PAN PACIFIC SERVICE G.R. No.

G.R. No. 169975 the General Conditions for the Construction of PCIB Tower II Extension (the
CONTRACTORS, INC. and escalation clause).[9]
RICARDO F. DEL ROSARIO, Present:
Petitioners,
CARPIO, J., Chairperson, Pursuant to the contract, Pan Pacific commenced the mechanical works in
BRION, the project site, the PCIB Tower II extension building in Makati City. The project was
DEL CASTILLO, completed in June 1992. Respondent accepted the project on 9 July 1992.[10]
- versus - ABAD, and
PEREZ, JJ. In 1990, labor costs and prices of materials escalated. On 5 April 1991, in
accordance with the escalation clause, Pan Pacific claimed a price adjustment
of P5,165,945.52. Respondents appointed project engineer, TCGI Engineers, asked
EQUITABLE PCI BANK (formerly for a reduction in the price adjustment. To show goodwill, Pan Pacific reduced the
THE PHILIPPINE COMMERCIAL Promulgated: price adjustment to P4,858,548.67.[11]
INTERNATIONAL BANK), On 28 April 1992, TCGI Engineers recommended to respondent that the
Respondent. March 18, 2010 price adjustment should be pegged at P3,730,957.07. TCGI Engineers based their
evaluation of the price adjustment on the following factors:
X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X
DECISION 1. Labor Indices of the Department of Labor and Employment.
2. PRICE INDEX OF THE NATIONAL
STATISTICS OFFICE.
CARPIO, J.: PD 1594 AND ITS IMPLEMENTING RULES AND REGULATIONS AS
AMENDED, 15 MARCH 1991.
The Case SHIPPING DOCUMENTS SUBMITTED BY PPSCI.
SUB-CLAUSE 70.1 OF THE GENERAL CONDITIONS OF THE CONTRACT
PAN PACIFIC SERVICE CONTRACTORS, INC. AND RICARDO F. DEL DOCUMENTS.[12]
ROSARIO (PETITIONERS) FILED THIS PETITION FOR REVIEW[1]ASSAILING
THE COURT OF APPEALS (CA) DECISION[2]DATED 30 JUNE 2005 IN CA-G.R.
CV NO. 63966 AS WELL AS THE RESOLUTION[3]DATED 5 OCTOBER 2005 Pan Pacific contended that with this recommendation, respondent was
DENYING THE MOTION FOR RECONSIDERATION. IN THE ASSAILED already estopped from disclaiming liability of at least P3,730,957.07 in accordance
DECISION, THE CA MODIFIED THE 12 APRIL 1999 DECISION[4]OF THE
with the escalation clause.[13]
REGIONAL TRIAL COURT OF MAKATI CITY, BRANCH 59 (RTC) BY
ORDERING EQUITABLE PCI BANK[5](RESPONDENT) TO PAY
PETITIONERS P1,516,015.07 WITH INTEREST AT THE LEGAL RATE OF 12% Due to the extraordinary increases in the costs of labor and materials, Pan Pacifics
PER ANNUM STARTING 6 MAY 1994 UNTIL THE AMOUNT IS FULLY PAID. operational capital was becoming inadequate for the project. However, respondent
withheld the payment of the price adjustment under the escalation clause despite Pan
Pacifics repeated demands.[14]Instead, respondent offered Pan Pacific a loan of P1.8
The Facts million. Against its will and on the strength of respondents promise that the price
adjustment would be released soon, Pan Pacific, through Del Rosario, was
Pan Pacific Service Contractors, Inc. (Pan Pacific) is engaged in contracting constrained to execute a promissory note in the amount of P1.8 million as a
mechanical works on airconditioning system. On 24 November 1989, Pan Pacific, requirement for the loan. Pan Pacific also posted a surety bond. The P1.8 million
through its President, Ricardo F. Del Rosario (Del Rosario), entered into a contract of
was released directly to laborers and suppliers and not a single centavo was given to
mechanical works (Contract) with respondent for P20,688,800. Pan Pacific and Pan Pacific.[15]
respondent also agreed on nine change orders for P2,622,610.30. Thus, the total Pan Pacific made several demands for payment on the price adjustment but
consideration for the whole project was P23,311,410.30.[6]The Contract stipulated, respondent merely kept on promising to release the same. Meanwhile, the P1.8
among others, that Pan Pacific shall be entitled to a price adjustment in case of
million loan matured and respondent demanded payment plus interest and penalty.
increase in labor costs and prices of materials under paragraphs 70.1[7]and 70.2[8]of
 Pan Pacific refused to pay the loan. Pan Pacific insisted that it would not have
incurred the loan if respondent released the price adjustment on time. Pan Pacific
alleged that the promissory note did not express the true agreement of the parties.
Pan Pacific maintained that the P1.8 million was to be considered as an advance
payment on the price adjustment. Therefore, there was really no consideration for
the promissory note; hence, it is null and void from the beginning.[16]
Respondent stood firm that it would not release any amount of the price adjustment
to Pan Pacific but it would offset the price adjustment with Pan Pacifics outstanding
balance of P3,226,186.01, representing the loan, interests, penalties and collection
charges.[17]
Pan Pacific refused the offsetting but agreed to receive the reduced amount
of P3,730,957.07 as recommended by the TCGI Engineers for the purpose of
extrajudicial settlement, less P1.8 million and P414,942 as advance payments.[18]
On 6 May 1994, petitioners filed a complaint for declaration of nullity/annulment of
the promissory note, sum of money, and damages against the respondent with the
RTC of Makati City, Branch 59. On 12 April 1999, the RTC rendered its decision,
the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED,
JUDGMENT IS HEREBY RENDERED IN FAVOR OF
THE PLAINTIFFS AND AGAINST THE DEFENDANT
AS FOLLOWS:
1. DECLARING THE PROMISSORY NOTE (EXHIBIT B) NULL AND
VOID;
ORDERING THE DEFENDANT TO PAY THE PLAINTIFFS THE FOLLOWING
AMOUNTS:
A. P1,389,111.10 REPRESENTING UNPAID BALANCE OF
THE ADJUSTMENT PRICE, WITH INTEREST THEREON
AT THE LEGAL RATE OF TWELVE (12%) PERCENT PER
ANNUM STARTING MAY 6, 1994, THE DATE WHEN THE
COMPLAINT WAS FILED, UNTIL THE AMOUNT IS FULLY
PAID;
P100,000.00 REPRESENTING MORAL DAMAGES;
P50,000.00 REPRESENTING EXEMPLARY DAMAGES; AND
P50,000.00 AS AND FOR ATTORNEYS FEES.
2. DISMISSING DEFENDANTS COUNTERCLAIM, FOR LACK OF
MERIT; AND
WITH COSTS AGAINST THE DEFENDANT.
SO ORDERED.[19]
On 23 May 1999, petitioners partially appealed the RTC Decision to the
CA. On 26 May 1999, respondent appealed the entire RTC Decision for being
contrary to law and evidence. In sum, the appeals of the parties with the CA are as
follows:
1. WITH RESPECT TO THE PETITIONERS, WHETHER THE
RTC ERRED IN DEDUCTING THE AMOUNT
OF P126,903.97 FROM THE BALANCE OF THE
ADJUSTED PRICE AND IN AWARDING ONLY
12% ANNUAL INTEREST ON THE AMOUNT DUE,
INSTEAD OF THE BANK LOAN RATE OF 18%
COMPOUNDED ANNUALLY BEGINNING
SEPTEMBER 1992.
2. With respect to respondent, whether the RTC erred in declaring
the promissory note void and in awarding moral and
exemplary damages and attorneys fees in favor of
petitioners and in dismissing its counterclaim.
In its decision dated 30 June 2005, the CA modified the RTC decision, with
respect to the principal amount due to petitioners. The CA removed the deduction
of P126,903.97 because it represented the final payment on the basic contract price.
Hence, the CA ordered respondent to pay P1,516,015.07 to petitioners, with interest
at the legal rate of 12% per annum starting 6 May 1994. [20]
On 26 July 2005, petitioners filed a Motion for Partial Reconsideration
seeking a reconsideration of the CAs Decision imposing the legal rate of 12%.
Petitioners claimed that the interest rate applicable should be the 18% bank lending
rate. Respondent likewise filed a Motion for Reconsideration of the CAs decision. In
a Resolution dated 5 October 2005, the CA denied both motions.
AGGRIEVED BY THE CAS DECISION, PETITIONERS ELEVATED THE CASE
BEFORE THIS COURT.
The Issue
Petitioners submit this sole issue for our consideration: Whether the CA, in awarding
the unpaid balance of the price adjustment, erred in fixing the interest rate at 12%
instead of the 18% bank lending rate.

