LOSS OF EARNING CAPACITY

MONZON VS. INTERMEDIATE APPELLATE COURT, 169 SCRA 760, G.R. NO.
72828 JANUARY 31, 1989

Formula for determining loss of earning capacity arising from the death of the
deceased.

It is worth noting that Arturo Monzon, at the time of his death, was 40 years old
and in good health. He left a widow and 8 children with ages from 5 to 19. He had a
flourishing legal practice, specializing in taxation and was retained by a number of large
companies. He had a total net income, as formally declared in his tax returns, of P213,
493.13 for the year 1967. Pursuant to the Formula established and repeatedly applied
by this Court (Villa Rey Transit v. Court of Appeals, 31 SCRA 511; Davila vs. Philippine
Airlines, 49 SCRA 497; Abeto v. Philippine Airlines, 115 SCRA 389; Philippine Airlines
v. Court of Appeals, 106 SCRA 391), the loss of earning capacity (as provided for in
Article 2206, New Civil Code) arising from the death of Arturo Monzon was computed by
the trial court in the following manner:

Loss of earning capacity equals 2/3 x [8040] x P213, 493.13 equals

P5,691,726.84."

Life expectancy of a person fluctuates with several factors justifying the formulation
of a generally accepted formula to determine loss of earning capacity.

We agree with respondent court in saying that life expectancy fluctuates with
several factors but it is for that very reason that a generally accepted formula cited
earlier was established by this court in a long line of cases. Otherwise stated, while
respondent court suggests that Arturo Monzon might have lived for less than 26.4 years
more, or until the age of 66, there is also the possibility that he would have lived for
much more than 26.4 years. Hence, the need of the formula by way of arriving at a
logical and workable average. Furthermore, it would be most unfair and illogical for
respondent court to have reduced the compensation due petitioners for the loss of the
earning capacity of Arturo Monzon by discarding the well established formula by taking
a pessimistic and depressed view of every situation instead of an average standard.
Moreover, as a man grows older, and gains more experience, his income generally
increases, with each passing year.

1
SMITH BELL DODWELL SHIPPING AGENCY CORP VS BORJA, GR NO. 143008,
JUNE 10, 2002

The formula for the computation of loss of earning capacity is as follows:

Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses (50%
of gross annual income)], where life expectancy = 2/3 (80 - the age of the deceased).

The Court uses the American Experience/Expectancy Table of Mortality or the

Actuarial or Combined Experience Table of Mortality, which consistently pegs the life
span of the average Filipino at 80 years, from which it extrapolates the estimated
income to be earned by the deceased had he or she not been killed.

PEOPLE VS. LAGAT, G.R. NO. 187044, SEPTEMBER 14, 2011

Biags widow, Florida, testified that Biag worked as a farmer, tanod, and tricycle
driver, and that his income amounted to 40,000.00 per cropping season as a farmer,
2,000.00 per month as a tanod, and 300.00 per day as a tricycle driver.However,
since the prosecution failed to present any document pertaining to Biags appointment
as a tanod, or that he actually worked as a farmer, we shall consider only his earnings
as a tricycle driver. According to the death certificate submitted by the prosecution, Biag
was 56 years old at the time of his death.

The amount of damages recoverable for the loss of earning capacity of the
deceased is based on two factors: 1) the number of years on the basis of which the
damages shall be computed; and 2) the rate at which the losses sustained by the heirs
of the deceased should be fixed. The first factor is based on the formula (2/3 x 80 age of
the deceased at the time of his death = life expectancy) which is adopted from the
American Expectancy Table of Mortality. Net income is computed by deducting from the
amount of the victims gross income the amount of his living expenses. As there is no
proof of Biags living expenses, the net income is estimated to be 50% of the gross
annual income. Thus, the loss of earning capacity of the deceased is computed as
follows:

Net Earning Capacity = life expectancy x [gross annual income living expenses]
= 2/3 [80-age at time of death] x [gross annual income - 50% of gross annual income]
= 2/3 [80-56] x [109,500.00 - 54,750.00]
= 16 x 54,750.00
= 876,000.00

PEOPLE VS. TEEHANKEE, JR., 249 SCRA 54, G.R. NOS. 111206-08 OCTOBER 6,
1995

Compensation for loss of earning capacity is awarded not for loss of earnings but for
loss of capacity to earn money, so it is not necessary that the victim, at the time of
injury or death, is gainfully employed.

