Title XVIII

DAMAGES

Fundamental Principle: one injured by a breach of a contract or by a wrongful or negligent act or

omission shall have a fair and just compensation -> commensurate with the loss sustained as a
consequence of the defendants act (genrule: damages awarded should be equal to and commensurate
w the injury sustained) -> remember: recovery of damages are framed w reference to just rights of
BOTH PARTIES

GR: actual pecuniary compensation

Exception: the allowance of other kinds of damages

Zulueta v Pan American Airways: passengers should be treated by the employees of an airplane carrier
w kindness and courtesy. In case of breach of contract, airline should be held liable for damages. The
contract of common air carrier generates a relation attended w a public duty.

Air France v CA: mere refusal to accede to the passengers wishes does not necessarily translate into
damages in the absence of bad faith

Tiu v CA: adverse result of a suit in law does not mean that the same is wrongful as to justify assessment
of damages against the actor

Chapter 1: General Provisions

A2195: The provisions of this title shall be resp applicable to all obligations mentioned in a1157

Applicability to All Kinds of Legal Obligations

A1157. Obligations arise from: 1) law; 2) contracts; 3) quasi-contracts; 4) acts or omissions punishable by
law; 5) quasi-delicts.

A2196. The rules under this Title are without prejudice to special provisions on damages formulated
elsewhere in this Code.

Compensation for workmen and other employees in case of death, injury or illness is regulated by
special laws.

Rules governing damages laid down in other laws shall be observed insofar as they are not in conflict w
this code. [1]

[1] Genrule: Conflict bet Civil Code & the Special Laws -> Civil Code prevails insofar as damages are
concerned; Exception: in the case of compensation for workmen & other employees

Indemnity in Workmens Compensation Cases

Forteza v Workmens Compensation Commission: Death is compensable. Rule in Workmens

Compensation cases: that it need not be proven that his employment was the sole cause of the death or
injury suffered by the employee. It is enough to entitle him or his heirs to compensation benefits
under the law that there be a showing that his employment had contributed to the acceleration of his
death or ailment. Law presumes that such death is compensable unless the employer clearly establishes
that it was not caused or aggravated by the employment.

Ysmael Maritime v Avelino: is the compensation remedy under the WCA (Labor Code) for work-
connected death/injuries sustained by an employee exclusive of other remedies available under the Civil
Code? Third view: the action is selective; the employee/his heirs have a choice of availing themselves of
the benefits under the WCA OR of suing in regular courts under the Civil Code for higher damages from
the employer by reason of negligence. BUT once the election has been exercised, the employee/his heirs
are no longer free to opt for the other remedy (employee cannot pursue the actions simultaneously).
The Court rejected the doctrine of exclusivity of the rights as remedies granted by the WCA (Robles case:
remedy of an employee for work-connected injury/accident is exclusive in accordance w Sec 5 of WCA).
Fair play -> if a person is entitled to a choice of remedies made a 1st election & accepted the benefits
thereof, he should no longer be allowed to exercise the 2nd option.

Dismissal of Action: case is already on appeal; action for damages is sought to be dismissed by the
plaintiff-appellant/heirs -> question: may the dismissal be granted despite the appeal? YES, since the
parties involved are no longer interested in prosecuting the appeal.

A2197. Damages may be: 1) actual/compensatory; 2) moral; 3) nominal; 4) temperate or moderate; 5)

liquidated; 6) exemplary or corrective.

Damages Injury
Harm done; what may be recovered Wrongful; unlawful; tortious act
Measure of recovery Legal wrong to be redressed

Damages without Injury (damnum absque injuria): physical hurt/injury without legal wrong

Sample: 1) govt contractual right to cancel an agency although by such cancellation the agent would
suffer damages; 2) one who complies w govt-promulgated rule cannot be held liable for damages that
may be caused by other persons

Rules on Waiver (right to recover civil liability): 1) waiver made in behalf of the minor heirs by a person
not their judicial guardian -> ineffective if it lacks judicial approval; 2) extinction of principal obligation
result to extinction of subsidiary obligation (accused employee to employer)

Liability of Prosecutor: Prosecutor who orders the seizure of property alleged to be involved in the crime
of robbery wo a search warrant is liable for actual damages, moral and exemplary damages.

