of its efficacy. ... Precedents established in those items
exert an unhappy influence even now" (citing Pound, Common
Law and Legislation 21 Harvard Law Review 383, 387).
Finally, Justice Holmes delivered the coup de grace when he
pragmatically admitted, although with a cautionary undertone:
"that judges do and must legislate, but they can do so only
interstitially they are confined from molar to molecular motions"
(Southern Pacific Company vs. Jensen, 244 US 204 1917). And in
the subsequent case of Springer vs. Government (277 US 188,
210-212, 72 L.ed. 845, 852- 853), Justice Holmes pronounced:
The great ordinances of the Constitution do not
establish and divide fields of black and white.
Even the more specific of them are found to
terminate in a penumbra shading gradually
from one extreme to the other. x x x. When we
come to the fundamental distinctions it is still
more obvious that they must be received with a
certain latitude or our government could not go
on.
To make a rule of conduct applicable to an
individual who but for such action would be free
from it is to legislate yet it is what the judges do
whenever they determine which of two
competing principles of policy shall prevail.
xxx xxx xxx
It does not seem to need argument to show that
however we may disguise it by veiling words we
do not and cannot carry out the distinction
between legislative and executive action with
mathematical precision and divide the branches
into waterlight compartments, were it ever so
desirable to do so, which I am far from believing
that it is, or that the Constitution requires.
True, there are jurists and legal writers who affirm that judges
should not legislate, but grudgingly concede that in certain cases
judges do legislate. They criticize the assumption by the courts of
such law-making power as dangerous for it may degenerate into
Judicial tyranny. They include Blackstone, Jeremy Bentham,
Justice Black, Justice Harlan, Justice Roberts, Justice David
Brewer, Ronald Dworkin, Rolf Sartorious, Macklin Fleming and
Beryl Harold Levy. But said Justices, jurists or legal
commentators, who either deny the power of the courts to legislate
in-between gaps of the law, or decry the exercise of such power,
have not pointed to examples of the exercise by the courts of such
law-making authority in the interpretation and application of the
laws in specific cases that gave rise to judicial tyranny or
oppression or that such judicial legislation has not protected
public interest or individual welfare, particularly the lowly workers
or the underprivileged.
On the other hand, there are numerous decisions interpreting the
Bill of Rights and statutory enactments expanding the scope of
such provisions to protect human rights. Foremost among them is
the doctrine in the cases of Miranda vs. Arizona (384 US 436
1964), Gideon vs. Wainright (372 US 335), Escubedo vs. Illinois
(378 US 478), which guaranteed the accused under custodial
investigation his rights to remain silent and to counsel and to be
informed of such rights as even as it protects him against the use
of force or intimidation to extort confession from him. These rights
are not found in the American Bill of Rights. These rights are now
institutionalized in Section 20, Article IV of the 1973 Constitution.
Only the peace-and-order adherents were critical of the activism of
the American Supreme Court led by Chief Justice Earl Warren.
Even the definition of Identical offenses for purposes of the double
jeopardy provision was developed by American judicial decisions,
not by amendment to the Bill of Rights on double jeopardy (see
Justice Laurel in People vs. Tarok, 73 Phil. 260, 261-268). And
these judicial decisions have been re-stated in Section 7 of Rule
117 of the 1985 Rules on Criminal Procedure, as well as in
Section 9 of Rule 117 of the 1964 Revised Rules of Court. In both
provisions, the second offense is the same as the first offense if the
second offense is an attempt to commit the first or frustration
thereof or necessarily includes or is necessarily included in the
first offense.
The requisites of double jeopardy are not spelled out in the Bill of
Rights. They were also developed by judicial decisions in the
United States and in the Philippines even before people vs. Ylagan
(58 Phil. 851-853).
Again, the equal protection clause was interpreted in the case of
Plessy vs. Ferguson (163 US 537) as securing to the Negroes equal
but separate facilities, which doctrine was revoked in the case of
Brown vs. Maryland Board of Education (349 US 294), holding
that the equal protection clause means that the Negroes are
entitled to attend the same schools attended by the whites-equal
facilities in the same school-which was extended to public parks
and public buses.
De-segregation, not segregation, is now the governing principle.
Among other examples, the due process clause was interpreted in
the case of People vs. Pomar (46 Phil. 440) by a conservative,
capitalistic court to invalidate a law granting maternity leave to
working women-according primacy to property rights over human
rights. The case of People vs. Pomar is no longer the rule.

As early as 1904, in the case of Lochner vs. New York (198 US 45,
76, 49 L. ed. 937, 949), Justice Holmes had been railing against
the conservatism of Judges perverting the guarantee of due
process to protect property rights as against human rights or
social justice for the working man. The law fixing maximum hours
of labor was invalidated. Justice Holmes was vindicated finally in
1936 in the case of West Coast Hotel vs. Parish (300 US 377-79;
81 L. ed. 703) where the American Supreme Court upheld the
rights of workers to social justice in the form of guaranteed
minimum wage for women and minors, working hours not
exceeding eight (8) daily, and maternity leave for women
employees.

The power of judicial review and the principle of separation of

powers as well as the rule on political questions have been evolved
and grafted into the American Constitution by judicial decisions
(Marbury vs. Madison, supra Coleman vs. Miller, 307 US 433, 83
L. ed. 1385; Springer vs. Government, 277 US 210-212, 72 L. ed.
852, 853).

It is noteworthy that Justice Black, who seems to be against

judicial legislation, penned a separate concurring opinion in the
case of Coleman vs. Miller, supra, affirming the doctrine of
political question as beyond the ambit of judicial review. There is
nothing in both the American and Philippine Constitutions
expressly providing that the power of the courts is limited by the
principle of separation of powers and the doctrine on political
questions. There are numerous cases in Philippine jurisprudence
applying the doctrines of separation of powers and political
questions and invoking American precedents.

Unlike the American Constitution, both the 1935 and 1973

Philippine Constitutions expressly vest in the Supreme Court the
power to review the validity or constitutionality of any legislative
enactment or executive act.

WHEREFORE, THE TRIAL COURT'S ORDER OF DISMISSAL IS

HEREBY REVERSED AND SET ASIDE AND THE CASE IS
REMANDED TO IT FOR FURTHER PROCEEDINGS. SHOULD A
GREATER AMOUNT OF DAMAGES BE DECREED IN FAVOR OF
HEREIN PETITIONERS, THE PAYMENTS ALREADY MADE TO
THEM PURSUANT TO THE WORKMEN'S COMPENSATION ACT
SHALL BE DEDUCTED. NO COSTS.

SO ORDERED.

G.R. No. 99301 March 13, 1997
VICTOR KIERULF, LUCILA H. KIERULF and PORFIRIO
LEGASPI, petitioners,  PESOS;
vs.
THE COURT OF APPEALS and PANTRANCO NORTH EXPRESS,
INCORPORATED, respondents.
G.R. No. 99343 March 13, 1997
PANTRANCO NORTH EXPRESS, INCORPORATED, petitioner,  THOUSAND and 00/100 (P10,000.00) PESOS.
vs.
VICTOR KIERULF, LUCILA H. KIERULF and PORFIRIO
LEGASPI, respondents.
How much moral, exemplary and actual damages are victims of
vehicular accidents entitled to?
In G.R. No. 99301, the victims of the vehicular mishap pray for an
increase in the award of damages, over and above those granted
by the appellate court. In this case, the husband of the victim of
the vehicular accident claims compensation/damages for the loss
of his right to marital consortium which, according to him, has
been diminished due to the disfigurement suffered by his wife. In
G.R. No. 99343, the transport company which owned the bus that
collided with the victims' pickup truck, asks for exoneration by
invoking an alleged fortuitous event as the cause of the mishap.
Petitioners in both cases assail the Decision, 1 dated March 13,
1991, in CA-GR CV No. 23361 of the Court of Appeals, Sixth
Division 2 ordering the following: 3
For reasons indicated and in the light of the law and
jurisprudence applicable to the case at bar, the judgment
of the trial court is hereby modified as follows:
Under the first cause of action, the defendant is hereby
ordered to pay Lucila H. Kierulf the following:
(1) For actual damages incurred for hospitalization,
medical case (sic) and doctor's fees, the sum of
P241,861.81;
(2) For moral damages the sum of P200,000.00;
(3) For exemplary damages the amount of P100,000.00.
Under the second cause of action, to pay Victor Kierulf, by
way of indemnification damage to the Isuzu Carry All with
plate No. UV PGS 798, the amount of P96,825.15.
Under the third cause of action, to pay Porfirio Legaspi the
following:
(1) For moral damages in the amount of P25,000.00;
(2) To reimburse the plaintiff the amount of P6,328.19 for
actual damages incurred in the treatment and
hospitalization of the driver Porfirio Legaspi.
The defendant is further ordered to pay the amount of
P50,000.00 as fair and reasonable attorney's fees.
And to pay the costs of suit.
Respondent Court of Appeals modified the decision of the
Regional Trial Court of Quezon City, Branch 92, 4rendered
on May 24, 1989 in Civil Case No. Q-50732 for damages.
The dispositive portion of the said decision is quoted
below: 5
WHEREFORE, in view of the foregoing, judgment is hereby
rendered against the defendant, ordering Pantranco to pay:
Under the First Cause of Action
1. In favor of plaintiff Lucia H. Kierulf actual damages in
the amount on ONE HUNDRED SEVENTY FOUR
THOUSAND ONE HUNDRED and 77/100 (P174,100.77)
2. To pay said plaintiff moral damages in the amount of
ONE HUNDRED THOUSAND and 00/100 (P100,000.00)
PESOS;
3. To pay exemplary damages in the amount of TEN
Under the Second Cause of Action
1. To pay plaintiff Victor Kierulf the amount of NINETY SIX
THOUSAND EIGHT HUNDRED TWENTY FIVE and 15/100
(P96,825.15) PESOS by way of indemnification for the
damages to the Isuzu Carry All with plate No. UV PGS 796
registered in his name.
Under the Third Cause of Action
1. To pay the plaintiff spouses by way of reimbursement for
actual damages incurred for the treatment of injuries
sustained by their driver Porfirio Legaspi in the amount of
SIX THOUSAND THREE HUNDRED TWENTY EIGHT and
19/100 (P6,328.19) PESOS; and
2. To pay plaintiff Porfirio Legaspi moral damages in the
amount of TEN THOUSAND and 00/100 (P10,000.00)
PESOS.
Defendant is further ordered to pay the amount of
P25,000.00 for and as attorney's fees, and to pay costs.
All other claims and counterclaims are dismissed.
The Facts
The following may be culled from the undisputed factual findings
of the trial court and Respondent Court of Appeals:
The initial investigation conducted by Pfc. D.O. Cornelio disclosed
that at about 7:45 p.m. of 28 February 1987, the Pantranco bus,
bearing plate number AVE-845 (TB PIL 86), was traveling along
Epifanio de los Santos Avenue (EDSA) from Congressional Avenue
towards Clover Leaf, Balintawak. Before it reached the corner of
Oliveros Drive, the driver lost control of the bus, causing it to
swerve to the left, and then to fly over the center island occupying
the east-bound lane of EDSA. The front of the bus bumped the
front portion of an Isuzu pickup driven by Legaspi, which was
moving along Congressional Avenue heading towards Roosevelt
Avenue. As a result, the points of contact of both vehicles were
damaged and physical injuries were inflicted on Legaspi and his
passenger Lucila Kierulf, both of whom were treated at the Quezon
City General Hospital. The bus also hit and injured a pedestrian
who was then crossing EDSA.
Despite the impact, said bus continued to move forward and its
front portion rammed against a Caltex gasoline station, damaging
its building and gasoline dispensing equipment.
As a consequence of the incident, Lucila suffered injuries, as
stated in the medical report 6 of the examining physician, Dr.
Pedro P. Solis of the Quezon City General Hospital. The injuries
sustained by Lucila required major surgeries like "tracheotomy,
open reduction, mandibular fracture, intermaxillary repair of
multiple laceration" and prolonged treatment by specialists. Per
medical report of Dr. Alex L. Castillo, Legaspi also suffered
injuries. 7
The front portion of the pickup truck, owned by Spouses Kierulf,
bearing plate number UV PGS 798, was smashed to pieces. The
cost of repair was estimated at P107,583.50.
Pantranco, in its petition, 8 adds that on said day, the above-
mentioned bus was driven by Jose Malanum. While cruising along
EDSA, a used engine differential accidentally and suddenly
dropped from a junk truck in front of the bus. Said differential hit
the under chassis of the bus, throwing Malanum off his seat and
making him lose control of said bus. The bus swerved to the left,
hit the center island, and bumped the pickup of the spouses.
The Issues
Spouses Kierulf and their driver Legaspi raise the following
assignment of errors in this appeal: 9
A considered in the proceedings below. 13
The respondent court of appeals erred in
awarding only P200,000.00 and P25,000.00 as
and for moral damages for the petitioners
Kierulf and Legaspi respectively when it should
at least have been P1,000,000.00 and
P100,000.00 respectively.
B collision, we see no reason to digress from the standard rule.
The respondent court of appeals erred in
awarding only P100,000.00 to the petitioners
Kierulf and nothing to petitioner Legaspi as and
for exemplary damages when it should have at
least been P500,000.00 and P50,000.00
respectively.
C court's findings that the proximate cause was
The respondent court of appeals erred in not
awarding any amount for the lost income due to
the petitioner Lucila H. Kierulf.
D driving habit of a careful and prudent man
The respondent court of appeals erred in not
awarding the amount of P107,583.50 for the
damages sustained by the Isuzu carry-all pick-
up truck.
E
The respondent court of appeals erred in not
awarding any legal interest on the sums
awarded.
On the other hand, Pantranco raises the following assignment of
errors: 10
4.1 The Honorable Court of Appeals erred in
holding that the driver of Pantranco was
negligent.
4.2 The Honorable Court of Appeals erred in
holding that the proximate cause of the accident
was the negligence of Pantranco and not a
fortuitous event; and
4.2 (sic) The Honorable Court of Appeals erred
in awarding excessive damages.
In sum, Spouses Kierulf and Legaspi argue that the damages
awarded were inadequate while Pantranco counters that they were
astronomical, bloated and not duly proved. 11
The Court's Ruling
First Issue: Negligence and Proximate
Cause Are Factual Issues
Even on appeal, Pantranco insists that its driver was not negligent
and that the mishap was due to a fortuitous event. February 28,
1987, the date of the incident, was a Saturday; hence, driving at
the speed of 40-50 kilometers per hour (kph) was prudent. It
contends that the proximate cause was the accidental dropping of
a used engine differential by a junk truck immediately ahead of
the bus. 12
As to what really caused the bus to careen to the opposite lane of
EDSA and collide with the pickup truck driven by Legaspi is
a factual issue which this Court cannot pass upon. As a rule, the
jurisdiction of this Court is limited to the review of errors of
law allegedly committed by the appellate court. This Court is not
bound to analyze and weigh all over again the evidence already
Although the Court may review factual issues in some
instances, 14 the case at bar does not fall under any one of them.
The fact that there is no conflict between the findings of the trial
court and respondent Court bolsters our position that a review of
the facts found by respondent Court is not necessary. 15 There
being no conflict between the findings of the Court of Appeals and
the trial court that gross negligence was the real cause of the
We quote with concurrence the factual findings of the appellate
and trial courts, showing that the accident was, contrary to the
belief of Pantranco, the result of the gross negligence of its driver.
To wit: 16
The vehicular accident was certainly not due to
a fortuitous event. We agree with the trial
the negligence of the defendant's driver, such
as: (1) Driving at that part of EDSA at 7:45 P.M.
from Congressional Avenue towards Clover Leaf
overpass in the direction of Balintawak at 40-50
kph is certainly not a manifestation of good
exercising the extraordinary diligence required
by law. Traffic in that place and at that time of
the day is always heavy. (2) Losing control of the
wheel in such a place crowded with moving
vehicles, jumping over the island which
separates the East bound from the West bound
lane of EDSA indicate that the defendant's bus
was traveling at a speed limit beyond what a
prudent and careful driver is expected of, if
such driver were exercising due diligence
required by law. (3) Finally, crossing over the
island and traversing the opposite lane and
hitting an oncoming vehicle with such force as
to smash the front of such vehicle and finally
being forced to stop by bumping against a
Caltex service station — all show not only
negligence, but recklessness of the defendant's
driver. (4) If defendant's driver was not driving
fast, was not recklessly negligent and had
exercised due care and prudence, with due
respect to human life and to others travelling in
the same place, the driver could have stopped
the bus the moment it crossed the island, and
avoided crossing over to the other lane and
bumping against vehicles travelling in opposite
direction. The defendant's driver did not take
any evasive action and utterly failed to adopt
any measure to avoid injuries and damage to
others because he "lost control of the bus",
which was like a juggernaut, let loose in a big
crowd, smashing everything on its path.
Second Issue: Moral Damages
Complainants aver that the moral damages awarded by
Respondent Court are "clearly and woefully not enough." The
established guideline in awarding moral damages takes into
consideration several factors, some of which are the social and
financial standing of the injured parties and 17 their wounded
moral feelings and personal pride. 18 The Kierulf spouses add that
the Respondent Court should have considered another factor: the
loss of their conjugal fellowship and the impairment or destruction
of their sexual life. 19
The spouses aver that the disfigurement of Lucila's physical
appearance cannot but affect their marital right to "consortium"
which would have remained normal were it not for the accident.
Thus, the moral damages awarded in favor of Lucila should be
increased to P1,000,000.00, not only for Lucila but also for her
husband Victor who also suffered "psychologically." A California
case, Rodriguez vs. Bethlehem Steel Corporation, 20 is cited as
authority for the claim of damages by reason of loss or marital
consortium, i.e. loss of conjugal fellowship and sexual relations. 21
Pantranco rebuts that Victor's claim of moral damages on alleged
loss of consortium is without legal basis. Article 2219 of the Civil
Code provides that only the person suffering the injury may claim
moral damages. Additionally, no evidence was adduced to show
that the consortium had indeed been impaired and the Court
cannot presume that marital relations disappeared with the
accident. 22
The Courts notes that the Rodriguez case clearly reversed
the original common law view first enunciated in the case
of Deshotel vs. Atchison, 23 that a wife could not recover for the
loss of her husband's services by the act of a third
party. Rodriguez ruled that when a person is injured to the extent
that he/she is no longer capable of giving love, affection, comfort
and sexual relations to his or her spouse, that spouse has suffered
a direct and real personal loss. The loss is immediate and
consequential rather than remote and unforeseeable; it is personal
to the spouse and separate and distinct from that of the injured
person.
Rodriguez involved a couple in their early 20s, who were married
for only 16 months and full of dreams of building a family of their
own, when the husband was struck and almost paralyzed by a
falling 600-pound pipe. The wife testified how her life had
deteriorated because her husband became a lifelong invalid,
confined to the home, bedridden and in constant need of
assistance for his bodily functions; and how her social,
recreational and sexual life had been severely restricted. It also
deprived her of the chance to bear their children. As a constant
witness to her husband's pain, mental anguish and frustration,
she was always nervous, tense, depressed and had trouble
sleeping, eating and concentrating. Thus, the California court
awarded her damages for loss of consortium.
Whether Rodriguez may be cited as authority to support the award
of moral damages to Victor and/or Lucila Kierulf for "loss of
consortium," however, cannot be properly considered in this case.
Victor's claim for deprivation of his right to consortium, although
argued before Respondent Court, is not supported by the evidence
on record. His wife might have been badly disfigured, but he had
not testified that, in consequence thereof, his right to marital
consortium was affected. Clearly, Victor (and for that matter,
Lucila) had failed to make out a case for loss of consortium, unlike
the Rodriguez spouse. Again, we emphasize that this claim is
factual in origin and must find basis not only in the evidence
presented but also in the findings of the Respondent Court. For
lack of factual basis, such claim cannot be ruled upon by this
Court at this time.
Third Issue: No Consideration of Social and
Financial Standing in this Case
The social and financial standing of Lucila cannot be considered
in awarding moral damages. The factual circumstances prior to
the accident show that no "rude and rough" reception, no
"menacing attitude," no "supercilious manner," no "abusive
language and highly scornful reference" was given her. The social
and financial standing of a claimant of moral damages may be
considered in awarding moral damages only if he or she was
subjected to contemptuous conduct despite the offender's
knowledge of his or her social and financial standing. 24
Be that as it may, it is still proper to award moral damages to
Petitioner Lucila for her physical sufferings, mental anguish,
fright, serious anxiety and wounded feelings. She sustained
multiple injuries on the scalp, limbs and ribs. She lost all her
teeth. She had to undergo several corrective operations and
treatments. Despite treatment and surgery, her chin was still
numb and thick. She felt that she has not fully recovered from her
injuries. She even had to undergo a second operation on her gums
for her dentures to fit. She suffered sleepless nights and shock as
a consequence of the vehicular accident. 25 In this light and
considering further the length of time spent in prosecuting the
complaint and this appeal, we find the sum of P400,000.00 as
moral damages for Petitioner Lucila to be fair and just under the
circumstances.
Fourth Issue: Exemplary Damages
Complainants also pray for an increase of exemplary damages to
P500,000.00 and P50,000 for Spouses Kierulf and Legaspi,
respectively. This prayer is based on the pronouncement of this
Court in Batangas Transportation Company vs. Caguimbal 26 that
"it is high time to impress effectively upon public utility operators
the nature and extent of their responsibility in respect of the
safety of their passengers and their duty to exercise greater care in
the selection of drivers and conductors . . . ."
Pantranco opposes this, for under Article 2231 of the Civil Code,
"exemplary damages may be granted if the defendant acted with
gross negligence." And allegedly, gross negligence is sorely lacking
in the instant case.
Exemplary damages are designed to permit the courts to mould
behavior that has socially deleterious consequences, and its
imposition is required by public policy to suppress the wanton
acts of an offender. 27However, it cannot be recovered as a matter
of right. It is based entirely on the discretion of the
Court. 28Jurisprudence sets certain requirements before
exemplary damages may be awarded, to wit: 29
(1) (T)hey may be imposed by way of example or
correction only in addition, among others, to
compensatory damages, and cannot be
recovered as a matter of right, their
determination depending upon the amount of
compensatory damages that may be awarded to
the claimant;
(2) the claimant must first establish his right to
moral, temperate, liquidated or compensatory
damages; and
(3) the wrongful act must be accompanied by
bad faith, and the award would be allowed only
if the guilty party acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.
The claim of Lucila has been favorably considered in view of the
finding of gross negligence by Respondent Court on the part of
Pantranco. This is made clear by Respondent Court in granting
Lucila's claim of exemplary damages: 30
(P)ublic utility operators like the defendant,
have made a mockery of our laws, rules and
regulations governing operations of motor
vehicles and have ignored either deliberately or
through negligent disregard of their duties to
exercise extraordinary degree of diligence for the
 safety of the travelling public and their
passengers. . . . .
To give teeth to this warning, the exemplary damages awarded to
Petitioner Lucila is increased to P200,000.00. The fact of gross
negligence duly proven, we believe that Legaspi, being also a
victim of gross negligence, should also receive exemplary damages.
Under the facts proven, the Court awards him P25,000 as
exemplary damages.
Fifth Issue: Loss of Earnings as a Component of Damages
Lost income in the amount of P16,500.00 is also claimed by
Legaspi stating that his "whole future has been
jeopardized." 31 This, in turn, is not rebutted by Pantranco.
It should be noted that Respondent Court already considered this
when it stated that the award of P25,000.00 included
compensation for "mental anguish and emotional strain of not
earning anything with a family to support." Moral damages,
though incapable of pecuniary estimation, are in the category of
an award designed to compensate the claimant for actual injury
and are not meant to enrich complainant at the expense of
defendant. 32
We find, however, the claim of Legaspi to be duly substantiated.
Pantranco failed to rebut the claim of Porfirio that he had been
incapacitated for ten (10) months and that during said period he
did not have any income. Considering that, prior to the accident,
he was employed as a driver and was earning P1,650.00 a month,
his claim for P16,500.00 as compensation for loss of earning
capacity for said period is amply supported by the records 33 and
is demandable under Article 2205 of the Civil Code. 34
Complainants contend that Lucila is also entitled to damages for
"loss or impairment of earning capacity in cases of temporary or
permanent personal injury" under Article 2205 of the Civil Code.
Notably, both the trial court and public respondent denied this
prayer because of her failure to produce her income tax returns
for the years 1985 and 1986, notwithstanding the production of
her 1983 and 1984 income tax returns.
Pantranco opposes the above claim for loss of earning capacity on
the ground that there is no proof "that for the two years
immediately preceding the accident Lucila was indeed deriving
income from some source which was cut off by the accident. 35
We agree with the findings of Respondent Court that Lucila's claim
of loss of earning capacity has not been duly proven. The alleged
loss must be established by factual evidence for it partakes of
actual damages. A party is entitled to adequate compensation for
such pecuniary loss actually suffered and duly proved. Such
damages, to be recoverable, must not only be capable of proof, but
must actually be shown with a reasonable degree of certainty. We
have emphasized that these damages cannot be presumed, and
courts in making an award must point out specific facts which
can serve as basis for measuring whatever compensatory or actual
damages are borne. 36 Mere proof of Lucila's earnings consisting of
her 1983 and 1984 income tax returns would not suffice to prove
earnings for the years 1985 and 1986. The incident happened on
February 28, 1987. If indeed Lucila had been earning P50,000.00
every month prior to the accident, as she alleged, there are
evidentiary proofs for such earnings other than income tax returns
such as, bur not limited to, payroll receipts, payments to the SSS,
or withholding tax paid every month. Sad to say, these other
proofs have not been presented, and we cannot presume that they
exist on the strength of the word of Lucila alone.
Sixth Issue: Reduction of Actual Damages on
the Pickup Based on an Estimate
Complainants contend that the reduction of 10% from the written
estimate of the cost of repairs by the trial court is pure
speculation. 37 Pantranco opposes this by pointing out that
judicial notice is made by respondent Court of the propensity of
motor repair shops to exaggerate their estimates. 38
An estimate, as it is categorized, is not an actual expense incurred
or to be incurred in the repair. The reduction made by respondent
Court is reasonable considering that in this instance such
estimate was secured by the complainants themselves.
Epilogue
This Court cannot remind the bench and the bar often enough
that in order that moral damages may be awarded, there must be
pleading and proof of moral suffering, mental anguish, fright and
the like. While no proof of pecuniary loss is necessary in order
that moral damages may be awarded, the amount of indemnity
being left to the discretion of the court, 39 it is nevertheless
essential that the claimant should satisfactorily show the
existence of the factual basis of
damages 40 and its causal connection to defendant's acts. This is
so because moral damages, though incapable of pecuniary
estimation, are in the category of an award designed to
compensate the claimant for actual injury suffered and not to
impose a penalty on the wrongdoer. 41 In Francisco vs. GSIS, 42 the
Court held that there must be clear testimony on the anguish and
other forms of mental suffering. Thus, if the plaintiff fails to take
the witness stand and testify as to his/her social humiliation,
wounded feelings and anxiety, moral damages cannot be awarded.
In Cocoland Development Corporation vs. National Labor Relations
Commission, 43 the Court held that "additional facts must be
pleaded and proven to warrant the grant of moral damages under
the Civil Code, these being, . . . social humiliation, wounded
feelings, grave anxiety, etc., that resulted therefrom."
Moral damages are awarded to enable the injured party to obtain
means, diversions or amusements that will serve to alleviate the
moral suffering he/she has undergone, by reason of the
defendant's culpable action. 44 Its award is aimed at restoration,
as much as possible, of the spiritual status quo ante; thus, it must
be proportionate to the suffering inflicted. 45 Since each case must
be governed by its own peculiar circumstances, there is no hard
and fast rule in determining the proper amount. The yardstick
should be that the amount awarded should not be so palpably and
scandalously excessive as to indicate that it was the result of
passion, prejudice or corruption on the part of the trial
judge. 46 Neither should it be so little or so paltry that it rubs salt
to the injury already inflicted on plaintiffs.
WHEREFORE, premises considered, the petition for review in G.R.
No. 99301 is PARTIALLY GRANTED, while that of Pantranco North
Express, Inc., in G.R. No. 99343 is DISMISSED. The Decision
appealed from is AFFIRMED with MODIFICATION. The award of
moral damages to Lucila and Legaspi is hereby INCREASED to
P400,000.00 and P50,000.00 respectively; exemplary damages to
Lucila is INCREASED to P200,000.00. Legaspi is awarded
exemplary damages of P50,000.00. The amount of P 16,500.00 as
actual or compensatory damages is also GRANTED to Legaspi. All
other awards of Respondent Court of Appeals are AFFIRMED.
Pantranco shall also PAY legal interest of 6% per annum on all
sums awarded from the date of promulgation of the decision of the
trial court, May 24, 1989, until actual payment.
SO ORDERED.