Ruling of the Court
We grant the petition.
This Court notes that respondent did not appeal the decision of the CA.
Hence, there is no longer any issue as to the principal amount of the unpaid balance
on the price adjustment, which the CA correctly computed at P1,516,015.07. The only
remaining issue is the interest rate applicable for respondents delay in the payment of
the balance of the price adjustment.
The CA denied petitioners claim for the application of the bank lending rate
of 18% compounded annually reasoning, to wit:
Anent the 18% interest rate compounded annually,
while it is true that the contract provides for an interest at the
current bank lending rate in case of delay in payment by the
Owner, and the promissory note charged an interest of 18%, the
said proviso does not authorize plaintiffs to unilaterally raise the
interest rate without the other partys consent. Unlike their request
for price adjustment on the basic contract price, plaintiffs never
informed nor sought the approval of defendant for the imposition
of 18% interest on the adjusted price. To unilaterally increase the
interest rate of the adjusted price would be violative of the
principle of mutuality of contracts. Thus, the Court maintains the
legal rate of twelve percent per annum starting from the date of
judicial demand. Although the contract provides for the period
when the recommendation of the TCGI Engineers as to the price
adjustment would be binding on the parties, it was established,
however, that part of the adjusted price demanded by plaintiffs
was already disbursed as early as 28 February 1992 by defendant
bank to their suppliers and laborers for their account.[21]
In this appeal, petitioners allege that the contract between the parties
consists of two parts, the Agreement[22]and the General Conditions,[23]both of which
provide for interest at the bank lending rate on any unpaid amount due under the
contract. Petitioners further claim that there is nothing in the contract which requires
the consent of the respondent to be given in order that petitioners can charge the bank
lending rate.[24]Specifically, petitioners invoke Section 2.5 of the Agreement and
Section 60.10 of the General Conditions as follows:
Agreement
2.5 IF ANY PAYMENT IS DELAYED, THE
CONTRACTOR MAY CHARGE INTEREST
THEREON AT THE CURRENT BANK
LENDING RATES, WITHOUT PREJUDICE
TO OWNERS RECOURSE TO ANY OTHER
REMEDY AVAILABLE UNDER EXISTING
LAW.[25]
GENERAL CONDITIONS
60.10 TIME FOR PAYMENT
THE AMOUNT DUE TO THE CONTRACTOR UNDER ANY INTERIM
CERTIFICATE ISSUED BY THE ENGINEER PURSUANT TO THIS CLAUSE,
OR TO ANY TERM OF THE CONTRACT, SHALL, SUBJECT TO CLAUSE 47,
BE PAID BY THE OWNER TO THE CONTRACTOR WITHIN 28 DAYS AFTER
SUCH INTERIM CERTIFICATE HAS BEEN DELIVERED TO THE OWNER,
OR, IN THE CASE OF THE FINAL CERTIFICATE REFERRED TO IN SUB-
CLAUSE 60.8, WITHIN 56 DAYS, AFTER SUCH FINAL CERTIFICATE HAS
BEEN DELIVERED TO THE OWNER. IN THE EVENT OF THE FAILURE OF
THE OWNER TO MAKE PAYMENT WITHIN THE TIMES STATED, THE
OWNER SHALL PAY TO THE CONTRACTOR INTEREST AT THE RATE
BASED ON BANKING LOAN RATES PREVAILING AT THE TIME OF THE
SIGNING OF THE CONTRACT UPON ALL SUMS UNPAID FROM THE DATE
BY WHICH THE SAME SHOULD HAVE BEEN PAID. THE PROVISIONS OF
THIS SUB-CLAUSE ARE WITHOUT PREJUDICE TO THE CONTRACTORS
ENTITLEMENT UNDER CLAUSE 69.[26](EMPHASIS SUPPLIED)
Petitioners thus submit that it is automatically entitled to the bank lending
rate of interest from the time an amount is determined to be due thereto, which
respondent should have paid. Therefore, as petitioners have already proven their
entitlement to the price adjustment, it necessarily follows that the bank lending interest
rate of 18% shall be applied.[27]
On the other hand, respondent insists that under the provisions of 70.1 and 70.2 of
the General Conditions, it is stipulated that any additional cost shall be determined
by the Engineer and shall be added to the contract price after due consultation with
the Owner, herein respondent. Hence, there being no prior consultation with the
respondent regarding the additional cost to the basic contract price, it naturally
follows that respondent was never consulted or informed of the imposition of 18%
interest rate compounded annually on the adjusted price.[28]
A perusal of the assailed decision shows that the CA made a distinction between the
consent given by the owner of the project for the liability for the price adjustments,
and the consent for the imposition of the bank lending rate. Thus, while the CA held
that petitioners consulted respondent for price adjustment on the basic contract price,
petitioners, nonetheless, are not entitled to the imposition of 18% interest on the
adjusted price, as petitioners never informed or sought the approval of respondent
for such imposition.[29]
We disagree.
It is settled that the agreement or the contract between the parties is the
formal expression of the parties rights, duties, and obligations. It is the best evidence
of the intention of the parties. Thus, when the terms of an agreement have been
reduced to writing, it is considered as containing all the terms agreed upon and there
can be, between the parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement.[30]
