REMEDIES

Exceptions :
i.
Waiver
ii.
Reservation
iii.
Prior Institution

Types of Actions :
1.
2.
3.

Culpa Aquiliana
Culpa Contractual
Culpa Criminal

CULPA CONTRACTUAL
a. Negligence is
merely incidental to
the performance of an
obligation already
existing because of
the contract.
b. There is preexisting obligation

c. Proof needed
preponderance of
evidence
d. Defense of good
father of a family in
the selection and
supervision of
employees is not a
proper complete
defense in culpa
contractual
e. As long as it is
proved that there was
a contract and that it
was not carried out, it
is presumed that the
debtor is at fault and
it is his duty to prove
that there was no
negligence in carrying
out the terms of the
contract.
a.

b.

CULPA AQUILIANA
a. Negligence here is
direct substantive,
independent.

CULPA CRIMINAL
a. Negligence here is
direct, substantive,
independent of a
contract.

b. No pre-existing
obligation (except of
course the duty to be
careful in all human
actuations)
c. Proof needed
preponderance of
evidence

b. No pre-existing
obligation (except the
duty never to harm
others.)

d. Defense of good
father, etch, is a
proper and complete
defense (insofar as
employers or
guardians are
concerned) in culpa
aquiliana
e. Ordinarily, the
victim has to prove
the negligence of the
defendant. This is
because his action is
based on alleged
negligence on the
part of the defendant.

c. Proof needed in a
crime proof of guilt
beyond reasonable
doubt
d. This is not a proper
defense in culpa
criminal. Here the
employees guilt is
automatically the
employers civil guilt,
if the former is
insolvent
e. Accused is
presumed innocent
until the contrary is
proved, so
prosecution has the
burden of proving the
negligence of the
accused.

General Rule : Actions to recover civil liability are deemed

instituted with the criminal action.

General Rule : Criminal Actions proceed before the civil

action
Exception: When there is a prejudicial question

DAMAGES A sum of money which the law awards or imposes as

pecuniary compensation, recompense or satisfaction for an injury done
or wrong sustained as a consequence of the breach of some duty or the
violation of some right.
GENERAL PRINCIPLES:
1. Damages must be proved.
2. Amount of damages must be fair and commensurate to the loss.
3. Damages must be a consequence of the tortuous act.
4. Remote and speculative damages are not allowed.
FILINVEST CREDIT CORPORATION vs. THE INTERMEDIATE
APPELLATE COURT and NESTOR B. SUGA JR.
G.R. No. L-65935 September 30, 1988
FACTS:
Nestor Sunga purchased a passenger Mazda minibus from Motor
Center, Inc. He executed a promissory not in lieu of the amount of the
vehicle. A chattel mortgage was likewise executed in favor Motor
Center. The Chattel Mortgage and assignment was assigned to Filinvest
Credit Corp (FCC).
On 21 October 1978, Sunga claims that the minibus was seized by 2
employees without any receipt. The taking was because of alleged
delinquency in payments.
It was later found out that there was a mistake on the part of FCC and
the vehicle was returned to him.
Sunga filed a claim for moral damages in the trial court. Trial Court
awarded damages amounting to P 30,000. FCC appealed to the Court of
Appeals. CA affirmed decision and increased amount of damages to
P50,000.
FCC filed a Petition for Certiorari saying that there was grave abuse of
discretion in the ascertainment of the amount of damages.
ISSUE:
Is the amount of moral damages awarded valid?

cavans of palay from petitioners tenant. In retaliation, petitioner

brought with him a constabulary soldier and appropriated 6 cavans of
the produce.

HELD:
Yes, the award is valid however it is exorbitant.
The Supreme Court held that the respondent court committed a
grave abuse of discretion in increasing extravagantly the award of moral
damages and in granting litigation expenses.
Although, there is no hard and fast rule in the determination of
what would be a fair amount of moral damages, since each case must
be governed by its own peculiar circumstances, the SC set the criterion
that "in the case of moral damages, the yardstick should be that the
"amount awarded should not be 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.
The SC reiterated the caveat to lower courts to guard against
the award of exorbitant damages that are way out of proportion
circumstances of a case
Dichoso vs. CA
GR No. 55613 December 10, 1990
Facts:
Spouses Gaspar Prila and Maria Beldad owned a parcel of land
at Cagmanaba, Ocampo, Camarines Sur surveyed in the name of
Gaspar. Upon the death of Maria in 1925, the eastern half was given to
their only daughter, Vivencia, and when Gaspar died, the portion
pertaining to him was divided into three: a third was given to Vivencia,
another third to Asuncion Pacamara, and the last third to Custodia
Parcia. The terms of said settlement were agreed to by the three parties
and the deeds were duly registered at the Register of Deeds. This was
further confirmed judicially by the CFI of Camarines Sur. In 1955
Vivencia sold her portion to petitioner Dichoso who has been, ever
since, in actual possession thereof, exercising various acts of ownership
thereof. On the other hand, Asuncion sold to wife of private respondent
Teodolfo Ramos her share but the deed mentions the area to be in
excess of her share. Hence, said property which Ramos claims to have
possessed is now the land in question.
Respondent Ramos took possession of the contested Riceland
upon its purchase. It yielded an average harvest of 20 sacks of palay
per planting whish was twice a year. One-third of the harvest went to
Ramos and the remaining two-thirds was the tenants share. Dichoso,
meanwhile, claims that the disputed land was inside his property.
Sometime in 1962 Ramos, with a constabulary soldier and two
policemen, allegedly seized the produce of the land consisting of 50

