G.R. No.

83589 March 13, 1991

RAMON FAROLAN as ACTING COMMISSIONER OF CUSTOMS, and GUILLERMO PARAYNO, as CHIEF OF

CUSTOM INTELLIGENCE and INVESTIGATION DIVISION, petitioners,
vs.
SOLMAC MARKETING CORPORATION and COURT OF APPEALS, respondents.
Dakila F. Castro & Associates for private respondent.
SARMIENTO, J.:
This petition for review on certiorari, instituted by the Solicitor General on behalf of the public officers-
petitioners, seek the nullification and setting aside of the Resolution1 dated May 25, 1988 of the Court
of Appeals in CA-G.R. No. SP-10509, entitled "Solmac Marketing Corporation vs. Ramon Farolan,
Acting Commissioner of Customs, and Guillermo Parayno, Chief of Customs Intelligence and
Investigation Division," which adjudged these public officers to pay solidarily and in their private
personal capacities respondent Solmac Marketing Corporation temperate damages in the sum of
P100,000.00, exemplary damages in the sum of P50,000.00, and P25,000.00, as attorney's fees and
expenses of litigation. This challenged resolution of the respondent court modified its decision2 of July
27, 1987 by reducing into halves the original awards of P100,000.00 and P50,000.00 for exemplary
damages and attorney's fees and litigation expenses, respectively, keeping intact the original grant of
P100,000.00 in the concept of temperate damages. (Strangely, the first name of petitioner Farolan
stated in the assailed resolution, as well as in the decision, of the respondent court is "Damian" when
it should be "Ramon", his correct given name. Strictly speaking, petitioner Ramon Farolan could not be
held liable under these decision and resolution for he is not the one adjudged to pay the huge
damages but a different person. Nonetheless, that is of no moment now considering the disposition of
this ponencia.)

The relevant facts, as culled from the records, are as follows:

At the time of the commission of the acts complained of by the private respondent, which was the
subject of the latter's petition for mandamus and injunction filed with the Regional Trial Court (RTC) of
Manila in Civil Case No. 84-23537, petitioner Ramon Farolan was then the Acting Commissioner of
Customs while petitioner Guillermo Parayno was then the Acting Chief, Customs Intelligence and
Investigation Division. They were thus sued in their official capacities as officers in the government as
clearly indicated in the title of the case in the lower courts and even here in this Court. Nevertheless,
they were both held personally liable for the awarded damages "(s)ince the detention of the goods by
the defendants (petitioners herein) was irregular and devoid of legal basis, hence, not done in the
regular performance of official duty . . . ."3

However, as adverted to at the outset, in the dispositive portion of the challenged resolution, the one
held personally liable is a "Damian Farolan" and not the petitioner, Ramon Farolan. Also as earlier
mentioned, we will ignore that gross error.

Private respondent Solmac Marketing Corporation is a corporation organized and existing under the
laws of the Philippines. It was the assignee, transferee, and owner of an importation of Clojus
Recycling Plastic Products of 202,204 kilograms of what is technically known as polypropylene film,
valued at US$69,250.05.

Polypropylene is a substance resembling polyethelyne which is one of a group of partially crystalline

lightweight thermoplastics used chiefly in making fibers, films, and molded and extruded products.4

Without defect, polypropylene film is sold at a much higher price as prime quality film. Once rejected
as defective due to blemishes, discoloration, defective winding, holes, etc., polypropylene film is sold
at a relatively cheap price without guarantee or return, and the buyer takes the risk as to whether he
can recover an average 30% to 50% usable matter.5 This latter kind of polypropylene is known as
OPP film waste/scrap and this is what respondent SOLMAC claimed the Clojus shipment to be.

The subject importation, consisting of seventeen (17) containers, arrived in December, 1981. Upon
application for entry, the Bureau of Customs asked respondent SOLMAC for its authority from any
government agency to import the goods described in the bill of lading. Respondent SOLMAC presented
a Board of Investment (BOI) authority for polypropylene film scrap. However, upon examination of the
shipment by the National Institute of Science and Technology (NIST), it turned out that the fibers of
the importation were oriented in such a way that the materials were stronger than OPP film scrap.6 In
other words, the Clojus shipment was not OPP film scrap, as declared by the assignee respondent
SOLMAC to the Bureau of Customs and BOI Governor Lilia R. Bautista, but oriented polypropylene the
importation of which is restricted, if not prohibited, under Letter of Instructions (LOI) No. 658-B.
Specifically, Sections 1 and 2 of LOI No. 658-B provide that:

xxx xxx xxx

1. The importation of cellophane shall be allowed only for quantities and types of cellophane that
cannot be produced by Philippine Cellophane Film Corporation. The Board of Investments shall issue
guidelines regulating such importations.

2. The Collector of Customs shall see to the apprehension of all illegal importations of cellophane and
oriented polypropylene (OPP) and the dumping of imported stock lots of cellophane and OPP.

xxx xxx xxx

Considering that the shipment was different from what had been authorized by the BOI and by law,
petitioners Parayno and Farolan withheld the release of the subject importation.

On June 7, 1982, petitioner Parayno, then Chief of Customs Intelligence and Investigation Division,
wrote the BOI asking for the latter's advice on whether or no t the subject importation may be
released7 A series of exchange of correspondence between the BOI and the Bureau of Customs, on
one hand, and between the late Dakila Castro, counsel for the private respondent, and the BOI and
the Bureau of Customs, on the other, ensued, to wit:

xxx xxx xxx

4. In a letter dated August 17, 1982, the BOI agreed that the subject imports may be released but
that holes may be drilled on them by the Bureau of Customs prior to their release.

5. On January 20, 1983, (the late) Atty. Dakila Castro, (then) counsel of private respondent wrote to
petitioner Commissioner Farolan of Customs asking for the release of the importation. The importation
was not released, however, on the ground that holes had to be drilled on them first.

6. Atty. Dakila Castro then wrote a letter dated October 6, 1983, to BOI Governor Hermenigildo Zayco
stressing the reasons why the subject importation should be released without drilling of holes.

7. On November 8, 1983, BOI Governor H. Zayco wrote a letter to the Bureau of Customs stating that
the subject goods may be released without drilling of holes inasmuch as the goods arrived prior to the
endorsement on August 17, 1982 to the drilling of holes on all importations of waste/scrap films.

8. On February 1, 1984, petitioner Commissioner Farolan wrote the BOI requesting for definite
guidelines regarding the disposition of importations of Oriented Polypropylene (OPP) and
Polypropylene (PP) then being held at the Bureau of Customs.

9. On March 12, 1984, Minister Roberto Ongpin of Trade, the BOI Chairman, wrote his reply to
petitioner Farolan . . . .8 (This reply of Minister Ongpin is copied in full infra.)

On March 26, 1984, respondent Solmac filed the action for mandamus and injunction with the RTC as
above mentioned. It prayed for the unconditional release of the subject importation. It also prayed for
actual damages, exemplary damages, and attorney's fees. As prayed for, the trial court issued a writ
of preliminary injunction.

After hearing on the merits, the RTC rendered a decision on February 5, 1985, the dispositive portion
of which reads as follows:
Premises considered, judgment is hereby rendered ordering defendants to release the subject
importation immediately without drilling of holes, subject only to the normal requirements of the
customs processing for such release to be done with utmost dispatch as time is of the essence; and
the preliminary injunction hereto issued is hereby made permanent until actual physical release of the
merchandise and without pronouncement as to costs.

SO ORDERED.9

From the decision of the trial court, Solmac, the plaintiff below and the private respondent herein,
appealed to the Court of Appeals only insofar as to the denial of the award of damages is concerned.
On the other hand, the petitioners did not appeal from this decision. They did not see any need to
appeal because as far as they were concerned, they had already complied with their duty. They had
already ordered the release of the importation "without drilling of holes," as in fact it was so released,
in compliance with the advice to effect such immediate release contained in a letter of BOI dated
October 9, 1984, to Commissioner Farolan. Thus, to stress, even before the RTC rendered its decision
on February 5, 1984, the Clojus shipment of OPP was released10 to the private respondent in its
capacity as assignee of the same. Be that it may, the private respondent filed its appeal demanding
that the petitioners be held, in their personal and private capacities, liable for damages despite the
finding of lack of bad faith on the part of the public officers.

After due proceeding, the Court of Appeals rendered a decision11 on July 27, 1987, the dispositive
portion which reads as follows:

WHEREFORE, the appealed judgment is modified by ordering the defendants Ramon Farolan and
Guillermo Parayno solidarity, in their personal capacity, to pay the plaintiff temperate damages in the
sum of P100,000, exemplary damages in the sum of P100,000 and P50,000 as attorney's fees and
expenses of litigation. Costs against the defendants.

SO ORDERED.

On August 14, 1987, the petitioners filed a motion for reconsideration of the decision of the Court of
Appeals.

On May 25, 1988, the Court of Appeals issued its resolution modifying the award of damages, to wit:
temperate damages in the sum of P100,000,00, exemplary damages in the sum of P50,000.00, and
P25,000.00 as attorney's fees and expenses of litigation. The respondent court explained the reduction
of the awards for exemplary damages and attorney's fees and expenses of litigation in this wise:

3. In our decision of July 27, 1987, We awarded to plaintiff-appellant Pl00,000 as temperate damages,
Pl00,000.00 as exemplary damages, and P50,000.00 as attorney's fees and expenses of litigation.
Under Art. 2233 of the Civil Code, recovery of exemplary damages is not a matter of right but
depends upon the discretion of the court. Under Article 2208 of the Civil Code, attorney's fees and
expenses of litigation must always be reasonable. In view of these provisions of the law, and since the
award of temperate damages is only P100,000.00, the amount of exemplary damages may not be at
par as temperate damages. An award of P50,000.00, as exemplary damages may already serve the
purpose, i.e., as an example for the public good. Likewise, the attorney's fees and expenses of
litigation have to be reduced to 25% of the amount of temperate damages, or P25,000.00, if the same
have to be reasonable. The reduction in the amount of exemplary damages, and attorney's fees and
expenses of litigation would be in accord with justice and fairness.12

The petitioners now come to this Court, again by the Solicitor General, assigning the following errors
allegedly committed by the respondent court:

The Court of Appeals erred in disregarding the finding of the trial court that the defense of good faith
of petitioners (defendants) cannot be discredited.
II

The Court of Appeals erred in adjudging petitioners liable to pay temperate damages, exemplary
damages, attorney's fees and expenses of litigation.13

These two issues boil down to a single question, i.e., whether or not the petitioners acted in good faith
in not immediately releasing the questioned importation, or, simply, can they be held liable, in their
personal and private capacities, for damages to the private respondent.

We rule for the petitioners.

The respondent court committed a reversible error in overruling the trial court's finding that:

. . . with reference to the claim of plaintiff to damages, actual and exemplary, and attorney's fees, the
Court finds it difficult to discredit or disregard totally the defendants' defense of good faith premised
on the excuse that they were all the time awaiting clarification of the Board of Investments on the
matter.14

We hold that this finding of the trial court is correct for good faith is always presumed and it is upon
him who alleges the contrary that the burden of proof lies.15 In Abando v. Lozada,16 we defined good
faith as "refer[ring] to a state of the mind which is manifested by the acts of the individual concerned.
It consists of the honest intention to abstain from taking an unconscionable and unscrupulous
advantage of another. It is the opposite of fraud, and its absence should be established by convincing
evidence."

We had reviewed the evidence on record carefully and we did not see any clear and convincing proof
showing the alleged bad faith of the petitioners. On the contrary, the record is replete with evidence
bolstering the petitioners' claim of good faith. First, there was the report of the National Institute of
Science and Technology (NIST) dated January 25, 1982 that, contrary to what the respondent
claimed, the subject importation was not OPP film scraps but oriented polypropylene, a plastic product
of stronger material, whose importation to the Philippines was restricted, if not prohibited, under LOI

658-B.17 It was on the strength of this finding that the petitioners withheld the release of the subject
importation for being contrary to law. Second, the petitioners testified that, on many occasions, the
Bureau of Customs sought the advice of the BOI on whether the subject importation might be
released.18 Third, petitioner Parayno also testified during the trial that up to that time (of the trial)
there was no clear-cut policy on the part of the BOI regarding the entry into the Philippines of oriented
polypropylene (OPP), as the letters of BOI Governors Tordesillas and Zayco of November 8, 1983 and
September 24, 1982, respectively, ordering the release of the subject importation did not clarify the
BOI policy on the matter. He then testified on the letter of the BOI Chairman Roberto Ongpin dated
March 12, 1984, which states in full:

Thank you for your letter of 1 February 1984, on the subject of various importations of Oriented
Polypropylene (OPP) and Polypropylene (PP) withheld by Customs and the confusion over the
disposition of such imports.

I have discussed the matter with Vice-Chairman Tordesillas and Governor Zayco of the Board of
Investments and the following is their explanation:

1. On 22 June 1982, the BOI ruled that importation of OPP/PP film scraps intended for recycling or
repelletizing did not fall within the purview of LOI 658-B.

2. On 17 August l982, the BOI agreed that holes could be drilled on subject film imports to prevent
their use for other purposes.

3. For importations authorized prior to 22 June 1982, the drilling of holes should depend on purpose
for which the importations was approved by the BOI that is, for direct packaging use or for
recycling/repelletizing into raw material. The exemption from drilling of holes on Solmac Marketing's
importation under Certificates of Authority issued on 1 April 1982 and 5 May 1982 and on Clojus'
importation authorized in 1982 were endorsed by the BOI on the premise that these were not
intended for recycling/repelletizing.

Should your office have any doubts as to the authorized intended use of any imported lots of OPP/PP
film scraps that you have confiscated, we have no objection to the drilling of holes to ensure that
these are indeed recycled.

I have requested Governor Zayco to contact your office in order to offer any further assistance which
you may require.19

It can be seen from all the foregoing that even the highest officers (Chairman Ongpin, Vice-Chairman
Tordesillas, and Governor Zayco) of the BOI themselves were not in agreement as to what proper
course to take on the subject of the various importations of Oriented Polypropylene (OPP) and
Polypropylene (PP) withheld by the Bureau of Customs. The conflicting recommendations of the BOI
on this score prompted the petitioners to seek final clarification from the former with regard to its
policy on these importations. This resulted in the inevitable delay in the release of the Clojus
shipment, one of the several of such importations. The confusion over the disposition of this particular
importation obviates bad faith. Thus the trial court's finding that the petitioners acted in good faith in
not immediately releasing the Clojus shipment pending a definitive policy of the BOI on this matter is
correct. It is supported by substantial evidence on record, independent of the presumption of good
faith, which as stated earlier, was not successfully rebutted.

When a public officer takes his oath of office, he binds himself to perform the duties of his office
faithfully and to use reasonable skill and diligence, and to act primarily for the benefit of the public.
Thus, in the discharge of his duties, he is to use that prudence, caution, and attention which careful
men use in the management of their affairs. In the case at bar, prudence dictated that petitioners first
obtain from the BOI the latter's definite guidelines regarding the disposition of the various
importations of oriented polypropylene (OPP) and polypropylene (PP) then being withheld at the
Bureau of Customs. These cellophane/film products were competing with locally manufactured
polypropylene and oriented polypropylene as raw materials which were then already sufficient to meet
local demands, hence, their importation was restricted, if not prohibited under LOI 658-B.
Consequently, the petitioners can not be said to have acted in bad faith in not immediately releasing
the import goods without first obtaining the necessary clarificatory guidelines from the BOI. As public
officers, the petitioners had the duty to see to it that the law they were tasked to implement, i.e., LOI
658-B, was faithfully complied with.

But even granting that the petitioners committed a mistake in withholding the release of the subject
importation because indeed it was composed of OPP film scraps,20 contrary to the evidence submitted
by the National Institute of Science and Technology that the same was pure oriented OPP,
nonetheless, it is the duty of the Court to see to it that public officers are not hampered in the
performance of their duties or in making decisions for fear of personal liability for damages due to
honest mistake.1âwphi1 Whatever damage they may have caused as a result of such an erroneous
interpretation, if any at all, is in the nature of a damnum absque injuria. Mistakes concededly
committed by public officers are not actionable absent any clear showing that they were motivated by
malice or gross negligence amounting to bad faith.21 After all, "even under the law of public officers,
the acts of the petitioners are protected by the presumption of good faith.22

In the same vein, the presumption, disputable though it may be, that an official duty has been
regularly performed23 applies in favor of the petitioners. Omnia praesumuntur rite et solemniter esse
acta. (All things are presumed to be correctly and solemnly done.) It was private respondent's burden
to overcome this juris tantum presumption. We are not persuaded that it has been able to do so.

WHEREFORE, the petition is hereby GRANTED, the assailed Resolution of the respondent court, in CA-
G.R. SP No. 10509, dated May 25, 1988, is SET ASIDE and ANNULLED. No costs.

SO ORDERED.
G.R. No. 152753 January 13, 2004

IGLECERIO MAHINAY, petitioner,

vs.
ATTY. GABINO A. VELASQUEZ, JR., respondent.
DECISION
CORONA, J.:
Before us is a petition for review of the decision1 dated December 20, 2001 of the Court of Appeals
affirming with modification the "order and resolution" dated October 31, 1977 of the Regional Trial
Court, Branch 16, Naval, Biliran in Civil Case No. B-0923, for damages.

The instant case arose from the alleged defamatory remarks of petitioner Iglecerio Mahinay against
respondent Gabino A. Velasquez, Jr

According to Olipio Machete, overseer of respondent, petitioner uttered the following malicious and
insulting statement against respondent: "Your master, a candidate for Congressman, Ben Velasquez,
is a land grabber." Machete informed respondent of what petitioner said about him. This impelled
respondent to file a complaint for damages against petitioner, claiming that his utterances besmirched
his and his family’s reputation and caused him anxiety, mental anguish and sleepless nights.

As no amicable settlement could be reached by the parties, trial on the merits ensued. The trial court
eventually ruled in favor of respondent on the basis of the sole testimony of Machete and awarded to
respondent moral damages in the amount of P100,000 and exemplary damages in the amount of
P50,000.2 No other evidence was adduced by either party.

Petitioner appealed to the Court of Appeals alleging that the trial court order lacked factual basis. The
Court of Appeals, however, modified the award, as follows:

"WHEREFORE, with the MODIFICATION that the award for moral and exemplary damages is hereby
reduced to P50,000.00 and P25,000.00, respectively, the decision appealed from is hereby AFFIRMED
and this appeal DISMISSED.

SO ORDERED."3

His motion for reconsideration having been denied, petitioner comes to this Court arguing that the
appellate court gravely erred in: (a) affirming the trial court order despite the lack of sufficient factual
basis and (b) awarding moral and exemplary damages to respondent despite his failure to take the
witness stand.4

We agree.

In order that moral damages may be awarded, there must be pleading and proof of moral suffering,
mental anguish, fright and the like.5 While respondent alleged in his complaint that he suffered mental
anguish, serious anxiety, wounded feelings and moral shock, he failed to prove them during the trial.
Indeed, respondent should have taken the witness stand and should have testified on the mental
anguish, serious anxiety, wounded feelings and other emotional and mental suffering he purportedly
suffered to sustain his claim for moral damages. Mere allegations do not suffice; they must be
substantiated by clear and convincing proof.6 No other person could have proven such damages
except the respondent himself as they were extremely personal to him.

In Keirulf vs. Court of Appeals,7 we held:

"While no proof of pecuniary loss is necessary in order that moral damages may be awarded, the
amount of indemnity being left to the discretion of the court, it is nevertheless essential that the
claimant should satisfactorily show the existence of the factual basis of damages and its causal
connection to defendant’s acts. This is so because moral damages, though incapable of pecuniary
estimation, are in the category of an award designed to compensate the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer. In Francisco vs. GSIS, the Court held that
there must be clear testimony on the anguish and other forms of mental suffering. Thus, if the plaintiff
fails to take the witness stand and testify as to his/her social humiliation, wounded feelings and
anxiety, moral damages cannot be awarded. In Cocoland Development Corporation vs. National labor
Relations Commission, the Court held that "additional facts must be pleaded and proven to warrant
the grant of moral damages under the Civil Code, these being, x x x social humiliation, wounded
feelings, grave anxiety, etc. that resulted therefrom."