The escalation clause of the contract provides:
CHANGES IN COST AND LEGISLATION
70.1 Increase or Decrease of Cost
There shall be added to or deducted from the Contract Price such sums in respect of
rise or fall in the cost of labor and/or materials or any other matters affecting the cost
of the execution of the Works as may be determined.
70.2 Subsequent Legislation
If, after the date 28 days prior to the latest date of submission of tenders for the
Contract there occur in the country in which the Works are being or are to be
executed changes to any National or State Statute, Ordinance, Decree or other Law
or any regulation or bye-law (sic) of any local or other duly constituted authority, or
the introduction of any such State Statute, Ordinance, Decree, Law, regulation or
bye-law (sic) which causes additional or reduced cost to the contractor, other than
under Sub-Clause 70.1, in the execution of the Contract, such additional or reduced
cost shall, after due consultation with the Owner and Contractor, be determined by
the Engineer and shall be added to or deducted from the Contract Price and the
Engineer shall notify the Contractor accordingly, with a copy to the Owner. [31]
In this case, the CA already settled that petitioners consulted respondent on
the imposition of the price adjustment, and held respondent liable for the balance
of P1,516,015.07. Respondent did not appeal from the decision of the CA; hence,
respondent is estopped from contesting such fact.
However, the CA went beyond the intent of the parties by requiring
respondent to give its consent to the imposition of interest before petitioners can hold
respondent liable for interest at the current bank lending rate. This is erroneous. A
review of Section 2.6 of the Agreement and Section 60.10 of the General Conditions
shows that the consent of the respondent is not needed for the imposition of interest
at the current bank lending rate, which occurs upon any delay in payment.
When the terms of a contract are clear and leave no doubt as to the intention
of the contracting parties, the literal meaning of its stipulations governs. In these
cases, courts have no authority to alter a contract by construction or to make a new
contract for the parties. The Courts duty is confined to the interpretation of the contract
which the parties have made for themselves without regard to its wisdom or folly as
the court cannot supply material stipulations or read into the contract words which it
does not contain. It is only when the contract is vague and ambiguous that courts are
permitted to resort to construction of its terms and determine the intention of the
parties.[32]
The escalation clause must be read in conjunction with Section 2.5 of the
Agreement and Section 60.10 of the General Conditions which pertain to the time of
payment. Once the parties agree on the price adjustment after due consultation in
compliance with the provisions of the escalation clause, the agreement is in effect an
amendment to the original contract, and gives rise to the liability of respondent to pay
the adjusted costs. Under Section 60.10 of the General Conditions, the respondent
shall pay such liability to the petitioner within 28 days from issuance of the interim
certificate. Upon respondents failure to pay within the time provided (28 days), then
it shall be liable to pay the stipulated interest.
This is the logical interpretation of the agreement of the parties on the imposition of
interest. To provide a contrary interpretation, as one requiring a separate consent for
the imposition of the stipulated interest, would render the intentions of the parties
nugatory.
Article 1956 of the Civil Code, which refers to monetary interest,
specifically mandates that no interest shall be due unless it has been expressly
stipulated in writing. Therefore, payment of monetary interest is allowed only if:
(1) there was an express stipulation for the payment of interest; and
(2) the agreement for the payment of interest was reduced in writing. The
concurrence of the two conditions is required for the payment of monetary interest.[33]
We agree with petitioners interpretation that in case of default, the consent
of the respondent is not needed in order to impose interest at the current bank lending
rate.
Applicable Interest Rate
 Under Article 2209 of the Civil Code, the appropriate measure for damages
in case of delay in discharging an obligation consisting of the payment of a sum of
money is the payment of penalty interest at the rate agreed upon in the contract of the
parties. In the absence of a stipulation of a particular rate of penalty interest, payment
of additional interest at a rate equal to the regular monetary interest becomes due and
payable. Finally, if no regular interest had been agreed upon by the contracting parties,
then the damages payable will consist of payment of legal interest which is 6%, or in
the case of loans or forbearances of money, 12% per annum.[34]It is only when the
parties to a contract have failed to fix the rate of interest or when such amount is
unwarranted that the Court will apply the 12% interest per annum on a loan or
forbearance of money.[35]

