Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 132252             April 27, 2000

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

 

BELLOSILLO, J.:

JESUS MUYCO and ARNULFO MUYCO, cousins, were charged with murder for the death of Romeo Boteja Jr. on 13 May 1995. Only Jesus Muyco was apprehended while Arnulfo Muyco remains at large. On 11 September 1997 the Regional Trial Court, Br. 25, Iloilo City, found Jesus guilty as charged and correspondingly sentenced him toreclusion perpetua and to pay the heirs of Romeo Boteja Jr. P30,000.00 as death indemnity and P27,000.00 as funeral expenses.

Jesus Muyco in this appeal submits that the lower court erred (a) in giving credence to the testimony of Ernesto Boteja, which he (Jesus) claims to be improbable and incredible; (b) in finding him guilty despite the failure of the prosecution to overcome the presumption of his innocence; (c) in disregarding his alibi; and, (d) in appreciating the qualifying aggravating circumstance of treachery.

These contentions are without merit as shown by these facts: From 6:00 o'clock to 7:00 o'clock in the evening of 13 May 1995, Jesus Muyco and Arnulfo Muyco together with Romeo Boteja Jr. were in the house of Narciso Nadales at Barangay Pamuringao-Garrido, Cabatuan, Iloilo. At about 9:00 o'clock the trio were seen walking towards the barangay dancehall where they met Ernesto Boteja, an uncle of Romeo and a relative by affinity of Jesus and Arnulfo. Romeo invited his uncle Ernesto for a drink so they all went to the store of Agnes Cao about a hundred (100) meters away from the dancehall to buy whisky. As the store was about to close, Jesus, Arnulfo, Romeo and Ernesto decided to drink their whisky under a mango tree nearby. After drinking for a while, Arnulfo suddenly grabbed the hands of Romeo, and while the latter was struggling, Jesus stabbed him with a knife hitting him near his collarbone. It was fatal. Arnulfo then dragged the lifeless body of Romeo towards the nearby sugarcane field with Jesus following them.

Ernesto was shocked by the startling occurrence. He was virtually immobilized. He only moved from there to run for his life when he Saw Jesus and Arnulfo returning from the field with Jesus pointing a knife at him. Ernesto fled towards the opposite side of the sugarcane field and stayed there until dawn. Romeo's body was found lifeless at 11:00 o'clock that same evening.

Leticia Boteja, mother of the victim, testified that she incurred P27,000.00 for funeral expenses. Dr. Ricardo Jaboneta autopsied the body of Romeo and found that he sustained one (1) stab wound which penetrated his chest wall. It was fatal.

Narciso Nadales narrated that from 6:00 o'clock until 7:00 o'clock in the evening of 13 May 1995 Jesus, Arnulfo and the deceased were in his house drinking. The group left at around 7:30 o'clock in the evening to go to the dancehall.

Leo Boteja, another prosecution witness, testified that on 13 May 1995 he joined Jesus, Arnulfo and the victim in the house of Narciso Nadales. They drank mucho. At around 7:30 o'clock in the evening he left for home while Jesus, Arnulfo and the victim proceeded to the dancehall. About two (2) hours later, he also went to the dancehall but could not find Jesus, Arnulfo and the deceased there. At 11:00 o'clock that evening he learned that Romeo Boteja Jr. was killed and his cadaver was found in the sugarcane field.

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

Vicente Inion and Joean Nufable corroborated accused-appellant's alibi. Both asserted that they saw Jesus in the house of Nestor in Passi, Iloilo, on the night of 13 May 1995.

As already stated, the court a quo ruled against accused-appellant and found him guilty of murder. It did not give any probative value to his denial and alibi in view of his positive identification by prosecution witness Ernesto Boteja.

Accused-appellant imputes error on the part of the court a quo in lending credence to the testimony of Ernesto Boteja, contending that his testimony was improbable and incredible. He argues that Ernesto's inaction when his nephew Romeo was stabbed just a meter away from him is contrary to human nature.1âwphi1.nêt

We disagree. Different people react differently to a given type of situation. There is no standard form of human behavioral response when one is confronted with a strange, startling or frightful experience. One person's spontaneous or unthinking, or even instinctive response to a horrid and repulsive stimulus may be aggression, while another person's reaction may be cold indifference.1 A witness' inability to move, help or even to run away when the incident occurs is not a ground to label his testimony as doubtful and unworthy of belief. There is no prescribed behavior when one is faced with a shocking event. In the case of Ernesto Boteja, his inability to react was understandable as he was shocked by the suddenness of the event and considering that it was his first time to witness a stabbing incident. Thus —

Q: After Romeo Boteja Jr. was hit and . . . was struggling, what happened next?

A: Arnulfo Muyco dragged Romeo towards the sugarcane field.

Q: What about you, what did you do?

A: I was stunned that being the first time I saw a person stabbed. I was not able to move. I just stayed there. . . .

Q: How about during the period that your nephew was stabbed up to the time that he was dragged to the sugarcane field? What did you do?

A: I remained standing. I got stunned and nervous.

Q: You mean that you remained there standing from the time your nephew was stabbed up to the time that he was dragged?

A: Yes sir, because I was nervous.2

Accused-appellant also cites inconsistencies in the testimony of Ernesto. A close scrutiny of the records however would reveal that there are none at all. That Ernesto testified having seen the victim stabbed on his neck instead of his collarbone was not inconsistency. Dr. Jaboneta who autopsied the body of the victim explained that the wound inflicted was just below the collarbone. For a lay-man like Ernesto who does not have any medical background at all, there is little or no material difference between a neck and a collarbone. Besides, it would be too much to expect from Ernesto to be perfectly accurate in reporting the

1

location of the wound considering the circumstances surrounding the incident. Inconsistencies and discrepancies in the testimony of a witness on minor details only serve to strengthen the credibility of the witness.3 What is material is that a witness positively identified the two (2) accused as the perpetrators of the crime. This Court has ruled often enough that discrepancies in minor details indicate veracity rather than prevarication. They tend to bolster the probative value of the testimony being questioned. They enhance, rather than destroy, the witness' credibility and the truthfulness of his testimony as they erase any suspicion of being a rehearsed testimony.4

Contrary to accused-appellant's assertion, the prosecution has more than overcome his presumed innocence; it has satisfactorily established his guilt beyond reasonable doubt. Plainly, his alibi could not be given any weight at all in view of his positive identification by the prosecution's eyewitness. No ill-motive was imputed to Ernesto Boteja that would so move him to falsely testify against accused-appellant. The trial court properly assessed his testimony as credible and trustworthy. We find no reason not to affirm its findings.

Weak as it was, accused-appellant's alibi became all the more ineffectual when he failed to demonstrate that it was physically impossible for him to be at the crime scene at the time it was committed. He testified being in Passi, Iloilo, during the stabbing incident. Passi, Iloilo is only fifty (50) kilometers from Cabatuan, Iloilo, the place where the crime was committed. He did not offer any evidence to prove impossibility of access between the two (2) places when the crime transpired.5 Significantly, the defense even failed to fully establish the presence of accused-appellant in Passi on the night of 13 May 1995.

This Court agrees with the court below that treachery attended the commission of the crime. 1âwphi1 The evidence amply proves that Romeo Boteja Jr. was killed in a manner ensuring suddenness and surprise that virtually incapacitated the victim from offering any resistance or defense. The victim did not have any inkling of the lurking danger to his life. He might have felt at ease with Jesus and Arnulfo for he had been drinking with them since 6:00 o'clock that evening of 13 May 1995 until he was stabbed to death. The attack was so sudden and unexpected that the victim failed to offer any resistance at all. All he could do was to struggle faintly against his attackers.

On the other hand, this Court notes that the trial court failed to award damages for loss of earning capacity despite the testimony of Leticia Boteja to this effect. In People v. Dizon6 this Court discussed the requisites for such award —

As a rule, documentary evidence should be presented to substantiate the claim for loss of earning capacity. InPeople v. Verde, the non-presentation of evidence to support the claim for damages for loss of earning capacity did not prevent this Court from awarding said damages. The testimony of the victim's wife as to earning capacity of her murdered husband, who was then 48 years old and was earning P200.00 a day as a tricycle driver, sufficed to establish the basis for such an award.

In this case, Erwin Gesmundo was only 15 years old at the time of his death and was earning a daily wage of P100.00 as a construction worker. As in People v. Verde, this Court is inclined to grant the claim for damages for loss of earning capacity despite the absence of documentary evidence. To be able to claim damages for loss of earning capacity despite the nonavailability of documentary evidence, there must be oral testimony that: (a) the victim was self-employed earning less than the minimum wage under the current labor laws and judicial notice was taken of the fact that in the victim's line of work, no documentary evidence is available; (b) the victim was employed as a daily wage worker earning less than the minimum wage under current labor laws. . .

In the instant case, the victim was nineteen (19) years old at the time of his death and earning P1,600.00 monthly as a farm laborer. Thus, his heirs are entitled to receive an award for lost earnings in accordance with the following formula: 2/3 (80 - ATD [age at time of death]) x (GAI [gross annual income]) - 80% GAI.7 Thus —

2/3 (80-19) x (P1,600 x 12) - 80% (P1,600.00 x 12)

2/3 (61) x P19,200 - 80% (P19,200)

40.67 x [P19,200 - P15,360]

40.67 x P3,840 = P156,172.80==========

On the basis of the above computation, the heirs of the deceased Romeo Boteja Jr. are entitled to receive P156,172.80 from accused-appellant Jesus Muyco.

WHEREFORE, the Decision appealed from finding accused-appellant JESUS MUYCO guilty of murder aggravated by treachery and sentencing him to reclusion perpetua, and to pay the heirs of Romeo Boteja Jr. P27,000.00 for funeral expenses is AFFIRMED with the MODIFICATION that the death indemnity is increased to P50,000.00. Accused-appellant is further directed to pay the heirs of his victim the amount of P156,172.80 for lost earnings conformably with prevailing jurisprudence. Costs against accused-appellant.

SO ORDERED.1âwphi1.nêt

Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. 159636             November 25, 2004

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

D E C I S I O N

YNARES-SANTIAGO, J.:

Assailed in this petition for review on certiorari is the April 11, 2003 decision1 of the Court of Appeals in CA-G.R. CV No. 63290 which affirmed with modification the November 6, 1998 decision 2 of the Regional Trial Court of Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of carriage in Civil Case No. 5023.

2

The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace Pagulayan-Gammad,3 was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries to other passengers.4

On May 14, 1996, respondent heirs of the deceased filed a complaint5 for damages arising from culpa contractual against petitioner. In its answer,6 the petitioner claimed that the incident was purely accidental and that it has always exercised extraordinary diligence in its 50 years of operation.

After several re-settings,7 pre-trial was set on April 10, 1997.8 For failure to appear on the said date, petitioner was declared as in default.9 However, on petitioner’s motion10 to lift the order of default, the same was granted by the trial court.11

At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the deceased was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for their part, did not accept petitioner’s proposal to pay P50,000.00.12

After respondent Rosalito Gammad completed his direct testimony, cross-examination was scheduled for November 17, 199713 but moved to December 8, 1997,14 because the parties and the counsel failed to appear. On December 8, 1997, counsel of petitioner was absent despite due notice and was deemed to have waived right to cross-examine respondent Rosalito.15

Petitioner’s motion to reset the presentation of its evidence to March 25, 199816 was granted. However, on March 24, 1998, the counsel of petitioner sent the court a telegram17 requesting postponement but the telegram was received by the trial court on March 25, 1998, after it had issued an order considering the case submitted for decision for failure of petitioner and counsel to appear.18

On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive portion of which reads:

WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered in favor of the plaintiffs and against the defendant Victory Liner, Incorporated, ordering the latter to pay the following:

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

2. Death Indemnity --------------------- 50,000.00

3. Exemplary and Moral Damages----- 400,000.00

4. Compensatory Damages ---------- 1,500,000.00

5. Attorney’s Fees --------------------- 10% of the total amount granted

6. Cost of the Suit.

SO ORDERED.19

On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification as follows:

[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the following are hereby adjudged in favor of plaintiffs-appellees:

1. Actual Damages in the amount of P88,270.00;

2. Compensatory Damages in the amount of P1,135,536,10;

3. Moral and Exemplary Damages in the amount of P400,000.00; and

4. Attorney’s fees equivalent to 10% of the sum of the actual, compensatory, moral, and exemplary damages herein adjudged.

The court a quo’s judgment of the cost of the suit against defendant-appellant is hereby AFFIRMED.

SO ORDERED.20

Represented by a new counsel, petitioner on May 21, 2003 filed a motion for reconsideration praying that the case be remanded to the trial court for cross- examination of respondents’ witness and for the presentation of its evidence; or in the alternative, dismiss the respondents’ complaint.21 Invoking APEX Mining, Inc. v. Court of Appeals,22 petitioner argues, inter alia, that the decision of the trial court should be set aside because the negligence of its former counsel, Atty. Antonio B. Paguirigan, in failing to appear at the scheduled hearings and move for reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents’ witness and right to present evidence, deprived petitioner of its day in court.

On August 21, 2003, the Court of Appeals denied petitioner’s motion for reconsideration.23

Hence, this petition for review principally based on the fact that the mistake or gross negligence of its counsel deprived petitioner of due process of law. Petitioner also argues that the trial court’s award of damages were without basis and should be deleted.

The issues for resolution are: (1) whether petitioner’s counsel was guilty of gross negligence; (2) whether petitioner should be held liable for breach of contract of carriage; and (3) whether the award of damages was proper.

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

The exceptions, however, are not present in this case. The record shows that Atty. Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially declared as in default, Atty. Paguirigan successfully moved for the setting aside of the order of default. In fact, petitioner was represented by Atty. Paguirigan at the pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed to file motions for reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents’ witness and to present evidence, he nevertheless, filed a timely appeal with the Court of Appeals assailing the decision of the trial court. Hence, petitioner’s claim that it was denied due process lacks basis.

3

Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it as in default for not appearing at the pre-trial, three notices (dated October 23, 1996,25 January 30, 1997,26 and March 26, 1997,27) requiring attendance at the pre-trial were sent and duly received by petitioner. However, it was only on April 27, 1997, after the issuance of the April 10, 1997 order of default for failure to appear at the pre-trial when petitioner, through its finance and administrative manager, executed a special power of attorney28 authorizing Atty. Paguirigan or any member of his law firm to represent petitioner at the pre-trial. Petitioner is guilty, at the least, of contributory negligence and fault cannot be imputed solely on previous counsel.

The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case at bar. In APEX, the negligent counsel not only allowed the adverse decision against his client to become final and executory, but deliberately misrepresented in the progress report that the case was still pending with the Court of Appeals when the same was dismissed 16 months ago.29 These circumstances are absent in this case because Atty. Paguirigan timely filed an appeal from the decision of the trial court with the Court of Appeals.

In Gold Line Transit, Inc. v. Ramos,30 the Court was similarly confronted with the issue of whether or not the client should bear the adverse consequences of its counsel’s negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer failed to appear at the pre-trial despite notice and was declared as in default. After the plaintiff’s presentation of evidence ex parte, the trial court rendered decision ordering Gold Line to pay damages to the heirs of its deceased passenger. The decision became final and executory because counsel of Gold Line did not file any appeal. Finding that Goldline was not denied due process of law and is thus bound by the negligence of its lawyer, the Court held as follows –

This leads us to the question of whether the negligence of counsel was so gross and reckless that petitioner was deprived of its right to due process of law. We do not believe so. It cannot be denied that the requirements of due process were observed in the instant case. Petitioner was never deprived of its day in court, as in fact it was afforded every opportunity to be heard. Thus, it is of record that notices were sent to petitioner and that its counsel was able to file a motion to dismiss the complaint, an answer to the complaint, and even a pre-trial brief. What was irretrievably lost by petitioner was its opportunity to participate in the trial of the case and to adduce evidence in its behalf because of negligence.

In the application of the principle of due process, what is sought to be safeguarded against is not the lack of previous notice but the denial of the opportunity to be heard. The question is not whether petitioner succeeded in defending its rights and interests, but simply, whether it had the opportunity to present its side of the controversy. Verily, as petitioner retained the services of counsel of its choice, it should, as far as this suit is concerned, bear the consequences of its choice of a faulty option. Its plea that it was deprived of due process echoes on hollow ground and certainly cannot elicit approval nor sympathy.

To cater to petitioner’s arguments and reinstate its petition for relief from judgment would put a premium on the negligence of its former counsel and encourage the non-termination of this case by reason thereof. This is one case where petitioner has to bear the adverse consequences of its counsel’s act, for a client is bound by the action of his counsel in the conduct of a case and he cannot thereafter be heard to complain that the result might have been different had his counsel proceeded differently. The rationale for the rule is easily discernible. If the negligence of counsel be admitted as a reason for opening cases, there would never be an end to a suit so long as a new counsel could be hired every time it is shown that the prior counsel had not been sufficiently diligent, experienced or learned.31

Similarly, in Macalalag v. Ombudsman,32 a Philippine Postal Corporation employee charged with dishonesty was not able to file an answer and position paper. He was found guilty solely on the basis of complainant’s evidence and was dismissed with forfeiture of all benefits and disqualification from government service. Challenging the decision of the Ombudsman, the employee contended that the gross negligence of his counsel deprived him of due process of law. In debunking his contention, the Court said –

Neither can he claim that he is not bound by his lawyer’s actions; it is only in case of gross or palpable negligence of counsel when the courts can step in and accord relief to a client who would have suffered thereby. If every perceived mistake, failure of diligence, lack of experience or insufficient legal knowledge of the lawyer would be admitted as a reason for the reopening of

a case, there would be no end to controversy. Fundamental to our judicial system is the principle that every litigation must come to an end. It would be a clear mockery if it were otherwise. Access to the courts is guaranteed, but there must be a limit to it.

Viewed vis-à-vis the foregoing jurisprudence, to sustain petitioner’s argument that it was denied due process of law due to negligence of its counsel would set a dangerous precedent. It would enable every party to render inutile any adverse order or decision through the simple expedient of alleging gross negligence on the part of its counsel. The Court will not countenance such a farce which contradicts long-settled doctrines of trial and procedure.33

Anent the second issue, petitioner was correctly found liable for breach of contract of carriage. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard to all the circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.34

In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of Marie Grace’s death was the negligence of petitioner. Hence, the courts below correctly ruled that petitioner was guilty of breach of contract of carriage.

Nevertheless, the award of damages should be modified.

Article 176435 in relation to Article 220636 of the Civil Code, holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages.

In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace which under current jurisprudence is fixed at P50,000.00.37

The award of compensatory damages for the loss of the deceased’s earning capacity should be deleted for lack of basis. As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the deceased’s line of work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.38

In People v. Oco,39 the evidence presented by the prosecution to recover damages for loss of earning capacity was the bare testimony of the deceased’s wife that her husband was earning P8,000.00 monthly as a legal researcher of a private corporation. Finding that the deceased was neither self-employed nor employed as a daily-wage worker earning less than the minimum wage under the labor laws existing at the time of his death, the Court held that testimonial evidence alone is insufficient to justify an award for loss of earning capacity.

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

The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio Castro Jr. were not self-employed or employed as daily-wage workers earning less than the minimum wage under the labor laws existing at the time of their death. Placido Agustin was a Social Security System employee who received a monthly salary of P5,000. Roberto Raagas was the President of Sinclair Security and Allied Services, a family owned corporation, with a monthly compensation of P30,000. Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily earning of P500 or a monthly earning of P7,500. Clearly, these cases do not fall under the exceptions where indemnity for loss of earning capacity can be given despite lack of

4

documentary evidence. Therefore, for lack of documentary proof, no indemnity for loss of earning capacity can be given in these cases. (Emphasis supplied)

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

However, the fact of loss having been established, temperate damages in the amount of P500,000.00 should be awarded to respondents. Under Article 2224 of the Civil Code, temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.

In Pleno v. Court of Appeals,42 the Court sustained the trial court’s award of P200,000.00 as temperate damages in lieu of actual damages for loss of earning capacity because the income of the victim was not sufficiently proven, thus –

The trial court based the amounts of damages awarded to the petitioner on the following circumstances:

...

"As to the loss or impairment of earning capacity, there is no doubt that Pleno is an ent[re]preneur and the founder of his own corporation, the Mayon Ceramics Corporation. It appears also that he is an industrious and resourceful person with several projects in line, and were it not for the incident, might have pushed them through. On the day of the incident, Pleno was driving homeward with geologist Longley after an ocular inspection of the site of the Mayon Ceramics Corporation. His actual income however has not been sufficiently established so that this Court cannot award actual damages, but, an award of temperate or moderate damages may still be made on loss or impairment of earning capacity. That Pleno sustained a permanent deformity due to a shortened left leg and that he also suffers from double vision in his left eye is also established. Because of this, he suffers from some inferiority complex and is no longer active in business as well as in social life. In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage, et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et al., L-11394, Sept. 9, 1958, the proper award of damages were given."

...

We rule that the lower court’s awards of damages are more consonant with the factual circumstances of the instant case. The trial court’s findings of facts are clear and well-developed. Each item of damages is adequately supported by evidence on record.

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

Anent the award of moral damages, the same cannot be lumped with exemplary damages because they are based on different jural foundations.45 These damages are different in nature and require separate determination.46 In culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of contractual obligations and, as in this case, when the act of breach of contract itself constitutes the tort that results in physical injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also be awarded in case the death of a passenger results from a breach of carriage.47 On the other hand, exemplary damages, which are awarded by way of example or correction for the public good may be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.48

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

The actual damages awarded by the trial court reduced by the Court of Appeals should be further reduced. In People v. Duban,51 it was held that only substantiated and proven expenses or those that appear to have been genuinely incurred in connection with the death, wake or burial of the victim will be recognized. A list of expenses (Exhibit "J"),52 and the contract/receipt for the construction of the tomb (Exhibit "F") 53 in this case, cannot be considered competent proof and cannot replace the official receipts necessary to justify the award. Hence, actual damages should be further reduced to P78,160.00,54 which was the amount supported by official receipts.

Pursuant to Article 220855 of the Civil Code, attorney’s fees may also be recovered in the case at bar where exemplary damages are awarded. The Court finds the award of attorney’s fees equivalent to 10% of the total amount adjudged against petitioner reasonable.

Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,56 it was held that when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit –

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. (Emphasis supplied).

In the instant case, petitioner should be held liable for payment of interest as damages for breach of contract of carriage. Considering that the amounts payable by petitioner has been determined with certainty only in the instant petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, per paragraph 3 of the aforecited rule.57

WHEREFORE, in view of all the foregoing, the petition is partially granted. The April 11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which modified the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3) P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5) P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys fees; and the costs of suit.

5

Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12% per annum computed from the finality of this decision until fully paid.

SO ORDERED.

Quisumbing, Carpio, and Azcuna, JJ., concur.Davide, Jr., C.J., (Chairman), on official leave.

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

G.R. No. 166869               February 16, 2010

PHILIPPINE HAWK CORPORATION, Petitioner, vs.VIVIAN TAN LEE, Respondent.

D E C I S I O N

PERALTA, J.:

This is a Petition for Review on Certiorari1 of the Decision of the Court of Appeals in CA-G.R. CV No. 70860, promulgated on August 17, 2004, affirming with modification the Decision of the Regional Trial Court (RTC) of Quezon City, Branch 102, dated March 16, 2001, in Civil Case No. Q-91-9191, ordering petitioner Philippine Hawk Corporation and Margarito Avila to jointly and severally pay respondent Vivian Tan Lee damages as a result of a vehicular accident.

The facts are as follows:

On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of Quezon City a Complaint 2 against petitioner Philippine Hawk Corporation and defendant Margarito Avila for damages based on quasi-delict, arising from a vehicular accident that occurred on March 17, 1991 in Barangay Buensoceso, Gumaca, Quezon. The accident resulted in the death of respondent’s husband, Silvino Tan, and caused respondent physical injuries.

On June 18, 1992, respondent filed an Amended Complaint,3 in her own behalf and in behalf of her children, in the civil case for damages against petitioner. Respondent sought the payment of indemnity for the death of Silvino Tan, moral and exemplary damages, funeral and interment expenses, medical and hospitalization expenses, the cost of the motorcycle’s repair, attorney’s fees, and other just and equitable reliefs.

The accident involved a motorcycle, a passenger jeep, and a bus with Body No. 119. The bus was owned by petitioner Philippine Hawk Corporation, and was then being driven by Margarito Avila.

In its Answer,4 petitioner denied liability for the vehicular accident, alleging that the immediate and proximate cause of the accident was the recklessness or lack of caution of Silvino Tan. Petitioner asserted that it exercised the diligence of a good father of the family in the selection and supervision of its employees, including Margarito Avila.