Damages in voidable contracts: person not obliged principally or subsidiarily in contract may ask for its
annulment (w damages) if he is prejudiced in his rights re 1 of the contracting parties.

A2198. The principles of the gen law on damages are hereby adopted insofar as they are not
inconsistent w this code. -> in case of conflict, it is the civil code that prevails

Chapter 2: Actual or Compensatory Damages

A2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for
such pecuniary loss suffered by him as he has duly proved. <- defn of actual/compensatory damages
Actual/Compensatory Damages recoverable bc of pecuniary loss. They include: 1) the value of the loss
suffered (dao emergente); 2) profits wc were not obtained or realized (lucro cesante)

Note: death of an unborn child (parents entitled to moral damages on account of distress & anguish
attendant to its loss & exemplary damages, if circumstances should warrant them)

Bert Osmena v CA: breach of contract on the part of the sellers; buyers were not able to build the house
they intended (at an estimated cost). Can they recover said cost from the delinquent party? NO, not
entitled to be awarded said estimated cost bc after all they did not lose this amount. The amt is not an
expected income that had been lost.

RCPI v CA: erroneous transmission of message wc caused damage to a freight company. RCPI was held
liable for: 1) both actual damages (damnum emergens) & compensatory damages (lucro
cessans/unrealized profit); 2) exemplary damages (bc of gross negligence & wanton misconduct); 3)
attys fees & expenses of litigation (wc may be reduced if found unreasonable); 4) temperate or
moderate damages (injury to ones business standing).

Ramos v CA: ruling on actual/compensatory damages generally assume that at the time of litigation, the
injury suffered (as a consequence of an act of negligence) has been completed & that the cost can be
liquidated. To be able to recover actual/compensatory damages, the amount of loss must be proven w a
reasonable degree of certainty based on competent proof & on the best evidence obtained by the
injured party.

Necessity of Pleading: to be recoverable, actual damages must be pleaded or prayed for. Prayer
mentions such further relief as this Honorable Court may deem just & equitable <- may include
actual damages if & when they are proved.

Necessity of Proof: Genrule: actual damages must be proved & the amt of damages must possess at
least some degree of certainty. Note: It is not necessary to prove exactly how much the loss is; it is
enough that LOSS is proved. Rep v Tayengco: in expropriation, owners of the lands involved can recover
interest from the date the expropriator takes possession of the parcels concerned until payment in court
is made.

Inhelder Corp v CA: Judges & Justices must be careful not to award exorbitant damages. Note: if there is
no proof of loss/proof is unsubstantial, no damages will be given. The court must depend on actual
proof that damages had been suffered & actual proof of the amt. The court must point specific acts as
bases for measuring compensatory/actual damages. If there was a proof BUT it is not clear/satisfactory,
the appellate court may remand the case to the lower court for a new trial.

Note: if there be an award of compensatory damages, there can be no grant of nominal damages.
Reason: the purpose of nominal damages is to vindicate or recognize a right that has been violated, in
order to preclude further cost thereon & not to indemnify plaintiff for any loss suffered by him.

Note: damages given must be based on the evidence given (not on the personal knowledge of the
court). Neither be remote/speculation nor must the claim be delayed unreasonably.

Kairuz v Pacio & Pacio: unjustifiably withhold motor engine -> not be held liable for speculative &
contingent damages (in the form of possible rentals); withholder must return (or pay for its values) plus
legal interest thereon from the date of demand.
Ventanilla v Centeno: atty fails to perfect an appeal in a civil case -> not liable for damages that may
have been recovered (highly speculative)

Rizal Surety v MRR: a provisional claim filed by a consignee BEFORE knowledge of actual
shortage/damage wrt cargo is a speculative claim.

Actual damages need not be proved:

1) Liquidated damages had been previously agreed upon;

2) In case damages other than actual;
3) Loss presumed as when a child (minor) or a spouse dies;
4) Forfeiture of bonds in favor of the govt for the purpose of promoting public interest or policy.

RCPI v Lantin: breach of contract -> there is an award of compensatory damages -> this award may be
ordered executed pending appeal BUT an award of MORAL or EXEMPLARY damages cannot be regarded
as fixed or definite until there is a final judgment (their grant is dependent on the outcome of the main
case).

