Civil Liability of Parents for Crimes of Their Children

[G.R. No. 70890. September 18, 1992.
CRESENCIO LIBI * and AMELIA YAP LIBI, Petitioners, v. HON. INTERMEDIATE APPELLATE
COURT, FELIPE GOTIONG and SHIRLEY GOTIONG, Respondents.
Alex Y. Tan, for Petitioners.
Mario D. Ortiz and Danilo V. Ortiz for Private Respondents.
SYLLABUS
1. CIVIL LAW; QUASI DELICT; LIABILITY OF PARENTS FOR CIVIL LIABILITY ARISING FROM CRIMINAL
OFFENSES COMMITTED BY THEIR MINOR CHILDREN; RULE. — The parents are and should be held
primarily liable for the civil liability arising from criminal offenses committed by their minor children
under their legal authority or control, or who live in their company, unless it is proven that the former
acted with the diligence of a good father of a family to prevent such damages. That primary liability is
premised on the provisions of Article 101 of the Revised Penal Code with respect to damages ex delicto
caused by their children 9 years of age or under, or over 9 but under 15 years of age who acted without
discernment; and, with regard to their children over 9 but under 15 years of age who acted with
discernment, or 15 years or over but under 21 years of age, such primary liability shall be imposed
pursuant to Article 2180 of the Civil Code. Under said Article 2180, the enforcement of such liability shall
be effected against the father and, in case of his death or incapacity, the mother. This was amplified by
the Child and Youth Welfare Code which provides that the same shall devolve upon the father and, in
case of his death or incapacity, upon the mother or, in case of her death or incapacity, upon the
guardian, but the liability may also be voluntarily assumed by a relative or family friend of the youthful
offender. However, under the Family Code, this civil liability is now, without such alternative
qualification, the responsibility of the parents and those who exercise parental authority over the minor
offender. For civil liability arising from quasi-delicts committed by minors, the same rules shall apply in
accordance with Articles 2180 and 2182 of the Civil Code, as so modified.
DECISION
REGALADO, J.:
One of the ironic verities of life, it has been said, is that sorrow is sometimes a touchstone of love. A
tragic illustration is provided by the instant case, wherein two lovers died while still in the prime of their
years, a bitter episode for those whose lives they have touched. While we cannot expect to award
complete assuagement to their families through seemingly prosaic legal verbiage, this disposition should
at least terminate the acrimony and rancor of an extended judicial contest resulting from the
unfortunate occurrence.
In this final denouement of the judicial recourse the stages whereof were alternately initiated by the
parties, petitioners are now before us seeking the reversal of the judgment of respondent court
promulgated on January 2, 1985 in AC-G.R. CV No. 69060 with the following decretal portion: jgc:cha nrob les.c om.ph
"WHEREFORE, the decision of the lower court dismissing plaintiff’s complaint is hereby reversed; and
instead, judgment is hereby rendered sentencing defendants, jointly and solidarily, to pay to plaintiffs
the following amounts: chanro bles. com : virtual law l ibra ry
1. Moral damages, P30,000.000;
2. Exemplary damages, P10,000.00;
3. Attorney’s fees, P20,000.00, and costs.
However, denial of defendants-appellees’ counterclaims is affirmed." 1
Synthesized from the findings of the lower courts, it appears that respondent spouses are the legitimate
parents of Julie Ann Gotiong who, at the time of the deplorable incident which took place and from which
she died on January 14, 1979, was an 18-year old first year commerce student of the University of San
Carlos, Cebu City; while petitioners are the parents of Wendell Libi, then a minor between 18 and 19
years of age living with his aforesaid parents, and who also died in the same event on the same date.
For more than two (2) years before their deaths, Julie Ann Gotiong and Wendell Libi were sweethearts
until December, 1978 when Julie Ann broke up her relationship with Wendell after she supposedly found
him to be sadistic and irresponsible. During the first and second weeks of January, 1979, Wendell kept
pestering Julie Ann with demands for reconciliation but the latter persisted in her refusal, prompting the
former to resort to threats against her. In order to avoid him, Julie Ann stayed in the house of her best
friend, Malou Alfonso, at the corner of Maria Cristina and Juana Osmeña Streets, Cebu City, from
January 7 to 13, 1978.
On January 14, 1979, Julie Ann and Wendell died, each from a single gunshot wound inflicted with the
same firearm, a Smith and Wesson revolver licensed in the name of petitioner Cresencio Libi, which was
recovered from the scene of the crime inside the residence of private respondents at the corner of
General Maxilom and D. Jakosalem streets of the same city.
Due to the absence of an eyewitness account of the circumstances surrounding the death of both
minors, their parents, who are the contending parties herein, posited their respective theories drawn
from their interpretation of circumstantial evidence, available reports, documents and evidence of
physical facts.
Private respondents, bereaved over the death of their daughter, submitted that Wendell caused her
death by shooting her with the aforesaid firearm and, thereafter, turning the gun on himself to commit
suicide. On the other hand, Petitioners, puzzled and likewise distressed over the death of their son,
rejected the imputation and contended that an unknown third party, whom Wendell may have
displeased or antagonized by reason of his work as a narcotics informer of the Constabulary Anti-
Narcotics Unit (CANU), must have caused Wendell’s death and then shot Julie Ann to eliminate any
witness and thereby avoid identification. chan roble s.com:c ralaw:red
As a result of the tragedy, the parents of Julie Ann filed Civil Case No. R-17774 in the then Court of First
Instance of Cebu against the parents of Wendell to recover damages arising from the latter’s vicarious
liability under Article 2180 of the Civil Code. After trial, the court below rendered judgment on October
20, 1980 as follows: jgc:chan robles. com.ph
"WHEREFORE, premises duly considered, judgment is hereby rendered dismissing plaintiffs’ complaint
for insufficiency of the evidence. Defendants’ counterclaim is likewise denied for lack of sufficient merit."
2
On appeal to respondent court, said judgment of the lower court dismissing the complaint of therein
plaintiffs-appellants was set aside and another judgment was rendered against defendants-appellees
who, as petitioners in the present appeal by certiorari, now submit for resolution the following issues in
this case:chanrob 1es vi rtua l 1aw lib rary
1. Whether or not respondent court correctly reversed the trial court in accordance with established
decisional laws; and
2. Whether or not Article 2180 of the Civil Code was correctly interpreted by respondent court to make
petitioners liable for vicarious liability. 3
In the proceedings before the trial court, Dr. Jesus P. Cerna, Police Medico-Legal Officer of Cebu,
submitted his findings and opinions on some postulates for determining whether or not the gunshot
wound was inflicted on Wendell Libi by his own suicidal act. However, undue emphasis was placed by the
lower court on the absence of gunpowder or tattooing around the wound at the point of entry of the
bullet. It should be emphasized, however, that this is not the only circumstance to be taken into account
in the determination of whether it was suicide or not.
It is true that said witness declared that he found no evidence of contact or close-contact of an explosive
discharge in the entrance wound. However, as pointed out by private respondents, the body of deceased
Wendell Libi must have been washed at the funeral parlor, considering the hasty interment thereof a
little after eight (8) hours from the occurrence wherein he died. Dr. Cerna himself could not categorically
state that the body of Wendell Libi was left untouched at the funeral parlor before he was able to
conduct his autopsy. It will also be noted that Dr. Cerna was negligent in not conducting a paraffin test
on Wendell Libi, hence possible evidence of gunpowder residue on Wendell’s hands was forever lost
when Wendell was hastily buried. c ralawnad
More specifically, Dr. Cerna testified that he conducted an autopsy on the body of Wendell Libi about
eight (8) hours after the incident or, to be exact, eight (8) hours and twenty (20) minutes based on the
record of death; that when he arrived at the Cosmopolitan Funeral Homes, the body of the deceased
was already on the autopsy table and in the stage of rigor mortis; and that said body was not washed,
but it was dried. 4 However, on redirect examination, he admitted that during the 8-hour interval, he
never saw the body nor did he see whether said body was wiped or washed in the area of the wound on
the head which he examined because the deceased was inside the morgue. 5 In fact, on cross-
examination, he had earlier admitted that as far as the entrance of the wound, the trajectory of the
bullet and the exit of the wound are concerned, it is possible that Wendell Libi shot himself. 6
He further testified that the muzzle of the gun was not pressed on the head of the victim and that he
found no burning or singeing of the hair or extensive laceration on the gunshot wound of entrance which
are general characteristics of contact or near-contact fire. On direct examination, Dr. Cerna nonetheless
made these clarification: jgc:chan rob les.com. ph
"Q Is it not a fact that there are certain guns which are so made that there would be no black residue or
tattooing that could result from these guns because they are what we call clean?
A Yes, sir. I know that there are what we call smokeless powder.
ATTY. ORTIZ: chanrob1es v irt ual 1aw l ibra ry
Q Yes. So, in cases, therefore, of guns where the powder is smokeless, those indications that you said
may not rule out the possibility that the gun was closer than 24 inches, is that correct?
A If the . . . assuming that the gun used was .. the bullet used was a smokeless powder.
Q At any rate, doctor, from . . . disregarding those other matters that you have noticed, the singeing,
etc., from the trajectory, based on the trajectory of the bullet as shown in your own sketch, is it not a
fact that the gun could have been fired by the person himself, the victim himself, Wendell Libi, because
it shows a point of entry a little above the right ear and point of exit a little above that, to be very fair
and on your oath?
A As far as the point of entrance is concerned and as far as the trajectory of the bullet is concerned and
as far as the angle or the manner of fire is concerned, it could have been fired by the victim." 7
As shown by the evidence, there were only two used bullets 8 found at the scene of the crime, each of
which were the bullets that hit Julie Ann Gotiong and Wendell Libi, respectively. Also, the sketch
prepared by the Medico-Legal Division of the National Bureau of Investigation, 9 shows that there is only
one gunshot wound of entrance located at the right temple of Wendell Libi. The necropsy report
prepared by Dr. Cerna states: chan rob1es v irt ual 1aw li bra ry
x x x
"Gunshot wound, ENTRANCE, ovaloid, 0.5 x 0.4 cm., with contusion collar widest inferiorly by 0.2 cm.,
edges inverted, oriented upward, located at the head, temporal region, right, 2.8 cms. behind and 5.5
cms. above right external auditory meatus, directed slightly forward, upward and to the left, involving
skin and soft tissues, making a punch-in fracture on the temporal bone, right, penetrating cranial cavity,
lacerating extensively along its course the brain tissues, fracturing parietal bone, left, and finally making
an EXIT wound, irregular, 2.0 x 1.8 cms., edges (e)verted, parietal region, left, 2.0 cms. behind and
12.9 cms. above left external auditory meatus. chanrobles vi rtua lawlib rary chan roble s.com:c hanro bles. com.ph
x x x
"Evidence of contact or close-contact fire, such as burning around the gunshot wound of entrance,
gunpowder tatooing (sic), smudging, singeing of hair, extensive laceration or bursting of the gunshot
wound of entrance, or separation of the skin from the underlying tissue, are absent." 10
On cross-examination, Dr. Cerna demonstrated his theory which was made of record, thus: jgc:chanroble s.com. ph
"Q Now, will you please use yourself as Wendell Libi, and following the entrance of the wound, the
trajectory of the bullet and the exit of the wound, and measuring yourself 24 inches, will you please
indicate to the Honorable Court how would it have been possible for Wendell Libi to kill himself? Will you
please indicate the 24 inches?
WITNESS: chanrob1e s virtual 1aw l ibra ry
A Actually, sir, the 24 inches is approximately one arm’s length.
ATTY. SENINING: chanrob1es vi rtua l 1aw li bra ry
I would like to make of record that the witness has demonstrated by extending his right arm almost
straight towards his head." 11
Private respondents assail the fact that the trial court gave credence to the testimonies of defendants’
witnesses Lydia Ang and James Enrique Tan, the first being a resident of an apartment across the street
from the Gotiongs and the second, a resident of the house adjacent to the Gotiong residence, who
declared having seen a "shadow" of a person at the gate of the Gotiong house after hearing shots
therefrom.
On cross-examination, Lydia Ang testified that the apartment where she was staying faces the gas
station; that it is the second apartment; that from her window she can see directly the gate of the
Gotiongs and, that there is a firewall between her apartment and the gas station. 12 After seeing a man
jump from the gate of the Gotiongs to the rooftop of the Tans, she called the police station but the
telephone lines were busy. Later on, she talked with James Enrique Tan and told him that she saw a
man leap from the gate towards his rooftop. 13
However, James Enrique Tan testified that he saw a "shadow" on top of the gate of the Gotiongs, but
denied having talked with anyone regarding what he saw. He explained that he lives in a duplex house
with a garden in front of it; that his house is next to Felipe Gotiong’s house; and he further gave the
following answers to these questions: chan robles .com : virtual law lib rary
"ATTY. ORTIZ: (TO WITNESS).
Q What is the height of the wall of the Gotiong’s in relation to your house?
A It is about 8 feet.
ATTY. ORTIZ: (TO WITNESS)
Q And where were you looking from?
A From upstairs in my living room.

ATTY. ORTIZ (TO WITNESS)
Q From Your living room window, is that correct?
A Yes, but not very clear because the wall is high." 14
Analyzing the foregoing testimonies, we agree with respondent court that the same do not inspire
credence as to the reliability and accuracy of the witnesses’ observations, since the visual perceptions of
both were obstructed by high walls in their respective houses in relation to the house of herein private
respondents. On the other hand, witness Manolo Alfonso, testifying on rebuttal, attested without
contradiction that he and his sister, Malou Alfonso, were waiting for Julie Ann Gotiong when they heard
her scream; that when Manolo climbed the fence to see what was going on inside the Gotiong house, he
heard the first shot; and, not more than five (5) seconds later, he heard another shot. Consequently, he
went down from the fence and drove to the police station to report the incident. 15 Manolo’s direct and
candid testimony establishes and explains the fact that it was he whom Lydia Ang and James Enrique
Tan saw as the "shadow" of a man at the gate of the Gotiong house.
We have perforce to reject petitioners’ effete and unsubstantiated pretension that it was another man
who shot Wendell and Julie Ann. It is significant that the Libi family did not even point to or present any
suspect in the crime nor did they file any case against any alleged "John Doe." Nor can we sustain the
trial court’s dubious theory that Wendell Libi did not die by his own hand because of the overwhelming
evidence — testimonial, documentary and pictorial — the confluence of which point to Wendell as the
assailant of Julie Ann, his motive being revenge for her rejection of his persistent pleas for a
reconciliation. cha nro bles. com:cra law:red
Petitioners’ defense that they had exercised the due diligence of a good father of a family, hence they
should not be civilly liable for the crime committed by their minor son, is not borne out by the evidence
on record either.
Petitioner Amelita Yap Libi, mother of Wendell, testified that her husband, Cresencio Libi, owns a gun
which he kept in a safety deposit box inside a drawer in their bedroom. Each of these petitioners holds a
key to the safety deposit box and Amelita’s key is always in her bag, all of which facts were known to
Wendell. They have never seen their son Wendell taking or using the gun. She admitted, however, that
on that fateful night the gun was no longer in the safety deposit box. 16 We, accordingly, cannot but
entertain serious doubts that petitioner spouses had really been exercising the diligence of a good father
of a family by safely locking the fatal gun away. Wendell could not have gotten hold thereof unless one
of the keys to the safety deposit box was negligently left lying around or he had free access to the bag
of his mother where the other key was.
The diligence of a good father of a family required by law in a parent and child relationship consists, to a
large extent, of the instruction and supervision of the child. Petitioners were gravely remiss in their
duties as parents in not diligently supervising the activities of their son, despite his minority and
immaturity, so much so that it was only at the time of Wendell’s death that they allegedly discovered
that he was a CANU agent and that Cresencio’s gun was missing from the safety deposit box. Both
parents were sadly wanting in their duty and responsibility in monitoring and knowing the activities of
their children who, for all they know, may be engaged in dangerous work such as being drug informers,
17 or even drug users. Neither was a plausible explanation given for the photograph of Wendell, with a
handwritten dedication to Julie Ann at the back thereof, 18 holding upright what clearly appears as a
revolver and on how or why he was in possession of that firearm.
In setting aside the judgment of the court a quo and holding petitioners civilly liable, as explained at the
start of this opinion, respondent court waved aside the protestations of diligence on the part of
petitioners and had this to say: jgc:chanro bles.c om.ph
". . . It is still the duty of parents to know the activity of their children who may be engaged in this
dangerous activity involving the menace of drugs. Had the defendants-appellees been diligent in
supervising the activities of their son, Wendell, and in keeping said gun from his reach, they could have
prevented Wendell from killing Julie Ann Gotiong. Therefore, appellants are liable under Article 2180 of
the Civil Code which provides: chan rob1es v irt ual 1aw li bra ry
‘The father, and in case of his death or incapacity, the mother, are responsible for the damages caused
by their minor children who live in their company.’
"Having been grossly negligent in preventing Wendell Libi from having access to said gun which was
allegedly kept in a safety deposit box, defendants-appellees are subsidiarily liable for the natural
consequence of the criminal act of said minor who was living in their company. This vicarious liability of
herein defendants-appellees has been reiterated by the Supreme Court in many cases, prominent of
which is the case of Fuellas v. Cadano, et. al. (L-14409, Oct. 31, 1961, 3 SCRA 361-367), which held
that:chanrob1e s virtual 1aw lib rary
‘The subsidiary liability of parents for damages caused by their minor children imposed by Article 2180
of the New Civil Code covers obligations arising from both quasi-delicts and criminal offenses.’
‘The subsidiary liability of parent’s arising from the criminal acts of their minor children who acted with
discernment is determined under the provisions of Article 2180, N.C.C. and under Article 101 of the
Revised Penal Code, because to hold that the former only covers obligations which arise from quasi-
delicts and not obligations which arise from criminal offenses, would result in the absurdity that while for
an act where mere negligence intervenes the father or mother may stand subsidiarily liable for the
damages caused by his or her son, no liability would attach if the damage is caused with criminal intent.’
(3 SCRA 361-362).
". . . In the instant case, minor son of herein defendants-appellees, Wendell Libi somehow got hold of
the key to the drawer where said gun was kept under lock without defendant-spouses ever knowing that
said gun had been missing from that safety box since 1978 when Wendell Libi had) a picture taken
wherein he proudly displayed said gun and dedicated this picture to his sweetheart, Julie Ann Gotiong;
also since then, Wendell Libi was said to have kept said gun in his car, in keeping up with his supposed
role of a CANU agent . . ." chanrobles lawl ibra ry : rednad
x x x
"Based on the foregoing discussions of the assigned errors, this Court holds that the lower court was not
correct in dismissing herein plaintiffs-appellants’ complaint because as preponderantly shown by
evidence, defendants-appellees utterly failed to exercise all the diligence of a good father of the family in
preventing their minor son from committing this crime by means of the gun of defendants-appellees
which was freely accessible to Wendell Libi for they have not regularly checked whether said gun was
still under lock, but learned that it was missing from the safety deposit box only after the crime had
been committed." (Emphases ours.) 19
We agree with the conclusion of respondent court that petitioners should be held liable for the civil
liability based on what appears from all indications was a crime committed by their minor son. We take
this opportunity, however, to digress and discuss its ratiocination therefor on jurisprudential dicta which
we feel require clarification.
In imposing sanctions for the so-called vicarious liability of petitioners, respondent court cites Fuellas v.
Cadano, Et. Al. 20 which supposedly holds that" (t)he subsidiary liability of parents for damages caused
by their minor children imposed by Article 2180 of the New Civil Code covers obligations arising from
both quasi-delicts and criminal offenses," followed by an extended quotation ostensibly from the same
case explaining why under Article 2180 of the Civil Code and Article 101 of the Revised Penal Code
parents should assume subsidiary liability for damages caused by their minor children. The quoted
passages are set out two paragraphs back, with pertinent underscoring for purposes of the discussion
hereunder. chan roble s law lib ra ry
Now, we do not have any objection to the doctrinal rule holding, the parents liable, but the
categorization of their liability as being subsidiary, and not primary, in nature requires a hard second
look considering previous decisions of this court on the matter which warrant comparative analyses. Our
concern stems from our readings that if the liability of the parents for crimes or quasi-delicts of their
minor children is subsidiary, then the parents can neither invoke nor be absolved of civil liability on the
defense that they acted with the diligence of a good father of a family to prevent damages. On the other
hand, if such liability imputed to the parents is considered direct and primary, that diligence would
constitute a valid and substantial defense.
We believe that the civil liability of parents for quasi-delicts of their minor children, as contemplated in
Article 2180 of the Civil Code, is primary and not subsidiary. In fact, if we apply Article 2194 of said code
which provides for solidary liability of joint tortfeasors, the persons responsible for the act or omission,
in this case the minor and the father and, in case of his death of incapacity, the mother, are solidarily
liable. Accordingly, such parental liability is primary and not subsidiary, hence the last paragraph of
Article 2180 provides that" (t)he responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father of a family to prevent
damages." cralaw virtua1aw l ibra ry
We are also persuaded that the liability of the parents for felonies committed by their minor children is
likewise primary, not subsidiary. Article 101 of the Revised Penal Code provides: jgc:c hanro bles. com.ph
"ARTICLE 101. Rules regarding civil liability in certain cases. —
x x x
First. In cases of subdivisions . . . 2, and 3 of Article 12, the civil liability for acts committed by . . . a
person under nine years of age, or by one over nine but under fifteen years of age, who has acted
without discernment, shall devolve upon those having such person under their legal authority or control,
unless it appears that there was no fault or negligence on their part." (Emphasis supplied.) 21
Accordingly, just like the rule in Article 2180 of the Civil Code, under the foregoing provision the civil
liability of the parents for crimes committed by their minor children is likewise direct and primary, and
also subject to the defense of lack of fault or negligence on their part, that is, the exercise of the
diligence of a good father of a family.
That in both quasi-delicts and crimes the parents primarily respond for such damages is buttressed by
the corresponding provisions in both codes that the minor transgressor shall be answerable or shall
respond with his own property only in the absence or in case of insolvency of the former. Thus, for civil
liability ex quasi delicto of minors, Article 2182 of the Civil Code states that" (i)f the minor causing
damage has no parents or guardian, the minor . . . shall be answerable with his own property in an
action against him where a guardian ad litem shall be appointed." For civil liability ex delicto of minors,
an equivalent provision is found in the third paragraph of Article 101 of the Revised Penal Code, to
wit:jgc:cha nrob les.co m.ph
"Should there be no person having such . . . minor under his authority, legal guardianship or control, or
if such person be insolvent, said . . . minor shall respond with (his) own property, excepting property
exempt from execution, in accordance with civil law." cralaw vi rtua1aw lib rary
The civil liability of parents for felonies committed by their minor children contemplated in the aforesaid
rule in Article 101 of the Revised Penal Code in relation to Article 2180 of the Civil Code has, aside from
the aforecited case of Fuellas, been the subject of a number of cases adjudicated by this Court, viz.:
Exconde v. Capuno, Et Al., 22 Araneta v. Arreglado, 23 Salen, Et. Al. v. Balce, 24 Paleyan, etc., Et. Al. v.
Bangkili, Et Al., 25 and Elcano, et al, v. Hill, Et. Al. 26 Parenthetically, the aforesaid cases were basically
on the issue of the civil liability of parents for crimes committed by their minor children over 9 but under
15 years of age, who acted with discernment, and also of minors 15 years of aye or over, since these
situations are not covered by Article 101, Revised Penal Code. In both instances, this Court held that the
issue of parental civil liability should be resolved in accordance with the provisions of Article 2180 of the
Civil Code for the reasons well expressed in Salen and adopted in the cases hereinbefore enumerated
that to hold that the civil liability under Article 2180 would apply only to quasi-delicts and not to criminal
offenses would result in the absurdity that in an act involving mere negligence the parents would be
liable but not where the damage is caused with criminal intent. In said cases, however, there are
unfortunate variances resulting in a regrettable inconsistency in the Court’s determination of whether
the liability of the parents, in cases involving either crimes or quasi-delicts of their minor children, is
primary or subsidiary.
In Exconde, where the 15-year old minor was convicted of double homicide through reckless
imprudence, in a separate civil action arising from the crime the minor and his father were held jointly
and severally liable for failure of the latter to prove the diligence of a good father of a family. The same
liability in solidum and, therefore, primary liability was imposed in a separate civil action in Araneta on
the parents and their 14-year old son who was found guilty of frustrated homicide, but on the authority
of Article 2194 of the Civil Code providing for solidary responsibility of two or more persons who are
liable for a quasi-delict.
However, in Salen, the father was declared subsidiarily liable for damages arising from the conviction of
his son, who was over 15 but less than 18 years of age, by applying Article 2180 but, this time,
disregarding Article 2194 of the Civil Code. In the present case, as already explained, the petitioners
herein were also held liable but supposedly in line with Fuellas which purportedly declared the parents
subsidiarily liable for the civil liability for serious physical injuries committed by their 13-year old son. On
the other hand, in Paleyan, the mother and her 19-year old son were adjudged solidarily liable for
damages arising from his conviction for homicide by the application of Article 2180 of the Civil Code
since this is likewise not covered by Article 101 of the Revised Penal Code. Finally, in Elcano, although
the son was acquitted in a homicide charge due to "lack of intent, coupled with mistake," it was ruled
that while under Article 2180 of the Civil Code there should be solidary liability for damages, since the
son, "although married, was living with his father and getting subsistence from him at the time of the
occurrence," but "is now of age, as a matter of equity" the father was only held subsidiarily liable.
It bears stressing, however, that the Revised Penal Code provides for subsidiary liability only for persons
causing damages under the compulsion of irresistible force or under the impulse of an uncontrollable
fear; 27 innkeepers, tavernkeepers and proprietors of establishments; 28 employers, teachers, persons
and corporations engaged in industry; 29 and principals, accomplices and accessories for the unpaid civil
liability of their co-accused in the other classes. 30
Also, coming back to respondent court’s reliance on Fuellas in its decision in the present case, it is not
exactly accurate to say that Fuellas provided for subsidiary liability of the parents therein. A careful
scrutiny shows that what respondent court quoted verbatim in its decision now on appeal in the present
case, and which it attributed to Fuellas, was the syllabus on the law report of said case which spoke of
"subsidiary" liability. However, such categorization does not specifically appear in the text of the decision
in Fuellas. In fact, after reviewing therein the cases of Exconde, Araneta and Salen and the discussions
in said cases of Article 101 of the Revised Penal Code in relation to Article 2180 of the Civil Code, this
Court concluded its decision in this wise: jgc:c hanrobles. com.ph
"Moreover, the case at bar was decided by the Court of Appeals on the basis of evidence submitted
therein by both parties, independent of the criminal case. And responsibility for fault or negligence under
Article 2176 upon which the present action was instituted, is entirely separate and distinct from the civil
liability arising from fault or negligence under the Penal Code (Art. 2177), and having in mind the
reasons behind the law as heretofore stated, any discussion as to the minor’s criminal responsibility is of
no moment." cralaw virtua1aw l ibra ry
Under the foregoing considerations, therefore, we hereby rule that the parents are and should be held
primarily liable for the civil liability arising from criminal offenses committed by their minor children
under their legal authority or control, or who live in their company, unless it is proven that the former
acted with the diligence of a good father of a family to prevent such damages. That primary liability is
premised on the provisions of Article 101 of the Revised Penal Code with respect to damages ex delicto
caused by their children 9 years of age or under, or over 9 but under 15 years of age who acted without
discernment; and, with regard to their children over 9 but under 15 years of age who acted with
discernment, or 15 years or over but under 21 years of age, such primary liability shall be imposed
pursuant to Article 2180 of the Civil Code. 31
Under said Article 2180, the enforcement of such liability shall be effected against the father and, in case
of his death or incapacity, the mother. This was amplified by the Child and Youth Welfare Code which
provides that the same shall devolve upon the father and, in case of his death or incapacity, upon the
mother or, in case of her death or incapacity, upon the guardian, but the liability may also be voluntarily
assumed by a relative or family friend of the youthful offender. 32 However, under the Family Code, this
civil liability is now, without such alternative qualification, the responsibility of the parents and those
who exercise parental authority over the minor offender. 33 For civil liability arising from quasi-delicts
committed by minors, the same rules shall apply in accordance with Articles 2180 and 2182 of the Civil
Code, as so modified.
In the case at bar, whether the death of the hapless Julie Ann Gotiong was caused by a felony or a
quasi-delict committed by Wendell Libi, respondent court did not err in holding petitioners liable for
damages arising therefrom. Subject to the preceding modifications of the premises relied upon by it
therefor and on the bases of the legal imperatives herein explained, we conjoin in its findings that said
petitioners failed to duly exercise the requisite diligentissimi patris familias to prevent such damages.
ACCORDINGLY, the instant Petition is DENIED and the assailed judgment of respondent Court of Appeals
is hereby AFFIRMED, with costs against petitioners.
SO ORDERED.
G.R. No. 85044 June 3, 1992
MACARIO TAMARGO, CELSO TAMARGO and AURELIA TAMARGO, petitioners,

vs.
HON. COURT OF APPEALS, THE HON. ARISTON L. RUBIO, RTC Judge, Branch 20, Vigan,
Ilocos Sur; VICTOR BUNDOC; and CLARA BUNDOC, respondents.
FELICIANO, J.:
On 20 October 1982, Adelberto Bundoc, then a minor of 10 years of age, shot Jennifer Tamargo
with an air rifle causing injuries which resulted in her death. Accordingly, a civil complaint for
damages was filed with the Regional Trial Court, Branch 20, Vigan, Ilocos Sur, docketed as Civil
Case No. 3457-V, by petitioner Macario Tamargo, Jennifer's adopting parent, and petitioner
spouses Celso and Aurelia Tamargo, Jennifer's natural parents against respondent spouses
Victor and Clara Bundoc, Adelberto's natural parents with whom he was living at the time of the
tragic incident. In addition to this case for damages, a criminal information or Homicide through
Reckless Imprudence was filed [Criminal Case No. 1722-V] against Adelberto Bundoc.
Adelberto, however, was acquitted and exempted from criminal liability on the ground that he bad
acted without discernment.
Prior to the incident, or on 10 December 1981, the spouses Sabas and Felisa Rapisura had filed
a petition to adopt the minor Adelberto Bundoc in Special Proceedings No. 0373-T before the
then Court of First Instance of Ilocos Sur. This petition for adoption was grunted on, 18
November 1982, that is, after Adelberto had shot and killed Jennifer.
In their Answer, respondent spouses Bundoc, Adelberto's natural parents, reciting the result of
the foregoing petition for adoption, claimed that not they, but rather the adopting parents, namely
the spouses Sabas and Felisa Rapisura, were indispensable parties to the action since parental
authority had shifted to the adopting parents from the moment the successful petition for
adoption was filed.
Petitioners in their Reply contended that since Adelberto Bundoc was then actually living with his
natural parents, parental authority had not ceased nor been relinquished by the mere filing and
granting of a petition for adoption.
The trial court on 3 December 1987 dismissed petitioners' complaint, ruling that respondent
natural parents of Adelberto indeed were not indispensable parties to the action.
Petitioners received a copy of the trial court's Decision on 7 December 1987. Within the 15-day
reglementary period, or on 14 December 1987, petitioners filed a motion for reconsideration
followed by a supplemental motion for reconsideration on 15 January 1988. It appearing,
however, that the motions failed to comply with Sections 4 and 5 of Rule 15 of the Revised Rules
of Court — that notice of the motion shall be given to all parties concerned at least three (3) days
before the hearing of said motion; and that said notice shall state the time and place of hearing
— both motions were denied by the trial court in an Order dated 18 April 1988. On 28 April 1988,
petitioners filed a notice of appeal. In its Order dated 6 June 1988, the trial court dismissed the
notice at appeal, this time ruling that the notice had been filed beyond the 15-day reglementary
period ending 22 December 1987.
Petitioners went to the Court of Appeals on a petition for mandamus and certiorari questioning
the trial court's Decision dated 3 December 1987 and the Orders dated 18 April 1988 and 6 June
1988, The Court of Appeals dismissed the petition, ruling that petitioners had lost their right to
appeal.
In the present Petition for Review, petitioners once again contend that respondent spouses
Bundoc are the indispensable parties to the action for damages caused by the acts of their minor
child, Adelberto Bundoc. Resolution of this Petition hinges on the following issues: (1) whether or
not petitioners, notwithstanding loss of their right to appeal, may still file the instant Petition;
conversely, whether the Court may still take cognizance of the case even through petitioners'
appeal had been filed out of time; and (2) whether or not the effects of adoption, insofar as
parental authority is concerned may be given retroactive effect so as to make the adopting
parents the indispensable parties in a damage case filed against their adopted child, for acts
committed by the latter, when actual custody was yet lodged with the biological parents.
1. It will be recalled that, petitioners' motion (and supplemental motion) for reconsideration filed
before the trial court, not having complied with the requirements of Section 13, Rule 41, and
Section 4, Rule 15, of the Revised Rules of Court, were considered pro forma and hence did not
interrupt and suspend the reglementary period to appeal: the trial court held that the motions, not
having contained a notice of time and place of hearing, had become useless pieces of paper
which did not interrupt the reglementary period. 1 As in fact repeatedly held by this Court, what is
mandatory is the service of the motion on the opposing counsel indicating the time and place of
hearing. 2
In view, however, of the nature of the issue raised in the instant. Petition, and in order that
substantial justice may be served, the Court, invoking its right to suspend the application of
technical rules to prevent manifest injustice, elects to treat the notice of appeal as having been
seasonably filed before the trial court, and the motion (and supplemental motion) for
reconsideration filed by petitioner in the trial court as having interrupted the reglementary period
for appeal. As the Court held in Gregorio v. Court of Appeals: 3
Dismissal of appeal; purely on technical grounds is frowned upon where the

policy of the courts is to encourage hearings of appeal on their merits. The rules
of procedure ought not be applied in a very rigid technical sense, rules of
procedure are used only to help secure not override, substantial justice. if d
technical and rigid enforcement of the rules is made their aim would be
defeated. 4
2. It is not disputed that Adelberto Bundoc's voluntary act of shooting Jennifer Tamargo with an
air rifle gave rise to a cause of action on quasi-delict against him. As Article 2176 of the Civil
Code provides:
Whoever by act or omission causes damage to another, there being fault or

negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasi-
delict . . .
Upon the other hand, the law imposes civil liability upon the father and, in case of his death or
incapacity, the mother, for any damages that may be caused by a minor child who lives with
them. Article 2180 of the Civil Code reads:
The obligation imposed by article 2176 is demandable not only for one's own acts
or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for
the damages caused by the minor children who live in their company.
xxx xxx xxx

The responsibility treated of in this Article shall cease when the person herein
mentioned prove that they observed all the diligence of a good father of a family
to prevent damage. (Emphasis supplied)
This principle of parental liability is a species of what is frequently designated as vicarious

liability, or the doctrine of "imputed negligence" under Anglo-American tort law, where a person is
not only liable for torts committed by himself, but also for torts committed by others with whom he
has a certain relationship and for whom he is responsible. Thus, parental liability is made a
natural or logical consequence of the duties and responsibilities of parents — their parental
authority — which includes the instructing, controlling and disciplining of the child. 5 The basis for
the doctrine of vicarious liability was explained by the Court in Cangco v. Manila Railroad Co. 6 in
the following terms:
With respect to extra-contractual obligation arising from negligence, whether of

act or omission, it is competent for the legislature to elect — and our Legislature
has so elected — to limit such liability to cases in which the person upon whom
such an obligation is imposed is morally culpable or, on the contrary, for reasons
of public policy. to extend that liability, without regard to the lack of moral
culpability, so as to include responsibility for the negligence of those persons
whose acts or omissions are imputable, by a legal fiction, to others who are in a
position to exercise an absolute or limited control over them. The legislature
which adopted our Civil Code has elected to limit extra-contractual liability — with
certain well-defined exceptions — to cases in which moral culpability can be
directly imputed to the persons to be charged. This moral responsibility may
consist in having failed to exercise due care in one's own acts, or in having failed
to exercise due care in the selection and control of one's agent or servants, or in
the control of persons who, by reasons of their status, occupy a position of
dependency with respect to the person made liable for their conduct. 7 (Emphasis
Supplied)
The civil liability imposed upon parents for the torts of their minor children living with
them, may be seen to be based upon the parental authority vested by the Civil Code
upon such parents. The civil law assumes that when an unemancipated child living with
its parents commits a tortious acts, the parents were negligent in the performance of their
legal and natural duty closely to supervise the child who is in their custody and control.
Parental liability is, in other words, anchored upon parental authority coupled with
presumed parental dereliction in the discharge of the duties accompanying such
authority. The parental dereliction is, of course, only presumed and the presumption can
be overtuned under Article 2180 of the Civil Code by proof that the parents had exercised
all the diligence of a good father of a family to prevent the damage.
In the instant case, the shooting of Jennifer by Adelberto with an air rifle occured when parental
authority was still lodged in respondent Bundoc spouses, the natural parents of the minor
Adelberto. It would thus follow that the natural parents who had then actual custody of the minor
Adelberto, are the indispensable parties to the suit for damages.
The natural parents of Adelberto, however, stoutly maintain that because a decree of adoption
was issued by the adoption court in favor of the Rapisura spouses, parental authority was vested
in the latter as adopting parents as of the time of the filing of the petition for adoption that
is, before Adelberto had shot Jennifer which an air rifle. The Bundoc spouses contend that they
were therefore free of any parental responsibility for Adelberto's allegedly tortious conduct.
Respondent Bundoc spouses rely on Article 36 of the Child and Youth Welfare Code 8 which reads
as follows:
Art. 36. Decree of Adoption. — If, after considering the report of the Department
of Social Welfare or duly licensed child placement agency and the evidence
submitted before it, the court is satisfied that the petitioner is qualified to maintain,
care for, and educate the child, that the trial custody period has been completed,
and that the best interests of the child will be promoted by the adoption, a decree
of adoption shall be entered, which shall be effective he date the original petition
was filed. The decree shall state the name by which the child is thenceforth to be
known. (Emphasis supplied)
The Bundoc spouses further argue that the above Article 36 should be read in relation to
Article 39 of the same Code:
Art. 39. Effect of Adoption. — The adoption shall:
xxx xxx xxx
(2) Dissolve the authority vested in the natural parents, except where the adopter
is the spouse of the surviving natural parent;
xxx xxx xxx
(Emphasis supplied)
and urge that their Parental authority must be deemed to have been dissolved as of the time the
Petition for adoption was filed.
The Court is not persuaded. As earlier noted, under the Civil Code, the basis of parental liability
for the torts of a minor child is the relationship existing between the parents and the minor child
living with them and over whom, the law presumes, the parents exercise supervision and control.
Article 58 of the Child and Youth Welfare Code, re-enacted this rule:
Article 58 Torts — Parents and guardians are responsible for the damage caused
by the child under their parental authority in accordance with the civil
Code. (Emphasis supplied)
Article 221 of the Family Code of the Philippines 9 has similarly insisted upon the requisite that
the child, doer of the tortious act, shall have beer in the actual custody of the parents sought to
be held liable for the ensuing damage:
Art. 221. Parents and other persons exercising parental authority shall be civilly
liable for the injuries and damages caused by the acts or omissions of their
unemancipated children living in their companyand under their parental authority
subject to the appropriate defenses provided by law. (Emphasis supplied)
We do not believe that parental authority is properly regarded as having been retroactively
transferred to and vested in the adopting parents, the Rapisura spouses, at the time the air rifle
shooting happened. We do not consider that retroactive effect may be giver to the decree of
adoption so as to impose a liability upon the adopting parents accruing at a time when adopting
parents had no actual or physically custody over the adopted child. Retroactive affect may
perhaps be given to the granting of the petition for adoption where such is essential to permit the
accrual of some benefit or advantage in favor of the adopted child. In the instant case, however,
to hold that parental authority had been retroactively lodged in the Rapisura spouses so as to
burden them with liability for a tortious act that they could not have foreseen and which they
could not have prevented (since they were at the time in the United States and had no physical
custody over the child Adelberto) would be unfair and unconscionable. Such a result, moreover,
would be inconsistent with the philosophical and policy basis underlying the doctrine of vicarious
liability. Put a little differently, no presumption of parental dereliction on the part of the adopting
parents, the Rapisura spouses, could have arisen since Adelberto was not in fact subject to their
control at the time the tort was committed.
Article 35 of the Child and Youth Welfare Code fortifies the conclusion reached above. Article 35
provides as follows:
Art. 35. Trial Custody. — No petition for adoption shall be finally granted unless
and until the adopting parents are given by the courts a supervised trial custody
period of at least six months to assess their adjustment and emotional readiness
for the legal union. During the period of trial custody, parental authority shall be
vested in the adopting parents. (Emphasis supplied)
Under the above Article 35, parental authority is provisionally vested in the adopting parents
during the period of trial custody, i.e., before the issuance of a decree of adoption, precisely
because the adopting parents are given actual custody of the child during such trial period. In the
instant case, the trial custody period either had not yet begun or bad already been completed at
the time of the air rifle shooting; in any case, actual custody of Adelberto was then with his
natural parents, not the adopting parents.
Accordingly, we conclude that respondent Bundoc spouses, Adelberto's natural parents, were
indispensable parties to the suit for damages brought by petitioners, and that the dismissal by the
trial court of petitioners' complaint, the indispensable parties being already before the court,
constituted grave abuse of discretion amounting to lack or excess of jurisdiction.
WHEREFORE, premises considered, the Petition for Review is hereby GRANTED DUE
COURSE and the Decision of the Court of Appeals dated 6 September 1988, in C.A.-G.R. No.
SP-15016 is hereby REVERSED and SET ASIDE. Petitioners' complaint filed before the trial
court is hereby REINSTATED and this case is REMANDED to that court for further proceedings
consistent with this Decision. Costs against respondent Bundoc spouses. This Decision is
immediately executory.
SO ORDERED.
G.R. No. 132266 December 21, 1999
CASTILEX INDUSTRIAL CORPORATION, petitioner,

vs.
VICENTE VASQUEZ, JR. and LUISA SO VASQUEZ, and CEBU DOCTORS' HOSPITAL,
INC., respondents.
DAVIDE, JR., C.J.:
The pivotal issue in this petition is whether an employer may be held vicariously liable for the
death resulting from the negligent operation by a managerial employee of a company-issued
vehicle.
The antecedents, as succinctly summarized by the Court of Appeals, are as follows:
On 28 August 1988, at around 1:30 to 2:00 in the morning, Romeo So Vasquez,

was driving a Honda motorcycle around Fuente Osmeña Rotunda. He was
traveling counter-clockwise, (the normal flow of traffic in a rotunda) but without
any protective helmet or goggles. He was also only carrying a Student's Permit to
Drive at the time. Upon the other hand, Benjamin Abad [was a] manager of
Appellant Castilex Industrial Corporation, registered owner [of] a Toyota Hi-Lux
Pick-up with plate no. GBW-794. On the same date and time, Abad drove the
said company car out of a parking lot but instead of going around the Osmeña
rotunda he made a short cut against [the] flow of the traffic in proceeding to his
route to General Maxilom St. or to Belvic St.
In the process, the motorcycle of Vasquez and the pick-up of Abad collided with
each other causing severe injuries to the former. Abad stopped his vehicle and
brought Vasquez to the Southern Islands Hospital and later to the Cebu Doctor's
Hospital.
On September 5, 1988, Vasquez died at the Cebu Doctor's Hospital. It was there
that Abad signed an acknowledgment of Responsible Party (Exhibit K) wherein
he agreed to pay whatever hospital bills, professional fees and other incidental
charges Vasquez may incur.
After the police authorities had conducted the investigation of the accident, a
Criminal Case was filed against Abad but which was subsequently dismissed for
failure to prosecute. So, the present action for damages was commenced by
Vicente Vasquez, Jr. and Luisa So Vasquez, parents of the deceased Romeo So
Vasquez, against Jose Benjamin Abad and Castilex Industrial Corporation. In the
same action, Cebu Doctor's Hospital intervened to collect unpaid balance for the
medical expense given to Romeo So Vasquez.1
The trial court ruled in favor of private respondents Vicente and Luisa Vasquez and ordered Jose
Benjamin Abad (hereafter ABAD) and petitioner Castilex Industrial Corporation (hereafter
CASTILEX) to pay jointly and solidarily (1) Spouses Vasquez, the amounts of P8,000.00 for
burial expenses; P50,000.00 as moral damages; P10,000.00 as attorney's fees; and
P778,752.00 for loss of earning capacity; and (2) Cebu Doctor's Hospital, the sum of P50,927.83
for unpaid medical and hospital bills at 3% monthly interest from 27 July 1989 until fully paid, plus
the costs of litigation.2
CASTILEX and ABAD separately appealed the decision.

In its decision3 of 21 May 1997, the Court of Appeals affirmed the ruling of the trial court holding
ABAD and CASTILEX liable but held that the liability of the latter is "only vicarious and not
solidary" with the former. It reduced the award of damages representing loss of earning capacity
from P778,752.00 to P214,156.80; and the interest on the hospital and medical bills, from 3% per
month to 12% per annum from 5 September 1988 until fully paid.
Upon CASTILEX's motion for reconsideration, the Court of Appeals modified its decision by (1)
reducing the award of moral damages from P50,000 to P30,000 in view of the deceased's
contributory negligence; (b) deleting the award of attorney's fees for lack of evidence; and (c)
reducing the interest on hospital and medical bills to 6% per annum from 5 September 1988 until
fully paid.4
Hence, CASTILEX filed the instant petition contending that the Court of Appeals erred in (1)
applying to the case the fifth paragraph of Article 2180 of the Civil Code, instead of the fourth
paragraph thereof; (2) that as a managerial employee, ABAD was deemed to have been always
acting within the scope of his assigned task even outside office hours because he was using a
vehicle issued to him by petitioner; and (3) ruling that petitioner had the burden to prove that the
employee was not acting within the scope of his assigned task.
Jose Benjamin ABAD merely adopted the statement of facts of petitioner which holds fast on the
theory of negligence on the part of the deceased.
On the other hand, respondents Spouses Vasquez argue that their son's death was caused by
the negligence of petitioner's employee who was driving a vehicle issued by petitioner and who
was on his way home from overtime work for petitioner; and that petitioner is thus liable for the
resulting injury and subsequent death of their son on the basis of the fifth paragraph of Article
2180. Even if the fourth paragraph of Article 2180 were applied, petitioner cannot escape liability
therefor. They moreover argue that the Court of Appeals erred in reducing the amount of
compensatory damages when the award made by the trial court was borne both by evidence
adduced during the trial regarding deceased's wages and by jurisprudence on life expectancy.
Moreover, they point out that the petition is procedurally not acceptable on the following grounds:
(1) lack of an explanation for serving the petition upon the Court of Appeals by registered mail, as
required under Section 11, Rule 13 of the Rules of Civil Procedure; and (2) lack of a statement of
the dates of the expiration of the original reglementary period and of the filing of the motion for
extension of time to file a petition for review.
For its part, respondent Cebu Doctor's Hospital maintains that petitioner CASTILEX is indeed
vicariously liable for the injuries and subsequent death of Romeo Vasquez caused by ABAD,
who was on his way home from taking snacks after doing overtime work for petitioner. Although
the incident occurred when ABAD was not working anymore "the inescapable fact remains that
said employee would not have been situated at such time and place had he not been required by
petitioner to do overtime work." Moreover, since petitioner adopted the evidence adduced by
ABAD, it cannot, as the latter's employer, inveigle itself from the ambit of liability, and is thus
estopped by the records of the case, which it failed to refute.
We shall first address the issue raised by the private respondents regarding some alleged
procedural lapses in the petition.
Private respondent's contention of petitioner's violation of Section 11 of Rule 13 and Section 4 of

Rule 45 of the 1997 Rules of Civil Procedure holds no water.
Sec. 11 of Rule 13 provides:
Sec. 11. Priorities in modes of services and filing. — Whenever practicable, the
service and filing of pleadings and other papers shall be done personally. Except
with respect to papers emanating from the court, a resort to other modes must be
accompanied by a written explanation why the service or filing was not done
personally. A violation of this Rule may be cause to consider the paper as not
filed.
The explanation why service of a copy of the petition upon the Court of Appeals was done by
registered mail is found on Page 28 of the petition. Thus, there has been compliance with the
aforequoted provision.
As regards the allegation of violation of the material data rule under Section 4 of Rule 45, the
same is unfounded. The material dates required to be stated in the petition are the following: (1)
the date of receipt of the judgment or final order or resolution subject of the petition; (2) the date
of filing of a motion for new trial or reconsideration, if any; and (3) the date of receipt of the notice
of the denial of the motion. Contrary to private respondent's claim, the petition need not indicate
the dates of the expiration of the original reglementary period and the filing of a motion for
extension of time to file the petition. At any rate, aside from the material dates required under
Section 4 of Rule 45, petitioner CASTILEX also stated in the first page of the petition the date it
filed the motion for extension of time to file the petition.
Now on the merits of the case.
The negligence of ABAD is not an issue at this instance. Petitioner CASTILEX presumes said
negligence but claims that it is not vicariously liable for the injuries and subsequent death caused
by ABAD.
Petitioner contends that the fifth paragraph of Article 2180 of the Civil Code should only apply to
instances where the employer is not engaged in business or industry. Since it is engaged in the
business of manufacturing and selling furniture it is therefore not covered by said provision.
Instead, the fourth paragraph should apply.
Petitioner's interpretation of the fifth paragraph is not accurate. The phrase "even though the
former are not engaged in any business or industry" found in the fifth paragraph should be
interpreted to mean that it is not necessary for the employer to be engaged in any business or
industry to be liable for the negligence of his employee who is acting within the scope of his
assigned task.5
A distinction must be made between the two provisions to determine what is applicable. Both
provisions apply to employers: the fourth paragraph, to owners and managers of an
establishment or enterprise; and the fifth paragraph, to employers in general, whether or not
engaged in any business or industry. The fourth paragraph covers negligent acts of employees
committed either in the service of the branches or on the occasion of their functions, while the
fifth paragraph encompasses negligent acts of employees acting within the scope of their
assigned task. The latter is an expansion of the former in both employer coverage and acts
included. Negligent acts of employees, whether or not the employer is engaged in a business or
industry, are covered so long as they were acting within the scope of their assigned task, even
though committed neither in the service of the branches nor on the occasion of their functions.
For, admittedly, employees oftentimes wear different hats. They perform functions which are
beyond their office, title or designation but which, nevertheless, are still within the call of duty.
This court has applied the fifth paragraph to cases where the employer was engaged in a
business or industry such as truck operators6 and banks.7 The Court of Appeals cannot,
therefore, be faulted in applying the said paragraph of Article 2180 of the Civil Code to this case.
Under the fifth paragraph of Article 2180, whether or not engaged in any business or industry, an
employer is liable for the torts committed by employees within the scope of his assigned tasks.
But it is necessary to establish the employer-employee relationship; once this is done, the
plaintiff must show, to hold the employer liable, that the employee was acting within the scope of
his assigned task when the tort complained of was committed. It is only then that the employer
may find it necessary to interpose the defense of due diligence in the selection and supervision
of the employee.8
It is undisputed that ABAD was a Production Manager of petitioner CASTILEX at the time of the
tort occurrence. As to whether he was acting within the scope of his assigned task is a question
of fact, which the court a quo and the Court of Appeals resolved in the affirmative.
Well-entrenched in our jurisprudence is the rule that the factual findings of the Court of Appeals
are entitled to great respect, and even finality at times. This rule is, however, subject to
exceptions such as when the conclusion is grounded on speculations, surmises, or
conjectures.9 Such exception obtain in the present case to warrant review by this Court of the
finding of the Court of Appeals that since ABAD was driving petitioner's vehicle he was acting
within the scope of his duties as a manager.
Before we pass upon the issue of whether ABAD was performing acts within the range of his
employment, we shall first take up the other reason invoked by the Court of Appeals in holding
petitioner CASTILEX vicariously liable for ABAD's negligence, i.e., that the petitioner did not
present evidence that ABAD was not acting within the scope of his assigned tasks at the time of
the motor vehicle mishap. Contrary to the ruling of the Court of Appeals, it was not incumbent
upon the petitioner to prove the same. It was enough for petitioner CASTILEX to deny that ABAD
was acting within the scope of his duties; petitioner was not under obligation to prove this
negative averment. Ei incumbit probatio qui dicit, non qui negat (He who asserts, not he who
denies, must prove). The Court has consistently applied the ancient rule that if the plaintiff, upon
whom rests the burden of proving his cause of action, fails to show in a satisfactory manner facts
which he bases his claim, the defendant is under no obligation to prove his exception or
defense. 10
Now on the issue of whether the private respondents have sufficiently established that ABAD
was acting within the scope of his assigned tasks.
ABAD, who was presented as a hostile witness, testified that at the time of the incident, he was
driving a company-issued vehicle, registered under the name of petitioner. He was then leaving
the restaurant where he had some snacks and had a chat with his friends after having done
overtime work for the petitioner.
No absolutely hard and fast rule can be stated which will furnish the complete answer to the
problem of whether at a given moment, an employee is engaged in his employer's business in
the operation of a motor vehicle, so as to fix liability upon the employer because of the
employee's action or inaction; but rather, the result varies with each state of facts. 11
In Filamer Christian Institute v. Intermediate Appellant Court, 12 this Court had the occasion to
hold that acts done within the scope of the employee's assigned tasks includes "any act done by
an employee in furtherance of the interests of the employer or for the account of the employer at
the time of the infliction of the injury or damages."
The court a quo and the Court of Appeals were one in holding that the driving by a manager of a
company-issued vehicle is within the scope of his assigned tasks regardless of the time and
circumstances.
We do not agree. The mere fact that ABAD was using a service vehicle at the time of the
injurious incident is not of itself sufficient to charge petitioner with liability for the negligent
operation of said vehicle unless it appears that he was operating the vehicle within the course or
scope of his employment.
The following are principles in American Jurisprudence on the employer's liability for the injuries
inflicted by the negligence of an employee in the use of an employer's motor vehicle:
I. Operation of Employer's Motor Vehicle in Going to
or from Meals
It has been held that an employee who uses his employer's vehicle in going from his work to a
place where he intends to eat or in returning to work from a meal is not ordinarily acting within
the scope of his employment in the absence of evidence of some special business benefit to the
employer. Evidence that by using the employer's vehicle to go to and from meals, an employee is
enabled to reduce his time-off and so devote more time to the performance of his duties supports
the finding that an employee is acting within the scope of his employment while so driving the
vehicle. 13
II. Operation of Employer's Vehicle in Going to
or from Work
In the same vein, traveling to and from the place of work is ordinarily a personal problem or
concern of the employee, and not a part of his services to his employer. Hence, in the absence of
some special benefit to the employer other than the mere performance of the services available
at the place where he is needed, the employee is not acting within the scope of his employment
even though he uses his employer's motor vehicle. 14
The employer may, however, be liable where he derives some special benefit from having the
employee drive home in the employer's vehicle as when the employer benefits from having the
employee at work earlier and, presumably, spending more time at his actual duties. Where the
employee's duties require him to circulate in a general area with no fixed place or hours of work,
or to go to and from his home to various outside places of work, and his employer furnishes him
with a vehicle to use in his work, the courts have frequently applied what has been called the
"special errand" or "roving commission" rule, under which it can be found that the employee
continues in the service of his employer until he actually reaches home. However, even if the
employee be deemed to be acting within the scope of his employment in going to or from work in
his employer's vehicle, the employer is not liable for his negligence where at the time of the
accident, the employee has left the direct route to his work or back home and is pursuing a
personal errand of his own.
III. Use of Employer's Vehicle Outside Regular Working Hours
An employer who loans his motor vehicle to an employee for the latter's personal use outside of
regular working hours is generally not liable for the employee's negligent operation of the vehicle
during the period of permissive use, even where the employer contemplates that a regularly
assigned motor vehicle will be used by the employee for personal as well as business purposes
and there is some incidental benefit to the employer. Even where the employee's personal
purpose in using the vehicle has been accomplished and he has started the return trip to his
house where the vehicle is normally kept, it has been held that he has not resumed his
employment, and the employer is not liable for the employee's negligent operation of the vehicle
during the return trip. 15
The foregoing principles and jurisprudence are applicable in our jurisdiction albeit based on the
doctrine of respondent superior, not on the principle of bonus pater familias as in ours. Whether
the fault or negligence of the employee is conclusive on his employer as in American law or
jurisprudence, or merely gives rise to the presumptionjuris tantum of negligence on the part of
the employer as in ours, it is indispensable that the employee was acting in his employer's
business or within the scope of his assigned task. 16
In the case at bar, it is undisputed that ABAD did some overtime work at the petitioner's office,
which was located in Cabangcalan, Mandaue City. Thereafter, he went to Goldie's Restaurant in
Fuente Osmeña, Cebu City, which is about seven kilometers away from petitioner's place of
business. 17 A witness for the private respondents, a sidewalk vendor, testified that Fuente
Osmeña is a "lively place" even at dawn because Goldie's Restaurant and Back Street were still
open and people were drinking thereat. Moreover, prostitutes, pimps, and drug addicts littered
the place. 18
At the Goldie's Restaurant, ABAD took some snacks and had a chat with friends. It was when
ABAD was leaving the restaurant that the incident in question occurred. That same witness for
the private respondents testified that at the time of the vehicular accident, ABAD was with a
woman in his car, who then shouted: "Daddy, Daddy!" 19 This woman could not have been
ABAD's daughter, for ABAD was only 29 years old at the time.
To the mind of this Court, ABAD was engaged in affairs of his own or was carrying out a personal
purpose not in line with his duties at the time he figured in a vehicular accident. It was then about
2:00 a.m. of 28 August 1988, way beyond the normal working hours. ABAD's working day had
ended; his overtime work had already been completed. His being at a place which, as petitioner
put it, was known as a "haven for prostitutes, pimps, and drug pushers and addicts," had no
connection to petitioner's business; neither had it any relation to his duties as a manager. Rather,
using his service vehicle even for personal purposes was a form of a fringe benefit or one of the
perks attached to his position.
Since there is paucity of evidence that ABAD was acting within the scope of the functions
entrusted to him, petitioner CASTILEX had no duty to show that it exercised the diligence of a
good father of a family in providing ABAD with a service vehicle. Thus, justice and equity require
that petitioner be relieved of vicarious liability for the consequences of the negligence of ABAD in
driving its vehicle. 20
WHEREFORE, the petition is GRANTED, and the appealed decision and resolution of the Court
of Appeals is AFFIRMED with the modification that petitioner Castilex Industrial Corporation be
absolved of any liability for the damages caused by its employee, Jose Benjamin Abad.
SO ORDERED.
G.R. No. 82465 February 25, 1991
ST. FRANCIS HIGH SCHOOL, as represented by SPS. FERNANDO NANTES AND

ROSARIO LACANDULA, BENJAMIN ILUMIN, TIRSO DE CHAVEZ, LUISITO VINAS, CONNIE
ARQUIO AND PATRIA CADIZ, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ELEVENTH DIVISION and DR. ROMULO
CASTILLO and LILIA CADIZ,respondents.
Jose C. Flores, Jr. for petitioners.

Jovito E. Talabong for private respondents.
PARAS, J.:
This is a petition for review of the decision * of the Court of Appeals, the dispositive portion of
which reads:
WHEREFORE, the decision under appeal is hereby affirmed, with the following
modifications: (1) Exemplary damages in the amount of P20,000.00 are hereby awarded
to plaintiffs, in addition to the actual damages of P30,000.00, moral damages of
P20,000.00 and attorney's fees in the amount of P15,000.00 awarded to plaintiffs in the
decision under appeal; (2) St. Francis High School, represented by the Spouses
Fernando Nantes and Rosario Lacandula, and Benjamin Illumin, are hereby held jointly
and severally liable with defendants Connie Arquio, Tirso de Chaves, Luisito Vinas and
Patria Cadis for the payment to plaintiffs of the abovementioned actual damages, moral
damages, exemplary damages and attorney's fees, and for costs; and (3) Defendants
Yoly Jaro and Nida Aragones are hereby absolved from liability, and the case against
them, together with their respective counterclaims, is hereby ordered dismissed.
SO ORDERED. (p. 60, Rollo)
The complaint alleged that Ferdinand Castillo, then a freshman student of Section 1-C at the St.
Francis High School, wanted to join a school picnic undertaken by Class I-B and Class I-C at
Talaan Beach, Sariaya, Quezon. Ferdinand's parents, respondents spouses Dr. Romulo Castillo
and Lilia Cadiz Castillo, because of short notice, did not allow their son to join but merely allowed
him to bring food to the teachers for the picnic, with the directive that he should go back home
after doing so. However, because of persuasion of the teachers, Ferdinand went on with them to
the beach.
During the picnic and while the students, including Ferdinand, were in the water, one of the
female teachers was apparently drowning. Some of the students, including Ferdinand, came to
her rescue, but in the process, it was Ferdinand himself who drowned. His body was recovered
but efforts to resuscitate him ashore failed. He was brought to a certain Dr. Luna in Sariaya,
Quezon and later to the Mt. Cannel General Hospital where he was pronounced dead on arrival.
Thereupon, respondent spouses filed a complaint docketed as Civil Case No. 8834, in the
Regional Trial Court, Branch LVIII of Lucena City, against the St. Francis High School,
represented by the spouses Fernando Nantes and Rosario Lacandula, Benjamin Illumin (its
principal), and the teachers: Tirso de Chaves, Luisito Vinas, Connie Arquio, Nida Aragones, Yoly
Jaro, and Patria Cadiz, for Damages which respondents allegedly incurred from the death of their
13-year old son, Ferdinand Castillo. Contending that the death of their son was due to the failure
of the petitioners to exercise the proper diligence of a good father of the family in preventing their
son's drowning, respondents prayed of actual, moral and exemplary damages, attorney's fees
and expenses for litigation.
The trial court found in favor of the respondents and against petitioners-teachers Arquio, de
Chaves, Vinas, Aragones, Jaro and Cadiz, ordering all of them jointly and severally to pay
respondents the sum of P30,000.00 as actual damages, P20,000.00 as moral damages,
P15,000.00 as attorney's fees, and to pay the costs. The court a quo reasoned:
Taking into consideration the evidence presented, this Court believes that the defendant
teachers namely: Connie Arquio, Luisito Vinas, Tirso de Chaves, Yoly Jaro, Nida
Aragones and Patria Cadiz had failed to exercise the diligence required of them by law
under the circumstances to guard against the harm they had foreseen. (pp. 2930, Rollo)
xxx xxx xxx
While it is alleged that when defendants Yoly Jaro and Nida Aragones arrived at the
picnic site, the drowning incident had already occurred, such fact does not and cannot
excuse them from their liability. In fact, it could be said that by coming late, they were
remiss in their duty to safeguard the students. (p. 30, Rollo)
The students, young as they were then (12 to 13 years old), were easily attracted to the
sea without aforethought of the dangers it offers. Yet, the precautions and reminders
allegedly performed by the defendants-teachers definitely fell short of the standard
required by law under the circumstances. While the defendants-teachers admitted that
some parts of the sea where the picnic was held are deep, the supposed lifeguards of the
children did not even actually go to the water to test the depth of the particular area
where the children would swim. And indeed the fears of the plaintiffs that the picnic area
was dangerous was confirmed by the fact that three persons during the picnic got
drowned at the same time. Had the defendant teachers made an actual and physical
observation of the water before they allowed the students to swim, they could have found
out that the area where the children were swimming was indeed dangerous. And not only
that, the male teachers who according to the female teachers were there to supervise the
children to ensure their safety were not even at the area where the children were
swimming. They were somewhere and as testified to by plaintiffs' witness they were
having a drinking spree. (pp. 55-56, Rollo)
On the other hand, the trial court dismissed the case against the St. Francis High School,
Benjamin Illumin and Aurora Cadorna. Said the court a quo:
As shown and adverted to above, this Court cannot find sufficient evidence showing that
the picnic was a school sanctioned one. Similarly no evidence has been shown to hold
defendants Benjamin Illumin and Aurora Cadorna responsible for the death of Ferdinand
Castillo together with the other defendant teachers. It has been sufficiently shown that
Benjamin Illumin had himself not consented to the picnic and in fact he did not join it. On
the other hand, defendant Aurora Cadorna had then her own class to supervise and in
fact she was not amongst those allegedly invited by defendant Connie Arquio to
supervise class I-C to which Ferdinand Castillo belongs. (p. 30, Rollo)
Both petitioners and respondents appealed to the Court of Appeals. Respondents-spouses

assigned the following errors committed by the trial court:
1. The lower court erred in not declaring the defendant St. Francis High School and its
administrator/principal Benjamin Illumin as equally liable not only for its approved co-
curricular activities but also for those which they unreasonably failed to exercise control
and supervision like the holding of picnic in the dangerous water of Talaan Beach,
Sariaya, Quezon.
2. The lower court erred in not declaring the St. Francis High School and principal
Benjamin Illumin as jointly and solidarily liable with their co-defendants-teachers Rosario
Lacandula, et als., for the tragic death of Ferdinand Castillo in a picnic at Talaan Beach,
Sariaya, Quezon, last March 20, 1982.
3. The lower court erred in not declaring higher amount for actual and moral damages for
the untimely and tragic death of Ferdinand Castillo in favor of plaintiffs-appellants against
all the defendants. (pp. 56-57, Rollo)
The Court of Appeals ruled:
We find plaintiffs-appellants' submission well-taken.
Even were We to find that the picnic in question was not a school-sponsored activity,
nonetheless it cannot be gainsaid that the same was held under the supervision of the
teachers employed by the said school, particularly the teacher in charge of Class I-C to
whom the victim belonged, and those whom she invited to help her in supervising the
class during the picnic. Considering that the court a quo found negligence on the part of
the six defendants-teachers who, as such, were charged with the supervision of the
children during the picnic, the St. Francis High School and the school principal, Benjamin
Illumin, are liable under Article 2176 taken together with the 1st, 4th and 5th paragraphs
of Article 2180 of the Civil Code. They cannot escape liability on the mere excuse that the
picnic was not an "extra-curricular activity of the St. Francis High School." We find from
the evidence that, as claimed by plaintiffs-appellants, the school principal had knowledge
of the picnic even from its planning stage and had even been invited to attend the affair;
and yet he did not express any prohibition against undertaking the picnic, nor did he
prescribe any precautionary measures to be adopted during the picnic. At the least, We
must find that the school and the responsible school officials, particularly the principal,
Benjamin Illumin, had acquiesced to the holding of the picnic.
Under Article 2180, supra, the defendant school and defendant school principal must be
found jointly and severally liable with the defendants-teachers for the damages incurred
by the plaintiffs as a result of the death of their son. It is the rule that in cases where the
above-cited provisions find application, the negligence of the employees in causing the
injury or damage gives rise to a presumption of negligence on the part of the owner
and/or manager of the establishment (in the present case, St. Francis High School and
its principal); and while this presumption is not conclusive, it may be overthrown only by
clear and convincing proof that the owner and/or manager exercised the care and
diligence of a good father of a family in the selection and/or supervision of the employee
or employees causing the injury or damage (in this case, the defendants-teachers). The
record does not disclose such evidence as would serve to overcome the aforesaid
presumption and absolve the St. Francis High School and its principal from liability under
the above-cited provisions.
As to the third assigned error interposed by plaintiffs-appellants, while We cannot but

commiserate with the plaintiffs for the tragedy that befell them in the untimely death of
their son Ferdinand Castillo and understand their suffering as parents, especially the
victim's mother who, according to appellants, suffered a nervous breakdown as a result
of the tragedy, We find that the amounts fixed by the court a quo as actual damages and
moral damages (P30,000.00 and P20,000.00, respectively) are reasonable and are those
which are sustained by the evidence and the law.
However, We believe that exemplary or corrective damages in the amount of P20,000.00

may and should be, as it is hereby, imposed in the present case by way of example of
correction for the public good, pursuant to Article 2229 of the Civil Code. (pp. 57-
59, Rollo)
On the other hand, petitioners-teachers assigned the following errors committed by the trial court:
1. ". . . in finding the defendants Connie Arquio, Tirso de Chavez, Luisito Vinas, Nida
Aragones, Yoly Jaro and Patria Cadiz guilty of negligence and jointly and severally liable
for damages such finding not being supported by facts and evidence.
2. ". . . in dismissing the counterclaim interposed by the defendants. (p. 59, Rollo)
On this score, respondent Court ruled:
The main thrust of defendants-appellants appeal is that plaintiffs, the parents of the victim
Ferdinand Castillo, were not able to prove by their evidence that they did not give their
son consent to join the picnic in question. However, We agree with the trial court in its
finding that whether or not the victim's parents had given such permission to their son
was immaterial to the determination of the existence of liability on the part of the
defendants for the damage incurred by the plaintiffs-appellants as a result of the death of
their son. What is material to such a determination is whether or not there was
negligence on the part of defendants vis-a-visthe supervision of the victim's group during
the picnic; and, as correctly found by the trial court, an affirmative reply to this question
has been satisfactorily established by the evidence, as already pointed out.
However, We sustain defendants-appellants insofar as two of the defendants-teachers,

Yoly Jaro and Nida Aragones, are concerned. As to them, the trial court found:
While it is alleged that when defendants Yoly Jaro and Nida Aragones arrived at
the picnic site, the drowning incident had already occurred, such fact does not
and cannot excuse them from their liability. In fact, it could be said that by coming
late, they were remiss in their duty to safeguard the students.
The evidence shows that these two defendants had satisfactorily explained why they
were late in going to the picnic site, namely, that they had to attend to the entrance
examination being conducted by the school which is part of their duty as teachers
thereof. Since they were not at the picnic site during the occurrence in question, it cannot
be said that they had any participation in the negligence attributable to the other
defendants-teachers who failed to exercise diligence in the supervision of the children
during the picnic and which failure resulted in the drowning of plaintiffs' son. Thus, We
may not attribute any act or omission to the two teachers, Yoly Jaro and Nida Aragones,
as to make them liable for the injury caused to the plaintiffs because of the death of their
son resulting from his drowning at the picnic. Accordingly, they must be absolved from
any liability.
As to the second assigned error raised by defendants-appellants, We agree with the

court a quo that the counterclaim must be dismissed for lack of merit. (pp. 59-60, Rollo)
Hence, this petition.
The issues presented by petitioners are:
A) Whether or not there was negligence attributable to the defendants which will warrant
the award of damages to the plaintiffs;
B) Whether or not Art. 2180, in relation to Art. 2176 of the New Civil Code is applicable to
the case at bar;
C) Whether or not the award of exemplary and moral damages is proper under the
circumstances surrounding the case at bar. (pp. 81-82, Rollo)
In the resolution of January 16, 1989, We gave due course to the petition and required the
parties to submit their respective memoranda.
The petition is impressed with merit.
If at all petitioners are liable for negligence, this is because of their own negligence or the
negligence of people under them. In the instant case however, as will be shown hereunder,
petitioners are neither guilty of their own negligence or guilty of the negligence of those under
them.
Hence, it cannot be said that they are guilty at all of any negligence. Consequently they cannot
be held liable for damages of any kind.
At the outset, it should be noted that respondent spouses, parents of the victim
Ferdinand, allowed their son to join the excursion.
Testimony of Dr. Castillo on cross exam. by Atty. Flores
Q Now, when your son asked you for money to buy food, did you not ask him
where he will bring this?
A I asked him where he was going, he answered, I am going to the picnic, and
when I asked him where, he did not answer, sir.
Q And after giving the money, you did not tell him anything more?
A No more, sir.
Q And after that you just learned that your son join the picnic?
A Yes, sir.
Q And you came to know of it after the news that your son was drowned in the
picnic came to you, is that correct?
A Yes, sir.
Q From 8:00 o'clock in the morning up to 12:00 o'clock noon of March 20, 1982,
you did not know that your son join the picnic?
A No, sir, I did not know.
Q Did you not look for your son during that time?
A I am too busy with my profession, that is why I was not able, sir.
Q You did not ask your wife?
A I did not, sir.
Q And neither did your wife tell you that your son join the picnic?
A Later on after 12:00, sir.
Q And during that time you were too busy that you did not inquire whether your
son have joined that picnic?
A Yes, sir.
(TSN, pp. 16-17, hearing of April 2, 1984 witness Romulo Castillo)
The fact that he gave money to his son to buy food for the picnic even without knowing where it
will be held, is a sign of consent for his son to join the same. Furthermore.
Testimony of Dr. Lazaro on cross examination:
Q How did you conduct this mental and physical examination?
A I have interviewed several persons and the patient herself She even felt guilty
about the death of her son because she cooked adobo for him so he could join
the excursion where her son died of drowning.
Q Why were you able to say she was feeling guilty because she was the one who
personally cooked the adobo for her son?
A It was during the interview that I had gathered it from the patient herself. She
was very sorry had she not allowed her son to join the excursion her son would
have not drowned. I don't know if she actually permitted her son although
she said she cooked adobo so he could join. (Emphasis Supplied) (TSN, p. 19,
hearing of April 30, 1984, Dr. Lazaro — witness).
Respondent Court of Appeals committed an error in applying Article 2180 of the Civil Code in
rendering petitioner school liable for the death of respondent's son.
Article 2180, par. 4 states that:
The obligation imposed by article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
Under this paragraph, it is clear that before an employer may be held liable for the negligence of
his employee, the act or omission which caused damage or prejudice must have occurred while
an employee was in the performance of his assigned tasks.
In the case at bar, the teachers/petitioners were not in the actual performance of their assigned
tasks. The incident happened not within the school premises, not on a school day and most
importantly while the teachers and students were holding a purely private affair, a picnic. It is
clear from the beginning that the incident happened while some members of the I-C class of St.
Francis High School were having a picnic at Talaan Beach. This picnic had no permit from the
school head or its principal, Benjamin Illumin because this picnic is not a school sanctioned
activity neither is it considered as an extra-curricular activity.
As earlier pointed out by the trial court, mere knowledge by petitioner/principal Illumin of the
planning of the picnic by the students and their teachers does not in any way or in any manner
show acquiescence or consent to the holding of the same. The application therefore of Article
2180 has no basis in law and neither is it supported by any jurisprudence. If we were to affirm the
findings of respondent Court on this score, employers wig forever be exposed to the risk and
danger of being hailed to Court to answer for the misdeeds or omissions of the employees even
if such act or omission he committed while they are not in the performance of their duties.
Finally, no negligence could be attributable to the petitioners-teachers to warrant the award of

damages to the respondents-spouses.
Petitioners Connie Arquio the class adviser of I-C, the section where Ferdinand belonged, did her
best and exercised diligence of a good father of a family to prevent any untoward incident or
damages to all the students who joined the picnic.
In fact, Connie invited co-petitioners Tirso de Chavez and Luisito Vinas who are both P.E.
instructors and scout masters who have knowledge in First Aid application and swimming.
Moreover, even respondents' witness, Segundo Vinas, testified that "the defendants (petitioners
herein) had life savers especially brought by the defendants in case of emergency." (p. 85, Rollo)
The records also show that both petitioners Chavez and Vinas did all what is humanly possible to
save the child.
Testimony of Luisito Vinas on cross examination,
Q And when you saw the boy, Ferdinand Castillo, you approached the boy and
claim also having applied first aid on him?
A Yes, sir.
Q And while you were applying the so called first aid, the children were covering
you up or were surrounding you?
A Yes, sir.
Q You were rattled at that time, is it not?
A No, sir.
Q You mean you were in calm and peaceful condition?
A Yes, sir.
Q Despite the fact that the boy was no longer responding to your application of
first aid?
A Yes, sir.
Q You have never been disturbed, "nababahala" in the process of your

application of the first aid on the body of Ferdinand Castillo?
A No, sir, because we were attending to the application of first aid that we were
doing, sir.
Q After you have applied back to back pressure and which you claimed the boy
did not respond, were you not disturb anyway?
A I was disturbed during that time, sir.
Q For how many minutes have you applied the back to back pressure?
A From 9 to 11 times, sir.
Q You mean 9 to 11 times of having applied the pressure of your body on the
body of Ferdinand Castillo?
A Yes, sir.
Q Will you please describe how you applied a single act of back to back
pressure?
A This has been done by placing the boy lay first downwards, then the face was a
little bit facing right and doing it by massaging the back of the child, sir." (TSN,
pp. 32-35, hearing of July 30, 1984)
Testimony of Tirso de Chavez on direct examination
ATTY. FLORES:
Q Who actually applied the first aid or artificial respiration to the child?
A Myself, sir.
Q How did you apply the first aid to the guy?
A The first step that I took, with the help of Mr. Luisito Vinas, was I applied back
to back pressure and took notice of the condition of the child. We placed the feet
in a higher position, that of the head of the child, sir.
Q After you have placed the boy in that particular position, where the feet were
on a higher level than that of the head, what did you do next?
A The first thing that we did, particularly myself, was that after putting the child in
that position, I applied the back to back pressure and started to massage from
the waistline up, but I noticed that the boy was not responding, sir.
Q For how long did you apply this back to back pressure on the boy?
A About 10 seconds, sir.
Q What about Mr. Vinas?
A Almost the same a little longer, for 15 seconds, sir.
Q After you noticed that the boy was not responding, what did you do?
A When we noticed that the boy was not responding, we changed the position of
the boy by placing the child facing upwards laying on the sand then we applied
the mouth to mouth resuscitation, sir. (pp. 92-93, Rollo)
With these facts in mind, no moral nor exemplary damages may be awarded in favor of
respondents-spouses. The case at bar does not fall under any of the grounds to grant moral
damages.
Art. 2217. Moral Damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury. Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant's wrongful act or omission.
Moreover, as already pointed out hereinabove, petitioners are not guilty of any fault or
negligence, hence, no moral damages can be assessed against them.
While it is true that respondents-spouses did give their consent to their son to join the picnic, this
does not mean that the petitioners were already relieved of their duty to observe the required
diligence of a good father of a family in ensuring the safety of the children. But in the case at bar,
petitioners were able to prove that they had exercised the required diligence. Hence, the claim
for moral or exemplary damages becomes baseless.
PREMISES CONSIDERED, the questioned decision dated November 19, 1987, finding
petitioners herein guilty of negligence and liable for the death of Ferdinand Castillo and awarding
the respondents damages, is hereby SET ASIDE insofar as the petitioners herein are concerned,
but the portion of the said decision dismissing their counterclaim, there being no merit, is hereby
AFFIRMED.
SO ORDERED
G.R. No. 152033 March 16, 2011
FILIPINAS SYNTHETIC FIBER CORPORATION, Petitioner,

vs.
WILFREDO DE LOS SANTOS, BENITO JOSE DE LOS SANTOS, MARIA ELENA DE LOS
SANTOS and CARMINA VDA. DE LOS SANTOS, Respondents.
DECISION
PERALTA, J.:
This Petition for Review under Rule 45 of the 1997 Rules of Civil Procedure assails the
Decision1 of the Court of Appeals (CA) dated August 15, 2001, affirming with modification, the
Decision2 dated February 14, 1994 of the Regional Trial Court (RTC), and the Resolution dated
January 29, 2002 of the CA, denying petitioner's Motion for Reconsideration.
This all stems from a case for damages filed against the petitioner and one of its employees. The
facts, as found by the RTC and the CA, are as follows:
On the night of September 30, 1984, Teresa Elena Legarda-de los Santos (Teresa Elena), the
wife of respondent Wilfredo de los Santos (Wilfredo), performed at the Rizal Theater in Makati
City, Metro Manila as a member of the cast for the musical play, Woman of the Year.
On that same night, at the request of Wilfredo, his brother Armando de los Santos (Armando),
husband of respondent Carmina Vda. de los Santos, went to the Rizal Theater to fetch Teresa
Elena after the latter's performance. He drove a 1980 Mitsubishi Galant Sigma (Galant Sigma)
with Plate No. NSL 559, a company car assigned to Wilfredo.
Two other members of the cast of Woman of the Year, namely, Annabel Vilches (Annabel) and
Jerome Macuja, joined Teresa Elena in the Galant Sigma.
Around 11:30 p.m., while travelling along the Katipunan Road (White Plains), the Galant Sigma
collided with the shuttle bus owned by petitioner and driven by Alfredo S. Mejia (Mejia), an
employee of petitioner. The Galant Sigma was dragged about 12 meters from the point of impact,
across the White Plains Road landing near the perimeter fence of Camp Aguinaldo, where the
Galant Sigma burst into flames and burned to death beyond recognition all four occupants of the
car.
A criminal charge for reckless imprudence resulting in damage to property with multiple homicide
was brought against Mejia, which was decided in favor of Mejia. The family of Annabel filed a
civil case against petitioner and Mejia docketed as Civil Case No. Q-51382, which was raffled to
Branch 82 of the RTC of Quezon City. Wilfredo and Carmina, joined by their minor children, also
filed separate actions for damages against petitioner and Mejia. The said cases were eventually
consolidated.
After trial on the merits, the RTC decided in favor of herein respondents. The dispositive portion
of the decision reads:
WHEREFORE, in view of the foregoing, this Court finds the herein plaintiffs in Civil Case Nos. Q-
44498 and Q-45602, namely Wilfredo de los Santos, et al. and Carmina Vda. de los Santos, et
al., respectively, to have duly proven their causes of action against Filipinas Synthetic Fiber
Corporation and Alfredo S. Mejia, defendants in both cases, thru preponderance of evidence,
hence, Judgment is hereby rendered ordering defendants, jointly and severally, to pay the herein
plaintiffs in Civil Case No. Q-44498, (1) for actual damages, ₱29,550.00, with interest thereon at
the legal rate until paid; (2) the amount of ₱4,769,525.00 as compensatory damages and
unrealized income of Teresa Elena, which is one-half of the amount of ₱9,539,050.00, taking into
consideration her status in life, and that during her lifetime she was not only spending for herself.
The latter's average expenses would either be more or less than one-half of her gross income for
the year; (3) ₱100,000.00 as moral damages to assuage the family of the deceased Teresa
Elena for the loss of a love one who was charred beyond recognition; and (4) attorney's fees of
₱150,000.00. As to exemplary damages, the same cannot be granted for the reason that no one
wanted this unfortunate accident to happen, which was a costly one.
For Civil Case No. Q-45602, the herein defendants are hereby ordered, jointly and severally, to
pay the plaintiffs (1) ₱20,550.00 for actual damages, with interest thereon at the legal rate until
the same is paid; (2) ₱444,555.00 as compensatory damages and unrealized income of the
deceased Armando de los Santos, for the same reason as the deceased Teresa Elena, who
during his lifetime, Armando was not only spending for himself; (3) ₱100,000.00 as moral
damages to assuage the loss of a love one who was burnt beyond recognition; and (4)
₱100,000.00 as attorney's fees. As to exemplary damages, the same could not be granted for
the same reason as that in Civil Case No. Q-44498.
SO ORDERED.
After the denial of the motion for reconsideration, petitioner appealed to the CA, and the latter
ruled:
WHEREFORE, the assailed February 14, 1994 Decision of the Regional Trial Court of Quezon
City, Branch 100 is AFFIRMED, subject to modification that in Civil Case No. Q-44498 the
compensatory damages and unrealized income of deceased Teresa Elena shall be
₱3,120,300.00, and in Civil Case No. Q-45602 the compensatory damages and unrealized
income of deceased Armando shall be ₱509,649.00.
SO ORDERED.
The subsequent motion for reconsideration was also denied. Hence, the present petition wherein
the petitioner assigned the following errors:
ASSIGNMENT OF ERRORS
I. THE HONORABLE COURT OF APPEALS ERRED IN FINDING THE PETITIONER

MEJIA NEGLIGENT, SUCH NOT BEING SUPPORTED BY THE EVIDENCE ON
RECORD.
II. THE HONORABLE COURT OF APPEALS' FINDING THAT PETITIONER FILSYN DID
NOT EXERCISE THE DUE DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE
SELECTION AND SUPERVISION OF ITS EMPLOYEES IS NOT SUPPORTED BY THE
EVIDENCE ON RECORD.
III. THE DAMAGES AWARDED BY THE HONORABLE COURT OF APPEALS IS NOT

IN ACCORD WITH THE EVIDENCE ON RECORD.
The respondents filed their Comment3 dated June 7, 2002, while the petitioner filed its
Reply4 dated January 29, 2003. Subsequently, their respective memoranda5 were filed.
The petition lacks merit.
Petitioner insists that the CA was not correct in ruling that Mejia was negligent. It argues that the
said conclusion was not derived from the evidence adduced during the trial, which, upon further
analysis, makes the nature of the issue presented to be factual.
Whether a person is negligent or not is a question of fact which this Court cannot pass upon in a
petition for review on certiorari, as its jurisdiction is limited to reviewing errors of law.6 As a rule,
factual findings of the trial court, affirmed by the CA, are final and conclusive and may not be
reviewed on appeal. The established exceptions are: (1) when the inference made is manifestly
mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) when the
findings are grounded entirely on speculations, surmises or conjectures; (4) when the judgment
of the CA is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6)
when the CA, in making its findings, went beyond the issues of the case and the same is contrary
to the admissions of both appellant and appellee; (7) when the findings of fact are conclusions
without citation of specific evidence on which they are based; (8) when the CA manifestly
overlooked certain relevant facts not disputed by the parties and which, if properly considered,
would justify a different conclusion; and (9) when the findings of fact of the CA are premised on
the absence of evidence and are contradicted by the evidence on record.7
Not falling under any of the exceptions enumerated above, this Court must defer to the findings
of the RTC and the CA.
Petitioner argues that the RTC admitted that De los Santos made a turn along White Plains Road
without exercising the necessary care which could have prevented the accident from happening.
It quoted the following portion of the RTC's decision:
The Court is convinced that defendant Mejia was running real fast along EDSA when he saw a
vehicle on the opposite side suddenly turn left towards White Plains.
According to petitioner, the sudden turn of the vehicle used by the victims should also be
considered as negligence on the part of the driver of that same vehicle, thus, mitigating, if not
absolving petitioner's liability. However, the said argument deserves scant consideration.
It was well established that Mejia was driving at a speed beyond the rate of speed required by
law, specifically Section 35 of Republic Act No. (RA) 4136.8 Given the circumstances, the
allowed rate of speed for Mejia's vehicle was 50 kilometers per hour, while the records show that
he was driving at the speed of 70 kilometers per hour. Under the New Civil Code,9 unless there is
proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at
the time of the mishap, he was violating any traffic regulation. Apparently, in the present case,
Mejia's violation of the traffic rules does not erase the presumption that he was the one negligent
at the time of the collision. Even apart from statutory regulations as to speed, a motorist is
nevertheless expected to exercise ordinary care and drive at a reasonable rate of speed
commensurate with all the conditions encountered10 which will enable him to keep the vehicle
under control and, whenever necessary, to put the vehicle to a full stop to avoid injury to others
using the highway.11 To suggest that De los Santos was equally negligent based on that sole
statement of the RTC is erroneous. The entire evidence presented must be considered as a
whole. Incidentally, a close reading of the ruling of the CA would clearly show the negligence of
Mejia. A portion of the decision reads:
A closer study of the Police Accident Report, Investigation Report and the sketch of the accident
would reveal nothing but that the shuttle bus was traveling at such a reckless speed that it
collided with the car bearing the deceased. The impact was such that the bus landed astride the
car, dragged the car across the right lane of White Plains Road, across the concrete island/flower
box in the center of White Plains Road, destroying the lamp post in the island until both vehicles
landed by the petitioner fence of Camp Aguinaldo.
From those evidence, borne out by the records, there was proof more than preponderant to
conclude that Mejia was traveling at an unlawful speed, hence, the negligent driver. We,
therefore, cannot find any error on the part of the trial court in concluding that he (Mejia) was
driving more than his claim of 70 kilometers per hour. Significantly, the claimed speed of Mejia is
still unlawful, considering that Section 35 of RA 4136 states that the maximum allowable speed
for trucks and buses must not exceed 50 kilometers per hour. We are, therefore, unpersuaded by
the defendants-appellants’ claim that it was the driver of [the] Galant Sigma who was negligent
by not observing Sections 42(d) and 43(c) of RA 4136-A. Second sentence of Section 42
provides that the driver of any vehicle traveling at any unlawful speed shall forfeit any right of way
which he might otherwise have. A person driving a vehicle is presumed negligent if at the time of
the mishap, he was violating a traffic regulation. The excessive speed employed by Mejia was
the proximate cause of the collision that led to the sudden death of Teresa Elena and Armando.
If the defendants-appellants truly believe that the accident was caused by the negligence of the
driver of the Galant Sigma, they should have presented Mejia to the witness stand. Being the
driver, Mejia would have been in the best position to establish their thesis that he was negligent
when the mishap happened. Under the RULES OF EVIDENCE (Section 3[e], Rule 131), such
suppression gives rise to the presumption that his testimony would have been adverse, if
presented. It must be stressed further that Mejia left the scene, not reporting the fatal accident to
the authorities neither did he wait for the police to arrive. He only resurfaced on the day after the
incident. This is a clear transgression of Section 55 of RA 4136-A which provides:
SEC. 55 Duty of driver in case of accident. - In the [event] that any accident should occur as a
result of the operation of a motor vehicle upon a highway, the driver shall stop immediately, and,
if requested by any person present, shall show his driver's license, give his true name and
address and also the true name and address of the owner of the motor vehicle.
No driver of a motor vehicle concerned in a vehicular accident shall leave the scene of the
accident without aiding the victim, except under any of the following circumstances:
1. If he is in imminent danger of being seriously harmed by any person or persons by

reason of the accident;
2. If he reports the accident to the nearest officer of the law; or
3. If he has to summon a physician or nurse to aid the victim.
xxxx
Equally untenable is the defendants-appellants contention that it would be impossible for the
shuttle bus which was traveling at 70 kilometers per hour to stop. In view of this assertion, we
quote with favor the statement of Justice Feliciano in the Kapalaran case that the law seeks to
stop and prevent the slaughter and maiming of people (whether passenger or not) and the
destruction of property (whether freight or not) on our highways by buses, the very size and
power of which seem often to inflame the minds of the drivers. To our mind, if a vehicle was
travelling in an allowable speed, its driver would not have a difficulty in applying the brakes.
Anent the second issue raised, petitioner insists that it exercised the due diligence of a good
father of a family in the selection and supervision of its employees. The RTC and the CA find
otherwise.
Under Article 218012 of the New Civil Code, when an injury is caused by the negligence of the
employee, there instantly arises a presumption of law that there was negligence on the part of
the master or employer either in the selection of the servant or employee, or in supervision over
him after selection or both. The liability of the employer under Article 2180 is direct and
immediate; it is not conditioned upon prior recourse against the negligent employee and a prior
showing of the insolvency of such employee. Therefore, it is incumbent upon the private
respondents (in this case, the petitioner) to prove that they exercised the diligence of a good
father of a family in the selection and supervision of their employee.13
Petitioner asserts that it had submitted and presented during trial, numerous documents in
support of its claim that it had exercised the proper diligence in both the selection and
supervision of its employees. Among those proofs are documents showing Mejia's proficiency
and physical examinations, as well as his NBI clearances. The Employee Staff Head of the
Human Resource Division of the petitioner also testified that Mejia was constantly under
supervision and was given daily operational briefings. Nevertheless, the RTC and the CA were
correct in finding those pieces of evidence presented by the petitioner insufficient.
In Manliclic v. Calaunan,14 this Court ruled that:
In the selection of prospective employees, employers are required to examine them as to their
qualifications, experience and service records. In the supervision of employees, the employer
must formulate standard operating procedures, monitor their implementation and impose
disciplinary measures for the breach thereof. To fend off vicarious liability, employers must
submit concrete proof, including documentary evidence, that they complied with everything that
was incumbent on them.
In Metro Manila Transit Corporation v. Court of Appeals, it was explained that:
Due diligence in the supervision of employees on the other hand, includes the formulation of
suitable rules and regulations for the guidance of employees and the issuance of proper
instructions intended for the protection of the public and persons with whom the employer has
relations through his or its employees and the imposition of necessary disciplinary measures
upon employees in case of breach or as may be warranted to ensure the performance of acts
indispensable to the business of and beneficial to their employer. To this, we add that actual
implementation and monitoring of consistent compliance with said rules should be the constant
concern of the employer, acting through dependable supervisors who should regularly report on
their supervisory functions.
In order that the defense of due diligence in the selection and supervision of employees may be
deemed sufficient and plausible, it is not enough to emptily invoke the existence of said company
guidelines and policies on hiring and supervision. As the negligence of the employee gives rise to
the presumption of negligence on the part of the employer, the latter has the burden of proving
that it has been diligent not only in the selection of employees but also in the actual supervision
of their work. The mere allegation of the existence of hiring procedures and supervisory policies,
without anything more, is decidedly not sufficient to overcome such presumption.
We emphatically reiterate our holding, as a warning to all employers, that "the formulation of
various company policies on safety without showing that they were being complied with is not
sufficient to exempt petitioner from liability arising from negligence of its employees. It is
incumbent upon petitioner to show that in recruiting and employing the erring driver the
recruitment procedures and company policies on efficiency and safety were followed." x x x.15
Applying the above ruling, the CA, therefore, committed no error in finding that the evidence
presented by petitioner is wanting. Thus, the CA ruled:
In the present case, Filsyn merely presented evidence on the alleged care it took in the selection
or hiring of Mejia way back in 1974 or ten years before the fatal accident. Neither did Filsyn
present any proof of the existence of the rules and regulations governing the conduct of its
employees. It is significant to note that in employing Mejia, who is not a high school graduate,
Filsyn waived its long-standing policy requirement of hiring only high school graduates. It
insufficiently failed to explain the reason for such waiver other than their allegation of Mejia's
maturity and skill for the job.
As revealed by the testimony of Rolando Landicho, Filsyn admitted that their shuttle buses were
used to ferry Filsyn's employees for three shifts. It failed to show whether or not Mejia was on
duty driving buses for all three shifts. On the other hand, the trial court found that Mejia, by the
different shifts would have been on the job for more than eight hours. Fylsin did not even
sufficiently prove that it exercised the required supervision of Mejia by ensuring rest periods,
particularly for its night shift drivers who are working on a time when most of us are usually taking
rest. As correctly argued by the plaintiffs-appellees, this is significant because the accident
happened at 11:30 p.m., when the shuttle bus was under the control of a driver having no
passenger at all. Despite, the lateness of the hour and the darkness of the surrounding area, the
bus was travelling at a speed of 70 kilometers per hour.
In view of the absence of sufficient proof of its exercise of due diligence, Filsyn cannot escape its
solidary liability as the owner of the wayward bus and the employer of the negligent driver of the
wayward bus. x x x
As to the amount of the damages awarded by the CA, petitioner claims that it is not in accord
with the evidence on record. It explained that the amounts used in computing for compensatory
damages were based mainly on the assertions of the respondents as to the amount of salary
being received by the two deceased at the time of their deaths. 1aw phil
This Court, in its ruling,16 expounded on the nature of compensatory damages, thus:
Under Article 2199 of the New Civil Code, actual damages include all the natural and probable
consequences of the act or omission complained of, classified as one for the loss of what a
person already possesses (daño emergente)and the other, for the failure to receive, as a benefit,
that which would have pertained to him (lucro cesante). As expostulated by the Court in PNOC
Shipping and Transport Corporation v. Court of Appeals:17
Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in
satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of
natural justice and are designed to repair the wrong that has been done, to compensate for the
injury inflicted and not to impose a penalty. In actions based on torts or quasi-delicts, actual
damages include all the natural and probable consequences of the act or omission complained
of. There are two kinds of actual or compensatory damages: one is the loss of what a person
already possesses (daño emergente), and the other is the failure to receive as a benefit that
which would have pertained to him (lucro cesante).18
The burden of proof is on the party who would be defeated if no evidence would be presented on
either side. The burden is to establish one’s case by a preponderance of evidence which means
that the evidence, as a whole, adduced by one side, is superior to that of the other. Actual
damages are not presumed. The claimant must prove the actual amount of loss with a
reasonable degree of certainty premised upon competent proof and on the best evidence
obtainable. Specific facts that could afford a basis for measuring whatever compensatory or
actual damages are borne must be pointed out. Actual damages cannot be anchored on mere
surmises, speculations or conjectures. As the Court declared:
As stated at the outset, to enable an injured party to recover actual or compensatory damages,
he is required to prove the actual amount of loss with reasonable degree of certainty premised
upon competent proof and on the best evidence available. The burden of proof is on the party
who would be defeated if no evidence would be presented on either side. He must establish his
case by a preponderance of evidence which means that the evidence, as a whole, adduced by
one side is superior to that of the other. In other words, damages cannot be presumed and
courts, in making an award, must point out specific facts that could afford a basis for measuring
whatever compensatory or actual damages are borne.19
The records show that the CA did not err in awarding the said amounts, nor was there any
mistake in its computation. The respondents were able to establish their case by a
preponderance of evidence. However, the petitioner is correct when it stated that the award of
₱100,000.00 as moral damages is excessive. Jurisprudence has set the amount to ₱50,000.00.20
WHEREFORE, the Petition for Review is hereby DENIED. Consequently, the Decision of the
Court of Appeals, dated August 15, 2001, is hereby AFFIRMED with the MODIFICATION that
the moral damages be reduced to ₱50,000.00.
SO ORDERED
G.R. No. 75112 August 17, 1992
FILAMER CHRISTIAN INSTITUTE, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity
as Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO
KAPUNAN, SR., respondents.
Bedona & Bedona Law Office for petitioner.
Rhodora G. Kapunan for private respondents.
GUTIERREZ, JR., J.:
The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the
decision rendered by this Court on October 16, 1990 (Filamer Christian Institute v. Court of
Appeals, 190 SCRA 477) reviewing the appellate court's conclusion that there exists an
employer-employee relationship between the petitioner and its co-defendant Funtecha. The
Court ruled that the petitioner is not liable for the injuries caused by Funtecha on the grounds that
the latter was not an authorized driver for whose acts the petitioner shall be directly and primarily
answerable, and that Funtecha was merely a working scholar who, under Section 14, Rule X,
Book III of the Rules and Regulations Implementing the Labor Code is not considered an
employee of the petitioner.
The private respondents assert that the circumstances obtaining in the present case call for the
application of Article 2180 of the Civil Code since Funtecha is no doubt an employee of the
petitioner. The private respondents maintain that under Article 2180 an injured party shall have
recourse against the servant as well as the petitioner for whom, at the time of the incident, the
servant was performing an act in furtherance of the interest and for the benefit of the petitioner.
Funtecha allegedly did not steal the school jeep nor use it for a joy ride without the knowledge of
the school authorities.
After a re-examination of the laws relevant to the facts found by the trial court and the appellate
court, the Court reconsiders its decision. We reinstate the Court of Appeals' decision penned by
the late Justice Desiderio Jurado and concurred in by Justices Jose C. Campos, Jr. and Serafin
E. Camilon. Applying Civil Code provisions, the appellate court affirmed the trial court decision
which ordered the payment of the P20,000.00 liability in the Zenith Insurance Corporation policy,
P10,000.00 moral damages, P4,000.00 litigation and actual expenses, and P3,000.00 attorney's
fees.
It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of
petitioner Filamer. He was, in relation to the school, an employee even if he was assigned to
clean the school premises for only two (2) hours in the morning of each school day.
Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed,
to take over the vehicle while the latter was on his way home one late afternoon. It is significant
to note that the place where Allan lives is also the house of his father, the school president,
Agustin Masa. Moreover, it is also the house where Funtecha was allowed free board while he
was a student of Filamer Christian Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a
sharp dangerous curb, and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79)
According to Allan's testimony, a fast moving truck with glaring lights nearly hit them so that they
had to swerve to the right to avoid a collision. Upon swerving, they heard a sound as if something
had bumped against the vehicle, but they did not stop to check. Actually, the Pinoy jeep swerved
towards the pedestrian, Potenciano Kapunan who was walking in his lane in the direction against
vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advise to swerve to the
right. (Ibid., p. 79) At the time of the incident (6:30 P.M.) in Roxas City, the jeep had only one
functioning headlight.
Allan testified that he was the driver and at the same time a security guard of the petitioner-
school. He further said that there was no specific time for him to be off-duty and that after driving
the students home at 5:00 in the afternoon, he still had to go back to school and then drive home
using the same vehicle.
Driving the vehicle to and from the house of the school president where both Allan and Funtecha
reside is an act in furtherance of the interest of the petitioner-school. Allan's job demands that he
drive home the school jeep so he can use it to fetch students in the morning of the next school
day.
It is indubitable under the circumstances that the school president had knowledge that the jeep
was routinely driven home for the said purpose. Moreover, it is not improbable that the school
president also had knowledge of Funtecha's possession of a student driver's license and his
desire to undergo driving lessons during the time that he was not in his classrooms.
In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha
definitely was not having a joy ride. Funtecha was not driving for the purpose of his enjoyment or
for a "frolic of his own" but ultimately, for the service for which the jeep was intended by the
petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80 ALR 722 [1932];
See also Association of Baptists for World Evangelism, Inc. v. Fieldmen's Insurance Co., Inc. 124
SCRA 618 [1983]). Therefore, the Court is constrained to conclude that the act of Funtecha in
taking over the steering wheel was one done for and in behalf of his employer for which act the
petitioner-school cannot deny any responsibility by arguing that it was done beyond the scope of
his janitorial duties. The clause "within the scope of their assigned tasks" for purposes of raising
the presumption of liability of an employer, includes any act done by an employee, in furtherance
of the interests of the employer or for the account of the employer at the time of the infliction of
the injury or damage. (Manuel Casada, 190 Va 906, 59 SE 2d 47 [1950]) Even if somehow, the
employee driving the vehicle derived some benefit from the act, the existence of a presumptive
liability of the employer is determined by answering the question of whether or not the servant
was at the time of the accident performing any act in furtherance of his master's business.
(Kohlman v. Hyland, 210 NW 643, 50 ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])
Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner
anchors its defense, was promulgated by the Secretary of Labor and Employment only for the
purpose of administering and enforcing the provisions of the Labor Code on conditions of
employment. Particularly, Rule X of Book III provides guidelines on the manner by which the
powers of the Labor Secretary shall be exercised; on what records should be kept; maintained
and preserved; on payroll; and on the exclusion of working scholars from, and inclusion of
resident physicians in the employment coverage as far as compliance with the substantive labor
provisions on working conditions, rest periods, and wages, is concerned.
In other words, Rule X is merely a guide to the enforcement of the substantive law on labor. The
Court, thus, makes the distinction and so holds that Section 14, Rule X, Book III of the Rules is
not the decisive law in a civil suit for damages instituted by an injured person during a vehicular
accident against a working student of a school and against the school itself.
The present case does not deal with a labor dispute on conditions of employment between an
alleged employee and an alleged employer. It invokes a claim brought by one for damages for
injury caused by the patently negligent acts of a person, against both doer-employee and his
employer. Hence, the reliance on the implementing rule on labor to disregard the primary liability
of an employer under Article 2180 of the Civil Code is misplaced. An implementing rule on labor
cannot be used by an employer as a shield to avoid liability under the substantive provisions of
the Civil Code.
There is evidence to show that there exists in the present case an extra-contractual obligation
arising from the negligence or reckless imprudence of a person "whose acts or omissions are
imputable, by a legal fiction, to other(s) who are in a position to exercise an absolute or limited
control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])
Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a
driver's position in order that the petitioner may be held responsible for his grossly negligent act,
it being sufficient that the act of driving at the time of the incident was for the benefit of the
petitioner. Hence, the fact that Funtecha was not the school driver or was not acting within the
scope of his janitorial duties does not relieve the petitioner of the burden of rebutting the
presumption juris tantum that there was negligence on its part either in the selection of a servant
or employee, or in the supervision over him. The petitioner has failed to show proof of its having
exercised the required diligence of a good father of a family over its employees Funtecha and
Allan.
The Court reiterates that supervision includes the formulation of suitable rules and regulations for
the guidance of its employees and the issuance of proper instructions intended for the protection
of the public and persons with whom the employer has relations through his employees. (Bahia
v. Litonjua and Leynes, supra, at p. 628; Phoenix Construction, v. Intermediate Appellate Court,
148 SCRA 353 [1987])
An employer is expected to impose upon its employees the necessary discipline called for in the
performance of any act indispensable to the business and beneficial to their employer.
In the present case, the petitioner has not shown that it has set forth such rules and guidelines as
would prohibit any one of its employees from taking control over its vehicles if one is not the
official driver or prohibiting the driver and son of the Filamer president from authorizing another
employee to drive the school vehicle. Furthermore, the petitioner has failed to prove that it had
imposed sanctions or warned its employees against the use of its vehicles by persons other than
the driver.
The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled
manner by which Funtecha drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768, 772
[1918]). In the absence of evidence that the petitioner had exercised the diligence of a good
father of a family in the supervision of its employees, the law imposes upon it the vicarious
liability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA 263 [1976]; Poblete v.
Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989]; Franco
v. Intermediate Appellate Court, 178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa,
179 SCRA 384 [1989]) The liability of the employer is, under Article 2180, primary and solidary.
However, the employer shall have recourse against the negligent employee for whatever
damages are paid to the heirs of the plaintiff.
It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party
defendant in the civil case for damages. This is quite understandable considering that as far as
the injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who was
the one driving the vehicle and presumably was one authorized by the school to drive. The
plaintiff and his heirs should not now be left to suffer without simultaneous recourse against the
petitioner for the consequent injury caused by a janitor doing a driving chore for the petitioner
even for a short while. For the purpose of recovering damages under the prevailing
circumstances, it is enough that the plaintiff and the private respondent heirs were able to
establish the existence of employer-employee relationship between Funtecha and petitioner
Filamer and the fact that Funtecha was engaged in an act not for an independent purpose of his
own but in furtherance of the business of his employer. A position of responsibility on the part of
the petitioner has thus been satisfactorily demonstrated.
WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby
GRANTED. The decision of the respondent appellate court affirming the trial court decision is
REINSTATED.
SO ORDERED
G.R. No. 116624 September 20, 1996
BALIWAG TRANSIT, INC., petitioner,

vs.
COURT OF APPEALS, DIVINA VDA. DE DIONISIO, for herself and in behalf of her minor
children MARK ANGELO and MA. LIZA, both surnamed DIONISIO, respondents.
BELLOSILLO, J.:
The wages earned by Mario Dionisio were the lifeblood of his family — his wife Divina and their
children Mark Angelo and Ma. Liza, both minors. A work-related disruption unfortunately abruptly
ended the means of livelihood of Mario prompting his defendant family to sue his employer and
co-employee for damages.
On 2 November 1990, at about 3:30 in the afternoon, petitioner's Baliwag Transit Bus No. 117
was driven by Juanito Fidel to its terminal on 2nd Avenue, Caloocan City, for repair of its brake
system. Juanito Fidel told mechanic Mario Dionisio to inform the headman about the matters so
that proper order to the mechanics could be made. Fidel then alighted from the bus and told the
gasman to fill up the gas tank.
Shortly after, Juanito Fidel returned to the bus and sat on the driver's seat. Suddenly the bus
moved; he felt something was hit. When he went down to investigate he saw Mario Dionisio lying
on the ground bleeding and convulsive, sandwiched between Bus No. 117 and another bus
parked thereat owned by the same petitioner. Fidel summoned his co-employees and they all
helped to extricate Mario Dionisio. They rushed him to St. Luke's Hospital in Quezon City. On 6
November 1990 however he expired as evidenced by his Certificate of Death issued 22
November 1990.
Thereafter a complaint for damages was lodged by private respondents Divina Vda. de Dionisio,
for herself and in behalf of her minor children Mark Angelo and Ma. Liza as heirs of the
deceased, before the Regional Trial Court of Quezon City. On 3 February 1993 the trial court
rendered a decision ordering petitioner Baliwag Transit, Inc., and its employee Juanito Fidel
jointly and severally to pay the heirs of Mario Dionisio the following amounts: P50,000.00 as
death indemnity, P10,000.00 as attorney's fees, P3,000.00 as funeral expenses, and costs of
suit.1
Private respondents appealed to the Court of Appeals which on 23 March 1994 rendered a
decision modifying the appealed judgment and ordering petitioners instead to pay jointly and
severally, P50,000.00 as death indemnity, P1,429,050.00 for loss of earning capacity, P3,000.00
for funeral expenses, P60,000.00 for moral damages, P30,000.00 for exemplary damages,
P50,000.00 for attorney's fees, plus the costs of suit2 On 8 August 1994 the motion to reconsider
the decision was denied.3 Hence, this petition.
Petitioners maintain that respondent Court of Appeals erred in affirming the appealed judgment
despite the contributory negligence of the deceased Mario Dionisio, i.e., in failing to take the
necessary precaution while doing repair work on the brake system of Bus No. 117, and that the
increase of the award of damages in unreasonable being unsupported by law and the evidence.
The petition must fail. The circumstances clearly show that the proximate cause of the death of
Mario Dionisio was the negligence of driver Juanito Fidel when he failed to take the necessary
precaution to prevent the accident. He boarded his bus, sat on the driver's seat and was at the
steering wheel when the bus moved pinning down the deceased who was repairing the defective
brake system below. Driver Fidel should have parked the bus properly and safely. After alighting
from the bus to tell the gasman to fill the tank, he should have placed a stopper or any hard
object against a tire or two of the bus. But without taking the necessary precaution he boarded
Bus No. 117 causing it to move and roll, pinning down the deceased which resulted in his serious
injuries and eventual death. The reckless imprudence of Juanito Fidel makes him liable to the
heirs of offended party for damages together with his employer. Article 2176 of the Civil Code
provides —
Whoever by act or omission causes damage to another, there being fault or

negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter.
Complementing Art 2176 is Art. 2180 which states —
or omissions, but also for those of persons for whom one is responsible . . .
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry . . .
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family
to prevent damage.
Article 2180, in relation to Art. 2176, of the Civil Code provides that the employer of a negligent
employee is liable for the damages caused by the latter. When an injury is caused by the
negligence of an employee there instantly arises a presumption of the law that there was
negligence on the part of the employer either in the selection of his employee or in the selection
of his employee or in the supervision over him after such selection. The presumption however
may be rebutted by a clear showing on the part of the employer that it had exercised the care
and diligence of a good father of a family in the selection and supervision of his employee.
Hence, to escape solidary liability for quasi-delict committed by an employee, the employer must
adduce sufficient proof that it exercised such degree of care.4 Petitioner's failure to prove that it
exercised the due diligence of a good father of a family in the selection and supervision of its
driver Juanito Fidel will make it solidarily liable with the latter for damages caused by him.
As regards the reasonableness of the damages awarded, under Art. 1764, in conjunction with
Art. 2206, of the Civil Code, as well as established jurisprudence, several factors are considered,
namely: (a) life expectancy (considering the health of the deceased and the mortality table being
deemed conclusive) and loss of earning capacity; (b) pecuniary loss, loss of support and service;
and (c) moral and mental sufferings. The loss of earnings capacity is based mainly on two
factors, namely, the number of years on the basis of which the damages shall be computed, and
the rate at which the loss sustained by the heirs should be fixed.5
Finding discrepancies in the computation of respondent Court of Appeals, we here opine that the
correct computation of the loss of earning capacity of the deceased, considering that he was the
sole bread-winner of the family and only 29 years old when he met his untimely death, should be
based on the formula: 2/3 x 51 (80 - 29 [age at time of death]) = life expectancy. Thus —
P33,273.60 — gross annual income (P2,772.80 x 12 mos.)