2
 To be compensated for loss of earning capacity, it is not necessary that the victim, at
the time of injury or death, is gainfully employed. Compensation of this nature is
awarded not for loss of earnings but for loss of capacity to earn money. In Cariaga v.
Laguna Tayabas Bus Company, we awarded to the heirs of Cariaga a sum representing
loss of his earning capacity although he was still a medical student at the time of injury.
However, the award was not without basis for Cariaga was then a fourth year medical
student at a reputable school; his scholastic record, which was presented at the trial,
justified an assumption that he would have been able to finish his course and pass the
board in due time; and a doctor, presented as witness for the appellee, testified as to
the amount of income Cariaga would have earned had he finished his medical studies.

PEOPLE VS. MUSA, JR., 404 SCRA 135, G.R. NO. 137042 JUNE 17, 2003

Under the Civil Code, appellants shall be liable for the loss of earning capacity of the
deceased.

Under Article 2206 of the Civil Code, appellants shall be liable for the loss of the
earning capacity of the deceased. Indemnification for loss of earning capacity partakes
of the nature of actual damages which must be duly proven.

VILLA REY TRANSIT, INC. vs. CA, G.R. No. L-25499, February 18, 1970

The amount recoverable is not the loss of the entire earning, but rather the loss
of that portion of the earnings which the beneficiary would have received. Hence, in
fixing the amount of the said damages, the necessary expenses of the deceased should
be deducted from his earnings.

NEGROS NAVIGATION CO., INC. vs. CA, G.R. No. 110398, November 7, 1997
The Court resolved that in calculating the life expectancy of an individual for the
purpose of determining loss of earning capacity under Article 2206(1) of the Civil Code,
it is assumed that the deceased would have earned income even after retirement from a
particular job.

HEIRS OF JOSE MARCIAL K. OCHOA vs. G & S TRANSPORT CORPORATION,

G.R. No. 170071, March 9, 2011

In Ereo, we denied the claim for loss of income because the handwritten
estimate of the deceaseds daily income as a self-employed vendor was not supported
by competent evidence like income tax returns or receipts. This was in view of the rule
that compensation for lost income is in the nature of damages and as such requires due
proof of damages suffered. We reiterated this rule in People v. Yrat where we likewise
denied the same claim because the only evidence presented to show that the deceased
was earning P50,000.00 a month was the testimony of the wife. There we stated that for
lost income due to death, there must be unbiased proof of the deceaseds average

3
income. Self-serving, hence, unreliable statement is not enough. In People v. Caraig,
we declared that "documentary evidence should be presented to substantiate the claim
for damages for loss of earning capacity. By way of exception, damages therefor may
be awarded despite the absence of documentary evidence, provided that there is
testimony that the victim was either (1) self-employed earning less than the minimum
wage under current labor laws, and judicial notice may be taken of the fact that in the
victims line of work no documentary evidence is available; or (2) employed as a daily-
wage worker earning less than the minimum wage under current labor laws". However,
we subsequently ruled in Pleyto v. Lomboy that "failure to present documentary
evidence to support a claim for loss of earning capacity of the deceased need not be
fatal to its cause. Testimonial evidence suffices to establish a basis for which the court
can make a fair and reasonable estimate of the loss of earning capacity". Hence, we
held as sufficient to establish a basis for an estimate of damages for loss of earning
capacity the testimony of the victims widow that her husband was earning a monthly
income of P8, 000.00. Later, in Victory Liner, Inc. v. Gammad, after finding that the
deceaseds earnings does not fall within the exceptions laid down in Caraig, we deleted
the award for compensatory damages for loss of earning capacity as same was
awarded by the lower courts only on the basis of the husbands testimony that the
deceased was 39 years of age and a Section Chief of the Bureau of Internal Revenue
with a salary of P83, 088.00 per annum at the time of her death. This same rule was
also applied in the 2008 case of Licyayo v. People.

PEOPLE VS. GATCHITORENA, 597 SCRA 420, G.R. NO. 175605 AUGUST 28, 2009

As a rule, documentary evidence should be presented to substantiate the claim for

damages for loss of earning capacity; Exceptions

The award of P408, 000.00 for loss of earning capacity is justified. As a rule,
documentary evidence should be presented to substantiate the claim for damages for
loss of earning capacity. By way of exception, damages for loss of earning capacity may
be awarded despite the absence of documentary evidence when (1) the deceased is
self-employed and earning less than the minimum wage under current labor laws, in
which case judicial notice may be taken of the fact that in the deceaseds line of work no
documentary evidence is available; or (2) the deceased is employed as a daily wage
worker earning less than the minimum wage under current labor laws. It cannot be
disputed that the victim, at the time of his death, was self-employed and earning less
than the minimum wage under current labor laws. The computation arrived at by the trial
court was in accordance with the formula for computing the award for loss of earning
capacity.