Torts

09-20-14

G.R. No. 120921 January 29, 1998

THE
PEOPLE
OF
THE
PHILIPPINES, plaintiff-appellee,
vs.
FELIPE
BALLESTEROS, CESAR GALO and ALVIN BULUSAN, accused-appellants
ROMERO, J.:
This is an appeal from the decision of the Regional Trial Court of Bangui, Ilocos
Norte, Branch 19, finding the accused guilty beyond reasonable doubt of murder,
qualified by treachery, as charged under Article 248 of the Revised Penal Code, as
amended, to wit:
WHEREFORE, the Court finds the three accused guilty beyond reasonable
doubt of murder, qualified by treachery, as charged, defined and penalized
under Article 248 of the Revised Penal Code, as amended, and applying
Article 248 of the Revised Penal Code hereby sentences them to reclusion
perpetua, with all the accessory penalties provided by law, and further
sentencing them to pay jointly and solidarily
1. The heirs of Jerry Agliam compensatory damages in the amount of FIFTY
THOUSAND PESOS (P50,000.00), moral damages in the amount of TWENTY
THOUSAND PESOS (P20,000.00), and actual damages in the amount of
THIRTY FIVE THOUSAND SEVEN HUNDRED FIFTY-FIVE PESOS (P35,755.00),
with interest;
2. The heirs of the late Eduardo Tolentino, Sr., compensatory damages in
the amount of FIFTY THOUSAND PESOS (P50,000.00), moral damages in
the amount of TWENTY THOUSAND PESOS (P20,000.00), and actual
damages in the total amount of SIXTY-ONE THOUSAND SEVEN HUNDRED
EIGHTY-FIVE PESOS (P61,785.00), with interest;
3. Carmelo Agliam, actual damages in the amount of TWO THOUSAND AND
THREE PESOS AND FORTY CENTAVOS (P2,003.40), and moral damages in
the amount of TEN THOUSAND PESOS (P10,000.00), with interest;
4. Vidal Agliam Jr., Robert Cacal and Ronnel Tolentino, moral damages in
the amount of FIVE THOUSAND PESOS (P5,000.00) each, with interest.
5. The costs.
The accused shall be credited in the service of their sentence the full time
during which they had undergone preventive imprisonment, if they agreed
voluntarily in writing to abide by the same disciplinary rules imposed upon
convicted prisoners, otherwise, they shall be credited in the service thereof
with only four-fifths of the time during which they had undergone
preventive imprisonment. 1

In the warm summer evening of May 28, 1991, Carmelo Agliam, his half-brother
Eduardo Tolentino, Ronnel Tolentino, Vidal Agliam, his brother Jerry Agliam, Robert
Cacal, Raymundo Bangi and Marcial Barid converged at acarinderia owned by
Ronnel Tolentino at Ganayao, Pasuquin, Ilocos Norte. They proceeded to the
barangay hall at Carusipan to attend a dance. The group did not tarry for long at
the dance because they sensed some hostility from Cesar Galo and his companions
who were giving them dagger looks. In order to avoid trouble, especially during the
festivity, they decided to head for home instead of reacting to the perceived
provocation of Galo and his companions.
The group had barely left when, within fifty meters from the dance hall, their owner
jeep was fired upon from the rear. Vidal Agliam was able to jump out from the
eastern side of the "topdown" jeep and landed just beside it. He scurried to the side
of the road and hid in the ricefield. His younger brother Jerry also managed to jump
out, but was shot in the stomach and died. 2 Carmelo Agliam, Robert Cacal and
Ronnel Tolentino sustained injuries in the right foot, back of the right thigh, and legs
and thighs, respectively. 3 The stunned Eduardo Tolentino was not even able to
move from his seat and was hit with a bullet which punctured his right kidney. 4 He
did not survive. The precipitate attack upon the jeep left two people dead and four
others injured.
Based upon the affidavits of Carmelo and Vidal Agliam, warrants for the arrest of
Ballesteros, Galo and Bulusan were issued. Charged with the crime of double
murder with multiple frustrated murder, an information was filed as follows:
That on or about (sic) May 28, 1991, in the Municipality of Pasuquin, Ilocos
Norte, Philippines and within the jurisdiction of the Honorable Court, the
abovenamed accused, nighttime purposely sought, with evident premeditation
and treachery, confederating and mutually helping one anotlner, did then and
there, with intent to kill, willfully, unlawfully and feloniously attack and shot
Eduardo Tolentino Sr., Jerry Agliam, Vidal Agliam, Carmelo Agliam, Robert
Cacal and Ronnel Tolentino, with the use of firearms which caused the death of
Eduardo Tolentino Sr. and Jerry Agliam and thereby inflicting gunshot wounds
to Vidal Agliam, Carmelo Agliam, Robert Cacal and Ronnel Tolentino having
performed all the acts which would have produced the crime of Murder, but
which did not by reason of causes independent of the will of the defendant,
namely the able and timely medical assistance given to said Vidal Agliam,
Carmelo Agliam, Robert Cacal and Ronnel Tolentino which prevented their
death.
All pleaded not guilty. Paraffin tests conducted on Galo and Ballesteros produced
positive results. Bulusan was not tested for nitrates.
In his testimony, Galo claimed that he did not even talk to Bulusan or any of his
companions at the basketball court, as alleged by the complainants. Having been
found with gunpowder residue in his hands, Galo attempted to exculpate himself
from the results by confessing that he had been a cigarette smoker for the past ten
years and had, in fact, just consumed eight cigarette sticks prior to the test. He
further asserted that paraffin tests are not infallible, and that his hand may have
been contaminated by a nitrogenous compound, the source of which is urine.

Torts
Lastly, he said that he was not even present at the crime scene when the firing
incident took place; hence, he could not have been one of those who strafed the
jeep. 5
For his part, Ballesteros interposed the defense of alibi, narrating to the court that,
on May 28, 1991, at around 7:00 o'clock in the evening, he went to a nearby store
to purchase some cigarettes. He returned home within thirty minutes and cleaned
his garlic bulbs before retiring at 9:00 o'clock. The next morning, he busied himself
with some chores, which included fertilizing his pepper plants with sulfate. He
handled the fertilizers without gloves. To counter the finding of traces of nitrates on
his left hand, Ballesteros maintained that he uses his left hand in lighting cigarettes,
as it was very painful for him to use his right hand. He likewise informed the trial
court that he had no motive to kill the victims. 6
Bulusan echoed the defense of alibi of Galo and Ballesteros, stating that he saw
only Galo on the evening of the dance but did not talk to him. He denied joining the
two later that night because after the dance, he went straight to the house of
Michael Viloria, where he spent the night he went to work at 7:00 o'clock in the
morning of the following day. 7
The trial court found the three accused guilty beyond reasonable doubt of murder,
qualified by treachery, as charged, defined and penalized under Article 248 of the
Revised Penal Code.
The accused now come to the High Court on appeal, praying that the decision of
the trial court be reversed and that a new one be entered acquitting them of the
charges.
The principal question to be resolved has to do with the merits of the decision of
the lower court. Was it correct in finding accused-appellants guilty beyond
reasonable doubt? We answer in the affirmative.
Accused-appellants insist that the trial court erred in finding that Carmelo and Vidal
Agliam recognized them as the assailants. This claim is unmeritorious. In their
testimonies, Carmelo and Vidal Agliam both described the area to be well illumined
by the moon. The shooting took place on a small road in the mountainous terrains
of Ilocos Norte, where the air is free from darkening elements and turbidity. It being
a summer evening, there could not have been any fog to becloud the atmosphere
and hamper the vision of the victims, which would have prevented them from
clearly seeing their assailants. They pinpointed the location of the malefactors to be
approximately three meters from where they stood. 8 Considering the luminescence
of the moon and the proximity between them, the victims could distinctly identify
their assailants. It must be noted that Carmelo was acquainted with Galo and his
brother, a butcher, since he used to deal with them in his business of buying and
selling cattle. 9 Bulusan was a classmate of Vidal at Cadaratan School. Generally,
people in rural communities know each other both by face and name. 10 Bulusan
and Agliam were, not only townmates, but former classmates as well. The constant
interaction between them through the years would necessarily lead to familiarity
with each other such that, at the very least, one would have been able to recognize
the other easily.

09-20-14
That accused-appellants had no motive in perpetrating the offense is irrelevant. A
distinction is herein timely made between motive and intent. Motive is the moving
power which impels one to action for a definite result. Intent, on the other hand, is
the purpose to use a particular means to effect such result. 11 Motive alone is not
proof of a crime. 12 In order to tip the scales in its favor, intent and not motive must
be established by the prosecution. Motive is hardly ever an essential element of a
crime. A man driven by extreme moral perversion may be led to commit a crime,
without a real motive but a just for the sake of committing it. 13 Along the same line,
a man who commits a crime with an apparent motive may produce different results,
for which he is punished. As held in a line of cases, the rule is well-settled that the
prosecution need not prove motive on the part of the accused when the latter has
been positively identified as the author of the crime. 14 Lack or absence of motive
for committing the crime does not preclude conviction thereof where there were
reliable witnesses who fully and satisfactorily identified the accused as the
perpetrator of the felony. 15
Accused-appellant's attempt to offer wild excuses regarding the source of the
gunpowder traces found on their hands is futile. Experts confirm the possibility that
cigarettes, fertilizers and urine may leave traces of nitrates, but these are minimal
and, unlike those found in gunpowder, may be washed off with tap water.
The hackneyed defense of alibi interposed by accused-appellants must likewise fail.
As consistently enunciated by this Court, the established doctrine is that, for the
defense of alibi to prosper, the accused must prove, not only that he was at some
other place at the time of the commission of the crime, but also that it was
physically impossible for him to be at the locus delicti or within its immediate
vicinity. 16 This accused-appellants failed to satisfactorily prove. On the night of May
28, 1991, Galo and Bulusan attended the dance at the barangay hall. After the
dance, they went their separate ways but remained within the barangay. Galo
lingered in the premises. Bulusan slept over at the house of Michael Viloria, which
was within walking distance from the dance hall.
The defense of alibi must be established by positive, clear and satisfactorily
evidence, the reason being that it is easily manufactured and usually so unreliable
that it can rarely be given credence. 17 This is especially true in case of positive
identification of the culprit by reliable witnesses, 18 which renders their alibis
worthless. 19 Positive identification prevails over denials and alibis. 20
Accused-appellants are under the common misconception that proof beyond
reasonable doubt requires total freedom from any quantum of doubt. This is not so.
Under Section 2, Rule 133 of the Rules of Court,
(p)roof beyond reasonable doubt does not mean such a degree of
proof as, excluding possibility of error, produces absolute
certainty. Moral certainty only is required, or that degree of proof
which produces conviction in an unprejudiced mind.
Absolute certainty of guilt is not demanded by law to convict a person of a criminal
charge. The doubt to the benefit of which an accused is entitled in a criminal trial is
a reasonable doubt, not a whimsical or fanciful doubt based on imagined but wholly

Torts
improbable possibilities and unsupported by evidence. 21 Reasonable doubt is that
engendered by an investigation of the whole proof and inability, after such
investigation, to let the mind rest easy upon the certainty of guilt. 22 A precise
example would be the uncorroborated alibi of accused in the case at bar where
accused-appellants individually interposed the wavering defense of alibi. Galo failed
to elucidate on his whereabouts after the dance, whereas Bulusan claimed to have
slept in the house of one Michael Viloria. Ballesteros attested that he was not at the
dance hall at all. None of them, however, attempted to corroborate their alibi
through the testimony of witnesses. In fact, they never attempted to present as
witnesses those who would have testified to having seen them elsewhere on the
night in question. Had they done so, the presentation of corroborative testimony
would have reenforced their defense of alibi. As held in People vs. Ligotan, 23an alibi
must be supported by credible corroboration from disinterested witnesses, and
where such defense is not corroborated, it is fatal to the accused.

09-20-14
the policy of this Court, the amount of fifty thousand pesos (P50,000.00) is given to
the heirs of the victims by way of indemnity, and not as compensatory
damages. 33 As regards moral damages, the amount of psychological pain, damage
and injury caused to the heirs of the victims, although inestimable, 34 may be
determined by the trial court in its discretion. Hence, we see no reason to disturb its
findings as to this matter.
WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED
WITH MODIFICATION. No pronouncement as to costs.
SO ORDERED.

The Court correctly ruled in finding that the offense was qualified by treachery.
Under Paragraph 16, Article 14 of the Revised Penal Code, "(t)here is treachery
when the offender commits any of the crimes against the person employing means,
methods or forms in the execution thereof which tend directly and specially to
insure its execution without risk to himself arising from the defense which the
offended party might make." The requisites of treachery are twofold: (1) (t)hat at
the time of the attack, the victim was not in a position to defend himself ; and (2)
that the offender consciously adopted the particular means, method or form of
attack employed by him. 24 As regards the second requisite, the accused must
make some preparation to kill his victim in such a manner at to insure the execution
of the crime or to make it impossible or hard for the person attacked to defend
himself or retaliate. 25 There must be evidence that such form of attack
was purposely adopted by the accused. 26 Here, it is obvious that the accusedappellants had sufficient opportunity to reflect on their heinous plan. The facts show
that the attack was well-planned and not merely a result of the impulsiveness of the
offenders. Manifestations of their evil designs were already apparent as early as the
time of the dance. They were well-armed and approached the homebound victims,
totally unaware of their presence, from behind. There was no opportunity for the
latter to defend themselves, the attack being so sudden and Eduardo Tolentino was
shot right where he sat.
The trial court was also correct in the award of damages to the heirs of the victims.
Damages may be defined as the pecuniary compensation, recompense, or
satisfaction for an injury sustained, or as otherwise expressed, the pecuniary
consequences which the law imposes for the breach of some duty or the violation of
some right. 27 Actual or compensatory damages are those awarded in satisfaction
of, or in recompense for, loss or injury sustained, 28 whereas moral damages may
be invoked when the complainant has experienced mental anguish, serious anxiety,
physical suffering, moral shock and so forth, and had furthermore shown that these
were the proximate result of the offender's wrongful act or omission. 29 In granting
actual or compensatory damages, the party making a claim for such must present
the best evidence available, viz., receipts, vouchers, and the like, 30 as corroborated
by his testimony. 31 Here, the claim for actual damages by the heirs of the victims is
not controverted, the same having been fully substantiated by receipts
accumulated by them and presented to the court. 32 Therefore, the award of actual
damages is proper. However, the order granting compensatory damages to the
heirs of Jerry Agliam and Eduardo Tolentino Sr. must be amended. Consistent with

Torts

09-20-14
Perusing the record, this Court finds that the original plaintiff Pacifico
Mabasa died during the pendency of this case and was substituted by
Ofelia Mabasa, his surviving spouse [and children].
The plaintiff owns a parcel of land with a two-door apartment erected
thereon situated at Interior P. Burgos St., Palingon, Tipas, Tagig, Metro
Manila. The plaintiff was able to acquire said property through a contract of
sale with spouses Mamerto Rayos and Teodora Quintero as vendors last
September 1981. Said property may be described to be surrounded by
other immovables pertaining to defendants herein. Taking P. Burgos Street
as the point of reference, on the left side, going to plaintiff's property, the
row of houses will be as follows: That of defendants Cristino and Brigido
Custodio, then that of Lito and Maria Cristina Santos and then that of
Ofelia Mabasa. On the right side (is) that of defendant Rosalina Morato and
then a Septic Tank (Exhibit "D"). As an access to P. Burgos Street from
plaintiff's property, there are two possible passageways. The first
passageway is approximately one meter wide and is about 20 meters
distan(t) from Mabasa's residence to P. Burgos Street. Such path is passing
in between the previously mentioned row of houses. The second
passageway is about 3 meters in width and length from plaintiff Mabasa's
residence to P. Burgos Street; it is about 26 meters. In passing thru said
passageway, a less than a meter wide path through the septic tank and
with 5-6 meters in length, has to be traversed.

G.R. No. 116100

February 9, 1996

SPOUSES CRISTINO and BRIGIDA CUSTODIO and SPOUSES LITO and MARIA
CRISTINA SANTOS,petitioners, vs. COURT OF APPEALS, HEIRS OF PACIFICO
C. MABASA and REGIONAL TRIAL COURT OF PASIG, METRO MANILA,
BRANCH 181, respondents.
REGALADO, J.:
This petition for review on certiorari assails the decision of respondent Court of
Appeals in CA-G.R. CV No. 29115, promulgated on November 10, 1993, which
affirmed with modification the decision of the trial court, as well as its resolution
dated July 8, 1994 denying petitioner's motion for reconsideration.1
On August 26, 1982, Civil Case No. 47466 for the grant of an easement of right of
way was filed by Pacifico Mabasa against Cristino Custodio, Brigida R. Custodio,
Rosalina R. Morato, Lito Santos and Maria Cristina C. Santos before the Regional
Trial Court of Pasig and assigned to Branch 22 thereof.2
The generative facts of the case, as synthesized by the trial court and adopted by
the Court of Appeals, are as follows:

When said property was purchased by Mabasa, there were tenants

occupying the remises and who were acknowledged by plaintiff Mabasa as
tenants. However, sometime in February, 1982, one of said tenants
vacated the apartment and when plaintiff Mabasa went to see the
premises, he saw that there had been built an adobe fence in the first
passageway making it narrower in width. Said adobe fence was first
constructed by defendants Santoses along their property which is also
along the first passageway. Defendant Morato constructed her adobe fence
and even extended said fence in such a way that the entire passageway
was enclosed. (Exhibit "1-Santoses and Custodios, Exh. "D" for plaintiff,
Exhs. "1-C", "1-D" and "1-E") And it was then that the remaining tenants of
said apartment vacated the area. Defendant Ma. Cristina Santos testified
that she constructed said fence because there was an incident when her
daughter was dragged by a bicycle pedalled by a son of one of the tenants
in said apartment along the first passageway. She also mentioned some
other inconveniences of having (at) the front of her house a pathway such
as when some of the tenants were drunk and would bang their doors and
windows. Some of their footwear were even lost. . . . 3 (Emphasis in original
text; corrections in parentheses supplied)
On February 27, 1990, a decision was rendered by the trial court, with this
dispositive part:
Accordingly, judgment is hereby rendered as follows:

Torts

09-20-14
1) Ordering defendants Custodios and Santoses to give plaintiff permanent
access ingress and egress, to the public street;

for the purpose of reversing or modifying the judgment in the appellee's favor and
giving him other affirmative reliefs.7

2) Ordering the plaintiff to pay defendants Custodios and Santoses the

sum of Eight Thousand Pesos (P8,000) as indemnity for the permanent use
of the passageway.

However, with respect to the second issue, we agree with petitioners that the Court
of Appeals erred in awarding damages in favor of private respondents. The award of
damages has no substantial legal basis. A reading of the decision of the Court of
Appeals will show that the award of damages was based solely on the fact that the
original plaintiff, Pacifico Mabasa, incurred losses in the form of unrealized rentals
when the tenants vacated the leased premises by reason of the closure of the
passageway.

The parties to shoulder their respective litigation expenses. 4

Not satisfied therewith, therein plaintiff represented by his heirs, herein private
respondents, went to the Court of Appeals raising the sole issue of whether or not
the lower court erred in not awarding damages in their favor. On November 10,
1993, as earlier stated, the Court of Appeals rendered its decision affirming the
judgment of the trial court with modification, the decretal portion of which disposes
as follows:
WHEREFORE, the appealed decision of the lower court is hereby AFFIRMED
WITH MODIFICATION only insofar as the herein grant of damages to
plaintiffs-appellants. The Court hereby orders defendants-appellees to pay
plaintiffs-appellants the sum of Sixty Five Thousand (P65,000) Pesos as
Actual Damages, Thirty Thousand (P30,000) Pesos as Moral Damages, and
Ten Thousand (P10,000) Pesos as Exemplary Damages. The rest of the
appealed decision is affirmed to all respects.5
On July 8, 1994, the Court of Appeals denied petitioner's motion for
reconsideration.6 Petitioners then took the present recourse to us, raising two
issues, namely, whether or not the grant of right of way to herein private
respondents is proper, and whether or not the award of damages is in order.
With respect to the first issue, herein petitioners are already barred from raising the
same. Petitioners did not appeal from the decision of the court a quo granting
private respondents the right of way, hence they are presumed to be satisfied with
the adjudication therein. With the finality of the judgment of the trial court as to
petitioners, the issue of propriety of the grant of right of way has already been laid
to rest.
For failure to appeal the decision of the trial court to the Court of Appeals,
petitioners cannot obtain any affirmative relief other than those granted in the
decision of the trial court. That decision of the court below has become final as
against them and can no longer be reviewed, much less reversed, by this Court.
The rule in this jurisdiction is that whenever an appeal is taken in a civil case, an
appellee who has not himself appealed may not obtain from the appellate court any
affirmative relief other than what was granted in the decision of the lower court.
The appellee can only advance any argument that he may deem necessary to
defeat the appellant's claim or to uphold the decision that is being disputed, and he
can assign errors in his brief if such is required to strengthen the views expressed
by the court a quo. These assigned errors, in turn, may be considered by the
appellate court solely to maintain the appealed decision on other grounds, but not

However, the mere fact that the plaintiff suffered losses does not give rise to a right
to recover damages. To warrant the recovery of damages, there must be both a
right of action for a legal wrong inflicted by the defendant, and damage resulting to
the plaintiff therefrom. Wrong without damage, or damage without wrong, does not
constitute a cause of action, since damages are merely part of the remedy allowed
for the injury caused by a breach or wrong.8
There is a material distinction between damages and injury. Injury is the illegal
invasion of a legal right; damage is the loss, hurt, or harm which results from the
injury; and damages are the recompense or compensation awarded for the damage
suffered. Thus, there can be damage without injury in those instances in which the
loss or harm was not the result of a violation of a legal duty. These situations are
often called damnum absque injuria.9
In order that a plaintiff may maintain an action for the injuries of which he
complains, he must establish that such injuries resulted from a breach of duty
which the defendant owed to the plaintiff a concurrence of injury to the plaintiff and
legal responsibility by the person causing it. 10 The underlying basis for the award of
tort damages is the premise that an individual was injured in contemplation of law.
Thus, there must first be the breach of some duty and the imposition of liability for
that breach before damages may be awarded; it is not sufficient to state that there
should be tort liability merely because the plaintiff suffered some pain and
suffering.11
Many accidents occur and many injuries are inflicted by acts or omissions which
cause damage or loss to another but which violate no legal duty to such other
person, and consequently create no cause of action in his favor. In such cases, the
consequences must be borne by the injured person alone. The law affords no
remedy for damages resulting from an act which does not amount to a legal injury
or wrong.12
In other words, in order that the law will give redress for an act causing damage,
that act must be not only hurtful, but wrongful. There must be damnum et
injuria.13 If, as may happen in many cases, a person sustains actual damage, that is,
harm or loss to his person or property, without sustaining any legal injury, that is,
an act or omission which the law does not deem an injury, the damage is regarded
as damnum absque injuria.14

Torts
In the case at bar, although there was damage, there was no legal injury. Contrary
to the claim of private respondents, petitioners could not be said to have violated
the principle of abuse of right. In order that the principle of abuse of right provided
in Article 21 of the Civil Code can be applied, it is essential that the following
requisites concur: (1) The defendant should have acted in a manner that is contrary
to morals, good customs or public policy; (2) The acts should be willful; and (3)
There was damage or injury to the plaintiff. 15
The act of petitioners in constructing a fence within their lot is a valid exercise of
their right as owners, hence not contrary to morals, good customs or public policy.
The law recognizes in the owner the right to enjoy and dispose of a thing, without
other limitations than those established by law. 16 It is within the right of petitioners,
as owners, to enclose and fence their property. Article 430 of the Civil Code
provides that "(e)very owner may enclose or fence his land or tenements by means
of walls, ditches, live or dead hedges, or by any other means without detriment to
servitudes constituted thereon."
At the time of the construction of the fence, the lot was not subject to any
servitudes. There was no easement of way existing in favor of private respondents,
either by law or by contract. The fact that private respondents had no existing right
over the said passageway is confirmed by the very decision of the trial court
granting a compulsory right of way in their favor after payment of just
compensation. It was only that decision which gave private respondents the right to
use the said passageway after payment of the compensation and imposed a
corresponding duty on petitioners not to interfere in the exercise of said right.
Hence, prior to said decision, petitioners had an absolute right over their property
and their act of fencing and enclosing the same was an act which they may lawfully
perform in the employment and exercise of said right. To repeat, whatever injury or
damage may have been sustained by private respondents by reason of the rightful
use of the said land by petitioners is damnum absque injuria.17
A person has a right to the natural use and enjoyment of his own property,
according to his pleasure, for all the purposes to which such property is usually
applied. As a general rule, therefore, there is no cause of action for acts done by
one person upon his own property in a lawful and proper manner, although such
acts incidentally cause damage or an unavoidable loss to another, as such damage
or loss is damnum absque injuria. 18 When the owner of property makes use thereof
in the general and ordinary manner in which the property is used, such as fencing
or enclosing the same as in this case, nobody can complain of having been injured,
because the incovenience arising from said use can be considered as a mere
consequence of community life. 19
The proper exercise of a lawful right cannot constitute a legal wrong for which an
action will lie, 20 although the act may result in damage to another, for no legal right
has been invaded. 21 One may use any lawful means to accomplish a lawful purpose
and though the means adopted may cause damage to another, no cause of action
arises in the latter's favor. An injury or damage occasioned thereby is damnum
absque injuria. The courts can give no redress for hardship to an individual resulting
from action reasonably calculated to achieve a lawful means. 22

09-20-14
WHEREFORE, under the compulsion of the foregoing premises, the appealed
decision of respondent Court of Appeals is hereby REVERSED and SET ASIDE and
the judgment of the trial court is correspondingly REINSTATED.

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
the Petroparcel. 9
For its part, private respondent later sought the amendment of its complaint on the
ground that the original complaint failed to plead for the recovery of the lost value
of the hull of M/V Maria Efigenia XV. 10 Accordingly, in the amended complaint,
private respondent averred that M/V Maria Efigenia XV had an actual value of
P800,000.00 and that, after deducting the insurance payment of P200,000.00, the

Torts

09-20-14

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.

Torts

09-20-14

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:

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.

(a) Exhibit A certified xerox copy of the certificate of ownership of M/V

Maria Efigenia XV;

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:

(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 baeras valued 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.

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

Torts

09-20-14

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 nonadmissibility (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

Torts
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

09-20-14
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." 41These 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

10

Torts

09-20-14

MARIA EFIGINIA FISHING CORPORATION

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

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., 6cylinder in-line, 4-stroke cycle, natural aspirated, 5 1/2 in. x 6 in. bore and stroke,
855 cu. In. displacement, keel-cooled, electric starting coupled with Twin-Disc
Marine gearbox model MG-509, 4.5:1 reduction ratio, includes oil cooler, companion
flange, manual and standard accessories as per attached sheet.
Price FOB Manila P580,000.00/unit
Total FOB Manila P1,160,000.00

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.

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.
(
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

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

11

Torts

09-20-14

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. 51 However, 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 Petroparcel was 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.

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.

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

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09-20-14

G.R. No. 118342 January 5, 1998

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
APPEALS and LYDIA CUBA, respondents.

vs. COURT

OF

G.R. No. 118367 January 5, 1998

LYDIA P. CUBA, petitioner, vs. COURT OF APPEALS, DEVELOPMENT BANK OF
THE PHILIPPINES and AGRIPINA P. CAPERAL,respondents.
DAVIDE, JR., J.:
These two consolidated cases stemmed from a complaint 1 filed against the
Development Bank of the Philippines (hereafter DBP) and Agripina Caperal filed by
Lydia Cuba (hereafter CUBA) on 21 May 1985 with the Regional Trial Court of
Pangasinan, Branch 54. The said complaint sought (1) the declaration of nullity of
DBP's appropriation of CUBA's rights, title, and interests over a 44-hectares
fishpond located in Bolinao, Pangasinan, for being violative of Article 2088 of the
Civil Code; (2) the annulment of the Deed of Conditional Sale executed in her favor
by DBP; (3) the annulment of DBP's sale of the subject fishpond to Caperal; (4) the
restoration of her rights, title, and interests over the fishpond; and (5) the recovery
of damages, attorney's fees, and expenses of litigation.
After the joinder of issues following the filing by the parties of their respective
pleadings, the trial court conducted a pre-trial where CUBA and DBP agreed on the
following facts, which were embodied in the pre-trial order: 2
1.

Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No.

2083 (new) dated May 13, 1974 from the Government;

2.

Plaintiff Lydia P. Cuba obtained loans from the Development Bank of

the Philippines in the amounts of P109,000.00; P109,000.00; and
P98,700.00 under the terms stated in the Promissory Notes dated
September 6, 1974; August 11, 1975; and April 4, 1977;

3.

As security for said loans, plaintiff Lydia P. Cuba executed two Deeds
of Assignment of her Leasehold Rights;

4.

Plaintiff failed to pay her loan on the scheduled dates thereof in

accordance with the terms of the Promissory Notes;

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09-20-14
5.

Without foreclosure proceedings, whether judicial or extra-judicial,

defendant DBP appropriated the Leasehold Rights of plaintiff Lydia
Cuba over the fishpond in question;

6.

After defendant DBP has appropriated the Leasehold Rights of plaintiff

Lydia Cuba over the fishpond in question, defendant DBP, in turn,
executed a Deed of Conditional Sale of the Leasehold Rights in favor
of plaintiff Lydia Cuba over the same fishpond in question;

7.

8.

9.

In the negotiation for repurchase, plaintiff Lydia Cuba addressed two

letters to the Manager DBP, Dagupan City dated November 6, 1979
and December 20, 1979. DBP thereafter accepted the offer to
repurchase in a letter addressed to plaintiff dated February 1, 1982;
After the Deed of Conditional Sale was executed in favor of plaintiff
Lydia Cuba, a new Fishpond Lease Agreement No. 2083-A dated March
24, 1980 was issued by the Ministry of Agriculture and Food in favor of
plaintiff Lydia Cuba only, excluding her husband;
Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the
Deed of Conditional Sale;

10. After plaintiff Lydia Cuba failed to pay the amortization as stated in
Deed of Conditional Sale, she entered with the DBP a temporary
arrangement whereby in consideration for the deferment of the
Notarial Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba
promised to make certain payments as stated in temporary
Arrangement dated February 23, 1982;
11. Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act
dated March 13, 1984, and which was received by plaintiff Lydia Cuba;
12. After the Notice of Rescission, defendant DBP took possession of the
Leasehold Rights of the fishpond in question;
13. That after defendant DBP took possession of the Leasehold Rights
over the fishpond in question, DBP advertised in the SUNDAY PUNCH
the public bidding dated June 24, 1984, to dispose of the property;
14. That the DBP thereafter executed a Deed of Conditional Sale in favor
of defendant Agripina Caperal on August 16, 1984;
15. Thereafter, defendant Caperal was awarded Fishpond Lease
Agreement No. 2083-A on December 28, 1984 by the Ministry of
Agriculture and Food.

Defendant Caperal admitted only the facts stated in paragraphs 14 and 15 of the
pre-trial order. 3
Trial was thereafter had on other matters.
The principal issue presented was whether the act of DBP in appropriating to itself
CUBA's leasehold rights over the fishpond in question without foreclosure
proceedings was contrary to Article 2088 of the Civil Code and, therefore, invalid.
CUBA insisted on an affirmative resolution. DBP stressed that it merely exercised its
contractual right under the Assignments of Leasehold Rights, which was not a
contract of mortgage. Defendant Caperal sided with DBP.
The trial court resolved the issue in favor of CUBA by declaring that DBP's taking
possession and ownership of the property without foreclosure was plainly violative
of Article 2088 of the Civil Code which provides as follows:
Art. 2088. The creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the contrary is
null and void.
It disagreed with DBP's stand that the Assignments of Leasehold Rights were not
contracts of mortgage because (1) they were given as security for loans, (2)
although the "fishpond land" in question is still a public land, CUBA's leasehold
rights and interest thereon are alienable rights which can be the proper subject of a
mortgage; and (3) the intention of the contracting parties to treat the Assignment
of Leasehold Rights as a mortgage was obvious and unmistakable; hence, upon
CUBA's default, DBP's only right was to foreclose the Assignment in accordance
with law.
The trial court also declared invalid condition no. 12 of the Assignment of Leasehold
Rights for being a clear case ofpactum commissorium expressly prohibited and
declared null and void by Article 2088 of the Civil Code. It then concluded that since
DBP never acquired lawful ownership of CUBA's leasehold rights, all acts of
ownership and possession by the said bank were void. Accordingly, the Deed of
Conditional Sale in favor of CUBA, the notarial rescission of such sale, and the Deed
of Conditional Sale in favor of defendant Caperal, as well as the Assignment of
Leasehold Rights executed by Caperal in favor of DBP, were also void and
ineffective.
As to damages, the trial court found "ample evidence on record" that in 1984 the
representatives of DBP ejected CUBA and her caretakers not only from the fishpond
area but also from the adjoining big house; and that when CUBA's son and
caretaker went there on 15 September 1985, they found the said house unoccupied
and destroyed and CUBA's personal belongings, machineries, equipment, tools, and
other articles used in fishpond operation which were kept in the house were
missing. The missing items were valued at about P550,000. It further found that
when CUBA and her men were ejected by DBP for the first time in 1979, CUBA had
stocked the fishpond with 250,000 pieces of bangus fish (milkfish), all of which died
because the DBP representatives prevented CUBA's men from feeding the fish. At

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09-20-14

the conservative price of P3.00 per fish, the gross value would have been P690,000,
and after deducting 25% of said value as reasonable allowance for the cost of
feeds, CUBA suffered a loss of P517,500. It then set the aggregate of the actual
damages sustained by CUBA at P1,067,500.

5.

The trial court further found that DBP was guilty of gross bad faith in falsely
representing to the Bureau of Fisheries that it had foreclosed its mortgage on
CUBA's leasehold rights. Such representation induced the said Bureau to terminate
CUBA's leasehold rights and to approve the Deed of Conditional Sale in favor of
CUBA. And considering that by reason of her unlawful ejectment by DBP, CUBA
"suffered moral shock, degradation, social humiliation, and serious anxieties for
which she became sick and had to be hospitalized" the trial court found her entitled
to moral and exemplary damages. The trial court also held that CUBA was entitled
to P100,000 attorney's fees in view of the considerable expenses she incurred for
lawyers' fees and in view of the finding that she was entitled to exemplary
damages.
In its decision of 31 January 1990, 4 the trial court disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff:
1.

2.

DECLARING null and void and without any legal effect the act of
defendant Development Bank of the Philippines in appropriating for its
own interest, without any judicial or extra-judicial foreclosure,
plaintiff's leasehold rights and interest over the fishpond land in
question under her Fishpond Lease Agreement No. 2083 (new);
DECLARING the Deed of Conditional Sale dated February 21, 1980 by
and between the defendant Development Bank of the Philippines and
plaintiff (Exh. E and Exh. 1) and the acts of notarial rescission of the
Development Bank of the Philippines relative to said sale (Exhs. 16
and 26) as void and ineffective;

3.

DECLARING the Deed of Conditional Sale dated August 16, 1984 by

and between the Development Bank of the Philippines and defendant
Agripina Caperal (Exh. F and Exh. 21), the Fishpond Lease Agreement
No. 2083-A dated December 28, 1984 of defendant Agripina Caperal
(Exh. 23) and the Assignment of Leasehold Rights dated February 12,
1985 executed by defendant Agripina Caperal in favor of the
defendant Development Bank of the Philippines (Exh. 24) as void ab
initio;

4.

ORDERING defendant Development Bank of the Philippines and

defendant Agripina Caperal, jointly and severally, to restore to plaintiff
the latter's leasehold rights and interests and right of possession over
the fishpond land in question, without prejudice to the right of
defendant Development Bank of the Philippines to foreclose the
securities given by plaintiff;

6.

ORDERING defendant Development Bank of the Philippines to pay to

plaintiff the following amounts:
a)

The sum of ONE MILLION SIXTY-SEVEN THOUSAND FIVE

HUNDRED PESOS (P1,067,500.00), as and for actual
damages;

b)

The sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS

as moral damages;

c)

The sum of FIFTY THOUSAND (P50,000.00) PESOS, as and for

exemplary damages;

d)

And the sum of ONE HUNDRED THOUSAND (P100,000.00)

PESOS, as and for attorney's fees;

And ORDERING defendant Development Bank of the Philippines to

reimburse and pay to defendant Agripina Caperal the sum of ONE
MILLION FIVE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED TEN
PESOS AND SEVENTY-FIVE CENTAVOS (P1,532,610.75) representing
the amounts paid by defendant Agripina Caperal to defendant
Development Bank of the Philippines under their Deed of Conditional
Sale.