A2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also
that of the profits which the obligee failed to obtain.

2 kinds of damages:

1) Losses suffered (damno vitando/dao emergente)

2) Unrealized profits (lucro captando/lucro cesante/lucrom cessans) -> basis for indemnification if
there is a basis for a reasonable expectation that profits would have continued had there been
no breach of contract.

St. louis realty corp v CA: persons house is used as an advertising material wo the consent of the owner
wo apologizing to him (entitled to an award of actual & moral damages)

BA Finance v CA: not proved/justified before the TC and the basis of the alleged unearned profits is too
speculative & conjectural to show actual damages for a future period -> the court cannot sustained
award for damages

Batong buhay v CA: damages by way of unrealized profits (lucro cesante) may not be awarded in the
absence of supporting evidence (must not be based on pure assumption, speculation, conjecture).
Speculative damages cannot be recovered.

Aguilar v Chan: actual damages suffered by plaintiff exceeded the amt awarded her by the lower court
but plaintiff did not appeal -> the appellate court cannot award her more than the amt awarded by the
lower court.

Samples dao emergente Samples lucro cesante

Destruction of things
Fines or penalties that had to be paid
Profits that could have been earned had there
been no interruption in the plaintiffs business as
evidenced by the reduced receipts of the
enterprise
Profits bc of a proposed future re-sale of the
property being purchased if the existence of a
 contract there was known to the delinquent
seller
Medical & hospitalization expenses Interest on rentals that were not paid (interest
Note: jaw injury -> lost sch yr; not awarded w forms profits wc could have been realized had
actual damages (the resulting reduction in the the rents been given)
victims earning capacity are manifestly
speculative & may not exist at all)
Victims mental capacity was so reduced he could
no longer finish his med studies; misfit for work
etc -> actual damages were awarded
Rents & agricultural products not received in an
agricultural lease

A2201. In contracts & quasi-contracts, the damages for wc the obligor who acted in good faith is liable
shall be those that are the natural & probable consequences of the breach of the obligation, & wc the
parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages wc
may be reasonably attributed to the non-performance of the obligation.

Liability of Debtor in Contracts & Quasi-Contracts

Good Faith Bad Faith
Essential that damages be: ENOUGH that the damages be REASONABLY
1) The NATURAL & PROBABLE ATTRIBUTED to the non-performance of the
consequences of the breach of the obligation (rel of cause & effect)
obligation;
2) Those wc the parties FORESAW or COULD
HAVE REASONABLY FORESEEN at the
time the obligation was constituted
Mere carelessness Deliberate/wanton wrongdoing

Samples of REASONABLY FORESEEN or FORESEEABLE DAMAGES in contracts

ORDINARY DAMAGES (generally inherent in a
breach of typical contract)
Common carries -> diff in the value of goods at
the time of stipulated delivery & at the time of
the actual delivery
Building contracts -> cost of completing/repairing Carrier fails to deliver a movie intended for
a defective building
Income wc an injured bus passenger could have
earned (w/in the category of natural & probable
consequences wc parties should have foreseen)
Salary for the entire period agreed upon in an
employment contract in case employer breaks it
wo just cause MINUS income actually earned
SPECIAL DAMAGES
- Exist bc of special circumstances
- A debtor in GOOD FAITH can be held
liable only if he had been previously
informed of such circumstances
showing at a fiesta
- Not liable for the extraordinary profits (it
had not been told that the film had to be
delivered in time of fiesta)
If in BAD FAITH: special damages can be assessed
against him even if he had no knowledge of the
special circumstances. It is enough that it be
 Note: breach is generally indivisible -> action may reasonably attributed to the non-performance of
be brought at once for both present & future the obligation
salaries wo waiting for the stipulated end of
contract. Failure to sue for all damages by suing
only for the damages already accrued will BAR
future suits on the same point
Note: employer has the duty to prove the
earnings made or wc could have been earned
during the unexpired period

A2202. In crimes & quasi-delicts, the defendant shall be liable for all damages wc are the natural &
probable consequences of the act or omission complained of.

It is not necessary that such damage have been foreseen or could have reasonably foreseen by the
defendant.