On March 25, 1993, the trial court issued a Pre-trial Order5 stating that the parties manifested that there was no possibility of amicable settlement between them. However, they agreed to stipulate on the following facts:

1. On March 17, 1991, in Bgy. Buensoceso, Gumaca, Quezon, plaintiff Vivian Lee Tan and her husband Silvino Tan, while on board a motorcycle with [P]late No. DA-5480 driven by the latter, and a Metro Bus with [P]late No. NXR-262 driven by Margarito Avila, were involved in an accident;

2. As a result of the accident, Silvino Tan died on the spot while plaintiff Vivian Lee Tan suffered physical injuries which necessitated medical attention and hospitalization;

3. The deceased Silvino Tan is survived by his wife, plaintiff Vivian Lee Tan and four children, three of whom are now residents of the United States; and

4. Defendant Margarito Avila is an employee of defendant Philippine Hawk.6

The parties also agreed on the following issues:

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

2. Whether or not defendant Philippine Hawk Transport Corporation exercised the diligence of a good father of the family in the selection and supervision of its driver Margarito Avila.7

Respondent testified that on March 17, 1991, she was riding on their motorcycle in tandem with her husband, who was on the wheel, at a place after a Caltex gasoline station in Barangay Buensoceso, Gumaca, Quezon on the way to Lopez, Quezon. They came from the Pasumbal Machine Shop, where they inquired about the repair of their tanker. They were on a stop position at the side of the highway; and when they were about to make a turn, she saw a bus running at fast speed coming toward them, and then the bus hit a jeep parked on the roadside, and their motorcycle as well. She lost consciousness and was brought to the hospital in Gumaca, Quezon, where she was confined for a week. She was later transferred to St. Luke’s Hospital in Quezon City, Manila. She suffered a fracture on her left chest, her left arm became swollen, she felt pain in her bones, and had high blood pressure.8

Respondent’s husband died due to the vehicular accident. The immediate cause of his death was massive cerebral hemorrhage.9

Respondent further testified that her husband was leasing10 and operating a Caltex gasoline station in Gumaca, Quezon that yielded one million pesos a year in revenue. They also had a copra business, which gave them an income of P3,000.00 a month or P36,000.00 a year.11

Ernest Ovial, the driver of the passenger jeep involved in the accident, testified that in the afternoon of March 17, 1991, his jeep was parked on the left side of the highway near the Pasumbal Machine Shop. He did not notice the motorcycle before the accident. But he saw the bus dragging the motorcycle along the highway, and then the bus bumped his jeep and sped away.12

For the defense, Margarito Avila, the driver of petitioner’s bus, testified that on March 17, 1999, at about 4:30 p.m., he was driving his bus at 60 kilometers per hour on the Maharlika Highway. When they were at Barangay Buensoceso, Gumaca, Quezon, a motorcycle ran from his left side of the highway, and as the bus came near, the motorcycle crossed the path of the bus, and so he turned the bus to the right. He heard a loud banging sound. From his side mirror, he saw that the motorcycle turned turtle ("bumaliktad"). He did not stop to help out of fear for his life, but drove on and surrendered to the police. He denied that he bumped the motorcycle.13

Avila further testified that he had previously been involved in sideswiping incidents, but he forgot how many times.14

6

Rodolfo Ilagan, the bus conductor, testified that the motorcycle bumped the left side of the bus that was running at 40 kilometers per hour.15

Domingo S. Sisperes, operations officer of petitioner, testified that, like their other drivers, Avila was subjected to and passed the following requirements:

(1) Submission of NBI clearance;

(2) Certification from his previous employer that he had no bad record;

(3) Physical examination to determine his fitness to drive;

(4) Test of his driving ability, particularly his defensive skill; and

(5) Review of his driving skill every six months.16

Efren Delantar, a Barangay Kagawad in Buensoceso, Gumaca, Quezon, testified that the bus was running on the highway on a straight path when a motorcycle, with a woman behind its driver, suddenly emerged from the left side of the road from a machine shop. The motorcycle crossed the highway in a zigzag manner and bumped the side of the bus.17

In its Decision dated March 16, 2001, the trial court rendered judgment against petitioner and defendant Margarito Avila, the dispositive portion of which reads:

ACCORDINGLY, MARGARITO AVILA is adjudged guilty of simple negligence, and judgment is hereby rendered in favor of the plaintiff Vivian Lee Tan and h[er] husband’s heirs ordering the defendants Philippine Hawk Corporation and Margarito Avila to pay them jointly and solidarily the sum of P745,575.00 representing loss of earnings and actual damages plus P50,000.00 as moral damages.18

The trial court found that before the collision, the motorcycle was on the left side of the road, just as the passenger jeep was. Prior to the accident, the motorcycle was in a running position moving toward the right side of the highway. The trial court agreed with the bus driver that the motorcycle was moving ahead of the bus from the left side of the road toward the right side of the road, but disagreed that the motorcycle crossed the path of the bus while the bus was running on the right side of the road.19

The trial court held that if the bus were on the right side of the highway, and Margarito Avila turned his bus to the right in an attempt to avoid hitting the motorcyle, then the bus would not have hit the passenger jeep, which was then parked on the left side of the road. The fact that the bus also hit the passenger jeep showed that the bus must have been running from the right lane to the left lane of the highway, which caused the collision with the motorcycle and the passenger jeep parked on the left side of the road. The trial court stated that since Avila saw the motorcycle before the collision, he should have stepped on the brakes and slowed down, but he just maintained his speed and veered to the left. 20 The trial court found Margarito Avila guilty of simple negligence.

The trial court held petitioner bus company liable for failing to exercise the diligence of a good father of the family in the selection and supervision of Avila, having failed to sufficiently inculcate in him discipline and correct behavior on the road.21

On appeal, the Court of Appeals affirmed the decision of the trial court with modification in the award of damages. The dispositive portion of the decision reads:

WHEREFORE, foregoing premises considered, the appeal is DENIED. The assailed decision dated March 16, 2001 is hereby AFFIRMED with MODIFICATION. Appellants Philippine Hawk and Avila are hereby ordered to pay jointly and severally appellee the following amount: (a)  P168,019.55 as actual damages;

(b) P10,000.00 as temperate damages; (c) P100,000.00 as moral damages; (d) P590,000.00 as unearned income; and (e) P50,000.00 as civil indemnity.22

Petitioner filed this petition, raising the following issues:

1) The Court of Appeals committed grave abuse of discretion amounting to lack of jurisdiction in passing upon an issue, which had not been raised on appeal, and which had, therefore, attained finality, in total disregard of the doctrine laid down by this Court in Abubakar v. Abubakar, G.R. No. 134622, October 22, 1999.

2) The Court of Appeals committed reversible error in its finding that the petitioner’s bus driver saw the motorcycle of private respondent executing a U-turn on the highway "about fifteen (15) meters away" and thereafter held that the Doctrine of Last Clear was applicable to the instant case. This was a palpable error for the simple reason that the aforesaid distance was the distance of the witness to the bus and not the distance of the bus to the respondent’s motorcycle, as clearly borne out by the records.

3) The Court of Appeals committed reversible error in awarding damages in total disregard of the established doctrine laid down in Danao v. Court of Appeals, 154 SCRA 447 and Viron Transportation Co., Inc. v. Delos Santos, G.R. No. 138296, November 22, 2000.23

In short, the issues raised by petitioner are: (1) whether or not negligence may be attributed to petitioner’s driver, and whether negligence on his part was the proximate cause of the accident, resulting in the death of Silvino Tan and causing physical injuries to respondent; (2) whether or not petitioner is liable to respondent for damages; and (3) whether or not the damages awarded by respondent Court of Appeals are proper.

Petitioner seeks a review of the factual findings of the trial court, which were sustained by the Court of Appeals, that petitioner’s driver was negligent in driving the bus, which caused physical injuries to respondent and the death of respondent’s husband.

The rule is settled that the findings of the trial court, especially when affirmed by the Court of Appeals, are conclusive on this Court when supported by the evidence on record.24 The Court has carefully reviewed the records of this case, and found no cogent reason to disturb the findings of the trial court, thus:

The Court agree[s] with the bus driver Margarito that the motorcycle was moving ahead of the bus towards the right side from the left side of the road, but disagrees with him that it crossed the path of the bus while the bus was running on the right side of the highway.

If the bus were on the right side of the highway and Margarito turned his bus to the right in an attempt to avoid hitting it, then the bus would not have hit the passenger jeep vehicle which was then parked on the left side of the road. The fact that the bus hit the jeep too, shows that the bus must have been running to the left lane of the highway from right to the left, that the collision between it and the parked jeep and the moving rightways cycle became inevitable. Besides, Margarito said he saw the motorcycle before the collision ahead of the bus; that being so, an extra-cautious public utility driver should have stepped on his brakes and slowed down. Here, the bus never slowed down, it simply maintained its highway speed and veered to the left. This is negligence indeed.25

Petitioner contends that the Court of Appeals was mistaken in stating that the bus driver saw respondent’s motorcycle "about 15 meters away" before the collision, because the said distance, as testified to by its witness Efren Delantar Ong, was Ong’s distance from the bus, and not the distance of the bus from the motorcycle. Petitioner asserts that this mistaken assumption of the Court of Appeals made it conclude that the bus driver, Margarito Avila, had the last clear chance to avoid the accident, which was the basis for the conclusion that Avila was guilty of simple negligence.

A review of the records showed that it was petitioner’s witness, Efren Delantar Ong, who was about 15 meters away from the bus when he saw the vehicular accident.26 Nevertheless, this fact does not affect the finding of the trial court that petitioner’s bus driver, Margarito Avila, was guilty of simple negligence as

7

affirmed by the appellate court. Foreseeability is the fundamental test of negligence. 27 To be negligent, a defendant must have acted or failed to act in such a way that an ordinary reasonable man would have realized that certain interests of certain persons were unreasonably subjected to a general but definite class of risks.28

In this case, the bus driver, who was driving on the right side of the road, already saw the motorcycle on the left side of the road before the collision. However, he did not take the necessary precaution to slow down, but drove on and bumped the motorcycle, and also the passenger jeep parked on the left side of the road, showing that the bus was negligent in veering to the left lane, causing it to hit the motorcycle and the passenger jeep.

Whenever an employee’s negligence causes damage or injury to another, there instantly arises a presumption that the employer failed to exercise the due diligence of a good father of the family in the selection or supervision of its employees.29 To avoid liability for a quasi-delict committed by his employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee.30

The Court upholds the finding of the trial court and the Court of Appeals that petitioner is liable to respondent, since it failed to exercise the diligence of a good father of the family in the selection and supervision of its bus driver, Margarito Avila, for having failed to sufficiently inculcate in him discipline and correct behavior on the road. Indeed, petitioner’s tests were concentrated on the ability to drive and physical fitness to do so. It also did not know that Avila had been previously involved in sideswiping incidents.

As regards the issue on the damages awarded, petitioner contends that it was the only one that appealed the decision of the trial court with respect to the award of actual and moral damages; hence, the Court of Appeals erred in awarding other kinds of damages in favor of respondent, who did not appeal from the trial court’s decision.

Petitioner’s contention is unmeritorious.

Section 8, Rule 51 of the 1997 Rules of Civil Procedure provides:

SEC. 8. Questions that may be decided. -- No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court pass upon plain errors and clerical errors.

Philippine National Bank v. Rabat31 cited the book32 of Justice Florenz D. Regalado to explain the section above, thus:

In his book, Mr. Justice Florenz D. Regalado commented on this section, thus:

1. Sec. 8, which is an amendment of the former Sec. 7 of this Rule, now includes some substantial changes in the rules on assignment of errors. The basic procedural rule is that only errors claimed and assigned by a party will be considered by the court, except errors affecting its jurisdiction over the subject matter. To this exception has now been added errors affecting the validity of the judgment appealed from or the proceedings therein.

Also, even if the error complained of by a party is not expressly stated in his assignment of errors but the same is closely related to or dependent on an assigned error and properly argued in his brief, such error may now be considered by the court. These changes are of jurisprudential origin.

2. The procedure in the Supreme Court being generally the same as that in the Court of Appeals, unless otherwise indicated (see Secs. 2 and 4, Rule 56), it has been held that the latter is clothed with ample authority to review matters, even if they are not assigned as errors on

appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. Also, an unassigned error closely related to an error properly assigned (PCIB vs. CA, et al., L-34931, Mar. 18, 1988), or upon which the determination of the question raised by error properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as error (Ortigas, Jr. vs. Lufthansa German Airlines, L-28773, June 30, 1975; Soco vs. Militante, et al., G.R. No. 58961, June 28, 1983).

It may also be observed that under Sec. 8 of this Rule, the appellate court is authorized to consider a plain error, although it was not specifically assigned by the appellant (Dilag vs. Heirs of Resurreccion, 76 Phil. 649), otherwise it would be sacrificing substance for technicalities.33

In this case for damages based on quasi-delict, the trial court awarded respondent the sum of P745,575.00, representing loss of earning capacity (P590,000.00) and actual damages (P155,575.00 for funeral expenses), plusP50,000.00 as moral damages. On appeal to the Court of Appeals, petitioner assigned as error the award of damages by the trial court on the ground that it was based merely on suppositions and surmises, not the admissions made by respondent during the trial.

In its Decision, the Court of Appeals sustained the award by the trial court for loss of earning capacity of the deceased Silvino Tan, moral damages for his death, and actual damages, although the amount of the latter award was modified.

The indemnity for loss of earning capacity of the deceased is provided for by Article 2206 of the Civil Code.34Compensation of this nature is awarded not for loss of earnings, but for loss of capacity to earn money.35

As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity.36 By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: (1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.37

In this case, the records show that respondent’s husband was leasing and operating a Caltex gasoline station in Gumaca, Quezon. Respondent testified that her husband earned an annual income of one million pesos. Respondent presented in evidence a Certificate of Creditable Income Tax Withheld at Source for the Year 1990,38which showed that respondent’s husband earned a gross income of P950,988.43 in 1990. It is reasonable to use the Certificate and respondent’s testimony as bases for fixing the gross annual income of the deceased at one million pesos before respondent’s husband died on March 17, 1999. However, no documentary evidence was presented regarding the income derived from their copra business; hence, the testimony of respondent as regards such income cannot be considered.

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

In this case, the computation for loss of earning capacity is as follows:

Net Earning Capacity =

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

x Gross Annual Income (GAI) –

Reasonable and Necessary Expenses (80% of GAI)

X = [2/3 (80-65)] x P1,000,000.00 - P800,000.00

X = 2/3 (15) x P200,000.00 - P100,000.00(Living Expenses)

8

X = 30/3 x P100,000.00

X = 10 x P100,000.00

X = P1,000,000.00

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

Actual damages must be substantiated by documentary evidence, such as receipts, in order to prove expenses incurred as a result of the death of the victim40 or the physical injuries sustained by the victim. A review of the valid receipts submitted in evidence showed that the funeral and related expenses amounted only to P114,948.60, while the medical expenses of respondent amounted only to P12,244.25, yielding a total of P127,192.85 in actual damages.

Moreover, the Court of Appeals correctly sustained the award of moral damages in the amount of P50,000.00 for the death of respondent’s husband. Moral damages are not intended to enrich a plaintiff at the expense of the defendant.41 They are awarded to allow the plaintiff to obtain means, diversions or amusements that will serve to alleviate the moral suffering he/she has undergone due to the defendant’s culpable action and must, perforce, be proportional to the suffering inflicted.42

In addition, the Court of Appeals correctly awarded temperate damages in the amount of  P10,000.00 for the damage caused on respondent’s motorcycle. Under Art. 2224 of the Civil Code, temperate damages "may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty." The cost of the repair of the motorcycle was prayed for by respondent in her Complaint. However, the evidence presented was merely a job estimate 43 of the cost of the motorcycle’s repair amounting to P17, 829.00. The Court of Appeals aptly held that there was no doubt that the damage caused on the motorcycle was due to the negligence of petitioner’s driver. In the absence of competent proof of the actual damage caused on the motorcycle or the actual cost of its repair, the award of temperate damages by the appellate court in the amount of  P10,000.00 was reasonable under the circumstances.44

The Court of Appeals also correctly awarded respondent moral damages for the physical injuries she sustained due to the vehicular accident. Under Art. 2219 of the Civil Code,45 moral damages may be recovered in quasi-delicts causing physical injuries. However, the award of P50,000.00 should be reduced to P30,000.00 in accordance with prevailing jurisprudence.46

Further, the Court of Appeals correctly awarded respondent civil indemnity for the death of her husband, which has been fixed by current jurisprudence at P50,000.00.47 The award is proper under Art. 2206 of the Civil Code.48

In fine, the Court of Appeals correctly awarded civil indemnity for the death of respondent’s husband, temperate damages, and moral damages for the physical injuries sustained by respondent in addition to the damages granted by the trial court to respondent. The trial court overlooked awarding the additional damages, which were prayed for by respondent in her Amended Complaint. The appellate court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.49

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

Costs against petitioner.

SO ORDERED.

DIOSDADO M. PERALTAAssociate Justice

WE CONCUR:

RENATO C. CORONAAssociate JusticeChairperson

PRESBITERO J. VELASCO, JR.Associate Justice

ANTONIO EDUARDO B. NACHURAAssociate Justice

JOSE CATRAL MENDOZAAssociate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONAAssociate JusticeThird Division, Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNOChief Justice

Republic of the PhilippinesSUPREME COURTBaguio

FIRST DIVISION

G.R. No. 188322               April 11, 2012

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

D E C I S I O N

9

LEONARDO-DE CASTRO, J.:

This is an appeal filed by the accused-appellant Joseph Asilan y Tabornal (Asilan) to challenge the February 25, 2009 Decision1 of the Court of Appeals in CA-G.R. CR.-H.C. No. 02686, which affirmed in toto his Murder conviction, rendered by the Regional Trial Court (RTC), Branch 20 of the City of Manila on January 8, 2007, in Criminal Case No. 06-243060.

On March 31, 2006, Asilan was charged with the complex crime of Direct Assault with Murder in an Information,2the pertinent portion of which reads:

That on or about March 27, 2006, in the City of Manila, Philippines, the said accused, conspiring, and confederating with another whose true name, real identity and present whereabouts are still unknown and mutually helping each other, did then and there willfully, unlawfully, and feloniously attack, assault and use personal violence upon the person of PO1 RANDY ADOVAS y PE-CAAT, a member of the Philippine National Police assigned at Camp Bagong Diwa, Bicutan, Taguig, MM, duly qualified, appointed, and acting as such, and therefore an agent of a person in authority, which fact was known to the said accused, while PO1 RANDY ADOVAS y PE-CAAT was in the performance of his official duty, that is, while handcuffing the at-large co-conspirator for illegal possession of deadly weapon, herein accused suddenly appeared and with intent to kill, treachery and evident premeditation, attack, assault, and use personal violence upon said police officer by then and there repeatedly stabbing the latter with a fan knife then grabbing his service firearm and shooting him, thereby inflicting upon the said PO1 RANDY ADOVAS y PE-CAAT mortal stab and gunshot wounds which were the direct and immediate cause of his death thereafter.

Asilan pleaded not guilty upon his arraignment3 on April 10, 2006. Pre-Trial Conference followed on April 26, 2006, where the counsels agreed to stipulate that Asilan, who was at that time present in the RTC, was the same Asilan named in the Information, and that the victim, Police Officer 1 (PO1) Randy Adovas y Pe-caat (Adovas), was a police officer in active duty at the time of his death. 4 Trial on the merits ensued after the termination of the pre-trial conference.

Below is the prosecution’s version, as succinctly summarized by the Office of the Solicitor General (OSG) from the testimony of Joselito Binosa (Binosa)5:

In the evening of March 27, 2006, around 10:00 o’clock, Joselito Binosa, a jeepney barker/carwash boy while chatting with his friends at the El Niño Bakery along Teresa Street, Sta. Mesa, Manila, heard a gunshot nearby. He then went to the place where the sound came and from where he was standing which was about three (3) to four (4) meters away, he saw a uniformed policeman, who seemed to be arresting someone and ordering the latter to lay on the ground.

The police officer pushed the man to the wall, poked the gun on him and was about to handcuff the latter when another man, herein appellant Asilan arrived, drew something from his back and stabbed the police officer on his back several times until the latter fell to the ground.

The man who was being arrested by the police officer held the latter’s hand while he was being stabbed repeatedly by [Asilan]. The man who was being arrested then took the officer’s gun and shot the latter with it.

The fellow barker of Joselito Binosa then threw stones at the malefactors who subsequently left the place.

Joselito Binosa secretly followed [Asilan] and his companion who walked towards the railroad track taking Teresa St., Sta. Mesa, Manila. [Asilan] entered an alley and thereafter returned to the place of the incident. The other man walked on to the tracks.

At that moment, a policeman passed by and Binosa pointed [Asilan] to him. [Asilan] was arrested and the knife which was used in the

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

The above narration of events was largely corroborated by Pol Justine San Diego (San Diego), a student, who also witnessed the events that transpired on March 27, 2006.7

The prosecution also submitted as evidence Medico Legal Report No. M-219-06,8 accomplished and testified to by Dr. Vladimir V. Villaseñor. The pertinent portion of the Medico Legal Report states:

SPECIMEN SUBMITTED:

Cadaver of Randy Pe-caat Adovas, 29 y/o male, married, a policeman, 167 cm in height and a resident of 19 West Bank Road, Floodway, Rosario Pasig City.

PURPOSE OF LABORATORY EXAMINATION:

To determine the cause of death.

FINDINGS:

Body belongs to a fairly nourished, fairly developed male cadaver in rigor mortis with postmortem lividity at the dependent portions of the body. Conjunctivae, lips and nailbeds are pale. With exploratory laparotomy incision at the anterior abdominal wall, measuring 29 cm long, along the anterior midline.

Trunk & Upper Extremity:

1) Stab wound, right axillary region, measuring 6 x 4 cm, 16 cm from the anterior midline.

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

-over-

CONCLUSION:

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

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

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

The RTC convicted Asilan of Murder in its Decision11 dated January 8, 2007, the dispositive portion of which reads:

10

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

WHEREFORE, his guilt having been proven beyond reasonable doubt for the crime of murder with the qualifying circumstance of treachery, judgment is hereby rendered finding accused Joseph Asilan y Tabornal GUILTY beyond reasonable doubt of the crime of murder and is hereby imposed the penalty of reclusion perpetua. He is hereby ordered to pay the heirs of PO1 Randy Adovas y Pe-Caat the sum of P 84,224.00 as actual damages, P 25,000.00 for moral damages and P 50,000.00 civil indemnity.12

The RTC, in acquitting Asilan of Direct Assault, held that while it was confirmed that Adovas was in his police uniform at the time of his death, the prosecution failed to establish convincingly that he was in the performance of his duty when he was assaulted by Asilan. The RTC explained that there was no evidence to show that Adovas was arresting somebody at the time Asilan stabbed him.13 The RTC added:

What the framers of the law wanted was to know the reason of the assault upon a person in authority or his agents. The prosecution failed to show why the victim was pushing the man on the wall or why he poked his gun at the latter. That the victim was assaulted while in the performance of his duty or by reason thereof was not conclusively proven.14

In convicting Asilan of Murder, the RTC held that his defense of denial could not be "accorded more weight than the categorical assertions of the witnesses who positively identified him as the man who suddenly appeared from behind [Adovas] and stabbed the latter repeatedly."15 Moreover, Asilan admitted that he was at the scene of the crime when he was arrested, that he could not give any reason for the witnesses to falsely testify against him, and that he did not know them.

Anent the aggravating circumstances, the RTC found that the killing of Adovas was proven to be attended with treachery since Adovas was attacked from behind, depriving him of the opportunity to defend himself.16 However, the RTC declared that the aggravating circumstance of evident premeditation "could not be appreciated x x x absent evidence that [Asilan] planned or prepared to kill [Adovas] or of the time when the plot was conceived."17

As to the damages, the RTC found the prosecution’s evidence, which consisted of Adovas’s wife’s testimony, and the receipts of the expenses she incurred in Adovas’s hospitalization, wake, and burial, sufficient to award moral and actual damages.

On January 19, 2007, Asilan appealed18 his conviction to the Court of Appeals, mainly on the ground that the prosecution failed to prove his guilt beyond reasonable doubt. He subsequently filed a Motion to Litigate as a Pauper, 19 which on February 28, 2007, was granted in an Order20 by the RTC.

On February 25, 2009, the Court of Appeals rendered its Decision, affirming in toto the RTC’s ruling.

WHEREFORE, premises considered, the assailed Decision dated 08 January 2007 of the Court a quo in Criminal Case No. 06-243060, finding Accused-Appellant JOSEPH ASILAN Y TABORNAL guilty beyond reasonable doubt of Murder, is hereby AFFIRMED in toto.21

The Court of Appeals rejected Asilan’s arguments and averred that his denial and bare attempt at exculpation by trying to destroy the credibility of the candid, categorical, and trustworthy testimonies of the witnesses must fail.

Aggrieved, Asilan is now appealing22 his case to this Court, with the same assignment of errors he posited before the Court of Appeals:

ASSIGNMENT OF ERRORS

I

THE TRIAL COURT GRAVELY ERRED IN FINDING THE ACCUSED-APPELLANT GUILTY BEYOND REASONABLE DOUBT OF THE OFFENSE CHARGED BY RELYING ON THE INCONSISTENT AND UNNATURAL TESTIMONY OF THE ALLEGED EYEWITNESS.

II

THE COURT A QUO GRAVELY ERRED IN FINDING THE ACCUSED-APPELLANT GUILTY OF THE CRIME CHARGED DESPITE THE FAILURE OF THE PROSECUTION TO PROVE HIS GUILT BEYOND REASONABLE DOUBT.

III

THE TRIAL COURT GRAVELY ERRED IN APPRECIATING THE QUALIFYING CIRCUMSTANCE OF TREACHERY.23

Discussion

Asilan was convicted of the crime of Murder under Article 248 of the Revised Penal Code:

Art. 248. Murder. — Any person who, not falling within the provisions of Article 246 shall kill another, shall be guilty of murder and shall be punished by reclusion perpetua to death, if committed with any of the following attendant circumstances:

1. With treachery, taking advantage of superior strength, with the aid of armed men, or employing means to weaken the defense or of means or persons to insure or afford impunity;

2. In consideration of a price, reward, or promise;

3. By means of inundation, fire, poison, explosion, shipwreck, stranding of a vessel, derailment or assault upon a railroad, fall of an airship, by means of motor vehicles, or with the use of any other means involving great waste and ruin;

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

5. With evident premeditation;

6. With cruelty, by deliberately and inhumanly augmenting the suffering of the victim, or outraging or scoffing at his person or corpse.

Asilan claims that the testimonies of the witnesses were not only filled with inconsistencies, they were also incredible for being contrary to the common experience and observation that mankind can approve as probable under the circumstance.24

11

Asilan insists that the testimony of Binosa should not be given credence as he was selective in his recollection of the events. Asilan claimed that Binosa seemed to have recalled more details on cross-examination, thus "improving" on the version he gave during his direct examination. Asilan further claims that Binosa’s suggestion that Asilan returned to the scene of the crime after he committed the alleged crime is very unlikely. Asilan avers that San Diego’s testimony was likewise not credible as it was clearly only a more refined version of Binosa’s account of the events. Moreover, Asilan says that San Diego’s testimony is too good to be true as he is unlikely to have a detailed recollection of an event, which according to him happened within a span of two minutes.25

Credibility of Witnesses

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

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

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

This Court sees no reason to apply the above exceptions and disturb the findings of the RTC, which were affirmed by the Court of Appeals.

Our perusal of the records showed that the RTC was vigilant in its duty to ascertain the truth. The RTC itself propounded clarificatory questions to Binosa and San Diego while they were testifying. At the end of the trial, the RTC found these witnesses credible, and believed their eyewitness accounts because they were categorical in their identification of Asilan as one of Adovas’s assailants. The RTC also pointed out that it could not find any dubious reason for Binosa and San Diego to falsely implicate Asilan in a heinous crime.28

Alleged Inconsistencies

The alleged inconsistency in Binosa’s testimony does not render his testimony fictitious. The fact that he was able to provide more details of the events only during cross-examination is not unusual, and on the contrary tends to buttress, rather than weaken, his credibility, since it shows that he was neither coached nor were his answers contrived.29 After all, "[w]itnesses are not expected to remember every single detail of an incident with perfect or total recall."30

As for San Diego’s testimony, it is not unnatural for him to have a detailed recollection of the incident. "Different persons have different reactions to similar situations. There is no typical reaction to a sudden occurrence."31 It is worthy to note that San Diego was only sixteen years old when he witnessed the stabbing of Adovas. It was his first time to witness a person being stabbed right before his very eyes. He testified that three months after that night, the events were still vividly imprinted in his mind.32 It is thus not improbable that he could, with certainty, identify Asilan as the man who stabbed Adovas that fateful night.