G.R. No. 160110               June 18, 2014
MARIANO C. MENDOZA and ELVIRA LIM, Petitioners,  Petitioners, on the other hand, presented Teresita Gutierrez
vs.
SPOUSES LEONORA J. GOMEZ and GABRIEL V.
GOMEZ, Respondents.
DECISION
PEREZ, J.:
Assailed in the present appeal by certiorari is the Decision 1 dated
29 September 2003 of the Special Fourth Division of the Court of
Appeals (CA) in CA-G.R. CV No. 71877, which affirmed with
modification the Decision2 dated 31 January 2001 of the Regional
Trial Court (RTC), Branch 172, Valenzuela City in Civil Case No.
5352-V-97, and which effectively allowed the award of actual,
moral, and exemplary damages, as well as attorney's fees and
costs of the suit in favor of respondent Spouses Leonora and
Gabriel Gomez (respondents).
Antecedent Facts
On 7 March 1997, an Isuzu Elf truck (Isuzu truck) with plate
number UAW 582,3 owned by respondent Leonora J. Gomez
(Leonora)4 and driven by Antenojenes Perez (Perez), 5 was hit by a
Mayamy Transportation bus (Mayamy bus) with temporary plate
number 1376-1280,6 registered under the name of petitioner
Elvira Lim (Lim)7 and driven by petitioner Mariano C. Mendoza
(Mendoza).8
Owing to the incident, an Information for reckless imprudence
resulting in damage to property and multiple physical injuries was
filed against Mendoza. 9 Mendoza, however, eluded arrest, thus,
respondents filed a separate complaint for damages against
Mendoza and Lim, seeking actual damages, compensation for lost
income, moral damages, exemplary damages, attorney’s fees and
costs of the suit.10 This was docketed as Civil Case No. 5352-V-97.
According to PO1 Melchor F. Rosales (PO1 Rosales), investigating
officer of the case, at around 5:30 a.m., the Isuzu truck, coming
from Katipunan Road and heading towards E. Rodriguez, Sr.
Avenue, was travelling along the downward portion of Boni
Serrano Avenue when, upon reaching the corner of Riviera Street,
fronting St. Ignatius Village, its left front portion was hit by the
Mayamy bus.11 According to PO1 Rosales, the Mayamy bus, while
traversing the opposite lane, intruded on the lane occupied by the
Isuzu truck.12
PO1 Rosales also reported that Mendoza tried to escape by
speeding away, but he was apprehended in Katipunan Road
corner C. P. Garcia Avenue by one Traffic Enforcer Galante and a
security guard of St. Ignatius Village.13
As a result of the incident, Perez,as well as the helpers on board
the Isuzu truck, namely Melchor V. Anla (Anla), Romeo J. Banca
(Banca), and Jimmy Repisada (Repisada), sustained injuries
necessitating medical treatment amounting to ₱11,267.35,which
amount was shouldered by respondents. Moreover, the Isuzu
truck sustained extensive damages on its cowl, chassis, lights and
steering wheel, amounting to ₱142,757.40.14
Additionally, respondents averred that the mishap deprived them
of a daily income of ₱1,000.00. Engaged in the business of buying
plastic scraps and delivering them to recycling plants,
respondents claimed that the Isuzu truck was vital in the
furtherance of their business.
For their part, petitioners capitalized on the issue of ownership of
the bus in question. Respondents argued that although the
registered owner was Lim, the actual owner of the bus was SPO1
Cirilo Enriquez (Enriquez), who had the bus attached with
Mayamy Transportation Company (Mayamy Transport) under the
so-called "kabit system." Respondents then impleaded both Lim
and Enriquez.
(Gutierrez), whose testimony was offered to prove that Mayamy
Bus or Mayamy Transport is a business name registered under
her name, and that such business is a sole proprietorship. Such
was presented by petitioners to rebut the allegation of respondents
that Mayamy Transport is a corporation;15 and to show, moreover,
that although Gutierrez is the sole proprietor of Mayamy
Transport, she was not impleaded by respondents in the case at
bar.16
After weighing the evidence, the RTC found Mendoza liable for
direct personal negligence under Article 2176 of the Civil Code,
and it also found Lim vicariously liable under Article 2180 of the
same Code.
As regards Lim, the RTC relied on the Certificate of Registration
issued by the Land Transportation Office on 9 December 1996 17 in
concluding that she is the registered owner of the bus in question.
Although actually owned by Enriquez, following the established
principle in transportation law, Lim, as the registered owner, is
the one who can be held liable.
Thus, the RTC disposed of the case as follows:
WHEREFORE, judgment is hereby rendered in favor of the
[respondents] and against the [petitioners]:
1. Ordering the [petitioners] except Enriquez to pay
[respondents], jointly and severally, the costs of repair of
the damaged vehicle in the amount of ₱142,757.40;
2. Ordering the defendants except Enriquez to pay
[respondents], jointly and severally, the amount of
₱1,000.00 per day from March 7, 1997 up to November
1997 representing the unrealized income of the
[respondents] when the incident transpired up to the
time the damaged Isuzu truck was repaired;
3. Ordering the [petitioners] except Enriquez to pay
[respondents], jointly and severally, the amount of
₱100,000.00 as moral damages, plus a separate amount
of ₱50,000.00 as exemplary damages;
4. Ordering the [petitioners] except Enriquez to pay
[respondents], jointly and severally, the amount of
₱50,000.00 as attorney’s fees; 5. Ordering the
[petitioners] except Enriquez to pay [respondents] the
costs of suit.18
Displeased, petitioners appealed to the CA, which appeal was
docketed as CA-G.R. CV No. 71877. After evaluating the damages
awarded by the RTC, such were affirmed by the CA with the
exception of the award of unrealized income which the CA ordered
deleted, viz:
WHEREFORE, premises considered, the appeal is PARTLY
GRANTED. The judgment of the Regional Trial Court of Valenzuela
City, Branch 172 dated January 31, 2001, is MODIFIED, in that
the award of ₱1,000.00 per day from March 1997 up to November
1997 representing unrealized income is DELETED. The award of
₱142,757.40 for the cost of repair of the damaged vehicle, the
award of ₱100,000.00 as moral damages, the award of ₱50,000.00
as exemplary damages, the award of ₱50,000.00 as attorney’s fees
and the costs of the suit are hereby MAINTAINED. 19
The Present Petition
Unsatisfied with the CA ruling, petitioners filed an appeal by
certiorari before the Court, raising the following issues: 20
1. The court a quo has decided questions of substance in
a way not in accord with law or with the applicable
decisions of the Supreme Court when it awarded:
a. Moral damages in spite of the fact that the
[respondents’] cause of action is clearly based
on quasi-delict and [respondents] did not
sustain physical injuries to be entitled thereto
pursuant to Article 2219 (2) of the New Civil
Code and pertinent decisions of the Supreme
Court to that effect. The court a quo
erroneously concluded that the driver acted in
bad faith and erroneously applied the provision
of Article 21 of the same code to justify the
award for bad faith is not consistent with quasi-
delict which is founded on fault or negligence.
b. Exemplary damages in spite of the fact that
there is no finding that the vehicular accident
was due to petitioner-driver’s gross negligence
to be entitled thereto pursuant to Article 2231
of the New Civil Code and pertinent decisions of
the Supreme Court to that effect. The factual
basis of the court a quo that "the act of the
driver of the bus in attempting to escape after
causing the accident in wanton disregard of the
consequences of his negligent act is such gross
negligence that justifies an award of exemplary
damages" is an act after the fact which is not
within the contemplation of Article 2231 of the
New Civil Code.
c. Attorney’s fees in spite of the fact that the
assailed decisions of the trial court and the
court a quo are bereft with jurisdictions for the
award of attorney’s fees pursuant to the
pertinent decisions of the Supreme Court on the
matter and provision Article 2208 of the New
Civil Code. The court a quo erroneously applied
the decision of the Supreme Court in Bañas, Jr.
vs. Court of Appeals, 325 SCRA 259.
The Court’s Ruling
The petition is partially meritorious.
Respondents anchor their claim for damages on Mendoza’s
negligence, banking on Article 2176 of the Civil Code, to wit:
Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
In impleading Lim, on the other hand, respondents invoke the
latter’s vicarious liability as espoused in Article 2180 of the same
Code:
The obligation imposed by Article 2176 is demandable not only for
one’s own acts or omissions, but also for those of persons for
whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business of industry.
The first question to address, then, is whether or not Mendoza’s
negligence was duly proven. Negligence is defined as the failure to
observe for the protection of the interests of another person, that
degree of care, precaution and vigilance which the circumstances
justly demand, whereby such other person suffers injury. 21
As found by the RTC, and affirmed by the CA, Mendoza was
negligent in driving the subject Mayamy bus, as demonstrated by
the fact that, at the time of the collision, the bus intruded on the
lane intended for the Isuzu truck. Having encroached on the
opposite lane, Mendoza was clearly in violation of traffic laws.
Article2185 of the Civil Code provides that unless there is proof to
the contrary, it is presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap, he was violating
any traffic regulation. In the case at bar, Mendoza’s violation of
traffic laws was the proximate cause of the harm.
Proximate cause is defined as that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening
cause, produces the injury, and without which the result would
not have occurred. And more comprehensively, the proximate legal
cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a
natural and continuous chain of events, each having a close
causal connection with its immediate predecessor, the final event
in the chain immediately effecting the injury as a natural and
probable result of the cause which first acted, under such
circumstances that the person responsible for the first event
should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default
that an injury to some person might probably result therefrom. 22
The evidence on record shows that before the collision, the Isuzu
truck was in its rightful lane, and was even at a stop, having been
flagged down by a security guard of St. Ignatius Village. 23 The
mishap occurred when the Mayamy bus, travelling at a fast speed
as shown by the impact of the collision, and going in the opposite
direction as that of the Isuzu truck, encroached on the lane
rightfully occupied by said Isuzu truck, and caused the latter to
spin, injuring Perez, Anla, Banca, and Repisada, and considerably
damaging the Isuzu truck.
Having settled the fact of Mendoza’s negligence, then, the next
question that confronts us is who may beheld liable. According to
Manresa, liability for personal acts and omissions is founded on
that indisputable principle of justice recognized by all legislations
that when a person by his act or omission causes damage or
prejudice to another, a juridical relation is created by virtue of
which the injured person acquires a right to be indemnified and
the person causing the damage is charged with the corresponding
duty of repairing the damage. The reason for this is found in the
obvious truth that man should subordinate his acts to the
precepts of prudence and if he fails to observe them and causes
damage to another, he must repair the damage.24 His negligence
having caused the damage, Mendoza is certainly liable to repair
said damage.
Additionally, Mendoza’s employer may also be held liable under
the doctrine of vicarious liability or imputed negligence. Under
such doctrine, a person who has not committed the act or
omission which caused damage or injury to another may
nevertheless be held civilly liable to the latter either directly or
subsidiarily under certain circumstances. 25 In our jurisdiction,
vicarious liability or imputed negligence is embodied in Article
2180 of the Civil Code and the basis for damages in the action
under said article is the direct and primary negligence of the
employer in the selection or supervision, or both, of his
employee.26
In the case at bar, who is deemed as Mendoza’s employer? Is it
Enriquez, the actual owner of the bus or Lim, the registered owner
of the bus?
In Filcar Transport Services v. Espinas, 27 we held that the
registered owner is deemed the employer of the negligent driver,
and is thus vicariously liable under Article 2176, in relation to
Article 2180, of the Civil Code. Citing Equitable Leasing
Corporation v. Suyom,28 the Court ruled that in so far as third
persons are concerned, the registered owner of the motor vehicle
is the employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner. Thus, whether there
is an employer-employee relationship between the registered
owner and the driver is irrelevant in determining the liability of the
registered owner who the law holds primarily and directly
responsible for any accident, injury or death caused by the
operation of the vehicle in the streets and highways. 29
As early as Erezo v. Jepte,30 the Court, speaking through Justice
Alejo Labrador summarized the justification for holding the
registered owner directly liable, to wit:
x x x The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or
injury is caused by the vehicles on the public highways,
responsibility therefore can be fixed on a definite individual, the
registered owner. Instances are numerous where vehicle running
on public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages
or injuries caused on public highways.
"‘One of the principal purposes of motor vehicles legislation is
identification of the vehicle and of the operator, in case of
accident; and another is that the knowledge that means of
detection are always available may act as a deterrent from lax
observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it
certain that the violator of the law or of the rules of safety shall
not escape because of lack of means to discover him." The purpose
of the statute is thwarted, and the displayed number becomes a
"snare and delusion," if courts will entertain such defenses as that
put forward by appellee in this case. No responsible person or
corporation could be held liable for the most outrageous acts of
negligence, if they should be allowed to place a "middleman"
between them and the public, and escape liability by the manner
in which they recompense their servants. 31
Generally, when an injury is caused by the negligence of a servant
or employee, there instantly arises a presumption of law that there
was negligence on the part of the master or employer either in the
selection of the servant or employee (culpa in eligiendo) or in the
supervision over him after the selection (culpa vigilando), or both.
The presumption is juris tantum and not juris et de jure;
consequently, it may be rebutted. Accordingly, the general rule is
that if the employer shows to the satisfaction of the court that in
the selection and supervision of his employee he has exercised the
care and diligence of a good father of a family, the presumption is
overcome and he is relieved of liability. 32 However, with the
enactment of the motor vehicle registration law, the defenses
available under Article 2180 of the Civil Code - that the employee
acts beyond the scope of his assigned task or that it exercised the
due diligence of a good father of a family to prevent damage – are
no longer available to the registered owner of the motor vehicle,
because the motor vehicle registration law, to a certain extent,
modified Article 2180.33
As such, there can be no other conclusion but to hold Lim
vicariously liable with Mendoza.
This does not mean, however, that Lim is left without any recourse
against Enriquez and Mendoza. Under the civil law principle of
unjust enrichment, the registered owner of the motor vehicle has a
right to be indemnified by the actual employer of the driver; and
under Article 2181 of the Civil Code, whoever pays for the damage
caused by his dependents or employees may recover from the
latter what he has paid or delivered in satisfaction of the claim.
Having identified the persons liable, our next question is what
may be awarded.
Actual or Compensatory Damages. Actual or compensatory
damages are those awarded in satisfaction of, or in recompense
for, loss or injury sustained. They simply make good or replace the
loss caused by the wrong.34
Article 2202 of the Civil Code provides that in crimes and quasi
delicts, the defendant shall be liable for all damages which are the
natural and probable consequences of the act or omission
complained of. It is not necessary that such damages have been
foreseen or could have reasonably been foreseen by the defendant.
Article 2199 of the same Code, however, sets the limitation that,
except as provided by law or by stipulation, one is entitled to an
adequate compensation only for such pecuniary loss suffered by
him as he has duly proved. As such, to warrant an award of actual
or compensatory damages, the claimant must prove that the
damage sustained is the natural and probable consequences of
the negligent act and, moreover, the claimant must adequately
prove the amount of such damage.
In the case at bar, the RTC, basing on the receipts submitted by
respondents and which receipts petitioners had the opportunity to
examine, found that the total repairs on the Isuzu truck amounted
to ₱142,757.40, and that the full hospitalization and medical
expenses of Perez, Anla, Banca, and Repisada amounted to
₱11,267.35. As such, these are the amounts that respondents are
entitled to as actual and compensatory damages.
Although respondents alleged in their complaint that the damage
to their Isuzu truck caused them the loss of a daily income of
₱1,000.00, such claim was not duly substantiated by any evidence
on record, and thus cannot be awarded in their favor.
Moral Damages. Moral damages are awarded to enable the injured
party to obtain means, diversions or amusements that will serve to
alleviate the moral suffering he has undergone, by reason of the
defendant's culpable action.35
In prayers for moral damages, however, recovery is more an
exception rather than the rule. Moral damages are not meant to be
punitive but are designed to compensate and alleviate the physical
suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation,
and similar harm unjustly caused to a person. To be entitled to
such an award, the claimant must satisfactorily prove that he has
suffered damages and that the injury causing it has sprung from
any of the cases listed in Articles 2219 and 2220 of the Civil Code.
Moreover, the damages must be shown to be the proximate result
of a wrongful act or omission. The claimant must thus establish
the factual basis of the damages and its causal tie with the acts of
the defendant.36
In fine, an award of moral damages calls for the presentation of 1)
evidence of besmirched reputation or physical, mental or
psychological suffering sustained by the claimant; 2)a culpable act
or omission factually established; 3) proof that the wrongful act or
omission of the defendant is the proximate cause of the damages
sustained by the claimant; and 4) the proof that the act is
predicated on any of the instances expressed or envisioned by
Article 2219 and Article 2220 of the Civil Code. 37
A review of the complaint and the transcript of stenographic notes
yields the pronouncement that respondents neither alleged nor
offered any evidence of besmirched reputation or physical, mental
or psychological suffering incurred by them. All that Leonora and
her counsel had to say on the matter of damages other than
actual or compensatory damages is this:38
Q: Did you ever spend covering attorney’s fees?
A: Yes, sir. ₱50,000.00.
Q: Aside from the actual damage that you have mentioned x x x,
how much more would you like this Court to award you by way of
moral damages?
A: ₱100,000.00, sir.
Q: How about exemplary damages?
A: ₱50,000.00, sir.
Q: What happened to you, what did you feel when the defendants
failed to immediately repair your vehicle that was damaged
Madam Witness?
A: I have incurred expenses and I was forced to apply for a loan,
sir.
39
In Kierulf v. CA,  we observed that this Court cannot remind the
bench and the bar often enough that in order that moral damages
may be awarded, there must be pleading and proof of moral
suffering, mental anguish, fright and the like. Citing Francisco v.
GSIS,40 the Court held that there must be clear testimony on the
anguish and other forms of mental suffering. Thus, if the plaintiff
fails to take the witness stand and testify as to his social
humiliation, wounded feelings and anxiety, moral damages cannot
be awarded.
Moreover, respondents were not able to show that their claim
properly falls under Articles 2219 and 2220 of the Civil Code.
Respondents cannot rely on Article 2219 (2) of the Civil Code
which allows moral damages in quasi-delicts causing physical
injuries because in physical injuries, moral damages are
recoverable only by the injured party, 41and in the case at bar,
herein respondents were not the ones who were actually injured.
In B.F. Metal (Corp.) v. Sps. Lomotan, et al., 42 the Court, in a
claim for damages based on quasi-delict causing physical injuries,
similarly disallowed an award of moral damages to the owners of
the damaged vehicle, when neither of them figured in the accident
and sustained injuries.
Neither can respondents rely on Article 21 of the Civil Code as the
RTC erroneously did. Article 21 deals with acts contra bonus
mores, and has the following elements: (1) There is an act which is
legal; (2) but which is contrary to morals, good custom, public
order, or public policy; (3) and it is done with intent to injure. 43 In
the present case, it can hardly be said that Mendoza’s negligent
driving and violation of traffic laws are legal acts. Moreover, it was
not proven that Mendoza intended to injure Perez, et al. Thus,
Article 21 finds no application to the case at bar. All in all, we find
that the RTC and the CA erred in granting moral damages to
respondents. Exemplary Damages. Article 2229 of the Civil Code
provides that exemplary or corrective damages are imposed, by
way of example or correction for the public good, in addition to
moral, temperate, liquidated or compensatory damages. Article
2231 of the same Code further states that in quasi-delicts,
exemplary damages may be granted if the defendant acted with
gross negligence.
Our jurisprudence sets certain conditions when exemplary
damages may be awarded: First, they may be imposed by way of
example or correction only in addition, among others, to
compensatory damages, and cannot be recovered as a matter of
right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant.
Second, the claimant must first establish his right to moral,
temperate, liquidated or compensatory damages. Third, the
wrongful act must be accompanied by bad faith, and the award
would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. 44
In motor vehicle accident cases, exemplary damages may be
awarded where the defendant’s misconduct is so flagrant as to
transcend simple negligence and be tantamount to positive or
affirmative misconduct rather than passive or negative
misconduct. In characterizing the requisite positive misconduct
which will support a claim for punitive damages, the courts have
used such descriptive terms as willful, wanton, grossly negligent,
reckless, or malicious, either alone or in combination. 45
Gross negligence is the absence of care or diligence as to amount
to a reckless disregard of the safety of persons or property. It
evinces a thoughtless disregard of consequences without exerting
any effort to avoid them.46
In the case at bar, having established respondents’ right to
compensatory damages, exemplary damages are also in order,
given the fact that Mendoza was grossly negligent in driving the
Mayamy bus. His act of intruding or encroaching on the lane
rightfully occupied by the Isuzu truck shows his reckless
disregard for safety.
In Baño v. Bachelor Express, Inc., et al., 47 where an erring bus, in
the process of overtaking a jeepney, also encroached on the
opposite lane, and consequently collided with a dump truck, the
Court held the driver of the bus grossly negligent and affirmed the
award of exemplary damages. Attorney’s Fees. Article 2208 of the
Civil Code enumerates the instances when attorney’s fees may be
recovered:
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 valid 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.
From the very opening sentence of Article 2208 of the Civil Code, it
is clearly intended to retain the award of attorney’s fees as the
exception in our law, as the general rule remains that attorney’s
fees are not recoverable in the absence of a stipulation thereto, the
reason being that it is not sound policy to set a premium on the
right to litigate.48
As such, in Spouses Agustin v. CA,49 we held that, 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. Thus, 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.
In the case at bar, the RTC Decision had nil discussion on the 7) MAINTAIN the award of costs of suit.
propriety of attorney’s fees, and it merely awarded such in the
dispositive. The CA Decision, on the other hand, merely stated SO ORDERED.
that the award of attorney’s fees is merited as such is allowed
when exemplary damages are awarded.50 Following established
jurisprudence,51however, the CA should have disallowed on appeal
said award of attorney’s fees as the RTC failed to substantiate said
award. Costs of suit. The Rules of Court provide that, generally,
costs shall be allowed to the prevailing party as a matter of course,
thus:52

Section 1. Costs ordinarily follow results of suit.- Unless otherwise

provided in these rules, costs shall be allowed to the prevailing
party as a matter of course, but the court shall have power, for
special reasons, to adjudge that either party shall pay the costs of
an action, or that the same be divided, as may be equitable. No
costs shall be allowed against the Republic of the Philippines,
unless otherwise provided by law.

In the present case, the award of costs of suit to respondents, as

the prevailing party, is in order. Interests.1âwphi1 Interest by way
of damages has been defined as interest allowed in actions for
breach of contractor tort for the unlawful detention of money
already due. This type of interest is frequently called "moratory
interest." Interest as a part of damage, is allowed, not by
application of arbitrary rules, but as a result of the justice of the
individual case and as compensation to the injured party. 53

The legal provision on interests in quasi-delicts is Article 2211 of

the Civil Code which provides that in crimes and quasi-delicts,
interest as part of the damage, may, in a proper case, be
adjudicated in the discretion of the court.

Generally, interest is allowed as a matter of right for failure to pay

liquidated claims when due.54 For unliquidated claims, however,
Article 2213 of the Civil Code provides that interest cannot be
recovered upon unliquidated claims or damages, except when the
demand can be established with reasonable certainty.

In the case at bar, although the award of exemplary damages is

unliquidated in the sense that petitioners cannot know for sure,
before judgment, the exact amount that they are required to pay
to respondents, the award of actual or compensatory damages,
however, such as the truck repairs and medical expenses, is
arguably liquidated in that they can be measured against a
reasonably certain standard.55 Moreover, justice would seem to
require that the delay in paying for past losses which can be made
reasonably certain should be compensated through an award of
interest.56

WHEREFORE, premises considered, the Court Resolves to

PARTIALLY GRANT the appeal by certiorari, as follows:

1) DECLARE Mariano Mendoza and Elvira Lim solidarily

liable to respondent Spouses Leonora and Gabriel
Gomez;

2) MAINTAIN the award of actual or compensatory

damages in the amount of ₱142,757.40 for the repair of
the Isuzu Elf truck, with legal interest beginning 31
January 2001 until fully paid;

3) GRANT additional actual or compensatory damages in

the amount of ₱11,267.35 for the medical expenses
shouldered by respondent Spouses Leonora and Gabriel
Gomez, with legal interest beginning 31 January 2001
until fully paid;

4) DELETE the award of moral damages;

5) MAINTAIN the award of exemplary damages at

₱50,000.00;

6) DELETE the award of attorney's fees; and


G.R. No. 85296 May 14, 1990
ZENITH INSURANCE CORPORATION, petitioner,  to appeal, the trial court, on June 20, 1986, ordered the execution
vs.
COURT OF APPEALS and LAWRENCE
FERNANDEZ, respondents.
MEDIALDEA, J.:
Assailed in this petition is the decision of the Court of Appeals in
CA-G.R. C.V. No. 13498 entitled, "Lawrence L. Fernandez,
plaintiff-appellee v. Zenith Insurance Corp., defendant-appellant"
which affirmed in toto the decision of the Regional Trial Court of
Cebu, Branch XX in Civil Case No. CEB-1215 and the denial of
petitioner's Motion for Reconsideration.
The antecedent facts are as follows:
On January 25, 1983, private respondent Lawrence Fernandez
insured his car for "own damage" under private car Policy No.
50459 with petitioner Zenith Insurance Corporation. On July 6,
1983, the car figured in an accident and suffered actual damages
in the amount of P3,640.00. After allegedly being given a run
around by Zenith for two (2) months, Fernandez filed a complaint
with the Regional Trial Court of Cebu for sum of money and
damages resulting from the refusal of Zenith to pay the amount
claimed. The complaint was docketed as Civil Case No. CEB-1215.
Aside from actual damages and interests, Fernandez also prayed
for moral damages in the amount of P10,000.00, exemplary
damages of P5,000.00, attorney's fees of P3,000.00 and litigation
expenses of P3,000.00.
On September 28, 1983, Zenith filed an answer alleging that it
offered to pay the claim of Fernandez pursuant to the terms and
conditions of the contract which, the private respondent rejected.
After the issues had been joined, the pre-trial was scheduled on
October 17, 1983 but the same was moved to November 4, 1983
upon petitioner's motion, allegedly to explore ways to settle the
case although at an amount lower than private respondent's
claim. On November 14, 1983, the trial court terminated the pre-
trial. Subsequently, Fernandez presented his evidence. Petitioner
Zenith, however, failed to present its evidence in view of its failure
to appear in court, without justifiable reason, on the day
scheduled for the purpose. The trial court issued an order on
August 23, 1984 submitting the case for decision without Zenith's
evidence (pp. 10-11, Rollo). Petitioner filed a petition
for certiorari with the Court of Appeals assailing the order of the
trial court submitting the case for decision without petitioner's
evidence. The petition was docketed as C.A.-G.R. No. 04644.
However, the petition was denied due course on April 29, 1986 (p.
56, Rollo).
On June 4, 1986, a decision was rendered by the trial court in
favor of private respondent Fernandez. The dispositive portion of
the trial court's decision provides:
WHEREFORE, defendant is hereby ordered to
pay to the plaintiff:
1. The amount of P3,640.00 representing the
damage incurred plus interest at the rate of
twice the prevailing interest rates;
2. The amount of P20,000.00 by way of moral
damages;
3. The amount of P20,000.00 by way of
exemplary damages;
4. The amount of P5,000.00 as attorney's fees;
5. The amount of P3,000.00 as litigation
expenses; and
6. Costs. (p. 9, Rollo)
Upon motion of Fernandez and before the expiration of the period
of the decision pending appeal. The order was assailed by
petitioner in a petition for certiorari with the Court of Appeals on
October 23, 1986 in C.A. G.R. No. 10420 but which petition was
also dismissed on December 24, 1986 (p. 69, Rollo).
On June 10, 1986, petitioner filed a notice of appeal before the
trial court. The notice of appeal was granted in the same order
granting private respondent's motion for execution pending
appeal. The appeal to respondent court assigned the following
errors:
I. The lower court erred in denying defendant
appellant to adduce evidence in its behalf.
II. The lower court erred in ordering Zenith
Insurance Corporation to pay the amount of
P3,640.00 in its decision.
III. The lower court erred in awarding moral
damages, attorneys fees and exemplary
damages, the worst is that, the court awarded
damages more than what are prayed for in the
complaint. (p. 12, Rollo)
On August 17, 1988, the Court of Appeals rendered its decision
affirming in toto the decision of the trial court. It also ruled that
the matter of the trial court's denial of Fernandez's right to adduce
evidence is a closed matter in view of its (CA) ruling in AC-G.R.
04644 wherein Zenith's petition questioning the trial court's order
submitting the case for decision without Zenith's evidence, was
dismissed.
The Motion for Reconsideration of the decision of the Court of
Appeals dated August 17, 1988 was denied on September 29,
1988, for lack of merit. Hence, the instant petition was filed by
Zenith on October 18, 1988 on the allegation that respondent
Court of Appeals' decision and resolution ran counter to
applicable decisions of this Court and that they were rendered
without or in excess of jurisdiction. The issues raised by
petitioners in this petition are:
a) The legal basis of respondent Court of
Appeals in awarding moral damages, exemplary
damages and attomey's fees in an amount more
than that prayed for in the complaint.
b) The award of actual damages of P3,460.00
instead of only P1,927.50 which was arrived at
after deducting P250.00 and P274.00 as
deductible franchise and 20% depreciation on
parts as agreed upon in the contract of
insurance.
Petitioner contends that while the complaint of private respondent
prayed for P10,000.00 moral damages, the lower court awarded
twice the amount, or P20,000.00 without factual or legal basis;
while private respondent prayed for P5,000.00 exemplary
damages, the trial court awarded P20,000.00; and while private
respondent prayed for P3,000.00 attorney's fees, the trial court
awarded P5,000.00.
The propriety of the award of moral damages, exemplary damages
and attorney's fees is the main issue raised herein by petitioner.
The award of damages in case of unreasonable delay in the
payment of insurance claims is governed by the Philippine
Insurance Code, which provides:
 Sec. 244. In case of any litigation for the
enforcement of any policy or contract of
insurance, it shall be the duty of the
Commissioner or the Court, as the case may be,
to make a finding as to whether the payment of
the claim of the insured has been unreasonably
denied or withheld; and in the affirmative case,
the insurance company shall be adjudged to
pay damages which shall consist of attomey's
fees and other expenses incurred by the insured
person by reason of such unreasonable denial
or withholding of payment plus interest of twice
the ceiling prescribed by the Monetary Board of
the amount of the claim due the insured, from
the date following the time prescribed in section
two hundred forty-two or in section two
hundred forty-three, as the case may be, until
the claim is fully satisfied; Provided, That the
failure to pay any such claim within the time
prescribed in said sections shall be
considered prima facie evidence of unreasonable
delay in payment.
It is clear that under the Insurance Code, in case of unreasonable
delay in the payment of the proceeds of an insurance policy, the
damages that may be awarded are: 1) attorney's fees; 2) other
expenses incurred by the insured person by reason of such
unreasonable denial or withholding of payment; 3) interest at
twice the ceiling prescribed by the Monetary Board of the amount
of the claim due the injured; and 4) the amount of the claim.
As regards the award of moral and exemplary damages, the rules
under the Civil Code of the Philippines shall govern.
The amount of P5,000.00 awarded as attomey's fees is justified
under the circumstances of this case considering that there were
other petitions filed and defended by private respondent in
connection with this case.
As regards the actual damages incurred by private respondent,
the amount of P3,640.00 had been established before the trial
court and affirmed by the appellate court. Respondent appellate
court correctly ruled that the deductions of P250.00 and P274.00
as deductible franchise and 20% depreciation on parts,
respectively claimed by petitioners as agreed upon in the contract,
had no basis. Respondent court ruled:
Under its second assigned error, defendant-
appellant puts forward two arguments, both of
which are entirely without merit. It is contented
that the amount recoverable under the
insurance policy defendant-appellant issued
over the car of plaintiff-appellee is subject to
deductible franchise, and . . . .
The policy (Exhibit G, pp. 4-9, Record), does not
mntion any deductible franchise, . . . (p.
13, Rollo)
Therefore, the award of moral damages is reduced to P10,000.00
and the award of exemplary damages is hereby deleted. The
awards due to private respondent Fernandez are as follows:
1) P3,640.00 as actual claim plus interest of
twice the ceiling prescribed by the Monetary
Board computed from the time of submission of
proof of loss;

"The purpose of moral damages is essentially indemnity or 2) P10,000.00 as moral damages;

reparation, not punishment or correction. Moral damages are
emphatically not intended to enrich a complainant at the expense 3) P5,000.00 as attorney's fees;
of a defendant, they are awarded only to enable the injured party
to obtain means, diversions or amusements that will serve to 4) P3,000.00 as litigation expenses; and
alleviate the moral suffering he has undergone by reason of the
defendant's culpable action." (J. Cezar S. Sangco, Philippine Law 5) Costs.
on Torts and Damages, Revised Edition, p. 539) (See also R and B
Surety & Insurance Co., Inc. v. IAC, G.R. No. 64515, June 22,
ACCORDINGLY, the appealed decision is MODIFIED as above
1984; 129 SCRA 745). While it is true that no proof of pecuniary
stated.
loss is necessary in order that moral damages may be adjudicated,
the assessment of which is left to the discretion of the court
SO ORDERED.
according to the circumstances of each case (Art. 2216, New Civil
Code), it is equally true that in awarding moral damages in case of
breach of contract, there must be a showing that the breach was
wanton and deliberately injurious or the one responsible acted
fraudently or in bad faith (Perez v. Court of Appeals, G.R. No. L-
20238, January 30,1965; 13 SCRA 137; Solis v. Salvador, G.R.
No. L-17022, August 14, 1965; 14 SCRA 887). In the instant case,
there was a finding that private respondent was given a "run-
around" for two months, which is the basis for the award of the
damages granted under the Insurance Code for unreasonable
delay in the payment of the claim. However, the act of petitioner of
delaying payment for two months cannot be considered as so
wanton or malevolent to justify an award of P20,000.00 as moral
damages, taking into consideration also the fact that the actual
damage on the car was only P3,460. In the pre-trial of the case, it
was shown that there was no total disclaimer by respondent. The
reason for petitioner's failure to indemnify private respondent
within the two-month period was that the parties could not come
to an agreement as regards the amount of the actual damage on
the car. The amount of P10,000.00 prayed for by private
respondent as moral damages is equitable.

On the other hand, exemplary or corrective damages are imposed

by way of example or correction for the public good (Art. 2229,
New Civil Code of the Philippines). In the case of Noda v. Cruz-
Arnaldo, G.R. No. 57322, June 22,1987; 151 SCRA 227,
exemplary damages were not awarded as the insurance company
had not acted in wanton, oppressive or malevolent manner. The
same is true in the case at bar.

G.R. No. 130030 June 25, 1999
EXPERTRAVEL & TOURS, INC., petitioner,  injury unjustly caused to a person. Although incapable of
vs.
THE HON. COURT OF APPEALS and RICARDO
LO, respondents.
VITUG, J.:
Petitioner, Expertravel and Tours, Inc., seeks in the instant
petition for review on certiorari a modification of the decision,
dated 20 March 1997, of the Court of Appeals affirming in toto the
07th November 1994 judgment of the Regional Trial Court (Branch
5) of Manila, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing,
judgment is rendered declaring the instant suit
DISMISSED, and hereby orders the plaintiff to
pay defendant Ricardo Lo moral damages in the
amount of P30,000.00; attorney's fees in the
amount of P10,000.00, and to pay the costs of
the suit.
No pronouncement as to other damages for lack
of evidence to warrant the same. 1
The factual and case settings of the controversy are culled from
the pleadings on record and the assailed decision of the appellate
court and that of the court a quo.
On 07 October 1987, Expertravel & Tours, Inc., ("Expertravel"), a
domestic corporation engaged in the travel agency business,
issued to private respondent Ricardo Lo four round-trip plane
tickets for Hongkong, together with hotel accommodations and
transfers, for a total cost of P39,677.20. Alleging that Lo had failed
to pay the amount due, Expertravel caused several demands to be
made. Since the demands were ignored by Lo, Expertravel filed a
court complaint for recovery of the amount claimed plus damages.
Respondent Lo explained, in his answer, that his account with
Expertravel had already been fully paid. The outstanding account
was remitted to Expertravel through its then Chairperson, Ms. Ma.
Rocio de Vega, who was theretofore authorized to deal with the
clients of Expertravel. The payment was evidenced by a Monte de
Piedad Check No. 291559, dated 06 October 1987, for P42,175.20
for which Ms. de Vega, in turn, issued City Trust Check No.
417920 in favor of Expertravel for the amount of P50,000.00, with
the notation "placement advance for Ricardo Lo, etc." Per its own
invoice, Expertravel received the sum on 10 October 1987.
The trial court, affirmed by the appellate court, held that the
payment made by Lo was valid and bidding on petitioner
Expertravel. Even on the assumption that Ms. de Vera had not
been specifically authorized by Expertravel, both courts said, the
fact that the amount "delivered to the latter remain(ed) in its
possession up to the present, mean(t) that the amount redounded
to the benefit of petitioner Expertravel, in view of the second
paragraph of Article 1241 of the Civil Code to the effect that
payment made to a third person shall also be valid in so far as it
has rebounded to the benefit of the creditor."
In this recourse, petitioner confines itself to the following related
legal issues; viz.:
I. Can moral damages be recovered in a clearly
unfounded suit?
II. Can moral damages be awarded for
negligence or quasi-delict that did not result to
physical injury to the offended party? 2
There is merit in the petition.
Moral damages are not punitive in nature but are designed to
compensate3 and alleviate in some way the physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
pecuniary computation, moral damages, nevertheless, must
somehow be proportional to and in approximation of the suffering
inflicted.4 Such damages, to be recoverable, must be the proximate
result of a wrongful act or omission the factual basis for which is
satisfactorily established by the aggrieved party. 5 An award of
moral damages would require certain conditions to be met; to wit:
(1) First, there must be an injury, whether physical, mental or
psychological, clearly sustained by the claimant; (2) second, there
must be a culpable act or omission factually established; (3) third,
the wrongful act or omission of the defendant is the proximate
cause of the injury sustained by the claimant; and (4) fourth, the
award of damages is predicated on any of the cases stated in
Article 2219.6 Under the provisions of this law, in culpa
contractual or breach of contract, moral damages may be
recovered when the defendant acted in bad faith or was guilty of
gross negligence (amounting to bad faith) or in wanton disregard
of his contractual obligation and, exceptionally, when the act of
breach of contract itself is constitutive of tort resulting in physical
injuries.7 By special rule in Article 1764, in relation to Article
2206, of the Civil Code, moral damages may also be awarded in
case the death of a passenger results from a breach of carriage.
In culpa aquiliana, or quasi-delict, (a) when an act or omission
causes physical injuries, or (b) where the defendant is guilty of
intentional tort,8 moral damages may aptly be recovered. This rule
also applies, as aforestated, to contracts when breached by tort.
In culpa criminal, moral damages could be lawfully due when the
accused is found guilty of physical injuries, lascivious acts,
adultery or concubinage, illegal or arbitrary detention, illegal
arrest, illegal search, or defamation. Malicious prosecution can
also give rise to a claim for moral damages. The term "analogous
cases," referred to in Article 2219, following the ejusdem
generis rule, must be held similar to those expressly enumerated
by the law. 9
Although the institution of a clearly unfounded civil suit can at
times be a legal justification for an award of attorney's
fees, 10 such filing, however, has almost invariably been held not
to be a ground for an award of moral
damages. 11 The rationale for the rule is that the law could not
have meant to impose a penalty on the right to litigate. The
anguish suffered by a person for having been made a defendant in
a civil suit would be no different from the usual worry and anxiety
suffered by anyone who is haled to court, a situation that cannot
by itself be a cogent reason for the award of moral damages. 12 If
the rule were otherwise, then moral damages must every time be
awarded in favor of the prevailing defendant against an
unsuccessful plaintiff.13
The Court confirms, once again, the foregoing rules.
WHEREFORE, the petition is GRANTED and the award of moral
damages to respondent Ricardo Lo under the assailed decision is
DELETED. In its other aspects, the appealed decision shall remain
undisturbed. No costs.1âwphi1.nêt
SO ORDERED.