On December 1967, respondent filed a complaint for quieting of

title over the Riceland before the CFI of Camarines SUr. It rendered a
decision in favor of respondent. On appeal, the CA affirmed the trial
courts decision.
Issue:
WON the CA erred in requiring petitioner to deliver 40 cavans
annually to respondent despite its finding that only 1/3 of the produce
went to Ramos.
Ruling:
YES. Petitioner alleged that since respondents share of the
harvest is only 1/3, only the 1/3 of the annual harvest must be awarded
to him. Ramos contention that his tenant will be deprived of his share if
only 1/3 was awarded to him. Actual or compensatory damages cannot
be presumed, but must be duly proved, and proved with reasonable
degree of certainty. A court cannot rely on speculation, conjecture, or
guesswork as to the fact and amount of damages, but must depend
upon competent proof that they have suffered and on evidence of the
actual amount thereof. In view of his dispossession from 1964 and the
fact that his tenant has vacated the land the same year, he cannot
allege that his tenant is entitled to his 2/3 share.

PHILIPPINE NATIONAL BANK vs. UTILITY ASSURANCE & SURETY

CO., INC.
FACTS:
The Kangyo Bank Ltd., Tokyo, Japan, issued Letter of Credit in
favor of the Pedro Bartolome Enterprises of Manila to cover an export
shipment of logs to Japan. The beneficiary of the Letter of Credit
assigned its rights to Lanuza Lumber. Lanuza Lumber obtained a loan of
P 25,000.00 from PNB secured by a PN of the proceeds of the Letter of
Credit. The PNB in addition required Lanuza Lumber to submit a surety
bond executed by defendant Utassco.

The promissory note executed by Lanuza Lumber became due

and payable. Neither Lanuza Lumber nor Utassco paid the loan despite
repeated demands by PNB for payment. Accordingly, PNB filed in the
then CFI of Manila an action to recover the amount of the promissory
note with interest as provided thereon plus attorney's fees. Utassco
admitted that it had executed the surety bond and contended that its
obligation under the Surety Bond was to secure the performance of all
the terms and conditions of the US$ 28,150.00 Letter of Credit issued by
Kangyo Bank Ltd. and had not guaranteed the performance of Lanuza
Lumber's obligation under its P 25,000.00 loan from PNB. CFI and CA
ruled in favor of PNB and moreso, awarded interest and attorneys fees.
ISSUE:
Whether or not interest and attorneys fees should have been
granted despite the clause limiting the liability of Utassco.
RULING:
Creditors suing on a suretyship bond may recover from the
surety as part of their damages, interest at the legal rate even if the
surety would thereby become liable to pay more than the total amount
stipulated in the bond. The theory is that interest is allowed only by way
of damages for delay upon the part of the sureties in making payment
after they should have done.

DENNIS L. LAO, petitioner,

vs.
HON. COURT OF APPEALS, JUDGE FLORENTINO FLOR, Regional
Trial Court, Branch 89 of Morong, Rizal, BENJAMIN L. ESPIRITU,
MANUEL QUERUBIN and CHAN TONG, respondents.
G.R. No. 82808 July 11, 1991
FACTS:
Petitioner Dennis Lao was an employee of the New St. Joseph
Lumber & Hardware Supply, owned by the private respondent, Chan
Tong. In January 1981, St. Joseph Lumber filed a collection suit against a

customer, the private respondent, Benjamin Espiritu, for unpaid

purchases of construction materials from St. Joseph Lumber.
Upon advice St. Josephs lawyer a criminal case for estafa was
filed against Espiritu. Lao being the employee who transacted business
with Espiritu, he was directed by his employer, Chan Tong, to sign the
affidavit or complaint prepared by the lawyer, Attorney Manuel
Querubin.
The Fiscal finding probable cause filed an information for estafa
which was dismissed, the court believed that the liability of Espiritu was
only civil and not criminal.
On April 12, 1984, Espiritu filed a complaint for malicious
prosecution against the petitioner and St. Joseph Lumber, praying that
the defendants be ordered to pay him P500,000 as moral damages,
P10,000 as actual damages, and P100,000 as attorney's fees. Lao in
his answer alleged he acted only as agent or employee of St. Joseph
Lumber when he executed the affidavit which his employer submitted to
the investigating fiscal who conducted the preliminary investigation of
his employer's estafa charge against Espiritu.
After petitioner was declared in default, private respondent was allowed
to present his evidence ex parte.
On January 22, 1985, a decision was rendered by the trial court
in favor of Espiritu ordering the defendants Lao and St. Joseph Lumber
to pay jointly and severally to Espiritu the sums of P100,000 as moral
damages, P5,000 as attorney's fees, and costs.
Petitioner's motion for reconsideration of the decision and
motion for new trial was denied by the trial court. Appeal to the Court
of Appeals was likewise denied, thus the filing of a special civil action of
certiorari and prohibition to partially annul the appellate court's decision
and to enjoin the execution of said decision against him.
ISSUE:
Whether or not Lao together with his employer is liable for
damages for malicious prosecution?
Whether the damages awarded to the defaulting debtor may be
satisfied by execution against the employee's property since his
employer's business has already folded up?
HELD:
Lao had a valid defense to the action for malicious prosecution
(Civil Case No. 84-M) because it was his employer, St. Joseph Lumber,