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

It is elementary in the rule of evidence that inconsistencies in the testimonies of prosecution witnesses with respect to minor details and collateral matters do not affect the substance of their declaration nor the veracity or weight of their testimony. In fact, these minor inconsistencies enhance the credibility of the witnesses, for they remove any suspicion that their testimonies were contrived or rehearsed. In People vs. Maglente, this Court ruled that inconsistencies in details which are irrelevant to the elements of the crime are not grounds for acquittal. x x x.35

Credibility of the evidence

Asilan further asseverates that it is perplexing how none of the witnesses, who were present during the incident, warned Adovas of the impending danger to his life. He contends that "for evidence to be believed, it must not only proceed from the mouth of a credible witness, but must be credible in itself such as the common experience and observation of mankind can approve as probable under the circumstance."36

This Court would like to reiterate that no standard form of behavior is expected of an individual who witnesses something shocking or gruesome like murder. This is especially true when the assailant is near. It is not unusual that some people would feel reluctant in getting involved in a criminal incident.37

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

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

Defense of Denial

Unfortunately, Asilan’s bare denial, when juxtaposed with the prosecution witnesses’ positive declarations, is not worthy of credence. Denial, which is the usual refuge of offenders, is an inherently weak defense, and must be buttressed by other persuasive evidence of non-culpability to merit credibility. The defense of denial fails even more when the assailant, as in this case, was positively identified by credible witnesses, against whom no ulterior motive could be ascribed.40

Asilan not only admitted that he was at the scene of the crime when he was arrested by the police authorities, he also admitted that he did not know any of the prosecution witnesses prior to his trial. Moreover, he had filed no case against the police officers whom he accused of mauling him to make him admit to the stabbing of Adovas. Asilan’s "self-serving statements deserve no weight in law and cannot be given greater evidentiary value over the testimony of the witnesses who testified on positive points."41

Qualifying Circumstance of Treachery

Asilan pleads that treachery cannot be appreciated in the present case as the prosecution failed to establish that he had consciously or deliberately adopted or chosen the mode of attack employed upon Adovas to deprive him of an opportunity to defend himself or retaliate. Asilan argues that mere suddenness of the attack is not enough to constitute treachery. He further posits that while it may be true that he allegedly came from behind, the "mode of attack could have occurred in a spur of the moment."42

The RTC correctly appreciated the qualifying circumstance of treachery in the killing of Adovas.

The prosecution was able to sufficiently establish the attendance of treachery in the case at bar. "It is basic in our penal law that treachery is present when the offender employs means, methods or forms which tend directly and especially to insure the execution of the crime, without risk to himself arising from the defense which the offended party might make."43 In People v. Tan,44 this Court expounded on the concept of treachery as follows:

The essence of treachery is the sudden and unexpected attack, without the slightest provocation on the part of the person attacked. Treachery is present when the offender commits any of the crimes against persons, employing means, methods or forms in the execution thereof, which tend directly and especially to insure its execution, without risk arising from the defense which the offended party might make. In the case at bar, the attack on Magdalino Olos was treacherous, because he was caught off guard and was therefore unable to defend himself, as testified to by the prosecution witnesses and as indicated by the wounds inflicted on him.45

12

Both eyewitnesses testified on how Asilan attacked Adovas from behind. Adovas could not have defended himself because Asilan stabbed him at his back repeatedly sans provocation or warning. The deciding factor is that Asilan’s execution of his attack made it impossible for Adovas to defend himself or retaliate.46

Sufficiency of the Information

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

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

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

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

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

This Court completely agrees with the Court of Appeals’ pronouncement that "since treachery was correctly alleged in the Information and duly established by the prosecution, x x x [Asilan]’s conviction for the crime of murder is proper."50

In any case, it is now too late for Asilan to assail the sufficiency of the Information on the ground that there was failure to specifically allege therein how treachery was carried out. Section 9, Rule 117 of the Rules of Court provides:

SEC. 9. Failure to move to quash or to allege any ground therefor.- The failure of the accused to assert any ground of a motion to quash before he pleads to the complaint or information, either because he did not file a motion to quash or failed to allege the same in said motion, shall be deemed a waiver of any objections except those based on the grounds provided for in paragraphs (a), (b), (g), and (i) of section 3 of this Rule.

Moreover, in People v. Candaza,51 this Court held that "[a]n Information which lacks essential allegations may still sustain a conviction when the accused fails to object to its sufficiency during the trial, and the deficiency was cured by competent evidence presented therein."52 In this case, Asilan not only failed to question the sufficiency of the Information at any time during the pendency of his case before the RTC, he also allowed the prosecution to present evidence, proving the elements of treachery in the commission of the offense. Asilan is thus deemed to have waived any objections against the sufficiency of the Information.531âwphi1

Pursuant to prevailing jurisprudence,54 this Court is increasing the award of civil indemnity from Fifty Thousand Pesos (P 50,000.00) to Seventy-Five Thousand Pesos (P 75,000.00), and the moral damages from Twenty-Five Thousand Pesos (P 25,000.00) to Fifty Thousand Pesos (P 50,000.00). Moreover, in view

of the presence of the qualifying circumstance of treachery, an additional award of Thirty Thousand Pesos (P 30,000.00), as exemplary damages, in accordance with Article 2230 of the Civil Code, 55 should be awarded to the heirs of Adovas.56

As to actual damages, Adovas’s widow, Irene Adovas, presented the receipts showing that she paid P 25,224.00 to Our Lady of Lourdes Hospital, Inc., as hospital expenses, 57 P 35,000.00 to Marulas Memorial Homes,58 and P20,000.00 to Funeraria Saranay as funeral expenses,59 or a total of P 80,224.00.

Both the RTC and the Court of Appeals failed to consider that under Article 2206 of the Civil Code, Asilan is also liable for the loss of the earning capacity of Adovas, and such indemnity should be paid to his heirs60:

Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death;

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

The following are the factors in computing the amount of damages recoverable for the loss of earning capacity of the deceased:

1) The number of years on the basis of which the damages shall be computed. This is based on the formula (2/3 x 80 – age of the deceased at the time of his death = life expectancy), which is adopted from the American Expectancy Table of Mortality; and

2) The rate at which the losses sustained by the heirs of the deceased should be fixed.64

Net income is arrived at by deducting the amount of the victim’s living expenses from the amount of his gross income.65 The loss of earning capacity of Asilan is thus computed as follows:

Net Earning Capacity = life expectancy x [gross annual income – living expenses]66

= 2/3 [80-age at time of death] x [gross annual income – 50% of gross annual income]

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

= 34 x P 51,630.00

= P 1,755,420.00

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

13

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 73886 January 31, 1989

JOHN C. QUIRANTE and DANTE CRUZ, petitioners, vs.THE HONORABLE INTERMEDIATE APPELLATE COURT, MANUEL C. CASASOLA, and ESTRELLITA C. CASASOLA, respondents.

Quirante & Associates Law Office for petitioners.

R.S. Bernaldo & Associates for private respondents.

 

REGALADO, J.:

This appeal by certiorari seeks to set aside the judgment' 1 of the former Intermediate Appellate Court promulgated on November 6, 1985 in AC-G.R. No. SP-03640, 2 which found the petition for certiorari therein meritorious, thus:

Firstly, there is still pending in the Supreme Court a petition which may or may not ultimately result in the granting to the Isasola (sic) family of the total amount of damages given by the respondent Judge. Hence the award of damages confirmed in the two assailed Orders may be premature. Secondly, assuming that the grant of damages to the family is eventually ratified, the alleged confirmation of attorney's fees will not and should not adversely affect the non-signatories thereto.

WHEREFORE, in view of the grave abuse of discretion (amounting to lack of jurisdiction) committed by the respondent Judge, We hereby SET ASIDE his questioned orders of March 20, 1984 and May 25, 1984. The restraining order previously issued is made permanent. 3

The challenged decision of respondent court succinctly sets out the factual origin of this case as follows:

... Dr. Indalecio Casasola (father of respondents) had a contract with a building contractor named Norman GUERRERO. The Philippine American General Insurance Co. Inc. (PHILAMGEN, for short) acted as bondsman for GUERRERO. In view of GUERRERO'S failure to perform his part of the contract within the period specified, Dr. Indalecio Casasola, thru his counsel, Atty. John Quirante, sued both GUERRERO and PHILAMGEN before the Court of first Instance of Manila, now the Regional Trial Court (RTC) of Manila for damages, with PHILAMGEN filing a cross-claim against GUERRERO for indemnification. The RTC rendered a decision dated October 16, 1981. ... 4

In said decision, the trial court ruled in favor of the plaintiff by rescinding the contract; ordering GUERRERO and PHILAMGEN to pay the plaintiff actual damages in the amount of P129,430.00, moral damages in the amount of P50,000.00, exemplary damages in the amount of P40,000.00 and attorney's fees in the amount of P30,000.00; ordering Guerrero alone to pay liquidated damages of P300.00 a day from December 15, 1978 to July 16, 1979; and ordering PHILAMGEN to pay the plaintiff the amount of the surety bond equivalent to P120,000.00. 5 A motion for reconsideration filed by PHILAMGEN was denied by the trial court on November 4, 1982. 6

Not satisfied with the decision of the trial court, PHILAMGEN filed a notice of appeal but the same was not given due course because it was allegedly filed out of time. The trial court thereafter issued a writ of execution. 7

A petition was filed in AC-G.R. No. 00202 with the Intermediate Appellate Court for the quashal of the writ of execution and to compel the trial court to give due course to the appeal. The petition was dismissed on May 4, 19838 so the case was elevated to this Court in G.R. No. 64334.  9 In the meantime, on November 16, 1981, Dr. Casasola died leaving his widow and several children as survivors. 10

On June 18, 1983, herein petitioner Quirante filed a motion in the trial court for the confirmation of his attorney's fees. According to him, there was an oral agreement between him and the late Dr. Casasola with regard to his attorney's fees, which agreement was allegedly confirmed in writing by the widow, Asuncion Vda. de Casasola, and the two daughters of the deceased, namely Mely C. Garcia and Virginia C. Nazareno. Petitioner avers that pursuant to said agreement, the attorney's fees would be computed as follows:

A. In case of recovery of the P120,000.00 surety bond, the attorney's fees of the undersigned counsel (Atty. Quirante) shall be P30,000.00.

B. In case the Honorable Court awards damages in excess of the P120,000.00 bond, it shall be divided equally between the Heirs of I. Casasola, Atty. John C. Quirante and Atty. Dante Cruz.

The trial court granted the motion for confirmation in an order dated March 20, 1984, despite an opposition thereto. It also denied the motion for reconsideration of the order of confirmation in its second order dated May 25, 1984. 11

These are the two orders which are assailed in this case.

Well settled is the rule that counsel's claim for attorney's fees may be asserted either in the very action in which the services in question have been rendered, or in a separate action. If the first alternative is chosen, the Court may pass upon said claim, even if its amount were less than the minimum prescribed by law for the jurisdiction of said court, upon the theory that the right to recover attorney's fees is but an incident of the case in which the services of counsel have been rendered ."  12 It also rests on the assumption that the court trying the case is to a certain degree already familiar with the nature and extent of the lawyer's services. The rule against multiplicity of suits will in effect be subserved. 13

What is being claimed here as attorney's fees by petitioners is, however, different from attorney's fees as an item of damages provided for under Article 2208 of the Civil Code, wherein the award is made in favor of the litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor who may enforce the judgment for attorney's fees by execution. 14 Here, the petitioner's claims are based on an alleged contract for professional services, with them as the creditors and the private respondents as the debtors.

In filing the motion for confirmation of attorney's fees, petitioners chose to assert their claims in the same action. This is also a proper remedy under our jurisprudence. Nevertheless, we agree with the respondent court that the confirmation of attorney's fees is premature. As it correctly pointed out, the petition for review on certiorari filed by PHILAMGEN in this Court (G.R. No. 64834) "may or may not ultimately result in the granting to the Isasola (sic) family of the total amount of damages" awarded by the trial court. This especially true in the light of subsequent developments in G.R. No. 64334. In a decision promulgated on May 21, 1987, the Court rendered judgment setting aside the decision of May 4, 1983 of the Intermediate Appellate Court in AC-G.R. No. 00202 and ordering the respondent Regional Trial Court of Manila to certify

14

the appeal of PHILAMGEN from said trial court's decision in Civil Case No. 122920 to the Court of Appeal. Said decision of the Court became final and executory on June 25, 1987.

Since the main case from which the petitioner's claims for their fees may arise has not yet become final, the determination of the propriety of said fees and the amount thereof should be held in abeyance. This procedure gains added validity in the light of the rule that the remedy for recovering attorney's fees as an incident of the main action may be availed of only when something is due to the client. Thus, it was ruled that:

... an attorney's fee cannot be determined until after the main litigation has been decided and the subject of recovery is at the disposition of the court. The issue over attorney's fee only arises when something has been recovered from which the fee is to be paid. 15

It is further observed that the supposed contract alleged by petitioners as the basis for their fees provides that the recovery of the amounts claimed is subject to certain contingencies. It is subject to the condition that the fee shall be P30,000.00 in case of recovery of the P120,000.00 surety bond, plus an additional amount in case the award is in excess of said P120,000.00 bond, on the sharing basis hereinbefore stated.

With regard to the effect of the alleged confirmation of the attorney's fees by some of the heirs of the deceased. We are of the considered view that the orderly administration of justice dictates that such issue be likewise determined by the court a quo inasmuch as it also necessarily involves the same contingencies in determining the propriety and assessing the extent of recovery of attorney's fees by both petitioners herein. The court below will be in a better position, after the entire case shall have been adjudicated, inclusive of any liability of PHILAMGEN and the respective participations of the heirs of Dr. Casasola in the award, to determine with evidentiary support such matters like the basis for the entitlement in the fees of petitioner Dante Cruz and as to whether the agreement allegedly entered into with the late Dr. Casasola would be binding on all his heirs, as contended by petitioner Quirante.

We, therefore, take exception to and reject that portion of the decision of the respondent court which holds that the alleged confirmation to attorney's fees should not adversely affect the non-signatories thereto, since it is also premised on the eventual grant of damages to the Casasola family, hence the same objection of prematurity obtains and such a holding may be pre-emptive of factual and evidentiary matters that may be presented for consideration by the trial court.

WHEREFORE, with the foregoing observation, the decision of the respondent court subject of the present recourse is hereby AFFIRMED.

SO ORDERED.

Melencio-Herrera, Padilla, and Sarmiento, JJ., concur.

Paras, J., took no part.

FIRST DIVISION

[G.R. No. 107508. April 25, 1996]

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS, CAPITOL CITY DEVELOPMENT BANK, PHILIPPINE BANK OF COMMUNICATIONS, and F. ABANTE MARKETING, respondents.

SYLLABUS

1. COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS; MATERIAL ALTERATION, DEFINED, - An alteration is said to be material if it alters the effect of the instrument.  It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law.

2. ID.; ID.; IMMATERIAL ALTERATION; EFFECT ON THE INSTRUMENT. - In his book entitled Pandect of Commercial Law and Jurisprudence, Justice Jose C. Vitug opines that an innocent alteration (generally, changes on items other than those required to be stated under Sec. 1, N. I. L.) and spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may enforce it only according to its original tenor.

3. ID.; ID.; ID.; PRESENT IN CASE AT BAR. The case at bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instrument Law.  The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same.The checks serial number is not the sole indication of its origin.  As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The checks issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential.Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number was altered, the same being an immaterial or innocent one.

4. CIVIL LAW; DAMAGES; ATTORNEYS FEES; AWARD THEREOF DEMANDS FACTUAL, LEGAL AND EQUITABLE JUSTIFICATION. The award of attorneys fees lies within the discretion of the court and depends upon the circumstances of each case. However, the discretion of the court to award attorneys fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and equitable justification, without which the award is a conclusion without a premise and improperly left to speculation and conjecture. It becomes a violation of the proscription against the imposition of a penalty on the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188 SCRA 170 [1990]). The reason for the award must be stated in the text of the courts decision.  If it is stated only in the dispositive portion of the decision, the same shall be disallowed.  As to the award of attorneys fees being an exception rather than the rule, it is necessary for the court to make findings of fact and law that would bring the case within the exception and justify the grant of the award (Refractories Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA 539).

APPEARANCES OF COUNSEL

Monsod Tamargo Valencia & Associates for private respondent Capitol City Development Bank.Siguion Reyna Montecillo & Ongsiako for private respondent Philippine Bank of Communications.

D E C I S I O N

KAPUNAN, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision dated April 29, 1992 of respondent Court of Appeals in CA-G.R. CV No. 24776 and its resolution dated September 16, 1992, denying petitioner Philippine National Banks motion for reconsideration of said decision.

The facts of the case are as follows:

A check with serial number 7-3666-223-3, dated August 7, 1981 in the amount of P97,650.00 was issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports [DECS]) payable to F. Abante Marketing. This check was drawn against Philippine National Bank (herein petitioner).

On August 11, 1981, F. Abante Marketing, a client of Capitol City Development Bank (Capitol), deposited the questioned check in its savings account with said bank. In turn, Capitol deposited the same in its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the check to petitioner for clearing.

15

Petitioner cleared the check as good and, thereafter, PBCom credited Capitols account for the amount stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom and debited PBComs account for the amount covered by the check, the reason being that there was a material alteration of the check number.

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

On the other hand, Capitol could not, in turn, debit F. Abante Marketings account since the latter had already withdrawn the amount of the check as of October 15, 1981.Capitol sought clarification from PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an explanation and re-crediting from petitioner.

Since the demands of Capitol were not heeded, it filed a civil suit with the Regional Trial Court of Manila against PBCom which, in turn, filed a third-party complaint against petitioner for reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourth-party complaint against F. Abante Marketing.

On October 3, 1989; the Regional Trial Court rendered its decision the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1.) On plaintiffs complaint, defendant Philippine Bank of Communications is ordered to re-credit or reimburse plaintiff Capitol City Development Bank the amount of P97,650.00, plus interest of 12 percent thereto from October 19, 1981 until the amount is fully paid;

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

3.) On Philippine National Banks fourth-party complaint, F. Abante Marketing is ordered to reimburse and indemnify PNB for whatever amount PNB pays to PBCom;

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

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

6.) No pronouncement as to costs.

SO ORDERED.[1]

An appeal was interposed before the respondent Court of Appeals which rendered its decision on April 29, 1992, the decretal portion of which reads:

WHEREFORE, the judgment appealed from is modified by exempting PBCom from liability to plaintiff-appellee for attorneys fees and ordering PNB to honor the check for P97,650.00, with interest as declared by the trial court, and pay plaintiff-appellee attorneys fees of P10,000.00. After the check shall have been honored by PNB, PBCom shall re-credit plaintiff-appellees account with it with the amount. No pronouncement as to costs.

SO ORDERED.[2]

A motion for reconsideration of the decision was denied by the respondent Court in its resolution dated September 16, 1992 for lack of merit.[3]

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

I

WHETHER OR NOT AN ALTERATION OF THE SERIAL NUMBER OF A CHECK IS A MATERIAL ALTERATION UNDER THE NEGOTIABLE INSTRUMENTS LAW.

II

WHETHER OR NOT A CERTIFICATION HEREIN ISSUED BY THE MINISTRY OF EDUCATION CAN BE GIVEN WEIGHT IN EVIDENCE.

III

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

IV

WHETHER OR NOT IN THE ABSENCE OF MALICE OR ILL WILL PETITIONER PNB MAY BE HELD LIABLE FOR ATTORNEYS FEES.[4]

We find no merit in the petition.

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

Petitioner anchors its position on Section 125 of the Negotiable Instrument Law (ACT No. 2031)[5] which provides:

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

(a) The date;

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

(c) The time or place of payment;

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

(e) The medium or currency in which payment is to be made;

(f) Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.

Petitioner alleges that there is no hard and fast rule in the interpretation of the aforequoted provision of the Negotiable Instruments Law. It maintains that under Section 125(f), any change that alters the effect of the instrument is a material alteration.[6]

We do not agree.

16

An alteration is said to be material if it alters the effect of the instrument. [7] It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.[8] In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instrument Law.

Section 1 of the Negotiable Instruments Law provides:

Section 1. - Form of negotiable instruments. An instrument to be negotiable must conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

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

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

In his book entitled Pandect of Commercial Law and Jurisprudence, Justice Jose C. Vitug opines that an innocent alteration (generally, changes on items other than those required to be stated under Sec. 1, N.I.L.) and spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may enforce it only according to its original tenor.[9]

Reproduced hereunder are some examples of material and immaterial alterations:

A. Material Alterations:

(1) Substituting the words or bearer for order.

(2) Writing protest waived above blank indorsements.

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

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

(5) Adding the words with interest with or without a fixed rate.

(6) An alteration in the maturity of a note, whether the time for payment is thereby curtailed or extended.

(7) An instrument was payable First Natl Bank, the plaintiff added the word Marion.

(8) Plaintiff, without consent of the defendant, struck out the name of the defendant as payee and inserted the name of the maker of the original note.

(9) Striking out the name of the payee and substituting that of the person who actually discounted the note.

(10) Substituting the address of the maker for the name of a co-maker.[10]

B. Immaterial Alterations:

(1) Changing I promise to pay to We promise to pay, where there are two makers.

(2) Adding the word annual after the interest clause.

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

(4) Filling in the date of the actual delivery where the makers of a note gave it with the date in blank, July . . .

(5) An alteration of the marginal figures of a note where the sum stated in words in the body remained unchanged.

(6) The insertion of the legal rate of interest where the note had a provision for interest at . . . per cent.

(7) A printed form of promissory note had on the margin the printed words, Extended to . . . The holder on or after maturity wrote in the blank space the words May 1, 1913, as a reference memorandum of a promise made by him to the principal maker at the time the words were written to extend the time of payment.

(8) Where there was a blank for the place of payment, filling in the blank with the place desired.

(9) Adding to an indorsees name the abbreviation Cash when it had been agreed that the draft should be discounted by the trust company of which the indorsee was cashier.

(10) The indorsement of a note by a stranger after its delivery to the payee at the time the note was negotiated to the plaintiff.

(11) An extension of time given by the holder of a note to the principal maker, without the consent of the a surety co-maker.[11]

The case at the bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same. Despite these findings, however, petitioner insists, that:

xxx xxx xxx.

It is an accepted concept, besides being a negotiable instrument itself, that a TCAA check by its very nature is the medium of exchange of governments (sic) instrumentalities or agencies. And as (a) safety measure, every government office o(r) agency (is) assigned TCAA checks bearing different number series.

A concrete example is that of the disbursements of the Ministry of Education and Culture. It is issued by the Bureau of Treasury sizeable bundles of checks in booklet form with serial numbers different from other government office or agency. Now, for fictitious payee to succeed in its malicious intentions to defraud the government, all it need do is to get hold of a TCAA Check and have the serial numbers of portion (sic) thereof changed or altered to make it appear that the same was issued by the MEC.

Otherwise, stated, it is through the serial numbers that (a) TCAA Check is determined to have been issued by a particular office or agency of the government.[12]

17

xxx xxx xxx

Petitioners arguments fail to convince. The checks serial number is not the sole indication of its origin. As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The checks issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential. Thus, we quote with favor the findings of the respondent court:

xxx xxx xxx

If the purpose of the serial number is merely to identify the issuing government office or agency, its alteration in this case had no material effect whatsoever on the integrity of the check.  The identity of the issuing government office or agency was not changed thereby and the amount of the check was not charged against the account of another government office or agency which had no liability under the check. The owner and issuer of the check is boldly and clearly printed on its face, second line from the top: MiNiSTRY OF EDUCATiON AND CULTURE, and below the name of the payee are the rubber-stamped words: Ministry of Educ. & Culture. These words are not alleged to have been falsely or fraudulently intercalated into the check. The ownership of the check is established without the necessity of recourse to the serial number. Neither is there any proof that the amount of the check was erroneously charged against the account of a government office or agency other than the Ministry of Education and Culture.  Hence, the alteration in the number of the check did not affect or change the liability of the Ministry of Education and Culture under the check and, therefore, is immaterial. The genuineness of the amount and the signatures therein of then Deputy Minister of Education Hermenegildo C. Dumlao and of the resident Auditor, Penomio C. Alvarez are not challenged. Neither is the authenticity of the different codes appearing therein questioned x x x.[13] (Italics ours.)

Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number was altered, the same being an immaterial or innocent one.

We now go to the second issue. It is petitioners submission that the certification issued by Minrado C. Batonghinog, Cashier III of the MEC clearly shows that the check was altered. Said certification reads:

July 22, 1985

TO WHOM IT MAY CONCERN:

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

Very truly yours,

(SGD.) MINRADO C. BATONGHINOG Cashier III.[14]

Petitioner claims that even if the author of the certification issued by the Ministry of Education and Culture (MEC) was not presented, still the best evidence of the material alteration would be the disputed check itself and the serial number thereon. Petitioner thus assails the refusal of respondent court to give weight to the certification because the author thereof was not presented to identify it and to be cross-examined thereon.[15]

We agree with the respondent court.

The one who signed the certification was not presented before the trial court to prove that the said document was really the document he prepared and that the signature below the said document is his own signature. Neither did petitioner present an eyewitness to the execution of the questioned document who

could possibly identify it.[16] Absent this proof, we cannot rule on the authenticity of the contents of the certification. Moreover, as we previously emphasized, there was no material alteration on the check, the change of its serial number not being substantial to its negotiability.

Anent the third issue - whether or not the drawee bank may still recover the value of the check from the collecting bank even if it failed to return the check within the twenty-four (24) hour clearing period because the check was tampered - suffice it to state that since there is no material alteration in the check, petitioner has no right to dishonor it and return it to PBCom, the same being in all respects negotiable.

However, the amount of P10,000.00 as attorneys fees is hereby deleted. In their respective decisions, the trial court and the Court of Appeals failed to explicitly state the rationale for the said award. The trial court merely ruled as follows:

With respect to Capitols claim for damages consisting of alleged loss of opportunity, this Court finds that Capitol failed to adequately substantiate its claim. What Capitol had presented was a self-serving, unsubstantiated and speculative computation of what it allegedly could have earned or realized were it not for the debit made by PBCom which was triggered by the return and debit made by PNB.  However, this Court finds that it would be fair and reasonable to impose interest at 12% per annum on the principal amount of the check computed from October 19, 1981 (the date PBCom debited Capitols account) until the amount is fully paid and reasonable attorneys fees.[17] (Italics ours.)

And contrary to the Court of Appeals resolution, petitioner unambiguously questioned before it the award of attorneys fees, assigning the latter as one of the errors committed by the trial court. [18]

The foregoing is in conformity with the guiding principles laid down in a long line of cases and reiterated recently in Consolidated Bank & Trust Corporation (Solidbank) v. Court of Appeals: [19]

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

WHEREFORE, premises considered, except for the deletion of the award of attorneys fees, the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Padilla (Chairman), Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 119707            November 29, 2001

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

DE LEON, JR., J.:

18

Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals dated November 22, 1994 in CA-G.R. CV No. 40142 reversing the Decision2 dated March 31, 1992 of the Regional Trial Court of Lucena City, Branch 54 in Civil Case No. 9114 on the ground of res judicata.

Civil Case No. 9114, which found its way to this Court via the instant petition, is a petition3 for declaratory relief and damages initiated by petitioner Veronica Padillo4 on December 14, 1983. In the petition filed against respondent Tomas Averia, Jr. and one Beato Casilang, petitioner Padillo alleged that she is the absolute owner of a Two Hundred Fifty-One (251) square meter parcel of land with improvements thereon located in Quezon Avenue, Lucena City, Quezon Province, covered and described in Transfer Certificate of Title (TCT) No. T-9863, which she purchased from Marina M. de Vera-Quicho and Margarita de Vera. Petitioner ascribed fault upon Averia and Casilang with unlawful refusal to turn over the property in her favor; and that respondent Averia even instituted Civil Case No. 1690-G,5 a suit for rescission of two (2) deeds solely for harassment and dilatory purposes although the suit actually established petitioner's right of ownership over the subject property.