G.R. No. L-28999 May 24, 1977
COMPAÑIA MARITIMA, plaintiff-appellee,  Upon the expiration of the one-month period, the said contract
vs.
ALLIED FREE WORKERS UNION, SALVADOR T. LLUCH,
MARIANO LL. BADELLES, individually and in their capacities
as President and Vice-President, respectively of the Allied
Free Workers Union, NICANOR HALEBAS and LAURENTINO
LL. BADELLES, individually and officers of Allied Free
Workers Union, defendants-appellants.
AQUINO, J.:
Antecedents. - Since the onset in 1954 of litigation between the
parties herein, this is the fifth case between them that has been
elevated to this Court. The incidents preceding the instant appeal
are as follows:
On August 11, 1952 the Compañia Maritima and the Allied Free
Workers Union entered into a written contract whereby the union
agreed to perform arrastre and stevedoring work for the
consignees. vessels at Iligan City. The contract was to be effective
for one month counted from August 12, 1952.
It was stipulated that the company could revoke the contract
before the expiration of the term if the union failed to render
proper service. The contract could be renewed by agreement of the
parties (Exh. J).
At the time the contract was entered into, the union had just been
organized. Its primordial desire was to find work for its members.
The union agreed to the stipulation that the company
would not be liable for the payment of the services of the union
"for the loading, unloading and deliveries of cargoes" and that the
compensation for such services would be paid "by the owners and
consigness of the cargoes" as "has been the practice in the port of
Iligan City" (Par. 2 of Exh. J).
The union found out later that that stipulation was oppressive and
that the company was unduly favored by that arrangement.
Under the contract, the work of the union consisted of arrastre
and stevedoring service. Arrastre, a Spanish word which refers to
hauling of cargo, comprehends the handling of cargo on the wharf
or between the establishment of the consignee or shipper and the
ship's tackle. The service is usually performed by longshoremen.
On the other hand, stevedoring refers to the handling of the cargo
in the holds of the vessel or between the ship's tackle and the
holds of the vessel.
The shippers and consignees paid the union oth for the arrastre
work. They refused to pay for the stevedoring service. They
claimed that the shipowner was the one obligated to pay for the
stevedoring service because the bill of lading provided that the
unloading of the cargo was at the shipowner's expense (Exh. 1).
On the other hand, the company refused to pay for the stevedoring
service because the contract (Exh. J) explicitly provided that the
compensation for both arrastre and stevedoring work should be
paid by the shippers and consignees, as was the alleged practice
in Iligan City, and that the shipowner would not be liable for the
payment of such services.
Thus, the issue of whether the company should pay for the
stevedoring service became a sore point of contention between the
parties. The union members labored under the impression that
they were not being compensated for their stevedoring service as
distinguished from arrastre service.
Although the arrastre and stevedoring contract (Exh. J) was
disadvantageous to the union, it did not terminate the contract
because its members were in dire need of work and work, which
was not adequately compensated, was preferable to having no
work at all (204, 214-5, 226-7 tsn May 20, 1960).
was verbally renewed. The company allowed the union to continue
performing arrastre and stevedoring work.
On July 23, 1954 the union sent a letter to the company
requesting that it be recognized as the exclusive bargaining unit to
load and unload the cargo of its vessels at Iligan City. The
company ignored that demand. So, the union filed on August 6,
1954 in the Court of Industrial Relations (CIR) a petition praying
that it be certified as the sole collective bargaining unit.
Despite that certification case, the company on August 24, 1954
served a written notice on the union that, in accordance with
payment of the 1952 contract, the same would be terminated on
August 31, 1954. Because of that notice, the union on August 26,
1954 filed in the CIR charges of unfair labor practice against the
company.
On August 31, 1954 the company entered into a new stevedoring
and arrastre contract with the Iligan Stevedoring Association. On
the following day, September 1, the union members picketed the
wharf and prevented the Iligan Stevedoring Association from
performing arrastre and stevedoring work. The picket lasted for
nine days.
On September 8, 1954 the company sued the union and its
officers in the Court of First Instance of Lanao for the rescission of
the aforementioned 1952 contract, to enjoin the union from
interfering with the loading and unloading of the cargo, and for
the recovery of damages.
On the following day, September 9, the lower court issued ex
parte a writ of preliminary injunction after the company had
posted a bond in the sum of P20,000. A few hours lateron that
same day the union was allowed to file a counterbond. The
injunction was lifted. The union members resumed their arrastre
and stevedoring work.
Later, the union assailed in a prohibition action in this Court the
jurisdiction of the trial court to entertain the action for damages,
and injunction.
A majority of this Court held that the lower court had jurisdiction
to issue the injunction and to take cognizance of the damage suit
filed by the company but that the injunction was void because it
was issued ex parte and the procedure laid down in section 9(d)
of Republic Act No. 875 was not followed by the trial court (Allied
Free Workers Union vs. Judge Apostol, 102 Phil. 292, 298).
After trial, the lower court rendered a decision dated December 5,
1960, amended on January 11, 1961, (1) declaring the arrastre
and stevedoring contract terminated on August $1, 1954; (2)
dismissing the union's counterclaim; (3) ordering the union and
its officers to pay solidarily to the company P520,000 as damages,
with six percent interest per annum from September 9, 1954,
when the complaint. was filed; (4) permanently enjoining the
union from performing any arrastre and stevedoring work for the
company at Iligan City, and (5) requiring the union to post a
supersedeas bond in the sum of P520,000 to stay execution.
The union filed a motion for reconsideration. On the other hand,
the company filed a motion for the execution pending appeal of the
money judgment. It filed another motion for the immediate
issuance of a writ of injunction. That second motion was filed in
the municipal court of Iligan City in view of the absence of the
District Judge.
The municipal court issued the writ of injunction. However, this
Court set it aside because it was not an interlocutory order and no
special reasons were adduced to justify its issuance (Allied Free
Workers Union vs. Judge Estipona, 113 Phil. 748).
The union on January 6, 1961 had perfected an appeal from the
lower court's original decision. It did not appeal from the amended
decision. On March 24, 1962 the lower court issued an order
declaring its amended decision final and executory in view of the
union's failure to appeal therefrom. The court directed the clerk of
court to issue a writ of execution. That order was assailed by the
union in a certiorari action filed in this Court. A preliminary
injunction was issued by this Court to restrain the execution of
the judgment.
On May 16, 1962 this Court dissolved the injunction at the
instance of the company which had filed a counterbond.
Thereupon, the 225 members of the union yielded their ten-year
old jobs to the new set of workers contracted by the company.
The certiorari incident was decided on June 30, 1966. This Court
noted that the lower court amended its decision for the purpose of
correcting certain errors and omissions which were not
substantial in character and that its amended decision was served
upon the parties after the union had perfected its appeal from the
original decision.
Under those circumstances, this Court held that the union's
appeal should be given due coarse, subject to the amendment of
its record on appeal. This Court reserved to the members of the
union the right to secure restitution under sections 2 and 5, Rule
39 of the Rules of Court (Allied Free Workers Union vs. Estipona,
L-19651, June 30, 1966,17 SCRA 513, 64 O.G. 2701).
Pursuant to that reservation, the union on December 16, 1966
filed a motion for restitution, praying that its 225 members be
restored to their jobs and that the company be ordered to pay P
1,620,000 as damages, consisting of the lost earnings during the
four-years period from May 8, 1962 to May 8, 1966.
On the other hand, the company in its motion of January 18,
1967 reiterated its 1960 motion for the execution of the lower
court's judgment as to the damages, of P520,000 and the
permanent injunction.
Later, the company called the lower court's attention to this
Court's decision dated January 31, 1967. In that decision, this
Court affirmed the CIR's decision holding that the company did
not commit any unfair labor practice and reversed the CIR's
directive that a certification election be held to determine whether
the union should be the exonemtod bargaining unit. This Court
held that the union could not act as a collective bargaining unit
because the union was an independent contractor and its
members were not employees of the company (Allied Free Workers
Union vs. Compañia Maritima, L-22951-2 and L-22971, 19 SCRA
258).
The lower court in its order of April 25, 1967 (1) denied the
union's motion for restitution and to stay execution of its amended
decision on January 11, 1961 and (2) required the union to file a
supersedeas bond in the sum of P100,000 within thirty days from
notice. The bond was reduced to P50,000 in the lower court's
order of August 16, 1967. The union posted the bond on August
24,1967.
The lower court approved the union's amended record on appeal
in its order of October 6, 1967.
The union appealed directly to this Court because the amount
involved exceeds P200,000. The appeal was perfected before
Republic Act No. 5440 took effect on September 9,1968.
Other proceedings. - The company in its original complaint prayed
that the union and its officials be ordered to pay actual damages,
amounting to P15,000 for the union's failure to load and unload
cargo in and from the consignees. vessels from September 1 to 8,
1954; P50,000 as damages, due to the union's inefficiency in
performing arrastre and stevedoring work "during the latter part of
the existence" of the contract; P50,000 as moral and exemplary
damages, (not supported by any allegation in the body of the
complaint) and P5,000 as attorney's Considering (10-12, Record
on Appeal).
On September 15, 1954 the company added a fourth cause
ofaction to its complaint. It alleged that by reason of the acts of
harassment and obstruction perpetrated by the union in the
loading and unloading ofcargo the company suffered additional
damage in the form of lost and unrealized freight and passenger
charges in the amount of P10,000 for September 9 and 10, 1954
(66, Record on Appeal).
On November 2, 1954 the company attached to its motion for the
revival of the injunction against the union an auditor's report
dated September 15, 1954 wherein it was indicated that the
company lost freight revenues amounting to P178,579.20 during
the period from January 1 to September 7, 1954 (121-143, Record
on Appeal).
On November 27, 1954 the company filed another motion for the
restoration of the injunction. In support of that motion the
company attached a trip operation report showing the unloaded
cargoes on the consignees. vessels, when they docked at Iligan
City on September 14, 19, 22 and 26 and October 3 and 5, 1954,
as well as the delays in their departure (157-162, Record on
Appeal).
On March 5, 1955 the company added a fifth cause ofaction too
its complaint. It alleged that during the period from September 12
to December 28, 1954 it lost freight charges on unloaded cargoes
in the sum of P62,680.12, as shown in a detailed statement, and
that it incurred an estimated amount of P20,000 for overhead
expenses. for the delay in the dismissal of its vessels attributable
to the union's unsatisfactory stevedoring and arrastre work (225-
229, 237-8, Record on Appeal).
Also on March 5, 1955 the union answered the original and
supplemental complaints. It denied that its members had
rendered inefficient service. It averred that the termination of the
contract was prompted by the consignees. desire to give the work
to the Iligan Stevedoring Association which the company had
allegedly organized and subsidized. The union filed a counterclaim
for P200,000 as compensation for its services to the company and
P500,000 as other damages, (239-252, Record on Appeal).
On March 9, 1960 the company filed a third supplemental
complaint, It alleged that the continuation of the stevedoring and
arrastre work by the union for the company from 1955 to date had
caused losses to the company at the rate of P25,000 annually in
the form of lost freight on shutout cargoes and the expenses. for
the equipment used to assist the union members in performing
their work (320-3, Record on Appeal).
Plaintiff company's evidence. - Jose C. Teves, the consignees.
branch manager at Iligan City, testified that on August 24, 1954
he terminated the arrastre and stevedoring contract with the
union (Exh. J) upon instruction of the head office. The contract
was terminated in order to avoid further losses to the company
caused by the union's inefficient service (85-86 tsn March 11,
1960).
After the termination of the contract, the members of the union
allegedly harassed the company with the help of goons. The
cargoes could not be unloaded in spite of the fact that the
company had sought the protection of the law-enforcing
authorities (88). The consignees. last recourse was to go to court.
(89).
The company supposedly suffered losses as a result of the union's
inefficient service since September 1, 1954 (91). Teves hired
auditors to ascertain the losses suffered by the company during
the period from January 1 to September 11, 1954.
The trial court awarded actual damages, amounting to P450,000
on the basis of the auditor's reports, Exhibits A to I. It did not
carefully examine the said exhibits. Contrary to the trial court's
impression, Exhibits B, C and D are not auditors' reports.
The trial court did not bother to make a breakdown of the alleged
damages, totalling P450,000. The reports of the two hired
accountants, Demetrio S. Jayme and M. J. Siojo, show the
following alleged damages, in the aggregate amount of
P349,245.37 (not P412,663.17, as erroneously added by the
consignees. counsel, 161,163-4 tsn March 11, 1960):
TABULATION OF ALLEGED
DAMAGES CLAIMED BY COMPAÑIA MARITIMA
(1) Freight for 74,751 bags of fertilizer
allegedly booked for shipment in the
company's vessels but loaded in other vessels
during the period from Jan. 1 to August 31,
1954, Statement A in Exh. A, CPA Jayme's
report.........................................................
(2) Lost freight on other shutout cargoes
for January 1 to August 31, 1954, Statement A
in Exh. A, of CPA Jayme .........................
(3) Lost freight on shutout cargoes for
September 2 to 7, 1954 booked for shipment in
M. V. Mindoro, Panay and Masterhead Knot,
Statement B in Exh. A, CPA Jayme's report...
(4) Losses sustained in voyages of M.V.
Panay and Mindoro in four voyages from
September 4 to 11, 1954, with estimates,
Statement B, Exh. A...............................
(5) Other estimated losses for the said
voyages of M.V. Panay and Mindoro for the
same period, based on interviews of parties at
the wharf, Statement B, Exh. A...............
(6) Additional subsistence expenses. for the
M.V. Mindoro and Panay due to the delays in
their dismissal from January 1 to August 31,
1954 as certified by the pursers of the two
vessels, Statement C, Exh. A.....................
(7) Estimated loss in freight and passenger
revenue for the period from January 1 to
August 31, 1954, based on 1953 freight revenue
for the same period Statement D, Exh. A.....
(8) Estimated loss in passenger fares for
the period from September to December 31,
1954, Statement D, Exh. A.......................
(9) Lost freight charges from September
12 to December 28, 1954, as certified by the
chief clerk of the consignees. Iligan office. Exh.
B.............................................................
(10) Estimated overhead expenses for
delay of vessels in port, Exh. B.................
(11) Forklift operating expenses. for 1955,
consisting of salaries and maintenance
expenses, Exh. E- 1....................................
(12) Lost freight revenue for 1955, Exh. E-
2...............................................................
(13) Forklift operating expenses. for 1956,
Exh. F- 1...................................................
(14) Lost freight revenue for 1956, Exh. F-2
(15) Forklift operating expenses. for 1957,
Exh. G- 1...................................................
(16) Lost freight revenue for 1957, Exh. G-
2....................................................................
(17) Forklift operating expenses. for 1958,
Exh. H-1...................................................
(18) Lost freight revenue for 1958, Exh. H-
2.............................................................
(19) Forklift operating expenses. for 1959,
Exh. I-1....................................................
(20) Lost freight revenue for 1959, Exh. I-2 7,959.83
T OT A L - P349,245.3
7
We tabulated the alleged damages, to show that the trial court's
award to the company of P450,000 as damages, is not supported
by the evidence. On the other hand, the statement of the
consignees. counsel that the damages, totalled P412,663.17 (162-
164 tsn March 11, 1960) is wrong.
Teves, the consignees. branch manager, submitted a statement
(Exh. K) showing the alleged cost of three forklifts, 200 pieces of
pallet boards, 530 pieces of wire rope slings and two pieces of
tarpaulins in the total sum of P27,215. In that statement, he
claims that the damages, to the company by reason of the
depreciation of the said items of equipment amounted to P38,835
or more than the cost thereof.
 
  The company's counsel, in his summary of the damages, ignored
  the alleged damages, of P38,835 indicated by Teves in Exhibit K.
  The consignees. counsel relied oth on the auditors' reports,
  Exhibits A and E to I and on Exhibit B, the chief clerk's statement.
P29,900.40 As already noted, those documents show that the total damages,
  claimed by the company amounted to P349,245.37.
 
4,339.64 The best evidence on the cost of the said equipment would have
been the sales invoices instead of the oral testimony of Teves. He
 
did not produce the sales invoices.
 
 
Teves further testified that Salvador T. Lluch was the president of
6,167.16
the union; Nicanor Halibas, the treasurer; Mariano Badelles, the
  general manager, and Luarentino Badelles, a vice president.
 
  Appellants' statement of facts. - To sustain their appeal, the
3,764.50 appellants made the following exceedingly short and deficient
  recital of the facts:
 
  Sometime in the month of August, 1954,
10,000.00 defendant, Allied Free Workers Union filed an
  unfair labor practice case against defendant
  (should be plaintiff) and its branch manager,
  Mr. Jose Teves, with the Court of Industrial
  Relations, Manila, and docketed as Case No.
4,407.50 426-UPL: defendant union also filed a petition
  for certification election docketed as Case No,
  175-MC against plaintiff; defendant union also
  filed a notice of strike dated August 27, 1954;
100,000.00 the Secretary of Labor wired the public
  defender, Iligan City, on August 27, 1954 (see
  annexes 1-4, motion to dismiss, Record on
Appeal, pp. 54-65).
20,000.00
 
To counteract these legitimate moves of labor,
 
plaintiff filed the complaint docketed as Civil
 
Case No. 577 in the Court of First Instance of
62,680.12 Lanao (now Lanao del Norte) for damages,
  and/or resolution of contract with writ of
20,000.00 preliminary injunction, On a decision adverse to
  their interests, defendants take this appeal.
 
5,677.54 On the question of jurisdiction taken before this
  Honorable Tribunal in G.R. No. L-8876, it was
17,838.78 held:
 
3,520.90 ... for the instant case merely refers to the
3,849.56 recovery of damages, occasioned by the
  picketing undertaken by the members of the
8,259.08 union and the rescission of the arrastre and
  stevedoring contract previously entered into
14,538.10 between the parties.
 
7,503.45 The appellants did not discuss their oral and documentary
  evidence. *
10,193.46
  First assignment of error. - The appellants contend that the trial
court erred in awarding to the company actual damages,
8,745.35
amounting to P450,000, moral damages, of P50,000 and
attorney's Considering of P20,000, and in holding that the four
officers of the union are solidarily liable for the said damages.
Appellants' counsel assailed the award of actual damages, on the
ground that the auditors' reports, on which they were based, were
hearsay.
After analyzing the nature of the damages, awarded, how the same
were computed, and the trustworthiness of the company's
evidence, we find the first assignment of error meritorious.
We have already stress that, on the basis of the reports of the two
accountants, the damages, claimed by the complaint as a matter
of simple addition, does not reach the sum of P 450,000 fixed by
the trial court. The damages, shown in the accountants' reports
and in the statement made by the consignees. chief clerk (who did
not testify) amount to P349,245.37, or much less than P450,000.
The company argues that the accountants' reports are admissible
in evidence because of the rule that "when the original consists of
numerous accounts or other documents which cannot be
examined in court without great loss-of time and the fact sought
to be established from them is oth the general result of the whole",
the original writings need not be produced (Sec. 2[e], Rule 130,
Rules of Court).
That rule cannot be applied in this case because the voluminous
character of the records, on which the accountants' reports were
based, was not duly established (U. S. vs. Razon and Tayag, 37
Phil. 856, 861; 29 Am Jur 2nd 529).
It is also a requisite for the application of the rule that the records
and accounts should be made accessible to the adverse party so
that the company, of the summary may be tested on cross-
examination (29 Am Jur 2nd 517-8; 32A C.J.S. 111).
What applies to this case is the general rule "that an audit made
by, or the testimony of, a private auditor, is inadmissible in
evidence as proof of the original records, books of accounts,
reports or the like" (Anno 52 ALR 1266).
That general rule cannot be relaxed in this case because the
company failed to make a preliminary showing as to the difficulty
or impossibility attending the production of the records in court
and their examination and analysis as evidence by the court (29
Am Jur 2nd 529).
A close scrutiny of the accountants' reports reveals their lack of
probative value. The propriety of allowing the different items of
damages, is discussed below.
Unrealized freight and passenger revenue for 1954 ascertained by
Accountant Demetrio S. Jayme. - In his report (Exh. A, pp. 134 to
147, Record on Appeal), Jayme used the pronouns "we" and "our"
and made reference to the examination made by the "auditors"
and his accounting office.
He did not disclose the names of other "auditors" who assisted
him in making the examination of the consignees. records.
He gave the impression that he was an independent accountant
hired by the company to make a "special investigation" of the
consignees. losses for the period from January 1 to September 7,
1954.
The truth is that Jayme was a "personal friend" of Teves, the
consignees. branch manager at Iligan City. Teves was the
consignees. principal witness in this case. He verified the
complaint. herein. He signed for the company the stevedoring and
arrastre contract which he later rescinded. In fact, Teves
intervened in the drafting of the contract. It was his Idea that the
company should not pay the arrastre and stevedoring Considering
and that those charges should be borne by the shippers and
consignees.
Jayme was not only the friend of Teves but was also his co-
employee. Jayme was the consignees. branch manager at Ozamis
City and later at Cagayan de Oro City (217-8 tsn May 20, 1960;
Exh. 12). He suppressed that fact in his report of examination.
Apparently, the practice of accounting was his sideline or he
practised accounting and, as the saying goes, he moonlighted as
the consignees. branch manager. Obviously, Jayme would be
biased for the company. He violated a rule of the accountants'
code of ethics by not disclosing in his report of examination that
he was an employee of the company (84 tsn June 2, 1960).
Accountant Jayme allegedly found from the consignees. records at
Iligan City that its freight and passenger revenue for the eight-
month period from January 1 to August 31, 1953 amounted to
P373,333.14 and that for the same period in 1954, that revenue
amounted to P470,716.29, or an increase of P97,383.12
(Statement D of Exh. A, 145, Record on Appeal).
Jayme interpreted those figures as signifying that the company
would have realized more revenue if the union had rendered better
service. He reasoned out that there was a big volume of business
in Iligan City due to the Maria Cristina Fertilizer Plant, Iligan Steel
Mill and NPC Hydroelectric Plant. He imagined that the
consignees. freight revenue during the first eight months of 1954
could have amounted to at least P600,000 and that since it
actually realized oth P 470,716.29, its loss of freight revenue for
that period could be "conservatively" estimated at least P100,000
(item 7 of the tabulation of damages).
He stated that he attached to his report on the comparative
statement of gross revenue a certificate of the captain of the vessel
Panay showing the delays in its dismissal in Iligan City as
indicated in its logbook. No such document was attached to
Jayme's report.
And from the fact that the total fares received by the company
during the eight-month period were reduced in the sum of
P3,951.58 (Jayme fixed the reduction at the round figure of
P4,000), he calculated that the company suffered a loss of at least
P20,000 in passenger revenue up to December 31, 1954 (Item 8 of
the tabulation of damages).
Jayme also included in his report (a) damages, amounting to
P10,000 as his estimate of losses supposedly "based on interviews
with disinterested parties at the wharf and city proper customers";
(b) damages, amounting to P3,764.50 allegedly suffered in the
operation of the vessels Mindoro and Panay from September 4 to
11, 1954, consisting of extra meals, expenses. for unloading cargo,
estimated loss in passage revenue for four voyages, and estimated
loss from 14 re-routed freights to competing vessels" (consisting of
rice, corn and bananas), and (e) the sum of P4,407.50 as alleged
additional subsistence incurred for the crew of
the Panay and Mindoro from January 1 to August 31, 1954 (items
4, 5 and 6 of the tabulation of damages). The records of the purser
and chief steward were allegedly examined in ascertaining those
damages.
It would not be proper to allow Jayme's estimates as recoverable
damages. They are not supported by reliable evidence. They can
hardly be sanctioned by the "generally accepted auditing
standards" alluded to in Jayme's report. The pertinent records of
the company should have been produced in court. The purser and
steward did not testify.
The rule is that the auditor's summary should not include his
conclusions or inferences (29 Am Jur 2d 519). His opinion is not
evidence.
The trial court unreservedly gave credence to the conjectures of
Jayme. Obviously, his inflated guesses are inherently speculative
and devoid of probative value. Furthermore, his estimate of the
unrealized freight revenue for January 1 to August 31, 1954
overlapped with his computation of the lost freight for the
unloaded 74,751 bags of fertilizer and other cargoes covering the
same period (Statement A of Exh. A).
The foregoing discussion shows Jayme's unreliable modus
operandi in ascertaining the 1954 losses which the company
claimed to have suffered in consequence of the union's alleged
inefficiency or poor service. It is noteworthy that those losses were
not averred with particularity and certitude in the consignees.
complaint.
The same observations apply with equal cogency to the damages,
amounting to P40,407.20 as lost freight revenue also for the year
1954 (items 1 to 3 of the tabulation of damages) which were
computed by Accountant Jayme.
Those items refer to (1) the sum of P29,900.40 as lost freight
revenue on 74,751 bags of fertilizer, already mentioned, which
were booked for shipment in the consignees. vessels from January
1 to August 31, 1954 but which were allegedly loaded in other
vessels; (2) P4,339.64 as unrealized freight revenue for other
cargoes booked in the consignees. vessels but not loaded therein
during the same eight-month period, and (3) P6,167,16 as
unrealized freight revenue on shutout cargoes not loaded in the
consignees. vessels during the six-day period from September 2 to
7, 1954.
Jayme allegedly based his computations on the records of the
company which were not produced in court. The union objected to
Jayme's report as inadmissible under the hearsay rule or as not
being the best evidence.
Even if the presentation of the records themselves as exhibits
should have been dispensed with, yet the complaint to show good
faith and fair dealing, could have brought the records in court
(manifests, bills of lading, receipts for the freights, if any, etc.) and
enabled the court and the union's counsel and its expert
accountant to verify the accuracy of Jayme's summaries.
Photostatic copies of some manifests and bills of lading proving
that the company was not able to collect the stipulated freight on
the alleged shutout cargoes should have been proforma. in
evidence as supporting papers for Jayme's report. No such
exhibits were presented.
The flaw or error in relying merely on Jayme's summaries is that,
as pointed out by witness Mariano LL. Badelles, cargoes might be
shutout due to causes other than the supposed inefficiency of the
union. He testified that cargoes were shutout deliberately by the
company because they could not be loaded in one vessel (for
example, 50,000 bags of fertilizer), or a shipper had no allotment,
or because the company did not want to load cargoes like bananas
(189-194 tsn May 20, 1960). Jayme's summaries did not take into
account the probability that a part of the cargo booked in the
consignees. vessel for a certain date might not have been loaded
on that date but was loaded in another vessel of the company
which docked at the port a few days later, In that case, there
would be no loss of freight revenue. The mere shutting out of
cargo in a particular voyage did not ipso facto produce loss of
freight revenue.
Our conclusion is that an injustice would be perpetrated if the
damages, aggregating P178,579 computed and estimated in the
report of Jayme, a biased witness, should be accepted at their face
value.
Damages computed by Salvador M. Magante. - The company also
claims as damages, for the period from September 12 to December
28, 1954 lost freight charges on shutout cargoes in the sum of
P62,680.12, and the sum of P20,000 as "overhead expenses. for
delay of vessels in port", as set forth by Salvador M. Magante, the
consignees. chief clerk at Iligan City, in his statement, Exhibit B
(items 9 and 10 of the tabulation of damages).
Magante did not testify on his statement. Instead, accountant
Jayme, substituting for Magante, testified on that statement.
Jayme said that he verified the consignees. records on which
Magante based his statement. Jayme assured the court that the
figures in Magante's statement were supported by the consignees.
records.
But as to the damages, of P20,000, Jayme said that he could not
certify as to their company, because he had not finished his
investigation (33 tsn March 9, 1955). In spite of that admission,
the trial court allowed that item of damages.
The trial court erred in allowing the damages, totalling P82,680.12
because Magante's statement, Exhibit B, is hearsay. Magante
should have been proforma. as a witness. Jayme was not
competent to take his place since the statement was prepared by
Magante, not by Jayme. More appropriate still, the documents and
records on which the statement was based should have been
proforma. as evidence or at least brought to the court for
examination by the union's counsel and its accountant. The trial
court required the production of the manifests supporting
Magante's statement (85-86 tsn march 9, 1955). Only one such
manifest, Exhibit C, was produced. The nonproduction of the
other records was not explained.
Lost freight revenue and operating expenses for the forklifts. - The
company claimed as damages, the sum of P87,986.05
(P151,403.85 as erroneously computed by the consignees.
counsel, 163 tsn March 11, 1950) consisting of supposed
unrealized freight charges for shutout or unloaded cargoes for the
year 1955 to 1959 (Exh. E to I, Items 11 to 20 of the tabulation of
damages).
The claim is covered by the company's third supplemental
complaint dated March 9, 1960 wherein it was alleged that due to
the acts of the union and its officers the company had suffered
damages, of not less than P25,000 annually since 1955 (320-3,
Record on Appeal). That supplemental complaint was hurriedly
filed during the trial as directed by the trial court.
The said damages, were computed in the reports of Miguel J.
Siojo, an accountant who, for two days and nights, March 8 to 10,
1960, or shortly before and during the trial, allegedly examined
the consignees. record at Iligan City, such as its cash book, cash
vouchers, reports to the head office, shipping manifests, and
liquidation reports. Those records were not produced in court.
Their nonproduction was not explained. If the accountant was
able to summarize the contents of those records in two days, they
could not have been very voluminous. They should have been
offered in evidence.
The alleged expenses. in the operation of the forklifts consisted of
(a) the wates of the operators hired by the company and (b) the
cost of gasoline and oil and expenses. for repair.
The company's theory is that under the 1952 contract (Exh. J) the
union was obligated to provide for forklifts in the loading and
unloading of cargo. Inasmuch as the union allegedly did not have
forklifts, the complaint to expedite the arrastre and stevedoring
work, purchase forklifts, hired laborers to operate the same, and
paid for the maintenance expenses. The company treated those
expenses as losses or damages.
Those alleged damages, amounting to P87,986.05 are in the same
category as the depreciation allowances amounting to P38,835
which the company claimed for the forklifts, pallet boards,
tarpaulins and wire rope slings that it purchased for oth P27,215,
We have stated that the consignees. counsel ignored that
depreciation in his recapitulation of the damages, claimed by the
plaintiff.
The union contends that Siojo's reports (Exh. E to I) were
inadmissible evidence because they were hearsay, meaning that
the original documents, on which the reports were based, were not
presented in evidence and, therefore, appellants' counsel and the
court itself were not able to gauge the correctness of the figures or
data contained in the said reports. The person who had personal
knowledge of the operating expenses. was not examined in court.
We are of the opinion that, to avoid fraud or fabrication, the
documents evidencing the alleged expenses. should have been
proforma. in evidence. Siojo's reports were not the best evidence
on the said operating expenses. The explanation of Badelles with
respect to shutout cargoes and our observations on Jayme's
summaries are applicable to accountant Siojo's reports.
A more substantial ground for rejecting Siojo's reports is that the
said expenses, if really incurred, cannot be properly treated as
darn ages to the company.
The union's witness, Mariano LI. Badelles, testified that the
consignees. forklifts were not used exclusively on the wharf. They
were used in the fertilizer and carbide plants. Sometimes, the
union supplied the driver and the gasoline for the operation of the
forklifts (174-177 tsn May 20, 1960).
Moreover, as stated earlier, the company was not paying the union
a single centavo for arrastre and stevedoring work. The shippers
and consignees paid for the arrastre service rendered by the
union. The union did not receive any compensation for stevedoring
work.
The company complained that the union had been rendering
unsatisfactory arrastre and stevedoring services. That grievance
was controverted by the union.
The use of the forklifts, tarpaulins pallet boards and wire rope
slings immeasurably benefitted the company. It is not proper nor
just that the consignees. investment in those pieces of equipment
should be considered damages, just because it was able to bind
the union to a one-sided contract which exempted it from the
payment of arrastre and stevedoring Considering and which
impliedly obligated the union to purchase the said equipment.
If the service rendered by the union members was unsatisfactory,
it must be because the poor stevedores were underfed and
underpaid. They were underfed and underpaid because the
company was astute enough to insure that it would obtain
stevedoring service without paying for it.
If to improve the arrastre and stevedoring service, the company
had to incur expenses. for the purchase of forklifts, pallet boards,
tarpaulins and wire rope slings and for the operation of the
forklifts, the union should not be required to reimburse the
company for those expenses. The company should bear those
expenses. because the same redounded to its benefit.
The trial court erred in ordering the union and its officials to pay
the amount of the said expenses. as damages, to the company.
Moral damages and attorney's fees. - Considering that the
consignees. claim for moral damages, was based on the same facts
on which it predicated its claim for actual deduction which we
have found to be groundless, it follows that the company, a
juridical person, is not entitled to moral damages.
Anyway, the company did not plead and prove moral damages. It
merely claimed moral damages, in the prayer of its complaint.
That is not sufficient (Darang vs. Ty Belizar, L-19487, January 31,
1967, 19 SCRA 214, 222).
Under the facts of this case, we do not find any justification for
awarding attorney's Considering to the company. Hence, the trial
court's award of P20,000 as attorney's Considering is set aside.
Appellants' first assignment of error, although not properly argued
by their counsel, should be sustained.
Other assignments of error. - The union and its officers contend
that the lower court erred in dismissing their counterclaims. Their
counsel did not even bother to state in their brief the amount of
the counterclaims.
The union filed counterclaims for P200,000 as compensation for
stevedoring services from August, 1952 to March 4, 1955;
P500,000 as deduction P10,000 as attorney's Considering and
P5,000 as premium on the counterbond (251-2, Record on
Appeal). In their supplemental counterclaim, they demanded
P500,000 as stevedoring charges for the period from March 4,
1955 to March 4, 1960 and additional damages, of P10,000 (308-
10, Record on Appeal). The trial court dismissed the said
counterclaims.
The appellants in their three-sentence argument in support of
their counterclaims alleged that the company's bill of lading
provided that the unloading of the cargoes was at the consignees.
expense (Exh. 1); that the company had not paid the sum of
P500,000 as compensation for the stevedoring services rendered
by the laborers up to 1960, and that the stipulation in the arrastre
contract, "that the Compañia Maritima shall not be liable for the
payment of the services rendered by the Allied Free Workers Union
for the loading and deliveries of cargoes as same is payable by the
owners and consignees of cargoes, as it has been the practice in
the port of Iligan City" (Exh. J, pp. 14, 334, 359, 500 Record on
Appeal), was 'non- operative" and void, "being contrary to morals
and public policy".
That superficial argument is not well-taken. The printed
stipulation in the bill of lading was superseded by the contractual
stipulation. The contract was prepared by the union officials. As
already noted, it was stipulated in the contract that the
stevedoring and arrastre charges should be paid by the shippers
and consignees in consonance with the practice in Iligan City.
That stipulation was binding and enforceable.
The supposed illegality of that stipulation was not squarely raised
by the union and its officials in their answer. They merely averred
that the contract did not express the true agreement of the
parties. They did not sue for reformation of the instrument
evidencing the contract. The lower court did not err in dismissing
defendants' counterclaims.
The other two errors assigned by the appellants, namely, that the
lower court erred in issuing a permanent injunction against them
and in executing its decision pending appeal, are devoid of merit.
The appellants invoke section 9(d) of the Magna Carta of Labor
regarding the issuance of injunctions. That section has no
application to this case because it was definitively ruled by this
Court in the certification and unfair labor practice cases that there
is no employer-employee relationship between the company and
the stevedores. (They work under the cabo system).
The lower court did not execute the money aspect of its judgment.
It merely required the defendants to file a supersedeas bond of
P50,000.
As to the injunction, it should be recalled that it was this Court
which, in its resolution of May 16, 1962 in the execution and
appeal incident (L-19651, 17 SCRA 513), allowed the company to
terminate the stevedoring and arrastre work of the union and to
use another union to perform that work.
The company had the contractual right to terminate the 1952
contract (Taylor vs. Uy Teng Piao, 43 Phil. 873). The lower court
did not err in sustaining the consignees. rescission of the contract
and in enjoining the union from performing arrastre and
stevedoring work.
WHEREFORE, that portion of the trial court's judgment declaring
the arrastre and stevedoring contract terminated, permanently
enjoining the union and its officials from performing arrastre and
stevedoring work for the vessels of the Compañia Maritima, and
dismissing defendants' counterclaim is affirmed.
The lower court's award of damages, is reversed and set aside. No
costs.
SO ORDERED.