not himself, that was the complainant in the estafa case against
Espiritu. It was Chan Tong, the owner of the St. Joseph Lumber, who,
upon advice of his counsel, filed the criminal complaint against Espiritu.
Lao was only a witness in the case. He had no personal interest in the
prosecution of Espiritu for he was not the party defrauded by Espiritu.
He executed the affidavit which was used as basis of the criminal
charge against Espiritu because he was the salesman who sold the
construction materials to Espiritu. He was only an agent of St. Joseph
Lumber, hence, not personally liable to the party with whom he
contracted (Art. 1897, Civil Code; Philippine Products Co. vs. Primateria
Societe Anonyme, 122 Phil. 698).
To maintain an action for damages based on malicious
prosecution, three elements must be present: First, the fact of the
prosecution and the further fact that the defendant was himself the
prosecutor, and that the action was finally terminated with an acquittal;
second, that in bringing the action, the prosecutor acted without
probable cause; and third, the prosecutor was actuated or impelled by
legal malice (Ferrer vs. Vergara, 52 O.G. 291).
Lao was not motivated by malice in making the affidavit upon
which the fiscal based the filing of the information against Espiritu. He
executed it as an employee, a salesman of the St. Joseph Lumber from
whom Espiritu made his purchases of construction materials and who,
therefore, had personal knowledge of the transaction. Although the
prosecution of Espiritu for estafa did not prosper, the unsuccessful
prosecution may not be labelled as malicious. "Sound principles of
justice and public policy dictate that persons shall have free resort to
the courts for redress of wrongs and vindication of their rights without
later having to stand trial for instituting prosecutions in good faith"
(Buenaventura vs. Sto. Domingo, 103 Phil. 239).
In view of the foregoing circumstances, the judgment against
Lao was a nullity and should be set aside. Its execution against the
petitioner cannot be allowed to proceed.
Country Bankers Insurance Corporation vs. Court of Appeals
G.R. No. 85161
Facts:
Respondent Oscar Ventanilla Enterprises Corporation (OVEC), as
lessor, and the petitioner Enrique F. Sy, as lessee, entered into a lease
agreement over the Avenue, Broadway and Capitol Theaters and the
land on which they are situated in Cabanatuan City, including their airconditioning systems, projectors and accessories needed for showing
the films or motion pictures. The term of lease was for 6 years
commencing from June 13, 1977 and ending June 12, 1983. After more
than 2 years of operation of the Avenue, Broadway and Capitol
Theaters, the lessor OVEC made demands for the repossession of the
said leased properties in view of the Sys arrears in monthly rentals and
non-payment of amusement taxes. On August 8, 1979, OVEC and Sy
had a conference and by reason of Sys request for reconsideration of

OVECs demand for repossession of the 3 theaters, the former was

allowed to continue operating the leased premises upon his conformity
to certain conditions imposed by the latter in a supplemental agreement
dated August 13, 1979.
In pursuance of their latter agreement, Sys arrears in rental
was reduced as of December 31, 1979. However, the accrued
amusement tax liability of the 3 theaters to the City Govt of
Cabanatuan City had accumulated. Hence, letters of demand dated
January 7, 1980 and February 3, 1980 were sent to Sy demanding
payment of the arrears and amusement tax delinquency. The latter
demand was with warning that OVEC will re-enter and repossess the
Avenue, Broadway and Capital Theaters on February 11, 1980 in
pursuance of the pertinent provisions of their lease contract of June 11,
1977 and their supplemental letter-agreement. Notwithstanding the said
demands and warnings Sy failed to pay the above-mentioned amounts
in full. Consequently, OVEC padlocked the gates of the three theaters
under lease and took possession thereof in the morning of February 11,
1980 by posting its men around the premises of the movie houses and
preventing the lessees employees from entering the same.
Sy, through counsel, filed the present action for reformation of
the lease agreement, damages and injunction late in the afternoon of
the same day. Sy prayed for the issuance of a restraining
order/preliminary injunction to enjoin OVEC and all persons employed by
it from entering and taking possession of the Three theaters,
conditioned upon Sys filing of a P500,000.00 bond supplied by Country
Bankers Insurance Corporation (CBISCO).
The trial court ruled that Sy is not entitled to the reformation of
the lease agreement and that Sy was not entitled to the writ of
preliminary injunction issued in his favor after the commencement of
the action and that the injunction bond filed by Sy is liable for whatever
damages OVEC may have suffered by reason of the injunction.
From this decision of the trial court, Sy and CBISCO appealed it to the
respondent court. The latter found no ambiguity in the provisions of the
lease agreement. It held that the provisions are fair and reasonable and
therefore, should be respected and enforced as the law between the
parties.
Issue:
Whether or not the awarding of damages to the respondents
constitutes unjust enrichment at the expense of the petitioners.
Held:
No. the forfeiture clause stipulated in the lease agreement does
not unjustly enrich the respondent OVEC at the expense of Sy and
CBISCO. A provision which calls for the forfeiture of the remaining