Add: 4,244.64 — gross annual allowance (P353.72 x 12 mos.)
3,199.00 — 13th month pay
P40,717.24 — total annual income
Less: 6,000.00 — annual expenses (P500.00 x 12 mos.)
13,776.00 — annual pension (P1,148.00 x 12 mos.)
P20,941.24 — total annual net income
Multiply: 34 — life expectancy of Mario (2/3 x 51 [80 -29
{age at date of death}])
P712,002.16 — total loss of earning capacity
Article 2206 grants the spouse, legitimate descendants and ascendants of the deceased moral
damages for mental anguish by reason of death. Indisputably, the heirs of Mario suffered no
small amount of mental anguish brought about by the manner he died and bearing in mind that
he was the sole breadwinner of the family.
Article 2231 also awards exemplary damages if the defendant acted with gross negligence, as
Juanito did, when he moved Bus No. 117 without first ascertaining if the repair of its break
system was already undertaken. Exemplary damages having been awarded, recovery of
attorney's fees follows under Art. 2208, par. (1), of the Civil Code.
WHEREFORE, the decision and resolution of respondent Court of Appeals subject of the instant
petition are MODIFIED as follows: petitioner BALIWAG TRANSIT INC., and JUANITO FIDEL are
ordered to pay jointly and severally the heirs of Mario Dionisio (a) P50,000.00 for death
indemnity, (b) P712,002.16 for loss of earning capacity, (c) P3,000.00 for funeral expenses, (d)
P40,000.00 for moral damages, (e) P15,000.00 for exemplary damages (f) P20,000.00 for
attorney's fees, and, (g) to pay the costs of suit.
SO ORDERED
G.R. No. 158995 September 26, 2006
L.G. FOODS CORPORATION and VICTORINO GABOR, Vice-President and General

Manager, petitioners,
vs.
HON. PHILADELFA B. PAGAPONG-AGRAVIADOR, in her capacity as Presiding Judge of
Regional Trial Court, Branch 43, Bacolod City, and SPS. FLORENTINO and THERESA
VALLEJERA, respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this petition for review on certiorari is the Decision1 dated
April 25, 2003 of the Court of Appeals (CA), as reiterated in its Resolution of July 10,
2003,2 in CA-G.R. SP No. 67600, affirming an earlier Order of the Regional Trial Court (RTC) of
Bacolod City, Branch 43, which denied the petitioners' motion to dismiss in Civil Case No. 99-
10845, an action for damages arising from a vehicular accident thereat instituted by the herein
private respondents - the spouses Florentino Vallejera and Theresa Vallejera - against the
petitioners.
The antecedent facts may be briefly stated as follows:
On February 26, 1996, Charles Vallereja, a 7-year old son of the spouses Florentino Vallejera
and Theresa Vallejera, was hit by a Ford Fiera van owned by the petitioners and driven at the
time by their employee, Vincent Norman Yeneza y Ferrer. Charles died as a result of the
accident.
In time, an Information for Reckless Imprudence Resulting to Homicide was filed against the
driver before the Municipal Trial Court in Cities (MTCC), Bacolod City, docketed as Criminal
Case No. 67787, entitled People of the Philippines v. Vincent Norman Yeneza.
Unfortunately, before the trial could be concluded, the accused driver committed suicide,
evidently bothered by conscience and remorse. On account thereof, the MTCC, in its order of
September 30, 1998, dismissed the criminal case.
On June 23, 1999, in the RTC of Bacolod City, the spouses Vallejera filed a complaint3 for
damages against the petitioners as employers of the deceased driver, basically alleging that as
such employers, they failed to exercise due diligence in the selection and supervision of their
employees. Thereat docketed as Civil Case No. 99-10845, the complaint was raffled to Branch
43 of the court.
In their Answer with Compulsory Counterclaim,4 the petitioners as defendants denied liability for
the death of the Vallejeras' 7-year old son, claiming that they had exercised the required due
diligence in the selection and supervision of their employees, including the deceased driver. They
thus prayed in their Answer for the dismissal of the complaint for lack of cause of action on the
part of the Vallejera couple.
During pre-trial, the defendant petitioners insisted that their dismissal prayer be resolved. Hence,
the trial court required them to file within ten days a memorandum of authorities supportive of
their position.
Instead, however, of the required memorandum of authorities, the defendant petitioners filed
a Motion to Dismiss, principally arguing that the complaint is basically a "claim for subsidiary
liability against an employer" under the provision of Article 1035 of the Revised Penal Code.
Prescinding therefrom, they contend that there must first be a judgment of conviction against
their driver as a condition sine qua non to hold them liable. Ergo, since the driver died during the
pendency of the criminal action, the sine qua non condition for their subsidiary liability was not
fulfilled, hence the of lack of cause of action on the part of the plaintiffs. They further argue that
since the plaintiffs did not make a reservation to institute a separate action for damages when the
criminal case was filed, the damage suit in question is thereby deemed instituted with the
criminal action. which was already dismissed.
In an Order dated September 4, 2001,6 the trial court denied the motion to dismiss for lack of
merit and set the case for pre-trial. With their motion for reconsideration having been denied by
the same court in its subsequent order7 of September 26, 2001, the petitioners then went
on certiorari to the CA in CA-G.R. SP No. 67600, imputing grave abuse of discretion on the part
of the trial judge in refusing to dismiss the basic complaint for damages in Civil Case No. 99-
10845.
In the herein assailed decision8 dated April 25, 2003, the CA denied the petition and upheld the
trial court. Partly says the CA in its challenged issuance:
xxx xxx xxx
It is clear that the complaint neither represents nor implies that the responsibility charged
was the petitioner's subsidiary liability under Art. 103, Revised Penal Code. As pointed
out [by the trial court] in the Order of September 4, 2001, the complaint does not even
allege the basic elements for such a liability, like the conviction of the accused employee
and his insolvency. Truly enough, a civil action to enforce subsidiary liability separate and
distinct from the criminal action is even unnecessary.
xxx xxx xxx
Specifically, Civil Case No. 99-10845 exacts responsibility for fault or negligence under
Art. 2176, Civil Code, which is entirely separate and distinct from the civil liability arising
from negligence under the Revised Penal Code. Verily, therefore, the liability under Art.
2180, Civil Code, is direct and immediate, and not conditioned upon prior recourse
against the negligent employee or prior showing of the latter's insolvency. (Underscoring
in the original.)
In time, the petitioners moved for a reconsideration but their motion was denied by the CA in its
resolution9 of July 10, 2003. Hence, the petitioners' present recourse on their submission that the
appellate court committed reversible error in upholding the trial court's denial of their motion to
dismiss.
We DENY.
As the Court sees it, the sole issue for resolution is whether the spouses Vallejeras' cause of
action in Civil Case No. 99-10845 is founded on Article 103 of the Revised Penal Code, as
maintained by the petitioners, or derived from Article 218010 of the Civil Code, as ruled by the two
courts below.
It thus behooves us to examine the allegations of the complaint for damages in Civil Case No.
99-10845. That complaint alleged, inter alia, as follows:
xxx xxx xxx

3. That defendant [LG Food Corporation] is the registered owner of a Ford Fiera Van with
Plate No. NMS 881 and employer sometime February of 1996 of one Vincent Norman
Yeneza y Ferrer, a salesman of said corporation;
4. That sometime February 26, 1996 at around 2:00 P.M. at Rosario St., Bacolod City,
the minor son of said plaintiffs [now respondents], Charles Vallejera, 7 years old, was hit
and bumped by above-described vehicle then driven by said employee, Vincent Norman
Yeneza y Ferrer;
5. That the mishap was due to the gross fault and negligence of defendant's employee,
who drove said vehicle, recklessly, negligently and at a high speed without regard to
traffic condition and safety of other road users and likewise to the fault and negligence of
the owner employer, herein defendants LG Food Corporation who failed to exercise due
diligence in the selection and supervision of his employee, Vincent Norman Yeneza y
Ferrer;
6. That as a result of said incident, plaintiffs' son suffered multiple body injuries which led
to his untimely demise on that very day;
7. That a criminal case was filed against the defendant's employee, docketed as Criminal
Case No. 67787, (earlier filed as Crim. Case No. 96-17570 before RTC) before MTC-
Branch III, entitled "People v. Yeneza" for "Reckless Imprudence resulting to Homicide,"
but the same was dismissed because pending litigation, then remorse-stricken [accused]
committed suicide;
xxx xxx xxx
8. That the injuries and complications as well as the resultant death suffered by the late
minor Charles Vallejera were due to the negligence and imprudence of defendant's
employee;
9. That defendant LG Foods Corporation is civilly liable for the

negligence/imprudence of its employee since it failed to exercise the necessary
diligence required of a good father of the family in the selection and supervision of
his employee, Vincent Norman Yeneza y Ferrer which diligence if exercised, would
have prevented said incident. (Bracketed words and emphasis ours.)
Nothing in the foregoing allegations suggests, even remotely, that the herein petitioners are
being made to account for their subsidiary liability under Article 103 of the Revised Penal Code.
As correctly pointed out by the trial court in its order of September 4, 2001 denying the
petitioners' Motion to Dismiss, the complaint did not even aver the basic elements for the
subsidiary liability of an employer under Article 103 of the Revised Penal Code, such as the prior
conviction of the driver in the criminal case filed against him nor his insolvency.
Admittedly, the complaint did not explicitly state that plaintiff Vallejeras were suing the defendant
petitioners for damages based on quasi-delict. Clear it is, however, from the allegations of the
complaint that quasi-delict was their choice of remedy against the petitioners. To stress, the
plaintiff spouses alleged in their complaint gross fault and negligence on the part of the driver
and the failure of the petitioners, as employers, to exercise due diligence in the selection and
supervision of their employees. The spouses further alleged that the petitioners are civilly liable
for the negligence/imprudence of their driver since they failed to exercise the necessary diligence
required of a good father of the family in the selection and supervision of their employees, which
diligence, if exercised, could have prevented the vehicular accident that resulted to the death of
their 7-year old son.
Section 2, Rule 2, of the 1997 Rules of Civil Procedure defines cause of action as the "act or
omission by which a party violates the right of another." Such act or omission gives rise to an
obligation which may come from law, contracts, quasi contracts, delicts or quasi-delicts.11
Corollarily, an act or omission causing damage to another may give rise to two separate civil
liabilities on the part of the offender, i.e., 1) civil liability ex delicto;12 and 2) independent civil
liabilities, such as those (a) not arising from an act or omission complained of as felony (e.g.,
culpa contractual or obligations arising from law;13 the intentional torts;14 and culpa aquiliana15); or
(b) where the injured party is granted a right to file an action independent and distinct from the
criminal action.16 Either of these two possible liabilities may be enforced against the offender.17
Stated otherwise, victims of negligence or their heirs have a choice between an action to enforce
the civil liability arising from culpa criminal under Article 100 of the Revised Penal Code, and an
action for quasi-delict (culpa aquiliana) under Articles 2176 to 2194 of the Civil Code. If, as here,
the action chosen is for quasi-delict, the plaintiff may hold the employer liable for the negligent
act of its employee, subject to the employer's defense of exercise of the diligence of a good
father of the family. On the other hand, if the action chosen is for culpa criminal, the plaintiff can
hold the employer subsidiarily liable only upon proof of prior conviction of its employee.18
Article 116119 of the Civil Code provides that civil obligation arising from criminal offenses shall
be governed by penal laws subject to the provision of Article 217720 and of the pertinent provision
of Chapter 2, Preliminary Title on Human Relation, and of Title XVIII of this Book, regulating
damages. Plainly, Article 2177 provides for the alternative remedies the plaintiff may choose from
in case the obligation has the possibility of arising indirectly from the delict/crime or directly
from quasi-delict/tort. The choice is with the plaintiff who makes known his cause of action in his
initiatory pleading or complaint,21 and not with the defendant who can not ask for the dismissal of
the plaintiff's cause of action or lack of it based on the defendant's perception that the plaintiff
should have opted to file a claim under Article 103 of the Revised Penal Code.
Under Article 2180 of the Civil Code, the liability of the employer is direct or immediate. It is not
conditioned upon prior recourse against the negligent employee and a prior showing of
insolvency of such employee.22
Here, the complaint sufficiently alleged that the death of the couple's minor son was caused by
the negligent act of the petitioners' driver; and that the petitioners themselves were civilly liable
for the negligence of their driver for failing "to exercise the necessary diligence required of a
good father of the family in the selection and supervision of [their] employee, the driver, which
diligence, if exercised, would have prevented said accident."
Had the respondent spouses elected to sue the petitioners based on Article 103 of the Revised
Penal Code, they would have alleged that the guilt of the driver had been proven beyond
reasonable doubt; that such accused driver is insolvent; that it is the subsidiary liability of the
defendant petitioners as employers to pay for the damage done by their employee (driver) based
on the principle that every person criminally liable is also civilly liable.23 Since there was no
conviction in the criminal case against the driver, precisely because death intervened prior to the
termination of the criminal proceedings, the spouses' recourse was, therefore, to sue the
petitioners for their direct and primary liability based on quasi-delict.
Besides, it is worthy to note that the petitioners, in their Answer with Compulsory Counter-
Claim,24 repeatedly made mention of Article 2180 of the Civil Code and anchored their defense
on their allegation that "they had exercised due diligence in the selection and supervision of
[their] employees." The Court views this defense as an admission that indeed the petitioners
acknowledged the private respondents' cause of action as one for quasi-delict under Article 2180
of the Civil Code.
All told, Civil Case No. 99-10845 is a negligence suit brought under Article 2176 - Civil Code to
recover damages primarily from the petitioners as employers responsible for their negligent
driver pursuant to Article 2180 of the Civil Code. The obligation imposed by Article 2176 is
demandable not only for one's own acts or omissions, but also for those of persons for whom
one is responsible. Thus, the employer is liable for damages caused by his employees and
household helpers acting within the scope of their assigned tasks, even though the former is not
engaged in any business or industry.
Citing Maniago v. CA,25 petitioner would argue that Civil Case No. 99-10845 should have been
dismissed for failure of the respondent spouses to make a reservation to institute a separate civil
action for damages when the criminal case against the driver was filed.
The argument is specious.
To start with, the petitioners' reliance on Maniago is obviously misplaced. There, the civil case
was filed while the criminal case against the employee was still pending. Here, the criminal case
against the employee driver was prematurely terminated due to his death. Precisely, Civil Case
No. 99-10845 was filed by the respondent spouses because no remedy can be obtained by them
against the petitioners with the dismissal of the criminal case against their driver during the
pendency thereof.
The circumstance that no reservation to institute a separate civil action for damages was made
when the criminal case was filed is of no moment for the simple reason that the criminal case
was dismissed without any pronouncement having been made therein. In reality, therefor, it is as
if there was no criminal case to speak of in the first place. And for the petitioners to insist for the
conviction of their driver as a condition sine qua non to hold them liable for damages is to ask for
the impossible.
IN VIEW WHEREOF, the instant petition is DENIED for lack of merit.
Costs against the petitioners.
SO ORDERED
G.R. No. 82318 May 18, 1989
GILBERTO M. DUAVIT, petitioner,

vs.
THE HON. COURT OF APPEALS, Acting through the Third Division, as Public
Respondent, and ANTONIO SARMIENTO, SR. & VIRGILIO CATUAR respondents.
Rodolfo d. Dela Cruz for petitioner.
Bito, Lozada, Ortega & Castillo for respondents.
GUTIERREZ, JR., J.:
This petition raises the sole issue of whether or not the owner of a private vehicle which figured
in an accident can be held liable under Article 2180 of the Civil Code when the said vehicle was
neither driven by an employee of the owner nor taken with the consent of the latter.
The facts are summarized in the contested decision, as follows:
From the evidence adduced by the plaintiffs, consisting of the testimonies of

witnesses Virgilio Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and
Norberto Bernarte it appears that on July 28, 1971 plaintiffs Antonio Sarmiento,
Sr. and Virgilio Catuar were aboard a jeep with plate number 77-99-F-I Manila,
1971, owned by plaintiff, Ruperto Catuar was driving the said jeep on Ortigas
Avenue, San Juan, Rizal; that plaintiff's jeep, at the time, was running moderately
at 20 to 35 kilometers per hour and while approaching Roosevelt Avenue, Virgilio
Catuar slowed down; that suddenly, another jeep with plate number 99-97-F-J
Manila 1971 driven by defendant Oscar Sabiniano hit and bumped plaintiff's jeep
on the portion near the left rear wheel, and as a result of the impact plaintiff's jeep
fell on its right and skidded by about 30 yards; that as a result plaintiffs jeep was
damaged, particularly the windshield, the differential, the part near the left rear
wheel and the top cover of the jeep; that plaintiff Virgilio Catuar was thrown to the
middle of the road; his wrist was broken and he sustained contusions on the
head; that likewise plaintiff Antonio Sarmiento, Sr. was trapped inside the fallen
jeep, and one of his legs was fractured.
Evidence also shows that the plaintiff Virgilio Catuar spent a total of P2,464.00 for
repairs of the jeep, as shown by the receipts of payment of labor and spare parts
(Exhs. H to H-7 Plaintiffs likewise tried to prove that plaintiff Virgilio Catuar,
immediately after the accident was taken to Immaculate Concepcion Hospital,
and then was transferred to the National Orthopedic Hospital; that while plaintiff
Catuar was not confined in the hospital, his wrist was in a plaster cast for a period
of one month, and the contusions on his head were under treatment for about two
(2) weeks; that for hospitalization, medicine and allied expenses, plaintiff Catuar
spent P5,000.00.
Evidence also shows that as a result of the incident, plaintiff Antonio Sarmiento,
Sr. sustained injuries on his leg; that at first, he was taken to the National
Orthopedic Hospital (Exh. K but later he was confined at the Makati Medical
Center from July 29, to August 29, 1971 and then from September 15 to 25,
1971; that his leg was in a plaster cast for a period of eight (8) months; and that
for hospitalization and medical attendance, plaintiff Antonio Sarmiento, Sr. spent
no less than P13,785.25 as evidenced by receipts in his possession. (Exhs. N to
N-1).
Proofs were adduced also to show that plaintiff Antonio sarmiento Sr. is
employed as Assistant Accountant of the Canlubang Sugar Estate with a salary
of P1,200.00 a month; that as sideline he also works as accountant of United
Haulers Inc. with a salary of P500.00 a month; and that as a result of this
incident, plaintiff Sarmiento was unable to perform his normal work for a period of
at least 8 months. On the other hand, evidence shows that the other plaintiff
Virgilio Catuar is a Chief Clerk in Canlubang Sugar Estate with a salary of
P500.00 a month, and as a result of the incident, he was incapacitated to work for
a period of one (1) month.
The plaintiffs have filed this case both against Oscar Sabiniano as driver, and
against Gualberto Duavit as owner of the jeep.
Defendant Gualberto Duavit, while admitting ownership of the other jeep (Plate
No. 99-07-F-J Manila, 1971), denied that the other defendant (Oscar Sabiniano)
was his employee. Duavit claimed that he has not been an employer of defendant
Oscar Sabiniano at any time up to the present.
On the other hand documentary and testimonial evidence show that defendant
Oscar Sabiniano was an employee of the Board of Liquidators from November
14, 1966 up to January 4, 1973 (Annex A of Answer).
Defendant Sabiniano, in his testimony, categorically admitted that he took the

jeep from the garage of defendant Duavit without the consent or authority of the
latter (TSN, September 7, 1978, p. 8). He testified further, that Duavit even filed
charges against him for theft of the jeep, but which Duavit did not push through
as his (Sabiniano's) parents apologized to Duavit on his behalf.
Defendant Oscar Sabiniano, on the other hand in an attempt to exculpate himself

from liability, makes it appear that he was taking all necessary precaution while
driving and the accident occurred due to the negligence of Virgilio Catuar.
Sabiniano claims that it was plaintiffs vehicle which hit and bumped their jeep.
(Reno, pp. 21-23)
The trial court found Oscar Sabiniano negligent in driving the vehicle but found no employer-
employee relationship between him and the petitioner because the latter was then a government
employee and he took the vehicle without the authority and consent of the owner. The petitioner
was, thus, absolved from liability under Article 2180 of the Civil Code.
The private respondents appealed the case.
On January 7, 1988, the Court of Appeals rendered the questioned decision holding the
petitioner jointly and severally liable with Sabiniano. The appellate court in part ruled:
We cannot go along with appellee's argument. It will be seen that in Vargas v.

Langcay, supra, it was held that it is immaterial whether or not the driver was
actually employed by the operator of record or registered owner, and it is even
not necessary to prove who the actual owner of the vehicle and who the
employer of the driver is. When the Supreme Court ruled, thus: 'We must hold
and consider such owner-operator of record (registered owner) as the employer
in contemplation of law, of the driver,' it cannot be construed other than that the
registered owner is the employer of the driver in contemplation of law. It is a
conclusive presumption of fact and law, and is not subject to rebuttal of proof to
the contrary. Otherwise, as stated in the decision, we quote:
The purpose of the principles evolved by the decisions in these matters will be
defeated and thwarted if we entertain the argument of petitioner that she is not
liable because the actual owner and employer was established by the evidence. .
..
Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed to prove that
the driver Sabiniano was not his employee at the time of the vehicular accident.
The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by this Court to
the effect that the burden of proving the non-existence of an employer-employee
relationship is upon the defendant and this he must do by a satisfactory
preponderance of evidence, has to defer to the doctrines evolved by the
Supreme Court in cases of damages arising from vehicular mishaps involving
registered motor vehicle. (See Tugade v. Court of Appeals, 85 SCRA 226, 230).
(Rollo, pp. 26-27)
The appellate court also denied the petitioner's motion for reconsideration. Hence, this petition.
The petitioner contends that the respondent appellate court committed grave abuse of discretion
in holding him jointly and severally liable with Sabiniano in spite of the absence of an employer-
employee relationship between them and despite the fact that the petitioner's jeep was taken out
of his garage and was driven by Sabiniano without his consent.
As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable for an
accident involving the said vehicle if the same was driven without his consent or knowledge and
by a person not employed by him. Thus, in Duquillo v. Bayot (67 Phil. 131-133-134) [1939] we
said:
Under the facts established, the defendant cannot be held liable for anything. At
the time of the accident, James McGurk was driving the truck, and he was not an
employee of the defendant, nor did he have anything to do with the latter's
business; neither the defendant nor Father Ayson, who was in charge of her
business, consented to have any of her trucks driven on the day of the accident,
as it was a holy day, and much less by a chauffeur who was not in charge of
driving it; the use of the defendant's truck in the circumstances indicated was
done without her consent or knowledge; it may, therefore, be said, that there was
not the remotest contractual relation between the deceased Pio Duquillo and the
defendant. It necessarily follows from all this that articles 1101 and following of
the Civil Code, cited by the appellant, have no application in this case, and,
therefore, the errors attributed to the inferior court are without basis.
The Court upholds the above ruling as still relevant and better applicable to present day
circumstances.
The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. 103 [1957]
and Vargas v. Langcay (6 SCRA 174 [1962]) cannot be sustained. In the Erezo case, Jepte, the
registered owner of the truck which collided with a taxicab, and which resulted in the killing of
Erezo, claimed that at the time of the accident, the truck belonged to the Port Brokerage in an
arrangement with the corporation but the same was not known to the Motor Vehicles Office. This
Court sustained the trial court's ruling that since Jepte represented himself to be the owner of the
truck and the Motor Vehicles Office, relying on his representation, registered the vehicle in his
name, the Government and all persons affected by the representation had the right to rely on his
declaration of ownership and registration. Thus, even if Jepte were not the owner of the truck at
the time of the accident, he was still held liable for the death of Erezo significantly, the driver of
the truck was fully authorized to drive it.
Likewise, in the Vargas case, just before the accident occurred Vargas had sold her jeepney to a
third person, so that at the time of the accident she was no longer the owner of the jeepney. This
court, nevertheless, affirmed Vargas' liability since she failed to surrender to the Motor Vehicles
Office the corresponding AC plates in violation of the Revised Motor Vehicle Law and
Commonwealth Act No. 146. We further ruled that the operator of record continues to be the
operator of the vehicle in contemplation of law, as regards the public and third persons, and as
such is responsible for the consequences incident to its operator. The vehicle involved was a
public utility jeepney for hire. In such cases, the law does not only require the surrender of the
AC plates but orders the vendor operator to stop the operation of the jeepney as a form of public
transportation until the matter is reported to the authorities.
As can be seen, the circumstances of the above cases are entirely different from those in the
present case. Herein petitioner does not deny ownership of the vehicle involved in tire mishap
but completely denies having employed the driver Sabiniano or even having authorized the latter
to drive his jeep. The jeep was virtually stolen from the petitioner's garage. To hold, therefore, the
petitioner liable for the accident caused by the negligence of Sabiniano who was neither his
driver nor employee would be absurd as it would be like holding liable the owner of a stolen
vehicle for an accident caused by the person who stole such vehicle. In this regard, we cannot
ignore the many cases of vehicles forcibly taken from their owners at gunpoint or stolen from
garages and parking areas and the instances of service station attendants or mechanics of auto
repair shops using, without the owner's consent, vehicles entrusted to them for servicing or
repair.
We cannot blindly apply absolute rules based on precedents whose facts do not jibe four square
with pending cases. Every case must be determined on its own peculiar factual circumstances.
Where, as in this case, the records of the petition fail to indicate the slightest indicia of an
employer-employee relationship between the owner and the erring driver or any consent given by
the owner for the vehicle's use, we cannot hold the owner liable.
We, therefore, find that the respondent appellate court committed reversible error in holding the
petitioner jointly and severally liable with Sabiniano to the private respondent.
WHEREFORE, the petition is GRANTED and the decision and resolution appealed from are
hereby ANNULLED and SET ASIDE. The decision of the then Court of First Instance (now
Regional Trial Court) of Laguna, 8th Judicial District, Branch 6, dated July 30, 1981 is
REINSTATED.
SO ORDERED
G.R. No. 161946 November 14, 2008
MEDARDO AG. CADIENTE, petitioner,

vs.
BITHUEL MACAS, respondent.
DECISION
QUISUMBING, Acting C.J.:
For review on certiorari are the Decision1 dated September 16, 2002 and the Resolution2 dated
December 18, 2003 of the Court of Appeals in CA-G.R. CV No. 64103, which affirmed the
Decision3 of the Regional Trial Court (RTC) of Davao City, Branch 10, in Civil Case No. 23,723-95.
The facts are undisputed.
Eyewitness Rosalinda Palero testified that on July 19, 1994, at about 4:00 p.m., at the intersection of
Buhangin and San Vicente Streets in Davao City, 15-year old high school student Bithuel Macas,
herein respondent, was standing on the shoulder of the road. She was about two and a half meters
away from the respondent when he was bumped and run over by a Ford Fiera, driven by Chona C.
Cimafranca. Rosalinda and another unidentified person immediately came to the respondent's rescue
and told Cimafranca to take the victim to the hospital. Cimafranca rushed the respondent to the
Davao Medical Center.
Dr. Hilario Diaz, the orthopedic surgeon who attended to the respondent, testified that the respondent
suffered severe muscular and major vessel injuries, as well as open bone fractures in both thighs and
other parts of his legs. In order to save his life, the surgeon had to amputate both legs up to the
groins.4
Cimafranca had since absconded and disappeared. Records showed that the Ford Fiera was
registered in the name of herein petitioner, Atty. Medardo Ag. Cadiente. However, Cadiente claimed
that when the accident happened, he was no longer the owner of the Ford Fiera. He alleged that he
sold the vehicle to Engr. Rogelio Jalipa on March 28, 1994,5 and turned over the Certificate of
Registration and Official Receipt to Jalipa, with the understanding that the latter would be the one to
cause the transfer of the registration.
The victim's father, Samuel Macas, filed a complaint6 for torts and damages against Cimafranca and
Cadiente before the RTC of Davao City, Branch 10. Cadiente later filed a third-party
complaint7 against Jalipa.
In answer, Jalipa claimed that he was no longer the owner of the Ford Fiera at the time of the
accident. He alleged that he sold the vehicle to Abraham Abubakar on June 20, 1994. 8 He thus filed a
fourth-party complaint9 against Abubakar.
After trial, the court ruled:
WHEREFORE, judgment is rendered in favor of the plaintiff declaring Atty. Medardo Ag.
Cadiente and Engr. Rogelio Jalipa jointly and severally liable for damages to the plaintiff for
their own negligence as stated above, and ordering them to indemnify the plaintiff jointly and
severally as follows:
(a) P300,000.00 as compensatory damages for the permanent and almost total
disability being suffered by him;
(b) P150,000.00 for moral damages;
(c) P18,982.85 as reimbursement of medical expenses;

(d) P30,000.00 for attorney's fees; and
(e) costs of suit.
SO ORDERED.10
On appeal, the Court of Appeals held that the findings of the trial court were in accordance with the
established facts and was supported by the evidence on record. Thus, it decreed as follows:
WHEREFORE, premises considered, the instant appeal is DENIED and the decision of the
Regional Trial Court of Davao City in Civil Case No. 23723-95 is hereby AFFIRMED.
SO ORDERED.11
From the aforequoted decision of the Court of Appeals and the subsequent denial of the motion for
reconsideration, only Cadiente appealed to this Court.
The instant petition alleges that the Court of Appeals committed serious errors of law in affirming the
decision of the trial court. Petitioner Cadiente raises the following as issues:
I.
WAS THERE … CONTRIBUTORY NEGLIGENCE ON THE PART OF THE INJURED

PARTY?
II.
ARE BOTH DEFENDANT CADIENTE AND THIRD-PARTY DEFENDANT JOINTLY AND

SEVERALLY LIABLE TO THE INJURED PARTY?
III.
THE HONORABLE COURT OF APPEAL[S] COMMIT[T]ED GRAVE LEGAL ERROR IN

ORDERING DEFENDANT CADIENTE AND THIRD-PARTY DEFENDANT JALIPA JOINTLY
AND SEVERALLY LIABLE.12
Essentially, the issues to be resolved are: (1) Whether there was contributory negligence on the part
of the victim; and (2) whether the petitioner and third-party defendant Jalipa are jointly and severally
liable to the victim.
The petitioner contends that the victim's negligence contributed to his own mishap. The petitioner
theorizes that if witness Rosalinda Palero, who was only two and a half meters away from the victim,
was not hit by the Ford Fiera, then the victim must have been so negligent as to be bumped and run
over by the said vehicle.13
The petitioner further argues that having filed a third-party complaint against Jalipa, to whom he had
sold the Ford Fiera, the Court of Appeals should have ordered the latter to reimburse him for any
amount he would be made to pay the victim, instead of ordering him solidarily liable for damages. 14
The respondent, for his part, counters that the immediate and proximate cause of the injuries he
suffered was the recklessly driven Ford Fiera, which was registered in the petitioner's name. He
insists that when he was hit by the vehicle, he was standing on the uncemented portion of the
highway, which was exactly where pedestrians were supposed to be. 15
The respondent stresses that as the registered owner of the Ford Fiera which figured in the accident,
the petitioner is primarily liable for the injury caused by the said vehicle. He maintains that the alleged
sale of the vehicle to Jalipa was tainted with irregularity, which indicated collusion between the
petitioner and Jalipa.16
After a careful consideration of the parties' submissions, we find the petition without merit.
Article 2179 of the Civil Code provides:
When the plaintiff's own negligence was the immediate and proximate cause of his injury, he
cannot recover damages. But if his negligence was only contributory, the immediate and
proximate cause of the injury being the defendant's lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded.
The underlying precept on contributory negligence is that a plaintiff who is partly responsible for his
own injury should not be entitled to recover damages in full, but must proportionately bear the
consequences of his own negligence. The defendant is thus held liable only for the damages actually
caused by his negligence.17
In this case, records show that when the accident happened, the victim was standing on the shoulder,
which was the uncemented portion of the highway. As noted by the trial court, the shoulder was
intended for pedestrian use alone. Only stationary vehicles, such as those loading or unloading
passengers may use the shoulder. Running vehicles are not supposed to pass through the said
uncemented portion of the highway. However, the Ford Fiera in this case, without so much as slowing
down, took off from the cemented part of the highway, inexplicably swerved to the shoulder, and
recklessly bumped and ran over an innocent victim. The victim was just where he should be when the
unfortunate event transpired.
Cimafranca, on the other hand, had no rightful business driving as recklessly as she did. The
respondent cannot be expected to have foreseen that the Ford Fiera, erstwhile speeding along the
cemented part of the highway would suddenly swerve to the shoulder, then bump and run him over.
Thus, we are unable to accept the petitioner's contention that the respondent was negligent.
Coming now to the second and third issues, this Court has recently reiterated in PCI Leasing and
Finance, Inc. v. UCPB General Insurance Co., Inc.,18 that the registered owner of any vehicle, even if
he had already sold it to someone else, is primarily responsible to the public for whatever damage or
injury the vehicle may cause. We explained,
…Were a registered owner allowed to evade responsibility by proving who the supposed
transferee or owner is, it would be easy for him, by collusion with others or otherwise, to
escape said responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or injury done. A
victim of recklessness on the public highways is usually without means to discover or identify
the person actually causing the injury or damage. He has no means other than by a recourse
to the registration in the Motor Vehicles Office to determine who is the owner. The protection
that the law aims to extend to him would become illusory were the registered owner given the
opportunity to escape liability by disproving his ownership.19
In the case of Villanueva v. Domingo,20 we said that the policy behind vehicle registration is the easy
identification of the owner who can be held responsible in case of accident, damage or injury caused
by the vehicle. This is so as not to inconvenience or prejudice a third party injured by one whose
identity cannot be secured.21
Therefore, since the Ford Fiera was still registered in the petitioner's name at the time when the
misfortune took place, the petitioner cannot escape liability for the permanent injury it caused the
respondent, who had since stopped schooling and is now forced to face life with nary but two
remaining limbs.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated September 16,
2002 and Resolution dated December 18, 2003 of the Court of Appeals in CA-G.R. CV No. 64103 are
hereby AFFIRMED. Costs against the petitioner.
SO ORDERED
G.R. No. L-11154 March 21, 1916
E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.
Crossfield and O'Brien for plaintiff.

Attorney-General Avanceña for defendant..
TRENT, J.:
This is an appeal by both parties from a judgment of the Court of First Instance of the city of
Manila in favor of the plaintiff for the sum of P14,741, together with the costs of the cause.
Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general damages which
the plaintiff suffered to P5,000, instead of P25,000 as claimed in the complaint," and (2) "in
limiting the time when plaintiff was entirely disabled to two months and twenty-one days and
fixing the damage accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in
his complaint."
The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding that
the collision between the plaintiff's motorcycle and the ambulance of the General Hospital was
due to the negligence of the chauffeur; (b) in holding that the Government of the Philippine
Islands is liable for the damages sustained by the plaintiff as a result of the collision, even if it be
true that the collision was due to the negligence of the chauffeur; and (c) in rendering judgment
against the defendant for the sum of P14,741.
The trial court's findings of fact, which are fully supported by the record, are as follows:
It is a fact not disputed by counsel for the defendant that when the plaintiff, riding on a
motorcycle, was going toward the western part of Calle Padre Faura, passing along the
west side thereof at a speed of ten to twelve miles an hour, upon crossing Taft Avenue
and when he was ten feet from the southwestern intersection of said streets, the General
Hospital ambulance, upon reaching said avenue, instead of turning toward the south,
after passing the center thereof, so that it would be on the left side of said avenue, as is
prescribed by the ordinance and the Motor Vehicle Act, turned suddenly and
unexpectedly and long before reaching the center of the street, into the right side of Taft
Avenue, without having sounded any whistle or horn, by which movement it struck the
plaintiff, who was already six feet from the southwestern point or from the post place
there.
By reason of the resulting collision, the plaintiff was so severely injured that, according to
Dr. Saleeby, who examined him on the very same day that he was taken to the General
Hospital, he was suffering from a depression in the left parietal region, a would in the
same place and in the back part of his head, while blood issued from his nose and he
was entirely unconscious.
The marks revealed that he had one or more fractures of the skull and that the grey
matter and brain was had suffered material injury. At ten o'clock of the night in question,
which was the time set for performing the operation, his pulse was so weak and so
irregular that, in his opinion, there was little hope that he would live. His right leg was
broken in such a way that the fracture extended to the outer skin in such manner that it
might be regarded as double and the would be exposed to infection, for which reason it
was of the most serious nature.
At another examination six days before the day of the trial, Dr. Saleeby noticed that the
plaintiff's leg showed a contraction of an inch and a half and a curvature that made his
leg very weak and painful at the point of the fracture. Examination of his head revealed a
notable readjustment of the functions of the brain and nerves. The patient apparently was
slightly deaf, had a light weakness in his eyes and in his mental condition. This latter
weakness was always noticed when the plaintiff had to do any difficult mental labor,
especially when he attempted to use his money for mathematical calculations.
According to the various merchants who testified as witnesses, the plaintiff's mental and
physical condition prior to the accident was excellent, and that after having received the
injuries that have been discussed, his physical condition had undergone a noticeable
depreciation, for he had lost the agility, energy, and ability that he had constantly
displayed before the accident as one of the best constructors of wooden buildings and he
could not now earn even a half of the income that he had secured for his work because
he had lost 50 per cent of his efficiency. As a contractor, he could no longer, as he had
before done, climb up ladders and scaffoldings to reach the highest parts of the building.
As a consequence of the loss the plaintiff suffered in the efficiency of his work as a
contractor, he had to dissolved the partnership he had formed with the engineer. Wilson,
because he was incapacitated from making mathematical calculations on account of the
condition of his leg and of his mental faculties, and he had to give up a contract he had
for the construction of the Uy Chaco building."
We may say at the outset that we are in full accord with the trial court to the effect that the
collision between the plaintiff's motorcycle and the ambulance of the General Hospital was due
solely to the negligence of the chauffeur.
The two items which constitute a part of the P14,741 and which are drawn in question by the
plaintiff are (a) P5,000, the award awarded for permanent injuries, and (b) the P2,666, the
amount allowed for the loss of wages during the time the plaintiff was incapacitated from
pursuing his occupation. We find nothing in the record which would justify us in increasing the
amount of the first. As to the second, the record shows, and the trial court so found, that the
plaintiff's services as a contractor were worth P1,000 per month. The court, however, limited the
time to two months and twenty-one days, which the plaintiff was actually confined in the hospital.
In this we think there was error, because it was clearly established that the plaintiff was wholly
incapacitated for a period of six months. The mere fact that he remained in the hospital only two
months and twenty-one days while the remainder of the six months was spent in his home, would
not prevent recovery for the whole time. We, therefore, find that the amount of damages
sustained by the plaintiff, without any fault on his part, is P18,075.
As the negligence which caused the collision is a tort committed by an agent or employee of the
Government, the inquiry at once arises whether the Government is legally-liable for the damages
resulting therefrom.
Act No. 2457, effective February 3, 1915, reads:
An Act authorizing E. Merritt to bring suit against the Government of the Philippine
Islands and authorizing the Attorney-General of said Islands to appear in said suit.
Whereas a claim has been filed against the Government of the Philippine Islands by Mr.
E. Merritt, of Manila, for damages resulting from a collision between his motorcycle and
the ambulance of the General Hospital on March twenty-fifth, nineteen hundred and
thirteen;
Whereas it is not known who is responsible for the accident nor is it possible to determine
the amount of damages, if any, to which the claimant is entitled; and
Whereas the Director of Public Works and the Attorney-General recommended that an
Act be passed by the Legislature authorizing Mr. E. Merritt to bring suit in the courts
against the Government, in order that said questions may be decided: Now, therefore,
By authority of the United States, be it enacted by the Philippine Legislature, that:
SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First Instance of
the city of Manila against the Government of the Philippine Islands in order to fix the
responsibility for the collision between his motorcycle and the ambulance of the General
Hospital, and to determine the amount of the damages, if any, to which Mr. E. Merritt is
entitled on account of said collision, and the Attorney-General of the Philippine Islands is
hereby authorized and directed to appear at the trial on the behalf of the Government of
said Islands, to defendant said Government at the same.
SEC. 2. This Act shall take effect on its passage.
Enacted, February 3, 1915.
Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit or did it
also concede its liability to the plaintiff? If only the former, then it cannot be held that the Act
created any new cause of action in favor of the plaintiff or extended the defendant's liability to
any case not previously recognized.
All admit that the Insular Government (the defendant) cannot be sued by an individual without its
consent. It is also admitted that the instant case is one against the Government. As the consent
of the Government to be sued by the plaintiff was entirely voluntary on its part, it is our duty to
look carefully into the terms of the consent, and render judgment accordingly.
The plaintiff was authorized to bring this action against the Government "in order to fix the
responsibility for the collision between his motorcycle and the ambulance of the General Hospital
and to determine the amount of the damages, if any, to which Mr. E. Merritt is entitled on account
of said collision, . . . ." These were the two questions submitted to the court for determination.
The Act was passed "in order that said questions may be decided." We have "decided" that the
accident was due solely to the negligence of the chauffeur, who was at the time an employee of
the defendant, and we have also fixed the amount of damages sustained by the plaintiff as a
result of the collision. Does the Act authorize us to hold that the Government is legally liable for
that amount? If not, we must look elsewhere for such authority, if it exists.
The Government of the Philippine Islands having been "modeled after the Federal and State
Governments in the United States," we may look to the decisions of the high courts of that
country for aid in determining the purpose and scope of Act No. 2457.
In the United States the rule that the state is not liable for the torts committed by its officers or
agents whom it employs, except when expressly made so by legislative enactment, is well
settled. "The Government," says Justice Story, "does not undertake to guarantee to any person
the fidelity of the officers or agents whom it employs, since that would involve it in all its
operations in endless embarrassments, difficulties and losses, which would be subversive of the
public interest." (Claussen vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9
Wheat, 720; 6 L. Ed., 199; and Beers vs. States, 20 How., 527; 15 L. Ed., 991.)
In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages from the
state for personal injuries received on account of the negligence of the state officers at the state
fair, a state institution created by the legislature for the purpose of improving agricultural and
kindred industries; to disseminate information calculated to educate and benefit the industrial
classes; and to advance by such means the material interests of the state, being objects similar
to those sought by the public school system. In passing upon the question of the state's liability
for the negligent acts of its officers or agents, the court said:
No claim arises against any government is favor of an individual, by reason of the

misfeasance, laches, or unauthorized exercise of powers by its officers or agents. (Citing
Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440;
Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29;
Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203; Story on Agency, sec. 319.)
As to the scope of legislative enactments permitting individuals to sue the state where the cause
of action arises out of either fort or contract, the rule is stated in 36 Cyc., 915, thus:
By consenting to be sued a state simply waives its immunity from suit. It does not thereby
concede its liability to plaintiff, or create any cause of action in his favor, or extend its
liability to any cause not previously recognized. It merely gives a remedy to enforce a
preexisting liability and submits itself to the jurisdiction of the court, subject to its right to
interpose any lawful defense.
In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915, the Act of
1913, which authorized the bringing of this suit, read:
SECTION 1. Authority is hereby given to George Apfelbacher, of the town of Summit,

Waukesha County, Wisconsin, to bring suit in such court or courts and in such form or
forms as he may be advised for the purpose of settling and determining all controversies
which he may now have with the State of Wisconsin, or its duly authorized officers and
agents, relative to the mill property of said George Apfelbacher, the fish hatchery of the
State of Wisconsin on the Bark River, and the mill property of Evan Humphrey at the
lower end of Nagawicka Lake, and relative to the use of the waters of said Bark River
and Nagawicka Lake, all in the county of Waukesha, Wisconsin.
In determining the scope of this act, the court said:
Plaintiff claims that by the enactment of this law the legislature admitted liability on the
part of the state for the acts of its officers, and that the suit now stands just as it would
stand between private parties. It is difficult to see how the act does, or was intended to
do, more than remove the state's immunity from suit. It simply gives authority to
commence suit for the purpose of settling plaintiff's controversies with the estate.
Nowhere in the act is there a whisper or suggestion that the court or courts in the
disposition of the suit shall depart from well established principles of law, or that the
amount of damages is the only question to be settled. The act opened the door of the
court to the plaintiff. It did not pass upon the question of liability, but left the suit just
where it would be in the absence of the state's immunity from suit. If the Legislature had
intended to change the rule that obtained in this state so long and to declare liability on
the part of the state, it would not have left so important a matter to mere inference, but
would have done so in express terms. (Murdock Grate Co. vs. Commonwealth, 152
Mass., 28; 24 N.E., 854; 8 L. R. A., 399.)
In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon and
considered, are as follows:
All persons who have, or shall hereafter have, claims on contract or for negligence
against the state not allowed by the state board of examiners, are hereby authorized, on
the terms and conditions herein contained, to bring suit thereon against the state in any
of the courts of this state of competent jurisdiction, and prosecute the same to final
judgment. The rules of practice in civil cases shall apply to such suits, except as herein
otherwise provided.
And the court said:
This statute has been considered by this court in at least two cases, arising under
different facts, and in both it was held that said statute did not create any liability or cause
of action against the state where none existed before, but merely gave an additional
remedy to enforce such liability as would have existed if the statute had not been
enacted. (Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Melvin vs. State, 121
Cal., 16.)
A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of all claims
against the commonwealth, whether at law or in equity," with an exception not necessary to be
here mentioned. In construing this statute the court, in Murdock Grate Co. vs.
Commonwealth (152 Mass., 28), said:
The statute we are discussing disclose no intention to create against the state a new and
heretofore unrecognized class of liabilities, but only an intention to provide a judicial
tribunal where well recognized existing liabilities can be adjudicated.
In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the terms of the
statute of New York, jurisdiction of claims for damages for injuries in the management of the
canals such as the plaintiff had sustained, Chief Justice Ruger remarks: "It must be conceded
that the state can be made liable for injuries arising from the negligence of its agents or servants,
only by force of some positive statute assuming such liability."
It being quite clear that Act No. 2457 does not operate to extend the Government's liability to any
cause not previously recognized, we will now examine the substantive law touching the
defendant's liability for the negligent acts of its officers, agents, and employees. Paragraph 5 of
article 1903 of the Civil Code reads:
The state is liable in this sense when it acts through a special agent, but not when the
damage should have been caused by the official to whom properly it pertained to do the
act performed, in which case the provisions of the preceding article shall be applicable.
The supreme court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person causes to another by
his fault or negligence is based, as is evidenced by the same Law 3, Title 15, Partida 7,
on that the person obligated, by his own fault or negligence, takes part in the act or
omission of the third party who caused the damage. It follows therefrom that the state, by
virtue of such provisions of law, is not responsible for the damages suffered by private
individuals in consequence of acts performed by its employees in the discharge of the
functions pertaining to their office, because neither fault nor even negligence can be
presumed on the part of the state in the organization of branches of public service and in
the appointment of its agents; on the contrary, we must presuppose all foresight humanly
possible on its part in order that each branch of service serves the general weal an that
of private persons interested in its operation. Between these latter and the state,
therefore, no relations of a private nature governed by the civil law can arise except in a
case where the state acts as a judicial person capable of acquiring rights and contracting
obligations. (Supreme Court of Spain, January 7, 1898; 83 Jur. Civ., 24.)
That the Civil Code in chapter 2, title 16, book 4, regulates the obligations which arise out
of fault or negligence; and whereas in the first article thereof. No. 1902, where the
general principle is laid down that where a person who by an act or omission causes
damage to another through fault or negligence, shall be obliged to repair the damage so
done, reference is made to acts or omissions of the persons who directly or indirectly
cause the damage, the following articles refers to this persons and imposes an identical
obligation upon those who maintain fixed relations of authority and superiority over the
authors of the damage, because the law presumes that in consequence of such relations
the evil caused by their own fault or negligence is imputable to them. This legal
presumption gives way to proof, however, because, as held in the last paragraph of
article 1903, responsibility for acts of third persons ceases when the persons mentioned
in said article prove that they employed all the diligence of a good father of a family to
avoid the damage, and among these persons, called upon to answer in a direct and not a
subsidiary manner, are found, in addition to the mother or the father in a proper case,
guardians and owners or directors of an establishment or enterprise, the state, but not
always, except when it acts through the agency of a special agent, doubtless because
and only in this case, the fault or negligence, which is the original basis of this kind of
objections, must be presumed to lie with the state.
That although in some cases the state might by virtue of the general principle set forth in
article 1902 respond for all the damage that is occasioned to private parties by orders or
resolutions which by fault or negligence are made by branches of the central
administration acting in the name and representation of the state itself and as an external
expression of its sovereignty in the exercise of its executive powers, yet said article is not
applicable in the case of damages said to have been occasioned to the petitioners by an
executive official, acting in the exercise of his powers, in proceedings to enforce the
collections of certain property taxes owing by the owner of the property which they hold in
sublease.
That the responsibility of the state is limited by article 1903 to the case wherein it
acts through a special agent(and a special agent, in the sense in which these words are
employed, is one who receives a definite and fixed order or commission, foreign to the
exercise of the duties of his office if he is a special official) so that in representation of the
state and being bound to act as an agent thereof, he executes the trust confided to him.
This concept does not apply to any executive agent who is an employee of the acting
administration and who on his own responsibility performs the functions which are
inherent in and naturally pertain to his office and which are regulated by law and the
regulations." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389, 390.)
That according to paragraph 5 of article 1903 of the Civil Code and the principle laid
down in a decision, among others, of the 18th of May, 1904, in a damage case, the
responsibility of the state is limited to that which it contracts through a special agent, duly
empowered by a definite order or commission to perform some act or charged with some
definite purpose which gives rise to the claim, and not where the claim is based on acts
or omissions imputable to a public official charged with some administrative or technical
office who can be held to the proper responsibility in the manner laid down by the law of
civil responsibility. Consequently, the trial court in not so deciding and in sentencing the
said entity to the payment of damages, caused by an official of the second class referred
to, has by erroneous interpretation infringed the provisions of articles 1902 and 1903 of
the Civil Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)
It is, therefore, evidence that the State (the Government of the Philippine Islands) is only liable,
according to the above quoted decisions of the Supreme Court of Spain, for the acts of its
agents, officers and employees when they act as special agents within the meaning of paragraph
5 of article 1903, supra, and that the chauffeur of the ambulance of the General Hospital was not
such an agent.
For the foregoing reasons, the judgment appealed from must be reversed, without costs in this
instance. Whether the Government intends to make itself legally liable for the amount of
damages above set forth, which the plaintiff has sustained by reason of the negligent acts of one
of its employees, by legislative enactment and by appropriating sufficient funds therefor, we are
not called upon to determine. This matter rests solely with the Legislature and not with the courts.
G.R. No. L-52179 April 8, 1991
MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner

vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA, IAUREANO BANIÑA, JR.,
SOR MARIETA BANIÑA, MONTANO BANIÑA, ORJA BANIÑA, AND LYDIA R.
BANIÑA, respondents.
Mauro C. Cabading, Jr. for petitioner.

Simeon G. Hipol for private respondent.
MEDIALDEA, J.:
This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory
injunction seeking the nullification or modification of the proceedings and the orders issued by
the respondent Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of
First Instance of La Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case
No. 107-BG, entitled "Juana Rimando Baniña, et al. vs. Macario Nieveras, et al." dated
November 4, 1975; July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26,
1979; September 7, 1979; November 7, 1979 and December 3, 1979 and the decision dated
October 10, 1979 ordering defendants Municipality of San Fernando, La Union and Alfredo Bislig
to pay, jointly and severally, the plaintiffs for funeral expenses, actual damages consisting of the
loss of earning capacity of the deceased, attorney's fees and costs of suit and dismissing the
complaint against the Estate of Macario Nieveras and Bernardo Balagot.
The antecedent facts are as follows:
Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and
in accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge
Romeo N. Firme is impleaded in his official capacity as the presiding judge of the Court of First
Instance of La Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-
Baniña, Laureano Baniña, Jr., Sor Marietta Baniña, Montano Baniña, Orja Baniña and Lydia R.
Baniña are heirs of the deceased Laureano Baniña Sr. and plaintiffs in Civil Case No. 107-Bg
before the aforesaid court.
At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a
passenger jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a
gravel and sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a
dump truck of the Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to
the impact, several passengers of the jeepney including Laureano Baniña Sr. died as a result of
the injuries they sustained and four (4) others suffered varying degrees of physical injuries.
On December 11, 1966, the private respondents instituted a compliant for damages against the
Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the
passenger jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La
Union, Branch I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party
Complaint against the petitioner and the driver of a dump truck of petitioner.
Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent
judge and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated
May 7, 1975, the private respondents amended the complaint wherein the petitioner and its
regular employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed
its answer and raised affirmative defenses such as lack of cause of action, non-suability of the
State, prescription of cause of action and the negligence of the owner and driver of the
passenger jeepney as the proximate cause of the collision.
In the course of the proceedings, the respondent judge issued the following questioned orders, to
wit:
(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;
(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San
Fernando, La Union and Bislig and setting the hearing on the affirmative defenses only
with respect to the supposed lack of jurisdiction;
(3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion
to Dismiss until the trial;
(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of
July 13, 1976 filed by the Municipality and Bislig for having been filed out of time;
(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of
the order of July 13, 1976;
(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it
appearing that parties have not yet submitted their respective memoranda despite the
court's direction; and
(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration
and/or order to recall prosecution witnesses for cross examination.
On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder
quoted as follows:
IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the
plaintiffs, and defendants Municipality of San Fernando, La Union and Alfredo Bislig are
ordered to pay jointly and severally, plaintiffs Juana Rimando-Baniña, Mrs. Priscilla B.
Surell, Laureano Baniña Jr., Sor Marietta Baniña, Mrs. Fe B. Soriano, Montano Baniña,
Orja Baniña and Lydia B. Baniña the sums of P1,500.00 as funeral expenses and
P24,744.24 as the lost expected earnings of the late Laureano Baniña Sr., P30,000.00 as
moral damages, and P2,500.00 as attorney's fees. Costs against said defendants.
The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo

Balagot.
SO ORDERED. (Rollo, p. 30)
Petitioner filed a motion for reconsideration and for a new trial without prejudice to another
motion which was then pending. However, respondent judge issued another order dated
November 7, 1979 denying the motion for reconsideration of the order of September 7, 1979 for
having been filed out of time.
Finally, the respondent judge issued an order dated December 3, 1979 providing that if
defendants municipality and Bislig further wish to pursue the matter disposed of in the order of
July 26, 1979, such should be elevated to a higher court in accordance with the Rules of Court.
Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to
excess of jurisdiction in issuing the aforesaid orders and in rendering a decision. Furthermore,
petitioner asserts that while appeal of the decision maybe available, the same is not the speedy
and adequate remedy in the ordinary course of law.
On the other hand, private respondents controvert the position of the petitioner and allege that
the petition is devoid of merit, utterly lacking the good faith which is indispensable in a petition
for certiorari and prohibition. (Rollo, p. 42.) In addition, the private respondents stress that
petitioner has not considered that every court, including respondent court, has the inherent
power to amend and control its process and orders so as to make them conformable to law and
justice. (Rollo, p. 43.)
The controversy boils down to the main issue of whether or not the respondent court committed
grave abuse of discretion when it deferred and failed to resolve the defense of non-suability of
the State amounting to lack of jurisdiction in a motion to dismiss.
In the case at bar, the respondent judge deferred the resolution of the defense of non-suability of
the State amounting to lack of jurisdiction until trial. However, said respondent judge failed to
resolve such defense, proceeded with the trial and thereafter rendered a decision against the
municipality and its driver.
The respondent judge did not commit grave abuse of discretion when in the exercise of its
judgment it arbitrarily failed to resolve the vital issue of non-suability of the State in the guise of
the municipality. However, said judge acted in excess of his jurisdiction when in his decision
dated October 10, 1979 he held the municipality liable for the quasi-delict committed by its
regular employee.
The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the
Constitution, to wit: "the State may not be sued without its consent."
Stated in simple parlance, the general rule is that the State may not be sued except when it gives
consent to be sued. Consent takes the form of express or implied consent.
Express consent may be embodied in a general law or a special law. The standing consent of the
State to be sued in case of money claims involving liability arising from contracts is found in Act
No. 3083. A special law may be passed to enable a person to sue the government for an alleged
quasi-delict, as in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United
States of America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)
Consent is implied when the government enters into business contracts, thereby descending to
the level of the other contracting party, and also when the State files a complaint, thus opening
itself to a counterclaim. (Ibid)
Municipal corporations, for example, like provinces and cities, are agencies of the State when
they are engaged in governmental functions and therefore should enjoy the sovereign immunity
from suit. Nevertheless, they are subject to suit even in the performance of such functions
because their charter provided that they can sue and be sued. (Cruz, Philippine Political Law,
1987 Edition, p. 39)
A distinction should first be made between suability and liability. "Suability depends on the
consent of the state to be sued, liability on the applicable law and the established facts. The
circumstance that a state is suable does not necessarily mean that it is liable; on the other hand,
it can never be held liable if it does not first consent to be sued. Liability is not conceded by the
mere fact that the state has allowed itself to be sued. When the state does waive its sovereign
immunity, it is only giving the plaintiff the chance to prove, if it can, that the defendant is liable."
(United States of America vs. Guinto, supra, p. 659-660)
Anent the issue of whether or not the municipality is liable for the torts committed by its
employee, the test of liability of the municipality depends on whether or not the driver, acting in
behalf of the municipality, is performing governmental or proprietary functions. As emphasized in
the case of Torio vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the
distinction of powers becomes important for purposes of determining the liability of the
municipality for the acts of its agents which result in an injury to third persons.
Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court
of Indiana in 1916, thus:
Municipal corporations exist in a dual capacity, and their functions are twofold. In one
they exercise the right springing from sovereignty, and while in the performance of the
duties pertaining thereto, their acts are political and governmental. Their officers and
agents in such capacity, though elected or appointed by them, are nevertheless public
functionaries performing a public service, and as such they are officers, agents, and
servants of the state. In the other capacity the municipalities exercise a private,
proprietary or corporate right, arising from their existence as legal persons and not as
public agencies. Their officers and agents in the performance of such functions act in
behalf of the municipalities in their corporate or individual capacity, and not for the state
or sovereign power." (112 N.E., 994-995) (Ibid, pp. 605-606.)
It has already been remarked that municipal corporations are suable because their charters grant
them the competence to sue and be sued. Nevertheless, they are generally not liable for torts
committed by them in the discharge of governmental functions and can be held answerable only
if it can be shown that they were acting in a proprietary capacity. In permitting such entities to be
sued, the State merely gives the claimant the right to show that the defendant was not acting in
its governmental capacity when the injury was committed or that the case comes under the
exceptions recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)
In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way
to the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal
streets." (Rollo, p. 29.)
In the absence of any evidence to the contrary, the regularity of the performance of official duty is
presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule
that the driver of the dump truck was performing duties or tasks pertaining to his office.
We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District
Engineer, and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of
roads in which the truck and the driver worked at the time of the accident are admittedly
governmental activities."
After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that
the municipality cannot be held liable for the torts committed by its regular employee, who was
then engaged in the discharge of governmental functions. Hence, the death of the passenger ––
tragic and deplorable though it may be –– imposed on the municipality no duty to pay monetary
compensation.
All premises considered, the Court is convinced that the respondent judge's dereliction in failing
to resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge
exceeded his jurisdiction when it ruled on the issue of liability.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby
modified, absolving the petitioner municipality of any liability in favor of private respondents.
SO ORDERED.
G.R. No. L-29025 October 4, 1971
Spouses MOISES P. PALISOC and BRIGIDA P. PALISOC, plaintiffs-appellants,

vs.
ANTONIO C. BRILLANTES and TEODOSIO V. VALENTON, owner and President,
respectively, of a school of arts and trades, known under the name and style of "Manila
Technical Institute" (M.I.T.), VIRGILIO L. DAFFON and SANTIAGO M.
QUIBULUE, defendants-appellees.
Leovillo C. Agustin for plaintiffs-appellants. .
Honorato S. Reyes for appellee Brillantes, et al. .
Villareal, Almacen Navarra & Amores for appellee Daffon. .
TEEHANKEE, J.:
An appeal in forma pauperis on pure questions of law from a decision of the Court of First
Instance of Manila. .
Plaintiffs-appellants as parents of their sixteen-year old son, Dominador Palisoc, and a student in
automotive mechanics at the Manila Technical Institute, Quezon Boulevard, Manila, had filed on
May 19, 1966, the action below for damages arising from the death on March 10, 1966 of their
son at the hands of a fellow student, defendant Virgilio L. Daffon, at the laboratory room of the
said Institute. .
Defendants, per the trial court's decision, are: "(T)he defendant Antonio C. Brillantes, at the time
when the incident which gave rise to his action occurred was a member of the Board of Directors
of the institute;1 the defendant Teodosio Valenton, the president thereof; the defendant Santiago
M. Quibulue, instructor of the class to which the deceased belonged; and the defendant Virgilio
L. Daffon, a fellow student of the deceased. At the beginning the Manila Technical Institute was a
single proprietorship, but lately on August 2, 1962, it was duly incorporated."
The facts that led to the tragic death of plaintiffs' son were thus narrated by the trial court: "(T)he
deceased Dominador Palisoc and the defendant Virgilio L. Daffon were classmates, and on the
afternoon of March 10, 1966, between two and three o'clock, they, together with another
classmate Desiderio Cruz were in the laboratory room located on the ground floor. At that time
the classes were in recess. Desiderio Cruz and Virgilio L. Daffon were working on a machine
while Dominador Palisoc was merely looking on at them. Daffon made a remark to the effect that
Palisoc was acting like a foreman. Because of this remark Palisoc slapped slightly Daffon on the
face. Daffon, in retaliation, gave Palisoc a strong flat blow on the face, which was followed by
other fist blows on the stomach. Palisoc retreated apparently to avoid the fist blows, but Daffon
followed him and both exchanged blows until Palisoc stumbled on an engine block which caused
him to fall face downward. Palisoc became pale and fainted. First aid was administered to him
but he was not revived, so he was immediately taken to a hospital. He never regained
consciousness; finally he died. The foregoing is the substance of the testimony of Desiderio
Cruz, the lone witness to the incident."
The trial court expressly gave credence to this version of the incident, as testified to by the lone
eyewitness, Desiderio Cruz, a classmate of the protagonists, as that of a disinterested witness
who "has no motive or reason to testify one way or another in favor of any party" and rejected the
self-exculpatory version of defendant Daffon denying that he had inflicted any fist blows on the
deceased. .
With the postmortem findings of Dr. Angelo Singian of the Manila Police Department who
performed the autopsy re "Cause of death: shock due to traumatic fracture of theribs (6th and
7th, left, contusion of the pancreas and stomach with intra-gastric hemorrhage and slight
subarachnoid hemorrhage on the brain," and his testimony that these internal injuries of the
deceased were caused "probably by strong fist blows," the trial court found defendant Daffon
liable for the quasi delict under Article 2176 of the Civil Code.3 It held that "(T)he act, therefore, of
the accused Daffon in giving the deceased strong fistblows in the stomach which ruptured his
internal organs and caused his death falls within the purview of this article of the Code."4
The trial court, however, absolved from liability the three other defendants-officials of the Manila
Technical Institute, in this wise:
... Their liabilities are based on the provisions of Article 2180 of the New Civil
Code which reads:
Art. 2180. ... .
Lastly, teachers or heads of establishments of arts and trades

shall be liable for damages caused by their pupils and students
and apprentices, so long as they remain in their custody.
In the opinion of the Court, this article of the Code is not applicable to the case at
bar, since this contemplates the situation where the control or influence of the
teachers and heads of school establishments over the conduct and actions by the
pupil supersedes those of the parents.
CIVIL LAW: DAMAGES ART 2180. NEW CIVIL CODE

CONSTRUED: — The clause "so long as they remain in their
custody" contained in Article 2180 of the new civil code
contemplated a situation where the pupil lives and boards with the
teacher, such that the control or influence on the pupil supersedes
those of the parents. In those circumstances the control or
influence over the conduct and actions of the pupil as well as the
responsibilities for their sort would pass from the father and
mother to the teachers. (Ciriaco L. Mercado, Petitioner vs. the
Court of Appeals, Manuel Quisumbing, Jr., et al., respondents,
G.R. No. L-14862, May 30, 1960).5
There is no evidence that the accused Daffon lived and boarded with his teacher
or the other defendant officials of the school. These defendants cannot therefore
be made responsible for the tort of the defendant Daffon.
Judgment was therefore rendered by the trial court as follows:
1. Sentencing the defendant Virgilio L. Daffon to pay the plaintiffs as heirs of the
deceased Dominador Palisoc (a) P6,000.00 for the death of Dominador Palisoc;
(b) P3,375.00 for actual and compensatory expenses; (c) P5,000.00 for moral
damages; (d) P10,000.00 for loss of earning power, considering that the
deceased was only between sixteen and seventeen years, and in good health
when he died, and (e) P2,000.00 for attorney's fee, plus the costs of this action. .
2. Absolving the other defendants. .

3. Dismissing the defendants' counterclaim for lack of merit.
Plaintiffs' appeal raises the principal legal question that under the factual findings of the trial
court, which are now beyond review, the trial court erred in absolving the defendants-school
officials instead of holding them jointly and severally liable as tortfeasors, with defendant Daffon,
for the damages awarded them as a result of their son's death. The Court finds the appeal, in the
main, to be meritorious. .
1. The lower court absolved defendants-school officials on the ground that the provisions of
Article 2180, Civil Code, which expressly hold "teachers or heads of establishments of arts and
trades ... liable for damages caused by their pupils and students and apprentices, so long as they
remain in their custody," are not applicable to to the case at bar, since "there is no evidence that
the accused Daffon [who inflicted the fatal fistblows]6 lived and boarded with his teacher or the
other defendants-officials of the school. These defendants cannot therefore be made responsible
for the tort of the defendant Daffon."
The lower court based its legal conclusion expressly on the Court's dictum in Mercado vs. Court
of Appeals,7 that "(I)t would seem that the clause "so long as they remain in their custody,"
contemplates a situation where the pupil lives and boards with the teacher, such that the control,
direction and influence on the pupil supersedes those of the parents. In these circumstances the
control or influence over the conduct and actions of the pupil would pass from the father and
mother to the teacher; and so would the responsibility for the torts of the pupil. Such a situation
does not appear in the case at bar; the pupils appear to go to school during school hours and go
back to their homes with their parents after school is over." This dictum had been made in
rejecting therein petitioner father's contention that his minor son's school, Lourdes Catholic
School at Kanlaon, Quezon City [which was not a party to the case] should be held responsible,
rather than him as father, for the moral damages of P2,000.00 adjudged against him for the
physical injury inflicted by his son on a classmate. [A cut on the right cheek with a piece of razor
which costs only P50.00 by way of medical expenses to treat and cure, since the wound left no
scar.] The moral damages award was after all set aside by the Court on the ground that none of
the specific cases provided in Article 2219, Civil Code, for awarding moral damages had been
established, petitioner's son being only nine years old and not having been shown to have "acted
with discernment" in inflicting the injuries on his classmate. .
The dictum in Mercado was based in turn on another dictum in the earlier case of Exconde vs.
Capuno,8 where the only issue involved as expressly stated in the decision, was whether the
therein defendant-father could be civilly liable for damages resulting from a death caused in a
motor vehicle accident driven unauthorizedly and negligently by his minor son, (which issue was
resolved adversely against the father). Nevertheless, the dictum in such earlier case that "It is
true that under the law abovequoted, teachers or directors of arts and trades are liable for any
damage caused by their pupils or apprentices while they are under their custody, but this
provision only applies to an institution of arts and trades and not to any academic educational
institution" was expressly cited and quoted in Mercado. .
2. The case at bar was instituted directly against the school officials and squarely raises the
issue of liability of teachers and heads of schools under Article 2180, Civil Code, for damages
caused by their pupils and students against fellow students on the school premises. Here, the
parents of the student at fault, defendant Daffon, are not involved, since Daffon was already of
age at the time of the tragic incident. There is no question, either, that the school involved is a
non-academic school,9 the Manila Technical Institute being admittedly a technical vocational and
industrial school. .
The Court holds that under the cited codal article, defendants head and teacher of the Manila
Technical Institute (defendants Valenton and Quibulue, respectively) are liable jointly and
severally for damages to plaintiffs-appellants for the death of the latter's minor son at the hands
of defendant Daffon at the school's laboratory room. No liability attaches to defendant Brillantes
as a mere member of the school's board of directors. The school itself cannot be held similarly
liable, since it has not been properly impleaded as party defendant. While plaintiffs sought to so
implead it, by impleading improperly defendant Brillantes, its former single proprietor, the lower
court found that it had been incorporated since August 2, 1962, and therefore the school itself, as
thus incorporated, should have been brought in as party defendant. Plaintiffs failed to do so,
notwithstanding that Brillantes and his co-defendants in their reply to plaintiffs' request for
admission had expressly manifested and made of record that "defendant Antonio C. Brillantes is
not the registered owner/head of the "Manila Technical Institute" which is now a corporation and
is not owned by any individual person."10
3. The rationale of such liability of school heads and teachers for the tortious acts of their pupils
and students, so long as they remain in their custody, is that they stand, to a certain extent, as to
their pupils and students, in loco parentis and are called upon to "exercise reasonable
supervision over the conduct of the child."11 This is expressly provided for in Articles 349, 350 and
352 of the Civil Code.12 In the law of torts, the governing principle is that the protective custody of
the school heads and teachers is mandatorily substituted for that of the parents, and hence, it
becomes their obligation as well as that of the school itself to provide proper supervision of the
students' activities during the whole time that they are at attendance in the school, including
recess time, as well as to take the necessary precautions to protect the students in their custody
from dangers and hazards that would reasonably be anticipated, including injuries that some
student themselves may inflict willfully or through negligence on their fellow students. .
4. As tersely summarized by Mr. Justice J.B.L. Reyes in his dissenting opinion in Exconde, "the
basis of the presumption of negligence of Art. 1903 [now 2180] is some culpa in vigilando that
the parents, teachers, etc. are supposed to have incurred in the exercise of their authority" 13 and
"where the parent places the child under the effective authority of the teacher, the latter, and not
the parent, should be the one answerable for the torts committed while under his custody, for the
very reason that the parent is not supposed to interfere with the discipline of the school nor with
the authority and supervision of the teacher while the child is under instruction." The school itself,
likewise, has to respond for the fault or negligence of its school head and teachers under the
same cited article.14
5. The lower court therefore erred in law in absolving defendants-school officials on the ground
that they could be held liable under Article 2180, Civil Code, only if the student who inflicted the
fatal fistblows on his classmate and victim "lived and boarded with his teacher or the other
defendants officials of the school." As stated above, the phrase used in the cited article — "so
long as (the students) remain in their custody" means the protective and supervisory custody that
the school and its heads and teachers exercise over the pupils and students for as long as they
are at attendance in the school, including recess time. There is nothing in the law that requires
that for such liability to attach the pupil or student who commits the tortious act must live and
board in the school, as erroneously held by the lower court, and the dicta in Mercado (as well as
in Exconde) on which it relied, must now be deemed to have been set aside by the present
decision. .
6. Defendants Valenton and Quibulue as president and teacher-in-charge of the school must
therefore be held jointly and severally liable for the quasi-delict of their co-defendant Daffon in
the latter's having caused the death of his classmate, the deceased Dominador Palisoc. The
unfortunate death resulting from the fight between the protagonists-students could have been
avoided, had said defendants but complied with their duty of providing adequate supervision over
the activities of the students in the school premises to protect their students from harm, whether
at the hands of fellow students or other parties. At any rate, the law holds them liable unless they
relieve themselves of such liability, in compliance with the last paragraph of Article 2180, Civil
Code, by "(proving) that they observed all the diligence of a good father of a family to prevent
damage." In the light of the factual findings of the lower court's decision, said defendants failed to
prove such exemption from liability. .
7. Plaintiffs-appellees' contention that the award of P6,000.00 as indemnity for the death of their
son should be increased to P12,000.00 as set by the Court in People vs. Pantoja,15 and observed
in all death indemnity cases thereafter is well taken. The Court, in Pantoja, after noting the
decline in the purchasing power of the Philippine peso, had expressed its "considered opinion
that the amount of award of compensatory damages for death caused by a crime or quasi-
delict should now be P12,000.00." The Court thereby adjusted the minimum amount of
"compensatory damages for death caused by a crime or quasi-delict" as per Article 2206, Civil
Code, from the old stated minimum of P3,000.00 to P12,000.00, which amount is to be awarded
"even though there may have been mitigating circumstances" pursuant to the express provisions
of said codal article. .
8. Plaintiffs-appellees' other claims on appeal that the lower court should have awarded
exemplary damages and imposed legal interest on the total damages awarded, besides
increasing the award of attorney's fees all concern matters that are left by law to the discretion of
the trial court and the Court has not been shown any error or abuse in the exercise of such
discretion on the part of the trial court.16 Decisive here is the touchstone provision of Article 2231,
Civil Code, that "In quasi-delicts, exemplary damages may be granted if the defendant acted
with gross negligence." No gross negligence on the part of defendants was found by the trial
court to warrant the imposition of exemplary damages, as well as of interest and increased
attorney's fees, and the Court has not been shown in this appeal any compelling reason to
disturb such finding. .
ACCORDINGLY, the judgment appealed from is modified so as to provide as follows: .
1. Sentencing the defendants Virgilio L. Daffon, TeodosioV. Valenton and Santiago M. Quibulue
jointly and severally to pay plaintiffs as heirs of the deceased Dominador Palisoc (a) P12,000.00
for the death of Dominador Palisoc; (b) P3,375.00 for actual and compensatory expenses; (c)
P5,000.00 for moral, damages; (d) P10,000.00 for loss of earning power and (e) P2,000.00 for
attorney's fee, plus the costs of this action in both instances; 2. absolving defendant Antonio C.
Brillantes from the complaint; and 3. dismissing defendants' counterclaims. .
Concepcion, C.J., Villamor and Makasiar, JJ., concur. .
Dizon, J., took no part. .
REYES, J.B.L., J., concurring: .
I concur with the opinion of Mr. Justice Teehankee but would like to clarify that the argument of
the dissenting opinion of the effect that the responsibility of teachers and school officers under
Articles 2180 should be limited to pupils who are minors (below the age of majority) is not in
accord with the plain text of the law. Article 2180 of the Civil Code of the Philippines is to the
following effect: .
or omissions, but also for those of persons for whom one is responsible. .
The father and, in case of his death or incapacity, the mother, are responsible for
the damages caused by the minor children who live in their company. .
Guardians are liable for damages caused by the minors or incapacitated persons
who are under their authority and live in their company. .
The owners and managers of an establishment or enterprise are likewise

responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their functions. .
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry. .
The State is responsible in like manner when it acts through a special agent; but
not when the damage has been caused by the official to whom the task done
properly pertains, in which case what is provided in article 2176 shall be
applicable. .
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they
remain in their custody.
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observe all the diligence of a good father of a family to
prevent damages.
Examination of the article shows that where the responsibility prescribed therein is limited to
illegal acts during minority, the article expressly so provides, as in the case of the parents and of
the guardians. It is natural to expect that if the law had intended to similarly restrict the civil
responsibility of the other categories of persons enumerated in the article, it would have
expressly so stated. The fact that it has not done so indicates an intent that the liability be not
restricted to the case of persons under age. Further, it is not without significance that the
teachers and heads of scholarly establishments are not grouped with parents and guardians but
ranged with owners and managers of enterprises, employers and the state, as to whom no
reason is discernible to imply that they should answer only for minors. .
Giorgi, in his well-known "Teoria de las Obligaciones en el Derecho Moderno", Volume 5, page
404, No. 272 (Sp. Ed.), after noting the split among commentators on the point it issue, observes
with considerable cogency that —
272. Ante esta variedad de opiniones, ninguna de las cuales se funds en

argumentos merecedores de seria ponderacion, no es facil tomar un partido.
Esto no obstante, debiendo manisfestar nuestra opinion, nos acercamos a la de
los que no estiman necesaria la menor edad del discipulo o del aprendiz; porque
si el aforismo ubi voluit dixit, ubi noluit tacuit, no es siempre argumento seguro
para interpreter la ley, es infalible cuanto se refiere a una misma disposicion
relative a varios casos. Y tal es el art. 1.153. Lo que haya establecido important
poco si, elevandones a los principios de razon, puede dudarse de la oportunidad
de semajante diferencia; porque la voluntad cierta del legislador prevalece in iure
condito a cualquier otra consideracion. Por otra parte, si bien se considera, no
puede parecer extrano o absurdo el suponer que un discipulo y un aprendiz,
aunque mayores de edad, acepten voluntariamente la entera vigilancia de su
preceptor mientras dura la educacion. Ni parece dudoso desde el momento que
los artesanos y los preceptores deben, al par de los padres, responder civilmente
de los daños comitidos por sus discipulos, aun cuando estos esten faltos de
discernimiento.
Similarly, Planiol-Ripert, in their "Droit Civil Pratique," Volume VI, No. 635 (Spanish version), say
that —
635. Personas de quien responde. — Si bien la responsibilidad del maestro es

originalmente una estension de la de los padres (1), el art. 1384 no especifica
que los alumnos y aprendices han de ser menores de edad, por lo que la
presuncion de culpa funcionara aun cuando sean mayores (2); pero, la vigilancia
no tendra que ser ejercida en iguales terminos. Aun respecto a los menores
variara segun la edad, extremo que tendra que ternese en ceunta a los fines de
apreciar si el maestro ha podido impedir el acto nocivo o no. .
I submit, finally, that while in the case of parents and guardians, their authority and supervision
over the children and wards end by law upon the latter reaching majority age, the authority and
custodial supervision over pupils exist regardless of the age of the latter. A student over twenty-
one, by enrolling and attending a school, places himself under the custodial supervision and
disciplinary authority of the school authorities, which is the basis of the latter's correlative
responsibility for his torts, committed while under such authority. Of course, the teachers' control
is not as plenary as when the student is a minor; but that circumstance can only affect the decree
of the responsibility but cannot negate the existence thereof. It is only a factor to be appreciated
in determining whether or not the defendant has exercised due diligence in endeavoring to
prevent the injury, as prescribed in the last paragraph of Article 2180
G.R. No. 143363 February 6, 2002
ST. MARY'S ACADEMY, petitioner,

vs.
WILLIAM CARPITANOS and LUCIA S. CARPITANOS, GUADA DANIEL, JAMES DANIEL II,
JAMES DANIEL, SR., and VIVENCIO VILLANUEVA, respondents.
DECISION
PARDO, J.:
The Case
The case is an appeal via certiorari from the decision1 of the Court of Appeals as well as the
resolution denying reconsideration, holding petitioner liable for damages arising from an accident
that resulted in the death of a student who had joined a campaign to visit the public schools in
Dipolog City to solicit enrollment.
The Facts
The facts, as found by the Court of Appeals, are as follows:
"Claiming damages for the death of their only son, Sherwin Carpitanos, spouses William
Carpitanos and Lucia Carpitanos filed on June 9, 1995 a case against James Daniel II and his
parents, James Daniel Sr. and Guada Daniel, the vehicle owner, Vivencio Villanueva and St.
Mary’s Academy before the Regional Trial Court of Dipolog City.
"On 20 February 1997, Branch 6 of the Regional Trial Court of Dipolog City rendered its decision
the dispositive portion of which reads as follows:
"‘WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in the following

manner:
1. Defendant St. Mary’s Academy of Dipolog City, is hereby ordered to pay plaintiffs William
Carpitanos and Luisa Carpitanos, the following sums of money:
a. FIFTY THOUSAND PESOS (P50,000.00) indemnity for the loss of life of Sherwin S.
Carpitanos;
b. FORTY THOUSAND PESOS (P40,000.00) actual damages incurred by plaintiffs for burial and
related expenses;
c. TEN THOUSAND PESOS (P10,000.00) for attorney’s fees;
d. FIVE HUNDRED THOUSAND PESOS (P500,000.00) for moral damages; and to pay costs.
2. Their liability being only subsidiary, defendants James Daniel, Sr. and Guada Daniel are
hereby ordered to pay herein plaintiffs the amount of damages above-stated in the event of
insolvency of principal obligor St. Mary’s Academy of Dipolog City;
3. Defendant James Daniel II, being a minor at the time of the commission of the tort and who
was under special parental authority of defendant St. Mary’s Academy, is ABSOLVED from
paying the above-stated damages, same being adjudged against defendants St. Mary’s
Academy, and subsidiarily, against his parents;
4. Defendant Vivencio Villanueva is hereby ABSOLVED of any liability. His counterclaim not
being in order as earlier discussed in this decision, is hereby DISMISSED.
IT IS SO ORDERED."’ (Decision, pp. 32-33; Records, pp. 205-206)."
"From the records it appears that from 13 to 20 February 1995, defendant-appellant St. Mary’s
Academy of Dipolog City conducted an enrollment drive for the school year 1995-1996. A facet of
the enrollment campaign was the visitation of schools from where prospective enrollees were
studying. As a student of St. Mary’s Academy, Sherwin Carpitanos was part of the campaigning
group. Accordingly, on the fateful day, Sherwin, along with other high school students were riding
in a Mitsubishi jeep owned by defendant Vivencio Villanueva on their way to Larayan Elementary
School, Larayan, Dapitan City. The jeep was driven by James Daniel II then 15 years old and a
student of the same school. Allegedly, the latter drove the jeep in a reckless manner and as a
result the jeep turned turtle.
"Sherwin Carpitanos died as a result of the injuries he sustained from the accident."2
In due time, petitioner St. Mary’s academy appealed the decision to the Court of Appeals.3
On February 29, 2000, the Court of Appeals promulgated a decision reducing the actual
damages to P25,000.00 but otherwise affirming the decision a quo, in toto.4
On February 29, 2000, petitioner St. Mary’s Academy filed a motion for reconsideration of the
decision. However, on May 22, 2000, the Court of Appeals denied the motion.5
Hence, this appeal.6
The Issues
1) Whether the Court of Appeals erred in holding the petitioner liable for damages for the
death of Sherwin Carpitanos.
2) Whether the Court of Appeals erred in affirming the award of moral damages against
the petitioner.
The Court’s Ruling
We reverse the decision of the Court of Appeals.
The Court of Appeals held petitioner St. Mary’s Academy liable for the death of Sherwin
Carpitanos under Articles 2187 and 2198 of the Family Code, pointing out that petitioner was
negligent in allowing a minor to drive and in not having a teacher accompany the minor students
in the jeep.
Under Article 218 of the Family Code, the following shall have special parental authority over a
minor child while under their supervision, instruction or custody: (1) the school, its administrators
and teachers; or (2) the individual, entity or institution engaged in child care. This special parental
authority and responsibility applies to all authorized activities, whether inside or outside the
premises of the school, entity or institution. Thus, such authority and responsibility applies to field
trips, excursions and other affairs of the pupils and students outside the school premises
whenever authorized by the school or its teachers.9
Under Article 219 of the Family Code, if the person under custody is a minor, those exercising
special parental authority are principally and solidarily liable for damages caused by the acts or
omissions of the unemancipated minor while under their supervision, instruction, or custody.10
However, for petitioner to be liable, there must be a finding that the act or omission considered
as negligent was the proximate cause of the injury caused because the negligence must have a
causal connection to the accident.11
"In order that there may be a recovery for an injury, however, it must be shown that the ‘injury for
which recovery is sought must be the legitimate consequence of the wrong done; the connection
between the negligence and the injury must be a direct and natural sequence of events,
unbroken by intervening efficient causes.’ In other words, the negligence must be the proximate
cause of the injury. For, ‘negligence, no matter in what it consists, cannot create a right of action
unless it is the proximate cause of the injury complained of.’ And ‘the proximate cause of an
injury is that cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have occurred.’"12
In this case, the respondents failed to show that the negligence of petitioner was the proximate
cause of the death of the victim.
Respondents Daniel spouses and Villanueva admitted that the immediate cause of the accident
was not the negligence of petitioner or the reckless driving of James Daniel II, but the
detachment of the steering wheel guide of the jeep.
In their comment to the petition, respondents Daniel spouses and Villanueva admitted the
documentary exhibits establishing that the cause of the accident was the detachment of the
steering wheel guide of the jeep. Hence, the cause of the accident was not the recklessness of
James Daniel II but the mechanical defect in the jeep of Vivencio Villanueva. Respondents,
including the spouses Carpitanos, parents of the deceased Sherwin Carpitanos, did not dispute
the report and testimony of the traffic investigator who stated that the cause of the accident was
the detachment of the steering wheel guide that caused the jeep to turn turtle.
Significantly, respondents did not present any evidence to show that the proximate cause of the
accident was the negligence of the school authorities, or the reckless driving of James Daniel II.
Hence, the respondents’ reliance on Article 219 of the Family Code that "those given the
authority and responsibility under the preceding Article shall be principally and solidarily liable for
damages caused by acts or omissions of the unemancipated minor" was unfounded.
Further, there was no evidence that petitioner school allowed the minor James Daniel II to drive
the jeep of respondent Vivencio Villanueva. It was Ched Villanueva, grandson of respondent
Vivencio Villanueva, who had possession and control of the jeep. He was driving the vehicle and
he allowed James Daniel II, a minor, to drive the jeep at the time of the accident.
Hence, liability for the accident, whether caused by the negligence of the minor driver or
mechanical detachment of the steering wheel guide of the jeep, must be pinned on the minor’s
parents primarily. The negligence of petitioner St. Mary’s Academy was only a remote cause of
the accident. Between the remote cause and the injury, there intervened the negligence of the
minor’s parents or the detachment of the steering wheel guide of the jeep.
"The proximate cause of an injury is that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury, and without which the result
would not have occurred."13
Considering that the negligence of the minor driver or the detachment of the steering wheel guide
of the jeep owned by respondent Villanueva was an event over which petitioner St. Mary’s
Academy had no control, and which was the proximate cause of the accident, petitioner may not
be held liable for the death resulting from such accident.
Consequently, we find that petitioner likewise cannot be held liable for moral damages in the
amount of P500,000.00 awarded by the trial court and affirmed by the Court of Appeals.
Though incapable of pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendant’s wrongful act or omission.14 In this case, the proximate cause
of the accident was not attributable to petitioner.
For the reason that petitioner was not directly liable for the accident, the decision of the Court of
Appeals ordering petitioner to pay death indemnity to respondent Carpitanos must be deleted.
Moreover, the grant of attorney’s fees as part of damages is the exception rather than the
rule.15 The power of the court to award attorney’s fees under Article 2208 of the Civil Code
demands factual, legal and equitable justification.16 Thus, the grant of attorney’s fees against the
petitioner is likewise deleted.
Incidentally, there was no question that the registered owner of the vehicle was respondent
Villanueva. He never denied and in fact admitted this fact. We have held that the registered
1âwphi1
owner of any vehicle, even if not used for public service, would primarily be responsible to the
public or to third persons for injuries caused the latter while the vehicle was being driven on the
highways or streets."17 Hence, with the overwhelming evidence presented by petitioner and the
respondent Daniel spouses that the accident occurred because of the detachment of the steering
wheel guide of the jeep, it is not the school, but the registered owner of the vehicle who shall be
held responsible for damages for the death of Sherwin Carpitanos.
The Fallo
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of
Appeals18 and that of the trial court.19 The Court remands the case to the trial court for
determination of the liability of defendants, excluding petitioner St. Mary’s Academy, Dipolog
City.
No costs.
SO ORDERED
G.R. No. 80718 January 29, 1988
FELIZA P. DE ROY and VIRGILIO RAMOS, petitioners,

vs.
COURT OF APPEALS and LUIS BERNAL, SR., GLENIA BERNAL, LUIS BERNAL, JR.,
HEIRS OF MARISSA BERNAL, namely, GLICERIA DELA CRUZ BERNAL and LUIS
BERNAL, SR., respondents.
RESOLUTION
CORTES, J.:
This special civil action for certiorari seeks to declare null and void two (2) resolutions of the Special First Division of the Court of
Appeals in the case of Luis Bernal, Sr., et al. v. Felisa Perdosa De Roy, et al., CA-G.R. CV No. 07286. The first resolution promulgated
on 30 September 1987 denied petitioners' motion for extension of time to file a motion for reconsideration and directed entry of
judgment since the decision in said case had become final; and the second Resolution dated 27 October 1987 denied petitioners'
motion for reconsideration for having been filed out of time.
At the outset, this Court could have denied the petition outright for not being verified as required
by Rule 65 section 1 of the Rules of Court. However, even if the instant petition did not suffer
from this defect, this Court, on procedural and substantive grounds, would still resolve to deny it.
The facts of the case are undisputed. The firewall of a burned-out building owned by petitioners
collapsed and destroyed the tailoring shop occupied by the family of private respondents,
resulting in injuries to private respondents and the death of Marissa Bernal, a daughter. Private
respondents had been warned by petitioners to vacate their shop in view of its proximity to the
weakened wall but the former failed to do so. On the basis of the foregoing facts, the Regional
Trial Court. First Judicial Region, Branch XXXVIII, presided by the Hon. Antonio M. Belen,
rendered judgment finding petitioners guilty of gross negligence and awarding damages to
private respondents. On appeal, the decision of the trial court was affirmed in toto by the Court of
Appeals in a decision promulgated on August 17, 1987, a copy of which was received by
petitioners on August 25, 1987. On September 9, 1987, the last day of the fifteen-day period to
file an appeal, petitioners filed a motion for extension of time to file a motion for reconsideration,
which was eventually denied by the appellate court in the Resolution of September 30, 1987.
Petitioners filed their motion for reconsideration on September 24, 1987 but this was denied in
the Resolution of October 27, 1987.
This Court finds that the Court of Appeals did not commit a grave abuse of discretion when it
denied petitioners' motion for extension of time to file a motion for reconsideration, directed entry
of judgment and denied their motion for reconsideration. It correctly applied the rule laid down
in Habaluyas Enterprises, Inc. v. Japzon, [G.R. No. 70895, August 5, 1985,138 SCRA 461, that
the fifteen-day period for appealing or for filing a motion for reconsideration cannot be extended.
In its Resolution denying the motion for reconsideration, promulgated on July 30, 1986 (142
SCRA 208), this Court en banc restated and clarified the rule, to wit:
Beginning one month after the promulgation of this Resolution, the rule shall be strictly enforced
that no motion for extension of time to file a motion for reconsideration may be filed with the
Metropolitan or Municipal Trial Courts, the Regional Trial Courts, and the Intermediate Appellate
Court. Such a motion may be filed only in cases pending with the Supreme Court as the court of
last resort, which may in its sound discretion either grant or deny the extension requested. (at p.
212)
Lacsamana v. Second Special Cases Division of the intermediate Appellate Court, [G.R. No.
73146-53, August 26, 1986, 143 SCRA 643], reiterated the rule and went further to restate and
clarify the modes and periods of appeal.
Bacaya v. Intermediate Appellate Court, [G.R. No. 74824, Sept. 15, 1986,144 SCRA
161],stressed the prospective application of said rule, and explained the operation of the grace
period, to wit:
In other words, there is a one-month grace period from the promulgation on May
30, 1986 of the Court's Resolution in the clarificatory Habaluyas case, or up to
June 30, 1986, within which the rule barring extensions of time to file motions for
new trial or reconsideration is, as yet, not strictly enforceable.
Since petitioners herein filed their motion for extension on February 27, 1986, it is
still within the grace period, which expired on June 30, 1986, and may still be
allowed.
This grace period was also applied in Mission v. Intermediate Appellate Court [G.R. No. 73669,
October 28, 1986, 145 SCRA 306].]
In the instant case, however, petitioners' motion for extension of time was filed on September 9,
1987, more than a year after the expiration of the grace period on June 30, 1986. Hence, it is no
longer within the coverage of the grace period. Considering the length of time from the expiration
of the grace period to the promulgation of the decision of the Court of Appeals on August 25,
1987, petitioners cannot seek refuge in the ignorance of their counsel regarding said rule for their
failure to file a motion for reconsideration within the reglementary period.
Petitioners contend that the rule enunciated in the Habaluyas case should not be made to apply
to the case at bar owing to the non-publication of the Habaluyas decision in the Official Gazette
as of the time the subject decision of the Court of Appeals was promulgated. Contrary to
petitioners' view, there is no law requiring the publication of Supreme Court decisions in the
Official Gazette before they can be binding and as a condition to their becoming effective. It is
the bounden duty of counsel as lawyer in active law practice to keep abreast of decisions of the
Supreme Court particularly where issues have been clarified, consistently reiterated, and
published in the advance reports of Supreme Court decisions (G. R. s) and in such publications
as the Supreme Court Reports Annotated (SCRA) and law journals.
This Court likewise finds that the Court of Appeals committed no grave abuse of discretion in
affirming the trial court's decision holding petitioner liable under Article 2190 of the Civil Code,
which provides that "the proprietor of a building or structure is responsible for the damage
resulting from its total or partial collapse, if it should be due to the lack of necessary repairs.
Nor was there error in rejecting petitioners argument that private respondents had the "last clear
chance" to avoid the accident if only they heeded the. warning to vacate the tailoring shop and ,
therefore, petitioners prior negligence should be disregarded, since the doctrine of "last clear
chance," which has been applied to vehicular accidents, is inapplicable to this case.
WHEREFORE, in view of the foregoing, the Court Resolved to DENY the instant petition for lack
of merit
G.R. No. 74431 November 6, 1989
PURITA MIRANDA VESTIL and AGUSTIN VESTIL, petitioners,

vs.
INTERMEDIATE APPELLATE COURT, DAVID UY and TERESITA UY, respondents.
Pablo P. Garcia for petitioners.
Roberto R. Palmares for private respondents.
CRUZ, J.:
Little Theness Tan Uy was dead at the age of three. Her parents said she died because she was
bitten by a dog of the petitioners, but the latter denied this, claiming they had nothing to do with
the dog. The Uys sued the Vestils, who were sustained by the trial court. On appeal, the decision
of the court a quo was reversed in favor of the Uys. The Vestils are now before us. They ask us
to set aside the judgment of the respondent court and to reinstate that of the trial court.
On July 29, 1915, Theness was bitten by a dog while she was playing with a child of the
petitioners in the house of the late Vicente Miranda, the father of Purita Vestil, at F. Ramos Street
in Cebu City. She was rushed to the Cebu General Hospital, where she was treated for "multiple
lacerated wounds on the forehead" 1 and administered an anti-rabies vaccine by Dr. Antonio
Tautjo. She was discharged after nine days but was readmitted one week later due to "vomiting
of saliva." 2 The following day, on August 15, 1975, the child died. The cause of death was
certified as broncho-pneumonia. 3
Seven months later, the Uys sued for damages, alleging that the Vestils were liable to them as
the possessors of "Andoy," the dog that bit and eventually killed their daughter. The Vestils
rejected the charge, insisting that the dog belonged to the deceased Vicente Miranda, that it was
a tame animal, and that in any case no one had witnessed it bite Theness. After trial, Judge Jose
R. Ramolete of the Court of First Instance of Cebu sustained the defendants and dismissed the
complaint. 4
The respondent court arrived at a different conclusion when the case was appealed. 5 It found
that the Vestils were in possession of the house and the dog and so should be responsible under
Article 2183 of the Civil Code for the injuries caused by the dog. It also held that the child had
died as a result of the dog bites and not for causes independent thereof as submitted by the
appellees. Accordingly, the Vestils were ordered to pay the Uys damages in the amount of
P30,000.00 for the death of Theness, P12,000.00 for medical and hospitalization expenses, and
P2,000.00 as attorney's fees.
In the proceedings now before us, Purita Vestil insists that she is not the owner of the house or of
the dog left by her father as his estate has not yet been partitioned and there are other heirs to
the property. Pursuing the logic of the Uys, she claims, even her sister living in Canada would be
held responsible for the acts of the dog simply because she is one of Miranda's heirs. However,
that is hardly the point. What must be determined is the possession of the dog that admittedly
was staying in the house in question, regardless of the ownership of the dog or of the house.
Article 2183 reads as follows:
The possessor of an animal or whoever may make use of the same is

responsible for the damage which it may cause, although it may escape or be
lost. 'This responsibility shall cease only in case the damages should come
from force majeure from the fault of the person who has suffered damage.
Thus, in Afialda v. Hisole, 6 a person hired as caretaker of a carabao gored him to death and his
heirs thereupon sued the owner of the animal for damages. The complaint was dismissed on the
ground that it was the caretaker's duty to prevent the carabao from causing injury to any one,
including himself.
Purita Vestil's testimony that she was not in possession of Miranda's house is hardly credible.
She said that the occupants of the house left by her father were related to him ("one way or the
other") and maintained themselves out of a common fund or by some kind of arrangement (on
which, however, she did not elaborate ). 7 She mentioned as many as ten of such relatives who
had stayed in the house at one time or another although they did not appear to be close kin.8 She
at least implied that they did not pay any rent, presumably because of their relation with Vicente
Miranda notwithstanding that she herself did not seem to know them very well.
There is contrary evidence that the occupants of the house, were boarders (or more of boarders
than relatives) who paid the petitioners for providing them with meals and accommodations. It
also appears that Purita Vestil had hired a maid, Dolores Jumao-as, who did the cooking and
cleaning in the said house for its occupants. 9 Her mother, Pacita, who was a nursemaid of Purita
herself, categorically declared that the petitioners were maintaining boarders in the house where
Theness was bitten by a dog.10 Another witness, Marcial Lao, testified that he was indeed a
boarder and that the Vestils were maintaining the house for business purposes. 11 And although
Purita denied paying the water bills for the house, the private respondents submitted
documentary evidence of her application for water connection with the Cebu Water District,
which strongly suggested that she was administering the house in question. 12
While it is true that she is not really the owner of the house, which was still part of Vicente
Miranda's estate, there is no doubt that she and her husband were its possessors at the time of
the incident in question. She was the only heir residing in Cebu City and the most logical person
to take care of the property, which was only six kilometers from her own house. 13 Moreover,
there is evidence showing that she and her family regularly went to the house, once or twice
weekly, according to at least one witness, 14 and used it virtually as a second house. Interestingly,
her own daughter was playing in the house with Theness when the little girl was bitten by the
dog. 15 The dog itself remained in the house even after the death of Vicente Miranda in 1973 and
until 1975, when the incident in question occurred. It is also noteworthy that the petitioners
offered to assist the Uys with their hospitalization expenses although Purita said she knew them
only casually. 16
The petitioners also argue that even assuming that they were the possessors of the dog that bit
Theness there was no clear showing that she died as a result thereof. On the contrary, the death
certificate 17 declared that she died of broncho-pneumonia, which had nothing to do with the dog
bites for which she had been previously hospitalized. The Court need not involve itself in an
extended scientific discussion of the causal connection between the dog bites and the certified
cause of death except to note that, first, Theness developed hydrophobia, a symptom of rabies,
as a result of the dog bites, and second, that asphyxia broncho-pneumonia, which ultimately
caused her death, was a complication of rabies. That Theness became afraid of water after she
was bitten by the dog is established by the following testimony of Dr. Tautjo:
COURT: I think there was mention of rabies in the report in the second
admission?
A: Now, the child was continuously vomiting just before I referred to Dr. Co earlier
in the morning and then the father, because the child was asking for water, the
father tried to give the child water and this child went under the bed, she did not
like to drink the water and there was fright in her eyeballs. For this reason,
because I was in danger there was rabies, I called Dr. Co.
Q: In other words, the child had hydrophobia?
A: Yes, sir. 18
As for the link between rabies and broncho-pneumonia, the doctor had the following to say under
oath:
A: Now, as 1 said before, broncho-pneumonia can result from physical, chemical

and bacterial means. ... It can be the result of infection, now, so if you have any
other disease which can lower your resistance you can also get pneumonia.
xxx xxx xxx
Q: Would you say that a person who has rabies may die of complication which is
broncho-pneumonia?
A: Yes.
Q: For the record, I am manifesting that this book shown the witness is know as
CURRENT DIANOSIS & TREATMENT, 1968 by Henry Brainerd, Sheldon
Margen and Milton Chaton. Now, I invite your attention, doctor, to page 751 of
this book under the title "Rabies." There is on this page, "Prognosis" as a result of
rabies and it says: Once the symptoms, have appeared death inevitably occurs
after 2-3 days as a result of cardiac or respiratory failure or generalized paralysis.
After a positive diagnosis of rabies or after a bite by a suspected animal if the
animal cannot be observed or if the bite is on the head, give rabies vaccine (duck
embryo). Do you believe in this statement?
A: Yes.
Q: Would you say therefore that persons who have rabies may die of respiratory
failure which leave in the form of bronco-pneumonia?
A: Broncho-pneumonia can be a complication of rabies. 19
On the strength of the foregoing testimony, the Court finds that the link between the dog bites
and the certified cause of death has beep satisfactorily established. We also reiterate our ruling
in Sison v. Sun Life Assurance Company of Canada, 20 that the death certificate is not conclusive
proof of the cause of death but only of the fact of death. Indeed, the evidence of the child's
hydrophobia is sufficient to convince us that she died because she was bitten by the dog even if
the death certificate stated a different cause of death. The petitioner's contention that they could
not be expected to exercise remote control of the dog is not acceptable. In fact, Article 2183 of
the Civil Code holds the possessor liable even if the animal should "escape or be lost" and so be
removed from his control. And it does not matter either that, as the petitioners also contend, the
dog was tame and was merely provoked by the child into biting her. The law does not speak only
of vicious animals but covers even tame ones as long as they cause injury. As for the alleged
provocation, the petitioners forget that Theness was only three years old at the time she was
attacked and can hardly be faulted for whatever she might have done to the animal.
It is worth observing that the above defenses of the petitioners are an implied rejection of their
original posture that there was no proof that it was the dog in their father's house that bit
Theness.
According to Manresa the obligation imposed by Article 2183 of the Civil Code is not based on
the negligence or on the presumed lack of vigilance of the possessor or user of the animal
causing the damage. It is based on natural equity and on the principle of social interest that he
who possesses animals for his utility, pleasure or service must answer for the damage which
such animal may cause. 21
We sustain the findings of the Court of Appeals and approve the monetary awards except only as
to the medical and hospitalization expenses, which are reduced to P2,026.69, as prayed for in
the complaint. While there is no recompense that can bring back to the private respondents the
child they have lost, their pain should at least be assuaged by the civil damages to which they
are entitled.
WHEREFORE, the challenged decision is AFFIRMED as above modified. The petition is

DENIED, with costs against the petitioners. It is so ordered.
G.R. No. 137916 December 8, 2004
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS, ELPIDIO O. CUCIO, SPOUSES JACINTO GOTANGCO and CHARITY
BANTUG,1 respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision2 of the Court of Appeals (CA) in CA-G.R.
CV No. 37873 which affirmed, with modification, the Decision3 of the Regional Trial Court (RTC)
of Palayan City, Branch 40, in Civil Case No. 0061-P.
The Spouses Jacinto Gotangco and Charity Bantug were the owners of seven parcels of land
located in Palayan City, with a total area of 21,000 square meters, covered by Transfer
Certificates of Title (TCT) Nos. NT-166092 to NT-166098. The Spouses Gotangco were also the
awardees of a parcel of land, identified as Lot No. 168, NG-130 (Pls-378), located in Canaderia,
Palayan City, per Order of the Director of the Bureau of Lands dated February 22, 1961. The
Spouses Gotangco declared Lot No. 168 for taxation purposes under Tax Declaration (TD) No.
0502 in 1980.
On August 22, 1980, the Spouses Gotangco secured a loan for their poultry project in Palayan
City from the Development Bank of the Philippines (DBP) in the amount of P121,400.00. They
then executed a real estate mortgage over the parcels of land.4
On December 16, 1981, the Spouses Gotangco executed a Deed of Undertaking5 wherein they
obliged themselves to secure a sales patent in their favor from the Bureau of Lands over Lot No.
168 covered by TD No. 0502 within two (2) years from the execution thereof. They also
undertook to deliver to the DBP the owner's duplicate of the certificate of title over the property
for the annotation of the real estate mortgage in favor of DBP at the dorsal portion thereof.6
On July 17, 1982, the Spouses Gotangco, as vendors, executed in favor of Elpidio O. Cucio a
contract to sell over the seven parcels of land mortgaged to DBP for P50,000.00, payable in two
installments. The parties agreed that the said amount shall be paid directly to DBP and applied to
the mortgage indebtedness of the Spouses Gotangco and that, upon full payment of the
purchase price, the Spouses shall execute a deed of sale over the said parcels of land in favor of
Cucio.7 The contract to sell was known to DBP.
Thereafter, Cucio made the following remittances to DBP in payment of the purchase price of the
seven parcels of land: (a) P16,000.00 per Official Receipt (OR) No. 2418258 dated January 13,
1983; and (b) P5,000.00. The DBP considered the remittances as deposits and issued OR No.
2792644 dated February 18, 1983 to Cucio for the total amount of P21,000.00. The DBP
informed Jacinto Gotangco, on February 18, 1983, of the said remittances made by Cucio.8 It also
requested the Spouses Gotangco to turn over the owner's copy of the title over the property
covered by TD No. 0502 so that it could effect the substitution of the seven (7) parcels of land
mortgaged by the Spouses Gotangco for the said lot.
Subsequently, the Spouses Gotangco were able to secure a sales patent over the parcel of land
covered by TD No. 0502, on the basis of which TCT No. NT-177647 was issued by the Register
of Deeds on March 23, 1983. Conformably to the request of DBP, the Spouses Gotangco turned
over the owner's duplicate of TCT No. NT-177647, and the mortgage executed in favor of DBP
was duly annotated at the back of the said title. DBP kept the owner's copies of TCT Nos. NT-
166092 to NT-166098 and TCT No. NT-177647.
On July 23, 1983, Jacinto Gotangco remitted the total amount of P57,097.36 to DBP in partial
payment of his loan account for which DBP issued OR Nos. 324501 to 324504.9 In 1984, Cucio
paid the balance of the purchase price of the seven parcels of land to DBP.
In the meantime, the Spouses Gotangco applied for a restructuring of their loan with the DBP
which was, thereafter, approved. In a Letter dated October 14, 1983, the DBP informed Cucio of
the approval of the restructuring of the loan of the Spouses Gotangco and requested him to
complete the downpayment of the purchase price of the seven (7) parcels of land so that the
appropriate substitution of the property covered by TCT No. NT-177647, in lieu of the seven (7)
other properties issued by the said Spouses as collateral for their loan, could be effected, and the
appropriate deed of absolute sale over TCT Nos. NT-166092 to NT-166098 could then be
executed by the said Spouses in favor of Cucio.10 As such, Cucio paid the balance of the
purchase price of the said lots to DBP on October 1, 1984.11
On July 3, 1988, the poultry farm of the Spouses Gotangco and the improvements thereon were
gutted by fire.
On December 6, 1988, the DBP Pool of Accredited Insurance Companies informed the DBP that
it had offered to settle the claim of the Spouses Gotangco for the proceeds of the insurance on
their poultry farm for P167,149.14.12The Spouses apparently did not respond.
On February 20, 1989, the DBP wrote the Spouses Gotangco demanding payment of the
balance of their loan in the amount of P408,026.96 within ten (10) days from notice thereof.
However, the Spouses failed to respond or pay their account with the DBP.
By September 30, 1989, the outstanding account of the Spouses Gotangco on the DBP or the
principal of their loan account amounted to P246,183.74.13 The DBP then wrote the Spouses
Gotangco reminding them that their loan would mature on June 30, 1991.
Cucio then filed a complaint against the Spouses Gotangco and the DBP with the RTC of
Palayan City for injunction and damages. Cucio alleged, inter alia, that despite his payment of
the full purchase price of the seven (7) parcels of land covered by TCT Nos. NT-166092 to NT-
166098 and his demands for the turnover of the owner's duplicates of the said title to the
Spouses Gotangco, the DBP refused to do so. He further alleged that the DBP even demanded
the payment of the interest on the loan account of the Spouses Gotangco. Furthermore, the
Spouses Gotangco refused to execute a deed of absolute sale of the said parcels of land in his
favor. Cucio prayed that, after due proceedings, judgment be rendered in his favor, thus:
WHEREFORE, it is respectfully prayed that a Writ of Preliminary Mandatory Injunction be

issued ordering defendants Jacinto Gotangco and Charity Bantug to execute the final
Deed of Sale over TCT Nos. NT-166092, NT-166093, NT-166094, NT-166095, NT-
166096, NT-166097 and NT-166098 and to submit additional collaterals to the
Development Bank of the Philippines (DBP) and the DBP to release the owner's copies
of said titles from its possession and deliver them to plaintiff.
After hearing, making the preliminary injunction permanent and ordering the defendants,
jointly and severally, to pay plaintiff moral damages, the amount of which is left to the
sound discretion of the Honorable Court; actual damages of P50,000.00; attorney's fee
of P30,000.00 and the cost of the suit.
Plaintiff prays for other remedies under the premises.14
The Spouses Gotangco filed their answer15 with counterclaim, alleging that they could not be
faulted for their failure to execute a deed of sale in favor of Cucio over the said parcels of land
because the latter did not notify them that he had already made the complete payment of
the P50,000.00 purchase price thereof to DBP. According to the Spouses Gotangco, considering
that the DBP had given its implied consent to the contract to sell over the subject parcels of land,
it was the DBP's obligation to release the titles after complete payment was made, following the
submission to it of TCT No. NT-177647, the substitute collateral for their loan.
In their cross-claim against the DBP, the Spouses Gotangco alleged the following:
24. That on account of non-approval of loan and non-release of collaterals/securities by

the DBP, the defendants Gotangcos were unnecessarily dragged into litigation by the
plaintiff where the DBP alone should have been sued in the first place, for all these, the
DBP alone should suffer if ever the Spouses Gotangco will be adjudged liable to the
plaintiff; for all the damages.16
The Spouses Gotangco prayed that, after due proceedings, judgment be rendered in their favor,
thus:
WHEREFORE, facts and premises considered, it is most respectfully prayed that

JUDGMENT BE RENDERED:
1. DISMISSING THE COMPLAINT for lack of cause of action and other grounds
stated in the Special and Affirmative Defenses;
2. ON COUNTERCLAIM, condemning the plaintiff to pay moral damages

of P100,000.00, attorney's fees of P25,000.00, more or less, and litigation
expenses of P10,000.00;
3. By way of cross-claim, ordering the other defendant DBP to pay whatever

amount the defendants Gotangcos may suffer in the event they may be adjudged
liable to the plaintiff.
GRANTING UNTO THE DEFENDANTS SPOUSES GOTANGCO reliefs and other

remedies just and proper under the premises and the law.17
In its answer,18 the DBP admitted that it charged Cucio interest on the Spouses Gotangco's loan;
however, it denied that it consented to the transaction between the Spouses Gotangco relative to
the seven (7) parcels of land claimed by Cucio. In its answer to the cross-claim,19 the DBP,
likewise, admitted receiving the P50,000.00 purchase price of the seven parcels of land from
Cucio but only as deposit, and agreeing verbally to the release of the properties, but only after
the Spouses Gotangco shall have fulfilled the conditions set forth in the real estate mortgage. It
further alleged that the Spouses Gotangco failed to comply with the said conditions, and that
their account remained dormant; hence, it refused to release the owner's duplicate copies of the
titles of the properties to the Spouses Gotangco.
While the case was pending, the DBP informed the Spouses Gotangco in a Letter dated
February 20, 199020 that it was going to have the mortgage foreclosed for their failure to settle
their account. Jacinto Gotangco arrived at the Cabanatuan branch office of the DBP to ascertain
the balance of his bank account but received no satisfactory answer. But the DBP sent a
letter21 to the Spouses Gotangco on May 24, 1990, warning them anew that it would institute
foreclosure proceedings for their failure to fulfill their loan obligations which already amounted
to P737,474.33 as of April 30, 1990. On June 8, 1990, the Spouses Gotangco wrote the DBP
requesting for an updated statement of their account and the application of their payments,
inclusive of the proceeds of their insurance claims.22
On the same date, the DBP filed an application for the extrajudicial foreclosure of the real estate
mortgage executed in its favor by the Spouses Gotangco.23 Appended to the application was a
statement of account of the Spouses. On June 7, 1990, Deputy Sheriff Rubentito Elonia issued a
Notice of Sale set on June 28, 1990 to satisfy the obligation of the Spouses Gotangco to the
DBP.24
The Spouses Gotangco wrote DBP anew, on June 14, 1990, protesting the foreclosure, claiming
that they owed DBP only the amount of P246,183.74 as of October 31, 1988.25 However, the DBP
was undaunted.
The Spouses Gotangco forthwith filed a petition before the trial court for a writ of preliminary
injunction26 to enjoin the public auction, alleging that the extrajudicial foreclosure of the real estate
in favor of the DBP would render the decision of the court on the merits moot and academic.27
The DBP opposed the motion, contending that the balance of the account of the Spouses
Gotangco as of April 30, 1990 was P737,474.33, exclusive of interests and expenses.28
The trial court issued a Temporary Restraining Order dated June 26, 1990. After due hearing, the
trial court issued an Order on October 4, 1990, granting the petition of the Spouses Gotangco for
a writ of preliminary injunction on a bond of P50,000.00 pending the resolution of the matters
raised in the main case.29 A writ of preliminary injunction was issued by the trial court after the
Spouses Gotangco posted a bond of P50,000.00. Consequently, the writ was issued on
November 12, 1990.30
The trial court issued a subpoena duces tecum to the cashier of the DBP in Cabanatuan City for
the production of the Spouses Gotangco's bank records reflecting the balance of their account.
However, the cashier failed to comply.31 During the trial, Jacinto Gotangco testified that he
suffered mental anguish and serious anxieties because of the threatened extrajudicial
foreclosure of the real estate mortgage in favor of DBP. Charity Gotangco failed to testify. The
Spouses also adduced in evidence the statement of their account from the DBP.32
On February 8, 1992, Jacinto Gotangco died intestate and was survived by his wife Charity
Bantug Gotangco and their children, Jojina Ann Gotangco, Jaime Gotangco and Jacinto B.
Gotangco, Jr.33
On April 14, 1992, the RTC rendered judgment as follows:
WHEREFORE, judgment is hereby rendered:
(1) Ordering DBP to release the owner's duplicate certificates of TCT Nos. NT-166092 to
NT-166098 to the Gotangcos;
(2) Declaring the owner's duplicate certificate TCT No. NT-177647 in the name of the
Gotangcos as a replacement thereof as their collateral to their restructured loan with
DBP;
(3) Ordering the Gotangcos to, thereafter, execute a deed of absolute sale covering the
properties described in TCT Nos. NT-166092 to NT-166098 in favor of Cucio;
(4) Declaring the writ of preliminary injunction issued on November 12, 1990, enjoining
DBP from foreclosing the properties of the Gotangcos covered by TCT No. NT-166092 to
NT-166098 and TCT No. NT-177647 and from the scheduled auction sale thereof
permanent;
(5) Ordering DBP to pay the Gotangcos the sum of P250,000.00 as moral damages; and
(6) Ordering DBP to pay costs.34
The trial court declared that the DBP was legally bound to release the Spouses Gotangco's
owner's duplicate of the certificates of title over the seven (7) parcels of land; the latter, in turn,
could execute a deed of sale over the property covered by TCT No. NT-177647 in favor of Cucio.
The trial court further ruled that the DBP prematurely sought the extrajudicial foreclosure of the
mortgaged properties considering that as of September 30, 1989, the outstanding loan balance
of the Spouses Gotangco was P246,183.74 with maturity date set on June 30, 1991; and yet the
DBP foreclosed the mortgage extrajudicially for the amount of P737,474.33. It declared that the
extrajudicial foreclosure of the mortgage was evidently made in bad faith and meant to harass
the Spouses Gotangco during the pendency of the case. As such, according to the trial court, the
DBP was liable for moral damages to the said Spouses.
On appeal by the DBP, the CA affirmed the decision, but reduced the award of moral damages
to P50,000.00. The fallo of the decision of the CA reads:
WHEREFORE, premises considered, the decision of the Regional Trial Court of Palayan
City, Nueva Ecija, Branch 40, in Civil Case No. 0061-P is AFFIRMED with modifications.
Appellant DBP is hereby ordered to release the owner's duplicate certificates of TCT
Nos. NT-166092 to NT-166098 to the Gotangcos and the Gotangco spouses to execute
the Deed of Sale in favor of Elpidio O. Cucio who shall cause the annotation of the
mortgage in favor of DBP at the back of the new certificates of title in his name. Appellant
DBP is further ordered to pay the amount of P50,000.00 as moral damages to the
Gotangcos. No pronouncement as to costs.35
The appellate court modified its decision on motion of the DBP, as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court of Palayan
City, Nueva Ecija, Branch 40, in Civil Case No. 0061-P, is AFFIRMED with modifications.
Appellant DBP is hereby ordered to release the owner's duplicate certificates of TCT
Nos. NT-166092 to 166098 to the Gotangcos and the Gotangco spouses to execute the
Deed of Sale in favor of Elpidio O. Cucio who shall cause the annotation of the mortgage
in favor of DBP at the back of the new certificates of title in his name. Thereafter,
pursuant to the subsisting mortgage agreements, DBP shall be entitled to the
possession of the new certificates of title until the mortgage indebtedness is fully
satisfied. Appellant DBP is further ordered to pay the amount of P50,000.00 as moral
damages to the Gotangcos. No pronouncement as to costs.36
The Present Petition
The DBP, now the petitioner, filed the instant petition raising as errors the following:
1. THE PERMANENT INJUNCTION ISSUED BY THE TRIAL COURT AND AFFIRMED