CUBA and DBP interposed separate appeals from the decision to the Court of
Appeals. The former sought an increase in the amount of damages, while the latter
questioned the findings of fact and law of the lower court.
In its decision 5 of 25 May 1994, the Court of Appeals ruled that (1) the trial court
erred in declaring that the deed of assignment was null and void and that
defendant Caperal could not validly acquire the leasehold rights from DBP; (2)
contrary to the claim of DBP, the assignment was not a cession under Article 1255
of the Civil Code because DBP appeared to be the sole creditor to CUBA cession
presupposes plurality of debts and creditors; (3) the deeds of assignment
represented the voluntary act of CUBA in assigning her property rights in payment
of her debts, which amounted to a novation of the promissory notes executed by
CUBA in favor of DBP; (4) CUBA was estopped from questioning the assignment of
the leasehold rights, since she agreed to repurchase the said rights under a deed of
conditional sale; and (5) condition no. 12 of the deed of assignment was an express
authority from CUBA for DBP to sell whatever right she had over the fishpond. It
also ruled that CUBA was not entitled to loss of profits for lack of evidence, but
agreed with the trial court as to the actual damages of P1,067,500. It, however,
deleted the amount of exemplary damages and reduced the award of moral
damages from P100,000 to P50,000 and attorney's fees, from P100,000 to P50,000.
The Court of Appeals thus declared as valid the following: (1) the act of DBP in
appropriating Cuba's leasehold rights and interest under Fishpond Lease Agreement
No. 2083; (2) the deeds of assignment executed by Cuba in favor of DBP; (3) the
deed of conditional sale between CUBA and DBP; and (4) the deed of conditional

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09-20-14

sale between DBP and Caperal, the Fishpond Lease Agreement in favor of Caperal,
and the assignment of leasehold rights executed by Caperal in favor of DBP. It then
ordered DBP to turn over possession of the property to Caperal as lawful holder of
the leasehold rights and to pay CUBA the following amounts: (a) P1,067,500 as
actual damages; P50,000 as moral damages; and P50,000 as attorney's fees.
Since their motions for reconsideration were denied, 6 DBP and CUBA filed separate
petitions for review.
In its petition (G.R. No. 118342), DBP assails the award of actual and moral
damages and attorney's fees in favor of CUBA.
Upon the other hand, in her petition (G.R. No. 118367), CUBA contends that the
Court of Appeals erred (1) in not holding that the questioned deed of assignment
was a pactum commissorium contrary to Article 2088 of the Civil Code; (b) in
holding that the deed of assignment effected a novation of the promissory notes;
(c) in holding that CUBA was estopped from questioning the validity of the deed of
assignment when she agreed to repurchase her leasehold rights under a deed of
conditional sale; and (d) in reducing the amounts of moral damages and attorney's
fees, in deleting the award of exemplary damages, and in not increasing the
amount of damages.
We agree with CUBA that the assignment of leasehold rights was a mortgage
contract.
It is undisputed that CUBA obtained from DBP three separate loans totalling
P335,000, each of which was covered by a promissory note. In all of these notes,
there was a provision that: "In the event of foreclosure of the mortgagesecuring this
notes, I/We further bind myself/ourselves, jointly and severally, to pay the
deficiency, if any." 7
Simultaneous with the execution of the notes was the execution of "Assignments of
Leasehold Rights" 8 where CUBA assigned her leasehold rights and interest on a 44hectare fishpond, together with the improvements thereon. As pointed out by
CUBA, the deeds of assignment constantly referred to the assignor (CUBA) as
"borrower"; the assigned rights, as mortgaged properties; and the instrument itself,
as mortgage contract. Moreover, under condition no. 22 of the deed, it was
provided that "failure to comply with the terms and condition of any of the loans
shall cause all other loans to become due and demandable and all mortgages shall
be foreclosed." And, condition no. 33 provided that if "foreclosure is actually
accomplished, the usual 10% attorney's fees and 10% liquidated damages of the
total obligation shall be imposed." There is, therefore, no shred of doubt that a
mortgage was intended.
Besides, in their stipulation of facts the parties admitted that the assignment was
by way of security for the payment of the loans; thus:
3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of
Assignment of her Leasehold Rights.

In People's Bank & Trust Co. vs. Odom, 9 this Court had the occasion to rule that an
assignment to guarantee an obligation is in effect a mortgage.
We find no merit in DBP's contention that the assignment novated the promissory
notes in that the obligation to pay a sum of money the loans (under the promissory
notes) was substituted by the assignment of the rights over the fishpond (under the
deed of assignment). As correctly pointed out by CUBA, the said assignment merely
complemented or supplemented the notes; both could stand together. The former
was only an accessory to the latter. Contrary to DBP's submission, the obligation to
pay a sum of money remained, and the assignment merely served as security for
the loans covered by the promissory notes. Significantly, both the deeds of
assignment and the promissory notes were executed on the same dates the loans
were granted. Also, the last paragraph of the assignment stated: "The assignor
further reiterates and states all terms, covenants, and conditions stipulated in the
promissory note or notes covering the proceeds of this loan, making said
promissory note or notes, to all intent and purposes, an integral part hereof."
Neither did the assignment amount to payment by cession under Article 1255 of
the Civil Code for the plain and simple reason that there was only one creditor, the
DBP. Article 1255 contemplates the existence of two or more creditors and involves
the assignment of all the debtor's property.
Nor did the assignment constitute dation in payment under Article 1245 of the civil
Code, which reads: "Dation in payment, whereby property is alienated to the
creditor in satisfaction of a debt in money, shall be governed by the law on sales." It
bears stressing that the assignment, being in its essence a mortgage, was but a
security and not a satisfaction of indebtedness. 10
We do not, however, buy CUBA's argument that condition no. 12 of the deed of
assignment constituted pactum commissorium. Said condition reads:
12. That effective upon the breach of any condition of this assignment, the
Assignor hereby appoints the Assignee his Attorney-in-fact with full power
and authority to take actual possession of the property above-described,
together with all improvements thereon, subject to the approval of the
Secretary of Agriculture and Natural Resources, to lease the same or any
portion thereof and collect rentals, to make repairs or improvements
thereon and pay the same, to sell or otherwise dispose of whatever rights
the Assignor has or might have over said property and/or its improvements
and perform any other act which the Assignee may deem convenient to
protect its interest. All expenses advanced by the Assignee in connection
with purpose above indicated which shall bear the same rate of interest
aforementioned are also guaranteed by this Assignment. Any amount
received from rents, administration, sale or disposal of said property may
be supplied by the Assignee to the payment of repairs, improvements,
taxes, assessments and other incidental expenses and obligations and the
balance, if any, to the payment of interest and then on the capital of the
indebtedness secured hereby. If after disposal or sale of said property and
upon application of total amounts received there shall remain a deficiency,
said Assignor hereby binds himself to pay the same to the Assignee upon

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09-20-14
demand, together with all interest thereon until fully paid. The power
herein granted shall not be revoked as long as the Assignor is indebted to
the Assignee and all acts that may be executed by the Assignee by virtue
of said power are hereby ratified.

The elements of pactum commissorium are as follows: (1) there should be a

property mortgaged by way of security for the payment of the principal obligation,
and (2) there should be a stipulation for automatic appropriation by the creditor of
the thing mortgaged in case of non-payment of the principal obligation within the
stipulated period. 11
Condition no. 12 did not provide that the ownership over the leasehold rights would
automatically pass to DBP upon CUBA's failure to pay the loan on time. It merely
provided for the appointment of DBP as attorney-in-fact with authority, among other
things, to sell or otherwise dispose of the said real rights, in case of default by
CUBA, and to apply the proceeds to the payment of the loan. This provision is a
standard condition in mortgage contracts and is in conformity with Article 2087 of
the Civil Code, which authorizes the mortgagee to foreclose the mortgage and
alienate the mortgaged property for the payment of the principal obligation.
DBP, however, exceeded the authority vested by condition no. 12 of the deed of
assignment. As admitted by it during the pre-trial, it had "[w]ithout foreclosure
proceedings, whether judicial or extrajudicial, . . . appropriated the [l]easehold
[r]ights of plaintiff Lydia Cuba over the fishpond in question." Its contention that it
limited itself to mere administration by posting caretakers is further belied by the
deed of conditional sale it executed in favor of CUBA. The deed stated:
WHEREAS, the Vendor [DBP] by virtue of a deed of assignment executed in
its favor by the herein vendees [Cuba spouses] the former acquired all the
right and interest of the latter over the above-described property;
xxx xxx xxx
The title to the real estate property [sic] and all improvements
thereon shall remain in the name of the Vendor until after the purchase
price, advances and interest shall have been fully paid. (Emphasis
supplied).
It is obvious from the above-quoted paragraphs that DBP had appropriated and
taken ownership of CUBA's leasehold rights merely on the strength of the deed of
assignment.
DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its
act of appropriating the leasehold rights. As stated earlier, condition no. 12 did not
provide that CUBA's default would operate to vest in DBP ownership of the said
rights. Besides, an assignment to guarantee an obligation, as in the present case, is
virtually a mortgage and not an absolute conveyance of title which confers
ownership on the assignee. 12

At any rate, DBP's act of appropriating CUBA's leasehold rights was violative of
Article 2088 of the Civil Code, which forbids a credit or from appropriating, or
disposing of, the thing given as security for the payment of a debt.
The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP
did not estop her from questioning DBP's act of appropriation. Estoppel is unavailing
in this case. As held by this Court in some cases, 13estoppel cannot give validity to
an act that is prohibited by law or against public policy. Hence, the appropriation of
the leasehold rights, being contrary to Article 2088 of the Civil Code and to public
policy, cannot be deemed validated by estoppel.
Instead of taking ownership of the questioned real rights upon default by CUBA,
DBP should have foreclosed the mortgage, as has been stipulated in condition no.
22 of the deed of assignment. But, as admitted by DBP, there was no such
foreclosure. Yet, in its letter dated 26 October 1979, addressed to the Minister of
Agriculture and Natural Resources and coursed through the Director of the Bureau
of Fisheries and Aquatic Resources, DBP declared that it "had foreclosed the
mortgage and enforced the assignment of leasehold rights on March 21, 1979 for
failure of said spouses [Cuba spouces] to pay their loan amortizations." 14 This only
goes to show that DBP was aware of the necessity of foreclosure proceedings.
In view of the false representation of DBP that it had already foreclosed the
mortgage, the Bureau of Fisheries cancelled CUBA's original lease permit, approved
the deed of conditional sale, and issued a new permit in favor of CUBA. Said acts
which were predicated on such false representation, as well as the subsequent acts
emanating from DBP's appropriation of the leasehold rights, should therefore be set
aside. To validate these acts would open the floodgates to circumvention of Article
2088 of the Civil Code.
Even in cases where foreclosure proceedings were had, this Court had not hesitated
to nullify the consequent auction sale for failure to comply with the requirements
laid down by law, such as Act No. 3135, as amended. 15With more reason that the
sale of property given as security for the payment of a debt be set aside if there
was no prior fore closure proceeding.
Hence, DBP should render an accounting of the income derived from the operation
of the fishpond in question and apply the said income in accordance with condition
no. 12 of the deed of assignment which provided: "Any amount received from rents,
administration, . . . may be applied to the payment of repairs, improvements, taxes,
assessment, and other incidental expenses and obligations and the balance, if any,
to the payment of interest and then on the capital of the indebtedness. . ."
We shall now take up the issue of damages.
Article 2199 provides:
Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly

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proved. Such compensation is referred to as actual or compensatory
damages.

Actual or compensatory damages cannot be presumed, but must be proved with

reasonable degree of certainty. 16A court cannot rely on speculations, conjectures,
or guesswork as to the fact and amount of damages, but must depend upon
competent proof that they have been suffered by the injured party and on the best
obtainable evidence of the actual amount thereof. 17 It must point out specific facts
which could afford a basis for measuring whatever compensatory or actual
damages are borne. 18
In the present case, the trial court awarded in favor of CUBA P1,067,500 as actual
damages consisting of P550,000 which represented the value of the alleged lost
articles of CUBA and P517,500 which represented the value of the 230,000 pieces
of bangus allegedly stocked in 1979 when DBP first ejected CUBA from the fishpond
and the adjoining house. This award was affirmed by the Court of Appeals.
We find that the alleged loss of personal belongings and equipment was not proved
by clear evidence. Other than the testimony of CUBA and her caretaker, there was
no proof as to the existence of those items before DBP took over the fishpond in
question. As pointed out by DBP, there was not "inventory of the alleged lost items
before the loss which is normal in a project which sometimes, if not most often, is
left to the care of other persons." Neither was a single receipt or record of
acquisition presented.
Curiously, in her complaint dated 17 May 1985, CUBA included "losses of property"
as among the damages resulting from DBP's take-over of the fishpond. Yet, it was
only in September 1985 when her son and a caretaker went to the fishpond and the
adjoining house that she came to know of the alleged loss of several articles. Such
claim for "losses of property," having been made before knowledge of the alleged
actual loss, was therefore speculative. The alleged loss could have been a mere
afterthought or subterfuge to justify her claim for actual damages.

Nowhere in the said letter, which was written seven months after DBP took
possession of the fishpond, did CUBA intimate that upon DBP's take-over there was
a total of 230,000 pieces of bangus, but all of which died because of DBP's
representatives prevented her men from feeding the fish.
The award of actual damages should, therefore, be struck down for lack of sufficient
basis.
In view, however, of DBP's act of appropriating CUBA's leasehold rights which was
contrary to law and public policy, as well as its false representation to the then
Ministry of Agriculture and Natural Resources that it had "foreclosed the mortgage,"
an award of moral damages in the amount of P50,000 is in order conformably with
Article 2219(10), in relation to Article 21, of the Civil Code. Exemplary or corrective
damages in the amount of P25,000 should likewise be awarded by way of example
or correction for the public good. 20 There being an award of exemplary damages,
attorney's fees are also recoverable. 21
WHEREFORE, the 25 May 1994 Decision of the Court of Appeals in CA-G.R. CV No.
26535 is hereby REVERSED, except as to the award of P50,000 as moral damages,
which is hereby sustained. The 31 January 1990 Decision of the Regional Trial Court
of Pangasinan, Branch 54, in Civil Case No. A-1574 is MODIFIED setting aside the
finding that condition no. 12 of the deed of assignment constituted pactum
commissorium and the award of actual damages; and by reducing the amounts of
moral damages from P100,000 to P50,000; the exemplary damages, from P50,000
to P25,000; and the attorney's fees, from P100,000 to P20,000. The Development
Bank of the Philippines is hereby ordered to render an accounting of the income
derived from the operation of the fishpond in question.
Let this case be REMANDED to the trial court for the reception of the income
statement of DBP, as well as the statement of the account of Lydia P. Cuba, and for
the determination of each party's financial obligation to one another.
SO ORDERED.

With regard to the award of P517,000 representing the value of the alleged 230,000
pieces of bangus which died when DBP took possession of the fishpond in March
1979, the same was not called for. Such loss was not duly proved; besides, the
claim therefor was delayed unreasonably. From 1979 until after the filing of her
complaint in court in May 1985, CUBA did not bring to the attention of DBP the
alleged loss. In fact, in her letter dated 24 October 1979, 19 she declared:
1. That from February to May 1978, I was then seriously ill in
Manila and within the same period I neglected the management
and supervision of the cultivation and harvest of the produce of
the aforesaid fishpond thereby resulting to the irreparable loss in
the produce of the same in the amount of about P500,000.00 to
my great damage and prejudice due to fraudulent acts of some of
my fishpond workers.

18

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09-20-14
COURT OF APPEALS, DELOS SANTOS MEDICAL CENTER, DR. ORLINO
HOSAKA and DRA. PERFECTA GUTIERREZ, respondents.
KAPUNAN, J.:
The Hippocratic Oath mandates physicians to give primordial consideration to the
health and welfare of their patients. If a doctor fails to live up to this precept, he is
made accountable for his acts. A mistake, through gross negligence or
incompetence or plain human error, may spell the difference between life and
death. In this sense, the doctor plays God on his patient's fate. 1
In the case at bar, the Court is called upon to rule whether a surgeon, an
anesthesiologist and a hospital should be made liable for the unfortunate comatose
condition of a patient scheduled for cholecystectomy. 2
Petitioners seek the reversal of the decision 3 of the Court of Appeals, dated 29 May
1995, which overturned the decision4 of the Regional Trial Court, dated 30 January
1992, finding private respondents liable for damages arising from negligence in the
performance of their professional duties towards petitioner Erlinda Ramos resulting
in her comatose condition.
The antecedent facts as summarized by the trial court are reproduced hereunder:
Plaintiff Erlinda Ramos was, until the afternoon of June 17, 1985, a 47-year
old (Exh. "A") robust woman (TSN, October 19, 1989, p. 10). Except for
occasional complaints of discomfort due to pains allegedly caused by the
presence of a stone in her gall bladder (TSN, January 13, 1988, pp. 4-5),
she was as normal as any other woman. Married to Rogelio E. Ramos, an
executive of Philippine Long Distance Telephone Company, she has three
children whose names are Rommel Ramos, Roy Roderick Ramos and Ron
Raymond Ramos (TSN, October 19, 1989, pp. 5-6).
Because the discomforts somehow interfered with her normal ways, she
sought professional advice. She was advised to undergo an operation for
the removal of a stone in her gall bladder (TSN, January 13, 1988, p. 5).
She underwent a series of examinations which included blood and urine
tests (Exhs. "A" and "C") which indicated she was fit for surgery.

G.R. No. 124354 December 29, 1999

ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as
natural guardians of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS
and
RON
RAYMOND
RAMOS, petitioners,
vs.

Through the intercession of a mutual friend, Dr. Buenviaje (TSN, January

13, 1988, p. 7), she and her husband Rogelio met for the first time Dr.
Orlino Hozaka (should be Hosaka; see TSN, February 20, 1990, p. 3), one of
the defendants in this case, on June 10, 1985. They agreed that their date
at the operating table at the DLSMC (another defendant), would be on June
17, 1985 at 9:00 A.M.. Dr. Hosaka decided that she should undergo a
"cholecystectomy" operation after examining the documents (findings
from the Capitol Medical Center, FEU Hospital and DLSMC) presented to
him. Rogelio E. Ramos, however, asked Dr. Hosaka to look for a good
anesthesiologist. Dr. Hosaka, in turn, assured Rogelio that he will get a
good anesthesiologist. Dr. Hosaka charged a fee of P16,000.00, which was

19

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09-20-14
to include the anesthesiologist's fee and which was to be paid after the
operation (TSN, October 19, 1989, pp. 14-15, 22-23, 31-33; TSN, February
27, 1990, p. 13; and TSN, November 9, 1989, pp. 3-4, 10, 17).
A day before the scheduled date of operation, she was admitted at one of
the rooms of the DLSMC, located along E. Rodriguez Avenue, Quezon City
(TSN, October 19,1989, p. 11).
At around 7:30 A.M. of June 17, 1985 and while still in her room, she was
prepared for the operation by the hospital staff. Her sister-in-law,
Herminda Cruz, who was the Dean of the College of Nursing at the Capitol
Medical Center, was also there for moral support. She reiterated her
previous request for Herminda to be with her even during the operation.
After praying, she was given injections. Her hands were held by Herminda
as they went down from her room to the operating room (TSN, January 13,
1988, pp. 9-11). Her husband, Rogelio, was also with her (TSN, October 19,
1989, p. 18). At the operating room, Herminda saw about two or three
nurses and Dr. Perfecta Gutierrez, the other defendant, who was to
administer anesthesia. Although not a member of the hospital staff,
Herminda introduced herself as Dean of the College of Nursing at the
Capitol Medical Center who was to provide moral support to the patient, to
them. Herminda was allowed to stay inside the operating room.
At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr.
Hosaka who was not yet in (TSN, January 13, 1988, pp. 11-12). Dr.
Gutierrez thereafter informed Herminda Cruz about the prospect of a delay
in the arrival of Dr. Hosaka. Herminda then went back to the patient who
asked, "Mindy, wala pa ba ang Doctor"? The former replied, "Huwag kang
mag-alaala, darating na iyon" (Ibid.).
Thereafter, Herminda went out of the operating room and informed the
patient's husband, Rogelio, that the doctor was not yet around (id., p. 13).
When she returned to the operating room, the patient told her, "Mindy, inip
na inip na ako, ikuha mo ako ng ibang Doctor." So, she went out again and
told Rogelio about what the patient said (id., p. 15). Thereafter, she
returned to the operating room.
At around 10:00 A.M., Rogelio E. Ramos was "already dying [and] waiting
for the arrival of the doctor" even as he did his best to find somebody who
will allow him to pull out his wife from the operating room (TSN, October
19, 1989, pp. 19-20). He also thought of the feeling of his wife, who was
inside the operating room waiting for the doctor to arrive (ibid.). At almost
12:00 noon, he met Dr. Garcia who remarked that he (Dr. Garcia) was also
tired of waiting for Dr. Hosaka to arrive (id., p. 21). While talking to Dr.
Garcia at around 12:10 P.M., he came to know that Dr. Hosaka arrived as a
nurse remarked, "Nandiyan na si Dr. Hosaka, dumating na raw." Upon
hearing those words, he went down to the lobby and waited for the
operation to be completed (id., pp. 16, 29-30).

At about 12:15 P.M., Herminda Cruz, who was inside the operating room
with the patient, heard somebody say that "Dr. Hosaka is already here."
She then saw people inside the operating room "moving, doing this and
that, [and] preparing the patient for the operation" (TSN, January 13, 1988,
p. 16). As she held the hand of Erlinda Ramos, she then saw Dr. Gutierrez
intubating the hapless patient. She thereafter heard Dr. Gutierrez say, "ang
hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan"
(id., p. 17). Because of the remarks of Dra. Gutierrez, she focused her
attention on what Dr. Gutierrez was doing. She thereafter noticed bluish
discoloration of the nailbeds of the left hand of the hapless Erlinda even as
Dr. Hosaka approached her. She then heard Dr. Hosaka issue an order for
someone to call Dr. Calderon, another anesthesiologist (id., p. 19). After Dr.
Calderon arrived at the operating room, she saw this anesthesiologist
trying to intubate the patient. The patient's nailbed became bluish and the
patient was placed in a trendelenburg position a position where the
head of the patient is placed in a position lower than her feet which is an
indication that there is a decrease of blood supply to the patient's brain
(Id., pp. 19-20). Immediately thereafter, she went out of the operating
room, and she told Rogelio E. Ramos "that something wrong was . . .
happening" (Ibid.). Dr. Calderon was then able to intubate the patient (TSN,
July 25, 1991, p. 9).
Meanwhile, Rogelio, who was outside the operating room, saw a
respiratory machine being rushed towards the door of the operating room.
He also saw several doctors rushing towards the operating room. When
informed by Herminda Cruz that something wrong was happening, he told
her (Herminda) to be back with the patient inside the operating room (TSN,
October 19, 1989, pp. 25-28).
Herminda Cruz immediately rushed back, and saw that the patient was still
in trendelenburg position (TSN, January 13, 1988, p. 20). At almost 3:00
P.M. of that fateful day, she saw the patient taken to the Intensive Care
Unit (ICU).
About two days thereafter, Rogelio E. Ramos was able to talk to Dr.
Hosaka. The latter informed the former that something went wrong during
the intubation. Reacting to what was told to him, Rogelio reminded the
doctor that the condition of his wife would not have happened, had he (Dr.
Hosaka) looked for a good anesthesiologist (TSN, October 19, 1989, p. 31).
Doctors Gutierrez and Hosaka were also asked by the hospital to explain
what happened to the patient. The doctors explained that the patient had
bronchospasm (TSN, November 15, 1990, pp. 26-27).
Erlinda Ramos stayed at the ICU for a month. About four months thereafter
or on November 15, 1985, the patient was released from the hospital.
During the whole period of her confinement, she incurred hospital bills
amounting to P93,542.25 which is the subject of a promissory note and
affidavit of undertaking executed by Rogelio E. Ramos in favor of DLSMC.

20

Torts

09-20-14
Since that fateful afternoon of June 17, 1985, she has been in a comatose
condition. She cannot do anything. She cannot move any part of her body.
She cannot see or hear. She is living on mechanical means. She suffered
brain damage as a result of the absence of oxygen in her brain for four to
five minutes (TSN, November 9, 1989, pp. 21-22). After being discharged
from the hospital, she has been staying in their residence, still needing
constant medical attention, with her husband Rogelio incurring a monthly
expense ranging from P8,000.00 to P10,000.00 (TSN, October 19, 1989,
pp. 32-34). She was also diagnosed to be suffering from "diffuse cerebral
parenchymal damage" (Exh. "G";see also TSN, December 21, 1989,
p. 6). 5

Thus, on 8 January 1986, petitioners filed a civil case 6 for damages with the
Regional Trial Court of Quezon City against herein private respondents alleging
negligence in the management and care of Erlinda Ramos.
During the trial, both parties presented evidence as to the possible cause of
Erlinda's injury. Plaintiff presented the testimonies of Dean Herminda Cruz and Dr.
Mariano Gavino to prove that the sustained by Erlinda was due to lack of oxygen in
her brain caused by the faulty management of her airway by private respondents
during the anesthesia phase. On the other hand, private respondents primarily
relied on the expert testimony of Dr. Eduardo Jamora, a pulmonologist, to the effect
that the cause of brain damage was Erlinda's allergic reaction to the anesthetic
agent, Thiopental Sodium (Pentothal).
After considering the evidence from both sides, the Regional Trial Court rendered
judgment in favor of petitioners, to wit:
After evaluating the evidence as shown in the finding of facts set forth
earlier, and applying the aforecited provisions of law and jurisprudence to
the case at bar, this Court finds and so holds that defendants are liable to
plaintiffs for damages. The defendants were guilty of, at the very least,
negligence in the performance of their duty to plaintiff-patient Erlinda
Ramos.
On the part of Dr. Perfecta Gutierrez, this Court finds that she omitted to
exercise reasonable care in not only intubating the patient, but also in not
repeating the administration of atropine (TSN, August 20, 1991, pp. 5-10),
without due regard to the fact that the patient was inside the operating
room for almost three (3) hours. For after she committed a mistake in
intubating [the] patient, the patient's nailbed became bluish and the
patient, thereafter, was placed in trendelenburg position, because of the
decrease of blood supply to the patient's brain. The evidence further
shows that the hapless patient suffered brain damage because of the
absence of oxygen in her (patient's) brain for approximately four to five
minutes which, in turn, caused the patient to become comatose.
On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the
acts of Dr. Perfecta Gutierrez whom he had chosen to administer
anesthesia on the patient as part of his obligation to provide the patient a

good anesthesiologist', and for arriving for the scheduled operation almost
three (3) hours late.
On the part of DLSMC (the hospital), this Court finds that it is liable for the
acts of negligence of the doctors in their "practice of medicine" in the
operating room. Moreover, the hospital is liable for failing through its
responsible officials, to cancel the scheduled operation after Dr. Hosaka
inexcusably failed to arrive on time.
In having held thus, this Court rejects the defense raised by defendants
that they have acted with due care and prudence in rendering medical
services to plaintiff-patient. For if the patient was properly intubated as
claimed by them, the patient would not have become comatose. And, the
fact that another anesthesiologist was called to try to intubate the patient
after her (the patient's) nailbed turned bluish, belie their claim.
Furthermore, the defendants should have rescheduled the operation to a
later date. This, they should have done, if defendants acted with due care
and prudence as the patient's case was an elective, not an emergency
case.
xxx xxx xxx
WHEREFORE, and in view of the foregoing, judgment is rendered in favor of
the plaintiffs and against the defendants. Accordingly, the latter are
ordered to pay, jointly and severally, the former the following sums of
money, to wit:
1)

the sum of P8,000.00 as actual monthly expenses for the plaintiff

Erlinda Ramos reckoned from November 15, 1985 or in the total sum
of P632,000.00 as of April 15, 1992, subject to its being updated;

2)

the sum of P100,000.00 as reasonable attorney's fees;

3)

the sum of P800,000.00 by way of moral damages and the further

sum of P200,000,00 by way of exemplary damages; and,

4)

the costs of the suit.

SO ORDERED.

Private respondents seasonably interposed an appeal to the Court of Appeals. The

appellate court rendered a Decision, dated 29 May 1995, reversing the findings of
the trial court. The decretal portion of the decision of the appellate court reads:
WHEREFORE, for the foregoing premises the appealed decision is hereby
REVERSED, and the complaint below against the appellants is hereby
ordered DISMISSED. The counterclaim of appellant De Los Santos Medical

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Torts

09-20-14
Center is GRANTED but only insofar as appellees are hereby ordered to pay
the unpaid hospital bills amounting to P93,542.25, plus legal interest for
justice must be tempered with mercy.
SO ORDERED.

I
IN PUTTING MUCH RELIANCE ON THE TESTIMONIES OF RESPONDENTS DRA.
GUTIERREZ, DRA. CALDERON AND DR. JAMORA;

The decision of the Court of Appeals was received on 9 June 1995 by petitioner
Rogelio Ramos who was mistakenly addressed as "Atty. Rogelio Ramos." No copy of
the decision, however, was sent nor received by the Coronel Law Office, then
counsel on record of petitioners. Rogelio referred the decision of the appellate court
to a new lawyer, Atty. Ligsay, only on 20 June 1995, or four (4) days before the
expiration of the reglementary period for filing a motion for reconsideration. On the
same day, Atty. Ligsay, filed with the appellate court a motion for extension of time
to file a motion for reconsideration. The motion for reconsideration was submitted
on 4 July 1995. However, the appellate court denied the motion for extension of
time in its Resolution dated 25 July 1995. 9Meanwhile, petitioners engaged the
services of another counsel, Atty. Sillano, to replace Atty. Ligsay. Atty. Sillano filed on
7 August 1995 a motion to admit the motion for reconsideration contending that
the period to file the appropriate pleading on the assailed decision had not yet
commenced to run as the Division Clerk of Court of the Court of Appeals had not yet
served a copy thereof to the counsel on record. Despite this explanation, the
appellate court still denied the motion to admit the motion for reconsideration of
petitioners in its Resolution, dated 29 March 1996, primarily on the ground that the
fifteen-day (15) period for filing a motion for reconsideration had already expired, to
wit:
We said in our Resolution on July 25, 1995, that the filing of a Motion for
Reconsideration cannot be extended; precisely, the Motion for Extension
(Rollo, p. 12) was denied. It is, on the other hand, admitted in the latter
Motion that plaintiffs/appellees received a copy of the decision as early as
June 9, 1995. Computation wise, the period to file a Motion for
Reconsideration expired on June 24. The Motion for Reconsideration, in
turn, was received by the Court of Appeals already on July 4, necessarily,
the 15-day period already passed. For that alone, the latter should be
denied.
Even assuming admissibility of the Motion for the Reconsideration, but
after considering the Comment/Opposition, the former, for lack of merit, is
hereby DENIED.
SO ORDERED.

Petitioners assail the decision of the Court of Appeals on the following grounds:

10

A copy of the above resolution was received by Atty. Sillano on 11 April 1996. The
next day, or on 12 April 1996, Atty. Sillano filed before this Court a motion for
extension of time to file the present petition for certiorari under Rule 45. The Court
granted the motion for extension of time and gave petitioners additional thirty (30)
days after the expiration of the fifteen-day (15) period counted from the receipt of
the resolution of the Court of Appeals within which to submit the petition. The due
date fell on 27 May 1996. The petition was filed on 9 May 1996, well within the
extended period given by the Court.

II
IN FINDING THAT THE NEGLIGENCE OF THE RESPONDENTS DID NOT CAUSE THE
UNFORTUNATE COMATOSE CONDITION OF PETITIONER ERLINDA RAMOS;
III
IN NOT APPLYING THE DOCTRINE OF RES IPSA LOQUITUR.

11

Before we discuss the merits of the case, we shall first dispose of the procedural
issue on the timeliness of the petition in relation to the motion for reconsideration
filed
by
petitioners
with
the
Court
of
Appeals.
In
their
Comment, 12 private respondents contend that the petition should not be given due
course since the motion for reconsideration of the petitioners on the decision of the
Court of Appeals was validly dismissed by the appellate court for having been filed
beyond the reglementary period. We do not agree.
A careful review of the records reveals that the reason behind the delay in filing the
motion for reconsideration is attributable to the fact that the decision of the Court
of Appeals was not sent to then counsel on record of petitioners, the Coronel Law
Office. In fact, a copy of the decision of the appellate court was instead sent to and
received by petitioner Rogelio Ramos on 9 June 1995 wherein he was mistakenly
addressed as Atty. Rogelio Ramos. Based on the other communications received by
petitioner Rogelio Ramos, the appellate court apparently mistook him for the
counsel on record. Thus, no copy of the decision of the counsel on record.
Petitioner, not being a lawyer and unaware of the prescriptive period for filing a
motion for reconsideration, referred the same to a legal counsel only on 20 June
1995.
It is elementary that when a party is represented by counsel, all notices should be
sent to the party's lawyer at his given address. With a few exceptions, notice to a
litigant without notice to his counsel on record is no notice at all. In the present
case, since a copy of the decision of the appellate court was not sent to the counsel
on record of petitioner, there can be no sufficient notice to speak of. Hence, the
delay in the filing of the motion for reconsideration cannot be taken against
petitioner. Moreover, since the Court of Appeals already issued a second Resolution,
dated 29 March 1996, which superseded the earlier resolution issued on 25 July
1995, and denied the motion for reconsideration of petitioner, we believed that the
receipt of the former should be considered in determining the timeliness of the
filing of the present petition. Based on this, the petition before us was submitted on
time.

22

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09-20-14

After resolving the foregoing procedural issue, we shall now look into the merits of
the case. For a more logical presentation of the discussion we shall first consider
the issue on the applicability of the doctrine of res ipsa loquiturto the instant case.
Thereafter, the first two assigned errors shall be tackled in relation to the res ipsa
loquiturdoctrine.
Res ipsa loquitur is a Latin phrase which literally means "the thing or the
transaction speaks for itself." The phrase "res ipsa loquitur'' is a maxim for the rule
that the fact of the occurrence of an injury, taken with the surrounding
circumstances, may permit an inference or raise a presumption of negligence, or
make out a plaintiff's prima faciecase, and present a question of fact for defendant
to meet with an explanation. 13 Where the thing which caused the injury complained
of is shown to be under the management of the defendant or his servants and the
accident is such as in ordinary course of things does not happen if those who have
its management or control use proper care, it affords reasonable evidence, in the
absence of explanation by the defendant, that the accident arose from or was
caused by the defendant's want of care. 14
The doctrine of res ipsa loquitur is simply a recognition of the postulate that, as a
matter of common knowledge and experience, the very nature of certain types of
occurrences may justify an inference of negligence on the part of the person who
controls the instrumentality causing the injury in the absence of some explanation
by the defendant who is charged with negligence. 15 It is grounded in the superior
logic of ordinary human experience and on the basis of such experience or common
knowledge, negligence may be deduced from the mere occurrence of the accident
itself. 16 Hence,res ipsa loquitur is applied in conjunction with the doctrine of
common knowledge.
However, much has been said that res ipsa loquitur is not a rule of substantive law
and, as such, does not create or constitute an independent or separate ground of
liability. 17 Instead, it is considered as merely evidentiary or in the nature of a
procedural rule. 18 It is regarded as a mode of proof, or a mere procedural of
convenience since it furnishes a substitute for, and relieves a plaintiff of, the burden
of producing specific proof of negligence. 19 In other words, mere invocation and
application of the doctrine does not dispense with the requirement of proof of
negligence. It is simply a step in the process of such proof, permitting the plaintiff
to present along with the proof of the accident, enough of the attending
circumstances to invoke the doctrine, creating an inference or presumption of
negligence, and to thereby place on the defendant the burden of going forward with
the proof. 20 Still, before resort to the doctrine may be allowed, the following
requisites must be satisfactorily shown:
1.

The accident is of a kind which ordinarily does not occur in the

absence of someone's negligence;

2.

It is caused by an instrumentality within the exclusive control of the

defendant or defendants; and

3.

The possibility of contributing conduct which would make the plaintiff

responsible is eliminated. 21

In the above requisites, the fundamental element is the "control of instrumentality"

which caused the damage. 22Such element of control must be shown to be within
the dominion of the defendant. In order to have the benefit of the rule, a plaintiff, in
addition to proving injury or damage, must show a situation where it is applicable,
and must establish that the essential elements of the doctrine were present in a
particular incident. 23
Medical malpractice 24 cases do not escape the application of this doctrine.
Thus, res ipsa loquitur has been applied when the circumstances attendant upon
the harm are themselves of such a character as to justify an inference of negligence
as the cause of that harm. 25 The application of res ipsa loquitur in medical
negligence cases presents a question of law since it is a judicial function to
determine whether a certain set of circumstances does, as a matter of law, permit a
given inference. 26
Although generally, expert medical testimony is relied upon in malpractice suits to
prove that a physician has done a negligent act or that he has deviated from the
standard medical procedure, when the doctrine of res ipsa loquitur is availed by the
plaintiff, the need for expert medical testimony is dispensed with because the injury
itself provides the proof of negligence. 27 The reason is that the general rule on the
necessity of expert testimony applies only to such matters clearly within the
domain of medical science, and not to matters that are within the common
knowledge of mankind which may be testified to by anyone familiar with the
facts. 28 Ordinarily, only physicians and surgeons of skill and experience are
competent to testify as to whether a patient has been treated or operated upon
with a reasonable degree of skill and care. However, testimony as to the statements
and acts of physicians and surgeons, external appearances, and manifest
conditions which are observable by any one may be given by non-expert
witnesses. 29 Hence, in cases where the res ipsa loquitur is applicable, the court is
permitted to find a physician negligent upon proper proof of injury to the patient,
without the aid of expert testimony, where the court from its fund of common
knowledge can determine the proper standard of care. 30Where common knowledge
and experience teach that a resulting injury would not have occurred to the patient
if due care had been exercised, an inference of negligence may be drawn giving rise
to an application of the doctrine of res ipsa loquiturwithout medical evidence, which
is ordinarily required to show not only what occurred but how and why it
occurred. 31 When the doctrine is appropriate, all that the patient must do is prove a
nexus between the particular act or omission complained of and the injury
sustained while under the custody and management of the defendant without need
to produce expert medical testimony to establish the standard of care. Resort to res
ipsa loquitur is allowed because there is no other way, under usual and ordinary
conditions, by which the patient can obtain redress for injury suffered by him.
Thus, courts of other jurisdictions have applied the doctrine in the following
situations: leaving of a foreign object in the body of the patient after an
operation, 32 injuries sustained on a healthy part of the body which was not under,
or in the area, of treatment, 33 removal of the wrong part of the body when another
part was intended, 34 knocking out a tooth while a patient's jaw was under
anesthetic for the removal of his tonsils, 35 and loss of an eye while the patient
plaintiff was under the influence of anesthetic, during or following an operation for
appendicitis, 36 among others.