Maranan v Perez: taxi driver kill his passenger: civil liability is based on having committed a crime. On
the basis of contracts, taxi owner-operator liable for damages (the driver-killer is not a party to the
contract of carriage)

Pp v Salig: appeal in a criminal case (conviction) -> 1 of the accused died. Estate of the person can be
held solidarily liable w others in case of a final judgment of conviction. Cuevas dissents based on A89 of
RPC, pecuniary liability of the deceased was extinguished bc of his death before FJ.

In a tort (quasi-delict) action, the alleged victim must prove:

1) a causal connection bet the tort & the injury;

2) the amt & extent of the injury.

Unfair competition -> prove the above elements. Liability may be reduced if loss was suffered w the
fault of the plaintiff.

Concealment of an Existing Marriage: from a girl whom a man intends to seduce can make a man liable
for damages. There is actual fraud (dolo). The liability may be considered extra-contractual in nature; it
is believed under the NCC that said liability is equivalent to that of a contractual debtor in bad faith.
Liable for moral damages? YES, he avoided the service of summons & exercised improper pressure upon
her to make her withdraw the suit. Deliberate maneuvers caused her anguish & physical suffering.

A2203. The party suffering loss or injury must exercise the diligence of a good father of a family to
minimize the damages resulting from the act or omission in question.

Victim must minimize the damage.

Burden of Proof (BOP) that the victim could have mitigated the damage lies on the person sued

Lim & Gumalan v CA & Gonzales: Private respondent left his passenger jeep by the roadside at the
mercy of the elements. Held: A2203. He can recover from the wrongdoers money lost in reasonable
efforts to preserve the property injured & for injuries incurred in attempting to prevent damages to it.
A2204. In crimes, the damages to be adjudicated may be respectively increased or lessened accdng to
the aggravating/mitigating circumstances.

A2205. Damages may be recovered:

1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury;
2) For injury to the plaintiffs business standing or commercial credit.

Consolidated plywood industries v CA, kho: private respondents acted w bad faith when it surreptiously
pulled out their hauler trucks from petitioners jobsite before the termination of the contract. Unjust
enrichment.

Francisco v ferrer: wedding cake delivered not the one agreed upon. The complaints alleged personal
embarrassments, mental anguish, serious anxiety & sleepless nights. Held: to recover moral damages, it
must be proven that the guilty party acted in bad faith. In this case no BF existed. The bakeshop owner
was quick to apologize & offered to repair whatever damage was done. Not liable to moral damages but
he must pay nominal damages (prevarication when asked on delay), cost of the cake, attys fee.

A2206. The amt of damages for death caused by a crime or quasi-delict shall be at least 3k pesos, even
though there may have been mitigating circumstances. In addition:

1) The defendant shall be liable for the loss of the earning capacity of the deceased, & 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 acct of permanent physical disability not
caused by the defendant, had no earning capacity at the time of his death;
2) If the deceased was obliged to give support accdng to the provisions of A291, the recipient who
is not an heir called to the decedents inheritance by the law of testate or intestate succession,
may demand support from the person causing the death, for a period not exceeding 5 yrs, the
exact duration to be fixed by the court;
3) The spouse, legit & illegit descendants & ascendants of the deceased may demand moral
damages for mental anguish by reason of the death of the deceased.

3K is the minimum award hence, a greater sum can be given (if its financial capacity enables it to pay
more; here financial capacity is amterial & significant)

Factors wc may be considered in determining the amt:

1) Life Expectancy & consequent loss of earning capacity

Considering the state of health & habit of the deceased; mortality tables are inconclusive evidence
Smith bell shipping agency v Borja: knowing that their vessel was carrying dangerous inflammable
chemicals, its officers & crew failed to take all the necessary precautions to prevent an accident.
Petitioner was negligent & held liable for damages & loss of respondent Borjas income. For
determining loss of earning capacity, life expectancy remains at 80. The computation should not
change even if Borja lived beyond 80 yrs.
2) Pecuniary loss, loss of support & service
3) Moral & mental suffering
Note: min award (actual) for the death of a person does not cover unborn foetus bc it is not endowed
w juridical personality however, under certain circumstances, moral damages may be awarded.
Villa rey transit v bello: breach of contract when it fails to comply w its obligation to bring safely the
passengers. Ruling: consequential damages (the heirs having been deprived of the earning capacity of
their husband/father); exemplary damages (failure to exercise due diligence in employing a careful &
prudent driver); moral damages (agony, mental anguish, sorrow suffered by the heirs bc of the sudden
death & the mutilated & gory condition of the body)