deposit still in the possession of the lessor, without prejudice to any

other obligation still owing, in the event of the termination or
cancellation of the agreement by reason of the lessees violation of any
of the terms and conditions of the agreement is a penal clause that may
be validly entered into. A penal clause is an accessory obligation which
the parties attach to a principal obligation for the purpose of insuring
the performance thereof by imposing on the debtor a special
presentation in case the obligation is not fulfilled or is irregularly or
inadequately fulfilled.
As a general rule, in obligations with a penal clause, the penalty
shall substitute the indemnity for damages and the payment of interest
in case of non-compliance. This is specifically provided for in Article
1226 (1), New Civil Code. However, there are exceptions to the rule that
the penalty shall substitute the indemnity for damages and the
payment of interests in case of non-compliance with the principal
obligation. They are first, when there is a stipulation to the contrary;
second, when the obligor is sued for refusal to pay the agreed penally;
and third, when the obligor is guilty of fraud. It is evident that in all said
cases, the purpose of the penalty is to punish the obligor. Therefore, the
obligee can recover from the obligor not only the penalty but also the
damages resulting from the non-fulfillment or defective performance of
the principal obligation.
In view of the foregoing, the respondent court correctly
sustained the trial court in holding that the bond shall and may answer
only for damages which OVEC may suffer as a result of the injunction.
The arrears in rental, the unmeritted amounts of the amusement tax
delinquency and attorneys fees which were all charged against Sy were
correctly considered by the respondent court as Damages which the
OVEC sustained not as a result of the injunction.
DE LEON vs. COURT OF APPEALS
G.R. No. L-31931 August 31, 1988
FACTS:
The third-party defendants spouses Juan Briones and Magdalena
Bernardo were the former registered owners of the fishpond situated at
Bulcacan. This fishpond was the subject of a deed of mortgage
executed by the spouses Briones in favor of Hermogenes Tantoco
involving the consideration of P20,000.00 which amount was later
assigned by the mortgagee to his father herein defendant and third
party plaintiff Dr. Cornelio S. Tantoco. Apart from this mortgage, the
spouses Briones likewise executed a deed of second mortgage for
P68,824.00 with 10% interest per annum in favor of Cornelio S. Tantoco.
Both mortgages were duly registered and duly annotated at the back of
TCT No. 28296of the Briones. While these two mortgages were still
subsisting the Briones spouses sold the fishpond, which is the subject

matter of said two mortgages, to plaintiff spouses De Leon in the

amount of P120,000.00. Of the said amount, the Briones spouses
actually received only the amount of P31,000.00, as the amount of
P89,000.00 was withheld by the plaintiff De Leon who assumed to
answer the mortgage indebtedness of the Briones to the Tantocos. After
the sale plaintiffs De Leon satisfied the mortgage loan of P20,000.00
including 10% interest per annum to Hermogenes Tantoco who then
accordingly executed a deed of discharge of mortgage, but the
mortgage in favor of Cornelio S. Tantoco in the amount of P68,824 was
not satisfied. On February 5, 1962 plaintiffs made payment of
P29,382.50 to the defendant Cornelio Tantocos.
Petitioners a complaint with the CFI of Bulacan against
private respondent Tantoco, for discharge of mortgage.
The Lower Court dismissed the complaint filed by De Leon and
ordered him to pay the private respondent attorneys fees as well as
moral and exemplary damages.
Petitioner appealed the said decision to the CA. The latter
affirmed the decision of the Lower Court, hence the present petition.
Petitioner questions the award of moral and exemplary damages
to private respondents, inter alia.
ISSUE:
Whether or not the award for damages is proper.
HELD:
Yes.
The Court ruled that the filing of the case against respondent
being unfounded and maliciously prosecuted satisfactorily proves the
existence of the factual basis for moral damages and the causal relation
to petitioners' acts.
ACTUAL DAMAGES
ART. 2199. Except as provided by law or by stipulation, one is entitled to
an adequate compensation only for such pecuniary loss suffered by him
as he has duly proved. Such compensation is referred to as actual or
compensatory damages.
-

or compensatory damages

the compensation awarded to a person for such pecuniary loss

suffered by him as he has duly proved
those recoverable because of pecuniary loss

Kinds

1.

Value of Loss Suffered(Damnun Emergens)

ExamplesofDaoEmergente
(a)destructionofthings.(19Scaevola557).(b)finesor
penaltiesthathadtobepaid.(19Scaevola
557).

