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Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 132252

April 27, 2000

PEOPLE
OF
THE
PHILIPPINES, plaintiff-appellee,
vs.
JESUS MUYCO and ARNULFO MUYCO (at large), accused, JESUS MUYCO, accused-appellant.

went to the dancehall but could not find Jesus, Arnulfo and the deceased there. At 11:00 o'clock that
evening he learned that Romeo Boteja Jr. was killed and his cadaver was found in the sugarcane field.
Jesus denied participation in the killing of Romeo Boteja, Jr. and insisted on his alibi. He averred that on 12
May 1995 he visited his brother Severe Muyco at Bgy. Pamuringao-Garrido, Cabatuan, Iloilo, as he got
married there a year ago. From 10:00 o'clock in the morning to 5:00 o'clock in the afternoon of 13 May 1995
he drank with his brother Severo, cousin Arnulfo, uncle Crispin Debucon and the deceased Romeo Boteja
Jr. whom he met drank for the first time. He did not know whose house it was where they drank. Upon the
prodding of Severe, he left Cabatuan and proceeded to Passi, Iloilo, which is about fifty (50) kilometers
away, arriving there at 7:00 o'clock in the evening. He spent the night in the house of his cousin Nestor
Muyco.
Vicente Inion and Joean Nufable corroborated accused-appellant's alibi. Both asserted that they saw Jesus
in the house of Nestor in Passi, Iloilo, on the night of 13 May 1995.

BELLOSILLO, J.:
JESUS MUYCO and ARNULFO MUYCO, cousins, were charged with murder for the death of Romeo
Boteja Jr. on 13 May 1995. Only Jesus Muyco was apprehended while Arnulfo Muyco remains at large. On
11 September 1997 the Regional Trial Court, Br. 25, Iloilo City, found Jesus guilty as charged and
correspondingly sentenced him toreclusion perpetua and to pay the heirs of Romeo Boteja Jr. P30,000.00
as death indemnity and P27,000.00 as funeral expenses.
Jesus Muyco in this appeal submits that the lower court erred (a) in giving credence to the testimony of
Ernesto Boteja, which he (Jesus) claims to be improbable and incredible; (b) in finding him guilty despite the
failure of the prosecution to overcome the presumption of his innocence; (c) in disregarding his alibi; and,
(d) in appreciating the qualifying aggravating circumstance of treachery.
These contentions are without merit as shown by these facts: From 6:00 o'clock to 7:00 o'clock in the
evening of 13 May 1995, Jesus Muyco and Arnulfo Muyco together with Romeo Boteja Jr. were in the house
of Narciso Nadales at Barangay Pamuringao-Garrido, Cabatuan, Iloilo. At about 9:00 o'clock the trio were
seen walking towards the barangay dancehall where they met Ernesto Boteja, an uncle of Romeo and a
relative by affinity of Jesus and Arnulfo. Romeo invited his uncle Ernesto for a drink so they all went to the
store of Agnes Cao about a hundred (100) meters away from the dancehall to buy whisky. As the store was
about to close, Jesus, Arnulfo, Romeo and Ernesto decided to drink their whisky under a mango tree
nearby. After drinking for a while, Arnulfo suddenly grabbed the hands of Romeo, and while the latter was
struggling, Jesus stabbed him with a knife hitting him near his collarbone. It was fatal. Arnulfo then dragged
the lifeless body of Romeo towards the nearby sugarcane field with Jesus following them.

As already stated, the court a quo ruled against accused-appellant and found him guilty of murder. It did not
give any probative value to his denial and alibi in view of his positive identification by prosecution witness
Ernesto Boteja.
Accused-appellant imputes error on the part of the court a quo in lending credence to the testimony of
Ernesto Boteja, contending that his testimony was improbable and incredible. He argues that Ernesto's
inaction when his nephew Romeo was stabbed just a meter away from him is contrary to human
nature.1wphi1.nt
We disagree. Different people react differently to a given type of situation. There is no standard form of
human behavioral response when one is confronted with a strange, startling or frightful experience. One
person's spontaneous or unthinking, or even instinctive response to a horrid and repulsive stimulus may be
aggression, while another person's reaction may be cold indifference. 1 A witness' inability to move, help or
even to run away when the incident occurs is not a ground to label his testimony as doubtful and unworthy
of belief. There is no prescribed behavior when one is faced with a shocking event. In the case of Ernesto
Boteja, his inability to react was understandable as he was shocked by the suddenness of the event and
considering that it was his first time to witness a stabbing incident. Thus
Q: After Romeo Boteja Jr. was hit and . . . was struggling, what happened next?
A: Arnulfo Muyco dragged Romeo towards the sugarcane field.
Q: What about you, what did you do?

Ernesto was shocked by the startling occurrence. He was virtually immobilized. He only moved from there to
run for his life when he Saw Jesus and Arnulfo returning from the field with Jesus pointing a knife at him.
Ernesto fled towards the opposite side of the sugarcane field and stayed there until dawn. Romeo's body
was found lifeless at 11:00 o'clock that same evening.
Leticia Boteja, mother of the victim, testified that she incurred P27,000.00 for funeral expenses. Dr. Ricardo
Jaboneta autopsied the body of Romeo and found that he sustained one (1) stab wound which penetrated
his chest wall. It was fatal.
Narciso Nadales narrated that from 6:00 o'clock until 7:00 o'clock in the evening of 13 May 1995 Jesus,
Arnulfo and the deceased were in his house drinking. The group left at around 7:30 o'clock in the evening to
go to the dancehall.
Leo Boteja, another prosecution witness, testified that on 13 May 1995 he joined Jesus, Arnulfo and the
victim in the house of Narciso Nadales. They drank mucho. At around 7:30 o'clock in the evening he left for
home while Jesus, Arnulfo and the victim proceeded to the dancehall. About two (2) hours later, he also

A: I was stunned that being the first time I saw a person stabbed. I was not able to move. I just
stayed there. . . .
Q: How about during the period that your nephew was stabbed up to the time that he was
dragged to the sugarcane field? What did you do?
A: I remained standing. I got stunned and nervous.
Q: You mean that you remained there standing from the time your nephew was stabbed up to
the time that he was dragged?
A: Yes sir, because I was nervous.2

2
Accused-appellant also cites inconsistencies in the testimony of Ernesto. A close scrutiny of the records
however would reveal that there are none at all. That Ernesto testified having seen the victim stabbed on
his neck instead of his collarbone was not inconsistency. Dr. Jaboneta who autopsied the body of the victim
explained that the wound inflicted was just below the collarbone. For a lay-man like Ernesto who does not
have any medical background at all, there is little or no material difference between a neck and a
collarbone. Besides, it would be too much to expect from Ernesto to be perfectly accurate in reporting the
location of the wound considering the circumstances surrounding the incident. Inconsistencies and
discrepancies in the testimony of a witness on minor details only serve to strengthen the credibility of the
witness.3 What is material is that a witness positively identified the two (2) accused as the perpetrators of
the crime. This Court has ruled often enough that discrepancies in minor details indicate veracity rather than
prevarication. They tend to bolster the probative value of the testimony being questioned. They enhance,
rather than destroy, the witness' credibility and the truthfulness of his testimony as they erase any suspicion
of being a rehearsed testimony.4
Contrary to accused-appellant's assertion, the prosecution has more than overcome his presumed
innocence; it has satisfactorily established his guilt beyond reasonable doubt. Plainly, his alibi could not be
given any weight at all in view of his positive identification by the prosecution's eyewitness. No ill-motive
was imputed to Ernesto Boteja that would so move him to falsely testify against accused-appellant. The trial
court properly assessed his testimony as credible and trustworthy. We find no reason not to affirm its
findings.
Weak as it was, accused-appellant's alibi became all the more ineffectual when he failed to demonstrate
that it was physically impossible for him to be at the crime scene at the time it was committed. He testified
being in Passi, Iloilo, during the stabbing incident. Passi, Iloilo is only fifty (50) kilometers from Cabatuan,
Iloilo, the place where the crime was committed. He did not offer any evidence to prove impossibility of
access between the two (2) places when the crime transpired. 5 Significantly, the defense even failed to fully
establish the presence of accused-appellant in Passi on the night of 13 May 1995.

with the following formula: 2/3 (80 - ATD [age at time of death]) x (GAI [gross annual income]) - 80%
GAI.7 Thus
2/3 (80-19) x (P1,600 x 12) - 80% (P1,600.00 x 12)
2/3 (61) x P19,200 - 80% (P19,200)
40.67 x [P19,200 - P15,360]
40.67 x P3,840 =

P156,172.80
==========

On the basis of the above computation, the heirs of the deceased Romeo Boteja Jr. are entitled to receive
P156,172.80 from accused-appellant Jesus Muyco.
WHEREFORE, the Decision appealed from finding accused-appellant JESUS MUYCO guilty of murder
aggravated by treachery and sentencing him to reclusion perpetua, and to pay the heirs of Romeo Boteja Jr.
P27,000.00 for funeral expenses is AFFIRMED with the MODIFICATION that the death indemnity is
increased to P50,000.00. Accused-appellant is further directed to pay the heirs of his victim the amount of
P156,172.80 for lost earnings conformably with prevailing jurisprudence. Costs against accused-appellant.
SO ORDERED.1wphi1.nt
Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur.

This Court agrees with the court below that treachery attended the commission of the crime. 1wphi1 The
evidence amply proves that Romeo Boteja Jr. was killed in a manner ensuring suddenness and surprise that
virtually incapacitated the victim from offering any resistance or defense. The victim did not have any inkling
of the lurking danger to his life. He might have felt at ease with Jesus and Arnulfo for he had been drinking
with them since 6:00 o'clock that evening of 13 May 1995 until he was stabbed to death. The attack was so
sudden and unexpected that the victim failed to offer any resistance at all. All he could do was to struggle
faintly against his attackers.
On the other hand, this Court notes that the trial court failed to award damages for loss of earning capacity
despite the testimony of Leticia Boteja to this effect. In People v. Dizon6 this Court discussed the requisites
for such award
As a rule, documentary evidence should be presented to substantiate the claim for loss of
earning capacity. InPeople v. Verde, the non-presentation of evidence to support the claim for
damages for loss of earning capacity did not prevent this Court from awarding said damages.
The testimony of the victim's wife as to earning capacity of her murdered husband, who was
then 48 years old and was earning P200.00 a day as a tricycle driver, sufficed to establish the
basis for such an award.
In this case, Erwin Gesmundo was only 15 years old at the time of his death and was earning a
daily wage of P100.00 as a construction worker. As in People v. Verde, this Court is inclined to
grant the claim for damages for loss of earning capacity despite the absence of documentary
evidence. To be able to claim damages for loss of earning capacity despite the nonavailability of
documentary evidence, there must be oral testimony that: (a) the victim was self-employed
earning less than the minimum wage under the current labor laws and judicial notice was taken
of the fact that in the victim's line of work, no documentary evidence is available; (b) the victim
was employed as a daily wage worker earning less than the minimum wage under current labor
laws. . .
In the instant case, the victim was nineteen (19) years old at the time of his death and earning P1,600.00
monthly as a farm laborer. Thus, his heirs are entitled to receive an award for lost earnings in accordance

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 159636

November 25, 2004

VICTORY
LINER,
INC., petitioner,
vs.
ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI ROZANO P. GAMMAD and DIANA FRANCES
P. GAMMAD, respondents.

DECISION

YNARES-SANTIAGO, J.:

3
Assailed in this petition for review on certiorari is the April 11, 2003 decision 1 of the Court of Appeals in CAG.R. CV No. 63290 which affirmed with modification the November 6, 1998 decision 2 of the Regional Trial
Court of Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of
carriage in Civil Case No. 5023.
The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace
Pagulayan-Gammad,3 was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan
from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in
Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries
to other passengers.4
On May 14, 1996, respondent heirs of the deceased filed a complaint 5 for damages arising from culpa
contractual against petitioner. In its answer,6 the petitioner claimed that the incident was purely accidental
and that it has always exercised extraordinary diligence in its 50 years of operation.
After several re-settings,7 pre-trial was set on April 10, 1997. 8 For failure to appear on the said date,
petitioner was declared as in default.9 However, on petitioners motion10 to lift the order of default, the same
was granted by the trial court.11
At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the deceased
was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket
No. 977785. Respondents, for their part, did not accept petitioners proposal to pay P50,000.00. 12
After respondent Rosalito Gammad completed his direct testimony, cross-examination was scheduled for
November 17, 1997 13 but moved to December 8, 1997, 14 because the parties and the counsel failed to
appear. On December 8, 1997, counsel of petitioner was absent despite due notice and was deemed to
have waived right to cross-examine respondent Rosalito. 15
Petitioners motion to reset the presentation of its evidence to March 25, 1998 16 was granted. However, on
March 24, 1998, the counsel of petitioner sent the court a telegram 17 requesting postponement but the
telegram was received by the trial court on March 25, 1998, after it had issued an order considering the
case submitted for decision for failure of petitioner and counsel to appear.18
On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive portion of
which reads:
WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered
in favor of the plaintiffs and against the defendant Victory Liner, Incorporated, ordering the latter
to pay the following:

On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification as
follows:
[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the following are
hereby adjudged in favor of plaintiffs-appellees:
1. Actual Damages in the amount of P88,270.00;
2. Compensatory Damages in the amount of P1,135,536,10;
3. Moral and Exemplary Damages in the amount of P400,000.00; and
4. Attorneys fees equivalent to 10% of the sum of the actual, compensatory, moral,
and exemplary damages herein adjudged.
The court a quos judgment of the cost of the suit against defendant-appellant is hereby
AFFIRMED.
SO ORDERED.20
Represented by a new counsel, petitioner on May 21, 2003 filed a motion for reconsideration praying that
the case be remanded to the trial court for cross- examination of respondents witness and for the
presentation of its evidence; or in the alternative, dismiss the respondents complaint. 21 Invoking APEX
Mining, Inc. v. Court of Appeals, 22 petitioner argues, inter alia, that the decision of the trial court should be
set aside because the negligence of its former counsel, Atty. Antonio B. Paguirigan, in failing to appear at
the scheduled hearings and move for reconsideration of the orders declaring petitioner to have waived the
right to cross-examine respondents witness and right to present evidence, deprived petitioner of its day in
court.
On August 21, 2003, the Court of Appeals denied petitioners motion for reconsideration. 23
Hence, this petition for review principally based on the fact that the mistake or gross negligence of its
counsel deprived petitioner of due process of law. Petitioner also argues that the trial courts award of
damages were without basis and should be deleted.
The issues for resolution are: (1) whether petitioners counsel was guilty of gross negligence; (2) whether
petitioner should be held liable for breach of contract of carriage; and (3) whether the award of damages
was proper.

1. Actual Damages -------------------- P 122,000.00


2. Death Indemnity --------------------- 50,000.00
3. Exemplary and Moral Damages----- 400,000.00
4. Compensatory Damages ---------- 1,500,000.00
5. Attorneys Fees --------------------- 10% of the total amount granted
6. Cost of the Suit.
SO ORDERED.19

It is settled that the negligence of counsel binds the client. This is based on the rule that any act performed
by a counsel within the scope of his general or implied authority is regarded as an act of his client.
Consequently, the mistake or negligence of counsel may result in the rendition of an unfavorable judgment
against the client. However, the application of the general rule to a given case should be looked into and
adopted according to the surrounding circumstances obtaining. Thus, exceptions to the foregoing have been
recognized by the court in cases where reckless or gross negligence of counsel deprives the client of due
process of law, or when its application will result in outright deprivation of the clients liberty or property or
where the interests of justice so require, and accord relief to the client who suffered by reason of the
lawyers gross or palpable mistake or negligence.24

4
The exceptions, however, are not present in this case. The record shows that Atty. Paguirigan filed an
Answer and Pre-trial Brief for petitioner. Although initially declared as in default, Atty. Paguirigan
successfully moved for the setting aside of the order of default. In fact, petitioner was represented by Atty.
Paguirigan at the pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed to file
motions for reconsideration of the orders declaring petitioner to have waived the right to cross-examine
respondents witness and to present evidence, he nevertheless, filed a timely appeal with the Court of
Appeals assailing the decision of the trial court. Hence, petitioners claim that it was denied due process
lacks basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it as in default for not
appearing at the pre-trial, three notices (dated October 23, 1996, 25 January 30, 1997,26 and March 26,
1997,27) requiring attendance at the pre-trial were sent and duly received by petitioner. However, it was only
on April 27, 1997, after the issuance of the April 10, 1997 order of default for failure to appear at the pre-trial
when petitioner, through its finance and administrative manager, executed a special power of
attorney28 authorizing Atty. Paguirigan or any member of his law firm to represent petitioner at the pre-trial.
Petitioner is guilty, at the least, of contributory negligence and fault cannot be imputed solely on previous
counsel.
The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case at bar. In APEX, the
negligent counsel not only allowed the adverse decision against his client to become final and executory,
but deliberately misrepresented in the progress report that the case was still pending with the Court of
Appeals when the same was dismissed 16 months ago. 29 These circumstances are absent in this case
because Atty. Paguirigan timely filed an appeal from the decision of the trial court with the Court of Appeals.
In Gold Line Transit, Inc. v. Ramos,30 the Court was similarly confronted with the issue of whether or not the
client should bear the adverse consequences of its counsels negligence. In that case, Gold Line Transit,
Inc. (Gold Line) and its lawyer failed to appear at the pre-trial despite notice and was declared as in default.
After the plaintiffs presentation of evidence ex parte, the trial court rendered decision ordering Gold Line to
pay damages to the heirs of its deceased passenger. The decision became final and executory because
counsel of Gold Line did not file any appeal. Finding that Goldline was not denied due process of law and is
thus bound by the negligence of its lawyer, the Court held as follows
This leads us to the question of whether the negligence of counsel was so gross and reckless
that petitioner was deprived of its right to due process of law. We do not believe so. It cannot be
denied that the requirements of due process were observed in the instant case. Petitioner was
never deprived of its day in court, as in fact it was afforded every opportunity to be heard. Thus,
it is of record that notices were sent to petitioner and that its counsel was able to file a motion to
dismiss the complaint, an answer to the complaint, and even a pre-trial brief. What was
irretrievably lost by petitioner was its opportunity to participate in the trial of the case and to
adduce evidence in its behalf because of negligence.
In the application of the principle of due process, what is sought to be safeguarded against is not
the lack of previous notice but the denial of the opportunity to be heard. The question is not
whether petitioner succeeded in defending its rights and interests, but simply, whether it had the
opportunity to present its side of the controversy. Verily, as petitioner retained the services of
counsel of its choice, it should, as far as this suit is concerned, bear the consequences of its
choice of a faulty option. Its plea that it was deprived of due process echoes on hollow ground
and certainly cannot elicit approval nor sympathy.
To cater to petitioners arguments and reinstate its petition for relief from judgment would put a
premium on the negligence of its former counsel and encourage the non-termination of this case
by reason thereof. This is one case where petitioner has to bear the adverse consequences of
its counsels act, for a client is bound by the action of his counsel in the conduct of a case and
he cannot thereafter be heard to complain that the result might have been different had his
counsel proceeded differently. The rationale for the rule is easily discernible. If the negligence of
counsel be admitted as a reason for opening cases, there would never be an end to a suit so
long as a new counsel could be hired every time it is shown that the prior counsel had not been
sufficiently diligent, experienced or learned. 31

Similarly, in Macalalag v. Ombudsman, 32 a Philippine Postal Corporation employee charged with


dishonesty was not able to file an answer and position paper. He was found guilty solely on the basis of
complainants evidence and was dismissed with forfeiture of all benefits and disqualification from
government service. Challenging the decision of the Ombudsman, the employee contended that the gross
negligence of his counsel deprived him of due process of law. In debunking his contention, the Court said
Neither can he claim that he is not bound by his lawyers actions; it is only in case of gross or
palpable negligence of counsel when the courts can step in and accord relief to a client who
would have suffered thereby. If every perceived mistake, failure of diligence, lack of experience
or insufficient legal knowledge of the lawyer would be admitted as a reason for the reopening of
a case, there would be no end to controversy. Fundamental to our judicial system is the principle
that every litigation must come to an end. It would be a clear mockery if it were otherwise.
Access to the courts is guaranteed, but there must be a limit to it.
Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument that it was denied due
process of law due to negligence of its counsel would set a dangerous precedent. It would enable every
party to render inutile any adverse order or decision through the simple expedient of alleging gross
negligence on the part of its counsel. The Court will not countenance such a farce which contradicts longsettled doctrines of trial and procedure. 33
Anent the second issue, petitioner was correctly found liable for breach of contract of carriage. A common
carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with due regard to all the circumstances. In a contract of
carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is
injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only be overcome by
evidence that the carrier exercised extraordinary diligence. 34
In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of
Marie Graces death was the negligence of petitioner. Hence, the courts below correctly ruled that petitioner
was guilty of breach of contract of carriage.
Nevertheless, the award of damages should be modified.
Article 176435 in relation to Article 220636 of the Civil Code, holds the common carrier in breach of its
contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for
death, (2) indemnity for loss of earning capacity, and (3) moral damages.
In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace
which under current jurisprudence is fixed at P50,000.00. 37
The award of compensatory damages for the loss of the deceaseds earning capacity should be deleted for
lack of basis. As a rule, documentary evidence should be presented to substantiate the claim for damages
for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded
despite the absence of documentary evidence when (1) the deceased is self-employed earning less than
the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the
deceaseds line of work no documentary evidence is available; or (2) the deceased is employed as a daily
wage worker earning less than the minimum wage under current labor laws. 38
In People v. Oco,39 the evidence presented by the prosecution to recover damages for loss of earning
capacity was the bare testimony of the deceaseds wife that her husband was earning P8,000.00 monthly as
a legal researcher of a private corporation. Finding that the deceased was neither self-employed nor
employed as a daily-wage worker earning less than the minimum wage under the labor laws existing at the
time of his death, the Court held that testimonial evidence alone is insufficient to justify an award for loss of
earning capacity.

5
Likewise, in People v. Caraig,40 damages for loss of earning capacity was not awarded because the
circumstances of the 3 deceased did not fall within the recognized exceptions, and except for the testimony
of their wives, no documentary proof about their income was presented by the prosecution. Thus

Article 2224 of the Civil Code was likewise applied in the recent cases of People v. Singh 43 and People v.
Almedilla,44 to justify the award of temperate damages in lieu of damages for loss of earning capacity which
was not substantiated by the required documentary proof.

The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio Castro Jr.
were not self-employed or employed as daily-wage workers earning less than the minimum
wage under the labor laws existing at the time of their death. Placido Agustin was a Social
Security System employee who received a monthly salary of P5,000. Roberto Raagas was the
President of Sinclair Security and Allied Services, a family owned corporation, with a monthly
compensation of P30,000. Melencio Castro Jr. was a taxi driver of New Rocalex with an average
daily earning of P500 or a monthly earning of P7,500. Clearly, these cases do not fall under the
exceptions where indemnity for loss of earning capacity can be given despite lack of
documentary evidence. Therefore, for lack of documentary proof, no indemnity for loss of
earning capacity can be given in these cases. (Emphasis supplied)

Anent the award of moral damages, the same cannot be lumped with exemplary damages because they are
based on different jural foundations. 45 These damages are different in nature and require separate
determination.46 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 contractual obligations and, as in this case, when the act of breach of contract itself constitutes
the tort that results in physical injuries. 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.47 On the other hand, exemplary damages, which are awarded by way of example or correction for
the public good may be recovered in contractual obligations if the defendant acted in wanton, fraudulent,
reckless, oppressive, or malevolent manner.48

Here, the trial court and the Court of Appeals computed the award of compensatory damages for loss of
earning capacity only on the basis of the testimony of respondent Rosalito that the deceased was 39 years
of age and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a salary of
P83,088.00 per annum when she died. 41 No other evidence was presented. The award is clearly erroneous
because the deceaseds earnings does not fall within the exceptions.

Respondents in the instant case should be awarded moral damages to compensate for the grief caused by
the death of the deceased resulting from the petitioners breach of contract of carriage. Furthermore, the
petitioner failed to prove that it exercised the extraordinary diligence required for common carriers, it is
presumed to have acted recklessly.49 Thus, the award of exemplary damages is proper. Under the
circumstances, we find it reasonable to award respondents the amount of P100,000.00 as moral damages
and P100,000.00 as exemplary damages. These amounts are not excessive. 50

However, the fact of loss having been established, temperate damages in the amount of P500,000.00
should be awarded to respondents. Under Article 2224 of the Civil Code, 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 proved
with certainty.
In Pleno v. Court of Appeals, 42 the Court sustained the trial courts award of P200,000.00 as temperate
damages in lieu of actual damages for loss of earning capacity because the income of the victim was not
sufficiently proven, thus
The trial court based the amounts of damages awarded to the petitioner on the following circumstances:
...
"As to the loss or impairment of earning capacity, there is no doubt that Pleno is an
ent[re]preneur and the founder of his own corporation, the Mayon Ceramics Corporation. It
appears also that he is an industrious and resourceful person with several projects in line, and
were it not for the incident, might have pushed them through. On the day of the incident, Pleno
was driving homeward with geologist Longley after an ocular inspection of the site of the Mayon
Ceramics Corporation. His actual income however has not been sufficiently established so that
this Court cannot award actual damages, but, an award of temperate or moderate damages may
still be made on loss or impairment of earning capacity. That Pleno sustained a permanent
deformity due to a shortened left leg and that he also suffers from double vision in his left eye is
also established. Because of this, he suffers from some inferiority complex and is no longer
active in business as well as in social life. In similar cases as in Borromeo v. Manila Electric
Railroad Co., 44 Phil 165; Coriage, et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in
Araneta, et al. v. Arreglado, et al., L-11394, Sept. 9, 1958, the proper award of damages were
given."
...
We rule that the lower courts awards of damages are more consonant with the factual
circumstances of the instant case. The trial courts findings of facts are clear and welldeveloped. Each item of damages is adequately supported by evidence on record.

The actual damages awarded by the trial court reduced by the Court of Appeals should be further reduced.
In People v. Duban,51 it was held that only substantiated and proven expenses or those that appear to have
been genuinely incurred in connection with the death, wake or burial of the victim will be recognized. A list of
expenses (Exhibit "J"),52 and the contract/receipt for the construction of the tomb (Exhibit "F") 53 in this case,
cannot be considered competent proof and cannot replace the official receipts necessary to justify the
award. Hence, actual damages should be further reduced to P78,160.00, 54 which was the amount supported
by official receipts.
Pursuant to Article 220855 of the Civil Code, attorneys fees may also be recovered in the case at bar where
exemplary damages are awarded. The Court finds the award of attorneys fees equivalent to 10% of the
total amount adjudged against petitioner reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals, 56 it was held that when an obligation, regardless
of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can
be held liable for payment of interest in the concept of actual and compensatory damages, subject to the
following rules, to wit
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

6
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. (Emphasis supplied).
In the instant case, petitioner should be held liable for payment of interest as damages for breach of
contract of carriage. Considering that the amounts payable by petitioner has been determined with certainty
only in the instant petition, the interest due shall be computed upon the finality of this decision at the rate of
12% per annum until satisfaction, per paragraph 3 of the aforecited rule. 57
WHEREFORE, in view of all the foregoing, the petition is partially granted. The April 11, 2003 decision of the
Court of Appeals in CA-G.R. CV No. 63290, which modified the decision of the Regional Trial Court of
Tuguegarao, Cagayan in Civil Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner
Victory Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death of
Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3) P100,000.00 as exemplary
damages; (4) P78,160.00 as actual damages; (5) P500,000.00 as temperate damages; (6) 10% of the total
amount as attorneys fees; and the costs of suit.
Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12% per annum
computed from the finality of this decision until fully paid.
SO ORDERED.
Quisumbing,
Carpio,
Davide, Jr., C.J., (Chairman), on official leave.
Republic
SUPREME
Manila

of

and

Azcuna,

the

JJ., concur.

Philippines
COURT

On June 18, 1992, respondent filed an Amended Complaint, 3 in her own behalf and in behalf of her
children, in the civil case for damages against petitioner. Respondent sought the payment of indemnity for
the death of Silvino Tan, moral and exemplary damages, funeral and interment expenses, medical and
hospitalization expenses, the cost of the motorcycles repair, attorneys fees, and other just and equitable
reliefs.
The accident involved a motorcycle, a passenger jeep, and a bus with Body No. 119. The bus was owned
by petitioner Philippine Hawk Corporation, and was then being driven by Margarito Avila.
In its Answer,4 petitioner denied liability for the vehicular accident, alleging that the immediate and proximate
cause of the accident was the recklessness or lack of caution of Silvino Tan. Petitioner asserted that it
exercised the diligence of a good father of the family in the selection and supervision of its employees,
including Margarito Avila.
On March 25, 1993, the trial court issued a Pre-trial Order 5 stating that the parties manifested that there was
no possibility of amicable settlement between them. However, they agreed to stipulate on the following
facts:
1. On March 17, 1991, in Bgy. Buensoceso, Gumaca, Quezon, plaintiff Vivian Lee Tan and her
husband Silvino Tan, while on board a motorcycle with [P]late No. DA-5480 driven by the latter,
and a Metro Bus with [P]late No. NXR-262 driven by Margarito Avila, were involved in an
accident;
2. As a result of the accident, Silvino Tan died on the spot while plaintiff Vivian Lee Tan suffered
physical injuries which necessitated medical attention and hospitalization;
3. The deceased Silvino Tan is survived by his wife, plaintiff Vivian Lee Tan and four children,
three of whom are now residents of the United States; and

THIRD DIVISION
4. Defendant Margarito Avila is an employee of defendant Philippine Hawk. 6
G.R. No. 166869

February 16, 2010


The parties also agreed on the following issues:

PHILIPPINE
vs.
VIVIAN TAN LEE, Respondent.

HAWK

CORPORATION, Petitioner,
1. Whether or not the proximate cause of the accident causing physical injuries upon the plaintiff
Vivian Lee Tan and resulting in the death of the latters husband was the recklessness and
negligence of Margarito Avila or the deceased Silvino Tan; and

DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari 1 of the Decision of the Court of Appeals in CA-G.R. CV No. 70860,
promulgated on August 17, 2004, affirming with modification the Decision of the Regional Trial Court (RTC)
of Quezon City, Branch 102, dated March 16, 2001, in Civil Case No. Q-91-9191, ordering petitioner
Philippine Hawk Corporation and Margarito Avila to jointly and severally pay respondent Vivian Tan Lee
damages as a result of a vehicular accident.
The facts are as follows:
On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of Quezon City a Complaint 2 against
petitioner Philippine Hawk Corporation and defendant Margarito Avila for damages based on quasi-delict,
arising from a vehicular accident that occurred on March 17, 1991 in Barangay Buensoceso, Gumaca,
Quezon. The accident resulted in the death of respondents husband, Silvino Tan, and caused respondent
physical injuries.