Davila v PAL: earning capacity = gross earning the necessary living expenses of the deceased

Budiong v Apalisok: after the accused has pleaded guilty in a crim case, the judge must set the case for
hearing so that the offended partys evidence on the civil liability may be received (so is true even the
accused already filed an application for probation)

Dangwa transpo v CA: Amt recoverable by the heirs of the victim = the loss of that portion of the
earnings wc the beneficiary would have received. Only net earnings are to be considered (total earnings
expenses necessary in the creation of such earnings living & other incidental expenses)

MMTC v CA: Employer & employee (driver) both liable for negligence for the death of Liza.
Responsibility of employers for the negligence of the employees is primary (the injured party may
recover from the employers directly regardless of the solvency of their employees). Defense: Employers
observed all the diligence of a good father of a family to prevent damage (burden of proof lies on the
employers (in the selection & supervision). Heirs were awarded w moral damages, exemplary damages,
attys fees & compensation for loss of earning capacity <- was a good student & promising artist. In
computing the victims projected gross annual income -> min wage for workers in a non-agri sector at
the time of her death.

Moral damages

If the victim dies of a crime, quasi-delict, breach of contract by common carrier, moral damages
may be recovered by:
1) Legit spouse;
2) Legit descendants & ascendants;
3) Illegit descendants & ascendants;

Once the heirs are able to prove that they are entitled to the actual damages, it becomes the duty of the
court to award moral damages to the claimants in an amt commensurate w their mental anguish.

Note: in ordinary breaches of contract, moral damages may be recovered only if the defendant acted
fraudently or in bad faith

Note: if a descendant is present, brothers & sisters are excluded in recovering moral damages

If the victim does not die, but merely suffers physical injuries, may moral damages be
recovered? YES only in the ff instances:
o If caused by a crime (a2219)
o If caused by a quasi-delict (A2219)
o If caused by a breach of contract (A2220) BUT only if the defendant acted fraudulently
or in bad faith or in case of wanton & deliberately injurious conduct on the part of the
carrier (common carrier) DIFFERENT from the case of death
 Proof of fraud, malice or bad faith must be given only if physical injuries were
sustained

Right of recovery not affected by testimony: pp v manos -> son killed father; mey he be reqd to
indemnify the victims heirs even if they testified in his favor? Yes for they have suffered

Liability for reckless imprudence: Pp v Carmen: liable for reckless imprudence resulting in homicide; civil
liability -> indemnity; moral damages; exemplary damages in attempting to cure the victim wo a license
(an example/correction for the public good)

A2207. 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 the 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 amt 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.

The fact that the plaintiff has been indemnified by an insurance company cannot lessen the
damages to be paid by the defendant
Rule is applicable even prior to the effectivity of the NCC
Amt of insurance recovered shall be deducted from the total liability of the defendant

Meaning of authorized driver in car insurance: the issuance of the license is proof that the driver was
entitled to drive. Insurance contracts must be construed liberally in favor of the insured & strictly against
the insurer

Subrogation of insurer: firemans fund insurance v Jamila & co: firemans fund insurance insured the
properties of firestone corp. FFI has a cause of action against Jamila & co? yes, a2207 CC. the insurer
who has paid shall be subrogated in the place of the injured party in the latters rights against the
offender of a contractual commitment -> an instance when the consent of the debtor is not reqd for the
subrogation in favor of the FFI.

A2208. In the absence of stipulation, attys fees & expenses of litigation, other than judicial costs, cannot
be recovered except:

1) When exemplary damages are awarded;

2) When the defendants act or omission has compelled the plaintiff to litigate w 3rd persons or to
incur expenses to protect his interest;
3) In criminal cases of malicious prosecution against the plaintiff;
4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
5) Where the defendant acted in gross & evident bad faith in refusing to satisfy the plaintiffs
plainly valid, just & demandable claim;
6) In actions for illegal support;
7) In actions for the recovery of wages of household helpers, laborers & skilled workers;
8) In actions for indemnity under workmens compensation & employers liability laws;
9) In a separate civil action to recover civil liability arising from a crime;
10) When at least double judicial costs are awarded;
 11) In any other case where the court deems it just & equitable that attys fees & expenses of
litigation should be recovered.