The testimony of Machete was not enough evidence of the moral damages that the respondent
supposedly suffered. Machete may have clearly testified on the specific words uttered by petitioner
against respondent but he could not have testified on the wounded feelings respondent allegedly went
through by reason of petitioner’s slanderous remark. The award of moral damages must be anchored
to a clear showing that respondent actually experienced mental anguish, besmirched reputation,
sleepless nights, wounded feelings or similar injury. There was no better witness to this experience
than respondent himself. Since respondent failed to testify on the witness stand, the trial court did not
have any factual basis to award moral damages to him.

Neither is respondent entitled to exemplary damages. "If the court has no proof or evidence upon
which the claim for moral damages could be based, such indemnity could not be outrightly awarded.
The same holds true with respect to the award of exemplary damages where it must be shown that
the party acted in a wanton, oppressive or malevolent manner."8 Furthermore, this specie of damages
is allowed only in addition to moral damages such that no exemplary damages can be awarded unless
the claimant first establishes his clear right to moral damages.

The affirmance of the Court of Appeals of the ruling of the trial court is therefore not in order as it
lacked sufficient factual basis.

WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and SET ASIDE. The complaint
for damages in Civil Case No. B-0923 against herein petitioner is hereby DISMISSED. No costs.

SO ORDERED.

G.R. No. 141994 January 17, 2005

FILIPINAS BROADCASTING NETWORK, INC., petitioner,
vs.
AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and
ANGELITA F. AGO, respondents.
DECISION
CARPIO, J.:

The Case

This petition for review1 assails the 4 January 1999 Decision2 and 26 January 2000 Resolution of the
Court of Appeals in CA-G.R. CV No. 40151. The Court of Appeals affirmed with modification the 14
December 1992 Decision3 of the Regional Trial Court of Legazpi City, Branch 10, in Civil Case No.
8236. The Court of Appeals held Filipinas Broadcasting Network, Inc. and its broadcasters Hermogenes
Alegre and Carmelo Rima liable for libel and ordered them to solidarily pay Ago Medical and
Educational Center-Bicol Christian College of Medicine moral damages, attorney’s fees and costs of
suit.
The Antecedents

"Exposé" is a radio documentary4 program hosted by Carmelo ‘Mel’ Rima ("Rima") and Hermogenes
‘Jun’ Alegre ("Alegre").5 Exposé is aired every morning over DZRC-AM which is owned by Filipinas
Broadcasting Network, Inc. ("FBNI"). "Exposé" is heard over Legazpi City, the Albay municipalities and
other Bicol areas.6

In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged complaints
from students, teachers and parents against Ago Medical and Educational Center-Bicol Christian
College of Medicine ("AMEC") and its administrators. Claiming that the broadcasts were defamatory,
AMEC and Angelita Ago ("Ago"), as Dean of AMEC’s College of Medicine, filed a complaint for
damages7 against FBNI, Rima and Alegre on 27 February 1990. Quoted are portions of the allegedly
libelous broadcasts:

JUN ALEGRE:

Let us begin with the less burdensome: if you have children taking medical course at AMEC-BCCM,
advise them to pass all subjects because if they fail in any subject they will repeat their year level,
taking up all subjects including those they have passed already. Several students had approached me
stating that they had consulted with the DECS which told them that there is no such regulation. If
[there] is no such regulation why is AMEC doing the same?

xxx

Second: Earlier AMEC students in Physical Therapy had complained that the course is not recognized
by DECS. xxx

Third: Students are required to take and pay for the subject even if the subject does not have an
instructor - such greed for money on the part of AMEC’s administration. Take the subject Anatomy:
students would pay for the subject upon enrolment because it is offered by the school. However there
would be no instructor for such subject. Students would be informed that course would be moved to a
later date because the school is still searching for the appropriate instructor.

xxx

It is a public knowledge that the Ago Medical and Educational Center has survived and has been
surviving for the past few years since its inception because of funds support from foreign foundations.
If you will take a look at the AMEC premises you’ll find out that the names of the buildings there are
foreign soundings. There is a McDonald Hall. Why not Jose Rizal or Bonifacio Hall? That is a very
concrete and undeniable evidence that the support of foreign foundations for AMEC is substantial, isn’t
it? With the report which is the basis of the expose in DZRC today, it would be very easy for detractors
and enemies of the Ago family to stop the flow of support of foreign foundations who assist the
medical school on the basis of the latter’s purpose. But if the purpose of the institution (AMEC) is to
deceive students at cross purpose with its reason for being it is possible for these foreign foundations
to lift or suspend their donations temporarily.8

xxx

On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and the AMEC-
Institute of Mass Communication in their effort to minimize expenses in terms of salary are absorbing
or continues to accept "rejects". For example how many teachers in AMEC are former teachers of
Aquinas University but were removed because of immorality? Does it mean that the present
administration of AMEC have the total definite moral foundation from catholic administrator of Aquinas
University. I will prove to you my friends, that AMEC is a dumping ground, garbage, not merely of
moral and physical misfits. Probably they only qualify in terms of intellect. The Dean of Student Affairs
of AMEC is Justita Lola, as the family name implies. She is too old to work, being an old woman. Is the
AMEC administration exploiting the very [e]nterprising or compromising and undemanding Lola? Could
it be that AMEC is just patiently making use of Dean Justita Lola were if she is very old. As in
atmospheric situation – zero visibility – the plane cannot land, meaning she is very old, low pay
follows. By the way, Dean Justita Lola is also the chairman of the committee on scholarship in AMEC.
She had retired from Bicol University a long time ago but AMEC has patiently made use of her.

xxx

MEL RIMA:

xxx My friends based on the expose, AMEC is a dumping ground for moral and physically misfit
people. What does this mean? Immoral and physically misfits as teachers.

May I say I’m sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no longer
fit to teach. You are too old. As an aviation, your case is zero visibility. Don’t insist.

xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the scholarship committee at
that. The reason is practical cost saving in salaries, because an old person is not fastidious, so long as
she has money to buy the ingredient of beetle juice. The elderly can get by – that’s why she (Lola)
was taken in as Dean.

xxx

xxx

On our end our task is to attend to the interests of students. It is likely that the students would be
influenced by evil. When they become members of society outside of campus will be liabilities rather
than assets. What do you expect from a doctor who while studying at AMEC is so much burdened with
unreasonable imposition? What do you expect from a student who aside from peculiar problems –
because not all students are rich – in their struggle to improve their social status are even more
burdened with false regulations. xxx9 (Emphasis supplied)

The complaint further alleged that AMEC is a reputable learning institution. With the supposed
exposés, FBNI, Rima and Alegre "transmitted malicious imputations, and as such, destroyed plaintiffs’
(AMEC and Ago) reputation." AMEC and Ago included FBNI as defendant for allegedly failing to
exercise due diligence in the selection and supervision of its employees, particularly Rima and Alegre.

On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an Answer10 alleging that
the broadcasts against AMEC were fair and true. FBNI, Rima and Alegre claimed that they were plainly
impelled by a sense of public duty to report the "goings-on in AMEC, [which is] an institution imbued
with public interest."

Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty. Edmundo Cea,
collaborating counsel of Atty. Lozares, filed a Motion to Dismiss11 on FBNI’s behalf. The trial court
denied the motion to dismiss. Consequently, FBNI filed a separate Answer claiming that it exercised
due diligence in the selection and supervision of Rima and Alegre. FBNI claimed that before hiring a
broadcaster, the broadcaster should (1) file an application; (2) be interviewed; and (3) undergo an
apprenticeship and training program after passing the interview. FBNI likewise claimed that it always
reminds its broadcasters to "observe truth, fairness and objectivity in their broadcasts and to refrain
from using libelous and indecent language." Moreover, FBNI requires all broadcasters to pass the
Kapisanan ng mga Brodkaster sa Pilipinas ("KBP") accreditation test and to secure a KBP permit.

On 14 December 1992, the trial court rendered a Decision12 finding FBNI and Alegre liable for libel
except Rima. The trial court held that the broadcasts are libelous per se. The trial court rejected the
broadcasters’ claim that their utterances were the result of straight reporting because it had no factual
basis. The broadcasters did not even verify their reports before airing them to show good faith. In
holding FBNI liable for libel, the trial court found that FBNI failed to exercise diligence in the selection
and supervision of its employees.
In absolving Rima from the charge, the trial court ruled that Rima’s only participation was when he
agreed with Alegre’s exposé. The trial court found Rima’s statement within the "bounds of freedom of
speech, expression, and of the press." The dispositive portion of the decision reads:

WHEREFORE, premises considered, this court finds for the plaintiff. Considering the degree of
damages caused by the controversial utterances, which are not found by this court to be really very
serious and damaging, and there being no showing that indeed the enrollment of plaintiff school
dropped, defendants Hermogenes "Jun" Alegre, Jr. and Filipinas Broadcasting Network (owner of the
radio station DZRC), are hereby jointly and severally ordered to pay plaintiff Ago Medical and
Educational Center-Bicol Christian College of Medicine (AMEC-BCCM) the amount of ₱300,000.00
moral damages, plus ₱30,000.00 reimbursement of attorney’s fees, and to pay the costs of suit.

SO ORDERED. 13 (Emphasis supplied)

Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the other,
appealed the decision to the Court of Appeals. The Court of Appeals affirmed the trial court’s judgment
with modification. The appellate court made Rima solidarily liable with FBNI and Alegre. The appellate
court denied Ago’s claim for damages and attorney’s fees because the broadcasts were directed
against AMEC, and not against her. The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the modification that
broadcaster Mel Rima is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes Alegre.

SO ORDERED.14

FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals denied in its 26
January 2000 Resolution.

Hence, FBNI filed this petition.15

The Ruling of the Court of Appeals

The Court of Appeals upheld the trial court’s ruling that the questioned broadcasts are libelous per se
and that FBNI, Rima and Alegre failed to overcome the legal presumption of malice. The Court of
Appeals found Rima and Alegre’s claim that they were actuated by their moral and social duty to
inform the public of the students’ gripes as insufficient to justify the utterance of the defamatory
remarks.

Finding no factual basis for the imputations against AMEC’s administrators, the Court of Appeals ruled
that the broadcasts were made "with reckless disregard as to whether they were true or false." The
appellate court pointed out that FBNI, Rima and Alegre failed to present in court any of the students
who allegedly complained against AMEC. Rima and Alegre merely gave a single name when asked to
identify the students. According to the Court of Appeals, these circumstances cast doubt on the
veracity of the broadcasters’ claim that they were "impelled by their moral and social duty to inform
the public about the students’ gripes."

The Court of Appeals found Rima also liable for libel since he remarked that "(1) AMEC-BCCM is a
dumping ground for morally and physically misfit teachers; (2) AMEC obtained the services of Dean
Justita Lola to minimize expenses on its employees’ salaries; and (3) AMEC burdened the students
with unreasonable imposition and false regulations."16

The Court of Appeals held that FBNI failed to exercise due diligence in the selection and supervision of
its employees for allowing Rima and Alegre to make the radio broadcasts without the proper KBP
accreditation. The Court of Appeals denied Ago’s claim for damages and attorney’s fees because the
libelous remarks were directed against AMEC, and not against her. The Court of Appeals adjudged
FBNI, Rima and Alegre solidarily liable to pay AMEC moral damages, attorney’s fees and costs of
suit.1awphi1.nét
Issues
FBNI raises the following issues for resolution:
I. WHETHER THE BROADCASTS ARE LIBELOUS;
II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;
III. WHETHER THE AWARD OF ATTORNEY’S FEES IS PROPER; and
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR PAYMENT OF MORAL DAMAGES,
ATTORNEY’S FEES AND COSTS OF SUIT.

The Court’s Ruling

We deny the petition.

This is a civil action for damages as a result of the allegedly defamatory remarks of Rima and Alegre
against AMEC.17 While AMEC did not point out clearly the legal basis for its complaint, a reading of
the complaint reveals that AMEC’s cause of action is based on Articles 30 and 33 of the Civil Code.
Article 3018 authorizes a separate civil action to recover civil liability arising from a criminal offense.
On the other hand, Article 3319 particularly provides that the injured party may bring a separate civil
action for damages in cases of defamation, fraud, and physical injuries. AMEC also invokes Article
1920 of the Civil Code to justify its claim for damages. AMEC cites Articles 217621 and 218022 of the
Civil Code to hold FBNI solidarily liable with Rima and Alegre.

I.

Whether the broadcasts are libelous

A libel23 is a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or
any act or omission, condition, status, or circumstance tending to cause the dishonor, discredit, or
contempt of a natural or juridical person, or to blacken the memory of one who is dead.24

There is no question that the broadcasts were made public and imputed to AMEC defects or
circumstances tending to cause it dishonor, discredit and contempt. Rima and Alegre’s remarks such
as "greed for money on the part of AMEC’s administrators"; "AMEC is a dumping ground, garbage of
xxx moral and physical misfits"; and AMEC students who graduate "will be liabilities rather than
assets" of the society are libelous per se. Taken as a whole, the broadcasts suggest that AMEC is a
money-making institution where physically and morally unfit teachers abound.

However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima and Alegre
were plainly impelled by their civic duty to air the students’ gripes. FBNI alleges that there is no
evidence that ill will or spite motivated Rima and Alegre in making the broadcasts. FBNI further points
out that Rima and Alegre exerted efforts to obtain AMEC’s side and gave Ago the opportunity to
defend AMEC and its administrators. FBNI concludes that since there is no malice, there is no libel.

FBNI’s contentions are untenable.

Every defamatory imputation is presumed malicious.25 Rima and Alegre failed to show adequately
their good intention and justifiable motive in airing the supposed gripes of the students. As hosts of a
documentary or public affairs program, Rima and Alegre should have presented the public issues "free
from inaccurate and misleading information."26 Hearing the students’ alleged complaints a month
before the exposé,27 they had sufficient time to verify their sources and information. However, Rima
and Alegre hardly made a thorough investigation of the students’ alleged gripes. Neither did they
inquire about nor confirm the purported irregularities in AMEC from the Department of Education,
Culture and Sports. Alegre testified that he merely went to AMEC to verify his report from an alleged
AMEC official who refused to disclose any information. Alegre simply relied on the words of the
students "because they were many and not because there is proof that what they are saying is
true."28 This plainly shows Rima and Alegre’s reckless disregard of whether their report was true or
not.
Contrary to FBNI’s claim, the broadcasts were not "the result of straight reporting." Significantly,
some courts in the United States apply the privilege of "neutral reportage" in libel cases involving
matters of public interest or public figures. Under this privilege, a republisher who accurately and
disinterestedly reports certain defamatory statements made against public figures is shielded from
liability, regardless of the republisher’s subjective awareness of the truth or falsity of the
accusation.29 Rima and Alegre cannot invoke the privilege of neutral reportage because unfounded
comments abound in the broadcasts. Moreover, there is no existing controversy involving AMEC when
the broadcasts were made. The privilege of neutral reportage applies where the defamed person is a
public figure who is involved in an existing controversy, and a party to that controversy makes the
defamatory statement.30

However, FBNI argues vigorously that malice in law does not apply to this case. Citing Borjal v. Court
of Appeals,31 FBNI contends that the broadcasts "fall within the coverage of qualifiedly privileged
communications" for being commentaries on matters of public interest. Such being the case, AMEC
should prove malice in fact or actual malice. Since AMEC allegedly failed to prove actual malice, there
is no libel.

FBNI’s reliance on Borjal is misplaced. In Borjal, the Court elucidated on the "doctrine of fair
comment," thus:

[F]air commentaries on matters of public interest are privileged and constitute a valid defense in an
action for libel or slander. The doctrine of fair comment means that while in general every
discreditable imputation publicly made is deemed false, because every man is presumed innocent until
his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the
discreditable imputation is directed against a public person in his public capacity, it is not necessarily
actionable. In order that such discreditable imputation to a public official may be actionable, it must
either be a false allegation of fact or a comment based on a false supposition. If the comment is an
expression of opinion, based on established facts, then it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the facts.32 (Emphasis supplied)

True, AMEC is a private learning institution whose business of educating students is "genuinely imbued
with public interest." The welfare of the youth in general and AMEC’s students in particular is a matter
which the public has the right to know. Thus, similar to the newspaper articles in Borjal, the subject
broadcasts dealt with matters of public interest. However, unlike in Borjal, the questioned broadcasts
are not based on established facts. The record supports the following findings of the trial court:

xxx Although defendants claim that they were motivated by consistent reports of students and parents
against plaintiff, yet, defendants have not presented in court, nor even gave name of a single student
who made the complaint to them, much less present written complaint or petition to that effect. To
accept this defense of defendants is too dangerous because it could easily give license to the media to
malign people and establishments based on flimsy excuses that there were reports to them although
they could not satisfactorily establish it. Such laxity would encourage careless and irresponsible
broadcasting which is inimical to public interests.

Secondly, there is reason to believe that defendant radio broadcasters, contrary to the mandates of
their duties, did not verify and analyze the truth of the reports before they aired it, in order to prove
that they are in good faith.

Alegre contended that plaintiff school had no permit and is not accredited to offer Physical Therapy
courses. Yet, plaintiff produced a certificate coming from DECS that as of Sept. 22, 1987 or more than
2 years before the controversial broadcast, accreditation to offer Physical Therapy course had already
been given the plaintiff, which certificate is signed by no less than the Secretary of Education and
Culture herself, Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could have easily known this
were they careful enough to verify. And yet, defendants were very categorical and sounded too
positive when they made the erroneous report that plaintiff had no permit to offer Physical Therapy
courses which they were offering.
The allegation that plaintiff was getting tremendous aids from foreign foundations like Mcdonald
Foundation prove not to be true also. The truth is there is no Mcdonald Foundation existing. Although
a big building of plaintiff school was given the name Mcdonald building, that was only in order to honor
the first missionary in Bicol of plaintiffs’ religion, as explained by Dr. Lita Ago. Contrary to the claim of
defendants over the air, not a single centavo appears to be received by plaintiff school from the
aforementioned McDonald Foundation which does not exist.

Defendants did not even also bother to prove their claim, though denied by Dra. Ago, that when
medical students fail in one subject, they are made to repeat all the other subject[s], even those they
have already passed, nor their claim that the school charges laboratory fees even if there are no
laboratories in the school. No evidence was presented to prove the bases for these claims, at least in
order to give semblance of good faith.

As for the allegation that plaintiff is the dumping ground for misfits, and immoral teachers,
defendant[s] singled out Dean Justita Lola who is said to be so old, with zero visibility already. Dean
Lola testified in court last Jan. 21, 1991, and was found to be 75 years old. xxx Even older people
prove to be effective teachers like Supreme Court Justices who are still very much in demand as law
professors in their late years. Counsel for defendants is past 75 but is found by this court to be still
very sharp and effective.l^vvphi1.net So is plaintiffs’ counsel.

Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally infirmed, but is still
alert and docile.

The contention that plaintiffs’ graduates become liabilities rather than assets of our society is a mere
conclusion. Being from the place himself, this court is aware that majority of the medical graduates of
plaintiffs pass the board examination easily and become prosperous and responsible professionals.33

Had the comments been an expression of opinion based on established facts, it is immaterial that the
opinion happens to be mistaken, as long as it might reasonably be inferred from the facts.34 However,
the comments of Rima and Alegre were not backed up by facts. Therefore, the broadcasts are not
privileged and remain libelous per se.

The broadcasts also violate the Radio Code35 of the Kapisanan ng mga Brodkaster sa Pilipinas, Ink.
("Radio Code"). Item I(B) of the Radio Code provides:

B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES

1. x x x

4. Public affairs program shall present public issues free from personal bias, prejudice and inaccurate
and misleading information. x x x Furthermore, the station shall strive to present balanced discussion
of issues. x x x.

xxx

7. The station shall be responsible at all times in the supervision of public affairs, public issues and
commentary programs so that they conform to the provisions and standards of this code.

