IX.

ACTUAL
DAMAGES

OR

COMPENSATORY

A. DEFINITION
Art. 2199. Except as provided by law or by
stipulation, one is entitled to an adequate
compensation only for such pecuniary loss
suffered by him as he has duly proved. Such
compensation is referred to as actual or
compensatory damages.
Art. 2200. Indemnification for damages shall
comprehend not only the value of the loss
suffered, but also that of the profits which the
obligee failed to obtain. (1106)

B. COMPONENTS
DAMAGES

OF

ACTUAL

B.1. VALUE OF LOSS SUFFERED (DAO

EMERGENTE)
Art. 2200. Indemnification for damages shall
comprehend not only the value of the loss
suffered, but also that of the profits which the
obligee failed to obtain. (1106)
B.2. PROFITS NOT OBTAINED
REALIZED (LUCRO CESANTE)

OR

Art. 2200. Indemnification for damages shall

comprehend not only the value of the loss
suffered, but also that of the profits which the
obligee failed to obtain. (1106)
B.3. LOSS OF EARNING CAPACITY FOR
PERSONAL INJURY
B.3.1:
DETERMINING
CAPACITY

FORMULA
IN
LOSS OF EARNING

[G.R. No. 132252. April 27, 2000]

PEOPLE OF THE PHILIPPINES, plaintiffappellee, vs. JESUS MUYCO and ARNULFO
MUYCO (at large), accused
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 to reclusion
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 oclock to 7:00 oclock 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 oclock 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. Romeos body was found
lifeless at 11:00 oclock 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 oclock
until 7:00 oclock in the evening of 13 May 1995
Jesus, Arnulfo and the deceased were in his
house drinking. The group left at around 7:30
oclock 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
oclock 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 oclock
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 Severo Muyco at Bgy. PamuringaoGarrido, Cabatuan, Iloilo, as he got married

there a year ago. From 10:00 oclock in the
morning to 5:00 oclock 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 for the
first time. He did not know whose house it was
where they drank. Upon the prodding of Severo,
he left Cabatuan and proceeded to Passi, Iloilo,
which is about fifty (50) kilometers away,
arriving there at 7:00 oclock in the evening. He
spent the night in the house of his cousin Nestor
Muyco.
Vicente Inion and Joean Nufable corroborated
accused-appellants 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 Ernestos inaction when his nephew
Romeo was stabbed just a meter away from him
is contrary to human nature.
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 persons spontaneous or
unthinking, or even instinctive response to a
horrid and repulsive stimulus may be
aggression, while another persons 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.
ThusQ: After romeo Boteja Jr. was hit and x x x 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 x x x x
Q: How about during the period that your
nephew was stabbed up to the time the 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 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 strenthen 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-appellants 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
prosecutions 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-appellants 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.
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 oclock 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.

earning less than the minimum wage under the

current labor laws and judicial notice was taken
of the fact that in the victims 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 x x x
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)

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. Dizon[6] this Court
discussed the requisites for such awardAs a rule, documentary evidence should be
presented to substantiate the claim for loss of
earning capacity. In People v. Verde, the nonpresentation 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 victims 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

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 the
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.

[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.

After several re-settings,[7] pre-trial was set on

April 10, 1997.[8] For failure to appear on the
said date, petitioner was declared as in default.
[9] However, on petitioners motion[10] to lift
the order of default, the same was granted by the
trial court.[11]

DECISION
YNARES-SANTIAGO, J.:

Assailed in this petition for review on certiorari

is the April 11, 2003 decision[1] 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.

The facts as testified by respondent Rosalito

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

On May 14, 1996, respondent heirs of the

deceased filed a complaint[5] for damages
arising from culpa contractual against petitioner.
In its answer,[6] the petitioner claimed that the
incident was purely accidental and that it has
always exercised extraordinary diligence in its
50 years of operation.

