G.R. No.

117103 January 21, 1999

Spouses RENATO S. ONG and FRANCIA N. ONG, petitioners,
vs.
COURT OF APPEALS, INLAND RAILWAYS, INC. and PHILTRANCO SERVICE ENTERPRISE,
INC., respondents.

PANGANIBAN, J.:
Evidence not formally offered during the trial cannot be used for or against a party litigant. Neither may it be
taken into account on appeal. Furthermore, actual and moral damages must be proven before any award
thereon can be granted.
The Case
Before us is a Petition for Review on Certiorari of the Decision dated May 20, 1993 and the Resolution dated
June 8, 1994, both promulgated by the Court of Appeals 1 in CA-GR CV No. 33755, modifying the Decision of the
trial court in an action for damages filed by spouses Renato and Francia Ong (petitioners herein) against Philtranco
Service Enterprise, Inc. and Inland Trailways, Inc. (respondents herein, hereafter referred to as "Philtranco" and "Inland,"
respectively).

The assailed Decision disposed as follows: 2

WHEREFORE, the appealed decision is hereby MODIFIED by ordering INLAND TRAILWAYS,
INC. to pay [petitioners] P3,977.00 for actual damages, P30,000.00 as moral damages and ten
(10) percent as contingent attorney's fees and to pay the costs of the suit.
Reconsideration was denied in the assailed Resolution: 3
WHEREFORE, IN VIEW OF THE FOREGOING, both motions for reconsideration filed by
[petitioners] and . . . Inland Trailways, Inc. are hereby DENIED.
The Facts
On February 9, 1987, petitioners boarded as paying passengers Bus-No. 101 with late No. EVB-508 ("Inland
bus," for convenience), which was owned and operated by Inland Trailways under a Lease Agreement with
Philtranco. It was driven by Calvin Coronel. 4 Around 3:50 in the morning of said date, when the Inland bus slowed
down to avoid a stalled cargo truck in Tiaong, Quezon, it was bumped from the rear by another bus, owned and operated
by Philtranco and driven by Apolinar Miralles. Francia sustained wounds and fractures in both of her legs and her right
arm, while Renato suffered injuries on his left chest, right knee, right arm and left eye. 5 They were brought to the San
Pablo City District Hospital for treatment and were confined there from February 9 to 18, 1987. 6

On December 22, 1988, petitioners filed an action for damages against Philtranco and Inland. 7 In their
Complaint, they alleged that they suffered injuries, preventing Francia from operating a sari-sari store at Las Pia's, Metro
Manila, where she derived a daily income of P200; and Renato from continuing his work as an overseas contract worker
(pipe welder) with a monthly salary of $690. Stating that they incurred P10,000 as medical and miscellaneous expenses,
they also claimed moral damages of P500,000 each, exemplary and corrective damages of P500,000 each, and
compensatory damages of P500,000 each plus 35 percent thereof as attorney's fees. In addition to their testimonies,
petitioners also presented the following documentary evidence:

Exhibit A Philtranco Bus Ticket No. 333398

B Philtranco Bus Ticket No. 333399
C Certification dated February 12, 1987
D Medical Certificate of Francis Ong dated February 18, 1987
E Medical Certificate of Renato S. Ong dated February 18, 1987
F Statement of Account of Francia N. Ong in the amount of P1,153.50
G Statement of Account of Renato S. Ong in the amount of P1,973.50
H Receipt dated February 9, 1987
I Receipt dated March 3, 1987
J Receipt dated February 18, 1987
K Receipt dated February 24, 1987
L & - L-1 Picture of face of Renato S. Ong
M & M-1 Picture of face of Renato S. Ong
N Payroll Summary for [period ending] November 1986
O Payroll Summary for [period ending] December, 1986
Philtranco answered that the Inland bus with Plate No. EVB-508 (which had transported petitioners) was
registered and owned by Inland; that its driver, Calvin Coronel, was an employee of Inland; that Philtranco was
merely leasing its support facilities, including the use of its bus tickets, to Inland; and that under their
Agreement, Inland would be solely liable for all claims and liabilities arising from the operation of said bus.
Philtranco further alleged that, with respect to its own bus (which bumped the Inland bus), it exercised the
diligence of a good father of a family in the selection and supervision of its drivers, and that the proximate
cause of the accident was the negligence of either the cargo truck or the Inland bus which collided with said
cargo truck.
Inland answered that, according to the Police Report, it was Apolinar Miralles, the driver of the Philtranco bus,
who was at fault, as shown by his flight from the situs of the accident; that said bus was registered and owned
by Philtranco; and that the driver of the Inland bus exercised extraordinary diligence as testified to by its
passengers. Inland and Philtranco filed cross-claims against each other.
Both respondents moved to submit the case for decision without presenting further evidence. Consequently,
the trial court, in its Order dated July 5, 1989, resolved: 8
When this case was called for continuation of presentation of plaintiffs evidence, over objections
from counsels for defendants, plaintiffs counsel was allowed to recall his first witness, Renato S.
Ong, for some additional direct questions[;] and after cross-examination by defendant Inland

Trailways, Inc., adopted by defendant Philtranco Service Enterprise, Inc., plaintiff presented his
second witness, [Francia] Ong, whose testimony on direct, cross and redirect was terminated[;]
and as prayed for, counsel for the plaintiffs shall have five (5) days from today within which to
submit his formal offer of evidence, furnishing copies thereof to defendants who shall have five
(5) days from their receipt within which to submit comments after which the same shall be
deemed submitted for resolution.
By agreement, considering the stipulations of parties made of record regarding factual issues
except as to whether or not the bus is included in the lease, counsels for the two (2) defendants
are given a period of ten (10) days from today within which to submit simultaneous offer[s] of
admission and denials not only on the above exception but on any other relevant matter.
Considering that the documents are admitted, there is no necessity of any formal written offer of
evidence and, therefore, after all the foregoing, the case shall be deemed submitted for decision
upon simultaneous memoranda of the parties and upon submission of complete transcripts.
Thereafter, the trial court rendered its May 7, 1991 Decision, which disposed as follows: 9
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of the [petitioners]
absolving Inland Trailways, Inc., from any liability whatsoever, and against . . . Philtranco
Service Enterprise, Inc., ordering the latter to pay the [petitioners]
1) P10,000.00 as actual damages for medical and miscellaneous expenses;
2) P50,000.00 as compensatory damages for the [diminution] of the use of the right arm of
[petitioner]-wife;
3) P48,000.00 as unrealized profit or income;
4) P50,000.00 as moral damages;
5) 25% of the foregoing as contingent attorney's fees; and
6) the costs.
According to the trial court, the proximate cause of the accident was "the bumping from behind by the
Philtranco bus with Plate No. 259 driven by Apolinar Miralles" based on the Police Report and the affidavits of
passengers, to which Philtranco did not object. As it failed to prove that it exercised due diligence in the
selection and supervision of its employees under Article 2176 of the Civil Code, Philtranco was held liable
based on culpa aquiliana.
Ruling of the Court of Appeals
On appeal, the Court of Appeals (CA) resolved that Philtranco's liability for damages could not be predicated
upon the Police Report which had not been formally offered in evidence. The report was merely annexed to the
answer of Inland, and petitioner did not adopt or offer it as evidence. Consequently, it had no probative value
and, thus, Philtranco should be absolved from liability.
Instead, the appellate court found that petitioners sufficiently established a claim against Inland based on culpa
contractual. As a common carrier, Inland was required to observe extra ordinary diligence under Articles 1735

and 1750 of the Code. Its liability arose from its failure to transport its passengers and cargo safely, and a
finding of fault or negligence was not necessary to hold it liable for damages. Inland failed to overcome this
presumption of negligence by contrary evidence; thus, it was liable for breach of its contractual obligation to
petitioners under Article 2201 of the Civil Code.
The liability of Inland for medical and miscellaneous expenses was reduced, as the evidence on record
showed that petitioners spent only P3,977. Deemed self-serving was Francia's testimony that the use of her
right arm was diminished and that she lost income. Thus, the award for unearned income was disallowed and
the amount of moral damages was reduced to P30,000.
Hence, this petition. 10
The Issues
In their Memorandum, 11 petitioners raise the following issues: 12
[I] Whether or not public respondent committed grave abuse of discretion in
completely reversing the decision of the Regional Trial Court, ordering Philtranco
to indemnify petitioners and in lieu thereof, order[ing] Inland to pay petitioners for
their damages.
[II] Whether or not public respondent committed grave abuse of discretion in
disallowing the P50,000.00 awarded to petitioner, Francia Ong for the diminution
of the use of her right arm and the P48,000.00 representing unrealized income.
[III] Whether or not public respondent committed grave abuse of discretion in
reducing the award for actual and miscellaneous expenses from P10,000.00 to
P3,977.00; the award of P50,000.00 moral damages to P30,000.00; and the 25%
contingent attorney's fees to10% thereof.
Simply stated, the main issues raised are: (1) whether the Police Report, which was not formally offered in
evidence, could be used to establish a claim against Philtranco based on culpa aquiliana; and (2) whether the
reduction in the amounts of damages awarded was proper.
The Court's Ruling
The petition is devoid of merit.
First Issue:
Retirement of Formal Offer of Evidence
Petitioners take exception to the rule requiring documents to be formally offered in evidence before they can be
given any probative value, arguing that the parties agreed to submit the case for resolution based on the July
5, 1989 Order of the trial court. Because of the agreement, petitioners assumed that all the pieces of
documentary evidence, including the Complaint and its Annexes, as well as those in the respective Answers of
the private respondents, were deemed admitted.
We disagree. Section 34, Rule 132 of the Rules of Court, provides that "[t]he court shall consider no evidence
which has not been formally offered." A formal offer is necessary, since judges are required to base their

findings of fact and their judgment solely and strictly upon the evidence offered by the parties at the trial. To
allow parties to attach any document to their pleadings and then expect the court to consider it as evidence,
even without formal offer and admission, may draw unwarranted consequences. Opposing parties will be
deprived of their chance to examine the document and to object to its admissibility. On the other hand, the
appellate court will have difficulty reviewing documents not previously scrutinized the court below. 13
In adhering to this rule, the appellate court cannot be faulted with reversible error, as it held: 14
. . . [T]he burden of proof lies with the plaintiff in establishing fault or negligence on the part of
the defendant (Ong vs. Metropolitan Water). This, however, plaintiff-appellees failed to establish.
Albeit, there was a police investigation report finding the driver of PHILTRANCO negligent which
became the basis of the court a qou [for] holding PHILTRANCO liable, this piece of evidence
was merely attached as Annex "1" of INLAND's answer, nothing more. It was not presented and
even offered as evidence by INLAND nor utilized by plaintiffs-appellees. Thus, even assuming
arguendo that the same had been identified in court, it would have no evidentiary value.
Identification of documentary evidence must be distinguished from its formal offer as an exhibit.
The first is done in the course of the trial and is accompanied by the marking of the evidence as
an exhibit. The second is done only when the party rests its case and not before. The mere fact
that a particular document is identified and marked as an exhibit does not mean it will be or has
been offered as part of the evidence of the party. The party may decide to offer it if it believes
this will advance the cause, and then again it may decide not to do so at all (People vs. Santito,
Jr., 201 SCRA 87).
In the case at bar, the defendant INLAND and plaintiffs-appellees did not identify the said Annex
"1" or the Police Investigation Report as evidence. Thus, under Section 35 of Rule 132 of the
Revised Rules on Evidence, the court shall consider no evidence which has not been formally
offered. Corollary, the Police Investigation Report of Annex "1" cannot be given any evidentiary
value.
Absen[t] Annex "1" which was the basis of the trial court in finding PHILTRANCO liable, the
latter is thus exonerated from liability.
Petitioners similarly erred in presuming that said Annex was admitted in evidence by virtue of the Order of July
5, 1989. Their presumption has no basis. The Order required counsel for the petitioners to "submit his formal
offer of evidence, furnishing copies thereof to defendants who shall have five (5) days from their receipt within
which to submit comments after which the same shall be deemed submitted for resolution." 15 In compliance,
petitioners filed a written offer of evidence on July 12, 1989. 16 Such offer led the trial court, in its Order of August 2, 1989,
to formally admit in evidence Exhibits "A"-"O." 17 Clearly, the Police Report was neither offered by the petitioners nor
admitted by the trial court.

Moreover, the petitioners' allegations in their Complaint did not establish a cause of action against Philtranco.
They similarly failed to make any reference to said Police Report during the presentation of their case. This is
precisely why Respondent Philtranco opted not to present further evidence. A document or an article is
valueless unless it is formally offered in evidence, and the opposing counsel is given an opportunity to object to
it and to cross-examine any witness called to present or identify it. 18 Evidence not formally offered before the trial
court cannot be considered on appeal, for to consider them at such stage will deny the other parties their right to rebut
them. 19

There is no agreement to submit the case based on the pleading, as contended by the petitioners. The parties
had no such intention, nor did said Order evince such an agreement.

Second Issue:
Damages Require Evidence
Petitioners aver that there was grave abuse of discretion when the amount of actual damages awarded was
reduced from P10,000 to P3,977, even if the original amount did not even include the medical expenses that
Francia continued to incur; and when the award of P48,000 as unrealized income was deleted despite her
testimony which was given credence by the trial court.
The Court disagrees. Granting arguendo that there was an agreement to submit the case for decision based
on the pleadings, this does not necessarily imply that petitioners are entitled to the award of damages. The
fundamental principle of the law on damages is that one injured by a breach of contract (in this case, the
contract of transportation) or by a wrongful or negligent act or omission shall have a fair and just
compensation, commensurate with the loss sustained as a consequence of the defendant's acts. Hence,
actual pecuniary compensation is the general rule, except where the circumstances warrant the allowance of
other kinds of damages.
Actual damages are such compensation or damages for an injury that will put the injured party in the position in
which he had been before he was injured. They pertain to such injuries or losses that are actually sustained
and susceptible of measurement. Except as provided by law or by stipulation, a party is entitled to adequate
compensation only for such pecuniary loss as he has duly proven.
To be recoverable, actual damages must be pleaded and proven in Court. In no instance may the trial judge
award more than those so pleaded and proven. Damages cannot be presumed. The award there of must be
based on the evidence presented, not on the personal knowledge of the court; and certainly not on flimsy,
remote, speculative and nonsubstantial proof. Article 2199 of the Civil Code expressly mandates that "[e]xcept
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."
The lack of basis for such award was patent in the trial court Decision:
The records will show that from the documentary evidence, [petitioners] have jointly spent the
sum of P3,977.00. [Respondent] Philtranco has not presented any evidence that it has
advanced any amount for medicine, hospitalization and doctor's fees, but on the contrary,
[petitioners] have testified that they paid for their expenses except at the initial stage wherein a
representative of [respondent] Philtranco went to the hospital to get the receipts of medicines
only and paid (t.s.n. June 29, 1989, p. 6). Considering the claim of the [petitioners], as
alleged in their complaint they spent P10,000.00 representing medical and miscellaneous
expenses[;] considering that they have gone for consultation to at least two (2) different doctors,
this Court may take judicial notice of the fact that miscellaneous expenses [are] bound to be
incurred to cover transportation and food, and therefore, finds the amount of P10,000.00 as
actual damages to be reasonable.
Damages, after all, are not intended to enrich the complainant at the expense of the defendant. 20
Moral Damages and Diminution
of Use of Francia's Arm

Petitioners protest the deletion of the amount of P50,000 earlier awarded by the trial court because of the
diminution of the use of Francia's right arm, arguing that she stated during direct examination that it could no
longer perform its normal functions, 21 and that private respondents impliedly admitted this matter when they failed to
present controverting evidence.

A person is entitled to the physical integrity of his or her body, and if that integrity is violated, damages are due
and assessable. However, physical injury, like loss or diminution of use of an arm or a limb, is not a pecuniary
loss. Indeed, it is nor susceptible of exact monetary estimation.
Thus, the usual practice is to award moral damages for physical injuries sustained. In Mayo v. People, 22 the
Court held that the permanent scar on the forehead and the loss of the use of the right eye entitled the victim to moral
damages. The victim, in said case, devastated by mental anguish, wounded feelings and shock, which she experienced
as a result of her false eye and the scar on her forehead. Furthermore, the loss of vision in her right eye hampered her
professionally for the rest of her life.

In the case at bar, it was sufficiently shown during the trial that Francia's right arm could not function in a
normal manner and that, as a result, she suffered mental anguish and anxiety. Thus, an increase in the amount
of moral damages awarded, from P30,000 to P50,000, appears to be reasonable and justified. Renato also
suffered mental anxiety and anguish from the accident. Thus, he should be separately awarded P30,000 as
moral damages.
In some instances, the Court awards the cost of medical procedures to restore the injured person to his or her
former condition. However, this award necessitates expert testimony on the cost of possible restorative medical
procedure. In Gatchalian v. Delim, 23 the Court, reasoning that a scar resulting from the infliction of injury on the face of
a woman gave rise to a legitimate claim for restoration to her conditio ante, granted P15,000 as actual damages for plastic
surgery. It bears emphasis that the said amount was based on expert testimony. 24

In another case, the Court granted actual or compensatory damages in the sum of P18,000 for the surgical
intervention necessary to arrest the degeneration of the mandible of a young boy. Again, there was an expert
testimony that such medical procedure would cost P3,000 and would have to be repeated several times to
restore him to nearly normal condition. 25
In the case at bar, petitioner failed to present evidence regarding the feasibility or practicability and the cost of
a restorative medical operation on her arm. Thus, there is no basis to grant her P48,000 for such expense.
Unrealized Income
Protesting the deletion of the award for Francia's unrealized income, petitioners contend that Francia's injuries
and her oral testimony adequately support their claim. The Court disagrees. Although actual damages include
indemnification for profits which the injured party failed to obtain (lucro cesante or lucrum cesans), 26 the rule
requires that said person produce the "best evidence of which his case is susceptible.

27

The bare and unsubstantiated assertion of Francia that she usually earned P200 a day from her market stall is
not the best evidence to prove her claim of unrealized income for the eight-month period that her arm was in
plaster cast. Her testimony that was their lessor who filed their income tax returns and obtained business
licenses for them does not justify her failure to present more credible evidence of her income. Furthermore,
after her ten-day confinement at the San Pablo Hospital, 28 she could have returned so her work at the public market
despite the plaster cast on her right arm, since she claimed to have two nieces as helpers. 29 Clearly, the appellate court
was correct in deleting the award for unrealized income, because of petitioner's utter failure to substantiate her claim.

Attorney's Fees

Counsel for petitioner deeply laments the reduction in the award of attorney's fees. He alleges that he had to
use his own money for transportation, stenographic transcriptions and other court expenses, and for such
reason, avers that the award of 25 percent attorney's fees made by the trial court was proper.
Under the Civil Code, an award of attorney's fees is an indemnity for damages ordered by a court to be paid by
the losing party to the prevailing party, based on any of the cases authorized by law. 30 It is payable not to the
lawyer but to the client, unless the two have agreed that the award shall pertain to the lawyer as additional compensation
or as part thereof. The Court has established a set standards in fixing the amount of attorney's fees: 31

(1) [T]he amount and character of the services rendered; (2) labor, time and trouble involved; (3)
the nature and importance of the litigation or business in which the services were rendered; (4)
the responsibility imposed; (5) the amount of money or the value of the property affected by the
controversy or involved in the employment; (6) the skill and experience called for in the
performance of the services; (7) the professional character and social standing of the attorney;
(8) the results secured, it being a recognized rule that an attorney may properly charge a much
larger fee when it is contingent than when it is not.
Counsel's performance, however, does not justify the award of 25 percent attorney's fees. It is well-settled that
such award is addressed to sound judicial discretion and subject to judicial control. 32
We do not see any abuse thereof in the case at bar. In fact, the appellate court had been generous to
petitioners' counsel, considering that the nature of the case was not exceptionally difficult, and he was not
required to exert Herculean efforts. All told, his handling of the case was sorely, inadequate, as shown by his
failure to follow elementary norms of civil procedure and evidence.
WHEREFORE, the assailed Decision is AFFIRMED with the MODIFICATION that Renato and Francia Ong are
separately awarded moral damages in the amount of P30,000 and P50,000, respectively. The ten percent
(10%) attorney's fees shall be based on the total modified award.
1wphi1.nt

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 damages 4 as well as hearsay 5 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 thePetroparcel. 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 (baeras) 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 XVsustained a hole at its left side that caused it to sink with its cargo of
1,050 baerasvalued 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 baera (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 (dao 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 profitearning 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 baeras 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." 40 The 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, keelcooled, 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.
Very truly
yours,
POWER
SYSTEMS,
INC.
(Sgd.)
E. D. Daclan
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.