BY THE RESPONDENT COURT OF APPEALS EFFECTIVELY NULLIFIES DBP'S
MORTGAGE LIEN OVER THE PROPERTIES AND WILL CONTRAVENE THE
MANDATORY PROVISIONS OF P.D. NO. 385.
2. THERE IS NEITHER FACTUAL NOR LEGAL BASIS FOR THE GRANT OF MORAL
DAMAGES IN FAVOR OF THE GOTANGCOS AS AGAINST PETITIONER DBP.37
Prefatorily, the issue of whether or not the petitioner caused the extrajudicial foreclosure of the
real estate mortgage to harass the respondents, the Spouses Gotangco, despite the pendency of
the case before the trial court, is one of fact. Under Rule 45 of the Rules of Civil Procedure, only
questions of law may be raised in this Court on petition for review on certiorari. However, the
Court may delve into and resolve questions of facts if grave abuse is shown or such findings are
contrary to the evidence on record or are not supported by preponderant evidence.38
The petitioner asserts that it had the right to enforce its mortgage lien over the property
notwithstanding the transfer of ownership over the same to a third party. It contends that it had
the right to institute foreclosure proceedings, considering that the respondents Spouses
Gotangco failed to comply with the terms of the real estate mortgage executed in favor of DBP.
The petitioner argues that, with the permanent writ of preliminary injunction issued by the trial
court against the petitioner as affirmed by the respondent court, the petitioner is forever barred
from foreclosing the properties mortgaged in the event the loan obligation is never paid, in
contravention with the provisions of Presidential Decree (P.D.) No. 385.39 It posits that it cannot
be held liable for moral damages for exercising its right under the real estate mortgage and the
law. The petitioner further argues that, even if the respondents Spouses Gotangco suffered
mental anguish as a result of the foreclosure, the same qualifies as damnum absque injuria.
Besides, the foreclosure did not push through because of the trial court's injunction order; hence,
there was no damage done to the respondents Spouses Gotangco.
There is merit in petitioner's contention.
The petitioner and the CA, however, misconstrued the width and breadth of the permanent
injunction issued by the RTC and affirmed by the CA, as well as the purpose of the trial court in
issuing the said writ.
It bears stressing that an injunction order must be as definite, clear and precise as possible and,
when practicable, it should inform the defendant of the act he is refrained from doing, without
calling on him for inferences or conclusions about which persons might well differ. A permanent
injunction should not be more comprehensive or restrictive than justified by the pleadings,
evidence and usages of equity.40 Such must be tailored to each case; they should not infringe
upon a conduct that does not produce the harm sought to be avoided.41 An injunction should be
limited to the requirements of the case.42 An injunctive order should never be broader than is
necessary to secure [to] the injured party, without injustice to the adversary, relief warranted by
the circumstances of the particular case. The order should be adequately particularized,
especially where some activities may be permissible and proper.43
Obviously, the trial court issued a permanent injunction to enjoin the petitioner from pursuing its
application for the extrajudicial foreclosure of the real estate mortgage on May 24, 1990 and the
sale at public auction of the property covered by the said mortgage, on its finding that the
petitioner failed to prove how much was the balance of the account of the respondents Spouses
Gotangco to the petitioner as of said date during the trial. The RTC did not perpetually foreclose
the right of the petitioner to file, under any and all circumstances, another application for the
extrajudicial foreclosure of the said mortgage for failure of the respondents spouses to pay the
correct balance of their account secured by the said mortgage. Otherwise, it would have deprived
the petitioner of its right to foreclose the real estate mortgage, to cause the sale of the property at
public auction and collect the balance of the account of the respondents spouses as provided for
under the Real Estate Mortgage and the New Civil Code.44 It would have given the Spouses carte
blanche not to pay the balance of their account to the petitioner without the mortgage being
foreclosed by the latter. The trial court would have deprived the petitioner of its lien over the
property without due process of law.
It must be noted that the petitioner had a mortgage lien over the parcels of land covered by the
real estate mortgage. It is a right in rem, a lien on the property.45 Like an attachment lien, it is a
vested interest, an actual and substantial security, affording specific security for the satisfaction
of the debt put in suit, which constitutes a cloud on the legal title.46 The lien subsists until the
destruction thereof by sale of the property.47
Patently, the trial court issued the writ of preliminary injunction not so much because of the failure
of the respondents Spouses Gotangco to pay at least 20% of their account as provided for in
Section 1 of P.D. No. 385, but because of the then still unresolved issue of whether the petitioner
was obliged to turn over the owner's duplicate copies of TCT Nos. NT-166092 to NT-166098 to
the respondents Spouses Gotangco even after the latter had substituted the property covered by
TCT No. NT-177647 as security for their loan. This is indubitable from the Order of the trial court
dated October 4, 1990 granting the petition of the respondents Spouses Gotangco for the
issuance of a writ of preliminary injunction:
The right of the Gotangcos over the subject properties sought to be protected at this
stage of the proceedings in the case filed against them by Elpidio O. Cucio consists not
so much against the lack of legal and factual basis on the part of the DBP in foreclosing
their properties because their arrearages on their account with it fall short of the
requirement under Sec. 1 of PD 385, but more on the liability of the DBP to release the
owner's duplicate certificates of TCT Nos. NT-166092 to NT-166098 in view of their
having already substituted them with TCT No. NT-177647 covering the parcel of land
under Tax Declaration No. 0502 (Exh. 5, Injunction, record, p. 106). In fact, said exhibit
speaks of Mayor Cucio's purchase of the properties mortgaged by the Gotangcos with
the DBP. This is precisely the cause of action of Mayor Cucio against the Gotangcos
who, in turn, filed a cross-claim against the DBP.
What actually is left for the determination of the Court now during the hearing on the
merits of the main case is whether or not Mayor Cucio has completed the payment of the
agreed price on the mortgaged properties of the Gotangcos with the DBP so that the
DBP will finally be ordered to release the owner's duplicate certificates of TCT No. NT-
166092 to NT-166098 and for the Gotangcos to execute the final deed of sale thereon in
the event that DBP fails (1) to prove that it did not give its consent or express conformity
to the contract to sell executed between Mayor Cucio and the Gotangcos; and (2) to
prove that the Gotangcos failed to comply with the alleged conditions for the release of
the properties (record, pp. 39-40).
Pending resolution on the matters raised in the main case, to allow foreclosure of the
properties by the DBP at this time would, indeed, render the main case nugatory and
ineffectual.48
Indeed, the trial court made it clear that it granted the petition of the respondents Spouses
Gotangco for the issuance of a writ of preliminary injunction "pending resolution on the matters
raised in the main case."49 The Spouses Gotangco, in fact, declared in their motion for a writ of
preliminary injunction that they filed the said motion to prevent the issues in the main case from
becoming moot and academic.
The trial court had already resolved the matter in its decision when it ruled that the petitioner was
obliged to turn over the owner's duplicate certificates of said titles over the seven parcels of land
to the respondents Spouses Gotangco to enable the latter to execute a deed of sale over the
said property in favor of Cucio. In a real sense, the writ of preliminary injunction issued by the
RTC had become functus officio. There was no longer a valid justification for the issuance of a
permanent injunction to perpetually enjoin the petitioner from foreclosing the real estate
mortgage.
In affirming the decision of the RTC, permanently enjoining the petitioner from foreclosing the
real estate mortgage in its favor, the CA ruled that since the trial court failed to determine the
exact amount of the balance of the account of the respondents Spouses Gotangco due to the
petitioner's refusal to produce before the trial court the records showing the balance of the
account of the respondents spouses, it cannot be determined whether the latter failed to pay the
twenty percent (20%) of their total outstanding obligation as envisaged in Section 1 of P.D. No.
385.50
We do not agree with the CA. For one thing, no less than the respondents Spouses Gotangco
adduced in evidence the statement of account issued by the petitioner showing the balance of
their account.51
For another, the trial court itself decided that it issued its order granting the petition of the
respondents Spouses Gotangco not so much because of the latter's failure to pay at least 20% of
their total outstanding obligation to the DBP, but because the extrajudicial foreclosure of the real
estate mortgage would render moot and academic the issues raised by the parties in the case.
One of these issues was whether the petitioner was obliged to turn over the owner's duplicate
copies of TCT Nos. NT-166092 to NT-166098 to the respondents spouses to enable them to
execute a deed of absolute sale over the said lots covered by the said titles to the petitioner. The
failure of the cashier of the Cabanatuan branch of the DBP to produce the DBP records showing
the precise balance of the account of the respondents spouses is not and should not be a
justification to perpetually deprive the petitioner of its right to foreclose the mortgage.
On the issue of moral damages, we agree with the trial court and the CA that the initiation of
extrajudicial foreclosure by the petitioner of the real estate mortgage pendente lite was
premature; hence, inappropriate. Although the Spouses Gotangco failed to heed the petitioner's
repeated demands for the updating of their account and the payment of the balance of the loan, it
behooved the petitioner to tarry until the trial court had decided, with finality, the case on its
merits.
Nevertheless, we find no sufficient basis for the award of moral damages in favor of the
respondents spouses based on Article 19 of the New Civil Code as a result of petitioner's
application for foreclosure of real estate mortgage. For one thing, Charity Bantug Gotangco did
not testify. There is no factual basis for the award of moral damages in her favor.
Abuse of right under Article 19 of the New Civil Code, on which the RTC anchored its award for
damages and attorney's fees, provides:
Art. 19. Every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.
The elements of abuse of rights are the following: (a) the existence of a legal right or duty; (b)
which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another. Malice
or bad faith is at the core of said provision.52 Good faith is presumed and he who alleges bad faith
has the duty to prove the same.53 Good faith refers to the state of the mind which is manifested by
the acts of the individual concerned. It consists of the intention to abstain from taking an
unconscionable and unscrupulous advantage of another. Bad faith does not simply connote bad
judgment or simple negligence, dishonest purpose or some moral obliquity and conscious doing
of a wrong, a breach of known duty due to some motives or interest or ill-will that partakes of the
nature of fraud.54 Malice connotes ill-will or spite and speaks not in response to duty. It implies an
intention to do ulterior and unjustifiable harm. Malice is bad faith or bad motive.55
The Spouses Gotangco failed to prove malice on the part of the petitioner. There was, for sure, a
divergence of opinion between the petitioner, on the one hand, and the Spouses Gotangco, on
the other, relative to the issue of whether Cucio's payments were mere deposits or partial
payments for the lot covered by TCT No. NT-177647, and whether the respondents Spouses
Gotangco had agreed to the offer of the pool of insurers to pay the amount of P167,149.14 as
indemnity for the loss of their poultry farm. However, the bare fact that the petitioner filed its
application of the extrajudicial foreclosure of the mortgage, notwithstanding those differences,
cannot thereby give rise to the conclusion that the petitioner did so with malice, to harass the
Spouses Gotangco. The records show that, time and again, the petitioner had sent notices to the
respondents spouses and demanded the updating of their account and the payment of the
balance thereof, but the respondents spouses failed to comply. In the meantime, interests and
penalties on the loan considerably accrued. Under the terms of the real estate mortgage and its
charter, the petitioner had the right to foreclose the said mortgage extrajudicially. Hence, the
petitioner was constrained to file its application for the extrajudicial foreclosure of the mortgage
for the Spouses Gotangco's past due obligation. Instead of settling their account, the Spouses
filed their petition for a writ of preliminary injunction. Because of the preliminary injunction issued
by the trial court, the foreclosure was aborted. Under the circumstances, it cannot be gainsaid
that the petitioner acted in bad faith or with malice in seeking the extrajudicial foreclosure of the
mortgage in its favor.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The assailed
Decision of the Court of Appeals is AFFIRMED WITH MODIFICATION. The permanent injunction
issued by the Regional Trial Court, as affirmed by the Court of Appeals; and the award for moral
damages in favor of the Spouses Jacinto Gotangco and Charity Bantug are DELETED. No costs.
SO ORDERED
G.R. No. 119107 March 18, 2005
JOSE V. LAGON, Petitioner,

vs.
HONORABLE COURT OF APPEALS and MENANDRO V. LAPUZ, respondents.
DECISION
CORONA, J.:
On June 23, 1982, petitioner Jose Lagon purchased from the estate of Bai Tonina Sepi, through
an intestate court,1two parcels of land located at Tacurong, Sultan Kudarat. A few months after
the sale, private respondent Menandro Lapuz filed a complaint for torts and damages against
petitioner before the Regional Trial Court (RTC) of Sultan Kudarat.
In the complaint, private respondent, as then plaintiff, claimed that he entered into a contract of
lease with the late Bai Tonina Sepi Mengelen Guiabar over three parcels of land (the "property")
in Sultan Kudarat, Maguindanao beginning 1964. One of the provisions agreed upon was for
private respondent to put up commercial buildings which would, in turn, be leased to new
tenants. The rentals to be paid by those tenants would answer for the rent private respondent
was obligated to pay Bai Tonina Sepi for the lease of the land. In 1974, the lease contract ended
but since the construction of the commercial buildings had yet to be completed, the lease
contract was allegedly renewed.
When Bai Tonina Sepi died, private respondent started remitting his rent to the court-appointed
administrator of her estate. But when the administrator advised him to stop collecting rentals from
the tenants of the buildings he constructed, he discovered that petitioner, representing himself as
the new owner of the property, had been collecting rentals from the tenants. He thus filed a
complaint against the latter, accusing petitioner of inducing the heirs of Bai Tonina Sepi to sell
the property to him, thereby violating his leasehold rights over it.
In his answer to the complaint, petitioner denied that he induced the heirs of Bai Tonina to sell
the property to him, contending that the heirs were in dire need of money to pay off the
obligations of the deceased. He also denied interfering with private respondent's leasehold rights
as there was no lease contract covering the property when he purchased it; that his personal
investigation and inquiry revealed no claims or encumbrances on the subject lots.
Petitioner claimed that before he bought the property, he went to Atty. Benjamin Fajardo, the
lawyer who allegedly notarized the lease contract between private respondent and Bai Tonina
Sepi, to verify if the parties indeed renewed the lease contract after it expired in 1974. Petitioner
averred that Atty. Fajardo showed him four copies of the lease renewal but these were all
unsigned. To refute the existence of a lease contract, petitioner presented in court a certification
from the Office of the Clerk of Court confirming that no record of any lease contract notarized by
Atty. Fajardo had been entered into their files. Petitioner added that he only learned of the
alleged lease contract when he was informed that private respondent was collecting rent from the
tenants of the building.
Finding the complaint for tortuous interference to be unwarranted, petitioner filed his
counterclaim and prayed for the payment of actual and moral damages.
On July 29, 1986, the court a quo found for private respondent (plaintiff below):
ACCORDINGLY, judgment is hereby rendered in favor of the plaintiff:

1. Declaring the "Contract of Lease" executed by Bai Tonina Sepi Mangelen Guiabar in
favor of the plaintiff on November 6, 1974 (Exh. "A" and "A-1") over Lot No. 6395, Pls-73.
Lot No 6396. Pls.-73. Lot No. 6399. 3ls-73, and Lot no.9777-A. CSD-11-000076-D (Lot
No. 3-A. 40124), all situated along Ledesma St., Tacurong, Sultan Kudarat, which
document was notarized by Atty. Benjamin S. Fajardo, Sr. and entered into his notarial
register as Doc. No. 619. Page No. 24. Book No. II. Series of 1974, to be authentic and
genuine and as such valid and binding for a period of ten (10) years specified thereon
from November 1, 1974 up to October 31, 1984;
2. Declaring the plaintiff as the lawful owner of the commercial buildings found on the
aforesaid lots and he is entitled to their possession and the collection (of rentals) of the
said commercial buildings within the period covered by this "Contract of Lease" in his
favor;
3. Ordering the defendant to pay to the plaintiff the following:
a) Rentals of the commercial buildings on the lots covered by the "Contract of

Lease" in favor of the plaintiff for the period from October 1, 1978 up to October
31, 1984, including accrued interests in the total amount of Five Hundred Six
Thousand Eight Hundred Five Pesos and Fifty Six Centavos (P506, 850.56), the
same to continue to bear interest at the legal rate of 12% per annum until the
whole amount is fully paid by the defendant to the plaintiff;
b) Moral damages in the amount of One Million Sixty Two Thousand Five
Hundred Pesos (P1,062,500.00);
c) Actual or compensatory damages in the amount of Three Hundred Twelve

Thousand Five Hundred Pesos (P312, 500.00);
d) Exemplary or corrective damages in the amount of One Hundred Eighty

Thousand Five Hundred Pesos (P187,500.00)
e) Temperate or moderate damages in the amount of Sixty Two Thousand Five

Hundred Pesos (P62,500.00);
f) Nominal damages in the amount of Sixty Two Thousand Five Hundred Pesos
(P62,500.00);
g) Attorney's fees in the amount of One Hundred Twenty Five Thousand Pesos
(P125,000.00);
h) Expenses of litigation in the amount of Sixty Two Thousand Five Hundred

Pesos (P62,500.00);
i) Interest on the moral damages, actual or compensatory damages temperate or

moderate damages, nominal damages, attorney's fees and expenses of litigation
in the amounts as specified hereinabove from May 24, 1982 up to June 27, 1986,
in the total amount of Nine Hundred Thousand Pesos (P900,000.00); all of which
will continue to bear interests at a legal rate of 12% per annum until the whole
amounts are fully paid by the defendants to the plaintiffs;
4. For failure of the defendant to deposit with this Court all the rentals he had collected
from the thirteen (13) tenants or occupants of the commercial buildings in question, the
plaintiff is hereby restored to the possession of his commercial buildings for a period of
seventy-three (73) months which is the equivalent of the total period for which he was
prevented from collecting the rentals from the tenants or occupants of his commercial
buildings from October 1, 1978 up to October 31, 1984, and for this purpose a Writ of
Preliminary Injunction is hereby issued, but the plaintiff is likewise ordered to pay to the
defendant the monthly rental of Seven Hundred Pesos (P700.00) every end of the month
for the entire period of seventy three (73) months. This portion of the judgment should be
considered as a mere alternative should the defendant fail to pay the amount of Five
Hundred Five Pesos and Fifty Six Centavos (P506,805.56) hereinabove specified;
5. Dismissing the counterclaim interposed by the defendant for lack of merit;
6. With costs against the defendant.2
Petitioner appealed the judgment to the Court of Appeals.3 In a decision dated January 31,
1995,4 the appellate court modified the assailed judgment of the trial court as follows:
a) The award for moral damages, compensatory damages, exemplary damages,

temperate or moderate damages, and nominal damages as well as expenses of litigation
in the amount of P62,500.00 and interests under paragraph 3-a(a), (b), (c), (d), (e), (f),
(g), (h), and (i) are deleted;
b) The award for attorney's fees is reduced to P30,000.00;
c) Paragraphs 1,2,5 and 6 are AFFIRMED;
d) Additionally, the defendant is hereby ordered to pay to the plaintiff by way of actual
damages the sum of P178,425.00 representing the amount of rentals he collected from
the period of October 1978 to August 1983, and minus the amount of P42,700.00
representing rentals due the defendant computed at P700.00 per month for the period
from August 1978 to August 1983, with interest thereon at the rate until the same is fully
paid;
e) Paragraph 4 is deleted.5
Before the appellate court, petitioner disclaimed knowledge of any lease contract between the
late Bai Tonina Sepi and private respondent. On the other hand, private respondent insisted that
it was impossible for petitioner not to know about the contract since the latter was aware that he
was collecting rentals from the tenants of the building. While the appellate court disbelieved the
contentions of both parties, it nevertheless held that, for petitioner to become liable for damages,
he must have known of the lease contract and must have also acted with malice or bad faith
when he bought the subject parcels of land.
Via this petition for review, petitioner cites the following reasons why the Court should rule in his
favor:
1. The Honorable Court of Appeals seriously erred in holding that petitioner is liable for
interference of contractual relation under Article 1314 of the New Civil Code;
2. The Honorable Court of Appeals erred in not holding that private respondent is
precluded from recovering, if at all, because of laches;
3. The Honorable Court of Appeals erred in holding petitioner liable for actual damages
and attorney's fees, and;
4. The Honorable Court of Appeals erred in dismissing petitioner's counterclaims.6

Article 1314 of the Civil Code provides that any third person who induces another to violate his
contract shall be liable for damages to the other contracting party. The tort recognized in that
provision is known as interference with contractual relations.7 The interference is penalized
because it violates the property rights of a party in a contract to reap the benefits that should
result therefrom.8
The core issue here is whether the purchase by petitioner of the subject property, during the
supposed existence of private respondent's lease contract with the late Bai Tonina Sepi,
constituted tortuous interference for which petitioner should be held liable for damages.
The Court, in the case of So Ping Bun v. Court of Appeals,9 laid down the elements of tortuous
interference with contractual relations: (a) existence of a valid contract; (b) knowledge on the part
of the third person of the existence of the contract and (c) interference of the third person without
legal justification or excuse. In that case, petitioner So Ping Bun occupied the premises which the
corporation of his grandfather was leasing from private respondent, without the knowledge and
permission of the corporation. The corporation, prevented from using the premises for its
business, sued So Ping Bun for tortuous interference.
As regards the first element, the existence of a valid contract must be duly established. To prove
this, private respondent presented in court a notarized copy of the purported lease
renewal.10 While the contract appeared as duly notarized, the notarization thereof, however, only
proved its due execution and delivery but not the veracity of its contents. Nonetheless, after
undergoing the rigid scrutiny of petitioner's counsel and after the trial court declared it to be valid
and subsisting, the notarized copy of the lease contract presented in court appeared to be
incontestable proof that private respondent and the late Bai Tonina Sepi actually renewed their
lease contract. Settled is the rule that until overcome by clear, strong and convincing evidence, a
notarized document continues to be prima facie evidence of the facts that gave rise to its
execution and delivery.11
The second element, on the other hand, requires that there be knowledge on the part of the
interferer that the contract exists. Knowledge of the subsistence of the contract is an essential
element to state a cause of action for tortuous interference.12 A defendant in such a case cannot
be made liable for interfering with a contract he is unaware of.13 While it is not necessary to prove
actual knowledge, he must nonetheless be aware of the facts which, if followed by a reasonable
inquiry, will lead to a complete disclosure of the contractual relations and rights of the parties in
the contract.14
In this case, petitioner claims that he had no knowledge of the lease contract. His sellers (the
heirs of Bai Tonina Sepi) likewise allegedly did not inform him of any existing lease contract.
After a careful perusal of the records, we find the contention of petitioner meritorious. He
conducted his own personal investigation and inquiry, and unearthed no suspicious circumstance
that would have made a cautious man probe deeper and watch out for any conflicting claim over
the property. An examination of the entire property's title bore no indication of the leasehold
interest of private respondent. Even the registry of property had no record of the same.15
Assuming ex gratia argumenti that petitioner knew of the contract, such knowledge alone was not
sufficient to make him liable for tortuous interference. Which brings us to the third element.
According to our ruling in So Ping Bun, petitioner may be held liable only when there was no
legal justification or excuse for his action16 or when his conduct was stirred by a wrongful motive.
To sustain a case for tortuous interference, the defendant must have acted with malice17 or must
have been driven by purely impious reasons to injure the plaintiff. In other words, his act of
interference cannot be justified.18
Furthermore, the records do not support the allegation of private respondent that petitioner
induced the heirs of Bai Tonina Sepi to sell the property to him. The word "induce" refers to
situations where a person causes another to choose one course of conduct by persuasion or
intimidation.19 The records show that the decision of the heirs of the late Bai Tonina Sepi to sell
the property was completely of their own volition and that petitioner did absolutely nothing to
influence their judgment. Private respondent himself did not proffer any evidence to support his
claim. In short, even assuming that private respondent was able to prove the renewal of his lease
contract with Bai Tonina Sepi, the fact was that he was unable to prove malice or bad faith on the
part of petitioner in purchasing the property. Therefore, the claim of tortuous interference was
never established.
In So Ping Bun, the Court discussed whether interference can be justified at all if the interferer
acts for the sole purpose of furthering a personal financial interest, but without malice or bad
faith. As the Court explained it:
x x x, as a general rule, justification for interfering with the business relations of another
exists where the actor's motive is to benefit himself. Such justification does not exist
where the actor's motive is to cause harm to the other. Added to this, some authorities
believe that it is not necessary that the interferer's interest outweigh that of the party
whose rights are invaded, and that an individual acts under an economic interest that is
substantial, not merely de minimis, such that wrongful and malicious motives are
negatived, for he acts in self-protection. Moreover, justification for protecting one's
financial position should not be made to depend on a comparison of his economic
interest in the subject matter with that of the others. It is sufficient if the impetus of his
conduct lies in a proper business interest rather than in wrongful motives.20
The foregoing disquisition applies squarely to the case at bar. In our view, petitioner's purchase
of the subject property was merely an advancement of his financial or economic interests, absent
any proof that he was enthused by improper motives. In the very early case of Gilchrist v.
Cuddy,21 the Court declared that a person is not a malicious interferer if his conduct is impelled
by a proper business interest. In other words, a financial or profit motivation will not necessarily
make a person an officious interferer liable for damages as long as there is no malice or bad faith
involved.
In sum, we rule that, inasmuch as not all three elements to hold petitioner liable for tortuous
interference are present, petitioner cannot be made to answer for private respondent's losses.
This case is one of damnun absque injuria or damage without injury. "Injury" is the legal invasion
of a legal right while "damage" is the hurt, loss or harm which results from the injury.22 In
BPI Express Card Corporation v. Court of Appeals,,23 the Court turned down the claim for
damages of a cardholder whose credit card had been cancelled by petitioner corporation after
several defaults in payment. We held there that there can be damage without injury where the
loss or harm is not the result of a violation of a legal duty. In that instance, the consequences
must be borne by the injured person alone since the law affords no remedy for damages
resulting from an act which does not amount to legal injury or wrong.24 Indeed, lack of malice in
the conduct complained of precludes recovery of damages.25
With respect to the attorney's fees awarded by the appellate court to private respondent, we rule
that it cannot be recovered under the circumstances. According to Article 2208 of the Civil Code,
attorney's fees may be awarded only when it has been stipulated upon or under the instances
provided therein.26 Likewise, being in the concept of actual damages, the award for attorney's
fees must have clear, factual and legal bases27 which, in this case, do not exist.
Regarding the dismissal of petitioner's counterclaim for actual and moral damages, the appellate
court affirmed the assailed order of the trial court because it found no basis to grant the amount
of damages prayed for by petitioner. We find no reason to reverse the trial court and the Court of
Appeals. Actual damages are those awarded in satisfaction of, or in recompense for, loss or
injury sustained. To be recoverable, they must not only be capable of proof but must actually be
proved with a reasonable degree of certainty.28 Petitioner was unable to prove that he suffered
loss or injury, hence, his claim for actual damages must fail. Moreover, petitioner's prayer for
moral damages was not warranted as moral damages should result from the wrongful act of a
person. The worries and anxieties suffered by a party hailed to court litigation are not
compensable.29
With the foregoing discussion, we no longer deem it necessary to delve into the issue of laches.
WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed decision of
the Court of Appeals is hereby REVERSED and SET ASIDE.
No costs.
SO ORDERED
G.R. No. 130547 October 3, 2000
LEAH ALESNA REYES, ROSE NAHDJA, JOHNNY, and minors LLOYD and KRISTINE, all
surnamed REYES, represented by their mother, LEAH ALESNA REYES, petitioners,
vs.
SISTERS OF MERCY HOSPITAL, SISTER ROSE PALACIO, DR. MARVIE BLANES, and DR.
MARLYN RICO, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision1 of the Court of Appeals in CA-G.R. CV No. 36551
affirming the decision of the Regional Trial Court, Branch IX, Cebu City which dismissed a
complaint for damages filed by petitioners against respondents.
The facts are as follows:
Petitioner Leah Alesna Reyes is the wife of the late Jorge Reyes. The other petitioners, namely,
Rose Nahdja, Johnny, Lloyd, and Kristine, all surnamed Reyes, were their children. Five days
before his death on January 8, 1987, Jorge had been suffering from a recurring fever with chills.
After he failed to get relief from some home medication he was taking, which consisted of
analgesic, antipyretic, and antibiotics, he decided to see the doctor.
On January 8, 1987, he was taken to the Mercy Community Clinic by his wife. He was attended
to by respondent Dr. Marlyn Rico, resident physician and admitting physician on duty, who gave
Jorge a physical examination and took his medical history. She noted that at the time of his
admission, Jorge was conscious, ambulatory, oriented, coherent, and with respiratory
distress.2 Typhoid fever was then prevalent in the locality, as the clinic had been getting from 15
to 20 cases of typhoid per month.3 Suspecting that Jorge could be suffering from this disease, Dr.
Rico ordered a Widal Test, a standard test for typhoid fever, to be performed on Jorge. Blood
count, routine urinalysis, stool examination, and malarial smear were also made.4 After about an
hour, the medical technician submitted the results of the test from which Dr. Rico concluded that
Jorge was positive for typhoid fever. As her shift was only up to 5:00 p.m., Dr. Rico indorsed
Jorge to respondent Dr. Marvie Blanes.
Dr. Marvie Blanes attended to Jorge at around six in the evening. She also took Jorge’s history
and gave him a physical examination. Like Dr. Rico, her impression was that Jorge had typhoid
fever. Antibiotics being the accepted treatment for typhoid fever, she ordered that a compatibility
test with the antibiotic chloromycetin be done on Jorge. Said test was administered by nurse
Josephine Pagente who also gave the patient a dose of triglobe. As she did not observe any
adverse reaction by the patient to chloromycetin, Dr. Blanes ordered the first five hundred
milligrams of said antibiotic to be administered on Jorge at around 9:00 p.m. A second dose was
administered on Jorge about three hours later just before midnight.
At around 1:00 a.m. of January 9, 1987, Dr. Blanes was called as Jorge’s temperature rose to
41°C. The patient also experienced chills and exhibited respiratory distress, nausea, vomiting,
and convulsions. Dr. Blanes put him under oxygen, used a suction machine, and administered
hydrocortisone, temporarily easing the patient’s convulsions. When he regained consciousness,
the patient was asked by Dr. Blanes whether he had a previous heart ailment or had suffered
from chest pains in the past. Jorge replied he did not.5 After about 15 minutes, however, Jorge
again started to vomit, showed restlessness, and his convulsions returned. Dr. Blanes re-applied
the emergency measures taken before and, in addition, valium was administered. Jorge,
however, did not respond to the treatment and slipped into cyanosis, a bluish or purplish
discoloration of the skin or mucous membrane due to deficient oxygenation of the blood. At
around 2:00 a.m., Jorge died. He was forty years old. The cause of his death was "Ventricular
Arrythemia Secondary to Hyperpyrexia and typhoid fever."
On June 3, 1987, petitioners filed before the Regional Trial Court of Cebu City a complaint6 for
damages against respondents Sisters of Mercy, Sister Rose Palacio, Dr. Marvie Blanes, Dr.
Marlyn Rico, and nurse Josephine Pagente. On September 24, 1987, petitioners amended their
complaint to implead respondent Mercy Community Clinic as additional defendant and to drop
the name of Josephine Pagente as defendant since she was no longer connected with
respondent hospital. Their principal contention was that Jorge did not die of typhoid
fever.7 Instead, his death was due to the wrongful administration of chloromycetin. They
contended that had respondent doctors exercised due care and diligence, they would not have
recommended and rushed the performance of the Widal Test, hastily concluded that Jorge was
suffering from typhoid fever, and administered chloromycetin without first conducting sufficient
tests on the patient’s compatibility with said drug. They charged respondent clinic and its
directress, Sister Rose Palacio, with negligence in failing to provide adequate facilities and in
hiring negligent doctors and nurses.8
Respondents denied the charges. During the pre-trial conference, the parties agreed to limit the
issues on the following: (1) whether the death of Jorge Reyes was due to or caused by the
negligence, carelessness, imprudence, and lack of skill or foresight on the part of defendants; (2)
whether respondent Mercy Community Clinic was negligent in the hiring of its employees; and (3)
whether either party was entitled to damages. The case was then heard by the trial court during
which, in addition to the testimonies of the parties, the testimonies of doctors as expert witnesses
were presented.
Petitioners offered the testimony of Dr. Apolinar Vacalares, Chief Pathologist at the Northern
Mindanao Training Hospital, Cagayan de Oro City. On January 9, 1987, Dr. Vacalares performed
an autopsy on Jorge Reyes to determine the cause of his death. However, he did not open the
skull to examine the brain. His findings9 showed that the gastro-intestinal tract was normal and
without any ulceration or enlargement of the nodules. Dr. Vacalares testified that Jorge did not
die of typhoid fever. He also stated that he had not seen a patient die of typhoid fever within five
days from the onset of the disease.
For their part, respondents offered the testimonies of Dr. Peter Gotiong and Dr. Ibarra Panopio.
Dr. Gotiong is a diplomate in internal medicine whose expertise is microbiology and infectious
diseases. He is also a consultant at the Cebu City Medical Center and an associate professor of
medicine at the South Western University College of Medicine in Cebu City. He had treated over
a thousand cases of typhoid patients. According to Dr. Gotiong, the patient’s history and positive
Widal Test results ratio of 1:320 would make him suspect that the patient had typhoid fever. As to
Dr. Vacalares’ observation regarding the absence of ulceration in Jorge’s gastro-intestinal tract,
Dr. Gotiong said that such hyperplasia in the intestines of a typhoid victim may be microscopic.
He noted that since the toxic effect of typhoid fever may lead to meningitis, Dr. Vacalares’
autopsy should have included an examination of the brain.10
The other doctor presented was Dr. Ibarra Panopio, a member of the American Board of
Pathology, examiner of the Philippine Board of Pathology from 1978 to 1991, fellow of the
Philippine Society of Pathologist, associate professor of the Cebu Institute of Medicine, and chief
pathologist of the Andres Soriano Jr. Memorial Hospital in Toledo City. Dr. Panopio stated that
although he was partial to the use of the culture test for its greater reliability in the diagnosis of
typhoid fever, the Widal Test may also be used. Like Dr. Gotiong, he agreed that the 1:320 ratio
in Jorge’s case was already the maximum by which a conclusion of typhoid fever may be made.
No additional information may be deduced from a higher dilution.11 He said that Dr. Vacalares’
autopsy on Jorge was incomplete and thus inconclusive.
On September 12, 1991, the trial court rendered its decision absolving respondents from the
charges of negligence and dismissing petitioners’ action for damages. The trial court likewise
dismissed respondents’ counterclaim, holding that, in seeking damages from respondents,
petitioners were impelled by the honest belief that Jorge’s death was due to the latter’s
negligence.
Petitioners brought the matter to the Court of Appeals. On July 31, 1997, the Court of Appeals
affirmed the decision of the trial court.
Hence this petition.
Petitioners raise the following assignment of errors:
I. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR

WHEN IT RULED THAT THE DOCTRINE OF RES IPSA LOQUITUR IS NOT
APPLICABLE IN THE INSTANT CASE.
II. THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR

WHEN IT MADE AN UNFOUNDED ASSUMPTION THAT THE LEVEL OF MEDICAL
PRACTICE IS LOWER IN ILIGAN CITY.
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED

FOR A LESSER STANDARD OF CARE AND DEGREE OF DILIGENCE FOR MEDICAL
PRACTICE IN ILIGAN CITY WHEN IT APPRECIATE[D] NO DOCTOR’S NEGLIGENCE
IN THE TREATMENT OF JORGE REYES.
Petitioner’s action is for medical malpractice. This is a particular form of negligence which
consists in the failure of a physician or surgeon to apply to his practice of medicine that degree of
care and skill which is ordinarily employed by the profession generally, under similar conditions,
and in like surrounding circumstances.12 In order to successfully pursue such a claim, a patient
must prove that the physician or surgeon either failed to do something which a reasonably
prudent physician or surgeon would have done, or that he or she did something that a
reasonably prudent physician or surgeon would not have done, and that the failure or action
caused injury to the patient.13 There are thus four elements involved in medical negligence cases,
namely: duty, breach, injury, and proximate causation.
In the present case, there is no doubt that a physician-patient relationship existed between
respondent doctors and Jorge Reyes. Respondents were thus duty-bound to use at least the
same level of care that any reasonably competent doctor would use to treat a condition under the
same circumstances. It is breach of this duty which constitutes actionable malpractice.14 As to this
aspect of medical malpractice, the determination of the reasonable level of care and the breach
thereof, expert testimony is essential. Inasmuch as the causes of the injuries involved in
malpractice actions are determinable only in the light of scientific knowledge, it has been
recognized that expert testimony is usually necessary to support the conclusion as to causation.15
Res Ipsa Loquitur
There is a case when expert testimony may be dispensed with, and that is under the doctrine
of res ipsa loquitur. As held in Ramos v. Court of Appeals:16
Although generally, expert medical testimony is relied upon in malpractice suits to prove that a
physician has done a negligent act or that he has deviated from the standard medical procedure,
when the doctrine of res ipsa loquitor is availed by the plaintiff, the need for expert medical
testimony is dispensed with because the injury itself provides the proof of negligence. The
reason is that the general rule on the necessity of expert testimony applies only to such matters
clearly within the domain of medical science, and not to matters that are within the common
knowledge of mankind which may be testified to by anyone familiar with the facts. Ordinarily, only
physicians and surgeons of skill and experience are competent to testify as to whether a patient
has been treated or operated upon with a reasonable degree of skill and care. However,
testimony as to the statements and acts of physicians and surgeons, external appearances, and
manifest conditions which are observable by any one may be given by non-expert
witnesses. Hence, in cases where the res ipsa loquitur is applicable, the court is permitted to find
a physician negligent upon proper proof of injury to the patient, without the aid of expert
testimony, where the court from its fund of common knowledge can determine the proper
standard of care. Where common knowledge and experience teach that a resulting injury would
not have occurred to the patient if due care had been exercised, an inference of negligence may
be drawn giving rise to an application of the doctrine of res ipsa loquitur without medical
evidence, which is ordinarily required to show not only what occurred but how and why it
occurred. When the doctrine is appropriate, all that the patient must do is prove a nexus between
the particular act or omission complained of and the injury sustained while under the custody and
management of the defendant without need to produce expert medical testimony to establish the
standard of care. Resort to res ipsa loquitor is allowed because there is no other way, under
usual and ordinary conditions, by which the patient can obtain redress for injury suffered by him.
Thus, courts of other jurisdictions have applied the doctrine in the following situations: leaving of
a foreign object in the body of the patient after an operation, injuries sustained on a healthy part
of the body which was not under, or in the area, of treatment, removal of the wrong part of the
body when another part was intended, knocking out a tooth while a patient’s jaw was under
anesthetic for the removal of his tonsils, and loss of an eye while the patient was under the
influence of anesthetic, during or following an operation for appendicitis, among others.17
Petitioners asserted in the Court of Appeals that the doctrine of res ipsa loquitur applies to the
present case because Jorge Reyes was merely experiencing fever and chills for five days and
was fully conscious, coherent, and ambulant when he went to the hospital. Yet, he died after only
ten hours from the time of his admission.
This contention was rejected by the appellate court.
Petitioners now contend that all requisites for the application of res ipsa loquitur were present,
namely: (1) the accident was of a kind which does not ordinarily occur unless someone is
negligent; (2) the instrumentality or agency which caused the injury was under the exclusive
control of the person in charge; and (3) the injury suffered must not have been due to any
voluntary action or contribution of the person injured.18
The contention is without merit. We agree with the ruling of the Court of Appeals. In
the Ramos case, the question was whether a surgeon, an anesthesiologist, and a hospital should
be made liable for the comatose condition of a patient scheduled for cholecystectomy.19 In that
case, the patient was given anesthesia prior to her operation. Noting that the patient was
neurologically sound at the time of her operation, the Court applied the doctrine of res ipsa
loquitur as mental brain damage does not normally occur in a gallblader operation in the absence
of negligence of the anesthesiologist. Taking judicial notice that anesthesia procedures had
become so common that even an ordinary person could tell if it was administered properly, we
allowed the testimony of a witness who was not an expert. In this case, while it is true that the
patient died just a few hours after professional medical assistance was rendered, there is really
nothing unusual or extraordinary about his death. Prior to his admission, the patient already had
recurring fevers and chills for five days unrelieved by the analgesic, antipyretic, and antibiotics
given him by his wife. This shows that he had been suffering from a serious illness and
professional medical help came too late for him.
Respondents alleged failure to observe due care was not immediately apparent to a layman so
as to justify application of res ipsa loquitur. The question required expert opinion on the alleged
breach by respondents of the standard of care required by the circumstances. Furthermore, on
the issue of the correctness of her diagnosis, no presumption of negligence can be applied to Dr.
Marlyn Rico.As held in Ramos:
. . . . Res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily used but a rule to be
cautiously applied, depending upon the circumstances of each case. It is generally restricted to
situations in malpractice cases where a layman is able to say, as a matter of common knowledge
and observation, that the consequences of professional care were not as such as would
ordinarily have followed if due care had been exercised. A distinction must be made between the
failure to secure results, and the occurrence of something more unusual and not ordinarily found
if the service or treatment rendered followed the usual procedure of those skilled in that particular
practice. It must be conceded that the doctrine of res ipsa loquitur can have no application in a
suit against a physician or a surgeon which involves the merits of a diagnosis or of a scientific
treatment. The physician or surgeon is not required at his peril to explain why any particular
diagnosis was not correct, or why any particular scientific treatment did not produce the desired
result.20
Specific Acts of Negligence
We turn to the question whether petitioners have established specific acts of negligence
allegedly committed by respondent doctors.
Petitioners contend that: (1) Dr. Marlyn Rico hastily and erroneously relied upon the Widal test,
diagnosed Jorge’s illness as typhoid fever, and immediately prescribed the administration of the
antibiotic chloromycetin;21 and (2) Dr. Marvie Blanes erred in ordering the administration of the
second dose of 500 milligrams of chloromycetin barely three hours after the first was
given.22 Petitioners presented the testimony of Dr. Apolinar Vacalares, Chief Pathologist of the
Northern Mindanao Training Hospital, Cagayan de Oro City, who performed an autopsy on the
body of Jorge Reyes. Dr. Vacalares testified that, based on his findings during the autopsy, Jorge
Reyes did not die of typhoid fever but of shock undetermined, which could be due to allergic
reaction or chloromycetin overdose. We are not persuaded.
First. While petitioners presented Dr. Apolinar Vacalares as an expert witness, we do not find
him to be so as he is not a specialist on infectious diseases like typhoid fever. Furthermore,
although he may have had extensive experience in performing autopsies, he admitted that he
had yet to do one on the body of a typhoid victim at the time he conducted the postmortem on
Jorge Reyes. It is also plain from his testimony that he has treated only about three cases of
typhoid fever. Thus, he testified that:23
ATTY. PASCUAL:
Q Why? Have you not testified earlier that you have never seen a patient who died of typhoid
fever?
A In autopsy. But, that was when I was a resident physician yet.
Q But you have not performed an autopsy of a patient who died of typhoid fever?
A I have not seen one.
Q And you testified that you have never seen a patient who died of typhoid fever within five
days?
A I have not seen one.
Q How many typhoid fever cases had you seen while you were in the general practice of
medicine?
A In our case we had no widal test that time so we cannot consider that the typhoid fever is like
this and like that. And the widal test does not specify the time of the typhoid fever.
Q The question is: how many typhoid fever cases had you seen in your general practice
regardless of the cases now you practice?
A I had only seen three cases.
Q And that was way back in 1964?
A Way back after my training in UP.
Q Clinically?
A Way back before my training.
He is thus not qualified to prove that Dr. Marlyn Rico erred in her diagnosis. Both lower courts
were therefore correct in discarding his testimony, which is really inadmissible.
In Ramos, the defendants presented the testimony of a pulmonologist to prove that brain injury
was due to oxygen deprivation after the patient had bronchospasms24 triggered by her allergic
response to a drug,25 and not due to faulty intubation by the anesthesiologist. As the issue was
whether the intubation was properly performed by an anesthesiologist, we rejected the opinion of
the pulmonologist on the ground that he was not: (1) an anesthesiologist who could enlighten the
court about anesthesia practice, procedure, and their complications; nor (2) an allergologist who
could properly advance expert opinion on allergic mediated processes; nor (3) a pharmacologist
who could explain the pharmacologic and toxic effects of the drug allegedly responsible for the
bronchospasms.
Second. On the other hand, the two doctors presented by respondents clearly were experts on
the subject. They vouched for the correctness of Dr. Marlyn Rico’s diagnosis. Dr. Peter Gotiong,
a diplomate whose specialization is infectious diseases and microbiology and an associate
professor at the Southwestern University College of Medicine and the Gullas College of
Medicine, testified that he has already treated over a thousand cases of typhoid fever.26 According
to him, when a case of typhoid fever is suspected, the Widal test is normally used,27 and if the
1:320 results of the Widal test on Jorge Reyes had been presented to him along with the
patient’s history, his impression would also be that the patient was suffering from typhoid
fever.28 As to the treatment of the disease, he stated that chloromycetin was the drug of
choice.29 He also explained that despite the measures taken by respondent doctors and the
intravenous administration of two doses of chloromycetin, complications of the disease could not
be discounted. His testimony is as follows:30
ATTY. PASCUAL:
Q If with that count with the test of positive for 1 is to 320, what treatment if any would be given?
A If those are the findings that would be presented to me, the first thing I would consider would
be typhoid fever.
Q And presently what are the treatments commonly used?
A Drug of choice of chloramphenical.

Q Doctor, if given the same patient and after you have administered chloramphenical about 3 1/2
hours later, the patient associated with chills, temperature - 41oC, what could possibly come to
your mind?
A Well, when it is change in the clinical finding, you have to think of complication.
Q And what will you consider on the complication of typhoid?
A One must first understand that typhoid fever is toximia. The problem is complications are
caused by toxins produced by the bacteria . . . whether you have suffered complications to think
of -- heart toxic myocardities; then you can consider a toxic meningitis and other complications
and perforations and bleeding in the ilium.
Q Even that 40-year old married patient who received medication of chloromycetin of 500
milligrams intravenous, after the skin test, and received a second dose of chloromycetin of 500
miligrams, 3 hours later, the patient developed chills . . . rise in temperature to 41oC, and then
about 40 minutes later the temperature rose to 100oF, cardiac rate of 150 per minute who
appeared to be coherent, restless, nauseating, with seizures: what significance could you attach
to these clinical changes?
A I would then think of toxemia, which was toxic meningitis and probably a toxic meningitis
because of the high cardiac rate.
Q Even if the same patient who, after having given intramuscular valium, became conscious and
coherent about 20 minutes later, have seizure and cyanosis and rolling of eyeballs and vomitting
. . . and death: what significance would you attach to this development?
A We are probably dealing with typhoid to meningitis.
Q In such case, Doctor, what finding if any could you expect on the post-mortem examination?
A No, the finding would be more on the meninges or covering of the brain.
Q And in order to see those changes would it require opening the skull?
A Yes.
As regards Dr. Vacalares’ finding during the autopsy that the deceased’s gastro-intestinal tract
was normal, Dr. Rico explained that, while hyperplasia31 in the payer’s patches or layers of the
small intestines is present in typhoid fever, the same may not always be grossly visible and a
microscope was needed to see the texture of the cells.32
Respondents also presented the testimony of Dr. Ibarra T. Panopio who is a member of the
Philippine and American Board of Pathology, an examiner of the Philippine Board of Pathology,
and chief pathologist at the MetroCebu Community Hospital, Perpetual Succor Hospital, and the
Andres Soriano Jr. Memorial Medical Center. He stated that, as a clinical pathologist, he
recognized that the Widal test is used for typhoid patients, although he did not encourage its use
because a single test would only give a presumption necessitating that the test be repeated,
becoming more conclusive at the second and third weeks of the disease.33 He corroborated Dr.
Gotiong’s testimony that the danger with typhoid fever is really the possible complications which
could develop like perforation, hemorrhage, as well as liver and cerebral complications.34 As
regards the 1:320 results of the Widal test on Jorge Reyes, Dr. Panopio stated that no additional
information could be obtained from a higher ratio.35 He also agreed with Dr. Gotiong that
hyperplasia in the payer’s patches may be microscopic.36
Indeed, the standard contemplated is not what is actually the average merit among all known
practitioners from the best to the worst and from the most to the least experienced, but the
reasonable average merit among the ordinarily good physicians.37 Here, Dr. Marlyn Rico did not
depart from the reasonable standard recommended by the experts as she in fact observed the
due care required under the circumstances. Though the Widal test is not conclusive, it remains a
standard diagnostic test for typhoid fever and, in the present case, greater accuracy through
repeated testing was rendered unobtainable by the early death of the patient. The results of the
Widal test and the patient’s history of fever with chills for five days, taken with the fact that
typhoid fever was then prevalent as indicated by the fact that the clinic had been getting about 15
to 20 typhoid cases a month, were sufficient to give upon any doctor of reasonable skill the
impression that Jorge Reyes had typhoid fever.
Dr. Rico was also justified in recommending the administration of the drug chloromycetin, the
drug of choice for typhoid fever. The burden of proving that Jorge Reyes was suffering from any
other illness rested with the petitioners. As they failed to present expert opinion on this,
preponderant evidence to support their contention is clearly absent.
Third. Petitioners contend that respondent Dr. Marvie Blanes, who took over from Dr. Rico, was
negligent in ordering the intravenous administration of two doses of 500 milligrams of
chloromycetin at an interval of less than three hours. Petitioners claim that Jorge Reyes died of
anaphylactic shock38 or possibly from overdose as the second dose should have been
administered five to six hours after the first, per instruction of Dr. Marlyn Rico. As held by the
Court of Appeals, however:
That chloromycetin was likewise a proper prescription is best established by medical authority.
Wilson, et. al., in Harrison’s Principle of Internal Medicine, 12th ed. write that chlorampenicol
(which is the generic of chloromycetin) is the drug of choice for typhoid fever and that no drug
has yet proven better in promoting a favorable clinical response. "Chlorampenicol
(Chloromycetin) is specifically indicated for bacterial meningitis, typhoid fever, rickettsial
infections, bacteriodes infections, etc." (PIMS Annual, 1994, p. 211) The dosage likewise
including the first administration of five hundred milligrams (500 mg.) at around nine o’clock in the
evening and the second dose at around 11:30 the same night was still within medically
acceptable limits, since the recommended dose of chloromycetin is one (1) gram every six (6)
hours. (cf. Pediatric Drug Handbook, 1st Ed., Philippine Pediatric Society, Committee on
Therapeutics and Toxicology, 1996). The intravenous route is likewise correct. (Mansser, O’Nick,
Pharmacology and Therapeutics) Even if the test was not administered by the physician-on-duty,
the evidence introduced that it was Dra. Blanes who interpreted the results remain
uncontroverted. (Decision, pp. 16-17) Once more, this Court rejects any claim of professional
negligence in this regard.
....
As regards anaphylactic shock, the usual way of guarding against it prior to the administration of
a drug, is the skin test of which, however, it has been observed: "Skin testing with haptenic drugs
is generally not reliable. Certain drugs cause nonspecific histamine release, producing a weal-
and-flare reaction in normal individuals. Immunologic activation of mast cells requires a
polyvalent allergen, so a negative skin test to a univalent haptenic drug does not rule out
anaphylactic sensitivity to that drug." (Terr, "Anaphylaxis and Urticaria" in Basic and Clinical
Immunology, p. 349) What all this means legally is that even if the deceased suffered from an
anaphylactic shock, this, of itself, would not yet establish the negligence of the appellee-
physicians for all that the law requires of them is that they perform the standard tests and
perform standard procedures. The law cannot require them to predict every possible reaction to
all drugs administered. The onus probandi was on the appellants to establish, before the trial
court, that the appellee-physicians ignored standard medical procedure, prescribed and
administered medication with recklessness and exhibited an absence of the competence and
skills expected of general practitioners similarly situated.39
Fourth. Petitioners correctly observe that the medical profession is one which, like the business
of a common carrier, is affected with public interest. Moreover, they assert that since the law
imposes upon common carriers the duty of observing extraordinary diligence in the vigilance over
the goods and for the safety of the passengers,40physicians and surgeons should have the same
duty toward their patients.41 They also contend that the Court of Appeals erred when it allegedly
assumed that the level of medical practice is lower in Iligan City, thereby reducing the standard of
care and degree of diligence required from physicians and surgeons in Iligan City.
The standard of extraordinary diligence is peculiar to common carriers. The Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to the circumstances of each case. . . .
The practice of medicine is a profession engaged in only by qualified individuals. It is a right

1âwphi 1
earned through years of education, training, and by first obtaining a license from the state
through professional board examinations. Such license may, at any time and for cause, be
revoked by the government. In addition to state regulation, the conduct of doctors is also strictly
governed by the Hippocratic Oath, an ancient code of discipline and ethical rules which doctors
have imposed upon themselves in recognition and acceptance of their great responsibility to
society. Given these safeguards, there is no need to expressly require of doctors the observance
of "extraordinary" diligence. As it is now, the practice of medicine is already conditioned upon the
highest degree of diligence. And, as we have already noted, the standard contemplated for
doctors is simply the reasonable average merit among ordinarily good physicians. That is
reasonable diligence for doctors or, as the Court of Appeals called it, the reasonable "skill and
competence . . . that a physician in the same or similar locality . . . should apply."
WHEREFORE, the instant petition is DENIED and the decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.
G.R. No. 126297 January 31, 2007
PROFESSIONAL SERVICES, INC., Petitioner,

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.
x-----------------------x
G.R. No. 126467 January 31, 2007
NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR.,
EMMA AGANA ANDAYA, JESUS AGANA, and RAYMUND AGANA) and ENRIQUE
AGANA, Petitioners,
vs.
JUAN FUENTES, Respondent.
x- - - - - - - - - - - - - - - - - - - -- - - - x
G.R. No. 127590 January 31, 2007
MIGUEL AMPIL, Petitioner,

vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Hospitals, having undertaken one of mankind’s most important and delicate endeavors, must
assume the grave responsibility of pursuing it with appropriate care. The care and service
dispensed through this high trust, however technical, complex and esoteric its character may be,
must meet standards of responsibility commensurate with the undertaking to preserve and
protect the health, and indeed, the very lives of those placed in the hospital’s keeping.1
Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals’
Decision2 dated September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198
affirming with modification the Decision3dated March 17, 1993 of the Regional Trial Court (RTC),
Branch 96, Quezon City in Civil Case No. Q-43322 and nullifying its Order dated September 21,
1993.
The facts, as culled from the records, are:
On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City
Hospital) because of difficulty of bowel movement and bloody anal discharge. After a series of
medical examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be
suffering from "cancer of the sigmoid."
On April 11, 1984, Dr. Ampil, assisted by the medical staff4 of the Medical City Hospital,
performed an anterior resection surgery on Natividad. He found that the malignancy in her
sigmoid area had spread on her left ovary, necessitating the removal of certain portions of it.
Thus, Dr. Ampil obtained the consent of Natividad’s husband, Enrique Agana, to permit Dr. Juan
Fuentes, respondent in G.R. No. 126467, to perform hysterectomy on her.
After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation
and closed the incision.
However, the operation appeared to be flawed. In the corresponding Record of Operation dated
April 11, 1984, the attending nurses entered these remarks:
"sponge count lacking 2
"announced to surgeon searched (sic) done but to no avail continue for closure."
On April 24, 1984, Natividad was released from the hospital. Her hospital and medical bills,
including the doctors’ fees, amounted to P60,000.00.
After a couple of days, Natividad complained of excruciating pain in her anal region. She
consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural
consequence of the surgery. Dr. Ampil then recommended that she consult an oncologist to
examine the cancerous nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek
further treatment. After four months of consultations and laboratory examinations, Natividad was
told she was free of cancer. Hence, she was advised to return to the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two weeks
thereafter, her daughter found a piece of gauze protruding from her vagina. Upon being informed
about it, Dr. Ampil proceeded to her house where he managed to extract by hand a piece of
gauze measuring 1.5 inches in width. He then assured her that the pains would soon vanish.
Dr. Ampil’s assurance did not come true. Instead, the pains intensified, prompting Natividad to
seek treatment at the Polymedic General Hospital. While confined there, Dr. Ramon Gutierrez
detected the presence of another foreign object in her vagina -- a foul-smelling gauze measuring
1.5 inches in width which badly infected her vaginal vault. A recto-vaginal fistula had formed in
her reproductive organs which forced stool to excrete through the vagina. Another surgical
operation was needed to remedy the damage. Thus, in October 1984, Natividad underwent
another surgery.
On November 12, 1984, Natividad and her husband filed with the RTC, Branch 96, Quezon City
a complaint for damages against the Professional Services, Inc. (PSI), owner of the Medical City
Hospital, Dr. Ampil, and Dr. Fuentes, docketed as Civil Case No. Q-43322. They alleged that the
latter are liable for negligence for leaving two pieces of gauze inside Natividad’s body and
malpractice for concealing their acts of negligence.
Meanwhile, Enrique Agana also filed with the Professional Regulation Commission (PRC) an
administrative complaint for gross negligence and malpractice against Dr. Ampil and Dr. Fuentes,
docketed as Administrative Case No. 1690. The PRC Board of Medicine heard the case only with
respect to Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who was then in the
United States.
On February 16, 1986, pending the outcome of the above cases, Natividad died and was duly
substituted by her above-named children (the Aganas).
On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil
and Dr. Fuentes liable for negligence and malpractice, the decretal part of which reads:
WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the defendants
PROFESSIONAL SERVICES, INC., DR. MIGUEL AMPIL and DR. JUAN FUENTES to pay to the
plaintiffs, jointly and severally, except in respect of the award for exemplary damages and the
interest thereon which are the liabilities of defendants Dr. Ampil and Dr. Fuentes only, as follows:
1. As actual damages, the following amounts:
a. The equivalent in Philippine Currency of the total of US$19,900.00 at the rate

of P21.60-US$1.00, as reimbursement of actual expenses incurred in the United
States of America;
b. The sum of P4,800.00 as travel taxes of plaintiffs and their physician daughter;
c. The total sum of P45,802.50, representing the cost of hospitalization at

Polymedic Hospital, medical fees, and cost of the saline solution;
2. As moral damages, the sum of P2,000,000.00;
3. As exemplary damages, the sum of P300,000.00;
4. As attorney’s fees, the sum of P250,000.00;
5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of filing of
the complaint until full payment; and
6. Costs of suit.
SO ORDERED.
Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of Appeals,
docketed as CA-G.R. CV No. 42062.
Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a partial execution of its
Decision, which was granted in an Order dated May 11, 1993. Thereafter, the sheriff levied upon
certain properties of Dr. Ampil and sold them for P451,275.00 and delivered the amount to the
Aganas.
Following their receipt of the money, the Aganas entered into an agreement with PSI and Dr.
Fuentes to indefinitely suspend any further execution of the RTC Decision. However, not long
thereafter, the Aganas again filed a motion for an alias writ of execution against the properties of
PSI and Dr. Fuentes. On September 21, 1993, the RTC granted the motion and issued the
corresponding writ, prompting Dr. Fuentes to file with the Court of Appeals a petition for certiorari
and prohibition, with prayer for preliminary injunction, docketed as CA-G.R. SP No. 32198.
During its pendency, the Court of Appeals issued a Resolution5 dated October 29, 1993 granting
Dr. Fuentes’ prayer for injunctive relief.
On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No. 42062.
Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision6 in
Administrative Case No. 1690 dismissing the case against Dr. Fuentes. The Board held that the
prosecution failed to show that Dr. Fuentes was the one who left the two pieces of gauze inside
Natividad’s body; and that he concealed such fact from Natividad.
On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing of CA-G.R.
CV No. 42062 and CA-G.R. SP No. 32198, thus:
WHEREFORE, except for the modification that the case against defendant-appellant Dr. Juan
Fuentes is hereby DISMISSED, and with the pronouncement that defendant-appellant Dr. Miguel
Ampil is liable to reimburse defendant-appellant Professional Services, Inc., whatever amount
the latter will pay or had paid to the plaintiffs-appellees, the decision appealed from is hereby
AFFIRMED and the instant appeal DISMISSED.
Concomitant with the above, the petition for certiorari and prohibition filed by herein defendant-
appellant Dr. Juan Fuentes in CA-G.R. SP No. 32198 is hereby GRANTED and the challenged
order of the respondent judge dated September 21, 1993, as well as the alias writ of execution
issued pursuant thereto are hereby NULLIFIED and SET ASIDE. The bond posted by the
petitioner in connection with the writ of preliminary injunction issued by this Court on November
29, 1993 is hereby cancelled.
Costs against defendants-appellants Dr. Miguel Ampil and Professional Services, Inc.
SO ORDERED.
Only Dr. Ampil filed a motion for reconsideration, but it was denied in a Resolution7 dated
December 19, 1996.
Hence, the instant consolidated petitions.
In G.R. No. 126297, PSI alleged in its petition that the Court of Appeals erred in holding that: (1)
it is estopped from raising the defense that Dr. Ampil is not its employee; (2) it is solidarily liable
with Dr. Ampil; and (3) it is not entitled to its counterclaim against the Aganas. PSI contends that
Dr. Ampil is not its employee, but a mere consultant or independent contractor. As such, he
alone should answer for his negligence.
In G.R. No. 126467, the Aganas maintain that the Court of Appeals erred in finding that Dr.
Fuentes is not guilty of negligence or medical malpractice, invoking the doctrine of res ipsa
loquitur. They contend that the pieces of gauze are prima facie proofs that the operating
surgeons have been negligent.
Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred in finding him liable
for negligence and malpractice sans evidence that he left the two pieces of gauze in Natividad’s
vagina. He pointed to other probable causes, such as: (1) it was Dr. Fuentes who used gauzes in
performing the hysterectomy; (2) the attending nurses’ failure to properly count the gauzes used
during surgery; and (3) the medical intervention of the American doctors who examined Natividad
in the United States of America.
For our resolution are these three vital issues: first, whether the Court of Appeals erred in holding
Dr. Ampil liable for negligence and malpractice; second, whether the Court of Appeals erred in
absolving Dr. Fuentes of any liability; and third, whether PSI may be held solidarily liable for the
negligence of Dr. Ampil.
I - G.R. No. 127590
Whether the Court of Appeals Erred in Holding Dr. Ampil
Liable for Negligence and Malpractice.
Dr. Ampil, in an attempt to absolve himself, gears the Court’s attention to other possible causes
of Natividad’s detriment. He argues that the Court should not discount either of the following
possibilities: first, Dr. Fuentes left the gauzes in Natividad’s body after performing hysterectomy;
second, the attending nurses erred in counting the gauzes; and third, the American doctors were
the ones who placed the gauzes in Natividad’s body.
Dr. Ampil’s arguments are purely conjectural and without basis. Records show that he did not
present any evidence to prove that the American doctors were the ones who put or left the
gauzes in Natividad’s body. Neither did he submit evidence to rebut the correctness of the record
of operation, particularly the number of gauzes used. As to the alleged negligence of Dr.
Fuentes, we are mindful that Dr. Ampil examined his (Dr. Fuentes’) work and found it in order.
The glaring truth is that all the major circumstances, taken together, as specified by the Court of
Appeals, directly point to Dr. Ampil as the negligent party, thus:
First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding
of the patient during the surgical operation.
Second, immediately after the operation, the nurses who assisted in the surgery noted in
their report that the ‘sponge count (was) lacking 2’; that such anomaly was ‘announced to
surgeon’ and that a ‘search was done but to no avail’ prompting Dr. Ampil to ‘continue for
closure’ x x x.
Third, after the operation, two (2) gauzes were extracted from the same spot of the body
of Mrs. Agana where the surgery was performed.
An operation requiring the placing of sponges in the incision is not complete until the sponges
are properly removed, and it is settled that the leaving of sponges or other foreign substances in
the wound after the incision has been closed is at least prima facie negligence by the operating
surgeon.8 To put it simply, such act is considered so inconsistent with due care as to raise an
inference of negligence. There are even legions of authorities to the effect that such act is
negligence per se.9
Of course, the Court is not blind to the reality that there are times when danger to a patient’s life
precludes a surgeon from further searching missing sponges or foreign objects left in the body.
But this does not leave him free from any obligation. Even if it has been shown that a surgeon
was required by the urgent necessities of the case to leave a sponge in his patient’s abdomen,
because of the dangers attendant upon delay, still, it is his legal duty to so inform his patient
within a reasonable time thereafter by advising her of what he had been compelled to do. This is
in order that she might seek relief from the effects of the foreign object left in her body as her
condition might permit. The ruling in Smith v. Zeagler10 is explicit, thus:
The removal of all sponges used is part of a surgical operation, and when a physician or surgeon
fails to remove a sponge he has placed in his patient’s body that should be removed as part of
the operation, he thereby leaves his operation uncompleted and creates a new condition which
imposes upon him the legal duty of calling the new condition to his patient’s attention, and
endeavoring with the means he has at hand to minimize and avoid untoward results likely to
ensue therefrom.
Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even
misled her that the pain she was experiencing was the ordinary consequence of her operation.
Had he been more candid, Natividad could have taken the immediate and appropriate medical
remedy to remove the gauzes from her body. To our mind, what was initially an act of negligence
by Dr. Ampil has ripened into a deliberate wrongful act of deceiving his patient.
This is a clear case of medical malpractice or more appropriately, medical negligence. To

successfully pursue this kind of case, a patient must only prove that a health care provider either
failed to do something which a reasonably prudent health care provider would have done, or that
he did something that a reasonably prudent provider would not have done; and that failure or
action caused injury to the patient.11 Simply put, the elements are duty, breach, injury and
proximate causation. Dr, Ampil, as the lead surgeon, had the duty to remove all foreign objects,
such as gauzes, from Natividad’s body before closure of the incision. When he failed to do so, it
was his duty to inform Natividad about it. Dr. Ampil breached both duties. Such breach caused
injury to Natividad, necessitating her further examination by American doctors and another
surgery. That Dr. Ampil’s negligence is the proximate cause12 of Natividad’s injury could be
traced from his act of closing the incision despite the information given by the attending nurses
that two pieces of gauze were still missing. That they were later on extracted from Natividad’s
vagina established the causal link between Dr. Ampil’s negligence and the injury. And what
further aggravated such injury was his deliberate concealment of the missing gauzes from the
knowledge of Natividad and her family.
II - G.R. No. 126467
Whether the Court of Appeals Erred in Absolving
Dr. Fuentes of any Liability
The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes on the
ground that it is contrary to the doctrine of res ipsa loquitur. According to them, the fact that the
two pieces of gauze were left inside Natividad’s body is a prima facie evidence of Dr. Fuentes’
negligence.
We are not convinced.
Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the fact of the
occurrence of an injury, taken with the surrounding circumstances, may permit an inference or
raise a presumption of negligence, or make out a plaintiff’s prima facie case, and present a
question of fact for defendant to meet with an explanation.13 Stated differently, where the thing
which caused the injury, without the fault of the injured, is under the exclusive control of the
defendant and the injury is such that it should not have occurred if he, having such control used
proper care, it affords reasonable evidence, in the absence of explanation that the injury arose
from the defendant’s want of care, and the burden of proof is shifted to him to establish that he
has observed due care and diligence.14
From the foregoing statements of the rule, the requisites for the applicability of the doctrine of res
ipsa loquitur are: (1) the occurrence of an injury; (2) the thing which caused the injury was under
the control and management of the defendant; (3) the occurrence was such that in the ordinary
course of things, would not have happened if those who had control or management used proper
care; and (4) the absence of explanation by the defendant. Of the foregoing requisites, the most
instrumental is the "control and management of the thing which caused the injury."15
We find the element of "control and management of the thing which caused the injury" to be
wanting. Hence, the doctrine of res ipsa loquitur will not lie.
It was duly established that Dr. Ampil was the lead surgeon during the operation of Natividad. He
requested the assistance of Dr. Fuentes only to perform hysterectomy when he (Dr. Ampil) found
that the malignancy in her sigmoid area had spread to her left ovary. Dr. Fuentes performed the
surgery and thereafter reported and showed his work to Dr. Ampil. The latter examined it and
finding everything to be in order, allowed Dr. Fuentes to leave the operating room. Dr. Ampil then
resumed operating on Natividad. He was about to finish the procedure when the attending
nurses informed him that two pieces of gauze were missing. A "diligent search" was conducted,
but the misplaced gauzes were not found. Dr. Ampil then directed that the incision be closed.
During this entire period, Dr. Fuentes was no longer in the operating room and had, in fact, left
the hospital.
Under the "Captain of the Ship" rule, the operating surgeon is the person in complete charge of
the surgery room and all personnel connected with the operation. Their duty is to obey his
orders.16 As stated before, Dr. Ampil was the lead surgeon. In other words, he was the "Captain
of the Ship." That he discharged such role is evident from his following conduct: (1) calling Dr.
Fuentes to perform a hysterectomy; (2) examining the work of Dr. Fuentes and finding it in order;
(3) granting Dr. Fuentes’ permission to leave; and (4) ordering the closure of the incision. To our
mind, it was this act of ordering the closure of the incision notwithstanding that two pieces of
gauze remained unaccounted for, that caused injury to Natividad’s body. Clearly, the control and
management of the thing which caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes.
In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not per se create
or constitute an independent or separate ground of liability, being a mere evidentiary rule.17 In
other words, mere invocation and application of the doctrine does not dispense with the
requirement of proof of negligence. Here, the negligence was proven to have been committed by
Dr. Ampil and not by Dr. Fuentes.
III - G.R. No. 126297
Whether PSI Is Liable for the Negligence of Dr. Ampil
The third issue necessitates a glimpse at the historical development of hospitals and the resulting
theories concerning their liability for the negligence of physicians.
Until the mid-nineteenth century, hospitals were generally charitable institutions, providing
medical services to the lowest classes of society, without regard for a patient’s ability to
pay.18 Those who could afford medical treatment were usually treated at home by their
doctors.19 However, the days of house calls and philanthropic health care are over. The modern
health care industry continues to distance itself from its charitable past and has experienced a
significant conversion from a not-for-profit health care to for-profit hospital businesses.
Consequently, significant changes in health law have accompanied the business-related
changes in the hospital industry. One important legal change is an increase in hospital liability for
medical malpractice. Many courts now allow claims for hospital vicarious liability under the
theories of respondeat superior, apparent authority, ostensible authority, or agency by
estoppel. 20
In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of the Civil
Code, which reads:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
A derivative of this provision is Article 2180, the rule governing vicarious liability under the
doctrine of respondeat superior, thus:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or
omissions, but also for those of persons for whom one is responsible.
x x x x x x
The owners and managers of an establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the branches in which the latter are
employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks even though the former are not engaged in any
business or industry.
x x x x x x
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.
A prominent civilist commented that professionals engaged by an employer, such as physicians,

dentists, and pharmacists, are not "employees" under this article because the manner in which
they perform their work is not within the control of the latter (employer). In other words,
professionals are considered personally liable for the fault or negligence they commit in the
discharge of their duties, and their employer cannot be held liable for such fault or negligence. In
the context of the present case, "a hospital cannot be held liable for the fault or negligence of a
physician or surgeon in the treatment or operation of patients."21
The foregoing view is grounded on the traditional notion that the professional status and the very
nature of the physician’s calling preclude him from being classed as an agent or employee of a
hospital, whenever he acts in a professional capacity.22 It has been said that medical practice
strictly involves highly developed and specialized knowledge,23 such that physicians are
generally free to exercise their own skill and judgment in rendering medical services sans
interference.24 Hence, when a doctor practices medicine in a hospital setting, the hospital and its
employees are deemed to subserve him in his ministrations to the patient and his actions are of
his own responsibility.25
The case of Schloendorff v. Society of New York Hospital26 was then considered an authority for
this view. The "Schloendorff doctrine" regards a physician, even if employed by a hospital, as an
independent contractor because of the skill he exercises and the lack of control exerted over his
work. Under this doctrine, hospitals are exempt from the application of the respondeat superior
principle for fault or negligence committed by physicians in the discharge of their profession.
However, the efficacy of the foregoing doctrine has weakened with the significant developments
in medical care. Courts came to realize that modern hospitals are increasingly taking active role
in supplying and regulating medical care to patients. No longer were a hospital’s functions limited
to furnishing room, food, facilities for treatment and operation, and attendants for its patients.
Thus, in Bing v. Thunig,27 the New York Court of Appeals deviated from the Schloendorff
doctrine, noting that modern hospitals actually do far more than provide facilities for treatment.
Rather, they regularly employ, on a salaried basis, a large staff of physicians, interns, nurses,
administrative and manual workers. They charge patients for medical care and treatment, even
collecting for such services through legal action, if necessary. The court then concluded that
there is no reason to exempt hospitals from the universal rule of respondeat superior.
In our shores, the nature of the relationship between the hospital and the physicians is rendered
inconsequential in view of our categorical pronouncement in Ramos v. Court of Appeals28 that for
purposes of apportioning responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their attending and visiting physicians. This
Court held:
"We now discuss the responsibility of the hospital in this particular incident. The unique practice
(among private hospitals) of filling up specialist staff with attending and visiting "consultants,"
who are allegedly not hospital employees, presents problems in apportioning responsibility for
negligence in medical malpractice cases. However, the difficulty is more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in
the conduct of their work within the hospital premises. Doctors who apply for ‘consultant’ slots,
visiting or attending, are required to submit proof of completion of residency, their educational
qualifications, generally, evidence of accreditation by the appropriate board (diplomate),
evidence of fellowship in most cases, and references. These requirements are carefully
scrutinized by members of the hospital administration or by a review committee set up by the
hospital who either accept or reject the application. x x x.
After a physician is accepted, either as a visiting or attending consultant, he is normally required

to attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and
residents, moderate grand rounds and patient audits and perform other tasks and
responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the
privilege of admitting patients into the hospital. In addition to these, the physician’s performance
as a specialist is generally evaluated by a peer review committee on the basis of mortality and
morbidity statistics, and feedback from patients, nurses, interns and residents. A consultant
remiss in his duties, or a consultant who regularly falls short of the minimum standards
acceptable to the hospital or its peer review committee, is normally politely terminated.
In other words, private hospitals, hire, fire and exercise real control over their attending and
visiting ‘consultant’ staff. While ‘consultants’ are not, technically employees, x x x, the control
exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of an
employer-employee relationship, with the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control test is determining. Accordingly, on the
basis of the foregoing, we rule that for the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship in effect exists between hospitals and their
attending and visiting physicians. "
But the Ramos pronouncement is not our only basis in sustaining PSI’s liability. Its liability is also
anchored upon the agency principle of apparent authority or agency by estoppel and the doctrine
of corporate negligence which have gained acceptance in the determination of a hospital’s
liability for negligent acts of health professionals. The present case serves as a perfect platform
to test the applicability of these doctrines, thus, enriching our jurisprudence.
Apparent authority, or what is sometimes referred to as the "holding
out" theory, or doctrine of ostensible agency or agency by estoppel,29 has its origin from the law
of agency. It imposes liability, not as the result of the reality of a contractual relationship, but
rather because of the actions of a principal or an employer in somehow misleading the public into
believing that the relationship or the authority exists.30 The concept is essentially one of estoppel
and has been explained in this manner:
"The principal is bound by the acts of his agent with the apparent authority which he knowingly
permits the agent to assume, or which he holds the agent out to the public as possessing. The
question in every case is whether the principal has by his voluntary act placed the agent in such
a situation that a person of ordinary prudence, conversant with business usages and the nature
of the particular business, is justified in presuming that such agent has authority to perform the
particular act in question.31
The applicability of apparent authority in the field of hospital liability was upheld long time ago in
Irving v. Doctor Hospital of Lake Worth, Inc.32 There, it was explicitly stated that "there does not
appear to be any rational basis for excluding the concept of apparent authority from the field of
hospital liability." Thus, in cases where it can be shown that a hospital, by its actions, has held
out a particular physician as its agent and/or employee and that a patient has accepted treatment
from that physician in the reasonable belief that it is being rendered in behalf of the hospital, then
the hospital will be liable for the physician’s negligence.
Our jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of
the Civil Code reads:
ART. 1869. Agency may be express, or implied from the acts of the principal, from his silence or
lack of action, or his failure to repudiate the agency, knowing that another person is acting on his
behalf without authority.
In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and
specializations of the physicians associated or accredited by it, including those of Dr. Ampil and
Dr. Fuentes. We concur with the Court of Appeals’ conclusion that it "is now estopped from
passing all the blame to the physicians whose names it proudly paraded in the public directory
leading the public to believe that it vouched for their skill and competence." Indeed, PSI’s act is
tantamount to holding out to the public that Medical City Hospital, through its accredited
physicians, offers quality health care services. By accrediting Dr. Ampil and Dr. Fuentes and
publicly advertising their qualifications, the hospital created the impression that they were its
agents, authorized to perform medical or surgical services for its patients. As expected, these
patients, Natividad being one of them, accepted the services on the reasonable belief that such
were being rendered by the hospital or its employees, agents, or servants. The trial court
correctly pointed out:
x x x regardless of the education and status in life of the patient, he ought not be burdened with
the defense of absence of employer-employee relationship between the hospital and the
independent physician whose name and competence are certainly certified to the general public
by the hospital’s act of listing him and his specialty in its lobby directory, as in the case herein.
The high costs of today’s medical and health care should at least exact on the hospital greater, if
not broader, legal responsibility for the conduct of treatment and surgery within its facility by its
accredited physician or surgeon, regardless of whether he is independent or employed."33
The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI, are
capable of acting only through other individuals, such as physicians. If these accredited
physicians do their job well, the hospital succeeds in its mission of offering quality medical
services and thus profits financially. Logically, where negligence mars the quality of its services,
the hospital should not be allowed to escape liability for the acts of its ostensible agents.
We now proceed to the doctrine of corporate negligence or corporate responsibility.
One allegation in the complaint in Civil Case No. Q-43332 for negligence and malpractice is that
PSI as owner, operator and manager of Medical City Hospital, "did not perform the necessary
supervision nor exercise diligent efforts in the supervision of Drs. Ampil and Fuentes and its
nursing staff, resident doctors, and medical interns who assisted Drs. Ampil and Fuentes in the
performance of their duties as surgeons."34 Premised on the doctrine of corporate negligence, the
trial court held that PSI is directly liable for such breach of duty.
We agree with the trial court.
Recent years have seen the doctrine of corporate negligence as the judicial answer to the
problem of allocating hospital’s liability for the negligent acts of health practitioners, absent facts
to support the application of respondeat superior or apparent authority. Its formulation proceeds
from the judiciary’s acknowledgment that in these modern times, the duty of providing quality
medical service is no longer the sole prerogative and responsibility of the physician. The modern
hospitals have changed structure. Hospitals now tend to organize a highly professional medical
staff whose competence and performance need to be monitored by the hospitals commensurate
with their inherent responsibility to provide quality medical care.35
The doctrine has its genesis in Darling v. Charleston Community Hospital.36 There, the Supreme
Court of Illinois held that "the jury could have found a hospital negligent, inter alia, in failing to
have a sufficient number of trained nurses attending the patient; failing to require a consultation
with or examination by members of the hospital staff; and failing to review the treatment rendered
to the patient." On the basis of Darling, other jurisdictions held that a hospital’s corporate
negligence extends to permitting a physician known to be incompetent to practice at the
hospital.37 With the passage of time, more duties were expected from hospitals, among them: (1)
the use of reasonable care in the maintenance of safe and adequate facilities and equipment; (2)
the selection and retention of competent physicians; (3) the overseeing or supervision of all
persons who practice medicine within its walls; and (4) the formulation, adoption and
enforcement of adequate rules and policies that ensure quality care for its patients.38 Thus, in
Tucson Medical Center, Inc. v. Misevich,39 it was held that a hospital, following the doctrine of
corporate responsibility, has the duty to see that it meets the standards of responsibilities for the
care of patients. Such duty includes the proper supervision of the members of its medical staff.
And in Bost v. Riley,40 the court concluded that a patient who enters a hospital does so with the
reasonable expectation that it will attempt to cure him. The hospital accordingly has the duty to
make a reasonable effort to monitor and oversee the treatment prescribed and administered by
the physicians practicing in its premises.
In the present case, it was duly established that PSI operates the Medical City Hospital for the
purpose and under the concept of providing comprehensive medical services to the public.
Accordingly, it has the duty to exercise reasonable care to protect from harm all patients admitted
into its facility for medical treatment. Unfortunately, PSI failed to perform such duty. The findings
of the trial court are convincing, thus:
x x x PSI’s liability is traceable to its failure to conduct an investigation of the matter reported in
the nota bene of the count nurse. Such failure established PSI’s part in the dark conspiracy of
silence and concealment about the gauzes. Ethical considerations, if not also legal, dictated the
holding of an immediate inquiry into the events, if not for the benefit of the patient to whom the
duty is primarily owed, then in the interest of arriving at the truth. The Court cannot accept that
the medical and the healing professions, through their members like defendant surgeons, and
their institutions like PSI’s hospital facility, can callously turn their backs on and disregard even a
mere probability of mistake or negligence by refusing or failing to investigate a report of such
seriousness as the one in Natividad’s case.
It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of
the Medical City Hospital’s staff, composed of resident doctors, nurses, and interns. As such, it is
reasonable to conclude that PSI, as the operator of the hospital, has actual or constructive
knowledge of the procedures carried out, particularly the report of the attending nurses that the
two pieces of gauze were missing. In Fridena v. Evans,41 it was held that a corporation is bound
by the knowledge acquired by or notice given to its agents or officers within the scope of their
authority and in reference to a matter to which their authority extends. This means that the
knowledge of any of the staff of Medical City Hospital constitutes knowledge of PSI. Now, the
failure of PSI, despite the attending nurses’ report, to investigate and inform Natividad regarding
the missing gauzes amounts to callous negligence. Not only did PSI breach its duties to oversee
or supervise all persons who practice medicine within its walls, it also failed to take an active step
in fixing the negligence committed. This renders PSI, not only vicariously liable for the negligence
of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its own negligence
under Article 2176. In Fridena, the Supreme Court of Arizona held:
x x x In recent years, however, the duty of care owed to the patient by the hospital has
expanded. The emerging trend is to hold the hospital responsible where the hospital has failed to
monitor and review medical services being provided within its walls. See Kahn Hospital
Malpractice Prevention, 27 De Paul . Rev. 23 (1977).
Among the cases indicative of the ‘emerging trend’ is Purcell v. Zimbelman, 18 Ariz. App. 75,500
P. 2d 335 (1972). In Purcell, the hospital argued that it could not be held liable for the malpractice
of a medical practitioner because he was an independent contractor within the hospital. The
Court of Appeals pointed out that the hospital had created a professional staff whose
competence and performance was to be monitored and reviewed by the governing body of the
hospital, and the court held that a hospital would be negligent where it had knowledge or reason
to believe that a doctor using the facilities was employing a method of treatment or care which
fell below the recognized standard of care.
Subsequent to the Purcell decision, the Arizona Court of Appeals held that a hospital has certain
inherent responsibilities regarding the quality of medical care furnished to patients within its walls
and it must meet the standards of responsibility commensurate with this undertaking. Beeck v.
Tucson General Hospital, 18 Ariz. App. 165, 500 P. 2d 1153 (1972). This court has confirmed the
rulings of the Court of Appeals that a hospital has the duty of supervising the competence of the
doctors on its staff. x x x.
x x x x x x
In the amended complaint, the plaintiffs did plead that the operation was performed at the
hospital with its knowledge, aid, and assistance, and that the negligence of the defendants was
the proximate cause of the patient’s injuries. We find that such general allegations of negligence,
along with the evidence produced at the trial of this case, are sufficient to support the hospital’s
liability based on the theory of negligent supervision."
Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for damages, let it be
emphasized that PSI, apart from a general denial of its responsibility, failed to adduce evidence
showing that it exercised the diligence of a good father of a family in the accreditation and
supervision of the latter. In neglecting to offer such proof, PSI failed to discharge its burden under
the last paragraph of Article 2180 cited earlier, and, therefore, must be adjudged solidarily liable
with Dr. Ampil. Moreover, as we have discussed, PSI is also directly liable to the Aganas.
One final word. Once a physician undertakes the treatment and care of a patient, the law
imposes on him certain obligations. In order to escape liability, he must possess that reasonable
degree of learning, skill and experience required by his profession. At the same time, he must
apply reasonable care and diligence in the exercise of his skill and the application of his
knowledge, and exert his best judgment.
WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the Court of
Appeals in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198.
Costs against petitioners PSI and Dr. Miguel Ampil.
SO ORDERED
G.R. No. 118141 September 5, 1997
LEONILA GARCIA-RUEDA, petitioner,

vs.
WILFRED L. PASCASIO, RAUL R. ARNAU, ABELARDO L. APORTADERA JR., Honorable
CONRADO M. VASQUEZ, all of the Office of the Ombudsman; JESUS F. GUERRERO,
PORFIRIO MACARAEG, and GREGORIO A. ARIZALA, all of the Office of the City
Prosecutor, Manila, respondents.
ROMERO, J.:
May this Court review the findings of the Office of the Ombudsman? The general rule has
been enunciated in Ocampo v. Ombudsman1 which states:
In the exercise of its investigative power, this Court has consistently held
that courts will not interfere with the discretion of the fiscal or the
Ombudsman to determine the specificity and adequacy of the averments of
the offense charged. He may dismiss the complaint forthwith if he finds it to
be insufficient in form and substance or if he otherwise finds no ground to
continue with the inquiry; or he may proceed with the investigation of the
complaint if, in his view, it is in due and proper form.
Does the instant case warrant a departure from the foregoing general rule? When a
patient dies soon after surgery under circumstances which indicate that the attending
surgeon and anaesthesiologist may have been guilty of negligence but upon their being
charged, a series of nine prosecutors toss the responsibility of conducting a preliminary
investigation to each other with contradictory recommendations, "ping-pong" style,
perhaps the distraught widow is not to be blamed if she finally decides to accuse the City
Prosecutors at the end of the line for partiality under the Anti-Graft and Corrupt Practices
Act. Nor may she be entirely faulted for finally filing a petition before this Court against
the Ombudsman for grave abuse of discretion in dismissing her complaint against said
City Prosecutors on the ground of lack of evidence. Much as we sympathize with the
bereaved widow, however, this Court is of the opinion that the general rule still finds
application in instant case. In other words, the respondent Ombudsman did not commit
grave abuse of discretion in deciding against filing the necessary information against
public respondents of the Office of the City Prosecutor.
The following facts are borne out by the records.
Florencio V. Rueda, husband of petitioner Leonila Garcia-Rueda, underwent surgical

operation at the UST hospital for the removal of a stone blocking his ureter. He was
attended by Dr. Domingo Antonio, Jr. who was the surgeon, while Dr. Erlinda Balatbat-
Reyes was the anaesthesiologist. Six hours after the surgery, however, Florencio died of
complications of "unknown cause," according to officials of the UST Hospital.2
Not satisfied with the findings of the hospital, petitioner requested the National Bureau of
Investigation (NBI) to conduct an autopsy on her husband's body. Consequently, the NBI ruled
that Florencio's death was due to lack of care by the attending physician in administering
anaesthesia. Pursuant to its findings, the NBI recommended that Dr. Domingo Antonio and Dr.
Erlinda Balatbat-Reyes be charged for Homicide through Reckless Imprudence before the Office
of the City Prosecutor.
During the preliminary investigation, what transpired was a confounding series of events which
we shall try to disentangle. The case was initially assigned to Prosecutor Antonio M. Israel, who
had to inhibit himself because he was related to the counsel of one of the doctors. As a result,
the case was re-raffled to Prosecutor Norberto G. Leono who was, however, disqualified on
motion of the petitioner since he disregarded prevailing laws and jurisprudence regarding
preliminary investigation. The case was then referred to Prosecutor Ramon O. Carisma, who
issued a resolution recommending that only Dr. Reyes be held criminally liable and that the
complaint against Dr. Antonio be dismissed.
The case took another perplexing turn when Assistant City Prosecutor Josefina Santos Sioson,
in the "interest of justice and peace of mind of the parties," recommended that the case be re-
raffled on the ground that Prosecutor Carisma was partial to the petitioner. Thus, the case was
transferred to Prosecutor Leoncia R. Dimagiba, where a volte face occurred again with the
endorsement that the complaint against Dr. Reyes be dismissed and instead, a corresponding
information be filed against Dr. Antonio. Petitioner filed a motion for reconsideration, questioning
the findings of Prosecutor Dimagiba.
Pending the resolution of petitioner's motion for reconsideration regarding Prosecutor Dimagiba's
resolution, the investigative "pingpong" continued when the case was again assigned to another
prosecutor, Eudoxia T. Gualberto, who recommended that Dr. Reyes be included in the criminal
information of Homicide through Reckless Imprudence. While the recommendation of Prosecutor
Gualberto was pending, the case was transferred to Senior State Prosecutor Gregorio A. Arizala,
who resolved to exonerate Dr. Reyes from any wrongdoing, a resolution which was approved by
both City Prosecutor Porfirio G. Macaraeg and City Prosecutor Jesus F. Guerrero.
Aggrieved, petitioner filed graft charges specifically for violation of Section 3(e) of Republic Act
No. 30193 against Prosecutors Guerrero, Macaraeg, and Arizala for manifest partiality in favor of
Dr. Reyes before the Office of the Ombudsman. However, on July 11, 1994, the Ombudsman
issued the assailed resolution dismissing the complaint for lack of evidence.
In fine, petitioner assails the exercise of the discretionary power of the Ombudsman to review the
recommendations of the government prosecutors and to approve and disapprove the same.
Petitioner faults the Ombudsman for, allegedly in grave abuse of discretion, refusing to find that
there exists probable cause to hold public respondent City Prosecutors liable for violation of
Section 3(e) of R.A. No. 3019.
Preliminarily, the powers and functions of the Ombudsman have generally been categorized into
the following: investigatory powers, prosecutory power, public assistance function, authority to
inquire and obtain information, and function to adopt, institute and implement preventive
measures.4
As protector of the people, the Office of the Ombudsman has the power, function and duty "to act
promptly on complaints filed in any form or manner against public officials" and "to investigate
any act or omission of any public official when such act or omission appears to be illegal, unjust,
improper or inefficient."5
While the Ombudsman has the full discretion to determine whether or not a criminal case should
be filed, this Court is not precluded from reviewing the Ombudsman's action when there is an
abuse of discretion, in which case Rule 65 of the Rules of Court may exceptionally be invoked
pursuant to Section I, Article VIII of the 1987 Constitution.6
In this regard, "grave abuse of discretion" has been defined as "where a power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility so patent and gross as to
amount to evasion of positive duty or virtual refusal to perform a duty enjoined by, or in
contemplation of law.7
From a procedural standpoint, it is certainly odd why the successive transfers from one
prosecutor to another were not sufficiently explained in the Resolution of the Ombudsman. Being
the proper investigating authority with respect to misfeasance, non-feasance and malfeasance of
public officials, the Ombudsmans should have been more vigilant and assiduous in determining
the reasons behind the "buckpassing" to ensure that no irregularity took place.
Whether such transfers were due to any outside pressure or ulterior motive is a matter of
evidence. One would have expected the Ombudsman, however, to inquire into what could hardly
qualify as "standard operating procedure," given the surrounding circumstances of the case.
While it is true that a preliminary investigation is essentially inquisitorial, and is often the only
means to discover who may be charged with a crime, its function is merely to determine the
existence of probable cause.8 Probable cause has been defined as "the existence of such fact
and circumstances as would excite the belief, in a reasonable mind, acting on the facts within the
knowledge of the prosecution, that the person charged was guilty of the crime for which he was
prosecuted."9
"Probable cause is a reasonable ground of presumption that a matter is, or may be, well
founded, such a state of facts in the mind of the prosecutor as would lead a person of ordinary
caution and prudence to believe, or entertain an honest or strong suspicion, that a thing is so."
The term does not mean actual and positive cause nor does it import absolute certainty. It is
merely based on opinion and reasonable belief. Thus, a finding of probable cause does not
require an inquiry into whether there is sufficient evidence to procure a conviction. It is enough
that it is believed that the act or omission complained of constitutes the offense charged.
Precisely, there is a trial for the reception of evidence of the prosecution in support of the
charge. 10
In the instant case, no less than the NBI pronounced after conducting an autopsy that there was
indeed negligence on the part of the attending physicians in administering the anaesthesia. 11 The
fact of want of competence or diligence is evidentiary in nature, the veracity of which can best be
passed upon after a full-blown trial for it is virtually impossible to ascertain the merits of a medical
negligence case without extensive investigation, research, evaluation and consultations with
medical experts. Clearly, the City Prosecutors are not in a competent position to pass judgment
on such a technical matter, especially when there are conflicting evidence and findings. The
bases of a party's accusation and defenses are better ventilated at the trial proper than at the
preliminary investigation.
A word on medical malpractice or negligence cases.
In its simplest terms, the type of lawsuit which has been called medical
malpractice or, more appropriately, medical negligence, is that type of claim
which a victim has available to him or her to redress a wrong committed by a
medical professional which has caused bodily harm.
In order to successfully pursue such a claim, a patient must prove that a health
care provider, in most cases a physician, either failed to do something which a
reasonably prudent health care provider would have done, or that he or she did
something that a reasonably prudent provider would not have done; and that that
failure or action caused injury to the patient. 12
Hence, there are four elements involved in medical negligence cases: duty, breach, injury and
proximate causation.
Evidently, when the victim employed the services of Dr. Antonio and Dr. Reyes, a physician-
patient relationship was created. In accepting the case, Dr. Antonio and Dr. Reyes in effect
represented that, having the needed training and skill possessed by physicians and surgeons
practicing in the same field, they will employ such training, care and skill in the treatment of their
patients. 13 They have a duty to use at least the same level of care that any other reasonably
competent doctor would use to treat a condition under the same circumstances. The breach of
these professional duties of skill and care, or their improper performance, by a physician surgeon
whereby the patient is injured in body or in health, constitutes actionable
malpractice. 14 Consequently, in the event that any injury results to the patient from want of due
care or skill during the operation, the surgeons may be held answerable in damages for
negligence. 15
Moreover, in malpractice or negligence cases involving the administration of anaesthesia, the

necessity of expert testimony and the availability of the charge of res ipsa loquitur to the plaintiff;
have been applied in actions against anaesthesiologists to hold the defendant liable for the death
or injury of a patient under excessive or improper anaesthesia. 16 Essentially, it requires two-
pronged evidence: evidence as to the recognized standards of the medical community in the
particular kind of case, and a showing that the physician in question negligently departed from
this standard in his treatment. 17
Another element in medical negligence cases is causation which is divided into two inquiries:
whether the doctor's actions in fact caused the harm to the patient and whether these were the
proximate cause of the patient's
injury. 18 Indeed here, a causal connection is discernible from the occurrence of the victim's death
after the negligent act of the anaesthesiologist in administering the anesthesia, a fact which, if
confirmed, should warrant the filing of the appropriate criminal case. To be sure, the allegation of
negligence is not entirely baseless. Moreover, the NBI deduced that the attending surgeons did
not conduct the necessary interview of the patient prior to the operation. It appears that the
cause of the death of the victim could have been averted had the proper drug been applied to
cope with the symptoms of malignant hyperthermia. Also, we cannot ignore the fact that an
antidote was readily available to counteract whatever deleterious effect the anaesthesia might
produce. 19 Why these precautionary measures were disregarded must be sufficiently explained.
The City Prosecutors were charged with violating Section 3(e) of the Anti-Graft and Corrupt
Practices Act which requires the following facts:
1. The accused is a public officer discharging administrative or official functions

or private persons charged in conspiracy with them;
2. The public officer committed the prohibited act during the performance of his
official duty or in relation to his public position;
3. The public officer acted with manifest partiality, evident bad faith or gross,
inexcusable negligence; and
4. His action caused undue injury to the Government or any private party, or gave
any party any unwarranted benefit, advantage or preference to such parties. 20
Why did the complainant, petitioner in instant case, elect to charge respondents under the above
law?
While a party who feels himself aggrieved is at liberty to choose the appropriate "weapon from
the armory," it is with no little surprise that this Court views the choice made by the complainant
widow.
To our mind, the better and more logical remedy under the circumstances would have been to
appeal the resolution of the City Prosecutors dismissing the criminal complaint to the Secretary
of Justice under the Department of Justice's Order No. 223, 21 otherwise known as the "1993
Revised Rules on Appeals From Resolutions In Preliminary Investigations/Reinvestigations," as
amended by Department Order No. 359, Section 1 of which provides:
Sec. 1. What May Be Appealed. — Only resolutions of the Chief State
Prosecutor/Regional State Prosecutor/Provincial or City Prosecutor dismissing a
criminal complaint may be the subject of an appeal to the Secretary of Justice
except as otherwise provided in Section 4 hereof.
What action may the Secretary of Justice take on the appeal? Section 9 of Order No. 223 states:
"The Secretary of Justice may reverse, affirm or modify the appealed resolution." On the other
hand, "He may motu proprio or on motion of the appellee, dismiss outright the appeal on
specified grounds." 22
In exercising his discretion under the circumstances, the Ombudsman acted within his power and
authority in dismissing the complaint against the Prosecutors and this Court will not interfere with
the same.
WHEREFORE, in view of the foregoing, the instant petition is DISMISSED, without prejudice to
the filing of an appeal by the petitioner with the Secretary of Justice assailing the dismissal of her
criminal complaint by the respondent City Prosecutors. No costs.
SO ORDERED
G.R. No. 124354 December 29, 1999
ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural guardians
of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS and RON RAYMOND
RAMOS, petitioners,
vs.
COURT OF APPEALS, DELOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and
DRA. PERFECTA GUTIERREZ, respondents.
KAPUNAN, J.:
The Hippocratic Oath mandates physicians to give primordial consideration to the health and
welfare of their patients. If a doctor fails to live up to this precept, he is made accountable for his
acts. A mistake, through gross negligence or incompetence or plain human error, may spell the
difference between life and death. In this sense, the doctor plays God on his patient's fate. 1
In the case at bar, the Court is called upon to rule whether a surgeon, an anesthesiologist and a
hospital should be made liable for the unfortunate comatose condition of a patient scheduled for
cholecystectomy. 2
Petitioners seek the reversal of the decision 3 of the Court of Appeals, dated 29 May 1995, which
overturned the decision 4 of the Regional Trial Court, dated 30 January 1992, finding private
respondents liable for damages arising from negligence in the performance of their professional
duties towards petitioner Erlinda Ramos resulting in her comatose condition.
The antecedent facts as summarized by the trial court are reproduced hereunder:
Plaintiff Erlinda Ramos was, until the afternoon of June 17, 1985, a 47-year old
(Exh. "A") robust woman (TSN, October 19, 1989, p. 10). Except for occasional
complaints of discomfort due to pains allegedly caused by the presence of a
stone in her gall bladder (TSN, January 13, 1988, pp. 4-5), she was as normal as
any other woman. Married to Rogelio E. Ramos, an executive of Philippine Long
Distance Telephone Company, she has three children whose names are Rommel
Ramos, Roy Roderick Ramos and Ron Raymond Ramos (TSN, October 19,
1989, pp. 5-6).
Because the discomforts somehow interfered with her normal ways, she sought
professional advice. She was advised to undergo an operation for the removal of
a stone in her gall bladder (TSN, January 13, 1988, p. 5). She underwent a series
of examinations which included blood and urine tests (Exhs. "A" and "C") which
indicated she was fit for surgery.
Through the intercession of a mutual friend, Dr. Buenviaje (TSN, January 13,
1988, p. 7), she and her husband Rogelio met for the first time Dr. Orlino Hozaka
(should be Hosaka; see TSN, February 20, 1990, p. 3), one of the defendants in
this case, on June 10, 1985. They agreed that their date at the operating table at
the DLSMC (another defendant), would be on June 17, 1985 at 9:00 A.M.. Dr.
Hosaka decided that she should undergo a "cholecystectomy" operation after
examining the documents (findings from the Capitol Medical Center, FEU
Hospital and DLSMC) presented to him. Rogelio E. Ramos, however, asked Dr.
Hosaka to look for a good anesthesiologist. Dr. Hosaka, in turn, assured Rogelio
that he will get a good anesthesiologist. Dr. Hosaka charged a fee of P16,000.00,
which was to include the anesthesiologist's fee and which was to be paid after the
operation (TSN, October 19, 1989, pp. 14-15, 22-23, 31-33; TSN, February 27,
1990, p. 13; and TSN, November 9, 1989, pp. 3-4, 10, 17).
A day before the scheduled date of operation, she was admitted at one of the
rooms of the DLSMC, located along E. Rodriguez Avenue, Quezon City (TSN,
October 19,1989, p. 11).
At around 7:30 A.M. of June 17, 1985 and while still in her room, she was
prepared for the operation by the hospital staff. Her sister-in-law, Herminda Cruz,
who was the Dean of the College of Nursing at the Capitol Medical Center, was
also there for moral support. She reiterated her previous request for Herminda to
be with her even during the operation. After praying, she was given injections.
Her hands were held by Herminda as they went down from her room to the
operating room (TSN, January 13, 1988, pp. 9-11). Her husband, Rogelio, was
also with her (TSN, October 19, 1989, p. 18). At the operating room, Herminda
saw about two or three nurses and Dr. Perfecta Gutierrez, the other defendant,
who was to administer anesthesia. Although not a member of the hospital staff,
Herminda introduced herself as Dean of the College of Nursing at the Capitol
Medical Center who was to provide moral support to the patient, to them.
Herminda was allowed to stay inside the operating room.
At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr.
Hosaka who was not yet in (TSN, January 13, 1988, pp. 11-12). Dr. Gutierrez
thereafter informed Herminda Cruz about the prospect of a delay in the arrival of
Dr. Hosaka. Herminda then went back to the patient who asked, "Mindy, wala pa
ba ang Doctor"? The former replied, "Huwag kang mag-alaala, darating na iyon"
(Ibid.).
Thereafter, Herminda went out of the operating room and informed the patient's
husband, Rogelio, that the doctor was not yet around (id., p. 13). When she
returned to the operating room, the patient told her, "Mindy, inip na inip na ako,
ikuha mo ako ng ibang Doctor." So, she went out again and told Rogelio about
what the patient said (id., p. 15). Thereafter, she returned to the operating room.
At around 10:00 A.M., Rogelio E. Ramos was "already dying [and] waiting for the
arrival of the doctor" even as he did his best to find somebody who will allow him
to pull out his wife from the operating room (TSN, October 19, 1989, pp. 19-20).
He also thought of the feeling of his wife, who was inside the operating room
waiting for the doctor to arrive (ibid.). At almost 12:00 noon, he met Dr. Garcia
who remarked that he (Dr. Garcia) was also tired of waiting for Dr. Hosaka to
arrive (id., p. 21). While talking to Dr. Garcia at around 12:10 P.M., he came to
know that Dr. Hosaka arrived as a nurse remarked, "Nandiyan na si Dr. Hosaka,
dumating na raw." Upon hearing those words, he went down to the lobby and
waited for the operation to be completed (id., pp. 16, 29-30).
At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the
patient, heard somebody say that "Dr. Hosaka is already here." She then saw
people inside the operating room "moving, doing this and that, [and] preparing the
patient for the operation" (TSN, January 13, 1988, p. 16). As she held the hand of
Erlinda Ramos, she then saw Dr. Gutierrez intubating the hapless patient. She
thereafter heard Dr. Gutierrez say, "ang hirap ma-intubate nito, mali yata ang
pagkakapasok. O lumalaki ang tiyan" (id., p. 17). Because of the remarks of Dra.
Gutierrez, she focused her attention on what Dr. Gutierrez was doing. She
thereafter noticed bluish discoloration of the nailbeds of the left hand of the
hapless Erlinda even as Dr. Hosaka approached her. She then heard Dr. Hosaka
issue an order for someone to call Dr. Calderon, another anesthesiologist (id., p.
19). After Dr. Calderon arrived at the operating room, she saw this
anesthesiologist trying to intubate the patient. The patient's nailbed became
bluish and the patient was placed in a trendelenburg position — a position where
the head of the patient is placed in a position lower than her feet which is an
indication that there is a decrease of blood supply to the patient's brain (Id., pp.
19-20). Immediately thereafter, she went out of the operating room, and she told
Rogelio E. Ramos "that something wrong was . . . happening" (Ibid.). Dr.
Calderon was then able to intubate the patient (TSN, July 25, 1991, p. 9).
Meanwhile, Rogelio, who was outside the operating room, saw a respiratory
machine being rushed towards the door of the operating room. He also saw
several doctors rushing towards the operating room. When informed by Herminda
Cruz that something wrong was happening, he told her (Herminda) to be back
with the patient inside the operating room (TSN, October 19, 1989, pp. 25-28).
Herminda Cruz immediately rushed back, and saw that the patient was still in
trendelenburg position (TSN, January 13, 1988, p. 20). At almost 3:00 P.M. of
that fateful day, she saw the patient taken to the Intensive Care Unit (ICU).
About two days thereafter, Rogelio E. Ramos was able to talk to Dr. Hosaka. The
latter informed the former that something went wrong during the intubation.
Reacting to what was told to him, Rogelio reminded the doctor that the condition
of his wife would not have happened, had he (Dr. Hosaka) looked for a good
anesthesiologist (TSN, October 19, 1989, p. 31).
Doctors Gutierrez and Hosaka were also asked by the hospital to explain what
happened to the patient. The doctors explained that the patient had
bronchospasm (TSN, November 15, 1990, pp. 26-27).
Erlinda Ramos stayed at the ICU for a month. About four months thereafter or on
November 15, 1985, the patient was released from the hospital.
During the whole period of her confinement, she incurred hospital bills amounting
to P93,542.25 which is the subject of a promissory note and affidavit of
undertaking executed by Rogelio E. Ramos in favor of DLSMC. Since that fateful
afternoon of June 17, 1985, she has been in a comatose condition. She cannot
do anything. She cannot move any part of her body. She cannot see or hear. She
is living on mechanical means. She suffered brain damage as a result of the
absence of oxygen in her brain for four to five minutes (TSN, November 9, 1989,
pp. 21-22). After being discharged from the hospital, she has been staying in their
residence, still needing constant medical attention, with her husband Rogelio
incurring a monthly expense ranging from P8,000.00 to P10,000.00 (TSN,
October 19, 1989, pp. 32-34). She was also diagnosed to be suffering from
"diffuse cerebral parenchymal damage" (Exh. "G"; see alsoTSN, December 21,
1989,
p. 6). 5
Thus, on 8 January 1986, petitioners filed a civil case 6 for damages with the Regional Trial Court
of Quezon City against herein private respondents alleging negligence in the management and
care of Erlinda Ramos.
During the trial, both parties presented evidence as to the possible cause of Erlinda's injury.
Plaintiff presented the testimonies of Dean Herminda Cruz and Dr. Mariano Gavino to prove that
the sustained by Erlinda was due to lack of oxygen in her brain caused by the faulty
management of her airway by private respondents during the anesthesia phase. On the other
hand, private respondents primarily relied on the expert testimony of Dr. Eduardo Jamora, a
pulmonologist, to the effect that the cause of brain damage was Erlinda's allergic reaction to the
anesthetic agent, Thiopental Sodium (Pentothal).
After considering the evidence from both sides, the Regional Trial Court rendered judgment in
favor of petitioners, to wit:
After evaluating the evidence as shown in the finding of facts set forth earlier, and
applying the aforecited provisions of law and jurisprudence to the case at bar, this
Court finds and so holds that defendants are liable to plaintiffs for damages. The
defendants were guilty of, at the very least, negligence in the performance of their
duty to plaintiff-patient Erlinda Ramos.
On the part of Dr. Perfecta Gutierrez, this Court finds that she omitted to exercise
reasonable care in not only intubating the patient, but also in not repeating the
administration of atropine (TSN, August 20, 1991, pp. 5-10), without due regard
to the fact that the patient was inside the operating room for almost three (3)
hours. For after she committed a mistake in intubating [the] patient, the patient's
nailbed became bluish and the patient, thereafter, was placed in trendelenburg
position, because of the decrease of blood supply to the patient's brain. The
evidence further shows that the hapless patient suffered brain damage because
of the absence of oxygen in her (patient's) brain for approximately four to five
minutes which, in turn, caused the patient to become comatose.
On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of
Dr. Perfecta Gutierrez whom he had chosen to administer anesthesia on the
patient as part of his obligation to provide the patient a good anesthesiologist',
and for arriving for the scheduled operation almost three (3) hours late.
On the part of DLSMC (the hospital), this Court finds that it is liable for the acts of
negligence of the doctors in their "practice of medicine" in the operating room.
Moreover, the hospital is liable for failing through its responsible officials, to
cancel the scheduled operation after Dr. Hosaka inexcusably failed to arrive on
time.
In having held thus, this Court rejects the defense raised by defendants that they
have acted with due care and prudence in rendering medical services to plaintiff-
patient. For if the patient was properly intubated as claimed by them, the patient
would not have become comatose. And, the fact that another anesthesiologist
was called to try to intubate the patient after her (the patient's) nailbed turned
bluish, belie their claim. Furthermore, the defendants should have rescheduled
the operation to a later date. This, they should have done, if defendants acted
with due care and prudence as the patient's case was an elective, not an
emergency case.
xxx xxx xxx
WHEREFORE, and in view of the foregoing, judgment is rendered in favor of the

plaintiffs and against the defendants. Accordingly, the latter are ordered to pay,
jointly and severally, the former the following sums of money, to wit:
1) the sum of P8,000.00 as actual monthly expenses for the

plaintiff Erlinda Ramos reckoned from November 15, 1985 or in
the total sum of P632,000.00 as of April 15, 1992, subject to its
being updated;
2) the sum of P100,000.00 as reasonable attorney's fees;
3) the sum of P800,000.00 by way of moral damages and the

further sum of P200,000,00 by way of exemplary damages; and,
4) the costs of the suit.
SO ORDERED. 7
Private respondents seasonably interposed an appeal to the Court of Appeals. The appellate
court rendered a Decision, dated 29 May 1995, reversing the findings of the trial court. The
decretal portion of the decision of the appellate court reads:
WHEREFORE, for the foregoing premises the appealed decision is hereby

REVERSED, and the complaint below against the appellants is hereby ordered
DISMISSED. The counterclaim of appellant De Los Santos Medical Center is
GRANTED but only insofar as appellees are hereby ordered to pay the unpaid
hospital bills amounting to P93,542.25, plus legal interest for justice must be
tempered with mercy.
SO ORDERED. 8
The decision of the Court of Appeals was received on 9 June 1995 by petitioner Rogelio Ramos
who was mistakenly addressed as "Atty. Rogelio Ramos." No copy of the decision, however, was
sent nor received by the Coronel Law Office, then counsel on record of petitioners. Rogelio
referred the decision of the appellate court to a new lawyer, Atty. Ligsay, only on 20 June 1995,
or four (4) days before the expiration of the reglementary period for filing a motion for
reconsideration. On the same day, Atty. Ligsay, filed with the appellate court a motion for
extension of time to file a motion for reconsideration. The motion for reconsideration was
submitted on 4 July 1995. However, the appellate court denied the motion for extension of time in
its Resolution dated 25 July 1995. 9 Meanwhile, petitioners engaged the services of another
counsel, Atty. Sillano, to replace Atty. Ligsay. Atty. Sillano filed on 7 August 1995 a motion to
admit the motion for reconsideration contending that the period to file the appropriate pleading on
the assailed decision had not yet commenced to run as the Division Clerk of Court of the Court of
Appeals had not yet served a copy thereof to the counsel on record. Despite this explanation, the
appellate court still denied the motion to admit the motion for reconsideration of petitioners in its
Resolution, dated 29 March 1996, primarily on the ground that the fifteen-day (15) period for filing
a motion for reconsideration had already expired, to wit:
We said in our Resolution on July 25, 1995, that the filing of a Motion for
Reconsideration cannot be extended; precisely, the Motion for Extension (Rollo,
p. 12) was denied. It is, on the other hand, admitted in the latter Motion that
plaintiffs/appellees received a copy of the decision as early as June 9, 1995.
Computation wise, the period to file a Motion for Reconsideration expired on June
24. The Motion for Reconsideration, in turn, was received by the Court of Appeals
already on July 4, necessarily, the 15-day period already passed. For that alone,
the latter should be denied.
Even assuming admissibility of the Motion for the Reconsideration, but after
considering the Comment/Opposition, the former, for lack of merit, is hereby
DENIED.
SO ORDERED. 10
A copy of the above resolution was received by Atty. Sillano on 11 April 1996. The next day, or
on 12 April 1996, Atty. Sillano filed before this Court a motion for extension of time to file the
present petition for certiorari under Rule 45. The Court granted the motion for extension of time
and gave petitioners additional thirty (30) days after the expiration of the fifteen-day (15) period
counted from the receipt of the resolution of the Court of Appeals within which to submit the
petition. The due date fell on 27 May 1996. The petition was filed on 9 May 1996, well within the
extended period given by the Court.
Petitioners assail the decision of the Court of Appeals on the following grounds:
IN PUTTING MUCH RELIANCE ON THE TESTIMONIES OF RESPONDENTS

DRA. GUTIERREZ, DRA. CALDERON AND DR. JAMORA;
II
IN FINDING THAT THE NEGLIGENCE OF THE RESPONDENTS DID NOT

CAUSE THE UNFORTUNATE COMATOSE CONDITION OF PETITIONER
ERLINDA RAMOS;
III
IN NOT APPLYING THE DOCTRINE OF RES IPSA LOQUITUR. 11
Before we discuss the merits of the case, we shall first dispose of the procedural issue on the
timeliness of the petition in relation to the motion for reconsideration filed by petitioners with the
Court of Appeals. In their
Comment, 12 private respondents contend that the petition should not be given due course since
the motion for reconsideration of the petitioners on the decision of the Court of Appeals was
validly dismissed by the appellate court for having been filed beyond the reglementary period.
We do not agree.
A careful review of the records reveals that the reason behind the delay in filing the motion for
reconsideration is attributable to the fact that the decision of the Court of Appeals was not sent to
then counsel on record of petitioners, the Coronel Law Office. In fact, a copy of the decision of
the appellate court was instead sent to and received by petitioner Rogelio Ramos on 9 June
1995 wherein he was mistakenly addressed as Atty. Rogelio Ramos. Based on the other
communications received by petitioner Rogelio Ramos, the appellate court apparently mistook
him for the counsel on record. Thus, no copy of the decision of the counsel on record. Petitioner,
not being a lawyer and unaware of the prescriptive period for filing a motion for reconsideration,
referred the same to a legal counsel only on 20 June 1995.
It is elementary that when a party is represented by counsel, all notices should be sent to the
party's lawyer at his given address. With a few exceptions, notice to a litigant without notice to his
counsel on record is no notice at all. In the present case, since a copy of the decision of the
appellate court was not sent to the counsel on record of petitioner, there can be no sufficient
notice to speak of. Hence, the delay in the filing of the motion for reconsideration cannot be taken
against petitioner. Moreover, since the Court of Appeals already issued a second Resolution,
dated 29 March 1996, which superseded the earlier resolution issued on 25 July 1995, and
denied the motion for reconsideration of petitioner, we believed that the receipt of the former
should be considered in determining the timeliness of the filing of the present petition. Based on
this, the petition before us was submitted on time.
After resolving the foregoing procedural issue, we shall now look into the merits of the case. For
a more logical presentation of the discussion we shall first consider the issue on the applicability
of the doctrine of res ipsa loquiturto the instant case. Thereafter, the first two assigned errors
shall be tackled in relation to the res ipsa loquiturdoctrine.
Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction speaks for
itself." The phrase "res ipsa loquitur'' is a maxim for the rule that the fact of the occurrence of an
injury, taken with the surrounding circumstances, may permit an inference or raise a presumption
of negligence, or make out a plaintiff's prima facie case, and present a question of fact for
defendant to meet with an explanation. 13 Where the thing which caused the injury complained of
is shown to be under the management of the defendant or his servants and the accident is such
as in ordinary course of things does not happen if those who have its management or control use
proper care, it affords reasonable evidence, in the absence of explanation by the defendant, that
the accident arose from or was caused by the defendant's want of care. 14
The doctrine of res ipsa loquitur is simply a recognition of the postulate that, as a matter of
common knowledge and experience, the very nature of certain types of occurrences may justify
an inference of negligence on the part of the person who controls the instrumentality causing the
injury in the absence of some explanation by the defendant who is charged with negligence. 15 It
is grounded in the superior logic of ordinary human experience and on the basis of such
experience or common knowledge, negligence may be deduced from the mere occurrence of the
accident itself. 16 Hence, res ipsa loquitur is applied in conjunction with the doctrine of common
knowledge.
However, much has been said that res ipsa loquitur is not a rule of substantive law and, as such,
does not create or constitute an independent or separate ground of liability. 17 Instead, it is
considered as merely evidentiary or in the nature of a procedural rule. 18 It is regarded as a mode
of proof, or a mere procedural of convenience since it furnishes a substitute for, and relieves a
plaintiff of, the burden of producing specific proof of negligence. 19 In other words, mere
invocation and application of the doctrine does not dispense with the requirement of proof of
negligence. It is simply a step in the process of such proof, permitting the plaintiff to present
along with the proof of the accident, enough of the attending circumstances to invoke the
doctrine, creating an inference or presumption of negligence, and to thereby place on the
defendant the burden of going forward with the proof. 20 Still, before resort to the doctrine may be
allowed, the following requisites must be satisfactorily shown:
1. The accident is of a kind which ordinarily does not occur in the

absence of someone's negligence;
2. It is caused by an instrumentality within the exclusive control of

the defendant or defendants; and
3. The possibility of contributing conduct which would make the

plaintiff responsible is eliminated. 21
In the above requisites, the fundamental element is the "control of instrumentality" which caused
the damage. 22Such element of control must be shown to be within the dominion of the defendant.
In order to have the benefit of the rule, a plaintiff, in addition to proving injury or damage, must
show a situation where it is applicable, and must establish that the essential elements of the
doctrine were present in a particular incident. 23
Medical malpractice 24 cases do not escape the application of this doctrine. Thus, res ipsa
loquitur has been applied when the circumstances attendant upon the harm are themselves of
such a character as to justify an inference of negligence as the cause of that harm. 25 The
application of res ipsa loquitur in medical negligence cases presents a question of law since it is
a judicial function to determine whether a certain set of circumstances does, as a matter of law,
permit a given inference. 26
Although generally, expert medical testimony is relied upon in malpractice suits to prove that a
physician has done a negligent act or that he has deviated from the standard medical procedure,
when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical
testimony is dispensed with because the injury itself provides the proof of negligence. 27 The
reason is that the general rule on the necessity of expert testimony applies only to such matters
clearly within the domain of medical science, and not to matters that are within the common
knowledge of mankind which may be testified to by anyone familiar with the facts. 28 Ordinarily,
only physicians and surgeons of skill and experience are competent to testify as to whether a
patient has been treated or operated upon with a reasonable degree of skill and care. However,
testimony as to the statements and acts of physicians and surgeons, external appearances, and
manifest conditions which are observable by any one may be given by non-expert
witnesses. 29 Hence, in cases where the res ipsa loquitur is applicable, the court is permitted to
find a physician negligent upon proper proof of injury to the patient, without the aid of expert
testimony, where the court from its fund of common knowledge can determine the proper
standard of care. 30 Where common knowledge and experience teach that a resulting injury would
not have occurred to the patient if due care had been exercised, an inference of negligence may
be drawn giving rise to an application of the doctrine of res ipsa loquitur without medical
evidence, which is ordinarily required to show not only what occurred but how and why it
occurred. 31 When the doctrine is appropriate, all that the patient must do is prove a nexus
between the particular act or omission complained of and the injury sustained while under the
custody and management of the defendant without need to produce expert medical testimony to
establish the standard of care. Resort to res ipsa loquitur is allowed because there is no other
way, under usual and ordinary conditions, by which the patient can obtain redress for injury
suffered by him.
Thus, courts of other jurisdictions have applied the doctrine in the following situations: leaving of
a foreign object in the body of the patient after an operation, 32 injuries sustained on a healthy part
of the body which was not under, or in the area, of treatment, 33 removal of the wrong part of the
body when another part was intended, 34 knocking out a tooth while a patient's jaw was under
anesthetic for the removal of his tonsils, 35 and loss of an eye while the patient plaintiff was under
the influence of anesthetic, during or following an operation for appendicitis, 36 among others.
Nevertheless, despite the fact that the scope of res ipsa loquitur has been measurably enlarged,
it does not automatically apply to all cases of medical negligence as to mechanically shift the
burden of proof to the defendant to show that he is not guilty of the ascribed negligence. Res
ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily used but a rule to be cautiously
applied, depending upon the circumstances of each case. It is generally restricted to situations in
malpractice cases where a layman is able to say, as a matter of common knowledge and
observation, that the consequences of professional care were not as such as would ordinarily
have followed if due care had been
exercised. 37 A distinction must be made between the failure to secure results, and the
occurrence of something more unusual and not ordinarily found if the service or treatment
rendered followed the usual procedure of those skilled in that particular practice. It must be
conceded that the doctrine of res ipsa loquitur can have no application in a suit against a
physician or surgeon which involves the merits of a diagnosis or of a scientific treatment. 38 The
physician or surgeon is not required at his peril to explain why any particular diagnosis was not
correct, or why any particular scientific treatment did not produce the desired result. 39 Thus, res
ipsa loquitur is not available in a malpractice suit if the only showing is that the desired result of
an operation or treatment was not accomplished. 40The real question, therefore, is whether or not
in the process of the operation any extraordinary incident or unusual event outside of the routine
performance occurred which is beyond the regular scope of customary professional activity in
such operations, which, if unexplained would themselves reasonably speak to the average man
as the negligent cause or causes of the untoward consequence. 41 If there was such extraneous
interventions, the doctrine of res ipsa loquitur may be utilized and the defendant is called upon to
explain the matter, by evidence of exculpation, if he could. 42
We find the doctrine of res ipsa loquitur appropriate in the case at bar. As will hereinafter be
explained, the damage sustained by Erlinda in her brain prior to a scheduled gall bladder
operation presents a case for the application of res ipsa loquitur.
A case strikingly similar to the one before us is Voss vs. Bridwell, 43 where the Kansas Supreme
Court in applying the res ipsa loquitur stated:
The plaintiff herein submitted himself for a mastoid operation and delivered his
person over to the care, custody and control of his physician who had complete
and exclusive control over him, but the operation was never performed. At the
time of submission he was neurologically sound and physically fit in mind and
body, but he suffered irreparable damage and injury rendering him decerebrate
and totally incapacitated. The injury was one which does not ordinarily occur in
the process of a mastoid operation or in the absence of negligence in the
administration of an anesthetic, and in the use and employment of an
endoctracheal tube. Ordinarily a person being put under anesthesia is not
rendered decerebrate as a consequence of administering such anesthesia in the
absence of negligence. Upon these facts and under these circumstances a
layman would be able to say, as a matter of common knowledge and
observation, that the consequences of professional treatment were not as such
as would ordinarily have followed if due care had been exercised.
Here the plaintiff could not have been guilty of contributory negligence because
he was under the influence of anesthetics and unconscious, and the
circumstances are such that the true explanation of event is more accessible to
the defendants than to the plaintiff for they had the exclusive control of the
instrumentalities of anesthesia.
Upon all the facts, conditions and circumstances alleged in Count II it is held that
a cause of action is stated under the doctrine of res ipsa loquitur. 44
Indeed, the principles enunciated in the aforequoted case apply with equal force here. In the
present case, Erlinda submitted herself for cholecystectomy and expected a routine general
surgery to be performed on her gall bladder. On that fateful day she delivered her person over to
the care, custody and control of private respondents who exercised complete and exclusive
control over her. At the time of submission, Erlinda was neurologically sound and, except for a
few minor discomforts, was likewise physically fit in mind and body. However, during the
administration of anesthesia and prior to the performance of cholecystectomy she suffered
irreparable damage to her brain. Thus, without undergoing surgery, she went out of the operating
room already decerebrate and totally incapacitated. Obviously, brain damage, which Erlinda
sustained, is an injury which does not normally occur in the process of a gall bladder operation.
In fact, this kind of situation does not in the absence of negligence of someone in the
administration of anesthesia and in the use of endotracheal tube. Normally, a person being put
under anesthesia is not rendered decerebrate as a consequence of administering such
anesthesia if the proper procedure was followed. Furthermore, the instruments used in the
administration of anesthesia, including the endotracheal tube, were all under the exclusive
control of private respondents, who are the physicians-in-charge. Likewise, petitioner Erlinda
could not have been guilty of contributory negligence because she was under the influence of
anesthetics which rendered her unconscious.
Considering that a sound and unaffected member of the body (the brain) is injured or destroyed
while the patient is unconscious and under the immediate and exclusive control of the
physicians, we hold that a practical administration of justice dictates the application of res ipsa
loquitur. Upon these facts and under these circumstances the Court would be able to say, as a
matter of common knowledge and observation, if negligence attended the management and care
of the patient. Moreover, the liability of the physicians and the hospital in this case is not
predicated upon an alleged failure to secure the desired results of an operation nor on an alleged
lack of skill in the diagnosis or treatment as in fact no operation or treatment was ever performed
on Erlinda. Thus, upon all these initial determination a case is made out for the application of the
doctrine of res ipsa loquitur.
Nonetheless, in holding that res ipsa loquitur is available to the present case we are not saying
that the doctrine is applicable in any and all cases where injury occurs to a patient while under
anesthesia, or to any and all anesthesia cases. Each case must be viewed in its own light and
scrutinized in order to be within the res ipsa loquitur coverage.
Having in mind the applicability of the res ipsa loquitur doctrine and the presumption of
negligence allowed therein, the Court now comes to the issue of whether the Court of Appeals
erred in finding that private respondents were not negligent in the care of Erlinda during the
anesthesia phase of the operation and, if in the affirmative, whether the alleged negligence was
the proximate cause of Erlinda's comatose condition. Corollary thereto, we shall also determine if
the Court of Appeals erred in relying on the testimonies of the witnesses for the private
respondents.
In sustaining the position of private respondents, the Court of Appeals relied on the testimonies
of Dra. Gutierrez, Dra. Calderon and Dr. Jamora. In giving weight to the testimony of Dra.
Gutierrez, the Court of Appeals rationalized that she was candid enough to admit that she
experienced some difficulty in the endotracheal intubation 45 of the patient and thus, cannot be
said to be covering her negligence with falsehood. The appellate court likewise opined that
private respondents were able to show that the brain damage sustained by Erlinda was not
caused by the alleged faulty intubation but was due to the allergic reaction of the patient to the
drug Thiopental Sodium (Pentothal), a short-acting barbiturate, as testified on by their expert
witness, Dr. Jamora. On the other hand, the appellate court rejected the testimony of Dean
Herminda Cruz offered in favor of petitioners that the cause of the brain injury was traceable to
the wrongful insertion of the tube since the latter, being a nurse, was allegedly not
knowledgeable in the process of intubation. In so holding, the appellate court returned a verdict
in favor of respondents physicians and hospital and absolved them of any liability towards Erlinda
and her family.
We disagree with the findings of the Court of Appeals. We hold that private respondents were
unable to disprove the presumption of negligence on their part in the care of Erlinda and their
negligence was the proximate cause of her piteous condition.
In the instant case, the records are helpful in furnishing not only the logical scientific evidence of
the pathogenesis of the injury but also in providing the Court the legal nexus upon which liability
is based. As will be shown hereinafter, private respondents' own testimonies which are reflected
in the transcript of stenographic notes are replete of signposts indicative of their negligence in the
care and management of Erlinda.
With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during the anesthesia
phase. As borne by the records, respondent Dra. Gutierrez failed to properly intubate the patient.
This fact was attested to by Prof. Herminda Cruz, Dean of the Capitol Medical Center School of
Nursing and petitioner's sister-in-law, who was in the operating room right beside the patient
when the tragic event occurred. Witness Cruz testified to this effect:
ATTY. PAJARES:
Q: In particular, what did Dra. Perfecta Gutierrez do, if any on the

patient?
A: In particular, I could see that she was intubating the patient.
Q: Do you know what happened to that intubation process

administered by Dra. Gutierrez?
ATTY. ALCERA:
She will be incompetent Your Honor.
COURT:
Witness may answer if she knows.
A: As have said, I was with the patient, I was beside the stretcher
holding the left hand of the patient and all of a sudden heard
some remarks coming from Dra. Perfecta Gutierrez herself. She
was saying "Ang hirap ma-intubate nito, mali yata ang
pagkakapasok. O lumalaki ang tiyan.
xxx xxx xxx
ATTY. PAJARES:
Q: From whom did you hear those words "lumalaki ang tiyan"?
A: From Dra. Perfecta Gutierrez.
xxx xxx xxx
Q: After hearing the phrase "lumalaki ang tiyan," what did you
notice on the person of the patient?
A: I notice (sic) some bluish discoloration on the nailbeds of the

left hand where I was at.
Q: Where was Dr. Orlino Ho[s]aka then at that particular time?
A: I saw him approaching the patient during that time.
Q: When he approached the patient, what did he do, if any?
A: He made an order to call on the anesthesiologist in the person

of Dr. Calderon.
Q: Did Dr. Calderon, upon being called, arrive inside the operating
room?
A: Yes sir.
Q: What did [s]he do, if any?
A: [S]he tried to intubate the patient.
Q: What happened to the patient?
A: When Dr. Calderon try (sic) to intubate the patient, after a while
the patient's nailbed became bluish and I saw the patient was
placed in trendelenburg position.
xxx xxx xxx