G.R. No. L-49390 January 28, 1980
NICETA MIRANDA-RIBAYA and LUIS CARBONELL
RIBAYA, petitioners,  memo form of the Bautista Logging Company
vs.
MARINO BAUTISTA, ENCARNACION BAUTISTA and the COURT
OF APPEALS, respondents.
TEEHANKEE, J.:p
The Court modifies the decisions of the trial court and of the
Court of Appeals insofar as they denied petitioner's claim for
damages and awards to petitioners moral and exemplary damages
in the amount of 25% of the principal sum adjudged in their favor
for the mental anguish and suffering undergone by them as a
result of the defraudation wantonly, oppressively and malevolently
committed by private respondents and by way of example and
correction for the public good.
In the decision of the Court of Appeals, 1 the facts of the case as
lifted from the decision of the Court of First Instance are stated, as
follows:
Mrs. Niceta Miranda-Ribaya was engaged
sometime in 1968 in the pawnshop business
and in the buying and selling of jewelry.
Sometime prior to April 23, 1968 one of her
agents, Mrs. Josefina Roco-Robles, informed her
that a millionaire logger by the name of Marino
Bautista was interested to buy big diamond
stones. Acting upon this information, Mrs.
Ribaya accompanied by her agent, Mrs. Robles,
decided to drop by the house of Mr. and Mrs.
Marino Bautista on April 23, 1968 at La Salle
Street, Greenhills Mandaluyong, Rizal. Mrs.
Ribaya was impress by the residence of the
Bautista and included within herself that the
Bautistas were millionaires as represented by
her agent, Josefina. On that occasion both Mr.
and Mrs. Bautista were present together with
Gloria Duque, the secretary of Mr. Bautista,
and the couple's daughter, Teresita Mrs. Ribaya
then offered to sell to the Bautistas ten (10)
pieces of jewelry described in paragraph 2 of the
complaint for the total amount of P224,000.00.
After some haggling, the Bautista were able to
convince Mrs. Ribaya to sell to them the
aforesaid pi of jewelry for the price of
P222,000.00. Mr. Bautista acknowledged the
receipt of the jewelry as well as the agreed
purchase price the f by signing the receipt
marked as Annex A and A-1 of the complaint
Mrs. Ribaya in turn was paid in the form of the
two (2) Equitable Banking Corporation checks
Nos. 10767485-A for P112,000.00 (Annex B of
the complaint) and No. 10755100-A for
P110,000.00, both checks postdated June 23,
1968. Mrs. Ribaya then executed a voucher
evidencing said payment (Annex C of the
complaint). The next day, plaintiff, accompanied
by Miss Narcisa Gosioco, went back to see
defendant Marino Bautista for the purpose of
requesting the latter to break up the Equitable
Banking Corporation Check No. 107561,00-A
for P110,000.00 into separate check inasmuch
as part of the jewelry sold to Bautista the
previous day belonged to Mrs. Gosioco Bautista
may accommodated the t of Mm Ribaya by g
said chink with four (4) Bank of Amerca DD-
8112 for P14,000.00, DD-8113 for P34,000.00,
DD- 8114 for P12,000.90 and DD-9115 for
P50,000.00 P110,000.00, all postdated June
23, 1968. On the four (4) checks Mrs. Ribaya
delivered Account Nos. 8113 for P34.000.00 and
8114 for P12.000.00 to Miss. Gosioco. Mrs.
Ribaya kept for herself checks Nos. 8115 and
8112 for the sum of P64,000.00. The four (4)
were a ed by Mrs. Ribaya in the debit-credit
Inc. (Annex F of the complaint).
On the same day, April 24, 1968, Mrs. Ribaya
again sold to the defendants four, (4) pieces of
worth P94,000.00. The pieces of jewelry sold are
described in paragraph 3 of the complaint and
the delivery of said pieces of jewelry was
acknowledged by defendant Bautista under
receipt marked Annex G of the complaint. While
defendant Bautista issued Bank of America
Checks Nos. DD-8106 forP12,000.00, DD-8111
for P12,000.00, DD-8110 for P35,000.00, and
DD-8107 for P35,000.00, all post dated June
23, 1968, plaintiff Ribaya in turn was made to
sign another voucher dated April 24, 1968
covering the said payment amounting to
P94,000.00 (Annex F of the complaint). This
transaction took place at the office of defendant
Bautista at the Bank of Philippine Islands
Building in Manila. During the transaction,
Gloria Duque, secretary of Mr. Bautista, and
Mr. Bautista himself were present aside from
the plaintiff Mrs. Ribaya, Mrs. Bautista was not
present on this occasion.
As some of the owners of the jewelry sold to the
defendants by Mrs. Ribaya on April 23, 1968
and April 24, 1968 wanted to get back their
jewelry, Mrs. Ribaya on May 15, 1968 went
back to the house of the Bautistas accompanied
by Gloria Duque bringing with her three (3)
pieces of jewelry more particularly described in
Annex L of the complaint which she showed to
Mr. Bautista for the purpose of giving said three
(3) pieces of jewelry in exchange for some pieces
previously sold to defendant Bautista. As Mrs.
Bautista and her daughter, however, were not
at home, she was requested by Mr. Bautista to
leave said jewelry so that he can show them to
his wife and daughter. Instead of returning the
jewelry with which she offered to exchange for
others previously sold, defendant Bautista sent
Mrs. Ribaya two (2) days later another Bank of
America check No. DD-8130 for P45,000.00
postdated July 17, 1968 issued by defendant
Bautista. She was informed by Josefina Robles
that the said check was in payment of the three
(3) pieces of jewelry which plaintiff had left in
the possession of the defendant Marino
Bautista. She was further informed that the
three (3) pieces of jewelry had been given away
by Bautista as presents to some bank officials.
When the maturity dates of the various
postdated checks given to Mrs. Ribaya in
payment of the different pieces of jewelry
arrived, Mrs. Ribaya tried several times to
contact defendant Marino Bautista pursuant to
their agreement but all her efforts were in vain
as she was informed that the Bautistas were in
the mountains atten ding to their logging
concession.
Unable to contact the defendants, Mrs. Ribaya
then deposited to her account at the
Continental Bank the checks in her possession.
All the checks paid by the defendant Bautista
were dishonored by the bank for the reason that
the accounts of the defendant were closed.
 As a former pawnshop operator, she know that
Pawnshop owners were required to report their
daily transactions with the Manila Police
Department. Suspecting that the Bautistas
might have pawned the pieces of jewelry
purchased from her, she went to the pawnshop
section of the Manila Police Department to
verify her suspicion and to her chagrin she
discovered that most of the jewelry she had sold
to the defendants were pledged to various
pawnshops in Manila.
Armed with this discovery she was finally able
to comfort the defendant Marino Bautista with
her findings. Defendant assured Mrs. Ribaya
that he would pay her their obligation in
connection with the jewelry transactions. After
failing to keep these promises from week to
week, Mrs. Ribaya demanded from the
defendant Marino Bautista the surrender of the
pawnshop tickets covering the pledge of the
different pieces of jewelry he had obtained from
her. Mrs. Ribaya was able to secure these
tickets from the defendant Bautista one by one.
The pawnshop tickets were issued in the names
of the driver of the Bautista family, their
secretary Gloria Duque, Mrs. Bautista, and a
certain Balagot. With these pawnshop tickets in
her possession, Mrs. Ribaya was able to redeem
part of the jewelry she had delivered to the
Bautistas after spending P52,900.00 for the
redemption price of said jewelry plus interest in
the amount of P760.79.
There were, however, three (3) pawnshop tickets
covering jewelry which did not belong to Mrs.
Ribaya included among the tickets delivered to
Mrs. Ribaya and (for) which defendant Bautista
wanted to value at P11,000.00 (Exhibits p. 4
and p. 5). These were pawnshop tickets Nos.
95716, 95719 and 95851, all issued in the
name of his driver Narciso Amaya and
pertaining to the Aguirre Pawnshop. Mrs.
Ribaya assessed the jewelry covered by these
three (3) tickets at P25,000.00 and after paying
P17,000.00 for the redemption of said pieces of
jewelry she credited the Bautistas with
P8,000.00.
xxx xxx xxx
After computing the value of the pieces of
jewelry recovered by Mrs. Ribaya and the
disbursements made by her for the redemption
of said jewelry and the unrecovered pieces, Mrs.
Ribaya concluded that the balance of the
account of the Bautistas for the purchase price
of the various pieces of jewelry amounts to
P125,460.79. She added that this amount does
not include the amount of the checks delivered
by her to Miss Gosioco. She also testified that
she has agreed to pay her lawyers an amount
equivalent to 25% of the obligation unpaid by
the Bautistas.
In the light of the above factual findings, the trial court rendered
judgment sentencing respondents-defendants to pay petitioners-
plaintiffs the sum of P125,460.79 with interest and 25% thereof
for attorney's fees and expenses of litigation. On petitioners' claim
for moral and exemplary damages, respondents had pleaded that
respondent Marino Bautista had acted "in utmost good faith" and
that damages in any concept could not be assessed against them,
and the trial court upheld them ruling that "the evidence adduced
by the plaintiffs [was] insufficient to warrant its grant.
Herein petitioners interposed an appeal to the Court of Appeals
insofar as the trial court failed to grant their claim for moral and
exemplary damages, but respondent appellate court rejected their
appeal and affirmed the appealed decision, finding that (1) as to
moral damages, petitioner (therein appellant) Niceta Ribaya had
not mentioned in her testimony in the trial court that she has
suffered "mental anguish, serious anxiety, wounded feelings and
moral shock"; and (2) as to exemplary damages, these damages
cannot be recovered as a matter of right and it was not prepared
to disturb the lower court's exercise of discretion in this regard.
Hence this petition for review, which we find to be meritorious.
Parenthetically, the petition has been submitted without a
comment or answer from respondents-spouses despite the fact
that on December 8, 1978, they were given through counsel ten
(10) days from notice thereof to comment. On March 27, 1979,
Zosimo T. Fama, a brother of Atty. Bienvenido T. Fama who was
the counsel of record for herein respondents-spouses, explained in
a letter that his brother, the counsel, could not file the required
comment since he had immigrated to the United states in 1972
and that he could not despite diligent efforts ascertain the
whereabouts of his brother's clients and that their house had long
been foreclosed by their creditors and the family had been long
ejected therefrom. Per resolution of May 91 1979, this Court, at
petitioner's instance, ordered that copy of its resolution of
December 8, 1978 requiring comment be sent directly to
respondents at their last known address of record at 599 La Salle
St., Greenhills Subdivision, Mandaluyong Metro Manila, but the
papers were returned unserved. Petitioners were further required
to ascertain the correct address of respondents to no avail. It is
noted further that in the trial court, the case was submitted for
decision on the basis of petitioners-plaintiffs' evidence, since
respondents-defendants failed to appear on the date set for the
continuation of the hearing and reception of their evidence. It thus
clearly appears that respondents have either absconded or have
entirely given up their fdefence. Their failure to answer or to
comment or to be reached by court processes are declared a
waiver on their part and cannot deter the Court from rendering
judgment on the issue properly raised by petitioners, since they
had been duly summoned at the commencement of the case and
placed under the jurisdiction of our courts in this case.
Respondent court quoted in its appealed decision petitioner
Niceta's testimony, as follows:
Q Now, because of Mr. Bautista's default and your looking
around in the pawnshops for those pieces of jewelries,
what was the effect on you and your business?
A I had to close my pawnshop and I had to sell some of my
personal jewelries and to borrow money.
Q Why do you have to do that?
A Because I have also to pay the persons from whom I got
the jewelries Mr. Bautista got from me.
Q And you have all paid them now?
A Yes, air.
Q And how about you, yourself, what happened?
A We are in debt now, up to our head.
Q And what is the effect of your indebtedness to yourself
A Extreme. For three months I could not sleep. (t.s.n., pp.
26-28, on Nov. 25, 1969).
and then erroneously "noted that it was her indebtedness that
caused her to have sleepless nights for three months. She did not
mention in her testimony that she suffered mental anguish,
serious anxiety or wounded feelings."
Respondent court, from its wrong premise, then as erroneously
concluded that "(I)n order that moral damages may be awarded,
there must be pleading and proof of moral suffering, mental
anguish, fright and the like (San Miguel Brewery, Inc. vs. Magno,
21 SCRA 292). While in the complaint of plaintiffs-appellants there
is an allegation of mental anguish, serious anxiety, wounded
feelings and moral shock, there is no proof of the alleged mental
anguish, serious anxiety, wounded feelings and moral shock.
There must be clear testimony on the mental anguish, serious
anxiety, wounded feelings and similar injuries. Plaintiff must
testify to his said injury (Francisco vs. Government Service
Insurance System, 7 SCRA 577). It would seem that 'physical
suffering, mental anguish, fright, serious anxiety, wounded
feelings, moral shock, and similar injury must be testified to by
the plaintiff, and not merely inferred from certain proven facts,
like having sleepless nights. Having sleepness nights is not
necessarily due to mental anguish, serious anxiety and the like.
In denying petitioner's claim for damages because of petitioner
Niceta's failure to "mention in her testimony that she suffered
mental anguish, serious anxiety or wounded feelings" respondent
court misread the case of Francisco vs. Government Service
Insurance System cited by it. There, this Court had sustained the
trial court's appealed decision denying the therein prevailing
plaintiff's claim for moral and exemplary damages "not only on
account of the plaintiff's failure to take the witness stand and
testify to her social humiliation, wounded feelings, anxiety, etc.,
but primarily because a breach of contract like that of
defendant, not being malicious or fraudulent, does not warrant the
award of moral damages. 2
Here, the facts and circumstances are totally different. In that
case, therein plaintiff failed to take the witness stand and
defendant's breach of contract was held to be not malicious and
fraudulent. In the present case, petitioner Niceta took the witness
stand and established by uncontradicted testimony that due to
respondents' deceitful and malevolent acts of defraudation, she
had suffered "extreme" anguish (without using the word anguish)
and "could not sleep for three months," since she was forced to
close her pawnshop, sell some of her personal jewelries and
borrow money in order to pay off the owners of the j ewelries
wrongfully gotten by respondents from her. The evidence of record
shows the magnitude of respondents' wanton, fraudulent and
malevolent acts of defraudation.
Thus, we find from the appealed decision that petitioner Niceta
was misled into believing that respondent Marino Bautista was a
millionaire when she saw their residence and was told that he was
in the logging business and that he could easily pay for the jewelry
because he had log shipments every two months; that all the
checks issued by him is in payment of the jewelries bounced with
a note "Account Closed" or were dishonored; that some of the
pieces of jewelry were pawned on the very same day that he got
them from petitioners; that after discovering that the jewelries had
been pawned with different pawnshops, petitioner Niceta "pleaded"
with respondents to give her the pawnshop tickets so that she
could redeem them and after weeks of anguished waiting and
pleading, Bautista gave her the pawnshop tickets "one by one",
which were issued in the names of the driver of the Bautista
family, their secretary Gloria Duque, Mrs. Bautista and a certain
Balagot; that petitioners, besides not having been paid, had to
raise P82,800.00 plus interest in redeeming the jewelries covered
by the pawnshop tickets, and were now in debt up to their heads;
as a result of which petitioner Niceta suffered "extremely" and she
"could not sleep for three months."
All this was preceded by a long period of serious anxiety: before
respondent Bautista returned to her the pawnshop tickets one by
one, petitioner Niceta had tried to see respondents in vain; they
were always out and did not answer or return her calls; she was
given the run-around at the maturity dates of the various
postdated checks give a her in payment of the different pieces of
jewelry, she tried several times to contact them pursuant to their
agreement, but an her efforts ended in frustration, as she was
informed that respondents were in the mountains attending to
their logging concession.
We do not share respondent court's narrow view that petitioner
Niceta's failure to use in her testimony the precise legal terms or
"sacramental phrases" of "mental anguish, fright, serious anxiety,
wounded feelings or moral shock" and the like justifies the denial
of the claim for damages. It is sufficient that these exact terms
have been pleaded in the complaint 3 and evidence has been
adduced, as cited above, amply supporting the averments of the
complaint. Indeed, petitioner Niceta vividly portrayed in simple
terms the moral shock and suffering she underwent as a result of
respondents' wanton abuse of her good faith and confidence.
Thus, petitioners' testimonial evidence to the effect that petitioner
Niceta suffered "extremely" and that for three months she could
not sleep was a clear demonstration of her physical suffering,
mental anguish and serious anxiety and similar injury, resulting
from respondents' malevolent acts that show her to be clearly
entitled to moral damages. 4
Petitioners having established the more damages, are entitled in
addition thereto, to exemplary damages.The wantonness and
malevolence through which respondents defrauded petitioners,
deceitfully incurring and then evading settlement of their just
liability certainly justifies the award of exemplary damages by way
of example and correction for the public good and also to serve as
a deterrent to the commission of similar misdeeds by others, 5even
if the transaction were viewed as a breach of civil contract.
In Pan Pacific Company (Phil.) vs. Phil. Advertising
Corporation,  6 this Court awarded moral and exemplary damages,
in addition to other kinds of damages, to the plaintiff upon ample
demonstration that the defendant therein, in utter disregard of the
contractual rights of therein plaintiff, had refused deliberately and
wantonly to pay the latter what was justly due under their
contract for installation of bowling alleys and for taking advantage
of the plaintiff's good faith, "notwithstanding that the defendant
had promised to pay the balance of the price of the bowling alleys.
Defendant, taking advantage of the plaintiff's good faith, requested
a deferment of the payment until the installation shall have been
completed; but the installation having been completed, defendants
under one pretext or another, refused without just cause to pay
what is due the plaintiff." Here, of course, there was more than
wanton refusal to pay a plainly valid and just contractual debt,
but a malicious defraudation and gross abuse of petitioners' good
faith, whereby petitioners were wantonly "paid" with bouncing
postdated checks and besides not being paid what was due them,
had to undergo trauma and travail to redeem with their own and
borrowed funds from the pawnshops some of the jewelries in order
to return them to their owners.
ACCORDINGLY, the decision of respondent court insofar as it
denies petitioners' claim for damages is hereby set aside. In
addition to the amounts awarded in the affirmed judgment of the
lower court, petitioners are further awarded moral and exemplary
damages equivalent to twenty-five per cent (25%) of the principal
sum of P125,460.79 adjudged in their favor by the lower court.
With costs.
SO ORDERED.
G.R. No. 118325 January 29, 1997
VIRGILIO M. DEL ROSARIO and CORAZON PAREDES-DEL
ROSARIO, petitioners,  roofing materials at (private respondents')
vs.
COURT OF APPEALS and METAL FORMING
CORPORATION, respondents.
NARVASA, C.J.:
On August 28, 1995, the Court En Banc promulgated judgment in
the case of Metal Forming Corporation v. Office of the President,
etc., et al.,1 dismissing the petitioner's appeal and affirming the
decision of the Office of the President dated April 30, 1993. The
latter decision in turn affirmed that of the Department of Trade
and Industry rendered on May 29, 1991 in an administrative case
initiated against Metal Forming Corporation (hereafter, MFC) by
complaint of the "spouses Virgillo M. del Rosario and Corazon
Paredes-del Rosario."
The Del Rosarios' complaint, filed on November 21, 1990, charged
MFC with a violation of Section 3 of Act No. 3740, "An Act to
Penalize Fraudulent Advertising, Mislabeling or Misbranding of Any
Product, Stocks, Bonds, etc." It alleged that:2
1) "in selling to the public roofing materials
known as "Banawe" shingles, . . . (MFC) made
representations on the durability of the product
and the sturdiness of its installation" through
massive advertisements in print media and
television. . . (and) brochures :"
2) these representations — particularly those
characterizing the shingles as "STRUCTURALLY
SAFE AND STRONG" and that the "BANAWE
METAL TILE structure acts as a single unit
against wind and storm pressure due to the
strong hook action on its overlaps" — "prompted.
. . (the Del Rosarios) to buy the "Banawe"
shingles and. . . (have) them installed at their
residence;" but
3) "(b)arely two (2) months after completion of
the installation, portions of the roof of. . . (the
Del Rosarios) were blown away by strong wind
brought about by typhoon "Ruping."
After due proceedings, the DTI rendered judgment declaring that
MFC had indeed misrepresented its product because "as the
records showed," strong winds actually blew off part of the
structure/roof of the Del Rosario Spouses and the same acted in
parts (instead of as a single unit) when strong winds blew, a part
remaining while another part was blown off. MFC was accordingly
sentenced to pay an "administrative fine of P10,000.00" (within
ten [10] days from finality of the decision), otherwise its "business
name and registration. . . would be deemed suspended and its
establishment closed until the fine was fully paid."
As already stated, the decision of the DTI (of May 29, 1991) was,
on appeal, affirmed in toto by the Office of the President on April
30, 1993; and the latter judgment was in turn affirmed by this
Court on August 28, 1995 with a modification solely as to the fine,
which was reduced to P5,000.00. In said judgment of August 28,
1995, this Court, stressing that the factual findings of such
administrative bodies as the Office of the President are generally
to be accorded respect, if not indeed invested with finality,
pronounced as correct that Office's ruling, among others, that:
(A)lthough the occurrence of a typhoon is a
fortuitous event which by itself might have
exempted petitioner from liability to private
respondents —
". . . it cannot efface the fundamental fact that
(petitioner) acted in bad faith and/or with gross
negligence in failing to deliver the necessary
accessories for the proper installation of the
structure. . . and actually installed inferior
residence, in violation of the proper installation
procedure expressly specified in the former's
brochures and advertisements for
installation, i.e., the metal tile attached to the
roof panels should be by two (2) self-drilling
screws for one [1] metal cleat. However, instead
of conforming with this procedure, (petitioner)
attached some of the metal cleats with only one
(1)-inch ordinary nail each and others were
fastened with only one (1) wood screw each.. . ."
It appears that MFC replaced and repaired the roof free of charge,
evidently acknowledging that the damage was covered by its one-
year warranty on the materials and the installation. The repair
work was observed and analyzed by the Esteban Adjusters and
Valuers, Inc., which was engaged by the Del Rosarios to determine
the cause of the destruction.3 The repair; work was begun on
October 23, 1989, with the delivery of replacement tiles, and
completed on November 7, 1989. Thereafter the Esteban Adjusters
and Valuers, Inc. submitted its report to the Del Rosarios, dated
November 8, 1989,4 in which it made the following conclusion:
The "Banawe" metal tiles which were detached
from the roof trusses were not fastened with two
(2) wood screws on each metal cleat as required
but only with a single wood screw or a
combination of a single wood screw and a 1-
inch nail which is contrary to the design and
specification. We have observed during the
course of repai(r) works that some "Banawe"
metal tiles installed were no longer than the roof
span, hence there is overlapping on the ridge
roll/hip. It is very evident that the original
subcontractor (which we were not able to
identify) were in haste to complete the
project. . . .
MFC however declined to concede liability for the other damages
claimed by the Del Rosario Spouses to have been caused to the
interior of their home. This prompted the latter to commence a
civil action against MFC on April 16, 1990 in the Regional Trial
Court of Manila.5 In this suit, docketed as Civil Case No. 90-
52734, the spouses sought to recover from MFC, damages
resulting from the events just narrated, contending that aside
from the destruction of the roof of their house, injury was also
caused to its electrical wiring, ceiling, furtures, walls, wall paper,
wood parquet flooring and furniture.6 The plaintiff spouses
reckoned their actual damages at P1,008,003.00 — "representing
the estimated cost of the repair, restoration and/or replacement of
the damaged areas and items in plaintiffs' house and the .cost of
the inspection conducted by the independent adjuster (engaged by
them), with legal interests thereon from 21 February 1990 when
defendant (MFL) received the formal demand from plaintiffs until
fully paid."7 They also prayed for an award to them of moral
damages in the sum of P3,000,000,00, exemplary damages in the
amount of P1,000,000.00, and attorney's fees in the sum of
P1,000,000.00.
MFC moved to dismiss the complaint for lack of cause of action. If
stated that it had no contractual relationship with the Del
Rosarios since the contract for the purchase and installation of
the roofing, upon which the latter's claims were based, was
actually entered into between it and another person, Jesus M.
Puno (an engineer identified as the Del Rosarios' contractor). The
Trial Court denied the motion. MFC assailed that denial in the
Court of Appeals, but was rebuffed; and its recourse to this Court
(G.R. No. 95514) was also unsuccessful. 8
Trial then ensued after which judgment was rendered on
November 18, 1991 by the Regional Trial Court in favor of the Del
Rosarios,9 the dispositive portion of which reads as follows: 10
 WHEREFORE, judgment is hereby rendered in
favor of the plaintiff and against the defendant,
to pay: —
"a) Actual Damages in the amount of ONE
MILLION EIGHT THOUSAND THREE
(P1,008,003.00) PESOS, with legal interest
thereon, from June 31, 1990 until fully paid;
"b) Moral Damages in the amount of FIVE
HUNDRED THOUSAND (P500,000.00) PESOS;
"c) Exemplary Damages in the amount of
THREE HUNDRED THOUSAND (P300,000.00)
PESOS; and
"d) Attorney's fees and expenses of litigation in
the amount of ONE HUNDRED FIFTY
THOUSAND (P150,000.00) PESOS.
Counter claims filed by the defendant are
dismissed.
SO ORDERED.
The Trial Court held the corporation liable for breach of its
contract for the supply and installation of the roofing materials in
the Del Rosarios' residence. According to the Court: 11
The following facts were duly established from
the evidence supporting plaintiffs' claim for
damages:
"1 There was actually serious damages caused
on plaintiffs' house on account of faulty or
inferior installation;
"2. Defendant himself admitted its liability by
making partial repairs of the roofing of
"Banawe" shingles, free of charge, after the
typhoon. . . (Ruping);
"3. There was an expressed warranty specified
in the brochure that there should be two (2)
metal screws for one (1) cleat but the same was
violated by the defendant who only used one (1)
1-inch nail or a combination of one (1) metal
screw to one (1) cleat;
"4. There is ample evidence including the
testimony of Engr. Puno that it was defendant
Metal Forming Corporation who. . . (had) a
contract with the plaintiffs for the supply and
installation of roofing materials in plaintiffs'
residential house located at No. 17 Tabuena
Street, Corinthian Gardens, Quezon City; and
"5. There was a declared warranty by the
defendants relied upon by the plaintiffs and
that the defendant was guilty of fraud and/or
breach of warranty."
Parenthetically, these conclusions are substantially the same as
those made by the Department of Trade and Industry in its own
judgment rendered on May 29, 1991 — affirmed by the Office of
the President in a decision dated April 30, 1993, and ultimately by
this Court En Banc in its decision promulgated on August 28,
1995.12 The Trial Court ruled that there was privity of contract
between the Del Rosarios and MFC; Engineer Puno acted as MFC's
agent in the signing of the contracts for the supply and
installation of the "Banawe'' shingles; hence, the contract was
really between the Del Rosarios and that company. 13
MFC appealed to the Court of Appeals. In its Decision
promulgated on June 29, 1994.14 said Court reversed the Trial
Court's judgment, It ruled that there was no privity of contract
between the Del Rosarios and MFC, for the following reasons: 15
a. The contracts for the supply of materials and
installation of the roof were signed by Engr.
Puno. On the face of the contracts, it does not
appear that the Del Rosarios were parties to it
or that it was entered into for their benefit. It
does not also appear that Engr. Puno acted as
agent of the Del Rosarios nor of the corporation.
b. The holding of the trial court that Engr. Puno
was an agent of the corporation is not borne out
by the records. There is no evidence, apart from
Engr. Puno's testimony, to show that any
agency exists.
c. The nature of the relationship between the
Del Rosarios and Engr. Puno is also not clear
from the records of the case.
d. While it may be implicit in the complaint of
the Del Rosarios that there was a contract
between them and the corporation, this is not
supported by the evidence presented.
There being no such privity, according to the Court of Appeals, the
Del Rosarios had no cause of action against MFC for breach of
warranties, there being no law allowing them to proceed directly
against those whom their contractor had subcontracted to furnish
materials and do part of the work that the latter was engaged to
perform.16
The Del Rosarios appealed, and in this Court expectedly present
for resolution,17 the issue of "'WHETHER OR NOT THERE IS A
PRIVITY OF CONTRACT BETWEEN THE PARTIES,'"
There is merit in the petition. The essential issue is whether or not
upon the facts established by the evidence, MFC is answerable to
the Del Rosarios for the damage caused to the latter's residence
when its roof, made of shingles purchased from and installed by
the former, was blown away by a typhoon. The Court rules that it
is.
The facts on record — including those set forth in the final
judgment of the Court En Banc involving the same parties,
adverted to in the opening paragraph of this opinion, supra.18 of
which judgment official cognizance may properly be, as it is
hereby, taken — constitute adequate basis for a verdict against
MFC. These are the following:
1. MFC was engaged in the business of selling
to the public roofing materials known as
"Banawe" shingles or metal tiles, and through
extensive advertisements in media and in its
brochures, made representations respecting the
durability of its tiles and the sturdiness of
roofing installed in accordance with its
particularly described method, These
representations included statements that the
shingles are "STRUCTURALLY SAFE AND
STRONG" and that the "BANAWE METAL
TILE structure acts as a single unit against wind
and storm pressure due to the strong hook action
on its overlaps."
2. After reading MFC's brochures and
advertisements, the Del Rosario Spouses
instructed their contractor, Engineer Puno, to
use the "Banawe" shingles or metal tiles in the
roofing of their house then under
construction.19
3. In other words, paraphrasing Article 1546 of
the Civil Code, MFC, as seller to the general
 public had made a affirmations of fact and
promises relating to its advertised product, the
"Banawe" tiles, the natural tendency of which
was to induce the buyers, as infact it did induce
the Del Rosarios, to purchase the same, relying
thereon.
4. Pursuant to the Del Rosarios' instructions.
Puno placed orders with MFC and signed the
pertinent contracts for the purchase of the
shingles, accepted deliveries thereof and signed
corresponding invoices, and made payments
thereon with the spouses funds.20
5. Deliveries of the "Banawe" metal tiles or
shingles were made by MFC's employees to the
construction site of the Del Rosarios' residence;
and installation of the metal tiles in the roof of
the Del Rosario's house was made by MFC's
workers.
6. MFC "acted in bad faith and/or with gross
negligence in failing to deliver the necessary
accessories for the proper installation of the
structure. . . and actually installed inferior
roofing materials at (private respondents')
residence, in violation of the proper installation
procedure expressly specified in the former's
brochures and advertisements for installation,
i.e., the metal tile attached to the roof panels
should be by two (2) self-drilling screws for one
(1) metal cleat. . . (but) instead of conforming
with this procedure, (petitioner) attached some
of the metal cleats with only one (l)-inch
ordinary nail each and others were fastened
with only one (1) wood screw each. . ."21
7. As a result, barely two (2) months after
completion of the installation of the roof by
MFC's workers, portions thereof were blown
away by the winds of typhoon "Ruping,"
8. MFC replaced the roof free of charge, in
acknowledgment of its one-year warranty on the
materials and their installation.
All the quibbling about whether Engineer Puno acted as agent of
MFC or of the spouses, is pointless. The matter is not a factor in
determining MFC's liability for its workers' use of inferior
materials and their defective installation of the "Banawe" metal
tiles in the roof of the latter's residence, Prescinding from the
persuasive proof on record that at all times material and with
regard to the acquisition and installation of the metal tiles or
shingles, Puno was in truth acting as contractor of the Del
Rosarios and on their instructions,22 ascertainment of the definite
identity of the person who actually ordered the shingles from MFC
is utterly inconsequential — it might just as well have been a
construction foreman, a trusted domestic, or any friend or
acquaintance of the Del Rosarios — in view of the indisputable
fact not only (1) that the tiles were delivered to the Del Rosarios
and used in fabricating the roof of their home, but also (2) that it
was the employees and workers of MFC who (a) delivered the
shingles or metal tiles to the construction site of the Del Rosarios'
home, and (b) undertook and completed the installation thereof
These they did in bad faith, using inferior materials and
assembling them in a manner contrary to MFC's express
representations in its brochures and advertisements circulated
and broadcast to the general public — which representations had,
in the first place, induced the Del Rosarios to choose the metal
tiles in question for their roofing. In fine, since MFC, in bad faith
and with gross negligence, infringed the express warranty made by
it to the general public in connection with the "Banawe" tiles
brought to and set up in the house of the Del Rosarios who had
relied on the warranty, and thereby caused them considerable
injury, the identity of the individual who actually dealt with MFC
and asked the latter to make such delivery and installation is of
little moment.
Turning now to the matter of damages, it is the Del Rosarios'
contention that the pecuniary detriment to their home amounted
to P1,008,003.00, covering not only the destruction of the roof,
but also substantial harm to the electrical wiring, ceiling, fixtures,
walls, wallpaper, wood parquet flooring and furniture. 23 They rely
on the Report of the Esteban Adjusters and Valuers, Inc., 24 to
which the Regional Trial Court accorded full credit. But that
report contains no statement whatever of the amount of the
damage. Indeed, the testimony of Engineer Abril, the
representative of the Esteban Adjusters and Valuers, Inc., is that
his firm had been retained only to determine the cause of the
damage, not to estimate and assess it.25 A similar aridity as to the
amount of the damage, unfortunately characterizes the testimony
of Atty. Virgilio Del Rosario and the rest of the spouses' proofs.
There is therefore no evidentiary foundation upon which to lay an
award of actual damages. The Trial Court's grant thereof must be
struck down. Lufthansa German Airlines vs. CA, et al.,
promulgated on April 21, 1995,26 inter alia ruled that:
Actual or compensatory damages cannot be
presumed, but must be duly proved and proved
with reasonable degree of certainty. A court
cannot rely on speculations, conjectures or
guesswork as to the fact and amount of
damages, but must depend upon competent
proof that they have (been) suffered and on
evidence of the actual amount thereof.
Its grant of moral and exemplary damages was justified by the
Trial Court as follows:27
Form the evidence presented, plaintiffs'
sufferings have been duly and substantially
proven by the defendant's fraudulent actuation
and breach of warranty, and thereby entitled for
the claim of damages and litigation costs as
enunciated by the testimony of the plaintiff...
that the damages to his house caused
sufferings and feelings of shock. helplessness,
fears, embarrassment and anger, thereby
entitling him to Moral Damages which should
be assessed at P500,000.00.
"The moral damages. . . . (are awarded) for
indemnity or reparation not punishment or
correction, that is, an award to entitle the
injured party to obtain means (of) diversions
and amusement that will serve to alleviate the
moral sufferings he has undergone by reason of
defendant's culpable action. (RNB Surety and
Ins. Co. v. IAC, G.R No. 64515, June 22, 1984,
129 SCRA 745)."
That MFC did in truth act with bad faith, in flagrant breach of its
express warranties made to the general public and in wanton
disregard of the rights of the Del Rosarios who relied on those
warranties, is adequately demonstrated by the recorded proofs.
The law explicitly authorizes the award of moral damages "in
breaches of contract where the defendant acted fraudulently or in
bad faith."28 There being, moreover, satisfactory evidence of the
psychological and mental trauma actually suffered by the Del
Rosarios, the grant to them of moral damages is warranted. Over a
period of about a month. they experienced "feelings of shock,
helplessness, fear, embarrassment and anger." 29 As declared by
this Court in Makabili v. Court of Appeals,30 among other
precedents:
It is essential. . . . in the award of damages that
the claimant must have satisfactorily proven
during the trial the existence of the factual
basis of the damages and its causal connection
to defendant's acts. This is so because moral
damages though incapable of pecuniary
 estimation, are in the category of an award
designed to compensate the claimant for actual
injury suffered and not to impose a penalty on
the wrongdoer (Enervida v. De la Torre, 55
SCRA 340 [1974.] and are allowable only when
specifically prayed for in the complaint. (San
Miguel Brewery, Inc. v. Magno, 21 SCRA 292
[1968])
As reflected in the records of the case, the Court
of Appeals was in agreement with the findings of
the trial court that petitioners suffered anguish,
embarrassment and mental sufferings due to
the failure of private respondent to perform its
obligation to petitioners. According to the Court
of Appeals, private respondent acted in wanton
disregard of the rights of petitioners. These
pronouncements lay the basis and justification
for this Court to award petitioners moral and
exemplary damages."
This Court also agrees with the Trial Court that exemplary
damages are properly exigible of MFC, "Article 2229 of the Civil
Code provides that such damages may be imposed by way of
example or correction for the public good, While exemplary
damages cannot be recovered as a matter of right, they need not
be proved, although plaintiff must show that he is entitled to
moral, temperate or compensatory damages before the court may
consider the question of whether or not exemplary damages
should be awarded."31 "Exemplary damages are imposed not to
enrich one party or impoverish another but to serve as a deterrent
against or as a negative incentive to curb socially deleterious
actions."32
However, the same statutory and jurisprudential standards just
mentioned dictate reduction of the amounts of moral and
exemplary damages fixed by the Trial Court. There is, to be sure,
no hard and fast rule for determining what would be a fair amount
of moral (or exemplary) damages, each case having to be governed
by its attendant particulars, Generally, the amount of moral
damages should be commensurate with the actual loss or injury
suffered. In the case of PNB v. C.A, just cited,33 this Court quoted
with approval the following observation from RCPI
v. Rodriguez, 34 viz.:
. . . Nevertheless, we find the award of
P100,000.00 as moral damages in favor of
respondent Rodriguez excessive and
unconscionable. In the case of Prudenciado
v. Alliance Transport System, Inc. (148 SCRA
440 [1987]) we said: ". . . [I]t is undisputed that
the trial courts are given discretion to determine
the amount of moral damages (Alcantara v.
Surro, 93 Phil. 472) and that the Court of
Appeals can only modify or change the amount
awarded when they are palpably and
scandalously excessive "so as to indicate that it
was the result of passion, prejudice or
corruption on the part of the trial court"
(Gellada v. Warner Barnes & Co., Inc., 57 O.G.
[4] 7347, 7358; Sadie v. Bacharach Motors Co.,
Inc., 57 O.G. [4] 636 and Adone v. Bacharach
Motor Co., Inc., 57 O.G. 656). But in more
recent cases where the awards of moral and
exemplary damages are far too excessive
compared to the actual loses sustained by the
aggrieved party, this Court ruled that they
should be reduced to more reasonable amounts.
. . . (Emphasis ours.)
In other words, the moral damages awarded
must be commensurate with the loss or injury
suffered.
In the same case (PNB v. CA), this Court 35 found the amount of
exemplary damages required to be paid (P1,000,000.00) "too
excessive" and reduced it to an "equitable level" (P25,000.00).
. . . (T)he award of P1,000,000.00 exemplary
damages is also far too excessive and should
likewise be reduced to an equitable level.
Exemplary damages are imposed not to enrich
one party or impoverish another but to serve as
a deterrent against or as a negative incentive to
curb socially deleterious actions.
In another case involving strikingly analogous facts decided in
1994, Geraldez vs. CA.,36 where no actual damages were
adjudicated but moral and exemplary damages in similar amounts
(P500.000.00 and P300,000.00, respectively) were awarded by the
Trial Court, as in this case, this Court reduced the amount of
moral damages to P100,000.00 and of exemplary damages to
P50,000.00. The Court sees no reason to adopt a different
treatment in the case at bar, and accordingly reduces the moral
damages from P500,000.00 to P100,000.00, and the exemplary
damages from P300,000.00 to P50,000.00.
Finally, like the adjudication of actual or compensatory damages,
the award of attorney's fees must be deleted. The matter was dealt
with only in the dispositive portion of the Trial Court's decision.
Since the judgment does not say why attorney's fees are awarded,
there is no basis for such award, which should consequently be
removed. So did this Court rule, for instance, in Scott Consultants
and Resource Development Corp., Inc. vs. CA, et al.:37
It is settled that the award of attorney's fees is
the exception rather than the rule and counsel's
fees are not to be awarded every time a party
wins. The power of the court to award attorney's
fees under Article 2208 of the Civil Code
demands factual, legal, and equitable
justification; its basis cannot be left to
speculation or conjecture. Where granted. the
court must explicitly state in the body of the
decision, and not only in the dispositive portion
thereof, the legal reason for the award of
attorney's fees.
WHEREFORE, the challenged Decision of the Court of Appeals of
June 29, 1994 is REVERSED and SET ASIDE; and the Decision of
the Regional Trial Court of November 18, 1991 is REINSTATED
AND AFFIRMED, with the modification that the award of actual
damages and attorney's fees is deleted, and the moral and
exemplary damages awarded are reduced from P500,000.00 to
P100,000.00, and from P300,000.00 to P50,000.00, respectively.
IT IS SO ORDERED.
G.R. No. 157009               March 17, 2010
SULPICIO LINES, INC., Petitioner, 
vs.
DOMINGO E. CURSO, LUCIA E. CURSO, MELECIO E. CURSO,
SEGUNDO E. CURSO, VIRGILIO E. CURSO, DIOSDADA E.
CURSO, and CECILIA E. CURSO, Respondents.
DECISION
BERSAMIN, J.:
Are the surviving brothers and sisters of a passenger of a vessel
that sinks during a voyage entitled to recover moral damages from
the vessel owner as common carrier?
This is the question presented in the appeal taken by the common
carrier from the reversal by the Court of Appeals (CA) of the
decision of the Regional Trial Court (RTC) dismissing the
complaint for various damages filed by the surviving brothers and
sisters of the late Dr. Cenon E. Curso upon a finding that force
majeure had caused the sinking. The CA awarded moral and other
damages to the surviving brothers and sisters.
Antecedents
On October 23, 1988, Dr. Curso boarded at the port of Manila the
MV Doña Marilyn, an inter-island vessel owned and operated by
petitioner Sulpicio Lines, Inc., bound for Tacloban City.
Unfortunately, the MV Doña Marilyn sank in the afternoon of
October 24, 1988 while at sea due to the inclement sea and
weather conditions brought about by Typhoon Unsang. The body
of Dr. Curso was not recovered, along with hundreds of other
passengers of the ill-fated vessel. At the time of his death, Dr.
Curso was 48 years old, and employed as a resident physician at
the Naval District Hospital in Naval, Biliran. He had a basic
monthly salary of ₱3,940.00, and would have retired from
government service by December 20, 2004 at the age of 65.
On January 21, 1993, the respondents, allegedly the surviving
brothers and sisters of Dr. Curso, sued the petitioner in the RTC
in Naval, Biliran to claim damages based on breach of contract of
carriage by sea, averring that the petitioner had acted negligently
in transporting Dr. Curso and the other passengers. They stated,
among others, that their parents had predeceased Dr. Curso, who
died single and without issue; and that, as such, they were Dr.
Curso’s surviving heirs and successors in interest entitled to
recover moral and other damages.1 They prayed for judgment, as
follows: (a) compensatory damages of ₱1,924,809.00; (b) moral
damages of ₱100,000.00; (c) exemplary or corrective damages in
the amount deemed proper and just; (d) expenses of litigation of at
least ₱50,000.00; (e) attorney’s fees of ₱50,000.00; and (f) costs of
suit.
The petitioner denied liability, insisting that the sinking of the
vessel was due to force majeure (i.e., Typhoon Unsang), which
exempted a common carrier from liability. It averred that the
MV Doña Marilyn was seaworthy in all respects, and was in fact
cleared by the Philippine Coast Guard for the voyage; and that
after the accident it conducted intensive search and rescue
operations and extended assistance and aid to the victims and
their families.
Ruling of the RTC
On July 28, 1995, the RTC dismissed the complaint upon its
finding that the sinking of the vessel was due to force majeure. The
RTC concluded that the officers of the MV Doña Marilyn had
acted with the diligence required of a common carrier; that the
sinking of the vessel and the death of its passengers, including Dr.
Curso, could not have been avoided; that there was no basis to
consider the MV Doña Marilyn not seaworthy at the time of the
voyage; that the findings of the Special Board of Marine Inquiry
(SBMI) constituted to investigate the disaster absolved the
petitioner, its officers, and crew of any negligence and
administrative liability; and that the respondents failed to prove
their claim for damages.
Ruling of the CA
The respondents appealed to the CA, contending that the RTC
erred: (a) in considering itself barred from entertaining the case by
the findings of fact of the SBMI in SBMI-ADM Case No. 08-88; (b)
in not holding that the petitioner was negligent and did not
exercise the required diligence and care in conducting Dr. Curso
to his destination; (c) in not finding that the MV Doña
Marilyn was unseaworthy at the time of its sinking; and (d) in not
awarding damages to them.2
In its decision dated September 16, 2002, 3 the CA held and
disposed:
Based on the events described by the appellee’s witness, the Court
found inadequate proof to show that Sulpicio Lines, Inc., or its
officers and crew, had exercised the required degree of diligence to
acquit the appellee of liability.
In the first place, the court finds inadequate explanation why the
officers of the M.V. Doña Marilyn had not apprised themselves of
the weather reports on the approach of typhoon "Unsang" which
had the power of a signal no. 3 cyclone, bearing upon the general
direction of the path of the M.V. Doña Marilyn. If the officers and
crew of the Doña Marilyn had indeed been adequately monitoring
the strength and direction of the typhoon, and had acted promptly
and competently to avoid the same, then such a mishap would not
have occurred.
Furthermore, there was no account of the acts and decision of the
crew of the ill-fated ship from 8:00 PM on October 23, 1988 when
the Chief Mate left his post until 4:00 AM the next day when he
resumed duty. It does not appear what occurred during that time,
or what weather reports were received and acted upon by the ship
captain. What happened during such time is important in
determining what information about the typhoon was gathered
and how the ship officers reached their decision to just change
course, and not take shelter while a strong typhoon was
approaching.
Furthermore, the Court doubts the fitness of the ship for the
voyage, since at the first sign of bad weather, the ship’s hydraulic
system failed and had to be repaired mid-voyage, making the
vessel a virtual derelict amidst a raging storm at sea. It is part of
the appellee’s extraordinary diligence as a common carrier to
make sure that its ships can withstand the forces that bear upon
them during a voyage, whether they be the ordinary stress of the
sea during a calm voyage or the rage of a storm. The fact that the
stud bolts in the ships hydraulic system gave way while the ship
was at sea discredits the theory that the appellee exercised due
diligence in maintaining the seaworthy condition of the M.V. Doña
Marilyn. xxx.4
xxx
Aside from these, the defendant must compensate the plaintiffs for
moral damages that they suffered as a result of the negligence
attending the loss of the M.V. Doña Marilyn. Plaintiffs, have
established that they took great pains to recover, in vain, the body
of their brother, at their own cost, while suffering great grief due
to the loss of a loved one. Furthermore, Plaintiffs were unable to
recover the body of their brother. Moral damages worth
₱100,000.00 is proper.
WHEREFORE, premises considered, the appealed decision of the
RTC of Naval, Biliran, Branch 16, rendered in Civil Case No. B-
0851, is hereby SET ASIDE. In lieu thereof, judgment is hereby
rendered, finding the defendant-appellee Sulpicio Lines, Inc, to
have been negligent in transporting the deceased Cenon E. Curso
who was on board the ill-fated M.V. Doña Marilyn, resulting in his
untimely death. Defendant-appellee is hereby ordered to pay the
plaintiffs heirs of Cenon E. Curso the following:
 (1) Death indemnity in the amount of ₱50,000.00;
(2) Loss of Earning Capacity in the amount of
₱504,241.20;
(3) Moral Damages in the amount of ₱100,000.00.
(4) Costs of the suit.5
Hence, this appeal, in which the petitioner insists that the CA
committed grievous errors in holding that the respondents were
entitled to moral damages as the brothers and sisters of the late
Dr. Curso; that the CA thereby disregarded Article 1764 and
Article 2206 of the Civil Code, and the ruling in Receiver for North
Negros Sugar Co., Inc. v. Ybañez,6 whereby the Supreme Court
disallowed the award of moral damages in favor of the brothers
and sisters of a deceased passenger in an action upon breach of a
contract of carriage.7
Issues
The petitioner raises the following issues:
ARE THE BROTHERS AND SISTERS OF A DECEASED
PASSENGER IN A CASE OF BREACH OF CONTRACT OF
CARRIAGE ENTITLED TO AN AWARD OF MORAL DAMAGES
AGAINST THE CARRIER?
ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL
DAMAGES, SHOULD THE AWARD BE GRANTED OR GIVEN TO
THE BROTHER OR SISTER NOTWITHSTANDING (THE) LACK OF
EVIDENCE AS REGARDS HIS OR HER PERSONAL SUFFERING?
Ruling
The petition is meritorious.
As a general rule, moral damages are not recoverable in actions
for damages predicated on a breach of contract, unless there is
fraud or bad faith.8 As an exception, moral damages may be
awarded in case of breach of contract of carriage that results in
the death of a passenger,9 in accordance with Article 1764, in
relation to Article 2206 (3), of the Civil Code, which provide:
Article 1764. Damages in cases comprised in this Section shall be
awarded in accordance with Title XVIII of this Book, concerning
Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
Article 2206. The amount of damages for death caused by a crime
or quasi-delict shall be at least three thousand pesos, even though
there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the
earning capacity of the deceased, and the indemnity shall
be paid to the heirs of the latter; such indemnity shall in
every case be assessed and awarded by the court, unless
the deceased on account of permanent physical disability
not caused by the defendant, had no earning capacity at
the time of his death;
(2) If the deceased was obliged to give support according
to the provisions of article 291, the recipient who is not
an heir called to the decedent's inheritance by the law of
testate or intestate succession, may demand support
from the person causing the death, for a period not
exceeding five years, the exact duration to be fixed by the
court;
(3) The spouse, legitimate and illegitimate descendants
and ascendants of the deceased may demand moral
damages for mental anguish by reason of the death of
the deceased.
The foregoing legal provisions set forth the persons entitled to
moral damages. The omission from Article 2206 (3) of the brothers
and sisters of the deceased passenger reveals the legislative intent
to exclude them from the recovery of moral damages for mental
anguish by reason of the death of the deceased. Inclusio unius est
exclusio alterius.10 The solemn power and duty of the courts to
interpret and apply the law do not include the power to correct the
law by reading into it what is not written therein. 11 Thus, the CA
erred in awarding moral damages to the respondents.
The petitioner has correctly relied on the holding in Receiver for
North Negros Sugar Company, Inc. v. Ybañez, 12 to the effect that in
case of death caused by quasi-delict, the brother of the deceased
was not entitled to the award of moral damages based on Article
2206 of the Civil Code.
Essentially, the purpose of moral damages is indemnity or
reparation, that is, to enable the injured party to obtain the
means, diversions, or amusements that will serve to alleviate the
moral suffering he has undergone by reason of the tragic event.
According to Villanueva v. Salvador,13 the conditions for awarding
moral damages are: (a) there must be an injury, whether physical,
mental, or psychological, clearly substantiated by the claimant; (b)
there must be a culpable act or omission factually established; (c)
the wrongful act or omission of the defendant must be the
proximate cause of the injury sustained by the claimant; and (d)
the award of damages is predicated on any of the cases stated in
Article 2219 of the Civil Code.
To be entitled to moral damages, the respondents must have a
right based upon law. It is true that under Article 100314 of the
Civil Code they succeeded to the entire estate of the late Dr. Curso
in the absence of the latter’s descendants, ascendants, illegitimate
children, and surviving spouse. However, they were not included
among the persons entitled to recover moral damages, as
enumerated in Article 2219 of the Civil Code, viz:
Article 2219. Moral damages may be recovered in the following
and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27,
28, 29, 30, 32, 34 and 35.
The parents of the female seduced, abducted, raped or abused
referred to in No. 3 of this article, may also recover moral
damages.
The spouse, descendants, ascendants and brothers and sisters
may bring the action mentioned in No. 9 of this article, in the
order named.1avvphi1
Article 2219 circumscribes the instances in which moral damages
may be awarded. The provision does not include succession in the
collateral line as a source of the right to recover moral damages.
The usage of the phrase analogous cases in the provision means
simply that the situation must be held similar to those expressly
enumerated in the law in question15 following the ejusdem
generis rule. Hence, Article 1003 of the Civil Code is not
concerned with recovery of moral damages.