2. Whether or not defendant Philippine Hawk Transport Corporation exercised the diligence of a
good father of the family in the selection and supervision of its driver Margarito Avila. 7
Respondent testified that on March 17, 1991, she was riding on their motorcycle in tandem with her
husband, who was on the wheel, at a place after a Caltex gasoline station in Barangay Buensoceso,
Gumaca, Quezon on the way to Lopez, Quezon. They came from the Pasumbal Machine Shop, where they
inquired about the repair of their tanker. They were on a stop position at the side of the highway; and when
they were about to make a turn, she saw a bus running at fast speed coming toward them, and then the bus
hit a jeep parked on the roadside, and their motorcycle as well. She lost consciousness and was brought to
the hospital in Gumaca, Quezon, where she was confined for a week. She was later transferred to St.
Lukes Hospital in Quezon City, Manila. She suffered a fracture on her left chest, her left arm became
swollen, she felt pain in her bones, and had high blood pressure. 8
Respondents husband died due to the vehicular accident. The immediate cause of his death was massive
cerebral hemorrhage.9

7
Respondent further testified that her husband was leasing 10 and operating a Caltex gasoline station in
Gumaca, Quezon that yielded one million pesos a year in revenue. They also had a copra business, which
gave them an income of P3,000.00 a month or P36,000.00 a year.11
Ernest Ovial, the driver of the passenger jeep involved in the accident, testified that in the afternoon of
March 17, 1991, his jeep was parked on the left side of the highway near the Pasumbal Machine Shop. He
did not notice the motorcycle before the accident. But he saw the bus dragging the motorcycle along the
highway, and then the bus bumped his jeep and sped away.12
For the defense, Margarito Avila, the driver of petitioners bus, testified that on March 17, 1999, at about
4:30 p.m., he was driving his bus at 60 kilometers per hour on the Maharlika Highway. When they were at
Barangay Buensoceso, Gumaca, Quezon, a motorcycle ran from his left side of the highway, and as the bus
came near, the motorcycle crossed the path of the bus, and so he turned the bus to the right. He heard a
loud banging sound. From his side mirror, he saw that the motorcycle turned turtle ("bumaliktad"). He did not
stop to help out of fear for his life, but drove on and surrendered to the police. He denied that he bumped
the motorcycle.13
Avila further testified that he had previously been involved in sideswiping incidents, but he forgot how many
times.14
Rodolfo Ilagan, the bus conductor, testified that the motorcycle bumped the left side of the bus that was
running at 40 kilometers per hour.15

The trial court held that if the bus were on the right side of the highway, and Margarito Avila turned his bus
to the right in an attempt to avoid hitting the motorcyle, then the bus would not have hit the passenger jeep,
which was then parked on the left side of the road. The fact that the bus also hit the passenger jeep showed
that the bus must have been running from the right lane to the left lane of the highway, which caused the
collision with the motorcycle and the passenger jeep parked on the left side of the road. The trial court
stated that since Avila saw the motorcycle before the collision, he should have stepped on the brakes and
slowed down, but he just maintained his speed and veered to the left. 20 The trial court found Margarito Avila
guilty of simple negligence.
The trial court held petitioner bus company liable for failing to exercise the diligence of a good father of the
family in the selection and supervision of Avila, having failed to sufficiently inculcate in him discipline and
correct behavior on the road.21
On appeal, the Court of Appeals affirmed the decision of the trial court with modification in the award of
damages. The dispositive portion of the decision reads:
WHEREFORE, foregoing premises considered, the appeal is DENIED. The assailed decision dated March
16, 2001 is hereby AFFIRMED with MODIFICATION. Appellants Philippine Hawk and Avila are hereby
ordered to pay jointly and severally appellee the following amount: (a) P168,019.55 as actual damages;
(b) P10,000.00 as temperate damages; (c) P100,000.00 as moral damages; (d) P590,000.00 as unearned
income; and (e) P50,000.00 as civil indemnity.22
Petitioner filed this petition, raising the following issues:

Domingo S. Sisperes, operations officer of petitioner, testified that, like their other drivers, Avila was
subjected to and passed the following requirements:
(1) Submission of NBI clearance;
(2) Certification from his previous employer that he had no bad record;
(3) Physical examination to determine his fitness to drive;
(4) Test of his driving ability, particularly his defensive skill; and
(5) Review of his driving skill every six months.16
Efren Delantar, a Barangay Kagawad in Buensoceso, Gumaca, Quezon, testified that the bus was running
on the highway on a straight path when a motorcycle, with a woman behind its driver, suddenly emerged
from the left side of the road from a machine shop. The motorcycle crossed the highway in a zigzag manner
and bumped the side of the bus.17
In its Decision dated March 16, 2001, the trial court rendered judgment against petitioner and defendant
Margarito Avila, the dispositive portion of which reads:
ACCORDINGLY, MARGARITO AVILA is adjudged guilty of simple negligence, and judgment is hereby
rendered in favor of the plaintiff Vivian Lee Tan and h[er] husbands heirs ordering the defendants Philippine
Hawk Corporation and Margarito Avila to pay them jointly and solidarily the sum of P745,575.00
representing loss of earnings and actual damages plus P50,000.00 as moral damages.18
The trial court found that before the collision, the motorcycle was on the left side of the road, just as the
passenger jeep was. Prior to the accident, the motorcycle was in a running position moving toward the right
side of the highway. The trial court agreed with the bus driver that the motorcycle was moving ahead of the
bus from the left side of the road toward the right side of the road, but disagreed that the motorcycle crossed
the path of the bus while the bus was running on the right side of the road. 19

1) The Court of Appeals committed grave abuse of discretion amounting to lack of jurisdiction in
passing upon an issue, which had not been raised on appeal, and which had, therefore, attained
finality, in total disregard of the doctrine laid down by this Court in Abubakar v. Abubakar, G.R.
No. 134622, October 22, 1999.
2) The Court of Appeals committed reversible error in its finding that the petitioners bus driver
saw the motorcycle of private respondent executing a U-turn on the highway "about fifteen (15)
meters away" and thereafter held that the Doctrine of Last Clear was applicable to the instant
case. This was a palpable error for the simple reason that the aforesaid distance was the
distance of the witness to the bus and not the distance of the bus to the respondents
motorcycle, as clearly borne out by the records.
3) The Court of Appeals committed reversible error in awarding damages in total disregard of the
established doctrine laid down in Danao v. Court of Appeals, 154 SCRA 447 and Viron
Transportation Co., Inc. v. Delos Santos, G.R. No. 138296, November 22, 2000. 23
In short, the issues raised by petitioner are: (1) whether or not negligence may be attributed to petitioners
driver, and whether negligence on his part was the proximate cause of the accident, resulting in the death of
Silvino Tan and causing physical injuries to respondent; (2) whether or not petitioner is liable to respondent
for damages; and (3) whether or not the damages awarded by respondent Court of Appeals are proper.
Petitioner seeks a review of the factual findings of the trial court, which were sustained by the Court of
Appeals, that petitioners driver was negligent in driving the bus, which caused physical injuries to
respondent and the death of respondents husband.
The rule is settled that the findings of the trial court, especially when affirmed by the Court of Appeals, are
conclusive on this Court when supported by the evidence on record. 24 The Court has carefully reviewed the
records of this case, and found no cogent reason to disturb the findings of the trial court, thus:
The Court agree[s] with the bus driver Margarito that the motorcycle was moving ahead of the bus towards
the right side from the left side of the road, but disagrees with him that it crossed the path of the bus while
the bus was running on the right side of the highway.

8
If the bus were on the right side of the highway and Margarito turned his bus to the right in an attempt to
avoid hitting it, then the bus would not have hit the passenger jeep vehicle which was then parked on the left
side of the road. The fact that the bus hit the jeep too, shows that the bus must have been running to the left
lane of the highway from right to the left, that the collision between it and the parked jeep and the moving
rightways cycle became inevitable. Besides, Margarito said he saw the motorcycle before the collision
ahead of the bus; that being so, an extra-cautious public utility driver should have stepped on his brakes
and slowed down. Here, the bus never slowed down, it simply maintained its highway speed and veered to
the left. This is negligence indeed.25
Petitioner contends that the Court of Appeals was mistaken in stating that the bus driver saw respondents
motorcycle "about 15 meters away" before the collision, because the said distance, as testified to by its
witness Efren Delantar Ong, was Ongs distance from the bus, and not the distance of the bus from the
motorcycle. Petitioner asserts that this mistaken assumption of the Court of Appeals made it conclude that
the bus driver, Margarito Avila, had the last clear chance to avoid the accident, which was the basis for the
conclusion that Avila was guilty of simple negligence.
A review of the records showed that it was petitioners witness, Efren Delantar Ong, who was about 15
meters away from the bus when he saw the vehicular accident. 26 Nevertheless, this fact does not affect the
finding of the trial court that petitioners bus driver, Margarito Avila, was guilty of simple negligence as
affirmed by the appellate court. Foreseeability is the fundamental test of negligence. 27 To be negligent, a
defendant must have acted or failed to act in such a way that an ordinary reasonable man would have
realized that certain interests of certain persons were unreasonably subjected to a general but definite class
of risks.28
In this case, the bus driver, who was driving on the right side of the road, already saw the motorcycle on the
left side of the road before the collision. However, he did not take the necessary precaution to slow down,
but drove on and bumped the motorcycle, and also the passenger jeep parked on the left side of the road,
showing that the bus was negligent in veering to the left lane, causing it to hit the motorcycle and the
passenger jeep.
Whenever an employees negligence causes damage or injury to another, there instantly arises a
presumption that the employer failed to exercise the due diligence of a good father of the family in the
selection or supervision of its employees. 29 To avoid liability for a quasi-delict committed by his employee,
an employer must overcome the presumption by presenting convincing proof that he exercised the care and
diligence of a good father of a family in the selection and supervision of his employee. 30
The Court upholds the finding of the trial court and the Court of Appeals that petitioner is liable to
respondent, since it failed to exercise the diligence of a good father of the family in the selection and
supervision of its bus driver, Margarito Avila, for having failed to sufficiently inculcate in him discipline and
correct behavior on the road. Indeed, petitioners tests were concentrated on the ability to drive and physical
fitness to do so. It also did not know that Avila had been previously involved in sideswiping incidents.
As regards the issue on the damages awarded, petitioner contends that it was the only one that appealed
the decision of the trial court with respect to the award of actual and moral damages; hence, the Court of
Appeals erred in awarding other kinds of damages in favor of respondent, who did not appeal from the trial
courts decision.
Petitioners contention is unmeritorious.
Section 8, Rule 51 of the 1997 Rules of Civil Procedure provides:
SEC. 8. Questions that may be decided. -- No error which does not affect the jurisdiction over the subject
matter or the validity of the judgment appealed from or the proceedings therein will be considered unless
stated in the assignment of errors, or closely related to or dependent on an assigned error and properly
argued in the brief, save as the court pass upon plain errors and clerical errors.
Philippine National Bank v. Rabat 31 cited the book32 of Justice Florenz D. Regalado to explain the section
above, thus:

In his book, Mr. Justice Florenz D. Regalado commented on this section, thus:
1. Sec. 8, which is an amendment of the former Sec. 7 of this Rule, now includes some
substantial changes in the rules on assignment of errors. The basic procedural rule is that only
errors claimed and assigned by a party will be considered by the court, except errors affecting its
jurisdiction over the subject matter. To this exception has now been added errors affecting the
validity of the judgment appealed from or the proceedings therein.
Also, even if the error complained of by a party is not expressly stated in his assignment of
errors but the same is closely related to or dependent on an assigned error and properly argued
in his brief, such error may now be considered by the court. These changes are of jurisprudential
origin.
2. The procedure in the Supreme Court being generally the same as that in the Court of
Appeals, unless otherwise indicated (see Secs. 2 and 4, Rule 56), it has been held that the latter
is clothed with ample authority to review matters, even if they are not assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.
Also, an unassigned error closely related to an error properly assigned (PCIB vs. CA, et al., L34931, Mar. 18, 1988), or upon which the determination of the question raised by error properly
assigned is dependent, will be considered by the appellate court notwithstanding the failure to
assign it as error (Ortigas, Jr. vs. Lufthansa German Airlines, L-28773, June 30, 1975; Soco vs.
Militante, et al., G.R. No. 58961, June 28, 1983).
It may also be observed that under Sec. 8 of this Rule, the appellate court is authorized to
consider a plain error, although it was not specifically assigned by the appellant (Dilag vs. Heirs
of Resurreccion, 76 Phil. 649), otherwise it would be sacrificing substance for technicalities. 33
In this case for damages based on quasi-delict, the trial court awarded respondent the sum of P745,575.00,
representing loss of earning capacity (P590,000.00) and actual damages (P155,575.00 for funeral
expenses), plusP50,000.00 as moral damages. On appeal to the Court of Appeals, petitioner assigned as
error the award of damages by the trial court on the ground that it was based merely on suppositions and
surmises, not the admissions made by respondent during the trial.
In its Decision, the Court of Appeals sustained the award by the trial court for loss of earning capacity of the
deceased Silvino Tan, moral damages for his death, and actual damages, although the amount of the latter
award was modified.
The indemnity for loss of earning capacity of the deceased is provided for by Article 2206 of the Civil
Code.34Compensation of this nature is awarded not for loss of earnings, but for loss of capacity to earn
money.35
As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of
earning capacity.36 By way of exception, damages for loss of earning capacity may be awarded despite the
absence of documentary evidence when: (1) the deceased is self-employed and earning less than the
minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the
deceased's line of work no documentary evidence is available; or (2) the deceased is employed as a daily
wage worker earning less than the minimum wage under current labor laws. 37
In this case, the records show that respondents husband was leasing and operating a Caltex gasoline
station in Gumaca, Quezon. Respondent testified that her husband earned an annual income of one million
pesos. Respondent presented in evidence a Certificate of Creditable Income Tax Withheld at Source for the
Year 1990,38which showed that respondents husband earned a gross income of P950,988.43 in 1990. It is
reasonable to use the Certificate and respondents testimony as bases for fixing the gross annual income of
the deceased at one million pesos before respondents husband died on March 17, 1999. However, no
documentary evidence was presented regarding the income derived from their copra business; hence, the
testimony of respondent as regards such income cannot be considered.

9
In the computation of loss of earning capacity, only net earnings, not gross earnings, are to be considered;
that is, the total of the earnings less expenses necessary for the creation of such earnings or income, less
living and other incidental expenses. 39 In the absence of documentary evidence, it is reasonable to peg
necessary expenses for the lease and operation of the gasoline station at 80 percent of the gross income,
and peg living expenses at 50 percent of the net income (gross income less necessary expenses).
In this case, the computation for loss of earning capacity is as follows:

Further, the Court of Appeals correctly awarded respondent civil indemnity for the death of her husband,
which has been fixed by current jurisprudence at P50,000.00.47 The award is proper under Art. 2206 of the
Civil Code.48
In fine, the Court of Appeals correctly awarded civil indemnity for the death of respondents husband,
temperate damages, and moral damages for the physical injuries sustained by respondent in addition to the
damages granted by the trial court to respondent. The trial court overlooked awarding the additional
damages, which were prayed for by respondent in her Amended Complaint. The appellate court is clothed
with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that
their consideration is necessary in arriving at a just decision of the case. 49

Net Earning
Capacity

Life
Expectancy
[2/3 (80-age at the
time of death)]

Gross
Annual
Income (GAI)

Reasonable
and
Necessary
Expenses
(80% of GAI)

[2/3 (80-65)]

P1,000,000.00

P800,000.00

2/3 (15)

P200,000.00

P100,000.00(Living
Expenses)

30/3

P100,000.00

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated August 17, 2004 in CAG.R. CV No. 70860 is hereby AFFIRMED with MODIFICATION. Petitioner Philippine Hawk Corporation and
Margarito Avila are hereby ordered to pay jointly and severally respondent Vivian Lee Tan: (a) civil indemnity
in the amount of Fifty Thousand Pesos (P50,000.00); (b) actual damages in the amount of One Hundred
Twenty-Seven Thousand One Hundred Ninety-Two Pesos and Eighty-Five Centavos ( P127,192.85); (c)
moral damages in the amount of Eighty Thousand Pesos (P80,000.00); (d) indemnity for loss of earning
capacity in the amount of One Million Pesos (P1,000,000.00); and (e) temperate damages in the amount of
Ten Thousand Pesos (P10,000.00).

10

P100,000.00

Costs against petitioner.

P1,000,000.00

The Court of Appeals also awarded actual damages for the expenses incurred in connection with the death,
wake, and interment of respondents husband in the amount of P154,575.30, and the medical expenses of
respondent in the amount of P168,019.55.

SO ORDERED.
DIOSDADO
Associate Justice

M.

PERALTA

WE CONCUR:
Actual damages must be substantiated by documentary evidence, such as receipts, in order to prove
expenses incurred as a result of the death of the victim 40 or the physical injuries sustained by the victim. A
review of the valid receipts submitted in evidence showed that the funeral and related expenses amounted
only to P114,948.60, while the medical expenses of respondent amounted only to P12,244.25, yielding a
total of P127,192.85 in actual damages.
Moreover, the Court of Appeals correctly sustained the award of moral damages in the amount
of P50,000.00 for the death of respondents husband. Moral damages are not intended to enrich a plaintiff at
the expense of the defendant. 41 They are awarded to allow the plaintiff to obtain means, diversions or
amusements that will serve to alleviate the moral suffering he/she has undergone due to the defendants
culpable action and must, perforce, be proportional to the suffering inflicted. 42
In addition, the Court of Appeals correctly awarded temperate damages in the amount of P10,000.00 for the
damage caused on respondents motorcycle. Under Art. 2224 of the Civil Code, temperate damages "may
be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from
the nature of the case, be proved with certainty." The cost of the repair of the motorcycle was prayed for by
respondent in her Complaint. However, the evidence presented was merely a job estimate 43 of the cost of
the motorcycles repair amounting to P17, 829.00. The Court of Appeals aptly held that there was no doubt
that the damage caused on the motorcycle was due to the negligence of petitioners driver. In the absence
of competent proof of the actual damage caused on the motorcycle or the actual cost of its repair, the award
of temperate damages by the appellate court in the amount of P10,000.00 was reasonable under the
circumstances.44
The Court of Appeals also correctly awarded respondent moral damages for the physical injuries she
sustained due to the vehicular accident. Under Art. 2219 of the Civil Code, 45 moral damages may be
recovered in quasi-delicts causing physical injuries. However, the award of P50,000.00 should be reduced
to P30,000.00 in accordance with prevailing jurisprudence. 46

RENATO
Associate
Chairperson
PRESBITERO
Associate Justice

C.

J.

JOSE
Associate Justice

VELASCO,

JR. ANTONIO
EDUARDO
Associate Justice
CATRAL

CORONA
Justice

B.

NACHURA

MENDOZA

ATTE S TATI O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
RENATO
Associate
Third Division, Chairperson

C.

CORONA
Justice

C E R T I F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.

10
REYNATO
Chief Justice

S.

Republic
SUPREME
Baguio

of

PUNO

the

Philippines
COURT

The police officer pushed the man to the wall, poked the gun on him and was about to handcuff the
latter when another man, herein appellant Asilan arrived, drew something from his back and stabbed the
police officer on his back several times until the latter fell to the ground.
The man who was being arrested by the police officer held the latters hand while he was being stabbed
repeatedly by [Asilan]. The man who was being arrested then took the officers gun and shot the latter with
it.

FIRST DIVISION
The fellow barker of Joselito Binosa then threw stones at the malefactors who subsequently left the place.
G.R. No. 188322

April 11, 2012

PEOPLE
OF
THE
vs.
JOSEPH ASILAN y TABORNAL, Accused-Appellant.

PHILIPPINES, Plaintiff-Appellee,

Joselito Binosa secretly followed [Asilan] and his companion who walked towards the railroad track taking
Teresa St., Sta. Mesa, Manila. [Asilan] entered an alley and thereafter returned to the place of the incident.
The other man walked on to the tracks.
At that moment, a policeman passed by and Binosa pointed [Asilan] to him. [Asilan] was arrested and the
knife which was used in the

DECISION

stabbing was confiscated by the policeman. 6 (Citations omitted.)

LEONARDO-DE CASTRO, J.:


This is an appeal filed by the accused-appellant Joseph Asilan y Tabornal (Asilan) to challenge the February
25, 2009 Decision1 of the Court of Appeals in CA-G.R. CR.-H.C. No. 02686, which affirmed in toto his
Murder conviction, rendered by the Regional Trial Court (RTC), Branch 20 of the City of Manila on January
8, 2007, in Criminal Case No. 06-243060.
On March 31, 2006, Asilan was charged with the complex crime of Direct Assault with Murder in an
Information,2the pertinent portion of which reads:
That on or about March 27, 2006, in the City of Manila, Philippines, the said accused, conspiring, and
confederating with another whose true name, real identity and present whereabouts are still unknown and
mutually helping each other, did then and there willfully, unlawfully, and feloniously attack, assault and use
personal violence upon the person of PO1 RANDY ADOVAS y PE-CAAT, a member of the Philippine
National Police assigned at Camp Bagong Diwa, Bicutan, Taguig, MM, duly qualified, appointed, and acting
as such, and therefore an agent of a person in authority, which fact was known to the said accused, while
PO1 RANDY ADOVAS y PE-CAAT was in the performance of his official duty, that is, while handcuffing the
at-large co-conspirator for illegal possession of deadly weapon, herein accused suddenly appeared and with
intent to kill, treachery and evident premeditation, attack, assault, and use personal violence upon said
police officer by then and there repeatedly stabbing the latter with a fan knife then grabbing his service
firearm and shooting him, thereby inflicting upon the said PO1 RANDY ADOVAS y PE-CAAT mortal stab
and gunshot wounds which were the direct and immediate cause of his death thereafter.
3

Asilan pleaded not guilty upon his arraignment on April 10, 2006. Pre-Trial Conference followed on April 26,
2006, where the counsels agreed to stipulate that Asilan, who was at that time present in the RTC, was the
same Asilan named in the Information, and that the victim, Police Officer 1 (PO1) Randy Adovas y Pe-caat
(Adovas), was a police officer in active duty at the time of his death. 4 Trial on the merits ensued after the
termination of the pre-trial conference.

The above narration of events was largely corroborated by Pol Justine San Diego (San Diego), a student,
who also witnessed the events that transpired on March 27, 2006. 7
The prosecution also submitted as evidence Medico Legal Report No. M-219-06, 8 accomplished and
testified to by Dr. Vladimir V. Villaseor. The pertinent portion of the Medico Legal Report states:
SPECIMEN SUBMITTED:
Cadaver of Randy Pe-caat Adovas, 29 y/o male, married, a policeman, 167 cm in height and a resident of
19 West Bank Road, Floodway, Rosario Pasig City.
PURPOSE OF LABORATORY EXAMINATION:
To determine the cause of death.
FINDINGS:
Body belongs to a fairly nourished, fairly developed male cadaver in rigor mortis with postmortem lividity at
the dependent portions of the body. Conjunctivae, lips and nailbeds are pale. With exploratory laparotomy
incision at the anterior abdominal wall, measuring 29 cm long, along the anterior midline.
Trunk & Upper Extremity:
1) Stab wound, right axillary region, measuring 6 x 4 cm, 16 cm from the anterior
midline.

Below is the prosecutions version, as succinctly summarized by the Office of the Solicitor General (OSG)
from the testimony of Joselito Binosa (Binosa)5:
In the evening of March 27, 2006, around 10:00 oclock, Joselito Binosa, a jeepney barker/carwash boy
while chatting with his friends at the El Nio Bakery along Teresa Street, Sta. Mesa, Manila, heard a
gunshot nearby. He then went to the place where the sound came and from where he was standing which
was about three (3) to four (4) meters away, he saw a uniformed policeman, who seemed to be arresting
someone and ordering the latter to lay on the ground.

2) Stab wound, right hypochondriac region, measuring 2.3 x 0.7 cm, 2cm right of the
anterior midline, 9 cm deep, directed posteriorwards, downwards & medialwards,
lacerating the right lobe of the liver.
-overCONCLUSION:

11
Cause of death is MULTIPLE STAB WOUNDS & GUNSHOT WOUND OF THE TRUNK AND UPPER
EXTREMITIES.

On January 19, 2007, Asilan appealed 18 his conviction to the Court of Appeals, mainly on the ground
that the prosecution failed to prove his guilt beyond reasonable doubt. He subsequently filed a Motion to
Litigate as a Pauper, 19 which on February 28, 2007, was granted in an Order 20 by the RTC.

Meanwhile, Asilan, in his Appellants Brief,9 summed up his defense as follows:


On February 25, 2009, the Court of Appeals rendered its Decision, affirming in toto the RTCs ruling.
On March 27, 2006, at around 10:00 oclock p.m. JOSEPH ASILAN [Asilan] was on board a passenger
jeepney on his way to Mandaluyong. As he had to transfer to another jeepney, [Asilan] alighted at Old Sta.
Mesa and waited for a jeep bound for Pasig City. Suddenly, three (3) motorcycles stopped in front of him,
the passengers of which approached and frisked him. He was thereafter brought to the police station and in
a small room, he was forced to admit to the stabbing of a police officer. Thereafter, he was brought to a
nearby hospital and was medically examined. Then he was again taken to the police station where he was
confronted with the knife which was allegedly used in stabbing PO1 Adovas. He was mauled for refusing to
confess to the stabbing of the said policeman. Afterwards, he was presented to alleged eyewitnesses.
However, the supposed eyewitnesses were not the ones presented by the prosecution in court. 10

WHEREFORE, premises considered, the assailed Decision dated 08 January 2007 of the Court a quo in
Criminal Case No. 06-243060, finding Accused-Appellant JOSEPH ASILAN Y TABORNAL guilty beyond
reasonable doubt of Murder, is hereby AFFIRMED in toto.21
The Court of Appeals rejected Asilans arguments and averred that his denial and bare attempt at
exculpation by trying to destroy the credibility of the candid, categorical, and trustworthy testimonies of the
witnesses must fail.

The RTC convicted Asilan of Murder in its Decision 11 dated January 8, 2007, the dispositive portion of which
reads:

Aggrieved, Asilan is now appealing 22 his case to this Court, with the same assignment of errors he posited
before the Court of Appeals:

WHEREFORE, premises considered, the Court finds the Prosecution to have failed to establish and prove
beyond reasonable doubt the offense of direct assault. Where a complex crime is charged and the evidence
fails to support the charge as to one of the component, the accused can be convicted of the other (People v.
Roma, 374 SCRA 457).

ASSIGNMENT OF ERRORS

WHEREFORE, his guilt having been proven beyond reasonable doubt for the crime of murder with the
qualifying circumstance of treachery, judgment is hereby rendered finding accused Joseph Asilan y Tabornal
GUILTY beyond reasonable doubt of the crime of murder and is hereby imposed the penalty of reclusion
perpetua. He is hereby ordered to pay the heirs of PO1 Randy Adovas y Pe-Caat the sum of P 84,224.00 as
actual damages, P 25,000.00 for moral damages and P 50,000.00 civil indemnity.12
The RTC, in acquitting Asilan of Direct Assault, held that while it was confirmed that Adovas was in his
police uniform at the time of his death, the prosecution failed to establish convincingly that he was in the
performance of his duty when he was assaulted by Asilan. The RTC explained that there was no evidence
to show that Adovas was arresting somebody at the time Asilan stabbed him. 13 The RTC added:
What the framers of the law wanted was to know the reason of the assault upon a person in authority or his
agents. The prosecution failed to show why the victim was pushing the man on the wall or why he poked his
gun at the latter. That the victim was assaulted while in the performance of his duty or by reason thereof
was not conclusively proven.14
In convicting Asilan of Murder, the RTC held that his defense of denial could not be "accorded more weight
than the categorical assertions of the witnesses who positively identified him as the man who suddenly
appeared from behind [Adovas] and stabbed the latter repeatedly." 15 Moreover, Asilan admitted that he was
at the scene of the crime when he was arrested, that he could not give any reason for the witnesses to
falsely testify against him, and that he did not know them.
Anent the aggravating circumstances, the RTC found that the killing of Adovas was proven to be attended
with treachery since Adovas was attacked from behind, depriving him of the opportunity to defend
himself.16 However, the RTC declared that the aggravating circumstance of evident premeditation "could not
be appreciated x x x absent evidence that [Asilan] planned or prepared to kill [Adovas] or of the time when
the plot was conceived." 17
As to the damages, the RTC found the prosecutions evidence, which consisted of Adovass wifes
testimony, and the receipts of the expenses she incurred in Adovass hospitalization, wake, and burial,
sufficient to award moral and actual damages.