8. It shall be the responsibility of the newscaster, commentator, host and announcer to protect public
interest, general welfare and good order in the presentation of public affairs and public issues.36
(Emphasis supplied)

The broadcasts fail to meet the standards prescribed in the Radio Code, which lays down the code of
ethical conduct governing practitioners in the radio broadcast industry. The Radio Code is a voluntary
code of conduct imposed by the radio broadcast industry on its own members. The Radio Code is a
public warranty by the radio broadcast industry that radio broadcast practitioners are subject to a
code by which their conduct are measured for lapses, liability and sanctions.
The public has a right to expect and demand that radio broadcast practitioners live up to the code of
conduct of their profession, just like other professionals. A professional code of conduct provides the
standards for determining whether a person has acted justly, honestly and with good faith in the
exercise of his rights and performance of his duties as required by Article 1937 of the Civil Code. A
professional code of conduct also provides the standards for determining whether a person who
willfully causes loss or injury to another has acted in a manner contrary to morals or good customs
under Article 2138 of the Civil Code.

II.

Whether AMEC is entitled to moral damages

FBNI contends that AMEC is not entitled to moral damages because it is a corporation.39

A juridical person is generally not entitled to moral damages because, unlike a natural person, it
cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental
anguish or moral shock.40 The Court of Appeals cites Mambulao Lumber Co. v. PNB, et al.41 to justify
the award of moral damages. However, the Court’s statement in Mambulao that "a corporation may
have a good reputation which, if besmirched, may also be a ground for the award of moral damages"
is an obiter dictum.42

Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 221943 of the Civil Code.
This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any
other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical
person. Therefore, a juridical person such as a corporation can validly complain for libel or any other
form of defamation and claim for moral damages.44

Moreover, where the broadcast is libelous per se, the law implies damages.45 In such a case,
evidence of an honest mistake or the want of character or reputation of the party libeled goes only in
mitigation of damages.46 Neither in such a case is the plaintiff required to introduce evidence of
actual damages as a condition precedent to the recovery of some damages.47 In this case, the
broadcasts are libelous per se. Thus, AMEC is entitled to moral damages.

However, we find the award of ₱300,000 moral damages unreasonable. The record shows that even
though the broadcasts were libelous per se, AMEC has not suffered any substantial or material
damage to its reputation. Therefore, we reduce the award of moral damages from ₱300,000 to
₱150,000.

III.

Whether the award of attorney’s fees is proper

FBNI contends that since AMEC is not entitled to moral damages, there is no basis for the award of
attorney’s fees. FBNI adds that the instant case does not fall under the enumeration in Article 220848
of the Civil Code.

The award of attorney’s fees is not proper because AMEC failed to justify satisfactorily its claim for
attorney’s fees. AMEC did not adduce evidence to warrant the award of attorney’s fees. Moreover,
both the trial and appellate courts failed to explicitly state in their respective decisions the rationale
for the award of attorney’s fees.49 In Inter-Asia Investment Industries, Inc. v. Court of Appeals ,50
we held that:

[I]t is an accepted doctrine that the award thereof as an item of damages is the exception rather than
the rule, and counsel’s fees are not to be awarded every time a party wins a suit. The power of the
court to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal and
equitable justification, without which the award is a conclusion without a premise, its basis being
improperly left to speculation and conjecture. In all events, the court must explicitly state in the text
of the decision, and not only in the decretal portion thereof, the legal reason for the award of
attorney’s fees.51 (Emphasis supplied)

While it mentioned about the award of attorney’s fees by stating that it "lies within the discretion of
the court and depends upon the circumstances of each case," the Court of Appeals failed to point out
any circumstance to justify the award.

IV.

Whether FBNI is solidarily liable with Rima and Alegre for moral damages, attorney’s fees and costs of
suit

FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of damages and
attorney’s fees because it exercised due diligence in the selection and supervision of its employees,
particularly Rima and Alegre. FBNI maintains that its broadcasters, including Rima and Alegre,
undergo a "very regimented process" before they are allowed to go on air. "Those who apply for
broadcaster are subjected to interviews, examinations and an apprenticeship program."

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

FBNI’s arguments do not persuade us.

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

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

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

FBNI claims that it "has taken all the precaution in the selection of Rima and Alegre as broadcasters,
bearing in mind their qualifications." However, no clear and convincing evidence shows that Rima and
Alegre underwent FBNI’s "regimented process" of application. Furthermore, FBNI admits that Rima
and Alegre had deficiencies in their KBP accreditation,56 which is one of FBNI’s requirements before it
hires a broadcaster. Significantly, membership in the KBP, while voluntary, indicates the broadcaster’s
strong commitment to observe the broadcast industry’s rules and regulations. Clearly, these
circumstances show FBNI’s lack of diligence in selecting and supervising Rima and Alegre. Hence, FBNI
is solidarily liable to pay damages together with Rima and Alegre.

WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January 1999 and Resolution
of 26 January 2000 of the Court of Appeals in CA-G.R. CV No. 40151 with the MODIFICATION that the
award of moral damages is reduced from ₱300,000 to ₱150,000 and the award of attorney’s fees is
deleted. Costs against petitioner. SO ORDERED.

G.R. No. 149368 April 14, 2004

PEOPLE OF THE PHILIPPINES, appellee,

vs.
FRANCISCO DACILLO alias DODOY AND JOSELITO PACOT y IBARRA (case provisionally dismissed),
accused,
FRANCISCO DACILLO alias DODOY, appellant.
DECISION
CORONA, J.:
Before us on automatic review is the decision1 of the Regional Trial Court of Davao City, Branch 31, in
Criminal Case No. 45,283-2000 convicting appellant Francisco Dacillo y Timtim alias Dodoy of the
crime of murder and sentencing him to suffer the penalty of death.

Appellant Dacillo together with Joselito Pacot y Ibarra were indicted for murder in an information that
read:

The undersigned accuses the above-named accused of the crime of Murder, under Art. 248 of the
Revised Penal Code, as amended by R.A. 7659, committed as follows:

That on or about February 6, 2000, in the City of Davao, Philippines, and within the jurisdiction of this
Honorable Court, the above-mentioned accused, conspiring, confederating together and helping one
another, with treachery and evident premeditation, and with intent to kill, willfully, unlawfully and
feloniously attacked, assaulted and stabbed one Rosemarie B. Tallada with a bladed weapon, thereby
inflicting upon the latter mortal wounds which caused her death.

That the commission of the foregoing offense was attended by the aggravating circumstance of abuse
of superior strength.

CONTRARY TO LAW.2

The case against appellant’s co-accused, Joselito Pacot, was provisionally dismissed for lack of
sufficient evidence to identify him with certainty.

Appellant was arraigned on February 21, 2001 and, assisted by counsel, pleaded not guilty. Pre-trial
was conducted on March 1, 2001 and trial ensued thereafter.

To establish appellant’s guilt, the prosecution presented the following witnesses: Charlita Tallada, the
victim’s mother; Patricia Turlao, the victim’s aunt; appellant Dacillo’s neighbors, Jovelyn Dagmil,
Augusto Cesar Arara, Roche Abregon, Resna Abregon, Allan Castanares, Jupiter Campaner; police
officers SPO2 Rodolfo Taburda and SPO1 Avelino Alcobus, and medico-legal officer Dr. Danilo P.
Ledesma.

The facts, as established by the prosecution witnesses’ collective testimonies, follow.

The victim, seventeen-year-old Rosemarie B. Tallada, was last seen alive at dusk on February 6, 2000,
on the bridge near appellant’s house at Purok No. 3, New Society Village, Ilang, Davao City.

Around 7:45 p.m. that evening, witness Jovelyn Dagmil, who was living with her aunt in the house
adjacent to appellant’s, was looking for her cousin when she saw the victim Rosemarie on the bridge.
Because it was drizzling, she invited Rosemarie inside their house but the latter declined and told her
she was waiting for someone.3

After a while, Jovelyn heard a man inside appellant’s house calling "Psst, psst . . ." Thinking the call
was meant for her, she turned but instead saw Rosemarie walking towards and entering appellant’s
house.4

Not long after Rosemarie went inside the house, a struggle was heard therein. Witnesses Roche and
Resna Abregon, who were in the adjacent house singing with a karaoke machine, suddenly felt the
floor shaking as if a scuffle was going on at the other side of the wall. The houses were built on stilts
above the seashore, adjoining one another with mere wooden partitions in between. Roche Abregon
peeped through a hole on the wall and saw appellant and another man grappling with a woman who
was gagged with a handkerchief.5 When Roche saw appellant choking the woman, she informed her
aunt about the commotion in appellant’s house but the aunt brushed it aside as a simple family
quarrel.6 For a while they heard the sound of a woman being beaten up. Then everything became
quiet. Later that evening, they saw appellant leaving his house.7

The following day, February 7, 2000, at around 8:00 a.m., appellant was seen entering his house
carrying lumber and screen.8 He was observed going in and out of his house several times, each time
carefully locking the gate as he left.9 At around 9:00 a.m., appellant was seen with ready-mixed
cement in a plastic pail and, when asked what he was going to do with the cement, replied that it was
for the sink he was constructing.10

Later, appellant entrusted a bag of woman’s personal belongings to barangay tanod Allan Castañares
and told the latter that it belonged to his woman companion. He allegedly could not bring it home
because his wife might see them.11

By February 11, 2000, neighbors started smelling the rotten odor of Rosemarie’s already decomposing
body.12

At 5:00 p.m. the same day, witnesses Roche, Resna, and Rachel were gathering seashells under
appellant’s house when they saw droplets of blood and pus dripping from appellant’s comfort room.
They immediately reported it to their aunt who in turn instructed her husband to get a stick and poke
the sacks covering the comfort room. However, the husband instead climbed up the house and was
greeted by the stink emanating from the corner where he saw a tomb-like structure. They
immediately reported the matter to barangay officials who called the police.13

At about 10:00 p.m., policemen arrived at appellant’s house, accompanied by his wife, and forcibly
opened the lock. They proceeded to where the tomb was located.

When cracked open, the tomb revealed the decomposing body of a woman.14

The corpse was brought to the Rivera Funeral Parlor where it was identified by the victim’s mother
Charlita Tallada and aunt Patricia Turlao as that of Rosemarie, through the keloid scar on her forearm.

Dr. Danilo Ledesma conducted an autopsy on Rosemarie’s remains. His necropsy report revealed that
Rosemarie died from a stab wound in the abdomen. The report further disclosed that she suffered
contusions in the anterior chest wall and her right hand; an incised wound on her left middle finger; a
stab wound on the left side of the face and fractures on the 2nd, 3rd, 4th, 5th, 6th and 7th ribs on her
side.15

Dr. Ledesma testified that the wounds suffered by Rosemarie indicated that she put up a struggle and
the wounds were inflicted before her death.16
In his defense, appellant admitted complicity in the crime but minimized his participation. Appellant
alleged that he only held down Rosemarie’s legs to prevent her from struggling and, after the latter
was killed by another man he identified as Joselito Pacot, he encased the corpse in cement.

He claimed that Pacot, a co-worker at Davao Union Cement Corporation (DUCC), was looking for a
house where he and his girlfriend Rosemarie could spend the night. He offered his brother’s house
which was under his care. In the evening of February 6, 2000, he and Joselito Pacot brought
Rosemarie to the house at Purok No. 3, New Society Village, Ilang, Davao City.

After accompanying the couple there, he went home to take supper. Later that evening, he returned
to the house with the bottle of Sprite Pacot had ordered. When he arrived, Pacot and Rosemarie were
already grappling with each other and Pacot was strangling the girl. He told Pacot to stop but instead
of heeding him, the latter ordered him to close the door. Pacot told appellant that he was going to be
implicated just the same so he closed the door as ordered and helped Pacot "(hold) the feet of the
woman" as "her feet kept hitting the walls."17

The two men stopped only when Rosemarie was already motionless. Pacot wanted to dump the body
into the sea but appellant told him it was low tide. Appellant then suggested that they entomb the
body in cement for which Pacot gave appellant ₱500.

Pacot left the house at dawn the following day, February 7, 2000. At past 10:00 a.m., appellant
brought the concrete mixture and cast the dead body in cement. After finishing the job in the
afternoon of that day, appellant reported for work at DUCC.

When the body was discovered in the evening of February 11, 2000, appellant immediately left for
Cebu City, arriving there the next day, February 12, 2000. He stayed in Cebu City until his arrest the
following year.

On May 31, 2001, the trial court rendered judgment finding appellant guilty of murder and imposed
upon him the supreme penalty of death:

WHEREFORE, this Court finds the accused Francisco Dacillo GUILTY beyond reasonable doubt of the
crime of MURDER for the death of Rosemarie Tallada, as defined and penalized under Art. 248 of the
Revised Penal Code, as amended. Considering the aggravating circumstance of recidivism with no
mitigating circumstance to offset the same, he is hereby sentenced to the extreme penalty of DEATH,

He is further ordered to indemnify the heirs of the offended party in the amount of ₱50,000.00, plus
the sum of ₱50,000.00 as moral damages, and the sum of ₱50,000.00 as exemplary damages.

His immediate confinement to the national penitentiary is hereby ordered.

Costs de oficio.

SO ORDERED.18

Thus, this automatic review.

In his brief, appellant raises the following errors allegedly committed by the trial court:

THE COURT A QUO GRAVELY ERRED IN FINDING THE APPELLANT GUILTY BEYOND REASONABLE
DOUBT OF THE CRIME OF MURDER.

II

THE COURT A QUO GRAVELY ERRED IN AWARDING THE HEIRS OF THE OFFENDED PARTY THE
AMOUNT OF PHP50,000.00, WHICH APPEARS AS PAYMENT FOR ACTUAL DAMAGES.19
Appellant admitted that he had a hand in the killing of Rosemarie but attempted to downgrade his
participation in the crime by claiming he only held Rosemarie’s legs as Pacot was strangulating her.
The rule is that any admission made by a party in the course of the proceedings in the same case does
not require proof to hold him liable therefor. Such admission may be contradicted only by showing
that it was made through palpable mistake or no such admission was in fact made. There was never
any such disclaimer by appellant.

Moreover, despite appellant’s self-serving, exculpatory statement limiting his involvement in the
crime, all circumstances pointed to his guilt. His declaration faltered in the face of the testimonies of
eyewitnesses positively identifying him as one of the two men who were with Rosemarie when she
was killed. Witness Roche Abregon pointed to appellant as the one who strangled Rosemarie. He was
established to be inside the house at the time the witnesses heard a woman being battered. Thus,
assuming for the sake of argument that Pacot was the mastermind, appellant’s admission that he
participated in its commission by holding Rosemarie’s legs made him a principal by direct
participation.

Two or more persons taking part in the commission of a crime are considered principals by direct
participation if the following requisites are present:

1. they participated in the criminal resolution and

2. they carried out their plan and personally took part in its execution by acts which directly tended to
the same end.20

Both requisites were met in this case. Two or more persons are said to have participated in the
criminal resolution when they were in conspiracy at the time of the commission of the crime. To
establish conspiracy, it is not essential that there be proof of the previous agreement and decision to
commit the crime, it being sufficient that the malefactors acted in concert pursuant to the same
objective.21

The prosecution was able to prove appellant’s participation in the criminal resolve by his own
admission that, right after he was told by Pacot to close the door, he held down Rosemarie’s legs. He
was pinpointed as the one who throttled the victim. He admitted that they only stopped when they
were sure that Rosemarie was already dead. The two men planned how to dispose of the victim’s
body; it was in fact appellant’s idea to pour concrete on the body, prevailing over Pacot’s suggestion
to just dump the body into the sea. It was appellant himself who encased the body in cement and
made sure that there were no leaks from which foul odor could emanate. He was a conspirator in the
killing and, whether or not he himself did the strangling or the stabbing, he was also liable for the acts
of the other accused.

It is well-settled that a person may be convicted for the criminal act of another where, between them,
there is conspiracy or unity of purpose and intention in the commission of the crime charged.22
Conspiracy need not be proved by direct evidence of prior agreement on the commission of the crime
as the same can be inferred from the conduct of the accused before, during, and after the commission
of the crime showing that they acted in unison with each other pursuant to a common purpose or
design.23

We are convinced beyond doubt of the joint and concerted effort between appellant and the man he
identified as Pacot in the killing of Rosemarie.

Appellant likewise contends that the trial court erred in ruling that the presence of the aggravating
circumstance of abuse of superior strength qualified the killing to murder. He contends that the
qualifying circumstance of abuse of superior strength was not specifically alleged in the information.
Nothing can be farther from the truth. A cursory reading of the information reveals that appellant was
sufficiently informed of the charges against him, including the use of superior strength in killing the
hapless and defenseless female victim.
The aggravating circumstance of abuse of superior strength necessitates a showing of the relative
disparity in the physical characteristics of the aggressor and the victim such as age, gender, physical
size and strength. We agree with the trial court that the killing of Rosemarie was committed with
abuse of superior strength. As found by the court a quo, two grown-up men against a young fragile
woman whose ability to defend herself had been effectively restrained revealed a shocking inequality
of physical strength. The victim was much weaker in constitution and could not have possibly
defended herself from her stronger assailants.24 Such disparity was manifest in the contusions in the
chest and hands, wounds on the fingers, a stab wound on the left side of the face and multiple
fractures in the ribs of the victim.25 The abuse of superior strength was obvious in the way Rosemarie
was mercilessly beaten to a pulp.

The killing of Rosemarie was thus correctly qualified to murder by the abuse of superior strength, a
circumstance specifically pleaded in the information and proved beyond reasonable doubt.

The Court, however, finds that the trial court erred in imposing the death penalty on the ground that
appellant admitted during re-cross examination that he had a prior conviction for the death of his
former live-in partner. The fact that appellant was a recidivist was appreciated by the trial court as a
generic aggravating circumstance which increased the imposable penalty from reclusion perpetua to
death.

In order to appreciate recidivism as an aggravating circumstance, it is necessary to allege it in the

information and to attach certified true copies of the sentences previously meted out to the
accused.26 This is in accord with Rule 110, Section 8 of the Revised Rules of Criminal Procedure which
states:

SEC. 8. Designation of the offense. - The complaint or information shall state the designation of the
offense given by the statute, aver the acts or omissions constituting the offense, and specify its
qualifying and aggravating circumstances. If there is no designation of the offense, reference shall be
made to the section or subsection of the statute punishing it. (Emphasis supplied)

The aggravating circumstance of recidivism was not alleged in the information and therefore cannot be
appreciated against appellant. Hence the imposable penalty should be reduced to reclusion perpetua.

Regarding the award of ₱50,000 as civil indemnity to the heirs of the victim, appellant claims that said
amount was awarded by the trial court as payment for actual damages. This claim is misleading. As
aptly pointed out by the Solicitor General, the amount was granted by the trial court by way of
indemnity ex delicto to compensate for the death of the victim which prevailing jurisprudence fixes at
₱50,000.27 The award of such indemnity requires no proof other than the death of the victim and the
accused’s responsibility therefor.28

The award of ₱50,000 as moral damages is proper, supported as it was by the testimony of Charlita
Tallada, the victim’s mother, that Rosemarie’s death caused her immeasurable pain.29

In addition, the Court awards ₱25,000 in temperate damages, said amount being awarded in homicide
or murder cases when no evidence of burial and funeral expenses is presented in the trial court.30

With regard to the award of exemplary damages, the Civil Code of the Philippines provides:

ART. 2229. Exemplary or corrective damages are imposed, by way of example of correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.

ART. 2230. In criminal offenses, exemplary damages as a part of the civil liability may be imposed
when the crime was committed with one or more aggravating circumstances. Such damages are
separate and distinct from fines and shall be paid to the offended party.

In People vs. Catubig,31 we explained that:

The term "aggravating circumstances" used by the Civil Code, the law not having specified otherwise,
is to be understood in its broad or generic sense. The commission of an offense has a two-pronged
effect, one on the public as it breaches the social order and the other upon the private victim as it
causes personal sufferings, each of which is addressed by, respectively, the prescription of heavier
punishment for the accused and by an award of additional damages to the victim. The increase of the
penalty or a shift to a graver felony underscores the exacerbation of the offense by the attendance of
aggravating circumstances, whether ordinary or qualifying, in its commission. Unlike the criminal
liability which is basically a State concern, the award of damages, however, is likewise, if not
primarily, intended for the offended party who suffers thereby. It would make little sense for an award
of exemplary damages to be due the private offended party when the aggravating circumstance is
ordinary but to be withheld when it is qualifying. Withal, the ordinary or qualifying nature of an
aggravating circumstance is a distinction that should only be of consequence to the criminal, rather
than to the civil, liability of the offender. In fine, relative to the civil aspect of the case, an aggravating
circumstance, whether ordinary or qualifying, should entitle the offended party to an award of
exemplary damages within the unbridled meaning of Article 2230 of the Civil Code.