23

Torts

09-20-14

Nevertheless, despite the fact that the scope of res ipsa loquitur has been
measurably enlarged, it does not automatically apply to all cases of medical
negligence as to mechanically shift the burden of proof to the defendant to show
that he is not guilty of the ascribed negligence. Res ipsa loquitur is not a rigid or
ordinary doctrine to be perfunctorily used but a rule to be cautiously applied,
depending upon the circumstances of each case. It is generally restricted to
situations in malpractice cases where a layman is able to say, as a matter of
common knowledge and observation, that the consequences of professional care
were not as such as would ordinarily have followed if due care had been
exercised. 37 A distinction must be made between the failure to secure results, and
the occurrence of something more unusual and not ordinarily found if the service or
treatment rendered followed the usual procedure of those skilled in that particular
practice. It must be conceded that the doctrine of res ipsa loquitur can have no
application in a suit against a physician or surgeon which involves the merits of a
diagnosis or of a scientific treatment. 38 The physician or surgeon is not required at
his peril to explain why any particular diagnosis was not correct, or why any
particular scientific treatment did not produce the desired result. 39 Thus, res ipsa
loquitur is not available in a malpractice suit if the only showing is that the desired
result of an operation or treatment was not accomplished. 40 The real question,
therefore, is whether or not in the process of the operation any extraordinary
incident or unusual event outside of the routine performance occurred which is
beyond the regular scope of customary professional activity in such operations,
which, if unexplained would themselves reasonably speak to the average man as
the negligent cause or causes of the untoward consequence. 41 If there was such
extraneous interventions, the doctrine of res ipsa loquitur may be utilized and the
defendant is called upon to explain the matter, by evidence of exculpation, if he
could. 42
We find the doctrine of res ipsa loquitur appropriate in the case at bar. As will
hereinafter be explained, the damage sustained by Erlinda in her brain prior to a
scheduled gall bladder operation presents a case for the application ofres ipsa
loquitur.
A case strikingly similar to the one before us is Voss vs. Bridwell,
Kansas Supreme Court in applying theres ipsa loquitur stated:

43

where the

The plaintiff herein submitted himself for a mastoid operation and

delivered his person over to the care, custody and control of his physician
who had complete and exclusive control over him, but the operation was
never performed. At the time of submission he was neurologically sound
and physically fit in mind and body, but he suffered irreparable damage
and injury rendering him decerebrate and totally incapacitated. The injury
was one which does not ordinarily occur in the process of a mastoid
operation or in the absence of negligence in the administration of an
anesthetic, and in the use and employment of an endoctracheal tube.
Ordinarily a person being put under anesthesia is not rendered
decerebrate as a consequence of administering such anesthesia in the
absence of negligence. Upon these facts and under these circumstances a
layman would be able to say, as a matter of common knowledge and
observation, that the consequences of professional treatment were not as
such as would ordinarily have followed if due care had been exercised.

Here the plaintiff could not have been guilty of contributory negligence
because he was under the influence of anesthetics and unconscious, and
the circumstances are such that the true explanation of event is more
accessible to the defendants than to the plaintiff for they had the exclusive
control of the instrumentalities of anesthesia.
Upon all the facts, conditions and circumstances alleged in Count II it is
held that a cause of action is stated under the doctrine of res ipsa
loquitur. 44
Indeed, the principles enunciated in the aforequoted case apply with equal force
here. In the present case, Erlinda submitted herself for cholecystectomy and
expected a routine general surgery to be performed on her gall bladder. On that
fateful day she delivered her person over to the care, custody and control of private
respondents who exercised complete and exclusive control over her. At the time of
submission, Erlinda was neurologically sound and, except for a few minor
discomforts, was likewise physically fit in mind and body. However, during the
administration of anesthesia and prior to the performance of cholecystectomy she
suffered irreparable damage to her brain. Thus, without undergoing surgery, she
went out of the operating room already decerebrate and totally incapacitated.
Obviously, brain damage, which Erlinda sustained, is an injury which does not
normally occur in the process of a gall bladder operation. In fact, this kind of
situation does not in the absence of negligence of someone in the administration of
anesthesia and in the use of endotracheal tube. Normally, a person being put under
anesthesia is not rendered decerebrate as a consequence of administering such
anesthesia if the proper procedure was followed. Furthermore, the instruments used
in the administration of anesthesia, including the endotracheal tube, were all under
the exclusive control of private respondents, who are the physicians-in-charge.
Likewise, petitioner Erlinda could not have been guilty of contributory negligence
because she was under the influence of anesthetics which rendered her
unconscious.
Considering that a sound and unaffected member of the body (the brain) is injured
or destroyed while the patient is unconscious and under the immediate and
exclusive control of the physicians, we hold that a practical administration of justice
dictates the application of res ipsa loquitur. Upon these facts and under these
circumstances the Court would be able to say, as a matter of common knowledge
and observation, if negligence attended the management and care of the patient.
Moreover, the liability of the physicians and the hospital in this case is not
predicated upon an alleged failure to secure the desired results of an operation nor
on an alleged lack of skill in the diagnosis or treatment as in fact no operation or
treatment was ever performed on Erlinda. Thus, upon all these initial determination
a case is made out for the application of the doctrine of res ipsa loquitur.
Nonetheless, in holding that res ipsa loquitur is available to the present case we are
not saying that the doctrine is applicable in any and all cases where injury occurs to
a patient while under anesthesia, or to any and all anesthesia cases. Each case
must be viewed in its own light and scrutinized in order to be within the res ipsa
loquitur coverage.

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Having in mind the applicability of the res ipsa loquitur doctrine and the
presumption of negligence allowed therein, the Court now comes to the issue of
whether the Court of Appeals erred in finding that private respondents were not
negligent in the care of Erlinda during the anesthesia phase of the operation and, if
in the affirmative, whether the alleged negligence was the proximate cause of
Erlinda's comatose condition. Corollary thereto, we shall also determine if the Court
of Appeals erred in relying on the testimonies of the witnesses for the private
respondents.

09-20-14
Q: Do you know what happened to that intubation process administered by Dra.
Gutierrez?
ATTY. ALCERA:
She will be incompetent Your Honor.
COURT:

In sustaining the position of private respondents, the Court of Appeals relied on the
testimonies of Dra. Gutierrez, Dra. Calderon and Dr. Jamora. In giving weight to the
testimony of Dra. Gutierrez, the Court of Appeals rationalized that she was candid
enough to admit that she experienced some difficulty in the endotracheal
intubation 45 of the patient and thus, cannot be said to be covering her negligence
with falsehood. The appellate court likewise opined that private respondents were
able to show that the brain damage sustained by Erlinda was not caused by the
alleged faulty intubation but was due to the allergic reaction of the patient to the
drug Thiopental Sodium (Pentothal), a short-acting barbiturate, as testified on by
their expert witness, Dr. Jamora. On the other hand, the appellate court rejected the
testimony of Dean Herminda Cruz offered in favor of petitioners that the cause of
the brain injury was traceable to the wrongful insertion of the tube since the latter,
being a nurse, was allegedly not knowledgeable in the process of intubation. In so
holding, the appellate court returned a verdict in favor of respondents physicians
and hospital and absolved them of any liability towards Erlinda and her family.
We disagree with the findings of the Court of Appeals. We hold that private
respondents were unable to disprove the presumption of negligence on their part in
the care of Erlinda and their negligence was the proximate cause of her piteous
condition.
In the instant case, the records are helpful in furnishing not only the logical
scientific evidence of the pathogenesis of the injury but also in providing the Court
the legal nexus upon which liability is based. As will be shown hereinafter, private
respondents' own testimonies which are reflected in the transcript of stenographic
notes are replete of signposts indicative of their negligence in the care and
management of Erlinda.
With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during the
anesthesia phase. As borne by the records, respondent Dra. Gutierrez failed to
properly intubate the patient. This fact was attested to by Prof. Herminda Cruz,
Dean of the Capitol Medical Center School of Nursing and petitioner's sister-in-law,
who was in the operating room right beside the patient when the tragic event
occurred. Witness Cruz testified to this effect:
ATTY. PAJARES:
Q: In particular, what did Dra. Perfecta Gutierrez do, if any on the patient?
A: In particular, I could see that she was intubating the patient.

Witness may answer if she knows.

A: As have said, I was with the patient, I was beside the stretcher holding the left
hand of the patient and all of a sudden heard some remarks coming from Dra.
Perfecta Gutierrez herself. She was saying "Ang hirap ma-intubate nito, mali yata
ang pagkakapasok. O lumalaki ang tiyan.
xxx xxx xxx
ATTY. PAJARES:
Q: From whom did you hear those words "lumalaki ang tiyan"?
A: From Dra. Perfecta Gutierrez.
xxx xxx xxx
Q: After hearing the phrase "lumalaki ang tiyan," what did you notice on the person
of the patient?
A: I notice (sic) some bluish discoloration on the nailbeds of the left hand where I
was at.
Q: Where was Dr. Orlino Ho[s]aka then at that particular time?
A: I saw him approaching the patient during that time.
Q: When he approached the patient, what did he do, if any?
A: He made an order to call on the anesthesiologist in the person of Dr. Calderon.
Q: Did Dr. Calderon, upon being called, arrive inside the operating room?
A: Yes sir.

25

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09-20-14

Q: What did [s]he do, if any?

A: [S]he tried to intubate the patient.
Q: What happened to the patient?
A: When Dr. Calderon try (sic) to intubate the patient, after a while the patient's
nailbed became bluish and I saw the patient was placed in trendelenburg position.
xxx xxx xxx
Q: Do you know the reason why the patient was placed in that trendelenburg
position?
A: As far as I know, when a patient is in that position, there is a decrease of blood
supply to the brain. 46
xxx xxx xxx
The appellate court, however, disbelieved Dean Cruz's testimony in the trial court
by declaring that:
A perusal of the standard nursing curriculum in our country will show that
intubation is not taught as part of nursing procedures and techniques.
Indeed, we take judicial notice of the fact that nurses do not, and cannot,
intubate. Even on the assumption that she is fully capable of determining
whether or not a patient is properly intubated, witness Herminda Cruz,
admittedly, did not peep into the throat of the patient. (TSN, July 25, 1991,
p. 13). More importantly, there is no evidence that she ever auscultated
the patient or that she conducted any type of examination to check if the
endotracheal tube was in its proper place, and to determine the condition
of the heart, lungs, and other organs. Thus, witness Cruz's categorical
statements that appellant Dra. Gutierrez failed to intubate the appellee
Erlinda Ramos and that it was Dra. Calderon who succeeded in doing so
clearly suffer from lack of sufficient factual bases. 47
In other words, what the Court of Appeals is trying to impress is that being a nurse,
and considered a layman in the process of intubation, witness Cruz is not
competent to testify on whether or not the intubation was a success.
We do not agree with the above reasoning of the appellate court. Although witness
Cruz is not an anesthesiologist, she can very well testify upon matters on which she
is capable of observing such as, the statements and acts of the physician and
surgeon, external appearances, and manifest conditions which are observable by
any one. 48 This is precisely allowed under the doctrine of res ipsa loquitur where
the testimony of expert witnesses is not required. It is the accepted rule that expert
testimony is not necessary for the proof of negligence in non-technical matters or

those of which an ordinary person may be expected to have knowledge, or where

the lack of skill or want of care is so obvious as to render expert testimony
unnecessary. 49 We take judicial notice of the fact that anesthesia procedures have
become so common, that even an ordinary person can tell if it was administered
properly. As such, it would not be too difficult to tell if the tube was properly
inserted. This kind of observation, we believe, does not require a medical degree to
be acceptable.
At any rate, without doubt, petitioner's witness, an experienced clinical nurse whose
long experience and scholarship led to her appointment as Dean of the Capitol
Medical Center School at Nursing, was fully capable of determining whether or not
the intubation was a success. She had extensive clinical experience starting as a
staff nurse in Chicago, Illinois; staff nurse and clinical instructor in a teaching
hospital, the FEU-NRMF; Dean of the Laguna College of Nursing in San Pablo City;
and then Dean of the Capitol Medical Center School of Nursing. 50Reviewing witness
Cruz' statements, we find that the same were delivered in a straightforward
manner, with the kind of detail, clarity, consistency and spontaneity which would
have been difficult to fabricate. With her clinical background as a nurse, the Court is
satisfied that she was able to demonstrate through her testimony what truly
transpired on that fateful day.
Most of all, her testimony was affirmed by no less than respondent Dra. Gutierrez
who admitted that she experienced difficulty in inserting the tube into Erlinda's
trachea, to wit:
ATTY. LIGSAY:
Q: In this particular case, Doctora, while you were intubating at your first attempt
(sic), you did not immediately see the trachea?
DRA. GUTIERREZ:
A: Yes sir.
Q: Did you pull away the tube immediately?
A: You do not pull the . . .
Q: Did you or did you not?
A: I did not pull the tube.
Q: When you said "mahirap yata ito," what were you referring to?
A: "Mahirap yata itong i-intubate," that was the patient.

26

Torts

09-20-14

Q: So, you found some difficulty in inserting the tube?

A: Yes, because of (sic) my first attempt, I did not see right away.

51

Curiously in the case at bar, respondent Dra. Gutierrez made the haphazard
defense that she encountered hardship in the insertion of the tube in the trachea of
Erlinda because it was positioned more anteriorly (slightly deviated from the normal
anatomy of a person) 52 making it harder to locate and, since Erlinda is obese and
has a short neck and protruding teeth, it made intubation even more difficult.
The argument does not convince us. If this was indeed observed, private
respondents adduced no evidence demonstrating that they proceeded to make a
thorough assessment of Erlinda's airway, prior to the induction of anesthesia, even
if this would mean postponing the procedure. From their testimonies, it appears
that the observation was made only as an afterthought, as a means of defense.
The pre-operative evaluation of a patient prior to the administration of anesthesia is
universally observed to lessen the possibility of anesthetic accidents. Pre-operative
evaluation and preparation for anesthesia begins when the anesthesiologist reviews
the patient's medical records and visits with the patient, traditionally, the day
before elective surgery. 53 It includes taking the patient's medical history, review of
current drug therapy, physical examination and interpretation of laboratory
data. 54 The physical examination performed by the anesthesiologist is directed
primarily toward the central nervous system, cardiovascular system, lungs
and upper airway. 55 A thorough analysis of the patient's airway normally involves
investigating the following: cervical spine mobility, temporomandibular mobility,
prominent central incisors, diseased or artificial teeth, ability to visualize uvula and
the thyromental distance. 56 Thus, physical characteristics of the patient's upper
airway that could make tracheal intubation difficult should be studied. 57 Where the
need arises, as when initial assessment indicates possible problems (such as the
alleged short neck and protruding teeth of Erlinda) a thorough examination of the
patient's airway would go a long way towards decreasing patient morbidity and
mortality.
In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the
first time on the day of the operation itself, on 17 June 1985. Before this date, no
prior consultations with, or pre-operative evaluation of Erlinda was done by her.
Until the day of the operation, respondent Dra. Gutierrez was unaware of the
physiological make-up and needs of Erlinda. She was likewise not properly informed
of the possible difficulties she would face during the administration of anesthesia to
Erlinda. Respondent Dra. Gutierrez' act of seeing her patient for the first time only
an hour before the scheduled operative procedure was, therefore, an act of
exceptional negligence and professional irresponsibility. The measures cautioning
prudence and vigilance in dealing with human lives lie at the core of the physician's
centuries-old Hippocratic Oath. Her failure to follow this medical procedure is,
therefore, a clear indicia of her negligence.
Respondent Dra. Gutierrez, however, attempts to gloss over this omission by
playing around with the trial court's ignorance of clinical procedure, hoping that she
could get away with it. Respondent Dra. Gutierrez tried to muddle the difference

between an elective surgery and an emergency surgery just so her failure to

perform the required pre-operative evaluation would escape unnoticed. In her
testimony she asserted:
ATTY. LIGSAY:
Q: Would you agree, Doctor, that it is good medical practice to see the patient a day
before so you can introduce yourself to establish good doctor-patient relationship
and gain the trust and confidence of the patient?
DRA. GUTIERREZ:
A: As I said in my previous statement, it depends on the operative procedure of the
anesthesiologist and in my case, with elective cases and normal cardio-pulmonary
clearance like that, I usually don't do it except on emergency and on cases that
have an abnormalities (sic). 58
However, the exact opposite is true. In an emergency procedure, there is hardly
enough time available for the fastidious demands of pre-operative procedure so
that an anesthesiologist is able to see the patient only a few minutes before
surgery, if at all. Elective procedures, on the other hand, are operative procedures
that can wait for days, weeks or even months. Hence, in these cases, the
anesthesiologist possesses the luxury of time to be at the patient's beside to do a
proper interview and clinical evaluation. There is ample time to explain the method
of anesthesia, the drugs to be used, and their possible hazards for purposes of
informed consent. Usually, the pre-operative assessment is conducted at least one
day before the intended surgery, when the patient is relaxed and cooperative.
Erlinda's case was elective and this was known to respondent Dra. Gutierrez. Thus,
she had all the time to make a thorough evaluation of Erlinda's case prior to the
operation and prepare her for anesthesia. However, she never saw the patient at
the bedside. She herself admitted that she had seen petitioner only in the operating
room, and only on the actual date of the cholecystectomy. She negligently failed to
take advantage of this important opportunity. As such, her attempt to exculpate
herself must fail.
Having established that respondent Dra. Gutierrez failed to perform pre-operative
evaluation of the patient which, in turn, resulted to a wrongful intubation, we now
determine if the faulty intubation is truly the proximate cause of Erlinda's comatose
condition.
Private respondents repeatedly hammered the view that the cerebral anoxia which
led to Erlinda's coma was due to bronchospasm 59 mediated by her allergic
response to the drug, Thiopental Sodium, introduced into her system. Towards this
end, they presented Dr. Jamora, a Fellow of the Philippine College of Physicians and
Diplomate of the Philippine Specialty Board of Internal Medicine, who advanced
private respondents' theory that the oxygen deprivation which led to anoxic
encephalopathy, 60 was due to an unpredictable drug reaction to the short-acting
barbiturate. We find the theory of private respondents unacceptable.

27

Torts
First of all, Dr. Jamora cannot be considered an authority in the field of
anesthesiology simply because he is not an anesthesiologist. Since Dr. Jamora is a
pulmonologist, he could not have been capable of properly enlightening the court
about anesthesia practice and procedure and their complications. Dr. Jamora is
likewise not an allergologist and could not therefore properly advance expert
opinion on allergic-mediated processes. Moreover, he is not a pharmacologist and,
as such, could not have been capable, as an expert would, of explaining to the
court the pharmacologic and toxic effects of the supposed culprit, Thiopental
Sodium (Pentothal).
The inappropriateness and absurdity of accepting Dr. Jamora's testimony as an
expert witness in the anesthetic practice of Pentothal administration is further
supported by his own admission that he formulated his opinions on the drug not
from the practical experience gained by a specialist or expert in the administration
and use of Sodium Pentothal on patients, but only from reading certain references,
to wit:
ATTY. LIGSAY:
Q: In your line of expertise on pulmonology, did you have any occasion to use
pentothal as a method of management?
DR. JAMORA:
A: We do it in conjunction with the anesthesiologist when they have to intubate our
patient.
Q: But not in particular when you practice pulmonology?
A: No.
Q: In other words, your knowledge about pentothal is based only on what you have
read from books and not by your own personal application of the medicine
pentothal?
A: Based on my personal experience also on pentothal.
Q: How many times have you used pentothal?
A: They used it on me. I went into bronchospasm during my appendectomy.
Q: And because they have used it on you and on account of your own personal
experience you feel that you can testify on pentothal here with medical authority?
A: No. That is why I used references to support my claims. 61

09-20-14
An anesthetic accident caused by a rare drug-induced bronchospasm properly falls
within the fields of anesthesia, internal medicine-allergy, and clinical pharmacology.
The resulting anoxic encephalopathy belongs to the field of neurology. While
admittedly, many bronchospastic-mediated pulmonary diseases are within the
expertise of pulmonary medicine, Dr. Jamora's field, the anesthetic drug-induced,
allergic mediated bronchospasm alleged in this case is within the disciplines of
anesthesiology, allergology and pharmacology. On the basis of the foregoing
transcript, in which the pulmonologist himself admitted that he could not testify
about the drug with medical authority, it is clear that the appellate court erred in
giving weight to Dr. Jamora's testimony as an expert in the administration of
Thiopental Sodium.
The provision in the rules of evidence

62

regarding expert witnesses states:

Sec. 49. Opinion of expert witness. The opinion of a witness on

a matter requiring special knowledge, skill, experience or training
which he is shown to possess, may be received in evidence.
Generally, to qualify as an expert witness, one must have acquired special
knowledge of the subject matter about which he or she is to testify, either by the
study of recognized authorities on the subject or by practical experience. 63 Clearly,
Dr. Jamora does not qualify as an expert witness based on the above standard since
he lacks the necessary knowledge, skill, and training in the field of anesthesiology.
Oddly, apart from submitting testimony from a specialist in the wrong field, private
respondents' intentionally avoided providing testimony by competent and
independent experts in the proper areas.
Moreover, private respondents' theory, that Thiopental Sodium may have produced
Erlinda's coma by triggering an allergic mediated response, has no support in
evidence. No evidence of stridor, skin reactions, or wheezing some of the more
common accompanying signs of an allergic reaction appears on record. No
laboratory data were ever presented to the court.
In any case, private respondents themselves admit that Thiopental induced,
allergic-mediated bronchospasm happens only very rarely. If courts were to accept
private respondents' hypothesis without supporting medical proof, and against the
weight of available evidence, then every anesthetic accident would be an act of
God. Evidently, the Thiopental-allergy theory vigorously asserted by private
respondents was a mere afterthought. Such an explanation was advanced in order
to advanced in order to absolve them of any and all responsibility for the patient's
condition.
In view of the evidence at hand, we are inclined to believe petitioners' stand that it
was the faulty intubation which was the proximate cause of Erlinda's comatose
condition.
Proximate cause has been defined as that which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces injury, and
without which the result would not have occurred. 64 An injury or damage is

28

Torts
proximately caused by an act or a failure to act, whenever it appears from the
evidence in the case, that the act or omission played a substantial part in bringing
about or actually causing the injury or damage; and that the injury or damage was
either a direct result or a reasonably probable consequence of the act or
omission. 65 It is the dominant, moving or producing cause.
Applying the above definition in relation to the evidence at hand, faulty intubation
is undeniably the proximate cause which triggered the chain of events leading to
Erlinda's brain damage and, ultimately, her comatosed condition.
Private respondents themselves admitted in their testimony that the first intubation
was a failure. This fact was likewise observed by witness Cruz when she heard
respondent Dra. Gutierrez remarked, "Ang hirap ma-intubate nito, mali yata ang
pagkakapasok. O lumalaki ang tiyan." Thereafter, witness Cruz noticed abdominal
distention on the body of Erlinda. The development of abdominal distention,
together with respiratory embarrassment indicates that the endotracheal tube
entered the esophagus instead of the respiratory tree. In other words, instead of the
intended endotracheal intubation what actually took place was an esophageal
intubation. During intubation, such distention indicates that air has entered the
gastrointestinal tract through the esophagus instead of the lungs through the
trachea. Entry into the esophagus would certainly cause some delay in oxygen
delivery into the lungs as the tube which carries oxygen is in the wrong place. That
abdominal distention had been observed during the first intubation suggests that
the length of time utilized in inserting the endotracheal tube (up to the time the
tube was withdrawn for the second attempt) was fairly significant. Due to the delay
in the delivery of oxygen in her lungs Erlinda showed signs of cyanosis. 66 As stated
in the testimony of Dr. Hosaka, the lack of oxygen became apparent only after he
noticed that the nailbeds of Erlinda were already blue. 67 However, private
respondents contend that a second intubation was executed on Erlinda and this one
was successfully done. We do not think so. No evidence exists on record, beyond
private respondents' bare claims, which supports the contention that the second
intubation was successful. Assuming that the endotracheal tube finally found its
way into the proper orifice of the trachea, the same gave no guarantee of oxygen
delivery, the hallmark of a successful intubation. In fact, cyanosis was again
observed immediately after the second intubation. Proceeding from this event
(cyanosis), it could not be claimed, as private respondents insist, that the second
intubation was accomplished. Even granting that the tube was successfully inserted
during the second attempt, it was obviously too late. As aptly explained by the trial
court, Erlinda already suffered brain damage as a result of the inadequate
oxygenation of her brain for about four to five minutes. 68
The above conclusion is not without basis. Scientific studies point out that
intubation problems are responsible for one-third (1/3) of deaths and serious
injuries associated with anesthesia. 69 Nevertheless, ninety-eight percent (98%) or
the vast majority of difficult intubations may be anticipated by performing a
thorough evaluation of the patient's airway prior to the operation. 70 As stated
beforehand, respondent Dra. Gutierrez failed to observe the proper pre-operative
protocol which could have prevented this unfortunate incident. Had appropriate
diligence and reasonable care been used in the pre-operative evaluation,
respondent physician could have been much more prepared to meet the
contingency brought about by the perceived anatomic variations in the patient's

09-20-14
neck and oral area, defects which would have been easily overcome by a prior
knowledge of those variations together with a change in technique. 71 In other
words, an experienced anesthesiologist, adequately alerted by a thorough preoperative evaluation, would have had little difficulty going around the short neck
and protruding teeth. 72 Having failed to observe common medical standards in preoperative management and intubation, respondent Dra. Gutierrez' negligence
resulted in cerebral anoxia and eventual coma of Erlinda.
We now determine the responsibility of respondent Dr. Orlino Hosaka as the head of
the surgical team. As the so-called "captain of the ship," 73 it is the surgeon's
responsibility to see to it that those under him perform their task in the proper
manner. Respondent Dr. Hosaka's negligence can be found in his failure to exercise
the proper authority (as the "captain" of the operative team) in not determining if
his anesthesiologist observed proper anesthesia protocols. In fact, no evidence on
record exists to show that respondent Dr. Hosaka verified if respondent Dra.
Gutierrez properly intubated the patient. Furthermore, it does not escape us that
respondent Dr. Hosaka had scheduled another procedure in a different hospital at
the same time as Erlinda's cholecystectomy, and was in fact over three hours late
for the latter's operation. Because of this, he had little or no time to confer with his
anesthesiologist regarding the anesthesia delivery. This indicates that he was
remiss in his professional duties towards his patient. Thus, he shares equal
responsibility for the events which resulted in Erlinda's condition.
We now discuss the responsibility of the hospital in this particular incident. The
unique practice (among private hospitals) of filling up specialist staff with attending
and visiting "consultants," 74 who are allegedly not hospital employees, presents
problems in apportioning responsibility for negligence in medical malpractice cases.
However, the difficulty is only more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of
consultants and in the conduct of their work within the hospital premises. Doctors
who apply for "consultant" slots, visiting or attending, are required to submit proof
of completion of residency, their educational qualifications; generally, evidence of
accreditation by the appropriate board (diplomate), evidence of fellowship in most
cases, and references. These requirements are carefully scrutinized by members of
the hospital administration or by a review committee set up by the hospital who
either accept or reject the application. 75 This is particularly true with respondent
hospital.
After a physician is accepted, either as a visiting or attending consultant, he is
normally required to attend clinico-pathological conferences, conduct bedside
rounds for clerks, interns and residents, moderate grand rounds and patient audits
and perform other tasks and responsibilities, for the privilege of being able to
maintain a clinic in the hospital, and/or for the privilege of admitting patients into
the hospital. In addition to these, the physician's performance as a specialist is
generally evaluated by a peer review committee on the basis of mortality and
morbidity statistics, and feedback from patients, nurses, interns and residents. A
consultant remiss in his duties, or a consultant who regularly falls short of the
minimum standards acceptable to the hospital or its peer review committee, is
normally politely terminated.

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Torts
In other words, private hospitals, hire, fire and exercise real control over their
attending and visiting "consultant" staff. While "consultants" are not, technically
employees, a point which respondent hospital asserts in denying all responsibility
for the patient's condition, the control exercised, the hiring, and the right to
terminate consultants all fulfill the important hallmarks of an employer-employee
relationship, with the exception of the payment of wages. In assessing whether
such a relationship in fact exists, the control test is determining. Accordingly, on the
basis of the foregoing, we rule that for the purpose of allocating responsibility in
medical negligence cases, an employer-employee relationship in effect exists
between hospitals and their attending and visiting physicians. This being the case,
the question now arises as to whether or not respondent hospital is solidarily liable
with respondent doctors for petitioner's condition. 76
The basis for holding an employer solidarily responsible for the negligence of its
employee is found in Article 2180 of the Civil Code which considers a person
accountable not only for his own acts but also for those of others based on the
former's responsibility under a relationship of patria potestas. 77 Such responsibility
ceases when the persons or entity concerned prove that they have observed the
diligence of a good father of the family to prevent damage. 78 In other words, while
the burden of proving negligence rests on the plaintiffs, once negligence is shown,
the burden shifts to the respondents (parent, guardian, teacher or employer) who
should prove that they observed the diligence of a good father of a family to
prevent damage.
In the instant case, respondent hospital, apart from a general denial of its
responsibility over respondent physicians, failed to adduce evidence showing that it
exercised the diligence of a good father of a family in the hiring and supervision of
the latter. It failed to adduce evidence with regard to the degree of supervision
which it exercised over its physicians. In neglecting to offer such proof, or proof of a
similar nature, respondent hospital thereby failed to discharge its burden under the
last paragraph of Article 2180. Having failed to do this, respondent hospital is
consequently solidarily responsible with its physicians for Erlinda's condition.
Based on the foregoing, we hold that the Court of Appeals erred in accepting and
relying on the testimonies of the witnesses for the private respondents. Indeed, as
shown by the above discussions, private respondents were unable to rebut the
presumption of negligence. Upon these disquisitions we hold that private
respondents are solidarily liable for damages under Article 2176 79 of the Civil Code.
We now come to the amount of damages due petitioners. The trial court awarded a
total of P632,000.00 pesos (should be P616,000.00) in compensatory damages to
the plaintiff, "subject to its being updated" covering the period from 15 November
1985 up to 15 April 1992, based on monthly expenses for the care of the patient
estimated at P8,000.00.
At current levels, the P8000/monthly amount established by the trial court at the
time of its decision would be grossly inadequate to cover the actual costs of homebased care for a comatose individual. The calculated amount was not even arrived
at by looking at the actual cost of proper hospice care for the patient. What it

09-20-14
reflected were the actual expenses incurred and proved by the petitioners after
they were forced to bring home the patient to avoid mounting hospital bills.
And yet ideally, a comatose patient should remain in a hospital or be transferred to
a hospice specializing in the care of the chronically ill for the purpose of providing a
proper milieu adequate to meet minimum standards of care. In the instant case for
instance, Erlinda has to be constantly turned from side to side to prevent bedsores
and hypostatic pneumonia. Feeding is done by nasogastric tube. Food preparation
should be normally made by a dietitian to provide her with the correct daily caloric
requirements and vitamin supplements. Furthermore, she has to be seen on a
regular basis by a physical therapist to avoid muscle atrophy, and by a pulmonary
therapist to prevent the accumulation of secretions which can lead to respiratory
complications.
Given these considerations, the amount of actual damages recoverable in suits
arising from negligence should at least reflect the correct minimum cost of proper
care, not the cost of the care the family is usually compelled to undertake at home
to avoid bankruptcy. However, the provisions of the Civil Code on actual or
compensatory damages present us with some difficulties.
Well-settled is the rule that actual damages which may be claimed by the plaintiff
are those suffered by him as he has duly proved. The Civil Code provides:
Art. 2199. Except as provided by law or by stipulation, one is entitled to
an adequate compensation only for such pecuniary loss suffered by him as
he has duly proved. Such compensation is referred to as actual or
compensatory damages.
Our rules on actual or compensatory damages generally assume that at the time of
litigation, the injury suffered as a consequence of an act of negligence has been
completed and that the cost can be liquidated. However, these provisions neglect
to take into account those situations, as in this case, where the resulting injury
might be continuing and possible future complications directly arising from the
injury, while certain to occur, are difficult to predict.
In these cases, the amount of damages which should be awarded, if they are to
adequately and correctly respond to the injury caused, should be one which
compensates for pecuniary loss incurred and proved, up to the time of trial;and one
which would meet pecuniary loss certain to be suffered but which could not, from
the nature of the case, be made with certainty. 80 In other words, temperate
damages can and should be awarded on top of actual or compensatory damages in
instances where the injury is chronic and continuing. And because of the unique
nature of such cases, no incompatibility arises when both actual and temperate
damages are provided for. The reason is that these damages cover two distinct
phases.
As it would not be equitable and certainly not in the best interests of the
administration of justice for the victim in such cases to constantly come before
the courts and invoke their aid in seeking adjustments to the compensatory

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damages previously awarded temperate damages are appropriate. The amount

given as temperate damages, though to a certain extent speculative, should take
into account the cost of proper care.
In the instant case, petitioners were able to provide only home-based nursing care
for a comatose patient who has remained in that condition for over a decade.
Having premised our award for compensatory damages on the amount provided by
petitioners at the onset of litigation, it would be now much more in step with the
interests of justice if the value awarded for temperate damages would allow
petitioners to provide optimal care for their loved one in a facility which generally
specializes in such care. They should not be compelled by dire circumstances to
provide substandard care at home without the aid of professionals, for anything less
would be grossly inadequate. Under the circumstances, an award of P1,500,000.00
in temperate damages would therefore be reasonable. 81
In Valenzuela vs. Court of Appeals, 82 this Court was confronted with a situation
where the injury suffered by the plaintiff would have led to expenses which were
difficult to estimate because while they would have been a direct result of the injury
(amputation), and were certain to be incurred by the plaintiff, they were likely to
arise only in the future. We awarded P1,000,000.00 in moral damages in that case.
Describing the nature of the injury, the Court therein stated:
As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic
amputation of her left lower extremity at the distal left thigh just above the
knee. Because of this, Valenzuela will forever be deprived of the full
ambulatory functions of her left extremity, even with the use of state of
the art prosthetic technology. Well beyond the period of hospitalization
(which was paid for by Li), she will be required to undergo adjustments in
her prosthetic devise due to the shrinkage of the stump from the process
of healing.
These adjustments entail costs, prosthetic replacements and months of
physical and occupational rehabilitation and therapy. During the lifetime,
the prosthetic devise will have to be replaced and readjusted to changes in
the size of her lower limb effected by the biological changes of middle-age,
menopause and aging. Assuming she reaches menopause, for example,
the prosthetic will have to be adjusted to respond to the changes in bone
resulting from a precipitate decrease in calcium levels observed in the
bones of all post-menopausal women. In other words, the damage done to
her would not only be permanent and lasting, it would also be permanently
changing and adjusting to the physiologic changes which her body would
normally undergo through the years. The replacements, changes, and
adjustments will require corresponding adjustive physical and occupational
therapy. All of these adjustments, it has been documented, are painful.
xxx xxx xxx

A prosthetic devise, however technologically advanced, will only allow a

reasonable amount of functional restoration of the motor functions of the
lower limb. The sensory functions are forever lost. The resultant anxiety,
sleeplessness, psychological injury, mental and physical pain are
inestimable. 83
The injury suffered by Erlinda as a consequence of private respondents' negligence
is certainly much more serious than the amputation in the Valenzuela case.
Petitioner Erlinda Ramos was in her mid-forties when the incident occurred. She has
been in a comatose state for over fourteen years now. The burden of care has so far
been heroically shouldered by her husband and children, who, in the intervening
years have been deprived of the love of a wife and a mother.
Meanwhile, the actual physical, emotional and financial cost of the care of
petitioner would be virtually impossible to quantify. Even the temperate damages
herein awarded would be inadequate if petitioner's condition remains unchanged
for the next ten years.
We recognized, in Valenzuela that a discussion of the victim's actual injury would
not even scratch the surface of the resulting moral damage because it would be
highly speculative to estimate the amount of emotional and moral pain,
psychological damage and injury suffered by the victim or those actually affected
by the victim's condition. 84 The husband and the children, all petitioners in this
case, will have to live with the day to day uncertainty of the patient's illness,
knowing any hope of recovery is close to nil. They have fashioned their daily lives
around the nursing care of petitioner, altering their long term goals to take into
account their life with a comatose patient. They, not the respondents, are charged
with the moral responsibility of the care of the victim. The family's moral injury and
suffering in this case is clearly a real one. For the foregoing reasons, an award of
P2,000,000.00 in moral damages would be appropriate.
Finally, by way of example, exemplary damages in the amount of P100,000.00 are
hereby awarded. Considering the length and nature of the instant suit we are of the
opinion that attorney's fees valued at P100,000.00 are likewise proper.
Our courts face unique difficulty in adjudicating medical negligence cases because
physicians are not insurers of life and, they rarely set out to intentionally cause
injury or death to their patients. However, intent is immaterial in negligence cases
because where negligence exists and is proven, the same automatically gives the
injured a right to reparation for the damage caused.
Established medical procedures and practices, though in constant flux are devised
for the purpose of preventing complications. A physician's experience with his
patients would sometimes tempt him to deviate from established community
practices, and he may end a distinguished career using unorthodox methods
without incident. However, when failure to follow established procedure results in
the evil precisely sought to be averted by observance of the procedure and a nexus
is made between the deviation and the injury or damage, the physician would

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necessarily be called to account for it. In the case at bar, the failure to observe preoperative assessment protocol which would have influenced the intubation in a
salutary way was fatal to private respondents' case.
WHEREFORE, the decision and resolution of the appellate court appealed from are
hereby modified so as to award in favor of petitioners, and solidarily against private
respondents the following: 1) P1,352,000.00 as actual damages computed as of the
date of promulgation of this decision plus a monthly payment of P8,000.00 up to
the time that petitioner Erlinda Ramos expires or miraculously survives; 2)
P2,000,000.00 as moral damages, 3) P1,500,000.00 as temperate damages; 4)
P100,000.00 each as exemplary damages and attorney's fees; and, 5) the costs of
the suit.
SO ORDERED.