I
THE TRIAL COURT GRAVELY ERRED IN FINDING THE ACCUSED-APPELLANT GUILTY BEYOND
REASONABLE DOUBT OF THE OFFENSE CHARGED BY RELYING ON THE INCONSISTENT AND
UNNATURAL TESTIMONY OF THE ALLEGED EYEWITNESS.
II
THE COURT A QUO GRAVELY ERRED IN FINDING THE ACCUSED-APPELLANT GUILTY OF THE
CRIME CHARGED DESPITE THE FAILURE OF THE PROSECUTION TO PROVE HIS GUILT BEYOND
REASONABLE DOUBT.
III
THE TRIAL COURT GRAVELY ERRED IN APPRECIATING THE QUALIFYING CIRCUMSTANCE OF
TREACHERY.23
Discussion
Asilan was convicted of the crime of Murder under Article 248 of the Revised Penal Code:
Art. 248. Murder. Any person who, not falling within the provisions of Article 246 shall kill another, shall be
guilty of murder and shall be punished by reclusion perpetua to death, if committed with any of the following
attendant circumstances:
1. With treachery, taking advantage of superior strength, with the aid of armed men, or
employing means to weaken the defense or of means or persons to insure or afford impunity;
2. In consideration of a price, reward, or promise;
3. By means of inundation, fire, poison, explosion, shipwreck, stranding of a vessel, derailment
or assault upon a railroad, fall of an airship, by means of motor vehicles, or with the use of any
other means involving great waste and ruin;

12
4. On occasion of any of the calamities enumerated in the preceding paragraph, or of an
earthquake, eruption of a volcano, destructive cyclone, epidemic, or any other public calamity;

Likewise, our scrutiny of the so-called inconsistencies relied upon by Asilan showed that they only
referred to minor details, which did not affect the credibility of the prosecution witnesses. 33 In People v.
Albarido,34 this Court said:

5. With evident premeditation;


6. With cruelty, by deliberately and inhumanly augmenting the suffering of the victim, or
outraging or scoffing at his person or corpse.
Asilan claims that the testimonies of the witnesses were not only filled with inconsistencies, they were also
incredible for being contrary to the common experience and observation that mankind can approve as
probable under the circumstance.24
Asilan insists that the testimony of Binosa should not be given credence as he was selective in his
recollection of the events. Asilan claimed that Binosa seemed to have recalled more details on crossexamination, thus "improving" on the version he gave during his direct examination. Asilan further claims
that Binosas suggestion that Asilan returned to the scene of the crime after he committed the alleged crime
is very unlikely. Asilan avers that San Diegos testimony was likewise not credible as it was clearly only a
more refined version of Binosas account of the events. Moreover, Asilan says that San Diegos testimony is
too good to be true as he is unlikely to have a detailed recollection of an event, which according to him
happened within a span of two minutes. 25

It is elementary in the rule of evidence that inconsistencies in the testimonies of prosecution witnesses with
respect to minor details and collateral matters do not affect the substance of their declaration nor the
veracity or weight of their testimony. In fact, these minor inconsistencies enhance the credibility of the
witnesses, for they remove any suspicion that their testimonies were contrived or rehearsed. In People vs.
Maglente, this Court ruled that inconsistencies in details which are irrelevant to the elements of the crime
are not grounds for acquittal. x x x.35
Credibility of the evidence
Asilan further asseverates that it is perplexing how none of the witnesses, who were present during the
incident, warned Adovas of the impending danger to his life. He contends that "for evidence to be believed,
it must not only proceed from the mouth of a credible witness, but must be credible in itself such as the
common experience and observation of mankind can approve as probable under the circumstance." 36
This Court would like to reiterate that no standard form of behavior is expected of an individual who
witnesses something shocking or gruesome like murder. This is especially true when the assailant is near. It
is not unusual that some people would feel reluctant in getting involved in a criminal incident. 37

Credibility of Witnesses
It is a well-settled rule that the assessment of the trial court regarding the credibility of witnesses will
generally not be disturbed on appeal. The rationale for this doctrine is that the trial court is in a better
position to decide the issue, as it heard the witnesses themselves and observed their deportment and
manner of testifying during the trial.26 The only exceptions to this rule are the following:

In the same manner, it is also not surprising that Asilan returned to the scene of the crime after stabbing
Adovas. His "failure to flee and the apparent normalcy of his behavior subsequent to the commission of the
crime do not imply his innocence." 38 This Court, elucidating on this point, declared:

1. When patent inconsistencies in the statements of witnesses are ignored by the trial court; or

Flight is indicative of guilt, but its converse is not necessarily true. Culprits behave differently and even
erratically in externalizing and manifesting their guilt. Some may escape or flee -- a circumstance strongly
illustrative of guilt -- while others may remain in the same vicinity so as to create a semblance of regularity,
thereby avoiding suspicion from other members of the community.39

2. When the conclusions arrived at are clearly unsupported by the evidence. 27

Defense of Denial

This Court sees no reason to apply the above exceptions and disturb the findings of the RTC, which were
affirmed by the Court of Appeals.
Our perusal of the records showed that the RTC was vigilant in its duty to ascertain the truth. The RTC itself
propounded clarificatory questions to Binosa and San Diego while they were testifying. At the end of the
trial, the RTC found these witnesses credible, and believed their eyewitness accounts because they were
categorical in their identification of Asilan as one of Adovass assailants. The RTC also pointed out that it
could not find any dubious reason for Binosa and San Diego to falsely implicate Asilan in a heinous crime. 28
Alleged Inconsistencies
The alleged inconsistency in Binosas testimony does not render his testimony fictitious. The fact that he
was able to provide more details of the events only during cross-examination is not unusual, and on the
contrary tends to buttress, rather than weaken, his credibility, since it shows that he was neither coached
nor were his answers contrived. 29 After all, "[w]itnesses are not expected to remember every single detail of
an incident with perfect or total recall."30
As for San Diegos testimony, it is not unnatural for him to have a detailed recollection of the incident.
"Different persons have different reactions to similar situations. There is no typical reaction to a sudden
occurrence."31 It is worthy to note that San Diego was only sixteen years old when he witnessed the
stabbing of Adovas. It was his first time to witness a person being stabbed right before his very eyes. He
testified that three months after that night, the events were still vividly imprinted in his mind. 32 It is thus not
improbable that he could, with certainty, identify Asilan as the man who stabbed Adovas that fateful night.

Unfortunately, Asilans bare denial, when juxtaposed with the prosecution witnesses positive declarations, is
not worthy of credence. Denial, which is the usual refuge of offenders, is an inherently weak defense, and
must be buttressed by other persuasive evidence of non-culpability to merit credibility. The defense of denial
fails even more when the assailant, as in this case, was positively identified by credible witnesses, against
whom no ulterior motive could be ascribed. 40
Asilan not only admitted that he was at the scene of the crime when he was arrested by the police
authorities, he also admitted that he did not know any of the prosecution witnesses prior to his trial.
Moreover, he had filed no case against the police officers whom he accused of mauling him to make him
admit to the stabbing of Adovas. Asilans "self-serving statements deserve no weight in law and cannot be
given greater evidentiary value over the testimony of the witnesses who testified on positive points." 41
Qualifying Circumstance of Treachery
Asilan pleads that treachery cannot be appreciated in the present case as the prosecution failed to establish
that he had consciously or deliberately adopted or chosen the mode of attack employed upon Adovas to
deprive him of an opportunity to defend himself or retaliate. Asilan argues that mere suddenness of the
attack is not enough to constitute treachery. He further posits that while it may be true that he allegedly
came from behind, the "mode of attack could have occurred in a spur of the moment." 42
The RTC correctly appreciated the qualifying circumstance of treachery in the killing of Adovas.

13
The prosecution was able to sufficiently establish the attendance of treachery in the case at bar. "It is basic
in our penal law that treachery is present when the offender employs means, methods or forms which tend
directly and especially to insure the execution of the crime, without risk to himself arising from the defense
which the offended party might make." 43 In People v. Tan,44 this Court expounded on the concept of
treachery as follows:
The essence of treachery is the sudden and unexpected attack, without the slightest provocation on the part
of the person attacked. Treachery is present when the offender commits any of the crimes against persons,
employing means, methods or forms in the execution thereof, which tend directly and especially to insure its
execution, without risk arising from the defense which the offended party might make. In the case at bar, the
attack on Magdalino Olos was treacherous, because he was caught off guard and was therefore unable to
defend himself, as testified to by the prosecution witnesses and as indicated by the wounds inflicted on
him.45
Both eyewitnesses testified on how Asilan attacked Adovas from behind. Adovas could not have defended
himself because Asilan stabbed him at his back repeatedly sans provocation or warning. The deciding factor
is that Asilans execution of his attack made it impossible for Adovas to defend himself or retaliate. 46

a motion to quash or failed to allege the same in said motion, shall be deemed a waiver of any
objections except those based on the grounds provided for in paragraphs (a), (b), (g), and (i) of section 3 of
this Rule.
Moreover, in People v. Candaza, 51 this Court held that "[a]n Information which lacks essential allegations
may still sustain a conviction when the accused fails to object to its sufficiency during the trial, and the
deficiency was cured by competent evidence presented therein." 52 In this case, Asilan not only failed to
question the sufficiency of the Information at any time during the pendency of his case before the RTC, he
also allowed the prosecution to present evidence, proving the elements of treachery in the commission of
the offense. Asilan is thus deemed to have waived any objections against the sufficiency of the
Information.531wphi1
Pursuant to prevailing jurisprudence, 54 this Court is increasing the award of civil indemnity from Fifty
Thousand Pesos (P 50,000.00) to Seventy-Five Thousand Pesos (P 75,000.00), and the moral damages
from Twenty-Five Thousand Pesos (P 25,000.00) to Fifty Thousand Pesos (P 50,000.00). Moreover, in view
of the presence of the qualifying circumstance of treachery, an additional award of Thirty Thousand Pesos
(P 30,000.00), as exemplary damages, in accordance with Article 2230 of the Civil Code, 55 should be
awarded to the heirs of Adovas.56

Sufficiency of the Information


Asilan also claims that his constitutional right to be informed of the nature and cause of accusation against
him was infringed when he was convicted for Murder, since the manner by which he carried out the killing
with the qualifying circumstance of treachery was not alleged in the Information against him. Thus, he
asserts, he was effectively only charged with Homicide. 47

As to actual damages, Adovass widow, Irene Adovas, presented the receipts showing that she
paid P 25,224.00 to Our Lady of Lourdes Hospital, Inc., as hospital expenses, 57 P 35,000.00 to Marulas
Memorial Homes,58 and P20,000.00 to Funeraria Saranay as funeral expenses, 59 or a total of P 80,224.00.
Both the RTC and the Court of Appeals failed to consider that under Article 2206 of the Civil Code, Asilan is
also liable for the loss of the earning capacity of Adovas, and such indemnity should be paid to his heirs 60:

This Court does not find merit in Asilans contention that he cannot be convicted of murder because his acts
of treachery were not alleged with specificity in the Information. Section 6, Rule 110 of the Rules on Criminal
Procedure states:

Art. 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:

Sec. 6. Sufficiency of complaint or information. A complaint or information is sufficient if it states the name
of the accused; the designation of the offense by the statute; the acts or omissions complained of as
constituting the offense; the name of the offended party; the approximate time of the commission of the
offense; and the place wherein the offense was committed.

(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;

When the offense is committed by more than one person, all of them shall be included in the complaint or
information.

Irene Adovas testified61 on the amount her husband received as police officer and presented documentary
evidence to show that Adovas, who was only 29 years old when he died, 62 earned P 8,605.00 a month63 at
the time of his death.

This Court held that "[u]nder Section 6, the Information is sufficient if it contains the full name of the
accused, the designation of the offense given by the statute, the acts or omissions constituting the offense,
the name of the offended party, the approximate date, and the place of the offense." 48 The Information
herein complied with these conditions. Contrary to Asilans contention, the qualifying circumstance of
"treachery" was specifically alleged in the Information. "The rule is that qualifying circumstances must be
properly pleaded in the Information in order not to violate the accuseds constitutional right to be properly
informed of the nature and cause of the accusation against him." 49 Asilan never claimed that he was
deprived of his right to be fully apprised of the nature of the charges against him due to the insufficiency of
the Information.

The following are the factors in computing the amount of damages recoverable for the loss of earning
capacity of the deceased:
1) The number of years on the basis of which the damages shall be computed. This is based on
the formula (2/3 x 80 age of the deceased at the time of his death = life expectancy), which is
adopted from the American Expectancy Table of Mortality; and
2) The rate at which the losses sustained by the heirs of the deceased should be fixed. 64

This Court completely agrees with the Court of Appeals pronouncement that "since treachery was correctly
alleged in the Information and duly established by the prosecution, x x x [Asilan]s conviction for the crime of
murder is proper."50
In any case, it is now too late for Asilan to assail the sufficiency of the Information on the ground that there
was failure to specifically allege therein how treachery was carried out. Section 9, Rule 117 of the Rules of
Court provides:

Net income is arrived at by deducting the amount of the victims living expenses from the amount of his
gross income.65 The loss of earning capacity of Asilan is thus computed as follows:
Net Earning Capacity = life expectancy x [gross annual income living expenses] 66
= 2/3 [80-age at time of death] x [gross annual income 50% of gross annual income]

SEC. 9. Failure to move to quash or to allege any ground therefor.- The failure of the accused to assert any
ground of a motion to quash before he pleads to the complaint or information, either because he did not file

= 2/3 [80-29] x [P 103,260.00 P 51,630.00]

14
= 34 x P 51,630.00
= P 1,755,420.00
WHEREFORE, the decision dated February 25, 2009 of the Court of Appeals in CA-G.R. CR.-H.C. No.
02686 is hereby AFFIRMED insofar as it found accused-appellant Joseph Asilan y Tabornal guilty beyond
reasonable doubt of MURDER and sentenced to suffer the penalty of reclusion perpetua, with
MODIFICATION as to the damages. Asilan is hereby ordered to indemnify the heirs of Randy Adovas y Pecaat the following: (a) P 75,000.00 as civil indemnity; (b) P 50,000.00 as moral damages; (c) P 30,000.00 as
exemplary damages; (d) P 80,224.00 as actual damages; (e) P 1,755,420.00 as loss of earning capacity;
and (f) interest on all damages awarded at the rate of 6% per annum from the date of finality of this
judgment.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 73886 January 31, 1989
JOHN
C.
QUIRANTE
and
DANTE
CRUZ, petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, MANUEL C. CASASOLA, and ESTRELLITA
C. CASASOLA, respondents.
Quirante & Associates Law Office for petitioners.
R.S. Bernaldo & Associates for private respondents.

... Dr. Indalecio Casasola (father of respondents) had a contract with a building
contractor named Norman GUERRERO. The Philippine American General Insurance
Co. Inc. (PHILAMGEN, for short) acted as bondsman for GUERRERO. In view of
GUERRERO'S failure to perform his part of the contract within the period specified,
Dr. Indalecio Casasola, thru his counsel, Atty. John Quirante, sued both
GUERRERO and PHILAMGEN before the Court of first Instance of Manila, now the
Regional Trial Court (RTC) of Manila for damages, with PHILAMGEN filing a crossclaim against GUERRERO for indemnification. The RTC rendered a decision dated
October 16, 1981. ... 4
In said decision, the trial court ruled in favor of the plaintiff by rescinding the contract; ordering GUERRERO
and PHILAMGEN to pay the plaintiff actual damages in the amount of P129,430.00, moral damages in the
amount of P50,000.00, exemplary damages in the amount of P40,000.00 and attorney's fees in the amount
of P30,000.00; ordering Guerrero alone to pay liquidated damages of P300.00 a day from December 15,
1978 to July 16, 1979; and ordering PHILAMGEN to pay the plaintiff the amount of the surety bond
equivalent to P120,000.00. 5 A motion for reconsideration filed by PHILAMGEN was denied by the trial court
on November 4, 1982. 6
Not satisfied with the decision of the trial court, PHILAMGEN filed a notice of appeal but the same was not
given due course because it was allegedly filed out of time. The trial court thereafter issued a writ of
execution. 7
A petition was filed in AC-G.R. No. 00202 with the Intermediate Appellate Court for the quashal of the writ of
execution and to compel the trial court to give due course to the appeal. The petition was dismissed on May
4, 19838 so the case was elevated to this Court in G.R. No. 64334. 9 In the meantime, on November 16,
1981, Dr. Casasola died leaving his widow and several children as survivors. 10
On June 18, 1983, herein petitioner Quirante filed a motion in the trial court for the confirmation of his
attorney's fees. According to him, there was an oral agreement between him and the late Dr. Casasola with
regard to his attorney's fees, which agreement was allegedly confirmed in writing by the widow, Asuncion
Vda. de Casasola, and the two daughters of the deceased, namely Mely C. Garcia and Virginia C.
Nazareno. Petitioner avers that pursuant to said agreement, the attorney's fees would be computed as
follows:
A. In case of recovery of the P120,000.00 surety bond, the attorney's fees of the undersigned counsel (Atty.
Quirante) shall be P30,000.00.
B. In case the Honorable Court awards damages in excess of the P120,000.00 bond, it shall be divided
equally between the Heirs of I. Casasola, Atty. John C. Quirante and Atty. Dante Cruz.

REGALADO, J.:
This appeal by certiorari seeks to set aside the judgment' 1 of the former Intermediate Appellate Court
promulgated on November 6, 1985 in AC-G.R. No. SP-03640, 2 which found the petition for certiorari therein
meritorious, thus:
Firstly, there is still pending in the Supreme Court a petition which may or may
not ultimately result in the granting to the Isasola (sic) family of the total amount of
damages given by the respondent Judge. Hence the award of damages confirmed in
the two assailed Orders may be premature. Secondly, assuming that the grant of
damages to the family is eventually ratified, the alleged confirmation of attorney's
fees will not and should not adversely affect the non-signatories thereto.
WHEREFORE, in view of the grave abuse of discretion (amounting to lack of
jurisdiction) committed by the respondent Judge, We hereby SET ASIDE his
questioned orders of March 20, 1984 and May 25, 1984. The restraining order
previously issued is made permanent. 3
The challenged decision of respondent court succinctly sets out the factual origin of this case as follows:

The trial court granted the motion for confirmation in an order dated March 20, 1984, despite an opposition
thereto. It also denied the motion for reconsideration of the order of confirmation in its second order dated
May 25, 1984. 11
These are the two orders which are assailed in this case.
Well settled is the rule that counsel's claim for attorney's fees may be asserted either in the very action in
which the services in question have been rendered, or in a separate action. If the first alternative is chosen,
the Court may pass upon said claim, even if its amount were less than the minimum prescribed by law for
the jurisdiction of said court, upon the theory that the right to recover attorney's fees is but an incident of the
case in which the services of counsel have been rendered ." 12 It also rests on the assumption that the court
trying the case is to a certain degree already familiar with the nature and extent of the lawyer's services. The
rule against multiplicity of suits will in effect be subserved. 13
What is being claimed here as attorney's fees by petitioners is, however, different from attorney's fees as an
item of damages provided for under Article 2208 of the Civil Code, wherein the award is made in favor of the
litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor who may enforce the

15
judgment for attorney's fees by execution. 14 Here, the petitioner's claims are based on an alleged contract
for professional services, with them as the creditors and the private respondents as the debtors.
In filing the motion for confirmation of attorney's fees, petitioners chose to assert their claims in the same
action. This is also a proper remedy under our jurisprudence. Nevertheless, we agree with the respondent
court that the confirmation of attorney's fees is premature. As it correctly pointed out, the petition for review
on certiorari filed by PHILAMGEN in this Court (G.R. No. 64834) "may or may not ultimately result in the
granting to the Isasola (sic) family of the total amount of damages" awarded by the trial court. This
especially true in the light of subsequent developments in G.R. No. 64334. In a decision promulgated on
May 21, 1987, the Court rendered judgment setting aside the decision of May 4, 1983 of the Intermediate
Appellate Court in AC-G.R. No. 00202 and ordering the respondent Regional Trial Court of Manila to certify
the appeal of PHILAMGEN from said trial court's decision in Civil Case No. 122920 to the Court of Appeal.
Said decision of the Court became final and executory on June 25, 1987.
Since the main case from which the petitioner's claims for their fees may arise has not yet become final, the
determination of the propriety of said fees and the amount thereof should be held in abeyance. This
procedure gains added validity in the light of the rule that the remedy for recovering attorney's fees as an
incident of the main action may be availed of only when something is due to the client. Thus, it was ruled
that:
... an attorney's fee cannot be determined until after the main litigation has been
decided and the subject of recovery is at the disposition of the court. The issue over
attorney's fee only arises when something has been recovered from which the fee is
to be paid. 15
It is further observed that the supposed contract alleged by petitioners as the basis for their fees provides
that the recovery of the amounts claimed is subject to certain contingencies. It is subject to the condition
that the fee shall be P30,000.00 in case of recovery of the P120,000.00 surety bond, plus an additional
amount in case the award is in excess of said P120,000.00 bond, on the sharing basis hereinbefore stated.
With regard to the effect of the alleged confirmation of the attorney's fees by some of the heirs of the
deceased. We are of the considered view that the orderly administration of justice dictates that such issue
be likewise determined by the court a quo inasmuch as it also necessarily involves the same contingencies
in determining the propriety and assessing the extent of recovery of attorney's fees by both petitioners
herein. The court below will be in a better position, after the entire case shall have been adjudicated,
inclusive of any liability of PHILAMGEN and the respective participations of the heirs of Dr. Casasola in the
award, to determine with evidentiary support such matters like the basis for the entitlement in the fees of
petitioner Dante Cruz and as to whether the agreement allegedly entered into with the late Dr. Casasola
would be binding on all his heirs, as contended by petitioner Quirante.
We, therefore, take exception to and reject that portion of the decision of the respondent court which holds
that the alleged confirmation to attorney's fees should not adversely affect the non-signatories thereto, since
it is also premised on the eventual grant of damages to the Casasola family, hence the same objection of
prematurity obtains and such a holding may be pre-emptive of factual and evidentiary matters that may be
presented for consideration by the trial court.
WHEREFORE, with the foregoing observation, the decision of the respondent court subject of the present
recourse is hereby AFFIRMED.

[G.R. No. 107508. April 25, 1996]


PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS, CAPITOL CITY DEVELOPMENT
BANK,
PHILIPPINE
BANK
OF
COMMUNICATIONS,
and
F.
ABANTE
MARKETING, respondents.
SYLLABUS
1. COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS; MATERIAL ALTERATION, DEFINED, - An
alteration is said to be material if it alters the effect of the instrument. It means an unauthorized
change in an instrument that purports to modify in any respect the obligation of a party or an
unauthorized addition of words or numbers or other change to an incomplete instrument relating to
the obligation of a party. In other words, a material alteration is one which changes the items which
are required to be stated under Section 1 of the Negotiable Instruments Law.
2. ID.; ID.; IMMATERIAL ALTERATION; EFFECT ON THE INSTRUMENT. - In his book entitled Pandect of
Commercial Law and Jurisprudence, Justice Jose C. Vitug opines that an innocent alteration
(generally, changes on items other than those required to be stated under Sec. 1, N. I. L.) and
spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may enforce it
only according to its original tenor.
3. ID.; ID.; ID.; PRESENT IN CASE AT BAR. The case at bench is unique in the sense that what was
altered is the serial number of the check in question, an item which, it can readily be observed, is not
an essential requisite for negotiability under Section 1 of the Negotiable Instrument Law. The
aforementioned alteration did not change the relations between the parties. The name of the drawer
and the drawee were not altered. The intended payee was the same. The sum of money due to the
payee remained the same.The checks serial number is not the sole indication of its origin. As
succinctly found by the Court of Appeals, the name of the government agency which issued the
subject check was prominently printed therein. The checks issuer was therefore sufficiently identified,
rendering the referral to the serial number redundant and inconsequential.Petitioner, thus cannot
refuse to accept the check in question on the ground that the serial number was altered, the same
being an immaterial or innocent one.
4. CIVIL LAW; DAMAGES; ATTORNEYS FEES; AWARD THEREOF DEMANDS FACTUAL, LEGAL AND
EQUITABLE JUSTIFICATION. The award of attorneys fees lies within the discretion of the court and
depends upon the circumstances of each case. However, the discretion of the court to award
attorneys fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and
equitable justification, without which the award is a conclusion without a premise and improperly left
to speculation and conjecture. It becomes a violation of the proscription against the imposition of a
penalty on the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188
SCRA 170 [1990]). The reason for the award must be stated in the text of the courts decision. If it is
stated only in the dispositive portion of the decision, the same shall be disallowed. As to the award of
attorneys fees being an exception rather than the rule, it is necessary for the court to make findings
of fact and law that would bring the case within the exception and justify the grant of the
award (Refractories Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA 539).
APPEARANCES OF COUNSEL
Monsod Tamargo Valencia & Associates for private respondent Capitol City Development Bank.

SO ORDERED.
Siguion Reyna Montecillo & Ongsiako for private respondent Philippine Bank of Communications.
Melencio-Herrera, Padilla, and Sarmiento, JJ., concur.
DECISION
Paras, J., took no part.
KAPUNAN, J.:
FIRST DIVISION

16
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision
dated April 29, 1992 of respondent Court of Appeals in CA-G.R. CV No. 24776 and its resolution dated
September 16, 1992, denying petitioner Philippine National Banks motion for reconsideration of said
decision.
The facts of the case are as follows:
A check with serial number 7-3666-223-3, dated August 7, 1981 in the amount of P97,650.00 was
issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports [DECS])
payable to F. Abante Marketing. This check was drawn against Philippine National Bank (herein petitioner).
On August 11, 1981, F. Abante Marketing, a client of Capitol City Development Bank (Capitol),
deposited the questioned check in its savings account with said bank. In turn, Capitol deposited the same in
its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the check to petitioner
for clearing.
Petitioner cleared the check as good and, thereafter, PBCom credited Capitols account for the
amount stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom and
debited PBComs account for the amount covered by the check, the reason being that there was a material
alteration of the check number.

5.) The Counterclaims of PBCom and PNB are hereby dismissed;


6.) No pronouncement as to costs.
SO ORDERED.[1]
An appeal was interposed before the respondent Court of Appeals which rendered its decision on
April 29, 1992, the decretal portion of which reads:
WHEREFORE, the judgment appealed from is modified by exempting PBCom from liability to plaintiffappellee for attorneys fees and ordering PNB to honor the check for P97,650.00, with interest as declared
by the trial court, and pay plaintiff-appellee attorneys fees of P10,000.00. After the check shall have been
honored by PNB, PBCom shall re-credit plaintiff-appellees account with it with the amount. No
pronouncement as to costs.
SO ORDERED.[2]
A motion for reconsideration of the decision was denied by the respondent Court in its resolution
dated September 16, 1992 for lack of merit. [3]

PBCom, as collecting agent of Capitol, then proceeded to debit the latters account for the same
amount, and subsequently, sent the check back to petitioner. Petitioner, however, returned the check to
PBCom.

Hence, petitioner filed the instant petition which raises the following issues:
I

On the other hand, Capitol could not, in turn, debit F. Abante Marketings account since the latter had
already withdrawn the amount of the check as of October 15, 1981.Capitol sought clarification from PBCom
and demanded the re-crediting of the amount. PBCom followed suit by requesting an explanation and recrediting from petitioner.
Since the demands of Capitol were not heeded, it filed a civil suit with the Regional Trial Court of
Manila against PBCom which, in turn, filed a third-party complaint against petitioner for
reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourth-party
complaint against F. Abante Marketing.
On October 3, 1989; the Regional Trial Court rendered its decision the dispositive portion of which

WHETHER OR NOT AN ALTERATION OF THE SERIAL NUMBER OF A CHECK IS A MATERIAL


ALTERATION UNDER THE NEGOTIABLE INSTRUMENTS LAW.
II
WHETHER OR NOT A CERTIFICATION HEREIN ISSUED BY THE MINISTRY OF EDUCATION CAN BE
GIVEN WEIGHT IN EVIDENCE.
III

reads:
WHEREFORE, judgment is hereby rendered as follows:

WHETHER OR NOT A DRAWEE BANK WHO FAILED TO RETURN A CHECK WITHIN THE TWENTY
FOUR (24) HOUR CLEARING PERIOD MAY RECOVER THE VALUE OF THE CHECK FROM THE
COLLECTING BANK.

1.) On plaintiffs complaint, defendant Philippine Bank of Communications is ordered to re-credit or


reimburse plaintiff Capitol City Development Bank the amount of P97,650.00, plus interest of 12 percent
thereto from October 19, 1981 until the amount is fully paid;

IV

2.) On Philippine Bank of Communications third-party complaint, third-party defendant PNB is ordered to
reimburse and indemnify Philippine Bank of Communications for whatever amount PBCom pays to plaintiff;

WHETHER OR NOT IN THE ABSENCE OF MALICE OR ILL WILL PETITIONER PNB MAY BE HELD
LIABLE FOR ATTORNEYS FEES.[4]
We find no merit in the petition.

3.) On Philippine National Banks fourth-party complaint, F. Abante Marketing is ordered to reimburse and
indemnify PNB for whatever amount PNB pays to PBCom;
4.) On attorneys fees, Philippine Bank of Communications is ordered to pay Capitol City Development Bank
attorneys fees in the amount of Ten Thousand (P 10,000.00) Pesos; but PBCom is entitled to
reimbursement/indemnity from PNB; and Philippine National Bank to be, in turn, reimbursed or indemnified
by F. Abante Marketing for the same amount;

We shall first deal with the effect of the alteration of the serial number on the negotiability of the
check in question.

[5]

Petitioner anchors its position on Section 125 of the Negotiable Instrument Law (ACT No. 2031)
which provides:

17
Section 125. What constitutes a material alteration. - Any alteration which changes:

(1) Substituting the words or bearer for order.

(a) The date;

(2) Writing protest waived above blank indorsements.

(b) The sum payable, either for principal or interest;

(3) A change in the date from which interest is to run.

(c) The time or place of payment;

(4) A check was originally drawn as follows: Iron County Bank, Crystal Falls, Mich. Aug. 5, 1901. Pay to G.L.
or order $9 fifty cents CTR. The insertion of the figure 5 before the figure 9, the instrument being otherwise
unchanged.

(d) The number or the relations of the parties;


(e) The medium or currency in which payment is to be made;
(f) Or which adds a place of payment where no place of payment is specified, or any other change or
addition which alters the effect of the instrument in any respect, is a material alteration.

(5) Adding the words with interest with or without a fixed rate.
(6) An alteration in the maturity of a note, whether the time for payment is thereby curtailed or extended.
(7) An instrument was payable First Natl Bank, the plaintiff added the word Marion.

Petitioner alleges that there is no hard and fast rule in the interpretation of the aforequoted provision
of the Negotiable Instruments Law. It maintains that under Section 125(f), any change that alters the effect
of the instrument is a material alteration.[6]
We do not agree.
An alteration is said to be material if it alters the effect of the instrument. [7] It means an unauthorized
change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized
addition of words or numbers or other change to an incomplete instrument relating to the obligation of a
party.[8] In other words, a material alteration is one which changes the items which are required to be stated
under Section 1 of the Negotiable Instrument Law.

(8) Plaintiff, without consent of the defendant, struck out the name of the defendant as payee and inserted
the name of the maker of the original note.
(9) Striking out the name of the payee and substituting that of the person who actually discounted the note.
(10) Substituting the address of the maker for the name of a co-maker.[10]
B. Immaterial Alterations:
(1) Changing I promise to pay to We promise to pay, where there are two makers.

Section 1 of the Negotiable Instruments Law provides:


(2) Adding the word annual after the interest clause.
Section 1. - Form of negotiable instruments. An instrument to be negotiable must conform to the following
requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;

(3) Adding the date of maturity as a marginal notation.


(4) Filling in the date of the actual delivery where the makers of a note gave it with the date in blank, July . . .
(5) An alteration of the marginal figures of a note where the sum stated in words in the body remained
unchanged.