No pronouncement as to costs.
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
1734 1 of the Civil Code, are exclusive, not one of which can be applied to this case.
The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the
goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port
Services (182 SCRA 455), we have explained, in holding the carrier and the arrastre operator liable
in solidum,thus:
The legal relationship between the consignee and the arrastre operator is akin to that of a
depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The
relationship between the consignee and the common carrier is similar to that of the consignee
and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]).
Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and
to deliver them in good condition to the consignee, such responsibility also devolves upon the
CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to
deliver the goods in good condition to the consignee.
We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker
are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in
a given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping Lines,
which, being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held
liable in this particular case. A factual finding of both the court a quo and the appellate court, we take note, is
that "there is sufficient evidence that the shipment sustained damage while in the successive possession of
appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines,
Inc., the sole petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing
remark.
Let us first see a chronological recitation of the major rulings of this Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries and pilferage of
goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its complaint that the total
amount of its claim for the value of the undelivered goods amounted to P3,947.20. This demand, however, was neither
established in its totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in lieu of
proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment ordering the appellants (defendants)

Manila Port Service and Manila Railroad Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal
interest thereon from the date the complaint was filed on 28 December 1962 until full payment thereof. The appellants
then assailed, inter alia, the award of legal interest. In sustaining the appellants, this Court ruled:

Interest upon an obligation which calls for the payment of money, absent a stipulation, is the
legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial.
The trial court opted for judicial demand as the starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered
upon unliquidated claims or damages, except when the demand can be established with
reasonable certainty." And as was held by this Court in Rivera vs. Perez, 4 L-6998, February 29,
1956, if the suit were for damages, "unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco
v. Guzman,
38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis supplied)

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

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants
and against the defendants and third party plaintiffs as follows:
Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and
severally the following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the
value of the boat F B Pacita III together with its accessories, fishing gear and equipment minus
P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a
month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up
to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972
with legal interest from the filing of the complaint until paid and to pay attorney's fees of
P5,000.00 with costs against defendants and third party plaintiffs. (Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the amount of damages awarded but sustained
the trial court in adjudging legal interest from the filing of the complaint until fully paid. When the
appellate court's decision became final, the case was remanded to the lower court for execution, and
this was when the trial court issued its assailed resolution which applied the 6% interest per
annum prescribed in Article 2209 of the Civil Code. In their petition for review on certiorari, the
petitioners contended that Central Bank Circular
No. 416, providing thus
By virtue of the authority granted to it under Section 1 of Act 2655, as amended, Monetary
Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for
the loan, or forbearance of any money, goods, or credits and the rate allowed in judgments, in
the absence of express contract as to such rate of interest, shall be twelve (12%) percent per
annum. This Circular shall take effect immediately. (Emphasis found in the text)
should have, instead, been applied. This Court 6 ruled:

The judgments spoken of and referred to are judgments in litigations involving loans or
forbearance of any money, goods or credits. Any other kind of monetary judgment which has
nothing to do with, nor involving loans or forbearance of any money, goods or credits does not
fall within the coverage of the said law for it is not within the ambit of the authority granted to the
Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to be executed is one rendered in an
Action for Damages for injury to persons and loss of property and does not involve any loan,
much less forbearances of any money, goods or credits. As correctly argued by the private
respondents, the law applicable to the said case is Article 2209 of the New Civil Code which
reads
Art. 2209. If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, shall be the payment of interest agreed upon, and in the absence of
stipulation, the legal interest which is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28 July 1986. The
case was for damages occasioned by an injury to person and loss of property. The trial court awarded private respondent
Pedro Manabat actual and compensatory damages in the amount of P72,500.00 with legal interest thereon from the filing
of the complaint until fully paid. Relying on the Reformina v. Tomol case, this Court 8 modified the interest award from 12%
to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid.

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

WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special
and environmental circumstances of this case, we deem it reasonable to render a decision
imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the
exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00)
Pesos to cover all damages (with the exception to attorney's fees) occasioned by the loss of the
building (including interest charges and lost rentals) and an additional ONE HUNDRED
THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon
the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent interest
per annum shall be imposed upon aforementioned amounts from finality until paid. Solidary
costs against the defendant and third-party defendants (Except Roman Ozaeta). (Emphasis
supplied)
A motion for reconsideration was filed by United Construction, contending that "the interest of twelve
(12%) per cent per annum imposed on the total amount of the monetary award was in contravention of
law." The Court 10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases and, in its
resolution of 15 April 1988, it explained:

There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular
No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any money, goods or
credit; and
(3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or
forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143
SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is true that in the
instant case, there is neither a loan or a forbearance, but then no interest is actually imposed
provided the sums referred to in the judgment are paid upon the finality of the judgment. It is
delay in the payment of such final judgment, that will cause the imposition of the interest.
It will be noted that in the cases already adverted to, the rate of interest is imposed on the total
sum, from the filing of the complaint until paid; in other words, as part of the judgment for
damages. Clearly, they are not applicable to the instant case. (Emphasis supplied.)
The subsequent case of American Express International, Inc., vs. Intermediate Appellate Court 11 was a petition
for review on certiorari from the decision, dated 27 February 1985, of the then Intermediate Appellate Court reducing the
amount of moral and exemplary damages awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and
its resolution, dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e., P2,000,000.00 as
moral damages and P400,000.00 as exemplary damages with interest thereon at 12% per annum from notice of
judgment, plus costs of suit. In a decision of 09 November 1988, this Court, while recognizing the right of the private
respondent to recover damages, held the award, however, for moral damages by the trial court, later sustained by the
IAC, to be inconceivably large. The Court 12 thus set aside the decision of the appellate court and rendered a new one,
"ordering the petitioner to pay private respondent the sum of One Hundred Thousand (P100,000.00) Pesos as moral
damages, with
six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis supplied)

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

WHEREFORE, except as modified hereinabove the decision of the CFI of Negros Oriental
dated October 31, 1972 is affirmed in all respects, with the modification that defendantsappellants, except defendant-appellant Merton Munn, are ordered to pay, jointly and severally,
the amounts stated in the dispositive portion of the decision, including the sum of P1,400.00 in
concept of compensatory damages, with interest at the legal rate from the date of the filing of
the complaint until fully paid(Emphasis supplied.)
The petition for review to this Court was denied. The records were thereupon transmitted to the trial
court, and an entry of judgment was made. The writ of execution issued by the trial court directed that
only compensatory damages should earn interest at 6% per annum from the date of the filing of the
complaint. Ascribing grave abuse of discretion on the part of the trial judge, a petition
for certiorari assailed the said order. This Court said:
. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the legal
rate" from the time of the filing of the complaint. . . Said circular [Central Bank Circular No. 416]
does not apply to actions based on a breach of employment contract like the case at bar.
(Emphasis supplied)
The Court reiterated that the 6% interest per annum on the damages should be computed from the time
the complaint was filed until the amount is fully paid.

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

. . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods or credits
but expropriation of certain parcels of land for a public purpose, the payment of which is without
stipulation regarding interest, and the interest adjudged by the trial court is in the nature of
indemnity for damages. The legal interest required to be paid on the amount of just
compensation for the properties expropriated is manifestly in the form of indemnity for damages
for the delay in the payment thereof. Therefore, since the kind of interest involved in the joint
judgment of the lower court sought to be enforced in this case is interest by way of damages,
and not by way of earnings from loans, etc. Art. 2209 of the Civil Code shall apply.
Concededly, there have been seeming variances in the above holdings. The cases can perhaps be classified
into two groups according to the similarity of the issues involved and the corresponding rulings rendered by the
court. The "first group" would consist of the cases of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines
v. Cruz(1986), Florendo v. Ruiz (1989)
and National Power Corporation v. Angas (1992). In the "second group" would be Malayan Insurance
Company v.Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express
International v.Intermediate Appellate Court (1988).
In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code) or 12%
(under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has been
a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans
or forbearance 16 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-delicts 18 is
breached, the contravenor can be held liable for damages. 19 The provisions under Title XVIII on "Damages" of the Civil
Code govern in determining the measure of recoverable damages. 20

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate
of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing. 21 Furthermore,
the interest due shall itself earn legal interest from the time it is judicially demanded. 22 In the absence of stipulation, the
rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 23 of the Civil Code.

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

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit.
WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION
that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated
03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%),
shall be imposed on such amount upon finality of this decision until the payment thereof.
G.R. No. 151339

January 31, 2006

EDITHA M. FRANCISCO, Petitioner,

vs.
ROQUE CO and/or MARIANO CO, Respondents.
DECISION
TINGA, J.:
The parcel of land that lies at the center of this case is covered by Transfer Certificate of Title (TCT) No. 44546,
issued by the Quezon City Register of Deeds registered in the name of Pastora Baetiong.1 It has spawned at
least three (3) different cases involving the parties, spanning the course of three (3) decades. Before this Court
is the third of the cases, the resolution of which ultimately hearkens back to the pronouncements made in the
first two (2) cases. Appropriately, the main issue before us is the applicability of res judicata.
The legal controversy was first sparked after the death of Pastora Baetiong in 1975 by a complaint for accion
publiciana filed against the heirs of Baetiong, including petitioner, by respondents Roque Co and Mariano Co,
involving the above-mentioned parcel of land, and another property, covered by TCT No. 63531 issued by the

Caloocan City Register of Deeds. The case was docketed as Civil Case No. Q-38464 and assigned to the
Quezon City Regional Trial Court (RTC), Branch 101.
The said complaint was settled when the parties entered into a Compromise Agreement dated 10 November
1983, which was duly approved by the Branch 101.2 In the Compromise Agreement, the parties acknowledged
the heirs of Baetiong as the owner of the subject properties. Further, it was agreed upon that the heirs of
Baetiong would lease to respondents a portion of the properties, totaling between 25,000 square meters to
30,000 square meters, covering land then already occupied by respondents. The lease agreement, which was
contained in a Contract of Lease, was to subsist for 15 years commencing retroactively from 1 October 1983.
Five (5) years after the execution of the Compromise Agreement and Contract of Lease, the heirs of Baetiong
filed a Motion with the Quezon City, RTC, Branch 101, wherein they alleged that respondents were actually
occupying a larger portion of their land than the 30,000 square meter limit agreed upon in the Compromise
Agreement. They prayed that a commission be constituted for the proper enforcement of the Compromise
Agreement.
The RTC granted the motion, but this action was challenged by respondents by way of a Petition for Certiorari
and Prohibition which was docketed as CA-G.R. SP. No. 18032. This is the second of the three (3) cases
earlier referred to. In a Decision rendered on 12 July 1990, the Court of Appeals reversed the RTC and
declared that the judgment by compromise rendered in Civil Case No. Q-38464 "was finally terminated and
executed".3 The appellate court concluded that the constitution of a commission for the purpose of delineating
the bounds of the leased portion of the property would serve no purpose, considering that the Compromise
Agreement itself mandated that the parties immediately conduct a delineation of the subject property for proper
inclusion in the Contract of Lease. According to the Court of Appeals, when the Contract of Lease was
executed on the same day, the Compromise Agreement was already deemed to have been fully implemented
and duly enforced.4
The Court of Appeals made several other conclusions which are worthy of note. It ruled that since the Contract
of Lease specified that the leased portion had an area of "approximately" three (3) hectares (or 30,000 sq.m.),
the area occupied by respondents was the same property agreed upon for lease by the parties in the
Compromise Agreement. On the claim that the area leased was actually in excess of 7,659 sq. meters, the
Court of Appeals held that the heirs of Baetiong were precluded by laches and negligence from asserting such
claim, as they had remained silent for almost five years in contesting the subject area.
In sum, the Court of Appeals set aside the RTC order constituting a commission, and declared "the judgment
by compromise rendered in Civil Case No. Q-38464 as finally terminated and executed." This Decision attained
finality after the Supreme Court declined to give due course to a petition for review filed by the heirs of
Baetiong, through a Resolution dated 10 June 1991.
Four (4) years later, or on 24 July 1995, petitioner filed a complaint for forcible entry against respondents
before the Metropolitan Trial Court (MeTC) of Quezon City, docketed as Civil Case No. 13158. This is the
instant case and the third of the cases earlier adverted to. Petitioner alleged therein that she was the owner in
fee simple of a parcel of land, denominated as Lot No. 2-F-4, with an area of 5,679 square meters,
encompassed under TCT No. 44546, which she inherited from her mother per a 1978 Extra-Judicial Settlement
of Estate which caused the subdivision of the property into several lots.
Petitioner maintained that on 19 July 1995, respondents, through agents, entered Lot No. 2-F-4 and started
fencing the said property. In their answer, respondents alleged that the property over which petitioner was
asserting her rights was covered under the Contract of Lease which had been executed pursuant to the earlier
Compromise Agreement. Respondents also cast doubt on the validity of the 1978 Extra-Judicial Settlement of

Estate.5 Respondents also pointed out that assuming petitioner had a cause of action against them, the same
was barred by res judicata, particularly the 12 July 1990 Decision of the Court of Appeals which had since
attained finality.
The MeTC ruled in favor of petitioner in a Decision6 dated 13 November 1996, such disposition being
subsequently affirmed by the RTC on 31 March 1999.7 The MeTC ruled that petitioner was indeed the owner
and prior possessor of Lot No. 2-F-4, as evidenced by the Extra-Judicial Settlement. The MeTC also concluded
that the Contract of Lease expressly delineated the coverage of the lease agreement as totaling only three (3)
hectares, which according to the MeTC, excluded Lot No. 2-F-4 of the subdivision plan.8 On the issue of res
judicata, the MeTC and RTC found that res judicata did not apply, owing to the absence of the requisite of
identity of causes of action. Both courts noted that the instant action concerned a complaint for forcible entry,
while the earlier case pertained to the execution of a contract of lease.
The MeTC ordered the respondents to pay petitioner the amount of P500.00 per day beginning 21 July 1995
as reasonable compensation until the vacation of the property. The RTC likewise ordered that the case be
remanded to the MeTC for immediate execution, and it appears that the judgment was executed while the case
was litigated before the Court of Appeals.
On 17 August 2000, the Court of Appeals Thirteenth Division issued its Decision9 reversing the rulings of the
lower courts. The Court of Appeals ruled that the complaint for forcible entry was indeed barred by res judicata.
It was held that while there was a difference in the forms of the two actions, there was nonetheless a similarity
of causes of action in the two cases, as the same evidence would support and establish both the former and
present causes of action. It was observed that the evidence to be presented by the contending parties in both
actions was that which would support their allegation of having a better right to the possession of the subject
property.
The appellate court expounded that that matter of preference of right of petitioners over the property by virtue
of the lease contract was already settled by the Court of Appeals in CA-G.R. SP No. 18032. As the Contract of
Lease was still in effect at the time of the supposed forcible entry, petitioner was declared as having no basis in
alleging such infraction. Moreover, the Court of Appeals ruled that the contention that Lot No. 2-F-4 was not
included in the Contract of Lease had also been resolved in CA-G.R. SP. No 18032, particularly the
declarations therein that:
It is very clear that the area now occupied by the lessee petitioners is the property that was actually agreed
upon by the lessees-petitioners and private respondents-lessors as stipulated in said contract of lease.10
The Court of Appeals also concluded that due to malicious prosecution, respondents were liable for moral
damages of P30,000.00, exemplary damages of P20,000.00, and attorneys fees of P20,000.00.
Hence the present petition.
Petitioner insists that res judicata does not apply in this case, owing to the difference between the two causes
of actions. Petitioner also claims that Lot No. 2-F-4 stands outside the lots covered by the lease contract.
Petitioner also argues that res judicata could apply only to facts and circumstances as they existed at the time
the judgment was rendered. On this point, petitioner points out that four (4) years had elapsed between the
final judgment in CA-G.R. SP No. 18032 and the filing of the instant complaint, which was governed by new
facts and conditions due to the intrusion by respondents into Lot No. 2-F-4.
The central issue obviously concerns the binding force of the decision in CA-G.R. SP No. 18032, which
respondents claim bars the present complaint due to res judicata. On this score, the matter would be best

illuminated by pointing out that there are two aspects to the doctrine of res judicata. The first, known as "bar by
prior judgment," is the effect of a judgment as a bar to the prosecution of a second action upon the same claim,
demand or cause of action. The second, known as "conclusiveness of judgment," issues actually and directly
resolved in a former suit cannot again be raised in any future case between the same parties involving a
different cause of action.11
The lower courts, in considering the question of res judicata, seem to have taken into account only the first kind
of res judicata, "bar by prior judgment," which involves identity of parties, subject matter, and causes of
action.12Indeed, the arguments of the parties, and the ratiocinations of the lower courts center on whether there
was identity in the causes of action in the case for execution of the lease contract and that of forcible entry. If
the case hinges on that point alone, it is easy to force a simplistic reading that a complaint for forcible entry
involves a different cause of action or right-duty correlative from that concerning the enforcement of a lease
contract, as well as for different reliefs.
However, the Court of Appeals, in reversing the lower courts, invoked Mendiola v. Court of Appeals,13 which
involved the application of the first kind of res judicata or "bar by prior judgment."14 In particular, the appellate
court cited the rule from Mendiola that "[t]he test of identity of causes of action lies not in the form of an action
but on whether the same evidence would support and establish the former and present causes of
action."15 Applying this test, it does appear that the present ejectment case could be barred by the prior
judgment in CA-G.R. SP No. 18032. The earlier case attempted to establish that respondents were entitled to
lease not more than three (3) hectares of TCT No. 44546. In the present case, petitioner is obliged to establish
that respondent has no legal right to occupy the portion of TCT No. 44546 denominated as Lot No. 2-F-4. It is
possible that the same evidence may be used to establish that petitioners could occupy in excess of three (3)
hectares of TCT No. 44546 and they could also occupy Lot No. 2-F-4.
Still, the Court considers the second facet of res judicata, "conclusiveness of judgment" as controlling in this
case. Conclusiveness of judgment operates as a bar even if there is no identity as between the first and
second causes of judgment. Under the doctrine, any right, fact, or matter in issue directly adjudicated or
necessarily involved in the determination of an action before a competent court in which judgment is rendered
on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties
and their privies whether or not the claim, demand, purpose, or subject matter of the two actions is the same.16
Evidently, "conclusiveness of judgment" may operate to bar the second case even if there is no identity of
causes of action. The judgment is conclusive in the second case, only as to those matters actually and directly
controverted and determined, and not as to matters merely involved therein.17
In that regard, we now consider the effect of the declarations on several questions of fact and law earlier made
by the Court of Appeals in its Decision in CA-G.R. SP No. 18032, a judgment that has since lapsed into finality.
The relevant portion of the ruling stated:
In the case at bar, the parties in pursuance of the judgment by compromise, the substantive portion of which
reads:
" . . . d. Area to be leased is that portion actually occupied with building constructions thereon in possession of
defendants, more specifically bounded by the road with fence. This may be the subject of an ocular inspection
by the parties./p. 1, Supplemental Pre-Trial Brief of Defendants/ which area be duly delineated by a geodetic
surveyimmediately to be conducted by a geodetic engineer chosen mutually by the parties, and in case of
disagreement, by a team composed of three geodetic surveyors/engineers, 1 chosen by plaintiffs, 1 chosen by
defendants, and the third to be chosen/commissioned by the Court, whose findings shall be final and binding