(b)profitsbecauseofaproposedfutureresaleoftheproperty
beingpurchasediftheexistenceofacontracttherewas
knowntothedelinquentseller.(SeeEnriquezdelaCavodav.
Diaz,37Phil.982).
(c)interestonrentalsthatwerenotpaid.(Here,theinterest
undeniablyformsprofitswhichcouldhavebeenrealizedhad
therentsbeengiven.)(SeeJ.M.Tuason,Inc.v.Santiago,et
al.,L5079,Jul.31,1956).
3.
-

(c)medicalandhospitalizationexpenses.(SeeAraneta,etal.
v.Arreglado,etal.,104Phil.529).
[NOTE:Iftheinjuredpartyclaimsactualdamagesbecausea
jawinjurypreventedhimfromgoingtoschoolforoneyear,
willnotbegivensaiddamagesbecausedamagesduetoalost
schoolyearandtheresultingreductioninthevictims
earningcapacityaremanifestlyspeculative,andmaynotexist
atall.

4.
5
6
7
-

2.

Unrealized Profits (Lucro Cesante) profits not obtained or

realized

ExamplesofLucroCesante
.

(a)profitsthatcouldhavebeenearnedhadtherebeenno
interruptionintheplaintiffsbusinessasevidencedbythe
reducedreceiptsoftheenterprise.(SeeAlgarrav.Sandejas,
27Phil.284;TanTiv.Alvear,26Phil.566).

Loss of Earning Capacity 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;
Injury to Business Standing/Credit
Indemnity for Death currently at P50,000
Lost Income = Life Expectancy * Net Income
Support for Compulsory heirs
To be able to recover actual or compensa- tory damages, the
amount of loss must be proven with a reasonable degree of
certainty, based on competent proof and on the best evidence
obtainable by the injured party.
GENERAL RULE : Actual damages must be proved and the
amount of damages must possess at least some degree of
certainty.
Not necessary to prove exactly how much the loss is; it is
enough that the LOSS is proved and if the amount the court
awards is fair and reasonable, this will be allowed
If there is NO proof of loss, or if the proof is flimsy and
unsubstantial, no damages will be given. The Court cannot rely
on its own speculations as to the fact and amount of damages,
but must depend on actual proof that damage had been
suffered and actual proof of the amount.

Iftherebeanawardforcompensatorydamages,there
canbenograntofnominaldamages.Thereasonisthat
thepurposeofnominaldamagesistovindicateor

recognizearightthathasbeenviolated,inorderto
precludefurthercostthereon,andnotforthepurpose
ofindemnifyingtheplaintiffforanylosssufferedby
him.
Inthefollowingcases,actualdamagesneedNOTbeproved:
-

1)Incaseliquidateddamageshadbeenpreviously
agreedupon.(Art.2216).

2)Incaseofdamagesotherthanactual.(Art.2216).

3)Incaselossispresumedaswhenachild(minor)or
aspousedies.(Manzanaresv.Moreta,38Phil.821).

4)Incaseofforfeitureofbondsinfavorofthegovern
mentforthepurposeofpromotingpublicinterestor
policy(likeabondforthetemporarystayofanalien).
(FarEasternSurety&Ins.Co.v.CourtofAppeals,L
12019,Oct.16,1958).

RULES ON INTEREST
1.
2.
3.

No interest may be awarded unless:

a. stipulated; or
b. delay or default
If there is stipulated rate, apply that rate. If no stipulation, apply
any legal rate (6%). In both cases, interest accrues upon
demand.
Upon finality of the decision, interest rate is 12% (CB Circular:
forbearance of money

EASTERN SHIPPING LINES, INC. VS. COURT OF APPEALS

234 SCRA 79
FACTS:
This is an action against defendants shipping company, arrastre
operator and broker-forwarder for damages sustained by a shipment
while in defendants' custody, filed by the insurer-subrogee who paid the
consignee the value of such losses/damages.
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 No.
YMA-8. 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.")
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).

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.
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).

ISSUES:
(a) whether or not a claim for damage sustained on a shipment
of goods can be a solidary, or joint and several, liability of the common
carrier, the arrastre operator and the customs broker; (b) whether the
payment of legal interest on an award for loss or damage is to be
computed from the time the complaint is filed or from the date the
decision appealed from is rendered; and (c) whether the applicable rate
of interest, referred to above, is twelve percent (12%) or six percent
(6%).
RULING:
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),the court 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.
The court 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.
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-delicts 18 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 court 24 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
03 February 1988, of the court a quo. A TWELVE PERCENT (12%)
interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount
upon finality of this decision until the payment thereof.

SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA,

petitioners,
vs.
HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES,
INC., respondents.
G.R. No. 104235 November 18, 1993
FACTS:

ATTORNEYS FEES
- must be stipulated except Art 2208
When Attorneys Fees are recoverable
1. When exemplary damages are awarded;
2. When the defendants act or omission has compelled the
plaintiff to litigate with 3rd persons or to incur expenses to
protect his interests;
3. In criminal cases of malicious prosecution against the plaintiff
4. Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiffs valid, just and demandable
claiml
5. In case of a clearly unfounded civil action or proceeding against
the plaintiff
6. In actions for legal support
7. In action for the recovery of wages of household help, laborers
and skilled workers.
8. In actions for indemnity under the workmens compensation and
employers 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 courts deems it just and equitable
that attorneys fees and expenses of litigation should be
recovered.

Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and

their daughter, Liana Zalamea, purchased three (3) airline tickets from
the Manila agent of respondent TransWorld Airlines, Inc. for a flight to
New York to Los Angeles on June 6, 1984. The tickets of petitionersspouses were purchased at a discount of 75% while that of their
daughter was a full fare ticket. All three tickets represented confirmed
reservations.
While in New York, on June 4, 1984, petitioners received notice
of the reconfirmation of their reservations for said flight. On the
appointed date, however, petitioners checked in at 10:00 a.m., an hour
earlier than the scheduled flight at 11:00 a.m. but were placed on the
wait-list because the number of passengers who had checked in before
them had already taken all the seats available on the flight. Liana
Zalamea and Cesar Zalamea, holding full fare tickets were able to board
while the two others holding discounted tickets were not able to fly and
thus were constrained to purchase tickets with American Airlines.
Upon their arrival in the Philippines, petitioners filed an action
for damages based on breach of contract of air carriage before the
Regional Trial Court. The court ruled in favor of petitioners ordering the
defendants to pay for the purchase of tickets fro, American Airlines,
Suthira and Lianas ticket with TWA, P250, 000 as moral damages and
P100,000 as attorneys fees and costs of suit.
On appeal, the respondent Court of Appeals modified the ruling
eliminating the award for moral and exemplary damages. That moral
damages are recoverable in a damage suit predicated upon a breach of

contract of carriage only where there is fraud or bad faith. And in

cancelling the order of refund for the tickets purchased with TWA.
Not satisfied with the decision, petitioners raised the case on
petition for review on certiorari.
ISSUE:
Whether or not fraud or bad faith existed on the part of TWA in
overbooking their flights and in the absence of bad faith or fraud
defendants need not pay exemplary damages?

HELD:
SC ruled in favor of petitioner and modified the ruling of the
Court of Appeals allowing the payment of exemplary and moral
damages as well as attorneys fees however modifying to a lesser
amount.
Court ruled that there was fraud or bad faith on the part of respondent
airline when it did not allow petitioners to board their flight for Los
Angeles in spite of confirmed tickets.
Existing jurisprudence explicitly states that overbooking
amounts to bad faith, entitling the passengers concerned to an award of
moral damages. In Alitalia Airways v. Court of Appeals, 9 where
passengers with confirmed bookings were refused carriage on the last
minute, this Court held that when an airline issues a ticket to a
passenger confirmed on a particular flight, on a certain date, a contract
of carriage arises, and the passenger has every right to expect that he
would fly on that flight and on that date. If he does not, then the carrier
opens itself to a suit for breach of contract of carriage. Where an airline
had deliberately overbooked, it took the risk of having to deprive some
passengers of their seats in case all of them would show up for the
check in. For the indignity and inconvenience of being refused a
confirmed seat on the last minute, said passenger is entitled to an
award of moral damages.
A contract to transport passengers is quite different in kind and
degree from any other contractual relation. So ruled this Court in
Zulueta v. Pan American World Airways, Inc. 12 This is so, for a contract
of carriage generates a relation attended with public duty. A duty to
provide public service and convenience to its passengers which must be
paramount to self-interest or enrichment.
Even on the assumption that overbooking is allowed,
respondent TWA is still guilty of bad faith in not informing its passengers

beforehand that it could breach the contract of carriage even if they

have confirmed tickets if there was overbooking. Respondent TWA
should have incorporated stipulations on overbooking on the tickets
issued or to properly inform its passengers about these policies so that
the latter would be prepared for such eventuality or would have the
choice to ride with another airline.
Moreover, respondent TWA was also guilty of not informing its
passengers of its alleged policy of giving less priority to discounted
tickets. While the petitioners had checked in at the same time, and held
confirmed tickets, yet, only one of them was allowed to board the plane
ten minutes before departure time because the full-fare ticket he was
holding was given priority over discounted tickets. The other two
petitioners were left behind.
It is evident that petitioners had the right to rely upon the
assurance of respondent TWA, thru its agent in Manila, then in New
York, that their tickets represented confirmed seats without any
qualification. The failure of respondent TWA to so inform them when it
could easily have done so thereby enabling respondent to hold on to
them as passengers up to the last minute amounts to bad faith.
Evidently, respondent TWA placed its self-interest over the rights of
petitioners under their contracts of carriage. Such conscious disregard
of petitioners' rights makes respondent TWA liable for moral damages.
To deter breach of contracts by respondent TWA in similar fashion in the
future, we adjudge respondent TWA liable for exemplary damages, as
well.

MORAL DAMAGES
8 the compensation awarded to a person for physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation,
wounded feeling, moral shock, social humiliation and similar
injury.

Moral Damages
Article 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be recovered
if they are the proximate result of the defendant's wrongful act for
omission.

Article 2218. In the adjudication of moral damages, the sentimental

value of property, real or personal, may be considered.
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.
Article 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad
faith.