(c) Must be payable on demand, or at a fixed or determinable future time;


(6) The insertion of the legal rate of interest where the note had a provision for interest at . . . per cent.
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty.
In his book entitled Pandect of Commercial Law and Jurisprudence, Justice Jose C. Vitug opines that
an innocent alteration (generally, changes on items other than those required to be stated under Sec. 1,
N.I.L.) and spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may
enforce it only according to its original tenor.[9]
Reproduced hereunder are some examples of material and immaterial alterations:
A. Material Alterations:

(7) A printed form of promissory note had on the margin the printed words, Extended to . . . The holder on or
after maturity wrote in the blank space the words May 1, 1913, as a reference memorandum of a promise
made by him to the principal maker at the time the words were written to extend the time of payment.
(8) Where there was a blank for the place of payment, filling in the blank with the place desired.
(9) Adding to an indorsees name the abbreviation Cash when it had been agreed that the draft should be
discounted by the trust company of which the indorsee was cashier.
(10) The indorsement of a note by a stranger after its delivery to the payee at the time the note was
negotiated to the plaintiff.

18
(11) An extension of time given by the holder of a note to the principal maker, without the consent of the a
surety co-maker.[11]
The case at the bench is unique in the sense that what was altered is the serial number of the check
in question, an item which, it can readily be observed, is not an essential requisite for negotiability under
Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the relations
between the parties. The name of the drawer and the drawee were not altered. The intended payee was the
same. The sum of money due to the payee remained the same. Despite these findings, however, petitioner
insists, that:

July
22, 1985
TO WHOM IT MAY CONCERN:
This is to certify that according to the records of this Office, TCAA PNB Check No. SN7-3666223-3 dated
August 7, 1981 drawn in favor of F. Abante Marketing in the amount of NINETY (S)EVEN THOUSAND SIX
HUNDRED FIFTY PESOS ONLY (P97,650.00) was not issued by this Office nor released to the payee
concerned. The series number of said check was not included among those requisition by this Office from
the Bureau of Treasury.

xxx xxx xxx.


Very truly yours,
It is an accepted concept, besides being a negotiable instrument itself, that a TCAA check by its very nature
is the medium of exchange of governments (sic) instrumentalities or agencies. And as (a) safety measure,
every government office o(r) agency (is) assigned TCAA checks bearing different number series.
A concrete example is that of the disbursements of the Ministry of Education and Culture. It is issued by the
Bureau of Treasury sizeable bundles of checks in booklet form with serial numbers different from other
government office or agency. Now, for fictitious payee to succeed in its malicious intentions to defraud the
government, all it need do is to get hold of a TCAA Check and have the serial numbers of portion (sic)
thereof changed or altered to make it appear that the same was issued by the MEC.
Otherwise, stated, it is through the serial numbers that (a) TCAA Check is determined to have been issued
by a particular office or agency of the government. [12]
xxx xxx xxx
Petitioners arguments fail to convince. The checks serial number is not the sole indication of its
origin. As succinctly found by the Court of Appeals, the name of the government agency which issued the
subject check was prominently printed therein. The checks issuer was therefore sufficiently identified,
rendering the referral to the serial number redundant and inconsequential. Thus, we quote with favor the
findings of the respondent court:
xxx xxx xxx
If the purpose of the serial number is merely to identify the issuing government office or agency, its
alteration in this case had no material effect whatsoever on the integrity of the check. The identity of the
issuing government office or agency was not changed thereby and the amount of the check was not
charged against the account of another government office or agency which had no liability under the
check. The owner and issuer of the check is boldly and clearly printed on its face, second line from the top:
MiNiSTRY OF EDUCATiON AND CULTURE, and below the name of the payee are the rubber-stamped
words: Ministry of Educ. & Culture. These words are not alleged to have been falsely or fraudulently
intercalated into the check. The ownership of the check is established without the necessity of recourse to
the serial number. Neither is there any proof that the amount of the check was erroneously charged against
the account of a government office or agency other than the Ministry of Education and Culture. Hence, the
alteration in the number of the check did not affect or change the liability of the Ministry of Education and
Culture under the check and, therefore, is immaterial. The genuineness of the amount and the signatures
therein of then Deputy Minister of Education Hermenegildo C. Dumlao and of the resident Auditor, Penomio
C. Alvarez are not challenged. Neither is the authenticity of the different codes appearing therein questioned
x x x.[13] (Italics ours.)
Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number
was altered, the same being an immaterial or innocent one.
We now go to the second issue. It is petitioners submission that the certification issued by Minrado
C. Batonghinog, Cashier III of the MEC clearly shows that the check was altered. Said certification reads:

(SGD.)

MINRADO
C.
BATONGHINOG
[14]
Cashier III.

Petitioner claims that even if the author of the certification issued by the Ministry of Education and
Culture (MEC) was not presented, still the best evidence of the material alteration would be the disputed
check itself and the serial number thereon. Petitioner thus assails the refusal of respondent court to give
weight to the certification because the author thereof was not presented to identify it and to be crossexamined thereon.[15]
We agree with the respondent court.
The one who signed the certification was not presented before the trial court to prove that the said
document was really the document he prepared and that the signature below the said document is his own
signature. Neither did petitioner present an eyewitness to the execution of the questioned document who
could possibly identify it.[16] Absent this proof, we cannot rule on the authenticity of the contents of the
certification. Moreover, as we previously emphasized, there was no material alteration on the check, the
change of its serial number not being substantial to its negotiability.
Anent the third issue - whether or not the drawee bank may still recover the value of the check from
the collecting bank even if it failed to return the check within the twenty-four (24) hour clearing period
because the check was tampered - suffice it to state that since there is no material alteration in the check,
petitioner has no right to dishonor it and return it to PBCom, the same being in all respects negotiable.
However, the amount of P10,000.00 as attorneys fees is hereby deleted. In their respective
decisions, the trial court and the Court of Appeals failed to explicitly state the rationale for the said
award. The trial court merely ruled as follows:
With respect to Capitols claim for damages consisting of alleged loss of opportunity, this Court finds
that Capitol failed to adequately substantiate its claim. What Capitol had presented was a self-serving,
unsubstantiated and speculative computation of what it allegedly could have earned or realized were it not
for the debit made by PBCom which was triggered by the return and debit made by PNB. However, this
Court finds that it would be fair and reasonable to impose interest at 12% per annum on the principal
amount of the check computed from October 19, 1981 (the date PBCom debited Capitols account) until the
amount is fully paid and reasonable attorneys fees.[17] (Italics ours.)
And contrary to the Court of Appeals resolution, petitioner unambiguously questioned before it the
award of attorneys fees, assigning the latter as one of the errors committed by the trial court. [18]
The foregoing is in conformity with the guiding principles laid down in a long line of cases and
reiterated recently in Consolidated Bank & Trust Corporation (Solidbank) v. Court of Appeals: [19]

19
The award of attorneys fees lies within the discretion of the court and depends upon the circumstances of
each case. However, the discretion of the court to award attorneys fees under Article 2208 of the Civil Code
of the Philippines demands factual, legal and equitable justification, without which the award is a conclusion
without a premise and improperly left to speculation and conjecture.It becomes a violation of the proscription
against the imposition of a penalty on the right to litigate (Universal Shipping Lines Inc. v. Intermediate
Appellate Court, 188 SCRA 170 [1990]). The reason for the award must be stated in the text of the courts
decision. If it is stated only in the dispositive portion of the decision, the same shall be disallowed. As to the
award of attorneys fees being an exception rather than the rule, it is necessary for the court to make
findings of fact and law that would bring the case within the exception and justify the grant of the award
(Refractories Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA 539).
WHEREFORE, premises considered, except for the deletion of the award of attorneys fees, the
decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
Padilla (Chairman), Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.

Republic
SUPREME
Manila

of

the

Philippines
COURT

November 29, 2001

VERONICA
vs.
COURT OF APPEALS, and TOMAS AVERIA, JR., respondents.

On March 2, 1984, respondent Averia filed his Answer with Counterclaim and Motion to Dismiss 7 wherein he
invoked the decision rendered in Civil Case No. 1620-G, a suit for specific performance against Marina M.
de Vera-Quicho. He further raised the defenses of litis pendencia, laches, estoppel, res judicata and lack of
cause of action, and prayed for the dismissal of the petition as well as the grant of his counterclaims for
damages.
It appears that prior to the institution of Civil Case No. 9114, there were already three (3) actions which
involved the said property, namely, Civil Case No. 1620-G, M.C. No. 374 82, and Civil Case No. 1690-G.
Civil Case No. 1620-G was instituted by respondent Averia against Marina M. de Vera-Quicho and the
Register of Deeds of Lucena City for specific performance and/or damages which involved the lot subject of
the sale. A subsequent decision dated June 2, 1983 rendered by the Regional Trial Court of Gumaca,
Quezon, Branch 62 in said Civil Case No. 1620-G ordered Marina M. de Vera-Quicho to execute the
necessary documents over the property covered by said Transfer Certificate of Title (TCT) No. T-9863 and
enjoined the Register of Deeds of Lucena City to desist from entering any encumbrance or transaction on
said certificate of title and/or cancel the same except in favor of respondent Averia. 8 The said decision
became final and executory as no motion for reconsideration or appeal was filed therefrom. 9
M. C. No. 374-82,10 was instituted by petitioner Padillo on July 6, 1982 to compel the Register of Deeds of
Lucena City to register the deed of sale dated February 10, 1982 wherein Margarita de Vera 11 sold to
petitioner Padillo her one-half () pro-indiviso share of the lot and the building erected thereon, covered by
TCT No. T-9863, considering the refusal of the Register of Deeds to register said deed of sale in view of a
restraining order issued in Civil Case No. 1620-G. The petition to register the deed was opposed by
respondent Averia.

SECOND DIVISION
G.R. No. 119707

In his Answer,6 Casilang specifically denied the material allegations of the petition. He alleged that as
early as June 1, 1982, he vacated the subject property and, thus, the case against him should be dismissed.

PADILLO, petitioner,

DE LEON, JR., J.:


Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals dated November 22,
1994 in CA-G.R. CV No. 40142 reversing the Decision 2 dated March 31, 1992 of the Regional Trial Court of
Lucena City, Branch 54 in Civil Case No. 9114 on the ground of res judicata.
Civil Case No. 9114, which found its way to this Court via the instant petition, is a petition 3 for declaratory
relief and damages initiated by petitioner Veronica Padillo 4 on December 14, 1983. In the petition filed
against respondent Tomas Averia, Jr. and one Beato Casilang, petitioner Padillo alleged that she is the
absolute owner of a Two Hundred Fifty-One (251) square meter parcel of land with improvements thereon
located in Quezon Avenue, Lucena City, Quezon Province, covered and described in Transfer Certificate of
Title (TCT) No. T-9863, which she purchased from Marina M. de Vera-Quicho and Margarita de Vera.
Petitioner ascribed fault upon Averia and Casilang with unlawful refusal to turn over the property in her
favor; and that respondent Averia even instituted Civil Case No. 1690-G, 5 a suit for rescission of two (2)
deeds solely for harassment and dilatory purposes although the suit actually established petitioner's right of
ownership over the subject property.
Petitioner Padillo prayed for the issuance of an injunctive writ to place her in the possession and use of her
said property, and prohibiting respondents from disturbing the same; and ultimately, that judgment be
rendered ordering respondent Averia and Casilang to pay jointly and severally to petitioner Padillo: (a) One
Hundred Fifty Thousand Pesos (P150,000.00) annual unrealized income for the use of her said property
from January 4, 1982, (b) moral and exemplary damages the amount of which she leaves to the court for
proper evaluation and (c) attorney's fees of Eighty Thousand Pesos (P80,000.00) .plus Six Hundred Pesos
(P600.00) per appearance in court.

On July 7, 1983, during the pendency of M.C. No. 374-82, Civil Case No. 1690-G was instituted by
respondent Averia against spouses Edilberto de Mesa and petitioner Padillo. 12 The said case is a complaint
for rescission of two(2) deeds of sale, namely: (a) the "Kasulatan ng Bilihan na may Pasubali" dated
January 5, 1982 wherein Marina M. de Vera-Quicho sold to petitioner Padillo her one-half () proindiviso share over lot together with the house thereon, subject of TCT No. T-9863, which was registered
and annotated at the back of said TCT on January 11, 1982 per Entry No. 54967, and (b) the deed of sale
dated February 10, 1982 subject of M.C. no. 374-82. Respondent Averia claimed ownership of the same lot
subject of TCT No. T-9863 by virtue of an unregistered contract to sell dated January 5, 1982 executed in
his favor by Marina M. de Vera-Quicho. 13 Petitioner Padillo sought the dismissal of the amended
complaint.14 In an Order dated September 30, 1983, Civil Case No. 1690-G was dismissed by Branch 61 of
the RTC of Gumaca, Quezon Province for improper venue. 15 Respondent Averia interposed an appeal with
the Court of Appeals.16
In the meantime. a decision dated September 23, 1983 was rendered in M.C. No. 374-82 wherein Branch
57 of the RTC, Lucena City ordered the Register of Deeds to register the deed of sale dated February 10,
1982.17Respondent Averia assailed the decision in M.C. No. 374-82 via a petition for certiorari and
prohibition in G.R. No. 65129 18 with the Supreme Court contending that the trial court has no jurisdiction to
order the registration of a deed of sale which is opposed on the ground of an antecedent contract to sell. In
a Decision dated December 29, 1986, the Supreme Court declared that the trial court has jurisdiction since
Section 2 of Presidential Decree No. 1529 (Property Registration Decree) eliminated the distinction between
the general jurisdiction and the limited jurisdiction of the Regional Trial Court acting as a cadastral court
under Section 112 of Act 496 (Land Registration Act). 19 The Supreme Court set aside the September 23,
1983 decision of the trial court and ordered a new trial where all parties interested in the case may appear
and be given opportunity to be heard.
Pursuant to the Supreme Court's decision, a new trial was conducted in M.C. No. 37482. Following notice
and hearing in the new trial, the trial court rendered a Decision dated May 5, 1988, which declared petitioner
Padillo as sole and exclusive owner of the property in question and ordered the Register of Deeds of
Lucena City to register the questioned deed of sale in favor of petitioner Padillo.

20
The decision of the RTC in M.C. No. 374-82 was appealed to the Court of Appeals 20 which rendered
judgment on December 28, 1990 sustaining the decision of the trial court. Dissatisfied, respondent Averia
appealed to the Supreme Court via a petition for review on certiorari which was denied in a Resolution
dated June 17, 1991 for failure to show that the Court of Appeals had committed any reversible error in the
questioned judgment.21Respondent Averia sought reconsideration but the same was denied in a Resolution
dated August 26, 1991.22 A subsequent motion for leave to file a second motion for reconsideration was
likewise denied on October 21, 1991. 23
While the foregoing proceedings ensued in M.C. No. 374-82, the trial court in Civil Case No. 9114, issued
an Order dated March 20, 1984 wherein it deferred the resolution of respondent Averia's motion to dismiss
and ordered the case temporarily archived in view of the pendency in the Court of Appeals of the appeal of
respondent Averia in Civil Case No. 1690-G.24
When the Court of Appeals subsequently affirmed, in a decision dated September 16, 1987, the dismissal of
Civil Case No. 1690-G for improper venue, 25 the hearing in Civil Case No. 9114 was resumed on November
19, 198726but resolution of respondent Averia's November 18, 1987 Motion to Dismiss 27 was deferred in
view of the pendency of M.C. No. 374-82. 28
When M.C. No. 374-82 was finally resolved in the decision dated May 5, 1988, the trial court in an Order
dated June 1, 1988 proceeded to deny respondent Averia's Motion to Dismiss and Motion to Suspend
Further Proceeding in Civil Case No. 9114. 29
Thereafter, respondent Averia assailed the denial of his motion to dismiss in a petition for certiorari and
prohibition, docketed as CA-G.R. SP No. 15356, before the Court of Appeals, which on December 21, 1989
rendered a decision therein ordering the suspension of the proceedings in Civil Case No. 9114 to await the
final termination of M.C. No. 37442 then pending appeal with the Court of Appeals. 30 No appeal was filed
therefrom, hence, the decision of the appellate court in CA-G.R. SP No. 15356 became final. 31
With the Supreme Court denying the petition to challenge the Court of Appeal's affirmance of the decision in
M.C. No. 374-82,32 the trial court rendered the assailed March 31, 1992 Decision 33 in Civil Case No. 9114,
which reads:
WHEREFORE, in view of the foregoing considerations, judgment is rendered ordering Tomas
Averia, Jr. or any persons claiming any right from him, to vacate and surrender the possession
of the lot covered by TCT No. T-9863 of the Registry of Deeds of Lucena City and the building
erected thereon, to Veronica Padillo and to pay the latter the following amounts:
1) Unrealized income from the lot and building in the sum of P150,000.00 every year
from January 5, 1982 until Tomas Averia vacates the same;
2) Attorneys fees in the sum of P107,000.00 plus P1,000.00 per appearance in the
hearing of the case and litigation expenses of P10,000.00;
3) Moral damages of P50,000.00;

The Court finds that res judicata bars the appellee's claims. MC No. 374-82 resolved the
case on the merits. Civil Case No. 1620-G, dismissed on account of improper venue, may not
strictly speaking be considered an adjudication of the case on the merits . . .
xxx

xxx

xxx

Not having claimed the damages she supposedly suffered despite the new trial ordered for MC
No. 374-82, and the clarification of the expanded jurisdiction of the court a quo, the appellee is
correctly perceived by the appellant to have already lost her right to recover the same in the
instant suit. In finding the decision in the former case a bar to the latter, the Court is guided by
the long-standing rule that a final judgment or order on the merits rendered by a court having
jurisdiction over the subject matter and the parties is conclusive in a subsequent case between
the same parties and their successors-in-interest litigating upon the same thing and issue
(Vencilao vs. Varo, 182 SCRA 492, citing Sy Kao vs. Court of Appeals, 132 SCRA
302; Carandang vs. Venturanza, 133 SCRA 344; Catholic Vicar Apostolic of the Mountain
Province vs. Court, 165 SCRA 515). It matters little that the instant case is supposedly one for
declaratory relief and damages, while the former case is one originally for registration of the
appellee's documents of title. A party cannot by varying the form of action or adopting a
different method of presenting his case escape the operation of the principle that one and the
same cause of action shall not be twice litigated between the parties and their privies (Filipinas
Investment and Finance Corp. vs. Intermediate Appellate Court, 179 SCRA S06; Bugnay
Construction and Development Corp. vs. Laron, 176 SCRA 804). On the principle, moreover,
that res judicata bars not only the relitigation in a subsequent action of the issues raised, passed
upon and adjudicated, but also the ventilation in said subsequent suit of any other issue which
could have been raised in the first but was not (Africa vs. NLRC, 170 SCRA 776), the court a
quo clearly erred in not holding the instant action to be barred by prior judgment. 34
Disagreeing with the foregoing disquisition, petitioner sought reconsideration of the same but it proved
unavailing inasmuch as petitioners motion for reconsideration 35 was denied in a Resolution 36 dated April 7,
1995. The Court of Appeals, in resolving petitioners motion for reconsideration in the negative, rendered the
following pronouncements:
Contrary, however, to [Padillo's] position, the Court's application of the principle of res
judicata was neither based nor in any way dependent on the inaccuracies emphasized in the
motion and incidents she filed. While it is readily conceded that the Court was obviously referring
to Civil Case No. 1690-G as that which the Gumaca Court dismissed on account of improper
venue, the passage which states that the self-same was filed ahead of MC No. 374-82 is one
actually quoted from the trial court's March 31, 1992 decision which [Padillo] did not and still
does not contest. Corrected though the Court may stand on these particulars, however, it bears
emphasis that the instant case was determined to be barred by res judicata not so much on
account of the decision rendered in Civil Case No. 1690-G but by that rendered in MC No. 37482. It consequently matters little that the latter case was originally filed ahead of the former as
[Padillo] had been wont to stress. The fact that its new trial was only ordered on December 29,
1986 together with a clarification of the land registration court's expanded jurisdiction under
Section 2 of Presidential Decree No. 1592 effectively rendered the decision promulgated therein
a bar to the claim for damages [Padillo] pursued in the instant case. It is, moreover, repugnant to
the prohibition against multiplicity of suits to allow [Padillo] or any party-litigant for that matter
to claim in a separate action the damages she supposedly suffered as a consequence to the
filing of another.

4) Exemplary damages of P20,000.00; and


5) Costs of suit.
SO ORDERED.
On appeal to the Court of Appeals, the appellate court in CA-G.R. CV No. 40142 rendered its subject
decision on November 22, 1994 reversing the trial court based on the ground of res judicata. The appellate
court ratiocinated:

Considering that the December 21, 1989 decision rendered in CA-G.R. SP No. 15356 granted
the petition then filed by [Averia] (p. 200, rec.), the Court, finally, fails to appreciate the sapience
of [Padillo's] invocation thereof as a bar to the appeal herein perfected by [Averia]. x x x 37
Hence, petitioner interposed the instant petition for review anchored on seven (7) assigned errors, to wit:
A. THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR
AMOUNTING TO GRAVE 'ABUSE OF DISCRETION IN ITS INCORRECT CITATIONS AND
PERCEPTIONS OF FACTS UPON WHICH IT PREDICATED ITS DECISION.

21
B. THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN DISREGARDING THE EFFECT OF THE
JUDGMENTS OF A CO-EQUAL COURT IN CA-G.R. CV NO. 18802 AND THAT OF THE
SUPREME COURT IN G.R. NO. 96662 DECLARING PETITIONER THE ABSOLUTE OWNER
OF THE COMMERCIAL PROPERTY UNDER TCT NO. T-9863.
C. THE RESPONDENT COURT OF APPEALS ERRED IN REVERSING THE JUST AND
EQUITABLE JUDGMENT OF THE TRIAL COURT IN CIVIL CASE NO. 9114.
D. THE RESPONDENT COURT OF APPEALS ERRED IN NULLIFYING THE JUDGMENT OF
THE APPELLATE COURT IN CA-G.R. NO. 15356 BETWEEN THE SAME PARTIES ON THE
SAME CAUSE AND ISSUES.
E. THE RESPONDENT COURT OF APPEALS ERRED AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN FAILING TO NOTE THE BAD FAITH OF PRIVATE RESPONDENT IN MOST
OF HIS ACTS TO POSSESS A PROPERTY NOT HIS OWN.
F. RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
FAILING TO NOTE AND OBSERVE THAT PRIVATE RESPONDENT INTENTIONALLY
PROLONG THE UNDUE EXPLOITATION OF PFTITIONER'S REALTY EVEN AFTER THE
SUPREME COURT'S DECISION IN G.R. NO. 96662.
G. THE MEMBERS OF THE FIRST DIVISION OF RESPONDENT COURT GRAVELY ABUSED
THEIR DISCRETION IN VIOLATING THE CONSTITUTIONAL MANDATE ON "CONSULATION"
AS PROVIDED IN SECTION 13, ARTICLE VIII OF THE FUNDAMENTAL LAW.38
Petitioner attacks the appellate court's posture that petitioner should have set up her claim for unrealized
income, litigation expenses and/or attorney's fees, as well as moral and exemplary damages, as a distinct
cause of action in M.C. No. 374-82 for she contends that it was not anticipated that respondent Averia would
oppose M.C. No. 37s82. Neither could she invoke art counterclaim for damages in Civil Case No. 1690-G
for the Regional Trial Court of Gumaca, Quezon, Branch 61 promptly dismissed it. Furthermore, res
judicata as a ground for the dismissal of the instant case was already rejected by the Court of Appeals in the
December 21, 1989 decision promulgated in CA-G.R. SP No. 15356. Lastly, petitioner cites anew the
alleged inaccuracies in the finding that Civil Case No. 1690-G was filed ahead of M.C. No. 37442 and that
Civil Case No. 1620-G was dismissed by the Regional Trial Court of Gumaca, Quezon on the ground of
improper venue.
The doctrine of res judicata is embodied in Section 47, Rule 39 of the Revised Rules of Court, 39 which
states:
Sec. 47. Effect of judgments or final orders. The effect of a judgment or final order rendered
by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be
as follows:
xxx

xxx

xxx

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or
as to any other matter that could have been raised in relation thereto, conclusive between the
parties and their successors in interest by title subsequent to the commencement of the action
or special proceeding, litigating for the same thing and under the same title and in the same
capacity;
(c) In any other litigation between the same parties or their successors in interest, that only is
deemed to have been adjudged in a former judgment or final order which appears upon its face
to have been so adjudged, or which was actually and necessarily included therein or necessary
thereto.

Section 49 (b) refers to bar by prior judgment while Section 49 (c) enunciates conclusiveness of
judgment.
Bar by prior judgment exists when, between the first case where the judgment was rendered, and the
second case where such judgment is invoked, there is identity of parties, subject matter and cause of
action. When the three (3) identities are present, the judgment on the merits rendered in the first constitutes
an absolute bar to the subsequent action. It is final as to the claim or demand in controversy, including the
parties and those in privity with them, not only as to every matter which was offered and received to sustain
or defeat the claim or demand, but as to any other admissible matter which might have been offered for that
purpose. But where between the first case wherein judgment is rendered and the second case wherein such
judgment is invoked, there is no identity of cause of action, the judgment is conclusive in the second case,
only as to those matters actually and directly controverted and determined, and not as to matters merely
involved therein. This is what is termed conclusiveness of judgment.40
Under ordinary circumstances, this Court would have subscribed to the appellate court's conclusion that
M.C. No. 37442 barred petitioner's claim for damages in Civil Case No. 9114 since all four (4) essential
requisites in order forres judicata as a "bar by prior judgment" to attach are present in the instant case, to
wit:
1. The former judgment must be final;
2. It must have been rendered by a court having jurisdiction over the subject matter and the
parties;
3. It must be a judgment or order on the merits; and
4. There must be between the first and second action identity of parties, identity of subject
matter, and identity of cause of action.41
M.C. No. 374-82, as affirmed by the Court of Appeals and the Supreme Court, is a final judgment. 42 Branch
57 of the Regional Trial Court of Lucena City, in the new trial it conducted in M.C. No. 374-82, following
clarification by the Supreme Court of its expanded jurisdiction, 43 had obtained jurisdiction over the subject
matter as well as the parties thereto. The judgment of Branch 57 of Lucena City in M.C. No. 374-82, as
affirmed by the Court of Appeals and the Supreme Court, is a judgment on the merits. A judgment is on the
merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of
formal, technical or dilatory objections. 44 Finally, there is identity of parties, subject matter and causes of
action. M.C. No. 374-82 and Civil Case No. 9114 both involved the petitioner and respondent Averia. The
subject matter of both actions is the parcel of land and building erected thereon covered by TCT No. T-9863.
The causes of action are also identical since the same evidence would support and establish M.C. No. 37482 and Civil Case No. 9114.45
However, a different conclusion is warranted under the principle of law of the case. Law of the case has
been defined as the opinion delivered on a former appeal. More specifically, it means that whatever is once
irrevocably established as the controlling legal rule or decision between the same parties in the same case
continues to be the law of the case, whether correct on general principles or not, so long as the facts on
which such decision was predicated continue to be the facts of the case before the court. 46 As a general
rule, a decision on a prior appeal of the same case is held to be the law of the case whether that question is
right or wrong, the remedy of the party deeming himself aggrieved being to seek a rehearing. 47
The concept of Law of the Case was further elucidated in the 1919 case of Zarate v. Director of
Lands,48 thus:
A well-known legal principle is that when an appellate court has once declared the law in a case, such
declaration continues to be the law of that case even on a subsequent appeal. The rule made by an
appellate court, while it may be reversed in other cases, cannot be departed from in subsequent
proceedings in the same case. The "Law of the Case," as applied to a former decision of an appellate court,
merely expresses the practice of the courts in refusing to reopen what has been decided. Such a rule is
'necessary to enable an appellate court to perform its duties satisfactorily and efficiently, which would be

22
impossible if a question, once considered and decided by it, were to be litigated anew in the same case
upon any and every subsequent appeal.' Again, the rule is necessary as a matter of policy to end litigation.
'There would be no end to a suit if every obstinate litigant could, by repeated appeals, compel a court to
listen to criticisms on their opinions, or speculate of chances from changes in its members.' x x x

Petitioner, therefore, should not be faulted for yielding in good faith to the ruling of the Court of Appeals,
Fourteenth Division, in CA-G.R. SP No. 15356 and continuing to pursue her claim for damages in Civil Case
No. 9114. The decision of the Court of Appeals in CA-G.R. SP No. 15356 on the matter of the issue of
existence of M.C. No. 37442 as a bar to Civil Case No. 9114 should dictate all further proceedings.

The phrase "Law of the Case" is described in a decision coming from the Supreme Court of Missouri in the
following graphical language:

Notwithstanding the foregoing conclusion, this Court is not inclined to sustain the monetary award for
damages granted by the trial court.

The general rule, nakedly and badly put, is that legal conclusions announced on a first appeal,
whether on the general law or the law as applied to the concrete facts, not only prescribed the
duty and limit the power of the trial court to strict obedience and conformity thereto, but they
become and remain the law of the case in all after steps below or above on subsequent appeal.
The rule is grounded on convenience, experience, and reason. Without the rule there would be
no end to criticism, reagitation, reexamination, and reformulation. In short, there would be
endless litigation. It would be intolerable if parties litigant were allowed to speculate on changes
in the personnel of a court, or on the chance of our rewriting propositions once gravely ruled on
solemn argument and handed down as the law of a given case. An itch to reopen questions
foreclosed on a first appeal, would result in the foolishness of the inquisitive youth who pulled up
his corn to see how it grew. Courts are allowed, if they so choose, to act like ordinary sensible
persons. The administration of justice is a practical affair. The rule is a practical and a good one
of frequent and beneficial use. x x x49

Concerning the alleged forgone income of One Hundred Fifty Thousand Pesos (P150,000.00) per year
since 1982 as testified on by petitioner as the income she could have realized had possession of the
property not been withheld from her by respondent Averia, 53 we consider such amount of expected profit
highly conjectural and speculative. With an allegation that respondent made millions for the improper use
and exploitation of the property, petitioner's testimony regarding the matter of unrealized income is sadly
lacking of the requisite details on how such huge amount of income could be made possible. Petitioner did
not detail out how such huge amount of income could have been derived from the use of the disputed lot
and building. Well-entrenched is the doctrine that actual, compensatory and consequential damages must
be proved, and cannot be presumed. If the proof adduced thereon is flimsy and insufficient, as in this case,
no damages will be allowed. 54 Verily, the testimonial evidence on alleged unrealized income earlier referred
to is not enough to warrant the award of damages. It is too vague and unspecified to induce faith and
reliance.