G.R. No. 124354

April 11, 2002

ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as

natural guardians of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS,
and
RON
RAYMOND
RAMOS, petitioners,
vs.
COURT OF APPEALS, DE LOS SANTOS MEDICAL CENTER, DR. ORLINO
HOSAKA and DR. PERFECTA GUTIERREZ, respondents.
RESOLUTION
KAPUNAN, J.:
Private respondents De Los Santos Medical Center, Dr. Orlino Hosaka and Dr.
Perfecta Gutierrez move for a reconsideration of the Decision, dated December 29,
1999, of this Court holding them civilly liable for petitioner Erlinda Ramos
comatose condition after she delivered herself to them for their professional care
and management.
For better understanding of the issues raised in private respondents respective
motions, we will briefly restate the facts of the case as follows:
Sometime in 1985, petitioner Erlinda Ramos, after seeking professional medical
help, was advised to undergo an operation for the removal of a stone in her gall
bladder (cholecystectomy). She was referred to Dr. Hosaka, a surgeon, who agreed
to perform the operation on her. The operation was scheduled for June 17, 1985 at
9:00 in the morning at private respondent De Los Santos Medical Center (DLSMC).
Since neither petitioner Erlinda nor her husband, petitioner Rogelio, knew of any
anesthesiologist, Dr. Hosaka recommended to them the services of Dr. Gutierrez.
Petitioner Erlinda was admitted to the DLSMC the day before the scheduled
operation. By 7:30 in the morning of the following day, petitioner Erlinda was
already being prepared for operation. Upon the request of petitioner Erlinda, her
sister-in-law, Herminda Cruz, who was then Dean of the College of Nursing at the
Capitol Medical Center, was allowed to accompany her inside the operating room.

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09-20-14

At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr. Gutierrez tried
to get in touch with him by phone. Thereafter, Dr. Gutierrez informed Cruz that the
operation might be delayed due to the late arrival of Dr. Hosaka. In the meantime,
the patient, petitioner Erlinda said to Cruz, "Mindy, inip na inip na ako, ikuha mo
ako ng ibang Doctor."
By 10:00 in the morning, when Dr. Hosaka was still not around, petitioner Rogelio
already wanted to pull out his wife from the operating room. He met Dr. Garcia, who
remarked that he was also tired of waiting for Dr. Hosaka. Dr. Hosaka finally arrived
at the hospital at around 12:10 in the afternoon, or more than three (3) hours after
the scheduled operation.
Cruz, who was then still inside the operating room, heard about Dr. Hosakas arrival.
While she held the hand of Erlinda, Cruz saw Dr. Gutierrez trying to intubate the
patient. Cruz heard Dr. Gutierrez utter: "ang hirap ma-intubate nito, mali yata ang
pagkakapasok. O lumalaki ang tiyan." Cruz noticed a bluish discoloration of
Erlindas nailbeds on her left hand. She (Cruz) then heard Dr. Hosaka instruct
someone to call Dr. Calderon, another anesthesiologist. When he arrived, Dr.
Calderon attempted to intubate the patient. The nailbeds of the patient remained
bluish, thus, she was placed in a trendelenburg position a position where the head
of the patient is placed in a position lower than her feet. At this point, Cruz went out
of the operating room to express her concern to petitioner Rogelio that Erlindas
operation was not going well.
Cruz quickly rushed back to the operating room and saw that the patient was still in
trendelenburg position. At almost 3:00 in the afternoon, she saw Erlinda being
wheeled to the Intensive Care Unit (ICU). The doctors explained to petitioner
Rogelio that his wife had bronchospasm. Erlinda stayed in the ICU for a month. She
was released from the hospital only four months later or on November 15, 1985.
Since the ill-fated operation, Erlinda remained in comatose condition until she died
on August 3, 1999.1
Petitioners filed with the Regional Trial Court of Quezon City a civil case for
damages against private respondents. After due trial, the court a quo rendered
judgment in favor of petitioners. Essentially, the trial court found that private
respondents were negligent in the performance of their duties to Erlinda. On appeal
by private respondents, the Court of Appeals reversed the trial courts decision and
directed petitioners to pay their "unpaid medical bills" to private respondents.
Petitioners filed with this Court a petition for review on certiorari. The private
respondents were then required to submit their respective comments thereon. On
December 29, 1999, this Court promulgated the decision which private respondents
now seek to be reconsidered. The dispositive portion of said Decision states:
WHEREFORE, the decision and resolution of the appellate court appealed
from are hereby modified so as to award in favor of petitioners, and
solidarily against private respondents the following: 1) P1,352,000.00 as
actual damages computed as of the date of promulgation of this decision
plus a monthly payment of P8,000.00 up to the time that petitioner Erlinda
Ramos expires or miraculously survives; 2) P2,000,000.00 as moral

damages, 3) P1,500,000.00 as temperate damages; 4) P100,000.00 each

exemplary damages and attorneys fees; and 5) the costs of the suit. 2
In his Motion for Reconsideration, private respondent Dr. Hosaka submits the
following as grounds therefor:
I
THE HONORABLE SUPREME COURT COMMITTED REVERSIBLE ERROR WHEN IT HELD
RESPONDENT DR. HOSAKA LIABLE ON THE BASIS OF THE "CAPTAIN-OF-THE-SHIP"
DOCTRINE.
II
THE HONORABLE SUPREME COURT ERRED IN HOLDING RESPONDENT DR. HOSAKA
LIABLE DESPITE THE FACT THAT NO NEGLIGENCE CAN BE ATTRIBUTABLE TO HIM.
III
ASSUMING WITHOUT ADMITTING THAT RESPONDENT DR. HOSAKA IS LIABLE, THE
HONORABLE SUPREME COURT ERRED IN AWARDING DAMAGES THAT WERE CLEARLY
EXCESSIVE AND WITHOUT LEGAL BASIS.3
Private respondent Dr. Gutierrez, for her part, avers that:
A. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY
OVERLOOKED THE FACT THAT THE COURT OF APPEALS DECISION DATED
29 MAY 1995 HAD ALREADY BECOME FINAL AND EXECUTORY AS OF 25
JUNE 1995, THEREBY DEPRIVING THIS HONORABLE COURT OF
JURISDICTION OVER THE INSTANT PETITION;
B. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY
OVERLOOKED SEVERAL MATERIAL FACTUAL CIRCUMSTANCES WHICH, IF
PROPERLY CONSIDERED, WOULD INDUBITABLY LEAD TO NO OTHER
CONCLUSION BUT THAT PRIVATE RESPONDENT DOCTORS WERE NOT
GUILTY OF ANY NEGLIGENCE IN RESPECT OF THE INSTANT CASE;
B.1
RESPONDENT
DOCTOR
PERFECTA
GUTIERREZ
HAS
SUFFICIENTLY DISCHARGED THE BURDEN OF EVIDENCE BY
SUBSTANTIAL PROOF OF HER COMPLIANCE WITH THE STANDARDS
OF DUE CARE EXPECTED IN HER RESPECTIVE FIELD OF MEDICAL
SPECIALIZATION.
B.2
RESPONDENT
DOCTOR
PERFECTA
GUTIERREZ
HAS
SUFFICIENTLY DISCHARGED THE BURDEN OF EVIDENCE BY
SUBSTANTIAL PROOF OF HER HAVING SUCCESSFULLY INTUBATED
PATIENT ERLINDA RAMOS

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09-20-14
C. THE SUPREME COURT MAY HAVE INADVERTENTLY PLACED TOO MUCH
RELIANCE ON THE TESTIMONY OF PETITIONERS WITNESS HERMINDA
CRUZ, DESPITE THE EXISTENCE OF SEVERAL FACTUAL CIRCUMSTANCES
WHICH RENDERS DOUBT ON HER CREDIBILITY
D. THE SUPREME COURT MAY HAVE INADVERTENTLY DISREGARDED THE
EXPERT TESTIMONY OF DR. JAMORA AND DRA. CALDERON
E. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY
AWARDED DAMAGES TO PETITIONERS DESPITE THE FACT THAT THERE WAS
NO NEGLIGENCE ON THE PART OF RESPONDENT DOCTOR.4

Private respondent De Los Santos Medical

reconsideration on the following grounds:

Center

likewise

moves

for

I
THE HONORABLE COURT ERRED IN GIVING DUE COURSE TO THE INSTANT PETITION
AS THE DECISION OF THE HONORABLE COURT OF APPEALS HAD ALREADY BECOME
FINAL AND EXECUTORY
II
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT AN EMPLOYEREMPLOYEE [RELATIONSHIP] EXISTS BETWEEN RESPONDENT DE LOS SANTOS
MEDICAL CENTER AND DRS. ORLINO HOSAKA AND PERFECTA GUTIERREZ
III
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT RESPONDENT DE LOS
SANTOS MEDICAL CENTER IS SOLIDARILY LIABLE WITH RESPONDENT DOCTORS
IV
THE HONORABLE SUPREME COURT ERRED IN INCREASING THE AWARD OF
DAMAGES IN FAVOR OF PETITIONERS.5
In the Resolution of February 21, 2000, this Court denied the motions for
reconsideration of private respondents Drs. Hosaka and Gutierrez. They then filed
their respective second motions for reconsideration. The Philippine College of
Surgeons filed its Petition-in-Intervention contending in the main that this Court
erred in holding private respondent Dr. Hosaka liable under the captain of the ship
doctrine. According to the intervenor, said doctrine had long been abandoned in the
United States in recognition of the developments in modern medical and hospital
practice.6 The Court noted these pleadings in the Resolution of July 17, 2000.7

On March 19, 2001, the Court heard the oral arguments of the parties, including the
intervenor. Also present during the hearing were the amicii curiae: Dr. Felipe A.
Estrella, Jr., Consultant of the Philippine Charity Sweepstakes, former Director of the
Philippine General Hospital and former Secretary of Health; Dr. Iluminada T.
Camagay, President of the Philippine Society of Anesthesiologists, Inc. and Professor
and Vice-Chair for Research, Department of Anesthesiology, College of MedicinePhilippine General Hospital, University of the Philippines; and Dr. Lydia M. Egay,
Professor and Vice-Chair for Academics, Department of Anesthesiology, College of
Medicine-Philippine General Hospital, University of the Philippines.
The Court enumerated the issues to be resolved in this case as follows:
1.

WHETHER OR NOT DR. ORLINO HOSAKA (SURGEON) IS LIABLE FOR

NEGLIGENCE;

2.

WHETHER OR NOT DR. PERFECTA GUTIERREZ (ANESTHESIOLOGIST) IS

LIABLE FOR NEGLIGENCE; AND

3.

WHETHER OR NOT THE HOSPITAL (DELOS SANTOS MEDICAL CENTER)

IS LIABLE FOR ANY ACT OF NEGLIGENCE COMMITTED BY THEIR
VISITING CONSULTANT SURGEON AND ANESTHESIOLOGIST.8

We shall first resolve the issue pertaining to private respondent Dr. Gutierrez. She
maintains that the Court erred in finding her negligent and in holding that it was the
faulty intubation which was the proximate cause of Erlindas comatose condition.
The following objective facts allegedly negate a finding of negligence on her part: 1)
That the outcome of the procedure was a comatose patient and not a dead one; 2)
That the patient had a cardiac arrest; and 3) That the patient was revived from that
cardiac arrest.9 In effect, Dr. Gutierrez insists that, contrary to the finding of this
Court, the intubation she performed on Erlinda was successful.
Unfortunately, Dr. Gutierrez claim of lack of negligence on her part is belied by the
records of the case. It has been sufficiently established that she failed to exercise
the standards of care in the administration of anesthesia on a patient. Dr. Egay
enlightened the Court on what these standards are:
x x x What are the standards of care that an anesthesiologist should do
before we administer anesthesia? The initial step is the preparation of the
patient for surgery and this is a pre-operative evaluation because the
anesthesiologist is responsible for determining the medical status of the
patient, developing the anesthesia plan and acquainting the patient or the
responsible adult particularly if we are referring with the patient or to adult
patient who may not have, who may have some mental handicaps of the
proposed plans. We do pre-operative evaluation because this provides for
an opportunity for us to establish identification and personal acquaintance
with the patient. It also makes us have an opportunity to alleviate anxiety,
explain techniques and risks to the patient, given the patient the choice
and establishing consent to proceed with the plan. And lastly, once this
has been agreed upon by all parties concerned the ordering of pre-

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09-20-14
operative medications. And following this line at the end of the evaluation
we usually come up on writing, documentation is very important as far as
when we train an anesthesiologist we always emphasize this because we
need records for our protection, well, records. And it entails having brief
summary of patient history and physical findings pertinent to anesthesia,
plan, organize as a problem list, the plan anesthesia technique, the plan
post operative, pain management if appropriate, special issues for this
particular patient. There are needs for special care after surgery and if it so
it must be written down there and a request must be made known to
proper authorities that such and such care is necessary. And the request
for medical evaluation if there is an indication. When we ask for a cardiopulmonary clearance it is not in fact to tell them if this patient is going to
be fit for anesthesia, the decision to give anesthesia rests on the
anesthesiologist. What we ask them is actually to give us the functional
capacity of certain systems which maybe affected by the anesthetic agent
or the technique that we are going to use. But the burden of responsibility
in terms of selection of agent and how to administer it rest on the
anesthesiologist.10

The conduct of a preanesthetic/preoperative evaluation prior to an operation,

whether elective or emergency, cannot be dispensed with. 11 Such evaluation is
necessary for the formulation of a plan of anesthesia care suited to the needs of the
patient concerned.
Pre-evaluation for anesthesia involves taking the patients medical history,
reviewing his current drug therapy, conducting physical examination, interpreting
laboratory data, and determining the appropriate prescription of preoperative
medications as necessary to the conduct of anesthesia. 12
Physical examination of the patient entails not only evaluating the patients central
nervous system, cardiovascular system and lungs but also the upper airway.
Examination of the upper airway would in turn include an analysis of the patients
cervical spine mobility, temporomandibular mobility, prominent central incisors,
deceased or artificial teeth, ability to visualize uvula and the thyromental
distance.13
Nonetheless, Dr. Gutierrez omitted to perform a thorough preoperative evaluation
on Erlinda. As she herself admitted, she saw Erlinda for the first time on the day of
the operation itself, one hour before the scheduled operation. She auscultated 14 the
patients heart and lungs and checked the latters blood pressure to determine if
Erlinda was indeed fit for operation. 15 However, she did not proceed to examine the
patients airway. Had she been able to check petitioner Erlindas airway prior to the
operation, Dr. Gutierrez would most probably not have experienced difficulty in
intubating the former, and thus the resultant injury could have been avoided. As we
have stated in our Decision:

was unaware of the physiological make-up and needs of Erlinda. She was
likewise not properly informed of the possible difficulties she would face
during the administration of anesthesia to Erlinda. Respondent Dra.
Gutierrez act of seeing her patient for the first time only an hour before
the scheduled operative procedure was, therefore, an act of exceptional
negligence and professional irresponsibility. The measures cautioning
prudence and vigilance in dealing with human lives lie at the core of the
physicians centuries-old Hippocratic Oath. Her failure to follow this
medical procedure is, therefore, a clear indicia of her negligence.16
Further, there is no cogent reason for the Court to reverse its finding that it was the
faulty intubation on Erlinda that caused her comatose condition. There is no
question that Erlinda became comatose after Dr. Gutierrez performed a medical
procedure on her. Even the counsel of Dr. Gutierrez admitted to this fact during the
oral arguments:
CHIEF JUSTICE:
Mr. Counsel, you started your argument saying that this involves a
comatose patient?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
How do you mean by that, a comatose, a comatose after any other acts
were done by Dr. Gutierrez or comatose before any act was done by her?
ATTY. GANA:
No, we meant comatose as a final outcome of the procedure.
CHIEF JUSTICE:
Meaning to say, the patient became comatose after some intervention,
professional acts have been done by Dr. Gutierrez?
ATTY. GANA:
Yes, Your Honor.

In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda
for the first time on the day of the operation itself, on 17 June 1985. Before
this date, no prior consultations with, or pre-operative evaluation of Erlinda
was done by her. Until the day of the operation, respondent Dra. Gutierrez

CHIEF JUSTICE:

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09-20-14
In other words, the comatose status was a consequence of some acts
performed by D. Gutierrez?

ATTY. GANA:
It was a consequence of the well, (interrupted)
CHIEF JUSTICE:
An acts performed by her, is that not correct?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
Thank you.

17

What is left to be determined therefore is whether Erlindas hapless condition was

due to any fault or negligence on the part of Dr. Gutierrez while she (Erlinda) was
under the latters care. Dr. Gutierrez maintains that the bronchospasm and cardiac
arrest resulting in the patients comatose condition was brought about by the
anaphylactic reaction of the patient to Thiopental Sodium (pentothal). 18 In the
Decision, we explained why we found Dr. Gutierrez theory unacceptable. In the first
place, Dr. Eduardo Jamora, the witness who was presented to support her (Dr.
Gutierrez) theory, was a pulmonologist. Thus, he could not be considered an
authority on anesthesia practice and procedure and their complications. 19
Secondly, there was no evidence on record to support the theory that Erlinda
developed an allergic reaction to pentothal. Dr. Camagay enlightened the Court as
to the manifestations of an allergic reaction in this wise:
DR. CAMAGAY:
All right, let us qualify an allergic reaction. In medical terminology an
allergic reaction is something which is not usual response and it is further
qualified by the release of a hormone called histamine and histamine has
an effect on all the organs of the body generally release because the
substance that entered the body reacts with the particular cell, the mass
cell, and the mass cell secretes this histamine. In a way it is some form of
response to take away that which is not mine, which is not part of the
body. So, histamine has multiple effects on the body. So, one of the effects
as you will see you will have redness, if you have an allergy you will have
tearing of the eyes, you will have swelling, very crucial swelling sometimes
of the larynges which is your voice box main airway, that swelling may be
enough to obstruct the entry of air to the trachea and you could also have

contraction, constriction of the smaller airways beyond the trachea, you

see you have the trachea this way, we brought some visual aids but
unfortunately we do not have a projector. And then you have the smaller
airways, the bronchi and then eventually into the mass of the lungs you
have the bronchus. The difference is that these tubes have also in their
walls muscles and this particular kind of muscles is smooth muscle so,
when histamine is released they close up like this and that phenomenon is
known as bronco spasm. However, the effects of histamine also on blood
vessels are different. They dilate blood vessel open up and the patient or
whoever has this histamine release has hypertension or low blood pressure
to a point that the patient may have decrease blood supply to the brain
and may collapse so, you may have people who have this.20
These symptoms of an allergic reaction were not shown to have been extant in
Erlindas case. As we held in our Decision, "no evidence of stridor, skin reactions, or
wheezing some of the more common accompanying signs of an allergic reaction
appears on record. No laboratory data were ever presented to the court." 21
Dr. Gutierrez, however, insists that she successfully intubated Erlinda as evidenced
by the fact that she was revived after suffering from cardiac arrest. Dr. Gutierrez
faults the Court for giving credence to the testimony of Cruz on the matter of the
administration of anesthesia when she (Cruz), being a nurse, was allegedly not
qualified to testify thereon. Rather, Dr. Gutierrez invites the Courts attention to her
synopsis on what transpired during Erlindas intubation:
12:15 p.m. Patient was inducted with sodium pentothal 2.5% (250 mg)
given by slow IV. 02 was started by mask. After pentothal injection this was
followed by IV injection of Norcuron 4mg. After 2 minutes 02 was given by
positive pressure for about one minute. Intubation with endotracheal tube
7.5 m in diameter was done with slight difficulty (short neck & slightly
prominent upper teeth) chest was examined for breath sounds & checked
if equal on both sides. The tube was then anchored to the mouth by plaster
& cuff inflated. Ethrane 2% with 02 4 liters was given. Blood pressure was
checked 120/80 & heart rate regular and normal 90/min.
12:25 p.m. After 10 minutes patient was cyanotic. Ethrane was
discontinued & 02 given alone. Cyanosis disappeared. Blood pressure and
heart beats stable.
12:30 p.m. Cyanosis again reappeared this time with sibilant and sonorous
rales all over the chest. D_5%_H20 & 1 ampule of aminophyline by fast
drip was started. Still the cyanosis was persistent. Patient was connected
to a cardiac monitor. Another ampule of of [sic] aminophyline was given
and solu cortef was given.
12:40 p.m. There was cardiac arrest. Extra cardiac massage and
intercardiac injection of adrenalin was given & heart beat reappeared in
less than one minute. Sodium bicarbonate & another dose of solu cortef
was given by IV. Cyanosis slowly disappeared & 02 continuously given &
assisted positive pressure. Laboratory exams done (see results in chart).

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Patient was transferred to ICU for further management. 22

From the foregoing, it can be allegedly seen that there was no withdrawal
(extubation) of the tube. And the fact that the cyanosis allegedly disappeared after
pure oxygen was supplied through the tube proved that it was properly placed.
The Court has reservations on giving evidentiary weight to the entries purportedly
contained in Dr. Gutierrez synopsis. It is significant to note that the said record
prepared by Dr. Gutierrez was made only after Erlinda was taken out of the
operating room. The standard practice in anesthesia is that every single act that
the anesthesiologist performs must be recorded. In Dr. Gutierrez case, she could
not account for at least ten (10) minutes of what happened during the
administration of anesthesia on Erlinda. The following exchange between Dr.
Estrella, one of the amicii curiae, and Dr. Gutierrez is instructive:
DR. ESTRELLA
Q

You mentioned that there were two (2) attempts in the intubation period?

DR. GUTIERREZ

A
I was not able to record everything I did not have time anymore because I
did that after the, when the patient was about to leave the operating room. When
there was second cyanosis already that was the (interrupted)
Q

When was the first cyanosis?

The first cyanosis when I was (interrupted)

What time, more or less?

I think it was 12:15 or 12:16.

Well, if the record will show you started induction at 12:15?

Yes, Your Honor.

And the first medication you gave was what?

A
The first medication, no, first the patient was oxygenated for around one to
two minutes.

Yes.
Q
Q
There were two attempts. In the first attempt was the tube inserted or was
the laryngoscope only inserted, which was inserted?
A

A
Yes, and then, I asked the resident physician to start giving the pentothal
very slowly and that was around one minute.

All the laryngoscope.

Q

Q
All the laryngoscope. But if I remember right somewhere in the re-direct, a
certain lawyer, you were asked that you did a first attempt and the question was
did you withdraw the tube? And you said you never withdrew the tube, is that
right?
A

Yes.

Q
Yes. And so if you never withdrew the tube then there was no, there was no
insertion of the tube during that first attempt. Now, the other thing that we have to
settle here is when cyanosis occurred, is it recorded in the anesthesia record when
the cyanosis, in your recording when did the cyanosis occur?
A

Yes, so, that is about 12:13?

(sic)

Q
Is it a standard practice of anesthesia that whatever you do during that
period or from the time of induction to the time that you probably get the patient
out of the operating room that every single action that you do is so recorded in your
anesthesia record?

So, that is about 12:13 no, 12:15, 12:17?

A
Yes, and then, after one minute another oxygenation was given and after
(interrupted)
Q

12:18?

A
Yes, and then after giving the oxygen we start the menorcure which is a
relaxant. After that relaxant (interrupted)
Q

After that relaxant, how long do you wait before you do any manipulation?

Usually you wait for two minutes or three minutes.

Q
So, if our estimate of the time is accurate we are now more or less 12:19, is
that right?
A

Maybe.

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Q

09-20-14
12:19. And at that time, what would have been done to this patient?

The "mahirap intubate ito" assuming that you (interrupted)

A
After that time you examine the, if there is relaxation of the jaw which you
push it downwards and when I saw that the patient was relax because that
monorcure is a relaxant, you cannot intubate the patient or insert the laryngoscope
if it is not keeping him relax. So, my first attempt when I put the laryngoscope on I
saw the trachea was deeply interiorly. So, what I did ask "mahirap ata ito ah." So, I
removed the laryngoscope and oxygenated again the patient.

Iyon lang, that is what I only said "mahirap intubate (interrupted)

At what point?

When the first attempt when I inserted the laryngoscope for the first time.

Q
So, more or less you attempted to do an intubation after the first attempt as
you claimed that it was only the laryngoscope that was inserted.

Q
right?

Yes.

Q
And in the second attempt you inserted the laryngoscope and now possible
intubation?
A

Yes.

And at that point, you made a remark, what remark did you make?

A
I said "mahirap ata ito" when the first attempt I did not see the trachea right
away. That was when I (interrupted)
Q

That was the first attempt?

Yes.

What about the second attempt?

A
On the second attempt I was able to intubate right away within two to three
seconds.
Q
At what point, for purposes of discussion without accepting it, at what point
did you make the comment "na mahirap ata to intubate, mali ata ang pinasukan"
A

I did not say "mali ata ang pinasukan" I never said that.

Q
Well, just for the information of the group here the remarks I am making is
based on the documents that were forwarded to me by the Supreme Court. That is
why for purposes of discussion I am trying to clarify this for the sake of
enlightenment. So, at what point did you ever make that comment?
A

Which one, sir?

So, when you claim that at the first attempt you inserted the laryngoscope,

Yes.

Q
But in one of the recordings somewhere at the, somewhere in the transcript
of records that when the lawyer of the other party try to inquire from you during the
first attempt that was the time when "mayroon ba kayong hinugot sa tube, I do not
remember the page now, but it seems to me it is there. So, that it was on the
second attempt that (interrupted)
A

I was able to intubate.

And this is more or less about what time 12:21?

Maybe, I cannot remember the time, Sir.

Q
Okay, assuming that this was done at 12:21 and looking at the anesthesia
records from 12:20 to 12:30 there was no recording of the vital signs. And can we
presume that at this stage there was already some problems in handling the
patient?
A

Not yet.

But why are there no recordings in the anesthesia record?

I did not have time.

Ah, you did not have time, why did you not have time?

Because it was so fast, I really (at this juncture the witness is laughing)

Q
No, I am just asking. Remember I am not here not to pin point on anybody I
am here just to more or less clarify certainty more ore less on the record.
A

Yes, Sir.

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09-20-14

Q
And so it seems that there were no recording during that span of ten (10)
minutes. From 12:20 to 12:30, and going over your narration, it seems to me that
the cyanosis appeared ten (10) minutes after induction, is that right?
A

Yes.

And that is after induction 12:15 that is 12:25 that was the first cyanosis?

Yes.

And that the 12:25 is after the 12:20?

We cannot (interrupted)

Q
Huwag ho kayong makuwan, we are just trying to enlighten, I am just going
over the record ano, kung mali ito kuwan eh di ano. So, ganoon po ano, that it
seems to me that there is no recording from 12:20 to 12:30, so, I am just wondering
why there were no recordings during the period and then of course the second
cyanosis, after the first cyanosis. I think that was the time Dr. Hosaka came in?
A

No, the first cyanosis (interrupted).23

We cannot thus give full credence to Dr. Gutierrez synopsis in light of her admission
that it does not fully reflect the events that transpired during the administration of
anesthesia on Erlinda. As pointed out by Dr. Estrella, there was a ten-minute gap in
Dr. Gutierrez synopsis, i.e., the vital signs of Erlinda were not recorded during that
time. The absence of these data is particularly significant because, as found by the
trial court, it was the absence of oxygen supply for four (4) to five (5) minutes that
caused Erlindas comatose condition.
On the other hand, the Court has no reason to disbelieve the testimony of Cruz. As
we stated in the Decision, she is competent to testify on matters which she is
capable of observing such as, the statements and acts of the physician and
surgeon, external appearances and manifest conditions which are observable by
any one.24 Cruz, Erlindas sister-in-law, was with her inside the operating room.
Moreover, being a nurse and Dean of the Capitol Medical Center School of Nursing
at that, she is not entirely ignorant of anesthetic procedure. Cruz narrated that she
heard Dr. Gutierrez remark, "Ang hirap ma-intubate nito, mali yata ang
pagkakapasok. O lumalaki ang tiyan." She observed that the nailbeds of Erlinda
became bluish and thereafter Erlinda was placed in trendelenburg position. 25Cruz
further averred that she noticed that the abdomen of Erlinda became distended. 26
The cyanosis (bluish discoloration of the skin or mucous membranes caused by lack
of oxygen or abnormal hemoglobin in the blood) and enlargement of the stomach of
Erlinda indicate that the endotracheal tube was improperly inserted into the
esophagus instead of the trachea. Consequently, oxygen was delivered not to the
lungs but to the gastrointestinal tract. This conclusion is supported by the fact that
Erlinda was placed in trendelenburg position. This indicates that there was a

decrease of blood supply to the patients brain. The brain was thus temporarily
deprived of oxygen supply causing Erlinda to go into coma.
The injury incurred by petitioner Erlinda does not normally happen absent any
negligence in the administration of anesthesia and in the use of an endotracheal
tube. As was noted in our Decision, the instruments used in the administration of
anesthesia, including the endotracheal tube, were all under the exclusive control of
private respondents Dr. Gutierrez and Dr. Hosaka. 27 In Voss vs. Bridwell,28 which
involved a patient who suffered brain damage due to the wrongful administration of
anesthesia, and even before the scheduled mastoid operation could be performed,
the Kansas Supreme Court applied the doctrine of res ipsa loquitur, reasoning that
the injury to the patient therein was one which does not ordinarily take place in the
absence of negligence in the administration of an anesthetic, and in the use and
employment of an endotracheal tube. The court went on to say that "[o]rdinarily a
person being put under anesthesia is not rendered decerebrate as a consequence
of administering such anesthesia in the absence of negligence. Upon these facts
and under these circumstances, a layman would be able to say, as a matter of
common knowledge and observation, that the consequences of professional
treatment were not as such as would ordinarily have followed if due care had been
exercised."29 Considering the application of the doctrine ofres ipsa loquitur, the
testimony of Cruz was properly given credence in the case at bar.
For his part, Dr. Hosaka mainly contends that the Court erred in finding him
negligent as a surgeon by applying the Captain-of-the-Ship doctrine. 30 Dr. Hosaka
argues that the trend in United States jurisprudence has been to reject said doctrine
in light of the developments in medical practice. He points out that anesthesiology
and surgery are two distinct and specialized fields in medicine and as a surgeon, he
is not deemed to have control over the acts of Dr. Gutierrez. As anesthesiologist, Dr.
Gutierrez is a specialist in her field and has acquired skills and knowledge in the
course of her training which Dr. Hosaka, as a surgeon, does not possess. 31 He states
further that current American jurisprudence on the matter recognizes that the trend
towards specialization in medicine has created situations where surgeons do not
always have the right to control all personnel within the operating
room,32 especially a fellow specialist.33
Dr. Hosaka cites the case of Thomas v. Raleigh General Hospital,34 which involved a
suit filed by a patient who lost his voice due to the wrongful insertion of the
endotracheal tube preparatory to the administration of anesthesia in connection
with the laparotomy to be conducted on him. The patient sued both the
anesthesiologist and the surgeon for the injury suffered by him. The Supreme Court
of Appeals of West Virginia held that the surgeon could not be held liable for the
loss of the patients voice, considering that the surgeon did not have a hand in the
intubation of the patient. The court rejected the application of the "Captain-of-theShip Doctrine," citing the fact that the field of medicine has become specialized
such that surgeons can no longer be deemed as having control over the other
personnel in the operating room. It held that "[a]n assignment of liability based on
actual control more realistically reflects the actual relationship which exists in a
modern operating room."35 Hence, only the anesthesiologist who inserted the
endotracheal tube into the patients throat was held liable for the injury suffered by
the latter.

39

Torts
This contention fails to persuade.
That there is a trend in American jurisprudence to do away with the Captain-of-theShip doctrine does not mean that this Court will ipso facto follow said trend. Due
regard for the peculiar factual circumstances obtaining in this case justify the
application of the Captain-of-the-Ship doctrine. From the facts on record it can be
logically inferred that Dr. Hosaka exercised a certain degree of, at the very least,
supervision over the procedure then being performed on Erlinda.
First, it was Dr. Hosaka who recommended to petitioners the services of Dr.
Gutierrez. In effect, he represented to petitioners that Dr. Gutierrez possessed the
necessary competence and skills. Drs. Hosaka and Gutierrez had worked together
since 1977. Whenever Dr. Hosaka performed a surgery, he would always engage
the services of Dr. Gutierrez to administer the anesthesia on his patient. 36
Second, Dr. Hosaka himself admitted that he was the attending physician of Erlinda.
Thus, when Erlinda showed signs of cyanosis, it was Dr. Hosaka who gave
instructions to call for another anesthesiologist and cardiologist to help resuscitate
Erlinda.37
Third, it is conceded that in performing their responsibilities to the patient, Drs.
Hosaka and Gutierrez worked as a team. Their work cannot be placed in separate
watertight compartments because their duties intersect with each other. 38
While the professional services of Dr. Hosaka and Dr. Gutierrez were secured
primarily for their performance of acts within their respective fields of expertise for
the treatment of petitioner Erlinda, and that one does not exercise control over the
other, they were certainly not completely independent of each other so as to
absolve one from the negligent acts of the other physician.
That they were working as a medical team is evident from the fact that Dr. Hosaka
was keeping an eye on the intubation of the patient by Dr. Gutierrez, and while
doing so, he observed that the patients nails had become dusky and had to call Dr.
Gutierrezs attention thereto. The Court also notes that the counsel for Dr. Hosaka
admitted that in practice, the anesthesiologist would also have to observe the
surgeons acts during the surgical process and calls the attention of the surgeon
whenever necessary39 in the course of the treatment. The duties of Dr. Hosaka and
those of Dr. Gutierrez in the treatment of petitioner Erlinda are therefore not as
clear-cut as respondents claim them to be. On the contrary, it is quite apparent that
they have a common responsibility to treat the patient, which responsibility
necessitates that they call each others attention to the condition of the patient
while the other physician is performing the necessary medical procedures.
It is equally important to point out that Dr. Hosaka was remiss in his duty of
attending to petitioner Erlinda promptly, for he arrived more than three (3) hours
late for the scheduled operation. The cholecystectomy was set for June 17, 1985 at
9:00 a.m., but he arrived at DLSMC only at around 12:10 p.m. In reckless disregard
for his patients well being, Dr. Hosaka scheduled two procedures on the same day,
just thirty minutes apart from each other, at different hospitals. Thus, when the first

09-20-14
procedure (protoscopy) at the Sta. Teresita Hospital did not proceed on time, Erlinda
was kept in a state of uncertainty at the DLSMC.
The unreasonable delay in petitioner Erlindas scheduled operation subjected her to
continued starvation and consequently, to the risk of acidosis, 40 or the condition of
decreased alkalinity of the blood and tissues, marked by sickly sweet breath,
headache, nausea and vomiting, and visual disturbances. 41 The long period that Dr.
Hosaka made Erlinda wait for him certainly aggravated the anxiety that she must
have been feeling at the time. It could be safely said that her anxiety adversely
affected the administration of anesthesia on her. As explained by Dr. Camagay, the
patients anxiety usually causes the outpouring of adrenaline which in turn results
in high blood pressure or disturbances in the heart rhythm:
DR. CAMAGAY:
x x x Pre-operative medication has three main functions: One is to
alleviate anxiety. Second is to dry up the secretions and Third is to
relieve pain. Now, it is very important to alleviate anxiety because
anxiety is associated with the outpouring of certain substances
formed in the body called adrenalin. When a patient is anxious
there is an outpouring of adrenalin which would have adverse
effect on the patient. One of it is high blood pressure, the other is
that he opens himself to disturbances in the heart rhythm, which
would have adverse implications. So, we would like to alleviate
patients anxiety mainly because he will not be in control of his
body there could be adverse results to surgery and he will be
opened up; a knife is going to open up his body. x x x42
Dr. Hosaka cannot now claim that he was entirely blameless of what happened to
Erlinda. His conduct clearly constituted a breach of his professional duties to
Erlinda:
CHIEF JUSTICE:
Two other points. The first, Doctor, you were talking about
anxiety, would you consider a patient's stay on the operating
table for three hours sufficient enough to aggravate or magnify
his or her anxiety?
DR. CAMAGAY:
Yes.
CHIEF JUSTICE:
In other words, I understand that in this particular case that was
the case, three hours waiting and the patient was already on the
operating table (interrupted)

40

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09-20-14
DR. CAMAGAY:

Dr. Hosaka's irresponsible conduct of arriving very late for the scheduled operation
of petitioner Erlinda is violative, not only of his duty as a physician "to serve the
interest of his patients with the greatest solicitude, giving them always his best
talent and skill,"44 but also of Article 19 of the Civil Code which requires a person, in
the performance of his duties, to act with justice and give everyone his due.

Yes.
CHIEF JUSTICE:
Would you therefore conclude that the surgeon contributed to the
aggravation of the anxiety of the patient?
DR. CAMAGAY:
That this operation did not take place as scheduled is already a
source of anxiety and most operating tables are very narrow and
that patients are usually at risk of falling on the floor so there are
restraints that are placed on them and they are never, never left
alone in the operating room by themselves specially if they are
already pre-medicated because they may not be aware of some
of their movement that they make which would contribute to their
injury.
CHIEF JUSTICE:
In other words due diligence would require a surgeon to come on
time?
DR. CAMAGAY:
I think it is not even due diligence it is courtesy.
CHIEF JUSTICE:
Courtesy.
DR. CAMAGAY:
And care.
CHIEF JUSTICE:
Duty as a matter of fact?