between the parties, without right of any appeal, the costs of which shall be defrayed by the parties on a 50-50
basis. (Underscoring supplied.)
executed simultaneously a lease contract, incorporating therein the terms and conditions agreed upon.
The Compromise Agreement speaks for itself. The delineation of the subject property was immediately
to be conducted by both parties for proper inclusion in the Contract of Lease. Thus, when the Contract
of Lease was executed, the Compromise Agreement have (sic) already been fully implemented and
duly enforced. Hence, the constitution of a commission for the purpose of delineating the bounds of the
property will serve no other purpose.
As regards the contention of the private respondent that the inclusion of the land in the Contract of
Lease is in excess of what was really agreed upon deserves no scant consideration. The fact remains
that the contract of lease specifically stipulates, thus:
" . . . certain portions of the above-mentioned parcels of land now actually occupied by the
LESSEESwith the warehouses/buildings constructed and owned by said LESSEESS, with a road and
fences constructed by them, with an approximate area of Three (3) hectares more or less which is
hereby delineated as per plan," (Underscoring supplied).
It is very clear that the area now occupied by the lessees- petitioners is the property that was actually
agreed upon by the lessees-petitioners and private respondents-lessors as stipulated in said Contract
of Lease.
Granting that the area leased is really in excess of 7,659.84 sq. meters as claimed by respondents, the
same is already precluded from asserting such contention. Records of the case show that
respondents-lessors by their silence and inaction for almost five years in contesting the area subject
of the lease constitutes laches that places them in estoppel to assert their alleged right under the
compromise agreement. The Motion for Constitution of Commission to delineate the boundaries of the area
subject matter of the lease should have been brought earlier before the execution of the contract of lease.
Failure to assert this fact within a reasonable time warrants a presumption that the respondents either has
abandoned it or declined to assert it.18
There are important conclusions drawn from the quoted pronouncement which are of binding force in this case.
First, the Compromise Agreement, which provided that the leased area be delineated by a geodetic survey
instituted by both parties, was already deemed as fully implemented and enforced through the simultaneous
execution of the Contract of Lease. Second, the Contract of Lease established that the area covered by the
agreement constituted those portions of TCT No. 44546 then occupied by respondents, which as approximated
as more or less three (3) hectares in area. Third, assuming that the area actually leased to respondents
exceeded the stipulated three (3) hectares by 7,659.84 sq. meters (or .76 hectares), the heirs of Baetiong,
petitioner among them, had since been barred from asserting such contention by reason of laches.
It should be understood that these pronouncements contained in the earlier Court of Appeals decision have the
force of law between the parties. Since this decision establishes the right of respondents to occupy by way of
lease a portion of TCT No. 44546 which may even exceed three (3) hectares, it thus becomes imperative for
petitioner to establish her cause of action which is that respondent had beyond that which they were entitled to
occupy according to the decision of the Court of Appeals. Following the Court of Appeals decision, respondents
would be entitled to remain in possession of the portion which they were actually occupying at the time of the
execution of the Contract of Lease even if such portion exceeded three (3) hectares.

The instant complaint predicated petitioners cause of action on her alleged ownership of Lot No. 2-F-4, without
any reference to the subsisting Contract of Lease.19 In answer, respondents asserted that they had been in
actual possession of the said portion since 1962.20 The decision of the MTC did not dwell on this claim of
respondents. Instead, it proceeded from the initial premise that petitioners right of ownership over Lot No. 2-F4 was evidenced by the Extra-Judicial Settlement,21 then followed it with the following observations regarding
the Contract of Lease:
As could be gleaned from the Contract of Lese dated November 10, 1993, executed between Roman
Macabagdal, Edlinda Macabagdal-Francisco and Editha Macabagdal-Francisco (herein plaintiff) as Lessors
and Mariano and Roque Co, as Lessees, the same covers only portions of the parcels of land being actually
occupied by the defendants with the warehouses/buildings/fences constructed thereon by them at that time
with an area of three (3) hectares or 30,000 sq. meters. As shown by the subdivision plan, the said area covers
only Lots 2-E, 2-F-1 and 2-F-2, with a total area of 31,624 sq. meters. Hence, the intrusion of the defendants
into Lot 2-F-4 with an area of 5,679 sq. meters, which is not covered by the said lease contract, clearly shows
their unlawful deprivation of plaintiffs possession over said property.22
Evidently, the MeTC considered Lot No. 2-F-4 as beyond the scope of the lease agreement because the
leased area, as shown by the subdivision plan, covered only three (3) particular lots, namely Lots No. 2-E, 2-F1, and 2-F-2, with these three lots covering a total area of 3.1 hectares. But that was contrary to the decision of
the Court of Appeals. Hence, in order that the trial court could rule in favor of petitioner without unsettling the
earlier final and executory decision of the Court of Appeals, it should have been able to establish that Lot No.
2-F-4 was outside the coverage of the Contract of Lease as construed by the appellate court.
This being the case, it was not enough for petitioner to establish that she was the owner of Lot No. 2-F-4 which
is the sole allegation in her complaint in support of her cause of action. Neither would it have been sufficient on
her part to prove that the three (3) hectares contemplated in the Contract of Lease consisted only of Lots No.
2-E, 2-F-1, and 2-F-2. By reason of the conclusiveness of the final judgment of the Court of Appeals, it was
essential on her part to establish that Lot No. 2-F-4 was not among that portion which respondents had been
occupying at the time of the execution of the Contract of Lease. Had respondents not been occupying Lot No.
2-F-4 when the Contract of Lease was executed, petitioner would have had the right to seek the ejectment of
respondents from the said lot, as the said portion would not have been among that which the Court of Appeals
had earlier ruled respondents were entitled to possess by way of lease. However, since the right to institute an
action for forcible entry or unlawful detainer extends only in the absence of the right to hold possession,
whether by virtue of any contract or otherwise, or upon the expiration of such right, the burden lies on petitioner
as plaintiff to establish that respondents had no legal right to enter into possession of Lot No. 2-F-4. Such
burden is further militated by the earlier binding declarations of the Court of Appeals on the scope in area of the
Contract of Lease.
Moreover, the Court of Appeals also ruled that petitioner was barred from challenging the possession in lease
by respondents of an area exceeding the stipulated three (3) hectare limit. Certainly, petitioner cannot
predicate her right to withhold Lot No. 2-F-4 from respondents possession on the basis that such lot exceeds
the three (3) hectares as stipulated in the compromise and lease agreements. As earlier stated, given the
binding effect of the earlier Court of Appeals decision, the fact that petitioner would have to establish to accord
merit to her complaint is that the subject lot was not in the possession of respondents at the time of the
execution of the Contract of Lease, and thus not subject to the said contract.
Unfortunately for petitioner, not only did she fail to establish such fact, her very cause of action is not even
premised on that ground. The lower courts erred in maintaining blissful ignorance of the Court of Appeals
decision in CA-G.R. SP No. 18032 and ruling for petitioner, despite the pronouncements made in that final and

executory decision. Indeed, in order that ejectment could be justified, it was imperative on the lower courts to
declare, after duly considering the earlier Court of Appeals Decision, that respondents had no existing legal
right to possess Lot No. 2-F-4. No conclusion was drawn on such premises; thus, the reversal made by the
Court of Appeals must be sustained.
It must be noted that the earlier Court of Appeals decision sustained respondents right to occupy only a
segregate portion of TCT No. 44546, particularly that which they had already been occupying at the time the
Contract of Lease was executed. Had petitioner been able to establish before the trial court that Lot No. 2-F-4
is outside that portion already occupied by respondents when the lease contract was executed, her complaint
may have been sustained. However, this question of fact was not preponderantly established in the lower
courts, and there is no basis for the Court to now make such a de novo factual finding.
One last point. We must reverse the Court of Appeals when it awarded moral and exemplary damages, as well
as attorneys fees to respondents. In ruling that petitioner was in bad faith in filing the instant suit, the appellate
court predicated this conclusion on the observation that "respondent was well-aware that the issue involved in
this case has already been settled by the courts. Due to this, petitioners understandably suffered mental
anguish and serious anxiety, thereby entitling them to moral damages."23
The Court is not wont to uphold awards of moral damages based on haphazard conjectures on the awardees
resultant mental state. We cannot agree with the appellate court that bad faith on the part of petitioner had
been preponderantly established in this case. Bad faith does not simply connote bad judgment or negligence,
but it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong.24 It should be
established by clear and convincing evidence since the law always presumes good faith.25 In ascertaining the
intention of the person accused of acting in bad faith, the courts must carefully examine the evidence as to the
conduct and outward acts from which the inward motive may be determined.26 Certainly, it does not appear that
the Court of Appeals has conducted the mandated careful examination of evidence that would sustain the
award of moral damages. Nothing in the record establishes any right to moral damages by respondents.
Neither should exemplary damages avail under the circumstances. The plaintiff must show that he is entitled to
moral, temperate or compensatory damages before the court may consider the question of whether exemplary
damages should be awarded.27 If the court has no proof or evidence upon which the claim for moral damages
could be based, such indemnity could not be outrightly awarded. The same holds true with respect to the
award of exemplary damages where it must be shown that the party acted in a wanton, oppressive or
malevolent manner. Furthermore, this specie of damages is allowed only in addition to moral damages such
that no exemplary damages can be awarded unless the claimant first establishes his clear right to moral
damages.28
Contrary to the pronouncement of the Court of Appeals, the mere fact that petitioners were constrained to
litigate in order to protect and assert their rights does not ipso facto entitle them to attorneys fees. What Article
2208 (2) of the Civil Code provides, in order that attorneys fees may be awarded, is that "the defendants act
or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest".
It is settled that the fact that the party was "compelled to litigate and incur expenses to protect and enforce
their claim does not justify the award of attorney's fees. The general rule is that attorney's fees cannot be
recovered as part of damages because of the public policy that no premium should be placed on the right to
litigate. The award of attorney's fees must be deleted where the award of moral and exemplary damages are
eliminated."29

WHEREFORE, the PETITION is GRANTED in PART. The Decision of the Court of Appeals dated 17 August
2000 is AFFIRMED with the MODIFICATION that the award of moral, exemplary damages and attorneys fees
are DELETED. No costs.
SO ORDERED.

G.R. No. 152040

March 31, 2006

MARIKINA AUTO LINE TRANSPORT CORPORATION and FREDDIE L. SUELTO, Petitioners,

vs.
PEOPLE OF THE PHILIPPINES and ERLINDA V. VALDELLON, Respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R.
CR No. 16739 affirming the Joint Decision of the Regional Trial Court (RTC) in Criminal Case No. Q-93-42629
and Civil Case No. Q-93-16051, where Freddie Suelto was convicted of reckless imprudence resulting in
damages to property.
Erlinda V. Valdellon is the owner of a two-door commercial apartment located at No. 31 Kamias Road, Quezon
City. The Marikina Auto Line Transport Corporation (MALTC) is the owner-operator of a passenger bus with
Plate Number NCV-849. Suelto, its employee, was assigned as the regular driver of the bus.2
At around 2:00 p.m. on October 3, 1992, Suelto was driving the aforementioned passenger bus along Kamias
Road, Kamuning, Quezon City, going towards Epifanio de los Santos Avenue (EDSA). The bus suddenly
swerved to the right and struck the terrace of the commercial apartment owned by Valdellon located along
Kamuning Road.3 Upon Valdellons request, the court ordered Sergio Pontiveros, the Senior Building
Inspection Officer of the City Engineers Office, to inspect the damaged terrace. Pontiveros submitted a report
enumerating and describing the damages:
(1) The front exterior and the right side concrete columns of the covered terrace were vertically
displaced from its original position causing exposure of the vertical reinforcement.
(2) The beams supporting the roof and parapet walls are found with cracks on top of the displaced
columns.
(3) The 6 CHB walls at [the] right side of the covered terrace were found with cracks caused by this
accident.

(4) The front iron grills and concrete balusters were found totally damaged and the later [sic] beyond
repair.4
He recommended that since the structural members made of concrete had been displaced, the terrace would
have to be demolished "to keep its monolithicness, and to insure the safety and stability of the building."5
Photographs6 of the damaged terrace were taken. Valdellon commissioned Engr. Jesus R. Regal, Jr. to
estimate the cost of repairs, inclusive of labor and painting, and the latter pegged the cost at P171,088.46.7
In a letter dated October 19, 1992 addressed to the bus company and Suelto, Valdellon demanded payment
ofP148,440.00, within 10 days from receipt thereof, to cover the cost of the damage to the terrace.8 The bus
company and Suelto offered a P30,000.00 settlement which Valdellon refused.9
Valdellon filed a criminal complaint for reckless imprudence resulting in damage to property against Suelto.
After the requisite preliminary investigation, an Information was filed with the RTC of Quezon City. The
accusatory portion of the Information reads:
That on or about the 3rd day of October 1992, in Quezon City, Philippines, the said accused, being then the
driver and/or person in charge of a Marikina Auto Line bus bearing Plate No. NVC-849, did then and there
unlawfully, and feloniously drive, manage, and operate the same along Kamias Road, in said City, in a
careless, reckless, negligent, and imprudent manner, by then and there making the said vehicle run at a speed
greater than was reasonable and proper without taking the necessary precaution to avoid accident to person/s
and damage to property, and considering the condition of the traffic at said place at the time, causing as a
consequence of his said carelessness, negligence, imprudence and lack of precaution, the said vehicle so
driven, managed and operated by him to hit and bump, as in fact it hit and bump a commercial apartment
belonging to ERLINDA V. VALDELLON located at No. 31 Kamias Road, this City, thereby causing damages to
said apartment in the total amount of P171,088.46, Philippine Currency, to her damage and prejudice in the
total amount aforementioned.
CONTRARY TO LAW.10
Valdellon also filed a separate civil complaint against Suelto and the bus company for damages. She prayed
that after due proceedings, judgment be rendered in her favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court to issue a writ of preliminary attachment
against the defendants upon approval of plaintiffs bond, and after trial on the merits, to render a decision in
favor of the plaintiff, ordering the defendants, jointly and severally, to pay
a) the total sum of P171,088.46 constituting the expenses for the repair of the damaged apartment of
plaintiff, with interests to be charged thereon at the legal rate from the date of the formal demand until
the whole obligation is fully paid;
b) the sum of not less than P20,000.00 each as compensatory and exemplary damages;
c) the sum of P20,000.00 as attorneys fees and the sum of P1,000.00 for each appearance of plaintiffs
counsel; and costs of suit;
PLAINTIFF further prays for such other reliefs as may be just and equitable in the premises.11
A joint trial of the two cases was ordered by the trial court.12

The trial court conducted an ocular inspection of the damaged terrace, where defendants offered to have it
repaired and restored to its original state. Valdellon, however, disagreed because she wanted the building
demolished to give way for the construction of a new one.13
During the trial, Valdellon testified on the damage caused to the terrace of her apartment, and, in support
thereof, adduced in evidence a receipt for P35,000.00, dated October 20, 1993, issued by the BB Construction
and Steel Fabricator for "carpentry, masonry, welding job and electrical [work]."14
Pontiveros of the Office of the City Engineer testified that there was a need to change the column of the
terrace, but that the building should also be demolished because "if concrete is destroyed, [one] cannot have it
restored to its original position."15
Engr. Jesus Regal, Jr., the proprietor of the SSP Construction, declared that he inspected the terrace and
estimated the cost of repairs, including labor, at P171,088.46.
Suelto testified that at 2:00 p.m. on October 3, 1992, he was driving the bus on its way to Ayala Avenue,
Makati, Metro Manila. When he reached the corner of K-H Street at Kamias Road, Quezon City, a passenger
jeepney suddenly crossed from EDSA going to V. Luna and swerved to the lane occupied by the bus. Suelto
had to swerve the bus to the right upon which it hit the side front of the terrace of Valdellons two-door
apartment.16 Based on his estimate, the cost to the damage on the terrace of the apartment amounted
to P40,000.00.17 On cross-examination, Suelto declared that he saw the passenger jeepney when it was a
meter away from the bus. Before then, he had seen some passenger jeepneys on the right trying to overtake
one another.18
Architect Arnulfo Galapate testified that the cost of the repair of the damaged terrace amounted
to P55,000.00.19
On April 28, 1994, the trial court rendered judgment finding Suelto guilty beyond reasonable doubt of reckless
imprudence resulting in damage to property, and ordered MALTC and Suelto to pay, jointly and
severally,P150,000.00 to Valdellon, by way of actual and compensatory damages, as well as attorneys fees
and costs of suit. The fallo of the decision reads:
WHEREFORE, finding the accused FREDDIE SUELTO Y LIWAG guilty beyond reasonable doubt of the crime
of Reckless Imprudence Resulting in Damage to Property, said accused is hereby sentenced to suffer
imprisonment of ONE (1) YEAR.
With respect to the civil liability, judgment is hereby rendered in favor of plaintiff Erlinda Valdellon and against
defendant Marikina Auto Line Transport Corporation and accused Freddie Suelto, where both are ordered,
jointly and severally, to pay plaintiff:
a. the sum of P150,000.00, as reasonable compensation sustained by plaintiff for her damaged
apartment;
b. the sum of P20,000.00, as compensatory and exemplary damages;
c. the sum of P20,000.00, as attorneys fees; and,
d. the costs of suit.
SO ORDERED.20

MALTC and Suelto, now appellants, appealed the decision to the CA, alleging that the prosecution failed to
prove Sueltos guilt beyond reasonable doubt. They averred that the prosecution merely relied on Valdellon,
who testified only on the damage caused to the terrace of her apartment which appellants also alleged was
excessive. Appellant Suelto further alleged that he should be acquitted in the criminal case for the
prosecutions failure to prove his guilt beyond reasonable doubt. He maintained that, in an emergency case, he
was not, in law, negligent. Even if the appellate court affirmed his conviction, the penalty of imprisonment
imposed on him by the trial court is contrary to law.
In its Brief for the People of the Philippines, the Office of the Solicitor General (OSG) submitted that the
appealed decision should be affirmed with modification. On Sueltos claim that the prosecution failed to prove
his guilt for the crime of reckless imprudence resulting in damage to property, the OSG contended that,
applying the principle of res ipsa loquitur, the prosecution was able to prove that he drove the bus with
negligence and recklessness. The OSG averred that the prosecution was able to prove that Sueltos act of
swerving the bus to the right was the cause of damage to the terrace of Valdellons apartment, and in the
absence of an explanation to the contrary, the accident was evidently due to appellants want of care.
Consequently, the OSG posited, the burden was on the appellant to prove that, in swerving the bus to the right,
he acted on an emergency, and failed to discharge this burden. However, the OSG averred that the trial court
erred in sentencing appellant to a straight penalty of one year, and recommended a penalty of fine.
On June 20, 2000, the CA rendered judgment affirming the decision of the trial court, but the award for actual
damages was reduced to P100,000.00. The fallo of the decision reads:
WHEREFORE, premises considered, the decision dated April 28, 1994, rendered by the court a quo is
AFFIRMED with the modification that the sum of P150,000.00 as compensation sustained by the plaintiffappellee for her damaged apartment be reduced to P100,000.00 without pronouncement as to costs.
SO ORDERED.21
Appellants filed a Motion for Reconsideration, but the CA denied the same.22
MALTC and Suelto, now petitioners, filed the instant petition reiterating its submissions in the CA: (a) the
prosecution failed to prove the crime charged against petitioner Suelto; (b) the prosecution failed to adduce
evidence to prove that respondent suffered actual damages in the amount of P100,000.00; and (c) the trial
court erred in sentencing petitioner Suelto to one (1) year prison term.
On the first issue, petitioners aver that the prosecution was mandated to prove that petitioner Suelto acted with
recklessness in swerving the bus to the right thereby hitting the terrace of private respondents apartment.
However, the prosecution failed to discharge its burden. On the other hand, petitioner Suelto was able to prove
that he acted in an emergency when a passenger jeepney coming from EDSA towards the direction of the bus
overtook another vehicle and, in the process, intruded into the lane of the bus.
On the second issue, petitioners insist that private respondent was able to prove only the amount
of P35,000.00 by way of actual damages; hence, the award of P100,000.00 is barren of factual basis.
On the third issue, petitioner Suelto posits that the straight penalty of imprisonment recommended by the trial
court, and affirmed by the CA, is contrary to Article 365 of the Revised Penal Code.
The petition is partially granted.