The appellate court apparently overlooked the significance of this principle called the law of the case which
is totally different from the concept of res judicata. Law of the case does not have the finality of the doctrine
of res judicata, and applies only to that one case, whereas res judicata forecloses parties or privies in one
case by what has been done in another case. 50 In the 1975 case of Comilang v. Court of Appeals (Fifth
Division.),51 a further distinction was made in this manner:
The doctrine of law of the case is akin to that of former adjudication, but is more limited in its
application. It relates entirely to questions of law, and is confined in its operation to subsequent
proceedings in the same case. The doctrine of res judicata differs therefrom in that it is
applicable to the conclusive determination of issues of fact, although it may include questions of
law, and although it may apply to collateral proceedings in the same action or general
proceeding, it is generally concerned with the effect of an adjudication in a wholly independent
proceeding.
Significantly in the instant case, the law of the case on the matter of the pendency of M.C. No. 374-82 to bar
Civil Case No. 9114 has been settled in CA-G.R. SP No. 15356.
It is worthwhile to consider that at the time this Court in G.R. No. 65129 ordered the new trial of M.C. No.
374-82, after clarifying the expanded jurisdiction of the trial court with authority to decide non-contentious
and contentious issues, Civil Case No. 9114 was already existent. When the issue of the dismissal of Civil
Case No. 9114 on the ground of pendency of M.C. No. 374-82 was raised before the trial court wherein the
said Civil Case No. 9114 was docketed, the trial court chose to merely defer resolution thereof. And when
the said issue of litis pendentia was raised before the Court of Appeals via a special civil action of certiorari
in CA-G.R. SP No. 15356, the Court of Appeals, while agreeing with respondent Averia's arguments on the
existence of litis pendentia, which would ultimately result in res judicata, incorrectly ordered the mere
suspension of Civil Case No. 9114 to await the final termination of M.C. No. 374-82, instead of dismissing
the case and/or ordering that the claim for damages be filed in M.C. No. 374-82.
The decision of the Court of Appeals was promulgated on December 21, 1989 and by then, M.C. No. 374 82
had long been resolved by the trial court and pending appeal with the Court of Appeals. Since no appeal
was filed from the decision of the Court of Appeals in CA-G.R. SP No. 15356, the resolution therein of the
appellate court which ordered the suspension instead of dismissal of Civil Case No. 9114, became final.
Thus, even if erroneous, the ruling of the Court of Appeals in CA-G.R. SP No. 15356 has become the law of
the case as between herein petitioner Padillo and respondent Averia, and may no longer be disturbed or
modified.52 It is not subject to review or reversal in any court.

The only amount of unrealized income petitioner should be entitled to is the unrealized monthly rentals
which respondent Averia admits to be in the amount of Eight Hundred Pesos (P800.00) a month or Nine
Thousand Six Hundred Pesos (P9,600.00) a year during the sixth (6th) to tenth (10th) year of the Contract
of Lease between Marina de Vera Quicho, as Lessor, and respondent Averia, as Lessee, which fell on 1982
to 1986.55 Inasmuch as respondent Averia had been in possession of the property from January 1982 to
February 1992 when he vacated the property,56 it is but just for him to pay petitioner the unrealized rentals of
Ninety-Seven Thousand Six Hundred Pesos (P97,600.00) for that period of time. Furthermore, said amount
of Ninety-Seven Thousand Six Hundred Pesos (P97,600.00) shall earn interest 57 at the legal
rate58 computed from the finality of this decision.59
On the award of moral and exemplary damages in the amounts of Fifty Thousand Pesos (P50,000.00) and
Twenty Thousand Pesos (P20,000.00), respectively, we find that there is no sound basis for the award. It
cannot be logically inferred that just because respondent Averia instituted Civil Case No. 1690-G while M.C.
No. 374-82 was pending, malice or bad faith is immediately ascribable against the said respondent to
warrant such an award.
The issue of whether the trial court in M.C. No. 374-82 could adjudicate contentious issues was only
resolved by this Court in G.R. No. 65129 on December 29, 1986 60 long after the dismissal of Civil Case No.
1690-G which was instituted by respondent Averia. 61 That respondent Averia instituted a separate suit which
was subsequently dismissed and all actions or appeals taken by respondent Averia relative to M.C. No. 37482 does not per se make such actions or appeals wrongful and subject respondent Averia to payment of
moral damages. The law could not have meant to impose a penalty on the right to litigate. Such right is so
precious that moral damages may not be charged on those who may exercise it erroneously. One may have
erred, but error alone is not a ground for moral damages. 62
In the absence of malice and bad faith, the mental anguish suffered by a person for having been made a
party in a civil case is not the kind of anxiety which would warrant the award of moral damages. 63 The
emotional distress, worries and anxieties suffered by her and her husband 64 are only such as are usually
caused to a party hauled into Court as a party in a litigation. Therefore, there is no sufficient justification for
the award of moral damages, more so, exemplary damages, and must therefore be deleted.
With respect to attorney's fees, the award thereof is the exception rather than the general rule; counsel's
fees are not awarded every time a party prevails in a suit because of the policy that no premium should be
placed on the right to litigate. 65 Attorney's fees as part of damages are not the same as attorney's fees in the
concept of the amount paid to a lawyer. In the ordinary sense, attorney's fees represent the reasonable
compensation paid to a lawyer by his client for the legal services he has rendered to the latter, while in its
extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing
party to the prevailing party.66

23
Attorney's fees as part of damages is awarded only in the instances specified in Article 2208 of the Civil
Code.67 As such, 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, and in all cases it must be reasonable. Thereunder,
the trial court may award attorney's fees where it deems just and equitable that it be so granted. While we
respect the trial court's exercise of its discretion in this case, we find the award of the trial court of attorney's
fees in the sum of One Hundred Seven Thousand Pesos (P107,000.00) plus One Thousand Pesos
(P1,000.00) per appearance in the hearing of the case and litigation expenses of Ten Thousand Pesos
(P10,000.00), to be unreasonable and excessive. Attorney's fees as part of damages is not meant to enrich
the winning party at the expense of the losing litigant. Thus, it should be reasonably reduced to Twenty-Five
Thousand Pesos (P25,000.00).
Because of the conclusions we have thus reached, there is no need to delve any further on the other
assigned errors.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated November 22,
1994 in CA-G.R. CV No. 40142 is REVERSED and SET ASIDE and another in its stead is hereby rendered
ORDERING respondent Tomas Averia, Jr., to pay petitioner Veronica Padillo the amounts of (a) NinetySeven Thousand Six Hundred Pesos (P97,600.00) as unrealized rentals which shall earn interest at the
legal rate from the finality of the this decision until fully paid, and (b) Twenty-Five Thousand Pesos
(P25,000.00) as attorney's fees.
SO ORDERED.
Bellosillo,
Mendoza,
Buena, J., on official leave.
Republic
SUPREME
Manila

and

of

Quisumbing,

the

JJ., concur.

Philippines
COURT

EN BANC

G.R. No. 97412 July 12, 1994


EASTERN
SHIPPING
LINES,
INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.
Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.
Zapa Law Office for private respondent.

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
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 shipment was turned over to the latter, is no longer its 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:

24
1. Whether or not the shipment sustained losses/damages;

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. 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).

2. P3,000.00 as attorney's fees, and


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 the Bill of
Lading and Commercial Invoice which do not 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 "TurnOver 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:

3. Costs.
B. Dismissing the counterclaims and
crossclaim
of
defendant/crossclaimant
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. 8789, Rollo.)
The
Court
a quo.

of

Appeals

thus

affirmed in

toto the

judgment

of

the

court

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

25
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 decided 3 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,
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
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, much less forbearances of any money, goods or 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

26
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 Court 8 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 the exception of Roman Ozaeta) a solidary (Art. 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 Court 10 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
(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 Court 11 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 Court 12 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
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. Ruiz 13 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 Circular No. 416] does not apply to actions 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
Court 15 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 corresponding rulings
rendered by the court. The "first group" would consist of the cases of Reformina v. Tomol (1985), Philippine
Rabbit
Bus
Lines
v. Cruz(1986),
Florendo
v. Ruiz (1989)

27
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 forbearance 16of 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.

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.
SO ORDERED.
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo,
Quiason, Puno and Kapunan, JJ., concur.

The "second group", did not alter the pronounced rule on the application of the 6% or 12% interest per
annum, 17depending on whether or not the amount involved is a loan or forbearance, on the one hand, or
one of indemnity for damage, on the other hand. Unlike, however, the "first group" which remained
consistent in 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.

Mendoza, J., took no part.


Republic
SUPREME
Baguio

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 175139

April 18, 2012

HERMOJINA
vs.
SPOUSES ARTURO and LAURA SUPANGAN, Respondents.

ESTORES, Petitioner,

DECISION
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasidelicts 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.

DEL CASTILLO, J.:


The only issue posed before us is the propriety of the imposition of interest and attorneys fees.
Assailed in this Petition for Review 1 filed under Rule 45 of the Rules of Court is the May 12, 2006
Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 83123, the dispositive portion of which reads:
WHEREFORE, the appealed decision is MODIFIED. The rate of interest shall be six percent (6%) per
annum, computed from September 27, 2000 until its full payment before finality of the judgment. If the
adjudged principal and the interest (or any part thereof) remain unpaid thereafter, the interest rate shall be
adjusted to twelve percent (12%) per annum, computed from the time the judgment becomes final and
executory until it is fully satisfied. The award of attorneys fees is hereby reduced to P100,000.00. Costs
against the defendants-appellants.
SO ORDERED.3
Also assailed is the August 31, 2006 Resolution 4 denying the motion for reconsideration.
Factual Antecedents

28
On October 3, 1993, petitioner Hermojina Estores and respondent-spouses Arturo and Laura Supangan
entered into a Conditional Deed of Sale 5 whereby petitioner offered to sell, and respondent-spouses offered
to buy, a parcel of land covered by Transfer Certificate of Title No. TCT No. 98720 located at Naic, Cavite for
the sum of P4.7 million. The parties likewise stipulated, among others, to wit:
xxxx
1. Vendor will secure approved clearance from DAR requirements of which are (sic):

After almost seven years from the time of the execution of the contract and notwithstanding payment
of P3.5 million on the part of respondent-spouses, petitioner still failed to comply with her obligation as
expressly provided in paragraphs 4, 6, 7, 9 and 10 of the contract. Hence, in a letter 7 dated September 27,
2000, respondent-spouses demanded the return of the amount of P3.5 million within 15 days from receipt of
the letter. In reply,8 petitioner acknowledged receipt of the P3.5 million and promised to return the same
within 120 days. Respondent-spouses were amenable to the proposal provided an interest of 12%
compounded annually shall be imposed on the P3.5 million.9 When petitioner still failed to return the amount
despite demand, respondent-spouses were constrained to file a Complaint 10 for sum of money before the
Regional Trial Court (RTC) of Malabon against herein petitioner as well as Roberto U. Arias (Arias) who
allegedly acted as petitioners agent. The case was docketed as Civil Case No. 3201-MN and raffled off to
Branch 170. In their complaint, respondent-spouses prayed that petitioner and Arias be ordered to:

a) Letter request
b) Title

1. Pay the principal amount of P3,500,000.00 plus interest of 12% compounded annually starting
October 1, 1993 or an estimated amount of P8,558,591.65;

c) Tax Declaration

2. Pay the following items of damages:

d) Affidavit of Aggregate Landholding Vendor/Vendee

a) Moral damages in the amount of P100,000.00;

e) Certification from the Provl. Assessors as to Landholdings of Vendor/Vendee

b) Actual damages in the amount of P100,000.00;

f) Affidavit of Non-Tenancy

c) Exemplary damages in the amount of P100,000.00;

g) Deed of Absolute Sale

d) [Attorneys] fee in the amount of P50,000.00 plus 20% of recoverable amount


from the [petitioner].

xxxx
4. Vendee shall be informed as to the status of DAR clearance within 10 days upon signing of
the documents.
xxxx
6. Regarding the house located within the perimeter of the subject [lot] owned by spouses
[Magbago], said house shall be moved outside the perimeter of this subject property to the 300
sq. m. area allocated for [it]. Vendor hereby accepts the responsibility of seeing to it that such
agreement is carried out before full payment of the sale is made by vendee.

e) [C]ost of suit.11
In their Answer with Counterclaim, 12 petitioner and Arias averred that they are willing to return the principal
amount of P3.5 million but without any interest as the same was not agreed upon. In their Pre-Trial
Brief,13 they reiterated that the only remaining issue between the parties is the imposition of interest. They
argued that since the Conditional Deed of Sale provided only for the return of the downpayment in case of
breach, they cannot be held liable to pay legal interest as well. 14
In its Pre-Trial Order15 dated June 29, 2001, the RTC noted that "the parties agreed that the principal
amount of 3.5 million pesos should be returned to the [respondent-spouses] by the [petitioner] and the issue
remaining [is] whether x x x [respondent-spouses] are entitled to legal interest thereon, damages and
attorneys fees."16

7. If and after the vendor has completed all necessary documents for registration of the title and
the vendee fails to complete payment as per agreement, a forfeiture fee of 25% or
downpayment, shall be applied. However, if the vendor fails to complete necessary documents
within thirty days without any sufficient reason, or without informing the vendee of its status,
vendee has the right to demand return of full amount of down payment.

Trial ensued thereafter. After the presentation of the respondent-spouses evidence, the trial court set the
presentation of Arias and petitioners evidence on September 3, 2003. 17 However, despite several
postponements, petitioner and Arias failed to appear hence they were deemed to have waived the
presentation of their evidence. Consequently, the case was deemed submitted for decision. 18

xxxx

Ruling of the Regional Trial Court

9. As to the boundaries and partition of the lots (15,018 sq. m. and 300 sq. m.) Vendee shall be
informed immediately of its approval by the LRC.

On May 7, 2004, the RTC rendered its Decision 19 finding respondent-spouses entitled to interest but only at
the rate of 6% per annum and not 12% as prayed by them. 20 It also found respondent-spouses entitled to
attorneys fees as they were compelled to litigate to protect their interest. 21

10. The vendor assures the vendee of a peaceful transfer of ownership.


The dispositive portion of the RTC Decision reads:
xxxx

WHEREFORE, premises considered, judgment is hereby rendered in favor of the [respondent-spouses] and
ordering the [petitioner and Roberto Arias] to jointly and severally:

29
1. Pay [respondent-spouses] the principal amount of Three Million Five Hundred Thousand pesos
(P3,500,000.00) with an interest of 6% compounded annually starting October 1, 1993 and attorneys fee in
the amount of Fifty Thousand pesos (P50,000.00) plus 20% of the recoverable amount from the defendants
and cost of the suit.
The Compulsory Counter Claim is hereby dismissed for lack of factual evidence.
SO ORDERED.

withheld the amount. Besides, the amount awarded by the CA is even smaller compared to the filing
fees they paid.
Our Ruling
The petition lacks merit.

22

Interest may be imposed even in the absence of stipulation in the contract.

Ruling of the Court of Appeals


Aggrieved, petitioner and Arias filed their notice of appeal. The CA noted that the only issue submitted for
its resolution is "whether it is proper to impose interest for an obligation that does not involve a loan or
forbearance of money in the absence of stipulation of the parties." 24
23

On May 12, 2006, the CA rendered the assailed Decision affirming the ruling of the RTC finding the
imposition of 6% interest proper.25 However, the same shall start to run only from September 27, 2000 when
respondent-spouses formally demanded the return of their money and not from October 1993 when the
contract was executed as held by the RTC. The CA also modified the RTCs ruling as regards the liability of
Arias. It held that Arias could not be held solidarily liable with petitioner because he merely acted as agent of
the latter. Moreover, there was no showing that he expressly bound himself to be personally liable or that he
exceeded the limits of his authority. More importantly, there was even no showing that Arias was authorized
to act as agent of petitioner.26 Anent the award of attorneys fees, the CA found the award by the trial court
(P50,000.00 plus 20% of the recoverable amount) excessive 27 and thus reduced the same to P100,000.00.28
The dispositive portion of the CA Decision reads:
WHEREFORE, the appealed decision is MODIFIED. The rate of interest shall be six percent (6%) per
annum, computed from September 27, 2000 until its full payment before finality of the judgment. If the
adjudged principal and the interest (or any part thereof) remain[s] unpaid thereafter, the interest rate shall be
adjusted to twelve percent (12%) per annum, computed from the time the judgment becomes final and
executory until it is fully satisfied. The award of attorneys fees is hereby reduced to P100,000.00. Costs
against the [petitioner].

We sustain the ruling of both the RTC and the CA that it is proper to impose interest notwithstanding the
absence of stipulation in the contract. Article 2210 of the Civil Code expressly provides that "[i]nterest may,
in the discretion of the court, be allowed upon damages awarded for breach of contract." In this case, there
is no question that petitioner is legally obligated to return the P3.5 million because of her failure to fulfill the
obligation under the Conditional Deed of Sale, despite demand. She has in fact admitted that the conditions
were not fulfilled and that she was willing to return the full amount of P3.5 million but has not actually done
so. Petitioner enjoyed the use of the money from the time it was given to her 30 until now. Thus, she is
already in default of her obligation from the date of demand, i.e., on September 27, 2000.
The interest at the rate of 12% is applicable in the instant case.
Anent the interest rate, the general rule is that the applicable rate of interest "shall be computed in
accordance with the stipulation of the parties." 31 Absent any stipulation, the applicable rate of interest shall
be 12% per annum "when the obligation arises out of a loan or a forbearance of money, goods or credits. In
other cases, it shall be six percent (6%)." 32 In this case, the parties did not stipulate as to the applicable rate
of interest. The only question remaining therefore is whether the 6% as provided under Article 2209 of the
Civil Code, or 12% under Central Bank Circular No. 416, is due.
The contract involved in this case is admittedly not a loan but a Conditional Deed of Sale. However, the
contract provides that the seller (petitioner) must return the payment made by the buyer (respondentspouses) if the conditions are not fulfilled. There is no question that they have in fact, not been fulfilled as
the seller (petitioner) has admitted this. Notwithstanding demand by the buyer (respondent-spouses), the
seller (petitioner) has failed to return the money and
should be considered in default from the time that demand was made on September 27, 2000.

SO ORDERED.29
Petitioner moved for reconsideration which was denied in the August 31, 2006 Resolution of the CA.

Even if the transaction involved a Conditional Deed of Sale, can the stipulation governing the return of the
money be considered as a forbearance of money which required payment of interest at the rate of 12%? We
believe so.

Hence, this petition raising the sole issue of whether the imposition of interest and attorneys fees is proper.
Petitioners Arguments
Petitioner insists that she is not bound to pay interest on the P3.5 million because the Conditional Deed of
Sale only provided for the return of the downpayment in case of failure to comply with her obligations.
Petitioner also argues that the award of attorneys fees in favor of the respondent-spouses is unwarranted
because it cannot be said that the latter won over the former since the CA even sustained her contention
that the imposition of 12% interest compounded annually is totally uncalled for.
Respondent-spouses Arguments
Respondent-spouses aver that it is only fair that interest be imposed on the amount they paid considering
that petitioner failed to return the amount upon demand and had been using the P3.5 million for her benefit.
Moreover, it is undisputed that petitioner failed to perform her obligations to relocate the house outside the
perimeter of the subject property and to complete the necessary documents. As regards the attorneys fees,
they claim that they are entitled to the same because they were forced to litigate when petitioner unjustly

In Crismina Garments, Inc. v. Court of Appeals, 33 "forbearance" was defined as a "contractual obligation of
lender or creditor to refrain during a given period of time, from requiring the borrower or debtor to repay
a loan or debt then due and payable." This definition describes a loan where a debtor is given a period
within which to pay a loan or debt. In such case, "forbearance of money, goods or credits" will have no
distinct definition from a loan. We believe however, that the phrase "forbearance of money, goods or credits"
is meant to have a separate meaning from a loan, otherwise there would have been no need to add that
phrase as a loan is already sufficiently defined in the Civil Code. 34 Forbearance of money, goods or credits
should therefore refer to arrangements other than loan agreements, where a person acquiesces to the
temporary use of his money, goods or credits pending happening of certain events or fulfillment of certain
conditions. In this case, the respondent-spouses parted with their money even before the conditions were
fulfilled. They have therefore allowed or granted forbearance to the seller (petitioner) to use their money
pending fulfillment of the conditions. They were deprived of the use of their money for the period pending
fulfillment of the conditions and when those conditions were breached, they are entitled not only to the
return of the principal amount paid, but also to compensation for the use of their money. And the
compensation for the use of their money, absent any stipulation, should be the same rate of legal interest
applicable to a loan since the use or deprivation of funds is similar to a loan.

30
Petitioners unwarranted withholding of the money which rightfully pertains to respondent-spouses amounts
to forbearance of money which can be considered as an involuntary loan. Thus, the applicable rate of
interest is 12% per annum. In Eastern Shipping Lines, Inc. v. Court of Appeals, 35cited in Crismina Garments,
Inc. v. Court of Appeals,36 the Court suggested the following guidelines:
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.
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.37
Eastern Shipping Lines, Inc. v. Court of Appeals 38and its predecessor case, Reformina v. Tongol 39 both
involved torts cases and hence, there was no forbearance of money, goods, or credits. Further, the amount
claimed (i.e., damages) could not be established with reasonable certainty at the time the claim was made.
Hence, we arrived at a different ruling in those cases.
Since the date of demand which is September 27, 2000 was satisfactorily established during trial, then the
interest rate of 12% should be reckoned from said date of demand until the principal amount and the
interest thereon is fully satisfied.1wphi1
The award of attorneys fees is warranted.
Under Article 2208 of the Civil Code, attorneys fees may be recovered:
xxxx
(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons
or to incur expenses to protect his interest;

xxxx
(11) In any other case where the court deems it just and equitable that attorneys fees and
expenses of litigation should be recovered.
In all cases, the attorneys fees and expenses of litigation must be reasonable.
Considering the circumstances of the instant case, we find respondent-spouses entitled to recover
attorneys fees. There is no doubt that they were forced to litigate to protect their interest, i.e., to recover
their money. However, we find the amount of P50,000.00 more appropriate in line with the policy enunciated
in Article 2208 of the Civil Code that the award of attorneys fees must always be reasonable.
WHEREFORE, the Petition for Review is DENIED. The May 12, 2006 Decision of the Court of Appeals in
CA-G.R. CV No. 83123 is AFFIRMED with MODIFICATIONS that the rate of interest shall be twelve percent
(12%) per annum, computed from September 27, 2000 until fully satisfied. The award of attorneys fees is
further reduced toP50,000.00.
SO ORDERED.
Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 164401

June 25, 2008

LILIBETH
SUNGA-CHAN
and
CECILIA
SUNGA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS; THE HONORABLE PRESIDING JUDGE, Regional Trial
Court, Branch 11, Sindangan, Zamboanga Del Norte; THE REGIONAL TRIAL COURT SHERIFF,
Branch 11, Sindangan, Zamboanga Del Norte; THE CLERK OF COURT OF MANILA, as Ex-Officio
Sheriff; and LAMBERTO T. CHUA, respondents.
DECISION
VELASCO, JR., J.:
The Case
Before us is a petition for review under Rule 45, seeking to nullify and set aside the Decision 1 and
Resolution dated November 6, 2003 and July 6, 2004, respectively, of the Court of Appeals (CA) in CA-G.R.
SP No. 75688. The impugned CA Decision and Resolution denied the petition for certiorari interposed by
petitioners assailing the Resolutions2 dated November 6, 2002 and January 7, 2003, respectively, of the
Regional Trial Court (RTC), Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, a suit
for winding up of partnership affairs, accounting, and recovery of shares commenced thereat by respondent
Lamberto T. Chua.
The Facts
In 1977, Chua and Jacinto Sunga formed a partnership to engage in the marketing of liquefied petroleum
gas. For convenience, the business, pursued under the name, Shellite Gas Appliance Center (Shellite), was
registered as a sole proprietorship in the name of Jacinto, albeit the partnership arrangement called for
equal sharing of the net profit.

31
After Jacintos death in 1989, his widow, petitioner Cecilia Sunga, and married daughter, petitioner Lilibeth
Sunga-Chan, continued with the business without Chuas consent. Chuas subsequent repeated demands
for accounting and winding up went unheeded, prompting him to file on June 22, 1992 a Complaint
for Winding Up of a Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with
Writ of Preliminary Attachment, docketed as Civil Case No. S-494 of the RTC in Sindangan, Zamboanga del
Norte and raffled to Branch 11 of the court.
After trial, the RTC rendered, on October 7, 1997, judgment finding for Chua, as plaintiff a quo. The RTCs
decision would subsequently be upheld by the CA in CA-G.R. CV No. 58751 and by this Court per its
Decision dated August 15, 2001 in G.R. No. 143340. 3 The corresponding Entry of Judgment 4 would later
issue declaring the October 7, 1997 RTC decision final and executory as of December 20, 2001. The fallo of
the RTCs decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants,
as follows:
(1) DIRECTING them to render an accounting in acceptable form under
accounting procedures and standards of the properties, assets, income and
profits of [Shellite] since the time of death of Jacinto L. Sunga, from whom they
continued the business operations including all businesses derived from [Shellite];
submit an inventory, and appraisal of all these properties, assets, income, profits,
etc. to the Court and to plaintiff for approval or disapproval;
(2) ORDERING them to return and restitute to the partnership any and
all properties, assets, income and profits they misapplied and converted to
their own use and advantage that legally pertain to the plaintiff and account for the
properties mentioned in pars. A and B on pages 4-5 of this petition as basis;
(3) DIRECTING them to restitute and pay to the plaintiff shares and interest of
the plaintiff in the partnership of the listed properties, assets and good will in
schedules A, B and C, on pages 4-5 of the petition;
(4) ORDERING them to pay the plaintiff earned but unreceived income and profits
from the partnership from 1988 to May 30, 1992, when the plaintiff learned of the
closure of the store the sum of P35,000.00 per month, with legal rate of interest
until fully paid;
(5) ORDERING them to wind up the affairs of the partnership and terminate its
business activities pursuant to law, after delivering to the plaintiff all the interest,
shares, participation and equity in the partnership, or the value thereof in money or
moneys worth, if the properties are not physically divisible;
(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad
faith and hold them liable to the plaintiff the sum of P50,000.00 as moral and
exemplary damages; and,
(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorneys
[fee] and P25,000.00 as litigation expenses.
NO special pronouncements as to COSTS.
SO ORDERED.5 (Emphasis supplied.)
Via an Order6 dated January 16, 2002, the RTC granted Chuas motion for execution. Over a month later,
the RTC, acting on another motion of Chua, issued an amended writ of execution. 7

It seems, however, that the amended writ of execution could not be immediately implemented, for, in an
omnibus motion of April 3, 2002, Chua, inter alia, asked the trial court to commission a certified public
accountant (CPA) to undertake the accounting work and inventory of the partnership assets if petitioners
refuse to do it within the time set by the court. Chua later moved to withdraw his motion and instead ask the
admission of an accounting report prepared by CPA Cheryl A. Gahuman. In the report under the
heading, Computation of Claims,8 Chuas aggregate claim, arrived at using the compounding-of-interest
method, amounted to PhP 14,277,344.94. Subsequently, the RTC admitted and approved the computation
of claims in view of petitioners failure and refusal, despite notice, to appear and submit an accounting report
on the winding up of the partnership on the scheduled hearings on April 29 and 30, 2002. 9
After another lengthy proceedings, petitioners, on September 24, 2002, submitted their own CPA-certified
valuation and accounting report. In it, petitioners limited Chuas entitlement from the winding up of
partnership affairs to an aggregate amount of PhP 3,154,736.65 only. 10 Chua, on the other hand, submitted
a new computation,11 this time applying simple interest on the various items covered by his claim. Under this
methodology, Chuas aggregate claim went down to PhP 8,733,644.75.
On November 6, 2002, the RTC issued a Resolution, 12 rejecting the accounting report petitioners submitted,
while approving the new computation of claims Chua submitted. The fallo of the resolution reads:
WHEREFORE, premises considered, this Court resolves, as it is hereby resolved, that the
Computation of Claims submitted by the plaintiff dated October 15, 2002 amounting to
P8,733,644.75 be APPROVED in all respects as the final computation and accounting of the
defendants liabilities in favor of the plaintiff in the above-captioned case, DISAPPROVING for
the purpose, in its entirety, the computation and accounting filed by the defendants.
SO RESOLVED.13
Petitioners sought reconsideration, but their motion was denied by the RTC per its Resolution of January 7,
2003.14
In due time, petitioners went to the CA on a petition for certiorari 15 under Rule 65, assailing the November 6,
2002 and January 7, 2003 resolutions of the RTC, the recourse docketed as CA-G.R. SP No. 75688.
The Ruling of the CA
As stated at the outset, the CA, in the herein assailed Decision of November 6, 2003, denied the petition for
certiorari, thus:
WHEREFORE, the foregoing considered, the Petition is hereby DENIED for lack of merit.
SO ORDERED.16
The CA predicated its denial action on the ensuing main premises:
1. Petitioners, by not appearing on the hearing dates, i.e., April 29 and 30, 2002, scheduled to consider
Chuas computation of claims, or rendering, as required, an accounting of the winding up of the partnership,
are deemed to have waived their right to interpose any objection to the computation of claims thus
submitted by Chua.
2. The 12% interest added on the amounts due is proper as the unwarranted keeping by petitioners of
Chuas money passes as an involuntary loan and forbearance of money.
3. The reiterative arguments set forth in petitioners pleadings below were part of their delaying tactics.
Petitioners had come to the appellate court at least thrice and to this Court twice. Petitioners had more than

32
enough time to question the award and it is now too late in the day to change what had become final and
executory.
Petitioners motion for reconsideration was rejected by the appellate court through the assailed
Resolution17 dated July 6, 2004. Therein, the CA explained that the imposition of the 12% interest for
forbearance of credit or money was proper pursuant to paragraph 1 of the October 7, 1997 RTC decision,
as the computation done by CPA Gahuman was made in "acceptable form under accounting procedures
and standards of the properties, assets, income and profits of [Shellite]." 18 Moreover, the CA ruled that the
imposition of interest is not based on par. 3 of the October 7, 1997 RTC decision as the phrase "shares and
interests" mentioned therein refers not to an imposition of interest for use of money in a loan or credit, but to
a legal share or right. The appellate court also held that the imposition of interest on the partnership assets
falls under par. 2 in relation to par. 1 of the final RTC decision as the restitution mentioned therein does not
simply mean restoration but also reparation for the injury or damage committed against the rightful owner of
the property.
Finally, the CA declared the partnership assets referred to in the final decision as "liquidated claim" since the
claim of Chua is ascertainable by mathematical computation; therefore, interest is recoverable as an
element of damage.
The Issues
Hence, the instant petition with petitioners raising the following issues for our consideration:

3. On February 18, 2005, Chua moved for the confirmation of the sheriffs final deed of sale
and for the issuance of an order for the cancellation of TCT No. 208782. Petitioners again
interposed an opposition in which they informed the RTC that this Court had already granted
due course to their petition for review on January 31, 2005;
4. On April 11, 2005, the RTC, via a Resolution, confirmed the sheriffs final deed of sale,
ordered the Registry of Deeds of Manila to cancel TCT No. 208782, and granted a writ of
possession23 in favor of Chua.
5. On May 3, 2005, petitioners filed before this Court a petition for the issuance of a temporary
restraining order (TRO). On May 24, 2005, the sheriff of Manila issued a Notice to
Vacate24 against petitioners, compelling petitioners to repair to this Court anew for the resolution
of their petition for a TRO.
6. On May 31, 2005, the Court issued a TRO,25 enjoining the RTC and the sheriff from
enforcing the April 11, 2005 writ of possession and the May 24, 2005 Notice to Vacate.
Consequently, the RTC issued an Order 26 on June 17, 2005, suspending the execution
proceedings before it.
7. Owing to the clashing ownership claims over the leased Paco property, coupled with the filing
of an unlawful detainer suit before the Metropolitan Trial Court (MeTC) in Manila against PNB,
the Court, upon the banks motion, allowed, by Resolution 27 dated April 26, 2006, the
consignation of the monthly rentals with the MeTC hearing the ejectment case.