The written agreement entered into between petitioners and respondent provides for
an interest at the current bank lending rate in case of delay in payment and the
promissory note charged an interest of 18%.

To prove petitioners entitlement to the 18% bank lending rate of interest,

petitioners presented the promissory note[36]prepared by respondent bank itself. This
promissory note, although declared void by the lower courts because it did not express
the real intention of the parties, is substantial proof that the bank lending rate at the
time of default was 18% per annum. Absent any evidence of fraud, undue influence
or any vice of consent exercised by petitioners against the respondent, the interest rate
agreed upon is binding on them.[37]

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision

and Resolution of the Court of Appeals in CA-G.R. CV No. 63966.
We ORDER respondent to pay petitioners P1,516,015.07 with interest at the bank
lending rate of 18% per annum starting 6 May 1994 until the amount is fully paid.

SO ORDERED.
 OCEANEERING CONTRACTORS (PHILS), INC. , G.R. No. 184215 counterclaims of defendant-appellant, are hereby reversed and set
Petitioner, aside. Plaintiff-appellee is ordered to pay defendant-appellant the
amount of P306,000.00 as actual damages and P30,000.00 as
attorneys fees.
Present:
SO ORDERED. [2]
CORONA, C.J.,
- versus - Chairperson,
VELASCO, JR., The Facts
LEONARDO-DE CASTRO
DEL CASTILLO, and
PEREZ, JJ.