Thus, the award of exemplary damages is warranted under Art. 2230 of the Civil Code in view of the
presence of the aggravating circumstance of abuse of superior strength. Imposition of exemplary
damages is also justified under Art. 2229 of the Civil Code in order to set an example for the public
good.32 For this purpose, we believe that the amount of ₱25,000 may be appropriately awarded.

WHEREFORE, the assailed judgment in Criminal Case No. 45,283-2000 of the Regional Trial Court of
Davao City, Branch 31, is hereby AFFIRMED with MODIFICATION. Appellant Francisco Dacillo y Timtim
alias Dodoy is declared guilty beyond reasonable doubt of murder as defined and penalized under
Article 248 of the Revised Penal Code. There being neither aggravating nor mitigating circumstances,
appellant is hereby sentenced to reclusion perpetua and is further ordered to indemnify the heirs of
Rosemarie Tallada the sum of ₱50,000 as civil indemnity, ₱50,000 as moral damages, ₱25,000 as
temperate damages and ₱25,000 as exemplary damages.Costs de oficio. SO ORDERED.

G.R. No. 179952 December 4, 2009

METROPOLITAN BANK AND TRUST COMPANY (formerly ASIANBANK CORPORATION), Petitioner,
vs.
BA FINANCE CORPORATION and MALAYAN INSURANCE CO., INC., Respondents.
DECISION
CARPIO MORALES, J.:

Lamberto Bitanga (Bitanga) obtained from respondent BA Finance Corporation (BA Finance) a
₱329,2801 loan to secure which, he mortgaged his car to respondent BA Finance.2 The mortgage
contained the following stipulation:

The MORTGAGOR covenants and agrees that he/it will cause the property(ies) hereinabove mortgaged
to be insured against loss or damage by accident, theft and fire for a period of one year from date
hereof with an insurance company or companies acceptable to the MORTGAGEE in an amount not less
than the outstanding balance of mortgage obligations and that he/it will make all loss, if any, under
such policy or policies, payable to the MORTGAGEE or its assigns as its interest may appear x x x.3
(emphasis and underscoring supplied)

Bitanga thus had the mortgaged car insured by respondent Malayan Insurance Co., Inc. (Malayan
Insurance)4 which issued a policy stipulating that, inter alia,

Loss, if any shall be payable to BA FINANCE CORP. as its interest may appear. It is hereby expressly
understood that this policy or any renewal thereof, shall not be cancelled without prior notification and
conformity by BA FINANCE CORPORATION.5 (emphasis and underscoring supplied)

The car was stolen. On Bitanga’s claim, Malayan Insurance issued a check payable to the order of
"B.A. Finance Corporation and Lamberto Bitanga" for ₱224,500, drawn against China Banking
Corporation (China Bank). The check was crossed with the notation "For Deposit Payees’ Account
Only."6
Without the indorsement or authority of his co-payee BA Finance, Bitanga deposited the check to his
account with the Asianbank Corporation (Asianbank), now merged with herein petitioner Metropolitan
Bank and Trust Company (Metrobank). Bitanga subsequently withdrew the entire proceeds of the
check.

In the meantime, Bitanga’s loan became past due, but despite demands, he failed to settle it.

BA Finance eventually learned of the loss of the car and of Malayan Insurance’s issuance of a crossed
check payable to it and Bitanga, and of Bitanga’s depositing it in his account at Asianbank and
withdrawing the entire proceeds thereof.

BA Finance thereupon demanded the payment of the value of the check from Asianbank7 but to no
avail, prompting it to file a complaint before the Regional Trial Court (RTC) of Makati for sum of
money and damages against Asianbank and Bitanga,8 alleging that, inter alia, it is entitled to the
entire proceeds of the check.

In its Answer with Counterclaim,9 Asianbank alleged that BA Finance "instituted [the] complaint in bad
faith to coerce [it] into paying the whole amount of the CHECK knowing fully well that its rightful
claim, if any, is against Malayan [Insurance]."10

Asianbank thereafter filed a cross-claim against Bitanga,11 alleging that he fraudulently induced its
personnel to release to him the full amount of the check; and that on being later informed that the
entire amount of the check did not belong to Bitanga, it took steps to get in touch with him but he had
changed residence without leaving any forwarding address.12

And Asianbank filed a third-party complaint against Malayan Insurance,13 alleging that Malayan
Insurance was grossly negligent in issuing the check payable to both Bitanga and BA Finance and
delivering it to Bitanga without the consent of BA Finance.14

Bitanga was declared in default in Asianbank’s cross-claim.15

Branch 137 of the Makati RTC, finding that Malayan Insurance was not privy to the contract between
BA Finance and Bitanga, and noting the claim of Malayan Insurance that it is its policy to issue checks
to both the insured and the financing company, held that Malayan Insurance cannot be faulted for
negligence for issuing the check payable to both BA Finance and Bitanga.

The trial court, holding that Asianbank was negligent in allowing Bitanga to deposit the check to his
account and to withdraw the proceeds thereof, without his co-payee BA Finance having either indorsed
it or authorized him to indorse it in its behalf,16 found Asianbank and Bitanga jointly and severally
liable to BA Finance following Section 41 of the Negotiable Instruments Law and Associated Bank v.
Court of Appeals.17

Thus the trial court disposed:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendants Asian Bank
Corporation and Lamberto Bitanga:

1) To pay plaintiff jointly and severally the sum of P224,500.00 with interest thereon at the rate of
12% from September 25, 1992 until fully paid;

2) To pay plaintiff the sum of P50,000.00 as exemplary damages; P20,000.00 as actual damages;
P30,000.00 as attorney’s fee; and

3) To pay the costs of suit.

Asianbank’s and Bitanga’s [sic] counterclaims are dismissed.

The third party complaint of defendant/third party plaintiff against third-party defendant Malayan
Insurance, Co., Inc. is hereby dismissed. Asianbank is ordered to pay Malayan attorney’s fee of
P50,000.00 and a per appearance fee of P500.00.
On the cross-claim of defendant Asianbank, co-defendant Lamberto Bitanga is ordered to pay the
former the amounts the latter is ordered to pay the plaintiff in Nos. 1, 2 and 3 above-mentioned.

SO ORDERED.18 (emphasis and underscoring supplied)

Before the Court of Appeals, Asianbank, in its Appellant’s Brief, submitted the following issues for
consideration:

3.01.1.1 Whether BA Finance has a cause of action against Asianbank.

3.01.1.2 Assuming that BA Finance has a valid cause of action, may it claim from Asianbank more
than one-half of the value of the check considering that it is a mere co-payee or joint payee of the
check?

3.01.1.3 Whether BA Finance is liable to Asianbank for actual and exemplary damages for wrongfully
bringing the case to court.

3.01.1.4 Whether Malayan is liable to Asianbank for reimbursement of any sum of money which this
Honorable Court may award to BA Finance in this case.19 (underscoring supplied)

And it proffered the following arguments:

A. BA Finance has no cause of action against Asianbank as it has no legal right and title to the check
considering that the check was not delivered to BA Finance. Hence, BA Finance is not a holder thereof
under the Negotiable Instruments Law.

B. Asianbank, as collecting bank, is not liable to BA Finance as there was no privity of contract
between them.

C. Asianbank, as collecting bank, is not liable to BA Finance, considering that, as the intermediary
between the payee and the drawee Chinabank, it merely acted on the instructions of drawee
Chinabank to pay the amount of the check to Bitanga, hence, the consequent damage to BA Finance
was due to the negligence of Chinabank.

D. Malayan’s act of issuing and delivering the check solely to Bitanga in violation of the "loss payee"
clause in the Policy, is the proximate cause of the alleged damage to BA Finance.

E. Assuming Asianbank is liable, BA Finance can claim only his proportionate interest on the check as
it is a joint payee thereof.

F. Bitanga alone is liable for the amount to BA Finance on the ground of unjust enrichment or solutio
indebiti.

G. BA Finance is liable to pay Asianbank actual and exemplary damages.20 (underscoring supplied)

The appellate court, "summarizing" the errors attributed to the trial court by Asianbank to be
"whether…BA Finance has a cause of action against [it] even if the subject check had not been
delivered to…BA Finance by the issuer itself," held in the affirmative and accordingly affirmed the trial
court’s decision but deleted the award of ₱20,000 as actual damages.21

Hence, the present Petition for Review on Certiorari22 filed by Metrobank (hereafter petitioner) to
which Asianbank was, as earlier stated, merged, faulting the appellate court

I. x x x in applying the case of Associated Bank v. Court of Appeals, in the absence of factual similarity
and of the legal relationships necessary for the application of the desirable shortcut rule. x x x

II. x x x in not finding that x x x the general rule that the payee has no cause of action against the
collecting bank absent delivery to him must be applied.

III. x x x in finding that all the elements of a cause of action by BA Finance Corporation against
Asianbank Corporation are present.
IV. x x x in finding that Article 1208 of the Civil Code is not applicable.

V. x x x in awarding of exemplary damages even in the absence of moral, temperate, liquidated or

compensatory damages and a finding of fact that Asianbank acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.

xxxx

VII. x x x in dismissing Asianbank’s counterclaim and Third Party complaint [against Malayan
Insurance].23 (italics in the original; underscoring supplied)

Petitioner proffers the following arguments against the application of Associated Bank v. CA to the
case:

x x x [T]he rule established in the Associated Bank case has provided a speedier remedy for the payee
to recover from erring collecting banks despite the absence of delivery of the negotiable instrument.
However, the application of the rule demands careful consideration of the factual settings and issues
raised in the case x x x.

One of the relevant circumstances raised in Associated Bank is the existence of forgery or
unauthorized indorsement. x x x

xxxx

In the case at bar, Bitanga is authorized to indorse the check as the drawer names him as one of the
payees. Moreover, his signature is not a forgery nor has he or anyone forged the signature of the
representative of BA Finance Corporation. No unauthorized indorsement appears on the check.

xxxx

Absent the indispensable fact of forgery or unauthorized indorsement, the desirable shortcut rule
cannot be applied,24 (underscoring supplied)

The petition fails.

Section 41 of the Negotiable Instruments Law provides:

Where an instrument is payable to the order of two or more payees or indorsees who are not partners,
all must indorse unless the one indorsing has authority to indorse for the others. (emphasis and
underscoring supplied)

Bitanga alone endorsed the crossed check, and petitioner allowed the deposit and release of the
proceeds thereof, despite the absence of authority of Bitanga’s co-payee BA Finance to endorse it on
its behalf.25

Denying any irregularity in accepting the check, petitioner maintains that it followed normal banking
procedure. The testimony of Imelda Cruz, Asianbank’s then accounting head, shows otherwise,
however, viz:

Q Now, could you be familiar with a particular policy of the bank with respect to checks with joined
(sic) payees?

A Yes, sir.

Q And what would be the particular policy of the bank regarding this transaction?

A The bank policy and procedure regarding the joint checks. Once it is deposited to a single account,
we are not accepting joint checks for single account, depositing to a single account (sic).

Q What happened to the bank employee who allowed this particular transaction to occur?
A Once the branch personnel, the bank personnel (sic) accepted it, he is liable.

Q What do you mean by the branch personnel being held liable?

A Because since (sic) the bank policy, we are not supposed to accept joint checks to a [single]
account, so we mean that personnel would be held liable in the sense that (sic) once it is withdrawn or
encashed, it will not be allowed.

Q In your experience, have you encountered any bank employee who was subjected to disciplinary
action by not following bank policies?

A The one that happened in that case, since I really don’t know who that personnel is, he is no longer
connected with the bank.

Q What about in general, do you know of any disciplinary action, Madam witness?

A Since there’s a negligence on the part of the bank personnel, it will be a ground for his separation
[from] the bank.26 (emphasis, italics and underscoring supplied)

Admittedly, petitioner dismissed the employee who allowed the deposit of the check in Bitanga’s
account.

Petitioner’s argument that since there was neither forgery, nor unauthorized indorsement because
Bitanga was a co-payee in the subject check, the dictum in Associated Bank v. CA does not apply in
the present case fails. The payment of an instrument over a missing indorsement is the equivalent of
payment on a forged indorsement27 or an unauthorized indorsement in itself in the case of joint
payees.28

Clearly, petitioner, through its employee, was negligent when it allowed the deposit of the crossed
check, despite the lone endorsement of Bitanga, ostensibly ignoring the fact that the check did not, it
bears repeating, carry the indorsement of BA Finance.29

As has been repeatedly emphasized, the banking business is imbued with public interest such that the
highest degree of diligence and highest standards of integrity and performance are expected of banks
in order to maintain the trust and confidence of the public in general in the banking sector.30
Undoubtedly, BA Finance has a cause of action against petitioner.

Is petitioner liable to BA Finance for the full value of the check?

Petitioner, at all events, argue that its liability to BA Finance should only be one-half of the amount
covered by the check as there is no indication in the check that Bitanga and BA Finance are solidary
creditors to thus make them presumptively joint creditors under Articles 1207 and 1208 of the Civil
Code which respectively provide:

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 one of the
latter is bound to render, entire compliance with the prestations. There is a solidary liability only when
the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.

Art. 1208. If from the law, or the nature or wording of the obligations to which the preceding article
refers to the contrary does not appear, the credit or debt shall be presumed to be divided into as
many equal shares as there are creditors or debtors, the debts or credits being considered distinct
from one another, subject to the Rules of Court governing the multiplicity of suits.

Petitioner’s argument is flawed.

The provisions of the Negotiable Instruments Law and underlying jurisprudential teachings on the
black-letter law provide definitive justification for petitioner’s full liability on the value of the check.
To be sure, a collecting bank, Asianbank in this case, where a check is deposited and which indorses
the check upon presentment with the drawee bank, is an indorser.[31] This is because in indorsing a
check to the drawee bank, a collecting bank stamps the back of the check with the phrase "all prior
endorsements and/or lack of endorsement guaranteed"32 and, for all intents and purposes, treats the
check as a negotiable instrument, hence, assumes the warranty of an indorser.33 Without Asianbank’s
warranty, the drawee bank (China Bank in this case) would not have paid the value of the subject
check.

Petitioner, as the collecting bank or last indorser, generally suffers the loss because it has the duty to
ascertain the genuineness of all prior indorsements considering that the act of presenting the check
for payment to the drawee is an assertion that the party making the presentment has done its duty to
ascertain the genuineness of prior indorsements.34

Accordingly, one who credits the proceeds of a check to the account of the indorsing payee is liable in
conversion to the non-indorsing payee for the entire amount of the check.35

It bears noting that in petitioner’s cross-claim against Bitanga, the trial court ordered Bitanga to
return to petitioner the entire value of the check ─ ₱224,500.00 ─ with interest as well as damages
and cost of suit. Petitioner never questioned this aspect of the trial court’s disposition, yet it now prays
for the modification of its liability to BA Finance to only one-half of said amount. To pander to
petitioner’s supplication would certainly amount to unjust enrichment at BA Finance’s expense.
Petitioner’s remedy—which is the reimbursement for the full amount of the check from the perpetrator
of the irregularity — lies with Bitanga.

Articles 1207 and 1208 of the Civil Code cannot be applied to the present case as these are completely
irrelevant. The drawer, Malayan Insurance in this case, issued the check to answer for an underlying
contractual obligation (payment of insurance proceeds). The obligation is merely reflected in the
instrument and whether the payees would jointly share in the proceeds or not is beside the point.

Moreover, granting petitioner’s appeal for partial liability would run counter to the existing principles
on the liabilities of parties on negotiable instruments, particularly on Section 68 of the Negotiable
Instruments Law which instructs that joint payees who indorse are deemed to indorse jointly and
severally.36 Recall that when the maker dishonors the instrument, the holder thereof can turn to
those secondarily liable — the indorser — for recovery.37 And since the law explicitly mandates a
solidary liability on the part of the joint payees who indorse the instrument, the holder thereof
(assuming the check was further negotiated) can turn to either Bitanga or BA Finance for full
recompense.

Respecting petitioner’s challenge to the award by the appellate court of exemplary damages to BA
Finance, the same fails. Contrary to petitioner’s claim that no moral, temperate, liquidated or
compensatory damages were awarded by the trial court,38 the RTC did in fact award compensatory or
actual damages of ₱224,500, the value of the check, plus interest thereon.

Petitioner argues, however, that assuming arguendo that compensatory damages had been awarded,
the same contravened Article 2232 of the Civil Code which provides that in contracts or quasi-
contracts, the court may award exemplary damages only if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner. Since, so petitioner concludes, there was no
finding that it acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner,39 it is not
liable for exemplary damages.

The argument fails. To reiterate, petitioner’s liability is based not on contract or quasi-contract but on
quasi-delict since there is no pre-existing contractual relation between the parties.40 Article 2231 of
the Civil Code, which provides that in quasi-delict, exemplary damages may be granted if the
defendant acted with gross negligence, thus applies. For "gross negligence" implies a want or absence
of or failure to exercise even slight care or diligence, or the entire absence of care,41 evincing a
thoughtless disregard of consequences without exerting any effort to avoid them.42
x x x The law allows the grant of exemplary damages to set an example for the public good. The
business of a bank is affected with public interest; thus it makes a sworn profession of diligence and
meticulousness in giving irreproachable service. For this reason, the bank should guard against in
injury attributable to negligence or bad faith on its part. The award of exemplary damages is proper as
a warning to [the petitioner] and all concerned not to recklessly disregard their obligation to exercise
the highest and strictest diligence in serving their depositors.43 (Italics and underscoring supplied)

As for the dismissal by the appellate court of petitioner’s third-party complaint against Malayan
Insurance, the same is well-taken. Petitioner based its third-party complaint on Malayan Insurance’s
alleged gross negligence in issuing the check payable to both BA Finance and Bitanga, despite the
stipulation in the mortgage and in the insurance policy that liability for loss shall be payable to BA
Finance.44 Malayan Insurance countered, however, that it

x x x paid the amount of ₱224,500 to ‘BA Finance Corporation and Lamberto Bitanga’ in compliance
with the decision in the case of "Lamberto Bitanga versus Malayan Insurance Co., Inc., Civil Case No.
88-2802, RTC-Makati Br. 132, and affirmed on appeal by the Supreme Court [3rd Division], G.R. no.
101964, April 8, 1992 x x x.45 (underscoring supplied)

It is noted that Malayan Insurance, which stated that it was a matter of company policy to issue
checks in the name of the insured and the financing company, presented a witness to rebut its
supposed negligence. 46 Perforce, it thus wrote a crossed check with joint payees so as to serve
warning that the check was issued for a definite purpose.47 Petitioner never ever disputed these
assertions.

The Court takes exception, however, to the appellate court’s affirmance of the trial court’s grant of
legal interest of 12% per annum on the value of the check. For the obligation in this case did not arise
out of a loan or forbearance of money, goods or credit. While Article 1980 of the Civil Code provides
that:

Fixed savings, and current deposits of money in banks and similar institutions shall be governed by
the provisions concerning simple loan,

said provision does not find application in this case since the nature of the relationship between BA
Finance and petitioner is one of agency whereby petitioner, as collecting bank, is to collect for BA
Finance the corresponding proceeds from the check.48 Not being a loan or forbearance of money, the
interest should be 6% per annum computed from the date of extrajudicial demand on September 25,
1992 until finality of judgment; and 12% per annum from finality of judgment until payment,
conformably with Eastern Shipping Lines, Inc. v. Court of Appeals.[49]

WHEREFORE, the Decision of the Court of Appeals dated May 18, 2007 is AFFIRMED with
MODIFICATION in that the rate of interest on the judgment obligation of ₱224,500 should be 6% per
annum, computed from the time of extrajudicial demand on September 25, 1992 until its full payment
before finality of judgment; thereafter, if the amount adjudged remains unpaid, the interest rate shall
be 12% per annum computed from the time the judgment becomes final and executory until fully
satisfied.Costs against petitioner. SO ORDERED.

G.R. No. 88013 March 19, 1990

SIMEX INTERNATIONAL (MANILA), INCORPORATED, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK, respondents.
Don P. Porcuincula for petitioner.
San Juan, Gonzalez, San Agustin & Sinense for private respondent.
CRUZ, J.:
We are concerned in this case with the question of damages, specifically moral and exemplary
damages. The negligence of the private respondent has already been established. All we have to
ascertain is whether the petitioner is entitled to the said damages and, if so, in what amounts.