At the pre-trial on May 6, 1997, petitioner did

not want to admit the proposed stipulation that
the deceased was a passenger of the Victory
Liner Bus which fell on the ravine and that she
was issued Passenger Ticket No. 977785.
Respondents, for their part, did not accept
petitioners proposal to pay P50,000.00.[12]

After respondent Rosalito Gammad completed

his direct testimony, cross-examination was
scheduled for November 17, 1997[13] but
moved to December 8, 1997,[14] because the
parties and the counsel failed to appear. On
December 8, 1997, counsel of petitioner was
absent despite due notice and was deemed to
have waived right to cross-examine respondent
Rosalito.[15]

Petitioners motion to reset the presentation of its

evidence to March 25, 1998[16] was granted.
However, on March 24, 1998, the counsel of
petitioner sent the court a telegram[17]
requesting postponement but the telegram was
received by the trial court on March 25, 1998,
after it had issued an order considering the case
submitted for decision for failure of petitioner
and counsel to appear.[18]

On November 6, 1998, the trial court rendered

its decision in favor of respondents, the
dispositive portion of which reads:

WHEREFORE, premises considered and in the

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

1. Actual
122,000.00

Damages

--------------------

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

3. Exemplary
400,000.00

and

4.
Compensatory
1,500,000.00

Moral

Damages-----

Damages

2. Compensatory Damages in the amount of

P1,135,536,10;

3. Moral and Exemplary Damages in the amount

of P400,000.00; and

4. Attorneys fees equivalent to 10% of the sum

of the actual, compensatory, moral, and
exemplary damages herein adjudged.

The court a quos judgment of the cost of the suit

against
defendant-appellant
is
hereby
AFFIRMED.

---------SO ORDERED.[20]

5. Attorneys 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 plaintiffsappellees:

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

Represented by a new counsel, petitioner on

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

On August 21, 2003, the Court of Appeals

denied petitioners motion for reconsideration.
[23]

Hence, this petition for review principally based

on the fact that the mistake or gross negligence
of its counsel deprived petitioner of due process
of law. Petitioner also argues that the trial courts
award of damages were without basis and
should be deleted.

The issues for resolution are: (1) whether

petitioners counsel was guilty of gross
negligence; (2) whether petitioner should be
held liable for breach of contract of carriage; and
(3) whether the award of damages was proper.

It is settled that the negligence of counsel binds

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

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 pretrial 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 crossexamine respondents witness and to present
evidence, he nevertheless, filed a timely appeal
with the Court of Appeals assailing the decision
of the trial court. Hence, petitioners claim that it
was denied due process lacks basis.

Petitioner too is not entirely blameless. Prior to

the issuance of the order declaring it as in
default for not appearing at the pre-trial, three
notices (dated October 23, 1996,[25] January 30,
1997,[26] and March 26, 1997,[27]) requiring
attendance at the pre-trial were sent and duly
received by petitioner. However, it was only on
April 27, 1997, after the issuance of the April
10, 1997 order of default for failure to appear at
the pre-trial when petitioner, through its finance
and administrative manager, executed a special
power of attorney[28] authorizing Atty.
Paguirigan or any member of his law firm to
represent petitioner at the pre-trial. Petitioner is
guilty, at the least, of contributory negligence
and fault cannot be imputed solely on previous
counsel.

The case of APEX Mining, Inc., invoked by

petitioner is not on all fours with the case at bar.
In APEX, the negligent counsel not only allowed
the adverse decision against his client to become
final
and
executory,
but
deliberately
misrepresented in the progress report that the
case was still pending with the Court of Appeals

when the same was dismissed 16 months ago.

[29] These circumstances are absent in this case
because Atty. Paguirigan timely filed an appeal
from the decision of the trial court with the
Court of Appeals.