PHILIPPINE AIR LINES VS. MIANO

242 SCRA 235
FACTS:
Private respondent took petitioners flight PR 722, Mabuhay
Class bound for Frankfurt, Germany. He had an immediate onward
connecting flight via Lufthansa flight LH 1452 to Vienna, Austria. At the
Ninoy Aquino International Airport (NAIA), he checked-in one brown
suitcase weighing twenty (20) kilograms but did not declare a higher
valuation. He claimed that his suitcase contained money, documents,
one Nikkon camera with zoom lens, suits, sweaters, shirts, pants, shoes
and other accessories.
Upon private respondetns arrival at Vienna via Lufthansa, his
checked-in baggage was missing. He reported the matter to the
Lufthansa authorities. After eleven (11) days, his suitcase was delivered
to him in his hotel in Piestany, Czecholovakia. He claimed that because
of the delay in the delivery of his suitcase, he was forced to borrow
money to buy some clothes, to pay for the transportation of his
baggage from Vienna to Piestany, and lost his Nikkon camera.
Private respondent instituted an action for damages.
ISSUE:
Whether or not private respondent is entitle to recover damages
for breach of contract of carriage
RULING:
In breach of contract of carriage by air, moral damages are
awarded only if the defendant acted fraudulently or in bad faith. Bad
faith means a breach of a known duty through some motive of interest
or ill will.

The court neither sustains the award of exemplary damages.

The prerequisite for the award of exemplary damages in cases of
contract or quasi-contract is that the defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner. The undisputed
facts do not so warrant the characterization of the action of petitioner.
The award of attorneys fee must also be disallowed for lack of
legal leg to stand on. The fact that private respondent was compelled to
litigate and incur expenses to protect and enforce his claim did not
justify the award of attorneys fee. Petitioner is willing to pay the just
claim of $200.00 as result of the delay in the transportation of the
luggage in accord with the Warsaw Convention. Needless to say, the
award of attorneys fee must be deleted where the awards of moral and
exemplary damages are eliminated.

SECTION 3
Temperate or Moderate Damages
Article 2224. Temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered when
the court finds that some pecuniary loss has been suffered but its
amount can not, from the nature of the case, be provided with certainty.
Article 2225. Temperate damages must be reasonable under the
circumstances.

LIQIUDATED DAMAGES
11 that agreed upon by the parties to a contract, to be paid in case
of breach thereof
NOMINAL DAMAGES
9 an amount awarded to a person in order that his right, which
has been violated or invaded, may be vindicated or recognized

Nominal Damages
Article 2221. Nominal damages are adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the defendant, may
be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
Article 2222. The court may award nominal damages in every
obligation arising from any source enumerated in article 1157, or in
every case where any property right has been invaded.

SECTION 4
Liquidated Damages
Article 2226. Liquidated damages are those agreed upon by the
parties to a contract, to be paid in case of breach thereof.
Article 2227. Liquidated damages, whether intended as an indemnity
or a penalty, shall be equitably reduced if they are iniquitous or
unconscionable.
Article 2228. When the breach of the contract committed by the
defendant is not the one contemplated by the parties in agreeing upon
the liquidated damages, the law shall determine the measure of
damages, and not the stipulation.

Article 2223. The 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.

Jison v. CA 164 SCRA 399

Facts:

TEMPERATE OR MODERATE DAMAGES

10 the compensation which is more than nominal but less than
compensatory damages awarded to a person when the court
finds that he has suffered some pecuniary loss, but its amount
cannot from the nature of the case be proved with certainty

In a contract to sell, Robert O. Phillips and Sons (ROPSI) agreed

to sell a lot in Antipolo for P55,000.00 to the spouses Jison, with the
interest of 8% payable on installment basis. The contract also provided
that a house be built on the lot. When the spouses Jison failed to build a
house, a penalty of P5 per sq/m. the Jison spouses failed to pay the
monthly installments for January, February, and March 1966 on their
due dates, but ROPSI accepted their subsequent payments. Afterwards,

the Jison spouses failed to pay again, this time for their October,
November, and December 1966 and January 1967. ROPSI reminded the
spouses to settle their accounts and of the automatic rescission clause
of their contract to sell. The Jison spouses eventually paid. However, the
Jison spouses again failed to pay their February, March, and April 1967
payments. When the Spouses Jison tried to tender payments, ROPSI
refused, prompting the Jison spouses to file an action for specific
performance.
Issue:
Whether or not the automatic rescission clause as well as the
forfeiture clause was valid
Held:
The Court ruled that the automatic rescission clause was valid,
citing the fact that while the Jison spouses had substantial compliance,
there was also a substantial breach on their part, as evidenced by their
failure to tender their monthly installment payments. Furthermore, the
forfeiture of the amounts already paid was valid. In this case, the Court
ruled the forfeiture of the amounts paid is to be treated as liquidated
damages.
However, the Court found that the forfeiture of the accumulated
fines due to the non-construction of a house as stipulated in the
contract was iniquitous, and thus lowered the amount which was to be
forfeited. The Code provides that liquidated damages, whether intended
as an indemnity or a penalty, shall be equitably reduced if they are
iniquitous or unconscionable [Art. 2227.]