In all cases, the attys fees & expenses of litigation must be reasonable.

Apply to instances when a client may recover from the other party the fees wc the former may
pay the formers atty

Luz v employees compensation comm: a pauper litigant is not exempted from the payment of attys
fees

Borcena v iac: in determining the compensation of an atty the ff circumstances shall be considered:

1) Amt & character of the services rendered;

2) Responsibility imposed;
3) Amt of money or the value of the property affected by the controversy or involved in the
employment;
4) The skilled & experience called for in the performance of the service;
5) Professional standing of the atty;
6) The results occurred;
7) Won the fee is contingent or absolute (recognized rule that an atty may properly charge a much
larger fee when it is to be contingent than when it is not)

Sun insurance v ca: if a party wins, he cannot, as a rule, recover attys fees & litigation expenses, since it
is not the fact of winning alone that entitles him to recover such damages of the exceptional
circumstances enumerated in a2208. Otherwise, every time a defendant wins, automatically the plaintiff
must pay attys fees thereby putting a premium on the right to litigate, wc should not be so.

Generally, not part of damages: for it is not sound public policy to place a penalty on the right to litigate.
if a party loses in court, this does not mean necessarily that the court will compel him to award attys
fees as damages to the winning party. However, in certain cases, attys fees are an element of
recoverable damages, whether they may be in writing or not stipulated at all. Appellate court may fix
attys fees even when the TC did not award attys fees & even when no appeal on this point was
interposed before the appellate court

Salao v salao: not assessed w moral damages & attys fees though their causes of action were
unfounded. They were in good faith (when they filed the case)

Public estates v uy: anent petitioners claim for attys fees, it was represented by the govt corporate
counsel. attys fees are in the nature of actual damages wc must be duly proved. Petitioner failed to
show convincing evidence that it incurred attys fees.

Given to party, not to counsel: the fact that the contract bet the client & his counsel was on a contingent
basis does not affect the clients right to counsel fees. A litigant who improvidently stipulates higher
counsel fees than those to wc he is lawfully entitled does not (for that reason) earn the right for a larger
indemnity; by parity of reasoning, he should not be deprived of counsel fees if by law he is entitled to
recover.
Tiu po v bautista: claim for attys fees wc arises out of the filing of a complaint partaked of the nature of
a compulsory counterclaim. Therefore, if it is not pleaded or prayed for in the answer to the complaint,
it is barred. <- applicable to all damages claimed to have been suffered by the defendant as a
consequence of the action filed against him

Quirante & cruz v iac: attys fees as an item of damages under a2208 is an award made in favor of the
litigant. Litigant is the judgment creditor who may enforce the judgment for attys fees by execution.
However, in this case attys fees is a different concept. Petitioners claims are based on an alleged
contract for professional services w them as creditors & private respondents as debtors.

Express stipulation

Attys fees & expenses of litigation may be recovered -> express stipulation to that effect. IF
despite an express stipulation for attys fees, theres an implied waiver thereof (cancellation of a
contract w attys fees in such fulfillment) -> attys fees cannot be recovered
Attys fees based on a certain percentage of the amt of the principal obligation <- valid
stipulation
Just & fair to reduce the amt of counsels fees in the courts discretionary power
A nonlawyer will be given part of the attys fees is immoral (condemned by legal ethics)

Kapol v masa: when exemplary damages are recovered, there can be an award of attys fees; exemplary
damages may be awarded even if not expressly prayed for in the complaint & even if not proved; moral
damages amy be proved by docu evidence wo testimonial proof

Par 2: defendants act or omission

If litigation was caused not by the defendants failure to pay but by the plaintiffs exorbitant
charge, plaintiff cannot get attys fees
Plaintiff goes to court after refusing an amicable settlement + proven that he was asking too
much -> defendant justified in refusing the claim
Defendants deliberate failure to pay -> compelled the plaintiff to litigate = entitled to attys fees