NESTOR N. BARRETTO, doing business as N.N.B. Doing business under the name and style of N.N. B. Lighterage, respondent Nestor N.
LIGHTERAGE, Barretto (Barretto) is the owner of the Barge Antonieta[3] which was last licensed and
Respondents. Promulgated: permitted to engage in coastwise trading for a period of one year expiring on 21
August 1998.[4] On 27 November 1997, Barretto and petitioner Oceaneering
February 9, 2011 Contractors (Phils.), Inc. (Oceaneering) entered into a Time Charter Agreement
whereby, for the contract price of P306,000.00,[5] the latter hired the aforesaid barge
x--------------------------------------------------x for a renewable period of thirty calendar days, for the purpose of transporting
construction materials from Manila to Ayungon, Negros Oriental.[6] Brokered by
freelance ship broker Manuel Velasco,[7] the agreement included Oceaneerings
DECISION acknowledgment of the seaworthiness of the barge as well as the following
stipulations, to wit:

PEREZ, J.: a) [Barreto] shall be responsible for the salaries, subsistence, SSS
premium, medical, workmens compensation
contribution and other legal expenses of the crew;

b) [Oceaneering] shall be responsible for all port charges,

insurance of all equipments, cargo loaded to the above
mentioned deck barge against all risks (Total or
The requirements for an award of actual damages are central to this petition for review Partial), or theft, security and stevedoring during
filed under Rule 45 of the 1997 Rules of Civil Procedure, primarily assailing the loading and unloading operations and all other
Decision dated 12 December 2007 rendered by the then Special Third Division of the expenses pertinent to the assessment, fines and
Court of Appeals (CA) in CA-G.R. CV No. 87168,[1] the dispositive portion of which forfeiture for any violation that may be imposed in
states: relation to the operation of the barge;

xxxx
WHEREFORE, premises considered, the instant appeal is
PARTIALLY GRANTED. The decision dated 27 December (f) Delivery and re-delivery be made in Pasig River, Metro
2005 and order dated 28 April 2006 of the Regional Trial Court Manila;
of Las Pias, City, Branch 255, to the extent that it dismissed the
 (g) Damage to deck barge caused by carelessness or negligence
of stevedores hired by [Oceaneering] will be
[Oceaneerings] liability. Upon clear findings by owners
or barge patron of any damages to the barge that will
endanger its seaworth(i)ness and stability, such
damage/s shall be repaired first before loading and
leaving port. Under such conditions, the Barge Patron
has the right to refuse loading and/or leaving port;
xxxx
(i) [Barreto] reserves the right to stop, abort and deviate
any voyage in case of imminent danger to the crew
and/or vessel that may be occasioned by any storm,
typhoon, tidal wave or any similar events.[8]
In accordance with the agreement, Oceaneerings hired stevedores who
loaded the barge with pipe piles, steel bollards, concrete mixers, gravel, sand, cement
and other construction materials in the presence of and under the direct supervision of
the broker Manuel Velasco and Barrettos Bargemen.[9] In addition to the polythene
ropes with which they were lashed, the cargoes were secured by steel stanchions
which Oceaneering caused to be welded on the port and starboard sides of the
barge.[10] On 3 December 1997, the barge eventually left Manila for Negros Oriental,
towed by the tug-boat Ayalit" which, for said purpose, was likewise chartered by
Oceaneering from Lea Mer Industries, Inc.[11] On 5 December 1997, however,
Barrettos Bargeman, Eddie La Chica, executed a Marine Protest, [12] reporting the
following circumstances under which the barge reportedly capsized in the vicinity of
Cape Santiago, Batangas, viz.:
That on or about 1635 December 3, 1997, Barge
Antonieta departed Pico de Loro, Pasig River and towed by Tug-
Boat Ayalit bound for Ayungon, Negros Oriental with cargo
onboard steel pipes and various construction materials. While
underway on or about 0245 December 4, 1997 encountered rough
sea at the vicinity of Cape Santiago, Batangas and ma(d)e the
barge x x x roll and pitch which caused the steel pipes and various
construction materials to shift on the starboardside causing the
breakdown of the steel stanch(i)ons welded on the deck of the
barge leaving holes on the deck that cause(d) water to enter the
hold.
That on or about 1529 December 5, 199[7], with the
continuous entrance of sea water on the hold, the barge totally
capsized touch(ed) bottom.
On 9 December 1997, Barretto apprised Oceaneering of the supposed fact
that the mishap was caused by the incompetence and negligence of the latters
personnel in loading the cargo and that it was going to proceed with the salvage,
refloating and repair of the barge.[13] In turn contending that the barge tilted because
of the water which seeped through a hole in its hull, Oceaneering caused its counsel
to serve Barretto a letter dated 12 March 1998, demanding the return of the unused
portion of the charter payment amounting to P224,400.00 as well as the expenses in
the sum of P125,000.00 it purportedly incurred in salvaging its construction
materials.[14] In a letter dated 25 March 1998, however, Barrettos counsel informed
Oceaneering that its unused charter payment was withheld by his client who was
likewise seeking reimbursement for the P836,425.00 he expended in salvaging,
refloating and repairing the barge.[15] In response to Barrettos 29 June 1998 formal
demand for the payment of the same expenses,[16] Oceaneering reiterated its demand
for the return of the unused charter payment and the reimbursement of its salvaging
expenses as aforesaid.[17]
On 6 October 1998, Barretto commenced the instant suit with the filing of his
complaint for damages against Oceaneering, which was docketed as Civil Case No.
LP-98-0244 before Branch 255 of the Regional Trial Court (RTC) of
Las Pias City. Contending that the accident was attributable to the incompetence and
negligence which attended the loading of the cargo by Oceaneerings hired employees,
Barretto sought indemnities for expenses incurred and lost income in the aggregate
sum of P2,750,792.50 and attorneys fees equivalent to 25% of said
sum.[18] Specifically denying the material allegations of the foregoing complaint in its
26 January 1999 answer, Oceaneering, on the other hand, averred that the accident
was caused by the negligence of Barrettos employees and the dilapidated hull of the
barge which rendered it unseaworthy. As a consequence, Oceaneering prayed for the
grant of its counterclaims for the value of its cargo in the sum of P4,055,700.00,
salvaging expenses in the sum of P125,000.00, exemplary damages, attorneys fees
and litigation expenses.[19]
The issues thus joined and the mandatory pre-trial conference subsequently
terminated upon the agreement of the parties,[20] the RTC proceeded to try the case on
the merits. In support of his complaint, Barretto took the witness stand to prove the
seaworthiness of the barge as well as the alleged negligent loading of the cargo by
Oceaneerings employees.[21] Barretto also presented the following witnesses: (a)
Toribio Barretto II, Vice President for Operations of N.B.B. Lighterage, who
primarily testified on the effort exerted to salvage the barge;[22] and, (b) Manuel
Velasco, who testified on his participation in the execution of the Time Charter
Agreement as well as the circumstances before and after the sinking of the
barge.[23] By way of defense evidence, Oceaneering in turn presented the testimonies
of the following witnesses: (a) Engr. Wenifredo Oracion, its Operations Manager, to
prove, among other matters, the value of the cargo and the salvage operation it
conducted in the premises;[24] and, (b) Maria Flores Escao, Accounting Staff at
Castillo Laman Tan Pantaleon and San Jose Law Offices, to prove its claim for
attorneys fees and litigation expenses.[25]
To disprove the rough sea supposedly encountered by the barge as well as
the negligence imputed against its employees, Oceaneering further adduced the
testimonies of the following witnesses: (a) Rosa Barba, a Senior Weather Specialist
at the Philippine Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA);[26] (b) Cmdr. Herbert Catapang, Officer-in-Charge of the
Hydrographic Division at the National Mapping Resource Information Authority
(NAMRIA);[27] and, (c) Engr. Carlos Gigante, a freelance marine surveyor and
licensed naval architect.[28] Recalled as a rebuttal witness, Toribio Barretto II, in turn,
asserted that the hull of the barge was not damaged and that the sinking of said vessel
was attributable to the improper loading of Oceaneerings construction
materials.[29] Upon the formal offer respectively made by the parties, the pieces of
documentary evidence identified and marked in the course of the testimonies of the
above named witnesses[30] were, accordingly, admitted by the RTC. [31]
On 27 December 2005, the RTC rendered a decision, dismissing both
Barrettos complaint and Oceaneerings counterclaims for lack of merit. While finding
that Barretto failed to adduce sufficient and convincing evidence to prove that the
accident was due to the negligence of Oceaneerings employees, the RTC nevertheless
brushed aside the latters claim that the barge was not seaworthy as acknowledged in
the Time Charter Agreement. Alongside its claim for reimbursement of the sums
expended for the salvage operation it conducted which was denied for lack of evidence
to prove the same, Oceaneerings claim for the value of its cargo was likewise denied
on the ground, among other matters, that the same was not included in the demand
letters it served Barretto; and, that it has no one but itself to blame for failing to insure
its cargo against all risks, as provided in the parties agreement. With its claims for
exemplary damages and attorneys fees further denied for lack of showing of bad faith
on the part of Barretto,[32] Oceaneering filed the motion for partial reconsideration of
the foregoing decision[33] which was denied for lack of merit in the RTCs 28 April
2006 order.[34]
Dissatisfied, Oceaneering perfected its appeal from the aforesaid 27
December 2005 decision on the ground that the RTC reversibly erred in not finding
that the accident was caused by the unseaworthy condition of the barge and in denying
its counterclaims for actual and exemplary damages as well as attorneys fees and
litigation expenses. Docketed before the CA as CA-G.R. CV No. 87168,[35] the appeal
was partially granted in the herein assailed 12 December 2007 decision upon the
finding, among others, that the agreement executed by the parties, by its express terms,
was a time charter where the possession and control of the barge was retained by
Barretto; that the latter is, therefore, a common carrier legally charged with
extraordinary diligence in the vigilance over the goods transported by him; and, that
the sinking of the vessel created a presumption of negligence and/or unseaworthiness
which Barretto failed to overcome and gave rise to his liability for Oceaneerings lost
cargo despite the latters failure to insure the same. Applying the rule, however, that
actual damages should be proved with a reasonable degree of certainty, the CA denied
Oceaneerings claim for the value of its lost cargo and merely ordered the refund of
the P306,000.00 it paid for the time charter, with indemnity for attorneys fees in the
sum of P30,000.[36]
Alongside that interposed by Barretto, the motion for reconsideration of the
foregoing decision filed by Oceaneerings[37] was denied for lack of merit in the CAs
resolution dated 11 August 2008,[38] hence, this petition.
The Issues
 Oceaneering urges the reversal of the assailed 12 December 2007 decision should be indemnified the sum of P3,703,700.00 for the value of the lost cargo, with
and 11 August 2008 resolution on the ground that the CA erred in the following wise: legal interest at 12% per annum, from the date of demand until fully paid. In addition,
Oceaneering maintains that Barretto should be held liable to refund the P306,000.00
it paid as consideration for the Time Charter Agreement and to pay the P125,000.00
it incurred by way of salvaging expenses as well as its claim for attorneys fees in the
sum of P750,000.00.
I. IN HOLDING THAT THERE WERE NO VALID
DOCUMENTS SHOWING THE REAL VALUE In finding Oceaneerings petition impressed with partial merit, uppermost in
OF THE MATERIALS LOST AND THOSE our mind is the fact that actual or compensatory damages are those damages which
ACTUALLY RECOVERED. the injured party is entitled to recover for the wrong done and injuries received when
none were intended.[40] Pertaining as they do to such injuries or losses that are actually
II. IN DENYING OCEANEERINGS COUNTERCLAIMS sustained and susceptible of measurement,[41] they are intended to put the injured party
FOR ACTUAL DAMAGES AMOUNTING TO in the position in which he was before he was injured.[42] Insofar as actual or
(A) P3,704,700.00 REPRESENTING THE VALUE compensatory damages are concerned, Article 2199 of the Civil Code of the
OF THE MATERIALS IT LOST DUE TO THE Philippines provides as follows:
SINKING OF [BARRETOS] BARGE; AND Art. 2199. Except as provided by law or by stipulation,
(b) P125,000.00 REPRESENTING THE one is entitled to an adequate compensation only for such
EXPENSES IT INCURRED FOR SALVAGING pecuniary loss suffered by him as he has duly proved. Such
ITS CARGO. compensation is referred to as actual or compensatory damages.
III. IN AWARDING OCEANEERINGS COUNTERCLAIM Conformably with the foregoing provision, the rule is long and well settled that there
FOR ATTORNEYS FEES IN THE REDUCED must be pleading and proof of actual damages suffered for the same to be
AMOUNT OF P30,000.00 ONLY.[39] recovered.[43] In addition to the fact that the amount of loss must be capable of proof,
it must also be actually proven with a reasonable degree of certainty, premised upon
competent proof or the best evidence obtainable.[44] The burden of proof of the
damage suffered is, consequently, imposed on the party claiming the same[45] who
The Courts Ruling should adduce the best evidence available in support thereof, like sales and delivery
receipts, cash and check vouchers and other pieces of documentary evidence of the
same nature. In the absence of corroborative evidence, it has been held that self-
serving statements of account are not sufficient basis for an award of actual
damages.[46] Corollary to the principle that a claim for actual damages cannot be
We find the modification of the assailed decision in order. predicated on flimsy, remote, speculative, and insubstantial proof,[47] courts are,
likewise, required to state the factual bases of the award.[48]

Oceaneering argues that, having determined Barrettos liability for presumed

negligence as a common carrier, the CA erred in disallowing its counterclaims for the
value of the construction materials which were lost as a consequence of the sinking of
the barge.Alongside the testimony elicited from its Operations Manager, Engr.
Winifredo Oracion, Oceaneering calls attention to the same witness inventory which
pegged the value of said construction materials at P4,055,700.00, as well as the
various sales receipts, order slips, cash vouchers and invoices which were formally
offered before and admitted in evidence by the RTC. Considering that it was able to
salvage only nine steel pipes amounting to P351,000.00, Oceaneering insists that it
Applying the just discussed principles to the case at bench, we find that Oceaneering
correctly fault the CA for not granting its claim for actual damages or, more
specifically, the portions thereof which were duly pleaded and adequately proved
before the RTC. While concededly not included in the demand letters dated 12 March
1998[49] and 13 July 1998[50] Oceaneering served Barretto, the formers counterclaims
for the value of its lost cargo in the sum of P4,055,700.00 and salvaging expenses in
the sum of P125,000.00 were distinctly pleaded and prayed for in the 26 January 1999
answer it filed a quo.[51] Rather than the entire P4,055,700.00 worth of construction
materials reflected in the inventory[52] which Engr. Oracion claims to have prepared
on 29 November 1997, based on the delivery and official receipts from Oceaneerings
suppliers,[53] we are, however, inclined to grant only the following items which were
duly proved by the vouchers and receipts on record, viz.: (a) P1,720,850.00 worth of
spiral welded pipes with coal tar epoxy procured on 22 November
1997;[54] (b) P629,640.00 worth of spiral welded steel pipes procured on 28 October
1997;[55] (c) P155,500.00 worth of various stainless steel materials procured on 27
November 1997;[56] (d) P66,750.00 worth of gaskets and shackles procured on 20
November 1997;[57] and, (e) P4,880.00 worth of anchor bolt procured on 27
November 1997.[58]
The foregoing sums all add up to of P2,577,620.00 from which should be deducted
the sum of P351,000.00 representing the value of the nine steel pipes salvaged by
Oceaneering, or a total of P2,226,620.00 in actual damages representing the value of
the latters lost cargo.Excluded from the computation are the following items which,
on account of the dates of their procurement, could not have possibly been included
in the 29 November 1997 inventory prepared by Engr. Oracion, to wit:
(a) P1,129,640.00 worth of WO#1995 and PO#OCPI-060-97 procured on 9
December 1997;[59] and, (b) P128,000.00 worth of bollard procured on 16 December
1997.[60]Likewise excluded are the anchor bolt with nut Oceaneering claims to have
procured for an unspecified amount on 3 November 1997 [61] and the P109,018.50
worth of Petron oil it procured on 28 November 1997[62] which does not fit into the
categories of lost cargo and/or salvaging expenses for which it interposed
counterclaims a quo. Although included in its demand letters as aforesaid and pleaded
in its answer, Oceaneerings claim for salvaging expenses in the sum of P125,000.00
cannot, likewise, be granted for lack of credible evidence to support the same.
Tested alongside the twin requirements of pleading and proof for the grant
of actual damages, on the other hand, we find that the CA also erred in awarding the
full amount of P306,000.00 in favor of Oceaneering, as and by way of refund of the
consideration it paid Barretto for the Time Charter Agreement. Aside from not being
clearly pleaded in the answer it filed a quo, said refund was claimed in Oceaneerings
demand letters only to the extent of the unused charter payment in the reduced sum
of P224,400.00[63] which, to our mind, should be the correct measure of the
award. Having breached an obligation which did not constitute a loan or forbearance
of money, moreover, Barretto can only be held liable for interest at the rate of 6% per
annum on said amount as well as the P2,226,620.00 value of the lost cargo instead of
the 12% urged by Oceaneering. Although the lost cargo was not included in the
demand letters the latter served the former, said interest rate of 6% per annum shall
be imposed from the time of the filing of the complaint which is equivalent to a
judicial demand.[64] Upon the finality of this decision, said sums shall earn a further
interest of 12% per annum until full payment in accordance with the following
pronouncements handed down in Eastern Shipping Lines, Inc. vs. Court of
Appeals,[65] to wit:
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 of 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 of 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.
For lack of sufficient showing of bad faith on the part of Barretto, we find that the
CA, finally, erred in granting Oceaneerings claim for attorneys fees, albeit in the much
reduced sum of P30,000.00. In the absence of stipulation, after all, the rule is settled
that there can be no recovery of attorneys fees and expenses of litigation other than
judicial costs except in the instances enumerated under Article 2208 of the Civil
Code.[66] Being the exception rather than the rule,[67] attorneys fees are not awarded
every time a party prevails in a suit,[68] in view of the policy that no premium should
be placed on the right to litigate.[69] Even when a claimant is compelled to litigate with
third persons or to incur expenses to protect his rights, still attorneys fees may not be
awarded where, as here, no sufficient showing of bad faith can be reflected in the
partys persistence in a case other than an erroneous conviction of the righteousness of
his cause.[70]
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED and
the assailed 12 December 2007 Decision is, accordingly, MODIFIED: (a)
to GRANT Oceaneerings claim for the value of its lost cargo in the sum
of P2,226,620.00 with 6% interest per annum computed from the filing of the
complaint and to earn further interest at the rate of 12% per annum from finality of
the decision until full payment; (b) to REDUCE the refund of the consideration for
the Time Charter Agreement from P306,000.00 to P224,400.00, with 6% interest per
annum computed from 12 March 1998, likewise to earn further interest at the rate of
12% per annum from finality of this decision; and, (c) to DELETE the CAs award of
salvaging expenses and attorneys fees, for lack of factual and legal basis. The rest
is AFFIRMED in toto.