On the first issue, we find and so resolve that respondent People of the Philippines was able to prove beyond
reasonable doubt that petitioner Suelto swerved the bus to the right with recklessness, thereby causing
damage to the terrace of private respondents apartment. Although she did not testify to seeing the incident as
it happened, petitioner Suelto himself admitted this in his answer to the complaint in Civil Case No. Q-9316051, and when he testified in the trial court.
Suelto narrated that he suddenly swerved the bus to the right of the road causing it to hit the column of the
terrace of private respondent. Petitioners were burdened to prove that the damage to the terrace of private
respondent was not the fault of petitioner Suelto.
We have reviewed the evidence on record and find that, as ruled by the trial court and the appellate court,
petitioners failed to prove that petitioner acted on an emergency caused by the sudden intrusion of a
passenger jeepney into the lane of the bus he was driving.
It was the burden of petitioners herein to prove petitioner Sueltos defense that he acted on an emergency, that
is, he had to swerve the bus to the right to avoid colliding with a passenger jeep coming from EDSA that had
overtaken another vehicle and intruded into the lane of the bus. The sudden emergency rule was enunciated
by this Court in Gan v. Court of Appeals,23 thus:
[O]ne who suddenly finds himself in a place of danger, and is required to act without time to consider the best
means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to adopt what
subsequently and upon reflection may appear to have been a better method unless the emergency in which he
finds himself is brought about by his own negligence.
Under Section 37 of Republic Act No. 4136, as amended, otherwise known as the Land Transportation and
Traffic Code, motorists are mandated to drive and operate vehicles on the right side of the road or highway:
SEC. 37. Driving on right side of highway. Unless a different course of action is required in the interest of the
safety and the security of life, person or property, or because of unreasonable difficulty of operation in
compliance herewith, every person operating a motor vehicle or an animal-drawn vehicle on a highway shall
pass to the right when meeting persons or vehicles coming toward him, and to the left when overtaking
persons or vehicles going the same direction, and when turning to the left in going from one highway to
another, every vehicle shall be conducted to the right of the center of the intersection of the highway.
Section 35 of the law provides, thus:
Sec. 35. Restriction as to speed.(a) Any person driving a motor vehicle on a highway shall drive the same at
a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the
traffic, the width of the highway, and of any other condition then and there existing; and no person shall drive
any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person,
nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance
ahead (emphasis supplied).
In relation thereto, Article 2185 of the New Civil Code provides that "unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle has been negligent, if at the time of mishap, he was violating
any traffic regulation." By his own admission, petitioner Suelto violated the Land Transportation and Traffic
Code when he suddenly swerved the bus to the right, thereby causing damage to the property of private
respondent.

However, the trial court correctly rejected petitioner Sueltos defense, in light of his contradictory testimony vis-vis his Counter-Affidavit submitted during the preliminary investigation:
It is clear from the photographs submitted by the prosecution (Exhs. C, D, G, H & I) that the commercial
apartment of Dr. Valdellon sustained heavy damage caused by the bus being driven by Suelto. "It seems highly
improbable that the said damages were not caused by a strong impact. And, it is quite reasonable to conclude
that, at the time of the impact, the bus was traveling at a high speed when Suelto tried to avoid the passenger
jeepney." Such a conclusion finds support in the decision of the Supreme Court in People vs. Ison, 173 SCRA
118, where the Court stated that "physical evidence is of the highest order. It speaks more eloquently than a
hundred witnesses." The pictures submitted do not lie, having been taken immediately after the incident. The
damages could not have been caused except by a speeding bus. Had the accused not been speeding, he
could have easily reduced his speed and come to a full stop when he noticed the jeep. Were he more prudent
in driving, he could have avoided the incident or even if he could not avoid the incident, the damages would
have been less severe.
In addition to this, the accused has made conflicting statements in his counter-affidavit and his testimony in
court. In the former, he stated that the reason why he swerved to the right was because he wanted to avoid the
passenger jeepney in front of him that made a sudden stop. But, in his testimony in court, he said that it was to
avoid a passenger jeepney coming from EDSA that was overtaking by occupying his lane. Such glaring
inconsistencies on material points render the testimony of the witness doubtful and shatter his credibility.
Furthermore, the variance between testimony and prior statements renders the witness unreliable. Such
inconsistency results in the loss in the credibility of the witness and his testimony as to his prudence and
diligence.
As already maintained and concluded, the severe damages sustained could not have resulted had the accused
acted as a reasonable and prudent man would. The accused was not diligent as he claims to be. What is more
probable is that the accused had to swerve to the right and hit the commercial apartment of the plaintiff
because he could not make a full stop as he was driving too fast in a usually crowded street.24
Moreover, if the claim of petitioners were true, they should have filed a third-party complaint against the driver
of the offending passenger jeepney and the owner/operator thereof.
Petitioner Sueltos reliance on the sudden emergency rule to escape conviction for the crime charged and his
civil liabilities based thereon is, thus, futile.
On the second issue, we agree with the contention of petitioners that respondents failed to prove that the
damages to the terrace caused by the incident amounted to P100,000.00. The only evidence adduced by
respondents to prove actual damages claimed by private respondent were the summary computation of
damage made by Engr. Jesus R. Regal, Jr. amounting to P171,088.46 and the receipt issued by the BB
Construction and Steel Fabricator to private respondent for P35,000.00 representing cost for carpentry works,
masonry, welding, and electrical works. Respondents failed to present Regal to testify on his estimation. In its
five-page decision, the trial court awarded P150,000.00 as actual damages to private respondent but failed to
state the factual basis for such award. Indeed, the trial court merely declared in the decretal portion of its
decision that the "sum ofP150,000.00 as reasonable compensation sustained by plaintiff for her damaged
apartment." The appellate court, for its part, failed to explain how it arrived at the amount of P100,000.00 in its
three-page decision. Thus, the appellate court merely declared:
With respect to the civil liability of the appellants, they contend that there was no urgent necessity to
completely demolish the apartment in question considering the nature of the damages sustained as a result of

the accident. Consequently, appellants continue, the award of P150,000.00 as compensation sustained by the
plaintiff-appellee for her damaged apartment is an unconscionable amount.
The damaged portions of the apartment in question are not disputed.
Considering the aforesaid damages which are the direct result of the accident, the reasonable, and adequate
compensation due is hereby fixed at P100,000.00.25
Under Article 2199 of the New Civil Code, actual damages include all the natural and probable consequences
of the act or omission complained of, classified as one for the loss of what a person already possesses (dao
emergente) and the other, for the failure to receive, as a benefit, that which would have pertained to him (lucro
cesante). As expostulated by the Court in PNOC Shipping and Transport Corporation v. Court of Appeals:26
Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or
in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to
repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. In
actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of
the act or omission complained of. There are two kinds of actual or compensatory damages: one is the loss of
what a person already possesses (dao emergente), and the other is the failure to receive as a benefit that
which would have pertained to him (lucro cesante).27
The burden of proof is on the party who would be defeated if no evidence would be presented on either side.
The burden is to establish ones case by a preponderance of evidence which means that the evidence, as a
whole, adduced by one side, is superior to that of the other. Actual damages are not presumed. The claimant
must prove the actual amount of loss with a reasonable degree of certainty premised upon competent proof
and on the best evidence obtainable. Specific facts that could afford a basis for measuring whatever
compensatory or actual damages are borne must be pointed out. Actual damages cannot be anchored on
mere surmises, speculations or conjectures. As the Court declared:
As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is required
to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on
the best evidence available. The burden of proof is on the party who would be defeated if no evidence would
be presented on either side. He must establish his case by a preponderance of evidence which means that the
evidence, as a whole, adduced by one side is superior to that of the other. In other words, damages cannot be
presumed and courts, in making an award, must point out specific facts that could afford a basis for measuring
whatever compensatory or actual damages are borne.28
The Court further declared that "where goods are destroyed by the wrongful act of defendant, the plaintiff is
entitled to their value at the time of the destruction, that is, normally, the sum of money which he would have to
pay in the market for identical or essentially similar goods, plus in a proper case, damages for the loss of the
use during the period before replacement.29
While claimants bare testimonial assertions in support of their claims for damages should not be discarded
altogether, however, the same should be admitted with extreme caution. Their testimonies should be viewed in
light of claimants self-interest, hence, should not be taken as gospel truth. Such assertion should be
buttressed by independent evidence. In the language of the Court:
For this reason, Del Rosarios claim that private respondent incurred losses in the total amount
of P6,438,048.00 should be admitted with extreme caution considering that, because it was a bare assertion, it
should be supported by independent evidence. Moreover, because he was the owner of private respondent

corporation whatever testimony he would give with regard to the value of the lost vessel, its equipment and
cargoes should be viewed in the light of his self-interest therein. We agree with the Court of Appeals that his
testimony as to the equipment installed and the cargoes loaded on the vessel should be given credence
considering his familiarity thereto. However, we do not subscribe to the conclusion that his valuation of such
equipment, cargo, and the vessel itself should be accepted as gospel truth. We must, therefore, examine the
documentary evidence presented to support Del Rosarios claim as regards the amount of losses.30
An estimate of the damage cost will not suffice:
Private respondents failed to adduce adequate and competent proof of the pecuniary loss they actually
incurred. It is not enough that the damage be capable of proof but must be actually proved with a reasonable
degree of certainty, pointing out specific facts that afford a basis for measuring whatever compensatory
damages are borne. Private respondents merely sustained an estimated amount needed for the repair of the
roof of their subject building. What is more, whether the necessary repairs were caused only by petitioners
alleged negligence in the maintenance of its school building, or included the ordinary wear and tear of the
house itself, is an essential question that remains indeterminable.31
We note, however, that petitioners adduced evidence that, in their view, the cost of the damage to the terrace
of private respondent would amount to P55,000.00.32 Accordingly, private respondent is entitled to P55,000.00
actual damages.
We also agree with petitioner Sueltos contention that the trial court erred in sentencing him to suffer a straight
penalty of one (1) year. This is so because under the third paragraph of Article 365 of the Revised Penal Code,
the offender must be sentenced to pay a fine when the execution of the act shall have only resulted in damage
to property. The said provision reads in full:
ART. 365. Imprudence and negligence. Any person who, by reckless imprudence, shall commit any act
which, had it been intentional, would constitute a grave felony, shall suffer the penalty of arresto mayor in its
maximum period, to prision correccional in its medium period; if it would have constituted a less grave felony,
the penalty of arresto mayor in its minimum and medium periods shall be imposed; if it would have constituted
a light felony, the penalty of arresto menor in its maximum period shall be imposed.
Any person who, by simple imprudence or negligence, shall commit an act which would, otherwise, constitute a
grave felony, shall suffer the penalty of arresto mayor in its medium and maximum periods; if it would have
constituted a less serious felony, the penalty of arresto mayor in its minimum period shall be imposed.
When the execution of the act covered by this article shall have only resulted in damage to the property of
another, the offender shall be punished by a fine ranging from an amount equal to the value of said damages
to three times such value, but which shall in no case be less than 25 pesos.
A fine not exceeding two hundred pesos and censure shall be imposed upon any person who, by simple
imprudence or negligence, shall cause some wrong which, if done maliciously, would have constituted a light
felony.
In the imposition of these penalties, the courts shall exercise their sound discretion, without regard to the rules
prescribed in Article 64 (Emphasis supplied).
In the present case, the only damage caused by petitioner Sueltos act was to the terrace of private
respondents apartment, costing P55,000.00. Consequently, petitioners contention that the CA erred in
awarding P100,000.00 by way of actual damages to private respondent is correct. We agree that private

respondent is entitled to exemplary damages, and find that the award given by the trial court, as affirmed by
the CA, is reasonable. Considering the attendant circumstances, we rule that private respondent Valdellon is
entitled to only P20,000.00 by way of exemplary damages.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The joint decision of the Regional
Trial Court of Quezon City is AFFIRMED WITH THE MODIFICATION that petitioner Suelto is sentenced to pay
a fine ofP55,000.00 with subsidiary imprisonment in case of insolvency. Petitioners are ORDERED to pay to
Erlinda V. Valdellon, jointly and severally, the total amount of P55,000.00 by way of actual damages,
and P20,000.00 by way of exemplary damages.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 132659

February 12, 2007

CONRADO MAGBANUA and ROSEMARIE MAGBANUA-TABORADA, the latter assisted by her husband
ARTEMIO TABORADA,Petitioners,
vs.
PILAR S. JUNSAY, asssisted by her husband VICENTE JUNSAY, IBARRA LOPEZ, and JUANITO
JACELA,Respondents.
DECISION
CHICO-NAZARIO, J.:
This is an Appeal by Certiorari from the Decision,1 dated 26 January 1998, of the Court of Appeals in CA-G.R.
CV No. 51750, which affirmed in toto the Decision,2 dated 25 July 1995, of the Regional Trial Court (RTC),
Branch 51, Bacolod City, in Civil Case No. 4361, dismissing the Complaint for Damages for malicious
prosecution, filed by petitioners against respondents. The RTC rendered judgment declaring that the
prosecution was not prompted by sinister design to vex and humiliate petitioner Rosemarie Magbanua. The
Court of Appeals similarly found the appeal without merit.
The following are the antecedent facts:
Petitioner Rosemarie Magbanua, who worked as a housemaid in the residence of complainant and herein
respondent Pilar S. Junsay was charged as a co-accused with the crime of Robbery before the RTC, Branch
XLI of Bacolod City in Criminal Case No. 28 entitled, People of the Philippines v. Rosemarie Magbanua, et al.,
by virtue of an Information, which recites, thus:
That on or about the 18th day of July, 1982, in the City of Bacolod, Philippines, and within the jurisdiction of this
Honorable Court, the herein accused, conspiring, confederating and mutually helping one another, with intent
to gain and with the use of force upon things by then and there making a hole on the lower portion of the
kitchens door of the house of the herein offended party, Dra. Pilar S. Junsay, situated at Bata Subdivision,
Bacolod City, through which opening made (sic) them, said accused gained entrance thereto and once inside
the said house, did, then and there willfully, unlawfully and feloniously take, rob and carry away with them,
assorted jewelries and cash, valued all in all in the amount of P29,624.00, Pesos, Philippine Currency, to the
damage and prejudice of the herein offended party in the aforementioned amount.3
The records show that only petitioner Rosemarie was tried in Criminal Case No. 28. Her co-accused, Ernesto
Fernandez and a certain Gudo, remain at large.
The case for the prosecution relied on an alleged confession made by petitioner Rosemarie, admitting her
participation in the crime of Robbery. The defense contested the admissibility of the confession, and averred
that the same was made under duress.
On 20 December 1985, the RTC, Branch XLI of Bacolod City, rendered a Decision,4 acquitting petitioner
Rosemarie of the crime of Robbery. The RTC held:
The evidence for accused [herein petitioner Rosemarie] more particularly the Medical Certificate and the
testimony of the attending physician as well as the Decision of the NAPOLCOM finding the investigating
officers guilty has clearly establish (sic) the fact that accused was physically maltreated by the investigating

officers in an attempt to force her to confess her participation in the robbery. Whatever declaration of accused
therefore against her interest is inadmissible in evidence against her, hence, the alleged admission of the
accused that she participated in the commission of the Robbery made to the police investigator and
complainant [complainant respondent Pilar] even if it is true cannot be used against her. Notwithstanding
however, accused could still be found guilty if the evidence for the prosecution is sufficient to establish her
participation in the crime without said alleged admission by the accused. Record, however, shows that other
than the alleged admission of the accused made to the police investigator and the complainant, the only
evidence to establish the participation of the accused in the robbery is the testimony of the complaining witness
that after accused informed her that part of the jewelry stolen was inside her bag at her room, the complaining
witness searched the room of accused and found one (1) piece of gold necklace. On this point, the evidence
adduced shows that the police authorities went at (sic) the scene of the robbery and thoroughly investigated
the incident including dusting for fingerprints, tending to show that the investigation of the police authorities
was extensive, hence, it was quite improbable and difficult to believe that the police investigator would fail to
search the bag nor the room of accused. This Court[,] therefore[,] find said testimony of the complaining
witness on this point discredited.5
The decretal portion of the 20 December 1985 RTC Decision pronounced:
IN VIEW OF THE FOREGOING THEREFORE, this Court finds the evidence for the prosecution not only
insufficient to prove the guilt of the accused beyond reasonable doubt but even insufficient to establish a prima
facie case against her for having participated in the robbery subject of the above entitled case and therefore
ACQUITS accused on the ground of insufficiency of evidence. The bailbond of the accused for her provisional
liberty is hereby ordered cancelled.6
On 9 March 1987, petitioner Rosemarie, assisted by Artemio Taborada, and together with co-petitioner
Conrado Magbanua (Rosemaries father) filed with the RTC, Branch 51, Bacolod City, a Complaint for
Damages7 against respondent Pilar, assisted by her husband Vicente Junsay, Ibarra Lopez, and Juanito
Jacela. Respondent Pilar was the employer of petitioner Rosemarie, while respondents Ibarra and Juanito
were members of the police force of Bacolod City, and assigned at the Police Station in Taculing, Bacolod City.
The Complaint, alleged, inter alia, that by reason of respondents false, malicious, and illegal actuations in filing
Criminal Case No. 28 for Robbery against petitioner Rosemarie, the latter suffered untold pain, shame,
humiliation, worry, and mental anguish, which if assessed in monetary terms will not be less
than P200,000.00.8 It was further alleged therein that Conrado, Rosemaries father, lost his job and his entire
family suffered.9 Petitioners maintained that Rosemarie suffered physical pain and mental torture due to the
filing of the false criminal charge against her.10 They sought moral and exemplary damages, including
attorneys fees and litigation expenses, as well as loss of earnings and expenses incurred in connection with
Rosemaries defense in Criminal Case No. 28 for Robbery.11 They similarly prayed for payment of the expenses
incurred in the prosecution of the instant case.
Subsequently, petitioners filed a Petition to litigate as pauper which the RTC granted in its Order dated 9 March
1987, it appearing that they had no means to prosecute their action.12
Respondent Pilar filed a Motion to Dismiss,13 on the ground that the cause of action is barred by the Statute of
Limitations, as crystallized in Article 114614 of the Civil Code. From the time the cause of action arose to the
filing of the Complaint, four years and eight months had already lapsed.
Petitioners filed an Opposition to the Motion to Dismiss,15 contending that their cause of action is not for
damages based on the physical injuries suffered by Rosemarie during the investigation of the criminal case nor
the violation of her rights for the indignities foisted upon her by the respondents from 18 July 1982, and several

days thereafter.16 They posited that the damages sought are for the malicious prosecution of Rosemarie. They
reasoned that the baseless filing of the criminal case for Robbery against Rosemarie, despite her protestations
of innocence and the lack of evidence against her, caused her family to incur expenses and subjected her to
untold shame and humiliation.17 Petitioners clarified that the allegations about the violation of Rosemaries
rights as a person were included only to demonstrate respondents palpable malice in the filing of the said
criminal case against her. Petitioners postulated that as the Complaint for Damages is for malicious
prosecution, the prescriptive period should be counted from the date of Rosemaries acquittal in Criminal Case
No. 28, or on 20 December 1985, and not from 18 July 1982, the date when respondents injured the rights of
Rosemarie. From the time judgment in Criminal Case No. 28 was rendered to the filing of the Complaint in the
instant case, not more than one year and three months had passed.18
On 24 March 1988, the RTC issued an Order19 denying respondents Motion to Dismiss for lack of merit. It
found that the cause of action of petitioners Complaint was based on malicious prosecution; hence, the
prescriptive period shall be counted from the date of petitioner Rosemaries acquittal. According to the RTC,
the allegations about the wanton violation of the rights of Rosemarie as a person were to show the pattern of
respondents malice.
Respondent Pilar filed before the RTC an Answer,20 dated 18 May 1988, disclaiming petitioners allegation that
she maltreated petitioner Rosemarie while the latter was being investigated by the police authorities. She
posited, inter alia: that she was not present during the investigation, and was subsequently informed of
petitioner Rosemaries participation in the robbery by the investigators, the same being reflected in the Joint
Affidavit of the police investigators; that she never laid a hand on petitioner Rosemarie before, during, or after
the investigation, as, in fact, she had no inkling of her participation in the crime; that she had no hand in the
filing of the case except to execute an affidavit regarding her ownership of the lost jewelry; and that she has no
liability whatsoever to petitioner Rosemarie, much less, to her father, petitioner Conrado, who does not appear
to have any involvement in the matter.21 By way of counterclaim, she sought damages, including attorneys
fees, and costs of suit from the petitioners.
Petitioners filed a Reply and Answer to Counterclaim,22 reiterating the allegation in the Complaint, that
respondent Pilar actually participated in the maltreatment of petitioner Rosemarie, and she cannot deny her
participation as she was always present in the police station during the investigation. Petitioners alleged that
respondent Pilar cannot claim lack of knowledge of the maltreatment and indignities suffered by petitioner
Rosemarie because she herself participated in such maltreatment. Petitioners further contended, inter alia, that
they have a proper and valid cause of action against the respondents, including petitioner Conrado who
suffered and incurred expenses to defend his daughter, Rosemarie, who was then a minor against unjust
accusation, maltreatment and torture.
On 9 September 1988, at the pre-trial, the parties entered into a stipulation of facts. Counsel for the petitioners
manifested that they were claiming damages not for physical injuries which petitioner Rosemarie allegedly
suffered in the hands of respondents during her investigation, but for her malicious prosecution.23 In
concurrence thereto, counsel for respondents declared that the main issue was whether Rosemarie was
maliciously prosecuted with the filing of the criminal case for Robbery.24 Following the stipulations and counterstipulation of facts, pre-trial was terminated.
Meanwhile, respondents Ibarra and Juanito, members of the police force of Bacolod City, filed an Answer and
Manifestation,25 adopting the Answer filed by their co-respondent Pilar, dated 18 May 1988, insofar as the
allegations therein were applicable to them, and further adopting the counterclaim interposed in the aforesaid
action.