Party was compelled to litigate to protect his interests -> he is entitled to an award of attys fees

Par 3 (malicious prosecution): if the person acted deliberately & knew that his accusation was false or
groundless -> not entitled to attys fees

Par 4 (unfounded civil action):

A complaints against B = baseless & intends to harass, annoy, defame. B can sue & be granted w
attys fees for the clearly unfounded civil actions/proceedings against the plaintiff
Applies to defendant under a counterclaim for attys fees (a counterclaim is a complaint filed by
the defendant against the orig plaintiff)

Hermosa v zobel: good faith & lack of knowledge of the actual facts -> A not liable for attys fees

Par 5 (bad faith of defendant):

Defendant must have acted in gross & evident bad faith in refusing to satisfy plaintiffs claim
 Where the defendant did not deny the debt but merely pleaded for adjustment in accordance w
the Ballantine Scale -> refusal is not in BF
Failure of the defendant to pay his obligation wo BF does not warrant recovery of attys fees

par 8 (workmens compensation & employers liability)

par 9 (civil liability arising from a crime)

Attys fees by express provision of law may be awarded in a separate civil action to recover the
civil liability arising from a crime. Award of attys fees granted by a trial court can envisage the
services of counsel only up to the date of its judgment. If decision is appealed, attys fees should
perhaps be doubled

Par 11 (any other case) <- NA if the case was instituted before the effectivity of the NCC

Bureau of Lands v Samia: unless authorized by statute, attys fees cannot be recovered from the
govt if it abandons expropriation proceedings. It would be otherwise if the abandoner is a
private entity or a quasi-public corp.

Instances when the insurance code grants damages

Prudential fuarantee v trans-asia shipping: sec 244 Insurance Code grants damages consisting of attys
fees & other expenses incurred by the insured after a finding by the Insurance Commissioner or the
Court (as the case may be) of an unreasonable denial or withholding of payment of the claims due. Sec
244 does not require a showing of bad faith in order that attys fees be granted.

A2209. 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 6% per annum.

Applies to a monetary obligation where the debtor is in default

Rules:

1) Give the indemnity (other than interest) agreed upon. Note: attys fees may be stipulated
2) If none was specified, give the interest agreed upon;
3) If none, give the LEGAL interest (now 12% per annum)

State investment v ca: if respondent was not in delay, what should he have been held liable for in
accordance w law? Respondent was not in delay -> he is liable for: 1) the principal loan; 2) regular or
monetary interest in the amt of 17% per annum. Not liable for penalty or compensatory interest fixed in
the promissory note. However, the fact that the respondent was not in default did not mean that he, as
a matter of law, was relieved from the payment not only of penalty or compensatory interest (24% per
annum) but also of regular monetary interest (17% per annum). Regular & monetary interest continued
to accrue under the terms of the relevant promi note until actual payment is effected. In this case, while
he properly regarded as having made a written tender of payment to the creditor, he failed to consign in
court the amt due at the time of the maturity of the obligation. Hence, his obli to pay principal-cum-
regular or monetary interest under the terms & conditions of the note was not extinguished by such
tender of payment alone. For the respondent to continue in possession of the principal of the loan & to
continue to use the same after maturity of the loan wo payment of regular or monetary interest, would
constitute unjust enrichment on the part of the respondent at the expense of the creditor even though
the respondent had not been guilty of mora. It is precisely this unjust enrichment wc a1256 NCC
prevents by requiring (in addition to tender of payment) the consignation of the amt due in court wc
amt would thereafter be deposited by the clerk of court in a bank & earn interest to wc the creditor
would be entitled.