Petitioner Padillo prayed for the issuance of an injunctive writ to place her in the possession and use of her said property, and prohibiting respondents from disturbing the same; and ultimately, that judgment be rendered ordering respondent Averia and Casilang to pay jointly and severally to petitioner Padillo: (a) One Hundred Fifty Thousand Pesos (P150,000.00) annual unrealized income for the use of her said property from January 4, 1982, (b) moral and exemplary damages the amount of which she leaves to the court for proper evaluation and (c) attorney's fees of Eighty Thousand Pesos (P80,000.00) .plus Six Hundred Pesos (P600.00) per appearance in court.

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

On March 2, 1984, respondent Averia filed his Answer with Counterclaim and Motion to Dismiss 7 wherein he invoked the decision rendered in Civil Case No. 1620-G, a suit for specific performance against Marina M. de Vera-Quicho. He further raised the defenses of litis pendencia, laches, estoppel, res judicata and lack of cause of action, and prayed for the dismissal of the petition as well as the grant of his counterclaims for damages.

It appears that prior to the institution of Civil Case No. 9114, there were already three (3) actions which involved the said property, namely, Civil Case No. 1620-G, M.C. No. 374 82, and Civil Case No. 1690-G.

Civil Case No. 1620-G was instituted by respondent Averia against Marina M. de Vera-Quicho and the Register of Deeds of Lucena City for specific performance and/or damages which involved the lot subject of the sale. A subsequent decision dated June 2, 1983 rendered by the Regional Trial Court of Gumaca, Quezon, Branch 62 in said Civil Case No. 1620-G ordered Marina M. de Vera-Quicho to execute the necessary documents over the property covered by said Transfer Certificate of Title (TCT) No. T-9863 and enjoined the Register of Deeds of Lucena City to desist from entering any encumbrance or transaction on said certificate of title and/or cancel the same except in favor of respondent Averia. 8 The said decision became final and executory as no motion for reconsideration or appeal was filed therefrom.9

M. C. No. 374-82,10 was instituted by petitioner Padillo on July 6, 1982 to compel the Register of Deeds of Lucena City to register the deed of sale dated February 10, 1982 wherein Margarita de Vera 11 sold to petitioner Padillo her one-half (½) pro-indiviso share of the lot and the building erected thereon, covered by TCT No. T-9863, considering the refusal of the Register of Deeds to register said deed of sale in view of a restraining order issued in Civil Case No. 1620-G. The petition to register the deed was opposed by respondent Averia.

On July 7, 1983, during the pendency of M.C. No. 374-82, Civil Case No. 1690-G was instituted by respondent Averia against spouses Edilberto de Mesa and petitioner Padillo.12 The said case is a complaint for rescission of two(2) deeds of sale, namely: (a) the "Kasulatan ng Bilihan na may Pasubali" dated January 5, 1982 wherein Marina M. de Vera-Quicho sold to petitioner Padillo her one-half (½) pro-indiviso share over lot together with the house thereon, subject of TCT No. T-9863, which was registered and annotated at the back of said TCT on January 11, 1982 per Entry No. 54967, and (b) the deed of sale dated February 10, 1982 subject of M.C. no. 374-82. Respondent Averia claimed ownership of the same lot subject of TCT No. T-9863 by virtue of an unregistered contract to sell dated January 5, 1982 executed in

his favor by Marina M. de Vera-Quicho.13 Petitioner Padillo sought the dismissal of the amended complaint.14 In an Order dated September 30, 1983, Civil Case No. 1690-G was dismissed by Branch 61 of the RTC of Gumaca, Quezon Province for improper venue.15 Respondent Averia interposed an appeal with the Court of Appeals.16

In the meantime. a decision dated September 23, 1983 was rendered in M.C. No. 374-82 wherein Branch 57 of the RTC, Lucena City ordered the Register of Deeds to register the deed of sale dated February 10, 1982.17Respondent Averia assailed the decision in M.C. No. 374-82 via a petition for certiorari and prohibition in G.R. No. 6512918 with the Supreme Court contending that the trial court has no jurisdiction to order the registration of a deed of sale which is opposed on the ground of an antecedent contract to sell. In a Decision dated December 29, 1986, the Supreme Court declared that the trial court has jurisdiction since Section 2 of Presidential Decree No. 1529 (Property Registration Decree) eliminated the distinction between the general jurisdiction and the limited jurisdiction of the Regional Trial Court acting as a cadastral court under Section 112 of Act 496 (Land Registration Act).19 The Supreme Court set aside the September 23, 1983 decision of the trial court and ordered a new trial where all parties interested in the case may appear and be given opportunity to be heard.

Pursuant to the Supreme Court's decision, a new trial was conducted in M.C. No. 37482. Following notice and hearing in the new trial, the trial court rendered a Decision dated May 5, 1988, which declared petitioner Padillo as sole and exclusive owner of the property in question and ordered the Register of Deeds of Lucena City to register the questioned deed of sale in favor of petitioner Padillo.

The decision of the RTC in M.C. No. 374-82 was appealed to the Court of Appeals20 which rendered judgment on December 28, 1990 sustaining the decision of the trial court. Dissatisfied, respondent Averia appealed to the Supreme Court via a petition for review on certiorari which was denied in a Resolution dated June 17, 1991 for failure to show that the Court of Appeals had committed any reversible error in the questioned judgment.21Respondent Averia sought reconsideration but the same was denied in a Resolution dated August 26, 1991.22 A subsequent motion for leave to file a second motion for reconsideration was likewise denied on October 21, 1991.23

While the foregoing proceedings ensued in M.C. No. 374-82, the trial court in Civil Case No. 9114, issued an Order dated March 20, 1984 wherein it deferred the resolution of respondent Averia's motion to dismiss and ordered the case temporarily archived in view of the pendency in the Court of Appeals of the appeal of respondent Averia in Civil Case No. 1690-G.24

When the Court of Appeals subsequently affirmed, in a decision dated September 16, 1987, the dismissal of Civil Case No. 1690-G for improper venue,25 the hearing in Civil Case No. 9114 was resumed on November 19, 198726but resolution of respondent Averia's November 18, 1987 Motion to Dismiss 27 was deferred in view of the pendency of M.C. No. 374-82.28

When M.C. No. 374-82 was finally resolved in the decision dated May 5, 1988, the trial court in an Order dated June 1, 1988 proceeded to deny respondent Averia's Motion to Dismiss and Motion to Suspend Further Proceeding in Civil Case No. 9114.29

Thereafter, respondent Averia assailed the denial of his motion to dismiss in a petition for certiorari and prohibition, docketed as CA-G.R. SP No. 15356, before the Court of Appeals, which on December 21, 1989 rendered a decision therein ordering the suspension of the proceedings in Civil Case No. 9114 to await the final termination of M.C. No. 37442 then pending appeal with the Court of Appeals. 30 No appeal was filed therefrom, hence, the decision of the appellate court in CA-G.R. SP No. 15356 became final.31

With the Supreme Court denying the petition to challenge the Court of Appeal's affirmance of the decision in M.C. No. 374-82,32 the trial court rendered the assailed March 31, 1992 Decision33 in Civil Case No. 9114, which reads:

WHEREFORE, in view of the foregoing considerations, judgment is rendered ordering Tomas Averia, Jr. or any persons claiming any right from him, to vacate and surrender the possession of the lot covered by TCT No. T-9863 of the Registry of Deeds of Lucena City and the building erected thereon, to Veronica Padillo and to pay the latter the following amounts:

19

1) Unrealized income from the lot and building in the sum of P150,000.00 every year from January 5, 1982 until Tomas Averia vacates the same;

2) Attorneys fees in the sum of P107,000.00 plus P1,000.00 per appearance in the hearing of the case and litigation expenses of P10,000.00;

3) Moral damages of P50,000.00;

4) Exemplary damages of P20,000.00; and

5) Costs of suit.

SO ORDERED.

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

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

xxx           xxx           xxx

Not having claimed the damages she supposedly suffered despite the new trial ordered for MC No. 374-82, and the clarification of the expanded jurisdiction of the court a quo, the appellee is correctly perceived by the appellant to have already lost her right to recover the same in the instant suit. In finding the decision in the former case a bar to the latter, the Court is guided by the long-standing rule that a final judgment or order on the merits rendered by a court having jurisdiction over the subject matter and the parties is conclusive in a subsequent case between the same parties and their successors-in-interest litigating upon the same thing and issue (Vencilao vs. Varo, 182 SCRA 492, citing Sy Kao vs. Court of Appeals, 132 SCRA 302; Carandang vs. Venturanza, 133 SCRA 344; Catholic Vicar Apostolic of the Mountain Province vs. Court, 165 SCRA 515). It matters little that the instant case is supposedly one for declaratory relief and damages, while the former case is one originally for registration of the appellee's documents of title. A party cannot — by varying the form of action or adopting a different method of presenting his case — escape the operation of the principle that one and the same cause of action shall not be twice litigated between the parties and their privies ( Filipinas Investment and Finance Corp. vs. Intermediate Appellate Court, 179 SCRA S06; Bugnay Construction and Development Corp. vs. Laron, 176 SCRA 804). On the principle, moreover, that res judicata bars not only the relitigation in a subsequent action of the issues raised, passed upon and adjudicated, but also the ventilation in said subsequent suit of any other issue which could have been raised in the first but was not (Africa vs. NLRC, 170 SCRA 776), the court a quo clearly erred in not holding the instant action to be barred by prior judgment.34

Disagreeing with the foregoing disquisition, petitioner sought reconsideration of the same but it proved unavailing inasmuch as petitioners motion for reconsideration35 was denied in a Resolution36 dated April 7, 1995. The Court of Appeals, in resolving petitioners motion for reconsideration in the negative, rendered the following pronouncements:

Contrary, however, to [Padillo's] position, the Court's application of the principle of  res judicata was neither based nor in any way dependent on the inaccuracies emphasized in the motion and incidents she filed. While it is readily conceded that the Court was obviously referring to Civil Case No. 1690-G as that which the Gumaca Court dismissed on account of improper venue, the passage which states that the self-same was filed ahead of MC No. 374-82 is one actually quoted from the trial court's March 31, 1992 decision which [Padillo] did not and still does not contest. Corrected though the Court may stand on these particulars, however, it bears

emphasis that the instant case was determined to be barred by res judicata not so much on account of the decision rendered in Civil Case No. 1690-G but by that rendered in MC No. 374-82. It consequently matters little that the latter case was originally filed ahead of the former as [Padillo] had been wont to stress. The fact that its new trial was only ordered on December 29, 1986 together with a clarification of the land registration court's expanded jurisdiction under Section 2 of Presidential Decree No. 1592 effectively rendered the decision promulgated therein a bar to the claim for damages [Padillo] pursued in the instant case. It is, moreover, repugnant to the prohibition against multiplicity of suits to allow [Padillo] — or any party-litigant for that matter — to claim in a separate action the damages she supposedly suffered as a consequence to the filing of another.

Considering that the December 21, 1989 decision rendered in CA-G.R. SP No. 15356 granted the petition then filed by [Averia] (p. 200, rec.), the Court, finally, fails to appreciate the sapience of [Padillo's] invocation thereof as a bar to the appeal herein perfected by [Averia]. x x x37

Hence, petitioner interposed the instant petition for review anchored on seven (7) assigned errors, to wit:

A. THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR AMOUNTING TO GRAVE 'ABUSE OF DISCRETION IN ITS INCORRECT CITATIONS AND PERCEPTIONS OF FACTS UPON WHICH IT PREDICATED ITS DECISION.

B. THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISREGARDING THE EFFECT OF THE JUDGMENTS OF A CO-EQUAL COURT IN CA-G.R. CV NO. 18802 AND THAT OF THE SUPREME COURT IN G.R. NO. 96662 DECLARING PETITIONER THE ABSOLUTE OWNER OF THE COMMERCIAL PROPERTY UNDER TCT NO. T-9863.

C. THE RESPONDENT COURT OF APPEALS ERRED IN REVERSING THE JUST AND EQUITABLE JUDGMENT OF THE TRIAL COURT IN CIVIL CASE NO. 9114.

D. THE RESPONDENT COURT OF APPEALS ERRED IN NULLIFYING THE JUDGMENT OF THE APPELLATE COURT IN CA-G.R. NO. 15356 BETWEEN THE SAME PARTIES ON THE SAME CAUSE AND ISSUES.

E. THE RESPONDENT COURT OF APPEALS ERRED AMOUNTING TO GRAVE ABUSE OF DISCRETION IN FAILING TO NOTE THE BAD FAITH OF PRIVATE RESPONDENT IN MOST OF HIS ACTS TO POSSESS A PROPERTY NOT HIS OWN.

F. RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN FAILING TO NOTE AND OBSERVE THAT PRIVATE RESPONDENT INTENTIONALLY PROLONG THE UNDUE EXPLOITATION OF PFTITIONER'S REALTY EVEN AFTER THE SUPREME COURT'S DECISION IN G.R. NO. 96662.

G. THE MEMBERS OF THE FIRST DIVISION OF RESPONDENT COURT GRAVELY ABUSED THEIR DISCRETION IN VIOLATING THE CONSTITUTIONAL MANDATE ON "CONSULATION" AS PROVIDED IN SECTION 13, ARTICLE VIII OF THE FUNDAMENTAL LAW.38

Petitioner attacks the appellate court's posture that petitioner should have set up her claim for unrealized income, litigation expenses and/or attorney's fees, as well as moral and exemplary damages, as a distinct cause of action in M.C. No. 374-82 for she contends that it was not anticipated that respondent Averia would oppose M.C. No. 37s82. Neither could she invoke art counterclaim for damages in Civil Case No. 1690-G for the Regional Trial Court of Gumaca, Quezon, Branch 61 promptly dismissed it. Furthermore,  res judicata as a ground for the dismissal of the instant case was already rejected by the Court of Appeals in the December 21, 1989 decision promulgated in CA-G.R. SP No. 15356. Lastly, petitioner cites anew the alleged inaccuracies in the finding that Civil Case No. 1690-G was filed ahead of M.C. No. 37442 and that Civil Case No. 1620-G was dismissed by the Regional Trial Court of Gumaca, Quezon on the ground of improper venue.

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The doctrine of res judicata is embodied in Section 47, Rule 39 of the Revised Rules of Court,39 which states:

Sec. 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

xxx           xxx           xxx

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity;

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto.

Section 49 (b) refers to bar by prior judgment while Section 49 (c) enunciates conclusiveness of judgment.

Bar by prior judgment exists when, between the first case where the judgment was rendered, and the second case where such judgment is invoked, there is identity of parties, subject matter and cause of action. When the three (3) identities are present, the judgment on the merits rendered in the first constitutes an absolute bar to the subsequent action. It is final as to the claim or demand in controversy, including the parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose. But where between the first case wherein judgment is rendered and the second case wherein such judgment is invoked, there is no identity of cause of action, the judgment is conclusive in the second case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein. This is what is termed conclusiveness of judgment.40

Under ordinary circumstances, this Court would have subscribed to the appellate court's conclusion that M.C. No. 37442 barred petitioner's claim for damages in Civil Case No. 9114 since all four (4) essential requisites in order forres judicata as a "bar by prior judgment" to attach are present in the instant case, to wit:

1. The former judgment must be final;

2. It must have been rendered by a court having jurisdiction over the subject matter and the parties;

3. It must be a judgment or order on the merits; and

4. There must be between the first and second action identity of parties, identity of subject matter, and identity of cause of action.41

M.C. No. 374-82, as affirmed by the Court of Appeals and the Supreme Court, is a final judgment.42 Branch 57 of the Regional Trial Court of Lucena City, in the new trial it conducted in M.C. No. 374-82, following clarification by the Supreme Court of its expanded jurisdiction, 43 had obtained jurisdiction over the subject matter as well as the parties thereto. The judgment of Branch 57 of Lucena City in M.C. No. 374-82, as affirmed by the Court of Appeals and the Supreme Court, is a judgment on the merits. A judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections.44 Finally, there is identity of parties, subject matter and causes of action. M.C. No. 374-82 and Civil Case No. 9114 both involved the petitioner and respondent Averia. The

subject matter of both actions is the parcel of land and building erected thereon covered by TCT No. T-9863. The causes of action are also identical since the same evidence would support and establish M.C. No. 374-82 and Civil Case No. 9114.45

However, a different conclusion is warranted under the principle of law of the case. Law of the case has been defined as the opinion delivered on a former appeal. More specifically, it means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.46 As a general rule, a decision on a prior appeal of the same case is held to be the law of the case whether that question is right or wrong, the remedy of the party deeming himself aggrieved being to seek a rehearing.47

The concept of Law of the Case was further elucidated in the 1919 case of Zarate v. Director of Lands,48 thus:

A well-known legal principle is that when an appellate court has once declared the law in a case, such declaration continues to be the law of that case even on a subsequent appeal. The rule made by an appellate court, while it may be reversed in other cases, cannot be departed from in subsequent proceedings in the same case. The "Law of the Case," as applied to a former decision of an appellate court, merely expresses the practice of the courts in refusing to reopen what has been decided. Such a rule is 'necessary to enable an appellate court to perform its duties satisfactorily and efficiently, which would be impossible if a question, once considered and decided by it, were to be litigated anew in the same case upon any and every subsequent appeal.' Again, the rule is necessary as a matter of policy to end litigation. 'There would be no end to a suit if every obstinate litigant could, by repeated appeals, compel a court to listen to criticisms on their opinions, or speculate of chances from changes in its members.' x x x

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

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

The appellate court apparently overlooked the significance of this principle called the law of the case which is totally different from the concept of res judicata. Law of the case does not have the finality of the doctrine of res judicata, and applies only to that one case, whereas res judicata forecloses parties or privies in one case by what has been done in another case.50 In the 1975 case of Comilang v. Court of Appeals (Fifth Division.),51 a further distinction was made in this manner:

The doctrine of law of the case is akin to that of former adjudication, but is more limited in its application. It relates entirely to questions of law, and is confined in its operation to subsequent proceedings in the same case. The doctrine of res judicata differs therefrom in that it is applicable to the conclusive determination of issues of fact, although it may include questions of law, and although it may apply to collateral proceedings in the same action or general proceeding, it is generally concerned with the effect of an adjudication in a wholly independent proceeding.

Significantly in the instant case, the law of the case on the matter of the pendency of M.C. No. 374-82 to bar Civil Case No. 9114 has been settled in CA-G.R. SP No. 15356.

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It is worthwhile to consider that at the time this Court in G.R. No. 65129 ordered the new trial of M.C. No. 374-82, after clarifying the expanded jurisdiction of the trial court with authority to decide non-contentious and contentious issues, Civil Case No. 9114 was already existent. When the issue of the dismissal of Civil Case No. 9114 on the ground of pendency of M.C. No. 374-82 was raised before the trial court wherein the said Civil Case No. 9114 was docketed, the trial court chose to merely defer resolution thereof. And when the said issue of litis pendentia was raised before the Court of Appeals via a special civil action of certiorari in CA-G.R. SP No. 15356, the Court of Appeals, while agreeing with respondent Averia's arguments on the existence of litis pendentia, which would ultimately result in res judicata, incorrectly ordered the mere suspension of Civil Case No. 9114 to await the final termination of M.C. No. 374-82, instead of dismissing the case and/or ordering that the claim for damages be filed in M.C. No. 374-82.

The decision of the Court of Appeals was promulgated on December 21, 1989 and by then, M.C. No. 374 82 had long been resolved by the trial court and pending appeal with the Court of Appeals. Since no appeal was filed from the decision of the Court of Appeals in CA-G.R. SP No. 15356, the resolution therein of the appellate court which ordered the suspension instead of dismissal of Civil Case No. 9114, became final. Thus, even if erroneous, the ruling of the Court of Appeals in CA-G.R. SP No. 15356 has become the law of the case as between herein petitioner Padillo and respondent Averia, and may no longer be disturbed or modified.52 It is not subject to review or reversal in any court.

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

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

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

The only amount of unrealized income petitioner should be entitled to is the unrealized monthly rentals which respondent Averia admits to be in the amount of Eight Hundred Pesos (P800.00) a month or Nine Thousand Six Hundred Pesos (P9,600.00) a year during the sixth (6th) to tenth (10th) year of the Contract of Lease between Marina de Vera Quicho, as Lessor, and respondent Averia, as Lessee, which fell on 1982 to 1986.55 Inasmuch as respondent Averia had been in possession of the property from January 1982 to February 1992 when he vacated the property,56 it is but just for him to pay petitioner the unrealized rentals of Ninety-Seven Thousand Six Hundred Pesos (P97,600.00) for that period of time. Furthermore, said amount of Ninety-Seven Thousand Six Hundred Pesos (P97,600.00) shall earn interest57 at the legal rate58 computed from the finality of this decision.59

On the award of moral and exemplary damages in the amounts of Fifty Thousand Pesos (P50,000.00) and Twenty Thousand Pesos (P20,000.00), respectively, we find that there is no sound basis for the award. It cannot be logically inferred that just because respondent Averia instituted Civil Case No. 1690-G while M.C. No. 374-82 was pending, malice or bad faith is immediately ascribable against the said respondent to warrant such an award.

The issue of whether the trial court in M.C. No. 374-82 could adjudicate contentious issues was only resolved by this Court in G.R. No. 65129 on December 29, 198660 long after the dismissal of Civil Case No. 1690-G which was instituted by respondent Averia.61 That respondent Averia instituted a separate suit which was subsequently dismissed and all actions or appeals taken by respondent Averia relative to M.C. No.

374-82 does not per se make such actions or appeals wrongful and subject respondent Averia to payment of moral damages. The law could not have meant to impose a penalty on the right to litigate. Such right is so precious that moral damages may not be charged on those who may exercise it erroneously. One may have erred, but error alone is not a ground for moral damages.62

In the absence of malice and bad faith, the mental anguish suffered by a person for having been made a party in a civil case is not the kind of anxiety which would warrant the award of moral damages. 63 The emotional distress, worries and anxieties suffered by her and her husband 64 are only such as are usually caused to a party hauled into Court as a party in a litigation. Therefore, there is no sufficient justification for the award of moral damages, more so, exemplary damages, and must therefore be deleted.

With respect to attorney's fees, the award thereof is the exception rather than the general rule; counsel's fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.65 Attorney's fees as part of damages are not the same as attorney's fees in the concept of the amount paid to a lawyer. In the ordinary sense, attorney's fees represent the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter, while in its extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party.66

Attorney's fees as part of damages is awarded only in the instances specified in Article 2208 of the Civil Code.67 As such, it is necessary for the court to make findings of facts and law that would bring the case within the exception and justify the grant of such award, and in all cases it must be reasonable. Thereunder, the trial court may award attorney's fees where it deems just and equitable that it be so granted. While we respect the trial court's exercise of its discretion in this case, we find the award of the trial court of attorney's fees in the sum of One Hundred Seven Thousand Pesos (P107,000.00) plus One Thousand Pesos (P1,000.00) per appearance in the hearing of the case and litigation expenses of Ten Thousand Pesos (P10,000.00), to be unreasonable and excessive. Attorney's fees as part of damages is not meant to enrich the winning party at the expense of the losing litigant. Thus, it should be reasonably reduced to Twenty-Five Thousand Pesos (P25,000.00).

Because of the conclusions we have thus reached, there is no need to delve any further on the other assigned errors.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated November 22, 1994 in CA-G.R. CV No. 40142 is REVERSED and SET ASIDE and another in its stead is hereby rendered ORDERING respondent Tomas Averia, Jr., to pay petitioner Veronica Padillo the amounts of (a) Ninety-Seven Thousand Six Hundred Pesos (P97,600.00) as unrealized rentals which shall earn interest at the legal rate from the finality of the this decision until fully paid, and (b) Twenty-Five Thousand Pesos (P25,000.00) as attorney's fees.

SO ORDERED.

Bellosillo, Mendoza, and Quisumbing, JJ., concur.Buena, J., on official leave.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

 

G.R. No. 97412 July 12, 1994

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EASTERN SHIPPING LINES, INC., petitioner, vs.HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.

Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.

Zapa Law Office for private respondent.

 

VITUG, J.:

The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the customs broker; (b) whether the payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).

The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed facts that have led to the controversy are hereunder reproduced:

This is an action against defendants shipping company, arrastre operator and broker-forwarder for damages sustained by a shipment while in defendants' custody, filed by the insurer-subrogee who paid the consignee the value of such losses/damages.

On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance Policy No. 81/01177 for P36,382,466.38.

Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without seal (per "Request for Bad Order Survey." Exh. D).

On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted to one drum which contained spillages, while the rest of the contents was adulterated/fake (per "Bad Order Waybill" No. 10649, Exh. E).

Plaintiff contended that due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims were presented against defendants who failed and refused to pay the same (Exhs. H, I, J, K, L).

As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against defendants (per "Form of Subrogation", "Release" and Philbanking check, Exhs. M, N, and O). (pp. 85-86, Rollo.)

There were, to be sure, other factual issues that confronted both courts. Here, the appellate court said:

Defendants filed their respective answers, traversing the material allegations of the complaint contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the latter, is no longer its liability (p. 17, Record); Metroport averred that although subject shipment was discharged unto its custody, portion of the same was already in bad order (p. 11, Record); Allied Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at fault for the shipment was already in damage and bad order condition when received by it, but nonetheless, it still exercised extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it.

From the evidence the court found the following:

The issues are:

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

2. Whether or not these losses/damages were sustained while in the custody of defendants (in whose respective custody, if determinable);

3. Whether or not defendant(s) should be held liable for the losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34; Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38).

As to the first issue, there can be no doubt that the shipment sustained losses/damages. The two drums were shipped in good order and condition, as clearly shown by the Bill of Lading and Commercial Invoice which do not indicate any damages drum that was shipped (Exhs. B and C). But when on December 12, 1981 the shipment was delivered to defendant Metro Port Service, Inc., it excepted to one drum in bad order.

Correspondingly, as to the second issue, it follows that the losses/damages were sustained while in the respective and/or successive custody and possession of defendants carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage). This becomes evident when the Marine Cargo Survey Report (Exh. G), with its "Additional Survey Notes", are considered. In the latter notes, it is stated that when the shipment was "landed on vessel" to dock of Pier # 15, South Harbor, Manila on December 12, 1981, it was observed that "one (1) fiber drum (was) in damaged condition, covered by the vessel's Agent's Bad Order Tally Sheet No. 86427." The report further states that when defendant Allied Brokerage withdrew the shipment from defendant arrastre operator's custody on January 7, 1982, one drum was found opened without seal, cello bag partly torn but contents intact. Net unrecovered spillages was 15 kgs. The report went on to state that when the drums reached the consignee, one drum was found with adulterated/faked contents. It is obvious, therefore, that these losses/damages occurred before the shipment reached the consignee while under the successive custodies of

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defendants. Under Art. 1737 of the New Civil Code, the common carrier's duty to observe extraordinary diligence in the vigilance of goods remains in full force and effect even if the goods are temporarily unloaded and stored in transit in the warehouse of the carrier at the place of destination, until the consignee has been advised and has had reasonable opportunity to remove or dispose of the goods (Art. 1738, NCC). Defendant Eastern Shipping's own exhibit, the "Turn-Over Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states that on December 12, 1981 one drum was found "open".

and thus held:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:

A. Ordering defendants to pay plaintiff, jointly and severally:

1. The amount of P19,032.95, with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the Management Contract);

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

3. Costs.

B. Dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation.

SO ORDERED. (p. 207, Record).