Trial, thereafter, ensued.

Seeking to fortify their case, petitioners offered the following exhibits, to wit:
Exhibit "A" The medical certificate issued by Dr. Teodoro S. Lavasa, Medico-legal officer and Chief,
Crime Laboratory, Bacolod Metro Police District, dated July 27, 1982.
This exhibit is offered to show the many injuries sustained by [herein petitioner] Rosemarie Magbanua
at the hands of the [herein respondents] in their joint effort to make her admit the crime in the absence
of proof that she participated therein and despite her protestations of innocence.
Exhibit "B" The note of Dr. Teodoro S. Lavada to the jail warden.
This exhibit is offered to show the result of the maltreatment and/or physical injuries inflicted by the
[respondents] on the person of [petitioner] Rosemarie Magbanua hemoptysis, fever, and body pains which made the medico-legal officer recommend hospitalization for her.
Exhibit "C" The information filed by Fiscal Ricardo F. Tornilla, 2nd Asst. City Fiscal, Bacolod City,
dated July 20, 1982.
This exhibit is offered to show the result of the [respondents] confederated efforts for Rosemarie
Magbanua to be prosecuted for the crime she did not commit, including untrue affidavits, a biased and
false investigation report mentioning Rosemarie Magbanuas alleged confession of her participation in
the robbery when she never did, despite the injuries and indignities to which she was subjected, all of
which made the Asst. City Fiscal Ricardo F. Tornilla file the information against said plaintiff Rosemarie
Magbanua.
Exhibit "D" The Decision rendered by Hon. Quirino D. Abad Santos, Jr., Judge, Regional Trial Court of
Negros Occidental, Branch XLI Bacolod City, in Criminal Case No. 28 entitled, "People of the
Philippines vs. Rosemarie Magbanua, et al." dated December 20, 1985.
Exhibit "D-1" The portion appearing on page 4 of said decision stating that, "IN VIEW OF THE
FOREGOING THEREFORE, this Court finds the evidence for the prosecution not only insufficient to
prove the guilt of the accused beyond reasonable doubt but even insufficient to establish a prima facie
case against her for having participated in the robbery subject of the above entitled case and therefore
ACQUITS accused on the ground of insufficiency of evidence. The bailbond of the accused for her
provisional liberty is hereby ordered cancelled."
This exhibit with its sub-marking is offered to show that the [petitioner] Rosemarie Magbanua was
acquitted of the crime charged because the evidence for the prosecution was not only insufficient to
prove the guilt of the accused beyond reasonable doubt but even insufficient to establish a prima facie
evidence against her for having participated in the robbery, thus glaringly exposing the utter lack of
basis for charging and/or prosecuting Rosemarie Magbanua for the crime of robbery which was
nevertheless filed at the behest of the [respondents] who knowing fully the bereftness of their stand
even tried to concoct additional evidence of having found still more jewelry in [petitioner] Rosemarie
Magbanuas handbag, a maneuver which was debunked by the honorable Court in its decision.
Exhibit "E" The decision of the National Police Commission Adjudication Board No. 11 in Adm. Case
No. 83-0888 finding the respondent PFC Ibarra Lopez and respondent Patrolman Juanito Jacela, two of

the defendants, guilty of grave misconduct and ordering their suspension for two (2) months without
pay.
Exhibit "E-1" The bracketed dispositive portion of the decision appearing on page 3 thereof which is
as follows:
"IN VIEW OF THE FOREGOING, this Board finds respondents PFC IBARRA LOPEZ AND PAT JUANITO
JACELA guilty of Misconduct and they are hereby ordered SUSPENDED FOR TWO (2) MONTHS WITHOUT
PAY WITH WARNING THAT A REPETITION OF THE SAME OFFENSE SHALL BE PENALIZED MORE
SEVERELY."
This exhibit with its submarking is offered to show that the two (2) [respondents], PFC Ibarra Lopez and
Patrolman Juanito Jacela, employed unnecessary force on the person of the [petitioner] Rosemarie Magbanua
just to make her admit and/or confess to a crime she did not commit, thus contributing to and even making
possible the unnecessary, baseless, and malicious prosecution of the [petitioner].26
On 25 January 1991, the RTC issued an Order,27 admitting Exhibits "A" to "E," including the sub-markings
thereon for the purposes for which they had been offered and for such purpose as may serve the court a quo in
the resolution of the case.28
On 25 July 1995, the RTC rendered a Decision dismissing the Complaint. The RTC applied the established
rule that for a malicious prosecution suit to succeed, two indispensable elements must be shown to exist, to
wit: (a) malice and (b) absence of probable cause. It found that the elements were not successfully shown by
petitioners. It held that the mere filing of a suit does not render a person liable for malicious prosecution should
he be unsuccessful for the law could not have meant to impose a penalty on the right to litigate.29
In sustaining the respondents, the RTC said that the filing of the criminal complaint against petitioner
Rosemarie was not prompted with a sinister design to vex, or humiliate her. It reasoned that respondent Pilar
reported the robbery which occurred on 17 July 1982 to the Bacolod Police Station; consequently, police
investigators, including respondents Ibarra and Juanito, proceeded to the residence of respondent Pilar. It
ratiocinated that there was no legal malice on the part of the latter as victim of the crime of robbery for bringing
the same to the attention of the police authorities. The RTC similarly did not find legal malice on the part of her
co-respondents, Ibarra and Juanito, as they were merely performing their duties when they conducted the
investigation; and subsequently filed the case against petitioner Rosemarie and her co-accused pursuant
thereto.
In denying petitioners prayer for damages arising from malicious prosecution, the RTC ruled that:
In the course of the investigation, Rosemarie Magbanua admitted her participation in the robbery together with
a certain Ernesto Fernandez and a person named "Gudo." The necklace given to her as her share was
recovered in her shoulder bag.
After the police authorities had completed their investigation, they filed a case for robbery with the office of the
City Fiscal of Bacolod City (now City Prosecutor) against Rosemarie Magbanua, Ernesto Fernandez and a
certain "Gudo." The Office of the City Fiscal after conducting a preliminary investigation filed a case for robbery
against the three suspects. After trial, as against then accused now [herein petitioner] Rosemarie Magbanua,
the Court acquitted her.
[Herein respondent] Dra. Pilar Junsay, cannot be faulted for reporting to the police. She was robbed of
valuables worth P29,974.00. Besides, she did not tell the police that she was robbed by herein [petitioner]

Rosemarie Magbanua. And, there is no legal malice for a victim of a crime to report the matter to the police.
Furthermore, the mere filing of a suit does not render a person liable for malicious prosecution should he be
unsuccessful for the law could not have meant to impose a penalty on the right to litigate (Albenson
Enterprises Corp. vs. Court of Appeals, 217 SCRA 16).
Neither can [respondents] police investigator Ibarra Lopez and Juanito Jacela be faulted for filing a complaint
of robbery with the Office of the City Fiscal, against herein plaintiff Rosemarie Magbanua, Ernesto Fernandez
and a certain "Gudo." It is part of their duties to conduct an investigation of a case reported to their office. And
Rosemarie Magbanua admitted to them her participation to the commission of the crime together with her coaccused Ernesto Fernandez and Gudo. Thus, there was probable cause of the crime of robbery against said
accused. Their finding of a probable cause against the accused was shared by the City Fiscals Office when an
Information for robbery against said accused was filed after conducting a preliminary investigation.
[Respondents] police investigators Ibarra Lopez and Juanito Jacela do not know [respondent] Dra.Pilar Junsay
nor [petitioner] Rosemarie Magbanua, prior to July 18, 1982, when the crime was reported by the former to
their office. And, the criminal complaint filed by them was not only against Rosemarie Magbanua, but also
against Ernesto Fernandez and a certain "Gudo." Hence, it cannot be said that they were prompted by a
sinister design to vex, and humiliate [petitioner] Rosemarie Magbanua.30
Petitioners filed a Notice of Appeal on the 25 July 1995 Decision of the RTC. Thus, the records of the case
were subsequently forwarded to the Court of Appeals.
The Court of Appeals affirmed the RTC in toto.
The appellate court declared that the design to vex and humiliate petitioner Rosemarie in the prosecution of
Criminal Case No. 28 was wanting. It held that respondent Pilar as complaining witness merely reported the
matter to the police authorities; while respondents Ibarra and Juanito were merely performing their duties as
investigating police officers. Thus:
In the present case, there was no proof that the prosecution was prompted by a design to vex and humiliate
the [herein petitioner] Rosemarie Magbanua. The crime of robbery was actually committed and [petitioner]
Rosemarie Magbanua admitted her participation therein. There was nothing illegal, sinister or malicious in
prosecuting her on the part of [herein respondent] Dra. Junsay who, as a victim of the crime of robbery,
reported the incident to the police authorities. In fact, the [respondent] did not suspect that the [petitioner] was
one of those who committed the crime.
On the part of the police investigators, they were only performing their duties in accordance with the standard
procedure of their office. They came to know the victim Dra. Junsay and [petitioner] Rosemarie Magbanua only
during the investigation. The fact was that Rosemarie Magbanua admitted participation in the commission of
the crime. Finding that there was a prima facie case, the City Fiscal who investigated the case filed a case for
robbery in the then Court of First Instance of Bacolod (now RTC).31
The Court of Appeals was also convinced that there was probable cause to believe that the robbery was
committed by petitioner Rosemarie and her co-accused. The finding of probable cause, according to the
appellate court, was confirmed by the filing of the Information for Robbery by the City Fiscals Office after the
preliminary investigation.32
The Court of Appeals disposed:

WHEREFORE, the Decision of the trial court dated July 25, 1995 is hereby AFFIRMED IN TOTO. Costs
against the [herein petitioners].33
Hence, petitioners come to the succor of this Court via the instant Appeal by Certiorari to assail the Decision of
the Court of Appeals, which affirmed the Decision of the RTC, that there was no malicious prosecution.
For our resolution is the issue of whether petitioners are entitled to damages for malicious prosecution.
However, before we could resolve said issue, we should first determine whether the filing of a criminal case for
Robbery against petitioner Rosemarie constituted malicious prosecution.
It is petitioners submission that the prosecution of petitioner Rosemarie was founded upon baseless
accusations.34 Petitioners posit that the charges were based on false affidavits and false police reports, without
which the criminal case against petitioner Rosemarie would not have been filed.35 Petitioners further decry the
maltreatment which petitioner Rosemarie allegedly suffered from the hands of respondents. According to
petitioners, Rosemarie was maltreated to extract a confession from her, and to make her admit to a crime she
did not commit. They reasoned that petitioner Rosemarie, who was then a minor, an uneducated farm girl, and
a stranger in Bacolod City, was subjected to torture and inhumane treatment.36 Petitioners contend further that
respondent Pilar employed her privileged status in the society as a medical doctor; and her co-respondents
Ibarra and Juanito utilized their positions as members of the Bacolod City Police to secure an admission from
petitioner Rosemarie.37
In this jurisdiction, the term "malicious prosecution" has been defined as "an action for damages brought by
one against whom a criminal prosecution, civil suit, or other legal proceeding has been instituted maliciously
and without probable cause, after the termination of such prosecution, suit, or other proceeding in favor of the
defendant therein."38 While generally associated with unfounded criminal actions, the term has been expanded
to include unfounded civil suits instituted just to vex and humiliate the defendant despite the absence of a
cause of action or probable cause.39
This Court, in Drilon v. Court of Appeals,40 elucidated, viz:
The term malicious prosecution has been defined in various ways. In American jurisdiction, it is defined as:
"One begun in malice without probable cause to believe the charges can be sustained (Eustace v. Dechter, 28
Cal. App. 2d. 706, 83 P. 2d. 525). Instituted with intention of injuring defendant and without probable cause,
and which terminates in favor of the person prosecuted. For this injury an action on the case lies, called the
action of malicious prosecution (Hicks v. Brantley, 29 S.E. 459, 102 Ga. 264; Eggett v. Allen, 96 N.W. 803, 119
Wis. 625)."
In Philippine jurisdiction, it has been defined as:
"An action for damages brought by one against whom a criminal prosecution, civil suit, or other legal
proceeding has been instituted maliciously and without probable cause, after the termination of such
prosecution, suit, or other proceeding in favor of the defendant therein. The gist of the action is the putting of
legal process in force, regularly, for the mere purpose of vexation or injury (Cabasaan v. Anota, 14169-R,
November 19, 1956)."
The statutory basis for a civil action for damages for malicious prosecution are found in the provisions of the
New Civil Code on Human Relations and on damages particularly Articles 19, 20, 21, 26, 29, 32, 33, 35, 2217
and 2219 (8). To constitute malicious prosecution, however, 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 by the

defendant knowing that his charges were false and groundless. Concededly, the mere act of submitting a case
to the authorities for prosecution does not make one liable for malicious prosecution.
This Court has drawn the four elements that must be shown to concur to recover damages for malicious
prosecution. Therefore, for a malicious prosecution suit to prosper, the plaintiff must prove the following: (1) the
prosecution did occur, and the defendant was himself the prosecutor or that he instigated its commencement;
(2) the criminal action finally ended with an acquittal; (3) in bringing the action, the prosecutor acted without
probable cause; and (4) the prosecution was impelled by legal malice -- an improper or a sinister motive. 41 The
gravamen of malicious prosecution is not the filing of a complaint based on the wrong provision of law, but the
deliberate initiation of an action with the knowledge that the charges were false and groundless.42
We shall proceed to determine whether in the prosecution of petitioner Rosemarie for the crime of Robbery, all
four elements were in attendance.
It is not disputed that the first and second elements are present.
The prosecution of petitioner Rosemarie for the crime of robbery did occur, and respondents Pilar, Ibarra and
Juanito instigated its commencement. On 20 December 1985, the RTC, Branch XLI, Bacolod City, rendered a
Decision acquitting Rosemarie Magbanua on the ground of insufficiency of evidence.
On the question of probable cause, this Court has ruled that for purposes of malicious prosecution, "probable
cause" means "such facts and circumstances as would excite the belief, in a reasonable mind, acting on the
facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was
prosecuted."43 It is merely based on opinion and reasonable belief.44 Thus, a finding of probable cause does not
require an inquiry into whether there is sufficient evidence to procure a conviction.45
Anent the question of whether the prosecutor acted without probable cause in bringing the action against
petitioner Rosemarie, we find no reason to depart from the conclusions reached by the RTC and the Court of
Appeals. The filing of Criminal Case No. 28 for Robbery was not without probable cause.
Indeed, during the investigation petitioner Rosemarie admitted her participation in the commission of the
incident complained of. The investigation report, which prompted the filing of the Information for Robbery
against petitioner Rosemarie showed that she admitted to receiving instruction from her co-accused Ernesto
Fernandez and a certain Gudo to leave the barrel belt of the kitchen door unlocked,46 so her co-accused can
gain entry to the house of respondent Pilar. Moreover, she admitted that after her co-accused had taken the
pieces of jewelry owned by respondent Pilar, they gave her a necklace which she kept in a shoulder bag.
During the investigation, she was shown the said necklace, and she positively identified the same to be the
necklace her co-accused had given her.47 On the basis of the said admission, the Office of the Prosecutor
found basis and probable cause to file the appropriate Information with the RTC against petitioner Rosemarie
and her co-accused Ernesto Fernandez and a certain Gudo. The inadmissibility of the aforesaid admission on
the ground that the same was extracted under duress was an evidentiary matter, which does not detract from
the fact that based on petitioner Rosemaries admission, there was reason for the respondents to believe that
the suit was not unfounded, and that the crime was committed.
1avvphi1.net

Finally, in an action to recover damages based on malicious prosecution, it must be established that the
prosecution was impelled by legal malice. There is necessity of proof that the suit was so patently malicious as
to warrant the award of damages under Articles 19 to 21,48 of the Civil Code, or that the suit was grounded on
malice or bad faith.49 Moreover, it is a doctrine well-entrenched in jurisprudence that the mere act of submitting
a case to the authorities for prosecution does not make one liable for malicious prosecution, for the law would
not have meant to impose a penalty on the right to litigate.50
1awphi1.net

Applying the rule to the case at bar, we affirm the findings of the RTC and the Court of Appeals that there was
no proof of a sinister design on the part of the respondents to vex or humiliate petitioner Rosemarie by
instituting the criminal case against her and her co-accused. Respondent Pilar who was robbed of her valuable
belongings can only be expected to bring the matter to the authorities. There can be no evil motive that should
be attributed to one, who, as victim of a crime institutes the necessary legal proceedings. At the risk of
redundancy, we stress that the proscription against the imposition of penalty on the right to litigate must not be
violated. Mere filing of a suit does not render a person liable for malicious prosecution should he be
unsuccessful, for the law could not have meant to impose a penalty on the right to litigate.51 There was no other
explanation or motive as to why respondents would institute baseless prosecution of petitioner Rosemarie. No
evidence was shown that there was bad blood between respondent Pilar and petitioner Rosemarie prior to the
supposed robbery.
We also do not find the actuations of respondents Ibarra and Juanito to be impelled by legal malice. Their
commencement of the action against petitioner Rosemarie and her co-accused was pursuant to their duties as
police officers. The same was made subsequent to the report of respondent Pilar of the commission of the
crime, and the investigation on the person of petitioner Rosemarie. Even then, mistakes committed by a public
officer are not actionable absent any clear showing that they were motivated by malice or gross negligence
amounting to bad faith,52 which was not established in the case at bar.
Moreover, as was clear from the outset, the instant case is a suit seeking damages for malicious prosecution,
and not for the violations and maltreatment that respondents allegedly committed against petitioner Rosemarie
in extracting the admission from her. At any rate, the RTC had ruled that the instant case is not an action on
the injuries allegedly suffered by petitioner Rosemarie, but rather for malicious prosecution. Otherwise, an
action seeking damages for her injuries should have been deemed prescribed.53
WHEREFORE, the Appeal is DENIED. The Decision, dated 26 January 1998, of the Court of Appeals in CAG.R. CV No. 51750, which affirmed in toto the Decision, dated 25 July 1995, of the RTC, Branch 51, Bacolod
City, in Civil Case No. 4361, is AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. 139436