I.
The Courts Ruling
Whether or not the Regional Trial Court can [impose] interest on a final judgment of unliquidated
claims.

The petition is partly meritorious.

II.

First Issue: Interest Proper in Forbearance of Credit

Whether or not the Sheriff can enforce the whole divisible obligation under judgment only
against one Defendant.

Petitioners, citing Article 2213 28 of the Civil Code, fault the trial court for imposing, in the execution of its final
judgment, interests on what they considered as unliquidated claims. Among these was the claim for goodwill
upon which the RTC attached a monetary value of PhP 250,000. Petitioners also question the imposition of
12% interest on the claimed monthly profits of PhP 35,000, reckoned from 1988 to October 15, 1992. To
petitioners, the imposable rate should only be 6% and computed from the finality of the RTCs underlying
decision, i.e., from December 20, 2001.

III.
Whether or not the absolute community of property of spouses Lilibeth Sunga Chan with her
husband Norberto Chan can be lawfully made to answer for the liability of Lilibeth Chan under
the judgment.19
Significant Intervening Events
In the meantime, pending resolution of the instant petition for review and even before the resolution by the
CA of its CA-G.R. SP No. 75688, the following relevant events transpired:
1. Following the RTCs approval of Chuas computation of claims in the amount of PhP
8,733,644.75, the sheriff of Manila levied upon petitioner Sunga-Chans property located along
Linao St., Paco, Manila, covered by Transfer Certificate of Title (TCT) No. 208782, 20 over which
a building leased to the Philippine National Bank (PNB) stood. In the auction sale of the levied
lot, Chua, with a tender of PhP 8 million, 21 emerged as the winning bidder.

Third on the petitioners list of unliquidated claims is the yet-to-be established value of the one-half
partnership share and interest adjudicated to Chua, which, they submit, must first be determined with
reasonable certainty in a judicial proceeding. And in this regard, petitioners, citing Eastern Shipping Lines,
Inc. v. Court of Appeals,29 would ascribe error on the RTC for adding a 12% per annum interest on the
approved valuation of the one-half share of the assets, inclusive of goodwill, due Chua.
Petitioners are partly correct.
For clarity, we reproduce the summary valuations and accounting reports on the computation of claims
certified to by the parties respective CPAs. Chua claimed the following:

A 50% share on assets (exclusive of goodwill) at fair market value (Schedule 1)


2. On January 21, 2005, Chua moved for the issuance of a final deed of sale and a writ of
possession. He also asked the RTC to order the Registry of Deeds of Manila to cancel TCT No.
208782 and to issue a new certificate. Despite petitioners opposition on the ground of
prematurity, a final deed of sale22 was issued on February 16, 2005.

33
B 50% share in the monetary value of goodwill (P500,000 x 50%)

50%
share
(500,000 x 50%)

in

the

monetary

value

of

C Legal interest on share of assets from June 1, 1992 to Oct. 15, 2002 at 12% interest per year (Schedule 2
Moral and Exemplary Damages
D Unreceived profits from 1988 to 1992 and its corresponding interest from Jan. 1, 1988 to Oct. 15, 2002 (
3)
Attorneys Fee
E Damages

Litigation Fee
F Attorneys fees

TOTAL AMOUNT

G Litigation fees

As may be recalled, the trial court admitted and approved Chuas computation of claims amounting to PhP
8,733,644.75, but rejected that of petitioners, who came up with the figure of only PhP 3,154,736.65. We
highlight the substantial differences in the accounting reports on the following items, to wit: (1) the
aggregate amount of the partnership assets bearing on the 50% share of Chua thereon; (2) interests added
on Chuas share of the assets; (3) amount of profits from 1988 through May 30, 1992, net of alleged
payments made to Chua; and (4) interests added on the amount entered as profits.

TOTAL AMOUNT

On the other hand, petitioners acknowledged the following to be due to Chua:

From the foregoing submitted valuation reports, there can be no dispute about the goodwill earned thru the
years by Shellite. In fact, the parties, by their own judicial admissions, agreed on the monetary value, i.e.,
PhP 250,000, of this item. Clearly then, petitioners contradict themselves when they say that such amount
of goodwill is without basis. Thus, the Court is loathed to disturb the trial courts approval of the amount of
PhP 250,000, representing the monetary value of the goodwill, to be paid to Chua.

Total Assets Schedule 1

Neither is the Court inclined to interfere with the CAs conclusion as to the total amount of the partnership
profit, that is, PhP 1,855,000, generated for the period January 1988 through May 30, 1992, and the total
partnership assets of PhP 3,227,100, 50% of which, or PhP 1,613,550, pertains to Chua as his share. To be
sure, petitioners have not adduced adequate evidence to belie the above CAs factual determination,
confirmatory of the trial courts own. Needless to stress, it is not the duty of the Court, not being a trier of
facts, to analyze or weigh all over again the evidence or premises supportive of such determination, absent,
as here, the most compelling and cogent reasons.

50% due to Lamberto Chua

Total
Alleged
May 1992-Sch. 2

Profit,

Net

of

Payments

This
brings us to the question of the propriety of the imposition of interest and, if proper, the imposable rate
Made,
of interest applicable.
In Reformina v. Tomol, Jr.,30 the Court held that the legal interest at 12% per annum under Central Bank
(CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money. And for
transactions involving payment of indemnities in the concept of damages arising from default in the
performance of obligations in general and/or for money judgment not involving a loan or forbearance of

goodw

34
money, goods, or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly 6%
interest. Art. 2209 pertinently provides:
Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be the
payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which
is six per cent per annum.
The term "forbearance," within the context of usury law, has been described as a contractual obligation of a
lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay the
loan or debt then due and payable. 31
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the applicable
rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only to loans or
forbearance of money, goods, or credits, as well as to judgments involving such loan or forbearance of
money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies "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," 32 with the application of both rates reckoned "from the time the
complaint was filed until the [adjudged] amount is fully paid." 33In either instance, the reckoning period for the
commencement of the running of the legal interest shall be subject to the condition "that the courts are
vested with discretion, depending on the equities of each case, on the award of interest." 34
Otherwise formulated, the norm to be followed in the future on the rates and application thereof is:
I. When an obligation, regardless of its source, 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.

Guided by the foregoing rules, the award to Chua of the amount representing earned but unremitted
profits, i.e.. PhP 35,000 monthly, from January 1988 until May 30, 1992, must earn interest at 6% per
annum reckoned from October 7, 1997, the rendition date of the RTC decision, until December 20, 2001,
when the said decision became final and executory. Thereafter, the total of the monthly profits inclusive of
the add on 6% interest shall earn 12% per annum reckoned from December 20, 2001 until fully paid, as the
award for that item is considered to be, by then, equivalent to a forbearance of credit. Likewise, the PhP
250,000 award, representing the goodwill value of the business, the award of PhP 50,000 for moral and
exemplary damages, PhP 25,000 attorneys fee, and PhP 25,000 litigation fee shall earn 12% per annum
from December 20, 2001 until fully paid.
Anent the impasse over the partnership assets, we are inclined to agree with petitioners assertion that
Chuas share and interest on such assets partake of an unliquidated claim which, until reasonably
determined, shall not earn interest for him. As may be noted, the legal norm for interest to accrue is
"reasonably determinable," not, as Chua suggested and the CA declared, determinable by mathematical
computation.
The Court has certainly not lost sight of the fact that the October 7, 1997 RTC decision clearly directed
petitioners to render an accounting, inventory, and appraisal of the partnership assets and then to wind up
the partnership affairs by restituting and delivering to Chua his one-half share of the accounted partnership
assets. The directive itself is a recognition that the exact share and interest of Chua over the partnership
cannot be determined with reasonable precision without going through with the inventory and accounting
process. In fine, a liquidated claim cannot validly be asserted without accounting. In net effect, Chuas
interest and share over the partnership asset, exclusive of the goodwill, assumed the nature of a liquidated
claim only after the trial court, through its November 6, 2002 resolution, approved the assets inventory and
accounting report on such assets.
Considering that Chuas computation of claim, as approved by the trial court, was submitted only on
October 15, 2002, no interest in his favor can be added to his share of the partnership assets.
Consequently, the computation of claims of Chua should be as follows:

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 breached 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 loans 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.35

(1)
50%
at fair market value

(2)
50%
(PhP 500,000 x 50%)

share

share

(3) 12% interest on share of


[PhP 250,000 x 0.12 x 299/365 days]

on

in

assets

the

goodwill

from

(exclusive

monetary

December

of

value

20,

2001

(4) Unreceived profits from 1988 to May 30, 1992

(5) 6% interest on unreceived profits from January 1, 1988 to December 20, 2001 36

good

of

to

October

good

15,

35
only when the obligation expressly so states, or when the law or the nature of the
obligation requires solidarity. (Emphasis ours.)
(6) 12% interest on unreceived profits from December
20,
2001
[PhP 3,215,362.50 x 12% x 299/365 days]

to

October

15,

Any suggestion that the obligation to undertake an inventory, render an accounting of partnership assets,
and 2002
to wind up the partnership affairs is divisible ought to be dismissed.
For the other, the duty of petitioners to remit to Chua his half interest and share of the total partnership
assets proceeds from petitioners indivisible obligation to render an accounting and inventory of such assets.
The need for the imposition of a solidary liability becomes all the more pronounced considering the
impossibility of quantifying how much of the partnership assets or profits was misappropriated by each
petitioner.

(7) Moral and exemplary damages

And for a third, petitioners obligation for the payment of damages and attorneys and litigation fees ought to
be solidary in nature, they having resisted in bad faith a legitimate claim and thus compelled Chua to litigate.
(8) Attorneys fee
Third Issue: Community Property Liable
Primarily anchored as the last issue is the erroneous theory of divisibility of petitioners obligation and their
joint liability therefor. The Court needs to dwell on it lengthily.

(9) Litigation fee

(10) 12% interest on moral and exemplary damages,


attorneys
fee,
and
litigation
[PhP 100,000 x 12% x 299/365 days]

fee

from

December

20,

2001

to

October

Given the solidary liability of petitioners to satisfy the judgment award, respondent sheriff cannot really be
faulted for levying upon and then selling at public auction the property of petitioner Sunga-Chan to answer
for the whole obligation of petitioners. The fact that the levied parcel of land is a conjugal or community
property, as the case may be, of spouses Norberto and Sunga-Chan does not per se vitiate the levy and the
consequent sale of the property. Verily, said property is not among those exempted from execution under
15,Section
200213,37 Rule 39 of the Rules of Court.
And it cannot be overemphasized that the TRO issued by the Court on May 31, 2005 came after the auction
sale in question.

TOTAL AMOUNT

Parenthetically, the records show that spouses Sunga-Chan and Norberto were married on February 4,
1992, or after the effectivity of the Family Code on August 3, 1988. Withal, their absolute community
property may be held liable for the obligations contracted by either spouse. Specifically, Art. 94 of said Code
pertinently provides:

Second Issue: Petitioners Obligation Solidary


Art. 94. The absolute community of property shall be liable for:
Petitioners, on the submission that their liability under the RTC decision is divisible, impugn the
implementation of the amended writ of execution, particularly the levy on execution of the absolute
community property of spouses petitioner Sunga-Chan and Norberto Chan. Joint, instead of solidary, liability
for any and all claims of Chua is obviously petitioners thesis.
Under the circumstances surrounding the case, we hold that the obligation of petitioners is solidary for
several reasons.
For one, the complaint of Chua for winding up of partnership affairs, accounting, appraisal, and recovery of
shares and damages is clearly a suit to enforce a solidary or joint and several obligation on the part of
petitioners. As it were, the continuance of the business and management of Shellite by petitioners against
the will of Chua gave rise to a solidary obligation, the acts complained of not being severable in nature.
Indeed, it is well-nigh impossible to draw the line between when the liability of one petitioner ends and the
liability of the other starts. In this kind of situation, the law itself imposes solidary obligation. Art. 1207 of the
Civil Code thus provides:
Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the
same obligation does not imply that each one of the former has a right to demand, or that each
of the latter is bound to render, entire compliance with the prestation. There is solidary liability

(1) x x x x
(2) All debts and obligations contracted during the marriage by the designated administratorspouse for the benefit of the community, or by both spouses, or by one spouse with the
consent of the other.
(3) Debts and obligations contracted by either spouse without the consent of the other to the
extent that the family may have been benefited. (Emphasis ours.)
Absent any indication otherwise, the use and appropriation by petitioner Sunga-Chan of the assets of
Shellite even after the business was discontinued on May 30, 1992 may reasonably be considered to have
been used for her and her husbands benefit.
It may be stressed at this juncture that Chuas legitimate claim against petitioners, as readjusted in this
disposition, amounts to only PhP 5,529,392.52, whereas Sunga-Chans auctioned property which Chua
acquired, as the highest bidder, fetched a price of PhP 8 million. In net effect, Chua owes petitioner SungaChan the amount of PhP 2,470,607.48, representing the excess of the purchase price over his legitimate
claims.

36
Following the auction, the corresponding certificate of sale dated January 15, 2004 was annotated on TCT
No. 208782. On January 21, 2005, Chua moved for the issuance of a final deed of sale (1) to order the
Registry of Deeds of Manila to cancel TCT No. 208782; (2) to issue a new TCT in his name; and (3) for the
RTC to issue a writ of possession in his favor. And as earlier stated, the RTC granted Chuas motion, albeit
the Court restrained the enforcement of the RTCs package of orders via a TRO issued on May 31, 2005.
Therefore, subject to the payment by Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, we affirm the
RTCs April 11, 2005 resolution, confirming the sheriffs final deed of sale of the levied property, ordering the
Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of Chua.
WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the assailed decision and resolution of the
CA in CA-G.R. SP No. 75688 are hereby AFFIRMED with the following MODIFICATIONS:
(1) The Resolutions dated November 6, 2002 and January 7, 2003 of the RTC, Branch 11 in Sindangan,
Zamboanga Del Norte in Civil Case No. S-494, as effectively upheld by the CA, are AFFIRMED with the
modification that the approved claim of respondent Chua is hereby corrected and adjusted to cover only the
aggregate amount of PhP 5,529,392.52;
(2) Subject to the payment by respondent Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, the
Resolution dated April 11, 2005 of the RTC, confirming the sheriffs final deed of sale of the levied property,
ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in
favor of respondent Chua, is AFFIRMED; and
The TRO issued by the Court on May 31, 2005 in the instant petition is LIFTED.
No pronouncement as to costs.
SO ORDERED.
Republic
SUPREME
Manila

of

the

Philippines
COURT

October 13, 2009

AIR
FRANCE
PHILIPPINES/KLM
vs.
JOHN ANTHONY DE CAMILIS, Respondent.

The RTC found that AF breached its contract of carriage and that it was liable to pay P200,000 actual
damages, P1 million moral damages, P1 million exemplary damages and P300,000 attorneys fees to
respondent.
On appeal, the Court of Appeals (CA) affirmed the RTC decision with modifications.1
The CA ruled that it was respondent (as passenger), and not AF, who was responsible for having the correct
travel documents. However, the appellate court stated that this fact did not absolve AF from liability for
damages.
The CA agreed with the findings of fact of the RTC that AFs agents and representatives repeatedly
subjected respondent to very poor service, verbal abuse and abject lack of respect and consideration. As
such, AF was guilty of bad faith for which respondent ought to be compensated.
The appellate court affirmed the award of P1 million moral damages and P300,000 attorneys fees.
However, it reduced the actual damages to US$906 (or its peso equivalent). According to the CA, this
amount represented the expenses respondent incurred from the time he was unable to join his group in
Rome (due to the unfounded "communiqu" of Ms. Soeyesol that he was a security threat) up to the time
his flight reservation from Paris to Manila was dishonored for which he was forced to stay in Paris for two
additional days. The appellate court pointed out that, on the other hand, respondents expenses for the
Moscow leg of the trip must be borne by him as AF could not be faulted when he was refused entry to
Moscow for lack of a transit visa.
The CA also decreased the exemplary damages from P1 million to P300,000. The CA further imposed
interest at the rate of 6% p.a. from the date of extrajudicial demand 2 until full satisfaction, but before
judgment becomes final. From the date of finality of the judgment until the obligation is totally paid, 12%
interest p.a. shall be imposed.

FIRST DIVISION
G.R. No. 188961

Soeyesol even reported him as a security threat which resulted in his being subjected to further
interrogation by the police in Paris and Rome, and worse, also lifted his flight coupons for the rest of his trip;
(3) AF agents in Rome refused to honor his confirmed flight to Paris; (4) upon reaching Paris for his
connecting flight to Manila, he found out that the AF agents did not check in his baggage and since he had
to retrieve his bags at the baggage area, he missed his connecting flight; (5) he had to shoulder his
extended stay in Paris for AFs failure to make good its representation that he would be given a
complimentary motel pass and (6) he was given a computer print-out of his flight reservation for Manila but
when he went to the airport, he was told that the flight was overbooked. It was only when he made a scene
that the AF agent boarded him on an AF flight to Hongkong and placed him on a connecting Philippine
Airlines flight to Manila.

AIR

FRANCE, Petitioner,

Hence, this recourse.

RESOLUTION

Essentially, AF assails the CAs award of moral and exemplary damages and attorneys fees to respondent
as the alleged injury sustained was not clearly established. AF added that, even if respondent was entitled
to the same, the amounts awarded were exorbitant. Lastly, it argued that the interest rate should run not
from the time of respondents extrajudicial demand but from the time of judgment of the RTC.

CORONA, J.:

We deny the petition.

Respondent John Anthony de Camilis filed a case for breach of contract of carriage, damages and
attorneys fees against petitioner Air France Philippines/KLM Air France (AF) in the Regional Trial Court
(RTC) of Makati City, Branch 59.

Preliminarily, on the issue pertaining to whether or not respondent was entitled to damages and attorneys
fees, the same entails a resort to the parties respective evidence. Thus, AF is clearly asking us to consider
a question of fact.

Respondent alleged that he went on a pilgrimage with a group of Filipinos to selected countries in Europe.
According to respondent: (1) AFs agent in Paris failed to inform him of the need to secure a transit visa for
Moscow, as a result of which he was denied entry to Moscow and was subjected to humiliating interrogation
by the police; (2) another AF agent (a certain Ms. Soeyesol) rudely denied his request to contact his travel
companions to inform them that he was being sent back to Paris from Moscow with a police escort; Ms.

Time and again, we have held that the jurisdiction of this Court in a petition for review on certiorari under
Rule 45 is limited only to questions of law, 3 save for certain exceptions,4 none of which are present in this
case.

37
Both the RTC and the CA have competently ruled on the issue of respondents entitlement to damages and
attorneys fees as they properly laid down both the factual and legal bases for their respective decisions. We
see no reason to disturb their findings.
The above liabilities of AF shall earn legal interest pursuant to the Courts ruling in Construction
Development Corporation of the Philippines v. Estrella,5 citing Eastern Shipping Lines, Inc. v. CA.61avvphi1
Pursuant to this ruling, the legal interest is 6% p.a. and it shall be reckoned from April 25, 2007 when the
RTC rendered its judgment, not from the time of respondents extrajudicial demand. This must be so as it
was at the time the RTC rendered its judgment that the quantification of damages may be deemed to have
been reasonably ascertained. Then, from the time this decision becomes final and executory, the interest
rate shall be 12% p.a. until full satisfaction.

WHEREFORE, the Court renders judgment enjoining the defendants to effect


the transfer of the shares covered by Stock Certificate No. 16807 to and in the name
of plaintiff INCORPORATED Mining Corporation, and the writ of preliminary
mandatory injunction issued on March 16, 1970 is hereby declared permanent.
SO ORDERED.
Upon the other hand, the decretal portion of the CA decision states:
WHEREFORE, the judgment appealed from is hereby modified by adding the
following to the dispositive portion thereof:

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals in CA-G.R. CV No.
90151 isAFFIRMED. Petitioner is ordered to PAY legal interest of 6% p.a. from the date of promulgation of
the decision dated April 25, 2007 of the Regional Trial Court, Branch 59, Makati City and 12% p.a. from the
time the decision of this Court attains finality, on all sums awarded until their full satisfaction.

Ordering defendant Batong Buhay Gold Mines, Inc. to pay to the plaintiff the sum of
P5,625.55, with interest at the legal rate from March 5, 1970 until full payment; and
dismissing the complaint with respect to defendant Del Rosario and Company.
Defendant Batong Buhay shall pay the costs.

Costs against petitioner.

IT IS SO ORDERED.

SO ORDERED.

(pp. 67-68, Rollo)


The antecedent facts, as found by the Court of Appeals, are as follows:

Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. L-45048 January 7, 1987
BATONG
BUHAY
GOLD
MINES,
vs.
THE COURT OF APPEALS and INC. MINING CORPORATION, respondents.

INC., petitioner,

Taada, Sanchez, Taada & Taada Law Office for petitioner.


Quisumbing, Caparas, Ilagan Alcantara & Mosqueda Law Office for private respondent.

PARAS, J.:
This is a petition to review the decision dated August 27, 1976 of the Court of Appeals (CA) in CA-G.R. No.
51313-R which modified the decision of the then Court of First Instance (CFI) of Manila, Branch 11 in Civil
Case No. 79183 Also sought for review are the resolutions of the aforenamed court dated October 21, 1976
and November 12, 1976 which denied petitioner's motion for reconsideration of the subject decision and
petition and/or motion for new trial, respectively.
The dispositive portion of the CFI judgment reads:

The defendant Batong Buhay Gold Mines, Inc. issued Stock Certificate No. 16807
covering 62,495 shares with a par value of P0.01 per share to Francisco Aguac who
was then legally married to Paula G. Aguac, but the said spouses had lived
separately for more than fourteen (14) years prior to the said date. On December 16,
1969, Francisco Aguac sold his 62,495 shares covered by Stock Certificate No.
16807 for the sum of P9,374.70 in favor of the plaintiff, the said transaction being
evidenced by a deed of sale (Exhibit D). The said sale was made by Francisco
Aguac without the knowledge or consent of his wife Paula G. Aguac.
On the same date of the sale, December 16, 1969, Paula G. Aguac wrote a letter to
the president of defendant Batong Buhay Gold Mines, Inc. asking that the transfer of
the shares sold by her husband be withheld, inasmuch as the same constituted
conjugal property and her share of proceeds of the sale was not given to her (Exhibit
1).
On January 5, 1970, under a covering letter dated December 26, 1969, plaintiff's
counsel presented Stock Certificate No. 16807 duly endorsed by Francisco Aguac
for registration and transfer of the said stock certificate in the name of the plaintiff
(Exhibit F). The said letter was addressed to defendant Del Rosario and Company
which was the transfer agent of Batong Buhay at that time. In a letter dated February
24, 1970 also addressed to Del Rosario and Company, plaintiff's counsel requested
information as to the action taken on the transfer of Stock Certificate No. 16807 in
favor of the plaintiff, nothing about which having heard despite the lapse of over a
month (Exhibit H). In a reply letter dated February 28, 1970, Del Rosario and
Company informed plaintiff's counsel that Batong Buhay has referred the matter to
their attorneys, inasmuch as there was a "technical problem that has developed in
the transfer of stock," and further advised that the plaintiff communicate directly with
Batong Buhay for further details (Exhibit 1).lwphl@it
It developed that when Batong Buhay was about to effect the cancellation of Stock
Certificate No. 16807 and transfer the 62,495 shares covered thereby to the plaintiff
and had, in fact, prepared new Stock Certificate No. 27650 dated January 5, 1970, it
received the letter of Paula G. Aguac advising it to withhold the transfer of the
subject shares of stock on the ground that the same are conjugal property.

38
On March 2, 1970 Francisco Aguac was charged in a criminal complaint Pasil
Kalinga-Apayao, docketed as Criminal Case No. 10, entitled "People vs. Francisco
Aguac, et al."
The defendants justify their refusal to transfer the shares of stock of Francisco Aguac
in the name of the plaintiff in view of their apprehension that they might he held liable
for damages under Article 173 of the Civil Code and the ruling of the Supreme Court
in Bucoy vs. Paulino, 23 SCRA 248.
On March 5, 1970, in view of the defendant's inaction on the request for the transfer
of the stock certificate in its name, the plaintiff commenced this action before the
Court of First Instance of Manila, praying that the defendants be ordered to issue
and release the transfer stock certificate covering 62,495 shares of defendant
Batong Buhay, formerly registered in the name of Francisco Aguac, in favor of the
plaintiff, and for the recovery of compensatory, exemplary and corrective damages
and attorney's fees. A writ of preliminary mandatory injunction was prayed for to
order the defendants to issue immediately the transfer certificate covering the
aforesaid shares of stock of defendant Batong Buhay in the name of the plaintiff.
The trial court granted the prayer for the issuance of the writ of preliminary
mandatory injunction in its order of March 16, 1970. In compliance therewith, Stock
Certificate No. 16807 was cancelled and new Stock Certificate No. 27650 dated
January 5, 1970 was issued to and received by the plaintiff on July 20, 1970."
On October 28, 1971, the trial court handed down its judgment ordering the defendant (herein petitioner) to
effect the transfer of the shares covered by Stock Certificate No. 16807 in the name of herein respondent
Incoporated Mining Corporation and declaring permanent the writ of preliminary mandatory injunction issued
on March 16, 1970.
Private respondent seasonably appealed the aforesaid decision to the Court of Appeals anchored on the
lower court's alleged failure to award damages for the wrongful refusal of petitioner to transfer the subject
shares of stock and alleged failure to award attorney's fees, cost of injunction bond and expenses of
litigation.
On August 27, 1986, respondent appellate court rendered the subject decision the dispositive portion of
which has already been quoted hereinabove.
Hence, this petition.

The stipulation of facts of the parties does not at all show that private respondent intended to sell, or
would sell or would have sold the stocks in question on specified dates. While it is true that shares of stock
may go up or down in value (as in fact the concerned shares here really rose from fifteen (15) centavos to
twenty three or twenty four (23/24) centavos per share and then fell to about two (2) centavos per share, still
whatever profits could have been made are purely SPECULATIVE, for it was difficult to predict with any
decree of certainty the rise and fall in the value of the shares. Thus this Court has ruled that speculative
damages cannot be recovered.
It is easy to say now that had private respondent gained legal title to the shares, it could have sold the same
and reaped a profit of P5,624.95 but it could not do so because of petitioner's refusal to transfer the stocks
in the former's name at the time demand was made, but then it is also true that human nature, being what it
is, private respondent's officials could also have refused to sell and instead wait for expected further
increases in value.
In view of what has been said, We find no necessity to discuss the second issue.
WHEREFORE, the assailed decision and resolutions of the Court of Appeals are hereby SET ASIDE, and a
new one is hereby rendered REINSTATING the decision of the trial court. No costs.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.
Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. L-18487

August 31, 1964

GENERAL
ENTERPRISES,
vs.
LIANGA BAY LOGGING COMPANY, INC., defendant-appellant.
William
H.
Quasha
and
Sabido and Sabido Law Office for defendant-appellant.

Associates

INC., plaintiff-appellee,

for

plaintiff-appellee.

In assailing the decision of the Court of Appeals, petitioner poses the following issues:
BAUTISTA ANGELO, J.:
1. May the Court of Appeals award damages by way of unrealized profits despite the absence of supporting
evidence, or merely on the basis of pure assumption, speculation or conjecture; or can the respondent
recover damages by way of unrealized profits when it has not shown that it was damaged in any manner by
the act of petitioner?
2. May the appellate court deny the petitioner the chance to present evidence discovered after judgment
which were not only very material to its case, but would also show the untenability and illegality of private
respondent's position?
We answer the first issue in the negative.
The petitioner alleges that the appellate court gravely and categorically erred in awarding damages by way
of unrealized profit (or lucro cesante) to private respondent. Petitioner company also alleges that the claim
for unrealized profit must be duly and sufficiently established, that is, that the claimant must submit proof
that it was in fact damaged because of petitioner's act or omission.

On May 25, 1959, Lianga Bay Logging Company, Inc., a corporation duly organized under the laws of the
Philippines, and General Enterprises, Inc, another corporation, entered into a contract, herein marked as
Annex A, whereby the former, a producer of logs from a timber concession at Lianga, Surigao, designated
the latter as distributor of a portion of its log production to Korea and Europe on condition that it would pay
the distributor a commission of 13% of the gross f.o.b. value of the logs exported. In the agreement, the
Lianga Bay Logging Company, Inc. was named as Producer and the General Enterprises, Inc. as
Distributor. The pertinent provisions of the agreement are hereunder quoted:
2. DISTRIBUTOR ... obliges to obtain the bent market prices for the logs sold by it ... that the
selling price shall not be lower than the current market price, such term "current price" being the
average price received by PRODUCER on other log sales over a ninety (90) day period: "current
market price" shall, if PRODUCER requests, be subject to renegotiation every sixty (60) days
during the term of this agreement; except that such renegotiation shall not take place where firm,
long-term orders solicited by DISTRIBUTOR shall have been accepted by PRODUCER.