Tio khe chio v ca: SC sustained CA & held that the legal rate of interest in the case at bar is 6% per
annum. Secs 243 & 244 of the Insurance Code are not pertinent to this case (they apply only when the
court finds an unreasonable delay or refusal in the payment of the claims). Circular 416 of the Central
Bank pursuant to PD 116 (Usury Law) wc raised the legal rate of interest from 6% to 12% per annum
does not apply to this case. The adjusted rate mentioned in the circular refers only to loans or
forbearances of money, goods, credits and court judgements thereon BUT not to court judgments for
damages arising from injury to persons and loss of property wc does not involve a loan. The legal rate of
interest is 6% per annum & not 12% where a judgment award is based on an action for damages for
personal injury, not use or forbearance of money, goods or credit. Since the contending parties did not
allege the rate of interest stipulated in the insurance contract, the legal interest was properly pegged by
the appellate court at 6% per annum

Absence of Stipulation -> only the legal interest can be recovered

From what moment interest runs -> absence of stipulation, interest (as damages) runs from default
(after judicial/extrajudicial demand, except when demand is NOT essential to put the debtor in default).
No evidence of extrajudicial demand, period starts from the judicial demand (in the form of filing a
complaint in court)

Consuelo piczon v esteban piczon: interest will run xxx in view of the express stipulation. A2209, NCC,
the indemnity of damages in a monetary obligation shall be the payment of interest agreed upon
(genrule).

Note: interest (by way of compensation for the use of money) cannot be demanded unless it was
previously stipulated upon in writing still interest (by way of damages/penalty) can be recovered in case
of default even if there be no stipulation to the effect.

Note: amt of the debt is unliquidated -> it is the final judgment that will ascertain the amt (interest by
way of damages shall be counted only from the date the decision becomes final). HOWEVER, the court
should not require the collection of interest when the judgment on wc it is issued does not give it, and
the interest is not allowed by statute (this is the rule even where the interest on judgments is allowed by
statute, IF the judgment does not include it)

Note: the contract stipulates from what time interest by way of damages will be counted, said stipulated
time controls, and therefore the interest is payable from such time.

Note: if the term for payment was left to the will of the debtor, the interest should not run from the
time the action was commenced in court, BUT only form default of payment AFTER the period was fixed
by the Court.

Arwood industries v DMCI: despite completion of the condo proj, the amt remained unpaid by
petitioner. Is the imposition of 2%/mo interest correct? YES. Upon fulfillment by respondent of its obli to
complete the construction proj, petitioner had a correlative duty to pay for respondents services.
However, petitioner refused to pay the balance of the contract price. there was delay on the part of the
petitioner. When a party to a contract incurs delay, the other party who performs his part of the
contract suffers damages. Damages take the form of interest. Appropriate measure of damages (in this
case) is the payment of interest at the rate agreed upon (2%). even in the absence of a stipulation on the
interest, under 2209, respondent would still be entitled to recover the balance of the contract price w
interest.

Question: in a loan, is it permissible to stipulate that in addition to 10% interest for use of the money,
the debtor would pay an additional 10% by way of penalty (penal clause) in case of default? Under the
present Usury Law, the word penalties is referred to, in case of a SECURED DEBT, aside from the word
interests. Strict construction -> NEGATIVE.

Recovery of interest in case of usury

Angel warehousing v chelda enterprises:

1) Can the creditor recover the principal debt? Yes. Contract of loan w usurious interest is valid as
to the loan & void only wrt interest for the loan is the principal contract while the interest is
merely an accessory element. They are separable from each other.
2) If the entire usurious rate has been paid by the debtor, how much of it can be recovered by said
debtor from the creditor? Wrt usurious interest, the entire interest agreed upon is void, and if
already paid, may be recovered by the debtor. A1413 NCC: interest paid in excess of the
interest allowed by the usury laws may be recovered by the debtor w interest thereon from the
date of payment. interest paid in excess of the interest allowed by the usury laws -> the whole
usurious interest. the whole stipulation as to interest is void since payment of said interest is
the cause or object & said interest is illegal. No conflict bert NCC & the usury law (sec 6, usury
law = any person who for a loan shall have paid a higher rate or greater sum or value than is
allowed in said law may recover the whole interest paid.

The principal debt remaining wo stipulation for payment of interest can be recovered by judicial
action. In case of such demand, and the debtor incurs in delay, the debt earns interest from the date
of the demand, whether judicial or extrajudicial (this case, filing of the complaint). Such interest is
not due to stipulation, for there was none, the same being void. It is due to the general provision of
law that in obligation to pay money, where the debtor incurs in delay, he has to pay interest by way
of damages (a2209).

Note: usury law has been repealed