January 25, 2006

ENRICO B. VILLANUEVA and EVER PAWNSHOP, Petitioners,

vs.
SPS. ALEJO SALVADOR and VIRGINIA SALVADOR, Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this petition for review on certiorari under Rule 45 of the Rules of Court
is the July 16, 1999 decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 49965, which affirmed in toto an
earlier decision2 of the Regional Trial Court (RTC) at Pasig in Civil Case No. 62334.
The pertinent facts:
On December 20, 1991, herein respondents, the spouses Alejo Salvador and Virginia Salvador (Salvadors,
collectively), secured a loan of P7,650.00 from petitioner Ever Pawnshop owned and managed by co-petitioner
Enrico B. Villanueva (Villanueva). On January 23, 1992, the Salvadors took out a second loan of P5,400.00
pledging, just like in the first loan transaction, jewelry items. Pawnshop Ticket No. 29919, covering the first
loan, indicated April 10, 1992 as the last day to redeem the jewelries pawned, whereas the redemption period
for the items given as security for the second loan under Pawnshop Ticket No. 30792 fell on May 22, 1992.
The separate redemption periods came and went, but the Salvadors failed to redeem the pawned pieces of
jewelry. Nonetheless, on June 1, 1992, their son paid Ever Pawnshop P7,000.00, the amount to be applied
against the first loan of P7,650.00. On account of this development, Pawnshop Ticket No. 29919 was cancelled
and replaced by Pawnshop Ticket No. 34932. Vis--vis the second loan, Ever Pawnshop agreed to the
extension of the maturity date to June 30, 1992, provided the Salvadors pay 20% of their second loan
obligation on or before June 4, 1992, failing which the securing items shall be auctioned as scheduled. Unlike
in the first loan, however, a new pawn ticket was not issued for the second loan.
In the meantime, Ever Pawnshop issued a notice announcing the public auction sale on June 4, 1992 of all
January 1 to 31, 1992 unredeemed pledges. The notice appeared in the Classified Ads Section of the Manila
Bulletin on June 4, 1992, the very day of the auction itself.
On July 1, 1992, the Salvadors repaired to the pawnshop in a bid to renew the second loan by tendering the
aforesaid 20% of the amount due thereon, only to be informed that the pledged jewelry had already been
auctioned as scheduled on June 4, 1992. As found by the CA, however, pieces of the pawned jewelry items
were still in the shop, 3 indicating that Ever Pawnshop either bought some of the unredeemed pledges or did
not sell them.
A month after, Mrs. Salvador attempted to redeem the jewelry items pledged for the first loan, as renewed, but
all she got in response were unclear information as to their whereabouts.
On August 7, 1992, Mr. Salvador tendered payment of the amount due on both loans, with a demand for the
return of the jewelry thus pledged. Ever Pawnshop, however, refused to accept the tender.
Such was the state of things when, on August 11, 1992, at the RTC-Pasig City, the Salvadors filed a complaint
for damages against Villanueva and Ever Pawnshop arising from the sale without notice of the two (2) sets of
jewelry pledged as security for both loans. The complaint, docketed as Civil Case No. 62334, was eventually
raffled to Branch 164 of the court.

Barely two days after Villanueva et al., received summons, their counsel informed the Salvadors of his clients
willingness to accept payment heretofore tendered for the redemption of the jewelry pledged to secure the first
loan. The Salvadors, however, turned down this belated offer.
Answering, Villanueva and Ever Pawnshop, as defendants a quo, averred, inter alia, that by letters dated
March 23, 1992 and May 5, 1992, Ever Pawnshop reminded the Salvadors of the maturity dates and
redemption period of their loans. Also alleged in the answer with counterclaim for damages was the publication
in the June 4, 1992 issue of the Manila Bulletin of the notice of public auction of all unredeemed pledges from
January 1 to 31, 1992.
Eventually, in a decision4 dated January 25, 1995, the trial court, on its finding that the set of jewelry covered
by the renewed first and second loans were sold without the necessary notice, rendered judgment for the
Salvadors, to wit:
WHEREFORE, the Court hereby renders judgment in favor of the plaintiffs [Salvadors] and against the
defendants [Villanueva and Ever Pawnshop]. Defendants are hereby ordered to pay to the plaintiffs:
1. The sum of P20,000.00 by way of moral damages;
2. The sum of P5,400.00 as the value of the jewelry sold under the second loan;
3. The sum of P5,000.00 as and for attorneys fees; and
4. The costs of suit.
Defendants are also ordered to restore to the possession of the [Salvadors] the jewelry that they pawned under
the first loan, covered by pawn ticket nos. 29919 and 34932, upon payment by the plaintiffs of the redemption
price due last 10 August 1992.
The counterclaim of the defendants is dismissed.
SO ORDERED. (Words in bracket added.)
Therefrom, petitioners went on appeal to the CA whereat their recourse was docketed as CA-G.R. CV No.
49965.
As stated at the threshold hereof, the CA, in its decision of July 16, 1999, affirmed in toto that of the trial court,
the affirmance being predicated on the following main justifications:
As the trial court correctly pointed out, the May 5, 1992 "List of Notified Clients" (Exhs. 6, 6-A, 6-B ) . . .
including the names of the [respondents] and Ticket Nos. 29919 and 30792 is not proof that notices
were actually sent to [respondents]. While the list contains 132 names, only 98 [postage] stamps were
purchased, hence, it cannot be determined who among the 132 people were sent notices.
And as surmised by the trial court, the set of jewelry pledged to secure the first loan must have been
auctioned, as scheduled on May 7, 1992, but that by mistake the pledge was renewed (on June 1, 1992), that
is why it was only after the [petitioners] received the summons in late August 1992 when probably they
recovered the pledged jewelry that they expressed willingness to accept the [respondents] tender of payment
for the redemption of said pledge jewelry securing the first (renewed) loan.

Admittedly, the [respondents] did not pay their loans on maturity. But [petitioners] breached their contractual
and legal obligation to inform the [respondents] of the public auction of the jewelry securing it.
Furthermore, [petitioners] failed to comply with the requirements . . . that the notice must be published during
the week preceding the sale in two daily newspapers of general circulation in the city or municipality. The paid
notice of public auction to be held on June 4, 1992 by Ever Pawnshop was published only on even date, and
only in one newspaper, the Manila Bulletin. And particularly with respect to the second loan, why was the
jewelry pledged to secure it included in the June 4, 1992 auction when plaintiffs had up to that date to pay 20%
of the amount due thereunder as a condition to its renewal?
xxx xxx xxx
Anent the questioned award of moral damages: Even assuming that [respondents] failure to pay their
obligation on maturity amounts to contributory negligence, that does not abate the award of moral damages in
their favor given the [petitioners] failure to comply with the contractual and statutory requirements before the
pledged jewelry was auctioned which failure amounts to misconduct contemplated in Article 2220 of the New
Civil Code basis of the award thereof (Laguna Tayabas Bus Company v. Cornista 11 SCRA 181- 182 (Words
in bracket added)
Hence, this petition on the following issues:
1. Whether the items of jewelry under the first loan were actually sold by the petitioners;
2. Whether valid notice of the sale of the pledged jewelry was effected;
3. Whether the award of P20,000.00 as moral damages and P5,000.00 as attorneys fees are proper;
and
4. Whether the trial and appellate courts erred in ordering both the petitioners to pay damages.
Under the first issue, petitioners fault the CA in holding that the jewelry pledged under the first loan was sold by
them.
Doubtless, the first issue raised by petitioners relates to the correctness of the factual finding of the CA
confirmatory of that of the trial court on the disposition of the set of jewelry covered by Pawnshop Ticket No.
34932. Such issue is beyond the province of the Court to review since it is not its function to analyze or weigh
all over again the evidence or premises supportive of such factual determination.5 The Court has consistently
held that the findings of the CA must be accorded great weight and shall not be disturbed on appeal, save for
the most compelling and cogent reasons,6 like when manifest error has been committed.7
As nothing in the record indicates any of such exceptions, the factual conclusion of the CA that petitioners
indeed sold the jewelry items given to secure the first loan must be affirmed.
Indeed, petitioner pawnshop expressed willingness to accept tender of payment and to return the pawned
jewelry only after being served with summons. Apparently, Ever Pawnshop had found a way to recover said
jewelry by that time. If, as aptly observed by the CA, the jewelry had never been sold, as petitioners so allege,
but had been in their possession all along, they could have provided a plausible explanation for the initial
refusal to accept tender of payment and to return the jewelry. Petitioners belated overture to accept payment
after spurning the initial offer to pay can only be due to the fact that, when respondents offered to pay the first

time around, they (petitioners) no longer had possession of the jewelry items in question, having previously
disposed of them.
Moving on to the second issue, petitioners argue that the respondents were effectively put on notice of the sale
of the pledged jewelries, the maturity date and expiry date of redemption period of the two loans being
indicated on the face of each of the covering pawnshop tickets. Pressing the point, petitioners invite attention
to the caveatprinted on the dorsal side of the tickets stating that the pledged items shall be auctioned off in the
event they are not redeemed before the expiry date of the redemption period.
We are not persuaded by petitioners faulty argument.
Section 13 of Presidential Decree (P.D.) 114, otherwise known as the Pawnshop Regulation Act, and even the
terms and conditions of the pledge itself, accord the pawner a 90-day grace period from the date of maturity of
the loan obligation within which to redeem the pawn. But even before the lapse of the 90-day period, the same
Decree requires the pawnbroker to notify the defaulting debtor of the proposed auction sale. Section 14 thereof
provides:
Section 14. Disposition of pawn on default of pawner.In the event the pawner fails to redeem the pawn within
ninety days from the date of maturity of the obligation . . ., the pawnbroker may sell . . . any article taken or
received by him in pawn: Provided, however, that the pawner shall be duly notified of such sale on or before
the termination of the ninety-day period, the notice particularly stating the date, hour and place of the sale.
However, over and above the foregoing prescription is the mandatory requirement for the publication of such
notice once in at least two daily newspapers during the week preceding the date of the auction sale.8
The CA cannot really be faulted for making short shrift of petitioners posture respecting their alleged
compliance with the notice requirement in question. As it were, petitioner Ever Pawnshop, as determined by
the CA, only caused publication of the auction in one newspaper, i.e., the Manila Bulletin, and on the very day
of the scheduled auction sale itself, instead of a week preceding the sale as prescribed by Section 15 of P.D.
114. Verily, a notice of an auction sale made on the very scheduled auction day itself defeats the purpose of
the notice, which is to inform a pawner beforehand that a sale is to occur so that he may have that last chance
to redeem his pawned items.
This brings us to the issue of the award of moral damages which petitioners correctly tag as erroneous, and,
therefore, should be deleted.
While proof of pecuniary loss is unnecessary to justify an award of moral damages, the amount of indemnity
being left to the sound discretion of the court, it is, nevertheless, essential that the claimant satisfactorily
proves the existence of the factual basis of the damages9 and its causal connection to defendants wrongful act
or omission. This is so because moral damages, albeit incapable of pecuniary estimation, are designed to
compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer.10 There is
thus merit on petitioners assertion that proof of moral suffering must precede a moral damage award.11
The conditions required in awarding moral damages are: (1) there must be an injury, whether physical, mental
or psychological, clearly sustained by the claimant; (2) there must be a culpable act or omission factually
established; (3) the wrongful act or omission of the defendant must be the proximate cause of the injury
sustained by the claimant; and (4) the award of damages is predicated on any of the cases stated in Article
2219 of the Civil Code.12

While there need not be a showing that the defendant acted in a wanton or malevolent manner, as this is a
requirement for an award of exemplary damages,13 there must still be proof of fraudulent action or bad faith for
a claim for moral damages to succeed.14 Then, too, moral damages are generally not recoverable in culpa
contractual except when bad faith supervenes and is proven.15
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 the fraud.16 And to the person claiming moral damages rests the onus of proving by
convincing evidence the existence of bad faith, for good faith is presumed.17
As aptly pointed out by petitioners, the trial court concluded that the respondents "cause of action arose
merely from the negligence of the herein [petitioners]."18 It may be that gross negligence may sometimes
amount to bad faith.19 But what is before us is a matter of simple negligence only, it being the trial courts
categorical finding that the case came about owing to petitioners mistake in renewing the loan when the sale
of the article to secure the loan had already been effected. Wrote the trial court:
"What must have happened next was that the jewelry under the first loan was sold, as scheduled, on 7 May
1992.Due to an oversight, the defendants mistakenly renewed the first loan on 1 June 1992, issuing pawn
ticket number 34932 in the process."20 [Emphasis supplied]
The CAs reliance on Article 2220 of the Civil Code in affirming the award of moral damages is misplaced. Said
article provides:
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find
that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad faith.
Clear it is from the above that before moral damages may be assessed thereunder, the defendants act must
be vitiated by bad faith or that there is willful intent to injure. Simply put, moral damages cannot arise from
simple negligence.
The award of attorneys fees should, likewise, be struck down, both the CA and trial court having failed to
explain respondents entitlement thereto. As a matter of sound practice, an award of attorneys fee has always
been regarded as the exception rather than the rule. Counsels fees are, to be sure, 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.
Attorneys fees, as part of damages, are assessed only in the instances specified in Article 2208 of the Civil
Code.21 And it is necessary for the trial court to make express findings of fact and law that would bring the case
within the exception. In short, the factual, legal or equitable justification for the award must be set forth in the
text of the decision.22 The matter of attorneys fees cannot be touched only in the fallo of the decision, else the
award should be thrown out for being speculative and conjectural.23
Certainly not lost on the Court is the fact that petitioners, after being served with summons, made an attempt to
obviate litigation by offering to accept tender of payment and return the jewelry. This offer, however belated,
could have saved much expense on the part of both parties, as well as the precious time of the court itself. The
respondents chose to turn down this offer and pursue judicial recourse. With this in mind, it hardly seems fair to
award them attorneys fees at petitioners expense.
The final issue relating to the question of whether or not both respondents are liable for damages has, for all
intent and purposes, been rendered moot and academic by the disposition just made. We need not dwell on it
any further. Besides, this particular issue has only made its debut in the present recourse. And it is a well-

entrenched rule that issues not raised below cannot be resolved on review in higher courts.24 A question that
was never raised in the court below cannot be allowed to be raised for the first time on appeal without
offending basic rules of fair play, justice and due process.25
WHEREFORE, with the MODIFICATION that the awards of moral damages and attorneys fees are deleted,
the decision under review is hereby AFFIRMED.
No pronouncement as to cost.
SO ORDERED.

G.R. No. 127957

February 21, 2001

COLLIN A. MORRIS and THOMAS P. WHITTIER, petitioner,

vs.
COURT OF APPEALS (Tenth Division) and SCANDINAVIAN AIRLINES SYSTEM, respondents.
PARDO, J.:
Petitioners appeal via certiorari from the decision1 of the Court of Appeals, which reversed the decision of the
trial court and ordered the dismissal of petitioners' complaint for damages against respondent for breach of
contract of air carriage.
On February 14, 1978, petitioners filed with the Regional Trial Court, Makati branch 143 an action for damages
for breach of contract of air carriage against respondent airline because they were bumped off from SAS Flight
SK 893, Manila-Tokyo, on February 14, 1978, despite a confirmed booking in the first class section of the flight.
Petitioners Collin A. Morris and Thomas P. Whittier were American citizens; the vice-president for technical
service and the director for quality assurance, respectively, of Sterling Asia, a foreign corporation with regional
headquarters at No. 8741 Paseo de Roxas, Makati City.
Respondent Scandinavian Airline System (SAS for brevity) is and at times material hereto has been engaged
in the commercial air transport of passengers globally.
1wphi1.nt

Petitioner Morris and co-petitioner Whittier had a series of business meetings with Japanese businessmen in
Japan from February 14 to February 22, 1978. They requested their travel agent, Staats Travel Service. Inc. to

book them as first class passengers in SAS Manila-Tokyo flight on February 14, 1978. Respondent booked
them as first-class passengers on Flight SK 893, Manila-Tokyo flight on February 14, 1978, at 3:50 in the
afternoon.
At 1:30 in the afternoon of February 14, 1978, a limousine service of the travel agency fetched petitioner Morris
at his house in Urdaneta Village, Makati City. Thereafter, they went to Merville Park, Paraaque and fetched
petitioner Whittier, arriving there at around 2:00 in the afternoon. From Paraaque, they went to the Manila
International Airport and arrived at 2:35 in the afternoon.
Upon arrival at the airport, representatives of the travel agency met petitioners. It took petitioners two to three
minutes to clear their bags at the customs section. After that, they proceed to the SAS check-in counter and
presented their tickets, passports, immigration cards and travel documents to Ms. Erlinda Ponce at the
reception desk.
After about fifteen (15) minutes, petitioners noticed that their travel documents were not being processed at the
check-in counter. They were informed that there were no more seats on the plane for which reason they could
not be accommodated on the flight.
Petitioner Morris contacted Staats Travel Service and asked the latter to contact the management of SAS to
find out what was the problem. After ten (10) minutes, Staats Travel Service called and confirmed their
booking. Thereafter, petitioner Morris and Whittier returned to respondent's check-in counter anticipating that
they would be allowed to check-in. However, the check-in counter was closed. When they informed Ms. Ponce,
in charge at the check-in counter that arrangements had been made with respondents office, she ignored
them. Even respondent's supervisor, Raul Basa, ignored them and refused to answer their question why they
could not be accomodated in the flight despite their confirmed booking.
When petitioners went to the supervisor's desk to check the flight manifest, they saw that their names on top of
the list of the first class section had been crossed out. They pressed the supervisor to allow them in the flight
as they had confirmed tickets. Mr. Basa informed them that it could not be done because the flight was closed
and it was too late to do anything. They checked in at exactly 3:10 in the afternoon and the flight was
scheduled to leave Manila International Airport at 3:50 in the afternoon.2
Petitioner Morris said that they were advised to be at the airport at least an hour before departure time. This
has been respondent's policy in petitioner's previous travels abroad.3
Ms. Erlinda Ponce, SAS employee on duty at the check-in counter on February 14, 1978 testified that the
economy class of SAS Flight SK 893 was overbooked; however, the first class section was open. She met
petitioners, who were booked in the first class section, when they approached the counter to check-in. They
not accomodated on the flight because they checked-in after the flight manifest had been closed forty (40)
minutes prior to the plane's departure. Petitioners' seats were given to economy class passengers who were
upgraded to first class.4
Upon cross-examination, Ms. Ponce sait that petitioners might have arrive at the airport earlier than 3:10 in the
afternoon when the flight manifest was closed; she was sure that they arrived at the check-in counter at past
3:10 in the afternoon. The first class seats ot petitioners were given to upgraded economy class passengers
three (3) minutes before the flight manifest was closed.5
Raul Cruz Basa, a supervisor of respondent airline company, testified that SAS Flight SK 893 on February 14,
1978 was overbooked in the economy class. Petitioner. Morris and Whittier were among the names listed in
the first class section of the flight manifest. However, their names were crossed out and the symbols "NOSH",
meaning NO SHOW, written after their names. The "NO SHOW" notation could mean either that the booked
passengers of his travel documents were not at the counter at the time of the closing of the flight manifest.
Mr. Basa said that he talked to petitioners at about 3:20 in the afternoon after receiving a radio call from the
ground staff at the check-in counter about complaints from passengers.