39
xxx

xxx

xxx

4. It is further understood that this agreement in no manner affects the existing and future barter
arrangements that PRODUCER has and will have covering logs: ...
5. DISTRIBUTOR hereby agrees and obliges to market, sell, export and dispose under this
agreement at least ONE MILLION (1,000,00) BOARD FEET BREARETON SCALE for
PRODUCER every month during the first months of the term of this agreement: and the
PRODUCER hereby agrees and obliges that each month thereafter, beginning September,
1959, PRODUCER will make available not less than 2,000,000 bd. ft. per month for export to the
sales area.
xxx

xxx

It will be necessary for us to increase our log production if we are to have available for the
sales area covered by the Agreement. To increase log production we must have additional
logging machinery. Such machinery had been available at Surigao; however, we have been
advised by our representative, who investigated the matter in Surigao, that the equipment which
we had agreed to buy had been sold to another purchaser under rather peculiar circumstances.
By reasons of, restrictions imposed by the Philippine Government we cannot barter logs (for,
among other purposes, obtaining logging machinery and equipment) but we can barter lumber
and low grade veneers. We have decided that we must take advantage of the situation and use
our lumber for barter, immediately concurrently we are taking the necessary steps to erect the
power house and veneer plant offered by a U.S. Firm. This will mean the immediate utilization
by ourselves of an excess of one million or more feet of logs per month. The net result will be
that we will not have logs for your sales area.

xxx

7. In order that PRODUCER may increase its productive capacity, DISTRIBUTOR has made
available to PRODUCER One (1) brand new TD-24 tractor, valued at approximately
P105,000.00, which PRODUCER will purchase, payment thereafter to be made in 24 or fewer
equal monthly installments DISTRIBUTOR further agrees that it will lend to PRODUCER pesos
as needed by the latter up to P95,000.00 for local purchases of logging machinery, equipment
and spare parts. PRODUCER agrees to repay any amount so loaned in twenty four (24) or less
equal monthly installments, it being understood that each loan shall be understood to be a
separate transaction. In the case of purchase of equipment, DISTRIBUTOR may retain title
thereto, until such loan has been fully repaid.

The Producer thereafter stopped supplying logs for export, whereupon the Distributor reminded the
Producer that it had a contract to fulfill relative to its log production as otherwise it would be held responsible
for the consequences of the breach that may ensue, but the Producer did not heed this reminder adducing
reasons which in its opinion justify the action it had taken, thereby causing the Distributor to initiate the
present action before the Court of First Instance of Rizal alleging breach of contract and praying for
damages both actual and compensatory.
In due time, both parties presented their evidence, and on December 8, 1960, the court a quo rendered
decision in favor of the plaintiff and against the defendant ordering the latter to pay the sum of P400,000.00
as actual damages, the sum of P100,000.00 as exemplary damages, and the sum of P400,000.00 as
attorney's fees and expenses of litigation. This is an appeal from said decision.

8. It is mutually agreed as follows:


The issues raised, stripped of non-essentials, may be summarized as follows:
(a) That if either party shall be unable, by reason of the happening of any one or more of the
causes set forth in the next succeeding paragraph marked "(b)" to carry out its obligations under
this contract, either wholly or partly, the party so failing shall give notice and full particulars of
such cause or causes in writing to the other party as soon as possible after the occurrence of
any such cause; and, thereupon, such obligation shall be suspended during the continuance of
such causes, which, however, shall be removed or remedied as soon as possible, and the
obligations terms and conditions of this contract shall be extended for such period as may be
necessary for the purpose of making good any suspension so caused:
(b) That the cause or causes of suspension herein before referred to shall be taken to mean fire,
flood, casualty, unavoidable accident, strikes, labor conditions, lockout acts of God, the
enactment of any national or local law or ordinance, or the issuance of any executive or judicial
order, the issuance of any prohibitive or restrictive order, rule or regulation by the Central Bank
of the Philippines or other government agency, accident to machinery, or any other cause not
within the control of the party making relief from any of the requirements of this contract, and
that, by the exercise of due care and diligence, the said party is unable to prevent or overcome.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of facts. 1wph1.t
9. Subject to any prior termination of this contract, the term of this contract for the distribution of
logs shall be two (2) years beginning June 1, 1959. ...
Thereupon, the parties immediately began implementing the provisions of the contract by having the
Distributor deliver to the Producer the tractor it agreed to deliver and by having the Producer deliver logs to
the Distributor for export as agreed upon. On October 27, 1959, the Producer sent a notice to the Distributor
stating that after the November shipment there will be no longer logs available for export to Korea and
Europe "unless the price of such logs become comparable to what we may expect to receive in the way of
returns from lumber and veneer of barterable and export grades", giving as reasons there for the following:

I. Is agreement Annex A valid?


II. Can the effectivity of the agreement be terminated or suspended for reasons and causes
stipulated by the parties?
III. Has appellant the right to demand negotiation of prices as provided in paragraph 2 of the
agreement, and, in the affirmative, is appellant under obligation to export thru appellee logs
during pendency of the negotiation?
IV. Has appellant the right to use its log production for barter arrangements irrespective of
Section 5 of said agreement?
V. Is appellant's obligation to make available 2,000,000 board feet of logs monthly absolute or
conditional?
VI. Is the lower court's adjudication of actual and exemplary damages and attorney's fees
justified?
VII. Did not the lower court err in not dismissing the complaint, declaring the agreement
rescinded and awarding appellant's counterclaim?
VIII. Did not the lower Court err in not allowing the amended answer?
1. Appellant claims that the agreement Annex A on which the complaint is based is null and void on the
ground that it has no cause or consideration or that it was secured thru fraud or misrepresentation. Basis of
the alleged fraud and misrepresentation is the claim that Mr. Freider, president of appellee, led appellant to
believe that he could secure for said appellant a certain Surigao logging equipment on which appellee had a

40
second mortgage and that he would place at the disposal of appellant at any time the sum of P95,000.00 by
way of loan to enable it to purchase the needed logging equipment, when appellee knew well that it did not
have such money nor could secure the Surigao logging equipment.
The claim of fraud has no basis, for while Mr. Freider stated in his testimony that the Distributor could take
steps to secure the Surigao logging equipment for the use of appellant no assurance was given that such
equipment would be acquired as a necessary incident of their contract. In fact, Mr. Dempsey, a high official
of appellant, admitted in open court that Mr. Freider merely promised to help appellant to procure or acquire
that equipment if the latter needed it, but appellant did not take any further step in this direction.
Neither can we attribute fraud to appellee's failure to grant appellant the loan of P95,000.00 for the purchase
of logging equipment, for the evidence shows that appellant did not make any demand for it. And this is
buttressed by the fact that in the five letters sent by appellant to appellee regarding the demand for
suspension of the contract it nowhere appears that the alleged failure is one of the reasons that had
motivated such suspension. Had appellee really failed to comply with such important commitment, it is
reasonable to expect that appellant would have adduced it as a reason for the unilateral suspension of the
agreement.
We also find untenable the claim that the agreement has no cause or consideration considering that the
same imposes reciprocal obligations. A perusal of the agreement would show that appellant designated
appellee as its distributor to export logs to Korea and Europe at the best market price obtainable on
condition that it would pay appellee a commission of 13% of the gross value of the logs. The cause of a
contract is the essential reason which moves the contracting parties to enter into it (8 Manresa., 5th edition,
p. 450). In other words, the cause is the immediate, direct and proximate reason which justifies the creation
of an obligation thru the will of the contracting parties (3 Castan, 4th edition, p. 347). Such being the case, it
is clear that for appellant the cause of the agreement is the distribution of its logs in the areas agreed upon
which appellee undertook to accomplish, whereas for appellee the cause is its commitment to sell or export
the logs for onerous consideration.
The contention that the essential reason which induced appellant to enter into the contract is the promise of
appellee to secure for it the Surigao logging equipment and to make available the loan of P95,000.00
likewise has no merit. In the first place, such commitment to procure the Surigao logging equipment is not
mentioned in the agreement, Annex A, though it was incidentally mentioned in the preparatory stage leading
to it, while the lending of P95,000.00 is merely a commitment made to appellant to help it purchase some
logging equipment to increase its productive capacity, if it may so require, but it has never been considered
as part of the cause of the agreement. In fact, as already stated, no such requirement or demand was ever
made by appellant. No doubt is entertained that if such demand where made appellee would have gladly
granted the loan in the same manner it readily delivered to appellant the brand new TD-24 tractor valued at
P105,000.00 mentioned in paragraph 7 of the agreement.
Finally, no weight can be given to the claim that because it was not explicity expressed in the agreement
that appellee has the corresponding obligation to sell and export the additional 2,000,000 board feet
appellant agreed to make available for export beginning September, 1959, that portion of the agreement has
no consideration, for such could clearly be inferred from a mere perusal of the whole paragraph 5 of the
agreement. It is explicit therein that appellee bound itself to export abroad whatever may be produced in the
form of logs by appellant during the first months of the agreement, as well as those that may be produced
thereafter, and it should not be forgotten that the term of the agreement is two years beginning June 1, 1959
(paragraph 9). Indeed, there is no point for appellant to agree to make available additional 2,000,000 board
feet beginning September, 1959 if appellee should not be given the corresponding commitment to export
under the same terms agreed upon in connection with previous production. A contrary interpretation would
be irrational and absurd.
II. This issue refers to the interpretation of paragraph 8 of the agreement which reads:
8. It is mutually agreed as follows:
(a) That if either party shall be unable, by reason of the happening of any one or more of the
causes set forth in the next succeeding paragraph marked "(b)" to carry out its obligations under
this contract, either wholly or partly the party so failing shall give notice and full particulars of

such cause or causes in writing to the other party as soon as possible after the occurrence
of any such cause; and, thereupon, such obligation shall be suspended during the continuance
of such cause, which however, shall be removed or remedied as soon as possible, and the
obligations, terms and conditions of this contract shall be extended for such period as may be
necessary for the purpose of making good any suspension so caused:
(b) That the cause or causes of suspension herein before referred to shall be taken to mean fire,
flood, casualty, unavoidable accident, strikes, labor conditions, lockouts, acts of God, the
enactment of any national or local law or ordinance, or the issuance of any executive or judicial
order, the issuance of any prohibitive or restrictive order, rule or regulation by the Central Bank
of the Philippines or other government agency, accident to machinery, or any other cause not
within the control of the party making relief from any of the requirements of this contract, and
that, by the exercise of due care and diligence, the said party is unable to prevent or overcome.
Based on the foregoing stipulation, appellant served on appellee notices of suspension of the operation of
said agreement for reasons stated in said notices. These notices are embodied in the following exhibits:
Exhibit 2, notice of October 27, 1959; Exhibit 2-A, notice of November 7, 1959; Exhibit 2-B, notice of
November 23, 1959; Exhibit 2-C, notice of February 23, 1960; and Exhibit 3, notice of December 11, 1959.
In the notice of October 27, 1959, appellant made it clear to appellee that because of restrictions imposed
by the Philippine government it can no longer barter logs for the purpose of obtaining logging equipment
and without such logging equipment it cannot make available to appellee any quantity of logs.
In the notice of November 7, 1959, appellant demanded a renegotiation on the question of prices for, unless
it can obtain a higher price, its only alternative would be to convert its log production into lumber in order to
buy the logging machinery needed to increase its production.
In the notice of November 23, 1959, appellant advised appellee that because of breakdowns of machinery
and equipment and its inability to secure spare parts replacements and wire ropes as a result of the steel
strike in the United States it has to suspend its shipment of logs.
In the notice of February 23, 1960, appellant advised appellee that the enactment of the Margin Law has
made it impossible for it to acquire the additional machinery to increase its production and unless the same
is repealed it would be very difficult for it to produce additional logs for appellee.
In the notice of December 11, 1959, appellant made it clear to appellee that because of the conditions
specified in its license agreement No. 40 with the Philippine government it becomes imperative for it to
increase production and to establish a veneer plant.
The court a quo said on this issue the following:
With respect to the defendant's claim of the adverse effects of the Barter Law and the Margin
Law, the Court cannot find sufficient reason to believe that the effectivity of said law would bring
defendant's production to such a stale condition as to justify its acquittance from its contractual
obligations. ... The other allegations of the defendant regarding the impassable roads caused by
the rainy season, the steel strike and the like have not been substantiated by evidence to the
effect that the operations of the defendant corporation in the production of logs have been
substantially or wholly impeded. In other words, although it cannot be denied that some of the
causes set up by the defendant are fortuitous and beyond man's control, nevertheless, they
failed to show it causal relation with any substantial impairment of its operations, such that it
could not possibly comply with its obligations as agreed upon. ...
Even assuming that the restrictions imposed by the government on barter, the breakdown of machineries
and the inability to secure spare parts, replacements and wire ropes, as well as the passage of the Margin
Law, have the nature of fortuitous events, yet it cannot be said that they had caused such a reduction in
appellant's production of logs that made it impossible for it to comply wholly, or even partly, with its
commitment with appellee. The rule is that even the happening of a fortuitous event in itself does not
necessarily extinguish an obligation for, as this Court has said, the fortuitous event must be of such a

41
character as to render it impossible for the obligor to fulfill his obligation in a normal manner (Lassam v.
Smith, 45 Phil. 990). And here such is not the situation. Thus, Mr. Dempsey, a high official of appellant,
testified that appellant made deliveries of logs in the months of June, July, August, 1959, and even in
October, 1959, in spite of the causes which appellant said have affected the operation of its log production.
Again, in Mr. Dempsey's letter dated October 27, 1959, he stand that appellant has "an excess of one
million or more board feet or logs per month," and in an application filed with the Central Bank for a
$500,000.00 loan from a Japanese entity Mr. Dempsey admitted that Lianga agreed to supply the Japanese
buyers 200,000,000 board feet of logs during a five-year period. And during the trial counsel for appellant
admitted that appellant sold to other parties a portion of its log production even if it failed to deliver the logs
committed to appellee. These facts eloquently support the finding of the court a quo on the matter.
One of the causes for the suspension of the agreement alleged by appellant was the demand for the
renegotiation of prices provided in paragraph 2 of the agreement. Another reason advanced is the
establishment of a veneer plant for the purpose of increasing the log production. But these two matters are
not among the various causes of suspension enumerated in paragraph 8 of the agreement. The
suspension, therefore, of the contract on these causes is not justified.
III. This issue refers to the portion of paragraph 2 of the agreement which provides that "'current market
price' shall, if PRODUCER requests, be subject to renegotiation every sixty (60) days during the term of this
agreement; except that such renegotiation shall not take place where firm, long-term orders solicited by
DISTRIBUTOR shall have been accepted by PRODUCER."
Appellant contends that under the above provision it has the right to demand a renegotiation of the prices at
any time during the existence of the contract, the only exception being when there has been a fixed, longterm orders that had already been solicited and accepted and that pending such renegotiation the operation
of the contract shall be suspended. And such demand having been made, appellant says it has the right to
suspend the operation until the renegotiation has been made. But this contention is based on a wrong
premise. The exception regarding long-term orders solicited and accepted refers to renegotiation and not to
suspension. As already indicated elsewhere, this right of renegotiation, although expressly admitted, is not
however one of the causes by which appellant could suspend the operation of the contract. Apparently, the
reason why appellee did not heed the demand is that appellant has not been able to indicate that it could
obtain better prices than what appellee had secured in selling its logs for sometime.
IV. This issue refers to the alleged right of appellant to use its log production for barter arrangements. The
pertinent provision is: "It is further understood that this agreement in no manner affects the existing and
future barter arrangements that PRODUCER has and will have covering logs." As may be seen, this
provision refers to the right of appellant to use its logs for barter purposes, but not to make use of them for
other purposes as the one indicated by it. Hence, appellant's claim that it has a right to convert its logs into
lumber and low grade veneer and to make these objects subject of barter arrangements does not come
within the purview of the agreement.
V. This issue refers to that portion of the agreement which requires appellant to make available to appellee
2,000,000 board feet of logs monthly beginning September, 1959. Appellant claims that its obligation under
this provision is only potestative and not compulsory, and this claim is based upon the fact that in preparing
the provision in question the words "shall reserve" and "first board feet" which appear in a similar contract
with Basilan Lumber Company which was taken as basis were eliminated thereby revealing the intention to
make the availability of the 2,000,000 board feet optional or dependent upon the will of appellant.
This claim may be correct if interpreted in the sense that appellant may take the 2,000,000 board feet from
any of the logs that may be produced by it, which may be either the first one or the subsequent ones, but is
untenable in the sense that by such elimination the availability was made dependent upon the exclusive will
of appellant. If such were the intention such would have been made to appear therein. No such intention
appears. The most that can be said is that the provision is ambiguous and the ambiguity should be resolved
against appellant whose counsel has been consulted in the preparation of the contract. The claim,
furthermore, would make the fulfillment of the contract dependent upon the exclusive will of appellant which
our law abhors (Article 1308, new Civil Code).
The contention that the availability of the additional 2,000,000 board feet is subject to the fulfillment of two
conditions, namely, the acquisition of the Surigao logging equipment, and the lending of P95,000.00 for
purchase of equipment and spare parts, cannot also be entertained, not only because said alleged

precedent conditions do not appear in the agreement, but also because they were merely discretionary
in the sense that they are subject to whatever negotiation the parties may undertake thereon, as already
stated elsewhere. We have already adverted to that the provision requiring the availability of the additional
2,000,000 board feet of logs calls for a counter obligation on the part of appellee to sell, export and dispose
of the same under the same terms and conditions it bound itself to undertake in connection with prior
production of logs.
VI. Appellant avers that Exhibit K, dated February 1960, and Exhibit L, dated February 12, 1960, are letters
supposed to have been written to Karl Nathan, vice president of appellee and were dated after the filing of
the instant complaint thereby giving the impression that they are mere self-serving evidences. The
signatures of said letters were not identified. Appellant did not even have a chance to cross-examine the
alleged senders thereof, and even if opportune objection was interposed to their admission, the trial court
admitted them as part of Mr. Freider's testimony. This is now assigned as error.
Exhibit K is a letter purporting to have been sent by Daiil Enterprises, Co., Ltd. in Seoul, Korea on February
3, 1960 to Mr. Karl Nathan of appellee complaining of the small quantity of logs shipped by appellant in spite
of the assurance that Daiil Enterprises "could count on substantial amount of supply from Lianga area in
addition to the usual sources of supply." Exhibit L is a letter purporting to have been sent by Tong Myung
Timber Lumber Company in Pusan, Korea on February 12, 1960 to Mr. Karl Nathan of appellee complaining
of the latter's decreasing supply of logs in spite of its promise "to supply us with 1,000 MBF or more per
month from either Milbul or Lianga." These letters apparently were presented in evidence to show that
appellee had orders of logs from areas that are covered by the contract but which were not met because of
the failure of appellant to supply them.
There is merit in appellant's contention it appearing that these exhibits were not properly identified and
apparently were received after appellee had conceived filing the instant complaint. Under Section 21 of Rule
132 of our Rules of Court, "before any private writing may be received in evidence, its due execution and
authenticity must be proved." And the rule is that when there is no proof as to the authenticity of the writer's
signature appearing in a private document, such private document should be excluded (Paz V. Santiago, 47
Phil. 334; Alejandro v. Reyes, 53 Phil. 973). Verily, the court a quo erred in admitting said exhibits as part of
appellees evidence.
Regarding the actual damages awarded to, appellee, appellant contends that they are unwarranted
inasmuch as appellee has failed to adduce any evidence to substantiate them even assuming arguendo that
appellant has failed to supply the additional monthly 2,000,000 board feet for the remainder of the period
agreed upon in the contract Exhibit A. Appellant maintains that for appellee to be entitled to demand
payment of sales that for appellee to be entitled to demand payment of sales that were not effected it should
have proved (1) that there are actual sales made of appellee's logs which were not fulfilled, (2) that it had
obtained the best price for such sales, (3) that there are buyers ready to buy at such price stating the
volume they are ready to buy, and (4) appellee could not cover the sales from the logs of other suppliers.
Since these facts were not proven, appellee's right to unearned commissions must fail.
This argument must be overruled in the light of the law and evidence on the latter. Under Article 2200 of the
Civil Code, indemnification for damages comprehends not only the value of the loss suffered but also at of
the profits which the creditor fails to obtain. In other words, lucrum cessans is also a basis for
indemnification. The question then that arises is: Has appellee failed to make profits because of appellant's
breach of contract, and in the affirmative, is there here basis for determining with reasonable certainty such
unearned profits?
Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract in question the
following board feet of logs, Breareton Scale:

Months

Board Feet

From June to August 1959

3,007,435

September, 1959

none

42
October, 1959

2,299,805

November, 1959

801,021

December, 1959

1,297,510

Total

7,405,861
=========

Republic
SUPREME
Manila

of

11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the agreed
F.O.B. price was P799,319.00; the commission at 13% (F.O.B.) is P117,859.54. But, as there
were always two prices. Invoice F.O.B. price and F.O.B. price as per contract, because of the
sales difference amounting to P31,920.18, and the same was deducted from the commission,
the commission, actually paid to plaintiff General is only P79.580.82.
It appears, therefore, that during the period of June to December, 1959, in spite of the short delivery
incurred by appellant, appellee had been earning its commission whenever logs were delivered to it. But
from January, 1960, appellee has ceased to earn any commission because appellant failed to deliver any
log in violation of their agreement. Had appellant continued to deliver the logs as it was bound to pursuant to
the agreement it is reasonable to expect that it would have continued earning its commission in much the
same manner as it used to in connection with the previous shipments of logs, which clearly indicates that it
failed to earn the commissions it should earn during this period of time. And this commission is not difficult
to estimate. Thus, during the seventeen remaining months of the contract, at the rate of at least 2,000,000
board feet, appellant should have delivered thirty-four million board feet. If we take the number of board feet
delivered during the months prior to the interruption, namely, 7,405,861 board feet, and the commission
received by appellee thereon, which amounts to P79,580,82, we would have that appellee received a
commission of P.0107456 per board feet. Multiplying 34 million board feet by P.0107456, the product is
P365,350.40, which represents the lucrum cessans that should accrue to appellee. The award therefore,
made by the court a quo of the amount of P400,000.00 as compensatory damages is not speculative, but
based on reasonable estimate.
We believes however, that the amount of P100,000.00 awarded to appellee as exemplary damages is
somewhat excessive it appearing that appellant is suspending the operation of the contract has not acted in
a wanton, oppressive or malevolent manner to deserve such a heavy punishment within the purview of the
law (Article 2232, new Civil Code). The most that can be said is that appellant, to suit its purpose, has
availed to certain misstatements or half truths as reflected in the declarations of Mr. Dempsey, one of its
high officials, in an attempt to justify its desistance from the contract. While this is reprehensible, it is not a
wanton or malevolent perversion of the truth. Hence, the award should be mitigated and in our opinion the
amount of P50,000.00 is a reasonable exemplary penalty.
We also find reasonable the amount awarded by the court a quo as attorney's fees considering the
importance of this litigation and the amount of time and effort therein involved. This is justified under Article
2208 of the Civil Code.
The other issues raised being merely a sequel to those we have heretofore discussed, further consideration
thereof is unnecessary.
WHEREFORE, the decision appealed from is hereby modified by awarding to appellee only the amount of
P50,000.00 as exemplary damages. In all other respects, the decision is affirmed, with costs.
Bengzon C.J., Concepcion, Reyes, J.B.L., Paredes, Regala and Makalintal, JJ., concur.

Philippines
COURT

FIRST DIVISION
G.R. No. 152040

The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims that in less than six
months' time appellee received by way of commission the amount of P117,859.54, while in its
memorandum, appellant makes the following statement:

the

March 31, 2006

MARIKINA AUTO LINE TRANSPORT CORPORATION and FREDDIE L. SUELTO, Petitioners,


vs.
PEOPLE OF THE PHILIPPINES and ERLINDA V. VALDELLON, Respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals (CA) in CAG.R. CR No. 16739 affirming the Joint Decision of the Regional Trial Court (RTC) in Criminal Case No. Q93-42629 and Civil Case No. Q-93-16051, where Freddie Suelto was convicted of reckless imprudence
resulting in damages to property.
Erlinda V. Valdellon is the owner of a two-door commercial apartment located at No. 31 Kamias Road,
Quezon City. The Marikina Auto Line Transport Corporation (MALTC) is the owner-operator of a passenger
bus with Plate Number NCV-849. Suelto, its employee, was assigned as the regular driver of the bus. 2
At around 2:00 p.m. on October 3, 1992, Suelto was driving the aforementioned passenger bus along
Kamias Road, Kamuning, Quezon City, going towards Epifanio de los Santos Avenue (EDSA). The bus
suddenly swerved to the right and struck the terrace of the commercial apartment owned by Valdellon
located along Kamuning Road.3 Upon Valdellons request, the court ordered Sergio Pontiveros, the Senior
Building Inspection Officer of the City Engineers Office, to inspect the damaged terrace. Pontiveros
submitted a report enumerating and describing the damages:
(1) The front exterior and the right side concrete columns of the covered terrace were vertically
displaced from its original position causing exposure of the vertical reinforcement.
(2) The beams supporting the roof and parapet walls are found with cracks on top of the
displaced columns.
(3) The 6 CHB walls at [the] right side of the covered terrace were found with cracks caused by
this accident.
(4) The front iron grills and concrete balusters were found totally damaged and the later [sic]
beyond repair.4
He recommended that since the structural members made of concrete had been displaced, the terrace
would have to be demolished "to keep its monolithicness, and to insure the safety and stability of the
building."5
Photographs6 of the damaged terrace were taken. Valdellon commissioned Engr. Jesus R. Regal, Jr. to
estimate the cost of repairs, inclusive of labor and painting, and the latter pegged the cost at P171,088.46.7
In a letter dated October 19, 1992 addressed to the bus company and Suelto, Valdellon demanded payment
ofP148,440.00, within 10 days from receipt thereof, to cover the cost of the damage to the terrace. 8 The bus
company and Suelto offered a P30,000.00 settlement which Valdellon refused. 9

43
Valdellon filed a criminal complaint for reckless imprudence resulting in damage to property against Suelto.
After the requisite preliminary investigation, an Information was filed with the RTC of Quezon City. The
accusatory portion of the Information reads:
That on or about the 3rd day of October 1992, in Quezon City, Philippines, the said accused, being then the
driver and/or person in charge of a Marikina Auto Line bus bearing Plate No. NVC-849, did then and there
unlawfully, and feloniously drive, manage, and operate the same along Kamias Road, in said City, in a
careless, reckless, negligent, and imprudent manner, by then and there making the said vehicle run at a
speed greater than was reasonable and proper without taking the necessary precaution to avoid accident to
person/s and damage to property, and considering the condition of the traffic at said place at the time,
causing as a consequence of his said carelessness, negligence, imprudence and lack of precaution, the
said vehicle so driven, managed and operated by him to hit and bump, as in fact it hit and bump a
commercial apartment belonging to ERLINDA V. VALDELLON located at No. 31 Kamias Road, this City,
thereby causing damages to said apartment in the total amount of P171,088.46, Philippine Currency, to her
damage and prejudice in the total amount aforementioned.
CONTRARY TO LAW.10
Valdellon also filed a separate civil complaint against Suelto and the bus company for damages. She prayed
that after due proceedings, judgment be rendered in her favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court to issue a writ of preliminary attachment
against the defendants upon approval of plaintiffs bond, and after trial on the merits, to render a decision in
favor of the plaintiff, ordering the defendants, jointly and severally, to pay

passenger jeepney suddenly crossed from EDSA going to V. Luna and swerved to the lane occupied
by the bus. Suelto had to swerve the bus to the right upon which it hit the side front of the terrace of
Valdellons two-door apartment.16 Based on his estimate, the cost to the damage on the terrace of the
apartment amounted to P40,000.00.17 On cross-examination, Suelto declared that he saw the passenger
jeepney when it was a meter away from the bus. Before then, he had seen some passenger jeepneys on
the right trying to overtake one another.18
Architect Arnulfo Galapate testified that the cost of the repair of the damaged terrace amounted
to P55,000.00.19
On April 28, 1994, the trial court rendered judgment finding Suelto guilty beyond reasonable doubt of
reckless imprudence resulting in damage to property, and ordered MALTC and Suelto to pay, jointly and
severally,P150,000.00 to Valdellon, by way of actual and compensatory damages, as well as attorneys fees
and costs of suit. The fallo of the decision reads:
WHEREFORE, finding the accused FREDDIE SUELTO Y LIWAG guilty beyond reasonable doubt of the
crime of Reckless Imprudence Resulting in Damage to Property, said accused is hereby sentenced to suffer
imprisonment of ONE (1) YEAR.
With respect to the civil liability, judgment is hereby rendered in favor of plaintiff Erlinda Valdellon and
against defendant Marikina Auto Line Transport Corporation and accused Freddie Suelto, where both are
ordered, jointly and severally, to pay plaintiff:
a. the sum of P150,000.00, as reasonable compensation sustained by plaintiff for her damaged
apartment;

a) the total sum of P171,088.46 constituting the expenses for the repair of the damaged
apartment of plaintiff, with interests to be charged thereon at the legal rate from the date of the
formal demand until the whole obligation is fully paid;

b. the sum of P20,000.00, as compensatory and exemplary damages;

b) the sum of not less than P20,000.00 each as compensatory and exemplary damages;

c. the sum of P20,000.00, as attorneys fees; and,

c) the sum of P20,000.00 as attorneys fees and the sum of P1,000.00 for each appearance of
plaintiffs counsel; and costs of suit;

d. the costs of suit.