In fine, moral damages may be recovered in an action upon breach

of contract of carriage only when: (a) where death of a passenger
results, or (b) it is proved that the carrier was guilty of fraud and
bad faith, even if death does not result. 16 Article 2206 of the Civil
Code entitles the descendants, ascendants, illegitimate children,
and surviving spouse of the deceased passenger to demand moral
damages for mental anguish by reason of the death of the
deceased.17

WHEREFORE, the petition for review on certiorari is granted, and

the award made to the respondents in the decision dated
September 16, 2002 of the Court of Appeals of moral damages
amounting to ₱100,000.00 is deleted and set aside.

SO ORDERED.
 G.R. No. 128690 January 21, 1999
ABS-CBN BROADCASTING CORPORATION, petitioner, 
vs.
HONORABLE COURT OF APPEALS, REPUBLIC
BROADCASTING CORP, VIVA PRODUCTION, INC., and
VICENTE DEL ROSARIO, respondents.
DAVIDE, JR., CJ.:
In this petition for review on certiorari, petitioner ABS-CBN
Broadcasting Corp. (hereafter ABS-CBN) seeks to reverse and set
aside the decision 1 of 31 October 1996 and the resolution 2 of 10
March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The
former affirmed with modification the decision 3 of 28 April 1993 of
the Regional Trial Court (RTC) of Quezon City, Branch 80, in Civil
Case No. Q-92-12309. The latter denied the motion to reconsider
the decision of 31 October 1996.
The antecedents, as found by the RTC and adopted by the Court
of Appeals, are as follows:
In 1990, ABS-CBN and Viva executed a Film
Exhibition Agreement (Exh. "A") whereby Viva
gave ABS-CBN an exclusive right to exhibit
some Viva films. Sometime in December 1991,
in accordance with paragraph 2.4 [sic] of said
agreement stating that —.
1.4 ABS-CBN shall have the right of first refusal
to the next twenty-four (24) Viva films for TV
telecast under such terms as may be agreed
upon by the parties hereto, provided, however,
that such right shall be exercised by ABS-CBN
from the actual offer in writing.
Viva, through defendant Del Rosario, offered
ABS-CBN, through its vice-president Charo
Santos-Concio, a list of three(3) film packages
(36 title) from which ABS-CBN may exercise its
right of first refusal under the afore-said
agreement (Exhs. "1" par, 2, "2," "2-A'' and "2-
B"-Viva). ABS-CBN, however through Mrs.
Concio, "can tick off only ten (10) titles" (from
the list) "we can purchase" (Exh. "3" - Viva) and
therefore did not accept said list (TSN, June 8,
1992, pp. 9-10). The titles ticked off by Mrs.
Concio are not the subject of the case at bar
except the film ''Maging Sino Ka Man."
For further enlightenment, this rejection letter
dated January 06, 1992 (Exh "3" - Viva) is
hereby quoted:
6 January 1992
Dear Vic,
This is not a very formal business letter I am
writing to you as I would like to express my
difficulty in recommending the purchase of the
three film packages you are offering ABS-CBN.
From among the three packages I can only tick
off 10 titles we can purchase. Please see
attached. I hope you will understand my
position. Most of the action pictures in the list
do not have big action stars in the cast. They
are not for primetime. In line with this I wish to
mention that I have not scheduled for telecast
several action pictures in out very first contract
because of the cheap production value of these
movies as well as the lack of big action stars. As
a film producer, I am sure you understand what
I am trying to say as Viva produces only big
action pictures.
In fact, I would like to request two (2) additional
runs for these movies as I can only schedule
them in our non-primetime slots. We have to
cover the amount that was paid for these
movies because as you very well know that non-
primetime advertising rates are very low. These
are the unaired titles in the first contract.
1. Kontra Persa [sic].
2. Raider Platoon.
3. Underground guerillas
4. Tiger Command
5. Boy de Sabog
6. Lady Commando
7. Batang Matadero
8. Rebelyon
I hope you will consider this request of mine.
The other dramatic films have been offered to us
before and have been rejected because of the
ruling of MTRCB to have them aired at 9:00
p.m. due to their very adult themes.
As for the 10 titles I have choosen [sic] from the
3 packages please consider including all the
other Viva movies produced last year. I have
quite an attractive offer to make.
Thanking you and with my warmest regards.
(Signed) Charo Santos-Concio
On February 27, 1992, defendant Del Rosario
approached ABS-CBN's Ms. Concio, with a list
consisting of 52 original movie titles (i.e. not yet
aired on television) including the 14 titles
subject of the present case, as well as 104 re-
runs (previously aired on television) from which
ABS-CBN may choose another 52 titles, as a
total of 156 titles, proposing to sell to ABS-CBN
airing rights over this package of 52 originals
and 52 re-runs for P60,000,000.00 of which
P30,000,000.00 will be in cash and
P30,000,000.00 worth of television spots (Exh.
"4" to "4-C" Viva; "9" -Viva).
On April 2, 1992, defendant Del Rosario and
ABS-CBN general manager, Eugenio Lopez III,
met at the Tamarind Grill Restaurant in Quezon
City to discuss the package proposal of Viva.
What transpired in that lunch meeting is the
subject of conflicting versions. Mr. Lopez
testified that he and Mr. Del Rosario allegedly
agreed that ABS-CRN was granted exclusive
film rights to fourteen (14) films for a total
consideration of P36 million; that he allegedly
put this agreement as to the price and number
of films in a "napkin'' and signed it and gave it
to Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-
78, June 8, 1992). On the other hand, Del
Rosario denied having made any agreement
with Lopez regarding the 14 Viva films; denied
the existence of a napkin in which Lopez wrote
something; and insisted that what he and Lopez
discussed at the lunch meeting was Viva's film
 package offer of 104 films (52 originals and 52
re-runs) for a total price of P60 million. Mr.
Lopez promising [sic]to make a counter proposal
which came in the form of a proposal contract
Annex "C" of the complaint (Exh. "1"·- Viva;
Exh. "C" - ABS-CBN).
On April 06, 1992, Del Rosario and Mr.
Graciano Gozon of RBS Senior vice-president
for Finance discussed the terms and conditions
of Viva's offer to sell the 104 films, after the
rejection of the same package by ABS-CBN.
On April 07, 1992, defendant Del Rosario
received through his secretary, a handwritten
note from Ms. Concio, (Exh. "5" - Viva), which
reads: "Here's the draft of the contract. I hope
you find everything in order," to which was
attached a draft exhibition agreement (Exh. "C''-
ABS-CBN; Exh. "9" - Viva, p. 3) a counter-
proposal covering 53 films, 52 of which came
from the list sent by defendant Del Rosario and
one film was added by Ms. Concio, for a
consideration of P35 million. Exhibit "C"
provides that ABS-CBN is granted films right to
53 films and contains a right of first refusal to
"1992 Viva Films." The said counter proposal
was however rejected by Viva's Board of
Directors [in the] evening of the same day, April
7, 1992, as Viva would not sell anything less
than the package of 104 films for P60 million
pesos (Exh. "9" - Viva), and such rejection was
relayed to Ms. Concio.
On April 29, 1992, after the rejection of ABS-
CBN and following several negotiations and
meetings defendant Del Rosario and Viva's
President Teresita Cruz, in consideration of P60
million, signed a letter of agreement dated April
24, 1992. granting RBS the exclusive right to
air 104 Viva-produced and/or acquired films
(Exh. "7-A" - RBS; Exh. "4" - RBS) including the
fourteen (14) films subject of the present case. 4
On 27 May 1992, ABS-CBN filed before the RTC a complaint for
specific performance with a prayer for a writ of preliminary
injunction and/or temporary restraining order against private
respondents Republic Broadcasting Corporation 5 (hereafter RBS ),
Viva Production (hereafter VIVA), and Vicente Del Rosario. The
complaint was docketed as Civil Case No. Q-92-12309.
On 27 May 1992, RTC issued a temporary restraining
order 6 enjoining private respondents from proceeding with the
airing, broadcasting, and televising of the fourteen VIVA films
subject of the controversy, starting with the film Maging Sino Ka
Man, which was scheduled to be shown on private respondents
RBS' channel 7 at seven o'clock in the evening of said date.
On 17 June 1992, after appropriate proceedings, the RTC issued
an 
order 7 directing the issuance of a writ of preliminary injunction
upon ABS-CBN's posting of P35 million bond. ABS-CBN moved for
the reduction of the bond, 8 while private respondents moved for
reconsideration of the order and offered to put up a
counterbound. 9
In the meantime, private respondents filed separate answers with
counterclaim. 10 RBS also set up a cross-claim against VIVA..
On 3 August 1992, the RTC issued an order 11 dissolving the writ
of preliminary injunction upon the posting by RBS of a P30 million
counterbond to answer for whatever damages ABS-CBN might
suffer by virtue of such dissolution. However, it reduced
petitioner's injunction bond to P15 million as a condition
precedent for the reinstatement of the writ of preliminary
injunction should private respondents be unable to post a
counterbond.
At the pre-trial 12 on 6 August 1992, the parties, upon suggestion
of the court, agreed to explore the possibility of an amicable
settlement. In the meantime, RBS prayed for and was granted
reasonable time within which to put up a P30 million counterbond
in the event that no settlement would be reached.
As the parties failed to enter into an amicable settlement RBS
posted on 1 October 1992 a counterbond, which the RTC
approved in its Order of 15 October 1992. 13
On 19 October 1992, ABS-CBN filed a motion for
reconsideration 14 of the 3 August and 15 October 1992 Orders,
which RBS opposed. 15
On 29 October 1992, the RTC conducted a pre-trial. 16
Pending resolution of its motion for reconsideration, ABS-CBN
filed with the Court of Appeals a petition17challenging the RTC's
Orders of 3 August and 15 October 1992 and praying for the
issuance of a writ of preliminary injunction to enjoin the RTC from
enforcing said orders. The case was docketed as CA-G.R. SP No.
29300.
On 3 November 1992, the Court of Appeals issued a temporary
restraining order18 to enjoin the airing, broadcasting, and
televising of any or all of the films involved in the controversy.
On 18 December 1992, the Court of Appeals promulgated a
decision 19 dismissing the petition in CA -G.R. No. 29300 for being
premature. ABS-CBN challenged the dismissal in a petition for
review filed with this Court on 19 January 1993, which was
docketed as G.R. No. 108363.
In the meantime the RTC received the evidence for the parties in
Civil Case No. Q-192-1209. Thereafter, on 28 April 1993, it
rendered a decision 20 in favor of RBS and VIVA and against ABS-
CBN disposing as follows:
WHEREFORE, under cool reflection and
prescinding from the foregoing, judgments is
rendered in favor of defendants and against the
plaintiff.
(1) The complaint is hereby dismissed;
(2) Plaintiff ABS-CBN is ordered to pay defendant
RBS the following:
a) P107,727.00, the amount of premium paid by
RBS to the surety which issued defendant RBS's
bond to lift the injunction;
b) P191,843.00 for the amount of print
advertisement for "Maging Sino Ka Man" in various
newspapers;
c) Attorney's fees in the amount of P1 million;
d) P5 million as and by way of moral damages;
e) P5 million as and by way of exemplary damages;
(3) For defendant VIVA, plaintiff ABS-CBN is
ordered to pay P212,000.00 by way of reasonable
attorney's fees.
(4) The cross-claim of defendant RBS against
defendant VIVA is dismissed.
(5) Plaintiff to pay the costs.
According to the RTC, there was no meeting of minds on the price
and terms of the offer. The alleged agreement between Lopez III
and Del Rosario was subject to the approval of the VIVA Board of
Directors, and said agreement was disapproved during the
meeting of the Board on 7 April 1992. Hence, there was no basis
for ABS-CBN's demand that VIVA signed the 1992 Film Exhibition
Agreement. Furthermore, the right of first refusal under the 1990
Film Exhibition Agreement had previously been exercised per Ms.
Concio's letter to Del Rosario ticking off ten titles acceptable to
them, which would have made the 1992 agreement an entirely
new contract.
On 21 June 1993, this Court denied21 ABS-CBN's petition for
review in G.R. No. 108363, as no reversible error was committed
by the Court of Appeals in its challenged decision and the case
had "become moot and academic in view of the dismissal of the
main action by the court a quo in its decision" of 28 April 1993.
Aggrieved by the RTC's decision, ABS-CBN appealed to the Court
of Appeals claiming that there was a perfected contract between
ABS-CBN and VIVA granting ABS-CBN the exclusive right to
exhibit the subject films. Private respondents VIVA and Del
Rosario also appealed seeking moral and exemplary damages and
additional attorney's fees.
In its decision of 31 October 1996, the Court of Appeals agreed
with the RTC that the contract between ABS-CBN and VIVA had
not been perfected, absent the approval by the VIVA Board of
Directors of whatever Del Rosario, it's agent, might have agreed
with Lopez III. The appellate court did not even believe ABS-CBN's
evidence that Lopez III actually wrote down such an agreement on
a "napkin," as the same was never produced in court. It likewise
rejected ABS-CBN's insistence on its right of first refusal and
ratiocinated as follows:
As regards the matter of right of first refusal, it may be
true that a Film Exhibition Agreement was entered into
between Appellant ABS-CBN and appellant VIVA under
Exhibit "A" in 1990, and that parag. 1.4 thereof
provides:
1.4 ABS-CBN shall have the right of first refusal to the
next twenty-four (24) VIVA films for TV telecast under
such terms as may be agreed upon by the parties
hereto, provided, however, that such right shall be
exercised by ABS-CBN within a period of fifteen (15)
days from the actual offer in writing (Records, p. 14).
[H]owever, it is very clear that said right of first refusal
in favor of ABS-CBN shall still be subject to such terms
as may be agreed upon by the parties thereto, and that
the said right shall be exercised by ABS-CBN within
fifteen (15) days from the actual offer in writing.
Said parag. 1.4 of the agreement Exhibit "A" on the
right of first refusal did not fix the price of the film right
to the twenty-four (24) films, nor did it specify the
terms thereof. The same are still left to be agreed upon
by the parties.
In the instant case, ABS-CBN's letter of rejection
Exhibit 3 (Records, p. 89) stated that it can only tick off
ten (10) films, and the draft contract Exhibit "C"
accepted only fourteen (14) films, while parag. 1.4 of
Exhibit "A'' speaks of the next twenty-four (24) films.
The offer of V1VA was sometime in December 1991
(Exhibits 2, 2-A. 2-B; Records, pp. 86-88; Decision, p.
11, Records, p. 1150), when the first list of VIVA films
was sent by Mr. Del Rosario to ABS-CBN. The Vice
President of ABS-CBN, Ms. Charo Santos-Concio, sent
a letter dated January 6, 1992 (Exhibit 3, Records, p.
89) where ABS-CBN exercised its right of refusal by
rejecting the offer of VIVA.. As aptly observed by the
trial court, with the said letter of Mrs. Concio of
January 6, 1992, ABS-CBN had lost its right of first
refusal. And even if We reckon the fifteen (15) day
period from February 27, 1992 (Exhibit 4 to 4-C) when
another list was sent to ABS-CBN after the letter of
Mrs. Concio, still the fifteen (15) day period within
which ABS-CBN shall exercise its right of first refusal
has already expired.22
Accordingly, respondent court sustained the award of actual
damages consisting in the cost of print advertisements and the
premium payments for the counterbond, there being adequate
proof of the pecuniary loss which RBS had suffered as a result of
the filing of the complaint by ABS-CBN. As to the award of moral
damages, the Court of Appeals found reasonable basis therefor,
holding that RBS's reputation was debased by the filing of the
complaint in Civil Case No. Q-92-12309 and by the non-showing
of the film "Maging Sino Ka Man." Respondent court also held that
exemplary damages were correctly imposed by way of example or
correction for the public good in view of the filing of the complaint
despite petitioner's knowledge that the contract with VIVA had not
been perfected, It also upheld the award of attorney's fees,
reasoning that with ABS-CBN's act of instituting Civil Case No, Q-
92-1209, RBS was "unnecessarily forced to litigate." The appellate
court, however, reduced the awards of moral damages to P2
million, exemplary damages to P2 million, and attorney's fees to
P500, 000.00.
On the other hand, respondent Court of Appeals denied VIVA and
Del Rosario's appeal because it was "RBS and not VIVA which was
actually prejudiced when the complaint was filed by ABS-CBN."
Its motion for reconsideration having been denied, ABS-CBN filed
the petition in this case, contending that the Court of Appeals
gravely erred in
I
. . . RULING THAT THERE WAS NO
PERFECTED CONTRACT BETWEEN
PETITIONER AND PRIVATE RESPONDENT VIVA
NOTWITHSTANDING PREPONDERANCE OF
EVIDENCE ADDUCED BY PETITIONER TO THE
CONTRARY.
II
. . . IN AWARDING ACTUAL AND
COMPENSATORY DAMAGES IN FAVOR OF
PRIVATE RESPONDENT RBS.
III
. . . IN AWARDING MORAL AND EXEMPLARY
DAMAGES IN FAVOR OF PRIVATE
RESPONDENT RBS.
IV
. . . IN AWARDING ATTORNEY'S FEES IN
FAVOR OF RBS.
ABS-CBN claims that it had yet to fully exercise its right of first
refusal over twenty-four titles under the 1990 Film Exhibition
Agreement, as it had chosen only ten titles from the first list. It
insists that we give credence to Lopez's testimony that he and Del
Rosario met at the Tamarind Grill Restaurant, discussed the
terms and conditions of the second list (the 1992 Film Exhibition
Agreement) and upon agreement thereon, wrote the same on a
paper napkin. It also asserts that the contract has already been
effective, as the elements thereof, namely, consent, object, and
consideration were established. It then concludes that the Court of
Appeals' pronouncements were not supported by law and
jurisprudence, as per our decision of 1 December 1995
in Limketkai Sons Milling, Inc. v. Court of Appeals, 23 which
cited Toyota Shaw, Inc. v. Court of Appeals, 24 Ang Yu Asuncion v.
Court of Appeals, 25 and Villonco Realty Company v. Bormaheco.
Inc.26
Anent the actual damages awarded to RBS, ABS-CBN disavows
liability therefor. RBS spent for the premium on the counterbond
of its own volition in order to negate the injunction issued by the
trial court after the parties had ventilated their respective
positions during the hearings for the purpose. The filing of the
counterbond was an option available to RBS, but it can hardly be
argued that ABS-CBN compelled RBS to incur such expense.
Besides, RBS had another available option, i.e., move for the
dissolution or the injunction; or if it was determined to put up a
counterbond, it could have presented a cash bond. Furthermore
under Article 2203 of the Civil Code, the party suffering loss or
injury is also required to exercise the diligence of a good father of
a family to minimize the damages resulting from the act or
omission. As regards the cost of print advertisements, RBS had
not convincingly established that this was a loss attributable to
the non showing "Maging Sino Ka Man"; on the contrary, it was
brought out during trial that with or without the case or the
injunction, RBS would have spent such an amount to generate
interest in the film.
ABS-CBN further contends that there was no clear basis for the
awards of moral and exemplary damages. The controversy
involving ABS-CBN and RBS did not in any way originate from
business transaction between them. The claims for such damages
did not arise from any contractual dealings or from specific acts
committed by ABS-CBN against RBS that may be characterized as
wanton, fraudulent, or reckless; they arose by virtue only of the
filing of the complaint, An award of moral and exemplary damages
is not warranted where the record is bereft of any proof that a
party acted maliciously or in bad faith in filing an action. 27 In any
case, free resort to courts for redress of wrongs is a matter of
public policy. The law recognizes the right of every one to sue for
that which he honestly believes to be his right without fear of
standing trial for damages where by lack of sufficient evidence,
legal technicalities, or a different interpretation of the laws on the
matter, the case would lose ground. 28 One who makes use of his
own legal right does no injury. 29 If damage results front the filing
of the complaint, it is damnum absque injuria. 30 Besides, moral
damages are generally not awarded in favor of a juridical person,
unless it enjoys a good reputation that was debased by the
offending party resulting in social humiliation. 31
As regards the award of attorney's fees, ABS-CBN maintains that
the same had no factual, legal, or equitable justification. In
sustaining the trial court's award, the Court of Appeals acted in
clear disregard of the doctrines laid down in Buan
v. Camaganacan  32 that the text of the decision should state the
reason why attorney's fees are being awarded; otherwise, the
award should be disallowed. Besides, no bad faith has been
imputed on, much less proved as having been committed by, ABS-
CBN. It has been held that "where no sufficient showing of bad
faith would be reflected in a party' s persistence in a case other
than an erroneous conviction of the righteousness of his cause,
attorney's fees shall not be recovered as cost." 33
On the other hand, RBS asserts that there was no perfected
contract between ABS-CBN and VIVA absent any meeting of
minds between them regarding the object and consideration of the
alleged contract. It affirms that the ABS-CBN's claim of a right of
first refusal was correctly rejected by the trial court. RBS insist
the premium it had paid for the counterbond constituted a
pecuniary loss upon which it may recover. It was obliged to put up
the counterbound due to the injunction procured by ABS-CBN.
Since the trial court found that ABS-CBN had no cause of action
or valid claim against RBS and, therefore not entitled to the writ of
injunction, RBS could recover from ABS-CBN the premium paid
on the counterbond. Contrary to the claim of ABS-CBN, the cash
bond would prove to be more expensive, as the loss would be
equivalent to the cost of money RBS would forego in case the P30
million came from its funds or was borrowed from banks.
RBS likewise asserts that it was entitled to the cost of
advertisements for the cancelled showing of the film "Maging Sino
Ka Man" because the print advertisements were put out to
announce the showing on a particular day and hour on Channel
7, i.e., in its entirety at one time, not a series to be shown on a
periodic basis. Hence, the print advertisement were good and
relevant for the particular date showing, and since the film could
not be shown on that particular date and hour because of the
injunction, the expenses for the advertisements had gone to waste.
As regards moral and exemplary damages, RBS asserts that ABS-
CBN filed the case and secured injunctions purely for the purpose
of harassing and prejudicing RBS. Pursuant then to Article 19 and
21 of the Civil Code, ABS-CBN must be held liable for such
damages. Citing Tolentino,34 damages may be awarded in cases of
abuse of rights even if the act done is not illicit and there is abuse
of rights were plaintiff institutes and action purely for the purpose
of harassing or prejudicing the defendant.
In support of its stand that a juridical entity can recover moral
and exemplary damages, private respondents RBS cited People
v. Manero,35 where it was stated that such entity may recover
moral and exemplary damages if it has a good reputation that is
debased resulting in social humiliation. it then ratiocinates; thus:
There can be no doubt that RBS' reputation has
been debased by ABS-CBN's acts in this case.
When RBS was not able to fulfill its
commitment to the viewing public to show the
film "Maging Sino Ka Man" on the scheduled
dates and times (and on two occasions that RBS
advertised), it suffered serious embarrassment
and social humiliation. When the showing was
canceled, late viewers called up RBS' offices and
subjected RBS to verbal abuse ("Announce kayo
nang announce, hindi ninyo naman ilalabas,"
"nanloloko yata kayo") (Exh. 3-RBS, par. 3).
This alone was not something RBS brought
upon itself. it was exactly what ABS-CBN had
planned to happen.
The amount of moral and exemplary damages
cannot be said to be excessive. Two reasons
justify the amount of the award.
The first is that the humiliation suffered by RBS
is national extent. RBS operations as a
broadcasting company is [sic] nationwide. Its
clientele, like that of ABS-CBN, consists of
those who own and watch television. It is not an
exaggeration to state, and it is a matter of
judicial notice that almost every other person in
the country watches television. The humiliation
suffered by RBS is multiplied by the number of
televiewers who had anticipated the showing of
the film "Maging Sino Ka Man" on May 28 and
November 3, 1992 but did not see it owing to
the cancellation. Added to this are the
advertisers who had placed commercial spots
for the telecast and to whom RBS had a
commitment in consideration of the placement
to show the film in the dates and times
specified.
The second is that it is a competitor that caused
RBS to suffer the humiliation. The humiliation
and injury are far greater in degree when
caused by an entity whose ultimate business
objective is to lure customers (viewers in this
case) away from the competition. 36
For their part, VIVA and Vicente del Rosario contend that the
findings of fact of the trial court and the Court of Appeals do not
support ABS-CBN's claim that there was a perfected contract.
Such factual findings can no longer be disturbed in this petition
for review under Rule 45, as only questions of law can be raised,
not questions of fact. On the issue of damages and attorneys fees,
they adopted the arguments of RBS.
The key issues for our consideration are (1) whether there was a
perfected contract between VIVA and ABS-CBN, and (2) whether
RBS is entitled to damages and attorney's fees. It may be noted
that the award of attorney's fees of P212,000 in favor of VIVA is
not assigned as another error.
I.
The first issue should be resolved against ABS-CBN. A contract is
a meeting of minds between two persons whereby one binds
himself to give something or to render some service to
another 37 for a consideration. there is no contract unless the
following requisites concur: (1) consent of the contracting parties;
(2) object certain which is the subject of the contract; and (3)
cause of the obligation, which is established. 38 A contract
undergoes three stages:
(a) preparation, conception, or generation,
which is the period of negotiation and
bargaining, ending at the moment of agreement
of the parties;
(b) perfection or birth of the contract, which is
the moment when the parties come to agree on
the terms of the contract; and
(c) consummation or death, which is the
fulfillment or performance of the terms agreed
upon in the contract. 39
Contracts that are consensual in nature are perfected upon mere
meeting of the minds, Once there is concurrence between the offer
and the acceptance upon the subject matter, consideration, and
terms of payment a contract is produced. The offer must be
certain. To convert the offer into a contract, the acceptance must
be absolute and must not qualify the terms of the offer; it must be
plain, unequivocal, unconditional, and without variance of any
sort from the proposal. A qualified acceptance, or one that involves
a new proposal, constitutes a counter-offer and is a rejection of
the original offer. Consequently, when something is desired which
is not exactly what is proposed in the offer, such acceptance is not
sufficient to generate consent because any modification or
variation from the terms of the offer annuls the offer. 40
When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN at
the Tamarind Grill on 2 April 1992 to discuss the package of films,
said package of 104 VIVA films was VIVA's offer to ABS-CBN to
enter into a new Film Exhibition Agreement. But ABS-CBN, sent,
through Ms. Concio, a counter-proposal in the form of a draft
contract proposing exhibition of 53 films for a consideration of P35
million. This counter-proposal could be nothing less than the
counter-offer of Mr. Lopez during his conference with Del Rosario
at Tamarind Grill Restaurant. Clearly, there was no acceptance of
VIVA's offer, for it was met by a counter-offer which substantially
varied the terms of the offer.
ABS-CBN's reliance in Limketkai Sons Milling, Inc. v. Court of
Appeals 41 and Villonco Realty Company v. Bormaheco, Inc., 42 is
misplaced. In these cases, it was held that an acceptance may
contain a request for certain changes in the terms of the offer and
yet be a binding acceptance as long as "it is clear that the meaning
of the acceptance is positively and unequivocally to accept the
offer, whether such request is granted or not." This ruling was,
however, reversed in the resolution of 29 March 1996, 43 which
ruled that the acceptance of all offer must be unqualified and
absolute, i.e., it "must be identical in all respects with that of the
offer so as to produce consent or meeting of the minds."
On the other hand, in Villonco, cited in Limketkai, the alleged
changes in the revised counter-offer were not material but merely
clarificatory of what had previously been agreed upon. It cited the
statement in Stuart v. Franklin Life Insurance Co.44 that "a
vendor's change in a phrase of the offer to purchase, which
change does not essentially change the terms of the offer, does not
amount to a rejection of the offer and the tender of a counter-
offer." 45However, when any of the elements of the contract is
modified upon acceptance, such alteration amounts to a counter-
offer.
In the case at bar, ABS-CBN made no unqualified acceptance of
VIVA's offer. Hence, they underwent a period of bargaining. ABS-
CBN then formalized its counter-proposals or counter-offer in a
draft contract, VIVA through its Board of Directors, rejected such
counter-offer, Even if it be conceded arguendo that Del Rosario
had accepted the counter-offer, the acceptance did not bind VIVA,
as there was no proof whatsoever that Del Rosario had the specific
authority to do so.
Under Corporation Code,46 unless otherwise provided by said
Code, corporate powers, such as the power; to enter into
contracts; are exercised by the Board of Directors. However, the
Board may delegate such powers to either an executive committee
or officials or contracted managers. The delegation, except for the
executive committee, must be for specific purposes, 47 Delegation
to officers makes the latter agents of the corporation; accordingly,
the general rules of agency as to the bindings effects of their acts
would 
apply. 48 For such officers to be deemed fully clothed by the
corporation to exercise a power of the Board, the latter must
specially authorize them to do so. That Del Rosario did not have
the authority to accept ABS-CBN's counter-offer was best
evidenced by his submission of the draft contract to VIVA's Board
of Directors for the latter's approval. In any event, there was
between Del Rosario and Lopez III no meeting of minds. The
following findings of the trial court are instructive:
A number of considerations militate against
ABS-CBN's claim that a contract was perfected
at that lunch meeting on April 02, 1992 at the
Tamarind Grill.
FIRST, Mr. Lopez claimed that what was agreed
upon at the Tamarind Grill referred to the price
and the number of films, which he wrote on a
napkin. However, Exhibit "C"
contains numerous provisions which, were not
discussed at the Tamarind Grill, if Lopez
testimony was to be believed nor could they
have been physically written on a napkin. There
was even doubt as to whether it was a paper
napkin or a cloth napkin. In short what were
written in Exhibit "C'' were not discussed, and
therefore could not have been agreed upon, by
the parties. How then could this court compel
the parties to sign Exhibit "C" when the
provisions thereof were not previously agreed
upon?
SECOND, Mr. Lopez claimed that what was
agreed upon as the subject matter of the
contract was 14 films. The complaint in fact
prays for delivery of 14 films. But Exhibit "C"
mentions 53 films as its subject matter. Which
is which If Exhibits "C" reflected the true intent
of the parties, then ABS-CBN's claim for 14
films in its complaint is false or if what it
alleged in the complaint is true, then Exhibit
"C" did not reflect what was agreed upon by the
parties. This underscores the fact that there
was no meeting of the minds as to the subject
matter of the contracts, so as to preclude
perfection thereof. For settled is the rule that
there can be no contract where there is no
object which is its subject matter (Art. 1318,
NCC).
THIRD, Mr. Lopez [sic] answer to question 29 of
his affidavit testimony (Exh. "D") states:
We were able to reach an agreement. VIVA gave
us the exclusive license to show these fourteen
(14) films, and we agreed to pay Viva the
amount of P16,050,000.00 as well as grant Viva
commercial slots worth P19,950,000.00. We had
already earmarked this P16, 050,000.00.
which gives a total consideration of P36 million
(P19,950,000.00 plus P16,050,000.00. equals
P36,000,000.00).
On cross-examination Mr. Lopez testified:
Q. What was written in this napkin?
A. The total price, the breakdown the known
Viva movies, the 7 blockbuster movies and the
other 7 Viva movies because the price was
broken down accordingly. The none [sic] Viva
and the seven other Viva movies and the
sharing between the cash portion and the
concerned spot portion in the total amount of
P35 million pesos.
Now, which is which? P36 million or P35
million? This weakens ABS-CBN's claim.
FOURTH. Mrs. Concio, testifying for ABS-CBN
stated that she transmitted Exhibit "C" to Mr.
Del Rosario with a handwritten note, describing
said Exhibit "C" as a "draft." (Exh. "5" - Viva; tsn
pp. 23-24 June 08, 1992). The said draft has a
well defined meaning.
Since Exhibit "C" is only a draft, or a tentative,
provisional or preparatory writing prepared for
discussion, the terms and conditions thereof
could not have been previously agreed upon by
ABS-CBN and Viva Exhibit "C'' could not
therefore legally bind Viva, not having agreed
thereto. In fact, Ms. Concio admitted that the
terms and conditions embodied in Exhibit "C"
were prepared by ABS-CBN's lawyers and there
was no discussion on said terms and conditions.
...
As the parties had not yet discussed the
proposed terms and conditions in Exhibit "C,"
and there was no evidence whatsoever that Viva
agreed to the terms and conditions thereof, said
document cannot be a binding contract. The
fact that Viva refused to sign Exhibit "C" reveals
only two [sic] well that it did not agree on its
terms and conditions, and this court has no
authority to compel Viva to agree thereto.
FIFTH. Mr. Lopez understand [sic] that what he
and Mr. Del Rosario agreed upon at the
Tamarind Grill was only provisional, in the
sense that it was subject to approval by the
Board of Directors of Viva. He testified:
Q. Now, Mr. Witness, and after that Tamarind
meeting ... the second meeting wherein you
claimed that you have the meeting of the minds
between you and Mr. Vic del Rosario, what
happened?
A. Vic Del Rosario was supposed to call us up
and tell us specifically the result of the
discussion with the Board of Directors.
Q. And you are referring to the so-called
agreement which you wrote in [sic] a piece of
paper?
A. Yes, sir.
Q. So, he was going to forward that to the board
of Directors for approval?
A. Yes, sir. (Tsn, pp. 42-43, June 8, 1992)
Q. Did Mr. Del Rosario tell you that he will
submit it to his Board for approval?
A. Yes, sir. (Tsn, p. 69, June 8, 1992).
The above testimony of Mr. Lopez shows beyond
doubt that he knew Mr. Del Rosario had no
authority to bind Viva to a contract with ABS-
CBN until and unless its Board of Directors
approved it. The complaint, in fact, alleges that
Mr. Del Rosario "is the Executive Producer of
defendant Viva" which "is a corporation." (par.
2, complaint). As a mere agent of Viva, Del
Rosario could not bind Viva unless what he did
is ratified by its Board of Directors. (Vicente
vs. Geraldez, 52 SCRA 210; Arnold
vs. Willets and Paterson, 44 Phil. 634). As a
mere agent, recognized as such by plaintiff, Del
Rosario could not be held liable jointly and
severally with Viva and his inclusion as party
defendant has no legal basis. (Salonga
vs. Warner Barner [sic] , COLTA , 88 Phil. 125;
Salmon vs. Tan, 36 Phil. 556).
The testimony of Mr. Lopez and the allegations
in the complaint are clear admissions that what
was supposed to have been agreed upon at the
Tamarind Grill between Mr. Lopez and Del
Rosario was not a binding agreement. It is as it
should be because corporate power to enter into
a contract is lodged in the Board of Directors.
(Sec. 23, Corporation Code). Without such
board approval by the Viva board, whatever
agreement Lopez and Del Rosario arrived at
could not ripen into a valid contract binding
upon Viva (Yao Ka Sin Trading vs. Court of
Appeals, 209 SCRA 763). The evidence adduced
shows that the Board of Directors of Viva
rejected Exhibit "C" and insisted that the film
package for 140 films be maintained (Exh. "7-1"
- Viva ). 49
The contention that ABS-CBN had yet to fully exercise its right of
first refusal over twenty-four films under the 1990 Film Exhibition
Agreement and that the meeting between Lopez and Del Rosario
was a continuation of said previous contract is untenable. As
observed by the trial court, ABS-CBN right of first refusal had
already been exercised when Ms. Concio wrote to VIVA ticking off
ten films, Thus:
[T]he subsequent negotiation with ABS-CBN two
(2) months after this letter was sent, was for an
entirely different package. Ms. Concio herself
admitted on cross-examination to having used
or exercised the right of first refusal. She stated
that the list was not acceptable and was indeed
not accepted by ABS-CBN, (TSN, June 8, 1992,
pp. 8-10). Even Mr. Lopez himself admitted that
the right of the first refusal may have been
already exercised by Ms. Concio (as she had).
(TSN, June 8, 1992, pp. 71-75). Del Rosario
himself knew and understand [sic] that ABS-
CBN has lost its rights of the first refusal when
his list of 36 titles were rejected (Tsn, June 9,
1992, pp. 10-11) 50
II
However, we find for ABS-CBN on the issue of damages. We shall
first take up actual damages. Chapter 2, Title XVIII, Book IV of the
Civil Code is the specific law on actual or compensatory damages.
Except as provided by law or by stipulation, one is entitled to
compensation for actual damages only for such pecuniary loss
suffered by him as he has duly proved. 51 The indemnification
shall comprehend not only the value of the loss suffered, but also
that of the profits that the obligee failed to obtain. 52 In contracts
and quasi-contracts the damages which may be awarded are
dependent on whether the obligor acted with good faith or
otherwise, It case of good faith, the damages recoverable are those
which are the natural and probable consequences of the breach of
the obligation and which the parties have foreseen or could have
reasonably foreseen at the time of the constitution of the
obligation. If the obligor acted with fraud, bad faith, malice, or
wanton attitude, he shall be responsible for all damages which
may be reasonably attributed to the non-performance of the
obligation. 53 In crimes and quasi-delicts, the defendant shall be
liable for all damages which are the natural and probable
consequences of the act or omission complained of, whether or not
such damages has been foreseen or could have reasonably been
foreseen by the defendant.54
Actual damages may likewise be recovered for loss or impairment
of earning capacity in cases of temporary or permanent personal
injury, or for injury to the plaintiff's business standing or
commercial credit.55
The claim of RBS for actual damages did not arise from contract,
quasi-contract, delict, or quasi-delict. It arose from the fact of
filing of the complaint despite ABS-CBN's alleged knowledge of
lack of cause of action. Thus paragraph 12 of RBS's Answer with
Counterclaim and Cross-claim under the heading
COUNTERCLAIM specifically alleges:
12. ABS-CBN filed the complaint knowing fully
well that it has no cause of action RBS. As a
result thereof, RBS suffered actual damages in
the amount of P6,621,195.32. 56
Needless to state the award of actual damages cannot be
comprehended under the above law on actual damages. RBS could
only probably take refuge under Articles 19, 20, and 21 of the Civil
Code, which read as follows:
Art. 19. Every person must, in the exercise of
his rights and in the performance of his duties,
act with justice, give everyone his due, and
observe honesty and good faith.
Art. 20. Every person who, contrary to law,
wilfully or negligently causes damage to
another, shall indemnify the latter for tile same.
Art. 21. Any person who wilfully causes loss or
injury to another in a manner that is contrary
to morals, good customs or public policy shall
compensate the latter for the damage.
It may further be observed that in cases where a writ of
preliminary injunction is issued, the damages which the
defendant may suffer by reason of the writ are recoverable from
the injunctive bond. 57 In this case, ABS-CBN had not yet filed the
required bond; as a matter of fact, it asked for reduction of the
bond and even went to the Court of Appeals to challenge the order
on the matter, Clearly then, it was not necessary for RBS to file a
counterbond. Hence, ABS-CBN cannot be held responsible for the
premium RBS paid for the counterbond.
Neither could ABS-CBN be liable for the print advertisements for
"Maging Sino Ka Man" for lack of sufficient legal basis. The RTC
issued a temporary restraining order and later, a writ of
preliminary injunction on the basis of its determination that there
existed sufficient ground for the issuance thereof. Notably, the
RTC did not dissolve the injunction on the ground of lack of legal
and factual basis, but because of the plea of RBS that it be
allowed to put up a counterbond.
As regards attorney's fees, the law is clear that in the absence of
stipulation, attorney's fees may be recovered as actual or
compensatory damages under any of the circumstances provided
for in Article 2208 of the Civil Code. 58
The general rule is that attorney's fees cannot be recovered as part
of damages because of the policy that no premium should be
placed on the right to litigate. 59 They are not to be awarded every
time a party wins a suit. The power of the court to award
attorney's fees under Article 2208 demands factual, legal, and
equitable justification.60Even when claimant is compelled to
litigate with third persons or to incur expenses to protect his
rights, still attorney's fees may not be awarded where no sufficient
showing of bad faith could be reflected in a party's persistence in a
case other than erroneous conviction of the righteousness of his
cause. 61
As to moral damages the law is Section 1, Chapter 3, Title XVIII,
Book IV of the Civil Code. Article 2217 thereof defines what are
included in moral damages, while Article 2219 enumerates the
cases where they may be recovered, Article 2220 provides that
moral damages may be recovered in breaches of contract where
the defendant acted fraudulently or in bad faith. RBS's claim for
moral damages could possibly fall only under item (10) of Article
2219, thereof which reads:
(10) Acts and actions referred to in Articles 21,
26, 27, 28, 29, 30, 32, 34, and 35.
Moral damages are in the category of an award designed to
compensate the claimant for actual injury suffered. and not to
impose a penalty on the wrongdoer.62 The award is not meant to
enrich the complainant at the expense of the defendant, but to
enable the injured party to obtain means, diversion, or
amusements that will serve to obviate then moral suffering he has
undergone. It is aimed at the restoration, within the limits of the
possible, of the spiritual status quo ante, and should be
proportionate to the suffering inflicted. 63 Trial courts must then
guard against the award of exorbitant damages; they should
exercise balanced restrained and measured objectivity to avoid
suspicion that it was due to passion, prejudice, or corruption on
the part of the trial court. 64
The award of moral damages cannot be granted in favor of a
corporation because, being an artificial person and having
existence only in legal contemplation, it has no feelings, no
emotions, no senses, It cannot, therefore, experience physical
suffering and mental anguish, which call be experienced only by
one having a nervous system. 65 The statement in People
v. Manero 66 and Mambulao Lumber Co. v. PNB  67 that a
corporation may recover moral damages if it "has a good
reputation that is debased, resulting in social humiliation" is
an obiter dictum. On this score alone the award for damages must
be set aside, since RBS is a corporation.
The basic law on exemplary damages is Section 5, Chapter 3, Title
XVIII, Book IV of the Civil Code. These are imposed by way of
example or correction for the public good, in addition to moral,
temperate, liquidated or compensatory damages. 68 They are
recoverable in criminal cases as part of the civil liability when the
crime was committed with one or more aggravating
circumstances; 69 in quasi-contracts, if the defendant acted with
gross negligence; 70 and in contracts and quasi-contracts, if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.71
It may be reiterated that the claim of RBS against ABS-CBN is not
based on contract, quasi-contract, delict, or quasi-delict, Hence,
the claims for moral and exemplary damages can only be based on
Articles 19, 20, and 21 of the Civil Code.
The elements of abuse of right under Article 19 are the following:
(1) the existence of a legal right or duty, (2) which is exercised in
bad faith, and (3) for the sole intent of prejudicing or injuring
another. Article 20 speaks of the general sanction for all other
provisions of law which do not especially provide for their own
sanction; while Article 21 deals with acts contra bonus mores, and
has the following elements; (1) there is an act which is legal, (2)
but which is contrary to morals, good custom, public order, or
public policy, and (3) and it is done with intent to injure. 72