Dissatisfied, defendant's recourse to US.

The appeal is devoid of merit.

After a careful scrutiny of the evidence on record. We find that the conclusion drawn therefrom is correct. As there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants, and therefore they are liable to the appellee, as subrogee for the amount it paid to the consignee. (pp. 87-89, Rollo.)

The Court of Appeals thus affirmed in toto the judgment of the court a quo.

In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of discretion on the part of the appellate court when —

I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION;

II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED.

The petition is, in part, granted.

In this decision, we have begun by saying that the questions raised by petitioner carrier are not all that novel. Indeed, we do have a fairly good number of previous decisions this Court can merely tack to.

The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases, enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can be applied to this case.

The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has, too, been passed upon by the Court. In  Fireman's Fund Insurance vs. Metro Port Services (182 SCRA 455), we have explained, in holding the carrier and the arrastre operator liable in solidum, thus:

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the consignee.

We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or  vice-versa, nor that attendant facts in a given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court  a quo and the appellate court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it.

It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing remark.

Let us first see a chronological recitation of the major rulings of this Court:

24

The early case of Malayan Insurance Co., Inc., vs. Manila Port Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its complaint that the total amount of its claim for the value of the undelivered goods amounted to P3,947.20. This demand, however, was neither established in its totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the complaint was filed on 28 December 1962 until full payment thereof.  The appellants then assailed, inter alia, the award of legal interest. In sustaining the appellants, this Court ruled:

Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial. The trial court opted for judicial demand as the starting point.

But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty." And as was held by this Court in Rivera vs. Perez, 4 L-6998, February 29, 1956, if the suit were for damages, "unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco v. Guzman, 38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis supplied)

The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was for "Recovery of Damages for Injury to Person and Loss of Property." After trial, the lower court decreed:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows:

Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and severally the following persons:

xxx xxx xxx

(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the value of the boat F B Pacita III together with its accessories, fishing gear and equipment minus P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs against defendants and third party plaintiffs. (Emphasis supplied.)

On appeal to the Court of Appeals, the latter modified the amount of damages awarded but sustained the trial court in adjudging legal interest from the filing of the complaint until fully paid . When the appellate court's decision became final, the case was remanded to the lower court for execution, and this was when the trial court issued its assailed resolution which applied the 6% interest per annum prescribed in Article 2209 of the Civil Code. In their petition for review on certiorari, the petitioners contended that Central Bank Circular No. 416, providing thus —

By virtue of the authority granted to it under Section 1 of Act 2655, as amended, Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for the loan, or forbearance of any money, goods, or credits and the rate allowed in judgments, in the absence of express contract as to such rate of

interest, shall be twelve (12%) percent per annum. This Circular shall take effect immediately. (Emphasis found in the text) —

should have, instead, been applied. This Court 6 ruled:

The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with, nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank.

xxx xxx xxx

Coming to the case at bar, the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code which reads —

Art. 2209. — If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum.

The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28 July 1986. The case was for damages occasioned by an injury to person and loss of property. The trial court awarded private respondent Pedro Manabat actual and compensatory damages in the amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully paid . Relying on the Reformina v. Tomol case, this Court 8 modified the interest award from 12% to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid.

In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action for the recovery of damages arising from the collapse of a building, ordered, inter alia, the "defendant United Construction Co., Inc. (one of the petitioners)  . . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from November 29, 1968, the date of the filing of the complaint until full payment . . . ." Save from the modification of the amount granted by the lower court, the Court of Appeals sustained the trial court's decision. When taken to this Court for review, the case, on 03 October 1986, was decided, thus:

WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, we deem it reasonable to render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra. p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with the exception to attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon the finality of this decision.  Upon failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon aforementioned amounts from finality until paid. Solidary costs against the defendant and third-party defendants (Except Roman Ozaeta). (Emphasis supplied)

A motion for reconsideration was filed by United Construction, contending that "the interest of twelve (12%) per cent per annum imposed on the total amount of the monetary award was in

25

contravention of law." The Court  10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it explained:

There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any money, goods or credit; and(3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is true that in the instant case, there is neither a loan or a forbearance, but then no interest is actually imposed provided the sums referred to in the judgment are paid upon the finality of the judgment. It is delay in the payment of such final judgment, that will cause the imposition of the interest.

It will be noted that in the cases already adverted to, the rate of interest is imposed on the total sum, from the filing of the complaint until paid; in other words, as part of the judgment for damages. Clearly, they are not applicable to the instant case. (Emphasis supplied.)

The subsequent case of American Express International, Inc., vs. Intermediate Appellate Court 11 was a petition for review on certiorari from the decision, dated 27 February 1985, of the then Intermediate Appellate Court reducing the amount of moral and exemplary damages awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and its resolution, dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e., P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest thereon at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09 November 1988, this Court, while recognizing the right of the private respondent to recover damages, held the award, however, for moral damages by the trial court, later sustained by the IAC, to be inconceivably large. The Court 12 thus set aside the decision of the appellate court and rendered a new one, "ordering the petitioner to pay private respondent the sum of One Hundred Thousand (P100,000.00) Pesos as moral damages, with six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis supplied)

Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz 13 which arose from a breach of employment contract. For having been illegally dismissed, the petitioner was awarded by the trial court moral and exemplary damages without, however, providing any legal interest thereon. When the decision was appealed to the Court of Appeals, the latter held:

WHEREFORE, except as modified hereinabove the decision of the CFI of Negros Oriental dated October 31, 1972 is affirmed in all respects, with the modification that defendants-appellants, except defendant-appellant Merton Munn, are ordered to pay, jointly and severally, the amounts stated in the dispositive portion of the decision, including the sum of P1,400.00 in concept of compensatory damages, with interest at the legal rate from the date of the filing of the complaint until fully paid(Emphasis supplied.)

The petition for review to this Court was denied. The records were thereupon transmitted to the trial court, and an entry of judgment was made. The writ of execution issued by the trial court directed that only compensatory damages should earn interest at 6%  per annum from the date of the filing of the complaint. Ascribing grave abuse of discretion on the part of the trial judge, a petition for certiorari assailed the said order. This Court said:

. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the legal rate" from the time of the filing of the complaint. . . Said circular [Central Bank Circular No. 416] does not apply to actions based on a breach of employment contract like the case at bar. (Emphasis supplied)

The Court reiterated that the 6% interest per annum on the damages should be computed from the time the complaint was filed until the amount is fully paid.

Quite recently, the Court had another occasion to rule on the matter. National Power Corporation vs. Angas, 14decided on 08 May 1992, involved the expropriation of certain parcels of land. After conducting a hearing on the complaints for eminent domain, the trial court ordered the petitioner to pay the private respondents certain sums of money as just compensation for their lands so expropriated "with legal interest thereon . . . until fully paid." Again, in applying the 6% legal interest per annum under the Civil Code, the Court 15 declared:

. . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods or credits but expropriation of certain parcels of land for a public purpose, the payment of which is without stipulation regarding interest, and the interest adjudged by the trial court is in the nature of indemnity for damages. The legal interest required to be paid on the amount of just compensation for the properties expropriated is manifestly in the form of indemnity for damages for the delay in the payment thereof. Therefore, since the kind of interest involved in the joint judgment of the lower court sought to be enforced in this case is interest by way of damages, and not by way of earnings from loans, etc. Art. 2209 of the Civil Code shall apply.

Concededly, there have been seeming variances in the above holdings. The cases can perhaps be classified into two groups according to the similarity of the issues involved and the corresponding rulings rendered by the court. The "first group" would consist of the cases of  Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz(1986), Florendo v. Ruiz (1989) and National Power Corporation v. Angas (1992). In the "second group" would be Malayan Insurance Company v.Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express International v.Intermediate Appellate Court (1988).

In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code) or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance 16of money, goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general. Observe, too, that in these cases, a common time frame in the computation of the 6% interest per annum has been applied, i.e., from the time the complaint is filed until the adjudged amount is fully paid.

The "second group", did not alter the pronounced rule on the application of the 6% or 12% interest  per annum, 17depending on whether or not the amount involved is a loan or forbearance, on the one hand, or one of indemnity for damage, on the other hand. Unlike, however, the "first group" which remained consistent in holding that the running of the legal interest should be from the time of the filing of the complaint until fully paid, the "second group" varied on the commencement of the running of the legal interest.

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

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

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts 18 is breached, the contravenor can be held liable for damages.  19 The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.  20

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II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money,  i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. 21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. 22 In the absence of stipulation, the rate of interest shall be 12%  per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169  23 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court 24 at the rate of 6% per annum. 25 No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.  26 Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12%  per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment thereof.

SO ORDERED.

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

Mendoza, J., took no part.

Republic of the PhilippinesSUPREME COURTBaguio

FIRST DIVISION

G.R. No. 175139               April 18, 2012

HERMOJINA ESTORES, Petitioner, vs.SPOUSES ARTURO and LAURA SUPANGAN, Respondents.

D E C I S I O N

DEL CASTILLO, J.:

The only issue posed before us is the propriety of the imposition of interest and attorney’s fees.

Assailed in this Petition for Review1 filed under Rule 45 of the Rules of Court is the May 12, 2006 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 83123, the dispositive portion of which reads:

WHEREFORE, the appealed decision is MODIFIED. The rate of interest shall be six percent (6%) per annum, computed from September 27, 2000 until its full payment before finality of the judgment. If the adjudged principal and the interest (or any part thereof) remain unpaid thereafter, the interest rate shall be adjusted to twelve percent (12%) per annum, computed from the time the judgment becomes final and executory until it is fully satisfied. The award of attorney’s fees is hereby reduced to P100,000.00. Costs against the defendants-appellants.

SO ORDERED.3

Also assailed is the August 31, 2006 Resolution4 denying the motion for reconsideration.

Factual Antecedents

On October 3, 1993, petitioner Hermojina Estores and respondent-spouses Arturo and Laura Supangan entered into a Conditional Deed of Sale5 whereby petitioner offered to sell, and respondent-spouses offered to buy, a parcel of land covered by Transfer Certificate of Title No. TCT No. 98720 located at Naic, Cavite for the sum of P4.7 million. The parties likewise stipulated, among others, to wit:

x x x x

1. Vendor will secure approved clearance from DAR requirements of which are (sic):

a) Letter request

b) Title

c) Tax Declaration

d) Affidavit of Aggregate Landholding – Vendor/Vendee

e) Certification from the Prov’l. Assessor’s as to Landholdings of Vendor/Vendee

f) Affidavit of Non-Tenancy

g) Deed of Absolute Sale

x x x x

4. Vendee shall be informed as to the status of DAR clearance within 10 days upon signing of the documents.

x x x x

6. Regarding the house located within the perimeter of the subject [lot] owned by spouses [Magbago], said house shall be moved outside the perimeter of this subject property to the 300 sq. m. area allocated for [it]. Vendor hereby accepts the responsibility of seeing to it that such agreement is carried out before full payment of the sale is made by vendee.

27

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

x x x x

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

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

x x x x 6

After almost seven years from the time of the execution of the contract and notwithstanding payment of  P3.5 million on the part of respondent-spouses, petitioner still failed to comply with her obligation as expressly provided in paragraphs 4, 6, 7, 9 and 10 of the contract. Hence, in a letter 7 dated September 27, 2000, respondent-spouses demanded the return of the amount of P3.5 million within 15 days from receipt of the letter. In reply,8 petitioner acknowledged receipt of the P3.5 million and promised to return the same within 120 days. Respondent-spouses were amenable to the proposal provided an interest of 12% compounded annually shall be imposed on the P3.5 million.9 When petitioner still failed to return the amount despite demand, respondent-spouses were constrained to file a Complaint10 for sum of money before the Regional Trial Court (RTC) of Malabon against herein petitioner as well as Roberto U. Arias (Arias) who allegedly acted as petitioner’s agent. The case was docketed as Civil Case No. 3201-MN and raffled off to Branch 170. In their complaint, respondent-spouses prayed that petitioner and Arias be ordered to:

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

2. Pay the following items of damages:

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

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

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

d) [Attorney’s] fee in the amount of P50,000.00 plus 20% of recoverable amount from the [petitioner].

e) [C]ost of suit.11

In their Answer with Counterclaim,12 petitioner and Arias averred that they are willing to return the principal amount of P3.5 million but without any interest as the same was not agreed upon. In their Pre-Trial Brief,13 they reiterated that the only remaining issue between the parties is the imposition of interest. They argued that since the Conditional Deed of Sale provided only for the return of the downpayment in case of breach, they cannot be held liable to pay legal interest as well.14

In its Pre-Trial Order15 dated June 29, 2001, the RTC noted that "the parties agreed that the principal amount of 3.5 million pesos should be returned to the [respondent-spouses] by the [petitioner] and the issue remaining [is] whether x x x [respondent-spouses] are entitled to legal interest thereon, damages and attorney’s fees."16

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

Ruling of the Regional Trial Court

On May 7, 2004, the RTC rendered its Decision19 finding respondent-spouses entitled to interest but only at the rate of 6% per annum and not 12% as prayed by them. 20 It also found respondent-spouses entitled to attorney’s fees as they were compelled to litigate to protect their interest.21

The dispositive portion of the RTC Decision reads:

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

1. Pay [respondent-spouses] the principal amount of Three Million Five Hundred Thousand pesos (P3,500,000.00) with an interest of 6% compounded annually starting October 1, 1993 and attorney’s fee in the amount of Fifty Thousand pesos (P50,000.00) plus 20% of the recoverable amount from the defendants and cost of the suit.

The Compulsory Counter Claim is hereby dismissed for lack of factual evidence.

SO ORDERED.22

Ruling of the Court of Appeals

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

On May 12, 2006, the CA rendered the assailed Decision affirming the ruling of the RTC finding the imposition of 6% interest proper.25 However, the same shall start to run only from September 27, 2000 when respondent-spouses formally demanded the return of their money and not from October 1993 when the contract was executed as held by the RTC. The CA also modified the RTC’s ruling as regards the liability of Arias. It held that Arias could not be held solidarily liable with petitioner because he merely acted as agent of the latter. Moreover, there was no showing that he expressly bound himself to be personally liable or that he exceeded the limits of his authority. More importantly, there was even no showing that Arias was authorized to act as agent of petitioner.26 Anent the award of attorney’s fees, the CA found the award by the trial court (P50,000.00 plus 20% of the recoverable amount) excessive27 and thus reduced the same to P100,000.00.28

The dispositive portion of the CA Decision reads:

WHEREFORE, the appealed decision is MODIFIED. The rate of interest shall be six percent (6%) per annum, computed from September 27, 2000 until its full payment before finality of the judgment. If the adjudged principal and the interest (or any part thereof) remain[s] unpaid thereafter, the interest rate shall be adjusted to twelve percent (12%) per annum, computed from the time the judgment becomes final and executory until it is fully satisfied. The award of attorney’s fees is hereby reduced to P100,000.00. Costs against the [petitioner].

SO ORDERED.29

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

28

Hence, this petition raising the sole issue of whether the imposition of interest and attorney’s fees is proper.

Petitioner’s Arguments

Petitioner insists that she is not bound to pay interest on the P3.5 million because the Conditional Deed of Sale only provided for the return of the downpayment in case of failure to comply with her obligations. Petitioner also argues that the award of attorney’s fees in favor of the respondent-spouses is unwarranted because it cannot be said that the latter won over the former since the CA even sustained her contention that the imposition of 12% interest compounded annually is totally uncalled for.

Respondent-spouses’ Arguments

Respondent-spouses aver that it is only fair that interest be imposed on the amount they paid considering that petitioner failed to return the amount upon demand and had been using the P3.5 million for her benefit. Moreover, it is undisputed that petitioner failed to perform her obligations to relocate the house outside the perimeter of the subject property and to complete the necessary documents. As regards the attorney’s fees, they claim that they are entitled to the same because they were forced to litigate when petitioner unjustly withheld the amount. Besides, the amount awarded by the CA is even smaller compared to the filing fees they paid.

Our Ruling

The petition lacks merit.

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

We sustain the ruling of both the RTC and the CA that it is proper to impose interest notwithstanding the absence of stipulation in the contract. Article 2210 of the Civil Code expressly provides that "[i]nterest may, in the discretion of the court, be allowed upon damages awarded for breach of contract." In this case, there is no question that petitioner is legally obligated to return the P3.5 million because of her failure to fulfill the obligation under the Conditional Deed of Sale, despite demand. She has in fact admitted that the conditions were not fulfilled and that she was willing to return the full amount of  P3.5 million but has not actually done so. Petitioner enjoyed the use of the money from the time it was given to her 30 until now. Thus, she is already in default of her obligation from the date of demand, i.e., on September 27, 2000.

The interest at the rate of 12% is applicable in the instant case.

Anent the interest rate, the general rule is that the applicable rate of interest "shall be computed in accordance with the stipulation of the parties."31 Absent any stipulation, the applicable rate of interest shall be 12% per annum "when the obligation arises out of a loan or a forbearance of money, goods or credits. In other cases, it shall be six percent (6%)."32 In this case, the parties did not stipulate as to the applicable rate of interest. The only question remaining therefore is whether the 6% as provided under Article 2209 of the Civil Code, or 12% under Central Bank Circular No. 416, is due.

The contract involved in this case is admittedly not a loan but a Conditional Deed of Sale. However, the contract provides that the seller (petitioner) must return the payment made by the buyer (respondent-spouses) if the conditions are not fulfilled. There is no question that they have in fact, not been fulfilled as the seller (petitioner) has admitted this. Notwithstanding demand by the buyer (respondent-spouses), the seller (petitioner) has failed to return the money and

should be considered in default from the time that demand was made on September 27, 2000.

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

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

Petitioner’s unwarranted withholding of the money which rightfully pertains to respondent-spouses amounts to forbearance of money which can be considered as an involuntary loan. Thus, the applicable rate of interest is 12% per annum. In Eastern Shipping Lines, Inc. v. Court of Appeals, 35cited in Crismina Garments, Inc. v. Court of Appeals,36 the Court suggested the following guidelines:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on ‘Damages’ of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.37

Eastern Shipping Lines, Inc. v. Court of Appeals38and its predecessor case, Reformina v. Tongol39 both involved torts cases and hence, there was no forbearance of money, goods, or credits. Further, the amount

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claimed (i.e., damages) could not be established with reasonable certainty at the time the claim was made. Hence, we arrived at a different ruling in those cases.

Since the date of demand which is September 27, 2000 was satisfactorily established during trial, then the interest rate of 12% should be reckoned from said date of demand until the principal amount and the interest thereon is fully satisfied.1âwphi1

The award of attorney’s fees is warranted.

Under Article 2208 of the Civil Code, attorney’s fees may be recovered:

x x x x

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;

x x x x

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

In all cases, the attorney’s fees and expenses of litigation must be reasonable.

Considering the circumstances of the instant case, we find respondent-spouses entitled to recover attorney’s fees. There is no doubt that they were forced to litigate to protect their interest, i.e., to recover their money. However, we find the amount of P50,000.00 more appropriate in line with the policy enunciated in Article 2208 of the Civil Code that the award of attorney’s fees must always be reasonable.

WHEREFORE, the Petition for Review is DENIED. The May 12, 2006 Decision of the Court of Appeals in CA-G.R. CV No. 83123 is AFFIRMED with MODIFICATIONS that the rate of interest shall be twelve percent (12%) per annum, computed from September 27, 2000 until fully satisfied. The award of attorney’s fees is further reduced toP50,000.00.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 164401             June 25, 2008

LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, vs.THE HONORABLE COURT OF APPEALS; THE HONORABLE PRESIDING JUDGE, Regional Trial Court, Branch 11, Sindangan, Zamboanga Del Norte; THE REGIONAL TRIAL COURT SHERIFF, Branch 11, Sindangan, Zamboanga Del Norte; THE CLERK OF COURT OF MANILA, as Ex-Officio Sheriff; and LAMBERTO T. CHUA, respondents.

D E C I S I O N

VELASCO, JR., J.:

The Case

Before us is a petition for review under Rule 45, seeking to nullify and set aside the Decision 1 and Resolution dated November 6, 2003 and July 6, 2004, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 75688. The impugned CA Decision and Resolution denied the petition for certiorari interposed by petitioners assailing the Resolutions2 dated November 6, 2002 and January 7, 2003, respectively, of the Regional Trial Court (RTC), Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, a suit for winding up of partnership affairs, accounting, and recovery of shares commenced thereat by respondent Lamberto T. Chua.

The Facts

In 1977, Chua and Jacinto Sunga formed a partnership to engage in the marketing of liquefied petroleum gas. For convenience, the business, pursued under the name, Shellite Gas Appliance Center (Shellite), was registered as a sole proprietorship in the name of Jacinto, albeit the partnership arrangement called for equal sharing of the net profit.

After Jacinto’s death in 1989, his widow, petitioner Cecilia Sunga, and married daughter, petitioner Lilibeth Sunga-Chan, continued with the business without Chua’s consent. Chua’s subsequent repeated demands for accounting and winding up went unheeded, prompting him to file on June 22, 1992 a Complaint for Winding Up of a Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment, docketed as Civil Case No. S-494 of the RTC in Sindangan, Zamboanga del Norte and raffled to Branch 11 of the court.

After trial, the RTC rendered, on October 7, 1997, judgment finding for Chua, as plaintiff a quo. The RTC’s decision would subsequently be upheld by the CA in CA-G.R. CV No. 58751 and by this Court per its Decision dated August 15, 2001 in G.R. No. 143340.3 The corresponding Entry of Judgment4 would later issue declaring the October 7, 1997 RTC decision final and executory as of December 20, 2001. The fallo of the RTC’s decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, as follows:

(1) DIRECTING them to render an accounting in acceptable form under accounting procedures and standards of the properties, assets, income and profits of [Shellite] since the time of death of Jacinto L. Sunga , from whom they continued the business operations including all businesses derived from [Shellite]; submit an inventory, and appraisal of all these properties, assets, income, profits, etc. to the Court and to plaintiff for approval or disapproval;

(2) ORDERING them to return and restitute to the partnership any and all properties, assets, income and profits they misapplied and converted  to their own use and advantage that legally pertain to the plaintiff and account for the properties mentioned in pars. A and B on pages 4-5 of this petition as basis;

(3) DIRECTING them to restitute and pay to the plaintiff ½ shares and interest of the plaintiff in the partnership of the listed properties, assets and good will in schedules A, B and C, on pages 4-5 of the petition;

(4) ORDERING them to pay the plaintiff earned but unreceived income and profits from the partnership from 1988 to May 30, 1992, when the plaintiff learned of the closure of the store the sum of P35,000.00 per month, with legal rate of interest until fully paid;

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(5) ORDERING them to wind up the affairs of the partnership and terminate its business activities pursuant to law, after delivering to the plaintiff all the ½ interest, shares, participation and equity in the partnership, or the value thereof in money or money’s worth, if the properties are not physically divisible;

(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to the plaintiff the sum of P50,000.00 as moral and exemplary damages; and,

(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorney’s [fee] and P25,000.00 as litigation expenses.

NO special pronouncements as to COSTS.

SO ORDERED.5 (Emphasis supplied.)

Via an Order6 dated January 16, 2002, the RTC granted Chua’s motion for execution. Over a month later, the RTC, acting on another motion of Chua, issued an amended writ of execution.7

It seems, however, that the amended writ of execution could not be immediately implemented, for, in an omnibus motion of April 3, 2002, Chua, inter alia, asked the trial court to commission a certified public accountant (CPA) to undertake the accounting work and inventory of the partnership assets if petitioners refuse to do it within the time set by the court. Chua later moved to withdraw his motion and instead ask the admission of an accounting report prepared by CPA Cheryl A. Gahuman. In the report under the heading, Computation of Claims,8 Chua’s aggregate claim, arrived at using the compounding-of-interest method, amounted to PhP 14,277,344.94. Subsequently, the RTC admitted and approved the computation of claims in view of petitioners’ failure and refusal, despite notice, to appear and submit an accounting report on the winding up of the partnership on the scheduled hearings on April 29 and 30, 2002.9

After another lengthy proceedings, petitioners, on September 24, 2002, submitted their own CPA-certified valuation and accounting report. In it, petitioners limited Chua’s entitlement from the winding up of partnership affairs to an aggregate amount of PhP 3,154,736.65 only.10 Chua, on the other hand, submitted a new computation,11 this time applying simple interest on the various items covered by his claim. Under this methodology, Chua’s aggregate claim went down to PhP 8,733,644.75.

On November 6, 2002, the RTC issued a Resolution,12 rejecting the accounting report petitioners submitted, while approving the new computation of claims Chua submitted. The fallo of the resolution reads:

WHEREFORE, premises considered, this Court resolves, as it is hereby resolved, that the Computation of Claims submitted by the plaintiff dated October 15, 2002 amounting to P8,733,644.75 be APPROVED in all respects as the final computation and accounting of the defendants’ liabilities in favor of the plaintiff in the above-captioned case, DISAPPROVING for the purpose, in its entirety, the computation and accounting filed by the defendants.

SO RESOLVED.13

Petitioners sought reconsideration, but their motion was denied by the RTC per its Resolution of January 7, 2003.14

In due time, petitioners went to the CA on a petition for certiorari 15 under Rule 65, assailing the November 6, 2002 and January 7, 2003 resolutions of the RTC, the recourse docketed as CA-G.R. SP No. 75688.

The Ruling of the CA

As stated at the outset, the CA, in the herein assailed Decision of November 6, 2003, denied the petition for certiorari, thus:

WHEREFORE, the foregoing considered, the Petition is hereby DENIED for lack of merit.

SO ORDERED.16

The CA predicated its denial action on the ensuing main premises:

1. Petitioners, by not appearing on the hearing dates, i.e., April 29 and 30, 2002, scheduled to consider Chua’s computation of claims, or rendering, as required, an accounting of the winding up of the partnership, are deemed to have waived their right to interpose any objection to the computation of claims thus submitted by Chua.

2. The 12% interest added on the amounts due is proper as the unwarranted keeping by petitioners of Chua’s money passes as an involuntary loan and forbearance of money.

3. The reiterative arguments set forth in petitioners’ pleadings below were part of their delaying tactics. Petitioners had come to the appellate court at least thrice and to this Court twice. Petitioners had more than enough time to question the award and it is now too late in the day to change what had become final and executory.

Petitioners’ motion for reconsideration was rejected by the appellate court through the assailed Resolution17 dated July 6, 2004. Therein, the CA explained that the imposition of the 12% interest for forbearance of credit or money was proper pursuant to paragraph 1 of the October 7, 1997 RTC decision, as the computation done by CPA Gahuman was made in "acceptable form under accounting procedures and standards of the properties, assets, income and profits of [Shellite]."18 Moreover, the CA ruled that the imposition of interest is not based on par. 3 of the October 7, 1997 RTC decision as the phrase "shares and interests" mentioned therein refers not to an imposition of interest for use of money in a loan or credit, but to a legal share or right. The appellate court also held that the imposition of interest on the partnership assets falls under par. 2 in relation to par. 1 of the final RTC decision as the restitution mentioned therein does not simply mean restoration but also reparation for the injury or damage committed against the rightful owner of the property.

Finally, the CA declared the partnership assets referred to in the final decision as "liquidated claim" since the claim of Chua is ascertainable by mathematical computation; therefore, interest is recoverable as an element of damage.