Anent private respondent DLSMCs liability for the resulting injury to petitioner
Erlinda, we held that respondent hospital is solidarily liable with respondent doctors
therefor under Article 2180 of the Civil Code45 since there exists an employeremployee relationship between private respondent DLSMC and Drs. Gutierrez and
Hosaka:
In other words, private hospitals, hire, fire and exercise real control over
their attending and visiting "consultant" staff. While "consultants" are not,
technically employees, x x x the control exercised, the hiring and the right
to terminate consultants all fulfill the important hallmarks of an employeremployee relationship, with the exception of the payment of wages. In
assessing whether such a relationship in fact exists, the control test is
determining. x x x46
DLSMC however contends that applying the four-fold test in determining whether
such a relationship exists between it and the respondent doctors, the inescapable
conclusion is that DLSMC cannot be considered an employer of the respondent
doctors.
It has been consistently held that in determining whether an employer-employee
relationship exists between the parties, the following elements must be present: (1)
selection and engagement of services; (2) payment of wages; (3) the power to hire
and fire; and (4) the power to control not only the end to be achieved, but the
means to be used in reaching such an end.47
DLSMC maintains that first, a hospital does not hire or engage the services of a
consultant, but rather, accredits the latter and grants him or her the privilege of
maintaining a clinic and/or admitting patients in the hospital upon a showing by the
consultant that he or she possesses the necessary qualifications, such as
accreditation by the appropriate board (diplomate), evidence of fellowship and
references.48 Second, it is not the hospital but the patient who pays the consultants
fee for services rendered by the latter. 49 Third, a hospital does not dismiss a
consultant; instead, the latter may lose his or her accreditation or privileges
granted by the hospital.50 Lastly, DLSMC argues that when a doctor refers a patient
for admission in a hospital, it is the doctor who prescribes the treatment to be given
to said patient. The hospitals obligation is limited to providing the patient with the
preferred room accommodation, the nutritional diet and medications prescribed by
the doctor, the equipment and facilities necessary for the treatment of the patient,
as well as the services of the hospital staff who perform the ministerial tasks of
ensuring that the doctors orders are carried out strictly. 51

DR. CAMAGAY:
Yes, Your Honor.

43

After a careful consideration of the arguments raised by DLSMC, the Court finds that
respondent hospitals position on this issue is meritorious. There is no employeremployee relationship between DLSMC and Drs. Gutierrez and Hosaka which would

41

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09-20-14

hold DLSMC solidarily liable for the injury suffered by petitioner Erlinda under Article
2180 of the Civil Code.

future complications directly arising from the injury, while certain to occur,
are difficult to predict.

As explained by respondent hospital, that the admission of a physician to

membership in DLSMCs medical staff as active or visiting consultant is first decided
upon by the Credentials Committee thereof, which is composed of the heads of the
various specialty departments such as the Department of Obstetrics and
Gynecology, Pediatrics, Surgery with the department head of the particular
specialty applied for as chairman. The Credentials Committee then recommends to
DLSMC's Medical Director or Hospital Administrator the acceptance or rejection of
the applicant physician, and said director or administrator validates the
committee's recommendation.52 Similarly, in cases where a disciplinary action is
lodged against a consultant, the same is initiated by the department to whom the
consultant concerned belongs and filed with the Ethics Committee consisting of the
department specialty heads. The medical director/hospital administrator merely
acts as ex-officio member of said committee.

In these cases, the amount of damages which should be awarded, if they

are to adequately and correctly respond to the injury caused, should be
one which compensates for pecuniary loss incurred and proved, up to the
time of trial; and one which would meet pecuniary loss certain to be
suffered but which could not, from the nature of the case, be made with
certainty. In other words, temperate damages can and should be awarded
on top of actual or compensatory damages in instances where the injury is
chronic and continuing. And because of the unique nature of such cases,
no incompatibility arises when both actual and temperate damages are
provided for. The reason is that these damages cover two distinct phases.

Neither is there any showing that it is DLSMC which pays any of its consultants for
medical services rendered by the latter to their respective patients. Moreover, the
contract between the consultant in respondent hospital and his patient is separate
and distinct from the contract between respondent hospital and said patient. The
first has for its object the rendition of medical services by the consultant to the
patient, while the second concerns the provision by the hospital of facilities and
services by its staff such as nurses and laboratory personnel necessary for the
proper treatment of the patient.
Further, no evidence was adduced to show that the injury suffered by petitioner
Erlinda was due to a failure on the part of respondent DLSMC to provide for hospital
facilities and staff necessary for her treatment.
For these reasons, we reverse the finding of liability on the part of DLSMC for the
injury suffered by petitioner Erlinda.
Finally, the Court also deems it necessary to modify the award of damages to
petitioners in view of the supervening event of petitioner Erlindas death. In the
assailed Decision, the Court awarded actual damages of One Million Three Hundred
Fifty Two Thousand Pesos (P1,352,000.00) to cover the expenses for petitioner
Erlindas treatment and care from the date of promulgation of the Decision up to
the time the patient expires or survives.53 In addition thereto, the Court awarded
temperate damages of One Million Five Hundred Thousand Pesos (P1,500,000.00) in
view of the chronic and continuing nature of petitioner Erlindas injury and the
certainty of further pecuniary loss by petitioners as a result of said injury, the
amount of which, however, could not be made with certainty at the time of the
promulgation of the decision. The Court justified such award in this manner:
Our rules on actual or compensatory damages generally assume that at
the time of litigation, the injury suffered as a consequence of an act of
negligence has been completed and that the cost can be liquidated.
However, these provisions neglect to take into account those situations, as
in this case, where the resulting injury might be continuing and possible

As it would not be equitableand certainly not in the best interests of the

administration of justicefor the victim in such cases to constantly come
before the courts and invoke their aid in seeking adjustments to the
compensatory damages previously awardedtemperate damages are
appropriate. The amount given as temperate damages, though to a certain
extent speculative, should take into account the cost of proper care.
In the instant case, petitioners were able to provide only home-based
nursing care for a comatose patient who has remained in that condition for
over a decade. Having premised our award for compensatory damages on
the amount provided by petitioners at the onset of litigation, it would be
now much more in step with the interests of justice if the value awarded
for temperate damages would allow petitioners to provide optimal care for
their loved one in a facility which generally specializes in such care. They
should not be compelled by dire circumstances to provide substandard
care at home without the aid of professionals, for anything less would be
grossly inadequate. Under the circumstances, an award of P1,500,000.00
in temperate damages would therefore be reasonable.54
However, subsequent to the promulgation of the Decision, the Court was informed
by petitioner Rogelio that petitioner Erlinda died on August 3, 1999. 55 In view of this
supervening event, the award of temperate damages in addition to the actual or
compensatory damages would no longer be justified since the actual damages
awarded in the Decision are sufficient to cover the medical expenses incurred by
petitioners for the patient. Hence, only the amounts representing actual, moral and
exemplary damages, attorneys fees and costs of suit should be awarded to
petitioners.
WHEREFORE, the assailed Decision is hereby modified as follows:
(1) Private respondent De Los Santos Medical Center is hereby absolved from
liability arising from the injury suffered by petitioner Erlinda Ramos on June
17, 1985;

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09-20-14

(2) Private respondents Dr. Orlino Hosaka and Dr. Perfecta Gutierrez are
hereby declared to be solidarily liable for the injury suffered by petitioner
Erlinda on June 17, 1985 and are ordered to pay petitioners
(a) P1,352,000.00 as actual damages;
(b) P2,000,000.00 as moral damages;
(c) P100,000.00 as exemplary damages;
(d) P100,000.00 as attorneys fees; and

winds while traversing the waters of Lianga Bay, Surigao del Sur, causing her to tilt
at three degrees on its starboard side. Due to the violent waves which continuously
hammered the tilting vessel, the seawaters slowly swallowed up the main deck
causing the tilting to worsen up to 30 degrees. In an effort to salvage the vessel,
the ship captain changed its course from the north to the south but the tilting
continued to grow to a dangerously high level, rendering the vessel beyond control.
It was at this point when the ship captain ordered the crew members to abandon
the vessel. Despite the efforts exerted by the crew members to save the vessel,
M/V David, Jr. sank together with her cargo at around eleven oclock in the evening
at Bakulin Point, Lianga Bay, Surigao del Sur. Among the 20 crew members, twelve
survived, one died and seven were missing. One of those who were missing was
Melquiades Sugata-on (Melquiades), the husband of herein respondent, Florentina
Sugata-on, (Florentina) as shown in the List of Surviving Crew of the Ill-Fated David,
Jr., prepared by Candano Shipping.5

(e) the costs of the suit.

Upon learning of Melquiades fate, Florentina immediately went to the office of
Candano Shipping in Manila to claim the death benefits of her husband but it
refused to pay.6

SO ORDERED.
G.R. No. 163212

March 13, 2007

CANDANO SHIPPING LINES, INC., Petitioner, vs. FLORENTINA J. SUGATAON, Respondent.

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court, seeking to reverse and set aside the Court of Appeals Decision 1 dated 23
May 2003 and its Resolution dated 1 April 2004, affirming with modification the
Decision of the Regional Trial Court (RTC) of Manila, Branch 20, finding Candano
Shipping Lines, Inc. (Candano Shipping) liable for the death of Melquiades Sugataon. The dispositive portion of the assailed decision of the appellate court reads:
IN VIEW OF ALL THE FOREGOING, the appealed decision is AFFIRMED, with
the MODIFICATION that: (1) the awarded compensation for the death of
Melquiades Sugata-on is reduced to P608,400.00; and, (2) the award of moral and
exemplary damages as well as attorneys fees is deleted. No pronouncement as to
costs.2
The factual and procedural antecedents of this instant petition are as follows:

Such refusal prompted Florentina to institute on 31 January 1997, an action seeking

indemnity for the death of her husband against Candano Shipping before the RTC of
Manila, Branch 20. She grounded her case on the provision of Article 1711 7 of the
New Civil Code, which imposes upon the employer liability for the death of his
employee in the course of employment, even if the death is caused by a fortuitous
event. Accordingly, Florentina prayed that actual, moral and exemplary damages
including attorneys fees, be awarded in her favor.8
In its Answer,9 Candano Shipping countered that Florentina had no cause of action
against it because the death of Melquiades was not yet an established fact since he
was merely reported missing upon the sinking of M/V David, Jr. The filing of the case
before the RTC therefore was premature for she should have waited until the body
of Melquiades could be recovered or until the lapse of time which would render the
provision of Article 391 of the New Civil Code 10 on presumptive death operative.
The RTC resolved the controversy in favor of Florentina and ratiocinated that the
provision of Article 391 of the New Civil Code on presumptive death had become
operative since the period of four years had already elapsed since Melquiades was
reported missing upon the sinking incident which occurred on 27 March 1996. In a
Decision11promulgated on 15 February 2001, the RTC ordered Candano Shipping to
indemnify Florentina for the death of her husband, in the following amounts:

Candano Shipping is a domestic corporation engaged in the business of coastwise

trading within the Philippines.3On 7 March 1994, Melquiades Sugata-on was
employed by Candano Shipping as Third Marine Engineer on board its cargo vessel,
M/V David, Jr., with the monthly salary of P7,800.00.4

WHEREFORE, premises considered, judgment is hereby rendered ordering

defendant Candano Shipping Lines, Inc. to indemnify plaintiff Forentina J. Sugata-on
the amount of P988,400.00 as actual damages, P100,000.00 as moral
damages P50,000.00 as exemplary damages and 10% of the amount due as and for
attorneys fees plus the cost of suit.

On 25 March 1996, M/V David, Jr. left the port of Davao City with its cargo and 20
crew members. The voyage was initially uneventful until around seven oclock in
the evening of 27 March 1996 when the vessel encountered rough seas and strong

The award for actual damages amounting to P988,400.00 was computed by the
lower court by adopting the formula in the computation of loss of earning capacity
enunciated in the case of Villa Rey Transit, Inc. v. Court of Appeals, 12wherein the

43

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09-20-14

annual expenses of the deceased are deducted from his gross annual income and
multiplied by life expectancy (gross annual income annual expense x life
expectancy).13
The Motion for Reconsideration interposed by Candano Shipping was denied by the
RTC for lack of cogent reason to disturb or reconsider its decision. 14
Aggrieved, Candano Shipping elevated the adverse RTC decision to the Court of
Appeals, which in turn, affirmed with modification the judgment of the lower court.
The award for actual damages was reduced from P998,400.00 toP608,400.00, while
the awards for moral and exemplary damages including attorneys fees were
deleted for lack of sufficient basis for their allowance.15
In arriving at the sum of P608,400.00, the appellate court applied the standard
prescribed by Article 194 of the Labor Code of the Philippines, as amended, to wit:
ART. 194. DEATH. (a) Under such regulations as the Commission may approve, the
System shall pay to the primary beneficiaries upon the death of the covered
employee under this Title an amount equivalent to his monthly income benefit, plus
ten percent thereof for each dependent child, but not exceeding five, beginning
with the youngest and without substitution, except as provided for in paragraph (j)
of Article 167 hereof; Provided, however, That the monthly income benefit shall be
guaranteed for five years: Provided, further, That if he has no primary beneficiary,
the System shall pay to his secondary beneficiaries the monthly income benefit not
to exceed sixty months; Provided, finally, That the minimum monthly death benefit
shall not be less that fifteen thousand pesos.
In a Resolution16 issued on 1 April 2004, the Court of Appeals denied the Motion for
Reconsideration filed by Candano Shipping for failure to offer any justifiable ground
to modify, reverse or reconsider the questioned decision.
Hence, this instant Petition for Review on Certiorari filed by Candano Shipping
raising the following issues:
WHETHER OR NOT THE FORMULA FOR FIXING THE AMOUNT OF DEATH
COMPENSATION IN ARTICLE 194 OF THE LABOR CODE APPLIES IN
DETERMINING THE COMPENSATION CLAIMED BY THE HEIR OF THE
DECEASED EMPLOYEE AGAINST THE EMPLOYER UNDER ARTICLE 1711?
WHETHER OR NOT IT IS PERMITTED FOR THE COURT OF APPEALS, ON
ORDINARY APPEAL, TO APPLY ART. 194 OF THE LABOR CODE ON A CLAIM
FOR DEATH COMPENSATION OF AN EMPLOYEE AGAINST THE EMPLOYER
FILED AND TRIED BEFORE THE REGULAR COURTS ON THE BASIS OF
ARTICLE 1711 OF THE CIVIL CODE AND THE DOCTRINE ENUNCIATED IN THE
VILLA REY TRANSIT CASE?
WHETHER OR NOT APPLICATION OF ARTICLE 194 OF THE LABOR CODE ON
THE CLAIM FOR DEATH COMPENSATION OF RESPONDENT OUSTS THE

REGULAR COURTS, INCLUDING THE COURT OF APPEALS OF JURISDICTION

OVER THE CASE?
IN THE EVENT THAT THE SUPREME COURT RULES THAT THE COURT OF
APPEALS APPLICATION OF ARTICLE 194 OF THE LABOR CODE IN THIS CASE
SHOULD BE SET ASIDE, IS RESPONDENT ENTITLED TO RECOVER DEATH
COMPENSATION FROM PETITIONER IN ACCORDANCE WITH HER THEORY OF
THE CASE AS ALLEGED, ARGUED AND TRIED BEFORE THE TRIAL COURT.17
Since the factual findings of the RTC and the Court of Appeals that the non-recovery
of Melquiades body for the period of four (4) years from 27 March 1996 creates a
presumption that he is already dead and that his death was caused by a fortuitous
event, were already settled, and considering that these findings were not
controverted by the parties in this instant petition, we find no compelling reason to
disturb the same. Henceforth, we will limit our discussion to the computation of the
amount of indemnification.
In its Petition, Candano Shipping argues that the application of the measure
stipulated under Article 194 of the Labor Code is erroneous since it applies only to
death compensation to be paid by the Social Security System to the beneficiaries of
a deceased member, to which proposition Florentina concedes. We agree. The
remedy availed by Sugata-on in filing the claim under the New Civil Code has been
validly recognized by the prevailing jurisprudence on the matter.
In the case of Floresca v. Philex Mining Company,18 we declared that the employees
may invoke either the Workmens Compensation Act or the provisions of the Civil
Code, subject to the consequence that the choice of one remedy will exclude the
other and that the acceptance of the compensation under the remedy chosen will
exclude the other remedy. The exception is where the claimant who had already
been paid under the Workmens Compensation Act may still sue for damages under
the Civil Code on the basis of supervening facts or developments occurring after he
opted for the first remedy.19
Stated differently, save for the recognized exception, an employee cannot pursue
both remedies simultaneously but has the option to proceed by interposing one
remedy and waiving his right over the other. As we have explained in Floresca, this
doctrinal rule is rooted on the theory that the basis of the compensation under the
Workmens Compensation Act is separate and distinct from the award of damages
under the Civil Code, thus:
The rationale in awarding compensation under the Workmens Compensation Act
differs from that in giving damages under the Civil Code. The compensation acts
are based on a theory of compensation distinct from the existing theories of
damages, payments under the acts being made as compensation and not as
damages (99 C.J.S. 53). Compensation is given to mitigate harshness and insecurity
of industrial life for the workman and his family. Hence, an employer is liable
whether negligence exists or not since liability is created by law. Recovery under
the Act is not based on any theory of actionable wrong on the part of the employer
(99 D.J.S. 36).

44

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09-20-14

In other words, under compensation acts, the employer is liable to pay

compensation benefits for loss of income, as long as the death, sickness or injury is
work-connected or work-aggravated, even if the death or injury is not due to the
fault of the employer (Murillo v. Mendoza, 66 Phil. 689). On the other hand,
damages are awarded to one as a vindication of the wrongful invasion of his rights.
It is the indemnity recoverable by a person who has sustained injury either in his
person, property or relative rights, through the act or default of another (25 C.J.S.
452).
The principle underscored in the case of Floresca was further affirmed in the later
case of Ysmael Maritime Corporation v. Avelino, 20 wherein we emphasized that once
the claimant had already exercised his choice to pursue his right under one remedy,
he is barred from proceeding with an alternative remedy. As eloquently laid down by
Chief Justice Marcelo Fernan:
It is therefore clear that respondents had not only opted to recover under the Act
but they had also been duly paid. At the very least, a sense of fair play would
demand that if a person entitled to a choice of remedies made a first election and
accepted the benefits thereof, he should no longer be allowed to exercise the
second option. "Having staked his fortunes on a particular remedy, (he) is
precluded from pursuing the alternate course, at least until the prior
claim is rejected by the Compensation Commission."
In the case at bar, Florentina was forced to institute a civil suit for indemnity under
the New Civil Code, after Candano Shipping refused to compensate her husbands
death.
The pertinent provision of the New Civil Code reads:
Article 1711. Owners of enterprises and other employers are obliged to pay
compensation for the death of or injuries to their laborers, workmen, mechanics or
other employees, even though the event may have been purely accidental or
entirely due to a fortuitous cause, if the death or personal injury arose out of and in
the course of employment. The employer is also liable for compensation if the
employee contracts any illness or diseases caused by such employment or as the
result of the nature of employment. If the mishap was due to the employees own
notorious negligence, or voluntary act, or drunkenness, the employer shall not be
liable for compensation. When the employees lack of due care contributed to his
death or injury, the compensation shall be equitably reduced.
21

In the case of Philippine Air Lines, Inc. v. Court of Appeals, this Court validated the
strength of the aforementioned provision and made the employer liable for the
injury suffered by its employee in the course of employment. We thus ruled:
Having affirmed the gross negligence of PAL in allowing Capt. Delfin Bustamante to
fly the plane to Daet on January 8, 1951 whose slow reaction and poor judgment
was the cause of the crash-landing of the plane which resulted in private
respondent Samson hitting his head against the windshield and causing him injuries
for which reason PAL terminated his services and employment as pilot after refusing

to provide him with the necessary medical treatment of respondents periodic

spells, headache and general debility produced from said injuries, We must
necessarily affirm likewise the award of damages or compensation under
the provisions of Art. 1711 and Art. 1712 of the New Civil Code. x x x.
As early as the case of Valencia v. Manila Yacht Club, Inc., 22 this Court,
speaking through the renowned civilist, Mr. Justice J.B.L. Reyes, made a
pronouncement that Article 1711 of the Civil Code imposes upon the
employer the obligation to compensate the employee for injury or
sickness occasioned by his employment, and thus articulated:
>Appellants demand for compensation is predicated on employers liability for the
sickness of, or injury to, his employee imposed by Article 1711 of the Civil Code,
which reads:
Article 1711. Owners of enterprises and other employers are obliged to pay
compensation for the death x x x.
We find the abovequoted provision to be applicable and controlling in this case. The
matter of the amount of compensation and allowable medical expenses should be
properly determined by the Municipal Court after the parties are heard accordingly.
Given that the right of the claimant arose from the contract of employment and the
corresponding obligation imposed by the New Civil Code upon the employer to
indemnify the former for death and injury of the employee circumstanced by his
employment, necessarily, the provisions of the same code on damages shall govern
the extent of the employers liability.
The pertinent provision on damages under the New Civil Code provides:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an
adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory damages.
Article 2200. Indemnification for damages shall comprehend not only the value of
the loss suffered, but also that of the profits which the obligee failed to obtain.
In order to give breath to the aforestated provisions on damages of the New Civil
Code, they must be transformed into a more tangible and practical mathematical
form, so that the purpose of the law to indemnify the employee or his heirs for his
death or injury occasioned by his employment, as envisioned by the Article 1711 of
the same code may be realized. We deem it best to adopt the formula for loss of
earning capacity enunciated in the case of Villa Rey v. Court of Appeals, 23 in
computing the amount of actual damages to be awarded to the claimant under
Article 1711 of the New Civil Code.
In Villa Rey, the common carrier was made liable for the death of its passenger on
board a passenger bus owned and operated by Villa Rey Transit, Inc. going to Manila

45

Torts
from Lingayen, Pangasinan. While the bus was nearing Sadsaran Bridge in Barrio
Sto. Domingo, Minalin, Pampanga, it frontally hit the rear side of bull cart filled with
hay and bamboo poles. The protruding end of one bamboo pole, about eight feet
long, penetrated through the glass windshield of the bus and hit the face of
Policarpio Quintos, Jr., who was then sitting at the front row, causing his death. 24
The obligation of the common carrier to indemnify its passenger or his heirs for
injury or death arose from the contract of carriage entered into by the common
carrier and the passenger.25 By the very nature of the obligation which is imbued
with public interest,26 in contract of carriage the carrier assumes the express
obligation to transport its passenger to his destination safely and to observe
extraordinary diligence with due regard to all the circumstances, and any injury that
might be suffered by the passenger is right away attributable to the fault or
negligence of the carrier and thus gives rise to the right of the passenger or his
heirs for indemnity.27
In the same breadth, the employer shall be liable for the death or personal injury of
its employees in the course of employment as sanctioned by Article 1711 of the
New Civil Code. The liability of the employer for death or personal injury of his
employees arose from the contract of employment entered into between the
employer and his employee which is likewise imbued with public
interest.28 Accordingly, when the employee died or was injured in the occasion of
employment, the obligation of the employer for indemnity, automatically attaches.
The indemnity may partake of the form of actual, moral, nominal, temperate,
liquidated or exemplary damages, as the case may be depending on the factual
milieu of the case and considering the criterion for the award of these damages as
outlined by our jurisprudence.29 In the case at bar, only the award of actual
damages, specifically the award for unearned income is warranted by the
circumstances since it has been duly proven that the cause of death of Melquiades
is a fortuitous event for which Candano Shipping cannot be faulted.

09-20-14
deceased, but only such portion that he would have used to support his dependents
or heirs. Hence, we deduct from his gross earnings the necessary expenses
supposed to be used by the deceased for his own needs. 32 The Court explained
in Villa Rey:1avvphi1
[(The award of damages for loss of earning capacity is)] concerned with the
determination of losses or damages sustained by the private respondents, as
dependents and intestate heirs of the deceased, and that said damages consist, not
of the full amount of his earnings, but of the support they received or would have
received from him had he not died in consequence of negligence of petitioners
agent. In fixing the amount of that support, we must reckon with the necessary
expenses of his own living, which should be deducted from his earnings. Thus, it
has been consistently held that earning capacity, as an element of damages to
ones estate for his death by wrongful act is necessarily his net earning capacity or
his capacity to acquire money, less necessary expense for his own living. Stated
otherwise, the amount recoverable is not the loss of entire earning, but rather the
loss of that portion of the earnings which the beneficiary would have received. In
other words, only net earnings, and not gross earnings are to be considered that is,
the total of the earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses. 33
In computing the third factor, the necessary living expense, a survey of more recent
jurisprudence shows that this Court consistently pegged the amount at 50% of the
gross annual income.34 We held in Smith Bell Dodwell Shipping Agency Corp. v.
Borja,35 that when there is no showing that the living expenses constituted the
smaller percentage of the gross income, we fix the living expenses at half of the
gross income.
Applying the aforestated jurisprudential guidelines in the computation of the
amount of award for damages set out inVilla Rey, we now proceed to determining
Melquiades life expectancy, thus:

The formula for the computation of unearned income is:

Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death]
Jurisprudence provides that the first factor, i.e., life expectancy, shall be computed
by applying the formula (2/3 x [80 - age at death]) adopted in the American
Expectancy Table of Mortality or the Actuarial of Combined Experience Table of
Mortality.30
In the computation of the second factor, it is computed by multiplying the life
expectancy by the net earnings of the deceased, i.e., the total earnings less
expenses necessary in the creation of such earnings or income and less living and
other incidental expenses.31 The loss is not equivalent to the entire earnings of the

Life expectancy = 2 / 3 x [80 age of deceased at the time of death]

2 /3 x [80 56]
2 / 3 x [24]
Life expectancy = 16
With 16 more years of life expectancy and a monthly income of P7,800.00, as
evidenced by the pay slips duly presented before the RTC, Melquiades earning
capacity is computed as follows:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).
= 16 x ( P93,600.00 P 46,800.00)

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09-20-14
= 16 x ( P 46,800.00 )

Net Earning Capacity = P 748,800.00

The argument raised by Candano Shipping that the formula for determining the life
expectancy under Villa Reycannot be automatically applied without proof of the
basis for the expected length of life of a Filipino does not merit our consideration.
The formula for life expectancy has been repeatedly adopted in our jurisprudence in
fixing the amount of indemnity for the death of a party. This was adopted from the
American Expectancy Table of Mortality or the Actuarial of Combined Experience
Table of Mortality which was used by insurers in determining the capital sum to be
charged for annuity.36
Admittedly, in several cases, this Court reduced the life expectancy multiplier
considering the medical history such as when the deceased previously underwent a
major surgery37 or when it was shown that he was treated for chest pains, backache
or occasional feeling of tiredness 38 and the fact that the deceased has been
consistently engaged in a dangerous and risky activity tending to shorten his
life.39 Failing to prove, however, that any of these circumstances is attendant in the
case at bar, Candano Shipping cannot validly assert that the standard life
expectancy factor laid down in Villa Rey cannot be applied in this case.
Accordingly, Florentina is entitled to recover the amount of P748,800.00 as actual
damages for the death of her husband. The awards of moral and exemplary
damages are deleted. However, the award of costs of litigation and attorneys fees
are proper.40
WHEREFORE, in view of the foregoing, the instant petition is DENIED and the
Decision dated 23 May 2003 as well as the Resolution dated 1 April 2004, rendered
by the Court of Appeals in CA-G.R. CV No. 70410, are hereby PARTIALLY AFFIRMED
in so far as it finds petitioner liable to respondent for damages.
Pursuant to the appropriate provisions of the New Civil Code and the prevailing
jurisprudence on the matter, petitioner Candano Shipping Lines, Inc., is ORDERED
to pay the amount of P748,800.00, as actual damages, plus 10% of the amount
awarded as attorneys fee plus cost of the suit.
SO ORDERED.

G.R. No. 184215

February 9, 2011

OCEANEERING CONTRACTORS (PHILS), INC., Petitioner, vs. NESTOR

BARRETTO, doing business as N.N.B. LIGHTERAGE, Respondents.

N.

PEREZ, J.:
The requirements for an award of actual damages are central to this petition for
review filed under Rule 45 of the 1997 Rules of Civil Procedure, primarily assailing
the Decision dated 12 December 2007 rendered by the then Special Third Division
of the Court of Appeals (CA) in CA-G.R. CV No. 87168, 1 the dispositive portion of
which states:
WHEREFORE, premises considered, the instant appeal is PARTIALLY GRANTED. The
decision dated 27 December 2005 and order dated 28 April 2006 of the Regional
Trial Court of Las Pias, City, Branch 255, to the extent that it dismissed the
counterclaims of defendant-appellant, are hereby reversed and set aside. Plaintiffappellee is ordered to pay defendant-appellant the amount of P306,000.00 as
actual damages and P30,000.00 as attorneys fees.
SO ORDERED.

The Facts
Doing business under the name and style of N.N. B. Lighterage, respondent Nestor
N. Barretto (Barretto) is the owner of the Barge "Antonieta" 3 which was last licensed
and permitted to engage in coastwise trading for a period of one year expiring on
21 August 1998.4 On 27 November 1997, Barretto and petitioner Oceaneering
Contractors (Phils.), Inc. (Oceaneering) entered into a Time Charter Agreement
whereby, for the contract price of P306,000.00,5the latter hired the aforesaid barge
for a renewable period of thirty calendar days, for the purpose of transporting
construction materials from Manila to Ayungon, Negros Oriental. 6 Brokered by
freelance ship broker Manuel Velasco,7 the agreement included Oceaneerings
acknowledgment of the seaworthiness of the barge as well as the following
stipulations, to wit:

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09-20-14
"a) [Barreto] shall be responsible for the salaries, subsistence, SSS
premium, medical, workmens compensation contribution and other legal
expenses of the crew;
b) [Oceaneering] shall be responsible for all port charges, insurance of all
equipments, cargo loaded to the above mentioned deck barge against all
risks (Total or Partial), or theft, security and stevedoring during loading and
unloading operations and all other expenses pertinent to the assessment,
fines and forfeiture for any violation that may be imposed in relation to the
operation of the barge;
xxxx
(f) Delivery and re-delivery be made in Pasig River, Metro Manila;
(g) Damage to deck barge caused by carelessness or negligence of
stevedores hired by [Oceaneering] will be [Oceaneerings] liability. Upon
clear findings by owners or barge patron of any damages to the barge that
will endanger its seaworth(i)ness and stability, such damage/s shall be
repaired first before loading and leaving port. Under such conditions, the
Barge Patron has the right to refuse loading and/or leaving port;
xxxx
(i) [Barreto] reserves the right to stop, abort and deviate any voyage in
case of imminent danger to the crew and/or vessel that may be occasioned
by any storm, typhoon, tidal wave or any similar events." 8

In accordance with the agreement, Oceaneerings hired stevedores who loaded the
barge with pipe piles, steel bollards, concrete mixers, gravel, sand, cement and
other construction materials in the presence of and under the direct supervision of
the broker Manuel Velasco and Barrettos Bargemen. 9 In addition to the polythene
ropes with which they were lashed, the cargoes were secured by steel stanchions
which Oceaneering caused to be welded on the port and starboard sides of the
barge.10 On 3 December 1997, the barge eventually left Manila for Negros Oriental,
towed by the tug-boat "Ayalit" which, for said purpose, was likewise chartered by
Oceaneering from Lea Mer Industries, Inc.11 On 5 December 1997, however,
Barrettos Bargeman, Eddie La Chica, executed a Marine Protest, 12 reporting the
following circumstances under which the barge reportedly capsized in the vicinity of
Cape Santiago, Batangas, viz.:
That on or about 1635 December 3, 1997, Barge Antonieta departed Pico de Loro,
Pasig River and towed by Tug-Boat Ayalit bound for Ayungon, Negros Oriental with
cargo onboard steel pipes and various construction materials. While underway on or
about 0245 December 4, 1997 encountered rough sea at the vicinity of Cape
Santiago, Batangas and ma(d)e the barge x x x roll and pitch which caused the
steel pipes and various construction materials to shift on the starboardside causing
the breakdown of the steel stanch(i)ons welded on the deck of the barge leaving
holes on the deck that cause(d) water to enter the hold.

That on or about 1529 December 5, 199[7], with the continuous entrance of sea
water on the hold, the barge totally capsized touch(ed) bottom.
On 9 December 1997, Barretto apprised Oceaneering of the supposed fact that the
mishap was caused by the incompetence and negligence of the latters personnel in
loading the cargo and that it was going to proceed with the salvage, refloating and
repair of the barge.13 In turn contending that the barge tilted because of the water
which seeped through a hole in its hull, Oceaneering caused its counsel to serve
Barretto a letter dated 12 March 1998, demanding the return of the unused portion
of the charter payment amounting to P224,400.00 as well as the expenses in the
sum of P125,000.00 it purportedly incurred in salvaging its construction
materials.14 In a letter dated 25 March 1998, however, Barrettos counsel informed
Oceaneering that its unused charter payment was withheld by his client who was
likewise seeking reimbursement for the P836,425.00 he expended in salvaging,
refloating and repairing the barge. 15 In response to Barrettos 29 June 1998 formal
demand for the payment of the same expenses, 16 Oceaneering reiterated its
demand for the return of the unused charter payment and the reimbursement of its
salvaging expenses as aforesaid.17
On 6 October 1998, Barretto commenced the instant suit with the filing of his
complaint for damages against Oceaneering, which was docketed as Civil Case No.
LP-98-0244 before Branch 255 of the Regional Trial Court (RTC) of Las Pias City.
Contending that the accident was attributable to the incompetence and negligence
which attended the loading of the cargo by Oceaneerings hired employees,
Barretto sought indemnities for expenses incurred and lost income in the aggregate
sum of P2,750,792.50 and attorneys fees equivalent to 25% of said
sum.18 Specifically denying the material allegations of the foregoing complaint in its
26 January 1999 answer, Oceaneering, on the other hand, averred that the accident
was caused by the negligence of Barrettos employees and the dilapidated hull of
the barge which rendered it unseaworthy. As a consequence, Oceaneering prayed
for the grant of its counterclaims for the value of its cargo in the sum
of P4,055,700.00, salvaging expenses in the sum ofP125,000.00, exemplary
damages, attorneys fees and litigation expenses.19
The issues thus joined and the mandatory pre-trial conference subsequently
terminated upon the agreement of the parties, 20 the RTC proceeded to try the case
on the merits. In support of his complaint, Barretto took the witness stand to prove
the seaworthiness of the barge as well as the alleged negligent loading of the cargo
by Oceaneerings employees.21 Barretto also presented the following witnesses: (a)
Toribio Barretto II, Vice President for Operations of N.B.B. Lighterage, who primarily
testified on the effort exerted to salvage the barge; 22 and, (b) Manuel Velasco, who
testified on his participation in the execution of the Time Charter Agreement as well
as the circumstances before and after the sinking of the barge. 23 By way of defense
evidence, Oceaneering in turn presented the testimonies of the following witnesses:
(a) Engr. Wenifredo Oracion, its Operations Manager, to prove, among other
matters, the value of the cargo and the salvage operation it conducted in the
premises;24 and, (b) Maria Flores Escao, Accounting Staff at Castillo Laman Tan
Pantaleon and San Jose Law Offices, to prove its claim for attorneys fees and
litigation expenses.251avvphi1

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Torts
To disprove the rough sea supposedly encountered by the barge as well as the
negligence imputed against its employees, Oceaneering further adduced the
testimonies of the following witnesses: (a) Rosa Barba, a Senior Weather Specialist
at the Philippine Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA);26 (b) Cmdr. Herbert Catapang, Officer-in-Charge of the
Hydrographic Division at the National Mapping Resource Information Authority
(NAMRIA);27 and, (c) Engr. Carlos Gigante, a freelance marine surveyor and licensed
naval architect.28 Recalled as a rebuttal witness, Toribio Barretto II, in turn, asserted
that the hull of the barge was not damaged and that the sinking of said vessel was
attributable
to
the
improper
loading
of
Oceaneerings
construction
materials.29 Upon the formal offer respectively made by the parties, the pieces of
documentary evidence identified and marked in the course of the testimonies of the
above named witnesses30were, accordingly, admitted by the RTC.31
On 27 December 2005, the RTC rendered a decision, dismissing both Barrettos
complaint and Oceaneerings counterclaims for lack of merit. While finding that
Barretto failed to adduce sufficient and convincing evidence to prove that the
accident was due to the negligence of Oceaneerings employees, the RTC
nevertheless brushed aside the latters claim that the barge was not seaworthy as
acknowledged in the Time Charter Agreement. Alongside its claim for
reimbursement of the sums expended for the salvage operation it conducted which
was denied for lack of evidence to prove the same, Oceaneerings claim for the
value of its cargo was likewise denied on the ground, among other matters, that the
same was not included in the demand letters it served Barretto; and, that it has no
one but itself to blame for failing to insure its cargo against all risks, as provided in
the parties agreement. With its claims for exemplary damages and attorneys fees
further denied for lack of showing of bad faith on the part of Barretto, 32 Oceaneering
filed the motion for partial reconsideration of the foregoing decision 33 which was
denied for lack of merit in the RTCs 28 April 2006 order. 34
Dissatisfied, Oceaneering perfected its appeal from the aforesaid 27 December
2005 decision on the ground that the RTC reversibly erred in not finding that the
accident was caused by the unseaworthy condition of the barge and in denying its
counterclaims for actual and exemplary damages as well as attorneys fees and
litigation expenses. Docketed before the CA as CA-G.R. CV No. 87168, 35 the appeal
was partially granted in the herein assailed 12 December 2007 decision upon the
finding, among others, that the agreement executed by the parties, by its express
terms, was a time charter where the possession and control of the barge was
retained by Barretto; that the latter is, therefore, a common carrier legally charged
with extraordinary diligence in the vigilance over the goods transported by him;
and, that the sinking of the vessel created a presumption of negligence and/or
unseaworthiness which Barretto failed to overcome and gave rise to his liability for
Oceaneerings lost cargo despite the latters failure to insure the same. Applying
the rule, however, that actual damages should be proved with a reasonable degree
of certainty, the CA denied Oceaneerings claim for the value of its lost cargo and
merely ordered the refund of theP306,000.00 it paid for the time charter, with
indemnity for attorneys fees in the sum of P30,000.36

09-20-14
The Issues
Oceaneering urges the reversal of the assailed 12 December 2007 decision and 11
August 2008 resolution on the ground that the CA erred in the following wise:
I. IN HOLDING THAT THERE WERE NO VALID DOCUMENTS SHOWING THE
REAL VALUE OF THE MATERIALS LOST AND THOSE ACTUALLY RECOVERED.
II. IN DENYING OCEANEERINGS COUNTERCLAIMS FOR ACTUAL DAMAGES
AMOUNTING TO (A)P3,704,700.00 REPRESENTING THE VALUE OF THE
MATERIALS IT LOST DUE TO THE SINKING OF [BARRETOS] BARGE; AND
(b) P125,000.00 REPRESENTING THE EXPENSES IT INCURRED FOR
SALVAGING ITS CARGO.
III. IN AWARDING OCEANEERINGS COUNTERCLAIM FOR ATTORNEYS FEES
IN THE REDUCED AMOUNT OF P30,000.00 ONLY.39
The Courts Ruling
We find the modification of the assailed decision in order.
Oceaneering argues that, having determined Barrettos liability for presumed
negligence as a common carrier, the CA erred in disallowing its counterclaims for
the value of the construction materials which were lost as a consequence of the
sinking of the barge. Alongside the testimony elicited from its Operations Manager,
Engr. Winifredo Oracion, Oceaneering calls attention to the same witness inventory
which pegged the value of said construction materials at P4,055,700.00, as well as
the various sales receipts, order slips, cash vouchers and invoices which were
formally offered before and admitted in evidence by the RTC. Considering that it
was able to salvage only nine steel pipes amounting to P351,000.00, Oceaneering
insists that it should be indemnified the sum of P3,703,700.00 for the value of the
lost cargo, with legal interest at 12% per annum, from the date of demand until
fully paid. In addition, Oceaneering maintains that Barretto should be held liable to
refund the P306,000.00 it paid as consideration for the Time Charter Agreement
and to pay the P125,000.00 it incurred by way of salvaging expenses as well as its
claim for attorneys fees in the sum of P750,000.00.
In finding Oceaneerings petition impressed with partial merit, uppermost in our
mind is the fact that actual or compensatory damages are those damages which
the injured party is entitled to recover for the wrong done and injuries received
when none were intended.40 Pertaining as they do to such injuries or losses that are
actually sustained and susceptible of measurement, 41 they are intended to put the
injured party in the position in which he was before he was injured. 42 Insofar as
actual or compensatory damages are concerned, Article 2199 of the Civil Code of
the Philippines provides as follows:

Alongside that interposed by Barretto, the motion for reconsideration of the

foregoing decision filed by Oceaneerings 37 was denied for lack of merit in the CAs
resolution dated 11 August 2008,38 hence, this petition.