Verily then, malice or bad faith is at the core of Articles 19, 20,
and 21. Malice or bad faith implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral
obliquity. 73 Such must be substantiated by evidence. 74

There is no adequate proof that ABS-CBN was inspired by malice

or bad faith. It was honestly convinced of the merits of its cause
after it had undergone serious negotiations culminating in its
formal submission of a draft contract. Settled is the rule that the
adverse result of an action does not per se make the action
wrongful and subject the actor to damages, for the law could not
have meant to impose a penalty on the right to litigate. If damages
result from a person's exercise of a right, it is damnum absque
injuria.75

WHEREFORE, the instant petition is GRANTED. The challenged

decision of the Court of Appeals in CA-G.R. CV No, 44125 is
hereby REVERSED except as to unappealed award of attorney's
fees in favor of VIVA Productions, Inc.1âwphi1.nêt

No pronouncement as to costs.

SO ORDERED.
G.R. No. 141994             January 17, 2005
FILIPINAS BROADCASTING NETWORK, INC., petitioner,  that the support of foreign foundations for AMEC is substantial,
vs.
AGO MEDICAL AND EDUCATIONAL CENTER-BICOL
CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and
ANGELITA F. AGO, respondents.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 4 January 1999 Decision2 and
26 January 2000 Resolution of the Court of Appeals in CA-G.R.
CV No. 40151. The Court of Appeals affirmed with modification
the 14 December 1992 Decision3 of the Regional Trial Court of
Legazpi City, Branch 10, in Civil Case No. 8236. The Court of
Appeals held Filipinas Broadcasting Network, Inc. and its
broadcasters Hermogenes Alegre and Carmelo Rima liable for libel
and ordered them to solidarily pay Ago Medical and Educational
Center-Bicol Christian College of Medicine moral damages,
attorney’s fees and costs of suit.
The Antecedents
"Exposé" is a radio documentary 4 program hosted by Carmelo ‘Mel’
Rima ("Rima") and Hermogenes ‘Jun’ Alegre ("Alegre"). 5 Exposé is
aired every morning over DZRC-AM which is owned by Filipinas
Broadcasting Network, Inc. ("FBNI"). "Exposé" is heard over
Legazpi City, the Albay municipalities and other Bicol areas. 6
In the morning of 14 and 15 December 1989, Rima and Alegre
exposed various alleged complaints from students, teachers and
parents against Ago Medical and Educational Center-Bicol
Christian College of Medicine ("AMEC") and its administrators.
Claiming that the broadcasts were defamatory, AMEC and
Angelita Ago ("Ago"), as Dean of AMEC’s College of Medicine, filed
a complaint for damages7 against FBNI, Rima and Alegre on 27
February 1990. Quoted are portions of the allegedly libelous
broadcasts:
JUN ALEGRE:
Let us begin with the less burdensome: if you have children taking
medical course at AMEC-BCCM, advise them to pass all subjects
because if they fail in any subject they will repeat their year level,
taking up all subjects including those they have passed already.
Several students had approached me stating that they had
consulted with the DECS which told them that there is no such
regulation. If [there] is no such regulation why is AMEC doing the
same?
xxx
Second: Earlier AMEC students in Physical Therapy had
complained that the course is not recognized by DECS. xxx
Third: Students are required to take and pay for the subject even
if the subject does not have an instructor - such greed for money
on the part of AMEC’s administration. Take the subject Anatomy:
students would pay for the subject upon enrolment because it is
offered by the school. However there would be no instructor for
such subject. Students would be informed that course would be
moved to a later date because the school is still searching for the
appropriate instructor.
xxx
It is a public knowledge that the Ago Medical and Educational
Center has survived and has been surviving for the past few years
since its inception because of funds support from foreign
foundations. If you will take a look at the AMEC premises you’ll
find out that the names of the buildings there are foreign
soundings. There is a McDonald Hall. Why not Jose Rizal or
Bonifacio Hall? That is a very concrete and undeniable evidence
isn’t it? With the report which is the basis of the expose in DZRC
today, it would be very easy for detractors and enemies of the Ago
family to stop the flow of support of foreign foundations who assist
the medical school on the basis of the latter’s purpose. But if the
purpose of the institution (AMEC) is to deceive students at cross
purpose with its reason for being it is possible for these foreign
foundations to lift or suspend their donations temporarily. 8
xxx
On the other hand, the administrators of AMEC-BCCM, AMEC
Science High School and the AMEC-Institute of Mass
Communication in their effort to minimize expenses in terms of
salary are absorbing or continues to accept "rejects". For example
how many teachers in AMEC are former teachers of Aquinas
University but were removed because of immorality? Does it mean
that the present administration of AMEC have the total definite
moral foundation from catholic administrator of Aquinas
University. I will prove to you my friends, that AMEC is a dumping
ground, garbage, not merely of moral and physical misfits.
Probably they only qualify in terms of intellect. The Dean of
Student Affairs of AMEC is Justita Lola, as the family name
implies. She is too old to work, being an old woman. Is the AMEC
administration exploiting the very [e]nterprising or compromising
and undemanding Lola? Could it be that AMEC is just patiently
making use of Dean Justita Lola were if she is very old. As in
atmospheric situation – zero visibility – the plane cannot land,
meaning she is very old, low pay follows. By the way, Dean Justita
Lola is also the chairman of the committee on scholarship in
AMEC. She had retired from Bicol University a long time ago but
AMEC has patiently made use of her.
xxx
MEL RIMA:
xxx My friends based on the expose, AMEC is a dumping ground
for moral and physically misfit people. What does this mean?
Immoral and physically misfits as teachers.
May I say I’m sorry to Dean Justita Lola. But this is the truth. The
truth is this, that your are no longer fit to teach. You are too old.
As an aviation, your case is zero visibility. Don’t insist.
xxx Why did AMEC still absorb her as a teacher, a dean, and
chairman of the scholarship committee at that. The reason is
practical cost saving in salaries, because an old person is not
fastidious, so long as she has money to buy the ingredient of
beetle juice. The elderly can get by – that’s why she (Lola) was
taken in as Dean.
xxx
xxx On our end our task is to attend to the interests of students.
It is likely that the students would be influenced by evil. When
they become members of society outside of campus will be
liabilities rather than assets. What do you expect from a doctor
who while studying at AMEC is so much burdened with
unreasonable imposition? What do you expect from a student who
aside from peculiar problems – because not all students are rich –
in their struggle to improve their social status are even more
burdened with false regulations. xxx9 (Emphasis supplied)
The complaint further alleged that AMEC is a reputable learning
institution. With the supposed exposés, FBNI, Rima and Alegre
"transmitted malicious imputations, and as such, destroyed
plaintiffs’ (AMEC and Ago) reputation." AMEC and Ago included
FBNI as defendant for allegedly failing to exercise due diligence in
the selection and supervision of its employees, particularly Rima
and Alegre.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil
Lozares, filed an Answer10 alleging that the broadcasts against
AMEC were fair and true. FBNI, Rima and Alegre claimed that
they were plainly impelled by a sense of public duty to report the
"goings-on in AMEC, [which is] an institution imbued with public
interest."
Thereafter, trial ensued. During the presentation of the evidence
for the defense, Atty. Edmundo Cea, collaborating counsel of Atty.
Lozares, filed a Motion to Dismiss11 on FBNI’s behalf. The trial
court denied the motion to dismiss. Consequently, FBNI filed a
separate Answer claiming that it exercised due diligence in the
selection and supervision of Rima and Alegre. FBNI claimed that
before hiring a broadcaster, the broadcaster should (1) file an
application; (2) be interviewed; and (3) undergo an apprenticeship
and training program after passing the interview. FBNI likewise
claimed that it always reminds its broadcasters to "observe truth,
fairness and objectivity in their broadcasts and to refrain from
using libelous and indecent language." Moreover, FBNI requires all
broadcasters to pass the Kapisanan ng mga Brodkaster sa
Pilipinas ("KBP") accreditation test and to secure a KBP permit.
On 14 December 1992, the trial court rendered a
Decision12 finding FBNI and Alegre liable for libel except Rima. The
trial court held that the broadcasts are libelous per se. The trial
court rejected the broadcasters’ claim that their utterances were
the result of straight reporting because it had no factual basis.
The broadcasters did not even verify their reports before airing
them to show good faith. In holding FBNI liable for libel, the trial
court found that FBNI failed to exercise diligence in the selection
and supervision of its employees.
In absolving Rima from the charge, the trial court ruled that
Rima’s only participation was when he agreed with Alegre’s
exposé. The trial court found Rima’s statement within the "bounds
of freedom of speech, expression, and of the press." The dispositive
portion of the decision reads:
WHEREFORE, premises considered, this court finds for the
plaintiff. Considering the degree of damages caused by the
controversial utterances, which are not found by this court to be
really very serious and damaging, and there being no showing that
indeed the enrollment of plaintiff school dropped, defendants
Hermogenes "Jun" Alegre, Jr. and Filipinas Broadcasting Network
(owner of the radio station DZRC), are hereby jointly and severally
ordered to pay plaintiff Ago Medical and Educational Center-Bicol
Christian College of Medicine (AMEC-BCCM) the amount of
₱300,000.00 moral damages, plus ₱30,000.00 reimbursement of
attorney’s fees, and to pay the costs of suit.
13
SO ORDERED.   (Emphasis supplied)
Both parties, namely, FBNI, Rima and Alegre, on one hand, and
AMEC and Ago, on the other, appealed the decision to the Court of
Appeals. The Court of Appeals affirmed the trial court’s judgment
with modification. The appellate court made Rima solidarily liable
with FBNI and Alegre. The appellate court denied Ago’s claim for
damages and attorney’s fees because the broadcasts were directed
against AMEC, and not against her. The dispositive portion of the
Court of Appeals’ decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED,
subject to the modification that broadcaster Mel Rima
is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes
Alegre.
SO ORDERED.14
FBNI, Rima and Alegre filed a motion for reconsideration which
the Court of Appeals denied in its 26 January 2000 Resolution.
Hence, FBNI filed this petition.15
The Ruling of the Court of Appeals
The Court of Appeals upheld the trial court’s ruling that the
questioned broadcasts are libelous per se and that FBNI, Rima
and Alegre failed to overcome the legal presumption of malice. The
Court of Appeals found Rima and Alegre’s claim that they were
actuated by their moral and social duty to inform the public of the
students’ gripes as insufficient to justify the utterance of the
defamatory remarks.
Finding no factual basis for the imputations against AMEC’s
administrators, the Court of Appeals ruled that the broadcasts
were made "with reckless disregard as to whether they were true
or false." The appellate court pointed out that FBNI, Rima and
Alegre failed to present in court any of the students who allegedly
complained against AMEC. Rima and Alegre merely gave a single
name when asked to identify the students. According to the Court
of Appeals, these circumstances cast doubt on the veracity of the
broadcasters’ claim that they were "impelled by their moral and
social duty to inform the public about the students’ gripes."
The Court of Appeals found Rima also liable for libel since he
remarked that "(1) AMEC-BCCM is a dumping ground for morally
and physically misfit teachers; (2) AMEC obtained the services of
Dean Justita Lola to minimize expenses on its employees’ salaries;
and (3) AMEC burdened the students with unreasonable
imposition and false regulations."16
The Court of Appeals held that FBNI failed to exercise due
diligence in the selection and supervision of its employees for
allowing Rima and Alegre to make the radio broadcasts without
the proper KBP accreditation. The Court of Appeals denied Ago’s
claim for damages and attorney’s fees because the libelous
remarks were directed against AMEC, and not against her. The
Court of Appeals adjudged FBNI, Rima and Alegre solidarily liable
to pay AMEC moral damages, attorney’s fees and costs of
suit.1awphi1.nét
Issues
FBNI raises the following issues for resolution:
I. WHETHER THE BROADCASTS ARE LIBELOUS;
II. WHETHER AMEC IS ENTITLED TO MORAL
DAMAGES;
III. WHETHER THE AWARD OF ATTORNEY’S FEES IS
PROPER; and
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA
AND ALEGRE FOR PAYMENT OF MORAL DAMAGES,
ATTORNEY’S FEES AND COSTS OF SUIT.
The Court’s Ruling
We deny the petition.
This is a civil action for damages as a result of the allegedly
defamatory remarks of Rima and Alegre against AMEC. 17 While
AMEC did not point out clearly the legal basis for its complaint, a
reading of the complaint reveals that AMEC’s cause of action is
based on Articles 30 and 33 of the Civil Code. Article
3018 authorizes a separate civil action to recover civil liability
arising from a criminal offense. On the other hand, Article
3319 particularly provides that the injured party may bring a
separate civil action for damages in cases of defamation, fraud,
and physical injuries. AMEC also invokes Article 1920 of the Civil
Code to justify its claim for damages. AMEC cites Articles
217621 and 218022 of the Civil Code to hold FBNI solidarily liable
with Rima and Alegre.
I.
Whether the broadcasts are libelous
A libel23 is a public and malicious imputation of a crime, or of a
vice or defect, real or imaginary, or any act or omission, condition,
status, or circumstance tending to cause the dishonor, discredit,
or contempt of a natural or juridical person, or to blacken the
memory of one who is dead.24
There is no question that the broadcasts were made public and
imputed to AMEC defects or circumstances tending to cause it
dishonor, discredit and contempt. Rima and Alegre’s remarks
such as "greed for money on the part of AMEC’s administrators";
"AMEC is a dumping ground, garbage of xxx moral and physical
misfits"; and AMEC students who graduate "will be liabilities
rather than assets" of the society are libelous per se. Taken as a
whole, the broadcasts suggest that AMEC is a money-making
institution where physically and morally unfit teachers abound.
However, FBNI contends that the broadcasts are not malicious.
FBNI claims that Rima and Alegre were plainly impelled by their
civic duty to air the students’ gripes. FBNI alleges that there is no
evidence that ill will or spite motivated Rima and Alegre in making
the broadcasts. FBNI further points out that Rima and Alegre
exerted efforts to obtain AMEC’s side and gave Ago the
opportunity to defend AMEC and its administrators. FBNI
concludes that since there is no malice, there is no libel.
FBNI’s contentions are untenable.
Every defamatory imputation is presumed malicious. 25 Rima and
Alegre failed to show adequately their good intention and
justifiable motive in airing the supposed gripes of the students. As
hosts of a documentary or public affairs program, Rima and Alegre
should have presented the public issues "free from inaccurate and
misleading information."26 Hearing the students’ alleged
complaints a month before the exposé,27 they had sufficient time
to verify their sources and information. However, Rima and Alegre
hardly made a thorough investigation of the students’ alleged
gripes. Neither did they inquire about nor confirm the purported
irregularities in AMEC from the Department of Education, Culture
and Sports. Alegre testified that he merely went to AMEC to verify
his report from an alleged AMEC official who refused to disclose
any information. Alegre simply relied on the words of the students
"because they were many and not because there is proof that what
they are saying is true."28 This plainly shows Rima and Alegre’s
reckless disregard of whether their report was true or not.
Contrary to FBNI’s claim, the broadcasts were not "the result of
straight reporting." Significantly, some courts in the United States
apply the privilege of "neutral reportage" in libel cases involving
matters of public interest or public figures. Under this privilege, a
republisher who accurately and disinterestedly reports certain
defamatory statements made against public figures is shielded
from liability, regardless of the republisher’s subjective awareness
of the truth or falsity of the accusation.29 Rima and Alegre cannot
invoke the privilege of neutral reportage because unfounded
comments abound in the broadcasts. Moreover, there is no
existing controversy involving AMEC when the broadcasts were
made. The privilege of neutral reportage applies where the
defamed person is a public figure who is involved in an existing
controversy, and a party to that controversy makes the defamatory
statement.30
However, FBNI argues vigorously that malice in law does not apply
to this case. Citing Borjal v. Court of Appeals,31 FBNI contends that
the broadcasts "fall within the coverage of qualifiedly privileged
communications" for being commentaries on matters of public
interest. Such being the case, AMEC should prove malice in fact
or actual malice. Since AMEC allegedly failed to prove actual
malice, there is no libel.
FBNI’s reliance on Borjal is misplaced. In Borjal, the Court
elucidated on the "doctrine of fair comment," thus:
[F]air commentaries on matters of public interest are privileged
and constitute a valid defense in an action for libel or slander. The
doctrine of fair comment means that while in general every
discreditable imputation publicly made is deemed false, because
every man is presumed innocent until his guilt is judicially
proved, and every false imputation is deemed malicious,
nevertheless, when the discreditable imputation is directed
against a public person in his public capacity, it is not necessarily
actionable. In order that such discreditable imputation to a public
official may be actionable, it must either be a false allegation of
fact or a comment based on a false supposition. If the comment is
an expression of opinion, based on established facts, then it is
immaterial that the opinion happens to be mistaken, as long as it
might reasonably be inferred from the facts. 32 (Emphasis supplied)
True, AMEC is a private learning institution whose business of
educating students is "genuinely imbued with public interest." The
welfare of the youth in general and AMEC’s students in particular
is a matter which the public has the right to know. Thus, similar
to the newspaper articles in Borjal, the subject broadcasts dealt
with matters of public interest. However, unlike in Borjal, the
questioned broadcasts are not based on established facts. The
record supports the following findings of the trial court:
xxx Although defendants claim that they were motivated by
consistent reports of students and parents against plaintiff, yet,
defendants have not presented in court, nor even gave name of a
single student who made the complaint to them, much less
present written complaint or petition to that effect. To accept this
defense of defendants is too dangerous because it could easily give
license to the media to malign people and establishments based
on flimsy excuses that there were reports to them although they
could not satisfactorily establish it. Such laxity would encourage
careless and irresponsible broadcasting which is inimical to public
interests.
Secondly, there is reason to believe that defendant radio
broadcasters, contrary to the mandates of their duties, did not
verify and analyze the truth of the reports before they aired it, in
order to prove that they are in good faith.
Alegre contended that plaintiff school had no permit and is not
accredited to offer Physical Therapy courses. Yet, plaintiff
produced a certificate coming from DECS that as of Sept. 22, 1987
or more than 2 years before the controversial broadcast,
accreditation to offer Physical Therapy course had already been
given the plaintiff, which certificate is signed by no less than the
Secretary of Education and Culture herself, Lourdes R.
Quisumbing (Exh. C-rebuttal). Defendants could have easily
known this were they careful enough to verify. And yet, defendants
were very categorical and sounded too positive when they made
the erroneous report that plaintiff had no permit to offer Physical
Therapy courses which they were offering.
The allegation that plaintiff was getting tremendous aids from
foreign foundations like Mcdonald Foundation prove not to be true
also. The truth is there is no Mcdonald Foundation existing.
Although a big building of plaintiff school was given the name
Mcdonald building, that was only in order to honor the first
missionary in Bicol of plaintiffs’ religion, as explained by Dr. Lita
Ago. Contrary to the claim of defendants over the air, not a single
centavo appears to be received by plaintiff school from the
aforementioned McDonald Foundation which does not exist.
Defendants did not even also bother to prove their claim, though
denied by Dra. Ago, that when medical students fail in one
subject, they are made to repeat all the other subject[s], even
those they have already passed, nor their claim that the school
charges laboratory fees even if there are no laboratories in the
school. No evidence was presented to prove the bases for these
claims, at least in order to give semblance of good faith.
As for the allegation that plaintiff is the dumping ground for
misfits, and immoral teachers, defendant[s] singled out Dean
Justita Lola who is said to be so old, with zero visibility already.
Dean Lola testified in court last Jan. 21, 1991, and was found to
be 75 years old. xxx Even older people prove to be effective
teachers like Supreme Court Justices who are still very much in
demand as law professors in their late years. Counsel for
defendants is past 75 but is found by this court to be still very
sharp and effective.l^vvphi1.net So is plaintiffs’ counsel.
Dr. Lola was observed by this court not to be physically decrepit
yet, nor mentally infirmed, but is still alert and docile.
The contention that plaintiffs’ graduates become liabilities rather
than assets of our society is a mere conclusion. Being from the
place himself, this court is aware that majority of the medical
graduates of plaintiffs pass the board examination easily and
become prosperous and responsible professionals. 33
Had the comments been an expression of opinion based on
established facts, it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the
facts.34 However, the comments of Rima and Alegre were not
backed up by facts. Therefore, the broadcasts are not privileged
and remain libelous per se.
The broadcasts also violate the Radio Code 35 of the Kapisanan ng
mga Brodkaster sa Pilipinas, Ink. ("Radio Code"). Item I(B) of the
Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES
1. x x x
4. Public affairs program shall present public issues free
from personal bias, prejudice and inaccurate and
misleading information. x x x Furthermore, the station
shall strive to present balanced discussion of issues. x x
x.
xxx
7. The station shall be responsible at all times in the
supervision of public affairs, public issues and
commentary programs so that they conform to the
provisions and standards of this code.
8. It shall be the responsibility of the newscaster,
commentator, host and announcer to protect public
interest, general welfare and good order in the
presentation of public affairs and public
issues.36 (Emphasis supplied)
The broadcasts fail to meet the standards prescribed in the Radio
Code, which lays down the code of ethical conduct governing
practitioners in the radio broadcast industry. The Radio Code is a
voluntary code of conduct imposed by the radio broadcast
industry on its own members. The Radio Code is a public
warranty by the radio broadcast industry that radio broadcast
practitioners are subject to a code by which their conduct are
measured for lapses, liability and sanctions.
The public has a right to expect and demand that radio broadcast
practitioners live up to the code of conduct of their profession, just
like other professionals. A professional code of conduct provides
the standards for determining whether a person has acted justly,
honestly and with good faith in the exercise of his rights and
performance of his duties as required by Article 19 37 of the Civil
Code. A professional code of conduct also provides the standards
for determining whether a person who willfully causes loss or
injury to another has acted in a manner contrary to morals or
good customs under Article 2138 of the Civil Code.
II.
Whether AMEC is entitled to moral damages
FBNI contends that AMEC is not entitled to moral damages
because it is a corporation.39
A juridical person is generally not entitled to moral damages
because, unlike a natural person, it cannot experience physical
suffering or such sentiments as wounded feelings, serious anxiety,
mental anguish or moral shock.40 The Court of Appeals
cites Mambulao Lumber Co. v. PNB, et al.41 to justify the award of
moral damages. However, the Court’s statement in Mambulao that
"a corporation may have a good reputation which, if besmirched,
may also be a ground for the award of moral damages" is an obiter
dictum.42
Nevertheless, AMEC’s claim for moral damages falls under item 7
of Article 221943 of the Civil Code. This provision expressly
authorizes the recovery of moral damages in cases of libel, slander
or any other form of defamation. Article 2219(7) does not qualify
whether the plaintiff is a natural or juridical person. Therefore, a
juridical person such as a corporation can validly complain for
libel or any other form of defamation and claim for moral
damages.44
Moreover, where the broadcast is libelous per se, the law implies
damages.45 In such a case, evidence of an honest mistake or the
want of character or reputation of the party libeled goes only in
mitigation of damages.46 Neither in such a case is the plaintiff
required to introduce evidence of actual damages as a condition
precedent to the recovery of some damages. 47 In this case, the
broadcasts are libelous per se. Thus, AMEC is entitled to moral
damages.
However, we find the award of ₱300,000 moral damages
unreasonable. The record shows that even though the broadcasts
were libelous per se, AMEC has not suffered any substantial or
material damage to its reputation. Therefore, we reduce the award
of moral damages from ₱300,000 to ₱150,000.
III.
Whether the award of attorney’s fees is proper
FBNI contends that since AMEC is not entitled to moral damages,
there is no basis for the award of attorney’s fees. FBNI adds that
the instant case does not fall under the enumeration in Article
220848 of the Civil Code.
The award of attorney’s fees is not proper because AMEC failed to
justify satisfactorily its claim for attorney’s fees. AMEC did not
adduce evidence to warrant the award of attorney’s fees. Moreover,
both the trial and appellate courts failed to explicitly state in their
respective decisions the rationale for the award of attorney’s
fees.49 In Inter-Asia Investment Industries, Inc. v. Court of
Appeals ,50 we held that:
[I]t is an accepted doctrine that the award thereof as an item of
damages is the exception rather than the rule, and counsel’s fees
are not to be awarded every time a party wins a suit. The power of
the court to award attorney’s fees under Article 2208 of the Civil
Code demands factual, legal and equitable justification, without
which the award is a conclusion without a premise, its basis being
improperly left to speculation and conjecture. In all events, the
court must explicitly state in the text of the decision, and not only
in the decretal portion thereof, the legal reason for the award of
attorney’s fees.51 (Emphasis supplied)
While it mentioned about the award of attorney’s fees by stating
that it "lies within the discretion of the court and depends upon
the circumstances of each case," the Court of Appeals failed to
point out any circumstance to justify the award.
IV.
Whether FBNI is solidarily liable with Rima and Alegre for moral
damages, attorney’s fees and costs of suit
FBNI contends that it is not solidarily liable with Rima and Alegre
for the payment of damages and attorney’s fees because it
exercised due diligence in the selection and supervision of its
employees, particularly Rima and Alegre. FBNI maintains that its
broadcasters, including Rima and Alegre, undergo a "very
regimented process" before they are allowed to go on air. "Those
who apply for broadcaster are subjected to interviews,
examinations and an apprenticeship program."
industry’s rules and regulations. Clearly, these circumstances
show FBNI’s lack of diligence in selecting and supervising Rima
and Alegre. Hence, FBNI is solidarily liable to pay damages
together with Rima and Alegre.
WHEREFORE, we DENY the instant petition. We AFFIRM the
Decision of 4 January 1999 and Resolution of 26 January 2000 of
the Court of Appeals in CA-G.R. CV No. 40151 with the
MODIFICATION that the award of moral damages is reduced from
₱300,000 to ₱150,000 and the award of attorney’s fees is deleted.
Costs against petitioner.