The parties agree on the basic facts. The petitioner is a private corporation engaged in the exportation
of food products. It buys these products from various local suppliers and then sells them abroad,
particularly in the United States, Canada and the Middle East. Most of its exports are purchased by the
petitioner on credit.

The petitioner was a depositor of the respondent bank and maintained a checking account in its
branch at Romulo Avenue, Cubao, Quezon City. On May 25, 1981, the petitioner deposited to its
account in the said bank the amount of P100,000.00, thus increasing its balance as of that date to
P190,380.74. 1 Subsequently, the petitioner issued several checks against its deposit but was
suprised to learn later that they had been dishonored for insufficient funds.

The dishonored checks are the following:

1. Check No. 215391 dated May 29, 1981, in favor of California Manufacturing Company, Inc. for
P16,480.00:
2. Check No. 215426 dated May 28, 1981, in favor of the Bureau of Internal Revenue in the amount of
P3,386.73:
3. Check No. 215451 dated June 4, 1981, in favor of Mr. Greg Pedreño in the amount of P7,080.00;
4. Check No. 215441 dated June 5, 1981, in favor of Malabon Longlife Trading Corporation in the
amount of P42,906.00:
5. Check No. 215474 dated June 10, 1981, in favor of Malabon Longlife Trading Corporation in the
amount of P12,953.00:
6. Check No. 215477 dated June 9, 1981, in favor of Sea-Land Services, Inc. in the amount of P27,024.45:
7. Check No. 215412 dated June 10, 1981, in favor of Baguio Country Club Corporation in the amount of
P4,385.02: and
8. Check No. 215480 dated June 9, 1981, in favor of Enriqueta Bayla in the amount of P6,275.00. 2
As a consequence, the California Manufacturing Corporation sent on June 9, 1981, a letter of demand
to the petitioner, threatening prosecution if the dishonored check issued to it was not made good. It
also withheld delivery of the order made by the petitioner. Similar letters were sent to the petitioner
by the Malabon Long Life Trading, on June 15, 1981, and by the G. and U. Enterprises, on June 10,
1981. Malabon also canceled the petitioner's credit line and demanded that future payments be made
by it in cash or certified check. Meantime, action on the pending orders of the petitioner with the other
suppliers whose checks were dishonored was also deferred.

The petitioner complained to the respondent bank on June 10, 1981. 3 Investigation disclosed that the
sum of P100,000.00 deposited by the petitioner on May 25, 1981, had not been credited to it. The
error was rectified on June 17, 1981, and the dishonored checks were paid after they were re-
deposited. 4

In its letter dated June 20, 1981, the petitioner demanded reparation from the respondent bank for its
"gross and wanton negligence." This demand was not met. The petitioner then filed a complaint in the
then Court of First Instance of Rizal claiming from the private respondent moral damages in the sum
of P1,000,000.00 and exemplary damages in the sum of P500,000.00, plus 25% attorney's fees, and
costs.

After trial, Judge Johnico G. Serquinia rendered judgment holding that moral and exemplary damages
were not called for under the circumstances. However, observing that the plaintiff's right had been
violated, he ordered the defendant to pay nominal damages in the amount of P20,000.00 plus
P5,000.00 attorney's fees and costs. 5 This decision was affirmed in toto by the respondent court. 6
The respondent court found with the trial court that the private respondent was guilty of negligence
but agreed that the petitioner was nevertheless not entitled to moral damages. It said:

The essential ingredient of moral damages is proof of bad faith (De Aparicio vs. Parogurga, 150 SCRA
280). Indeed, there was the omission by the defendant-appellee bank to credit appellant's deposit of
P100,000.00 on May 25, 1981. But the bank rectified its records. It credited the said amount in favor
of plaintiff-appellant in less than a month. The dishonored checks were eventually paid. These
circumstances negate any imputation or insinuation of malicious, fraudulent, wanton and gross bad
faith and negligence on the part of the defendant-appellant.

It is this ruling that is faulted in the petition now before us.

This Court has carefully examined the facts of this case and finds that it cannot share some of the
conclusions of the lower courts. It seems to us that the negligence of the private respondent had been
brushed off rather lightly as if it were a minor infraction requiring no more than a slap on the wrist.
We feel it is not enough to say that the private respondent rectified its records and credited the
deposit in less than a month as if this were sufficient repentance. The error should not have been
committed in the first place. The respondent bank has not even explained why it was committed at all.
It is true that the dishonored checks were, as the Court of Appeals put it, "eventually" paid. However,
this took almost a month when, properly, the checks should have been paid immediately upon
presentment.

As the Court sees it, the initial carelessness of the respondent bank, aggravated by the lack of
promptitude in repairing its error, justifies the grant of moral damages. This rather lackadaisical
attitude toward the complaining depositor constituted the gross negligence, if not wanton bad faith,
that the respondent court said had not been established by the petitioner.

We also note that while stressing the rectification made by the respondent bank, the decision
practically ignored the prejudice suffered by the petitioner. This was simply glossed over if not,
indeed, disbelieved. The fact is that the petitioner's credit line was canceled and its orders were not
acted upon pending receipt of actual payment by the suppliers. Its business declined. Its reputation
was tarnished. Its standing was reduced in the business community. All this was due to the fault of
the respondent bank which was undeniably remiss in its duty to the petitioner.

Article 2205 of the Civil Code provides that actual or compensatory damages may be received "(2) for
injury to the plaintiff s business standing or commercial credit." There is no question that the
petitioner did sustain actual injury as a result of the dishonored checks and that the existence of the
loss having been established "absolute certainty as to its amount is not required." 7 Such injury
should bolster all the more the demand of the petitioner for moral damages and justifies the
examination by this Court of the validity and reasonableness of the said claim.

We agree that moral damages are not awarded to penalize the defendant but to compensate the
plaintiff for the injuries he may have suffered. 8 In the case at bar, the petitioner is seeking such
damages for the prejudice sustained by it as a result of the private respondent's fault. The respondent
court said that the claimed losses are purely speculative and are not supported by substantial
evidence, but if failed to consider that the amount of such losses need not be established with
exactitude precisely because of their nature. Moral damages are not susceptible of pecuniary
estimation. Article 2216 of the Civil Code specifically provides that "no proof of pecuniary loss is
necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be
adjudicated." That is why the determination of the amount to be awarded (except liquidated damages)
is left to the sound discretion of the court, according to "the circumstances of each case."

From every viewpoint except that of the petitioner's, its claim of moral damages in the amount of
P1,000,000.00 is nothing short of preposterous. Its business certainly is not that big, or its name that
prestigious, to sustain such an extravagant pretense. Moreover, a corporation is not as a rule entitled
to moral damages because, not being a natural person, it cannot experience physical suffering or such
sentiments as wounded feelings, serious anxiety, mental anguish and moral shock. The only exception
to this rule is where the corporation has a good reputation that is debased, resulting in its social
humiliation. 9

We shall recognize that the petitioner did suffer injury because of the private respondent's negligence
that caused the dishonor of the checks issued by it. The immediate consequence was that its prestige
was impaired because of the bouncing checks and confidence in it as a reliable debtor was diminished.
The private respondent makes much of the one instance when the petitioner was sued in a collection
case, but that did not prove that it did not have a good reputation that could not be marred, more so
since that case was ultimately settled. 10 It does not appear that, as the private respondent would
portray it, the petitioner is an unsavory and disreputable entity that has no good name to protect.

Considering all this, we feel that the award of nominal damages in the sum of P20,000.00 was not the
proper relief to which the petitioner was entitled. Under Article 2221 of the Civil Code, "nominal
damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him." As we have found that the petitioner has indeed incurred loss through
the fault of the private respondent, the proper remedy is the award to it of moral damages, which we
impose, in our discretion, in the same amount of P20,000.00.

Now for the exemplary damages.

The pertinent provisions of the Civil Code are the following:

Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.

Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

The banking system is an indispensable institution in the modern world and plays a vital role in the
economic life of every civilized nation. Whether as mere passive entities for the safekeeping and
saving of money or as active instruments of business and commerce, banks have become an
ubiquitous presence among the people, who have come to regard them with respect and even
gratitude and, most of all, confidence. Thus, even the humble wage-earner has not hesitated to
entrust his life's savings to the bank of his choice, knowing that they will be safe in its custody and will
even earn some interest for him. The ordinary person, with equal faith, usually maintains a modest
checking account for security and convenience in the settling of his monthly bills and the payment of
ordinary expenses. As for business entities like the petitioner, the bank is a trusted and active
associate that can help in the running of their affairs, not only in the form of loans when needed but
more often in the conduct of their day-to-day transactions like the issuance or encashment of checks.

In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether
such account consists only of a few hundred pesos or of millions. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if
the account is to reflect at any given time the amount of money the depositor can dispose of as he
sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of
the bank, such as the dishonor of a check without good reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps even civil and criminal litigation.

The point is that as a business affected with public interest and because of the nature of its functions,
the bank is under obligation to treat the accounts of its depositors with meticulous care, always having
in mind the fiduciary nature of their relationship. In the case at bar, it is obvious that the respondent
bank was remiss in that duty and violated that relationship. What is especially deplorable is that,
having been informed of its error in not crediting the deposit in question to the petitioner, the
respondent bank did not immediately correct it but did so only one week later or twenty-three days
after the deposit was made. It bears repeating that the record does not contain any satisfactory
explanation of why the error was made in the first place and why it was not corrected immediately
after its discovery. Such ineptness comes under the concept of the wanton manner contemplated in
the Civil Code that calls for the imposition of exemplary damages.

After deliberating on this particular matter, the Court, in the exercise of its discretion, hereby imposes
upon the respondent bank exemplary damages in the amount of P50,000.00, "by way of example or
correction for the public good," in the words of the law. It is expected that this ruling will serve as a
warning and deterrent against the repetition of the ineptness and indefference that has been displayed
here, lest the confidence of the public in the banking system be further impaired.

ACCORDINGLY, the appealed judgment is hereby MODIFIED and the private respondent is ordered to
pay the petitioner, in lieu of nominal damages, moral damages in the amount of P20,000.00, and
exemplary damages in the amount of P50,000.00 plus the original award of attorney's fees in the
amount of P5,000.00, and costs.

SO ORDERED.

G.R. No. 83768 February 28, 1990

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI) and GLOBE MACKAY AND RADIO
CORPORATION, petitioners,
vs.
RUFUS B. RODRIGUEZ, respondent.
Salalima, Ungos and David for petitioners.
Maximo G. Rodriguez for private respondent.

GUTIERREZ, JR., J.:

This petition for review on certiorari seeks to reverse the decision of the Court of Appeals which
affirmed the decision of the then Court of First Instance of Rizal, Branch 17-B, Quezon City in Civil
Case No. Q-26623 ordering petitioner Radio Communications of the Philippines, Inc. [RCPI] and their
co-defendant Globe Mackay and Radio Corporation (Globe Mackay), jointly and severally to pay the
plaintiff, private respondent herein, a total amount of Two Hundred Thirteen Thousand One Hundred
Forty Eight Pesos (P213,148.00) broken down as follows: a) P100, 000.00 as moral damages; b)
P50,000.00 as exemplary damages; c) P43,148.00 as actual damages; and d) P20,000.00 as
attorney's fees by way of damages.

This is the second time that this case has been brought to us. The first was when petitioner RCPI
questioned the decision of the Court of Appeals which refused to set aside the orders of the lower
court directing execution pending appeal of the money awards. In that case (G.R. No. 59311, 134
SCRA [1985]) we set aside the decision of the appellate court and entered a new order authorizing
execution pending appeal of the award of actual damages but enjoining the execution of the award of
moral damages, exemplary damages and attorney's fees until after the resolution of the issues in the
main case. We summarized the facts of the case as follows:

On September 8, 1978, Rufus B. Rodriguez, as President of the World Association of Law Students
(WALS), sent two cablegrams overseas through RCPI, one addressed to Mohamed Elsir Taha in
Khartoum, Sudan Socialist Union, and the other to Diane Merger in Athens, Georgia, United States.
The cablegram were, in turn, relayed to GLOBE for transmission to their foreign destination The
telegram to Taha advised him of Rodriguez's pending arrival in Khartoum on September 18, 1978,
while the telegram to Merger advised her of the scheduled WALS conference in Khartoum. Rodriguez
left the Philippines on September 15, 1978. On September 18, 1978, he arrived in Khartoum, Sudan
at 9:30 in the evening. Nobody was at the airport to meet him. Due to the lateness of the hour, he
was forced to sleep at the airport. He lined up five (5) chairs together and lay down with his luggages
near him. Because of the non-receipt of the cablegram, Taha was not able to meet him. Worse all
preparations for the international conference had to be cancelled. Furthermore, Fernando Barros, the
Vice-President, arrived the next day from Chile, followed by the other officers from other countries
except Diane Merger, the organization's secretary. It turned out that the wire sent by Rodriguez to
Merger was delivered to the address on the message but the person who delivered it was told that the
address was no longer staying there. This fact was not accordingly reported to Rodriguez in Metro
Manila. The undelivered cablegram was not returned by the correspondent abroad to Globe for
disposition in the Philippines.

On December 8, 1978, Rodriguez filed a complaint for compensatory damages in the amount of
P45,147.00, moral damages in the amount of P200,000.00, and exemplary damages in the amount of
P50,000.00 against RCPI and GLOBE.

On March 17, 1980, the then Presiding Judge Lino L. Anover of the Court of First Instance of Rizal
rendered a decision, the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally to pay the
plaintiff the total sum of TWO HUNDRED THIRTEEN THOUSAND ONE HUNDRED FORTY EIGHT PESOS
(P213,148.00) by way of damages and to pay the costs of this suit."

The above amount is broken down as follows by the trial court:

"Moral damages consequent to the humiliation and embarrassment that the plaintiff suffered under
the two causes of action in the amount of P100,000.00 are adequate. Exemplary damages under both
counts are fixed reasonably at P50,000.00. On the actual damages, the court accepts plaintiffs
expenses for the preparation of the trip at P10,000.00; plane fare at P20,000.00; stay in transit in
Pakistan at P5,000.00; his hotel bills in Khartoum at P4,000.00; his meals in Khartoum at P4,000.00
and the telegraphic toll at P78.00. The court refuses the sum spent for the dinner that he allegedly
tendered as not established by sufficient proof.

With respect to the telegram sent to Diane Merger, the court finds that the actual damages amount to
P70.00 representing the cost of cablegram. As for attorney's fees, the court finds that the amount of
P20,000.00 including litigation expenses are reasonable. (at pp. 396-398)"

Upon appeal, the Court of Appeals affirmed the lower court's decision. A motion for reconsideration
was denied.

Hence, this petition filed by RCPI. The title of the case includes Globe Mackay but the petition proper
and the name on counsel show that only RCPI comes to this Court through the petition. Globe Mackay
did not join as petitioner and its counsel Atty. Romulo P. Atencia did not sign the petition.

The issues raised by petitioner RCPI are two-fold — 1) whether or nor petitioner RCPI is responsible
for the non-delivery of the two (2) telegrams notwithstanding the fact that RCPI relayed said
telegrams to Globe Mackay and 2) whether or not under the attendant facts and circumstances
petitioner RCPI is liable for moral damages in the amount of P100,000.00; exemplary damages in the
amount of P50,000.00; actual damages in the amount of P43,148.00 and attorney's fees in the
amount of P20,000.00.

RCPI insists that its responsibility vis-a-vis the two (2) telegrams ceased after it relayed and
transmitted the telegrams on the same day they were filed to Globe Mackay. It argues that it was not
incumbent upon RCPI to advise respondent Rodriguez the status of his telegrams because Globe
Mackay did not also inform RCPI what happened to the telegrams since the respective operating
agency of the country of destination did not also inform Globe Mackay about the non-delivery of the
telegrams.

Moreover, RCPI blames respondent Rodriguez for the non-delivery of the two telegrams. Regarding
the telegram addressed to Elsir Taha, RCPI avers that it has an incomplete address as it did not
include P.O. Box 1850 per instruction of Taha in an earlier cable asking for respondent to reply via
telex, to wit:
... send me a telegram immediately after receiving this one a telex number if any. Thanks.
Mohammed Elsir Taha Regional Director WALS Africa Youth Committee SSU, Khartoum, P.O. Box
1850. (Exhibit D). (Rollo, p. 27)

In regard to the telegram addressed to Diane Merger which she did not receive because she had
moved, to another place RCPI avers that respondent Rodriguez was partly at fault for not verifying the
address of Diane before sending the telegram and that Merger was negligent by not leaving her
forwarding address with the present occupant of the apartment she vacated.

Petitioner RCPI is a domestic corporation engaged in the business of receiving and transmitting
messages. Mr. Alfredo Catolico, Jr., manager, Customer and Relations Office testified that RCPI does
not have facilities for foreign countries, hence it has a contract to course all international
communications thru Globe Mackay. On the other hand, Wenceslao Felix, the Traffic Operations
Manager of Globe Mackay testified that Globe Mackay has an inter-connecting agreement with RCPI
under which the latter's international messages are coursed thru Globe Mackay in the same way that
local and domestic messages received by Globe Mackay are coursed thru RCPI.

Respondent Rodriguez and RCPI entered into a contract whereby for a fee RCPI undertook to send the
respondent's messages overseas. When, therefore, respondent Rodriguez paid RCPI to deliver his
messages overseas by telegram, RCPI obligated itself to transmit the messages to the addressee.
Clearly, RCPI reneged on its obligation when it failed to deliver the messages or to inform the sender
about the non-delivery, thus making it liable for damages. (Article 1170, Civil Code; Article 2176; see
also Telefast Communication/Philippine Wireless, Inc. v. Castro, Sr., 158 SCRA 445 [1988]).

Parenthetically, RCPI cannot escape liability for damages by passing off the blame for negligence to
Globe Mackay. It has an inter-connecting agreement with Globe Mackay. RCPI receives messages for
overseas destinations and conducts its business to transmit foreign messages only through Globe
Mackay. To allow it to escape liability for damages by attributing sole negligence to Globe Mackay for
the expedient reason that it had already delivered the messages to the latter would deprive the
general public availing of the services of RCPI of an effective and adequate remedy. (See Radio
Communications of the Philippines, Inc. (RCPI) v. Court of Appeals, 143 SCRA 657 [1986]). It cannot
simply wash its hands of all responsibility.

RCPI's similar attempt to pass the total blame for the non-delivery of the telegram intended for Taha
to respondent Rodriguez is not supported by the records. The evidence clearly demonstrates that an
earlier cablegram dated July 27, 1978 (Exhibit "E") similarly addressed to Taha, Africa, Youth
Committee, Khartoum, SSU and without P.O. Box 1850 was received by Taha. This is conclusively
shown by a cable (Exhibit "F") addressed by Taha to respondent Rodriguez acknowledging the receipt
of the July 27 cablegram. Evidence was also introduced to show that the Africa Youth Committee is a
very important office in Khartoum, Sudan and the building that houses it is a very popular building
known to the people.

We rule that the arguments about the alleged negligence on the part of respondent Rodriguez in not
verifying the address of Diane Merger before sending the telegram and also the alleged negligence on
the part of Merger for not leaving a forwarding address do not deserve much consideration.
Considering the public utility nature of RCPI's business and its contractual obligation to transmit
messages, it should exercise due diligence to ascertain that messages are delivered to the persons at
the given address and should provide a system whereby in cases of undelivered messages the sender
is given notice of non-delivery. Messages sent by cable or wireless means are usually more important
and urgent than those which can wait for the mail.

For recovery of damages, Article 2217 of the New Civil Code applies. It is provided therein that: "Moral
damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feeling, moral shock, social humiliation, and similar injury. Though incapable of pecuniary
computation moral damages may be recovered if they are the proximate result of the defendant's
wrongful act or omission." (Emphasis supplied)
There is no doubt that RCPI's failure to deliver the two questioned telegrams resulted in the suffering
that respondent Rodriguez, had to undergo.

Respondent Rodriguez left Manila for Khartoum, Sudan believing that Taha received his telegram and
would meet him at the airport. He related his experience at the airport of Khartoum, Sudan as follows:

Q. All right, from 9:30 in the evening up to 12:00 midnight, was there any person or officer of the
World Association of Law Students who met you?