Article 2229. Exemplary or corrective damages are imposed, by way of

example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.
Article 2230. In criminal offenses, exemplary damages as a part of the
civil liability may be imposed when the crime was committed with one
or more aggravating circumstances. Such damages are separate and
distinct from fines and shall be paid to the offended party.
Article 2231. In quasi-delicts, exemplary damages may be granted if
the defendant acted with gross negligence.
Article 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.
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.

EXEMPLARY OR CORRECTIVE DAMAGES

- that imposed by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory damages

SECTION 5
Exemplary or Corrective Damages

Air France vs. CA

G.R. No. 76093 March 21, 1989

its equivalent in Philippine peso at prevailing rate of exchange as actual

damages, with legal interest thereon from the date of the filing of the
complaint until fully paid; (2) P 500,000.00, as moral damages; (3) P
150,000.00, as exemplary damages; and
(4) 5% of the amount of actual, moral and exemplary damages which
are recoverable, as attorney's fees.
Issue:

Facts:
Sometime in October 1977, respondent Narciso Morales thru his
representative purchased an airline ticket from Aspac Management
Corporation, petitioner's General Sales Agent in Makati. The itinerary
covered by the ticket included several cities, with certain segments
thereof restricted by markings of "non endorsable' and 'valid on AF
(meaning Air France) only. While in New York, Morales obtained 3
medical certificates attesting to an ear infection which necessitated
medical treatment. From New York, he flew to Paris, Stockholm and then
Copenhagen where he made representations with petitioner's office to
shorten his trip by deleting some of the cities in the itinerary. Morales
was informed that, as a matter of procedure, confirmation of petitioner's
office in Manila (as ticketing office) must be secured before shortening
of the route. Air France in Amsterdam telexed AF Manila requesting for
rerouting of the passenger to Amsterdam, Hamburg, Geneva, Rome,
Hong Kong, Manila. As there was no immediate response to the telex,
respondent proceeded to Hamburg where he was informed of AF
Manila's negative reply. After reiterating his need to flying home on a
shorter route due to his ear infection, and presentation of supporting
medical certificates, again, the airline office made the necessary
request to Manila on 23 November 1977 for a Hamburg, Paris, Geneva,
Rome, Paris, Hong Kong and Manila route. Still, the request was denied.
Despite respondents protest and offer to pay any fare difference,
petitioner did not relent in its position. Respondent, therefore, had to
buy an entirely new set of tickets, for the homeward route. Upon arrival
in Manila, respondent sent a letter-complaint to Air France dated 20
December 1977 thru Aspac Management Corporation. Morales was
advised to surrender the unused flight coupons for a refund of its value,
but he kept the same and, instead, filed a complaint for breach of
contract of carriage and damages.

WON there was a breach of contract of carriage on the part of

the petitioner, as to justify the award to private respondent of actual,
moral and exemplary damages.

The CFI found Air France in evident bad faith for violation of the
contract of carriage, aggravated by the threatening attitude of its
employees in Hamburg. Considering the social and economic standing
of respondent, who is chairman of the board of directors of a multimillion corporation and a member of several civic and business
organizations, an award of moral and exemplary damages, in addition to
the actual damages incurred, was deemed proper under the
circumstances. On appeal, the CA modified the award of damages,
ordering defendant to pay to said plaintiff: (1) 1,914 German Marks in

Air France Manila acted upon the advise of ASPAC in denying

private respondent's request. There was no evident bad faith when it
followed the advise not to authorize rerouting. At worst, the situation
can be considered a case of inadvertence on the part of ASPAC in not
explaining the non-endorsable character of the ticket. Of importance,
however, is the fact that private respondent is a lawyer, and the
restriction box clearly indicated the non-endorsable character of the
ticket.

Ruling:
NO. Private respondent wanted a rerouting to Hamburg,
Geneva, Rome, Hong Kong and Manilas which shortened the original
itinerary on the ticket issued by AF Manila through ASPAC. Considering
the original restrictions on the ticket, it was not unreasonable for Air
France to deny the request. Besides, a recurring ear infection was
pleaded as reason necessitating urgent return to Manila. Assuming
arguendo a worsening pain or discomfort, private respondent appears to
have still proceeded to 4 other cities covering a period of at least 6 days
and leaving open his date of departure from Hong Kong to Manila. And
even if he claimed to have undergone medical examination upon arrival
in Manila, no medical certificate was presented. He failed to even
remember his date of arrival in Manila. With a claim for a large amount
of damages, the Court finds it unusual for respondent, a lawyer, to
easily forget vital information to substantiate his plea. It is also essential
before an award of damages that the claimant must satisfactorily prove
during the trial the existence of the factual basis of the damages and its
causal connection to defendant's acts. Air France employees in
Hamburg informed private respondent that his tickets were partly
stamped "non-endorsable" and "valid on Air France only." Mere refusal
to accede to the passenger's wishes does not necessarily translate into
damages in the absence of bad faith. Respondent has failed to show
wanton, malevolent or reckless misconduct imputable to petitioner in its
refusal to re-route.