FBNI further argues that Alegre’s age and lack of training are SO ORDERED.
irrelevant to his competence as a broadcaster. FBNI points out
that the "minor deficiencies in the KBP accreditation of Rima and
Alegre do not in any way prove that FBNI did not exercise the
diligence of a good father of a family in selecting and supervising
them." Rima’s accreditation lapsed due to his non-payment of the
KBP annual fees while Alegre’s accreditation card was delayed
allegedly for reasons attributable to the KBP Manila Office. FBNI
claims that membership in the KBP is merely voluntary and not
required by any law or government regulation.

FBNI’s arguments do not persuade us.

The basis of the present action is a tort. Joint tort feasors are
jointly and severally liable for the tort which they commit. 52 Joint
tort feasors are all the persons who command, instigate, promote,
encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done
for their benefit.53Thus, AMEC correctly anchored its cause of
action against FBNI on Articles 2176 and 2180 of the Civil
Code.1a\^/phi1.net

As operator of DZRC-AM and employer of Rima and Alegre, FBNI

is solidarily liable to pay for damages arising from the libelous
broadcasts. As stated by the Court of Appeals, "recovery for
defamatory statements published by radio or television may be
had from the owner of the station, a licensee, the operator of the
station, or a person who procures, or participates in, the making
of the defamatory statements."54 An employer and employee are
solidarily liable for a defamatory statement by the employee within
the course and scope of his or her employment, at least when the
employer authorizes or ratifies the defamation. 55 In this case,
Rima and Alegre were clearly performing their official duties as
hosts of FBNI’s radio program Exposé when they aired the
broadcasts. FBNI neither alleged nor proved that Rima and Alegre
went beyond the scope of their work at that time. There was
likewise no showing that FBNI did not authorize and ratify the
defamatory broadcasts.

Moreover, there is insufficient evidence on record that FBNI

exercised due diligence in the selection and supervision of its
employees, particularly Rima and Alegre. FBNI merely showed that
it exercised diligence in the selection of its broadcasters without
introducing any evidence to prove that it observed the same
diligence in the supervision of Rima and Alegre. FBNI did not show
how it exercised diligence in supervising its broadcasters. FBNI’s
alleged constant reminder to its broadcasters to "observe truth,
fairness and objectivity and to refrain from using libelous and
indecent language" is not enough to prove due diligence in the
supervision of its broadcasters. Adequate training of the
broadcasters on the industry’s code of conduct, sufficient
information on libel laws, and continuous evaluation of the
broadcasters’ performance are but a few of the many ways of
showing diligence in the supervision of broadcasters.

FBNI claims that it "has taken all the precaution in

the selection of Rima and Alegre as broadcasters, bearing in mind
their qualifications." However, no clear and convincing evidence
shows that Rima and Alegre underwent FBNI’s "regimented
process" of application. Furthermore, FBNI admits that Rima and
Alegre had deficiencies in their KBP accreditation, 56 which is one
of FBNI’s requirements before it hires a broadcaster. Significantly,
membership in the KBP, while voluntary, indicates the
broadcaster’s strong commitment to observe the broadcast

G.R. No. 170631, February 10, 2016
CARAVAN TRAVEL AND TOURS INTERNATIONAL,
INC., Petitioner, v. ERMILINDA R. ABEJAR, Respondent.
DECISION
LEONEN, J.:
The plaintiff may first prove the employer's ownership of the
vehicle involved in a mishap by presenting the vehicle's
registration in evidence. Thereafter, a disputable presumption that
the requirements for an employer's liability under Article 2180 1 of
the Civil Code have been satisfied will arise. The burden of
evidence then shifts to the defendant to show that no liability
under Article 2180 has ensued. This case, thus, harmonizes the
requirements of Article 2180, in relation to Article 2176 2 of the
Civil Code, and the so-called registered-owner rule as established
in this court's rulings in Aguilar, Sr. v. Commercial Savings
Bank,3Del Carmen, Jr. v. Bacoy,4Filcar Transport Services v.
Espinas,5 and Mendoza v. Spouses Gomez.6
Through this Petition for Review on Certiorari, 7 Caravel Travel and
Tours International, Inc. (Caravan) prays that the Decision 8 dated
October 3, 2005 and the Resolution 9 dated November 29, 2005 of
the Court of Appeals Twelfth Division be reversed and set aside. 10
On July 13, 2000, Jesmariane R. Reyes (Reyes) was walking along
the west-bound lane of Sampaguita Street, United Parañaque
Subdivision IV, Parañaque City. 11 A Mitsubishi L-300 van with
plate number PKM 19512 was travelling along the east-bound lane,
opposite Reyes.13 To avoid an incoming vehicle, the van swerved to
its left and hit Reyes.14 Alex Espinosa (Espinosa), a witness to the
accident, went to her aid and loaded her in the back of the
van.15 Espinosa told the driver of the van, Jimmy Bautista
(Bautista), to bring Reyes to the hospital. 16 Instead of doing so,
Bautista appeared to have left the van parked inside a nearby
subdivision with Reyes still in the van. 17 Fortunately for Reyes, an
unidentified civilian came to help and drove Reyes to the
hospital.18
Upon investigation, it was found that the registered owner of the
van was Caravan.19 Caravan is a corporation engaged in the
business of organizing travels and tours.20 Bautista was Caravan's
employee assigned to drive the van as its service driver. 21
Caravan shouldered the hospitalization expenses of
Reyes.22 Despite medical attendance, Reyes died two (2) days after
the accident.23
Respondent Ermilinda R. Abejar (Abejar), Reyes' paternal aunt
and the person who raised her since she was nine (9) years
old,24 filed before the Regional Trial Court of Parañaque a
Complaint25 for damages against Bautista and Caravan. In her
Complaint, Abejar alleged that Bautista was an employee of
Caravan and that Caravan is the registered owner of the van that
hit Reyes.26
Summons could not be served on Bautista. 27 Thus, Abejar moved
to drop Bautista as a defendant.28 The Regional Trial Court
granted her Motion.29
After trial, the Regional Trial Court found that Bautista was
grossly negligent in driving the vehicle. 30 It awarded damages in
favor of Abejar, as follows:
chanRoblesvirtualLawlibrary
WHEREFORE, considering that the [respondent] was able to
provide by preponderance of evidence her cause of action against
the defendants, judgment is hereby rendered ordering defendants
JIMMY BAUTISTA and CARAVAN TRAVEL and TOURS[,] INC., to
jointly and solidarity pay the plaintiff, the following, to wit:
chanRoblesvirtualLawlibrary
1. The amount of P35,000.00 representing actual damages;
2. The amount of P300,000.00 as moral damages;
3. The amount of P30,000.00 as exemplary damages;
4. The amount of P50,000.00 as and by way of attorney's fees; and
5. The cost of suit.
SO ORDERED.31ChanRoblesVirtualawlibrary
Caravan's Motion for Reconsideration 32 was denied through the
October 20, 2003 Order33 of the Regional Trial Court.
The Court of Appeals affirmed with modification the Regional Trial
Court's July 31, 2003 Decision and October 20, 2003 Order, as
follows:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the instant appeal
is DENIED for lack of merit. The assailed Decision dated 31 July
2003 and Order dated 20 October 2003 of the Regional Trial
Court, City of Para[ñ]aque, Branch 258, in Civil Case No. 00-0447
are AFFIRMED with the following MODIFICATIONS:
1. Moral Damages is REDUCED to Php 200,000.00;
2. Death Indemnity of Php 50,000.00 is awarded;
3. The Php 35,000.00 actual damages, Php 200,000.00
moral damages, Php 30,000.00 exemplary damages and
Php 50,000.00 attorney's fees shall earn interest at the
rate of 6% per annum computed from 31 July 2003, the
date of the [Regional Trial Court's] decision; and upon
finality of this Decision, all the amounts due shall earn
interest at the rate of 12% per annum, in lieu of 6% per
annum, until full payment; and
4. The Php 50,000.00 death indemnity shall earn interest at
the rate of 6% per annum computed from the date of
promulgation of this Decision; and upon finality of this
Decision, the amount due shall earn interest at the rate
of 12% per annum, in lieu of 6% per annum, until full
payment.
Costs against [Caravan]. 
SO ORDERED.34ChanRoblesVirtualawlibrary
Caravan filed a Motion for Reconsideration, but it was denied in
the Court of Appeals' assailed November 29, 2005 Resolution. 35
Hence, this Petition was filed.
Caravan argues that Abejar has no personality to bring this suit
because she is not a real party in interest. According to Caravan,
Abejar does not exercise legal or substitute parental authority.
She is also not the judicially appointed guardian or the only living
relative of the deceased.36 She is also not "the executor or
administrator of the estate of the deceased." 37 According to
Caravan, only the victim herself or her heirs can enforce an action
based on culpa aquiliana such as Abejar's action for damages.38
Caravan adds that Abejar offered no documentary or testimonial
evidence to prove that Bautista, the driver, acted "within the scope
of his assigned tasks"39 when the accident occurred.40 According to
Caravan, Bautista's tasks only pertained to the transport of
company personnel or products, and when the accident occurred,
he had not been transporting personnel or delivering products of
and for the company.41
Caravan also argues that "it exercised the diligence of a good
father of a family in the selection and supervision of its
employees."42
Caravan further claims that Abejar should not have been awarded
moral damages, actual damages, death indemnity, exemplary
damages, and attorney's fees.43 It questions the Certificate
provided by Abejar as proof of expenses since its signatory, a
certain Julian Peñaloza (Peñaloza), was not presented in court,
and Caravan was denied the right to cross-examine
him.44 Caravan argues that the statements in the Certification
constitute hearsay.45 It also contends that based on Article
2206(3)46 of the Civil Code, Abejar is not entitled to moral
damages.47 It insists that moral and exemplary damages should
not have been awarded to Abejar because Caravan acted in good
faith.48 Considering that moral and exemplary damages are
unwarranted, Caravan claims that the award of attorney's fees
should have also been removed.49
Lastly, Caravan argues that it should not be held solidarily liable
with Bautista since Bautista was already dropped as a party. 50
Abejar counters that Caravan failed to provide proof that it
exercised the requisite diligence in the selection and supervision of
Bautista.51 She adds that the Court of Appeals' ruling that
Caravan is solidarily liable with Bautista for moral damages,
exemplary damages, civil indemnity ex delicto, and attorney's fees
should be upheld.52 Abejar argues that since Caravan is the
registered owner of the van, it is directly, primarily, and solidarity
liable for the tortious acts of its driver. 53
For resolution are the following issues:
First, whether respondent Ermilinda R. Abejar is a real party in
interest who may bring an action for damages against petitioner
Caravan Travel and Tours International, Inc. on account of
Jesmariane R. Reyes' death; and
Second, whether petitioner should be held liable as an employer,
pursuant to Article 2180 of the Civil Code.
We deny the Petition.
I respondent's words in her Complaint, she treated Reyes as if she
Having exercised substitute parental authority, respondent
suffered actual loss and is, thus, a real party in interest in this
case.
In her Complaint, respondent made allegations that would sustain
her action for damages: that she exercised substitute parental
authority over Reyes; that Reyes' death was caused by the
negligence of petitioner and its driver; and that Reyes' death
caused her damage.54 Respondent properly filed an action based
on quasi-delict. She is a real party in interest.
Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a
real party in interest:
chanRoblesvirtualLawlibrary
RULE 3. Parties to Civil Actions
....
SECTION 2. Parties in Interest. — A real party in interest is the
party who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.
"To qualify a person to be a real party in interest in whose name
an action must be prosecuted, he [or she] must appear to be the
present real owner of the right sought to be
enforced."55 Respondent's capacity to file a complaint against
petitioner stems from her having exercised substitute parental
authority over Reyes.
Article 216 of the Family Code identifies the persons who exercise
substitute parental authority:
chanRoblesvirtualLawlibrary
Art. 216. In default of parents or a judicially appointed guardian,
the following persons shall exercise substitute parental authority
over the child in the order indicated:
(1) The surviving grandparent, as provided in Art. 214; 56
(2) The oldest brother or sister, over twenty-one years of age,
unless unfit or disqualified; and
(3) The child's actual custodian, over twenty-one years of age,
unless unfit or disqualified.
Whenever the appointment or a judicial guardian over the
property of the child becomes necessary, the same order of
preference shall be observed. (Emphasis supplied)
Article 233 of the Family Code provides for the extent of authority
of persons exercising substitute parental authority, that is, the
same as those of actual parents:
chanRoblesvirtualLawlibrary
Art. 233. The person exercising substitute parental authority shall
have the same authority over the person of the child as the
parents. (Emphasis supplied)
Both of Reyes' parents are already deceased. 57 Reyes' paternal
grandparents are also both deceased.58The whereabouts of Reyes'
maternal grandparents are unknown.59 There is also no record
that Reyes has brothers or sisters. It was under these
circumstances that respondent took custody of Reyes when she
was a child, assumed the role of Reyes' parents, and thus,
exercised substitute parental authority over her. 60 As Reyes'
custodian, respondent exercised the full extent of the statutorily
recognized rights and duties of a parent. Consistent with Article
22061 of the Family Code, respondent supported Reyes'
education62 and provided for her personal needs.63 To echo
were her own daughter.64
Respondent's right to proceed against petitioner, therefore, is
based on two grounds.
First, respondent suffered actual personal loss. With her affinity
for Reyes, it stands to reason that when Reyes died, respondent
suffered the same anguish that a natural parent would have felt
upon the loss of one's child. It is for this injury — as authentic
and personal as that of a natural parent — that respondent seeks
to be indemnified.
Second, respondent is capacitated to do what Reyes' actual
parents would have been capacitated to do.
In Metro Manila Transit Corporation v. Court of
Appeals,65Tapdasan, Jr. v. People,66 and Aguilar, Sr. v. Commercial
Savings Bank,67 this court allowed natural parents of victims to
recover damages for the death of their children. Inasmuch as
persons exercising substitute parental authority have the full
range of competencies of a child's actual parents, nothing prevents
persons exercising substitute parental authority from similarly
possessing the right to be indemnified for their ward's death.
We note that Reyes was already 18 years old when she died.
Having reached the age of majority, she was already emancipated
upon her death. While parental authority is terminated upon
emancipation,68respondent continued to support and care for
Reyes even after she turned 18.69 Except for the legal technicality
of Reyes' emancipation, her relationship with respondent
remained the same. The anguish and damage caused to
respondent by Reyes' death was no different because of Reyes'
emancipation.
In any case, the termination of respondent's parental authority is
not an insurmountable legal bar that precludes the filing of her
Complaint. In interpreting Article 190270 of the old Civil Code,
which is substantially similar to the first sentence of Article
217671 of the Civil Code, this court in The Receiver For North
Negros Sugar Company, Inc. v. Ybañez, et al. 72 ruled that brothers
and sisters may recover damages, except moral damages, for the
death of their sibling.73 This court declared that Article 1902 of the
old Civil Code (now Article 2176) is broad enough to accommodate
even plaintiffs who are not relatives of the deceased, thus: 74
This Court said: "Article 1902 of the Civil Code declares that any
person who by an act or omission, characterized by fault or
negligence, causes damage to another shall be liable for the
damage done ... a person is liable for damage done to another by
any culpable act; and by any culpable act is meant any act which
is blameworthy when judged by accepted legal standards. The idea
thus expressed is undoubtedly broad enough to include any
rational conception of liability for the tortious acts likely to be
developed in any society." The word "damage" in said article,
comprehending as it does all that are embraced in its meaning,
includes any and all damages that a human being may suffer in
any and all the manifestations of his life: physical or material,
moral or psychological, mental or spiritual, financial, economic,
social, political, and religious.
It is particularly noticeable that Article 1902 stresses the passive
subject of the obligation to pay damages caused by his fault or
negligence. The article does not limit or specify the active subjects,
much less the relation that must exist between the victim of the
culpa aquiliana and the person who may recover damages, thus
warranting the inference that, in principle, anybody who suffers
any damage from culpa aquiliana, whether a relative or not of the
victim, may recover damages from the person responsible
therefor[.]75(Emphasis supplied, citations omitted)
II
Respondent's Complaint is anchored on an employer's liability for
quasi-delict provided in Article 2180, in relation to Article 2176 of
the Civil Code. Articles 2176 and 2180 read:
chanRoblesvirtualLawlibrary
ARTICLE 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
.....
ARTICLE 2180. The obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children who live
in their company.
Guardians are liable for damages caused by the minors or
incapacitated persons who are under their authority and live in
their company.
The owners and managers of an establishment or enterprise are
likewise responsible for damages caused by their employees in the
service of the branches in which the latter are employed or on the
occasion of their functions.
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
The State is responsible in like manner when it acts through a
special agent; but not when the damage has been caused by the
official to whom the task done properly pertains, in which case
what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades
shall be liable for damages caused by their pupils and students or
apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
(Emphasis supplied)
Contrary to petitioner's position, it was not fatal to respondent's
cause that she herself did not adduce proof that Bautista acted
within the scope of his authority. It was sufficient that Abejar
proved that petitioner was the registered owner of the van that hit
Reyes.
The resolution of this case must consider two (2) rules. First,
Article 2180's specification that "[e]mployers shall be liable for the
damages caused by their employees . . . acting within the scope of
their assigned tasks[.]" Second, the operation of the registered-
owner rule that registered owners are liable for death or injuries
caused by the operation of their vehicles. 76
These rules appear to be in conflict when it comes to cases in
which the employer is also the registered owner of a vehicle.
Article 2180 requires proof of two things: first, an employment
relationship between the driver and the owner; and second, that
the driver acted within the scope of his or her assigned tasks. On
the other hand, applying the registered-owner rule only requires
the plaintiff to prove that the defendant-employer is the registered
owner of the vehicle.
The registered-owner rule was articulated as early as 1957
in Erezo, et al. v. Jepte,77 where this court explained that the
registration of motor vehicles, as required by Section 5(a) 78 of
Republic Act No. 4136, the Land Transportation and Traffic Code,
was necessary "not to make said registration the operative act by
which ownership in vehicles is transferred, . . . but to permit the
use and operation of the vehicle upon any public highway[.]" 79 Its
"main aim . . . is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on
the public highways, responsibility therefor can be fixed on a
definite individual, the registered owner." 80
Erezo notwithstanding, Castilex Industrial Corporation v. Vasquez,
Jr.81 relied on Article 2180 of the Civil Code even though the
employer was also the registered owner of the vehicle. 82 The
registered-owner rule was not mentioned.
In Castilex, Benjamin Abad (Abad) was a manager of Castilex
Industrial Corporation (Castilex). Castilex was also the registered
owner of a Toyota Hi-Lux pick-up truck. While Abad was driving
the pick-up truck, it collided with a motorcycle driven by Romeo
Vasquez (Vasquez). Vasquez died a few days after. Vasquez's
parents filed a case for damages against Abad and
Castilex.83 Castilex denied liability, arguing that Abad was acting
in his private capacity at the time of the accident. 84
This court absolved Castilex of liability, reasoning that it was
incumbent upon the plaintiff to prove that the negligent employee
was acting within the scope of his assigned tasks.85 Vasquez's
parents failed to prove this.86 This court outlined the process
necessary for an employer to be held liable for the acts of its
employees and applied the process to the case:
chanRoblesvirtualLawlibrary
Under the fifth paragraph of Article 2180, whether or not engaged
in any business or industry, an employer is liable for the torts
committed by employees within the scope of his assigned tasks.
But it is necessary to establish the employer-employee
relationship; once this is done, the plaintiff must show, to hold the
employer liable, that the employee was acting within the scope of
his assigned task when the tort complained of was committed. It is
only then that the employer may find it necessary to interpose the
defense of due diligence in the selection and supervision of the
employee.
....
Since there is paucity of evidence that ABAD was acting within the
scope of the functions entrusted to him, petitioner CASTILEX had
no duty to show that it exercised the diligence of a good father of a
family in providing ABAD with a service vehicle. Thus, justice and
equity require that petitioner be relieved of vicarious liability for
the consequences of the negligence of ABAD in driving its vehicle.
(Emphasis supplied, citations
omitted)87ChanRoblesVirtualawlibrary
Aguilar, Sr. v. Commercial Savings Bank recognized the seeming
conflict between Article 2180 and the registered-owner rule and
applied the latter.88
In Aguilar, Sr., a Mitsubishi Lancer, registered in the name of
Commercial Savings Bank and driven by the bank's assistant vice-
president Ferdinand Borja, hit Conrado Aguilar, Jr. The impact
killed Conrado Aguilar, Jr. His father, Conrado Aguilar, Sr. filed a
case for damages against Ferdinand Borja and Commercial
Savings Bank. The Regional Trial Court found Commercial
Savings Bank solidarity liable with Ferdinand Borja. 89
However, the Court of Appeals disagreed with the trial court's
Decision and dismissed the complaint against the bank. The Court
of Appeals reasoned that Article 2180 requires the plaintiff to prove
that at the time of the accident, the employee was acting within the
scope of his or her assigned tasks. The Court of Appeals found no
evidence that Ferdinand Borja was acting as the bank's assistant
vice-president at the time of the accident. 90
The Court of Appeals' ruling was reversed by this court. 91Aguilar,
Sr. reiterated the following pronouncements made in Erezo in
ruling that the bank, as the registered owner of the vehicle, was
primarily liable to the plaintiff:92
The main aim of motor vehicle registration is to identify the owner
so that if any accident happens, or that any damage or injury is
caused by the vehicle on the public highways, responsibility
therefor can be fixed on a definite individual, the registered
owner....
....
A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the
injury or damage. He has no means other than by a recourse to
the registration in the Motor Vehicles Office to determine who is
the owner. The protection that the law aims to extend to him
would become illusory were the registered owner given the
opportunity to escape liability by disproving his
ownership.93ChanRoblesVirtualawlibrary
Thus, Aguilar, Sr. concluded:
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In our view, respondent bank, as the registered owner of the
vehicle, is primarily liable for Aguilar, Jr.'s death. The Court of
Appeals erred when it concluded that the bank was not liable
simply because (a) petitioner did not prove that Borja was acting as
the bank's vice president at the time of the accident; and (b) Borja
had, according to respondent bank, already bought the car at the
time of the mishap. For as long as the respondent bank remained
the registered owner of the car involved in the vehicular accident, it
could not escape primary liability for the death of petitioner's
son.94 (Emphasis supplied)
Preference for the registered-owner rule became more pronounced
in Del Carmen, Jr. v. Bacoy:95
Without disputing the factual finding of the [Court of Appeals] that
Allan was still his employee at the time of the accident, a finding
which we see no reason to disturb, Oscar Jr. contends that Allan
drove the jeep in his private capacity and thus, an employer's
vicarious liability for the employee's fault under Article 2180 of the
Civil Code cannot apply to him.
The contention is no longer novel. In Aguilar Sr. v. Commercial
Savings Bank, the car of therein respondent bank caused the
death of Conrado Aguilar, Jr. while being driven by its assistant
vice president. Despite Article 2180, we still held the bank liable for
damages for the accident as said provision should defer to the
settled doctrine concerning accidents involving registered motor
vehicles, i.e., that the registered owner of any vehicle, even if not
used for public service, would primarily be responsible to the
public or to third persons for injuries caused the latter while the
vehicle was being driven on the highways or streets. We have
already ratiocinated that:
chanRoblesvirtualLawlibrary
The main aim of motor vehicle registration is to identify the owner
so that if any accident happens, or that any damage or injury is
caused by the vehicle on the public highways, responsibility
therefor can be fixed on a definite individual, the registered owner.
Instances are numerous where vehicles running on public
highways caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or drivers, or
with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that
the motor vehicle registration is primarily ordained, in the interest
of the determination of persons responsible for damages or
injuries caused on public highways.96 (Emphasis supplied,
citations omitted)
Filcar Transport Services v. Espinas 97 stated that the registered
owner of a vehicle can no longer use the defenses found in Article
2180:98
Neither can Filcar use the defenses available under Article 2180 of
the Civil Code - that the employee acts beyond the scope of his
assigned task or that it exercised the due diligence of a good father
of a family to prevent damage - because the motor vehicle
registration law, to a certain extent, modified Article 2180 of the
Civil Code by making these defenses unavailable to the registered
owner of the motor vehicle. Thus, for as long as Filcar is the
registered owner of the car involved in the vehicular accident, it
could not escape primary liability for the damages caused to
Espinas.99ChanRoblesVirtualawlibrary
Mendoza v. Spouses Gomez100 reiterated this doctrine.
However, Aguilar, Sr., Del Carmen, Filcar, and Mendoza should not
be taken to mean that Article 2180 of the Civil Code should be
completely discarded in cases where the registered-owner rule
finds application.
As acknowledged in Filcar, there is no categorical statutory
pronouncement in the Land Transportation and Traffic Code
stipulating the liability of a registered owner. 101 The source of a
registered owner's liability is not a distinct statutory provision, but
remains to be Articles 2176 and 2180 of the Civil Code:
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While Republic Act No. 4136 or the Land Transportation and
Traffic Code does not contain any provision on the liability of
registered owners in case of motor vehicle mishaps, Article 2176,
in relation with Article 2180, of the Civil Code imposes an
obligation upon Filcar, as registered owner, to answer for the
damages caused to Espinas' car.102ChanRoblesVirtualawlibrary
Thus, it is imperative to apply the registered-owner rule in a
manner that harmonizes it with Articles 2176 and 2180 of the
Civil Code. Rules must be construed in a manner that will
harmonize them with other rules so as to form a uniform and
consistent system of jurisprudence.103 In light of this, the words
used in Del Carmen are particularly notable. There, this court
stated that Article 2180 "should defer to"104 the registered-owner
rule. It never stated that Article 2180 should be totally
abandoned.
Therefore, the appropriate approach is that in cases where both
the registered-owner rule and Article 2180 apply, the plaintiff
must first establish that the employer is the registered owner of
the vehicle in question. Once the plaintiff successfully proves
ownership, there arises a disputable presumption that the
requirements of Article 2180 have been proven. As a consequence,
the burden of proof shifts to the defendant to show that no liability
under Article 2180 has arisen.
This disputable presumption, insofar as the registered owner of
the vehicle in relation to the actual driver is concerned, recognizes
that between the owner and the victim, it is the former that should
carry the costs of moving forward with the evidence. The victim is,
in many cases, a hapless pedestrian or motorist with hardly any
means to uncover the employment relationship of the owner and
the driver, or any act that the owner may have done in relation to
that employment.
The registration of the vehicle, on the other hand, is accessible to
the public.
Here, respondent presented a copy of the Certificate of
Registration105 of the van that hit Reyes.106 The Certificate attests
to petitioner's ownership of the van. Petitioner itself did not
dispute its ownership of the van. Consistent with the rule we have
just stated, a presumption that the requirements of Article 2180
have been satisfied arises. It is now up to petitioner to establish
that it incurred no liability under Article 2180. This it can do by
presenting proof of any of the following: first, that it had no
employment relationship with Bautista; second, that Bautista
acted outside the scope of his assigned tasks; or third, that it
exercised the diligence of a good father of a family in the selection
and supervision of Bautista. 107
On the first, petitioner admitted that Bautista was its employee at
the time of the accident.108
On the second, petitioner was unable to prove that Bautista was
not acting within the scope of his assigned tasks at the time of the
accident. When asked by the court why Bautista was at the place
of the accident when it occurred, Sally Bellido, petitioner's
accountant and supervisor,109 testified that she did not "have the
personal capacity to answer [the question]" 110 and that she had no
knowledge to answer it:
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COURT : Madam Witness, do you know the reason why
your driver, Jimmy Bautista, at around 10:00 o'
clock in the morning of July 13, 2000 was in the
vicinity of Barangay Marcelo Green, United
Parañaque Subdivision 4?
WITNESS : I don't have the personal capacity to answer that,
Sir.
Q : So you don't have any knowledge why he was
there?
A : Yes, Sir.111 (Emphasis supplied)
Sally Bellido's testimony does not affect the presumption that
Article 2180's requirements have been satisfied. Mere disavowals
are not proof that suffice to overturn a presumption. To this end,
evidence must be adduced. However, petitioner presented no
positive evidence to show that Bautista was acting in his private
capacity at the time of the incident.
On the third, petitioner likewise failed to prove that it exercised
the requisite diligence in the selection and supervision of Bautista.
In its selection of Bautista as a service driver, petitioner contented
itself with Bautista's submission of a non-professional driver's
license.112 Hence, in Sally Balledo's cross-examination:
chanRoblesvirtualLawlibrary
Q : . . . when he was promoted as service driver, of
course, there were certain requirements and
among other else, you made mention about a
driver's license.
A : Yes, Sir.
Q : Would you be able to show to this Honorable
Court whether indeed this person did submit a
driver's license to your company?
A : Yes, Sir.
....
Q : Do you recall what kind of driver's license is this?
A : The Land Transportation Office.
Q : Is it a professional driver's license or non-
proffesional [sic] driver's license?
A : Non-professional.
Q : You are not sure?
COUR : Non professional, professional?
T
A : It's a non-professional.113 (Emphasis supplied)
Employing a person holding a non-professional driver's license to
operate another's motor vehicle violates Section 24 of the Land
Transportation and Traffic Code, which provides:
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SEC. 24. Use of driver's license and badge. — ...
....
No owner of a motor vehicle shall engage, employ, or hire any
person to operate such motor vehicle, unless the person sought to
be employed is a duly licensed professional driver.
Evidently, petitioner did not only fail to exercise due diligence
when it selected Bautista as service driver; it also committed an
actual violation of law.
To prove that it exercised the required diligence in supervising
Bautista, petitioner presented copies of several memoranda and
company rules.114 These, however, are insufficient because
petitioner failed to prove actual compliance. Metro Manila Transit
Corporation v. Court of Appeals115 emphasized that to establish
diligence in the supervision of employees, the issuance of
company policies must be coupled with proof of compliance:
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Due diligence in the supervision of employees, on the other hand,
includes the formulation of suitable rules and regulations for the
guidance of employees and the issuance of proper instructions
intended for the protection of the public and persons with whom the
employer has relations through his or its employees and the
imposition of necessary disciplinary measures upon employees in
case of breach or as may be warranted to ensure the performance
of acts indispensable to the business of and beneficial to their
employer. To this, we add that actual implementation and
monitoring of consistent compliance with said rules should be the
constant concern of the employer, acting through dependable
supervisors who should regularly report on their supervisory
functions.
In order that the defense of due diligence in the selection and
supervision of employees may be deemed sufficient and
plausible, it is not enough to emptily invoke the existence of said
company guidelines and policies on hiring and supervision. As the
negligence of the employee gives rise to the presumption of
negligence on the part of the employer, the latter has the burden
of proving that it has been diligent not only in the selection of
employees but also in the actual supervision of their work. The
mere allegation of the existence of hiring procedures and
supervisory policies, without anything more, is decidedly not
sufficient to overcome presumption.
We emphatically reiterate our holding, as a warning to all
employers, that "(t)he mere formulation of various company
policies on safety without showing that they were being complied
with is not sufficient to exempt petitioner from liability arising
from negligence of its employees. It is incumbent upon petitioner
to show that in recruiting and employing the erring driver the
recruitment procedures and company policies on efficiency and
safety were followed." Paying lip-service to these injunctions or
merely going through the motions of compliance therewith will
warrant stern sanctions from the Court. 116(Emphasis supplied,
citations omitted)
For failing to overturn the presumption that the requirements of
Article 2180 have been satisfied, petitioner must be held liable.
III
Petitioner's argument that it should be excused from liability
because Bautista was already dropped as a party is equally
unmeritorious. The liability imposed on the registered owner is
direct and primary.117 It does not depend on the inclusion of the
negligent driver in the action. Agreeing to petitioner's assertion
would render impotent the rationale of the motor registration law
in fixing liability on a definite person.
Bautista, the driver, was not an indispensable party under Rule 3,
Section 7118 of the 1997 Rules of Civil Procedure. Rather, he was a
necessary party under Rule 3, Section 8. 119 Instead of insisting
that Bautista — who was nothing more than a necessary party —
should not have been dropped as a defendant, or that petitioner,
along with Bautista, should have been dropped, petitioner (as a
co-defendant insisting that the action must proceed with Bautista
as party) could have opted to file a cross-claim against Bautista as
its remedy.
The 1997 Rules of Civil Procedure spell out the rules on joinder of
indispensable and necessary parties. These are intended to afford
"a complete determination of all possible issues, not only between
the parties themselves but also as regards to other persons who
may be affected by the judgment."120
However, while an exhaustive resolution of disputes is desired in
every case, the distinction between indispensable parties and
necessary parties delineates a court's capacity to render effective
judgment. As defined by Rule 3, Section 7, indispensable parties
are "[p]arties in interest without whom no final determination can
be had of an action[.]" Thus, their non-inclusion is debilitating:
"the presence of indispensable parties is a condition for the
exercise of juridical power and when an indispensable party is not
before the court, the action should be dismissed." 121
In contrast, a necessary party's presence is not imperative, and
his or her absence is not debilitating. Nevertheless, it is preferred
that they be included in order that relief may be complete.
The concept of indispensable parties, as against parties whose
inclusion only allows complete relief, was explained in Arcelona v.
Court of Appeals:122
An indispensable party is a party who has such an interest in the
controversy or subject matter that a final adjudication cannot be
made, in his absence, without injuring or affecting that interest, a
party who has not only an interest in the subject matter of the
controversy, but also has an interest of such nature that a final
decree cannot be made without affecting his interest or leaving the
controversy in such a condition that its final determination may
be wholly inconsistent with equity and good conscience. It has
also been considered that an indispensable party is a person in
whose absence there cannot be a determination between the
parties already before the court which is effective, complete, or
equitable. Further, an indispensable party is one who must be
included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in
the controversy or subject matter is separable from the interest of
the other parties, so that it will not necessarily be directly or
injuriously affected by a decree which does complete justice
between them. Also, a person is not an indispensable party if his
presence would merely permit complete relief between him and
those already parties to the action, or if he has no interest in the
subject matter of the action. It is not a sufficient reason to declare
a person to be an indispensable party that his presence will avoid
multiple litigation. 123ChanRoblesVirtualawlibrary
Petitioner's interest and liability is distinct from that of its driver.
Regardless of petitioner's employer-employee relationship with
Bautista, liability attaches to petitioner on account of its being the
registered owner of a vehicle that figures in a mishap. This alone
suffices. A determination of its liability as owner can proceed
independently of a consideration of how Bautista conducted
himself as a driver. While certainly it is desirable that a
determination of Bautista's liability be made alongside that of the
owner of the van he was driving, his non-inclusion in these
proceedings does not absolutely hamper a judicious resolution of
respondent's plea for relief.
IV
The Court of Appeals committed no reversible error when it
awarded actual damages to respondent. Respondent's claim for
actual damages was based on the Certificate 124 issued and signed
by a certain Peñaloza showing that respondent paid Peñaloza
P35,000.00 for funeral expenses.
Contrary to petitioner's claim, this Certificate is not hearsay.
Evidence is hearsay when its probative value is based on the
personal knowledge of a person other than the person actually
testifying.125 Here, the Certificate sought to establish that
respondent herself paid Peñaloza P35,000.00 as funeral expenses
for Reyes' death:126
3. Na ang aking kontrata ay nagkakahalaga ng P35,000-00
[sic] sa lahat ng nagamit na materiales at labor nito
kasama ang lote na ibinayad sa akin ni Gng. ERMILINDA
REYES ABEJAR na siyang aking kakontrata sa
pagsasagawa ng naturang paglilibingan.127 (Emphasis
supplied)
It was respondent herself who identified the Certificate. She
testified that she incurred funeral expenses amounting to
P35,000.00, that she paid this amount to Peñaloza, and that she
was present when Peñaloza signed the Certificate:
chanRoblesvirtualLawlibrary
[ATTY. Did you incur any expenses?
LIM] :
A: Meron po.
Q: How much did you spend for the death of Jesmarian
[sic] Reyes?
A: 'Yun pong P35,000.00 na pagpapalibing at saka...
Q: You said that you spent P35,000.00. Do you have any
evidence or proof that you spent that amount?
A: Meron po.
Q: Showing to you this sort of certification. What relation
has this...
A: 'Yan po' yung contractor nagumawa.
Q: Contractor of what?
A: 'Yan po' yung mismong binilhan ko ng lupa at nitso.
....
ATTY. LIM There is a signature at the top of the printed name
: Julian Penalosa [sic]. Whose signature is this?
A: 'Yan po' yung mismong contractor.
....
Q: Did you see him sign this?
A: Opo.128 (Emphasis supplied)
Respondent had personal knowledge of the facts sought to be
proved by the Certificate, i.e. that she spent P35,000.00 for the
funeral expenses of Reyes. Thus, the Certificate that she identified
and testified to is not hearsay. It was not an error to admit this
Certificate as evidence and basis for awarding P35,000.00 as
actual damages to respondent.
The Court of Appeals likewise did not err in awarding civil
indemnity and exemplary damages.
Article 2206 of the Civil Code provides:
chanRoblesvirtualLawlibrary
ARTICLE 2206. The amount of damages for death caused by a
crime or quasi-delict shall be at least three thousand pesos, even
though there may have been mitigating circumstances[.]
Further, Article 2231 of the Civil Code provides:
chanRoblesvirtualLawlibrary
ARTICLE 2231. In quasi-delicts, exemplary damages may be
granted if the defendant acted with gross negligence.
Both the Court of Appeals and the Regional Trial Court found
Bautista grossly negligent in driving the van and concluded that
Bautista's gross negligence was the proximate cause of Reyes'
death. Negligence and causation are factual issues. 129 Findings of
fact, when established by the trial court and affirmed by the Court
of Appeals, are binding on this court unless they are patently
unsupported by evidence or unless the judgment is grounded on a
misapprehension of facts.130 Considering that petitioner has not
presented any evidence disputing the findings of the lower courts
regarding Bautista's negligence, these findings cannot be
disturbed in this appeal. The evidentiary bases for the award of
civil indemnity and exemplary damages stand. As such, petitioner
must pay the exemplary damages arising from the negligence of its
driver.131 For the same reasons, the award of P50,000.00 by way of
civil indemnity is justified.132
The award of moral damages is likewise proper.  reasonably ascertained). The actual base for the
Article 2206(3) of the Civil Code provides:
chanRoblesvirtualLawlibrary
ARTICLE 2206. The amount of damages for death caused by a
crime or quasi-delict shall be at least three thousand pesos, even
though there may have been mitigating circumstances. In
addition:
. . . .  credit.146 (Emphasis supplied)
(3) The spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased.
(Emphasis supplied)
For deaths caused by quasi-delict, the recovery of moral damages
is limited to the spouse, legitimate and illegitimate descendants,
and ascendants of the deceased.133
Persons exercising substitute parental authority are to be
considered ascendants for the purpose of awarding moral
damages. Persons exercising substitute parental authority are
intended to stand in place of a child's parents in order to ensure
the well-being and welfare of a child. 134 Like natural parents,
persons exercising substitute parental authority are required to,
among others, keep their wards in their company, 135 provide for
their upbringing,136 show them love and affection,137 give them
advice and counsel,138 and provide them with companionship and
understanding.139 For their part, wards shall always observe
respect and obedience towards the person exercising parental
authority. 140 The law forges a relationship between the ward and
the person exercising substitute parental authority such that the
death or injury of one results in the damage or prejudice of the
other.
Moral damages are awarded to compensate the claimant for his or
her actual injury, and not to penalize the wrongdoer. 141 Moral
damages enable the injured party to alleviate the moral suffering
resulting from the defendant's actions.142 It aims to restore — to
the extent possible — "the spiritual status quo ante[.]" 143
Given the policy underlying Articles 216 and 220 of the Family
Code as well as the purposes for awarding moral damages, a
person exercising substitute parental authority is rightly
considered an ascendant of the deceased, within the meaning of
Article 2206(3) of the Civil Code. Hence, respondent is entitled to
moral damages.
As exemplary damages have been awarded and as respondent was
compelled to litigate in order to protect her interests, she is rightly
entitled to attorney's fees.144
However, the award of interest should be modified. This
modification must be consistent with Nacar v. Gallery
Frames,145 in which we ruled:
chanRoblesvirtualLawlibrary
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
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 6% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
WHEREFORE, the Decision of the Court of Appeals dated October
3, 2005 is AFFIRMED with the following MODIFICATIONS: (a)
actual damages in the amount of P35,000.00 shall earn interest at
the rate of 6% per annum from the time it was judicially or
extrajudicially demanded from petitioner Caravan Travel and
Tours International, Inc. until full satisfaction; (b) moral damages,
exemplary damages, and attorney's fees shall earn interest at the
rate of 6% per annum from the date of the Regional Trial Court
Decision until full satisfaction; and (c) civil indemnity shall earn
interest at the rate of 6% per annum from the date of the Court of
Appeals Decision until full satisfaction.
SO ORDERED.cralawlawlibrary
G.R. No. 88561               April 20, 1990