He learned from Ms. Ponce that petitioners checked in late after the flight manifest had been closed, after
which time waitlisted passengers from the economy class had been upgraded. He explained to petitioners that
they could not be accommodated on the plane because the seats were all filled up. He admitted that there
were about six (6) passengers in the counter who were refused boarding because waitlisted passengers had
been accepted. Most of those who were refused boarding came in late.6
Alice Magtulac, another witness of the respondent, testified that she was supervisor of ticketing and
reservation section. She said that petitioners Morris and Whittier had confirmed reservation tickets to the first
class section of SAS Flight SK 893, Manila-Tokyo flight, on February 14, 1978. She confirmed that Ms. Thelma
Lorraine Sayer was one of the economy class passengers who was not able to leave because the flight was
overbooked on the economy class.
Ms. Magtulac said that it was not SAS' policy to upgrade economy passenger to first class if passengers
booked for first class did not show up.7
On August 24, 1988, the trial court rendered a judgement against respondent and in favor of petitioners Morris
and Whittier. The dispositive portion reads:
"WHEREFORE, in view of the foregoing, the Court hereby renders judgement in favor of the
plaintiffs and against defendant, ordering the latter to pay the former the following:
1. Moral damages to plaintiff Collin A. Morris in the amount of P1,000,000.00 and to plaintiff
Thomas P. Whittier the sum of P750,000.00;
2. Exemplary damages in the sum of P200,00.00;
3. Attorney's fees in the amount of P300,000.00, plus the costs of suit.
"Makati, Metro Manila, August 24, 1988

[ORIGINAL SIGNED]

TEOFILO GUADIZ, JR.

J u d g d e"8

On October 5, 1988, respondent filed a notice of appeal.9

Meanwhile, on October 6, 1988, petitioners Morris and Whittier moved for reconsideration of the decision as
regards the award of damages.
On November 2, 1988, respondent opposed the motion for reconsideration.10
On February 26, 1992, the trial court issued an order granting petitioners' motion for reconsideration, the
decretal portion of which is quoted herein, to wit:
"WHEREFORE, in view of the foregoing, the Court hereby grants the "Motion for
Reconsideration". The dispositive portion of the "Decision" is hereby amended with respect to
the amount of moral damages, ordering the defendant to pay moral damages to Collin Morris in
the amount of P1,500,000.00 and to Thomas whittier the amount of P1,000.000.00.

"SO ORDERED.
"Makati, Metro Manila, February 26, 1992.

[ORIGINAL SIGNED]

TEOFILO GUADIZ, JR.

J u d g d e"11

Respondent's appeal rested mainly on the ground that the trial court misappreciated the facts and evidence
adduced during the trial. The thrust of its defense was petitioners' lack of cause of action, considering that they
checked-in at the SAS counter at the Manila International Airport after the flight manifest was closed and after
their first class seats were given to waitlisted economy class passengers.12
On January 21, 1997, the Court of Appeals Promulgated a decision reversing the decision of the court a quo,
and ordering the dismissal of the complaint for damages. The dispositive portion of the decision provides:
"WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another one
rendered dismissing plaintiffs-appellees' complaint.
SO ORDERED."13
In reversing the trial court's decision, the Court of Appeals found petitioners' statement self-serving. Petitioners
failed to prove that they checked-in on time. The appellate court lent credence to respondent's claim that
petitioners were denied boarding on SAS Flight SK 893 because of their late arrival for check-in at the
international airport. Respondent's employee, Ms. Erlinda Ponce, testified that petitioners checked in after the
flight manifest was closed.
Hence, this petition.14
Petitioners allege that the Court of Appeals gravely erred in dismissing their complaint for damages and in
finding their testimonies self-serving. They contend that the trial court did not act arbitrarily in lending credence
to their testimonies and finding their evidence sufficient to warrant the award of damages against respondent.
In sum, they claim to be entitled to the award for damages because, as found by the trial court, they were
wrongfully and in bad faith, "bumped-off" from SAS Flight SK 893 on February 14, 1978, despite their timely
arrival at the airport for check-in and confirmed bookings as first class passengers.15
The petition has no merit.
"To begin with, it must be emphasized that a contract to transport passengers is quite different kind and degree
from any other contractual relations, and this is because relation, which an air carrier sustains with the public.
Its business is mainly with the travelling public. It invites people business is mainly with the traveling public. It
invites people to avail [themselves] of the comforts and advantages it offers. The contract of air carriage,
therefore, generates a relation attended wit h a pubic duty. Neglect or malfeasance of the carrier's employees
naturally could give ground for an action for damages."16
"In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately
injurious or the one responsible acted fraudulently or with malice or bad faith."17 "Where in breaching the
contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for

damages is limited to the natural and probable consequences of the breach of obligation which the parties had
foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary
damages."18"Moral damages are generally not recoverable in culpa contractual except when bad faith had
been proven. However, the same damages may be recovered when reach of contract of carriage results in the
death of a passenger."19
"The award of exemplary damages has likewise no factual basis. It is requisite that the act must be
accompanied by bad faith or done in wanton, fraudulent or malevolent mannercircumstances which are
absent in this case. In addition, exemplary damages cannot be awarded as the requisite element of
compensatory damages was not present."20
In the instant case, assuming arguendo that breach of contract of carriage may be attributed to respondent,
petitioners' travails were directly traceable to their failure to check-in on time, which lewd to respondent's
refusal to accommodate them on the flight.
"The rule is that moral damages are recoverable in a damage suit predicated upon a breach of contract of
carriage only where (a) the mishap result in the death of a passenger and (b) it is proved that the carrier was
guilty of fraud and bad faith even if death does not result."21
For having arrived at the airport after the closure of the flight manifest, respondent's employee could not be
faulted for not entertaining petitioners' tickets and travel documents for processing, as the checking in of
passengers for SAS Flight SK 893 was finished, there was no fraud or bad faith as would justify the court's
award or normal damages.
"Bad faith does not simply connote bad judgement 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."22
In the instant case, respondent's denial of petitioners' boarding on SAS Flight 893 was not attended by bad
faith or malice.
To the contrary, facts revealed that they were not allowed to board the plane due to their failure to check-in on
time. Petitioner Morris admitted that they were at the check-in counter at around 3:10, exactly the same time
the flight manifest was closed, but still too late to be accommodated on the plane. Respondent's supervisor,
Raul C. Basa, testified that he met petitioners at about 3:20 in the afternoon after receiving a radio call from the
ground staff regarding petitioners' complaints. Clearly did not arrive on time for check-in.
1wphi1.nt

As we find petitioners not entitled to moral damages, "an award of exemplary damages is likewise
baseless."23"Where the award of moral and exemplary damages is eliminated, so must the award for attorney's
fees be deleted."24
WHEREFORE, the Court DENIES the petition for lack of merit. The Court AFFIRMS in toto decision of the
Court of Appeals in CA-G.R. CV. No. 38684.
No Costs.
SO ORDERED.

G.R. No. 142029

February 28, 2001

ERLINDA FRANCISCO, doing business in the name and style of Cebu Fountainhead Bakeshop and JULIANA
PAMAONG, petitioners,
vs.
RICARDO FERRER, JR., ANNETTE FERRER, ERNESTO LO AND REBECCA LO, respondents.
PARDO, J.:
Appeal via certiorari1 taken by petitioners from the decision of the Court of Appeals2 increasing the trial court's
award of moral damages to Ricardo Ferrer, Jr., Annette Ferrer, Ernesto Lo and Rebecca Lo to two hundred fifty
thousand pesos (P250,000.00) and awarding exemplary damages in the amount of one hundred thousand
pesos (P100,000.00), in addition to the following:
"1. The cost of the wedding cake in the amount of P3,175.00;
"2. Attorney's fees in the amount of P10,000.00; and

"3. Cost of litigation."

The facts, as found by the Court of Appeals,3 are as follows:
"On November 19, 1992 Mrs. Rebecca Lo and her daughter Annette Ferrer ordered a three-layered
cake from Fountainhead Bakeshop, Mango Avenue Branch. It was then agreed that the wedding cake
shall be delivered at 5:00 o'clock in the afternoon at the Cebu Country Club, Cebu City, stating clearly
that the wedding is scheduled on December 14, 1992.
"Plaintiffs made their first deposit in the amount of P1,000.00 on November 19, 1992 and two weeks
thereafter made a full payment on the remaining balance.
"On the day of the wedding, December 14, 1992, plaintiffs arrived at the Cebu Country Club around
6:00 o'clock in the evening. They immediately notice the absence of the wedding cake.
"At 7:00 o'clock in the evening they made a follow-up call to Fountainhead Bakeshop and was informed
that it was probably late because of the traffic.
"At 8:00 o'clock they were informed that no wedding cake will be delivered because the order slip got
lost. Plaintiffs were then compelled to buy the only available cake at the Cebu Country Club which was
a sans rival. Even though they felt that it was a poor substitute to a wedding cake, the cutting of the
cake is always a part of the ceremony.
"At 10:00 o'clock in the evening, the wedding cake arrived but plaintiffs declined to accept it, besides
their order was a three-layered cake and what was actually delivered was a two-layered one.
"Subsequently, defendant Erlinda Francisco sent a letter of apology accompanied with a P5,000.00
check, however, the same was declined by plaintiffs because they felt it was inadequate.
"Two weeks after the wedding, defendant Erlinda Francisco called Mrs. Rebecca Lo and apologized.
"Ricardo Ferrer, son-in-law of Rebecca Lo corroborated the latter's testimony, stating that two weeks
after the wedding, as a result of the non-delivery of the wedding cake, Ramon Montinola, the son-in-law
of Erlinda Francisco, went to Rebecca Lo's residence and offered the sum of P5,000.00 to indemnify for
the damage done, but it was rejected."4
On March 12, 1993, respondents filed with the Regional Trial Court, Cebu City an action for breach of contract
with damages against petitioners.5
After due trial, on May 19, 1995, the trial court rendered a decision in favor of plaintiffs [herein defendants], the
dispositive portion of which reads as follows:
"THE FOREGOING CONSIDERED, judgment is hereby rendered in favor of the plaintiffs and against
Erlinda Francisco.
"Directing the latter to pay the former the following:
"1. The cost of the wedding cake in the amount of P3,175.00;
"2. Moral damages in the amount of P30,000.00;

"3. Attorney's fees in the amount of P10,000.00; and

"4. Cost of litigation.
"SO ORDERED."6
On May 25, 1995, petitioners appealed to the Court of Appeals.7
After due proceedings, on July 05, 1999, the Court of Appeals promulgated its decision modifying the appealed
decision as set out in the opening paragraph of this opinion.8
Hence, this appeal.9
The issues raised are (1) whether the Court of Appeals erred in affirming the trial court's award of moral
damages and increasing the amount from thirty thousand (30,000.00) to two hundred fifty thousand pesos
(P250,000.00); and (2) whether the Court of Appeals was justified in awarding in addition to moral damages,
exemplary damages of one hundred thousand pesos (P100,000.00).
1wphi1.nt

Petitioners submit that the Court of Appeals and the trial court erred in awarding moral damages in favor of
respondents because moral damages are recoverable in breach of contract cases only where the breach was
palpably wanton, reckless, malicious, in bad faith, oppressive or abusive.10
We agree. "To recover moral damages in an action for breach of contract, the breach must be palpably
wanton, reckless, malicious, in bad faith, oppressive or abusive."11
"Under the provisions of this law,12 in culpa contractual or breach of contract, moral damages may be
recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or
in wanton disregard of his contractual obligation and, exceptionally, when the act of breach of contract itself is
constitutive of tort resulting in physical injuries."13
"Moral damages may be awarded in breaches of contracts where the defendant acted fraudulently or in bad
faith."14
"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."15
In this case, "[w]e find no such fraud or bad faith."16
"Moral damages are in the category of an award designed to compensate the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer."17
"The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence
for the law always presumes good faith. It is not enough that one merely suffered sleepless nights, mental
anguish, serious anxiety as the result of the actuations of the other party. Invariably such action must be shown
to have been willfully done in bad faith or will ill motive."18 "Mere allegations of besmirched reputation,
embarrassment and sleepless nights are insufficient to warrant an award for moral damages. It must be shown
that the proximate cause thereof was the unlawful act or omission of the [private respondent] petitioners."19

"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.21
"It must again be stressed that moral damages are emphatically not intended to enrich a plaintiff at the
expense of the defendant."22 "When awarded, moral damages must not be palpably and scandalously
excessive as to indicate that it was the result of passion, prejudice or corruption on the part of the trial court
judge"23 or appellate court justices.24
In the same fashion, to warrant the award of exemplary damages, "[t]he wrongful act must be accompanied by
bad faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent,
reckless or malevolent manner."25
"The requirements of an award of exemplary damages are: (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 can not be recovered as a matter of right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant; (3) the act must be accompanied by bad faith or
done in a wanton, fraudulent, oppressive or malevolent manner."26
Nevertheless, the facts show that when confronted with their failure to deliver on the wedding day the wedding
cake ordered and paid for, petitioners gave the lame excuse that delivery was probably delayed because of the
traffic, when in truth, no cake could be delivered because the order slip got lost. For such prevarication,
petitioners must be held liable for nominal damages for insensitivity, inadvertence or inattention to their
customer's anxiety and need of the hour. "Nominal damages are '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.'"27 Nominal damages may be awarded "to a plaintiff whose right has been violated or invaded
by the defendant, for the purpose of vindicating or recognizing that right, not for indemnifying the plaintiff for
any loss suffered."28
WHEREFORE, the Court GRANTS the petition. The Court REVERSES the decision of the Court of Appeals in
CA-G. R. CV No. 50894, and in lieu thereof, sentences petitioners to pay respondents, as follows:
1. The cost of the wedding cake in the amount of P3,175.00;
2. Nominal damages in the amount of P10,000.00;
3. Attorney's fees in the amount of P10,000.00; and
4. Costs of litigation.
No costs in this instance.
G.R. No. 141994

January 17, 2005

FILIPINAS BROADCASTING NETWORK, INC., petitioner,

vs.

AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMECBCCM) and ANGELITA F. AGO, respondents.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 4 January 1999 Decision2 and 26 January 2000 Resolution of the Court of
Appeals in CA-G.R. CV No. 40151. The Court of Appeals affirmed with modification the 14 December 1992
Decision3 of the Regional Trial Court of Legazpi City, Branch 10, in Civil Case No. 8236. The Court of Appeals
held Filipinas Broadcasting Network, Inc. and its broadcasters Hermogenes Alegre and Carmelo Rima liable
for libel and ordered them to solidarily pay Ago Medical and Educational Center-Bicol Christian College of
Medicine moral damages, attorneys fees and costs of suit.
The Antecedents
"Expos" is a radio documentary4 program hosted by Carmelo Mel Rima ("Rima") and Hermogenes Jun
Alegre ("Alegre").5 Expos is aired every morning over DZRC-AM which is owned by Filipinas Broadcasting
Network, Inc. ("FBNI"). "Expos" is heard over Legazpi City, the Albay municipalities and other Bicol areas.6
In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged complaints from
students, teachers and parents against Ago Medical and Educational Center-Bicol Christian College of
Medicine ("AMEC") and its administrators. Claiming that the broadcasts were defamatory, AMEC and Angelita
Ago ("Ago"), as Dean of AMECs College of Medicine, filed a complaint for damages7 against FBNI, Rima and
Alegre on 27 February 1990. Quoted are portions of the allegedly libelous broadcasts:
JUN ALEGRE:
Let us begin with the less burdensome: if you have children taking medical course at AMEC-BCCM,
advise them to pass all subjects because if they fail in any subject they will repeat their year level,
taking up all subjects including those they have passed already. Several students had approached me
stating that they had consulted with the DECS which told them that there is no such regulation. If [there] is no
such regulation why is AMEC doing the same?
xxx
Second: Earlier AMEC students in Physical Therapy had complained that the course is not recognized
by DECS. xxx
Third: Students are required to take and pay for the subject even if the subject does not have an
instructor - such greed for money on the part of AMECs administration. Take the subject Anatomy:
students would pay for the subject upon enrolment because it is offered by the school. However there would be
no instructor for such subject. Students would be informed that course would be moved to a later date because
the school is still searching for the appropriate instructor.
xxx

It is a public knowledge that the Ago Medical and Educational Center has survived and has been surviving for
the past few years since its inception because of funds support from foreign foundations. If you will take a look
at the AMEC premises youll find out that the names of the buildings there are foreign soundings. There is a
McDonald Hall. Why not Jose Rizal or Bonifacio Hall? That is a very concrete and undeniable evidence that
the support of foreign foundations for AMEC is substantial, isnt it? With the report which is the basis of the
expose in DZRC today, it would be very easy for detractors and enemies of the Ago family to stop the flow of
support of foreign foundations who assist the medical school on the basis of the latters purpose. But if the
purpose of the institution (AMEC) is to deceive students at cross purpose with its reason for being it is possible
for these foreign foundations to lift or suspend their donations temporarily.8
xxx
On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and the AMECInstitute of Mass Communication in their effort to minimize expenses in terms of salary are absorbing
or continues to accept "rejects". For example how many teachers in AMEC are former teachers of Aquinas
University but were removed because of immorality? Does it mean that the present administration of AMEC
have the total definite moral foundation from catholic administrator of Aquinas University. I will prove to you my
friends, that AMEC is a dumping ground, garbage, not merely of moral and physical misfits. Probably
they only qualify in terms of intellect. The Dean of Student Affairs of AMEC is Justita Lola, as the family name
implies. She is too old to work, being an old woman. Is the AMEC administration exploiting the very
[e]nterprising or compromising and undemanding Lola? Could it be that AMEC is just patiently making use of
Dean Justita Lola were if she is very old. As in atmospheric situation zero visibility the plane cannot land,
meaning she is very old, low pay follows. By the way, Dean Justita Lola is also the chairman of the committee
on scholarship in AMEC. She had retired from Bicol University a long time ago but AMEC has patiently made
use of her.
xxx
MEL RIMA:
xxx My friends based on the expose, AMEC is a dumping ground for moral and physically misfit people. What
does this mean? Immoral and physically misfits as teachers.
May I say Im sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no longer fit to
teach. You are too old. As an aviation, your case is zero visibility. Dont insist.
xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the scholarship committee at that.
The reason is practical cost saving in salaries, because an old person is not fastidious, so long as she has
money to buy the ingredient of beetle juice. The elderly can get by thats why she (Lola) was taken in as
Dean.
xxx
xxx On our end our task is to attend to the interests of students. It is likely that the students would be
influenced by evil. When they become members of society outside of campus will be liabilities rather
than assets.What do you expect from a doctor who while studying at AMEC is so much burdened with
unreasonable imposition? What do you expect from a student who aside from peculiar problems because not
all students are rich in their struggle to improve their social status are even more burdened with false
regulations. xxx9(Emphasis supplied)