A. None

Q. Now, inform the Court what was your feeling during that time in a foreign country?

A. First of all, when I arrived at 9:30 A.M., I was thinking that Mr. Taha was first late in fetching me
but when it was already 10:30 to 11:00 P.M., I was already afraid because there was no one there
that I know and it was already late in the evening that I could not go to the address of Mr. Taha. (TSN
pages 18 and 19, August 20, 1979).

Q. What were you doing at that time from 9:30 in the evening until 6:00 in the morning?

A. I was every tired and what I did was pulled five chairs together. I remember there were about ten
(10) persons and some tourists in that restaurant. I got five chairs together and laid my baggage
trying to sleep but which I was not able to do because of fear and anxiety. (TSN, pages 10 and 11,
August 20, 1979). (Rollo, p. 15)

We are convinced that respondent Rodriguez suffered a certain degree of mental anguish, fear and
anxiety considering his experience at the airport of a foreign country. His suffering was caused by the
non-appearance of Taha who did not receive the telegram sent by the respondent due to the gross
negligence of RCPI. There is moreover, the dismay arising from the fact, that after so much
preparation and travel on the part of Rodriguez, his pains were all for nothing. Hence, RCPI is liable
for moral damages.

Nevertheless, we find the award of P100,000.00 as moral damages in favor of respondent Rodriguez
excessive and unconscionable. In the case of Prudenciado v. Alliance Transport System, Inc. (148
SCRA 440 [1987]) we said:

... [I]t is undisputed that the trial courts are given discretion to determine the amount of moral
damages (Alcantara v. Surro, 93 Phil. 472) and that the Court of Appeals can only modify or change
the amount awarded when they are palpably and scandalously excessive 'so as to indicate that it was
the result of passion, prejudice or corruption on the part of the trial court' (Gellada v. Warner Barnes
& Co., Inc., 57 O.G. [4] 7347, 7358; Sadie v. Bachrach Motors Co., Inc., 57 O.G. [4] 636 and Adone
v. Bachrach Motor Co., Inc., 57 O.G. 656). But in more recent cases where the awards of moral and
exemplary damages are far too excessive compared to the actual losses sustained by the aggrieved
party, this Court ruled that they should be reduced to more reasonable amounts.

Thus, in the case of San Andres v. Court of Appeals (116 SCRA 85 [1982]) the Supreme Court ruled
that while the amount of moral damages is a matter left largely to the sound discretion of a court, the
same when found excessive should be reduced to more reasonable amounts, considering the
attendant facts and circumstances. Moral damages, though incapable of pecuniary estimation, are in
the category of an award designed to compensate the claimant for actual injury suffered and not to
impose a penalty on the wrongdoer.

In a much later case (Siguenza v. Court of Appeals, 137 SCRA 578-579 [1985]), the Supreme Court,
reiterating the above ruling, reduced the awards of moral and exemplary damages which were far too
excessive compared to the actual losses sustained by the aggrieved parties and where the records
show that the injury suffered was not serious or gross and, therefore, out of proportion to the amount
of damages generously awarded by the trial court.
In any case the Court held that 'moral damages are emphatically not intended to enrich a complainant
at the expense of a defendant. They are awarded only to enable the injured party to obtain means,
diversion or amusements that will serve to alleviate the moral suffering he has undergone, by reason
of the defendants' culpable action.' The award of moral damages must be proportionate to the
suffering inflicted (R & B Surety & Insurance Co., Inc. v. Intermediate Appellate Court, 129 SCRA 745
[1984] citing Grand Union Supermarket, Inc. v. Espino, Jr., 94 SCRA 966). (Emphasis supplied)

The respondent is not entirely blameless for the problems which befell him. Apart from the various
arguments raised by RCPI in its petition, there are other factors to be considered in fixing the amount
of damages. Anybody who has been involved in international conferences and meetings knows that a
telegram is not adequate preparation. Considering the lackaidaisical attitude of public utility
employees in the Philippines and presumably in Africa, the head of an international student
organization cannot simply send a telegram and nonchalantly assume that every preparation will
proceed as he anticipates it. The planning expertise and degree of thoroughness incumbent upon
conference organizers is missing from the records. The trial court appears to have been influenced by
the impressive title of World Association of Law Students. There is nothing in the records pointing to a
certain degree of distinction earned by WALS which would warrant substantial damages because of a
failed meeting.

Be that as it may, damages are warranted. People depend on telecommunications companies in times
of deep emotional stress or pressing financial needs. Knowing that messages about the illnesses or
deaths of loved ones, births or marriages in a family, important business transactions, and notices of
conferences or meetings as in this case, are coursed through the petitioner and similar corporations, it
is incumbent upon them to exercise a greater amount of care and concern than that shown in this
case. Every reasonable effort to inform senders of the non-delivery of messages should be
undertaken. From the pleadings filed by counsel in this case, RCPI does not seem to be particularly
concerned about its responsibility.

We rule that the amount of P10,000.00 as moral damages in favor of the respondent would be
reasonable considering the facts and circumstances surrounding the petitioner's liability.

The award of exemplary damages is not proper considering that there is no showing that RCPI acted
in "a wanton, fraudulent, reckless, oppressive, or malevolent manner." (Article 2232, New Civil Code).

Respondent Rodriguez was awarded the total amount of P43,148.00 as actual or compensatory
damages broken down as follows: (a) P10,000.00 for the preparation of the trip; (b) P20,000.00 for
plane fare; (c) P5,000.00 for respondent's stay in transit in Pakistan; (d) P4,000.00 for hotel bills in
Khartoum; (e) P78.00 for the telegraphic toll, and P70.00 for the cost of the cablegram sent to Diane
Merger. The trial court rejected the expenses allegedly incurred by the respondent for a dinner he
tendered for the officers, organizers and students at Khartoum for insufficiency of evidence. It is to be
noted that the petitioner does not controvert the amounts. Instead, the petitioner concentrates its
opposition to the award of actual damages on the argument that the respondent's expenses were
actually paid by the organization and the Sudanese government. The petitioner, however, fails to
substantiate its allegations with clear proof. On the other hand, what is evident on record is that due
to the non-receipt of the telegram which would have confirmed the scheduled conference on
September 20, 1978, Taha cancelled all preparations and stopped the soliciting of funds for the
conference which would have included the expenses of the respondent. As a result of the cancellation
of the conference, triggered by the non-delivery of the telegrams, the officers were constrained to
schedule another meeting in Santiago, Chile in April 1979. Therefore, we see no reason to disturb
these findings of the trial court affirmed by the appellate court as these were not sufficiently
controverted by the petitioner (See Ganzon v. Court of Appeals, 161 SCRA 646 [1988]).

Finally, petitioner RCPI objects to the award of attorney's fees. Citing the case of Mirasol v. De la Cruz
(84 SCRA 337 (1987]), RCPI contends that the award of attorney's fees was improper because there
was no allegation in the complaint with respect to attorney's fees; respondent Rodriguez did not
present any evidence to prove attorney's fees and the decision failed to explain why attorney's fees
are being awarded.

We agree. In the recent case of Stronghold Insurance Company, Inc. v. Court of Appeals, (G.R. No.
88376, May 29,1989), we ruled:

In Abrogar v. Intermediate Appellate Court (G.R. No. 67970, January 15, 1988, 157 SCRA 57) the
Court had occasion to state that '[t]he reason for the award of attorney's fees must be stated in the
text of the court's decision, otherwise, if it is stated only in the dispositive portion of the decision, the
same must be disallowed on appeal. (at p. 61 citing Mirasol v. dela Cruz, G.R. No. L-32552, July 31,
1978, 84 SCRA 337).

A cursory reading of the trial court's decision shows that the award of attorney's fees was stated only
once — "As for attorney's fees, the court finds that the amount of P20,000.00 including litigation
expenses are reasonable" — just below the dispositive portion of the decision which reads:
"WHEREFORE judgment is hereby rendered ordering the defendants jointly and severally liable to pay
the plaintiff the total sum of TWO HUNDRED THIRTEEN THOUSAND ONE HUNDRED FORTY EIGHT
PESOS (P213,148.00) by way of damages and to pay the costs of this suit." The trial court failed to
justify the payment of attorney's by RCPI, therefore, the award of attorney's fees as part of its liability
should be disallowed and deleted.

WHEREFORE, the instant petition is PARTLY GRANTED. The questioned decision of the respondent
court is MODIFIED. The award directing Radio Communications of the Philippines, Inc., to pay
P100,000.00 moral damages is reduced to P10,000.00. The award ordering it to pay exemplary
damages and attorney's fees is DELETED. In all other respects, the questioned decision is AFFIRMED.
Costs against the petitioner. SO ORDERED.

G.R. No. 83033 June 8, 1990

NORTHWEST ORIENT AIRLINES, petitioner,
vs.
COURT OF APPEALS, CONCEPCION S. SALONGA, BENJAMIN SALONGA, ANNETE S. PASTORAL, JOY ANN S.
PASTORAL (represented by their parents BENJAMIN C. PASTORAL and ERLINDA S. PASTORAL) and
MARILOU VELISANO (represented by her parents CARMELITA VELISANO and GABRIEL VELISANO),
respondents.
Guerrero and Torres for petitioner.

Salonga, Andres, Hernandez & Associates and Angara, Concepcion, Regala & Cruz for private
respondents.

CRUZ, J.:
As found by the respondent court, the facts of this case are simple.

Three young ladies, Annette Pastoral, Joy Ann Pastoral, and Marilou Velisano, who are among the
private respondent herein, were gifted on their graduation with their first trip abroad, to Hongkong,
Tokyo and the United States, by their parents. Accompanied by their grandmother, Concepcion
Salonga, they flew on April 23, 1978, to Hongkong, where they were to await their plane tickets for
the rest of their trip.

On April 26, 1978, Erlinda Pastoral and her uncle, Serafin Salonga, went to the Office of the
petitioner's agent, the Inter-Pacific Transit, Inc., in Manila to purchase the said tickets. They paid the
computed total price of P25,100.40 in the afternoon of that same day and were assured that the
tickets would be delivered to the passengers in Hongkong in time for their flight to Japan the following
day.
The Hongkong office of the Northwest Orient Airlines found, however, that ITI had made a mistake in
the computation of the price of the tickets-in fact, two mistakes. That office first sent a telex to the
Manila office that the wrong conversion rates of exchange had been used and that there was a deficit
of $160.70 for each ticket. Then a second telex advised that the 10% mileage surcharge had not been
paid, which meant that the revised additional charge should be further increased to $261.60 per
ticket.

As a result of these errors, the NOA office in Hongkong refused to release the prepaid tickets to the
four passengers when Annette Pastoral and Marilou Velisano came to claim them on April 27, 1978.
They were told they had to pay the additional fare of $261.60 per ticket. The girls requested the NOA
personnel to cheek with their Manila Office, but this request was arrogantly rejected in the presence of
many persons. As the flight was scheduled at one o'clock that same afternoon, the girls had no choice
but to pay the total differential fare of $ 1,046.40.

That unexpected expense depleted their foreign currency and caused them a great deal of tension and
inconvenience. They had to stay in a cheap hotel in Tokyo, with all four of them occupying only one
room. Marilou got sick. The 69-year old Concepcion, who had a heart condition, fretted. Frantic and
worried over their dwindlings funds, the girls called up their parents for assistance. Their grandfather,
Benjamin Salonga, finally decided to fly to Japan to join them, incurring additional expenses for this
purpose.

On January 4, 1979, the private respondents sued the petitioner and ITI for breach of contract and
damages. After trial, judgment was rendered for the plaintiffs and the defendants were jointly and
severally required.

1. To pay unto the plaintiffs the expenses of Benjamin Salonga from Manila to Tokyo only which
should be less than P5,000.00 to include actual fare and incidental expenses of travel;

2. To pay moral damages for physical sufferings, mental anguish, serious anxiety and humuliation in
the amount of P400,000.00 incurred by each passenger;

3. To pay exemplary damages unto plaintiffs in the breach of contract and a public duty as a carrier
P200,000.00; and

4. To pay for and as attorney's fees P80,000.00 for having failed to honor immediately plaintiffs' just
and lawful demand thus compelling plaintiffs to go to court; and to pay the costs of the proceedings. 1

On its motion for reconsideration, however, ITI was absolved of liability as a mere agent of the
petitioner.2

On appeal, the findings of the trial court were sustained by the respondent court which, however,
modified the decision as follows:

WHEREFORE, the decision appealed from is modified by ordering the defendant Northwest Orient
Airlines to pay P50,000.00 to each passenger as moral damages, P10,000.00 each to the passengers
as exemplary damages and P50,000.00 as attorney's fees.

The award of P5,000.00 to Benjamin Salonga is eliminated.

Costs against the appellant Northwest Orient Airlines.

SO ORDERED. 3

The petitioner now challenges this ruling on the ground that there is no factual or legal basis for the
award to the plaintiffs of the moral and exemplary damages, and neither are the attorney's fees
justified. While it now concedes that it was negligent in computing the correct fare, it insists it had not
acted in bad faith or with malice, to warrant the said awards.
The rule, indeed, is that even if there is a breach of contract, as admitted in this case, moral damages
are nevertheless not justified where only simple negligence can be imputed to the defendant.

In China Airlines v. Intermediate Appellate Court, 4 we held as follows:

With respect to moral damages, the rule is that the same are recoverable in a damage suit predicated
upon a breach of contract of carriage only where (1) the mishap results in the death of a passenger
and (2) it is proved that the carrier was guilty of fraud or bad faith, even if death does not result. As
the present case does not fall under either of the cited instances, the award of moral damages should
be, as it is hereby disallowed.

And only recently, Sabena Belgian World vs. Court of Appeals 5 affirmed the doctrine that:

In cases of breach of contract, moral damages can be awarded only where the defendant has acted
fraudulently or in bad faith. Mere negligence, even if thereby the plaintiff suffers mental anguish or
serious fright is not ground for awarding moral damages.

However, the finding of the trial court in the case at bar is that the petitioner should not be faulted
with mere negligence that would absolve it from damages for its breach of contract. Rejecting its
defense of good faith, Judge Rafael de la Cruz observed:

To evade liability good faith is being claimed by the defendants in the performance of their part of the
obligation. The facts adduced from the pleadings and the records, to our mind, are not sufficient to
make good faith the thinly veiled excuse for justification because as aptly said: "A contract to
transport passengers is quite different in kind and degree from any other contractual relations. And
this is so because of the relation which an air carrier sustains with the public. Its business is mainly
with the travelling public. It invites people to avail of the comfort and advantages it offers. The
contract of air carriage therefore generates a relation attended with public duty. Neglect or
malfeasance of the carriers' employees, naturally, could give ground for an action for damages.

The court agrees.

We note first the error upon error committed by the petitioner's agent in computing the passengers'
fare, a task with which it was not exactly unfamiliar, being experienced in the travel business. That
negligence imposed needless burden on the passengers who had gone on their trip, the first abroad
for the three girls, precisely to enjoy themselves. Worse, the negligence, which was strange enough as
it was, was not the only vexation. On top of this annoyance was the manner in which the petitioner's
personnel in Hongkong sought to rectify the supposed mistakes of its Manila office. It was far from
acceptable.

The petitioner's employees should have been at least polite if not even sympathetic and apologetic to
the two young girls in the foreign land. Instead they were overbearing and hostile, forgetting that they
were dealing not with bothersome persons begging for a free ride. The girls were respectable
passengers who had in fact paid for their tickets in advance in the exact amount computed by the
petitioner's own agent in Manila.

Annete Pastoral and Marilou Velisano testified that they were treated coldly and arrogantly by the NOA
Hongkong personnel. They were flatly told their tickets would not be released unless the additional
charge was paid. They were humiliated when their request to contact the Manila office by telex was
haughtily rejected in the presence and within hearing of other persons. They were not accorded the
courtesy due them even only as ordinary individuals if not, indeed, as pre-paid passengers.

We accept the findings of the lower courts in this regard, absent a clear showing that they were
arbitrarily reached. We are satisfied with the evidence that the petitioner's personnel in Hongkong
were less than polite to the two young ladies who, it must be added, had not provoked any
boorishness. And we also agree with the following observation of the respondent court:
We find no merit in the contention of appellant NOA that no coercion or threat or force (was) used on
the passengers in the payment of the additional amount of $261.00 from each passenger.

The worries and axiety of the Plaintiffs passengers started when the Hongkong office of NOA refused
to issued their tickets for the rest of their trip to the United States. There may be no threat with
physical sence but the mere fact of the refusal of defendant's office in Hongkong to issue the pre-paid
tickets was enough tension as they could be stranded in Hongkong with meager funds.

The cavalier treatment of the two girls at the Hongkong NOA office requires a brief comment. The
Court feels it is about time foreigners realized that Filipinos, whatever their station in life, are entitled
to the same civility accorded other persons when they are in an alien land. We cannot be dismissed or
disdained on the basis of our nationality, which is as proud and as respectable as any other on this
earth. The haughty attitude of some foreigners who seem to think they belong to a superior race has
irked not a few Filipino travelers. Let it be stressed to our credit that we are not impressed at all by
such self-importance. Airlines should especially advise their personnel against superciliousness when
dealing with citizens of the Philippines and are cautioned that this Court will not countenance that kind
of conduct.

We hold that the acts of the petitioner, assessed in their totality, constituted more than mere
negligence and assumed the dimensions of bad faith. There was clear malice here, manifested in the
contemptuous disregard of the passenger's protest and the abrupt rejection of their request that the
Manila office be contacted for verification of the correct billing. Rudeness is never excusable. It is
especially condemnable if it is committed in one's own country against a foreign guest, as in the case
at bar. It is not correct to say that moral damages are not due Concepcion Salonga and Joy Ann
Pastoral because they had not testified on the effects of the petitioner's acts upon them. The other
two girls took the stand to described their common experiences and reactions and were later
corroborated by Benjamin Salonga. Their testimonies were enough. It is true that we denied moral
damages to the plaintiff in Francisco v. GSIS, 6 because she failed to testify as to her social
humiliation, wounded feelings and anxiety. In that case, however, there was absolutely no evidence in
this respect from her or from any other source, let alone the fact that bad faith had also not been
proved.

But we do agree that the amount awarded in the present case is rather steep. We hereby reduce it to
P10,000.00 for each of the four passengers plus another P10,000.00 each for Annette Pastoral and
Marilou Velisano for their humiliation at the NOA Hongkong office.

We sustain the award of exemplary damages, to deter the petitioner and other airlines from the
commission of the acts complained of by the private respondents. Airlines should always bear in mind
the special responsibilities they owe their passengers not only of carrying them safely and comfortably
according to their contracts but also of extending to them the courtesy due them in all matters
relating to their trip, including reservations, confirmation of bookings, ticketing and other ground and
in-flight services. The fare of the passenger includes payment for politeness.

In view of our findings regarding the mala fides of the petitioner, we also approve the award of
attorney's fees but reduce it in our discretion to P20,000.00.

WHEREFORE, with the modification of the amount of the moral damages and of the attorney's fees as
above indicated, the appealed decision of the respondent court is AFFIRMED, with costs against the
petitioner. SO ORDERED.

G.R. No. 138550 October 14, 2005

AMERICAN EXPRESS INTERNATIONAL, INC., Petitioner,
vs.
NOEL CORDERO, Defendant.
DECISION
SANDOVAL-GUTIERREZ, J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated April 30, 1999
in CA-G.R. CV No. 51671, entitled, "Noel Cordero, Plaintiff-Appellee versus American Express
International, Inc., Defendant-Appellant."

Petitioner is a foreign corporation that issues charge cards to its customers, which the latter then use
to purchase goods and services at accredited merchants worldwide. Sometime in 1988, Nilda Cordero,
wife of respondent Noel Cordero, applied for and was issued an American Express charge card with
No. 3769-895901-010020. The issuance of the charge card was covered by an Amex Cardmember
Agreement. As cardholder, Nilda, upon signing the back portion of the card, manifested her
acceptance of the terms of the Agreement.