The Issues

Hence, the instant petition with petitioners raising the following issues for our consideration:

I.

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

II.

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

III.

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Whether or not the absolute community of property of spouses Lilibeth Sunga Chan with her husband Norberto Chan can be lawfully made to answer for the liability of Lilibeth Chan under the judgment.19

Significant Intervening Events

In the meantime, pending resolution of the instant petition for review and even before the resolution by the CA of its CA-G.R. SP No. 75688, the following relevant events transpired:

1. Following the RTC’s approval of Chua’s computation of claims in the amount of PhP 8,733,644.75, the sheriff of Manila levied upon petitioner Sunga-Chan’s property located along Linao St., Paco, Manila, covered by Transfer Certificate of Title (TCT) No. 208782, 20 over which a building leased to the Philippine National Bank (PNB) stood. In the auction sale of the levied lot, Chua, with a tender of PhP 8 million,21 emerged as the winning bidder.

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

3. On February 18, 2005, Chua moved for the confirmation of the sheriff’s final deed of sale and for the issuance of an order for the cancellation of TCT No. 208782. Petitioners again interposed an opposition in which they informed the RTC that this Court had already granted due course to their petition for review on January 31, 2005;

4. On April 11, 2005, the RTC, via a Resolution, confirmed the sheriff’s final deed of sale, ordered the Registry of Deeds of Manila to cancel TCT No. 208782, and granted a writ of possession23 in favor of Chua.

5. On May 3, 2005, petitioners filed before this Court a petition for the issuance of a temporary restraining order (TRO). On May 24, 2005, the sheriff of Manila issued a Notice to Vacate24 against petitioners, compelling petitioners to repair to this Court anew for the resolution of their petition for a TRO.

6. On May 31, 2005, the Court issued a TRO,25 enjoining the RTC and the sheriff from enforcing the April 11, 2005 writ of possession and the May 24, 2005 Notice to Vacate. Consequently, the RTC issued an Order26 on June 17, 2005, suspending the execution proceedings before it.

7. Owing to the clashing ownership claims over the leased Paco property, coupled with the filing of an unlawful detainer suit before the Metropolitan Trial Court (MeTC) in Manila against PNB, the Court, upon the bank’s motion, allowed, by Resolution 27 dated April 26, 2006, the consignation of the monthly rentals with the MeTC hearing the ejectment case.

The Court’s Ruling

The petition is partly meritorious.

First Issue: Interest Proper in Forbearance of Credit

Petitioners, citing Article 221328 of the Civil Code, fault the trial court for imposing, in the execution of its final judgment, interests on what they considered as unliquidated claims. Among these was the claim for goodwill upon which the RTC attached a monetary value of PhP 250,000. Petitioners also question the imposition of 12% interest on the claimed monthly profits of PhP 35,000, reckoned from 1988 to October 15, 1992. To

petitioners, the imposable rate should only be 6% and computed from the finality of the RTC’s underlying decision, i.e., from December 20, 2001.

Third on the petitioners’ list of unliquidated claims is the yet-to-be established value of the one-half partnership share and interest adjudicated to Chua, which, they submit, must first be determined with reasonable certainty in a judicial proceeding. And in this regard, petitioners, citing  Eastern Shipping Lines, Inc. v. Court of Appeals,29 would ascribe error on the RTC for adding a 12% per annum interest on the approved valuation of the one-half share of the assets, inclusive of goodwill, due Chua.

Petitioners are partly correct.

For clarity, we reproduce the summary valuations and accounting reports on the computation of claims certified to by the parties’ respective CPAs. Chua claimed the following:

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

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

C Legal interest on share of assets from June 1, 1992 to Oct. 15, 2002 at 12% interest per year (Schedule 2)

D Unreceived profits from 1988 to 1992 and its corresponding interest from Jan. 1, 1988 to Oct. 15, 2002 (Schedule 3)

E Damages

F Attorney’s fees

G Litigation fees

TOTAL AMOUNT

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

Total Assets – Schedule 1

50% due to Lamberto Chua

Total Alleged Profit, Net of Payments Made,May 1992-Sch. 2

50% share in the monetary value of goodwill(500,000 x 50%)

Moral and Exemplary Damages

Attorney’s Fee

Litigation Fee

TOTAL AMOUNT

As may be recalled, the trial court admitted and approved Chua’s computation of claims amounting to PhP 8,733,644.75, but rejected that of petitioners, who came up with the figure of only PhP 3,154,736.65. We highlight the substantial differences in the accounting reports on the following items, to wit: (1) the

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aggregate amount of the partnership assets bearing on the 50% share of Chua thereon; (2) interests added on Chua’s share of the assets; (3) amount of profits from 1988 through May 30, 1992, net of alleged payments made to Chua; and (4) interests added on the amount entered as profits.

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

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

This brings us to the question of the propriety of the imposition of interest and, if proper, the imposable rate of interest applicable.

In Reformina v. Tomol, Jr.,30 the Court held that the legal interest at 12% per annum under Central Bank (CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money. And for transactions involving payment of indemnities in the concept of damages arising from default in the performance of obligations in general and/or for money judgment not involving a loan or forbearance of money, goods, or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly 6% interest. Art. 2209 pertinently provides:

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.

The term "forbearance," within the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable.31

Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only to loans or forbearance of money, goods, or credits, as well as to judgments involving such loan or forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies "when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general,"32 with the application of both rates reckoned "from the time the complaint was filed until the [adjudged] amount is fully paid." 33In either instance, the reckoning period for the commencement of the running of the legal interest shall be subject to the condition "that the courts are vested with discretion, depending on the equities of each case, on the award of interest."34

Otherwise formulated, the norm to be followed in the future on the rates and application thereof is:

I. – When an obligation, regardless of its source, is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. – With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation breached consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation not constituting loans or forbearance of money is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.35

Guided by the foregoing rules, the award to Chua of the amount representing earned but unremitted profits, i.e.. PhP 35,000 monthly, from January 1988 until May 30, 1992, must earn interest at 6% per annum reckoned from October 7, 1997, the rendition date of the RTC decision, until December 20, 2001, when the said decision became final and executory. Thereafter, the total of the monthly profits inclusive of the add on 6% interest shall earn 12% per annum reckoned from December 20, 2001 until fully paid, as the award for that item is considered to be, by then, equivalent to a forbearance of credit. Likewise, the PhP 250,000 award, representing the goodwill value of the business, the award of PhP 50,000 for moral and exemplary damages, PhP 25,000 attorney’s fee, and PhP 25,000 litigation fee shall earn 12% per annum from December 20, 2001 until fully paid.

Anent the impasse over the partnership assets, we are inclined to agree with petitioners’ assertion that Chua’s share and interest on such assets partake of an unliquidated claim which, until reasonably determined, shall not earn interest for him. As may be noted, the legal norm for interest to accrue is "reasonably determinable," not, as Chua suggested and the CA declared, determinable by mathematical computation.

The Court has certainly not lost sight of the fact that the October 7, 1997 RTC decision clearly directed petitioners to render an accounting, inventory, and appraisal of the partnership assets and then to wind up the partnership affairs by restituting and delivering to Chua his one-half share of the accounted partnership assets. The directive itself is a recognition that the exact share and interest of Chua over the partnership cannot be determined with reasonable precision without going through with the inventory and accounting process. In fine, a liquidated claim cannot validly be asserted without accounting. In net effect, Chua’s interest and share over the partnership asset, exclusive of the goodwill, assumed the nature of a liquidated claim only after the trial court, through its November 6, 2002 resolution, approved the assets inventory and accounting report on such assets.

Considering that Chua’s computation of claim, as approved by the trial court, was submitted only on October 15, 2002, no interest in his favor can be added to his share of the partnership assets. Consequently, the computation of claims of Chua should be as follows:

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

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(2) 50% share in the monetary value of goodwill(PhP 500,000 x 50%)

(3) 12% interest on share of goodwill from December 20, 2001 to October 15, 2000[PhP 250,000 x 0.12 x 299/365 days]

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

(5) 6% interest on unreceived profits from January 1, 1988 to December 20, 200136

(6) 12% interest on unreceived profits from December

20, 2001 to October 15, 2002[PhP 3,215,362.50 x 12% x 299/365 days]

(7) Moral and exemplary damages

(8) Attorney’s fee

(9) Litigation fee

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

attorney’s fee, and litigation fee from December 20, 2001 to October 15, 2002[PhP 100,000 x 12% x 299/365 days]

TOTAL AMOUNT

Second Issue: Petitioners’ Obligation Solidary

Petitioners, on the submission that their liability under the RTC decision is divisible, impugn the implementation of the amended writ of execution, particularly the levy on execution of the absolute community property of spouses petitioner Sunga-Chan and Norberto Chan. Joint, instead of solidary, liability for any and all claims of Chua is obviously petitioners’ thesis.

Under the circumstances surrounding the case, we hold that the obligation of petitioners is solidary for several reasons.

For one, the complaint of Chua for winding up of partnership affairs, accounting, appraisal, and recovery of shares and damages is clearly a suit to enforce a solidary or joint and several obligation on the part of petitioners. As it were, the continuance of the business and management of Shellite by petitioners against the will of Chua gave rise to a solidary obligation, the acts complained of not being severable in nature. Indeed, it is well-nigh impossible to draw the line between when the liability of one petitioner ends and the liability of the other starts. In this kind of situation, the law itself imposes solidary obligation. Art. 1207 of the Civil Code thus provides:

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each of the latter is bound to render, entire compliance with the prestation. There is solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (Emphasis ours.)

Any suggestion that the obligation to undertake an inventory, render an accounting of partnership assets, and to wind up the partnership affairs is divisible ought to be dismissed.

For the other, the duty of petitioners to remit to Chua his half interest and share of the total partnership assets proceeds from petitioners’ indivisible obligation to render an accounting and inventory of such assets. The need for the imposition of a solidary liability becomes all the more pronounced considering the impossibility of quantifying how much of the partnership assets or profits was misappropriated by each petitioner.

And for a third, petitioners’ obligation for the payment of damages and attorney’s and litigation fees ought to be solidary in nature, they having resisted in bad faith a legitimate claim and thus compelled Chua to litigate.

Third Issue: Community Property Liable

Primarily anchored as the last issue is the erroneous theory of divisibility of petitioners’ obligation and their joint liability therefor. The Court needs to dwell on it lengthily.

Given the solidary liability of petitioners to satisfy the judgment award, respondent sheriff cannot really be faulted for levying upon and then selling at public auction the property of petitioner Sunga-Chan to answer for the whole obligation of petitioners. The fact that the levied parcel of land is a conjugal or community property, as the case may be, of spouses Norberto and Sunga-Chan does not per se vitiate the levy and the consequent sale of the property. Verily, said property is not among those exempted from execution under Section 13,37 Rule 39 of the Rules of Court.

And it cannot be overemphasized that the TRO issued by the Court on May 31, 2005 came after the auction sale in question.

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

Art. 94. The absolute community of property shall be liable for:

(1) x x x x

(2) All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the community, or by both spouses, or by one spouse with the consent of the other.

(3) Debts and obligations contracted by either spouse without the consent of the other  to the extent that the family may have been benefited. (Emphasis ours.)

Absent any indication otherwise, the use and appropriation by petitioner Sunga-Chan of the assets of Shellite even after the business was discontinued on May 30, 1992 may reasonably be considered to have been used for her and her husband’s benefit.

It may be stressed at this juncture that Chua’s legitimate claim against petitioners, as readjusted in this disposition, amounts to only PhP 5,529,392.52, whereas Sunga-Chan’s auctioned property which Chua acquired, as the highest bidder, fetched a price of PhP 8 million. In net effect, Chua owes petitioner Sunga-Chan the amount of PhP 2,470,607.48, representing the excess of the purchase price over his legitimate claims.

Following the auction, the corresponding certificate of sale dated January 15, 2004 was annotated on TCT No. 208782. On January 21, 2005, Chua moved for the issuance of a final deed of sale (1) to order the Registry of Deeds of Manila to cancel TCT No. 208782; (2) to issue a new TCT in his name; and (3) for the RTC to issue a writ of possession in his favor. And as earlier stated, the RTC granted Chua’s motion, albeit the Court restrained the enforcement of the RTC’s package of orders via a TRO issued on May 31, 2005.

Therefore, subject to the payment by Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, we affirm the RTC’s April 11, 2005 resolution, confirming the sheriff’s final deed of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of Chua.

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WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the assailed decision and resolution of the CA in CA-G.R. SP No. 75688 are hereby AFFIRMED with the following MODIFICATIONS:

(1) The Resolutions dated November 6, 2002 and January 7, 2003 of the RTC, Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, as effectively upheld by the CA, are AFFIRMED with the modification that the approved claim of respondent Chua is hereby corrected and adjusted to cover only the aggregate amount of PhP 5,529,392.52;

(2) Subject to the payment by respondent Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, the Resolution dated April 11, 2005 of the RTC, confirming the sheriff’s final deed of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of respondent Chua, is AFFIRMED; and

The TRO issued by the Court on May 31, 2005 in the instant petition is LIFTED.

No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. 188961               October 13, 2009

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

R E S O L U T I O N

CORONA, J.:

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

Respondent alleged that he went on a pilgrimage with a group of Filipinos to selected countries in Europe. According to respondent: (1) AF’s agent in Paris failed to inform him of the need to secure a transit visa for Moscow, as a result of which he was denied entry to Moscow and was subjected to humiliating interrogation by the police; (2) another AF agent (a certain Ms. Soeyesol) rudely denied his request to contact his travel companions to inform them that he was being sent back to Paris from Moscow with a police escort; Ms. Soeyesol even reported him as a security threat which resulted in his being subjected to further interrogation by the police in Paris and Rome, and worse, also lifted his flight coupons for the rest of his trip; (3) AF agents in Rome refused to honor his confirmed flight to Paris; (4) upon reaching Paris for his connecting flight to Manila, he found out that the AF agents did not check in his baggage and since he had to retrieve his bags at the baggage area, he missed his connecting flight; (5) he had to shoulder his extended stay in Paris for AF’s failure to make good its representation that he would be given a complimentary motel pass and (6) he was given a computer print-out of his flight reservation for Manila but when he went to the airport, he was told that the flight was overbooked. It was only when he made a scene that the AF agent boarded him on an AF flight to Hongkong and placed him on a connecting Philippine Airlines flight to Manila.

The RTC found that AF breached its contract of carriage and that it was liable to pay  P200,000 actual damages, P1 million moral damages, P1 million exemplary damages and P300,000 attorney’s fees to respondent.

On appeal, the Court of Appeals (CA) affirmed the RTC decision with modifications.1

The CA ruled that it was respondent (as passenger), and not AF, who was responsible for having the correct travel documents. However, the appellate court stated that this fact did not absolve AF from liability for damages.

The CA agreed with the findings of fact of the RTC that AF’s agents and representatives repeatedly subjected respondent to very poor service, verbal abuse and abject lack of respect and consideration. As such, AF was guilty of bad faith for which respondent ought to be compensated.

The appellate court affirmed the award of P1 million moral damages and P300,000 attorney’s fees. However, it reduced the actual damages to US$906 (or its peso equivalent). According to the CA, this amount represented the expenses respondent incurred from the time he was unable to join his group in Rome (due to the unfounded "communiqué" of Ms. Soeyesol that he was a security threat) up to the time his flight reservation from Paris to Manila was dishonored for which he was forced to stay in Paris for two additional days. The appellate court pointed out that, on the other hand, respondent’s expenses for the Moscow leg of the trip must be borne by him as AF could not be faulted when he was refused entry to Moscow for lack of a transit visa.

The CA also decreased the exemplary damages from P1 million to P300,000. The CA further imposed interest at the rate of 6% p.a. from the date of extrajudicial demand 2 until full satisfaction, but before judgment becomes final. From the date of finality of the judgment until the obligation is totally paid, 12% interest p.a. shall be imposed.

Hence, this recourse.

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

We deny the petition.

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

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

Both the RTC and the CA have competently ruled on the issue of respondent’s entitlement to damages and attorney’s fees as they properly laid down both the factual and legal bases for their respective decisions. We see no reason to disturb their findings.

The above liabilities of AF shall earn legal interest pursuant to the Court’s ruling in  Construction Development Corporation of the Philippines v. Estrella,5 citing Eastern Shipping Lines, Inc. v. CA.61avvphi1

Pursuant to this ruling, the legal interest is 6% p.a. and it shall be reckoned from April 25, 2007 when the RTC rendered its judgment, not from the time of respondent’s extrajudicial demand. This must be so as it was at the time the RTC rendered its judgment that the quantification of damages may be deemed to have

35

been reasonably ascertained. Then, from the time this decision becomes final and executory, the interest rate shall be 12% p.a. until full satisfaction.

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

Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. L-45048 January 7, 1987

BATONG BUHAY GOLD MINES, INC., petitioner, vs.THE COURT OF APPEALS and INC. MINING CORPORATION, respondents.

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

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

 

PARAS, J.:

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

The dispositive portion of the CFI judgment reads:

WHEREFORE, the Court renders judgment enjoining the defendants to effect the transfer of the shares covered by Stock Certificate No. 16807 to and in the name of plaintiff INCORPORATED Mining Corporation, and the writ of preliminary mandatory injunction issued on March 16, 1970 is hereby declared permanent.

SO ORDERED.

Upon the other hand, the decretal portion of the CA decision states:

WHEREFORE, the judgment appealed from is hereby modified by adding the following to the dispositive portion thereof:

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

IT IS SO ORDERED.

(pp. 67-68, Rollo)

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

The defendant Batong Buhay Gold Mines, Inc. issued Stock Certificate No. 16807 covering 62,495 shares with a par value of P0.01 per share to Francisco Aguac who was then legally married to Paula G. Aguac, but the said spouses had lived separately for more than fourteen (14) years prior to the said date. On December 16, 1969, Francisco Aguac sold his 62,495 shares covered by Stock Certificate No. 16807 for the sum of P9,374.70 in favor of the plaintiff, the said transaction being evidenced by a deed of sale (Exhibit D). The said sale was made by Francisco Aguac without the knowledge or consent of his wife Paula G. Aguac.

On the same date of the sale, December 16, 1969, Paula G. Aguac wrote a letter to the president of defendant Batong Buhay Gold Mines, Inc. asking that the transfer of the shares sold by her husband be withheld, inasmuch as the same constituted conjugal property and her share of proceeds of the sale was not given to her (Exhibit 1).

On January 5, 1970, under a covering letter dated December 26, 1969, plaintiff's counsel presented Stock Certificate No. 16807 duly endorsed by Francisco Aguac for registration and transfer of the said stock certificate in the name of the plaintiff (Exhibit F). The said letter was addressed to defendant Del Rosario and Company which was the transfer agent of Batong Buhay at that time. In a letter dated February 24, 1970 also addressed to Del Rosario and Company, plaintiff's counsel requested information as to the action taken on the transfer of Stock Certificate No. 16807 in favor of the plaintiff, nothing about which having heard despite the lapse of over a month (Exhibit H). In a reply letter dated February 28, 1970, Del Rosario and Company informed plaintiff's counsel that Batong Buhay has referred the matter to their attorneys, inasmuch as there was a "technical problem that has developed in the transfer of stock," and further advised that the plaintiff communicate directly with Batong Buhay for further details (Exhibit 1).lwphl@itç

It developed that when Batong Buhay was about to effect the cancellation of Stock Certificate No. 16807 and transfer the 62,495 shares covered thereby to the plaintiff and had, in fact, prepared new Stock Certificate No. 27650 dated January 5, 1970, it received the letter of Paula G. Aguac advising it to withhold the transfer of the subject shares of stock on the ground that the same are conjugal property.

On March 2, 1970 Francisco Aguac was charged in a criminal complaint Pasil Kalinga-Apayao, docketed as Criminal Case No. 10, entitled "People vs. Francisco Aguac, et al."

The defendants justify their refusal to transfer the shares of stock of Francisco Aguac in the name of the plaintiff in view of their apprehension that they might he held liable for damages under Article 173 of the Civil Code and the ruling of the Supreme Court in Bucoy vs. Paulino, 23 SCRA 248.

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On March 5, 1970, in view of the defendant's inaction on the request for the transfer of the stock certificate in its name, the plaintiff commenced this action before the Court of First Instance of Manila, praying that the defendants be ordered to issue and release the transfer stock certificate covering 62,495 shares of defendant Batong Buhay, formerly registered in the name of Francisco Aguac, in favor of the plaintiff, and for the recovery of compensatory, exemplary and corrective damages and attorney's fees. A writ of preliminary mandatory injunction was prayed for to order the defendants to issue immediately the transfer certificate covering the aforesaid shares of stock of defendant Batong Buhay in the name of the plaintiff.

The trial court granted the prayer for the issuance of the writ of preliminary mandatory injunction in its order of March 16, 1970. In compliance therewith, Stock Certificate No. 16807 was cancelled and new Stock Certificate No. 27650 dated January 5, 1970 was issued to and received by the plaintiff on July 20, 1970."

On October 28, 1971, the trial court handed down its judgment ordering the defendant (herein petitioner) to effect the transfer of the shares covered by Stock Certificate No. 16807 in the name of herein respondent Incoporated Mining Corporation and declaring permanent the writ of preliminary mandatory injunction issued on March 16, 1970.

Private respondent seasonably appealed the aforesaid decision to the Court of Appeals anchored on the lower court's alleged failure to award damages for the wrongful refusal of petitioner to transfer the subject shares of stock and alleged failure to award attorney's fees, cost of injunction bond and expenses of litigation.

On August 27, 1986, respondent appellate court rendered the subject decision the dispositive portion of which has already been quoted hereinabove.

Hence, this petition.

In assailing the decision of the Court of Appeals, petitioner poses the following issues:

1. May the Court of Appeals award damages by way of unrealized profits despite the absence of supporting evidence, or merely on the basis of pure assumption, speculation or conjecture; or can the respondent recover damages by way of unrealized profits when it has not shown that it was damaged in any manner by the act of petitioner?

2. May the appellate court deny the petitioner the chance to present evidence discovered after judgment which were not only very material to its case, but would also show the untenability and illegality of private respondent's position?

We answer the first issue in the negative.

The petitioner alleges that the appellate court gravely and categorically erred in awarding damages by way of unrealized profit (or lucro cesante) to private respondent. Petitioner company also alleges that the claim for unrealized profit must be duly and sufficiently established, that is, that the claimant must submit proof that it was in fact damaged because of petitioner's act or omission.

The stipulation of facts of the parties does not at all show that private respondent intended to sell, or would sell or would have sold the stocks in question on specified dates. While it is true that shares of stock may go up or down in value (as in fact the concerned shares here really rose from fifteen (15) centavos to twenty three or twenty four (23/24) centavos per share and then fell to about two (2) centavos per share, still whatever profits could have been made are purely SPECULATIVE, for it was difficult to predict with any decree of certainty the rise and fall in the value of the shares. Thus this Court has ruled that speculative damages cannot be recovered.

It is easy to say now that had private respondent gained legal title to the shares, it could have sold the same and reaped a profit of P5,624.95 but it could not do so because of petitioner's refusal to transfer the stocks in the former's name at the time demand was made, but then it is also true that human nature, being what it is, private respondent's officials could also have refused to sell and instead wait for expected further increases in value.

In view of what has been said, We find no necessity to discuss the second issue.

WHEREFORE, the assailed decision and resolutions of the Court of Appeals are hereby SET ASIDE, and a new one is hereby rendered REINSTATING the decision of the trial court. No costs.

SO ORDERED.

Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-18487             August 31, 1964

GENERAL ENTERPRISES, INC., plaintiff-appellee, vs.LIANGA BAY LOGGING COMPANY, INC., defendant-appellant.

William H. Quasha and Associates for plaintiff-appellee.Sabido and Sabido Law Office for defendant-appellant.

BAUTISTA ANGELO, J.:

On May 25, 1959, Lianga Bay Logging Company, Inc., a corporation duly organized under the laws of the Philippines, and General Enterprises, Inc, another corporation, entered into a contract, herein marked as Annex A, whereby the former, a producer of logs from a timber concession at Lianga, Surigao, designated the latter as distributor of a portion of its log production to Korea and Europe on condition that it would pay the distributor a commission of 13% of the gross f.o.b. value of the logs exported. In the agreement, the Lianga Bay Logging Company, Inc. was named as Producer and the General Enterprises, Inc. as Distributor. The pertinent provisions of the agreement are hereunder quoted:

2. DISTRIBUTOR ... obliges to obtain the bent market prices for the logs sold by it ... that the selling price shall not be lower than the current market price, such term "current price" being the average price received by PRODUCER on other log sales over a ninety (90) day period: "current market price" shall, if PRODUCER requests, be subject to renegotiation every sixty (60) days during the term of this agreement; except that such renegotiation shall not take place where firm, long-term orders solicited by DISTRIBUTOR shall have been accepted by PRODUCER.

x x x           x x x           x x x

4. It is further understood that this agreement in no manner affects the existing and future barter arrangements that PRODUCER has and will have covering logs: ...

5. DISTRIBUTOR hereby agrees and obliges to market, sell, export and dispose under this agreement at least ONE MILLION (1,000,00) BOARD FEET BREARETON SCALE for

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PRODUCER every month during the first months of the term of this agreement: and the PRODUCER hereby agrees and obliges that each month thereafter, beginning September, 1959, PRODUCER will make available not less than 2,000,000 bd. ft. per month for export to the sales area.

x x x           x x x           x x x

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

8. It is mutually agreed as follows:

(a) That if either party shall be unable, by reason of the happening of any one or more of the causes set forth in the next succeeding paragraph marked "(b)" to carry out its obligations under this contract, either wholly or partly, the party so failing shall give notice and full particulars of such cause or causes in writing to the other party as soon as possible after the occurrence of any such cause; and, thereupon, such obligation shall be suspended during the continuance of such causes, which, however, shall be removed or remedied as soon as possible, and the obligations terms and conditions of this contract shall be extended for such period as may be necessary for the purpose of making good any suspension so caused:

(b) That the cause or causes of suspension herein before referred to shall be taken to mean fire, flood, casualty, unavoidable accident, strikes, labor conditions, lockout acts of God, the enactment of any national or local law or ordinance, or the issuance of any executive or judicial order, the issuance of any prohibitive or restrictive order, rule or regulation by the Central Bank of the Philippines or other government agency, accident to machinery, or any other cause not within the control of the party making relief from any of the requirements of this contract, and that, by the exercise of due care and diligence, the said party is unable to prevent or overcome.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët

9. Subject to any prior termination of this contract, the term of this contract for the distribution of logs shall be two (2) years beginning June 1, 1959. ...

Thereupon, the parties immediately began implementing the provisions of the contract by having the Distributor deliver to the Producer the tractor it agreed to deliver and by having the Producer deliver logs to the Distributor for export as agreed upon. On October 27, 1959, the Producer sent a notice to the Distributor stating that after the November shipment there will be no longer logs available for export to Korea and Europe "unless the price of such logs become comparable to what we may expect to receive in the way of returns from lumber and veneer of barterable and export grades", giving as reasons there for the following:

It will be necessary for us to increase our log production if we are to have available for the sales area covered by the Agreement. To increase log production we must have additional logging machinery. Such machinery had been available at Surigao; however, we have been advised by our representative, who investigated the matter in Surigao, that the equipment which we had agreed to buy had been sold to another purchaser under rather peculiar circumstances.