In Gold Line Transit, Inc. v. Ramos,[30] the

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

This leads us to the question of whether the

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

In the application of the principle of due

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

To cater to petitioners arguments and reinstate

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

Similarly, in Macalalag v. Ombudsman,[32] a

Philippine Postal Corporation employee charged
with dishonesty was not able to file an answer
and position paper. He was found guilty solely
on the basis of complainants evidence and was
dismissed with forfeiture of all benefits and
disqualification from government service.
Challenging the decision of the Ombudsman, the
employee contended that the gross negligence of

his counsel deprived him of due process of law.

In debunking his contention, the Court said

Neither can he claim that he is not bound by his

lawyers actions; it is only in case of gross or
palpable negligence of counsel when the courts
can step in and accord relief to a client who
would have suffered thereby. If every perceived
mistake, failure of diligence, lack of experience
or insufficient legal knowledge of the lawyer
would be admitted as a reason for the reopening
of a case, there would be no end to controversy.
Fundamental to our judicial system is the
principle that every litigation must come to an
end. It would be a clear mockery if it were
otherwise. Access to the courts is guaranteed,
but there must be a limit to it.

Viewed vis--vis the foregoing jurisprudence, to

sustain petitioners argument that it was denied
due process of law due to negligence of its
counsel would set a dangerous precedent. It
would enable every party to render inutile any
adverse order or decision through the simple
expedient of alleging gross negligence on the
part of its counsel. The Court will not
countenance such a farce which contradicts
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 Graces death was the negligence
of petitioner. Hence, the courts below correctly
ruled that petitioner was guilty of breach of
contract of carriage.

Nevertheless, the award of damages should be

modified.

Article 1764[35] in relation to Article 2206[36]

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

In the present case, respondent heirs of the

deceased are entitled to indemnity for the death
of Marie Grace which under current
jurisprudence is fixed at P50,000.00.[37]

The award of compensatory damages for the

loss of the deceaseds earning capacity should be
deleted for lack of basis. As a rule, documentary
evidence should be presented to substantiate the
claim for damages for loss of earning capacity.
By way of exception, damages for loss of
earning capacity may be awarded despite the
absence of documentary evidence when (1) the
deceased is self-employed earning less than the

minimum wage under current labor laws, and

judicial notice may be taken of the fact that in
the deceaseds line of work no documentary
evidence is available; or (2) the deceased is
employed as a daily wage worker earning less
than the minimum wage under current labor
laws.[38]

In People v. Oco,[39] the evidence presented by

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

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 dailywage workers earning less than the minimum
wage under the labor laws existing at the time of
their death. Placido Agustin was a Social
Security System employee who received a
monthly salary of P5,000. Roberto Raagas was
the President of Sinclair Security and Allied
Services, a family owned corporation, with a
monthly compensation of P30,000. Melencio

Castro Jr. was a taxi driver of New Rocalex with

an average daily earning of P500 or a monthly
earning of P7,500. Clearly, these cases do not
fall under the exceptions where indemnity for
loss of earning capacity can be given despite
lack of documentary evidence. Therefore, for
lack of documentary proof, no indemnity for
loss of earning capacity can be given in these
cases. (Emphasis supplied)

Here, the trial court and the Court of Appeals

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

However, the fact of loss having been

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

In Pleno v. Court of Appeals,[42] the Court

sustained the trial courts award of P200,000.00
as temperate damages in lieu of actual damages
for loss of earning capacity because the income
of the victim was not sufficiently proven, thus

The trial court based the amounts of damages

awarded to the petitioner on the following
circumstances:

As to the loss or impairment of earning capacity,

there is no doubt that Pleno is an ent[re]preneur
and the founder of his own corporation, the
Mayon Ceramics Corporation. It appears also
that he is an industrious and resourceful person
with several projects in line, and were it not for
the incident, might have pushed them through.
On the day of the incident, Pleno was driving
homeward with geologist Longley after an
ocular inspection of the site of the Mayon
Ceramics Corporation. His actual income
however has not been sufficiently established so
that this Court cannot award actual damages,
but, an award of temperate or moderate damages
may still be made on loss or impairment of
earning capacity. That Pleno sustained a
permanent deformity due to a shortened left leg
and that he also suffers from double vision in his
left eye is also established. Because of this, he
suffers from some inferiority complex and is no
longer active in business as well as in social life.
In similar cases as in Borromeo v. Manila
Electric Railroad Co., 44 Phil 165; Coriage, et
al. v. LTB Co., et al., L-11037, Dec. 29, 1960,
and in Araneta, et al. v. Arreglado, et al., L11394, Sept. 9, 1958, the proper award of
damages were given.
We rule that the lower courts awards of damages
are more consonant with the factual
circumstances of the instant case. The trial
courts findings of facts are clear and welldeveloped. Each item of damages is adequately
supported by evidence on record.
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 petitioners breach of contract
of carriage. Furthermore, the petitioner failed to
prove that it exercised the extraordinary
diligence required for common carriers, it is
presumed to have acted recklessly.[49] Thus, the
award of exemplary damages is proper. Under
the circumstances, we find it reasonable to
award respondents the amount of P100,000.00
as moral damages and P100,000.00 as
exemplary damages. These amounts are not
excessive.[50]
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 2208[55] of the Civil Code,
attorneys fees may also be recovered in the case
at bar where exemplary damages are awarded.
The Court finds the award of attorneys fees
equivalent to 10% of the total amount adjudged
against petitioner reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court
of Appeals,[56] it was held that when an
obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasidelicts 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.
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.

B.4. ATTORNEYS FEES AND INTEREST

Art. 2208. In the absence of stipulation,
attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(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;

(9) In a separate civil action to recover civil

liability arising from a crime;
(10) When at least double judicial costs are
awarded;
(11) In any other case where the court deems it
just 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.
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. (1108)
Art. 2212. Interest due shall earn legal interest
from the time it is judicially demanded, although
the obligation may be silent upon this point.
(1109a)

(3) In criminal cases of malicious prosecution

against the plaintiff;
(4) In case of a clearly unfounded civil action or
proceeding against the plaintiff;
(5) Where the defendant acted in gross and
evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable
claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of
household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's
compensation and employer's liability laws;

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.
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 ACG.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, 1983 8 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 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
P120,000.00 surety bond,
amount in case the award
P120,000.00 bond, on
hereinbefore stated.

recovery of the
plus an additional
is in excess of said
the sharing basis

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.

[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.

DECISION
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.
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.

reimburse and indemnify PNB for whatever

amount PNB pays 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 recrediting of the amount. PBCom followed suit
by requesting an explanation and re-crediting
from petitioner.

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;

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.

5.) The Counterclaims of PBCom and PNB are

hereby dismissed;

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;

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]

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;

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]

3.) On Philippine National Banks fourth-party

complaint, F. Abante Marketing is ordered to

Hence, petitioner filed the instant petition which

raises the following issues:

WHETHER OR NOT AN ALTERATION OF

THE SERIAL NUMBER OF A CHECK IS A
MATERIAL ALTERATION UNDER THE
NEGOTIABLE INSTRUMENTS LAW.

(b) The sum payable, either for principal or

interest;

II

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

WHETHER OR NOT A CERTIFICATION

HEREIN ISSUED BY THE MINISTRY OF
EDUCATION CAN BE GIVEN WEIGHT IN
EVIDENCE.

(e) The medium or currency in which payment is

to be made;

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;

(c) The time or place of payment;

(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.
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:

(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.
A. Material Alterations:

(2) Adding the word annual after the interest

clause.

(1) Substituting the words or bearer for order.

(3) Adding the date of maturity as a marginal

notation.

(2) Writing protest

indorsements.

waived

above

blank

(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.

(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]
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. SN73666223-3 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
Cashier III.[14]

C.

BATONGHINOG

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.)

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.