An extension charge card, with No. 3769-895901-01010, was likewise issued to respondent Noel
Cordero which he also signed.2

On November 29, 1991, respondent, together with his wife, Nilda, daughter, sisters-in-law and uncle-
in-law, went on a three-day holiday trip to Hong Kong. In the early evening of November 30, 1991, at
about 7:00 o’clock, the group went to the Watson’s Chemist Shop located at 277C Ocean Gallery,
Kowloon, Hong Kong. Noel picked up some chocolate candies and handed to the sales clerk his
American Express extension charge card to pay for his purchases. The sales clerk verified the card by
making a telephone call to the American Express Office in Hong Kong. Moments later, Susan Chong,
the store manager, emerged from behind the counter and informed respondent that she had to
confiscate the card. Thereupon, she cut respondent’s American Express card in half with a pair of
scissors. This, according to respondent, caused him embarrassment and humiliation considering that it
was done in front of his family and the other customers lined up at the check-out counter. Hence,
Nilda had to pay for the purchases using her own American Express charge card.3

When they returned to the Excelsior Hotel, Nilda called up petitioner’s Office in Hong Kong. She was
able to talk to Senior Authorizer Johnny Chen, who informed her that on November 1, 1991, a person
in Hong Kong attempted to use a charge card with the same number as respondent’s card. The Hong
Kong American Express Office called up respondent and after determining that he was in Manila and
not in Hong Kong, placed his card in the "Inspect Airwarn Support System." This is the system utilized
by petitioner as a protection both for the company and the cardholders against the fraudulent use of
their charge cards. Once a card suspected of unauthorized use is placed in the system, the person to
whom the card is tendered must verify the identity of the holder. If the true identity of the card owner
is established, the card is honored and the charges are approved. Otherwise, the card is revoked or
confiscated.4

When the Watson’s sales clerk called up petitioner’s Hong Kong Office, its representative said he
wants to talk to respondent in order to verify the latter’s identity, pursuant to the procedure observed
under the "Inspect Airwarn Support System." However, respondent refused. Consequently, petitioner’s
representative was unable to establish the identity of the cardholder.5 This led to the confiscation of
respondent’s card.

On March 31, 1992, respondent filed with the Regional Trial Court, Branch V, Manila, a complaint for
damages against petitioner, docketed as Civil Case No. 92-60807. He prayed for the award of moral
damages and exemplary damages, as well as attorney’s fees as a result of the humiliation he suffered.

The trial court found that "the inexcusable failure of defendant (petitioner herein) to inform plaintiff
(respondent herein) of the November 1, 1991 incident despite sufficient time was the proximate cause
of the confiscation and cutting of plaintiff’s extension card which exposed the latter to public
humiliation for which defendant should be held liable."6 On February 20, 1995, the trial court
promulgated its Decision, the dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter to pay the former the following amounts, namely:
a) The sum of ₱300,000.00 as and by way of moral damages;
b) The sum of ₱200,000.00 as exemplary damages;
c) The sum of ₱100,000.00 as and for reasonable attorney’s fees; and
d) The costs of the suit.
SO ORDERED."7

Upon appeal, the Court of Appeals rendered the assailed Decision affirming the trial court’s Decision
with modification in the sense that the amounts of damages awarded were reduced, thus:

"WHEREFORE, in view of the foregoing, the appealed decision dated February 20, 1995 of the Regional
Trial Court of Manila, Branch V, in Civil Case No. 92-60807 is hereby AFFIRMED, subject to
modifications with respect to the amount of damages awarded, which are reduced as follows:

(a) Moral damages from ₱300,000.00 to ₱150,000.00; and

(b) Exemplary damages from ₱200,000.00 to ₱100,000.00.
No pronouncement as to costs.

SO ORDERED."

Hence, the instant petition raising the following issues:

"A. Whether the lower courts gravely erred in attributing the ‘public humiliation’ allegedly suffered by
Cordero to Amex.

B. Whether the lower courts gravely erred in holding Amex liable to Cordero for moral damages,
exemplary damages and attorney’s fees."8

Respondent filed his comment contending in the main that the petition raises questions of fact beyond
this Court’s domain.

While it is true that under Rule 45 of the 1997 Rules of Civil Procedure, as amended, this Court may
review only errors of law, however, this rule admits of well-known recognized exceptions, thus:

". . . (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the
inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is
based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of Appeals
went beyond the issues of the case and its findings are contrary to the admissions of both parties; (7)
the findings of fact of the Court of Appeals are contrary to those of the trial court; (8) said findings of
fact are conclusions without citation of specific evidence on which they are based; (9) the facts set
forth in the petition are not disputed by the respondents; and (10) the findings of fact of the Court of
Appeals are premised on the supposed absence of evidence and contradicted by the evidence on
record."9

In this case, the inference made by the courts below is manifestly mistaken. Therefore, we are
justified in reviewing the records of this case and rendering judgment based on our own findings.

In his complaint, respondent claimed that he suffered embarrassment and humiliation because his
card was unceremoniously confiscated and cut in half by Susan Chong of Watson’s Chemist Shop.

Respondent anchors his cause of action on the following provision of the Civil Code:

"Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this
Chapter."10

In order that an obligation based on quasi-delict may arise, there must be no pre-existing contractual
relation between the parties. But there are exceptions. There may be an action for quasi-delict
notwithstanding that there is a subsisting contract between the parties. A liability for tort may arise
even under a contract, where tort is that which breaches the contract. Stated differently, when an act
which constitutes a breach of contract would have itself constituted the source of a quasi-delictual
liability, the contract can be said to have been breached by tort, thereby allowing the rules on tort to
apply.11

Furthermore, to constitute quasi-delict, the fault or negligence must be the proximate cause of the
damage or injury suffered by the plaintiff. Proximate cause is that cause which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred. Proximate cause is determined by the facts of each case
upon mixed considerations of logic, common sense, policy and precedent.12

According to the trial court, petitioner should have informed respondent that on November 1, 1991, a
person in Hong Kong attempted to use a charge card bearing similar number to that of respondent’s
card; and that petitioner’s inexcusable failure to do so is the proximate cause of the "confiscation and
cutting of [respondent’s] extension card which exposed the latter to public humiliation for which
[petitioner] should be held liable."13

We cannot sustain the trial court’s conclusion.

As explained by respondent himself, he could have used his card upon verification by the sales clerk of
Watson that indeed he is the authorized cardholder. This could have been accomplished had
respondent talked to petitioner’s representative, enabling the latter to determine that respondent is
indeed the true holder of the card. Clearly, no negligence which breaches the contract can be
attributed to petitioner. If at all, the cause of respondent’s humiliation and embarrassment was his
refusal to talk to petitioner’s representative.

That respondent refused to talk to petitioner’s representative can be gleaned from the testimony of
Mr. Chen Heng Kun a.k.a. Johnny Chen during the deposition in Hong Kong,14 thus:

"Question No 9 : Was AEII required under its existing policies and/or membership agreement with its
cardholders to advise said cardholders of their card have been put under the support INSPECT –
Strictly Question (for identification) cardmembers before approving any charge?

Mr. Johnny Chen : Under the existing policies of AEII, we don’t have to inform the cardholders if they
have to pass the INSPECT –Strictly Questions (for identification).

Question No 10 : If the answer to Q9 is in the negative, please explain why not?

Mr. Johnny Chen : The reason why we don’t have to are because, first, we are not terminating the
service to the cardholder. Second, it doesn’t mean that we are going to limit the service to the
cardholder. Third, as long as the cardholder can present an identification card of his membership, we
allow him to use the card. He can show this by telephoning the company or by presenting us his
passport or travel document. When Watson Company called AEII for authorization, AEII representative
requested that he talk to Mr. Cordero but he refused to talk to any representative of AEII. AEII could
not prove then that he is really the real card holder."

Mr. Chen Heng Kun was briefly cross-examined by respondent’s counsel, thus:

"Question No 10 : Question 9 is objected to since the best evidence would be the membership
agreement between plaintiffs and AEII."

Significantly, paragraph 16 of the Cardmember Agreement signed by respondent provides:

"16. THE CARD REMAINS OUR PROPERTY

"The Card remains our property and we can revoke your right and the right of ay Additional
Cardmember to use it at any time, we can do this with or without giving you notice. If we have
revoked the Card without cause, we will refund a proportion of your annual Card Account fee. We may
list revoked Cards in our "Cancellation Bulletin", or otherwise inform Establishments that the Card
issued to you and, if you are the basic Cardmember, any Additional Cards have been revoked or
cancelled.

"If we revoke the card or it expires, you must return it to us if we request. Also, if any Establishment
asks you to surrender an expired or revoked Card, you must do so. You may not use the Card after it
has expired or after it has been revoked.

"The revocation, repossession or request for the return of the Card is not, and shall not constitute any
reflection of your character or credit-worthiness and we shall not be liable in any way for any
statement made by any person requesting the return or surrender of the Card."15

To be sure, pursuant to the above stipulation, petitioner can revoke respondent’s card without notice,
as was done here. It bears reiterating that the subject card would not have been confiscated and cut
had respondent talked to petitioner’s representative and identified himself as the genuine cardholder.
It is thus safe to conclude that there was no negligence on the part of petitioner and that, therefore, it
cannot be held liable to respondent for damages.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV
No. 51671 is REVERSED.SO ORDERED.

G.R. No. 89880 February 6, 1991

EMMA ADRIANO BUSTAMANTE, in her own behalf as Guardian-Ad-Litem of minors: ROSSEL, GLORIA,
YOLANDA, ERIC SON and EDERIC, all surnamed BUSTAMANTE, Spouses SALVADOR JOCSON and PATRIA
BONE-JOCSON, Spouses JOSE RAMOS and ENRIQUETA CEBU-RAMOS, Spouses NARCISO-HIMAYA and
ADORACION MARQUEZ-HIMAYA, and Spouses JOSE BERSAMINA and MA. COMMEMORACION PEREA-
BUSTAMANTE, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, FEDERICO DEL PILAR AND EDILBERTO MONTESIANO,
respondents.
Dolorfino and Dominguez Law Offices for petitioners.
J.C. Baldoz & Associates for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari seeking the reversal of the decision of the respondent Court
of Appeals dated February 15, 1989 which reversed and set aside the decision of the Regional Trial
Court of Cavite, Branch XV ordering the defendants to pay jointly and severally the plaintiffs indemnity
for death and damages; and in further dismissing the complaint insofar as defendants-appellants
Federico del Pilar and Edilberto Montesiano are concerned; and its resolution dated August 17, 1989
denying the motion for reconsideration for lack of merit.

The facts giving rise to the controversy at bar are recounted by the trial court as follows:

At about 6:30 in the morning of April 20, 1983, a collision occurred between a gravel and sand truck,
with Plate No. DAP 717, and a Mazda passenger bus with Motor No. Y2231 and Plate No. DVT 259
along the national road at Calibuyo, Tanza, Cavite. The front left side portion (barandilla) of the body
of the truck sideswiped the left side wall of the passenger bus, ripping off the said wall from the
driver's seat to the last rear seat.

Due to the impact, several passengers of the bus were thrown out and died as a result of the injuries
they sustained, Among those killed were the following:

1. Rogelio Bustamante, 40, husband of plaintiff Emma Adriano Bustamante and father of plaintiffs
Rossel, Gloria, Yolanda, Ericson, and Ederic, all surnamed Bustamante;
2. Maria Corazon Jocson, 16, daughter of plaintiffs spouses Salvador and Patria Jocson;
3. Jolet C. Ramos, 16, daughter of plaintiffs spouses Jose and Enriqueta Ramos;
4. Enrico Himaya, 18, son of plaintiffs spouses Narciso and Adoracion Himaya; and
5. Noel Bersamina, 17, son of plaintiffs spouses Jose and Ma. Commemoracion Bersamina. (Rollo, p. 48)

During the incident, the cargo truck was driven by defendant Montesiano and owned by defendant Del
Pilar; while the passenger bus was driven by defendant Susulin. The vehicle was registered in the
name of defendant Novelo but was owned and/or operated as a passenger bus jointly by defendants
Magtibay and Serrado, under a franchise, with a line from Naic, Cavite, to Baclaran, Paranaque, Metro
Manila, and vice versa, which Novelo sold to Magtibay on November 8, 1981, and which the latter
transferred to Serrado (Cerrado) on January 18, 1983.

Immediately before the collision, the cargo truck and the passenger bus were approaching each other,
coming from the opposite directions of the highway. While the truck was still about 30 meters away,
Susulin, the bus driver, saw the front wheels of the vehicle wiggling. He also observed that the truck
was heading towards his lane. Not minding this circumstance due to his belief that the driver of the
truck was merely joking, Susulin shifted from fourth to third gear in order to give more power and
speed to the bus, which was ascending the inclined part of the road, in order to overtake or pass a
Kubota hand tractor being pushed by a person along the shoulder of the highway. While the bus was
in the process of overtaking or passing the hand tractor and the truck was approaching the bus, the
two vehicles sideswiped each other at each other's left side. After the impact, the truck skidded
towards the other side of the road and landed on a nearby residential lot, hitting a coconut tree and
felling it." (Rollo, pp. 48-50)

After a careful perusal of the circumstances of the case, the trial court reached the conclusion "that
the negligent acts of both drivers contributed to or combined with each other in directly causing the
accident which led to the death of the aforementioned persons. It could not be determined from the
evidence that it was only the negligent act of one of them which was the proximate cause of the
collision. In view of this, the liability of the two drivers for their negligence must be solidary. (Rollo,
pp. 50-51) Accordingly, the trial court rendered a decision on March 7, 1986, the dispositive portion is
hereunder quoted as follows:

WHEREFORE, defendants Valeriano Magtibay, Simplicio Serrado, Ricardo Susulin, Efren Novelo,
Federico del Pilar and Edilberto Montesiano are hereby ordered to pay jointly and severally to the
plaintiffs, as follows:

1. To plaintiffs Emma Adriano Bustamante and her minor children, the sum of P30,000.00 as
indemnity for the death of Rogelio Bustamante; U.S. $127,680.00 as indemnity for the loss of the
earning capacity of the said deceased, at its prevailing rate in pesos at the time this decision shall
have become final and executory; P10,000.00 as moral damages; and P5,000.00 as exemplary
damages;

2. To plaintiffs Salvador and Patria Jocson, the sum of P30,000.00 as indemnity for the death of their
daughter, Maria Corazon Jocson; P10,000.00 as moral damages; and P5,000.00 as exemplary
damages;

3. To plaintiffs Jose and Enriqueta Ramos, the sum of P30,000.00 as indemnity for the death of their
daughter, Jolet Ramos; P10,000.00 as moral damages; and P5,000.00 as exemplary damages; and

4. To plaintiffs Narciso and Adoracion Himaya, the amount of P30,000.00 as indemnity for the death of
their son, Enrico Himaya, P10,000.00 as moral damages; and P5,000.00 as exemplary damages; and

5. To plaintiffs Jose and Ma. Commemoracion Bersamina, the sum of P30,000.00 as indemnity for the
death of their son, Noel Bersamina, P10,000.00 as moral damages and P5,000.00 as exemplary
damages.
The defendants are also required to pay the plaintiffs the sum of P10,000.00 as attorney's fees and to
pay the costs of the suit.

The cross-claim of defendant Novelo is hereby allowed, and defendants Magtibay and Serrado, the
actual owners and/or operators of the passenger bus concerned, are hereby ordered to indemnify
Novelo in such amount as he may be required to pay as damages to the plaintiffs.

The cross-claims and counter-claims of the other defendants are hereby dismissed for lack of merit.

SO ORDERED. (pp. 55-57, Rollo)

From said decision, only defendants Federico del Pilar and Edilberto Montesiano, owner and driver,
respectively, of the sand and gravel truck have interposed an appeal before the respondent Court of
Appeals. The Court of Appeals decided the appeal on a different light. It rendered judgment on
February 15, 1989, to wit:

WHEREFORE, the appealed judgment is hereby REVERSED and SET ASIDE and the complaint
dismissed insofar as defendants-appellants Federico del Pilar and Edilberto Montesiano are concerned.
No costs in this instance.

SO ORDERED. (p. 96, Rollo)

On March 9, 1989, the plaintiffs-appellees filed a motion for reconsideration of the aforementioned
Court of Appeals' decision. However, respondent Court of Appeals in a resolution dated August 17,
1989 denied the motion for lack of merit. Hence, this petition.

Petitioners raised the following questions of law, namely:

First. Whether the respondent Court can legally and validly absolve defendants-appellants from
liability despite its own finding, as well as that of the trial court that defendant-appellant Edilberto
Montesiano, the cargo truck driver, was driving an old vehicle very fast, with its wheels already
wiggling, such that he had no more control of his truck.

Second. Whether the respondent court can validly and legally disregard the findings of fact made by
the trial court which was in a better position to observe the conduct and demeanor of the witnesses,
particularly appellant Edilberto Montesiano, cargo truck driver, and which conclusively found appellant
Montesiano as jointly and severally negligent in driving his truck very fast and had lost control of his
truck.

Third. Whether the respondent court has properly and legally applied the doctrine of "last clear
chance" in the present case despite its own finding that appellant cargo truck driver Edilberto
Montesiano was admittedly negligent in driving his cargo truck very fast on a descending road and in
the presence of the bus driver coming from the opposite direction.

Fourth. Whether the respondent court has applied the correct law and the correct doctrine so as to
reverse and set aside the judgment with respect to defendants-appellants. (Rollo, pp. 133-134)

As a rule, findings of fact of the Court of Appeals are final and conclusive and cannot be reviewed on
appeal, provided, they are borne out by the record or are based on substantial evidence However, this
rule admits of certain exceptions, as when the findings of facts are conclusions without citation of
specific evidence on which they are based; or the appellate court's findings are contrary to those of
the trial court. (Sese v. Intermediate Appellate Court, G.R. 66168, 31 July 1987, 152 SCRA 585).

Furthermore, only questions of law may be raised in a petition for review on certiorari under Rule 45
of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the
Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of fact
being conclusive. It is not the function of the Supreme Court to analyze or weigh such evidence all
over again, its jurisdiction being limited to reviewing errors of law that might have been committed.
Barring, therefore, a showing that the findings complained of are totally devoid of support in the
records, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such
findings must stand for the Supreme Court is not expected or required to examine or contrast the oral
and documentary evidence submitted by the parties. (Andres v. Manufacturers Hanover and Trust
Corp., G.R. 82670, 15 September 1989, 177 SCRA 618).

Bearing in mind these basic principles, We have opted to re-examine the findings of fact mainly
because the appellate court's findings are contrary to those of the trial court.

The trial court, in declaring that the negligent acts of both drivers directly caused the accident which
led to the death of the aforementioned persons, considered the following:

It was negligent on the part of driver Montesiano to have driven his truck fast, considering that it was
an old vehicle, being a 1947 model as admitted by its owner, defendant Del Pilar; that its front wheels
were wiggling; that the road was descending; and that there was a passenger bus approaching it.
Likewise, driver Susulin was also guilty of negligence in not taking the necessary precaution to avoid
the collision, in the light of his admission that, at a distance of 30 meters, he already saw the front
wheels of the truck wiggling and that the vehicle was usurping his lane coming towards his direction.
Had he exercised ordinary prudence, he could have stopped his bus or swerved it to the side of the
road even down to its shoulder. And yet, Susulin shifted to third gear so as to, as claimed by him, give
more power and speed to his bus in overtaking or passing a hand tractor which was being pushed
along the shoulder of the road. (Rollo, p. 50)

The respondent Court of Appeals ruling on the contrary, opined that "the bus driver had the last clear
chance to avoid the collision and his reckless negligence in proceeding to overtake the hand tractor
was the proximate cause of the collision." (Rollo, p. 95). Said court also noted that "the record also
discloses that the bus driver was not a competent and responsible driver. His driver's license was
confiscated for a traffic violation on April 17, 1983 and he was using a ticket for said traffic violation
on the day of the accident in question (pp. 16-18, TSN, July 23, 1984). He also admitted that he was
not a regular driver of the bus that figured in the mishap and was not given any practical examination.
(pp. 11, 96, TSN, supra)." (Rollo, p96)

The respondent Court quoting People v. Vender, CA-G.R. 11114-41-CR, August 28, 1975 held that
"We are not prepared to uphold the trial court's finding that the truck was running fast before the
impact. The national road, from its direction, was descending. Courts can take judicial notice of the
fact that a motor vehicle going down or descending is more liable to get out of control than one that is
going up or ascending for the simple reason that the one which is going down gains added momentum
while that which is going up loses its initial speeding in so doing."