By reasons of, restrictions imposed by the Philippine Government we cannot barter logs (for, among other purposes, obtaining logging machinery and equipment) but we can barter lumber

and low grade veneers. We have decided that we must take advantage of the situation and use our lumber for barter, immediately concurrently we are taking the necessary steps to erect the power house and veneer plant offered by a U.S. Firm. This will mean the immediate utilization by ourselves of an excess of one million or more feet of logs per month. The net result will be that we will not have logs for your sales area.

The Producer thereafter stopped supplying logs for export, whereupon the Distributor reminded the Producer that it had a contract to fulfill relative to its log production as otherwise it would be held responsible for the consequences of the breach that may ensue, but the Producer did not heed this reminder adducing reasons which in its opinion justify the action it had taken, thereby causing the Distributor to initiate the present action before the Court of First Instance of Rizal alleging breach of contract and praying for damages both actual and compensatory.

In due time, both parties presented their evidence, and on December 8, 1960, the court a quo rendered decision in favor of the plaintiff and against the defendant ordering the latter to pay the sum of P400,000.00 as actual damages, the sum of P100,000.00 as exemplary damages, and the sum of P400,000.00 as attorney's fees and expenses of litigation. This is an appeal from said decision.

The issues raised, stripped of non-essentials, may be summarized as follows:

I. Is agreement Annex A valid?

II. Can the effectivity of the agreement be terminated or suspended for reasons and causes stipulated by the parties?

III. Has appellant the right to demand negotiation of prices as provided in paragraph 2 of the agreement, and, in the affirmative, is appellant under obligation to export thru appellee logs during pendency of the negotiation?

IV. Has appellant the right to use its log production for barter arrangements irrespective of Section 5 of said agreement?

V. Is appellant's obligation to make available 2,000,000 board feet of logs monthly absolute or conditional?

VI. Is the lower court's adjudication of actual and exemplary damages and attorney's fees justified?

VII. Did not the lower court err in not dismissing the complaint, declaring the agreement rescinded and awarding appellant's counterclaim?

VIII. Did not the lower Court err in not allowing the amended answer?

1. Appellant claims that the agreement Annex A on which the complaint is based is null and void on the ground that it has no cause or consideration or that it was secured thru fraud or misrepresentation. Basis of the alleged fraud and misrepresentation is the claim that Mr. Freider, president of appellee, led appellant to believe that he could secure for said appellant a certain Surigao logging equipment on which appellee had a second mortgage and that he would place at the disposal of appellant at any time the sum of P95,000.00 by way of loan to enable it to purchase the needed logging equipment, when appellee knew well that it did not have such money nor could secure the Surigao logging equipment.

The claim of fraud has no basis, for while Mr. Freider stated in his testimony that the Distributor could take steps to secure the Surigao logging equipment for the use of appellant no assurance was given that such equipment would be acquired as a necessary incident of their contract. In fact, Mr. Dempsey, a high official

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of appellant, admitted in open court that Mr. Freider merely promised to help appellant to procure or acquire that equipment if the latter needed it, but appellant did not take any further step in this direction.

Neither can we attribute fraud to appellee's failure to grant appellant the loan of P95,000.00 for the purchase of logging equipment, for the evidence shows that appellant did not make any demand for it. And this is buttressed by the fact that in the five letters sent by appellant to appellee regarding the demand for suspension of the contract it nowhere appears that the alleged failure is one of the reasons that had motivated such suspension. Had appellee really failed to comply with such important commitment, it is reasonable to expect that appellant would have adduced it as a reason for the unilateral suspension of the agreement.

We also find untenable the claim that the agreement has no cause or consideration considering that the same imposes reciprocal obligations. A perusal of the agreement would show that appellant designated appellee as its distributor to export logs to Korea and Europe at the best market price obtainable on condition that it would pay appellee a commission of 13% of the gross value of the logs. The cause of a contract is the essential reason which moves the contracting parties to enter into it (8 Manresa., 5th edition, p. 450). In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation thru the will of the contracting parties (3 Castan, 4th edition, p. 347). Such being the case, it is clear that for appellant the cause of the agreement is the distribution of its logs in the areas agreed upon which appellee undertook to accomplish, whereas for appellee the cause is its commitment to sell or export the logs for onerous consideration.

The contention that the essential reason which induced appellant to enter into the contract is the promise of appellee to secure for it the Surigao logging equipment and to make available the loan of P95,000.00 likewise has no merit. In the first place, such commitment to procure the Surigao logging equipment is not mentioned in the agreement, Annex A, though it was incidentally mentioned in the preparatory stage leading to it, while the lending of P95,000.00 is merely a commitment made to appellant to help it purchase some logging equipment to increase its productive capacity, if it may so require, but it has never been considered as part of the cause of the agreement. In fact, as already stated, no such requirement or demand was ever made by appellant. No doubt is entertained that if such demand where made appellee would have gladly granted the loan in the same manner it readily delivered to appellant the brand new TD-24 tractor valued at P105,000.00 mentioned in paragraph 7 of the agreement.

Finally, no weight can be given to the claim that because it was not explicity expressed in the agreement that appellee has the corresponding obligation to sell and export the additional 2,000,000 board feet appellant agreed to make available for export beginning September, 1959, that portion of the agreement has no consideration, for such could clearly be inferred from a mere perusal of the whole paragraph 5 of the agreement. It is explicit therein that appellee bound itself to export abroad whatever may be produced in the form of logs by appellant during the first months of the agreement, as well as those that may be produced thereafter, and it should not be forgotten that the term of the agreement is two years beginning June 1, 1959 (paragraph 9). Indeed, there is no point for appellant to agree to make available additional 2,000,000 board feet beginning September, 1959 if appellee should not be given the corresponding commitment to export under the same terms agreed upon in connection with previous production. A contrary interpretation would be irrational and absurd.

II. This issue refers to the interpretation of paragraph 8 of the agreement which reads:

8. It is mutually agreed as follows:

(a) That if either party shall be unable, by reason of the happening of any one or more of the causes set forth in the next succeeding paragraph marked "(b)" to carry out its obligations under this contract, either wholly or partly the party so failing shall give notice and full particulars of such cause or causes in writing to the other party as soon as possible after the occurrence of any such cause; and, thereupon, such obligation shall be suspended during the continuance of such cause, which however, shall be removed or remedied as soon as possible, and the obligations, terms and conditions of this contract shall be extended for such period as may be necessary for the purpose of making good any suspension so caused:

(b) That the cause or causes of suspension herein before referred to shall be taken to mean fire, flood, casualty, unavoidable accident, strikes, labor conditions, lockouts, acts of God, the enactment of any national or local law or ordinance, or the issuance of any executive or judicial order, the issuance of any prohibitive or restrictive order, rule or regulation by the Central Bank of the Philippines or other government agency, accident to machinery, or any other cause not within the control of the party making relief from any of the requirements of this contract, and that, by the exercise of due care and diligence, the said party is unable to prevent or overcome.

Based on the foregoing stipulation, appellant served on appellee notices of suspension of the operation of said agreement for reasons stated in said notices. These notices are embodied in the following exhibits: Exhibit 2, notice of October 27, 1959; Exhibit 2-A, notice of November 7, 1959; Exhibit 2-B, notice of November 23, 1959; Exhibit 2-C, notice of February 23, 1960; and Exhibit 3, notice of December 11, 1959.

In the notice of October 27, 1959, appellant made it clear to appellee that because of restrictions imposed by the Philippine government it can no longer barter logs for the purpose of obtaining logging equipment and without such logging equipment it cannot make available to appellee any quantity of logs.

In the notice of November 7, 1959, appellant demanded a renegotiation on the question of prices for, unless it can obtain a higher price, its only alternative would be to convert its log production into lumber in order to buy the logging machinery needed to increase its production.

In the notice of November 23, 1959, appellant advised appellee that because of breakdowns of machinery and equipment and its inability to secure spare parts replacements and wire ropes as a result of the steel strike in the United States it has to suspend its shipment of logs.

In the notice of February 23, 1960, appellant advised appellee that the enactment of the Margin Law has made it impossible for it to acquire the additional machinery to increase its production and unless the same is repealed it would be very difficult for it to produce additional logs for appellee.

In the notice of December 11, 1959, appellant made it clear to appellee that because of the conditions specified in its license agreement No. 40 with the Philippine government it becomes imperative for it to increase production and to establish a veneer plant.

The court a quo said on this issue the following:

With respect to the defendant's claim of the adverse effects of the Barter Law and the Margin Law, the Court cannot find sufficient reason to believe that the effectivity of said law would bring defendant's production to such a stale condition as to justify its acquittance from its contractual obligations. ... The other allegations of the defendant regarding the impassable roads caused by the rainy season, the steel strike and the like have not been substantiated by evidence to the effect that the operations of the defendant corporation in the production of logs have been substantially or wholly impeded. In other words, although it cannot be denied that some of the causes set up by the defendant are fortuitous and beyond man's control, nevertheless, they failed to show it causal relation with any substantial impairment of its operations, such that it could not possibly comply with its obligations as agreed upon. ...

Even assuming that the restrictions imposed by the government on barter, the breakdown of machineries and the inability to secure spare parts, replacements and wire ropes, as well as the passage of the Margin Law, have the nature of fortuitous events, yet it cannot be said that they had caused such a reduction in appellant's production of logs that made it impossible for it to comply wholly, or even partly, with its commitment with appellee. The rule is that even the happening of a fortuitous event  in itself does not necessarily extinguish an obligation for, as this Court has said, the fortuitous event must be of such a character as to render it impossible for the obligor to fulfill his obligation in a normal manner (Lassam v. Smith, 45 Phil. 990). And here such is not the situation. Thus, Mr. Dempsey, a high official of appellant, testified that appellant made deliveries of logs in the months of June, July, August, 1959, and even in October, 1959, in spite of the causes which appellant said have affected the operation of its log production. Again, in Mr. Dempsey's letter dated October 27, 1959, he stand that appellant has "an excess of one million or more board feet or logs per month," and in an application filed with the Central Bank for a

39

$500,000.00 loan from a Japanese entity Mr. Dempsey admitted that Lianga agreed to supply the Japanese buyers 200,000,000 board feet of logs during a five-year period. And during the trial counsel for appellant admitted that appellant sold to other parties a portion of its log production even if it failed to deliver the logs committed to appellee. These facts eloquently support the finding of the court a quo on the matter.

One of the causes for the suspension of the agreement alleged by appellant was the demand for the renegotiation of prices provided in paragraph 2 of the agreement. Another reason advanced is the establishment of a veneer plant for the purpose of increasing the log production. But these two matters are not among the various causes of suspension enumerated in paragraph 8 of the agreement. The suspension, therefore, of the contract on these causes is not justified.

III. This issue refers to the portion of paragraph 2 of the agreement which provides that "'current market price' shall, if PRODUCER requests, be subject to renegotiation every sixty (60) days during the term of this agreement; except that such renegotiation shall not take place where firm, long-term orders solicited by DISTRIBUTOR shall have been accepted by PRODUCER."

Appellant contends that under the above provision it has the right to demand a renegotiation of the prices at any time during the existence of the contract, the only exception being when there has been a fixed, long-term orders that had already been solicited and accepted and that pending such renegotiation the operation of the contract shall be suspended. And such demand having been made, appellant says it has the right to suspend the operation until the renegotiation has been made. But this contention is based on a wrong premise. The exception regarding long-term orders solicited and accepted refers to renegotiation and not to suspension. As already indicated elsewhere, this right of renegotiation, although expressly admitted, is not however one of the causes by which appellant could suspend the operation of the contract. Apparently, the reason why appellee did not heed the demand is that appellant has not been able to indicate that it could obtain better prices than what appellee had secured in selling its logs for sometime.

IV. This issue refers to the alleged right of appellant to use its log production for barter arrangements. The pertinent provision is: "It is further understood that this agreement in no manner affects the existing and future barter arrangements that PRODUCER has and will have covering logs." As may be seen, this provision refers to the right of appellant to use its logs for barter purposes, but not to make use of them for other purposes as the one indicated by it. Hence, appellant's claim that it has a right to convert its logs into lumber and low grade veneer and to make these objects subject of barter arrangements does not come within the purview of the agreement.

V. This issue refers to that portion of the agreement which requires appellant to make available to appellee 2,000,000 board feet of logs monthly beginning September, 1959. Appellant claims that its obligation under this provision is only potestative and not compulsory, and this claim is based upon the fact that in preparing the provision in question the words "shall reserve" and "first board feet" which appear in a similar contract with Basilan Lumber Company which was taken as basis were eliminated thereby revealing the intention to make the availability of the 2,000,000 board feet optional or dependent upon the will of appellant.

This claim may be correct if interpreted in the sense that appellant may take the 2,000,000 board feet from any of the logs that may be produced by it, which may be either the first one or the subsequent ones, but is untenable in the sense that by such elimination the availability was made dependent upon the exclusive will of appellant. If such were the intention such would have been made to appear therein. No such intention appears. The most that can be said is that the provision is ambiguous and the ambiguity should be resolved against appellant whose counsel has been consulted in the preparation of the contract. The claim, furthermore, would make the fulfillment of the contract dependent upon the exclusive will of appellant which our law abhors (Article 1308, new Civil Code).

The contention that the availability of the additional 2,000,000 board feet is subject to the fulfillment of two conditions, namely, the acquisition of the Surigao logging equipment, and the lending of P95,000.00 for purchase of equipment and spare parts, cannot also be entertained, not only because said alleged precedent conditions do not appear in the agreement, but also because they were merely discretionary in the sense that they are subject to whatever negotiation the parties may undertake thereon, as already stated elsewhere. We have already adverted to that the provision requiring the availability of the additional 2,000,000 board feet of logs calls for a counter obligation on the part of appellee to sell, export and dispose of the same under the same terms and conditions it bound itself to undertake in connection with prior production of logs.

VI. Appellant avers that Exhibit K, dated February 1960, and Exhibit L, dated February 12, 1960, are letters supposed to have been written to Karl Nathan, vice president of appellee and were dated after the filing of the instant complaint thereby giving the impression that they are mere self-serving evidences. The signatures of said letters were not identified. Appellant did not even have a chance to cross-examine the alleged senders thereof, and even if opportune objection was interposed to their admission, the trial court admitted them as part of Mr. Freider's testimony. This is now assigned as error.

Exhibit K is a letter purporting to have been sent by Daiil Enterprises, Co., Ltd. in Seoul, Korea on February 3, 1960 to Mr. Karl Nathan of appellee complaining of the small quantity of logs shipped by appellant in spite of the assurance that Daiil Enterprises "could count on substantial amount of supply from Lianga area in addition to the usual sources of supply." Exhibit L is a letter purporting to have been sent by Tong Myung Timber Lumber Company in Pusan, Korea on February 12, 1960 to Mr. Karl Nathan of appellee complaining of the latter's decreasing supply of logs in spite of its promise "to supply us with 1,000 MBF or more per month from either Milbul or Lianga." These letters apparently were presented in evidence to show that appellee had orders of logs from areas that are covered by the contract but which were not met because of the failure of appellant to supply them.

There is merit in appellant's contention it appearing that these exhibits were not properly identified and apparently were received after appellee had conceived filing the instant complaint. Under Section 21 of Rule 132 of our Rules of Court, "before any private writing may be received in evidence, its due execution and authenticity must be proved." And the rule is that when there is no proof as to the authenticity of the writer's signature appearing in a private document, such private document should be excluded (Paz V. Santiago, 47 Phil. 334; Alejandro v. Reyes, 53 Phil. 973). Verily, the court a quo erred in admitting said exhibits as part of appellees evidence.

Regarding the actual damages awarded to, appellee, appellant contends that they are unwarranted inasmuch as appellee has failed to adduce any evidence to substantiate them even assuming arguendo that appellant has failed to supply the additional monthly 2,000,000 board feet for the remainder of the period agreed upon in the contract Exhibit A. Appellant maintains that for appellee to be entitled to demand payment of sales that for appellee to be entitled to demand payment of sales that were not effected it should have proved (1) that there are actual sales made of appellee's logs which were not fulfilled, (2) that it had obtained the best price for such sales, (3) that there are buyers ready to buy at such price stating the volume they are ready to buy, and (4) appellee could not cover the sales from the logs of other suppliers. Since these facts were not proven, appellee's right to unearned commissions must fail.

This argument must be overruled in the light of the law and evidence on the latter. Under Article 2200 of the Civil Code, indemnification for damages comprehends not only the value of the loss suffered but also at of the profits which the creditor fails to obtain. In other words, lucrum cessans is also a basis for indemnification. The question then that arises is: Has appellee failed to make profits because of appellant's breach of contract, and in the affirmative, is there here basis for determining with reasonable certainty such unearned profits?

Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract in question the following board feet of logs, Breareton Scale:

Months Board Feet

From June to August 1959 3,007,435

September, 1959 none

October, 1959 2,299,805

November, 1959 801,021

December, 1959 1,297,510

40

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

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

11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the agreed F.O.B. price was P799,319.00; the commission at 13% (F.O.B.) is P117,859.54. But, as there were always two prices. Invoice F.O.B. price and F.O.B. price as per contract, because of the sales difference amounting to P31,920.18, and the same was deducted from the commission, the commission, actually paid to plaintiff General is only P79.580.82.

It appears, therefore, that during the period of June to December, 1959, in spite of the short delivery incurred by appellant, appellee had been earning its commission whenever logs were delivered to it. But from January, 1960, appellee has ceased to earn any commission because appellant failed to deliver any log in violation of their agreement. Had appellant continued to deliver the logs as it was bound to pursuant to the agreement it is reasonable to expect that it would have continued earning its commission in much the same manner as it used to in connection with the previous shipments of logs, which clearly indicates that it failed to earn the commissions it should earn during this period of time. And this commission is not difficult to estimate. Thus, during the seventeen remaining months of the contract, at the rate of at least 2,000,000 board feet, appellant should have delivered thirty-four million board feet. If we take the number of board feet delivered during the months prior to the interruption, namely, 7,405,861 board feet, and the commission received by appellee thereon, which amounts to P79,580,82, we would have that appellee received a commission of P.0107456 per board feet. Multiplying 34 million board feet by P.0107456, the product is P365,350.40, which represents the lucrum cessans that should accrue to appellee. The award therefore, made by the court a quo of the amount of P400,000.00 as compensatory damages is not speculative, but based on reasonable estimate.

We believes however, that the amount of P100,000.00 awarded to appellee as exemplary damages is somewhat excessive it appearing that appellant is suspending the operation of the contract has not acted in a wanton, oppressive or malevolent manner to deserve such a heavy punishment within the purview of the law (Article 2232, new Civil Code). The most that can be said is that appellant, to suit its purpose, has availed to certain misstatements or half truths as reflected in the declarations of Mr. Dempsey, one of its high officials, in an attempt to justify its desistance from the contract. While this is reprehensible, it is not a wanton or malevolent perversion of the truth. Hence, the award should be mitigated and in our opinion the amount of P50,000.00 is a reasonable exemplary penalty.

We also find reasonable the amount awarded by the court a quo as attorney's fees considering the importance of this litigation and the amount of time and effort therein involved. This is justified under Article 2208 of the Civil Code.

The other issues raised being merely a sequel to those we have heretofore discussed, further consideration thereof is unnecessary.

WHEREFORE, the decision appealed from is hereby modified by awarding to appellee only the amount of P50,000.00 as exemplary damages. In all other respects, the decision is affirmed, with costs.

Bengzon C.J., Concepcion, Reyes, J.B.L., Paredes, Regala and Makalintal, JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. 152040             March 31, 2006

MARIKINA AUTO LINE TRANSPORT CORPORATION and FREDDIE L. SUELTO, Petitioners, vs.PEOPLE OF THE PHILIPPINES and ERLINDA V. VALDELLON, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. CR No. 16739 affirming the Joint Decision of the Regional Trial Court (RTC) in Criminal Case No. Q-93-42629 and Civil Case No. Q-93-16051, where Freddie Suelto was convicted of reckless imprudence resulting in damages to property.

Erlinda V. Valdellon is the owner of a two-door commercial apartment located at No. 31 Kamias Road, Quezon City. The Marikina Auto Line Transport Corporation (MALTC) is the owner-operator of a passenger bus with Plate Number NCV-849. Suelto, its employee, was assigned as the regular driver of the bus.2

At around 2:00 p.m. on October 3, 1992, Suelto was driving the aforementioned passenger bus along Kamias Road, Kamuning, Quezon City, going towards Epifanio de los Santos Avenue (EDSA). The bus suddenly swerved to the right and struck the terrace of the commercial apartment owned by Valdellon located along Kamuning Road.3 Upon Valdellon’s request, the court ordered Sergio Pontiveros, the Senior Building Inspection Officer of the City Engineer’s Office, to inspect the damaged terrace. Pontiveros submitted a report enumerating and describing the damages:

(1) The front exterior and the right side concrete columns of the covered terrace were vertically displaced from its original position causing exposure of the vertical reinforcement.

(2) The beams supporting the roof and parapet walls are found with cracks on top of the displaced columns.

(3) The 6″ CHB walls at [the] right side of the covered terrace were found with cracks caused by this accident.

(4) The front iron grills and concrete balusters were found totally damaged and the later [sic] beyond repair.4

He recommended that since the structural members made of concrete had been displaced, the terrace would have to be demolished "to keep its monolithicness, and to insure the safety and stability of the building."5

Photographs6 of the damaged terrace were taken. Valdellon commissioned Engr. Jesus R. Regal, Jr. to estimate the cost of repairs, inclusive of labor and painting, and the latter pegged the cost at P171,088.46.7

In a letter dated October 19, 1992 addressed to the bus company and Suelto, Valdellon demanded payment ofP148,440.00, within 10 days from receipt thereof, to cover the cost of the damage to the terrace. 8 The bus company and Suelto offered a P30,000.00 settlement which Valdellon refused.9

Valdellon filed a criminal complaint for reckless imprudence resulting in damage to property against Suelto. After the requisite preliminary investigation, an Information was filed with the RTC of Quezon City. The accusatory portion of the Information reads:

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That on or about the 3rd day of October 1992, in Quezon City, Philippines, the said accused, being then the driver and/or person in charge of a Marikina Auto Line bus bearing Plate No. NVC-849, did then and there unlawfully, and feloniously drive, manage, and operate the same along Kamias Road, in said City, in a careless, reckless, negligent, and imprudent manner, by then and there making the said vehicle run at a speed greater than was reasonable and proper without taking the necessary precaution to avoid accident to person/s and damage to property, and considering the condition of the traffic at said place at the time, causing as a consequence of his said carelessness, negligence, imprudence and lack of precaution, the said vehicle so driven, managed and operated by him to hit and bump, as in fact it hit and bump a commercial apartment belonging to ERLINDA V. VALDELLON located at No. 31 Kamias Road, this City, thereby causing damages to said apartment in the total amount of  P171,088.46, Philippine Currency, to her damage and prejudice in the total amount aforementioned.

CONTRARY TO LAW.10

Valdellon also filed a separate civil complaint against Suelto and the bus company for damages. She prayed that after due proceedings, judgment be rendered in her favor, thus:

WHEREFORE, it is respectfully prayed of this Honorable Court to issue a writ of preliminary attachment against the defendants upon approval of plaintiff’s bond, and after trial on the merits, to render a decision in favor of the plaintiff, ordering the defendants, jointly and severally, to pay –

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

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

c) the sum of P20,000.00 as attorney’s fees and the sum of P1,000.00 for each appearance of plaintiff’s counsel; and costs of suit;

PLAINTIFF further prays for such other reliefs as may be just and equitable in the premises.11

A joint trial of the two cases was ordered by the trial court.12

The trial court conducted an ocular inspection of the damaged terrace, where defendants offered to have it repaired and restored to its original state. Valdellon, however, disagreed because she wanted the building demolished to give way for the construction of a new one.13

During the trial, Valdellon testified on the damage caused to the terrace of her apartment, and, in support thereof, adduced in evidence a receipt for P35,000.00, dated October 20, 1993, issued by the BB Construction and Steel Fabricator for "carpentry, masonry, welding job and electrical [work]."14

Pontiveros of the Office of the City Engineer testified that there was a need to change the column of the terrace, but that the building should also be demolished because "if concrete is destroyed, [one] cannot have it restored to its original position."15

Engr. Jesus Regal, Jr., the proprietor of the SSP Construction, declared that he inspected the terrace and estimated the cost of repairs, including labor, at P171,088.46.

Suelto testified that at 2:00 p.m. on October 3, 1992, he was driving the bus on its way to Ayala Avenue, Makati, Metro Manila. When he reached the corner of K-H Street at Kamias Road, Quezon City, a passenger jeepney suddenly crossed from EDSA going to V. Luna and swerved to the lane occupied by the bus. Suelto had to swerve the bus to the right upon which it hit the side front of the terrace of Valdellon’s two-door apartment.16 Based on his estimate, the cost to the damage on the terrace of the apartment amounted to P40,000.00.17 On cross-examination, Suelto declared that he saw the passenger jeepney when

it was a meter away from the bus. Before then, he had seen some passenger jeepneys on the right trying to overtake one another.18

Architect Arnulfo Galapate testified that the cost of the repair of the damaged terrace amounted to P55,000.00.19

On April 28, 1994, the trial court rendered judgment finding Suelto guilty beyond reasonable doubt of reckless imprudence resulting in damage to property, and ordered MALTC and Suelto to pay, jointly and severally,P150,000.00 to Valdellon, by way of actual and compensatory damages, as well as attorney’s fees and costs of suit. The fallo of the decision reads:

WHEREFORE, finding the accused FREDDIE SUELTO Y LIWAG guilty beyond reasonable doubt of the crime of Reckless Imprudence Resulting in Damage to Property, said accused is hereby sentenced to suffer imprisonment of ONE (1) YEAR.

With respect to the civil liability, judgment is hereby rendered in favor of plaintiff Erlinda Valdellon and against defendant Marikina Auto Line Transport Corporation and accused Freddie Suelto, where both are ordered, jointly and severally, to pay plaintiff:

a. the sum of P150,000.00, as reasonable compensation sustained by plaintiff for her damaged apartment;

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

c. the sum of P20,000.00, as attorney’s fees; and,

d. the costs of suit.

SO ORDERED.20

MALTC and Suelto, now appellants, appealed the decision to the CA, alleging that the prosecution failed to prove Suelto’s guilt beyond reasonable doubt. They averred that the prosecution merely relied on Valdellon, who testified only on the damage caused to the terrace of her apartment which appellants also alleged was excessive. Appellant Suelto further alleged that he should be acquitted in the criminal case for the prosecution’s failure to prove his guilt beyond reasonable doubt. He maintained that, in an emergency case, he was not, in law, negligent. Even if the appellate court affirmed his conviction, the penalty of imprisonment imposed on him by the trial court is contrary to law.

In its Brief for the People of the Philippines, the Office of the Solicitor General (OSG) submitted that the appealed decision should be affirmed with modification. On Suelto’s claim that the prosecution failed to prove his guilt for the crime of reckless imprudence resulting in damage to property, the OSG contended that, applying the principle of res ipsa loquitur, the prosecution was able to prove that he drove the bus with negligence and recklessness. The OSG averred that the prosecution was able to prove that Suelto’s act of swerving the bus to the right was the cause of damage to the terrace of Valdellon’s apartment, and in the absence of an explanation to the contrary, the accident was evidently due to appellant’s want of care. Consequently, the OSG posited, the burden was on the appellant to prove that, in swerving the bus to the right, he acted on an emergency, and failed to discharge this burden. However, the OSG averred that the trial court erred in sentencing appellant to a straight penalty of one year, and recommended a penalty of fine.