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]

C. EXTENT
OF
DAMAGES

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

C.1.A. GOOD
OBLIGOR

RECOVERABLE

C.1. IN CONTRACTS AND QUASICONTRACTS WHERE THERE IS:

FAITH

ON

THE

Art. 2201. In contracts and quasicontracts, the damages for which the obligor
who acted in good faith is liable shall be
those that are the natural and probable
consequences of the breach of the
obligation, and which the parties have
foreseen or could have reasonably foreseen
at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton

attitude, the obligor shall be responsible for
all damages which may be reasonably

attributed to the non-performance of the

obligation. (1107a)

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

BATONG
BUHAY
GOLD
MINES,
INC., petitioner,
vs.
THE COURT OF APPEALS and INC.
MINING CORPORATION, respondents.
Taada, Sanchez, Taada & Taada Law Office
for petitioner.
Quisumbing, Caparas, Ilagan Alcantara &
Mosqueda Law Office for private respondent.

PARAS, J.:
This is a petition to review the decision dated
August 27, 1976 of the Court of Appeals (CA) in
CA-G.R. No. 51313-R which modified the
decision of the then Court of First Instance (CFI)
of Manila, Branch 11 in Civil Case No. 79183
Also sought for review are the resolutions of the
aforenamed court dated October 21, 1976 and
November 12, 1976 which denied petitioner's
motion for reconsideration of the subject
decision and petition and/or motion for new
trial, respectively.
The dispositive portion of the CFI judgment
reads:
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@it
It developed that when Batong Buhay was about
to effect the cancellation of Stock Certificate
No. 16807 and transfer the 62,495 shares
covered thereby to the plaintiff and had, in fact,
prepared new Stock Certificate No. 27650 dated
January 5, 1970, it received the letter of Paula G.
Aguac advising it to withhold the transfer of the
subject shares of stock on the ground that the
same are conjugal property.
On March 2, 1970 Francisco Aguac was charged
in a criminal complaint Pasil Kalinga-Apayao,
docketed as Criminal Case No. 10, entitled
"People vs. Francisco Aguac, et al."
The defendants justify their refusal to transfer
the shares of stock of Francisco Aguac in the
name of the plaintiff in view of their
apprehension that they might he held liable for
damages under Article 173 of the Civil Code and
the ruling of the Supreme Court in Bucoy vs.
Paulino, 23 SCRA 248.

On March 5, 1970, in view of the defendant's

inaction on the request for the transfer of the
stock certificate in its name, the plaintiff
commenced this action before the Court of First
Instance of Manila, praying that the defendants
be ordered to issue and release the transfer stock
certificate covering 62,495 shares of defendant
Batong Buhay, formerly registered in the name
of Francisco Aguac, in favor of the plaintiff, and
for the recovery of compensatory, exemplary
and corrective damages and attorney's fees. A
writ of preliminary mandatory injunction was
prayed for to order the defendants to issue
immediately the transfer certificate covering the
aforesaid shares of stock of defendant Batong
Buhay in the name of the plaintiff.
The trial court granted the prayer for the
issuance of the writ of preliminary mandatory
injunction in its order of March 16, 1970. In
compliance therewith, Stock Certificate No.
16807 was cancelled and new Stock Certificate
No. 27650 dated January 5, 1970 was issued to
and received by the plaintiff on July 20, 1970."
On October 28, 1971, the trial court handed
down its judgment ordering the defendant
(herein petitioner) to effect the transfer of the
shares covered by Stock Certificate No. 16807
in the name of herein respondent Incoporated
Mining Corporation and declaring permanent the
writ of preliminary mandatory injunction issued
on March 16, 1970.
Private respondent seasonably appealed the
aforesaid decision to the Court of Appeals
anchored on the lower court's alleged failure to
award damages for the wrongful refusal of
petitioner to transfer the subject shares of stock
and alleged failure to award attorney's fees, cost
of injunction bond and expenses of litigation.
On August 27, 1986, respondent appellate court
rendered the subject decision the dispositive
portion of which has already been quoted
hereinabove.
Hence, this petition.

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.