DR. HERMAN ARMOVIT, DORA ARMOVIT and JACQUELINE

ARMOVIT, petitioners, 
vs.
COURT OF APPEALS, and NORTHWEST AIRLINES,
INC., respondents.

GANGAYCO, J.:

This is a case which involves a Filipino physician and his family

residing in the United States who came home to the Philippines on
a Christmas visit. They were bumped off at the Manila
International Airport on their return flight to the U.S. because of
an erroneous entry in their plane tickets relating to their time of
departure.
In October 1981, the petitioners decided to spend their Christmas
holidays with relatives and friends in the Philippines, so they
purchased from private respondent, (Northwest Airlines, Inc.)
three (3) round trip airline tickets from the U.S. to Manila and
back, plus three (3) tickets for the rest of the children, though not
involved in the suit. Each ticket of the petitioners which was in
the handwriting of private respondent's tickets sales agent
contains the following entry on the Manila to Tokyo portion of the
return flight:
from Manila to Tokyo, NW flight 002, date 17 January,
time 10:30 A.M. Status, OK. 1
On their return trip from Manila to the U.S. scheduled on January
17, 1982, petitioner arrived at the check-in counter of private
respondent at the Manila International Airport at 9:15 in the
morning, which is a good one (1) hour and fifteen (15) minutes
ahead of the 10:30 A.M. scheduled flight time recited in their
tickets. Petitioners were rudely informed that they cannot be
accommodated inasmuch as Flight 002 scheduled at 9:15 a.m.
was already taking off and the 10:30 A.M. flight time entered in
their plane tickets was erroneous.
Previous to the said date of departure petitioners re-confirmed
their reservations through their representative Ernesto Madriaga
who personally presented the three (3) tickets at the private
respondent's Roxas Boulevard office. 2 The departure time in the
three (3) tickets of petitioners was not changed when re-confirmed.
The names of petitioners appeared in the passenger manifest and
confirmed as Passenger Nos. 306, 307, and 308, Flight 002. 3
Herein petitioner Dr. Armovit protested in extreme agitation that
because of the bump-off he will not be able to keep his
appointments with his patients in the U.S. Petitioners suffered
anguish, wounded feelings, and serious anxiety day and night of
January 17th until the morning of January 18th when they were
finally informed that seats will be available for them on the flight
that day.
Because of the refusal of the private respondent to heed the
repeated demands of the petitioners for compensatory damages
arising from the aforesaid breach of their air-transport
contracts, 4 petitioners were compelled to file an action for
damages in the Regional Trial Court of Manila.
After trial on the merits, a decision was rendered on July 2, 1985,
the dispositive part of which reads as follows:
WHEREFORE, in view of the foregoing considerations,
judgment is hereby rendered ordering defendant to pay
plaintiffs actual, moral, exemplary and nominal
damages, plus attorney's fees, as follows:
a) Actual damages in favor of Dr. Herman
Armovit in the sum of P1,300.00, with interest
at the legal rate from January 17, 1982;
b) Moral damages of P500,000.00, exemplary
damages of P500,000.00, and nominal damages
of P100,000.00 in favor of Dr. Herman Armovit;
c) Moral damages of P300,000.00, exemplary
damages of P300,000.00, and nominal damages
of P50,000.00 in favor of Mrs. Dora Armovit;
d) Moral damages of P300,000.00, exemplary
damages of P300,000.00, and nominal damages
of P50,000.00 in favor of Miss Jacqueline
Armovit; and
e) Attorney's fees of 5% of the total awards
under the above paragraphs.
plus costs of suit. 5
Not satisfied therewith, private respondent interposed an appeal to
the Court of Appeals wherein in due course a decision was
rendered on June 20, 1989, the relevant portion and dispositive
part of which read as follows:
Plaintiffs-appellees had complied with the "72-hour
reconfirmation rule." They had obtained reconfirmation
from defendant-appellant of the time and date of their
flight, as indicated in their tickets. The trial court said so
and We find nothing significance to warrant a
disturbance of such finding.
On the allowance of damages, the trial court has
discretion to grant and fix the amounts to be paid the
prevailing party. In this case, there was gross negligence
on the part of defendant-appellant in reconfirming the
time and date of departure of Flight No. 002 as indicated
in the three (3) tickets (Exhibits A, A-1 and A-2). And, as
admitted by defendant-appellant, plaintiffs-appellees had
arrived at the airport at 9:15 A.M. or one (1) hour before
departure time of 10:30 A.M.
Appellees' actual damages in the amount of P1,300.00 is
maintained for being unrebutted by the Appellant.
However, We modify the allowance of the other awards
made by the trial court.
The moral damages of P900,000.00 awarded to Appellees
must be eliminated considering the following:
1. That the appellees did not take the witness stand to
testify on their "social humiliation, wounded feelings and
anxiety" and the breach of contract was not malicious or
fraudulent. (Art. 2220, Civil Code). It has been held that:
Nor was there error in the appealed decision in denying
moral damages, not only on account of the plaintiffs
failure to take the witness stand and testify to her social
humiliation, wounded feelings, anxiety, etc., as the
decision holds, but primarily because a breach of
contract like that of defendant not being malicious or
fraudulent, does not warrant the award of moral
damages under Article 2220 of the Civil Code (Ventilla vs.
Centeno, L-14333, 28 Jan. 1961; Fores vs. Miranda, L-
12163; 4 March 1959 Francisco vs. GSIS, 7 SCRA 577).
2. Furthermore, moral damages, though incapable of
pecuniary estimation, are in the category of an award
designed to compensate the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer
(San Andres vs. Court of Appeals, 116 SCRA 85). In a
later case, the Supreme Court held that moral damages
are emphatically not intended to enrich a complainant at
the expense of the defendant (R & B Surety vs. IAC, 129
SCRA 745) citing Grand Union Supermarket, Inc. vs.
Espino, Jr. 94 SCRA 966).
However, there is no question that appellant acted with
negligence in not informing appellees about the change of
hour of departure. To provide an example or correction
for the public good, therefore, the award of exemplary
damages is proper (Art. 2229 & 2231 Civil Code; Lopez v.
Pan American World Airways, 16 SCRA 431; Prudenciado
vs. Alliance Transport, 148 SCRA 440). Nonetheless, the
awards granted by the trial court are far too exhorbitant
and excessive compared to the actual loss of P1,300.00.
The authority of the Court of Appeals to modify or change
the amounts of awards has been upheld in a long line of
decisions. We reduce the award of exemplary damages
 from P500,000.00 to P100,000.00 in favor of Dr. Herman
Armovit, from P500,000.00 to P50,000.00 in favor of Mrs.
Dora Armovit; and from P300,000.00 to P20,000.00 in
favor of Miss Jacqueline Armovit. (Gellada vs. Warner
Barnes, 57 O.G. (4) 7347, Sadie vs. Bachrach, 57 O.G.
(4) 636, Prudenciado vs. Alliance Transport, supra). The
award of nominal damages has to be eliminated since we
are already awarding actual loss. Nominal damages
cannot co-exist with actual or compensatory damages
(Vda. de Medina, et al. v. Cresencia, et al., 99 Phil. 506).
The award of 5% of the total damages as attorney's fees
is reasonable.
3. WHEREFORE, with the above modifications, the
decision appealed from is hereby AFFIRMED in all other
respects. 6
A motion for reconsideration thereof filed by the petitioners was
denied in a resolution dated May 29, 1989. 7
Both petitioners and private respondent elevated the matter to this
Court for review by certiorari.
The petition of private respondent was docketed as G.R. No.
86776. It was denied in a resolution of this Court dated July 10,
1989, and the motion for reconsideration thereof was denied in a
resolution dated September 6, 1989. On October 12, 1989 this
Court ordered the entry of judgment in this case and for the
records to be remanded to the court of origin for prompt execution
of the judgment.
In the herein petition for review on certiorari filed by petitioner
they claim that the questioned decision and resolution of the
Court of Appeals should be struck down as an unlawful, unjust
and reasonless departure from the decisions of this Court as far
as the award for moral damages and the drastic reduction of the
exemplary damages are concerned.
The petition is impressed with merit.
The appellate court observed that private respondent was guilty of
gross negligence not only in the issuance of the tickets by the
erroneous entry of the date of departure and without changing or
correcting the error when the said three (3) tickets were presented
for re-confirmation. Nevertheless it deleted the award of moral
damages on the ground that petitioners did not take the witness
stand to testify on "their social humiliation, wounded feelings and
anxiety, and that the breach of contract was not malicious or
fraudulent." 8
We disagree.
In Air France vs. Carrascoso, 9 Lopez vs. Pan American World
Airways, 10 and Zulueta vs. Pan American World Airways, 11 this
Court awarded damages for the gross negligence of the airline
which amounted to malice and bad faith and which tainted the
breach of air transportation contract.
Thus in Air France, this Court observed:
A contract to transport passengers is quite different in
kind and degree from any other contractual relation. And
this, because of the relation which an air carrier sustains
with the public. Its business is mainly with the traveling
public. It invites people to avail of the comforts and
advantages it offers. The contract of air carriage,
therefore, generates a relation attended with a public
duty. Neglect or malfeasance of the carrier's employees,
naturally, could give ground for an action for damages.
Passengers do not contract merely for transportation.
They have the right to be treated by the carrier's
employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against
personal misconduct, injurious language, indignities and
abuses from such employees. So it is, that any rude or
discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against
the carrier.12
The gross negligence committed by private respondent in the
issuance of the tickets with entries as to the time of the flight, the
failure to correct such erroneous entries and the manner by which
petitioners were rudely informed that they were bumped off are
clear indicia of such malice and bad faith and establish that
private respondent committed a breach of contract which entitles
petitioners to moral damages.
The appellate court observed that the petitioners failed to take the
witness stand and testify on the matter.1âwphi1 It overlooked
however, that the failure of the petitioner to appear in court to
testify was explained by them. The assassination of Senator
Benigno Aquino, Jr. on August 21, 1983 following the year they
were bumped off caused a turmoil in the country. This turmoil
spilled over to the year 1984 when they were scheduled to testify.
However, the violent demonstrations in the country were
sensationalized in the U.S. media so petitioners were advised to
refrain from returning to the Philippines at the time.
Nevertheless, Atty. Raymund Armovit, brother of petitioner Dr.
Armovit, took the witness stand as he was with the petitioners
from the time they checked in up to the time of their ultimate
departure. He was a witness when the check-in officer rudely
informed the petitioners that their flight had already taken off,
while petitioner Dr. Armovit remonstrated that their tickets
reflected their flight time to be 10:30 A.M.; that in anger and
frustration, Dr. Armovit told the said check-in-officer that he had
to be accommodated that morning so that he could attend to all
his appointments in the U.S.; that petitioner Jacqueline Armovit
also complained about not being able to report for work at the
expiration of her leave of absence; that while petitioner had to
accept private respondent's offer for hotel accommodations at the
Philippine Village Hotel so that they could follow up and wait for
their flight out of Manila the following day, petitioners did not use
their meal coupons supplied because of the limitations thereon so
they had to spend for lunch, dinner, and breakfast in the sum of
P1,300.00 while waiting to be flown out of Manila; that Dr.
Armovit had to forego the professional fees for the medical
appointments he missed due to his inability to take the January
17 flight; that the petitioners were finally able to fly out of Manila
on January 18, 1982, but were assured of this flight only on the
very morning of that day, so that they experienced anxiety until
they were assured seats for that flight. 13
No doubt Atty. Raymund Armovit's testimony adequately and
sufficiently established the serious anxiety, wounded feelings and
social humiliation that petitioners suffered upon having been
bumped off. However, considering the circumstances of this case
whereby the private respondent attended to the plight of the
petitioners, taking care of their accommodations while waiting and
boarding them in the flight back to the U.S. the following day, the
Court finds that the petitioners are entitled to moral damages in
the amount of P100,000.00 each.
By the same token to provide an example for the public good, an
award of exemplary damages is also proper. 14The award of the
appellate court is adequate.
Nevertheless, the deletion of the nominal damages by the appellate
court is well-taken since there is an award of actual damages.
Nominal damages cannot co-exist with actual or compensatory
damages. 15
WHEREFORE, the petition is GRANTED. The questioned judgment
of the Court of Appeals is hereby modified such that private
respondent shall pay the following:
(a) actual damages in favor of Dr. Armovit in the sum of
P1,300.00 with interest at the legal rate from January
17, 1982;
 (b) moral damages at P100,000.00 and exemplary
damages and P100,000.00 in favor of Dr. Armovit;

(c) moral damages of P100,000.00 and exemplary

damages of P50,000.00 in favor of Mrs. Dora Armovit;

(d) moral damages of P100,000.00 and exemplary

damages in the amount of P20,000.00 in favor of Miss
Jacqueline Armovit; and

(e) attorney's fees at 5% of the total awards under the

above paragraphs, plus the cost of suit.

SO ORDERED.

G.R. No. 137842            August 23, 2001

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, 

vs.
DANILO CATUBIG y HORIO, accused-appellant.

VITUG, J.:

In an information, dated 29 January 1998, the accused, Danilo

Catubig y Horio, was charged with the crime of rape before the
Regional Trial Court, Branch 78, of Malolos, Bulacan; viz:

"The undersigned Asst. Provincial Prosecutor on

complaint of the offended party Dannilyn Catubig y
 Lazaro accuses Danilo Catubig y Horio of the crime of
rape, penalized under the provisions of Art. 335 of the
Revised Penal Code, committed as follows:
"That on or about the 27th day of November, 1997, in the
municipality of San Jose del Monte, province of Bulacan,
Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, did then and there
wilfully, unlawfully and feloniously, by means of force,
threats and intimidation and with lewd design have
carnal knowledge of the said offended party against her
will."1
When arraigned on 16 July 1998, accused Catubig, represented
by counsel de oficio, pleaded "not guilty" to the offense charged;
forthwith, trial ensued.
The case for the prosecution was laid bare in Appellee's Brief
submitted by the Office of the Solicitor General.
"On November 27, 1997, at around 4:00 o'clock in the
afternoon, private complainant Dannilyn Catubig, who
was born on August 9, 1985, and her four (4) younger
siblings were watching television in the sala of their
house located at Sunlife Subdivision, San Jose del
Monte, Bulacan.
"After an hour, Dannilyn's father, herein appellant Danilo
Catubig, arrived and told Dannilyn's siblings to proceed,
as in fact they did proceed, to her aunt's house which is
just located nearby. Thereafter, appellant told Dannilyn
to go inside a room and to lie down on the bed. After
Dannilyn had complied, appellant removed Dannilyn's
shorts and panty, while appellant, after removing his
brief and t-shirt, [laid] on top of Dannilyn. Afraid of
appellant who beat and raped her in the past, Dannilyn
was not able to resist appellant who succeeded in
inserting his penis into Dannilyn's vagina.
"However, Dannilyn's aunt, who got suspicious of what
appellant was doing to Dannilyn, informed the latter's
mother, Jocelyn Catubig, about the said suspicion. Thus,
when confronted by her mother, Dannilyn was forced to
reveal that she was indeed raped by appellant. The
sexual assault was reported to the San Jose del Monte
Police Station where Dannilyn's sworn statement was
subsequently taken on December 3, 1997.
"Upon the request of the police authorities, Dannilyn was
examined on December 1, 1997 by Dr. Wilfredo E. Tiera,
Medico-Legal Officer of the National Bureau of
Investigation, who found out that Dannilyn's healed
laceration in the hymen was caused by sexual
intercourse."2
The accused denied the accusation against him. He claimed that
the rape charge was brought about only because of the ill-will
between him, on the one hand, and his wife and daughter
Dannilyn, on the other hand, following a quarrel. On 27 November
1997, he asseverated, he had fought with his wife, hitting her and
his daughter. His wife then threatened him that it was the last
time that she would allow him to harm her and that he would
regret what he did. True to her foreboding, the next day, he was
arrested and a complaint for rape was filed against him.
On 11 December 1998, the Regional Trial Court rendered a
decision holding the accused guilty of the crime of rape; it
adjudged:
"WHEREFORE, in view of the foregoing, the Court hereby
finds accused DANILO CATUBIG Y HORIO GUILTY
beyond reasonable doubt of the crime of Rape defined
and penalized under Article 335 of the Revised Penal
Code, as amended by Republic Act No. 7659, and hereby
sentences him to suffer the penalty of DEATH, and to pay
private complainant Dannilyn Catubig the amount of
Fifty Thousand Pesos (P50,000.00) as moral damages." 3
With the imposition of the death penalty by the trial court, the
records were elevated to this Court for automatic review.
In his brief, appellant submitted thusly:
"1. The lower court erred in finding the accused guilty of
the crime of rape in violation of Article 335 of the Revised
Penal Code as amended by Republic Act 7659.
"2. The lower court erred in not taking into consideration
the fact that the information was defective for failure to
state that the accused is the father of the victim and that
the victim was under 18 years [of] age at the time of the
commission of the alleged rape."4
Private complainant Dannilyn Catubig narrated how she was
repeatedly abused by her own father; she testified:
"Q         Now, after your sisters and brother [went] to the
house of your aunt, what did your father do?
"A         He instructed me to go inside the room.
"Q         How many rooms were there in your house?
"A         Only one.
"Q         Did you go to the room per instruction?
"A         Yes, sir.
"Q         And what happened inside the room?
"A         My father entered the room.
"Q         And when your father entered the room, what
did he do next?
"A         He removed my short [pants] and my panty.
"Q         What was your position at that time when your
father removed your short pants and panty?
"A         I was lying.
"Q         When you entered the room, did you lie
immediately?
"A         No, I just sat.
"Q         How come as you claimed a while ago, you were
lying when your father removed your short pants and
panty?
"A         Once I entered the room, I was sitting then he
removed my short [pants] and panty.
"Q         You said upon entering the room, you sat and
while sitting, all of a sudden your father removed your
short pants and panty while already lying at that time,
how come you were lying when according to you, you
were sitting inside the room?
"A         I was sitting first and he instructed me to lie
down.
"Q         While you were sitting inside the room and you
were instructed by your father to lie, what comes to your
mind?
"A         That he will rape me.
"Q         How did you come to know that?
"A         He was raping me before, doing that before.
"Q         In other words, that was not the first time your
father raped you on that particular date?
"A         No, sir.
"Q         When was the first time, if you remember?
"A         When I was still in grade 1.
"Q         How many times were you raped by your father?
"A         I can no longer remember how many it was —
several.
"Q         When was the last time your father raped you?
"A         November 27.
"Q         Now, when your father removed your short pants
and panty, what did he do next?
"A         He removed his brief and shirt.
"Q         After removing his brief and shirt, what did he
do?
"A         He [laid] on top me.
"Q         When your father [laid] on top of you, what did
he do?
"A         He was inserting his penis to my vagina.
 "Q         At this juncture, may we make of record that course of the testimony in open court. There is no valid reason to
witness starts to cry. now ignore this long accepted jurisprudence in this instance.
"Q         How did you know your father inserted his penis
to your vagina? This Court, however, finds the second assignment of error
"A         I can feel it and it is painful. impressed with merit.
"Q         That was the time when your father was already
lying on top of you? Article 335 of the Revised Penal Code, as amended by Section 11
"A         Yes, sir. of Republic Act No. 7659, at times also referred to as the Death
"Q         And what was the movement of the body of your Penalty Law, states in part:
father while he was lying on top of you?
"A         Push and pull movement. "ARTICLE 335. When and how rape is committed. x x x .
"Q         For how long did your father stay on top of you
doing that push and pull movement? "xxx           xxx           xxx
"A         That must be about 1 hour, but my aunt arrived.
"Q         Aside from the pain, what else did you feel? "The death penalty shall also be imposed if the crime of
"A         Mahapdi at parang may pumipitik sa loob ng ari rape is committed with any of the following attendant
ko. circumstances:
"Q         Did you not try to resist?
"A         No, because I am afraid of him. "1. When the victim is under eighteen (18) years of age
"Q         You are afraid of your father? and the offender is a parent, ascendant, step-parent,
"A         Yes, sir. guardian, relative by consanguinity or affinity within the
"Q         Afraid of what? third civil degree, or the common-law spouse of the
"A         Because he was beating us, hitting us. parent of the victim."
"Q         Why, what was the reason why your father was
hitting you?
The concurrence of the minority of the victim and her relationship
"A         To threaten us.
to the offender are special qualifying circumstances that are
"Q         For what purpose?
needed to be alleged in the complaint or information for the
"A         Whenever my mother sided with us, my father
penalty of death to be decreed.7The Constitution guarantees to be
and mother engaged in a fight.
inviolable the right of an accused to be informed of the nature and
"Q         In this case, you were raped and sexually
cause of the accusation against him.8 It is a requirement that
abused by your father, what made you afraid of him?
renders it essential for every element of the offense with which he
"A         Because we were afraid of my father since
is charged to be properly alleged in the complaint or information.
childhood."5
Here, the information failed to state the minority of the victim and
her relationship with the offender, both special qualifying
Dannilyn has given her testimony in a plain, categorical,
circumstances under Republic Act No. 7659, and for want of such
spontaneous and frank manner, remaining consistent throughout,
allegations, the trial court erred in imposing the death penalty on
and there is hardly anything on record that can cast doubt on her
the accused.9 Appellant could only thus be convicted under Article
sincerity. The revelations of an innocent child whose chastity has
335 of the Revised Penal Code, as amended, of simple rape
been abused, coupled with her willingness to face police
punishable by reclusion perpetua.
investigation and to undergo the trouble and humiliation of a
public trial, should merit credence unless strong justifications
Anent the award of damages, the trial court has correctly awarded
dictate otherwise. Indeed, it would take a most senseless kind of
P50,000.00 moral damages, an award that rests on the jural
depravity for a young daughter to just make up a story which
foundation that the crime of rape necessarily brings with it shame,
could put her own father to an undeserved indictment and to even
mental anguish, besmirched reputation, moral shock and social
possibly face death in the hands of the law. 6
humiliation to the offended party.10 In addition, the offended party
deserves to receive the amount of P50,000.00 civil indemnity, 11 the
When rape is committed against one's own daughter, the moral
equivalent of compensatory damages, and exemplary damages in
ascendancy and influence of the father, that necessarily flows
the amount of P25,000.00.
from his parental authority, can sufficiently cow the child to
submission and can rightly be held to substitute for the requisite
An apparent discord in the award of exemplary damages in simple
"violence or intimidation" that, normally, would be characterized
and qualified rape cases perhaps deserves more than just a
by physical acts and uttered threats made on the victim.
passing remark.
The trite defenses of alibi and denial proferred by appellant cannot
The Civil Code of the Philippines provides, in respect to exemplary
prevail over the positive and categorical statements of private
or corrective damages, thusly:
complainant. Alibi is often viewed with suspicion and received
with caution not only because it is inherently weak and unreliable
"ARTICLE 2229. Exemplary or corrective damages are
but also because it is easy to fabricate. In order that this defense
imposed, by way of example or correction for the public
can prosper, it must be convincing to preclude any doubt on the
good, in addition to the moral, temperate, liquidated or
physical impossibility of the presence of the accused at the locus
compensatory damages.
criminis at the time of the incident. These conditions have not
been met in the case at bar.
"ARTICLE 2230. In criminal offenses, exemplary damages
as a part of the civil liability may be imposed when the
The contention of appellant that his wife and daughter Dannilyn
crime was committed with one or more aggravating
have accused him merely because of his violent ways is much too
circumstances. Such damages are separate and distinct
flimsy to be believed. The mere resentment of a wife and daughter
from fines and shall be paid to the offended party.
is not so compelling as to have motivated them to wrongly lodge a
complaint for a crime much more serious than might, if at all, be
expected. "ARTICLE 2231. In quasi-delicts, exemplary damages
may be granted if the defendant acted with gross
negligence.
It is likewise a settled doctrine that the assessment made by the
trial court on the credibility of witnesses deserves great regard and
weight on appeal. The rule is not without reason; the trial judge "ARTICLE 2232. In contracts and quasi-contracts, the
has a unique position of hearing first hand the witnesses and court may award exemplary damages if the defendant
observing their deportment, conduct and attitude during the
 acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.
"ARTICLE 2233. Exemplary damages cannot be recovered
as a matter of right; the court will decide whether or not
they should be adjudicated.
"ARTICLE 2234. While the amount of the exemplary
damages need not be proved, the plaintiff must show
that he is entitled to moral, temperate or compensatory
damages before the court may consider the question of
whether or not exemplary damages should be awarded.
In case liquidated damages have been agreed upon,
although no proof of loss is necessary in order that such
liquidated damages may be recovered, nevertheless,
before the court may consider the question of granting
exemplary in addition to the liquidated damages, the
plaintiff must show that he would be entitled to moral,
temperate or compensatory damages were it not for the
stipulation for liquidated damages.
"ARTICLE 2235. A stipulation whereby exemplary
damages are renounced in advance shall be null and
void."
The attendance of aggravating circumstances in the perpetration
of the crime serves to increase the penalty (the criminal liability
aspect),12 as well as to justify an award of exemplary or corrective
damages (the civil liability aspect), 13 moored on the greater
perversity of the offender manifested in the commission of the
felony such as may be shown by (1) the motivating power itself, (2)
the place of commission, (3) the means and ways employed, (4) the
time, or (5) the personal circumstances of the offender or the
offended party or both. There are various types of aggravating
circumstances, among them, the ordinary and the qualifying.
Relationship is an alternative circumstance under Article 15 of the
Revised Penal Code.
"ARTICLE 15. Their concept. — Alternative circumstances
are those which must be taken into consideration as
aggravating or mitigating according to the nature and
effects of the crime and other conditions attending its
commission. They are relationship, intoxication, and
degree of instruction and education of the offender.
"The alternative circumstance of relationship shall be
taken into consideration when the offended party is the
spouse, ascendant, descendant, legitimate, natural, or
adopted brother or sister, or relative by affinity in the
same degree of the offender."
As a rule, relationship is held to be aggravating in crimes against
chastity, such as rape and acts of lasciviousness, whether the
offender is a higher or a lower degree relative of the offended
party.14
Under Section 11 of Republic Act No. 7659, amending Article 335
of the Revised Penal Code, the death penalty is to be imposed in
rape cases "when the victim is under eighteen (18) years of age
and the offender is a parent, ascendant, step-parent, guardian,
relative by consanguinity or affinity within the third civil degree, or
the common-law spouse of the parent of the victim." The Court
has since held that the circumstances enumerated by the
amendatory law are to be regarded as special qualifying
(aggravating) circumstances. Somehow doubts linger on whether
relationship may then be considered to warrant an award for
exemplary damages where it is used to qualify rape as a heinous
crime, thereby becoming an element thereof, as would subject the
offender to the penalty of death. Heretofore, the Court has not
categorically laid down a specific rule, preferring instead to treat
the issue on a case to case basis.
In People vs. Fundano,15 People vs. Ramos,16 People vs.
Medina,17 People vs. Dimapilis,18 People vs. Calayca,19People vs.
Tabion,20 People vs. Bayona,21 People vs. Bayya,22 and People vs.
Nuñez,23 along with still other cases, the Court has almost
invariably appreciated relationship as an ordinary aggravating
circumstance in simple rape and thereby imposed exemplary
damages upon the offender whether or not the offense has been
committed prior to or after the effectivity of Republic Act No. 7659.
Exceptionally, as in People vs. Decena,24 People vs. Perez,25 People
vs. Perez,26 and People vs. Ambray,27 the Court has denied the
award of exemplary damages following the effectivity of that law.
In qualified rape cases, such as in People vs. Magdato, 28 People vs.
Arizapa,29 and People vs. Alicante,30the Court decreed the payment
of exemplary damages to the offended party but it did not do so as
in People vs. Alba,31 People vs. Mengote,32 and People vs.
Maglente.33
It may be time for the Court to abandon its pro hac vice stance
and provide, for the guidance of the bar and the bench, a kind of
standard on the matter.
Also known as "punitive" or "vindictive" damages, exemplary or
corrective damages are intended to serve as a deterrent to serious
wrongdoings and as a vindication of undue sufferings and wanton
invasion of the rights of an injured or a punishment for those
guilty of outrageous conduct. These terms are generally, but not
always, used interchangeably. In common law, there is preference
in the use of exemplary damages when the award is to account for
injury to feelings and for the sense of indignity and humiliation
suffered by a person as a result of an injury that has been
maliciously and wantonly inflicted,34 the theory being that there
should be compensation for the hurt caused by the highly
reprehensible conduct of the defendant — associated with such
circumstances as willfulness, wantonness, malice, gross
negligence or recklessness, oppression, insult or fraud or gross
fraud35 — that intensifies the injury. The terms punitive or
vindictive damages are often used to refer to those species of
damages that may be awarded against a person to punish him for
his outrageous conduct. In either case, these damages are
intended in good measure to deter the wrongdoer and others like
him from similar conduct in the future.36
The term "aggravating circumstances" used by the Civil Code, the
law not having specified otherwise, is to be understood in its
broad or generic sense. The commission of an offense has a two-
pronged effect, one on the public as it breaches the social order
and the other upon the private victim as it causes personal
sufferings, each of which is addressed by, respectively, the
prescription of heavier punishment for the accused and by an
award of additional damages to the victim. The increase of the
penalty or a shift to a graver felony underscores the exacerbation
of the offense by the attendance of aggravating circumstances,
whether ordinary or qualifying, in its commission. Unlike the
criminal which is basically a State concern, the award of damages,
however, is likewise, if not primarily, intended for the offended
party who suffers thereby. It would make little sense for an award
of exemplary damages to be due the private offended party when
the aggravating circumstance is ordinary but to be withheld when
it is qualifying. Withal, the ordinary or qualifying nature of an
aggravating circumstance is a distinction that should only be of
consequence to the criminal, rather than to the civil, liability of
the offender. In fine, relative to the civil aspect of the case, an
aggravating circumstance, whether ordinary or qualifying, should
entitle the offended party to an award of exemplary damages
within the unbridled meaning of Article 2230 of the Civil Code.
Relevantly, the Revised Rules on Criminal Procedure, made
effective on 01 December 2000, requires aggravating
circumstances, whether ordinary or qualifying, to be stated in the
complaint or information. Sections 8 and 9 of Rule 110 of the
Rules of Court now provide:
"SECTION 8. Designation of the offense. — The complaint
or information shall state the designation of the offense
given by the statute, aver the acts or omissions
constituting the offense, and specify its qualifying and
aggravating circumstances. If there is no designation of
the offense, reference shall be made to the section or
subsection of the statute punishing it.
 "SECTION 9. Cause of the accusation. — The acts or
omissions complained of as constituting the offense and
the qualifying and aggravating circumstances must be
stated in ordinary and concise language and not
necessarily in the language used in the statute but in
terms sufficient to enable a person of common
understanding to know what offense is being charged as
well as its qualifying and aggravating circumstances and
for the court to pronounce judgment."

A court would thus be precluded from considering in its judgment

the attendance of "qualifying or aggravating circumstances" if the
complaint or information is bereft of any allegation on the
presence of such circumstances.

The retroactive application of procedural rules, nevertheless,

cannot adversely affect the rights of the private offended party that
have become vested prior to the effectivity of said rules. Thus, in
the case at bar, although relationship has not been alleged in the
information, the offense having been committed, however, prior to
the effectivity of the new rules, the civil liability already incurred
by appellant remains unaffected thereby.

WHEREFORE, the decision of the court a quo is AFFIRMED with

MODIFICATION in that appellant Danilo Catubig y Horio is found
guilty only of simple rape and not in its qualified form, and he is
hereby sentenced to suffer the penalty of reclusion perpetua and
to pay complainant Dannilyn Catubig P50,000.00 civil indemnity,
P50,000.00 moral damages and P25,000.00 exemplary damages.
Costs de oficio.

SO ORDERED.