49

Torts
"Art. 2199. Except as provided by law or by stipulation, one is entitled to an
adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory damages."
Conformably with the foregoing provision, the rule is long and well settled that
there must be pleading and proof of actual damages suffered for the same to be
recovered.43 In addition to the fact that the amount of loss must be capable of
proof, it must also be actually proven with a reasonable degree of certainty,
premised upon competent proof or the best evidence obtainable. 44 The burden of
proof of the damage suffered is, consequently, imposed on the party claiming the
same45 who should adduce the best evidence available in support thereof, like sales
and delivery receipts, cash and check vouchers and other pieces of documentary
evidence of the same nature. In the absence of corroborative evidence, it has been
held that self-serving statements of account are not sufficient basis for an award of
actual damages.46 Corollary to the principle that a claim for actual damages cannot
be predicated on flimsy, remote, speculative, and insubstantial proof, 47 courts are,
likewise, required to state the factual bases of the award. 48
Applying the just discussed principles to the case at bench, we find that
Oceaneering correctly fault the CA for not granting its claim for actual damages or,
more specifically, the portions thereof which were duly pleaded and adequately
proved before the RTC. While concededly not included in the demand letters dated
12 March 199849and 13 July 199850 Oceaneering served Barretto, the formers
counterclaims for the value of its lost cargo in the sum of P4,055,700.00 and
salvaging expenses in the sum of P125,000.00 were distinctly pleaded and prayed
for in the 26 January 1999 answer it filed a quo. 51 Rather than the
entire P4,055,700.00 worth of construction materials reflected in the
inventory52 which Engr. Oracion claims to have prepared on 29 November 1997,
based on the delivery and official receipts from Oceaneerings suppliers, 53 we are,
however, inclined to grant only the following items which were duly proved by the
vouchers and receipts on record, viz.: (a) P1,720,850.00 worth of spiral welded
pipes with coal tar epoxy procured on 22 November 1997; 54 (b) P629,640.00 worth
of spiral welded steel pipes procured on 28 October 1997; 55 (c) P155,500.00 worth
of
various
stainless
steel
materials
procured
on
27
November
1997;56 (d) P66,750.00 worth of gaskets and shackles procured on 20 November
1997;57 and, (e)P4,880.00 worth of anchor bolt procured on 27 November 1997.58
The foregoing sums all add up to of P2,577,620.00 from which should be deducted
the sum of P351,000.00 representing the value of the nine steel pipes salvaged by
Oceaneering, or a total of P2,226,620.00 in actual damages representing the value
of the latters lost cargo. Excluded from the computation are the following items
which, on account of the dates of their procurement, could not have possibly been
included in the 29 November 1997 inventory prepared by Engr. Oracion, to wit:
(a) P1,129,640.00 worth of WO#1995 and PO#OCPI-060-97 procured on 9
December 1997;59 and, (b) P128,000.00 worth of bollard procured on 16 December
1997.60 Likewise excluded are the anchor bolt with nut Oceaneering claims to have
procured for an unspecified amount on 3 November 1997 61 and the P109,018.50
worth of Petron oil it procured on 28 November 1997 62 which does not fit into the
categories of lost cargo and/or salvaging expenses for which it interposed
counterclaims a quo. Although included in its demand letters as aforesaid and
pleaded in its answer, Oceaneerings claim for salvaging expenses in the sum

09-20-14
of P125,000.00 cannot, likewise, be granted for lack of credible evidence to support
the same.
Tested alongside the twin requirements of pleading and proof for the grant of actual
damages, on the other hand, we find that the CA also erred in awarding the full
amount of P306,000.00 in favor of Oceaneering, as and by way of refund of the
consideration it paid Barretto for the Time Charter Agreement. Aside from not being
clearly pleaded in the answer it filed a quo, said refund was claimed in
Oceaneerings demand letters only to the extent of the unused charter payment in
the reduced sum of P224,400.0063 which, to our mind, should be the correct
measure of the award. Having breached an obligation which did not constitute a
loan or forbearance of money, moreover, Barretto can only be held liable for
interest at the rate of 6% per annum on said amount as well as the P2,226,620.00
value of the lost cargo instead of the 12% urged by Oceaneering. Although the lost
cargo was not included in the demand letters the latter served the former, said
interest rate of 6% per annum shall be imposed from the time of the filing of the
complaint which is equivalent to a judicial demand.64 Upon the finality of this
decision, said sums shall earn a further interest of 12% per annum until full
payment in accordance with the following pronouncements handed down in Eastern
Shipping Lines, Inc. vs. Court of Appeals,65 to wit:
"2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however, shall
be adjudged on unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date of the judgment of the court is made
(at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall,
in any case, be on the amount of finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit."
For lack of sufficient showing of bad faith on the part of Barretto, we find that the
CA, finally, erred in granting Oceaneerings claim for attorneys fees, albeit in the
much reduced sum of P30,000.00. In the absence of stipulation, after all, the rule is
settled that there can be no recovery of attorneys fees and expenses of litigation
other than judicial costs except in the instances enumerated under Article 2208 of
the Civil Code.66 Being the exception rather than the rule, 67 attorneys fees are not
awarded every time a party prevails in a suit, 68 in view of the policy that no
premium should be placed on the right to litigate. 69 Even when a claimant is
compelled to litigate with third persons or to incur expenses to protect his rights,
still attorneys fees may not be awarded where, as here, no sufficient showing of

50

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09-20-14

bad faith can be reflected in the partys persistence in a case other than an
erroneous conviction of the righteousness of his cause.70
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED and the
assailed 12 December 2007 Decision is, accordingly, MODIFIED: (a) to GRANT
Oceaneerings claim for the value of its lost cargo in the sum ofP2,226,620.00 with
6% interest per annum computed from the filing of the complaint and to earn
further interest at the rate of 12% per annum from finality of the decision until full
payment; (b) to REDUCE the refund of the consideration for the Time Charter
Agreement from P306,000.00 to P224,400.00, with 6% interest per annum
computed from 12 March 1998, likewise to earn further interest at the rate of 12%
per annum from finality of this decision; and, (c) to DELETE the CAs award of
salvaging expenses and attorneys fees, for lack of factual and legal basis. The rest
is AFFIRMED in toto.
SO ORDERED.

G.R. No. 123498

November 23, 2007

51

Torts
BPI FAMILY BANK, Petitioner,
APPEALS, Respondents.

09-20-14
vs.

AMADO

FRANCO

and

COURT

OF

NACHURA, J.:
Banks are exhorted to treat the accounts of their depositors with meticulous care
and utmost fidelity. We reiterate this exhortation in the case at bench.
Before us is a Petition for Review on Certiorari seeking the reversal of the Court of
Appeals (CA) Decision1 in CA-G.R. CV No. 43424 which affirmed with modification
the judgment2 of the Regional Trial Court, Branch 55, Manila (Manila RTC), in Civil
Case No. 90-53295.
This case has its genesis in an ostensible fraud perpetrated on the petitioner BPI
Family Bank (BPI-FB) allegedly by respondent Amado Franco (Franco) in conspiracy
with other individuals,3 some of whom opened and maintained separate accounts
with BPI-FB, San Francisco del Monte (SFDM) branch, in a series of transactions.
On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) opened a
savings and current account with BPI-FB. Soon thereafter, or on August 25, 1989,
First Metro Investment Corporation (FMIC) also opened a time deposit account with
the same branch of BPI-FB with a deposit of P100,000,000.00, to mature one year
thence.
Subsequently, on August 31, 1989, Franco opened three accounts, namely, a
current,4 savings,5 and time deposit,6with BPI-FB. The current and savings accounts
were respectively funded with an initial deposit of P500,000.00 each, while the time
deposit account had P1,000,000.00 with a maturity date of August 31, 1990. The
total amount of P2,000,000.00 used to open these accounts is traceable to a check
issued by Tevesteco allegedly in consideration of Francos introduction of Eladio
Teves,7 who was looking for a conduit bank to facilitate Tevestecos business
transactions, to Jaime Sebastian, who was then BPI-FB SFDMs Branch Manager. In
turn, the funding for the P2,000,000.00 check was part of the P80,000,000.00
debited by BPI-FB from FMICs time deposit account and credited to Tevestecos
current account pursuant to an Authority to Debit purportedly signed by FMICs
officers.
It appears, however, that the signatures of FMICs officers on the Authority to Debit
were forged.8 On September 4, 1989, Antonio Ong,9 upon being shown the Authority
to Debit, personally declared his signature therein to be a forgery. Unfortunately,
Tevesteco had already effected several withdrawals from its current account (to
which had been credited the P80,000,000.00 covered by the forged Authority to
Debit) amounting to P37,455,410.54, including the P2,000,000.00 paid to Franco.
On September 8, 1989, impelled by the need to protect its interests in light of
FMICs forgery claim, BPI-FB, thru its Senior Vice-President, Severino Coronacion,
instructed Jesus Arangorin10 to debit Francos savings and current accounts for the
amounts remaining therein.11 However, Francos time deposit account could not be
debited due to the capacity limitations of BPI-FBs computer.12

In the meantime, two checks 13 drawn by Franco against his BPI-FB current account
were dishonored upon presentment for payment, and stamped with a notation
"account under garnishment." Apparently, Francos current account was garnished
by virtue of an Order of Attachment issued by the Regional Trial Court of Makati
(Makati RTC) in Civil Case No. 89-4996 (Makati Case), which had been filed by BPIFB against Franco et al., 14 to recover the P37,455,410.54 representing Tevestecos
total withdrawals from its account.
Notably, the dishonored checks were issued by Franco and presented for payment
at BPI-FB prior to Francos receipt of notice that his accounts were under
garnishment.15 In fact, at the time the Notice of Garnishment dated September 27,
1989 was served on BPI-FB, Franco had yet to be impleaded in the Makati case
where the writ of attachment was issued.
It was only on May 15, 1990, through the service of a copy of the Second Amended
Complaint in Civil Case No. 89-4996, that Franco was impleaded in the Makati
case.16 Immediately, upon receipt of such copy, Franco filed a Motion to Discharge
Attachment which the Makati RTC granted on May 16, 1990. The Order Lifting the
Order of Attachment was served on BPI-FB on even date, with Franco demanding
the release to him of the funds in his savings and current accounts. Jesus Arangorin,
BPI-FBs new manager, could not forthwith comply with the demand as the funds,
as previously stated, had already been debited because of FMICs forgery claim. As
such, BPI-FBs computer at the SFDM Branch indicated that the current account
record was "not on file."
With respect to Francos savings account, it appears that Franco agreed to an
arrangement, as a favor to Sebastian, whereby P400,000.00 from his savings
account was temporarily transferred to Domingo Quiaoits savings account, subject
to its immediate return upon issuance of a certificate of deposit which Quiaoit
needed in connection with his visa application at the Taiwan Embassy. As part of the
arrangement, Sebastian retained custody of Quiaoits savings account passbook to
ensure that no withdrawal would be effected therefrom, and to preserve Francos
deposits.
On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted
the amount of P63,189.00 from the remaining balance of the time deposit account
representing advance interest paid to him.
These transactions spawned a number of cases, some of which we had already
resolved.
FMIC filed a complaint against BPI-FB for the recovery of the amount
of P80,000,000.00 debited from its account.17The case eventually reached this
Court, and in BPI Family Savings Bank, Inc. v. First Metro Investment
Corporation,18 we upheld the finding of the courts below that BPI-FB failed to
exercise the degree of diligence required by the nature of its obligation to treat the
accounts of its depositors with meticulous care. Thus, BPI-FB was found liable to
FMIC for the debited amount in its time deposit. It was ordered to
pay P65,332,321.99 plus interest at 17% per annum from August 29, 1989 until

52

Torts

09-20-14

fully restored. In turn, the 17% shall itself earn interest at 12% from October 4,
1989 until fully paid.
In a related case, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica
(Buenaventura, et al.),19 recipients of aP500,000.00 check proceeding from
the P80,000,000.00 mistakenly credited to Tevesteco, likewise filed suit.
Buenaventura et al., as in the case of Franco, were also prevented from effecting
withdrawals20 from their current account with BPI-FB, Bonifacio Market, Edsa,
Caloocan City Branch. Likewise, when the case was elevated to this Court docketed
as BPI Family Bank v. Buenaventura, 21 we ruled that BPI-FB had no right to freeze
Buenaventura, et al.s accounts and adjudged BPI-FB liable therefor, in addition to
damages.
Meanwhile, BPI-FB filed separate civil and criminal cases against those believed to
be the perpetrators of the multi-million peso scam. 22 In the criminal case, Franco,
along with the other accused, except for Manuel Bienvenida who was still at large,
were acquitted of the crime of Estafa as defined and penalized under Article 351,
par. 2(a) of the Revised Penal Code.23 However, the civil case24 remains under
litigation and the respective rights and liabilities of the parties have yet to be
adjudicated.
Consequently, in light of BPI-FBs refusal to heed Francos demands to unfreeze his
accounts and release his deposits therein, the latter filed on June 4, 1990 with the
Manila RTC the subject suit. In his complaint, Franco prayed for the following reliefs:
(1) the interest on the remaining balance 25 of his current account which was
eventually released to him on October 31, 1991; (2) the balance 26 on his savings
account, plus interest thereon; (3) the advance interest 27 paid to him which had
been deducted when he pre-terminated his time deposit account; and (4) the
payment of actual, moral and exemplary damages, as well as attorneys fees.
BPI-FB traversed this complaint, insisting that it was correct in freezing the accounts
of Franco and refusing to release his deposits, claiming that it had a better right to
the amounts which consisted of part of the money allegedly fraudulently withdrawn
from it by Tevesteco and ending up in Francos accounts. BPI-FB asseverated that
the claimed consideration of P2,000,000.00 for the introduction facilitated by
Franco between George Daantos and Eladio Teves, on the one hand, and Jaime
Sebastian, on the other, spoke volumes of Francos participation in the fraudulent
transaction.
On August 4, 1993, the Manila RTC rendered judgment, the dispositive portion of
which reads as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of
[Franco] and against [BPI-FB], ordering the latter to pay to the former the following
sums:
1.

P76,500.00 representing the legal rate of interest on the amount

of P450,000.00 from May 18, 1990 to October 31, 1991;

2.

P498,973.23 representing the balance on [Francos] savings account

as of May 18, 1990, together with the interest thereon in accordance
with the banks guidelines on the payment therefor;

3.

P30,000.00 by way of attorneys fees; and

4.

P10,000.00 as nominal damages.

The counterclaim of the defendant is DISMISSED for lack of factual and legal anchor.
Costs against [BPI-FB].
SO ORDERED.28
Unsatisfied with the decision, both parties filed their respective appeals before the
CA. Franco confined his appeal to the Manila RTCs denial of his claim for moral and
exemplary damages, and the diminutive award of attorneys fees. In affirming with
modification the lower courts decision, the appellate court decreed, to wit:
WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with
modification ordering [BPI-FB] to pay [Franco] P63,189.00 representing the interest
deducted from the time deposit of plaintiff-appellant.P200,000.00 as moral
damages and P100,000.00 as exemplary damages, deleting the award of nominal
damages (in view of the award of moral and exemplary damages) and increasing
the award of attorneys fees fromP30,000.00 to P75,000.00.
Cost against [BPI-FB].
SO ORDERED.29
In this recourse, BPI-FB ascribes error to the CA when it ruled that: (1) Franco had a
better right to the deposits in the subject accounts which are part of the proceeds
of a forged Authority to Debit; (2) Franco is entitled to interest on his current
account; (3) Franco can recover the P400,000.00 deposit in Quiaoits savings
account; (4) the dishonor of Francos checks was not legally in order; (5) BPI-FB is
liable for interest on Francos time deposit, and for moral and exemplary damages;
and (6) BPI-FBs counter-claim has no factual and legal anchor.
The petition is partly meritorious.
We are in full accord with the common ruling of the lower courts that BPI-FB cannot
unilaterally freeze Francos accounts and preclude him from withdrawing his
deposits. However, contrary to the appellate courts ruling, we hold that Franco is
not entitled to unearned interest on the time deposit as well as to moral and
exemplary damages.

53

Torts
First. On the issue of who has a better right to the deposits in Francos accounts,
BPI-FB urges us that the legal consequence of FMICs forgery claim is that the
money transferred by BPI-FB to Tevesteco is its own, and considering that it was
able to recover possession of the same when the money was redeposited by
Franco, it had the right to set up its ownership thereon and freeze Francos
accounts.
BPI-FB contends that its position is not unlike that of an owner of personal property
who regains possession after it is stolen, and to illustrate this point, BPI-FB gives the
following example: where Xs television set is stolen by Y who thereafter sells it to
Z, and where Z unwittingly entrusts possession of the TV set to X, the latter would
have the right to keep possession of the property and preclude Z from recovering
possession thereof. To bolster its position, BPI-FB cites Article 559 of the Civil Code,
which provides:
Article 559. The possession of movable property acquired in good faith is equivalent
to a title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully
deprived, has acquired it in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
BPI-FBs argument is unsound. To begin with, the movable property mentioned in
Article 559 of the Civil Code pertains to a specific or determinate thing. 30 A
determinate or specific thing is one that is individualized and can be identified or
distinguished from others of the same kind.31
In this case, the deposit in Francos accounts consists of money which, albeit
characterized as a movable, is generic and fungible. 32 The quality of being fungible
depends upon the possibility of the property, because of its nature or the will of the
parties, being substituted by others of the same kind, not having a distinct
individuality.33
Significantly, while Article 559 permits an owner who has lost or has been
unlawfully deprived of a movable to recover the exact same thing from the current
possessor, BPI-FB simply claims ownership of the equivalent amount of money, i.e.,
the value thereof, which it had mistakenly debited from FMICs account and
credited to Tevestecos, and subsequently traced to Francos account. In fact, this is
what BPI-FB did in filing the Makati Case against Franco, et al. It staked its claim on
the money itself which passed from one account to another, commencing with the
forged Authority to Debit.
It bears emphasizing that money bears no earmarks of peculiar ownership, 34 and
this characteristic is all the more manifest in the instant case which involves money
in a banking transaction gone awry. Its primary function is to pass from hand to
hand as a medium of exchange, without other evidence of its title. 35 Money, which
had passed through various transactions in the general course of banking business,
even if of traceable origin, is no exception.

09-20-14
Thus, inasmuch as what is involved is not a specific or determinate personal
property, BPI-FBs illustrative example, ostensibly based on Article 559, is
inapplicable to the instant case.
There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco,
but not as a legal consequence of its unauthorized transfer of FMICs deposits to
Tevestecos account. BPI-FB conveniently forgets that the deposit of money in banks
is governed by the Civil Code provisions on simple loan or mutuum. 36 As there is a
debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately
acquired ownership of Francos deposits, but such ownership is coupled with a
corresponding obligation to pay him an equal amount on demand. 37Although BPI-FB
owns the deposits in Francos accounts, it cannot prevent him from demanding
payment of BPI-FBs obligation by drawing checks against his current account, or
asking for the release of the funds in his savings account. Thus, when Franco issued
checks drawn against his current account, he had every right as creditor to expect
that those checks would be honored by BPI-FB as debtor.
More importantly, BPI-FB does not have a unilateral right to freeze the accounts of
Franco based on its mere suspicion that the funds therein were proceeds of the
multi-million peso scam Franco was allegedly involved in. To grant BPI-FB, or any
bank for that matter, the right to take whatever action it pleases on deposits which
it supposes are derived from shady transactions, would open the floodgates of
public distrust in the banking industry.
Our pronouncement in Simex International
Appeals38 continues to resonate, thus:

(Manila),

Inc.

v.

Court

of

The banking system is an indispensable institution in the modern world and plays a
vital role in the economic life of every civilized nation. Whether as mere passive
entities for the safekeeping and saving of money or as active instruments of
business and commerce, banks have become an ubiquitous presence among the
people, who have come to regard them with respect and even gratitude and, most
of all, confidence. Thus, even the humble wage-earner has not hesitated to entrust
his lifes savings to the bank of his choice, knowing that they will be safe in its
custody and will even earn some interest for him. The ordinary person, with equal
faith, usually maintains a modest checking account for security and convenience in
the settling of his monthly bills and the payment of ordinary expenses. x x x.
In every case, the depositor expects the bank to treat his account with the utmost
fidelity, whether such account consists only of a few hundred pesos or of millions.
The bank must record every single transaction accurately, down to the last centavo,
and as promptly as possible. This has to be done if the account is to reflect at any
given time the amount of money the depositor can dispose of as he sees fit,
confident that the bank will deliver it as and to whomever directs. A blunder on the
part of the bank, such as the dishonor of the check without good reason, can cause
the depositor not a little embarrassment if not also financial loss and perhaps even
civil and criminal litigation.
The point is that as a business affected with public interest and because of the
nature of its functions, the bank is under obligation to treat the accounts of its

54

Torts
depositors with meticulous care, always having in mind the fiduciary nature of their
relationship. x x x.
Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to
know the signatures of its customers. Having failed to detect the forgery in the
Authority to Debit and in the process inadvertently facilitate the FMIC-Tevesteco
transfer, BPI-FB cannot now shift liability thereon to Franco and the other payees of
checks issued by Tevesteco, or prevent withdrawals from their respective accounts
without the appropriate court writ or a favorable final judgment.
Further, it boggles the mind why BPI-FB, even without delving into the authenticity
of the signature in the Authority to Debit, effected the transfer of P80,000,000.00
from FMICs to Tevestecos account, when FMICs account was a time deposit and it
had already paid advance interest to FMIC. Considering that there is as yet no
indubitable evidence establishing Francos participation in the forgery, he remains
an innocent party. As between him and BPI-FB, the latter, which made possible the
present predicament, must bear the resulting loss or inconvenience.
Second. With respect to its liability for interest on Francos current account, BPI-FB
argues that its non-compliance with the Makati RTCs Order Lifting the Order of
Attachment and the legal consequences thereof, is a matter that ought to be taken
up in that court.
The argument is tenuous. We agree with the succinct holding of the appellate court
in this respect. The Manila RTCs order to pay interests on Francos current account
arose from BPI-FBs unjustified refusal to comply with its obligation to pay Franco
pursuant to their contract of mutuum. In other words, from the time BPI-FB refused
Francos demand for the release of the deposits in his current account, specifically,
from May 17, 1990, interest at the rate of 12% began to accrue thereon. 39
Undeniably, the Makati RTC is vested with the authority to determine the legal
consequences of BPI-FBs non-compliance with the Order Lifting the Order of
Attachment. However, such authority does not preclude the Manila RTC from ruling
on BPI-FBs liability to Franco for payment of interest based on its continued and
unjustified refusal to perform a contractual obligation upon demand. After all, this
was the core issue raised by Franco in his complaint before the Manila RTC.
Third. As to the award to Franco of the deposits in Quiaoits account, we find no
reason to depart from the factual findings of both the Manila RTC and the CA.
Noteworthy is the fact that Quiaoit himself testified that the deposits in his account
are actually owned by Franco who simply accommodated Jaime Sebastians request
to temporarily transfer P400,000.00 from Francos savings account to Quiaoits
account.40 His testimony cannot be characterized as hearsay as the records reveal
that he had personal knowledge of the arrangement made between Franco,
Sebastian and himself.41
BPI-FB makes capital of Francos belated allegation relative to this particular
arrangement. It insists that the transaction with Quiaoit was not specifically alleged

09-20-14
in Francos complaint before the Manila RTC. However, it appears that BPI-FB had
impliedly consented to the trial of this issue given its extensive cross-examination
of Quiaoit.
Section 5, Rule 10 of the Rules of Court provides:
Section 5. Amendment to conform to or authorize presentation of evidence. When
issues not raised by the pleadings are tried with the express or implied consent of
the parties, they shall be treated in all respects as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to cause them
to conform to the evidence and to raise these issues may be made upon motion of
any party at any time, even after judgment; but failure to amend does not affect
the result of the trial of these issues. If evidence is objected to at the trial on the
ground that it is now within the issues made by the pleadings, the court may allow
the pleadings to be amended and shall do so with liberality if the presentation of
the merits of the action and the ends of substantial justice will be subserved
thereby. The court may grant a continuance to enable the amendment to be made.
(Emphasis supplied)
In all, BPI-FBs argument that this case is not the right forum for Franco to recover
the P400,000.00 begs the issue. To reiterate, Quiaoit, testifying during the trial,
unequivocally disclaimed ownership of the funds in his account, and pointed to
Franco as the actual owner thereof. Clearly, Francos action for the recovery of his
deposits appropriately covers the deposits in Quiaoits account.
Fourth. Notwithstanding all the foregoing, BPI-FB continues to insist that the
dishonor of Francos checks respectively dated September 11 and 18, 1989 was
legally in order in view of the Makati RTCs supplemental writ of attachment issued
on September 14, 1989. It posits that as the party that applied for the writ of
attachment before the Makati RTC, it need not be served with the Notice of
Garnishment before it could place Francos accounts under garnishment.
The argument is specious. In this argument, we perceive BPI-FBs clever but
transparent ploy to circumvent Section 4, 42 Rule 13 of the Rules of Court. It should
be noted that the strict requirement on service of court papers upon the parties
affected is designed to comply with the elementary requisites of due process.
Franco was entitled, as a matter of right, to notice, if the requirements of due
process are to be observed. Yet, he received a copy of the Notice of Garnishment
only on September 27, 1989, several days after the two checks he issued were
dishonored by BPI-FB on September 20 and 21, 1989. Verily, it was premature for
BPI-FB to freeze Francos accounts without even awaiting service of the Makati
RTCs Notice of Garnishment on Franco.
Additionally, it should be remembered that the enforcement of a writ of attachment
cannot be made without including in the main suit the owner of the property
attached by virtue thereof. Section 5, Rule 13 of the Rules of Court specifically
provides that "no levy or attachment pursuant to the writ issued x x x shall be
enforced unless it is preceded, or contemporaneously accompanied, by service of
summons, together with a copy of the complaint, the application for attachment, on
the defendant within the Philippines."

55

Torts
Franco was impleaded as party-defendant only on May 15, 1990. The Makati RTC
had yet to acquire jurisdiction over the person of Franco when BPI-FB garnished his
accounts.43 Effectively, therefore, the Makati RTC had no authority yet to bind the
deposits of Franco through the writ of attachment, and consequently, there was no
legal basis for BPI-FB to dishonor the checks issued by Franco.
Fifth. Anent the CAs finding that BPI-FB was in bad faith and as such liable for the
advance interest it deducted from Francos time deposit account, and for moral as
well as exemplary damages, we find it proper to reinstate the ruling of the trial
court, and allow only the recovery of nominal damages in the amount
of P10,000.00. However, we retain the CAs award of P75,000.00 as attorneys fees.
In granting Francos prayer for interest on his time deposit account and for moral
and exemplary damages, the CA attributed bad faith to BPI-FB because it (1)
completely disregarded its obligation to Franco; (2) misleadingly claimed that
Francos deposits were under garnishment; (3) misrepresented that Francos current
account was not on file; and (4) refused to return the P400,000.00 despite the fact
that the ostensible owner, Quiaoit, wanted the amount returned to Franco.
In this regard, we are guided by Article 2201 of the Civil Code which provides:
Article 2201. In contracts and quasi-contracts, the damages for which the obligor
who acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen
or could have reasonable foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the nonperformance of the obligation. (Emphasis supplied.)
We find, as the trial court did, that BPI-FB acted out of the impetus of self-protection
and not out of malevolence or ill will. BPI-FB was not in the corrupt state of mind
contemplated in Article 2201 and should not be held liable for all damages now
being imputed to it for its breach of obligation. For the same reason, it is not liable
for the unearned interest on the time deposit.
Bad faith does not simply connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of wrong; it
partakes of the nature of fraud. 44 We have held that it is a breach of a known duty
through some motive of interest or ill will.45 In the instant case, we cannot attribute
to BPI-FB fraud or even a motive of self-enrichment. As the trial court found, there
was no denial whatsoever by BPI-FB of the existence of the accounts. The
computer-generated document which indicated that the current account was "not
on file" resulted from the prior debit by BPI-FB of the deposits. The remedy of
freezing the account, or the garnishment, or even the outright refusal to honor any
transaction thereon was resorted to solely for the purpose of holding on to the
funds as a security for its intended court action, 46 and with no other goal but to
ensure the integrity of the accounts.

09-20-14
We have had occasion to hold that in the absence of fraud or bad faith, 47 moral
damages cannot be awarded; and that the adverse result of an action does not per
se make the action wrongful, or the party liable for it. One may err, but error alone
is not a ground for granting such damages.48
An award of moral damages contemplates the existence of the following requisites:
(1) there must be an injury clearly sustained by the claimant, whether physical,
mental or psychological; (2) there must be a culpable act or omission factually
established; (3) the wrongful act or omission of the defendant is the proximate
cause of the injury sustained by the claimant; and (4) the award for damages is
predicated on any of the cases stated in Article 2219 of the Civil Code. 49
Franco could not point to, or identify any particular circumstance in Article 2219 of
the Civil Code,50 upon which to base his claim for moral damages.1wphi1
Thus, not having acted in bad faith, BPI-FB cannot be held liable for moral damages
under Article 2220 of the Civil Code for breach of contract. 51
We also deny the claim for exemplary damages. Franco should show that he is
entitled to moral, temperate, or compensatory damages before the court may even
consider the question of whether exemplary damages should be awarded to
him.52 As there is no basis for the award of moral damages, neither can exemplary
damages be granted.
While it is a sound policy not to set a premium on the right to litigate, 53 we,
however, find that Franco is entitled to reasonable attorneys fees for having been
compelled to go to court in order to assert his right. Thus, we affirm the CAs grant
of P75,000.00 as attorneys fees.
Attorneys fees may be awarded when a party is compelled to litigate or incur
expenses to protect his interest,54 or when the court deems it just and
equitable.55 In the case at bench, BPI-FB refused to unfreeze the deposits of Franco
despite the Makati RTCs Order Lifting the Order of Attachment and Quiaoits
unwavering assertion that theP400,000.00 was part of Francos savings account.
This refusal constrained Franco to incur expenses and litigate for almost two (2)
decades in order to protect his interests and recover his deposits. Therefore, this
Court deems it just and equitable to grant Franco P75,000.00 as attorneys fees.
The award is reasonable in view of the complexity of the issues and the time it has
taken for this case to be resolved.56
Sixth. As for the dismissal of BPI-FBs counter-claim, we uphold the Manila RTCs
ruling, as affirmed by the CA, that BPI-FB is not entitled to recover P3,800,000.00 as
actual damages. BPI-FBs alleged loss of profit as a result of Francos suit is, as
already pointed out, of its own making. Accordingly, the denial of its counter-claim
is in order.
WHEREFORE, the petition is PARTIALLY GRANTED. The Court of Appeals Decision
dated November 29, 1995 is AFFIRMED with the MODIFICATION that the award of

56

Torts

09-20-14

unearned interest on the time deposit and of moral and exemplary damages is
DELETED.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 172122

June 22, 2007

MERCURY DRUG CORPORATION and ROLANDO J. DEL ROSARIO, petitioners,

vs. SPOUSES RICHARD HUANG and CARMEN HUANG, and STEPHEN
HUANG, respondents.
PUNO, C.J.:
On appeal are the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV
No. 83981, dated February 16, 2006 and March 30, 2006, respectively which
affirmed with modification the Decision 3 of the Regional Trial Court (RTC) of Makati
City, dated September 29, 2004. The trial court found petitioners jointly and
severally liable to pay respondents damages for the injuries sustained by
respondent Stephen Huang, son of respondent spouses Richard and Carmen Huang.
First, the facts:
Petitioner Mercury Drug Corporation (Mercury Drug) is the registered owner of a sixwheeler 1990 Mitsubishi Truck with plate number PRE 641 (truck). It has in its
employ petitioner Rolando J. del Rosario as driver. Respondent spouses Richard and
Carmen Huang are the parents of respondent Stephen Huang and own the red 1991
Toyota Corolla GLI Sedan with plate number PTT 775 (car).
These two vehicles figured in a road accident on December 20, 1996 at around
10:30 p.m. within the municipality of Taguig, Metro Manila. Respondent Stephen
Huang was driving the car, weighing 1,450 kg., while petitioner Del Rosario was
driving the truck, weighing 14,058 kg. Both were traversing the C-5 Highway, north
bound, coming from the general direction of Alabang going to Pasig City. The car
was on the left innermost lane while the truck was on the next lane to its right,
when the truck suddenly swerved to its left and slammed into the front right side of
the car. The collision hurled the car over the island where it hit a lamppost, spun
around and landed on the opposite lane. The truck also hit a lamppost, ran over the
car and zigzagged towards, and finally stopped in front of Buellah Land Church.
At the time of the accident, petitioner Del Rosario only had a Traffic Violation
Receipt (TVR). His drivers license had been confiscated because he had been
previously apprehended for reckless driving.
The car, valued at P300,000.00, was a total wreck. Respondent Stephen Huang
sustained massive injuries to his spinal cord, head, face, and lung. Despite a series
of operations, respondent Stephen Huang is paralyzed for life from his chest down
and requires continuous medical and rehabilitation treatment.

57

Torts

09-20-14

Respondents fault petitioner Del Rosario for committing gross negligence and
reckless imprudence while driving, and petitioner Mercury Drug for failing to
exercise the diligence of a good father of a family in the selection and supervision
of its driver.
In contrast, petitioners allege that the immediate and proximate cause of the
accident was respondent Stephen Huangs recklessness. According to petitioner Del
Rosario, he was driving on the left innermost lane when the car bumped the trucks
front right tire. The truck then swerved to the left, smashed into an electric post,
crossed the center island, and stopped on the other side of the highway. The car
likewise crossed over the center island and landed on the same portion of C-5.
Further, petitioner Mercury Drug claims that it exercised due diligence of a good
father of a family in the selection and supervision of all its employees.
The trial court, in its Decision dated September 29, 2004, found petitioners Mercury
Drug and Del Rosario jointly and severally liable to pay respondents actual,
compensatory, moral and exemplary damages, attorneys fees, and litigation
expenses. The dispositive portion reads:
WHEREFORE, judgment is rendered finding defendants Mercury Drug Corporation,
Inc. and Rolando del Rosario, jointly and severally liable to pay plaintiffs Spouses
Richard Y. Huang and Carmen G. Huang, and Stephen Huang the following amounts:
1.