Q: Do you know the reason why the patient was placed in that
trendelenburg position?
A: As far as I know, when a patient is in that position, there is a

decrease of blood supply to the brain. 46
xxx xxx xxx
The appellate court, however, disbelieved Dean Cruz's testimony in the trial court by declaring
that:
A perusal of the standard nursing curriculum in our country will show that
intubation is not taught as part of nursing procedures and techniques. Indeed, we
take judicial notice of the fact that nurses do not, and cannot, intubate. Even on
the assumption that she is fully capable of determining whether or not a patient is
properly intubated, witness Herminda Cruz, admittedly, did not peep into the
throat of the patient. (TSN, July 25, 1991, p. 13). More importantly, there is no
evidence that she ever auscultated the patient or that she conducted any type of
examination to check if the endotracheal tube was in its proper place, and to
determine the condition of the heart, lungs, and other organs. Thus, witness
Cruz's categorical statements that appellant Dra. Gutierrez failed to intubate the
appellee Erlinda Ramos and that it was Dra. Calderon who succeeded in doing
so clearly suffer from lack of sufficient factual bases. 47
In other words, what the Court of Appeals is trying to impress is that being a nurse, and
considered a layman in the process of intubation, witness Cruz is not competent to testify on
whether or not the intubation was a success.
We do not agree with the above reasoning of the appellate court. Although witness Cruz is not an
anesthesiologist, she can very well testify upon matters on which she is capable of observing
such as, the statements and acts of the physician and surgeon, external appearances, and
manifest conditions which are observable by any one. 48 This is precisely allowed under the
doctrine of res ipsa loquitur where the testimony of expert witnesses is not required. It is the
accepted rule that expert testimony is not necessary for the proof of negligence in non-technical
matters or those of which an ordinary person may be expected to have knowledge, or where the
lack of skill or want of care is so obvious as to render expert testimony unnecessary. 49 We take
judicial notice of the fact that anesthesia procedures have become so common, that even an
ordinary person can tell if it was administered properly. As such, it would not be too difficult to tell
if the tube was properly inserted. This kind of observation, we believe, does not require a medical
degree to be acceptable.
At any rate, without doubt, petitioner's witness, an experienced clinical nurse whose long
experience and scholarship led to her appointment as Dean of the Capitol Medical Center School
at Nursing, was fully capable of determining whether or not the intubation was a success. She
had extensive clinical experience starting as a staff nurse in Chicago, Illinois; staff nurse and
clinical instructor in a teaching hospital, the FEU-NRMF; Dean of the Laguna College of Nursing
in San Pablo City; and then Dean of the Capitol Medical Center School of Nursing. 50 Reviewing
witness Cruz' statements, we find that the same were delivered in a straightforward manner, with
the kind of detail, clarity, consistency and spontaneity which would have been difficult to
fabricate. With her clinical background as a nurse, the Court is satisfied that she was able to
demonstrate through her testimony what truly transpired on that fateful day.
Most of all, her testimony was affirmed by no less than respondent Dra. Gutierrez who admitted
that she experienced difficulty in inserting the tube into Erlinda's trachea, to wit:
ATTY. LIGSAY:
Q: In this particular case, Doctora, while you were intubating at
your first attempt (sic), you did not immediately see the trachea?
DRA. GUTIERREZ:
A: Yes sir.
Q: Did you pull away the tube immediately?
A: You do not pull the . . .
Q: Did you or did you not?
A: I did not pull the tube.
Q: When you said "mahirap yata ito," what were you referring to?
A: "Mahirap yata itong i-intubate," that was the patient.
Q: So, you found some difficulty in inserting the tube?
A: Yes, because of (sic) my first attempt, I did not see right

away. 51
Curiously in the case at bar, respondent Dra. Gutierrez made the haphazard defense that she
encountered hardship in the insertion of the tube in the trachea of Erlinda because it was
positioned more anteriorly (slightly deviated from the normal anatomy of a person) 52 making it
harder to locate and, since Erlinda is obese and has a short neck and protruding teeth, it made
intubation even more difficult.
The argument does not convince us. If this was indeed observed, private respondents adduced
no evidence demonstrating that they proceeded to make a thorough assessment of Erlinda's
airway, prior to the induction of anesthesia, even if this would mean postponing the procedure.
From their testimonies, it appears that the observation was made only as an afterthought, as a
means of defense.
The pre-operative evaluation of a patient prior to the administration of anesthesia is universally

observed to lessen the possibility of anesthetic accidents. Pre-operative evaluation and
preparation for anesthesia begins when the anesthesiologist reviews the patient's medical
records and visits with the patient, traditionally, the day before elective surgery. 53 It includes
taking the patient's medical history, review of current drug therapy, physical examination and
interpretation of laboratory data. 54 The physical examination performed by the anesthesiologist is
directed primarily toward the central nervous system, cardiovascular system, lungs and upper
airway. 55 A thorough analysis of the patient's airway normally involves investigating the following:
cervical spine mobility, temporomandibular mobility, prominent central incisors, diseased or
artificial teeth, ability to visualize uvula and the thyromental distance. 56 Thus, physical
characteristics of the patient's upper airway that could make tracheal intubation difficult should be
studied. 57 Where the need arises, as when initial assessment indicates possible problems (such
as the alleged short neck and protruding teeth of Erlinda) a thorough examination of the patient's
airway would go a long way towards decreasing patient morbidity and mortality.
In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the first time on
the day of the operation itself, on 17 June 1985. Before this date, no prior consultations with, or
pre-operative evaluation of Erlinda was done by her. Until the day of the operation, respondent
Dra. Gutierrez was unaware of the physiological make-up and needs of Erlinda. She was
likewise not properly informed of the possible difficulties she would face during the administration
of anesthesia to Erlinda. Respondent Dra. Gutierrez' act of seeing her patient for the first time
only an hour before the scheduled operative procedure was, therefore, an act of exceptional
negligence and professional irresponsibility. The measures cautioning prudence and vigilance in
dealing with human lives lie at the core of the physician's centuries-old Hippocratic Oath. Her
failure to follow this medical procedure is, therefore, a clear indicia of her negligence.
Respondent Dra. Gutierrez, however, attempts to gloss over this omission by playing around with
the trial court's ignorance of clinical procedure, hoping that she could get away with it.
Respondent Dra. Gutierrez tried to muddle the difference between an elective surgery and an
emergency surgery just so her failure to perform the required pre-operative evaluation would
escape unnoticed. In her testimony she asserted:
ATTY. LIGSAY:
Q: Would you agree, Doctor, that it is good medical practice to

see the patient a day before so you can introduce yourself to
establish good doctor-patient relationship and gain the trust and
confidence of the patient?
DRA. GUTIERREZ:
A: As I said in my previous statement, it depends on the operative

procedure of the anesthesiologist and in my case, with elective
cases and normal cardio-pulmonary clearance like that, I usually
don't do it except on emergency and on cases that have an
abnormalities (sic). 58
However, the exact opposite is true. In an emergency procedure, there is hardly enough time
available for the fastidious demands of pre-operative procedure so that an anesthesiologist is
able to see the patient only a few minutes before surgery, if at all. Elective procedures, on the
other hand, are operative procedures that can wait for days, weeks or even months. Hence, in
these cases, the anesthesiologist possesses the luxury of time to be at the patient's beside to do
a proper interview and clinical evaluation. There is ample time to explain the method of
anesthesia, the drugs to be used, and their possible hazards for purposes of informed consent.
Usually, the pre-operative assessment is conducted at least one day before the intended
surgery, when the patient is relaxed and cooperative.
Erlinda's case was elective and this was known to respondent Dra. Gutierrez. Thus, she had all
the time to make a thorough evaluation of Erlinda's case prior to the operation and prepare her
for anesthesia. However, she never saw the patient at the bedside. She herself admitted that she
had seen petitioner only in the operating room, and only on the actual date of the
cholecystectomy. She negligently failed to take advantage of this important opportunity. As such,
her attempt to exculpate herself must fail.
Having established that respondent Dra. Gutierrez failed to perform pre-operative evaluation of
the patient which, in turn, resulted to a wrongful intubation, we now determine if the faulty
intubation is truly the proximate cause of Erlinda's comatose condition.
Private respondents repeatedly hammered the view that the cerebral anoxia which led to
Erlinda's coma was due to bronchospasm 59 mediated by her allergic response to the drug,
Thiopental Sodium, introduced into her system. Towards this end, they presented Dr. Jamora, a
Fellow of the Philippine College of Physicians and Diplomate of the Philippine Specialty Board of
Internal Medicine, who advanced private respondents' theory that the oxygen deprivation which
led to anoxic encephalopathy, 60 was due to an unpredictable drug reaction to the short-acting
barbiturate. We find the theory of private respondents unacceptable.
First of all, Dr. Jamora cannot be considered an authority in the field of anesthesiology simply
because he is not an anesthesiologist. Since Dr. Jamora is a pulmonologist, he could not have
been capable of properly enlightening the court about anesthesia practice and procedure and
their complications. Dr. Jamora is likewise not an allergologist and could not therefore properly
advance expert opinion on allergic-mediated processes. Moreover, he is not a pharmacologist
and, as such, could not have been capable, as an expert would, of explaining to the court the
pharmacologic and toxic effects of the supposed culprit, Thiopental Sodium (Pentothal).
The inappropriateness and absurdity of accepting Dr. Jamora's testimony as an expert witness in
the anesthetic practice of Pentothal administration is further supported by his own admission that
he formulated his opinions on the drug not from the practical experience gained by a specialist or
expert in the administration and use of Sodium Pentothal on patients, but only from reading
certain references, to wit:
ATTY. LIGSAY:
Q: In your line of expertise on pulmonology, did you have any

occasion to use pentothal as a method of management?
DR. JAMORA:
A: We do it in conjunction with the anesthesiologist when they

have to intubate our patient.
Q: But not in particular when you practice pulmonology?
A: No.
Q: In other words, your knowledge about pentothal is based only

on what you have read from books and not by your own personal
application of the medicine pentothal?
A: Based on my personal experience also on pentothal.
Q: How many times have you used pentothal?
A: They used it on me. I went into bronchospasm during my

appendectomy.
Q: And because they have used it on you and on account of your

own personal experience you feel that you can testify on
pentothal here with medical authority?
A: No. That is why I used references to support my claims. 61
An anesthetic accident caused by a rare drug-induced bronchospasm properly falls within the
fields of anesthesia, internal medicine-allergy, and clinical pharmacology. The resulting anoxic
encephalopathy belongs to the field of neurology. While admittedly, many bronchospastic-
mediated pulmonary diseases are within the expertise of pulmonary medicine, Dr. Jamora's field,
the anesthetic drug-induced, allergic mediated bronchospasm alleged in this case is within the
disciplines of anesthesiology, allergology and pharmacology. On the basis of the foregoing
transcript, in which the pulmonologist himself admitted that he could not testify about the drug
with medical authority, it is clear that the appellate court erred in giving weight to Dr. Jamora's
testimony as an expert in the administration of Thiopental Sodium.
The provision in the rules of evidence 62 regarding expert witnesses states:
Sec. 49. Opinion of expert witness. — The opinion of a witness on a matter

requiring special knowledge, skill, experience or training which he is shown to
possess, may be received in evidence.
Generally, to qualify as an expert witness, one must have acquired special knowledge of the
subject matter about which he or she is to testify, either by the study of recognized authorities on
the subject or by practical experience. 63Clearly, Dr. Jamora does not qualify as an expert witness
based on the above standard since he lacks the necessary knowledge, skill, and training in the
field of anesthesiology. Oddly, apart from submitting testimony from a specialist in the wrong
field, private respondents' intentionally avoided providing testimony by competent and
independent experts in the proper areas.
Moreover, private respondents' theory, that Thiopental Sodium may have produced Erlinda's
coma by triggering an allergic mediated response, has no support in evidence. No evidence of
stridor, skin reactions, or wheezing — some of the more common accompanying signs of an
allergic reaction — appears on record. No laboratory data were ever presented to the court.
In any case, private respondents themselves admit that Thiopental induced, allergic-mediated
bronchospasm happens only very rarely. If courts were to accept private respondents' hypothesis
without supporting medical proof, and against the weight of available evidence, then every
anesthetic accident would be an act of God. Evidently, the Thiopental-allergy theory vigorously
asserted by private respondents was a mere afterthought. Such an explanation was advanced in
order to advanced in order to absolve them of any and all responsibility for the patient's
condition.
In view of the evidence at hand, we are inclined to believe petitioners' stand that it was the faulty
intubation which was the proximate cause of Erlinda's comatose condition.
Proximate cause has been defined as that which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces injury, and without which the result would not have
occurred. 64 An injury or damage is proximately caused by an act or a failure to act, whenever it
appears from the evidence in the case, that the act or omission played a substantial part in
bringing about or actually causing the injury or damage; and that the injury or damage was either
a direct result or a reasonably probable consequence of the act or omission. 65 It is the dominant,
moving or producing cause.
Applying the above definition in relation to the evidence at hand, faulty intubation is undeniably
the proximate cause which triggered the chain of events leading to Erlinda's brain damage and,
ultimately, her comatosed condition.
Private respondents themselves admitted in their testimony that the first intubation was a failure.
This fact was likewise observed by witness Cruz when she heard respondent Dra. Gutierrez
remarked, "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan."
Thereafter, witness Cruz noticed abdominal distention on the body of Erlinda. The development
of abdominal distention, together with respiratory embarrassment indicates that the endotracheal
tube entered the esophagus instead of the respiratory tree. In other words, instead of the
intended endotracheal intubation what actually took place was an esophageal intubation. During
intubation, such distention indicates that air has entered the gastrointestinal tract through the
esophagus instead of the lungs through the trachea. Entry into the esophagus would certainly
cause some delay in oxygen delivery into the lungs as the tube which carries oxygen is in the
wrong place. That abdominal distention had been observed during the first intubation suggests
that the length of time utilized in inserting the endotracheal tube (up to the time the tube was
withdrawn for the second attempt) was fairly significant. Due to the delay in the delivery of
oxygen in her lungs Erlinda showed signs of cyanosis. 66 As stated in the testimony of Dr.
Hosaka, the lack of oxygen became apparent only after he noticed that the nailbeds of Erlinda
were already blue. 67 However, private respondents contend that a second intubation was
executed on Erlinda and this one was successfully done. We do not think so. No evidence exists
on record, beyond private respondents' bare claims, which supports the contention that the
second intubation was successful. Assuming that the endotracheal tube finally found its way into
the proper orifice of the trachea, the same gave no guarantee of oxygen delivery, the hallmark of
a successful intubation. In fact, cyanosis was again observed immediately after the second
intubation. Proceeding from this event (cyanosis), it could not be claimed, as private respondents
insist, that the second intubation was accomplished. Even granting that the tube was
successfully inserted during the second attempt, it was obviously too late. As aptly explained by
the trial court, Erlinda already suffered brain damage as a result of the inadequate oxygenation of
her brain for about four to five minutes. 68
The above conclusion is not without basis. Scientific studies point out that intubation problems
are responsible for one-third (1/3) of deaths and serious injuries associated with
anesthesia. 69 Nevertheless, ninety-eight percent (98%) or the vast majority of difficult intubations
may be anticipated by performing a thorough evaluation of the patient's airway prior to the
operation. 70 As stated beforehand, respondent Dra. Gutierrez failed to observe the proper pre-
operative protocol which could have prevented this unfortunate incident. Had appropriate
diligence and reasonable care been used in the pre-operative evaluation, respondent physician
could have been much more prepared to meet the contingency brought about by the perceived
anatomic variations in the patient's neck and oral area, defects which would have been easily
overcome by a prior knowledge of those variations together with a change in technique. 71 In
other words, an experienced anesthesiologist, adequately alerted by a thorough pre-operative
evaluation, would have had little difficulty going around the short neck and protruding
teeth. 72 Having failed to observe common medical standards in pre-operative management and
intubation, respondent Dra. Gutierrez' negligence resulted in cerebral anoxia and eventual coma
of Erlinda.
We now determine the responsibility of respondent Dr. Orlino Hosaka as the head of the surgical
team. As the so-called "captain of the ship," 73 it is the surgeon's responsibility to see to it that
those under him perform their task in the proper manner. Respondent Dr. Hosaka's negligence
can be found in his failure to exercise the proper authority (as the "captain" of the operative
team) in not determining if his anesthesiologist observed proper anesthesia protocols. In fact, no
evidence on record exists to show that respondent Dr. Hosaka verified if respondent Dra.
Gutierrez properly intubated the patient. Furthermore, it does not escape us that respondent Dr.
Hosaka had scheduled another procedure in a different hospital at the same time as Erlinda's
cholecystectomy, and was in fact over three hours late for the latter's operation. Because of this,
he had little or no time to confer with his anesthesiologist regarding the anesthesia delivery. This
indicates that he was remiss in his professional duties towards his patient. Thus, he shares equal
responsibility for the events which resulted in Erlinda's condition.
We now discuss the responsibility of the hospital in this particular incident. The unique practice
(among private hospitals) of filling up specialist staff with attending and visiting
"consultants," 74 who are allegedly not hospital employees, presents problems in apportioning
responsibility for negligence in medical malpractice cases. However, the difficulty is only more
apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in
the conduct of their work within the hospital premises. Doctors who apply for "consultant" slots,
visiting or attending, are required to submit proof of completion of residency, their educational
qualifications; generally, evidence of accreditation by the appropriate board (diplomate),
evidence of fellowship in most cases, and references. These requirements are carefully
scrutinized by members of the hospital administration or by a review committee set up by the
hospital who either accept or reject the application. 75 This is particularly true with respondent
hospital.
After a physician is accepted, either as a visiting or attending consultant, he is normally required
to attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and
residents, moderate grand rounds and patient audits and perform other tasks and
responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the
privilege of admitting patients into the hospital. In addition to these, the physician's performance
as a specialist is generally evaluated by a peer review committee on the basis of mortality and
morbidity statistics, and feedback from patients, nurses, interns and residents. A consultant
remiss in his duties, or a consultant who regularly falls short of the minimum standards
acceptable to the hospital or its peer review committee, is normally politely terminated.
In other words, private hospitals, hire, fire and exercise real control over their attending and
visiting "consultant" staff. While "consultants" are not, technically employees, a point which
respondent hospital asserts in denying all responsibility for the patient's condition, the control
exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of an
employer-employee relationship, with the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control test is determining. Accordingly, on the
basis of the foregoing, we rule that for the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship in effect exists between hospitals and their
attending and visiting physicians. This being the case, the question now arises as to whether or
not respondent hospital is solidarily liable with respondent doctors for petitioner's condition. 76
The basis for holding an employer solidarily responsible for the negligence of its employee is
found in Article 2180 of the Civil Code which considers a person accountable not only for his own
acts but also for those of others based on the former's responsibility under a relationship of patria
potestas. 77 Such responsibility ceases when the persons or entity concerned prove that they
have observed the diligence of a good father of the family to prevent damage. 78In other words,
while the burden of proving negligence rests on the plaintiffs, once negligence is shown, the
burden shifts to the respondents (parent, guardian, teacher or employer) who should prove that
they observed the diligence of a good father of a family to prevent damage.
In the instant case, respondent hospital, apart from a general denial of its responsibility over
respondent physicians, failed to adduce evidence showing that it exercised the diligence of a
good father of a family in the hiring and supervision of the latter. It failed to adduce evidence with
regard to the degree of supervision which it exercised over its physicians. In neglecting to offer
such proof, or proof of a similar nature, respondent hospital thereby failed to discharge its burden
under the last paragraph of Article 2180. Having failed to do this, respondent hospital is
consequently solidarily responsible with its physicians for Erlinda's condition.
Based on the foregoing, we hold that the Court of Appeals erred in accepting and relying on the
testimonies of the witnesses for the private respondents. Indeed, as shown by the above
discussions, private respondents were unable to rebut the presumption of negligence. Upon
these disquisitions we hold that private respondents are solidarily liable for damages under
Article 2176 79 of the Civil Code.
We now come to the amount of damages due petitioners. The trial court awarded a total of
P632,000.00 pesos (should be P616,000.00) in compensatory damages to the plaintiff, "subject
to its being updated" covering the period from 15 November 1985 up to 15 April 1992, based on
monthly expenses for the care of the patient estimated at P8,000.00.
At current levels, the P8000/monthly amount established by the trial court at the time of its
decision would be grossly inadequate to cover the actual costs of home-based care for a
comatose individual. The calculated amount was not even arrived at by looking at the actual cost
of proper hospice care for the patient. What it reflected were the actual expenses incurred and
proved by the petitioners after they were forced to bring home the patient to avoid mounting
hospital bills.
And yet ideally, a comatose patient should remain in a hospital or be transferred to a hospice
specializing in the care of the chronically ill for the purpose of providing a proper milieu adequate
to meet minimum standards of care. In the instant case for instance, Erlinda has to be constantly
turned from side to side to prevent bedsores and hypostatic pneumonia. Feeding is done by
nasogastric tube. Food preparation should be normally made by a dietitian to provide her with the
correct daily caloric requirements and vitamin supplements. Furthermore, she has to be seen on
a regular basis by a physical therapist to avoid muscle atrophy, and by a pulmonary therapist to
prevent the accumulation of secretions which can lead to respiratory complications.
Given these considerations, the amount of actual damages recoverable in suits arising from
negligence should at least reflect the correct minimum cost of proper care, not the cost of the
care the family is usually compelled to undertake at home to avoid bankruptcy. However, the
provisions of the Civil Code on actual or compensatory damages present us with some
difficulties.
Well-settled is the rule that actual damages which may be claimed by the plaintiff are those
suffered by him as he has duly proved. The Civil Code provides:
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.
Our rules on actual or compensatory damages generally assume that at the time of litigation, the
injury suffered as a consequence of an act of negligence has been completed and that the cost
can be liquidated. However, these provisions neglect to take into account those situations, as in
this case, where the resulting injury might be continuing and possible future complications
directly arising from the injury, while certain to occur, are difficult to predict.
In these cases, the amount of damages which should be awarded, if they are to adequately and
correctly respond to the injury caused, should be one which compensates for pecuniary loss
incurred and proved, up to the time of trial; and one which would meet pecuniary loss certain to
be suffered but which could not, from the nature of the case, be made with certainty. 80 In other
words, temperate damages can and should be awarded on top of actual or compensatory
damages in instances where the injury is chronic and continuing. And because of the unique
nature of such cases, no incompatibility arises when both actual and temperate damages are
provided for. The reason is that these damages cover two distinct phases.
As it would not be equitable — and certainly not in the best interests of the administration of
justice — for the victim in such cases to constantly come before the courts and invoke their aid in
seeking adjustments to the compensatory damages previously awarded — temperate damages
are appropriate. The amount given as temperate damages, though to a certain extent
speculative, should take into account the cost of proper care.
In the instant case, petitioners were able to provide only home-based nursing care for a
comatose patient who has remained in that condition for over a decade. Having premised our
award for compensatory damages on the amount provided by petitioners at the onset of litigation,
it would be now much more in step with the interests of justice if the value awarded for temperate
damages would allow petitioners to provide optimal care for their loved one in a facility which
generally specializes in such care. They should not be compelled by dire circumstances to
provide substandard care at home without the aid of professionals, for anything less would be
grossly inadequate. Under the circumstances, an award of P1,500,000.00 in temperate damages
would therefore be reasonable. 81
In Valenzuela vs. Court of Appeals, 82 this Court was confronted with a situation where the injury
suffered by the plaintiff would have led to expenses which were difficult to estimate because
while they would have been a direct result of the injury (amputation), and were certain to be
incurred by the plaintiff, they were likely to arise only in the future. We awarded P1,000,000.00 in
moral damages in that case.
Describing the nature of the injury, the Court therein stated:
As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic

amputation of her left lower extremity at the distal left thigh just above the knee.
Because of this, Valenzuela will forever be deprived of the full ambulatory
functions of her left extremity, even with the use of state of the art prosthetic
technology. Well beyond the period of hospitalization (which was paid for by Li),
she will be required to undergo adjustments in her prosthetic devise due to the
shrinkage of the stump from the process of healing.
These adjustments entail costs, prosthetic replacements and months of physical

and occupational rehabilitation and therapy. During the lifetime, the prosthetic
devise will have to be replaced and readjusted to changes in the size of her lower
limb effected by the biological changes of middle-age, menopause and aging.
Assuming she reaches menopause, for example, the prosthetic will have to be
adjusted to respond to the changes in bone resulting from a precipitate decrease
in calcium levels observed in the bones of all post-menopausal women. In other
words, the damage done to her would not only be permanent and lasting, it would
also be permanently changing and adjusting to the physiologic changes which
her body would normally undergo through the years. The replacements, changes,
and adjustments will require corresponding adjustive physical and occupational
therapy. All of these adjustments, it has been documented, are painful.
xxx xxx xxx
A prosthetic devise, however technologically advanced, will only allow a

reasonable amount of functional restoration of the motor functions of the lower
limb. The sensory functions are forever lost. The resultant anxiety, sleeplessness,
psychological injury, mental and physical pain are inestimable. 83
The injury suffered by Erlinda as a consequence of private respondents' negligence is certainly

much more serious than the amputation in the Valenzuela case.
Petitioner Erlinda Ramos was in her mid-forties when the incident occurred. She has been in a
comatose state for over fourteen years now. The burden of care has so far been heroically
shouldered by her husband and children, who, in the intervening years have been deprived of the
love of a wife and a mother.
Meanwhile, the actual physical, emotional and financial cost of the care of petitioner would be
virtually impossible to quantify. Even the temperate damages herein awarded would be
inadequate if petitioner's condition remains unchanged for the next ten years.
We recognized, in Valenzuela that a discussion of the victim's actual injury would not even
scratch the surface of the resulting moral damage because it would be highly speculative to
estimate the amount of emotional and moral pain, psychological damage and injury suffered by
the victim or those actually affected by the victim's condition. 84 The husband and the children, all
petitioners in this case, will have to live with the day to day uncertainty of the patient's illness,
knowing any hope of recovery is close to nil. They have fashioned their daily lives around the
nursing care of petitioner, altering their long term goals to take into account their life with a
comatose patient. They, not the respondents, are charged with the moral responsibility of the
care of the victim. The family's moral injury and suffering in this case is clearly a real one. For the
foregoing reasons, an award of P2,000,000.00 in moral damages would be appropriate.
Finally, by way of example, exemplary damages in the amount of P100,000.00 are hereby
awarded. Considering the length and nature of the instant suit we are of the opinion that
attorney's fees valued at P100,000.00 are likewise proper.
Our courts face unique difficulty in adjudicating medical negligence cases because physicians
are not insurers of life and, they rarely set out to intentionally cause injury or death to their
patients. However, intent is immaterial in negligence cases because where negligence exists and
is proven, the same automatically gives the injured a right to reparation for the damage caused.
Established medical procedures and practices, though in constant flux are devised for the
purpose of preventing complications. A physician's experience with his patients would sometimes
tempt him to deviate from established community practices, and he may end a distinguished
career using unorthodox methods without incident. However, when failure to follow established
procedure results in the evil precisely sought to be averted by observance of the procedure and a
nexus is made between the deviation and the injury or damage, the physician would necessarily
be called to account for it. In the case at bar, the failure to observe pre-operative assessment
protocol which would have influenced the intubation in a salutary way was fatal to private
respondents' case.
WHEREFORE, the decision and resolution of the appellate court appealed from are hereby
modified so as to award in favor of petitioners, and solidarily against private respondents the
following: 1) P1,352,000.00 as actual damages computed as of the date of promulgation of this
decision plus a monthly payment of P8,000.00 up to the time that petitioner Erlinda Ramos
expires or miraculously survives; 2) P2,000,000.00 as moral damages, 3) P1,500,000.00 as
temperate damages; 4) P100,000.00 each as exemplary damages and attorney's fees; and, 5)
the costs of the suit.
SO ORDERED
G.R. No. 124354 April 11, 2002
ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural guardians
of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS, and RON RAYMOND
RAMOS, petitioners,
vs.
COURT OF APPEALS, DE LOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and
DR. PERFECTA GUTIERREZ,respondents.
RESOLUTION
KAPUNAN, J.:
Private respondents De Los Santos Medical Center, Dr. Orlino Hosaka and Dr. Perfecta
Gutierrez move for a reconsideration of the Decision, dated December 29, 1999, of this Court
holding them civilly liable for petitioner Erlinda Ramos’ comatose condition after she delivered
herself to them for their professional care and management.
For better understanding of the issues raised in private respondents’ respective motions, we will
briefly restate the facts of the case as follows:
Sometime in 1985, petitioner Erlinda Ramos, after seeking professional medical help, was
advised to undergo an operation for the removal of a stone in her gall bladder (cholecystectomy).
She was referred to Dr. Hosaka, a surgeon, who agreed to perform the operation on her. The
operation was scheduled for June 17, 1985 at 9:00 in the morning at private respondent De Los
Santos Medical Center (DLSMC). Since neither petitioner Erlinda nor her husband, petitioner
Rogelio, knew of any anesthesiologist, Dr. Hosaka recommended to them the services of Dr.
Gutierrez.
Petitioner Erlinda was admitted to the DLSMC the day before the scheduled operation. By 7:30 in
the morning of the following day, petitioner Erlinda was already being prepared for operation.
Upon the request of petitioner Erlinda, her sister-in-law, Herminda Cruz, who was then Dean of
the College of Nursing at the Capitol Medical Center, was allowed to accompany her inside the
operating room.
At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr. Gutierrez tried to get in
touch with him by phone. Thereafter, Dr. Gutierrez informed Cruz that the operation might be
delayed due to the late arrival of Dr. Hosaka. In the meantime, the patient, petitioner Erlinda said
to Cruz, "Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor."
By 10:00 in the morning, when Dr. Hosaka was still not around, petitioner Rogelio already
wanted to pull out his wife from the operating room. He met Dr. Garcia, who remarked that he
was also tired of waiting for Dr. Hosaka. Dr. Hosaka finally arrived at the hospital at around 12:10
in the afternoon, or more than three (3) hours after the scheduled operation.
Cruz, who was then still inside the operating room, heard about Dr. Hosaka’s arrival. While she
held the hand of Erlinda, Cruz saw Dr. Gutierrez trying to intubate the patient. Cruz heard Dr.
Gutierrez utter: "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan."
Cruz noticed a bluish discoloration of Erlinda’s nailbeds on her left hand. She (Cruz) then heard
Dr. Hosaka instruct someone to call Dr. Calderon, another anesthesiologist. When he arrived, Dr.
Calderon attempted to intubate the patient. The nailbeds of the patient remained bluish, thus, she
was placed in a trendelenburg position – a position where the head of the patient is placed in a
position lower than her feet. At this point, Cruz went out of the operating room to express her
concern to petitioner Rogelio that Erlinda’s operation was not going well.
Cruz quickly rushed back to the operating room and saw that the patient was still in
trendelenburg position. At almost 3:00 in the afternoon, she saw Erlinda being wheeled to the
Intensive Care Unit (ICU). The doctors explained to petitioner Rogelio that his wife had
bronchospasm. Erlinda stayed in the ICU for a month. She was released from the hospital only
four months later or on November 15, 1985. Since the ill-fated operation, Erlinda remained in
comatose condition until she died on August 3, 1999.1
Petitioners filed with the Regional Trial Court of Quezon City a civil case for damages against
private respondents. After due trial, the court a quo rendered judgment in favor of petitioners.
Essentially, the trial court found that private respondents were negligent in the performance of
their duties to Erlinda. On appeal by private respondents, the Court of Appeals reversed the trial
court’s decision and directed petitioners to pay their "unpaid medical bills" to private respondents.
Petitioners filed with this Court a petition for review on certiorari. The private respondents were
then required to submit their respective comments thereon. On December 29, 1999, this Court
promulgated the decision which private respondents now seek to be reconsidered. The
dispositive portion of said Decision states:
WHEREFORE, the decision and resolution of the appellate court appealed from are
hereby modified so as to award in favor of petitioners, and solidarily against private
respondents the following: 1) P1,352,000.00 as actual damages computed as of the date
of promulgation of this decision plus a monthly payment of P8,000.00 up to the time that
petitioner Erlinda Ramos expires or miraculously survives; 2) P2,000,000.00 as moral
damages, 3) P1,500,000.00 as temperate damages; 4) P100,000.00 each exemplary
damages and attorney’s fees; and 5) the costs of the suit.2
In his Motion for Reconsideration, private respondent Dr. Hosaka submits the following as
grounds therefor:
THE HONORABLE SUPREME COURT COMMITTED REVERSIBLE ERROR WHEN IT HELD

RESPONDENT DR. HOSAKA LIABLE ON THE BASIS OF THE "CAPTAIN-OF-THE-SHIP"
DOCTRINE.
II
THE HONORABLE SUPREME COURT ERRED IN HOLDING RESPONDENT DR. HOSAKA

LIABLE DESPITE THE FACT THAT NO NEGLIGENCE CAN BE ATTRIBUTABLE TO HIM.
III
ASSUMING WITHOUT ADMITTING THAT RESPONDENT DR. HOSAKA IS LIABLE, THE

HONORABLE SUPREME COURT ERRED IN AWARDING DAMAGES THAT WERE CLEARLY
EXCESSIVE AND WITHOUT LEGAL BASIS.3
Private respondent Dr. Gutierrez, for her part, avers that:
A. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY

OVERLOOKED THE FACT THAT THE COURT OF APPEAL’S DECISION DATED 29
MAY 1995 HAD ALREADY BECOME FINAL AND EXECUTORY AS OF 25 JUNE 1995,
THEREBY DEPRIVING THIS HONORABLE COURT OF JURISDICTION OVER THE
INSTANT PETITION;
B. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY
OVERLOOKED SEVERAL MATERIAL FACTUAL CIRCUMSTANCES WHICH, IF
PROPERLY CONSIDERED, WOULD INDUBITABLY LEAD TO NO OTHER
CONCLUSION BUT THAT PRIVATE RESPONDENT DOCTORS WERE NOT GUILTY
OF ANY NEGLIGENCE IN RESPECT OF THE INSTANT CASE;
B.1 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS SUFFICIENTLY

DISCHARGED THE BURDEN OF EVIDENCE BY SUBSTANTIAL PROOF OF
HER COMPLIANCE WITH THE STANDARDS OF DUE CARE EXPECTED IN
HER RESPECTIVE FIELD OF MEDICAL SPECIALIZATION.
B.2 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS SUFFICIENTLY

DISCHARGED THE BURDEN OF EVIDENCE BY SUBSTANTIAL PROOF OF
HER HAVING SUCCESSFULLY INTUBATED PATIENT ERLINDA RAMOS
C. THE SUPREME COURT MAY HAVE INADVERTENTLY PLACED TOO MUCH

RELIANCE ON THE TESTIMONY OF PETITIONER’S WITNESS HERMINDA CRUZ,
DESPITE THE EXISTENCE OF SEVERAL FACTUAL CIRCUMSTANCES WHICH
RENDERS DOUBT ON HER CREDIBILITY
D. THE SUPREME COURT MAY HAVE INADVERTENTLY DISREGARDED THE

EXPERT TESTIMONY OF DR. JAMORA AND DRA. CALDERON
E. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY AWARDED

DAMAGES TO PETITIONERS DESPITE THE FACT THAT THERE WAS NO
NEGLIGENCE ON THE PART OF RESPONDENT DOCTOR.4
Private respondent De Los Santos Medical Center likewise moves for reconsideration on the
following grounds:
THE HONORABLE COURT ERRED IN GIVING DUE COURSE TO THE INSTANT PETITION
AS THE DECISION OF THE HONORABLE COURT OF APPEALS HAD ALREADY BECOME
FINAL AND EXECUTORY
II
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT AN EMPLOYER-

EMPLOYEE [RELATIONSHIP] EXISTS BETWEEN RESPONDENT DE LOS SANTOS
MEDICAL CENTER AND DRS. ORLINO HOSAKA AND PERFECTA GUTIERREZ
III
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT RESPONDENT DE LOS

SANTOS MEDICAL CENTER IS SOLIDARILY LIABLE WITH RESPONDENT DOCTORS
IV
THE HONORABLE SUPREME COURT ERRED IN INCREASING THE AWARD OF DAMAGES

IN FAVOR OF PETITIONERS.5
In the Resolution of February 21, 2000, this Court denied the motions for reconsideration of
private respondents Drs. Hosaka and Gutierrez. They then filed their respective second motions
for reconsideration. The Philippine College of Surgeons filed its Petition-in-Intervention
contending in the main that this Court erred in holding private respondent Dr. Hosaka liable
under the captain of the ship doctrine. According to the intervenor, said doctrine had long been
abandoned in the United States in recognition of the developments in modern medical and
hospital practice.6 The Court noted these pleadings in the Resolution of July 17, 2000.7
On March 19, 2001, the Court heard the oral arguments of the parties, including the intervenor.
Also present during the hearing were the amicii curiae: Dr. Felipe A. Estrella, Jr., Consultant of
the Philippine Charity Sweepstakes, former Director of the Philippine General Hospital and
former Secretary of Health; Dr. Iluminada T. Camagay, President of the Philippine Society of
Anesthesiologists, Inc. and Professor and Vice-Chair for Research, Department of
Anesthesiology, College of Medicine-Philippine General Hospital, University of the Philippines;
and Dr. Lydia M. Egay, Professor and Vice-Chair for Academics, Department of Anesthesiology,
College of Medicine-Philippine General Hospital, University of the Philippines.
The Court enumerated the issues to be resolved in this case as follows:
1. WHETHER OR NOT DR. ORLINO HOSAKA (SURGEON) IS LIABLE FOR

NEGLIGENCE;
2. WHETHER OR NOT DR. PERFECTA GUTIERREZ (ANESTHESIOLOGIST) IS

LIABLE FOR NEGLIGENCE; AND
3. WHETHER OR NOT THE HOSPITAL (DELOS SANTOS MEDICAL CENTER) IS

LIABLE FOR ANY ACT OF NEGLIGENCE COMMITTED BY THEIR VISITING
CONSULTANT SURGEON AND ANESTHESIOLOGIST.8
We shall first resolve the issue pertaining to private respondent Dr. Gutierrez. She maintains that
the Court erred in finding her negligent and in holding that it was the faulty intubation which was
the proximate cause of Erlinda’s comatose condition. The following objective facts allegedly
negate a finding of negligence on her part: 1) That the outcome of the procedure was a
comatose patient and not a dead one; 2) That the patient had a cardiac arrest; and 3) That the
patient was revived from that cardiac arrest.9 In effect, Dr. Gutierrez insists that, contrary to the
finding of this Court, the intubation she performed on Erlinda was successful.
Unfortunately, Dr. Gutierrez’ claim of lack of negligence on her part is belied by the records of the
case. It has been sufficiently established that she failed to exercise the standards of care in the
administration of anesthesia on a patient. Dr. Egay enlightened the Court on what these
standards are:
x x x What are the standards of care that an anesthesiologist should do before we

administer anesthesia? The initial step is the preparation of the patient for surgery and
this is a pre-operative evaluation because the anesthesiologist is responsible for
determining the medical status of the patient, developing the anesthesia plan and
acquainting the patient or the responsible adult particularly if we are referring with the
patient or to adult patient who may not have, who may have some mental handicaps of
the proposed plans. We do pre-operative evaluation because this provides for an
opportunity for us to establish identification and personal acquaintance with the patient. It
also makes us have an opportunity to alleviate anxiety, explain techniques and risks to
the patient, given the patient the choice and establishing consent to proceed with the
plan. And lastly, once this has been agreed upon by all parties concerned the ordering of
pre-operative medications. And following this line at the end of the evaluation we usually
come up on writing, documentation is very important as far as when we train an
anesthesiologist we always emphasize this because we need records for our protection,
well, records. And it entails having brief summary of patient history and physical findings
pertinent to anesthesia, plan, organize as a problem list, the plan anesthesia technique,
the plan post operative, pain management if appropriate, special issues for this particular
patient. There are needs for special care after surgery and if it so it must be written down
there and a request must be made known to proper authorities that such and such care is
necessary. And the request for medical evaluation if there is an indication. When we ask
for a cardio-pulmonary clearance it is not in fact to tell them if this patient is going to be fit
for anesthesia, the decision to give anesthesia rests on the anesthesiologist. What we
ask them is actually to give us the functional capacity of certain systems which maybe
affected by the anesthetic agent or the technique that we are going to use. But the
burden of responsibility in terms of selection of agent and how to administer it rest on the
anesthesiologist.10
The conduct of a preanesthetic/preoperative evaluation prior to an operation, whether elective or

emergency, cannot be dispensed with.11 Such evaluation is necessary for the formulation of a
plan of anesthesia care suited to the needs of the patient concerned.
Pre-evaluation for anesthesia involves taking the patient’s medical history, reviewing his current
drug therapy, conducting physical examination, interpreting laboratory data, and determining the
appropriate prescription of preoperative medications as necessary to the conduct of anesthesia.12
Physical examination of the patient entails not only evaluating the patient’s central nervous
system, cardiovascular system and lungs but also the upper airway. Examination of the upper
airway would in turn include an analysis of the patient’s cervical spine mobility,
temporomandibular mobility, prominent central incisors, deceased or artificial teeth, ability to
visualize uvula and the thyromental distance.13
Nonetheless, Dr. Gutierrez omitted to perform a thorough preoperative evaluation on Erlinda. As

she herself admitted, she saw Erlinda for the first time on the day of the operation itself, one hour
before the scheduled operation. She auscultated14 the patient’s heart and lungs and checked the
latter’s blood pressure to determine if Erlinda was indeed fit for operation.15 However, she did not
proceed to examine the patient’s airway. Had she been able to check petitioner Erlinda’s airway
prior to the operation, Dr. Gutierrez would most probably not have experienced difficulty in
intubating the former, and thus the resultant injury could have been avoided. As we have stated
in our Decision:
In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the first
time on the day of the operation itself, on 17 June 1985. Before this date, no prior
consultations with, or pre-operative evaluation of Erlinda was done by her. Until the day
of the operation, respondent Dra. Gutierrez was unaware of the physiological make-up
and needs of Erlinda. She was likewise not properly informed of the possible difficulties
she would face during the administration of anesthesia to Erlinda. Respondent Dra.
Gutierrez’ act of seeing her patient for the first time only an hour before the scheduled
operative procedure was, therefore, an act of exceptional negligence and professional
irresponsibility. The measures cautioning prudence and vigilance in dealing with human
lives lie at the core of the physician’s centuries-old Hippocratic Oath. Her failure to follow
this medical procedure is, therefore, a clear indicia of her negligence.16
Further, there is no cogent reason for the Court to reverse its finding that it was the faulty
intubation on Erlinda that caused her comatose condition. There is no question that Erlinda
became comatose after Dr. Gutierrez performed a medical procedure on her. Even the counsel
of Dr. Gutierrez admitted to this fact during the oral arguments:
CHIEF JUSTICE:
Mr. Counsel, you started your argument saying that this involves a comatose
patient?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
How do you mean by that, a comatose, a comatose after any other acts were
done by Dr. Gutierrez or comatose before any act was done by her?
ATTY. GANA:
No, we meant comatose as a final outcome of the procedure.
CHIEF JUSTICE:
Meaning to say, the patient became comatose after some intervention,

professional acts have been done by Dr. Gutierrez?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
In other words, the comatose status was a consequence of some acts performed
by D. Gutierrez?
ATTY. GANA:
It was a consequence of the well, (interrupted)
CHIEF JUSTICE:
An acts performed by her, is that not correct?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
Thank you.17
What is left to be determined therefore is whether Erlinda’s hapless condition was due to any
fault or negligence on the part of Dr. Gutierrez while she (Erlinda) was under the latter’s care. Dr.
Gutierrez maintains that the bronchospasm and cardiac arrest resulting in the patient’s comatose
condition was brought about by the anaphylactic reaction of the patient to Thiopental Sodium
(pentothal).18 In the Decision, we explained why we found Dr. Gutierrez’ theory unacceptable. In
the first place, Dr. Eduardo Jamora, the witness who was presented to support her (Dr.
Gutierrez) theory, was a pulmonologist. Thus, he could not be considered an authority on
anesthesia practice and procedure and their complications.19
Secondly, there was no evidence on record to support the theory that Erlinda developed an
allergic reaction to pentothal. Dr. Camagay enlightened the Court as to the manifestations of an
allergic reaction in this wise:
DR. CAMAGAY:
All right, let us qualify an allergic reaction. In medical terminology an allergic

reaction is something which is not usual response and it is further qualified by the
release of a hormone called histamine and histamine has an effect on all the
organs of the body generally release because the substance that entered the
body reacts with the particular cell, the mass cell, and the mass cell secretes this
histamine. In a way it is some form of response to take away that which is not
mine, which is not part of the body. So, histamine has multiple effects on the
body. So, one of the effects as you will see you will have redness, if you have an
allergy you will have tearing of the eyes, you will have swelling, very crucial
swelling sometimes of the larynges which is your voice box main airway, that
swelling may be enough to obstruct the entry of air to the trachea and you could
also have contraction, constriction of the smaller airways beyond the trachea, you
see you have the trachea this way, we brought some visual aids but unfortunately
we do not have a projector. And then you have the smaller airways, the bronchi
and then eventually into the mass of the lungs you have the bronchus. The
difference is that these tubes have also in their walls muscles and this particular
kind of muscles is smooth muscle so, when histamine is released they close up
like this and that phenomenon is known as bronco spasm. However, the effects
of histamine also on blood vessels are different. They dilate blood vessel open up
and the patient or whoever has this histamine release has hypertension or low
blood pressure to a point that the patient may have decrease blood supply to the
brain and may collapse so, you may have people who have this.20
These symptoms of an allergic reaction were not shown to have been extant in Erlinda’s case.
As we held in our Decision, "no evidence of stridor, skin reactions, or wheezing – some of the
more common accompanying signs of an allergic reaction – appears on record. No laboratory
data were ever presented to the court."21
Dr. Gutierrez, however, insists that she successfully intubated Erlinda as evidenced by the fact
that she was revived after suffering from cardiac arrest. Dr. Gutierrez faults the Court for giving
credence to the testimony of Cruz on the matter of the administration of anesthesia when she
(Cruz), being a nurse, was allegedly not qualified to testify thereon. Rather, Dr. Gutierrez invites
the Court’s attention to her synopsis on what transpired during Erlinda’s intubation:
12:15 p.m. Patient was inducted with sodium pentothal 2.5% (250 mg) given by slow IV.
02 was started by mask. After pentothal injection this was followed by IV injection of
Norcuron 4mg. After 2 minutes 02 was given by positive pressure for about one minute.
Intubation with endotracheal tube 7.5 m in diameter was done with slight difficulty (short
neck & slightly prominent upper teeth) chest was examined for breath sounds & checked
if equal on both sides. The tube was then anchored to the mouth by plaster & cuff
inflated. Ethrane 2% with 02 4 liters was given. Blood pressure was checked 120/80 &
heart rate regular and normal 90/min.
12:25 p.m. After 10 minutes patient was cyanotic. Ethrane was discontinued & 02 given
alone. Cyanosis disappeared. Blood pressure and heart beats stable.
12:30 p.m. Cyanosis again reappeared this time with sibilant and sonorous rales all over
the chest. D_5%_H20 & 1 ampule of aminophyline by fast drip was started. Still the
cyanosis was persistent. Patient was connected to a cardiac monitor. Another ampule of
of [sic] aminophyline was given and solu cortef was given.
12:40 p.m. There was cardiac arrest. Extra cardiac massage and intercardiac injection of
adrenalin was given & heart beat reappeared in less than one minute. Sodium
bicarbonate & another dose of solu cortef was given by IV. Cyanosis slowly disappeared
& 02 continuously given & assisted positive pressure. Laboratory exams done (see
results in chart).
Patient was transferred to ICU for further management.22
From the foregoing, it can be allegedly seen that there was no withdrawal (extubation) of the
tube. And the fact that the cyanosis allegedly disappeared after pure oxygen was supplied
through the tube proved that it was properly placed.
The Court has reservations on giving evidentiary weight to the entries purportedly contained in
Dr. Gutierrez’ synopsis. It is significant to note that the said record prepared by Dr. Gutierrez was
made only after Erlinda was taken out of the operating room. The standard practice in anesthesia
is that every single act that the anesthesiologist performs must be recorded. In Dr. Gutierrez’
case, she could not account for at least ten (10) minutes of what happened during the
administration of anesthesia on Erlinda. The following exchange between Dr. Estrella, one of the
amicii curiae, and Dr. Gutierrez is instructive:
DR. ESTRELLA
Q You mentioned that there were two (2) attempts in the intubation period?
DR. GUTIERREZ
Yes.
Q There were two attempts. In the first attempt was the tube inserted or was the
laryngoscope only inserted, which was inserted?
A All the laryngoscope.
Q All the laryngoscope. But if I remember right somewhere in the re-direct, a certain
lawyer, you were asked that you did a first attempt and the question was – did you
withdraw the tube? And you said – you never withdrew the tube, is that right?
A Yes.
Q Yes. And so if you never withdrew the tube then there was no, there was no
insertion of the tube during that first attempt. Now, the other thing that we have to settle
here is – when cyanosis occurred, is it recorded in the anesthesia record when the
cyanosis, in your recording when did the cyanosis occur?
A (sic)
Q Is it a standard practice of anesthesia that whatever you do during that period or

from the time of induction to the time that you probably get the patient out of the
operating room that every single action that you do is so recorded in your anesthesia
record?
A I was not able to record everything I did not have time anymore because I did that
after the, when the patient was about to leave the operating room. When there was
second cyanosis already that was the (interrupted)
Q When was the first cyanosis?
A The first cyanosis when I was (interrupted)

Q What time, more or less?
A I think it was 12:15 or 12:16.
Q Well, if the record will show you started induction at 12:15?
A Yes, Your Honor.
Q And the first medication you gave was what?
A The first medication, no, first the patient was oxygenated for around one to two
minutes.
Q Yes, so, that is about 12:13?
A Yes, and then, I asked the resident physician to start giving the pentothal very
slowly and that was around one minute.
Q So, that is about 12:13 no, 12:15, 12:17?
A Yes, and then, after one minute another oxygenation was given and after
(interrupted)
Q 12:18?
A Yes, and then after giving the oxygen we start the menorcure which is a relaxant.
After that relaxant (interrupted)
Q After that relaxant, how long do you wait before you do any manipulation?
A Usually you wait for two minutes or three minutes.
Q So, if our estimate of the time is accurate we are now more or less 12:19, is that
right?
A Maybe.
Q 12:19. And at that time, what would have been done to this patient?
A After that time you examine the, if there is relaxation of the jaw which you push it
downwards and when I saw that the patient was relax because that monorcure is a
relaxant, you cannot intubate the patient or insert the laryngoscope if it is not keeping him
relax. So, my first attempt when I put the laryngoscope on I saw the trachea was deeply
interiorly. So, what I did ask "mahirap ata ito ah." So, I removed the laryngoscope and
oxygenated again the patient.
Q So, more or less you attempted to do an intubation after the first attempt as you
claimed that it was only the laryngoscope that was inserted.
A Yes.
Q And in the second attempt you inserted the laryngoscope and now possible
intubation?
A Yes.
Q And at that point, you made a remark, what remark did you make?
A I said "mahirap ata ito" when the first attempt I did not see the trachea right away.
That was when I (interrupted)
Q That was the first attempt?
A Yes.
Q What about the second attempt?
A On the second attempt I was able to intubate right away within two to three
seconds.
Q At what point, for purposes of discussion without accepting it, at what point did
you make the comment "na mahirap ata to intubate, mali ata ang pinasukan"
A I did not say "mali ata ang pinasukan" I never said that.
Q Well, just for the information of the group here the remarks I am making is based
on the documents that were forwarded to me by the Supreme Court. That is why for
purposes of discussion I am trying to clarify this for the sake of enlightenment. So, at
what point did you ever make that comment?
A Which one, sir?
Q The "mahirap intubate ito" assuming that you (interrupted)
A Iyon lang, that is what I only said "mahirap intubate (interrupted)
Q At what point?
A When the first attempt when I inserted the laryngoscope for the first time.
Q So, when you claim that at the first attempt you inserted the laryngoscope, right?
A Yes.
Q But in one of the recordings somewhere at the, somewhere in the transcript of

records that when the lawyer of the other party try to inquire from you during the first
attempt that was the time when "mayroon ba kayong hinugot sa tube, I do not remember
the page now, but it seems to me it is there. So, that it was on the second attempt that
(interrupted)
A I was able to intubate.
Q And this is more or less about what time 12:21?
A Maybe, I cannot remember the time, Sir.

Q Okay, assuming that this was done at 12:21 and looking at the anesthesia
records from 12:20 to 12:30 there was no recording of the vital signs. And can we
presume that at this stage there was already some problems in handling the patient?
A Not yet.
Q But why are there no recordings in the anesthesia record?
A I did not have time.
Q Ah, you did not have time, why did you not have time?
A Because it was so fast, I really (at this juncture the witness is laughing)
Q No, I am just asking. Remember I am not here not to pin point on anybody I am
here just to more or less clarify certainty more ore less on the record.
A Yes, Sir.
Q And so it seems that there were no recording during that span of ten (10) minutes.
From 12:20 to 12:30, and going over your narration, it seems to me that the cyanosis
appeared ten (10) minutes after induction, is that right?
A Yes.
Q And that is after induction 12:15 that is 12:25 that was the first cyanosis?
A Yes.
Q And that the 12:25 is after the 12:20?
A We cannot (interrupted)
Q Huwag ho kayong makuwan, we are just trying to enlighten, I am just going over
the record ano, kung mali ito kuwan eh di ano. So, ganoon po ano, that it seems to me
that there is no recording from 12:20 to 12:30, so, I am just wondering why there were no
recordings during the period and then of course the second cyanosis, after the first
cyanosis. I think that was the time Dr. Hosaka came in?
A No, the first cyanosis (interrupted).23
We cannot thus give full credence to Dr. Gutierrez’ synopsis in light of her admission that it does
not fully reflect the events that transpired during the administration of anesthesia on Erlinda. As
pointed out by Dr. Estrella, there was a ten-minute gap in Dr. Gutierrez’ synopsis, i.e., the vital
signs of Erlinda were not recorded during that time. The absence of these data is particularly
significant because, as found by the trial court, it was the absence of oxygen supply for four (4) to
five (5) minutes that caused Erlinda’s comatose condition.
On the other hand, the Court has no reason to disbelieve the testimony of Cruz. As we stated in
the Decision, she is competent to testify on matters which she is capable of observing such as,
the statements and acts of the physician and surgeon, external appearances and manifest
conditions which are observable by any one.24 Cruz, Erlinda’s sister-in-law, was with her inside
the operating room. Moreover, being a nurse and Dean of the Capitol Medical Center School of
Nursing at that, she is not entirely ignorant of anesthetic procedure. Cruz narrated that she heard
Dr. Gutierrez remark, "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang
tiyan." She observed that the nailbeds of Erlinda became bluish and thereafter Erlinda was
placed in trendelenburg position.25Cruz further averred that she noticed that the abdomen of
Erlinda became distended.26
The cyanosis (bluish discoloration of the skin or mucous membranes caused by lack of oxygen
or abnormal hemoglobin in the blood) and enlargement of the stomach of Erlinda indicate that
the endotracheal tube was improperly inserted into the esophagus instead of the trachea.
Consequently, oxygen was delivered not to the lungs but to the gastrointestinal tract. This
conclusion is supported by the fact that Erlinda was placed in trendelenburg position. This
indicates that there was a decrease of blood supply to the patient’s brain. The brain was thus
temporarily deprived of oxygen supply causing Erlinda to go into coma.
The injury incurred by petitioner Erlinda does not normally happen absent any negligence in the
administration of anesthesia and in the use of an endotracheal tube. As was noted in our
Decision, the instruments used in the administration of anesthesia, including the endotracheal
tube, were all under the exclusive control of private respondents Dr. Gutierrez and Dr.
Hosaka.27 In Voss vs. Bridwell,28 which involved a patient who suffered brain damage due to the
wrongful administration of anesthesia, and even before the scheduled mastoid operation could
be performed, the Kansas Supreme Court applied the doctrine of res ipsa loquitur, reasoning that
the injury to the patient therein was one which does not ordinarily take place in the absence of
negligence in the administration of an anesthetic, and in the use and employment of an
endotracheal tube. The court went on to say that "[o]rdinarily a person being put under
anesthesia is not rendered decerebrate as a consequence of administering such anesthesia in
the absence of negligence. Upon these facts and under these circumstances, a layman would be
able to say, as a matter of common knowledge and observation, that the consequences of
professional treatment were not as such as would ordinarily have followed if due care had been
exercised."29 Considering the application of the doctrine of res ipsa loquitur, the testimony of Cruz
was properly given credence in the case at bar.
For his part, Dr. Hosaka mainly contends that the Court erred in finding him negligent as a
surgeon by applying the Captain-of-the-Ship doctrine.30 Dr. Hosaka argues that the trend in
United States jurisprudence has been to reject said doctrine in light of the developments in
medical practice. He points out that anesthesiology and surgery are two distinct and specialized
fields in medicine and as a surgeon, he is not deemed to have control over the acts of Dr.
Gutierrez. As anesthesiologist, Dr. Gutierrez is a specialist in her field and has acquired skills
and knowledge in the course of her training which Dr. Hosaka, as a surgeon, does not
possess.31 He states further that current American jurisprudence on the matter recognizes that the
trend towards specialization in medicine has created situations where surgeons do not always
have the right to control all personnel within the operating room,32especially a fellow specialist.33
Dr. Hosaka cites the case of Thomas v. Raleigh General Hospital,34 which involved a suit filed by
a patient who lost his voice due to the wrongful insertion of the endotracheal tube preparatory to
the administration of anesthesia in connection with the laparotomy to be conducted on him. The
patient sued both the anesthesiologist and the surgeon for the injury suffered by him. The
Supreme Court of Appeals of West Virginia held that the surgeon could not be held liable for the
loss of the patient’s voice, considering that the surgeon did not have a hand in the intubation of
the patient. The court rejected the application of the "Captain-of-the-Ship Doctrine," citing the fact
that the field of medicine has become specialized such that surgeons can no longer be deemed
as having control over the other personnel in the operating room. It held that "[a]n assignment of
liability based on actual control more realistically reflects the actual relationship which exists in a
modern operating room."35 Hence, only the anesthesiologist who inserted the endotracheal tube
into the patient’s throat was held liable for the injury suffered by the latter.
This contention fails to persuade.

That there is a trend in American jurisprudence to do away with the Captain-of-the-Ship doctrine
does not mean that this Court will ipso facto follow said trend. Due regard for the peculiar factual
circumstances obtaining in this case justify the application of the Captain-of-the-Ship doctrine.
From the facts on record it can be logically inferred that Dr. Hosaka exercised a certain degree
of, at the very least, supervision over the procedure then being performed on Erlinda.
First, it was Dr. Hosaka who recommended to petitioners the services of Dr. Gutierrez. In effect,
he represented to petitioners that Dr. Gutierrez possessed the necessary competence and skills.
Drs. Hosaka and Gutierrez had worked together since 1977. Whenever Dr. Hosaka performed a
surgery, he would always engage the services of Dr. Gutierrez to administer the anesthesia on
his patient.36
Second, Dr. Hosaka himself admitted that he was the attending physician of Erlinda. Thus, when
Erlinda showed signs of cyanosis, it was Dr. Hosaka who gave instructions to call for another
anesthesiologist and cardiologist to help resuscitate Erlinda.37
Third, it is conceded that in performing their responsibilities to the patient, Drs. Hosaka and
Gutierrez worked as a team. Their work cannot be placed in separate watertight compartments
because their duties intersect with each other.38
While the professional services of Dr. Hosaka and Dr. Gutierrez were secured primarily for their
performance of acts within their respective fields of expertise for the treatment of petitioner
Erlinda, and that one does not exercise control over the other, they were certainly not completely
independent of each other so as to absolve one from the negligent acts of the other physician.
That they were working as a medical team is evident from the fact that Dr. Hosaka was keeping
an eye on the intubation of the patient by Dr. Gutierrez, and while doing so, he observed that the
patient’s nails had become dusky and had to call Dr. Gutierrez’s attention thereto. The Court also
notes that the counsel for Dr. Hosaka admitted that in practice, the anesthesiologist would also
have to observe the surgeon’s acts during the surgical process and calls the attention of the
surgeon whenever necessary39 in the course of the treatment. The duties of Dr. Hosaka and those
of Dr. Gutierrez in the treatment of petitioner Erlinda are therefore not as clear-cut as
respondents claim them to be. On the contrary, it is quite apparent that they have a common
responsibility to treat the patient, which responsibility necessitates that they call each other’s
attention to the condition of the patient while the other physician is performing the necessary
medical procedures.
It is equally important to point out that Dr. Hosaka was remiss in his duty of attending to petitioner
Erlinda promptly, for he arrived more than three (3) hours late for the scheduled operation.
The cholecystectomy was set for June 17, 1985 at 9:00 a.m., but he arrived at DLSMC only at
around 12:10 p.m. In reckless disregard for his patient’s well being, Dr. Hosaka scheduled two
procedures on the same day, just thirty minutes apart from each other, at different hospitals.
Thus, when the first procedure (protoscopy) at the Sta. Teresita Hospital did not proceed on time,
Erlinda was kept in a state of uncertainty at the DLSMC.
The unreasonable delay in petitioner Erlinda’s scheduled operation subjected her to continued
starvation and consequently, to the risk of acidosis,40 or the condition of decreased alkalinity of
the blood and tissues, marked by sickly sweet breath, headache, nausea and vomiting, and
visual disturbances.41 The long period that Dr. Hosaka made Erlinda wait for him certainly
aggravated the anxiety that she must have been feeling at the time. It could be safely said that
her anxiety adversely affected the administration of anesthesia on her. As explained by Dr.
Camagay, the patient’s anxiety usually causes the outpouring of adrenaline which in turn results
in high blood pressure or disturbances in the heart rhythm:
DR. CAMAGAY:
x x x Pre-operative medication has three main functions: One is to alleviate
anxiety. Second is to dry up the secretions and Third is to relieve pain. Now, it is
very important to alleviate anxiety because anxiety is associated with the
outpouring of certain substances formed in the body called adrenalin. When a
patient is anxious there is an outpouring of adrenalin which would have adverse
effect on the patient. One of it is high blood pressure, the other is that he opens
himself to disturbances in the heart rhythm, which would have adverse
implications. So, we would like to alleviate patient’s anxiety mainly because he
will not be in control of his body there could be adverse results to surgery and he
will be opened up; a knife is going to open up his body. x x x42
Dr. Hosaka cannot now claim that he was entirely blameless of what happened to Erlinda. His
conduct clearly constituted a breach of his professional duties to Erlinda:
CHIEF JUSTICE:
Two other points. The first, Doctor, you were talking about anxiety, would you
consider a patient's stay on the operating table for three hours sufficient enough
to aggravate or magnify his or her anxiety?
DR. CAMAGAY:
Yes.
CHIEF JUSTICE:
In other words, I understand that in this particular case that was the case, three
hours waiting and the patient was already on the operating table (interrupted)
DR. CAMAGAY:
Yes.
CHIEF JUSTICE:
Would you therefore conclude that the surgeon contributed to the aggravation of
the anxiety of the patient?
DR. CAMAGAY:
That this operation did not take place as scheduled is already a source of anxiety
and most operating tables are very narrow and that patients are usually at risk of
falling on the floor so there are restraints that are placed on them and they are
never, never left alone in the operating room by themselves specially if they are
already pre-medicated because they may not be aware of some of their
movement that they make which would contribute to their injury.
CHIEF JUSTICE:
In other words due diligence would require a surgeon to come on time?
DR. CAMAGAY:
I think it is not even due diligence it is courtesy.

CHIEF JUSTICE:
Courtesy.
DR. CAMAGAY:
And care.
CHIEF JUSTICE:
Duty as a matter of fact?
DR. CAMAGAY:
Yes, Your Honor.43
Dr. Hosaka's irresponsible conduct of arriving very late for the scheduled operation of petitioner
Erlinda is violative, not only of his duty as a physician "to serve the interest of his patients with
the greatest solicitude, giving them always his best talent and skill,"44 but also of Article 19 of the
Civil Code which requires a person, in the performance of his duties, to act with justice and give
everyone his due.
Anent private respondent DLSMC’s liability for the resulting injury to petitioner Erlinda, we held
that respondent hospital is solidarily liable with respondent doctors therefor under Article 2180 of
the Civil Code45 since there exists an employer-employee relationship between private
respondent DLSMC and Drs. Gutierrez and Hosaka:
In other words, private hospitals, hire, fire and exercise real control over their attending
and visiting "consultant" staff. While "consultants" are not, technically employees, x x x
the control exercised, the hiring and the right to terminate consultants all fulfill the
important hallmarks of an employer-employee relationship, with the exception of the
payment of wages. In assessing whether such a relationship in fact exists, the control
test is determining. x x x46
DLSMC however contends that applying the four-fold test in determining whether such a
relationship exists between it and the respondent doctors, the inescapable conclusion is that
DLSMC cannot be considered an employer of the respondent doctors.
It has been consistently held that in determining whether an employer-employee relationship

exists between the parties, the following elements must be present: (1) selection and
engagement of services; (2) payment of wages; (3) the power to hire and fire; and (4) the power
to control not only the end to be achieved, but the means to be used in reaching such an end.47
DLSMC maintains that first, a hospital does not hire or engage the services of a consultant, but
rather, accredits the latter and grants him or her the privilege of maintaining a clinic and/or
admitting patients in the hospital upon a showing by the consultant that he or she possesses the
necessary qualifications, such as accreditation by the appropriate board (diplomate), evidence of
fellowship and references.48 Second, it is not the hospital but the patient who pays the
consultant’s fee for services rendered by the latter.49 Third, a hospital does not dismiss a
consultant; instead, the latter may lose his or her accreditation or privileges granted by the
hospital.50 Lastly, DLSMC argues that when a doctor refers a patient for admission in a hospital, it
is the doctor who prescribes the treatment to be given to said patient. The hospital’s obligation is
limited to providing the patient with the preferred room accommodation, the nutritional diet and
medications prescribed by the doctor, the equipment and facilities necessary for the treatment of
the patient, as well as the services of the hospital staff who perform the ministerial tasks of
ensuring that the doctor’s orders are carried out strictly.51
After a careful consideration of the arguments raised by DLSMC, the Court finds that respondent
hospital’s position on this issue is meritorious. There is no employer-employee relationship
between DLSMC and Drs. Gutierrez and Hosaka which would hold DLSMC solidarily liable for
the injury suffered by petitioner Erlinda under Article 2180 of the Civil Code.
As explained by respondent hospital, that the admission of a physician to membership in

DLSMC’s medical staff as active or visiting consultant is first decided upon by the Credentials
Committee thereof, which is composed of the heads of the various specialty departments such
as the Department of Obstetrics and Gynecology, Pediatrics, Surgery with the department head
of the particular specialty applied for as chairman. The Credentials Committee then recommends
to DLSMC's Medical Director or Hospital Administrator the acceptance or rejection of the
applicant physician, and said director or administrator validates the committee's
recommendation.52 Similarly, in cases where a disciplinary action is lodged against a consultant,
the same is initiated by the department to whom the consultant concerned belongs and filed with
the Ethics Committee consisting of the department specialty heads. The medical director/hospital
administrator merely acts as ex-officio member of said committee.
Neither is there any showing that it is DLSMC which pays any of its consultants for medical
services rendered by the latter to their respective patients. Moreover, the contract between the
consultant in respondent hospital and his patient is separate and distinct from the contract
between respondent hospital and said patient. The first has for its object the rendition of medical
services by the consultant to the patient, while the second concerns the provision by the hospital
of facilities and services by its staff such as nurses and laboratory personnel necessary for the
proper treatment of the patient.
Further, no evidence was adduced to show that the injury suffered by petitioner Erlinda was due
to a failure on the part of respondent DLSMC to provide for hospital facilities and staff necessary
for her treatment.
For these reasons, we reverse the finding of liability on the part of DLSMC for the injury suffered
by petitioner Erlinda.
Finally, the Court also deems it necessary to modify the award of damages to petitioners in view
of the supervening event of petitioner Erlinda’s death. In the assailed Decision, the Court
awarded actual damages of One Million Three Hundred Fifty Two Thousand Pesos
(P1,352,000.00) to cover the expenses for petitioner Erlinda’s treatment and care from the date
of promulgation of the Decision up to the time the patient expires or survives.53 In addition thereto,
the Court awarded temperate damages of One Million Five Hundred Thousand Pesos
(P1,500,000.00) in view of the chronic and continuing nature of petitioner Erlinda’s injury and the
certainty of further pecuniary loss by petitioners as a result of said injury, the amount of which,
however, could not be made with certainty at the time of the promulgation of the decision. The
Court justified such award in this manner:
Our rules on actual or compensatory damages generally assume that at the time of
litigation, the injury suffered as a consequence of an act of negligence has been
completed and that the cost can be liquidated. However, these provisions neglect to take
into account those situations, as in this case, where the resulting injury might be
continuing and possible future complications directly arising from the injury, while certain
to occur, are difficult to predict.
In these cases, the amount of damages which should be awarded, if they are to
adequately and correctly respond to the injury caused, should be one which
compensates for pecuniary loss incurred and proved, up to the time of trial; and one
which would meet pecuniary loss certain to be suffered but which could not, from the
nature of the case, be made with certainty. In other words, temperate damages can and
should be awarded on top of actual or compensatory damages in instances where the
injury is chronic and continuing. And because of the unique nature of such cases, no
incompatibility arises when both actual and temperate damages are provided for. The
reason is that these damages cover two distinct phases.
As it would not be equitable—and certainly not in the best interests of the administration
of justice—for the victim in such cases to constantly come before the courts and invoke
their aid in seeking adjustments to the compensatory damages previously awarded—
temperate damages are appropriate. The amount given as temperate damages, though
to a certain extent speculative, should take into account the cost of proper care.
In the instant case, petitioners were able to provide only home-based nursing care for a
comatose patient who has remained in that condition for over a decade. Having premised
our award for compensatory damages on the amount provided by petitioners at the onset
of litigation, it would be now much more in step with the interests of justice if the value
awarded for temperate damages would allow petitioners to provide optimal care for their
loved one in a facility which generally specializes in such care. They should not be
compelled by dire circumstances to provide substandard care at home without the aid of
professionals, for anything less would be grossly inadequate. Under the circumstances,
an award of P1,500,000.00 in temperate damages would therefore be reasonable.54
However, subsequent to the promulgation of the Decision, the Court was informed by petitioner
Rogelio that petitioner Erlinda died on August 3, 1999.55 In view of this supervening event, the
award of temperate damages in addition to the actual or compensatory damages would no
longer be justified since the actual damages awarded in the Decision are sufficient to cover the
medical expenses incurred by petitioners for the patient. Hence, only the amounts representing
actual, moral and exemplary damages, attorney’s fees and costs of suit should be awarded to
petitioners.
WHEREFORE, the assailed Decision is hereby modified as follows:
(1) Private respondent De Los Santos Medical Center is hereby absolved from liability arising
from the injury suffered by petitioner Erlinda Ramos on June 17, 1985;
(2) Private respondents Dr. Orlino Hosaka and Dr. Perfecta Gutierrez are hereby declared to be
solidarily liable for the injury suffered by petitioner Erlinda on June 17, 1985 and are ordered to
pay petitioners—
(a) P1,352,000.00 as actual damages;
(b) P2,000,000.00 as moral damages;
(c) P100,000.00 as exemplary damages;
(d) P100,000.00 as attorney’s fees; and
(e) the costs of the suit.
SO ORDERED.
G.R. No. 165279 June 7, 2011
DR. RUBI LI, Petitioner,

vs.
SPOUSES REYNALDO and LINA SOLIMAN, as parents/heirs of deceased Angelica
Soliman, Respondents.
DECISION
VILLARAMA, JR., J.:
Challenged in this petition for review on certiorari is the Decision1 dated June 15, 2004 as well as
the Resolution2dated September 1, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 58013
which modified the Decision3 dated September 5, 1997 of the Regional Trial Court of Legazpi
City, Branch 8 in Civil Case No. 8904.
The factual antecedents:
On July 7, 1993, respondents’ 11-year old daughter, Angelica Soliman, underwent a biopsy of
the mass located in her lower extremity at the St. Luke’s Medical Center (SLMC). Results
showed that Angelica was suffering from osteosarcoma, osteoblastic type,4 a high-grade (highly
malignant) cancer of the bone which usually afflicts teenage children. Following this diagnosis
and as primary intervention, Angelica’s right leg was amputated by Dr. Jaime Tamayo in order to
remove the tumor. As adjuvant treatment to eliminate any remaining cancer cells, and hence
minimize the chances of recurrence and prevent the disease from spreading to other parts of the
patient’s body (metastasis), chemotherapy was suggested by Dr. Tamayo. Dr. Tamayo referred
Angelica to another doctor at SLMC, herein petitioner Dr. Rubi Li, a medical oncologist.
On August 18, 1993, Angelica was admitted to SLMC. However, she died on September 1, 1993,
just eleven (11) days after the (intravenous) administration of the first cycle of the chemotherapy
regimen. Because SLMC refused to release a death certificate without full payment of their
hospital bill, respondents brought the cadaver of Angelica to the Philippine National Police (PNP)
Crime Laboratory at Camp Crame for post-mortem examination. The Medico-Legal Report
issued by said institution indicated the cause of death as "Hypovolemic shock secondary to
multiple organ hemorrhages and Disseminated Intravascular Coagulation."5
On the other hand, the Certificate of Death6 issued by SLMC stated the cause of death as
follows:
Immediate cause : a. Osteosarcoma, Status Post AKA
Antecedent cause : b. (above knee amputation)
Underlying cause : c. Status Post Chemotherapy
On February 21, 1994, respondents filed a damage suit7 against petitioner, Dr. Leo Marbella, Mr.
Jose Ledesma, a certain Dr. Arriete and SLMC. Respondents charged them with negligence and
disregard of Angelica’s safety, health and welfare by their careless administration of the
chemotherapy drugs, their failure to observe the essential precautions in detecting early the
symptoms of fatal blood platelet decrease and stopping early on the chemotherapy, which
bleeding led to hypovolemic shock that caused Angelica’s untimely demise. Further, it was
specifically averred that petitioner assured the respondents that Angelica would recover in view
of 95% chance of healing with chemotherapy ("Magiging normal na ang anak nyo basta ma-
chemo. 95% ang healing") and when asked regarding the side effects, petitioner mentioned only
slight vomiting, hair loss and weakness ("Magsusuka ng kaunti. Malulugas ang buhok.
Manghihina"). Respondents thus claimed that they would not have given their consent to
chemotherapy had petitioner not falsely assured them of its side effects.
In her answer,8 petitioner denied having been negligent in administering the chemotherapy drugs
to Angelica and asserted that she had fully explained to respondents how the chemotherapy will
affect not only the cancer cells but also the patient’s normal body parts, including the lowering of
white and red blood cells and platelets. She claimed that what happened to Angelica can be
attributed to malignant tumor cells possibly left behind after surgery. Few as they may be, these
have the capacity to compete for nutrients such that the body becomes so weak structurally
(cachexia) and functionally in the form of lower resistance of the body to combat infection. Such
infection becomes uncontrollable and triggers a chain of events (sepsis or septicemia) that may
lead to bleeding in the form of Disseminated Intravascular Coagulation (DIC), as what the
autopsy report showed in the case of Angelica.
Since the medical records of Angelica were not produced in court, the trial and appellate courts
had to rely on testimonial evidence, principally the declarations of petitioner and respondents
themselves. The following chronology of events was gathered:
On July 23, 1993, petitioner saw the respondents at the hospital after Angelica’s surgery and
discussed with them Angelica’s condition. Petitioner told respondents that Angelica should be
given two to three weeks to recover from the operation before starting chemotherapy.
Respondents were apprehensive due to financial constraints as Reynaldo earns only from
₱70,000.00 to ₱150,000.00 a year from his jewelry and watch repairing business.9Petitioner,
however, assured them not to worry about her professional fee and told them to just save up for
the medicines to be used.
Petitioner claimed that she explained to respondents that even when a tumor is removed, there
are still small lesions undetectable to the naked eye, and that adjuvant chemotherapy is needed
to clean out the small lesions in order to lessen the chance of the cancer to recur. She did not
give the respondents any assurance that chemotherapy will cure Angelica’s cancer. During these
consultations with respondents, she explained the following side effects of chemotherapy
treatment to respondents: (1) falling hair; (2) nausea and vomiting; (3) loss of appetite; (4) low
count of white blood cells [WBC], red blood cells [RBC] and platelets; (5) possible sterility due to
the effects on Angelica’s ovary; (6) damage to the heart and kidneys; and (7) darkening of the
skin especially when exposed to sunlight. She actually talked with respondents four times, once
at the hospital after the surgery, twice at her clinic and the fourth time when Angelica’s mother
called her through long distance.10 This was disputed by respondents who countered that
petitioner gave them assurance that there is 95% chance of healing for Angelica if she
undergoes chemotherapy and that the only side effects were nausea, vomiting and hair
loss.11 Those were the only side-effects of chemotherapy treatment mentioned by petitioner.12
On July 27, 1993, SLMC discharged Angelica, with instruction from petitioner that she be
readmitted after two or three weeks for the chemotherapy.
On August 18, 1993, respondents brought Angelica to SLMC for chemotherapy, bringing with
them the results of the laboratory tests requested by petitioner: Angelica’s chest x-ray, ultrasound
of the liver, creatinine and complete liver function tests.13 Petitioner proceeded with the
chemotherapy by first administering hydration fluids to Angelica.14
The following day, August 19, petitioner began administering three chemotherapy drugs –
Cisplatin,15 Doxorubicin16and Cosmegen17 – intravenously. Petitioner was supposedly assisted by
her trainees Dr. Leo Marbella18 and Dr. Grace Arriete.19 In his testimony, Dr. Marbella denied
having any participation in administering the said chemotherapy drugs.20
On the second day of chemotherapy, August 20, respondents noticed reddish discoloration on
Angelica’s face.21They asked petitioner about it, but she merely quipped, "Wala yan. Epekto ng
gamot."22 Petitioner recalled noticing the skin rashes on the nose and cheek area of Angelica. At
that moment, she entertained the possibility that Angelica also had systemic lupus and consulted
Dr. Victoria Abesamis on the matter.23
On the third day of chemotherapy, August 21, Angelica had difficulty breathing and was thus
provided with oxygen inhalation apparatus. This time, the reddish discoloration on Angelica’s
face had extended to her neck, but petitioner dismissed it again as merely the effect of
medicines.24 Petitioner testified that she did not see any discoloration on Angelica’s face, nor did
she notice any difficulty in the child’s breathing. She claimed that Angelica merely complained of
nausea and was given ice chips.25 1avvphi 1
On August 22, 1993, at around ten o’clock in the morning, upon seeing that their child could not
anymore bear the pain, respondents pleaded with petitioner to stop the chemotherapy. Petitioner
supposedly replied: "Dapat 15 Cosmegen pa iyan. Okay, let’s observe. If pwede na, bigyan uli ng
chemo." At this point, respondents asked petitioner’s permission to bring their child home. Later
in the evening, Angelica passed black stool and reddish urine.26 Petitioner countered that there
was no record of blackening of stools but only an episode of loose bowel movement (LBM).
Petitioner also testified that what Angelica complained of was carpo-pedal spasm, not convulsion
or epileptic attack, as respondents call it (petitioner described it in the vernacular as "naninigas
ang kamay at paa"). She then requested for a serum calcium determination and stopped the
chemotherapy. When Angelica was given calcium gluconate, the spasm and numbness
subsided.27
The following day, August 23, petitioner yielded to respondents’ request to take Angelica home.
But prior to discharging Angelica, petitioner requested for a repeat serum calcium determination
and explained to respondents that the chemotherapy will be temporarily stopped while she
observes Angelica’s muscle twitching and serum calcium level. Take-home medicines were also
prescribed for Angelica, with instructions to respondents that the serum calcium test will have to
be repeated after seven days. Petitioner told respondents that she will see Angelica again after
two weeks, but respondents can see her anytime if any immediate problem arises.28
However, Angelica remained in confinement because while still in the premises of SLMC, her
"convulsions" returned and she also had LBM. Angelica was given oxygen and administration of
calcium continued.29
The next day, August 24, respondents claimed that Angelica still suffered from convulsions. They
also noticed that she had a fever and had difficulty breathing.30 Petitioner insisted it was carpo-
pedal spasm, not convulsions. She verified that at around 4:50 that afternoon, Angelica
developed difficulty in breathing and had fever. She then requested for an electrocardiogram
analysis, and infused calcium gluconate on the patient at a "stat dose." She further ordered that
Angelica be given Bactrim,31 a synthetic antibacterial combination drug,32 to combat any infection
on the child’s body.33
By August 26, Angelica was bleeding through the mouth. Respondents also saw blood on her
anus and urine. When Lina asked petitioner what was happening to her daughter, petitioner
replied, "Bagsak ang platelets ng anak mo." Four units of platelet concentrates were then
transfused to Angelica. Petitioner prescribed Solucortef. Considering that Angelica’s fever was
high and her white blood cell count was low, petitioner prescribed Leucomax. About four to eight
bags of blood, consisting of packed red blood cells, fresh whole blood, or platelet concentrate,
were transfused to Angelica. For two days (August 27 to 28), Angelica continued bleeding, but
petitioner claimed it was lesser in amount and in frequency. Petitioner also denied that there
were gadgets attached to Angelica at that time.34
On August 29, Angelica developed ulcers in her mouth, which petitioner said were blood clots
that should not be removed. Respondents claimed that Angelica passed about half a liter of
blood through her anus at around seven o’clock that evening, which petitioner likewise denied.
On August 30, Angelica continued bleeding. She was restless as endotracheal and nasogastric
tubes were inserted into her weakened body. An aspiration of the nasogastric tube inserted to
Angelica also revealed a bloody content. Angelica was given more platelet concentrate and fresh
whole blood, which petitioner claimed improved her condition. Petitioner told Angelica not to
remove the endotracheal tube because this may induce further bleeding.35She was also
transferred to the intensive care unit to avoid infection.
The next day, respondents claimed that Angelica became hysterical, vomited blood and her body
turned black. Part of Angelica’s skin was also noted to be shredding by just rubbing cotton on it.
Angelica was so restless she removed those gadgets attached to her, saying "Ayaw ko na"; there
were tears in her eyes and she kept turning her head. Observing her daughter to be at the point
of death, Lina asked for a doctor but the latter could not answer her anymore.36 At this time, the
attending physician was Dr. Marbella who was shaking his head saying that Angelica’s platelets
were down and respondents should pray for their daughter. Reynaldo claimed that he was
introduced to a pediatrician who took over his daughter’s case, Dr. Abesamis who also told him
to pray for his daughter. Angelica continued to have difficulty in her breathing and blood was
being suctioned from her stomach. A nurse was posted inside Angelica’s room to assist her
breathing and at one point they had to revive Angelica by pumping her chest. Thereafter,
Reynaldo claimed that Angelica already experienced difficulty in urinating and her bowel
consisted of blood-like fluid. Angelica requested for an electric fan as she was in pain. Hospital
staff attempted to take blood samples from Angelica but were unsuccessful because they could
not even locate her vein. Angelica asked for a fruit but when it was given to her, she only smelled
it. At this time, Reynaldo claimed he could not find either petitioner or Dr. Marbella. That night,
Angelica became hysterical and started removing those gadgets attached to her. At three o’clock
in the morning of September 1, a priest came and they prayed before Angelica expired.
Petitioner finally came back and supposedly told respondents that there was "malfunction" or
bogged-down machine.37
By petitioner’s own account, Angelica was merely irritable that day (August 31). Petitioner noted
though that Angelica’s skin was indeed sloughing off.38 She stressed that at 9:30 in the evening,
Angelica pulled out her endotracheal tube.39 On September 1, exactly two weeks after being
admitted at SLMC for chemotherapy, Angelica died.40 The cause of death, according to
petitioner, was septicemia, or overwhelming infection, which caused Angelica’s other organs to
fail.41 Petitioner attributed this to the patient’s poor defense mechanism brought about by the
cancer itself.42
While he was seeking the release of Angelica’s cadaver from SLMC, Reynaldo claimed that
petitioner acted arrogantly and called him names. He was asked to sign a promissory note as he
did not have cash to pay the hospital bill.43
Respondents also presented as witnesses Dr. Jesusa Nieves-Vergara, Medico-Legal Officer of

the PNP-Crime Laboratory who conducted the autopsy on Angelica’s cadaver, and Dr. Melinda
Vergara Balmaceda who is a Medical Specialist employed at the Department of Health (DOH)
Operations and Management Services.
Testifying on the findings stated in her medico-legal report, Dr. Vergara noted the following: (1)
there were fluids recovered from the abdominal cavity, which is not normal, and was due to
hemorrhagic shock secondary to bleeding; (2) there was hemorrhage at the left side of the heart;
(3) bleeding at the upper portion of and areas adjacent to, the esophagus; (4) lungs were heavy
with bleeding at the back and lower portion, due to accumulation of fluids; (4) yellowish
discoloration of the liver; (5) kidneys showed appearance of facial shock on account of
hemorrhages; and (6) reddishness on external surface of the spleen. All these were the end
result of "hypovolemic shock secondary to multiple organ hemorrhages and disseminated
intravascular coagulation." Dr. Vergara opined that this can be attributed to the chemical agents
in the drugs given to the victim, which caused platelet reduction resulting to bleeding sufficient to
cause the victim’s death. The time lapse for the production of DIC in the case of Angelica (from
the time of diagnosis of sarcoma) was too short, considering the survival rate of about 3 years.
The witness conceded that the victim will also die of osteosarcoma even with amputation or
chemotherapy, but in this case Angelica’s death was not caused by osteosarcoma. Dr. Vergara
admitted that she is not a pathologist but her statements were based on the opinion of an
oncologist whom she had interviewed. This oncologist supposedly said that if the victim already
had DIC prior to the chemotherapy, the hospital staff could have detected it.44
On her part, Dr. Balmaceda declared that it is the physician’s duty to inform and explain to the
patient or his relatives every known side effect of the procedure or therapeutic agents to be
administered, before securing the consent of the patient or his relatives to such procedure or
therapy. The physician thus bases his assurance to the patient on his personal assessment of
the patient’s condition and his knowledge of the general effects of the agents or procedure that
will be allowed on the patient. Dr. Balmaceda stressed that the patient or relatives must be
informed of all known side effects based on studies and observations, even if such will aggravate
the patient’s condition.45
Dr. Jaime Tamayo, the orthopaedic surgeon who operated on Angelica’s lower extremity,
testified for the defendants. He explained that in case of malignant tumors, there is no guarantee
that the ablation or removal of the amputated part will completely cure the cancer. Thus, surgery
is not enough. The mortality rate of osteosarcoma at the time of modern chemotherapy and early
diagnosis still remains at 80% to 90%. Usually, deaths occur from metastasis, or spread of the
cancer to other vital organs like the liver, causing systemic complications. The modes of therapy
available are the removal of the primary source of the cancerous growth and then the residual
cancer cells or metastasis should be treated with chemotherapy. Dr. Tamayo further explained
that patients with osteosarcoma have poor defense mechanism due to the cancer cells in the
blood stream. In the case of Angelica, he had previously explained to her parents that after the
surgical procedure, chemotherapy is imperative so that metastasis of these cancer cells will
hopefully be addressed. He referred the patient to petitioner because he felt that petitioner is a
competent oncologist. Considering that this type of cancer is very aggressive and will
metastasize early, it will cause the demise of the patient should there be no early intervention (in
this case, the patient developed sepsis which caused her death). Cancer cells in the blood
cannot be seen by the naked eye nor detected through bone scan. On cross-examination, Dr.
Tamayo stated that of the more than 50 child patients who had osteogenic sarcoma he had
handled, he thought that probably all of them died within six months from amputation because he
did not see them anymore after follow-up; it is either they died or had seen another doctor.46
In dismissing the complaint, the trial court held that petitioner was not liable for damages as she
observed the best known procedures and employed her highest skill and knowledge in the
administration of chemotherapy drugs on Angelica but despite all efforts said patient died. It cited
the testimony of Dr. Tamayo who testified that he considered petitioner one of the most proficient
in the treatment of cancer and that the patient in this case was afflicted with a very aggressive
type of cancer necessitating chemotherapy as adjuvant treatment. Using the standard of
negligence laid down in Picart v. Smith,47 the trial court declared that petitioner has taken the
necessary precaution against the adverse effect of chemotherapy on the patient, adding that a
wrong decision is not by itself negligence. Respondents were ordered to pay their unpaid hospital
bill in the amount of ₱139,064.43.48
Respondents appealed to the CA which, while concurring with the trial court’s finding that there
was no negligence committed by the petitioner in the administration of chemotherapy treatment
to Angelica, found that petitioner as her attending physician failed to fully explain to the
respondents all the known side effects of chemotherapy. The appellate court stressed that since
the respondents have been told of only three side effects of chemotherapy, they readily
consented thereto. Had petitioner made known to respondents those other side effects which
gravely affected their child -- such as carpo-pedal spasm, sepsis, decrease in the blood platelet
count, bleeding, infections and eventual death -- respondents could have decided differently or
adopted a different course of action which could have delayed or prevented the early death of
their child.
The CA thus declared:
Plaintiffs-appellants’ child was suffering from a malignant disease. The attending physician
recommended that she undergo chemotherapy treatment after surgery in order to increase her
chances of survival. Appellants consented to the chemotherapy treatment because they believed
in Dr. Rubi Li’s representation that the deceased would have a strong chance of survival after
chemotherapy and also because of the representation of appellee Dr. Rubi Li that there were
only three possible side-effects of the treatment. However, all sorts of painful side-effects
resulted from the treatment including the premature death of Angelica. The appellants were
clearly and totally unaware of these other side-effects which manifested only during the
chemotherapy treatment. This was shown by the fact that every time a problem would take place
regarding Angelica’s condition (like an unexpected side-effect manifesting itself), they would
immediately seek explanation from Dr. Rubi Li. Surely, those unexpected side-effects culminating
in the loss of a love[d] one caused the appellants so much trouble, pain and suffering.
On this point therefore, [w]e find defendant-appellee Dr. Rubi Li negligent which would entitle
plaintiffs-appellants to their claim for damages.
xxxx
WHEREFORE, the instant appeal is hereby GRANTED. Accordingly, the assailed decision is
hereby modified to the extent that defendant-appellee Dr. Rubi Li is ordered to pay the plaintiffs-
appellants the following amounts:
1. Actual damages of P139,064.43, plus P9,828.00 for funeral expenses;
2. Moral damages of P200,000.00;
3. Exemplary damages of P50,000.00;
4. Attorney’s fee of P30,000.00.
SO ORDERED.49 (Emphasis supplied.)
Petitioner filed a motion for partial reconsideration which the appellate court denied.
Petitioner assails the CA in finding her guilty of negligence in not explaining to the respondents
all the possible side effects of the chemotherapy on their child, and in holding her liable for
actual, moral and exemplary damages and attorney’s fees. Petitioner emphasized that she was
not negligent in the pre-chemotherapy procedures and in the administration of chemotherapy
treatment to Angelica.
On her supposed non-disclosure of all possible side effects of chemotherapy, including death,
petitioner argues that it was foolhardy to imagine her to be all-knowing/omnipotent. While the
theoretical side effects of chemotherapy were explained by her to the respondents, as these
should be known to a competent doctor, petitioner cannot possibly predict how a particular
patient’s genetic make-up, state of mind, general health and body constitution would respond to
the treatment. These are obviously dependent on too many known, unknown and immeasurable
variables, thus requiring that Angelica be, as she was, constantly and closely monitored during
the treatment. Petitioner asserts that she did everything within her professional competence to
attend to the medical needs of Angelica.
Citing numerous trainings, distinctions and achievements in her field and her current position as
co-director for clinical affairs of the Medical Oncology, Department of Medicine of SLMC,
petitioner contends that in the absence of any clear showing or proof, she cannot be charged
with negligence in not informing the respondents all the side effects of chemotherapy or in the
pre-treatment procedures done on Angelica.
As to the cause of death, petitioner insists that Angelica did not die of platelet depletion but of
sepsis which is a complication of the cancer itself. Sepsis itself leads to bleeding and death. She
explains that the response rate to chemotherapy of patients with osteosarcoma is high, so much
so that survival rate is favorable to the patient. Petitioner then points to some probable
consequences if Angelica had not undergone chemotherapy. Thus, without chemotherapy, other
medicines and supportive treatment, the patient might have died the next day because of
massive infection, or the cancer cells might have spread to the brain and brought the patient into
a coma, or into the lungs that the patient could have been hooked to a respirator, or into her
kidneys that she would have to undergo dialysis. Indeed, respondents could have spent as much
because of these complications. The patient would have been deprived of the chance to survive
the ailment, of any hope for life and her "quality of life" surely compromised. Since she had not
been shown to be at fault, petitioner maintains that the CA erred in holding her liable for the
damages suffered by the respondents.50
The issue to be resolved is whether the petitioner can be held liable for failure to fully disclose
serious side effects to the parents of the child patient who died while undergoing chemotherapy,
despite the absence of finding that petitioner was negligent in administering the said treatment.
The petition is meritorious.
The type of lawsuit which has been called medical malpractice or, more appropriately, medical
negligence, is that type of claim which a victim has available to him or her to redress a wrong
committed by a medical professional which has caused bodily harm. In order to successfully
pursue such a claim, a patient must prove that a health care provider, in most cases a physician,
either failed to do something which a reasonably prudent health care provider would have done,
or that he or she did something that a reasonably prudent provider would not have done; and that
that failure or action caused injury to the patient.51
This Court has recognized that medical negligence cases are best proved by opinions of expert
witnesses belonging in the same general neighborhood and in the same general line of practice
as defendant physician or surgeon. The deference of courts to the expert opinion of qualified
physicians stems from the former’s realization that the latter possess unusual technical skills
which laymen in most instances are incapable of intelligently evaluating, hence the
indispensability of expert testimonies.52
In this case, both the trial and appellate courts concurred in finding that the alleged negligence of
petitioner in the administration of chemotherapy drugs to respondents’ child was not proven
considering that Drs. Vergara and Balmaceda, not being oncologists or cancer specialists, were
not qualified to give expert opinion as to whether petitioner’s lack of skill, knowledge and
professional competence in failing to observe the standard of care in her line of practice was the
proximate cause of the patient’s death. Furthermore, respondents’ case was not at all helped by
the non-production of medical records by the hospital (only the biopsy result and medical bills
were submitted to the court). Nevertheless, the CA found petitioner liable for her failure to inform
the respondents on all possible side effects of chemotherapy before securing their consent to the
said treatment.
The doctrine of informed consent within the context of physician-patient relationships goes far
back into English common law. As early as 1767, doctors were charged with the tort of "battery"
(i.e., an unauthorized physical contact with a patient) if they had not gained the consent of their
patients prior to performing a surgery or procedure. In the United States, the seminal case was
Schoendorff v. Society of New York Hospital53 which involved unwanted treatment performed by
a doctor. Justice Benjamin Cardozo’s oft-quoted opinion upheld the basic right of a patient to
give consent to any medical procedure or treatment: "Every human being of adult years and
sound mind has a right to determine what shall be done with his own body; and a surgeon who
performs an operation without his patient’s consent, commits an assault, for which he is liable in
damages."54 From a purely ethical norm, informed consent evolved into a general principle of law
that a physician has a duty to disclose what a reasonably prudent physician in the medical
community in the exercise of reasonable care would disclose to his patient as to whatever grave
risks of injury might be incurred from a proposed course of treatment, so that a patient,
exercising ordinary care for his own welfare, and faced with a choice of undergoing the proposed
treatment, or alternative treatment, or none at all, may intelligently exercise his judgment by
reasonably balancing the probable risks against the probable benefits.55
Subsequently, in Canterbury v. Spence56 the court observed that the duty to disclose should not
be limited to medical usage as to arrogate the decision on revelation to the physician alone.
Thus, respect for the patient’s right of self-determination on particular therapy demands a
standard set by law for physicians rather than one which physicians may or may not impose
upon themselves.57 The scope of disclosure is premised on the fact that patients ordinarily are
persons unlearned in the medical sciences. Proficiency in diagnosis and therapy is not the full
measure of a physician’s responsibility. It is also his duty to warn of the dangers lurking in the
proposed treatment and to impart information which the patient has every right to expect. Indeed,
the patient’s reliance upon the physician is a trust of the kind which traditionally has exacted
obligations beyond those associated with armslength transactions.58 The physician is not
expected to give the patient a short medical education, the disclosure rule only requires of him a
reasonable explanation, which means generally informing the patient in nontechnical terms as to
what is at stake; the therapy alternatives open to him, the goals expectably to be achieved, and
the risks that may ensue from particular treatment or no treatment.59 As to the issue of
demonstrating what risks are considered material necessitating disclosure, it was held that
experts are unnecessary to a showing of the materiality of a risk to a patient’s decision on
treatment, or to the reasonably, expectable effect of risk disclosure on the decision. Such
unrevealed risk that should have been made known must further materialize, for otherwise the
omission, however unpardonable, is without legal consequence. And, as in malpractice actions
generally, there must be a causal relationship between the physician’s failure to divulge and
damage to the patient.60
Reiterating the foregoing considerations, Cobbs v. Grant61 deemed it as integral part of

physician’s overall obligation to patient, the duty of reasonable disclosure of available choices
with respect to proposed therapy and of dangers inherently and potentially involved in each.
However, the physician is not obliged to discuss relatively minor risks inherent in common
procedures when it is common knowledge that such risks inherent in procedure of very low
incidence. Cited as exceptions to the rule that the patient should not be denied the opportunity to
weigh the risks of surgery or treatment are emergency cases where it is evident he cannot
evaluate data, and where the patient is a child or incompetent.62 The court thus concluded that
the patient’s right of self-decision can only be effectively exercised if the patient possesses
adequate information to enable him in making an intelligent choice. The scope of the physician’s
communications to the patient, then must be measured by the patient’s need, and that need is
whatever information is material to the decision. The test therefore for determining whether a
potential peril must be divulged is its materiality to the patient’s decision.63
Cobbs v. Grant further reiterated the pronouncement in Canterbury v. Spence that for liability of
the physician for failure to inform patient, there must be causal relationship between physician’s
failure to inform and the injury to patient and such connection arises only if it is established that,
had revelation been made, consent to treatment would not have been given.
There are four essential elements a plaintiff must prove in a malpractice action based upon the
doctrine of informed consent: "(1) the physician had a duty to disclose material risks; (2) he failed
to disclose or inadequately disclosed those risks; (3) as a direct and proximate result of the
failure to disclose, the patient consented to treatment she otherwise would not have consented
to; and (4) plaintiff was injured by the proposed treatment." The gravamen in an informed
consent case requires the plaintiff to "point to significant undisclosed information relating to the
treatment which would have altered her decision to undergo it.64
Examining the evidence on record, we hold that there was adequate disclosure of material risks
inherent in the chemotherapy procedure performed with the consent of Angelica’s parents.
Respondents could not have been unaware in the course of initial treatment and amputation of
Angelica’s lower extremity, that her immune system was already weak on account of the
malignant tumor in her knee. When petitioner informed the respondents beforehand of the side
effects of chemotherapy which includes lowered counts of white and red blood cells, decrease in
blood platelets, possible kidney or heart damage and skin darkening, there is reasonable
expectation on the part of the doctor that the respondents understood very well that the severity
of these side effects will not be the same for all patients undergoing the procedure. In other
words, by the nature of the disease itself, each patient’s reaction to the chemical agents even
with pre-treatment laboratory tests cannot be precisely determined by the physician. That death
can possibly result from complications of the treatment or the underlying cancer itself,
immediately or sometime after the administration of chemotherapy drugs, is a risk that cannot be
ruled out, as with most other major medical procedures, but such conclusion can be reasonably
drawn from the general side effects of chemotherapy already disclosed.
As a physician, petitioner can reasonably expect the respondents to have considered the
variables in the recommended treatment for their daughter afflicted with a life-threatening illness.
On the other hand, it is difficult to give credence to respondents’ claim that petitioner told them of
95% chance of recovery for their daughter, as it was unlikely for doctors like petitioner who were
dealing with grave conditions such as cancer to have falsely assured patients of chemotherapy’s
success rate. Besides, informed consent laws in other countries generally require only a
reasonable explanation of potential harms, so specific disclosures such as statistical data, may
not be legally necessary.65
The element of ethical duty to disclose material risks in the proposed medical treatment cannot
thus be reduced to one simplistic formula applicable in all instances. Further, in a medical
malpractice action based on lack of informed consent, "the plaintiff must prove both the duty and
the breach of that duty through expert testimony.66 Such expert testimony must show the
customary standard of care of physicians in the same practice as that of the defendant doctor.67
In this case, the testimony of Dr. Balmaceda who is not an oncologist but a Medical Specialist of
the DOH’s Operational and Management Services charged with receiving complaints against
hospitals, does not qualify as expert testimony to establish the standard of care in obtaining
consent for chemotherapy treatment. In the absence of expert testimony in this regard, the Court
feels hesitant in defining the scope of mandatory disclosure in cases of malpractice based on
lack of informed consent, much less set a standard of disclosure that, even in foreign
jurisdictions, has been noted to be an evolving one.
As society has grappled with the juxtaposition between personal autonomy and the medical
profession's intrinsic impetus to cure, the law defining "adequate" disclosure has undergone a
dynamic evolution. A standard once guided solely by the ruminations of physicians is now
dependent on what a reasonable person in the patient’s position regards as significant. This
change in perspective is especially important as medical breakthroughs move practitioners to the
cutting edge of technology, ever encountering new and heretofore unimagined treatments for
currently incurable diseases or ailments. An adaptable standard is needed to account for this
constant progression. Reasonableness analyses permeate our legal system for the very reason
that they are determined by social norms, expanding and contracting with the ebb and flow of
societal evolution.
As we progress toward the twenty-first century, we now realize that the legal standard of
disclosure is not subject to construction as a categorical imperative. Whatever formulae or
processes we adopt are only useful as a foundational starting point; the particular quality or
quantity of disclosure will remain inextricably bound by the facts of each case. Nevertheless,
juries that ultimately determine whether a physician properly informed a patient are inevitably
guided by what they perceive as the common expectation of the medical consumer—"a
reasonable person in the patient’s position when deciding to accept or reject a recommended
medical procedure."68 (Emphasis supplied.)
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated June 15,
2004 and the Resolution dated September 1, 2004 of the Court of Appeals in CA-G.R. CV No.
58013 are SET ASIDE.
The Decision dated September 5, 1997 of the Regional Trial Court of Legazpi City, Branch 8, in
Civil Case No. 8904 is REINSTATED and UPHELD.
No costs.
SO ORDERED
G.R. No. 143196 November 26, 2002
STI DRIVERS ASSOCIATION, SALVADOR CARANZA, MARIANO TAN, AMADO

EVANGELISTA, MANUEL EVANGELISTA, EUSEBIO TABULOD, JR., MANUEL T.
RODULFO, JOHNNY BUMATAY, FRANCISCO DOMINGO, NOLITO BRANZUELA,
DOMIZALDE BUMATAY, FERNANDO ARIBON, JUNELIAM QUINANOLA, JESUS FERRER,
RAYMUNDO BUMATAY, JR., MANUEL MOSTRALES, ROGELIO MAZO, ROLANDO
EVASCO, FELIXBERTO BADINAS, GERRY BOLIDO, GREGORIO GALVEZ, JR., CHARITO
MOSCOSA, MARCELINO VILLANUEVA, IBARISTO LACATA, FELIX OROGAN, GERRY
CONDA, DENNIS SANCHEZ, PABLO ARAOS, NARIO BERNALDEZ, LITO YAMBA, ANDRES
NOVAL, JUDY VICENTE, DAVID CAJES, and FELIPE CASBADILLO, petitioners,
vs.
COURT OF APPEALS, SIMENT TRANSPORT, INC., ELY CHUA, WILLIAM CHUA, SIMON
CHUAHE, ELIZABETH TAN, JRB MANPOWER AGENCY/ EDWIN BUMATAY, respondents.
DECISION
CORONA, J.:
Before us is a petition for review of the decision1 dated July 26, 1999 of the Court of Appeals2 in
CA-G.R. SP No. 51216 dismissing the petition for certiorari of the decision3 dated January 31,
1996 of the National Labor Relations Commission in NLRC NCR Case No. 008951-95 which
affirmed the decision4 dated April 21, 1995 of Labor Arbiter Romulus Protasio ruling in favor of
the respondents.
The facts, as found by the appellate court, are as follows:
The petitioners are truck drivers and truck helpers of herein respondents Siment Transport, Inc.
(STI, for brevity), Family Mercantile (FM, for brevity), Simon Enterprises (SE, for brevity), and
their owners, namely, Ely Chua, Willam Chua, Simon Chuahe, and Elizabeth Tan. JRB
Manpower Agency and Edwin Bumatay were likewise included as respondents in the instant
petition. The petitioners are Salvador Caranza, Mariano Tan, Amado Evangelista, Manuel
Evangelista, Eusebio Tabulod, Jr., Manuel T. Rodulfo, Johnny Bumatay, Francisco Domingo,
Nolito Branzuela, Domizalde Bumatay, Fernando Aribon, Juneliam Quinanola, Jesus Ferrer,
Raymundo Bumatay, Jr., Manuel Mostrales, Rogelio Mazo, Rolando Evasco, Felixberto Badinas,
Gerry Bolido, Gregorio Galvez, Jr., Charito Moscosa, Marcelino Villanueva, Ibaristo Lacata, Felix
Orogan, Gerry Conda, Dennis Sanchez, Pablo Araos, Nario Bernaldez, Lito Yamba, Andres
Noval, Judy Vicente, David Cajes and Felipe Casbadillo.
The petitioner drivers formed STI Drivers Association which was registered with the Department
of Labor and Employment (DOLE, for brevity) under Registration Certificate No. NCR-UR-1-1
188-94. On May 2, 1994, the said union filed a petition for certification election duly signed by
Atty. Ernesto Arellano. On June 13, 1994, Med-arbiter Brigada Fadrigon issued an order
dismissing the petition. On appeal to the DOLE, Undersecretary Bienvenido Laguesma affirmed
the said order on August 25, 1994.
Pending resolution of the appeal to the DOLE, however, on June 29, 1994, petitioner drivers
Salvador Caranza, Mariano Tan, Amado Evangelista, Manuel Rudolfo, Johnny Bumatay and
Eusebio Tabulod, Jr. were dismissed by respondent STI for violation of the "Union Security
Clause" provided for in respondent’s Collective Bargaining Agreement (CBA, for brevity) with the
Federation of Democratic Trade Unions- STI Workers Union Chapter (FDTU-STI, for brevity).
Subsequently, the concerned petitioners filed a complaint for illegal dismissal, unfair labor
practice and payment of damages against the respondents before the Regional Arbitration
Branch of the NLRC. On the same day, the petitioner drivers also filed a complaint for
underpayment of their vacation leave, sick leave and 13th month pay against the respondents.
The petitioner truck helpers (pahinantes) were also dismissed for abandonment of work when
they failed to report for work on July 13, 1994 on the ground that they allegedly attended an
organizational meeting of the drivers’ union. Respondent JRB sent notices to the concerned
petitioners requiring them to report for work with a stern warning that their employment would be
terminated if they failed to comply. Inasmuch as they disobeyed the said order, they were
dismissed for abandonment of work. On August 2, 1994, they filed a complaint for illegal
dismissal, unfair labor practice and payment of damages against the respondents before the
Regional Arbitration Branch of the NLRC.
On October 1, 1994, the petitioner drivers Francisco Domingo, Nolito Branzuela, Domizalde
Bumatay, Fernando Aribon, Juneliam Quinanola, Jesus Ferrer, Manuel Mostrales, Raymundo
Bumatay, Jr., Rogelio Mazo, and Rolando Evasco were also dismissed on the ground that they
failed to join FDTU-STI as required by the union security clause of their CBA. They filed a
complaint for illegal dismissal, unfair labor practice and damages. This case was consolidated
with the first case filed by the first group of petitioner drivers.
The three cases were consolidated and assigned to Labor Arbiter Ernesto Dinopol. They were
later on re-raffled and assigned to Labor Arbiter Romulus Protasio. The parties were required to
submit their respective position papers. However, petitioners failed to submit their position paper.
Hence, Labor Arbiter Protasio proceeded to hear the case ex parte. On April 21, 1995, Labor
Arbiter Protasio dismissed the three consolidated complaints, the dispositive portion of which
reads:
"WHEREFORE, judgment is hereby rendered declaring the dismissal of the complainants in

Case No. 1 by JRB Manpower Agency/Edwin Bumatay and the dismissal of complainants by
respondent Siment Transport, Inc. and its officers, William Chua, Ely Chua, Simon Chuahe and
Elizabeth Tan in Case No. 2 as valid and legal. Paragraph Case No. 3 is also dismissed since
the benefits prayed for have already been fully paid for as here before indicated."5
On May 9, 1995, the petitioners appealed the case to the NLRC but, in a resolution dated June
30, 1995, the NLRC dismissed the appeal for being filed out of time. The motion for
reconsideration was likewise denied.
They filed a petition for certiorari before the Court of Appeals questioning the decision of the
NLRC but the appellate court dismissed the same. The Court of Appeals held that the petitioners
were not denied due process inasmuch as their counsel, a certain Villamor Mostrales, was
informed in open court to submit petitioners’ position paper, but he did not. In affirming the
legality of the petitioners’ dismissal, the Court of Appeals found that they committed an act of
disloyalty when, during the existence of the CBA, they organized another union (the STI Drivers’
Association) and then filed a petition for certification election outside the 60-day freedom period,
in violation of the "contract bar rule" under Articles 253 and 253-A of the Labor Code.
Hence, this petition for review of the decision of the Court of Appeals based on this sole
assignment of error:
"I
"PETITIONERS WERE DENIED DUE PROCESS BECAUSE THEY WERE