On the other hand, the trial court found and We are convinced that the cargo truck was running fast.
It did not overlook the fact that the road was descending as in fact it mentioned this circumstance as
one of the factors disregarded by the cargo truck driver along with the fact that he was driving an old
1947 cargo truck whose front wheels are already wiggling and the fact that there is a passenger bus
approaching it. In holding that the driver of the cargo truck was negligent, the trial court certainly
took into account all these factors so it was incorrect for the respondent court to disturb the factual
findings of the trial court, which is in a better position to decide the question, having heard the
witness themselves and observed their deportment.

The respondent court adopted the doctrine of "last clear chance." The doctrine, stated broadly, is that
the negligence of the plaintiff does not preclude a recovery for the negligence of the defendant where
it appears that the defendant, by exercising reasonable care and prudence, might have avoided
injurious consequences to the plaintiff notwithstanding the plaintiff's negligence. In other words, the
doctrine of last clear chance means that even though a person's own acts may have placed him in a
position of peril, and an injury results, the injured person is entitled to recovery. As the doctrine is
usually stated, a person who has the last clear chance or opportunity of avoiding an accident,
notwithstanding the negligent acts of his opponent or that of a third person imputed to the opponent
is considered in law solely responsible for the consequences of the accident. (Sangco, Torts and
Damages, 4th Ed., 1986, p. 165).

The practical import of the doctrine is that a negligent defendant is held liable to a negligent plaintiff,
or even to a plaintiff who has been grossly negligent in placing himself in peril, if he, aware of the
plaintiffs peril, or according to some authorities, should have been aware of it in the reasonable
exercise of due case, had in fact an opportunity later than that of the plaintiff to avoid an accident (57
Am. Jur., 2d, pp. 798-799).

In the recent case of Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court, et al. (G.R.
Nos. 66102-04, August 30, 1990), the Court citing the landmark decision held in the case of Anuran,
et al. v. Buno, et al. (123 Phil. 1073) ruled that the principle of "last clear chance" applies "in a suit
between the owners and drivers of colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to
exempt the negligent driver of the jeepney and its owners on the ground that the other driver was
likewise guilty of negligence."

Furthermore, "as between defendants: The doctrine cannot be extended into the field of joint
tortfeasors as a test of whether only one of them should be held liable to the injured person by reason
of his discovery of the latter's peril, and it cannot be invoked as between defendants concurrently
negligent. As against third persons, a negligent actor cannot defend by pleading that another had
negligently failed to take action which could have avoided the injury." (57 Am. Jur. 2d, pp. 806-807).

All premises considered, the Court is convinced that the respondent Court committed an error of law
in applying the doctrine of last clear chance as between the defendants, since the case at bar is not a
suit between the owners and drivers of the colliding vehicles but a suit brought by the heirs of the
deceased passengers against both owners and drivers of the colliding vehicles. Therefore, the
respondent court erred in absolving the owner and driver of the cargo truck from liability.

Pursuant to the new policy of this Court to grant an increased death indemnity to the heirs of the
deceased, their respective awards of P30,000.00 are hereby increased to P50,000.00.

ACCORDINGLY, the petition is GRANTED; the appealed judgment and resolution of the Court of
Appeals are hereby REVERSED and SET ASIDE and the judgment of the lower court is REINSTATED
with the modification on the indemnity for death of each of the victims which is hereby increased to
P50,000.00 each. No pronouncement as to costs. SO ORDERED.

G.R. No. 164349 January 31, 2006

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI),Petitioner,
vs.
ALFONSO VERCHEZ, GRACE VERCHEZ-INFANTE, MARDONIO INFANTE, ZENAIDA VERCHEZ-CATIBOG, AND
FORTUNATO CATIBOG, Respondents.
DECISION
CARPIO MORALES, J.:

On January 21, 1991, Editha Hebron Verchez (Editha) was confined at the Sorsogon Provincial
Hospital due to an ailment. On even date, her daughter Grace Verchez-Infante (Grace) immediately
hied to the Sorsogon Branch of the Radio Communications of the Philippines, Inc. (RCPI) whose
services she engaged to send a telegram to her sister Zenaida Verchez-Catibog (Zenaida) who was
residing at 18 Legal St., GSIS Village, Quezon City1 reading: "Send check money Mommy hospital."
For RCPI’s services, Grace paid P10.502 for which she was issued a receipt.3

As three days after RCPI was engaged to send the telegram to Zenaida no response was received from
her, Grace sent a letter to Zenaida, this time thru JRS Delivery Service, reprimanding her for not
sending any financial aid.
Immediately after she received Grace’s letter, Zenaida, along with her husband Fortunato Catibog, left
on January 26, 1991 for Sorsogon. On her arrival at Sorsogon, she disclaimed having received any
telegram.

In the meantime, Zenaida and her husband, together with her mother Editha left for Quezon City on
January 28, 1991 and brought Editha to the Veterans Memorial Hospital in Quezon City where she was
confined from January 30, 1991 to March 21, 1991.

The telegram was finally delivered to Zenaida 25 days later or on February 15, 1991.4 On inquiry from
RCPI why it took that long to deliver it, a messenger of RCPI replied that he had nothing to do with
the delivery thereof as it was another messenger who previously was assigned to deliver the same but
the address could not be located, hence, the telegram was resent on February 2, 1991, and the
second messenger finally found the address on February 15, 1991.

Editha’s husband Alfonso Verchez (Verchez), by letter of March 5, 1991,5 demanded an explanation
from the manager of the Service Quality Control Department of the RCPI, Mrs. Lorna D. Fabian, who
replied, by letter of March 13, 1991,6 as follows:

Our investigation on this matter disclosed that subject telegram was duly processed in accordance
with our standard operating procedure. However, delivery was not immediately effected due to the
occurrence of circumstances which were beyond the control and foresight of RCPI. Among others,
during the transmission process, the radio link connecting the points of communication involved
encountered radio noise and interferences such that subject telegram did not initially registered (sic)
in the receiving teleprinter machine.

Our internal message monitoring led to the discovery of the above. Thus, a repeat transmission was
made and subsequent delivery was effected. (Underscoring supplied)

Verchez’s lawyer thereupon wrote RCPI’s manager Fabian, by letter of July 23, 1991,7 requesting for a
conference on a specified date and time, but no representative of RCPI showed up at said date and
time.

On April 17, 1992, Editha died.

On September 8, 1993, Verchez, along with his daughters Grace and Zenaida and their respective
spouses, filed a complaint against RCPI before the Regional Trial Court (RTC) of Sorsogon for
damages. In their complaint, the plaintiffs alleged that, inter alia, the delay in delivering the telegram
contributed to the early demise of the late Editha to their damage and prejudice,8 for which they
prayed for the award of moral and exemplary damages9 and attorney’s fees.10

After its motion to dismiss the complaint for improper venue11 was denied12 by Branch 5 of the RTC
of Sorsogon, RCPI filed its answer, alleging that except with respect to Grace,13 the other plaintiffs
had no privity of contract with it; any delay in the sending of the telegram was due to force majeure,
"specifically, but not limited to, radio noise and interferences which adversely affected the
transmission and/or reception of the telegraphic message";14 the clause in the Telegram Transmission
Form signed by Grace absolved it from liability for any damage arising from the transmission other
than the refund of telegram tolls;15 it observed due diligence in the selection and supervision of its
employees; and at all events, any cause of action had been barred by laches.16

The trial court, observing that "although the delayed delivery of the questioned telegram was not
apparently the proximate cause of the death of Editha," ruled out the presence of force majeure.
Respecting the clause in the telegram relied upon by RCPI, the trial court held that it partakes of the
nature of a contract of adhesion.

Finding that the nature of RCPI’s business obligated it to dispatch the telegram to the addressee at the
earliest possible time but that it did not in view of the negligence of its employees to repair its radio
transmitter and the concomitant delay in delivering the telegram on time, the trial court, upon the
following provisions of the Civil Code, to wit:
Article 2176 – Whoever by act or omission causes damage to another, there being at fault or
negligence, is obliged to pay for the damage done. Such fault or negligence if there is no pre-existing
contractual relation between the parties, is called quasi-delict and is governed by the provisions of this
Chapter.

Article 1173 defines the fault of (sic) negligence of the obligor as the "omission of the diligence which
is required by the nature of the obligation and corresponds with the circumstances of the person, of
the time, or the place."

In the instant case, the obligation of the defendant to deliver the telegram to the addressee is of an
urgent nature. Its essence is the early delivery of the telegram to the concerned person. Yet, due to
the negligence of its employees, the defendant failed to discharge of its obligation on time making it
liable for damages under Article 2176.

The negligence on the part of the employees gives rise to the presumption of negligence on the part of
the employer.17 (Underscoring supplied), rendered judgment against RCPI. Accordingly, it disposed:

WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered in favor of the
plaintiffs and against the defendant, to wit:

Ordering the defendant to pay the plaintiffs the following amount:

1. The amount of One Hundred Thousand (P100,000.00) Pesos as moral damages;

2. The amount of Twenty Thousand (P20,000.00) Pesos as attorney’s fees; and
3. To pay the costs.
SO ORDERED.18

On appeal, the Court of Appeals, by Decision of February 27, 2004,19 affirmed the trial court’s
decision.

Hence, RCPI’s present petition for review on certiorari, it raising the following questions: (1) "Is the
award of moral damages proper even if the trial court found that there was no direct connection
between the injury and the alleged negligent acts?"20 and (2) "Are the stipulations in the ‘Telegram
Transmission Form,’ in the nature "contracts of adhesion" (sic)?21

RCPI insists that respondents failed to prove any causal connection between its delay in transmitting
the telegram and Editha’s death.22

RCPI’s stand fails. It bears noting that its liability is anchored on culpa contractual or breach of
contract with regard to Grace, and on tort with regard to her co-plaintiffs-herein-co-respondents.

Article 1170 of the Civil Code provides:

Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages. (Underscoring supplied)

Passing on this codal provision, this Court explained:

In culpa contractual x x x the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory
force of contracts, will not permit a party to be set free from liability for any kind of misperformance of
the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract
confers upon the injured party a valid cause for recovering that which may have been lost or suffered.
The remedy serves to preserve the interests of the promissee that may include his "expectation
interest," which is his interest in having the benefit of his bargain by being put in as good a position as
he would have been in had the contract been performed, or his "reliance interest," which is his interest
in being reimbursed for loss caused by reliance on the contract by being put in as good a position as
he would have been in had the contract not been made; or his "restitution interest," which is his
interest in having restored to him any benefit that he has conferred on the other party. Indeed,
agreements can accomplish little, either for their makers or for society, unless they are made the
basis for action. The effect of every infraction is to create a new duty, that is, to make recompense to
the one who has been injured by the failure of another to observe his contractual obligation unless he
can show extenuating circumstances, like proof of his exercise of due diligence x x x or of the
attendance of fortuitous event, to excuse him from his ensuing liability.23 (Emphasis and underscoring
supplied)

In the case at bar, RCPI bound itself to deliver the telegram within the shortest possible time. It took
25 days, however, for RCPI to deliver it.

RCPI invokes force majeure, specifically, the alleged radio noise and interferences which adversely
affected the transmission and/or reception of the telegraphic message. Additionally, its messenger
claimed he could not locate the address of Zenaida and it was only on the third attempt that he was
able to deliver the telegram.

For the defense of force majeure to prosper,

x x x it is necessary that one has committed no negligence or misconduct that may have occasioned
the loss. An act of God cannot be invoked to protect a person who has failed to take steps to forestall
the possible adverse consequences of such a loss. One’s negligence may have concurred with an act of
God in producing damage and injury to another; nonetheless, showing that the immediate or
proximate cause of the damage or injury was a fortuitous event would not exempt one from liability.
When the effect is found to be partly the result of a person’s participation – whether by active
intervention, neglect or failure to act – the whole occurrence is humanized and removed from the
rules applicable to acts of God.

xxxx

Article 1174 of the Civil Code states that no person shall be responsible for a fortuitous event that
could not be foreseen or, though foreseen, was inevitable. In other words, there must be an exclusion
of human intervention from the cause of injury or loss.24 (Emphasis and underscoring supplied)

Assuming arguendo that fortuitous circumstances prevented RCPI from delivering the telegram at the
soonest possible time, it should have at least informed Grace of the non-transmission and the non-
delivery so that she could have taken steps to remedy the situation. But it did not. There lies the fault
or negligence.

In an earlier case also involving RCPI, this Court held:

Considering the public utility of RCPI’s business and its contractual obligation to transmit messages, it
should exercise due diligence to ascertain that messages are delivered to the persons at the given
address and should provide a system whereby in cases of undelivered messages the sender is given
notice of non-delivery. Messages sent by cable or wireless means are usually more important and
urgent than those which can wait for the mail.25

xxxx

People depend on telecommunications companies in times of deep emotional stress or pressing

financial needs. Knowing that messages about the illnesses or deaths of loved ones, births or
marriages in a family, important business transactions, and notices of conferences or meetings as in
this case, are coursed through the petitioner and similar corporations, it is incumbent upon them to
exercise a greater amount of care and concern than that shown in this case. Every reasonable effort to
inform senders of the non-delivery of messages should be undertaken.26

(Emphasis and underscoring supplied)

RCPI argues, however, against the presence of urgency in the delivery of the telegram, as well as the
basis for the award of moral damages, thus:27

The request to send check as written in the telegraphic text negates the existence of urgency that
private respondents’ allegations that ‘time was of the essence’ imports. A check drawn against a
Manila Bank and transmitted to Sorsogon, Sorsogon will have to be deposited in a bank in Sorsogon
and pass thru a minimum clearing period of 5 days before it may be encashed or withdrawn. If the
transmittal of the requested check to Sorsogon took 1 day – private respondents could therefore still
wait for 6 days before the same may be withdrawn. Requesting a check that would take 6 days before
it could be withdrawn therefore contradicts plaintiff’s claim of urgency or need.28

At any rate, any sense of urgency of the situation was met when Grace Verchez was able to
communicate to Manila via a letter that she sent to the same addressee in Manila thru JRS.29

xxxx

As far as the respondent court’s award for moral damages is concerned, the same has no basis
whatsoever since private respondent Alfonso Verchez did not accompany his late wife when the latter
went to Manila by bus. He stayed behind in Sorsogon for almost 1 week before he proceeded to
Manila. 30

When pressed on cross-examination, private respondent Alfonso Verchez could not give any plausible
reason as to the reason why he did not accompany his ailing wife to Manila.31

xxxx

It is also important to consider in resolving private respondents’ claim for moral damages that private
respondent Grace Verchez did not accompany her ailing mother to Manila.32

xxxx

It is the common reaction of a husband to be at his ailing wife’s side as much as possible. The fact
that private respondent Alfonso Verchez stayed behind in Sorsogon for almost 1 week convincingly
demonstrates that he himself knew that his wife was not in critical condition.33

(Emphasis and underscoring supplied)

RCPI’s arguments fail. For it is its breach of contract upon which its liability is, it bears repeating,
anchored. Since RCPI breached its contract, the presumption is that it was at fault or negligent. It,
however, failed to rebut this presumption.

For breach of contract then, RCPI is liable to Grace for damages.

And for quasi-delict, RCPI is liable to Grace’s co-respondents following Article 2176 of the Civil Code
which provides:

Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
(Underscoring supplied)

RCPI’s liability as an employer could of course be avoided if it could prove that it observed the
diligence of a good father of a family to prevent damage. Article 2180 of the Civil Code so provides:

The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but
also for those of persons for whom one is responsible.

xxxx
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage. (Underscoring
supplied)

RCPI failed, however, to prove that it observed all the diligence of a good father of a family to prevent
damage.

Respecting the assailed award of moral damages, a determination of the presence of the following
requisites to justify the award is in order:

x x x firstly, evidence of besmirched reputation or physical, mental or psychological suffering

sustained by the claimant; secondly, a culpable act or omission factually established; thirdly, proof
that the wrongful act or omission of the defendant is the proximate cause of damages sustained by
the claimant; and fourthly, that the case is predicated on any of the instances expressed or envisioned
by Article 2219 and Article 2220 of the Civil Code.34

Respecting the first requisite, evidence of suffering by the plaintiffs-herein respondents was correctly
appreciated by the CA in this wise:

The failure of RCPI to deliver the telegram containing the message of appellees on time, disturbed
their filial tranquillity. Family members blamed each other for failing to respond swiftly to an
emergency that involved the life of the late Mrs. Verchez, who suffered from diabetes.35

As reflected in the foregoing discussions, the second and third requisites are present.

On the fourth requisite, Article 2220 of the Civil Code provides:

Willful injury to property may be a legal ground for awarding moral damages if the court should find
that, under the circumstances, such damages are justly due. The same rule applies to breaches of
contract where the defendant acted fraudulently or in bad faith. (Emphasis and underscoring supplied)

After RCPI’s first attempt to deliver the telegram failed, it did not inform Grace of the non-delivery
thereof and waited for 12 days before trying to deliver it again, knowing – as it should know – that
time is of the essence in the delivery of telegrams. When its second long-delayed attempt to deliver
the telegram again failed, it, again, waited for another 12 days before making a third attempt. Such
nonchalance in performing its urgent obligation indicates gross negligence amounting to bad faith. The
fourth requisite is thus also present.

In applying the above-quoted Article 2220, this Court has awarded moral damages in cases of breach
of contract where the defendant was guilty of gross negligence amounting to bad faith, or in wanton
disregard of his contractual obligation.36

As for RCPI’s tort-based liability, Article 2219 of the Civil Code provides:

Moral damages may be recovered in the following and analogous cases:

xxxx

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. (Emphasis
supplied)
Article 26 of the Civil Code, in turn, provides:

Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and
other persons. The following and similar acts, though they may not constitute a criminal offense, shall
produce a cause of action for damages, prevention, and other relief:

xxx

(2) Meddling with or disturbing the private life or family relations of another. (Emphasis supplied)

RCPI’s negligence in not promptly performing its obligation undoubtedly disturbed the peace of mind
not only of Grace but also her co-respondents. As observed by the appellate court, it disrupted the
"filial tranquillity" among them as they blamed each other "for failing to respond swiftly to an
emergency." The tortious acts and/or omissions complained of in this case are, therefore, analogous
to acts mentioned under Article 26 of the Civil Code, which are among the instances of quasi-delict
when courts may award moral damages under Article 2219 of the Civil Code.

In fine, the award to the plaintiffs-herein respondents of moral damages is in order, as is the award of
attorney’s fees, respondents having been compelled to litigate to protect their rights.

Clutching at straws, RCPI insists that the limited liability clause in the "Telegram Transmission Form"
is not a contract of adhesion. Thus it argues:

Neither can the Telegram Transmission Form be considered a contract of adhesion as held by the
respondent court. The said stipulations were all written in bold letters right in front of the Telegram
Transmission Form. As a matter of fact they were beside the space where the telegram senders write
their telegraphic messages. It would have been different if the stipulations were written at the back
for surely there is no way the sender will easily notice them. The fact that the stipulations were
located in a particular space where they can easily be seen, is sufficient notice to any sender (like
Grace Verchez-Infante) where she could manifest her disapproval, leave the RCPI station and avail of
the services of the other telegram operators.37 (Underscoring supplied)

RCPI misunderstands the nature of a contract of adhesion. Neither the readability of the stipulations
nor their physical location in the contract determines whether it is one of adhesion.

A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of
contract, which the other party may accept or reject, but which the latter cannot modify. One party
prepares the stipulation in the contract, while the other party merely affixes his signature or his
"adhesion" thereto, giving no room for negotiation and depriving the latter of the opportunity to
bargain on equal footing.38 (Emphasis and underscoring supplied)

While a contract of adhesion is not necessarily void and unenforceable, since it is construed strictly
against the party who drafted it or gave rise to any ambiguity therein, it is stricken down as void and
unenforceable or subversive of public policy when the weaker party is imposed upon in dealing with
the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely
deprived of the opportunity to bargain on equal footing.39

This Court holds that the Court of Appeals’ finding that the parties’ contract is one of adhesion which is
void is, given the facts and circumstances of the case, thus well-taken.

WHEREFORE, the petition is DENIED, and the challenged decision of the Court of Appeals is
AFFIRMED.

Costs against petitioner. SO ORDERED.