Two Million Nine Hundred Seventy Three Thousand Pesos (P2,973,000.00)

actual damages;

2.

As compensatory damages:
a.

Twenty Three Million Four Hundred Sixty One Thousand, and SixtyTwo Pesos (P23,461,062.00) for life care cost of Stephen;

b.

Ten Million Pesos (P10,000,000.00) as and for lost or impaired

earning capacity of Stephen;

3.

Four Million Pesos (P4,000,000.00) as moral damages;

4.

Two Million Pesos (P2,000,000.00) as exemplary damages; and

5.

One Million Pesos (P1,000,000.00) as attorneys fees and litigation

expense.4

On February 16, 2006, the Court of Appeals affirmed the decision of the trial court
but reduced the award of moral damages to P1,000,000.00. The appellate court
also denied the motion for reconsideration filed by petitioners.
Hence, this appeal.

Petitioners cite the following grounds for their appeal:

1. That the subject Decision which dismissed the appeal of petitioners herein but
AFFIRMED WITH MODIFICATION the decision of the Regional Trial Court, Branch 64,
Makati City, in that the award of moral damages was reduced toP1,000,000.00 and
its Resolution dated March 30, 2006, which dismissed outright the Motion for
Reconsideration must be set aside because the Honorable Court of Appeals
committed reversible error:
A. IN DENYING OUTRIGHTLY THE MOTION FOR RECONSIDERATION ON ALLEGEDLY
BEING FILED OUT OF TIME FOR ONE DAY;
B. IN ACCORDING GREATER WEIGHT TO THE EVIDENCE ADDUCED BY THE
RESPONDENTS HEREIN AND COMPLETELY DISREGARDING THE DEFENSE
INTERPOSED BY THE PETITIONERS HEREIN;
C. IN DISREGARDING COMPLETELY ALL EVIDENCES PRESENTED BY THE PETITIONERS
HEREIN AND PROCEEDED TO RENDER ITS DECISION BASED ON PRESUMPTIONS AND
PERSONAL OPINIONS OF PEOPLE WHO ARE NOT WITNESSES TO THE ACCIDENT;
D. IN AWARDING DAMAGES IN FAVOR OF RESPONDENTS HEREIN;
E. IN FINDING THAT MERCURY DRUG CORPORATION FAILED TO EXERCISE THE
DILIGENCE REQUIRED IN SUPERVISING ITS EMPLOYEES DESPITE OVERWHELMING
EVIDENCE PRESENTED BY PETITIONER COMPANY;
F. IN FINDING THAT PETITIONER ROLANDO DEL ROSARIO WAS NEGLIGENT IN
DRIVING THE TRUCK AT THE TIME OF ACCIDENT AND TOTALLY DISREGARDING THE
EVIDENCES PRESENTED DURING THE TRIAL OF THE CASE.
G. IN PRESENTING ONLY IN THE DECISION TESTIMONIES FAVORABLE TO THE
RESPONDENTS HEREIN AND COMPLETELY DISREGARDING THE EVIDENCES
PRESENTED BY THE PETITIONERS HEREIN WHICH CONTRADICTED SUCH
TESTIMONIES NOT ONLY THROUGH ORAL TESTIMONIES BUT AS WELL AS
DOCUMENTARY EVIDENCES.5
We affirm the findings of the trial court and the appellate court that petitioner Del
Rosario was negligent. The evidence does not support petitioners claim that at the
time of the accident, the truck was at the left inner lane and that it was respondent
Stephen Huangs car, at its right, which bumped the right front side of the truck.
Firstly, petitioner Del Rosario could not precisely tell which part of the truck was hit
by the car,6 despite the fact that the truck was snub-nosed and a lot higher than the
car. Petitioner Del Rosario could not also explain why the car landed on the opposite
lane of C-5 which was on its left side. He said that "the car did not pass in front of
him after it hit him or under him or over him or behind him." 7 If the truck were really
at the left lane and the car were at its right, and the car hit the truck at its front
right side, the car would not have landed on the opposite side, but would have been
thrown to the right side of the C-5 Highway. Noteworthy on this issue is the

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09-20-14

testimony of Dr. Marlon Rosendo H. Daza, an expert in the field of physics. He

conducted a study based on the following assumptions provided by respondents:

ATTY. DIAZ:
Because as you said you lost control, correct sir?

1.

Two vehicles collided;

2.

One vehicle is ten times heavier, more massive than the other;

3.

Both vehicles were moving in the same direction and at the same speed of
about 85 to 90 kilometers per hour;

WITNESS:
Yes, sir.

4.

The heavier vehicle was driving at the innermost left lane, while the lighter
vehicle was at its right.

Dr. Daza testified that given the foregoing assumptions, if the lighter vehicle hits
the right front portion of the heavier vehicle, the general direction of the light
vehicle after the impact would be to the right side of the heavy vehicle, not the
other way around. The truck, he opined, is more difficult to move as it is heavier. It
is the car, the lighter vehicle, which would move to the right of, and away from the
truck. Thus, there is very little chance that the car will move towards the opposite
side, i.e., to the left of the truck.
Dr. Daza also gave a further study on the basis of the same assumptions except
that the car is on the left side of the truck, in accordance with the testimony of
respondent Stephen Huang. Dr. Daza concluded that the general direction of the car
after impact would be to the left of the truck. In this situation, the middle island
against which the car was pinned would slow down the car, and enable the truck to
catch up and hit the car again, before running over it.8
To support their thesis, petitioners tried to show the damages that the truck
sustained at its front right side. The attempt does not impress. The photographs
presented were taken a month after the accident, and Rogelio Pantua, the
automechanic who repaired the truck and authenticated the photographs, admitted
that there were damages also on the left side of the truck.9
Worse still, petitioner Del Rosario further admitted that after the impact, he lost
control of the truck and failed to apply his brakes. Considering that the car was
smaller and lighter than the six-wheeler truck, the impact allegedly caused by the
car when it hit the truck could not possibly be so great to cause petitioner to lose all
control that he failed to even step on the brakes. He testified, as follows:
ATTY. DIAZ:
May I proceed, Your Honor. You were able to apply the brakes, were you sir?
WITNESS:

ATTY. DIAZ:
In other words, sir from the time your truck was hit according to you up to the time
you rested on the shoulder, you traveled fifty meters?
WITNESS:
Yes, sir, about that distance.
ATTY. DIAZ:
And this was despite the fact that you were only traveling at the speed of seventy
five kilometers per hour, jumped over the island, hit the lamppost, and traveled the
three lanes of the opposite lane of C-5 highway, is that what you want to impress
upon this court?
WITNESS:
Yes, sir.10
We therefore find no cogent reason to disturb the findings of the RTC and the Court
of Appeals. The evidence proves petitioner Del Rosarios negligence as the direct
and proximate cause of the injuries suffered by respondent Stephen Huang.
Petitioner Del Rosario failed to do what a reasonable and prudent man would have
done under the circumstances.
We now come to the liability of petitioner Mercury Drug as employer of Del Rosario.
Articles 2176 and 2180 of the Civil Code provide:
Art. 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasidelict and is governed by the provisions of this Chapter.
Art. 2180. The obligation imposed by article 2176 is demandable not only for ones
own acts or omissions, but also for those of persons for whom one is responsible.

No more, sir, because I went over the island.

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Torts
xxx
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches
in which the latter are employed or on the occasion of their functions.
xxx
The liability of the employer under Art. 2180 of the Civil Code is direct or
immediate. It is not conditioned on a prior recourse against the negligent employee,
or a prior showing of insolvency of such employee. It is also joint and solidary with
the employee.11
To be relieved of liability, petitioner Mercury Drug should show that it exercised the
diligence of a good father of a family, both in the selection of the employee and in
the supervision of the performance of his duties. Thus, in the selection of its
prospective employees, the employer is required to examine them as to their
qualifications, experience, and service records. 12 With respect to the supervision of
its employees, the employer should formulate standard operating procedures,
monitor their implementation, and impose disciplinary measures for their breach. To
establish compliance with these requirements, employers must submit concrete
proof, including documentary evidence.13
In the instant case, petitioner Mercury Drug presented testimonial evidence on its
hiring procedure. According to Mrs. Merlie Caamic, the Recruitment and Training
Manager of petitioner Mercury Drug, applicants are required to take theoretical and
actual driving tests, and psychological examination. In the case of petitioner Del
Rosario, however, Mrs. Caamic admitted that he took the driving tests and
psychological examination when he applied for the position of Delivery Man, but not
when he applied for the position of Truck Man. Mrs. Caamic also admitted that
petitioner Del Rosario used a Galant which is a light vehicle, instead of a truck
during the driving tests. Further, no tests were conducted on the motor skills
development, perceptual speed, visual attention, depth visualization, eye and hand
coordination and steadiness of petitioner Del Rosario. No NBI and police clearances
were also presented. Lastly, petitioner Del Rosario attended only three driving
seminars on June 30, 2001, February 5, 2000 and July 7, 1984. In effect, the only
seminar he attended before the accident which occurred in 1996 was held twelve
years ago in 1984.
It also appears that petitioner Mercury Drug does not provide for a back-up driver
for long trips. At the time of the accident, petitioner Del Rosario has been out on the
road for more than thirteen hours, without any alternate. Mrs. Caamic testified that
she does not know of any company policy requiring back-up drivers for long trips. 14
Petitioner Mercury Drug likewise failed to show that it exercised due diligence on
the supervision and discipline over its employees. In fact, on the day of the
accident, petitioner Del Rosario was driving without a license. He was holding a TVR
for reckless driving. He testified that he reported the incident to his superior, but
nothing was done about it. He was not suspended or reprimanded. 15 No disciplinary

09-20-14
action whatsoever was taken against petitioner Del Rosario. We therefore affirm the
finding that petitioner Mercury Drug has failed to discharge its burden of proving
that it exercised due diligence in the selection and supervision of its employee,
petitioner Del Rosario.
We now consider the damages which respondents should recover from the
petitioners.
The trial court awarded the following amounts:
1.

Two Million Nine Hundred Seventy-Three Thousand Pesos (P2,973,000.00)

actual damages;

2.

As compensatory damages:
a.

Twenty-Three Million Four Hundred Sixty One Thousand, and SixtyTwo Pesos (P23,461,062.00) for life care cost of Stephen;

b.

Ten Million Pesos (P10,000,000.00) as and for lost or impaired

earning capacity of Stephen;

3.

Four Million Pesos (P4,000,000.00) as moral damages;

4.

Two Million Pesos (P2,000,000.00) as exemplary damages; and

5.

One Million Pesos (P1,000,000.00) as attorneys fees and litigation

expense.

The Court of Appeals affirmed the decision of the trial court but reduced the award
of moral damages toP1,000,000.00.
With regard to actual damages, Art. 2199 of the Civil Code provides 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 x x x." In the
instant case, we uphold the finding that the actual damages claimed by
respondents were supported by receipts. The amount of P2,973,000.00 represented
cost of hospital expenses, medicines, medical services and supplies, and nursing
care services provided respondent Stephen from December 20, 1996, the day of the
accident, until December 1998.
Petitioners are also liable for all damages which are the natural and probable
consequences of the act or omission complained of. 16 The doctors who attended to
respondent Stephen are one in their prognosis that his chances of walking again
and performing basic body functions are nil. For the rest of his life, he will need
continuous rehabilitation and therapy to prevent further complications such as
pneumonia,
bladder
and
rectum
infection, renal failure, sepsis and severe bed sores, osteoporosis and fractures, and

60

Torts
other spinal cord injury-related conditions. He will be completely dependent on the
care and support of his family. We thus affirm the award ofP23,461,062.00 for the
life care cost of respondent Stephen Huang, based on his average monthly expense
and the actuarial computation of the remaining years that he is expected to live;
and the conservative amount ofP10,000,000.00, as reduced by the trial court, for
the loss or impairment of his earning capacity,17 considering his age, probable life
expectancy, the state of his health, and his mental and physical condition before
the accident. He was only seventeen years old, nearly six feet tall and weighed 175
pounds. He was in fourth year high school, and a member of the school varsity
basketball team. He was also class president and editor-in-chief of the school
annual. He had shown very good leadership qualities. He was looking forward to his
college life, having just passed the entrance examinations of the University of the
Philippines, De La Salle University, and the University of Asia and the Pacific. The
University of Sto. Tomas even offered him a chance to obtain an athletic
scholarship, but the accident prevented him from attending the basketball try-outs.
Without doubt, he was an exceptional student. He excelled both in his academics
and extracurricular undertakings. He is intelligent and motivated, a go-getter, as
testified by Francisco Lopez, respondent Stephen Huangs godfather and a bank
executive.18 Had the accident not happened, he had a rosy future ahead of him. He
wanted to embark on a banking career, get married and raise children. Taking into
account his outstanding abilities, he would have enjoyed a successful professional
career in banking. But, as Mr. Lopez stated, it is highly unlikely for someone like
respondent to ever secure a job in a bank. To his knowledge, no bank has ever hired
a
person
suffering
with
the kind of disability as Stephen Huangs.19
We likewise uphold the award of moral and exemplary damages and attorneys
fees.
"The award of moral damages is aimed at a restoration, within the limits of the
possible, of the spiritual status quo ante." 20 Moral damages are designed to
compensate and alleviate in some way the physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury unjustly caused a person. Although incapable
of pecuniary computation, they must be proportionate to the suffering
inflicted.21 The amount of the award bears no relation whatsoever with the wealth
or means of the offender.

09-20-14
him, ministering to his daily needs, altering the lifestyle to which they had been
accustomed.
Respondent Carmen Huangs brother testified on the insensitivity of petitioner
Mercury Drug towards the plight of respondent. Stephen, viz.:
Maybe words cannot describe the anger that we feel towards the defendants. All
the time that we were going through the crisis, there was none (sic) a single sign of
nor offer of help, any consolation or anything whatsoever. It is funny because, you
know, I have many colleagues, business associates, people even as far as United
States, Japan, that I probably met only once, when they found out, they make a call,
they sent card, they write small notes, but from the defendant, absolute silence.
They didnt care, and worst, you know, this is a company that have (sic) all the
resources to help us. They were (sic) on our part, it was doubly painful because we
have no choice but to go back to them and buy the medicines that we need for
Stephen. So, I dont know how someone will really have no sense of decency at all
to at least find out what happened to my son, what is his condition, or if there is
anything that they can do to help us.22
On the matter of exemplary damages, Art. 2231 of the Civil Code provides that in
cases of quasi-delicts, exemplary damages may be granted if the defendant acted
with gross negligence. The records show that at the time of the accident, petitioner
Del Rosario was driving without a license because he was previously ticketed for
reckless driving. The evidence also shows that he failed to step on his brakes
immediately after the impact. Had petitioner Del Rosario done so, the injuries which
respondent Stephen sustained could have been greatly reduced. Wanton acts such
as that committed by petitioner Del Rosario need be suppressed; and employers
like petitioner Mercury Drug should be more circumspect in the observance of due
diligence in the selection and supervision of their employees. The award of
exemplary damages in favor of the respondents is therefore justified.
With the award of exemplary damages, we also affirm the grant of attorneys fees
to respondents.23 In addition, attorneys fees may be granted when a party is
compelled to litigate or incur expenses to protect his interest by reason of an
unjustified act of the other party.24
Cost against petitioners.

In the instant case, respondent Stephen Huang and respondent spouses Richard
and Carmen Huang testified to the intense suffering they continue to experience as
a result of the accident. Stephen recounted the nightmares and traumas he suffers
almost every night when he relives the accident. He also gets depression when he
thinks of his bleak future. He feels frustration and embarrassment in needing to be
helped with almost everything and in his inability to do simple things he used to do.
Similarly, respondent spouses and the rest of the family undergo their own private
suffering. They live with the day-to-day uncertainty of respondent Stephen Huangs
condition. They know that the chance of full recovery is nil. Moreover, respondent
Stephen Huangs paralysis has made him prone to many other illnesses. His family,
especially respondent spouses, have to make themselves available for Stephen
twenty-four hours a day. They have patterned their daily life around taking care of

IN VIEW THEREOF, the petition is DENIED. The Decision and Resolution of the Court
of Appeals dated February 16, 2006 and March 30, 2006, respectively, in CA-G.R.
CV No. 83981, are AFFIRMED.
SO ORDERED.

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Resolution3 dated July 1, 2003, denying petitioner's motion for reconsideration, be
reversed and set aside.
The Regional Trial Court (RTC) of Quezon City, Branch 81, accurately summarized
the facts as culled from the records, thus:
The evidence on record has established that in the year 1987 the National Power
Corporation (NPC) filed with the MTC Quezon City a case for ejectment against
several persons allegedly illegally occupying its properties in Baesa, Quezon City.
Among the defendants in the ejectment case was Leoncio Ramoy, one of the
plaintiffs in the case at bar. On April 28, 1989 after the defendants failed to file an
answer in spite of summons duly served, the MTC Branch 36, Quezon City rendered
judgment for the plaintiff [MERALCO] and "ordering the defendants to demolish or
remove the building and structures they built on the land of the plaintiff and to
vacate the premises." In the case of Leoncio Ramoy, the Court found that he was
occupying a portion of Lot No. 72-B-2-B with the exact location of his apartments
indicated and encircled in the location map as No. 7. A copy of the decision was
furnished Leoncio Ramoy (Exhibits 2, 2-A, 2-B, 2-C, pp. 128-131, Record; TSN, July 2,
1993, p. 5).
On June 20, 1990 NPC wrote Meralco requesting for the "immediate disconnection
of electric power supply to all residential and commercial establishments beneath
the NPC transmission lines along Baesa, Quezon City (Exh. 7, p. 143, Record).
Attached to the letter was a list of establishments affected which included plaintiffs
Leoncio and Matilde Ramoy (Exh. 9), as well as a copy of the court decision (Exh. 2).
After deliberating on NPC's letter, Meralco decided to comply with NPC's request
(Exhibits 6, 6-A, 6-A-1, 6-B) and thereupon issued notices of disconnection to all
establishments affected including plaintiffs Leoncio Ramoy (Exhs. 3, 3-A to 3-C),
Matilde Ramoy/Matilde Macabagdal (Exhibits 3-D to 3-E), Rosemarie Ramoy (Exh. 3F), Ofelia Durian (Exh. 3-G), Jose Valiza (Exh. 3-H) and Cyrene S. Panado (Exh. 3-I).

G.R. No. 158911

March 4, 2008

MANILA ELECTRIC COMPANY, Petitioner, vs. MATILDE MACABAGDAL RAMOY,

BIENVENIDO RAMOY, ROMANA RAMOY-RAMOS, ROSEMARIE RAMOY, OFELIA
DURIAN and CYRENE PANADO, Respondents.
AUSTRIA-MARTINEZ, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of
Court, praying that the Decision1 of the Court of Appeals (CA) dated December 16,
2002, ordering petitioner Manila Electric Company (MERALCO) to pay Leoncio
Ramoy2 moral and exemplary damages and attorney's fees, and the CA

In a letter dated August 17, 1990 Meralco requested NPC for a joint survey to
determine all the establishments which are considered under NPC property in view
of the fact that "the houses in the area are very close to each other" (Exh. 12).
Shortly thereafter, a joint survey was conducted and the NPC personnel pointed out
the electric meters to be disconnected (Exh. 13; TSN, October 8, 1993, p. 7; TSN,
July 1994, p. 8).
In due time, the electric service connection of the plaintiffs [herein respondents]
was disconnected (Exhibits D to G, with submarkings, pp. 86-87, Record).
Plaintiff Leoncio Ramoy testified that he and his wife are the registered owners of a
parcel of land covered by TCT No. 326346, a portion of which was occupied by
plaintiffs Rosemarie Ramoy, Ofelia Durian, Jose Valiza and Cyrene S. Panado as
lessees. When the Meralco employees were disconnecting plaintiffs' power
connection, plaintiff Leoncio Ramoy objected by informing the Meralco foreman that
his property was outside the NPC property and pointing out the monuments
showing the boundaries of his property. However, he was threatened and told not to
interfere by the armed men who accompanied the Meralco employees. After the

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electric power in Ramoy's apartment was cut off, the plaintiffs-lessees left the
premises.
During the ocular inspection ordered by the Court and attended by the parties, it
was found out that the residence of plaintiffs-spouses Leoncio and Matilde Ramoy
was indeed outside the NPC property. This was confirmed by defendant's witness
R.P. Monsale III on cross-examination (TSN, October 13, 1993, pp. 10 and 11).
Monsale also admitted that he did not inform his supervisor about this fact nor did
he recommend re-connection of plaintiffs' power supply (Ibid., p. 14).
The record also shows that at the request of NPC, defendant Meralco re-connected
the electric service of four customers previously disconnected none of whom was
any of the plaintiffs (Exh. 14).4
The RTC decided in favor of MERALCO by dismissing herein respondents' claim for
moral damages, exemplary damages and attorney's fees. However, the RTC ordered
MERALCO to restore the electric power supply of respondents.
Respondents then appealed to the CA. In its Decision dated December 16, 2002, the
CA faulted MERALCO for not requiring from National Power Corporation (NPC) a writ
of execution or demolition and in not coordinating with the court sheriff or other
proper officer before complying with the NPC's request. Thus, the CA held MERALCO
liable for moral and exemplary damages and attorney's fees. MERALCO's motion for
reconsideration of the Decision was denied per Resolution dated July 1, 2003.
Hence, herein petition for review on certiorari on the following grounds:
I
THE COURT OF APPEALS GRAVELY ERRED WHEN IT FOUND MERALCO NEGLIGENT
WHEN IT DISCONNECTED THE SUBJECT ELECTRIC SERVICE OF RESPONDENTS.
II
THE COURT OF APPEALS GRAVELY ERRED WHEN IT AWARDED MORAL AND
EXEMPLARY DAMAGES AND ATTORNEY'S FEES AGAINST MERALCO UNDER THE
CIRCUMSTANCES THAT THE LATTER ACTED IN GOOD FAITH IN THE DISCONNECTION
OF THE ELECTRIC SERVICES OF THE RESPONDENTS. 5
The petition is partly meritorious.
MERALCO admits6 that respondents are its customers under a Service Contract
whereby it is obliged to supply respondents with electricity. Nevertheless, upon
request of the NPC, MERALCO disconnected its power supply to respondents on the
ground that they were illegally occupying the NPC's right of way. Under the Service
Contract, "[a] customer of electric service must show his right or proper interest
over the property in order that he will be provided with and assured a continuous

09-20-14
electric service."7 MERALCO argues that since there is a Decision of the Metropolitan
Trial Court (MTC) of Quezon City ruling that herein respondents were among the
illegal occupants of the NPC's right of way, MERALCO was justified in cutting off
service to respondents.
Clearly, respondents' cause of action against MERALCO is anchored on culpa
contractual or breach of contract for the latter's discontinuance of its service to
respondents under Article 1170 of the Civil Code which provides:
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof,
are liable for damages.
In Radio Communications of the Philippines, Inc. v. Verchez,8 the Court expounded
on the nature of culpa contractual, thus:
"In culpa contractual x x x the mere proof of the existence of the contract
and the failure of its compliance justify, prima facie, a corresponding right
of relief. The law, recognizing the obligatory force of contracts, will not permit a
party to be set free from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof. A breach upon the contract
confers upon the injured party a valid cause for recovering that which may have
been lost or suffered. The remedy serves to preserve the interests of the promissee
that may include his "expectation interest," which is his interest in having the
benefit of his bargain by being put in as good a position as he would have been in
had the contract been performed, or his "reliance interest," which is his interest in
being reimbursed for loss caused by reliance on the contract by being put in as
good a position as he would have been in had the contract not been made; or his
"restitution interest," which is his interest in having restored to him any benefit that
he has conferred on the other party. Indeed, agreements can accomplish little,
either for their makers or for society, unless they are made the basis for action. The
effect of every infraction is to create a new duty, that is, to make recompense to
the one who has been injured by the failure of another to observe his contractual
obligation unless he can show extenuating circumstances, like proof of his exercise
of due diligence x x x or of the attendance of fortuitous event, to excuse him from
his ensuing liability.9 (Emphasis supplied)
Article 1173 also provides that the fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place.
The Court emphasized in Ridjo Tape & Chemical Corporation v. Court of
Appeals10 that "as a public utility, MERALCO has the obligation to discharge its
functions with utmost care and diligence." 11
The Court agrees with the CA that under the factual milieu of the present case,
MERALCO failed to exercise the utmost degree of care and diligence required of it.
To repeat, it was not enough for MERALCO to merely rely on the Decision of the MTC
without ascertaining whether it had become final and executory. Verily, only upon
finality of said Decision can it be said with conclusiveness that respondents have no

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right or proper interest over the subject property, thus, are not entitled to the
services of MERALCO.
Although MERALCO insists that the MTC Decision is final and executory, it never
showed any documentary evidence to support this allegation. Moreover, if it were
true that the decision was final and executory, the most prudent thing for MERALCO
to have done was to coordinate with the proper court officials in determining which
structures are covered by said court order. Likewise, there is no evidence on record
to show that this was done by MERALCO.
The utmost care and diligence required of MERALCO necessitates such great degree
of prudence on its part, and failure to exercise the diligence required means that
MERALCO was at fault and negligent in the performance of its obligation. In Ridjo
Tape,12 the Court explained:
[B]eing a public utility vested with vital public interest, MERALCO is impressed with
certain obligations towards its customers and any omission on its part to perform
such duties would be prejudicial to its interest. For in the final analysis, the bottom
line is that those who do not exercise such prudence in the discharge of their duties
shall be made to bear the consequences of such oversight. 13
This being so, MERALCO is liable for damages under Article 1170 of the Civil Code.
The next question is: Are respondents entitled to moral and exemplary damages
and attorney's fees?
Article 2220 of the Civil Code provides:
Article 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.
In the present case, MERALCO wilfully caused injury to Leoncio Ramoy by
withholding from him and his tenants the supply of electricity to which they were
entitled under the Service Contract. This is contrary to public policy because, as
discussed above, MERALCO, being a vital public utility, is expected to exercise
utmost care and diligence in the performance of its obligation. It was incumbent
upon MERALCO to do everything within its power to ensure that the improvements
built by respondents are within the NPCs right of way before disconnecting their
power supply. The Court emphasized in Samar II Electric Cooperative, Inc. v.
Quijano14 that:
Electricity is a basic necessity the generation and distribution of which is imbued
with public interest, and itsprovider is a public utility subject to strict
regulation by the State in the exercise of police power. Failure to comply with
these regulations will give rise to the presumption of bad faith or abuse of
right.15 (Emphasis supplied)

09-20-14
Thus, by analogy, MERALCO's failure to exercise utmost care and diligence in the
performance of its obligation to Leoncio Ramoy, its customer, is tantamount to bad
faith. Leoncio Ramoy testified that he suffered wounded feelings because of
MERALCO's actions.16 Furthermore, due to the lack of power supply, the lessees of
his four apartments on subject lot left the premises. 17 Clearly, therefore, Leoncio
Ramoy is entitled to moral damages in the amount awarded by the CA.
Leoncio Ramoy, the lone witness for respondents, was the only one who testified
regarding the effects on him of MERALCO's electric service disconnection. His corespondents Matilde Ramoy, Rosemarie Ramoy, Ofelia Durian and Cyrene Panado
did not present any evidence of damages they suffered.
It is a hornbook principle that damages may be awarded only if proven. In Mahinay
v. Velasquez, Jr.,18 the Court held thus:
In order that moral damages may be awarded, there must be pleading and
proof of moral suffering, mental anguish, fright and the like. While
respondent alleged in his complaint that he suffered mental anguish, serious
anxiety, wounded feelings and moral shock, he failed to prove them during the
trial. Indeed, respondent should have taken the witness stand and should
have testified on the mental anguish, serious anxiety, wounded feelings and other
emotional and mental suffering he purportedly suffered to sustain his claim for
moral damages. Mere allegations do not suffice; they must be substantiated by
clear and convincing proof. No other person could have proven such damages
except the respondent himself as they were extremely personal to him.
In Keirulf vs. Court of Appeals, we held:
"While no proof of pecuniary loss is necessary in order that moral damages may be
awarded, the amount of indemnity being left to the discretion of the court, it is
nevertheless essential that the claimant should satisfactorily show the existence of
the factual basis of damages and its causal connection to defendants acts. This is
so because moral damages, though incapable of pecuniary estimation, 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. In Francisco vs. GSIS, the
Court held that there must be clear testimony on the anguish and other
forms of mental suffering. Thus, if the plaintiff fails to take the witness stand and
testify as to his/her social humiliation, wounded feelings and anxiety, moral
damages cannot be awarded. In Cocoland Development Corporation vs. National
Labor Relations Commission, the Court held that "additional facts must be pleaded
and proven to warrant the grant of moral damages under the Civil Code, these
being, x x x social humiliation, wounded feelings, grave anxiety, etc. that resulted
therefrom."
x x x The award of moral damages must be anchored to a clear showing that
respondent actually experienced mental anguish, besmirched reputation, sleepless
nights, wounded feelings or similar injury. There was no better witness to this
experience than respondent himself. Since respondent failed to testify on the
witness stand, the trial court did not have any factual basis to award
moral damages to him.19 (Emphasis supplied)

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09-20-14

Thus, only respondent Leoncio Ramoy, who testified as to his wounded feelings,
may be awarded moral damages.20

(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;

With regard to exemplary damages, Article 2232 of the Civil Code provides that in
contracts and quasi-contracts, the court may award exemplary damages if the
defendant, in this case MERALCO, acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner, while Article 2233 of the same Code provides
that such damages cannot be recovered as a matter of right and the
adjudication of the same is within the discretion of the court.1avvphi1
The Court finds that MERALCO fell short of exercising the due diligence required,
but its actions cannot be considered wanton, fraudulent, reckless, oppressive or
malevolent. Records show that MERALCO did take some measures, i.e., coordinating
with NPC officials and conducting a joint survey of the subject area, to verify which
electric meters should be disconnected although these measures are not sufficient,
considering the degree of diligence required of it. Thus, in this case, exemplary
damages should not be awarded.
Since the Court does not deem it proper to award exemplary damages in this case,
then the CA's award for attorney's fees should likewise be deleted, as Article 2208
of the Civil Code states that in the absence of stipulation,attorney's fees cannot
be recovered except in cases provided for in said Article, to wit:

(11) In any other case where the court deems it just and equitable that
attorneys fees and expenses of litigation should be recovered.
In all cases, the attorneys fees and expenses of litigation must be reasonable.
None of the grounds for recovery of attorney's fees are present.
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of
Appeals is AFFIRMED withMODIFICATION. The award for exemplary damages and
attorney's fees is DELETED.
No costs.
SO ORDERED.

Article 2208. In the absence of stipulation, attorneys fees and expenses of

litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the
plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing
to satisfy the plaintiffs plainly valid, just and demandable claim;

G.R. No. 150666

August 3, 2010

LUCIANO BRIONES and NELLY BRIONES, Petitioners, vs. JOSE MACABAGDAL,

FE D. MACABAGDAL and VERGON REALTY INVESTMENTS CORPORATION
Respondents.
VILLARAMA, JR., J.:

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers
and skilled workers;
(8) In actions for indemnity
employers liability laws;

under

workmens

compensation

and

On appeal under Rule 45 of the 1997 Rules of Civil Procedure, as amended,

is the Decision[1] dated December 11, 2000 of the Court of Appeals (CA) in CA-G.R.
CV No. 48109 which affirmed the September 29, 1993 Decision [2] of the Regional
Trial Court (RTC) of Makati City, Branch 135, ordering petitioners Luciano and Nelly
Briones to remove the improvements they have made on the disputed property or
to pay respondent-spouses Jose and Fe Macabagdal the prevailing price of the land
as compensation.

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09-20-14
The undisputed factual antecedents of the case are as follows:

Respondent-spouses purchased from Vergon Realty Investments

Corporation (Vergon) Lot No. 2-R, a 325-square-meter land located in Vergonville
Subdivision No. 10 at Las Pias City, Metro Manila and covered by Transfer
Certificate of Title No. 62181 of the Registry of Deeds of Pasay City. On the other
hand, petitioners are the owners of Lot No. 2-S, which is adjacent to Lot No. 2-R.
Sometime in 1984, after obtaining the necessary building permit and the
approval of Vergon, petitioners constructed a house on Lot No. 2-R which they
thought was Lot No. 2-S. After being informed of the mix up by Vergons manager,
respondent-spouses immediately demanded petitioners to demolish the house and
vacate the property. Petitioners, however, refused to heed their demand. Thus,
respondent-spouses filed an action to recover ownership and possession of the said
parcel of land with the RTC of Makati City.[3]
Petitioners insisted that the lot on which they constructed their house was
the lot which was consistently pointed to them as theirs by Vergons agents over
the seven (7)-year period they were paying for the lot. They interpoed the defense
of being buyers in good faith and impleaded Vergon as third-party defendant
claiming that because of the warranty against eviction, they were entitled to
indemnity from Vergon in case the suit is decided against them. [4]
The RTC ruled in favor of respondent-spouses and found that petitioners
house was undoubtedly built on Lot No. 2-R. The dispositive portion of the trial
courts decision reads as follows:
PREMISES CONSIDERED, let judgment be rendered declaring, to wit:
1.

2.

3.

That plaintiffs are the owners of Lot No. 2-R of

subdivision plan (LRC) Psd-147392 at Vergonville
Subdivision, No. 10, Las Pias, Metro Manilacovered by
TCT No. 62181 of the Registry of Deeds of Pasay City on
which defendants have constructed their house;
Defendants, jointly and severally, are ordered to
demolish their house and vacate the premises and
return the possession of the portion of Lot No. 2-R as
above-described to plaintiffs within thirty (30) days from
receipt of this decision, or in the alternative, plaintiffs
should be compensated by defendants, jointly and
severally, by the payment of the prevailing price of the
lot involved as Lot No. 2-R with an area of 325 square
meters which should not be less than P1,500.00 per
square meter, in consideration of the fact that prices of
real estate properties in the area concerned have
increased rapidly;
Defendants, jointly and severally, pay to plaintiffs for
moral damages with plaintiffs plans and dreams of

building their own house on their own lot being severely

shattered and frustrated due to defendants incursion as
interlopers of Lot No. 2-R in the sum of P50,000.00;
Defendants, jointly and severally, to pay plaintiffs in the
amount of P30,000.00 as attorneys fees; and,
to pay the costs of the proceedings.

4.
5.

Defendants counterclaim against plaintiffs is dismissed

for lack of merit and with no cause of action.
Defendants third-party complaint against third-party
defendant Vergonville Realty and Investments Corporation is
likewise ordered dismissed for lack of cause of action and
evidently without merit.
On the other hand, defendants, jointly and severally, are
liable for the litigation expenses incurred by Vergonville Realty by
way of counterclaim, which is also proven by the latter with a
mere preponderance of evidence, and are hereby ordered to pay
the sum of P20,000.00 as compensatory damage; and attorneys
fees in the sum of P10,000.00
SO ORDERED.[5]
On appeal, the CA affirmed the RTCs finding that the lot upon which
petitioners built their house was not the one (1) which Vergon sold to them. Based
on the documentary evidence, such as the titles of the two (2) lots, the contracts to
sell, and the survey report made by the geodetic engineer, petitioners house was
built on the lot of the respondent-spouses. [6] There was no basis to presume that
the error was Vergons fault. Also the warranty against eviction under Article 1548
of the Civil Code was not applicable as there was no deprivation of property: the lot
on which petitioners built their house was not the lot sold to them by Vergon, which
remained vacant and ready for occupation. [7] The CA further ruled that petitioners
cannot use the defense of allegedly being a purchaser in good faith for wrongful
occupation of land.[8]
Aggrieved, petitioners filed a motion for reconsideration, but it was denied
by the appellate court.[9] Hence, this petition for review oncertiorari.
Petitioners raise the following assignment of errors:

I.
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE
CONTRARY TO LAW AND APPLICABLE DECISIONS OF THE
SUPREME COURT IN AFFIRMING THE DECISION OF THE TRIAL
COURT ORDERING PETITIONERS TO DEMOLISH THEIR ONLY
HOUSE AND VACATE THE LOT AND TO PAY MORAL AND
COMPENSATORY DAMAGES AS WELL AS ATTORNEYS FEE IN THE
TOTAL AMOUNT OF PS[P] 110,000; AND
II.

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09-20-14
THE COURT OF APPEALS SANCTIONED THE DEPARTURE OF
THE LOWER COURT FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE
POWER OF SUPERVISION.[10]

In the main, it is petitioners position that they must not bear the damage
alone. Petitioners insist that they relied with full faith and confidence in the
reputation of Vergons agents when they pointed the wrong property to them. Even
the President of Vergon, Felix Gonzales, consented to the construction of the house
when he signed the building permit.[11] Also, petitioners are builders in good faith.
[12]

The petition is partly meritorious.