On June 20, 2000, the CA rendered judgment affirming the decision of the trial court, but the award for actual damages was reduced to P100,000.00. The fallo of the decision reads:

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

SO ORDERED.21

Appellants filed a Motion for Reconsideration, but the CA denied the same.22

MALTC and Suelto, now petitioners, filed the instant petition reiterating its submissions in the CA: (a) the prosecution failed to prove the crime charged against petitioner Suelto; (b) the prosecution failed to adduce evidence to prove that respondent suffered actual damages in the amount of P100,000.00; and (c) the trial court erred in sentencing petitioner Suelto to one (1) year prison term.

On the first issue, petitioners aver that the prosecution was mandated to prove that petitioner Suelto acted with recklessness in swerving the bus to the right thereby hitting the terrace of private respondent’s apartment. However, the prosecution failed to discharge its burden. On the other hand, petitioner Suelto was able to prove that he acted in an emergency when a passenger jeepney coming from EDSA towards the direction of the bus overtook another vehicle and, in the process, intruded into the lane of the bus.

On the second issue, petitioners insist that private respondent was able to prove only the amount of P35,000.00 by way of actual damages; hence, the award of P100,000.00 is barren of factual basis.

On the third issue, petitioner Suelto posits that the straight penalty of imprisonment recommended by the trial court, and affirmed by the CA, is contrary to Article 365 of the Revised Penal Code.

The petition is partially granted.

On the first issue, we find and so resolve that respondent People of the Philippines was able to prove beyond reasonable doubt that petitioner Suelto swerved the bus to the right with recklessness, thereby causing damage to the terrace of private respondent’s apartment. Although she did not testify to seeing the incident as it happened, petitioner Suelto himself admitted this in his answer to the complaint in Civil Case No. Q-93-16051, and when he testified in the trial court.

Suelto narrated that he suddenly swerved the bus to the right of the road causing it to hit the column of the terrace of private respondent. Petitioners were burdened to prove that the damage to the terrace of private respondent was not the fault of petitioner Suelto.

We have reviewed the evidence on record and find that, as ruled by the trial court and the appellate court, petitioners failed to prove that petitioner acted on an emergency caused by the sudden intrusion of a passenger jeepney into the lane of the bus he was driving.

It was the burden of petitioners herein to prove petitioner Suelto’s defense that he acted on an emergency, that is, he had to swerve the bus to the right to avoid colliding with a passenger jeep coming from EDSA that had overtaken another vehicle and intruded into the lane of the bus. The sudden emergency rule was enunciated by this Court in Gan v. Court of Appeals,23 thus:

[O]ne who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to adopt what subsequently and upon reflection may appear to have been a better method unless the emergency in which he finds himself is brought about by his own negligence.

Under Section 37 of Republic Act No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code, motorists are mandated to drive and operate vehicles on the right side of the road or highway:

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

Section 35 of the law provides, thus:

Sec. 35. Restriction as to speed.—(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and of any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead (emphasis supplied).

In relation thereto, Article 2185 of the New Civil Code provides that "unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent, if at the time of mishap, he was violating any traffic regulation." By his own admission, petitioner Suelto violated the Land Transportation and Traffic Code when he suddenly swerved the bus to the right, thereby causing damage to the property of private respondent.

However, the trial court correctly rejected petitioner Suelto’s defense, in light of his contradictory testimony vis-à-vis his Counter-Affidavit submitted during the preliminary investigation:

It is clear from the photographs submitted by the prosecution (Exhs. C, D, G, H & I) that the commercial apartment of Dr. Valdellon sustained heavy damage caused by the bus being driven by Suelto. "It seems highly improbable that the said damages were not caused by a strong impact. And, it is quite reasonable to conclude that, at the time of the impact, the bus was traveling at a high speed when Suelto tried to avoid the passenger jeepney." Such a conclusion finds support in the decision of the Supreme Court in People vs. Ison, 173 SCRA 118, where the Court stated that "physical evidence is of the highest order. It speaks more eloquently than a hundred witnesses." The pictures submitted do not lie, having been taken immediately after the incident. The damages could not have been caused except by a speeding bus. Had the accused not been speeding, he could have easily reduced his speed and come to a full stop when he noticed the jeep. Were he more prudent in driving, he could have avoided the incident or even if he could not avoid the incident, the damages would have been less severe.

In addition to this, the accused has made conflicting statements in his counter-affidavit and his testimony in court. In the former, he stated that the reason why he swerved to the right was because he wanted to avoid the passenger jeepney in front of him that made a sudden stop. But, in his testimony in court, he said that it was to avoid a passenger jeepney coming from EDSA that was overtaking by occupying his lane. Such glaring inconsistencies on material points render the testimony of the witness doubtful and shatter his credibility. Furthermore, the variance between testimony and prior statements renders the witness unreliable. Such inconsistency results in the loss in the credibility of the witness and his testimony as to his prudence and diligence.

As already maintained and concluded, the severe damages sustained could not have resulted had the accused acted as a reasonable and prudent man would. The accused was not diligent as he claims to be. What is more probable is that the accused had to swerve to the right and hit the commercial apartment of the plaintiff because he could not make a full stop as he was driving too fast in a usually crowded street.24

Moreover, if the claim of petitioners were true, they should have filed a third-party complaint against the driver of the offending passenger jeepney and the owner/operator thereof.

Petitioner Suelto’s reliance on the sudden emergency rule to escape conviction for the crime charged and his civil liabilities based thereon is, thus, futile.

43

On the second issue, we agree with the contention of petitioners that respondents failed to prove that the damages to the terrace caused by the incident amounted to P100,000.00. The only evidence adduced by respondents to prove actual damages claimed by private respondent were the summary computation of damage made by Engr. Jesus R. Regal, Jr. amounting to P171,088.46 and the receipt issued by the BB Construction and Steel Fabricator to private respondent for P35,000.00 representing cost for carpentry works, masonry, welding, and electrical works. Respondents failed to present Regal to testify on his estimation. In its five-page decision, the trial court awardedP150,000.00 as actual damages to private respondent but failed to state the factual basis for such award. Indeed, the trial court merely declared in the decretal portion of its decision that the "sum of P150,000.00 as reasonable compensation sustained by plaintiff for her damaged apartment." The appellate court, for its part, failed to explain how it arrived at the amount of P100,000.00 in its three-page decision. Thus, the appellate court merely declared:

With respect to the civil liability of the appellants, they contend that there was no urgent necessity to completely demolish the apartment in question considering the nature of the damages sustained as a result of the accident. Consequently, appellants continue, the award of  P150,000.00 as compensation sustained by the plaintiff-appellee for her damaged apartment is an unconscionable amount.

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

Considering the aforesaid damages which are the direct result of the accident, the reasonable, and adequate compensation due is hereby fixed at P100,000.00.25

Under Article 2199 of the New Civil Code, actual damages include all the natural and probable consequences of the act or omission complained of, classified as one for the loss of what a person already possesses (daño emergente) and the other, for the failure to receive, as a benefit, that which would have pertained to him (lucro cesante). As expostulated by the Court in PNOC Shipping and Transport Corporation v. Court of Appeals:26

Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. In actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of the act or omission complained of. There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses (daño emergente), and the other is the failure to receive as a benefit that which would have pertained to him (lucro cesante).27

The burden of proof is on the party who would be defeated if no evidence would be presented on either side. The burden is to establish one’s case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side, is superior to that of the other. Actual damages are not presumed. The claimant must prove the actual amount of loss with a reasonable degree of certainty premised upon competent proof and on the best evidence obtainable. Specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne must be pointed out. Actual damages cannot be anchored on mere surmises, speculations or conjectures. As the Court declared:

As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is required to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available. The burden of proof is on the party who would be defeated if no evidence would be presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other. In other words, damages cannot be presumed and courts, in making an award, must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne.28

The Court further declared that "where goods are destroyed by the wrongful act of defendant, the plaintiff is entitled to their value at the time of the destruction, that is, normally, the sum of money which he would have to pay in the market for identical or essentially similar goods, plus in a proper case, damages for the loss of the use during the period before replacement.29

While claimants’ bare testimonial assertions in support of their claims for damages should not be discarded altogether, however, the same should be admitted with extreme caution. Their testimonies should be viewed in light of claimants’ self-interest, hence, should not be taken as gospel truth. Such assertion should be buttressed by independent evidence. In the language of the Court:

For this reason, Del Rosario’s claim that private respondent incurred losses in the total amount of P6,438,048.00 should be admitted with extreme caution considering that, because it was a bare assertion, it should be supported by independent evidence. Moreover, because he was the owner of private respondent corporation whatever testimony he would give with regard to the value of the lost vessel, its equipment and cargoes should be viewed in the light of his self-interest therein. We agree with the Court of Appeals that his testimony as to the equipment installed and the cargoes loaded on the vessel should be given credence considering his familiarity thereto. However, we do not subscribe to the conclusion that his valuation of such equipment, cargo, and the vessel itself should be accepted as gospel truth. We must, therefore, examine the documentary evidence presented to support Del Rosario’s claim as regards the amount of losses.30

An estimate of the damage cost will not suffice:

Private respondents failed to adduce adequate and competent proof of the pecuniary loss they actually incurred. It is not enough that the damage be capable of proof but must be actually proved with a reasonable degree of certainty, pointing out specific facts that afford a basis for measuring whatever compensatory damages are borne. Private respondents merely sustained an estimated amount needed for the repair of the roof of their subject building. What is more, whether the necessary repairs were caused only by petitioner’s alleged negligence in the maintenance of its school building, or included the ordinary wear and tear of the house itself, is an essential question that remains indeterminable.31

We note, however, that petitioners adduced evidence that, in their view, the cost of the damage to the terrace of private respondent would amount to P55,000.00.32 Accordingly, private respondent is entitled to P55,000.00 actual damages.

We also agree with petitioner Suelto’s contention that the trial court erred in sentencing him to suffer a straight penalty of one (1) year. This is so because under the third paragraph of Article 365 of the Revised Penal Code, the offender must be sentenced to pay a fine when the execution of the act shall have only resulted in damage to property. The said provision reads in full:

ART. 365. Imprudence and negligence. – Any person who, by reckless imprudence, shall commit any act which, had it been intentional, would constitute a grave felony, shall suffer the penalty of arresto mayor in its maximum period, to prision correccional in its medium period; if it would have constituted a less grave felony, the penalty of arresto mayor in its minimum and medium periods shall be imposed; if it would have constituted a light felony, the penalty of arresto menor in its maximum period shall be imposed.

Any person who, by simple imprudence or negligence, shall commit an act which would, otherwise, constitute a grave felony, shall suffer the penalty of arresto mayor in its medium and maximum periods; if it would have constituted a less serious felony, the penalty of arresto mayor in its minimum period shall be imposed.

When the execution of the act covered by this article shall have only resulted in damage to the property of another, the offender shall be punished by a fine ranging from an amount equal to the value of said damages to three times such value, but which shall in no case be less than 25 pesos.

A fine not exceeding two hundred pesos and censure shall be imposed upon any person who, by simple imprudence or negligence, shall cause some wrong which, if done maliciously, would have constituted a light felony.

In the imposition of these penalties, the courts shall exercise their sound discretion, without regard to the rules prescribed in Article 64 (Emphasis supplied).

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In the present case, the only damage caused by petitioner Suelto’s act was to the terrace of private respondent’s apartment, costing P55,000.00. Consequently, petitioner’s contention that the CA erred in awarding P100,000.00 by way of actual damages to private respondent is correct. We agree that private respondent is entitled to exemplary damages, and find that the award given by the trial court, as affirmed by the CA, is reasonable. Considering the attendant circumstances, we rule that private respondent Valdellon is entitled to only P20,000.00 by way of exemplary damages.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The joint decision of the Regional Trial Court of Quezon City is AFFIRMED WITH THE MODIFICATION that petitioner Suelto is sentenced to pay a fine of P55,000.00 with subsidiary imprisonment in case of insolvency. Petitioners are ORDERED to pay to Erlinda V. Valdellon, jointly and severally, the total amount of  P55,000.00 by way of actual damages, and P20,000.00 by way of exemplary damages.

No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 193629               August 17, 2011

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

D E C I S I O N

CARPIO, J.:

The Case

G.R. No. 193629 is a petition for review1 assailing the Decision2 promulgated on 11 March 2010 as well as the Resolution3 promulgated on 3 September 2010 by the Court of Appeals (appellate court) in CA-G.R. SP No. 105338. The appellate court affirmed with modification the 27 May 2008 Decision 4 of Branch 37 of the Regional Trial Court of Manila (RTC) in Civil Case No. 00-99410. The RTC dismissed RCJ Bus Lines’ appeal from the 12 July 2000 Decision5 of the Metropolitan Trial Court of Manila (MeTC) in Civil Case No. 153566. The MeTC rendered judgment in favor of Standard Insurance Company, Incorporated (Standard) and ordered Flor Bola Mangoba (Mangoba) and RCJ Bus Lines, Incorporated (RCJ) to pay damages.

The Facts

The appellate court narrated the facts as follows:

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

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

bearing Plate No. NYG-363 in a reckless and imprudent manner, bumped and hit a 1991 Mitsubishi Lancer GLX bearing Plate No. TAJ-796, a photocopy of the police report is attached hereto and made an integral part hereof as Annex ‘A.’

3. The subject Mitsubishi Lancer which is owned by Rodelene Valentino was insured for loss and damage with plaintiff [Standard Insurance Co. Inc.] for P450,000.00, a photocopy of the insurance policy is attached hereto and made an integral part hereof as Annex ‘B.’

4. Defendant RCJ Bus Lines, Inc. is the registered owner of the Passenger Bus bearing Plate No. NYG-363 while defendant Flor Mangoba was the driver of the subject Passenger Bus when the accident took place.

5. As a direct and proximate cause of the vehicular accident, the Mitsubishi Lancer was extensively damaged, the costs of repairs of which were borne by the plaintiff [Standard Insurance Co. Inc.] at a cost ofP162,151.22.

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

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

8. Despite demands, defendants have failed and refused and still continue to fail and refuse to reimburse plaintiff the sum of P162,151.22. A photocopy of the demand letter is attached hereto and made an integral part hereof as Annex ‘C.’

9. As a consequence, plaintiff [Standard Insurance Co. Inc.] has been compelled to resort to court action and thereby hire the services of counsel as well as incur expenses of litigation for all of which it should be indemnified by the defendant in the amount of at least P30,000.00.

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

Thus, STANDARD prayed:

"WHEREFORE, plaintiff respectfully prays that after due trial on the issues, this court render judgment against the defendants adjudging them jointly and severally liable to pay plaintiff the following amounts:

1. The principal claim of P162,151.22 with interest at 12% per annum from September 1, 1995 until fully paid.

2. P30,000.00 as and by way of indemnification for attorney’s fees.

3. P25,000.00 as exemplary damages.

Plaintiff prays for such further or other reliefs as may be deemed just and equitable under the premises."

In its answer, RCJ Bus Lines, Inc. maintained:

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

2. That venue was improperly laid; and,

3. That the direct, immediate and proximate cause of the accident was the negligence of the driver of the Mitsubishi Lancer when, for no reason at all, it made a sudden stop along the National Highway, as if to initiate and/or create an accident."

Flor Bola Mangoba, in his own answer to the complaint, also pointed his finger at the driver of the Mitsubishi Lancer as the one who caused the vehicular accident on the time, date and place in question.

For his failure to appear at the pre-trial despite notice, Flor Bola Mangoba was declared in default on 14 November 1997. Accordingly, trial proceeded sans his participation.

At the trial, the evidence adduced by the parties established the following facts:

In the evening of 19 June 1994, at around 7:00 o’clock, a Toyota Corolla with Plate No. PHU-185 driven by Rodel Chua, cruised along the National Highway at Barangay Amlang, Rosario, La Union, heading towards the general direction of Bauan, La Union. The Toyota Corolla travelled at a speed of 50 kilometers per hour as it traversed the downward slope of the road, which curved towards the right.

The Mitsubishi Lancer GLX with Plate No. TAJ-796, driven by Teodoro Goki, and owned by Rodelene Valentino, was then following the Toyota Corolla along the said highway. Behind the Mitsubishi Lancer GLX was the passenger bus with Plate No. NYG-363, driven by Flor Bola Mangoba and owned by RCJ Bus Lines, Inc. The bus followed the Mitsubishi Lancer GLX at a distance of ten (10) meters and traveled at the speed of 60 to 75 kilometers per hour.

Upon seeing a pile of gravel and sand on the road, the Toyota Corolla stopped on its tracks. The Mitsubishi Lancer followed suit and also halted. At this point, the bus hit and bumped the rear portion of the Mitsubishi Lancer causing it to move forward and hit the Toyota Corolla in front of it.

As a result of the incident, the Mitsubishi Lancer sustained damages amounting to  P162,151.22, representing the costs of its repairs. Under the comprehensive insurance policy secured by Rodelene Valentino, owner of the Mitsubishi Lancer, STANDARD reimbursed to the former the amount she expended for the repairs of her vehicle. Rodelene then executed a Release of Claim and Subrogation Receipt, subrogating STANDARD to all rights, claims and actions she may have against RCJ Bus Lines, Inc. and its driver, Flor Bola Mangoba.6

The MeTC’s Ruling

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

WHEREFORE, consistent with Section 1, Rule 131 and Section 1, Rule 133 of the Revised Rules on Evidence, judgment is hereby rendered in favor of the plaintiff, ordering defendants Flor Bola Mangoba and RCJ Bus Lines, Inc.:

1. To pay the principal sum of ONE HUNDRED SIXTY TWO THOUSAND ONE HUNDRED FIFTY ONE PESOS and 22/100 (P162,151.22), with legal rate of interest at 12% per annum from September 1, 1995 until full payment;

2. To pay the sum of TWENTY THOUSAND PESOS (P20,000.00) as exemplary damages;

3. To pay the sum of TWENTY THOUSAND PESOS (P20,000.00) as reasonable attorney’s fees; and

4. To pay the costs of suit.

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

In an Order8 dated 2 May 2002, the RTC dismissed Mangoba and RCJ’s appeal for filing their pleading beyond the reglementary period. The appellate court, however, in a Decision9 in CA-G.R. SP No. 77598 dated 23 April 2004, granted RCJ’s petition and remanded the case to the RTC for further proceedings.

The RTC’s Ruling

In its Decision dated 27 May 2008, the RTC affirmed with modification the MeTC’s Decision dated 12 July 2000. The RTC deleted the award for exemplary damages.

RCJ failed to convince the RTC that it observed the diligence of a good father of a family to prevent damages sustained by the Mitsubishi Lancer. The RTC ruled that the testimony of Conrado Magno, RCJ’s Operations Manager, who declared that all applicants for employment in RCJ were required to submit clearances from the barangay, the courts and the National Bureau of Investigation, is insufficient to show that RCJ exercised due diligence in the selection and supervision of its drivers. The allegation of the conduct of seminars and training for RCJ’s drivers is not proof that RCJ examined Mangoba’s qualifications, experience and driving history. Moreover, the testimony of Noel Oalog, the bus conductor, confirmed that the bus was travelling at a speed of 60 to 75 kilometers per hour, which was beyond the maximum allowable speed of 50 kilometers per hour for a bus on an open country road. The RTC, however, deleted the award of exemplary damages because it found no evidence that Mangoba acted with gross negligence.

In an Order10 dated 27 August 2008, the RTC partially reconsidered its 27 May 2008 Decision and modified the MeTC’s Decision to read as follows:

WHEREFORE, the Decision dated May 27, 2008 is partially reconsidered and the Decision of the court a quo dated July 12, 2000 is MODIFIED. Appellant RCJ Bus Lines, Inc. and defendant Flor Bola Mangoba are ordered to pay jointly and severally the appellee [Standard Insurance Co., Inc.] the following:

1. ONE HUNDRED SIXTY TWO THOUSAND ONE FIFTY ONE PESOS and 22/100 (P162,151.22), with legal rate of interest at 6% per annum from September 1, 1995 until full payment;

2. TWENTY THOUSAND PESOS (P20,000.00) as reasonable attorney’s fees; and

3. Cost of suit.

SO ORDERED.11

The Appellate Court’s Ruling

Mangoba and RCJ filed a petition for review before the appellate court. The appellate court found that the RTC committed no reversible error in affirming RCJ’s liability as registered owner of the bus and employer of Mangoba, as well as Mangoba’s negligence in driving the passenger bus. The appellate court, however, deleted the award for attorney’s fees and modified the legal interest imposed by the MeTC.

The dispositive portion of the appellate court’s decision reads:

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WHEREFORE, the instant petition for review is DENIED. The assailed Decision of the Regional Trial Court of Manila, Branch 37, in Civil Case No. 00-99410 is hereby AFFIRMED with MODIFICATION that the legal interest that should be imposed on the actual damages awarded in favor of respondent Standard Insurance, Co., Inc. should be at the rate of 6% per annum computed from the time of extra judicial demand until the finality of the 12 July 2000 Decision of the MeTC and thereafter, the legal interest shall be at the rate of 12% per annum until the full payment of the actual damages. The award of attorney’s fees is DELETED.

SO ORDERED.12

The appellate court denied RCJ’s Motion for Reconsideration13 for lack of merit.14

The Issues

RCJ assigns the following as errors of the appellate court:

1. The Court of Appeals erroneously awarded the amount of  P162,151.22 representing actual damages based merely on the proof of payment of policy/insurance claim and not on an official receipt of payment of actual cost of repair;

2. The Court of Appeals erroneously disregarded the point that petitioner RCJ’s defense of extraordinary diligence in the selection and supervision of its driver was made as an alternative defense;

3. The Court of Appeals erroneously disregarded the legal principle that the supposed violation of Sec. 35 of R.A. 4136 merely results in a disputable presumption; and

4. The Court of Appeals erroneously held that petitioner RCJ is vicariously liable for the claim of supposed actual damages incurred by respondent Standard Insurance.15

The Court’s Ruling

The petition has no merit. We see no reason to overturn the findings of the lower courts. We affirm the ruling of the appellate court.

RCJ’s Liability

RCJ argues that its defense of extraordinary diligence in the selection and supervision of its employees is a mere alternative defense. RCJ’s initial claim was that Standard’s complaint failed to state a cause of action against RCJ.

Standard may hold RCJ liable for two reasons, both of which rely upon facts uncontroverted by RCJ. One, RCJ is the registered owner of the bus driven by Mangoba. Two, RCJ is Mangoba’s employer.

Standard’s allegation in its amended complaint that RCJ is the registered owner of the passenger bus with plate number NYG 363 was sufficient to state a cause of action against RCJ. The registered owner of a vehicle should be primarily responsible to the public for injuries caused while the vehicle is in use. 16 The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner.17

Moreover, in its efforts to extricate itself from liability, RCJ proffered the defense of the exercise of the diligence of a good father of a family. The MeTC characterized RCJ’s defense against negligence in this manner:

To repel the idea of negligence, defendant [RCJ] bus company’s operations manager at the Laoag City Terminal was presented on the witness stand on January 5, 2000 in regard to the company’s seminars and dialogues with respect to its employees, and the absence of any record of a vehicular accident involving the co-defendant driver [Mangoba] (TSN, January 5, 2000, pp. 2-17; TSN, February 16, 2000, pp. 2-9). As the last witness of defendant [RCJ] bus company, Noel Oalog, bus conductor who was allegedly seated to the right side of the bus driver during the incident, was presented on March 22, 2000 (TSN, March 22, 2000, page 2). He confirmed on direct examination and cross examination that it was defendant’s bus, then running at 60-75 [kph] and at a distance of 10 meters, which bumped a Mitsubishi Lancer without a tail light. According to him, the incident occurred when the driver of the Toyota Corolla, which was ahead of the Lancer, stepped on the brakes due to the pile of gravel and sand in sight (TSN, Vide at pp. 3-11). Subsequent to the proffer of exhibits (TSN, Vide, at page 14), and in default of any rebuttal, the parties were directed to file the Memoranda within thirty days from March 23, 2000.18

RCJ, by presenting witnesses to testify on its exercise of diligence of a good father of a family in the selection and supervision of its bus drivers, admitted that Mangoba is its employee. Article 2180 19 of the Civil Code, in relation to Article 2176,20 makes the employer vicariously liable for the acts of its employees. When the employee causes damage due to his own negligence while performing his own duties, there arises the juris tantum presumption that the employer is negligent, rebuttable only by proof of observance of the diligence of a good father of a family. For failure to rebut such legal presumption of negligence in the selection and supervision of employees, the employer is likewise responsible for damages, the basis of the liability being the relationship of pater familias or on the employer’s own negligence.21 1avvphi1

Mangoba, per testimony of his conductor, was ten meters away from the Mitsubishi Lancer before the collision and was driving 60 to 75 kilometers per hour when the speed limit was 50 kilometers per hour.22 The presumption under Article 218523 of the Civil Code was thus proven true: Mangoba, as driver of the bus which collided with the Mitsubishi Lancer, was negligent since he violated a traffic regulation at the time of the mishap. We see no reason to depart from the findings of the MeTC, RTC and appellate court that Mangoba was negligent. The appellate court stated:

To be sure, had not the passenger bus been speeding while traversing the downward sloping road, it would not have hit and bumped the Mitsubishi Lancer in front of it, causing the latter vehicle to move forward and hit and bump, in turn, the Toyota Corolla. Had the bus been moving at a reasonable speed, it could have avoided hitting and bumping the Mitsubishi Lancer upon spotting the same, taking into account that the distance between the two vehicles was ten (10) meters. As fittingly opined by the MeTC, the driver of the passenger bus, being the rear vehicle, had full control of the situation as he was in a position to observe the vehicle in front of him. Had he observed the diligence required under the circumstances, the accident would not have occurred.24

Subrogation

In the present case, it cannot be denied that the Mitsubishi Lancer sustained damages. Moreover, it cannot also be denied that Standard paid Rodelene Valentino P162,151.22 for the repair of the Mitsubishi Lancer pursuant to a Release of Claim and Subrogation Receipt. Neither RCJ nor Mangoba cross-examined Standard’s claims evaluator when he testified on his duties, the insurance contract between Rodelene Valentino and Standard, Standard’s payment of insurance proceeds, and RCJ and Mangoba’s refusal to pay despite demands. After being lackadaisical during trial, RCJ cannot escape liability now. Standard’s right of subrogation accrues simply upon its payment of the insurance claim.25

Article 2207 of the Civil Code reads:

Art. 2207. If the plaintiff’s property has been insured and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.

Subrogation is the substitution of one person by another with reference to a lawful claim or right, so that he who substitutes another succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. The principle covers a situation wherein an insurer who has paid a loss under an

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insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy.26

WHEREFORE, we DENY the petition. We AFFIRM the Decision of the Court of Appeals in CA-G.R. SP No. 105338 promulgated on 11 March 2010 as well as the Resolution promulgated on 3 September 2010.

SO ORDERED.

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