MISREPRESENTED BY AN IMPOSTOR LAWYER OR A NON-LAWYER."6
The petitioners pray that the case be remanded to the Regional Arbitration Branch of the NLRC
on the ground that they were denied due process for being represented by an impostor lawyer
who was negligent in attending to their case from the moment it was filed up to its dismissal by
the appellate court. They claim that a certain Villamor Mostrales led them to believe that he was
a lawyer who could represent them in the consolidated labor complaints against herein
respondents. However, Mr. Mostrales failed to file the necessary position papers required by
Labor Arbiter Protasio. As a result, Labor Arbiter Protasio declared the petitioners in default and
ruled against them on the basis of the position paper submitted by the respondents. The
petitioners discovered that Mr. Mostrales was not a lawyer after they secured a certification from
the Office of the Bar Confidant that Mr. Mostrales’ name is not included in the Roll of Attorneys.
They now argue that the actions of the impostor lawyer denied them due process for the reason
that they were not given competent representation during the hearing of the case and thus the
proceedings a quo were null and void.
We deny the petition.
The records show that, aside from Mr. Mostrales, a counsel named Atty. Ernesto R. Arellano,
represented them in all the stages of the proceedings. In fact, the Labor Arbiter issued an order
notifying Atty. Arellano of the reglementary period within which to file the petitioners’ position
papers. We herein quote the judgment of the NLRC denying petitioners’ motion for
reconsideration as proof of this fact, to wit:
"Records show that contrary to complainants’ allegations, the Order of February 20, 1995 was
served to their counsel, ‘Atty. Ernesto R. Arellano of Rm. 400, Jino Bldg., Timog Avenue, Quezon
City.’ It was received by certain ‘Edmond T. Lao’ on February 27, 1995 (See Record, p. 268).
xxx."7
In addition, the petitioners failed to dispute the fact that the written notification of the order of
dismissal of the petition for certification election was directed to Atty. Arellano as petitioners’
counsel of record.8 And after the adverse decision of the Labor Arbiter, Atty. Ernesto Arellano
filed the appeal to the NLRC, as evidenced by his signature on the appeal brief.9 Also, the NLRC
directed the notice of its resolution (dismissing the petitioners’ appeal for having been filed out of
time) to his law firm, Arellano and Associates.10 The earlier petition that they filed before this
Court (involving the same parties and issues), which was remanded to the Court of Appeals as a
result of our ruling in St. Martin Funeral Home vs. National Labor Relations Commission,11 was
likewise signed by the same Atty. Ernesto R. Arellano.12 These undisputed facts prove that,
during the entire proceedings, a bona-fide lawyer represented them and filed pleadings in their
behalf.
Based on the foregoing, we find that the petitioners were duly represented by a bona-fide lawyer
and the latter’s failure to file the required position papers before the Labor Arbiter or to appeal on
time to the NLRC is not a ground to declare the proceedings a quo null and void. We have ruled
time and again that any act performed by a lawyer within the scope of his general or implied
authority is regarded as an act of his client. Consequently, the mistake or negligence of
petitioners’ counsel may result in the rendition of an unfavorable judgment against
them.13Exceptions to the foregoing have been recognized by this Court in cases where reckless
or gross negligence of counsel deprives the client of due process of law, or when its application
"results in the outright deprivation of one’s property through a technicality."14 None of these
exceptions has been sufficiently shown in the instant case.
In the case at bar, the petitioners merely claimed deprivation of their rights as a result of
misrepresentations perpetrated by an impostor lawyer. But, as already discussed, we cannot
overlook the fact that they retained the services of Atty. Arellano. The petitioners failed to show
any evidence that the services of Atty. Arellano violated their right to due process or deprived
them of their property through a technicality. No gross negligence can be attributed to Atty.
Arellano inasmuch as he did not totally abandon or disregard his clients’ cases. He filed
pleadings for and in their behalf. The petitioners should therefore, as far as this suit is concerned,
bear the consequences of their faulty option. After all, 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 the petitioners succeeded in
defending their interest but whether the petitioners had the opportunity to present their side.15
Although nothing can be done to reverse the decision of the appellate court, the aggrieved
petitioners can still explore the feasibility of filing the appropriate criminal, civil and administrative
cases against Mr. Mostrales and Atty. Arellano, as warranted. Damages, after all, can be
recovered as a result of fraud or inaction.
WHEREFORE, premises considered, the petition is hereby DENIED. No costs.
SO ORDERED
G.R. No. 160110 June 18, 2014
MARIANO C. MENDOZA and ELVIRA LIM, Petitioners,

vs.
SPOUSES LEONORA J. GOMEZ and GABRIEL V. GOMEZ, Respondents.
DECISION
PEREZ, J.:
Assailed in the present appeal by certiorari is the Decision1 dated 29 September 2003 of the
Special Fourth Division of the Court of Appeals (CA) in CA-G.R. CV No. 71877, which affirmed
with modification the Decision2 dated 31 January 2001 of the Regional Trial Court (RTC), Branch
172, Valenzuela City in Civil Case No. 5352-V-97, and which effectively allowed the award of
actual, moral, and exemplary damages, as well as attorney's fees and costs of the suit in favor of
respondent Spouses Leonora and Gabriel Gomez (respondents).
Antecedent Facts
On 7 March 1997, an Isuzu Elf truck (Isuzu truck) with plate number UAW 582,3 owned by
respondent Leonora J. Gomez (Leonora)4 and driven by Antenojenes Perez (Perez),5 was hit by
a Mayamy Transportation bus (Mayamy bus) with temporary plate number 1376-
1280,6 registered under the name of petitioner Elvira Lim (Lim)7 and driven by petitioner Mariano
C. Mendoza (Mendoza).8
Owing to the incident, an Information for reckless imprudence resulting in damage to property
and multiple physical injuries was filed against Mendoza.9 Mendoza, however, eluded arrest,
thus, respondents filed a separate complaint for damages against Mendoza and Lim, seeking
actual damages, compensation for lost income, moral damages, exemplary damages, attorney’s
fees and costs of the suit.10 This was docketed as Civil Case No. 5352-V-97.
According to PO1 Melchor F. Rosales (PO1 Rosales), investigating officer of the case, at around
5:30 a.m., the Isuzu truck, coming from Katipunan Road and heading towards E. Rodriguez, Sr.
Avenue, was travelling along the downward portion of Boni Serrano Avenue when, upon
reaching the corner of Riviera Street, fronting St. Ignatius Village, its left front portion was hit by
the Mayamy bus.11 According to PO1 Rosales, the Mayamy bus, while traversing the opposite
lane, intruded on the lane occupied by the Isuzu truck.12
PO1 Rosales also reported that Mendoza tried to escape by speeding away, but he was
apprehended in Katipunan Road corner C. P. Garcia Avenue by one Traffic Enforcer Galante
and a security guard of St. Ignatius Village.13
As a result of the incident, Perez,as well as the helpers on board the Isuzu truck, namely Melchor
V. Anla (Anla), Romeo J. Banca (Banca), and Jimmy Repisada (Repisada), sustained injuries
necessitating medical treatment amounting to ₱11,267.35,which amount was shouldered by
respondents. Moreover, the Isuzu truck sustained extensive damages on its cowl, chassis, lights
and steering wheel, amounting to ₱142,757.40.14
Additionally, respondents averred that the mishap deprived them of a daily income of ₱1,000.00.
Engaged in the business of buying plastic scraps and delivering them to recycling plants,
respondents claimed that the Isuzu truck was vital in the furtherance of their business.
For their part, petitioners capitalized on the issue of ownership of the bus in question.
Respondents argued that although the registered owner was Lim, the actual owner of the bus
was SPO1 Cirilo Enriquez (Enriquez), who had the bus attached with Mayamy Transportation
Company (Mayamy Transport) under the so-called "kabit system." Respondents then impleaded
both Lim and Enriquez.
Petitioners, on the other hand, presented Teresita Gutierrez (Gutierrez), whose testimony was
offered to prove that Mayamy Bus or Mayamy Transport is a business name registered under her
name, and that such business is a sole proprietorship. Such was presented by petitioners to
rebut the allegation of respondents that Mayamy Transport is a corporation;15 and to show,
moreover, that although Gutierrez is the sole proprietor of Mayamy Transport, she was not
impleaded by respondents in the case at bar.16
After weighing the evidence, the RTC found Mendoza liable for direct personal negligence under
Article 2176 of the Civil Code, and it also found Lim vicariously liable under Article 2180 of the
same Code.
As regards Lim, the RTC relied on the Certificate of Registration issued by the Land
Transportation Office on 9 December 199617 in concluding that she is the registered owner of the
bus in question. Although actually owned by Enriquez, following the established principle in
transportation law, Lim, as the registered owner, is the one who can be held liable.
Thus, the RTC disposed of the case as follows:
WHEREFORE, judgment is hereby rendered in favor of the [respondents] and against the
[petitioners]:
1. Ordering the [petitioners] except Enriquez to pay [respondents], jointly and severally,
the costs of repair of the damaged vehicle in the amount of ₱142,757.40;
2. Ordering the defendants except Enriquez to pay [respondents], jointly and severally,
the amount of ₱1,000.00 per day from March 7, 1997 up to November 1997 representing
the unrealized income of the [respondents] when the incident transpired up to the time
the damaged Isuzu truck was repaired;
the amount of ₱100,000.00 as moral damages, plus a separate amount of ₱50,000.00 as
exemplary damages;
the amount of ₱50,000.00 as attorney’s fees; 5. Ordering the [petitioners] except
Enriquez to pay [respondents] the costs of suit.18
Displeased, petitioners appealed to the CA, which appeal was docketed as CA-G.R. CV No.
71877. After evaluating the damages awarded by the RTC, such were affirmed by the CA with
the exception of the award of unrealized income which the CA ordered deleted, viz:
WHEREFORE, premises considered, the appeal is PARTLY GRANTED. The judgment of the
Regional Trial Court of Valenzuela City, Branch 172 dated January 31, 2001, is MODIFIED, in
that the award of ₱1,000.00 per day from March 1997 up to November 1997 representing
unrealized income is DELETED. The award of ₱142,757.40 for the cost of repair of the damaged
vehicle, the award of ₱100,000.00 as moral damages, the award of ₱50,000.00 as exemplary
damages, the award of ₱50,000.00 as attorney’s fees and the costs of the suit are hereby
MAINTAINED.19
The Present Petition

Unsatisfied with the CA ruling, petitioners filed an appeal by certiorari before the Court, raising
the following issues:20
1. The court a quo has decided questions of substance in a way not in accord with law or
with the applicable decisions of the Supreme Court when it awarded:
a. Moral damages in spite of the fact that the [respondents’] cause of action is
clearly based on quasi-delict and [respondents] did not sustain physical injuries to
be entitled thereto pursuant to Article 2219 (2) of the New Civil Code and
pertinent decisions of the Supreme Court to that effect. The court a quo
erroneously concluded that the driver acted in bad faith and erroneously applied
the provision of Article 21 of the same code to justify the award for bad faith is not
consistent with quasi-delict which is founded on fault or negligence.
b. Exemplary damages in spite of the fact that there is no finding that the
vehicular accident was due to petitioner-driver’s gross negligence to be entitled
thereto pursuant to Article 2231 of the New Civil Code and pertinent decisions of
the Supreme Court to that effect. The factual basis of the court a quo that "the act
of the driver of the bus in attempting to escape after causing the accident in
wanton disregard of the consequences of his negligent act is such gross
negligence that justifies an award of exemplary damages" is an act after the fact
which is not within the contemplation of Article 2231 of the New Civil Code.
c. Attorney’s fees in spite of the fact that the assailed decisions of the trial court
and the court a quo are bereft with jurisdictions for the award of attorney’s fees
pursuant to the pertinent decisions of the Supreme Court on the matter and
provision Article 2208 of the New Civil Code. The court a quo erroneously applied
the decision of the Supreme Court in Bañas, Jr. vs. Court of Appeals, 325 SCRA
259.
The petition is partially meritorious.
Respondents anchor their claim for damages on Mendoza’s negligence, banking on Article 2176
of the Civil Code, to wit:
Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the provisions
of this Chapter.
In impleading Lim, on the other hand, respondents invoke the latter’s vicarious liability as
espoused in Article 2180 of the same Code:
The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions,
but also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business of industry.
The first question to address, then, is whether or not Mendoza’s negligence was duly proven.
Negligence is defined as the failure to observe for the protection of the interests of another
person, that degree of care, precaution and vigilance which the circumstances justly demand,
whereby such other person suffers injury.21
As found by the RTC, and affirmed by the CA, Mendoza was negligent in driving the subject
Mayamy bus, as demonstrated by the fact that, at the time of the collision, the bus intruded on
the lane intended for the Isuzu truck. Having encroached on the opposite lane, Mendoza was
clearly in violation of traffic laws. Article2185 of the Civil Code provides that unless there is proof
to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the
time of the mishap, he was violating any traffic regulation. In the case at bar, Mendoza’s violation
of traffic laws was the proximate cause of the harm.
Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without which the result would not
have occurred. And more comprehensively, the proximate legal cause is that acting first and
producing the injury, either immediately or by setting other events in motion, all constituting a
natural and continuous chain of events, each having a close causal connection with its
immediate predecessor, the final event in the chain immediately effecting the injury as a natural
and probable result of the cause which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default that an injury to some person
might probably result therefrom.22
The evidence on record shows that before the collision, the Isuzu truck was in its rightful lane,
and was even at a stop, having been flagged down by a security guard of St. Ignatius
Village.23 The mishap occurred when the Mayamy bus, travelling at a fast speed as shown by the
impact of the collision, and going in the opposite direction as that of the Isuzu truck, encroached
on the lane rightfully occupied by said Isuzu truck, and caused the latter to spin, injuring Perez,
Anla, Banca, and Repisada, and considerably damaging the Isuzu truck.
Having settled the fact of Mendoza’s negligence, then, the next question that confronts us is who
may beheld liable. According to Manresa, liability for personal acts and omissions is founded on
that indisputable principle of justice recognized by all legislations that when a person by his act or
omission causes damage or prejudice to another, a juridical relation is created by virtue of which
the injured person acquires a right to be indemnified and the person causing the damage is
charged with the corresponding duty of repairing the damage. The reason for this is found in the
obvious truth that man should subordinate his acts to the precepts of prudence and if he fails to
observe them and causes damage to another, he must repair the damage.24 His negligence
having caused the damage, Mendoza is certainly liable to repair said damage.
Additionally, Mendoza’s employer may also be held liable under the doctrine of vicarious liability
or imputed negligence. Under such doctrine, a person who has not committed the act or
omission which caused damage or injury to another may nevertheless be held civilly liable to the
latter either directly or subsidiarily under certain circumstances.25 In our jurisdiction, vicarious
liability or imputed negligence is embodied in Article 2180 of the Civil Code and the basis for
damages in the action under said article is the direct and primary negligence of the employer in
the selection or supervision, or both, of his employee.26
In the case at bar, who is deemed as Mendoza’s employer? Is it Enriquez, the actual owner of
the bus or Lim, the registered owner of the bus?
In Filcar Transport Services v. Espinas,27 we held that the registered owner is deemed the
employer of the negligent driver, and is thus vicariously liable under Article 2176, in relation to
Article 2180, of the Civil Code. Citing Equitable Leasing Corporation v. Suyom,28 the Court ruled
that in so far as third persons are concerned, the registered owner of the motor vehicle is the
employer of the negligent driver, and the actual employer is considered merely as an agent of
such owner. Thus, whether there is an employer-employee relationship between the registered
owner and the driver is irrelevant in determining the liability of the registered owner who the law
holds primarily and directly responsible for any accident, injury or death caused by the operation
of the vehicle in the streets and highways.29
As early as Erezo v. Jepte,30 the Court, speaking through Justice Alejo Labrador summarized the
justification for holding the registered owner directly liable, to wit:
x x x The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicles on the public highways,
responsibility therefore can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicle running on public highways caused accidents or injuries to pedestrians
or other vehicles without positive identification of the owner or drivers, or with very scant means
of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the interest of the determination of
persons responsible for damages or injuries caused on public highways.
"‘One of the principal purposes of motor vehicles legislation is identification of the vehicle and of
the operator, in case of accident; and another is that the knowledge that means of detection are
always available may act as a deterrent from lax observance of the law and of the rules of
conservative and safe operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it certain that the violator of the law or
of the rules of safety shall not escape because of lack of means to discover him." The purpose of
the statute is thwarted, and the displayed number becomes a "snare and delusion," if courts will
entertain such defenses as that put forward by appellee in this case. No responsible person or
corporation could be held liable for the most outrageous acts of negligence, if they should be
allowed to place a "middleman" between them and the public, and escape liability by the manner
in which they recompense their servants.31
Generally, when an injury is caused by the negligence of a servant or employee, there instantly
arises a presumption of law that there was negligence on the part of the master or employer
either in the selection of the servant or employee (culpa in eligiendo) or in the supervision over
him after the selection (culpa vigilando), or both. The presumption is juris tantum and not juris et
de jure; consequently, it may be rebutted. Accordingly, the general rule is that if the employer
shows to the satisfaction of the court that in the selection and supervision of his employee he has
exercised the care and diligence of a good father of a family, the presumption is overcome and
he is relieved of liability.32 However, with the enactment of the motor vehicle registration law, the
defenses available under Article 2180 of the Civil Code - that the employee acts beyond the
scope of his assigned task or that it exercised the due diligence of a good father of a family to
prevent damage – are no longer available to the registered owner of the motor vehicle, because
the motor vehicle registration law, to a certain extent, modified Article 2180.33
As such, there can be no other conclusion but to hold Lim vicariously liable with Mendoza.
This does not mean, however, that Lim is left without any recourse against Enriquez and
Mendoza. Under the civil law principle of unjust enrichment, the registered owner of the motor
vehicle has a right to be indemnified by the actual employer of the driver; and under Article 2181
of the Civil Code, whoever pays for the damage caused by his dependents or employees may
recover from the latter what he has paid or delivered in satisfaction of the claim.
Having identified the persons liable, our next question is what may be awarded.
Actual or Compensatory Damages. Actual or compensatory damages are those awarded in

satisfaction of, or in recompense for, loss or injury sustained. They simply make good or replace
the loss caused by the wrong.34
Article 2202 of the Civil Code provides that in crimes and quasi delicts, the defendant shall be
liable for all damages which are the natural and probable consequences of the act or omission
complained of. It is not necessary that such damages have been foreseen or could have
reasonably been foreseen by the defendant. Article 2199 of the same Code, however, sets the
limitation that, 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. As such, to
warrant an award of actual or compensatory damages, the claimant must prove that the damage
sustained is the natural and probable consequences of the negligent act and, moreover, the
claimant must adequately prove the amount of such damage.
In the case at bar, the RTC, basing on the receipts submitted by respondents and which receipts
petitioners had the opportunity to examine, found that the total repairs on the Isuzu truck
amounted to ₱142,757.40, and that the full hospitalization and medical expenses of Perez, Anla,
Banca, and Repisada amounted to ₱11,267.35. As such, these are the amounts that
respondents are entitled to as actual and compensatory damages.
Although respondents alleged in their complaint that the damage to their Isuzu truck caused
them the loss of a daily income of ₱1,000.00, such claim was not duly substantiated by any
evidence on record, and thus cannot be awarded in their favor.
Moral Damages. Moral damages are awarded to enable the injured party to obtain means,
diversions or amusements that will serve to alleviate the moral suffering he has undergone, by
reason of the defendant's culpable action.35
In prayers for moral damages, however, recovery is more an exception rather than the rule.
Moral damages are not meant to be punitive but are designed to compensate and alleviate the
physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar harm unjustly caused to a person. To be
entitled to such an award, the claimant must satisfactorily prove that he has suffered damages
and that the injury causing it has sprung from any of the cases listed in Articles 2219 and 2220 of
the Civil Code. Moreover, the damages must be shown to be the proximate result of a wrongful
act or omission. The claimant must thus establish the factual basis of the damages and its causal
tie with the acts of the defendant.36
In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched
reputation or physical, mental or psychological suffering sustained by the claimant; 2)a culpable
act or omission factually established; 3) proof that the wrongful act or omission of the defendant
is the proximate cause of the damages sustained by the claimant; and 4) the proof that the act is
predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of
the Civil Code.37
A review of the complaint and the transcript of stenographic notes yields the pronouncement that
respondents neither alleged nor offered any evidence of besmirched reputation or physical,
mental or psychological suffering incurred by them. All that Leonora and her counsel had to say
on the matter of damages other than actual or compensatory damages is this:38
Q: Did you ever spend covering attorney’s fees?
A: Yes, sir. ₱50,000.00.
Q: Aside from the actual damage that you have mentioned x x x, how much more would you like
this Court to award you by way of moral damages?
A: ₱100,000.00, sir.
Q: How about exemplary damages?

A: ₱50,000.00, sir.
Q: What happened to you, what did you feel when the defendants failed to immediately repair
your vehicle that was damaged Madam Witness?
A: I have incurred expenses and I was forced to apply for a loan, sir.
In Kierulf v. CA,39 we observed that this Court cannot remind the bench and the bar often enough
that in order that moral damages may be awarded, there must be pleading and proof of moral
suffering, mental anguish, fright and the like. Citing Francisco v. GSIS,40 the Court held that there
must be clear testimony on the anguish and other forms of mental suffering. Thus, if the plaintiff
fails to take the witness stand and testify as to his social humiliation, wounded feelings and
anxiety, moral damages cannot be awarded.
Moreover, respondents were not able to show that their claim properly falls under Articles 2219
and 2220 of the Civil Code. Respondents cannot rely on Article 2219 (2) of the Civil Code which
allows moral damages in quasi-delicts causing physical injuries because in physical injuries,
moral damages are recoverable only by the injured party,41 and in the case at bar, herein
respondents were not the ones who were actually injured.
In B.F. Metal (Corp.) v. Sps. Lomotan, et al.,42 the Court, in a claim for damages based on quasi-
delict causing physical injuries, similarly disallowed an award of moral damages to the owners of
the damaged vehicle, when neither of them figured in the accident and sustained injuries.
Neither can respondents rely on Article 21 of the Civil Code as the RTC erroneously did. Article
21 deals with acts contra bonus mores, and has the following elements: (1) There is an act which
is legal; (2) but which is contrary to morals, good custom, public order, or public policy; (3) and it
is done with intent to injure.43 In the present case, it can hardly be said that Mendoza’s negligent
driving and violation of traffic laws are legal acts. Moreover, it was not proven that Mendoza
intended to injure Perez, et al. Thus, Article 21 finds no application to the case at bar. All in all,
we find that the RTC and the CA erred in granting moral damages to respondents. Exemplary
Damages. Article 2229 of the Civil Code provides that exemplary or corrective damages are
imposed, by way of example or correction for the public good, in addition to moral, temperate,
liquidated or compensatory damages. Article 2231 of the same Code further states that in quasi-
delicts, exemplary damages may be granted if the defendant acted with gross negligence.
Our jurisprudence sets certain conditions when exemplary damages may be awarded: First, they
may be imposed by way of example or correction only in addition, among others, to
compensatory damages, and cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be awarded to the claimant.
Second, the claimant must first establish his right to moral, temperate, liquidated or
compensatory damages. Third, the wrongful act must be accompanied by bad faith, and the
award would be allowed only if the guilty party acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.44
In motor vehicle accident cases, exemplary damages may be awarded where the defendant’s
misconduct is so flagrant as to transcend simple negligence and be tantamount to positive or
affirmative misconduct rather than passive or negative misconduct. In characterizing the requisite
positive misconduct which will support a claim for punitive damages, the courts have used such
descriptive terms as willful, wanton, grossly negligent, reckless, or malicious, either alone or in
combination.45
Gross negligence is the absence of care or diligence as to amount to a reckless disregard of the
safety of persons or property. It evinces a thoughtless disregard of consequences without
exerting any effort to avoid them.46
In the case at bar, having established respondents’ right to compensatory damages, exemplary
damages are also in order, given the fact that Mendoza was grossly negligent in driving the
Mayamy bus. His act of intruding or encroaching on the lane rightfully occupied by the Isuzu
truck shows his reckless disregard for safety.
In Baño v. Bachelor Express, Inc., et al.,47 where an erring bus, in the process of overtaking a
jeepney, also encroached on the opposite lane, and consequently collided with a dump truck, the
Court held the driver of the bus grossly negligent and affirmed the award of exemplary damages.
Attorney’s Fees. Article 2208 of the Civil Code enumerates the instances when attorney’s fees
may be recovered:
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;
(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 valid 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;
(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.
From the very opening sentence of Article 2208 of the Civil Code, it is clearly intended to retain
the award of attorney’s fees as the exception in our law, as the general rule remains that
attorney’s fees are not recoverable in the absence of a stipulation thereto, the reason being that
it is not sound policy to set a premium on the right to litigate.48
As such, in Spouses Agustin v. CA,49 we held that, the award of attorney’s fees being an
exception rather than the general rule, it is necessary for the court to make findings of facts and
law that would bring the case within the exception and justify the grant of such award. Thus, the
reason for the award of attorney’s fees must be stated in the text of the court’s decision;
otherwise, if it is stated only in the dispositive portion of the decision, the same must be
disallowed on appeal.
In the case at bar, the RTC Decision had nil discussion on the propriety of attorney’s fees, and it
merely awarded such in the dispositive. The CA Decision, on the other hand, merely stated that
the award of attorney’s fees is merited as such is allowed when exemplary damages are
awarded.50 Following established jurisprudence,51however, the CA should have disallowed on
appeal said award of attorney’s fees as the RTC failed to substantiate said award. Costs of suit.
The Rules of Court provide that, generally, costs shall be allowed to the prevailing party as a
matter of course, thus:52
Section 1. Costs ordinarily follow results of suit.- Unless otherwise provided in these rules, costs
shall be allowed to the prevailing party as a matter of course, but the court shall have power, for
special reasons, to adjudge that either party shall pay the costs of an action, or that the same be
divided, as may be equitable. No costs shall be allowed against the Republic of the Philippines,
unless otherwise provided by law.
In the present case, the award of costs of suit to respondents, as the prevailing party, is in order.
Interests. Interest by way of damages has been defined as interest allowed in actions for breach
1âw phi 1
of contractor tort for the unlawful detention of money already due. This type of interest is
frequently called "moratory interest." Interest as a part of damage, is allowed, not by application
of arbitrary rules, but as a result of the justice of the individual case and as compensation to the
injured party.53
The legal provision on interests in quasi-delicts is Article 2211 of the Civil Code which provides
that in crimes and quasi-delicts, interest as part of the damage, may, in a proper case, be
adjudicated in the discretion of the court.
Generally, interest is allowed as a matter of right for failure to pay liquidated claims when
due.54 For unliquidated claims, however, Article 2213 of the Civil Code provides that interest
cannot be recovered upon unliquidated claims or damages, except when the demand can be
established with reasonable certainty.
In the case at bar, although the award of exemplary damages is unliquidated in the sense that
petitioners cannot know for sure, before judgment, the exact amount that they are required to pay
to respondents, the award of actual or compensatory damages, however, such as the truck
repairs and medical expenses, is arguably liquidated in that they can be measured against a
reasonably certain standard.55 Moreover, justice would seem to require that the delay in paying
for past losses which can be made reasonably certain should be compensated through an award
of interest.56
WHEREFORE, premises considered, the Court Resolves to PARTIALLY GRANT the appeal by
certiorari, as follows:
1) DECLARE Mariano Mendoza and Elvira Lim solidarily liable to respondent Spouses
Leonora and Gabriel Gomez;
2) MAINTAIN the award of actual or compensatory damages in the amount of

₱142,757.40 for the repair of the Isuzu Elf truck, with legal interest beginning 31 January
2001 until fully paid;
3) GRANT additional actual or compensatory damages in the amount of ₱11,267.35 for

the medical expenses shouldered by respondent Spouses Leonora and Gabriel Gomez,
with legal interest beginning 31 January 2001 until fully paid;
4) DELETE the award of moral damages;
5) MAINTAIN the award of exemplary damages at ₱50,000.00;

6) DELETE the award of attorney's fees; and
7) MAINTAIN the award of costs of suit.
SO ORDERED.
G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner,

vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.
Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.
Zapa Law Office for private respondent.
VITUG, J.:
The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on
a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the
arrastre operator and the customs broker; (b) whether the payment of legal interest on an award
for loss or damage is to be computed from the time the complaint is filed or from the date the
decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to
above, is twelve percent (12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and
undisputed facts that have led to the controversy are hereunder reproduced:
This is an action against defendants shipping company, arrastre operator and

broker-forwarder for damages sustained by a shipment while in defendants'
custody, filed by the insurer-subrogee who paid the consignee the value of such
losses/damages.
On December 4, 1981, two fiber drums of riboflavin were shipped from

Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by
defendant Eastern Shipping Lines under Bill of Lading
No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance
Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged
unto the custody of defendant Metro Port Service, Inc. The latter excepted to one
drum, said to be in bad order, which damage was unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation received the

shipment from defendant Metro Port Service, Inc., one drum opened and without
seal (per "Request for Bad Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage Corporation made

deliveries of the shipment to the consignee's warehouse. The latter excepted to
one drum which contained spillages, while the rest of the contents was
adulterated/fake (per "Bad Order Waybill" No. 10649, Exh. E).
Plaintiff contended that due to the losses/damage sustained by said drum, the
consignee suffered losses totaling P19,032.95, due to the fault and negligence of
defendants. Claims were presented against defendants who failed and refused to
pay the same (Exhs. H, I, J, K, L).
As a consequence of the losses sustained, plaintiff was compelled to pay the

consignee P19,032.95 under the aforestated marine insurance policy, so that it
became subrogated to all the rights of action of said consignee against
defendants (per "Form of Subrogation", "Release" and Philbanking check, Exhs.
M, N, and O). (pp. 85-86, Rollo.)
There were, to be sure, other factual issues that confronted both courts. Here, the appellate court
said:
Defendants filed their respective answers, traversing the material allegations of

the complaint contending that: As for defendant Eastern Shipping it alleged that
the shipment was discharged in good order from the vessel unto the custody of
Metro Port Service so that any damage/losses incurred after the shipment was
incurred after the shipment was turned over to the latter, is no longer its liability
(p. 17, Record); Metroport averred that although subject shipment was
discharged unto its custody, portion of the same was already in bad order (p. 11,
Record); Allied Brokerage alleged that plaintiff has no cause of action against it,
not having negligent or at fault for the shipment was already in damage and bad
order condition when received by it, but nonetheless, it still exercised extra
ordinary care and diligence in the handling/delivery of the cargo to consignee in
the same condition shipment was received by it.
From the evidence the court found the following:
The issues are:
1. Whether or not the shipment sustained losses/damages;
2. Whether or not these losses/damages were sustained while in

the custody of defendants (in whose respective custody, if
determinable);
3. Whether or not defendant(s) should be held liable for the

losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34;
Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38).
As to the first issue, there can be no doubt that the shipment

sustained losses/damages. The two drums were shipped in good
order and condition, as clearly shown by the Bill of Lading and
Commercial Invoice which do not indicate any damages drum that
was shipped (Exhs. B and C). But when on December 12, 1981
the shipment was delivered to defendant Metro Port Service, Inc.,
it excepted to one drum in bad order.
Correspondingly, as to the second issue, it follows that the

losses/damages were sustained while in the respective and/or
successive custody and possession of defendants carrier
(Eastern), arrastre operator (Metro Port) and broker (Allied
Brokerage). This becomes evident when the Marine Cargo
Survey Report (Exh. G), with its "Additional Survey Notes", are
considered. In the latter notes, it is stated that when the shipment
was "landed on vessel" to dock of Pier # 15, South Harbor, Manila
on December 12, 1981, it was observed that "one (1) fiber drum
(was) in damaged condition, covered by the vessel's Agent's Bad
Order Tally Sheet No. 86427." The report further states that when
defendant Allied Brokerage withdrew the shipment from
defendant arrastre operator's custody on January 7, 1982, one
drum was found opened without seal, cello bag partly torn but
contents intact. Net unrecovered spillages was
15 kgs. The report went on to state that when the drums reached
the consignee, one drum was found with adulterated/faked
contents. It is obvious, therefore, that these losses/damages
occurred before the shipment reached the consignee while under
the successive custodies of defendants. Under Art. 1737 of the
New Civil Code, the common carrier's duty to observe
extraordinary diligence in the vigilance of goods remains in full
force and effect even if the goods are temporarily unloaded and
stored in transit in the warehouse of the carrier at the place of
destination, until the consignee has been advised and has had
reasonable opportunity to remove or dispose of the goods (Art.
1738, NCC). Defendant Eastern Shipping's own exhibit, the
"Turn-Over Survey of Bad Order Cargoes" (Exhs. 3-Eastern)
states that on December 12, 1981 one drum was found "open".
and thus held:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby

rendered:
A. Ordering defendants to pay plaintiff, jointly and severally:
1. The amount of P19,032.95, with the present legal interest of

12% per annum from October 1, 1982, the date of filing of this
complaints, until fully paid (the liability of defendant Eastern
Shipping, Inc. shall not exceed US$500 per case or the CIF value
of the loss, whichever is lesser, while the liability of defendant
Metro Port Service, Inc. shall be to the extent of the actual invoice
value of each package, crate box or container in no case to
exceed P5,000.00 each, pursuant to Section 6.01 of the
Management Contract);
2. P3,000.00 as attorney's fees, and
3. Costs.
B. Dismissing the counterclaims and crossclaim of

defendant/cross-claimant Allied Brokerage
Corporation.
SO ORDERED. (p. 207, Record).
Dissatisfied, defendant's recourse to US.
The appeal is devoid of merit.
After a careful scrutiny of the evidence on record. We find that the conclusion
drawn therefrom is correct. As there is sufficient evidence that the shipment
sustained damage while in the successive possession of appellants, and
therefore they are liable to the appellee, as subrogee for the amount it paid to the
consignee. (pp. 87-89, Rollo.)
The Court of Appeals thus affirmed in toto the judgment of the court
a quo.
In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave
abuse of discretion on the part of the appellate court when —
I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH

THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF
PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE

RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF
THE COMPLAINT AT THE RATE OF TWELVE PERCENT PER
ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF THE TRIAL
COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE
RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED.
The petition is, in part, granted.
In this decision, we have begun by saying that the questions raised by petitioner carrier are not
all that novel. Indeed, we do have a fairly good number of previous decisions this Court can
merely tack to.
The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from
the time the articles are surrendered to or unconditionally placed in the possession of, and
received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time
for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon
vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). When
the goods shipped either are lost or arrive in damaged condition, a presumption arises against
the carrier of its failure to observe that diligence, and there need not be an express finding of
negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of
Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of
course, exceptional cases when such presumption of fault is not observed but these cases,
enumerated in Article 17341 of the Civil Code, are exclusive, not one of which can be applied to
this case.
The question of charging both the carrier and the arrastre operator with the obligation of properly
delivering the goods to the consignee has, too, been passed upon by the Court. In Fireman's
Fund Insurance vs. Metro Port Services(182 SCRA 455), we have explained, in holding the
carrier and the arrastre operator liable in solidum, thus:
The legal relationship between the consignee and the arrastre operator is akin to
that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19
SCRA 5 [1967]. The relationship between the consignee and the common carrier
is similar to that of the consignee and the arrastre operator (Northern Motors, Inc.
v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE
to take good care of the goods that are in its custody and to deliver them in good
condition to the consignee, such responsibility also devolves upon the CARRIER.
Both the ARRASTRE and the CARRIER are therefore charged with the obligation
to deliver the goods in good condition to the consignee.
We do not, of course, imply by the above pronouncement that the arrastre operator and the
customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-
versa, nor that attendant facts in a given case may not vary the rule. The instant petition has
been brought solely by Eastern Shipping Lines, which, being the carrier and not having been
able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A
factual finding of both the court a quo and the appellate court, we take note, is that "there is
sufficient evidence that the shipment sustained damage while in the successive possession of
appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern
Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are
others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court that deserves more than just
a passing remark.
Let us first see a chronological recitation of the major rulings of this Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service,2 decided3 on 15 May 1969, involved a suit for recovery of money arising out of short
deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the
lower court) averred in its complaint that the total amount of its claim for the value of the
undelivered goods amounted to P3,947.20. This demand, however, was neither established in its
totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in lieu
of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment ordering
the appellants (defendants) Manila Port Service and Manila Railroad Company to pay appellee
Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the complaint
was filed on 28 December 1962 until full payment thereof. The appellants then assailed, inter
alia, the award of legal interest. In sustaining the appellants, this Court ruled:
Interest upon an obligation which calls for the payment of money, absent a
stipulation, is the legal rate. Such interest normally is allowable from the date of
demand, judicial or extrajudicial. The trial court opted for judicial demand as the
starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be
recovered upon unliquidated claims or damages, except when the demand can
be established with reasonable certainty." And as was held by this Court
in Rivera vs. Perez,4 L-6998, February 29, 1956, if the suit were for
damages, "unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos,
25 Phil. 447; Lichauco v. Guzman,
38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis
supplied)
The case of Reformina vs. Tomol,5 rendered on 11 October 1985, was for "Recovery of Damages
for Injury to Person and Loss of Property." After trial, the lower court decreed:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third

party defendants and against the defendants and third party plaintiffs as follows:
Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to
pay jointly and severally the following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of

P131,084.00 which is the value of the boat F B Pacita III together with its
accessories, fishing gear and equipment minus P80,000.00 which is the value of
the insurance recovered and the amount of P10,000.00 a month as the estimated
monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time
they are actually paid or already the total sum of P370,000.00 as of June 4, 1972
with legal interest from the filing of the complaint until paid and to pay attorney's
fees of P5,000.00 with costs against defendants and third party plaintiffs.
(Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the amount of damages awarded
but sustained the trial court in adjudging legal interest from the filing of the complaint until
fully paid. When the appellate court's decision became final, the case was remanded to
the lower court for execution, and this was when the trial court issued its assailed
resolution which applied the 6% interest per annum prescribed in Article 2209 of the Civil
Code. In their petition for review on certiorari, the petitioners contended that Central Bank
Circular
No. 416, providing thus —
By virtue of the authority granted to it under Section 1 of Act 2655, as amended,

Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed
that the rate of interest for the loan, or forbearance of any money, goods, or
credits and the rate allowed in judgments, in the absence of express contract as
to such rate of interest, shall be twelve (12%) percent per annum. This Circular
shall take effect immediately. (Emphasis found in the text) —
should have, instead, been applied. This Court6 ruled:
The judgments spoken of and referred to are judgments in litigations involving

loans or forbearance of any money, goods or credits. Any other kind of monetary
judgment which has nothing to do with, nor involving loans or forbearance of any
money, goods or credits does not fall within the coverage of the said law for it is
not within the ambit of the authority granted to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to be executed is one
rendered in an Action for Damages for injury to persons and loss of property and
does not involve any loan, much less forbearances of any money, goods or
credits. As correctly argued by the private respondents, the law applicable to the
said case is Article 2209 of the New Civil Code which reads —
Art. 2209. — If the obligation consists in the payment of a sum of

money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the
payment of interest agreed upon, and in the absence of
stipulation, the legal interest which is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz,7 promulgated on 28
July 1986. The case was for damages occasioned by an injury to person and loss of property.
The trial court awarded private respondent Pedro Manabat actual and compensatory damages in
the amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully
paid. Relying on the Reformina v. Tomol case, this Court8 modified the interest award from 12%
to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the
complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals,9 the trial court, in an action for the recovery of damages
arising from the collapse of a building, ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from November
29, 1968, the date of the filing of the complaint until full payment . . . ." Save from the
modification of the amount granted by the lower court, the Court of Appeals sustained the trial
court's decision. When taken to this Court for review, the case, on 03 October 1986, was
decided, thus:
WHEREFORE, the decision appealed from is hereby MODIFIED and considering
the special and environmental circumstances of this case, we deem it reasonable
to render a decision imposing, as We do hereby impose, upon the defendant and
the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art.
1723, Civil Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages (with the exception to attorney's
fees) occasioned by the loss of the building (including interest charges and lost
rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as
and for attorney's fees, the total sum being payable upon the finality of this
decision. Upon failure to pay on such finality, twelve (12%) per cent interest per
annum shall be imposed upon aforementioned amounts from finality until paid.
Solidary costs against the defendant and third-party defendants (Except Roman
Ozaeta). (Emphasis supplied)
A motion for reconsideration was filed by United Construction, contending that "the
interest of twelve (12%) per cent per annum imposed on the total amount of the monetary
award was in contravention of law." The Court10 ruled out the applicability of the
Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it
explained:
There should be no dispute that the imposition of 12% interest pursuant to

Central Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2)
forbearance of any money, goods or credit; and
(3) rate allowed in judgments (judgments spoken of refer to judgments involving
loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus
Lines Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139
SCRA 260 [1985]). It is true that in the instant case, there is neither a loan or a
forbearance, but then no interest is actually imposed provided the sums referred
to in the judgment are paid upon the finality of the judgment. It is delay in the
payment of such final judgment, that will cause the imposition of the interest.
It will be noted that in the cases already adverted to, the rate of interest is
imposed on the total sum, from the filing of the complaint until paid; in other
words, as part of the judgment for damages. Clearly, they are not applicable to
the instant case. (Emphasis supplied.)
The subsequent case of American Express International, Inc., vs. Intermediate Appellate
Court11 was a petition for review on certiorari from the decision, dated 27 February 1985, of the
then Intermediate Appellate Court reducing the amount of moral and exemplary damages
awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and its resolution,
dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e.,
P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest thereon
at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09 November
1988, this Court, while recognizing the right of the private respondent to recover damages, held
the award, however, for moral damages by the trial court, later sustained by the IAC, to be
inconceivably large. The Court12 thus set aside the decision of the appellate court and rendered a
new one, "ordering the petitioner to pay private respondent the sum of One Hundred Thousand
(P100,000.00) Pesos as moral damages, with
six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis
supplied)
Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz13 which arose
from a breach of employment contract. For having been illegally dismissed, the petitioner was
awarded by the trial court moral and exemplary damages without, however, providing any legal
interest thereon. When the decision was appealed to the Court of Appeals, the latter held:
WHEREFORE, except as modified hereinabove the decision of the CFI of Negros
Oriental dated October 31, 1972 is affirmed in all respects, with the modification
that defendants-appellants, except defendant-appellant Merton Munn, are
ordered to pay, jointly and severally, the amounts stated in the dispositive portion
of the decision, including the sum of P1,400.00 in concept of compensatory
damages, with interest at the legal rate from the date of the filing of the complaint
until fully paid (Emphasis supplied.)
The petition for review to this Court was denied. The records were thereupon transmitted
to the trial court, and an entry of judgment was made. The writ of execution issued by the
trial court directed that only compensatory damages should earn interest at 6% per
annum from the date of the filing of the complaint. Ascribing grave abuse of discretion on
the part of the trial judge, a petition for certiorari assailed the said order. This Court said:
. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at
the legal rate" from the time of the filing of the complaint. . . Said circular [Central
Bank Circular No. 416] does not apply to actions based on a breach of
employment contract like the case at bar. (Emphasis supplied)
The Court reiterated that the 6% interest per annum on the damages should be
computed from the time the complaint was filed until the amount is fully paid.
Quite recently, the Court had another occasion to rule on the matter. National Power Corporation
vs. Angas,14decided on 08 May 1992, involved the expropriation of certain parcels of land. After
conducting a hearing on the complaints for eminent domain, the trial court ordered the petitioner
to pay the private respondents certain sums of money as just compensation for their lands so
expropriated "with legal interest thereon . . . until fully paid." Again, in applying the 6% legal
interest per annum under the Civil Code, the Court15 declared:
. . . , (T)he transaction involved is clearly not a loan or forbearance of money,

goods or credits but expropriation of certain parcels of land for a public purpose,
the payment of which is without stipulation regarding interest, and the interest
adjudged by the trial court is in the nature of indemnity for damages. The legal
interest required to be paid on the amount of just compensation for the properties
expropriated is manifestly in the form of indemnity for damages for the delay in
the payment thereof. Therefore, since the kind of interest involved in the joint
judgment of the lower court sought to be enforced in this case is interest by way
of damages, and not by way of earnings from loans, etc. Art. 2209 of the Civil
Code shall apply.
Concededly, there have been seeming variances in the above holdings. The cases can perhaps
be classified into two groups according to the similarity of the issues involved and the
corresponding rulings rendered by the court. The "first group" would consist of the cases
of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz (1986), Florendo
v. Ruiz (1989)
and National Power Corporation v. Angas (1992). In the "second group" would be Malayan
Insurance Company v.Manila Port Service (1969), Nakpil and Sons v. Court of
Appeals (1988), and American Express International v.Intermediate Appellate Court (1988).
In the "first group", the basic issue focuses on the application of either the 6% (under the Civil
Code) or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in
these cases that there has been a consistent holding that the Central Bank Circular imposing the
12% interest per annum applies only to loans or forbearance16 of money, goods or credits, as well
as to judgments involving such loan or forbearance of money, goods or credits, and that the 6%
interest under the Civil Code governs when the transaction involves the payment of indemnities
in the concept of damage arising from the breach or a delay in the performance of obligations in
general. Observe, too, that in these cases, a common time frame in the computation of the 6%
interest per annum has been applied, i.e., from the time the complaint is filed until the adjudged
amount is fully paid.
The "second group", did not alter the pronounced rule on the application of the 6% or 12%
interest per annum,17depending on whether or not the amount involved is a loan or forbearance,
on the one hand, or one of indemnity for damage, on the other hand. Unlike, however, the "first
group" which remained consistent in holding that the running of the legal interest should be from
the time of the filing of the complaint until fully paid, the "second group" varied on the
commencement of the running of the legal interest.
Malayan held that the amount awarded should bear legal interest from the date of the decision of
the court a quo,explaining that "if the suit were for damages, 'unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof,' then, interest 'should
be from the date of the decision.'" American Express International v. IAC, introduced a different
time frame for reckoning the 6% interest by ordering it to be "computed from the finality of (the)
decision until paid." The Nakpil and Sons case ruled that 12% interest per annum should be
imposed from the finality of the decision until the judgment amount is paid.
The ostensible discord is not difficult to explain. The factual circumstances may have called for
different applications, guided by the rule that the courts are vested with discretion, depending on
the equities of each case, on the award of interest. Nonetheless, it may not be unwise, by way of
clarification and reconciliation, to suggest the following rules of thumb for future guidance.
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts18 is breached, the contravenor can be held liable for damages.19 The provisions
under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages.20
II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing.21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded.22 In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 116923 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 court24 at the rate of
6% per annum.25 No interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable certainty.26 Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the quantification
of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.
WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the
MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due
computed from the decision, dated
03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX
PERCENT (6%), shall be imposed on such amount upon finality of this decision until the
payment thereof.
SO ORDERED
G.R. No. 190957 June 5, 2013
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner,

vs.
APAC MARKETING CORPORATION, represented by CESAR M. ONG, JR., Respondents.
DECISION
SERRENO, CJ.:
In this Petition for Review on Certiorari under Rule 45 of the Revised Rules on Civil Procedures,
the primordial issue to be resolved is whether the Court of Appeals (CA)1 correctly affirmed the
court a quo2 in holding petitioner liable to respondent for attorney’s fees.
The Antecedent Facts
Considering that there are no factual issues involved, as the Court of Appeals (CA) adopted the
findings of fact of the Regional Trial Court (RTC) of Quezon City, Branch 96, we hereby adopt
the CA’s findings, as follows:
The present case involves a simple purchase transaction between defendant-appellant Philippine
National Construction Corporation (PNCC), represented by defendants-appellants Rogelio
Espiritu and Rolando Macasaet, and plaintiff-appellee APAC, represented by Cesar M. Ong, Jr.,
involving crushed basalt rock delivered by plaintiff-appellee to defendant-appellant PNCC.
On August 17, 1999, plaintiff-appellee filed with the trial court a complaint against defendants-
appellees for collection of sum of money with damages, alleging that (i) in March 1998,
defendants-appellants engaged the services of plaintiff-appellee by buying aggregates materials
from plaintiff-appellee, for which the latter had delivered and supplied good quality crushed basalt
rock; (ii) the parties had initially agreed on the terms of payment, whereby defendants-appellants
would issue the check corresponding to the value of the materials to be delivered, or "Check
Before Delivery," but prior to the implementation of the said payment agreement, defendants-
appellants requested from plaintiff-appellee a 30-day term from the delivery date within which to
pay, which plaintiff-appellee accepted; and (iii) after making deliveries pursuant to the purchase
orders and despite demands by plaintiff-appellee, defendants appellants failed and refused to
pay and settle their overdue accounts. The complaint prayed for payment of the amount of
₱782,296.80 "plus legal interest at the rate of not less than 6% monthly, to start in April, 1999
until the full obligation is completely settled and paid," among others.
On November 16, 1999, defendants-appellants filed a motion to dismiss, alleging that the
complaint was premature considering that defendant-appellant PNCC had been faithfully paying
its obligations to plaintiff-appellee, as can be seen from the substantial reduction of its overdue
account as of August 1999.
In an Order dated January 17, 2000, the trial court denied the motion to dismiss. Thus,
defendants-appellants filed their answer, alleging that the obligation of defendant-appellant
PNCC was only with respect to the balance of the principal obligation that had not been fully paid
which, based on the latest liquidation report, amounted to only ₱474,095.92.
After the submission of the respective pre-trial briefs of the parties, trial was held. However, only
plaintiff-appellee presented its evidence. For their repeated failure to attend the hearings,
defendants-appellants were deemed to have waived the presentation of their evidence.
On July 10, 2006, the trial court rendered a Decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff, ordering defendants jointly
and solidarily to pay:
1. ₱782,296.80 as actual damages;
2. ₱50,000.00 as attorney’s fees, plus ₱3,000.00 per court appearance;
3. Cost of suit.
SO ORDERED.
Defendants-appellants filed a motion for reconsideration, alleging that during the pendency of the
case, the principal obligation was fully paid and hence, the award by the trial court of actual
damages in the amount of ₱782,269.80 was without factual and legal bases.
In an Order dated October 6, 2006, the trial court considered defendants-appellants’ claim of full
payment of the principal obligation, but still it ordered them to pay legal interest of twelve per cent
(12%) per annum. Thus:
"WHEREFORE, the decision dated July 10, 2006 is hereby modified, by ordering defendants
jointly and solidarily to pay plaintiff as follows, to wit:
1. ₱220,234.083
2. ₱50,000.00 as attorney’s fees, plus ₱3,000.00 per court appearance;
3. Cost of Suit.
SO ORDERED."
Defendants-appellants filed the present appeal which is premised on the following assignment of
errors:
I. THE REGIONAL TRIAL COURT GRAVELY ERRED IN AWARDING INTEREST AT THE

RATE OF 12% PER ANNUM AMOUNTING TO ₱220,234.083 AND ATTORNEY’S FEES IN
FAVOR OF PLAINTIFF-APPELLEE.
II. THE REGIONAL TRIAL COURT GRAVELY ERRED IN HOLDING DEFENDANTS ROGELIO
ESPIRITU AND ROLANDO MACASAET JOINTLY AND SOLIDARILY LIABLE WITH
DEFENDANT PNCC.
THE RULING OF THE COURT OF APPEALS
On 9 July 2009, the Special Fourth Division of the CA promulgated a Decision3 in CA-G.R. CV
No. 88827, affirming with modification the assailed Decision of the court a quo. The dispositive
portion of the CA Decision reads as follows:
WHEREFORE, the appealed Order dated October 6, 2006 is affirmed, subject to the modification
that defendant-appellant PNCC is ordered to pay legal interest at six per cent (6%) per annum on
the principal obligation, computed from January 8, 1999 until its full payment in January 2001.
Defendants-appellants Rogelio Espiritu and Rolando Macasaet are absolved from liability. The
Order dated October 6, 2006 is affirmed in all other respects.
On 29 July 2009, herein petitioner filed a Motion for Reconsideration, which raised the lone issue
of the propriety of the award of attorney’s fees in favor of respondent.4 It should be noted that in
said motion, petitioner fully agreed with the CA Decision imposing 6% legal interest per annum
on the principal obligation and absolving Rogelio Espiritu and Rolando Macasaet from any
liability as members of the board of directors of PNCC. Thus, the main focus of the Motion for
Reconsideration was on the CA’s affirmation of the court a quo’s Decision awarding attorney’s
fees in favor of respondent. However, the appellate court’s Former Special Fourth Division
denied petitioner’s Motion for Reconsideration in a Resolution dated 18 January 2010.6
THE SOLE ISSUE
Aggrieved, petitioner now assails before us the 9 July 2009 Decision of the CA by raising the
sole issue of whether the CA gravely erred in awarding attorney’s fees to respondent.
THE COURT’S RULING
The Petition is impressed with merit.
Article 2208 of the New Civil Code of the Philippines states the policy that should guide the
courts when awarding attorney’s fees to a litigant. As a general rule, the parties may stipulate the
recovery of attorney’s fees. In the absence on such stipulation, this article restrictively
enumerates the instances when these fees may be recovered, to wit:
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim;
workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(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.
In ABS-CBN Broadcasting Corp. v. CA,7 this Court had the occasion to expound on the policy
behind the grant of attorney’s fees as actual or compensatory damages:
(T)he law is clear that in the absence of stipulation, attorney’s fees may be recovered as actual
or compensatory damages under any of the circumstances provided for in Article 2208 of the
Civil Code.
The general rule is that attorney’s fees cannot be recovered as part of damages because of the
policy that no premium should be placed on the right to litigate. They are not to be awarded every
time a party wins a suit. The power of the court to award attorney’s fees under Article 2208
demands factual, legal, and equitable justification. Even when a claimant is compelled to litigate
with third persons or to incur expenses to protect his rights, still attorney’s fees may not be
awarded where no sufficient showing of bad faith could be reflected in a party’s persistence in a
case other than an erroneous conviction of the righteousness of his cause.
In Benedicto v. Villaflores,8 we explained the reason behind the need for the courts to arrive upon
an actual finding to serve as basis for a grant of attorney’s fees, considering the dual concept of
these fees as ordinary and extraordinary:
It is settled that the award of attorney's fees is the exception rather than the general rule;
counsel's fees are not awarded every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate. Attorney's fees, as part of damages, are not
necessarily equated to the amount paid by a litigant to a lawyer. In the ordinary sense, attorney's
fees represent the reasonable compensation paid to a lawyer by his client for the legal services
he has rendered to the latter; while in its extraordinary concept, they may be awarded by the
court as indemnity for damages to be paid by the losing party to the prevailing party. Attorney's
fees as part of damages are awarded only in the instances specified in Article 2208 of the Civil
Code. As such, it is necessary for the court to make findings of fact and law that would bring the
case within the ambit of these enumerated instances to justify the grant of such award, and in all
cases it must be reasonable.
We can glean from the above ruling that attorney’s fees are not awarded as a matter of course
every time a party wins. We do not put a premium on the right to litigate. On occasions that those
fees are awarded, the basis for the grant must be clearly expressed in the decision of the court. 1âwphi1
Petitioner contends that the RTC’s Decision has no finding that would fall under any of the
exceptions enumerated in Article 2208 of the new Civil Code. Further, it alleges that the court a
quo has not given any factual, legal, or equitable justification for applying paragraph 11 of Article
2208 as basis the latter’s exercise of discretion in holding petitioner liable for attorney’s fees.9
We agree with petitioner on these points.
We have consistently held that an award of attorney’s fees under Article 2208 demands factual,
legal, and equitable justification to avoid speculation and conjecture surrounding the grant
thereof.10 Due to the special nature of the award of attorney’s fees, a rigid standard is imposed
on the courts before these fees could be granted. Hence, it is imperative that they clearly and
distinctly set forth in their decisions the basis for the award thereof. It is not enough that they
merely state the amount of the grant in the dispositive portion of their decisions.11 It bears
reiteration that the award of attorney’s fees is an exception rather than the general rule; thus,
there must be compelling legal reason to bring the case within the exceptions provided under
Article 2208 of the Civil Code to justify the award.12
We have perused the assailed CA’s Decision, but cannot find any factual, legal, or equitable
justification for the award of attorney’s fees in favor of respondent. The appellate court simply
quoted the portion of the RTC Decision that granted the award as basis for the affirmation
thereof. There was no elaboration on the basis. There is therefore an absence of an independent
CA finding of the factual circumstances and legal or equitable basis to justify the grant of
attorney’s fees. The CA merely adopted the RTC’s rational for the award, which in this case we
find to be sorely inadequate.
The RTC found as follows:
x x x since it is clear that plaintiff was compelled to hire the services of a counsel, to litigate and
to protect his interest by reason of an unjustified act of the other party, plaintiff is entitled to
recover attorney’s fees in the amount of ₱50,000.00 which it paid as acceptance fee and
₱3,000.00 as appearance fee.13
The only discernible reason proffered by the trial court in granting the award was that
respondent, as complainant in the civil case, was forced to litigate to protect the latter’s interest.
Thus, we find that there is an obvious lack of a compelling legal reason to consider the present
case as one that falls within the exception provided under Article 2208 of the Civil Code. Absent
such finding, we hold that the award of attorney’s fees by the court a quo, as sustained by the
appellate court, was improper and must be deleted.
WHEREFORE, the foregoing Petition is GRANTED. The assailed Decision dated 9 July 2009 of
the Court of Appeals in CA-G.R. CV No. 88827 is MODIFIED, in that the award of attorney’s fees
in the amount of ₱50,000 as acceptance fee and ₱3,000 as appearance fee, in favor of
respondent APAC Marketing Incorporated, is hereby DELETED.
No pronouncement as to costs.
SO ORDERED
G.R. No. 146918 May 2, 2006
CITIBANK, N.A., Petitioner,

vs.
SPS. LUIS and CARMELITA CABAMONGAN and their sons LUISCABAMONGAN, JR. and
LITO CABAMONGAN, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari of the Decision1 dated January 26, 2001 and
the Resolution2dated July 30, 2001 of the Court of Appeals (CA) in CA-G.R. CV No. 59033.
The factual background of the case is as follows:
On August 16, 1993, spouses Luis and Carmelita Cabamongan opened a joint "and/or" foreign
currency time deposit in trust for their sons Luis, Jr. and Lito at the Citibank, N.A., Makati branch,
with Reference No. 60-22214372, in the amount of $55,216.69 for a term of 182 days or until
February 14, 1994, at 2.5625 per cent interest per annum.3Prior to maturity, or on November 10,
1993, a person claiming to be Carmelita went to the Makati branch and pre-terminated the said
foreign currency time deposit by presenting a passport, a Bank of America Versatele Card, an
ATM card and a Mabuhay Credit Card.4 She filled up the necessary forms for pre-termination of
deposits with the assistance of Account Officer Yeye San Pedro. While the transaction was being
processed, she was casually interviewed by San Pedro about her personal circumstances and
investment plans.5 Since the said person failed to surrender the original Certificate of Deposit,
she had to execute a notarized release and waiver document in favor of Citibank, pursuant to
Citibank's internal procedure, before the money was released to her.6 The release and waiver
document7 was not notarized on that same day but the money was nonetheless given to the
person withdrawing.8The transaction lasted for about 40 minutes.9
After said person left, San Pedro realized that she left behind an identification card.10 Thus, San
Pedro called up Carmelita's listed address at No. 48 Ranger Street, Moonwalk Village, Las
Pinas, Metro Manila on the same day to have the card picked up.11 Marites, the wife of Lito,
received San Pedro's call and was stunned by the news that Carmelita preterminated her foreign
currency time deposit because Carmelita was in the United States at that time.12 The
Cabamongan spouses work and reside in California. Marites made an overseas call to Carmelita
to inform her about what happened.13 The Cabamongan spouses were shocked at the news. It
seems that sometime between June 10 and 16, 1993, an unidentified person broke in at the
couple's residence at No. 3268 Baldwin Park Boulevard, Baldwin Park, California. Initially, they
reported that only Carmelita's jewelry box was missing, but later on, they discovered that other
items, such as their passports, bank deposit certificates, including the subject foreign currency
deposit, and identification cards were also missing.14 It was only then that the Cabamongan
spouses realized that their passports and bank deposit certificates were lost.15
Through various overseas calls, the Cabamongan spouses informed Citibank, thru San Pedro,
that Carmelita was in the United States and did not preterminate their deposit and that the
person who did so was an impostor who could have also been involved in the break-in of their
California residence. San Pedro told the spouses to submit the necessary documents to support
their claim but Citibank concluded nonetheless that Carmelita indeed preterminated her deposit.
In a letter dated September 16, 1994, the Cabamongan spouses, through counsel, made a
formal demand upon Citibank for payment of their preterminated deposit in the amount of
$55,216.69 with legal interests.16 In a letter dated November 28, 1994, Citibank, through counsel,
refused the Cabamongan spouses' demand for payment, asserting that the subject deposit was
released to Carmelita upon proper identification and verification.17
On January 27, 1995, the Cabamongan spouses filed a complaint against Citibank before the
Regional Trial Court of Makati for Specific Performance with Damages, docketed as Civil Case
No 95-163 and raffled to Branch 150 (RTC).18
In its Answer dated April 20, 1995, Citibank insists that it was not negligent of its duties since the
subject deposit was released to Carmelita only upon proper identification and verification.19
At the pre-trial conference the parties failed to arrive at an amicable settlement.20 Thus, trial on
the merits ensued.
For the plaintiffs, the Cabamongan spouses themselves and Florenda G. Negre, Documents
Examiner II of the Philippine National Police (PNP) Crime Laboratory in Camp Crame, Quezon
City, testified. The Cabamongan spouses, in essence, testified that Carmelita could not have
preterminated the deposit account since she was in California at the time of the incident.21 Negre
testified that an examination of the questioned signature and the samples of the standard
signatures of Carmelita submitted in the RTC showed a significant divergence. She concluded
that they were not written by one and the same person.22
For the respondent, Citibank presented San Pedro and Cris Cabalatungan, Vice-President and
In-Charge of Security and Management Division. Both San Pedro and Cabalatungan testified
that proper bank procedure was followed and the deposit was released to Carmelita only upon
proper identification and verification.23
On July 1, 1997, the RTC rendered a decision in favor of the Cabamongan spouses and against
Citibank, the dispositive portion of which reads, thus:
WHEREFORE, premises considered, defendant Citibank, N.A., is hereby ordered to pay the
plaintiffs the following:
1) the principal amount of their Foreign Currency Deposit (Reference No. 6022214372)
amounting to $55,216.69 or its Phil. Currency equivalent plus interests from August 16,
2) Moral damages of P50,000.00;
3) Attorney's fees of P50,000.00; and
4) Cost of suit.
SO ORDERED.24
The RTC reasoned that:
xxx Citibank, N.A., committed negligence resulting to the undue suffering of the plaintiffs. The
forgery of the signatures of plaintiff Carmelita Cabamongan on the questioned documents has
been categorically established by the handwriting expert. xxx Defendant bank was clearly remiss
in its duty and obligations to treat plaintiff's account with the highest degree of care, considering
the nature of their relationship. Banks are under the obligation to treat the accounts of their
depositors with meticulous care. This is the reason for their established procedure of requiring
several specimen signatures and recent picture from potential depositors. For every transaction,
the depositor's signature is passed upon by personnel to check and countercheck possible
irregularities and therefore must bear the blame when they fail to detect the forgery or
discrepancy.25
Despite the favorable decision, the Cabamongan spouses filed on October 1, 1997 a motion to
partially reconsider the decision by praying for an increase of the amount of the damages
awarded.26 Citibank opposed the motion.27On November 19, 1997, the RTC granted the motion
for partial reconsideration and amended the dispositive portion of the decision as follows:
From the foregoing, and considering all the evidence laid down by the parties, the dispositive
portion of the court's decision dated July 1, 1997 is hereby amended and/or modified to read as
follows:
WHEREFORE, defendant Citibank, N.A., is hereby ordered to pay the plaintiffs the following:
1) the principal amount of their foreign currency deposit (Reference No. 6022214372)
amounting to $55,216.69 or its Philippine currency equivalent (at the time of its actual
payment or execution) plus legal interest from Aug. 16, 1993 until fully paid.
2) moral damages in the amount of P200,000.00;
3) exemplary damages in the amount of P100,000.00;
4) attorney's fees of P100,000.00;
5) litigation expenses of P200,000.00;
6) cost of suit.
SO ORDERED.28
Dissatisfied, Citibank filed an appeal with the CA, docketed as CA-G.R. CV No. 59033.29 On
January 26, 2001, the CA rendered a decision sustaining the finding of the RTC that Citibank
was negligent, ratiocinating in this wise:
In the instant case, it is beyond dispute that the subject foreign currency deposit was pre-
terminated on 10 November 1993. But Carmelita Cabamongan, who works as a nursing aid (sic)
at the Sierra View Care Center in Baldwin Park, California, had shown through her Certificate of
Employment and her Daily Time Record from the [sic] January to December 1993 that she was
in the United States at the time of the incident.
Defendant Citibank, N.A., however, insists that Carmelita was the one who pre-terminated the
deposit despite claims to the contrary. Its basis for saying so is the fact that the person who
made the transaction on the incident mentioned presented a valid passport and three (3) other
identification cards. The attending account officer examined these documents and even
interviewed said person. She was satisfied that the person presenting the documents was indeed
Carmelita Cabamongan. However, such conclusion is belied by these following circumstances.
First, the said person did not present the certificate of deposit issued to Carmelita Cabamongan.
This would not have been an insurmountable obstacle as the bank, in the absence of such
certificate, allows the termination of the deposit for as long as the depositor executes a notarized
release and waiver document in favor of the bank. However, this simple procedure was not
followed by the bank, as it terminated the deposit and actually delivered the money to the
impostor without having the said document notarized on the flimsy excuse that another
department of the bank was in charge of notarization. The said procedure was obviously for the
protection of the bank but it deliberately ignored such precaution. At the very least, the conduct of
the bank amounts to negligence.
Second, in the internal memorandum of Account Officer Yeye San Pedro regarding the incident,
she reported that upon comparing the authentic signatures of Carmelita Cabamongan on file with
the bank with the signatures made by the person claiming to be Cabamongan on the documents
required for the termination of the deposit, she noticed that one letter in the latter [sic] signatures
was different from that in the standard signatures. She requested said person to sign again and
scrutinized the identification cards presented. Presumably, San Pedro was satisfied with the
second set of signatures made as she eventually authorized the termination of the deposit.
However, upon examination of the signatures made during the incident by the Philippine National
Police (PNP) Crime Laboratory, the said signatures turned out to be forgeries. As the
qualifications of Document Examiner Florenda Negre were established and she satisfactorily
testified on her findings during the trial, we have no reason to doubt the validity of her findings.
Again, the bank's negligence is patent. San Pedro was able to detect discrepancies in the
signatures but she did not exercise additional precautions to ascertain the identity of the person
she was dealing with. In fact, the entire transaction took only 40 minutes to complete despite the
anomalous situation. Undoubtedly, the bank could have done a better job.
Third, as the bank had on file pictures of its depositors, it is inconceivable how bank employees
could have been duped by an impostor. San Pedro admitted in her testimony that the woman she
dealt with did not resemble the pictures appearing on the identification cards presented but San
Pedro still went on with the sensitive transaction. She did not mind such disturbing anomaly
because she was convinced of the validity of the passport. She also considered as decisive the
fact that the impostor had a mole on her face in the same way that the person in the pictures on
the identification cards had a mole. These explanations do not account for the disparity between
the pictures and the actual appearance of the impostor. That said person was allowed to
withdraw the money anyway is beyond belief.
The above circumstances point to the bank's clear negligence. Bank transactions pass through a
successive [sic] of bank personnel, whose duty is to check and countercheck transactions for
possible errors. While a bank is not expected to be infallible, it must bear the blame for failing to
discover mistakes of its employees despite established bank procedure involving a battery of
personnel designed to minimize if not eliminate errors. In the instant case, Yeye San Pedro, the
employee who primarily dealt with the impostor, did not follow bank procedure when she did not
have the waiver document notarized. She also openly courted disaster by ignoring discrepancies
between the actual appearance of the impostor and the pictures she presented, as well as the
disparities between the signatures made during the transaction and those on file with the bank.
But even if San Pedro was negligent, why must the other employees in the hierarchy of the
bank's work flow allow such thing to pass unnoticed and unrectified?30
The CA, however, disagreed with the damages awarded by the RTC. It held that, insofar as the
date from which legal interest of 12% is to run, it should be counted from September 16, 1994
when extrajudicial demand was made. As to moral damages, the CA reduced it to P100,000.00
and deleted the awards of exemplary damages and litigation expenses. Thus, the dispositive
portion of the CA decision reads:
WHEREFORE, the decision of the trial court dated 01 July 1997, and its order dated 19
November 1997, are hereby AFFIRMED with the MODIFICATION that the legal interest for
actual damages awarded in the amount of $55,216.69 shall run from 16 September 1994;
exemplary damages amounting to P100,000.00 and litigation expenses amounting
to P200,000.00 are deleted; and moral damages is reduced to P100,000.00.
Costs against defendant.
SO ORDERED.31
The Cabamongan spouses filed a motion for partial reconsideration on the matter of the award of
damages in the decision.32 On July 30, 2001, the
CA granted in part said motion and modified its decision as follows:
1. The actual damages in amount of $55,216.69, representing the amount of appellees'

foreign currency time deposit shall earn an interest of 2.5625% for the period 16 August
1993 to 14 February 1994, as stipulated in the contract;
2. From 16 September 1994 until full payment, the amount of $55,216.69 shall earn
interest at the legal rate of 12% per annum, and;
3. The award of moral damages is reduced to P50,000.00.33
Dissatisfied, both parties filed separate petitions for review on certiorari with this Court. The
Cabamongan spouses' petition, docketed as G.R. No. 149234, was denied by the Court per its
Resolution dated October 17, 2001.34 On the other hand, Citibank's petition was given due
course by the Court per Resolution dated December 10, 2001 and the parties were required to
submit their respective memoranda.35
Citibank poses the following errors for resolution:
1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND GRAVELY

ABUSED ITS DISCRETION IN UPHOLDING THE LOWER COURT'S DECISION
WHICH IS NOT BASED ON CLEAR EVIDENCE BUT ON GRAVE MISAPPREHENSION
OF FACTS.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE

DECISION OF THE TRIAL COURT AWARDING MORAL DAMAGES WHEN IN FACT
THERE IS NO BASIS IN LAW AND FACT FOR SAID AWARD.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE

PRINCIPAL AMOUNT OF US$55,216.69 SHOULD EARN INTEREST AT THE RATE OF
12% PER ANNUM FROM 16 SEPTEMBER 1994 UNTIL FULL PAYMENT.36
Anent the first ground, Citibank contends that the CA erred in affirming the RTC's finding that it
was negligent since the said courts failed to appreciate the extra diligence of a good father of a
family exercised by Citibank thru San Pedro.
As to the second ground, Citibank argues that the Cabamongan spouses are not entitled to
moral damages since moral damages can be awarded only in cases of breach of contract where
the bank has acted willfully, fraudulently or in bad faith. It submits that it has not been shown in
this case that Citibank acted willfully, fraudulently or in bad faith and mere negligence, even if the
Cabamongan spouses suffered mental anguish or serious anxiety on account thereof, is not a
ground for awarding moral damages.
On the third ground, Citibank avers that the interest rate should not be 12% but the stipulated
rate of 2.5625% per annum. It adds that there is no basis to pay the interest rate of 12% per
annum from September 16, 1994 until full payment because as of said date there was no legal
ground yet for the Cabamongan spouses to demand payment of the principal and it is only after a
final judgment is issued declaring that Citibank is obliged to return the principal amount of
US$55,216.69 when the right to demand payment starts and legal interest starts to run.
On the other hand, the Cabamongan spouses contend that Citibank's negligence has been
established by evidence. As to the interest rate, they submit that the stipulated interest of
2.5635% should apply for the 182-day contract period from August 16, 1993 to February 14,
1993; thereafter, 12% should apply. They further contend that the RTC's award of exemplary
damages of P100,000.00 should be maintained. They submit that the CA erred in treating the
award of litigation expenses as lawyer's fees since they have shown that they incurred actual
expenses in litigating their claim against Citibank. They also contend that the CA erred in
reducing the award of moral damages in view of the degree of mental anguish and emotional
fears, anxieties and nervousness suffered by them.37
Subsequently, Citibank, thru a new counsel, submitted a Supplemental Memorandum,38 wherein

it posits that, assuming that it was negligent, the Cabamongan spouses were guilty of
contributory negligence since they failed to notify Citibank that they had migrated to the United
States and were residents thereat and after having been victims of a burglary, they should have
immediately assessed their loss and informed Citibank of the disappearance of the bank
certificate, their passports and other identification cards, then the fraud would not have been
perpetuated and the losses avoided. It further argues that since the Cabamongan spouses are
guilty of contributory negligence, the doctrine of last clear chance is inapplicable.
Citibank's assertion that the Cabamongan spouses are guilty of contributory negligence and non-
application of the doctrine of last clear chance cannot pass muster since these contentions were
raised for the first time only in their Supplemental Memorandum. Indeed, the records show that
said contention were neither pleaded in the petition for review and the memorandum nor in
Citibank's Answer to the complaint or in its appellant's brief filed with the CA. To consider the
alleged facts and arguments raised belatedly in a supplemental pleading to herein petition for
review at this very late stage in the proceedings would amount to trampling on the basic
principles of fair play, justice and due process.39
1avvphil.net
The Court has repeatedly emphasized that, since the banking business is impressed with public
interest, of paramount importance thereto is the trust and confidence of the public in general.
Consequently, the highest degree of diligence40 is expected,41 and high standards of integrity and
performance are even required, of it.42 By the nature of its functions, a bank is "under obligation
to treat the accounts of its depositors with meticulous care,43always having in mind the fiduciary
nature of their relationship."44
In this case, it has been sufficiently shown that the signatures of Carmelita in the forms for
pretermination of deposits are forgeries. Citibank, with its signature verification procedure, failed
to detect the forgery. Its negligence consisted in the omission of that degree of diligence required
of banks. The Court has held that a bank is "bound to know the signatures of its customers; and
if it pays a forged check, it must be considered as making the payment out of its own funds, and
cannot ordinarily charge the amount so paid to the account of the depositor whose name was
forged."45 Such principle equally applies here.
Citibank cannot label its negligence as mere mistake or human error. Banks handle daily
transactions involving millions of pesos.46 By the very nature of their works the degree of
responsibility, care and trustworthiness expected of their employees and officials is far greater
than those of ordinary clerks and employees.47 Banks are expected to exercise the highest
degree of diligence in the selection and supervision of their employees.48
The Court agrees with the observation of the CA that Citibank, thru Account Officer San Pedro,
openly courted disaster when despite noticing discrepancies in the signature and photograph of
the person claiming to be Carmelita and the failure to surrender the original certificate of time
deposit, the pretermination of the account was allowed. Even the waiver document was not
notarized, a procedure meant to protect the bank. For not observing the degree of diligence
required of banking institutions, whose business is impressed with public interest, Citibank is
liable for damages.
As to the interest rate, Citibank avers that the claim of the Cabamongan spouses does not
constitute a loan or forbearance of money and therefore, the interest rate of 6%, not 12%,
applies.
The Court does not agree.
The time deposit subject matter of herein petition is a simple loan. The provisions of the New
Civil Code on simple loan govern the contract between a bank and its depositor. Specifically,
Article 1980 thereof categorically provides that ". . . savings . . . deposits of money in banks and
similar institutions shall be governed by the provisions concerning simple loan." Thus, the
relationship between a bank and its depositor is that of a debtor-creditor, the depositor being the
creditor as it lends the bank money, and the bank is the debtor which agrees to pay the depositor
on demand.
The applicable interest rate on the actual damages of $55,216.69, should be in accordance with
the guidelines set forth in Eastern Shipping Lines, Inc. v. Court of Appeals49 to wit:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,

delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The
provisions under Title XVIII on "Damages" of the Civil Code govern in determining the
measure of recoverable damages.
II. With regard particularly to an award of interest, in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed,
as follows:
1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
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.50
Thus, in a loan or forbearance of money, the interest due should be that stipulated in writing, and
in the absence thereof, the rate shall be 12% per annum counted from the time of demand.
Accordingly, the stipulated interest rate of 2.562% per annum shall apply for the 182-day contract
period from August 16, 1993 to February 14, 1994. For the period from the date of extra-judicial
demand, September 16, 1994, until full payment, the rate of 12% shall apply. As for the
intervening period between February 15, 1994 to September 15, 1994, the rate of interest then
prevailing granted by Citibank shall apply since the time deposit provided for roll over upon
maturity of the principal and interest.51
As to moral damages, in culpa contractual or breach of contract, as in the case before the Court,
moral damages are recoverable only if the defendant has acted fraudulently or in bad faith,52 or is
found guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual
obligations.53 The act of Citibank's employee in allowing the pretermination of Cabamongan
spouses' account despite the noted discrepancies in Carmelita's signature and photograph, the
absence of the original certificate of time deposit and the lack of notarized waiver dormant,
constitutes gross negligence amounting to bad faith under Article 2220 of the Civil Code.
There is no hard-and-fast rule in the determination of what would be a fair amount of moral
damages since each case must be governed by its own peculiar facts. The yardstick should be
that it is not palpably and scandalously excessive.54 The amount of P50,000.00 awarded by the
CA is reasonable and just. Moreover, said award is deemed final and executory insofar as
respondents are concerned considering that their petition for review had been denied by the
Court in its final and executory Resolution dated October 17, 2001 in G.R. No. 149234.
Finally, Citibank contends that the award of attorney's fees should be deleted since such award
appears only in the dispositive portion of the decision of the RTC and the latter failed to
elaborate, explain and justify the same.
Article 2208 of the New Civil Code enumerates the instances where such may be awarded and,
in all cases, it must be reasonable, just and equitable if the same were to be granted. Attorney's
fees as part of damages are not meant to enrich the winning party at the expense of the losing
litigant. They are not awarded every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate.55 The award of attorney's fees is the exception
rather than the general rule. As such, it is necessary for the court to make findings of facts and
law that would bring the case within the exception and justify the grant of such award. The matter
of attorney's fees cannot be mentioned only in the dispositive portion of the decision.56 They must
be clearly explained and justified by the trial court in the body of its decision. Consequently, the
award of attorney's fees should be deleted.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision and
Resolution are AFFIRMEDwith MODIFICATIONS, as follows:
1. The interest shall be computed as follows:
a. The actual damages in principal amount of $55,216.69, representing the

amount of foreign currency time deposit shall earn interest at the stipulated rate
of 2.5625% for the period August 16, 1993 to February 14, 1994;
b. From February 15, 1994 to September 15, 1994, the principal amount of
$55,216.69 and the interest earned as of February 14, 1994 shall earn interest at
the rate then prevailing granted by Citibank;
c. From September 16, 1994 until full payment, the principal amount of
$55,216.69 and the interest earned as of September 15, 1994, shall earn interest
at the legal rate of 12% per annum;
2. The award of attorney's fees is DELETED.
SO ORDERED.
G.R. No. 146918 May 2, 2006
CITIBANK, N.A., Petitioner,

vs.
SPS. LUIS and CARMELITA CABAMONGAN and their sons LUISCABAMONGAN, JR. and
LITO CABAMONGAN, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari of the Decision1 dated January 26, 2001 and
the Resolution2dated July 30, 2001 of the Court of Appeals (CA) in CA-G.R. CV No. 59033.
The factual background of the case is as follows:
On August 16, 1993, spouses Luis and Carmelita Cabamongan opened a joint "and/or" foreign
currency time deposit in trust for their sons Luis, Jr. and Lito at the Citibank, N.A., Makati branch,
with Reference No. 60-22214372, in the amount of $55,216.69 for a term of 182 days or until
February 14, 1994, at 2.5625 per cent interest per annum.3Prior to maturity, or on November 10,
1993, a person claiming to be Carmelita went to the Makati branch and pre-terminated the said
foreign currency time deposit by presenting a passport, a Bank of America Versatele Card, an
ATM card and a Mabuhay Credit Card.4 She filled up the necessary forms for pre-termination of
deposits with the assistance of Account Officer Yeye San Pedro. While the transaction was being
processed, she was casually interviewed by San Pedro about her personal circumstances and
investment plans.5 Since the said person failed to surrender the original Certificate of Deposit,
she had to execute a notarized release and waiver document in favor of Citibank, pursuant to
Citibank's internal procedure, before the money was released to her.6 The release and waiver
document7 was not notarized on that same day but the money was nonetheless given to the
person withdrawing.8The transaction lasted for about 40 minutes.9
After said person left, San Pedro realized that she left behind an identification card.10 Thus, San
Pedro called up Carmelita's listed address at No. 48 Ranger Street, Moonwalk Village, Las
Pinas, Metro Manila on the same day to have the card picked up.11 Marites, the wife of Lito,
received San Pedro's call and was stunned by the news that Carmelita preterminated her foreign
currency time deposit because Carmelita was in the United States at that time.12 The
Cabamongan spouses work and reside in California. Marites made an overseas call to Carmelita
to inform her about what happened.13 The Cabamongan spouses were shocked at the news. It
seems that sometime between June 10 and 16, 1993, an unidentified person broke in at the
couple's residence at No. 3268 Baldwin Park Boulevard, Baldwin Park, California. Initially, they
reported that only Carmelita's jewelry box was missing, but later on, they discovered that other
items, such as their passports, bank deposit certificates, including the subject foreign currency
deposit, and identification cards were also missing.14 It was only then that the Cabamongan
spouses realized that their passports and bank deposit certificates were lost.15
Through various overseas calls, the Cabamongan spouses informed Citibank, thru San Pedro,
that Carmelita was in the United States and did not preterminate their deposit and that the
person who did so was an impostor who could have also been involved in the break-in of their
California residence. San Pedro told the spouses to submit the necessary documents to support
their claim but Citibank concluded nonetheless that Carmelita indeed preterminated her deposit.
In a letter dated September 16, 1994, the Cabamongan spouses, through counsel, made a
formal demand upon Citibank for payment of their preterminated deposit in the amount of
$55,216.69 with legal interests.16 In a letter dated November 28, 1994, Citibank, through counsel,
refused the Cabamongan spouses' demand for payment, asserting that the subject deposit was
released to Carmelita upon proper identification and verification.17
On January 27, 1995, the Cabamongan spouses filed a complaint against Citibank before the
Regional Trial Court of Makati for Specific Performance with Damages, docketed as Civil Case
No 95-163 and raffled to Branch 150 (RTC).18
In its Answer dated April 20, 1995, Citibank insists that it was not negligent of its duties since the
subject deposit was released to Carmelita only upon proper identification and verification.19
At the pre-trial conference the parties failed to arrive at an amicable settlement.20 Thus, trial on
the merits ensued.
For the plaintiffs, the Cabamongan spouses themselves and Florenda G. Negre, Documents
Examiner II of the Philippine National Police (PNP) Crime Laboratory in Camp Crame, Quezon
City, testified. The Cabamongan spouses, in essence, testified that Carmelita could not have
preterminated the deposit account since she was in California at the time of the incident.21 Negre
testified that an examination of the questioned signature and the samples of the standard
signatures of Carmelita submitted in the RTC showed a significant divergence. She concluded
that they were not written by one and the same person.22
For the respondent, Citibank presented San Pedro and Cris Cabalatungan, Vice-President and
In-Charge of Security and Management Division. Both San Pedro and Cabalatungan testified
that proper bank procedure was followed and the deposit was released to Carmelita only upon
proper identification and verification.23
On July 1, 1997, the RTC rendered a decision in favor of the Cabamongan spouses and against
Citibank, the dispositive portion of which reads, thus:
WHEREFORE, premises considered, defendant Citibank, N.A., is hereby ordered to pay the
plaintiffs the following:
1) the principal amount of their Foreign Currency Deposit (Reference No. 6022214372)
amounting to $55,216.69 or its Phil. Currency equivalent plus interests from August 16,
2) Moral damages of P50,000.00;
3) Attorney's fees of P50,000.00; and
4) Cost of suit.
SO ORDERED.24
The RTC reasoned that:
xxx Citibank, N.A., committed negligence resulting to the undue suffering of the plaintiffs. The
forgery of the signatures of plaintiff Carmelita Cabamongan on the questioned documents has
been categorically established by the handwriting expert. xxx Defendant bank was clearly remiss
in its duty and obligations to treat plaintiff's account with the highest degree of care, considering
the nature of their relationship. Banks are under the obligation to treat the accounts of their
depositors with meticulous care. This is the reason for their established procedure of requiring
several specimen signatures and recent picture from potential depositors. For every transaction,
the depositor's signature is passed upon by personnel to check and countercheck possible
irregularities and therefore must bear the blame when they fail to detect the forgery or
discrepancy.25
Despite the favorable decision, the Cabamongan spouses filed on October 1, 1997 a motion to
partially reconsider the decision by praying for an increase of the amount of the damages
awarded.26 Citibank opposed the motion.27On November 19, 1997, the RTC granted the motion
for partial reconsideration and amended the dispositive portion of the decision as follows:
From the foregoing, and considering all the evidence laid down by the parties, the dispositive
portion of the court's decision dated July 1, 1997 is hereby amended and/or modified to read as
follows:
WHEREFORE, defendant Citibank, N.A., is hereby ordered to pay the plaintiffs the following:
1) the principal amount of their foreign currency deposit (Reference No. 6022214372)
amounting to $55,216.69 or its Philippine currency equivalent (at the time of its actual
payment or execution) plus legal interest from Aug. 16, 1993 until fully paid.
2) moral damages in the amount of P200,000.00;
3) exemplary damages in the amount of P100,000.00;
4) attorney's fees of P100,000.00;
5) litigation expenses of P200,000.00;
6) cost of suit.
SO ORDERED.28
Dissatisfied, Citibank filed an appeal with the CA, docketed as CA-G.R. CV No. 59033.29 On
January 26, 2001, the CA rendered a decision sustaining the finding of the RTC that Citibank
was negligent, ratiocinating in this wise:
In the instant case, it is beyond dispute that the subject foreign currency deposit was pre-
terminated on 10 November 1993. But Carmelita Cabamongan, who works as a nursing aid (sic)
at the Sierra View Care Center in Baldwin Park, California, had shown through her Certificate of
Employment and her Daily Time Record from the [sic] January to December 1993 that she was
in the United States at the time of the incident.
Defendant Citibank, N.A., however, insists that Carmelita was the one who pre-terminated the
deposit despite claims to the contrary. Its basis for saying so is the fact that the person who
made the transaction on the incident mentioned presented a valid passport and three (3) other
identification cards. The attending account officer examined these documents and even
interviewed said person. She was satisfied that the person presenting the documents was indeed
Carmelita Cabamongan. However, such conclusion is belied by these following circumstances.
First, the said person did not present the certificate of deposit issued to Carmelita Cabamongan.
This would not have been an insurmountable obstacle as the bank, in the absence of such
certificate, allows the termination of the deposit for as long as the depositor executes a notarized
release and waiver document in favor of the bank. However, this simple procedure was not
followed by the bank, as it terminated the deposit and actually delivered the money to the
impostor without having the said document notarized on the flimsy excuse that another
department of the bank was in charge of notarization. The said procedure was obviously for the
protection of the bank but it deliberately ignored such precaution. At the very least, the conduct of
the bank amounts to negligence.
Second, in the internal memorandum of Account Officer Yeye San Pedro regarding the incident,
she reported that upon comparing the authentic signatures of Carmelita Cabamongan on file with
the bank with the signatures made by the person claiming to be Cabamongan on the documents
required for the termination of the deposit, she noticed that one letter in the latter [sic] signatures
was different from that in the standard signatures. She requested said person to sign again and
scrutinized the identification cards presented. Presumably, San Pedro was satisfied with the
second set of signatures made as she eventually authorized the termination of the deposit.
However, upon examination of the signatures made during the incident by the Philippine National
Police (PNP) Crime Laboratory, the said signatures turned out to be forgeries. As the
qualifications of Document Examiner Florenda Negre were established and she satisfactorily
testified on her findings during the trial, we have no reason to doubt the validity of her findings.
Again, the bank's negligence is patent. San Pedro was able to detect discrepancies in the
signatures but she did not exercise additional precautions to ascertain the identity of the person
she was dealing with. In fact, the entire transaction took only 40 minutes to complete despite the
anomalous situation. Undoubtedly, the bank could have done a better job.
Third, as the bank had on file pictures of its depositors, it is inconceivable how bank employees
could have been duped by an impostor. San Pedro admitted in her testimony that the woman she
dealt with did not resemble the pictures appearing on the identification cards presented but San
Pedro still went on with the sensitive transaction. She did not mind such disturbing anomaly
because she was convinced of the validity of the passport. She also considered as decisive the
fact that the impostor had a mole on her face in the same way that the person in the pictures on
the identification cards had a mole. These explanations do not account for the disparity between
the pictures and the actual appearance of the impostor. That said person was allowed to
withdraw the money anyway is beyond belief.
The above circumstances point to the bank's clear negligence. Bank transactions pass through a
successive [sic] of bank personnel, whose duty is to check and countercheck transactions for
possible errors. While a bank is not expected to be infallible, it must bear the blame for failing to
discover mistakes of its employees despite established bank procedure involving a battery of
personnel designed to minimize if not eliminate errors. In the instant case, Yeye San Pedro, the
employee who primarily dealt with the impostor, did not follow bank procedure when she did not
have the waiver document notarized. She also openly courted disaster by ignoring discrepancies
between the actual appearance of the impostor and the pictures she presented, as well as the
disparities between the signatures made during the transaction and those on file with the bank.
But even if San Pedro was negligent, why must the other employees in the hierarchy of the
bank's work flow allow such thing to pass unnoticed and unrectified?30
The CA, however, disagreed with the damages awarded by the RTC. It held that, insofar as the
date from which legal interest of 12% is to run, it should be counted from September 16, 1994
when extrajudicial demand was made. As to moral damages, the CA reduced it to P100,000.00
and deleted the awards of exemplary damages and litigation expenses. Thus, the dispositive
portion of the CA decision reads:
WHEREFORE, the decision of the trial court dated 01 July 1997, and its order dated 19
November 1997, are hereby AFFIRMED with the MODIFICATION that the legal interest for
actual damages awarded in the amount of $55,216.69 shall run from 16 September 1994;
exemplary damages amounting to P100,000.00 and litigation expenses amounting
to P200,000.00 are deleted; and moral damages is reduced to P100,000.00.
Costs against defendant.
SO ORDERED.31
The Cabamongan spouses filed a motion for partial reconsideration on the matter of the award of
damages in the decision.32 On July 30, 2001, the
CA granted in part said motion and modified its decision as follows:
1. The actual damages in amount of $55,216.69, representing the amount of appellees'

foreign currency time deposit shall earn an interest of 2.5625% for the period 16 August
1993 to 14 February 1994, as stipulated in the contract;
2. From 16 September 1994 until full payment, the amount of $55,216.69 shall earn
interest at the legal rate of 12% per annum, and;
3. The award of moral damages is reduced to P50,000.00.33
Dissatisfied, both parties filed separate petitions for review on certiorari with this Court. The
Cabamongan spouses' petition, docketed as G.R. No. 149234, was denied by the Court per its
Resolution dated October 17, 2001.34 On the other hand, Citibank's petition was given due
course by the Court per Resolution dated December 10, 2001 and the parties were required to
submit their respective memoranda.35
Citibank poses the following errors for resolution:
1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND GRAVELY

ABUSED ITS DISCRETION IN UPHOLDING THE LOWER COURT'S DECISION
WHICH IS NOT BASED ON CLEAR EVIDENCE BUT ON GRAVE MISAPPREHENSION
OF FACTS.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE

DECISION OF THE TRIAL COURT AWARDING MORAL DAMAGES WHEN IN FACT
THERE IS NO BASIS IN LAW AND FACT FOR SAID AWARD.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE

PRINCIPAL AMOUNT OF US$55,216.69 SHOULD EARN INTEREST AT THE RATE OF
12% PER ANNUM FROM 16 SEPTEMBER 1994 UNTIL FULL PAYMENT.36
Anent the first ground, Citibank contends that the CA erred in affirming the RTC's finding that it
was negligent since the said courts failed to appreciate the extra diligence of a good father of a
family exercised by Citibank thru San Pedro.
As to the second ground, Citibank argues that the Cabamongan spouses are not entitled to
moral damages since moral damages can be awarded only in cases of breach of contract where
the bank has acted willfully, fraudulently or in bad faith. It submits that it has not been shown in
this case that Citibank acted willfully, fraudulently or in bad faith and mere negligence, even if the
Cabamongan spouses suffered mental anguish or serious anxiety on account thereof, is not a
ground for awarding moral damages.
On the third ground, Citibank avers that the interest rate should not be 12% but the stipulated
rate of 2.5625% per annum. It adds that there is no basis to pay the interest rate of 12% per
annum from September 16, 1994 until full payment because as of said date there was no legal
ground yet for the Cabamongan spouses to demand payment of the principal and it is only after a
final judgment is issued declaring that Citibank is obliged to return the principal amount of
US$55,216.69 when the right to demand payment starts and legal interest starts to run.
On the other hand, the Cabamongan spouses contend that Citibank's negligence has been
established by evidence. As to the interest rate, they submit that the stipulated interest of
2.5635% should apply for the 182-day contract period from August 16, 1993 to February 14,
1993; thereafter, 12% should apply. They further contend that the RTC's award of exemplary
damages of P100,000.00 should be maintained. They submit that the CA erred in treating the
award of litigation expenses as lawyer's fees since they have shown that they incurred actual
expenses in litigating their claim against Citibank. They also contend that the CA erred in
reducing the award of moral damages in view of the degree of mental anguish and emotional
fears, anxieties and nervousness suffered by them.37
Subsequently, Citibank, thru a new counsel, submitted a Supplemental Memorandum,38 wherein

it posits that, assuming that it was negligent, the Cabamongan spouses were guilty of
contributory negligence since they failed to notify Citibank that they had migrated to the United
States and were residents thereat and after having been victims of a burglary, they should have
immediately assessed their loss and informed Citibank of the disappearance of the bank
certificate, their passports and other identification cards, then the fraud would not have been
perpetuated and the losses avoided. It further argues that since the Cabamongan spouses are
guilty of contributory negligence, the doctrine of last clear chance is inapplicable.
Citibank's assertion that the Cabamongan spouses are guilty of contributory negligence and non-
application of the doctrine of last clear chance cannot pass muster since these contentions were
raised for the first time only in their Supplemental Memorandum. Indeed, the records show that
said contention were neither pleaded in the petition for review and the memorandum nor in
Citibank's Answer to the complaint or in its appellant's brief filed with the CA. To consider the
alleged facts and arguments raised belatedly in a supplemental pleading to herein petition for
review at this very late stage in the proceedings would amount to trampling on the basic
principles of fair play, justice and due process.39
1avvphil.net
The Court has repeatedly emphasized that, since the banking business is impressed with public
interest, of paramount importance thereto is the trust and confidence of the public in general.
Consequently, the highest degree of diligence40 is expected,41 and high standards of integrity and
performance are even required, of it.42 By the nature of its functions, a bank is "under obligation
to treat the accounts of its depositors with meticulous care,43always having in mind the fiduciary
nature of their relationship."44
In this case, it has been sufficiently shown that the signatures of Carmelita in the forms for
pretermination of deposits are forgeries. Citibank, with its signature verification procedure, failed
to detect the forgery. Its negligence consisted in the omission of that degree of diligence required
of banks. The Court has held that a bank is "bound to know the signatures of its customers; and
if it pays a forged check, it must be considered as making the payment out of its own funds, and
cannot ordinarily charge the amount so paid to the account of the depositor whose name was
forged."45 Such principle equally applies here.
Citibank cannot label its negligence as mere mistake or human error. Banks handle daily
transactions involving millions of pesos.46 By the very nature of their works the degree of
responsibility, care and trustworthiness expected of their employees and officials is far greater
than those of ordinary clerks and employees.47 Banks are expected to exercise the highest
degree of diligence in the selection and supervision of their employees.48
The Court agrees with the observation of the CA that Citibank, thru Account Officer San Pedro,
openly courted disaster when despite noticing discrepancies in the signature and photograph of
the person claiming to be Carmelita and the failure to surrender the original certificate of time
deposit, the pretermination of the account was allowed. Even the waiver document was not
notarized, a procedure meant to protect the bank. For not observing the degree of diligence
required of banking institutions, whose business is impressed with public interest, Citibank is
liable for damages.
As to the interest rate, Citibank avers that the claim of the Cabamongan spouses does not
constitute a loan or forbearance of money and therefore, the interest rate of 6%, not 12%,
applies.
The Court does not agree.
The time deposit subject matter of herein petition is a simple loan. The provisions of the New
Civil Code on simple loan govern the contract between a bank and its depositor. Specifically,
Article 1980 thereof categorically provides that ". . . savings . . . deposits of money in banks and
similar institutions shall be governed by the provisions concerning simple loan." Thus, the
relationship between a bank and its depositor is that of a debtor-creditor, the depositor being the
creditor as it lends the bank money, and the bank is the debtor which agrees to pay the depositor
on demand.
The applicable interest rate on the actual damages of $55,216.69, should be in accordance with
the guidelines set forth in Eastern Shipping Lines, Inc. v. Court of Appeals49 to wit:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,

delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The
provisions under Title XVIII on "Damages" of the Civil Code govern in determining the
measure of recoverable damages.
II. With regard particularly to an award of interest, in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed,
as follows:

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
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.
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.50
Thus, in a loan or forbearance of money, the interest due should be that stipulated in writing, and
in the absence thereof, the rate shall be 12% per annum counted from the time of demand.
Accordingly, the stipulated interest rate of 2.562% per annum shall apply for the 182-day contract
period from August 16, 1993 to February 14, 1994. For the period from the date of extra-judicial
demand, September 16, 1994, until full payment, the rate of 12% shall apply. As for the
intervening period between February 15, 1994 to September 15, 1994, the rate of interest then
prevailing granted by Citibank shall apply since the time deposit provided for roll over upon
maturity of the principal and interest.51
As to moral damages, in culpa contractual or breach of contract, as in the case before the Court,
moral damages are recoverable only if the defendant has acted fraudulently or in bad faith,52 or is
found guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual
obligations.53 The act of Citibank's employee in allowing the pretermination of Cabamongan
spouses' account despite the noted discrepancies in Carmelita's signature and photograph, the
absence of the original certificate of time deposit and the lack of notarized waiver dormant,
constitutes gross negligence amounting to bad faith under Article 2220 of the Civil Code.
There is no hard-and-fast rule in the determination of what would be a fair amount of moral
damages since each case must be governed by its own peculiar facts. The yardstick should be
that it is not palpably and scandalously excessive.54 The amount of P50,000.00 awarded by the
CA is reasonable and just. Moreover, said award is deemed final and executory insofar as
respondents are concerned considering that their petition for review had been denied by the
Court in its final and executory Resolution dated October 17, 2001 in G.R. No. 149234.
Finally, Citibank contends that the award of attorney's fees should be deleted since such award
appears only in the dispositive portion of the decision of the RTC and the latter failed to
elaborate, explain and justify the same.
Article 2208 of the New Civil Code enumerates the instances where such may be awarded and,
in all cases, it must be reasonable, just and equitable if the same were to be granted. Attorney's
fees as part of damages are not meant to enrich the winning party at the expense of the losing
litigant. They are not awarded every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate.55 The award of attorney's fees is the exception
rather than the general rule. As such, it is necessary for the court to make findings of facts and
law that would bring the case within the exception and justify the grant of such award. The matter
of attorney's fees cannot be mentioned only in the dispositive portion of the decision.56 They must
be clearly explained and justified by the trial court in the body of its decision. Consequently, the
award of attorney's fees should be deleted.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision and
Resolution are AFFIRMEDwith MODIFICATIONS, as follows:
1. The interest shall be computed as follows:
a. The actual damages in principal amount of $55,216.69, representing the

amount of foreign currency time deposit shall earn interest at the stipulated rate
of 2.5625% for the period August 16, 1993 to February 14, 1994;
b. From February 15, 1994 to September 15, 1994, the principal amount of
$55,216.69 and the interest earned as of February 14, 1994 shall earn interest at
the rate then prevailing granted by Citibank;
c. From September 16, 1994 until full payment, the principal amount of
$55,216.69 and the interest earned as of September 15, 1994, shall earn interest
at the legal rate of 12% per annum;
2. The award of attorney's fees is DELETED.
SO ORDERED.
G.R. No. 170073 October 18, 2010
SPOUSES RAMY and ZENAIDA PUDADERA, Petitioners,

vs.
IRENEO MAGALLANES and the late DAISY TERESA CORTEL MAGALLANES substituted
by her children, NELLY M. MARQUEZ, ELISEO MAGALLANES and ANGEL
MAGALLANES, Respondents.
DECISION
DEL CASTILLO, J.:
One is considered a buyer in bad faith not only when he purchases real estate with knowledge of
a defect or lack of title in his seller but also when he has knowledge of facts which should have
alerted him to conduct further inquiry or investigation.
This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeal’s (CA’s)
June 6, 2005 Decision1 in CA-G.R. CV No. 55850, which affirmed the September 3, 1996
Decision2 of the Regional Trial Court (RTC) of Iloilo City, Branch 39 in Civil Case No. 22234.
Likewise assailed is the September 20, 2005 Resolution3denying petitioners’ motion for
reconsideration.
Factual Antecedents
Belen Consing Lazaro (Lazaro) was the absolute owner of a parcel of land, Lot 11-E, with an
area of 5,333 square meters (sq. m.) located in the District of Arevalo, Iloilo City and covered by
Transfer Certificate of Title (TCT) No. T-51250. On March 13, 1979, Lazaro sold a 400 sq. m.
portion of Lot 11-E to Daisy Teresa Cortel Magallanes (Magallanes) for the sum of ₱22,000.00
under a "Contract To Sale"4 [sic] payable in two years. On July 21, 1980, upon full payment of
the monthly installments, Lazaro executed a "Deed of Definite Sale"5 in favor of Magallanes.
Thereafter, Magallanes had the lot fenced and had a nipa hut constructed thereon.
The other portions of Lot 11-E were, likewise, sold by Lazaro to several buyers, namely,
Elizabeth Norada, Jose Macaluda, Jose Melocoton, Nonilon Esteya, Angeles Palma, Medina
Anduyan, Evangelina Anas and Mario Gonzales.6 On July 14, 1980, Lazaro executed a "Partition
Agreement"7 in favor of Magallanes and the aforesaid buyers delineating the portions to be
owned by each buyer. Under this agreement, Magallanes and Mario Gonzales were assigned an
800 sq. m. portion of Lot 11-E, with each owning 400 sq. m. thereof, denominated as Lot No. 11-
E-8 in a Subdivision Plan8 which was approved by the Director of Lands on August 25, 1980.
It appears that the "Partition Agreement" became the subject of legal disputes because Lazaro
refused to turn over the mother title, TCT No. T-51250, of Lot 11-E to the aforesaid buyers, thus,
preventing them from titling in their names the subdivided portions thereof. Consequently,
Magallanes, along with the other buyers, filed an adverse claim with the Register of Deeds of
Ilolilo City which was annotated at the back of TCT No. T-51250 on April 29, 1981.9 Thereafter,
Magallanes and Gonzales filed a motion to surrender title in Cadastral Case No. 9741 with the
then Court of First Instance of Iloilo City, Branch 1 and caused the annotation of a notice of lis
pendens at the back of TCT No. T-51250 on October 22, 1981.10
On November 23, 1981, Lazaro sold Lot 11-E-8, i.e., the lot previously assigned to Magallanes
and Mario Gonzales under the aforesaid "Partition Agreement," to her niece, Lynn Lazaro, and
the latter’s husband, Rogelio Natividad (Spouses Natividad), for the sum of ₱8,000.00.11 As a
result, a new title, TCT No. T-58606,12 was issued in the name of Spouses Natividad. Due to this
development, Magallanes pursued her claims against Spouses Natividad by filing a civil case for
specific performance, injunction and damages. On September 2, 1983, Magallanes caused the
annotation of a notice of lis pendens at the back of TCT No. T-58606.13 Subsequently, Spouses
Natividad subdivided Lot 11-E-8 into two, Lot 11-E-8-A and Lot 11-E-8-B, each containing 400
sq. m.
The civil case filed by Magallanes was later dismissed by the trial court for lack of jurisdiction as
per an Order dated September 16, 1985 which was inscribed at the back of TCT No. T-58606 on
July 7, 1986.14 Four days prior to this inscription or on July 3, 1986, Spouses Natividad sold Lot
11-E-8-A (subject lot) to petitioner Ramy Pudadera (who later married petitioner Zenaida
Pudadera on July 31, 1989) as evidenced by a "Deed of Sale"15 for the sum of ₱25,000.00. As a
consequence, a new title, TCT No. 72734,16 was issued in the name of the latter.
Sometime thereafter Magallanes caused the construction of two houses of strong materials on
the subject lot. On April 20, 1990, petitioners filed an action for forcible entry against Magallanes
with the Municipal Trial Court in Cities of Iloilo City, Branch 2. On July 17, 1991, the trial court
dismissed the action.17 It held that Magallanes was first in possession of the subject lot by virtue
of the "Deed of Definite Sale" dated July 21, 1980 between Lazaro and Magallanes. After the
aforesaid sale, Magallanes filled the lot with soil; put up a fence; and built a small hut thereon. On
the other hand, the trial court found that when petitioner Ramy Pudadera bought the subject lot
from Spouses Natividad on July 3, 1986, the former had notice that someone else was already in
possession of the subject lot.
Having failed to recover the possession of the subject lot through the aforesaid forcible entry
case, petitioners commenced the subject action for Recovery of Ownership, Quieting of Title and
Damages against Magallanes and her husband, Ireneo, in a Complaint18 dated February 25,
1995. Petitioners alleged that they are the absolute owners of Lot 11-E-8-A as evidenced by TCT
No. T-72734; that Magallanes is also claiming the said lot as per a "Deed of Definite Sale" dated
July 21, 1980; that the lot claimed by Magallanes is different from Lot 11-E-8-A; and that
Magallanes constructed, without the consent of petitioners, several houses on said lot. They
prayed that they be declared the rightful owners of Lot 11-E-8-A and that Magallanes be ordered
to pay damages.
In her Answer,19 Magallanes countered that she is the absolute lawful owner of Lot 11-E-8-A; that
Lot 11-E-8-A belongs to her while Lot 11-E-8-B belongs to Mario Gonzales; that petitioners had
prior knowledge of the sale between her and Lazaro; that she enclosed Lot 11-E-8-A with a
fence, constructed a house and caused soil fillings on said lot which petitioners were aware of;
and that she has been in actual possession of the said lot from March 11, 1979 up to the present.
She prayed that TCT No. T-72734 in the name of petitioner Ramy Pudadera be cancelled and a
new one be issued in her name.
During the pendency of this case, Magallanes passed away and was substituted by her heirs,
herein respondents.
Ruling of the Regional Trial Court
On September 6, 1996, the trial court rendered judgment in favor of respondents, viz:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the [respondents]

and against the [petitioners]:
1. Declaring the [respondent] Daisy Teresa Cortel Magallanes, substituted by her heirs,
Nelly M. Magallanes, Eliseo Magallanes and Angel Magallanes and Ireneo Magallanes,
as the rightful owners of Lot 11-E-8-A, Psd-06-002539, which is now covered by Transfer
Certificate of Title No. T-72734, still in the name of Ramy Pudadera, situated in the
District of Arevalo, Iloilo City, with an area of 400 square meters more or less;
2. The [petitioners] spouses Ramy Pudadera and Zenaida Pudadera are hereby ordered
to execute the necessary Deed of Reconveyance in favor of the above-named parties,
namely[,] Nelly M. Magallanes, Eliseo Magallanes, x x x Angel Magallanes, and Ireneo
Magallanes;
3. Ordering the [petitioners] to pay jointly and severally the [respondents] the amount of
₱10,000.00 as attorney’s fees and the costs of the suit.
SO ORDERED.20
The trial court ruled that respondents are the rightful owners of the subject lot which was sold by
Lazaro to their predecessor-in-interest, Magallanes, on July 21, 1980. When Lazaro sold the
subject lot for a second time to Spouses Natividad on November 23, 1981, no rights were
transmitted because, by then, Magallanes was already the owner thereof. For the same reason,
when Spouses Natividad subsequently sold the subject lot to petitioners on July 3, 1986, nothing
was transferred to the latter.
The trial court further held that petitioners cannot be considered buyers in good faith and for
value because after Magallanes bought the subject lot from Lazaro, Magallanes immediately took
possession of the lot, and constructed a fence with barbed wire around the property. The
presence of these structures should, thus, have alerted petitioners to the possible flaw in the title
of the Spouses Natividad considering that petitioners visited the subject lot several times before
purchasing the same. Neither can petitioners claim that the title of the subject lot was clean
considering that a notice of lis pendens was annotated thereon in connection with a civil case
that Magallanes filed against Spouses Natividad involving the subject lot. Although the notice
of lis pendens was subsequently cancelled on July 7, 1986, the deed of sale between petitioners
and Spouses Natividad was executed on July 3, 1986 or four days before said cancellation.
Thus, petitioners had notice that the subject property was under litigation. Since respondents are
the rightful owners of the subject lot, petitioners should execute a deed of conveyance in favor of
the former so that a new title may be issued in the name of the respondents. 1aw p++il
Ruling of the Court of Appeals
On June 6, 2005, the CA rendered the assailed Decision:
WHEREFORE, with all the foregoing, the decision of the Regional Trial Court, Branch 39, Iloilo
City dated September 3, 1996 in civil case no. 22234 for Quieting of Title, Ownership and
Damages is hereby AFFIRMED in toto.
All other claims and counterclaims are hereby dismissed for lack of factual and legal basis.
No pronouncement as to cost.
SO ORDERED.21
In affirming the ruling of the trial court, the appellate court reasoned that under the rule on double
sale what finds relevance is whether the second buyer registered the second sale in good faith,
that is, without knowledge of any defect in the title of the seller. Petitioners’ predecessor-in-
interest, Spouses Natividad, were not registrants in good faith. When Magallanes first bought the
subject lot from Lazaro on July 21, 1980, Magallanes took possession of the same and had it
fenced and filled with soil. This was made way ahead of the November 23, 1981 Deed of Sale
between Lazaro and Spouses Natividad. With so much movement and transactions involving the
subject lot and given that Lyn Lazaro-Natividad is the niece of Lazaro, the appellate court found it
hard to believe that the Spouses Natividad were completely unaware of any controversy over the
subject lot.
The CA, likewise, agreed with the trial court that at the time petitioners acquired the subject lot
from Spouses Natividad on July 3, 1986, a notice of lis pendens was still annotated at the back of
TCT No. T-58606 due to a civil case filed by Magallanes against Spouses Natividad. Although
the case was subsequently dismissed by the trial court for lack of jurisdiction, the notice of lis
pendens was still subsisting at the time of the sale of the subject lot between Spouses Natividad
and petitioners on July 3, 1986 because the lis pendens notice was cancelled only on July 7,
1986. Consequently, petitioners cannot be considered buyers and registrants in good faith
because they were aware of a flaw in the title of the Spouses Natividad prior to their purchase
thereof.
Issues
1. The Court of Appeals erred in not considering the judicial admissions of Magallanes as
well as the documentary evidence showing that she was claiming a different lot, Lot No.
11-E-8-B, and not Lot 11-E-8-A which is registered in the name of petitioners under TCT
No. T-72734, consequently, its findings that Magallanes is the rightful owner of Lot 11-E-
8-A is contrary to the evidence on record;
2. The Court of Appeals erred in applying the principle of innocent purchasers for value
and in good faith to petitioners. Granting that the said principle may be applied, the Court
of Appeals erred in finding that petitioners are not innocent purchasers for value;
3. The Court of Appeals erred in affirming the award of attorney’s fees against the
petitioners.22
Petitioners’ Arguments
Petitioners postulate that the subject lot is different from the lot which Magallanes bought from
Lazaro. As per Magallanes’ testimony in the ejectment case, she applied for the zoning permit for
Lot 11-E-8-B and not Lot 11-E-8-A. Further, the tax declarations submitted in evidence therein
showed that Magallanes paid for the real estate taxes of Lot 11-E-8-B and not Lot 11-E-8-A.
Hence, there is no conflict of claims since petitioners are asserting their rights over Lot 11-E-8-A
while respondents claim ownership over Lot 11-E-8-B. Moreover, assuming that there was a
double sale, the same did not involve petitioners. The first sale was between Lazaro and
Magallanes while the second sale was between Lazaro and Spouses Natividad. It was erroneous
for the appellate court to conclude that Lyn Natividad was in bad faith simply because she is the
niece of Lazaro. The Spouses Natividad were not impleaded in this case and cannot be charged
as buyers in bad faith without giving them their day in court. Petitioners claim that respondents
should first impugn the validity of Spouses Natividad’s title by proving that the latter acted in bad
faith when they bought the subject lot from Lazaro. Petitioners aver that the evidence on record
failed to overcome the presumption of good faith. Considering that Spouses Natividad were
buyers in good faith and considering further that petitioners’ title was derived from Lazaro,
petitioners should, likewise, be considered buyers in good faith.
Petitioners further argue that the rule on notice of lis pendens was improperly applied in this
case. The trial court’s order dismissing the civil case filed by Magallanes against Spouses
Natividad had long become final and executory before petitioners bought the subject lot from
Spouses Natividad. While it is true that the order of dismissal was annotated at the back of TCT
No. T-58606 only on July 7, 1986 or four days after the sale between Spouses Natividad and
petitioners, the cancellation of the notice of lis pendens was a mere formality. In legal
contemplation, the notice was, at the time of the sale on July 3, 1986, ineffective. Citing Spouses
Po Lam v. Court of Appeals,23[23] petitioners contend that the then existing court order for the
cancellation of the lis pendens notice at the time of the sale made them buyers in good faith.
Finally, petitioners question the award of attorney’s fees in favor of respondents for lack of basis.
Petitioners claim that they should be awarded damages because respondents unlawfully
prevented them from taking possession of the subject lot.
Respondents’ Arguments
Respondents counter that they are in possession of, and claiming ownership over the subject lot,
i.e., Lot 11-E-8-A, and not Lot 11-E-8-B. The claim of petitioners that the subject lot is different
from what respondents assert to be lawfully theirs is, thus, misleading. The subject lot was
acquired by respondents’ predecessor-in-interest, Magallanes, when Lazaro sold the same to
Magallanes through a contract to sell in 1979 and a deed of sale in 1980 after full payment of the
monthly installments.
After executing the contract to sell, Magallanes immediately took possession of the subject lot;
constructed a fence with barbed wire; and filled it up with soil in preparation for the construction
of concrete houses. She also built a nipa hut and stayed therein since 1979 up to her demise.
Respondents emphasize that upon payment of the full purchase price under the contract to sell
and the execution of the deed of sale, Magallanes undertook steps to protect her rights due to
the refusal of Lazaro to surrender the mother title of the subject lot. Magallanes recorded an
adverse claim at the back of the mother title of the subject lot and an initial notice of lis pendens
thereon. She then filed a civil case against Lazaro, and, later on, against Lazaro’s successors-in-
interest, Spouses Natividad, which resulted in the inscription of a notice of lis pendens on TCT
No. 51250 and TCT No. T-58606. When petitioners bought the subject lot from Spouses
Natividad on July 3, 1986, the said notice of lis pendens was subsisting because the court
dismissal of said case was inscribed on the title only on July 7, 1986. Petitioners cannot,
therefore, be considered buyers in good faith.
Our Ruling
We affirm the decision of the CA with modifications.
Petitioners and respondents are claiming ownership over the same lot.
Petitioners contend that they are claiming ownership over Lot 11-E-8-A while Magallanes’ claim
is over Lot 11-E-8-B. Thus, there is no conflict between their claims.
The argument is specious.
It is clear that Magallanes is claiming ownership over Lot 11-E-8-A and not Lot 11-E-8-B. In her
Answer to the Complaint, she alleged that she is "the absolute lawful owner of Lot 11-E-8-
A."24[24] Her act of fencing Lot 11-E-8-A and constructing two houses of strong materials thereon
further evince her claim of ownership over the subject lot. Thus, in the forcible entry case which
petitioners previously filed against Magallanes involving the subject lot, the trial court noted:
At the pre-trial conference held on June 13, 1990, both parties agreed to a relocation survey of
the lot whereupon the Court commissioned the Bureau of Lands to undertake a relocation survey
of the lot in question.
On October 1, 1990, the Bureau of Lands thru Engr. Filomeno P. Daflo submitted the relocation
survey report with the following findings: x x x
xxxx
5. That it was ascertained in our investigation that the entire lot occupied by [Magallanes] (lot 11-
E-8-A) is the very same lot claimed by the [petitioners], as pointed out by its representative.25[25]
(Emphasis supplied.)
After losing in the aforesaid forcible entry case, petitioners commenced the subject action for
quieting of title and recovery of ownership over Lot 11-E-8-A. Plainly, both parties are asserting
ownership over the same lot, i.e. Lot 11-E-8-A, notwithstanding the error in the entries made by
Magallanes in her zoning application and tax declaration forms.
The notice of lis pendens at the back of the mother title of the subject lot was already ordered
cancelled at the time of the sale of the subject lot to petitioners, hence, said notice cannot be
made a basis for finding petitioners as buyers in bad faith.
A notice of lis pendens at the back of the mother title (i.e., TCT No. T-58606) of Lot 11-E-8-A was
inscribed on September 2, 1983 in connection with the civil case for specific performance,
injunction and damages which Magallanes filed against Spouses Natividad. This case was
subsequently dismissed by the trial court for lack of jurisdiction in an Order dated September 16,
1985 which has already become final and executory as per the Certification dated June 16, 1986
issued by the Branch Clerk of Court of the RTC of Iloilo City, Branch 33.26 The aforesaid court
dismissal was, however, inscribed only on July 7, 1986 or three days after the sale of the subject
lot to petitioners.27
Based on these established facts, petitioners correctly argue that the said notice of lis
pendens cannot be made the basis for holding that they are buyers in bad faith. Indeed, at the
time of the sale of the subject lot by Spouses Natividad to petitioners on July 7, 1986, the civil
case filed by Magallanes against Spouses Natividad had long been dismissed for lack of
jurisdiction and the said order of dismissal had become final and executory. In Spouses Po Lam
v. Court of Appeals,28 the buyers similarly bought a property while a notice of lis pendens was
subsisting on its title. Nonetheless, we ruled that the buyers cannot be considered in bad faith
because the alleged flaw, the notice of lis pendens, was already being ordered cancelled at the
time of the sale and the cancellation of the notice terminated the effects of such notice.29
This notwithstanding, petitioners cannot be considered buyers in good faith because, as will be
discussed hereunder, they were aware of other circumstances pointing to a possible flaw in the
title of Spouses Natividad prior to the sale of the subject lot. Despite these circumstances,
petitioners did not take steps to ascertain the status of the subject lot but instead proceeded with
the purchase of the same.
One who buys a property with knowledge of facts which should put him upon inquiry or
investigation as to a possible defect in the title of the seller acts in bad faith.
Lot 11-E-8, of which the subject lot (i.e., Lot 11-E-8-A) forms part, was sold by Lazaro to two
different buyers. As narrated earlier, Lot 11-E-8 is a portion of Lot 11-E, a 5,333 sq. m. lot
covered by TCT No. T-51250. Lazaro subdivided the said lot and sold portions thereof to several
buyers. One of these buyers was Magallanes who purchased a 400 sq. m. portion on March 13,
1979. The metes and bounds of this lot were later delineated in a "Partition Agreement" dated
July 14, 1980 executed by Lazaro in favor of the aforesaid buyers. As per this agreement,
Magallanes and Mario Gonzales were assigned Lot 11-E-8 comprising 800 sq. m with each
owning a 400 sq. m. portion thereof. This was the first sale involving Lot 11-E-8.
After the aforesaid sale, it appears Lazaro refused to turnover the mother title of Lot 11-E which
resulted in the filing of legal suits by Magallanes and the other buyers against her (Lazaro). While
these suits were pending, Lazaro sold Lot 11-E-8 to her niece Lynn and the latter’s husband
Rogelio Natividad on November 23, 1981. Consequently, a new title, TCT No. T-58606, was
issued covering Lot 11-E-8 in the name of Spouses Natividad. This was the second sale of Lot
11-E-8.
Subsequently, Spouses Natividad subdivided Lot 11-E-8 into two, i.e., Lot 11-E-8-A and Lot 11-
E-8-B, with each containing 400 sq. m. On July 3, 1986, they sold Lot 11-E-8-A to petitioners. Lot
11-E-8-A is the 400 sq. m. portion of Lot 11-E-8 which Magallanes claims to be owned by her
pursuant to the aforesaid "Partition Agreement" while the other half, Lot 11-E-8-B, pertains to the
lot of Mario Gonzales.
The question before us, then, is who between petitioners and respondents have a better right
over Lot 11-E-8-A?
Article 1544 of the Civil Code provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
Thus, in case of a double sale of immovables, ownership shall belong to "(1) the first registrant in
good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer who in good faith
presents the oldest title."30However, mere registration is not enough to confer ownership. The law
requires that the second buyer must have acquired and registered the immovable property in
good faith. In order for the second buyer to displace the first buyer, the following must be shown:
"(1) the second buyer must show that he acted in good faith (i.e., in ignorance of the first sale
and of the first buyer’s rights) from the time of acquisition until title is transferred to him by
registration or failing registration, by delivery of possession; and (2) the second buyer must show
continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens
into full ownership through prior registration as provided by law."31
One is considered a purchaser in good faith if he buys the property without notice that some
other person has a right to or interest in such property and pays its fair price before he has notice
of the adverse claims and interest of another person in the same property.32 Well-settled is the
rule that every person dealing with registered land may safely rely on the correctness of the
certificate of title issued therefor and the law will in no way oblige him to go beyond the certificate
to determine the condition of the property.33 "However, this rule shall not apply when the party
has actual knowledge of facts and circumstances that would impel a reasonably cautious man to
make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the
title of the property in litigation."34 "His mere refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in his vendor’s title will not make
him an innocent purchaser for value if it later develops that the title was in fact defective, and it
appears that he had such notice of the defect had he acted with that measure of precaution
which may reasonably be required of a prudent man in a like situation."35 1avvphi 1
In the case at bar, both the trial court and CA found that petitioners were not buyers and
registrants in good faith owing to the fact that Magallanes constructed a fence and small hut on
the subject lot and has been in actual physical possession since 1979. Hence, petitioners were
aware or should have been aware of Magallanes’ prior physical possession and claim of
ownership over the subject lot when they visited the lot on several occasions prior to the sale
thereof. Thus, the trial court held:
This Court believes the version of [Magallanes], that when she bought the property from [Lazaro],
she took immediate possession of the 400-square meter portion and constructed a fence [with]
barbed wire surrounding the said property. She also constructed a house made of nipa, bamboo
and concrete materials. This fact was even confirmed by [petitioner] Zenaida Pudadera in her
testimony.
This Court cannot believe the testimony of [petitioner] Zenaida Pudadera that they were the ones
who constructed the fence surrounding the 400-square meter portion, because there was already
an existing fence made of bamboos and barbed wire put up by [Magallanes]. When the
[petitioners] therefore, visited the land in question, several times before the purchase, particularly
[petitioner] Ramy Pudadera, he must have seen the fence surrounding the property in question.
He should have been curious why there was an existing fence surrounding the property? [sic] He
should have asked or verified as to the status of the said property. A real estate buyer must
exercise ordinary care in buying x x x real estate, especially the existence of the fence in this
case which must have [alerted him to inquire] whether someone was already in possession of the
property in question.36
We find no sufficient reason to disturb these findings. The factual findings of the trial court are
accorded great weight and respect and are even binding on this Court particularly where, as
here, the findings of the trial and appellate courts concur.37 Although this rule is subject to certain
exceptions, we find none obtaining in this case.
Petitioners next argue that since the second sale involves Lazaro and their predecessor-in-
interest, Spouses Natividad, due process requires that Spouses Natividad should first be allowed
to establish that they (Spouses Natividad) are second buyers and first registrants in good faith
before any finding on petitioners’ own good faith can be made considering that they (petitioners)
merely acquired their title from Spouses Natividad. Petitioners lament that Spouses Natividad
were not impleaded in this case. Thus, the finding that petitioners acted in bad faith was
improper.
The argument fails on two grounds.
First, as previously explained, the evidence duly established that petitioners were aware of facts
pointing to a possible flaw in the title of Spouses Natividad when they visited the subject lot on
several occasions prior to the sale. This, by itself, was sufficient basis to rule that they acted in
bad faith. Stated differently, the presence or absence of good faith on the part of Spouses
Natividad during the second sale involving the subject lot will not erase the bad faith of
petitioners in purchasing the subject lot from Spouses Natividad.
Second, petitioners miscomprehend the right to due process. The records indicate that at no
instance during the trial of this case were they prevented from presenting evidence, including the
testimonies of Spouses Natividad, to support their claims. Thus, they were not denied their day in
court. Petitioners seem to forget that they were the ones who filed this action to recover
ownership and quiet title against Magallanes. If petitioners intended to bolster their claim of good
faith by impleading the Spouses Natividad in this case, there was nothing to prevent them from
doing so. Time and again, we have ruled that the burden of proof to establish the status of a
purchaser and registrant in good faith lies upon the one who asserts it.38 This onus
probandi cannot be discharged by mere invocation of the legal presumption of good faith.39
In sum, petitioners were negligent in not taking the necessary steps to determine the status of
the subject lot despite the presence of circumstances which would have impelled a reasonably
cautious man to do so. Thus, we affirm the findings of the lower courts that they cannot be
considered buyers and registrants in good faith. Magallanes, as the first buyer and actual
possessor, was correctly adjudged by the trial court as the rightful owner of the subject lot and
the conveyance thereof in favor of her heirs, herein respondents, is proper under the premises.
In addition, the trial court should be ordered to cause the cancellation of TCT No. T-72734 by the
Register of Deeds of Iloilo City and the issuance of a new certificate of title in the names of
respondents.40 This is without prejudice to any remedy which petitioners may have against
Spouses Natividad and/or Lazaro.
The award of attorney’s fees is improper.
On the issue of the propriety of attorney’s fees which the trial court awarded in favor of
respondents, we are inclined to agree with petitioners that the same should be deleted for lack of
basis. An award of attorney’s fees is the exception rather than the rule.41 "The right to litigate is
so precious that a penalty should not be charged on those who may exercise it erroneously."42 It
is not given merely because the defendant prevails and the action is later declared to be
unfounded unless there was a deliberate intent to cause prejudice to the other party.43 We find
the evidence of bad faith on the part of petitioners in instituting the subject action to be wanting.
Thus, we delete the award of attorney’s fees.
WHEREFORE, the petition is PARTIALLY GRANTED. The June 6, 2005 Decision and
September 20, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 55850
are AFFIRMED with the following MODIFICATIONS: (1) The Regional Trial Court of Iloilo City,
Branch 39 is ORDERED to cause the cancellation by the Register of Deeds of Iloilo City of TCT
No. T-72734 and the issuance, in lieu thereof, of the corresponding certificate of title in the
names of respondents, heirs of Daisy Teresa Cortel Magallanes, and (2) The award of attorney’s
fees in favor of respondents is DELETED.
SO ORDERED.
G.R. No. 198656 September 8, 2014
NANCY S. MONTINOLA, Petitioner,