At the outset, we note that petitioners raise factual issues, which are
beyond the scope of a petition for review on certiorari under Rule 45 of
theRules. Well settled is the rule that the jurisdiction of this Court in cases brought
to it from the CA via a petition for review on certiorari under Rule 45is limited to the
review of errors of law. The Court is not bound to weigh all over again the evidence
adduced by the parties, particularly where the findings of both the trial court and
the appellate court coincide. The resolution of factual issues is a function of the
trial court whose findings on these matters are, as a general rule, binding on this
Court, more so where these have been affirmed by the CA. [13] We note that the CA
and RTC did not overlook or fail to appreciate any material circumstance which,
when properly considered, would have altered the result of the case. Indeed, it is
beyond cavil that petitioners mistakenly constructed their house on Lot No. 2-R
which they thought was Lot No. 2-S.
However, the conclusiveness of the factual findings notwithstanding, we
find that the trial court nonetheless erred in outrightly ordering petitioners to
vacate the subject property or to pay respondent spouses the prevailing price of the
land as compensation. Article 527[14] of the Civil Code presumes good faith, and
since no proof exists to show that the mistake was done by petitioners in bad faith,
the latter should be presumed to have built the house in good faith.
When a person builds in good faith on the land of another, Article 448 of
the Civil Code governs. Said article provides,
ART. 448. The owner of the land on which anything has
been built, sown or planted in good faith, shall have the right
to appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in Articles 546 and 548, or
to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper

indemnity. The parties shall agree upon the terms of the lease
and in case of disagreement, the court shall fix the terms thereof.
(Emphasis ours.)
The above-cited article covers cases in which the builders, sowers or
planters believe themselves to be owners of the land or, at least, to have a claim of
title thereto.[15] The builder in good faith can compel the landowner to make a
choice between appropriating the building by paying the proper indemnity or
obliging the builder to pay the price of the land. The choice belongs to the owner of
the land, a rule that accords with the principle of accession, i.e., that the accessory
follows the principal and not the other way around. However, even as the option
lies with the landowner, the grant to him, nevertheless, is preclusive. He must
choose one.[16] He cannot, for instance, compel the owner of the building to
remove the building from the land without first exercising either option. It is only if
the owner chooses to sell his land, and the builder or planter fails to purchase it
where its value is not more than the value of the improvements, that the owner
may remove the improvements from the land. The owner is entitled to such
remotion only when, after having chosen to sell his land, the other party fails to pay
for the same.[17]
Moreover, petitioners have the right to be indemnified for the necessary
and useful expenses they may have made on the subject property. Articles 546 and
548 of the Civil Code provide,
ART. 546. Necessary expenses shall be refunded to every
possessor; but only the possessor in good faith may retain the
thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor
in good faith with the same right of retention, the person who has
defeated him in the possession having the option of refunding the
amount of the expenses or of paying the increase in value which
the thing may have acquired by reason thereof.
ART. 548. Expenses for pure luxury or mere pleasure
shall not be refunded to the possessor in good faith; but he may
remove the ornaments with which he has embellished the
principal thing if it suffers no injury thereby, and if his successor
in the possession does not prefer to refund the amount expended.
Consequently, the respondent-spouses have the option to appropriate the
house on the subject land after payment to petitioners of the appropriate indemnity
or to oblige petitioners to pay the price of the land, unless its value is considerably
more than the value of the structures, in which case petitioners shall pay
reasonable rent.
In accordance with Depra v. Dumlao,[18] this case must be remanded to the
RTC which shall conduct the appropriate proceedings to assess the respective
values of the improvement and of the land, as well as the amounts of reasonable
rentals and indemnity, fix the terms of the lease if the parties so agree, and to
determine other matters necessary for the proper application of Article 448, in
relation to Articles 546 and 548, of the Civil Code.

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09-20-14

As to the liability of Vergon, petitioners failed to present sufficient evidence

to show negligence on Vergons part. Petitioners claim is obviously one (1) for tort,
governed by Article 2176 of the Civil Code, which provides:
ART. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no
preexisting contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
(Emphasis ours.)
Under this provision, it is the plaintiff who has to prove by a preponderance
of evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of
the defendant or some other person for whose act he must respond; and (3) the
connection of cause and effect between the fault or negligence and the damages
incurred.[19] This the petitioners failed to do. The President of Vergon signed the
building permit as a precondition for its approval by the local government, but it did
not guarantee that petitioners were constructing the structure within the metes and
bounds of petitioners lot. The signature of the President of Vergon on the building
permit merely proved that petitioners were authorized to make constructions within
the subdivision project of Vergon. And while petitioners acted in good faith in
building their house on Lot No. 2-R, petitioners did not show by what authority the
agents or employees of Vergon were acting when they pointed to the lot where the
construction was made nor was petitioners claim on this matter corroborated by
sufficient evidence.
One (1) last note on the award of damages. Considering that petitioners
acted in good faith in building their house on the subject property of the
respondent-spouses, there is no basis for the award of moral damages to
respondent-spouses. Likewise, the Court deletes the award to Vergon of
compensatory damages and attorneys fees for the litigation expenses Vergon had
incurred as such amounts were not specifically prayed for in its Answer to
petitioners third-party complaint. Under Article 2208[20] of the Civil Code,
attorneys fees and expenses of litigation are recoverable only in the concept of
actual damages, not as moral damages nor judicial costs. Hence, such must be
specifically prayed foras was not done in this caseand may not be deemed
incorporated within a general prayer for such other relief and remedy as this court
may deem just and equitable. [21] It must also be noted that aside from the
following, the body of the trial courts decision was devoid of any statement
regarding attorneys fees. In Scott Consultants & Resource Development
Corporation, Inc. v. Court of Appeals, [22] we reiterated that attorneys 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; its basis cannot be left to speculation or conjecture. Where
granted, the court must explicitly state in the body of the decision, and not only in
the dispositive portion thereof, the legal reason for the award of attorneys fees.
WHEREFORE, the Decision dated December 11, 2000 of the Court of
Appeals in CA-G.R. CV No. 48109 is AFFIRMED WITH MODIFICATION. The award

of moral damages in favor of respondent-spouses Jose and Fe Macabagdal and the

award of compensatory damages and attorneys fees to respondent Vergon Realty
Investments
Corporation
are DELETED. The
case
is REMANDED to
the Regional Trial Court of MakatiCity, Branch 135, for further proceedings
consistent with the proper application of Articles 448, 546 and 548 of the Civil
Code, as follows:
1.

The trial court shall determine:

a.
the present fair price of the respondent-spouses lot;
b.
the amount of the expenses spent by petitioners for the building of
their house;
c.
the increase in value (plus value) which the said lot may have
acquired by reason thereof; and
d.
whether the value of said land is considerably more than that of the
house built thereon.
2.
After said amounts shall have been determined by competent evidence, the
Regional Trial Court shall render judgment, as follows:
a.
The trial court shall grant the respondent-spouses a period of fifteen
(15) days within which to exercise their option under Article 448 of
theCivil Code, whether to appropriate the house as their own by
paying to petitioners either the amount of the expenses spent by
petitioners for the building of the house, or the increase in value
(plus value) which the said lot may have acquired by reason thereof,
or to oblige petitioners to pay the price of said land. The amounts to
be respectively paid by the respondent-spouses and petitioners, in
accordance with the option thus exercised by written notice of the
other party and to the Court, shall be paid by the obligor within fifteen
(15) days from such notice of the option by tendering the amount to
the Court in favor of the party entitled to receive it;
b.
The trial court shall further order that if the respondent-spouses
exercises the option to oblige petitioners to pay the price of the land
but the latter rejects such purchase because, as found by the trial
court, the value of the land is considerably more than that of the
house, petitioners shall give written notice of such rejection to the
respondent-spouses and to the Court within fifteen (15) days from
notice of the respondent-spouses option to sell the land. In that
event, the parties shall be given a period of fifteen (15) days from
such notice of rejection within which to agree upon the terms of the
lease, and give the Court formal written notice of such agreement and
its provisos. If no agreement is reached by the parties, the trial court,
within fifteen (15) days from and after the termination of the said
period fixed for negotiation, shall then fix the terms of the lease,
payable within the first five (5) days of each calendar month. The
period for the forced lease shall not be more than two (2) years,
counted from the finality of the judgment, considering the long period
of time since petitioners have occupied the subject area. The rental
thus fixed shall be increased by ten percent (10%) for the second year
of the forced lease. Petitioners shall not make any further
constructions or improvements on the house. Upon expiration of the
two (2)-year period, or upon default by petitioners in the payment of
rentals for two (2) consecutive months, the respondent-spouses shall
be entitled to terminate the forced lease, to recover their land, and to

68

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09-20-14

c.

d.

have the house removed by petitioners or at the latters expense. The

rentals herein provided shall be tendered by petitioners to the Court
for payment to the respondent-spouses, and such tender shall
constitute evidence of whether or not compliance was made within
the period fixed by the Court.
In any event, petitioners shall pay the respondent-spouses reasonable
compensation for the occupancy of the respondent-spouses land for
the period counted from the year petitioners occupied the subject
area, up to the commencement date of the forced lease referred to in
the preceding paragraph;
The periods to be fixed by the trial court in its Decision shall be
inextendible, and upon failure of the party obliged to tender to the
trial court the amount due to the obligee, the party entitled to such
payment shall be entitled to an order of execution for the enforcement
of payment of the amount due and for compliance with such other
acts as may be required by the prestation due the obligee.

No costs.
SO ORDE
G.R. No. 169975

March 18, 2010

PAN PACIFIC SERVICE CONTRACTORS, INC. and RICARDO F. DEL ROSARIO,

vs. EQUITABLE PCI BANK (formerly THE PHILIPPINE COMMERCIAL
INTERNATIONAL BANK)

consideration for the whole project was P23,311,410.30.[6] The Contract

among others, that Pan Pacific shall be entitled to a price adjustment
increase in labor costs and prices of materials under paragraphs
70.2[8] of the General Conditions for the Construction of PCIB Tower II
(the escalation clause).[9]

stipulated,
in case of
70.1 [7] and
Extension

Pursuant to the contract, Pan Pacific commenced the mechanical works in

the project site, the PCIB Tower II extension building in Makati City. The project was
completed in June 1992. Respondent accepted the project on 9 July 1992. [10]
In 1990, labor costs and prices of materials escalated. On 5 April 1991, in
accordance with the escalation clause, Pan Pacific claimed a price adjustment
of P5,165,945.52. Respondents appointed project engineer, TCGI Engineers, asked
for a reduction in the price adjustment. To show goodwill, Pan Pacific reduced the
price adjustment to P4,858,548.67.[11]
On 28 April 1992, TCGI Engineers recommended to respondent that the
price adjustment should be pegged at P3,730,957.07. TCGI Engineers based their
evaluation of the price adjustment on the following factors:
1. Labor Indices of the Department of Labor and Employment.
2.
PRICE INDEX OF THE NATIONAL STATISTICS OFFICE.
PD 1594 AND ITS IMPLEMENTING RULES AND REGULATIONS AS AMENDED, 15
MARCH 1991.
SHIPPING DOCUMENTS SUBMITTED BY PPSCI.
SUB-CLAUSE 70.1 OF THE GENERAL CONDITIONS OF THE CONTRACT DOCUMENTS.
[12]

CARPIO, J.:
The Case

Pan Pacific contended that with this recommendation, respondent was

already estopped from disclaiming liability of at least P3,730,957.07 in accordance

PAN PACIFIC SERVICE CONTRACTORS, INC. AND RICARDO F. DEL ROSARIO

(PETITIONERS) FILED THIS PETITION FOR REVIEW[1] ASSAILING THE COURT OF
APPEALS (CA) DECISION[2] DATED 30 JUNE 2005 IN CA-G.R. CV NO. 63966 AS WELL
AS THE RESOLUTION[3] DATED 5 OCTOBER 2005 DENYING THE MOTION FOR
RECONSIDERATION. IN THE ASSAILED DECISION, THE CA MODIFIED THE 12 APRIL
1999 DECISION[4] OF THE REGIONAL TRIAL COURT OF MAKATI CITY, BRANCH 59
(RTC)
BY
ORDERING
EQUITABLE
PCI
BANK[5] (RESPONDENT)
TO
PAY
PETITIONERS P1,516,015.07 WITH INTEREST AT THE LEGAL RATE OF 12% PER
ANNUM STARTING 6 MAY 1994 UNTIL THE AMOUNT IS FULLY PAID.
The Facts
Pan Pacific Service Contractors, Inc. (Pan Pacific) is engaged in contracting
mechanical works on airconditioning system. On 24 November 1989, Pan Pacific,
through its President, Ricardo F. Del Rosario (Del Rosario), entered into a contract of
mechanical works (Contract) with respondent for P20,688,800. Pan Pacific and
respondent also agreed on nine change orders for P2,622,610.30. Thus, the total

with the escalation clause.[13]

Due to the extraordinary increases in the costs of labor and materials, Pan Pacifics
operational capital was becoming inadequate for the project. However, respondent
withheld the payment of the price adjustment under the escalation clause despite
Pan Pacifics repeated demands.[14] Instead, respondent offered Pan Pacific a loan
of P1.8 million. Against its will and on the strength of respondents promise that the
price adjustment would be released soon, Pan Pacific, through Del Rosario, was
constrained to execute a promissory note in the amount of P1.8 million as a
requirement for the loan. Pan Pacific also posted a surety bond. The P1.8 million
was released directly to laborers and suppliers and not a single centavo was given
to Pan Pacific.[15]
Pan Pacific made several demands for payment on the price adjustment but
respondent merely kept on promising to release the same. Meanwhile, theP1.8
million loan matured and respondent demanded payment plus interest and penalty.
Pan Pacific refused to pay the loan. Pan Pacific insisted that it would not have
incurred the loan if respondent released the price adjustment on time. Pan Pacific

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09-20-14

alleged that the promissory note did not express the true agreement of the parties.
Pan Pacific maintained that the P1.8 million was to be considered as an advance
payment on the price adjustment. Therefore, there was really no consideration for
the promissory note; hence, it is null and void from the beginning. [16]
Respondent stood firm that it would not release any amount of the price adjustment
to Pan Pacific but it would offset the price adjustment with Pan Pacifics outstanding
balance of P3,226,186.01, representing the loan, interests, penalties and collection
charges.[17]
Pan Pacific refused the offsetting but agreed to receive the reduced amount
of P3,730,957.07 as recommended by the TCGI Engineers for the purpose of
extrajudicial settlement, less P1.8 million and P414,942 as advance payments.[18]
On 6 May 1994, petitioners filed a complaint for declaration of nullity/annulment of
the promissory note, sum of money, and damages against the respondent with the
RTC of Makati City, Branch 59. On 12 April 1999, the RTC rendered its decision,
the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, JUDGMENT IS
HEREBY RENDERED IN FAVOR OF THE PLAINTIFFS AND
AGAINST THE DEFENDANT AS FOLLOWS:
1.

DECLARING THE PROMISSORY NOTE (EXHIBIT B) NULL AND

VOID;

ORDERING THE DEFENDANT TO PAY THE PLAINTIFFS THE FOLLOWING AMOUNTS:

A.
P1,389,111.10 REPRESENTING UNPAID BALANCE OF THE
ADJUSTMENT PRICE, WITH INTEREST THEREON AT THE LEGAL
RATE OF TWELVE (12%) PERCENT PER ANNUM STARTING MAY 6,
1994, THE DATE WHEN THE COMPLAINT WAS FILED, UNTIL THE
AMOUNT IS FULLY PAID;
P100,000.00 REPRESENTING MORAL DAMAGES;
P50,000.00 REPRESENTING EXEMPLARY DAMAGES; AND
P50,000.00 AS AND FOR ATTORNEYS FEES.
2.
DISMISSING DEFENDANTS COUNTERCLAIM, FOR
MERIT; AND

2. With respect to respondent, whether the RTC erred in declaring the promissory
note void and in awarding moral and exemplary damages and
attorneys fees in favor of petitioners and in dismissing its counterclaim.
In its decision dated 30 June 2005, the CA modified the RTC decision, with
respect to the principal amount due to petitioners. The CA removed the deduction
of P126,903.97 because it represented the final payment on the basic contract
price. Hence, the CA ordered respondent to payP1,516,015.07 to petitioners, with
interest at the legal rate of 12% per annum starting 6 May 1994. [20]
On 26 July 2005, petitioners filed a Motion for Partial Reconsideration
seeking a reconsideration of the CAs Decision imposing the legal rate of 12%.
Petitioners claimed that the interest rate applicable should be the 18% bank lending
rate. Respondent likewise filed a Motion for Reconsideration of the CAs decision. In
a Resolution dated 5 October 2005, the CA denied both motions.
AGGRIEVED BY THE CAS DECISION, PETITIONERS ELEVATED THE CASE
BEFORE THIS COURT.
The Issue
Petitioners submit this sole issue for our consideration: Whether the CA, in
awarding the unpaid balance of the price adjustment, erred in fixing the interest
rate at 12% instead of the 18% bank lending rate.

Ruling of the Court

We grant the petition.

LACK

OF

WITH COSTS AGAINST THE DEFENDANT.

SO ORDERED.[19]
On 23 May 1999, petitioners partially appealed the RTC Decision to the CA.
On 26 May 1999, respondent appealed the entire RTC Decision for being contrary to
law and evidence. In sum, the appeals of the parties with the CA are as follows:
1. WITH RESPECT TO THE PETITIONERS, WHETHER THE RTC ERRED IN DEDUCTING
THE AMOUNT OF P126,903.97 FROM THE BALANCE OF THE ADJUSTED
PRICE AND IN AWARDING ONLY 12% ANNUAL INTEREST ON THE
AMOUNT DUE, INSTEAD OF THE BANK LOAN RATE OF 18%
COMPOUNDED ANNUALLY BEGINNING SEPTEMBER 1992.

This Court notes that respondent did not appeal the decision of the CA.
Hence, there is no longer any issue as to the principal amount of the unpaid
balance on the price adjustment, which the CA correctly computed
at P1,516,015.07. The only remaining issue is the interest rate applicable for
respondents delay in the payment of the balance of the price adjustment.
The CA denied petitioners claim for the application of the bank lending
rate of 18% compounded annually reasoning, to wit:
Anent the 18% interest rate compounded annually, while
it is true that the contract provides for an interest at the current
bank lending rate in case of delay in payment by the Owner, and
the promissory note charged an interest of 18%, the said proviso
does not authorize plaintiffs to unilaterally raise the interest rate
without the other partys consent. Unlike their request for price
adjustment on the basic contract price, plaintiffs never informed
nor sought the approval of defendant for the imposition of 18%
interest on the adjusted price. To unilaterally increase the interest
rate of the adjusted price would be violative of the principle of

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09-20-14
mutuality of contracts. Thus, the Court maintains the legal rate of
twelve percent per annum starting from the date of judicial
demand. Although the contract provides for the period when the
recommendation of the TCGI Engineers as to the price adjustment
would be binding on the parties, it was established, however, that
part of the adjusted price demanded by plaintiffs was already
disbursed as early as 28 February 1992 by defendant bank to
their suppliers and laborers for their account.[21]

In this appeal, petitioners allege that the contract between the parties
consists of two parts, the Agreement [22] and the General Conditions,[23] both of which
provide for interest at the bank lending rate on any unpaid amount due under the
contract. Petitioners further claim that there is nothing in the contract which
requires the consent of the respondent to be given in order that petitioners can
charge the bank lending rate.[24] Specifically, petitioners invoke Section 2.5 of the
Agreement and Section 60.10 of the General Conditions as follows:
Agreement
2.5

IF
ANY
PAYMENT
IS
DELAYED,
THE
CONTRACTOR
MAY
CHARGE
INTEREST
THEREON AT THE CURRENT BANK LENDING
RATES,
WITHOUT
PREJUDICE
TO OWNERS
RECOURSE TO ANY OTHER REMEDY AVAILABLE
UNDER EXISTING LAW.[25]

GENERAL CONDITIONS
60.10 TIME FOR PAYMENT
THE AMOUNT DUE TO THE CONTRACTOR UNDER ANY INTERIM CERTIFICATE ISSUED
BY THE ENGINEER PURSUANT TO THIS CLAUSE, OR TO ANY TERM OF THE
CONTRACT, SHALL, SUBJECT TO CLAUSE 47, BE PAID BY THE OWNER TO THE
CONTRACTOR WITHIN 28 DAYS AFTER SUCH INTERIM CERTIFICATE HAS BEEN
DELIVERED TO THE OWNER, OR, IN THE CASE OF THE FINAL CERTIFICATE REFERRED
TO IN SUB-CLAUSE 60.8, WITHIN 56 DAYS, AFTER SUCH FINAL CERTIFICATE HAS
BEEN DELIVERED TO THE OWNER. IN THE EVENT OF THE FAILURE OF THE OWNER
TO MAKE PAYMENT WITHIN THE TIMES STATED, THE OWNER SHALL PAY TO THE
CONTRACTOR INTEREST AT THE RATE BASED ON BANKING LOAN RATES PREVAILING
AT THE TIME OF THE SIGNING OF THE CONTRACT UPON ALL SUMS UNPAID FROM
THE DATE BY WHICH THE SAME SHOULD HAVE BEEN PAID. THE PROVISIONS OF THIS
SUB-CLAUSE ARE WITHOUT PREJUDICE TO THE CONTRACTORS ENTITLEMENT
UNDER CLAUSE 69.[26] (EMPHASIS SUPPLIED)

Petitioners thus submit that it is automatically entitled to the bank lending

rate of interest from the time an amount is determined to be due thereto, which
respondent should have paid. Therefore, as petitioners have already proven their
entitlement to the price adjustment, it necessarily follows that the bank lending
interest rate of 18% shall be applied.[27]

On the other hand, respondent insists that under the provisions of 70.1 and 70.2 of
the General Conditions, it is stipulated that any additional cost shall be determined
by the Engineer and shall be added to the contract price after due consultation with
the Owner, herein respondent. Hence, there being no prior consultation with the
respondent regarding the additional cost to the basic contract price, it naturally
follows that respondent was never consulted or informed of the imposition of 18%
interest rate compounded annually on the adjusted price.[28]
A perusal of the assailed decision shows that the CA made a distinction between
the consent given by the owner of the project for the liability for the price
adjustments, and the consent for the imposition of the bank lending rate. Thus,
while the CA held that petitioners consulted respondent for price adjustment on the
basic contract price, petitioners, nonetheless, are not entitled to the imposition of
18% interest on the adjusted price, as petitioners never informed or sought the
approval of respondent for such imposition.[29]
We disagree.
It is settled that the agreement or the contract between the parties is the
formal expression of the parties rights, duties, and obligations. It is the best
evidence of the intention of the parties. Thus, when the terms of an agreement
have been reduced to writing, it is considered as containing all the terms agreed
upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement. [30]
The escalation clause of the contract provides:
CHANGES IN COST AND LEGISLATION
70.1 Increase or Decrease of Cost
There shall be added to or deducted from the Contract Price such sums in respect of
rise or fall in the cost of labor and/or materials or any other matters affecting the
cost of the execution of the Works as may be determined.
70.2 Subsequent Legislation
If, after the date 28 days prior to the latest date of submission of tenders for the
Contract there occur in the country in which the Works are being or are to be
executed changes to any National or State Statute, Ordinance, Decree or other Law
or any regulation or bye-law (sic) of any local or other duly constituted authority, or
the introduction of any such State Statute, Ordinance, Decree, Law, regulation or
bye-law (sic) which causes additional or reduced cost to the contractor, other than
under Sub-Clause 70.1, in the execution of the Contract, such additional or reduced
cost shall, after due consultation with the Owner and Contractor, be determined by
the Engineer and shall be added to or deducted from the Contract Price and the
Engineer shall notify the Contractor accordingly, with a copy to the Owner. [31]

In this case, the CA already settled that petitioners consulted respondent

on the imposition of the price adjustment, and held respondent liable for the
balance of P1,516,015.07. Respondent did not appeal from the decision of the CA;
hence, respondent is estopped from contesting such fact.

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09-20-14

However, the CA went beyond the intent of the parties by requiring

respondent to give its consent to the imposition of interest before petitioners can
hold respondent liable for interest at the current bank lending rate. This is
erroneous. A review of Section 2.6 of the Agreement and Section 60.10 of the
General Conditions shows that the consent of the respondent is not needed for the
imposition of interest at the current bank lending rate, which occurs upon any delay
in payment.

payment of additional interest at a rate equal to the regular monetary interest

becomes due and payable. Finally, if no regular interest had been agreed upon by
the contracting parties, then the damages payable will consist of payment of legal
interest which is 6%, or in the case of loans or forbearances of money, 12% per
annum.[34] It is only when the parties to a contract have failed to fix the rate of
interest or when such amount is unwarranted that the Court will apply the 12%
interest per annum on a loan or forbearance of money. [35]

When the terms of a contract are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning of its stipulations
governs. In these cases, courts have no authority to alter a contract by
construction or to make a new contract for the parties. The Courts duty is confined
to the interpretation of the contract which the parties have made for themselves
without regard to its wisdom or folly as the court cannot supply material
stipulations or read into the contract words which it does not contain. It is only
when the contract is vague and ambiguous that courts are permitted to resort to
construction of its terms and determine the intention of the parties. [32]

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

The escalation clause must be read in conjunction with Section 2.5 of the
Agreement and Section 60.10 of the General Conditions which pertain to the time of
payment. Once the parties agree on the price adjustment after due consultation in
compliance with the provisions of the escalation clause, the agreement is in effect
an amendment to the original contract, and gives rise to the liability of respondent
to pay the adjusted costs. Under Section 60.10 of the General Conditions, the
respondent shall pay such liability to the petitioner within 28 days from issuance of
the interim certificate. Upon respondents failure to pay within the time provided
(28 days), then it shall be liable to pay the stipulated interest.

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

petitioners presented the promissory note[36] prepared by respondent bank itself.
This promissory note, although declared void by the lower courts because it did not
express the real intention of the parties, is substantial proof that the bank lending
rate at the time of default was 18% per annum. Absent any evidence of fraud,
undue influence or any vice of consent exercised by petitioners against the
respondent, the interest rate agreed upon is binding on them. [37]
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision and
Resolution of the Court of Appeals in CA-G.R. CV No. 63966. We ORDER respondent
to pay petitioners P1,516,015.07 with interest at the bank lending rate of 18% per
annum starting 6 May 1994 until the amount is fully paid.

SO ORDERED.

This is the logical interpretation of the agreement of the parties on the imposition of
interest. To provide a contrary interpretation, as one requiring a separate consent
for the imposition of the stipulated interest, would render the intentions of the
parties nugatory.
Article 1956 of the Civil Code, which refers to monetary interest,
specifically mandates that no interest shall be due unless it has been expressly
stipulated in writing. Therefore, payment of monetary interest is allowed only if:
(1) there was an express stipulation for the payment of interest; and
(2) the agreement for the payment of interest was reduced in writing. The
concurrence of the two conditions is required for the payment of monetary interest.
[33]

We agree with petitioners interpretation that in case of default, the

consent of the respondent is not needed in order to impose interest at the current
bank lending rate.

Applicable Interest Rate

Under Article 2209 of the Civil Code, the appropriate measure for damages
in case of delay in discharging an obligation consisting of the payment of a sum of
money is the payment of penalty interest at the rate agreed upon in the contract of
the parties. In the absence of a stipulation of a particular rate of penalty interest,

72

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09-20-14

G.R. No. 125817

January 16, 2002

ABELARDO LIM and ESMADITO GUNNABAN, petitioners,

APPEALS and DONATO H. GONZALES, respondents.

vs. COURT OF

BELLOSILLO, J.:
When a passenger jeepney covered by a certificate of public convenience is sold to
another who continues to operate it under the same certificate of public
convenience under the so-called kabit system, and in the course thereof the vehicle
meets an accident through the fault of another vehicle, may the new owner sue for
damages against the erring vehicle? Otherwise stated, does the new owner have
any legal personality to bring the action, or is he the real party in interest in the
suit, despite the fact that he is not the registered owner under the certificate of
public convenience?
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu
passenger jeepney from Gomercino Vallarta, holder of a certificate of public
convenience for the operation of public utility vehicles plying the MonumentoBulacan route. While private respondent Gonzales continued offering the jeepney
for public transport services he did not have the registration of the vehicle
transferred in his name nor did he secure for himself a certificate of public
convenience for its operation. Thus Vallarta remained on record as its registered
owner and operator.1wphi1.nt
On 22 July 1990, while the jeepney was running northbound along the North
Diversion Road somewhere in Meycauayan, Bulacan, it collided with a ten-wheelertruck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito
Gunnaban. Gunnaban owned responsibility for the accident, explaining that while
he was traveling towards Manila the truck suddenly lost its brakes. To avoid
colliding with another vehicle, he swerved to the left until he reached the center
island. However, as the center island eventually came to an end, he veered farther
to the left until he smashed into a Ferroza automobile, and later, into private
respondent's passenger jeepney driven by one Virgilio Gonzales. The impact caused
severe damage to both the Ferroza and the passenger jeepney and left one (1)
passenger dead and many others wounded.
Petitioner Lim shouldered the costs for hospitalization of the wounded,
compensated the heirs of the deceased passenger, and had the Ferroza restored to
good condition. He also negotiated with private respondent and offered to have the
passenger jeepney repaired at his shop. Private respondent however did not accept
the offer so Lim offered him P20,000.00, the assessment of the damage as
estimated by his chief mechanic. Again, petitioner Lim's proposition was rejected;
instead, private respondent demanded a brand-new jeep or the amount
of P236,000.00. Lim increased his bid to P40,000.00 but private respondent was
unyielding. Under the circumstances, negotiations had to be abandoned; hence, the
filing of the complaint for damages by private respondent against petitioners.

73

Torts
In his answer Lim denied liability by contending that he exercised due diligence in
the selection and supervision of his employees. He further asserted that as the
jeepney was registered in Vallartas name, it was Vallarta and not private
respondent who was the real party in interest. 1 For his part, petitioner Gunnaban
averred that the accident was a fortuitous event which was beyond his control. 2
Meanwhile, the damaged passenger jeepney was left by the roadside to corrode
and decay. Private respondent explained that although he wanted to take his
jeepney home he had no capability, financial or otherwise, to tow the damaged
vehicle.3
The main point of contention between the parties related to the amount of
damages due private respondent. Private respondent Gonzales averred that per
estimate made by an automobile repair shop he would have to spendP236,000.00
to restore his jeepney to its original condition. 4 On the other hand, petitioners
insisted that they could have the vehicle repaired for P20,000.00.5
On 1 October 1993 the trial court upheld private respondent's claim and awarded
him P236,000.00 with legal interest from 22 July 1990 as compensatory damages
and P30,000.00 as attorney's fees. In support of its decision, the trial court
ratiocinated that as vendee and current owner of the passenger jeepney private
respondent stood for all intents and purposes as the real party in interest. Even
Vallarta himself supported private respondent's assertion of interest over the
jeepney for, when he was called to testify, he dispossessed himself of any claim or
pretension on the property. Gunnaban was found by the trial court to have caused
the accident since he panicked in the face of an emergency which was rather
palpable from his act of directing his vehicle to a perilous streak down the fast lane
of the superhighway then across the island and ultimately to the opposite lane
where it collided with the jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's negligence was
premised on his want of diligence in supervising his employees. It was admitted
during trial that Gunnaban doubled as mechanic of the ill-fated truck despite the
fact that he was neither tutored nor trained to handle such task. 6
Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996,
affirmed the decision of the trial court. In upholding the decision of the court a
quo the appeals court concluded that while an operator under thekabit system
could not sue without joining the registered owner of the vehicle as his principal,
equity demanded that the present case be made an exception.7 Hence this petition.
It is petitioners' contention that the Court of Appeals erred in sustaining the
decision of the trial court despite their opposition to the well-established doctrine
that an operator of a vehicle continues to be its operator as long as he remains the
operator of record. According to petitioners, to recognize an operator under
the kabit system as the real party in interest and to countenance his claim for
damages is utterly subversive of public policy. Petitioners further contend that
inasmuch as the passenger jeepney was purchased by private respondent for
only P30,000.00, an award of P236,000.00 is inconceivably large and would amount
to unjust enrichment.8

09-20-14
Petitioners' attempt to illustrate that an affirmance of the appealed decision could
be supportive of the perniciouskabit system does not persuade. Their labored
efforts to demonstrate how the questioned rulings of the courts a quoare
diametrically opposed to the policy of the law requiring operators of public utility
vehicles to secure a certificate of public convenience for their operation is quite
unavailing.
The kabit system is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the
earnings.9 Although the parties to such an agreement are not outrightly penalized
by law, the kabit system is invariably recognized as being contrary to public policy
and therefore void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio10 the Court explained that one of the primary
factors considered in the granting of a certificate of public convenience for the
business of public transportation is the financial capacity of the holder of the
license, so that liabilities arising from accidents may be duly compensated.
The kabit system renders illusory such purpose and, worse, may still be availed of
by the grantee to escape civil liability caused by a negligent use of a vehicle owned
by another and operated under his license. If a registered owner is allowed to
escape liability by proving who the supposed owner of the vehicle is, it would be
easy for him to transfer the subject vehicle to another who possesses no property
with which to respond financially for the damage done. Thus, for the safety of
passengers and the public who may have been wronged and deceived through the
baneful kabit system, the registered owner of the vehicle is not allowed to prove
that another person has become the owner so that he may be thereby relieved of
responsibility. Subsequent cases affirm such basic doctrine.11
It would seem then that the thrust of the law in enjoining the kabit system is not so
much as to penalize the parties but to identify the person upon whom responsibility
may be fixed in case of an accident with the end view of protecting the riding
public. The policy therefore loses its force if the public at large is not deceived,
much less involved.
In the present case it is at once apparent that the evil sought to be prevented in
enjoining the kabit system does not exist. First, neither of the parties to the
pernicious kabit system is being held liable for damages. Second, the case arose
from the negligence of another vehicle in using the public road to whom no
representation, or misrepresentation, as regards the ownership and operation of the
passenger jeepney was made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said that private respondent
Gonzales and the registered owner of the jeepney were in estoppel for leading the
public to believe that the jeepney belonged to the registered owner. Third, the
riding public was not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who had been
wronged and was seeking compensation for the damage done to him. Certainly, it
would be the height of inequity to deny him his right.

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09-20-14

In light of the foregoing, it is evident that private respondent has the right to
proceed against petitioners for the damage caused on his passenger jeepney as
well as on his business. Any effort then to frustrate his claim of damages by the
ingenuity with which petitioners framed the issue should be discouraged, if not
repelled.

It is axiomatic that if the suit were for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof, interest
at the rate of six percent (6%) per annum should be from the date the judgment of
the court is made (at which time the quantification of damages may be deemed to
be reasonably ascertained).14

In awarding damages for tortuous injury, it becomes the sole design of the courts to
provide for adequate compensation by putting the plaintiff in the same financial
position he was in prior to the tort. It is a fundamental principle in the law on
damages that a defendant cannot be held liable in damages for more than the
actual loss which he has inflicted and that a plaintiff is entitled to no more than the
just and adequate compensation for the injury suffered. His recovery is, in the
absence of circumstances giving rise to an allowance of punitive damages, limited
to a fair compensation for the harm done. The law will not put him in a position
better than where he should be in had not the wrong happened. 12

In this case, the matter was not a liquidated obligation as the assessment of the
damage on the vehicle was heavily debated upon by the parties with private
respondent's demand for P236,000.00 being refuted by petitioners who argue that
they could have the vehicle repaired easily for P20,000.00. In fine, the amount due
private respondent was not a liquidated account that was already demandable and
payable.

In the present case, petitioners insist that as the passenger jeepney was purchased
in 1982 for only P30,000.00 to award damages considerably greater than this
amount would be improper and unjustified. Petitioners are at best reminded that
indemnification for damages comprehends not only the value of the loss suffered
but also that of the profits which the obligee failed to obtain. In other words,
indemnification for damages is not limited to damnum emergens or actual loss but
extends to lucrum cessans or the amount of profit lost.13
Had private respondent's jeepney not met an accident it could reasonably be
expected that it would have continued earning from the business in which it was
engaged. Private respondent avers that he derives an average income ofP300.00
per day from his passenger jeepney and this earning was included in the award of
damages made by the trial court and upheld by the appeals court. The award
therefore of P236,000.00 as compensatory damages is not beyond reason nor
speculative as it is based on a reasonable estimate of the total damage suffered by
private respondent, i.e. damage wrought upon his jeepney and the income lost from
his transportation business. Petitioners for their part did not offer any substantive
evidence to refute the estimate made by the courts a quo.
However, we are constrained to depart from the conclusion of the lower courts that
upon the award of compensatory damages legal interest should be imposed
beginning 22 July 1990, i.e. the date of the accident. Upon the provisions of Art.
2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or
damages, except when the demand can be established with reasonable certainty."

One last word. We have observed that private respondent left his passenger
jeepney by the roadside at the mercy of the elements. Article 2203 of the Civil Code
exhorts parties suffering from loss or injury to exercise the diligence of a good
father of a family to minimize the damages resulting from the act or omission in
question. One who is injured then by the wrongful or negligent act of another
should exercise reasonable care and diligence to minimize the resulting damage.
Anyway, he can recover from the wrongdoer money lost in reasonable efforts to
preserve the property injured and for injuries incurred in attempting to prevent
damage to it.15
However we sadly note that in the present case petitioners failed to offer in
evidence the estimated amount of the damage caused by private respondent's
unconcern towards the damaged vehicle. It is the burden of petitioners to show
satisfactorily not only that the injured party could have mitigated his damages but
also the amount thereof; failing in this regard, the amount of damages awarded
cannot be proportionately reduced.
WHEREFORE, the questioned Decision awarding private respondent Donato
Gonzales P236,000.00 with legal interest from 22 July 1990 as compensatory
damages and P30,000.00 as attorney's fees is MODIFIED. Interest at the rate of six
percent (6%) per annum shall be computed from the time the judgment of the
lower court is made until the finality of this Decision. If the adjudged principal and
interest remain unpaid thereafter, the interest shall be twelve percent (12%) per
annum computed from the time judgment becomes final and executory until it is
fully satisfied. Costs against petitioners

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