The complaint further alleged that AMEC is a reputable learning institution. With the supposed exposs, FBNI,
Rima and Alegre "transmitted malicious imputations, and as such, destroyed plaintiffs (AMEC and Ago)
reputation." AMEC and Ago included FBNI as defendant for allegedly failing to exercise due diligence in the
selection and supervision of its employees, particularly Rima and Alegre.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an Answer10 alleging that the
broadcasts against AMEC were fair and true. FBNI, Rima and Alegre claimed that they were plainly impelled by
a sense of public duty to report the "goings-on in AMEC, [which is] an institution imbued with public interest."
Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty. Edmundo Cea,
collaborating counsel of Atty. Lozares, filed a Motion to Dismiss11 on FBNIs behalf. The trial court denied the
motion to dismiss. Consequently, FBNI filed a separate Answer claiming that it exercised due diligence in the
selection and supervision of Rima and Alegre. FBNI claimed that before hiring a broadcaster, the broadcaster
should (1) file an application; (2) be interviewed; and (3) undergo an apprenticeship and training program after
passing the interview. FBNI likewise claimed that it always reminds its broadcasters to "observe truth, fairness
and objectivity in their broadcasts and to refrain from using libelous and indecent language." Moreover, FBNI
requires all broadcasters to pass the Kapisanan ng mga Brodkaster sa Pilipinas ("KBP") accreditation test and
to secure a KBP permit.
On 14 December 1992, the trial court rendered a Decision12 finding FBNI and Alegre liable for libel except
Rima. The trial court held that the broadcasts are libelous per se. The trial court rejected the broadcasters
claim that their utterances were the result of straight reporting because it had no factual basis. The
broadcasters did not even verify their reports before airing them to show good faith. In holding FBNI liable for
libel, the trial court found that FBNI failed to exercise diligence in the selection and supervision of its
employees.
In absolving Rima from the charge, the trial court ruled that Rimas only participation was when he agreed with
Alegres expos. The trial court found Rimas statement within the "bounds of freedom of speech, expression,
and of the press." The dispositive portion of the decision reads:
WHEREFORE, premises considered, this court finds for the plaintiff. Considering the degree of damages
caused by the controversial utterances, which are not found by this court to be really very serious and
damaging, and there being no showing that indeed the enrollment of plaintiff school
dropped,defendants Hermogenes "Jun" Alegre, Jr. and Filipinas Broadcasting Network (owner of the radio
station DZRC), are hereby jointly and severally ordered to pay plaintiff Ago Medical and Educational CenterBicol Christian College of Medicine (AMEC-BCCM) the amount of P300,000.00 moral damages,
plus P30,000.00 reimbursement of attorneys fees, and to pay the costs of suit.
SO ORDERED. 13 (Emphasis supplied)
Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the other, appealed the
decision to the Court of Appeals. The Court of Appeals affirmed the trial courts judgment with modification. The
appellate court made Rima solidarily liable with FBNI and Alegre. The appellate court denied Agos claim for
damages and attorneys fees because the broadcasts were directed against AMEC, and not against her. The
dispositive portion of the Court of Appeals decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the modification that broadcaster
Mel Rima is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes Alegre.
SO ORDERED.14

FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals denied in its 26 January
2000 Resolution.
Hence, FBNI filed this petition.15
The Ruling of the Court of Appeals
The Court of Appeals upheld the trial courts ruling that the questioned broadcasts are libelous per se and that
FBNI, Rima and Alegre failed to overcome the legal presumption of malice. The Court of Appeals found Rima
and Alegres claim that they were actuated by their moral and social duty to inform the public of the students
gripes as insufficient to justify the utterance of the defamatory remarks.
Finding no factual basis for the imputations against AMECs administrators, the Court of Appeals ruled that the
broadcasts were made "with reckless disregard as to whether they were true or false." The appellate court
pointed out that FBNI, Rima and Alegre failed to present in court any of the students who allegedly complained
against AMEC. Rima and Alegre merely gave a single name when asked to identify the students. According to
the Court of Appeals, these circumstances cast doubt on the veracity of the broadcasters claim that they were
"impelled by their moral and social duty to inform the public about the students gripes."
The Court of Appeals found Rima also liable for libel since he remarked that "(1) AMEC-BCCM is a dumping
ground for morally and physically misfit teachers; (2) AMEC obtained the services of Dean Justita Lola to
minimize expenses on its employees salaries; and (3) AMEC burdened the students with unreasonable
imposition and false regulations."16
The Court of Appeals held that FBNI failed to exercise due diligence in the selection and supervision of its
employees for allowing Rima and Alegre to make the radio broadcasts without the proper KBP accreditation.
The Court of Appeals denied Agos claim for damages and attorneys fees because the libelous remarks were
directed against AMEC, and not against her. The Court of Appeals adjudged FBNI, Rima and Alegre solidarily
liable to pay AMEC moral damages, attorneys fees and costs of suit.
1awphi1.nt

Issues
FBNI raises the following issues for resolution:
I. WHETHER THE BROADCASTS ARE LIBELOUS;
II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;
III. WHETHER THE AWARD OF ATTORNEYS FEES IS PROPER; and
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR PAYMENT OF MORAL
DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT.
The Courts Ruling
We deny the petition.
This is a civil action for damages as a result of the allegedly defamatory remarks of Rima and Alegre against
AMEC.17 While AMEC did not point out clearly the legal basis for its complaint, a reading of the complaint
reveals that AMECs cause of action is based on Articles 30 and 33 of the Civil Code. Article 3018 authorizes a

separate civil action to recover civil liability arising from a criminal offense. On the other hand, Article
3319 particularly provides that the injured party may bring a separate civil action for damages in cases of
defamation, fraud, and physical injuries. AMEC also invokes Article 1920 of the Civil Code to justify its claim for
damages. AMEC cites Articles 217621 and 218022 of the Civil Code to hold FBNI solidarily liable with Rima and
Alegre.
I.
Whether the broadcasts are libelous
A libel23 is a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or any act or
omission, condition, status, or circumstance tending to cause the dishonor, discredit, or contempt of a natural
or juridical person, or to blacken the memory of one who is dead.24
There is no question that the broadcasts were made public and imputed to AMEC defects or circumstances
tending to cause it dishonor, discredit and contempt. Rima and Alegres remarks such as "greed for money on
the part of AMECs administrators"; "AMEC is a dumping ground, garbage of xxx moral and physical misfits";
and AMEC students who graduate "will be liabilities rather than assets" of the society are libelous per se.
Taken as a whole, the broadcasts suggest that AMEC is a money-making institution where physically and
morally unfit teachers abound.
However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima and Alegre were plainly
impelled by their civic duty to air the students gripes. FBNI alleges that there is no evidence that ill will or spite
motivated Rima and Alegre in making the broadcasts. FBNI further points out that Rima and Alegre exerted
efforts to obtain AMECs side and gave Ago the opportunity to defend AMEC and its administrators. FBNI
concludes that since there is no malice, there is no libel.
FBNIs contentions are untenable.
Every defamatory imputation is presumed malicious.25 Rima and Alegre failed to show adequately their good
intention and justifiable motive in airing the supposed gripes of the students. As hosts of a documentary or
public affairs program, Rima and Alegre should have presented the public issues "free from inaccurate and
misleading information."26 Hearing the students alleged complaints a month before the expos,27 they had
sufficient time to verify their sources and information. However, Rima and Alegre hardly made a thorough
investigation of the students alleged gripes. Neither did they inquire about nor confirm the purported
irregularities in AMEC from the Department of Education, Culture and Sports. Alegre testified that he merely
went to AMEC to verify his report from an alleged AMEC official who refused to disclose any information.
Alegre simply relied on the words of the students "because they were many and not because there is proof that
what they are saying is true."28 This plainly shows Rima and Alegres reckless disregard of whether their report
was true or not.
Contrary to FBNIs claim, the broadcasts were not "the result of straight reporting." Significantly, some courts in
the United States apply the privilege of "neutral reportage" in libel cases involving matters of public interest or
public figures. Under this privilege, a republisher who accurately and disinterestedly reports certain defamatory
statements made against public figures is shielded from liability, regardless of the republishers subjective
awareness of the truth or falsity of the accusation.29 Rima and Alegre cannot invoke the privilege of neutral
reportage because unfounded comments abound in the broadcasts. Moreover, there is no existing controversy
involving AMEC when the broadcasts were made. The privilege of neutral reportage applies where the
defamed person is a public figure who is involved in an existing controversy, and a party to that controversy
makes the defamatory statement.30

However, FBNI argues vigorously that malice in law does not apply to this case. Citing Borjal v. Court of
Appeals,31 FBNI contends that the broadcasts "fall within the coverage of qualifiedly privileged
communications" for being commentaries on matters of public interest. Such being the case, AMEC should
prove malice in fact or actual malice. Since AMEC allegedly failed to prove actual malice, there is no libel.
FBNIs reliance on Borjal is misplaced. In Borjal, the Court elucidated on the "doctrine of fair comment," thus:
[F]air commentaries on matters of public interest are privileged and constitute a valid defense in an action for
libel or slander. The doctrine of fair comment means that while in general every discreditable imputation
publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and
every false imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against
a public person in his public capacity, it is not necessarily actionable. In order that such discreditable
imputation to a public official may be actionable, it must either be a false allegation of fact or a
comment based on a false supposition. If the comment is an expression of opinion, based on
established facts, then it is immaterial that the opinion happens to be mistaken, as long as it might reasonably
be inferred from the facts.32(Emphasis supplied)
True, AMEC is a private learning institution whose business of educating students is "genuinely imbued with
public interest." The welfare of the youth in general and AMECs students in particular is a matter which the
public has the right to know. Thus, similar to the newspaper articles in Borjal, the subject broadcasts dealt with
matters of public interest. However, unlike in Borjal, the questioned broadcasts are not based on established
facts. The record supports the following findings of the trial court:
xxx Although defendants claim that they were motivated by consistent reports of students and parents against
plaintiff, yet, defendants have not presented in court, nor even gave name of a single student who made the
complaint to them, much less present written complaint or petition to that effect. To accept this defense of
defendants is too dangerous because it could easily give license to the media to malign people and
establishments based on flimsy excuses that there were reports to them although they could not satisfactorily
establish it. Such laxity would encourage careless and irresponsible broadcasting which is inimical to public
interests.
Secondly, there is reason to believe that defendant radio broadcasters, contrary to the mandates of their
duties, did not verify and analyze the truth of the reports before they aired it, in order to prove that they are in
good faith.
Alegre contended that plaintiff school had no permit and is not accredited to offer Physical Therapy courses.
Yet, plaintiff produced a certificate coming from DECS that as of Sept. 22, 1987 or more than 2 years before
the controversial broadcast, accreditation to offer Physical Therapy course had already been given the plaintiff,
which certificate is signed by no less than the Secretary of Education and Culture herself, Lourdes R.
Quisumbing (Exh. C-rebuttal). Defendants could have easily known this were they careful enough to verify. And
yet, defendants were very categorical and sounded too positive when they made the erroneous report that
plaintiff had no permit to offer Physical Therapy courses which they were offering.
The allegation that plaintiff was getting tremendous aids from foreign foundations like Mcdonald Foundation
prove not to be true also. The truth is there is no Mcdonald Foundation existing. Although a big building of
plaintiff school was given the name Mcdonald building, that was only in order to honor the first missionary in
Bicol of plaintiffs religion, as explained by Dr. Lita Ago. Contrary to the claim of defendants over the air, not a
single centavo appears to be received by plaintiff school from the aforementioned McDonald Foundation which
does not exist.

Defendants did not even also bother to prove their claim, though denied by Dra. Ago, that when medical
students fail in one subject, they are made to repeat all the other subject[s], even those they have already
passed, nor their claim that the school charges laboratory fees even if there are no laboratories in the school.
No evidence was presented to prove the bases for these claims, at least in order to give semblance of good
faith.
As for the allegation that plaintiff is the dumping ground for misfits, and immoral teachers, defendant[s] singled
out Dean Justita Lola who is said to be so old, with zero visibility already. Dean Lola testified in court last Jan.
21, 1991, and was found to be 75 years old. xxx Even older people prove to be effective teachers like Supreme
Court Justices who are still very much in demand as law professors in their late years. Counsel for defendants
is past 75 but is found by this court to be still very sharp and effective. So is plaintiffs counsel.
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Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally infirmed, but is still alert and
docile.
The contention that plaintiffs graduates become liabilities rather than assets of our society is a mere
conclusion. Being from the place himself, this court is aware that majority of the medical graduates of plaintiffs
pass the board examination easily and become prosperous and responsible professionals.33
Had the comments been an expression of opinion based on established facts, it is immaterial that the opinion
happens to be mistaken, as long as it might reasonably be inferred from the facts.34 However, the comments of
Rima and Alegre were not backed up by facts. Therefore, the broadcasts are not privileged and remain
libelousper se.
The broadcasts also violate the Radio Code35 of the Kapisanan ng mga Brodkaster sa Pilipinas, Ink. ("Radio
Code"). Item I(B) of the Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES
1. x x x
4. Public affairs program shall present public issues free from personal bias, prejudice
andinaccurate and misleading information. x x x Furthermore, the station shall strive to present
balanced discussion of issues. x x x.
xxx
7. The station shall be responsible at all times in the supervision of public affairs, public issues and
commentary programs so that they conform to the provisions and standards of this code.
8. It shall be the responsibility of the newscaster, commentator, host and announcer to protect public
interest, general welfare and good order in the presentation of public affairs and public
issues.36 (Emphasis supplied)
The broadcasts fail to meet the standards prescribed in the Radio Code, which lays down the code of ethical
conduct governing practitioners in the radio broadcast industry. The Radio Code is a voluntary code of conduct
imposed by the radio broadcast industry on its own members. The Radio Code is a public warranty by the
radio broadcast industry that radio broadcast practitioners are subject to a code by which their conduct are
measured for lapses, liability and sanctions.

The public has a right to expect and demand that radio broadcast practitioners live up to the code of conduct of
their profession, just like other professionals. A professional code of conduct provides the standards for
determining whether a person has acted justly, honestly and with good faith in the exercise of his rights and
performance of his duties as required by Article 1937 of the Civil Code. A professional code of conduct also
provides the standards for determining whether a person who willfully causes loss or injury to another has
acted in a manner contrary to morals or good customs under Article 2138 of the Civil Code.
II.
Whether AMEC is entitled to moral damages
FBNI contends that AMEC is not entitled to moral damages because it is a corporation.39
A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or
moral shock.40 The Court of Appeals cites Mambulao Lumber Co. v. PNB, et al.41 to justify the award of moral
damages. However, the Courts statement in Mambulao that "a corporation may have a good reputation which,
if besmirched, may also be a ground for the award of moral damages" is an obiter dictum.42
Nevertheless, AMECs claim for moral damages falls under item 7 of Article 221943 of the Civil Code. This
provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of
defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a
juridical person such as a corporation can validly complain for libel or any other form of defamation and claim
for moral damages.44
Moreover, where the broadcast is libelous per se, the law implies damages.45 In such a case, evidence of an
honest mistake or the want of character or reputation of the party libeled goes only in mitigation of
damages.46Neither in such a case is the plaintiff required to introduce evidence of actual damages as a
condition precedent to the recovery of some damages.47 In this case, the broadcasts are libelous per se. Thus,
AMEC is entitled to moral damages.
However, we find the award of P300,000 moral damages unreasonable. The record shows that even though
the broadcasts were libelous per se, AMEC has not suffered any substantial or material damage to its
reputation. Therefore, we reduce the award of moral damages from P300,000 to P150,000.
III.
Whether the award of attorneys fees is proper
FBNI contends that since AMEC is not entitled to moral damages, there is no basis for the award of attorneys
fees. FBNI adds that the instant case does not fall under the enumeration in Article 220848 of the Civil Code.
The award of attorneys fees is not proper because AMEC failed to justify satisfactorily its claim for attorneys
fees. AMEC did not adduce evidence to warrant the award of attorneys fees. Moreover, both the trial and
appellate courts failed to explicitly state in their respective decisions the rationale for the award of attorneys
fees.49 In Inter-Asia Investment Industries, Inc. v. Court of Appeals ,50 we held that:
[I]t is an accepted doctrine that the award thereof as an item of damages is the exception rather than the rule,
and counsels fees are not to be awarded every time a party wins a suit. The power of the court to award
attorneys fees under Article 2208 of the Civil Code demands factual, legal and equitable justification,

without which the award is a conclusion without a premise, its basis being improperly left to
speculation and conjecture. In all events, the court must explicitly state in the text of the decision, and not
only in the decretal portion thereof, the legal reason for the award of attorneys fees.51 (Emphasis supplied)
While it mentioned about the award of attorneys fees by stating that it "lies within the discretion of the court
and depends upon the circumstances of each case," the Court of Appeals failed to point out any circumstance
to justify the award.
IV.
Whether FBNI is solidarily liable with Rima and Alegre for moral damages, attorneys fees and costs of suit
FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of damages and attorneys
fees because it exercised due diligence in the selection and supervision of its employees, particularly Rima
and Alegre. FBNI maintains that its broadcasters, including Rima and Alegre, undergo a "very regimented
process" before they are allowed to go on air. "Those who apply for broadcaster are subjected to interviews,
examinations and an apprenticeship program."
FBNI further argues that Alegres age and lack of training are irrelevant to his competence as a broadcaster.
FBNI points out that the "minor deficiencies in the KBP accreditation of Rima and Alegre do not in any way
prove that FBNI did not exercise the diligence of a good father of a family in selecting and supervising them."
Rimas accreditation lapsed due to his non-payment of the KBP annual fees while Alegres accreditation card
was delayed allegedly for reasons attributable to the KBP Manila Office. FBNI claims that membership in the
KBP is merely voluntary and not required by any law or government regulation.
FBNIs arguments do not persuade us.
The basis of the present action is a tort. Joint tort feasors are jointly and severally liable for the tort which they
commit.52 Joint tort feasors are all the persons who command, instigate, promote, encourage, advise,
countenance, cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for
their benefit.53 Thus, AMEC correctly anchored its cause of action against FBNI on Articles 2176 and 2180 of
the Civil Code.
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As operator of DZRC-AM and employer of Rima and Alegre, FBNI is solidarily liable to pay for damages arising
from the libelous broadcasts. As stated by the Court of Appeals, "recovery for defamatory statements published
by radio or television may be had from the owner of the station, a licensee, the operator of the station, or a
person who procures, or participates in, the making of the defamatory statements." 54 An employer and
employee are solidarily liable for a defamatory statement by the employee within the course and scope of his
or her employment, at least when the employer authorizes or ratifies the defamation.55 In this case, Rima and
Alegre were clearly performing their official duties as hosts of FBNIs radio program Expos when they aired
the broadcasts. FBNI neither alleged nor proved that Rima and Alegre went beyond the scope of their work at
that time. There was likewise no showing that FBNI did not authorize and ratify the defamatory broadcasts.
Moreover, there is insufficient evidence on record that FBNI exercised due diligence in
the selection andsupervision of its employees, particularly Rima and Alegre. FBNI merely showed that it
exercised diligence in theselection of its broadcasters without introducing any evidence to prove that it
observed the same diligence in thesupervision of Rima and Alegre. FBNI did not show how it exercised
diligence in supervising its broadcasters. FBNIs alleged constant reminder to its broadcasters to "observe
truth, fairness and objectivity and to refrain from using libelous and indecent language" is not enough to prove
due diligence in the supervision of its broadcasters. Adequate training of the broadcasters on the industrys

code of conduct, sufficient information on libel laws, and continuous evaluation of the broadcasters
performance are but a few of the many ways of showing diligence in the supervision of broadcasters.
FBNI claims that it "has taken all the precaution in the selection of Rima and Alegre as broadcasters, bearing
in mind their qualifications." However, no clear and convincing evidence shows that Rima and Alegre
underwent FBNIs "regimented process" of application. Furthermore, FBNI admits that Rima and Alegre had
deficiencies in their KBP accreditation,56 which is one of FBNIs requirements before it hires a broadcaster.
Significantly, membership in the KBP, while voluntary, indicates the broadcasters strong commitment to
observe the broadcast industrys rules and regulations. Clearly, these circumstances show FBNIs lack of
diligence in selecting andsupervising Rima and Alegre. Hence, FBNI is solidarily liable to pay damages
together with Rima and Alegre.
WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January 1999 and Resolution of
26 January 2000 of the Court of Appeals in CA-G.R. CV No. 40151 with the MODIFICATION that the award of
moral damages is reduced from P300,000 to P150,000 and the award of attorneys fees is deleted. Costs
against petitioner.
SO ORDERED.