SO ORDERED.20

PLAINTIFF further prays for such other reliefs as may be just and equitable in the premises. 11
A joint trial of the two cases was ordered by the trial court. 12
The trial court conducted an ocular inspection of the damaged terrace, where defendants offered to have it
repaired and restored to its original state. Valdellon, however, disagreed because she wanted the building
demolished to give way for the construction of a new one. 13
During the trial, Valdellon testified on the damage caused to the terrace of her apartment, and, in support
thereof, adduced in evidence a receipt for P35,000.00, dated October 20, 1993, issued by the BB
Construction and Steel Fabricator for "carpentry, masonry, welding job and electrical [work]." 14
Pontiveros of the Office of the City Engineer testified that there was a need to change the column of the
terrace, but that the building should also be demolished because "if concrete is destroyed, [one] cannot
have it restored to its original position."15
Engr. Jesus Regal, Jr., the proprietor of the SSP Construction, declared that he inspected the terrace and
estimated the cost of repairs, including labor, at P171,088.46.
Suelto testified that at 2:00 p.m. on October 3, 1992, he was driving the bus on its way to Ayala Avenue,
Makati, Metro Manila. When he reached the corner of K-H Street at Kamias Road, Quezon City, a

MALTC and Suelto, now appellants, appealed the decision to the CA, alleging that the prosecution failed to
prove Sueltos guilt beyond reasonable doubt. They averred that the prosecution merely relied on Valdellon,
who testified only on the damage caused to the terrace of her apartment which appellants also alleged was
excessive. Appellant Suelto further alleged that he should be acquitted in the criminal case for the
prosecutions failure to prove his guilt beyond reasonable doubt. He maintained that, in an emergency case,
he was not, in law, negligent. Even if the appellate court affirmed his conviction, the penalty of imprisonment
imposed on him by the trial court is contrary to law.
In its Brief for the People of the Philippines, the Office of the Solicitor General (OSG) submitted that the
appealed decision should be affirmed with modification. On Sueltos claim that the prosecution failed to
prove his guilt for the crime of reckless imprudence resulting in damage to property, the OSG contended
that, applying the principle of res ipsa loquitur, the prosecution was able to prove that he drove the bus with
negligence and recklessness. The OSG averred that the prosecution was able to prove that Sueltos act of
swerving the bus to the right was the cause of damage to the terrace of Valdellons apartment, and in the
absence of an explanation to the contrary, the accident was evidently due to appellants want of care.
Consequently, the OSG posited, the burden was on the appellant to prove that, in swerving the bus to the
right, he acted on an emergency, and failed to discharge this burden. However, the OSG averred that the
trial court erred in sentencing appellant to a straight penalty of one year, and recommended a penalty of
fine.
On June 20, 2000, the CA rendered judgment affirming the decision of the trial court, but the award for
actual damages was reduced to P100,000.00. The fallo of the decision reads:

44
WHEREFORE, premises considered, the decision dated April 28, 1994, rendered by the court a quo is
AFFIRMED with the modification that the sum of P150,000.00 as compensation sustained by the plaintiffappellee for her damaged apartment be reduced to P100,000.00 without pronouncement as to costs.
SO ORDERED.21

SEC. 37. Driving on right side of highway. Unless a different course of action is required in the
interest of the safety and the security of life, person or property, or because of unreasonable difficulty of
operation in compliance herewith, every person operating a motor vehicle or an animal-drawn vehicle on a
highway shall pass to the right when meeting persons or vehicles coming toward him, and to the left when
overtaking persons or vehicles going the same direction, and when turning to the left in going from one
highway to another, every vehicle shall be conducted to the right of the center of the intersection of the
highway.

Appellants filed a Motion for Reconsideration, but the CA denied the same. 22
Section 35 of the law provides, thus:
MALTC and Suelto, now petitioners, filed the instant petition reiterating its submissions in the CA: (a) the
prosecution failed to prove the crime charged against petitioner Suelto; (b) the prosecution failed to adduce
evidence to prove that respondent suffered actual damages in the amount of P100,000.00; and (c) the trial
court erred in sentencing petitioner Suelto to one (1) year prison term.
On the first issue, petitioners aver that the prosecution was mandated to prove that petitioner Suelto acted
with recklessness in swerving the bus to the right thereby hitting the terrace of private respondents
apartment. However, the prosecution failed to discharge its burden. On the other hand, petitioner Suelto
was able to prove that he acted in an emergency when a passenger jeepney coming from EDSA towards
the direction of the bus overtook another vehicle and, in the process, intruded into the lane of the bus.
On the second issue, petitioners insist that private respondent was able to prove only the amount
of P35,000.00 by way of actual damages; hence, the award of P100,000.00 is barren of factual basis.
On the third issue, petitioner Suelto posits that the straight penalty of imprisonment recommended by the
trial court, and affirmed by the CA, is contrary to Article 365 of the Revised Penal Code.
The petition is partially granted.
On the first issue, we find and so resolve that respondent People of the Philippines was able to prove
beyond reasonable doubt that petitioner Suelto swerved the bus to the right with recklessness, thereby
causing damage to the terrace of private respondents apartment. Although she did not testify to seeing the
incident as it happened, petitioner Suelto himself admitted this in his answer to the complaint in Civil Case
No. Q-93-16051, and when he testified in the trial court.
Suelto narrated that he suddenly swerved the bus to the right of the road causing it to hit the column of the
terrace of private respondent. Petitioners were burdened to prove that the damage to the terrace of private
respondent was not the fault of petitioner Suelto.
We have reviewed the evidence on record and find that, as ruled by the trial court and the appellate court,
petitioners failed to prove that petitioner acted on an emergency caused by the sudden intrusion of a
passenger jeepney into the lane of the bus he was driving.
It was the burden of petitioners herein to prove petitioner Sueltos defense that he acted on an emergency,
that is, he had to swerve the bus to the right to avoid colliding with a passenger jeep coming from EDSA that
had overtaken another vehicle and intruded into the lane of the bus. The sudden emergency rule was
enunciated by this Court in Gan v. Court of Appeals, 23 thus:
[O]ne who suddenly finds himself in a place of danger, and is required to act without time to consider the
best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to
adopt what subsequently and upon reflection may appear to have been a better method unless the
emergency in which he finds himself is brought about by his own negligence.
Under Section 37 of Republic Act No. 4136, as amended, otherwise known as the Land Transportation and
Traffic Code, motorists are mandated to drive and operate vehicles on the right side of the road or highway:

Sec. 35. Restriction as to speed.(a) Any person driving a motor vehicle on a highway shall drive the same
at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for
the traffic, the width of the highway, and of any other condition then and there existing; and no person shall
drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any
person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear
distance ahead (emphasis supplied).
In relation thereto, Article 2185 of the New 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 mishap, he was
violating any traffic regulation." By his own admission, petitioner Suelto violated the Land Transportation and
Traffic Code when he suddenly swerved the bus to the right, thereby causing damage to the property of
private respondent.
However, the trial court correctly rejected petitioner Sueltos defense, in light of his contradictory testimony
vis--vis his Counter-Affidavit submitted during the preliminary investigation:
It is clear from the photographs submitted by the prosecution (Exhs. C, D, G, H & I) that the commercial
apartment of Dr. Valdellon sustained heavy damage caused by the bus being driven by Suelto. "It seems
highly improbable that the said damages were not caused by a strong impact. And, it is quite reasonable to
conclude that, at the time of the impact, the bus was traveling at a high speed when Suelto tried to avoid the
passenger jeepney." Such a conclusion finds support in the decision of the Supreme Court in People vs.
Ison, 173 SCRA 118, where the Court stated that "physical evidence is of the highest order. It speaks more
eloquently than a hundred witnesses." The pictures submitted do not lie, having been taken immediately
after the incident. The damages could not have been caused except by a speeding bus. Had the accused
not been speeding, he could have easily reduced his speed and come to a full stop when he noticed the
jeep. Were he more prudent in driving, he could have avoided the incident or even if he could not avoid the
incident, the damages would have been less severe.
In addition to this, the accused has made conflicting statements in his counter-affidavit and his testimony in
court. In the former, he stated that the reason why he swerved to the right was because he wanted to avoid
the passenger jeepney in front of him that made a sudden stop. But, in his testimony in court, he said that it
was to avoid a passenger jeepney coming from EDSA that was overtaking by occupying his lane. Such
glaring inconsistencies on material points render the testimony of the witness doubtful and shatter his
credibility. Furthermore, the variance between testimony and prior statements renders the witness
unreliable. Such inconsistency results in the loss in the credibility of the witness and his testimony as to his
prudence and diligence.
As already maintained and concluded, the severe damages sustained could not have resulted had the
accused acted as a reasonable and prudent man would. The accused was not diligent as he claims to be.
What is more probable is that the accused had to swerve to the right and hit the commercial apartment of
the plaintiff because he could not make a full stop as he was driving too fast in a usually crowded street. 24
Moreover, if the claim of petitioners were true, they should have filed a third-party complaint against the
driver of the offending passenger jeepney and the owner/operator thereof.
Petitioner Sueltos reliance on the sudden emergency rule to escape conviction for the crime charged and
his civil liabilities based thereon is, thus, futile.

45
On the second issue, we agree with the contention of petitioners that respondents failed to prove that the
damages to the terrace caused by the incident amounted to P100,000.00. The only evidence adduced by
respondents to prove actual damages claimed by private respondent were the summary computation of
damage made by Engr. Jesus R. Regal, Jr. amounting to P171,088.46 and the receipt issued by the BB
Construction and Steel Fabricator to private respondent for P35,000.00 representing cost for carpentry
works, masonry, welding, and electrical works. Respondents failed to present Regal to testify on his
estimation. In its five-page decision, the trial court awardedP150,000.00 as actual damages to private
respondent but failed to state the factual basis for such award. Indeed, the trial court merely declared in the
decretal portion of its decision that the "sum of P150,000.00 as reasonable compensation sustained by
plaintiff for her damaged apartment." The appellate court, for its part, failed to explain how it arrived at the
amount of P100,000.00 in its three-page decision. Thus, the appellate court merely declared:
With respect to the civil liability of the appellants, they contend that there was no urgent necessity to
completely demolish the apartment in question considering the nature of the damages sustained as a result
of the accident. Consequently, appellants continue, the award of P150,000.00 as compensation sustained
by the plaintiff-appellee for her damaged apartment is an unconscionable amount.

While claimants bare testimonial assertions in support of their claims for damages should not be
discarded altogether, however, the same should be admitted with extreme caution. Their testimonies should
be viewed in light of claimants self-interest, hence, should not be taken as gospel truth. Such assertion
should be buttressed by independent evidence. In the language of the Court:
For this reason, Del Rosarios 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 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 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. We must,
therefore, examine the documentary evidence presented to support Del Rosarios claim as regards the
amount of losses.30
An estimate of the damage cost will not suffice:

The damaged portions of the apartment in question are not disputed.


Considering the aforesaid damages which are the direct result of the accident, the reasonable, and
adequate compensation due is hereby fixed at P100,000.00.25
Under Article 2199 of the New Civil Code, actual damages include all the natural and probable
consequences of the act or omission complained of, classified as one for the loss of what a person already
possesses (dao emergente) and the other, for the failure to receive, as a benefit, that which would have
pertained to him (lucro cesante). As expostulated by the Court in PNOC Shipping and Transport Corporation
v. Court of Appeals:26
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. In actions based on torts or quasi-delicts, actual damages include all the natural and probable
consequences of the act or omission complained of. There are two kinds of actual or compensatory
damages: one is the loss of what a person already possesses (dao emergente), and the other is the failure
to receive as a benefit that which would have pertained to him (lucro cesante). 27
The burden of proof is on the party who would be defeated if no evidence would be presented on either
side. The burden is to establish ones 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. Actual damages are not presumed. The
claimant must prove the actual amount of loss with a reasonable degree of certainty premised upon
competent proof and on the best evidence obtainable. Specific facts that could afford a basis for measuring
whatever compensatory or actual damages are borne must be pointed out. Actual damages cannot be
anchored on mere surmises, speculations or conjectures. As the Court declared:
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. 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. 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. 28
The Court further declared that "where goods are destroyed by the wrongful act of defendant, the plaintiff is
entitled to their value at the time of the 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
the use during the period before replacement.29

Private respondents failed to adduce adequate and competent proof of the pecuniary loss they actually
incurred. It is not enough that the damage be capable of proof but must be actually proved with a
reasonable degree of certainty, pointing out specific facts that afford a basis for measuring whatever
compensatory damages are borne. Private respondents merely sustained an estimated amount needed for
the repair of the roof of their subject building. What is more, whether the necessary repairs were caused
only by petitioners alleged negligence in the maintenance of its school building, or included the ordinary
wear and tear of the house itself, is an essential question that remains indeterminable. 31
We note, however, that petitioners adduced evidence that, in their view, the cost of the damage to the
terrace of private respondent would amount to P55,000.00.32 Accordingly, private respondent is entitled
to P55,000.00 actual damages.
We also agree with petitioner Sueltos contention that the trial court erred in sentencing him to suffer a
straight penalty of one (1) year. This is so because under the third paragraph of Article 365 of the Revised
Penal Code, the offender must be sentenced to pay a fine when the execution of the act shall have only
resulted in damage to property. The said provision reads in full:
ART. 365. Imprudence and negligence. Any person who, by reckless imprudence, shall commit any act
which, had it been intentional, would constitute a grave felony, shall suffer the penalty of arresto mayor in its
maximum period, to prision correccional in its medium period; if it would have constituted a less grave
felony, the penalty of arresto mayor in its minimum and medium periods shall be imposed; if it would have
constituted a light felony, the penalty of arresto menor in its maximum period shall be imposed.
Any person who, by simple imprudence or negligence, shall commit an act which would, otherwise,
constitute a grave felony, shall suffer the penalty of arresto mayor in its medium and maximum periods; if it
would have constituted a less serious felony, the penalty of arresto mayor in its minimum period shall be
imposed.
When the execution of the act covered by this article shall have only resulted in damage to the property of
another, the offender shall be punished by a fine ranging from an amount equal to the value of said
damages to three times such value, but which shall in no case be less than 25 pesos.
A fine not exceeding two hundred pesos and censure shall be imposed upon any person who, by simple
imprudence or negligence, shall cause some wrong which, if done maliciously, would have constituted a
light felony.
In the imposition of these penalties, the courts shall exercise their sound discretion, without regard to the
rules prescribed in Article 64 (Emphasis supplied).

46
In the present case, the only damage caused by petitioner Sueltos act was to the terrace of private
respondents apartment, costing P55,000.00. Consequently, petitioners contention that the CA erred in
awarding P100,000.00 by way of actual damages to private respondent is correct. We agree that private
respondent is entitled to exemplary damages, and find that the award given by the trial court, as affirmed by
the CA, is reasonable. Considering the attendant circumstances, we rule that private respondent Valdellon
is entitled to only P20,000.00 by way of exemplary damages.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The joint decision of the
Regional Trial Court of Quezon City is AFFIRMED WITH THE MODIFICATION that petitioner Suelto is
sentenced to pay a fine of P55,000.00 with subsidiary imprisonment in case of insolvency. Petitioners are
ORDERED to pay to Erlinda V. Valdellon, jointly and severally, the total amount of P55,000.00 by way of
actual damages, and P20,000.00 by way of exemplary damages.

bearing Plate No. NYG-363 in a reckless and imprudent manner, bumped and hit a 1991
Mitsubishi Lancer GLX bearing Plate No. TAJ-796, a photocopy of the police report is attached
hereto and made an integral part hereof as Annex A.
3. The subject Mitsubishi Lancer which is owned by Rodelene Valentino was insured for loss
and damage with plaintiff [Standard Insurance Co. Inc.] for P450,000.00, a photocopy of the
insurance policy is attached hereto and made an integral part hereof as Annex B.
4. Defendant RCJ Bus Lines, Inc. is the registered owner of the Passenger Bus bearing Plate
No. NYG-363 while defendant Flor Mangoba was the driver of the subject Passenger Bus when
the accident took place.
5. As a direct and proximate cause of the vehicular accident, the Mitsubishi Lancer was
extensively damaged, the costs of repairs of which were borne by the plaintiff [Standard
Insurance Co. Inc.] at a cost ofP162,151.22.

No pronouncement as to costs.
SO ORDERED.
Republic
SUPREME
Manila

of

the

Philippines
COURT

7. After plaintiff [Standard Insurance Co. Inc.] has complied with its obligation under the policy
mentioned above, plaintiffs assured executed in plaintiffs favor a Release of Claim thereby
subrogating the latter to all his rights of recovery on all claims, demands and rights of action on
account of loss, damage or injury as a consequence of the accident from any person liable
therefor.

SECOND DIVISION
G.R. No. 193629

August 17, 2011

RCJ
BUS
LINES,
vs.
STANDARD INSURANCE COMPANY, INCORPORATED, Respondent.

6. By virtue of the insurance contract, plaintiff [Standard Insurance Co. Inc.] paid Rodelene
Valentino the amount of P162,151.22 for the repair of the Mitsubishi Lancer car.

INCORPORATED, Petitioner,

DECISION

8. Despite demands, defendants have failed and refused and still continue to fail and refuse to
reimburse plaintiff the sum of P162,151.22. A photocopy of the demand letter is attached hereto
and made an integral part hereof as Annex C.
9. As a consequence, plaintiff [Standard Insurance Co. Inc.] has been compelled to resort to
court action and thereby hire the services of counsel as well as incur expenses of litigation for all
of which it should be indemnified by the defendant in the amount of at least P30,000.00.

CARPIO, J.:
10. In order that it may serve as a deterrent for others and by way of example for the public
good, defendants should be adjudged to pay plaintiff [Standard Insurance Co. Inc.] exemplary
damages in the amount ofP20,000.00."

The Case
G.R. No. 193629 is a petition for review 1 assailing the Decision2 promulgated on 11 March 2010 as well as
the Resolution3 promulgated on 3 September 2010 by the Court of Appeals (appellate court) in CA-G.R. SP
No. 105338. The appellate court affirmed with modification the 27 May 2008 Decision 4 of Branch 37 of the
Regional Trial Court of Manila (RTC) in Civil Case No. 00-99410. The RTC dismissed RCJ Bus Lines
appeal from the 12 July 2000 Decision 5 of the Metropolitan Trial Court of Manila (MeTC) in Civil Case No.
153566. The MeTC rendered judgment in favor of Standard Insurance Company, Incorporated (Standard)
and ordered Flor Bola Mangoba (Mangoba) and RCJ Bus Lines, Incorporated (RCJ) to pay damages.

Thus, STANDARD prayed:


"WHEREFORE, plaintiff respectfully prays that after due trial on the issues, this court render judgment
against the defendants adjudging them jointly and severally liable to pay plaintiff the following amounts:
1. The principal claim of P162,151.22 with interest at 12% per annum from September 1, 1995
until fully paid.

The Facts
The appellate court narrated the facts as follows:
On 01 December 2000, respondent Standard Insurance Co., Inc. (STANDARD) filed an
amended complaint against the petitioners Flor Bola Mangoba and RCJ Bus Lines, Inc.
(docketed as Civil Case No. 153566-CV before the Metropolitan Trial Court of Manila, Branch
29). Said amended complaint alleged, among others:

2. P30,000.00 as and by way of indemnification for attorneys fees.


3. P25,000.00 as exemplary damages.
Plaintiff prays for such further or other reliefs as may be deemed just and equitable under the premises."
In its answer, RCJ Bus Lines, Inc. maintained:

"2. On June 19, 1994 along the National Highway at Brgy. Amlang, Rosario, La Union,
defendant Flor B. Mangoba while driving [sic] an RCJ HINO BLUE RIBBON PASSENGER BUS

47
"1. That the complaint states no cause of action against it;

3. To pay the sum of TWENTY THOUSAND PESOS (P20,000.00) as reasonable attorneys


fees; and

2. That venue was improperly laid; and,


4. To pay the costs of suit.
3. That the direct, immediate and proximate cause of the accident was the negligence of the
driver of the Mitsubishi Lancer when, for no reason at all, it made a sudden stop along the
National Highway, as if to initiate and/or create an accident."
Flor Bola Mangoba, in his own answer to the complaint, also pointed his finger at the driver of the Mitsubishi
Lancer as the one who caused the vehicular accident on the time, date and place in question.
For his failure to appear at the pre-trial despite notice, Flor Bola Mangoba was declared in default on 14
November 1997. Accordingly, trial proceeded sans his participation.
At the trial, the evidence adduced by the parties established the following facts:
In the evening of 19 June 1994, at around 7:00 oclock, a Toyota Corolla with Plate No. PHU-185 driven by
Rodel Chua, cruised along the National Highway at Barangay Amlang, Rosario, La Union, heading towards
the general direction of Bauan, La Union. The Toyota Corolla travelled at a speed of 50 kilometers per hour
as it traversed the downward slope of the road, which curved towards the right.
The Mitsubishi Lancer GLX with Plate No. TAJ-796, driven by Teodoro Goki, and owned by Rodelene
Valentino, was then following the Toyota Corolla along the said highway. Behind the Mitsubishi Lancer GLX
was the passenger bus with Plate No. NYG-363, driven by Flor Bola Mangoba and owned by RCJ Bus
Lines, Inc. The bus followed the Mitsubishi Lancer GLX at a distance of ten (10) meters and traveled at the
speed of 60 to 75 kilometers per hour.
Upon seeing a pile of gravel and sand on the road, the Toyota Corolla stopped on its tracks. The Mitsubishi
Lancer followed suit and also halted. At this point, the bus hit and bumped the rear portion of the Mitsubishi
Lancer causing it to move forward and hit the Toyota Corolla in front of it.
As a result of the incident, the Mitsubishi Lancer sustained damages amounting to P162,151.22,
representing the costs of its repairs. Under the comprehensive insurance policy secured by Rodelene
Valentino, owner of the Mitsubishi Lancer, STANDARD reimbursed to the former the amount she expended
for the repairs of her vehicle. Rodelene then executed a Release of Claim and Subrogation Receipt,
subrogating STANDARD to all rights, claims and actions she may have against RCJ Bus Lines, Inc. and its
driver, Flor Bola Mangoba.6

For want of merit, the separate Counterclaim is hereby DISMISSED. 7


In an Order8 dated 2 May 2002, the RTC dismissed Mangoba and RCJs appeal for filing their pleading
beyond the reglementary period. The appellate court, however, in a Decision 9 in CA-G.R. SP No. 77598
dated 23 April 2004, granted RCJs petition and remanded the case to the RTC for further proceedings.
The RTCs Ruling
In its Decision dated 27 May 2008, the RTC affirmed with modification the MeTCs Decision dated 12 July
2000. The RTC deleted the award for exemplary damages.
RCJ failed to convince the RTC that it observed the diligence of a good father of a family to prevent
damages sustained by the Mitsubishi Lancer. The RTC ruled that the testimony of Conrado Magno, RCJs
Operations Manager, who declared that all applicants for employment in RCJ were required to submit
clearances from the barangay, the courts and the National Bureau of Investigation, is insufficient to show
that RCJ exercised due diligence in the selection and supervision of its drivers. The allegation of the
conduct of seminars and training for RCJs drivers is not proof that RCJ examined Mangobas qualifications,
experience and driving history. Moreover, the testimony of Noel Oalog, the bus conductor, confirmed that the
bus was travelling at a speed of 60 to 75 kilometers per hour, which was beyond the maximum allowable
speed of 50 kilometers per hour for a bus on an open country road. The RTC, however, deleted the award of
exemplary damages because it found no evidence that Mangoba acted with gross negligence.
In an Order10 dated 27 August 2008, the RTC partially reconsidered its 27 May 2008 Decision and modified
the MeTCs Decision to read as follows:
WHEREFORE, the Decision dated May 27, 2008 is partially reconsidered and the Decision of the court a
quo dated July 12, 2000 is MODIFIED. Appellant RCJ Bus Lines, Inc. and defendant Flor Bola Mangoba are
ordered to pay jointly and severally the appellee [Standard Insurance Co., Inc.] the following:
1. ONE HUNDRED SIXTY TWO THOUSAND ONE FIFTY ONE PESOS and 22/100
(P162,151.22), with legal rate of interest at 6% per annum from September 1, 1995 until full
payment;

The MeTCs Ruling

2. TWENTY THOUSAND PESOS (P20,000.00) as reasonable attorneys fees; and

On 12 July 2000, the MeTC rendered its decision in favor of Standard, the dispositive portion of which
reads:

3. Cost of suit.
SO ORDERED.11

WHEREFORE, consistent with Section 1, Rule 131 and Section 1, Rule 133 of the Revised Rules on
Evidence, judgment is hereby rendered in favor of the plaintiff, ordering defendants Flor Bola Mangoba and
RCJ Bus Lines, Inc.:
1. To pay the principal sum of ONE HUNDRED SIXTY TWO THOUSAND ONE HUNDRED
FIFTY ONE PESOS and 22/100 (P162,151.22), with legal rate of interest at 12% per annum
from September 1, 1995 until full payment;
2. To pay the sum of TWENTY THOUSAND PESOS (P20,000.00) as exemplary damages;

The Appellate Courts Ruling


Mangoba and RCJ filed a petition for review before the appellate court. The appellate court found that the
RTC committed no reversible error in affirming RCJs liability as registered owner of the bus and employer
of Mangoba, as well as Mangobas negligence in driving the passenger bus. The appellate court, however,
deleted the award for attorneys fees and modified the legal interest imposed by the MeTC.
The dispositive portion of the appellate courts decision reads:

48
WHEREFORE, the instant petition for review is DENIED. The assailed Decision of the Regional Trial Court
of Manila, Branch 37, in Civil Case No. 00-99410 is hereby AFFIRMED with MODIFICATION that the legal
interest that should be imposed on the actual damages awarded in favor of respondent Standard Insurance,
Co., Inc. should be at the rate of 6% per annum computed from the time of extra judicial demand until the
finality of the 12 July 2000 Decision of the MeTC and thereafter, the legal interest shall be at the rate of 12%
per annum until the full payment of the actual damages. The award of attorneys fees is DELETED.
SO ORDERED.12
The appellate court denied RCJs Motion for Reconsideration 13 for lack of merit.14
The Issues
RCJ assigns the following as errors of the appellate court:
1. The Court of Appeals erroneously awarded the amount of P162,151.22 representing actual
damages based merely on the proof of payment of policy/insurance claim and not on an official
receipt of payment of actual cost of repair;
2. The Court of Appeals erroneously disregarded the point that petitioner RCJs defense of
extraordinary diligence in the selection and supervision of its driver was made as an alternative
defense;
3. The Court of Appeals erroneously disregarded the legal principle that the supposed violation
of Sec. 35 of R.A. 4136 merely results in a disputable presumption; and
4. The Court of Appeals erroneously held that petitioner RCJ is vicariously liable for the claim of
supposed actual damages incurred by respondent Standard Insurance. 15
The Courts Ruling
The petition has no merit. We see no reason to overturn the findings of the lower courts. We affirm the ruling
of the appellate court.

To repel the idea of negligence, defendant [RCJ] bus companys operations manager at the Laoag City
Terminal was presented on the witness stand on January 5, 2000 in regard to the companys seminars and
dialogues with respect to its employees, and the absence of any record of a vehicular accident involving the
co-defendant driver [Mangoba] (TSN, January 5, 2000, pp. 2-17; TSN, February 16, 2000, pp. 2-9). As the
last witness of defendant [RCJ] bus company, Noel Oalog, bus conductor who was allegedly seated to the
right side of the bus driver during the incident, was presented on March 22, 2000 (TSN, March 22, 2000,
page 2). He confirmed on direct examination and cross examination that it was defendants bus, then
running at 60-75 [kph] and at a distance of 10 meters, which bumped a Mitsubishi Lancer without a tail light.
According to him, the incident occurred when the driver of the Toyota Corolla, which was ahead of the
Lancer, stepped on the brakes due to the pile of gravel and sand in sight (TSN, Vide at pp. 3-11).
Subsequent to the proffer of exhibits (TSN, Vide, at page 14), and in default of any rebuttal, the parties were
directed to file the Memoranda within thirty days from March 23, 2000. 18
RCJ, by presenting witnesses to testify on its exercise of diligence of a good father of a family in the
selection and supervision of its bus drivers, admitted that Mangoba is its employee. Article 2180 19 of the Civil
Code, in relation to Article 2176, 20 makes the employer vicariously liable for the acts of its employees. When
the employee causes damage due to his own negligence while performing his own duties, there arises
the juris tantum presumption that the employer is negligent, rebuttable only by proof of observance of the
diligence of a good father of a family. For failure to rebut such legal presumption of negligence in the
selection and supervision of employees, the employer is likewise responsible for damages, the basis of the
liability being the relationship of pater familias or on the employers own negligence. 21 1avvphi1
Mangoba, per testimony of his conductor, was ten meters away from the Mitsubishi Lancer before the
collision and was driving 60 to 75 kilometers per hour when the speed limit was 50 kilometers per
hour.22 The presumption under Article 2185 23 of the Civil Code was thus proven true: Mangoba, as driver of
the bus which collided with the Mitsubishi Lancer, was negligent since he violated a traffic regulation at the
time of the mishap. We see no reason to depart from the findings of the MeTC, RTC and appellate court that
Mangoba was negligent. The appellate court stated:
To be sure, had not the passenger bus been speeding while traversing the downward sloping road, it would
not have hit and bumped the Mitsubishi Lancer in front of it, causing the latter vehicle to move forward and
hit and bump, in turn, the Toyota Corolla. Had the bus been moving at a reasonable speed, it could have
avoided hitting and bumping the Mitsubishi Lancer upon spotting the same, taking into account that the
distance between the two vehicles was ten (10) meters. As fittingly opined by the MeTC, the driver of the
passenger bus, being the rear vehicle, had full control of the situation as he was in a position to observe the
vehicle in front of him. Had he observed the diligence required under the circumstances, the accident would
not have occurred.24
Subrogation

RCJs Liability
RCJ argues that its defense of extraordinary diligence in the selection and supervision of its employees is a
mere alternative defense. RCJs initial claim was that Standards complaint failed to state a cause of action
against RCJ.
Standard may hold RCJ liable for two reasons, both of which rely upon facts uncontroverted by RCJ. One,
RCJ is the registered owner of the bus driven by Mangoba. Two, RCJ is Mangobas employer.
Standards allegation in its amended complaint that RCJ is the registered owner of the passenger bus with
plate number NYG 363 was sufficient to state a cause of action against RCJ. The registered owner of a
vehicle should be primarily responsible to the public for injuries caused while the vehicle is in use. 16 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.17
Moreover, in its efforts to extricate itself from liability, RCJ proffered the defense of the exercise of the
diligence of a good father of a family. The MeTC characterized RCJs defense against negligence in this
manner:

In the present case, it cannot be denied that the Mitsubishi Lancer sustained damages. Moreover, it cannot
also be denied that Standard paid Rodelene Valentino P162,151.22 for the repair of the Mitsubishi Lancer
pursuant to a Release of Claim and Subrogation Receipt. Neither RCJ nor Mangoba cross-examined
Standards claims evaluator when he testified on his duties, the insurance contract between Rodelene
Valentino and Standard, Standards payment of insurance proceeds, and RCJ and Mangobas refusal to pay
despite demands. After being lackadaisical during trial, RCJ cannot escape liability now. Standards right of
subrogation accrues simply upon its payment of the insurance claim. 25
Article 2207 of the Civil Code reads:
Art. 2207. If the plaintiffs property has been insured and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the wrongdoer or the person who has
violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss,
the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.
Subrogation is the substitution of one person by another with reference to a lawful claim or right, so that he
who substitutes another succeeds to the rights of the other in relation to a debt or claim, including its
remedies or securities. The principle covers a situation wherein an insurer who has paid a loss under an

49
insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with
respect to any loss covered by the policy.26
WHEREFORE, we DENY the petition. We AFFIRM the Decision of the Court of Appeals in CA-G.R. SP No.
105338 promulgated on 11 March 2010 as well as the Resolution promulgated on 3 September 2010.

SO ORDERED.