vs.
PHILIPPINE AIRLINES, Respondnet.
DECISION
LEONEN, J.:
Illegally suspended employees, similar to illegally dismissed employees, are entitled to moral
damages when their suspension was attended by bad faith or fraud, oppressive to labor, or done
in a manner contrary to morals, good customs, or public policy.
Petitioner Nancy S. Montinola (Montinola) comes to this court via a petition for review on
certiorari under Rule 45 of the Rules of Court. She assails the decision1 of the Court of
Appeals2 dated June 28, 2011 and its resolution3 dated September 20, 2011 in Philippine Airlines
v. National Labor Relations Commission and Nancy S. Montinola.4 The Court of Appeals affirmed
the finding of the National Labor Relations Commission that petitioner was suspended illegally
but deleted the award of moral and exemplary damages and attorney’s fees.5
The deletion of the award of attorney’s fees and moral and exemplary damages is the subject of
this petition.
Montinola was employed as a flightattendant of Philippine Airlines (PAL) since 1996.6 On January
29, 2008, Montinola and other flight crew members were subjected to custom searches in
Honolulu, Hawaii, USA. Items from the airline were recovered from the flight crew by customs
officials. Nancy Graham (Graham), US Customs and Border Protection Supervisor, sent an email
to PAL regarding the search. The email7 contained a list of PAL flight crewmembers involved in
the search:
FP CHUIDIAN, JUAN DE GUZMAN
FS CARTAGENA, REGINALD
FS NAVA, PETER DE GUZMAN
FS PADILLA, ANGELITO
FA CRUZ, MARIA FA MONTINOLA, NANCY
FA VICTA, ROSE ANN (Emphasis supplied)
Another email8 enumerated the list of items taken from the crew members:
Katie,
Here is the list.
Flight Crew Blitz in gate area 10 crew. Seven of the 10 crew members had items removed from
the aircraft on their possession. Two additional bags were found on jet-way after blitz. No bonded
items were found but crew removed food items as listed:
18 bags Doritos
15 bags Banana Chips
5 pkg instant chocolate
5 bars Granola
18 bars Kit Kat
34 Chocolate flavored Goldilocks
16 Regular Goldilocks cakes
9 1st class Bulgari Kits
2 magazines
6 rolls toilet paper
9 cans soda
16 bottles of water
1 yogurt
12 small ice creams
2 jars salsa
2 bottles Orange Juice
1 bottle Cranberry Juice
1 bottle smoothie
All items returned to Philippine Airlines.
Nancy I. Graham
Supervisory CBPO
A-TCET Air
Honolulu Hi
PAL conducted an investigation. Montinola was among those implicated because she was
mentioned in Graham’s email.9 On February 1, 2008, PAL’s Cabin Services Sub-Department
required Montinola to comment on the incident.10She gave a handwritten explanation three days
after, stating that she did not take anything from the aircraft. She also committed to give her full
cooperation should there be any further inquiries on the matter.11
On February 22, 2008, PAL’s International Cabin Crew Division Manager, Jaime Roberto A.
Narciso (Narciso), furnished Montinola the emails from the Honolulu customs official.12 This was
followed by a notice of administrative charge13 which Narciso gave Montinola on March 25, 2008.
On April 12, 2008, there was a clarificatory hearing.14 The clarificatory hearing was conducted by
a panel of PAL’s Administrative Personnel, namely, Senior Labor Counsel Atty. Crisanto U.
Pascual (Atty. Pascual), Narciso, Salvador Cacho, June Mangahas,Lina Mejias, Carolina
Victorino, and Ruby Manzano.15
Montinola alleged that her counselobjected during the clarificatory hearing regarding PAL’s
failure to specify her participation in the alleged pilferage.16 Atty. Pascual threatened Montinola
that a request for clarification would result in a waiver of the clarificatory hearing.17 This matter
was not reflected in the transcript of the hearing.18Despite her counsel’s objections, Montinola
allowed the clarificatory hearings to proceed because she "wanted to extend her full cooperation
[in] the investigation[s]."19
During the hearing, Montinola admitted that in Honolulu, US customs personnel conducted a
search of her person. At that time, she had in her possession only the following food items:
cooked camote, 3-in-1 coffee packs, and Cadbury hot chocolate.20
PAL, through Senior Assistant Vice President for Cabin Services Sub- Department Sylvia
C.Hermosisima, found Montinola guilty of 11 Violations21 of the company’s Code ofDiscipline and
Government Regulation. She was meted with suspension for one (1) year without
pay.22 Montinola asked for a reconsideration.23 Hermosisima, however, denied her motion for
reconsideration a month after.24
Montinola brought the matter before the Labor Arbiter.25 The Labor Arbiter26 found her suspension
illegal,27 finding that PAL never presented evidence that showed Montinola as the one
responsible for any of the illegally taken airline items.28 The Labor Arbiter ordered Montinola’s
reinstatement with backwages, inclusive of allowances and benefits amounting to ₱378,630.00.29
In addition, the Labor Arbiter awarded moral damagesin the amount of ₱100,000.00 and
exemplary damages amounting to ₱100,000.00 for the following reasons:30
This Office observes that the records are replete with substantial evidence that the
circumstances leading to complainant’s one-year suspension without pay are characterized by
arbitrariness and bad faith on the part of respondents. The totality ofrespondents’ acts clearly
shows that complainant had been treated unfairly and capriciously, for which complainant should
be awarded moral damages in the amount of One Hundred Thousand Pesos (₱100,000.00) and
exemplary damages also in the amount of One Hundred Thousand Pesos (₱100,000.00).31
The Labor Arbiter also awarded attorney’s feesto Montinola because she was "forced to litigate
and incur expenses to protect [her] rights."32
PAL appealed the Labor Arbiter’sdecision to the National Labor Relations Commission
(NLRC).33 During the pendency of the appeal, PAL submitted new evidence consisting of an
affidavit executed by Nancy Graham, the Customs and Border Protection Supervisor who
witnessed the January 29, 2008 search in Honolulu.34 This affidavit enumerated the names of the
flight crew members searchedby the Honolulu customs officials. However, the National Labor
RelationsCommission observed that "it was categorically admitted in the said declaration that
Ms. Graham did not know which items were attributable to eachof the seven crew members
whom she identified and there was no individual inventories (sic)."35
Through the resolution36 dated June 9, 2009,the National Labor Relations Commission37 affirmed
the decision of the Labor Arbiter. PAL appealed the Commission’s decision to the Court of
Appeals through a petition for certiorari.38
The Court of Appeals affirmed the decisions of the Labor Arbiter and National Labor Relations
Commission in finding the suspension illegal.39 However, the Court of Appeals modified the
award:
WHEREFORE, premises considered, the petition is DENIED. Respondent NLRC’s Decision in
NLRC LAC No. 01000263-09 (NLRC NCR CN 08-11137-08), dated June 9, 2009, is AFFIRMED
with MODIFICATION in that the award of moral and exemplary damages and attorney’s fees to
private respondent are deleted.40 (Emphasis supplied)
The Court of Appeals deleted the moral and exemplary damages and attorney’s fees stating that:
Relevant to the award of moral damages, not every employee who is illegally dismissed or
suspended isentitled to damages. Settled is the rule that moral damages are recoverable only
where the dismissal or suspension of the employee was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy. Bad faith does not simply mean negligence or bad judgment. It involves
a state of mind dominated by ill will or motive. It implies a conscious and intentional design to do
a wrongful act for a dishonest purpose orsome moral obliquity. The person claiming moral
damages must prove the existence of bad faith by clear and convincing evidence for the law
always presumes good faith.
In the case at bar, there is no showing that PAL was moved by any ill will or motive in
suspending private respondent. It is evident that petitioner gave private respondent every
opportunity to refute the charges against her and to present her side as part of due
process.These negate the existence of bad faith on the part of petitioner. Under the
circumstances, we hold that private respondent is not entitled to moral damages and exemplary
damages. Furthermore, the Court finds the award of attorney’s fees improper. The award of
attorney’s fees was merely cited in the dispositive portion of the decision without the RTC [sic]
stating any legal or factual basis for said award.41 (Citations omitted)
Montinola filed a partial motion for reconsideration,42 praying that the award of moral and
exemplary damages and attorney’s fees be reintegrated into the decision. PAL also filed a
motion for reconsideration,43 but its motion sought a complete reversal of the decision.
The Court of Appeals denied both motions.44 Only Montinola sought to continue challenging the
Court of Appeals’ decision through a petition for review on certiorari45 brought to this court.
The sole issue in this case is whether Montinola’s illegal suspension entitled her to an award of
moral and exemplary damages and attorney’s fees.
Montinola claims that she is entitled to moral damages because her illegal suspension was
attended by bad faith, causing her to suffer "mental anguish, fright, serious anxiety, and moral
shock."46 Furthermore, the illegal suspension tarnished her good standing.47 Prior to this incident
and in her 12 years of service, she was never charged administratively.48 The illegal suspension
likewise affected her family because it created "a state of uncertainty and adversity."49
Montinola underscores that the investigation against her was conducted in a "hasty, impetuous,
harsh and unjust"50manner. She was not properly apprised of the charges against her.51 She
requested for proper notice of the acts violative of PAL’s Codeof Discipline. Instead of giving
proper notice, PAL threatened that she would be waiving her right to a clarificatory hearing if she
insisted on her request.52
Montinola likewise alleges that PAL violated its own rules by not applying the same penalty
uniformly.53 Flight Purser Juan Chuidian III was involved in the same incident and was likewise
suspended. However, on motion for reconsideration, PAL allowed him to retire early without
serving the penalty of suspension.54
The claim for exemplary damages isanchored on Montinola’s belief that such damages "are
designed to permit the courts to mould behaviour that has socially deleterious consequences,
and their imposition is required by public policy to suppress the wanton acts of the offender."55 In
Montinola’s view, PAL suspended her in a "wanton, oppressive, and malevolent manner."56
Finally, Montinola argues that she is entitled to attorney’s fees because she was forced to litigate.
In Article 2208, paragraph (2) of the Civil Code, individuals forced to litigate may ask for
attorney’s fees.
On the other hand, PAL argues that moral damages are only recoverable when "the dismissal of
the employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or
was done in a manner contrary to morals, good customs or public policy."57 The company
believes that Montinola failed to present clear and convincing proof of bad faith.
PAL stands by how it investigated the alleged pilferage of the in-flight items in the January 29,
2008 flight. Itbelieves that it afforded due process to Montinola and the other implicated crew
members. From PAL’s point of view, she was given an opportunity to explain her side and was
even assisted by counsel of her choice.58
PAL claims that since moral damages have not been proven, exemplary damages should
likewise not be awarded.59
Moreover, PAL argues that Montinola failed to provide basis for the award of attorney’s fees.
Attorney’s fees are only awarded when the trial court (or in this case, the Labor Arbiter) states a
factual, legal, or equitable justification for awarding the same.60
Montinola is entitled to moral and exemplary damages. She is also entitled to attorney’s fees.
The Labor Code provides:
Art. 279. Security of Tenure – In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
Security of tenure of workers is not only statutorily protected, it is also a constitutionally

guaranteed right.61 Thus, any deprivation of this right must be attended by due process of
law.62 This means that any disciplinary action which affects employment must pass due process
scrutiny in both its substantive and procedural aspects.
The constitutional protection for workers elevates their work to the status of a vested right. It is a
vested right protected not only against state action but against the arbitrary acts of the employers
as well. This court in Philippine Movie Pictures Workers’ Association v. Premier Productions,
Inc.63 categorically stated that "[t]he rightof a person to his labor is deemed to be property within
the meaning of constitutional guarantees."64 Moreover, it is of that species of vestedconstitutional
right that also affects an employee’s liberty and quality of life. Work not only contributes to
defining the individual, it also assists in determining one’spurpose. Work provides for the material
basis of human dignity.
Suspension from work is prima facie a deprivation of this right. Thus, termination and suspension
from workmust be reasonable to meet the constitutional requirement of due process of law. It will
be reasonable if it is based on just or authorized causes enumerated in the Labor Code.65
On the other hand, articulation of procedural due process in labor cases is found in Article 277(b)
ofthe Labor Code, which states:
(b) Subject to the constitutional right of workers to security of tenure and their right tobe protected
against dismissal except for a just and authorized cause and without prejudice to the requirement
of notice under Article 283 of this Code, the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a statement of the causes for
termination and shall afford the latter ample opportunity to be heard and to defend himself with
the assistance of his representative if he so desires in accordance with the company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment.
Any decision taken bythe employer shall be without prejudice to the right of the worker to consent
the validity or legality of his dismissal by filing a complaint with the regional branch of the
National Labor Relations Commission. The burden of proving that the termination was for a valid
or authorized cause shall rest on the employer.
The procedure can be summarized in this manner. First, the employer must furnish the employee
with a written notice containing the cause for termination. Second, the employer must give the
employee an opportunity to be heard. This could be done either through a position paper or
through a clarificatory hearing.66 The employee may alsobe assisted by a representative or
counsel. Finally, the employer must give another written noticeapprising the employee of its
findings and the penalty to be imposed against the employee, if any.67 In labor cases, these
requisites meet the constitutional requirement of procedural due process, which "contemplates
notice and opportunity to be heard before judgment is rendered, affecting one’s person or
property."68
In this case, PAL complied with procedural due process as laid out in Article 277, paragraph (b)
of the LaborCode. PAL issued a written notice of administrative charge, conducted a clarificatory
1âwphi 1
hearing, and rendered a written decision suspending Montinola. However, we emphasize that the
written notice of administrative charge did not serve the purpose required under due process.
PAL did not deny her allegation that there would be a waiver of the clarificatory hearing ifshe
insisted on a specific notice of administrative charge. With Montinola unable to clarify the
contents of the notice of administrative charge, there were irregularities in the procedural due
process accorded to her.
Moreover, PAL denied Montinola substantial due process.
Just cause has to be supported by substantial evidence. Substantial evidence, or "such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion,"69 is the
quantum of evidence required in administrative bodies such as the National Labor Relations
Commission. It is reasonable to expect the employer to consider substantial evidence in
disciplinary proceedings against its employees. The employer’s decision will be subject to review
by the LaborArbiter and National Labor Relations Commission.
The employer has the burden of proof in showing that disciplinary action was made for lawful
cause.70 The employer must consider and show facts adequate to support the conclusionthat an
employee deserves to be disciplined for his or her acts or omissions.
PAL, however, merely relied on these pieces of information in finding administrative liability
against Montinola:
1) a list of offenses found in PAL’s Code of Discipline that Montinola allegedly violated;
2) a list of flight crew members that were checked at the Honolulu airport; and
3) a list of all items confiscated from allthese flight crew members.

The lists are not sufficient to show the participation of any of the flight crew members,least of all
Montinola. None of the evidence presented show that the customs officials confiscated any of
these items from her. Thus, the evidence by themselves do not show that Montinola pilfered
airline items.
Together with the manner in which the investigation proceeded, i.e., that Montinola was
prevented from asking for clarification of the charges against her, the absence of substantial
evidence is so apparent that disciplining an employee only on these bases constitutes bad faith.
Under the Labor Code, Labor Arbitersare authorized by law to award moral and exemplary
damages:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and
decide within thirty (30) calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:
....
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations[.]
The nature of moral damages is defined under our Civil Code. Article 2220 states that "[w]illful
injury to property may be a legal ground for awarding moral damages if the court should find that,
under the circumstances, such damages are justlydue. The same rule applies to breaches of
contract where the defendantacted fraudulently or in bad faith." In Primero v. Intermediate
Appellate Court,71 this court stated that damages, as defined in the Civil Code, is recoverable in
labor cases. Thus, moral damages:
. . . cannot be justified solely upon the premise (otherwise sufficient for redress under the Labor
Code) that the employer fired his employee without just cause or due process. Additional facts
must be pleaded and proven to warrant the grant of moral damages under the Civil Code, these
being, to repeat, that the act of dismissal wasattended by bad faith or fraud, or was oppressive to
labor, or done ina manner contrary to morals, good customs, or public policy;and, of course, that
social humiliation, wounded feelings, grave anxiety, etc., resulted therefrom.72
The employee is entitled to moral damages when the employer acted a) in bad faith or fraud; b)
in a manner oppressive to labor; or c) in a manner contrary to morals, good customs, or public
policy.
Bad faith "implies a conscious and intentional design to do a wrongful act for a dishonest
purpose or moral obliquity."73 Cathay Pacific Airways v. Spouses Vazquez74 established that bad
faith must be proven through clear and convincing evidence.75 This is because "[b]adfaith and
fraud . . . are serious accusations that can be so conveniently and casually invoked, and that is
why they are never presumed. They amount to mere slogans or mudslinging unless convincingly
substantiated by whoever is alleging them."76 Here, there was clear and convincing evidence of
bad faith adduced in the lower tribunals.
PAL’s actions in implicating Montinola and penalizing her for no clear reason show bad faith.
PAL’s denial of her request to clarify the charges against her shows its intent to do a wrongful act
for moral obliquity. If it were acting in good faith, it would have gathered more evidence from its
contact in Honolulu or from other employees before it started pointing fingers. PAL should not
have haphazardly implicated Montinola and denied her livelihood even for a moment.
PAL apparently granted Montinola procedural due process by giving her a notice of
administrative charge and conducting a hearing. However, this was more apparent than real. The
notice of administrative charge did not specify the acts committed by Montinola and how these
acts violated PAL’s Code of Discipline. The notice did not state which among the items
confiscated by the US customs officials were originally found in Montinola’s possession. Worse,
the panel of PAL officers led by Atty. Pascual did not entertain any query toclarify the charges
against her.
There is denial of an opportunity to be heard if the employee is not clearly apprised of the acts
she committed that constituted the cause for disciplinary action. The Omnibus Rules
Implementing the Labor Code requires that "a written notice [be] served on the employee
specifying the ground or grounds for termination, and giving said employee reasonable
opportunity within which to explain his side."77 Reasonable opportunity has been described as
"every kind of assistance that managementmust accord to the employees to enable them to
prepare adequately for their defense."78
When the alleged participation of the employee in the illicit act which serves as a basis for the
disciplinary action is not clear from the notice, the opportunity to be heard will not be reasonable.
The notice fails to meet reasonable standards. It does not have enough information to enable the
employee to adequatelyprepare a defense.
Moreover, the list of provisions in PAL’s Code of Discipline allegedly violated was long and
exhaustive. PAL’s notice of administrative charge stated that it had probable cause to
1âw phi 1
administratively chargeMontinola of the following:
I. ILLEGAL ACTS – Section 2/Article 20
....
As a cabin attendant you should know very well the laws, rules and regulations of
every country in which the Company operates including the entry/exit
requirements to which your cabin crew must adhere.
II. VIOLATION OF LAW/GOVERNMENT REGULATIONS – Section 6/Article 46
....
Incident is a violation of the Entry/Exit requirements in HNL Station, as quoted:
"Note: U.S. Customs Trade Law/Sec. 301 on Intellectual Property Right prohibits
bringing of counterfeit consumer goods such as fake bags, clothes, shoes,
colognes, books, medicine, audio/video tapes & CD’s." (ref. Entry-Exit
Requirements Quick Reference Guide–Transpacific)
III. ANTI-COMPANY OFFENSES – Article 44/Section 5
....
As noted on the e-mail report from HNL Station dated 30 January 2008, PAL will
be penalized by customs and border protection – HNL due to cabin crew took
items again from the aircraft upon arrival.
Article 26 NON-OBSERVANCE OF QUALITY STANDARDS
....
As a cabin attendant, it is yourresponsibility to strictly adhered [sic] to the rules,
regulations, prescriptions, mandates and policies of the Company.
Article 28 INEFFICIENCY AND WASTE
....
The subject items confiscated at the holding gate area are Company supplies
and resources which must only be consumed or utilized reasonably inflight [sic].
Article 37 ANTI-TEAMWORK OFFENSES
....
In the email report from HNL Station, Ms. Nancy Graham, CBP–Supervisor your
name was specifically listed as part of the cabin crew members who were
involved in the Flight
Crew Blitz in gate area.
Article 38 INSUBORDINATIONS OR WILLFUL DISOBEDIENCE
....
Article 58 MISHANDLING/MISUSE OF COMPANY FUNDS, PROPERTY OR

RECORDS
....
The subject items confiscated at the holding gate area are Company supplies
and resources which must only be consumed or utilized reasonably inflight [sic].
Article 59 THEFT, PILFERAGE, OR EMBEZZLEMENT
....
As noted on the e-mail reports from HNL Station both from Station Supervisor,
Ms. Keity Wells and Ms. Nancy Graham, CBP–Supervisor, The different items
confiscated are taken by the cabin crew from the aircraft upon arrival.
Article 61 UNOFFICIAL USE OF COMPANY PROPERTY AND FACILITIES
....
IV. FAILURE ON THE JOB – Article 25/Section 2
....
As a cabin attendant, you should know very well the certain laws, rules and regulations ofevery
country in which the Company operates. Thus, adherence (sic) to these rules and regulations is
a must.79
To constitute proper notice, the facts constitutive of the violations of these rules — and not just
the rules of conduct — must be clearly stated. Proper notice also requires that the alleged
participation of the employee be clearly specified. Without these, the most fundamental
requirement of a fair hearing cannot be met.
Parenthetically, we note that the enumeration of rules violated even included violation of "U.S.
Customs Trade Law/Sec. 301 on Intellectual Property Right." This has no bearing on the basis
for the termination or suspension of the employee. It only serves to confuse. At worse, it is
specified simply to intimidate.
Montinola was found by PAL to be guilty of allthe charges against her. According to PAL, "[t]hese
offenses call for the imposition of the penalty of Termination, however, we are imposing upon you
the reduced penalty of One (01) year Suspension."80 It is not clear how she could violate all the
prestations in the long list of rules she allegedly violated. There is also no clear explanation why
termination would be the proper penalty to impose. That the penalty was downgraded, without
legal explanation, to suspension appears as a further badgeof intimidation and bad faith on the
part of the employer.
Nothing in PAL’s action supports the finding that Montinola committed specific acts constituting
violations of PAL’s Code of Discipline.
This act of PAL is contrary tomorals, good customs, and public policy. PAL was willing to deprive
Montinola of the wages she would have earned during her year of suspension even if there was
no substantial evidence that she was involved in the pilferage.
Moral damages are, thus, appropriate. In Almira v. B.F. Goodrich Philippines, this court noted
that unemployment "brings untold hardships and sorrows on those dependent on the wage-
earner."81 This is also true for the case of suspension. Suspension istemporary unemployment.
During the year of her suspension, Montinola and her family had to survive without her usual
salary. The deprivation of economic compensation caused mental anguish, fright, serious
anxiety, besmirched reputation, and wounded feelings. All these are grounds for an award of
moral damages under the Civil Code.82
II
Montinola is also entitled to exemplary damages.
Under Article 2229 of the Civil Code, "[e]xemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages." As this court has stated in the past: "Exemplary damages are designed
by our civil law to permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behaviour."83
If the case involves a contract, Article 2332 of the Civil Code provides that "the court may award
exemplary damages if the defendant acted in a wanton, fraudulent, reckless,oppressive or
malevolent manner." Thus, in Garcia v. NLRC,84 this court ruled that in labor cases, the court may
award exemplary damages "if the dismissal was effected in a wanton, oppressive or malevolent
manner."85
It is socially deleterious for PAL to suspend Montinola without just cause in the manner suffered
by her.Hence, exemplary damages are necessary to deter future employers from committing the
same acts.
III
Montinola is also entitled to attorney’s fees.

Article 2208 of the Civil Code enumerates the instances when attorney’s fees can be awarded:
ART. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation,other than
judicialcosts, cannot be recovered, except:
(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third
(5) Where the defendant acted ingross and evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable claim;
workers;
(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;
(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. (Emphasis
supplied)
This case qualifies for the first, second, and seventh reasons why attorney’s fees are awarded
under the Civil Code.
First, considering thatwe have awarded exemplary damages in this case, attorney’s fees
canlikewise be awarded.
Second, PAL’s acts and omissionscompelled Montinola to incur expenses to protect her rights
with the National Labor Relations Commission and the judicial system. She went through four
tribunals, and she was assisted by counsel. These expenses would have been unnecessary if
PAL had sufficient basis for its decision to discipline Montinola.
Finally, the action included recovery for wages. To bring justice to the illegal suspension of
Montinola, she asked for backwages for her year of suspension:
PAL argued that the factual, legal, or equitable justification for awarding attorney's fees must be
stated in the Labor Arbiter's decision. The legal justification of the Labor Arbiter is apparent in the
decision:
Complainant's claim for attorney's fees is also justified. It is settled that where an employee was
forced 'to litigate and incur expenses to protect his rights and interest, as in the instant case, he
is entitled to an award of attorney's fees (Building Case Corp. vs. NLRC, G.R. No. 94237,
February 26, 1997). She is thus granted attorney's fees equivalent to ten percent of the total
award.86
We find no factual, legal, or equitable reason to depart from this justification. Hence, we also
affirm the award of attorney's fees equivalent to 10% of the total award, or ₱57,863.00.87
We acknowledge the right of PAL to be constantly vigilant to prevent and deter pilferage. After
all, that is equally its property which is also protected by the Constitution. However, PAL cannot
assume liability on the employee. It has to endeavor to move through its administrative
investigations more humanely and more in consonance with the law. Its employees may only
have their work. It is their work, no matter what the classification and how significant they may be
in the eyes of their employer, that should give them their dignity.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. SP
No. 112552 is MODIFIED in order to REINTEGRATE the award for moral damages of
₱100,000.00, exemplary damages of ₱100,000.00, and attorney's fees of ₱57,863.00.
SO ORDERED
G.R. No. 104576 January 20, 1995
MARIANO L. DEL MUNDO, petitioner,

vs.
HON. COURT OF APPEALS, JOSE U. FRANCISCO and GENOVEVA V.
ROSALES, respondents.
VITUG, J.:
Mariano Del Mundo ("Del Mundo") impugns in this petition for review on certiorari the 07th April
1989 decision 1 of the Court of appeals which has affirmed, with modification, the 29th June 1984
decision2 of the Regional Trial Court of Quezon City ordering him, together with the Republic
Planters bank ("RPB"), inter alia, to pay jointly and severally herein private respondents, the
spouses Jose Francisco and Genoveva Francisco ("Franciscos"), the sum of P200,000.00 by
way of actual and moral damages, as well as P6,000.00 of attorney's fees, plus litigation
expenses.
The Franciscos are the owners of a parcel of land, with an area of 38,010 square meters,
situated in Barrio Anilao, Municipality of Mabini, Province of Batangas, covered by and described
in Original Certificate of title ("OCT") No. 0-3267 of the Registry of deeds of Batangas. Del
Mundo, on the other hand, is the operator of a dive camp resort adjacent to the property.
Sometime in June of 1980, Del Mundo, on the other hand, is the operator of a dive camp resort
adjacent to the property.
Sometime in June of 1980, Del Mundo proposed a corporate joint venture with the Franciscos for
the development of the latter's property. The corporation (to be named the "Anilao Development
Corporation") would have a capital stock of One Million (P1,000,000.00) Pesos to be subscribed
equally between Del Mundo and the Franciscos. To cover the proposed subscription of the
Franciscos, Del Mundo assured the couple that he could get from them a P125,000.00 loan
secured by the realty.3
The Franciscos executed a special power of attorney ("SPA"), dated 25 July 1980,4 in favor of
Del Mundo authorizing him to obtain a bank loan. The SPA, in part, provided:
1. To negotiate for a loan with any bank or financial institution, in such amount or
amounts as our said attorney-in-fact may deem proper and expedient and under
such terms and conditions as he may also deem proper and convenient;
2. To sign, execute and deliver by way of first mortgage in favor of said bank or
financial institution on our property situated in Anilao, Mabini, Batangas, . . .
3. To receive and receipt for the proceeds of the loan, and to sign such other
papers and documents as may be necessary in connection therewith;
GIVING AND GRANTING unto our said attorney-in-fact full power and authority
as we might or could do if personally present and acting in person, and hereby
CONFIRMING all that our said attorney-in-fact may lawfully do under and by
virtue of these presents.
Only the duplicate copy of the SPA was given to Del Mundo by the Francisco. The latter kept the
original copy but agreed to have it delivered to Del Mundo once he would have been able to firm
up the P125,000.00 financing to cover their (the Franciscos) proposed subscription.5 Aside from
the special power of attorney, the Franciscos, who were then about to depart for abroad,6 turned
over to Del Mundo the physical possession of the real property along with its existing facilities
and equipment.
Del Mundo proceeded to the Republic Planters Bank ("RPB") to apply for the loan. After the loan
application was approved, Del Mundo executed a deed of real estate mortgage over the
Franciscos' property to secure a P265,000.00 loan. The mortgage, however, could not be
annotated on the owner's copy of OCT NO. 0-3267, then in the possession of the Development
Bank of the Philippines ("DBP") which had a previous mortgage lien on it. To obtain said owner's
copy, the RPB agreed to assume, and thereafter paid, Franciscos' outstanding indebtedness to
the DBP. The latter, despite the payment, refused to release the owner's copy of the certificate of
title due to Franciscos' objection.7 In order to allow the release of the loan proceeds, Del Mundo
submitted additional collaterals. The RPB then withdrew its previous payment to the DBP of
P22,621.75, and the P265,000.00 loan was forthwith released to Del Mundo.8
The joint venture did not materialize. The Franciscos wrote a demand letter addressed to Del
Mundo for the payment of rentals for the use of their property at the rate of P3,000.00 a month
(totalling P42,000.00) and for the return of the equipment taken by Del Mundo from
the bodega of the Franciscos valued at P15,000.00.9
Since Del Mundo failed to settle with the Franciscos, the latter sued Del Mundo, along with the
RPB, for annulment of the mortgage, as well as for damages, before the Regional Trial Court of
Quezon City. The Franciscos asserted that Del Mundo made use of their property for his sole
benefit and purpose, and that the use of the property could not have been availed by Del Mundo
himself had it not been for the latter's proposal to put up the joint venture. After trial, the trial court
rendered judgment, dated 29 June 1984, 10 in favor of the Franciscos thusly:
(1) Declaring the real estate mortgage (Exh. E) executed by defendant Mariano
Del Mundo in favor of defendant Republic Planters Bank on January 10, 1981,
null and void ab initio;
(2) Declaring the unauthorized payments made by defendant Republic Planters

Bank to the Development Bank of the Philippines for the account of plaintiffs as
null and void;
(3) Ordering defendant Mariano L. del Mundo to pay to plaintiffs the sum of
P42,000.00 as reasonable rental payment for the use and occupancy of plaintiffs'
property, plus P15,000.00 representing the value of equipment taken by said
defendant from plaintiffs;
(4) Ordering defendants jointly and severally, to pay to plaintiffs the sum of
P200,000.00 as actual and moral damages, plus P6,000.00 as attorney's fees
and litigation expenses, plus costs;
(5) Ordering plaintiffs to reimburse defendant Republic Planters Bank the sum of
P67,000.00;
(6) Dismissing defendants' counterclaims for lack of merit. 11
Both parties appealed the decision to the Court of Appeals. While the appeal was pending, Jose
Francisco died; he was substituted by his heirs. On 07 April 1989, the court of Appeals rendered
its now assailed decision 12 which decreed:
WHEREFORE, the appealed decision is hereby AFFIRMED in all respects

subject to the modification that plaintiff-appellants be absolved of any liability to
appellant bank. 13
On its assumption that the decision had already become final and executory, the Court of
Appeals made an entry of judgment on 28 September 1989. 14 Thus, RPB, sometime in October
1990, paid Genoveva Francisco and the substituted heirs the amount of P209,126.00, the extent
to which RPB was held to be jointly and solidarily liable with Del Mundo conformably with the
appellate court's decision (affirming that of the trial court). 15 The Franciscos acknowledged the
payment and manifested that "(t)he only amount not satisfied . . . (was) the amount due solely
from defendant Mariano L. Del Mundo" pursuant to that portion of the judgment —
3) Ordering defendant Mariano L. Del Mundo to pay plaintiffs the sum of

P42,000.00 as reasonable rental payment for the use and occupancy of plaintiff's
property, plus P15,000.00 representing the value of equipment taken by said
defendant from plaintiffs; 16
When Del Mundo learned, for the first time, that a writ of execution pursuant to the appellate
court's decision was sought to be implemented against his property on 09 October 1990, he filed
on the very next day, or on 10 October 1990, an urgent manifestation with motion to lift the entry
of judgment against him alleging non-service of the assailed decision. 17 The appellate court
acted favorably on Del Mundo's motion and, "in the interest of justice," 18 he was also allowed to
file his own for reconsideration. He did in due time. 19
After Del Mundo's motion for reconsideration was denied on 18 March 1992, the present petition
was seasonably instituted assigning three alleged errors; viz:
A.
RESPONDENT C.A. ERRED IN AFFIRMING THE TRIAL COURT'S FINDING

THAT PRIVATE RESPONDENTS HAVE A CAUSE OF ACTION AGAINST
PETITIONER DESPITE THE TOTAL ABSENCE OF DAMAGE ON THE PART
OF PRIVATE RESPONDENTS.
B.
RESPONDENT C.A. ERRED IN AFFIRMING THE TRIAL COURT'S DECISION

DESPITE THE FACT THAT SAID DECISION DOES NOT STATE THE FACTS
AND THE LAW ON WHICH IT IS BASED IN GROSS VIOLATION OF SEC. 9, X
OF THE 1973 CONSTITUTION THEN IN FORCE AND EFFECT.
C.
RESPONDENT C.A. ERRED IN AFFIRMING THE TRIAL COURT'S DECISION

ORDERING PETITIONER AND CO-DEFENDANT REPUBLIC PLANTERS BANK
("RPB") TO PAY PRIVATE RESPONDENTS, JOINTLY AND SEVERALLY, THE
SUM OF p200,000.00 AS ACTUAL AND MORAL DAMAGES PLUS
ATTORNEY'S FEES, AND COSTS/EXPENSES OF LITIGATION.
We see partial merit in the petition.
In its 29th June 1984 decision, the trial court, after summarizing the conflicting asseverations of
the parties, went on to discuss, and forthwith to conclude on, the kernel issue of the case in just
two paragraphs, to wit:
The evidence disclose that defendant RPB executed said mortgage with del
Mundo, although the original of said special power-of-attorney and the original of
the owner's duplicate certificate of title was not presented to it and without
requiring its registration. Under the circumstances, the mortgage to defendant
RPB was irregularity executed, justifying annulment of said mortgage in its favor.
However, the evidence disclose that plaintiffs has received the sum of
P45,000.00 from del Mundo, and the sum of P22,300.00 was paid to DBP (Exh.
F) and applied to plaintiffs' previous loan with DBP, as part of an agreement
between plaintiffs and del Mundo, or a total of P67,300.00. Plaintiffs are,
therefore, duty bound to make reimbursement of said amount to RPB, as they
cannot be allowed to enrich themselves at RPB's expense and prejudice. 20
After that brief disquisition, the trial court disposed of the case by ordering Del Mundo and
RPB, inter alia, jointly and severally to pay the Franciscos the sum of P200,000.00 as actual and
moral damages, P6,000.00 as attorney's fees, and litigation expenses plus costs.
It is understandable that courts, with their heavy dockets and time constraints, often find
themselves with little to spare in the preparation of decisions to the extent most desirable. We
have thus pointed out that judges might learn to synthesize and to simplify their
pronouncements. 21 Nevertheless, concisely written such as they may be, decisions must still
distinctly and clearly express, at least in minimum essence, its factual and legal bases. 22
The two awards — one for actual damages and the other for moral damages — cannot be dealt
with in the aggregate; neither being kindred terms nor governed by a coincident set of rules, each
must be separately identified and independently justified. A requirement common to both, of
course, is that an injury must have been sustained by the claimant. The nature of that injury,
nonetheless, differs for while it is pecuniary in actual or compensatory damages, 23 it is, upon the
other hand, non-pecuniary in the case of moral damages. 24
A party is entitled to an adequate compensation for such pecuniary loss actually suffered by him
as he has duly proved. 25 Such damages, to be recoverable, must not only be capable of proof,
but must actually be proved with a reasonable degree of certainty. 26 We have emphasized that
these damages cannot be presumed, 27 and courts, in making an award must point out specific
facts which could afford a basis for measuring whatever compensatory or actual damages are
borne. 28
Moral damages, upon the other hand, may be awarded to compensate one for manifold injuries
such as physical suffering, mental anguish, serious anxiety, besmirched reputation, wounded
feelings and social humiliation. These damages must be understood to be in the concept of
grants, not punitive 29 or corrective30 in nature, calculated to compensate the claimant for the injury
suffered.31 Although incapable of exactness and no proof of pecuniary loss is necessary in order
that moral damages may be awarded, the amount of indemnity being left to the discretion of the
court,32 it is imperative, nevertheless, that (1) injury must have been suffered by the claimant, and
(2) such injury must have sprung from any of the cases expressed in Article 2219 33 and Article
2220 34 of the civil Code. A causal relation, in fine, must exist between the act or omission
referred to in the Code which underlies, or gives rise to, the case or proceeding, on the one
hand, and the resulting injury, on the other hand; i.e., the first must be the proximate cause and
the latter the direct consequence thereof.
A judicious review of the records in the case at bench, indeed, fails to show that substantial legal
basis was shown to support the herein questioned collective award for the questioned damages.
We are, therefore, constrained to disregard them.
As regards the other issues raised by petitioner, the findings of the appellate court, involving
such as they do mainly factual matters that are not entirely bereft of substantial basis, must be
respected and held binding on this Court.
In passing, we have taken note of the fact that the RPB, itself a judgment co-debtor in
solidum with Del Mundo, did not join the latter in this appeal. The Court, accordingly, cannot here
and now make any pronouncement on the effects of said bank's payment to Del Mundo under
and by virtue of the appellate court's appealed decision.
WHEREFORE, the decision of the Court of Appeals is accordingly MODIFIED by deleting the
award of P200,000.00 for actual and moral damages. In all other respects, the appealed decision
is AFFIRMED. No costs.
SO ORDERED
G.R. No. 126363 June 26, 1998
THE CONGREGATION OF THE RELIGIOUS OF THE VIRGIN MARY, petitioner,

vs.
THE COURT OF APPEALS and SPOUSES JEROME and TERESA PROTASIO, respondents.
MARTINEZ, J.:
Petitioner, The Congregation Of The Religious Of The Virgin Mary, has filed this petition
for review on certiorari, urging us to reverse the decision 1 of the Court of Appeals dated
September 12, 1996, in CA-G.R. CV No. 43311, entitled "SPS. JEROME and TERESA
PROTASIO, Plaintiffs-Appellees, versus, THE RELIGIOUS OF THE VIRGIN MARY,
Defendant-Appellant." The decision affirmed the judgment of the Regional Trial Court of
Davao City in Civil Case No. 29,960-91, ordering the petitioner to return the possession of
the disputed land to the respondents-spouses and to pay them damages.
The facts of this case, as found by the respondent court, 2 are as follows:
On December 26, 1964, Gervacio Serapio, the grandfather of herein respondents-spouses

Jerome and Teresa Protasio, sold to herein petitioner, the Congregation of the Religious
of the Virgin Mary, two (2) lots identified as Lot No. 5-A and Lot No. 5-C which were
covered by TCT Nos. 14834 and 14835, respectively. In between Lot No. 5-A and Lot No. 5-
C is Lot No. 5-B. Petitioner did not buy it when it was offered for sale by Gervacio Serapio.
In 1978, Gervacio died and his estate consisting of several parcels of land was settled
extra-judicially among his heirs.
In October of 1989, respondents-spouses purchased Lot No. 5-B from the heirs of
Gervacio Serapio. Accordingly, TCT No. 148595 was issued in their name. Sometime in
November of 1989, respondents-spouses had the subject Lot No. 5-B surveyed and they
discovered that 664 square meters of their 858 square meters property was fenced and
occupied by petitioner. They also found out that a building for the boys' quarters and a
portion of petitioner's gymnasium were constructed inside Lot No. 5-B. The encroachment
by petitioner on respondents-spouses land was made without the latter's knowledge and
consent. Despite repeated demands by respondents-spouses, petitioner failed and
refused to (1) restore to the spouses possession of the encroached property; (2) demolish
the improvements constructed thereon, and (3) pay damages and back rentals. Thus, on
September 23, 1991, a complaint for recovery of possession of real property damages,
back rentals and attorney's fees was filed by respondents-spouses against the petitioner.
The complaint was docketed as Civil Case No. 20,960-91 of the Regional Trial Court of
Davao City, Branch 15. In answer to the complaint, petitioner admitted that it occupies
part of the litigated property but averred that Lot No. 5-B was supposed to be a road lot
that would give their Lots 5-A and 5-C means of entry and egress to the public road and,
therefore, was beyond the commerce of man. Petitioner further claims that respondents-
spouses, as successors-in-interest of Gervacio Serapio, have the obligation to respect the
perpetual use of Lot No. 5-B ceded to it by Serapio.
After trial on the merits, the trials court rendered judgment in favor of respondents-
spouses and against the petitioner. It rejected petitioner's claim of being a builder in good
faith of the improvements it introduced on the disputed lot of respondents-spouses. The
dispositive portion of the decision dated July 30, 1993 reads:
WHEREFORE, judgment is rendered ordering the defendant (now

petitioner):
1. To vacate the part of the plaintiffs' (now respondents-spouses') lot
covered by TCT No. 148595 it is presently occupying and to peaceably
return the possession to the plaintiffs at its own expense.
2. To demolish the buildings and improvements it introduced on the lot of

the plaintiffs at its own expense.
3. To pay on hundred thousand pesos (P100,000.00) as moral damages.
4. To pay back rentals of fifteen thousand pesos (P15,000.00) with legal

interests to be computed from January 31, 1991 until fully paid.
5. To pay one hundred thousand pesos (P100,000.00) as attorney's fees,

four thousand pesos (P4,000.00) as litigation expenses and the costs of
suit.
SO ORDERED. 3
Upon appeal by petitioner to the respondent court, the latter affirmed in toto the judgment
of the trial court.
Still dissatisfied, petitioner now comes to us via the present petition, assailing the
respondent court's decision on the following grounds:
THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT FINDING THAT

PRIVATE RESPONDENTS' ANCESTOR, GERVACIO SERAPIO, HAD CEDED
TO THE PETITIONER THE PERPETUAL USE OF LOT 5-B.
II
THE PUBLIC RESPONDENT GRIEVOUSLY IGNORED THE EVIDENCE ON

RECORD AND ERRED IN NOT HOLDING THAT PRIVATE RESPONDENTS'
CLAIM HAD CLEARLY BEEN BARRED BY LACHES.
III
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

WHEN IT AWARDED ACTUAL DAMAGES IN THE FORM OF BACK RENTALS
WITHOUT PROOF TO SUPPORT THE SAME.
IV
THE PUBLIC RESPONDENT COMMITTED GAVE ABUSE OF DISCRETION IN

AWARDING MORAL DAMAGES TO PRIVATE RESPONDENTS —
(A) IN THE ABSENCE OF A PRAYER FOR THE AWARD NOR PROOF OF

THE SAME.
(B) IN THE FACE OF EVIDENCE CLEARLY SHOWING THAT PRIVATE

RESPONDENTS WERE PURCHASERS IN BAD FAITH. 4
The above-quoted errors allegedly committed by the respondent court call for a review of
its findings of facts. As a general rule, the re-examination of the evidence submitted by
the contending parties during the trial of case is not a function that this Court normally
undertakes inasmuch as the findings of facts of the respondent court are generally
binding and conclusive on the Supreme Court. 5 The jurisdiction of this Court in a petition
for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing
only errors of law, 6 not of fact, unless the factual findings complained of are devoid of
support by the evidence on record or the assailed judgment is based on misapprehension
of facts. 7
Petitioner contends that its case should be treated as an exception to the said general
rule since the respondent court "overlooked certain relevant facts not disputed by the
parties, which if properly considered, would justify a different conclusion." 8
Let us examine these "relevant facts" which the respondent court allegedly overlooked
when it rendered the assailed decision.
First. Petitioner maintains that Gervacio Serapio, the original owner of the land in
question (Lot 5-B), had in his lifetime represented, committed and warranted that the said
lot would be for petitioner's perpetual use as a road lot, it being the only access to the
public road for Lot 5-A and 5-C, and to each other. 9
In support of this posture, petitioner cited the document entitled "Agreement Of Purchase
And Sale" 10 dated July 8, 1959, executed between Gervacio Serapio and petitioner, which
Agreement shows a sketch attached thereto as Annex "A" 11 indicating the locating of the
two (2) lots subject of the Agreement and two (2) proposed roads, the Simeon de Jesus
St. and Padre Faura St. (which is the disputed Lot B). Petitioner argues that "without that
map (sketch) and the implicit assurance that goes with it, there could not have been a
sale." 12
There is nothing significant in the said sketch which would justify a reversal of the
findings and conclusions reached by the respondent court. It is merely a sketch of the
location of the two (2) lots subject of the sale. There is no express or implied agreement in
said annex containing the sketch which would confirm petitioner's claim that Geronimo
Serapio "had ceded to the petitioner the perpetual use of Lot 5-B." If petitioner's claim was
true, then the same could have easily been inserted as an additional agreement between
the parties. That it was not made so, only shows that petitioner's claim is nothing but a
mere conjecture, which has zero evidentiary weight. Section 9, Rule 130 of the Revised
Rules of Court provides in part that where, as here, "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." Simply put, any oral evidence of an
agreement should be excluded when after all, the existing agreement is already in
writing. 13 Thus, we are not prepared to disturb the following findings and conclusions of
the respondent court:
Appellant first argues that the original owner of the subject land, Gervacio
Serapio, had intended, represented and warranted that the same would be
for its perpetual; use as a road lot. Involving as it does a transmission of
real rights, this claim should be based on something more concrete than
bare allegations and speculations. In the instant case, however, there is
notably no concrete evidence supporting appellant's claim.
Appellant would have Us believe that the map attached to the Agreement of
Purchase and Sale between it and Gervacio Serapio, containing as it does
the proposed roads in the area, implicitly carries the assurance that
Gervacio Serapio had made with respect to said proposed roads.
Even the most careful perusal of the map attached to the Agreement of
Purchase and Sale between appellant and Gervacio Serapio, however, does
not reveal anything other than that it merely shows the location of the lots
subject of such Agreement. Indeed, from the Agreement itself, it is clear
that said map was attached simply to identify the location of the lots
covered by the Agreement; and that reference to the map was simply as
follows —
. . ., the SELLER by these presents PROMISE TO SELL to

said BUYER, these portions of land more particularly
identified and designated as Lot Nos. "A" and "C" in the
sketch hereto attached and marked as Annex "A," . . . (Exh.
16, Agreement of Purchase and Sale) [Emphasis ours]
There being no provision in the Agreement, whatsoever, regarding the

subject lot, or the grant of its use unto appellant, We cannot now accept
appellant's bare allegations on Gervacio Serapio's representation and
warranty that the subject land would be for its perpetual use as a road lot.
At any rate, it has been ruled that in case of doubt in the provisions of the
Deed of Sale, the least transmission of rights should prevail (Gacos vs.
Court of Appeals, 212 SCRA 8).
The rest of appellant's arguments in support of its claim regarding

perpetual use of the subject land as a road lot are nothing but mere
speculations which, as We have stressed, cannot suffice for Us to uphold
any transmission of real rights. Being painfully bereft of concrete evidence,
said claim of appellant must be brushed aside. 14
Even if we were to accept as true petitioner's stance that Lot 5-B was intended by
Gervacio Serapio as a road right of way for petitioner's perpetual use, still a grant of a
right of way in favor of petitioner does not legally entitle it to occupy part of the said lot
which is registered in repondents-spouses' name, more so to introduce permanent
improvements thereon such as a gymnasium and a boys' quarters/dormitory.
Thus, what is actually at issue here is not whether the petitioner could use Lot 5-B in
question as a road, but rather whether the petitioner could legally possess/occupy part of
the said lot. This is, in fact, the only issue as agreed upon by the contending parties
during the pre-trial conference of this case before the trial court. 15 As discussed earlier,
petitioner has no right whatsover to possess and construct permanent structures on the
questioned land owned by respondent-spouses. Petitioner admits in its answer to the
complaint that it introduced improvement on the subject lot without the consent and
knowledge of respondent-spouses. 16 It is thus a builder in bad faith. Again, we find no
reversible error in the following ruling of the respondent court:
Which leads us to a discussion of whether or not appellant was in bad faith

in introducing improvements on the subject land. It cannot be denied that
appellant never gained title to the subject land as it admits to not having
purchased the said lot (TSN, p. 81, November 9, 1992). Neither has appellant
successfully shown any right to introduce improvements on the said land
(its claim of grant of perpetual use of the same as a road lot and its right to
build on a right of way both having been rejected above). This being so, it
follows that appellant was a builder in bad faith in that, knowing that the
land did not belong to it and that it had no right to build thereon, it
nevertheless caused the improvements in question to be erected.
Next, appellant claims that granting that it was in bad faith appellees and
their predecessors-in-interest were equally guilty of bad faith in allowing
the construction of the improvements. This bad faith on the part of the
appellees and their predecessors-in-interest should, however, have been
proved at the hearing below, for in the absence of such proof, it must be
presumed that with the unlawful trespass upon the subject land, the
building were commenced thereon without the knowledge and consent of
the owners thereof (Rivera vs. Archbishop of Manila, 40 Phil. 717). Again,
We find such proof absent in the instant case. 17
Second. Petitioner contends that the respondent court struck down its defense of laches
"with a grossly erroneous and unfair declaration that since the private respondents
themselves did not sleep on their rights, there could be no laches." 18 Suffice it to state
that no evidence was presented by petitioner during the trial to prove that the
improvements constructed on the subject property were made during the lifetime of
Gervacio Serapio, nor that Serapio, his heirs or respondents-spouses were aware of,
much less tolerated, the said structures so as to make them guilty of laches proper:
Neither are We convinced by appellant's argument that appellee's claim is

barred by laches. In Olizon vs. Court of Appeals, 236 SCRA 148, the
Supreme Court once again defined laches —
. . . as the failure or neglect, for an unreasonable and

unexplained length of time, to do that which by exercising
due diligence could or should have been done earlier: it is
negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it.
Here, the improvements introduced by appellant were finished in 1988. In

November 1989, a month after appellees purchased the subject lot, they
had the same surveyed, after which they immediately sought to inform the
appellant about the encroachment they had discovered (TSN, pp. 8-11,
August 26, 1992). Thereafter, on October 26, 1990, appellees, through their
lawyer, sent a demand letter to appellant regarding the matter, followed by
another demand letter dated January 31, 1991. Finally the Complaint was
filed on September 23, 1991. All told, We do not find laches to have set in to
effectively bar appellees from the claims contained in their Complaint. By
any indication, the lapse of a mere three (3) years from the time the
improvements were constructed up to the time of the filing of the Complaint
cannot be construed as sufficient to hold the complainant as barred by
laches. Especially so since during the interim, appellees were diligent in
having the subject land surveyed and in sending demand letter to
appellant. 19
Third. Petitioner claims that the respondent court committed grave abuse of discretion
when it awarded respondents-spouses actual damages in the form of back rentals of
P15,000.00 a month, plus the legal rate of interest, to be reckoned from January, 1991,
without proof to support the same. We have examined the respondents-spouses'
complaint and the testimony of respondent Jerome Protasio on the matter of back rentals
prayed for in the complaint, and we find no factual basis how such award was arrived at.
Thus, we have to discard such award of damages. A party is entitled to an adequate
compensation for such pecuniary loss actually suffered by him as he has duly
prove. 20 Such damages, to be recoverable, must not only be capable of proof, but must
actually be proved with a reasonable degree of certainty. 21 These damages cannot be
presumed, 22 and the courts in making such award of damages must point out specific
facts which could afford a basis for measuring whatever compensatory or actual damages
are borne. 23
Fourth. We also agree with the petitioner that the respondent court should not have
awarded respondents-spouses moral damages of P100,00.00 simply because their
complaint did not specifically ask for such relief. Moral damages must be disallowed
when it is not specifically prayed for in the complaint. 24 It is elementary that in order that
moral damages may be awarded, there must be pleading and proof of moral suffering,
mental anguish, fright and the like, 25 both of which are absent in this case.
Finally. We further agree with the petitioner that the award of attorney's fees of
P100,000.00 should be eliminated for lack of factual basis and legal justification. The only
evidence to support respondents-spouses' claim for attorney's fees is the testimony of
Jerome Protasio to effect that his agreement with the law firm handling his case is that he
is obligated to pay "25% of the obligation receivable . . ." 26 That is all. Both the trial court
and respondent Court of Appeals likewise did not cite specific factual basis to justify the
award of attorney's fees, which is in violation of the proscription against the imposition of
a penalty on the right to litigate. 27 As we enunciated in Refractories Corporation of the
Philippines vs. Intermediate Appellate Court: 28
. . . The award of attorney's fees is the exception rather than the general
rule and counsel's fees is not to be awarded every time a party wins a suit.
The discretion of the court to award attorney's fees under Article 2208 of
the Civil Code "demand factual, legal and equitable justification, without
which the award is a conclusion without a premise, its basis being
improperly left to speculation and conjecture." In all events, the court must
state the reason for the award of attorney's fees.
WHEREFORE, the decision of the respondent Court of Appeals dated September 12, 1996,
in CA-G.R. CV No. 43311, is hereby MODIFIED in the sense that the awards of back
rentals, moral damages and attorney's fees are hereby DELETED. In all other respects, the
assailed decision is AFFIRMED. No pronouncement as to costs.
SO ORDERED
G.R. Nos. 129292-93 June 20, 2001
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
ARLENGEN DEGALA, accused-appellant.
PUNO, J.:
Accused-appellant ARLENGEN DEGALA seeks to reverse the judgment in Criminal Case Nos.
916 and 917 of the Regional Trial Court (Branch XXV) of Koronadal, South Cotabato, finding him
guilty as charged of two (2) counts of rape committed in March 1988 and December 6,
1992.1 The complainant is his minor daughter, HAILYN DEGALA.
When arraigned, the accused pled not guilty to both crimes.2
The records show that the complainant, Hailyn Degala, is the second child in a brood of six
children of spouses Heidi Degala and accused Arlengen Degala. She was born on August 3,
1977.3 Her siblings are Arnel, Helen, Harlyn, Arnold and Arlengen, Jr.4
The Degalas used to live in Tubing, Tupi, South Cotabato. On school days, the complainant,
Hailyn, and her siblings stayed in the house of their maternal grandparents in Martinez
Subdivision, Marbel, Koronadal, South Cotabato. They went home on weekends or when they
did not have classes.
In the evening of March 1988, Hailyn and her younger sisters were in their house in Tubing. They
slept in one room at the ground floor. The accused slept outside their room near the door.
Hailyn’s paternal grandparents were in another house, about a meter away from their place. At
that time, Hailyn’s mother was in Koronadal where she worked as a laundry woman.
Later that night, the accused broke into the room where Hailyn was sleeping. He was wearing
only his brief. He crept towards Hailyn. He lifted her T-shirt and touched her body. He mashed
her left breast. She resisted and they wrestled. He succeeded in lifting her skirt and taking off her
panty. He started to caress her and kiss her on the face, neck and lips. She then kicked his feet
and desperately reached out for her sisters who were sleeping beside her. Unfortunately, she
failed to awake them. Finally, the accused succeeded in having carnal knowledge of her. She
asked the accused: "Why are you doing this to me?" He replied that she was sweet. After
satisfying his lust, he rushed out of the room. It was Hailyn’s first sexual contact. The experience
was painful. She was 10 years and 7 months old.
She wept the whole night until morning. Her sisters woke up and left the room, but did not see
her crying because she was lying face down. She kept herself in the room the whole day crying.
Nobody was able to talk to her that day because the accused shouted at her siblings when they
tried to enter her room.5
The rape was repeated several times for four years. Hailyn estimated that she was abused
twenty (20) times. Her last sexual molestation happened on December 6, 1992. On that day, the
accused directed her siblings to go to the house of their paternal grandparents and ordered her
to stay behind. Again, he forced himself on Hailyn. He boxed her in the epigastric region and
violated her.
On December 10, 1992, Hailyn learned from her mother (Heidi) that the accused tried to rape her
aunt, Nora Ronquillo. The information enraged her and she finally revealed to her mother that the
accused had raped her. Her mother then asked her other daughters (Helen and Harlyn) if the
accused also raped them. They made the same revelations. The accused laughed off the
charges upon confrontation. He eventually left their house when Hailyn’s mother threatened him
that she would call the police.
Nelida Ladrillo, a younger sister of Heidi, happened to drop by her sister’s house in Marbel. She
sensed that something wrong had happened when she talked to Hailyn and her sisters. The
three girls were sad. They admitted the rapes to Nelida. Hailyn requested Nelida to accompany
them to a doctor.
On December 14, 1992, Dr. Apolinar Hatulan of the Municipal Health Office of Tupi examined
Hailyn and her sisters. He found healed lacerations on Hailyn’s genitalia at 12, 3, 5 and 7 o’clock
positions, indicating the possibility of her sexual molestation.6 He also confirmed the possible
sexual abuses on her sisters. Nelida then brought the three girls to Tupi Police Station where
Hailyn executed her sworn statement accusing their father of raping them on separate occasions
from 1988 to 1992.
When Nelida finally had the chance to talk to Heidi, she reported that the medical test results
confirmed the girls’ accusations of rape. Heidi refused to believe her and insisted that Hailyn
could have made up the story. As Heidi was disinterested to prosecute the accused, Nelida
assisted Hailyn and her sisters in filing the rape cases against him. Helen’s complaint was
docketed as Criminal Case Nos. 913-914, Harlyn’s, Criminal Case No. 915 and Hailyn’s, Criminal
Case Nos. 916-917. Of the three girls, only Hailyn did not desist from prosecuting the accused.
Nelida went to Harlyn’s school and talked to her niece about the case. The latter refused to
continue with its prosecution because Heidi would not let her go to court. Nelida also tried to talk
to Helen but she failed because Heidi sent Helen to work in Davao.
Nelida testified that when Hailyn was still in the custody of her parents, the accused would often
beat her up. The beatings only stopped after December 6, 1992 because she ceased living with
them.
The defense was anchored on denial. The accused presented Heidi, his mother (Julieta), his
mother-in-law (Magdalena Dariaga), and Harlyn as witnesses. They testified that Hailyn was a
disrespectful and stubborn child. Allegedly, in the evening of December 6, 1992, Magdalena
Dariaga caught Hailyn and her boyfriend having sexual intercourse inside their toilet located in
their backyard. The toilet had no roof, its four sides were covered with sacks: three served as
walls while one served as its door. The earth served as its floor. Magdalena claimed she saw
Hailyn’s boyfriend on top of her. She stood by the makeshift door for two minutes and was not
noticed by them. She did not stop the two but waited for them to come out from the toilet. She
then scolded them.
The next day, Magdalena allegedly went to Tubing and informed Hailyn’s parents about her
indiscretion. They went to Marbel and there, the accused beat up Hailyn in the presence of Heidi,
Helen and Harlyn. He used his leather belt and later a branch of ipil-ipil in hitting her.
The defense charged that Hailyn carried a grudge against the accused for the constant beatings
she received from him. Thus, to spite him, she falsely accused him of raping her. The defense
witnesses claimed that the rape could not take place in Tubing because they always slept in one
room.
As for the rape cases filed by Harlyn, the latter denied that the accused raped her. Allegedly,
Nelida threatened them that they would go to prison if they refused to charge the accused in
court.
To further discredit Nelida, the defense alleged that Nelida’s husband had a fistfight with the
accused on one occasion, in connection with the expenses incurred during the wake of a relative.
Since then, Nelida allegedly bore a grudge against him and to get even, she forced the three girls
to charge him.
After trial, the court a quo found the accused guilty of two counts of rape.7 He was sentenced in
each case to suffer the penalty of reclusion perpetua and ordered to pay a total of P100,000.00
as civil indemnity by way of moral damages.
Hence, this appeal.
The only issue posed is whether or not the accused-appellant’s guilt was established beyond
reasonable ground.
In rape cases, the lone testimony of the victim, if credible, is sufficient to sustain a conviction.8 It
is a settled rule that when the issue focuses on the credibility of witnesses, or the lack of it, the
assessment of the trial court should be controlling, unless cogent reasons, and none exists in this
case, dictate otherwise.
After a study of the evidence, we are convinced that Hailyn narrated the truth in court. Her
testimony is full of details and straightforward. As rightly ruled by the trial court, "it can come only
from one who has truly and personally undergone the agonizing events." We also note that there
were instances when Hailyn was ashamed to narrate her ordeal in court, an indication of a sense
of loss of self-pride because of what she had gone through. She testified as follows:9
"PROSECUTOR LECHONSITO:
Q: How did your father rape you, please tell the Court.
A: He entered the room, sir.
Q: And then what happened?
A: Then (he) creeped (sic) towards me, then he touched my body and pointed a gun
to my head.
x x x
Q: You said that your father approached you by creeping. How did you know that he
approached you by creeping, please tell the Court.
A: Because I was able to notice.
Q: So that because you noticed it, you were not yet sleeping at that time, is that
correct?
A: I was already asleep, but I noticed when he crept towards me.
Q: And then after he crept towards you, what happened?
A: He pointed a gun at my head (witness pointing at the left temple) and he

undressed me by removing my panty.
COURT:
Hailyn, do not be embarrassed, when you testify. If you like, we can have the
other people sent outside the courtroom.
WITNESS:
I would like the audience to move out.
COURT:
Those who are not concerned, please step out.
PROSECUTOR LECHONSITO:
Q: You said that when your father approach (sic) you creeping, he touched you
body. Did I get you right when you testified on that a while ago?
A: Yes, sir.
Q: What part of your body was touched by your father?
A: He touched my breast, sir.
Q: How did he touch your breast, tell the Court.
A: He mashed my breast.
Q: You were wearing clothes during that time:
A: Yes, sir.
x x x
Q: How did he mash your breast, please tell the Court.
A: He placed his hands under my dress and then he mashed my breast.
Q: What side of your breast was mashed by your father?
A: My left breast, sir.
Q: After he mashed you left breast, what else did he do?
A: He removed my panty, sir.
Q: And then?
A: We wrestled with each other.
Q: How did you wrestle with each other.
A: He laid on me.
Q: What kind of dress were you wearing during that time?
A: I was wearing a skirt and a t-shirt.

Q: When he removed your panty, did he remove also your skirt?
A: No, sir.
Q: What did he do with your skirt?
A: He raised my skirt upwards, sir.
Q: How about your shirt, what did he do with your shirt?
A: He did not remove it.
Q: You said that after your father removed your panty, he laid on top of you. What
did he do when he laid on top of you?
A: He caressed me.
Q: How did he caress you?
A: He kissed me, sir, on my face and on my lips.
Q: When your father was doing that to you, what was your reaction, if any?
A: I was struggling, sir.
Q: How did you struggle?
A: I struggled by kicking him.
Q: Did you kick your father?
A: Yes, sir.
x x x
Q: You said that your father caressed you by kissing your face and your lips and
what else (sic) did he kiss in you, aside from those:
A: My neck, sir.
Q: What else?
A: No more, sir.
Q: What else did he do, after kissing you?
A: He touched my vagina, sir.
Q: How did he touch your vagina?
A: He mashed my vagina.
Will I be allowed to talk to the witness?
ATTY. SUNGA: (sic)
Atty. Sunga, please come forward.
COURT:
Prosecutor advised the witness not to be ashamed in testifying. The advice was
made in the presence of counsel for the accused. Proceed.
Q: When your father mashed your vagina, was your panty still on?
A: No more, sir.
Q: When he mashed your vagina, what else did he do after mashing your vagina?
A: He let his penis touched (sic) my vagina.
Q: How long did he touch your vagina?
A: For a short time, sir.
Q: You said that after mashing your vagina for a short time, he let his penis touch
your vagina, how long did he let his penis touch your vagina?
A: For a long time, sir.
Q: What was he doing with his penis?
A: He was inserting his penis into my vagina.
Q: How did he insert his penis towards your vagina?
A: He spread my legs.
Q: How did he spread your legs?
A: He held both my legs and spread them, sir.
Q: By the way, when your father approached you by creeping towards your, what
was he wearing, if you could recall?
A: He was wearing a brief and he was naked on the other part of his body.
x x x
Q: What did you feel when his penis entered your vagina?
A: It was painful, sir.
Q: Because it was painful, what did you do?
A: Nothing, sir.
Q: Did you not cry because of the pain?
ATTY. SUNGA:
We object.
COURT:
Sustained.
WITNESS:
I cried.
x x x
Q: In your estimate, how long did it take him to let his penis enter into your vagina?
A: It took a long time.
Q: And in the process, what did you feel while he was letting his penis enter into
your vagina?
A: It was painful, sir.
x x x
Q: Did you tell your father not to do that to you?
A: I told him, "Why are you doing this to me?"
Q: What was his response to you?
A: He told me, "Don’t tell this to your mother or to others or else, I will kill you."
Q: What else did you talk about?
A: I told him, "There is my mother. Why are you doing it to me when in fact, I am
your daughter."
Q: What was his answer?
A: He told me that I am sweet.
x x x."
We do not believe that Hailyn would accuse her father of rape to spite him for the beatings she
received from him when she was still in his custody. Even with these alleged beatings, it would
take a most senseless kind of depravity for a young daughter to concoct a story against her
father, accusing him of beastly conduct that would put him for most of his remaining life in jail and
expose herself and her family to public humiliation.10 Hailyn was only ten years old at the time of
the first sexual molestation.
The accused-appellant claims that the place where he allegedly raped Hailyn was too cramped.
Allegedly, it was impossible for him to rape her because they slept in one room with the other
members of their household. The argument that rape cannot be committed in a room shared with
other members of the family has long been rejected by this Court, lust being no respecter of time
and place.11
Next, accused-appellant banks on the delayed filing of the rape cases against him. The rule is
that delay in reporting the offense of incestuous rape is not necessarily an indication that the
charge is fabricated. It does not diminish the complainant’s credibility nor undermine the charges
of rape where the delay can be attributed to the pattern of fear instilled by the threats of bodily
harm, specially by one who exercises moral ascendancy over the victim.12
In the cases at bar, it is understandable why it took a long time for Hailyn to reveal to her mother
that she was sexually molested by accused-appellant. She was very young. She grew up being
beaten up by him. He had threatened her with harm should she tell anyone about the rapes.
Obviously, fear cowed her to silence and inaction.
The accused-appellant’s mere denial that he raped Hailyn will not exonerate him. Denial cannot
prevail over the positive and candid testimony of the victim whose credibility was not eroded. No
young girl would concoct a story of sexual assault, undergo gynecologic examination and subject
herself to the trauma and embarrassment of criminal prosecution unless she speaks the truth.13
The defense’s story that Hailyn was caught by her grandmother having sexual intercourse with
her boyfriend is incredible. We agree with the trial court’s observation, thus:14
"Even the allegation of sexual intercourse between complainant Hailyn Degala and her
supposed boyfriend which per the defense is the reason why Hailyn Degala was beaten
by her father taxes our mind into disbelief. The toilet where the sex act was performed
was square-shaped structure, two arms length wide. There was no door which could be
secured, only a piece of sack serving as curtain would hide the person attending to his
biological needs inside. The walling was also made of sack. There was no roof. The
boyfriend was supposed to be five feet and five inches tall. Verily, if the two sex partners
would lie on the floor, as what complainant and Marlon did, and with a toilet bowl and
other articles such as pail for water inside, the lovers would be in a cramped position.
Being lovers, why would the two choose of all places a ramshackle toilet to do their
thing."
We add that it is implausible that Hailyn’s grandmother would just stand by the sack door of the
toilet for two minutes while her granddaughter was having sex with her boyfriend. Common
human experience dictates that such a scandalous conduct would have prompted her to call
Hailyn’s attention right away and not wait for the alleged young lovers to consummate their lustful
act. Evidence to be believed must not only proceed from the mouth of a credible witness but
must foremost be credible in itself.15
The accused-appellant also alleges that Hailyn’s maternal aunt, Nelida Ladrillo, induced her and
her sisters to file a complaint against him. The reason given was the alleged misunderstanding
between him and Nelida’s husband. The allegation does not merit serious consideration
especially when viewed against the fact that when Hailyn and her sisters were examined by the
doctor, all three medical results showed signs that they were sexually molested.
All told, we agree with the judgment of the trial court that the accused-appellant is liable for two
counts of rape. At the time the rape incidents were committed, Republic Act Nos. 7659 and 8353
were not yet in effect. Thus, he was correctly sentenced to suffer the penalty of reclusion
perpetua.16
As regards the damages, the trial court awarded in favor of the complainant the amount of
P50,000.00 in each case "as civil indemnity by way of moral damages." We reiterate that civil
indemnity is distinct from moral damages and the two are awarded separately from each
other.17 Civil indemnity is mandatory upon the finding of the fact of rape. In the case of People vs.
Victor,18 we reemphasized the difference of the two awards, thus:
"The lower court, however, erred in categorizing the award of P50,000.00 to the offended
party as being in the nature of moral damages. We have heretofore explained in People
vs. Gementiza that the indemnity authorized by our criminal law as civil indemnity ex
delicto for the offended party, in the amount authorized by the prevailing judicial policy
and aside from other proven actual damages, is itself equivalent to actual or
compensatory damages in civil law. It is not to be considered as moral damages
thereunder, the latter being based on different jural foundations and assessed by the
court in the exercise of sound discretion."
In People vs. Prades,19 we also resolved that moral damages may be awarded to the rape victim,
in such amount as the Court deems just, without the need for pleading or proof of the basis
thereof. The conventional requirement of allegata et probata in civil procedure and for essentially
civil cases was dispensed with in criminal prosecutions for rape with the civil aspect included
therein since no appropriate pleadings are filed wherein such allegations can be made.
Accordingly, the damages awarded by the trial court must be modified.20 Accused-appellant
should be held liable to pay the complainant P50,000.00 as civil indemnity and another
P50,0000.00 as moral damages in each rape case.21In addition, accused-appellant should be
held liable for exemplary damages in accord with our ruling in People vs. Antipona.22 We held
therein that when a man perpetrates his lascivious designs on his own direct blood relative, he
descends to a level lower than beasts. Exemplary damages is thus awarded to deter other
fathers with perverse tendencies or aberrant sexual behavior from abusing their own daughters.23
IN VIEW WHEREOF, the decision of the Regional Trial Court of Koronadal, South Cotabato,
Branch 25, in Criminal Case Nos. 916 and 917 is AFFIRMED, with the modification that accused-
appellant Arlengen Degala is ordered to pay complainant Hailyn Degala, in each criminal case,
the amount of P50,000.00 as civil indemnity, P50,000 as moral damages and P50,000.00 as
exemplary damages. Costs against accused-appellant.
SO ORDERED
G.R. No. 192180 March 21, 2012
PEOPLE OF THE PHILIPPINES, Appellee,

vs.
ALIAS KINO LASCANO (at large) and ALFREDO DELABAJAN alias TABOYBOY, Accused.
ALFREDO DELABAJAN, Appellant.
DECISION
BRION, J.:
We decide the appeal, filed by Alfredo Delabajan (appellant), from the decision1 of the Court of
Appeals (CA) dated May 25, 2006 in CA-G.R. CEB-CR-H.C. No. 00228. The CA decision
affirmed with modification the November 26, 2001 decision2 of the Regional Trial Court (RTC),
Branch 23, Allen, Northern Samar, and found the appellant guilty beyond reasonable doubt of
three (3) counts of rape, sentencing him to suffer the penalty of reclusion perpetua for each
count.
The RTC Decision
In its November 26, 2001 decision, the RTC found the appellant guilty beyond reasonable doubt
of three (3) counts of rape. It gave credence to the testimony of AAA3 that alias Kino Lascano and
the appellant took turns in raping her. According to the trial court, the victim recognized her
assailants through their respective voices. The trial court held that a public accusation by a blind
Filipina whose virtue has been unblemished is worthy of belief. It also disregarded the appellant’s
alibi, as he failed to show that it was physically impossible for him to be at the scene of the crime.
The RTC sentenced the appellant to suffer the penalty of reclusion perpetua for each count, and
to pay the victim the amounts of ₱50,000.00 as civil indemnity and ₱50,000.00 as moral
damages, also for each count.4
The CA Decision
On intermediate appellate review, the CA affirmed the RTC decision with the modification that
the appellant is guilty beyond reasonable doubt of six (6) counts of qualified rape. It held that the
appellant actively participated with Kino in raping AAA; he tied the victim’s hands, and then held
her feet when Kino was raping her. In addition, AAA’s testimony was corroborated by the medical
findings of Dr. Ethel Simeon. The appellate court also rejected the appellant’s alibi in light of the
victim’s positive declaration, and for the appellant’s failure to show that it was physically
impossible for him to be at the locus criminis.5
Our Ruling
We dismiss the appeal, but modify the counts of rape committed and the awarded indemnities.
Sufficiency of Prosecution Evidence
For a charge of rape to prosper under Article 266-A of the Revised Penal Code, as amended, the
prosecution must prove that (1) the offender had carnal knowledge of a woman; and (2) he
accompanied such act through force, threat, or intimidation, or when she was deprived of reason
or otherwise unconscious, or when she was under twelve years of age or was demented.6
In her September 20, 2000 testimony, AAA narrated in detail how the appellant and Kino
threatened to kill her, and then took turns in raping her. AAA explained that she recognized her
assailants through their respective voices. We emphasize that the victim, although blind, knew
the identities of her two assailants because they were her neighbors. AAA explained that Kino
and the appellant often went to her residence in Sitio Maraga-as because they were the friends
of her brother. Notably, the appellant admitted that he talked to AAA on many occasions.
We view AAA’s testimony to be clear, convincing and credible considering especially the
corroboration it received from the medical certificate and testimony of Dr. Simeon. Our
examination of the records shows no indication that we should view the victim’s testimony in a
suspicious light. It bears stressing that identification of an accused by his voice has been
accepted, particularly in cases where, as in this case, the victim has known the perpetrator for a
long time;7 for the blind voice recognition must be a special sense that has been developed to a
very high degree. Besides, it is inconceivable that a blind woman would concoct a story of
defloration, allow an examination of her private parts and subject herself to public trial or ridicule
if she has not, in truth, been a victim of rape and impelled to seek justice for the wrong done to
her. Thus, to us, the prosecution positively established the elements of rape required under
Article 266-A of the Revised Penal Code. First, the appellant and Kino succeeded in having
carnal knowledge with the victim. AAA was steadfast in her assertion that both the appellant and
Kino had raped her, as a result of which, she felt pain. She also felt that something "sticky" came
out of the appellant’s and Kino’ private parts. Second, the assailants employed force, threat and
intimidation in satisfying their bestial desires. According to AAA, the appellant and Kino
threatened to kill her if she refused to obey them.
The Presence of Conspiracy
We agree with the CA that the appellant and Kino conspired in sexually assaulting AAA.
"Conspiracy exists when the acts of the accused demonstrate a common design towards the
accomplishment of the same unlawful purpose."8 In the present case, the acts of Kino and of the
appellant clearly indicate a unity of action: (1) Kino and the appellant entered the victim’s house
at around 9:00 p.m.; (2) Kino and the appellant ordered the victim to lie down, and threatened to
kill her if she refused to do so; (3) Kino undressed AAA, while the appellant tied her hands; (4)
the appellant held AAA’s feet, while Kino inserted his penis into the victim’s private parts; and (5)
the appellant raped AAA afterwards.
Clearly, the appellant and Kino performed specific acts with such closeness and coordination as
to indicate an unmistakably common purpose or design to commit the felony. Thus, they are
liable for two (2) counts of rape on account of a clear conspiracy between them, shown by their
obvious concerted efforts to perpetrate, one after the other, the rapes. Each of them is
responsible not only for the rape committed personally by him but also for the rape committed by
the other as well.
The Appellant’s Defenses
We reject the appellant’s claim that he was gathering coconuts in Sitio Pasakayon on the date
and time of the rapes. It is settled that the defense of alibi is inherently weak and easily
fabricated, particularly when it is corroborated only by the wife of the appellant, as in this case. In
order for the defense of alibi to prosper, it is not enough to prove that the appellant was
somewhere else when the offense was committed, but it must likewise be demonstrated that he
was so far away that it was not possible for him to have been physically present at the place of
the crime or its immediate vicinity at the time of its commission.9
In the present case, the appellant admitted that Sitio Pasakayon is just a 30-minute walk from
Sitio Maraga-as. Considering how near he was to the place where the crime was committed, the
appellant’s alibi cannot be given any value. Clearly, the defense failed to prove that it was
physically impossible for the appellant to have been at the locus criminis at the time of the
commission of the rapes.
The Court also finds unmeritorious the appellant’s contention that AAA had been instigated by
Wawing Lascano to falsely testify against him. The appellant alleged that Wawing was mad at
him because he struck the latter’s pigs. Aside from being uncorroborated, we find this claim
implausible as the victim has no relation at all to Wawing. It is inconceivable that a young girl
would be willing to drag her honor to a merciless public scrutiny, and expose herself and her
family to scandal upon the mere command and instigation of a complete stranger.
The Other Rapes Not Proven With Moral Certainty
As earlier stated, the CA convicted the appellant of six (6) counts of qualified rape. After a
meticulous reading of the records, we sustain the appellant’s conviction for only two (2) counts of
rape. It is settled that each and every charge of rape is a separate and distinct crime that the law
requires to be proven beyond reasonable doubt.10 The prosecution’s evidence must pass the
exacting test of moral certainty that the law demands to satisfy the burden of overcoming the
appellant’s presumption of innocence.11
AAA’s testimonies on two of the sexual abuses were explicit, detailing the participations of the
appellant and Kino, and clearly illustrating all the elements of the crime. However, AAA’s
statements that the appellant and Kino each raped her three times were too general and clearly
inadequate to establish beyond reasonable doubt that each accused committed two other
succeeding rapes. Her testimonies were overly generalized and lacked specific details on how
the other rapes were committed. We stress that a witness is not permitted to make her own
conclusion of law; whether the victim had been raped is a conclusion for this Court to make
based on the evidence presented.12
The Proper Penalty
Under Article 266-B of the Revised Penal Code, the penalty of reclusion perpetua to death shall
be imposed whenever the rape is committed by two or more persons. Since reclusion perpetua
and death are two indivisible penalties, Article 6313 of the Revised Penal Code applies; when
there are neither mitigating nor aggravating circumstances in the commission of the deed, as in
this case, the lesser penalty shall be applied. The lower courts were, therefore, correct in
imposing the penalty of reclusion perpetua on the appellant.
It bears noting that under Article 266-B, paragraph 10 of the Revised Penal Code, the death
penalty shall be imposed when the offender knew of the mental disability, emotional disorder
and/or physical handicap of the offended party at the time of the commission of the crime.
However, the information in the present case merely stated that the victim was blind; it did not
specifically allege that the appellant knew of her blindness at the time of the commission of the
rape. Hence, we cannot impose the death penalty on the appellant.
The Civil Indemnities
The award of civil indemnity to the rape victim is mandatory upon the finding that rape took
place. Moral damages, on the other hand, are awarded to rape victims without need of proof
1âwphi 1
other than the fact of rape, under the assumption that the victim suffered moral injuries from the
experience she underwent. Therefore, this Court affirms the award of ₱50,000.00 as civil
indemnity and ₱50,000.00 as moral damages, based on prevailing jurisprudence.14
In addition, we likewise award exemplary damages in the amount of ₱30,000.00 for each count
of rape.15 The award of exemplary damages is justified under Article 2229 of the Civil Code to set
a public example or correction for the public good.
WHEREFORE, the decision of the Court of Appeals dated May 25, 2006 in CA-G.R. CEB-CR-
H.C. No. 00228 is AFFIRMED with the following MODIFICATIONS: (a) Alfredo Delabajan is
found guilty beyond reasonable doubt of two (2) counts of rape; and (b) he is further ordered to
pay the victim the amount of ₱30,000.00 as exemplary damages for each count of rape. SO
ORDERED
G.R. No. 85847 December 21, 1989
SPOUSES BELEN GREGORIO, petitioners,

vs.
THE HONORABLE JUDGE ZOSIMO Z. ANGELES, Presiding Judge of the Regional Trial
Court, Makati, Branch 58, SPOUSES SYLVIA AND RAMON CARRION, and THE OFFICE OF
THE SHERIFF OF MAKATI, respondents.
Victoria S.A. Cuyos for petitioners.
Rogelio N. Velarde for respondents.
SARMIENTO, J.:
The only issue here is whether or not the failure of the complaint to specify the sum of exemplary
damages allegedly suffered (among other damages sustained) warrants its dismissal ostensibly
in consonance with the Court's ruling in Manchester Development Corporation v. Court of
appeals. 1 The Court rules, insofar as the litigation is concerned, that it does not.
The facts, in their barest essentials, are not disputed.
On October 16,1987, the petitioners sued the private respondents for a sum of money arising
from a loan. The complaint, docketed as Civil Case No. 18058 of the Regional Trial Court,
Branch 137, Makati, Metro Manila, prayed for judgment as follows;
WHEREFORE, premises considered, it is respectfully prayed that the Honorable

Court, after due hearing, orders the defendants to pay jointly and severally:
a. The principal of P l00,000.00, less whatever was paid per evidence to be

presented, if any;
b. Attorney's fees of 25% of principal, plus interest or P 52,000.00;
c. Interests of 12% per annum =P 108,000.00 for nine (9) years which is provided
in Annex "B" and is part of the principal = P100,000.00 + P108,000.00;
d. Exemplary damages subject to the discretion of the Honorable Court;
e. Expenses of litigation of P 10,000.00;
f. For other relief which the Honorable Court may deem just to impose under the
circumstances, such as issuance of the order/writ of attachment due to
conversion as stated in the herein affidavit. 2
On account of the failure on the part of the petitioners to appear at the pre-trial conference and to
file a pre-trial brief, the trial court dismissed the complaint.
On February 23,1988, the petitioners filed another complaint, denominated as Civil Case No. 88-
159 of the Regional Trial Court, Branch 58, Makati, Metro Manila, praying as follows:
WHEREFORE, premises considered, it is respectfully prayed that the Honorable

Court, after due hearing, orders the defendants to pay jointly and severally:
a. The principal of Pl00,000.00, less whatever was paid per evidence to be
presented, if any;
b. Attorney's fees of 25% of principal, plus interest or P 52,000.00;
c. Interests of 12% per annum = P 108,000.00 for nine (9) years which Is
provided in Annex "B" and is part of the principal = P 1 00,000.00 + P 108,000.00;
d. Exemplary damages subject to the discretion of the Honorable Court;
e. Expenses of litigation of P10,000.00;
f. For other relief which the Honorable Court may deem just to impose under the
circumstances, such as issuance of the order/writ of attachment due to
conversion as stated in the herein affidavit. 3
The private respondents moved for the dismissal of this complaint on the ground of failure to
prosecute for an unreasonable length of time pursuant to Section 3, Rule 17 of the Revised
Rules of Court. The trial court denied the dismissal motion.
Subsequently, the private respondents filed a "Motion to Dismiss and/or to Expunge Complaint
from the Record." Expunction was sought for failure of the petitioners "to specify both in the body
and in the prayer of their Complaint the amount of exemplary damages they seek to recover from
the defendants
. . . 4 on the strength of Manchester as well as Circular No. 7 of the Court,

implementing Manchester. On November 10, 1988, the trial judge dismissed the
case . . .
... for failure of the plaintiff to comply with Administration Circular No. 7 dated
March 24, 1988 re-affirming the pronouncement of the Supreme Court in this
case in Manchester Development Corporation vs. Court of Appeals "No. L-75919,
May 7,1987." (149 SCRA 562) 5
The lower court is now held to be in error in ordering dismissal.
The petition is possessed of merit.
The complaint (first or second) specified enough sums, as and for actual damages, except
exemplary damages, within Manchester's (or Circular No. 7's) contemplation. What would have
been fatal was if the petitioners mentioned no amount at all.
This is the teaching of Manchester.
At any rate:
Art. 2233. Exemplary damages cannot be recovered as a matter of right; the

court will decide whether or not they should be adjudicated . 6
So also, "...the amount of the exemplary damages need not be proved... 7
In other words, the amount payable by way of exemplary damages may be determined in the
course of the trial. The plaintiff (the petitioners in this case) could not have therefore predicted
how much exemplary losses they had incurred.
We are not saying -so let us make one thing clear-that the amount of exemplary damages need
not be alleged in all cases. Certainly, it would have been different had the case been one purely
for moral, nominal, temperate, or exemplary, damages, (as in libel) other than actual. Though
these damages are, under the Civil Code, damages that can not be shown with certainty, unlike
actual damages, the plaintiff must ascertain, in his estimation, the sums he wants, and the sums
required to determine the amount of docket and other fees.
The case at bar is different. It is, in essence, a demand for specific performance, as a
consequence of a contract of loan between the parties in the sum of: "a. The principal of
P100,000.00, less whatever was paid per evidence to be presented, if any; b. Attorney's fees of
25% of principal, plus interest or P52,000.00; c. Interests of 12% per annum = P108,000.00 for
nine (9) years which is provided in Annex "B" and is part of the principal = P100,000.00 +
P108,000.00; d. Exemplary damages subject to the discretion of the Honorable Court; e.
Expenses of litigation of P10,000.00; f. For other relief which the Honorable Court may deem just
to impose under the circumstances, such as issuance of the order/writ of attachment due to
conversion as stated in the herein affidavit." 8
The demand for exemplary damages was obviously meant to magnify the total claims, as is the
usual practice, but the failure to specify it is not lethal. The court can assess the docketing fees
on the basis of the actual damages sought.
So it has been held that where the complaint states enough facts and sums to "enable . . . the
Clerk of Court of the lower Court to compute the docket fees payable, 9 the trial court would be in
error to expunge the pleading. What is fatal, so we are told 10 is if the complaint left to the judge
mere "guesswork" as to the amounts payable as and by way of docket fees.
Finally, Manchester involved clearly an effort to defraud the government, and so, resort to its
ruling must be justified by a showing of a prior attempt to cheat the courts. This is not the case
here.
WHEREFORE, the petition is GRANTED. The case is REMANDED to the court a quo for further
proceedings.
SO ORDERED
G.R. No. 148246 February 16, 2007
REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
JUAN C. TUVERA, VICTOR P. TUVERA and TWIN PEAKS DEVELOPMENT
CORPORATION, Respondents.
DECISION
TINGA, J.:
The long-term campaign for the recovery of ill-gotten wealth of former President Ferdinand E.
Marcos, his wife Imelda, and their associates, has been met with many impediments, some of
which are featured in this case, that have led to doubts whether there is still promise in that
enterprise. Yet even as the prosecution of those cases have drudged on and on, the era of their
final reckoning is just beginning before this Court. The heavy hammer of the law is just starting to
fall.
The instant action originated from a civil complaint for restitution and damages filed by the
Republic of the Philippines against Marcos and his longtime aide Juan Tuvera, as well as
Tuvera's son Victor and a corporation the younger Tuvera had controlled. Trial on the case
against the Tuveras proceeded separately before the Sandiganbayan. After the Republic had
presented its evidence, the Tuveras successfully moved for the dismissal of the case on
demurrer to evidence. The demurrer was sustained, and it falls upon this Court to ascertain the
absence or existence of sufficient proof to support the relief sought by the Republic against the
Tuveras.
I.
We begin with the facts.
Twin Peaks Development Corporation (Twin Peaks) was organized on 5 March 1984 as a
corporation with a principal purpose of engaging in the real estate business. There were five
incorporating stockholders, including respondent Victor Tuvera (Victor)1 who owned 48% of the
shares of the fledgling corporation. Victor was the son of respondent Juan Tuvera, who was then
Presidential Executive Assistant of President Marcos.
Acting on a letter dated 31 May 1984 of Twin Peaks’ Vice-President and Treasurer Evelyn
Fontanilla in behalf of the corporation, President Marcos granted the award of a Timber License
Agreement (TLA), more specifically TLA No. 356, in favor of Twin Peaks to operate on 26,000
hectares of forest land with an annual allowable cut of 60,000 cubic meters of timber and to
export 10,000 cubic meters of mahogany of the narra species.2 As a result, Twin Peaks was able
to engage in logging operations.
On 25 February 1986, President Marcos was ousted, and Corazon C. Aquino assumed the
presidency. Among her first acts as President was to establish the Philippine Commission on
Good Government (PCGG), tasked with tracking down the ill-gotten wealth procured by Marcos,
his family, and associates during his 20-year rule. Among the powers granted to the PCGG was
the power to issue writs of sequestration.3 On 13 June 1988, the PCGG issued a Writ of
Sequestration on all assets, properties, records, documents, and shares of stock of Twin Peaks
on the ground that all the assets of the corporation are ill-gotten wealth for having been acquired
directly or indirectly through fraudulent and illegal means.4 This was followed
two days later by Mission Order No. MER-88 (Mission Order), also issued by the PCGG,
implementing the aforementioned Writ of Sequestration.5
On 9 December 1988, the PCGG, in behalf of the Republic, filed the Complaint now subject of
this Petition.6Impleaded as defendants in the Complaint7 were Juan and Victor Tuvera, as well as
the then-exiled President Marcos. Through the Complaint, the Republic sought to recover funds
allegedly acquired by said parties in flagrant breach of trust and fiduciary obligations with grave
abuse of right and power in violation of the Constitution and the laws of the Republic of the
Philippines.8
In particular, the Complaint alleged that Juan Tuvera, as Presidential Executive Assistant of
President Marcos, took advantage of his relationship to influence upon and connection with the
President by engaging in a scheme to unjustly enrich himself at the expense of the Republic and
of the Filipino people. This was allegedly accomplished on his part by securing TLA No. 356 on
behalf of Twin Peaks despite existing laws expressly prohibiting the exportation of mahogany of
the narra species9 and Twin Peaks’ lack of qualification to be a grantee thereof for lack of
sufficient logging equipment to engage in the logging business.10 The Complaint further alleged
that Twin Peaks exploited the country’s natural resources by engaging in large-scale logging and
the export of its produce through its Chinese operators whereby respondents obtained a revenue
of approximately ₱45 million.
The Complaint prayed that (1) TLA No. 356 be reverted to the State or cancelled; (2)
respondents be jointly and severally ordered to pay ₱48 million11 as actual damages; and (3)
respondents pay moral, temperate and exemplary damages, litigation expenses, and treble
judicial costs.12 It cited as grounds for relief, gross abuse of official position and authority, breach
of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, and
violation of the Constitution.13
In their Answer,14 respondents Victor Tuvera and Twin Peaks claimed that Twin Peaks was
awarded TLA No. 356 only after its articles of incorporation had been amended enabling it to
engage in logging operations,15 that the Republic’s reference to Chinese operations and revenue
of approximately ₱45 million were merely
imagined,16 and that the PCGG has no statutory authority to institute the action.17 By way of
counterclaim, respondents asked that the Republic be ordered to pay Victor Tuvera moral
damages and to pay both Victor Tuvera and Twin Peaks exemplary damages, and to reimburse
their attorney’s fees.18
Anent the allegation that Twin Peaks sold about ₱3 million worth of lumber despite the Writ of
Sequestration issued by the PCGG, respondents stressed that the Director of Forest
Development acted within the scope of his authority and the courts have no supervising power
over the actions of the Director of Forest Development and the Secretary of the Department of
Environment and Natural Resources (DENR) in the performance of their official duties.19
As an affirmative and special defense, respondents Victor Tuvera and Twin Peaks alleged that
after Twin Peaks was granted TLA No. 356 in 24 August 1984, Felipe Ysmael, Jr. and Co., Inc.
had filed a motion for the cancellation of the same with the DENR
Secretary. When respondents submitted their Answer, the denial by the DENR of the Ysmael
motion was under review before the Court.20
Juan Tuvera, who was abroad when the case was filed on 9 December 1988, later submitted his
own Answer on 6 December 1989.21 He also denied the allegations of the Republic and alleged
that as Presidential Executive Assistant of then President Marcos, he acted within the confines of
his duties and had perpetrated no unlawful acts. He merely transmitted communications of
approval in the course of his duties and had nothing to do with the decisions of then President
Marcos.22 He denied having anything to do with Twin Peaks.
Juan Tuvera filed a compulsory counterclaim on the ground that the instant action had
besmirched his reputation and caused serious anxiety and mental anguish thus entitling him to
moral and exemplary damages and litigation expenses.23
On 3 May 1989, respondents filed an Omnibus Motion to Nullify Writ of Sequestration and/or the
Mission Order.24The Sandiganbayan issued a Temporary Restraining Order against the PCGG
requiring it to cease, refrain and desist from further implementing the Writ of Sequestration and
the Mission Order.25 Subsequently, on motion of respondents, the Sandiganbayan granted a Writ
of Preliminary Injunction covering the Mission Order. The Sandiganbayan deferred its resolution
on the Motion to Lift the Writ of Sequestration.26
From 1988 to 1993, the proceedings before the Sandiganbayan were delayed owing to the
difficulty of acquiring jurisdiction over the person of President Marcos, who was by then already
in exile. Thus, upon motion by respondents, the Sandiganbayan granted them a separate pre-
trial/trial from President Marcos.27
Respondents submitted their documentary evidence in the Pre-Trial Conference while the
Republic reserved to present the same during trial. After the pre-trial conference, the
Sandiganbayan issued a Pre-Trial Order28 dated 3 November 1993, which presented the issues
for litigation as follows:
Whether or not defendant Juan C. Tuvera who was a Presidential Executive Assistant at the time
material to this case, by himself and in concert with his co-defendants Ferdinand E. Marcos and
Victor Tuvera, took advantage of his relation and connection with the late Marcos, secure (sic) a
timber concession for Twin Peaks Development Corporation and, engage (sic) in a scheme to
unjustly enrich himself at the expense of the Republic and the Filipino People.29
The Pre-Trial Order also indicated that the Republic admitted the exhibits by respondents,
subject to the presentation of certified true copies thereof. Respondents’ exhibits were as
follows:30
Exhibit Description
Nos.
1 Amended Articles of Incorporation dated 31 July 1984
2 TLA No. 356
3 Order, Minister Ernesto M. Maceda, 22 July 1986
3-A Order, Minister Ernesto M. Maceda, 10 October 1986
3-B Order, Minister Ernesto M. Maceda, 26 November 1986, O.P. Case No. 3521
3-C Resolution, Office of the President, 6 July 1987, O.P. Case No. 3521
3-D Order, Office of the President, 14 August 1987, I.S. No. 66
3-E Complaint, PCGG, dated 20 July 1988
3-E-1, 3-E- I.S. No. 66 Affidavit, PCGG, Almario F. Mendoza, Ltv. Ramon F. Mendoza and
2, Affidavit, Isidro Santiago
3-E-3
3-F Counter-Affidavit, Juan C. Tuvera, 17 August 1989
3-F-1 PCGG, Motion to Withdraw, Jose Restituto F. Mendoza, 10 May 1989
3-F-2 Decision, Supreme Court, 18 October 1990
3-G Resolution, Supreme Court, 5 June 1991
4 Complaint, DENR, Almario F, Mendoza, 9 March 1990
4-A Answer/Comment, DENR, Almario F. Mendoza, dated 20 April 1990
4-B Decision, DENR, dated 28 August 1990
5 Complaint, Ombudsman, etc., Case No. 0-90-0708, 9 March 1990
6, 6-A Answer/Counter-Affidavit, etc.
6-B Decision, Ombudsman Case No. 0-90-0708, dated 8 August 1990
The Republic presented three (3) witnesses during the trial. The first witness was Joveniana M.
Galicia, Chief of the National Forest Management Division of the Forest Management Bureau.
She identified TLA No. 356 of Twin Peaks dated 20 August 1984 and a Memorandum dated 18
July 1984. She testified that TLA No. 356 covers 26,000 hectares of forest land located in the
Municipality of Isabela, Province of Quirino.31 The Memorandum dated 18 July 1984 addressed
to Director Edmundo Cortez recited then President Marcos’ grant of the timber concession to
Twin Peaks. Identified and marked in the same memorandum were the name and signature of
Juan Tuvera.32 Upon cross-examination, Galicia stated that she was not yet the chief of the
Division when the documents she identified were submitted to the Bureau. She further stated it
was her first time to see the aforementioned documents when she was asked to bring the same
before the trial court.33
The next witness was Fortunato S. Arcangel, Regional Technical Director III of the DENR. He
testified that he is a Technical Director under the Forest Management Services of the
DENR.34 He identified Forestry Administration Order (FAO) No. 11 dated 1 September 1970. He
said he was aware of TLA No. 356 of Twin Peaks35 because at the time it was issued, he was the
chief of the Forestry Second Division and his duties included the evaluation and processing of
applications for licenses and permits for the disposition and distribution of timber and other forest
products.36 Consequently,
he was aware of the process by which TLA No. 356 was issued to Twin Peaks.37 According to
him, they processed the application insofar as they evaluated the location of the area concerned
and its present vegetative state, examined the records, and determined the annual allowable
land. After the examination, the license agreement was prepared and submitted for
approval.38 He continued that under FAO No. 11, a public bidding is required before any license
agreement or permit for the utilization of timber within the forestry land is issued39 but no public
bidding was conducted for TLA No. 356.40 He explained that no such bidding was conducted
because of a Presidential Instruction not to accept any application for timber licensing as a
consequence of which bidding procedures were stopped.41 Upon cross-examination, Arcangel
said that at the time TLA No. 356 was issued, the Revised Forestry Code of the Philippines42 was
already in effect but there were still provisions in FAO No. 11 that remained applicable such as
the terms and conditions of granting a license. He also stated that the issuance of the license to
Twin Peaks emanated from the President of the Philippines.43
The Republic’s third and last witness was Teresita M. Zuñiga, employee of the Bureau of Internal
Revenue. She identified the 1986 Income Tax Returns of Victor P. Tuvera, Evelyn Fontanilla and
Feliciano O. Salvana, stockholders of Twin Peaks.44
On 24 June 1994, the Republic rested its case after its formal offer of evidence, as follows:45
Exhibits Documents Purpose
A Timber License Agreement No. To prove that the Timber License Agreement was
356 of Twin Peaks Realty executed prior to the amendment of the Articles of
Development Corp. dated 20 Incorporation of Twin Peaks Realty Development
August 1984 Corp.
B Memorandum dated 18 July To prove the participation of Juan C. Tuvera in the

1984 of Juan C. Tuvera, grant of the timber concession of Twin Peaks
Presidential Executive Secretary Realty Development Corp.
C Forestry Administrative Order To prove that Twin Peaks Realty Development

No. 11 (Revised) Corp. was granted a timber license agreement
without following the procedure outlined in the
forestry rules and regulation and in violation of law.
D Income Tax Return of Victor To prove that Victor Tuvera was not a legitimate
Tuvera stockholder of Twin Peaks Realty Development
Corp.
E Income Tax Return of Evelyn To prove that Evelyn Fontanilla was not a legitimate
Fontanilla stockholder of Twin Peaks Realty Development
Corp.
F Income Tax Return of Feliciano To prove that Feliciano Salvana was not a
Salvana legitimate stockholder of Twin Peaks Realty
Development Corp.
G Articles of Incorporation of Twin To prove that Twin Peaks Realty Development

Peaks Realty Development Corp. was organized to engage in the real estate
Corp. (original) business and not in the logging industry.
H Timber Manifestation Report of To show that Twin Peaks Realty Development

[Twin Peaks Realty Corp. lacks equipment to process logs.
Development Corp.] consigned
to Scala Sawmill46
I Timber Manifestation Report of To show that Twin Peaks Realty Development

Twin Peaks consigned to La Corp. lacks equipment to process logs.
Peña Sawmill47
Respondents subsequently submitted certified true copies of the exhibits they had presented
during the pre-trial conference.48
With leave of court, respondents filed a Demurrer to Evidence. Respondents argued that the
Republic failed to present sufficient legal affirmative evidence to prove its claim. In particular,
respondents’ demurrer contends that the memorandum (Exh. B) and TLA No. 356 are not "legal
evidence" because "legal evidence" is not meant to raise a mere suspicion or doubt.
Respondents also claim that income tax returns are not sufficient to show one’s holding in a
corporation. Respondents also cited the factual antecedents culminating with the Court’s
decision in Felipe Ysmael, Jr. & Corp., Inc. v. Sec. of Environment and Natural Resources.49
The Republic filed a Manifestation, contending that the demurrer is not based on the insufficiency
of its evidence but on the strength of the evidence of respondents as shown by their own
exhibits. The Republic claimed that the Revised Forestry Code of the Philippines does not
dispense with the requirement of public bidding. The Republic added that Sec. 5 of said law
clearly provides that all applications for a timber license agreement must be filed before the
Bureau of Forest Development and that respondents still have to prove compliance with the
requirements for service contracts.50
Respondents opposed the Manifestation, maintaining that since the Republic admitted the
exhibits of respondents during the pre-trial, it is bound by its own admission. Further, these same
exhibits contain uncontroverted facts and laws that only magnify the conclusion that the Republic
has no right to relief.51
In its Resolution dated 23 May 2001,52 the Sandiganbayan sustained the demurrer to evidence
and referred to the decision of this Court in Ysmael in holding that res judicata applies. The Anti-
Graft Court also did not give credence to the Republic’s allegations concerning respondents’
abuse of power and/or public trust and consequent liability for damages in view of its failure to
establish any violation of Arts. 19, 20 and 21 of the Civil Code.
In essence, the Sandiganbayan held that the validity of TLA No. 356 was already fully
adjudicated in a Resolution/Order issued by the Office of the President on 14 August 1987, which
had become final and executory with the failure of the aggrieved party to seek a review thereof.
The Sandiganbayan continued that the above pronouncement is supported by this Court in
Ysmael. Consequently, the Sandiganbayan concluded, the Republic is barred from questioning
the validity of TLA No. 356 in consonance with the principle of res judicata.
The Republic now questions the correctness of the Sandiganbayan’s decision to grant the
demurrer to evidence because it was not based solely on the insufficiency of its evidence but
also on the evidence of respondent mentioned during the pre-trial conference. The Republic also
challenges the applicability of res judicata.
II.
Preliminarily, we observe that respondents had filed before the Sandiganbayan a pleading
captioned Motion to Dismiss or Demurrer to Evidence, thus evincing that they were seeking the
alternative reliefs of either a motion to dismiss or a demurrer to evidence. However, the
Sandiganbayan, in resolving this motion, referred to it as Motion to Dismiss on Demurrer to
Evidence, a pleading of markedly different character from a Motion to Dismiss or Demurrer to
Evidence. Still, a close reading of the Sandiganbayan Resolution reveals clearly that the
Sandiganbayan was treating the motion as a demurrer, following Rule 33, Section 1 of the Rules
of Court, rather than a motion to dismiss under Rule 16, Section 1.
This notwithstanding, the Sandiganbayan justified the grant of demurrer with res judicata as
rationale. Res judicata is an inappropriate ground for sustaining a demurrer to evidence, even as
it stands as a proper ground for a motion to dismiss. A demurrer may be granted if, after the
presentation of plaintiff’s evidence, it appears upon the facts and the law that the plaintiff has
shown no right to relief. In contrast, the grounds for res judicata present themselves even before
the presentation of evidence, and it should be at that stage that the defense of res judicata
should be invoked as a ground for dismissal. Properly speaking, the movants for demurral who
wish to rely on a controlling value of a settled case as a ground for demurrer should invoke the
ground of stare decisis in lieu of res judicata.
In Domondon v. Lopez,53 we distinguished a motion to dismiss for failure of the complainant to

state a cause of action from a motion to dismiss based on lack of cause of action. The first is
governed by Rule 16, Section 1(g),54while the second by Rule 3355 of the Rules of Court, to wit:
x x x The first [situation where the complaint does not alleged cause of action] is raised in a
motion to dismiss under Rule 16 before a responsive pleading is filed and can be determined
only from the allegations in the initiatory pleading and not from evidentiary or other matter
aliunde. The second [situation where the evidence does not sustain the cause of
action alleged] is raised in a demurrer to evidence under Rule 33 after the plaintiff has rested his
case and can be resolved only on the basis of the evidence he has presented in support of his
claim. The first does not concern itself with the truth and falsity of the allegations while the
second arises precisely because the judge has determined the truth and falsity of the allegations
and has found the evidence wanting.
Hence, a motion to dismiss based on lack of cause of action is filed by the defendant after the
plaintiff has presented his evidence on the ground that the latter has shown no right to the relief
sought. While a motion to dismiss under Rule 16 is based on preliminary objections which can be
ventilated before the beginning of the trial, a motion to dismiss under Rule 33 is in the nature of a
demurrer to evidence on the ground of insufficiency of evidence and is presented only after the
plaintiff has rested his case.56 [Emphasis supplied]
III.
We shall first discuss the question of whether or not a demurrer to evidence may be granted
based on the evidence presented by the opposing parties.
An examination of the Sandiganbayan’s Resolution shows that dismissal of the case on demurrer
to evidence was principally anchored on the Republic’s failure to show its right to relief because
of the existence of a prior judgment which consequently barred the relitigation of the same issue.
In other words, the Sandiganbayan did
not dismiss the case on the insufficiency of the Republic’s evidence nor on the strength of
respondents’ evidence. Rather, it based its dismissal on the existence of the Ysmael case which,
according to it, would render the case barred by res judicata.
Prescinding from this procedural miscue, was the Sandiganbayan correct in applying res judicata
to the case at bar? To determine whether or not res judicata indeed applies in the instant case, a
review of Ysmael is proper.
In brief, Felipe Ysmael, Jr. & Co., Inc. was a grantee of a timber license agreement, TLA No. 87.
Sometime in August 1983, the Bureau of Forest Development cancelled TLA No. 87 despite the
company’s letter for the reconsideration of the revocation. Barely one year thereafter, one-half (or
26,000 hectares) of the area formerly covered by TLA No. 87 was re-awarded to Twin Peaks
under TLA No. 356.
In 1986, Felipe Ysmael, Jr. & Co., Inc. sent separate letters to the Office of the President and the
Ministry of Natural Resources primarily seeking the reinstatement of TLA No. 87 and the
revocation of TLA No. 356. Both offices denied the relief prayed for. Consequently, Felipe
Ysmael, Jr. & Co., Inc. filed a petition for review before this Court.
The Court, through the late Justice Irene Cortes, held that Ysmael’s letters to the Office of the
President and to the Ministry of Natural Resources in 1986 sought the reconsideration of a
memorandum order by the Bureau of Forest Development canceling their timber license
agreement in 1983 and the revocation of TLA No. 356 subsequently issued by the Bureau in
1984. Ysmael did not attack the administrative actions until after 1986. Since the decision of the
Bureau has become final, it has the force and effect of a final judgment within the purview of the
doctrine of res judicata. These decisions and orders, therefore, are conclusive upon the rights of
the affected parties as though the same had been rendered by a court of general jurisdiction. The
Court also denied the petition of Ysmael because it failed to file the special civil action for
certiorari under Rule 65 within a reasonable time, as well as in due regard for public policy
considerations and the principle of non-interference by the courts in matters which are addressed
to the sound discretion of government agencies entrusted with the regulation of activities coming
under the special technical knowledge and training of such agencies.
In Sarabia and Leido v. Secretary of Agriculture and Natural Resources, et al.,57 the Court
discussed the underlying principle for res judicata, to wit:
The fundamental principle upon which the doctrine of res judicata rests is that parties ought not
to be permitted to litigate the same issue more than once; that, when a right or fact has been
judicially tried and determined by a court of competent jurisdiction, or an opportunity for such trial
has been given, the judgment of the court, so long as it remains unreversed, should be
conclusive upon the parties and those in privity with them in law or estate.
For res judicata to serve as an absolute bar to a subsequent action, the following requisites must
concur: (1) the former judgment or order must be final; (2) the judgment or order must be on the
merits; (3) it must have been rendered by a court having jurisdiction over the subject matter and
parties; and (4) there must be between the first and second actions, identity of parties, of subject
matter, and of causes of action.58 When there is only identity of issues with no identity of causes
of action, there exists res judicata in the concept of conclusiveness of judgment.59
In Ysmael, the case was between Felipe Ysmael Jr. & Co., Inc. and the Deputy Executive
Secretary, the Secretary of Environment and Natural Resources, the Director of the Bureau of
Forest Development and Twin Peaks Development and Realty Corporation. The present case,
on the other hand, was initiated by the Republic of
the Philippines represented by the Office of the Solicitor General. No amount of imagination
could let us believe that there was an identity of parties between this case and the one formerly
filed by Felipe Ysmael Jr. & Co., Inc.
The Sandiganbayan held that despite the difference of parties, res judicata nevertheless applies
on the basis of the supposed sufficiency of the "substantial identity" between the Republic of the
Philippines and Felipe Ysmael, Jr. Co., Inc. We disagree. The Court in a number of cases
considered the substantial identity of parties in the application of res judicata in instances where
there is privity between the two parties, as between their successors in interest by title60 or where
an additional party was simply included in the subsequent case61 or where one of the parties to a
previous case was not impleaded in the succeeding case.62
The Court finds no basis to declare the Republic as having substantial interest as that of Felipe
Ysmael, Jr. & Co., Inc. In the first place, the Republic’s cause of action lies in the alleged abuse
of
power on respondents’ part in violation of R.A. No. 301963 and breach of public trust, which in
turn warrants its claim for restitution and damages. Ysmael, on the other hand, sought the
revocation of TLA No. 356 and the reinstatement of its own timber license agreement. Indeed,
there is no identity of parties and no identity of causes of action between the two cases.
IV.
What now is the course of action to take since we cannot affirm the Sandiganbayan’s grant of the
demurrer to evidence? Rule 33, Sec. 1 reads:
Sec. 1. Effect of judgment on demurrer to evidence. – After the plaintiff has completed the
presentation of his evidence, the defendant may move for dismissal on the ground that upon the
facts and the law the plaintiff has shown no right to relief. If his motion is denied, he shall have
the right to present evidence. If the motion is granted but on appeal the order of dismissal is
reversed he shall have be deemed to have waived the right to present evidence.
The general rule is that upon the dismissal of the demurrer in the appellate court, the defendant
loses the right to present his evidence and the appellate court shall then proceed to render
judgment on the
merits on the basis of plaintiff’s evidence. As the Court explained in Generoso Villanueva Transit
Co., Inc. v. Javellana:64
The rationale behind the rule and doctrine is simple and logical. The defendant is permitted,
without waiving his right to offer evidence in the event that his motion is not granted, to move for
a dismissal (i.e., demur to the plaintiff’s evidence) on the ground that upon the facts as thus
established and the applicable law, the plaintiff has shown no right to relief. If the trial court
denies the dismissal motion, i.e., finds that plaintiff’s evidence is sufficient for an award of
judgment in the absence of contrary evidence, the case still remains before the trial court which
should then proceed to hear and receive the defendant’s evidence so that all the facts and
evidence of the contending parties may be properly placed before it for adjudication as well as
before the appellate courts, in case of appeal. Nothing is lost. The doctrine is but in line with the
established procedural precepts in the conduct of trials that the trial court liberally receive all
proffered evidence at the trial to enable it to render its decision with all possibly relevant proofs in
the record, thus assuring that the appellate courts upon appeal have all the material before them
necessary to make a correct judgment, and avoiding the need of remanding the case for retrial or
reception of improperly excluded evidence, with the possibility thereafter of still another appeal,
with all the concomitant delays. The rule, however, imposes the condition by the same token that
if his demurrer is granted by the trial court, and the order of dismissal is reversed on appeal, the
movant loses his right to present evidence in his behalf and he shall have been deemed to have
elected to stand on the insufficiency of plaintiff’s case and evidence. In such event, the appellate
court which reverses the order of dismissal shall proceed to render judgment on the merits on the
basis of plaintiff’s evidence.65
It thus becomes the Court's duty to rule on the merits of the complaint, duly taking into account
the evidence presented by the Republic, and without need to consider whatever evidence the
Tuveras have, they having waived their right to present evidence in their behalf.
V.
Executive Order No. 14-A66 establishes that the degree of proof required in cases such as this
instant case is preponderance of evidence. Section 3 thereof reads:
SEC. 3. The civil suits to recover unlawfully acquired property under Republic Act No. 1379 or for
restitution, reparation of damages, or indemnification for consequential and other damages or
any other civil actions under the Civil Code or other existing laws filed with the Sandiganbayan
against Ferdinand E. Marcos, Imelda R. Marcos, members of their immediate family, close
relatives, subordinates, close and/or business associates, dummies, agents and nominees, may
proceed independently of any criminal proceedings and may be proved by a preponderance of
evidence. [Emphasis supplied.]
Thus, the Court recently held in Yuchengco v. Sandiganbayan,67 that in establishing the quantum
of evidence required for civil cases involving the Marcos wealth held by their immediate family,
close relatives, subordinates, close and/or business associates, dummies,
agents and nominees filed before the Sandiganbayan, that "the Sandiganbayan, x x x was not to
look for proof beyond reasonable doubt, but to determine, based on the evidence presented, in
light of common human experience, which of the theories proffered by the parties is more worthy
of credence."
In order that restitution may be proper in this case, it must be first established that the grant of
the TLA to Twin Peaks was illegal. With the illegality of the grant established as fact, finding
Victor Tuvera, the major stockholder of Twin Peaks, liable in this case should be the ineluctable
course. In order that Juan Tuvera may be held answerable as well, his own participation in the
illegal grant should also be substantiated.
Regarding the first line of inquiry, the Complaint adverted to several provisions of law which
ostensibly were violated by the grant of the TLA in favor of Twin Peaks. These include R.A. No.
3019, otherwise known as the Anti-Graft and Corrupt Practices Act, and Articles 19, 20 and 21 of
the Civil Code.
Still, the most organic laws that determine the validity or invalidity of the TLA are those that
governed the issuance of timber license agreements in 1984. In that regard, the Republic argues
that the absence of a bidding process is patent proof of the irregularity of the issuance of the TLA
in favor of Twin Peaks.
A timber license agreement authorizes a person to utilize forest resources within any forest land
with the right of possession and exclusion of others.68 The Forestry Reform Code prohibits any
person from utilizing, exploiting, occupying, possessing or conducting any activity within any
forest land unless he had been authorized to do so under a license agreement, lease, license or
permit.69 The Code also mandates that no timber license agreement shall be issued unless the
applicant satisfactorily proves that he has the financial resources and technical capability not only
to minimize utilization, but also to practice forest protection, conservation and development
measures to insure the perpetuation of said forest in productive condition.70 However, the Code
is silent as to the procedure in the acquisition of such timber license agreement. Such procedure
is more particularly defined under FAO No. 11, dated 1 September 1970, which provides for the
"revised forestry license regulations."
FAO No. 11 establishes that it is the Director of Forestry who has the power "to grant timber
licenses and permits."71It also provides as a general policy that timber license agreements shall
be
granted through no other mode than public bidding.72 However, Section 24 of FAO No. 11 does
admit that a timber license agreement may be granted through "negotiation," as well as through
"public bidding."
26. When license may be issued.–A license under this Regulations may be issued or granted
only after an application and an award either through bidding or by negotiation has been made
and the Director of Forestry is satisfied that the issuance of such license shall not be inconsistent
with existing laws and regulations or prejudicial to public interest, and that the necessary license
fee, bond deposit and other requirements of the Bureau of Forestry have been paid and complied
with.73 [Emphasis supplied.]
However, even a person who is granted a TLA through "negotiation" is still required to submit the
same requirements and supporting papers as required for public bidding. The pertinent
provisions of FAO No. 11 state:
18. Requirements and supporting papers to be submitted.—The following requirements with

accompanying supporting papers or documents shall be submitted in addition to the
requirements of Section 12:
a. With bid application:

The applicant shall support his bid application with the required application fee duly paid and
proofs of the following:
(1) Capitalization.—Cash deposits and established credit line by applicant in domestic bank
certified to by the bank President or any of its authorized officials, duly attested by depositor as
his own to be used exclusively in logging and wood processing operations if awarded the area.
The bank certificate shall be accompanied by a written consent by the applicant-depositor for the
Director of Forestry or his authorized representative to verify such cash deposit with bank
authorities.
Capitalization and financial statements.— A minimum capitalization of ₱20.00 per cubit meter in
cash and an established credit line of ₱150.00 per cubic meter based on the allowable annual
cut are required. Financial statements certified by the independent and reputable certified public
accountants must accompany the application as proof of the necessary capitalization.
Additional capitalization, Real Estate.— In the event that the capitalization of the applicant is less
than the minimum or less than that set by the Director of Forestry for the area, the applicant
bidder may be asked to submit an affidavit signifying his readiness, should the area be awarded
to him, to convert within a specified time any specified unencumbered and titled real estate into
cash for use in operating and developing the area. Presentation of real estate should show
location by municipality and province, hectarage, title number, latest land tax declaration,
assessed value of land and improvements (stating kind of improvements), and encumbrances if
any.
(2) Logging machinery and equipment.—Evidence of ownership or capacity to acquire the

requisite machinery or equipment shall accompany the bid application. The capacity or ability to
acquire machineries and equipments shall be determined by the committee on award. Leased
equipment or machineries may be considered in the determination by the Committee if expressly
authorized in writing by the Director of Forestry.
(3) Technical know-how.—To assure efficient operation of the area or concession, the applicant
shall submit proof of technical competence and know-how and/or his ability to provide hired
services of competent personnel.
(4) Operation or development plan.— An appropriate plan of operation and development of the
forest area applied for shall be submitted, including phasing plans and the fund requirements
therefor, consistent with selective logging methods and the sustained yield policy of the Bureau
of Forestry. This plan must be in general agreement with the working unit plan for the area as
contained in Chapter III, Section 6(a) hereinabove.
(5) Processing plant.—The bidder or applicant shall show evidence of ownership of, or
negotiation to acquire, a wood processing plant. The kind and type of plant, such as plywood,
veneer, bandmill, etc. shall be specified. The plant should be capable of processing at least 60%
of the allowable annual cut.
(6) Forestry Department.—The applicant shall submit assurance under oath that he shall put a
forestry department composed of trained or experienced foresters to carry out forest
management activities such as selective logging, planting of denuded or logged-over areas
within the concessions as specified by the Director of Forestry and establish a forest nursery for
the purpose.
(7) Statement on sustained yield operations, reforestation, and protection under management
plans.— The bidder or applicant shall submit a sworn statement of his agreement and willingness
to operate the area under sustained yield to reforest cleared areas and protect the concession or
licensed area and under the approved management plan, and to abide with all existing forestry
laws, rules and regulations and those that may hereafter be promulgated; and of his agreement
that any violation of these conditions shall be sufficient cause for the cancellation of the licenses.
(8) Organization plan.–Other important statement connected with sound management and
operation of the area, such as the submission among others, of the organizational plan and
employment of concession guards, shall be submitted. In this connection, the applicant shall
submit a sworn statement to the effect no alien shall be employed without prior approval of
proper authorities.
(9) Unauthorized use of heave equipment.—The applicant shall give his assurance that he shall
not introduce into his area additional heave equipment and machinery without approval of the
Director of Forestry.
(10) Such other inducements or considerations to the award as will serve public interest may also
be required from time to time.
xxxx
d) With applications for areas to be negotiated.—All the foregoing requirements and supporting
papers required for bidding under Section 18(a) hereinabove and of Section 20(b) hereinbelow
shall also apply to all areas that may be granted through negotiation. In no case shall an area
exceeding 100,000 hectares be granted thru negotiation.74
The rationale underlying the very elaborate procedure that entails prior to the grant of a timber
license agreement is to avert the haphazard exploitation of the State's forest resources as it
provides that only the most qualified applicants will be allowed to engage in timber activities
within the strict limitations of the grant and that cleared forest areas will have to be renewed
through reforestation. Since timber is not a readily renewable natural resource, it is essential and
appropriate that the State serve and act as a jealous and zealous guardian of our forest lands,
with the layers of bureaucracy that encumber the grant of timber license agreements effectively
serving as a defensive wall against the thoughtless ravage of our forest resources.
There is no doubt that no public bidding occurred in this case. Certainly, respondents did not
raise the defense in their respective answers. The absence of such bidding was testified on by
prosecution witness Arcangel. Yet even if we consider that Twin Peaks could have acquired the
TLA through "negotiation," the prescribed requirements for "negotiation" under the law were still
not complied with.
It is evident that Twin Peaks was of the frame of mind that it could simply walk up to President
Marcos and ask for a timber license agreement without having to comply with the elaborate
application procedure under the law. This is indicated by the letter dated 31 May 198475 signed
by Twin Peaks’ Vice President and Treasurer Evelyn Fontanilla, addressed directly to then
President Marcos, wherein Twin Peaks expressed that "we would like to request a permit to
export 20,000 cubic meters of logs and to cut and process 10,000 cubic meters of the narra
species in the same area."76 A marginal note therein signed by Marcos indicates an approval
thereof. Neither the Forestry Reform Code nor FAO No. 11 provide for the submission of
an application directly to the Office of the President as a proper mode for the issuance of a TLA.
Without discounting the breadth and scope of the President’s powers as Chief Executive, the
authority of the President with respect to timber licenses is, by the express terms of the Revised
Forestry Code, limited to the amendment, modification, replacement or rescission of any
contract, concession, permit, license or any other form of privilege granted by said Code.77
There are several factors that taint this backdoor application for a timber license agreement by
Twin Peaks. The forest area covered by the TLA was already the subject of a pre-existing TLA in
favor of Ysmael. The Articles of Incorporation of Twin Peaks does not even stipulate that logging
was either a principal or secondary purpose of the corporation. Respondents do allege that the
Articles was amended prior to the grant in order to accommodate logging as a corporate
purpose, yet since respondents have waived their right to present evidence by reason of their
resort to demurrer, we cannot consider such allegation as proven.
Sec. 18(a)(1) of FAO No. 11 requires that an applicant must have a minimum capitalization of
₱20.00 per cubic meter in cash and an established credit line of ₱150.00 per cubic meter based
on the allowable annual cut. TLA No. 356 allowed Twin Peaks to operate on 26,000 hectares of
forest land with an annual allowable cut of 60,000 cubic meters of timber. With such annual
allowable cut, Twin
Peaks, therefore, must have at least ₱1,200,000.00 in cash as its minimum capitalization,
following FAO No. 11. An examination of Twin Peaks’ Articles of Incorporation shows that its
paid-up capital was only ₱312,500.00.78 Clearly, Twin Peaks’ paid-up capital is way below the
minimum capitalization requirement.
Moreover, Sec. 18(5) provides that the bidder or applicant shall show evidence of ownership of,
or negotiation to acquire, a wood processing plant. However, although TLA No. 356 was issued
to Twin Peaks in 1984, it continued to engage the services of at least two sawmills79 as late as
1988. Four (4) years from the issuance of the license, Twin Peaks remained incapable of
processing logs.
What could have made Twin Peaks feel emboldened to directly request President Marcos for the
grant of Timber License Agreement despite the obvious problems relating to its capacity to
engage in timber activities? The reasonable assumption is that the official and personal proximity
of Juan Tuvera to President Marcos was a key factor, considering that he was the father of Twin
Peaks' most substantial stockholder.
The causes of action against respondents allegedly arose from Juan Tuvera’s abuse of his
relationship, influence and connection as Presidential Executive Assistant of then President
Marcos. Through Juan Tuvera’s position, the Republic claims that Twin Peaks was able to
secure a Timber License Agreement despite its lack of qualification and the absence of a public
bidding. On account of the unlawful issuance of a timber license agreement, the natural
resources of the country were unlawfully exploited at the expense of the Filipino people. Victor
Tuvera, as son of Juan Tuvera and a major stockholder of Twin Peaks, was included as
respondent for having substantially benefited from this breach of trust. The circumstance of
kinship alone may not be enough to disqualify Victor Tuvera from seeking a timber license
agreement. Yet the basic ethical principle of delicadeza should have dissuaded Juan Tuvera
from any official or unofficial participation or intervention in behalf of the "request" of Twin Peaks
for a timber license.
Did Juan Tuvera do the honorable thing and keep his distance from Twin Peaks' "request"?
Apparently not. Instead, he penned a Memorandum dated 18 July 1984 in his capacity as
Presidential Executive Assistant, directed at the Director of Forestry, the official who, under the
law, possessed the legal authority to decide whether to grant the timber license agreements after
deliberating on the application and its supporting documents. The Memorandum reads in full:
Office of the President of the Philippines

Malacanang
18 July 1984
74-84
MEMORANDUM to
Director Edmundo Cortes
Bureau of Forest Development
I wish to inform you that the President has granted the award to the Twin Peaks
Realty Development Corporation, of the concession to manage, operate and
develop in accordance with existing policies and regulations half of the timber
area in the Province of Quirino covered by TLA No. 87, formerly belonging to the
Felipe Ysmael, Jr. & Company and comprising 54,920 hectares, and to export
half of the requested 20,000 cubic meters of logs to be gathered from the area.
Herewith is a copy of the letter concering (sic) this matter of Ms. Evelyn F.
Fontanilla, Vice-President and Treasurer of the Twin Peaks Realty Development
Corporation, on which the President indicated such approval in his own hand,
which I am furnishing you for your information and appropriate action.
(signed)
JUAN C. TUVERA
Presidential Executive Assistant80
The Memorandum establishes at the very least that Tuvera knew about the Twin Peaks
"request," and of President Marcos's favorable action on such "request." The Memorandum also
indicates that Tuvera was willing to convey those facts to the Director of Forestry, the ostensible
authority in deciding whether the Twin Peaks "request" should have been granted. If Juan Tuvera
were truly interested in preventing any misconception that his own position had nothing to do with
the favorable action on the "request" lodged by the company controlled by his son, he would not
have prepared or signed the Memorandum at all. Certainly, there were other officials in
Malacañang who could have performed that role had the intent of the Memorandum been merely
to inform the Director of Forestry of such Presidential action.
Delicadeza is not merely a stentorian term evincing a bygone ethic. It is a legal principle as
embodied by certain provisions of the Anti-Graft and Corrupt Practices Act. Section 3 of R.A. No.
3019 states in part:
Sec. 3. Corrupt practices of public officers.—In addition to acts or omissions of public officers
already penalized by existing law, the following shall constitute corrupt practices of any public
officer and are hereby declared to be unlawful:
(a) Persuading, inducing or influencing another public officer to perform an act constituting a
violation of rules and regulations duly promulgated by competent authority or an offense in
connection with the official duties of the latter, or allowing himself to be persuaded, induced or
influenced to commit such violation or offense.
xxxx
(h) Directly or indirectly having financial or pecuniary interest in any business, contract or
transaction in connection with which he intervenes or takes part in his official capacity, or in
which he is prohibited by the Constitution or by any law from having any interest.
The Memorandum signed by Juan Tuvera can be taken as proof that he "persuaded, induced or
influenced" the Director of Forestry to accommodate a timber license agreement in favor of Twin
Peaks, despite the failure to undergo public bidding, or to comply with the requisites for the grant
of such agreement by negotiation, and in favor of a corporation that did not appear legally
capacitated to be granted such agreement. The fact that the principal stockholder of Twin Peaks
was his own son establishes his indirect pecuniary interest in the transaction he appears to have
intervened in. It may have been possible on the part of Juan Tuvera to prove that he did not
persuade, induce or influence the Director of Forestry or any other official in behalf of the timber
license agreement of Twin Peaks, but then again, he waived his right to present evidence to
acquit himself of such suspicion. Certainly, the circumstances presented by the evidence of the
prosecution are sufficient to shift the burden of evidence to Tuvera in establishing that he did not
violate the provisions of the Anti-Graft and Corrupt Practices Act in relation to the Twin Peaks
"request." Unfortunately, having waived his right to present evidence, Juan Tuvera failed to
disprove that he failed to act in consonance with his obligations under the Anti-Graft and Corrupt
Practices Act.
In sum, the backdoor recourse for a hugely priced favor from the government by itself, and more
in tandem with other brazen relevant damning circumstances, indicates the impudent abuse of
power and the detestable misuse of influence that homologously made the acquisition of ill-
gotten wealth a reality. Upon the facts borne out by the evidence for the Republic and guideposts
supplied by the governing laws, the Republic has a clear right to the reliefs it seeks.
VI.
If only the Court's outrage were quantifiable in sums of money, respondents are due for
significant pecuniary hurt. Instead, the Court is forced to explain in the next few paragraphs why
respondents could not be forced to recompensate the Filipino people in appropriate financial
terms. The fault lies with those engaged by the government to litigate this case in behalf of the
State.
It bears to the most primitive of reasons that an action for recovery of sum of money must prove
the amount sought to be recovered. In the case at bar, the Republic rested its case without
presenting any evidence, documentary or testimonial, to establish the amount that should be
restituted to the State by reason of the illegal acts committed by the respondents. There is the
bare allegation in the complaint that the State is entitled to ₱48 million by way of actual damages,
but no single proof presented as to why the State is entitled to such amount.
Actual damages must be proven, not presumed.81 The Republic failed to prove damages. It is not
enough for the Republic to have established, as it did, the legal travesty that led to the wrongful
obtention by Twin Peaks of the TLA. It should have established the degree of injury sustained by
the State by reason of such wrongful act.
We fail to comprehend why the Republic failed to present any proof of actual damages. Was it
the inability to obtain the necessary financial documents that would establish the income earned
by Twin Peaks during the period it utilized the TLA, despite the presence of the discovery
processes? Was it mere indolence or sheer incompetence? Whatever the reason, the lapse is
inexcusable, and the injury ultimately conduces to the pain of the Filipino people. If the litigation
of this case is indicative of the mindset in the prosecution of ill-gotten wealth cases, it is
guaranteed to ensure that those who stole from the people will be laughing on their way to the
bank.
The claim for moral damages deserves short shrift. The claimant in this case is the Republic of
the Philippines, a juridical person. We explained in Filipinas Broadcasting v. Ago Medical &
Educational Center-Bicol Christian College of Medicine (AMEC-BCCM):82
A juridical person is generally not entitled to moral damages because, unlike a natural person, it
cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety,
mental anguish or moral shock. The Court of Appeals cites Mambulao Lumber Co. v. PNB, et al.
to justify the award of moral damages. However, the Court's statement in Mambulao that "a
corporation may have a good reputation which, if besmirched, may also be a ground for the
award of moral damages" is an obiter dictum.
Nevertheless, AMEC's claim for moral damages falls under item 7 of Article 2219 of the Civil
Code. This provision expressly authorizes the recovery of moral damages in cases of libel,
slander or any other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a
natural or juridical person. Therefore, a juridical person such as a corporation can validly
complain for libel or any other form of defamation and claim for moral damages.83
As explained, a juridical person is not entitled to moral damages under Article 2217 of the Civil
Code. It may avail of moral damages under the analogous cases listed in Article 2219, such as
for libel, slander or any other form of defamation. Suffice it to say that the action at bar does not
involve any of the analogous cases under Article 2219, and indeed upon an intelligent reading of
Article 2219, it is difficult to see how the Republic could sustain any of the injuries contemplated
therein. Any lawyer for the Republic who poses a claim for moral damages in behalf of the State
stands in risk of serious ridicule.
However, there is sufficient basis for an award of temperate damages, also sought by the
Republic notwithstanding the fact that a claim for both actual and temperate damages is
internally inconsistent. Temperate or moderate damages avail 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."84 The textual language might betray an intent that temperate damages do not
avail when the case, by its nature, is susceptible to proof of pecuniary loss; and certainly the
Republic could have proved pecuniary loss herein.85 Still, jurisprudence applying Article 2224 is
clear that temperate damages may be awarded even in instances where pecuniary loss could
theoretically have been proved with certainty. 1aw phi1.net
In a host of criminal cases, the Court has awarded temperate damages to the heirs of the victim
in cases where the amount of actual damages was not proven due to the inadequacy of the
evidence presented by the prosecution. These cases include People v. Oliano,86 People v.
Suplito,87 People v. De la Tongga,[88] People v. Briones,89 and People v. Plazo.90 In Viron
Transportation Co., Inc. v. Delos Santos,91 a civil action for damages involving a vehicular
collision, temperate damages were awarded for the resulting damage sustained by a cargo truck,
after the plaintiff had failed to submit competent proof of actual damages.
We cannot discount the heavy influence of common law, and its reliance on judicial precedents,
in our law on tort and damages. Notwithstanding the language of Article 2224, a line of
jurisprudence has emerged authorizing the award of temperate damages even in cases where
the amount of pecuniary loss could have been proven with certainty, if no such adequate proof
was presented. The allowance of temperate damages when actual damages were not
adequately proven is ultimately a rule drawn from equity, the principle affording relief to those
definitely injured who are unable to prove how definite the injury. There is no impediment to apply
this doctrine to the case at bar, which involves one of the most daunting and noble undertakings
of our young democracy–the recovery of ill-gotten wealth salted away during the Marcos years. If
the doctrine can be justified to answer for the unlawful damage to a cargo truck, it is a
compounded wrath if it cannot answer for the unlawful exploitation of our forests, to the injury of
the Filipino people. The amount of ₱1,000,000.00 as temperate damages is proper.
The allowance of temperate damages also paves the way for the award of exemplary damages.
Under Article 2234 of the Civil Code, a showing that the plaintiff is entitled to temperate damages
allows for the award of exemplary damages. Even as exemplary damages cannot be recovered
as a matter of right, the courts are empowered to decide whether or not they should be
adjudicated. Ill-gotten wealth cases are hornbook demonstrations where damages by way of
example or correction for the public good should be awarded. Fewer causes of action deserve
the stigma left by exemplary damages, which "serve as a deterrent against or as a negative
incentive to curb socially deleterious actions."92 The obtention of the timber license agreement by
Twin Peaks through fraudulent and illegal means was highlighted by Juan Tuvera’s abuse of his
position as Presidential Executive Assistant. The consequent exploitation of 26 hectares of forest
land benefiting all respondents is a grave case of unjust enrichment at the expense of the Filipino
people and of the environment which should never be countenanced. Considering the expanse
of forest land exploited by respondents, the volume of timber that was necessarily cut by virtue of
their abuse and the estimated wealth acquired by respondents through grave abuse of trust and
public office, it is only reasonable that petitioner be granted the amount of ₱1,000,000.00 as
exemplary damages.
The imposition of exemplary damages is a means by which the State, through its judicial arm,
can send the clear and unequivocal signal best expressed in the pithy but immutable phrase,
"never again." It is severely unfortunate that the Republic did not exert its best efforts in the full
recovery of the actual damages caused by the illegal grant of the Twin Peaks TLA. To the best of
our ability, through the appropriate vehicle of exemplary damages, the Court will try to fill in that
deficiency. For if there is a lesson that should be
learned from the national trauma of the rule of Marcos, it is that kleptocracy cannot pay. As those
dark years fade into the backburner of the collective memory, and a new generation emerges
without proximate knowledge of how bad it was then, it is useful that the Court serves a reminder
here and now.
WHEREFORE, the petition is GRANTED. The Resolution of the Sandiganbayan dated 23 May
2001 is REVERSED. Respondents Juan C. Tuvera, Victor P. Tuvera and Twin Peaks
Development Corporation are hereby ordered to jointly and severally pay to the Republic of the
Philippines One Million (₱1,000,000.00) Pesos, as and for temperate damages, and One Million
(₱1,000,000.00) Pesos, as and for exemplary damages, plus costs of suit.
SO ORDERED
G.R. No. 107518 October 8, 1998
PNOC SHIPPING AND TRANSPORT CORPORATION, petitioner,

vs.
HONORABLE COURT OF APPEALS and MARIA EFIGENIA FISHING
CORPORATION, respondents.
ROMERO, J.:
A party is entitled to adequate compensation only for such pecuniary loss actually suffered and
duly proved.1Indeed, basic is the rule that to recover actual damages, the amount of loss
must not only be capable of proof but must actually be proven with a reasonable degree
of certainty, premised upon competent proof or best evidence obtainable of the actual
amount thereof.2 The claimant is duty-bound to point out specific facts that afford a basis
for measuring whatever compensatory damages are borne.3 A court cannot merely rely on
speculations, conjectures, or guesswork as to the fact and amount of damages4 as well as
hearsay5 or uncorroborated testimony whose truth is suspect.6 Such are the
jurisprudential precepts that the Court now applies in resolving the instant petition.
The records disclose that in the early morning of September 21, 1977, the M/V Maria
Efigenia XV, owned by private respondent Maria Efigenia Fishing Corporation, was
navigating the waters near Fortune Island in Nasugbu, Batangas on its way to Navotas,
Metro Manila when it collided with the vessel Petroparcel which at the time was owned by
the Luzon Stevedoring Corporation (LSC).
After investigation was conducted by the Board of Marine Inquiry, Philippine Coast Guard
Commandant Simeon N. Alejandro rendered a decision finding the Petroparcel at fault.
Based on this finding by the Board and after unsuccessful demands on
petitioner, 7 private respondent sued the LSC and the Petroparcel captain, Edgardo
Doruelo, before the then Court of First Instance of Caloocan City, paying thereto the
docket fee of one thousand two hundred fifty-two pesos (P1,252.00) and the legal research
fee of two pesos (P2.00). 8 In particular, private respondent prayed for an award of
P692,680.00, allegedly representing the value of the fishing nets, boat equipment and
cargoes of M/V Maria Efigenia XV, with interest at the legal rate plus 25% thereof as
attorney's fees. Meanwhile, during the pendency of the case, petitioner PNOC Shipping
and Transport Corporation sought to be substituted in place of LSC as it had already
acquired ownership of the Petroparcel. 9
For its part, private respondent later sought the amendment of its complaint on the
ground that the original complaint failed to plead for the recovery of the lost value of the
hull of M/V Maria Efigenia XV. 10 Accordingly, in the amended complaint, private
respondent averred that M/V Maria Efigenia XV had an actual value of P800,000.00 and
that, after deducting the insurance payment of P200,000.00, the amount of P600,000.00
should likewise be claimed. The amended complaint also alleged that inflation resulting
from the devaluation of the Philippine peso had affected the replacement value of the hull
of the vessel, its equipment and its lost cargoes, such that there should be a reasonable
determination thereof. Furthermore, on account of the sinking of the vessel, private
respondent supposedly incurred unrealized profits and lost business opportunities that
would thereafter be proven. 11
Subsequently, the complaint was further amended to include petitioner as a

defendant 12 which the lower court granted in its order of September 16,
1985. 13 After petitioner had filed its answer to the second amended complaint, on
February 5, 1987, the lower court issued a pre-trial order 14 containing, among other
things, a stipulations of facts, to wit:
1. On 21 September 1977, while the fishing boat "M/V MARIA EFIGENIA"

owned by plaintiff was navigating in the vicinity of Fortune Island in
Nasugbu, Batangas, on its way to Navotas, Metro Manila, said fishing boat
was hit by the LSCO tanker "Petroparcel" causing the former to sink.
2. The Board of Marine Inquiry conducted an investigation of this marine

accident and on 21 November 1978, the Commandant of the Philippine
Coast Guard, the Honorable Simeon N. Alejandro, rendered a decision
finding the cause of the accident to be the reckless and imprudent manner
in which Edgardo Doruelo navigated the LSCO "Petroparcel" and declared
the latter vessel at fault.
3. On 2 April 1978, defendant Luzon Stevedoring Corporation

(LUSTEVECO), executed in favor of PNOC Shipping and Transport
Corporation a Deed of Transfer involving several tankers, tugboats, barges
and pumping stations, among which was the LSCO Petroparcel.
4. On the same date on 2 April 1979 (sic), defendant PNOC STC again
entered into an Agreement of Transfer with co-defendant Lusteveco
whereby all the business properties and other assets appertaining to the
tanker and bulk oil departments including the motor tanker LSCO
Petroparcel of defendant Lusteveco were sold to PNOC STC.
5. The aforesaid agreement stipulates, among others, that PNOC-STC

assumes, without qualifications, all obligations arising from and by virtue
of all rights it obtained over the LSCO "Petroparcel".
6. On 6 July 1979, another agreement between defendant LUSTEVECO and

PNOC-STC was executed wherein Board of Marine Inquiry Case No. 332
(involving the sea accident of 21 September 1977) was specifically
identified and assumed by the latter.
7. On 23 June 1979, the decision of Board of Marine Inquiry was affirmed by

the Ministry of National Defense, in its decision dismissing the appeal of
Capt. Edgardo Doruelo and Chief mate Anthony Estenzo of LSCO
"Petroparcel".
8. LSCO "Petroparcel" is presently owned and operated by PNOC-STC and

likewise Capt. Edgardo Doruelo is still in their employ.
9. As a result of the sinking of M/V Maria Efigenia caused by the reckless

and imprudent manner in which LSCO Petroparcel was navigated by
defendant Doruelo, plaintiff suffered actual damages by the loss of its
fishing nets, boat equipments (sic) and cargoes, which went down with the
ship when it sank the replacement value of which should be left to the
sound discretion of this Honorable Court.
After trial, the lower court 15 rendered on November 18, 1989 its decision disposing of Civil
Case No. C-9457 as follows:
WHEREFORE, and in view of the foregoing, judgment is hereby rendered in
favor of the plaintiff and against the defendant PNOC Shipping & Transport
Corporation, to pay the plaintiff:
a. The sum of P6,438,048.00 representing the value of the

fishing boat with interest from the date of the filing of the
complaint at the rate of 6% per annum;
b. The sum of P50,000.00 as and for attorney's fees; and
c. The costs of suit.
The counterclaim is hereby DISMISSED for lack of merit. Likewise, the case
against defendant Edgardo Doruelo is hereby DISMISSED, for lack of
jurisdiction.
SO ORDERED.
In arriving at the above disposition, the lower court cited the evidence presented by
private respondent consisting of the testimony of its general manager and sole witness,
Edilberto del Rosario. Private respondent's witness testified that M/V Maria Efigenia
XV was owned by private respondent per Exhibit A, a certificate of ownership issued by
the Philippine Coast Guard showing that M/V Maria Efigenia XV was a wooden motor boat
constructed in 1965 with 128.23 gross tonnage. According to him, at the time the vessel
sank, it was then carrying 1,060 tubs (bañeras) of assorted fish the value of which was
never recovered. Also lost with the vessel were two cummins engines (250 horsepower),
radar, pathometer and compass. He further added that with the loss of his flagship vessel
in his fishing fleet of fourteen (14) vessels, he was constrained to hire the services of
counsel whom he paid P10,000 to handle the case at the Board of Marine Inquiry and
P50,000.00 for commencing suit for damages in the lower court.
As to the award of P6,438,048.00 in actual damages, the lower court took into account the
following pieces of documentary evidence that private respondent proffered during trial:
(a) Exhibit A — certified xerox copy of the certificate of

ownership of M/V Maria Efigenia XV;
(b) Exhibit B — a document titled "Marine Protest" executed

by Delfin Villarosa, Jr. on September 22, 1977 stating that as
a result of the collision, the M/V Maria Efigenia XV sustained
a hole at its left side that caused it to sink with its cargo of
1,050 bañerasvalued at P170,000.00;
(c) Exhibit C — a quotation for the construction of a 95-footer

trawler issued by Isidoro A. Magalong of I. A. Magalong
Engineering and Construction on January 26, 1987 to Del
Rosario showing that construction of such trawler would
cost P2,250,000.00;
(d) Exhibit D — pro forma invoice No. PSPI-05/87-NAV issued

by E.D. Daclan of Power Systems, Incorporated on January
20, 1987 to Del Rosario showing that two (2) units of
CUMMINS Marine Engine model N855-M, 195 bhp. at 1800
rpm. would cost P1,160,000.00;
(e) Exhibit E — quotation of prices issued by Scan Marine
Inc. on January 20, 1987 to Del Rosario showing that a unit of
Furuno Compact Daylight Radar, Model FR-604D, would cost
P100,000.00 while a unit of Furuno Color Video Sounder,
Model FCV-501 would cost P45,000.00 so that the two units
would cost P145,000.00;
(f) Exhibit F — quotation of prices issued by Seafgear Sales,

Inc. on January 21, 1987 to Del Rosario showing that two (2)
rolls of nylon rope (5" cir. X 300fl.) would cost P140,000.00;
two (2) rolls of nylon rope (3" cir. X 240fl.), P42,750.00; one
(1) binocular (7 x 50), P1,400.00, one (1) compass (6"),
P4,000.00 and 50 pcs. of floats, P9,000.00 or a total of
P197,150.00;
(g) Exhibit G — retainer agreement between Del Rosario and

F. Sumulong Associates Law Offices stipulating an
acceptance fee of P5,000.00, per appearance fee of P400.00,
monthly retainer of P500.00, contingent fee of 20% of the
total amount recovered and that attorney's fee to be awarded
by the court should be given to Del Rosario; and
(h) Exhibit H — price quotation issued by Seafgear Sales, Inc.

dated April 10, 1987 to Del Rosario showing the cost of poly
nettings as: 50 rolls of 400/18 3kts. 100md x 100mtrs.,
P70,000.00; 50 rolls of 400/18 5kts. 100md x 100mtrs.,
P81,500.00; 50 rolls of 400/18 8kts. 100md x 100mtrs.,
P116,000.00, and 50 rolls of 400/18 10kts. 100md x 100mtrs.,
P146,500 and bañera (tub) at P65.00 per piece or a total of
P414,065.00.
The lower court held that the prevailing replacement value of P6,438,048.00 of the fishing
boat and all its equipment would regularly increase at 30% every year from the date the
quotations were given.
On the other hand, the lower court noted that petitioner only presented Lorenzo Lazaro,
senior estimator at PNOC Dockyard & Engineering Corporation, as sole witness and it did
not bother at all to offer any documentary evidence to support its position. Lazaro
testified that the price quotations submitted by private respondent were "excessive" and
that as an expert witness, he used the quotations of his suppliers in making his estimates.
However, he failed to present such quotations of prices from his suppliers, saying that he
could not produce a breakdown of the costs of his estimates as it was "a sort of secret
scheme." For this reason, the lower court concluded:
Evidently, the quotation of prices submitted by the plaintiff relative to the

replacement value of the fishing boat and its equipments in the tune of
P6,438,048.00 which were lost due to the recklessness and imprudence of
the herein defendants were not rebutted by the latter with sufficient
evidence. The defendants through their sole witness Lorenzo Lazaro relied
heavily on said witness' bare claim that the amount afore-said is excessive
or bloated, but they did not bother at all to present any documentary
evidence to substantiate such claim. Evidence to be believed must not only
proceed from the mouth of the credible witness, but it must be credible in
itself. (Vda. de Bonifacio vs. B. L. T. Bus Co., Inc. L-26810, August 31, 1970).
Aggrieved, petitioner filed a motion for the reconsideration of the lower court's decision
contending that: (1) the lower court erred in holding it liable for damages; that the lower
court did not acquire jurisdiction over the case by paying only P1,252.00 as docket fee; (2)
assuming that plaintiff was entitled to damages, the lower court erred in awarding an
amount greater than that prayed for in the second amended complaint; and (3) the lower
court erred when it failed to resolve the issues it had raised in its
memorandum. 16 Petitioner likewise filed a supplemental motion for reconsideration
expounding on whether the lower court acquired jurisdiction over the subject matter of
the case despite therein plaintiff's failure to pay the prescribed docket fee. 17
On January 25, 1990, the lower court declined reconsideration for lack of
merit. 18 Apparently not having received the order denying its motion for reconsideration,
petitioner still filed a motion for leave to file a reply to private respondent's opposition to
said motion. 19 Hence, on February 12, 1990, the lower court denied said motion for leave
to file a reply on the ground that by the issuance of the order of January 25, 1990, said
motion had become moot and academic. 20
Unsatisfied with the lower court's decision, petitioner elevated the matter to the Court of
Appeals which, however, affirmed the same in toto on October 14, 1992. 21 On petitioner's
assertion that the award of P6,438,048.00 was not convincingly proved by competent and
admissible evidence, the Court of Appeals ruled that it was not necessary to qualify Del
Rosario as an expert witness because as the owner of the lost vessel, "it was well within
his knowledge and competency to identify and determine the equipment installed and the
cargoes loaded" on the vessel. Considering the documentary evidence presented as in
the nature of market reports or quotations, trade journals, trade circulars and price lists,
the Court of Appeals held, thus:
Consequently, until such time as the Supreme Court categorically rules on

the admissibility or inadmissibility of this class of evidence, the reception
of these documentary exhibits (price quotations) as evidence rests on the
sound discretion of the trial court. In fact, where the lower court is
confronted with evidence which appears to be of doubtful admissibility, the
judge should declare in favor of admissibility rather than of non-
admissibility (The Collector of Palakadhari, 124 [1899], p. 13, cited in
Francisco, Revised Rules of Court, Evidence, Volume VII, Part I, 1990
Edition, p. 18). Trial courts are enjoined to observe the strict enforcement of
the rules of evidence which crystallized through constant use and practice
and are very useful and effective aids in the search for truth and for the
effective administration of justice. But in connection with evidence which
may appear to be of doubtful relevancy or incompetency or admissibility, it
is the safest policy to be liberal, not rejecting them on doubtful or technical
grounds, but admitting them unless plainly irrelevant, immaterial or
incompetent, for the reason that their rejection places them beyond the
consideration of the court. If they are thereafter found relevant or
competent, can easily be remedied by completely discarding or ignoring
them. (Banaria vs. Banaria, et al., C.A. No. 4142, May 31, 1950; cited in
Francisco, Supra). [Emphasis supplied].
Stressing that the alleged inadmissible documentary exhibits were never satisfactorily
rebutted by appellant's own sole witness in the person of Lorenzo Lazaro, the appellate
court found that petitioner ironically situated itself in an "inconsistent posture by the fact
that its own witness, admittedly an expert one, heavily relies on the very same pieces of
evidence (price quotations) appellant has so vigorously objected to as inadmissible
evidence." Hence, it concluded:
. . . The amount of P6,438,048.00 was duly established at the trial on the

basis of appellee's documentary exhibits (price quotations) which stood
uncontroverted, and which already included the amount by way of
adjustment as prayed for in the amended complaint. There was therefore no
need for appellee to amend the second amended complaint in so far as to
the claim for damages is concerned to conform with the evidence
presented at the trial. The amount of P6,438,048.00 awarded is clearly within
the relief prayed for in appellee's second amended complaint.
On the issue of lack of jurisdiction, the respondent court held that following the ruling
in Sun Insurance Ltd. v. Asuncion, 22 the additional docket fee that may later on be
declared as still owing the court may be enforced as a lien on the judgment.
Hence, the instant recourse.
In assailing the Court of Appeals' decision, petitioner posits the view that the award of
P6,438,048 as actual damages should have been in light of these considerations, namely:
(1) the trial court did not base such award on the actual value of the vessel and its
equipment at the time of loss in 1977; (2) there was no evidence on extraordinary inflation
that would warrant an adjustment of the replacement cost of the lost vessel, equipment
and cargo; (3) the value of the lost cargo and the prices quoted in respondent's
documentary evidence only amount to P4,336,215.00; (4) private respondent's failure to
adduce evidence to support its claim for unrealized profit and business opportunities; and
(5) private respondent's failure to prove the extent and actual value of damages sustained
as a result of the 1977 collision of the vessels. 23
Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded
in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a
sense of natural justice and are designed to repair the wrong that has been done, to
compensate for the injury inflicted and not to impose a penalty. 24 In actions based on
torts or quasi-delicts, actual damages include all the natural and probable consequences
of the act or omission complained of. 25 There are two kinds of actual or compensatory
damages: one is the loss of what a person already possesses (daño emergente), and the
other is the failure to receive as a benefit that which would have pertained to him (lucro
cesante). 26 Thus:
Where goods are destroyed by the wrongful act of the defendant the
plaintiff is entitled to their value at the time of destruction, that is, normally,
the sum of money which he would have to pay in the market for identical or
essentially similar goods, plus in a proper case damages for the loss of use
during the period before replacement. In other words, in the case of profit-
earning chattels, what has to be assessed is the value of the chattel to its
owner as a going concern at the time and place of the loss, and this means,
at least in the case of ships, that regard must be had to existing and
pending engagements, . . .
. . . . If the market value of the ship reflects the fact that it is in any case
virtually certain of profitable employment, then nothing can be added to
that value in respect of charters actually lost, for to do so would be pro
tanto to compensate the plaintiff twice over. On the other hand, if the ship
is valued without reference to its actual future engagements and only in the
light of its profit-earning potentiality, then it may be necessary to add to the
value thus assessed the anticipated profit on a charter or other engagement
which it was unable to fulfill. What the court has to ascertain in each case is
the "capitalised value of the vessel as a profit-earning machine not in the
abstract but in view of the actual circumstances," without, of course, taking
into account considerations which were too remote at the time of the
loss. 27 [Emphasis supplied].
As stated at the outset, to enable an injured party to recover actual or compensatory
damages, he is required to prove the actual amount of loss with reasonable degree of
certainty premised upon competent proof and on the best evidence available. 28 The
burden of proof is on the party who would be defeated if no evidence would be presented
on either side. He must establish his case by a preponderance of evidence which means
that the evidence, as a whole, adduced by one side is superior to that of the other. 29 In
other words, damages cannot be presumed and courts, in making an award must point
out specific facts that could afford a basis for measuring whatever compensatory or
actual damages are borne. 30
In this case, actual damages were proven through the sole testimony of private
respondent's general manager and certain pieces of documentary evidence. Except for
Exhibit B where the value of the 1,050 bañeras of fish were pegged at their September
1977 value when the collision happened, the pieces of documentary evidence proffered by
private respondent with respect to items and equipment lost show similar items and
equipment with corresponding prices in early 1987 or approximately ten (10) years after
the collision. Noticeably, petitioner did not object to the exhibits in terms of the time index
for valuation of the lost goods and equipment. In objecting to the same pieces of
evidence, petitioner commented that these were not duly authenticated and that the
witness (Del Rosario) did not have personal knowledge on the contents of the writings
and neither was he an expert on the subjects thereof. 31 Clearly ignoring petitioner's
objections to the exhibits, the lower court admitted these pieces of evidence and gave
them due weight to arrive at the award of P6,438,048.00 as actual damages.
The exhibits were presented ostensibly in the course of Del Rosario's testimony. Private
respondent did not present any other witnesses especially those whose signatures
appear in the price quotations that became the bases of the award. We hold, however, that
the price quotations are ordinary private writings which under the Revised Rules of Court
should have been proffered along with the testimony of the authors thereof. Del Rosario
could not have testified on the veracity of the contents of the writings even though he was
the seasoned owner of a fishing fleet because he was not the one who issued the price
quotations. Section 36, Rule 130 of the Revised Rules of Court provides that a witness can
testify only to those facts that he knows of his personal knowledge.
For this reason, Del Rosario's claim that private respondent incurred losses in the total
amount of P6,438,048.00 should be admitted with extreme caution considering that,
because it was a bare assertion, it should be supported by independent evidence.
Moreover, because he was the owner of private respondent corporation 32 whatever
testimony he would give with regard to the value of the lost vessel, its equipment and
cargoes should be viewed in the light of his self-interest therein. We agree with the Court
of Appeals that his testimony as to the equipment installed and the cargoes loaded on the
vessel should be given credence 33 considering his familiarity thereto. However, we do not
subscribe to the conclusion that his valuation of such equipment, cargo and the vessel
itself should be accepted as gospel truth. 34 We must, therefore, examine the documentary
evidence presented to support Del Rosario's claim as regards the amount of losses.
The price quotations presented as exhibits partake of the nature of hearsay evidence
considering that the persons who issued them were not presented as witnesses. 35 Any
evidence, whether oral or documentary, is hearsay if its probative value is not based on
the personal knowledge of the witness but on the knowledge of another person who is not
on the witness stand. Hearsay evidence, whether objected to or not, has no probative
value unless the proponent can show that the evidence falls within the exceptions to the
hearsay evidence rule. 36 On this point, we believe that the exhibits do not fall under any of
the exceptions provided under Sections 37 to 47 of Rule 130. 37
It is true that one of the exceptions to the hearsay rule pertains to "commercial lists and
the like" under Section 45, Rule 130 of the Revised Rules on Evidence. In this respect, the
Court of Appeals considered private respondent's exhibits as "commercial lists." It added,
however, that these exhibits should be admitted in evidence "until such time as the
Supreme Court categorically rules on the admissibility or inadmissibility of this class of
evidence" because "the reception of these documentary exhibits (price quotations) as
evidence rests on the sound discretion of the trial court." 38 Reference to Section 45, Rule
130, however, would show that the conclusion of the Court of Appeals on the matter was
arbitrarily arrived at. This rule states:
Commercial lists and the like. — Evidence of statements of matters of

interest to persons engaged in an occupation contained in a list, register,
periodical, or other published compilation is admissible as tending to prove
the truth of any relevant matter so stated if that compilation is published for
use by persons engaged in that occupation and is generally used and relied
upon by them there.
Under Section 45 of the aforesaid Rule, a document is a commercial list if: (1) it is a
statement of matters of interest to persons engaged in an occupation; (2) such statement
is contained in a list, register, periodical or other published compilation; (3) said
compilation is published for the use of persons engaged in that occupation, and (4) it is
generally used and relied upon by persons in the same occupation.
Based on the above requisites, it is our considered view that Exhibits B, C, D, E, F and
H 39 are not "commercial lists" for these do not belong to the category of "other published
compilations" under Section 45 aforequoted. Under the principle of ejusdem generis,
"(w)here general words follow an enumeration of persons or things, by words of a
particular and specific meaning, such general words are not to be construed in their
widest extent, but are to be held as applying only to persons or things of the same kind or
class as those specifically mentioned." 40The exhibits mentioned are mere price
quotations issued personally to Del Rosario who requested for them from dealers of
equipment similar to the ones lost at the collision of the two vessels. These are not
published in any list, register, periodical or other compilation on the relevant subject
matter. Neither are these "market reports or quotations" within the purview of
"commercial lists" as these are not "standard handbooks or periodicals, containing data
of everyday professional need and relied upon in the work of the occupation." 41 These are
simply letters responding to the queries of Del Rosario. Thus, take for example Exhibit D
which reads:
January 20, 1987
PROFORMA INVOICE NO. PSPI-05/87-NAV
MARIA EFIGINIA FISHING CORPORATION
Navotas, Metro Manila
Attention: MR. EDDIE DEL ROSARIO
Gentlemen:
In accordance to your request, we are pleated to quote our Cummins

Marine Engine, to wit.
Two (2) units CUMMINS Marine Engine model

N855-M, 195 bhp. at 1800 rpm., 6-cylinder in-
line, 4-stroke cycle, natural aspirated, 5 1/2 in.
x 6 in. bore and stroke, 855 cu. In.
displacement, keel-cooled, electric starting
coupled with Twin-Disc Marine gearbox model
MG-509, 4.5:1 reduction ratio, includes oil
cooler, companion flange, manual and
standard accessories as per attached sheet.
Price FOB Manila P580,000.00/unit
Total FOB Manila P1,160,000.00
TERMS : CASH
DELIVERY : 60-90 days from date of order.
VALIDITY : Subject to our final confirmation.
WARRANTY : One (1) full year against factory defect.
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To be sure, letters and telegrams are admissible in evidence but these are, however,
subject to the general principles of evidence and to various rules relating to documentary
evidence. 42 Hence, in one case, it was held that a letter from an automobile dealer offering
an allowance for an automobile upon purchase of a new automobile after repairs had been
completed, was not a "price current" or "commercial list" within the statute which made
such items presumptive evidence of the value of the article specified therein. The letter
was not admissible in evidence as a "commercial list" even though the clerk of the dealer
testified that he had written the letter in due course of business upon instructions of the
dealer. 43
But even on the theory that the Court of Appeals correctly ruled on the admissibility of
those letters or communications when it held that unless "plainly irrelevant, immaterial or
incompetent," evidence should better be admitted rather than rejected on "doubtful or
technical grounds," 44 the same pieces of evidence, however, should not have been given
probative weight. This is a distinction we wish to point out. Admissibility of evidence
refers to the question of whether or not the circumstance (or evidence) is to considered at
all. 45 On the other hand, the probative value of evidence refers to the question of whether
or not it proves an issue. 46 Thus, a letter may be offered in evidence and admitted as such
but its evidentiary weight depends upon the observance of the rules on evidence.
Accordingly, the author of the letter should be presented as witness to provide the other
party to the litigation the opportunity to question him on the contents of the letter. Being
mere hearsay evidence, failure to present the author of the letter renders its contents
suspect. As earlier stated, hearsay evidence, whether objected to or not, has no probative
value. Thus:
The courts differ as to the weight to be given to hearsay evidence admitted

without objection. Some hold that when hearsay has been admitted without
objection, the same may be considered as any other properly admitted
testimony. Others maintain that it is entitled to no more consideration than
if it had been excluded.
The rule prevailing in this jurisdiction is the latter one. Our Supreme Court
held that although the question of admissibility of evidence can not be
raised for the first time on appeal, yet if the evidence is hearsay it has no
probative value and should be disregarded whether objected to or not. "If
no objection is made" — quoting Jones on Evidence — "it (hearsay)
becomes evidence by reason of the want of such objection even though its
admission does not confer upon it any new attribute in point of weight. Its
nature and quality remain the same, so far as its intrinsic weakness and
incompetency to satisfy the mind are concerned, and as opposed to direct
primary evidence, the latter always prevails.
The failure of the defense counsel to object to the presentation of
incompetent evidence, like hearsay evidence or evidence that violates the
rules of res inter alios acta, or his failure to ask for the striking out of the
same does not give such evidence any probative value. But admissibility of
evidence should not be equated with weight of evidence. Hearsay evidence
whether objected to or not has no probative value. 47
Accordingly, as stated at the outset, damages may not be awarded on the basis of
hearsay evidence. 48
Nonetheless, the non-admissibility of said exhibits does not mean that it totally deprives
private respondent of any redress for the loss of its vessel. This is because in Lufthansa
German Airlines v. Court of Appeals, 49 the Court said:
In the absence of competent proof on the actual damage suffered, private

respondent is "entitled to nominal damages which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been violated or
invaded by defendant, may be vindicated and recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered." [Emphasis
supplied].
Nominal damages are awarded in every obligation arising from law, contracts, quasi-
contracts, acts or omissions punished by law, and quasi-delicts, or in every case where
property right has been invaded. 50 Under Article 2223 of the Civil Code, "(t)he adjudication
of nominal damages shall preclude further contest upon the right involved and all
accessory questions, as between the parties to the suit, or their respective heirs and
assigns."
Actually, nominal damages are damages in name only and not in fact. Where these are
allowed, they are not treated as an equivalent of a wrong inflicted but simply in
recognition of the existence of a technical injury. 51However, the amount to be awarded as
nominal damages shall be equal or at least commensurate to the injury sustained by
private respondent considering the concept and purpose of such damages. 52 The amount
of nominal damages to be awarded may also depend on certain special reasons extant in
the case. 53
Applying now such principles to the instant case, we have on record the fact that
petitioner's vessel Petroparcelwas at fault as well as private respondent's complaint
claiming the amount of P692,680.00 representing the fishing nets, boat equipment and
cargoes that sunk with the M/V Maria Efigenia XV. In its amended complaint, private
respondent alleged that the vessel had an actual value of P800,000.00 but it had been paid
insurance in the amount of P200,000.00 and, therefore, it claimed only the amount of
P600,000.00. Ordinarily, the receipt of insurance payments should diminish the total value
of the vessel quoted by private respondent in his complaint considering that such
payment is causally related to the loss for which it claimed compensation. This Court
believes that such allegations in the original and amended complaints can be the basis for
determination of a fair amount of nominal damages inasmuch as a complaint alleges the
ultimate facts constituting the plaintiffs cause of
action. 54 Private respondent should be bound by its allegations on the amount of its
claims.
With respect to petitioner's contention that the lower court did not acquire jurisdiction
over the amended complaint increasing the amount of damages claimed to P600,000.00,
we agree with the Court of Appeals that the lower court acquired jurisdiction over the
case when private respondent paid the docket fee corresponding to its claim in its original
complaint. Its failure to pay the docket fee corresponding to its increased claim for
damages under the amended complaint should not be considered as having curtailed the
lower court's jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL) v.
Asuncion, 55 the unpaid docket fee should be considered as a lien on the judgment even
though private respondent specified the amount of P600,000.00 as its claim for damages
in its amended complaint.
Moreover, we note that petitioner did not question at all the jurisdiction of the lower court
on the ground of insufficient docket fees in its answers to both the amended complaint
and the second amended complaint. It did so only in its motion for reconsideration of the
decision of the lower court after it had received an adverse decision. As this Court held
in Pantranco North Express, Inc. v. Court of Appeals, 56 participation in all stages of the
case before the trial court, that included invoking its authority in asking for affirmative
relief, effectively barred petitioner by estoppel from challenging the court's jurisdiction.
Notably, from the time it filed its answer to the second amended complaint on April 16,
1985, 57 petitioner did not question the lower court's jurisdiction. It was only on December
29, 1989 58 when it filed its motion for reconsideration of the lower court's decision that
petitioner raised the question of the lower court's lack of jurisdiction. Petitioner thus
foreclosed its right to raise the issue of jurisdiction by its own inaction.
WHEREFORE, the challenged decision of the Court of Appeals dated October 14, 1992 in
CA-G.R. CV No. 26680 affirming that of the Regional Trial Court of Caloocan City, Branch
121, is hereby MODIFIED insofar as it awarded actual damages to private respondent
Maria Efigenia Fishing Corporation in the amount of P6,438,048.00 for lack of evidentiary
bases therefor. Considering the fact, however, that: (1) technically petitioner sustained
injury but which, unfortunately, was not adequately and properly proved, and (2) this case
has dragged on for almost two decades, we believe that an award of Two Million
(P2,000,000.00) 59 in favor of private respondent as and for nominal damages is in order.
SO ORDERED
G.R. No. L-68138 May 13, 1991
AGUSTIN Y. GO and THE CONSOLIDATED BANK AND TRUST CORPORATION

(Solidbank), petitioners,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT and FLOVERTO JAZMIN, respondents.
C.M. De los Reyes & Associates for petitioners.

Millora & Maningding Law Offices for private respondent.
FERNAN, C.J.:
The instant petition for review on certiorari questions the propriety of the respondent appellate
court's award of nominal damages and attorney's fees to private respondent whose name was
used by a syndicate in encashing two U.S. treasury checks at petitioner bank.
Floverto Jazmin is an American citizen and retired employee of the United States Federal
Government. He had been a visitor in the Philippines since 1972 residing at 34 Maravilla Street,
Mangatarem, Pangasinan. As pensionado of the U.S. government, he received annuity checks in
the amounts of $ 67.00 for disability and $ 620.00 for retirement through the Mangatarem post
office. He used to encash the checks at the Prudential Bank branch at Clark Air Base,
Pampanga.
In January, 1975, Jazmin failed to receive one of the checks on time thus prompting him to
inquire from the post offices at Mangatarem and Dagupan City. As the result of his inquiries
proved unsatisfactory, on March 4, 1975, Jazmin wrote the U.S. Civil Service Commission,
Bureau of Retirement at Washington, D.C. complaining about the delay in receiving his check.
Thereafter, he received a substitute check which he encashed at the Prudential Bank at Clark Air
Base.
Meanwhile, on April 22, 1975, Agustin Go, in his capacity as branch manager of the then
Solidbank (which later became the Consolidated Bank and Trust Corporation) in Baguio City,
allowed a person named "Floverto Jazmin" to open Savings Account No. BG 5206 by depositing
two (2) U. S. treasury checks Nos. 5-449-076 and 5-448-890 in the respective amounts of
$1810.00 and $913.401 equivalent to the total amount of P 20,565.69, both payable to the order
of Floverto Jasmin of Maranilla St., Mangatarem, Pangasinan and drawn on the First National
City Bank, Manila.
The savings account was opened in the ordinary course of business. Thus, the bank, through its
manager Go, required the depositor to fill up the information sheet for new accounts to reflect his
personal circumstances. The depositor indicated therein that he was Floverto Jazmin with
mailing address at Mangatarem, Pangasinan and home address at Maravilla St., Mangatarem,
Pangasinan; that he was a Filipino citizen and a security officer of the US Army with the rank of a
sergeant bearing AFUS Car No. H-2711659; that he was married to Milagros Bautista; and that
his initial deposit was P3,565.35. He wrote CSA No. 138134 under remarks or instructions and
left blank the spaces under telephone number, residence certificate/alien certificate of
registration/passport, bank and trade performance and as to who introduced him to the
bank.2 The depositor's signature specimens were also taken.
Thereafter, the deposited checks were sent to the drawee bank for clearance. Inasmuch as
Solidbank did not receive any word from the drawee bank, after three (3) weeks, it allowed the
depositor to withdraw the amount indicated in the checks.
On June 29, 1976 or more than a year later, the two dollar cheeks were returned to Solidbank
with the notation that the amounts were altered.3 Consequently, Go reported the matter to the
Philippine Constabulary in Baguio City.
On August 3, 1976, Jazmin received radio messages requiring him to appear before the
Philippine Constabulary headquarters in Benguet on September 7, 1976 for investigation
regarding the complaint filed by Go against him for estafa by passing altered dollar checks.
Initially, Jazmin was investigated by constabulary officers in Lingayen, Pangasinan and later, at
Camp Holmes, La Trinidad, Benguet. He was shown xerox copies of U.S. Government checks
Nos. 5-449-076 and 5-448-890 payable to the order of Floverto Jasmin in the respective amounts
of $1,810.00 and $913.40. The latter amount was actually for only $13.40; while the records do
not show the unaltered amount of the other treasury check.
Jazmin denied that he was the person whose name appeared on the checks; that he received
the same and that the signature on the indorsement was his. He likewise denied that he opened
an account with Solidbank or that he deposited and encashed therein the said checks.
Eventually, the investigators found that the person named "Floverto Jazmin" who made the
deposit and withdrawal with Solidbank was an impostor.
On September 24, 1976, Jazmin filed with the then Court of First Instance of Pangasinan, Branch
II at Lingayen a complaint against Agustin Y. Go and the Consolidated Bank and Trust
Corporation for moral and exemplary damages in the total amount of P90,000 plus attorney's
fees of P5,000. He alleged therein that Go allowed the deposit of the dollar checks and the
withdrawal of their peso equivalent "without ascertaining the identity of the depositor considering
the highly suspicious circumstances under which said deposit was made; that instead of taking
steps to establish the correct identity of the depositor, Go "immediately and recklessly filed (the)
complaint for estafa through alteration of dollar check" against him; that Go's complaint was "an
act of vicious and wanton recklessness and clearly intended for no other purpose than to harass
and coerce the plaintiff into paying the peso equivalent of said dollar checks to the CBTC branch
office in Baguio City" so that Go would not be "disciplined by his employer;" that by reason of
said complaint, he was "compelled to present and submit himself" to investigations by the
constabulary authorities; and that he suffered humiliation and embarrassment as a result of the
filing of the complaint against him as well as "great inconvenience" on account of his age (he was
a septuagenarian) and the distance between his residence and the constabulary headquarters.
He averred that his peace of mind and mental and emotional tranquility as a respected citizen of
the community would not have suffered had Go exercised "a little prudence" in ascertaining the
identity of the depositor and, for the "grossly negligent and reckless act" of its employee, the
defendant CBTC should also be held responsible.4
In their answer, the defendants contended that the plaintiff had no cause of action against them
because they acted in good faith in seeking the "investigative assistance" of the Philippine
Constabulary on the swindling operations against banks by a syndicate which specialized in the
theft, alteration and encashment of dollar checks. They contended that contrary to plaintiff s
allegations, they verified the signature of the depositor and their tellers conducted an Identity
check. As counterclaim, they prayed for the award of P100,000 as compensatory and moral
damages; P20,000 as exemplary damages; P20,000 as attorney's fees and P5,000 as litigation,
incidental expenses and costs.5
In its decision of March 27, 19786 the lower court found that Go was negligent in failing to
exercise "more care, caution and vigilance" in accepting the checks for deposit and encashment.
It noted that the checks were payable to the order of Floverto Jasmin, Maranilla St., Mangatarem,
Pangasinan and not to Floverto Jazmin, Maravilla St., Mangatarem, Pangasinan and that the
differences in name and address should have put Go on guard. It held that more care should
have been exercised by Go in the encashment of the U.S. treasury checks as there was no time
limit for returning them for clearing unlike in ordinary checks wherein a two to three-week limit is
allowed.
Emphasizing that the main thrust of the complaint was "the failure of the defendants to take steps
to ascertain the identity of the depositor," the court noted that the depositor was allegedly a
security officer while the plaintiff was a retiree-pensioner. It considered as "reckless" the
defendants' filing of the complaint with the Philippine Constabulary noting that since the article on
a fake dollar check ring appeared on July 18, 1976 in the Baguio Midland Courier, it was only on
August 24, 1976 or more than a month after the bank had learned of the altered checks that it
filed the complaint and therefore, it had sufficient time to ascertain the identity of the depositor.
The court also noted that instead of complying with the Central Bank Circular Letter of January
17, 1973 requesting all banking institutions to report to the Central Bank all crimes involving their
property within 48 hours from knowledge of the crime, the bank reported the matter to the
Philippine Constabulary.
Finding that the plaintiff had sufficiently shown that prejudice had been caused to him in the form
of mental anguish, moral shock and social humiliation on account of the defendants' gross
negligence, the court, invoking Articles 2176, 2217 and 2219 (10) in conjunction with Article 21 of
the Civil Code, ruled in favor of the plaintiff. The dispositive portion of the decision states:
WHEREFORE, this Court finds for plaintiff and that he is entitled to the reliefs prayed for
in the following manner: Defendant Agustin Y. Co and the CONSOLIDATED BANK AND
TRUST CORPORATION are hereby ordered to pay, jointly and severally, to the plaintiff
the amount of SIX THOUSAND PESOS (P6,000.00) as moral damages; ONE
THOUSAND PESOS (P1,000.00) as attorney's fees and costs of litigation and to pay the
costs and defendant AGUSTIN Y. Go in addition thereto in his sole and personal capacity
to pay the plaintiff the amount of THREE THOUSAND PESOS (P3,000.00) as exemplary
damages, all with interest at six (6) percent per annum until fully paid.
SO ORDERED.
The defendants appealed to the Court of Appeals. On January 24, 1984, said court (then named
Intermediate Appellate Court) rendered a decision7 finding as evident negligence Go's failure to
notice the substantial difference in the identity of the depositor and the payee in the check,
concluded that Go's negligence in the performance of his duties was "the proximate cause why
appellant bank was swindled" and that denouncing the crime to the constabulary authorities
"merely aggravated the situation." It ruled that there was a cause of action against the
defendants although Jazmin had nothing to do with the alteration of the checks, because he
suffered damages due to the negligence of Go. Hence, under Article 2180 of the Civil Code, the
bank shall be held liable for its manager's negligence.
The appellate court, however, disallowed the award of moral and exemplary damages and
granted nominal damages instead. It explained thus:
While it is true that denouncing a crime is not negligence under which a claim for moral
damages is available, still appellants are liable under the law for nominal damages. The
fact that appellee did not suffer from any loss is of no moment for nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, maybe vindicated or recognized and not for the purpose of indemnifying the
plaintiff for any loss suffered by him (Article 2221, New Civil Code). These are damages
recoverable where a legal right is technically violated and must be vindicated against an
invasion that has produced no actual present loss of any kind, or where there has been a
breach of contract and no substantial injury or actual damages whatsoever have been or
can be shown (Elgara vs. Sandijas, 27 Phil. 284). They are not intended for
indemnification of loss suffered but for the vindication or recognition of a right violated or
invaded (Ventanilla vs. Centeno, L-14333, January 28, 1961). And, where the plaintiff as
in the case at bar, the herein appellee has established a cause of action, but was not
able to adduce evidence showing actual damages then nominal damages may be
recovered (Sia vs. Espenilla CA-G.R. Nos. 45200-45201-R, April 21, 1975).
Consequently, since appellee has no right to claim for moral damages, then he may not
likewise be entitled to exemplary damages (Estopa vs. Piansay, No. L-14503, September
30, 1960). Considering that he had to defend himself in the criminal charges filed against
him, and that he was constrained to file the instant case, the attorney's fees to be
amended (sic) to plaintiff should be increased to P3,000.00.
Accordingly, the appellate court ordered Go and Consolidated Bank and Trust Corporation to pay
jointly and severally Floverto Jazmin only NOMINAL DAMAGES in the sum of Three Thousand
Pesos (P 3,000.00) with interest at six (6%) percent per annum until fully paid and One
Thousand Pesos (P 1,000.00) as attorney's fees and costs of litigation.
Go and the bank filed a motion for the reconsideration of said decision contending that in view of
the finding of the appellate court that "denouncing a crime is not negligence under which a claim
for moral damages is available," the award of nominal damages is unjustified as they did not
violate or invade Jazmin's rights. Corollarily, there being no negligence on the part of Go, his
employer may not be held liable for nominal damages.
The motion for reconsideration having been denied, Go and the bank interposed the instant
petition for review on certiorari arguing primarily that the employer bank may not be held "co-
equally liable" to pay nominal damages in the absence of proof that it was negligent in the
selection of and supervision over its employee.8
The facts of this case reveal that damages in the form of mental anguish, moral shock and social
humiliation were suffered by private respondent only after the filing of the petitioners' complaint
with the Philippine Constabulary. It was only then that he had to bear the inconvenience of
travelling to Benguet and Lingayen for the investigations as it was only then that he was
subjected to embarrassment for being a suspect in the unauthorized alteration of the treasury
checks. Hence, it is understandable why petitioners appear to have overlooked the facts
antecedent to the filing of the complaint to the constabulary authorities and to have put undue
emphasis on the appellate court's statement that "denouncing a crime is not negligence."
Although this Court has consistently held that there should be no penalty on the right to litigate
and that error alone in the filing of a case be it before the courts or the proper police authorities,
is not a ground for moral damages,9 we hold that under the peculiar circumstances of this case,
private respondent is entitled to an award of damages.
Indeed, it would be unjust to overlook the fact that petitioners' negligence was the root of all the
inconvenience and embarrassment experienced by the private respondent albeit they happened
after the filing of the complaint with the constabulary authorities. Petitioner Go's negligence in
fact led to the swindling of his employer. Had Go exercised the diligence expected of him as a
bank officer and employee, he would have noticed the glaring disparity between the payee's
name and address on the treasury checks involved and the name and address of the depositor
appearing in the bank's records. The situation would have been different if the treasury checks
were tampered with only as to their amounts because the alteration would have been
unnoticeable and hard to detect as the herein altered check bearing the amount of $ 913.40
shows. But the error in the name and address of the payee was very patent and could not have
escaped the trained eyes of bank officers and employees. There is therefore, no other conclusion
than that the bank through its employees (including the tellers who allegedly conducted an
identification check on the depositor) was grossly negligent in handling the business transaction
herein involved.1âwphi 1
While at that stage of events private respondent was still out of the picture, it definitely was the
start of his consequent involvement as his name was illegally used in the illicit transaction. Again,
knowing that its viability depended on the confidence reposed upon it by the public, the bank
through its employees should have exercised the caution expected of it.
In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural
and probable consequences of the act or omission complained of. It is not necessary that such
damages have been foreseen or could have reasonably been foreseen by the defendant.10 As
Go's negligence was the root cause of the complained inconvenience, humiliation and
embarrassment, Go is liable to private respondents for damages.
Anent petitioner bank's claim that it is not "co-equally liable" with Go for damages, under the fifth
paragraph of Article 2180 of the Civil Code, "(E)mployers shall be liable for the damages caused
by their employees . . . acting within the scope of their assigned tasks." Pursuant to this
provision, the bank is responsible for the acts of its employee unless there is proof that it
exercised the diligence of a good father of a family to prevent the damage.11Hence, the burden of
proof lies upon the bank and it cannot now disclaim liability in view of its own failure to prove not
only that it exercised due diligence to prevent damage but that it was not negligent in the
selection and supervision of its employees.
WHEREFORE, the decision of the respondent appellate court is hereby affirmed. Costs against
the petitioners.
SO ORDERED.
G.R. No. 159352 April 14 ,2004
PREMIERE DEVELOPMENT BANK, petitioner,

vs.
COURT OF APPEALS, PANACOR MARKETING CORPORATION and ARIZONA
TRANSPORT CORPORATION,respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the 1997 Rules on Civil Procedure seeking the
annulment of the Decision dated June 18, 2003 of the Court of Appeals1 which affirmed the
Decision of the Regional Trial Court2 in Civil Case No. 65577.
The undisputed facts show that on or about October 1994, Panacor Marketing Corporation
(Panacor for brevity), a newly formed corporation, acquired an exclusive distributorship of
products manufactured by Colgate Palmolive Philippines, Inc. (Colgate for short). To meet the
capital requirements of the exclusive distributorship, which required an initial inventory level of
P7.5 million, Panacor applied for a loan of P4.1 million with Premiere Development Bank. After
an extensive study of Panacor’s creditworthiness, Premiere Bank rejected the loan application
and suggested that its affiliate company, Arizona Transport Corporation (Arizona for
short),3 should instead apply for the loan on condition that the proceeds thereof shall be made
available to Panacor. Eventually, Panacor was granted a P4.1 million credit line as evidenced by
a Credit Line Agreement.4 As suggested, Arizona, which was an existing loan client, applied for
and was granted a loan of P6.1 million, P3.4 million of which would be used to pay-off its existing
loan accounts and the remaining P2.7 million as credit line of Panacor. As security for the P6.1
million loan, Arizona, represented by its Chief Executive Officer Pedro Panaligan and spouses
Pedro and Marietta Panaligan in their personal capacities, executed a Real Estate Mortgage
against a parcel of land covered by TCT No. T-3475 as per Entry No. 49507 dated October 2,
1995.5
Since the P2.7 million released by Premiere Bank fell short of the P4.1 million credit line which
was previously approved, Panacor negotiated for a take-out loan with Iba Finance Corporation
(hereinafter referred to as Iba-Finance) in the sum of P10 million, P7.5 million of which will be
released outright in order to take-out the loan from Premiere Bank and the balance of P2.5
million (to complete the needed capital of P4.1 million with Colgate) to be released after the
cancellation by Premiere of the collateral mortgage on the property covered by TCT No. T-3475.
Pursuant to the said take-out agreement, Iba-Finance was authorized to pay Premiere Bank the
prior existing loan obligations of Arizona in an amount not to exceed P6 million.
On October 5, 1995, Iba-Finance sent a letter to Ms. Arlene R. Martillano, officer-in-charge of

Premiere Bank’s San Juan Branch, informing her of the approved loan in favor of Panacor and
Arizona, and requesting for the release of TCT No. T-3475. Martillano, after reading the letter,
affixed her signature of conformity thereto and sent the original copy to Premiere Bank’s legal
office. The full text of the letter reads:6
Please be informed that we have approved the loan application of ARIZONA

TRANSPORT CORP. and PANACOR MARKETING CORPORATION. Both represented
by MR. PEDRO P. PANALIGAN (hereinafter the BORROWERS) in the principal amount
of PESOS: SEVEN MILLION FIVE HUNDRED THOUSAND ONLY (P7,500,000.00)
Philippine Currency. The loan shall be secured by a Real Estate Mortgage over a parcel
of land located at #777 Nueve de Pebrero St. Bo. Mauway, Mandaluyong City, Metro
Manila covered by TCT No. 3475 and registered under the name of Arizona Haulers, Inc.
which is presently mortgaged with your bank.
The borrowers have authorized IBA FINANCE CORP. to pay Premiere Bank from the
proceeds of their loan. The disbursement of the loan, however is subject to the
annotation of our mortgage lien on the said property and final verification that said title is
free from any other lien or encumbrance other than that of your company and IBA
Finance Corporation.
In order to register the mortgage, please entrust to us the owner’s duplicate copy of TCT
No. 3475, current tax declaration, realty tax receipts for the current year and other
documents necessary to affect annotation thereof.
Upon registration of our mortgage, we undertake to remit directly to you or your

authorized representative the amount equivalent to the Borrower’s outstanding
indebtedness to Premiere Bank as duly certified by your goodselves provided such an
amount shall not exceed PESOS: SIX MILLION ONLY (P6,000,000.00) and any amount
in excess of the aforestated shall be for the account of the borrowers. It is understood
that upon receipt of payment, you will release to us the corresponding cancellation of
your mortgage within five (5) banking days therefrom.
If the foregoing terms and conditions are acceptable to you, please affix your signature
provided below and furnish us a copy of the Statement of Account of said borrowers.
On October 12, 1995, Premiere Bank sent a letter-reply7 to Iba-Finance, informing the latter of its
refusal to turn over the requested documents on the ground that Arizona had existing unpaid
loan obligations and that it was the bank’s policy to require full payment of all outstanding loan
obligations prior to the release of mortgage documents. Thereafter, Premiere Bank issued to Iba-
Finance a Final Statement of Account8 showing Arizona’s total loan indebtedness. On October
19, 1995, Panacor and Arizona executed in favor of Iba-Finance a promissory note in the amount
of 7.5 million. Thereafter, Iba-Finance paid to Premiere Bank the amount of P6,235,754.79
representing the full outstanding loan account of Arizona. Despite such payment, Premiere Bank
still refused to release the requested mortgage documents specifically, the owner’s duplicate
copy of TCT No. T-3475.9
On November 2, 1995, Panacor requested Iba-Finance for the immediate approval and release
of the remaining P2.5 million loan to meet the required monthly purchases from Colgate. Iba-
Finance explained however, that the processing of the P2.5 million loan application was
conditioned, among others, on the submission of the owner’s duplicate copy of TCT No. 3475
and the cancellation by Premiere Bank of Arizona’s mortgage. Occasioned by Premiere Bank’s
adamant refusal to release the mortgage cancellation document, Panacor failed to generate the
required capital to meet its distribution and sales targets. On December 7, 1995, Colgate
informed Panacor of its decision to terminate their distribution agreement.
On March 13, 1996, Panacor and Arizona filed a complaint for specific performance and
damages against Premiere Bank before the Regional Trial Court of Pasig City, docketed as Civil
Case No. 65577.
On June 11, 1996, Iba-Finance filed a complaint-in-intervention praying that judgment be

rendered ordering Premiere Bank to pay damages in its favor.
On May 26, 1998, the trial court rendered a decision in favor of Panacor and Iba-Finance, the
decretal portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Panacor Marketing

Corporation and against the defendant Premiere Bank, ordering the latter to pay the
former the following sums, namely:
1) P4,520,000.00 in addition to legal interest from the time of filing of the
complaint until full payment;
2) P1,000,000.00 as and for exemplary damages;
3) P100,000.00 as and for reasonable attorney’s fees; and
4) Costs of suit.
Similarly, judgment is hereby rendered in favor of plaintiff-in-intervention IBA-Finance

Corporation as against defendant Premiere bank, as follows, namely:
1) Ordering defendant Premiere Bank to release to plaintiff-intervenor IBA-

Finance Corporation the owner’s duplicate copy of Transfer Certificate of Title
No. 3475 registered in the name of Arizona Haulers, Inc. including the deed of
cancellation of the mortgage constituted thereon;
2) Ordering the defendant Premiere Bank to pay to Intervenor IBA-Finance, the

following sums, to wit:
3) P1,000,000.00 as and by way of exemplary damages; and
4) P100,000.00 as and for reasonable attorney’s fees; and
5) Costs of suit.
For lack of sufficient legal and factual basis, the counterclaim of defendant Premiere
Bank is DISMISSED.
SO ORDERED.
Premiere Bank appealed to the Court of Appeals contending that the trial court erred in
finding, inter alia, that it had maliciously downgraded the credit-line of Panacor from P4.1 million
to P2.7 million.
In the meantime, a compromise agreement was entered into between Iba-Finance and Premiere
Bank whereby the latter agreed to return without interest the amount of P6,235,754.79 which Iba-
Finance earlier remitted to Premiere Bank to pay off the unpaid loans of Arizona. On March 11,
1999, the compromise agreement was approved.
On June 18, 2003, a decision was rendered by the Court of Appeals which affirmed with
modification the decision of the trial court, the dispositive portion of which reads:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED, and the
decision appealed from in Civil Case No. 65577 is hereby AFFIRMED with
MODIFICATION in that the award of exemplary damages in favor of the appellees is
hereby reduced to P500,000.00. Needless to add, in view of the Compromise Agreement
plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE between plaintiff-
intervenor IBA-Finance and defendant-appellant PREMIERE as approved by this Court
per Resolution dated March 11, 1999, Our dispositive of the present appeal is only with
respect to the liability of appellant PREMIERE to the plaintiff-appellees.
With costs against the defendant-appellant.
SO ORDERED.10
Hence the present petition for review, which raises the following issues:11
WHETHER OR NOT THE DECISION OF HONORABLE COURT OF APPEALS

EXCEEDED AND WENT BEYOND THE FACTS, THE ISSUES AND EVIDENCE
PRESENTED IN THE APPEAL TAKING INTO CONSIDERATION THE
ARGUMENT OF PETITIONER BANK AND ADVENT OF THE DULY APPROVED
COMPROMISE AGREEMENT BETWEEN THE PETITIONER BANK AND IBA
FINANCE CORPORATION.
II
WHETHER OR NOT THE ISSUES THAT SHOULD HAVE BEEN RESOLVED BY

THE HONORABLE COURT OF APPEALS, BY REASON OF THE EXISTENCE
OF THE COMPROMISE AGREEMENT, IS LIMITED TO THE ISSUE OF
ALLEGED BAD FAITH OF PETITIONER BANK IN THE DOWNGRADING OF
THE LOAN AND SHOULD NOT INCLUDE THE RENDITION OF AN ADVERSE
PRONOUNCEMENT TO AN ALREADY FAIT ACCOMPLI- ISSUE ON THE
REFUSAL OF THE BANK TO RECOGNIZE THE TAKE-OUT OF THE LOAN
AND THE RELEASE OF TCT NO. 3475.
III
WHETHER OR NOT PETITIONER ACTED IN BAD FAITH IN THE

DOWNGRADING OF THE LOAN OF RESPONDENTS TO SUPPORT AN
AWARD OF ACTUAL AND EXEMPLARY DAMAGES NOW REDUCED TO
P500,000.00.
IV
WHETHER OR NOT THERE IS BASIS OR COMPETENT PIECE OF EVIDENCE

PRESENTED DURING THE TRIAL TO SUPPORT AN AWARD OF ACTUAL
DAMAGES OF P4,520,000.00.
Firstly, Premiere Bank argues that considering the compromise agreement it entered with Iba-
Finance, the Court of Appeals should have ruled only on the issue of its alleged bad faith in
downgrading Panacor’s credit line. It further contends that the Court of Appeals should have
refrained from making any adverse pronouncement on the refusal of Premiere Bank to recognize
the take-out and its subsequent failure to release the cancellation of the mortgage because they
were rendered fait accompli by the compromise agreement.
We are not persuaded.
In a letter-agreement12 dated October 5, 1995, Iba-Finance informed Premiere Bank of its

approval of Panacor’s loan application in the amount of P10 million to be secured by a real estate
mortgage over a parcel of land covered by TCT No. T-3475. It was agreed that Premiere Bank
shall entrust to Iba-Finance the owner’s duplicate copy of TCT No. T-3475 in order to register its
mortgage, after which Iba-Finance shall pay off Arizona’s outstanding indebtedness. Accordingly,
Iba-Finance remitted P6,235,754.79 to Premiere Bank on the understanding that said amount
represented the full payment of Arizona’s loan obligations. Despite performance by Iba-Finance
of its end of the bargain, Premiere Bank refused to deliver the mortgage document. As a
consequence, Iba-Finance failed to release the remaining P2.5 million loan it earlier pledged to
Panacor, which finally led to the revocation of its distributorship agreement with Colgate.
Undeniably, the not-so-forthright conduct of Premiere Bank in its dealings with respondent
corporations caused damage to Panacor and Iba-Finance. It is error for Premiere Bank to
assume that the compromise agreement it entered with Iba-Finance extinguished all direct and
collateral incidents to the aborted take-out such that it also cancelled its obligations to Panacor.
The unjustified refusal by Premiere Bank to release the mortgage document prompted Iba-
Finance to withhold the release of the P2.5 million earmarked for Panacor which eventually
terminated the distributorship agreement. Both Iba-Finance and Panacor, which are two separate
and distinct juridical entities, suffered damages due to the fault of Premiere Bank. Hence, it
should be held liable to each of them.
While the compromise agreement may have resulted in the satisfaction of Iba-Finance’s legal
claims, Premiere Bank’s liability to Panacor remains. We agree with the Court of Appeals that the
"present appeal is only with respect to the liability of appellant Premiere Bank to the plaintiffs-
appellees (Panacor and Arizona)"13 taking into account the compromise agreement.
For the foregoing reasons, we find that the Court of Appeals did not err in discussing in the
assailed decision the abortive take-out and the refusal by Premiere Bank to release the
cancellation of the mortgage document.
Secondly, Premiere Bank asserts that it acted in good faith when it downgraded the credit line of
Panacor from P4.1 million to P2.7 million. It cites the decision of the trial court which, albeit
inconsistent with its final disposition, expressly recognized that the downgrading of the loan was
not the proximate cause of the damages suffered by respondents.
Under the Credit Line Agreement14 dated September 1995, Premiere Bank agreed to extend a
loan of P4.1 million to Arizona to be used by its affiliate, Panacor, in its operations. Eventually,
Premiere approved in favor of Arizona a loan equivalent to P6.1 million, P3.4 million of which was
allotted for the payment of Arizona’s existing loan obligations and P2.7 million as credit line of
Panacor. Since only P2.7 million was made available to Panacor, instead of P4.1 million as
previously approved, Panacor applied for a P2.5 loan from Iba-Finance, which, as earlier
mentioned, was not released because of Premiere Bank’s refusal to issue the mortgage
cancellation.
It is clear that Premiere Bank deviated from the terms of the credit line agreement when it
unilaterally and arbitrarily downgraded the credit line of Panacor from P4.1 million to P2.7 million.
Having entered into a well-defined contractual relationship, it is imperative that the parties should
honor and adhere to their respective rights and obligations thereunder. Law and jurisprudence
dictate that obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.15 The appellate court correctly observed, and
we agree, that:
Appellant’s actuations, considering the actual knowledge of its officers of the tight
financial situation of appellee PANACOR brought about primarily by the appellant bank’s
considerable reduction of the credit line portion of the loan, in relation to the "bail-out"
efforts of IBA Finance, whose payment of the outstanding loan account of appellee
ARIZONA with appellant was readily accepted by the appellant, were truly marked by
bad faith and lack of due regard to the urgency of its compliance by immediately
releasing the mortgage cancellation document and delivery of the title to IBA Finance.
That time is of the essence in the requested release of the mortgage cancellation and
delivery of the subject title was only too well-known to appellant, having only belatedly
invoked the cross-default provision in the Real Estate Mortgage executed in its favor by
appellee ARIZONA to resist the plain valid and just demand of IBA Finance for such
compliance by appellant bank.16
Premiere Bank cannot justify its arbitrary act of downgrading the credit line on the alleged finding
by its project analyst that the distributorship was not financially feasible. Notwithstanding the
alleged forewarning, Premiere Bank still extended Arizona the loan of P6.1 million, albeit in
contravention of the credit line agreement. This indubitably indicates that Premiere Bank had
deliberately and voluntarily granted the said loan despite its claim that the distributorship contract
was not viable.
Neither can Premiere Bank rely on the puerile excuse that it was the bank’s policy not to release
the mortgage cancellation prior to the settlement of outstanding loan obligations. Needless to
say, the Final Statement of Account dated October 17, 1995 showing in no uncertain terms
Arizona’s outstanding indebtedness, which was subsequently paid by Iba-Finance, was the full
payment of Arizona’s loan obligations. Equity demands that a party cannot disown it previous
declaration to the prejudice of the other party who relied reasonably and justifiably on such
declaration.
Thirdly, Premiere Bank avers that the appellate court’s reliance on the credit line agreement as
the basis of bad faith on its part was inadmissible or self-serving for not being duly notarized,
being unsigned in all of its left margins, and undated. According to Premiere Bank, the
irregularities in the execution of the credit line agreement bolsters the theory that the same was
the product of manipulation orchestrated by respondent corporations through undue influence
and pressure exerted by its officers on Martillano.
Premiere Bank’s posture deserves scant consideration. As found by the lower court, there are
sufficient indicia that demonstrate that the alleged unjust pressure exerted on Martillano was
more imagined than real. In her testimony, Martillano claims that she was persuaded and coaxed
by Caday of Iba-Finance and Panaligan of Panacor to sign the letter. It was she who provided
Iba-Finance with the Final Statement of Account and accepted its payment without objection or
qualification. These acts show that she was vested by Premiere Bank with sufficient authority to
enter into the said transactions.
If a private corporation intentionally or negligently clothes its officers or agents with apparent
power to perform acts for it, the corporation will be estopped to deny that the apparent authority
is real as to innocent third persons dealing in good faith with such officers or agents.17 As testified
to by Martillano, after she received a copy of the credit line agreement and affixed her signature
in conformity thereto, she forwarded the same to the legal department of the Bank at its Head
Office. Despite its knowledge, Premiere Bank failed to disaffirm the contract. When the officers or
agents of a corporation exceed their powers in entering into contracts or doing other acts, the
corporation, when it has knowledge thereof, must promptly disaffirm the contract or act and allow
the other party or third persons to act in the belief that it was authorized or has been ratified. If it
acquiesces, with knowledge of the facts, or fails to disaffirm, ratification will be implied or else it
will be estopped to deny ratification.18
Finally, Premiere Bank argues that the finding by the appellate court that it was liable for actual
damages in the amount of P4,520,000.00 is without basis. It contends that the evidence
presented by Panacor in support of its claim for actual damages are not official receipts but self-
serving declarations.
To justify an award for actual damages, there must be competent proof of the actual amount of
loss. Credence can be given only to claims, which are duly supported by receipts.19 The burden
of proof is on the party who will be defeated if no evidence is presented on either side. He must
establish his case by a preponderance of evidence which means that the evidence, as a whole,
adduced by one side is superior to that of the other. In other words, damages cannot be
presumed and courts, in making an award, must point out specific facts that can afford a basis
for measuring whatever compensatory or actual damages are borne.
Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in
satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of
natural justice and are designed to repair the wrong that has been done, to compensate for the
injury inflicted and not to impose a penalty.
In the instant case, the actual damages were proven through the sole testimony of Themistocles
Ruguero, the vice president for administration of Panacor. In his testimony, the witness affirmed
that Panacor incurred losses, specifically, in terms of training and seminars, leasehold
acquisition, procurement of vehicles and office equipment without, however, adducing receipts to
substantiate the same. The documentary evidence marked as exhibit "W", which was an ordinary
private writing allegedly itemizing the capital expenditures and losses from the failed operation of
Panacor, was not testified to by any witness to ascertain the veracity of its contents. Although the
lower court fixed the sum of P4,520,000.00 as the total expenditures incurred by Panacor, it
failed to show how and in what manner the same were substantiated by the claimant with
reasonable certainty. Hence, the claim for actual damages should be admitted with extreme
caution since it is only based on bare assertion without support from independent evidence.
Premiere’s failure to prove actual expenditure consequently conduces to a failure of its claim. In
determining actual damages, the court cannot rely on mere assertions, speculations, conjectures
or guesswork but must depend on competent proof and on the best evidence obtainable
regarding the actual amount of loss.20
Even if not recoverable as compensatory damages, Panacor may still be awarded damages in
the concept of temperate or moderate damages. When the court finds that some pecuniary loss
has been suffered but the amount cannot, from the nature of the case, be proved with certainty,
temperate damages may be recovered. Temperate damages may be allowed in cases where
from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the
court is convinced that the aggrieved party suffered some pecuniary loss.
The Code Commission, in explaining the concept of temperate damages under Article 2224,
makes the following comment:21
In some States of the American Union, temperate damages are allowed. There are cases
where from the nature of the case, definite proof of pecuniary loss cannot be offered,
although the court is convinced that there has been such loss. For instance, injury to
ones commercial credit or to the goodwill of a business firm is often hard to show with
certainty in terms of money. Should damages be denied for that reason? The judge
should be empowered to calculate moderate damages in such cases, rather than that the
plaintiff should suffer, without redress from the defendant's wrongful act.
It is obvious that the wrongful acts of Premiere Bank adversely affected, in one way or another,
the commercial credit22 of Panacor, greatly contributed to, if not, decisively caused the premature
stoppage of its business operations and the consequent loss of business opportunity. Since
these losses are not susceptible to pecuniary estimation, temperate damages may be awarded.
Article 2216 of the Civil Code:
No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or
exemplary damages may be adjudicated. The assessment of such damages, except liquidated
ones, is left to the discretion of the Court, according to the circumstances of each case.
Under the circumstances, the sum of P200,000.00 as temperate damages is reasonable.
WHEREFORE, the petition is DENIED. The Decision dated June 18, 2003 of the Court of
Appeals in CA-G.R. CV No. 60750, ordering Premiere Bank to pay Panacor Marketing
Corporation P500,000.00 as exemplary damages, P100,000.00 as attorney’s fees, and costs,
is AFFIRMED, with the MODIFICATION that the award of P4,520,000.00 as actual damages
is DELETED for lack of factual basis. In lieu thereof, Premiere Bank is ordered to pay Panacor
P200,000.00 as temperate damages. SO ORDERED.
G.R. No. 112576 October 26, 1994
(CA-GR CV No. 26571)
METROPOLITAN BANK AND TRUST COMPANY, petitioner,

vs.
THE HON. COURT OF APPEALS, RURAL BANK OF PADRE GARCIA, INC. and ISABEL R.
KATIGBAK, respondents.
Makalintal, Barot, Torres & Ibarra for petitioner.
Fornier, Lava & Fornier for private respondents.
ROMERO, J.:
This petition for certiorari seeks to annul the decision of respondent Court of Appeals dated
October 29, 1992 in CA — GR CV No. 26571 affirming the decision of the Regional Trial Court of
Lipa, Batangas — Branch XIII for damages, and the Resolution dated November 11, 1993
denying petitioner's motion for reconsideration of the aforesaid decision.
The case emanated from a dispute between the Rural Bank of Padre Garcia, Inc. (RBPG) and
Metropolitan Bank and Trust Company (MBTC) relative to a credit memorandum dated April 5,
1982 from the Central Bank in the amount of P304,000.00 in favor of RBPG.
The records show that Isabel Katigbak is the president and director of RBPG, owning 65% of the
shares thereof. Metropolitan Bank and Trust Company (MBTC) is the rural bank's depository
bank, where Katigbak maintains current accounts with MBTC's main office in Makati as well as
its Lipa City branch.
On April 6, 1982, MBTC received from the Central Bank a credit memo dated April 5, 1982 that
its demand deposit account was credited with P304,000.00 for the account of RBPG,
representing loans granted by the Central Bank to RBPG. On the basis of said credit memo,
Isabel Katigbak issued several checks against its account with MBTC in the total amount of
P300,000.00, two (2) of which (Metrobank Check Nos. 0069 and 0070) were payable to Dr.
Felipe C. Roque and Mrs. Eliza Roque for P25,000.00 each. Said checks issued to Dr. and Mrs.
Roque were deposited by the Roques with the Philippine Banking Corporation, Novaliches
Branch in Quezon City. When these checks were forwarded to MBTC on April 12, 1982 for
payment (six (6) days from receipt of the Credit Memo), the checks were returned by MBTC with
the annotations "DAIF — TNC" (Drawn Against Insufficient Funds — Try Next Clearing) so they
were redeposited on April 14, 1982. These
were however again dishonored and returned unpaid for the following reason: "DAIF — TNC —
NO ADVICE FROM CB."
After the second dishonor of the two (2) checks, Dr. Felipe Roque, a member of the Board of
Directors of Philippine Banking Corporation, allegedly went to the Office of Antonio Katigbak, an
officer of RBPG, chiding him for the bouncing checks. In order to appease the doctor, RBPG paid
Dr. Roque P50,000.00 in cash to replace the aforesaid checks.
On April 13, 1982, Isabel Katigbak who was in Hongkong on a

business-vacation trip together with her sons Alfredo and Antonio, both of whom were also
officers of RBPG, received overseas phone calls from Mrs. Maris Katigbak-San Juan at her
residence in San Lorenzo Village, Makati, informing Isabel Katigbak that a certain Mr. Rizal
Dungo, Assistant Cashier of MBTC insisted on talking to her (Mrs. San Juan), berating her about
the checks which bounced, saying "Nag-issue kayo ng tseke, wala namang pondo," even if it
was explained to Mr. Dungo that Mrs. San Juan was not in any way connected with RBPG.
Mrs. Katigbak testified that she informed Mrs. San Juan to request defendant MBTC to check
and verify the records regarding the aforementioned Central Bank credit memo for P304,000.00
in favor of RBPG as she was certain that the checks were sufficiently covered by the CB credit
memo as early as April 6, 1994, but the following day, Mrs. San Juan received another insulting
call from Mr. Dungo ("Bakit kayo nag-issue ng tseke na wala namang pondo, Three Hundred
Thousand na.")1 When Mrs. San Juan explained to him the need to verify the records regarding
the Central Bank memo, he merely brushed it aside, telling her sarcastically that he was very
sure that no such credit memo existed. Mrs. San Juan was constrained to place another long
distance call to Mrs. Katigbak in Hongkong that evening. Tense and angered, the Katigbaks had
to cut short their Hongkong stay with their respective families and flew back to Manila, catching
the first available flight on April 15, 1982.
Immediately upon arrival, Mrs. Katigbak called up MBTC, through a

Mr. Cochico, for a re-examination of the records of MBTC regarding the Central Bank credit
memo dated April 5, 1982 for P304,000.00. Mr. Dungo, to whom Cochico handed over the
phone, allegedly arrogantly said: "Bakit kayo magagalit, wala naman kayong pondo?" These
remarks allegedly so shocked Mrs. Katigbak that her blood pressure rose to a dangerous level
and she had to undergo medical treatment at the Makati Medical Center for two (2) days.
Metrobank not only dishonored the checks issued by RBPG, the latter was issued four (4) debit
memos representing service and penalty charges for the returned checks.
RBPG and Isabel Katigbak filed Civil Case No. V-329 in the RTC of Lipa, Batangas — Branch
XIII against the Metropolitan Bank and Trust Company for damages on April 26, 1983.
The ultimate facts as alleged by the defendant MBTC in its answer are as follows: that on April 6,
1982, its messenger, Elizer Gonzales, received from the Central Bank several credit advices on
rural bank accounts, which included that of plaintiff RBPG in the amount of P304,000.00; that
due to the inadvertence of said messenger, the credit advice issued in favor of plaintiff RBPG
was not delivered to the department in charge of processing the same; consequently, when
MBTC received from the clearing department the checks in question, the stated balance in
RBPG's account was only P5,498.58 which excluded the unprocessed credit advice of
P304,000.00 resulting in the dishonor of the aforementioned checks; that as regards the
P304,000.00 which was
a re-discounting loan from the Central Bank, the same was credited only on April 15, 1982 after
the Central Bank finally confirmed that a credit advice was indeed issued in favor of RBPG; that
after the confirmation, MBTC credited the amount of the credit advice to plaintiff RBPG's account
and thru its officers, allegedly conveyed personally on two occasions its apologies to plaintiffs to
show that the bank and its officers acted with no deliberate intent on their part to cause injury or
damage to plaintiffs, explaining the circumstances that gave rise to the bouncing checks
situation. Metrobank's negligence arising from their messenger's misrouting of the credit advice
resulting in the return of the checks in question, despite daily reporting of credit memos and a
corresponding daily radio message confirmation, (as shown by Exhibit "I," the Investigation
Report of the bank's Mr. Valentino Elevado) and Mr. Dungo's improper handling of clients led to
the messenger's dismissal from service and Mr. Dungo's transfer from Metro Manila to Mindoro.
The threshold issue was whether or not, under the facts and circumstances of the case, plaintiff
may be allowed to recover actual, moral and exemplary damages, including attorney's fees,
litigation expenses and the costs of the suit. On August 25, 1989, the RTC of Lipa City rendered
a decision2 in favor of plaintiffs and against the defendant MBTC, ordering the latter to:
1. pay plaintiff Isabel Katigbak P50,000.00 as temperate damages;

2. pay P500,000.00 as moral damages, considering that RBPG's credit standing
and business reputation were damaged by the wrongful acts of defendant's
employees, coupled with the rude treatment received by Isabel Katigbak at the
hands of Mr. Dungo, all of which impelled her to seek medical treatment;
3. pay P100,000.00 as attorney's fees and litigation expenses; and.
4. pay the costs of suit.
The lower court did not award actual damages in the amount of P50,000.00 representing the
amount of the two (2) checks payable to Dr. Felipe C. Roque and Mrs. Elisa Roque for P25,000
each, as it found no showing that Mr. Antonio Katigbak who allegedly paid the amount was
actually reimbursed by plaintiff RBPG. Moreover, the court held that no actual damages could
have been suffered by plaintiff RBPG because on April 15, 1982, the Central Bank credit advice
in the amount of P304,000 which included the two (2) checks issued to the Roque spouses in the
sum of P50,000.00 were already credited to the account of RBPG and the service, as well as
penalty charges, were all reversed.
MBTC appealed from the decision to the Court of Appeals in CA — GR CV No. 26571, alleging
that the trial court erred in awarding temperate and moral damages, as well as attorney's fees,
plus costs and expenses of litigation without factual or legal basis therefor.
On October 29, 1992, the Court of Appeals rendered a decision3 affirming that of the trial court,
except for the deletion of the award of temperate damages, the reduction of moral damages from
P500,000.00 to P50,000.00 in favor of RBPG and P100,000.00 for Isabel Katigbak and
P50,000.00, as attorney's fees. Plaintiffs-appellees filed a motion for reconsideration of the
decision, questioning the deletion of the award of temperate damages and the reduction of the
award of moral damages and attorney's fees. The motion was denied.
MBTC filed this petition, presenting the following issues for resolution:
1. whether or not private respondents RBPG and Isabel Rodriguez are legally
entitled to moral damages and attorney's fees, and
2. assuming that they are so entitled, whether or not the amounts awarded are
excessive and unconscionable.
The petition is devoid of merit.
The case at bench was instituted to seek damages caused by the dishonor through negligence of
respondent bank's checks which were actually sufficiently funded, and the insults from petitioner
bank's officer directed against private respondent Isabel R. Katigbak. The presence of malice
and the evidence of besmirched reputation or loss of credit and business standing, as well as a
reappraisal of its probative value, involves factual matters which, having been already thoroughly
discussed and analyzed in the courts below, are no longer reviewable here. While this rule
admits of exceptions, this case does not fall under any of these.
There is no merit in petitioner's argument that it should not be considered negligent, much less
be held liable for damages on account of the inadvertence of its bank employee as Article 1173
of the Civil Code only requires it to exercise the diligence of a good pater familias.
As borne out by the records, the dishonoring of the respondent's checks committed through
negligence by the petitioner bank on April 6, 1982 was rectified only on April 15, 1992 or nine (9)
days after receipt of the credit memo. Clearly, petitioner bank was remiss in its duty and
obligation to treat private respondent's account with the highest degree of care, considering the
fiduciary nature of their relationship. The bank is under obligation to treat the accounts of its
depositors with meticulous care, whether such account consists only of a few hundred pesos or
of millions. It must bear the blame for failing to discover the mistake of its employee despite the
established procedure requiring bank papers to pass through bank personnel whose duty it is to
check and countercheck them for possible errors.4 Responsibility arising from negligence in the
performance of every kind of obligation is demandable.5 While the bank's negligence may not
have been attended with malice and bad faith, nevertheless, it caused serious anxiety,
embarrassment and humiliation to private respondents for which they are entitled to recover
reasonable moral damages.6
As the records bear out, insult was added to injury by petitioner bank's issuance of debit
memoranda representing service and penalty charges for the returned checks, not to mention the
insulting remarks from its Assistant Cashier.
In the case of Leopoldo Araneta v. Bank of America,7 we held that:
The financial credit of a businessman is a prized and valuable asset, it being a

significant part of the foundation of his business. Any adverse reflection thereon
constitutes some financial loss to him. As stated in the case of Atlanta National
Bank vs. Davis, 96 Ga 334, 23 SE 190, citing 2 Morse Banks, Sec. 458, "it can
hardly be possible that a customer's check can be wrongfully refused payment
without some impeachment of his credit, which must in fact be an actual injury,
though he cannot, from the nature of the case, furnish independent, distinct proof
thereof".
It was established that when Mrs. Katigbak learned that her checks were not being honored and
Mr. Dungo repeatedly made the insulting phone calls, her wounded feelings and the mental
anguish suffered by her caused her blood pressure to rise beyond normal limits, necessitating
medical attendance for two (2) days at a hospital.
The damage to private respondents' reputation and social standing entitles them to moral
damages. Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar
injury.8 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 cannot, from the nature of the case, be proved with
certainty.9 Temperate damages may be allowed in cases where from the nature of the case,
definite proof of pecuniary loss cannot be adduced, although the court is convinced that there
has been such loss. The appellate court, however, justified its deletion when MBTC reasoned out
that the amount of P50,000.00 is not part of the relief prayed for in the complaint, aside from the
fact that the amount allegedly suffered by Mrs. Katigbak is susceptible of proof. 10
Moral and temperate damages which are not susceptible of pecuniary estimation are not
awarded to penalize the petitioner but to compensate the respondents for injuries suffered as a
result of the former's fault and negligence, taking into account the latter's credit and social
standing in the banking community, particularly since this is the very first time such humiliation
has befallen private respondents. The amount of such losses need not be established with
exactitude, precisely due to their nature. 11
The carelessness of petitioner bank, aggravated by the lack of promptness in repairing the error
and the arrogant attitude of the bank officer handling the matter, justifies the grant of moral
damages, which are clearly not excessive and unconscionable.
Moreover, considering the nature and extent of the services rendered by private respondent's
counsel, both in the trial and appellate courts, the Court deems it just and equitable that
attorney's fees in the amount of P50,000.00 be awarded. WHEREFORE, the decision of
respondent Court of Appeals is AFFIRMED in all respects.
SO ORDERED
G.R. No. 190521 January 12, 2011
LETICIA TAN, MYRNA MEDINA, MARILOU SPOONER, ROSALINDA TAN, and MARY JANE
TAN, MARY LYN TAN, CELEDONIO TAN, JR., MARY JOY TAN, and MARK ALLAN TAN,
represented herein by their mother, LETICIA TAN,Petitioners,
vs.
OMC CARRIERS, INC. and BONIFACIO ARAMBALA, Respondents.
RESOLUTION
BRION, J.:
We resolve the motion for reconsideration1 – filed by Leticia Tan, Myrna Medina, Marilou
Spooner, Rosalinda Tan, Mary Jane Tan, Mary Lyn Tan, Celedonio Tan, Jr., Mary Joy Tan, and
Mark Allan Tan (petitioners), all heirs of the late Celedonio Tan – asking us to reverse and set
aside our Resolution of February 17, 2010.2 We denied in this Resolution their petition for review
on certiorari for failing to show any reversible error in the assailed Court of Appeals (CA) decision
of June 22, 20093 sufficient to warrant the exercise of our discretionary appellate jurisdiction.
The CA decision, in turn, affirmed with modification the decision of the Regional Trial Court
(RTC) of Muntinlupa City in Civil Case No. 96-186, finding the respondents – OMC Carriers, Inc.
(OMC) and Bonifacio Arambala – guilty of gross negligence and awarding damages to the
petitioners.
THE FACTS
On September 27, 1996, the petitioners filed a complaint for damages with the RTC against
OMC and Bonifacio Arambala.4 The complaint states that on November 24, 1995, at around 6:15
a.m., Arambala was driving a truck5with a trailer6 owned by OMC, along Meralco Road, Sucat,
Muntinlupa City. When Arambala noticed that the truck had suddenly lost its brakes, he told his
companion to jump out. Soon thereafter, he also jumped out and abandoned the truck.
Driverless, the truck rammed into the house and tailoring shop owned by petitioner Leticia Tan
and her husband Celedonio Tan, instantly killing Celedonio who was standing at the doorway of
the house at the time.7
The petitioners alleged that the collision occurred due to OMC’s gross negligence in not properly
maintaining the truck, and to Arambala’s recklessness when he abandoned the moving truck.
Thus, they claimed that the respondents should be held jointly and severally liable for the actual
damages that they suffered, which include the damage to their properties, the funeral expenses
they incurred for Celedonio Tan’s burial, as well as the loss of his earning capacity. The
petitioners also asked for moral and exemplary damages, and attorney’s fees.8
The respondents denied any liability for the collision, essentially claiming that the damage to the
petitioners was caused by a fortuitous event, since the truck skidded due to the slippery condition
of the road caused by spilled motor oil.9
THE RTC DECISION
After trial, the RTC found OMC and Arambala jointly and severally liable to the petitioners for
damages.10 Relying on the doctrine of res ipsa loquitur, the RTC held that it was unusual for a
truck to suddenly lose its brakes; the fact that the truck rammed into the petitioners’ house raised
the presumption of negligence on the part of the respondents. These, the respondents failed to
refute.11
The RTC did not agree with the respondents’ claim of a fortuitous event, pointing out that even
with oil on the road, Arambala did not slow down or take any precautionary measure to prevent
the truck from skidding off the road. The alleged oil on the road did not also explain why the truck
lost its brakes. Had OMC done a more rigid inspection of the truck before its use, the defective
brake could have been discovered. The RTC, thus, held OMC jointly and severally liable with
Arambala for the damage caused to the petitioners, based on the principle of vicarious liability
embodied in Article 218012 of the Civil Code.13
The dispositive portion of the decision stated:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs and
against the defendants ordering:
1. The defendants to pay the plaintiffs jointly and severally the amount of ₱50,000.00 for
the death of Celedonio Tan;
2. The defendants to pay the plaintiffs jointly and severally the amount of ₱500,000.00 for
the loss of earning capacity of Celedonio Tan, plus interest thereon from the date of
death of Celedonio Tan;
3. The defendants to pay the plaintiff Leticia Tan jointly and severally the amount of
₱355,895.00 as actual damages;
4. The defendants to pay the plaintiffs jointly and severally the amount of ₱500,000.00 as
moral damages;
5. The defendants to pay the plaintiffs jointly and severally the amount of ₱500,000.00 as
exemplary damages; and
6. The defendants to pay the plaintiffs jointly and solidarily the amount of ₱500,000.00 as
attorney’s fees.
Costs against the defendants.
SO ORDERED.14
THE COURT OF APPEALS DECISION
On appeal, the CA affirmed the RTC’s findings on the issues of the respondents’ negligence and
liability for damages. However, the CA modified the damages awarded to the petitioners by
reducing the actual damages award from ₱355,895.00 to ₱72,295.00. The CA observed that only
the latter amount was duly supported by official receipts.15
The CA also deleted the RTC’s award for loss of earning capacity. The CA explained that the
petitioners failed to substantiate Celedonio Tan’s claimed earning capacity with reasonable
certainty; no documentary evidence was ever presented on this point. Instead, the RTC merely
relied on Leticia Tan’s testimony regarding Celedonio Tan’s income. The CA characterized this
testimony as self-serving.16
The CA further reduced the exemplary damages from ₱500,000.00 to ₱200,000.00, and deleted
the award of attorney’s fees because the RTC merely included the award in the dispositive
portion of the decision without discussing its legal basis.17
THE PETITION
In the petition for review on certiorari before us,18 the petitioners assert that the CA erred when it
modified the RTC’s awarded damages. The petitioners submit the reasons outlined below.
First, the CA erred when it reduced the RTC’s award of actual damages from ₱355,895.00 to
₱72,295.00. The petitioners claim that they sought compensation for the damage done to
petitioner Leticia Tan’s house, tailoring shop, sewing machines, as well as other household
appliances. Since the damages primarily refer to the value of their destroyed property, and not
the cost of repairing or replacing them, the value cannot be evidenced by receipts. Accordingly,
the RTC correctly relied on petitioner Leticia Tan’s testimony and the documentary evidence
presented, consisting of pictures of the damaged property, to prove their right to recover actual
damages for the destroyed property.
Second, the petitioners are entitled to actual damages for the loss of Celedonio Tan’s earning
capacity. While they admit that they did not submit any documentary evidence to substantiate
this claim, the petitioners point out that Celedonio Tan was undisputably a self-employed tailor
who owned a small tailor shop; in his line of work, no documentary evidence is available.
Third, the petitioners maintain that they are entitled to exemplary damages in the amount of
₱500,000.00 because the RTC and the CA consistently found that the collision was caused by
the respondents’ gross negligence. Moreover, the respondents acted with bad faith when they
fabricated the "oil slick on the road" story to avoid paying damages to the petitioners. As
observed by the CA, the Traffic Accident Investigation Report did not mention any motor oil on
the road at the time of the accident. SPO4 Armando Alambro, the Investigation Officer, likewise
testified that there was no oil on the road at the time of the accident. For the public good and to
serve as an example, the respondents should be made to pay ₱500,000.00 as exemplary
damages.
Lastly, the petitioners are entitled to attorney’s fees based on Article 2208 of the Civil Code which
provides, among others, that attorney’s fees can be recovered when exemplary damages are
awarded, and when the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable claim.
We initially denied the petition in our Resolution of February 17, 2010, for the petitioners’ failure
to show any reversible error in the CA decision sufficient to warrant the exercise of our
discretionary appellate jurisdiction. In our Resolution of August 11, 2010, we reinstated the
petition on the basis of the petitioners’ motion for reconsideration.
OUR RULING
Finding merit in the petitioners’ arguments, we partly grant the petition.
Procedural Issue
As both the RTC and the CA found that the respondents’ gross negligence led to the death of
Celedonio Tan, as well as to the destruction of the petitioners’ home and tailoring shop, we see
no reason to disturb this factual finding. We, thus, concentrate on the sole issue of what
damages the petitioners are entitled to.
We are generally precluded from resolving a Rule 45 petition that solely raises the issue of
damages, an essentially factual question, because Section 1, Rule 45 of the Rules of Court,
expressly states that –
Section 1. Filing of petition with Supreme Court. – A party desiring to appeal by certiorari from a
judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional
Trial Court or other courts whenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari. The petition shall raise only questions of law which must
be distinctly set forth.
In light, however of the RTC’s and the CA’s conflicting findings on the kind and amount of
damages suffered which must be compensated, we are compelled to consider the case as one of
the recognized exceptions.19 We look into the parties’ presented evidence to resolve this appeal.
Temperate damages in lieu of actual damages
We begin by discussing the petitioners’ claim for actual damages arising from the damage
inflicted on petitioner Leticia Tan’s house and tailoring shop, taking into account the sewing
machines and various household appliances affected. Our basic law tells us that to recover
damages there must be pleading and proof of actual damages suffered.20 As we explained in
Viron Transportation Co., Inc. v. Delos Santos:21
Actual damages, to be recoverable, must not only be capable of proof, but must actually be
proved with a reasonable degree of certainty. Courts cannot simply rely on speculation,
conjecture or guesswork in determining the fact and amount of damages. To justify an award of
actual damages, there must be competent proof of the actual amount of loss, credence can be
given only to claims which are duly supported by receipts.22
The petitioners do not deny that they did not submit any receipt to support their claim for actual
damages to prove the monetary value of the damage caused to the house and tailoring shop
when the truck rammed into them. Thus, no actual damages for the destruction to petitioner
Leticia Tan’s house and tailoring shop can be awarded.
Nonetheless, absent competent proof on the actual damages suffered, a party still has the option
of claiming temperate damages, which may be allowed in cases where, from the nature of the
case, definite proof of pecuniary loss cannot be adduced although the court is convinced that the
aggrieved party suffered some pecuniary loss.23As defined in Article 2224 of the Civil Code:
Article 2224. 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 Canada v. All Commodities Marketing Corporation,24 we disallowed the award of actual

damages arising from breach of contract, where the respondent merely alleged that it was
entitled to actual damages and failed to adduce proof to support its plea. In its place, we awarded
temperate damages, in recognition of the pecuniary loss suffered.
The photographs the petitioners presented as evidence show the extent of the damage done to
the house, the tailoring shop and the petitioners’ appliances and equipment.25 Irrefutably, this
damage was directly attributable to Arambala’s gross negligence in handling OMC’s truck.
Unfortunately, these photographs are not enough to establish the amount of the loss with
certainty. From the attendant circumstances and given the property destroyed,26 we find the
amount of ₱200,000.00 as a fair and sufficient award by way of temperate damages.
Temperate damages in lieu of loss of earning capacity
Similarly, the CA was correct in disallowing the award of actual damages for loss of earning
capacity. Damages for loss of earning capacity are awarded pursuant to Article 2206 of the Civil
Code, which states that:
Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there may have been mitigating circumstances. In
addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed
and awarded by the court, unless the deceased on account of permanent physical disability not
caused by the defendant, had no earning capacity at the time of his death[.]
As a rule, documentary evidence should be presented to substantiate the claim for loss of
earning capacity.27 By way of exception, damages for loss of earning capacity may be awarded
despite the absence of documentary evidence when: (1) the deceased is self-employed and
earning less than the minimum wage under current labor laws, in which case, judicial notice may
be taken of the fact that in the deceased's line of work, no documentary evidence is available; or
(2) the deceased is employed as a daily wage worker earning less than the minimum wage under
current labor laws.28
According to the petitioners, prior to his death, Celedonio was a self-employed tailor who earned
approximately ₱156,000.00 a year, or ₱13,000.00 a month. At the time of his death in 1995, the
prevailing daily minimum wage was ₱145.00,29 or ₱3,770.00 per month, provided the wage
earner had only one rest day per week. Even if we take judicial notice of the fact that a small
tailoring shop normally does not issue receipts to its customers, and would probably not have
any documentary evidence of the income it earns, Celedonio’s alleged monthly income of
₱13,000.00 greatly exceeded the prevailing monthly minimum wage; thus, the exception set forth
above does not apply.
In the past, we awarded temperate damages in lieu of actual damages for loss of earning
capacity where earning capacity is plainly established but no evidence was presented to support
the allegation of the injured party’s actual income.
In Pleno v. Court of Appeals,30 we sustained the award of temperate damages in the amount of
₱200,000.00 instead of actual damages for loss of earning capacity because the plaintiff’s
income was not sufficiently proven.
We did the same in People v. Singh,31 and People v. Almedilla,32 granting temperate damages in
place of actual damages for the failure of the prosecution to present sufficient evidence of the
deceased’s income.
Similarly, in Victory Liner, Inc. v. Gammad,33 we deleted the award of damages for loss of
earning capacity for lack of evidentiary basis of the actual extent of the loss. Nevertheless,
because the income-earning capacity lost was clearly established, we awarded the heirs
₱500,000.00 as temperate damages.
In the present case, the income-earning capacity of the deceased was never disputed.
Petitioners Mary Jane Tan, Mary Lyn Tan, Celedonio Tan, Jr., Mary Joy Tan and Mark Allan Tan
were all minors at the time the petition was filed on February 4, 2010,34 and they all relied mainly
on the income earned by their father from his tailoring activities for their sustenance and support.
Under these facts and taking into account the unrebutted annual earnings of the deceased, we
hold that the petitioners are entitled to temperate damages in the amount of ₱300,000.00 [or
roughly, the gross income for two (2) years] to compensate for damages for loss of the earning
capacity of the deceased.
Reduction of exemplary damages proper

Exemplary or corrective damages are imposed by way of example or correction for the public
good, in addition to moral, temperate, liquidated or compensatory damages.35 In quasi-delicts,
exemplary damages may be granted if the defendant acted with gross negligence.36
Celedonio Tan’s death and the destruction of the petitioners’ home and tailoring shop were
unquestionably caused by the respondents’ gross negligence. The law allows the grant of
exemplary damages in cases such as this to serve as a warning to the pubic and as a deterrent
against the repetition of this kind of deleterious actions.37 The grant, however, should be
tempered, as it is not intended to enrich one party or to impoverish another. From this
perspective, we find the CA’s reduction of the exemplary damages awarded to the petitioners
from ₱500,000.00 to ₱200,000.00 to be proper.
Attorney’s fees in order
In view of the award of exemplary damages, we find it also proper to award the petitioners
attorney's fees, in consonance with Article 2208(1) of the Civil Code.38 We find the award of
attorney’s fees, equivalent to 10% of the total amount adjudged the petitioners, to be just and
reasonable under the circumstances.
Interests due
Finally, we impose legal interest on the amounts awarded, in keeping with our ruling in Eastern
Shipping Lines, Inc. v. Court of Appeals,39 which held that:
quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under
Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable
damages. lavvphil

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.
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.
Accordingly, legal interest at the rate of 6% per annum on the amounts awarded starts to run
from May 14, 2003, when the trial court rendered judgment. From the time this judgment
becomes final and executory, the interest rate shall be 12% per annum on the judgment amount
and the interest earned up to that date, until the judgment is wholly satisfied.
WHEREFORE, premises considered, we PARTIALLY GRANT the petition. The June 22, 2009
decision of the Court of Appeals in CA-G.R. CV. No. 84733, which modified the decision of the
Regional Trial Court of Muntinlupa City, Branch 256, in Civil Case No. 96-186, is AFFIRMED with
MODIFICATION. As modified, respondents OMC Carriers, Inc. and Bonifacio Arambala are
ordered to jointly and severally pay the petitioners the following:
(1) ₱50,000.00 as indemnity for the death of Celedonio Tan;
(2) ₱72,295.00 as actual damages for funeral expenses;
(3) ₱200,000.00 as temperate damages for the damage done to petitioner Leticia’s
house, tailoring shop, household appliances and shop equipment;
(4) ₱300,000.00 as damages for the loss of Celedonio Tan’s earning capacity;
(5) ₱500,000.00 as moral damages;
(6) ₱200,000.00 as exemplary damages; and
(7) 10% of the total amount as attorney’s fees; and costs of suit.
In addition, the total amount adjudged shall earn interest at the rate of 6% per annum from May
14, 2003, and at the rate of 12% per annum, from the finality of this Resolution on the balance
and interest due, until fully paid.
SO ORDERED.
G.R. No. 135644 September 17, 2001
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,

vs.
SPOUSES GONZALO and MATILDE LABUNG-DEANG, respondents.
PARDO, J.:
The petitioner in the case is the Government Service Insurance System (hereafter, "GSIS").
Having lost the case in the trial court and the Court of Appeals, it now comes to this Court for
redress.
At the onset, we state that the issue is not "suability" or whether GSIS may be sued despite the
doctrine of state immunity from suit, but liability, whether or not GSIS may be liable to pay
damages to respondent spouses given the applicable law and the circumstances of the case.1
The Case
The case is a petition2 for review on certiorari of the decision of the Court of Appeals3 affirming
the decision of the Regional Trial Court, Angeles City4 ordering GSIS to pay respondents
Gonzalo (now deceased)5 and Matilde Labung-Deang (hereafter, "spouses Deang") temperate
damages, attorney's fees, legal interests and costs of suit for the loss of their title to real property
mortgaged to the GSIS.
The Facts
Sometime in December 1969, the spouses Deang obtained a housing loan from the GSIS in the
amount of eight thousand five hundred pesos (P8,500.00). Under the agreement, the loan was to
mature on December 23, 1979. The loan was secured by a real estate mortgage constituted over
the spouses' property covered by Transfer Certificate of Title No. 14926-R issued by the Register
of Deeds of Pampanga.6 As required by the mortgage deed, the spouses Daeng deposited the
owner's duplicate copy of the title with the GSIS.7
On January 19, 1979, eleven (11) months before the maturity of the loan, the spouses Deang
settled their debt with the GSIS8 and requested for the release of the owner's duplicate copy of
the title since they intended to secure a loan from a private lender and use the land covered by it
as collateral security for the loan of fifty thousand pesos (P50,000.00)9 which they applied for
with one Milagros Runes.10 They would use the proceeds of the loan applied for the renovation of
the spouses' residential house and for business.11
However, personnel of the GSIS were not able to release the owner's duplicate of the title as it
could not be found despite diligent search.12 As stated earlier, the spouses as mortgagors
deposited the owner's duplicate copy of the title with the GSIS located at its office in San
Fernando, Pampanga.13
Satisfied that the owner's duplicate copy of the title was really lost, in 1979, GSIS commenced
the reconstitution proceedings with the Court of First Instance of Pampanga for the issuance of a
new owner's copy of the same.14
On June 22, 1979, GSIS issued a certificate of release of mortgage.15
On June 26, 1979, after the completion of judicial proceedings, GSIS finally secured and
released the reconstituted copy of the owner's duplicate of Transfer Certificate of Title No.
14926-R to the spouses Deang.16
On July 6, 1979, the spouses Deang filed with the Court of First Instance, Angeles City a
complaint against GSIS for damages, claiming that as result of the delay in releasing the
duplicate copy of the owner's title, they were unable to secure a loan from Milagros Runes, the
proceeds of which could have been used in defraying the estimated cost of the renovation of
their residential house and which could have been invested in some profitable business
undertaking.17
In its defense, GSIS explained that the owners' duplicate copy of the title was released within a
reasonable time since it had to conduct standard pre-audit and post-audit procedures to verify if
the spouses Deang's account had been fully settled.18
On July 31, 1995, the trial court rendered a decision ruling for the spouses Deang. The trial court
reasoned that the loss of the owner's duplicate copy of the title "in the possession of GSIS as
security for the mortgage... without justifiable cause constitutes negligence on the part of the
employee of GSIS who lost it," making GSIS liable for damages.19 We quote the dispositive
portion of the decision:20
"IN VIEW OF THE FOREGOING, the Court renders judgment ordering the GSIS:
"a) To pay the plaintiffs-spouses the amount of P20,000.00 as temperate damages;
"b) To pay plaintiffs-spouses the amount of P15,000.00 as attorney's fees;
"c) To pay legal interest on the award in paragraphs a) and b) from the filing of the
complaint; and,
"d) To pay cost of the suit.
"SO ORDERED."
On August 30, 1995, GSIS appealed the decision to the Court of Appeals.21
On September 21, 1998, the Court of Appeals promulgated a decision affirming the appealed
judgment, ruling: First, since government owned and controlled corporations (hereafter,
"GOCCs") whose charters provide that they can sue and be sued have a legal personality
separate and distinct from the government, GSIS is not covered by Article 218022 of the Civil
Code, and it is liable for damages caused by their employees acting within the scope of their
assigned tasks. Second, the GSIS is liable to pay a reasonable amount of damages and
attorney's fees, which the appellate court will not disturb. We quote the dispositive portion:23
"WHEREFORE, finding no reversible error in the appealed judgment, the same is hereby
AFFIRMED.
"SO ORDERED."
Hence, this appeal.24
The Issue
Whether the GSIS, as a GOCC primarily performing governmental functions, is liable for a
negligent act of its employee acting within the scope of his assigned tasks.25
The Court's Ruling
We rule that the GSIS is liable for damages. We deny the petition for lack of merit.
GSIS, citing the sixth paragraph of Article 2180 of the Civil Code argues that as a GOCC, it falls
within the term "State" and cannot be held vicariously liable for negligence committed by its
employee acting within his functions.26
"Article 2180. The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
xxx
"Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business of industry.
"The State is responsible in like manner when it acts though a special agent, but not
when the damage has been caused by the official to whom the task was done properly
pertains, in which case what is provided in Article 2176 shall be applicable.
xxx (italics ours)"
The argument is untenable. The cited provision of the Civil Code is not applicable to the case at
bar. However, the trial court and the Court of Appeals erred in citing it as the applicable law.
Nonetheless, the conclusion is the same. As heretofore stated, we find that GSIS is liable for
damages.
The trial court and the Court of Appeals treated the obligation of GSIS as one springing
from quasi-delict.27 We do not agree. Article 2176 of the Civil Code defines quasi-delict as
follows:
"Whoever by act or omission causes damages to another, there being fault or

negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter (italics ours)."
Under the facts, there was a pre-existing contract between the parties. GSIS and the spouses
Deang had a loan agreement secured by a real estate mortgage. The duty to return the owner's
duplicate copy of title arose as soon as the mortgage was released.28 GSIS insists that it was
under no obligation to return the owner's duplicate copy of the title immediately. This insistence is
not warranted. Negligence is obvious as the owners' duplicate copy could not be returned to the
owners. Thus, the more applicable provisions of the Civil Code are:
"Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay and those who in any manner contravene the tenor thereof are liable
for damages."
"Article 2201. In contracts and quasi-contracts, 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 x x x."
Since good faith is presumed and bad faith is a matter of fact which should be proved,29 we shall
treat GSIS as a party who defaulted in its obligation to return the owners' duplicate copy of the
title. As an obligor in good faith, GSIS is liable for all the "natural and probable consequences of
the breach of the obligation." The inability of the spouses Deang to secure another loan and the
damages they suffered thereby has its roots in the failure of the GSIS to return the owners'
duplicate copy of the title.
We come now to the amount of damages. In a breach of contract, moral damages are not
awarded if the defendant is not shown to have acted fraudulently or with malice or bad
faith.30 The fact that the complainant suffered economic hardship31 or worries and mental
anxiety32 is not enough.
There is likewise no factual basis for an award of actual damages. Actual damages to be
compensable must be proven by clear evidence.33 A court can not rely on "speculation,
conjecture or guess work" as to the fact and amount of damages, but must depend on actual
proof.34
However, it is also apparent that the spouses Deang suffered financial damage because of the
loss of the owners' duplicate copy of the title. Temperate damages may be granted.
"Article 2224. 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 cannot, from the nature of the case, be
proved with certainty."
GSIS submits that there must be proof of pecuniary loss. This is untenable. The rationale behind
temperate damages is precisely that from the nature of the case, definite proof of pecuniary loss
cannot be offered. When the court is convinced that there has been such loss, the judge is
empowered to calculate moderate damages, rather than let the complainant suffer without
redress from the defendant's wrongful act.35
The award of twenty thousand pesos (P20,000.00) in temperate damages is reasonable

considering that GSIS spent for the reconstitution of the owners' duplicate copy of the title.
Next, the attorney's fees. Attorney's fees which are granted as an item of damages are generally
not recoverable.36The award of attorney's fees is the exception rather than the rule and counsel's
fees are not to be awarded every time a party wins a suit. The award of attorney's fees demands
factual, legal and equitable justification; its basis cannot be left to speculation or conjecture.37
We find no circumstance to justify the award of attorney's fees. We delete the same.
The Fallo
WHEREFORE, we DENY the petition. We AFFIRM the decision of the Court of Appeals in CA-
G.R. CV No. 51240 with the MODIFICATION that award of attorney's fees is DELETED.
No costs.
SO ORDERED.
G.R. No.138980 September 20, 2005
FILINVEST LAND, INC., Petitioners,

vs.
HON. COURT OF APPEALS, PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY,
and PACIFIC EQUIPMENT CORPORATION, Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated 27 May
1999 affirming the dismissal by the Regional Trial Court of Makati, Branch 65,2 of the complaint
for damages filed by Filinvest Land, Inc. (Filinvest) against herein private respondents Pacific
Equipment Corporation (Pecorp) and Philippine American General Insurance Company.
The essential facts of the case, as recounted by the trial court, are as follows:
On 26 April 1978, Filinvest Land, Inc. ("FILINVEST", for brevity), a corporation engaged in the
development and sale of residential subdivisions, awarded to defendant Pacific Equipment
Corporation ("PACIFIC", for brevity) the development of its residential subdivisions consisting of
two (2) parcels of land located at Payatas, Quezon City, the terms and conditions of which are
contained in an "Agreement". (Annex A, Complaint). To guarantee its faithful compliance and
pursuant to the agreement, defendant Pacific posted two (2) Surety Bonds in favor of plaintiff
which were issued by defendant Philippine American General Insurance ("PHILAMGEN", for
brevity). (Annexes B and C, Complaint).
Notwithstanding three extensions granted by plaintiff to defendant Pacific, the latter failed to
finish the contracted works. (Annexes G, I and K, Complaint). On 16 October 1979, plaintiff wrote
defendant Pacific advising the latter of its intention to takeover the project and to hold said
defendant liable for all damages which it had incurred and will incur to finish the project. (Annex
"L", Complaint).
On 26 October 1979, plaintiff submitted its claim against defendant Philamgen under its
performance and guarantee bond (Annex M, Complaint) but Philamgen refused to acknowledge
its liability for the simple reason that its principal, defendant Pacific, refused to acknowledge
liability therefore. Hence, this action.
In defense, defendant Pacific claims that its failure to finish the contracted work was due to
inclement weather and the fact that several items of finished work and change order which
plaintiff refused to accept and pay for caused the disruption of work. Since the contractual
relation between plaintiff and defendant Pacific created a reciprocal obligation, the failure of the
plaintiff to pay its progressing bills estops it from demanding fulfillment of what is incumbent upon
defendant Pacific. The acquiescence by plaintiff in granting three extensions to defendant Pacific
is likewise a waiver of the former’s right to claim any damages for the delay. Further, the
unilateral and voluntary action of plaintiff in preventing defendant Pacific from completing the
work has relieved the latter from the obligation of completing the same.
On the other hand, Philamgen contends that the various amendments made on the principal
contract and the deviations in the implementation thereof which were resorted to by plaintiff and
co-defendant Pacific without its (defendant Philamgen’s) written consent thereto, have
automatically released the latter from any or all liability within the purview and contemplation of
the coverage of the surety bonds it has issued. Upon agreement of the parties to appoint a
commissioner to assist the court in resolving the issues confronting the parties, on 7 July 1981,
an order was issued by then Presiding Judge Segundo M. Zosa naming Architect Antonio
Dimalanta as Court Commissioner from among the nominees submitted by the parties to conduct
an ocular inspection and to determine the amount of work accomplished by the defendant Pacific
and the amount of work done by plaintiff to complete the project.
On 28 November 1984, the Court received the findings made by the Court Commissioner. In
arriving at his findings, the Commissioner used the construction documents pertaining to the
project as basis. According to him, no better basis in the work done or undone could be made
other than the contract billings and payments made by both parties as there was no proper
procedure followed in terminating the contract, lack of inventory of work accomplished, absence
of appropriate record of work progress (logbook) and inadequate documentation and system of
construction management.
Based on the billings of defendant Pacific and the payments made by plaintiff, the work
accomplished by the former amounted to ₱11,788,282.40 with the exception of the last billing
(which was not acted upon or processed by plaintiff) in the amount of ₱844,396.42. The total
amount of work left to be accomplished by plaintiff was based on the original contract amount
less value of work accomplished by defendant Pacific in the amount of ₱681,717.58 (12,470,000-
11,788,282.42).
As regards the alleged repairs made by plaintiff on the construction deficiencies, the Court
Commissioner found no sufficient basis to justify the same. On the other hand, he found the
additional work done by defendant Pacific in the amount of ₱477,000.00 to be in order.
On 01 April 1985, plaintiff filed its objections to the Commissioner’s Resolution on the following
grounds:
a) Failure of the commissioner to conduct a joint survey which according to the latter is
indispensable to arrive at an equitable and fair resolution of the issues between the parties;
b) The cost estimates of the commissioner were based on pure conjectures and contrary to the
evidence; and,
c) The commissioner made conclusions of law which were beyond his assignment or capabilities.
In its comment, defendant Pacific alleged that the failure to conduct joint survey was due to
plaintiff’s refusal to cooperate. In fact, it was defendant Pacific who initiated the idea of
conducting a joint survey and inventory dating back 27 November 1983. And even assuming that
a joint survey were conducted, it would have been an exercise in futility because all physical
traces of the actual conditions then obtaining at the time relevant to the case had already been
obliterated by plaintiff.
On 15 August 1990, a Motion for Judgment Based on the Commissioner’s Resolution was filed
by defendant Pacific.
On 11 October 1990, plaintiff filed its opposition thereto which was but a rehash of objections to
the commissioner’s report earlier filed by said plaintiff.3
On the basis of the commissioner’s report, the trial court dismissed Filinvest’s complaint as well
as Pecorp’s counterclaim. It held:
In resolving this case, the court observes that the appointment of a Commissioner was a joint
undertaking among the parties. The findings of facts of the Commissioner should therefore not
only be conclusive but final among the parties. The court therefore agrees with the
commissioner’s findings with respect to
1. Cost to repair deficiency or defect – ₱532,324.02

2. Unpaid balance of work done by defendant - ₱1,939,191.67
3. Additional work/change order (due to defendant) – ₱475,000.00
The unpaid balance due defendant therefore is ₱1,939,191.67. To this amount should be added
additional work performed by defendant at plaintiff’s instance in the sum of ₱475,000.00. And
from this total of ₱2,414,191.67 should be deducted the sum of ₱532,324.01 which is the cost to
repair the deficiency or defect in the work done by defendant. The commissioner arrived at the
figure of ₱532,324.01 by getting the average between plaintiff’s claim of ₱758,080.37 and
defendant’s allegation of ₱306,567.67. The amount due to defendant per the commissioner’s
report is therefore ₱1,881,867.66.
Although the said amount of ₱1,881,867.66 would be owing to defendant Pacific, the fact
remains that said defendant was in delay since April 25, 1979. The third extension agreement of
September 15, 1979 is very clear in this regard. The pertinent paragraphs read:
a) You will complete all the unfinished works not later than Oct. 15, 1979. It is agreed and
understood that this date shall DEFINITELY be the LAST and FINAL extension & there will be no
further extension for any cause whatsoever.
b) We are willing to waive all penalties for delay which have accrued since April 25,
1979 provided that you are able to finish all the items of the contracted works as per revised
CPM; otherwise you shall continue to be liable to pay the penalty up to the time that all the
contracted works shall have been actually finished, in addition to other damages which we may
suffer by reason of the delays incurred.
Defendant Pacific therefore became liable for delay when it did not finish the project on the date
agreed on October 15, 1979. The court however, finds the claim of ₱3,990,000.00 in the form of
penalty by reason of delay (₱15,000.00/day from April 25, 1979 to Jan. 15, 1980) to be
excessive. A forfeiture of the amount due defendant from plaintiff appears to be a reasonable
penalty for the delay in finishing the project considering the amount of work already performed
and the fact that plaintiff consented to three prior extensions.
The foregoing considered, this case is dismissed. The counterclaim is likewise dismissed.
No Costs.4
The Court of Appeals, finding no reversible error in the appealed decision, affirmed the same.
Hence, the instant petition grounded solely on the issue of whether or not the liquidated damages
agreed upon by the parties should be reduced considering that: (a) time is of the essence of the
contract; (b) the liquidated damages was fixed by the parties to serve not only as penalty in case
Pecorp fails to fulfill its obligation on time, but also as indemnity for actual and anticipated
damages which Filinvest may suffer by reason of such failure; and (c) the total liquidated
damages sought is only 32% of the total contract price, and the same was freely and voluntarily
agreed upon by the parties.
At the outset, it should be stressed that as only the issue of liquidated damages has been
elevated to this Court, petitioner Filinvest is deemed to have acquiesced to the other matters
taken up by the courts below. Section 1, Rule 45 of the 1997 Rules of Court states in no
uncertain terms that this Court’s jurisdiction in petitions for review on certiorari is limited to
"questions of law which must be distinctly set forth."5 By assigning only one legal issue, Filinvest
has effectively cordoned off any discussion into the factual issue raised before the Court of
Appeals.6 In effect, Filinvest has yielded to the decision of the Court of Appeals, affirming that of
the trial court, in deferring to the factual findings of the commissioner assigned to the parties’
case. Besides, as a general rule, factual matters cannot be raised in a petition for review
on certiorari. This Court at this stage is limited to reviewing errors of law that may have been
committed by the lower courts.7 We do not perceive here any of the exceptions to this rule;
hence, we are restrained from conducting further scrutiny of the findings of fact made by the trial
court which have been affirmed by the Court of Appeals. Verily, factual findings of the trial court,
especially when affirmed by the Court of Appeals, are binding and conclusive on the Supreme
Court.8 Thus, it is settled that:
(a) Based on Pecorp’s billings and the payments made by Filinvest, the balance of work to be
accomplished by Pecorp amounts to ₱681,717.58 representing 5.47% of the contract work. This
means to say that Pecorp, at the time of the termination of its contract, accomplished 94.53% of
the contract work;
(b) The unpaid balance of work done by Pecorp amounts to ₱1,939,191.67;
(c) The additional work/change order due Pecorp amounts to ₱475,000.00;
(d) The cost to repair deficiency or defect, which is for the account of Pecorp, is ₱532,324.02;
and
(e) The total amount due Pecorp is ₱1,881,867.66.
Coming now to the main matter, Filinvest argues that the penalty in its entirety should be
respected as it was a product of mutual agreement and it represents only 32% of the
₱12,470,000.00 contract price, thus, not shocking and unconscionable under the circumstances.
Moreover, the penalty was fixed to provide for actual or anticipated liquidated damages and not
simply to ensure compliance with the terms of the contract; hence, pursuant to Laureano v.
Kilayco,9 courts should be slow in exercising the authority conferred by Art. 1229 of the Civil
Code.
We are not swayed.
There is no question that the penalty of ₱15,000.00 per day of delay was mutually agreed upon
by the parties and that the same is sanctioned by law. A penal clause is an accessory
undertaking to assume greater liability in case of breach.10 It is attached to an obligation in order
to insure performance11 and has a double function: (1) to provide for liquidated damages, and (2)
to strengthen the coercive force of the obligation by the threat of greater responsibility in the
event of breach.12 Article 1226 of the Civil Code states:
Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for
damages and the payment of interests in case of noncompliance, if there is no stipulation to the
contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty
of fraud in the fulfillment of the obligation.
The penalty may be enforced only when it is demandable in accordance with the provisions of
this Code.
As a general rule, courts are not at liberty to ignore the freedom of the parties to agree on such
terms and conditions as they see fit as long as they are not contrary to law, morals, good
customs, public order or public policy.13 Nevertheless, courts may equitably reduce a stipulated
penalty in the contract in two instances: (1) if the principal obligation has been partly or irregularly
complied; and (2) even if there has been no compliance if the penalty is iniquitous or
unconscionable in accordance with Article 1229 of the Civil Code which provides:
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been
partly or irregularly complied with by the debtor. Even if there has been no performance, the
penalty may also be reduced by the courts if it is iniquitous or unconscionable.
In herein case, the trial court ruled that the penalty charge for delay – pegged at ₱15,000.00 per
day of delay in the aggregate amount of ₱3,990,000.00 -- was excessive and accordingly
reduced it to ₱1,881,867.66 "considering the amount of work already performed and the fact that
[Filinvest] consented to three (3) prior extensions." The Court of Appeals affirmed the ruling but
added as well that the penalty was unconscionable "as the construction was already not far from
completion." Said the Court of Appeals:
Turning now to plaintiff’s appeal, We likewise agree with the trial court that a penalty interest of
₱15,000.00 per day of delay as liquidated damages or ₱3,990,000.00 (representing 32% penalty
of the ₱12,470,000.00 contract price) is unconscionable considering that the construction was
already not far from completion. Penalty interests are in the nature of liquidated damages and
may be equitably reduced by the courts if they are iniquitous or unconscionable (Garcia v. Court
of Appeals, 167 SCRA 815, Lambert v. Fox, 26 Phil. 588). The judge shall equitably reduce the
penalty when the principal obligation has been partly or irregularly complied with by the debtor.
Even if there has been no performance, the penalty may also be reduced by the courts if it is
iniquitous or unconscionable (Art. 1229, New Civil Code). Moreover, plaintiff’s right to indemnity
due to defendant’s delay has been cancelled by its obligations to the latter consisting of unpaid
works.
This Court finds no fault in the cost estimates of the court-appointed commissioner as to the cost
to repair deficiency or defect in the works which was based on the average between plaintiff’s
claim of ₱758,080.37 and defendant’s ₱306,567.67 considering the following factors: that
"plaintiff did not follow the standard practice of joint survey upon take over to establish work
already accomplished, balance of work per contract still to be done, and estimate and inventory
of repair" (Exhibit "H"). As for the cost to finish the remaining works, plaintiff’s estimates were
brushed aside by the commissioner on the reasoned observation that "plaintiff’s cost estimate for
work (to be) done by the plaintiff to complete the project is based on a contract awarded to
another contractor (JPT), the nature and magnitude of which appears to be inconsistent with the
basic contract between defendant PECORP and plaintiff FILINVEST."14
We are hamstrung to reverse the Court of Appeals as it is rudimentary that the application of
Article 1229 is essentially addressed to the sound discretion of the court.15 As it is settled that the
project was already 94.53% complete and that Filinvest did agree to extend the period for
completion of the project, which extensions Filinvest included in computing the amount of the
penalty, the reduction thereof is clearly warranted.
Filinvest, however, hammers on the case of Laureano v. Kilayco,16 decided in 1915, which
cautions courts to distinguish between two kinds of penalty clauses in order to better apply their
authority in reducing the amount recoverable. We held therein that:
. . . [I]n any case wherein there has been a partial or irregular compliance with the provisions in a
contract for special indemnification in the event of failure to comply with its terms, courts
will rigidly apply the doctrine of strict construction against the enforcement in its entirety
of the indemnification, where it is clear from the terms of the contract that the amount or
character of the indemnity is fixed without regard to the probable damages which might be
anticipated as a result of a breach of the terms of the contract; or, in other words, where the
indemnity provided for is essentially a mere penalty having for its principal object the
enforcement of compliance with the contract. But the courts will be slow in exercising the
jurisdiction conferred upon them in article 115417 so as to modify the terms of an agreed
upon indemnification where it appears that in fixing such indemnification the parties had in mind
a fair and reasonable compensation for actual damages anticipated as a result of a breach of the
contract, or, in other words, where the principal purpose of the indemnification agreed upon
appears to have been to provide for the payment of actual anticipated and liquidated damages
rather than the penalization of a breach of the contract. (Emphases supplied)
Filinvest contends that the subject penalty clause falls under the second type, i.e., the principal
purpose for its inclusion was to provide for payment of actual anticipated and liquidated damages
rather than the penalization of a breach of the contract. Thus, Filinvest argues that had Pecorp
completed the project on time, it (Filinvest) could have sold the lots sooner and earned its
projected income that would have been used for its other projects.
Unfortunately for Filinvest, the above-quoted doctrine is inapplicable to herein case. The
Supreme Court in Laureanoinstructed that a distinction between a penalty clause imposed
essentially as penalty in case of breach and a penalty clause imposed as indemnity for damages
should be made in cases where there has been neither partial nor irregular compliance with the
terms of the contract. In cases where there has been partial or irregular compliance, as in this
case, there will be no substantial difference between a penalty and liquidated damages insofar
as legal results are concerned.18 The distinction is thus more apparent than real especially in the
light of certain provisions of the Civil Code of the Philippines which provides in Articles 2226 and
Article 2227 thereof:
Art. 2226. Liquidated damages are those agreed upon by the parties to a contract to be paid in
case of breach thereof.
Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable.
Thus, we lamented in one case that "(t)here is no justification for the Civil Code to make an
apparent distinction between a penalty and liquidated damages because the settled rule is that
there is no difference between penalty and liquidated damages insofar as legal results are
concerned and that either may be recovered without the necessity of proving actual damages
and both may be reduced when proper."19
Finally, Filinvest advances the argument that while it may be true that courts may mitigate the
amount of liquidated damages agreed upon by the parties on the basis of the extent of the work
done, this contemplates a situation where the full amount of damages is payable in case of total
breach of contract. In the instant case, as the penalty clause was agreed upon to answer for
delay in the completion of the project considering that time is of the essence, "the parties thus
clearly contemplated the payment of accumulated liquidated damages despite, and precisely
because of, partial performance."20 In effect, it is Filinvest’s position that the first part of Article
1229 on partial performance should not apply precisely because, in all likelihood, the penalty
clause would kick in in situations where Pecorp had already begun work but could not finish it on
time, thus, it is being penalized for delay in its completion.
The above argument, albeit sound,21 is insufficient to reverse the ruling of the Court of Appeals. It
must be remembered that the Court of Appeals not only held that the penalty should be reduced
because there was partial compliance but categorically stated as well that the penalty was
unconscionable. Otherwise stated, the Court of Appeals affirmed the reduction of the penalty not
simply because there was partial compliance per se on the part of Pecorp with what was
incumbent upon it but, more fundamentally, because it deemed the penalty unconscionable in
the light of Pecorp’s 94.53% completion rate.
In Ligutan v. Court of Appeals,22 we pointed out that the question of whether a penalty is
reasonable or iniquitous can be partly subjective and partly objective as its "resolution would
depend on such factors as, but not necessarily confined to, the type, extent and purpose of the
penalty, the nature of the obligation, the mode of breach and its consequences, the supervening
realities, the standing and relationship of the parties, and the like, the application of which, by
and large, is addressed to the sound discretion of the court."23
In herein case, there has been substantial compliance in good faith on the part of Pecorp which
renders unconscionable the application of the full force of the penalty especially if we consider
that in 1979 the amount of ₱15,000.00 as penalty for delay per day was quite steep indeed.
Nothing in the records suggests that Pecorp’s delay in the performance of 5.47% of the contract
was due to it having acted negligently or in bad faith. Finally, we factor in the fact that Filinvest is
not free of blame either as it likewise failed to do that which was incumbent upon it, i.e., it failed
to pay Pecorp for work actually performed by the latter in the total amount of ₱1,881,867.66.
Thus, all things considered, we find no reversible error in the Court of Appeals’ exercise of
discretion in the instant case.
Before we write finis to this legal contest that had spanned across two and a half decades, we
take note of Pecorp’s own grievance. From its Comment and Memorandum, Pecorp, likewise,
seeks affirmative relief from this Court by praying that not only should the instant case be
dismissed for lack of merit, but that Filinvest should likewise be made to pay "what the Court
Commissioner found was due defendant" in the "total amount of ₱2,976,663.65 plus 12% interest
from 1979 until full payment thereof plus attorneys fees."24 Pecorp, however, cannot recover that
which it seeks as we had already denied, in a Resolution dated 21 June 2000, its own petition for
review of the 27 May 1999 decision of the Court of Appeals. Thus, as far as Pecorp is
concerned, the ruling of the Court of Appeals has already attained finality and can no longer be
disturbed.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 27 May 1999 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 147614 January 29, 2004
H.L. CARLOS CONSTRUCTION, INC., Petitioner,

vs.
MARINA PROPERTIES CORPORATION, JESUS K. TYPOCO SR. and TAN YU, Respondents.
DECISION
PANGANIBAN, J.:
There is unjust enrichment when a building contractor is denied payment for increased labor cost
validly incurred and additional work validly rendered with the owner’s express or implied
agreement.
The Case
The Petition for Review1 before the Court, filed under Rule 45, seeks the reversal of the
Decision2 dated March 29, 2001, issued by the Court of Appeals3 in CA-GR CV No. 60975. The
assailed Decision disposed as follows:
"WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE, and a new
one entered DISMISSING the [petitioner’s] Complaint, and partially granting the [respondent-
corporation’s] Counterclaim, in that the [petitioner] is directed to pay unto the [respondent-
corporation] the sum of ₱4,604,579.00 in actual damages plus ₱3,549,416.00 as and for
liquidated damages."4
The Facts
The facts of the case, summarized by the Court of Appeals (CA), are as follows:
"[Respondent] MARINA PROPERTIES CORPORATION (MPC for brevity) is engaged in the

business of real estate development. On May 10, 1988, MPC entered into a contract5 with
[Petitioner] H.[L.] CARLOS CONSTRUCTION, INC. (HLC) to construct Phase III of a
condominium complex called MARINA BAYHOMES CONDOMINIUM PROJECT, consisting of
townhouses and villas, totaling 31 housing units, for a total consideration of ₱38,580,609.00,
within a period of 365 days from receipt of ‘Notice to Proceed’. The original completion date of
the project was May 16, 1989, but it was extended to October 31, 1989 with a grace period until
November 30, 1989.6
"The contract was signed by Jovencio F. Cinco, president of MPC, and Honorio L. Carlos,
president of HLC.
"On December 15, 1989, HLC instituted this case for sum of money against not only MPC but
also against the latter’s alleged president, [Respondent] Jesus K. Typoco, Sr. (Typoco) and
[Respondent] Tan Yu (Tan), seeking the payment of various sums with an aggregate amount of
₱14 million pesos, broken down as follows:
a) ₱7,065,885.03 for costs of labor escalation, change orders and material price escalation;
b) ₱2,000,000.00 as additional compensatory damages, exclusive of the cost of suit.
c) ₱3,147,992.00 representing retention money allegedly withheld by MPC on HLC’s Progress

Billings as of January 1990, and
d) ₱2,000,000.00 representing the value of construction materials allegedly withheld/detained by
MPC.
"Traversing the allegations of the complaint, [respondents] filed separate answers, whereby the
two individual [respondents] alleged that they are not parties to the Construction Contract and
Amendatory Contract and are therefore not liable to HLC. [Respondent] MPC on the other hand
alleged that the [petitioner] has no cause of action against it and that it (HLC) is not entitled to its
various claims. MPC interposed a counterclaim in the aggregate sum of ₱68,296,227.14 for
actual and compensatory damages, liquidated damages, unliquidated advances, and attorney’s
fees."7
On May 15, 1997, the trial court8 ruled as follows:9
"WHEREFORE, premises above considered, judgment is hereby rendered for [Petitioner] H.L.
CARLOS CONSTRUCTION, INC. and as against [Respondents] MARINA PROPERTIES
CORPORATION, TAN YU, and JESUS K. TYPOCO, SR., who are hereby ordered to pay, jointly
and severally, the [petitioner], as follows:
"1. the amount of ₱7,065,885.03, representing unpaid labor escalation costs, change orders and
material price escalations, plus 12% interest per annum from date of filing of the complaint, until
fully paid;
"2. the amount of ₱3,147,992.39 representing the 10% retention money withheld by the
[respondents] [from] [petitioner’s] progress billing as of January 1990, plus 12% interest per
annum from the date of filing of the complaint, until fully paid;
"3. the amount of ₱2,000,000.00 representing the value of construction materials and the like
detained by the [respondents], plus 12% legal interest from the date of filing of the complaint,
until fully paid;
"4. the sum equivalent to 15% of the principal sum as and by way of attorney’s fees; and to
"5. [p]ay the costs of this suit.
"The counterclaim for liquidated damages, are hereby DISMISSED for lack of evidence.
Liquidated damages can only be awarded under paragraph 2 of the amended construction
contract that extended the completion period and mainly on the finding of the 85% substantial
completion of the project, and that the delay and stoppage of the project was caused by
[respondents’] default in payment of [the] progress billings that would have allowed [petitioner] to
have the capability to continue and complete the project."
Ruling of the Court of Appeals
On appeal, the CA held that respondents were not liable for escalations in the cost of labor and
construction materials, because of the following reasons: (1) the contract between the parties
was for a lump sum consideration, which did not allow for cost escalation; and (2) petitioner failed
to show any basis for the award sought.
Respondents were also absolved from paying for change orders and extra work, inasmuch as
there was no supplemental agreement covering them as required in the main Construction
Contract. Although Progress Billing No. 24 apparently indicates that extra work was rendered by
petitioner, this claim is not supported by sufficient evidence.
The CA further failed to find any basis for the release of the 10 percent retention fee. The
Construction Contract had provided that such release would be made only under certain
conditions, none of which was complied with, as petitioner failed to complete the work required.
Furthermore, MPC was not held liable for detained or withheld construction materials, since
petitioner had eventually withdrawn them.
Nothing in the records indicated any personal liability on the part of Typoco and Tan. Moreover,
they had nothing to assume, as MPC was not held liable to petitioner.
Furthermore, the CA ruled that petitioner was liable for actual and liquidated damages. The latter
had abandoned the project prior to its completion; hence, MPC contracted out the work to
another entity and incurred actual damages in excess of the remaining balance of the contract
price. In addition, the Construction Contract had stipulated payment of liquidated damages in an
amount equivalent to 1/1000 of the contract price for each calendar day of delay.
Hence, this Petition.10
Issues
In its Memorandum, petitioner raises the following issues:
"a. Whether or not the respondents are liable to pay the petitioner its claim for price escalation of
construction materials and labor cost escalation.
"b. Whether or not the respondents are liable to the petitioner for cost of change orders and extra
works.
"c. Whether or not the respondents are liable to the petitioner for the ten percent retention
money.
"d. Whether or not the respondents are liable to pay the petitioner attorney’s fees.
"e. Whether or not the respondents are liable to the petitioner for the cost of illegally detained
materials.
"f. Whether or not the respondents Jesus Typoco Sr., and Tan Yu are jointly and solidarily liable
to the petitioner for the latter’s claims.
"g. Whether or not the petitioner is liable to the respondents for actual and liquidated damages."11
In simpler terms, the issues to be resolved are as follows:
(1) Whether petitioner is entitled to (a) a price escalation for labor and material cost, (b) the cost
of change orders and extra work, (c) the release of the 10 percent retention money, (d) the cost
of illegally detained materials, and (e) attorney’s fees
(2) Whether Typoco and Tan are solidarily liable with MPC
(3) Whether petitioner is liable for actual and liquidated damages
The Petition is partly meritorious.
First Issue:
Liability for Additional Costs
Petitioner argues that it is entitled to price escalation for both labor and materials, because MPC
was delayed in paying for its obligations. The former admits that it is normally not entitled to any
price increase for labor and materials, because a contractor is expected to build into its price a
contingency factor to protect it from cost increases that may occur during the contract period.12 It
justifies its claim, however, on the ground that a contractor cannot be expected to anticipate price
increases beyond the original contract period. Respondents, on the other hand, aver that it was
delayed in finishing the project; hence, it is not entitled to any price increase.
It must be pointed out that the reason for the CA’s denial of petitioner’s claim was that the
contract between the parties was for a lump sum consideration, and petitioner was guilty of delay
in completing the project.
Labor and Material
Cost Escalation
We agree with petitioner that it is entitled to price escalation, but only for the labor component of
Progress Billing No. 24. The Construction Contract contains the following provision on the
considerations therefor:
"6.1 For and in consideration of the true and faithful performance of the work by the
CONTRACTOR, the OWNER shall pay the Lump Sum Contract Price of PESOS: THIRTY
EIGHT MILLION FIVE HUNDRED EIGHTY THOUSAND SIX HUNDRED NINE (₱38,580,609.00)
broken down as shown in the Bid Form. No cost escalation shall be allowed except on the labor
component of the work x x x."13
Since the Contract allows escalation only of the "labor component," the implication is that
material cost escalations are barred. There appears to be no provision, either in the original or in
the amended contract, that would justify billing of increased cost of materials. Furthermore, no
evidence -- like official economic data showing an increase in the price index of construction
materials -- was even adduced by petitioner to prove that there had indeed been increases in
material costs.14
Petitioner attempts to pass off these cost escalations as a form of damages suffered by it as a
natural consequence of the delay in the payment of billings and claims for additional work. It
argues that the baseless and malicious refusal to pay for those claims renders respondents liable
for damages under Article 2201 of the Civil Code.
We disagree. Without tackling the issue of delay, we find that the contentious Progress Billing
No. 24 contains no claim for material cost escalation. The other unsettled bills claimed by
petitioner are those for change orders or extra work, which have not been shown to be related to
the increase in cost of materials. Dealt with in separate contracts between the parties were such
claims, the costs of which were to be determined and agreed upon only when required by MPC.
Materials used for those additional jobs were to be purchased only when the work was
contracted, not prior thereto. As admitted by petitioner, expenses for change orders/additional
work were not included in the agreed contract price15 and, hence, were not subject to increases.
MPC admits that the labor cost escalation clause was adopted by the parties to safeguard the
contractor against losses in the event that, during the execution of the Contract, the government
would order a minimum wage adjustment, which would then inflate the labor cost.16 Respondents
deny liability for this added expense because, according to the Contract, the allowance for labor
cost escalation is available only within the duration of the original construction period.
We clarify. The claimed cost of labor escalation pertains to the period September 1 to December
15, 1989, in the amount of ₱170,722.10; and December 16 to January 27, 1990, ₱45,983.91.
During those periods, petitioner had not yet incurred any delay in the project, originally stipulated
to be finished by May 16, 1989. But by mutual agreement, the period was extended up to
October 31, 1989, with a grace period until November 30, 1989.
Furthermore, a legislated wage increase became effective after the expiration of the original
period.17 Respondents are, therefore, liable for this increase in labor cost, because they allowed
petitioner to continue working on the project until April 20, 1990 (even beyond November 30,
1989).
MPC argues that to allow the claim for labor cost escalation would be to reward petitioner for
incurring delay, thereby breaching a contractual obligation.
This contention is untenable. Before the expiration of the extended period, petitioner was not yet
in delay. It was granted by MPC an extension to complete the project until November 30, 1989.
Moreover, despite the expiration of the extended period, MPC allowed it to continue working on
the project until the former took over and awarded that project to another contractor. Hence,
labor costs were actually incurred by petitioner until April 20, 1990. It was thus entitled to
reimbursement for labor cost escalation until that date. MPC cannot now be allowed to question
the true valuation of the additional labor because, instead of submitting to an independent
evaluator, it violated the Temporary Restraining Order (TRO) issued by the trial court and hired
another contractor to finish the project.
Noteworthy is the fact that MPC paid for the labor cost escalation during the period August 1-15,
1989,18 which was past the expiration of the original period. Apparently, it thereafter stopped
paying for labor cost escalation in response to the suit filed against it by petitioner.
The CA denied the labor cost escalation claim because, despite having billed MPC therefor,
petitioner accepted payments that did not include such claim. The appellate court construed the
acceptance by petitioner as a waiver of the latter’s right to be reimbursed for the increased labor
cost.
We believe that this position is untenable. The CA mistook Exhibits "C-7-B"19 and "D-1"20 as bills
coming from petitioner, when in truth they were Accomplishment Evaluation Sheets issued by
MPC. The notation "labor escalation not included" in the said Exhibits was an admission on the
part of MPC that it had not paid such amount, upon the advice of Atty. Jose C. Laureta, its
resident counsel. According to him, petitioner should be faulted for having incurred labor cost
increases after the expiration of the original period (after May 16, 1989). Not having waived such
increases, it should thus bear them.21
To allow MPC to acquire the partially accomplished project without paying for labor cost
escalation validly incurred would constitute unjust enrichment at the expense of petitioner.22 There
is unjust enrichment under Article 22 of the Civil Code when (1) a person is unjustly benefited,
and (2) such benefit is derived at the expense of or with damages to another.23 Since petitioner
had rendered services that were accepted by MPC, then the former should be compensated for
them. Labor cost escalation, in this case, has already been earned by petitioner.
Change Orders and Extra Work
Petitioner claims entitlement to compensation for change orders and extra work that were
covered by construction memoranda. MPC counters, however, that the former never presented
any cost estimate for additional work. The estimate would have formed the basis for a
consensual agreement and a computation of actual accomplishment, for which MPC could have
been unilaterally billed. Worse, the extra work was allegedly assessed by its engineer to be worth
only ₱705.41.
We side with petitioner. The "General Conditions to the Construction Contract" provides:
"13. CLAIMS FOR EXTRA AND FORCE ACCOUNT WORK:
If the Contractor claims that any construction by drawings or otherwise involve extra cost under
this Contract, he shall give the Owner and/or the Architect, written notice thereof within a
reasonable time after receipt of such instructions, and in any event before proceeding to execute
the work, except in emergency endangering life or property. No such claim shall be valid unless
so made.
Extra work for which no price is provided in the proposal shall be covered by a supplementary
agreement to be signed by both parties before such work is commenced." 24
The CA is correct in holding that there is no supplemental agreement covering the claimed extra
work and change orders. Exhibits "C-1," "C-2," "C-2-A," "C-3" and "C-4" show billings for extra
work sent by petitioner to MPC. But the former did not submit in evidence the alleged
construction memoranda covering them. Neither were they mentioned in the letter25 of Roilo
Golez dated November 24, 1989.
Progress Billing No. 24, which pertained to the project as covered by the Construction Contract,
did not mention any claim for extra work or change orders. These additional jobs were covered
by separate bills other than the twenty-four Progress Billings sent by petitioner.
MPC, however, never denied having ordered additional work. In Item No. 12 of its Amended
Answer,26 it averred that petitioner’s claim for change orders and extra work were premature.
Limneo P. Miranda, respondent’s work engineer, manifested that additional work was indeed
done, but that claims therefor were not settled for the following reasons: (1) reconciliation
between the parties was never completed due to the absence of petitioner’s representative in
scheduled meetings; (2) difference in opinion on the proper valuation of the additional work, as
MPC wanted to use the net quantity method, while petitioner preferred the gross method; and (3)
some claims were rejected by MPC, because they had not been properly approved in
accordance with the Contract.27
Evidence on record further reveals that MPC approved some change order jobs despite the
absence of any supplementary agreement. In its "Over-all Summary of Reconciled Quantities" as
of September 6, 1989 (Annex "C"),28it valued petitioner’s valid claim therefor at ₱79,340.52. After
noting that the claim had extremely been bloated, Atty. Laureta, in-house counsel for respondent
corporation, affirmed as valid the amount stated in the summary.29
Petitioner may have failed to show the construction memoranda covering its claim, but it
inarguably performed extra work that was accepted by MPC. Hence, we will consider Annex "C"
as the proper valuation thereof.
Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value of
the thing or services rendered despite the lack of a written contract, in order to avoid unjust
enrichment.30 Quantum meruit means that in an action for work and labor, payment shall be made
in such amount as the plaintiff reasonably deserves.31 To deny payment for a building almost
completed and already occupied would be to permit unjust enrichment at the expense of the
contractor.32
The CA held that since Billing No. 24 did not include any claim for additional work, such work had
presumably been previously paid for. This reasoning is not correct. It is beyond dispute that the
change orders and extra work were billed separately from the usual progress billings petitioner
sent to MPC.
Retention Money
The CA denied the claim for the 10 percent retention money, because petitioner had failed to
comply with the conditions under paragraph 6.3 of the Construction Contract. On the other hand,
the latter avers that these conditions were deemed fulfilled under Article 1186 of the Civil Code
because, when its contract was terminated, MPC prevented the fulfillment of those conditions. It
would allegedly be unfair and unreasonable for petitioner to guarantee a project finished by
another contractor.
We disagree with petitioner. In the construction industry, the 10 percent retention money is a
portion of the contract price automatically deducted from the contractor’s billings, as security for
the execution of corrective work -- if any -- becomes necessary. This amount is to be released
one year after the completion of the project, minus the cost of corrective work.33 The conditions for
its release are stated in the Construction Contract as follows:
"6.3 In all cases, however, payment of the progress billings shall be subject to deduction of
twenty percent (20%) recoupment of the downpayment, ten percent (10%) retention and
expanded withholding tax on CONTRACTOR’S income. Upon issuance of the Certificate of
Completion of the work by the OWNER and upon submission of Guaranty Bond, Ninety Percent
(90%) of the retained amount shall be released to the CONTRACTOR and the balance thereof
shall be released by the OWNER within thirty (30) days after the expiration of the guaranty period
which is 365 days after issuance of the certificate of completion." 34
None of the foregoing conditions were satisfied; hence, the CA was correct in forfeiting the
retention fee. The completion of the work was stipulated in the Contract to be within 365 days
from the issuance of a Notice to Proceed or until May 16, 1989. Then the period was extended
up to November 30, 1989. Petitioner worked on the project till April 20, 1990. It was given by
MPC ample time and two extensions to complete the project. The simple truth is that in failing to
finish the project, the former failed to fulfill a prerequisite for the release of the retention money.
Detained Materials
Petitioner claims cost reimbursement of illegally detained materials, as it was allowed to withdraw
them from the site only after two years from the unilateral termination of the Contract. By 1992,
only 30 percent of the materials detained were salvageable, while the rest had depreciated.
This contention has no merit. According to the CA’s ruling, the only proof that MPC detained
materials belonging to petitioner was the denial of the request, contained in the latter’s February
1990 letter,35 for the release of used form lumber. Aside from that letter, however, no other
attempt was shown to have been made by petitioner to obtain its request. It should have tried
again to do so before claiming that respondents unreasonably prevented it from removing its
construction materials from the premises. As to the other materials, there was absolutely no
attempt to remove them from the construction site. Hence, we cannot say that these were ever
withheld from petitioner.
Detention is not proved by Atty. Laureta’s letter36 dated July 4, 1992, allowing petitioner to remove
its materials from the site. The letter was merely a directive for it to clear out its belongings
therefrom, in view of the hiring of a second contractor to finish the project.
Moreover, in a specifically designated yard inside the construction site, petitioner maintained a
warehouse that was guarded by its own security complement and completely inaccessible to
MPC personnel.37 It therefore had control over those materials and should have made provisions
to keep them safe from the elements and from pilferage.
Attorney’s Fees
Petitioner argues that it is entitled to attorney’s fees based on Article 2208 of the Civil Code,
because (1) respondents’ act or omission has compelled it to litigate with third persons or to incur
expenses to protect its interest; and (2) respondents acted in gross and evident bad faith in
refusing to satisfy its plainly valid, just and demandable claim.
The grant of some of the claims of petitioner does not change the fact that it did not finish the
project. Attorney’s fees are not granted every time a party prevails in a suit, because no premium
should be placed on the right to litigate.38 Petitioner is not, after all, blameless in the present
controversy. Just because MPC withheld some payments from petitioner does not mean that the
former was in gross or evident bad faith. MPC had claims that it wanted to offset with those of the
latter.
Second Issue:
Typoco and Tan’s Liabilities
Petitioner claims that Respondents Jesus Typoco and Tan Yu are solidarily liable with MPC.
We concur with the CA that these two respondents are not liable. Section 31 of the Corporation
Code (Batas Pambansa Blg. 68) provides:
"Section 31. Liability of directors, trustees or officers. Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross
negligence or bad faith x x x shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders and other persons."
The personal liability of corporate officers validly attaches only when (a) they assent to a patently
unlawful act of the corporation; or (b) they are guilty of bad faith or gross negligence in directing
its affairs; or (c) they incur conflict of interest, resulting in damages to the corporation, its
stockholders or other persons.39
The records are bereft of any evidence that Typoco acted in bad faith with gross or inexcusable
negligence, or that he acted outside the scope of his authority as company president. The
unilateral termination of the Contract during the existence of the TRO was indeed contemptible --
for which MPC should have merely been cited for contempt of court at the most -- and a
preliminary injunction would have then stopped work by the second contractor. Besides, there is
no showing that the unilateral termination of the Contract was null and void.
Respondent Tan is not an officer or a director of MPC. His participation is limited to an alleged
conversation between him and Engineer Mario Cornista, petitioner’s project manager.
Supposedly, the former verbally agreed therein to guarantee the payment of the latter’s progress
billings. We find no satisfactory evidence to show respondent’s alleged solidary liability to
petitioner.
Third Issue:
Liability for Actual and Liquidated Damages
Petitioner avers that it should be exonerated from the counterclaims for actual and liquidated
damages, because its failure to complete the project was due to respondents’ acts.
Central to the resolution of this issue is the question of which party was in delay. Aside from the
contentious Progress Billing No. 24, there are no other unpaid claims. The bills for extra work
and change orders, aside from those for the beams and columns, were premature and still
subject to reconciliation and adjustment. Hence, we cannot hold MPC liable for them.
In comparison, petitioner did not fulfill its contractual obligations. It could not totally pass the
blame to MPC for hiring a second contractor, because the latter was allowed to terminate the
services of the contractor.
"10.1 The OWNER shall have the right to terminate this Contract in the event that the
CONTRACTOR incurs a fifteen percent (15%) or greater slippage in the prosecution of the
overall work evaluated against the Project schedule as indicated by the critical path of the
approved PERT/CPM network for the Project or as amended by Art. II herein.
Either party shall have the right to terminate this Contract for reason of violation or non-
compliance by the other party of the terms and conditions herein agreed upon."40
As of November 30, 1989, petitioner accomplished only approximately 80 percent of the project.
In other words, it was already in delay at the time. In addition, Engineer Miranda testified that it
would lose money even if it finished the project;41 thus, respondents already suspected that it had
no intention of finishing the project at all.
Petitioner was in delay and in breach of contract. Clearly, the obligor is liable for damages that
are the natural and probable consequences of its breach of obligation.42 Petitioner was already
paid by MPC in the amount of ₱31,435,187 out of the total contract price of ₱38,580,609; thus,
only ₱7,145,422 remained outstanding. In order to finish the project, the latter had to contract the
services of a second construction firm for ₱11,750,000. Hence, MPC suffered actual damages in
the amount of ₱4,604,579 for the completion of the project.
Petitioner is also liable for liquidated damages as provided in the Contract,43 the pertinent portion
of which is quoted as follows:
"4.1 Time is an essential feature of this Contract and in the event that the CONTRACTOR fails to
complete the contracted work within the stipulated time inclusive of any granted extension of
time, the CONTRACTOR shall pay the OWNER, as liquidated damages, the amount of one over
one thousand (1/1000) of the value of the contract price for each and every calendar day of delay
(Sundays and Holidays included), not to exceed 15% of [the] Contract amount, in the completion
of the work as specified in Article II above. It is understood that the liquidated damages herein
provided are fixed, agreed upon and not by way of penalty, and as such, the OWNER shall not
be further required to prove that he has incurred actual damages to be entitled thereto. In the
case of such delays, the OWNER is hereby authorized to deduct the amount of liquidated
damages from any money due or which may become due the CONTRACTOR in this or any other
contract or to collect such amount from the CONTRACTOR’s performance bond whichever is
convenient and expeditious to the OWNER."
Liquidated damages are those that the parties agree to be paid in case of a breach.44 As worded,
the amount agreed upon answers for damages suffered by the owner due to delays in the
completion of the project. Under Philippine laws, these damages take the nature of penalties.45 A
penal clause is an accessory undertaking to assume greater liability in case of a breach. It is
attached to an obligation in order to ensure performance.
Thus, as held by the CA, petitioner is bound to pay liquidated damages for 92 days, or from the
expiration of the grace period in the Amended Contract until February 1, 1990, when it effectively
abandoned the project.
WHEREFORE, the Petition is partly GRANTED and the assailed Decision MODIFIED. Petitioner
is AWARDED labor cost escalation in the sum of ₱1,196,202 and cost of extra work in the sum of
₱79,340.52. In all other respects, the appealed Decision is AFFIRMED.
SO ORDERED
G.R. No. 137842 August 23, 2001
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
DANILO CATUBIG y HORIO, accused-appellant.
VITUG, J.:
In an information, dated 29 January 1998, the accused, Danilo Catubig y Horio, was charged
with the crime of rape before the Regional Trial Court, Branch 78, of Malolos, Bulacan; viz:
"The undersigned Asst. Provincial Prosecutor on complaint of the offended party

Dannilyn Catubig y Lazaro accuses Danilo Catubig y Horio of the crime of rape,
penalized under the provisions of Art. 335 of the Revised Penal Code, committed as
follows:
"That on or about the 27th day of November, 1997, in the municipality of San Jose del
Monte, province of Bulacan, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, did then and there wilfully, unlawfully and feloniously,
by means of force, threats and intimidation and with lewd design have carnal knowledge
of the said offended party against her will."1
When arraigned on 16 July 1998, accused Catubig, represented by counsel de oficio, pleaded
"not guilty" to the offense charged; forthwith, trial ensued.
The case for the prosecution was laid bare in Appellee's Brief submitted by the Office of the
Solicitor General.
"On November 27, 1997, at around 4:00 o'clock in the afternoon, private complainant
Dannilyn Catubig, who was born on August 9, 1985, and her four (4) younger siblings
were watching television in the sala of their house located at Sunlife Subdivision, San
Jose del Monte, Bulacan.
"After an hour, Dannilyn's father, herein appellant Danilo Catubig, arrived and told
Dannilyn's siblings to proceed, as in fact they did proceed, to her aunt's house which is
just located nearby. Thereafter, appellant told Dannilyn to go inside a room and to lie
down on the bed. After Dannilyn had complied, appellant removed Dannilyn's shorts and
panty, while appellant, after removing his brief and t-shirt, [laid] on top of Dannilyn. Afraid
of appellant who beat and raped her in the past, Dannilyn was not able to resist appellant
who succeeded in inserting his penis into Dannilyn's vagina.
"However, Dannilyn's aunt, who got suspicious of what appellant was doing to Dannilyn,
informed the latter's mother, Jocelyn Catubig, about the said suspicion. Thus, when
confronted by her mother, Dannilyn was forced to reveal that she was indeed raped by
appellant. The sexual assault was reported to the San Jose del Monte Police Station
where Dannilyn's sworn statement was subsequently taken on December 3, 1997.
"Upon the request of the police authorities, Dannilyn was examined on December 1,
1997 by Dr. Wilfredo E. Tiera, Medico-Legal Officer of the National Bureau of
Investigation, who found out that Dannilyn's healed laceration in the hymen was caused
by sexual intercourse."2
The accused denied the accusation against him. He claimed that the rape charge was brought
about only because of the ill-will between him, on the one hand, and his wife and daughter
Dannilyn, on the other hand, following a quarrel. On 27 November 1997, he asseverated, he had
fought with his wife, hitting her and his daughter. His wife then threatened him that it was the last
time that she would allow him to harm her and that he would regret what he did. True to her
foreboding, the next day, he was arrested and a complaint for rape was filed against him.
On 11 December 1998, the Regional Trial Court rendered a decision holding the accused guilty
of the crime of rape; it adjudged:
"WHEREFORE, in view of the foregoing, the Court hereby finds accused DANILO
CATUBIG Y HORIO GUILTY beyond reasonable doubt of the crime of Rape defined and
penalized under Article 335 of the Revised Penal Code, as amended by Republic Act No.
7659, and hereby sentences him to suffer the penalty of DEATH, and to pay private
complainant Dannilyn Catubig the amount of Fifty Thousand Pesos (P50,000.00) as
moral damages."3
With the imposition of the death penalty by the trial court, the records were elevated to this Court
for automatic review.
In his brief, appellant submitted thusly:
"1. The lower court erred in finding the accused guilty of the crime of rape in violation of
Article 335 of the Revised Penal Code as amended by Republic Act 7659.
"2. The lower court erred in not taking into consideration the fact that the information was
defective for failure to state that the accused is the father of the victim and that the victim
was under 18 years [of] age at the time of the commission of the alleged rape."4
Private complainant Dannilyn Catubig narrated how she was repeatedly abused by her own
father; she testified:
"Q Now, after your sisters and brother [went] to the house of your aunt, what did
your father do?
"A He instructed me to go inside the room.
"Q How many rooms were there in your house?
"A Only one.
"Q Did you go to the room per instruction?
"A Yes, sir.
"Q And what happened inside the room?
"A My father entered the room.
"Q And when your father entered the room, what did he do next?
"A He removed my short [pants] and my panty.
"Q What was your position at that time when your father removed your short pants
and panty?
"A I was lying.

"Q When you entered the room, did you lie immediately?
"A No, I just sat.
"Q How come as you claimed a while ago, you were lying when your father removed
your short pants and panty?
"A Once I entered the room, I was sitting then he removed my short [pants] and
panty.
"Q You said upon entering the room, you sat and while sitting, all of a sudden your
father removed your short pants and panty while already lying at that time, how come you
were lying when according to you, you were sitting inside the room?
"A I was sitting first and he instructed me to lie down.
"Q While you were sitting inside the room and you were instructed by your father to
lie, what comes to your mind?
"A That he will rape me.
"Q How did you come to know that?
"A He was raping me before, doing that before.
"Q In other words, that was not the first time your father raped you on that particular
date?
"A No, sir.
"Q When was the first time, if you remember?
"A When I was still in grade 1.
"Q How many times were you raped by your father?
"A I can no longer remember how many it was — several.
"Q When was the last time your father raped you?
"A November 27.
"Q Now, when your father removed your short pants and panty, what did he do
next?
"A He removed his brief and shirt.
"Q After removing his brief and shirt, what did he do?
"A He [laid] on top me.
"Q When your father [laid] on top of you, what did he do?
"A He was inserting his penis to my vagina.

"Q At this juncture, may we make of record that witness starts to cry.
"Q How did you know your father inserted his penis to your vagina?
"A I can feel it and it is painful.
"Q That was the time when your father was already lying on top of you?
"A Yes, sir.
"Q And what was the movement of the body of your father while he was lying on top
of you?
"A Push and pull movement.
"Q For how long did your father stay on top of you doing that push and pull
movement?
"A That must be about 1 hour, but my aunt arrived.
"Q Aside from the pain, what else did you feel?
"A Mahapdi at parang may pumipitik sa loob ng ari ko.
"Q Did you not try to resist?
"A No, because I am afraid of him.
"Q You are afraid of your father?
"A Yes, sir.
"Q Afraid of what?
"A Because he was beating us, hitting us.
"Q Why, what was the reason why your father was hitting you?
"A To threaten us.
"Q For what purpose?
"A Whenever my mother sided with us, my father and mother engaged in a fight.
"Q In this case, you were raped and sexually abused by your father, what made you
afraid of him?
"A Because we were afraid of my father since childhood."5
Dannilyn has given her testimony in a plain, categorical, spontaneous and frank manner,
remaining consistent throughout, and there is hardly anything on record that can cast doubt on
her sincerity. The revelations of an innocent child whose chastity has been abused, coupled with
her willingness to face police investigation and to undergo the trouble and humiliation of a public
trial, should merit credence unless strong justifications dictate otherwise. Indeed, it would take a
most senseless kind of depravity for a young daughter to just make up a story which could put
her own father to an undeserved indictment and to even possibly face death in the hands of the
law.6
When rape is committed against one's own daughter, the moral ascendancy and influence of the
father, that necessarily flows from his parental authority, can sufficiently cow the child to
submission and can rightly be held to substitute for the requisite "violence or intimidation" that,
normally, would be characterized by physical acts and uttered threats made on the victim.
The trite defenses of alibi and denial proferred by appellant cannot prevail over the positive and
categorical statements of private complainant. Alibi is often viewed with suspicion and received
with caution not only because it is inherently weak and unreliable but also because it is easy to
fabricate. In order that this defense can prosper, it must be convincing to preclude any doubt on
the physical impossibility of the presence of the accused at the locus criminis at the time of the
incident. These conditions have not been met in the case at bar.
The contention of appellant that his wife and daughter Dannilyn have accused him merely
because of his violent ways is much too flimsy to be believed. The mere resentment of a wife and
daughter is not so compelling as to have motivated them to wrongly lodge a complaint for a crime
much more serious than might, if at all, be expected.
It is likewise a settled doctrine that the assessment made by the trial court on the credibility of
witnesses deserves great regard and weight on appeal. The rule is not without reason; the trial
judge has a unique position of hearing first hand the witnesses and observing their deportment,
conduct and attitude during the course of the testimony in open court. There is no valid reason to
now ignore this long accepted jurisprudence in this instance.
This Court, however, finds the second assignment of error impressed with merit.
Article 335 of the Revised Penal Code, as amended by Section 11 of Republic Act No. 7659, at
times also referred to as the Death Penalty Law, states in part:
"ARTICLE 335. When and how rape is committed. x x x .
"xxx xxx xxx
"The death penalty shall also be imposed if the crime of rape is committed with any of the
following attendant circumstances:
"1. When the victim is under eighteen (18) years of age and the offender is a parent,
ascendant, step-parent, guardian, relative by consanguinity or affinity within the third civil
degree, or the common-law spouse of the parent of the victim."
The concurrence of the minority of the victim and her relationship to the offender are special
qualifying circumstances that are needed to be alleged in the complaint or information for the
penalty of death to be decreed.7The Constitution guarantees to be inviolable the right of an
accused to be informed of the nature and cause of the accusation against him.8 It is a
requirement that renders it essential for every element of the offense with which he is charged to
be properly alleged in the complaint or information.
Here, the information failed to state the minority of the victim and her relationship with the
offender, both special qualifying circumstances under Republic Act No. 7659, and for want of
such allegations, the trial court erred in imposing the death penalty on the accused.9 Appellant
could only thus be convicted under Article 335 of the Revised Penal Code, as amended, of
simple rape punishable by reclusion perpetua.
Anent the award of damages, the trial court has correctly awarded P50,000.00 moral damages,
an award that rests on the jural foundation that the crime of rape necessarily brings with it
shame, mental anguish, besmirched reputation, moral shock and social humiliation to the
offended party.10 In addition, the offended party deserves to receive the amount of P50,000.00
civil indemnity,11 the equivalent of compensatory damages, and exemplary damages in the
amount of P25,000.00.
An apparent discord in the award of exemplary damages in simple and qualified rape cases
perhaps deserves more than just a passing remark.
The Civil Code of the Philippines provides, in respect to exemplary or corrective damages,
thusly:
"ARTICLE 2229. Exemplary or corrective damages are imposed, by way of example or

correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.
"ARTICLE 2230. In criminal offenses, exemplary damages as a part of the civil liability
may be imposed when the crime was committed with one or more aggravating
circumstances. Such damages are separate and distinct from fines and shall be paid to
the offended party.
"ARTICLE 2231. In quasi-delicts, exemplary damages may be granted if the defendant

acted with gross negligence.
"ARTICLE 2232. In contracts and quasi-contracts, the court may award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.
"ARTICLE 2233. Exemplary damages cannot be recovered as a matter of right; the court
will decide whether or not they should be adjudicated.
"ARTICLE 2234. While the amount of the exemplary damages need not be proved, the
plaintiff must show that he is entitled to moral, temperate or compensatory damages
before the court may consider the question of whether or not exemplary damages should
be awarded. In case liquidated damages have been agreed upon, although no proof of
loss is necessary in order that such liquidated damages may be recovered, nevertheless,
before the court may consider the question of granting exemplary in addition to the
liquidated damages, the plaintiff must show that he would be entitled to moral, temperate
or compensatory damages were it not for the stipulation for liquidated damages.
"ARTICLE 2235. A stipulation whereby exemplary damages are renounced in advance

shall be null and void."
The attendance of aggravating circumstances in the perpetration of the crime serves to increase
the penalty (the criminal liability aspect),12 as well as to justify an award of exemplary or corrective
damages (the civil liability aspect),13 moored on the greater perversity of the offender manifested
in the commission of the felony such as may be shown by (1) the motivating power itself, (2) the
place of commission, (3) the means and ways employed, (4) the time, or (5) the personal
circumstances of the offender or the offended party or both. There are various types of
aggravating circumstances, among them, the ordinary and the qualifying. Relationship is an
alternative circumstance under Article 15 of the Revised Penal Code.
"ARTICLE 15. Their concept. — Alternative circumstances are those which must be
taken into consideration as aggravating or mitigating according to the nature and effects
of the crime and other conditions attending its commission. They are relationship,
intoxication, and degree of instruction and education of the offender.
"The alternative circumstance of relationship shall be taken into consideration when the
offended party is the spouse, ascendant, descendant, legitimate, natural, or adopted
brother or sister, or relative by affinity in the same degree of the offender."
As a rule, relationship is held to be aggravating in crimes against chastity, such as rape and acts
of lasciviousness, whether the offender is a higher or a lower degree relative of the offended
party.14
Under Section 11 of Republic Act No. 7659, amending Article 335 of the Revised Penal Code,
the death penalty is to be imposed in rape cases "when the victim is under eighteen (18) years of
age and the offender is a parent, ascendant, step-parent, guardian, relative by consanguinity or
affinity within the third civil degree, or the common-law spouse of the parent of the victim." The
Court has since held that the circumstances enumerated by the amendatory law are to be
regarded as special qualifying (aggravating) circumstances. Somehow doubts linger on whether
relationship may then be considered to warrant an award for exemplary damages where it is
used to qualify rape as a heinous crime, thereby becoming an element thereof, as would subject
the offender to the penalty of death. Heretofore, the Court has not categorically laid down a
specific rule, preferring instead to treat the issue on a case to case basis.
In People vs. Fundano,15 People vs. Ramos,16 People vs. Medina,17 People vs. Dimapilis,18 People
vs. Calayca,19 People vs. Tabion,20 People vs. Bayona,21 People vs. Bayya,22 and People vs.
Nuñez,23 along with still other cases, the Court has almost invariably appreciated relationship as
an ordinary aggravating circumstance in simple rape and thereby imposed exemplary damages
upon the offender whether or not the offense has been committed prior to or after the effectivity
of Republic Act No. 7659. Exceptionally, as in People vs. Decena,24 People vs. Perez,25 People vs.
Perez,26and People vs. Ambray,27 the Court has denied the award of exemplary damages
following the effectivity of that law. In qualified rape cases, such as in People vs.
Magdato,28 People vs. Arizapa,29 and People vs. Alicante,30 the Court decreed the payment of
exemplary damages to the offended party but it did not do so as in People vs. Alba,31 People vs.
Mengote,32 and People vs. Maglente.33
It may be time for the Court to abandon its pro hac vice stance and provide, for the guidance of
the bar and the bench, a kind of standard on the matter.
Also known as "punitive" or "vindictive" damages, exemplary or corrective damages are intended
to serve as a deterrent to serious wrongdoings and as a vindication of undue sufferings and
wanton invasion of the rights of an injured or a punishment for those guilty of outrageous
conduct. These terms are generally, but not always, used interchangeably. In common law, there
is preference in the use of exemplary damages when the award is to account for injury to feelings
and for the sense of indignity and humiliation suffered by a person as a result of an injury that
has been maliciously and wantonly inflicted,34 the theory being that there should be compensation
for the hurt caused by the highly reprehensible conduct of the defendant — associated with such
circumstances as willfulness, wantonness, malice, gross negligence or recklessness, oppression,
insult or fraud or gross fraud35 — that intensifies the injury. The terms punitive or vindictive
damages are often used to refer to those species of damages that may be awarded against a
person to punish him for his outrageous conduct. In either case, these damages are intended in
good measure to deter the wrongdoer and others like him from similar conduct in the future.36
The term "aggravating circumstances" used by the Civil Code, the law not having specified
otherwise, is to be understood in its broad or generic sense. The commission of an offense has a
two-pronged effect, one on the public as it breaches the social order and the other upon the
private victim as it causes personal sufferings, each of which is addressed by, respectively, the
prescription of heavier punishment for the accused and by an award of additional damages to the
victim. The increase of the penalty or a shift to a graver felony underscores the exacerbation of
the offense by the attendance of aggravating circumstances, whether ordinary or qualifying, in its
commission. Unlike the criminal which is basically a State concern, the award of damages,
however, is likewise, if not primarily, intended for the offended party who suffers thereby. It would
make little sense for an award of exemplary damages to be due the private offended party when
the aggravating circumstance is ordinary but to be withheld when it is qualifying. Withal, the
ordinary or qualifying nature of an aggravating circumstance is a distinction that should only be of
consequence to the criminal, rather than to the civil, liability of the offender. In fine, relative to the
civil aspect of the case, an aggravating circumstance, whether ordinary or qualifying, should
entitle the offended party to an award of exemplary damages within the unbridled meaning of
Article 2230 of the Civil Code.
Relevantly, the Revised Rules on Criminal Procedure, made effective on 01 December 2000,
requires aggravating circumstances, whether ordinary or qualifying, to be stated in the complaint
or information. Sections 8 and 9 of Rule 110 of the Rules of Court now provide:
"SECTION 8. Designation of the offense. — The complaint or information shall state the
designation of the offense given by the statute, aver the acts or omissions constituting
the offense, and specify its qualifying and aggravating circumstances. If there is no
designation of the offense, reference shall be made to the section or subsection of the
statute punishing it.
"SECTION 9. Cause of the accusation. — The acts or omissions complained of as

constituting the offense and the qualifying and aggravating circumstances must be stated
in ordinary and concise language and not necessarily in the language used in the statute
but in terms sufficient to enable a person of common understanding to know what offense
is being charged as well as its qualifying and aggravating circumstances and for the court
to pronounce judgment."
A court would thus be precluded from considering in its judgment the attendance of "qualifying or
aggravating circumstances" if the complaint or information is bereft of any allegation on the
presence of such circumstances.
The retroactive application of procedural rules, nevertheless, cannot adversely affect the rights of
the private offended party that have become vested prior to the effectivity of said rules. Thus, in
the case at bar, although relationship has not been alleged in the information, the offense having
been committed, however, prior to the effectivity of the new rules, the civil liability already
incurred by appellant remains unaffected thereby.
WHEREFORE, the decision of the court a quo is AFFIRMED with MODIFICATION in that
appellant Danilo Catubig y Horio is found guilty only of simple rape and not in its qualified form,
and he is hereby sentenced to suffer the penalty of reclusion perpetua and to pay complainant
Dannilyn Catubig P50,000.00 civil indemnity, P50,000.00 moral damages and P25,000.00
exemplary damages. Costs de oficio.
SO ORDERED
G.R. No. 206806 June 25, 2014
ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS, Petitioners,
vs.
DAN T. LIM, doing business under the name and style of QUALITY PAPERS & PLASTIC
PRODUCTS ENTERPRISES,Respondent.
DECISION
LEONEN, J.:
Novation must be stated in clear and unequivocal terms to extinguish an obligation. It cannot be
presumed and may be implied only if the old and new contracts are incompatible on every point.
Before us is a petition for review on certiorari1 assailing the Court of Appeals’ decision2 in CA-
G.R. CV No. 95709, which stemmed from a complaint3 filed in the Regional Trial Court of
Valenzuela City, Branch 171, for collection of sum of money.
The facts are as follows:
Dan T. Lim works in the business of supplying scrap papers, cartons, and other raw materials,
under the name Quality Paper and Plastic Products, Enterprises, to factories engaged in the
paper mill business.4 From February 2007 to March 2007, he delivered scrap papers worth
7,220,968.31 to Arco Pulp and Paper Company, Inc. (Arco Pulp and Paper) through its Chief
Executive Officer and President, Candida A. Santos.5 The parties allegedly agreed that Arco Pulp
and Paper would either pay Dan T. Lim the value of the raw materials or deliver to him their
finished products of equivalent value.6
Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and Paper issued a post-
dated check dated April 18, 20077 in the amount of 1,487,766.68 as partial payment, with the
assurance that the check would not bounce.8 When he deposited the check on April 18, 2007, it
was dishonored for being drawn against a closed account.9
On the same day, Arco Pulp and Paper and a certain Eric Sy executed a memorandum of
agreement10 where Arco Pulp and Paper bound themselves to deliver their finished products to
Megapack Container Corporation, owned by Eric Sy, for his account. According to the
memorandum, the raw materials would be supplied by Dan T. Lim, through his company, Quality
Paper and Plastic Products. The memorandum of agreement reads as follows:
Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida A.
Santos and Mr. Eric Sy that ARCO will deliver 600 tons Test Liner 150/175 GSM, full width 76
inches at the price of ₱18.50 per kg. to Megapack Container for Mr. Eric Sy’s account. Schedule
of deliveries are as follows:
....
It has been agreed further that the Local OCC materials to be used for the production of the
above Test Liners will be supplied by Quality Paper & Plastic Products Ent., total of 600 Metric
Tons at ₱6.50 per kg. (price subject to change per advance notice). Quantity of Local OCC
delivery will be based on the quantity of Test Liner delivered to Megapack Container Corp. based
on the above production schedule.11
On May 5, 2007, Dan T.Lim sent a letter12 to Arco Pulp and Paper demanding payment of the
amount of 7,220,968.31, but no payment was made to him.13
Dan T. Lim filed a complaint14 for collection of sum of money with prayer for attachment with the
Regional Trial Court, Branch 171, Valenzuela City, on May 28, 2007. Arco Pulp and Paper filed
its answer15 but failed to have its representatives attend the pre-trial hearing. Hence, the trial
court allowed Dan T. Lim to present his evidence ex parte.16
On September 19, 2008, the trial court rendered a judgment in favor of Arco Pulp and Paper and
dismissed the complaint, holding that when Arco Pulp and Paper and Eric Sy entered into the
memorandum of agreement, novation took place, which extinguished Arco Pulp and Paper’s
obligation to Dan T. Lim.17
Dan T. Lim appealed18 the judgment with the Court of Appeals. According to him, novation did not
take place since the memorandum of agreement between Arco Pulp and Paper and Eric Sy was
an exclusive and private agreement between them. He argued that if his name was mentioned in
the contract, it was only for supplying the parties their required scrap papers, where his
conformity through a separate contract was indispensable.19
On January 11, 2013, the Court of Appeals20 rendered a decision21 reversing and setting aside the
judgment dated September 19, 2008 and ordering Arco Pulp and Paper to jointly and severally
pay Dan T. Lim the amount of ₱7,220,968.31 with interest at 12% per annum from the time of
demand; ₱50,000.00 moral damages; ₱50,000.00 exemplary damages; and ₱50,000.00
attorney’s fees.22
The appellate court ruled that the facts and circumstances in this case clearly showed the
existence of an alternative obligation.23 It also ruled that Dan T. Lim was entitled to damages and
attorney’s fees due to the bad faith exhibited by Arco Pulp and Paper in not honoring its
undertaking.24
Its motion for reconsideration25 having been denied,26 Arco Pulp and Paper and its President and
Chief Executive Officer, Candida A. Santos, bring this petition for review on certiorari.
On one hand, petitioners argue that the execution of the memorandum of agreement constituted
a novation of the original obligation since Eric Sy became the new debtor of respondent. They
also argue that there is no legal basis to hold petitioner Candida A. Santos personally liable for
the transaction that petitioner corporation entered into with respondent. The Court of Appeals,
they allege, also erred in awarding moral and exemplary damages and attorney’s fees to
respondent who did not show proof that he was entitled to damages.27
Respondent, on the other hand, argues that the Court of Appeals was correct in ruling that there
was no proper novation in this case. He argues that the Court of Appeals was correct in ordering
the payment of 7,220,968.31 with damages since the debt of petitioners remains unpaid.28 He
also argues that the Court of Appeals was correct in holding petitioners solidarily liable since
petitioner Candida A. Santos was "the prime mover for such outstanding corporate liability."29 In
their reply, petitioners reiterate that novation took place since there was nothing in the
memorandum of agreement showing that the obligation was alternative. They also argue that
when respondent allowed them to deliver the finished products to Eric Sy, the original obligation
was novated.30
A rejoinder was submitted by respondent, but it was noted without action in view of A.M. No. 99-
2-04-SC dated November 21, 2000.31
The issues to be resolved by this court are as follows:
1. Whether the obligation between the parties was extinguished by novation
2. Whether Candida A. Santos was solidarily liable with Arco Pulp and Paper Co., Inc.
3. Whether moral damages, exemplary damages, and attorney’s fees can be awarded
The petition is denied.
The obligation between the

parties was an alternative
obligation
The rule on alternative obligations is governed by Article 1199 of the Civil Code, which states:
Article 1199. A person alternatively bound by different prestations shall completely perform one
of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking.
"In an alternative obligation, there is more than one object, and the fulfillment of one is sufficient,
determined by the choice of the debtor who generally has the right of election."32 The right of
election is extinguished when the party who may exercise that option categorically and
unequivocally makes his or her choice known.33
The choice of the debtor must also be communicated to the creditor who must receive notice of it
since: The object of this notice is to give the creditor . . . opportunity to express his consent, or to
impugn the election made by the debtor, and only after said notice shall the election take legal
effect when consented by the creditor, or if impugned by the latter, when declared proper by a
competent court.34
According to the factual findings of the trial court and the appellate court, the original contract
between the parties was for respondent to deliver scrap papers worth ₱7,220,968.31 to petitioner
Arco Pulp and Paper. The payment for this delivery became petitioner Arco Pulp and Paper’s
obligation. By agreement, petitioner Arco Pulp and Paper, as the debtor, had the option to either
(1) pay the price or(2) deliver the finished products of equivalent value to respondent.35
The appellate court, therefore, correctly identified the obligation between the parties as an
alternative obligation, whereby petitioner Arco Pulp and Paper, after receiving the raw materials
from respondent, would either pay him the price of the raw materials or, in the alternative, deliver
to him the finished products of equivalent value.
When petitioner Arco Pulp and Paper tendered a check to respondent in partial payment for the
scrap papers, they exercised their option to pay the price. Respondent’s receipt of the check and
his subsequent act of depositing it constituted his notice of petitioner Arco Pulp and Paper’s
option to pay.
This choice was also shown by the terms of the memorandum of agreement, which was
executed on the same day. The memorandum declared in clear terms that the delivery of
petitioner Arco Pulp and Paper’s finished products would be to a third person, thereby
extinguishing the option to deliver the finished products of equivalent value to respondent.
The memorandum of
agreement did not constitute
a novation of the original
contract
The trial court erroneously ruled that the execution of the memorandum of agreement constituted
a novation of the contract between the parties. When petitioner Arco Pulp and Paper opted
instead to deliver the finished products to a third person, it did not novate the original obligation
between the parties.
The rules on novation are outlined in the Civil Code, thus:
Article 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor. (1203)
Article 1292. In order that an obligation may be extinguished by another which substitute the
same, it is imperative that it be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other. (1204)
Article 1293. Novation which consists in substituting a new debtor in the place of the original one,
may be made even without the knowledge or against the will of the latter, but not without the
consent of the creditor. Payment by the new debtor gives him the rights mentioned in Articles
1236 and 1237. (1205a)
Novation extinguishes an obligation between two parties when there is a substitution of objects
or debtors or when there is subrogation of the creditor. It occurs only when the new contract
declares so "in unequivocal terms" or that "the old and the new obligations be on every point
incompatible with each other."36
Novation was extensively discussed by this court in Garcia v. Llamas:37
Novation is a mode of extinguishing an obligation by changing its objects or principal obligations,

by substituting a new debtor in place of the old one, or by subrogating a third person to the rights
of the creditor. Article 1293 of the Civil Code defines novation as follows:
"Art. 1293. Novation which consists in substituting a new debtor in the place of the original one,
may be made even without the knowledge or against the will of the latter, but not without the
consent of the creditor. Payment by the new debtor gives him rights mentioned in articles 1236
and 1237."
In general, there are two modes of substituting the person of the debtor: (1) expromision and (2)
delegacion. In expromision, the initiative for the change does not come from — and may even be
made without the knowledge of — the debtor, since it consists of a third person’s assumption of
the obligation. As such, it logically requires the consent of the third person and the creditor. In
delegacion, the debtor offers, and the creditor accepts, a third person who consents to the
substitution and assumes the obligation; thus, the consent of these three persons are necessary.
Both modes of substitution by the debtor require the consent of the creditor.
Novation may also be extinctive or modificatory. It is extinctive when an old obligation is

terminated by the creation of a new one that takes the place of the former. It is merely
modificatory when the old obligation subsists to the extent that it remains compatible with the
amendatory agreement. Whether extinctive or modificatory, novation is made either by changing
the object or the principal conditions, referred to as objective or real novation; or by substituting
the person of the debtor or subrogating a third person to the rights of the creditor, an act known
as subjective or personal novation. For novation to take place, the following requisites must
concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.
Novation may also be express or implied. It is express when the new obligation declares in
unequivocal terms that the old obligation is extinguished. It is implied when the new obligation is
incompatible with the old one on every point. The test of incompatibility is whether the two
obligations can stand together, each one with its own independent existence.38 (Emphasis
supplied)
Because novation requires that it be clear and unequivocal, it is never presumed, thus:
In the civil law setting, novatio is literally construed as to make new. So it is deeply rooted in the
Roman Law jurisprudence, the principle — novatio non praesumitur —that novation is never
presumed.At bottom, for novation tobe a jural reality, its animus must be ever present, debitum
pro debito — basically extinguishing the old obligation for the new one.39 (Emphasis supplied)
There is nothing in the memorandum of agreement that states that with its execution, the
obligation of petitioner Arco Pulp and Paper to respondent would be extinguished. It also does
not state that Eric Sy somehow substituted petitioner Arco Pulp and Paper as respondent’s
debtor. It merely shows that petitioner Arco Pulp and Paper opted to deliver the finished products
to a third person instead.
The consent of the creditor must also be secured for the novation to be valid:
Novation must be expressly consented to. Moreover, the conflicting intention and acts of the
parties underscore the absence of any express disclosure or circumstances with which to deduce
a clear and unequivocal intent by the parties to novate the old agreement.40 (Emphasis supplied)
In this case, respondent was not privy to the memorandum of agreement, thus, his conformity to
the contract need not be secured. This is clear from the first line of the memorandum, which
states:
Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida A.
Santos and Mr. Eric Sy. . . .41
If the memorandum of agreement was intended to novate the original agreement between the
parties, respondent must have first agreed to the substitution of Eric Sy as his new debtor. The
memorandum of agreement must also state in clear and unequivocal terms that it has replaced
the original obligation of petitioner Arco Pulp and Paper to respondent. Neither of these
circumstances is present in this case.
Petitioner Arco Pulp and Paper’s act of tendering partial payment to respondent also conflicts
with their alleged intent to pass on their obligation to Eric Sy. When respondent sent his letter of
demand to petitioner Arco Pulp and Paper, and not to Eric Sy, it showed that the former neither
acknowledged nor consented to the latter as his new debtor. These acts, when taken together,
clearly show that novation did not take place. Since there was no novation, petitioner Arco Pulp
and Paper’s obligation to respondent remains valid and existing. Petitioner Arco Pulp and Paper,
therefore, must still pay respondent the full amount of ₱7,220,968.31.
Petitioners are liable for

damages
Under Article 2220 of the Civil Code, moral damages may be awarded in case of breach of
contract where the breach is due to fraud or bad faith:
Art. 2220. Willfull injury to property may be a legal ground for awarding moral damages if the
court should find that, under the circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted fraudulently or in bad faith. (Emphasis
supplied)
Moral damages are not awarded as a matter of right but only after the party claiming it proved
that the breach was due to fraud or bad faith. As this court stated:
Moral damages are not recoverable simply because a contract has been breached. They are
recoverable only if the party from whom it is claimed acted fraudulently or in bad faith or in
wanton disregard of his contractual obligations. The breach must be wanton, reckless, malicious
or in bad faith, and oppressive or abusive.42
Further, the following requisites must be proven for the recovery of moral damages:
An award of moral damages would require certain conditions to be met, to wit: (1)first, there must
be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2)
second, there must be culpable act or omission factually established; (3) third, the wrongful act or
omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4)
fourth, the award of damages is predicated on any of the cases stated in Article 2219 of the Civil
Code.43
Here, the injury suffered by respondent is the loss of ₱7,220,968.31 from his business. This has
remained unpaid since 2007. This injury undoubtedly was caused by petitioner Arco Pulp and
Paper’s act of refusing to pay its obligations.
When the obligation became due and demandable, petitioner Arco Pulp and Paper not only
issued an unfunded check but also entered into a contract with a third person in an effort to
evade its liability. This proves the third requirement.
As to the fourth requisite, Article 2219 of the Civil Code provides that moral damages may be
awarded in the following instances:
Article 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;

(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
Breaches of contract done in bad faith, however, are not specified within this enumeration. When
a party breaches a contract, he or she goes against Article 19 of the Civil Code, which states:
Article 19. Every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith.
Persons who have the right to enter into contractual relations must exercise that right with
honesty and good faith. Failure to do so results in an abuse of that right, which may become the
basis of an action for damages. Article 19, however, cannot be its sole basis:
Article 19 is the general rule which governs the conduct of human relations. By itself, it is not the
basis of an actionable tort. Article 19 describes the degree of care required so that an actionable
tort may arise when it is alleged together with Article 20 or Article 21.44
Article 20 and 21 of the Civil Code are as follows:
Article 20. Every person who, contrary to law, wilfully or negligently causes damage to another,
shall indemnify the latter for the same.
Article 21.Any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage.
To be actionable, Article 20 requires a violation of law, while Article 21 only concerns with lawful
acts that are contrary to morals, good customs, and public policy:
Article 20 concerns violations of existing law as basis for an injury. It allows recovery should the
act have been willful or negligent. Willful may refer to the intention to do the act and the desire to
achieve the outcome which is considered by the plaintiff in tort action as injurious. Negligence
may refer to a situation where the act was consciously done but without intending the result
which the plaintiff considers as injurious.
Article 21, on the other hand, concerns injuries that may be caused by acts which are not
necessarily proscribed by law. This article requires that the act be willful, that is, that there was
an intention to do the act and a desire to achieve the outcome. In cases under Article 21, the
legal issues revolve around whether such outcome should be considered a legal injury on the
part of the plaintiff or whether the commission of the act was done in violation of the standards of
care required in Article 19.45
When parties act in bad faith and do not faithfully comply with their obligations under contract,
they run the risk of violating Article 1159 of the Civil Code:
Article 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.
Article 2219, therefore, is not an exhaustive list of the instances where moral damages may be
recovered since it only specifies, among others, Article 21. When a party reneges on his or her
obligations arising from contracts in bad faith, the act is not only contrary to morals, good
customs, and public policy; it is also a violation of Article 1159. Breaches of contract become the
basis of moral damages, not only under Article 2220, but also under Articles 19 and 20 in relation
to Article 1159.
Moral damages, however, are not recoverable on the mere breach of the contract. Article 2220
requires that the breach be done fraudulently or in bad faith. In Adriano v. Lasala:46
To recover moral damages in an action for breach of contract, the breach must be palpably
wanton, reckless and malicious, in bad faith, oppressive, or abusive. Hence, the person claiming
bad faith must prove its existence by clear and convincing evidence for the law always presumes
good faith.
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong, a breach of known duty through some
motive or interest or ill will that partakes of the nature of fraud. It is, therefore, a question of
intention, which can be inferred from one’s conduct and/or contemporaneous
statements.47 (Emphasis supplied)
Since a finding of bad faith is generally premised on the intent of the doer, it requires an
examination of the circumstances in each case.
When petitioner Arco Pulp and Paper issued a check in partial payment of its obligation to
respondent, it was presumably with the knowledge that it was being drawn against a closed
account. Worse, it attempted to shift their obligations to a third person without the consent of
respondent.
Petitioner Arco Pulp and Paper’s actions clearly show "a dishonest purpose or some moral
obliquity and conscious doing of a wrong, a breach of known duty through some motive or
interest or ill will that partakes of the nature of fraud."48 Moral damages may, therefore, be
awarded.
Exemplary damages may also be awarded. Under the Civil Code, exemplary damages are due in
the following circumstances:
Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Article 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide
whether or not they should be adjudicated.
Article 2234. While the amount of the exemplary damages need not be proven, the plaintiff must
show that he is entitled to moral, temperate or compensatory damages before the court may
consider the question of whether or not exemplary damages should be awarded.
In Tankeh v. Development Bank of the Philippines,49 we stated that:
The purpose of exemplary damages is to serve as a deterrent to future and subsequent parties
from the commission of a similar offense. The case of People v. Ranteciting People v. Dalisay
held that:
Also known as ‘punitive’ or ‘vindictive’ damages, exemplary or corrective damages are intended
to serve as a deterrent to serious wrong doings, and as a vindication of undue sufferings and
wanton invasion of the rights of an injured or a punishment for those guilty of outrageous
conduct. These terms are generally, but not always, used interchangeably. In common law, there
is preference in the use of exemplary damages when the award is to account for injury to feelings
and for the sense of indignity and humiliation suffered by a person as a result of an injury that
has been maliciously and wantonly inflicted, the theory being that there should be compensation
for the hurt caused by the highly reprehensible conduct of the defendant—associated with such
circumstances as willfulness, wantonness, malice, gross negligence or recklessness, oppression,
insult or fraud or gross fraud—that intensifies the injury. The terms punitive or vindictive damages
are often used to refer to those species of damages that may be awarded against a person to
punish him for his outrageous conduct. In either case, these damages are intended in good
measure to deter the wrongdoer and others like him from similar conduct in the
future.50 (Emphasis supplied; citations omitted)
The requisites for the award of exemplary damages are as follows:
(1) they may be imposed by way of example in addition to compensatory damages, and
only after the claimant's right to them has been established;
(2) that they cannot be recovered as a matter of right, their determination depending
upon the amount of compensatory damages that may be awarded to the claimant; and
(3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive
or malevolent manner.51
Business owners must always be forthright in their dealings. They cannot be allowed to renege
on their obligations, considering that these obligations were freely entered into by them.
Exemplary damages may also be awarded in this case to serve as a deterrent to those who use
fraudulent means to evade their liabilities.
Since the award of exemplary damages is proper, attorney’s fees and cost of the suit may also
be recovered.
Article 2208 of the Civil Code states:
Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
(1) When exemplary damages are awarded[.]

Petitioner Candida A. Santos
is solidarily liable with
petitioner corporation
Petitioners argue that the finding of solidary liability was erroneous since no evidence was
adduced to prove that the transaction was also a personal undertaking of petitioner Santos. We
disagree.
In Heirs of Fe Tan Uy v. International Exchange Bank,52 we stated that:
Basic is the rule in corporation law that a corporation is a juridical entity which is vested with a
legal personality separate and distinct from those acting for and in its behalf and, in general, from
the people comprising it. Following this principle, obligations incurred by the corporation, acting
through its directors, officers and employees, are its sole liabilities. A director, officer or employee
of a corporation is generally not held personally liable for obligations incurred by the corporation.
Nevertheless, this legal fiction may be disregarded if it is used as a means to perpetrate fraud or
an illegal act, or as a vehicle for the evasion of an existing obligation, the circumvention of
statutes, or to confuse legitimate issues.
....
Before a director or officer of a corporation can be held personally liable for corporate obligations,
however, the following requisites must concur: (1) the complainant must allege in the complaint
that the director or officer assented to patently unlawful acts of the corporation, or that the officer
was guilty of gross negligence or bad faith; and (2) the complainant must clearly and convincingly
prove such unlawful acts, negligence or bad faith.
While it is true that the determination of the existence of any of the circumstances that would
warrant the piercing of the veil of corporate fiction is a question of fact which cannot be the
subject of a petition for review on certiorari under Rule 45, this Court can take cognizance of
factual issues if the findings of the lower court are not supported by the evidence on record or are
based on a misapprehension of facts.53 (Emphasis supplied)
As a general rule, directors, officers, or employees of a corporation cannot be held personally

liable for obligations incurred by the corporation. However, this veil of corporate fiction may be
pierced if complainant is able to prove, as in this case, that (1) the officer is guilty of negligence
or bad faith, and (2) such negligence or bad faith was clearly and convincingly proven.
Here, petitioner Santos entered into a contract with respondent in her capacity as the President
and Chief Executive Officer of Arco Pulp and Paper. She also issued the check in partial
payment of petitioner corporation’s obligations to respondent on behalf of petitioner Arco Pulp
and Paper. This is clear on the face of the check bearing the account name, "Arco Pulp & Paper,
Co., Inc."54 Any obligation arising from these acts would not, ordinarily, be petitioner Santos’
personal undertaking for which she would be solidarily liable with petitioner Arco Pulp and Paper.
We find, however, that the corporate veil must be pierced. In Livesey v. Binswanger Philippines:55
Piercing the veil of corporate fiction is an equitable doctrine developed to address situations
where the separate corporate personality of a corporation is abused or used for wrongful
purposes. Under the doctrine, the corporate existence may be disregarded where the entity is
formed or used for non-legitimate purposes, such as to evade a just and due obligation, or to
justify a wrong, to shield or perpetrate fraud or to carry out similar or inequitable considerations,
other unjustifiable aims or intentions, in which case, the fiction will be disregarded and the
individuals composing it and the two corporations will be treated as identical.56 (Emphasis
supplied)
According to the Court of Appeals, petitioner Santos was solidarily liable with petitioner Arco Pulp
and Paper, stating that:
In the present case, We find bad faith on the part of the [petitioners] when they unjustifiably
refused to honor their undertaking in favor of the [respondent]. After the check in the amount of
1,487,766.68 issued by [petitioner] Santos was dishonored for being drawn against a closed
account, [petitioner] corporation denied any privity with [respondent]. These acts prompted the
[respondent] to avail of the remedies provided by law in order to protect his rights.57
We agree with the Court of Appeals. Petitioner Santos cannot be allowed to hide behind the
corporate veil. When petitioner Arco Pulp and Paper’s obligation to respondent became due and
1âw phi 1
demandable, she not only issued an unfunded check but also contracted with a third party in an
effort to shift petitioner Arco Pulp and Paper’s liability. She unjustifiably refused to honor
petitioner corporation’s obligations to respondent. These acts clearly amount to bad faith. In this
instance, the corporate veil may be pierced, and petitioner Santos may be held solidarily liable
with petitioner Arco Pulp and Paper.
The rate of interest due on

the obligation must be
reduced in view of Nacar v.
Gallery Frames58
In view, however, of the promulgation by this court of the decision dated August 13, 2013 in
Nacar v. Gallery Frames,59 the rate of interest due on the obligation must be modified from 12%
per annum to 6% per annum from the time of demand.
Nacar effectively amended the guidelines stated in Eastern Shipping v. Court of Appeals,60 and
we have laid down the following guidelines with regard to the rate of legal interest:
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping
Linesare accordingly modified to embody BSP-MB Circular No. 799, as follows:
quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under
Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable
damages.
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 6% 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.
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1,
2013, shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein.61 (Emphasis supplied; citations omitted.)
According to these guidelines, the interest due on the obligation of ₱7,220,968.31 should now be
at 6% per annum, computed from May 5, 2007, when respondent sent his letter of demand to
petitioners. This interest shall continue to be due from the finality of this decision until its full
satisfaction.
WHEREFORE, the petition is DENIED in part. The decision in CA-G.R. CV No. 95709 is
AFFIRMED.
Petitioners Arco Pulp & Paper Co., Inc. and Candida A. Santos are hereby ordered solidarily to
pay respondent Dan T. Lim the amount of ₱7,220,968.31 with interest of 6% per annum at the
time of demand until finality of judgment and its full satisfaction, with moral damages in the
amount of ₱50,000.00, exemplary damages in the amount of ₱50,000.00, and attorney's fees in
the amount of ₱50,000.00.
SO ORDERED
G.R. No. L-52358 May 30, 1983
INHELDER CORPORATION, petitioner,

vs.
COURT OF APPEALS, DANIEL PANGANIBAN and PAULA RAMIREZ
PANGANIBAN, respondents.
Ozaeta Romulo, De Leon, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Nario de la Cruz for private respondents.
MELENCIO-HERRERA, J:
What commenced the instant proceedings is a case (hereinafter referred to as the DAMAGE
CASE) instituted by private respondents (hereinafter referred to as the PANGANIBANS),
residents of Calapan, Oriental Mindoro, against petitioner (hereinafter referred to as INHELDER),
domiciled in Mandaluyong, Rizal, before the Court of First Instance of Oriental Mindoro
(hereinafter referred to as the MINDORO COURT). The Complaint alleged that INHELDER had
filed a case (hereinafter referred to as the COLLECTION CASE) against the PANGANIBANS
before the Municipal Court of Mandaluyong, Rizal (hereinafter referred to as MANDALUYONG
COURT), which was subsequently dismiss; that the COLLECTION CASE (Civil Case No. 5582),
was clearly unfounded,- and that the PANGANIBANS were entitled, as against INHELDER, to
quantified damages totalling P169,550.00. The prayer in the complaint was:
WHEREFORE, it is most respectfully prayed:
1. That defendant be ordered to pay plaintiffs the amount of FOUR THOUSAND

FIVE HUNDRED FIFTY PESOS (P4,550.00), as actual damages spent by
plaintiffs in Civil Case No. 5582 of the Municipal Court of Mandaluyong, Rizal;
2. That defendant be ordered to pay plaintiffs the amount of FIVE THOUSAND

PESOS (P5,000.00) as attorney's fees in Civil Case No. 5582;
3. That defendant be ordered to pay plaintiffs the amount of FIFTY THOUSAND

PESOS (P50,000.00) as compensatory damages for injury to plaintiffs' business
standing or commercial credit pursuant to Art. 2205, par. 2 of the New Civil Code
in relation to Art. 2201 and 2202 of the same Code;
4. That defendant be ordered to pay plaintiffs the amount of FIFTY THOUSAND

PESOS (P50,000.00) as moral and/or compensatory damages due to the
nervous breakdown suffered by plaintiff Dra. Paula R. Panganiban, Pursuant to
Arts. 2201, 2202 and 2217 of the New Civil Code;
5. That defendant be ordered to pay plaintiff the amount of FIFTY THOUSAND

PESOS (P50,000.00) as moral damages suffered by plaintiffs due to the mental
anguish, social humiliation besmirched reputation and similar injury;
6. That defendant -e ordered to pay plaintiffs the amount of TEN THOUSAND

PESOS (P10,000.00) as attorney's fees in pro. securing this claim;
7. That defendant be ordered to pay plaintiffs any amount that may be

determined by this Honorable Court as exempt or corrective damages pursuant
to Art. 2229 of the New Civil Code;
8. And for such other relief as may be deemed just and equitable in the premises.
As will be seen, the complaint of the PANGANIBANS was essentially for actual and
compensatory damages, moral damages and exemplary damages, based on the alleged clearly
unfounded COLLECTION CASE.
After declaring INHELDER in default in the DAMAGE CASE, the MINDORO COURT rendered
judgment in favor of the PANGANIBANS as follows:
WHEREFORE, judgment is hereby ed in favor of the plaintiffs and against the

defendant Inhelder Corporation, as follows:
1. Ordering defendant to pay plaintiffs the sum of P4,550.00 as actual damages

spent by plaintiffs in Civil Case No. 5682 of the Municipal Court of Mandaluyong,
Rizal as well as the sum of P3,000.00 as attorney's fees in said Civil Case No.
5682;
2. Ordering defendant to pay plaintiffs the sum of P50,000.00 as compensatory

damages for injury to plaintiffs business standing,
3. Ordering defendant to pay plaintiff the sum of P50,000.00 as compensatory

damages due to the nervous breakdown suffered by plaintiff Paula R.
Panganiban and the additional amount of P50,000.00 for moral damages
plaintiffs sustained due to mental anguish, social humiliation, besmirched
reputation and other injuries;
4. Ordering defendant to pay plaintiffs the sum of P50,000.00 as exemplary

damages;
5. Ordering defendant to pay plaintiffs the sum of P5,000.00 in the form of

attorney's fees. With costs against defendant corporation.
It will be noted that the P5,000.00 claim for attorney's fees corresponding to the COLLECTION
CASE was reduced from P5,000.00 to P3,000.00, and attorney's fees corresponding to the
DAMAGE CASE was reduced from P10,000.00 to P5,000.00. But the prayed for P50,000.00 "as
moral and/or compensatory damages due to the nervous break-down suffered by plaintiff Dra.
Paula R. Panganiban" was increased to P100,000.00, that is, P50,000.00 compensatory and
P50,000.00 moral. Thus, the total damages granted to the PANGANIBANS by the MINDORO
COURT amounted to P169,550.00 minus P7,000.00 plus P50,000.00, or P212,550.00.
On appeal by INHELDER, the Appellate Court * reduced the total damages awarded to the PANGANIBANS from
P212,650.00 to P41,550.00 by modifying the judgment of the MINDORO COURT as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against

the defendant Inhelder Corporation as follows:
1. Ordering defendant to pay plaintiffs the sum of P4,550.00 as actual damages

spent by plaintiffs in Civil Case No. 5582 of the Municipal Court of Mandaluyong,
Rizal as well as the sum of P2,000.00 as attorney's fees in Civil Case No. 5582;

damages for injury to plaintiffs' business standing,
damages due to the nervous breakdown suffered by plaintiff Paula R.
Panganiban;
4. Ordering defendant to pay plaintiffs the sum of P 10,000.00 as exemplary

damages;
5. Ordering defendant to pay plaintiffs the sum of P5,000.00 in the form of

attorney's fees for the prosecution of this case.
The background facts and circumstances of the COLLECTION CASE can be stated as follows:
1. (a) INHELDER is engaged in the manufacture and sale of medicines and drug. Its principal
office is at No. 41 Pioneer Street, Mandaluyong, Rizal (now Metro Manila).
(b) McGaw Baxter Laboratories, Inc. appears to be another Company also having its principal
office at No. 41 Pioneer Street.
(c) INHELDER's lawyer, both in the COLLECTION CASE and in the DAMAGE CASE is Atty.
Maximo M. Fajardo, Jr. He appears to have offices both at INHELDER (Annex "C", Petition for
Review) and at McGaw Baxter Laboratories, Inc. 1
2. The PANGANIBANS, physicians, are the owners of the DOCTOR's CLINIC in Calapan.
3. On December 29, 1972, DOCTOR's CLINIC purchased medicines and drugs from INHELDER
in the amount of P1,385.10, payable in installments. The PANGANIBANS were able to pay the
amount of P824.10 for that purchase, leaving a balance of P561.00 which had remained unpaid
for approximately two years.
4. On December 2, 1974, Atty. Fajardo sent a letter to the PANGANIBANS requesting settlement
of the said amount of P561.00. In their reply, the PANGANIBANS requested a statement of
account which was sent to them on January 17, 1975 with a follow-up letter, again, requesting
remittance of the outstanding balance of P561.00.
5. (a) On January 28, 1975, the PANGANIBANS, as stated by them, "sent PNB Check No.
32058 to (INHELDER) in the amount of P561.00, dated January 28, 1975, and said check was
received by (INHELDER) on or before February 5. 1975". 2
(b) The check must have been sent by mail If it was personally delivered, the PANGANIBANS
would know the specific date when the check was received, which then would not be "on or
before February 5, 1975."
(c) It can be presumed that the PNB Check was drawn on the PNB Branch in Calapan.
6. On February 8, 1975, Atty. Fajardo prepared the complaint in the COLLECTION CASE, which
was filed with the MANDALUYONG COURT on February 12, 1975.
7. (a) On February 19, 1975, INHELDER sent a letter to the PANGANIBANS "acknowledging the
receipt of the PNB Check No. 32058 in the amount of P561.00 representing full payment of the
('PANGANIBANS') account with INHELDER". 3
(b) For the payment made by the PANGANIBANS to be effective, the PNB Check must first be
cleared with the PNB Branch in Calapan, which could have been completed only on February 19,
1975.
8. The records do not disclose the written Answer to the complaint in the COLLECTION CASE.
In regards to the hearing thereof on May 14, 1975, the PANGANIBANS have alleged:
22. That during the hearing of the instant case before the Municipal Court of
Mandaluyong, undersigned counsel showed to the Court plaintiffs' receipts to the
effect that several days before the malicious and unfounded complaint was filed
before said Court Dr. and Mm Panganiban had already paid their accounts and
as a matter of fact the Inhelder Corporation has acknowledged receipt of
payment, thus, upon motion of the undersigned counsel, Civil Case No. 5582 was
dismissed without the objection of Atty. Maximo M. Fajardo, Jr., counsel for the
Inhelder Corporation;
23. That the ORDER of dismissal by the Municipal Judge of Mandaluyoug, Rizal
dated May 14, 1975, was given in open court and the written order was nut to the
undersigned counsel later at Calapan, Oriental Mindoro thru the mails, hence, it
is very clear that mill ORDER of with the conformity of defendant Inhelder
Corporation, has already become final; insofar as plaintiffs and defendant are
concerned; 4
On the above facts and circumstances, it should be difficult to conclude that the COLLECTION
CASE was a clearly unfounded civil action. It is not clear that the account of the PANGANIBANS
had already been paid as of February 12, 1975. Under Article 1249 of the Civil Code, payment
should be held effective only when PNB Check No. 32058 was actually cashed by, or credited to
the account of, INHELDER. If that did not eventuate on or before February 12, 1975, and there is
no proof that it did, the account would still be unpaid, and the complaint in the COLLECTION
CASE, technically, could not be considered as substantially unfounded.
It is true that when the check of the PANGANIBANS was received on February 5, 1975, the
better procedure would have been to withhold a complaint pending determination of whether or
not the check was good. If dishonored, that would be the time to file the complaint. That
procedure was not followed because of the failure of the corresponding advice which could have
been given to Atty. Fajardo by the INHELDER Credit and Collection Manager. But the lack of that
advice should not justify qualifying the COLLECTION CASE as clearly unfounded. If the check
had bounced, the COLLECTION CASE would have been tried and acted upon by the
MANDALUYONG COURT on the merits.
Neither may it be said that the COLLECTION CASE was malicious. Malicious prosecution, to be
the basis of a suit, requires the elements of malice and want of probable cause. 5 There must be
proof that the prosecution was prompted by a sinister design to vex and humiliate a person, and
that it was initiated deliberately knowing that the charge was false and groundless. 6
In the present case, there is no evidence on record, clearly establishing these two elements.
Although there may be want of probable cause, there is no proof that petitioner deliberately
initiated the COLLECTION CASE knowing that the same was false and groundless.
And the rule is the same for criminal prosecution and civil suits.
To support an action for malicious prosecution under American law the plaintiff
must prove, in the first place, the fact of the p petition and the fact that the
defendant was himself the prosecutor, or that he instigated its commencement,
and that it finally terminated in his acquittal that, in bringing it, the prosecutor had
acted without probable cause, and that he was actuated by legal malice, i.e., by
improper or sinister motives. These three elements must concur; and there is no
distinction between actions for criminal prosecutions and civil suits. Both classes
require substantially the same essentials. Malice is essential to the maintenance
of an action for malicious prosecution and not merely to the recovery of
exemplary damages. But malice alone does not make one liable for malicious
prosecution where probable cause is shown, even where it appears that the suit
was brought, for the mere purpose of vexing harrassing and injuring his
adversary. In other words, malice and want of probable cause must both exist in
order to justify the action. (Buchanan vs. Vda. de Esteban 32 Phil.
363). 7 (Emphasis ours)
Nor can malice be inferred from want of probable cause.
It would be a harsh rule to hold that, where the evidence was merely sufficient to
make a prima facie showing of want of probable cause. malice must necessarily
be inferred thererom. 8
It should also be stressed that the mere filing of a suit does 'not render a person liable for
malicious prosecution should he be unsuccessful. The law could not have meant to impose a
penalty on the right to litigate. 9 Sound principles of justice and public policy demand that persons
shall have free resort to Courts of law for redress of wrongs and vindication of their rights without
fear of later on standing trial for damages should their actions lose ground. 10 As expressed by
Chief Justice Enrique M. Fernando from a broader perspective:
... Well-worth paraphrasing is the thought expressed in a United States Supreme

Court decision as to the existence of an abiding and fundamental principle that
the expenses and annoyance of litigation form part of the social burden of living
in a society which seeks to attain social control through law. 11
At this juncture, it may not be amiss to remind Trial Courts to guard against the award of
exhorbitant damages that are way out of proportion to the environmental circumstances of a case
and which, time and again, this Court has reduced or eliminated. Judicial discretion granted to
the Courts in the assessment of damages must always be ex with balanced restraint and
measured objectivity.
WHEREFORE, the appealed judgment of the erstwhile Court of Appeals is hereby reversed, and
the decision of the Court of First Instance of Oriental Mindoro in its Civil Case No. R-2525 is set
aside.
No costs.
SO ORDERED

Civil Liability of Parents for Crimes of Their Children

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Civil Liability of Parents for Crimes of Their Children

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[G.R. No. 70890. September 18, 1992.

Alex Y. Tan, for Petitioners.

Mario D. Ortiz and Danilo V. Ortiz for Private Respondents.

2. Exemplary damages, P10,000.00;

3. Attorney’s fees, P20,000.00, and costs.

However, denial of defendants-appellees’ counterclaims is affirmed." 1

ATTY. ORTIZ: chanrob1es v irt ual 1aw l ibra ry

WITNESS: chanrob1e s virtual 1aw l ibra ry

A Actually, sir, the 24 inches is approximately one arm’s length.

ATTY. SENINING: chanrob1es vi rtua l 1aw li bra ry

"ATTY. ORTIZ: (TO WITNESS).

WITNESS: chanrob1e s virtual 1aw l ibra ry

ATTY. ORTIZ: (TO WITNESS)

Q And where were you looking from?

WITNESS: chanrob1e s virtual 1aw l ibra ry

A From upstairs in my living room.

Q From Your living room window, is that correct?

WITNESS: chanrob1e s virtual 1aw l ibra ry

A Yes, but not very clear because the wall is high." 14

"ARTICLE 101. Rules regarding civil liability in certain cases. —

MACARIO TAMARGO, CELSO TAMARGO and AURELIA TAMARGO, petitioners,

Dismissal of appeal; purely on technical grounds is frowned upon where the

Whoever by act or omission causes damage to another, there being fault or

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This principle of parental liability is a species of what is frequently designated as vicarious

With respect to extra-contractual obligation arising from negligence, whether of

Art. 39. Effect of Adoption. — The adoption shall:

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CASTILEX INDUSTRIAL CORPORATION, petitioner,

DAVIDE, JR., C.J.:

The antecedents, as succinctly summarized by the Court of Appeals, are as follows:

On 28 August 1988, at around 1:30 to 2:00 in the morning, Romeo So Vasquez,

CASTILEX and ABAD separately appealed the decision.

Private respondent's contention of petitioner's violation of Section 11 of Rule 13 and Section 4 of

Sec. 11 of Rule 13 provides:

Now on the merits of the case.

I. Operation of Employer's Motor Vehicle in Going to

II. Operation of Employer's Vehicle in Going to

III. Use of Employer's Vehicle Outside Regular Working Hours

ST. FRANCIS HIGH SCHOOL, as represented by SPS. FERNANDO NANTES AND

Jose C. Flores, Jr. for petitioners.

SO ORDERED. (p. 60, Rollo)

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Both petitioners and respondents appealed to the Court of Appeals. Respondents-spouses

The Court of Appeals ruled:

We find plaintiffs-appellants' submission well-taken.

As to the third assigned error interposed by plaintiffs-appellants, while We cannot but

However, We believe that exemplary or corrective damages in the amount of P20,000.00

On this score, respondent Court ruled:

However, We sustain defendants-appellants insofar as two of the defendants-teachers,

As to the second assigned error raised by defendants-appellants, We agree with the

Hence, this petition.

The issues presented by petitioners are:

The petition is impressed with merit.

Testimony of Dr. Castillo on cross exam. by Atty. Flores

A No, sir, I did not know.

Q You did not ask your wife?

A I did not, sir.

(TSN, pp. 16-17, hearing of April 2, 1984 witness Romulo Castillo)

Testimony of Dr. Lazaro on cross examination:

Q How did you conduct this mental and physical examination?

Article 2180, par. 4 states that: